CJcrnfll ICatu i^rlynnl ICibraty KF 1405.3?B6l" ""'™™"l' "-'"rary *lSSMM.,lJ!r.ff '■" wrporation , 3 1924 019 376 148 The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924019376148 A DIGEST AMERICA! CORPORATION CASES, PRESENTING THE AMERICAN JUDICATIONS EMBRACED IN THB DECISIONS OF THE SUPREME COURT OF THE UNITED STATES, AND THE COURTS OF LAST RESORT IN THE SEVERAL STATES AND TERRITORIES SINCE JANUARY 1, 1868, OF QUESTIONS PECULIAR LAW OF CORPORATIONS. COMPILED BY HENRY BITfl"M:ORB}, OF THE CHICAGO BAR. CHICAGO : E. B. MYEES & COMPANY. 1888. Entered, according to act of Congress, in the year 1888, By E. B. MYERS & COMPANY, In the office of the Librarian of Congress, at Washington, D. C. DIGEST AMERICAN CORPORATION CASES. ABATEMENT OF ACTION. 1. Consolidation of companies. A consolidation of a defend- ant corporation with other companies, under a statute which con- tinues its liabilities, is not such a dissolution of the corporation as will abate an action brought before such consolidation was effected ; East Tenn. & Ga. E.E. Co, v. Evans, 4-186. 2. Consolidation ; effect. "Where a suit is pending against a corporation, at the time of its consolidation with another com- pany, the plaintifE has a right to treat it as continuing to have a separate existence for the prosecution of his action against it ; Shackelford v. Miss. Cent. K.R. Co., 8-31. 3. Action foe penalty. Action for the recovery of a statu- tory penalty does not survive, the death of defendant ; Diversy v. Smith, 9-155 ; Burkett et al. v. Plankinton et al., 9-155. ACADEMY. • 1. Power to boerow money. The power to borrow money may be fairly implied as a usual and appropriate means to accomplish the object of a charter granted to an academical cor- poration ; Moss V. Harpeth Academy, 4-133. 2. Devise of realty. An academy incorporated for the promotion of literature, authorized to educate male and female students, may lawfully establish separate departments for each sex. Under the laws of New York (1840-1) it may take and hold real estate devised to it in trust, for the benefit of either department ; Adams et al. v. Perry et al., 3-623. 3. . A devis6 to an incorporated academy, for the pro- motion of literary education, is liot void because it provides that the daughters of oflacers, soldiers, etc., who have been killed, or died, while in the service of the tTnited States etc., together with girls and young ladies in needy and indigent circumstances, shall receive their tuition free. Such a provision does not constitute a tru8t.in favor of such daughters, girls and young ladies, or render 2 DIGEST OF THE them the beneficiaries. If they attend they receive their instruc- tion free, otherwise, not ; the academy takes the subject of the devise to its own uses and purposes, subject to any valid trust and condition attached thereto. Id. 4. Devise of peesonal pbopeett. A bequest of personal property to invest and re-invest, and pay over the income to an incorporated academy, forever, creates a perpetuity contrary to the statute of New York, and is, therefore, void. Id. 5. Not foe peofit. A corporation for educational purposes, as an academy, is not one for pecuniary profit, merely because fees are charged for tuition ; Santa Clara Academy v. Sullivan, 10-298. See College ; Educational Institution ; Unxveesitt. ACKNOWLEDGMENT OF DEED. 1. By a teustee. An acknowledgment of a deed by a trustee, empowered by his corporation to act with others, before himself, renders the deed void as to him. Such acknowledgment will not, however, adversely affect the instrument as to co-trustees who act ; Darst v. Gale et al., 6-380. 2. Who to acknowledge. In the absence of a statutory pro- vision prescribing the mode of executing and acknowledging a corporate deed, the officer who affixes the seal executes it, w;ithin the meaning of Statutes requiring deeds to be acknowledged by the grantor ; Kelly v. Calhoun, 6i--26. 3. Valid acknowledgmenti'. The statute prescribing for form of acknowledgment thus : " personally appeared before me , the within named bargainor, with whom I am personally acquainted, and who acknowledged that he executed the within instrument for the purposes therein contained." Certificate of an officer taking the acknowledgment of the grantor to a deed executed by a proper officer of a corporation, that said grantor is personally known to him, is a sufficient compliance with the stat- ute. Id. ACTION. 1. Psaotioe; venue. Corporations can not be sued in any other than the courts of their domicil, for damages arising out of their passive breaches of contract. A statute which provides in all cases where a corporation shall commit trespass, or do any thing for which an action for damages hes, it shall be liable to be sued in the parish where such damage is done, or trespass com- mitted, relates exclusively to actions for damages caused by posi- tive acts of, commission ; it does not include actions for damages resulting from acts of omission, as neglects, failures and the like ; Montgomery v. The La. Levee Co., 7-218. 2. Pasticulab PE0VI8I0NS AS TO. Particular provisions for the bringing of suits against corporations formed under a general law, AMERICAN CORPORATION CASES. 3 must apply and operate in the same manner as would like provis- ions in a special charter; Dewey v. Central Car & Manui. Co., 6-642. 3. Paeticulae peovisions as to. Where a general incorpora- tion law contains provisions regulating the bringing of suits against corporations organized under it, such provisions must be regarded as exceptions to earlier general provisions on the same subject, if there be an inconsistency between these. Id. i. Against a municipal coepoeation. An action may be maintained against a municipal corporation for a tort resulting in an injury to a person ; Mayor and aldermen of the city of Savannah v. Cullins, 3-132. 5. . Such an action can be maintained against a muni- cipal corporation by one of its members. Id. 6. Teovee, foe conveesion of stock. An action of trover will lie for the wrongful conversion of shares of stock in an incor- porated company ; Nabring v. Bank of Mobile, 6-124. 7. Teovee, when not lie. Where the legal title of shares of stopk has been placed by pledgor, in pledgee, the supreme court of Alabama is inclined to agree that trover will not lie ; but, in such case the form of action must be objected to in the trial court ; whereupon, plaintiff might amend, by adding a count in case, for the same cause of action and recover upon case made. Id. 8.. Kecoupmbnt of debt owing. In an action of trOver, for the wrongful conversion of shares of stock, which have been pledged, as security for the re-payment of money borrowed, pledgee may recoup the debt of defendant to him. Id. 9. Fob penalty ; defendant dead. An action to recover a statutory penalty does not survive the death of the defendant, and a writ of error, from the appellate court, to reverse a judgment in favor of the defendant against his executors is properly dis- missed ; Diversy v. Smith, 9-155 ; Burkett et al. v. Plankinton et al., 9-155. ACTION ; PARTIES TO. 1. When not lie. A society which is not authorized by law to become incorporated can not institute suit, for the collection of moneys, in its society name ; Detroit Schutzen Bund v. Detroit Agitations Verein, 6-651. 2. Eight to sub. No association of persons can appear in court, as a corporation, unless organized, as such, in strict accord- ance with law. Unless so organized such persons can sue only as individuals and in their names as such; Workingmen's Accommoda- tion Bank v. Converse et al., 7-203. 3. Petvate person ; public mattee. A citizen can not, in his individual capacity, maintain an action to control the conduct of public oflScers which inflicts no special injury upon him ; Conklin V. County Commissioners of FiUmore County, 3-558. 4 DIGEST OF THE 4. In action at law. In a suit, against the members of an association, for services rendered, the name of a person, which was signed to the articles of association, without authority or ratifica- tion, may properly be omitted as a defendant ; Boyd v. Merriell, 3-260. 5. In actions foe violation of tbusts. When the property of a corporation was conveyed to trustees to secure the payment of debts and was sold, without judicial proceedings, in the execu- tion of a power attempted to be conferred by the terms of the deed, but which was invalid because of a statute requiring that all such sales should be made by proceedings in court, it was held ; (1) that the purchaser was answerable for the proceeds of the property ; (2) that the corporation was a necessary and indispen- sable party to any proceedings for its recovery; Samuel v. Holladay, 1-139. 6. In action to abate nuisance. An action to recover money expended from the treasury of a city or town, by its board of health, to remove a nuisance, may be maintained in the name of such city or town; Citv of Salem v. The Eastern Il.Il. Co., 2-429. 7. Action by stockholdees. When the proceedings were insti- tuted by two stockholders in behalf of themselves and all others who might come in and take pai't in the litigation ; and it appeared that the bill was pending six years without service on the corpora- tion, that if the suit should be successful the property would be absorbed in the payment of debts, leaving nothing to be distribu- ted among stockholders, and that the interests of the plaintiffs, by reason of the small amount of stock held by them, was nominal, merely, the court refused to order that the cause should stand over for service upon the corporation ; Samuel v. Holladay, 1-139. 8. Illinois and Michigan canal. In an action, on the case, brought against the board of trustees of the Illinois and Michigan canal, to recover damages for the loss of a canal boat, occasioned, as alleged, by the negligence of the defendant, held, that the ac- tion was alone maintainable against the state trustee, and would not, therefore, lie against the defendants as a board of trustees ; Board of Trustees ra the Illinois & Michigan Canal v. Daft. 1 ^23. ' ' 9. Crbditoe's bill. Neither the bond nor stockholders of a corporation are necessary parties to a creditor's bill seeking to subject assets to the payment of debts, where they are represented by the parties before the court; Chicago, Eock Island & Pa- cific R.E. Co. V. Howard et al., 1-1. 10. Paetneeship to caeet on coepoeation. Where some of the members of an incorporated company form a partnership, be- tween themselves, for the purpose of carrying on the business of the company, under a lease, upon bill filed by one of the partners lor a dissolution and a settlement of the partnership affairs the AMERICAN CORPORATION CASES. 5 corporation is neither a necessary nor a proper party ; Faulds v. Yates, 3-289, note 3. 11. Insolvency of bank. The receiver, holding the assets of an insolvent national bank, is a proper party in proceedings for' the adjudication of claims against the banii ; Turner v. First Na- tional Bank of Keokuk et al., 3-298. 12. Keceivee. The insolvent corporation had gone into the hands of a receiver, and it was held that a suit to recover the moneys received by the stockholders was properly brought by the receiver; Crandall «. Allen, 10-102. 13. MuLTiFAEious. A demurrer to a bill filed by a great num- ber of persons, owning distinct parcels of land fronting upon a street, to restrain the collection of a tax levied on their several parcels for grading the street, on the ground that it is multi- farious, will not be sustained when the questions presented by the bill appear, prima facie, to depend upon the same proceedings for assessing the tax. If, in the progress of the cause, it is devel- oped that the multiplicity of issues orr other complications, grow- ing out of the joinder, would produce embarrassment, to more than balance the advantages to be derived from settling the whole in one suit, the court may, in the legitimate exercise of its powers, qn its own motion, dismiss the bill ; Schofield et al, v. City of Lansing et al., 3-638. 14. State : cnizEN. The state of Georgia, being a stockholder in a railroad company, may, on her own motion, become a party to a bill filed by other persons in interest against defendants to en- join the consummation of a contract. by which a controlling amount of the stock in which it is interested, as a stockholder, is about to pass into the control of other and competing companies. A citizen of the state, as such, is not a proper party to a bill, the object of which is to enjoin the defendant railroad companies from making a purchase of stock in another railroad company ; Central E.R. Co. et al. v. Collins et al., 3-224. 15. Another action pending ; new paett. It is not a suffi- cient answer to a plea of another action pending in a court of competent jurisdiction, that the case at bar involves an additional issue and another party. The issue joined in'the action pending will remain in and be decided by the court in which the original action is ; City of Memphis v. Dean, 3-1. ACTION, EIGHT, OF. 1. Attachment against foreign coeporation. The legislature of Kentucky conferred upon a foreign corporation all the privi- leges, rights and immunities, subject to all such restrictions as were granted, made and prescribed for the benefit, government and direction of the company by an act of incorporation passed by the legislature of Alabama. Held, that unless the property and effects of the corporation could be attached for a mere failure 6 DIGEST OF THE to pay its liabilities in the state of its creation, they could not be so attached in Kentucky, notwithstanding a provision in the civil code of Kentucky^ to the contrary effect, but which had been enacted subsequent to the passage of the act conferring _ such privileges and immunities ; Martin & Merriwether v. Mobile & Ohio R.R. Co., S-339. 2. Peioe moetga&e. Where property attached had been pre- viously mortgaged to pay certain outstanding debts, of which those of plaintiff constituted a part, plaintiffs could not appro- priate such mortgaged property to the payment of their debts, without alleging that the residue of the indebtedness secured had been paid, and bringing the trustees or legal title holders before the court. Id. 3. Taxes illbgallt collected. The sheriff, as collector, hav- ing wrongfully levied upon the currency, belonging to the bank, sufficient to satisfy the tax and fees for collection, the bank is en- titled to recover the same, as in an action of trespass ; Smith v. First National Bank of Tecumseh, 3-485. 4. Bank check. The holder of a bank check can not sue the bank for refusing payment, in the absence of proof that it was accepted by the bank or charged against the drawer. There is no privity of contract between the hdder of a check and the bank. The holder receives the check on the credit of the drawer, in the belief that he has funds to meet it, but in no sense can the bank be said to be connected with the transaction. No duty is owing from the bank to the holder until the check is presented and ac- cepted ; Bank of the Eepublic v. Millard, 3-22. 5. . The fact that a check was drawn on a public de- positary, by an officer of the government, in favor of a public creditor, can not change the right of the parties. Id. 6. Action against trustees. The general rule is that an action against trustees of a corporation, for a misappropriation of its funds, must be brought in the name of the corporation. An exception to this rule is when a corporation, on proper demand, from a stockholder, refuses to bring suit. In such case stock- holders may sue in their own names ; Cogswell v. Bull, 3-129. 7. Remedy against delinquent subscriber fob stock. The remedy against a delinquent subscriber is to enforce payment by a judgment for the money and not by a forfeiture or sale of the stock ; Gills, Adm'x, v. Kentucky, etc., Mining Co., ^-346. 8. Transfer of stock. To allow stock, the certificates of which are_ held by a bona fide holder, to be transferred to another without his consent is a breach of corporate duty, for which an action will lie ; National Bk. v. Lanier, 3-74. 9. Misappropriation of property. "Where there is a misap- propriation of property by the trustees of a corporation — in this case of all the property of a canal company, to the use of a railroad corporation — at a price far below the actual value of the prop- AMERICAN CORPORATION CASES. 7 erty, the stockholders of the sold out property can not, after it is converted to the new purpose, reclaim the property or enjoin its new use. So far, however, as regards the price of the property they are not concluded by the wrongful agreement. They may, by action, compel the company which acquired the property to account for its value ; Goodin v. Cincin. etc. Canal Co. et al., 3-652. 10. DiEECTOES AS TEUSTEBS. Directors are treated as trustees for stockholders ; wherefore, a stockholder will be allowed, in a proper case, to maintain a suit in equity to restrain them from doing acts which may be within the corporate authority, but, whicli would be in violation of the trust, or he may procure re- dress, for such acts, after they have been performed ; Wright v. Oroville Gold etc. Mining Co., 3-146. 11. JuETSDicTioN OF EQUITY. Courts of equity, as between the corporation and its officers, on the one hand, and the stockholders, on the othpr, in the management of the corporate affairs, look beyond the mere observance of forms of law and inquire if the authority has been, in good faith, exercised to promote the interest of the stockholders. Id. 12. Mandamus to produce accounts. By statute of Connecticut, joint stock corporations are required to keep all books of account, of such corporations, open for the examination of stockholders, at the town within said state in which the corporation is located, or at the office of the treasurer in such state. So, where the com- pany's manufactory was located in the state but its principal office for the sale of its wares was in New York, it was held that its books of account should be kept at its office in Connecticut. Nevertheless it would not be prohibited from keeping books of account in New York, and mandamus would not issue to compel their production in Connecticut, as the suit of a stockholder who does not show some injury to himself; Pratt v. Meriden Cutlery Co., 3-103. 13. Liability foe profits. A contractor agreed to construct and equip a company's railroad line for $1,600,000, of which sum $2.50, 000 were to be paid in cash and cash assets and the balance in bonds and stock of the company, the price named being twice the cash value of the work. Payments were to be made on monthly estimates, in such class of property as should best subserve the pur- poses of the contractor. No time was fixed for the completion of the work. The contractor performed work, under the contract, to the nominal value of $117,000, which was paid for, mostly, in the cash assets, and, then the charter of the company expired by its own hmitation, the work was suspended by mutual consent, the road abandoned and its stock and bonds became worthless. The contractor was held bound to account for all actual profits realized ; Four Mile Y. E.E. Co. •». Bailey, 3-659. 14. Default in payment foe stock. The law raises a promise to pay for stock subscribed for as it is lawfully assessed and de- 8 DIGEST OF THE mandable. The common law affords a remedy for recovery by action of assumpsit. Subsequent enactments authorizing forfeit- ure and sale of the stock, are cumulative as to the remedy ; Hughes V. Antietam Manuf. Co., 3-37Y. See Bae to Actiost ; Eight of Action. AGENCY. 1. Genbeal eitle. a corporation may, unless otherwise pro- vided by its charter, by resolution or by-law, appoint any person an agent for the purpose of transferring or disposing of its prop- erty or negotiable securities; Mitchell v. Deeds, 1-461. 2. . No officer of the corporation possesses such exclusive power, unless conferred by charter. Id. 3. Infbeence of authoeity. In the absence of both statutory authority and regulations of the corporate body, if the proof shows that the president was in the habit of 'exercising such power, then his authority to so act may be inferred. Jd. 4. Implications as to. The rule is that not only the appoint- ment but the authority of the agent of a corporation may be im- plied by the adoption, or recognitiouj of his acts by the corpora- tion ; Southgate v. Atlantic & Pacific R.R. Co., 8-144. 5. Appointment. The entry upon the records of a corporation of the resolution appointing an agent is not essential to the validity of the appointment, unless the charter, statute or by-laws are not merely directory, in this particular, but render it absolutely essen- tial ; Smiley v. Mayor and aldermen of Chattanooga, 4-185. 6. Implication of appointment. The authority of an agent of a corporation may be implied from the adoption or recognition of his acts by the corporation or its directors. Jd. 7. Evidence of appointment. In the absence of ex oflScio power, on the part of a director or vice president of a corporation, his authority as agent must be shown by some competent testi- mony. In the absence of testimony it can not be presumed from the mere fact that he assumed to act as agent. Such authority may be shown in various ways ; as by resolution of the board of directors; or, by verbal appointment under their authority, or with their approbation ; or, by proof of acts of agency, with the knowledge of the directors, who tacitly acquiesced or took no action to prevent it ; Chicago & Northwestern Ey. Co, ii. James et al., 4^218. 8. How EVIDENCED. Agencv for a corporation is not required to be shown by a resolution of the board of directors, or other written evidence, but it may be inferred from facts and circum- stances ; Santa Clara Mining Ass'n v. Meredith, 7-396. 9. Qf coepoeations. Where a corporation is created by each of two states, to control the same substance in a joint busiaess, there are, in fact, two corporations with a common purpose, standing in the relation of co-partners. Each is the agent of the AMERICAN CORPORATION CASES. 9 other in the management of their common business, and each is bound by the act of the other in the legitimate prosecution and protection of their joint business; Newport & Gin. Bridge Co. V. WooUey, 7-184. 10. Powers of ; general rule. Public officers or agents are held more strictly within their prescribed powers than private general agents. A contract made by a public agent, within the general scope of his powers, does not bind his principal in the absence of specific authority ; Parcel v. Barnes & Bro., 3-39. 11. Implied power ; estoppel. An attempt to imply author- ity to sell stock from other acts of the agent of a different char- acter, done without authority, but approved by the principal, does not constitute an estoppel; Woodhouse v. Orescent Mut. Ins. Co., 10-472. 12. Authority. Where one deals with a corporation through one of its members, he must, though himself a member, take the peril of the authority of the one, through whom he deals, to act as agent of the corporation and that his acts are within the scope of his authority; Rice v. Peninsular Club, 10-621. 13. . A party dealing with another, supposing him to be an agent, is not protected by the latter's assumption of author- ity to act. Id. 14. . Power to employ an agent or servant, unless there are restrictive words, includes authority to make a complete express contract, definite as to the amount of wages, etc. So, where the assistant superintendent of a railroad, in transferring one of its depot agents to another station, by order of the super- intendent, agreed that such agent should have a stipulated price per month at the new place, the company was held bound by the agreement; Ala. Great Southern E.il. Co. v. Hill, 10-40. 15. Katification. An act by trustees which is prohibited by law can not be made valid by ratification ; Martin v. Zellerbach, 1-170. 16. . A city can not ratify the unauthorized act of its agent, in so far as the same affects the rights of third persons ; Meuser v. Risdon et al., 3-101. 17. . The appropriatiofl by a corporation of money re- ceived on a promissory note, executed as the instrument of the company by an agent not thereto authorized, in the payment of the company's debts, is a ratification of the unauthorized act and makes the note a valid note of the company ; Windham Provi- dent Institute for Savings v. Sprague, 4-199. 18. Ratification by silence. Where an agency exists, and the agent exceeds his authority, the silence of the principal may give rise to the presumption of an intentional ratification of the unauthorized act. Before such inference can be drawn from silence, however, there must have been afforded an opportunity to act or speak upon a full understanding of the circumstances, 2 10 DIGEST OF THE and these circumstances must be such as would properly and nat- urally call for some action or reply from men similarly situated ; Union Gold Mining Co. v. Kocky Mountain National Bank, 4- 298. 19. Eatification — case stated. The president of a corpora- tion, without authority, signed the corporate name to a contract ; the secretary was one of two agents with full power in the prem- ises, and, as such agent, had full knowledge ; the other agent knew there was a contract and knew some of its provisions, with every facility for informing himself fully ; he and the president were directors of the corporation ; a supplemental agreement, which could not be understood without knowledge of the contract, was signed by the secretary of the corporation and was fully per- formed by title corporation ; the contract was partially executed by the plaintiff, as to the time, and, so far as the motives and pur- poses of the defendants were concerned, was fully executed ; and the execution of the contract was connected with important and radical changes in the business affairs of the corporation. There being no pretense that any officer, or other person connected with the company, ever intimated any objection to the contract ; held, there had been a ratification of the contract ; Perry v. Simpson Waterproof Manuf. Co., 4-309. 20. JRatifioation. Where the secretary of a corporation, with- out express authority, pledges the bonds of the company, secured by deed of trust, which is recorded, for an existing indebtedness and future advances, the directors of the corporation having knowledge of and acquiescing in such pledge, the act will be binding in the absence of proof of fraud. , The principle that a subsequent ratification is equivalent to a prior authority will apply ; Darst '». Gale et al., 6-380. 21. Disavowal. Where delay, on the part of the principal, to disavow the agency will result in loss, and where the .transaction may turn out a profit or loss according to circumstances, the prin- cipal must disavow the unauthorized act of the agent within a reasonable time after notice ; Union Gold Mining Co. v. Rocky Mountain National Bank, 4-298. 22. Faeol oontkacts by agents. A corporation acting within the scope of its authority is bound by the parol contract of its authorized agent, the same as an individual under Hke circum- stances; Eacine & Mississippi E.E. Co. v. Farmers Loan and Trust Co., 1-441. 23. Notice to peinoipal theough agent. The act and knowl- edge of an agent transacting the business, are the acts and knowl- edge of the principal ; Singer Manuf. Co. v. Holdfodt, 6-402. 24. Knowledge of, affects pkincipal. The knowledge of an agent, in matters pertaining to his agency and within the scope of his authority, is the knowledge of the principal. This prin- ciple is peculiarly applicable to corporations, which must transact AMERICAN CORPORATION CASES. 11 their business through agents; Perry v. Simpson Waterproof Manuf, Co., 4^-309. 25. Notice to oo-agent. Where a corporation has two agents, of equal power and authority, notice to one is constructive notice to the other and, ,therefore, notice to the corporation. Jd. 26. Admission of, when binding. A corporation may be bound by the language of its agent ; as where a superintendent of a street railway company admitted and justified an assault by one of its drivers ; Malaeek v. Tower Grove & Lafayette Ky. Co., 8-120. 27. Presumption as to. The habitual exercise of power by the cashier of a bank, with the knowledge and acquiescence of the bank, establishes, as to the public, the existence of such powers as fully as the same could be established by the order of the board of directors ; Merchants National Bank v. State National Bank, 3-25. 28. Pbebumption. One openly and notoriously exercising the functions of a particular agency of a corporation will be pre- sumed to have sufficient authority from the corporation to so act ; Singer Manuf. Co. v. Holdfodt, 6-402. 29. In managing business. In respect to the management of the business of a corporation, a general managing agent and superintendent represents the corporation and may do, in the transaction of ordinary affairs, all the corporation may do within the scope of its powers ; M'Kiernan v. Lenzen, 6-264. 30. Chaeacter of acts of. If the business of a corporation is transacted by a general managing agent, who is suffered to exercise general authority in respect to its business, the corporation is bound by his acts within the scope of the powers assumed by him, as if these powers were expressly granted. Id. 31. Liability foe acts of. In the absence of an express charter provision to the contrary, the acts of an agent of a corporation, within the scope of his authority, bind his principal to the same extent and in the same manner as though he were acting for a natural person ; City of Covington v. Covington & Cincinnati Bridge Co., S-388. 32. Liability for his acts. As against strangers, it is imma- terial whether one, who openly and with knowledge of a corpora- tion, acts as a managing director received a specific appointment to that position from the board of directors, or not ; if he has long acted in that capacity without objection, his services have been accepted and the benefit thereof appropriated to the company's use ; Walker v. Detroit Transit Ey. Co. et al., 7-582. 33. Acts performed in public. If an officer of a corporation is continuously suffered to exercise general authority, in the cor- porate business, the company may become bound by his acts, within the scope of the powers so assumed, as if the authority had been expressly granted ; Union Gold Mining Co. v. Rocky Mount. Nat. Bk., 5-176. 13 DIGEST OF THE 34. Unlawful profits. An agent can not make profits, out of his principal, in the business of his agency ; nor can partners or associates of their co-associates for whom they have undertaken to act ; Simons et al. v. Vulcan Oil and Mining Co., 4^-80. 35. PuECHASE OF CLAIMS BY AGENT. The purchase of claims against a corporation by an agent thereof does not extinguish the indebtedness of the principal, unless the corporation furnishes or refunds the money. It remains, even when the purchase is made without authority, liable to the agent for the amount expended in the purchase ; Sullivan v. Triunfo Gold and Silver Mining Co., 3-132. 36. As DISTINCT FEOM TRUSTEESHIP. The treasurer of a corpora- tion — in this case a savings bank — being instructed by a vote of the finance committee to sell certain _ rights to take stock in the corporation, the property of the corporation, for not less than a sum named, undertaking to do so, acts as an agent of the corpora- tion, and, not as a trustee,«ieverthele38 he is, also, a trustee of the corporation and a member of its finance committee. If the treas- urer immediately sells the rights to himself and other members of the committee for the price named, which is less than the market value of the rights, not making any attempt to procure purchasers at a higher rate, and pays to the corporation the money so obtained, the corporation may, without returning the money, maintain an action at law, against him, to recover the difference between the market value of the rights and the price obtained'; but is not entitled to dividends paid on the stock represented by the rights ; Greenfield Savings Bank v. Simons, 9-451. 37. Acts of attoenet. Where notice of the revocation of a contract with a corporation is prepared and served upon the other party by an attorney of the company, with the knowledge and consent of its manager, the company and its manager will be bound by the act of the attorney, and not be allowed to dispute the attorney's authority ; Parmly v. Buckley et al., 9-149. 38. Conveyance of land by. No body corporate can appoint an agent to convey lands, except by a vote of its directors or managing board, in whom the power to sell may be reposed by charter or by general law; Standifer v. Swann & Billups, 10-49. 39. Authority to draw bills may be conferred by parol. The officers of a corporation, in the absence of a prohibition by the charter of the company, may confer authority, upon the cor- porate agent, to draw and execute bills of exchange on behalf of the company. Action in writing, on the part of the board of directors, is not necessary to vest such authority in the agent ; Preston v. Missouri & Pennsylvania Lead Co., 8-86. 40. Signature by agent. It is competent for an agent to sign simply the name of the principal. The fact that it was placed there by an agent need not appear on the paper ; First National Bank of Rock Island, Illinois, v. Loyhed, 8-11. AMERICAN CORPORATION CASES. 13 41. Promissory note. The secretary of a corporation executed a promissory note in which were the words " we promise," etc., and to which was affixed the seal of the corporation and his own name, with the word " Secretary " appended. It was held to be the note of the corporation, on which the secretary was not indi- vidually liable ; Means et al. v. Swormstedt, 1-3T0. 42. IUndisolosbd principal. If an agent, who is autliorized to execute a promissory note, shall executt. such note in his own name, whether he discloses his principal or not, such principal may be sued on the note ; imless it is made clear that both parties to the contract intended that the agent alone should be liable ; and parol evidence is admissible to prove the intent; Ferris v. Thaw et al., 8-205. 43. As TO PROMISSORY NOTE. The issuing of promissory notes is not a power necessarily incident to the conduct of the business of mining. Neither the general agent nor the president and sec- retary of such a company, unless authorized by the board of directors so to do, can bind the corporation by a note made in its name; New York Iron Mine Co. v. First Nat. Bk. of Negaunee, 6-612. 44. . A mine in Michigan was the property of a corpora- tion which had its financial office in New York. The general agent, at the location of the mine, was accustomed to indorse negotiable paper, belonging to the company, for collection or discount, and draw on the treasurer, in New York, for money needed for the purposes of the corporation. These drafts were paid. This course of dealing would imply an authority in the agent to execute promissory notes in the name of the corporation. Id. 45. Innocent sufferer. The principle of law, that where one of two innocent parties must suffer from the dishonesty of a third, that one shall bear the loss who, by his negligence, has enabled the third to occasion it, can not be successfully invoked by a party who is not, himself, entirely innocent in the particular transac- tion. Thus, where there were, as matter of fact, but two stock- holders having beneficial interests in a corporation. One of whom conducted the financial affairs of the company, having his office in New York, and the other was its general agent at the locality of the business, in Michigan, and the corporation did not hold meetings for a series of years; nor3,t stated periods elect officers; and these two stockholders conducted the business as though they were partners, the maxim would not apply unless it was made to appear that plaintiff was influenced by these neglects of corporate right and duty, or the absence of formality of proceeding, and where there was no pretense such plaintiff dealt with the parties as partners, but, by notes sued upon, showed he dealt with the corporation. Id. 46. Notice of want of authority. "Where the general agent of a corporation makes negotiable paper in the name of his prin- 14 DIGEST OF THE cipal, a corporate body, payable to himself, he appears to be acting in two capacities, in one of which he stands adversary to his cor- porate principal. This imposes upon the party discounting, or taking, the paper the obligation of special care in inquiring into his authority to execute the paper. Id. 47. Pkomissoky note to agent. A promissory note, payable to one named "agent of the Enterprise Insurance Company," executed for the use of the company, in consideration of a policj' of insurance issued by it, is properly sued, in Indiana, in the name of the corporation ; Black v. Enterprise Ins. Co., 3-294. 48. Peomissory note. A complaint upon a promissory note, alleged to have been made to A., and by him assigned, by indorse- ment, to a plaintiff corporation, is not supported by proof that A. was the agent of the corporation and, as such, took the note in his own name for the plaintiff, upon a consideration moving to the latter ; Smelser v. Wayne & Union Straight Line Turnpike Co., 9-238. 49. Utile as to toets. Strictly speaking, corporations, while acting within the scope of their delegated powers, can not be guilty of wilful fraud ; nevertheless, corporations carrying on trade or business, of any kind, are liable for the frauds and wrongs of their agents, perpetrated in the course of their employment, as individual principals would be under like circumstances ; West. E.E. Co. V. Franklin Bank, 9-411. 50. Toets ; punith^b damages. While the principal is liable for the torts of his servant or agent in the course of his employ- ment, a railroad company is not liable in punitive damages for the malicious and wanton acts of a conductor, in the absence of proof tending to show either that the company prompted or was Srivy to it, or approved it afterward ; Turner v. North Beach & [ission R.E. Co., 1^202. 51. Common caeeiee. A railroad company, acting as a common carrier of passengers, is liable in actual damages for the wrongful act of one of its conductors in refusing to receive a passenger. Id. 52. Liability. Whether the agents of a corporation have been negligent in performing their duties is a question of fact for a jury ; Weymouth, survivor, v. Penobscot Log Driving Co., 7- o2T. 53. Pebsident as. The president of a corporation, like any other person, may_ be constituted an agent for the transaction of its business, and his authority to act may be proved by the charter or by-laws, a direct vote of the corporators or board of directors, or by usage acquiesced in by the corporation ; Perry -y. Simpson Waterproof Manuf. Co., 4-309. 54. AUTHOEITY OF THE PRESIDENT TO SELL AND ASSIGN 8ECUEI- TiES. It can not be objected by a corporation that an assign- ment of a note by its president was without authority, the proof AMERICAN CORPORATION CASES. 15 showing that by a resolution of the board of directors, adopted prior to the assignment, the president was authorized to pay ofi any debts owing by the company, in any securities or other prop- erty of the corporation, and there being no evidence that it was assigned by him for any other purpose than that expressed in such resolution; Mitchell v. Deeds, 1-461. 55. GEisrEEAL powEEs OF PRESIDENT. The doctrine seems to be well settled, that the president of a corporate body may perform all acts which are incidental to the execution of the trust reposed in him, such as custom or necessity has imposed upon the office, and this without express axithority. And it is immaterial whether such authority exists by virtue of his office or is imposed by the course of the business of the company. Id. 56. Appeaeance in sun. The managing agent of a corpora- tion, to have authority to appear for his company in a suit insti- tuted against it, must be one whose powers extend to the whole business of the company and on whom service of summons could be made in accordance with statutory provision : Lamb v. Gaston & Simpson Gold and Silver Mining Co., 8-300. 57. BmniNG- acts op. A director of a corporation retained an attorney and authorized him to employ local counsel to attend to certain suits pending in which the company was interested. The report of the attorney originally retained, of his retainer of the local counsel, to the director, was legal notice to the corporation, and the continued silence of the director amounted, in law, to a ratificatioil by him and, through him, by the corporation of 'the action of the original attorney in the premises ; Pittsburg, Cin. & St. L. E.E. Co. V. Woolley, 7-170. 58. Eailboad engineer. An engineer, employed by a rail- road corporation, has no authority, by virtue of his position, to bind the corporation, by his contracts. Special authority therefor must be shown; Gardner v. Boston & M. E.R. Co., 7-326. 59. Assignment. A corporation may make an assignment by an agent ; M'Kiernan v. Lenzen, 6-264. 60. Conveyance of eealtt. A statute providing that a cor- poration may convey real estate by an agent appointed by vote for that purpose, does not exclude other modes of conveyance; as by the regular officers of the corporation ; Morris v. Kell, 3-487. 61. Purchase and sale. Where promoters of a company purchase land and convey it to the corporation formed, at an increased price, pretending to sell at what they paid, and stock- holders invest in reliance on the truth of these assertions, they are guilty of fraud, and will not be allowed to hold the profit, even though they acted without precedent authority, if their doings were accepted as agents of the company ; Simmons et al. V. Vulcan Oil, etc., Co., 4^80. 62. Trusteeship. An agent or trustee can not, rightfully, place himself in a position of conflict between self-interest and duty. 18 DIGEST OF THE Generally, snch persons may not purchase and make_ profit from the estate of those toward whom they occupy a confidential rela- tion : Covington & Lex. K.E. Co. v. Bowler's Heirs, 4-404. 'a 63. Agbnot to subsceibe foe stock. Secretary of an organ- ization, authorized to proceed to an incorporation, may be empow- ered to subscribe for shares for individuals according to their interests ; Marseilles Land & W. Power Co. v. Aldrich, 6-406. 64. FoEFBiTUKB OF EIGHTS. Violations of proper instructions given and of charter provisions by a mere agent, the manag- ing officers of the corporation being in ignorance of the wrong done, are not grounds of forfeiture of charter ; Tuscaloosa Sci. & Art Assoc. V. State, ex rel., 6-120. AMOTIOK 1. The powee and ns exeeoise. The law relating to ,the power of amotion has been long and well settled. It is a power, judicial in its character, generally exercised by the courts of the land, though it may be given to the corporation, by its charter, and, even if the charter is silent, an officer, or a corporator, in some classes of corporations, may be expelled for sufficient cause. It is essential, in every case, that charges be made, a trial be had, and that the accused be notified and have a fall opportunity for defense. The matter must be decided judicially and fairly, and, if against the accused, he, then, may apply to the courts for re- dress. If it is there found that the corporator or officer had had a fair opportunity for hearing, in his society, and that the charges against him were sufficient and fairly proved, he can have no fur- ther relief, but otherwise he will be restored to his rights ; State, ex rel. Pittmann et al., v. Adams et al., 3-515. 2. Legislative powbe. In a university, a state institution which the state had been in the habit of governing by means of curators appointed by the legislature, for the term di six years from the date of such appointment, " subject to law," it is within the power of such legislature to vacate the office of a curator at discretion, without any fault of his and to vote^ a new election of a professor to the same chair ; Head v. University, 5-59. See DisFEANCHisEMENT OF Membee ; Expulsion of Member. AEBITRATIOK 1. A corporation, which is empowered to sue and be sued, plead and be impleaded, appear in court, defend and prosecute to final judgment and execution, has power to submit a demand made against it, to arbitration, authorized by statute, for the adjustment of controversies ; Morville v. Amer. Tract Soc, 7-473. ' 2. BoAED OF teade. If a board of trade can, by articles of association, acquire the power to arbitrate, as a court, the business disputes of its members, still its decisions are subject to be reviewed and examined by the courts. Wherefore, a party AMERICAN CORPORATION OASES. 17 to such proceeding has a right to an appeal, without conditions, to the superior body of the board ; Savannah Cotton Excli. v. State of Ga., ex rel., 6-343. 3. Agreements to AEBrrBATE. Agreements to submit a matter to arbitration are valid when made after the specific controversy has actually arisen, but not when made in advance. The weight of authority is against the powCT of parties to bind themselves, in advance, that a controversy that may possibly arise shall be con- clusively settled by an individual or a corporation; Bauer v. Sam- son Lodge, 10-336. 4. . So, where the by-laws of a society provided that a member entitled to benefits, may, if dissatisfied with the decision of the subordinate lodge, appeal, the remedy by appeal is merely cumulative, and does not destroy the right of the member to sue in the courts of the state for the recovery of such benefits. Id. AETICLES OF ASSOCIATION. 1. Effbot of. Where corporations are organized under a gen- eral incorporation law, their powers and privileges depend on the law and the articles of association framed thereunder ; much as they would depend on a charter, if created by special act ; Dewey V. Central Car & Manuf. Co., 6-642. 2. Requisites of. The requirements, of a statute, prescribed for the execution of articles of association must be complied with in respect to all substantive statements called for to be made and subscribed ; Richmond Street R.R. Co. v. Reed, 9-243. 3. Certificate of incorporation. The making of the certifi- cate required by the Massachusetts statute in the organization of manufacturing corporations is not a condition precedent to the existence of the corporation under the statute; the failure to make such certificate can not be set up as a defense against a creditor of the corporation ; Merrick v. Reynolds Engine & Grov^ ernor Co., 3-405. 4. Acknowledgment of. The statute of Maryland provides that " any five or more, free white persons, who may desire to form a company for the purpose of carrying on any manufactur- ing business, may make, sign and acknowledge ... a cer- tificate in writing," etc. It was objected to the certificate of the Antietam Manufacturing Company of Washington county, that it did not appear upon its face to have been acknowledged by aU of the subscribers. Held, that the statute does not require the acknowledgment of more than five persons ; such acknowledgment, therefore, by all the subscribers is not a condition precedent, nor can the refusal of one, or more, deprive those wlio do join in the acknowledgment, from claiming the right of incorporation, pro- vided they be five, or more, in number; Hughes v. Antietam Manuf. Co. of Washington county, 3-377. 5. Use of words. Where, in preparing a certificate of incor- 3 18 DIGEST OF THE poration, the corporators employ only the words used in the stat- ute to describe the general purposes of such incorporation, it will be presumed that they intended to create a corporation of the same general nature and with the same general powers granted by the statute ; rather than that, by such words, they sought to apply special limitations on the powers of the corporation; Whetstone v. Ottawa University, 7-116. 6. Ceetainty of dbsobiption. Articles of association of a road corporation describe the termini of the projected road, with suffi- cient certainty, when the description can lie rendered certain ; as where the road is made to start at a point definitely described, to run specified courses and distances to an end, the whole length of road being given ; Miller v. "Wild Cat Gravel Road Co., 7-58. 7. Papers attached. A paper referred to in the articles, as an exhibit, and as a part of such articles and recorded with them, becomes a part of the articles as eilectually as if it had been con- tained in the body of them. Id. 8. Attestation of. The authority of the officer to certify to the formality of articles of association, or incorporation, is a qnes- tion of jurisdiction ; and, as such, is a proper subject of inquiry when the legal existence of the corporation is in issue. The court of appeals of Maryland must be understood as expressing no opin- ion as to " whether the mere form of proceedings, taken to cre- ate a corporation, is open " after certificate duly made that they are formal ; Oler v. Baltimore & E. R.R., for use etc., 7-349. 9. Misnomer.' If there is enough in the expressions used in a subscription to stock, under articles of association, or incorpo- ration, to describe the corporation intended, it will effectuate the contract of subscription. Id. 10. Insufficient. A law required (California) the articles of incorporation, among other things, to set forth \he^ a majority of the members of such association voted at such election, etc., upon the recital of the election, that is, of directors ; if the aver- ment of such vote by a majority of the members be omitted, the certificate will not constitute the association a corporate body ; People, ex rel. v. Segbridge et al., 6-242. 11. DouBTPPL validity. It is questionable (but not in this case meant to be decided) whether an incorporation is binding and of force, in the event that the principal part of the agreement of association is not sustainable in law ; People, ex rel. Stewart, v. Young Men's Father Matthew Total Abstinence Society, 6-526. 12. Effect of signing. One who signs an instrument plainly intended to be final articles of association for the organization of a corporation — in this case, a street railway company — though defective in form, but which, by one article, gives power to any two subscribers to call a meeting " for the purpose of effecting an organization and incorporation under the laws " of the state, and electing directors and authorizing any three subscribers, at such AMERICAN COEPORATION CASES. 19 meeting, " to have said company duly organized and incorporated as herein provided," does not empower such meeting to make new and perfect articles of association and bind him thereby; Kichmond Street Ky. Co. v. Keed, 9-243. 13. SiGNATUKK BY INITIALS. Under a statute which requires the names and places of residence of the subscribers shall be sub- scribed to said articles the law intends they may be subscribed by the corporators, by their usual signatures, and the use of ini- tials to designate their given names is not objectionable ; State, ex rel. OoUings, prosecuting attorney, v. Beck et al., 9-227. 14. Aetioles as a conteact. a corporation is bound to per- form the duties prescribed by its certificate of incorporation and a trust deed made thereunder. For any neglect or failure properly to discharge its duty in this respect, it will be liable to a stock- holder who is injured thereby ; O'Connor v. North Tuckee Ditch Co., 9-542. 15. CoMMEKcmo BusmBss UNDEE. The general incorporation law of Iowa requires the filing of the copy of notice of incorpora- tion in the oflBice of the secretary of state, within three months of their publication in the county wherein is located the conipany's principal office. The court follows First National Bank v. JJavies, Amer. Corp. Cas., 6-517, in which case, a majority of the mem- bers of the court held the omission so to file did not invalidate transactions of the company, nor render stockholders liable as partners ; Eisfield v. Kenworth et al., 6-546. 16. . By the law of Iowa (revision, § 1152, as amended by chapter 172 of 1870) a corporation organizing is not a valid corporation for the prosecution of its business, unless it shall file a copy of its articles of incorporation in the office of the secre- tary of state within three months of the date at which the same were filed in the office of the recorder of deeds in the county in which its principal office is located ; First Nat. Bk. of Davenport V. Davies, 6-517. 17. . On rehearing allowed, three judges, a majority of the court, held that the filing of articles of incorporation in the oflBce of secretary of state is not essential to the validity of the corporation. Id. 18. Evidence of sum subsoeibed. The articles of association, certified by the secretary of state, afford prima facie evidence that the full amount of capital stock required to be subscribed before there is a lawful organization, has been subscribed. In the absence of evidence to the contrary such articles are conclusive ; Jewell et al. v. Rock R. Paper Co. et al., 9-71. 19. Teem of existence. The statute under which a corpora- tion was organized provided that the certificate of incorporation should state " the term of its existence, not to exceed forty years." The corporators used the words, " the term of existence of said company or corporation not to exceed the term of forty years," 30 DIGEST OP THE Held, this was sufficiently definite. It means and is to be under- stood as creatine a term for at least forty years ; Merrick v. Eey- nolds Eng. & Q. Co., 3-405. 20. Immatekial eeeoe. The statute required articles of asso- ciation to set forth, among other things, ' ' the amount of the capital stock," and " the number of shares of which said stock shall consist." Articles were subscribed reading thus, " have fixed the capital stock of said company at $150,000, said capital stock shall consist of 500 shares, at $100 per share," etc. It was ob- jected that this did not state the number of shares with sufficient precision and accuracy. Held, this is a mistake apparent on the lace of the certificate itself ; the insertion of 500 instead of 1,500 shares is an error which could not deceive or injure any one. Id. 21. Invalid acts under. A by-law of a corporation can not be valid which seeks to impose restrictions on membership, which are not to be found in, or are in conflict with, the articles of asso- ciation. A by-law can not narrow the plain meaning of such articles ; People, ex rel., v. Young Men's etc. JBenevolent Soc, 6-626. 22. Unlawful ebsteictions undbe. Where articles of associa- tion prescribe qualifications for, and conditions of, membership no additional, or other, restriction on such membership can be im- posed by by-law, unless the articles be themselves amended to admit it. Id. 23. Copt of aeticles as evidknce. When it is shown that the original articles of a corporation are lost, the record of the copy, filed in the recorder's office, is admissible in evidence ; Washer v. AUensvUIe etc. Turnpike Co., 9-223. 24r. Pleading not aid defects. If articles of association be defective, in not setting forth a material fact, required by law to be set forth, they will not be aided by an answer on quo warranto, nor can proof be admitted to establish the fact ; People, ex rel., v. Sey bridge et al., 6-242. See Chaetee ; Oeganization. ASSESSMENT. 1. Its nature. An assessment of benefits is an exercise of the taxing power, and, in a general sense, a tax, but it is a tax of a pecuhar nature. It is a local assessment imposed occasionally, as required, upon a limited class of persons interested in a local improvement, who are assumed to be benefited by the improve- ment, to the extent of the assessment, and it is imposed and col- lected as an equivalent for that benefit and to pay for the im- provement ; City of Bridgeport v. New York etc. R.R. Co., o— 189. 2. Assessments aee not taxes. Assessments made for local improvements are not taxes levied, within the meaning of the constitution of Louisiana, and are not controlled by Siat pro- AMERICAN CORPORATION CASES. 21 vision which requires that all taxes shall be uniform ; City of New Orleans, praying for the opening of Oasacalvo and Moreau streets, 2-375. 3. Upon what peopeett to be made. Property lying in the neighborhood of an improvement, whether taken or not, is liable to be assessed for the proportion of benefit derived from such improvements. Id. 4. . To authorize an assessment of a tax for an improve- ment, it must be shown that the property assessed was benefited by the improvement. Id. 5. Unifoemitt of assessment, a rate of assessment which is uniform and equal throughout the district in which it is imposed, is consistent with the constitutional provision, of Indiana, requir- ing the legislature " to prescribe such regulations as shall seem a just valuation for taxation of all property, both real and personal " ; Palmer v. Stumph, 3-216. 6. Eight of way. That the company has not procured the right of way for the location and construction of its drain is no defense to an action to recover assessments; Large «. Keen's Creek Draining Co., 1-358. 7. Assessment of benefits. The value of land benefited should be considered in assessing against the owner the expenses of making a sewer. An arbitrary rule, to apportion the expense against owners by the front feet of their lots, is unreasonable; Clapp V. City of Hartford, 3-107. 8. Affidavit of appeaisees. An aflSdavit of appraisement showing that " the foregoing appraisement is correct to the best of our judgment " is sufficient under section 12 of the statute, which requires an affidavit showing " that the same is in all re- spects a true assessment to the best of their judgment and belief ; " Large v. Keen's Creek Draining Co., 1-358. 9. objection : when taken. An objection to an assess- ment, upon the ground that it was levied upon the front foot, and not upon the property specially benefited, should be taken before the council ; Jenks et al. v. City of Chicago, 3-183. 10. Right to object to finding of appeaisee. The act pro- viding for the assessment of the expenses of opening streets in the city of New Orleans confers upon " any person whose inter- est may be affected," the right to make objections to the report, estimate and assessment. Held, that the term " person " included the city, and that it was not precluded from objecting to an assess- ment ; City of New Orleans, praying for the opening of Oasa- calvo and Moreau streets, 3-375. 11. Notice; time of publication. When the record of pro- ceedings for a judgment upon a special assessment warrant shows that the notice given by the collector, upon receipt of the war- rant, was published ten days consecutively, and it is not made to appear that the paper in which the notice was published was pub- 23 DIGEST OP THE lished on Sunday, it will be presumed that the ten days were ten consecutive secular days ; Jenks et al. v. City of Chicago, 3-183, 12. Mode of authentication. An assessment made by the superintendent of public streets in San Francisco, to cover a sum due for the improvement of a street, is an official act, and must be authenticated by his official signature. An assessment not thus officially attested, though attached to the diagram and the superintendent's warrant, which were in due form properly at- tested, does not constitute a valid assessment, and is not admissi- ble in evidence, either by itself, or in connection with the war- rant and diagram ; Dougherty v. Hitchcock, 3-179. 13. Eepoet of the boaed of public woeks can not be IMPEACHED. The report of the board of public works in the city of Chicago, showing that lots against which they have made an assessment for a pubHc improvement will be specially benefited thereby, can be impeached only for fraud; Elliott v. City of Chicago, 3-181. 14r. Alteeation of eoll. An assessor in the state of Nevada is not authorized to alter an assessment roll, after its delivery for collection ; State of Nevada v. Manhattan Silv. Min. Co., 3-607. 15. Finding of commissionees. The determination of the com- missioners as to what property shall be assessed is conclusive, unless impeached for fraud ; and, in an application for judgment on such an assessment, it is not competent to prove that lots have been omitted from the assessment, though benefited by the pro- posed improvement as much as those included therein ; Wright V. City of Chicago, 3-176. 16. ■ CAN NOT BE IMPEACHED. When it appears that an assessment in the city of Chicago, for a proposed improvement, was upon property specially benefited, in the judgment, of the commissioners making the assessment, their judgment can not be impeached, except for fraud ; Jenks et al. v. City of Chicago, 3-183. 17. Conclusiveness of finding. After final ratification and return of commissioners appointed to lay out and condemn a public road, their proceedings can be in no wise collaterally impeached ; Tyson v. Com'rs of Bait. Co., 3-391. 18. Evidence. Commissioners in making such an assessment act in a quasi judicial capacity, and they can not be required, in any tribunal, to give reasons for their action ; Wright v. City of Chicago, 3-176. 19. Befoee completed oeganization. Procuring an assessment to be made upon lands to aid in the construction of a drain by a draining association, organized under the statute of the state of Indiana, is a corporate act, and can not be legally done until after the articles of association have been legally recorded ; New Eel Eiver Draining Association v. Caniger, 1-357; Same v. Durbin, 1 -353. AMERICAN CORPORATION CASES. 23 20. Action on assessment. In a suit by such an association upon an assessment, the defendant, if not a member of the associa- tion and if he has not contracted with it as a corporation, may plead nul tiel corporation at the date of the assessment. M. 21. Excessive assessment. The fact that an assessment made by such an association, otherwise valid, is too high, will not defeat an action thereon, but will go to reduce the amount of the recovery. Id. 22. Interest on illegal assessment. It is error in rendering judgment upon a new assessment which is sustained upon the ground that a former assessment was invalid, to include in such judgment the costs of the original assessment, with interest from the date of its confirmation ; Laflin et al. t). City of Chicago, a-199. 23. CoNTKAOT UNDER ASSESSMENT. A valid assessmcnt must be founded on a contract duly authorized and executed as required by statute ; Dougherty «. Hitchcock, 3-719. 24. When invalid. An order of a board of commissioners, appointing assessors to make an assessment under the statute of Indiana, of March 11, 1867, for a gravel road company not legally incorporated, is void; Piper et al. v. Rhodes et al., l-3*)0. 25. Void assessment. In the estimate of damages and bene- fits, for the laying out and opening a public highway alonj^ side of and parallel with a railroad, the franchise of the railroad com- pany is not properly the subject of assessment ; wherefore, an assessment laid upon such corporate franchise on the ground that it will be benefited and its value increased, because by the perma- nent removal and prevention of obstructions to vision the lines of sight on the road will be extended and the company be, thereby, enabled to run its trains at greaterspeed, with less liability to casu- alties or to possible future expense of maintaining gates, or flag- men, at crossings, was held to be void ; City of Bridgeport v. H. Y. etc. E.R. Co., 3-189. 26. DOES NOT EXHAUST POWER. An attempt to make an assessment does not exhaust the power of the superintendent, when such assessment is void ; Himmelman v. Cof ran, 3-104, 27. Chaetee oonsteubd. The charter of the city of Chicago authorized a new assessment for the purpose of opening a street, when "from any cause the city fails to collect the whole or any portion of any special assessment." This was held to apply to new assessments made necessary by the illegality of the original assess- ment ; Laflin et al. v. City of Chicago, 3-i99. 28. " Investigation ; " statute construed. An investigation of the facts upon which an assessment is made, for the purpose of opening a street in the city of Chicago, does not necessarily involve an examination of the premises ; Wright v. City of Chicago, 3- 176. 29. San Francisco ; stbeets ; mandate. The contractor who 34 DIGEST OF THE has completed work on the streets of San Francisco, under a vahd contract, is entitled to an assessment on the lots fronting on the street improved, to pay for such improvement ; and upon a proper showing the courts will, by mandate, compel the superintendent of streets to make such assessment ; Himmelman v. Cofran, 3- 104. ^ ... 30. Pkkstjmption. When a report of commissioners, in respect to an assessment of special benefits to be derived from public improvements, shows that they found and estimated the benefits to private property, relating to that of the whole city, and assessed the private property accordingly, it will be presumed that they thoroughly investigated the subject, though it is not so expressly stated ; Wright v. City of Chicago, 3-176. 31. Payment; cancellation; dischaege. The municipal authorities levied an assessment upon a lot, for the construction of a drain from it to the main sewer, the owner having been required to construct the same, and having failed to comply with the requirement. After the levy was made the owner sold the lot, and after the sale, his agent, having no knowledge of the sale, paid the assessment and took a receipt therefor. The col- lector marked the assessment upon his books as paid, but after- ward, upon the claim of the agent that the payment was made by mistake, refunded the money, destroyed the receipt and canceled the entries of payment on the books. Held, 1. That this oper- ated as a payment and discharge of the assessment ; but, 2. That if money received in payment of an assessment on one lot was entered by mistake to the credit of another, the mistake could be corrected by the collector ; Mason v. City of Chicago, 3-194. 32. Contbaotoe's eecouese. Contract to perform work on streets, expressly stipulating, on the part of the contrabtor, that he will look for payment only to the proceeds of special assess- ments already levied, or to be levied, making no claim against the corporation, except as upon the collection of such assessments. Mandamus will not issue to compel the city to some other mode of payment, it appearing that the corporation is in good faith and with reasonable diligence, collecting by means of such assess- ments ; City of Chicago v. People, ex rel., 3-192. ASSESSMENT OF STOCK. 1. LiABiLiTT ON STOCK. The Original holder of stock is liable for unpaid assessments thereon, without any express promise to pay. Any contract in limitation of his liability is void ; Upton etc. V. Tribilcock, and Webster v. Upton etc., 5-111, 120. 2. Assessments, oe calls. The general rule is, that where the capital stock and the number of shares are fixed, in the articles of association or recorded certificate, no valid assessments or calls can be made against a subscriber until all the shares are taken, unless there be a provision to that effect, either in the certificate or gen- AMERICAN CORPORATION CASES. 25 eral law under which the company is organized ; Hughes v. An- tietam Manaf. Co. of "Washington Co., 3-377. 3. Pebeequisite. Where the charter of a corporation provides for, or authorizes, a stipulated amount of capital stock, divided into shares of a specific number, or value, no assessment can be made against the subscribers until the whole amount has been sub- scribed, unless a contrary intention is manifested in the charter or in the subscription; Selma, Marion & Memphis K.R. Co. v. Anderson, 8-27- 4. Consolidated company. A corporation, formed by the consolidation of two, or more, companies, can not make valid assessments on subscriptions to the stock of one of its constituent companies, before corporate existence has been completed, by compliance with all statutory requirements ; Peninsular Ry. Co. V. Tharp, 5-466. 5. . It is essential, in such case, in an action upon assess- ments to the capital stock of a constituent company, on a ground of right by succession under the statute, that there be shown a consolidation strictly conforming to the statute authorizing it; Mansfield etc. E.E. Co. v. Drinker, 5-466. 6. Condition peecedent. Oontradt of subscription containing a condition precedent — in this case that a certain amount of stock should be subscribed for — plaintiff must aver and prove per- formance or a waiver to fix a liability on defendant ; Livesey v. Omaha Hotel Co., 8-312. 7. Assessment as peecedent to action. Agreement to take stock and pay aU charges and assessments regularly levied or assessed by directors. Recovery only after assessment or call; Grosse I. Hotel Co. v. Exec'rs etc. 8-407 ; S. E., Santa Cruz E.R. Co. V. Schwartz, 6-243. 8. Peeeeqtjisite OF. Before an assessment can be legally made, the number of shares or the amount of capital stock must be definitely fixed ; Somerset E.E. Co. v, Clarke, 4-428. 9. . It is indispensable that the number of shares should be determined before an assessment on the shares can be made. If the number be not fixed by the charter, it is to be presumed that it should be by the directors or stockholders. Id. 10. . When an act of incorporation fixes the amount of capital stock which a corporation may hold, the corporation can not make an assessment upon the shares of a stockholder, until all the capital stock has been subscribed, unless, either expressly or by implication, a different intent appears in the charter, or in the contract of subscription ; Peoria & Eock Island E.E. Co. v. Preston, 4-389. 11. . When the subscription contract, or charter, of a cor- poration specifically fixes the amount of the capital stock at a certain amount, divided into shares of a certain amount each, the capital 60 fixed must be fully subscribed before an action wiU lie against 4 26 DIGEST OF THE a subscriber to recover assessments levied on the shares of stock, in the absence of a clear provision in the contract authorizing the corporation to proceed, with the accomplishment of the main design, with a less subscription than the whole amount of capital specified, or unless there is a waiver of the condition precedent ; JAvesey V. Omaha Hotel Co., 8-312. 12. Con'dition precedent. Where the amount of the capital stock of a corporation, and the number of shares into which it shall be divided, are fixed by articles of incorporation, it is necessary that the whole capital stock shall be subscribed before an assess- ment can be made ; Baile v. Calvert College Educational Soc, r-379. 13. . A general incorporation act provided that the direc- tors of corporations formed under it might call in all sums of money subscribed at such times and in such payments and instal- ments as they might deem proper, under penalty of forfeiting the shares subscribed for and payments previously made, if pay- ment be not made, within a number of days fixed, after personal demand or publication in a manner prescribed. Demand or notice, as prescribed, is a condition precedent to tlje right to sue for calls or assessments upon the stock subscribed ; Granite Koof- ing Co. V. Michael, 7-407. 14. Conditional subsoeiption. The charter of a corporation authorizing subscribers to its capital stock to designate upon what part of the company's work the amount of their subscriptions shall be expended, a general creditor can not, by trustee process, collect an assessment made upon a subscriber, and divert and hold the proceeds of such assessment for a debt not contracted within the purpose designated in the subscription; Pike v. Bangor & C. S. L. R.R. Co. et al., 7-32.:i. 15. Capital must be fixed. Where by charter the capital stock might consist of not less than a given number of shares, which number might be, from time to time, increased, an assess- ment before the capital stock was fixed was invalid. Id. 16. Equality of. An assessment must be upon all shares of stock held in like manner ; wherefore an assessment made on the stock held by towns and cities and omitting the shares held by individuals, is invalid. Id. 17. Peioe to sitbsceiption. An assessment upon stock of a cor- poration subscribed for, made before the date of subscription for the stock, creates no liability against the subscriber. Id. 18. Made by committee. The appointment by a board of directors of a committee to make an assessment is in excess of the directors' authority, and, unless ratified by act of the directors, an assessment so made is void. Id. 19. By overplus of dieeotoes. An assessment of stock made by a greater number of directors than the charter has authorized to be elected is invalid. A subscriber who has acquiesced in the AMERICAN CORPORATION CASES. 27 • illegal action of such an unlawful board can not, however, set it up as a defense when called upon to pay the assessment; Macon & Augusta Ky. Co. v. Vason et al., 7-4. 20. Computation of subsoeiption. Where the subscription list shows upon its face that the capital stock of a corporation has been taken, and, when the subscriptions have been, in good faith, accepted by the company, and when, upon the faith of such sub- scriptions, property is acquired and liabilities are incurred, a subscriber to the stock can not rely upon the fact, subsequently appearing, that some of the subscriptions were improperly made and without authority, as a defense to an action against him to recover an assessment levied on shares of the stock held by him; Baile v. Calvert College Educat'l Soc, 7-3Y9. 21. Notice. Publication of notice, by statute, required during sixty days, is not good, the publication being only during fifty- nine days ; Macon & Augusta Ry. Co. v. Vason et al., 7-4. 22. Notice of. The president of the board of trustees called upon a stockholder and made demand, in person, that he pay an assessment levied upon his stock, at the time, stating that he did so at the request and by the authority of the" trustees. Sufficient notice of assessment, or call; Baile v. Calvert College Educat'l Soc, 7-379. 23. "Waiver of condition peecbiiknt. When articles of incorporation are adopted and properly filed, as required by law, in the absence of any prohibition by such articles or by-law, the parties to the undertaking may employ agents to secure the full amount of capital required, to procure information in regard to the enterprise, and may contribute money to pay expenses incurred in all necessary preliminary steps in perfecting the organization of the company. Participation in such and similar acts will not be the basis of a presumption that any subscriber waived a precedent condition that the whole amount of capital stock required should be subscribed before the company proceeds to the accomplishment of the main design of its incorporation; Livesey v. Omaha Hotel Co., 8-312. 24. Effect of patment. Payment of calls on shares subscribed will estop, an original subscriber for shares, from denying his lia- bility for future calls ; Hamilton et al. v. Grangers Life & Health Ins. Co., 9-56. ^ 25. Estoppel bt paeticipation. One who participates in all the proceedings, in forming a corporation and making calls for the subscriptions, both as stockholder and director, is estopped to deny the validity of such proceedings in a suit to oompel the pay- ment of calls on the stock he subscribed for ; Kansas City Hotel Co. V. Harris, 8-89 ; S. E. Ossipee Hosiery etc. Co. v. Canney, 5-532. 26. Chaeteb eight consteued. Where the charter of a rail- road company provided that upon stock to the amount of 28 DIGEST OP THE $100,000, or ten per cent, of the whole capital stock being subscribed for, an organization of the corporation should be perfected by the election and appointment of proper officers, and the directors elected should then re-open the books, and continue the receipt of subscriptions until the whole amount of the capital stock should be subscribed, and that "all subscriptions to. the stock of said company shall be paid, at such times, in such amounts, and on such conditions as said directors may prescribe," it was held that the latter provision, respecting the times and terms of payment, had reference to the time when the full amount of stock is taken, and no authority is conferred by it to assess until all the stock is subscribed for ; Peoria & E. Isl. K.E. Co. v. Preston, 4-389. 27. In Oregon. The general incorporation act in Oregon does not require subscription to the entire amount of the capital stock of a corporation as a condition precedent to legal existence ; there- fore, whenever a corporation is so organized as to be capacitated to prosecute its business, it has, through its board of directois, the power to levy assessments. Generally, whenever a sufficient amount of tlje capital stock of a private corporation has been sub- scribed to authorize the stockholders to proceed to the election of directors, and such directors have been properly elected, assess- ments can be lawfully made upon the unpaid stock subscribed for ; Williamette Freighting Co. v. Stannus, 4-64. 28. After capital increased. In Oregon, notwithstanding the entire amount of the capital stock has not been subscribed for, the directors may increase the amount of such capital stock. If such increase be made, still, although the original stock be not yet taken, the directors may levy assessments on the unpaid stock sub- scribed for. This rule, however, would not apply where sub- scription to the entire capital stock, as fixed or to be determined by the board of directors, is made a condition precedent to the exercise of the power of levying stock. Id. 29. Remedy foe default in payment. The act of becoming a stockholder in a corporation, by subscribing articles of associar tion, is one from which the law raises a promise to pay the instal- ments legally assessed and demandable. The common law fur- nishes a remedy for a violation of this engagement by an action of assumpsit. The subsequent enactment authorizing forfeiture and sale of the stock is cumulative as a remedy ; Hughes v. An- tietam Manuf. Co., 3-37Y. 30. FoEFEiTUEB AND SALE, ciTMTjLATiVE REMEDY. A Corpora- tion may maintain an action upon an express promise to pay as- sessments on stock, although, by a subsequent provision of the subscription paper, it is authorized, in case of non payment, to sell the stock : Boston, Barre & Gardner RR. Co. v. Wellington, S-442. ^ 31. Power to assess before stock sttbsokibed. By the char- ter, in this case, the corporation was empowered to receive sub- AMERICAN CORPORATION CASES. 39 scriptiona and lay assessments and sue for their recovery before the stock was fully subscribed. Id. 32. Sale foe non payment. After a sale of shares of stock in a corporation, under a statute providing that " if the proprietor of any share or shares shall refuse or neglect to pay any tax or assessment duly voted " etc., " the treasurer may sell, by public auction, the share or shares of such delinquent proprietor, suf- ficient to pay all taxes and assessments which may be then due from said proprietor, with all necessary and incidental charges," no action can be maintained against the stockholder for a balance due thereon ; Mechanics' Foundry etc. Co. v. Hall, 7-458. 33. Assessment of stock befoke organization. Where the owners of undivided interests in real property enter into an agree- ment, in writing, to form, immediately, a special partnership, to improve and develop the property, until a corporation can be law- fully organized, each party agreeing to furnish his proportion of the fund necessary for the immediate improvement thereof and to receive stock proportioned to his payments, the owner of such in- terest will, in equity, be held, both before and after the organiza- tion of the corporate body, liable to reasonable assessments for the attainment of the contemplated purposes; Marseilles Land & Water Power Co. v. Aldrich, 6-406. 84. Eeeoe in. When the court, upon application by the re- ceiver, made an order prescribing the per centage of assessment to be made against makers of premium notes of an insurance com- pany, the policy holders are bound by such adjudication, and a supposed error in making such assessment can not be availed of by a member of the corporation ; Lycoming Fire Ins. Co. v. Langley, 10-542. 35. Limitations. A subscription being in writing, an action to recover an assessment thereon is not, in Ohio, barred until fifteen years expired ; Gibson v. Columbia & N. H. T. & B. Co., 3-665. 36. Enfoeoement of. A subscriber for shares in the capital stock of a corporation refused to pay the assessments on the shares. The company did not formally declare such shares for- feited, but procured subscriptions from other persons to the full amount of the capital stock as fixed by the directors. It was held, that the company could not thus sell the shares and sue the subscriber for the difference between the assessment and the sum ■ for which the shares were sold, under a statute which provides : (1) The shares may be sold, and any deficiency collected by an action ; (2) The shares may be declared forfeited, and may be transferred to any responsible person who will subscribe for the same ; Athol & Enfield E.R. Co. v. Inhabitauts of Prescott, 4-448. 37. Collection of, aftee business discontinued. The adop' tion, by a corporation, of a resolution to discontinue its business 30 DIGEST OP THE does not operate to work a dissolution of the company ; nor does it deprive the corporation of the power to enforce assessments on stock owned, by action ; Chotean Ins. Co. v. Floyd, 8-283. 38. Eequiebments in action foe. In an action brought to recover an unpaid balance of assessments due upon shares of stock after sale of the shares, made for non compliance with calls, the plaintiff must prove legal assessments upon the shares of de- fendant and a legal sale, before defendant can be held accountable for such balance ; Somerset E.R. Co. v. Clarke, 4-428. 39. Invalid. An association of one state, organized under its laws, can not compel its members to pay an assessment levied by another corporate body which is beyond the jurisdiction of the law of the state which created the first mentioned corporation. As it may not compel the payment of such assessment it can not suspend a member for non payment thereof ; liamphere v. Grand Lodge A. O. U. W., 7-594. 40. Defense; misappeopbiation of funds. That funds of a corporation, sufficient to pay its debts, have been misappropriated by an agent is not a sufficient defense against an assessment made for the payment of debts ; Sullivan v. Triunfo Gold and Silver Mining Co., 3-132. 41. Action on stock held bt city. Where an invalid assess- ment is levied on stock owned by a city, subscribed for in a cor- poration, a vote of common council, authorizing its payment, will not preclude the city from setting up any legal defense in bar of , recovery ; Pike v. Bangor & C. S. L. KR. Co. et al., 7-323. 42. Insolvency ; defense. In action by an insolvent corpora- tion, to collect an assessment on stock, no defense will be admitted grounded on defects of organization, unless such defects might be successfully set up in answer to a creditor's bill filed against the stockholder to enforce his personal liability; Ossipee Hosiery etc. Co. V. Canney, 5-532. 43. CoMPEOMisE OF COMPANY DEBTS. A stockholder can not defeat an assessment by showing that the directors have compro- mised and paid all the debts of the corporation with their own money. If they paid them at a discount the corporation is entitled, against such directors, to any profit resulting from such transac- tion ; Choteau Ins. Co. v. Floyd, 8-283. 44. Necessity of, as a defense against. When a stockholder of a corporation is sued for the amount of an assessment upon his subscription for stock, he will not be allowed to dispute the necessity of the assessment. Id. 45. Unwaeeanted sale- upon. Plaintiff's testator, Mitchell, was a stockholder in a Vermont mining corporation. The direc- tors of the company imposed an assessment upon its stock and advertised the stock of Mitchell for sale for non payment thereof. Prior to the sale Mitchell tendered to the president of the corpo- ration, at its office, during business hours, his check for the AMERICAN CORPORATION CASES. 31 amount of the assessment. The president refused to accept, but made no objection as to form or amount. The stock was sold and bought in by the president. Mitchell repeatedly thereafter offered to the corporation and to its president the amount of the assessment and all charges and expenses in making the sale. In an action brought to set aside the sale and to restrain a transfer of the stock to the purchaser, the court of appeals of New York held that in the absence of evidence of want of authority in the president, the tender must be assumed to have been properly made to him ; that the question of want of authority not having been raised upon the trial, could not be raised upon appeal ; that no objections as to the, form or amount of the tender having been made at the time they were waived the tender must be held sufficient ; that a sufficient tender having been made, the sale was without authority and void, and that plaintiff was entitled to the equitable relief claimed ; Mitchell, executrix etc., et al. v. Yt. Copper Min. Co. et al., 8-4:Y3., ASSETS. 1. Trust fund. In equity the property of a corporation is re- garded as held in trust for the payment of its debts. Creditors may pursue it in to the hands of all persons, except only those of bona fide purchasers; Chic, R. I. & P. II.R. Co. v. Howard et al., 1-1. 2. . The assets of an incorporated company are a trust fund, for the payment of its debts ; which may be followed in to the hand of any person having notice of the trust; Jones, M'Dowell & Co. et al. v. Ark. M. & A. Co., 6-213 ; Bartlett v. Drew, 4-634. 3. . In equity the corporation is regarded as a trustee, holding the corporate property for the benefit of its creditors and shareholders, which, upon its dissolution or civil death, a court of chancery will lay hold of for a trust fund and distribute for their benefit; St. L. & Sandoval Coal Co. v. Sandoval Coal Co., 10- 292. 4. . The property and assets of a corporation are vested in the trustees, to be preserved by them, as a fund to secure the creditors of the corporation ; San Francisco & North Pacific R.K. Co. V. Bee et al.,. 5-147. 5. Cbeditoe's eights. It is not competent, to the members of a corporation, to dissipate its property and assets so as to place any portion thereof beyond the reach of the creditors of the cor- poration, and a re-incorporation under or by a new corporate name and the transfer of the assets of the old incorporation to the new one, will not be effectual to bar the rights of creditors, who may follow the property in possession of the new company. Id. 6. PuECHASE OF, BY DiEBCTOE. The purchaso of the assets of a corporation, which is insolvent, by a director thereof, is not void. 32 DIGEST OF THE but only voidable at the instance of a party in interest ; Jones etc. Co. et al. v. Ark. M. & A. Co., 6-213. 7. PuECHASB OF, BY DiEECTOE. When the property and fran- chises of an insolvent corporation are sold for a certain considera- tion, and mortgagors and bondholders, who had a lien on the property sold, arranged with stockholders and the corporation and effected the sale thereunder, agreeing that a per centage of the proceeds shall be paid to the boudholders in full satisfaction of their bonds, and the remainder shall be distributed to the stock- holders, the portion set apart for the stockholders is a fund belonging to the corporation, discharged of the lien of the mort- gage, and subject, as other assets, to the debts of the corporation ; Chic, E. I. & P. R.K. Co. v. Howard, 1-1. 8. Legislatfve power. It- is a proper exercise of the police power of the state, that the legislature shall prescribe what amount of assets an incorporated compamr shall possess, or on what basis its solvency shall be estimated ; Chic. L. Ins. Co. v. Auditor etc., 9-79. 9. . A transfer of corporate property may be well worked by legislative enactment, accepted, sanctioned and given effect to by the parties between whom the transfer is made; Miller v. Lancaster, 4-170. 10. What aee not accounted. Securities which stand in the name of a corporation and to which apparently the company has title, but for which the company has paid nothing and which are, in fact, not its property ; but which they have taken in the name of the company, expecting in the future to acquire property therein, are not bona fide assets of such corporation ; Chic. L. Ins. Co. V. Auditor etc., 9-79. 1 1. . The good wiU of a corporation, be its value what it may, is not to be accounted as an asset of such company. Id. 12. Unpaid STOCK. Unpaid balances of stock subscriptions are corporate assets ; Shockley v. Fisher, 9-520 ; Lane v. Kickerson, 6-513. See Cobpoeate Funds. ASSIGNMENT. 1. CoRPOEATioN MAT ASSIGN. An existing corporation may make a valid assignment of its assets for the benefit of creditors; M'Callie & Jones v. Walton, assignee, 1-314:. 2. . An assignment by a corporation of all its property for the benefit of all its creditors, with the usual directions as to the performance of the trust, is not obnoxious to the statutes of 13 and 27 Ehzabeth. Id. 3. Foe sENEFrr of ceeditoes. A corporation may make an assignment for the benefit of creditors, under the statute of Missouri ; Shockley v. Fisher, 9-520. 4. Power to make. Where the affairs of a corporation are AMERICAN CORPORATION CASES. 33 intrusted to a general managing agent, he may assign the choses in action of the corporation to its creditors, either in payment of or to secure a precedent debt of the corporation, without express authority from the board of directors. An assignment so made is valid ; M'Kiernan v. Lenzen, 6-264. 5. PowEE TO MAKE. It is weU settled that, in the absence of any restriction, by charter or general law, a corporation may execute an assignment of its property for the benefit of its creditors. Such an assignment may be made by the corporate directors, without express authority, or consent of the stockholders ; De- Camp et al. V. Alward, 7-76. 6. Effect of general assignment. The act of a corporation in assigning its property, for the payment of the debts of the cor- poration and to distribute the surplus, if any, does not work a dis- solution of the company. Id. 7. Judgment. A judgment obtained subsequently to such an assignment takes no priority in the distribution of the assets ; M'Callie et al. v. Walton, assignee, 1-314. 8. Trustee. If one of two persons to whom an assignment for the benefit of creditors is made refuses to quahfy, all the powers of the trust vest in the other and he may proceed alone to collect the assets ; Shockley v. Fisher, 9-520. 9. Assignment of stock dues. Where the amount due on a stock subscription has been regularly called in, by assessment, and stands as a liquidated demand, on which suit will lie, it would seem that the claim may be assigned as well before as after judg- ment. Such assignment, however, will be subject to equities and will not .deprive the debtor of any rights of a stockholder ; Wells et al. v. Rogers, 9-487. 10. Unpaid stock. Unpaid balances upon stock subscriptions are corporate assets and are assignable. Being properly assigned they pass to the assignee. He may collect them ; Shockley v. Fisher, 9-520. 11. Right of subscriber on assignment made. Action by assignee of a claim for an amount unpaid on a stock assessment. Defendant, if he be a stockholder in the corporation which exe- cuted the assignment, may have a right to know whether or not he is sued by a purchaser for value. He can, therefore, show the consideration of the assignment ; WeUs et al. v. Rogers, 9-487. 12. Assignment executed in another state. A general as- signment, for the benefit of creditors, executed in a state other than that of a corporation's creation, which is executed with ex- press reference to the state of its existence, and intended to have its first operation in such state^ is to be treated in passing on its validity, contested by a creditor, as though it were originally exe- cuted in the state of the' corporation's residence ; Richardson et al. V. Rogers, 7-573. 13. Exhaustion of power to execute. Where a "general as- 5 34 DIGEST OF THE signment, for the benefit of creditors, is authorized by the direc- tors of a corporation and executed under it, the assignees enter into possession and proceed to the execution of the trusts imposed and accepted, the assignment being good as against the company^ the power of the agent to execute and of the company is ex- hausted, and the original resolution of authority will not support a further execution, even to avoid invalidity of the first instrument. The company having parted with its title, can not, at will, re-assume it that it may again transfer it; especially where the assignees in possession neither renounce their trust nor waive any right. Id. 14. Unauthoeized. A promissory note of a corporation, as- signed by an otEcer, without authority, remains the property of the company, and if collected by the assignee, holding under th& invalid assignment, the actual owner may recover against such assignee the amount thereof; Blood i>. Marcuse, 1-195. ATTACHMENT. 1. Natijee op the PEocKEDmo. A proceeding by attachment is the prosecution of a special and extraordinary remedy. Stat- utes authorizing it are to be strictly construed and can have na force in any case which is not plainly within their terms ; Van Norman v. Circuit Judge for Jackson Co., 6-663. 2. Inbolvenot ; attachment. Where real estate, belonging to an insolvent bank of the state of Ehode Island, located in Illinois, was attached at the suit of a creditor ; held, that a decree of a com- petent court of Ehode Island finding the bank insolvent, appoint- ing a receiver of its effects, and restraining it from transacting further business, does not constitute any suflScient cause for quash- ing the attachment writ ; City Ins. Co. of Providence v. Commer- cial Bank of Bristol,. 5-219. 3. Liability of munioipal coepoeations. Under the provisions of the act of the legislature of Alabama, approved February 22, 1866, process of garnishment lies against a municipal corporation to subject the wages or salary of a policeman to the satisfaction of ajudgment obtained against him ; City Council of Monteomerv v. Van Dorn, »-33. s J 4. Pleadings, Under the provisions of this statute, the answer of the corporation is not required to be under its corporate seal, but may be made by the treasurer, upon whom the garnishment ifi served. Id. 6._ Waivee. a municipal corporation may waive its statutory privilege of exemption from garnishment ; Clapp v. Walker & Davis et al., ^-294. 6. _0e fees in the hands of au offioee. Fees and allowances to jailers being provided by law as necessary to enable them to discharge their official duties, the attachment of the same, in the hands of the sheriff, is prohibited by public policy : Webb v. M'- Cauley, 3-341. AMERICAN CORPORATION CASES. 35 7. Attachment of shares of stock. An attaeliment can not be levied on sliares in the stock of a corporation, as property of a debtor, when such shares stand, on the corporate books, in the name of another, regularly assigned and transferred within the knowledge of the company ; Van Norman v. Circuit Judge, 6-663. 8. National bank. The property of a national bank, organ- ized under act of congress of June 3, 1864, attached at the suit of an individual creditor, after the bank had become insolvent, can not be subject to sale, for the payment of his demand, against the claim of a receiver, subsequently appointed, who claims pos- session of the property ; National Bank v. Colby, 5-82. ATTOENET. 1. PowEE TO RETAIN. Managing officers of corporations have power to employ attorneys and counselors, without express dele- gation of power, or formal resolutions to that effect ; Southgate v. Atlantic & Pacific R.R. Co., 8-144. 2. Who mat appear. The managing agent of a corporation, to have authority to appear for his company, in a suit instituted against it, must be one whose powers extend to the whole business of the company and on whom service of summons could be made pursuant to statute ; Lamb v. Gaston & S. G. & S. M. Co., 8-300. 3. -Appearance in suit. The authority for an attorney in fact of a corporation to appear in a suit against it must appear within the terms of the grant of power to him, unless he is a general managing agent of the corporation. Jd. 4. Instance. A director of a corporation retained an attorney and authorized him to retain local counsel to attend to certain suits in which the company was interested. The report of the attorney originally retained, of his retainer of the local counsel, to the direc- tor was legal notice to the corporation, and the continued silence of the director was, in law, a ratification, by and through him, of the corporation of the original attorney in the premises ; Pittsb., Cin. & St. L. R.E. Co. v. WooUey, 7-170. 5. Proof of value of service. In a suit, against a corporation, to recover for professional services, proof that the services of a good attorney, at the place where plaintiff was located, were worth a specified sum is not competent. The attention of the witness should be called to the particular services rendered and his opinion should be thereon predicated ; Southgate v. Atl. & Pac. R.R. Co., 8-144. See Offices and Officbeb. BANK AND BANKING ; see, also. National Banks. 1. Statutory. No association of persons can acquire corporate existence, under the free banking act of Louisiana, without com- 36 DIGEST OF THE plying with all tlie conditions precedent prescribed for incorpora- tion thereunder. No corporation organized under the general incorporation law can engage in banking ; Workingmen's A.ssocia- tion Bank v. Converse et d., 7-203. 2. Limitation of acts. A bank, like other private corporations, is confined to the sphere of action limited by the terms and intention of its charter ; Weckler v. First Nat. Bank of Hagerstown, 7-354. 3. Amendment of chaetbe. Where one, who is a stockholder in a corporation which possesses banking privileges, is conversant with its affairs and does not object to the amendment of its char- ter and consequent changes in its business, if he participate in the benefits derived therefrom he can not avoid a personal liability, to creditors, by reason of such amendment ; Dow v. Naper, 6-424. 4. Investment not. The investment of premiums, etc., received by an insurance corporation, in secured loans, is not an act of bank- ing ; Life Association of America v. Levy etc., 7-264. 5. Relation of bank and depositor. The relation of banker and customer, in their pecuniary dealings, is that of debtor and creditor. Deposits, when received and credited to the depositor, unless there are stipulations to the contrary, become the property of the bank, and part of its general fund, and may be loaned by it as other moneys. The bank is responsible for the deposits, which it receives, as a debtor, agreeing to discharge the indebtedness by honoring the depositor's checks ; Bank of the Republic v. Millard, 3-22. 6. . Where money has been deposited with a bank, on drafts, etc., to be collected in money, and there has been no con- tract or understanding that a different rule should prevail, the bank where the deposit is made ordinarily becomes the owner of the money and, consequently, a debtor for the amount collected and under obligation to pay on demand, not the identical money received, but a sum equal in legal value. Yet this does not apply where the thing deposited was not money, but a commodity, sucn as " confederate notes " and it was agreed that the collection should be made in like notes. The fact that the collecting bank used the notes in its business does not alter the case ; Planters' Bank v. Union Bank, 3-23, note 3. 7. Peebident. Even if it is within the authority of a presi- dent of a national bank to bind the bank by an agreement with the acceptor of a draft which is discounted by the bank, not to enforce the draft against him, yet oral evidence of such an agree- ment is not competent in defense of a suit, by the bank, against the acceptor ; Davis, rec'r, v. Randall, 5-455. 8. Cashiee. The cashier of an incorporated bank is the general executive officer, to manage its affairs in all things not peculiarly committed to the directors, by the charter, and he is the agent of the corporation and not of the directors; Bissell et al. v. First Nat. Bank of Franklin, 4-120. AMERICAN CORPORATION CASES. 37 9. Cabhiee — ACTS OF. The habitual exercise of power by the cashier of a bai^ with the knowledge and acquiescence of the bank establishes, as to the public, the existence of such powers as fully as the same could be established by the order of the board of directors; Merch. Nat. Bk. v. State Nat. Bk., 3-25. 10. Cashiee — HIS OFFICE. The cashier is the general execu- tive officer of the bank. His power may be limited by order of the board of directors, but such limitation will bind only those who have knowledge thereof. Id. 11. Teansactions not at office. It is not essential to the validity of the act of a cashier, as binding upon a national bank, that it should be done at its place of business. Id. 12. Cbetifting check. The cashier of a national bank has authority to certify that a check drawn upon his bank is good, and thereby render it equivalent to a certificate of deposit in the hands of the holder. Id. 13. Liability foe acts of. The rule that those who create a trust, appoint a trustee, and clothe him with powers which enable him to mislead, shall suffer from the misconduct of such an officer rather than another party, is applicable to the transactions of a cashier of a national bank. Id. 14. Liability foe his feaud. The cashier of a bank, having ostensibly the powers usually given to the cashiers of such institu- tions, received notes, drafts and checks sent to his bank for col- lection with instruction to protest and return them if they are not paid. Colluding with the drawer to permit his over due paper to accumulate in the bank, he neither protested nor returned the same to the owners, nor entered it upon the books of the bank, nor in any other manner gave notice to the directors of its pos- session and non payment. Held, that the bank was liable to the owners of such paper for the amount thereof, in the absence of any showing of knowledge on his part of the fraudulent conduct of the cashier ; National Pahquioque Bank v. First National Bank of Bethel, 3-176. 15. Liability foe puechases. If the cashier of a national bank buy coin without authority and it actually goes in to the funds of the bank, the bank is liable therefor, upon the principle of quantum valebat ; Merchants National Bank v. State National Bank, 3-25. 16. Bank tellee's bond. A bank teller's official bond covers any duty to which, in the natural course of the business of the bank, he may be assigned by the cashier, or other proper officer, in the temporary absence of the person whose duty it would be to perform it ; Detroit Sav. Bk. v. Zeigler et al., 9-480. 17. POWEK TO PEOVIDE INVESTMENT DEPARTMENT. Where, by itS charter, a banking corporation is authorized to contract and agree with persons desiring to make deposits or loans of m(raey, as to the terms and give its note, bond, or certificate for the amount 38 DIGEST OF THE and secure the same by pledge, chattel mortgage, note, securities, or by real estate mortgage or deed of trust, _as agreed upon, it may provide a system for securing loans and deposits generally, in a particular way, or by providing an investment department, in which certificates issued for loans and deposits are secured by the transfer to a trustee of notes, etc., to be held by the trustee, solely for the benefit of depositors and others dealing with such bank, or agency of the bank ; and, the general creditors of the bank, as depositors and lenders not thus secured, will not be entitled to share in the securities, so transferred in trust, until those so secured are first paid ; Ward, rec'r, v. Johnson et al., 6-462. 18. Deposits. The rule is, a deposit is general unless the de- positor makes it special, or deposits it expressly in some particular capacity. Where a deposit is general, there is an implied under- taking, on the part of the bank, to restore, not the same funds, but an equivalent sum, whenever it shall be demanded ; Ward, rec'r, v. Johnson, 6-462. 19. Changing natueb of deposit. While, if a deposit be made in trust any investment of it, in public or other securities, will also be in trust, upon a perversion of which the depositor, at his election, may follow and re-claim it wherever it can be distinctly identified, a by-law which declares that all savings deposited, over and above such sums as it may be expedient to reserve for immedi- ate use, shall be invested in stocks and obligations of the ilnited States, or of this state, etc.; but, which does not declare that such investments are to be made for the benefit of depositors, nor assume to give them the right to control, or withdraw, them on any contingency, will not render the investments trust property, and the bank may sell, assign, or pledge, or mortgage them, in good faith, to secure other loans or deposits. Id. , 20. Depositoe' s lien. A lien in favor of a depositor can only be created by mortgage or pledge. A promise, by the officers of a bank, to savings' depositors, to keep and use the securities taken on loans, or by way of investment, for their benefit, can not be held to create a mortgage, or pledge, of such securities, nor as creating a trust. Id. 21. Name as ajffeoting natueb op deposits. A bank being a stockholders' commercial bank — not a savings bank — of which the stockholders own the capital and the corporation is but a trustee, for such stockholders, in its management, it would seem the name, as savings bank, in the absence of proof that the depos- itors were deceived and deluded thereby, is of no importance, as tending to render the deposits made trust funds, so that the money deposited shall remain that of the depositor. Id. 22. Ceetipting oheok. The legal effect of identifying a check, in the usual form, is to vouch for the genuineness of the drawer's signature, that he has funds sufficient to meet it, and that AMERICAN CORPORATION CASES. 39 such funds shall not be withdrawn from the bank except upon such check ; Marine Nat. Bank v. National City Bank, 5-557. 23. Cektifying check. It does not warrant the body of the check, either as to payee or amount. Id. 24. . So, where one certified a check, altered as to date, name of payee and amount, and subsequently paid the same, it was held it could recover the sum paid, as being paid by mistake. Id. 25. Effect of by-law. In the absence of proof that the hold- ers of certificates of deposit have such knowledge of the by-laws of the bank as to be bound and concluded by them they can not be affected by any disobedience of the directors and officers of the corporation to its by-laws, directing the investment of savings' deposits in certain designated securities; Ward, rec'r, v. John- son et al., 6-462. 26. Bt-law constetjed. A by-law of a banking corporation, having 'power, under its charter, to receive deposits, either as sav- ings or in trust ; that deposits, of one dollar and upward, may be received from any person, etc., to be held in trust for them, does not show that all deposits were held in trust, but the reverse. "Where the charter confers power to make such special regulations in reference to the trust funds, deposits or savings as shall best aid depositors, it plainly shows trust funds, deposits and savings were regarded as separate and distinct ; neither included within the other. Id. 27. . A by-law of a banking corporation that deposits may be received and paid in gold, or silver, coin, or in such funds as may be current in the city where the bank is located, or as may be arranged by special agreement, made in writing, by the president etc., is a clear recognition that the deposits become debts of the bank, and authorizes the officers named to stipulate, for payment, without reference to the securities in which they may be invested. Id. 28. . A by-law, of a bank, authorizing a savings' deposit to be withdrawn,' after giving a certain notice, without regard to the condition of the investment at the time, indicates that the de- positor has no trust in the investment. If he had a trust in the investment, he could not withdraw his deposit without regard to the investment ; for, if loaned on note secured, he must await its maturity and collection, or withdraw the note and security ; so an agreement to pay interest, semi-annually, on such deposits, at all events, shows, clearly, the deposits are not in trust. Id. 29. Eight to shaee m profits. Wliere a banking corporation is constituted of stockholders its property belongs to such stock- holders and the bank is carried on for their benefit. The profits belong to them. Ordinarily, the depositor is but a creditor, en- titled to receive his deposit, with such interest as, by contract, his ■deposit may have earned. Id. 40 DIGEST OF THE 30. Lien on dividend. A bank may hold a cash dividend as pledge for an indebtedness of a stockholder to the bank. A demand by the shareholder for the payment of such dividend made, while the lien continues, is premature; Hager v. Un. J^at. Bk., 5-417. ^ , 31. Peioeitt of bill holdees. The statute, of the state of Georgia, which gives to the holders of bills of a banking^ corpora- tion priority over other persons in the payment of its debts applies only where there has been a forfeiture of charter by adjur dication of court ; Dobbins v. Walton, ass'e, 1-31Y. 32. UsuEY. A statute authorized the formation of banking corporations, with power to loan money at a rate of interest not exceeding ten per cent, per annum. A promissory note taken to evidence a loan niade at a greater rate of interest is not void j Farmers & T. Bk. v. Harrison et al., 8-129 ; Eittenhour v. Har- rison et al., 8-137. 33. Ultea viees. The charter of a corporation (L., 'N. Y., 1870, ch. 685) granted authority "to grant, bargain, sell, buy or receive all kinds of property . . . or to hold the same in trust, or otherwise, . . . and to advance moneys,, securities or credits upon any property." These provisions do not confer banking powers, or authorize the company to discount commercial paper ; JN . Y. State Loan & T. Co. v. Helmer, impl., 8-594. 34. Impaieing seoueitt. It is not within the scope of the authority of the oflBcers of a bank, to consent to an arrangement by which the security of the bank, on negotiable paper due to it, will be impaired ; Gallery v. Nat. Ex. Bk. of Albion, 6-632. 35. Liability foe losses. The directors of a bank are not liable for losses sustained by the corporation, by the fraud and default of its cashier, unless it be shown that they have been guilty of fraud, bad faith, or such gross negligence as would imply bad faith ; Dunn's. Adm'r v. Kyle's Exec'r, 7-174 ; Moran's Adm'r v. Kyle's Exec'r, 7-174; Dunn's Adm'r v. Davis, 7-174. 36. Notice of equities. Where a negotiable promissory note is discounted by a bank, through its cashier, the mere fact that such cashier was a stockholder and director of the corporation, and payee and indorser of the note, will not charge the bank with notice of any equities against the paper ; it affirmatively appear- ing that the cashier had no duties to perform in reference to the note, either as stockholder or director of the payee, and it had no actual notice of any equities against the note ; First Nat. Bk. of Eock Island, Illinois, v. Loyhed, 8-11. 37. Foeged insteitment. A mistake in recognizing a forged instrument in writing, is binding only, when the forgery is such that it ought to have been detected by a bare inspection of the instrument itself, without reference to books, or any thing out- side of the document presented, even the memory of the party, as to the written obligations which he has issued ; National Bank AMERICAN CORPORATION CASES. 41 of Commerce in New York v. National Mechanics Banking Asso- ciation, 4^605. 38. Liability ; eaised check. A bank is not bound to know the handwriting or genuineness of the filling up of a check. It is legally concluded only as to the signature of the drawer, and its own certification. Id. 39. . Where a bank has, by mistake, paid to a bona.fide holder the amount of a certified check, which, after certification, had been fraudulently altered by raising the amount, it was held that it could recover, the sum paid, back, unless the holder had suffered loss, as a consequence of the mistake. Id. 40. Effect of publication. A circular, issued by a banking corporation, which declares that the capital and stock of the bank constitute a capital, or safety fund for the benefit of savings' depositors, does not declare that the capital and stock of the bank belong to such depositors, nor does it amount to a legal declara- tion of trust in that regard. It falls far short of the creation of a trust and it does not have the elements of an estoppel in pais ; Ward, rec'r, v. Johnson, 6-462. 41. Assignment in trust. Where a commercial bank has made an assignment in trust, for the benefit of a certain class of loans and deposits, under which it receives moneys, the holders of its certificates of indebtedness, made under such arrangement for securing payment, will not be bound by any previous repre- sentations of the oflScers of the bank that the capital stock is a safety fund for the benefit of savings' depositors, in a case where it is not shown they caused, or encouraged, such representations to be made, or even knew they were made at the time they acquired their certificates. Still less will it be so when it is not shown that the savings' depositors relied upon the truthfulness of the representations. Id. 42. What is not. A corporation, the only business of which is the investment of its own capital in mortgage securities on real estate and selling such mortgage securities with its guaranty, lends its own money and sells its own property, and is not a bank, or a banker, within the meaning pf section 6407, of the revised statutes of the United States, relative to internal revenue ; Selden V. Equitable Trust Co., 6-5. 43. Insolvency; attachment. The property of a national bank, organized under act of congress of June 3, 1864, attached at the suit of an individual creditor, after the bank had become insolvent, can not be sijbject to sale, for the payment- of his demand, against the claim of a receiver, subsequently appointed, who claims possession of the property ; National Bank v. Colby, 5-82. 44. ; abatement of suit. A suit instituted against a national bank, by a creditor to enforce the collection of a demand, is abated by a decree of United States court, forfeiting its rights 6 43 DIGEST OF THE and franchises and dissolving it, rendered upon an information, against the bank, filed by the comptroller of the currency. Id. 45. Liquidation; bealty. That the trustees of a bank in liquidation are without power, as such, to acquire real property, does not include that they can not, through the medium of a trus- tee, enter into an arrangement by which the bank officers may secure a sale of land for the payment of a debt due the bank, such officers not themselves assuming to take title, control or owner- ship of the property ; Zantzingers v. Gunton, 5-49. 46. Dissolution ; expiration of ohaetee. Want of power in a bank, or a trustee, to wind up the affairs of a bank on its disso- lution by the expiration of its charter, to purchase and hold real estate, does not render void an arrangement whereby land subject to a lien, in favor of the bank, and other incumbrances, is dis- charged of those incumbrances, by aid of money advanced from the assets of the bank, then sold and the whole proceeds realized for the bank ; provided the legal title, or the absolute equitable ownership and control of the property is not passed through the bank or its trustees. Id. 47. Parties to suit. In an action to recover losses occasioned by the gross neghgence of directors, the corporation and receiver, if one has been appointed, are necessary parties. If the proceed- • ing be by stockholders, they must be parties defendant ; Brinker- hoff V. Bostwick, 9-610. 48. Accommodation paper. It is no defense to a suit against the acceptor of a draft, which has been discounted and upon which money has been advanced by plaintiff, that the draft was accepted for the accommodation of the drawer; Ward, rec'r, v. Johnson, 6-462. 49. Action ; no defense. It is no defense to an action brought by a bank against its late cashier, for a wrongful appropriation of moneys, that at the time of such appropriation he was the owner of four-fifths of the stock of the bank, and has, since that time, sold all of said stock to other parties, who are now the officers and managing authority of the bank ; First Nat. Bank of Fort Scott V. Drake, 9-340. 50. Priority of lien. Where a bank holds a judgment which is a first lien upon real estate and an arrangement is made be-' tween the officers of the bank and the parties to a mortgage, sub- sequently executed upon the same premises, that the mortgage is to be considered a lien prior to the judgment of the bank, but the records continue to show the judgment to be prior and paramount and the premises are sold under the judgment, and an innocent purchaser for value without notice acquires title thereto, such pur- chaser is not subject to the equities in favor of the parties having title under the foreclosure of the mortgage ; Baker et al. v. Wool- ston, 9-321. 51. Forfeiture of charter. Before suit for the forfeiture of AMERICAN CORPORATION CASES. 43 a bank charter, in the city of New Orleans, can be entertained, ii is indispensable that a petition for such forfeiture shall be pre- sented by the attorney general, the district attorney, or both ; State of La. V. Citizens' Sav. Bk., 7-250. 52. Penal laws of another state. The courts of Illinois will not take jurisdiction of a suit by a corporation created by and existing under the laws of and doing business in another state against a national bank organized under the laws of the United States, for the recovery of a penalty, provided for by act of congress, for receiving interest over and above the rate allowed by the laws of the state where the bank is located and transacts its business, that being also a foreign state ; Missouri River Tele- graph Co. V. First Nat. Bk. of Sioux City, 5-322u See National Banks. BANKRUPTCY. 1. A court of bankruptcy has jurisdiction to make an order that the balance upon stock of a bankrupt corporation unpaid in the hands of shareliolders should be collected from such share- holders, as the directors, under the instructions of a majority of the stockholders, might, before the decree in bankruptcy, have done ; Sawyer v. Upton, 1-125, note 2. 2. Of oobpokation. The holder of a promissory note, made by a corporation, is not debarred from taking judgment against the corporation, by proceedings in bankruptcy against the corpora- tion ; Athol Nat. Bk. v. Hingham Manuf. Co., 7-461. 3. . Nor by his having proved the note in bankruptcy against the indorsers. Id. 4. Dissolution bt bankruptcy. A corporation which is insol- vent and has been adjudicated a bankrupt, under the federal bankrupt act, is dissolved. A dissolution so effected authorizes creditors to maintain an action against the stockholders of the de- funct corporation in Missouri, without joining the company; State Sav. Assoc, v. Kellogg et al., 8-95. 5. . Bankruptcy of a corporation and proof of a credit- or's claim against the estate in bankruptcy do not dissolve the corporation or prevent a recovery of judgment against it for the purpose of charging the officers and stockholders therewith ; Ohamberlin v. Huguenot Manuf. Co., 7-446. 6. . Bankruptcy does not put an end to corporate ex- istence nor vacate the office of the directors. A corporation created by a state can not be dissolved by an act of congress or by the administration of such enactment by a federal court ; Hol- land V. Heyman, 7-10. 7. Unpaid subscriptions. Unpaid subscriptions of stock form part of the assets of a corporation. If the corporation be adjudged bankrupt and an assignee in bankruptcy be appointed, unpaid subscriptions pass to the assignee. Action for the recovery thereof 44 DIGEST OF THE can be prosecuted, only, in his name ; Lane et al. v. Nickerson etal., 6-513. 8. Assignee. An assignee appointed under tlie bankrupt law of the United States, represents both the corporation and itscreditors. The defense of irregular organization can not be urged against him; Chubb v. Upton, 6-23. 9. PiTECHASB OF CLAIMS BY DiEECTOES. A Corporation having been adjudicated a bankrupt, a member of its board of directors in existence at the date of the act of bankruptcy can not buy up claims against it, at a discount, and entitle himself to credit there- for, at full face value, on settlement with creditors on his personal liability as a stockholder ; Holland v. Heyman, 7-10. 10. Effect of on liability on stock. The bankrupt law of the United States (Rev. Stats., § 5117, 2 ed., 1878, 986), provided that " no debt created by the fraud or embezzlement of the bank- rupt, or by his defalcation as a public officer or while acting in any fiduciary character, shall be discharged by proceedings in bankruptcy." An action was brought against a discharged bank- rupt, to recover a balance due on subscription to the stock of a corporation. There is nothing of a fiduciary relation, or char- acter, created by the subscription, other than exists from the ordinary relation of debtor and creditor and, certainly, none to bring it within the meaning of the statute ; Morrison et al., re- ceivers etc., V. Savage, 7—437. 11. . It is no defense to a bill, in equity, to enforce the statutory liability of stockholders or directors of a corporation that, at the time of demand made on an execution issued on judgment recovered in the original action and at the time of filing the bill, the corporation was in bankruptcy, and its property in the pos- session of an assignee ; First Nat. Bk. v. Hingham Manuf. Co., r-496. 12. . I^or will such proceeding to enforce the personal lia- bility of stockholder or director, be barred by the fact that the creditor has proved his demand against the corporation, in bank- ruptcy, and received dividends thereon. Id. 13. Liability of oeiginal stookholdee. The original holder of corporate stock is liable for unpaid assessments thereon, with- out an express promise to pay them. Any contract between the corporation, or its agents, and the stockholder, limiting this lia- bility is void as to creditors or assignee in bankruptcy ; Upton, assignee, v. Tribilcock, and "Webster v. Upton, assignee, 5-111, 14. Liability of assignee op stock. Assignee of corporate stock, who has caused the evidences thereof to be transferred to himself, on the books of the corporation, and holds it as collateral security, for a debt due from his assignor, is liable for any unpaid balance due thereon, after the company has become bankrupt; Pullman v. Upton, 6-34. AMERICAN CORPORATION CASES. 45 15. Bankeitpt as voter. That one has been adjudicated a bankrupt and that his estate has passed to his assignee will not affect his right to vote on stock which stood in his name and has not been formally transferred on the books of the company; State etc. v. Ferris et al., 6-312. 16. DiscHAEGE AS A DEFENSE. Bankruptcy, and discharge under it, being in the nature of a personal defense, must be pleaded in the trial court ; Collins et al. v. Hammock, 1-143 ; Collins v. Garrett, 1-143. 17. Composition and eelease. ^ director, or stockholder, of a corporation being liable as an indorser on the note of his com- pany becoming bankrupt and, in proceedings for a composition, receiving a release from all liability as such indorser, can not urge that fact in defense to a bill in equity, against him and other directors and stockholders, to enforce their personal liability, as stockholders on the same note and other corporate debts ; First Nat. Bk. V. Hingham Manuf. Co., 7-496. BAE TO ACTION. 1. Approval or sale. The finance committee of a corpora- tion — a savings bank — by vote, instructed its treasurer to sell certain property of the bank at not less than a price named. The treasurer sold the property to himself and other members of the finance committee, for the price named, which was less than the market value of the property, and entered the amount on the cash book of the corporation. This approval was no bar to an action by the bank against the treasurer, to recover the difference between the market value of the property and the price paid, it not appearing that the attention of the trustees was called to the entry in the cash book'; Greenfield Sav. Bk. v. Simons, 9-451. 2. By-law as a bae. By-laws of a mutual benefit association provided for an adjudication of all claims for relief by tribunals of the association and expulsion of any member who should pur- sue such claim in the courts. Proceedings had before such tri- bunals will bar recovery in court ; Osceola Tribe v. Schmidt, 9-387. BENEFIT SOCIETIES. 1. Theie natuee. An association of persons desiring to be- come incorporated, made a certificate in which it was stated " the object for which the said society is formed is benevolent ; by the association and co-operation of its members, by their contributions and the contributions of others, to provide a relief fund; also, to aid persons of moderate pecuniary resources in obtaining, from a reputable insurance company, insurance upon their lives, and in maintaining the necessary payments on the same, and to secure to families of persons, so insured, an immediate advance of funds, in case of death." Upon an application for mandamus, to com- 46 DIGEST OF THE pel the secretary of state to file the certificate, held this was evi- dently a corporation for business purposes, having in view pecuniary gain and profit to the corporators. It may contemplate the promotion of the temporal interests of others, but such object is merely incidental to the chief end of the association ; People, ex rel. Blossom et al., v. Nelson, 4-554. 2. Power to oedain bt-laws. A beneficial association is formed for the benefit of its members. It is a purely volunteer association and it may adopt such reasonable regulations as are conducive to the interests of the members ; St. Mary's Beneficial Society v. Burford's adm'r, 4-125. 3. . Volunteer beneficial societies may, by by-law, pro- hibit their members from indulgence in vices which multiply disease and death among them, and thus diminish their general funds. Id. 4. CoNSTEucTioN. A by-law of a beneficial society, which makes the payment of a sum, in case of death, contingent on the orderly conduct of the member, is not expulsion or a total denial of benefits, but the loss of benefits, pro hac vice ; the member- ship remains and the title to benefits remains and attaches to every case of death not resulting from the prohibited vices. Id. 5. Instance. The charter of a benefit society stated its object to be to afford relief to its members and their families and to defray expenses of their funerals or of such other cases of distress as should be defined by the by-laws. It authorized the association to make by-laws necessary for its government and, generally, to do the matters and things lawful for them to do for the well- being of the society, etc. A by-law provided that, at tbe death of a member " entitled to benefits," a fixed sum should be paid to his widow or legal representative, but, that the stewards " shall withhold all benefits when intemperance, debauchery, fighting, dueling or other disgraceful practices are the cause o'f disease or death." Upon action brought to recover the sum fixed as payable upon death, held, that this provision was within the power of legislating for the well being of the society, and is reasonable. Id. 6. JuEisDioTioN OF COURTS. "Where a beneficial society has decided, under its by-laws, that a member is not entitled to benefits, that decision is conclusive on him ; Osceola Tribe, I. O. R. M. . Schmidt, 9-387. 7. . Every person who joins such an association assents to the laws adopted for the government of the association, and, where a member is subjected to the general rules and by-laws of the asso- ciation, according to the usual course, and the tribunal of his own choice has decided against him, he ought not to complain. Id. _ 8. Instance. Thg by-laws of a mutual benefit association pro vided that whenever a member had cause of complaint, on ques- tions having relation to his enjoyment of benefits, he should seek redress from his tribe, and if the decision was against him, by an AMERICAN CORPORATION- CASES. 47 appeal from its decision to the grand tribe of the state, and, there- after, to the grand tribe of the United States and, should he neglect to pursue such a course and bring suit in a tribunal out- side the order, he should be subject to expulsion. Appellee's intestate, a member of the association, pursued the course pre- scribed, and his suit having been decided against' him, suit was brought to recover sick benefits from appellant. Held, that the proceedings mentioned bar recovery. Id. 9. PowEK TO LEASE. "When the trustees of a secret benevolent society are invested with general power to manage its property, a lease of the meeting room of the corporation to another society for use during some night of each week is not beyond their power and is valid ; Philip et al. v. Aurora Lodge, I. O. Gr. T. et al., 9-274. See By-laws, 53-67; Societies- Benefit. BENEVOLENT ASSOCIATION. 1. Distinguished feom a ohaeitt. A beneficial society whose benefits and benevolence are confined exclusively to its contribut- ing members is not a charitable use within the 11th section of the act of Pennsylvania in relation to bequests to charities ; Swift's executors v. Beneficial Society of the Borough of Easton, 5-605. 2. Private savings banks aee not. A .savings association, formed for the pecuniary profit of its members, is not a benevo- lent or charitable society, within the meaning of public statutes, chapter 17, §§ 56 and 57, which authorizes two or mpre persons desirous of forming any benevolent or charitable society to be- come a corporation ; Sheren v. Mendenhall et al., 7-607. 3. Incoepoeation. A statute provided for the incorporation of a benevolent association by an election, in such mode as its rules or regulations may direct, of trustees to take charge of its estate and property ; and, upon such appointment or election, a certificate thereof shall be executed by the person or persons mak- ing the appointment or the judges holding the election stating the names of the trustees or directors, and the name by which said trustees shall thereafter be called and known shall be particularly mentioned and specified. Under such act it is not essential the certificate should show such persons constituted an existing so- ciety with rules and regulations, or that the rules and regulations under which they act be set forth in the certificate, or that the choice of trustees was, in fact, made under them ; Eoman Catho- lic Orphan Asylum v. Abrams, ^'ii9i'2i. 4. CoEPOEATE eesidenoe. Under such\an act the county in which the society is located is not an essential of the certificate of incorporation. Id. 5. CoEPOEATE NAME. To State the society shall be called the Koman Catholic Orphan Asylum, is suflBcient compliance with a statutory provision requiring that the name by which said trus- 48 DIGEST OF THE tees shall thereafter, for ever, be called and known " shall be par- ticularly mentioned." Id. 6. Election by peoxt. The charter of a benevolent^ society authorized the election of directors or managers atsuch time and place and in such manner as might be specified by its by-laws and gave power to make by-laws consistent with law. The state con- stitution, adopted since the charter was accepted, required the passage of a statute authorizing proxy votes at elections held by incorporated companies. A by-law ordaining a right to vote by proxy is lawful ; People, ex rel., v. Crossley et al., 5-240. 7. Review of election. At an election of directors of an in- corporated benevolent association, votes by proxy were received under a by-law adopted at the meeting for election. The sole objection made was as to the right to vote by proxy under the bv-law. On quo warranto to try the title to office of the directors declared elected, held, in the absence of objection made at the time of election, or to the form, execution or validity of the proxies received and acted upon, it is to be presumed that they were regular and proper, id. 8. Election of trustees. If all members of a society join in a certificate of election of trustees it is to be presumed there were no rules or regulations conflicting with the mode they adopted to express their will ; Rom. C. Orph. Asyl. v. Abrams, 6-222. 9. Who can object. It is doubtful whether one who is not a member can object to an informality in such organization ; as that regulations concerning an election of trustees were violated; where all the members join in assenting to the mode. Id. 10. Consideration fob dues. The benefit of membership of a benevolent association affords sufficient consideration to support a promise to pay dues, so long as such membership continues ; United Hebrew Ass'n v. Benshimol, 7-536. 11. . It is a sufficient consideration to support a promise to pay dues to a benevolent association that the asso'ciation ha^ in reliance upon the payment of these dues, annually expended for charitable purposes a sum equal to their whole amount. Id. 12. Membership. The constitution of a charitable corporation provided that any person could apply for admission to member- ship by paying an admission fee and, when declared elected, could, after signing the constitution, vote at all meetings and be eligible to office, and that each member should pay a certain amount yearly to the corporation. It was held that signing the constitution was not a prerequisite to membership ; and that an action would lie by the corporation against the member, who had not signed, for his yearly dues. Id. 13. Right of action against. The by-laws of an incorporated benevolent society provided for the payment of a stated weekly allowance to a sick or incapacitated member, upon the perform- ance of certain conditions by him. Upon substantial compliance AMERICAN CORPORATION CASES. 49 with the by-laws, the right to the allowance rests in the sick or disabled member, and should the society refuse to fulfill its con- tract, he may maintain an action of law against it, if there be no provision in the by-laws delegating to some tribunal the power to decide questions arising between the society and its members; Dolan V. Court, Good Samaritan, etc.. 7-512. 14. Instance. The by-laws of an incorporated benevolent society provided that a sick member sending tq the society " every , week during his sickness " a certificate signed by a qualified sur- geon, attending him, stating his illness, should be entitled to a weekly allowance of five dollars. A member of the society was taken ill, in another state ; he sent to the society a certificate, stating his illness and signed by one who was, in fact, a surgeon in attendance upon him and who was so described in a letter of transmittal, although not by addendum to the signature placed upon the certificate. No other certificate was furnished until after the member's return to the residence of the corporation, some three months later, when a certificate was furnished stating he had been sick since the date of the first certificate. It was held the first certificate was in substantial compliance with the by-law, entitling the member to receive an allowance for one week ; but, that he was not entitled to any further allowance. Id. 15. Bequest to cokpoeation not in esse. The testator be- queathed, in trust, to " the first Calvinist Baptist society that may be organized in " a certain school district, the sum of $1,000 for the purpose of buying a lot of land and erecting thereupon a meeting-house. Upon objection to the validity of the bequest that there is no such incorporated society, held, that a devise to an unincorporated religions society will be regarded as a bequest to charitable uses and wiU be enforced ; Swasey, adm'r, etc., v. American Bible Society et al., 3-352. BOAED OF TRADE. 1. Aebiteation. If a board of trade, by articles of associa- tion, can acquire the power to arbitrate, as a court, the business disputes of its members, still its decisions are subject to be re- viewed and examined by courts as in other cases of arbitration. Wherefore, a defendant in such proceeding has a right to an ap- peal without conditions to the superior body of the board; Savannah Cotton Exch. v. State of Georgia, ex rel., Warfield et al., 6-343. 2. Issue of mandamus. Writ of mandamus properly issued to cause the restoration of members wrongfully suspended from a board of trade. Id. 3. . Courts never interfere to control the enforcement of the by-laws of mere voluntary associations incorporated for the advancement of religious, moral, etc., principles or merely for amusement. Such organizations must be left to enforce their 7 50 DIGEST OF THE rules and regulations bj such means as they may adopt for their government ; People, ex rel., v. Board of Trade, 6-365. 4. By-law ; validity of. A by-law of a chamber of commerce, which provided for the suspension or expulsion of a member for "failing to comply promptly with the terms of any contract, either verbal or written," is not unreasonable or unjust, illegal or wrong, even though the contract involved in the oflEense be such a one as can not be enforced at law as being violative of the statute of frauds. Such a by-law has reference to contracts not made during a ses- sion of 'change of the chamber of commerce upon the floor of the chamber of the corporation, at least, when such contracts are entered into between the members of the association ; Dickenson V. Chamber of Commerce, 4-229. BOND. 1. Authority to issub. Business relating to the legitimate purposes of a corporation, as stated in its charter, may be trans- acted by the board of directors, without the sanction of the stock- holders ; wherefore, the charter of the corporation providing it shall have power to borrow money and secure the same by deed, or lien, upon its property, real or personal, or both, the borrowing of money for the purpose of forwarding the legitimate objects of the company is within the power and the board of directors was empowered to so borrow and secure by mortgage, and whether such acts were or were not ratified by the stockholders the bonds and the deed securing them would be vahd and bind- ing ; Wood et al. v. Whelen, 6-442. 2. Eatification of pledge. Secretary of a corporation having, without express authority, pledged the corporate bonds, secured by recorded deed of trust, for an existing indebtedness and future advances, but with the knowledge and acquiescence of the direct- ors, his act will be binding in the absence of fraud ', Darst v. Gale et al, 6-380. 3. Plkdg'B. Where the bonds of a corporation were issued on the understanding that they were to be sold for cash, but, as a fact, they were pledged to a creditor, as collateral security to cor- porate notes executed to and held by him, the objection that such disposition is unlawful is one open to the corporate body or its stockholders alone ; Beecher v. Marquette etc. Co., 6-665. 4. Convertible. Bonds of a corporation were issued converti- ble into common stock of the company until a day named. Upon bill to foreclose the mortgage given to secure the bonds, judgment creditors objected that the bonds were invalid by reason of this condition of conversion, claiming it was equivalent to an increase of the stock of the company without the assent of the stockholders. It was held, the provision could not operate to excuse the company from the payment of money it had obtained on the faith of the bonds, which the mortgage was given to secure, wherefore, this AMERICAN CORPORATION CASES. 51 condition in the bond did not infect the mortgage : Wood et al, V. Whelen, 6-442. 5. Of officeks. Sureties on the bond of an officer of a private corporation, whose office is annual^ with power in him to hold over until his successor is elected, or appointed, and qualified, are bound only for the year for which he was chosen and for such further time as is reasonably sufficient for the election and qualifi- cation of his successor. A condition in such bond guaranteeing the good faith and honesty of such an officer " during his con- tinuance in office," does not mean for an indefinite period, or for the time he may. remain in office under new elections, but for the space of his continuance in office under the then election and for the legal term ; Mutual Loan & Build'g Ass'n v. Price, 6-336. 6. . When the tenure of the office is for a fixed period of time, the sureties upon the bond, for the faithful performance by the incumbent of the duties of the office, are not liable for any defaults of the principal occurring under a new appointment, after the fixed period has expired, unless the bond contains stipu- lations that such sureties shall be liable during any successive term of office to which the principal may be elected or appointed ; Trustees v. Dean et al., 7-531. T. . If the tenure of an office be for an indefinite and not a fixed period of time, the sureties on a bond given, for the faith- ful performance of the duties of the office, which does not con- tain any stipulation limiting the period for which they shall be liable, are liable so long as the principal shall continuously liold the office. Id. 8. Instance. A fund was left by will, for a charitable pur- pose, to be managed by trustees to be chosen once in three years. The trustees were incorporated by an act which gave the corpora- tion power to appoint officers, and provided that the then officers should hold their offices until others were chosen in their places. R., who had been treasurer of the trustees, was chosen treasurer, for the term of three years, and gave a bond conditioned that he would account for the funds of the corporation deposited in and which should come to his hands and would faithfully perform the duties of his office. This was not a continuing bond. Id. 9. Of opficee. The obligation of an official bond is strictis- simi juris and nothing can be taken by construction against the obligors; the sureties do not undertake for any thing beyond the letter of their contract and are only liable within its terms ; Detroit Savings Bank v. Zeigler et al., 9-480. 10. Scope of. Where an officer or agent executes a bond, con- ditioned, in general terms, for the faithful performance of his duties, it extends to and covers all acts done within the general scope and authority of the officer or agent ; Tyler et al. v. Old Post Building Association, 9-272. 11. . The by-laws of a corporation — in this case a build- 52 DIGEST OP THE ing association — required dues and assessments to be paid to the secretary at weekly meetings, and, also, required that officer to give bond for the faithful performance of his duties. It was held, that a bond executed under this direction, covered all money received by such officer in his official character, whether paid at the time required or not. Id. 12. Scope of. A bank teller's official bond covers any duties to which in the natural course of the business of the bank he may be assigned, by the cashier or other proper officer, in the tempo- rary absence of the person whose duty it would be to ]5erforin them. So, where the receiving teller of a bank who, during the temporary absence of the general teller, was assigned to his duties by the cashier, embezzled funds of the bank that so came in his hands, it was held, that the sureties on his bond were liable, though such funds had not come into his hands as receiving teller; Detroit Savings Bank v. Zeigler et al., 9-480. 13. Additional employment. The fact that the book-keeper of a banking corporation performs the duties of teller also, will not relieve Sie sureties on his bond for the faithful performance of his duties as book-keeper, from liability for errors committed by him in that capacity, unless the errors were, in some way, con- nected with some improper act on his part as teller, or were super- induced by his employment as such ; Home Savings .Bank «. Traube, 9-512. 14. Of offioee. It is a reasonable by-law, on the part of a savings bank, to require its cashier to furnish bond, with security to be approved by the directors, conditioned for the faithful dis- charge of the duties of his office ; and the adoption of such a by- law IS within the scope of the power conferred to make by-laws, not inconsistent with existing law ; Savings Bank of Hannibal v. Hunt, 8-271. 15. . It is the settled doctrine of Missouri that an officer, elected or appointed, to hold for a definite period of time and until his successor shall be duly elected and qualified, holds for the specified term, and if no successor be elected, or appointed, at the expiration of the time, his term of office continues until such ap- pointment, or election, and that the time during which he holds, after that specified time has expired and until a successor is elected and qualified, is a part of his term of office. If there be no elec- tion of a successor, the liabilities of his sureties upon an official bond taken of him continues, the bond being kept alive until office expired. Id. 16. . Where an officer — in this case the cashier of a sav- ings bank — gave a bond with sureties, which was silent as to the term of his office and as to the period of the liability of suretyship; but by the organic law governing the corporation the term of such officer was fixed for one year and until his successor was duly elected and qualified, and at the expiration of each of , two annual AMERICAN CORPORATION CASES. 53 terms he was re-elected and continusd to discharge the duties of the office, but gave no new bond, and during the third year of his cashiership he became a defaulter, the sureties were not liable, the bond being without force when the defalcation occurred. Id. 17. Indemnity bond. If a note be executed by the agent of a corporation, principal obligor on an indemnity bond, to the obligee in such bond, without consideration and after the execution of the bond, the sureties on the bond will not be liable, in an action on the bond, as for a breach on the non payment of the note ; Cox et al. v. Weed Sewing Mach. Co., 8-59. 18. Of AaENT. Sureties on a bond of indemnity, to a corpora- tion, conditioned to answer for the debts and defaults of the agent of the corporation, the principal obUgor. The bond was delivered to the agent — obligor. Such sureties are neither guarantors nor sureties on a guaranty. Wherefore they are not entitled to notice of the obligee's acceptance of the bond or the agent's debts subsequently contracted. Id. 19. Release of sueeties. Sureties upon an officer's indemnity bond are not discharged by the laches of corporate officers in not making examinations into his affairs punctually, according to by- laws, etc. , of the corporation ; unless there be an admixture of fraud with the delay ; Mut. L. & B. Assoc, v. Price, 6-336. 20. Action on ; defense. In an action, by the holder, on over- due and unpaid obligations, issued by the defendant corporation under its seal, and expressed to be payable to the holder, the fact that the corporation delivered to the plaintiff part of them as collateral security -for the payment of the residue is no defense. Royal Banis of Liverpool v. Grand Junct. R. & Depot Co., 1 -644. BOUNTIES. 1. CoNTBAOT, WHEN EXECUTED. A towu meeting voted that $100 should be paid to each person who should " voluntarily enter and be accepted in the United States service." Held, that the right to the bounty was complete when a person had voluntarily entered the seiwice and had been accepted, and that such right was not affected by his subsequent desertion ; Terrell v. Town of Colbrook, 2-121. 2. When deaft was complete. A town, in the state of Con- necticut, voted, on the 8th day of August, 1863, " that the select- men be authorized to pay $300 to every citizen of the town drafted into the service of the United States during the present war, and accepted by the board of examiners, who shall enter said service or procure a substitute ; " the plaintiff was notified on the Ist day of August that he had been drafted and was required to appear for examination on the 11th of the same month. It was held, (1) That he was not " drafted into the service " at the time the vote was passed ; and that the bounty provided by the vote was not as to him a gratuity. (2) That the vote purported a 54 DIGEST OF THE promise, and that the payment of the bounty was not discretionary with the selectmen. (3) That the vote of the town, if invalid when passed, was made valid and binding on the town by the act of July 6, 1864. (4) That the " board of examiners " mentioned in the vote, must be taken to mean the " board of enrollment ; '' Eeed v. Town of Sharon, 3-123. 3. C0MTEA.CT coNSTKUED. The plaintiff volunteered in the mihtary service of the United States, to the credit of defendant's town, under a pending call for volunteers, made by the president of the United States. A few days tliereafter the town " voted to raise $300 for each man who volunteers for one year, to fill the town's qiiota under the present call for men," and after the vote, and the credit to the town, on account of plaintiff's enlistment, a warrant for the amount named was made to him by the town clerk. Held, that he was within the terms of the vote and the warrant was valid ; Hart v. Holden, 2-383. 4. Charaotee of conteact. The validity of the obligations entered into between towns and volunteers depended upon the vote of the towns and the ratifying acts of the legislative authority, and not upon a legal consideration in the ordinary acceptance of the term, or upon the power of the parties at the time to con- tract. Id. 5. Modification op oonteaot. The vote was taken on the 14th of January. The plaintiff had already enlisted. On the 15th of February he received a town warrant for the amount voted. On the 17th of the same month the legislature enacted that " the past acts and doings of cities, towns and plantations, in offering, paying, agreeing to pay, and in raising and providing the means to pay bounties to, and notes and town orders given by the municipal officers of any city, town or plantation, in pursuance of a previ- ous vote for the benefit of volunteers, or substitutes for drafted or enrolled men," were made valid. On the 13th of March the town made an order limiting the sum to be paid to those of these volunteers who had been assigned to the coast guard to $100. Held, that the last act was inoperative and null as to plaintiff. Id. 6. Tax in Illinois. The legislature has the power to author- ize taxation, by a municipal corporation, for the purpose of re- funding money borrowed to pay bounties to volunteers and which was borrowed on the faith that the money advanced would be re- paid; Johnson etal. v. Campbell et al., 3-211. 7. Tax in Minnesota. The legislature of Minnesota has con- stitutional power to authorize the levy of a tax for the payment of bounties to persons who enlist in the military service of the United States ; Wilson v. Buckman, 2-557. 8. . The legislature of Minnesota may, under the consti- tution of the state, validate the illegal issue 01 bonds, by munici- pal corporations, in payment of bounties to persons enlisting in AMERICAN CORPORATION CASES. 55 the federal armies ; Comer v. Folsom, 3-555 ; Kunkle v. Town of Franklin, 3-501. 9. CuEATivB ACT. When a tax for the payment of bounties has been levied without legal authority, it may be ratified and le- galized by legislative enactment ; Wilson v. Buckman, 3-557. BRIDGE COMPANY. 1. Infeingbment of fbanohise. a franchise to erect a bridge, with the right to collect toll and prohibiting the erection of any other bridge within one mile on either side thereof, is not inter- fered with by a grant to a railroad company of the right to con- struct a railroad bridge within that distance. The crossing a river by a railroad track on piers is neither a bridge, ferry, nor any public means of crossing by the ordinary modes of travel such as are contemplated in the grant of a toll bridge franchise ; Lake v. Virginia & Truckee E.R. Co., 4-526. 2. Legislative power. Notwithstanding the grant of a ferry franchise, the power and right still exist, in the legislature, to authorize the erection of a bridge in the vicinity, better to sub- serve the interests of the pubUc ; Piatt et al. v. Covington & Cincinnati Bridge Co., 4-401. 3. Exclusive PEiviLEGES. Theestablishment of aferry overand across a river does not vest, in the owner of the franchise, the exclusive privilege of transporting persons and property, for hire, across such river. The legislature may authorize other means of crossing, as it may deem proper, having in view the convenience of the pubhc, increase of travel and the like. Id. 4. Inteefeeence with feeet. Ferries and bridges, under legis- lative sanction, are not authorized for remunerative purposes to the owners, only, but for the benefit of the public, whose interest is their first and paramount object. In the absence of express law to the contrary, the legislature should not be presumed to have intended to deprive itself of the power of promoting that object. It follows, if the construction of a bridge will interpose no phy- sical obstruction to the enjoyment of a ferry franchise across tne same river, the owners of the ferry are not entitled to compensa- tion for any incidental impairment of the profits of their ferry, resulting merely from the use of a bridge instead of a ferry, by the public. Id. 5. Inooepobation. The charter of a bridge company provided that the capital should not exceed $30,000, and that certain com- missioners, named, should receive subscriptions to the stock in a book to be opened for the purpose, at a time and place, of which public notice should be given, and that, when stock sufficient for the construction of the bridge was subscribed, they should distrib- ute it among the subscribers, and appoint the first meeting of the corporation. The stock subscribed was not, by itself, suffi- cient for the construction of the bridge ; but the amount actually 56 DIGEST OF THE subscribed, taken in connection with a contract by which the town in which the bridge was situated undertook to purchase and pay for the bridge, was sufficient to secure the construction of the bridge. The commissioners treating the amount subscribed as sufficient, distributed the stock among the subscribers, and called the first meeting of the corporators. Held, (1) That the question whether the amount of stock was sufficient, was wholly one for the commissioners to decide; and the town, having contracted with the corporation to purchase the bridge, with full knowledge of the amount of stock that had been subscribed, had no right to complain. (2) That the action of the commissioners was not invalidated by the fact that they did not attend, personally, dur- ing the time the books were open for subscriptions, but left them in charge of another person, and only attended for final action after the subscriptions were all made. (3) That the fact that the bridge corporation, when the bridge was completed, conveyed to the town the bridge and the corporative franchise, according to the contract and the provisions of its charter, did not deprive it of its legal existence as a corporation ; Saugatuck Bridge Co. v. Town of Westport, 4r-328. BEOKERAGE. 1. OoEPOEATE EIGHT. A Corporation may do business for another person and, in that sense, become a broker. It does not, however, become a broker by transacting, for itself, such business as it is empowered by its charter to conduct ; Henderson et al. v. State, etc., 7-45. BUILDING AND LOAN ASSOCIATION. 1. Cube of defect in. In organizing a building association, under the general law of Ohio, of 21st of February, 1867, the cer- tificate of incorporation was, by mistake, acknowledged before a notary public, instead of before a justice of the peace, as by that law required. Under an act of March 10, 1859, proceedings were afterward instituted to correct the error, and decree was so entered ; held, that the effect of such correction was to make the association a lawful corporation from the date of its organization, not only against persons dealing directly with the association but as against the whole world ; Spinning v. Home Building & Saving Associa- tion of Dayton, Ohio, et al., S-601. 2. Not in the exeeoise of banking powees. An act of the legislature of Ohio, of February 21, 1867, authorized the forma- tion of associations for the purpose of raising moneys, to be loaned, among the members, for use in buying lots or houses, or in building or repairing houses. It was objected that this act as- sumed to authorize the exercise of banking powers, in violation of the constitution of the state. It was held, that the collection of money from the members and the loaning of it among them, for AMERICAK CORPORATION CASES. 57 the purposes provided for, is not the exercise of banking powers ; Forest City United Land & Building Association v. Gallagher et al., 5-595. 3. PowEE TO LOAii ON MORTGAGE. The Statute of Alabama au- thorizing building and loan associations to lend money to their shareholders and to secure the loan on real estate, on such terms and conditions as are prescribed by law, such a loan is not ultra vires the corporation although it may be in contravention of the by-laws; Kelly v. Mobile Building & Loan Assoc, 6-180. 4. Computation of interest. Building associations are not authorized, in Ohio, to charge interest on the premiums allowed for precedence in obtaining loans. The money actually advanced is the basis for the cpmputation of interest; Forest City U.'L. & B. Assoc. V. Gallagher et al., 5-595. 5. Distribution of assets. Where a member of a building society assigned the certificate of his shares to a bank in consid- eration of money loaned him, and subsequently borrowed a sum on the same shares from the society, to which he transferred his stock on the books, the bank failing to produce its shares for transfer, and the society was wound up and its assets distributed under its charter to the holders of stock as by the company books, it was held, the directors were not liable to the bank for the sum which would have accrued upon the stock it held had it been properly transferred ; Bank of Commerce's Appeal, 5-603. See, also, Loan Association. BY-LAWS. 1. Power to make. The power to make by-laws, not incon- sistent with its charter or the purpose of its creation, nor repug- nant to the common law, is an attribute of every corporation. "When duly enacted, such by-laws are binding upon all the mem- bers of the corporation, who are presumed to know them, and to contract with reference to them ; Supreme Commandery v. Ains- worth, 10-1. 2. Must conform to law. All by-laws contrary to the general Principles of the common law, or the policy of the state, are void ; 'eople, ex rel., v. Fire Department, 5-479. 3. Compact with stockholders. A by-law enters into the compact between the corporation, which adopts it, and every taker of a share. Itis in the nature of a contract between them ; Kent V. Quicksilver Mining Co. et al., 8-614. 4. Inoompktenct to adopt, a corporation can not make by- laws contrary to its charter ; State of Nevada, ex rel. Corey, v. Curtis, 5-509. 5. Void in part, void in all. A single entire clause of a by- law can not be good in part and bad in part ; otherwise if it con- sists of two parts, each entire and both distinct. Jd. 6. Ex post facto. A by-law, or regulation, means a rule for 8 58 DIGEST OF THE future action. Ex post facto laws are no more lawful for corpora- tions than for a state ; People, ex rel. Pulford, v. Fire Department of the City of Detroit, 5-479. I. Peemissible kules. Volunteer beneficial societies may, by by-law, prohibit their members from indulgence in vices, which vices tend to multiply disease and death among them, and thus diminish their means of benevolence ; St. Mary's Ben. Soc. v. Burford's adm., 4-125. 8. . It is a reasonable by-law, on the part of a savings bank, to require its cashier to furnish bond, with surety, for the faithful discharge of the duties of his office. Such a by-law is not inconsistent with law ; Sav. Bk. v. Hunt, 8-271. 9. Unwritten. It is settled that the pnactment of a by-law need not, necessarily, be in writing ; and, it may be inferred from facts proved ; Lockwood v. Mech. N. Bk., 4-140. 10. . The by-laws of a corporation need not be in writing. They may be adopted as well by the company's conduct and the acts and conduct of the corporate officers as by an express vote, or an adoption in a meeting ; Bank v. Pinson, 8-69. II. VOTES NECBSSAET TO ADOPT. In all cascs where an act is to be done by a corporate body, or a part of a corporate body, and the number is definite, a majority of the whole number is neces- sary to constitute a legal meeting. At such legal meeting, a quo- rum being present, a majority of such quorum can act. Hence, a by-law adopted at a meeting, at which were present six ad interim directors of a national bank, which bank had twelve directors, is invalid, because not adopted by a quorum or majority of the board ; Lockwood V. Mechanics National Bank, 4-140. 12. Signing. A by-law of an association provided that each member admitted should sign the same. The provision of such by-law is simply directory; a mere failure to comply with it, unin- tentionally, will not invalidate a membership that lias been asserted by a party claiming it, and which claim of membership has been recognized, and acquiesced in, by the corporation for a long space of time, without objection ; State of Minnesota v. Sibley et al., y-624. 13. Limitation oe eight to adopt. Authority of the charter of a corporation to regulate the mode and manner of the transfer of stock, does not include the authority to prevent, or even restrict, the power of disposition ; Bank of Holly Springs v. Pinson, 14.. Ieeegulaeities in adopting. Irregularities in the adop- tion of by-laws, where all the stockholders and officers of the cor- poration recognize and treat such by-laws as legal and valid, will not relieve a stockholder ; who. is, afterward, sued for the amount of his subscription to the capital stock of the corporation ; from the duty of paying the amount of such subscription ; Ginrich v. Patrons Mill Co., 7-142. AMERICAN CORPORATION CASES. 59 15. Necessary ingeedient. All by-laws of corporations must be of uniform operation upon the members of the corporation. No member can be subjected to any condition which does not apply to his associates, nor can he be . compelled to receive, as matter of grace, any thing which is his of right. There may not be a personal exemption of a general nature from any valid regu- lation which binds the mass of corporators ; People, ex rel. Stewart, v. Young Men's Father Matthew Total Abstinence Eenev. Soc, 6-626. 16. Invalid. A by-law of a corporation can not be valid which seeks to impose restrictions upon membership, which are not to be found in, or are in conflict with, the articles of association of a corporation. Id. 17. . No by-law can narrow the plain meaning of articles of association. Id. 18. . A by-law, of a corporation, is invalid which seeks to create oflScers whose authority is not derived from the members or the board of directors. Jd. 19. . No by-law can be lawful which subjects the interest of the corporation to any interference outside of its board of directors. Id. 20. . A charter provided that the membership should con- sist of not more than one hundred active members and that honor- ary membership might be bestowed on active members at will. Honorary members are to be elected only from active mem- bers, and a by-law authorizing the election of contributing mem- bers, in the same manner as active members, is void ; Diligent Fire Co. v. Commonwealth, 5-613. 21. Limitations on power. Where a total forfeiture of im- portant rights, as of membership, is asserted to have been created by proceedings of which the owner has no actual notice, the party insisting on the forfeiture has the burden of making it out in all particulars. No presumption will be allowed in his favor. The authority must be clearly shown and strictly construed ; People, ex rel., v. Fire Department, 5-479. 22. Necessity of by-laws. In the state of Michigan sub- scriptions to stock can not be taken, or if taken are not binding, until by-laws have been adopted, if the charter provides that the persons subscribing in the manner to be provided by by-laws shall be a body corporate ; Carlisle v. Sag. V. & St. L. II.R. Co., 5-456. 23. Unreasonable. The defendant canal company established the following regulation : " No boat will be allowed to pass the lock on Sunday without a written permit from the superintendent, or his assistant, and this permit will not be granted unless in case of actual necessity." It was held, in an action for damages, that this was unreasonable and one which neither the board oi direct- ors nor its agent could establish, because : (a) It requires, in the 60 DIGEST OF THE event the navigation of the canal is a necessity and, therefore, lawful, that a permit be obtained from an officer who may not be accessible : (5) It is for the boat owner, for himself, to determine the question of the necessity for Sunda;^ navigation, subject only to his liability under the statute regulating travel on the sabbath day ; M' Arthur v. Green Bay & Mississippi Canal Co., 5-6.25. 24. ENFOEomo penalty. The only implied means for enforce- ment of corporate charges and penaltiefe is by action. Summary means and methods, unknown to the common law, must be authorized by express authority, and a pecuniary obligation or penalty may not be enforced by means disproportionate to "its im- portance ; People ex rel. , ■;;. Fire Dep't, 5-479. 25. Necessity of notice. It is abhorrent to all reason to allow a forfeiture to be enforced, on an alleged default, without notice and hearing or an opportunity to be heard. Id. 26. Infeaction of by-law not cause. By the statute of Michigan, which has always limited the penalties for violations of by-laws, expulsions can not be allowed for any mere infraction of a by-law. Id. 27. Eesolution having force of. Articles of incorporation provided that the company should have " the right to purchase, sell, mortgage, control and lease property, either real or personal, and to exercise all other incidental powers as shall be necessary in conducting said business." They, also, provided that the stock- holders, at any annual meeting, might adopt such by-laws for the government of directors as they might deem necessary. A reso- lution was adopted that it was deemed not necessary to adopt by- laws, for the reason that the afticles of association provided that the control and management of the corporation should be in the board of directors. Such resolution was an expression of the stockholders of an intention to leave the entire control and man- agement of the company with the directors ; Keichwald v. Comm'l Hotel Co., 10-203. 28. Amendment of. It was provided, by the by-laws of a corporation, that " these by-laws and regulations may be altered or amended, by an affirmative vote, at any regular meeting of directors and the approval of the board at the next regular meet- ing." Another by-law provided " that the president shall make all contracts of purchase or sale, by and with the advice of the directors, or a majority of the same ; but no contract shall be made involving the franchise of said road, except the same be approved by a general meeting representing a majority of the stock, after being recommended by a majority of the stockholders. Held, that although the by-law first quoted gives, to the board of directors, power to amend and alter any of the by-laws, the board had no authority, by virtue of it or otherwise, to disregard or alter the by-law last stated, which was intended to impose a limi- tation upon its powers ; Stevenson et al. v. Davison, 4-203. AMERICAN CORPORATION CASES. 61 29. Amendment. An amendment of a corporate constitution (which, theretofore, contained no snch provision) declared that any member who should fail to pay the. whole of his dues, which should then be in arrears or any indebtedness then owing to the corporation on or before a day named, should, from and after that day, cease absolutely to be such member, without any further action whatever of the corporation or its trustees, and that the secretary should drop the names of all such delinquent persons from the roll of members ; Held, that such was not a by-law or regulation, but an adjudication on existing defaults, analogous to a foreclosure decree fixing a short time for payment, and clearly ex post facto, in that it enforces a new penalty beyond those existing ^at the time of the default, and void ; People, ex rel. v. Fire Dep't, 5-479. 30. Additional bdbdens. The right to levy burdens on mem- bers is governed, to great extent, by the occasion for them. Id. 31. Power to change conteacts by subsequent by-laws. Although a corporation may not, by by-laws subsequently made, disturb rights which it had created, or impair the obligations of its contracts, yet parties may contract with corporations, having reference to laws of future enactment, and they may agree to be bound and affected as they would be if such laws were then exist- ing and may thereby consent that such laws may enter into and form part of their contracts, modifying or varying them ; Supr. Command., 10-1. 32. Instance. Where a member of a mutual benefit insurance company accepts a certificate of insurance, conditioned upon and accepted by him, subject to " the full compliance with all the laws of the order now in force or that may hereafter be enacted," a by-law subsequently enacted providing that certificates of this class shall be forfeited if the member, whether sane or insane, shall take his own life, entered into and became.a part of the con- tract represented by the certificates and became binding on the assured. Id. 33. Repeal of. A private corporation can not repeal a by-law so as to impair rights which have been given and become vested by virtue of the by-law ; this, although the power is reserved, by charter, to alter, amend or repeal its by-laws ; Kent v. Quick- silver Mining Co. et al., 8-613. 34. Waiver and repeal of. Under a charter, granted, the directory of the corporation created was empowered to make by- laws etCi for the control and management of the business and affairs of said company, its property and the mode and manner of transferring its stock. It having been the uniform course of the corporation to issue certificates of stock which did not contain a notice required by the by-law, providing for a lien on the stock, such uniform course of conduct must be regarded, at least as to all persons not members of the corporation, as making a by-law 63 DIQEST OF THE repealing that providing for th| lien and as waiving the lien as to any particular certificates issued not containing such notice ; Bank of Holly Springs v. Pinson, 8-69. 35. Votes at elections by proxy. The charter of a henevo- lent society authorized the election of directors or managers at such time and place and in such manner as might be specified in its by-laws, and gave power to make by-laws not inconsistent with the constitution and laws of the state or of the United States. The constitution, passed since the charter was accepted, required the passage of a law authorizing proxy votes at elections for directors, etc., of incorporated companies. It was held, that a by- law authorizing its members to vote at all elections, etc., either in person or by proxy, was valid and not inconsistent with the con- stitution and laws of the state ; People, ex rel. Chritzman et al., V. Crossley et al., 5-240. 36. Who bound by.' The general rule is that the by-laws of a private corporation are binding upon none but its members and ofiicers. Hence ; the proof not showing that the holders of certifi- cates of deposit in a bank, had such knowledge of its by-laws as to be bound and concluded by them, they could not be affected by any disobedience of the directors and officers of the corporation to its by-laws, directing the investment of savings | deposits in certain designated securities ; "Ward, rec'r, v. Johnson et al., 6-462. 37. As TO dieeotoes when adopted by ooepoeation. The will of the stockholders, expressed in a by-law, is as binding upon directors of a corporation as a provision of the charter ; Samuel V. Holladay, 1-139. 38. Binding foeoe. A by-law of a corporation which is not in conflict with the company's charter or otherwise illegal is binding on all stockholders and their heirs ; State, ex rel. Martin et al., v. New Orleans, etc., E.K. Co., 7-208. 39. When binding. Where by the charter of a corporation the corporate powers are to be exercised by a board of directors, or managers, which board is authorized to adopt by-laws for the government of the officers and affairs of the company, and, at a meeting of the stockholders, all parties in interest, whether as ofiicers, managers, or stockholders, are present participating in the adoption of by-laws, such by-laws will be binding, notwithstand- ing in the resolution of adoption such persons style themselves stockholders and not directors or managers. Such by-laws, in such case, are, as matter of fact, adopted by the managers ; People, ex rel. Wallace, v. Sterling Burial-case Manuf. Co., 6-376. 40. Estoppel, by paeticipation in adoption. Where one acts in the adoption of by-laws and acquires rights under them, and third persons have acquired rights in the corporation the affairs of which they are to regulate, such actor will be estopped to deny the validity of such by-laws he himself adopted and held out to AMERICAN CORPORATION CASES. 63 be valid. The transferee of the s]jares of stock of such actor will, also, in like manner be estopped. " Id. 41. Estoppel. In an action, by receivers of a corporation, against a subscriber, to collect his subscription to the capital stock of the company, a book of by-laws, introduced by himself, on request of plaintiffs, and testified to be the by-laws under which the corpora- tion acted, is admissible in evidence. As against a member of the company such by-laws are always evidence ; Frank v. Morrison et al., rec'rs, 9-390. 42. Knowledge of officer. It is presumed that a corporate oificer knows its by-laws, adopted prior to his appointment, and is bound by them as by a law between himself and his employer ; Hunter v. Sun M. Ins. Co., 5-403. 43. Notice to employes. An appointee of directors of a cor- poration authorized to make by-laws is bound by all the provisions of the by-laws in force at the time of his appointment ; Ellis «. North Carolina Institution for the Deaf and Dumb and the Blind, 5-591. 44. Estoppel to deny formal adoption of. In an action to recover unpaid instalments on a subscription to the capital stock of a corporation, one who has been made acquainted with the by- laws of the company, subscribed and held in his possession a copy of them and paid instalments on his subscription is to be held to have recognized and admitted the validity of the by-laws under which the corporation has acted ; and, when, upon the faith of such admissions others have been induced to act, he will not be permitted to question the mode by which such by-laws were adopted ; Morrison et al., rec'rs, v. Dorsey, 7-389. 45. As TO third persons. One who, to become a member of a corporation, signs a by-law which pledges members to be liable " in their individual as well as their collective capacity," for all moneys lent to it, is not thereby personally liable to the lender for money subsequently loaned to the corporation, without other evidence that it was so loaned on the credit of the by-law than that the preamble thereof sets forth that the design of the cor- poration is to afford to persons desirous of saving their money the means of employing it to advantage ; Flint v. Pierce, 1-593. 46. As to third parties when adopted by direotoes. a by-law adopted by a board of directors, providing the manner in whicli special meetings may be called, does not affect the validity of the acts of the board in disregard of it, especially where third persons are concerned; Samuel v. Holladay, 1-139. 47. Limit of their binding force. A person who is not a member of a corporation, is not bound by the provisions of any resolve or vote it may have passed, or any contract it may have made, to which he is not a party ; Weymouth, survivor, v. Penob- scot Log Driving Co., 7-327. 48. Not binding on strangers. The by-laws of a corporation 64 DIGEST OF THE are private and only accessible to the officers of the company. Strangers to the company can not be bound by the rules adopted for the government of the company ; Smith v. Smith, 4-366. 49. So AS Tb BANK DEPOSITORS. In the absence of proof, that the holders of certificates of deposit have such knowledge of the by-laws of the bank as to be bound and concluded by them, they can not be afEected by any disobedience of the directors and offi- cers of the corporation to its by-laws, directing the investment of savings deposits in certain designated securities ; Ward, rec'r, v. Johnson et al., 6-462. 50. Jurisdiction of courts. Courts will not review proceed- ings of a society, taken by authority of its articles of association, assented to by its members, for the expulsion of a member under charges presented and tried according to by-law, unless injustice has been done, which the party charged, tried and expelled" could not have objected to in the society proceedings ; People, ex rel., V. St. George's Soc, 4-480. 51. . Equity will not entertain a bill by a member of a private corporation, against the corporation and its officers, to re- strain the expulsion of a member for a violation of its by-laws and rules. If there be any remedy it is in a court of law ; Sturges V. Board of Trade, 6-401. 52. As BAR TO ACTION. By-laws of a mutual benefit association provided for the final adjudication of all claims for relief by tri- bunals within the society, with expulsion of a member who should pursue his claim in the courts. Proceedings had before such tri- bunals bar recovery in court ; Osceola Tribe v. Schmidt, 9-387. 53. As TO LIEN ON BANK STOCK. A by-law giving a bank a lien on the stock of its debtors is not " a regulation of the busi- ness of the bank or a reflation for the conduct of its affairs," within the meaning of the national banking act of 1864, and therefore not such a, regulation as, under the said act, national banks have a right to make; BuUard v. Bank, 3-74, note 1. 54. . A banking association organized under the national banking act of June, 1864, can not, even by provisions framed with a direct view to that effect, and inserted in its articles of as- sofiation and by direct bylaws, acquire a lien on its own stock held by persons who are its debtors. Id. 55. In RESTRAINT OF TRADE. M. procuTcd a loan from plain- tiff, upon stock in the defendant company, standing in his name, transferring the stock to a trustee to secure the loan. Default being made in repayment, the stock was sold under a power of sale contained in the deed of transfer, and plaintiff became the purchaser. Upon demand made after this sale, and an offer to pay all assessments due, defendant refused to certify the transfer of stock by new certificate, alleging that the stock was held, at the time the plaintiff took it, for debts due from M., and that it had been forfeited under a by-law of the corporation, ordained AMERICAN CORPORATION CASES. 65 under power in the cliarter, authorizing the transfer of stock in such manner as the company might prescribe. The by-law- was in effect that stock could only be transferred on the books of the company. Held, that the right of alienation is an incident of property, a by-law prohibiting or restricting the exercise of the right is in restraint of trade, against public pcuicy and void. The company might, as a cumulative mode of transfer, require its registration, but whether entered or not, the title would pass as between the former owner and the purchaser ; Moore v. Bk. of Commerce, 4-519. 56. Tkansfee of stock. A by-law adopted, whUe section 30 of the currency act of 1863 was in force, providing for the trans- fer of stock, " subject to the provisions and restrictions " of said act, did not operate to continue the repealed section in force; First Nat. Bk. of South Bend v. Lanier, 3-74. 57. Compliance with by-laws. By-law of a corporation pro- viding that transfers of stock shall only be made on surrender and cancellation of the original certificate is binding on stockholders and their heirs. It follows, that before the latter can lawfully demand a transfer to them of their ancestor's stock, or the pay- ment of accrued dividends, they, must comply with the law gov- erning them ; State, ex rel. v. N. Orl., etc. il.R. Co., 7-208. 58. Prohibiting teansfees. A by-law prohibiting the transfer of stock where the stockholder is in arrears in answering calls on such stock and, also, when he shall be otherwise indebted to the bank, is reasonable and not inconsistent with law ; Kahn v. Bank of St. Jo., 8-232. 69. . A by-law which should prohibit the transfer of stock merely because it is not fully paid up, when all calls made on it have been paid, would be unreasonable. Id. 60. . By-laws of a corporation provided that there should be no transfer of shares of stock which were not paid in full or by one who was indebted to the corporation until transferee should satisfactorily secure the indebtedness of his transferror and that, then, all evidences of debt, or liability, should be sur- rendered to transferror. The lieu of the corporation must prevail over the claim of an equitable assignee of the original owner or transferror; Planters etc. Ins. Co. v. Selma Sav. Bk., 6-171. < 61. . A national bank has power to make a by-law pro- hibiting the transfer of shares of its capital stock while the holder is indebted to the bank and that such stock shall be pledged and liable for the payment of any debt to the bank, owing by the shareholder ; Lockwood v. Mech. Nat. Bk., 4-14:0 ; but, see Nat. Bk. V. Lanier, 3-74. 62. . A by-law, " that shares shall he transferable by in- dorsement, in writing, and subscribed, by the holder, in presence of the cashier, or two other witnesses," etc., is lawful and salutary ; Dane et al. v. Young et al., 4-425. 9 66 DIGEST OF THE 63. PEOHiErnNG teansfebs. In the absence of any by-law as to the sale of shares of stock, a regulation, as to such transfer, incorporated into the certificate of stock and established by long usage, may well be recognized as the law of the matter ; State, ex rel., v. "M'lver, 4^160. 64. Construed. A provision of the by-laws of a corporation, that its "shares shall be transferable by indorsement in writing, and subscribed by the holder in the presence of the cashier, or two other witnesses," requires that the cashier, or two other witnesses, , shall, in writing, attest the signature in order to render the trans- fer vahd between the parties ; Dane et al. v. Young et al, 4-425. 65. . A by-law of a banking company, authorized to receive deposits, either as savings or in trust, that deposits of one dollar and upward may be received, from any person, etc., to be held in trust for them," does not show that all deposits were to be held in trust — but, the reverse. The charter conferring power, it plainly shows that trust funds, deposits and savings were regarded as separate and distinct ; Ward, rec'r, v. Johnson, 6-462. 66. . A by-law of a banking corporation to the effect that deposits may be received and paid in gold or silver coin, or in such funds as may be current in the city where the bank is located, or as may be arranged by special agreement, made in writing by the president, etc., dearly recognizes that the deposits become debts of the bank and authorizes the officers named to stipulate for pay- ment, without reference to the securities in which they are de- posited. Id. 67. . A by-law authorizing a savings deposit to be with- drawn after a certain notice given, without regard to the condi- tion of the investment, at the time, indicates that the depositor has no trust in his investment. Id. 68. . A by-law of a benevolent society which makes the pay- ment of a sum in case of death, contingent on the orderly conduct of the member, is not an expulsion, or a total denial of benefits ; but the loss of benefits, pro hac vice. The membership and the title to benefits remain and attach to every case of deatn not resulting from prohibited vices; St. Mary's Ben. Soc. v. Burford's adm., 4-125. 69. . A by-law of a chamber of commerce provided for the suspension, or expulsion, of any member for " failing to comply promptly with the terms of any contract, either verbal or written." This is neither illegal, unreasonable, unjust or wrong,' albeit the contract repudiated be unwritten and within the statute of frauds. Such by-law has reference to contracts not made during a session of 'change of or upon the floor of the chamber, at least, when such contracts are entered into between members 6i the association. Dickenson v. Chamber of Com., 4-229. TO. . A by-law which provides that a member who shall wilfully violate the constitution and by-laws, or be guilty of AMERICAN CORPORATION CASES. 67 fraudulent breach of contract, or of any proceeding inconsistent with the just and equitable principles of trade, or other miscon- duct, is not infringed by a refusal to pay an award, made by a committee, when the party against whom the award is made is and has been respectfully protesting against tiie jurisdiction of the arbitrators and demanding an appeal. A suspension in such case is not warranted ; Savan. Cotton Exch. v. State, etc., 6-342. 71. . By-laws, requiring that certificates of stock shall be issued under the corporate seal and signed by the president and cashier. In the absence of any further provision, no other or difEerent form of certificate is required in the case of stock owned by the officers named ; Titus v. Great W. T. E., 5-563. 72. CEMBTEEr coMPANT. Authority by charter to make rules and regulations for the government of lot owners, gives authority to make such rules as they may deem necessary ; but, the same must be reasonable and uniform as to all lot owners ; Rosehill Cem. Co. V. Hopkinson, 10-269. See Benefit Sooiett ; Benevolent Association ; Telegbaph Companies. c. CANAL COMPANT. 1. Canal is a public highwat. A canal is a public highway which all persons, upon complying with all lawful requirements, may navigate and use, at their pleasure, on aU days except Sun- day, and on Sunday in case of necessity ; M' Arthur v. Green Bay & Mississippi Canal Co., 5-625. 2. Obligation ; liability. It is the legal duty of a canal com- pany to use all ordinary and reasonable means and appliances to guard against the breaking away of the embankment of its canal. Failing to do so, if a break therein occur which results in an injury to the person or property of others (the latter being free from contributory negligence) the defendant is liable to respond in damages for such injury. Id. CAPACITY TO SUE. 1. How ATTACKED. There can be no attack on the character in which a corporate plaintiff sues, raising the question of due organi- zation, save, only, by verified plea, denying the character assumed ; Selma etc. II.R. Co. v. Anderson, 8-27. CAPITAL STOCK ; see Stock and Stockholdee.. CAEKIER; see Common Caebiee. CASETIER OF BANK ; see Bank akd Banking ; National Bank. 68 DIGEST OF THE CEMETEEY COMPANY. 1. Legislative conteol. A cemetery is not a nuisance, per se, and the subject of absolute prohibition by legislative action. Burial places ar^ indispensable. They concern the public health and, if they were not prepared by private entei^jrise, it would be the duty of the state to act in the premises. The legislature has the right to pass laws to regnlate interments,^ to prevent injury to the health of the community, notwithstanding the burial place may be owned by a corporation, which exercises franchises con- ferred by the state. In this regard it is within the legislative con- trol ; Town of Lake View v. Rose Hill Cemetery Co., 5-252. 2. . Where a cemetery company is chartered, with power to acquire lands for burial purpose, not exceeding a speci- fied quantity, and it acquires such lands and makes expenditures in preparing and beautifying the same, a legislative enactment prohibiting the company from using any of its lands, outside its present inclosure, for the burial of the dead, without regard to the manner of the exercise of the franchise, is unconstitutional and void, as impairing the obligation of the contract contained in its charter. Id. 3. Pbivate coepoeation. The use of lands for the purposes of a cemetery association, incorporated under the. general incorpora- tion law of New York (Laws of 1847, ch. 133, as amended by laws of 1852, ch. 280, and laws of 1874, ch. 245), is private, not public ; In re petition of Deansville Cemetery Assoc, 8-470. 4. Not subject to sale, when. A cemetery, or graveyard, can not be subjected to sale, to pay fbr improvements on adjacent streets ; Louisville v. Nevin, etc. , 5-401. 5. Rules must be unifoem. Where the charter incorporating a cemetery company provides for a board of managers who are authorized to make rules and regulations for the govfernment of lot owners, they may make such rules and reguktions as they deem necessary, but the same must be reasonable and uniform as to all owners of lots in the cemetery. The managers have no right to make a rule which wiU confer a right upon one owner and deny the same right to another lot owner ; Rosehill Cem. Co. V. Hopkinson, 10-269. 6. . Such company, being a quasi public corporation, is bound to exercise its rights and privileges fairly and impartially, and if it undertakes to act arbitrarily or transcend its powers to the injury of a lot owner, such action may be reviewed by the courts. Id. 7. . If the board of managers of a public cemetery company?, incorporated by law, have authority to prevent a lot owner from erecting a vault upon his lot, that power must be ex- ercised by the adoption of a general rule applicable to every lot owner. Id. AMERICAN CORPORATION CASES. 69 8. EuLEs MUST BE uiTiFEOM. The rulc adopted by the board of managers that " no vault shall be built entirely or partially above ground without, permission of the company," taken in connection with another rule that " no vault shall be constructed until the designs and plans shall have been submitted and approved by the board of managers," is not to be regarded as prohibiting the erec- tion of a vault ; and in the absence of a rule prohibiting such erec- tion as to all persons, the board of managers have do power to establish a rule governing a particular case. Id. CERTIFICATE OF DEPOSIT. 1. Its natuee. A certificate of deposit is a written instrument, ascertaining the holder's demand, upon which, in Alabama, a judgment by default may be entered up by the clerk without the intervention of a jury ; Talladega Ins. Co. v. "Woodward, 3-116. 2. Issue; power. A corporation authorized to receive depos- its, on trust, but prohibited to " make or issue any bills, bonds, notes or other securities to circulate, in the community, as money," may issue certificates of deposit ; Talladega Ins. Co. v. Landers, 3-102. CHAMBER OF COMMERCE ; see Boaed of Teade. CHANCERY; see Equity. CHANGE OF NAME; see Coepoeate Name. CHANGE OF FORUM ; see Removal of Causes ; Venue. CHARITABLE ORGANIZATION. 1. "What is. A corporation, the object of which is to provide a general hospital for sick and insane persons, which has no capi- tal stock nor any provision for making dividends or profits ; de- riving its funds mainly from public and private charity and holding these funds for the object of sustaining the hospital, con- ducting its afiairs for the purpose of administering to the comfort of the sick, without expectation, or right, on the part of those immediately interested in the corporation to receive compensation for their own benefit, is a public charitable institution ; M'Donald V. Mass. General Hospital, 7-463. 2. . The facts that a corporation, established for the main- tenance of a public hospital, by its rules, requires of its patients payment for their board, according to their circumstances and the accommodations they receive ; that no person has, individually, a right to demand admission ; and, that the trustees of the hospital, by their agents, determine who shall be received, do not render it the less a public charity. Id. 3. What mat be. The fact that a corporation established for and devoting its funds (which are mainly acquired by voluntary -70 DIGEST OF THE donation) to the support of poor and old women, requires an en- trance fee from each applicant for admission, does not deprive it of the character of a charitable corporation ; Gooch v. Assoc, for Belief of Aged Indigent Females, 4-446. 4. "When not pubelt ptrsLin ohaeitibs. A charitable or beney- olent association which extends relief only to its sick and needy members and the widows and orphans of its deceased members, is not "an institution of purely public charity," so that its moneys held and invested for the purposes mentioned are exempt from taxation ; Morning Star Lodge, No. 26, 1. O. O. F. v. Hay- slip, treas. etc., 4-58. 5. Distinguished. A corporation for the purpose of receiving and investing, in public stock or substantial security on real estate such sums of money as may be saved from the earnings of trades- men, mechanics, laborers, servants and others, and of afiording to industrious persons the advantages of security and interest, au- thorised by charter to receive, take, hold, possess, enjoy and re- tain lands, rents, etc., stock, goods, chattels and effects of what kind, nature or quality soever, etc., by gift, grant, demise,_bar- gain and ^sale, devise, ibequest, testament, legacy, loan, deposit or advance, or by any other mode of conveyance, with the right to apply the same or the income thereof to the uses, ends and pur- poses of the association, and whose president and managers are prohibited to receive any emolument for their services, is a busi- ness corporation and not a charitable one subject to the laws limit- ing property of "charitable institutions. The words "gift, devise, bequest, legacy " in the charter denote only means to effectuate its purposes, and do not indicate the purpose or design of the cor- poration, and a power given to " improve and augment " the property of the society is a power to furnish adequate security tor re-payment of depositors ; "West's App'l, 4-111. , 6. Mbasueb op liability, a corporation, established for the maintenance of a public charitable hospital, which has exercised due care in the selection of its agents, is not liable for injury to a patient caused by their negligence, nor for the unauthorized as- sumption of other persons — in this cause the house pupil — not selected for the office of surgeon, to act as such; M'Donald «. Mass. Gen'l Hospital, 7-453. 7. Enforcement op escheat. Proceedings to escheat prop- erty held by a literary, charitable, religious or benevolent society or corporation, in excess of the limit prescribed by the statutes of Pennsylvania, must be by quo warranto, as in case of the usurpation of a corporate franchise ; West's App'l, 4-111. CHAETER. 1. Equivalent of. A general statute authorizing the incor- poration of companies and articles of incorporation entered into under such law are considered in the nature of a grant from AMJiJKlC'AN C'OKPORATION CASES. 71 the state, and, taken together, constitute the charter ; Livesey v. Omaha Hotel Co., 8-312. 2. Articles of rNCOEPOEATiON. The articles of an association, formed under the general laws of the state, are its charter and, subject to the constitution and general laws of the state, its funda- mental and organic law. They tix the rights of the stockholders, and are in the nature of a fundamental contract, in form, between the corporators and, in practical effect, between the association and its stockholders, which neither party is at liberty to violate. This can no more be done by by-laws and resolutions, adopted by the stockholders, than in any other way ; the authority to pass by- laws being an authority to pass such only as are consistent with the articles of incorporation — rules and regulations as to the manner in which the corporate powers shall be exercised ; Berg- man V. St. Paul Mut. Building Ass'n, 9-492. 3. Power to grant limited. The legislature has no power to confer upon any corporation the right to manufacture or sell any article for ever, notwithstanding and in spite of any exigencies which may occur, in the morals or health of community, requir- ing such manufacture to cease ; Beer Co. v. Massachusetts, 6-43. 4. Distinctions drawn. Under a charter which is a mere proposition for the organization of a corporation and which re- quires certain acts to he performed precedent to the existence of the corporation, it can not come into existence until the condi- tions have been complied with. Where, on th6 other hand, the charter itself creates a corporation, provided it be accepted by the corporators, the corporation is in existence, for all the pur- poses of its creation, from the beginning, except so far as there may be restraints placed on it by the charter, either expressly or by plain implication ; Perkins v. Sanders et al., 8-53. 5. Nature of. Every charter of a private corporation is a contract, (1) between the state and the corporation, to which each, is solemnly bound ; the state that it will not impair the obligation, and the corporation that it will perform the objects of its incor- poration and keep within the powers granted to it ; (2) between stockholders, who are bound to consent to the management of the affairs of the corporation by the majority and by the by-laws which that majority makes ; (3) the whole agree with each other, that they will apply the funds of the company to the objects and purposes of the charter and not otherwise ; Central RJR. Co. et al. V. Collins et al., 3-224. 6. . "While the charter of a private corporation is a law, it is, also, something more than a law, in that it contains stipula- tions which are terms of compact between the state, as the one party, and the corporation, as the other, which neither party is at liberty to disregard or repudiate, and which are as much removed from tlie modifying and controlling power of legislation as would 72 DIGEST OP THE be contracts between two private persons ; Flint & Fentonville Plankroad Co. v. WoodhuU, 4-449. 7. Inviolability of. Charters of private corporations are re- garded as executed contracts between the state and the corpora- tors, and the rule is well settled that the legislature, if the charter does not contain any reservation or other provision _ modifying or limiting the nature of the contract, can not repeal, impair or alter such a charter against the consent or without the default of the corporation, judicially ascertained and declared ; Miller v. State of New York, 4U256. 8. . Exemption from liability to any greater tax than one-half of one per centum of its net annual income having been conferred by its charter upon one company, of two which consoli- dated, it is not in the power of the legislature to impose an in- creased tax after consolidation ; Central R.E. & Banking Co. v. Georgia, 5-126. 9. . When the trustees of a private corporation accept the terms of the act of incorporation and the corporation is organized thereunder, the franchises and privileges, inclusive of a lottery privilege (not prohibited by constitution) with which the corpora- tion is endowed by the law making power, become and are mat- ters of contract, and vested rights, which can not be abridged, impaired or annulled by subsequent legislation ; KeUum v. State, 7-93. 10. . A charter is a contract. The state has, as an incident of sovereignty, the right to contract. The power to contract is all embracing and includes all subjects in which the interests of the state are involved, unless when restricted by constitutional prohibition. The contracts of the state are as binding as those of' individuals; State v. Maine Cent. R.R. Co., 7-284. 11. Contract. A legislative charter granted and accepted constitutes a charter between the state and the corporation. The obligation of such contract can not be impaired by subsequent constitutional legislation; Scotland County v. Missouri, Iowa & Nebraska Ey. Co., 8-159. 12. . That the grant of a charter by the state, to a private corporation, creates a contract between the state and the corpora- tion, is no longer an open question; Ward, rec'r, v. Farwell et al., 6-490. 13. Contract with state. A charter granted to a corpora- tion is a contract between the state and the company, and the corporation may exercise its chartered rights until the expiration of the term for which it is granted, unless, by some act violative of the obligations assumed by its organization, it shall forfeit the privileges and franchises granted. IFnder the constitution of the United States the general assembly has no power to impair the obligation of these contracts ; Euggles v. People of State of Illi- nois, 6-428. AMERICAN CORPORATION CASES. 73 14. Subsequent legislation. A charter granted to a corpo- ration before the enactment of a state constitution or a general law imposing new liabilities upon stockholders, is not affected by such legislation ; Union Mut. Life Ins. Co. v. Frear Stone Manuf . Co. et al., 6-481. 15. CoEPOEATioN UNDER SPECIAL OHAETEE. A Corporation which is created by special act of the legislature is not placed under the provisions of a general incorporation law ; Winoock et al. V. Turpin, 6-473. 16. When a conteaot. To create an inviolable contract with the commonwealth arising out of the passage and acceptance of a charter, it must, by virtue of the act, invest the corporation with an absolute right of property, or confer such authority as vests the corporation with such interests as are of appreciable value ; Chattaroi R.R. 'Co. v. Kinnear, 10-445. 17. Effect of peioe geneeal statute. A general statute pro- viding that every act of incorporation passed after a day stated shall be subject to amendment, alteration or repeal, at the pleasure of the legislature, forms a part of the contract between the cor- poration and state ; Thornton v. Marginal Freight Hy. Co. et al., y-467. 18. . A general incorporation law, passed August 24, 1855, limited the existence of every corporation to the period' expressed in -its charter, or, if no period of limitation was expi'essed in its charter, then said general incorporation law limited its existence to ten years. On the 30th day of August, 1855 — six days later — an act was passed incorporating a company. This act did not limit the existence of the company, as a corporation, to any particular period of time. The corporation organized October 13, 1855. The corporation was created, to exist as such, for the period of ten years and no longer ; Krutz v. Paola Town Co., 7-124. 19. . A general incorporation law provided for the altera- tion, suspension, or repeal, by any subsequent legislature, of any charter granted to any corporation after said general law was passed. It, also, provided for closing up the affairs of any cor- poration upon its dissolution. Six days after this general law was passed a corporation was created. Five years thereafter the gen- eral incorporation law and the special act of incorporation referred to were repealed. If such repeal did not have the effect to abolish the corporation as such, it certainly did not have the effect to ex- tend its corporate existence indefinitely, or beyond the date it would expire by limitation of the same general law in force when it was created. Id. 20. Change by legislatueb. The legislature has the power to enact any subsequent or amendatory law which regulates the remedy for enforcing corporate rights and privileges, provided 10 74 DIGEST OF THE it does not impair the obligations of the contract or interfere with vested rights; Chattaroi K.K. Co. v. Kinnear, 10-445. 21. Special. A charter granted by the legislature is not affected by subsequent change in "the state constitution prohibiting the granting of charters in that manner ; City of Atlanta v. Gate City Gas Light Co., 10-150. 22. General and speolal. The general law of Iowa provid- ing for the incorporation of towns and cities has no application to towns existing under special charters when it was enacted ; and the election of officers pursuant to the general law, by a town organized by special charter, without more, does not amount to an abandonment of the special charter, and an organization under the act ; Town of Decorah v. Bulls, 3-278. 23. Constitutes legal estate. Corporate franchises granted to private corporations partake of the nature of legal estates ; Miller v. State of New York, 4-256. 24. PowEE TO DISPOSE OF. It sccms to be well settled, by judicial decisions, that a corporation can, when authorized by law "so to do, transfer, sell or convey its charter or franchise to be a corporation, and thus vest it in others ; State of Ohio, ex rel., v, Sherman et al., 4-28. 25. Effect of transfer of. When a corporation transfers or conveys its charter, being thereto authorized by law, the legal effect of such transfer is a surrender or abandonment of the old charter by the corporators and a grant de novo of a similar charter to the transferees or purchasers. This charter granted de novo is, however, subject to all the requirements and limitation of the constitution in force at the time of its re-issue or new grant. Id. 26. Legal consideration moving to grant. There is no ne- cessity of looking for the consideration for a legislative contract outside of the objects for which the corporation was created. These objects were deemed by the legislature to be beneficial to the community, and this benefit constitutes the consideration for the contraqt and no other is required to support it ; Home of the Friendless v. Rouse, 3-7. 27. Aogbptance ; general rule. As a general rule, when a charter is granted, whether it be one of creation or an amendment to a pre existing corporation, it must either be accepted or rejected as offered and without condition ; and, in accepting the privileges conferred, the grantees will be required to perform the conditions imposed ; Lyons v. Orange, Alexandria & Manassas E..E. Co., 3-371. 28. Necessity of acceptance. Private corporations are created by charter or acts of incorporation from the government, and these are in the nature of contracts. Therefore^ in order to com- plete the creation of such corporations, something more than the mere grant of a charter is required ; that is, in order to give to the charter the full force and effect of an executed contoct, it AMERICAN CORPORATION CASES. 75 must be accepted. The government can not enforce the accept- ance of a charter, iipon a private corporation, without its consent ; Teaton v. Bank of the Old Dominion, 4^211. 29. AccEPTAifOE OF. "When a charter is granted as a privilege, and not for the purpose of imposing an obligation, ib has no binding effect until accepted by those for whom it was intended. When accepted it becomes of binding force and must be taken with all its burdens as well as its privileges. It can not be ac- cepted in part ; but must be taken as a whole ; Weymouth v. Penobscot L. D. Co., 7-327. 30. . It does not lie in the mouth of a corporation which has accepted a charter to complain that the granting of the privi- leges granted is beyond the power of the legislature which made the grant. Id. 31. ; CONDITIONS PEECBDENT. The general Tule, in regard to the acceptance of a charter or charter amendments, while ap- plicable to subsequent conditions, to be performed after the or- ganization of the company, does not apply to conditions prece- dent, upon the strict performance of which the very existence and exercise of the powers on the part of the corporation depend. In such cases the organic hfe of the corporation depends upon a strict compliance with the conditions imposed, and, until this is done, there can be no such thing as an acceptance of the charter ; Lyons v. Orange etc. Co., 3-371. 32. Qdalifibd acceptance insufficient, a qualified or par- tial acceptance of an act of the legislature, granting new fran- chises to an existing corporation upon conditions specified, will not be recognized. The corporation must accept it as offered. Id. 33. Acceptance implied. An act of incorporation which, after naming certain persons, declares that they " and such others as may thereafter become associated with them for that purpose, and their successors, are hereby declared and created a body politic and corporate," constitutes the parties named a corporation imme- diately on its passage, there being no conditions expressed to be complied with before they can, become a body corporate; Talla- dega Ins. Co. V. Landers, 3-102. 34. Acceptance presumed. As a general proposition it is true that the charter of a corporation must be accepted, but in cases of private corporations, created for individual benefit, the presump- tion is they are created at the instance and on the request of the parties to be benefited thereby, and, consequently, are accepted by them. If, therefore, they are found exercising the privileges granted, it will be almost conclusive evidence of the fact of acceptance. Id. , 35. . If a charter is granted after having been applied for, acceptance will be presumed from such previous application ; City of Atlanta v. Gate City Gas Light Co., 10-150. 76 DIGEST OF THE 36. Coupled with conditions. If the stockholders of a cor^ poratiou accept a charter, coupled with a condition and privilege to be exerciised provided such stockholders have complied with certain prerequisites and at a time fixed, the company will have no right to exercise the privilege without first complying with such prerequisites and at the time designated; Grrumbine v. State of Maryland, 9-424:. 37. Instance. The charter of a turnpike company fixed the rate of toUs which might be collected, the intention being to re- strict the clear profits within ten per cent. The company was required, once a year, at least, to render to an officer named, a de- tailed statement of its receipts and disbursements, and such officer was authorized to lower or increase the rates of tolls, and if at the end of two years after the completion of the road it appeared that the average profits for those two years would not yield a dividend of ten per cent, then the company had the right to increase the tolls. In the absence of such report of receipts and expenditures, the corporation was powerless to increase such tolls, nor could they increase them at any other period of time than at the end of the two years from the completion of the road. Id. 38. Conditions ; acceptance. When the charter of an incor- porated company provides that it shall be liable for damages to persons or property caused by the exercise of its powers, the ac- ceptance of such charter by the corporation renders it liable for such injuries ; Alton & Upper Alton Horse Ry. & Carrying Co. V. Deitz, 1-439. 39. Implied condition. Fidelity to the state, on the part of corporators, is embraced in every charter ; no charter involves the imperative obligation of permitting a public enemy, alien or do- mestic, to remain in the management of corporations whose oper- ations may be made to embarrass us or aid the public enemy. The duty of loyalty is antecedent, perpetual, paramount, and in granting a charter, the state can make no engagement to dispense with that duty. It enters into the contract and is a fundamental condition of the grant ; State, ex rel. Pittmann et al., v. Adams et al., 3-515. 40. Implied agreement. A corporation receives its charter, and donations under it, with the implied agreement that it will perform, in good faith, the duties imposed by the charter ; Attor- ney Gen. V. Illinois Agric. College, 6-393. 41. Implied conditions. There are annexed to charters, by implication of law, terms and conditions which are as much parts of the contract as those which are expressly stated. Wherefore, the corporators of every corporation are held, impliedly, to agree to take the privileges and immunities con ferried by the charter, subject to the right of the state to reclaim them for any manifest misuser of them; Ward, rec'r, v. Farwell et al., 6-490. AMERICAN CORPORATION CASES. 77 42. Implied conditions. Every private corporation, in accept- ing its charter, impliedly undertakes and agrees, upon condition of forfeiture, that it will exercise the rights and privileges conferred upon it in furtherance of the objects and purposes of its creation, and not otherwise, and that it will so manage and conduct its affairs that it shall not become dangerous or hazardous to the safety or well being of the state or community in and with which it transacts its business. Id. 43. ; nrjuEiEs. The acceptance of a charter and the con- struction of a railroad thereunder is upon the implied condition that the work shall be so constructed and operated as not to injure others ; Alton etc. Ky. etc. Co. «. Deitz, 1-439. 44. Implied conditions. There is an implied undertaking, on the part of every corporation, to render to the public, so far as it reasonably can, that service for which it was created, and not vol- untarily render itself unable to perform it ; Kenton County Court •0. Bank Lick Turnpike Co., 5-395. 45. . It is a tacit condition of a grant of incorporation that the grantees shall act up to the end or design for which they are incorporated ; State of !N ebraska, ex rel., v. Council Bluffs & Neb. Ferry Co., 8-336. 46. Legislative control. An enactment which creates and imposes upon the stockholders of a bank becoming thereafter organized, though not for the purpose of issuing notes to circu- late as currency, an individual liability for the corporate debts of the bank, is not repellanfc to the constitution ; Allen v. Walsh, 7-634. 47. SuPEEViGioN OF CHAETEES. In the state of Wisconsin the legislature retains control over charters, and has the power to take away any exclusive privilege or franchise which it may, improvi- dently, have granted ; State of Wisconsin v . Milwaukee Gas Light Co., 4-234. 48. Legislative conteol of. Limited in the charter of a cor- J)oration that it may be altered, amended or repealed by the legis- ature, and the power thus reserved is in terms absolute. It is not an unlimited power. Like all legislative powers it is subject to this important limitation, viz.; it shall not be so exercised as to im- pair the obligation of a contract, or to destroy vested rights ; New Haven & Derby R.R. Co. v. Chapman ; Same v. Barker, 4-320. 49. . A general statute of Massachusetts provides that every act of incorporation, passed since March 11, 1831, shall, " at all times, be subject to amendment, alteration or repeal, at the pleasure of the legislature." This, at least, reserves the authority to make any alteration or amendment, in a charter granted subject to it, that will not defeat or substantially impair the object of the grant, or any rights which have vested under it, and that the legislature may deem necessary to secure either thdt object or other public or private rights ; Comm'rs etc. v. Holyoke Water P. Co., 3-445. 78 DIGEST OF THE 50. Legislative control of. "Where there is a general law of the state reserving, to the legislature, the power to alter, amend, or withdraw any privilege grainted bya' charter, this reservation qualifies the grant ; a subsequent exercise of the reserved power is not within the prohibition of the federal constitution, as an act impairing the obligation of contracts ; State v. Maine Central E.R. Co., r-284. 51. Amendment under eeseeved powee. Where, in the char-- ter of a corporation, the legislature expressly reserved the power to alter, repeal or annul the charter at pleasure, the question whether a proposed amendment of the charter is wise and con- sistent with the interests of the public and the prosperity of the company, is one which, by the charter, is made to depend upon the wisdom and discretion of the legislature ; it is not a question to be determined by the courts. American Coal Co. v. Con- solidation Coal Co. et al., 7-372. 52. . The reservation, by the legislature, in a charter, of the right to alter, repeal or annul such charter at pleasure is a part of the contract. All parties dealing with the company ac- quire and hold their rights siibject to the reserved power of the legislature. It is not for courts to presume tliat the power re- served will be exercised by the legislature, arbitrarily or unjustly. Jd. 53. Effect op general legislation upon. The general pur- pose of the general incorporation laws of 1845 and 1855 and the general railroad corporation law of 1855 of the state of Missouri, was to confer certain designated powers and privileges and im- pose certain duties and liabilities upon corporations, formed under such laws, in the absence of stipulations or provisions, inconsist- ent with these, contained in special charters subsequently granted. Where such inconsistencies occur in the subsequent l^islation, the previous restrictions, contained in the general statutes, must be understood to have been removed ; Scotland County v. Mis- souri, Iowa & Nebraska Ry. Co., 8-159. 54. . Where there is a. general law concerning corpora- tions, in existence and in force at the time of the granting of a charter creating a corporate body, such parts of the general statute as are not excluded by the charter enter into and form part of it ; Preston v. Missouri & Pennsylvania Lead Co., 8-86. 55. Modification of. The power of the legislature to repeal, alter or modify the charter of any bank, at its pleasure, must be held to be limited to this extent ; it may repeal the charter of any bank, but it can not compel a bank to accept an amendment or modification of :ts charter, nor is any such amendment or modi- fication of its charter binding upon the bank without its accept- ance; Yeaton v. Bank of the Old Dominion, 4-211. 56. Abrogation of privilege. A state may, in the exercise of its police power and in the interest of good morals, take away AMERICAN CORPORATION CASES. 79 and abrogate a lottery privilege previously granted, without im- pairing the obligation of a contract, within the meaning of the constitution of the United States ; State v. Woodward, 9-285. 57. IirsTANCE. The lottery privilege conferred on the Yincen- nes CTnivei'sity by the territorial legislature of 1807, was taken away by section 8 of article 15 of the state constitution and the statute (Rev. St., 1881, § 2077), makes the sale of lottery tickets a crime. Id. 58. Amendment. The right to amend a charter, reserved to the general assembly, does not confer upon the general assembly the power to take away from the corporators the control of the corporate property; Orr v. Bracken County, 10-449. 59. . Neither can it change the object of the incorpora- tion by taking away from the corporators the right to seJect officers under their charter, and place it in the hands of those whose stock, by reason of the increased power of the amendment, are enabled to control the corporation. Id. 60. . The court finds that the amendment was not asked for by a majority of the stockholders, and was not accepted by them. Id. 61. . It is the general rule that an amendment to the charter of a corporation must be accepted by the corporators be- fore it will become binding; Mower v. Staples, 10-677. / 62. . No fundamental change in the charter of a corpora- tion which vitally and radically affects fixed and established rights, can be forced, by the acts of the majority, upon an unwill- ing stockholder ; Hoey, liquidator etc. v. Henderson et al., 7-253. 63. Amendment as affecting stockholdek's liabilitf. "Where a stockholder, in a corporation which possesses banking powers, is conversant with its affairs and does not object to the amendment of its charter and consequent changes in the business of the com- pany, and participates in the benefits derived therefrom, he can not avoid a personal liability, to creditors, by reason of such amendment, but will be held to have acquiesced therein ; Dows V. Naper, 6-424. 64. Amendment; new teems. Where the right to engraft upon a charter new terms, or provisions, has not been reserved in the grant, it is not within the power of the legislature, after the acceptance of the charter, to amend it, without the concurrence and assent of the corporation; Ward, rec'r, v. Farwell et al., 6^90. 65. Resekved power to amend. The reservation, in the char- ter of a private corporation, of the right to repeal or amend it does not necessarily extend to every subsequent amendment. ^ The par- ticular language used is not to be extended beyond its proper meaning, by implication ; New Jersey v. Yard, 6-17. 66. Amendment by oeneeal law. A state statute which de- clares all corporate charters granted after its passage may be 80 DIGEST OF THE altered, amended or repealed by the legislature, does not neces- sarily apply to supplements to existing charters, enacted subse- quent to the statute. Id. 67. Eepeal oe amendmbnt under prior statute. _ The right to amend or repeal legislative grants, etc., reserved in a general statute is but the expression of the purpose of the legislature of that session or term, and it can not bind any succeeding legisla- ture which may choose to make a ^rant or contract not subject to be altered or repealed ; wherefore, if a subsequent legislature shall grant or amend a charter declaring, in the act, that it shall not be subject to alteration and repeal, the former act is of no force in that case. lA. 68. Amendment under supplement. A provision in an act supplementary to an act of incorporation which provides " this supplement, and the charter to which it is a supplement, may be altered or amended by the legislature," does not apply to a con- tract made, with the corporation, by a subsequent supplementary act. Id. 69. Amendment op. A general statute existing subjecting aU railroad charters granted, since a day fixed, to alteration, amend- ment or repeal at the pleasure of the legislature, includes the right to take away some of the powers granted to such' a corpora- tion as well as to add new powers, without which improvements of the greatest importance would be ultra vires ; Mayor and aldermen of Worcester et al. v. Norwich & Worcester R.R. Co. et al., 4-438. TO. . Where, by a general statute, there is power reserved to the legislature to alter, amend or repeal the charter of corpora- tions at pleasure, the right of amendment being absolute, it is not dependent in its exercise upon the consent of the corpora- tion. Id. 71. Power to amend. Where a special charter of a company contained a provision that it might be altered, amended or re- pealed, at any time, by the legislature, there caa be no doubt of the power of the legislature to so amend such charter as to impose new duties and liabilities upon the stockholders ; even such as they were exempt from by the provisions of the special charter ; Butler V. Walker, 5-333. 72. Amendment. Where in the charter granted to a corpora- tion, or by the constitution or some general law of the state, applicable to a charter subsequently granted, the power is reserved to alter, amend or repeal the franchise or privilege granted, such reservation qualifies the' grant, and a subsequent exercise of the reserved power is not an act within the prohibition of the federal constitution as impairing the obligation of a contract ; West Wis- consin Ry. Co. V. Board of Supervisors of Trempealeau County, 5-641. 73. r , The power reserved, to repeal, alter or amend a AMERICAN CORPORATION CASES. 81 charter, authorizes the legislature to destroy the charter. If the legislature should undertake to make a legitimate alteration or amendment, the corporation has the power to reject or accept it. If it does not accept the modification or amendment proposed, the corporation must discontinue its operations as a corporate body ; Yeaton v. Bk. of Old Dominion, -4-211. 74. Amendment. Some amendments, or laws, affecting corpora- tions, are binding with or without their assent. Others bind the corporation and every member thereof, if assented to by a majority of the stockholders. Others are not binding upon non consenting members, although assented to by the majority. All general laws and mere matters of police regulation are embraced in the first class. Additional powers, duties and privileges, which do not change essentially the nature and character of the corporation, or the purpose for which it was created, and have for their object the promotion of the enterprise originally contemplated, fall within the second class. All amendments which work a radical change in the nature and character of a corporation, or the purpose for which it was created, are within the third class ; New Ha\en & Derby PLR. Co. v. Chapman ; Same v. Barker, 4^320. 75. Power TO. AMEND. Power to legislate, founded upon such a reservation, while it can not be exercised to take away or destroy rights acquired by virtue of the charter, and which, by the legiti- mate use of the powers granted, have become vested in the cor- poration, may be exercised to almost any extent to carry into ef- fect the original purpose of the grant, or to secure the due ad- ministration of the corporate affairs so as to protect the rights of stockholders and creditors and for the proper disposition of the assets ; Miller v. State of New York, 4-256. 76. Amendment. An amendment of the charter of a corpora- tion, conferring additional powers and privileges upon it, it being an existing corporation, upon certain terms and conditions, can not operate or have any binding effect unless accepted ; Lyons v. Orange, Alexandria »fe Manassas E.R. Co., 4^371. 77. AocEPTANCB OF AMENDMENT, The fact that one corpora^ tion has been in possession of, and was exercising acts of owners ship over the franchises and property of another, and was known by its name in conjunction with that of the company it had sought to merge into itself, raises a presumption that there had been an acceptance of the act of the legislature authorising the consolidation and merger. This presumption, however, can not prevail against direct proof to the contrary, exhibited in a con- tract declaring, in express language, the terms upon which the transfer or charter and franchise was made, and to which its acts of possession and user are to be referred. Id. 78. . The acceptance of a charter amendment, like the acceptance of an original charter, may be proved by showing that the corporation has done corporate acts authorized by the amend. 11 82 DIGEST OF THE ment, which acts without the amendment would not have been authorized ; Kenton County Court v. Bank Lick Turnpike Co., S-395. 79. AocEPTANOE OF AMENDMBNr. It is not indispensable that the vote of acceptance of a charter amendment, or other enact- ment, should appear of record on the books of a corporation; such acceptance may be inferred from the acts of the corporation through its officers, or otherwise ; City of Covington v. Coving- ton & Cincinnati Bridge Co., 5-388. 80. . Legislative alterations of a private corporation, if merely auxiliary, may be adopted by a majority of the corpora- tors, and such acceptance will bind the whole ; but, if such altera- tions be fundamental, the acceptance must be unanimous ; State, ex rel. Att'y Gen. v. Accommodation Bank of Louisiana, 5-405. 81. . Where a corporation, by its conduct, accepts the benef.t of an act amending its charter, it must take it as a whole, with its burdens also ; Kenton County Court v. Bank Lick Turn- pike Co., 5-395. 82., . "When an amendment to the charter of a private cor- poration aggregate is silent upon the subject of the acceptance, by the corporation, of an amendment to its charter, an acceptance thereof may be shown by any corporate acts which necessarily imply a previous valid acceptance of the provisions of the amend- ment ; State of Minnesota v. Sibley et al., 7-624, 83. Acceptance oe amendment — minoeiit. Amendments which are not " fundamental," may be accepted by a majority of the stockholders ; Mower v. Staples, 10-6T7. 84r. . An amendment increasing the number of directors from five to nine, is not "fundamental," and its acceptance by a majority of the stockholders is binding. Id. 85. MEACfiNG OF MAJORITY. By a majority of stockholders, is meant a majority per capita, where the right to vote is per capita, and a majority of stock where each share of stock is entitled to a vote. lA. 86. Peemissible amendment. An amendment to the charter of a corporation (insurance) which makes the company an exclusive stock company (Spec. Laws 1865, ch. 61), the original charter having created it as a mutual company with authority to issue stock policies (Laws 1853, chs. 7, 8), is not obnoxious to that clause of the constitution of Minnesota which forbids the forma- tion of corporations by special act ; St. Paul F. «fe Mar. Ins. Co. V. AUisetal., 7-6J6. 87. Act not violating. A statute prohibiting the employ- ment of all persons under the age of eighteen and of all women, in laboring in any manufacturing establishment within the state, more than sixty hours per week, violates no contract of the coni' mon wealth, implied in the granting of a charter to a manufactur- ing company ; Commonwealth v. Hamilton Manuf . Co., 7-451. AMERICAN CORPORATION CASES. 83 88. Invalid amendment. The charter of St. Charles College, incorporated by the state of Missouri, reqtiired the college to be coaducted, by its curators, upon the principles of its foundation, as " an institution purely literary, affording instruction in ancient and modem languages, ike sciences and liberal arts, and not in- cluding or supporting, by its funds, any department for instruc- tion in systematic or polemical theology, nor instituting any regu- lations which should render a place in its classes offensive to reasonable or liberal minded persons, whatever may be their re- ligious opinions." It was held, that an amendment of the charter providing that the concurrence of the Missouri annual conference of the Methodist Episcopal Church South should " be requisite in filling all places in the board, upon the conference affording, to the board, satisfactory assurances for the maintenance and endow- ment of the college," by requiring the concurrence, in the choice of curators, of an ecclesiastical body, representing one of the religious denominations of the state, endangered, in this respect, the principles of the foundation ; and,, even if it did not, it changed the character of the administrators of the trust, hindered the free choice of their successors, according to the will of the founder, by the men to whom he had intrusted his bounty, and essentially injured the contract upon which he advanced it ; State, ex rel. Pittmann et al., v. Adams et al., 3-515. 89. Vaeianoe of name. A discrepancy between the correct corporate name of the defendant corporation, as given in the orig- inal charter (Laws 1857, Ex. sess., ch. 60), and the corporate name used in the special laws of 1857, chapter 134, amendatory of the charter, held unimportant, in view of the clear intention of the legislature and of the provisions of special laws of 1868, chapter 120 ; Cotton v. Miss. & Eum Kiver Boom Co., 7-603. 90. Provision of, as to duration. The words " perpetual suc- cession " used in the charter of a private corporation, without other words of limitation or restriction, signify an indefinite duration ; and are not to be understood in the sense of continuous, or unin- terrupted, succession. A corporation chartered with perpetual succession is not limited as to its existence by a general law which confines the duration of all corporations, where there is no limit in its charter, to the term of twenty years ; Fairohild v. Masonic Hal' Association, 8-278. 91. New ohaetee. The acceptance of a new charter, by a cor- poration, is a surrender of exemptions before existing; State v. Maine Central R.E. Co., 7-284. 92. Extension of. The charter of a railroad company pro- vided that if the road should not be constructed and put in opera- tion in five years the charter should become void. The road was constructed in part and, six days before the expiration of the five years, an act was passed by the legislature authorizing the company to issue its bonds to a large amount, drawing interest payable 84 DIGEST OF THE semi-annually, to be guaranteed by a municipal corporation, which should be secured by mortgages of the property and franchises of the company. Held, that the time for the completion of the road was thereby extended and the charter continued in force an indefi- nite time ; Foster v. Fitch et a)., 3-174. 93.- Extending duration. By its original charter, passed in 1857, defendant was made a body corporate . . . for the period of fifteen years. In 1867 the charter was amended by striking out the words " for the period of fifteen years," and, also, by changing the form of proceedings for condemnation. Held, that neither of the amendments infringes upon that provision of the constitution prohibiting the formation of corporations under special act ; Cotton v. Missis. & Eum Eiver Boom Co., 7-603. 94. Effect of eevival. It was provided in the charter of a corporation that in the event of non user during a period of eight years, all the privileges and immunities granted should cease and terminate. Non user existed for twelve years, at the expiration of which period, the legislature passed an act to revive and amend the charter, making, however, no provision for any new or further organization. It was objected that the acts specially mentioned, in the act of revivor, only were revived, and that the old board of directors were not authorized to act, so that the company was left without organization, directors or officers, wherefore it was incompetent to contract. Held, as there had been at no time a judicial finding and declaration of forfeiture, the act reviving the charter of the association must be construed to intend the revival and continuance of the organization as it existed de facto at the time of the passage of the act ; Phillips et al. v. Town of Albany et al., 4-220. 95. Reseevation of poweb to eepeal. a general act of the legislature of the state of Kentucky reserved to the legislature the right to amend or repeal all charters and grants to corporations, unless the contrary intent be therein plainly expressed. Sub- sequently the legislature incorporated an insurance company by an act in which no such intent was expressed. Held, that the reservation of the general law was a part of the special charter, and that an act repealing the charter was constitutional ; Griffin V. Kentucky Ins. Co., 1-530. 96. Alteeation oe eepeal. It is the well-settled law of the state of New Jersey that the provisions of a special charter shall not be altered or repealed, except by express words ; State, The Morris & Essex R.E. Co., v. Commissioners of Taxation, 8-376. 97. Geneeal eepealee. A general repealer in a general law can not disturb the provisions of a special charter, id. 98. Eepeal bt geneeal law. If the prior clauses of a general law apply, in express terms, to a special corporation, a general repealer would repeal inconsistent provisions in the special charter. If there is an g-bsejjce of such express prior reference there must AMERICAN CORPORATION CASES. 85 be a special repealing clause to make a general law applicable to such particular corporation. Id. 99. Kbpbal of. The charter of a corporation provided " the legislature may, at any time, alter, amend or repeal this act, but such alteration, amendment or repeal, shall not be made . . unless it shall be made to appear, to the legislature, that there has been a violation, by the company, of some of the provisions of this act." An act of the legislature was passed, without preamble or recital, but simply declaring that the act "be and the same is hereby repealed." On question as to the validity of the repealing act, held, (o) The right of the legisla- ture to repeal, when it is properly made to appear that a breach of the charter has taken place, can not be questioned. (5) The inquiry into the fact of violation would be an inquiry for the leg- islature, for the purpose of enabling the legislature to exercise its legitimate powers, and if such inquiry be legislative in character, it might be entered upon in any manner, and through any chan- nels the legislative wisdom might devise or see iit to employ, un- trammeled by any of the rules which govern the action of judicial tribunals, (c) A legislative act, not violative of any constitu- tional principle, must be its own sufficient and conclusive evi- dence, when assailed, of the justice, propriety and policy of its passage. (vould be liable to any person suffering damages 92 DIGEST OF THE through a negligent performance of any of its duties ; Weymouth, survivor, v. Penobscot Log Driving Co., 7-327. 134. Peesomption as to. Every person dealing with a corpora- tion, or receiving its obligations, is supposed to be cognizant of the provisions of its charter ; Lowry et al. v. Inman, 4-649. 135. IiT CONFLICT wrrH CONGRESSIONAL ACT. Commerce be- tween states being a matter delegated to congress to be by it regulated, the statute of a state which shall grant to a corporation (in this case a telegraph company), an exclusive right to construct and operate necessary works, conflicting with an act of congress, upon the same subject matter, is inoperative as to any corporation which is entitled to the privileges of the act of congress ; Pensa- cola Tel. Co. «'. Western Union Tel. Co., 6^8. 136. Conflict of laws. The decisions of the supreme court of the United States, while entitled to great respect, are not of binding authority on a state court in the construction of one of the statutes of the state, especially when such construction is at variance with the previous decisions of the state court ; Penn v. Bomman et al., 9-134. 137. CoEPORATioNS CREATED BY STATE IN REBELLION. Corpo- rations created by the legislature of a state in armed rebellion against the United States, are empowered since the restoration of the normal condition of that state as to the Union and the states composing it, to sue and be sued in the federal courts ; provided, however, their acts of incorporation had no relation to any thing else than the domestic concerns of the state and were neither in purpose nor operation hostile to the United States or in conflict with its constitution ; but were, in fact, created in the ordinary course of legislation, such as there might have been had there been no war or attempted rebellion, and such as is of annual occurrence in all the states ; United States v. Ins. Cos., 5-98. 138. Action in a state not op rrs creation. While corpo- rations can exercise no corporate powers within the limits of a state, not the state of its creation, without the consent of the lat- ter ; yet, when that consent is given, the amendment of the charter of the company by the state creating it by a provision which conflicts with some law or constitutional provision of the state licensing the corporation, can not destroy the validity of the amendment; City of Covington v. Covington & Cincinnati Bridge Co., 5-388. 139. Confirmatory action of another state. The action of one state in confirming the act of incorporation of a company in- corporated by another state, creates no compact or agreement by which like legislation must be obtained from each state before an amendment could be made to the original charter, or additional power given to the corporation. Id. _ 1 40. Judicial notice of. Courts will not take judicial cog- nizance of the charter of a private corporation, nor of its corpo- AMEEICAN CORPORATION CASES. 98 rate powers or capacity, if it derives its existence from a special act of incorporation. If it is shown to be organized, existing and acting under a general law, the court must take notice of the source of its creation and its provisions ; Kelly et al. v. Trustees of the Alabama & Cincinnati K..K. Co., 6-130. 141. Copt as evidence. A copy of the charter of a corpora- tion, duly certified by the secretary of state, under the seal of the state, is evidence of the creation of such corporation ; M'Cune Mining Co. v. Adams, 10-430. 142. UNCONSTrriTTioNAL AS A DEFENSE. An act of the legisla- ture was adopted as a law, by which a so called charitable associa- tion was established and subsequently organized and placed in operation. The supreme court of the state held the act of its creation to be unconstitutional and so void. The act could not be pleaded or admitted in defense of an agent of the association in a suit to recover from him money received while acting as such agent ; Harris v. Brooks, 6-116. 143. Expiration by injunction. The charter of a corporation expires when an injunction against its further operation is made perpetual; Dane et al. v. Young et al., 4—425. 144. Forfeit [TEE. The charter of a corporation can be for- feited only at the instance of the state; In re Louisiana Sav. Bank, 10-466. 145. . A cause of forfeiture, such as non user of the franchise that has been judicially declared, can not be taken ad- vantage of collaterally, as in a proceeding to collect benefits; Barren Creek Co. v. Beck, 10-333. 146. . A charter may be forfeited for non user or mis- user, but its dissolution for either of these causes can be effected only by the judgment of a court of competent jurisdiction. Such matters can not be set up collaterally ; City of Atlanta v. Gate City Gas Light Co., 10-150. See Aetioles of Association; Constitutional Law; Dissolu- tion; FoEFErruEE; Feanchise; Incoepoeation; Legislative Power; Oeganization ; Police Powee; Suekendek of Chaetee. CHUECH OEGANIZATION. 1. CoEPOEATE EXISTENCE. The Corporate existence of a church association is not proved by evidence that the members held the ordinary meeting of a church society and elected officers ; Fre- denburg v. Lyon Lake Meth. Epis. Ch., 6-605. 2. PowBE IMPLIED. Undoubtedly, the power to erect a church building carries with it power to raise the necessary means to accomplish the purpose ; and, to this end, debts may be con- tracted, and notes would evidence the indebtedness ; Cattron et al. V. First Universalist Soc. of Manchester, 6-534. 3. Election of trustees. In the absence of rule, regulation, 94 DIGEST OF THE or discipline governing an ecclesiastical body as to its election of trustees, if usage or custom may amount to a rule, strict compli- ance with such usage and custom must be shown to validate an election ; First African Meth. Epis, Zion Oh. etc. v. Hillery et al.; 6-232. 4. Necessity of notice of election. If custom has established the giving of a notice of annual election of trustees, there being no rule or regulation adopted as to such election, an election with- out such notice will not constitute the persons elected officers de jure. Id. 5. Tetjstbes de facto. It is not unlawful for trustees de facto of a church to eject persons, claiming to be trustees de jure under an invalid election, who enter upon the temporalities of the church; such intermeddlers being neither trustees in law or in fact. Id. 6. IIsuepation. Entry upon the temporalities of an ecclesiasti- cal corporation and notice of dismissal to its pastor by persons claiming to be trustees under an illegal election, will not consti- tute such persons trustees de facto. Id. 7. Acceptance of office ; estoppel. The acceptance of the office of treasurer of a church association does not estop the in- cumbent from denying it has a corporate existence, in the absence of proof of corporate acts; Fredenburg v. Lyon Lake Meth. Epis. Oh., 6-605. 8. Membership ; subscription. Agreement by several to pay the sums set opposite their names, signed to a subscription paper, to a treasurer to be appointed for the building of a church edince. A treasurer was appointed, and at meetings, at which defendant was present, not objecting, an organization was perfected, officers appointed, and the work carried through, and the organization later became incorporated. The subscription was held to be bind- ing ; but, to recover on it, it must be shown that, when the paper was circulated for the obtaining of subscriptions, it was the under- standing and purpose that the edifice should become part of the temporalities of an incorporated religious society ; Presbyterian Soc. V. Beach, 8-537. 9. Duty of officees. It is the office of the managing com- mittee of an ecclesiastical society to transact the business incident to the purposes for which the society was brought into existence ; Harrison v. First Presbyterian Soc. of Hartford, 6-315. 10. Mannee of oonteaoting. In the absence of evidence show- ing in what manner a church organization contracts debts and executes contracts, when it appears there are trustees, it will be presumed such trustees are intrusted with the control of the temporalities of the church and empowered to make contracts and incur liabilities, on account of the church property ; St. Pat- rick's Kotnan Catholic Church etc. v. Gavaton, 6-372. 11. Execution of contract. The trustees of a religious society are the corporate body and they alone can act for and AMERICAN CORPORATION CASES. 95 bind the society b^ the corporate name. Such trustees should sim as trustees, giving the name of the society adopted ; Little, adm'r, v. Bailey et al., 6-413. 12. Tetjstbes ; how to act. The trustees alone can act to exe- cute contracts for a church ; and, that their contracts may be valid and binding, they should act as a body, or delegate power to one of their number, or other person, or ratify and approve the acts of the person acting for them. The unauthorized act of one trus- tee can not bind the church as a corporation ; St. Patrick's E.oman Catholic Church etc. v. Gavaton, 6-372. 13. Employment bt priest; trustee. Where the officiating priest is also one of the trustees of a church, and he shaU employ a person to work for the church without authority from his co- trustees, and his act is not ratified by them, the church, as a corpo- ration, is not liable. Id. 14. Alienation of real property. It seems that the only method by which a religious corporation can divide its real estate and vest a portion thereof in a part of its congregation, set off from the parent organization, is by legislative enactment ; Re- formed Church of Grallupville v. Schoolcraft et al., 8-450. 15. Public policy ; alienation. Since the passage of the stat- ute of New York authorizing religious corporations to sell their real estate, upon order of the chancellor, it would seem such sales can only be considered as against public policy when unauthorized by the proper tribunal. Id. 16. . Even if the alienation of the real estate of a religious corporation be against public policy, such a corporation may lose title thereto by adverse possession. The statute of limitations ope- rates as well against corporations as against natural persons. Id. 17. Adverse possession. A resolution of the governing body of a religious corporation, purporting to transfer a portion of its real estate to a new organization, consisting of members of the parent society, set off therefrom, is sufficient to lay the foundar tion of an adverse possession. Id. 18. . Where the officers and members of a new society, composed of a part of a parent religious organization, set off from it by competent authority of the old organization, take possession of premises allotted to such new society and, thereafter, without being formally incorporated, occupy such premises, claiming to own them, and subsequently a corporation is.duly organized, under a general law providing for the organization of religious corporar tions,' it succeeds, without formal conveyance, to the property of the society and to all property held for its use, and, in such case, there is such a continuity and privity of possession and estate as will enable the last possessor to tack to his possession the prior possession, so as to establish title by adverse possession. Id. 19. Quality of title acquired. A deed conveyed certain premises to a religious corporation, reserving a right to build a 96 DIGEST OF THE .basement story upon the premises, to be used solely for the purposes of a school, with a right of passage to and from the same ; the grantee to build a church upon the basement walls ; a privilege was given grantee to purchase the basement. The deed vested the fee in the grantee, with the reservation of an easement merely; and, though the right to the basement was not forfeited by an omission to use it, or by a use of it for other than school purposes, the corporation, by action of ejectment, might cause the removal of persons occupying and holding possession of the basement for other than school purposes, the Judgment awarding possession subject to the easement. Id. 20. Sepulture as a peopeett eight. A suit by a member expelled from a church corporation, to compel restoration to mem- bership, on the ground that such restoration is necessary to enable him to enjoy the right of sepulture in church grounds, acquired by him as a member, is premature; State, ex rel., v. Hebrew Congr., 7-239. 21. Jtjeisdiction of civil courts. Although the civil courts will not, in case of persons excommunicated by competent church authority, go behind that authority and inquire whether the per- sons have been regularly or irregularly excommunicated, the court may inquire whether or not the expulsion was the act of the church ; Bates et al., trustees, et al. v. Houston et al., 9-47. 22. . When property is devoted to the promotion of a specific doctrine, the civil courts will, when necessary to protect the trust to which the property has been devoted, inquire into the religious faith and practice of the parties claiming its use, and will see that it shall not be diverted from that trust. Id. 23. Instance. The wrongful and violent seizure of the edifice and property belonging to a church of the congregational form of government by a minority of the members, contrary to the wishes of a majority ; the deposition of the officers of the church and trustees, who hold the property; and, the retention and use thereof by the minoritj', to the exclusion of the majority, furnish good grounds for equitable relief. Id. 24. When mandamus not lie to. A mandamus will not lie to compel a religious society to restore to its membership one who had been expelled by a decree of the legally constituted church judicatory, on account of an alleged violation of some one or more of the laws of the society. The civil courts will not revise the ordinary acts of church discipline, or the administration of church government; State, ex rel. v. Hebrew Congregation, 7-239. 25. Powers as to litigation. As managers of the affairs of an ecclesiastical society, its committee, or trustees, are in duty bound to resist proceedings, at law or in equity, which, if success- ful, will bar its revenue. It is not, however, within the scope of the duty, or power, of such managers to defend, at the cost of the AMERICAN CORPORATION CASES. 97 society, matter in litigation wliicli is purely personal in its aim and effect ; as in this case, to defend the legality of their own election when that was assailed ; Harrison v. First Presbyterian Soc. of Hartford, 6-315. See Religious Society. CITIZENSHIP. 1. Of members of ooepoeation; peesumption. The members of a corporation are legally presumed to be citizens of the state by the laws of which the corporation was created ; Hobbs et al. v. Man- hattan Ins. Co., 1-583 ; Manufs. Nat. Bk. v. Baack et al., 1-93. 2. National banks. It is presumed that the members of a bank organized under the national bank act are citizens of the state in which the bank is situated. Id. 3. Of ooepoeation. A corporation itself can be a citizen of no state, in the sense in which the word " citizen " is used in the constitution of the United States; Muller v. Dows, 6-8. 4. Peivileges and immunities. Corporations are not citizens within the meaning of that provision Of the federal constitution which declares that the " citizens of each state shall be entitled to the privileges and immunities of the citizens of the several states." That provision of the constitution applies to natural persons, members of the body politic, owing allegiance to the state, and not to artificial persons ; Paul v. Commonwealth of Virginia, 1- 19 ; Ducat v. City of Chicago, 1-55 ; Liverpool Ins. Co. v. Com- monwealth of Massachusetts, 1-30 ; Ins. Cos. v. Commonwealth, 1-485. 5. . A corporation aggregate may be a citizen in the sense in which the term "citizen " is used in that part of the constitution which speaks of the judicial power of the United States. It may enforce legal rights, or may obtain redress for wrongs, not only in the state of its creation, but also in the other states of the Union, by virtue of the comity between the states. But, a corporation aggregate is not a citizen within the meaning of that clause of the constitution which declares " the citizens of each state shall be entitled to all privileges and immunities of citizens of the several states ;" Ducat i). City of Chicago, 1-426; affirmed, 1-55- 6. Of ooepoeation. A corporation is regarded as, in effect, a citizen of the state which created it ; City of St. Louis v. Wiggins Ferry Co., 3-79. 7. Of state of ceeation. It is too well settled to be ques- tioned that a corporation is a citizen of the state where it is cre- ated ; Quigley v. Central Pacific E.R. Co., 8-343. 8. Foebign ooepoeation. a corporation can be a citizen only of the state by the laws of which it is created. It may be permitted to transact business elsewhere, but can not, like a natural person, change its domidl ; Germania Fire Ins. Co. v. Francis, 3-60. 13 98 DIGEST OF THE 9. On consolidation. Two corporations, organized and exist- ing as such, under the laws of two different states, lawfully con- solidating, become one ; nevertheless, in the state of the organiza- tion of each constituent, the consohdated corporation is but a cor- poration of that state ; MuUer v. Dows, 6-8._ 10. JuEiSDioTiON. A corporation is a citizen of the state in which it is created, and the federal courts have no jurisdiction of actions between states and their own corporations ; Common- wealth of Pennsylvania v. Quicksilver Mining Co., 1-57 ; Ins. Cos. V. Commonwealth, 1—485. 11. . In a suit by a state against a corporation, an aver- ment that the defendant is a body " politic in the law of, and doing business" in another state, is insufficient to establish the jurisdiction of the federal courts; Commonwealth of Pennsyl- vania V. Quicksilver Mining Co., 1-57. 12. JuEisDioTioN ; NATIONAL BANKS. A district court of the United States has jurisdiction of a suit brought against an in- habitant of the district by a national bank located in another state ; Manufacturers' Nat. Bk. v. Baack, 1-93. 13. ; presumption; parties. A suit against a corporation by its corporate name is regarded as a suit against citizens of the state which created it ; the legal — and, for the purposes of juris- diction, conclusive — presumption being that the members of the corporation are citizens of that state; Hatch v. Chic, K. I. & Pac. E.E. Co., 1-79. 14. Foe purposes of suit. A corporation may sue or be sued in the federal courts; but, in such case, it is regarded as a suit brought by or against the stockholders of the corporation ; and, for the purpose of jurisdiction, it is conclusively presumed that all the stockholders are citizens of the state which, by its law, creates the corporation ; Muller v. Dows, 6-8. 15. Foe certain purposes. A corporation may be a citizen of a state, for the purpose of suing and being sued in the courts of the United States, and the laws of the state can not withdraw a citizen of another state from the operation of an act of congress nor deprive him of the right of removal of his cause to a federal court; Herryford v. -iEtna Ins. Co., 3-511. 16. Qu^RB. "Whether by the act of March 2, 1867, for the re- moval of causes, the congress of the United States intended hj the use of the words " citizen of another state " to include " artifi- cial beings" such as corporations are; Dodge, adm'r, v. North- western Union Packet Co., 3-502. 17. Removal of cause. Corporations are citizens for the pur- poses of suit and are embraced within the federal legislation with reference to the removal of causes from state to federal courts ; Stanley v. Chic, E. I. & C. E.E. Co., 8-154; Quigley v. Cen- tral P. E.E. Co., 8-343. 18. . A suit in a state court in which a foreign corporation AMERICAN CORPORATION CASES. 99 is joined with other defendants who are residents of the state can not be removed to the federal courts unless such residents are merely nominal parties ; but when the action is against the cor- poration and its officers, and no relief is prayed for as to any of such officers that is not prayed for as against the corporation, and no relief is prayed for against any officer in his individual capacity, such officers are merely nominal parties ; and the action may, by proper proceedings, be removed ; Hatch v. Chic, E. I. & P. R.R. Co., 1-79. 19. ^Change of foeum. Nothing done by a corporation in regard to the place or manner of transacting its business, and no statute of a state in which it transacts such business, can deprive it of its rights and privileges when sued in a state foreign to the one in which it was created, to remove such action in the manner pre- scribed by the acts of congress, from the state court to the proper court of the United States. Id. 20. Extea-tereitOrial existence, a corporation has no legal existence beyond the territory of the sovereignty by which it is created, and its dwelling place is within such territory ; Hatch v. Chic, E.. 1. & Pac E.R.. Co., 1-79 ; Commonwealth of Pennsyl- vania «. Quicksilver Mining Co., 1-57; Ducats. City of Chicago, 1-55 ; Liverpool Ins. Co. v. Commonwealth of Massachusetts, 1-60 ; Ducat v. City of Chicago, 1-426. 21. Comity. The right of a corporation created in one state to do business and make contracts, in the full enjoyment of its powers, in another state, is a right based upon the comity between the states, and is a voluntary act of the sovereign power ; but when contrary to good policy, or when prejudicial to the interests of the state, the comity ceases to be obligatory ; Ducat v. City of Chicago, 1-426. 22. . So, an insurance company, incorporated under the laws of another state, coming into the state of Illinois to do busi- ness and make profits, may be taxed, and the legislature may rightfully discriminate between such corporations and domestic corporations of the same character, when, in their judgment, the policy and interests of the state demand it. Id. ; affirmed, 1-55 ; State of Louisiana v. Fosdick, 1-581. 23. Taxation. A state law imposing upon corporations organ- ized in other states and transacting business within its jurisdiction discriminating conditions is not repugnant to the federal consti- tution, either as a discrimination between citizens of the United States, or as an exercise of the power to regulate commerce. _ Id. '2iL , Unincorpoeated associations. The petition described plaintiffs as an association of per'sons, not incorporated, for the purpose of carrying on a banking business at Omaha, and that they were at the time the cause of the action arose, as well as at the time the action was commenced, engaged in said busmess at that place. Equivalent to an averment that their domicil was 100 DIGEST OF THE at Omaha, and that it was a suflScient averment of citizenship ; United States Express Co. v. Kountze Bros., 1-45. 25. Unincoepoeated associations ; pleadings. An averment that defendant is a foreign corporation organized under the laws of another state, is a sufficient averment that the defendant is a citizen of such state. Id. CLASSIFICATION OF COEPOEATIOJSTS ; see Coepoea- TI0N8. COLLEGE. 1. Incoepoeation and feanohise. The limitations upon the power of the legislature over incorporated colleges, as elucidated by the opinions in the Dartmouth College case, which has been substantially followed in aU subsequent cases, are ; that such cor- porations belong to the class of private corporations, as opposed to municipal or such as are owned entirely by the state ; that they are strictly eleemosynary, contributing to our higher wants and, generally, furnishing to the comparatively poor, opportunities otherwise beyond their reach ; that private contributions for the endowment of institutions of learning, on the faith o^ a charter, constitute a contract, between the contributors and others inter- ested and the state ; that the contribution is a sufficient considera- tion for the franchises given by the charter, the whole constituting a valid and binding agreement, not to be impaired by the state nor avoided by the corporation ; that the trustees named in the charter and those chosen as their successors, according to its terms, are not only trustees of the fund, but, also, take the place of the founder of the charity, as its lawful visitors and overseers, their trust implying an obligation to govern according to the statutes of the founder, as embodied in the charter ; that, in f ul^Uing this obligation, they can be controlled as other trustees, the only duty of the courts being to see that the trust is faithfully executed ; and, that any statute making a substantial change in the charter, as by the addition of new trustees, or by a material change in the manner of choosing them, in the mode of expending the funds, or in the objects of the charity, impairs the obligation of the con- tract and is forbidden by the constitution of the United States; State, ex rel., v. Adams et al., 3-515. 2. Subsceiptions. If a number of persons subscribe to a paper, in and by which they promise to contribute money for the uccom- plishment of an object of interest to all of them, as the erection of a building for a college, and which object can not be accom- plished save by their common performance, their mutual promises constitute mutual obligations, and are a sufficient consideration to support the promise of each ; Christian College v. Hendley, 5-151. 3. CoNsiDKEATioN FOE sTJBSCEiPTioN TO STOCK. Where a Sub- scription to an educational society is made upon condition that a AMERICAN CORPORATION CASES. 101 certain amount shall be obtained in cash, or promissory notes given, for the same purpose, the labor and expense necessary to obtain such amount, if it is obtained, is a good consideration for the sub- scription; Trustees of Kentucky Baptist Education Society v. Carter, 5-290. 4. Endowment note ; not negotiable. A note was executed in the following words : Ten years after date, for value received, I promise to pay to the treasurer of Wilton Collegiate Institute the sum of $1,000, as endowment, with annual interest, at ten per cent., to secure two permanent scholarships, No. , in said collegiate institute, said scholarships to be available on the pay- ment of the interest annually. The supreme court of Iowa held, (1) the note was not negotiable and that it could not be sold, at sheriff' s sale, to pay the debts of the institute, so as to pass, to the purchaser, a right to recover thereon, regardless of the equi- ties existing between maker and payee; wherefore, (2) a good defense was presented by allegations, properly pleaded, (a) that the note was given, in consideration of two perpetual scholar- ships, to raise an endowment, which was to constitute a trust fund, which fund could not be appropriated to the payment of the debts of the institution ; (5) that the institution had become defunct and that, thereby, the maker of the note was deprived of his scholarships, as well as defeated in his purpose to aid in en- dowing the institute ; (c) the note was not to be vaKd unless $40,000 endowment should be raised, and that only $3,000 were raised ; Ingham v. Dudley, adm'r, 9-312. 5. Otteatoes of a college. Curators may have an absolute right to their places ; such a right as would be sustained without reference to the question of possession ; and, even under lawful judicial proceedings against them, or a right to continue until re- moved by such lawful judicial proceedings; State, ex rel., v. Adams et al., 3-515. 6. FowEES OF TE0STBES. The trustees or curators of an elee- mosynary institution, such as an incorporated college, the charter of which is an absolute grant, subject only to the conditions im- posed, have no power over the charter; on the contrary, it is their creator and their absolute rule of conduct. The beneficial interest, in the charity fund, belongs neither to them or to the state, but to the beneficiaries only, who, from the nature 6f the case, can not consent to any change in the charter. Hence, its essential condi- tions are permanent, so far as change depends upon consent, and the acceptance of a legislative amendment to the charter of such an institution, by its board of curators, gives such amendment no validity. Id. 7. AuTHOEiTT OF TRUSTEES WITH visTTORiAL powBES. The au- thority of trustees of an eleemosynary corporation, having visi- torial powers, is more extensive over the concerns and manage- ment of the corporation than that of directors of a private 103 DIGEST OF THE moneyed corporation, such as a bank or railroad. In eleemosynary corporations there are no stockholders and regulations, that in or- dinary corporations are made by stockholders, and disputes which are submitted to the courts are, in the case of eleemosynary cor- porations, made and decided by those intrusted with the visitorial power. The visitor is the judge or arbiter to decide all disputed questions not involving the integrity of the management of the fund, or the observance of the statutes of the founder, and he, alone, can make regulations and by-laws that shall bind the offi- cers. There being no constituent members, he, in a sense, is the corporation and conti-ols its operations, subject only to the ex- pressed will of the founder. Id. 8. Power of trustees limited. The authority of trustees of an eleemosynary corporation having visitorial powers is not abso- lute. It does not extend to enable them to accept, on behalf of the corporation, any and all amendments to the charter which the legislature may prescribe. Amendments found necessary to adapt the management of the corporate affairs to altered conditions, and enabling the corporation to attain the general objects of the founder by more appropriate means, may be sustained, when en- acted by the legislature and accepted by the trustees, but, it is not competent for such trustees to accept amendments which change the character and purpose of the foundation or divert the prop- erty from the uses which the donor designed. Id. 9. Legislative power of amotion. Where in a university, which is a state institution, and which the state has been in the habit of governing by means of curators appointed by the legis- lature (in this case the University of the state of Missouri) a pro- fessor was appointed, for the term of six years from the date of such appointment, " subject to law," it is within the power of the legislature to vacate his office at discretion and without fault on his part and order a new election of a professor to the same chair ; Head v. University, 5-59. 10. DissoLUTioisr ; non usee. "Where a corporation is organized for educational purposes, and, to carry out these purposes, the cor- poration is, by charter, authorized to locate a college at a certain place, to purchase property, real and personal, and such corpora- tion organizes and for a time carries out the purposes of its crea- tion, but, afterward, transfers all its property and ceases to main- tain a college, or to perform any of its duties or acts required and authorized by its charter and remains in such condition for nine- teen years, a quo warranto will lie, in the name of the state, for its dissolution ; State, ex rel., v. Pipher et al., 9-329. 11. . It is no defense in such action that a suit is at the time pending, brought by the • corporation against a grantee of its realty, to recover some of such real estate, which the corpora- tion had granted to such grantee nearly nineteen years prior to that time. Id. AMERICAN CORPORATION CASES. 103 12. Dissolution ; effect of. Upon the dissolution of such a corporation, in which there are no stockholders and which owes no debts, all its property acquired by purchase for value vests in the state. That acquired by donation reverts to the donors ; People V. President etc., 1-161. COMITY. 1. The peinoiple generally. Upon the principle of comity, which is a part of the voluntary law of nations, effect is fre- quently given in one state or country, to the laws of another in a great variety of ways, especially upon questions of contract, rights of property, and rights of action connected with, or depending upon, such foreign laws, without which commercial and business intercourse between the people of different states and countries could scarcely exist; Thompson v. Waters, 4-458. 2. Among the states. Among the states composing the fed- eral union it is the common interest of all to encourage the recog- nition of those principles of state comity which tend to make us in feeling and in interest one homogeneoas people. This comity has been more generally admitted and administered in reference to corporate rights and interests than upon scarcely any other sub- ject. Id. 3. Between states. There is nothing in the comity which ex- ists between states, that makes it improper for courts of one state to afford a remedy against the property of a corporation which has forfeited its franchises under the laws of another state, such property not being in the hands of a bona fide purchaser, not- withstanding the fact, by the local laws of such other state which created the corporation, its effects are in the hands of a receiver ; City Ins. Co. of Providence v. Commercial Bank of Bristol, 5-219. 4. Title to eealtt. No doctrine is better settled by authority, than that the title to real estate, or immovable property, can only be affected in the mode recognized by the laws of the state within whose territory it is situated. Jd. 5. ExEEOisE OF FEANCHisES. No State cau create corporations or regulate their powers or authorize the exercise of corporate fran- chises in another state. It may confer powers, in the nature of a commission, to be exercised anywhere on condition that their exercise be assented to by the state or sovereignty where it may be sought to act. Without such assent, express or implied, such powers are nugatory outside of the state granting them ; Thomp- son V. Waters, 4-468. 6. CoNTEACTs. Foreign corporations may, by comity of nations, make contracts in other states and establish agencies there, unless excluded from so doing, or unless against the policy or interest of the state ; Williams v. Cresswell et al., comm'rs, 8-23. 7. Geant of peivileges. Comity to a foreign corporation can 104 DIGEST OF THE not extend to the point of granting it privileges which its charter does not permit it to exercise, and a state in extending its comity may go no further than its pleasure dictates. It may_ stop short and tolerate but a part of the applicants' chartered rights ; Dia- mond Match Co. V. Powers, 10-616. 8. Geant of privileges. In the present case, application for a mandamus to compel the register of deeds to permit relator, for its own private use, access to the records of the county for the purpose of making a complete abstract of titles to all the lands in the county, was refused. Id. 9. Organization of company. If, by the law under which a corporation is organized, the corporation has a lien on the stock of a shareholder for a debt due from him to the corporation, such lien is a good defense to an action in another state, aga,inst the corporation, by a person to whom the shareholder has transferred his stock ; Bishop v. Globe Co., 6-468. 10. Laws of a sistbk state. The laws of a foreign state oper- ate beyond the territorial limits of such state ex comitate only. The courts of a state where the laws of such foreign state are sought to be enforced, will use a sound discretion as to the extent and mode of the. exercise of that comity. Such courts will not permit themselves to be used for the purpose of affording reme- dies which are denied to parties in the jurisdiction of the state which enacted the law and which tend to operate with hardship on her own citizens and subjects ; Eice v. Merrimack Hosiery Co., 8-370. 11. Instance. A creditor of a corporation, crea.ted by and existing under the laws of the state of Ohio, filed a bill in a cir- cuit court of New Hampshire, to enforce the individual liability of the stockholders of the corporation. The corporation had no assets in the latter named state, nor did any of its stockholders re- side in that state. The bill contained no recital of the remedial process by which the individual liability of stockholders is enforced in Ohio. This court held that comity does not require the courts of this state, in the exercise of a judicial discretion, to give effect here to the statutes of that state. Id. 12. Judicial comitx. "When the question is presented, in the supreme court of the United States, whether, under the constitu- tion and laws of a particular state, a company, professing to be a corporation, is legally so, this court will receive as conclusive of the question, the decision of the highest court of the state, deciding, in a case identical in principle, in favor of the corporate existence ; Secombe v. R.E. Co., S-108. 13. . The highest courts of a state having decided upon the construction of its statute of limitations, such decisions are bind- ing upon the supreme court of the United States, whatever that court may think of their soundness on general principles ; Tioga B.E. Co. v. Blossburg & Corning E.E., 4-265. AMERICAN CORPORATION CASKS. 105 14. Judicial comitt. In the absence of any positive rule affirm- ing, or denying or restraining the operation of foreign laws, courts presume the tacit adoption of them by their own government, unless repugnant to its policy or interests. Each state, within the limit of the rule, wUl recognize those corporations enacted into being by the legislatures of other jurisdictions and allow access to its tribunals on all lawful contracts ; WUliams v. Cresswell et al., comm'rs, 8- 23. COMMEECE. 1, Natiokal charge. The regulation of commerce is placed within the power of congress, because, being national in its opera- tion, it should be under the protecting care of the national gov- ernment ; Pensacola Tel. Go. v. Western Union Tel. Co., 6-48. 2. Eleotsic telegeaph. The power to regulate commerce be- tween states is not confined to the instrumentahties of commerce known, or in use, when the federal constitution was adopted ; but, it keeps pace with and adapts itself to the new developments of time and circumstance. The electric telegraph has become one of the necessities of commerce, and, as such, it has come under the controlling power of congress. Id. COMMON CAKKIEE. 1. Duty. A common carrier owes an equal duty to all, and it can not be discharged if he is allowed to make unequal prefer- ences and, thereby, prevent or impair the enjoyment of the com- mon right ; Messenger et al. v. Pennsylvania R.E. Co., 5-542. 2. Obligations. The obligations and liability of a common carrier are not dependent upon the contract of parties, though they may be modified and limited by such contract ; they are im- posed by law, from the public nature of the employment, inde- pendent of contract ; Hannibal E.E. v. Swift, 3-94. 3. "When liabilitt attaches. The liability of the common carrier attaches when the property passes, with its assent, in to its possession. The common carrier is an insurer of the property carried, and it is its duty to see to its proper disposition to insure its safety. Id. 4. Eight or action. An action on the case lies against a party who has a public employment, as, for example, a common carrier, for a breach of duty, which the law implies from his employment or general relation ; Southern Express Co. v. M'Veigh, 4-207. 5. . "Where there is a public employment from which arises a common law duty, an action may be brought in tort, al- though the breach of duty assigned is the doing or not doing of some thing contrary to an agreement, made in the course of such employment, by the party on whom such general duty is imposed. Id. 6. Stipulations in limitation. A c6mmon carrier can not, 14 106 DIGEST OF THE even by contract, exempt himself from the exercise of reasonable care ; Adams Express Co. v. Stettaners, 4-358. 7. Pkinted eecedpts. The printed receipts, generally used and given by common carriers, containing conditions limiting their liability to a certain sum, unless the value of each package is named and stated therein, will not exempt them from liability for the value of packages lost by the negligence or fraud of themselves or their agents ; Southern Express Co. v. Crook, 3-118. 8. Kesteiotion of liability, a. distinction exists between the effect of those notices, by a carrier, which seek to discharge him from duties which the law has annexed to his employment, and those designed simply to insure good faith and fair dealing on the part of his employer. In the former ca§e, notice alone is not effectual, without an assent to the attempted restriction. In the latter case notice alone, if brought home to the knowledge of the owner of the property delivered for carriage, will be sufficient ; Oppenheimer & Co. v. tj. S. Express Co., 5-234. 9. OoNSTKUOTioK OF CLAUSES OF EESTEicTioN. The established legal construction of clauses of restriction, in receipts or bills of lading, is not to read them as providing against losses or injuries occasioned by actual negligence. Id. 10. Waivee of EESTEICTION. Because an express company had settled for losses, of bulky goods, without raising the point whether, by the terms of the contract, it was discharged from liability, and, in one instance, paid for a loss exceeding $50, where there was no valuation, the company was not precluded from questioning its liability in any case which might arise thereafter. Id. 11. Waives of conditions peecedent to shipment. If the appearance of a package fairly indicates that its value is greater than the sum named in the limitation of the receipt, th^ carrier will be presumed to waive the necessity of stating a value, unless the attention of the shipper is called to the conditions and the value of the package is required to be given; South. Express Co. V. Crook, 3-118. ^ 12. Liability unaffected. The liability of a common carrier is not affected by the facts that the property to be carried is placed in a separate car, selected by the property owner ; that the prop- erty is loaded or packed by such owner; or, that the owner accompanies it and keeps watch for its safety ; Hannibal E.R. V. Swift, 3-94 ; Harvey v. Rose, 3-125. 13. Avoidance of liability. If, at any time, reasonable ground exists for refusing to receive and carry passengers, their baggage or property, for transportation, the company is bound to insist upon such ground of refusal if desirous of avoiding responsibility. Id. 14. Liability, how limited. A special agreement by a common carrier, by which his liability, as such, is to be modified or limited AMERICAN CORPORATION CASES. 107 may be in the form of a special acceptance of the goods by the carrier, as by a unilateral bill of lading or receipt, but to bind the shipper, by its terms, he must expressly assent to it, or it must be brought home to him under circumstances from which his assent is to be implied ; Christensen et al. v. American Express Co., S-504. 15. Applicatoet laws. A bill of lading, stipulating for exemp- tion of a carrier from liability from losses by fire, was drawn in Connecticut, where such exemption is lawful. The goods were shipped to Iowa, where carriers may not limit their liability. The goods were destroyed by fire, without the fault of the carrier. Held, that the limitation was valid and plaintiff had no recovery ; Talbott V. Merchants' Despatch Transportation Co., 5- 372. 16. Caeeiee's eight. As the carrier incurs a heavy responsi- bility, he has a right to demand, from his employer, such infor- mation as will enable him to decide on the proper amount of compensation for his services and risk, and the degree of care which he ought to bestow in discharging his trust. Therefore, a limitation of liability to the sum of $50, unless the just and true value of the box, package or thing, deliver'ed to be carried, is stated, is reasonable and consistent with public policy ; Oppen- heimer & Co. v. United States Express Co., 5-234. 17. Concealment of value. A party forwarded jewelry, Talued at $3,800, in a box, by express, -taking a receipt which was filled up by the party' s own agent, and which disclosed the fact that the company should not be liable for any loss or damage of any box, package or thing, for over $50, unless the just and true value thereof was therein stated, the blank space for the value being filled with a mark indicative of no value, and in con- sequence thereof was charged a less price or premium than would otherwise have been exacted, it was held, that independent of the qualifying words in the receipt, the court would be inclined to exempt the company from liability, on the ground of want of good faith, in not disclosing the value of the goods. Id. 18. ExTEA-TEEEiTOBiAL DEFAULTS. Carriers are responsible only to the extent and in conformity with the law of the state, where the contract is made, or the duty undertaken. In this there is no difference whether the action be in form ex contractu or ex delicto ; N. Orl. J. & G. IST. E.E. Co. v. Wallace, 5-490. See ExPEEss Company ; Feeet Company ; Kaileoad Company ; Telegkaph Company. COMMON LAW. 1. How fae adopted. The courts of this state are not re- quired, by our statute adopting the common law of England, to enforce local customs of that realm, as it does not prescribe local customs and statutes as a rule of action in this state. On the 108 DIGEST OF THE contrary, they are excluded ; Hannibal & St. Joe E.E. Co. v. Crane, for use of etc., 9-111. 2. JtTDGMENT AFTEK DEATH. By the common law and in the absence of any statutory provision on the subject, a judgment against a dead person, whether natural or artificial, is absolutely void. The fact that service may have been obtained, or that suit was commenced before the death, makes no difference. This rule of the common law is in force in Illinois ; Life Assoc, v. Passett, 9-119. COMPENSATION. 1. Without agreement. An officer of a corporation can not recover compensation for the performance of the usual and ordi- nary duties of his office, unless it has been so specially agreed. In such case he can not recover on a quantum meruit ; CitizenB N. Bk. V. Elliott, 6-571. 2. Agreement before organization. The founders of a cor- poration, or members of it, can not by agreement, or converse, bind the corporation they afterward form to the payment of salaries to officers. The fact that services are performed after organization is immaterial to change the rule of non payment for such services, save on contract made by the corporation. Id. 3. Directors.. The president and directors of a corporation, occupying the position of trustees of the fund and property of the corporation, are not entitled to any compensation for ordinary services, as such officers, unless such compensation be fixed by by- law or resolution of the board of directors, passed before the ser- vices are performed ; Gridley v. Lafayette etc. Ey. Co., 5-260. 4. Director as treasurer. Where a director is appointed to act as the corporate treasurer, no provision being then or previ- ously made, by by-law or resolution, for his compensation, it will be presumed that the fulfillment of the duty was regarded as a part of his duty as a director, and he will have no right to claim pay for the same. A subsequent allowance of such a claim, in his favor, will not warrant a recovery ; Holder v. Lafayette etc. Co., S-258. 5. ExTRApRDiNAEY SERVICES. For scrviccs such as do not pertain to the particular office one holds, compensation may be recovered, although there be no official agreement ; Citizens N. Bk. V. Elliott, 6-571. 6. . A president or director of a corporation performing extraordinary duties^ not pertaining to his office, may recover compensation for such; Gridley «. Lafayette etc. Ey. Co., 5-260. 7. . Where one not connected with the management and disposal of corporate property performs services for the company, or where directors are employed, as agents, to perform duties dis- connected from their office, and no rule of public policy is thereby AMERICAN CORPORATION CASES. 109 violated, compensation for such services may be allowed and re- covered ; Holder v. Lafayette etc. E.E. Co., 5-258. 8. Unlawtul oedee to pat. To audit an account for ordinary services of the president and to draw an order to pay the same, no compensation having been provided for before service rendered, is unlawful ; no recovery can be had thereon ; Gridley v. Lafay- ette etc. Ey. Co., 5-260. 9. CoNTEACT TO PAT. A Contract in regard to compensation measures both rights and obligations. The agent alone can not change it, notwithstanding the services may have been of incal- culable benefit to the principal. His possession and control of the funds of his principal give .him no added rights. A failure to return all funds and properties of such principal in excess of the stipulated compensation, gives to such principal a clear and undisputed right of action. This elementary rule is not changed by reason that the principal is a corporation and the agent its chief executive and managing officer. In such a case a contract to act as agent, gratuitously, is binding; Nat. Bk. v. Drake, 9-340. 10. ExEOUTrvE oFFicEE. In the absence of positive restric- tions, where no salary is prescribed, one appointed to an execu- tive office — as the office of cashier — is entitled to a reasonable compensation for his services. The directors are empowered to fix such salary after the expiration of the term of office ; this, althoiigh such appointee is, also, a director, and continues to be such while holding the independent office. Id. CONDEMNATION ; see Eminent Domain. CONFLICT OF LAWS. ' 1. Fedeeal and state law. Commerce is subject to the regulation of congress. A state statute granting to a corporation — in this case a telegraph company — an exclusive right to con- struct and operate necessary works, conflicting with an act of congress, upon the same subject matter, is inoperative as to any corporation which is entitled to the privilege of the act of con- gress; Pensacola Tel. Co. v. W. Un. Tel. Co., 6-48. 2. Conflict of law. Decisions of the supreme court of Penn- sylvania are not of binding authority on a state court in the con- struction of a statute of the state ; especially when such construc- tion is at variance with prior decisions of such court ; Penn v. Bornman et al., 9-1 34. 3. . While corporations can exercise no corporate powers within the limits of another state than that of their creation, without the consent of the latter, yet, when that consent is given, the amendment of the charter of the company, by the state creating it, by a provision which conflicts with some law or constitutional provision of the state licensing the corporation, can not destroy the 110 DIGEST OF THE validity of the amendment ; City of Covington v. Gov. & Cin. Bridge Co., 5-388. 4. Conflict of law. A bill of lading stipulating for exemp- tion of a carrier from liability from loss by fire, was made in Con- necticut, ia which state such exemption is lawful. The goods were shipped to Iowa, where carriers may not limit their liability. The goods were destroyed by fire, without the fault of the carrier. The limitation was valid and plaintiff could not recover ; Talbott V. Merch. Disp. Transp. Co., 5-372. 5. . Where there is a conflict of appHcatory laws, the parties are presumed to have made their agreement with refer- ence to that statute which is most favorable to its validity and performance. Id. CONSIGNEE. 1. Keoipeocal duties. The carrier's duty to deliver and that of the consignee to receive are reciprocal ; Adams Ex. Co. v. Dar- nell, 3-289. CONSOLIDATION. 1. Geant of power. The power conferred on a railroad com- pany, by its charter, to form a union or consolidation with an- other company, is a contract between the state and the corpora- tion, and can not be impaired by subsequent legislation ; Zimmer V. State, 5-139. 2. Is ACCEPTANCE OF CHAETEE AMENDMENTS AUTHOEIZING. The very fact of the consolidation made by companies, pursuant to and by virtue of an act of the legislature, which declares the ef- fect upon the rights and liabilities of the parties to such consoli- dation, of itself, implies, as between the companies, the assent to the transfer and the acceptance of the rights and liabilities, as de- clared by the act; Miller et al. v. Lancaster et al., 4-lYO.* 3. Condition peeobdent. By compiled laws, 1857, § 1996, of Michigan, an election of directors of the consolidated company was made a condition precedent of the acquisition of the rights and franchises of the original companies by the consolidated cor- poration; Mansfield, Coldwater & Lake Michigan R.R. Co. v. Drinker, 5-466. 4. . By the same act the filing of a duplicate of the agreement of consolidation with the secretary of state, after it shall have been confirmed by the stockholders, was made a condi- tion precedent to a merger of the original corporations, and be- fore such filing no valid action as a consolidated company could be taken, and any prior attempted election of directors would be without authority and of no effect. Id. 5. CoNSTEucTioN OF STATUTE. The act of the legislature of the state of Illinois, of February 10, 1853, incorporating the Kockton and Freeport Kailroad Company, empowered said company, in AMERICAN CORPORATION CASES. Ill the event of a consolidation of its stock with that of another cor- poration outside of said state, to place the control of said stock under the control of the board of directors of the foreign corpora- tion ; Racine & Mississippi R-E. Co. v. Farmers Loan & Trust Co., 1-441. 6. Qualification of grant. Where an act authorizing the consolidation of two or more companies, provides the new or con- solidated company shall have all the powers, privileges and immu- nities of the original companies, this must be taken with the qualification that it should have been so far as they can be exer- cised or enjoyed by it, with its different officers and distinct con- stitution ; R.R. Co. V. Maine, 6-37. 7. Effect of peioe legislation. Where two or more corpora- tions are consolidated under an act of incorporation, and the con- stituent companies become merged into the new or consolidated company, the enactment authorizing the consolidation becomes its act of incorporation. Wherefore, if there be an act providing, as to all corporations created after its passage, that their charters shall be liable to be amended, altered or repealed, at the pleasure of the legislature, and the act for consolidation was thereafter passed, and it contains no express limitation or provision to the contrary, such prior act is to be considered as embodied therein, and the consolidated company will be subjected to the condition as to amendment, etc. la. 8. Judicial cognizance. An act of legislature passed au- thorizing the consolidation of two corporations, the consolidated company to have and possess all the rights, powers, privileges, immunities, advantages, franchises and property of the constitu- ent company merged into it, subject to all the duties, liabilities, obhgations and restrictions resting upon either and both of the constituent companies. The consolidated company would be liable for the debts and Habilities of the merged corporation if the con- solidation authorized took place. In suit to enforce an indebted- ness of the merged company against the consolidated corporation, the court can not take judicial notice of the fact that the com- panies accepted the act and consummated the consolidation. Proof is requisite ; Southgate v. Atlantic & Pac. R.R. Co., 8-144. 9. Under a domestic law. The Lake Shore and Michigan Southern Railway Company organized, under a statute of New York (Laws of 1869, ch. 917), by the consolidation of various foreign and domestic railroad companies. It is a domestic, not a foreign corporation, and, therefore, a statute (Laws of 1842, ch. 165) to compel transfer agents of foreign corporations to exhibit lists of their stockholders has no application to it ; Sage et al. v. Lake Shore & Mich. South. Ry. Co. et al., 8-500. 10. Dissolution; effect. The consolidation of two compa- nies does not necessarily work the dissolution of both and the creation of a new corporation. Whether such be its effect de- 113 , DIGEST OF THE pends upon the legislative intent manifested in the statute under which the consolidation takes place ; Central E.R. & Banking Co. V. Georgia, 5-12t!. 11. JNoT A DISSOLUTION. A uniQn or consolidation of a defend- ant corporation with other corporations, under a law which con- tinues its liabilities, is not such a dissolution of the corporation as will abate an action brou^t before consolidation was effected ; East Tennessee & Georgia K.E. Co. v. Evans, 4-186. 12. Meegee; effect of. When, by consolidation, one cor- poration becomes merged in the consolidated company, its distinct corporate existence ceases, except so far as such existence may be necessary for the protection of its creditors, or mortgagees, or those of the new corporation ; R.R. Co. v. Maine, 6-37. 13. Is EE-iNCOEPOBATioN. An act authorizing the consolida- tion of two, or more, corporations is an act of incorporation. The companies organizing under it are dissolved, save as the law suffers them to exist for some special purposes, and the new or- ganization is a new and distinct corporation ; State v. Maine Cent. R.R. Co., r-284. 14. Incoepoea^ion by. a new corporation may be as readily created by the union of two or more corporations as by the union of individuals. Its powers and privileges may as well be desig- nated by reference to the charters of other companies as by special enumeration ; R.R. Co. v. Maine, 6-37. 15. Existence meeged. Where two corporations acting under legislative authority, become consolidated, the effect of such con- solidation is to terminate the existence of the original corpora- tions, to create a new corporation, to transmute the members into the latter and transfer the property, rights and liabilities of each old company to the new one ; Fee v. N. O. Gas Light Co., 10-486. 16. Want of consideeation. Where two corporations unite their property and form a new corporation, no money being paid or article of value passing between the parties as a consideration for the property of the old corporations, the new corporation can not avail itself of the rule for the protection of bona fide pur- chasers for value, but it takes the property subject to existing liens; Key City, 4-239. 17. Meegee op powee. A consolidation of two corporations extinguishes the original corporations and merges the powers of both into a new one ; Indianapolis, Cincinnati & Lafayette E.R. Co. V. Jones, 1-351. 18. Meegee of eights, etc. Where consolidation and merger of corporations are made, imder legislative sanction, and the trans- fer of rights and properties and assumption of liabilities, between the old and new companies, are effected, the new company stands in the stead of the old companies and may enforce the rights of the old companies and be subjected to their liabilities ; Miller et al. V. Lancaster et al., 4-170. AMERICAN CORPORATION CASES. 113 19. Special peivileges. One company, as a constituent of a consolidated company, being possessed of a certain special privi- lege, the act of consolidation does not confer such privilege upon another company of the consolidation ; Cent. E.E. & Banking Oo. V. Georgia, a-126. 20. SucoBBSOESHiP. Where two corporations are consolidated, the new corporation is the successor of each of its constituents and it takes all the franchises and properties of each. At the same time it assumes all their debts and obligations and, therefore, is bound by an unrecorded mortgage made by one of them, of which it had no notice ; Miss. Yalley Co v. Chicago, St. Louis & New Orleans K.E. Co., 8-Y5. 21. Succession by. A corporation formed by consolidation succeeds to all the rights conferred by charter on the several con- stituent companies; but, it becomes, by the act of consolidation, invested with no greater, or other rights than were possessed by the constituent companies forming the consolidated organization ; Ruggles V. People of State of Illinois, 6-428. 22. Succession to eights. A provision in the charter of a railroad company, exempting its officers, agents and servants from military and road duty and serving on juries, was not a mere personal privilege conferred upon the class of persons described, but constituted a valuable right in the company, to which another company, formed by a consolidation between it and another com- pany, would succeed ; Zimmer v. State, 5-139. 23. Natueb of eights acquiebd by. An agreement of the consolidated corporation to pay all the debts, obligations, and responsibilities of a constituent company, coupled with the acqui- sition, in the same transaction, of all the property out of which creditors should be paid and the subsequent dissolution of the debtor company, to which the promise was made, will create a lien, in favor of the creditors, on the property of the constituent debtor company, superior to the lien of a subsequent mortgage executed by the consolidated company ; Montgomery & West Point E..R. Oo. V. Branch Sons & Co., 6-136. 24. Succession to powees, etc. When a new corporation is formed out of two or more previously existing corporations, and, by the act creating it, is to have the powers, privileges and immunities possessed by each of the corporations, whose union constitutes such new corporation, the new corporation will have the privi- leges, powers and immunities which they all — that is, everyone of them ; all — had ; it will not have such special powers, privi- leges and immunities which some had and some did not have ; State V. Maine Cent. E.R. Co., 7-284. 25. Powees acquieeik by. Where a railroad corporation of Illinois is consolidated with a similar corporation of another state, in conformity with the laws of that state, the new com- 15 114 DIGEST OF THE ■>pany so created will be clothed with all the rights, privileges and powers conferred by the laws of Illinois upon the old corporation of that state ; Cooper et al. v. Corbin et al., 9-192. 26. Right to sue, etc. A railroad company, formed by the consolidation of two companies, succeeds to all the rights of each of the corporations of which it is composed, and may compromise and settle a claim against one of them, and sustain an action to enforce the settlement; Paine et al. v. Lake Erie & Louisville R.R. Co., 1-386. 27. Rights and privileges. "Where, by consolidation, two or more corporations form a new or consolidated company, the lat^ ter, unless restricted by the law under which the consolidation takes place, succeeds to all the rights, privileges, immunities and franchises of the several companies forming it ; Zimmer v. State, 5-139. 28. Rights and buedens of each company. Where railroad companies are amalgamated or consolidated, unless the contrary be expressly stated in the act authorizing the amalgamation, each of the lines united will be held, respectively, with the rights, privileges and burdens originally attaching thereto ; Tomlinson v. Branch, 4-249. 29. Existing liabilities. The consolidatea corporation must, for the purpose of answering for the liabilities of the old corpora- tions, be deemed the same as each of its constituents, and liable for their debts, which may be enforced against it as if no change had been made ; Indianopolis, etc. R.R. Co. v. Jones, 1-351. 30. Rights anb liabilities undek. When a new corporation is formed, under authority of the state, by the amalgamation of two or more distinct corporations into one, such new corporation succeeds to all the faculties and rights of the several components and must, as a necessary consequence, be subject to all the con- ditions and duties imposed by the law of their creation, except so far as it may be otherwise provided by the act under which such consolidation is effected ; Chic, R. I. & P. R.R. Co. v. Moffit, 5-330. 31. . After the consolidation of companies, the new com- pany, formed by the consolidation, becomes uable to perform the duties required of the constituent companies. If no part of the franchise be reserved to either of the old companies, they will not be liable for the performance of dutips devolving upon the new or consolidated company ; Peoria & Rock Island Ry. Co. v. Coal Yalley Mining Co., 5-225. 32. As TO CONVERSION OF BONDS. Such Consolidation extin- guishes a previously existing agreement for the conversion of bonds, into stock of the constituents, at the option of the holder ■ of the bonds ; Tagart et al. v. N. Cent. Ry. Co., 3-362. 33. As TO ISSUE OF STOCK. The lawful consolidation of two or more railroad companies, causes each of the constituents to cease AMERICAN CORPORATION CASES. 115 to exist as a private corporation so far as respects its power to create or issue certificates of capital stock. Id. 34. Stock sttbsoeiptions. Quaere, whether subscriptions to the stock of a corporation which has become merged into a new con- solidated company, can be assigned by the latter ; Eodgers v. Wells, 6-654. 35. Assessment of stock. A corporation formed by the con- solidation of two, or more, corporations can not make vahd assess- ments npon subscriptions to the stock of one constituent company, before corporate existence has been completed by compliance with all statutory requirements ; Peninsular Ky. Co. v. Tharp, 5-465. 36. Kecoveet of assessments. It is essential to a recovery by a consolidated corporation, in an action upon assessments upon a subscription to the capital stock of one of the original corporations, on the ground of a right by succession under the statute, that a consolidation strictly conforming to the statute authorizing it be proved; Mansfield, Coldwater & Lake Michigan R.E. Co. v. Drinker, 5-466. 37. Eights of stookholdeks. While the law authorizing the consolidation provided that it might be effected by action of three- fifths of all the stockholders, it did not confer upon them power, without his consent, to transfer the rights of any stockholder to a third person. As holder of stock in one of the original companies, he became entitled to an equivalent in stock of the new company ; Fee V. N. O, Gas L. Co., 10-486. 38. . Where, in effecting such consolidation, there was an attempted transfer of certain shares of stock to one A. as repre- sentative of the stockholders of the new company, held, that plain- tiff was not estopped to demand his share of stock in the new company, and inasmuch as his claim was not for any particular stock, he need not make such unauthorized transferee a party to his suit. Id. 39. Special exemptions lost by. When a corporation is, by its charter, specially exempted from some general burden, as of taxation at a greater rate than specified, and by consolidation with another company, which is not so exempted, and by its merger into such consolidated company it incapacitates itself from the performance of those duties, as of reporting its earnings, as a dis- tinct corporation, upon which its immunity is to be determined, the immunity, as to it, is lost ; E.R. Co. v. Maine, 6-37. 40. Exemption feom taxation. When two, or more, corpora- tions with a special immunity from general taxation, the amount of such taxation being dependent upon certain precedent acts to be done by such corporation, thus to be exempted, are incorpo- rated (by consolidation, or otherwise), into a new corporation which is unable and is not required to do. or perform, the acts which must precede such special taxation, the new corporation, thus created, can not claim the special immunity belonging to the 116 DIGEST OF THE corporations out of whicli it is composed ; State v. Maine Cent. E.R. Co., y-284. 41. Exemption from taxation. Exemption from liability to any greater tax than one-half of one per cent, of its net annual income having been conferred, by its charter, on one company, of two which consolidated, it is not in the power of the legislature to impose an increased tax after consolidation ; Cent. E.R. etc. Co. V. Georgia, 5-126. 42. CoEPOEATION DE FACTO ; TEANSFEE OF OOEPOEATE EIGHTS. It is not enough to authorize a recovery, in such an action, that the consolidated company be shown to be a corporation de facto, and entitled, as such, to enforce contracts against parties who have dealt with it ; to acquire the rights of the original corporation in its contract with subscribers to its stock, otherwise than by assign- ment, it is essential that the statutory requirements of a transfer by succession be complied with, at least in the absence of any par- ticipation by such subscriber, as a stockholder, in the action of the new or consolidated corporation by virtue of his previous relation as stockholder in the original corporation, such as would estop him from disputing the consolidation ; Mansfield, etc., R.R. Oo. V. Drinker, a-466. 43. Of ooepoeations in diffeeent states. The consolidation of the stock of a railroad company, created by the laws of the state of Wisconsin, with that of one created by the laws of the state of Illinois, does not constitute the corporations thus consoli- dating one corporation of both states, or of either, but the corpo- ration of each state continues a corporation of the state of its creation, although both corporations are managed by one board of directors as one body ; Racine & M. R.E. Co. v. Loan etc. Co., 1-441. 44. Effect of, as to citizenship. Two corporations, organized and existing as such under the laws of two diflEerent states, law- fully consolidating become one ; nevertheless in the state of the organization of each constituent the consolidated company is but a corporation of that state ; MuUer v. Dows, 6-8. 45. Rights and privileges in several states. A railroad corporation was created under an act of the state of Maryland, of 1831, and a supplement thereto. The corporation was authorized to construct and maintain a railroad from a point on the Dela- ware and Maryland state line to a point on the Susquehanna river, in Maryland. By one section of the act it was provided that the shares of the capital stock of the company should be exempt from the imposition of any tax or burden by the states assenting to the act, except upon that portion of the permanent and fixed works of the company which might be within the state of Maryland. A second corporation was created, by an act of the state of Delaware, in 1882, and its supplement, with authority to construct and maintain a railroad from a point on the boundary AMERICAN CORPORATION CASES. 117 line of Pennsylvania and Delaware to the city of Wilmington and thence toward the Susquehanna, in the direction of Balti- more. These two companies were consolidated, in 1835, under acts of the states of Delaware and Maryland. The act of Dela- ware authorizing the consolidation, on her part, provided that " the holders of the stocks of the two companies should, when consolidated, hold, possess and enjoy all the property, rights and privileges and exercise all the powers granted to and vested in the companies, or either of them, by that law or any other law or laws" of that state or of Maryland. The act of Maryland authorizing the union of the companies, on her part, contained a similar provision. Held, that the purpose of the two provisions was to vest, in the new company, the rights and privileges which the original companies had previously possessed under their separate charters ; the rights and privileges in Maryland which the Maryland company nad there enjoyed and the rights and privileges in Delaware which the Delaware, company had there enjoyed ; and not to transfer to either state and enforce therein the legislation of the other. The new company stood, in each state, as the original company had previously stood in that state, invested with the same rights and subject to the same liabilities ; Delaware R.R. Tax Cases, 5-30. 46. MoBTGAGE BY CONSOLIDATED ooMFAiTsr. Where, after such a consolidation, the name of the Wisconsin corporation was, by the act of the legislature of the state of Illinois, also made the name of the Illinois corporation, and a mortgage was made in the corporate name by the officers of the consolidated company, conveying the property of the Illinois corporation, the mortgage should be held legal and valid as the sole and separate mortgage of the Illinois corporation. Kacine & M. R.R. Co. v. Loan etc. Co., 1-441. 47. . And, when the consohdated corporation thus created afterward consolidated with another corporation created by the state of Illinois, its name being changed by legislative enactment to that of consolidated corpoiation, after which a mortgage was executed conveying the entire property held by the company in the state of Illinois, it was held, that while the contract for consolidation with the third company may have been invalid, that could not affect the validity of the mortgage as to that portion of the property not owned by such corporation at the time of the consolidation. Id. 48. EsTOPPBi-. In a suit to foreclose a mortgage executed by a consolidated railroad company, it will not be permitted to ques- tion the validity of its contract of consolidation. Id. 49. MoBTGAGE ; DEFECTIVE CONSOLIDATION. Where corpora- tions created respectively by the laws of Wisconsin and Illinois consolidate, but in the contract of consolidation fail to ])ursue the terms of their charters, and the contract of consolidation is sub- 118 DIGEST OF THE sequently confirmed by an act of the legislature of the state of Illinois, the corporate existence of the corporation is thereby recognized as a body corporate of the state of Illinois. A mort- gage subsequently executed in the name borne by all of the con- solidated corporations, by a common board of directors, conveying the property of the corporation in the state of Illinois, is as vaUd as a mortgage of the Illinois corporation. Id. 50. Failtieb of attempted consolidation. Where two or more turnpike companies attempted a consolidation, which con- solidation was afterward declared by the supreme court illegal, there was no ground for the forfeiture, of the franchise of one of such companies, by reason of a non user of its separate cor- porate rights during the period of such attempted consolidation ; State, ex rel. «. Crawfordsville, etc.. Turnpike Co., 10-343. 51. . The rights, privileges and franchises of such cor- porations should not be declared forfeited, and they ousted and excluded therefrom except for solid, weighty and cogent reasons, for the violation of a positive and prohibitory statute, and not of a statute whose provisions are permissive and apparently directory, and never upon merely technical grounds. Id. 52. Teusteb. a person having the management and control of consolidated corporations for the security and protection of a mortgagee is a trustee, not only for the mortgagee, but for the mortgagor corporations; Eacine & M. II.K. Co. «. Loan, etc., Co., 1-441. 53. ; puBOHASE BY. If a person occupying such a relation become a purchaser of the property of the corporation at a fore- closure sale of the property under a second mortgage, he may be required to surrender the property purchased to the mortgagor corporation, upon being reimbursed the amount of his bid, with interest thereon. Id. 64. ; rents ajstd pboeits. Such a trustee should be held to account for the earnings of the property, while it is in his pos- session. Id. 55. ; EEDEMPTioN. lu such case, the account must be stated, and a reasonable time allowed after the balance is ascer- tained, to the mortgagor corporation in which to redeem. Id. 56. Suit, how brought. Where a company, having executed its promissory note, becomes consolidated with another company, and the company thus formed assumes a new name, the constit- uent corporation, maker of the note, may be sued by the new name thus assumed, and it will be estopped to deny the name by which it is sued ; Columbus, Chi. & Ind. Ry. Co. i). Skidmore, 6-243. 57. Evidence of. In a suit (in Illinois), against a corporation, formed by the consolidation of two or more companies, upon a promissory note executed by one of the constituent corporations, copies of the articles of consolidation on file in the office of the AMERICAN CORPORATION CASES. 119 secretary of state, duly certified by that officer and authenticated by his seal of office, are competent evidence to prove the con- solidation, the same as the original articles would be. Id. 58. Notice of meeting, when it does not appear notice of a legal meeting to act upon consolidation was given, proof of per- fected consoudation is not made ; Eogers v. "Wells, 6-654. 59. Eeooveet foe tort. During August, 1879, the Kansas Pacific Railroad Company owned and operated a line of railway through the city of Lawrence. While so owning and operating its railroad one of its trains ran over and injured the plaintiff. In January, 1880, the Kansas Pacific Eailroad Company, the Denver Pacific Railroad and Telegraph Company and the Union Pacific Railroad Company entered into an agreement of consolidation ; by which agreement they formed, or attempted to form, the Union Pacific Railroad Company, and to such company, by their articles of consolidation, transferred all their respective properties. The articles of consolidation expressly stipulated that the consolidated company should not be liable for the individual debts of the con- stituent companies, but that such constituent companies should continue in existence for the purpose of adjusting all claims and demands, and, also, that the consolidation snould not prevent the enforcement of any valid obligation or liability of either con- stituent company against the properties so transferred by such constituent company. The supreme court of Kansas held, that before plaintiff could maintain an action against the consolidated company, Whether such articles of consolidation were valid and such consolidated company a legal corporation, or not, or the articles of consolidation void and the consolidated company a mere irregular association, he must, by an action against the Kansas Pacific Railway Company, the party who did the injuries, con- vert his unliquidated claim into a liquidated demand, and have both the fact and the amount of the Kansas Pacific Company's liability adjudicated ; Whipple v. Union Pacific R.R. Co., 9-334. 60. As TO JUDGMENT cEEDiTOE. A judgment creditor of a con- sofidated company, without actual notice, does not stand in like predicament with the consolidated company in respect to an unrecorded mortgage of one of the constituent corporations. As to him, although at common law a mere volunteer, taking only the rights of his debtor, the effect of the registry law is to post- pone such mortgage to his rights; Mississippi Yalley Co. v. Chicago, St. Louis & N. Orleans R.R. Co., 8-75. 61. . At common law, in case of natural persons, the death of defendant in error did not abate the writ, but the case proceeded to judgment and, afterward, that judgment was revived by scire facias. The statute of Mississippi, to bring in parties to pending suits, relates only to natural persons. Where a suit is pending against a corporation, at the time of its consolidation with another company, the plaintiff has a right to treat it as continuing 120 DIGEST OF THE to have a separate existence for the prosecution of his action against it. The action of the legislature authorizing, and the act of the corporation, in effecting the consolidation can not defeat or prejudice a plaintiff's rights in pending suits. As to such, the corporation exists for the purpose of judgment, not losing, as to them, individuality or identity ; Shackelford v. Mississippi Cent. R.R Co., 8-31. 62. Creditor's libn. Where two, or more, corporations con- solidate, one or more of the constituent companies transferring its property and effects, out of which creditors should be paid, to another of the companies forming the new corporation, in con- sideration that the latter admits to its membership the stockholders of the former, the consolidated company can claim nothing in capacity of innocent purchaser for value without notice ; Mont- gomery & West Point K.E. Co. v. Branch Sons & Co., 6-136. 68. Question m a suit. Where one declares on an assignment of stock subscriptions, made by a consolidated corporation, it is essential he should show a perfected consolidation of the con- stituent companies. In the absence of proof thereof, showing a substantial compliance with the law authorizing consolidation, no recovery can be had on the thing assigned ; Eodgers v. Wells, 6-654. 64. AvEJBMENT OF. Whcu ouc sues upon a chose in action, assigned by a consolidated corporation, evidence which tends to prove a direct assignment by a constituent corporation, which was the prior holder of the thing in action, is of no avail as a basis of recovery. Id. c6:n'spieact. 1. To DESTROY FRANCHISES. A conspiracy, with a portion of the directors of a corporation, to suspend and destroy the business and franchises of the company, as, in this case, by suspending the publication of a newspaper, for the benefit of a rival estabhshment, is a corporate wrong, for which the appropriate remedy is a suit brought in the corporate name ; Talbot v. Scripps et al., 5-477. CONSTITUTIONAL LAW. 1. Charters are contracts. Acts of incorporation are con- tracts within the meaning of the provisions of the federal consti- tution and the constitution of Kentucky prohibiting the enact- ment of laws impairing the obligation of contracts ; Hamilton v. Kutte et al., 1-549. 2, Void chaktee as a license. Notwithstanding a legislative act creating a corporation may be void, as being obnoxious to a constitutional provision prohibiting such creation by a special act * of the legislature, it may operate as a legislative license, or au- thority, to the parties named in the act and their associates to do that which the language and obvious intent of the act authorizes AMERICAN CORPORATION CASES. 121 them to do — as to set up and carry on a lottery for specified pur- poses — so far, at least, as to constitute a defense to an indictment punishing persons setting up and carrying on lotteries ; Brent v. State, 3-111. 3. Intalid oeganization ; curative act. The legislature has the same power to ratify and confirm an irregular organization of a corporate body, that it has to create a new one ; Mitchell v. Deeds, 1-460. 4. Statutes consteued. By the act of the legislature of Illi- nois of February 14, 1857, confirming the consolidation before then entered into, between the Savannah Branch Railroad Com- pany and the Racine and Mississippi Railroad Company, the cor- porate body which was organized in accordance with the act of consolidation, became legal, notwithstanding such organization may have been irregular. Id. 5. Imposition of new buedens upon stockholders. A railroad company, defendant, having constructed a part of its road, was largely in debt, and without means to complete its work. The company accepted an act authorizing the issue of bonds in such case, which act provided for the liability of the individual stock- holders upon the bonds issued. At a stockholders' meeting, those present unanimously voted an assessment on the whole stock of the company for the payment of the bonds. PlaintifE did not take part in these proceedings, and suit having been brought to recover the amount of an assessment levied on his paid up stock, it was held, that the act of the legislature (of May 3, 1852), in so far as it undertakes to impose individual liability, not imposed by the charters of corporations, or the laws under which they were organized, is a law impairing the validity of the stockholder's contract with the company and, therefore, unconstitutional ; Ire- land V. Palestine, Braffitsville, New Paris & New Westville Turn- pike Co., 4-1. 6. Political TRUSTS. Constitutions provide for the selection of political agencies. The powers of government are, by the pro- visions of such constitutions, given to these ; but these powers are generally so distributed that no one class is permitted to exercise any of the powers conferred upon either of the others. These political agencies, commonly called branches of government, are the representatives of the people, in their sovereign capacity ; and, the powers thus conferred upon them, so far as they are essential to the attainment of the objects and purposes of the government, are held, by them, in trust, for the people, and it is not in their power to delegate them to others, or to contract, or to barter them away ; Ward, rec'r, v. Farwell et al., 6-490. 7. Creation of corporation. Each state has plenary power to create a corporation ; but no state can create a part of the elements of a corporation and rely upon the other to complete it and, thus, 16 123 DIGEST OF THE produce a being which has not received full life from either ; New- port & Cin. Bridge Co. v. WooUey, 7-184. 8. CEEATioiir OF coKPOEATioif. A Constitutional provision which provides that corporations may be formed under general law, but not by special act, except for municipal purposes, does not apply to acts of incorporation to enable operations to be carried on in specified localities, which operations can not, in the nature of things, be elsewhere carried on ; Att'y Gen., ex rel. Nelson, v. M'Arthuretal., 6-606. 9. Peohibition against special feanohises. The constitutional prohibition (of Illinois) as to the grant of any special or exclusive privilege, immunity or franchise, is a limitation upon the power of the general assembly and can not be construed as a limitation upon the power of a municipal corporation to designate streets and fix the conditions upon which a railway company, organized under a special charter, previously granted, may construct and operate its road upon such street ; Chicago City By. Co. v. People, ex rel. Story, S-310. 10. Limitations. Corporations, in the state of California, except for municipal purposes, must be formed under general laws and can exercise no powers except such as are conferred by such gen- eral laws. The legislature can not confer on such corporations any powers or grant them any privileges by sp ecial act ; City and County of San Francisco v. Spring v alley Water Works, 5-153. 11. . The legislature is restricted not only from creating a business corporation by special act, but, also, from conferring any right of franchise by such an act. The true intent is that no cor- porate right or power shall be derived from any other than a gen- eral law. Id. 12. Instance. An act which grants, to individuals and their successors, powers and privileges and imposes certain duties and obligations upon them, and then provides that the act shall not take effect unless the persons to whom the grant is made shall, within a certain time, organize themselves into a corporation, under existing laws, is a grant, not to the individuals as persons, but to the corporation when formed, and such an act is an at- tempt, on the part of the legislature, to confer powers and priv^ ileges upon a corporation by special act. When such persons organize themselves into a corporation under the general laws the corporation possesses no powers or privileges except such as are conferred by the general law. Id. 13. ; CHANGE OF NAME. It sccms that a constitutional provision, prohibiting the creation of private corporations by special enactment, does not prohibit the change of the name of an existing corporation by such legislation ; Pacific Bank v. De Eoe, l-2f6. 14. Legislative powee. Whenever a legislature has a right to accomplish a certain result, and that result is best attained by AMERICAN CORPORATION CASES. 123 means of a corporation, it has the power to create such a corpora- tion and to endow it with the powers necessary to effect the de- sired and lawful purpose ; Slaughter House Oases, 5-1. 15. As TO MONOPOLIES. The parliament of Great Britain, rep- resenting the people in their legislative functions, and the legisla- tive bodies of this country have, from time immemorial to the present day, continued to grant, to persons and corporations, exclusive privileges, that is, privileges denied to other citizens, and which come within any just definition of the word "mono- poly." Id. 16. Monopoly. The power, in the legislature, to grant exclu- sive privileges is not forbidden to be exercised by the thirteenth and fourteenth amendments to the constitution of the United States. Id. 17. . The authority of the legislature of a state extends to the passage of statutes granting exclusive privileges, unless such legislature be restrained in the exercise of such power, by some provision of the constitution of the state or of the constitu- tion of the United States. Id. 18. Exclusive eight to manufaotuee gas. The legislature of the state of Wisconsin may, of its prerogative, confer upon a private corporation the exclusive right and privilege to manufac- ture and sell gas, to erect works and apparatus therefor, and to use the streets, lanes, etc., for the purpose of laying pipes and conducting the manufactured article to consumers within the limits of a municipal corporation ; State of Wisconsin v. Mil- waukee Gas Light Co., 4-234. 19. Exclusive eight, subject to bepeal. A legislative grant to a gas company of the exclusive right to lay gas pipes in the streets of a city is not obnoxious to objection as an unconstitu- tional franchise, for the reason that it is not limited to any par- ticular term of years. If it should become oppressive in the future the legislature may revoke it. Id. 20. One subject in a statute. An act to revive and amend the charter of a company and to authorize certain towns to aid in the construction of its railroad was passed. It provided to revive and continue in force the prior acts, and then that certain towns named might subscribe for stock in the corporation. It proceeded to require an election by £he voters as a , pre-requisite of the sub- scription which was, only, to be made when a majority of the votes in the town was cast in its favor ; it then prescritjed the method of ascertaining the sense of the voters, and for the elec- tion of directors in the company, to represent the town's shares, if it was resolved to subscribe. It was objected that this act was obnoxious to constitutional objection, as embracing more than one subject. Held, that it embraces but one general matter, the build- ing of a line of railroad, or creating a corporation for that pur- 124 DIGEST OP THE pose, and providing a means for accomplishing the purpose; Phillips et al. v. Town of Albany et al., 4-220. 21. To BOEEOW MONET. The legislature of a state may, consti- tutionally, empower a corporation of its creation to borrow money by mortgaging its property and f ranchiseSj or by issuing preferred stock and pledging its revenues for the payment of dividends thereon, where such course is necessary to carry into effect the object for which the corporation was created. Even if the grant of power to make such pledge of the revenue was regarded as unconstitutional, after the payment of money on such pledge, chancery would scarcely refuse its aid in enforcing its collection by subjecting the property of the corporation to the payment of the loan ; City of Covington v. Covington & Cincinnati Bridge Co., 5-388. 22. TaxA-Tion; foebign ooepoeations. The act of the legis- lature of Louisiana of 1855, imposing double the amount of license tax upon foreign insurance companies doing business in said state, as upon domestic companies, is not in conflict with the provision of the constitution requiring all taxes to be equal and uniform; State of Louisiana ■!;. Fosdick, 1-581. 23. . The agent of an insurance company which is for- eign to all the states of the Union, can not invoke the clause of the federal constitution securing to the citizens of each state the privileges and immunities of the citizens of the several states. Id. 24. I)iscEiMmATm& against. The law of the state of Ken- tucky discriminating between domestic and foreign insurance companies is constitutional ; Ins. Cos. v. Commonwealth, 1-485. 25. Taxation of bank shakes. The act of Kentucky taxing the shares in banks owned by individuals is valid under the con- stitution. State laws affecting banks are void under the federal constitution, only, when they interfere with the discharge of the duties of the bank to the federal government ; National Bank v. Commonwealth of Kentucky, 3-12. 26. Specific taxation. The provision, in the constitution of the state of Michigan, which requires that every law imposing a tax shall specify the object to which it shall be applied does not require that this shall be done, by the terms of the act, when such application is made by the constitution and can not be changed by legislative action ; and, inasmuch as all specific taxes are appro- priated by the constitution, a law imposing such a tax and omitting to provide for its application is not void ; Walcott v. People, 3- ^56. 27. . The express power given, by the constitution, to con- tinue specilic taxes authorized by existing laws, and to impose specific taxes on corporations thereafter created, does not limit the right of specific taxation to such cases, but leaves the legis- lature at liberty to use it for such other purposes and branches of business as may be found to render it expedient. Id. AMERICAN CORPORATION CASES. 125 28. Exemption feom taxation. A constitution which forbids the exempting of property of a corporation from taxation impliedly forbids the renewal of an exemption which has expired or become merged ; Trask v. Maguire, 5^2. 29. Regulation of commerce. The power conferred on con- gress to " regulate commerce," does not exclude the commerce of corporations ; Paul v. Commonwealth of Virginia, 1-19. 30. ; INSURANCE. The issuance of a policy of insurance is not a commercial transaction within the meaning of the consti- tution. Id. 31. . The act of the general assembly of the state of Michigan requiring express companies to pay a specific tax of one per cent, of the gross amount of current business within the state, is not repugnant to that clause of the federal constitution which gives to (Jongress the power to regulate commerce among the several states ; Walcott v. People, 3-456. 32. Kaileoad tariffs ; statute construed. The act of Feb- ruary 16, 1869, repealing section & of the act of February 6, 1854, amending the charter of the Covington and Lexington Railroad Company, and establishing a tariff of way freights on said road, is held to be unconstitutional ; Hamilton v. Kutte, 1-549. 33. Reserved power. The act of February 14, 1856, " reserv- ing power to amend or repeal charters and other laws," is pros- pective, and does not apply to charters theretofore granted, unless the amendment is accepted by the stockholders. Td. 34. CoNSTrruTioNAL PROVISION construed. The provision, in the constitution of IlHnois, of 1870, "the general assembly shall pass laws to correct abuses and prevent unjust discrimination and extortion in the rates of freight and passenger tariff on the different roads in the state," etc., is a recognition of the palpable fact that there may be discriminations which are not unjust, and, by implication, it restrains the power of the legisla- ture to a prohibition of those which are unjust ; Chic. & Alton R.R. Co. V. People, ex rel. Gustavus Koerner et al., com'rs, ^- 196. 35. An UNCONSTITUTIONAL ACT. Au act, of 1871, of the state of Illinois, to prevent unjust discriminations and extortions in the rates to be charged by the different railroads for the transporta- tion of freight, the court finds, forbids any discrimination what- ever, under any circumstances, and whether just or unjust, in the charges for transporting the same class of freight over equal dis- tances, even though moving in opposite directions, and does not permit the companies to show that the discrimination is not un- just. The mere proof of the discrimination makes oat a case against the companies, which they are not allowed to meet by evi- dence showing the reason or propriety of the discrimination and, upon this sort of ex parte trial, imposes, as a penalty for the of- fense, a forfeiture of the franchise, which would often be equiva- 136 DIGEST OF THE lent to a fine of millions of dollars. Held, that such a proceeding, to be followed by such a penalty for the first offense, can not be sustained. Id. 36. Limitation; conoltisive pkesumptions. The legislature can not raise a conclusive presumption of guilt, from an act that may be innocent in itself, taking away the privilege of showing the actual innocence or propriety of the act and confiscating the property as a penalty for the supposed offense. Id. 37. State conteol of eates. The state has the right to pre- scribe the maximum rate of charges which a telephone company may demand for the use of its instruments ; Hockett v. State, 10-34:9. 38. ; patented aetioles. The fact that such appliances are protected by letters patent of the United States, giving the owner an exclusive right to their use, does not preclude the state from regulating the right to use them within its borders. Id. 39. . In legal contemplation all the instruments and ap- pliances used by a telephone company, in its business, are devoted to public use, and property thus devoted becomes a legitimate sub- ject of legislative regulation. This is not a taking of property for a pubuc use withm the meaning of the constitution. Id. 40. Liability of diebctoes. A statute which prescribes a pen- alty, a fine of not less than five nor more than fifteen dollars for each day, after a day fixed, during which there is a neglect, or re- fusal, of directors of a corporation, to make, verify and record a financial statement, is not a violation of a constitutional provision prohibiting the imposition of excessive fines ; State «. Cox et al., 9-277. 41. Due peocess of law. Au act which contemplates, and provides for, a fuU hearing, upon due notice to all persons inter- ested, is not obnoxious to the constitution, as one which deprives stockholders of their property, liberties and franchises without due process of law ; Ward, rec'r, v. Farwell et al., 6-490. 42. Ebmovajl of causes. When the party makes an applica- tion for the removal of a cause, from state to federal jurisdiction in the manner req[uired by the act of congress, it is error in the state court to proceed further in the matter, and every subsequent step is coram non judice ; Herryford v. JEtna Ins. Co., 3-511. 43. The constitution of the United States secures to citi- zens of another state than that in which suit is brought, an abso- lute right to remove their causes into the federal court, upon com- fliance with the terms of the twelfth section -of the judiciary act; ns. Co. V. Morse, S-61. 44. . The obstruction to this right imposed by a statute of a state which enacts, that " any fire insurance company, asso- ciation or partnership, incorporated by or organized under the laws of any other state of the United States, desiring to transact any such business, as aforesaid, by any agent or agents, in this AMERICAN CORPORATION CASES. 137 state, shall first appoint an attorney in this state on whom process of law can be served, containing an agreement that such company- will not remove the suit for trial into the United States circuit court or federal courts and file in the office of the secretary of state a written instrument, duly signed and sealed, certifying such appointment, which shall continue until another attorney be substituted," is repugnant to the constitution of the United States and the laws in pursuance thereof and is illegal and void. Id. 45. Void agreement. An agreement of an insurance com- pany, filed in pursuance of the act, derives no support from a statute thus unconstitutional, and is as void as it would be had no such statute been passed. Id. 46. Lbgislativb power; aegttendo. The English doctrine that the king can-not force a new charter upon a corporation has no application in this country to the power of the legislature over municipal corporations. The powers of a municipal corporation may, without its consent, be qualified, abridged or abolished ; City of Clinton v. Cedar Rapids & Missouri Eiver R.E. Co., 8-253. 47. Peohibctions ; debt. Constitutional prohibitions against the contracting of a debt by the state to aid in any work of inter- nal improvement, and the subscription for stock by a county in any incorporate company, until the same be paid for at the time of such subscription, does not include cities within its scope ; Thompson v. City of Peru, 2-213. 48. Destettctioit or btitldings. The destruction of buildings to prevent the spread of a conflagration is not a taking of private property for public use, in the sense of a constitutional provision requiring compensation for property when so taken ; M'Donald V. City of Red Wing, 2-549. 49. Election of officers. As to offices in existence when the constitution of New York of 1846 was adopted the legislature has no power to vest the appointment of the incumbents in the gover- nor and senate. It belongs exclusively to the local power to fiU such offices, either by appointment or as the legislature may di- rect ; Metropolitan Board of Health v. Heister, 2-634. 50. New districts. The legislature has power, under the con- stitution, to create.new civil divisions of the state, embracing more than one county, for purposes of temporary or permanent civil government, without impairing the county organization; and offi- cers of such newly created districts may be legally appointed by the governor and the senate. Id. 51. Nuisance ; publio health ; trial by jury. An act con- ferring upon a board of health commissioners power to prohibit the driving of cattle through certain streets at certain hours, or the maintenance of slaughter houses within certain territory in a city, is not in violation of the constitutional provisions providing that " trial by jury in all cases in which it has heretofore been used shall remain inviolable forever." And that " no person shall 128 DIGEST OF THE be deprived of life, liberty or property, without due process of law." Id. 52. Abatement of NmsANCBS. The provision, in the constitu- tion of Massachusetts, authorizing the legislature to make " all manner of wholesome and reasonable laws so as the same be not repugnant or contrary to this constitution," confers power upon the legislature to provide for the taking, by a city, of the fee- simple title to real estate when it is necessary to change the char- acter of the land to remove a nuisance dangerous to the public health ; Dingley v. City of Boston, 2-603. 53. EXEECISE OF LEGISLATIVE AJSD JUDICIAL FUNCTIONS. The designation of the property which may be taken for such purpose is an exercise of legislative power ; the ascertainment of its value is properly referred to the judiciary. Id. 54. Roads and highways ; title of act. An act " for open- ing and regulating roads and highways," ma;y^ embrace, within that title, provision for the construction and maintenance of bridges ; Fletcher v. Oliver, sheriff, 3-47. 55. Eevenue law. An act providing for raising moneys, by taxation, for the opening and regulation of roads and highways, including bridges, is not a revenue act within the meaning of the constitutional requirement that all revenue bills shall originate in the house of representatives. Id. 56. Fee foe license not a tax. A license for the sale of intoxicating liquors within the limits of a municipal corporation is not a tax within the meaning of the constitutional provision requiring uniformity in the assessment and collection of taxes; East St. Louis v. Wehring, 3-148. 57. . License taxes may be made to conform to the advan- tages and disadvantages of localities for business ; but it should not discriminate between persons having equal facilities for profit. Id. 58. License. The legislature of Kentucky has the constitu- tional power to authorize towns to refuse or grant licenses for the sale, by retail, of intoxicating drinks, and to fix a tax therefor ; Mason 'o. Trustees of Lancaster, 3-351. 59. The imposition of taxes. The authorities of a town may be authorized by law to levy taxes as fees for licenses, for munic- ipal purposes. Id. 60. Assessments: unifoemitt. The constitution of the state of Indiana provides that "the general assembly shall prescribe by law for a uniform and equal rate of assessment and taxation, and shall prescribe such regulations as shall seem a just valuation for taxation of all property, both real and personal.". Held, that a rate of assessment which is uniform and equal throughout the district in which it is imposed, is consistent with the constitutional provision ; Palmer v. Stumph, 3-216. 61. Local and special acts. A law which is general in its AMERICAN CORPORATION CASES. 129 provisions and open to all the citizens of the state who may de- sire to avail themselves of its benefits, is not a local or special law within the meaning of the provision of the constitution prohibit- ing local or special legislation. Id. 62. BouHTT TAX. The legislature of Illinois has power to au- thorize taxation by a municipal corporation for the purpose of refunding money raised to pay bounties to volunteers, and which was raised on the faith that the money so advanced would be re- funded ; Johnson et al. v. Campbell et al., ^211. 63. CtTEATivE LEGISLATION. The legislature of Minnesota has power, under the constitution of that state, to validate the illegal issuance of bonds by a municipal corporation in payment of boun- ties to persons enlisting in the military service of the United States ; Comer, treas., v. Folsom, 3-555 ; Kunkle v. Town of Franklin, 3-561. 64. Effect of. When bonds are issued by a municipal corpo- ration, under a statute upon the subject, ratification by a curative act passed by the legislature, is, in all respects, equivalent to an original authority, and cures all defects of power, if such existed, and all irregularities in the execution ; City of Beloit v. Morgan, 3-11. 65. Commissioners of taxes. The office of commissioner of taxes in the city of New York comprises the oifieial functions and duties of offices existing at the date of the adoption of the constitution of 1846 ; and the act of the general assembly vesting the power in the governor to fill such office by appointment, by and with the consent of the senate, is unconstitutional ; People v. Kaymond, 3 -619. ^Q. CotTNTT SCRIP ; FORFErruRE OF. A statuto of the state of Arkansas authorized the county court of any county to make an order fixing a time within which outstanding county scrip shall be presented for redemption, cancellation, re-issue or classification, and provided for giving notice thereof to the holders of such scrip. It further provided that all persons holding any of such county scrip, who should neglect or refuse to present the same, as required by such order at the county court, after the notice afore-, said, shall be forever debarred from deriving any benefit from these claims. It was held, that this act is valid as to all scrip ex- ecuted by the county after its passage ; City of Beloit v. Morgan, 3-11. 67. Amendment of charter; local taxation. A railroad company was organized and a portion of the grading on its line done by exhausting all its capital. The legislature amended the charter, authorizing a subscription of $300,000, additional stock, by the citizens within a defined boundary in one section of the county through which the road runs. It directed the county judge to subscribe the amount, and that it be collected by a tax on the tax payers within the prescribed boundary, to be levied as 17. 130 DIGEST OF THE other taxes are levied. Held, (1) that the act was not invahd as an infiingement upon the rights of the original stockholders ; (2) that it was not invalid because it provided for the levy of taxea on a portion of the county only ; County Judge of Shelby County V. Shelby K.E. Co., 2-363. 68. Constitution of Kentucky consteued ; officers op munici- pal coEPOEATioNS. The constitution of Kentucky provides that the " officers of towns and cities shall be elected for such terms,, and in such manner, and with such qualifications as may be pre- scribed by law," and that "all district, county or town officers" shall reside " within their respective districts." The legislature, by the act of February 2i, 1868, jjrovided for the organization of a " pohce force for the city of Louisville and county of Jefferson," consisting of a board of police commissioners and policemen divided into two classes: one for the city and county, elected and appointed by the board and compensated by the city ; the other for the county, outside the city, appointed by the board with a limitation as to number fixed by the county court, and compen- sated by the county. Held, valid under the constitution ; Police Commissioners v. City of Louisville, 3-331. 69. Election. The term " election," in the sense in which it is used in the constitution, means a selection by the popular voice of a district, county, town or city, or by some organized body, in contra-distinction to an appointment by some single person or officer. Id. 70. . The constitutional provisions above mentioned have application only to those who are strictly city officers. Id. 71. Salaet. The source of an officer's salary does not indi- cate his character. Id. 72. Statute of ' Massachusetts. It was enacted by the stat- ute, under consideration, that the turnpike way, bridges, draws and piers belonging to the turnpike and bridge corporation named, and lying in three cities and two towns named, should be laid out and become a public highway upon the acceptance of the award of commissioners to be appointed by the supreme judicial court or any justice thereof and judgment thereon; that upon its becom- ing a highway, so much of it, excluding the abutments, bridges, draws and piers, as lies in reach of said cities and towns, should be maintained by them respectively ; that they should collect from a railroad company, named, such proportion of the expense of maintaining the turnpike and way as should be due from the company under the provisions of the act ; that if, in the opinion of the commissioners, any city or town should have an undue bur- den cast upon it in maintaining its proportion of the turnpike passing through it, they should determine and decree what sum in gross should be paid to such city or town, and by what cities and towns in two counties named, or whether either of said counties should contribute to said sum, and in what proportions, AMERICAN CORPORATION CASES. 131 as a final adjustment of expense and benefit. It was held, that the act was not unconstitutional, either in the fact that it required a county benefited, or towns and cities within it, to contribute toward maintaining parts of a highway in other counties ; or as imposing on the judiciary the exercise of legislative or executive power, or assuming to the legislative the exercise of judicial power; Salem Turnpike & Chelsea Bridge Corp. v. County of Essex etal., 3-498. See, also, Speoifio Titles. CONTEACT. 1. Chaetee not paet of. In the absence of express stipula- tion, the charter of a corporation is not to be taken as part of a contract made by the corporation ; Merrill v. Beaver, 6-549. 2. Manner of makes-g. Unless restrained, by legislative enact- ment, to a specific mode of contracting, the contracts a corpora- tion has capacity to make may be made in that manner, or form, in which a similar contract by an individual could be made; Trustees of University v. Moody, 6-166. 3. . In the United States the execution of a contract is valid if it be shown there was authority in the agent to contract ; Crowley v. Genesee Mining Co., 6-260. 4. CoNSiDEEATioN. A railroad corporation having issued first mortgage bonds, the proceeds of which were inadequate to com- plete its road, an association was formed which contracted to furnish money sufficient to insure its completion and for the payment of interest upon its mortgage bonds then about to fall due, and also to purchase and hold the company harmless from a matured lien on the road, then held by the state, for about $7,000,000. The cash outlay to be ma"de under the contract amounted to about $2,000,000 and the associated parties, in acquiring the state lien, were required to enter into bond with the state, in the penal sum of $500,000, for the completion of the road within a time specified. In return for these payments, habilities and assumptions, the com- pany, which was financially powerless, issued to the association $4,000,000 of second mortgage bonds and $5,000,000 of stock. These bonds and stock were issued upon sufficient consideration ; Kitchen et al. v. St. Louis, Kansas City & Northern Ky. Co., 8-199. 5. When binding. A corporation can only be bound by cor- porate acts ; Finley Shoe & Leather Co. v. Kurtz, 6-593. 6. Individual action. An undertaking by all the stockholders, acting as individuals, severally, in behalf of a corporation will not bind it. Where joint action is required, by law, individual action is of no avail. Id. 7. When coepoeate act. In respect of the particular note in suit, it was considered as apparent on the face of it that it was executed by the signers in their capacity as officers of the corpora- 132 DIGEST OP THE tion — their official character or designation of office and the cor- porate seal being attached — and no extrinsic facts were necessary to be shown ; Scanlan v. Keith, 9-143. 8. Use of wobd " wb." Nor need any importance be attached to the use of the words " we promise to pay," in the body of the note. The word " we " may not improperly be used to denote a corporation aggregate, such as this is, and in the connection in which it is used, in this note, it may more appropriately be re- garded as referring to the corporation than the persons, as indi- viduals, who signed the instrument. Id 9. AuTHOEirT TO oonteact; how conferred. Authority to contract, in the name and in behalf of a corporation, at a regular meeting of the directors, or by their separate assent, or by any other mode in which the company is accustomed to do such acts is binding ; Crowley v. Genesee Mining Co., 6-260. 10. Bt EESOLunoN, ETC. The resolutions, 'declarations, or ad- missions of the managing board are full evidence of an indebted- ness, and in no more appropriate mode could it be recognized and its amount and time of payment expressed ; Trustees of Univer- sity V. Moody, 6-166. 11. AuTHOEiTT iNFEEEED. The authority of an agent to make a contract of employment may be inferred from the admitted rela- tions of the agent to the company, actually within the scope of his authority, or from its usual course of business ; and, proof that the agent is president, superintendent and general managing agent of the company, is sufficient evidence of his authority to act in the premises ; Crowley v. Genesee Mining Co., 6-260. 12. Implied. A corporation maybe bound by an implied con- tract, in the same manner as an individual ; Pew v. First Nat. Bk. of Gloucester, 7-539. 13. . At common law a corporation could not manifest its intention by any personal act or oral discourse; and spake and acted only by its common seal. This rule has been relaxed, and corporations can now be bound by contracts made by their agents, though not under seal, and also on implied contracts, to be deduced, by inference, from corporate acts, without either a vote or deed or any writing. The doctrine of implied municipal liability applies to all cases where money, or other property, of a party is received under such circumstances that the general law, independent of express contract, imposes the obligation upon the city to do justice with respect to the same. If the corporation receives money, or other property, which does not belong to it, it is its duty to restore it to its true owner, or, if used by it, to render an equivalent to the true owner. From the like general obligation, the law, which always intends iustiee, implies a promise; Methodist Episcopal Church, South, v. Mayor and aldermen of Vicksburg, 8-20. 14. . "When it is sought toTender a corporation liable for the AMEEICAN CORPORATION CASES. 133 acts of servants, or agents, a cardinal inquiry is, whether they are the servants, or agents, of the corporation. If the corporation appoints, or elects, them and can control them in the discharge of their duties, can continue or remove them, can hold them respon- sible for the manner iu which they discharge their duties ; and if those duties relate to the exercise of corporate powers and are for the peculiar benefit of the corporation, in its local or special interest, they may be justly regarded as its agents or servants and the maxim of respondeat superior applies. Id. 15. Pkioe to oegakization. An agreement among the owners of a mine, who expect to organize a corporation, but have not done so, that one is entitled to a given number of shares of the stock of the company is no contract of the corporation ; Morrison V. Gold Mountain Gold Mining Co, , 6-240. 16. Adoption of contract made prior to organization. The law of a state (Michigan) provided for the filing of the articles of association of a proposed corporation, with the secretary of state and with the county clerk etc., before the corporation should commence business. If before such filing, individuals, who become members thereof, haAdng authority, shall enter into a con- tract for machinery, necessary to enable it to carry on its proposed business, and their contract shall be subsequently recognized and ratified by the corporation, when formed, the corporation is liable; Whitney -u. Wyman, 6-77. 17. Ascertainment of parties. When the question arises, whether a contract executed by a corporate oflScer is that of the company or of the officer, the court will look to the conclusion of the instrument as well as the commencement, for the description of the parties bound by the deed ; Northwestern Distilling Co. v. Brandt, 5-249. 18. Extrinsic evidence, as to who bound by. A party will not be permitted to show, by oral testimony, that his written agree- ment, understandingly entered into, was not, in fact, to be binding on him. So it has been held, where trustees of a church corpora- tion made a note in their individual names, although they de- scribed themselves as trustees of the church, parol evidence was inadmissible to show it was the intention of the parties that it was to be the note of the church corporation, and not that of the trus- tees executing it ; the principle being that such instruments will be construed as the parties made them, without the aid of extrinsic evidence ; Scanlan v. Keith, 9-143. 19. . There is another principle, however, — that where a person signs his name as cashier or agent for a banking, railroad or other corporation, in drawing drafts and bills, or in accepting drafts or other evidences of indebtedness, in its ordinary business, if it appears, or is made to appear, it is the obligation of the com- pany, and if the cashier or agent or other officer had authority to bind the corporation, he is not personally liable, and the facts — 134 DIGEST OB' THE cqllateral though they may sometimes be — may be shown by extrinsic evidence, in order that it may appear whose obligation it is. Id. 20. EXTEINSIC EVIDBNCE, AS TO WHO BOUND BY. AsSUmpsit was brought upon a promissory note, against A. B., who, it was alleged, made the note jointly with 0. D. The note sued upon was as follows : " Ninety days after date we prom- ise to pay to the order of" E. F., a certain sum of money, at a specified place, and was signed underneath, at the right hand, A. B., "Pres't Chicago Eeady Roofing Company,'' and at the left hand, at the usual place for the signature of an attesting witness, it was signed C. D., " Sec'y," with the seal of the " Chicago Eeady Eoofing Company " attached. The defense was that the note was the obHgation of the " Chicago Eeady Eoofing Company," claimed to be a corporation, and not the indi- vidual obligation of the officers who executed the same. It was held to be competent for the defendant to prove that the " Chicago Eeady Eoofing Company " was a corporation existing under the laws of the state, and the character of^ the business carried on by it and other extrinsic facts and circumstances attending the trans- action, as tending to show whether the note was that of the cor- poration, or of the persons whose names were signed to it. Id. 21. ; SUFFICIENCY OF PROOF. Upou the question as to the proof required in such case to establish the existence of the cor- poration, its legality not being in issue, it would seem, for the purposes of the defence interposed, it was sufficient to show it was a de facto corporation, actually engaged in the business for the carrying on of which it purported to have been organized, and this was sufficiently proven by the fact that the plaintiff had transacted business with it as a corporation, and in that way recog- nized its existence. Id. 22. . Taking all the facts appearing — the existence of the corporation ; its engaging in the business for which it pur- ported to have been organized ; the dealings of the plaintiff with it as a corporation ; the fact the note was for a balance due from the corporation for materials sold to it by the plaintiff ; that the signers were the president and secretary of the company, and known to the plaintiff to be such ; taking a note executed by the officers of the company, with its corporate seal attached, and, finally, suing upon the note as the obligation of the corporation, and recovering judgment thereon — they abundantly show the real character of the instrument as that of the corporation, and not of the individuals who signed it. Id. 23. Location of a eaileoad ; invalid. A contract was made between the president of a railroad corporation, one of its directors, and its construction agent, of the one part, and two land owners, of the other part, by which the latter were to sell to the first mentioned parties an undivided one-half of 160 acres of land upon AMERICAN CORPORATION CASES. 135 these terms : No money was to be paid by the purchasers, but the land was to be laid out into town lots and sold. The first pro- ceeds of the sale, to the amount of $4,800, were to be retained by the parties of the first part, as owners, and, when this sum was realized, they were to convey an undivided half of the residue. The consideration for the agreement was, that the parties of the :first part should " aid, assist and contribute to the buUding up of a town on said land." The land was situated upon one railroad, and where another road, then in process of construction, might, or was expected to, cross it. A town was built partly on this tract of land, and a bill was filed for an account of sales and convey- ance of a half interest in the unsold lots. The court held the contract to be a bribe on the part of the land owners, in consid- eration of which the road was to be constructed on a certain line and a depot built at a certain point. This, in any point of view, was in violation of the duty of the officials and agents of the cor- poration, both to stockholders and the public, against public policy and a contract not to be enforced in equity. A cross bill having been filed to cancel the contract as a cloud upon title, it was held, that as the land owners had entered into a contract, the effect or tendency of which was to induce complainants to commit a breach of duty, they were entitled to no affirmative relief ; Bestor et al. V. Wathen et al., 4-351. 24. Which of two must suffer loss. If the owner of prop- erty or chose in action voluntarily clothes another with the indicia of ownership, by which the latter is enabled to sell or- pledge the same, for his own benefit, to an innocent party for value, the former can have no relief against such act to the prejudice of the pledgee or vendee. Where one of two or more persons must suf- fer loss, it must fall upon him whose conduct made it possible for loss to occur; Otis, adm'r, v. Gardner et al., 9-199. 25. Construed ; eeooveet. A railroad contractor agreed with the company to construct and equip its entire road for $1,600,000, of which $250,000 was to be paid in cash and cash assets, and the balance in the bonds and stock of the company, the price named being more than twice the cash value of the work. The contract provided that payments should be made on monthly esti- mates, and in such of the said descriptions of payment as the con- tractor deemed would best subserve his purpose in doing the work ; but the contract fixed no time for the completion of the work. It also provided that both the parties should aid in converting said assets, bonds and stock into means for carrying on the work, and that the contractor need not carry it on faster than such means would serve. The contractor performed work under the contract to the nominal amount of $117,000, which at his request was mostly paid him in the cash assets and, then, the charter of the company having expired by its own limitation, .the work was suspended by mutual consent, and the road abandoned, its bonds 136 DIGEST OF THE and stock thus becoming worthless ; held, that the contractor is bound to account to the company for all actual profits realized from the work; Four Mile Valley R.R. Co. v. Bailey et al., 3-659. 26. On condition. A promise by a corporation to pay money when it " should succeed in sinking a shaft on its leased lands, and developing a paying vein of coal," the contract being silent as to when the shaft should be sunk, further than the company should " use all reasonable efforts to sell stock to raise sufficient money to dig a shaft," does not bind the company to sink a shaft regardless of the means at command, nor is it bound to sell its stock at less than par for that purpose ; Oliphant v. "Woodburn Coal Co., 10-374. 27. Release of debt on condition. There was testimony that the pastor offered to forgive the society a portion of the debt, if they would pay $50 to a person named ; but tbere was no evidence that they had paid the $50, or ever acted upon the proposition ; held, there was evidence sufficient to sustain a finding for the whole amount; M'Crary w. M'Farland, 10-310. 28. Peesumption as to. Corporations are presumed, in deal- ing with each other, to contract within the powers and limitations of their charter. Where general words are used, in a contract between such companies, which words admit of a double construc- tion, those words must be construed consistently with the scope > and power of the charter ; Morris & Essex R.R. Co. v. Sussex R.R. Co., 3-579. 29. Teaffic conteacts. The right of railroad corporations to divide througb fares and freight on authorized lines, or to offer inducements, by a reduction in rates, to secure freight and travel over such lines, are contracts concernihg their own authorized business and not objectionable ; if not made illegally, without con- sideration or against conscience. Id. ■ 30. Bonds. The bonds of a town issued in payment of bounties to persons who enlisted in the military service of the United States are not invalidated by the fact that the enlistments were placed to the credit of a district which embraced another town ; Comer, treasurer, v, Folsom, 3-555. 31. Assets ; eights of oeeditoes. When the property and franchises of an insolvent corporation are sold for a certain con- sideration, and the mortgage bondholders, who had a hen upon the property sold, entered into an arrangement with stockholders and the corporation, pursuant to which such sale was made, wherein it was agreed that eighty-four per cent, of the proceeds should be paid to the bondholders, entering into the arrangement, in full satisfaction of their bonds, and the remainder be distributed to the stockholders, it was held, that the portion set apart for the stockholders was a fund belonging to the corporation discharged of the lien of the mortgage, and subject, as other assets, to the AMERICAN CORPORATION CASES. 137 payment of the debts of the corporation ; Chic, K. I. & Pae. JR.R. Co. V. Howard et al., 1-1. 32. CoNTEAOT BY BOND AND STOCK H0LDEE8. A contract, for the sale of the property and franchises of a corporation, by a meeting of a majority of the bond and stockholders, acting without authority, to make a contract binding upon the corporation, is valid ■when carried into effect with the consent or subsequent ratification of all the parties interested in the subject matter of the sale. Id. 33. NBGOTiABiLrrr. A certificate executed by a trustee, show- ing that he has received a number, named, of certificates of stock in a corporation, and that the bearer of the certificaoe is entitled to a certain number of dollars in bonds, to be issued by a new cor- poration, is not a negotiable instrument in such sense that the holder is protected against equities which could be asserted against the original holder. Id. 34. Modification of conteact. The common council of a city has power, without a petition of property owners, to modify, with the consent of the contractor, a contract for the improvement of a street, which it had power to make without such petition, such modification being made in good faith ; Hallencamp v. City of Lafayette, 3-225. 35. Ratification of illegal conteacts. Where an order, drawn by one board of directors of a school district, was void in its inception, no act of a succeeding board can render it valid ; Glidden v. Hopkins, 3-172. 36. Public agents. A contract made by a public' agent, within the general scope of his powers, does not bind his principal in the absence of specific authority ; Parcel v. Barnes & Bro., 3-39. ] 37. . A city can not ratify the unauthorized act of its agent, in so far as the same affects the rights of third persons ; Meuser v. Eisdon et al., 3-101. 38. Ratification of unattthoeized conteact. The fact that maps and apparatus were distributed among the several sub-dis- tricts, and were thenceforward used in the schools thereof, with the knowledge of the directors and electors, and the further fact that no steps were taken at the regular district meetings, held thereafter, to repudiate the contract, and return the property, did not amount to a ratification. Nothing less than the action of the electors in their corporate capacity would amount to a ratifica- tion; ^lor V. Dist. T., 3-300. 39. With dieectoes — eatification. As a general rule a con- tract between a corporation and its directors is not absolutely void, but voidable at the election of the corporation; such con- tract does not necessarily require any independent and substan. tive act of ratification, but it may become established a valia con- tract by acquiescence. The right to avoid it may be waived ; "Kelleyy. Newburyport, etc., K)rse Ey. Co., 10-600. 18 138 DIGEST OF THE 40. Laches of stockholders. The existence of a contract and the issue of mortgage bonds under it, being reported to a meeting of the stockholders in due time and no objection being made thereto and, no offer of aid being tendered, the embarrassed corporation executing the contract, but the parties to the contract being allowed to proceed and expend their money in aid of the corporation, in good faith, it is too late, after the lapse of five years, for stockholders to impeach the transaction ; Kitchen et al. V. St. Louis, Kansas City & Northern Ky. Co., 8-199. 41. Repudiation. It is competent for a corporation, when sued upon a promise to pay, executed by an ageiit in its name, to show, as matter of defense, that immediately on its existence becoming tuown, or that power to execute negotiable paper had been exer- cised by its agent, its validity was formally and at once repudiated; N. Y. Iron Mine v. First Nat. Bk. of Negaunee, 6-612. 42. Voidable only. A savings bank was prohibited from loaning money on notes, bills of exchange, drafts, or any personal security. A loan was made to a firm on security of stock, and it was claimed in an action by an agent, employed to make sale of the stock, by reason of a subsequent sale of the same stock with- out notice to him of revocation of his authority, that the loan on security of the stock was in violation of the charter, wherefore the employment of plaintiff to sell the same was void. The court held the defense untenable ; at most the pledge was voida- ble, not void, and plaintiff, in accepting the employment to sell, was not bound to inquire as to his employer's title ; Sistare v. Best, rec'r, 9-626. 43. Impossible. A private corporation can not, by entering into a peculiar form of contract, avoid an action at law for the breach of such contract. Nor can it by its contract confer upon an appellate court original jurisdiction for the collection of money demands; nor will its insolvency or the fact that it can not meet a demand until the necessary funds are raised by assessment, or otherwise, confer such jurisdiction; Burland v. North-western Mut. Ben. Assoc, 7-592. 44. Ultka viees. A contract to purchase for sale to another a quantity of excelsior, by a corporation organized for the manu- facture and sale of carriages, is ultra vires and void; Day i). Spiral Spring Co., 10-647. 45. ; EBPUDiATioN. Being void, such contract is open to repudiation by either party. la. 46. . Plaintiff contracted to manufacture for defendant corporation a certain quantity of excelsior which defendant had contracted to sell to other parties, and having delivered a portion under the contract, refused to go on with the contract, and brought salt for the value of what had been delivered. Held, plaintiff was entitled to recover for as much as had been delivered and not paid for. Held, further, that plaintiff was not estopped AMERICAN CORPORATION CASES. 139 to allege the illegality of the contract as ultra vires. Held, further, that defendant could not recoup against plaintiff's claim, damages for a failure to go on with the contract, because to allow recoupment would be indirectly to enforce the contract. Id. 47. In violation of statute. A contract made by a corpora- tion, which is expressly prohibited from making such a contract, is void so far that the corporation can not maintain an action there- upon. This is so even though the statute does not, in terms, declare that such a contract shall be void, but merely prescribes a penalty for ma,king it. When the legislature prohibits an act, or declares that it shall be unlawful to perform it, every rule of in- terpretation must say that the legislature intended to interpose its power to prevent the act, and, as one means of its prevention, that the courts should hold it void. That the legislature imposed a penalty, for the violation of the provisions of the law, does not, in the remotest degree, legalize or give validity to the contract. It but shows that the general assembly intended to adopt such measures as should compel obedience to the law ; Cincinnati Mu- tual Health Assurance Co. v. Rosenthal, 3-263. 48. PEOHiBrrED by law. A contract to do a thing prohibited by statute is not, necessarily, void if the statute visit the unlawful act with a penalty. If the thing be malum in se, the contract can not be enforced, but as to things not immoral or against public policy it may be sufficient to enforce the statutory penalty only. If it was not the intention of the law maker to make the contract void, it will be enforced, and for the violation of law the penalty may be applied ; Union Gold Mining Co. v. Eocky Mountain National Bank, 4-298. 49. Conflict of law. Where there is a conflict of applicatory laws, the parties are presumed to have made their agreenient with reference to that statute which is most favorable to its validity and performance ; Talbott v. Merchants Despatch Transp. Co., 5-372. 50. In excess of corporate powers. Although a corporation can make only such contracts as its charter authorizes, it may be held liable for acts and contracts not permitted by such charter. The general rule is, that if a corporation, in the exercise of a franchise not granted to it by the legislature, makes a contract or performs an act, th e want of authority may be pleaded and the courts will not interfere to grant redress between two parties en- gaged in an illegal enterprise. If the contract be within the scope of the franchise and merely fails to conform to the regulations prescribed by the charter for the guidance of the corporate officers and the protection of the rights of the members as to each other, the corporation may be held liable, under the general rules of law as to agents, estoppel, waiver, etc.; City Fire Ins. Co. of Hart- ford v.CaiTugi, 4-333. 61. In excess of agent's authority. Where the officers or gents of a corporation have exceeded, not the powers of the cor- 140 DIGEST OP THE poration, but their own power as agents, the corporation stands Eke other principals employing agents. If it, knowingly, receives the fruits of the excessive exercise of authority by its agent, it is held to have ratified the act ; Wood Hydraulic Hose Mining Co. V. King, 4-344:. 52. WrrH a&ents of towns. A town meeting directed its selectmen to contract for the building of a sewer of certain dimensions, "the proposals to be advertised and the contract given to the lowest bidder." They advertised for proposals to build a sewer, according to specifications which presented dimen- sions, and reserved to the selectmen " the right to reject aU bids, if none are satisfactory." The party making the lowest bid was notified that none of the bids made would be accepted. The matter was referred to another town meeting, which referred the whole matter to the selectmen, with instructions to " build the sewer at the earliest possible moment." Held, (1) that the bid- der had no right of action against the town, on the contract ; (2) that he had no right of action against the town for time and money spent in making estimates for it ; (3) that his rights were not affected by the action of the last mentioned town meeting; Palmer v. Inhabitants of Haverhill, 3-450. 53. By school diebotoes. The board of directors of a school district township in Iowa have no power to make contracts for maps, charts and other school apparatus, without being first authorized thereto by a vote of the electors ; Taylor v. District Township of Otter Creek, 3-309. 54. The board of directors of a district township have no power, unless authorized by a vote of the electors, to bind the district by the purchase of maps, charts and other school appa- ratus ; Taylor «. District Township of Wayne, 2-3U0. 55. The pooe ; MEnicAL services. Section 4 of the pauper act of the state of Illinois, imposes upon counties a liability to pay a reasonable compensation to persons who have been legally employed, and who do render medical aid, to persons falling sick within the county and having no money or property with which to pay for such services ; Board of Supervisors of La SaUe County V. Reynolds, 2-202. 56. ; EXTENT OF LIABILITY. In such cascs the obligation of the county is to allow a reasonable compensation, and the de- cision of the board of supervisors, as to what is a proper allow- ance, is not conclusive.. If a proper amount is not allowed an action may be maintained therefor. Id. 57. ; pooe house. Such persons are not paupers within the meaning of the statute, and the fact that a poor house has been provided by the county for the reception of paupers does not aliect the liability of the county for medical attendance fur- nished them. Id. 58. Assessments. When a corporation made a contract with AMERICAN CORPORATION CASES. 141 a party to perform certain work upon its streets, wherein it was expressly stipulated, on the part of the contractor, that he would look for payment only from the proceeds of certain special assess- ments already levied, and from the proceeds of any special assess- ments which might thereafter be levied, he agreeing to make no claim against the corporation, except as upon the collection of such assessments ; it was held, in a proceeding by mandamus, to compel payment, that such contractor must abide by his agree- ment to look for payment only to the proceeds of special assess- ments made or to be made, it appearing that the corporation was, in good faith, and with reasonable diligence, proceeding to make collections by means of such assessments ; City of Chicago v. People, ex rel., 3-192. 59. Employment of attorney. It is competent for the city of New Orleans to employ an attorney to enforce the payment of claims due to the city, when such duty is not imposed upon any city officer; and when such a contract has been entered into, on the part of the corporate authorities, by the passage of an ordinance, it can not be rescinded by a repeal of the ordinance; State of Louisiana, ex rel., v. Heath, mayor, 3-372. 60. Exclusive privileges. A municipal corporation entered into a contract with a gas company, conferring upon it the ex- clusive privilege, for a term of years and until notified to the contrary, of lighting the city with public lamps, the number to be agreed upon ; the right to lay down and extend its pipes and other apparatus through all the streets, alleys, lanes and squares of the city and declaring that still " further to encourage the com- pany, it would take fifty lamps to begin with, to be extended hereafter as the public wants and increase of the city might de- mand, and such as might be agreed upon by the company and the city corporation." The gas company in consideration of these grants, concessions and privileges, bound itself to furnish to the city gas at half the price charged to priv"-te consumers. It was held, that the contract did not give to the gas company a right which would be impaired by a subscription on the part of the city to the stock of a new gas company, whose object was the intro- duction of gas into the same city; City of Memphis v. Dean, 3-1. See Agency ; Estoppel ; Powers ; Promissory Notes ; Ultra ViRBs AND Corporations by their class. CONTEIBUTION. 1. Among stockholders. A statute provided that all stock- holders of a corporation should be severally and individually liable to the creditors of their corporations, to an amount equal to any unpaid subscription to stock held by them respectively. If any one stockholder be required, under such statute, to pay a debt due by the corporation, he is entitled to contribution from all other 142 DIGEST OF THE stockholders whose subscriptions are unpaid ; Weber v. Finley^ for the use, 7-385. 2. Among stockholdees. In such ease if a stockholder shall not have paid up his subscription, but shall claim to be a creditor of the corporation, his unpaid stock is liable for the debt and he can not recover from any other stockholder, to the full extent of his claim. Id. 3. . Where the stockholders are individually liable for its debts and a bill is filed by one creditor, for the use of all cred- itors, against one stockholder, the court should ascertain the whole amount of the indebtedness of the company and render a decree for the payment of all of it. It may be, then, collected from the solvent stockholders or stockholder. In settling the equities between stockholders, however, each should be made to contribute his proportion rated by the amount of his stock. If complainant be himself a stockholder, he should be made to con- tribute his share of his own debt and to all other debts which may be established; Perkins v. Sanders et al., 8-53. 4. . When a joint action may be or is instituted against stockholders of an insolvent corporation, to recover of them the sums, by them, due on subscriptions to stock, it is not error to award a judgment for the entire sum of the debt against all, to be discharged on the payment of specified sums apportioned among the stockholders, as they are bound to pay under the stat- ute ; Overmeyer v. Cannon, 9-241. 5. CoNTEACT OF STOCKHOLDEES. Plaintiffs and other holders of stock of an insolvent corporation, supposing themselves to be per- sonally liable for the payment of the corporate indebtedness, agreed among themselves and with defendants in action, wha were stockholders of the same company, that defendants, for the benefit of all parties to the agreement, should negotiate for and effect the purchase of the corporate debts, paying therefor less than their nominal amounts, and, thereafter, collect them of the corporation and receive from the corporate funds a sum, more than sufficient to pay all their disbursements and expenses. In such a ease defendants can not recover of .plaintiffs a sum in ex- cess of the cost of obtaining a discharge of plaintiffs' personal lia- bility. In equity, all the cost having been paid by the money of the corporation, by the defendants, they have no valid claim, as against plaintiffs, for indemnity or contribution ; Sinclair et al. v. Eedington et al., 8-387. 6. Stibeogation. a holder of stock in a corporation who pays the amount of his individual liability to a firm of which he is a partner, for a debt due such firm from the corporation, thereby acquires an equitable right against his co-stockholders, recogni- zable and enforceable, only, in equity ; Buchanan v. Meisser> 9-209. AMERICAN CORPORATION CASES. 14a CONVEESION OF STOCK. 1. Wrongful sale by pledgee. The pledgee of stock, who holds such stock for the payment of money borrowed, holds the same subject to the pledgor's legal right to domand and receive the evidence of ownership on payment of the debt. Pledgee has no right to sell such shares without first demanding payment of the debt due from pledgor, or giving him notice of an intention to sell. Neither may he sell such stock, at private sale, for less than its current value. ' If he acts otherwise he becomes liable to pledgor for the difference between the amount of the debt secured and the amount of the stock ; Nabring v. Bk., of Mobile, 6-124. 2. . If a corporation, without authority, shall dispose of the shares of a stockholder, the latter may recover the value of the stock at the time of such sale ; or, in some cases, the money received by reason of the sale ; Marseilles L. & W. P. Co. v. Aldrich, 6-406. 3. "What is not a conveesion. It is not a conversion of stock by the corporation, where its president draws an order on himself, as president, to transfer, to a person named, a certain number of the shares of the company which he (as president) and the secretary of the corporation refuse to deliver; Morrison v. Gold Moimt. G. M'g Co., 6-240. _ 4. Teovee, as a eemedt. Action of trover will lie for the wrongful conversion of shares of stock in an incorporated com- pany ; Nabring v. Bk. of Mobile, 6-124. 5. ; WHEN NOT lie. One who has not the legal right to stock of a corporation can not sustain an action against the cor- poration for converting it ; Morrison v. Gold Mount. G. M'g Co., 6-240. 6. . Where the legal title of shares of stock has been placed by pledgor, in pledgee, the supreme court of Alabama is inclined to agree that trover will not lie. In such case, however, the form of action must be objected to in the trial court; for there, the plaintiff might amend, by adding a count in case, for the same cause of action, and recover on case made ; Nabring v. Bk. of Mobile, 6-124. 7. . In action of trover, for the wrongful conversion of shares of stock, which have been pledged (as security for the pay- ment of money borrowed), pledgee may recoup the debt due to him from defendant. Id. COKPOEATE ACTS. 1. What constitute. Before any act can be accepted and treated as the exercise of a corporate franchise or privilege, it must be made to appear that it is some thing which distinctly per- tains to corporate powers. Such acts as would justify an inter- ference on the part of the state to test corporate rights ; Kirk- patrick V. U. P. Church, Keota, 10-379. 144 DIGEST OF THE 2. "What constitutb. Acts which may as properly belong to a partnership or unincorporated association, will not be so re- garded. Id. 3. Instance. Holding business meetings, acquiring property, receiving and paying out money, appointing of agents to make settlements, etc., can not be said to evince an assumption of dis- tinctive corporate powers. Id. 4. Enacting by-laws. The passage of a by-law conferring upon the trustees the duty of keeping the church building in repair, heated and lighted, and intrusting them with the custody of the church property, and with power to sign deeds and mort- gages, but only with consent of the congregation, is not a corpo- rate act. Id. 5. Attempted organization. Whether if there had been an attempt at organization, such as signing articles of incorporation and a failure to record them, such acts would be regarded as cor- porate acts — not decided. Id. 6. CotruTS DiPFEE. The courts differ as to what are corporate acts; Eeichwald v. Comm'l Hotel Co., 10-203. See Title having reference to the partictilar act inquired of. COEPOEATE ASSETS ; see Assets. COEPOEATE BOOKS ; see Coepoeate Eeooeds. COEPOEATE CHAEACTEE. 1. When admiited. Where the defendant is sued as a cor- poration aggregate, the appointment of an attorney and an appear- ance entered by him, is an admission of record of the corporate character of the defendant ; Oxford Iron Co. v. Spradley, 4-272. See Coepoeate Existence; Estoppel; Pleading. COEPOEATE DEBTS. 1. Assignment, eight of assignee. The president and other officers of a corporation entered into a contract between them- selves relative to debts of the corporation due to themselves, sever- ally, and to others, and regarding the security for the same. The president assigned his interest in such contract to a third party not interested in the company. Held, such assignment gave the assignee no interest in the corporation or right therein, further than as assignee of a creditor of the corporation ; Hentig v. Sweet, 10-413. 2. Collateeal seoueitt — statutes of limitations. Where indorsers of commercial paper, given by a corporation, bold secu- rities belonging to the corporation as collaterals, and the commer- cial paper is never paid and becomes barred by the statute, the indorsers of such papers cease to have an interest in the securities, and should return them to the corporation. Id AMERICAN CORPORATION CASES. 145 3. Contract. By an agreement between the president and the vice president and treasurer, to all of whom the corporation was indebted, to the president in the smaller sum, it was agreed the vice president and treasurer should collect for all, and after paying themselves the excess of their claims over that of the president, should divide the remainder equally with him. The corporation became insolvent, and there was not enough to pay the excess mentioned. Held, no cause of action arose in favor of the president against the vice president and treasurer. Id. 4. Effect of, on dividend. There was a stipulation in the contract of subscription that there should be no assessment until the full amount was subscribed, but without dissent from any one, debts were incurred, and the property of the company mort- gaged ; held, that this change in the policy of the corporation did not require that all debts should be paid before preferred divi- dends might be declared ; Belfast etc. E.R. v. City of Belfast, 10-534. See Consolidation ; Liabilities ; Powers. COEPOEATE DEED. 1. Manner of execution. The execution of a sealed instru- ment — as a lease — by the president of a private corporation, in his own name, for the company, is a good execution by the company, binding upon it and not upon the president who signs; N. Wn. Distilling Co. v. Brandt, 5-249. 2. Who executes it. If there be no statutory provision pre- scribing the mode of executing and acknowledging a corporate deed, the oflBcer aflBxing the seal is the party executing it, Avithin the meaning of statutes requiring deeds to be acknowledged by the grantor ; Kelly 'o. Calhoun, 6-26. 3. Ascertainment of parties. When the question arises whether a contract executed by a corporate officer, is that of the company or of the officer, the court wiU look to the conclusion of the instrument, as well as the commencement, for the descrip- tion of the parties bound by the deed ; N. Wn. Distilling Co. v. Brandt, 5-249. 4. Deed by owner of all the stock. While the title of cer- tain real property was in a corporation, one King, who owned all the stock thereof, executed, in his own name, a deed of such realty. As respects the title of the association to such property, this deed is void upon its face and is, therefore, not a cloud upon its title ; Baldwin et al. v. Canfield, 7-641. 6. As EVIDENCE. The deed of a corporation, purporting to have been executed by its agent or attorney in fact, is not admissible in evidence without also producing the written evidence of the authority of such agent. Without this the deed is no evidence'of title, but only color of , title; Standifer v. Swann & Billups, 10-49. 19 146 DIGEST OF THE 6. Of ooepoeation. A deed of a corporation, signed by the president thereof, with its seal attached, will be presumed to have been well executed and binding and valid; Smith v. Smith, 4-366. 7. Sttffioient execution. If the testatum clause shall set forth that the company, as such, has caused its corporate seal to be affixed and the instrument to be signed by its president and sec- retary, and it is so signed and ensealed, and if the ensealing and deHvery be attested by two subscribing witnesses, the deed will be executed ; Kelly v. Calhoun, 6-26. 8. Valid acknowledgment. Where the form of acknowledg- ment prescribed by statute is " personally appeared before me . the within named bargainor, with whom I am personally acquainted, and who acknowledged that he executed the within in- strument for the purposes therein contained," a certificate of an officer taking the acknowledgment of the grantor, to a deed exe- cuted by a proper officer of a corporation, that said grantor is per- sonally known to him, is sufficient compliance with the statute. Id. 9. Regulaeitt OF. The execution of a deed — in this case a mortgage — under the seal of a corporation, regular on its face, by the properly constituted officers is prima facie evidence it was executed by the authority of the corporation. Parties objecting to it take upon themselves the burden of proving it was not so executed; Wood'w. Whelen, 6-442. 10. Void execution of. A deed of real estate, the property of a coi-poration, executed, in the name of the corporation, by all the directors acting separately and not as a board and without authority from the board of directors, is held void as a conveyance and equally ineffectual as a contract to convey; Baldwin et al. v. Can- field, 7-641. 11. Cloud of void deed. Holders of the stock of a corporation, whether holding as general owners or as pledgees, are interested in the preservation of the corporate property and in preventing it from passing out of the hands of the corporation. They have, therefore, a right to take legal means to preserve the corporate pro- perty and to prevent it from being lost to the corporation, or its value from being impaired. If such value is impaired by a cloud , upon the title of the corporation to real property, they have a right to have the cloud removed. Id. 12. Cloud on title. A deed executed by directors separately, and not as a board, purports, on its face,' to be the deed of the cor- poration. Although it is not the corporate deed, that fact is not apparent, but the instrument is upon its face regular and valid. Whether it is so, in fact and law, depends upon the extrinsic con- sideration whether its execution was authorized by the board of directors. It, therefore, throws a cloud upon the title of the cor- poration. Id. AMERICAN CORPORATION CASES. 147 13. Deliyert. Delivery of a deed need not be made by the grantor himself, nor is it indispensably requisite that it be made to the grantee. If delivery be made to any person for the use of the grantee, and is absolute and not on condition, his assent is pre- sumed from the fact that the deed is beneficial to him. A con- trolling element in determining the delivery, as well as the acceptance of a deed, is the intention of the parties ; Thompson V. Candor, 4-355. 14. Katification. The board of directors of a corporation may adopt, by resolution, an instrument (in this case a mortgage) which has been executed, originally, without authority, but which was executed in the name of the company, sealed with its cor- porate seal and signed by the proper officers. This will give the instrument full vahdity, as the deed of the corporation; Wood V. "Whelen, 6-442. 15. MisNOMBE. Where a deed is made to a corporation by a name varying from its true one, parties suing upon it may sne the company in its true name and aver in the declaration that the de- fendant company made the deed by the name therein mentioned ; so, in such case, the corporation may sue in its true name and aver in the declaration that the defendant made the deed to it, by the name mentioned in the deed ; N. Wn. Distilling Co. v. Brandt, 5-249. 16. To COEPOBATION NOT DULY OEEATED. It is BSSCntial tO a valid conveyance that there should be a grantee capable of taking. A deed which professes to convey real estate to a corporation, by name, which has no valid existence, is a nullity and passes no title to any one ; Douthitt et al. v. Stinson, 8-178. CORPORATE EXISTENCE. 1. Definition. A general law (of Missouri) provided " when- ever any corporation shall be organized under the laws of this state, it shall be the duty of the officers of said corporation to file, with the secretary of state, a copy of the articles of association, or corporation, and the corporate existence of such corporation shall date from the time of filing said copy of such articles and a cer- tificate by the secretary of state, under the seal of the state, that said corporation lias become duly organized" (Wagner's Stats., ch. 37, art. 1, § 4). The words " corporate existence," in this section, as used, mean full authority to transact business ; Hurt v. Salis- bury et a]., 8-101. 2. Can not do business wii'hout. Before a corporation can enter into a contract or transact business, it must have a full and complete organization and existence; Gent v. Manufacturers etc. Ins. Co., 10-211. 3. . Incorporators can not bring a corporation into being, or bind it by contract unless authorized by the charter. Id. 4. Legality of, a question of law and fact. Whether a 148 _ DIGEST OP THE corporation is legally constituted, involves questions of fact and of law. The things' done under the statute, in and about the organization, are, of course, facts susceptible of direct proof, but, whether the things, when done, constitute a legal corporation, is a question of law ; Scanlan v. Keith, 9-143. 5. PowEE OF LEGiSLATCJEE. All act of the legislature incorpo- rating certain persons, who have applied for a charter, and their associates may constitute the persons named a corporation at once, without further action on their part, either in the admis- sion of associates, the choice of officers or the division of capital stock ; Harris v. Anglo-Saxon Petroleum Co., 3-408. 6. Bv CHAETEE. "When the legislative enactment, which pro- vides for the incorporation of a body, names the trustees of the body and requires no act to be done by them, as a condition, pre- cedent, such a body is created ipso facti et eo instante, a corpora- tion ; Blackwell v. State of Arkansas, 6-210. 7. AcQuiEED UNDEE GENEEAL LAW. It is a Well Settled prin- ciple that where a corporation must be formed under a general statute requiring certain acts to be done before it can be consid- ered in being, its existence, if properly called in question, must be proved by showing compliance with the requirements of the statute ; but, it is sufficient if a substantial compliance be shown ; State, ex rel. v. Beck et al., 9-227. 8. Pee-eequisites. An association of persons can not claim a corporate existence, unless they shall have fulfilled the conditions precedent, prescribed by the statute authorizing their incorpora- tion ; Workingmen's Accom. Bk. t). Converse et al., 7-203. 9. Essentials of. Under the constitution of Michigan there can be no chartered companies. All private corporations must be organized under general laws and can only be valid when strictly conforming to all conditions imposed : Doyle v. Mizner et al., 6-635. 10. . By general statute of Michigan, concerning manufacturing companies, the proper acknowledgment of articles of association is required. Apart from any circumstances which might estop parties, by a recognition of an association de facto, so long as the articles of association are not duly authenticated they remain inchoate and imperfect to effect corporate existence. 11. . In respect to acts declared to be necessary steps in the process of incorporation, any material omission will be fatal to the existence of the corporation. Such omissions may be taken advantage of collaterally in any form in which the incorporation can be called in question. In respect of such acts as are required to be performed, but which are not made pre-requisite to the assumption of corporate powers, the incorporation is responsible only to the state in a direct proceeding ; as to forfeit the charter. Humphreys, impleaded etc., v. Mooney, 6-292. AMERICAN CORPORATION CASES. 149 12. NoN ESSENTIAL OF. Where a general incorporation law re- quired the filing of a certificate of the president and directors of a corporation in the office of the secretary of state, before it should commence business, it was held, that such filing is not a condition precedent to the legal existence of the corporation as such; Augur Steel Axle, etc., Co. v. Whittier, 7-443. 13. . The statute of Wisconsin, relating to joint stock companies, does not make the publication and recording of the evidence thereof, of the articles of association, a condition prece- dent to corporate existence ; Harrod v. Hamer et al., 5-621. 14. When existence commences. Under statute of Illinois, of 1857, the signers of articles of .incorporation did not become in- corporated until the issue and acceptance of license from the clerk of circuit court ; Stowe v. Flagg, 5-292. 15. . In Kansas, incorporation is perfected when the cer- tificate is filed with the secretary of state ; Hunt v. Kas. & Mo. Bridge Co., 5-374. 16. When acquieed. One Sanf ord as the owner of 2,965 shares, with seven others as the owners of five shares each, filed and re- corded, in the office of the secretary of state of New Jersey, on the 28th day of October, 1856, a certificate in conformity with the sixteenth section of the banking act of New Jersey, which pro- vides " upon making said certificate and causing the same to be recorded, as aforesaid, the said persons so associating, their succes- sors and assigns, shall be, from the time of the eommeacement fixed in said certificate and until the time limited therein for the termination thereof, a body politic and corporate." The certifi- cate expressed that the association should continue for twenty years from its date ; the capital stock was stated to be $20,000, and it also stated that Charles Sanford had been appointed presi- dent. No board of directors was elected, but the association pro- ceeded to the business of banking. Held, that this constituted a corporation, which went into existence on the date of the fifing of the articles of association ; the associates claiming or assuming to be directors, without election and the certificate stating the ap- pointment of president; KafEerty, rec'r, v. Bank of Jersey City, 3-571. 17. Aboetive attempt to attain. Where parties attempt to incorporate but fail to comply with a general law which requires the filing of their articles of association in the office of the secre- tary of state, they acquire no corporate existence ; Richardson v. Pitts et al., 8-275. 18. Aeticles not filed. Where, under the general law, arti- cles of association were duly acknowledged and recorded in the office of the recorder of the county where the corporation was lo- cated, in pursuance of statute (Wagner's Stats., Mo., 333, § 2), but were not filed with the secretary of state, as required hy an- other provision of law, supra, the officers of the corporation had 150 DIGEST OF THE no power to issue a note as the note of the company. Such note, issued and signed by them as directors, would bind them person- ally and not the corporation ; Hurt v. Salisbury et al., 8-101. 19. Extension of, is ke-acquikkment of feanchise. Where a corporation is lawfully existing, under and by virtue oT a general incorporation law, and a new, or revised, incorporation law is adopted, under which it may proceed, act, and extend the period of its corporate existence, when the corporation shall have con- formed to the requirements of the latter law, it will acquire all the rights and powers granted by the new law; notwithstanding terms of limitation in the law of its original organization ; People, by the Att'y Gen., v. Pfister et al., 6-272. 19^. Repeal of general law. The repeal of a general incor- poration law, by a statute substantially re-enacting and extending its provisions, does not terminate the existence of corporations organized under it ; United Hebrew Benefit Ass'n v. Benshimol, 7-536. 20. Existence oontintted to wind up. It is the settled policy of the state of Illinois, so far at least as concerns domestic corpo- rations, that upon their dissolution, however that may be effected, that they shall be regarded as still existing for the purpose of settling up their affairs and having their property applied to the payment of their just debts. No reason is perceived why the same policy should not, so far as practicable, be extended to for- eign corporations owning property within the state and located herein for business purposes; Life Assoc, v. Fassett, 9-119. 21. Teeeitorial limitation, a corporation has no existence or power beyond the jurisdiction of the state by the laws of which it is created, except so far, and under such restrictions and condi- tions, as may be recognized by the laws and comity of other states ; Folger v. Columbian Ins. Co., 3-387. 22. . A corporation can have no legal existence out of the boundary of the state, or the sovereignty which created it ; the exercise of any power in another state depends upon the will of that sovereignty ; Gill's adm'x v. Kentucky etc. Mining Co., 3-346. 23. Its commencement. The life of a corporation dates from its organization, and not from the time it commences to do busi- ness. The insertion in the charter of a power to act outside the state creating the company does not invalidate the grant, and the fact that the corporation first commences to do business in a for- eign state (the laws of which do not prohibit such business) is immaterial; Hanna & Finley v. International Petroleum Co., 5-593. 24. Its end ; effect. Upon dissolution the existence of a cor- poration, as a legal entity, is ended. Judgment can no more be rendered against it, in a suit previously commenced, than judg- ment can be rendered against one who dies pendente lite. All AMERICAN CORPORATION CASES. 151 suits abate, unless there is a prolongation of corporate life, for this specific purpose, granted, by the sovereignty, as in the case of original creation ; Nat. Bank v. Colby, 5-82. 25. General law. A general law limited the existence of every corporation to the period expressed in its charter, or, if no limitation was expressed in such charter, then to the term of ten years. Six days later an act passed incorporating a company, without limiting its existence. The corporation was limited to ten years of existence; Krutz v. Paolo Town Co., 7-124. 26. Collateral attack. The legahty of an incorporation can not be attacked collaterally; M'Carthy v. Lavasche, 6-419. 27. Assuming to act — collateral issue. Where persons assume to incorporate under the laws of the state, and assume corporate functions and transact business as a corporation, private persons can not collaterally question the right of such association to a corporate existence, although there has not been a full com- pliance with the provisions of the statute ; Hudson «. Green Hill Seminan^, 10-259. 28. !NoT TO BE COLLATERALLY ASSAILED. When an association of persons is found in the exercise and user of corporate fran- chises, under color of legal organization, its existence as a cor- poration can not be inquired of collaterally. Persons transacting business with such association can not be heard to deny, or to assail, the legality of corporate existence; Central Agricultural and Mechanical Association v. Alabama Gold Life Ins. Co., 9-8. 29. . Where the law authorizes the incorporation of an associa- tion, and there is an attempt, in good faith, to organize, and cor- porate functions are thereupon exercised though some formali- ties, required by law in the organization, have been omitted, there is a corporation de facto, the legal existence of which can not, ordinarily, be questioned collaterally ; Williamson v. Kokomo Building and Loan Fund Association, 9-301. 30. Instance. A building association filed its articles of asso- ciation in the proper recorder's office and a certified copy, instead of a duplicate, as the statute required, in the office of the secre- tary of state, and then assumed the exercise of corporate func- tions and took a mortgage. It was held, by the supreme court of Indiana, that a junior mortgagee could not question the corporate existence, for the purpose of defeating the mortgage of the association. Id. 31. Collateral attack. It is well settled that a corporation can be judicially determined to have ceased to exist only in a suit to which the commonwealth is a narty ; Briggs v. Cape Cod Ship Canal Co., 10-568. 32. Impeachment op. Whether an incorporated company was or was not properly organized, according to its charter, is a ques- tion that can not be made collaterally, but must be made by a 153 DIGEST OF THE direct proceeding against the corporation ; Gill's adm. v. Ken- tucky etc. M'g. Co., 3-346. 33. Oeganization. As in favor of creditors and third persons dealing with a corporation in good faith, the regularity and vaKd- ity of its organization, effected under color of its charter, can not be impeached ; and, the acts of its officers who are officers de facto, under color of an election, are binding upon the corporation; Hackensack Water Co. v. DeKay et al., 9-559. 34. Inquiry into legality of. If a corporation shall have come into existence wrongfully, one who has aided in procuring it to exist and who thereafter, by paying installments on his stock sub- scription, enables it to transact business and exist lawfully, waives the original wrong doing, and, as rights of third parties attach from the moment of the transaction of business, the subscriber to stock may not withdraw his subscription, either to the prejudice of a creditor or the corporation ; nor may he deny the legality of existence ; Lehmann, Durr & Co. v. Warner, 9-135. 35. Denial of. Until the statutory requirements to organize a corporation have been complied with, a subscriber to the articles of association is not estopped to deny the existence of the corpo- ration ; Indianapolis Furnace and Mining Co. v. Herkimer, 5-353. 36. When not to be impeached. Where a company has in- corporated according to the forms required by law and entered on and exercised its corporate powers and the fulfillment of its purposes, it has become a corporation de facto as to parties deal- ing with it, and its existence as a corporation can not be collater- ally drawn in question ; Laflin & Hand Powder Co. v. Sin- sheimer et al., 7-375. 37. How questioned. Where persons in good faith act under a corporate name and exercise the rights and franchises of a cor- poration authorized by law, they become a corporation de facto, and a private citizen, though a stockholder therein, can not main- tain a suit to inquire into its legal existence. Such proceeding can only be brought on behalf of the state by the proper prose- cuting officer ; l^North v. State, 7-359. 38. How attacked. By code of Mississippi (Rev. Code, § 683) there can be no attack on the character in which a corporate plaintiff sues, raising the question of due organization, save by a verified plea denying the corporate existence ; Selma etc. E.R. Co. V. Anderson, 8-27. 39. How DENIAL OF, AVAILABLE. It is the Settled law of the state of Maine, that the non existence of a plaintiff corporation can only be taken advantage of by plea in abatement. It can not be set up as a ground of defense, by a brief statement filed with a plea in bar, nor can it be given in evidence under the general issue ; Inhabitants of School Dist. v. ^tna Ins. Co., 7-280. 40. When to be proved. In an action by a private corpora- tion upon a promissory note, given upon a subscription to the AMERICAN CORPORATION CASES. 153 capital stock of the company, a plea of nul tiel corporation being interposed, it behooves plaintiff to prove its corporate character and use under its charter ; Ramsey v. Peoria Marine & Fire Ins. Co., 3-271. 41. When to be peoved. By the statute of New York it is provided that in suits brought by or against a corporation created by or under the laws of that state, it is not necessary to prove, on the trial of the cause, the existence of such corporation, unless the defendant shall have alleged in answer to the action that the plaintiff or defendant, as the case may be, is not a corporation ; Stone V. "Western Trans. Co., 3-602. 42. Who caw iroT dent. Where there has been an attempt to create a corporation, a general law authorizing incorporation has been, in part at least, complied with ; after an assertion and exer- cise of corporate powers and a contract with an individual, the right to corporate existence can not be tried in an action instituted by such individual, in his own behalf, for the purpose of annulling the contract. In such case the right to possess and enjoy corporate franchises can be questioned only by the state, in a direct pro- ceeding; Baker et al. v. Neff, 7-106. 43. WHO MAY NOT QUESTION. Appellant was one of the original subscribers to the capital stock of a corporation and, as such, had been elected and served as a director. These facts preclude him from objecting to the legality of the organization of the company. His acts as a director, implying that it was a corporation, estop him from denying its incorporation. A party who has contracted with a corporation de facto, is never permitted to allege any defect in its organization, as affecting its capacity to contract or sue. Such objections, if valid, are only available on behalf of the sovereign power of the state ; Ramsey v. Peoria etc. Ins. Co., 3-271. 44. DooTEiNE or estoppel. In ordinary cases, the recognition of corporate existence by deahngs with the corporation will estop from questioning it. Where, however, no new rights have inter- vened and the recognition is brought about by fraudulent dealings, carried on for the purpose of entrapping a party into the action on which the recognition is based, there is no room for an estoppel ; Doyle V. Mizner et al., 6-635. 45. Estoppel OF one DEALING WITH. When the action is against one contracting with a corporation, in its corporate capacity, the contract furnishes the evidence of corporate existence. If the action be against a stranger, the user of the corporate power and franchise and the color of right to use, is conclusive of corporate existence ; Lehmann, Durr & Co. v. Warner, 6-155. 46. . Parties who contract with a corporation, whether by subscription for its stock or by promissory note, bond, mort- gage, or other form of contract, are estopped from denying the existence of the corporation. Id. 20 154 DIGEST OF THE 47. Estoppel of one dealing with. In an action to foreclose a mortgage given to a corporation for money loaned, the defen- dant is estopped to deny the regularity of the incorporation or its power to make the loan ; Grangers Business Ass'n v. Clark, 10-80. 48. . The maker of a note, payable to a payee named as a corporation (in this case a_ savings bank), is estopped, in an action on the note, to deny that the payee is a corporation ; Stoutimore V. Clark et al., 8-238. 49. . Conceded, one executing a note to a body purport- ing to be a corporation is estopped to deny its corporate existence ; he can not avoid the estoppel by an answer alleging a subsequent discovery that the payee in the note named was not such cor- poration ; Eansom v. Priam Lodge, No. 145, Free and Accepted Masons, 7-52. 50. . A party who has recognized an association claiming to be a corporation, by deahng and contracting with it, is deemed to have admitted its legal existence, in an action on contracts made upon the faith of such transactions ; French et al. v. Dono- hue, 9-489. 51. . Where the evidence shows an attempt to incorpo- rate under the laws of a state — which laws authorize such incor- poration — the assertion of corporate existence and that a party has contracted with the association as a corporation, such party I will not be in a situation to deny its corporate existence. The question as to whether there was a right to exercise corporate powers is a question to be litigated only in a direct proceeding ; Smelser v. Wayne & Union Straight Line Turnpike Co., 9-238. 52. . Whoever contracts with a corporation having a de facto existence, and the reputation of a legal corporation in the actual exercise of corporate powers and franchises is estopped from denying the legality of the existence of the corpciration or inquiring into irregularities attending its formation, to defeat the contract, or to avoid the liability he has voluntarily and deliberately incurred ; Central Agric. & Mech. Ass'n v. Alabama Gold Life Ins. Co., 9-8. 53. . A person who deals with an association claiming to be a corporation and, in so doing, recognizes its corporate exis- tence, can not escape liability by denying that there was any such corporation. In such case, it is not necessary there should be an express contract directly recognizing corporate existence. It will be sufficient if the acknowledgment is fairly to be implied from the contracts and the course of dealing between the parties ; Smel- ser V. Wayne & Union Straight Line Turnpike Co., 9-238. 54. . One who contracts, by deed, with a coi'poration, as such, is estopped to assert that there is no such corporation ; Baker v. Neff, 7-106. 55. . One having made a contract with a company in its AMERICAN CORPORATION CASES. 155 corporate name, admits that it is a duly constituted body politic and corporate, at the time of the execution of the contract and is estopped from setting up, for defense, the non allegation of the fact of corporate existence in suit, by the corporation, brought on the contract ; Nat. Ins. Co. v. Bowman et al., 8-141. 56. Estoppel of one dealing wrrn. Upon objection being made that no board of directors was regularly elected, for a bank- ing corporation, organized under the banking act of New Jersey, the purpose being to cause the assets of the corporation to be treated as the individual assets of those interested in the bank, to relieve defendants from the consequences of obtaining assets of an insolvent corporation, after notice ; held, that defendants having for a considerable length of time dealt with the bank as such and not with the associates as individuals, they are estopped from denying the corporate existence and can not be allowed to appro- priate such assets to the detriment of others equally entitled; xtafferty, rec'r, v. Bank of Jersey City, 3-571. 57. When not applicable. Where no new rights have inter- vened and corporate existence has been recognized only by reason and means of fraudulent deahngs, carried on for the very purpose of entrapping a party into the acts on which such recognition is based, the rule does not apply. In such case if there be, in fact, no legal corporation and no fact to make it unjust, in law, to deny corporate existence there is no room for estoppel ; Doyle v. Mizner et al., 6-635. 58. Participation in its affairs. Where one participates in all proceedings to create a corporation, in increasing its stock and in making calls on the subscriptions, both as stockholder and di- rector, he can not be heard to deny the validity of such proceed- ings in a suit against him to compel payment of calls on stock subscribed for ; Kansas City Hotel Co. v. Harris, 8-89. 59. . Where one has acted as president of a corporation, participated for months in its transactions, and held it out to the world as being legally organized and lawfully acting, nevertheless the whole of its capital stock was never subscribed, as required by the law of its creation, be will be held estopped from setting that fact up as a defense for the purpose of showing that the company could not act as a corporation or enter into contracts on which he could be made liable by law ; Corwith et al. v. Culver, 5-24A. 60. . Acceptance of the office of treasurer of a church association will not estop the incumbent from denying its corpo- rate existence, in the absence of proof of corporate acts ; Freden- burg V. Meth. Epis. Ch., 6-605. 61. Estoppel of company. In a suit, by attachment, against a foreign corporation, where defendant voluntarily appears and gives bond in its corporate name, the companjr is, thereby, es- topped from denying its corporate existence ; Smith & Boland v. Burlington & Wisconsin RTR. Co., 8-118; Seaton v. Chicago, 156 DIGEST OF THE Rhode Island & P. E.E. Co. (note), 8-118 ; Witthouse v. At- lantic & Pacific E.E. Co. (note), 8-118. 62. Estoppel as to the state. That the state has instituted a criminal prosecution for breaking down a toll gate, described in the indictment as tbe property of a corporation named, is no bar to an information to contest the vaKd organization or existence of the supposed corporation; State, ex rel., v. Beck et al., 9-227. 63. Admitted. In a suit by a corporation on a promissory note given to it in its corporate capacity, by defendant, it is not ground of demurrer that plaintiff failed to allege that it was, at the date of' the note, a corporation etc. Defendant having entered into the contract with the company in its corporate name, thereby admitted it to be duly constituted a body politic and corporate ; Farmers & Merchants' Ins. Co. v. Needles, 8-92 ; Studebaker Bros. Manuf. Co. v. Montgomery (note), 8-92. 64. . A subscription read : " We, the undersigned, agree to subscribe the number of shares, of $50 each, to the capital stock of the Mount Sterling Coal Eoad Company." A direct ad- mission of corporate existence; Lail v. Mt. Sterling C. E. Co., 7-172. 65. When admitted. In an action at law the failure to prove corporate character is obviated by the proof of the dealings of parties recognizing it ; Chapman v. Colby Bros. & Co., 7-578. 66. . A corporation by appearing to a suit, thereby ad- mits its corporate existence; Missouri Eiver etc. E.E. Co. v. Shirley, 7-139. 67. Admission of, in pleading. The plea of the general issue, in a suit by the*corporation, admits corporate existence and the competency of the plaintiff to sue as a corporation ; Pullman v. Upton, 6-34. 68. . Corporate existence is admitted by a complaint against a party named as a corporation ; State v. Indep. Sch. Dist., 6-522. 69. Pleading. A defendant, sued as a corporation, can not deny its own capacity, by a plea, either alone or with pleas in abatement or in bar. If it be not a corporation it can not, as such, be present in court or plead ; Western Un. Tel. Co. v. Eyser, 5-161. 70. . Upon an unconditional promise to pay to a corporar tion a certain sum of money, either as an ordinary debt or as a subscription to its capital stock, it is not necessary to aver that the necessary amount of stock has been subscribed in order to show corporate existence ; Lail v. Mt. Sterling Coal E. Co., 7- 172. 71. . On such a promise the undertaking admits corpo- rate existence. If the corporation has ceased to exist, or never was incorporated, the defense, to be available, must be pleaded, nul tiel corporation. Id. AMERICAN CORPORATION CASES. 157 12. Denial of coepoeate existence. Action by a corpora- tion. An answer denying knowledge or information sufficient to form a belief as to whether plaintiff is a corporation, imposes, on plaintiff, no necessity of proving its corporate existence : Nat. Bk. V. Loyhed, 8-11. 73. — — . A general denial, or plea of the general issue, does not put in issue the corporate existence of a corporate plaintiff : Nat. L. Ins. Co. v. Eobinson, 8-325. 74. ■ . In a complaint, of a turnpike company, for the re- covery of a subscription to capital stock of the corporation, an allegation of the date of the filing of its articles of association sufficiently shows the date of its corporate birth ; Washer -y. AUens- ville etc. Turnpike Co., 9-223. To. _ . A statute (of Mass., 1851, ch. 113) providing that when it appears,, from the pleadings in any suit, that either party sues, or is sued, as a corporation, such fabt shall be taken as admit- ted, unless the party controverting it shall file in court, within ten days from the time allowed for answer, a special demand for proof of the fact, does not apply to an action in which the plaintiff sues as a corporation and in which an answer denying each and every allegation in the writ and declaration has been filed and more than ten days have elaused, after the time allowed for answer, before the passage of the statute ; but, it is incumbent on the plaintiff, to prove the existence and organization of the alleged corporation; Groodwin Invalid Bedstead Co. v. Darling, 9-436. 76. . In suit instituted, by a corporation, an averment that plaintiff is a corporation, duly incorporated under and by virtue of an act of the general assembly of the state of Missouri, entitled etc. sufficiently alleges plaintiff's corporate existence; Chillicothe Sav. Assoc, v. Eueger et al., 8-140. 77. Infoemation; quo waeeanto. An information against parties acting as a corporation, charging it not to be legally or- ganized and praying its dissolution, is bad if brought against the corporation by name ; Mud Creek Dr. Co. v. State, 5-337. 78. Peesitmed. Under the statute in Michigan, a religious society, that in good faith has for ten years exercised corporate powers, bought and sold property, etc., wiU be treated as a legal incorporation, though the proceedings to incorporate are in them- selves fatally defective ; Trustees ■y.w'ebber, 10-636. 79. Peoof theeeof. The execution of a note, or mortgage to a corporation, as such, is sufficient prima facie evidence of the existence of the corporation, and no further proof thereon is neces- sary until such existence is questioned. This is a rule of evidence rather than of the doctrine of estoppel ; Brown v. Scottish Am. Mtg. Co., 10-233. 80. . "Where in a suit against a corporation the evidence to prove the claim, at the same time, amounts to evidence that the defendant was doing business in the name by which it was sued, 158 DIGEST OF THE and there is no countervailing evidence, this is sufficient proof of the corporate existence of defendant under a statute providing that evidence that a company is doing a business under a certain name, shall be prima facie proof of its due incorporation, or exist- ence, pursuant to law, and of its name ; Lake Superior Building Co. V. Thompson, 5-186. 81. Peoof thbkeof. If a corporation be in the exercise of cor- porate power, possessing and enjoying corporate franchises under color of right — as when there is a legislative" grant under which these are claimed — a private person can not be heard to inquire into the legality of corporate existence ; but, only the state ; Leh- mann et al. v. Warner, 6-155. 82. . Corpoi'ate existence of a church association is not proved by evidence that the members held the ordinary meetings of a church society and elected officers ; Fredenburg v. Lyou L M. Epis. Oh., 6-605. 83. Proof of, on appeal feom justice. In the absence of evidence to the contrary, it is presumed that the defendant in a suit before a justice of the peace pleads the general issue, and the plaintifE being a corporation, such plea admits its corporate capac- ity. It follows, on appeal to the circuit court, in such case, plaintiff is not required to prove its incorporation ; Farmers & Drovers' Bank v. Williamson et al., 8-147. 84. Pkoof of ; foeeign coepoeation. It is not error, of a trial judge, to exclude a certified copy of articles of incorporation, purporting to be in pursuance of the general statutes of a sister state, the same not being accompanied by proof of the enabling statute and not being properly certified and authenticated, either under state or federal law ; French et al. t). Donohue, -9489. 85. ; ACTION AGAINST A FOKEiGN ooEPOEATioN. By exhib- iting a certificate of its incorporation, duly and properly authenti- cated, a foreign corporation answers a claim that its stockholders are liable as members of an unincorporated association. In a proceeding by an individual — a person other than the government that created it — no proof aliunde the certificate is admissible to impeach corporate existence ; Laflin etc. Co. ». Sinsheimer et al., 7-375. 86. Evidence of continued existence. A continued user of the franchises of an incorporated and organized company, by per- sons assuming to act as the directors and officers of such company — persons in the actual possession and exercise of such franchises, and in possession and control of the company's records and who have carried on its business without any objection — is compe- tent evidence of the continued corporate existence of such com- pany and that the persons who thus claimed to be its directors, and acted as such, were its legal directors ; St. Paul F. & Mar. Ins. Co. V. Allis et al., 7-616. 87. How ESTABLISHED. Where a corporation is created by AMERICAN CORPORATION CASES. 159 statute, or under a general law, which requires certain acts to be performed before it can be considered in esse, then those acts must appear to have been done in order to establish the corporate existence; Lord et al. v. Essex Building Association, No. 4, 4^434. 88. How oouTEOVEETED. A general statute regulating the formation of corporations, provided (but not as a condition pre- cedent to corporate existence) for the declaration in the articles of association of the number of shares, not exceeding 1,000, and the par value of the same, not exceeding $400 per share. An association organizing, provided that the number of its shares should be indefinite. This can only be made cause for affecting the corporate existence, by direct proceediiig, takeu at the in- stance and in the name of the state, alone. Id. 89. Weongfullt assuming. While persons assuming to act in a corporate capacity are liable as partners to those with whom they contract, to charge any one of them as such it must be shown that he was acting in that capacity at the time the contract sued upon was made, or that, upon some consideration, he agreed to become liable ; Fuller v. Rowe, impleaded, etc., 4-615. 90. Evidence conclusive of. Courts are bound to regard a company, which exhibits certificate of its due incorporation, ac- cording to all the forms required by the law of its creation, as a corporation, so far as third persons are concerned, until it is dis- solved by a iudicial proceeding in behalf of the government which created it : Laflin & Eand Powder Co. v. Sinsheimer et al., 7-375. 91. . Defendant Sweet, claiming to be president of a cor- poration duly organized, employed plaintiff to act as its superin- tendent. Appellant, supposing the company to be legally incor- porated, subscribed and paid in $5,000, and was elected president. At his election he notified plaintiff, and plaintiff thereafter drew drafts upon him, as president, which were honored by the treas- urer. The business proving unprofitable, it was abandoned. ' Eowe directed the transfer of the books for safe custody. No corporation had, in fact, existed. It did not appear Eowe was cognizant of the fact that there was not a legal incorporation until the date of abandonment of the business. Action to recover plaintiff's salary. Eowe was not liable ; Fuller v. Eowe, 4r-615. 92. When not subject to eeview. It is manifestly improper on the part of an inferior tribunal, sitting for the assessment of damages caused by the expropriation of property, under laws of eminent domain, to pass upon questions of corporate existence and the right to exercise corporate franchises ; Schroeder, relator, V. Detroit, Grand Haven & Milwaukee Ry. Co., 6-653. 93. Waivee. The commonwealth may waive a strict compli- ance with the terms of the act of incorporation, and may elect 160 DIGEST OF THE whether it will insist upon a forfeiture if there has been a breach of condition; Briggs v. Cape Cod Ship Canal Co., 10-568. 94. Waiver of fokfbitobe. Although a corporation has en- gaged in another and different business than that provided in its charter, so that a forfeiture of its franchise may have been de clared, yet, if the legislature during the existence of such ground of forfeiture has passed a law amending _ the act under which it was organized, in which its corporate existence and its acquisition of real estate is recognized, its powers enlarged and new ones conferred, such amendatory act will be construed as granting a new charter, and a waiver of any ground of forfeiture ; People v. Ottawa Hydraulic Co., 10-279. 95. Criminal law ; evidence of. On the trial of a criminal cause, the existence of a corporation may be proved by general reputation, a de facto existence is all that need be shown; State V. Thompson, 7-159. 96. . On trial of an indictment against an agent of a cor- poration, the incorporation may be shown by parol; State v. Cheek, 8-185. 97. . It is competent, on the trial of an indictment, to prove that a corporation (averred to be the party injured) existed, by testimony that it was known and acting as a corporation; iJorton V. State, 7-109. 98. . Prosecution for malicious injury done to corporate property. It is not necessary that the state shall prove the organ- ization of the company. That it was known, recognized and operating as such is sufficient ; Franklin v. State, 9-257. 99. Presumption of, m criminal cause. On the trial of an indictment, for trespass upon real estate, as between a corporation and the party accused and all other persons except the state, it may well be presumed, after the lapse of twenty-four years of assumed corporate existence, that the party injured, named as a corporation is such ; at all events, a want of legal corporate exist- ence can not be shown collaterally in such prosecution, nor be made an available defense to it ; White v. State, 7-101. 100. Judicial oomitt. When the question is presented in the supreme court of the United States, whether, under the constitu- tion and laws of a particular state, a company, professing to be a corporation, is legally so, this court will receive, as conclusive of the question, the decision of the highest court of the state decid- ing, in a case identical in principle, in favor of the corporate existence ; Secombe v. R.R. Co., 5-108. CORPORATE FRANCHISE. 1. Defined. A franchise may be defined as^ certain privilege of a public nature, conferred by grant from the government and vested in individuals. It is a sovereign prerogative and vests in AMERICAN CORPORATION CASES. 161 an individual only by virtue of a legislative grant ; Truckee & Tahoe Turnpike Eoad Co. v. Campbell, 4^287. 2. "Who may geaut. It makes no difference whether the grant of a franchise be made directly by the legislature, or by a subordinate body to vrhich the power is delegated. It is still a grant emanating from the sovereign authority of the state. Id. 3. Tolls. Tbe right to collect tolls on bridges, roads etc. is a franchise. Id. 4. A GEAiJT ; mPEAOHMBNT OF. A grant regularly made by a board of supervisors has the same standing in respect to its val- idity, the same presumptions in its favor, and the same privilege as to the mode in which it may be attacked, as a grant of any other right, privilege or thing made by any department of the government under the authority of law. The grant is not liable to be attacked by a private person, or in a collateral proceeding, for mere error in the exercise of ,the authority to make the grant. Id. COEPORATE FUNDS. 1. Teust fund. The funds of a corporation are held in trust to pay the debts of the company ; Lyman v. Bonney et al., 7-44:5. 2. Tebasurbe. The treasurer of a corporation is the officer charged, by law, with the custody of its funds and made respon- sible for their safe keeping. The directors can not, lawfully, de- prive the corporation of this responsibility by depositing the funds with others for safe keeping or causing such disposition of the funds to be made. They may be restrained from so doing, by injunction, at the suit of any stockholder, who makes a proper case ; Pearson v. Tower, 5-540. 3. . The treasurer of an association can not set up, in defense to an action, of members of the society, to recover the funds of the association, that the purpose and object of the society are unlawful ; Wilson v. Owens, 5-469. 4. Assent of dieectoes to EXPENDmrEE. If a corporation binds itself to the payment of money upon condition subsequent, and places the sum thereof into the hands of its treasurer, in readiness to meet the obKgation, and such treasurer expends the same for the benefit of the obligee in the bond, with the assent of the president and directors of the corporation, entered of record, this will bar recovery, by the corporation, of the sum so delivered to the treasurer ; Bay Yiew Homestead Assoc, v. Wil- liams et al., 6-224. 5. Misuse of funds. It is not competent for the directors of a corporation to use its funds in payment of a note, executed by themselves, to the president of the corporation, as payee, for its benefit; GaUery v. Nat. Exch. Bk., 6-632. 6. Omission to eeooed assent. When a corporation, by its proper officers, formally assents to the expenditure of money from 21 163 DIGEST OF THE its funds, but by some neglect, or oversight, of its secretary, no record entry is made of such assent, or if, for any cause deemed suflScient by such officers, the corporation postpones the formal entry of such assent upon the record, the assent will bar recovery of moneys paid pursuant thereto ; Bay View Homest. Assoc, v. Williams, 6-224. 7. MisAPPEOPEiATioN OF ; EEMEDT. The remedy of a creditor, who complains of the fraudulent misappropriation of corporate funds, whereby the company becomes insolvent and he is dam- aged, is by a proceeding in the nature of a creditor's bill, where, all the parties in interest being brought in, the court may compel an accounting and distribute proceeds according to justice and equity ; Eeed v. Goldstein et al., 6-247. 8. Jurisdiction of equity. When persons have ceased to be officers of a corporation and the only complaint against them is of an appropriation of corporate funds to their own use, and no discovery is sought, the reasons for seeking the aid of equity — which commonly exist in cases of breach of trust — are wholly wanting. Courts of law are adequate to relieve and are the most suitable tribunals ; — equity stands by ; Bay City Bridge Co. v. Van Etten et al., 6-(;01. 9. . A bill for injunction being exhibited, by a subscriber to stock, complaining that a corporation and its directors were keeping the funds of the company in a manner not authorized by the charter and by-laws and so as to endanger their safety, a gen- eral demurrer, ore tenus, was interposed. It was overruled, as admitting the charge ; Pearson v. Tower, 3-540. See Assets. COKPOEATE LIABILITY; see Liability; Pbesonal Lia- bility. COEPOKATE NAME. 1. Will be peotected. Where the name of a manufacturing corporation has been used, to designate the origin and ownership of the goods manufactured by it, such use of its name wUl be pro- tected, upon the same principle and to the same extent, that indi- viduals are protected in the use of trade marks ; Holmes et al. v. The Holmes, Booth & Atwood Manufacturing Co., 3-210. 2. Use of stockholdees' names. Where a corporation, with the consent of some of itf stockholders, have embodied their names in the corporate name, the right to use the name so adopted will continue during the existence of the corporation. Id. 3. Use of name by' eival coepoeation. Stockholders who have permitted the use of their names, in the corporate name of one company, must use their own names subject to the rights of that corporation, unless relieved of that inconvenience by its con- sent. A rival corporation, subsequently formed and embracing AMERICAN CORPORATION CASES. 163 such stockholders, will have no right to so use their names as to mislead those who deal with them into the belief that the two companies are the same. Id. 4. Use of family name. A statute (Rev. Stat., Mo., § 762) provided that no certificate of incorporation should issue to any company, where the corporate name and style assumed is the name of a person or firm, unless there be joined thereto some word designating the business to be carried on, followed by the word " company " or " corporation." A family name, not conjoined with a given name, is not the name of a person, within the meaning of the statute. Hence the name "Mallinckrodt Chemical Works" does not come within the statutory requirements ; State of Mis- souri, ex rel., v. M'Grath, secretary of state, 9-519. 5. . The object of the statute is to prevent corporations from conducting business in the name of firms and individuals, thereby misleading the public into the behef they are dealing with individuals and are entitled to the protection offered by their personal liability. Id. 6. Use by two companies. A company claiming to have been incorporated, in the state of Michigan, transacted business in Illi- nois under the name it had assumed. Later a corporation was organized, in Illinois, adopting the name the other was acting under. It commenced business in the same city where the other company was already established. The company last formed sought to restrain the persons composing the other company from continuing to do business under the common name, alleging that the foreign corporation had ceased to exist. It was held this was no good ground upon which to proceed. If defendants no longer had corporate rights, or if their incorporation was originally ille- gal, they had, at least, as much right to use the name assumed as complainant and might still prosedute their business as partners, under the name they had adopted ; Ottoman Cahvey Co. v. Dane et al., 6-460. 7. Two C0KP0EA.TI0NS WITH LIKE NAMES. PlaintifiE sued a cor- poration as being organized under the statute of Missouri. It was set up, in defense, that its managing ofiBcers were, at the time of making the contract declared on, acting in behalf of a foreign corporation bearing the same name. It was held that plaintiff had a right to presume that the company was lawfully acting in pur- suance of authority derived from the local statute ; the more so that the same persons were the managers of both companies; Dean v. La Motte Lead Co., 8-138. 8. Yariance. While it is true that to sustain a grant, or that under the operation of the doctrine of estoppels,_a variance in the name of a corporation may be disregarded, it is otherwise as to an act done by a corporation for its own benefit, in accordance with the requirements of a statute ; Glass v. Tipton, Tetersburgh «fe Berlin Turnpike Co., 1-377. 164 DIGEST OF THE 9. Vaeianob in pleading. In an action by a corporation on an indemnity bond, the complainant alleged the name of the cor- poration had been changed since the date of the writing obliga- tory. The complainant, by amendment, averring such change of name, it was held that the bond was admissible evidence ; West et al. V. Carolina Life Ins. Co., 6-190. 10. Identity; vaeianoe. A banking association described itself, in an action brought upon a note, as " The Washington County Bank, a corporation duly established by law and doing business in Greenwich, in the state of JSTew York." To prove its corporate existence it introduced an organization certiticate of " The Washington County National Bank of G-reenwich," to be " located ... in the town of Greenwich, county of Wash- ington, and state of New York," as well as a certificate of the controller of the currency of the due organization of " The Wash- ington County National Bank of Greenwich, in the county of Washington and state of New York." In the absence of evidence of the existence of any other bank named the Washington County National Bank of Greenwich, the evidence warranted the infer- ence that the organization proved was that of plaintiff ; Wash- ington County Nat. Bk. v. Lee, 3-440. 11. In suit, a corporation may be known in its public pro- ceedings by several names, as individuals may, and may be sued by a name substantially answering its true appellation ; East Tennessee & Georgia U.K. Co. v. Evans, 4-186. 11^. In legislation. A discrepancy between the correct cor- porate name of a defendant corporation, as given in the original charter and the name used in a special law amending the charter was held of no consequence, in view of the clear intention of the legislature ; Cotton v. Miss. & Hum R. Boom Co., 7-603. 12. Plea of geneeal issue ; effect. The plea of the general issue by a defendant sued in a corporate name is, in effect, under the statute of Michigan, an admission that it is sued by the right name ; Lake Superior Building Co. «. Thompson, 5-186. 13. Change op ; by amendment of ohaetee. A railroad com- pany having been incorporated, with its purposes defined, by sub- sequent legislation its name was changed. This was not a funda- mental change ; it was the same company with a different name, although it received the right to change its location a few miles, the general purpose and direction of the road being the same. The mere change of names does not and can not change things or their properties ; Town of Eeading v. Wedder, 4-371. 14. . An act of the legislature, providing that any uni- versity ,-or college, organized and incorporated under the provision, of any special charter, etc., may, by a majority of its board of directors change its name, if done before a day stated, is not unconstitutional. It is not a local law ; it does not amend the AMERICAN CORPORATION CASES. 165 charter ; nor does it create a new corporation ; Hazelett v. Butler University, 9-252. 15. Pleading ; complaint. In a suit brought by a university which had changed its name under such an act, last above de- scribed, it is sufficient, in alleging such change, to aver that it was made by a vote of a majority of the directors within the time limited, without stating the name of the directors, the num- ber of votes Qast, etc. Id. 16. Effect of change or. An act of the legislature permit- ting a railroad company to change its name " and that of its branches, or any division or portion of its roads " by resolution of its board of directors, sanctions nothing other than a change of name. The change of name does not create a new or distinct corporation nor efEect a change of responsibihty. Wherefore suits against the company must be in the new corporate name and not in that of any of its branches or any division or portion of its road ; Morris v. St. Paul & Chic. Ry. Co., 4-501. 17. . An act of the legislature, changing the name of a corporation and continuing it, under the new name, in all the rights, honors, privileges, and immunities it possessed under its original charter and ancient name, has no effect to revive provisions of such original charter — as a provision exempting it from taxa- tion — which has been repealed by prior charter amendments accepted by the company. If this were otherwise the reviving act, if passed subsequently to a general law having relation to the matter, would interpose no constitutional barrier to the taxation of the company like natural persons ; Macon & Augusta K.E. Co. V. Goldsmith^ comptroller general, 7-16 ; Goldsmith, comptroller general, v. Macon & Augusta E.E. Co., 7-16. 18. ; suBSCEiPTioN TO STOCK. A Valid subscription for stock of an incorporated company is not rendered invalid by a change of name, effected by an act of the legislature. The com- pany may sue for and recover by its new name ; Bucksport & B. RE. Co. V. Buck, 7-318. 19. LiABiLiTT FOE OLD DEBTS. "Where, for the purpose of con- venience, a corporation changes its name, but contiuues in the same general business, with the same officers, the company under the new name is responsible for all the debts it had previously contracted ; Dean v. LaMotte Lead Co., 8-138. 20. Eights and liabilities. A mere change in the corporate name does not affect the rights or liabilities of a corporation. If under the legislative act by which the change is effected, these liabilities and rights are reserved, the reservation is no more than the affirmation of what the law would imply in the absence of the reservation ; Trustees of University v. Moody, 6-166. 21. Ceetificate of change. In Illinois, a certificate of the change of name of a corporation is sufficient which shows a law- ful meeting of the stockholders, at the office of the company, called 166 DIGEST OF THE pursuant to statute, at which over two-thirds of the stock of the company was represented, and at which a resolution to change the name was unanimously adopted and stating the new name adopted; Anthony et al. v. International Bank, 6-453. 22. Estoppel. An appeal was prosecuted, to the supreme court (of Tennessee), in the name of a corporation, judgment debtor, by the name it bore at the time of suit brought. The corporation had, after suit brought and before judgment entered, consolidated with other companies under a new name. It moved in arrest of judgment, and its motion was overruled in the trial court. The motion was properly overruled. It was not competent to raise the matter by motion, and plaintiff in error was estopped to deny its existence in the appellate court ; E. Tenn. & Ga. E.E. Co. v. Evans, 4-186. 23. Must be pleaded. A corporation defendant can not take advantage of a misnomer in arrest of judgment, but must plead it in abatement ; East Tenn. & Ga. K.R. Co. v. Evans, 4-186. 24. . Misnomer of a party, if not pleaded, is waived. If it be necessary to plead a judgment obtained against one wrongly named, the party intended is to be connected with it by averment of his proper name ; Lehmann, Durr & Co. v., Warner, 6-155. 25. . Action based on contract. If a corporation be joined as a party plaintiff, by its corporate name, the objection that, being a partnership, merely, the persons thereby represented should be specially named as parties can not be urged after plea to the merits filed and trial had ; French et al. v. Donohue, 6-489. 26. Peactioe at law. In an action brought against a corpora- tion, a misnomer can be taken advantage of only by plea in abate- ment. Where service of process is properly had upon the proper officers, or officer, of the corporation sued and the case proceeds to judgment, no plea in abatement being interposed, the judg- ment will bind the corporation, though it be named by some other than its true name of incorporation ; Wilson & Co. v. Baker et al., 6-563. 27. MisHOMEB. The Fall River Print Works was summoned as trustee, in a process of foreign attachment. A claimant filed with his declaration an assignment duly recorded, of the wages of the principal defendant, from the Robeson Print Works, and offered evidence tending to show that the trustee was as well known by the appellation as by its corporate name, and that it accepted the assignment. The trial judge, jury having been waived, ruled there was no variance between the declaration and proof and found for claimant. It was held, there was no ground for exception ; Gifford v. Rockett et al., 7-462. 28. Immatebial vaeiance. Complaint was filed iu the name of the Capitol Bank of Topeka. The certificate of incorporation offered in evidence showed that the name selected by the corpora- tion was The Capitol Bank, and that its stated place of business AMERICAN CORPORATION CASES. 167 was Topeka, The variance was immaterial ; and, if amendment were necessary, the appellate court would consider it made ; Pape V. Capitol Bank, 7-130. 29. Amendment of judgment as to. A judgment against a corporation can not be corrected nunc pro tunc, by striking out the name under which the defendant was sued and served with process and substituting another name ; Brown v. Terre Haute & Ind. E. E. Co., 8-2Y0. COEPOEATE PEOPEETT. 1. Tbitst fund. The stock and property of every corporation is to be regarded as a trust fund for the payment of its debts, and its creditors have a lien and the right of priority of payment over any stockholder ; Bartlett v. Drew, 4^634. 2. Legislative conteol. A transfer of, may be well worked by legislative enactment, accepted, sanctioned and given effect to by the parties between whom the transfer is made ; Miller et al. V. Lancaster et al., -ir-lTO. 3. . The legislature may interfere with property held by a corporation for one public use and apply it to another. So it may delegate the power to do so by that other corporation. Such delegation of power must, however, be in express terms or must arise from necessary implication ; Application of City of Buffalo, 8-480. 4. Cebditoes' lien ; teust fund. The property of every cor- poration is to be regarded as a trust fund for the payment of its debts. The creditors of the corporation have a lien thereon and may follow it in to the hands of the directors or stockholders. Where, therefore, the property of a corporation has been divided among its stockholders, a judgment creditor, after return of an execution against the corporation unsatisfied, may maintain an action, in the nature of a creditor's bill, against a stockholder, to reach whatever was so received by him ; Hastings, rec'r etc., v. Drew et al., 8-560. 5. Instance. Certain of the directors and stockholders of the New Jersey Steam Navigation Company entered into an arrange- ment that a steamboat and an interest in another belonging to said corporation should be sold at auction, bid off by one of their number for their benefit, and that the other stockholders joining in the arrangement — those who did not participate — were to receive their proportionate share of the sum bid. The sale was accordingly made, in February, 1868, but the sum bid was not paid and the boat was, therefore, operated as before. In July, 1864, through the negligence of those in charge of the steam- boat, a collision occurred between her and another vessel. In March, 1865, the steamboat was sold and, by an instrument exe- cuted in the name of said company by its president, transferred to another corporation. It was adjudged that the facts author- 168 DiaSST OF THE ized a finding that the sale was not a real one ; but that the title remained in said company, and that it was liable for the negli- gence. Id. 6. Ceeditoes' lien. Creditors of a private corporation, who are secured by mortgage upon corporate property, acquire rights of which not even the legislature can deprive them ; Montgom- ery etc. E.Ii. Co. V. Branch et al., 6-436. _ 7. Tenfee of. a corporation is a distinct entity ; in law, it is as distinct a being as an individual is ; and is entitled to hold property — if not contrary to its charter — as absolutely as an individual can. Its estate, interest and possession are the same as in the case of a natural person. The right of stockholders to call their officers to account, and to prevent any malversation of the corporate funds or fraudulent disposition of their property, is in the exercise of its corporate rights and coincident with, but not adverse to, the corporate interests ; Graham v. R.R. Co., 6-81. 8. . The legal title to the property of a mining company is vested in the corporation, as such ; not in its stockholders ; Wright V. Oroville etc. Mining Co., 3-146. 9. Dividends. Stockholders of a corporation have no claims to a dividend until it is declared. Until that time the earnings belong to the corporate body, precisely as any other property it may own ; Goodwin et al. v. Hardy et al., 3-350. iO. Eight to control. An agricultural society is public as to its objects; but, being organized under general law not for !)ecuniary profit, it is essentially a private corporation. The pub- ic authorities can not, in any manner, control, or derive pecuniary benefit from the use of its property ; Thompson et al. ». Lambert et al., 6-523. 11. Its alienation. Corporate acts, by means of which cor- porate property is alienated, if not ultra vires, and when per- formed according to the mode prescribed by law are, in point of law, binding upon the corporation, and, through that title, equally binding upon the interest of stockholders ; Wright v. Oroville Gold etc. Mining Co. et al., 3-146. 12. Its redemption. "Where the property of a corporation has been sold under execution and no steps are taken by the officers of the association to redeem the property within the period limited by law, a stockholder may interpose to redeem such property for the corporation. By so doing he becomes the equitable assignee of the certificate of sale, and is subrogated to all the rights of the purchaser at the sheriff's sale. Id. 13. Conveyance of ; subsequent ceeditoes. If a corporation, being solvent and without actual intent to defraud creditors, shall dispose of lands for an inadequate consideration, or by a voluntary conveyance, its subsequent creditors can not question the transac- tion ; Graham «. E.E. Co., 6-81. 14. Insolvency. When a corporation becomes insolvent it is AMERICAN CORPORATION CASES. 169 SO far civilly dead that its property raay be administered as a trust fund, for the benefit of its stockholders and creditors. Id. 15. PtTEOHASE BY AGENT. An agent of a corporation who, as an individual, purchases the property of a corporation for him- self, as agent, can not uphold such purchase by proof that he agreed to pay what he thought the property to be worth ; but, he is liable to the company to the amount of its actual value; Nat. Bis. t). Drake, 9-340. 16. Recovbet of. Stockholders of an existing corporation can not maintain an action in their individual names, for the alleged wrongful conversion of the corporate money or property ; the right of action therefor is in the corporation ; Tomlinson et aL V. Bricklayers Union, No. 1 of Indiana, 9-269. 17. Prevention of injury. A stockholder has such an interest in the property of the corporation as wiU entitle him to prevent a sale thereof by persons who have no lawful power, or mandate, to sell ; State, ex rel., ■». The Judge etc., 7-247. 18. CoNSTEUOTioN OF WORDS. Mortgage, by a corporation, of aU the " real and personal property now or hereafter belonging to the company." A lien is created on the incomes, profit and earn- ings of tne corporation, and mortgagees take such lien co-extensive with the lien on the property embraced in the deed, with a right to take and apply such incomes, etc., to the payment of the mortgage debt, so far as it is past due and unpaid ; Kelly et al. X). Trustees, 6-130. See Assets ; Coepoeate Funds ; Equity ; Stock and Stock- holders. CORPOEATE RECORDS. 1. Speaking by its records. It is not true that a corporation can speak only by its record, either as to the creation or acknow- ledgment of liabilities upon contract ; M'Crary ». M'Farland, 10-310. 2. General rule. The members of a corporation have no right, upon speculative grounds, to demand an examination of the books of a corporation ; Pratt v. Meriden Cutlery Co., 3-163. 3. Where kept ; mandamus. The statute of Connecticut in regard to joint stock corporations requires that all books of ac- count of such corporations shall be kept, and shall be open to the examination of stockholders, at the town within said state at which the corporation is located, or at the oflice of the treasurer thereof in said state. A manufacturing corporation organized under this statute had its factory and principal office in a town in said state, and also a store in the city of New York for the sale of its manufactured articles. The books pertaining to its business in manufacturing were kept at the place of its factory and princi- pal office, while the books of account of sales and a bank account were kept in New York. A monthly statement from the books 170 DIGEST OF THE kept in'New York, showing the aggregate of sales, the amounts due to and the persons owing the company, was entered on the books in the principal office.. Held, {a) that if it was the duty of the corporation to keep the books of original entry pertaining to its transaction in New York at its principal office in Connecticut, it would not be enforced by mandamus upon the application of a stockholder who fails to show any injury to himself from the keeping of the books in New York; (5) the business of the company in New York being lawful, the statute should not be so construed as to prohibit such business, by prohibiting, the keep- ing of the necessary books in that city. Id. 4. Inspbotion of books, a domestic corporation (of the state of New York) is within and controlled by the statute requiring the transfer books and the books containing the names of stock- holders of any incorporated company to be open for inspection for thirty days previous to the election of directors ; Sage et al. V. Lake Shore & M. S. Ey. Co., 8-500. 5. . Such statute does not deprive the stockholders of the right to examine such books, for proper purposes and on proper occasions, at other times. Proceeding by mandamus is appropri- ate to enforce the right. Id. 6. Stockholders' eights as to. A stockholder of a corpora- tion has, in the very nature of things and upon principles of equity and fair dealing, the right to know how the affairs of the corporation are conducted — whether the capital, to which he has contributed — is being prudently and profitably employed, or other- wise. A provision of the charter of the corporation delegating to the board of directors the right to exercise " all the powers of the corporation," is not effectual to deprive a stockholder of his right, above stated, and to acquire the proper knowledge from an inspection of the corporate books and papers ; State of J^uisiana, ex rel. Martin, v. Bienville Oil Works Co., 7-197. 7. Inspection of. The right to inspect the books and papers, within seasonable hours and in such manner as not to incommode the officers of the corporation, is in the stockholder ; unless such right be extinguished by some law, clear and explicit in its terms, or by necessary and certain imphcation. Id. 8. . Where a stockholder seeks to enforce his right to in- spect the books and papers of a corporation of which he is a member, his application must not be general, but specific ; that is to say, he must show a clear right and a just and useful purpose to be effected. Id. 9. . An objection that if the relator has the right to inspect books and papers of the corporation of which he is a member, it is a right personal to himself, and one which can not be exercised by him through an agent, is without force. The right is useful only as it can be made available to the useful end intended ; and, as the stockholder might be without special know- AMERICAN CORPORATION CASES. 171 ledge to an understanding of the books, etc., it would be to deprive him of his right, if he might not exercise it through one who has the necessary knowledge. Id. 10. How WRITTEN. It is not necessary that the minutes of proceedings of a corporation should be written up by the secretary of the company in his own handwriting, or that they should be aj)proved by the board ; Wells et al. n. Kahway White Rubber Co., 3-592. 11. Binding foboe of enteies. A corporation is not bound, as to third persons, by interpolations fraudulently inserted in its records, if such third persons have not acted on, or seen, or known of, the existence of the matters so interpolated and appearing to be a part of the records ; Holden et al. v. Hoyt et al., 9-453. 12. Its effect. In order to exclude oral testimony of a con- tract, on the ground that a resolution found written of the book of record of a corporation is a subsisting written contract be- tween parties, in a case where the immediate issue is whether there is, or was, a writing covering the contract, it must be first settled that there is such a written contract. Such resolution may not contain the assent of the parties, and will then be a simple declaration by the company, subject to be withdrawn or altered before acceptance ; Kalamazoo Noveltv Manuf. Works u. Macalis- ter, 6-620. 13. As EViDENOE. A book containing a record of the regular propeedings had by the board of directors of a corporation, being a proper record book of that corporation in respect of such mat- ters as are in contest, and actually kept by the proper officer of the company, is admissible to show a resolution adopted, and such resolution so proved is a declaration of the corporation admissible in evidence, although it may not be further shown that a majority of the board was present or that the minutes of the meeting were approved. Id. 14. . Entries in the books of the corporation are, as a general rule, competent evidence of the proceedings of the corporation, and of the acts and votes of its officers transacted at official meet- ings ; but such entries are not' notice to third persons of acts or resolutions entered on the minutes, so as to raise up, against them, an equitable estoppel arising from a consent to the pro- ceedings ; Wetherbee ■». Baker et al., 9-547. 15. . The books of a corporation are admissible against the corporators, charged with liability on stock subscribed for, the fact that they are corporators having been otherwise established ; Macon & Augusta Ry. Co. «. Yason et al., 7-4. 16. . The books of a corporation are competent evidence, for and against its members, in an action between the corpora- tion and such members ; Washer «. Allensville etc. Co., 9-223. 17. Eeooeds. As between a corporator and the corporation, the records of the corporation, or its stock book, so called, is the 172 DIGEST OF THE evidence of their relations. Meetings of the stockholders, elec- tions, dividends etc. are regulated by this record ; People v. Eobinson, 10-59. 18. Verified copy. If the books of a corporation are admissi- ble in evidence, and are not within the jurisdiction of the court, copies, properly verified, are admissible ; Ide v. Pierce, exec'r, 9-458. 19. Stock book as evidence. Entries made in a book of the corporation, used for the purpose of keeping account of shares of stock issued, in the handwriting of the president, or of the com- pany's secretary by direction of the president, are admissible evi- dence, in the hands of the president, to prove the issue of stock of said corporation ; Weber v. Fickey, jr., use of etc., 7-385. 20. Impeachment. Action for deceit in the sale of stock of a corporation. Defendant called, as a witness, the corporate treasurer, who produced his cash book and testified that he showed it to plaintifi before he purchased the stock from defen- dant. It is competent for plaintifE to cross examine as to the manner of keeping the books and to show that it was not fairly kept and did not contain a correct statement of the corporate affairs ; Teague v. Irwin, 9-461. 21. Acceptance of chaktee. The journal of the acts and proceedings of a corporation is admissible in evidence, in an action against a stockholder, in an action to enforce his personal liability in favor of a corporate creditor, to show an acceptance of a charter amendment, without showing that the parties accept- ing such amendment were directors, if they be named as such in that journal ; Dows v. Naper, 6-424. 22. LiABiLiTT to oeeditok. In such an action, on the part of a bank depositor against a stockholder, the bank ledger, although not a book of original entries, is testimony, as an admission of the corporation, on its own books, of a sum due to a depositor suing. Id. 23. Right to vote. The books and records of a corporation determine who are its stockholders, for the time being, and who have a right to vote on the stock, although the same may have been sold or pledged as collateral security. The person who appears, on the books of the company, to be the owner has the right to vote all the stock which stands in his name ; State etc. V. Ferris et aJ., 6-312. 24. . The books of a corporation are prima facie evi- dence as to the person who possesses the right to vote at a meeting of the corporation ; Hoppin et al. v, Buffum et al., 4-151. 25. As NOTICE TO DEALERS WITH. Persons dealing with a cor- poration are in no wise affected with notice of entries made upon its books of record and account, limiting the liability of holders of corporate stock ; Griswold v. Seligman, 8-247. AMERICAN CORPORATION CASES. 173 26. Peesumption. Where the records of a corporate body show that a resolution was adopted by the stockholders, it is presumed, in the absence of evidence to the contrary, that such resolution was lawfully adopted by the holders of a majority of the stock ; Star Line of Steamers v. Yan Vleit, 6-649. 27. Peoof of adoption of eesolutions. If it be shown that a resolution had been passed by a board of directors, lawfully assembled, it would be valid, although never entered on the com- pany's minutes ; Wells et al. v. Eahway W. Kubber Co., 3-592. 28. CoNTEADiCTioN THBEEOF. Parol testimony may be intro- duced, by a corporation, to evidence that a resolution of its board of trustees, spread upon the minutes of its proceedings, does not correctly express the proposition which was voted on and adopted by the board; Gilson Quartz Mining Co. v. Gilson et al., 6-234. 29. Oeajl testimony to eebut. A resolution of directors of a corporation, appointing an officer, or employing an agent (in this case superintendent), which does not show'assent of the appointee or employe, is not subject to the rule excluding oral testimony to affect a written contract. To the contrary, evidence may be given to show the actual establishment of contract relations under the resolutions; Kalamazoo Novelty Manuf. Works v. Macalister, 6-620. 30. Desteoted. When the records of a corporation are shown, to a reasonable certainty, to have been burned, parol evidence is admissible to show the organization of the corporation and action linder it ; Proprietors of Bapt. Meeting House v. Webb et al., r-282. 31. Uneecoeded eesolution. Parol testimony is admissible to prove a, resolution or acts of corporate directors which, for reasons deemed sufficient by them, are not formally entered of record ; Bay View Homestead Association v. Williams et al., 6-224. 32. Omission to eeooed. The omission of the secretary to enter corporate resolutions npon the records of a corporation, whether by neglect or mistake, does not render the resolution of no avail. It may be proved by parol. Id. 33. . Where a corporation, by its proper officers, formally assents to the expenditure of money, from its funds, but, by neglect or oversight of its secretary, no record entry is made of such assent, or if, for any cause, deemed sufficient by such officers, the corporation postpones the formal entry of such assent upon the record, the assent will bar the recovery of moneys paid thereunder. Id. 34. . In the absence of the corporate seal to a written in- strument, purporting to be executed by a corporation, or of the proof of facts and circumstances from which the existence of a resolution of authorization, or of the authority itself, may be in- ferred, the authority to execute a conveyance can only be estab- lished by resolution of the trustees recorded in a proper corporate 174 DIGEST OF THE book, which should be in the custody of the secretary ; S. Cal. Colony Ass'n v. Bustamente et al., 6-239. 35. Sufficient indictment foe false kntet. Where the stat- ute makes it criminal and penal on the part of an agent of a cor- poration to make a false entry in corporate books, an indictment, accusing such agent of that offense, should specify the particular entry, complained of and to be rehed upon to secure conviction, setting forth or, at least, giving its substance according to its effect. An averment that defendant made a fraudulent entry in the books, by which false entry it appears that the cash on hand, at the commencement of business on that day, was a sum specified, is insufficient ; People v. Palmer, 6-253. COEPORATE RESIDENCE. 1. Evidence of. That the meetings of the stockholders and directors are held, and the official records, cash book, stock ledger and certificate book are kept at an office and that the blanks used by the corporation have a printed heading giving the name of the corporation and the number of the street and the street of the city of such office, which is the place of business of its treasurer, is sufficient evidence that the corporation has a usual place of business there, albeit it does not hire such office ; First Nat, Bk. V. Hinghara Manuf. Co., 7-496. 2. Impossible. A corporation can not have two domicils, or I residences, at the same time. It obtains a residence by authority of law, which fixes it ; and it retains that residence so long as it legally exists within the state of its creation; Newport & Cin. Bridge Co. v. Woolley, 7-184. 3. Removal. Corporations can not remove from place to place, or establish branches for the transaction of their regular corporate business, unless authorized by law ; Chapman v. Colby Bros. & Co., 7-578. 4. NoN EEsiDENOE. A Corporation incorporated by and organ- ized under an act of the legislature of a sister state, is a non resi- dent entity; Newp. etc. Bridge Co. v. Woolley, 7-184. 5. Foe seevioe of peoobss in bquitt. If a corporation have a manufactory in one county and a usual place of business in an- other, a demand made in the latter county on an execution issu- ing on a judgment recovered against the corporation is a sufficient demand ; First Nat. Bk. v. Hingham Manuf. Co., 7-496. 6. NoN location AS BY OHAETEE. Action to rocover the amount of a subscription to stock. It is no defense that the corporation has not located its place of business as contemplated by its char- ter ; Courtright v. Deeds, 5-366. 7. Estoppel to dent. One who has contracted with a corpora- tion, by its corporate name, has admitted its corporate capacity at the time of the execution of the contract. In action brought on the contract the company need not state where it has its residence, AMERICAN CORPORATION CASES. 175 or principal place of business ; Nat. Ins. Co. v. Bowman et al., 8-141. OOEPOEATE SEAL. 1. Use of. The technical rale of the ancient common law that a corporation speaks and acts only by its common seal, if it ever obtained in this country, is now obsolete ; Trustees of University V. Moody, 6-166. 2. . The rule of the common law which prevailed at one time, in England, that a corporation has no capacity to act, or make a contract, except under its common seal, has been long since exploded in this country; Crowley v. Genesee Mining Co., 6- 260. 3. Effect of. When the common seal of a corporation is affixed to an instrument in writing, purporting to be executed by it, and the signatures of the proper officers are proved, courts pre- sume that the officers did not exceed their authority and the seal, itself, is prima facie evidence that it was affixed by proper authority; Southern California Colony Ass'n v. Bustamente et al., 6-239. 4. Impression made by thied peeson. An impression of the seal of a corporation indented, without any intervening substance, upon the surface of a printed bond, otherwise valid as a corporate obligation, and purporting to bear the corporate seal by the cor- poration affixed, which was so impressed by the printer, by direc- tion of the officers of the corporation, after the bond was printed, and in order to prepare it to be signed and issued, renders the bond valid as an obligation under seal; Royal Bank of Liverpool v. Grand Junction R.R. & Depot Co., 1-644. 5. Sealed note. Under statute of Minnesota, the seal of a corporation affixed to an instrument made by it, which is other- wise a negotiable note, does not impair its negotiability; Auer- bach et al. v. Mill Co., 8-6. 6. Absence of. In the "absence of the corporate seal, to a written instrument purporting to be executed by the corporation, or of the proof of facts and circumstances from which the ex- istence of a resolution of authorization, or of the authority itself, may be inferred, the authority to execute a conveyance can only be estabhshed by resolution of the trustees recorded in a proper book of the corporation ; which should be in the custody of the secre- tary ; S. Cal. Col. Assoc, v. Bustamente et al., 6-239. 7. Peesumption as to. A certified copy of a certificate of change of corporate name, showed, affixed to the name of the president thus: "(seal)." This affords prima facie evidence it is the seal of the corporation ; it is not necessary the secretary of state, in making a certified copy, shall make a fac simile of the seal found upon the paper copied ; Anthony et al. v. International Bank, 6-453. 176 DIGEST OP THE 8. Pbesumption as to seal. When the common seal of a corpo- ration appears to be affixed to an instrument, and the signatures of the proper officers are proved, courts will presume that the officers did not exceed their authority, and the presence of the seal is, per se, prima facie evidence that it was affixed by proper authority ; Morris v. Keil, 5-487- 9. . Where an appeal bond purports to have been exe- cuted in the name of a corporation, by its general attorney, and has the seal of the corporation attached, the presumption arises that the person using the seal had authority so to use it ; Indian- apolis & St. Louis R.K. Co. v. Morganstem, 9-152. 10. . The seal of a corporation having been affixed to an instrument purporting to be executed by the corporation — in this case a mortgage — by the proper custodian thereof, the pre- sumption is it was so affixed by the direction of the company, and it devolves upon those who dispute the validity of the deed to prove he acted without authority ; Evans v. Lee, 8-338. 11. Private seal. If the by-laws require a transfer of stock to be under seal, a transfer signed, in blank, with the word " seal " inclosed in a bracket, is of no effect ; Bishop v. Globe Co., 9-468. COEPORA.TE WRONG. 1. JomT iNJUET ; eemedt. The legal redress for a corporate wrong, which constitutes a joint injury to all the stockholders, should be at the instance of a corporation, which represents all gtockholders for the purposes of legal remedy. A stockholder is not entitled to institute proceedings in his own name for the damage done to him individually, unless upon showing that the corporate authorities have refused to bring suit after proper ap- plication; Talbot ». Scripps et al., 5-477. CORPORATION. 1. Gbaut necessaet. In the absence of a general statute on the subject of corporations and authorizing their organizations, etc., a private corporation can only be called into existence by special act of the legislature ; Douthitt et al. v. Stinson, 8-178. 2. Possible ooNDrrioNS, A corporation takes its right to exist from legislative grant, either under the operation of general laws or special enactment. Corporations may exist either de facto or de jure ; Lehmann, Durr & Co. v. Warner, 6-155. 3. Ceeation. No particular words or expressions are necessary to create a corporation. If the legislative intention is manifested clearly to clothe an association of persons with rights and powers to be enjoyed and exercised by a collective name, for designated purposes, and in a corporate capacity, the association is by impli- cation a corporation ; Grangers Life & Health Ins. Co. V. Kamper, 10-21. 4. Can not oebate ooeporations. Corporations created under AMERICAN CORPORATION CA8BS. 177 the general law of the state have no power to create a corporation distinct and independent from themselves. The word persons found in the law was designed to mean natural persons, not ju- . Tinney, 9-234. CURATIVE STATUTE ; see Constitutional Law. CUSTOM. 1. Of coepoeation, when not binding. A corporation can not relieve itself from responsibility for neglect or failure to perform its duty by pursuing a practice at variance with its agreement, as created by articles of incorporation, without the consent of all the stockholders. Any stockholder not assenting thereto, will not be bound by any custom which the officers of the corporation may adopt in contravention of its agreement to protect the rights of the several stockholders ; O'Connor «, North Truckle Ditch Co.,. 9-542. See Church OEGAiazATioN ; Express Co.; Usage. DAMAGES. 1. Liability of city foe consequential damages. An incor- porated city is not ordinarily liable for consequential injuries to private property resulting from the grading and improvement of its streets, if, in making such improvements, reasonable skill and care be used to avoid the injuries. The skiU and care required relates to the plan as well as to the execution of the work ; City of Indianapolis ». Huffer, S-227. 2. Measuee of. In an action against a city to recover dam- ages resulting from the overflow by water, several times, of plain- tiffs lot and dwelhng thereon, used by him as a residence for his family, such overflows being caused by an insufficient and care- lessly constructed sewer, built by the city, the jury made up the amount of damages by ascertaining the losses sufEered by the AMERICAN CORPORATION CASES. 191 plaintiff by reason of injury to his realty, garden crops and per- sonal property, such as houseliold goods and family supplies, and adding thereto a certain sum on account of decrease in the rental value of the premises during the period caused by the backwater ; held, that the damages were excessive. Id. 3. Teansfee of stock. Action by a corporation, against one to whom it has issued a new certificate of stock on the faith of a forged power of attorney, to transfer stock presented by him. The measure of damages will embrace, (1) costs and expenses — not including counsel fees — of a suit brought against the com- pany, by the person whose name was forged, to compel the issue of new stock to replace that transferred ; the corporation having notified defendant and requested him to defend the suit, which he refused to do ; (2) the amount paid, bona fide, by the corporation for stock bought by it, to replace that so transferred, though such stock was then of a higher value in the market than at the time the forgery was committed; (3) the dividends the company was compelled to pay the person whose name was forged ; Boston & Albany K.R. Co. v. Richardson, 9-472. 4. Failtjee to subsceibe to stock. Where there is an agree- ment to subscribe to stock, in the future, the measure of damages upon a failure so to subscribe, would seem to be, the difference between the market price and the par value of the stock ; Mount Sterling Coal Road Co. v. Little, 7-181. 5. ExEMPLAET DAMAGES. Exemplary damages will not be allowed, in an action against a municipal corporation, for a per- sonal injury sustained by reason of the mere negligence of the corporation to repair a defect in one of its streets, which is not in the business part of the city and is but little used by the public ; City of Chicago «. Martin et al., S-205. 6. . It is diflacult to conceive a case, against a municipal corporation, which would justify the allowance of exemplary damages. Id. 7. . The rule is that, to justify the allowance of exemplary or vindictive daniages, either gross fraud, malice or oppression must appear. In the absence of these elements, damages can not exceed and must be confined to compensation for the injury sus- tained. Id. 8. Punitive damages. A corporation may be subjected to exemplary or punitive damages for tortious acts of its agents or servants, done within the scope of their employment, in all cases where natural persons, acting for themselves, if guilty of hke tortious acts, would be liable to such damages ; Atl. & G. W. Ry. Co. V. Dunn, 4-5. 9. ExEMPLAET damages. It is well settled that, where the conduct of a corporation is characterized by gross negligence, although there may be an absence of malice and oppression, it is 192 DIGEST OP THE amenable to exemplary damages ; W. Un. Tel. Co. v. Eyser, 5- 161. 10. ToETs ; PUNITIVE DAMAGES. While the principal is liable for the torts of his servant or agent in the course of his employ- ment, a railroad company is not liable in punitive damages for the malicious and wanton acts of a conductor, in the absence of proof tending to show either that the company prompted or was privy to it, or approved it afterward ; Turner v. North Beach & Mission E.E. Co., 1-202. 11. When peoperly awaeded. If the wrongful act of the agent of a corporation is perpetrated while ostensibly discharging duties within the scope of the corporate purposes, the corporation may be liable in vindictive damages ; Singer Manuf. Co. v. Hold- fodt, 6-402. 12. Instance. Where a sewing machine was sold, to be paid for in monthly instalments, and a lease given and accepted pro- viding that the vendor might, without process, enter and take possession of the machine for the non payment of any instalment, and the purchaser made all his payments to the agent selling the same; and afterward the vendor, by other agents, entered the purchaser's house in his absence, and with force and violence re- moved the machine against the remonstrances of his wife, and kept the same for one day, when the same was returned, the party so taking claiming that it was done under the belief that full payment had not been made, but the evidence showed notice of the facts to the vendor's agents, it was held, that the case was one eminently proper for the imposition of exemplary damages. Id. 13. . It is well settled law, of the state of Missouri, that corporations, like natural persons, are liable in exemplary dam- ages, when the facts of the case are of such character as to war- rant them ; Malecek v. Tower Grove & Lafayette Ry. Co. , 8-120. See Eminent Domain ; Liabilities ; Personal Liability ; Teanspee of Stock. DEBTOE AND CEEDITOE. 1. Teansfee of peopeety, as between. An individual who is solvent, in the absence of intent to defraud creditors, may dis- pose of property even by voluntary conveyance, and subsequent creditors can not question the transaction. If, however, the owner of property shall dispose of such property with intent to defraud those to whom he expects to become immediately or soon indebted, this may be a fraud against them, which they may have a right to unravel ; but, a subsequent creditor will have no right to question a previous transaction in which the debtor's property was obtained from him by fraud ; which the debtor has acquiesced in, and which he has manifested no desire to disturb ; G-raham V. R.R. Co., 6-81. AMERICAN CORPORATION CASES. 193 2. Teust fund fok use of. An excess of indebtedness of a corporation, for which, by statute, directors become hable, con- stitutes a fund, for the benefit of all the creditors, so far as the condition of the company renders it necessary, for the payment of debts due to them ; Horner v. Henning et al., 6-1. 3. Inviolability of claims of. Creditors of a private cor- poration who are secured by mortgage upon the corporate prop- erty, by such contract of mortgage, acquire rights of which they can not be deprived, even by act of the legislature ; Montgomery & West Point K.K. Co. v. Branch, Sons & Co., 6-136. 4. Not bound by coepoeate estoppel. It is not true that creditors of a corporation can not enforce obligations resting upon stockholders that the dbrporation might not be able to ; Union Mut. L. Ins. Co. V. Frear Stone Manuf. Co. et al., 6-481. 5. Feattd in oeganization. If a new corporation be organ- ized, by parties interested in an older one, for the purpose of get- ting rid of liabilities and to fasten them on the new company, and the latter, by arrangement with the creditors of the elder organi- zation, at trustee's sale, bids off the property of the latter for the amount of its liabilities and gives notes to its creditors, secured by trust deed on the property thus acquired, the fraud — if any — on the part of the representatives of the old company can not affect the creditors. The existence of such a state of facts will constitute no defense to a suit to compel the subscribers to stock in the new company to pay unpaid balances of their subscrip- tions, to satisfy the liabilities assumed by the new company; Jewell et al. v. Rock E. P'pr Co. et al., 9-Yl. See Assets ; Consolidation ; Coepoeate Peopeety ; Ceeditoe's •Bill; Dissolution; Estoppel; Liabilities; Peesonal Lia- bilities ; Stock and Stockholdees ; Teansfee of Stock. DECEIT. 1. False eepebsentations. A fraudulent or reckless repre- sentation of a fact as true, which the party may not know to be false, if intended to deceive, is equivalent to a knowledge of the falsehood ; and a concealment of a material fast, if done in such a manner as to deceive and mislead, will give a right of action for deceit; National Exchange Bank v. Sibley, 10-1*65. 2. . In an action, by assignee in bankruptcy of an active corporation, to recover unpaid subscriptions to its stock, the de- fense of false and fraudulent representations, inducing the sub- scription, can not be set up ; Chubb v. Upton, 6-23. DECLAKATION OF INTENTION, 1. OoNSTEUED. A declaration of intention to create a com- pany, " for the purpose of locating, building, owning and main- taining a union depot for railroads in the city of Denver," and of locating, etc., "as many different lines of railroads from said 26 194 DIGEST OF THE depot to the exterior boundary of the city ot Denver, as may be necessary for the accommodation and use of the different railroad companies making said city a point of delivery for freight and passengers," does not indicate an attempt to create an ordinary railroad company under the statute; People v. Cheeseman, 10-93. 2. CoNSTETTED. Neither is a statement in the articles of incor- poration that the term of existence of the corporation shall be fifty years when the statute provided that such corporations shall exist for only twenty years, a fatal defect. Id. 3. Office of. In organizing a corporation under a general law, the declaration is an acceptance by the corporators, under the name designated, and for the objects expressed, of the corpo- rate powers and capacity the law confers, a" statement of the prin- cipal constituents of the corporation — its name, object for wTiich formed, amount of capital stock, names of the stockholders and the interest of each, is all that is required ; Grangers Life & Health Ins. Co. v. Kamper, 10-21. DECEEASE OF STOCK. 1. Statutoet peemission. a statute which authorizes a cor- poration, at any meeting called for the purpose, to reduce its cap- ital stock and the number of shares thereof, does not empower a corporation to effect such reduction by purchasing the shares of a particular stockholder. Unless a course be adopted which will work exact and even justice to the whole body of stockholders the statute is inoperative ; Currier v. Lebanon Slate Co., 8-377. 2. What is not. Where a corporation agrees with its stock- holders to issue certificates of stock for the amount of their sub- scriptions paid in and cancel the subscription as to the amount not paid, this is not a diminishing of the capital stock, as the remain- ing stock still belongs to the company, to be disposed of ; Chet- lain,adm'r, v. Kepub. L. Ins. Co. et al., 6-397. DEDICATION. 1. Evidence of. When a dedication is relied upon to estab- lish the right, the acts, of both the donor and of the public authorities, should be unequivocal and satisfactory of the design to dedicate on the one part, and to accept and appropriate to public use, on the other; Trustees of the First Evangelical Church et al. v. Walsh et al., 3-280. 2. WiTHDEAWAL OF. A dedication of property by the state, to a private corporation, in trust for a public use, may be with- drawn at any time before its acceptance ; State Historical Assoc. V. City of Lincoln, 9-535. 3. Acceptance. The bringing of an action to recover prop- erty dedicated to public use, from a subsequent donee, is not an acceptance of the dedication. Id. See Streets. AMERICAN CORPORATION CASES. 195 DEED ; see Coepohate Deed. DE FACTO CORPOEATION ; see Ookpoeation De Faoto. DEFINITIONS. 1. "Conditions peeoedent." By " conditions precedent " is meant any thing which, by the express provisions of the statute, is made a condition to be performed, on the part of the corpora- tors, before and as a foundation of the exercise of powers and privileges under the charter ; Lyons v. Orange, Alex. & Man. K. R. Co., 3-371. 2. "Dividend." A dividend, as applied to a corporation, means a sum which the corporation sets apart, from its profits, to be divided among its members ; Lockhart v. Van Alstyne, S-4Y0. 3. . The word has a technical but well understood mean- ing. It indicates corporate funds derived from the business and earnings of the corporation, appropriated by a corporate act, to the use of and to be divided among the stockholders ; Hyatt et al. V. Allen, 4-624. 4. " Expenses." A statute of the state of California author- ized the trustees of any corporation to levy and collect, for the purpose of paying " the proper "and legal expenses of sucli corpo- ration," assessments on the capital stock thereof. It was held, that this authorized the levy of assessments for the payment of the debts of the corporation incurred in the transaction of its le- gitimate business ; Sullivan v. Triunfo Gold & Silver Mining Co., 3-132. 5. " FoEEiGN COEPOEATION." A foreign corporation is a cor- poration created by, or under, the laws of any other state, gov- ernment or country ; Daly et al. v. Nat. L. Ins. Co., 7-87. 6. " Feanchise." The word " franchise," as used in relation to corporations, means certain privileges conferred by government, on individuals, which do not belong to the citizens of the country of common right ; Abbott v. Omaha Smelting & Refining Co., 8-306. 7. . The word franchise must always be considered in connection with the corporation, or property, to which it is alleged to pertain. Franchises are rights or privileges, which are essen- tial to the operations of the incorporation. They are positive rights or privileges ; Morgan ■». State of Louisiana, 6-12. 8. " FuTXJEE EXTENSIONS OE BEANCHES." The words " any future extensions or branches," in a contract, between two con- necting railroad corporations, for a division or drawback of freights and fares over their roads, " or any future extensions or branches on the same," must not be construed, in their general sense, to apply to extensions then unauthorized by the legislature, so as to invalidate the contract, where there were unexhausted powers, in 196 DIGEST OF THE the charter and supplements, at the time of the contract, to build other extensions or branches, sufficient to meet the requirements of the words ; an application must be given to the words consist- ent with the obi'ects authorized when the contract was made; Morris & Essex E.K. Co. «. Sussex E.K. Co., 3-579. 9. " Impkove." a corporation was formed, under the general incorporation law of California of 1863 as amended by an act of 1864, " to buy, improve, lease, sell, and otherwise dispose of real estate " as well as " to build water front protection, slips, docks, piers, wharves, warehouses, and otherwise improve such property as may be obtained by the company." Held, that, in this connec- tion, the word "improve" includes the performance of any act, whether on or off the land, the direct and proximate tendency of which is to enhance its value in the market ; Yandall et al. v. South San Francisco Dock Co., 3-150. 10. " Maintaining and sustaining." The words " maintaining and sustaining " a railroad, have reference to keeping the road in repair, supplying it with machinery and such like acts ; Central EJl. Co. et al. v. Collins et al., 3-224. 11. "Package." Bales of cotton, in contemplation of law, are not " packages " Vithin the meaning of that word, as commonly , imderstood when used in express receipts. Nor are they articles the value of which it is necessary to state to enable the carrier to understand the extent of his responsibility, or the amount of care which should be observed in their transportation, or the sum to be charged for their carriage ; Southern Express Co. v. Crook, 3-118. 12. " Penal statute." A penal statute is an act by which a for- feiture is imposed for transgressing the provisions of the act. It may also be remedial in one part and penal in another. The effect, and not the form, of the statute is to be considered, and if its ob- ject is clearly to inflict a punishment on a party for doing what is prohibited, or failing to do what is commanded to be done, it is penal in its character, and the circumstance that, in punishing, a remedy is likewise afforded to those having an interest in the ob- servance of the statute, is unimportant ; Diversy v. Smith, 9-155 ; Burkett et al. v. Plankinton et al., 9-155. 13. " Private coepoeations." Artificial persons, created for business purposes, clothed with certain rights and privileges, per- mitted to own and acquire property, for certain purposes and to a limited extent ; Ward, rec'r, v. Farwell et al., 6-490. . 14. . "Where the object of the creation of a corporation is not declared in the law creating it, but it appears it was to ad- vance the private interests of land owners, in the district incor- porated, and none others are embraced in its provision, although it may incidentally enhance the general prosperity of the whole community, it is none the less a private corporation ; Board etc. «. Houston, 5-268. AMERICAN CORPORATION CASES. 197 DEFUJS^CT CORPOEATION. 1. Its indebtedness ; counter olaim. ■ An indebtedness due to defendants from a defunct corporation, of which plaintiff was act- ing as manager when the indebtedness was created, will not be allowed as a counter claim in a suit for the price of goods subse- quently sold by plaintiff to defendants, although, when they made the purchase, defendants supposed they were still dealing with the corporation ; unless plaintiff had notice of such indebtedness and, thereafter, concealed from defendants the fact that he had succeeded to the business and was selling on his own account and not as manager of the corporation: Field v. Hahn et al., 8-173. DEMUREER; see Pleading. DEVISE. 1. Generally. A devise of real and personal property generally, without stating the purpose, to a corporation existing for educational purposes, must be regarded as a devise for educa- tional purposes; Santa Clara Female Academy v. Sullivan, 10- 298. See Academy ; Trust and Trustee. DIRECTORS. 1. Their status. Directors are trustees of the powers and property of the corporation and the shareholders are the benefi- ciaries. They can exercise no power not within the province of the charter, and must bring to the service fidelity to the welfare of the beneficiaries and diligence in the performance of their duties. They are not guarantors that the methods they adopt will lead to the most prosperous results ; Tuscaloosa Manuf . Co. et al. V. Cox et al., 9-1. 2. Their character and obligations. A director of a corpo- ration acts as trustee for the stockholders and as agent and repre- sentative of the corporation. He is under obligations to use his best exertions in behalf of the company in all matters relating to its affairs ; Covington & Lexington R.R. Co. v. Bowler's heirs et al., 4-404. 3. Are trustees. Directors are but the agents and trustees of the corporation ; they have power only to act for the interest of the company and not against it ; Simons et al. v. Vulcan Oil & Mining Co., 4-80. 4. . Directors of a corporation are bound to act as the representatives and for the benefit of the company. They can not acquire, for themselves, the property which it is their duty to acquire for the company, and which is necessary for its purposes, nor can they purchase from the company what it is their duty to sell in its behalf. In respect to this class of dealings, they stand 198 DIGEST OF THE upon the same footing as ordinary trustees; Blake v. Buffalo Creek K.K. Co., impleaded etc., 4-620. 5. Aee teustees. It is a rule which rests in the soundest wisdom, and is sustained by the best consideration of the infirmities of our human nature, called for by the only safe protection of the in- terest of cestuis que trust or beneficiaries, viz, : That trustees and persons standing in similar fiduciary relations shall not be per- mitted to exercise their powers and manage or appropriate the property of which they have control to their own profit or emolu- ment, or as it has been expressed, " shall not take advantage of their situation to obtain any personal benefit to themselves at the expense of their cestuis que trust ; " Ogden v. Murray, 3-510. 6. . Directors of a corporation are within this rule, and although in this case there is nothing to show that the trustees were not in the actual exercise of the highest integrity, yet the principle is one of great importance, and forbids any inquiry into the honesty of a particular case. Id. 7. . Directors are regarded as trustees for stockholders, wherefore, a stockholder will be allowed, in a proper case, to maintain a suit in equity instituted to restrain them from doing acts which, while they may be within the corporate authority, would be in violation or breach of their trust, or he may procure redress for such acts after they have been performed ; Wright v. Oroville Gold etc. Mining Co. et al., 3-146. 8. Duty to stockholders. Corporate authority is considered to have been conferred by the stockholders upon the trust and confidence that it will be exerted, at least, with the view to ad- vance the interest of the stockholders and not used with a pur- pose to injure or destroy that interest. Id. 9. Teust eblation. Directors of corporations are subject to the rule governing the office of trustee, in regard to their dealings with the trust estate ; Wardell v. R.R. Co., 6-91. 10. . The directors of a corporation are clothed with ^ower to manage the affairs of their company for the benefit of its stockholders and creditors. Their character as agents forbids the exercise of their powers for their own personal ends against the interest of the company, and they are precluded from deriv- ing any advantage from contracts of the company, made by their authority as directors, except through the company for which they act. Id. 11. . In transacting the business of a corporation and in exercising its franchises, the directors are agents, or trustees, for the stockholders, and the latter are bonnd by me acts of the former within the scope of their authority ; Chetlain, adm'r, v. Eepublic Life Ins. Co. et al., 6-397. 12. FiDuoiAEY eelation. Directors manage the property of a corporation as trustees for the stockholders, and they have no right to use or appropriate the funds of their cestuis que trust to AMERICAN CORPORATION CASES. 199 themselves. They have no power to waste, destroy, give away or misapply the corporate property: Holder v. Lafaystte etc. E.K. Co., 5-258. ^ r j j 13. As TEUSTEES. The principle that the directors of a corpo- ration are trustees for the stockholders, relates only to their acts in connection with the property held by the corporation itself. It has no application to a purchase of stock in the company by a director from a stockholder; Board of Commissioners v. Eeynolds, 5-340. 14. . The directors of corporations are trustees of the stockholders, and, in a certain sense, of its creditors. Any agree- ment to influence their action for the benefit of others, and to the prejudice of the company, is fraudulent and void; Bliss v. Mat- teson & Litchfield, 4-540. 15. Teustees foe oeeditoeb. "When the franchises, track, etc., of a railroad corporation are sold under execution, the directors become trustees, by virtue of the statute, and all unsold property of the company passes to such trustees, for the benefit of any creditors of the company; Good v. Sherman et al., trustees, 4-197. 16. Disqualifications. The fiduciary relations of directors not only inhibit them as grantees from purchasing an individual grant from themselves, so as to bind their company to them indi- vidually for its purchase money, but also forbid that they should, by subsequent resolutions, create, revive, or continue a debt for such a purpose in their favor against the company ; Coleman et al. V. Second Ave. K.R. Co., 3-603. 17. DisABiLiTT. A director of an incorporated company can not become a contractor with the company, nor can he have any personal and pecuniary interest in a contract between the com- pany, of which he is a director, and a third person ; Port et al. v. Rassell et al., 4-381. 18. Can not make peofit to himself. A director of a corpo- ration can not, by an agreement with his co-directors, sell the bonds of the company and realize a profit thereon. If he does so he will be required to account for that profit to the creditors or stockholders; Widrig & Co. ■». Newport St. Ry. Co., 10-463. 19. . A director so selling is a trustee for both creditors and stockholders, and they will be protected against such bar- gains. Jd. 20. Advancing money foe co-dibectoes. A director advancing money for his' co-directors is entitled to a contribution from them. Id. 21. Loan by. Directors and other officers of a corporation may, when they honestly deem it for the interest of the corpora- tion to borrow, advance it money on terms as favorable as any on which they could have procured the money from other sources] Sutter St. E.R. Co. v. Baum, 10-69. 200 DIGEST OF THE 22. Loan by. But, where a director uses his official position to obtain an undue advantage in making a loan to the corporation, he is not entitled to recover the amount charged as expenses for making and acknowledging the mortgage. Id. 23. Skcdeing personal fayoes. The managing director of a corporation can not use for his own personal benefit, without pay- ment therefor, the property of the company, unless by consent of its proper officers, and if he does so the company may recover of him the value of the use so taken ; N. O. & B. S. Packet Co. v. Brown, 10-507. 24r. FEAxiDutENT DEVICES. All arrangements, by directors of a company, to secure undue advantage to themselves, at the expense of the corporation, as by the foundation 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 con- tracts shall be given to it, in the profits of which they, as stock- holders in the new company, are to share, are unlawful devices, in fraud of stockholders and condemned by courts whenever brought in for consideration ; Wardell v. E.E. Co., 6-91. 25. Dealing with company. A director, acting in good faith and fairly, may as lawfully advance money to his corporation, upon the faith of its securities, as any one else ; Darst v. Gale et al, 6-380. 26. Inteeebt in conteaot. A director can not, legitimately, acquire an interest adverse to the corporation of which he is a director. If he purchase any claim against the company it is in trust for the company. If he enters into a contract for the com- pany he can not, personally, derive any benefit from it. If, subse- quent to the letting of the contract, he acquires an interest therein, he must still account, for profits, to the association ; European & North American Ky. Co. v. Poor, 4-421. 27. PxrECHAsrKTG company peopeety. , A director is a trustee for the corporation, and, it being his duty to act in good faith toward his cestuis que trust, it is a breach of trust, on his part, to create any relation between himself and the trust property, whereby it becomes his interest to subserve his individual interests at the expense or to the injury of the beneficiary of the trust property ; Cov. & Lex. E.Bi. Co. v. Bowler's heirs et al., 4-404. 28. Sale to themselves. Ordinarily the law frowns upon contracts made by directors in their representative character, with themselves as private persons, but such sales are not necessarily void. They are carefully watched and their fairness must be shown. Such sales are supported in equity, where the fiduciary relation of the purchaser has ceased before the purchase, when the purchase was made with full consent of the stockholders, or ' where stockholders have, by their acquiescence, debarred them- selves from questioning the transaction ; Ashurst's Appeal, 4- AMERICAN CORPORATiON CASES. 201 29. CoNTEACT FOE HIS BENEFIT. A director of a corporation can not make for himself, or for his own benefit, a contract which will bind the company. Such contract may be repudiated, by the company, at the instance of any stockholder ; Guild, exec, etc., v. Parker, rec'r, 8-401. 30. . A board of directors who have, by contract, made a barter of the assets of their corporation for their personal gain, can not, by an act purporting to be an acceptance, for the com- pany, of an equivalent for such assets, conclude the stockholders, or their representatives, from showing that no equivalent was actually received. Id. 31. . A director of a corporation can not make a contract with himself, or for his own benefit, which will bind the com- pany. The contract may be repudiated by the company, at the instance of a stockholder ; Gardner et al. v. Butler et al., 8-413. 32. . The Accessory Transit Company was a corporation created by the republic of Nicaragua, for the purpose of carry- ing freight and passengers between the city of New York and certain ports on the Pacific. It had seven directors and purchased seven steamships of Cornelius Vanderbilt. The title to the ships, however, by resolution of the board of directors, was transferred to three trustees (each of whom was then a director of the com- pany), to evade the acts of congress relative to the registration of vessels, in which foreigners hold an interest. After the passage of an act of congress enabling the company to hold the vessels in its own name, the trustees transferred the ships to the company. Afterward they demand compensation of the company, claiming that where an active trust for the care, management, conveyance and appropriation of personal property has been created and the instrument creating the trust makes no provision for the compen- sation of trustees, they are prima facie entitled to the same com- missions as are by statute allowed to guardians, executors and administrators. The company subsequently became insolvent and was placed in the hands of a receiver ; one of the trustees died ; the other two brought suit against the receiver to recover the com- pensation claimed. The court held, (a) that under the circumstances, the trust was in contravention of the laws of the United States, and could not be upheld for any purpose ; and, (J) that the fidu- ciary relation of the tmstees, as directors of the company, pro- hibited them from in any way securing to themselves a personal advantage in the administration of their trust ; Ogden v. Murray, 3-510. 33. Inteeested in ooepobate conteact. The North Missouri Railroad Company was heavily indebted and unable to make sale of its bonds, except at a ruinous sacrifice, nor could it otherwise provide the means necessary for the completion of its road. An association was formed, the purpose of which, as expressed in its articles, was the purchase of the bonds remaining unsold and, ul- 26 203 DIGEST OF THE timately, if found profitable so to do, the purchase of the road itself, provided the association could obtain the control of the corporation. The bonds were subsequently purchased of the com- pany, three of the corporate directors being members thereof, at a price some ten per cent, above their then market value, and the association was allowed to name a majority of the directors. The transaction was assailed as fraudulent in fact. It was held, that the stipulation on the purchase that the purchasers should acquire control of the company was nothing more than a proper security for the proper application of the money advanced on the security of the bonds and the court could not presume from the provision as to the purchase of the road that, in the event of such purchase, the purchase would be made other than in a lawful manner, and under circumstances authorizing such purchase ; there was in the transaction, no taint of actual fraud ; Kitchen et al. v. St. Louis, Kansas City & Northern Ey. Co., 8-199. 34. Inteeested in coepoeate conteaot. It being objected that the above transaction was constructively fraudulent inasmuch as three of the eighteen directors of the corporation were members of the purchasing association and the sale of the bonds was a sale to themselves ; the court found, from the evidence, this objection urged to the transaction was not supported by the facts, but, if such had been the fact, it would not make the sale void. Id. 35. . The mere fact that one or more persons proposing to advance money to an embarrassed corporation, to enable it to complete the purpose of its creation, are directors and a minority of the board of directors to which the proposition is made and by whom it is accepted does not vitiate and render the contract based upon the proposition void ; but, such contract will be voidable only, at the election of a party whose interest has been so repre- sented by the party claiming under it. Id. 36. Teustee selling to himself. A sale of the property etc. of an insolvent corporation was made by trustees under its mort- gage bonds, the trustees making the sale being members of the association who made the purchase and owning one thirty-fourth part of the whole capital of the association. This fact did not render the sale void, but it gave the company a right to redeem within a reasonable time and before the intervention of new equi- ties. Id. 37. Enfoecing debts puechased at a discount. Where di- rectors of a corporation purchase the indebtedness of the com- pany from its creditors, such purchase does not discharge the debt and absolve the company from its obligation to pay. The only effect would be to limit the amount of such purchasers' re- covery against the company to the amount actually paid for the debts. Id. 38. Acquiescence of cestui que teust. While a cestui que trust has a right to come in to a court of equity and ask that a sale AMERICAN CORPORATION CASES. 203 of trust property made by a trustee to himself be set aside his coming must be timely ; he has no right to lie idly by until new equities arise and speculate on the success or non success of the investment or transaction of which he complains and see others in good faith and without fraud, by a vast expenditure of money, make that valuable which was before valueless and then come and ask aid of the chancellor to enable him to appropriate to himself such benefits and advantages. Id. 39. Instanos. a director of a railroad corporation purchased the railroad and appurtenances thereof, belonging to the corpora- tion, at a judicial sale had under foreclosure of its mortgage, not having the consent of the corporation and without the permission of the chancellor by whom the sale was decreed. It was held, that the corporation had a right to have its road surrendered to it upon placing 'the director, who purchased it, in statu quo. The com- pany had a right to take the benefit of his bond or to demand a re-sale ; Gov. & Lex. R.II. Co. v. Bowler's heirs et al., 4-404. 40. Insolvency of coepoeation. The insolvency of a corpora- tion is no defense against its suit to recover its property from, or to fasten a trust upon, a director of the company who wrongfully became the purchaser of such property at a judicial sale thereof. Id. 41. Feaudulent oonteact. The directors of a railroad com- pany can not acquire such an interest in the profits of a contract for the construction of the road as to give them a standing in a court of equity to interpose an objection to a compromise between such company and its contractor ; Paine et al. v. Lake E. & Louisv. R.E. Co., 1-386. 42. ; eatifioation of. An arrangement made by directors, securing to themselves a share in the profits of a contract for the construction of a railroad, can be ratified and confirmed, only, by the stockholders. Id. 4.3. Peesumption. There is no legal presumption of illegality or unfairness, in transactions between two corporations, from the mere fact that a portion of the board of directors of the one com- pany constitute a part of the board of directors in the other at the same time, and participate in the dealings between the two cor- porations, such dealings being within the scope of the powers delegated by the stockholders ; Booth et al. v. Robinson et al., 7- 419. 44. Peaud and eedeess. Directors of a company can not bind the stockholders by allowing profits to the vendor of property purchased by the company, after holding out, in a prospectus, advertisement, etc., that the property was obtained at original prices. Such a fraud may be redressed by an action in the name of the corporation ; Simons et al. v. Yulcan Oil «fc Mining Co., 4-80. 204 DIGEST OF THE 45. As CEEDITOE. A director may become a creditor of the cor- poration of which he is director, by loaning money to it ; he may take security for re-payment ; may enforce the security ; and, may bid at a judicial sale had and purchase the property, upon which he is secured ; Hallam v. Indianola Hotel Co. et al., 6-580. 46. . Creditors of a corporation have a right to receive pay, in money or goods, and the fact that being creditors they are also stockholders and directors does not modify, or abridge, the right, so long as there is no actual fraudulent intent ; Smith, adm'x, et al. v. Skeary, 6-317. 47. . If stockholders and directors may deal with the cor- poration, in their individual capacity, the law will protect them as it will any other parties. Their relation to the corporation, how- ever, is admissible as evidence bearing on the question of good faith in the particular transaction. la. 48 . While a director may deal with his company and may acquire its property sold at execution sale, such liberty is to be exercised, subject to the rules which belong to his peculiar posi- tion, as one bearing such fiduciary relations that his dealings with the subject matter of his trust, or agency, and the party confided to his care, are viewed with jealousy and may be laid aside on slight grounds ; Hallam v. Indianola Hotel Co. et al., 6-580. 49. . A corporation transferred a quantity of goods to two of its directors, who were also creditors, to be sold by them and the proceeds applied in payment of a joint claim, of large amount, which they justly held against the company. The cor- poration was, in fact, insolvent ; but, it was supposed, by the parties, at the time, it was able to pay all its debts and liabilities. The transaction was in good faith and there was no intention to defraud creditors. The supreme court of Connecticut was unable to discover any principle of law which rendered the transaction fraudulent ; Smith, adm'x, et al. «. Skeary, 6-317. 50. . Where a director, who was also president, of a banking corporation, loaned a sum of its funds to others upon their interest bearing note, and, in consideration of the loan, re- ceived to himself an agreement that he should share in the profits of the adventure to carry out which the money was loaned, it was held, that equity will not permit such officer to thus profit to the exclusion of the shareholders and a recovery was approved ; Far- mers & Merchants Bk. etc. v. Downey, 6-251. 51. Elections before oeganization illegal. Under an agreement of stockholders of a state bank, authorizing the con- version of such bank into a national bank, the stockholders pro- ceeded to appoint directors of the, to be, national bank. This was not a legal election of directors ; such election could not be had until organization ; Lockwood v. Mechanics Nat. Bk., 4-140. 52. Qualification ; not stookholdees. Where the statute of a state providing for the organization of a corporation does not AMERICAN CORPORATION CASES. 205 require its directors to be stockholders of the association, the dis- cretion of the stockholders in electing directors is not limited to persons holding stock; State, ex rel. Att'y Gen'l, v. M'Daniel et al., 4-20. 53. Ketieing. Where a director of a corporation sold out his stock and ceased, thereafter, to take any part in the management of its afEairs, or in the meetings of its directors, he was not bound to see that a successor was elected in his place, or to tender a formal resignation, and he was not responsible for the acts of those in its management at the time of its dissolution, some five years after he had thus severed his connection, although no suc- cessors to the directors then in office were ever elected ; Sturges, adm. etc., v. Vanderbilt, impleaded, 8-523. 54. Holding ovee. The acts of a board of directors, of a cor- poration, elected, under charter authority, to act until the end of a day certain, when its successors would assume the powers of the office, after the expiration of the term for which they are ap- pointed are valid, as to persons not being the state or stockholdei-s of the company ; Thorington v. Gould, 6-147. 55. Meetings ; notice of. Every member of a board of direct- ors had notice of a special meeting and was in attendance. Held, that as to whether the notice was given verbally or in writing was immaterial; Samuel -y. HoUaday, 1-139. 56. Meeting or, powee to act. In case of a definite body, like a board of bank directors, a majority must be present, at a regular meeting or at a special meeting, notified according to by-law, if there be any, or otherwise reasonably notified to all the members (except, perhaps, cases of absence at a distance), without fraud or attempt at surprise, and, at such meeting, a majority of thosa present can act for the whole, and the meeting will be presumed to be regular unless the contrary appears ; Lockwood v. Mechanics Nat. Bank, 4-140. 57. PowEE OF A MAJOEiTT OF A QTTOEUM. At a meeting of directors, at which the execution of a mortgage of defendants' realty and fixed machinery was authorized, three directors were f resent, two of whom concurred in the adoption of the resolution, ive members constituted the board of directors, of which number three were a quorum. Held, that the mortgage was authorized, a quorum being competent to act and two being a majority of the quorum, wherefore, the mortgage was valid ; Wells et al. v. Eah- way White'Rubber Co., 13-592. 58. Irregulaeitt of. Mere irregularity in the vote of direct- ors, as that one voted by proxy, does not warrant the interference of a chancellor to prevent the consummation of a resolution ; Dud- ley V. Kentucky High Sch., S-382. 59. Relation to stockholdees. The officers and directors, of a corporate body, are the trustees of the stockholders and can not, without being guilty of fraud, secure to themselves advantages not 206 DIGEST OF THE common to the latter ; Farmers & Merchants Bk. etc. v. Downey, 6-251. 60. Their eelatiok to stockholdehs. Directors of a stock corporation can only be regarded as mandatories, persons who have gratuitously undertaken to perform certain duties and who are, therefore, bound to apply ordinary skill and diligence in the ad- ministration of the affairs of the association : Spering's Appeal, 4-129. 61. Relation to stockholders. Directors, in joint stock cor- porations, are not, in the strict and technical sense of the term, trustees for the stockholders. They are, however, in one sense, trustees and they occupy a fiduciary relation to the corporation and its stockholders. The confidence reposed in them and the position they occupy, toward the corporation and its stockholders, require a strict and faithful discharge of duty and they are not allowed to derive, from their position, either directly or indirectly, any profit of advantage whatever, except it be with the full knowl- edge and concurrence of the company, represented by others than themselves ; Booth et al. v. Robinson et al., 7-419. 62. . The relation of directors to stockholders in the same corporation is that they shall discharge their duties faith- fully to the extent of their ability, as mandatories. They do not insure the fidelity and honesty of those employed by them ; and, as gratuitous bailees they are not responsible for loss unless occasioned by fraud or gross negligence on their part ; Dunn's adm'r v. Kyle's exec'r, 7-174; Moran's adm'r v. Kyle's exec'r, 7-174; Dunn's adm'r «. Davis, 7-174. 63. . The directors of a corporation are the agents of the corporation and the trustees of the stockholders in the business of the corporation and may not exceed their agency or violate their trust. As between themselves and the company, their power is conferred by the corporators and must not be exceeded. As between the corporation and the stockholders, the latter are not bound by the act of the board of directors outside the ordi- nary business and general purpose of the company ; Board of Comm'rs et al. «. Lafayette etc. R.R. Co. et al., 7-26. 64. . The directors of a corporation are its primary agents, and, in reference to corporate property, act in the relation of trustees. The character of their relation requires of them the highest and most scrupulous good faith in their transactions for the corporation and the stockholders. The law does not permit them to manage the affairs of the corporation for their personal and private advantage, nor pecuniarily to be interested in con- tracts with other parties made with the corporation, through their influence and direction ; Ryan et al. v. Leavenworth etc. By. Co. et al., 7-144. 65. Control of stock. The directors of a corporation have no control or authority over the property of a stockholder in his AMERICAN CORPORATION CASES. 207 shares, or any duty in regard to sale or transfer of it, except to see that proper regulations and facilities for transfer are provided ; Board of Comm'rs v. Reynolds, 5-340. 66. Theib liability. Directors are personally responsible to the stockholders for any losses resulting from fraud, embezzlement or willful misconduct or breach of trust for their own benefit and not for the benefit of the stockholders, and for gross inattention and negligence by which such fraud or misconduct has been per- petrated by agents, oflScers or co-directors; Spering's Appeal, 4-129. 67. Misconduct in office. An individual stockholder, in a corporation, may maintain an equitable action against the direct- ors of such corporation, for misconduct in office, when the corpo- ration itself is unable, or, through fraud or collusion, omits to sue. When the directors are charged with fraud, it is not neces- sary for the stockholder to apply to them for the use of the cor- porate name in bringing suit ; Mussina v. Goldthwaite, trustee etc., 4-195. 68. MistrsE OF funds. It is not competent for the directors of a corporation to use funds in payment of a note executed by themselves to the president of the corporation, as payee, for its benefit ; Gallery v. Nat. Exchange Bk. of Albion, 6-632. 69. Remedy. Where a stock corporation has incurred indebt- edness in excess of its capital stock, to various persons, and by statute the directors and officers of the corporation assenting thereto are made liable for such excess to the creditors of such corporation, their liability can not be enforced by action of law, at the suit of an individual creditor. The remedy is in equity, where the rights and liabilities of all in interest may be deter- mined and properly adjusted ; Low, use etc., v. Buchanan, 6-454. 70. . If, in such case, an action at law can be maintained by a single creditor, on the ground there are no other creditors, he must set forth the special circumstances warranting his action, by proper averments in his declaration. Id. 71. Liability foe acts ultra vires. When directors of a cor- poration are sought to be held responsible to stockholders for acts ultra vires, and in violation of the company's charter, the ques- tion will be, were such acts the result of mistake as to their pow- ers, and if so, did they fall into the mistake from want of proper care, that is, such care as a man of ordinary prudence practices in his own affairs. 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 they might well make, notwithstanding the exercise of proper care, and if they acted in good faith and for the benefit of their company, they ought not to be liable y Sper- ing's Appeal, 4-129. 72. Exemption, FROM LiABiLirr. Directors are not liable for mistakes of judgment, even though they may be so gross as to 208 DIGEST OF THE appear to others absurd and ridiciilous, provided they are honest, and provided they are fairly within the scope of the powers and discretion confided to the mana^ng body. Id. 73. Acts of co-dibectoes. The mere fact of being a director and stockholder is not per se sufiicient to hold a party liable for the frauds and misrepresentations of the active managers of a cor- poration. Some knowledge of and participation in the act claimed to be fraudulent must be brought home to the person charged. It is only when a director lends his name and influence to promote a fraud upon the community, or is guilty of some violation of law, or other mismanagement, that he is personally liable ; Arthur «. Griswold, executor etc., at al., 4-609. 74. . The facts that the name of a person was published as a trustee, and a certificate of stock issued to him, are not suffi- cient to authorize a verdict based upon false representations. Id. 75. Functions of. Generally a director is authorized to act as a member of the board of directors, in all matters touching the business concerns of the corporation and the management of its affairs ; when not acting as a member of the board, he has no authority to represent the corporation, or to bind it by his acts, unless authorized by some proper action of the board ; Chicago & N. "W". Ey. Co. ■». James et al., 4-218. 76. Delegation of powbe to, exclusive. Where the corpo- rate powers are vested in a board of directors, the proceedings of a stockholders' meeting can not be shown to establish a disavowal, by the corporation, of the acts of one who, without authority, has assumed to contract for it. The delegation of power to the trus- tees or directors is exclusive ; Union Gold Mining Co. v. Eocky Mountain Nat. Bk., 5-176. 77. General powers. The general power, in a charter, dele- gating, to the directors, the performance of 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 ; Ey. Co. v. AUerton, 5-39. 78. DisoEETioNAEY POWERS. The directors (or other board of management) having general avithority to manage its concerns, are vested, by law, with the only discretionary power that can exist, in any one, to carry on the corporate business ; People, ex rel., v. Judge of St. Clair Circuit, 5-478. 79. Powers. Directors of a corporation have no right to do an act which is foreign to the purposes of its creation ; Ashurst's Appeal, 4-71. 80. . The general rule is, that directors of a corporation may do any act, within the powers of the company, unless re- strained by the by-laws or by the special votes of the stockholders, at their meetings; Wood Hydraulic Hose Mining Co. v. King, 81. Powers of; division of property. Directors of acorpo- AMERICAN CORPORATION CASES. 209 ration, in reference to the corporate property, act m the relation of trustees, the stockholders being the cestuis que trust. The directors can make no disposition of the corporate property which shall not inure to the equal benefit of all the stockholders. If they attempt to divide, they must so divide that each shall receive his proportionate share. They can not agree for and bind the stockholders to any other division : Hale v. Republican Bridire Co., 4-396. ^ ^ 82. FowEK TO LEASE. A board of directors, of a railroad com- pany, has no authority to execute and deliver a lease for years of the road and property of the corporation they manage, giving to the lessees power to operate the road and to demand and receive tolls for transportation over it ; Stevenson et al. v. Davison, 4-203. 83. Lease of FEAjsroHisE. A by-law of a railroad corporation provided that no contract shall be made " involving the franchise of said road, except the same be approved by a general meeting, representing a majority of the stock, after being recommended by a majority of the stockholders." The directors executed a lease to two individuals of the road of the company, together with all its property and rights of every kind, both real and personal, with some exceptions named, for the term of ten years, upon certain considerations. Held, that, while such a lease does not involve the essential franchise of the company to be a corporation, it does involve the franchise to take tolls upon the road of the company, which comes within the meaning of " the franchises of said road ' as exp'ressed in said by-law ; wherefore, the directors were with- out power to execute it. Id. 84. PowEE ; FOEM OF ooNTBACTiNG. The Stockholders of a cor- poration, by a two-thirds vote, resolved to lease the property of the corporation. The board of directors adopted resolutions set- tling the specifications, and providing that public notice should be given inviting sealed proposals for leasing the property, according to the specifications, and reserving to themselves the right to re- ject any and all bids. The proposals received were opened, ex-- amined and rejected. At the meeting at which this was done, another bid was made, received and accepted against the objec- tions of some stockholders and directors. It was held, that the course to be pursued was in the discretion of the directors, and that the adoption of the one mode did not preclude them from afterward pursuing another ; Ricau v. Baquie et al., 1-675. 85. Judicial control of discretion. Courts will not interfere to control the exercise of the discretion vested in the board of di- rectors of a corporation. Jd. 86. Presumption as to. A director' is conclusively presumed to know the pecuniary condition of his company ; Jones, M'Dow- ell & Co. et al. v. Arkansas Meoh. & Agric. Co., 6-213. 87. Presumptive knowledge of. The doctrine that the di- 27 210 DIGEST OF THE rectors of a corporation — in this case a bank — are conclusively presumed to know the financial condition of the corporation, its general business and its receipts and expenditures, as shown by its regular books, is for the protection of third parties dealing with the bank, and of the banli against the prejudicial action of any di- rector, and can not be invoked to uphold a wrongful appropria- tion of moneys by the cashier or other officer, which appropriation is made and also entered tipon the corporate books without the actual knowledge of the directors ; First Nat. Bk. ■». Drake, 9-340. 88. Compensation. If directors are employed in the business of the company and agree to pay themselves a stipulated eum, the agreement is void and no recovery can be based upon such con- tract ; but, for such services as tbey render, they can recover upon the quantum meruit; Gardner et al. v. Butler et al., 8-413. 89. . The president and directors of a corporation, occu- pying the position of trustees of the fund and property of the company, are not entitled to any compensation for ordinary services, as such officers, unless such compensation be fixed by by-law or resolution of the board of directors, passed before the services are performed ; Gridley v. Lafayette, Bloomington & Mississippi Ey. Co., 5-260. 90. Compensation of. Where a director of a corporation is appointed to act as its treasurer, no provision being then or pre- viously made, by by-law or resolution, for his compensation, it will be presumed the fulfillment of the duty was regarded as a part of his duty as director, and he will have no right to claim pay for the same, A subsequent allowance of such a claim, in his favor, will not warrant a recovery ; Holder v. Lafayette, Bloom- ington & Mississippi Ey. Co., S-258. 91. ExTKAOEDiNAEY sEEvicES. A president or director of a cor- poration, performing extraordinary duties, not pertaining to his office, may recover compensation for such ; Gridley v. Lafayette etc. Ey. Co., 5-260. 92. . Where one not connected with the management and disposal of the corporate property, performs services for the corporation, or where directors are employed, as agents, to perform duties disconnected from their office, and no rule of public policy is, thereby, violated, compensation for such services may be allowed and recovered ; Holder v. Lafayette etc. E.E. Co., 5- 258. 93. . To audit an account for ordinary services of the president and to draw an order to pay the same, no compensation having been provided before the services were rendered, is illegal, and no recovery can be had upon the same; Gridley t). La- Fayette, B. & M. Ey. Co., 5-260. 94. Bank ; statute of maine. Under the statute of the state of Maine the directors of a bank are personally responsible for losses or deficiency of capital stock of the corporation, occurring AMERICAN CORPORATION CASES. 211 because of their mismanagement. They are liable for mismanage- ment during the time for which they were chosen and acted. They are not answerable for' renewals of worthless paper, dis- counted by a board of which they were not members. Bank of Mutual Redemption v. Hill, 1-588. 95. Individual liabiliit ; wmDme up affairs. That a manu- facturing corporation has ceased to do business and is engaged in closing up its affairs, is no excuse for a failure of trustees to com- ply with the requirement as to the filing of an annual report of the capital and indebtedness of the company, and does not, in the absence of a legal dissolution, affect the liability of the trustees, to a creditor, imposed for the failure to file such report ; Sanborn V. Lefferts, 4-647. 96. Personal liabilitt. Under the law of Michigan the lia- bility of directors does not extend to contingent liabilities of the corporation, but only to present debts ; Lockhart v. Van Alstyne, 5-470. 97. Liability fob falsehood. A director of a corporation who knowingly issues, or sanctions the circulation of a prospectus containing false statements as to material facts, the natural tend*- eney of which is to deceive and to induce the public to purchase the corporate stock, is liable for the damages sustained by one who, relying upon and induced by the statements, makes such a purchase, and an action can be maintained where the false state- ments were one of, although not the sole inducement to, the pur- chase ; Morgan v. Skiddy et al., 5-567. 98. . The mere fact that a trustee allows his name and credit to be used to float the stock of a corporation which, after- ward, turns out to be worthless, in the absence of evidence of knowledge on his part, or that he has made or sanctioned any false representation, does not constitute actionable fraud. Id. 99. Personal liability. An incorporation act authorized the organization of corporations, to be managed by not less than three not more than eleven directors. These were to elect a president, secretary and treasurer. After the first year of corporate exis- tence the directors were to be annually elected by the stockholders. The corporation, acting through its president and at least a ma- jority of its directors, was required annually, and within a time fixed, to make and publish a report, showing its financial condi- tion. On failure to make such report, in the event any person or persons should be misled or deceived, and damaged by such failure all the officers who had failed to make such report were declared to be jointly and severally liable for all resulting damages. The right of action accrues against the delinquent ofiicers, from the failure of the corporation to make the report. In a suit to recover, under the statute, it is, therefore, necessary to show by express averments that the ])arties charged constituted-a majority of the directors at the time of default ; Niles et al. v. Dodge, 7-113. 213 DIGEST OF THE 100. Personal liability. To render the directors of a corpora- tion personally liable for injuries alleged to be occasioned by conduct wiUf nlly fraudulent, in intent and purpose, amounting to breaches of trust, the proof in support of the allegations must be other than of mere constructive fraud or breaches of trust ; there must be affirmative proof of the misconduct charged, tending to establish the fraud in fact ; Booth et al. v. Kobinson et al., 7-419. 101. Liability fob abuse of tetjst. An association of fifteen persons, consisting among others of two of the directors of a rail- road corporation, one of whom was its president and the other its treasurer, was formed to obtain a contract for the construction of the railroad of said corporation ; to gain the control of the corpora- tion, by the issuance to the association, as part payment of the work to be done, of a majority of the stock of the coi-poration ; to depreciate and render valueless the shares of certain stock- holders and acquire for the association the property and effects of the corporation. At a meeting of a bare quorum of the direc- tors of the corporation, at which the president and treasurer at- tended, a proposal was received from C, who was a member of the association, on behalf of himself and his associates, whose names were concealed, to construct the road. The directors referred the matter to the president of the corporation. He made the contract therefor with C, as previously arranged by the association ; but, in fact, for the joint interest of all the members of the association, which included the president and treasurer. To further conceal the true character of this arrangement, C. transferred the con- tract to G. & Co., and under the latter name the work was done. This transfer was merely colorable; the work was performed, expenses paid and profits divided by the association. The name of G. & Co. was only another style for the association. With the majority of the stock issued under the contract, seven of the association were chosen directors of the corporation, constituting a majority of that body. Ever since, a majority of the directors has been selected from the association. The president, who exe- cuted the contract, has been continued in office as a director and president. Held, that the said contract, made by the president in the name of the corporation with C, for the benefit of himself and his associates, is fraudulent and void; and that the corpora- tion may call its officers to account for their willful abuse of their trust, or for any misapplication of the funds of the corporation, or for any profits realized under the fraudulent contract ; and, further, all the persons who participated with the directors and ofiicers of the corporation, in their fraudulent and unlawful trans- actions, with full knowledge of all the facts, are equally liable with said officers ; Ryan et al. v. Leavenworth etc. Ey. Co. et al., 7- 144. 102. Action against. The corporation is the proper and pri- mary party to call its directors to an account, in a court of equity, AMERICAN CORPORATION CASES. 313 for fraud or breaches of trust in the management of its affairs. To enaMe a shareholder, either for himself alone or for him- self and others, to maintain a bill against directors, for fraud or breaches of trust in the management of the corporate affairs, he must allege and show not only the violations of duty or breach of trust on the part of the directors charged, but, as well, that he, as a stockholder, has been damnified thereby and that the corporation has failed or refused to take the proper legal steps for the redress of the wrong. If, however, a bill be filed by stockholders and the proof shall sustain allegations made that a maj'ority of the shares are owned by another company and that a majority of the directors are adverse to the interest of the plain- tiffs, and are combined against them, and would frustrate and de- feat any attempt to induce the corporation to take action for the wrongs complained of, such facts would be a sufiicient excuse for not making or alleging a formal demand upon the corporation to take action ; Booth et al. v. Robinson et al., 7^19. 103. When not iNDiviDtrALLT liable. Directors of a corpora- tion are not personally liable for the debts of a corporation, pro- vided they have complied with the requirements of the statutes defining their duties and have managed the company's affairs without fraud. They are not responsible for mere errors of judg- ment, or want of prudence, in conducting or closing up its busi- ness ; Lyman v. Bonney et al., 7-445. 104. Jurisdiction of equity as to.- A director, by reason of the trust relation, is precluded from asserting rights under a lease, procured by him in disregard of his duty as a trustee, hostile to the company of which he is a director. The declaration and en- forcement of such a trust are peculiarly within the province of a court of equity. Wherefore, when the trustee comes into equity, claiming its protection for his alleged legal title, as against the cestui que trust, it is competent for the court to declare that title subject to the trust and to restrain the trustee from asserting any further claim in violation of the trust ; Blake v. Buffalo Creek E.R. Co., impleaded etc., 4-620. 105. Jurisdiction of equity. When the acts of directors are outside of, and beyond the scope of their authority, the stock- holders are not bound by such acts and may, no doubt, within a leasonable time, proceed in equity to have the acts cancelled and their rights protected from injury and loss growing out of the unauthorized acts ; Chetlain, adm'r, v. Republic Life Ins. Co., 6- 397. J 06. Jurisdiction of equity. In equity, directors of a corpo- ration are personally liable for the consequences of frauds or mal- feasance they may be guilty of, or for such gross negligence as amounts to a breach of trust, to the damage of the corporation or its stockholders. They are not liable for the consequences of un- wise or indiscreet management, if their conduct is entirely due to 214 DIGEST OF THE mere defaults or mistakes in judgment ; and the onus of proof of fraud, combination or gross 'negligence, to render directors per- sonally liable, is upon the party making the charge. The charge must be distinctly made and fully supported by proof ; Booth et al. V. Robinson et al., 7-419. 107. Statute of limitation as to acts of. An action against a du-ector of a corporation for gross negligence in regard to the affairs of the company during some period of his official incum- bency as such director, will be barred by lapse of time, under the statute of limitations ; Spering's Appeal, 4-129. DISFRANCHISEMENT OF MEMBER; see Expulsion of Member. DISSOLUTION. 1. Effect at common law. By the principles of the common law an absolute and unqualified dissolution of a corporation, by a decree of forfeiture or legislative repeal, extinguishes its rights of action and property ; Nat. Pahquioque Bank v. Nat. Bank of Bethel, 3-176. 2. . Upon dissolution of a corporation, by the common law, debts due to it or from it become extinguished ; Eamsey v. Peoria M. & F. Ins. Co., 3-271. 3. Power of court to disso;.ve. Where a corporation has ceased to do business, leaving debts unpaid, and is insolvent, and unable to prosecute the work for which it was organized, the court under the twenty-fifth section of the corporation act has power to dissolve it ; St. L. & S. Coal Co. v. Sandoval Coal & Mining Co:, 10-292. 4. Must be authorized by statute. To decree the absolute and final dissolution of a corporation, at the suit of an individual, is no part of the general jurisdiction of a court of law or equity, and can be authorized only by express statute ; Folger v. Colum- bian Ins. Co., 3-387. 5. Not to be presumed. The ownership of property is not essential to the existence of a corporation ; and the courts will not treat it as actually dissolved because its condition would warrant steps to be taken for its dissolution; Sullivan v. Triunfo Gold etc. Mining Co., 3-132. 6. Judicial action necessary. To prevent the harsh opera- tion of the common law rule it is settled that a dissolution by forfeiture can only be affected by judicial proceedings against the corporation, taken for that purpose, an opportunity for a hearing and a judgment of forfeiture rendered thereon ; Nat. Pahquioque Bk. V. Nat. Bk. of Bethel, 3-176. 7. Judicial determination necessary. A national banking association does not lose its corporate existence or become dis- solved by mere default in the redemption of its circulating notes. AMERICAN COUPORATION CASES. 215 nor by the appointment, by the comptroller of the currency, of a receiver of its assets. Before it shall be declared dissolved, the question of violation of its charter must be judicially determined ; Bank of Bethel «. Pahquioque Bk., 4-241. 8. Judicial question. Violations of the act authorizing the incorporation of a national bank must be determined and ad- judged by a proper circuit, district or territori.al court of the United States, in a suit brought by the comptroller of tlie cur- rency in his own name, before the association can be declared dissolved; Union Gold Mining Co. v. Eocky Mountain Nat. Bank, 4-298. 9. Judicial question, kequiring direct action. A corpora- tion enjoined from the exercise of its corporate franchises and deprived of its property, and which has, thus, ceased to exist, for all practical purposes, is not thereby actually dissolved. It can not be dissolved, save by the judgment of a court of competent jurisdiction. Until such judgment is rendered, creditors may pro- ceed, by suit, against it, unless restrained by injunction, and its stockholders do not cease to be such ; Kincaid v. Dwindle, 5-560. 10. Only bt direct proceeding. A corporation can not be dissolved in a collateral proceeding, and, in a suit to recover money loaned, a national bank must stand until it is dissolved by a direct proceeding ; Un. Gold M'g Co. v. Rocky M. JST. Bk., 4-298. 11. Question can not be tried collaterally, A plea in avoidance of a promissory note executed to a corporation, because of its dissolution, brought by payee against maker, must show that the corporation has come to an end by legal process ; Pres . and Trustees v. Hamilton, 3-295. 11^. Collection of, after business discontinued. The adop- tion, by a corporation, of a resolution to discontinue its business does not operate to work a dissolution of the company ; nor does it deprive the corporation of the power to enforce assessments on stock owned, by action ; Chotean Jns. Co. v. Floyd, 8-282. 12. Organization under general law. That a corporation derives its existence and franchise from a general law, and not by special charter, in no way affects the nature and duration of the franchise granted or the mode in which it may be dissolved ; Chainbevlin «. Huguenot Manuf. Co., 7-446. 13. "When no jurisdiction. A court will not take jurisdiction to dissolve a corporation as an easy and convenient mode of dis- Bolntion, when the purposes of its organization could not be suc- cessfully prosecuted, or to impose a penalty of forfeiture of its charter, upon mere vague apprehension of some future mischief ; In re Franklin Telegraph Co., 7-449. 14. Judgment of. Where a corporation is proved to have been guilty of such neglect as is made, by its charter, cause for the for- feiture of its franchises, which forfeiture the state demands, a court has no discretion to refuse judgment of ouster or dissolution 216 DIGEST OF THE OQ the ground that private or public interest will be better sub- served by preserving the existence of the corporation ; State of Ohio V. Pennsylvania & Ohio Canal Co., 4-54. 15. Bt efflux of time. Where pending an action, against a corporation, on a dormant judgment, the charter of the company expires, the court will properly dismiss the action, the charter being a public Jaw, of which courts take cognizance ; Terry v. Merchants & Planters Bank of Savannah, 9-45. 16. . If the act of incorporation fixes a definite time in which the charter shall expire, when that period of time expires the corporation is dissolved. But, when the continuance of the corporation beyond a fixed time is made to depend upon the per- formance of a given condition, then the non performance of the condition is a mere ground of forfeiture. That can be taken ad- vantage of by the state only, in the proceeding in the nature of a quo warranto, and the existence of the corporation can never be collaterally called in question, and this is so where it is expressly provided that, upon failure to comply with the condition, the corporation shall be dissolved ; LaGxange & Memphis R.E. Co. V. Rainey et al, 4-175. 17. Bt lapse of time ; action theeeaftee. From the date of its incorporation to the date of action commenced, which lat- ter date was about ten years after, by lapse of time the corpora- tion became defunct, the company owned various town lots. Members of the company received lots from it and received the proceeds of lots sold by them, which, in fact, belonged to the company. After the date (1865) when the company ceased to exist as a corporation, an action could not be maintained in the name of the corporation against a member of the corporation who had received property from the company, or had received more than his pro rata share of its property, or owed it money. In such case the only remedy would be an action by one or more of its members, against the others, for an accounting, and to set- tle and close up all the affairs of the company ; Krutz v. Paola Town Co., 7-124. 18. ExpiEATioN OF ohaetee TEEM. Upon the expiration of the term of the existence of a corporation, as limited by its charter, it becomes extinct; no formal decree of dissolution is necessary, and a judgment thereafter against it, in an action then pending, is void, unless the action be continued by order of the court, as pro- vided for by statute (Laws of N. Y., 1832, ch. 295), to prevent the abatement of actions by or against corporations; Sturges, adm'r etc., v. Vanderbilt, impleaded etc., 8-523. 19. ; teusteeship. The provisions of a statute, of New Jersey (Laws of New Jersey, April 15, 1846, § 29), constituting the directors and managers of a corporation trustees thereof upon its dissolution, does not continue its existence as cestui que trust and render it capable of defending in its corporate name, where AMERICAN CORPORATION CASES. 217 the corporation has expired bj the termination of the period for which it was created. Id. 20. Eeinstating dismissed cause, a corporation being dis- solved by efflux of time, limited in its charter, an action at law against it being dismissed as brought against one dead, in the ab- sence of others made parties defendant, a motion to reinstate the original cause and appoint a receiver is properly overruled ; Terry e. Merchants & Planters Bank, 9-45. _ 21. Weit of error after. If a corporation is absolutely ex- tinct, so as to be presumed civilly dead, no writ of error can be prosecuted in its name to correct an error in the circuit court ; but, it should be prosecuted in the name of the receiver, where one has been appointed, as its legal representative, and the law in this respect can not be changed or suspended by a decree of any court, foreign or domestic ; Life Association of America v. Fas- sett, 9-119. 22. Pleading. Every pleading which sets up matter in abate- ment which does not appear of record to be efifective must be verified by afiidavit ; otherwise it sliould lie stricken from the files, on motion. So, a suggestion of the dissolution of a defendant corporation by its receiver and successor, the receiver not seeking to be made a party and his paper not verified, can not be acted on by the court and the plaintiff is not bound to answer it, as a plea in abatement. Id. 23. Defective ALLEGATION AS TO. The statement, in a petition, that a corporation — in this case a bank — has long since ceased to transact business, is insolvent and has no property or assets of any description out of which the money alleged to be due can be collected by execution or other process of law, is not equivalent to an allegation that the corporation is dissolved ; Valley Bank & Savings Inst, et al. v. Ladies Congregational Sewing Soc, 9-331. 24. Untenable claim of. A corporation was, by its charter, to continue in existence for a period of five years. Five years elapsed, and then S. commenced an action against the corporation and others to recover the land which he had formerly conveyed to the corporation, claiming that the corporation had been dis- solved by lapse of time and that the land reverted to him. Held, such claim is not tenable (Oomp. L. 1879, 223) ; Sword v. Wicker- eham, 9-356. 25. Estoppel. Although a member of a corporation after it had 'ceased to exist, by lapse of time, might have sold property belonging to it and might have received the proceeds thereof, and, in doing so, might have dealt with the company as a corpo- ration, he would not be estopped from setting up the defense that the company had, prior to that time, ceased to exist as a corpora- tion, and that, therefore, it no longer had any capacity to sue its members as such. There is no rule of equity, or public policy, authorizing an estoppel to be interposed in such a ease ; but, on 28 218 DIGEST OF THE the contrary, it would be against equity, and would, also, be against public policy ; Krutz v. Paola Town Co., 7-124. 26. Entering judgment after. When a corporation has been legally dissolved, by expiration of the time limited for its con- tinuance by the terms of its charter, or articles of incorporation, during the pendency of an action in the name of the corporation, it is not error of the trial court in its discretion and in further- ance of justice, to refuse to enter judgment on a verdict in favor of the extinct corporation, and to set aside the verdict and grant a new trial, upon the payment of all costs by the defendants, al- though the question of the existence of the corporation is not raised in the pleadings and the expiration of the charter is proved by documentary testimony ofEered in behalf of the corporation ; Eagle Chair Co. v. Kelsey & Simpson, 7-161. 27. By surrender. The general rule is that the acceptance by the government of the surrender of corporate existence is essen- tial to effect a dissolution of the corporation. Exception is some- times made where, by the charter of incorporation, the stock- holders are made individually liable for the debts of the corpora- tion ; LaGrange etc. K.E. Co. v. Rainey, 4-175. 28. Failure to hold meetings. The neglect of a corporation to hold meetings for a period of ten years will not operate to dis- solve the corporation ; State v. Barron et al., 8-391. 29. In-action. a corporation is not dissolved by merelyceas- ing to exercise its powers ; Proprietors of Baptist Meeting House V. "Webb et al., 7-282. 30. By abandonment. A turnpike company was incorporated in February, and organized, under its charter, in March, and opened stock subscription books in April, of the same year, and the next year commenced the work of constructing its road, and by the end of the tiftli year completed about one-third of it, and made no progress in the manual labor of constructing the road for the next four years, but completed the entire road in the succeed- ing four years, being in all about thirteen years from the date of the company's charter. This can not properly be regarded as an abandonment of the enterprise, when the board of directors of the company did not intend to abandon it, but continued to hold meetings regularly, and to make efforts to obtain subscriptions to the stock of the company, and progressed with their works as fast as their means would permit. Payment of stock subscribe for when the books were first opened, can not be resisted oti the ground that the road was not built within a reasonable tin;^; Gibson v. Columbia & New Eichmond Turnpike and Bridge Co., 3-665. 31. NoN USEE. Where a corporation is organized for the pur- poses of the promotion of education, the conducting of experi- ments in agriculture, the testing of soils and the cultivation of trees ; and, to carry out these purposes, the corporation is, by its AMERICAN CORPORATION CASES. 219 charter, authorized to locate a college, at a certain place, to pur- chase real and personal property, but not to hold, at any one time, more than 5,000 acres of real property ; and, the corporation is, afterward, duly organized and for a time carries out the purposes for which it was created, but, afterward, transfers all its property, both real and personal, and ceases to maintain a college, or to per- form any of the other duties or things required or authorized by its charter, and remains in such a condition for nearly nineteen years ; and, at the end of such time, the attorney general com- mences a civil action in the nature of a quo warranto, in the name of the state, for the purpose of obtaining a judicial deter- mination dissolving the corporation, the action can be maintained ; State of Kansas, ex rel., w.TPipher et al., 9-329. 32. NoN USEE. It is no defense to such action that a suit is pend- ing at the time, brought by the corporation against a grantee of its realty, to recover some of such real estate which the corpora- tion had conveyed to such grantee nearly nineteen years prior to that time. Id. 33. By act of the corporation. Where a by-law was enacted, that the corporation should be dissolved on a day named, the cor- poration, by force of such by-law, became dissolved; Merchants & Planters Line v. "W aga ner, 10-12. 34. By trustees. Where there are no stockholders in a cor- poration, the ti'ustees may take the necessary steps to dissolve it, and convey the corporate property, first paying the c;)rporate debts, when in their opinion such dissolution and conveyance will the better secure the corporate purpose ; People v. Pres. and Trustees, 1-161. 35. Appointment of liquidators. Where there is no insol- vency of the corporation, and no complaint on the part of the stockholders, the right of the st^ockholders to choose their own liquidators upon the winding up of the corporate affairs will not be denied, notwithstanding there may have been such acts on the part of the corporation as might warrant the interference of the state to forfeit its charter and appoint a liquidator under the statute ; State v. Herdic Coach Co., 10-478. 36. By death of members. By the death of all its members a corporation aggregate is dissolved. So when, by death or dis- franchisement, so few remain that, pursuant to its fundamental law, they can not continue the succession, the corporation is, for all purposes of action, dissolved. The corporation remains, how- ever, so long as there are corporators in number snfiicient to con- tinue the succession ; Blackwell «. State of Kansas, 6-210. 37. By death, how shown. When a corporation has been dis- solved by the death of its members this fact may be shown collat- erally. Id. 38. Winding up. A loan of money was made to an educa- tional corporation, the lenders agreeing to look to the rents of the 220 DIGEST OF THE property, the income of the school and the aid of the state for re-payment. By means of these resonrces, about one-half the in- debtedness was cancelled. The buildings were then destroyed by fire, no effort was made to restore them and there was no user of the corporate franchises. It was held, that in this condition of things, the directors having broken their implied contract to keep up the income to which the lenders had agreed to look, they conld not resist the sale of the company's property under the prayer of the bill to wind up, etc., this being the only means of repaying the' borrowed money; Moss v. Harpeth Academy, 4-188. 39. Power of corntTS. An act of Connecticut provides that the superior court, as a court of equity, may, on the application of any stockholder in any corporation, organized under the laws of that state, wind up the affairs of the corporation and dissolve the same, whenever it shall appear, to the court, that the corporation has voted to wind up its affairs, or has abandoned the business for which it was organized, and has neglected, for an unreasonable time, to wind up its affairs and distribute its effects among its stockholders. In a case where a railroad company had so aban- doned its business and neglected to wind up its affairs ; held, that it was not a sufficient reason for a refusal to dissolve a corporation that ((7-) the company had received franchises from other states as well as this ; the dissolution affecting only the franchise conferred by this state. (5) That the company had been carried into bank- rijptcy and- that its assets were in the hands of assignees in bank- ruptcy, (c) That the abandonment of business had not been of the free choice of the company ; but, compelled by legal proceedings, and other causes, it could not successfully resist ; Hart v. Boston, Hartford & Erie R.R. Co., 5-185. 40. PowEE AS TO SUITS AFTER. Where a corporation surrenders its charter, or where it ceases to exist by the efflux of time, or where its charter is declared forfeited by a judicial tribunal of competent jurisdiction, it can neither sue nor be sued, although the obligation of its contracts survive and may be enforced against any property that belonged to the corporation which has not passed - into the hands of bona iide purchasers ; City Ins. Co. of Provi- dence V. Commercial Bk. of Bristol, 5-219. 41. Defective. In a suit, based on the statute of New York, by a stockholder of a corporation chartered under the laws of that state, against the corporation, for a violation of its charter in de- claring and paying a dividend out of its capital stock, a decree of the supreme court of that state declaring the corporation dissolved is in excess of the jurisdiction of the court, and therefore entitled to no faith and credit in another state as a judicial proceeding ; Polger v. Columbian Ins. Co., 3-387. 42. Effect of general assignment. The act of a corporation in assigning its property to a trustee, for the payment of the debts AMERICAN CORPORATION CASES. 231 of the corporation and to distribute the surplus, if any, does not work a dissolution of the corporation ; De Camp et al. v. Alward, 7-76. 43. Reoeiveeship. A corporation having been dissolved by judicial decree and its effects having been delivered over to the cliarge of a receiver, authorized to collect moneys due to it, such receiver is entitled to maintain a suit against a stockholder of the defunct corporation for a balance due on his subscription to its capital stock ; Stillman v. Dougherty, rec'r, 7-361. 44. Peesonal liability. It seems that if the appointment of a receiver ipso facto dissolved a corporation (which it does not), and it was thereafter incapable of being sued, the condition pre- cedent of suit against stockholders having, thereby, become im- possible of performance, it would not longer be in force, and the creditor's right of action would be perfect, without an attempt, first, to recover of the corporation; Kancaid v. Dwinelle, 5-560. 45. NATioNALBAiirKs; APPOINTMENT OF EBOEivEE. The appoint- ment by the controller of the currency of the United States of a receiver, the taking into his possession (by such receiver) of the assets of a national bank and the institution of proceedings to wind up its affairs did not operate to forfeit the franchises of the bank or dissolve the corporation in such sense that a creditor could not maintain an action against it, even upon a claim disallowed by the receiver ; Nat. P. Bk. v. Nat. Bk., 3-1 Y6. 46. Judicial AscEETAiNMBNT. An act which provides that "when . . . the corporation is restrained from further prosecution of its business, or is dissolved . . . the court upon the ap- plication of the auditor, etc, may, at any time before the expira- tion of said two years, appoint . . . receivers," etc., re- quires that final decree of dissolution be passed before the ap- pointment of receiver to dispossess the corporation of its estate, etc. ; Ward, rec'r, v. Farwell et al., ©-490. 47. Paeties to peocebdings. Where a right is sought to be enforced against a corporation, and the relief asked will only affect the stockholders as such, and no discovery or relief is sought against them as individuals, such stockholders are not necessary parties to a bill in chancery, for dissolution. Jd. 48. Teial by juey. An act, providing in certain contingen- cies, for the dissolution of corporations and the appointment of re- ceivers, is of an equitable nature and not void, in that it does not provide for trial by jury. Even if the party have constitutional right to that mode of trial, it does not, necessarily, follow an act not expressly providing for such right would be invalid. If the right exists, the constitution has already provided for it, and it is to be presumed that a court would order such trial of contested issues, unless upon waiver of the right. Id. 49. Constitutional pbooeedings foe. A statute which author- izes the auditor of state to proceed to the dissolution of a corpo- 322 DIGEST OF THE ration when he shall be of opinion the company is insolvent, or its condition such as to render its further continuance in business hazardous to dealers with it — in this case parties insured — or to the public, or where the company has failed to comply with the rules, restrictions or conditions required by law, is not unconstitu- tional as impairing the obligation of contracts. This is the more so when the corporation shall have formally adopted the act as an amendment of its charter; Chicago Life Ins. Co. v. Aud. of Pub- lic Accounts, 9-79. 50. Constitutional peoobedinqs foe. Nor is such an act re- pugnant to a constitutional provision prohibiting the passage of special laws regulating the practice in courts of justice. It is not special legislation if it applies to all corporations of a specific class — as to all insurance companies — in like predicament. Id. 61. Bankeuptct. The bankruptcy of a corporation does not put an end to the corporate existence, nor vacate the office of the directors. A corporation created by a state can not be dissolved by an act of congress or by administration thereof through the federal courts ; Holland v. Heyman, 7-10. 52. . Bankruptcy of a corporation and proof of a plaintiff's claim against the estate in bankruptcy do not dissolve a corpora- tion or prevent a recovery of judgment against it for the purpose of charging its officers and stockholders therewith ; Chamberhn «. Huguenot Manuf. Co., 7-446. 63. . A corporation which is insolvent and has been adjudicated a bankrupt, under the federal bankrupt act, is dissolved. A dissolution, so effected, is sufficient to authorize creditors to bring suits against its stockholders, under the statute of Missouri, without joining 'the company in the suit ; State Sav- ings Ass'n V. Kellogg et al., 8-95. 64. . A statute which provides that stockholders, shall not be personally liable for any debt contracted by the corporation unless suit shall be brought against the corporation within one year after the debt becomes due, does not apply when the corpo- ration has been dissolved by bankruptcy. Such suit against tlie corporation would be a useless form, and the law will not enforce an act which would be frivolous. Id. 65. Effect. Upon dissolution, the existence of a corporation, as a legal entity, is ended, and judgment could no more be ren- dered against it, in a suit previously commenced, than judgment could be rendered against a dead man dying pendente lite. All pending suits are abated unless there is a prolongation of corporate life, for this specific purpose, granted by enactment of the sover- eignty as in the case of the original creation ; Nat. Bank v. Colbv, S-82. 56. . Upon the dissolution of a corporation for literary purposes, in which there are no stockholders, and which owes no debts, all its property acquired by purchase for value vests by AMERICAN CORPORATION CASES. 5J33 operation of law in the state. That acquired bj donation reverts to the donors; People v. Pres. and Trustees, 1-161. 57. College of Califoenia. The president and trustees of the college of California had power to convey its property to the state, to be applied in establishing and supporting a state uni- versity. Id. 58. Effect oh debts. Debts due to a moneyed corporation do not become extinct upon its dissolution ; M'Coy et al. v. Farmer et al., 8-169 ; Kansas City Hotel Co. v. Sauer (note), 8-169. 59. Stockholdebs' liabilu't on. A statutory provision that the stockholders of a corporation are liable for all debts due, at the time of its dissolution, to the extent of their stock, creates a primary and absolute liability on tiie part of the stockholder on the dissolution of the company ; and a bill in equity will lie to enforce such liability without averring the insolvency of the com- pany and without previous suit against it; Spence v. Shapard et al., 6-118. 60. Action at law not lie against stockholdees on. The supreme court of Alabama declines to follow the New York rul- ing, that, under such statute, an action at law may be maintained by creditors against individual stockholders. Id. 61. Stockholdbb's liability. The liability of a stockholder, under a statute which provides that if any company * * * dissolve, leaving debts unpaid, suits may be brought against any person, or persons, who were stockholders at the, time of such dis- solution, without joining the company in such suit, is secondary and contingent and the statute only relieves the creditor from pursuing the company in case of its dissolution ; Perry et al. v. Turner et al., 8-111. 62. . The charter of a manufacturing corporation expired by statutory limitation. He who was its general agent, appointed during the existence of the corporation, continued to carry on the business and to contract debts. For one debt he executed and delivered a promissory note in the name of the corporation. In an action against the stockholders, seeking to charge them as makers of the note^ on the ground that there was an implied con- tract of co-partnership between them, it appeared that defendants, six months after the expiration of the charter, received dividends as from the earnings of the corporation, but, without notice that it was not so paid and without actual knowledge of the expira- tion of the charter ; also that credit was not given to them as partners or individuals, but to the supposed corporation. _ The court held that, npOu the expiration of the charter, the title to the corporate property vested in the trustees then in office, in trust for the creditors and stockholders; that the defendants, being merely cestuis que trnst, could not, without other evidence of proof of" their interest, be charged as co-partners ; and that if they had rebel ved any part of the earnings of the business car- 224 • DIGEST OF THE ried ou after the corporation ceased to exist, this did not make them liable in an action at law upon the contracts made by the agent, nor did it amount to a ratification of his acts ; Central City Savings Bk. v. Walker et al., '8-464. 63. Rights of ckeditoes. It is a well settled rule that a disso- lution of a corporation in any other mode than by legislative repeal or by judicial decree does not aft'ect the right of creditors; as to their rights and the remedies for their enforcement the cor- poration will be deemed to continue in existence ; Nat. Pahquio- que Bk. ». First ISTat. Bk., 3-176. 64. Claims ; enfoeckd. In respect to a dissolved corporation, it is not necessary that a claimant shall have procured a judgment and return nulla bona, before he can proceed in equity against property belonging to the corporation that has not passed in to the hands of innocent purchasers. Such property remains a trust fund, subject to the cognizance and control of a court of equity, for the benefit of creditors ; Howe v. Eobinson, 10-142. 65. . Scire facias can not be maintained and a judgment and execution had thereon against a dead corporation. Id. 66. Closing up. When the act under which an incorporation was had, provided that when the corporation was dissolved, the court decreeing such dissolution might appoint a receiver, with power to prosecute and defend suits, in the name of the corpora- tion, held; in a suit in another state, by a receiver so appointed, in the name of the corporation, the decree of dissolution of the corporation was no bar; Lycoming Fire lUs. Co. v. Langley, 10-542. 67. Priority of creditors. The creditors of a corporation have a lien or priority of payment in preference to the stock- holders. The latter are the owners of the franchise, property and assets of the company which remain after its debts and liabil- ities are discharged. St. L. & S. Coal Co. «. Sandoval C. & M. Co., 10-292. 68. Purchase by new company — puechaser subrogated. Where a new company purchased the assets of an insolvent cor- poration and advanced an amount of money sufficient to pay all the creditors of the old company in full, and they were so paid, the new company is entitled to be subrogated to the rights oi the creditors,. notwithstanding that the deed from the receiver under which it is held was declared void. The old company holds the legal title to the property as trustee for the benefit of the new company, cestui que trust, to the extent to which the ptirchase money of the latter discharged the debts. Id. 69. Repeal of act. In this case it is held, that the corpora- tion was not dissolved by the repeal of the act under which it was organized ; the repealing act containing a saving clause as to all corporations already organized ; Barron Creek Co. v. Beck, 10-333. AMERICAN CORPORATION CASES. 225 70. Hepbal of act. A proceeding by a corporation to enforce a judgment for collection of benefits is not affected by the act repealing the statute under which the corporation was organized. Id. 71. Creditor's bill. An action, in the nature of a creditor's bill, can not be maintained by a creditor of an extinct corporation, to reach funds of the corporation paid out to stockholders before dissolution, without a valid judgment and execution against the corporation or its successors, or without first exhausting the cred- itor's remedies against the property remaining in the hands of the corporation, or received by its trustees, on its dissolution ; Stur- ges, adm'r etc., v. Vanderbilt, impleaded etc., 8-523. 72. Reversion of franchise, etc. Upon a dissolution of the coi-poratiou the franchises can not be transferred, but they revert to the sovereignty from which they were derived and the share- holders become partners, or joint owners, in the assets ; Black et al. «. Delaware & Raritan Canal Co. et al., 5-547. 73. On allegation of personal liability. A technical dis- solution of a corporation is not essential to relieve a trustee from the consequences of not filing an annual statement after the organization had been practically abandoned ; Losee et al., execu- tors, V. Bullard, impl., 8-630. 74. Instance. A judgment was obtained against a manufac- turing corporation in 1867 ; no annual statement was thereafter filed. The company was organized in 1873 with three trustees. No ofiicers were thereafter efected. It ceased to do business dur- ing 1865. In 1870 two of the trustees sold out their stock to their co-trustee and never afterward acted, and the third trustee thus became the sole stockholder. The sole act done by him thereafter was to pay a debt of the corporation incurred some time in 1865. Action was brought in June, 1875. The corpo- ration was practically abandoned and statutory provisions as to filing reports did not apply to it. Even though successive defaults could continue or renew the liability, default must be, as they were not shown to have been, committed within three years before action commenced. 'Id. 75. Continuing action. The mode of continuing an action against a foreign corporation after its dissolution is a matter of practice, governed by the laws of the state in which the action is pending ; Sturges, etc., stockholder is entitled to any of the property of the company until the debts are paid, and he is estopped from denying his liability to the amount of the interest he has received from the company, until such indebtedness is paid. Id. 27. Infringement of patent. The liability for damages aris- ing from the infringement by a corporation of a patent, is not, before judgment is obtained against the corporation, a "debt," within the meaning of the statute, making the officers of a cor- poration liable for its debts in certain cases ; Child u. Boston cfe Fairhaven Iron Works, 10-578. 28. Extra-territorial defaults. As corporations can only act in conformity with the law of the state by which they are created, such corporations are responsible, as carriers, only to the extent and in conformity to the law of the state, where "the con^ tract is made or the duty undertaken, and, it will make no differ- ence whether the action is in form ex contractu or ex delicto. This is in conformity to the general rule of law upon the subject of contracts and torts, and where railroad companies are sued out of the jurisdiction by which they are created and under whose law alone they can act, the extent and degree of their responsibility must be determined by the law of the place of the existence and 43 338 DIGEST OP THE action of such corporation ; N. Orl., J. & G. N. E.R. Co. v. "Wal- lace, 5-490. . , . 29. Damages ex delicto. A statutory provision, declaring that " a corporation can not commit the crime of treason, or any other offense, in its corporate capacity," does not protect corpora- tions from civil prosecutions for damages ex delicto. Corpora- tions have been, and are held responsible for acts done by their agents ex contractu and ex delicto ; Yinas v. Merchants Mut. Ins. Co. of N. O., 7-193. 30. Malio:b. It would seem, now, to be clear that corporations are liable for aU acts, whether-willful or malicious, of their agents or servants done in the course of their employment ; Carter v. Howe Machine Co., 7-398. 31. Torts. The doctrine is well settled that a corporation is liable for the willful acts and torts of its agents committed within the general scope of their employment, as well as acts of negli- gence ; and, that the corporation is thus bound, although the par- ticular acts were not previously authorized nor subsequently rati- fied, by the corporation ; Terre Haute & Ind. R.R. Co. v. Jack- son, 9-231. 32. . Strictly speaking, corporations, while acting within the scope of the powers delegated to them, can not be guilty of willful fraud ; yet, it is settled, by a great number of decided cases, that corporations, carrying on trade or business of any kind, are equally and to the same extent liable for the frauds and wrongs of their agents, perpetrated in the course of their employment, as in- dividual principals would be under like circumstances ; Western E.R. Co. V. Franklin Bk. of Baltimore, 9-411 ; Same v. Stein Bros., 9-411 ; Same v. Rous, 9-411. 33. . It is as possible for a corporation as for an indi- vidual to act maliciously ; that is, with a bad intent. Accord- ingly, a corporation aggregate may, in its corporate capacity, cause the publication of a defamatory statement under such circumstan- ces as to imply malice, in law, suflScient to support an action. There may be circumstances by which express malice, in fact, might be proved, such as to make such corporation liable in its corporate capacity ; Yinas v. Merchants Mut. Ins. Co., 7-193. 34. . When the agent of a corporation, acting in the car pacity bestowed upon him by such corporation and in discharge of some duty or employment directed by the employer, or inci- dental to his situation, does an act which causes damage to an in- dividual, the body corporate is responsible. Id. 35. . Corporations, established, in whole or in part, for the pecuniary benefit of the members, are liable in actions for torts, in the same way and to the same extent, as individuals and natural persons ; "Western Un. Tel. Co. v. Eyser, 5-161. 86. . A corporation is civilly liable for torts, or for tlxe acts and negligence of its servants or agents, while in its employ- AMERICAN CORPORATION CASES. 339 ment, to the same extent and under the same circumstances, as a natural person. The only limitation being that it is not liable, civilly or criminallv, for torts, of which malice is an essential in- gredient ; N. & S."Ala. E.E. Co. v. Chappell, 6-161. 37. ToETs. It is not necessary, to fix the liability of a corpora- tion, as a tort-feasor, that the wrongful act, or the neghgence, from which the injury proceeds, should have been committed while the corporation was in the exercise of the powers conferred by its charter. It may have been committed while the corpora- tion, or its servants or agents, acting under its authority, were ex- ceeding corporate power, or engaged in business, or transactions, wholly foreign to its nature. Id. 38. . A corporation is liable, the same as a natural person, for the tortious acts of its servants, or agents, in the course of their employment ; Miller v. Pres't etc. of Burl. & Mo. E. E.E., 8-325. 39. . To make a corporation liable for the tortious acts of its employes, done in obedience to the commands of its officers, the act must be connected with the transaction of the business for which the company was incorporated. Id. 40. — ^ — . When an injury is committed by an employe of a corporation, willfully and of his own malice and not in the course of his employment, the corporation is not bound by his acts. Id. 41. Acts of agents. A corporation is liable for the willful, wanton, or malicious acts of its agents, while acting in the course of its business and of their employment ; although the act was neither directly or impliedly authorized, nor ratified by the cor- poration ; Quigley v. Cent. Pac. E.E. Co., 8-343. 42. -. For all acts done by the agent or servant of a cor- poration, within the scope of the employment and the limits of implied authority, the corporation is liable, however erroneous, mistaken, or malicious, such acts may be ; but, ior acts done be- yond that limit the corporation can not be made liable, unless express authority be shown, or there be subsequent adoption, or ratification, of the act complained of ; Carter v. Howe Machine Co., 7-398. 43. Instance. Where it was sought to hold a corporation liable for the wrongful and malicious act of its agent, in putting the criminal law in operation against a person, upon charge of having fraudulently embezzled the money and goods of the com-. pany, in order to sustain the right to recover, it should be made to appear that there was express precedent authority for doing the act, or that the act had been, subsequently, ratified md adopted by the corporation. Id. 44. Tort of officer. Where the general manager of a cor- poration having authority among other things to collect money on checks, for his company, presents for payment a check for $300, and through mistake $800 is paid thereon, the corporation 340 DIGEST OP THE is liable for the excess so paid, whether the general manager ever accounted to the company for the excess or not ; Kansas Lumber Co. V. Central Bank, 10-419. 45. Repbesentations as to solvency. In this ease the cor- poration was held bound by representations as to its solvency, made for the purpose of floating its paper, by a member of a firm that was both payee and indorser of the paper, and owned nearly all the stock of the company and controlled its operations; Genesee Co. Sav. Bk. v. Michigan Barge Co., 10-624. 46. . The liability of a corporation for the acts of one, who, with its assent, has controlled and sold its paper for his own benefit, is the same as that of an individual in like circumstances. Id. 47. Malicious peoseoution. A corporation is liable to an action for malicious prosecution instituted by its authority ; Boogher B. Life Assoc, of Amer., 9-514. 48. . An action for malicious prosecution may be main- tained against a corporation aggregate ; Carter v. Howe Machine Co., 7-398. 49. Slander. A corporation may sanction the publication of a libel. In such case the corporation is the publisher of the libel and liable, in like manner, as an individual ; for the reason it has the capacity for voluntary action and is responsible for such action; Vinas V. Merchants Mut. Ins. Co., 7-193. 50. Libel. An action for libel can be maintained against a corporation ; Evening Journal Ass'n v. M'Dermott, 9-546. See Action; Chaetee; Common Caeeiee ; Consolidation; Dam- ages ; FoEEiGN Cdepoeation ; Libel ; Malicious Peoseoution ; Negligence ; Office and Officer ; Transfer of Stock. LIBEL. 1. Corporations mat be guilty of. It is well settled that an action for libel can be maintained against a corporation ; Bacon v. M. C. R.R. Co., 10-639 ; Evening Johrnal Assoc. V. M'Dermott, 9-546. 2. Corporate liability. A publishing corporation is liable for publishing a libel ; Johnson v. St. Louis Dispatch Co., 8-174. 3. . A corporation may sanction the publication of a libel. In such case such corporation is the publisher of and liable for the publication of the libel ; Vinas v. Merch, Mut, Ins. Co., 7-193. 4. Publication. The sending by a railroad company to its agents along its line of road, a circular containing libelous matter, is a sufficient publication ; Bacon v. M. C. E.R. Co., 10-639. 5. Instance. A railroad company supplied certain of its agents with a tabulated list of employes who had been discharged, stating in parallel columns, the name and occupation of the employes, and under the heading "why discharged," the reason. Held, where the reason stated was " stealing," the statement was libelous, and Its issue to the agents of the company was a publication. Id. AMERICAN CORPORATION CASES. 341 6. Action theeefoe by a ooepoeation. A domestic corpora- tion may maintain an action for libel ; but quaere, whether the comity by which a foreign corporation is permitted to bring suit in our courts upon its contracts should be so far extended as to permit a suit for libel ; Hahnemannian Life Ins. Co. v. Beebe, 1-420. 7. What coNSTrruTBs a libel. If an insurance company has procured a charter which authorizes it to pay an interest of thirty per cent, per annum to its stockholders, before laying by a fund for the security of its policy holders, a publication can not be held libelous, merely because it assumes that the company will do, for the profit of its stockholders, that which it has obtained an express power to do, and because it argues that a company, organized under such a charter, must necessaruy be unworthy of public confidence. Id. 8. . A free criticism oi the charter of an insurance com- pany, or of any other corporation which claims the confidence of the public and seeks the possession of its funds, is to be encour- aged rather 'than repressed, as a means of public security; and it would be against public policy to treat as libelous an article which merely assumes that an insurance corporation proposes to do for its own advantage or that of its stockholders, whatever its charter may expressly authorize it to do. Id. 9. . If, however, the charter contains no authority to do that which is made the subject of criticism, and the company does not propose to do its business in the method which is objected to, the publication may be libelous. Id. LICENSE ; see Powees. LIEN. 1. On stock, a national bank has power, to make by-laws providing that the shares of its capital stock shall be transferable only on its books, that no stockholder shall be allowed or transfer his stock, while indebted to the bank, without the assent of direc- tors ; and that the stock of any shareholder shall be pledged and liable for the payment of any debt due or owing from such share- holder ; Lockwood v. Mech. Nat. Bk., 4-140 ; see Nat. Bk. v. Lanier, 3-74. 2. Of coepoeation on stock. In the absence of contract,^ or provision of charter or by-law, a corporation has no implied lien on the shares of a stockholder indebted to it, to secure such in- debtedness ; Farm. & Merch. Bk. v. "Wasson, 6-638. 3. Comity. If, by the law under which a corporation is or- ganized, the corporation has a lien on the stock of a shareholder for a debt due from him to the corporation, such lien is a good defense to an action in another state, against the corporation, by a person to whom the shareholder has transfen-ed his stock ; Bishop V. Globe Co., 9-468. 343 DIGEST OF THE 4. Extent of. The by-laws of a corporation provided there should be no transfer of stock, which was not paid up in full, or by one who was indebted to the corporation, until the transferree, should secure satisfactorily the transferror's indebtedness and, that then all evidences of debt or liability should be surrendered to transferror. The lien of the corporation on the stock covers the liabilities to the company of the equitable owner of the stock ; and must prevail over the claim of an equitable assignee of the original owner or transferror ; Planters & Merchants Mat. Ins. Co. V. Selma Sav. Bank, 6-171. 5. Waivee. Under a charter, the directory of the corporation was empowered to make by-laws and regulations for the control and management of the business and affairs of said company, its property and the mode and manner of transferring its stock. It having been the uniform course of the company to issue certificates of stock which did not contain a notice, required by the by-law, providing for a lien on the stock, such uniform course of conduct must be regarded, at least as to aU persons not members of the corporation, as making a by law repealing that providing for a li^n and waiving the lien as to any certificates issued not contain- ing such notice ; Bank of HoUy Springs v. Pinson, 8-69. 6. Estoppel. If a corporation has a lien on stock, for a debt due from a stockholder, it is not estopped from asserting such lien by the fact that on the presentation of the certificate for transfer, to the person in charge of the transfer book, such person promised to make the transfer and issue a new certificate so soon as a cer- tain oificer returned ; Bishop v. Globe Co., 9-468. 7. . No estoppel can arise against the corporation — in this ease a bank — from a letter written by its cashier, to the firm which originally held the stock, or to the retiring member of the firm who transferred his interest to his successors, stating that there was no lien or incumbrance on the stock, in favor of the corporation,, the letter containing no intentional misrepresentation, and having been written some time before any interest in the stock was acquired by an equitable assignee of the retiring mem- ber of the firm. Id. 8. Ceeditoe's lien. Bona fide creditors, as against whom transfers of stock certificates, in private corporations, are required to be registered on the corporate books, are judgment creditors who have acquired a lien. When the lien of an execution has attached before notice — actual or constructive — to the creditor, a purchaser at judicial sale will be protected although he had actual notice of a prior unregistered transfer: Jones et al. v, Latham, 9-16. 9. . The capital stock of an incorporated company is a fund set apart for the payment of its debts and its creditors have a lien in equity. If diverted they may follow it so far as it can be traced and subject it to their claims, except as against holders AMERICAN CORPORATION CASES. 343 who have taken it, bona fide, for a valuable consideration and without notice ; Clapp at al. v. Peterson, 9-172. 10. PuKOHASEE OF PBOPEETT. Where a railroad corporation, under authority of law, executes a mortgage, or deed of trust, upon all its property, both real and personal, including its fran- chise and the same is duly recorded in the several counties through which the road runs, a purchaser of such property, under a valid foreclosure, will take the same free from all subsequent liens and incumbrances. The title will relate back, in respect of this to the date of the record of the security ; Cooper et al. v. Corbin et al., 9-192. 11. Tax on stock. A tax on the capital stock of a railroad company is a tax on personal property. Such tax is not a charge or lien thereon until the tax books are delivered to the collector. Id. 12. Tax on eealtt. Taxes on realty are a lien on the land itself, from and after the first day of May of each year during which they are levied. If not paid, the land may be sold for their payment and the title will pass regardless of any incum- brances resting thereon, whensoever such incumbrances were created. Id. See Stock and Stockholdee. LIFE INSUKANCE COMPANY; see Foeeign Coepoeation; Instjeanoe. LIMITATION" OF ACTIONS. 1. Sealed insteuments. The consideration of the convey- ance of a grant under seal, wliich contains no covenant for pay- ment, rests upon a simple contract, express or implied, and a suit for it must, therefore, be begun within the period prescribed for bringing suits on simple contracts ; Coleman et al. v. Second Ave. R7R. Co., 3-603. _ 2. Instalments of stock. A right of action to recover instal- ments of a subscription to the capital stock of such company, made in 1849, but not called for until 1861, did not accrue until such call was made ; and such right of action being on a promise in writing, the limitation is fifteen years ; Gibson v. Columbia & N. E. T. & B. Co., 3-665. 3. LLiBiLrrr as stockholdee. The probate act of California provides that claims against the estate of a decedent, not filed within ten months after the first publication of notice to creditors to file their claims, should be for ever barred. It was held, that a claim on a liability of decedent as a stockholder in a mining cor- poration, which accrued prior to his death, and was not filed until after the expiration of the ten months, was absolutely barred ; Davidson v. Rankin et al., 1-199. 4. Statute of Massachusetts. In that clause of the general 344 DIGEST OF THE statutes, chapter 43, section 79, which secures to any person ag- grieved by the doings of the board of aldermen of the city of Bos- ton, in relation to laying out a way, the right, if his application is merely for the assessment of damages, to apply for a jury within one year after the final determination of any suit wherein the legal effect of these acts is being drawn in question, the words " any suits " embrace only suits to which the applicant is a party, and is bound by the judgment, or the judgment in which is bind- ing on all persons, like a judgment in rem ; Shutt et ux. v. City of Boston, 2-474. 6. Statute of Nebraska. As against a foreign corporation the statute begins to run from the date of the presence of its managing agent in the state ; i. e. d., there must be the opportu- nity, during five years before suit brought, for plaintiff to sue defendant in the state and compel it to answer, by service on a managing agent ; Exp. Co. v. Ware, 5-72. 6. Statute of New Yoek. The courts of New York have decided that a foreign corporation can not avail itself of the stat- ute of limitations of that state ; Tioga R.K. Co. v. Blossburg etc. E.E., 4-265. See Dieectors; Statxttb of Limitations; Stock Ajsm Stock- holder. LIQUIDATION. 1. How effected. Where the law provides a method for liquidation of a corporation, that method must be pursued ; In re Louisiana Sav. Bk., 10-466. 2. Appointment of liquidators. If the charter provides for liquidators to be chosen by the stockholders, the courts have no power to interfere in the liquidation, uor remove a liquidator so chosen. Id. 3. The power to choose liquidators implies a power to fill a vacancy. Id. 4. Under insolvency. Where a petition is filed praying, for certain causes alleged, the forfeiture of the charter of a banking corporation an order of court which does not decree the forfeiture, but, which merely appoints a commissioner to take charge of the assets of the company, can not be construed as directing the liqui- dation of the affairs of the company; State, ex rel. Morey, v. Judge etc., 7-247. LIS PENDENS. 1. Curative act. An action brought to enjoin the issuing of bonds of a county because of irregularities in the vote which authorized their issuance, and a judgment thereon as prayed, were rendered inoperative as notice to purchasers by a curative act confirming the execution of the bonds ; Lee County v, Eog- ©rSj J.— o. AMERICAN CORPORATION CASES. 845 2. CoNTiNTJOus PE08ECUTI0N. "When three distinct and inde- pendent suits are prosecuted, with an interval of one year between the first and second, and of two years between the second and third, the doctrine of lis pendens does not apply. Id. LITER AEY SOCIETF. 1. What is not. A missionary and benevolent society — as an organization to encourage total abstinence — is not a literary and scientific society ; People, ex rel., v. Young Men's F. M. T. Abst, Soc, 6-626. LOAN ASSOCTATIOK 1. AoT CONSTITUTIONAL. The act for the incorporation of loan associations is not unconstitutional, and loans made according to its provisions are not usurious ; Freeman ■», Ottawa Building Homest & Sav. Ass'n, 10-267. 2. FoKFEiTUEE OF BIGHTS. Where the statute creating the cor- poration provides for a declaration of forfeiture upon default of a party, and such default being willful and with full knowledge of the consequences, he is entitled to no notice; having lost his rights as a stockholder, loss of money paid on that account follows as an incident. Id. See Building and Loan Association. LOANS. 1. By coepobation. A statute prohibiting a corporation from loaning its funds to any member or oflicer charged with the duty of investing its funds, is directory merely, and a loan made to such member or officer is valid, and may be enforced by the cor- poration, notwithstanding the statute; Bowditch «. New Eng- land Mnt. Life Ins. Co., 10-595. 2. . Collaterals taken as security for such loan, if taken in good faith and without notice of any fraud, may be held and enforced by the corporation. Id. LOG COEPORATION. 1. Duties — log company. Where a corporation was author- ized to make certain improvements in a river, and facilitate the driving etc. of logs therein, and was further authorized to take and charge toll for logs driven in such river, held, that the com- pany was bound to furnish to any one paying such tolls, reasona- ble facilities for driving logs etc. ; meaning all the facilities it has acquired and controls, in derogation of the common right ; Lewis- ton- Steam Mill Co. V. Richardson Lake Dam Co., 10-528. 2. — — . The wants or desires of a particular shareholder in such company can not abridge or modify the duties of the com- pany to log owners. Id. 3. . It is not material who may be the owners of lands 44 346 DIGEST OP THE upon -which the dams of the company are built, so long as the company maintains them for the purposes expressed in its char- ter. Id. LOST OEETIFIOATE. 1. Casual finding and purchase. Where a corporation is- sues its certificate of shares of stock, transferable on the books of the company by indorsement and surrender of the certificate, and its owner loses the same after he has indorsed it, and it comes to the hand of a bona fide purchaser for value, such purchaser ac- quires no interest in the stock ; Sherwood v. Meadow Val. Min. Co., 6-228. 2. Replacing ; indemnity. The loss of one's certificate of the ownership of shares of stock and advertisement of the loss being established the proper oflicers of the corporation may not refuse to issue a new certificate, on the ground that a bond of indemnity is not furnished. There is no reason for requiring such bond. The stock can not be transferred save upon the books of the com- pany and on the production of the certificates. This is a suffi- cient protection for the corporation ; State, ex rel. Phillips, v. N. Orl. Gas L. Co., 5-404. LOTTERY. 1. Constitutional peohibition. A constitutional provision that " no lottery shall be authorized, nor shall the sale of lottery tickets be allowed," has reference only to future authorization by the legislature. It could have no effect to abridge, impair or an- nul a lottery right, franchise or privilege granted by charter, or act of incorporation, by a precedent territorial government; Kellum V. State, 7-93. 2. . The territorial legislature of the Indiana Territory had full and ample power to incorporate a university with per- petual succession, and to endow it with the power and privilege of raising a fund, of a certain specified amount, by a lottery scheme, for the purpose of procuring a library and philosophical and experimental apparatus. Id. See Chaetee ; Police Powee. MALICE. 1. CoEPOEATiON MAT BE GUILTY. It IS as possible for a corpo- ration as for an individual to act maliciously — that is, with a bad intent. Accordingly, a corporation aggregate may, in its corpo- rate capacity, cause the publication of a defamatory statement under such circumstances as to imply malice, in law, sufficient to support an action ; Vinas v. Merch. Mut. Ins. Co., 7-193. AMERICAN CORPORATION CASES. 347 2. OoEPOBATE LIABILITY. A corporatioa may be liable in an action of tort, even when a fraudulent or malicious intent in fact is necessary to be proved ; the fraud or malice of its authorized agent being, imputable to the corporation ; Reed v. Home Savings Bank, 7-544. 3. Liability. Semble, it is clear that corporations are liable for all acts, whether willful or malicious, of their agents or ser- vants, done in the course of their employment ; Carter v. Howe Mach. Co., 7-398. 4. . For all acts done by the agent or servant of a cor- poration, within the scope of the employment and the limits of implied authority, the corporation is liable, however erroneous, mistaken or malicious such acts may be. For acts done beyond that limit the corporation can not be made liable, unless express authority be shown, or there be a subsequent adoption or ratifica- tion of the act complained of. Id. 5. . A corporation is liable for the willful, wanton or malicious acts of its agents, while acting in the course of its busi- ness and of their employment, although the act be neither directly or impliedly authorized nor ratified by the corporation ; Quigley V. Cent. Pac. E.E. Co., 8-343. 6. . A corporation is civilly liable for torts or negligences of its servants or agents, while in its employment, to the same extent and under the same circumstances as a natural person. The only limitation -being that it is not liable, civilly or criminally, for torts, of which malice is an essential ingredient ; N. & S. Ala. E.R. Co. V. Chappell, 6-161. 7. . Where an injury is committed by a corporate em- ploye, willfully and of his own malice and not in the course of his employment, the corporation is not bound by his acts ; Miller V. Pres't etc., 8-325. See Liabilities. MALICIOUS PROSECUTIOK 1. Action maintainable. Action for malicious prosecution may be maintained against a corporation aggregate ; Carter v. Howe Mach. Co., 7-398. 2. CoEPOEATB liability. A Corporation, like a natural person, is liable, to an action of trespass on the case, for a malicious pros- ecution conducted by its officers and agents ; Williams v. Planters Ins. Co. et al., 8-64. 3. . As the result of the modern cases, it seems to be the law that where corporations have been held liable for the malice of their agents, the acts of the latter were not only within the scope of the supposed authority of the particular agent commit- ing the act complained of, but the act performed by the agent was done in performance of business coming within the purview of the objects and powers for which the corporation was created 348 DIGEST OP THE and the powers were conferred by the charter ; Gillett v. Mis- souri Valley K.E. Co., 8-103. 4. CoEPOEATE LIABILITY. In this casc, it was held that a railroad corporation was not liable for a mahcious prosecution, instituted by its agent, against one of its employes — a clerk — in the name of the state, for alleged embezzlement of funds ; there being no pretense that any power was given the company to engage in such public prosecutions or that they came within the scope of its gen- eral powers or purposes. Id. 5. . Adams, j., dissenting, held that where a corporation — in this case a railroad company — through the malice of its officers, institutes a groundless prosecution, it should be made to respond in damages to the party injured, in an action for malic- ious prosecution. Id. 6. . Also, that the prosecution of offenders against the criminal law, especially when, by reason of insolvency, not respon- sible in a civil action is not only within the scope of the author- ity of a corporation carried on mainly for profit, but becomes the imperative duty of such corporation. Id. 7. MisjoiNDEE OF COUNTS. That some counts in the declara- tion aver imprisonment, in consequence of a malicious prosecu- tion, neither converts the action into trespass nor constitutes mis- joinder ; Williams v. Planters Ins. Co. et al., 8-64. MANDAMUS. 1. PowEE OF THE WEiT. The wrft of mandamus does not pur- port to adjudge or decide any right. It is the mode of compelling the performance of acknowledged duty, or enforcing an existing right, rather than deciding what the right or duty is ; Burland v. North Western Mut. Ben. Ass'n, 7-592. 2. Natuee of WEIT. The appropriate remedy in respect of in- juries received at the hands of private corporations is at common law. The writ of mandamus is a discretionary writ and should not, usually, issue save to settle some controversy of importance on public grounds or which, by its nature, would justify the inter- ference of the court if corporate powers did not exist ; Lamphere V. Grand Lodge, A. O. U. W., 7-594. 3. DisoEETioNAEY. The granting of writ of mandamus is in the discretion of the court and an order refusing it is not review- able on appeal ; Sage et al. v. Lake Shore & Mich. South. Ry. Co., 8-500. 4. Quality of the weit. The writ of mandamus is not a writ of right. It is only to be granted at the discretion of the court. This process was not intended, and is not well adapted, for the trial of mere questions of property ; Murray v. Sterens et al., 4-447. 5. Requisite to belief. To entitle a party to a writ of man- damus, he must be clothed with a clear legal and equitable right AMERICAN CORPORATION CASES. 349 to the thing which is withheld ; State, ex rel., v. M'lver et al., 4-160. 6. Statement of case. To entitle a relator to a writ of man- damus, he should make a case clearly showing his right thereto. An ambiguous statement leaving it doubtful is not sufficient; People, ex rel., v. German U. Evang. Church, 4-594. 7. When rr will issue. Thougli it is true that a writ of mandamus will not issue, unless the duty to be performed is one in which the public has an interest, and, not even then where the party demanding the writ has another plain and adequate remedy, yet the duty of the officers of a railroad corporation, to permit the transfer of its stock, is one in which the public has a suffi- cient interest to warrant the court in issuing the writ ; to compel its performance and the remedy by action, against the officers of the corporation, to recover damages for their refusal to permit the transfer, is of such doubtful and uncertain character that it can not supersede the specific and more speedy remedy by man- damus ; State, ex rel. «. M'lver et al., 4-160. 8. Will issue to a eailkoad company. A railroad corpora- tion, chartered by a state, is a public corporation to the extent that it and its officers owe duties to the public, which they may be compelled to perform, by writ of mandamus. Among these duties is that which relates to the capital stock of the company and its control of the transfer thereof. Id. 9. Supreme couet of South Carolina. The supreme court of South Carolina has authority, by virtue of the power conferred by section 4 of article 4 of the constitution of that state, to issue writs of mandamus upon original application and independent of its jurisdiction as an appellate court. Id. 10. In Massachusetts. Mandamus lies to enforce the right of the member of a board to the exclusion of a person whom the other members wrongfully recognize and permit to act in his stead ; Conlin v. Aldrich et al., 2-461. 11. To EESTEAIN ACTS OF UNAUTHORIZED PERSONS. In the StatO of Maryland, mandamus is the proper remedy to restrain commis- sioners who have assumed to act without lawful authority from the discharge of the duties of their supposed office; State of Maryland, ex rel., v. Kirkley et al, 3-406. 12. To ENFORCE PAYMENT OF COUNTY BONDS. "Where the alter- native writ of mandamus recited the execution of the negotiable bonds of the county, their maturity, the levy and collection of a tax to pay them, and the refusal of the treasurer to make the pay- ment as stipulated in the bonds, held, that the_ remedy of the holder was by action against the treasurer, on his official bond ; that this was an adequate remedy at law and, for this reason,, the writ should be quashed ; State, ex rel., v. M'Crillus, 2-319. 13. Order by commissioner. It was held further, that, when the county commissioners made the order directing the levy of 350 DIGEST OF THE the taxes, their powers ceased, and a subsequent order directing the treasurer to make no payment on the bonds was a nullity, having no effect upon the rights or duties of the parties. Id. 14. Whebb it libs. Where a corporator in a corporation has a clear legal right which has been violated by the corporation, and he has no other adequate remedy, he is entitled to relief by mandamus; State, ex rel., v. Georgia Medical Soc, 1-328. 15. To COMPEL EBPOETS. One, or more, of the stockholders of a corporation, may compel its officers, by mandamus, to make and publish reports required to be made, by them, by the statute of incorporation ; Smith & Crittenden v. Steele, 8-322. 16. Illegal election. A mandamus may issue on the petition of a corporation against persons claiming to hold its offices, by virtue of an election at which illegal votes were cast, by means whereof a minority of the stockholders have usurped the power of government ; A.mer. Eailway Frog Co. v. Haven et al., 3- 418. 16^. Enfoecing election. In case the proper officers of a manufacturing company refuse to perform the duty imposed upon them, to call an election for directors, a stockholder has a remedy, by mandamus, to compel such performance ; People, ex rel. Miller, i the execution of the deed ; but, any enlargement of the original works, or extension of mains in the streets or under lands not owned by the company but upon license granted for that pur- pose, or additional machinery supplied for and attached to the AMERICAN CORPORATION CASES. 369 •works would be regarded as additions to and part of the property originally mortgaged and would pass with the estate upon fore- closure sale ; Wood et al. v. Whelen, 6-442. 31. Sale of eealtt and personalty together. A corporate mortgage embraced and covered not only the real estate upon ■which the company's works were situate, but, also, the " machinery, implements, materials, and fixtures in and about the same . . . together with the office, office fixtures and furniture," and pro- vided the personal property, so embraced, should be sold with the other property. It was held proper, in decreeing sale upon fore- closure, to decree that the property be sold as stipulated : i. e. the real estate and personal property together, inclusive of all property necessary- to carry on the works mortgaged and to be sold. Id. 32. UsTTRT. Usury in a debt secured by mortgage does not render the debt or mortgage void, and in an action of ejectment by mortgagee no inquiry into the validity of the debt is admissible. The party complaining of usury must proceed in equity by bUl to redeem ; Kelly v. Mobile Eg. & Loan Assoc, 6-160. 33. Defense to ; validity. A statute forbade a manufactur- ing company, organized under general law, to mortgage its prop- erty unless authorized, thereto, by vote of stockholders holding three-fifths interest after notification, according to the law, of the object of the meeting called to obtain such vote. The statute pro- vided that, in the absence of such notice, no mortgage should have any force or effect, or pass any title or interest, in the property mortgaged. Notice was given of a meeting to authorize the issue of bonds, to the extent of $100,000, secured by mortgage. The meeting, in fact, authorized an issue to the amount of $150,000 ; held, that so long as neither the corporation nor the stockholders raised any objection, no other person could. An act of the legis- lature declaring a contract void on grounds of public policy makes the contract void to all intents ; but, if the manifest purpose of the law is to protect determinate individuals who are sui generis, in their own rights, they alone are entitled to take advantage of it ; Beecher v. Marquette & Pac. E.R. Mill Co. et al., 6-655. MOETGAGE OF CHATTELS. 1. TJnauthoeized. a resolution adopted by two of three directors of a corporation, during the absence of the third director and in the absence of any lawful notice to him of the meeting, will not authorize the execution of a mortgage, whereby the latter's property is taken from his possession ; Doyle v. Mizner et al., 6-655. MUTUAL BENEFIT ASSOCIATION ; see Instjraiiob. MUTUAL INSUEANCE COMPANY ; see Insurance. 47 370 DIGEST OF THE NAME ; see Coepoeate Name ; Misnombe. NATIONAL BANKING ACT. 1. Section oonstkued. Section 29 of the national banMng act^ which limits the liability of any association, person, company or corporation to a national bank that it " shall at no time exceed one-tenth part of the amount of the capital stock of such " bank- ing association " actually paid in," is to be regarded as a direction respecting the management of the bank and not as a limitation of its powers ; Union Gold Min. Co. v. Nat. Bank, 4-298. 2. Peovision oonsteued. The provision of section 30 of the act of congress of June 3, 1864, for the formation of national banks, limiting the forfeiture, in cases of usurious contracts, to the amount of the interest, has reference only to the preceding sent- ence, which prescribes the rate of interest in states and territories where no rate is fixed by law. A construction of this provision, , which would make it applicable to contracts made in states where the rate of interest is regulated, would bring it in conflict with such state laws, be a manifest excess of the power confided in the national legislature and, therefore, unconstitutional ; Nat. Bank V. Lamb et al., 4-585. 3. ; STATUTE coNSTETJED. Suits may be brought under the fifty- seventh section of the act by any association as well as against it. The omission of the word " by " in the text of the statute should be regarded as accidental only; Kennedy v. Gibson et al., 1-47. 4. . The effect of section 8, act of June 3, 1864, is to pro- vide that a national bank, when it has come or been brought as a suitor in to a court which has jurisdiction of the suit, shall stand in court in the same position, in all respects, as regafrds its own rights or the rights of others against it, as to the subject matter of the suit, in which a natural person who is a suitor in such case can stand. It does not give to all the courts in the United States erisdiction of every case to which a corporation is a party; anufacturers Nat. Bank v. Baack et al., 1-93. 5. . The provision, of the national banking act (U. S. Kev. Stat., § 5239), that if the directors of a bauK organized under the statute shall knowingly violate or permit the violation of the provisions of the act, the franchises of the association shall be forfeited, such violation, however, to be first determined by a proper federal court, in a direct action brought by the comptroUer of the currency, in his own name, and, in case of such violation, making the directors participating therein liable for damages, applies only to violations of the act itself, by the assumption of powers in excess of the franchises granted or by a disregard of some prohibition of the act ; Brinkerhoff v. Bostwick, receiver, 9-610. AMERICAN CORPORATION CASES. 371 T^^ATIONAL BANKS. 1. PowEE TO CREATE. The power to create a corporation, as an appropriate instrument for the execution of a constitutional' power, does not carry with it authority to confer upon that cor- poration unlimited privileges or immunities from state law ; but only such as are necessary to enable it to effect the legitimate national objects for which it is created ; Nat. Bank v. Lamb et al., 4-585. 2. By-law — lien upon stock. A national bank has the power, under the national currency act of congress, of 1864, chapter 106, to make by-laws providing that the shares of its capital stock shall be transferable only on its books ; that no stockholder shall be allowed to sell or transfer his stock, while indebted to the bank, without the assent of its directors ; and, that the stock of any shareholder shall be pledged and liable for the payment of any debt due or owing from such shareholder; Lockwood «. Mech. Nat. Bank, 4-140 ; but see Nat. Bank v. Lanier, 3-74. 3. Shareholder. It may be true that a national bank may not be bound to admit a purchaser of stock in the association to all the rights and liabilities of the prior owner, unless the transfer is made on the books of the bank, in the manner prescribed by the articles of association, or by-laws, yet where it does issue cer- tificates of shares to a subsequent purchaser, in lieu of the certi- ficates of the prior owner, without observing its by-laws, so far as creditors of the bank are concerned, a party taking and holding such shares of stock will be subject to the liabilities imposed by section 5151 of the national banking law ; Laing, adm., v. Burley,. 9-107. 4. Powers. National banks possess just such powers as the act incorporating them gives to them — no more ; Matthews v, Skinker, 8-149. 5. . National banks are formed and organized for com- mercial purposes. Their business is the discounting and negotia- tion of notes etc., the purchase and SJ^le of bills, bullion etc., and the lending of money on personal security ; they may not deal in real estate, save for necessary purposes of their business or to se- cure pre-existing debts. In no case can they loan money on the faith of real estate security, where the debtor was not previously indebted to them. If such security is taken it is ultra vires and void and may be pleaded, by the party defendant, against its en- forcement. Jd. 6. To receive and sell its own stock. When a national bank purchases its own stock to protect itself from loss, upon its debt, it is bound to sell the stock within six months. It may sell on credit and take the purchaser's notes, with the stock sold as col- lateral to secure it ; provided, this is done in good faith ; Union National Bank v. Hunt, 9-528. 372 DIGEST OF THE 7. PuECHASE OF COIN. National banks are authorized to buy and sell coin. Banks holding coin in pledge may sell and assign its special property therein, and such an assignment vests the legal title in the assignee ; Merch. Nat. Bk. v. State Nat. Bk., 3-25. 8. Dealing on commission. A national bank, organized under the act of congress, June 3, 1864, known as the national currency act, has no authority to engage in the business of selling the bonds of railroad companies on commission ; such business is not within the scope of its corporate powers and is, therefore, prohibited to it; Weckler «. First Nat. Bank of Hagerstown, 7-354. 9. . A national bank may be held liable to the owner of merchandise, intrusted to the bank for shipment and sale, for the proceeds, although to sell produce on commission is not within the chartered or general powers of national banks ; Nat. Bank v. Priest, 3-252. 10. Dealing in bonds. A national banking association is com- petent to receive on deposit United States bonds of one class, under promise to exchange them for those of another. Where- fore, under such an agreement it will not be regarded as a mere mandatory or a bailee acting without compensation, but may be held to the terms of the contract and liable to the depositor, for the value of the bonds, on its refusal to deliver them ; Leach v. Hale, rec'r, 3-336. 11. Loans ob discounts on stock. National banks are expressly prohibited, by the act of June 3, 1864, from making any loan or discount on the security of shares of their own capital stock. This inhibition includes deposits made by one bank with another ; Nat. Bk. V. Lanier, 3-74. 12. Loan in excess of limitation. A bank having loaned money to a debtor so that his liability became in excess of the limitation stated in section 29 of the national banking act, may, nevertheless, have its action to recover the amount ; Union Gold Min. Co. V. Nat. Bk., 4-298. 13. . Where a national bank organized, from a state bank, under the national currency act, at the time of such organization received from the state bank, among its discounted notes, one for an amount larger than it was authorized to loan to a single bor- rower ; that is, being in excess of one-tenth of its capital paid up ; such note is not, nor is any note subsequently executed in renewal thereof, to be regarded, within the meaning of section 29 of the national banking act, as given for money borrowed of the national bank ; Allen v. Nat. Bk., 4-45. 14. . It is no defense to an action brought by a national bank on a note given by way of renewal for a balance due on a previous loan, which balance had been reduced, by payments and renewals, below the maximum sum it was authorized to loan, to a single borrower, that the original loan was for a sum in excess of that which the bank, by its charter, was authorized to make. Id. AMERICAN CORPORATION CASES. 373 15. Mortgage seoueitt. National banks are authorized to re- ceive mortgages on real estate in good faith, to secure debts pre- viously contracted. A national bank extended the time of pay- ment of indebtedness at a usurious rate of interest, and took notes and a mortgage executed by the debtor to a third person, who in- dorsed them. In such case the usury only avoided the interest, and to the extent the debt was valid, the mortgage was a bona fide security, and the bank, becoming the owner of the notes, ac- quired the equity in the mortgage. Id. 16. Loan on stock of coepobation owning only eeal estate. The taking, by a national bank, of the stock of a corporation as col- lateral security for a loan of money, is not a violation of that pro- vision of the national banking act, making it incompetent for a national bank to loan money on mortgage of real estate, although the property of such corporation consists wholly in real estate ; Baldwin et al. v. Canfield, 7-641. 17. MoETGAGE seoueitt. A national bank having no power to take a deed of trust, on real estate, as security for a contem- poraneous loan, an injunction will lie to prevent a sale of the property, by the bank, under the deed ; Matthews v. Skinker, 8-149. 18. Dealings ttltea vibes; estoppel. The maker of a prom- issory note, not negotiable, discounted by a national bank, can not question the right of the bank to recover on it, on the ground that such banks have no right to deal in that kind of paper ; Na- tional Bank v. GilUlan, 8-'243. 19. UsuET. The provisions of the United States statute of 1863, chapter 106, § 30, imposing penalties upon national banks for taking usu^, supersede the state laws upon that subject ; Davis, rec'r, v. Randall, 5-455. 20. . The provision of the thirtieth section of the na- tional banking act, of June 3, 1864, limiting the forfeiture, for usurious charges by national banks, to the interest carried with the evidence of debt or which was agreed to be paid thereon, ap- plies to banks in all the states and supersedes state laws on that subject; National Bank v. Garlinghouse et al., 4-38. 21. . The laws of the states, which avoid usurious con- tracts, do not obstruct or impede national banks, as agents of the government, in doing any thing which the public interests re- quire that they should do, or which they are authorized to do. They affect, simply, the private interests of -the bank, wherefore they have acquired no immunity from the usury laws of the state or territory, wherein they may be located ; nor is such immunity necessary. Congressional legislation, for creating na,tional banks, is not to be so construed as to bring it into conflict with state law ; Nat. Bank v. Lamb et al., 4-585. 22. . Immunity from the usury laws of the state is not conferred upon national banks by the act of June 3, 1864 (13 374 DIGEST OF THE Stats, at L. 99). A contract for a loan, made in the state of New- York, with such a bank, by which it reserves a greater rate of in- terest than is allowed by state statute, is void. Id. 23. UstTEY. In Ohio the discounting of a note by a national bank at a usurious rate of interest does not avoid the note in toto but only to the extent of the interest ; National Bank v. Garling- house et al., 4-38. ^4. State statute of usury. A statuue of Ohio, of March 19, 1850, an act to restrain banks from taking usury, has no applica- tion to banking institutions existing under and exercising powers by virtue of the authority of congress. Id. 25. Negligence of directors. In an action by stockholders to recover from directors of a national bank the sum of losses occurring by reason of the gross negligence and inattention to the duties of their trust, it is not necessary to allege, in the complaint, a direction to the receiver or a demand upon him and a refusal to direct such receiver to bring the action, or a refusal of the receiver to sue ; Brinckerhoff, etc., v. Bostwick, rec'r, 9-610. 26. Jukisdiotion of. A national banking association can be ' sued only in the judicial district in which it is established ; Crocker et al. V. Nat. ftk., and Baker et al. v. The same defendant, 3- 402. 27. State jurisdiction of. A national banking corporation may be sued in a state court of competent jurisdiction, in the county in which such association is located ; Cooke v. Nat. Bk., 4-571. 28. . A state court has jurisdiction of an action to re- cover from directors of a national banking corporation, the amount of losses caused to stockholders by the gross negligence of direct- ors ; Brinckerhoff, etc., v. Bostwick, rec'r, 9-610. 29. Suits against. Creditors may proceed against banks or- ganized under the national currency act, in all suits, actions and proceedings, in any state, county or municipal court in the county or city in which such association is located, where it appears that such courts have jurisdiction, under state laws, in similar contro- Tersies ; Bk. of Bethel v. Pahquioque Bk., 4-241. 30. . Creditors can not proceed directly against the stock- holders. These actions can be brought only by the receiver acting under the direction of the comptroller. He represents both the government and thp creditors, neither of whom are nec- essary parties to an action in his name; Kennedys. Gibson, 1-41. 31. Attachment. Under the national banking act an attach- ment is prohibited and may not issue out of a state court against a national bank which is, or is about to become, insolvent ; Nat. Shoe & L. Bk. v. Mech. Nat. Bk., 9-638. 31^. . The property of a national bank, organized under act of congress of June 3, 1864, attached at the suit of an indivi- dual creditor, after the bank has become insolvent, can not be sub- AMERICAN CORPORATION CASES. 375 jected to sale, for the payment of his demand, against the claim of a receiver, subsequently appointed ; Nat. Bk. v. Colby, 5-82. 32. Claims against delinquent. The decision of the receiver of a delinquent national bank disallowing a claim is not final. Claims presented by creditors may be proved before the receiver, or they may be put in suit, in any court of competent jurisdiction, as a means of establishing their validity and to determine the amount owed by the association ; Bk. of Bethel v. Pahquioque Bk., 4-241. 33. Injunction. A national banking association formed under the act of congress having no power to take a deed of trust on real estate as security for a contemporaneous loan, injunction will lie to prevent a sale of the property by the bank under the deed ; Matthews v. Skinker, 8-149. 34. Insolvency ; distribution of assets. Under the act of congress of June 3, 1864, to provide a national currency, estab- lishing national banks, the assets of an insolvent bank, when re- duced to money, should be divided ratably and appropriated to the payment of all legal liabilities of the association, whether these consist of debts, technically so called, or result from the nonfeasance or malfeasance of the bank in respect of its binding obligations and duties ; Turner v. ITat. Bank et al., 3-298. 35. Suits bt. Notwithstanding the appointment of a receiver, a national banking association may sue and be sued, complain and defend, in all cases where it may be necessary that the corpo- rate name of the association shall be used for the purpose of clos- ing its business and winding up its affairs ; Bank of Bethel v. Pahquioque Bank, 4-241. 36. Receiver ; actions bt. The receiver of a national bank is the agent of the government of the United States, and suits in which he is officially plaintiff should be conducted by the district attorney. But, a defendant to such an action can not be heard to make the objection that the proceeding is not being conducted by the proper law officer ; Kennedy v. Gibson et al.. 1-47. 37. Actions against stockholders. The power to determine Tvhen it is necessary to proceed against stockholders to enforce their personal liability to pay the debts of the association is vested by the law in the comptroller, and his determination is conclu- sive. Id. 38. Character and limii of LiABiLmr. The liability of stock- holders is several, and not joint. The limit of liability is the par of the stock held by each one. Id. 39. Jurisdiction. When the whole amount of the par of the stock is sought to be recovered, the action should be at law : when less is required, the proceeding may be in equity ; and in such case an interlocutory decree may be entered for contribution, and the cause continued for further orders. Id. 376 DIGEST OP THE 40. Paeties. When contribution only is sought, all the stock- holders within the jurisdiction may be made parties to the suit ; those beyond the jurisdiction are not indispensable parties. Id. 41. . The receiver holding the assets of an insolvent na- tional bank, is a proper party in proceedings for the adjudication of claims against the bank ; Turner v. First National Bank of Keokuk et al., 3-298. 42. Abatement of suit. A suit instituted against a national bank, by a creditor to enforce the collection of a demand, is abated by a decree of United States court, forfeiting its rights and fran- chises and dissolving it, rendered upon an information, against the bank, filed by the comptroller of the currency ; National Bank v. Colby, 5-82. 43. Removal op cause. Such an association is a citizen of the state in which it exists, and, as such citizen, it may, in a proper ease, exercise the right of applying for a removal of a cause pend- ing against it from state to federal jurisdiction ; Cooke v. Nat. Bank, 4-571. 44. Ceiminal law ; embezzlement. Since the passage of the statute of the United States making embezzlement of the funda of a national bank, by one of its officers, a misdemeanor indicta- ble in the federal courts, an accessory to such embezzlement by an officer of such a bank can not be indicted for embezzlement, under the Massachusetts statute, even though he is not indictable in the federal courts ; Commonwealth v. Felton, 3-399. See Bank and Banking ; Bt-laws ; Cashibe ; Constitutional Law ; Powers ; Quo Waeeanto ; Taxation. NEGLIGENCE. 1. Liability foe. The doctrine that municipal corporations are liable for the negligent construction or repairs of streets recog- nized and held applicable to an action against a road supervisor for the diversion of a stream by the negligent construction of a crossing thereover ; M'Cord w. High, 3-244. 2. Steeets ; aooidents. When an injury is caused in part by a defect in a street and in part by an accident, the accident forms no excuse for the negligence of the corporation, when the damage would not have been sustained but for such defect, which was the result of carelessness, and the plaintifE is guilty of no fault or negligence ; City of Lacon v. Page, 3-200. 3. ; sidewalk. The liability of the corporation is not changed b^r the fact that the defect, in consequence of which a party while driving his horses, which ran away, was injured, was in that portion of the street set apart as a sidewalk when such portion, instead of being used for foot passengers alone, was devoted to the common use of teams and foot passengers. Id. 4. Steeets and sidewalks. It is the duty of the city of New York to keep the streets and sidewalks in repair ; and when an AMERICAN CORPORATION CASES. 377 injury arises from the neglect of the corporation to perform this duty, it is liable to the person injured ; Davenport v. Ruckman et ai., 3-628. 5. CoNTEBBUTOET NE&LioENCE. When the party injured by a defect in a street, was partially blind, and it was urged as a defense that going upon the Street with impaired vision consti- tuted contributory negligence, which would prevent a recovery, the court properly submitted this question to the jury : " Was it so improper for her to have gone into the street unattended, in her then condition of sight, that it would be negligence on her part to do so, suflBcient to prevent her from receiving compensation for an injury she might sustain from the negligence of others while passing along the street." Whether the plaintiff's sight was such that she could walk the streets with " a reasonable assurance of safety," relying upon the performance by the corporation of its duty to keep the streets in good condition, was a fair test to determine plaintifi's negligence. Id. 6. OwNEE OF ADJACENT PEOPEETY. The owner of a house, whose duty it was to keep a passage way in repair, and who al- lowed it to become and remain in a dangerous condition, is also liable to a person who receives an injury from such neglect. Id, 7. ExEMPLAET DAMAGES wiU uot 06 allowcd in an action against a municipal corporation for a personal injury sustained by reason of the mere negligence of the corporation to repair a defect in one of its streets, which was not in the business part of the city, and was but little used by the public ; City of Chicago v. Martin et al., 2-205. 8. . It is difficult to conceive a case against a nmnicipal corporation which would justify the allowance of exemplary damages. Id. 9. DisoEETiON, EEPAiE OF STEEETS. Municipal corporations have a discretion as to the time when repairs in streets not much used by the public and not in the business part of the city, shall be made ; and if a personal injury is sustained by a person, by reason of a defect in any such street, the corporation can not be held guilty of gross negligence and subjected to exemplary damages for the mere failure to make the necessary repairs. Id. 10. When allowed. The rule is, that to justify the allowance of exemplary or vindictive damages, either gross fraud, malice or oppression must appear ; and in the absence of these elements, the damages can not exceed and must be strictly confined to compensa- tion for the injury sustained. Id. NET EAENINGS. 1. Meaning of. The term "net earning," in the by-laws, means such as are applicable to dividends. They would be gross receipts less the expenses of operation, and less also interest on such indebtedness of the company as it is prudent and proper to keep in a permanent form, and less also, any floating indebtedness 48 378 DIGEST OF THE whicli good judgment would require to be presently paid, and Buch annual contribution to a sinking fund for the payment of debts, as might be deemed expedient to provide; Belfast etc. E.K €o. V. City of Belfast,, 10-534. NOlSr RESIDENT COEPOKATIOK 1. What is. A corporation incorporated by and organized under a statute of another state, is a non resident entity ; New- port etc. Bridge Co. v. Woolley, 7-184. 2. Gtarnishment. Plaintiff and his debtor were, both, residents of Nebraska, by the law of which state the larger part of the fund attached was exempt from seizure. The debt was for personal services which were contracted for and performed in Nebraska, where the corporation garnished had its general office and where it was accustomed to pay its employes laboring in that state. The original notice was served on the debtor in Nebraska ; the notice of garnishment was served on the corporation, as garnishee, in Iowa. The supreme court of Iowa held, (1) that the court below took jurisdiction of the person of the non resident debtor by reason of the personal service, such service having the same effect as would service by publication ; (2) that the rule that the situs of a debt, considered as property, is determined by the residence of the creditor, can not be applied, in Iowa, in attachment proceed- ings against a non resident ; (3) where a corporation — in this case a railroad company — operates a road within the state it is subject to the jurisdiction of that state ; (4) non residents have a right to sue in the courts of the state, and, in the absence of fraud in bringing the party or the subject matter of the suit within the jurisdiction of the court, the garnishee can not complain that the debtor is deprived of the benefit of some law existent in the state of his residence ; Moonev v. Union Pacific Ry. Co., garnishee, 0-317. NOTICE. 1. Posting. Required that an oflBcer post notices, as of an ■election. It is not contemplated that the officer will post them with his own hands or in person ; Philips et al. v. Town of Albany et al., 4-220. 2. Seevice of. Notice of the acceptance of a cancellation of a contract served, upon a private corporation, by leaving the same at the company's business office with a person acting as its agent and, at the time, in charge of its business, is a good service as to the company ; Parmly v. Buckley et al., 9-149. 3. What is sufficient. Where knowledge of a fact by a cor- poration is necessary, the corporation is held to know concerning that fact whatever its president, directors and treasurer all know ; Factors & Traders Ins. Co. v. Marine Dry dock & Ship yard Co.j 7-286. ^ ^^ AMERICAN CORPORATION CASES. 379 4. Of ownership of stock. A corporation can not oe held to knowledge of ownership of eighty shares of stock by the transferee of a certificate of eighty shares, which shares he has not caused to be transferred to himself, merely because he, through an agent, voted at an election, at which 12,475 shares voted in the affirma- tive and sixty -eight only in the negative on the pending proposi- tion ; there being such almost complete unanimity as to preclude necessity for scrutiny and especially is this so when the agent who voted was himself a stockholder by purchase of other shares from the original owner of the eighty shares so voted ; Friedlander v. Slaughter House Co., 7-243. 5. Of powers. Persons dealing in the negotiable securities of a corporation are chargeable with notice of the powers of such corporation to make such securities, as conferred by its charter. If the power granted, by the charter, be subject to a condition, relating either to the form in which such securities shall be made, in order to be valid, or relating to some preliminary proceeding extraneous to the acts of the corporation or its officers, securities issued, not- in the prescribed form or without the preliminary proceedings had,' are subject to defenses in consequence thereof, even in the hands of bona fide, holders. This rule does not apply where the right to issue such securities is, by charter, conditioned on the performance of acts by the corporation or its officers, re- lating to the management of the corporate afiEairs ; Hackensack "Water Co. v. DeKay et al., 9-558. 6. Of pledgee. In order to make the pledge of a certificate of shares of stock valid, as to third persons, it is not necessary to give notice of the pledge to the corporation ; Factors & T. Ins. Co. V. Marine Dry Dock etc. Co., 7-236. See Assessment ; Chuech Organization ; Meeting. NUISANCES. 1. Nuisances. The offense of maintaining a nuisance is not com- plete under the laws of the state, unless maintained after notice to abate ; and the city council may cause any person to be punished who maintains a nuisance in the city, in violation of their ordi- nances, at any stage previous to the consummation of the offense under the penal code ; Yason v. City of Augusta, 3-136. 2. Removal of ; notice. The order of the board of health of a municipal corporation, under the general statutes of the state of Massachusetts, for the removal of a nuisance, is valid without previous notice to the parties interested and opportunity for them to appear and be heard ; City of Salem v. Eastern II.R. Co., 3- 429. 3. ; ORDER. An order of a board of health to a railroad company, under the same statute, for the removal of a nuisance, reciting that the company, by filling up parts of a certain pond, without supplying culverts or other means of drainage, have 380 DIGEST OF THE created and are maintaininga nuisance at said pond; it sufficiently informs the company of the nature and locality of the nuisance to he removed. Id. 4. Removal of; oedee. The order need not prescribe the mode of removal, and if it does prescribe a mode for the removal, the owner or occupant of the property is not restricted thereto \ neither is the board restricted to that mode in removing the nui- sance after the owner or occupant has neglected to remove it in compliance with the order. Id. 5. No ATJTHOEiTT BY LAW. A private railroad, to .mines, was declared to be a nuisance and without authority of law. A statute authorized the location, building and operation of a railroad, and the purchase of any railroad, or part thereof, built or constructed, or partly built or constructed, to the right to use the same etc. A company was organized and to it was sold the railroad, mines and their appurtenances, and the road so purchased was adopted as part of its railroad and no other act was performed by the com- pany than to relay the track, taken up under the above mentioned decree. The road so purchased having been built without author- ity of law and being, therefore, a nuisance, the act of incorpora- tion did not authorize the company to purchase it, nor was it covered by the act of incorporation ; M'Candless' Appeal, 4-121. 6. JuEisDiOTioN ; OEDEE. In an action by a city against a party alleged to have caused a nuisance, to recover money expended by the board of health for removing it, if such party had no oppor- tunity to be heard before the board, none of its findings or adjudi- cations prehminary to the incurring of the expenses, are conclusive upon him, and all the facts on which the recovery is sought are open to be controverted and must be established by proof ; City of Salem v. Eastern R.E. Co., 2-429. 7. Action to abate. An action to recover money expended from the treasury of a city or town, by its board of health, to remove a nuisance, may be maintained in the name of such city or town; City of Salem v. Eastern E.E. Co., 2-429. OBLIGATIOI^S. 1. County bonds. The power of counties of the state of Iowa to issue bonds in payment of subscriptions for railroad stock, while such power was recognized by the settled adjudications of the highest court of the state, as settled by the supreme court of the United States, in Gelpcke v. City of Dubuque, is not open for re-examination ; Lee County v. Rogers, 2-3. 2. Town and criY ; appoetionment. A city was created by legislative enactment, embracing territory which formed a portion of the town. The act provided that all bonds previously issued AMERICAN CORPORATION CASES. 381 should be paid by the city and town, in the sam3 proportions as if the same were not dissolved ; held, that a bill will lie in equity to enforce payment by the two bodies respectively, in the propor- tion which the assessment rolls show the property in one bears to the property in the other ; Morgan v. Town and City of Beloit, 3-9. See CONTEACTS. OFFICES A.ND OFFICEKS. 1. Nature of the title of office. Neither an office nor the prospective fees thereof are the property of the incumbent. The right to fees arises only upon a rendition of services ; Smith v. Mayor etc. of New York, 3-624. 2. CoLLEOTOB OF ASSESSMENTS. A deputy colloctor of assess- ments, who has been kept out of possession of his office by an- other, and who has not performed its duties, can not maintain an action against the city to recover the amount of fees which' ac- crued to the office. Id. 3. Powers. The power to invest town officers, lawfully chosen at any town meeting, with any special authority which the town may lawfully confer upon them, in the exercise of their official duties, is incident to the power to choose them ; Sherman v. Tor- rey et al., 3-477. 4. . A specification in a warrant for an annual town meeting that it is called " to elect all necessary town officers for the ensuing year, and to raise and appropriate such sums of money as may be necessary to defray town charges'for the coming year, and pay any indebtedness of the town," is sufficient, under the general statute of Massachusetts (chapter 18, section 22) to au- thorize the town to vote at the meeting, in conformity with sec- tion 73 of the same statute, to invest the collector of taxes, then duly chosen, with all the powers which a town treasurer has when appointed collector of taxes. Id. 5. Liability for serving tax warrant. An officer who serves a warrant addressed to him by a collector of taxes, substantially in the manner prescribed by the statute of Massachusetts of 1785 (chapter 50, section 6) directing him to collect from a person named a certain sum due as his portion of a certain tax, whereof said per- son has neglected to make payment, and thereof is delinquent," is not liable in damages to the delinquent tax payer, on the ground that it does not appear on the face of the warrant that it was issued in the due and legal exercise of a power or jurisdiction conferred by law. Id. 6. PowBRS, when not duly elected. When the officers of a town organized by special charter were elected pursuant to the general statute of the state relating to the incorporation of towns and cities, at a dififerent time and as members of a body different from that provided by the special charter, they can not exercise 382 DIGEST OF THE the authority conferred by such charter upon the body therein provided for ; Town of Decorah v. Bulis, 3-278. 7. Judicial acts ; disoeetion. That an oflScer is clothed with a discretion as to the manner in which he discharges his duties, or as to the control of the attendant acts and circumstances neces- sarily arising in its course, does not give to its acts a judicial char- acter; M'Cord V. High, 3-244. 8. Highway ; consteuction of ; watee couese. The construc- tion of a highway over a' water course, by a road supervisor, is a ministerial act, and must be so performed that a person through whose land a stream meanders will not be injured by a diversion or diminution of the stream. Id. 9. Peesonal liability foe toets. When an officer, other than a judicial one, does an act directly invasive of the private rights of' others, and there is otherwise no remedy for the injury, such officer is personally liable, without proof of malice and intent to injure. Id. 10. Appointment of police officers. The vote of the select- men of a town in Massachusetts, appointing a person " on police duty," is a sufficient appointment under the statutes ; Common- wealth V. Gushing, 3-483. 11. Qualification. A police officer appointed by the select- men of a town, under chapter 18 of the general statutes of Massa- chusetts, need not be sworn to the faithful discharge of the duties of his office. Id. 12. TJnauthoeized oedees. The directions of a superior of- ficer, when unauthorized by law, do not justify a disregard of official duty ; State, ex rel., v. Magill, 3-327. 13. Umtauthoeized action ; liability foe. "When a municipal corporation has no authority Under its charter to destroy build- ings to prevent the spreading of a conflagration, it is not liable for buildings destroyed by its officers for that purpose, though they assumed to act officially ; Hornblower v. Duden, 3-86. 14. Liability of officee. The agent of a town for the pur- chase and sale of intoxicating liquors, under the general statutes of Massachusetts (chapter 86, section 17) is not liable, under any circumstances, in damages to any person for refusing to seU in- toxicating liquors ; Dwinnells v. Parsons, 3-447. 15. Liability foe mistakes. Under the statutes of Massa- chusetts, the assessors of a town are not liable for assessing er- roneously, but with integrity or fidelity, a tax on a person not an inhabitant thereof ; Durant v. Eaton et al., 3-445. 16. Personal liability of officers. The makers of a prom- issory note were described in the body thereof as " we, the trus- tees of School District No. 20, county of Olmstead," and ap- pended to the individual signatures of the makers was added the word "trustees." Held, that prima facie the note was the indi- AMERICAN CORPORATION CASES. 383 vidual obligation of the makers and not of the district ; Bingham V. Stewart et al., 3-559. 17. Mandamus. In Massachusetts, mandamus lies to enforce the right of the member of a board to the exclusion of a person whom the other members wrongfully recognize and permit to act in his stead ; Conlin v. Aldrich et al., S-461. 18. Health commissioners. The board of health, provided by chapter T2, Laws of New York, 1866, exercises administrative rather than judicial functions ; Metrop. Board of Health v. Heis- ter, 2-634. 19. Auditor of accounts ; authoeitt of. The statute creat- ing the office of auditor of St. Louis county defined his duties to " be the general accountant of said county, and keeper of all pub- lic account books, accounts, contracts, vouchers, documents, official bonds and all papers relating to the accounts and contracts of said county and its revenue, debt and fiscal affairs not herein required to be kept by some other person." Held, that this did not confer authority upon the auditor to draw warrants upon the county treasurer: State of Missouri, ex rel., v. St. Louis Co. Court, 2-594. 20. Directors of school district. While the board of direc- tors of a school district are a corporation, under the laws of Illi- nois, they are the agents of the tax payers and inhabitants of the districts, and as such can do valid acts only within the scope of their authority ; Glidden v. Hopkins, 2-172. 21. Delegation of authority. The members of a ooard of directors can not delegate their authority — the trust reposed in them being personal in its character. Id. 22. Power of clerk ; statute construed. The statute pro- vides that the clerk of the circuit and county commissioners' courts shall provide books, safes and other articles for the safe- keeping of the archives of their respective offices and that " the county commissioners' court shall make allowances for the same, and for articles of stationery necessary for their respective courts out of the county treasury from time to time." Held, that if the county board of supervisors caused the clerk's offices to be fur- nished with the necessary stationery the clerk would not be at liberty to purchase at the expense of the county; but, if the offices are not properly furnished by the board, the clerk, in the exercise of a power incidental to the office, may make .the necessary purchases and insist upon payment by the county ; M'Glaughi7 v. Supervisors, 2-146. 23. Statute of Georgia construed. It was decided by stat- ute that the city council of Augusta " shall be and they are hereby authorized to elect an officer to be known as 'recorder,' in whom they may vest exclusive jurisdiction of the violation of their ordinances ; " that, " in the absence of the recorder, the city council or mayor may appoint one of their body to preside in the 384 DIGEST OF THE recorder's court," and " that said recorder shall be elected, and hold his office for the term of two years, shall take an oath before the mayor, well and truly to discharge the duties of his office," etc. Held; (1) that it was the duty of the city council, to elect a recorder — the word " may," when used in relation to the duties of officers, being equivalent to the word "shall;" (2) that the council had no power to remove the recorder except for cause ; and, when legally removed, the mayor could not be appointed to act permanently in his place ; Vason v. City of Augusta, 2-136. 24. Eligible person. One who is competent to vote is a stock- holder. If competent to vote he is eligible to office in the corpo- ration ; State of Connecticut, ex rel., v. Ferris et al., 6-312. 25. Voting. Every stockholder has the right to vote at one time the number of shares owned by him, for the whole number of directors to be elected ; or he may cumulate his shares upon one candidate, or distribute them among many as he may see &t, and the corporation has no power to adopt any other mode of election; Wright v. Cent. Cal. "Water Co., 10-76. 26. Defect of powek. An individual officer of a corporation can not, by his acts, bind the corporation, unless such acts are authorized, or approved, by the corporation ; Brooklyn Gravel E. Co. V. Slaughter, 3-292. 27. NoN EXISTENT POWER. An officcr of a corporation has no power, by virtue of his office merely, to make a sale of the pro- perty of the company ; Chi. & Northwestern Ky. Co. v. James et al., 4r-218. 28. Acts of; corpoe ate acts. Acts of the officers of a company done in the line of their official duty, or under the sanction of law, are as effectually the acts of the company they are members of, as if those acts were done by authority of a vote of the direc- tors of the corporation ; Starrett v. Eockland Eire & Mar. Ins. Co., r-271. 29. AcMiNiSTEATrvE ACTS. Acts of administration in the ordi- nary business pursuits of a corporation can be performed by the president, or other authorized officer ; but such authority must be provided for by special laws, or by stipulations in the charter, and must apply to well defined acts within the essential object, or objects, for which the corporation was created ; Bright v. Metarie Cemetery Asso., 7-260. 30. Acts of, not binding. Where certain officers of a corpo- ration, having general authority to execute promissory notes for their corporation in proper cases ; but, having no authority in the particular case in question, in a transaction having no connection with the corporate business and not au,thorized by the corporation, and without any consideration moving to the corporation; exe- cute, in the name of the corporation, to a third person who has no actual knowledge of their want of authority, a promissory note for a claim which such third person holds against another and a AMERICAN CORPORATION CASES. 385 •different corporation, the first mentioned corporation is not liable, on the said note, to the payee thereof, where there has been no subsequent ratification, by the corporation, of the act of its offi- cers ; Ehrgott & Krebs v. Bridge Manuf . of Topeka, 7-122. 31. Theie obligations. When the people, through the legis- lature, grants to a company the right of eminent domain, for the purpose of constructing a railway, the grant is made because it is supposed the road will bring certain benefits to the public. When the company is incorporated and subscriptions are made to the stock, the money is subscribed upon the understanding that the officers, intrusted with the construction of the road, will so locate its line and establish its depots as to bring the highest pecuniary profit to the stockholders, compatible with a proper regard for the public convenience. These, and these alone, are the considera- tions which should control the action of the president and direc- tors of the road and, so far as they permit their official action to be swayed by their private interests, they are guilty of a breach of trust toward the stockholders and of a breach of duty to the public at large ; Bestor et al. v. Wathen et al., 4-351. 32. Powers and duties. The managers and officers of a corpo- lation are, in fact if not in form, trastees for its stockholders and its creditors. As such they have no right to enter into any com- bination, the object of which is to divest the company of its 3)roperty and obtain it for themselves at a sacrifice. If called upon to sell the estate of the company, it is their duty, to the utmost of their power, to secure the highest price which can be ■obtained for the property ; Jackson v. Ludeling, 5-86. 33. . If the officers of a corporation openly exercise a power, which presupposes a delegated authority for the purpose, and other corporate acts show that the corporation must have con- templated the legal existence of such authority, the acts of such officers shall be deemed rightful, and the delegated authority will he presumed; Western Un. Tel. Co. v. Eyser, 5-161. 34. Mismanagement. Oflicers and directors are mandataries of the corporation, and as such, they are liable to their principal for breaches of their duty; Raymond v. Palmer, 10-482. 35. Presumption as to. The presumption of authority to act, on the part of the proper officer of a corporation, will not be overcome by the mere fact that it is proved that there is no vote of the board of directors on the subject matter of the action ; Thorington v. Gould, 6-147. 36. Presumption as to. Persons acting as officers of a cor- poration are presumed to be rightfully in office ; W. Un. Tel. Co. V. Eyser, 5-161. 37. Binding effect of by-laws. An officer of a corporation must be presumed to know its by-laws adopted prior to his ap- pointment, and is bound by them, as by a law between himself 49 386 DIGEST OF THE and his employers, as to his tenure of office ; Hunter v. Suu Mut. Ins. Co., 5-403. 38. UsTTEPBRS. After the lawful election of other directors and their organization as a board, a note executed by the old board, still acting as such, but as usurpers, to its president and signed by him, as such, with the other oiBcers, is unauthorized and is not the note of the corporation ; Lebanon etc. G. E. Co. v. Adair, 9-259. 39. Election — setting aside. A stockholder may maintain an action to s6t aside an election of directors, although at the time of the election there was no stock standing in his name on the books of the company, sufficiently long to entitle him to a vote ; Wright V. Gen. Cal. Water Co., 10-76. 40. Act in excess of authority. If an officer of a corporar tion is continuously suffered to exercise general authority, in the corporate business, the corporation may become bound by his acts,, within the scope of the powers so assumed, as if the authority had been expressly granted ; Union Gold Min. Co. v. Nat. Bank,. 5-176. 41. Corporate liability foe acts of. If the officers and agents of a corporation contract with other persons, and, in their negotiations, so act as to induce such persons to believe they are acting for the corporation, and credit is given upon that belief, the corporation will be liable, although such officers or agents were not, in fact, acting for it in such negotiations ; Wilson Sew- ing Machine Co. V. Boyington, 5-308. 42. Act in excess of authority. It is well settled that where a person deals with an officer of a corporation, who assumes authority to act in the premises, and no irregularity or want of authority is brought to the knowledge of the party so dealing and nothing occurs to excite suspicion of such defect, the corporation is bound although the agent exceeded his powers ; Lungstrass «. German Ins. Co., 8-124. 43. Instance. Where the agent of a fire insurance company, acting under authorization of the company's secretary, accepts a policy sent him by the company and charges himself on his agency books with the premium, the contract, between him and the cor- poration, is consummated although neither the premium nor a letter of acceptance is forwarded by him to his principal. Id. 44. Company's liability foe acts of. The fact that the mis- management of a company, making its condition such as to be hazardous to parties in interest, and to the public, is attributable to one officer alone — in this case the secretary — is no defense to a proceeding to bring about its dissolution. The corporation can act only through its officers and agents and it is their management which produces the result, without regard to which one, or how many officers or agents participate in the mis-management ; Chi. Life Ins. Co. v. Auditor etc., 9-79. AMERICAN CORPORATION CASES. 387 45. Scope of power. The president of a corporation who is, also, general agent and superintendent, clothed with power neces- sary to carry on its business ; subject to the law of the state, the corporate by-laws and the directions of the directory ; has power to raise money for the company to carry on the business of the company and to pay off the debts for which it is liable ; Seeley v. San Jose Indep. Mill & Lumber Co., 9-1 Y. 46. Inditiduai, liability for tort of servant. An officer of a private corporation is liable individually for an illegal act done by him or another servant of the corporation acting under his orders where he has authority to control the servant doing the act, and such act results in an injury to another person. The fact that the corporation will also be liable will not exonerate the officer from individual Hability ; Peck w. Cooper, 10-237. 47. . Where the president of an omnibus line, issued an order to its drivers to exclude all colored persons from riding in their conveyances and, in pursuance of such order, a driver ejected a colored person from his omnibus and, in so doing, inflicted a per- sonal injury, the president was held liable individually to the per- son so ejected for the damages so received. Id. 48. ; EVIDENCE OF INTEREST OF OFFICER IN CORPORATION NOT MATERIAL. In an action to recover damages for such injury, evidence that defendant was a large stockholder in the corporation, and as to what disposition he had made of his stock, is irrelevant and immaterial. Id. 49. ; RETENTION OF OFFENDER IN SERVICE OF COMPANY MAY BE SHOWN. In such an action the fact that the driver was retained in the service of the company after the injury, with knowledge by the officers, of his misconduct, resulting in a personal injury to another, or their failure to discharge him for negligence, is ad- missible in evidence as indicating the animus of those controlling- the corporation, and an ingredient in the measure of damages. Id. 50. Purchase by, of corporate property. An agent of a corporation who, as an individual, purchases the property of a corporation from himself, as agent, can not uphold such purchase by proof that he agreed to pay what he thought the property was worth, but is liable to the corporation for the actual value of the property so, by him, purchased; Nat. Bk. v. Drake, 9-340. 51. Personal liability. In Massachusetts, an action at law does not lie against corporate officers to enforce liability, to the extent of their stock, for debts ; the remedy is in equity ; M'Rae V. Locke et al., 5-454. 52. Mal-feasance of. "When a corporation is empowered to borrow money for the proper use of the corporation, the mis-ap- propriations of money borrowed, by the officers of the company, in the absence of fraud participated in by the lender, is no defense to an action to recover the sum lent and borrowed ; Thompson et al. V. Lambert et al., 6-523. 388 DIGEST OF THE 53. Mal-feasance of. While the lender may justly be required to ascertain there is a right in the company to borrow, he will not be required to follow the money he lends and see that it is applied to a corporate purpose ; and, in the absence of bad faith on the part of the lender, it is immaterial that he has knowledge of the in- tended purpose to which the fund borrowed is to be applied. Id. 54. Wrongful appeopeiation of moneys. A bill, by a corpo- ration, against persons who were formerly its officers, to recover moneys which the bill alleges they wrongfully and fraudulently voted to themselves severally for services and nioneys, which it is alleged they wrongfully made by the use of the company's money, can not be said to be a bill which will save a multiplicity of suits. It might enable three distinct causes of action against different parties to be united, but would be as likely to create confusion as to save difficulty. Moreover, if the parties have combined in fraud, they may be united in suit at law ; Bay City Bridge Co. '0. Van Elten et al., 6-601. 55. Mis-APPEOPEiATioN OF PEOPEETT. An action agaiust an officer of a corporation, to recover damages for a fraudulent mis-appro- priation and conversion, by him, of the corporate property, can only be brought by a stockholder in his own name after applica- tion to and a refusal upon the part of the corporation to bring the action ; Greaves w. Gouge, 8-492. 56. — ^ — . The fact that the wrongful acts of an officer of a corporation have depreciated the market value of the capital stock held by a stockholder, to an extent greater than its share of the actual loss sustained, does not authorize an action by the stockholder in his own name, without making the corporation a party to recover the difference between the actual loss and the depreciation. Id. 57. WiTHDEAWAL OF DEPOSITS. The permitting of depositors to withdraw their deposits from the bank at any time before sus- pension of the bank, may or may not entail responsibilities on the directors, according to circumstances. Some thing more than mere knowledge of insolvency would be essential to sustain such lia- bility ; Eaymond ». Palmer, 10-482. 58. Abuse of authoeitt. Under general authority to officers of a corporation — in this case the president and cashier of a bank — giving them entire control of all financial transactions of the company, unrestricted by any by-laws or rules of the board -of directors or stockholders, they have no power to use the property of the corporation in the private business, or for the individual benefit, of one of themselves ; Ehodes, ass'e etc., v. Webb, 7-619. _ 59. . Under such general authority such officers can not bind the corporation by any contract to which they, or either of them, are parties. Id. 60. Instance. W., a director of a bank, owed it $1,000, evi- denced by a note, and held $1,000 of its stock. T., president of AMERICAN CORPORATION CASES. 389 the bank, made an agreement with him to purchase the stock for himself and, to carry out this agreement, the president received the stock from W. , handed it to the cashier, instructing him to hold it in place of W.'s notes and to surrender the note to "W., say- ing that he, the president, would pay the amount to the bank. The cashier received the stock, stamped the note paid and surren- dered it to "W". Held, that the bank, there being no ratification of the transaction, was not bound and that the transaction did not discharge W.'s liability to the bank upon the note. Id. 61. Salary. The officers of a corporation who are to receive any compensation, are usually provided for by regular salaries. If no salary, and no particular contract for compensation is made, much must depend upon the custom with regard to their com- pensation, and the expectation of the parties growing out of the employment ; N. O. & B. S. Packet Co. -o. Brown, 10-707. 62. Instance. In this case, the court finds that defendant's services were valuable to the company, and he having retained a stated sum out of the earnings of the company as his salary, with the knowledge of the other directors, refused a judgment for res- titution of the same, asked for by the company. Id. 63. Qu^EB. whether, in case the defendant has been suing the company for payment of his salary, the court would compel payment is not decided. Id. 64. Compensation. A contract in regard to compensation measures both rights and obligations. The agent alone can not change it, nevertheless, the services may have been of incalcula- ble benefit to the principal. His possession and control of the funds of his principal give him no added rights. A failure to return all funds atid properties of such principal in excess of the stipulated compensation, gives to such principal a clear and undis- puted right of action. This elementary rule is not changed by reason that the principal is a corporation and the agent its chief executive and managing officer ; and, in such a case, a contract to act as agent gratuitously is binding ; Nat. Bank '«. Drake, 9-340. 65. . In the absence of positive restrictions, where no salary is prescribed, one appointed to an executive office — like that of cashier — is entitled to a reasonable compensation for his services ; and the directors have power to fix the salary after the expiration of the term of office ; this, though such appointee is, also, a director and continues to be such while holding the independent office. Id. 66. . An officer of a corporation can not recover com- pensation for the performance of the usual and ordinary duties of his office, unless it has been so specially agreed. In such case he 'can not recover on the quantum meruit ; Citizens Nat. Bk. ■». Elliott, 6-571. 67. Ageeement to pat made befoee oeganization. The promoters of a corporation, or members of it, can not by agree- 390 DIGEST OF THE ment, or converse, bind the corporation they subsequently form to the payment of salaries to officers, and the fact that services are performed after organization is immaterial to change the rule of non payment for such services, save upon contract entered into by the corporation. Id. 68. ExTEAOEDiNAEY sEEViCES. For scrvices such as do not pertain to the particular office one holds, compensation may be recovered, although there be no official agreement. Id. 69. Salary of. It will be presumed that the salary awarded an officer of a corporation (as the president), is provided as a com- pensation for services which he is expected to perform for the company. Therefore, when with the assent and co-operation of the officer, the company' disposes of all its property and business, so that he has no further duty to perform or service to render as an officer, there is no basis, whether in law or in equity, for a claim that his salary shall continue. The contract, as to the salary, must be deemed dissolved by the act and consent of the parties ; Long Island Ferry Co. «. Terbell, 4-562. 70. Salary of PEEsroENr. In the absence of a by-law or reso- lution of a corporation providing compensation for the service of its president, such compensation can not be recovered ; Merrick ■0. Peru Coal Co., 4r-360. 71. Compensation foe seevices. To entitle a president or director of a corporation to recover for services rendered to the corporation, he must prove an express contract of employment, if the services, for which he claims compensation, are within the line and scope of his duties as president or director ; Santa Clara Mining Ass'n ®. Meredith, 7-396. 72. . If a president or director of a corporation renders services to his corporation which are not within the scope of, or are not required of him by his duties as president or 4jrector ; but, are such as are properly to be performed by an agent, broker or attorney ; he may recover compensation for such services upon an. implied promise. Id. 73. . A president of a corporation acting upon a commit- tee of the directory, in the prosecution of business of the direc- tory, is not entitled to compensation for services rendered, in the absence of a contract for payment for such services ; Pew v. First Nat'l Bank of Gloucester, 7-539. 74. — — . The directors of a corporation — a bank — at a reg- ular meeting, appointed their president and two others a commit- tee on alteration of a building the corporation had purchased, on which expensive repairs were projected. Subsequently, at a board meeting complaint was made tbat no one was superintend- ing the work. The president, after consulting with the other members of the committee and with the knowledge of the direc- tors, but without any vote had on the subject, devoted all his time, not taken up by his duties as president of the corporation, AMERICAN CORPORATION CASES. 391 to superintending the work, which occupied a period of six months. Had he not done so the employment of a superinten- dent of the repair would have been rendered necessary. In an action by the president, based upon an implied promise of the corporation, for the value of his services as superintendent, it was held, the facts did not warrant a verdict in his favor. Id. 75. Compensation foe. sekvices. By formal vote, the directors of a corporation fixed the salary of their president at $4-00 per annum The president acted under this vote during four years, at the expira- tion of which time he demanded an increase of compensation and verbally resigned his office. A conference committee reported that he would not serve unless his salary was fixed at $2,000 per annum. After this report was made the directors voted to fix the salary at $400. At the next meeting of the board it was voted to approve the record of the last meeting. The president, plaintiff in action, claiming to be ignorant of these votes, came to and presided at the meeting, saying, " at your request and upon the assurance that the salary shall be arranged to my satisfaction, I withdraw ray resignation." No remark was made in reply and the plaintiff, president, acted as such officer for several months when no other vote having passed on the subject matter of his salary he resigned and his resignation was accepted. He brought his action to re- cover for services at the rate of $2,000 per annum. It was held, there was no contract, express or implied, to pay him as salary other than $400. Id. 76. Quantum meruit. Plaintiff brings this action to recover compensation for services, which he claims to have rendered de- fendant (1) as its secretary, (2) as its land commissioner, (3) as its attorney and legal adviser. Defendant's charter provides that the board of directors " shall appoint a secretary and other officers and fix their compensation for the services to be rendered." Plaintiff was appointed secretary by resolution of defendant's di- rectors, but his compensation was not fixed. Held, that plaintiff is entitled to recover the reasonable value of the services rendered by him, as secretary, as upon a quantum meruit ; Kodgers v. Hasting & D. Ry., 7-600. 77. V oting salaries to Themselves. A vote of directors fix- ing the salaries of any of their number as officers of the corpora- tion, where such vote was carried by the vote of the director whose compensation is so fixed, is prima facie voidable, at the election of the corporation or of a stockholder ; Jones n. Morri- son, 10-657. 73. Office, when not vacated. Non compliance with a statutory provision that officers shall be annually elected,_ and the failure to elect a successor to an officer at the appointed time does not, in the absence of any restrictive provision of the by-laws of *he corporation, vacate the office — in this case that of president — but the officer continues to be such officer de facto, so far, at 392 DIGEST OP THE least, that service of process upon him, will bring the corporation in to court ; City of Fort Scott v. Schulenberg et al,, 7-156. 79. Attorneys at law. The managing officers of a corpora- tion have power to employ attorneys and counselors without for- mal resolutions, to that effect, from the board of directors. If such officers transcend their powers, as limited by the particular corporation, they are responsible to their employers ; but, outsiders^ are not supposed to be advised of their limitations ; Western Bk. of Missouri v. Gilstrap, 5-536. 80. Acting without fokmal appointment. For a period of four years, plaintiff, without any formal appointment by resolution, but with the knowledge and assent and at the request of the presi- dent and directors of defendant, acted as its land commissioner, and also as its attorney and legal adviser, and in both these capa- cities rendered services to defendant. Held, (1) that defendant is liable, upon an implied assumpsit, to pay the reasonable value of the services thus rendered by the plaintiff ; (2) that the fact that at the time when he acted in the capacities above mentioned, plaintiff was a member of defendant's board of directors does not preclude him from recovering for his services in such capacities, the same being outside of, and beyond his duties as director; Eodgers v. Hastings & D. Ry., 7-600. 81. PowEE OF dieegtobs — TO PAT GEATUiTiES. Directors of a corporation have no power to appropriate the funds of the com- pany to the payment of claims which the corporation is under no legal or moral obligation to pay, as for past services rendered gratuitously; Jones ■?;. Morrison, 10-657. 82. Teespasses. They are likewise liable for trespasses, frauds, deceits and other wrongs they may commit against third persons; Raymond ■?;. Palmer, 10-482. 82J. Weongful conteol. Action will lie in favor of a stock- holder, for relief against the wrongful acts of a president, when it is shown that large profits have been made by the corporation ; that the president will not suffer the books of the company to show the same ; that he is largely indebted to the company, for the use of its property for his individual purposes and profit ; that he has received all the earnings of the company ; that the other directors are stockholders only by his gift to them of stock and are under his influence and control and have yielded to him sole control of the corporate affairs. In such case an averment of demand that suit be brought by the company is not necessary ; Rogers et al. v. Lafay. Agric. Works, 7-67. 83. Peesident and diebctoes. The president and directors of a corporation must be held as occupying a fiduciary relation to the stockholders for and in behalf of whom they act. Per- sons, who become directors and managers of a corporation, place themselves in the situation of trustees, and the relation of trustees AMERICAN CORPORATION CASES. 393 and cestuis que trust is, thereby, created between them and the stockholders ; European & N. A. Ry. Co. v. Poor, 4-421. 84. Disability. Occupying a fiduciary relation toward the members of a corporation, the president and directors of a corpo- ration can not be permitted to acquire interests adverse to such relation. Id. 85. President. In the absence of legislative enactment or provision made in the by-laws, corporations usually act through their president, or those representing him. He, being the legal head of the body, when an act pertaining to the business of the company is performed by him, the presumption will be indulged that the act is legally done and is binding upon the body ; Smith V. Smith, 4-366. 86. President as. The president of a corporation, like any other person, may be constituted an agent for the transaction of its business, and his authority to act may be proved by the charter or by-laws, a direct vote of the corporators or board of directors, or by usage acquiesced in by the corporation ; Perry v. Simpson Waterproof Manufacturing Co., 87. Doubtful powee. Quaere, whether the president of a corporation can confess judgment therefor, without authority from the directors ; Jones v. Avery, 9-488. 88. Authority of the president to sell and assign securities. It can not be objected by a corporation that an assignment of a note by its president was without authority, the proof showing that by a resolution of the board of directors, adopted prior to the assignment, the president was authorized to pay off any debts owing by the company, in any securities or other property of the corporation, and there being no evidence that it was assigned by him for any other purpose than that expressed in such resolution-; Mitchell V. Deeds, 1-461. 89. General powers of president. The doctrine seems to be well settled, that the president of a corporate body may perform all acts which are incidental to the execution of the trust reposed in him, such as custom or necessity has imposed upon the office, and this without express authority. And it is immaterial whether such authority exists by virtue of his oflSce or is imposed by the course of the business of the company. Jd. 90. Presumption as to. One who, claiming to be elected to an office as president of a corporation, fills the office, and was so accepted and received until an act of ouster, by competent au- thority, is such officer, and presumed to be rightfully in office ; State, ex rel., v. M'lver et al, 4-160. 91. Inference of authority. In the absence of both statutory authority and regulations of the corporate body, if the proof shows that the president was in the habit of exercising such power; i. e. to act as agent to transfer, or dispose of property, or nego- 50 394 DIGEST OF THE tiable securities of the corporation ; then his authority to so act may be inferred ; Mitchell V. Deeds, 1-461. 92. President. The president of a corporation can not put ofE his oflBcial character and assume the status personal at will, and deny, to those who have business with the corporation, access through him. While acting upon the business of the company, within the scope of his authority as president, all his acts must be regarded as official ; Union Gold Min. Co. v. Nat. Bank, 4-298. 93. President's undertaking. The undertaking of the presi- dent of a corporation to submit, at a specified time, a claim made to the board of directors of his company, is within the scope of his power, and it bound the company to consider the claim at the time stated. Jd. 94. Power of president. The president of a corporation has authority to convene the board of directors to bring to its know- ledge any matter affecting the interest of the corporation. Id. 95. . The president of a corporation, merely as president, has no power to bind the corporation by any act of his aside from his official duties; Perry v. Simpson Waterproof Manuf. Co., 4-309. 96. . Neither the president nor cashier of a bank have the power, virtute officii, to sell the safe of the bank for a debt of the bank; Asher «. Sutton, 10-410. 97. . The directors of a corporation adopted a resolution that all laborers signing a contract to remain through the season, should be paid a bonus of fifteen per cent, when the season closed. Held, that this did not restrict the power of the president or superintendent of the company to hire other persons than the amount that may remain due, or unpaid, for the stock subscribed for by him, and may be sued by any creditor of the corporation " etc. Under this section each stockholder is severally liable to, and may be sued by each judgment creditor of the corporation ; but, exceptional circumstances must be shown to "justify a suit by one against many, or by many against one, or all. The statute seems to contemplate an action at law as the remedy; but, as to whether a bill in equity would not lie, the court expresses no opinion ; Vick et al. v. Lane, Hazlehurst & Co., 8-51. 105. The eemedt against stockholders. It has been held, by the supreme court of Illinois, that an action at law by a single creditor will lie against any stockholder of an insolvent corpora- tion, to enforce an individual liability created by its charter ; but these rulings are not to be taken as a denial of -the right to seek relief in a coui-t of equity when there are equitable grounds therefor. The right to sue at law does not necqssarily exclude the jurisdiction of a court of equity ; Eames v. Doris, 9-129. 106. . Where the personal liability of stockholders of a corporation is made, by a statute, a common fund for the benefit of depositors of trust and savings funds, and the debts due such depositors greatly exceed the assets and such personal liability combined, so that the funds will be insufficient to discharge all of the claims upon it, a court of equity may, at the suit of a part of the creditors, on their own behalf and that of all other such cred- itors, take jurisdiction, and bring before it all the stockholders and depositors, and determine their several rights and liabilities, and adjust equities, marshal the fund, and distribute it pro rata, and in such case enjoin the prosecution of suits at law by in- dividual creditors against stockholders seeking to appropriate the entire and unequal benefit of such security. The securing of a ratable distribution of such fund among all the creditors entitled to share is a proper ground for equitable jurisdiction ; and so is the avoidance of a multiplicity of suits. Fd. 107. Joint action. A statute (Rev. Stat., Ind., 1881, § 3883) provided that the stockholders of corporations formed under it " shall be liable, individually and jointly, to an amount equal to the stock held by them respectively. " A creditor is authorized to join all the stockholders in action ; Overmyer et al. v. Cannon, 9-241. 108. Eemedt cumulative. The provisions of the code of Georgia, concerning actions against corporations and other com- panies (code of 1873, 582, §§ 3367, 3375), are cumulative, not re- strictive. So, where suit was brought against certain persons for material furnished in and about the erection of a building and a judgment prayed against them personally and, also, a lien fore- closed against certain property, which it was alleged they owned AMERICAN CORPORATION CASES. 433 as a joint stock company, a judgment against them as individuals was not so illegal as to be set aside on motion, or to be resisted by aiSdavit of illegality ; Mosely et al. v. Jones, 9-53. 109. Keseevation in charteb, as limiting the mode, a reservation in an amendment to the charter of a corporation — in this case an insurance company — of the right of the legislature to bring the corporation under the operation of general laws, does not bind the legislature to enact any specific law, and does not operate as a contract with the stockholders that they shall be subjected to any specific additional primary liability on their con- tracts of subscription. It only gives a discretion to enact such general law as the legislature, in its discretion, deems best for the public good, and such laws may be penal in their character as to the liability of stockholders ; Diversy v. Smith, 9-155 ; Burkett et al. V. Piankinton et al., 9-155. 110. Treated as paetnees; eemedt. A charter of incorpo- ration provided, " tbat, until $30,000 of the stock shall have been paid in, every stockholder of said company shall be held individ- ually liable for the debts of the company." Under this provis- ion, the stockholders are jointly and severally liable, until the payment of the $30,000, for all the debts of the company ; and, they are to be held as having contracted their obligations as part- ners, not as guarantors, where a creditor for any such debt is himself a stockholder, he can not sue at law, but must seek his remedy in equity ; Perkins v. Sanders et al., 8-53. 111. Of stockholder, not enfoeceable by the corporation. The constitution of a state provided that a stockholder should be liable for the amount of his stock and for all sums unpaid upon the stock subscribed. This is not a liability which can be en- forced by the corporation ; but, only by creditors of the corpora- tion ; Liberty Female College Ass'n v. Watkins, 8-229. 112. Remedy against dieeotoes. Under a statute containing a provision that, " if the indebtedness of any company, organized under this act, shall at any time exceed the amoun,t of its oapi'tal stock, the trustees of such company assenting thereto shall be personally and individually liable for such excess, to the creditors of the company " an action at law can not be sustained by one creditor, of mafly, for the liability created, or for any part of it. The remedy is in equity ; HOrnor v. Henning et al., 6-1. 113. Remedy TO ENFOECE double liability. Where a consti- tutional enactment executes itself to the extent of imposing an individual liability on stockholders, but the legislature omits to prescribe the manner of enforcing it, or the statute fails to give a creditor a right of action in a court of law to enforce such lia^ bility, a court of equity is the appropriate tribunal to act; Jones et al. V. Jarrnan, 6-198. 1 14. Double liability. The constitution of the state of Mis- souri provided " dues from private corporations shall be secured 55 434 DIGEST OF THE by such means as may be prescribed by law ; but, in all cases, each stockholder shall be individually liable, over and above the stock by him, or her, owned and any amount unpaid thereon, in a further sum, at least equal in amount to, such stock." A statute (Wagner's statutes, 291, § 13 ; Gen. stat., 1865, 328, § 11), was adopted pro- viding for the issue of an execution against any of the stockholders of the corporation to an extent equal in amount to the amount of stock by him, or her, owned, together with any amount unpaid thereon, upon a return of execution nulla bona, against the corpo- ration. A stockholder of the delinquent corporation is not liable for double the amount of his stock, on execution against the com- pany, the execution having been levied after the stock has been transferred on the corporate books, the transfer being in all re- spects complete ; Miller et al. v. Great Repub. Ins. Co. etc., 8-82. 115. Double LIABILITY. A statute provided that if any company . , . dissolve, leaving debts unpaid, suits may be brought against any person , or persons, who were stockholders at the time of such dis- solution, without joining the company in such suit. The liability of the stockholder was double, that is equal to twice the amount of stock by him held. Defendant could not be held liable for the entire amount of the corporate debt, but only in a sum equal to the amount of stock owned by him, together with the amount of his unpaid subscription ; Perry et al. v. Turner et al., 8-111. 116. Change of conditions or, by subsequent legislation. A constitutional provision, that " dues from corporations, not possess- ing banking powers or privileges, shall be secured by such indi- vidual habflity of stockholders of the corporation, or other means, as may be prescribed by law," was designed to express the reservar tion of power in the general assembly in granting charters to pro- vide, from time to time, by legislation, as experience should sug- gest or wisdom dictate, for the securing of dues from corpprations, by individual liability of the corporators, or other means. It is not required, of necessity, that this should be done in the charters, and be made a condition precedent to the exercise of corporate powers, but rather to cast upon the legislature the supervising duty of ascertaining what legislation shall be necessary to attain the desired end, and then to provide it ; so that every stockholder in a corporation of a character not within the exception named, organized under that constitution, took his stock subject to this supervisory power of the general assembly, and to be affected by whatever legislation in that regard the general assembly might deem necessary ; Weidenger v. Spruance, 9-102. 117. . The general insurance law of 1 869, of Illinois, pro- vides that " the trustees and corporators shall be severally liable for all debts or responsibilities of such company, to the amount by him or her subscribed, until the whole amount of the capital of such com- pany shall have been paid in." The Commercial Insurance Com- pany was organized under a special charter granted in 1865, which AMERICAN CORPORATION CASES. 435 did not prescribe as a condition to the liability of the individual Btockholders that the entire capital of the company should be paid in, nor did the charter, as considered for the purposes of the decision, contain any reservation to the general assembly of power to amend it. Nevertheless, that provision of the act of 1869 was given effect as against the corporators or stockholders of the company for lia- bilities of the corporation accruing after the act went into effect — and this, by virtue of the reservation of power to the general assembly, in the constitution, to supervise, in that regard, the affairs of pre-existing corporations. In giving such effect to the act it was not regarded as an impairment of the obligation of the contract between tne prior stockholders and the corporation, or the credi- tors of the corporation. The act simply required pre-existing cor- porations to cease to carry on business unless they should comply with its provisions and the liability imposed upon the stockholders is by way of penalty, only, for disobedience to this mandate. Id. 118. Change of conditions of, bt subsequent legislation. The charter of the company authorized the directory to call in such an instalment on stock subscribed as they might deem necessary — not less than twenty per cent, in cash — and the balance to be secured in a prescribed manner. Even if there was an implied authority, in the absence of any express grant of power to that effect, for the company to commence or prosecute business before the payment so authorized to be required, was made, still such implied authority but amounted to a license, subject to be revoked, except so far as acted upon, at any time, by the general assembly. Id. 119. . The obligation of the contract, of each subscriber, was that he should pay for his stock. A mere expectation on his part that the law would not be enforced in requiring all the capi- tal stock to be paid in, was not a vested right. It became the duty of the corporation to have payment made in to its treasuiy of its capital stock, and if the stockholders failed to exercise their con- trolling authority in requiring that duty to be performed, it was competent for the general assembly to impose a reasonable penalty, such as that prescribed in the act of 1869, for the non perform- ance of that duty, although the duty may have been declared, and its performance enjoined, by the principles of the common law or the provisions of a prior statute. Id. 120. When enfoecbd at law. Under a general incorporation act, which provides that stockholders of a corporation shaUbe sever- ally, individually, liable to creditors of the company, to the amount of unpaid stock held by them respectively, the stockholder is primarily liable to such creditors to the extent of his indebtedness for stock, and any creditor may maintain an Action against the individual stockholder and recover the amount due on the stock held ; Smith et al. «. Londoner, 6-302. 436 DIGEST OP THE 121: JuEiSDionoN OF EQDiTT. A court of equity will, for the benefit of a creditor of an insolvent commercial corporation, com- pel a stockholder in such corporation to pay in the amount of capi- tal stock, which he lias contracted with the corporation to take ; in other words, when a stockholder has contracted with the cor- poration to pay in a certain amount of the capital stock, he is bound by such contract and a court of equity will enforce it, for the benefit of creditors of the insolvent corporation ; Harmon v. Page et al., 9-29. 122. . Neither the provisions of the constitution of Cali- fornia (art. 4, §§ 32, 36) of 1863, nor those of the constitution of 1869 (art. 12, §§ 2, 3), nor the civil code of the state (§ 322), oust a court of equity of its jurisdiction to compel the stockholders of commercial corporations to pay in, for the benefit of creditors, the amount of capital stock contracted for by them. Id. 123. . In eases where many persons have claims and are prosecuting, or are about to prosecute them, at law against one defendant, or class of defendants, or a fund liable in equal de- gree to all those persons and to others, a court of equity, to fore- stall a multiplicity of actions, has jurisdictiou of an action for a general accounting and adjustment of all the rights and to restrain separate and individual actions at law, in the same or other courts, thus bringing all the litigation into one suit ; and, in this regard, it is immaterial whether the rights of action arise from general principles of law or from particular provisions of constitution or statute ; Pfohl v. Simpson et al., impleaded, 8-52. 124. . The bringing into one such action, however, of all parties similarly situated, will not give a right or impose a liability which did not exist otherwise. Id. 125. Instance. An action was held maintainable which was brought by a creditor of the Peoples Safe Deposit and Savings Institution, organized under Law of 1868 of New York (ch. 816), in his own behalf and that of other creditors, against the stock- holders of said company, the assignee in bankruptcy and such creditors as had brought suits at law, to collect of such stockholders the sums for which they were liable under the provisions of said act (§§ 13, 14), to distribute the same among the creditors and to restrain the prosecution of said actions at law and the fact that, by the statute, the stockholders were made severally liable did not preclude the attaching and exercise of this equitable jurisdiction ; but, the court, in such action, could only divide among all the cred- itors, having legal claims against one or more of the stockholders, the avails of the liabilities of those stockholders ; it could not take from one creditor his right against a certain stockholder and give it, in whole or in part, to a creditor having no legal right against that stockholder. Id. 126. Lien of suit. Unless by statute it be otherwise provided, the institution of suit against a stockholder for a corporate debt AMERICAN CORPORATION CASES. 437 does not operate as a lien upon his limited liability, so as to hold him therefor against a senior judgment and execution obtained in an action commenced later ; State Savings Ass'n v. Kellogg, 8-186. 127. OoifO0EEBNT juEisDiOTioN. In enforcing the personal liability, of a stockholder of a commercial corporation, for all dejats and liabilities of the corporation contracted or incurred during the time he was a stockholder, in such proportion of aU its debts contracted or incurred during the time he was a stockholder, as the amount or shares owned by hirn bears to the whole of the. subscribed capital stock, or shares, of the corporation, the creditor has an election of remedy. At law it is constitutional or statutory ; in the other case it is equitable ; Harmon v. Page et al., 9-29. 128. PEOCEEDmG m equity. A creditor of a corporation, having exhausted his remedy against the corporation, by judg- ment, execution and return of nulla bona, may proceed, by bill in equity, against stockholders to compel the payment of unpaid subscriptions to the capital stock; Wetherbee v. Baker etal., 9- 547. ] 29. Form or AonoN. A creditor of a manufacturing corpo- ration, organized under the general manufacturing law of New York (Laws of 1848, ch. 40), in seeking to enforce the indi- vidual liability of stockholders, imposed upon them by that stat- ute (§ 12) where the stock has not been paid in, has his elec- tion either to bring an action at law against a stockholder or to bring an action in equity, against all the stockholders, for an accounting between them and all the creditors ; Mathez v. Bei- dig, 8-507. 130. Pleading ; complaint. In an action against stockhol- ders, by a creditor, to recover upon their personal liability to the amount of stock held by them, it is not necessary to allege the manner of their acquisition of stock. It is sufficient to aver the fact they are stockholders, and the amount of stock they hold ; Overmyer v. Cannon, 9-241. 131. Who may sue. The charter of a corporation, providing that " each stockholder shall be liable to double the amount of stock held, or owned by him," it gives a creditor of the corpora- tion a right of action at law, in his own name, against any stock- holder, for the recovery of the amount due him, and each stock- holder is severally and individually liable ; M'Carthy v. La- vasche, 6-419. 132. Who peoceeded against. The creditor of a corporation is not required to proceed against all the stockholders, for their pro rata shares ; but, he may recover his entire claim against one ; provided the amount of the debt to him does not exceed the stockholder's proportion of the entire indebtedness of the com- pany; Boyd & Son v. Hale et al., 6-354. 133. Necessary parties. A statute concerning corporations provided, " where the whole capital stock of a corporation shall not 438 DIGEST OF THE have been paid in, and the capital paid shall be insufficient to sat- isfy the claims of its creditors, each stockholder shall be bbund to pay, on each share held by him, the sam necessary to complete the amount of such share, as fixed by the charter of the com- pany, or such proportion of that sum as shall be required to sat- isfy the debts of the company." In enforcing such liability the proceeding should be in equity and prosecuted for the benefit of all the creditors, and the corporation is a necessary party ; Weth- erbee v. Baker et al., 9-54T. 134. Disability consteued. The charter of a bank providing that all the stockholders of the corporation shall be severally and individually liable to the depositors of the bank, to the amount of stock held by them, respectively, during six months after the sale and transfer of their stock, creates a several liability on the part of stockholders in favor of depositors only. There is no liability incurred to the bank, or to creditors other than depositors, and the remedy of the depositor, in such case, is in law ; Wincock V. Tnrpin, 6-473. '. 135. Mbasiteb of, "Where, by constitution and statute, it is provided there shall be a liability of the stockholder for indebted- ness of his corporation to the extent of an amount equal to the value of his stock, paid and unpaid — that is a double liability — the stockholder is not liable for the debts of the company in fuU, as in case of partnership ; but, only to an amount equal to his stock together with any unpaid subscription ; State Sav. Ass'n v. Kellogg, 8-186. 136. Effect of bankeuptot. It is no defense to a bill in equity, to enforce statutory liability of directors or stockholders of a corporation that, at the time of demand made on an execu- tion issued on the judgment recovered in the original action and at the time of filing the bill, the corporation was in bankruptcy and its property in the hands of an assignee in bankruptcy ; First Nat. Bank v. Hingham Manuf. Co., 7-496. 137. Peoof of debt in bankeuptoy. It is no bar to a bill in equity against a corporation and its directors or stockholders, to enforce the personal liability of the latter, that the plaintiffs have proved their demands in bankruptcy against the corporation and received dividends thereon. Id. 138. DiscHAEGE IN BANKEUPTOY, The discharge in bank- ruptcy, of a director or stockholder of a corporation under pro- ceedings begun before an action is brought against the corporation, in which judgment is afterward obtained against it, is no defense to a bill in equity brought by such judgment creditor to enforce the personal liability of such director or stockholder for an excess of indebtedness of the corporation over the sum of its capital stock, or for the amount due for stock subscribed. The phrase " contingent liabilities " in the bankrupt law (U, S. Eev, Stat., § 5,068) can not be construed to include the possibility that, by AMERICAN PORPORATION CASES. 439 means of proceedings not yet instituted, the bankrupt may have enforced against him a liability created by statute, which can be enforced only by statutory method and which does not grow out of any contract on the part of the bankmpt with the person, or persons, for whose benefit the statute may be invoked. Id. 139. Composition in bankruptct and release. A director or stockholder of a corporation being liable as an indoraer on the note of the corporation becoming bankrupt and, in proceedings for a composition, receiving a release from all liability as such in- dorser, can not urge that fact in defense to a bill -in equity against him and other directors and stockholders to enforce their personal liability, as such, on the same note and other debts of the corpo- ration. Id. 140. Another action, no defense. The fact that another creditor has filed a biH,'in equity, in behalf of himself and all other creditors who may join etc. against the stockholders of a corporation which is in default of payment, in no manner afEects the right of an individual creditor to maintain his act at law against an individual stockholder who is liable ; Qarling v. Baech- tel ct al., 7-345. 141. . It is no ground of objection to a bill in equity, filed under a statute authorizing a judgment, or other, creditor to file a bill in behalf of himself and all other creditors of a corpo- ration, against a corporation and its directors, to enforce the per- sonal liability of the latter, on the ground that the debts of the company exceeded the capital stock at a particular time, that the directors are, also, defendants to. a bill in equity brought by the same plaintiffs against them as stockholders to enforce their indi- vidual liability on the ground that the capital stock of the corpo- ration was not paid in. The same principle applies to a bill against stockholders sued as directors to enforce liability for an excess of indebtedness over the capital stock ; First Nat. Bank v. Hingham Manuf. Co., 7-496. 142. Estoppel by payment op subscription. The mere fact that a stockholder in a manufacturing company, pays his subscrip- tion, knowing that the whole capital stock of the corporation has not been subscribed for, and, that the company is incurring debts for buildings and materials necessary in and about its business, is not such an act of participation as will estop him, when sued by a creditor of the corporation, from setting up as a defense, the partial subscription to the capital stock ; Garling ». Baechtel et al., 7-345. 143. Estoppel bt participation in iRREotrLARiTY. Where a stockholder, in a manufacturing corporation, made liable by stat- ute to the creditors of the company to an amount equal to the amount of capital stock held by Mm, is sued, under the provisions of the statute for the recovery of a debt owing by the corpora- tion, it he has participated in the affairs of the company, attended 440 DIGEST OF THE meetings of stockholders, and knows the company is engaged in business, purchasing property and incurring liabilities, as well as that the capital stock has not been fully subscribed for and taken, he will be estopped, from pleading the partial subscription to the capital stock ; but, in such case the debts must have been con- tracted on the faith of some act, or acts, or participation on his part. Id. 144. Bill to enforce. Under a statute which provides that a "judgment creditor, or any other creditor, may file a bill in equity in behalf of himself and all other creditors" of a corpora- tion, to enforce the personal liabiHty of th,e stockholders or di- rectors of the corporation, the bill may be exhibited by two or more creditors in behalf of themselves and all other creditors ; and, a prayer that the defendants be ordered " to pay to the plain- tiffs and to such other creditors as may become parties to the bill " the amounts due to them is not repugnant to a bill so framed; Nat. Bank «. Hingham Manuf. Co., 7-496. 145. . A statute provides, of stockholders, they "shall be individually liable in an amount equal to double the amount of stock owned by them, for aU debts of such bank, and such in- dividual liabihty shall continue for one year after any transfer or sale of stock by any stockholder or stockholders " (Gen. Stat., Minn., ch. 32, § 21). The statute applies to stockholders in all banks organized under the chapter since the passage of an amen- datory act of 1869 (ch. 85). The remedy to enforce the lia- bility given is exclusive, and requires the creditor to file his com- plaint, in the district court (Gen. Stat., ch. 76), against all stock- holders liable ; Allen w. Walsh, 7-634. 146. Insufficient bill to enforce. A bill in chancery, ex- hibited by the receiver of a banking corporation and a creditor, who claims as a depositor, to enjoin actions at law, by depositors, against stockholders, which fails to allege that such stockholders are liable for unpaid balances due on their stock, or under a clause in the charter of the company which renders them liable to de- positors to the amount of shares of stock held by them, or that their liability was incurred in some other way, is too indefinite and vague to sustain a decree for relief against such stockholders ; Wincock et al. v. Turpin, 9 -473. 147. Action between partners. A partnership firm, as a creditor of a corporation, can not maintain an action at law against a member of such firm to enforce his individual liability, as a stockholder, to the creditors of the corporation ; since, he can not be both a plaintiff and defendant; Buchanan v. Meisser, 9-209. 148. Defense. In an action to enforce a personal liability im- posed by statute, for a default in making reports, the trustees sought to be charged can not avail themselves 01 a defense not per- sonal to them, but going to the foundation of the claim and cause AMERICAN CORPORATION CASES. 441 of action against the corporation, which would not be available in its favor; and, where a valid debt exists against the corporation to which it has no good defense, legal or equitable, the trustees, if in default, are chargeable with its payment ; Whitney Arms Co. V. Barlow et al., 8-425. . 149. Release feom, by ooepoeation. A statute (Missis. Code, 1871, § 2413) provides " that each stockholder shall be individually liable for the debts of the corporation, contracted during his owner- ship of stock, for the amount or balance that may remain due or unpaid for the stock so subscribed for by him, and may be sued by any creditor of the corporation, and such liability shall continue for one year after the sale or transfer of the stock." The liability of a stockholder to the extent of his unpaid subscriptions to a creditor of the corporation, is not discharged by a release executed by the corporation, when solvent, in consideration of a payment in excess of the calls and a surrender of one-half the subscribers' shares ; Vick v. La Eochelle, 8-63. 150. EQurrABLE eelease of. A promissory note, signed with the name of a corporation by its treasurer and indorsed with its name by its directors was delivered to a person under a written agreement with him and the corporation, by which he sold prop- erty to the corporation, and the corporation was to give the note as the price, and, in pursuance of a contemporaneous oral agree- ment, made in a talk with the directors, " that there should be no personal liability on the note referred to " in the written agree- ment. He afterward recovered judgment on the note, in an action at law against the corporation. It was held, on a bill in equit}', against the stockholders of the corporation, to enforce pay- ment of the judgment, under statutory provisions (Stat. Mass., 1870, ch. 224, §§ 39 et seq.; 1875, eh. 177, § 1 ; and, 1876, ch. 1, § 1), that the oral agreement meant that -there should be no statutory liability on the part of the stockholders, and that this agreement was admissible in defense, and was not merged in the" judgment ; Brown v. Eastern Slate Co. et al., 9-465. 151. Insolvency op tbanspeebe. Where, before execution against a corporation, the stockholder honestly and without inten- tion to defeat creditors of the company, sells and transfers his stock, the mere fact of the insolvency of the purchaser at the time of the transfer is not sufficient ground upon which to hold such stockholder liable for the corporate debts. The inquiry in such a case is whether the transfer was fraudulent and void as to creditors of the company. If the stockholder making the transfer had knowledge of his assignee's insolvency at the time of the assign- ment it would be very strong evidence of fraud, making it hard' to resist the conclusion that the transfer was made in bad faith ; Miller et al. v. Great RepubKc Ins. Co. etc., 8-82. 152. Statute op limitations. Where a trustee has become liable for a debt of his corporation, because of failure to make and 56 442 DIGEST OF THE file an annual financial statement, the statute of limitations begins to run as to that and the right of action is barred, according to the terms of the statute, although the default is continued during succeeding years ; the continuance of the default does not con- tinue the liability or create a new one ; Losee et al., ex'rs etc., v. Bullard, impleaded etc., 8-603. 153. Limitation of eight of action against stookholdees. The general manufacturing act of the state of New York (Laws of 184:8, ch. 40), provided that stockholders, under special circum- stances, shall be liable " to creditors of the company " for " debts and contracts of the company." A subsequent section of the statute defines the conditions of enforcing such liability ; 1, that the debt must be payable within a year from the time it was con- tracted ; 2, that suit against the company must have been brought within a year after the debt became due ; 3, that execution against the company must have been returned unsatisfied ; and, 4, that suits against persons who, have ceased to be stockholders must be brought within two years thereafter. A creditor of a corporation organized under this law can not maintain an action against a stock- holder to enforce the liability imposed until he has obtained a judg- ment upon his claim against the corporation and an execution has been issued and returned unsatisfied. Therefore, the statute of limitations does not commence to run in favor of a stockholder until after the return of execution against the corporation ; Handy v. Draper, 9-633. 154. . In such case the stockholder's liability is limited to the amount of his stock with interest from the time of the commencement of the action ; wherefore, the allowance of inter- est from the date of the recovery of judgment against the corpora- tion was error. Id. 155. Onus PEOBANDi. "Where personal liability for , the debts of a corporation is imposed upon trustees and stockholders, in case of non compliance with provisions of the statute under which the company is organized, it is incumbent on the plaintiff, in an action to enforce such liability, to establish that the provisions have not been complied with ; Chase «. Lord et al., 8-575. 156. Nboebsaet facts to establish. Where one, who is a shareholder of a corporation, claims exemption under the pro- visions of a general incorporation law, he must show that the corporation, of which he is a member, has complied with all mate- rial, or mandatory, requirements of the law, authorizing the incor- poration, and exemption. An attempt to become incorporated, although in good faith, and user of franchises, will not suflBce to secure exemption and bar a personal action ; Kaiser v, Lawrence Savings Bk., 6-5 Y4. 157. Set off. In a proceeding in eqjiity, a bona fide judg- ment debt, of a holder of stock of a corporation, may be set ofE against the claim to make him individually liable for the debts of AMERICAN CORPORATION CASES. 443 the corporation in proportion to his stock ; Boyd & Son v. Hale et al., 6-354, 158. Judgment fraudulent. A judgment offered to be sot off, in a suit to recover from an individual stockholder his proportion of the indebtedness of the corporation, may be attacked for fraud ; but, the pleadings must allege the facts of the fraud and the proof must establish these, in order to set such judgment aside. Id. 159. Right to set off debt due feom the oorpobation. In an action by a creditor of a corporation against a stockholder to enforce his individual Hability to the amount of his stock, he can not plead, as a set off, an indebtedness of the corporation to him- self ; as such set off is not that of the party suing. Debts, to be set off at law, must be mutual and between the same parties ; Buchanan v. Meisser, 9-209. 160. Set off. A defendant, in an action to recover an in- debtedness of a corporation, on the ground that the capital stock had not been paid in, set up as an equitable off-set, an alleged in- debtedness of the corporation to him. It was made to appear that the amount of his claim was less than the amount due upon his subscription for stock. It was adjudged that defendant was not entitled to the off-set claimed ; that he was bound first to pay his own debt to the corporation and only in case there was a bal- ance due him after such payment was he entitled to the allowance to the extent of that balance ; that it was immaterial that his claim had not been actually applied on the subscription, as plain- tiff had a right to insist that, equitably, it should be so applied when defendant stands upon an equitable right ; Wheeler v. Mil- lar, 9-647. 161. Set off in EQmTT, A creditor of a corporation recovered a judgment at law against the corporation, upon which an exe- cution was issued, and returned nulla bona. Thereupon the judg- ment creditor exhibited a creditor's bill against several persons as stockholders in the corporation, for the purpose of recovering their nnpaid subscriptions in satisfaction of his debt. The cor- poration was, also, made a party. At the time of the bringing of the suit, in which the judgment was rendered, the corporation held a claim for damages against the plaintiff in that action, grow- ing out of the same transaction as that involved in the suit at law, and of such character that it could have been interpdsed as a set off in that suit — but that was not done. The corporation, however, asked leave to file a cross bill in the suit in chancery, by which it sought to set off its claim as against the judgment held by the complainant in the original bill, who was alleged to be a non resident of the state. The trial court refused to permit the cross bill to be filed. This was held to be error. Although the claim of the corporation was a legal demand, and capable of be- ing set off in the suit at law, the corporation was not bound to set it up as a defense in that suit. The judgment creditor having 444 DIGEST OF THE invoked the aid of a court of equity to enforce the collection of his ]'udgment, this claim of the corporation became a proper sub- ject of set off in that suit, if there was equitable ground for such relief. The fact of the non residence of the complainant in the creditor's bill afforded such equitable ground ; Quick et al. v. Lemon, 9-204. 162. OoEPOBATE BOOKS. In an action by a depositor, in a cor- poration having banking powers, against one of its stockholders, to enforce his personal liability, the bank ledger, although not a book of original entries, is competent testimony, as an admission of the company, on its own books, of the amount due the de- positor ; Dows V. Naper, 6-424. 163. ; TO SHOW ACCEPTANCE OF CHAETEE AMENDMENT. The record or journal of the acts and proceedings of a corporation is admissible in evidence against a stockholder, in a suit to enforce his personal liability to a creditor of the corporation. It is com- petent evidence to show an acceptance of an amendment of the charter, without first showing that the persons accepting the same were directors, when they are named as such in the journal. Id. 164. Evidence of deposit. Where the charter of a corpora- tion with banking powers provided that its officers, when re- quired by any person making a deposit in the savings department of the company, shall issue certificates of deposit for the same, and made the stockholders personally responsible to depositors in such department, it is not essential to the liability of the stock- holders that a certificate of deposit be given, but the amount and character of a deposit may be shown by any other competent evi- dence. It may be shown by the pass book given the depositor. Id. 165. Extinguishment op liability. The recovery of a judg- ment by a creditor of a corporation against a stockholder, for a sum equal to the amount of his stock, that being the limit of his liability for the corporation, will extinguish his liability. So, it is not doubted, will a voluntary payment, by him, to such a cred- itor of the corporation as has the right to sue him and recover judgment at law on his liability ; Buchanan v. Meisser, 9-209. 166. . A payment of a sum equal to his stock, however, to a firm of which he is a member, in satisfaction of a debt due from the corporation to his firm will not release him from his lia- bility as a stockholder of such corporation, or bar a suit by another creditor ; as the firm could not maintain an action at law against him. Id. 167. Judgment conolusive. There is room for contending in a case where the liability of the stockholder attaches, as an indi- vidual, that a judgment obtained without fraud, or collusion be- tween the judgment creditor and the corporation, is conclusive and binding on the stockholder, as to the fact and extent of the company's liability ; but, the questions whether the cause of action , AMERICAN CORPORATION CASES. 445 adjudicated was of a nature to iavolve the stoukholder under the statute, and whether the conditions as to ownership of stock ex- isted are to be considered open ; Bohn v. Brown, 6-582. 168. ExEODTioN AGAINST STOCKHOLDERS ; WHEN. Where an action is brought, in Kansas, against an incorporated bank, to re- cover money due upon a certihcate of deposit, issued by it to the plaintiff, and certain stockholders of the corporation are, also, made parties defendant and the petition fails to show that the bank is dissolved, or that primarily there is any liability against the stockholders, within' the terms of the statute, no judgment can be rendered in the first instance against the stockholders. After judgment is obtained agaiiist the corporation, if the execu- tion issued thereon against its property be returned nulla bona, then execution may issue against any of the stockholders, to an extent equal in amount to the amount of stock owned by him or her, in accordance with the terms of Comp. L., 1879, ch. 23, art. 4, § 32 ; Valley Bank & Savings Inst. v. Ladies Congrega- tional Sewing So., 9-331. 169. Execution; when liability fixed. A statute (Wag. Stat., 291, § 13) provides, "if any execution shall have been is- sued against the property or effects of a corporation, and if there can not be found whereon to levy such execution, then such exe- cution may be issued against any of the stockholders to an extent equal in amount to the amount of stock by him, or her, owned, together with any amount unpaid thereon ; provided, always, that no execution shall issue against any stockholder except upon an order from the court in which the action, suit or other pro- ceeding shall have been brought or instituted, made upon motion in open court, after sufficient notice, in writing, to the person to be charged ; and, upon such motion, such court may order execu- tion to "issue accordingly." The liability of the stobkholders is measured by the number of shares held by him at the return of the execution, and not by the number which he held when the motion was filed ; Skrainka et al. v. Allen, 9-5i!2. 170. Paetneeship. Where a partnership owns stocK in an in- solvent corporation a member of the firm will be liable, to an exe- cution against him individually, as a stockholder, upon a motion of a creditor of the coi-poration, in all cases where the firm would be subject to such liability ; Bray's adm'r v. Seligman's adm'r, 9-507. 171. Appoetionment. Where a joint action may be and is in- stituted against stockholders of an insolvent corporation, to recover of them the sums by them due upon subscriptions to stock, it is not error to award a judgment for the entire sum of the debt against all, to be discharged upon the payment of specified sums apportioned among the stockholders, as they are bound to pay under the statute ; Overmyer et al. «. Cannon, 9-241. 446 DIGEST OF THE 172. CoNTKiBUTiON. Where a stockholder of a corporation be- comes liable under its charter for all debts of the corporation, and he has been sued, recovered against, and paid the amount of the recovery, he is entitled to contribution from the other stockholders, who are liable under the same law and he may enforce this right in equity ; Winoock et al. ». Turpin, 6 -473. 173. . A statute which provides for contribution, in the event any stockholder is compelled to pay the debt of any creditor, giving a right of joint or several action and recovery of the ratable amount due from" the one or more persons so sued (Comp. L., sec- tion stated in the opinion) does not contemplate a joint judgment, by which one party defendant would be charged, not only for his own delinquency, but, for the delinquency of others. The words of a statute should be very plain before it should be held to au- thorize a joint judgment on promises which were several; Bagley v. Beecher, 6-595. 174. . A statute provided that all stockholders of a corpo. ration shall be severally and individually liable to the creditors of the corporation of which they are stockholders to an amount equal to any unpaid subscription to stock, held by them respectively^ If any one stockholder is required, under such statute, to pay a debt due by the corporation, he is entitled to contribution from all the other stockholders whose subscriptions are unpaid ; Weber v. Fickey, jr., use of etc., 7-385. 175. . In such case if a stockholder shall not have paid up his subscription but shall claim to be a creditor of the corporation of which he is a stockholder, his unpaid stock is liable for the debt and he can not recover from any other stockholder to the full ex- tent of his claim. Id. 176. •: . Where the stockholders of a corporation are indi- vidually liable for its debts and a bill is filed by one creditor, in behalf of all the creditors, against one of the stockholders, the court should ascertain the whole of the indebtedness of the com. pany and render a decree for the payment of all of it ; and, it may be collected from the solvent stockholders, or stockholder. In settling the equities between the stockholders, however, each should be made to contribute in proportion to the amount of his stock ; and, if the complainant himself be a stockholder, he should be made to contribute his share of his own debt and to all other debts which may be established ; Perkins v. Sanders et al., 8-53. 177. . Plaintiffs and other stockholders in an insolvent corporation, supposing themselves to be personally liable for the payment of the corporate indebtedness, joined in an agreement with defendants, who were stockholders in the same company, by which it was stipulated that defendants, for the benefit of all the parties to the agreement, should negotiate for the purchase of the corporate debts, effect a purchase of them, paying therefor less than their nominal amounts and, Bubsequently, collect them of the AMERICAN CORPORATION CASES. 447 corporation, and receive out of the corporate fnnds, a sum more than sufficient to pay all their disbursements and expenses. De- fendants, in such case, can not recover of plaintiffs a sum in excess of the cost of obtaining a discharge of plaintiffs' personal liability; and, in equity, all the cost having been paid by the money of the corporation, received by the defendants, they have no valid claim against the plaintiffs for indemnity or contribution ; Sinclair et al. V. Eedington et al., 8-387. 178. OoNTEiBUTioN. A Stockholder of a corporation who pays the amount of his individual liability to a firm of which he is a partner, for a debt due such firm from the coi-poration, thereby acquires an equitable right against his co-stockholders, recognizable and enforceable only in equity ; Buchanan v. Meisser, 9-209. See Cbeditoe's Bill ; Directors ; Dissolution ; Estoppel ; Or- riCBS AND Officers; Organization; Partnership; Penalty; Stock and Stockholders (148-197). PLANK EOAD OOMPA:N"Y. 1. Public highways. Plank roads constructed by private cor- porations, are public highways, especially when constructed upon the right of way of public highways, and travelers have the same right to use them as other public highways, upon the payment of the tolls authorized to be collected; Oraig v. People, ex rel. JSTeviU, 3-240. 2. Closing same. A plank road constructed over a portion of a public highway, which highway was closed to divert travel to the plank road, can not be closed against the public. Id. 3. Abandonment. When a plank road company forfeits its charter, or abandons or suffers the road to become so out of repair as to amount to an abandonment, the franchise ceases and the road becomes a common highway. Td. 4. Abandonment of charter. When the lessees or assignees of a plank road company published a notice, that owing to the bad condition of the road, the high price of labor and materials, they could not profitably keep up the road at the prescribed tolls, and that unless the county would buy their entire interest in the road- way, bridges, plank, toll gates, etc. the road would be closed up as private property, it was held the notice was in effect an abandon- ment of the franchise. Jd. PLEADINGS. 1. Capacity to sue. The question of the want of capacity of plaintiff to sue can not be raised under a demurrer, to the com- plaint, for its failure to state sufficient facts to constitute a cause of action ; Eogers et al. v. Lafayette Agric. Works et al., 7-67. 2. . To sustain a demurrer upon the ground that it ap- pears from the face of the complaint " that the plaintiff has not legal capacity to sue," it is not enough that it does not appear 448 DIGEST OF THE that the plaintiff has legal capacity to sue ; but, the want of such legal capacity must appear aifirmatively ; Minneapolis Harvester W. V. Libby, 7-621. 3. CoEPOEATE EXISTENCE. Corporate existence is admitted by a complaint against a party named as a corporation. If it be claimed tjhere is no lawful corporation the individuals usurping corporate rights should be brought in to court ; State of Iowa v. Indep. School Dist., 6-522. 4. . Upon an unconditional promise to pay a corporation a certain sum of money, either as an ordinary debt or as a sub- scription to its capital stock, it is unnecessary to aver that the requisite amount of capital stock has been subscribed as provided by the charter, in order to present a good cause of action ; Lail V. Mount Sterling 0. R. Co., 7-172. 5. . A demurrer questioning the sufficiency of a com- plaint by a plaintiff, styled "The trustees of" a "church" named, does not question, but admits the corporate existence and plaintiff's capacity to sue ; Wiles v. Trustees, 7-85. 6. . A plea of general denial does not put in issue cor- porate existence and capacity to sue. Such plea, or answer, simply denies the cause of action. Id. 7. — \ — . In a suit instituted by a corporation, an averment that plaintiff was a corporation, duly incorporated under and by virtue of an act of the general assembly of the state of Missouri, entitled etc., sufficiently alleges plaintiff's corporate existence; Chillicothe Saving Ass'n v. Kueger et al., 8-140. 8. . It is not necessary to allege, in complaint, that a corpora- tion is such other than by the statement of its name. No more cer- tainty is required, in the complaint, as to the corporate character of the company, than if the company had brought the action; and, in that case, at common law, no specific allegation of incor- poration would be important. The name of the company implies its corporate existence; Odd Fellows Building Ass'n ». Hogan, 4-278. 9. . It is incumbent on the part of the defendant, sued as a corporation, to raise objection as to its corporate capacity, by plea, in abatement or otherwise, to entitle it to avail itself of the omission or defect of proof in respect to the corporate capacity. Id. 10. Oeganization. In a complaint filed by a corporation, the pleader is not required to set forth every fact necessary to a com- plete organization ; nor is he required to anticipate supposed de- fenses growing out of irregularities oeearring in, or after, the election of directors ; Washer v. Allensville etc. Turnpike Co., 9-223. 11. . In an action by a company the complaint alleged the_ due incorporation thereof. Every material allegation of the petition, including the execution of the instrument sued on, was denied by an answer under oath. Held, that an omission to AMERICAN CORPORATION CASES. 449 testabliBli this allegatiop was fatal to a recovery ; Chance v. Indian- apolis etc. G. R. Co,, 1-385. 12. Allegation of corporate existence. In an action against the " Neal Manufacturing Company," the complaint averred that the defendants were the directors and sole stockholders of said company ; " that said Neal Manufacturing Company was organized April 10, 1866, by articles of association iiled and recorded in the Jefferson county recorder's oifice on said day, a copy of which articles of association is filed herewith as part hereof ; and said company carried on said business at said Madison." It was held, that the corporate existence was sufficiently alleged ; Traber et al. «. Brown et al., 1-366. 13. Allegation of omission to file for record. An informa- tion in the nature of a quo warranto alleged that the company did not file a copy of its articles of association "with the recorder of" the county in which etc. It was held, not a reasonably certain averment that the articles were not filed in the recorder's office ; State, ex rel. O'Brien, -y. Bethlehem etc. G. R. Co., 1-375. 14. Statute. When the statute of another state constitutes a {lart of the organization of a corporation suing in the state of ndiana, it is not necessary to its introduction in evidence by the plaintiff that it should have been pleaded ; Paine et al. v. Lake Erie & Louisville R.R. Co., 1-386. 15. . It is not necessary to plead a public law, and in this respect there is no difference between a public law, so called, and •one declared to be such by the legislature ; People v. Ottawa Hydr. Co., 10-279. 16. Power to contract. An allegation, in a complaint, that "plaintiff [a corporation] and defendant entered into an agree- ment to and with each other " etc., includes and implies plaintiff's capacity and power to make the agreement ; La Grange Mill Co. D. Bennewitz, 8-5. 17. . In action by a corporation, obligee in a bond of in- demnity executed by and for an agent, to recover the principal ■obligor's note and his debt of one dollar, a plea by sureties on such bond, that the plaintiff has not power to make the contract sued on — if allowable at all — must state which contract is sought to be impugned and wherein it is ultra vires ; Cox et al. v. Weed S. Mach. Co., 8-59. 18. Denial of existence. In an action by a corporation, a de- nial, in the answer, of knowledge or information sufficient to form a belief as to whether plaintiff is a corporation, will_ not impose upon plaintiff the necessity of proving, on the trial, its corporate €xistence ; First Nat'l Bank v. Loyhed, 8-11. 19. Denial of corporate rights. A general denial, or plea of the general issue, does not put in issue the corporate existence of a corporate plaintiff, nor its right to sue. That could only be 57' 450 DIGEST OF THE done by demurrer or by special denial, in the nature of a plea in abatement ; National Life Ins. Co. v. Eobinson, §-325. 20. Dissolution. In a suit on a promissory note executed to a corporation, brought by the payee against the maker, the fact that the corporation has ceased to exist since the execution of the note, may be pleaded in abatement, not in bar. Such plea must show that the corporation had come to an end by some legal process. Facts upon which dissolution or the forfeiture of its franchises might be declared can not be tried collaterally in such suit ; President etc, of Hartsv. Univ. v. Hamilton, 3-295. 21. NiTL TiEL coEPOEATioN. In an action upon an Unconditional promise to pay money to a corporation, the undertaking admits corporate existence and organization. If the corporation has ceased to exist, or the company never was incorporated, the de- fense can not be raised on demurrer, but to be available, must be made by appropriate pleading ; Lail ». Mount Sterling 0. E. Co., r-172. 22. . The plea of nul tiel corporation is a proper plea, in a suit by a corporate body, when it is denied there is any such body ; but, under that plea it is sufficient for the corporation to prove that it is known and transacts business under the corporate name in which the suit is assumed to be brought, or is a corpora- tion de facto. It is not necessary under such plea in such suit to show that the plaintiff is a corporation de jure, as in case of a quo warranto ; Osborne v. People, ex rel., 9-153. 23. Citizenship. An averment that a corporation is created by • the statute of one state, and is located in another and doing busi- ness therein under its laws, does not allege that it is a citizen of the latter state ; Germania Fire Ins. Co. v. Francis, 3-60. 24. . It is necessary in a proceeding by or against a cor- poration, in the federal courts, that it be made to appear that the artificial being was brought into existence by the law of some state other than that of which the adverse party is a citizen ; Muller v. Dows, 6-8. 25. . While in a bill, formally drafted, the averment of citizenship of a corporation should, always, be made in the intro- duction or in the stating part of the bill, the bill will not be dis- missed if it be made any where in the pleadings. Id. 26. Abatement. A plea in abatement by a corporation aggre- gate must purport to be by their attorney. A plea which says that the company, " by its president and secretary, comes and says," etc., is defective, and obnoxious to a demurrer ; Nixon, Ellison & Co. V. S. "W. Ins. Co., 1-418. 27. . A plea in bar waives all pleas, and the right to plead, in abatement ; K.R. Co. v. Harris, 3-83. 28. Another action pending ; joindeb op new paktt. It is not a sufficient answer to a plea of another action pending in a court of competent jurisdiction, that the case at bar involves an additional AMERICAN CORPORATION CASES. 451 issue and an additional party. The issue joined in the action pend- ing will remain in, andbe decided by, the court in which the original action is ; City of Memphis v. Dean, 3-1. 29. Assessments of stock. In an action on a contract of sub- scription to stock of a corporation, containing a condition prece- dent — in this case that a certain amount of capital stock shall be subscribed for — the plaintiff must aver performance to show a cause of action against the subscriber, defendant ; or he must aver all the facts necessary to show a waiver of the condition precedent and to fix defendant's liability notwithstanding the non perform- ance ; Livesey «. Omaha Hotel Co., 8-312. 30. Assessment. In an action by a draining association. to en- force payment' of an assessment, the complaint need not state, in terms, the use for which the money is required, if it appears from the whole complaint that it is for the construction of the drain referred to in the directors' order of payment set out in the com- plaint ; Large v. Keen's Creek Drain. Co., 1-358. 31. Desceiption of drain. In an action on an assessment against a defendant who is not a member of the association the complaint must describe the commencement, course and terminus of the drain. Id. 32. Caeeieb. Though the declaration does not allege that the defendants are common carriers, yet if the facts set out consti- tute them such in law, it is suflScient to sustain an action against them as common carriers; South. Exp. Co. v. M'Veigh, 4-207. 33. False eepeesentations. False representations, upon which fraud can be predicated, urged in defense against a promissory note, must be of existing facts, or facts alleged to exist at the time, and not of promises to be performed in the future, or the legal construction or effect of a written instrument executed at the time of the making of the representations ; President etc. of Hartsville Univ. v. Hamilton, 3-295. 34. Foefeittiee. Where a number of individuals assume to act as a corporation an information concerning a general denial of their right to do so wiU be sufficient to put them to their plea of justification, but if the information attempts to set out their title, as was done here, and the facts shown for that purpose when taken in connection with other facts appearing upon the face of the statutes make the title good, the information will be bad on demurrer; People v. Ottawa Hydraulic Co., 10-279. 35. . A pleading which sets up an abandonment and forfeiture of a corporate purpose — in this case a railroad — for failure to perform the actions mentioned in section 3980 of the revised statutes of Indiana, of 1881, but which does not allege that the forfeiture had been judicially declared in a suit for that purpose, at the instance of the state, by information on the rela^ tion of the prosecuting attorney (§§ 1131-2, Eev. Stat., 1881) is bad. A cause of forfeiture, not judicially declared, in a direct 453 DIGEST OF THE proceeding, can not be taken advantage of collaterally ; Logan v. Vernon etc. RR. Co. et a)., 9-304. 36. Judgment. Complaint in action not expressly averring that a judgment was fraudulent in fact or that the officers of the company colluded with plaintiff therein, but, averring facts which, if proved, authorized the inference that the judgment was without consideration and fraudulently and conclusively obtained. Sufficient after judgment ; Whittlesey, rec'r, v. De- laney, 8-528. 37. Libel. In an action by a foreign corporation, for an al- leged libel, on demurrer to the declaration, it was held, that the charter of the plaintiff should be set out at length, in order that it might be seen whether the publication was false in stating the mode in which it authorized the business of the company to be done, and which was the subject of the criticism which constituted the alleged libel ; Hahnemannian Life Ins. Co. v. Beebe, 1-420. 38. . Nov could the charter be treated as properly pleaded, when only brought before the court as a part of the alleged libel- ous publication. Id. 39. . Neither would the usual formula, to the effect that the defendant falsely and maliciously wrote, published etc. be suf- ficient in a case of this character ; it is sufficient in an action by a natural person, for words actionable in themselves, because the law presumes such person to be of good credit and character until the contrary is made to appear. But, it can not be presumed that the legislature of a foreign state has not granted an unwise charter to a corporation. Jd. 40. Monet oeder. A declaration, against a corporation, foun- ded on an order alleged to have been accepted by its treasurer should aver his power to accept such order on behalf of the cor- poration ; Trustees of Prairie Lodge v. Smith, 8-66. 41. Nuisance. An allegation in a declaration, in substance, that the defendants have unlawfully, injuriously etc. built a rail- road bridge or viaduct over navigable waters, whereby their navigahiUty is impaired and diminished, so as to cause special damage, specified in an action on the case against a railroad com- pany, authorized by legislative enactment to build such a structure, discloses no cause of action and is obnoxious to demurrer ; Stephens & Condit Transp. Co. v. Central E.R. Co. of New Jersey, 3-558. 42. Ratification. A bill in equity was exhibited praying for relief against the board of directors of a corporation, for their ac- tion in increasing the capital stock thereof, without authority of law, or the consent of complaining stockholders. The answer averred that if the directors had no power, the shareholders had ratified the act. The allegation was unaccompanied with any of the facts as to the time, manner or circumstances under which the ratification was claimed to have been made. Such an aver- ment is insufficient; Eidmanet al. v. Bowman et al., 4-347. AMERICAN CORPORATION CASES. 453 43. Statute of limitations. Defendant can not avail himself of limitations by demurrer to complaint, unless it afiSrmatively appears, on its face, that the action is barred by some provision of statute ; Harmon v. Page et al., 9-29. 44. Stockholders against teustees. In an action brought by stockholders of a corporation against its trustees, the averment they are " the duly elected trustees of said corporation " is equiva- lent to an averment that they are the only trustees ; Parrott et al. ts. Byers et al., 4-282. 45. . Where the relations between parties are such that a demand and refusal is a condition precedent to the right of the plaintiff to maintain the action, a denial, in the answer, of the re- lation on which the action is founded, will dispense with the neces- sity of an averment, in the complaint, of a previous demand and refusal. Id. 46. Suit by stockholder. Where a suit is instituted by a stockholder of a corporation, which involves some right of the body corporate, the failure to make the corporation a party is not a mere defect of parties, to be taken advantage of by special demurrer ; but, the stockholder is left without cause of action, the party entitled to relief not being before the court. In such case the court should not require the corporation to be brought in, but, the proceedings should be dismissed absolutely; Shawhan etc. ■». Zinn etc., 7-186. 47. . Where a stockholder of a corporation is a creditor thereof and seeks to recover his debt from another stockholder who has not paid up his subscription, the plaintiff must aver and ' prove that he has paid up his whole subscription to the stock and, also, that the defendant was a stockholder of the corporation at the time the debt was contracted and that he has not paid up his subscription ; Weber v. Fickey, jr., use of etc., 7-385. 48. Subscription before organization. When a suit is brought to recover on a subscription to stock made on original articles of association, signed preliminary to incorporation, it is essential that the company suing shall aver in its complaint and prove on the hearing, that it has become lawfully incorporated. In such case defendant is not estopped from denying the legality of incorpora^ tion ; J^elson v. Blakey, ass'e, 7-23. _ , 49. . Subscription for stock made, before the organization of the company.' It is necessary to a recovery at law thereon that it shall appear that the subsequent steps, essential to bring the corporation into existence, were taken ; Keed v. Richmond S. Ky. Co., 7-49. 50. Stock subscribed for. In an action to recover the value of stock subscribed for, it is not necessary to aver a tender of certificates of shares, in the absence of stipulation made, on sub- scription, to the contrary ; Miller v. Wild Cat G. E. Co., 7-58. 51. . If a subscription, to pay money, in aid of a college 454 DIGEST OP THE is made to a committee and passes by operation of law to a cor- poration afterward formed, the complaint, in an action to recover the subscription, should aver that fact ; Christian Coll. v. Hend- ley, 5-151. 52. Stock strBSOEiBBD foe. In an action upon the oripjinal sub- scription it is not necessary to aver calls or assessments, at least after the lapse of time within which the organic act requires the whole capital to be paid in ; Phoenix Warehouse Co. v. Badger, 5-588. 53. Feaud in obtaining subsoeiption. Suit being brought to recover upon a subscription for stock in a corporation, defendant pleaded specially, that " the company fraudulently obtained the signature of the defendant to the subscription for stock in said compauy, by fraudulent representations, and that said company sot fraudulent possession of the said subscription of the said de- fendant, and that said company knowingly committed said fraudu- lent acts." Plea held bad, it failing to aver the facts constituting the fraud ; Cole v. Joliet Opera House Co., 6-357. 54. Deceit in sale of stock. A count in tort in the sale of stock of a corporation may be joined with a count in contract to recover back the price paid ; Teague v. Irwin, 9-461. 55. Bill not demueeable. A bill filed against two persons, charging them as stockholders in a corporation organized to con- tract for and build and construct railroads, which alleges, as to stockholders not made parties, that one is dead and the others are non residents of the state and charges an indebtedness for wood sold and delivered to the corporation, which has been dissolved, is not demurrable for uncertainty in not averring power to con- tract and the court can not say the contract is ultra vires the cor- poration ; Spence v. Shapard et al., 6-118. 56. Complaint. The complaint, in this case, states that the MinneapoHs Harvester Company is a corporation organized under the general laws of this state ; that after its organization defen- dant made, signed and delivered to it an agreement in writing, whereby he agreed to take ten shares of its capital stock and to pay $500 for the same in four equal instalments, and that the Minneapolis Harvester Company, for value, transferred the agree- ment to plaintiff and that by the terms of the same the first three instalments have become due and payable. Held, (1) that the complaint is insufficient ; because, it does not show that the Min- neapoUs Harvester Company is authorized to have a capital stock, or to take subscriptions to the same; (2) it is, further, insufficient in failing to allege that the Minneapolis Harvester Company trans- ferred its obligation to deliver the stock, as well as the defendant's agreement to pay the same ; (3) but, the complaint is not insuffi- cient for not alleging the issuance and delivery, or tender, of the shares of stock mentioned ; Minneapolis Harvester Works V. Libby, 7-621. AMERICAN CORPORATION CASES. 455 67. Receiver against maker of stock notes. Where suit is brought for the use of a receiver of an insolvent corporation, against a stockholder, to enforce payment of his subscription, or a note given therefor, no recovery can be had without an aver- ment of the amount of the debts of the corporation. The re- ceiver can recover no more than is sufficient to discharge the debts and liabilities of the corporation. The declaration should also show that the capital stock paid in "has been exhausted ; Lamar Ins. Co. «. Moore, 6-390. 58. Disability of diebctok. When a stockholder is sued, as such, and he defends on claims against the corporation, purchased by him, his disability as a director to purchase at a discount may be urged, by plaintifE, without allegation to that effect in the pleadings ; Holland v. Heyman, 7-10. 59. Stock not paid foe. In an action to charge a stockholder with an indebtedness of the corporation, on the ground the capi- tal stock has not been fully paid in, it is not necessary that de- fendant's indebtedness to the corporation should be pleaded. It is not required of plaintiff to anticipate the defense ; Wheeler v. Millar, 9-649. 60. Transfer of stock. Plaintiff's complaint alleged, in sub- stance, that defendant issued a written instrument, as follows : This certifies that the bearer, Charles Foster, is entitled to ten shares of the capital stock of the Bushwick Railroad Company, upon surrender of this certificate at the company's office, $1,000, which was duly delivered to Foster ; that the same came into the possession of plaintiff by purchase for value and he is now the lawful owner and holder thereof ; that defendant, on presentation of the certificate, refused to deliver said stock ; and, judgment was asked compelling a dehvery and that defendant pay interest on the value of the same, to wit, $1,000, or, in case of .failure to deliver, judgment for $1,000 with interest. On demurrer to the complaint, it was adjudged that it did not state a cause of action ; that the complaint contained no sufficient averments to establish a cause of action for $1,000, or the interest thereon, as there is no averment that the shares are of any value, or that any duty or obligation rests on the defendant to pay interest ; and, no cause of action was stated to compel the delivery of shares of stock ■, for that, 1, construing the complaint rigidly it asked for the delivery of shares, which it was not in the power of defendant to do ; 2, construing the instrument as an evidence of the right of Foster to ten shares of stock, the allegation of ownership as an averment of a valid assignment to plaintiff and the prayer of the complaint as calling for tne issue and delivery to plaintiff of a certificate, no facts were alleged showing an unjust refusal. If the corporation had no rules requiring evidence of the assignment and authority to make transfers upon its books, the act of the former owner, by which plaintiff became the lawful owner and holder, was all that 456 DIGEST OF THE was required to entitle him to the shares and he could not compel, an extraordinary act on the part of the defendant. If the defen- dant had duly prescribed rules for transfer before it will recognize the rights of assignees and give them evidence thereof, plaintift has not averred them, nor has he alleged the presentation to de- fendant of any evidence of an assignment to him, or of authority to make a trapsfer, so that defendant was put in default ; BarralL V. Bushwick E.R. Co., 8-554. 61. Feaudulbnt teansfkr. In a bill charging a transfer of stock under a forged power and seeking a re-placement of the certificates, want of authority to execute the power is suflSciently alleged by an averment that the certificates were purloined or stolen, by a certain person, as complainant believes, and after- ward used by such person without complainant's knowledge or consent ; Blaisdell et al. v. Bohr et al., 9-64. 62. In such bill all persons who are directly or conse- quentially interested in the event of the suit are properly made parties, rd. 63. . In such bill it was not error to order the person who fraudulently sold the stock to be made a party. Id. 64. Depaktuee. In an action against a corporation for refus- ing to traUsfer stock upon its books, the petition alleging that plaintiff owns the stock and the reply setting up a special owner- ship as a pledgee, there is no departure ; Merchants Nat. Bank v, Richards, 8-282. 65. MisjoiNDEE OF COUNTS. If the first count of a declaration be in case for a tort and other counts be joined which are not in tort, the declaration is clearly bad, upon demurrer, for misjoin- der ; South. Exp. Co. v. M'Veigh, 4-207. 66. MisNOMBK. A corporation, defendant, can not take advan- tage of a misnomer in arrest of judgment, but must plead it in abatement ; East Tenn. & Ga. R.R. Co. v. Evans, 4-186. 67. . The statutes incorporating the city of San Jose are entitled acts to incorporate " the city of San Jose ; " describe the territory as " now called the city of San Jose," or further declare " that it shall be henceforth known as the city of San Jose ; " they, also, provide for a city government under the name and style of the " Mayor and Common Council of the city of San Jose." Held, that an indictment charging the defendant with the embezzlement of the moneys of the city of San Jose^ a municipal corporation under and by virtue of certain statutes, citing those above mentioned, did not correctly state- the name of the owner ; but that the error in name was immaterial under the provision of the statute providing that, when the offense charged in the indictment is described with sufficient certainty in other respects to identify the act, an erroneous allegation as to the per- son injured, or intended to be injured, shall not be material ;. People V. Potter, 2-66. AMERICAN CORPORATION CASES. 457 68. Officer, na.me of. It was also averred that the defendant was, at the time the act charged was committed, the " city mar- shal." Held, that it sufficiently appeared that he was at the time an officer of the corporation. Id. 69. Yaeianoe. The declaration averred the contract sued on to have been made with the Insurance Company of North America, and the proof showed that it was made with the presi- dent and directors of the company. Held, that the legal effect of the contract was alleged; Ins. Co. B.M'Dowell and Brown, 1-438. 70. — r — . If the complaint alleges a promise to pay money to a corporation and the proniise proved was to a committee, there is a fatal variance between the complaint and proof ; Christian College «. Hendley, 5-151. 71. . Where a note sued upon is described as executed by defendant corporation and the note produced in evidence is sub- scribed by it and another, there is no variance ; it is still the note of the company ; Rock Yalley Paper Co. B. Nixon et al., 6-392. 72. . A declaration, in a suit to recover the amount of a subscription to stock, alleged that the defendant " subscribed for, and agreed to take, five shares of the stock of the " corporation " and to pay $400 therefor, in weekly instalments of one dollar per share in each and every week." The contract offered in evi- dence was that defendant " agreed to take five shares of stock ^nd pay $400 per share therefor in weekly instalments." In this case the non payment of the instalments was the gravamen of the com- plaint and there was no substantial variance between the narr. and the contract ; Frank «. Morrison et al., rec'rs, 9-390. 73. . A declaration alleged that defendant agreed to pay plaintiff a certain sum, in consideration that plaintiff would assent to the election of a certain person as manager, in the defendant's place, of a corporation of which plaintiff and defendant were members. The evidence introduced at the trial showed that the consideration of the defendant's promise was that the plaintiff would vote for the person named as manager, and would, also, vote to increase the salaries of the officers of the corporation. It was held that there was a variance between the declaration and proof, in regard to the consideration ; Woodruff «. Wentworth, 9-432. 74. Abbreviations. Where abbreviations, or initials of words, are used in pleadings, if, when taken in connection with the re- mainder of the pleading and subject matter, they can be clearly understood and not be ambiguous, the same effect will be given to them as if the words were written in full; Odd Fellows Building Assoc. «. Hogan, 4-278. 75. Defective declaration-. A defective declaration may be cured by additional averments in a replication admitted by dei- murrer to be true ; R.R. Co. v. Harris, 3-83. 58 458 DIGEST OF THE 76. Bill of paeticulaes. In an action against a stockholder of a corporation who has not paid up his subscription, to recover a debt due by the corporation, wherein the plaintiff declares on a judgment recovered against the corporation as his cause of action, the defendant is entitled to a bill of particulars, in order that he may be informed whether the debt due by the corporation was contracted at the time defendant was a stockholder; Weber v. Fickey, jr. etc., 7-385. 77. Demueeee. The principle of pleading that a demurrer, after several pleadings, reaches back to a defective declaration, does not apply where the defect is one of form and not of substance ; E.K. Co. V. Harris, 3-83. 78. . A bill to enforce a contract for the re-payment of money loaned to a corporation, which does not set out the pur- poses for which the corporation was created, is not demurrable upon ground of its failure to show affirmatively that such corporate de- fendant had capacity to contract. Prima facie its contracts are valid and the burden of showing invahdity is upon him who seeks to impeach the act ; Ala. Gold Life Ins. Co. v. Central Agric. & Mech. Ass'n, 6-108. 79. Amendment. The refusal of a referee, in an action to re- cover an unpaid balance of subscription for stock, to allow an amendment, of the answer, setting up that the signature of another apparent subscriber was not genuine and that defendant was mis- led thereby, is not the proper subject of exception. If the referee has power to allow the amendment, it is matter of discretion ; PhcEnix Warehousing Co. v. Badger, 8-476. 80. Mtjltifaeiousness. A bill is not multifarious because all the defendants named are not interested in all the matters con- tained in the bill. It is sufficient if each party had an interest in some matter in the suit which, is common to all and that they are connected with the others ; Blaisdell et al. v. Bohr et al.', 9-64. 81. Motion to dissolve injunction. A bill in equity being exhibited, injunction issued, defendants answered and moved to dissolve on the ground, among others, that there were not proper parties to the bill. Held, that as this ground of motion, to dis- solve, is in the nature of a general demurrer, to be good, it should show there are no proper parties to the bill ; Central li.R. Co. et al. V. Collins et al, 3-224. 82. Peoof. Where there are several* paragraphs of answer, some in confession and others in denial, plaintiff can not treat those in confession as dispensing with the proof of facts put in issue by the paragraphs in denial ; Smelser v. Wayne & Union Straight Line Turnpike Co., 9-288. 83. Not aid defective articles. If the articles of incorpora- tion of an association be defective, in not setting forth a material fact, required by law to be stated, they will not be aided by an AMERICAN CORPORATION CASES. 459 answer on quo warranto, nor can proof be admitted to establish the fact ; People, ex rel., v. Segbridge et al., 6-242. See Action ; Assessment ; Bankeuptct ; Coepoeate Existence ; Equity ; Foefeituee ; Mandamus ; Misnomee ; Quo Wae- EANTo ; Receivee. PLEDGE. 1. Essentials or. A delivery to pledgee of the thing pledged is essential to the contract and until delivery the special property, that pledgee is entitled to hold, does not vest in him. Incorporeal property — ■ stocks in a corporate company — can not be pledged without a written transfer of the title, unless it is expressly made assignable by delivery of the certificates ; State, ex rel. Koods, v. National Bank et al., 9-293. 2. Possession of ceettficate. The title and ownership of stock in a national bank can pass only by a transfer of the stock on the books of the corporation ; hence, a mere possession of a certi- ficate of stock, in such a bank, is not such a possession as to consti- tute the holder a pledgee ; he has, at most, a mere equity : Koons V. Nat. Bank et al., 9-289. 3. Statotoey. Under statute of Louisiana, pledges of stock in a corporation are vahd against third persons by mere delivery o# the certificates. This, too, although the certificates declare the stock to be transferable on the books of the company, without ex- fressly requiring surrender of such certificates ; Factors & Traders ns. Co. V. Marine Dry Dock etc. Co., 7-236. 4. Teustee. Where shares of stock of a corporation are issued, to a trustee, to secure the payment of a debt the transaction con- stitutes a pledge of the stock, the title thereto remaining in the corporation ; Brewster et al. «. Hartley et al., 1-233. 5. . A trustee has, prima facie, no right to pledge certifi- ■cates of stock held by him, as a part of his trust fund, to secure his own debt growing out of transactions independent of the trust; Shaw V. Spencer et al., 1-625. 6. Not authoeized. A blank transfer of a certificate of stock with irrevocable power of attorney to transfer, signed by the per- son who appears by the certificate to be the owner, does not confer on the holder apparent authority, as agent for such owner, • to pledge the stock as collateral ; Merchants Bank v. Livingston, imp., 8-547. 7. Instance. Defendant, L., aelivered to defendant, B., a cer- tificate of stock as collateral for the loan of $3,000. B. applied to W., plaintiff's agent, for a loan thereon of $8,000, stating that he wanted it for a client. W. agreed to make the loan if B. would procure a proper power of attorney, to be attached to the certifi- cate. B., by representing that he should have the instrument to secure his loan, procured from L. a transfer and irrevocable power of attorney to make a transfer, executed in blank. B. filled up 460 DIGEST OF THE the blanks, save the name of transferee and attorney, and delivered it with the certificate to W., who, thereupon, made the loan. B. had no authority from L. to borrow or to pledge the stock. In an action to foreclose plaintiff's alleged lien on the stock, it was held that as B. did not claim to be the owner of the stock, but only to be acting as agent for the owner, and as he had, in fact, no autho- rity, or apparent authority, so to act, L. was not estopped from asserting his title to the stock and plaintiff could not assert a lien save, at most, for the amount for which the stock was pledged to B.; that, while the transfer and power of attorney gave to B. an apparent ownership in case he had claimed title, or an apparent authority to sell as agent, it did not hold him out as authorized to make a loan or to pledge the stock, or at most, it only indicated that he could pledge the stock for an authorized loan. Id. 7^. Payment with notice. If a certificate of stock in a cor- poration expressed in the name of " A. B., trustee," is by him fraudulently pledged for his own debt, and accepted without in- quiry ; and the pledgee, after receiving notice of the fraud, and a demand of the parties beneficially interested under the trust that the stock shall be held subject to their direction, voluntarily pays an assessment due on the stock, to one of them, as treasurer •of the corporation, in the presence of the other, such payment does not estop them from maintaining their claim to the stock ; Shaw V. Spencer et al., 1-625. 8. Of ooepoeate bonds. Where the bonds of a corporation were issued on the understanding that they were to be sold for cash, but, as matter of fact, they were pledged to a creditor, as col- lateral security to corporate notes executed to and held by hira, the objection that such disposition is unlawful is one open alone to the corporation or its stockholders. It can not be raised by one who holdg the property of the corporation as the purchaser, at execu- tion sale, of the equity of redemption, or one who holds under a voluntary conveyance; Beecher v. Marquette & Pac. R.R. Mill Co. et al., 6-665. 9. CoLLATEKAi, sECUEiTT. A Certificate of stock of an incorpo- rated company was deposited. Math complainants, as collateral security for a loan of money. The defendant, N., who was the owner of the certificate, gave it to D., the other defendant, for the purpose of borrowing money on the security thereof. When the loan fell due, it was discovered that the power of attorney, by which alone the certificate could be transferred on the books of the company, had been stricken out. Neither of the defendants were aware of this until informed by complainants. N. refused to re-execute said power of attorney; and, the indebtedness remains unpaid. Under these circumstances, the court made a decree for the sale of the certificate of stock and that the proceeds thereof be applied to the payment of the amount due upon the loan ; Lewis, Johnson & Co. v. Dexter, Nash et al., 6-334. AMERICAN CORPORATION CASES. 461 10. Collateral. Where shares of stock are deposited with a bank, as collateral security for the payment of notes, with power in the creditor to sell such stock and apply the proceeds to the payment of the notes, if they be not paid promptly at maturity, without further notice to the debtor, a mere failure on the part of the creditor to sell the stock at the maturity of the notes will con- stitute no defense to a suit thereon and give defendant in such suit, no right to damages ; Napier, exec'r, v. Central Ga. Bk., 9-68. 11. Sale of. No statutory duty to sell exists. A debtor can not, by notice to his creditor, who holds stock as collateral security, force a sale thereof at his pleasure and, in default of immediate sale, recover damages against the creditor. Id. 12. Eatifioation. Secretary of a corporation having, without express authority, pledged the corporate bonds, secured by re- corded deed of trust, for aa existing indebtedness and future ad- vances, but, with the knowledge and acquiescence of the directors, his act was held binding, in the absence of fraud ; Darst v. Gale et al, 6-380. 13. Notice of pledge. In order to make the pledge of a cer- tiiicate of the stock of a corporation valid, as to third persons, it is not necessary to give notice of the pledge to the company ; Factors & Traders Ins. Co. v. Marine Dry Dock & Ship Yard Co., 7-236. 14. Contemporaneous agreement. A receipt stating that a certificate of stock in a corporation is received as collateral secu- rity and containing an agreement that pledgee may sell " on one day's notice," parol evidence of a contemporaneous agreement that the pledgee may use the stock is inadmissible ; Fay v. Gray, 7-479. 15. LiABiLiiT OF PLEDGEE. One who receives a certificate of stock, as collateral security for a debt, the statute providing that stockholders shall be jointly and severally liable for the debts of the corporation contracted before the original capital is fully paid in to the extent of the par value of the stock held by him, is subject to such liability, unless his certificate shows that the shares are held in pledge. If he claims exemption the burden is on him — he must show the form of the certificate ; Nat'l Bank v. Hing- ham Manuf. Co., 7-496. 16. Rights of pledgee. A person holding stock of a cor- poration, not as a stockholder, but merely as a pledgee, may bring an action on his own account, and in his own name, to protect his rights and interests as a pledgee and '.s not required in such mat- ters to act through the association ; Baldwin et al. v. Canfield, 7-641. 17. Lien of, on stock. A promissory note, delivered to a banking corporation, concluded with the statement that the maker had pledged, as collateral security, certain shares in the capital stock of a corporation with authority to the holder to sell the 463 DIGEST OF THE same " on the non performance of this promise, he giving : me credit for any balance of the net proceeds of such sale and paying all sums then due from me to said holder." On tender of the amount due on the note at its maturity, the holder of the note had no right to retain the stock as security for other debts then due him from the maker ; Hathaway et al., trustees, v. Fall River Nut. Bk., 7-546. 18. Lien of, on stock. Shares of stock in a corporation were pledged for the paj'ment of a promissory note, with authority to pledgee to sell on non performance of the promise to pay. Later, the maker of the note assigned all his estate, real and personal, to trustees, for the benefit of his creditors. On the maturity of the note the trustees tendered the amount of the note to the holder, and, on his refusal to deliver the shares, brought a bill, in equity, to re- deem the same. Even if the trustees had no greater rights than an assignee in insolvency, defendant could not, under the insol- vency law of Massachusetts (Gen. Stat., ch. 118, § 20), set ofE other debts due him, from pledgor, at the time the note matured ; and, in such case it is no defense that pledgee has applied the ex- cess of value of the stock over the note it was given to secure in payment of such debts. Id. 19. Possession as defense to action for the debt. In the absence of statutory stipulation to the contrary, the possession of pledged property does not suspend the right of pledgee to pro- ceed personally against the pledgor. It follows that the fact that the pledged property of a corporate defendant remains undisposed of will not operate as a bar to plaintiff's action ; Sonoma Valley Bank v. Hill, 9-20. 20. Depeeoiation of. In suit brought upon notes secured by pledge of stock, to a banking corporation, a plea that the bank had notice from the debtor, both before and after the' debt be- came due, to seU the stock and that it failed and refused to re- gard such notice because one or more of its officers and some of its stockholders were largely interested in the stock, of which that pledged was a partj and were engaged in an effort to depre- ciate the same and, thus, to buy the controlling interest therein for less than its value and, in fact, did so depreciate it and that defendant was injured, by the refusal to sell, in the sum of $1,250, presents a substantial defense, which should not be stricken on general demurrer. Want of particularity in setting forth the names of the officers and stockholders so proceeding, or the mode of operation, might furnish good ground for special demurrer; Napier, exee'r, v. Central Georgia Bank, 9-68. 21. . That the president of the creditor bank and an- ■ other stockholder therein engaged in depreciating the stock of which that held by the bank, as collateral security, formed a part, with a view to purchasing a controlling interest therein and, in fact, succeeded in effecting such depreciation, whereby the debtor AMERICAN CORPORATION CASES. 46a was injured, did not, without more, make such conduct the act of the bank, so as to furnish a basis for a recovery of damages against it. A plea of recoupment to a suit by the bank, on the notes of the debtor setting up the above facts, is demurrable. Id. 22. Depreciation of. A plea that the creditor bank, through its president, corresponded with defendant about the sale of the stock and led him to believe that it was trying to sell the same, which was untrue, and the stock depreciated, causing him damage, is demurrable, as setting up conclusions, or impressions, of defen- dant's mind instead of facts of fraud. Id. 23. CoNVEESiON OF. If a certificate of stock in a corporation, pledged as collateral security, is transferred by the pledgee to a creditor of his own, the pledgor may treat this as a conversion. The fact that the pledgee has a greater number of shares standing to his credit on the books of the corporation is immaterial ; Fay ■B. Gray, 7-479. 24. Notice to pubchasee. If a certificate of shares, expressed to one as " trustee," is by him pledged to secure his own debt, pledgee is, by the terms of the certificate, put on inquiry as to the character and limitations of the trust. If he accept the pledge without inquiry he does so at his peril ; Shaw n. Spencer et al., 1-625. 25. Wrongful sale by pledgee. The pledgee of stock, who holds such stock forthepayment of money borrowed, holds subject to pledgor's legal right to demand and receive the shares upon payment of the debt. Pledgee has no right to sell such shares without first demanding payment of the debt from pledgor, or giving him notice of the intention to sell. So he may not sell the stock at private sale for less than its current value. If he does, he becomes responsible to pledgor for the difference between the amount of the debt secured and the market value of the stock \ Nabring v. Bank of Mobile, 6-124. 26. Absolute transfer. A plea which merely alleged, in an action on notes secured by pledge, that twenty-five shares of the stock were transferred absolutely to the bank, the president refus- ing to make the loan without such transfer, affords no defense and is demurrable ; Napier, executor, «. Central Ga. Bank, 9-68. 27. YoTE ON stock pledged, a person who pledges stock has the right to vote upon it until the title of the pledgee to the stock is perfected, unless there be an agreement to the contrary ; Hop- pin et al. V. Buffum et al., 4-151. 28. . The pledgor of stock which stands on the books of a corporation in the name of the pledgee, may, by proceeding in equity, compel a transfer to him or oblige the pledgee to givehim a proxy to vote ; but, where the pledgor acquiesces, for years, in the control of the stock by the record owner, the pledgee, and makes no attempt to inform the corporation of the true state of facts until a contested election occurs and then not until the votes 464 DIGEST OP THE are being or have been counted, it is too late to ask the interfe- rence 6i a court with the result of such election as declared. Id. 29. Vote on stock pledged. "When the statute under which a corporation is organized provides that the directors shall be elected by the stockholders, it can not confer upon a trustee, holding stock as a pledge, the right to vote at an election of such officers ; State V. Curtis, 1-233. 30. . Stock owned by a corporation, even when held by a trustee, can not be voted upon by any person. Id. 31. Cloud op void deed. Holders of the stock of a corpora- tion, holding as pledgees, are, interested in the preservation of the corporate property and in preventing it from passing out of the hands of the corporation. They have, therefore, a right to take legal means to preserve the corporate property and to prevent it from being lost to the corporation, or its value from being im- paired. If such value is impaired by a cloud upon the title of the corporation to real property, they have a right to have the cloud removed. Baldwin et al. v. Canfield, 7-641, See Election ; Mandamus. POLICE PC WEE. 1. Defined. The police power of the state is a power co-exten- eive with self protection, and is not inaptly termed the law of overruling necessity. It may be said to be that inherent and plenary power in the state which enables it to prohibit all things hurtful to the comfort, safety and welfare of society. It may be exercised to control the use of property of corporations as well as of private persons : Town of Lake View v. Rose Hill Cem. Co., 5-252. 2. . The police power of a state is, and must be, from its very nature, incapable of any very exact definition or limitation. Upon it depends the security of social order, the Hfe and health of the citizen, the comfort of an existence in a thickly populated community, the enjoyment of private and social life and the beneficial use of property. It extends to the protection of the lives, limbs, health, comfort and quiet of all persons and the pro- tection of all property within the state, and persons and property are subjected to all kinds of restraints and burdens, in order to secure the general comfort, health and prosperity of the state ; Slaughter House Cases, 5-1. _ 3. Univeesalitt. With certain constitutional Hmitations, the rights of all persons, natural or artificial, are subject to such legis- lative control as the legislature may deem necessary for the general welfare. It is a fundamental error to suppose there is any differ- ence, in this respect, between the rights of natural and artificial persons. They both stand upon the same footine : Ward, rec'r, v. Farwell et al., 6-490. b> . j AMERICAN CORPORATION CASES. 465 4. Scope and inviolability. The police power extends to the protection of the Hves, health and property of the citizens, and the preservation of good order and the public morals, and the legis- lature can not^ by any contract, divest itself of the power to pro- vide for these objects, nor can it bargain away its discretion to exercise it ; Beer Co. v. Massachusetts, 6-43. 5. Paeamotjnt foece. All rights are held subject to tne pohce power of the state ; except that property actually in existence, and in which the right of the owner has become vested, may not be taken for the public good without due compensation. Id. 6. Commerce. The power in congress to regulate commerce does not exclude the exercise of concurrent power by the states, except so far as congress has actually exercised its power. Ifo act of congress is to be interpreted, in the absence of express words, to invade the police power of the state. The regulation of the doing of business by a foreign corporation is such a police law of the state; Am. Un. Tel. Co. v. W. Un. Tel. Co., 6-186. 7. The authoeitt to exeeoise. As a general proposition, it is the province of the law making power to determine when the exigency exists, calhng into exercise the police power. What are the subjects of its exercise, is clearly a judicial question ; Town of Lake View v. Eose Hill Cem. Co., 5-252. 8. Legislative powee. The legislature has a right to subject persons and property to restraints, in order to secure the general comfort, health and prosperity of the citizens of the state. Ordi- nances regulating the traffic in all kinds of products are common to aU cities, and, equally common, to prohibit the sale of these commodities except upon the certificate of an officer as to the weight according to pubhc scales. Laws .requiring articles to be inspected or weighed or measured before being sold are in the nature of poHce regulations, and are valid in the absence of special constitutional provisions, and, if reasonable, are not in restraint of trade ; Gaines et al. v. Coates, 5-503. 9. Exeeoise of. So far as franchises of a corporation are pub- lioi juris it has, always, been held that the state may jjroperly legislate touching them. Such legislation is not prohibited by that clause of the constitution of the United States which forbids the passage of laws impairing the obligation of contracts, nor does it deprive such corporations of any of the substantial bene- fits intended to be conferred by the acts of incorporation. Id. _ 10. Peoteotion of community. The legislature is authorized, in the proper exercise of the police power, to adopt such necessary legislation and regulations as will effectually protect community from losses and injury incident to a public business, conducted by a corporation, under a charter from the state, where such busi- ness has become hazardous and will, probably, result in financial distress to those who, in ignorance of its condition, do business with it; Ward, rec'r, v. Farwell et al., 6-490. 59 466 DIGEST OP THE 11. CoEPOBATE EIGHTS. Where a corporation is formed, under legislative sanction, it becomes amenable to the police power of the state, to the full extent that natural persons are subject to its control ; Euggles v. People, 6-428. 12. . Corporations are under the control of the state to the same but to no greater extent than individuals. The legisla- ture may require of such bodies, the performance of any and all acts, which they are capable of performing, which they may re- quire of individuals. Id. 13. As TO coEPOKATiONS. It is essential that police regulations must have reference to the comfort, safety or welfare of society, and when applied to corporations, they naust not be in conflict with any of the provisions of the charter. It is not lawful, under the pretense of police regulations, to take from a corporation any of the essential rights and privileges conferred by its charter ; Town of Lake View v. Rose Hill Cem. Co., 5-252. 14. Instance. An act granting, to a corporation, the exclusive right, during a term of twenty-five years, to have and maintain cattle landings, stock yards and slaughter houses within one or more parishes and prohibiting the landing, inclosing or slaughter- ing animals for use as food at any place other than as designated ; but, permitting all butchers to slaughter at such houses, and charging a reasonable fee for each animal received and slaughtered thereat is a police regulation, for the preservation of the health and the promotion of the comfort of the people, the statute locat- ing the abattoir at a suitable place, is within the power of the state legislature unaffected by the constitution of the United States ; Slaughter House Cases, 5-1. 15. . A state legislature passed "an act in relation to the duties of railroad companies " providing (1) That each such company should, annually, in a month named, fix its rates for the transportation of passengers and freight of different kinds. (2) That it should, on the first day of the next month, cause a printed copy of such rates to be posted at all its stations and depots and cause a copy to remain so posted during the year. (3) That a failure so to post rates, or the charging of a higher rate than so posted, should subject the offending company to certain prescribed penalties. Subsequently congress passed "an act to facilitate commercial, postal and military communication among the several states," reciting the power of congress to regulate commerce among the several states and enacting " that every railroad com- pany in the United States, whose road is operated by steam • • • be and, hereby, is authorized to carry upon and over its road, boats, bridges and ferries, all ■ passengers, troops, govern- ment supplies, mails, freights and property on their way from any state to another state, and to receive compensation therefor" and the act provided " that congress may, at any time, alter, amend or repeal this act." Held, that, as affecting a railroad running in AMERICAN CORPORATION CASES. 467 several states, the state legislation was but a police law and, there- fore, not unconstitutional ; Chicago & Northwestern R.R. Co. v. Fuller, 5-21. 16. Instance. The legislature may fix the maximum charges of corporations, as well as of individuals, as common carriers, ware- housemen, or others exercising a calling, or business, public in its character, or in which the public has an interest to be protected against extortion, or oppression ; Ruggles v. People, 6-428. 17. . A provision of a state constitution, providing that "no foreign corporation shall do any business in this state with- out having, at least, one known place of business and an authorized agent, or agents, therein," is not repugnant to the commercial clause of the federal constitution ; it is but the legitimate exercise of the police power of the state ; Amer. Un. Tel. Co. v. W. Un. Tel. Co., 6-186. 18. . Cemeteries concern the public health. The legis- lature has the right to pass laws to regulate interments, to pre- vent injury to the health of community, notwithstanding the burial place may be owned by a corporation, which exercises fran- chises conferred by the state ; Lake View v. Kose Hill Cem. Co., 5-252. 19. Insolvency. For the protection of the public, it is a proper exercise of the police power of the state, that the legisla- ture shall prescribe what amount of assets an incorporated com- pany shall possess, or on what basis its solvency shall be estimated ; Chi*. L. Ins. Co. v. Auditor etc., 9-79. 20. GovBENiNG CONTRACTS. Contracts between corporations and dealers with them are entered into subject to this right of legislation ; wherefore, an act to wind up a corporation (in this case, an insurance company), when its financial condition is such as to be hazardous to parties contracting with it, is not obnoxious to the objection that such legislation impairs the validity of the contract entered into ; Ward, rec'r, v. Farwell, 6-490. See Foreign Corporation. POWERS. 1. Munioipai. ; general. A municipal corporation possesses and can exercise the following powers and none others : 1. Those granted in express words. 2. Those necessarily implied or neces- sarily incident to the powers expressly granted. 3. Those abso- lutely essential to the declared purposes and objects of the corn poration — not simply convenient but indispensable. Any fair doubt as to the existence of a power is resolved by the courts against the corporation and the existence of the power ; Merriam V. Moody's Exec, 3-283 ; Tucker v. City of Virginia, 3-599. 2. Must be expressly granted. Municipal corporations pos- sess and can exercise only such powers as are expressly or by necessary implication conferred or delegated by legislative autho- 468 DIGEST OF THE rity ; and, when the legislature prescribes the mode of exercising delegated powers, such mode must be strictly pursued. City of Placerville v. Wilcox, 3-62 ; Nicholson Pavement v. Painter, 3-91. 3. Can not be delegated. The charter of a municipal cor- poration provided that its "general council may pass ordinances to procure the grading etc. of sidewalks." It was held that the power to determine whether or not such improvements were necessary was vested in the council, and could not be delegated to the city engineer ; Hyde & Goose v. Joyes, 3-76. 4. . To ordain generally that a street or square shall be graded and paved, or "so much thereof as the engineer might direct, and according to specifications by him furnished," is a delegation of the power to fix the grade, what material shall be used, and how much of the street or square shall be thus im- proved. Such an ordinance is void and can not be validated by subsequent ratification. Id. 5. . Where the charter required the common council of a municipal corporation, as a condition precedent to the levy of a tax, to declare, by an entry on the minutes, what portion of the expenses of a certain improvement should be assessed to the own- ers of premises to be benefited thereby, and specifying the amount to be assessed, it was held that the power could not be delegated to commissioners ; School District v. Dean et al., 8-519. 6. Teansfee of. The statute of Missouri, relating to bridges, provided that the commissioner might take, or cause to be taken, from the adjoining or most convenient lands, such quantities of rock and timber as might be necessary for building and repairing, and provided for compensation therefor. A contractor undertook to build a bridge, and to " furnish all material required for said bridge and to receive as full compensation therefor " a specified sum. Held, (1) Per Holmes, j. That the contractor, as the agent of the commissioner, had the power to take material, in the manner prescribed by the statute. (2) Per Curiam. That the statute au- thorized such taking by the commissioner only after the contractor had failed to perform his contract to build or repair, and that the commissioner could not delegate his 'power; Schmidt ■». Dens- more, 3-6Y5. 7. . The board of supervisors of San Francisco can not, by resolution, transfer its appropriate functions to its clerk ; Meuser V. Eisdon et al., 3-101. 8. BoAKD OF STJPEEvisoES. In the matter of the improvement of streets, the board of supervisors of the city and county of San Francisco have the powers conferred upon them by statute and no others. The powers conferred must be exercised in the mode prelferibed and in no other ; Nicholson Pavement Co. V. Painter, 3-91. AMERICAN CORPORATION OASES. 469 9. To TAKE EFFFOT ON FDTDRE CONTINGENCIES. A municipal Cor- poration inay pass an ordinance within the limits of its delegated powers contingent, as to its operation and effect, on the future ex- istence or occurrence of facts germane to its subject matter ; State, ex rel., v. Kirkley et al., S-406. 10. . A law which by its own terms is to have no effect until the happening of some contingent result can not be made effective before the event happens by any acts or series of acts passed upon the assumption that the result has happened, and that the law is in force. All such acts, instead of passing any curative powers, merely multiply errors. Id. 11. i'o COLLECT TAXES. An act of incorporation, granting to the common council of a city the right to levy and collect certain taxes, constituted the city marshal ex officio collector, and made it his duty to collect all the taxes due the city. Held, that an ordinance regulating the collection of taxes remaining unpaid after a certain date, devolving such duty upon the city attorney and dispensing with the services of the city marshal, was void ; City of Placerville v. Wilcox, 3-62. 12. Impeovement of streets. Under the statute regulating street improvements in San Francisco, the board of supervisors adopted a resolution of intention to grade certain streets and a crossing. They subsequently ordered the work to be done. The bidders were notified to put in separate bids for each block and crossing. The board accepted bids for the entire work, but the superintendent -contracted with the successful bidder for one block only. Held, (1) that the resolution of intention, and its publication constituted the sole authority of the board to proceed to order said work to be done, and that it conferred no authority to have other or different work done ; (2) that the work described in the resolution constituted but one subject matter ; (3) that the contract, by reason of the variance between it and the resolution accepting the bids, which constituted the superintendent's sole authority, was unauthorized and void ; (4) that a valid assess- ment must be founded upon a contract duly authorized and exe- cuted as required by the terms of the law ; Dougherty v. Hitch- cock, 3-79. 13. CoNTEAOTS ; PATENT. The cuarter of the city of Detroit invested the city council with power to improve the streets, and provided that no contract for the construction of any public work, including paving, grading, planking and macadamizing the pub- lic streets, if the same should exceed the sum of $200, " should be let or entered into, except to and with the lowest responsible bid- der," after notice advertised in the manner therein prescribed. Held, that this did not preclude the city council from entering into a contract for the paving of the streets with the Nicholson^ pavement, which was protected by a patent, and the right to use 470 DIGEST OF THE which was owned exclusively by one firm, who was the only bid- der ; Scholfield v. City of Lansing et al., 3-538. 14. BoAJEtD OF suPEEvisoES ; JUEI8DI0TI0N. Under the statute regulating the improvement of streets in the city of San Fran- cisco, the board of supervisors acquire jurisdiction of the subject matter of the improvement of a street after the expiration of the notice of intention to improve, as provided by the statute; Dougherty v. Miller et al., 2-95. 15. Feontagb ; subsequent division. If, at the time the boards acquires jurisdiction, and the contract for the improvement is let, any part of the land fronting upon the street constitutes one lot, the contractor is entitled to have the cost of the improve- ment made opposite the lot assessed on the whole of the same, in one assessment; and no subsequent change in cutting pflE the same by selling parts thereof can defeat that right. Id. 16. JuEisDiOTioN ; SUBSEQUENT DIVISION. When the jurisdic- tion of the board once attaches to the entire lot, it extends through the entire proceeding, though it may be subsequently divided by a sale of a portion thereof to other parties. Id. 17. Statute consteued ; patent. The statutes governing the improvement of streets in the city of San Francisco require the board of supervisors, after taking the proper preliminary steps for the improvement of a street, to advertise for sealed pro- posals for the contemplated work, and to award the work to the lowest responsible bidder. Held, that the board could not, under this statute, order a pavement to be put down when patented, and the patent held by one party against whom there can be no com- petition in the bidding; Nicholson Pavement Co. v. Painter, 2- 91. 18. Nicholson pavement. The board of supervisors of said city and county can cause the Nicholson pavement to ,be put down in the streets of said city only in the manner prescribed by the act of 1866, upon the petition of a majority of the owners or their agents, in frontage, and upon the condition that it shall not cost to exceed twenty-eight cents per square foot. Id. 19. To suBscEiBE FOE STOCK. The statute of the state of In- diana, relating to the incorporation of cities, provides "that any incorporated city, under this act, shall have power to borrow money, to subscribe to the stock of any railroad running in to or through such city, to aid in the construction of such roads, only on petition of a majority of the resident freeholders thereof. It was held, that this statute conferred authority upon cities to subscribe to the stock of railroads running in to or through the city, and to borrow money by executing its bonds to pay such subscriptions ; Thompson v. City of Peru, 2-213. 20. Donations and subsceiptions. There is an essential dif- ference between a subscription of stock in a corporation and a donation thereto. Under said statute the petition of a majority AMERICAN CORPORATION CASES. 471 of the resident freeholders is necessary to the validity of a dona- tion, but it is not essential to a subscription of stock. Id. 21. To ISSUE bonds; constbdotion of statute. The general power was conferred upon the county court to subscribe for stock in a railroad company, subject to the provisions of the general railroad law of the state. The general railroad law referred to provided that the county " may, for information, cause an elec- tion to be held to ascertain the sense of the tax payers " as to such subscription. Held, that the word " may " should be interpreted to mean " shall," and that such vote was essential to tbe exercise of the power ; Hobert v. City of Detroit, 3-527. 22. Fund existing debt. The requirement of the charter of a city, that money borrowed should be expended and applied in the liquidation of its debts, and in the permanent and useful im- provement of the city, is not a prohibition against funding an existing debt and issuing the necessary evidences thereof in such mode and form as the parties may agree upon ; City of Galena v. Corwith, 2-197. 23. Independently of the chabtee. The power of a mu- nicipal corporation to pay debts, or provide for their payment, to fund them and issue the necessary evidence thereof, exists in every corporation to the same extent as in natural persons, and this without any express authority in the charter. Id. 24. General powers. Corporations have all the powers of ordinary persons, as respects their contracts, except when they are expressly, or by necessary implication, restricted. Id. 25. Board of supervisors. Boards of supervisors have the power, as incidental to that of buying, selling and leasing prop- erty, and the management, care and preservation thereof, to take all legal measures necessary to that end, by suit or otherwise, and therein have large discretionary powers ; Hornblower v. Duden, 3-86. 26. Exercise of discretion. If, in the exercise of discretion, the board, believing that the interests of the county are involved in a matter, take legal measures, by suit or otherwise, to advance or protect those interests, the expenses incurred are a legal charge upon the county, notwithstanding the courts might ultimately hold that they had adopted the wrong remedy, or were entitled to no remedy whatever. Id. 27. Employ counsel. The board of supervisors has the power to employ counsel other than the district attorney, to prosecute or defend, or assist in the prosecution or defense, of any suit in which the county has an interest, whether it be a party to the record or otherwise. Id. 28. Not reviewable. The exercise oi discretion by the board in such matters is not reviewable by the courts. Id. 29. School district committee. Authority to prosecute ac- tions is not incidental to the official power of a prudential com- 472 DIGEST OF THE mittee of a school district, under the laws of Massachusetts; Burgess «. School Dist., 3-492. 30. Implied powee. The vote of a school district directing its prudential committee " to look into the rights of the districts," implies authority to consult counsel as to those rights, but not to prosecute an action ; and a subsequent vote of the district to stop such an action does not render the district liable for expenses pre- viously incurred by the committee in prosecuting it. Id. 31. To ABOLISH SCHOOL DISTRICT. The general statutes of the state of Michigan invested the boards of school directors with power to create and abolish school districts within ,the territory of their several jurisdictions. The legislature, by special enactment, created a school district, and embraced within its limits portions of three districts already existing, and made provision for the collection of taxes assessed on the property of the three districts before the creation of the fourth one, and for the division of the same among the four districts existing thereafter. The board of inspectors abolished, in the manner prescribed by the general law, the new district, and assigned to each of the original districts the territory taken therefrom when the new district was created. Held, (1) that, inasmuch as the controversy might involve the taking of an account of the taxes collected, a court of equity had jurisdiction to hear and determine the questions presented by the action of the board of inspectors ; (2) that the inspectors had no authority, in the exercise of the powers conferred by the general statute, to divide the dis- trict created by a special enactment ; School Dist. v. Dean et al., 2-519. 32. GrEANT LICENSES. The act amending the several acts incor- porating the city of Holly Springs, Mississippi, conferred upon the mayor and aldermen of the city "the exclusive right to grant licenses for the sale of spirituous and vinous liquors within the corporate limits of the same." The general statutes of the state, in force when this act was passed, conferred this power as to towns of the same class upon the county board of police, and provided that it should be exercised only upon the petition of a majority of the legal voters " residents within the corporate limits of the town within which the liquors were to be sold," which petition should be laid over for consideration one month after it was received and filed : Held, that the special act only transferred the authority as to Holly Springs from the county board to the mayor and alder- men, and that its exercise by the latter was subject to the limita- tions and restrictions prescribed by the general law ; House «. State of Mississippi, 3-563. 33. Peovide foe indigent sick. Authority in a common council to elect a city physician, and to " establish a board of health, to prevent the introduction and spread of disease, to establish a city infirmary and provide for the indigent " is legiti- mately exercised by entering into a contract securing medical at- AMERICAN CORPORATION CASES. 473 tendance, and making other provisions for the indigent sick. Such authority canbe exercised only in behalf of the indigent ; Tucker V. Yirginia City, S-599. 34.' Fees of physician. "When the fees of a physician em- ployed by a city for attendance upon the indigent are not fixed at the time of his appointment or performance of service, he may recover their reasonable value. Id. 35. Imi^lied conteact. A municipal corporation may be bound by an implied contract upon the same principle that an individual or private corporation is so bound. la. 36. CoMMissiONEEs ; EOADS. When the law casts upon the county commissioners the duty of protecting the public roads from injury, and to keep them in proper repair for public use, the public right becomes paramount to that of individuals which would be affected by the discharge of such duties, and if, by reasonable and necessary improvement to the highway, a party suffer consequential damages, it Is damnum absque injuria, and no right of action accrues to him ; Tyson v. Commissioners etc., S-391. 37. SiTBSCBiBE FOE TtTENPiKE STOCK. An act of the legislature of Kentucky authorized all the justices of the county court to subscribe not exceeding $750 per mile to any chartered turnpike in the county, "provided that such subscription shall not be made until said court shall be satisfied that an amount of stock, suffi- cient, with the aid of said county subscriptions, to complete each mile of road to which such county subscriptions apply, has been taken by private subscription." Held, that such private subscrip- tions were indispensable to the special authority conferred upon the court; Clay et al. v. Nicholas County Court, 2-345. 38. CiTT COUNCIL. The power conferred upon a city council to establish such by-laws, rules and ordinances, as shall appear to them requisite and necessary for the security, welfare and con- venience of the city, for preserving peace, order and good govern- ment within the city, confers authority to make such rules and regulations as the health, comfort and convenience of the people may require, and to provide for the punishment of all offenses as are not under the constitution and laws punishable in the criminal courts of the state. As to offenses punishable under the laws of the state, the council can only make provision for having the offenders bound over to answer in the proper counts ; Vason V. City of Augusta, 3-136. 39. GuAEANTT. The common council of the city of New Or- leans has no power to bind the city by a contract of guaranty with a lessee of its wharves, undertaking that the income arising from the leased property shall amount to a specific sum ; Patterson v. City of New Orieans, 3-367. 40. To EESOIND OEDEES. The board of commissioners of high- ways in Illinois may modify, rescind or alter any order made by 60 474 DIGEST OF THE their predecessors, provided such modifications, alterations or rescission does not affect the rights of third persons acquired thereunder ; People, ex rel. Stine, v. Board etc., S-162. 41. Notice. Parties dealing with the agents or officers- of a municipal corporation must, at their peril, take notice of the limits of the powers, both of the municipality and those who assume to act as its agents or officers ; State, ex rel., v. Kirkley et al., 2-406. 42. Acquire pkopeett. At common law a municipal corpora- tion can take and hold the title to such lands only as its necessities may require ;. Root v. Shields, 2-15. 43. Take tax deeds. The statutes of Kansas confer upon counties the power to purchase land sold at tax sales, but they are not authorized to receiv^e conveyances of the same by deed. They may receive certificates of sale and transfer the same by as- signment in the manner prescribed by the statute; Guittard Township v. Commissioners etc., 3-323. 44. . Under the statutes of Kansas a county may pur- chase lands at tax sale and receive certificates of sale, but it can not receive a deed, and a deed executed conveying to a county lands so purchased is a nullity ; State, ex rel., v. Magill, 2-327, 45. Effect as against thibd pbbsons. That such a deed has been executed is not a sufficient defense to proceedings by man- damus by a third person who has entitled himself to an assign- ment of the certificate. Id. 46. Extent of. A corporation has no other powers than such as are specifically granted, or such as are necessary for the purpose of carrying into effect the powers expressly granted ; Weckler v. Nat. Bank, 7-354. 47. . A corporation is a creature of law. It has no powers except those expressly granted or necessarily' implied ; and none can be implied except such as are necessary to the exercise and enjoyment of those expressly granted; Board of Comm'rs of Tippecanoe Co. et al. v. Lafayette etc. R.R. Co. et al., 7-26. 48. Limitations on. A corporation can not, by by-laws, resolu tions or contracts, enlarge or abridge the power given to the stock- holders by the statutes of the state : Brewster et al. v. Hartley et al., 1-233. 49. ■. A corporation possesses no powers except those given by its charter, either by express language or implied as necessary in strict furtherance of the objects of the incorporation ; Diligent Fire Co. v. Commonwealth, 5-613. 50. . Contracts, engagements and acts of a corporation not necessarily embraced within thb scope of the undertaking authorized by the act of incorporation, can not be legally made or performed by the corporation. It has no power or authority other than that which is expressly given it or which necessarily flows from those given ; Pittsburg & Oonnellsville R.R. Co. v. County of Allegheny, 4-92. AMERICAN CORPORATION CASES. 475 51. Limitations on. Corporations have such powers as are specifically granted by charter or are necessary to carry into effect such specified power. These only. They must act strictly within the scope of the powers conferred and, where a grant of power is relied on, the mode prescribed in the grant for its exercise must be pursued according to the grant ; Matthews v. Skinker, 8-149. 52. . Limitations on powers to be exercised by corpora- tions and natural persons are to be interpreted, alike in both cases, by the terms iu which they are expressed and without reference to the fact that they are powers inherent or conferred ; Farmers & T. Bank v. Harrison et al., 8-129 ; Rittenhour v. Same, 8-137. 63. . Generally, a private corporation can not go into any business, or do any act, not fairly within the extent of its granted powers; Chapman v. Colby Bros. & Co., 7-578. 54. . A corporation, being the creature of the law, pos- sesses only those powers which the charter of its creation confers upon it, either expressly or as incidental to its very existence ; H. Orl. etc. Steam^ip Co. v. Ocean Dry Dock Co., 7'-195. 55. . The modern doctrine is to consider corporations as having such powers as are specifically granted by the act of incor- poration, or are necessary for the purpose of carrying into effect the powers expressly granted, and not as having any other. Id. 56. . As a corporation is a mere creature of the act of in- corporation, it has no other powers except such as are in said act expressly granted, or are necessary to effect the ends and objects of its existence. Every power which it possesses need not be granted in detail, but the company is confined, in its operations, to the objects and purposes expressly set forth in its charter, and it can undertake no other enterprise than is there expressly men- tioned ; Central K.U. Co. et al. v. Collins et al., 3-224. . 57- . The charter of corporations constitute the chart of their authority and they have no powers except such as are ex- pressly granted and such as are auxiliary and necessary, to carry out and subserve the object of their creation ; Pacific K.R. Co. V. Seely et al., 3-529. 58. . A corporation has no other powers than such as are specifically granted, or such as are necessary for the purpose of carrying into effect the powers expressly granted ; Vandall et al. V. South San Francisco Dock Co., 3-150. 59. . A corporation can not lawfully exercise any power not conferred upon it by the statute creating it or under which it is organized ; Rochester Ins. Co. v. Martin, 3-486. 60. WrrHHELD. Powers not conferred on a corporation are withheld and denied, as much as though express language of pro- hibition was employed. Id. 61. CoNSTEUCTioN OF STATUTORY LIMITATION. A Statute forbid- ding corporations to exercise any powers except the ordinary powers incident to corporate existence, the powers expressly given 476 DIGEST OF THE by charter, or act of incorporation, and such as shall be necessary to the exercise of the powers so enumerated and given, must be construed as a prohibition of any acts not within the scope of the powers permitted and as operating to render contracts, in contra- vention of it, illegal and void; Morris & Essex E.E. Co. v. Sussex E.K. Co., 3-579. 62. NEOBSSAitT POWERS. Uuless restrained by the charter, the grant of corporate powers carries with it the powers necessary to carry the franchise into effect. The power to contract, to incur debts etc., would seem to be incident to every corporation, unless the charter provides to the contrary ; Wood Hydr. H. M. Co. v. King; 4-344. 63. Implied. The power to do acts and make contracts neces- sary to enable a corporation to answer the ends of its creation, like the express grants o^ power, is to be strictly construed and is limited, by all the cases and by th6 general principles of all the books, with this qualification, that even for this purpose, the com- pany can not engage in any new and distinct enterprise, involving new risks to its stockholders and not fairly within the terms of the original grant ; Central R.E,. Co. et al. v. Collins et al., 3-224. 64. . The power to make all such contracts as are neces- sary and usual in the course of business, or are reasonably incident to the objects for which a private corporation is created, is always implied, where there is no positive restriction in the charter; Morville v. Am. Tract Soc, 7-473. 65. ExTBAOEDiNAET POWERS. Extraordinary authority cauouly be conferred upon a corporation by express words ; it will not be implied. A corporation created by statute possesses only those powers which the charter confers upon it, either expressly or by implication, as necessary to its very existence, and this necessity must be so essential to the enjoyment of some special grant that without it, that grant would fail ; Gaines et al. v. Coates, 5-503. 66. . After shareholders of a corporation have entered into a contract amoug themselves, under legislative sanction, and expended their money in the execution of the purpose mutually agreed upon, that purpose can not be radically changed by the majority, by virtue of legislative enactment, so that a dissentient stockholder shall be compelled to engage in a totally different undertaking, without impairing the obligation of his contract with his associates and with the state ; Black et al. v. Delaware etc. Canal Co. et al., 5-547. 67. Incidental. By the common law every corporation has, as an incident to its corporate existence, among others, the powers of purchasing and alienating lands and chattels ; of entering in to contracts, necessary to carry out the purposes of their creation and, as a consequence, to incur debts and secure them^ by negotiable paper, mortgage, and the like. It will be presumed of all cor- porations, in the absence of prohibition or restraint of statute, or AMERICAN COBPORATION CASES. 477 charter, that each and every company possesses such incidental powers ; KeEy et al. v. Trustees of the Alabama & Cincinnati RE. Co., 6-130. 68. iNoiDENTAi. A corporation which is competent to sue, or to be sued, has power incidental to execute a bond necessary, or proper, in the course of judicial proceeding ; Collins et al. v. Ham- mock, 6-143 ; Collins v. Garrett, 6-143. 69. . A corporation organized under a general law which provides for the formation of any manner of corporation for " law- ful purposes except banking, insurance, real estate brokerage, the operation of raih'oads and business of loaning money," and the objects of which, as declared in articles of incorporation, are "the manufacture and sale " of specific articles, has power, if the exer- cise thereof be necessary for the proper transaction of its business, to sell for cash or on credit and to receive and hold the proceeds ; to appoint agents and hold them responsible for all proceeds of sales ; to receive notes and to purchase, or receive from its agents, notes executed to them in course of business ; Western Cottage Organ Co. v. Eeddish, 6-560. 70, . Where a corporation has the right, under its charter, to make all contracts necessary for the erection of a specified build- ing, it has the power to accept, for payment, an order drawn, in favor of a material man, by the contractor for erection of the build- ing, payable from the money due the latter by the corporation ; Trustees of Prairie Lodge v. Smith, 8-66. '71. DisoEBTioNAET. Corporations in the exercise of discre- tionary powers, conferred by statute, must so exercise them as not to infringe upon the established legal rights of others ; Holmes, Booth & Haydens v. The Holmes, Booth & Atwood Manufactur- ing Co., 3-210. 72. Test of power. In ascertaining the power of a corpora- tion, as respects a given act, it is necessary to consider (1) whether it falls within the powers enumerated in its charter, articles of association, or certificate under a general law, or (2), whether it is necessary to the exercise of one of the powers therein enumerated; Vandall et al. v. South San Francisco Dock Co., 3-150. 73. A CASE msTANOED. A corporation chartered," to buy, im- prove, lease, sell" etc. real estate, owning land in the vicinity of a railroad, may properly appropriate a portion of its funds for the purposes of increasing the facilities and lessening the cost of transportation on such railroad, where the direct and proximate tendency of such increase of facilities is to enhance the value of the company's lands. Id. 74. Determination of eightfulness of exercise. In deter- mining whether a corporation can make a particular contract, it must l)e considered, in the first place, whether its charter, or some statute binding upon it, forbids or permits it to make such a contract ; and, if the charter and valid statutory law are 478 DIGEST OF THE silent upon the subject, in the second place, wh^ther the power to make such a contract may not be implied, on the part of the cor- poration, as directly or indirectly necessary to enable it to fulfill the pm-pose of its existence ; or whether the contract is entirely foreign to that purpose ; Weckler v. Nat. Bank, 7-354. 75. At common law. Every corporation " for the purposes declared by the charter " might, by the common law, hold and possess any kind of real and personal property and make any kind of a contract whatsoever ; Cent. K.E. Co. et al. v. Collins et al., 3-224. 76. To AOQUiEE PEOPEETY. A Corporation chartered for a spe- cific purpose has no power to take a lease of property not needed for that purpose, or other substantial use, with the intention and for the purpose of harassing another party by the use, under the forms of law, of the supposed rights thus obtained. Where a party has a legal right, his motive for asserting that right is immaterial ; but, where a corporation obtains title to property, for the sole purpose of making a mahcious use of it, the motive becomes material as affecting the question of power ; Occum Co. V. Sprague Manuf. Co., 1-295. 77. To AOQUIEE AND HOLD EEAL ESTATE. A Corporation created by and existing under the laws of the state of Illinois, autho- rized by its charter to purchase, receive conveyance of and hold title to land for prescribed purposes, purchasing and receiving a deed executed to it by one competent to convey, becomes vested with the title, and the question whether such corporation has exceeded its power, or violated its charter, in making the pur- chase, is one between the state and the company with which the grantor, as such, has no concern ; Hough v. Cook Co. Land Co., 5-295. 78. . A corporation (in Cahfornia) for the construction of turnpike roads, can hold only such real estate as the purposes of the corporation may require ; Coleman v. San Rafael Turn- pike Co. et al., 5-159. 79. Mode or acquieing. When a corporation has the capacity of acquiring and holding personal and real property, the mode of acquiring not being limited, it may acquire the same either by purchase or gift ; Ala. Gr. L. Ins. Co. v. Cent. Agric. etc. Ass'n, 6-108. 80. Bond foe deed. A bond to convey land to a corporation, which the purposes of the corporation do not require, is void ; Coleman v. San Rafael Turnpike Co. et al., 5-159. 81. AcQuisrrioN of eealtt. It can not be presumed, by the federal supreme court, that it is, or was, against the public policy of a state, that one of her citizens, owning real estate, should con- vey it to a benevolent corporation of another state of the nation, for the purpose of enabling it to carry out the objects of its crea- tion, if suc/i state permits her own corporations, organized for AMERICAN CORPORATION CASES. 479 like pui'poses, to take such real estate by purcliase, gift, devise, or in any other manner ; Christian Union v. Yount, 6-69. 82. Limitation by subsequent legislation. Where a general law for the incorporation of corporate bodies contains no hmita- tions as to the capacity to acquire and hold lands, but declares that such act shall be subject to any limitation or modification that may hereafter be enacted, by general law, as to the amount of real estate to be held by such corporations, a subsequent gen- eral law limiting their capacity to acquire lands to ten acres will bind them, and any conveyance to them of lands afterward, when they have already acquired ten acres or more of land, will be null and void ; St. Peter's Eom. Cath. Cong. v. Germain, 9-185. 83. To TAKE AND HOLD KEAL PEOPERTY. The main objection to allowing corporations in the state of their creation to hold lands not occupied and used in, or necessary to, the exercise of their franchises, is based upon the idea that it might be prejudi- cial to the public interest of that state to allow corporations to become speculators in lands, or to hold them in large amounts, keeping them out of market for an unreasonable time, preventing improvement etc.; Thompson v. Waters, 4-468. 84. Tenure of realty. Land which a corporation can not hold in its own name, it can not hold in the name of another. When a corporation can not hold the legal title to land it can not take a beneficial interest in it; Coleman v. San Rafael Tp. Co. et al., S-159. 85. . The power to acquire and hold real estate is not allowed to private corporations ; except under the conditions pre- scribed by their organic law ; Chapman v. Colby Bros. & Co., y-578. 86. To HOLD PROPERTY. A Corporation was authorized, by legislative resolution, in 1796, to build and maintain a toll bridge. The resolution making the grant declared that " for the purpose of carrying this resolve into effect said company have liberty and are hereby authorized to purchase and hold lands not exceeding one hundred acres ; and said bridge and all property that shall be vested therein, appurtenant thereto, and belonging to said company, shall be considered and is hereby declared to be per- sonal estate, and shall be divided into sixty shares." Held, (a) that the charter did not grant authority to build and rent wharves ; (5) that the long continued exercise by a corporation of powers not granted by its charter does not create such powers by impli- cation ; (c) that wharves owned by the company were not per- sonal property within the meaning of the charter ; (d) that as to the bridge and the property appurtenant thereto it should be con- sidered personal property only when represented by the shares of capital stock ; and that in other respects its character was not changed ; (e) that when the statute provided for the taxation of any real estate owned by a private corporation " above what was 480 DIGEST OF THE required and used for the transaction of its appropriate business " to the same extent as if owned by an individual, such wharves were hable to taxation ; Toll Bridge Co. v. Osborn, 3-156. 87. Use will not stop extension. Where a railroad corpo- ration has procured a right to widen its road bed, as originally constructed, the circumstance of cars having been run over the road so constructed, for some years after obtaining the right, does not estop the company from widening the road; Childs et al. v. Central Ey. Co., 3-568. 88. Legislative eecognition. The passage of a subsequent act, authorizing a new railroad company to take more land than one hundred feet in width in case of necessity, from excavations or embankments, is a strong legislative recognition of the continu- ance of the power originally given to have land sequestered for the purposes of the road constructed by the former railroad cor- poration. Id. 89. Land fok speculation. An agreement by the owner of land to convey, to a railroad company,- certain lands, in considera- tion that the company shall build a freight and passenger depot at a particular place, where the land, so proposed to be conveyed, is to be used for speculative purposes, and not for the general business of locating, constructing, managing and using the road, is against public policy and void, although, in one sense, a railroad company is a private corporation, the public is deeply interested in it. Its chartered privileges and franchises are not granted, solely and exclusively for private benefit and emolument, but to subserve a great public interest ; there is a mingling of both pub- lic and private benefit, and the interests of the public are not to be sacrificed to mere private gain ; Pacific E..II. Co. v. Seely et al., .3-529. 90. . The charter of a railroad corporation gave it power to acquire and hold a strip of land for a right of way, turn outs, embankments or excavations, and to hold sufficient ground for the erection and maintenance of depots, landing places or wharves, engine houses, offices, machine shops, and wood and water sta- tions. Held, that the corporation had no power to acquire land for purposes of speculation. A corporation can purchase and hold land only for such purposes as are authorized by its cliarter. Id. 91. Disposition of coepoeatb peopeett. A corporation hav- ing power, under the statute under which it is organized, " to re- ceive and hold, by purchase, gift or grant, any real or personal property," and to " sell, mortgage, lease and otherwise use and dispose of such property in such manner as they shall deem most conducive " to the purposes of the corporation, has power to make any disposition of its property by sale or conveyance which, in the opinion of the trustees, acting in good faith, will advance the purpose for which the corporation was organized ; People v. President and Trustees, 1-161. AMERICAN CORPORATION CASES. 481 92. Extent of powee. All corporations capable of taking and holdijig property have the jus disponendi as fully as natural per- sons, except in so far as they are restrained by statute. Id. 93. To SELL PEOPEETT. Equity will not, generally, interfere Upon the petition of a general creditor, to restrain a corporation from selling even its entire property to a stockholder or director, where the sale is made with no fraudulent intent, for an adequate price, for the purpose of paying corporate debts, and where no shareholder objects ; Barr «. Bartram & Fantor Manuf. Co. et al., 5-188. 94. Powee to sell. A corporation having power " to purchase, hold, sell and convey such real and personal estate as the purpose of the corporation may require," may sell and convey its entire property ; Miners Ditch Co. b. Zelle'rbach, 1-250. 95. Effect of sale. The sale of the entire property of a pri- vate corporation held as a natural person holds property, and in the use of which the pubhc has no special interest, does not trans- fer the franchise or dissolve the corporation. Id. 96. As TO sale of peopeett. A railroad company was autho- rized, by the terms of its charter, " to lease, rent or sell its said railroad, its appurtenances and franchises to any other incorpo- rated railroad company of this state." It was held, that a sale of the road either in detached portions, or of the iron separately from the remainder of the road, to a party other than an incorpo- rated company of the state, was a violation of the charter, and should be restrained by injunction upon the application of stock- holders in the company ; iJpson County K.R. Co. et al. fl. Shar- man et al., 1-322. 97. Conveyance of eealtt. A statute providing that a cor- poration may convey real estate by an agent appointed by vote for that purpose, does not exclude other modes of conveyance, as, for instance, through the regular officers of the corporation ; Mor- ris «. Keil, 5-487. 98. KiGHT TO MOETGAGE. A Corporation, oeing authorized to acquire real property, will be regarded as having power to sell or mortgage the same in the absence of some statutory prohibition ; Aurora Agric. & Horti. So. ». Paddock et al., 6-368. 99. . Mortgage under a statute authorizing a corporation — in this case a railway company — to borrow money for certain purposes, to dispose of its bonds for the sum so borrowed, and to mortgage its property and franchises to secure the same, upon the concurrence of the holders of two-thirds in amount of the stock of such corporation, to be expressed at a meeting of stockholders to be called by the directors, who are to give notice etc. _ A resolu- tion of the directors at a directors' meeting, authorizing and di- recting the execution of a mortgage for a loan, it being shown that they were the only stockholders except one, and that all the stockholders assented to the making of the mortgage, while not a 61 482 DIGEST OF THE literal compliance with the law is a substantial compliance with its spirit, and the mortgage will be held good; Thomas v. Citi- zens Horse Ry. Co., 9-189. 100. Right to mortgage. A statute required the concurrence of the holders of two-thirds in amount of the stock of the -cor- poration to the proposition to borrow money and mortgage the corporate property. In such case, whether the stockholders received such a notice of the meeting as the statute requires, is a matter of no importance, if they met and acted upon the question. Their action is as binding as if they had the proper notice. Id. 101. To contract, a corporation can make no valid contract except such as relates to the business and objects of the corpora- tion ; and all such contracts must be made either by the board of directors or a duly authorized agent or attorney ; Brooklyn Gravel Eoad Co. V. Slaughter, 3-292. 102. . A corporation, as an artificial person, is endowed with the capacity to enter into any obligation, or contract, essen- tial for its purposes and for the transaction of its ordinary affairs ; M'Kiernan v. Lenzen, 6-264. 103. . The power to contract existing, it may be exer- cised by a corporation, or its agent, in the same way that a natural person may contract, unless restrained, by charter, to some par- ticular mode of contracting. Id. 104. . Capacity to contract is an incidental corporate power ; limited, only, to such contracts as are necessary and proper to enable the corporation to accomplish the purposes of its crea- tion ; Ala. Gold Life Ins. Co. v. Central Agric. & Mech'l Ass'n, 6-108. 105. Voro coNTEACTS. The general principle is, that a corpo- ration can make no contracts and do no acts except such as are authorized by its charter. Any contract, made by it, not neces- sary and proper, directly or indirectly, to enable it to answer the purpose of its creation is void, and not enforceable, at law or in equity. Id. 106. To INCUR DEBTS AND EXECUTE NOTES. A Corporation or- ganized under the provisions of general statutes of 1866 (chapter 34, title 2) of Minnesota, for the incorporation of manufacturing companies, which adopted, as one of its articles of association, a provision fixing a limit to the amount of indebtedness which might be incurred by the corporation, had power to create debts in the ordinary transaction of its business and to give its nego- tiable note for such indebtedness ; Auerbach et al. v. La Sueur Mill Co., 8-6. 107. Contracting and securing debts. A corporation has im- plied power to contract debts like an individuaU whenever ne- cessary, or convenient, in furtherance of its legitimate objects. Whenever it may contract a debt it may borrow money to pay it. Whenever it contracts a debt, in the scope of its business, or bor- AMERICAN CORPORATION CASES. 483 rows money, it may execute a negotiable bill, note, or bond and secure it by mortgage, to the creditor, in payment ; Ward, re- ceiver, V. Johnson et al., 6-462. 108. To BOEEOW MONEY. Withoiit authority expressly given by the act of incorporation, a private corporation may borrow money for the legitimate pui-poses of its creation or organization. As it may borrow money so it may secure the re-payment of the same upon the corporate property, by mortgage or otherwise, as exercising an implied or incidental power. The corporation would be estopped to deny it had authority thus to pledge its property etc., after having received the benefits of the proceeds of the se- curity ; Wood et al. v. Whelen, 6-442. 109. . A corporation, organized not for pecuniary profit, the articles of association of which neither assiime the power to borrow money or to execute securities therefor, nor prohibit the doing of these, has, by implication, the power to borrow and se- cure the payment of moneys for the necessary and proper pur- pose of carrying out the objects of the corporation ; Thompson et al. v. Lambert et al., 6-523. 110. . Every private corporation, unless prohibited, may borrow money to carry out the purposes of its creation ; Ala. Gold Life Ins. Co. v. Cent. Agric. & Mech. Ass'n, 6-108. 111. . Corporations, like individuals, may borrow money, for use in the conduct of their affairs, without express authority therefor, when the nature of their business may render it proper or expedient. The power to borrow carries with it, generally, unless expressly restrained, the power to secure the loan made by mortgage. If there be no such express power found in the charter of a corporation, but power is conferred on its directors to make all necessary contracts and to sell, or otherwise dispose of, any portion of its property whenever, in the judgment of its directors, it should be found to be to the interest of the company the exer- cise of the power to borrow and to secure the loan by mortgage will be valid ; Booth et al. v. Kobinson et al., 7^19. 112. To EXECUTE NOTE. A Corporation created under general statutes of Minnesota (chapter 34, title 2) may execute promissory notes to evidence debts which it may contract ; Sullivan et al. v. Murphy et al., 7-606. 113. BoEEOwiNG. In order to borrow money and mortgage the franchises and property of a corporation to secure its re-payment, special authority is necessary ; because these are not incidents of the charter; Pittsburg & Connellsville K.R. Co. «. County of Allegheny, 4-92. 1 14. As TO NEGOTIABLE PAPEE. Manufacturing and other like corporations in Alabama may, unless expressly prohibited by their charters, borrow money and' make and receive promissory notes and bills of exchange, in carrying on their lawful business ; Oxford Iron Co. V. Spradley, 4^272. 484 DIGEST OP THE 116. Peesumption as to negotiable papee. The pre8nmption is in favor of the validity of notes and bills of exchange made by manufacturing and other like corporations of Alabama, as vrell as that they are made in the lawful course of their business, until the contrary is shown. Id. 116. Bills OF EXCHANGE. A corporation, having the, ordinarily granted, authority to contract and be contracted with, has the power to execute bills of exchange. Its directors, unless expressly prohibited by charter, may therefore confer authority upon its agent to draw and execute bills of exchange on behalf of the com- pany. This may be done without any formal action, in writing, on the part of the board of directors; Preston -o. Missouri & Pennsylvania Lead Co., 4-514. 117. Peomissoet note void, a promissory note executed by an iron company for money, or other thing, loaned to it, to be used by the company in erecting iron works, and making iron for the late confederate government, for military purposes in carrying on the late rebellion against the United States, if known to the lender at the time of the loan, is against public policy and illegal, and no action can be maintained on it ; Oxford Iron Go. v. Sprad- ley, 4^272. 118. BoEEowiNG MONET. A Corporation has power to borrow money and give a mortgage to pay its floating indebtedness, and enable it to carry on business ; Hopson v. ^tna Axle & Spring Co., 10-97. 119. . The directors may guarantee the payment of such indebtedness ; and the company, having used the money in paying its debts, can not be heard to say that the mortgage is invalid. Id. 120. BoEEowiNG PEOM oFFicEE. Under statutc of Indiana (Rcv. Stat., 1881, § 3653) a turnpike company is authorized to borrow money of any oflBcer of the company, for use in making »its road ; and, it may execute a promissory note therefor ; Lebanon etc. G-ravel Eoad Co. v. Adair, 9-259. 121. Violation of statute. A statutory provision which for- bids a corporation to contract debts or incur liabilities exceeding , one-half of its capital stock actually paid in and unimpaired and its other property and assets, is directory. Debts contracted and liabilities incurred in excess of that amount are binding upon the corporation. The contracting of such debts is not the exercise of a power not conferred upon the corporation ; but, merely the abuse of the given power in particular instances, of which abuse third parties can not, ordinarily, be presumed to have had know- ledge ; Ossipee Hosiery & Woolen Manuf. Co. v. Canney, 3- 532. 122. UsuEious conteaot. The directors and shareholders of a corporation are the agents and quasi trustees of the corporation ; wherefore, they have no power or authority, in the absence of ex- press words of the charter, to make an illegal usurious contract AMERICAN CORPORATION CASES. 485 ■which shall bind the corporation, or its assets ; Planters Ware- house Co. et al. V. Johnson, exec'r, et al., 7-15. _ 123. To MAKE ASSIGNMENT. A Corporation may make an as- signment, which is a contract of transfer or sale. It may make euch assignment by an agent ; M'Kiernan v. Lenzen, 6-264. 124. General assignment. Itiis well settled law that, in the absence of any restriction, by charter or by general law, a corpora- tion may execute an assignment of its property for the benefit of its creditors. Such an assignment may be made by the board of directors, without the express authority, or consent, of the stock- holders ; De Camp et al. v. Alward, 7-76. _ 125. Joint obligation with individual. Where an associa- tion of persons employ an individual, to render services for them, a third party, not a member of the association, may become bound with the company ; Boyd v. Merriell, 3-260. 126. Election oe members. The power to elect members is incidental in the corporate body, and such power need not be ex- pressed in the statute under which the corporatipn organizes, but, where the power is limited, it cannot be exceeded; Diligent Fire Oo. V. Commonwealth, S-613. 127. LrMiTATioN or membeeship. The charter of a corpora- tion provided it should consist of not more than one hundred ac- tive members, and might bestow honorary membership on active members as they might think proper. The corporation could not create honorary members except from active members. Id. 128. . A by-law authorizing the election of contributing members, in the same maimer as active members, held void. Id. 129. To EXPEL members. Such a corporation may provide by by-law for the expulsion of members, but it is not invested with arbitrary power or uncontrollable discretion. When a proper case is made the courts will construe a by-law made within the power of the corporation, and investigate the legality of action taken un- der it ; State, ex rel., v. Ga. Med. Soc, 1-328. 130. . When a corporation is duly organized it has power to make by-laws and expel members, though the charter is silent upon the subject ; Dickenson v. Chamber of Comm., 4-229. 131. . If the power to expel members from a corporation be expressly granted in general terms, it is conferred to enable the corporation to accomplish the objects of its creation and is limited to such objects or purposes, it appears to be well settled, that when the charter of a corporation is silent upon the subject of ex- pulsion, or grants the power in general terms, there are but three legal causes of disfranchisement: 1. Offenses of an infamous character indictable at common law. 2. Offenses against the cor- porator's duty to the corporation, as a member of it. 3. Offenses compounded of the two. Id. 132. ExEEOisE OF coKPOEATE EIGHTS. A corporatiou may do business for another person, and in that sense become a broker ; 486 DIGEST OF THE but, it does not become a broker by transacting, for itself, such business as its charter authorizes it to do ; Henderson et al. v. State of Indiana, 7-45: 133. Eight to sue. If it be assumed that until the filing of a certain certificate, as an act precedent to the doing of business as a corporation, the corporation has not the power to sue or to transact business, it does not follow it can not maintain an action for goods it owned and has sold or consigned for sale on its account prior to such filing. Upon filing the requisite certificate the title to the goods sold, or consigned, or the proceeds thereof, would at once vest in the corporation and it would acquire the right to maintain suit for them ; Augur Steel Axle etc. Co. v. Whittier, 7-443. 134. To ARBITRATE. A Corporation which is empowered to sue and be sued, plead and be impleaded, appear in court, defend and prosecute to final judgment and execution has power to submit a demand made against it to arbitration, authorized by statute, for the adjustment of controversies; Morville v. American Tract Soc, 7-473. 135. Compromise of suit. The president and directors of a corporation, having the power to institute an action, have the power to dismiss it ; Shawhan etc. v. Zinn etc., 7-186. 136. Exercise of. A corporation which, by its charter, can only act through its board of directors, can not be bound to con- tracts by its president, without the authorization of the board ; unless it be in acts of simple administration which, of necessity, should be done without that authorization; Bright v. Metarie Cemetery Ass'n, 7-260. 137. . By the articles of incorporation, of a corporation, formed under general law, the government thereof and the man- agement of its affairs was vested in the board of directors. The legal effect of this is to invest the directors with such government as a board, and not otherwise. The general rule is, that the gov- erning body, as such, of a corporation are agents of the corporation only as a board and not individually. They have no authority to act for the corporation, save when assembled at the board meeting. The separate action, individually, of the persons composing such governing body, is not the action of the constituted body clothed with the corporate powers ; Baldwin et al. ■». Canfield, 7-641. 138. Delegation op. Where by vote of the corporation it is resolved " that the president have the full power and control of all the business of the company," and he exercises the delegated authority, this will authorize him to execute and issue negotiable paper for money borrowed about the business ; Castle v. Belfast Foundry Co., 7-340. 139. Katifioation of exercise. The action of two of three directors in ratifying and confirming the acts of one of the two will be binding on the corporation ; albeit the third may be de- ceased or have resigned. III. AMERICAN CORPORATION CASES. 487 140. ExtEA-TEEEiTOKiAii EXERCISE OF. A Corporation created by and existing under the laws of one state, may transact business and have places of business elsewhere, unless prohibited by its charter or by local law ; Nat'l Bank of Commerce v. Huntington et al., 7-524. 141. . A corporation may exercise its franchises extra- territorially, only so far as it may be permitted by the policy or comity of other sovereignties : Citv of St. Louis v. Wieeins Ferry Co., 3-79. « , j gg 142. . A corporation, as such, does not exist out of the jurisdiction which charters it. But, a corporation may, by its agents, make contracts and sue and be sued, out of the jurisdic- tion which gave it birth ; provided there be nothing in the charter, or in the nature of its powers, to contravene ; "Wood Hydr, Hose Mining Co. v. King, ^344. 143. Pkesumption as to exercise of. In harmony with the general law of comity, among the states composing the nation, the presumption should be indulged that a corporation of one state, not forbidden by the law of its being, may exercise within any other state the general power conferred by its own charter, unless it is prohibited from so doing, either by the direct enactments of the latter state, or by its public policy, to be deduced from the general course of legislation, or from the settled adjudications of its highest court ; Christian Union v. Tount, 6-69. 144. ExTEA-TEEKiTOEiAL EXBECI8E OF. Although generally a cor- poration must dwell in the state under whose laws it was created, its existence, as an artificial person, may be acknowledged and recognized in other states. Its residence in one state creates no insuperable objection to its power of contracting in another. Id. 145. . The directors of a corporation, unless forbidden by its charter or the general laws of the state from which it derives existence, may perform all except strictly corporate acts outside of the limits of such state, as within them ; Bassett v. Monte Christo Gold & Silver Mining Co. et al., 8-366. 146. Ultea viees. The term ultra vires is used in two senses. 'An act is ultra vires when beyond the scope of the powers of the corporation under any circumstances. An act may also be ultra vires with reference to the rights of certain persons, when without their .consent, or with reference to some specific purpose as to which it is prohibited, though fuUy within the scope of the general powers of the corporation, or its powers for some other purpose. Miners Ditch Co. v. Zellerbaeh et al., 1-250. 147. . The test, as between strangers who have no actual notice and the corporation, i,s to so compare the terms of the con- tract with the provisions of the law from which the corporation derives its powers, and if the court can see that the act to be per- formed is necessarily beyond the powers of the corpOTation for any purpose, the contract can not be enforced ; otherwise it can. Id. 488 DIGEST OF THE 148. Before stock subsceibed. Neither a railroad corporation, organized under the general act, of Ilhnois, of March 1, 1873, nor its charter directors, can do other acts than such as are necessary to set the association in motion as a corporation, until the whole number of shares of its capital stock, as fixed by its articles of as- sociation, have been subscribed. Until that is done no contracts can be made, nor can any liability be incurred for the construction of the contemplated road, in which one of them may have had a pecuniary interest as a stockholder ; AUman v. Havana, Eantoul & Eastern E.R Co., 6-415. 149. . Where a railroad company was attempted to be formed under the general railroad incorporation law of Illinois, of March 1, 18T2, and its capital stock was fixed at $1,000,000, by its articles of association, the number of shares being 10,000, of $100 each, it was held the corporation could have no legal existence until the entire amount had been subscribed ; and that, prior to the happening of that event, the directors could make no assess- ment, or call, on the shares of those who had subscribed. Id. 150. Excess in bxeeoisb of. Excess in the exercise of power by a corporation is' to be redressed by the commonwealth and not by volunteers who may choose to interfere ; Pittsb. & Conn. E.R. Co. V. Allegheny Co., 4^92. 151. Realty held in ex;cess of limitation. It is matter of no concern to the individual litigant that a corporation has acquired, or is holding, more real estate than its charter authorizes. The matter can be raised and proceeded upon only by authority and in the name of the state ; Christian Tin. v. Yount, 6-69. 152. Indebtedness in excess of limitation. Where a private corporation has authority to issue negotiable paper, such paper, when issued, possesses the legal character ordinarily attaching to commercial paper ; and, a holder in good faith, before maturity and for value, may recover, although, in this particular case, the power of the corporation was irregularly exercised or was exceeded ; Auerbaeh v. La Sueur Mill Co., 8-6. 153. Who mat not question the exeecise of. The purchaser, at a judicial sale, of real estate, of a private corporation, who is , neither a stockholder nor creditor, can not question the power of the corporation to make a prior deed of trust upon the property by him so purchased and have the same set aside in his favor, he having, at the time of purchase, notice of the incumbrance and the company having been guilty of no fraud ; Darst v. Gale et al., 6-380. 154. Defect of. A corporation, organized under general law of ja state, can not subject itself, or its members, to the jurisdic- tion or control of an authority existing out of the state of its * creation and which is not subject to the jurisdiction of domestic law ; Lamphere v. Grand Lodge A. 0. U. W., 7-595. 155. . The powers of a railroad company do not extend AMERICAN CORPORATION CASES. 489 to its becoming a stockholder in other railroad companies, and a court of equity will, at the instance of stockholders, enjoina pur- chase of stock by such corporation ; Central R.R. Co. et al. v. Collins et al., 3-224. 156. AoQuiEiNG STOCK OF OTHER coBPOEATioTTS. A Corporation may invest in the stock of other corporations, as well as in other funds ; provided it be done in good faith and with no sinister or unlawful purpose and there is nothing in its character or the nature of its business forbidding such investment ; Booth et al. v. Eobinson et al., 7-419. 157. MisAPPEOPEiATioN OF PEOPEETT. A railroad company having purchased a majority of the shares of stock in a canal cora- pajiy, elected for the latter a board of directors, who were in the interest of the railroad company, and then with the assent of such board, appropriated the entire canal and property of the canal company as a railroad track, paying therefor a price or compensa- tion which was agreed by the directors of the two companies, but which was far below the actual value of the property ; held, that, although the stockholders and creditors of the canal company can not, after the road has been completed, reclaim the property or enjoin its use, yet they are not concluded by such agreement, so far as regards the price of the property, but may, by action, com- pel the railroad company to account for its additional value; Goodin w. Cincinnati etc. Canal Co. et al., 3-652. 158. Measijee of damage. The rule of valuation in such cases is, what the interests of the canal company was worth, not for canal purposes merely, or for any other particular use, but what it was worth generally — for any and all uses for whicli it might be suitable. Id. 159. Of national bank; pttechasb of coin. The national bank act of 1864, authorized the banks erected under it to buy and sell coin. Banks holding coin in pledge may sell and assign ita special property, and such an assignment vests the legal title of the assignor ; iTerchants Nat. Bk. v. State Nat. Bk., 3-25. 160. Ceetificates op deposit, a corporation authorized by its act to receive deposits on trust, but prohibited to " make or issue any bills, bonds, notes or other securities to circulate in the community as money," may issue certificates of deposit; Talla- dega Ins. Co. v. Landers, 3-102. 161. Construed. An express grant of power, in a charter, to a corporation, to fix the rates of tolls to be charged, as for trans- portation by a railway, and to alter and change such rates, does not confer unlimited power ; but, only tRe right to charge reason- able rates, and what is a reasonable rate may be fixed by statute ; Enggles V. People of State of Illinois, 6-428. 162. CoNSTEUED. The power to build bridges or make any other work necessary for the construction, use or enjoyment of a railroad, implies only that the company can make such works on 62 490 DIGEST OF THE the line which they may take by condemnation ; State v, Han- cock, 3-566. 163. IN'oN USEE. A mere non user of all corporate powers is not a concealment of the corporation, such as to suspend the run- ning of the statute of limitations ; City of Fort Scott v. Schulen- berg et al., 7-156. 164. Removal. Corporations can not remove from place to place, or establish branches for the transaction of their regular corporate business, unless authorized by law ; Chapman v. Colby Bros. & Co., 7-578. See, also, Agency ; Bank and Banking , Conteact ; Dieectoes ; FoEEiGN Coepoeation ; National Bank ; Offices an^ Of- EicEEs ; Ultea Viees. PEACTICE. 1. Capacitt to sue. The rule that the question of the plain- tiff's capacity to sue must be raised either by demurrer or answer, and, if not so raised is to be deemed waived, applies to all cases where the plaintiff, though having an interest in the subject of the suit and the relief demanded, does not show a right to appear in court and demand such relief in his own name ; as in the case of a stockholder in a corporation suing directors of the corpora- tion for a fraudulent breach of trust in dealing with the corpo- rate property ; Bulkley v. Big Muddy Iron Co. et al., 9-533. 2. Appeaeance. a corporation, like a natural person, may appear voluntarily by attorney; such appearance gives jurisdic- tion to the same extent as if there were actual service of process ; Attorney General v. Guardian Mut. L. Ins. Co., 8-609. 3. Seevioe of peooess. a foreign corporation not having an agency established, in the state of Minnesota, for the transac- tion of any portion of its business and upon whose property plaintiff has not acquired a lien, by attachment or garnishment, may be subjected to the jurisdiction of the courts of the state by service on its president, secretary or any managing or general agent found within the state ; Guernsey v. Amer. Ins. Co., 8- 490. 4. ; acceptance. In a suit against a corporation, any oflScer, agent or employe thereof, on whom the summons and complaint may be executed, is competent to accept the service ; Talladega Ins. Co. v. Woodward, 3-116. 5. Appeaeance waives no eights. By subjecting itself to the provisions of a state statute requiring it to maintain an office in the state where process o£ the state courts may be served on it, a corporation makes no contract divesting itseli of its rights of a citizen of a foreign state, nor does it waive any right which as a foreign citizen it may have under an act of the congress of the United States ; neither does it waive such right by appearing to answer in a suit brought, nor, after application for removal has AMERICAN CORPORATION CASES. 491 been made according to tlie act of coneress and refused, by going to trial and judgment; Herryford v. ^tna Ins. Co., 8-511. 6. Appeaeanceikekgulaelt ENTERED. An appearance irregu- larly entered by defendant's attorney will not be allowed to be withdrawn when the cause is called for trial, if objected to, and if such withdrawal will have the effect to prejudice the plaintiff. The irregularity will be held to be the fault of the party's attorneys, who made the irregular appearance, and they will not, at that stage of the case, be permitted to withdraw it, and thus take advantage of their own fault to the injury of the plaintiff ; Talladega Ins. Co. V. Landers, 3-102, note 1. 7. PowEE OF couET. The chancellor has the power to require an election of directors, upon the presentation of a proper case ; Orr V. Bracken County, 10-449. 8. Injunctions. An injunction will lie at the suit of a corpora- tor to present the misappropriation of corporate property. In such actions the corporation is a proper party ; Tipton Fire Ins. Co. V. Bamheisel, 10-307. 9. To STAY WASTE . When the purpose of the action is only to stay waste and to preserve the corporate property, no useful end could be subserved by making the corporation a party ; Parrott et al. V. Byers et al., 4-282. 10. Winding up. The statute of Tennessee requires that a bill filed by creditors of a corporation, in the process of winding up, praying for distribution of the proceeds of its property, shall be tiled by the complaining creditor, for himself and other creditors. A defect in this particular is cured by an order in the final decree directing that notice be given to such other creditors to come in and present their debts ; Moss v. Harpeth Academy, 4-188. 11. Defense at law, neglect. If a party has the means of defense to an action at law in his power, and neglects to employ them, and suffers a recovery to be had against him, a court of equity will not grant him relief against the judgment unless he shows he was prevented by fraud or improper act of the plaintiff in making his defense at law; Galena & S, W. P.K. Co. v. Ennor, 10-286. 12. . The fact that there was false testimony given on the trial, or false representations or assertions as to defendant's liability previously made, is no ground in equity for setting aside a judg- ment at law, nor wiU the failure of the plaintiff to produce written evidence on the trial, and the giving parol evidence where inadmis- sible if objected to, amount to a fraud on the defendant in the judgment as to the fact the written evidence would have shown. Id. 13. BuL TO COMPEL PAYMENT OF suBscEiPTioN. On a bill filed to enforce the liability of a stockholder for his unpaid stock, the corporation, if existing, or if it has ceased to exist, all its stock- holders and creditors, are indispensable parties and should be before 493 DIGEST OF THE the court so that complete justice may be done to all, and all con- flicting rights and equities finally adjusted ; Patterson v. Lynde, 10-239. 14. Bill to compel payment or stjbsceiption. On a bill filed in the courts of this state by creditors of an insolvent corporation of the state of Oregon against the corporation, alleging its insol- vency and their inability to obtain a judgment at law in this state, and also that the defendant owed large sums on their subscriptions to the capital stock of the company, and seeking a decree against them for the same, to satisfy complainant's judgment, held, that A demurrer to the biU was properly sustained for the reason of its being impossible to acquire jurisdiction of the corporation, the non resident stockholders having no property here. Id. 15. Bill and cross bill. Where a mutual insurance com- pany filed a bill in equity, alleging that a large surplus fund had accumulated ; that this fund had become amply sufficient, and was in danger of becoming too large ; that certain questions had arisen concerning it, and the interest arising from it, and praying an interpretation of the charter, and that the legal status of said fund be determined so that it might be ascertained who were its lawful owners, such bill brought the reserve fund before the court, and cross bills setting up rights or claims as to the fund, were germane to the litigation and not demurrable; Carlton ». Southern Mut. Ins. Co., 10-171. 16. Trustee as paety. If a cestui que trust bring a suit against a third person to whom the trustee has assigned property in violation of the trust, the trustee should be made a party, for he is ultimately bound for the due fulfilment of the trust ; Cov- ington & Lexington R.E.. Co. v. Bowler's heirs et al., 4-404. 17. Paeties. On a bill by one trustee of a chutch against his co-trustees to obtain the cancellation of a sale of real estate of the society made by such co-trustees, the corporation should be com- plainant, or at least a party to the suit ; Cicotte v. Anciaux, 10-629. 18. Suing as a class. "When defendants are brought iu to court as a class on account of numbers, they may defend in the same manner, and if a cross bill is a legitimate mode of defense, it may be filed by them as a class ; Carlton v. Southern Mut. Ins. Co., 10-171. 19. Amendment of declaeation. In an action at law against individuals as agents, or committee, or trustees of an association, it is proper, for the attainment of justice, that the court shall allow plaintiff to amend his declaration, so as to charge defen- dants, in their true character, as a corporation, where the original and amended declarations seek the same end — the subjection of certain property to the plaintifE's demand ; Trustees of Prairie Lodge V. Smith, 8-66. 20. Plea of nul tibl coepokation. The plea of nul tiel AMERICAN CORPORATION CASES. 493 corporation does not impose upon tlie plaintifE proof that it was in all respects a perfectly legal corporation. On the issue pre- sented by that plea, plaintifE is entitled to recover on making a proof that it had a de facto existence. The execution of the in- strument upon which the suit is brought is sufficient prima facie evidence of its existence as a corporation and no further proof is necessary until rebutted by the defendant ; Hudson v. Green Hill Seminary, 10-259. 21/ Proof of corpoeate existence. In an action for divi- sion of the property of a defunct corporation, as against corpora- tors, it is not necessary to prove a regular corporate organization; Tipton Fire Ins. Co. V. Barnheisel, 10-307. 22. Se'iting aside default. A default should not be set aside, if the service has been regular, without affidavits of excu- sable neglect, or inadvertence, and, also, of merits ; Lamb v. Gas- ton & Simpson Gold & Sil. Min. Co., 8-300. 23. Exceptions. When the bill of exceptions does not purport to contain all the evidence, the court will not consider objections relating to the admission of testimony ; Fasnacht v. German As- sociation, 10-330. 24. Bill of exceptions. It is a well settled rule of practice, of the supreme court of Indiana, that where time is given ex- tending beyond the term of the trial court, in which to file bills of exceptions, they must be filed within the time limited or they will constitute no part of the record. A bill of exceptions is no part of the record unless the record shows when it was filed ; Port et al. v. Eussell et al., 4-381. 25. Removal of causes. In the absence of authority, shown of record, to make the affidavit required by the act of congress of March 2, 1867, for the removal of a cause from state to federal jurisdiction, the court wiU not presume that the secretary of a cor- poration has been authorized to make such affidavit for the corpo- ration ; Dodge, adm'r etc., v. North Western Union Packet Co., 3-502. 26. . On an appKcation to remove a cause from state to federal jurisdiction nothing must be left to intendment or infe- rence. There must be a clear showing, by the record, that the law authorizing the change has been complied with. Id. 27. Lost papers. In Alabama, when a cause is called for trial, if the summons and complaint are lost, plaintiff will be permitted to substitute them on the best evidence that can be adduced (if such evidence is satisfactory to the court), of the former existence and contents of the originals ; Talladega Ins. Co. v. Landers, 3- 102, note 1. 28. In U. S. supreme court. This court can not examine evi- dence, to ascertain whether a jury was justified in finding as it did upon issues of fact ; Express Co. V. Ware, 5-72. 494 DIGEST OF THE 29. Weit of eeeoe. Under the provisions of the practice act of Illinois, any one or two, or more parties, to a suit, either at law, or in equity, may sue out a writ of error to have reviewed the propriety of any final decree or judgment ; St. Louis & Sandoval Coal & Mining Oo. v. Edwards et al, 9-169. 30. Statute of Indiana. No question involving the power of the common council of a city to make a contract for street im- provement, under an order to that effect, can be made an appeal from a precept ; Hallencamp v. City of Lafayette, 3-225. PEE-EMPTION OF PUBLIC LANDS. 1. Within limits of corpoeate town. Public lands included within the limits of an incorporated town are not subject to entry un- der the pre-emption laws of the United States ; 6oot «. Shields, 3-15. 2. Oeganio act, Nebeaska. The provisions of the act of con- gress of September 4, 1841, relating to pre-etaptions, are not re- pealed by the provisions of the organic act, prohibiting the terri- torial legislature of Nebraska from interfering with the primary disposal of the soil. Id. 3. Statute construed. The extent of land which may be in- cluded within the limits of a city is not limited by the act of May 23, 1844, authorizing the corporate authorities to pre-empt three hundred and twenty acres of the town site. Id. PEEFEREED STOCK. 1.- Stock to be equal. Upon the purchase of stock of a cor- oration and the issue, to the purchaser, of a certificate therefor, e acquires a vested right. Any action of the corporation which divides the shares 'of its stock sold and in the hands of lawful owners into classes and gives to one class a preference over the other in sharing in the earnings of the company materially and injuriously affects the rights of the owners of the latter class and, if without their assent or acquiescence, is unlawful; Kent v. Quicksilver Mining Co. et al., 8-613. 2. Issue with privilege. The issue of preferred stock, with the privilege annexed that stockholders may subscribe for and take it on the payment of a stipulated sum per share, can not be considered as an executory contract. Id. 8. Majoeiiy can not bind to. There is no power in a cor- poration — or in the majority of the stockholders — to provide for the creation of a preferred stock, so as to bind the minority of the stockholders not assenting thereto or acquiescing therein. Id. 4. Injunction. A holder of common stock has a right, in equity, to restrain a privileged payment, to a preferred stock- holder, from the profits of the corporation and to have the con- tract therefor declared illegal. It is, however, his duty to be AMBRICAK CORPORATION CASES. 495 prompt in his application for relief, before innocent third persons can be injured. Id. 6. Lbgislatube mat attthoeizb ; to boeeow money. The legislature of a state may, constitutionally, empower a corporation of its creation to borrow money by mortgaging its property and franchises, or hy issuing preferred stock and pledging its revenues for the payment of dividends thereon, where such course is neces- sary to carry into effect the object for which the corporation was created. Even if the grant of power to make such pledge of the revenue was regarded as unconstitutional, after the payment of money on such pledge, chancery would scarcely refuse its aid in enforcing its collection by subjecting the property of the corpora- tion to the payment of the loan ; City of Covington -u. Covington & Cincinnati Bridge Co., S-388. 6. Guaranty indoesed. Where there is indorsed upon stock certificates, a guaranty, as " five per cent, semi-annual dividend guaranteed" ficmi a date fixed, signed by the treasurer, it will not be construed as a guaranty to pay at all events, but, only to pay dividends, from earnings, in preference to stockholders hold- ing common stock ; Lockhart v. Yan Alstyne, 5-4 YO. See Stock and Stockholdeks, 70-80. PEESIDENT ; see Offices and Officees. PEESUMPTIONS. 1. Applicable to coEPOsAnoNS. Generally the presumptions applicable to individuals apply to corporations. In this case, the court applied the presumption of rightfulness of the act to a gen- eral assignment for the equal benefit of creditors, executed after the term of directors had expired, the assignment being under the corporate seal, executed by persons by designation of office as required by its charter, in the"name of a bank, where the assignee had accepted the trust and since had possession of the assets, openly exercising his duties and powers, in the absence of evi- dence to overcome the validity of the assignment ; Thorington «. Gould, 6-147. 2. Compliance with sTATtrrE. It is the presumption of the law that a corporation has complied with all conditions imposed by statute. This presumption prevails until the contrary is shown ; Chase v. Lord et al., exec'rs etc., 8-576. _ 3. Two coEPOEATioNS WITH LIKE NAMES. Plaintiff sued a Cor- poration as being organized under the laws of Missouri. The de- fense set up was that its managing officers, at the time of the making of the contract declared on, were acting in behalf of a foreign coraoration bearing the same name. The court held that plaintiff had a right to presume that the company was lawfully acting here in pursuance of authority derived from the local 496 DIGEST OF THE statute; especially as the same persons were the managers of both corporations ; Dean v. La Motte Lead Co., 8-138. 4. As TO iNCOBPOEATOBS. Where the incorporators of a town company, who sign and acknowledge the charter thereof, desig- nate themselves, in the charter, as citizens of Greenwood county, state of Kansas, and, further, state in the charter that they are all of Salt Springs, Greenwood county, Kansas, and also state in the charter the object of the corporation to be for the purpose of purchasing, locating and laying out a town site, and the sale and conveyance of the same in lots, sub-divisions, or otherwise, and afterward the charter is filed with the secretary of state ; and, afterward, S., who was one of the incorporators, and who signed and acknowledged the charter, conveyed a piece of land to the town company, and there is no evidence tending to show that the persons who signed and acknowledged the charter were not citi- zens of the state of Kansas, or that the corporation was not fully and completely organized; it was held, as against S., it will be presumed that the corporate members were citizens of the state of Kansas, and that the corporation was fully and completely or- ganized ; Sword v. Wickersham, 9-356. See Particular titles. PEINOIPAL AND AGENT ; see Agency. PROCESS. 1. PowEE TO PEEscEiBE. The legislature has authority to pro- vide for and authorize the service of process, issued against a for- eign corporation, upon its agent; Hiller v. Burlington & Mo. Eiver R.B. Co., 8-502. ■ 2. Legislative peebogative. It is for the legislature to de- termine what shall be a sufficient service of process, for the com- mencement of an action ; subject only to the limitation that the service must be such as may reasonably be expected to give the party proceeded against, notice ; Pope et al. ■». Terre Haute Car & Manuf. Co., 9-602. 3. Gbneeal etile. As a general rule, any service will be deemed sufficient which renders it reasonably probable that the party proceeded against will be apprised of the action against him and have an opportunity to defend. So long as this general rule is not violated, by a mode of service prescribed by the legislature, no constitutional right of the party served is invaded ; Hiller v. Burl. & Mo. L. E.R. Co., 8-502. 4. Undee statute of Illinois. Under the act of the legisla- ture of Illinois, of 1853, in relation to the service of process upon incorporated companies, in order that a return of service upon an agent may be held good, the return must show that the president of the company did not reside in, or was absent from, the county ; St. Louis, A. & T. H. E.R. Co. v. Dorsey, 1-417. AMERICAN CORPORATION CASES. 497 5. Service of. It being provided by statute (in the state of Illinois) that an incorporated company may be served with pro- cess, by leaving a copy thereof with its president etc., it is suffi- cient to return : " served this writ on the within named company (naming it) by reading and delivering a copy thereof to Albert Felsenthal, president of said company, this " etc. ; Eock Valley Paper Co. ■». Nixon et al., 6-392. 6. . In Michigan, process can be served on a manufacturing ■corporation organized under general law, only in the county in which its business office is fixed ; Dewey v. Central Car JVCanuf. Co., 6-642. 7. — — . A statute (Wag. Stat., Mo., 29, §§ 26-7) provided for service of process on a corporation by delivery on the president or other chief officer of such company, or, in his absence, by leaving a copy thereof at any business office of the company with the person having charge thereof, and that on the return of such summons, ■served as aforesaid, the officer serving the same shall express in his return on whom, how and when the same, has been executed and if not on the chief officer, he shall express the absence of such officer or that he can not be found. The return of service made by leaving a copy at such business office, in order to be valid must recite that the chief officer is absent from, or can not be found in, . the county and not merely and generally that he is absent ; the proper inference from the latter recital is that he was absent from his office ; Hoen v. Atlantic & Pacific K.E. Co., 8-157. 8. . A foreign corporation not having an agency estab- lished, in the state of Minnesota, for the transaction of any portion of its business and upon whose property plaintiff has not acquired a lien, by attachment or garnishment, may be subjected to the jurisdiction of the courts of the state by service on its president, secretary or any managing or general agent found within the state ; Guernsey v. American Ins. Co., 3-490. 9. ; ACCEPTANCE. In a suit against a corporation, any officer, agent or employe thereof, on whom the summons and complaint may be executed, is competent to accept the service ; Talladega Ins. Co. «. Woodward, 3-116. ' 10. Appeakance. By subjecting itself to the provisions of a state statute requiring it to maintain an office in the state where process of the state courts may be served on it, a corporation makes no contract divesting itself of its rights of a citizen of a, foreign state, nor does it waive any right which as a foreign citi- zen it may have under an act of the congress of the United States ; neither does it waive such right by appearing to answer in a suit brought, nor, after application for removal has been made accor- ding to the act of congress and refused, by going to trial and judgment ; Herryford v. JEtna Ins. Co. , S-511. 11. Service. Where a corporation appears generally and pleads to the merits in an action, the subject matter of which is within 63 498 DIGEST OF THE the jurisdiction of the court, it cau not, as defendant, afterward interpose any objection to the jurisdiction of the court, over its- person, based on defects in the service of the summons ; Anderson V. Southern Minn. E.R. Co., 7-599. 12. Service; notice oe injunction. A person who has been designated by the corporation, as required by statute, as an agent upon whom process against such corporation may be served, is a proper party upon whom to serve notice of an injunction against such corporation; Eureka Lake etc. Co. v. Superior Court, 10-73. 13. . On a bill by a director of a private corporation and others, stockholders and creditors of the corporation, the only ser- vice on the corporation was by leaving a copy of the summons- with the complainant director, the return stating " the president, clerk, secretary, superintendent, general agent, cashier and princi- pal of said company not found." The bill alleged that the presi- dent and all the other directors and officers of the company were non residents. Held, that the service as to the corporation waa void, the director with whom notice was left being a party com- plainant in the suit, and, the service being void, advantage might be taken of it on error as well as in the trial court ; St. Louis & Sandoval Coal & Mining Co. v. Edwards et al., 9-169. 14. Seevice on eoeeign cobpokation. Any service which would be sufficient as against a domestic corporation may be au- thorized to commence an action against a foreign corporation; Pope et aL v. Terre Haute Car & Manuf. Co., 9-602. 15. . Under the provisions of the code of civil procedure of New York (§ 1780), authorizing actions against foreign corpo- rations and providing (§ 492) that personal service of a summon& upon such a corporation may be made by delivering a copy thereof,, within the state, to the president, secretary or treasurer of the cor- poration, in order to make that service effectual, it is not needful that the officer served should be here in his official capacity, or engaged in the business of the corporation, or that it should have any property within the state, or that the cause of action should have arisen therein ; and it would seem that a judgment against a foreign corporation, in an action so commenced, will be valid for every purpose within the state, and can be enforced against any of its property, at any time, found within the state. Id. 16. Dieectoe tbmpoeaeily in state. Where a foreign corpo- ration has entered into a contract, in an action for services under the contract and for damages for a breach thereof, the cause of action arises in the state, or place, where the principal part of what is contracted to be done is, by its terms, to be performed. The cause of action arising within the state of New York, service of summons in the action upon one of the defendant's directors while temporarily within the state, on his own business, is good service and a sufficient commencement of the suit, although def en- AMERICAN CORPORATION CASES. 49& dant has no property within the state; Hiller v. Burl. & Mo. River R.R. Co., 8-502. See FoEBiGN Cokpoeatiok; MAiroAikras. PROHIBITION — WEIT OF. 1. Pkactice. a proceeding for a writ of prohibition to restrain the court from signing a certificate removing'the officers of a cor- poration, is well brought in the name of the corporation ; Chollar Miniiig Co. ■». Wilson, 10-67. 2. Petition foe weit. Under a statute providing for the removal of officers of a corporation, which requires the petition to be signed by a majority of the stockholders, the petition should state the whole number of stockholders, so that the court can de- termine whether a majority have signed. Id. 3. ; MEANING or MAJORITY. Under such a statute the word " majority " has reference to a majority in numbers of the stock- holders, and not in amount of stock held. Id. 4. When the writ will not lie. A writ of prohibition will not issue to arrest a proceeding at law for defect of parties ; as when a suit which should be brought in the name of the state i& instituted in the name of a private person ; Bowman's Case, 8-190. PROMISSORY NOTE. 1. PowEE TO EXECUTE. In the absence of an express authority to make negotiable paper and to issue it, a corporation may do so, for any debt which it may lawfully contract ; Castle v. Belfast Foundry Co., 7-340. 2. Execution. Where by articles of association, or incorpora- tion, the business of a corporation is required to be conducted by a board of trustees, or by the officers as such board, the president and secretary of such board have no power, in the absence of a by-law, act, resolution, or custom, to execute a note binding upon the corporation ; Cattron et al. v. First Universalist So. of Man- chester, 6-534. 3. Executed by ofeicee. It would seem that one who is presi- dent, treasurer and a director of a company ; who owns three- fourths of its stock ; who has charge of its books, solicits and fills orders, has the general management of the company aflEairs and transacts all its business, may give the company's note for any in- debtedness arising in the general management of the business in- trusted to him ; Castle w. Belfast Foundry Co., 7-340. 4. Between coepoeations. Where a promissory note is exe- cuted by the directors of a corporation, one of such makers being also payee of and indorser upon the note and the president of the corporation and such note is transferred to a second corporation — in this case a bank — of which the payee and indorser is, also, the president, such maker, payee, indors6r and president is not in po- sition to consent, for the corporate creditor, to any agreement the 500 DIGEST OP THE effect of which is to release himself and his co-makers and co-di- rectors from liability on the one hand, or to impair the corporate creditor's security on the other ; Gallery v. Nat. Exchange Bk., 6-632. 5. Insttkance peemium note, a promissory note, made in con- sideration of a policy of insurance and a part of the same transac- tion, the policy of insurance being the only consideration for such note, it stands or falls with the policy. If the policy be ultra vires — wherefore void — the note fails ; Rochester Ina Co. v. Martin, 3-486. 6. Accommodation paper. In Massachusetts the note of a manufacturing corporation in the hands of a holder for value, who took it before maturity and without notice that the maker had not received fuU consideration, may be enforced against the maker, thoiTgh a corporation note; Monument ISTat. Bank v. Globe "Works, 3-394. 7. CoNSiDEEATioN. In a suit on a promissory note executed, by defendant to an incorporated university, for a perpetual schol- arship therein, the fact that no certificate of such scholarship has been delivered or tendered can not constitute a defense ; President etc. V. Hamilton, 3-295. 8. Given foe stock. A written obligation for the payment of money imports a consideration; and, upon an issue of want of consideration the burden is upon the defendant. Where persons part with stock, no part of which is paid for, but which has been issued by the company, with the knowledge and assent of payor or payee, the assignor parts with a thing of value ; it is erroneous to find there is no consideration for the notes given for the same ; Woodruff V. M'Donald et al., 6-193. 9. Abandoned bntbepeise. Where subscribers to the stock of a railroad company had given their notes for the amount of sub- scriptions, payable when the road should be completed, but, were subsequently induced to take up these notes and to give new ones, payable in four years, in order to enable the company to carry out a contract for the completion of the road and upon the confi- dent, but honest, expression of opinion by its officers, that, if they would do so, the road would be completed under such contract in less than four years, it was held that although the said contract, for building the road was abandoned, before any thing was done under it, by the contractor and the road was never completed, yet the makers of the notes, as subscribers for stock, were liable; Four Mile Valley Co. v. Bailey et al., 3-659. 10. Payable to coepoeation. An action may be maintained by a corporation upon a note execxited and made payable to the treasurer thereof without giving his name ; M'Broom v. Corpora- tion of Lebanon, 1-373. 11. Discount — stjeeties. The discounting of a promissory note for the principal maker at a usurious rate of interest will not AMEKICAN CORPORATION CASES. 501 discharge the sureties where there is no intention to practice a fraud oa the sureties, or, in the absence of an express agreement between the sureties and the principal, of which the creditor had ilotice, that the note was not to be used unless it could be dis- counted at the legal rate of interest. In such case the sureties must be held to have trusted to the judgment and discretion of the principal as to the terms on which the note might be dis- counted ; Nat. Bank v. Garlinghouse et al., 4-38. 12. Liability on note signed by offiobe. The question whether one signing a note, or accepting a bill of exchange, as an officer of a corporation means to bind himself personally, is a question of intention between the parties to the instrument, and this intention, as a general rule, must be determined by the face of the paper itself ; Laflin & Band Power Co. v. Sinsheimer, 7-392. 13. . "Where one, having authority, accepts a bill in such a manner as manifests an intention not to bind himself ; but, to bind a corporation of which he is an officer ; and the bill is to be paid out of the funds of the corporation, the acceptance, in such case, will not bind him personally. Id. 14. Ambiguity. Where there is such amoiguity on the face of the paper as to be consistent with either of two constructions, that is that the party signing meant to bind himself, adding his official character merely for the purpose of indicating the character in which he acted, or whether the official character is added for the purpose of showing the party acting performed a mere mini- sterial act, parol evidence is admissible, to prove the circumstances under which the contract was made ; in other words, to prove the nature of the transaction. Id. 15. Instance. Where a bill of exchange was drawn upon a person in his individual capacity and accepted by him as treasurer of a corporation, and there was such ambiguity, on the face of the paper, as to raise the question whether he meant to bind him- self personally, or acted only in an official capacity, parol evi- dence was admissible, in a suit against him by the payee, to prove the nature of the transaction. Id. 15^. ExTEiNSio EVIDENCE. A party will not be permittea to show, by oral testimony, that his written agreement, understand- ingly made, was not, in'fact, to be binding on him. It was so held where trustees of a church corporation made a note in their indi- vidual names ; although they described themselves as trustees of the church, parol evidence was not admissible to show it was the intention of the parties that it was the note of the church corpora- tion and not that of the trustees executing it. The principle of law is that such instruments will be construed as the parties make them, without the aid of extrinsic evidence. There is another rule, however, that where a person signs his name as cashier, or agent, for a corporation, it is the obligation of the corporation and, if the 502 BIGEST OF THE person who signed, had authority to bind the company he is not liable personally, and the facts may be shown by extrinsic evidence, that it may be known whose obligation it is ; Soanlan v. Keith, 9-143. 16. Indoesement of. A general statute (Minnesota, 1873, chap- ter 73, § 89) provides that in actions brought on promissory notes or bills of exchange by the indorsee, the possession of the note or bill shall be prima facie evidence that the same was indorsed by the person by whom it purports to have been indorsed. This rule of the statute applies to indorsements purporting to be made by corporations as well as those purporting to be made by natural persons ; First Nat'l Bank «. Loyhed, 8-11. 17. Indorsee ; tsuet. An accommodation indorser of a promissory note made by a manufacturing company, for its benefit, can not defend the same on the ground of usury ; Stewart v. Bram- hall, 8-541. 18. . The statute of New York of 1850 (Laws 1850, ch. 172), prohibiting a corporation from interposing the defense of usury, includes the collateral contracts of individuals as sureties, guarantors or indorsers for the corporation. Id. 19. . The fact that the note was discounted under an arrangement, between the lender and the borrower, that the for- mer would discount if the latter would indorse, does not affect the legal aspect of the question. Id. 20. Alteeation of. Any alteration of a promissory note by a party thereto, without the knowledge of the other parties, how- ever immaterial, will invalidate it as against them; First Nat. Bk. V. Fricke, 9-508. 21. Instance. One of the makers of a note, who was presi- dent of the Odd Fellows Building Association, after a note had been negotiated and without the knowledge of his co-makers, aflfixed to his name, where it appeared as maker, the abbrevia- tions : " Pres't O. F. B. Ass'n," and where it ajppeared as payee and indorser, in each place, the abbreviation, " Pres'd't." These were material alterations and invalidated the note as against the other makers. Id. 22. Sealed. Under the statute of Minnesota, the seal of the corporation affixed to an instrument made by it and which is otherwise a negotiable note, does not impair its negotiability; Auerbach et al. «. La Sueur Mill Co., 8-6. 23. FoEM AND EXECDTiON. In the body of a promissory note, signed by three persons, they were designated as trustees of a corporation, and as such they appeared to promise to pay. To their signatures was appended the words " trustees " etc. Held, that the iiote did not, on its face, purport to be the note of the persons signing it, so that they might be held personally liable in a suit upon it. This, too, although they showed no authority from the corporation to execute the note, and even, although there AMERICAN CORPORATION CASES. 503 -was no such corporation lawfully organized: Blanchard et al. v. Kaull et al., 4^289. 24-. Form and execution. A note payable at the office of a corporation and signed in its name, by one who signs as an officer ■of the company, is a corporate note ; and, not the note of the individual signing it; Castle v. Belfast F. Co., 7-340. 25. . A promissory note reciting that " the trustees of " a church named, "as such trustees, promise to pay" etc., signed by five persons, with the words, "as trustee" etc.,^ after each name, shows, clearly, an undertaking by the corporate body and creates no individual liability ; Little, adm'r, v. Bailey et al., 6-413. 26. . A note in the following words : " Twelve months after date, the president and directors of the Hustonsville and Bradfordsville Turnpike Eoad Company will pay Le Koy Yowell twelve hundred dollars, for value received, at six per cent, interest from date." Held, the note of the corporation, and pot the indi- vidual note of the president and directors, whose names were attached thereto ; Yowell v. Dodd et al., 1-527. 27. . Upon a note written, " We the subscribers for the Carmel Cheese Manufacturing Co." etc., and signed by the indi- vidual names of members, held, an action can not be maintained against the signers, as it did not purport to be their promise, but the promise of their principal, and if given without authority, the -signers might be made liable in another form of action ; Simpson V. Garland, 10-625. 28. ; NOT OF coBPOEATioN. A uote which reads : " If inety days after date, without grace, I promise to pay " etc., signed "D. P. Sackett, Pres't Pacific Wool-growers' Go." is not the note of the corporation. It is a promise of the individual, who has signed it, and the words which follow the sign ature are mere descriptio personae ; Chamberlain v. Pacific w ool-growing Co., «-255. 29. . An instrument in these words : " Twelve months after date, the president, by the order of the board of the Houstons- ville and Bradfordsville Turnpike Company, promise to pay Ma- haly Caphart, three hundred and fifty dollars, with six per cent, interest from date,' ' was the obligation of the president as an in- dividual and not of the corporation; Caphart v. Dodd et al., 1-533. 30. . A promissory note in usual form, i. e. , we promise -to pay etc., given for an indebtedness of a corporation and signed by the trustees of the corporation, " G. W., I. B., G. "W". F., trustees Perry Lodge, 37, F. & A. M.," is the note of the persons whose names are appended ; and parol evidence is not admissible to show that the parties intended and supposed it to be the note of -the corporate lodge and agreed that such should be its efEect ; Williams et al. v. Second National Bank of Lafayette, 9-24S. 504 DIGEST OF THE 31. FoEM AND EXECUTION. The makers of a promissory note- were described in the body thereof as " we, the trustees of School District No. 20, county of Olmstead," and appended to the indi- vidual signatures of the makers was added the word " trustees." Held, that prima facie the note was the individual obligation of the makers and not of the district ; Eingham v. Stewart et al.,. 2-559. 32. . In respect of the particular note in suit, it was con- sidered as apparent on the face of it that it was executed by the signers in their capacity as officers of the corporation — their official character or designation of office and the corporate seal being attached — and no extrinsic facts were necessary to be shown ^ Scanlan v. Keith, 9-143. 33. Use op woed " we." Nor need any importance be attached to the use of the words, " we " promise to pay, in the body of the note. 'The word " we " may not improperly be used to denote a corporation aggregate, such as this is, and in the connection in which it is used, in this note, it may more appropriately be re- garded as referring to the corporation than the persons, as indi- viduals, who signed the instrument. Id. 34. Acts op, not binding. Where certain officers of a corpora- tion, having general authority to execute promissory notes for their corporation in proper cases ; but, having no authority in the pai*- ticular case in question, in a transaction having no connection with the corporate business and not authorized by the corporation, and without any consideration moving to the corporation ; execute, in the name of the corporation, to a third person who has no actual knowledge of their want of authority, a promissory note for a claim which such third person holds against another and a diffe- rent corporation, the first mentioned corporation is not hable, on the said note, to the payee thereof, where there has been no sub- sequent ratification, by the corporation, of the act of its officers ; Ehrgott & Krebs v. The Bridge Manuf. of Topeka, 7-122. 35. UsiJEPEES. After the lawful election of other directors and their organization as a board, a note executed by the old board^. still acting as such, but as usurpers, to its president and signed by him, as such, with the other officers, is unauthorized and is not the- note of the corporation ; Lebanon etc. G. R. Co. v. Adair, 9-259. 36. Ratification. Notes of the corporation were issued in its corporate name signed by its president, with a corporate seal added. Upon the question of authority to use the corporate seal, it appeared that a committee from the directors was appointed to examine the notes and they reported the signatures genuine, which report was accepted. Held, there was sufficient evidence of a ratification ; Parish of St. James v. Newburyport etc. Horse E.E. Co., 10-603. 37. Acceptance of coepoeate obligation. Where a person, in his deahngs with a corporation, has accepted a promissory note AMERICAN CORPORATION CASES. 505 for money due him from the corporation, and subsequently, in a suit upon the note against the corporation, as such, recovers judg- ment, he ought to be for ever thereafter estopped to assert that the note was the individual obligation of the officer executing it on behalf of the corporation ; Scanlan v. Keith, 9-143. See Agency ; Conteact ; Insueance ; Powers, PROMOTEES. 1. Repeesentationb of. In the location of the road of a cor- poration, a promoter of the company can not bind the corpora- tion, subsequently formed. "Wherefore, a subscriber having no right to rely on his statements, it is no defense to an action to re- cover upon the subscription that the road is not laid out as the location was stated to be originally intended : Miller v. Wild Oat G. R. Co., r-58. 2. . A representation that one subscribing for stock will not be required to pay the amount of the subscription can not impose on the most unsuspecting. Id. 3. . Parties purchased oil land and, shortly afterward, with others formed a corporation to which the land was conveyed at an advanced price. If in order to get up a companj'' they rep- resented themselves as having acted for the association to be formed and proposed to sell at the same prices they paid, and their purchases were taken on these representations, and stock- holders invested in a rehance upon them, it would be a fraud on the company, and all others interested, to allow "them to retain the profits paid them, by the company, in ignorance of the true sums actually advanced. This is so, also, if they assumed to act without precedent authority, if their doings were accepted as the acts of agents by the association ; Simons et al. v. Vulcan Oil & Mining Co., 4-80. 4. Sales by. Any man, or number of men, who are the owners of any kind of property, real or personal, may form a partnership or association with others, and sell that property to the association at any price which may be agreed upon between them, no matter what it may have originally cost ; provided there be no fraudulent misrepresentations made by the vendors to their associates. They are not bound to disclose the profit which they may realize by the transaction ; Densmore Oil Co. v. Densmore et al., 4-106. 5. . Where persons form such an association, or begin, or start the project of one, from that time they do stand in a confi- dential relation to each other, and to all others who may sub- sequently become members or subscribers, and it is not competent for any of them to purchase property for the purposes of such a company and then sell it at an advance without a full disclosure of the facts. They must account to the company for the benefit, because it legitimately belongs to it. Jd. 64 506 DIGEST OP THE 6. Ratification . of acts of. "Where an act has been done in the name of a corporation which the corporation might lawfully perform, but, which when done there was no authority to-do, the board of directors, lawfully in office, may ratify it and such ratifi- cation will be equivalent to a precedent authority to do the act so confirmed ; Wood et al. v. Whelen, 6-442. 7. CoEPOEATiON MAT ASSUME DEBTS OF. A. Corporation may, by express agreement, assume obligations entered into by its pro- moters prior to its organization, where the corporation receives the benefit of the contract in respect of which such obligations were incurred; Keichwald -y. Commercial Hotel Co., 10-203. 8. ; OBLIGATIONS TO DisoHAEGE PEioK DEBT. A hotcl Com- pany was organized with a capital stock of $160,000 which, was all subscribed by one of the corporators except three shares of $100, none of which was ever paid. At the time of the organiza- tion of the corporation, the principal stockholder, who was elected president, was the owner of a large amount of hotel furniture, subject to a chattel mortgage of $116,000, which he turned over to the company in payment of his subscription, in pursuance of an arrangement prior to the organization of the company, and the corporation, in pursuance of the same arrangement, gave its notes secured by chattel mortgage on the same property, to release it from the prior incumbrance and such property constituted the whole assets of the company. Held, that so far as the hotel company was concerned it received full consideration for the notes and mortgage so given, and they were valid obligations. Id. PEOXY ; see By-laws ; Dieeotoes ; Election. PUBLIC POLICY. 1. Authoeitt to deteemine. The law making power of the State, where the authority is proposed to be exercised, is Mone in- vested with the authority and must determine its public policy. The public policy of the state may be ascertained by reference to the general course of legislation, either by prohibitory or enabling acts, or by its general course of legislation on a given subject. The general course of legislation is to be ascertained by the gen- eral laws of the state, and special and private laws, like other ex- ceptions, tend to establish, rather than impair, the force of the general rule ; Carroll v. City of East St. Louis, S-208. 2. EuLE OF. Whenever any contract conflicts with the morals of the times and contravenes any estabhshed interest of society, it is void as being against piibhc policy ; Pueblo & Arkansas v. E.E. Co. V. Taylor et al., 9-37. 3. Legislative powee. It is competent for the legislature to declare all contracts made by a citizen of the state with a foreign corporation — in this case an insurance company — having no right to do business within the state, void. This on the ground AMERICAN CORPORATION CASES. 507 such contract is contrary to the pubhc pohcy of the state. la furtherance of this same object the legislature may declare it a penal ofEense on the part of any person within the state, whether acting on behalf of the corporation or with it — as an insurer or one insured — to do any thing, within the state, by way of exe- cuting contracts with such foreign corporation, not qualified to do business within the state under the local law ; Pierce v. People, 9-213. 4. ExEECiSE OF coEPOEATE FEANOHisES. Ko statc has powcr to create corporations, or to regulate their powers, or to authorize the exercise of corporate franchises in other states. It may confer powers in the nature of a commission, to be exercised any where upon condition that their exercise be assented to by the state or sovereignty where it may be sought ; but without this assent, ex- press or implied, such powers would be nugatory outside of the state granting them. Each state, by its own legislature, must determine, for itself, all such questions of public policy arising within its own limits ; Thompson v. Waters, 4^58. 5. Mat exeecise powees in anothee state. A corporation created in one state may, upon the principle of comity, exercise within another state the general powers conferred by its own charter, and permitted by the Jaw of its own state, provided that the doing so be not inconsistent with the laws or public policy of such other state ; Santa Clara Female Academy v. Sullivan, lO- 298. 6. Rtjle op comity. The rule seems to be generally and well settled, that the corporate existence, rights of making and enfor- cing contracts, of acquiring property and transacting business (not requiring the exercise of official corporate action or franchises within the state) of a corporation created by the laws of one state will be recognized and protected in another, subject only to the qualification that the enjoyment and exercise of such rights shall not be contrary to the laws or settled policy of the state in which they are sought to be enjoyed or exercised, or prejudicial to the interests of such state or its citizens ; Thompson v. Waters, 4^458. 7. . Upon the principles of comity, the corporations of one state are permitted to do business in another, unless it con- flicts with the law, or unjustly interferes with the rights of the citizens of the state in to which they come. Under such circum- stances, no citizen of a state can enjoin a foreign corporation from pursuing its business. The state must determine for itself when the pnblic good requires that its impUed assent to the ad- mission shall be withdrawn ; Pensacola Tel. Co. v. Western Tel. Co., ^8. 8. VOID conteaot. a contract, between two stockholders in a ■corporation, by which one, in consideration of a sum of money paid to him by the other, agrees to vote for a certain person as manager of the corporation and to vote to increase the salaries of 508 DIGEST OP THE the officers of the company, including that of the manager, is- void, as against publifc policy, unless it be assented to by all the stockholders of the corporation. Quaere, whether it would be valid if so assented to; Woodruff -y. Wentworth, 9-432. 9. Illegal conteaot. A contract for the payment of money — in this case a bond — which seeks to, and by its terms does, prevent a neighboring town, through which a railroad passes, from having the facilities it is the duty of the owner of the road to furnish, or which prevents such owner from the exercise of discretion in providing such facilities for the public is illegal and void ; Pueblo etc. E.E. Co. v. Tyler et al., 9-37 ; St. Louis, J. & Chi. R.E. Co. V. Mathers, 5-277. 10. . A contract was made between the president of a railroad corporation, one of its directors and its construction agent, of the one part and two land owners, of the other part, by which the latter were to sell to the first mentioned parties an undivided one-half of 160 acres of land upon these terms ; no money was to be paid by the purchasers, but the land was to be laid out in to town lots and sold. The iirst proceeds of the sale, to the amount of $4,800, were to be retained by the parties of the first part, as owners, and, when this sum was realized, they were to convey an undivided half of the residue. The consideration for the agree- ment was, that the parties of the first part should " aid, assist and contribute to the building up of a town on said land." The land was situated upon one railroad and where another road, then in process of construction might, or was expected to cross it. A town was built partly on this tract of land, and a bill was filed for an account of sales and conveyance of a half interest in the imsold lots. The court held the contract to be a bribe on the part of the land owners, in consideration of which the road was to be constructed, on a certain line and a depot built at a,, certain point. This, in any point of view, was ill violation of the duty of the officials and agents of the corporations, both to stockholders and the public, against public policy and a contract not to be en- forced in equity. A cross bill having been filed to cancel the contract as a cloud upon title, it was held that as the land owners had entered into a contract, the effect, or tendency, of which was, to induce complainants to cotnmit a breach of duty, they were entitled to no affirmative relief ; Bestor et al. v. "Wathen et al., 4-351. 11. Land fok speculation. An agreement by the owner of land to convey, to a railroad company, certain lands in considera- tion that the company shall build a freight and passenger depot at a particular place, where the land, so proposed to be conveyed, is to be used for speculative purposes, and not for the general business of locating, constructing, managing and using the road, is against public policy and void, although, in one s^nse, a railroad company is a private corporation, the public is deeply interested AMERICAN CORPORATION CASES. 509 in it. Its chartered privileges and franchises are not granted, solely and exclusively for private benefit and emolument, but to subserve a great public interest ; there is a mingling of both pub- lic and private benefit, and the interests of the public are not to be sacrificed to mere private gain ; Fac^c fl.Il. Co. v. Seely et al., 3-529. 12. YoiD CONTRACT TO PAT. An agreement by a corporation, to pay interest or dividends on its capital stock, without reference to its ability to pay such from its earnings, is contrary to public policy, and, therefore, void ; Lockhart v. Yan Alstyne, 5-470. 13. Limitation or payment on stock. When the charter has fixed the minimum amount of capital stock, the stockholders cati not, by their private agreement, abrogate that provision ; any de- vice, by which the members of a corporation seek to avoid the lia- bility which the law imposes on them is void, as to creditors, whether binding or not among themselves. An agreement, in writing, in- corporated as part of the contract of subscription, that no assess- ment should ever be made upon the stock of the company, and that ten dollars on each share subscribed should be the total sum each stockholder should be liable to pay, the par value of the shares being one hundred dollars each, is void as against creditors, as being against public policy and justice. The creditors may enforce the payment of such stock to the extent of their demands, as against the corporation ; Un. Mut. L. Ins. Co. v. Frear Stone Manuf. Co., 6-481. 14. Peomissoet note void, a promissory note executed by an iron company for money, or other thing, loaned to it, to be used by the company in erecting iron works, and making iron for the late confederate government for military purposes in carrying on the late rebellion against the United States, if known to the lender at the time of the loan, is against public poHcy and illegal, and no action can be maintained on it; Oxford Iron Co. v. Spradley, 4-272. 15. Caeeiees. As common carriers, express companies may reasonably limit their liability by special contract, but public policy will not permit such companies, in this way, to be exempted from damages for losses occasioned by the negligence or misfea- sance of themselves or servants ; Southern Expr. Co. v. Crook, 3-118. 16. Telegeaph companies, a rule adopted by a telegraph company, that it will receive and send messages by night at one- half its usual rates " on condition that the company shall not be liable for errors or delay in the transmission or delivery or for the non delivery of such message, from whatever cause occurring, and shall only be bound in such cases to return the amount paid by the sender," is against public policy and void ; Bartlett v. W. Un. Tel. Co., 5-406. 17. . A regulation the design of which is to protect a tele- 510 DIGEST OF THE graph company from responsibility on account of the gross negli- gence or fraud of its agents and employes, in the transmission or delivery of a message, which the company undertakes, for a valu- able consideration, to send, is against public policy and void ; Can- dee V. W. Un. Tel. Co., 5-633. 18. In violation of statute. A contract, made by a corpora- tion, which is expressly prohibited from making such a contract, is void so far that the corporation can not maintain an action there- upon. This is so even though the statute does not, in terms, de- clare that such a contract shall be void, but merely prescribes a penalty for making it. When the legislature prohibits an act, or declares that it shall be unlawful to perform it, every rule of inter- pretation must say that the legislature intended to interpose its power to prevent the act, and, as one means of its prevention, that the courts should hold it void. That the legislature imposed a penalty, for the violation of the provisions of the law, does not, in the remotest degree, legalize or give validity to the contract. It but shows that the general assembly intended to adopt such mea- sures as should compel obedience to the law ; Cincinnati Mutual Health Assurance Co. v. Rosenthal, 3-263. 19. Peohibited by law. A contract to do a thing prohibited by statute is not, necessarily, void if the statute visit the unlawful act with a penalty. If the thing be malum in se, the contract can not be enforced, but as to things not immoral or against pub- lic policy it may be suflScient to enforce the statutory penalty only. If it was not the intention of the law maker to make the contract void, it will be enforced, and for the violation of law the penalty may be applied ; Union Gold Mining Co. v. Eocky Mountain Nat. Bk., 4-298. 20. Illegal teanspbr. A sale and transfer of the powers of one company to another, without the authority of the legislature, are against public policy and courts will do nothing which would promote the transfer, as it is in utter disregard of the duties and obligations of the company ; Ottawa E.Il. Co. v. Black et al., 6-359. 21. State policy ; how evidenced. The policy of a state not to permit the transaction of business in its limits by foreign cor- porations, or to allow such corporations to acquire and hold real estate, must be expressed in some affirmative way. It can not be inferred from the fact that the legislature has made no provision for the formation of similar corporations ; Stevens v. Pratt et al., 9-85 and note. 22. . Equity has no jurisdiction of an information by the attorney general, against a private trading corporation, whose pro- ceedings are not shown to have injured, or endangered, any pub- lic or private rights and are objected to, solely, upon the ground that they are not authorized by its act of incorporation and are,,. AMERICAN CORPORATION CASES. 511 therefore, against piiblic policy ; Attorney General v. Tudor Ice Co., 3-440. See Kaileoad Compakt. PURCHASER. 1. Of coepoeate peopeett tjndee atjthoeized moetgage. Where a railroad company, under authority of law, executes a mortgage or deed of trust upon all its property, both real and per- sonal, including its franchise, and the same is duly recorded in the several counties through which the road runs, a purchaser of such property, under a valid foreclosure of the mortgage, will take the same free of all subsequent liens and incumbrances. The title of the purchaser, for the purpose of cutting ofE all intervening liens, will relate back to the date of the record of the mortgage ; Cooper et al. V. Corbin et al., 9-192. 2. Where he takes feee fkom taxes. Where, at the time the taxes assessed upon the capital stock of a railroad company become a lien on its property, a prior lien has been created upon the same by the execution and recording of a valid mortgage thereon the tax lien will attach only on the company's equity of redemption, and when that equity is cut off by a foreclosure and sale under the mortgage, the purchaser will take the property free from any lien for such taxes, and a court of equity will enjoin a sale of the rolling stock of such company for the payment of the taxes. Id. Q. QUO WARRANTO. ^ 1. Relatoes. Any person having an interest in a corporation may prosecute proceedings by quo warranto, to test the validity of an election for directors ; the right is not confined to the de- feated candidates ; State of Louisiana v. N. Orl., J. & G. N. Ry. Co., 1-5Y8. 2. . Stockholders of a corporation who claim to have been legally elected directors thereof may file an information under section 750 of the code of Indiana, on their own relation, without the prosecuting attorney, against others by whose usurpation the relators are prevented from exercising such office ; Becket et al. V. Houston et al., 1-379. 3. Who MAT institute. Under the Alabama code of 1^76, it is competent for the circuit court to direct the solicitor of the cir- cuit to proceed by information, in the nature of quo warranto, against a corporation guilty of non user or mis-user of its franchise. In the same way such proceeding may be instituted, in the name of the state, by any individual who shall file security for costs ap- proved by the circuit clerk ; Tuscaloosa Scient. and Art Ass'n v. State, ex rel., 6-120. 513 DiaEST OF THE 4. OoNTEOL OF SUIT. Although individuals may institute proceed- ings for the dissolution of a corporatiou, the proceeding will be in the name of the state, the informer's name being joined as relator ; the proceedings are, however, conducted in the interest of the state and the relator can neither confess error, nor dismiss the suit without leave of the court before which it is pending. Id. 4J. Impeachment of existence. "Whether an incorporated company was or was not properly organized, according to its charter, is a question that can not be made collaterally, but must be made by a direct proceeding against the corporation ; Grill's adm'r ». Kentucky etc. Mfg. Co., 3-^46. 5. Dissolution. It is well settled that a corporation can be judicially determined to have ceased to exist only in a suit to which the commonwealth is a party ; Briggs ». Cape Cod Ship Canal Co., 10-568. h\. When peopek remedy. Quo' warranto is the appropriate remedy against persons usurping the offices of trustees of an in- corporated church ; Commonwealth, ex rel. etc., v. Graham et al., 4-116. 6. De facto offioee. "Where an association, which has been organized as a corporation, under the statute of Kansas, sues a per- son who has acted as treasurer for the company for over a year, for moneys received by him as treasurer of such corporation, upon the ground that he has ceased to be such treasurer and that his successor has been duly elected and qualified, and has tal^en pos- session of the office, and it appears that such person — the original treasurer — is still in possession of the office, claiming that his successor has not been elected and qualified, the action can not be maintained. The proper remedy of the plaintiff to determine whether the defendant is still the treasurer of the association, or not, is a civil action in the nature of quo warranto; Hunt v. Pleasant Hill Cemetery A.ss'n, 9-324. 7. Disttirbanoe of enjoyment. Where a majority of a church congregation pretending, contrary to the fact, that some of the trustees have resigned and refused to act, proceed to elect others in their places, without notice to the minority of the association, and the parties elected proceed so to act as to exclude the minority from the use and enjoyment of the church property, the remedy, as to the illegal election, is by quo warranto ; Nelson et al. v. Benson et al., 5-231. 8. National banks. An information, in the nature of a quo warranto, to try the right to the office of director in a bank or- ganized under the national currency act will lie only in a proper court of the United States, the sovereign power which created this class of corporations. The courts of the states have no jurisdic- tion in such cases ; State etc. v. Curtis, 8-167. 9. When not lie. An information, in the nature of a quo warranto, will not lie to persons associated, on the ground that as AMERICAN CORPORATION CASES. 513 a corporation it does not intend, in goqd faith, to carry out the purposes of its organization ; State, ex rel., v. Beck et al., 9-227. 10. When not lie. An information, in the nature of a writ of quo warranto, will not lie to an association of persons, or a corpora- tion, on the ground that as a corporation it does not intend to con- struct the whole of the work proposed by and described in articles of association — in this case a railroad. Nor will such information lie on the ground that the real purpose of the organization is to condemn and appropriate private property over which to con- struct the proposed work; State, ex rel. Cafer. pros, att'y, v. Kingan et al., 7-53. 11. . Under a statute wnich authorizes any person whose private right or interest has been injured or put in hazard by the exercise by any private corporation, or persons claiming to be such, of a franchise or privilege not conferred by law, an information in the nature of a quo warranto will not lie in favor of such indi- vidual against the stockholders of a corporation, if the forms of law in the organization of the corporation, as required by a general statute, have been complied with and the proper certificate of in- corporation issued. This is so, although the certificate was ob- tained by fraud ; Eice et al. v. Nat'l Bank of the Commonwealth et al., 7^83. 12. Refused when. A contested election of directors of a cor- poration was decided by votes cast upon shares owned by two per- sons, who had pledged them to another as security for an indebt- edness. The stock stood upon the books of the corporation (and always had done so) in the name of the pledgee, as trustee. Pledgee had always voted the stock without objection until the meeting at which the contested election was held, and he so voted it at that election, no objection being made until the votes were being counted or had been counted. It was held, on an applica- tion for a quo warranto against the directors elected at such meet- ing, that judgment must be for respondents and the application be refused ; Hoppen et al. v. BufEum et al., 4H51. 13. Indtjotion into office. Persons who, at an election for di- rectors of a corporation, have only a minority of the votes re- ceived by the inspectors, can not, upon an information in the na- ture of a quo warranto, be declared elected and inducted into of- fice, although it is made to appear that legal votes sufficient^ to have made up a nyijority in their favor were tendered and im- properly rejected by the -"udges of election; State, ex rel., v. M'Daniel et al., 4-20. 14. Time as a bae. After a user of corporate franchises dur- ing fifteen years an information in the nature of quo warranto, against the persons acting as a corporation, will not be enter- tained, in Indiana. Such proceeding may, however, be limited in particular cases to a shorter period, where requiring a lohgei time would be unavailing, unreasonable or unconscionable on ac- 65 514 DIGEST OF THE count of the laches of relator ; State, ex rel. Bleetti et al., v. Gor- don et al., »-264. 15. iNSTAwcE. Where a turnpike company had used the fran- chises of a corporation during nearly nineteen years, acting under articles of association which were defective in failing to set forth the line of the route of the road, or to describe it etc., a prosecu- tion by information, in the nature of quo warranto, against the persons in possession of such corporate franchises, to show by what right they are held, is barred by lapse of time. Id. 16. Resignation pending peocbeding. Where defendants, charged with usurpation of office, pending quo warranto proceed- ing, resign, their resignation constitutes no answer. Their suc- cessors stand, as to the unexpired term, in their shoes, and will be bound by the judgment; State, ex rel. Att'y G-en., v. M' Daniel et al., 4-20. 17. Pleading. The rules of pleading prescribed by the code of Ohio do not apply to proceedings in the nature of quo war- ranto. Pleading in such cases is governed by the rules in force at the time of the adoption of the code. Wherefore, in such pro- ceedings, the defendant may, by leave of court, plead double, and where the charge against him is that he usurps an office, he may be allowed to set up several titles thereto. Id. 18. . A proceeding in quo warranto, to dissolve a corpo- ration, or declare a forfeiture of its charter, or to oust it from the exercise of franchises which are usurpations, must be against the corporation itself and not against the individual corporators ; State, ex rel. Att'y Gen., v. Taylor et al.,' 4-599. 19. . The common law system of pleading, and not that prescribed by the code of civil procedure, is to be followed in proceedings in quo warranto ; therefore, new matter set up in confession and avoidance of a plea is taken as confessed if not denied. Id. 20. . Where an information is exhibited contemplating the ease of an assumption of the franchise of incorporation with- out legal right, to which respondents answer averring right and setting forth title, a demurrer to the plea admits the facts alleged well pleaded. It follows that under such admission respondents must be deemed to be lawfully incorporated unless there be in- superable difficulties in the way ; Att'y Gen., ex rel. Nelson, «. M' Arthur et al., 6-606. 21. Information; when sufficient. An information is suf- ficient if it appears therefrom that the defendants named pretend to be organized as a corporation and are exercising corporate powers, when they are not organized as the law requires ; State, ex rel., v. Beck et al., 9-227. 22. Paett to proceeding. An information against a corpora- tion in its corporate name, charging it has not been legally organ- ized, pointing out defects in its organization and praying for the AMERICAN CORPORATION CASES. 515 dissolution of its franchises is bad for not being against certain persons claiming to be a corporation, for it can not be brought in to court as a corporation to answer an allegation that it never was a corporation. When a corporation is brought into court by its cor- porate name its existence, as such, is admitted ; Mud Creek Drain- ing Co. V. State, ex rel. Marley et al., 5-337. 23. Practice. When an information in the nature of quo warranto is filed against a corporation, by its corporate name, it admits the corporate existence of respondent de facto, but not its legal right to exist or to exercise any other franchise specified in the information. "When, therefore, a charter, regular upon its face, is pleaded by respondent, it is competent for relator to show, by replication, that such charter has become forfeited by the act of respondent, or, that it does not, in fact and in law, confer the particular franchise in dispute; State of Ohio v. Pennsylvania & Ohio Canal Co., 4-54. 24. Peoceedings in natiiee of. A proceeding under a code, of Iowa, which provides that " a civil action, by ordinary proceed- ings, may be brought in the name of the state," to test the right of certain persons claiming to be a corporation to act as such, must be brought against the individuals associating and acting, not against the alleged corporation ; State of Iowa v. Independent Sch. Dist., 6-522. 25. Paeties. Where an information, in the nature of a quo warranto, is aimed at alleged corporate delinquencies it supposes and virtually admits corporate existence, instead of denying, or ignoring, it and the corporation itself is a party ; Att'y G-en., ex rel. Nelson, v. M' Arthur et al., 6-606. 26. Motion to quash. A motion to quash a writ of quo war- ranto must be for some defect in the -suggestion itself, and not for any matter outside of it. Mere defects in form, that can be amended, will not be regarded ; Commonwealth, ex rel. etc.. v. Graham et al., 4-116. 27. BuEDEN OF PEOOF. In proceedings by information in tne nature of quo warranto, the people are not bound to show any thing. The burden, generally, lies on the defendant, who must prove his title as pleaded, or such part of it as is traversed by the replication; but the court does not express any opinion as to whether or not any exception to this general rule obtains in _ cases . where the act, charged to work a forfeiture, implies a violation of a public law, or would impute to the respondent crime that might involve punishment, on the ground of the presumption in favor of the respondent's innocence ; Chicago City Ry. Co. v. People, ex rel. StoiT, 5-310. 28. Measuee of peoof. Where the lapse of time is great, in this case ten years, since the act was required to be done, as, m the case, to procure the consent of a given number of the owners of a certain proportion of property by lineal feet along a street 516 -DIGEST OF THE frontage, to the laying etc. of a street railway, and there has been a subsequent acquiescence and all written evidence of consent has been destroyed by fire, and oral consent might, under the ordi- nance requiring it, be given, slight evidence was held to be sufficient to estabhsh the fact of such consent. Id. , 29. Evidence of mis-usbk. In a proceeding to dissolve a cor- poration for mis-use of its franchise, the trial court can not affirm, as matter of law, that the managing officers of the corporation had knowledge that the agents of the company were violating proper rules of action framed in accordance with the company's charter ; such matter is for the consideration of the jury ; Tuscaloosa Scien- tific and Art Ass'n v. State, ex rel, 6-120. 30. Ceedibility of witness. Upon the trial of an information, filed against a corporation, charging a mis-use of its franchise, it is competent for the defendant to give evidence tending to show the animus of the informing relator in instituting the prosecution. Thus, where it was charged there was a mis-user in establishing covertly, or by simulation, a lottery not authorized by charter, it was admissible for defendant to show the information had its origin in a combination, or conspiracy between proprietors of other asso- ciations, engaged in the lottery business ; -for, if the witnesses developed their interest .in such associations, it was proper to be considered by the jury, in respect of the credibility of the wit- nesses. Id. 31. Evidence. Upon the question whether, in equity and good conscience, the charter of a bridge corporation should be forfeited for neglect to make returns as required by law, evidence is admis- sible to show how the corporation has been managed, the amount of its receipts from tolls and its expenditures ; as well as whether the bridge is longer needed to accommodate public travel ; State •w.^Barron et al., 8-391. * 32. Effect of judgment.'. A judgment of ouster, entered upon an information in the nature of a quo warranto, against a corpora- tion, excludes the corporation from the right to exercise its fran- chises. A necessary effect of the judgment, whether followed by execution or not, is to exclude the corporation and no grantee or licensee of such corporation can thereafter justify his action under its rights or franchises ; Campbell et al. v. Talbot et al., 9-428. 33. Instance. A grantee of a corporation with franchise, by charter, to hold mill seats on waters connected with its canal and to erect mills thereon, erected and maintained a certain dam. Sub- sequently, by judicial decree judgment of ouster passed. A grantee of the corporation, by deed executed prior to the entry of such judgment, holds possession adversely from that day, and ac- quires a prescriptive right at the expiration of twenty years. Id- 34. Penalty. Where there is an usurpation of the franchise of being an incorporated society, which so acts as to injure a member, in his legal rights, but no bad faith is exercised toward AMERICAN CORPORATION CASES. 617 him, the purposes of justice will be fully. answered by judgment of ouster from the illegal franchises and the imposition of a nominal line, carrying costs ; Feople, ex rel. Stewart, v. Young Mens F. M. Total Absti. So., 6-626. 35. JuEisDiOTiON. The court oi common pleas in Georgia has concurrent jurisdiction with the circuit court of such a proceeding by information ; Beckefc et al. v. Houston et al., 1-3T9. R. EAILEOAD COMPANY. 1. Chaeaotek and duty, a railroad corporation is a common carrier, occupying, also, a peculiar relation to the public, being vested with certain franchises, for the public benefit. Such fran- chises it is bound to use with fairness and for the common good ; Messenger et al. v. Pennsylvania U.K. Co., S-542. 2. Object of theie oeeation. The considerations operating on the general assembly and the people, in granting charters to railroad corporations, were two-fold. The first and most impor- tant was, the accommodation of the public and the promotion of "their interests. The other was, the advancement of the interests of private individuals, who should become stockholders in such corporations ; Peoria & E.. I. Ey. Co. v. Coal Valley Mining Co., 5-225. 3. Public chaeactee. A railroad company is a quasi public corporation, receiving powers denied to individuals, partnerships, and o'ther corporations and common carriers. It is bound by reciprocal obligations to the state and owes reciprocal duties to the pubHc ; Board of Comm'rs et al. v. Lafayette etc. E.E. Co. €t ah, 7-26. 4. Eights and duties. By their charters, railroad corporations are empowered, besides building and maintaining their roads, to carry passengers and property for compensation. At the same time a corrSative duty is imposed, that they shall receive and carry passengers and freights over their road, as they may be offered for the purpose. When they accept their charters it is with the implied understanding that they wiU fairly perform these duties to the public, as common carriers of both persons and property, under the responsibility which that relation imposes ; Peoria & E. I. Rj. Co. v. Coal Valley Mining Co., 5-225. 5. Avoidance OF duty. Eailroad companies can not escape from their duty, as common carriers of both persons and property, by neglect, refusal or by agreement, with other persons or corpo- rations, that they will disregard or refuse to perform them. They have no power to absolve themselves from performing their charter obligations, and any effort to do so, by contract or other- wise, is void. Id. 618 DIGEST OF THE 6. PtJBLio COMPANIES. Eailroads, constructed under a general railroad law, become, ipso facto, public ; because the public have the right of passage thereon by paying reasonable and uniform tolls and that, regardless of the motives of their projectors or the Generality of their proba/ble use ; Nat. Docks Ry. Co. v. Central t.R. Co. et al., 8-420. 7. . Railroad companies are quasi public corporations and agencies. Their directors act as agents for the company and as trustees for the public and are clothed with an important public trust. When the public interests are brought in conflict with the private interests of the company, or of private individuals with whom such companies deal, such private interests must yield to those of the public ; Pueblo & Ark. Yalley R.E. Co. v. Taylor et al., 9-37. 8. Nature oe eeanchise. Railway companies have delegated to them, as part of their franchises, much of the sovereign power of the state, in consideration of their discharging part of what are the proper duties of government, that is, providing the means of commerce and intercourse by constructing the roads ; which are the avenues of that commerce. When, being au- thorized, they assume to operate these roads, they have devolved upon them, in consideration of that franchise, the additional duty, which is not one of the proper functions of the government, of common carriers, and are obliged to transport all merchandise and passengers, on the terms fixed in the grant through which they obtained their franchises ; Rogers Locomotive etc. Works v. Erie Ry. Co. et al., 3-599. 9. Implied condition oe eeanchise granted. In the grant of the franchise, of building and using a public railway, there is an implied condition that it is held as a quasi public trust, for the benefit of the public, and the company possessed of the grant must exercise a perfect impartiality toward all who seek the bene- fit of the trust ; Messenger et al. v. Pennsylvania R.R. Co., 5-542. 10: Limitations on charters. A common carrier exercises a public employment, and in accepting a charter, which gives a rail- road company an artificial existence as a common carrier, the com- pany, necessarily, accepts it with all the duties and liabilities attached, by the existing law, to the function of a common carrier. Among these duties is that, well settled at common law, he shall not exercise any unjust and injurious discrimination between indi- viduals in the rates of toll; Chic. & A. R.R. Co. v. People, ex rel. Koerner et al., 5-196. 11. Legislativb control of railroad CHARTERS; Conceding the inviolability of railroad charters, regarded in the light of con- tracts, the legislature has the clearest right to pass an act for the purpose of preventing an unjust discrimination in railway freights, AMERICAN CORPORATION CASES. 519 "whether as between individuals or communities, and to enforce its observance by appropriate penalties. Id. 12. Connecting companies. A Maryland railroad corporation, whose charter contemplated the extension of its road beyond the limits of the state of Maryland, was licensed by an act of the legislature of Virginia, re-enacting the Maryland charter, in words, to continue its road through that state, and, subsequently, was allowed by an act of congress, to extend a lateral road into the district of Columbia, in connection with its road through Mary- land and Virginia. It was held, the unity of the road being un- changed in name, locality, election and powers of officers and mode of declaring dividends and of conducting business gene- rally; (a) that no new corporation was created, either in the dis- trict of Columbia or the state of Virginia, but only that the old association was exercising its franchises in them, with their per- mission ; (5) that, as related to responsibility for damages, there was a unity of ownership, throughout the line, in the several states and district ; (c) that in view of such unity of ownership, the corporation was amenable to the courts of the district for injuries done in Virginia on its road, and in all actions not local ; (a) that such responsibility was not changed by reason of the issuing, to travellers, of "coupon" tickets, upon each of which was printed, by way of limitation, the words, " Responsibility for safety of person or loss of baggage on each portion of the route is confined to the proprietors of that portion alone" ; (e) such in- dorsement on a ticket given to a passenger over connecting lines of transportation, does not exempt the company issuing the ticket from liability for a loss occurring on a connecting line, un- less the passenger had actual notice of the limitation and assented to it; E.E. Co. v. Harris, 3-83. 13. . Where a through line, for the transportation of passengers and freight, is established by the owners of difEerent roads, the first carrier who receives fare over the whole route and gives a through check for baggage, becomes liable for any loss or injury, not only on its own line, but on any other road in the con- necting line, throughout the entire distance : Croft v. Bait. & O. E.R. Co., 5-191. 14. . Where three companies constitute a 'through line and the fare received for through tickets is accounted for by the first to the other companies, according to a tariff established by each company for itself, and there is no division of profits or losses, such an arrangement is not a partnership involving joint liability. Id. 15. Purchase of stock in connecting line. Where a railroad corporation was organized under a general incorporation law of the state of Kansas (Gen. Stat., ch. 23) relating to private cor- porations, the corporation had the right to purchase and hold such real and personal estate as the purposes of the corporation required; 520 DIGEST OF THE and, in the absence of any showing to the contrary, a piirchase of stock in a connecting line will be presumed to be requisite for the purposes of the corporation ; Kyan et al. v. Leavenwortb etc. Ky. Co. et al., 7-144. 16. Leasing other lines. Any railroad organized under the laws of this state (Kansas), may lease another road, and the road so leased will become in operation thereof, a continuation and ex- tension of the road so leasing it ; A. T. & S. F. E.K. Co. v. Fletcher, 10-432. lY. ; IN OTHER STATES. Under the charter of the road in question, it could lease roads in other states if the roads so leased became, in their operation, a continuation of the leasing road. Id. 18. Stock of leased road. By the provisions of its charter, this road could accept the stock of a road leased by it, and guar- antee its first mortgage bonds. Id. 19. Competing roads. The grants, oy the state of Georgia, of charters to several railroads from the seaboard to the interior of the state, indicate a public policy to secure a reasonable com- petition, between such roads, for public patronage, and it is con- trary to that policy for one of said roads to attempt to secure a controlling interest in another, and a contract made with that view will be set aside by a court of equity as illegal, beyond the objects of the charter and contrary to the public policy of the state ; Central E.R. Co. et al. v. Collins et al., 3-224. 20. Subscription to stock. It has been repeatedly held, in Michigan, that only the commissioners appointed for the purpose, can lawfully take subscriptions to the stock of a railroad company ; JSTorthern Cent. Mich. E.E. Co. v. Eslow et al., 6-625. 21. Subscriptions to stock. The statute, authorizing and reg- ulating the incorporation of railroads in Michigan (Comp. L., 1871, § 2405) provided as to subscriptions of stock not made upon the original articles of association, that they should be'made " in the manner to be provided by its (the company's) by-laws." Held, that a subscription made before any by-laws were adopted gave no rights to either party and, where there had been nothing done to create an estoppel, the subscriber was not bound by a by- law subsequently made, the intent of which was to adopt such subscription ; Carlisle v. Saginaw Y. & St. L. R.E. Co., 4-476. 22. ■ . The court can not take judicial notice, that in the location of a line of raUroad, the company authorized to construct it between two given points, will or will not so locate it so as to run to, near or through a given town, which is empowered to subscribe for the stock of the corporation ; nor can it act upon any knowledge it may have of the geography of the state. The plaintiff must aver and prove facts, in this regard, if he seeks to take advantage of them, to avoid a subscription to stock on that ground ; Phillips et al. v. Town of Albany et al., 4-220. 23. Contingent subscription. If one town subscribes for AMERICAN CORPORATION CASES. 521 . stock in a railroad corporation, contingent upon like action on the part of other towns, also authorized to subscribe, and the sub- scriptions of all or any of the other towns fail or lack validity, on any ground, then by» the terms of the agreement to subscribe, the town making the conditional subscription will be absolved from all obligation to receive or pay for the stock. Id. 24. Statute oonstkued. The general railroad law of New Jersey authorizes the organization of a company to build a rail- way wholly within one city ; Nat. D. Ry. Co. v. Cent. E.R. Co., 8-420. 25. CoiiTSTBTJCTION OF ROAD ; OEOSSING STREAMS. To the CrOSS- ing of streams, the company not being their owner, legislative authority is required. This necessity exists whether the streams to be crossed happen to be public highways or mere private water courses ; Chicago, E. I. & P. R.E. Co. v. Moffit, 5-330. 26. Duty to restore stream. Where authority is given, by charter, to cross any stream of water in the route or line of its road, coupled with the duty to restore the stream so crossed to its former state, or such state as not to materially impair its use- fulness, it is incumbent on the railroad company constructing the bridge so to construct it that the water should not be ob- structed, pent up, or otherwise caused, thereby, to overflow lands of riparian owners and to keep it in such condition as not to ob- struct the stream to the injury of such owners. Id. 27. Prohibition of stations. A railroad company, chartered by a legislative act and intrusted with the right of eminent do- main, upon the ground that its road is for the use of the public, received a conveyance of real estate upon condition or agreement that the company would not establish a depot or station within three miles of a designated point. It was held that the condition or agreement was illegal as against public policy, and that a re- conveyance of the property could not be decreed on account of a violation thereof by the railroad company ; St. Louis, J. & Chi. R.R. Co. V. Mathers, S-2Y7. 28. . The directors of a railroad company are the trustees both of the stockholders of the company and the public, and in the discharge of their three-fold duty are required to act with reference to the public convenience, on the one hand, and the private interests of the stockholders, upon the other. The in- terests of both forbid there should be a positive prohibition against the establishing of stations at any point on the line of the road. Whenever the public convenience requires that a station on a railroad should be established at a particular point, and it can be done, without detriment to the interests of the stockholders, the law authorizes I't to be established there, and no contract between directors and individuals can be allowed to pro- hibit it. Id. 29. Relation to public. The i«ublic has a right to say that 66 522 DIGEST OF THE railroad companies shall not be permitted to make any contract which would prevent them from accommodating the public — where entitled to it — in the matter of transportation and travel ; Pueblo & Ark. V. K.K. Co. v. Taylor et al., 9-37. 30. Illegal contbact. A contract for the payment of money — in this case a bond — which seeks to, and by its terms does, pre- vent a neighboring town through which a railroad passes, from having the facilities it is the duty of the owner of the road to furnish or which prevents such owner from the exercise of dis- cretion in providing such facilities for the public is illegal and void. Id. 31. Re-oeganization. A railroad corporation re-organized under an act of the state of Ohio, of April 11, 1861, regulating the sale of railroads and the re-organization of companies (S. & C. 127). In its agreement it was stipulated that certain mortgage bonds of the original corporation should be assumed by the new associa- tion, and that the owner of such bonds should be entitled to vote at all meetings of stockholders, upon the performance of certain conditions, as to the extension of time in which the bonds shall become due. Such conditions being fulfilled by the holder of the bonds, he becomes entitled to vote and the company is liable to pay the bonds without further action of the new company ; State, ex rel. Att'y Gen., v. M' Daniel et al., 4-20. 32. Teansfbe of bonds. An executory agreement to sell and 'deliver such bonds to a corporation, made subject to ratification by its directors and stockholders, does not, until consummation by ratification, divest the holder of his title therein, nor of his privilege of voting by virtue of his ownership. Id. 33. Mat make eeasonablb eegtjlations. Kailroad companies carrying passengers have the right to make reasonable rules and regulations for conducting their business, and they and their agents incur no liability in enforcing them in a proper manner ; Elmore «. Sands, 4-603. 34r. Regulations affecting passengees. It is the undoubted right of railroad companies to make all reasonable rules and re- gulations for the safety and comfort of passengers travelling on their lines of road. It is not only their right, but their duty to make such rules and regulations. But, such rules and regulations must always be reasonable and uniform with respect to persons. What are reasonable rules is a question of law and is for the court to determine, under all the circumstances in each particular case ; Chicago & Northwestern Ry. Co. v. Williams, 4-263. 35. . A rule which sets apart a car of a passenger train, for the exclusive use of ladies, and gentlemen accompanied by ladies, is a reasonable one. Id. 36. . Public carriers will not be justified, on the ground of mere prejudice, in the exclusion of a colored woman from the privileges of a car set apart for the exclusive use of ladies and AMERICAN CORPORATION CASES. 523 gentlemen accompanied by ladies ; at all events, tintil they furnish separate seats, equal in comfort and safety to those furnished for other travellers. They have no right to discriminatie between passengers on account of color, race or nativity alone. Id. 37. Discrimination as to passengers. Kailroad companies may discriminate between the amount of fare where the ticket is purchased and where the fare is paid upon the train ; Indianapolis, P. & Ohi. Ey. Co. v. Einard, 5-356. 38. . Eailroad companies have no right to discriminate between persons, and sell tickets to some and refuse others. Id. 39. LiMiTBD TICKETS REASONABLE. A railroad company is not bound to issue a ticket in advance of the day on which it has to be used, and has a right to insist and provide that it shall be used on the day upon which it is issued, and that every passenger, when he enters the train, shall pay his fare, or produce a ticket showing his right to ride upon that train. In enforcing such regulations, neither the company, nor its agent, incurs any liability ; Elmore v. Sands, 4-603. 40. Contracts not enforceable. A contract, of a railroad company, which gives to one, or more, persons, an exclusive ad- vantage, or monopoly, over all other transporters in the transpor- tation of goods, is unjust and can not be enforced at law ; Messen- ger et al. V. Pennsylvania E.E. Co., 5-542. 41. Liability for injury to ^rvant. The true rule is to hold the corporation liable for negligence, or want of proper care, in respect to such acts and duties as it is required to perform and discharge as master or principal, without regard to the rank or title of the agent intrusted with their performance; Flike, adm., V. Boston & Alb. E.E. Co., 4-^599. 42. . As to such acts, the agent occupies the place of the corporation and the latter should be deemed present, and, con- sequently, liable for the manner in which they are performed. If an agent employs unfit servants, his fault is that of the corporation, because it occurred in the performance of the principal's duty, although only an agent himself. So in providing machinery or materials, and in the general arrangement and management of the business, he is in the discharge of the duty pertaining to the principal. Id. 43. . So, of a railroad company, it is clearly its duty, in making up and dispatching a train, to supply it with suitable machinery and help for the business and journey it is about to undertake. If there be any want of care, in these respects, which causes an Injury, it is liable to a servant ; as a fireman employed on another train. Id. 44. Duty as to machinery. It is the duty of a railroad com- pany to provide suitable and safe machinery; such machinery should not be so unskillfully constructed that the slightest indis- cretion on the part of the operatives would prove fatal. Where 524 DIGEST OF THE ' they are so constructed, it is such negligence as will render them liable for damages occasioned thereby to an employe who is ignorant of such unskillful construction ; Tol., W. & W. Ky. Co. V. Fredericks, 5-266. 45. Duty as to maohineet. The law does not require a rail- road company to provide and use the best known appliances that mechanical skill and ingenuity have been able to devise and con- struct to prevent the escape of sparks from its locomotives, with- out reference to whether the company could, by any degree of effort, know of such inventions or not, or whether they have been tested and proved to be the best; ToL^ W. & W. Ey. Co. v. Com et al., 5-263. 46. . A railroad company is not bound to purchase the patent for every invention claimed to be an improvement on such machinery, and test it ; but, when such an invention has been tested and approved as better than that it is using, it is required to adopt and use the better machinery. In this, as in the dis- charge of their other duties, railroad companies can only be re- quired to employ due diligence to provide themselves with the best, but can not be held to unreasonable and ruinous efforts to prevent injury. Id. 47. LiABiiiiTT TO EMPLOYE. The fact that defendant's agent had employed a third brakeman to go upon a train, who, by reason of oversleeping, failed to get aboard in time, and injury was caused, did not excuse a railroad company from liability. Such hiring was only one of the steps proper to be taken to discharge the principal's duty, which was to supply with sufficient help and machinery, and properly dispatch its train, and this duty remained to be performed, though every man employed had died or run away during the night. If negligent in discharging this duty, either by act of commission or omission, whether employing im- proper help, or not enough of it, or in not requiring their presence upon a train, it is, upon every just principle, responsible for the consequences ; Flike, admr., v. Bost. & Alb. U.K. Co., 4-599. 48. . Although negligence may be imputed to one em- ployed, the only effect would be to make the negligence of the company contributory with that of the employe ; it would not affect the liability of the company. Id. 49. Injury to employe. Although the charter of a railroad company may not, in terms, authorize the company to incur ex- pense on account of injury received by their employes, yet they may, in exercising such franchises, incur such liability ; Tol., W. & W. Ey. Co. V. Eodrigues, 1-414. 50. The oonsideeation foe a peomise. When an employe has been disabled while in the employ of the railroad company, and in the discharge of his hazardous duties, it is a sufficient considera- tion to support a promise to pay for the nursing and medical attendance necessary to his cure. Id. AMERICAN CORPORATION CASES. 535 51. • Railroad sttpekintendbnt ; .powees. The general superin- tendent may, in the exercise of his powers as such, hind the com- pany for the payment of such liabihties, which his constructive consent assumed. Id. 52. . Where an employe of a railroad company has re- ceived injury while in the discharge of his duty, and the station agent, in his capacity as such, assumes certain liabilities in his behalf, for nurse and medical attendance, and writes a letter to the general superintendent, stating the facts, it is presumed that the general superintendent received such notice, and, in the ab- sence of any instructions to the contrary, consented, on the part of the railroad company, to assume the liabilities of the station agent for all reasonable charges. Id. 53. The eight to take tolls. The title of a railway company to demand compensation for carrying freight and passengers is not derived by it upon common law principles, and is not to' be measured by the rules of the common law; the right to exact tolls or charge for freight is granted for a service to the public ; it was an attribute of sovereignty, which has been granted ; and where the grant does not fix the rates of toll which the company may levy, the only logical conclusion is that the company may fix them itself, subject to legislative superintendence ; Blake et al. v. Winona & St. Peter Ey. Co., 4-487. ' 64. Eight to regulate tolls. A privilege of immunity of a pubhc nature which can not be exercised without legislative grant is a franchise. The right to make roads and levy tolls is a fran- chise ; a railroad is but an improved modern highway, which it is the duty and interest of the government to construct, when pub- lic interest and convenience demand it. The legislature may also, from time to time, regulate the use of the franchise and limit.the amount of the toU which it shall be lawful to take ; in the same manner as it may regulate the amount of toll to be taken at a ferry, or for grinding at a mill, unless it has deprived itself of that power by a legislative contract with the owners of the road. Id. . ^ 65. Power to establish tolls. A railroad conipany is char- teredfsolely for the purpose of exercising the functions and per- forming the duties of a common carrier. When its charter au- thorizes it, in broad and general terms, to establish tolls, it imports nothing more than that the corporation should have the same right of establishing tolls that a natural person has when accepting as a common carrier; a right to be exercised within the same liinita- tions that the common law, in behalf of justice and public policy, imposes upon the natural man ; Chi. & A. E.E. Co. v. People etc., S-196. \ 56. Of puechasb. A grant of power to a railroad conipany to locate and construct branch roads does not confer authority to purchase and operate the raihroad of another company constructed 536 * DIGEST OF THE under a different charter; Campbell et al. v. Marietta & Cine. K.R Co., 4-60. 57. Teansfee bt pueohase. When the railroad of one com- pany is purchased by another railroad corporation, by authority of a legislative enactment, in the absence of any provision of law to the contrary, the purchased road passes to the purchasing com- pany, subject to the same restrictions and' limitations as to rates chargeable for transportation as attached to it in the hands of the vendor. Id. 58. PowEE AS TO LAND. A railroad company vested with power to hold real estate donated for the purpose oi aiding in the construction of its road or raising a fund to pay debts contracted in its construction, and for depots, roadbeds etc. and to sell and dispose of the same can not, nevertheless, become a large landed proprietor for purposes not connected with its creation. The amount of lands it may receive, however, can not be decided between private parties. That question can only be raised, by the state, in a direct proceeding against the railroad corporation ; Land V. Ooffman et al., 4-510. 59. . Under the general statutes, 202, § 4, of the state of Kansas, railroad corporations may receive lands by voluntary grant or purchase, and sell them " for the purpose of aiding them in the construction, maintenance and accommodation of their rail- ways," and a contract to convey lands to a railway company for such purposes, conditioned the company should build its railway to a certain place and locate its depot within a certain town, was held not to be in contravention of public policy or void ; M'Clure V. Missouri Eiver, Fort Scott & Gulf K.E. Co., 4-398. See Common Caeeiee ; Eminent Domain ; Foeei&n Coepoea- TIONB. EAILKOAD CONSTRUCTION. 1. Depot. An agreement was entered into by defendant com- pany, in consideration of the transfer of roadbed etc., not to " build or allow but one other depot between " two points named. It is not a violation of this agreement to construct a station at a coal bank, where trains merely stop to take or leave cars, for the purposes connected with the coal trade. Such station is no more within the meaning of the contract than would be a water station ; Mahaska County K.E. Co. v. Des Moines Valley E.E. Co., 3- 325. EATIFICATION. 1. Of acts of agent. Subsequent ratification ia equivalent to prior authorization of the acts of an agent. No new conside- ration is necessary to support it ; Ferris v. Thaw et al., 8-265. 2. Infeeeed. Eatification by a corporation of the unautho- rized act of its agent is equivalent to previous authorization. It AMERICAN CORPORATION CASES. 537 need not be manifested by a vote or formal resolution or be au- thenticated by the seal of the corporation. It will be inferred from failure promptly to disavow the act when it comes to the knowledge of the corporation ; First Nat'l Bk. of Springfield v. Fricke, 9-^608. 3. Knowledge. Eatification, implies knowledge, and a party can not be adjudged to have ratified an act of which he has no knowledge, actual or constructive ; First N at'l Bank of Fort Scott V. Drake, 9-340. 4. By acquiescenoe. An attorney was retained by the supep intendent of a corporation. After retainer and while acting for the company, during a period of some eight months, the attorney, at different times, corresponded as such with the various officers and managers of the company, who recognized him as attorney. If there was any defect in the authority conferring the original appointment, this would amount to a ratification ; Southgate v. Atlantic & Pacific E.K. Co., 8-144. _ 5. By silence. Where an agency exists and the agent exceeds his authority, the silence of the principal may give rise to the pre- sumption of an intentional ratification of the unauthorized act. Before such inference can be drawn from silence, however, there must have been afforded an opportunity to act or speak upon a full understanding of the circumstances, and these circumstances must be such as would properly and naturally call for some action or reply from men similarly situated ; Union Gold Mining Co. v. Eocky Mountain National Bank, 4-298. 6. Case stated. The president of a corporation, without au- thority, signed the corporate name to a contract ; the secretary was one of two agents with full power in the premises, and as such agent, had full knowledge ; the other agent knew there was a con- tract and knew some of its provisions, with every facility for inform- ing himself fully ; he and the president were directors of the corporation ; a supplemental agreement, which could not be under- stood without knowledge of the contract, was signed by the secre- tary of the corporation and was fully performed by the corpora- tion ; the contrfct was partially executed by the plaintiff, as to the time, and, so far as the motives and purposes of the defendants were concerned, was fully executed ; and the execution of the con- tract was connected with important and radical changes in the business affairs of the corporation. There being no pretense that any officer, or other person connected with the company ever intimated any objection to the contract, held, there had been a ratification of the contract ; Perry v. Simpson Waterproof Manu- facturing Co., 4-309. T. Disavowal. Where delay, on the part of the principal, to disavow the agency will result in loss, and where the transaction may turn out a profit or loss according to circumstances, the prin- (dpal must disavow the unauthorized act of the agent within a . 538 DIGEST OF THE reasonable time after notice; Union Gold Mining Co. v. Koeky Mountain National Bank, 4-298. 8. Kepudiation. It is competent for a corporation, when sued upon a promise to pay, executed by an agent in its name, to show, as matter of defense, that immediately on its existence becoming known, or that power to execute negotiable paper had been exei^ cised by its agent, its validity was formally and at once repudiated; New York ton Mine v. First Nat. Bk. of Negaunee, 6-612. 9. Dieeotor's acts. Ratification of the acts of an officer or agent of a corporation, must flow from the acquiescence of the directors, with knowledge of the facts, a consent by one of the directors, the other being ignorant of the acts done by the officer, will not operate as a ratification ; N. O. & B. K. Packet Co. v. Brown, 10-507. 10. . When, at a meeting of a board of directors of a corporation for pecuniary profit, an act is ordered to be done with- out objection, either then or subsequently made, to the regularity of the meeting, by any director or stockholder, and the act thus authorized is subsequently performed, its legality can not after- ward be questioned in equity on the ground of irregularity ; Samuel v. Holladay, 1-139. 11. . As a general rule a contract between a corporation and its directors is not absolutely void, but voidable at the elec- tion of the corporation ; such contract does not necessarily require any independent and substantive act of ratification, but it may become established as a valid contract by acquiescence. The right to avoid it may be waived ; Kelley v. Newburyport etc. Horse Ry. Co., 10-600. 12. . A director of a corporation retained an attorney and authorized him to employ local counsel to attend to certain suits pending in which the company was interested. The j-eport of the attorney originally retained of his retainer of the local counsel, to the director, was legal notice to the corporation and the continued silence of the director amounted, in law, to a ratifi- cation by him and, through him, by the corporation of the action of the original attorney in the premises ; Pittsb*., Cin. & St. L. E.R. Co. V. Woolley, 7-170. 13. . The board of directors of a corporation, may adopt, by resolution, an instrument (in this case a mortgage) which has been executed, originally, without authority, but which was exe- cuted in the name of the company, sealed with its corporate seal and signed by the proper officers. This will give the instrument full validity, as the deed of the corporation ; Wood v. Whelen, 6-442. 14. By opfioees op corporation. Notes and mortgages given by the president of a corporation formed under the laws of the state of Iowa, executed by the president and secretary under ,the corporate seal, though made without authority from the AMEKICAN CORPORATION CASES. 529 board of directors, are valid, if the directors afterward authorized and approved a sale of property in satisfaction of the same; Eeichwald v. Commercial Hotel Co., 10-203. 15. By officers of coepoeation. Where the secretary of a corporation, without express authority, pledges the bonds of the company, secured by deed of trust, which is recorded, for an exist- ing indebtedness and future advances, the directors of the corpora- tion having knowledge of and acquiescing in such pledge, the act will be binding in the absence of proof of fraud. The principle that a subsequent ratification is equivalent to a prior authority will apply ; Darat v. Gale et al., 6-380. 16. Competency of. Where a loan is made by request of an authorized oflScer of the corporation for the purpose of paying its debts, such loan being within the powers of the corporation to effect, the proper oflBcer is competent to issue ordinary evi- dence of the new indebtedness and the directors or stockholders may sanction and ratify such transaction ; and, it is immaterial that the new creditor is a director of the company at the time the loan is, in good faith, made ; Seeley v. San Jose Indep. Mill etc. Co., 9-17. 17. Not effectual. The president of a board of trustees having performed an act unaijthorized by his corporation, a reso- lution of the board of trustees, adopted by the casting vote of such president, will not be effectual to ratify and adopt the un- authorized act, so as to create a liability on the part of the com- pany ; Chamberlain v. Pac. Wool Growing Co., 6-255. 18. . A bare vote of a coi-poration, accepting the report of a committee of its members, can not be construed to be such a ratification of the acts of a member in the voluntary payments of the debts of an association — in this case a religious society — as to authorize him to institute and maintain suit to recover the sum paid ; Blanchard v. First Assoc, etc., 4-il9. 19. CoNTEACT, NOT TO BE EATiFiED. A coutract ultra vircs the corporation is void. It can not be made valid by any subsequent act of the corporate body ; for the reason that there is no residu- ary power to confirm it. That which it could neither make nor do it can not ratify. A void act can never become valid because it remains unouestioned ; Board etc. v. Lafayette etc. R.E. Co. et al., y-26. 20. Unconscionable ageeement. An unconscionable arrange- ment will not be disturbed when there has been a ratification of it, with knowledge of all its bearings, after time has been had for consideration; Xent v. Quicksilver Mining Co. et al., 8-614. 21. Laches of stockholders. The existence of a contract and the issue of mortgage bonds under it, being reported to a meeting of the stockholders in due time and no objection being made thereto and no offer of aid being tendered the embarrassed corporation executing the contract, but the parties to the contract 67 630 DIGEST OF THE being allowed to proceed and expend their money in aid of the corporation, in good faith, it is too late, after the lapse of five years, for stockholders to impeach the transaction ; Kitchen et al. V. St. Louis, Kansas City & Northern Ry. Co., 8-199. 22. By all paeties. A contract for the sale of the property and franchises of a corporation, by a meeting of a majority of the holders of bonds and stock, acting without authority, to make a contract binding on the corporation is valid when carried into efEect, with the subsequent ratification of all the parties interested in the subject matter of the sale ; Chi., E. I. & P. R.R. Co. v. Howard, 1-1. 23. Of peomotees' acts. Where an act has been done, in the name of a corporation, which the corporation might lawfully per- form, but which when done there was no authority to do, the board of directors, lawfully in office, may ratify it and such rati- fication will be equivalent to ajrecedent authority to do the act so confirmed ; "Wood et al. v. W helen, 6-442. 24. Instance as to bonds. The promoters of a private cor- poration, acting as directors of a corporation de facto, which was not yet incorporated, resolved for the purpose of completing, and putting into successful operation, its works, and to provide for their future extension, to issue bonds, to be secured by mortgage of its company property, upon which to borrow money for the company's use. The company became incorporated and the pro- moters became its directors. The bonds and mortgage were exe- cuted, and, subsequently, while the bonds and mortgage were still in the possession of the company, the directors, by resolution, authorized their sale, upon terms stated, and the delivery of the mortgage security. This action of the directory of the company, now incorporated, was equivalent to an original authority to issue the bonds and an adoption of the mortgage executed under the prior resolve, as well as a ratification of the action of the pro- moters in respect thereof. Wherefore, irrespective of the ques- tion of power or want of power in the promoters of the corpora- tion, to bind the future corporation, the securities became valid and binding obligations of the company by its act of adoption and ratification through its lawful board of directors. Id. 25. May assume debts of. A corporation may, by express agreement, assume obligations entered into by its promoters prior to its organization, where the corporation receives the benefit of the contract in respect of which such obligations were incurred; Eeichwald v. Commercial Hotel Co., 10-203. 26. Peioe note. An officer of a corporation must have special authority to ^ve the note of a corporation to take up outstanding prior obligations of the company. Where, therefore, persons as partners gave their notes, and before the same fell due, became incorporated, and after incorporation the president of the com- pany renewed such notes as the notes of the corporation, and AMERICAN CORPORATION CASES. 531 made payments therein with corporate funds, the corporation was not liable on such notes, there being no evidence that it ever authorized them. Neither the fact that the proceeds of such notes were included in the assets of the new corporation, nor that some of the payments thereon were made in corporate checks will be suflScient to prove a ratification by the corporation ; M'Lellan V. Detr. File Works, 10-644. See Aqenot ; Contract ; Estoppel ; Powers. KEAL ESTATE. 1. Acquisition of. It is a well settled rule that when a cor- poration is forbidden to take or receive lands, such prohibition goes to its capacity to acquire, and a deed made to it under such circumstances passes no title, and the conveyance will be abso- lutely void. The same rule applies when siieh corporation has once exhausted its capacity in acquiring land to the limit that is given ; St. Peter's Kom. Cath. Cong. v. Germain, 9-185. 2. . "Where a corporation, by its charter, is without power to take title to real estate a conveyance to it is not void, but, only voidable and the sovereignty alone can object. It is valid until assailed in a direct proceeding instituted for that pur- pose ; Missouri Yalley Land Co. v. Bushnell et al., 8-332. _ 3. . The right of an association assuming to be a corpora^ tion, under a law autborizing the creation of corporations of the class to wbicb it claims to belong, and which has exercised corpo- rate powers to hold property, can only be questioned by a direct proceeding in behalf of the state ; Baker "et al. v. Neff, 7-106. 4. Limitation. By statute of Illinois, any corporation which may be formed for religious purposes may receive, by gift, devise or purchase, land not exceeding ten acres. The limitation was — in other words — contained in the revised statutes of 1845. It applies to such societies as were formed under a statute of 1869, although that act contains no words of limitation. Hence, when a religious society, organized under the act. of 1869, has acquired ten acres of land all contracts and conveyances to it of any other real estate are void ; St. Peter's Eom. Cath. Cong. v. Germain, 9-185. 5. Purchase. A corporation was authorized " to receive and hold, for the benefit of a high school, any lands, by gift, devise, donation, contract or purchase." A stockholder brought suit to enjoin a contemplated purchase of real estate, setting out that the corporation was unable to pay the contemplated price, and that the result of the purchase, if consummated, would be the bank- ruptcy of the corporation and the failure of the project to estab- lish the school, but did not allege that the lands were not to be held for the benefit of the school. It was held that the petition did not show a cause of action ; Dudley v. Kentucky High School, 5-382. 532 DIGEST OF THE 6. Donation. A donation of lots of land by a town site cor- poration, in the absence of some special limitation on its powers, is not necessarily ultra vires ; Whetstone v. Ottawa University, 7-116. 7. . A corporation being formed for the purpose of lo- cating and laying out a town site and making improvements therein, where the direct and proximate tendency of certain im- provements sought to be obtained by a donation of land is the building -ap of the town and the advancement of the value of the remaining property of the corporation, such donation is within the powers of such corporation ; and, this though the improve- ments are to be made outside the particular town site. Id. 8. Implied power. Where, by the general law under which a corporation is organized, such corporation is authorized to contract and be contracted with, to purchase, hold, or sell property and to sue and be sued, it would seem the corporation has the power to execute a deed of trust, upon its real estate, to secure money, borrowed in furtherance of the objects of its creation, as a neces- sary incident to the power to acquire and hold the same; West et al. V. Madison Co. Agric. Board, 6-374. 9. Sale. Where the owners of real property sell and dispose of an undivided interest in such property for certain machinery, and they and the purchaser organize a corporation for the im- provement and development of the joint property, the corpora- tion has no interest in the question as to how the machinery is disposed of. It has no connection with the business of the com- pany ; Marseilles Land & Water Power Co. v. Aldrich, 6-406, 10. . Where the owners of real property, upon which is a valuable water power, organize themselves as a corporation to improve and develop the power, by the construction of a dam, canal etc., and the construction of a cotton mill, puttipg such property in the corporation, the company will have authority, un- der the law, to sell and convey a portion of the real estate and in- vest the proceeds in other property. Id. 11. . Admitted there is a want of authority on the part of a corporation, under its charter, to take or hold real estate ex- cept for certain specified purposes, in an action upon a contract of sale of real estate, under which the defendant has acquired and enjoyed property rights, such defendant can not defend by setting up the want of authority ; Mo. YaUey Land Co. v. Bushnell, 8-332. 12. Acknowledgment of deed. An acknowledgment of a deed, by a trustee, who is empowered by his corporation to act with others, before himself, renders the deed void as to him ; but, such acknowledgment will not adversely affect the instrument as to the other trustees who act ; Darst v. Gale et al., 6-380. 13. CoNTBAOT not WITNESSED NOE ACKNOWLEDGED. As between the parties to it and those having knowledge of its existence, a AMERICAN CORPORATION CASES. 533 written contract for the sale of real estate is valid although not witnessed or acknowledged, as required in the case of a deed by the recording act , Mo. V alley Land Co. v. Bushnell, 8-332. 14. CoNTEAOT OF SALE ; WHAT IT CONVEYS. Where a person purchased an undivided one-fifth interest in realty, water power and personalty, under a written contract, with the owners of the other undivided interests, to form, at once, a special partnership to improve the same, which partnership should be treated as a corporation from that date, owning all the property of the several owners, and, until a regular organization could be effected, under a charter to be procured, the business was to be managed by a board of directors consisting of five members, to be controlled by a majority vote of the directors in the same manner as if a real corporation were organized, and each owner was to unite with the others in organizing a regular corporation under the charter when procured, each taking stock in proportion to his interest in the assets of the special partnership, and such corporation, when formed, was to become the owner of the assets of the special part- nership and assume all its liabilities, the piirchaser did not acquire, either legally or equitably, any title to the undivided one-fifth part of the property, but only an equitable right to stock in the com- pany formed, the legal title thereto to be consummated when the corporatipn should be organized and the stock issued, and that neither he, nor a purchaser from him, could enforce a partition ; Marseilles Land & Water Power Co. v. Aldrich, 6-406. 15. Geaut of. Where one grants to another, the right to enter upon his lands to construct a dam near a point specified, and to take possession of such portion of the lands as may be necessary for that purpose, when the dam is located and built, the grant be- comes as specific in respect to the land subject to the easement as if it had been particularly described in the grant, and neither grantor nor grantee can, without the consent of other parties in interest, change the location of the dam ; St. John's Orphan Home «. Buffalo Hydraulic Asso'n et al., 5-579. 16. Easement subject to. The estate and interest of a corpo- ration in real property, although it may be but an easement, is subject to levy and sale on execution, as property distinguished from the franchise of such corporation. Id. See Chukch Oegaitization ; Coepoeate Deed ; Powees ; Ee- LiGiotrs Society ; Taxation. KEBELLION". 1. CoEPOEATioN OEBATED DUEiNG. Corporations created by the legislature of a state in armed rebellion against the TJnited_ States are empowered, since the restoration of the normal condition of that state as to the nation and the states composing it, to sue and be sued in the federal courts ; provided, however, their acts of incorporation had no relation to any thing other than the domes- 534 DIGEST OF THE tic concerns of the state and were neither in purpose nor operation hostile to the United States or in conflict with its constitution ; but were, in fact, created in the ordinary course of legislation, such as there might have been had there been no war, or attempted rebellion and such as is of annual occurrence in all the states ; United States v. Ins. Cos., 5-98. 2. YoBD NOTE. A promissory note executed by an iron com- pany for money, or other thing, loaned to it, to be used by the corporation in erecting iron works and making iron for the late confederate goTemment, for military purposes in carrying on the late rebellion against the United States, if known to the lender at the time of the loan, is against public policy and illegal. No action can be maintained on it; Oxford Iron Co. v. bpradley, 4-272. EECEIYEE. 1. Natube of PEOOEEDrsTG. A proceeding for the appointment of a receiver of a corporation, under the provisions of the revised statutes of New York (2 Eev. Stat., 463, § 63), is a proceeding against the corporation, and, if the appointment of a receiver therein is binding on the corporation, no one else can question it ; Whittlesey, receiver etc., v. Frantz, administratrix etc., 8-550, 2. JuEisDioTioN. The jurisdiction of the court to entertain a proceeding for the appointment of a receiver does not depend upon the truth of the facts alleged in the petition ; if it allege suffi- cient facts and the court is called on to decide whether they are established, its determination, whether rightful or not, does not affect the jurisdiction. Id. 2^. Seqtjestkation ; pleading. "When a bill is filed in the circuit court of the United States for one state, against a corpora- tion created by the laws of another state, by a judgment creditor, praying a sequestration of its property, rights and franchises, and for the appointment of a receiver thereof, with power to collect from its stockholders the amount of the unpaid subscriptions, or sufficient thereof to satisfy such judgment, and for payment of his judgment, it is sufficient to allege the amount and value of such unpaid subscriptions, and to show that such subscriptions are more than sufficient to satisfy such judgment. That such corporation has no property, in the district in which the bill is filed, and no property any where except such unpaid subscrip- tions, is no objection to the jurisdiction of the court of defense to the suit ; Wihans v. M'Kean E.R. & Navig. Co., 1-103. 3. When to be appointed. While a court of chancery will be reluctant to appoint a receiver to take charge of and manage a railroad, it is competent to do so when such a course is indispen- sable to secure the rights of the legitimate stockholders and to prevent a failure of justice; .Stevenson et al. v. Davison, 4—203. 4r. . Courts of equity are very reluctant to appoint re- AMERICAN CORPORATION CASES. 535 ceiyers over any and all corporations ; and, will never exercise jurisdiction in this regard, save with extreme caution and on a clear case of right and pressing necessity ; Kelly et al. v. Trustees etc., 6-130. 5. SuPBEVisiON OF EQUITY. A court of chanccry can not as- sume, or vest in a receiver, the management and control of cor- porate business, except under proceedings instituted to wind up the corporation ; People, ex rel., v. Judge of St. Clair Circuit 5-478. ' 6. — ;-. In case of proceeding taken to wind up an insolvent corporation, a receiver should not be appointed when it appears that the directors are closing its affairs, and that such directors are, in all respects, trustworthy ; City Pottery Co. v. Yates, superintendent, 9-579. 7. _ . _ As a general principle, courts have no jurisdiction to appoint receivers for corporations, in the absence of express statu- tory authority. The supreme court of Louisiana has recognized no exception to this rule, unless wher§ the corporate property is abandoned or when there are no persons authorized to take charge of and conduct its affairs. Such power has never been claimed in the case of an existing corporation, the charter of which has neither expired nor been declared forfeited and which is under the management of competent officers ; Baker et al. v. Louisiana Portable R.E. Co., 9-366. 8. Wheit peopeelt appointed. On a bill by a portion of the stockholders, a director and creditor of a private corporation, against the corporation and the other stockholders, alleging mis- management of the business of the company, its insolvency, its ceasing to prosecute the work for which it was organized, and that it would be useless to resume business, on account of finan- cial embarrassment, and praying for a dissolution of the corpora- tion and the appointment of a receiver, in which the defendant stockholders were properly served by actual or constructive notice of the suit, though the service of summons as to the corporation itself was void, it was held, that a clear case was shown for the appointment of a receiver, and the part of the decree making such appointment was affirmed, while that part dissolving the corpora- tion was reversed for want of proper service on the corporation ; St. Louis & Sandoval Coal & Mining Co. -y. Edwards et al., 9-169. 9. Appointment ; in case of eaileoad company. If a railway corporation becomes insolvent ; makes default in the payment of the principal, or interest, of its bonds secured by mortgage ; and the mortgaged property is an inadequate security, a receiver will be appointed on a bill for foreclosure. Especially will the ap- pointment be made if in addition to the insolvency of the corpora- tion and the inadequacy of the security, the only fund, for the payment of the debt, be the earnings of the company and these are being misapplied ; Kelly et al. v. Trustees etc., 6-130. 536 DIGEST OF THE 10. Effect of appointment. The subjection of corporate property and franchises to the custody of a receiver, is a suspen- sion, in a greater or less degree, of the powers of the corporation. Id. 11. . A receiver having been appointed of all the mort- gaged property of a corporation, the land and other property of the company was in legal custody and could not be levied on ; Eobinson v. Atl. & Gt. W. Ky. Co., 4-118. 12. . A decree, made upon application of the attorney general, dissolving a corporation and appointing a receiver, vesta in the latter all the property of the corporation ; Attorney Gen- eral V. Guardian Mut. L. Ins. Co., 8-609. 13. . On the appointment of a receiver of a manufactu- ring company the corporation is so far dissolved that, thereafter, the duty is no longer upon the trustees to make the annual report ; Huguenot Nat. Bank etc. w. Cudwell et al., 8-554. 14. Injunction. The court, having acquired jurisdiction of proceedings for winding up the affairs of a corporation and hav- ing appointed a receiver, has jurisdiction to stay the suit of a creditor brought to recover assets to which the receiver is enti- tled, in whatever court such suit may be pending ; Attorney General -y. Guardian Mut. L. Ins. Co., 8-609. 15. . Such stay of proceedings may be granted on mo- tion in the proceedings ; it is not necessary that the receiver bring an action for that purpose. Id. 16. Instance. Upon application to the supreme court of New York, by the attorney general, under the general insurance law of that state (Laws, 1853, ch. 463, § 17 ; Laws, 1869, ch. 902), against the Guardian Mutual Life Insurance Company, said cor- poration was dissolved and a receiver appointed. The decree was granted upon return of an order to show cause, service whereof was admitted by the attorney of the corporation, who appeared upon the hearing. At the time of the appointment an action was pending in the New York common pleas, brought by policy holders against said corporation and others, to recover its assets alleged to have been illegally diverted. After the ap- pointment of the receiver he was, upon motion, made a party defen- dant in said action. He, also, brought an action to recover the same assets alleged to have been illegally transferred and, upon his motion, an order was granted perpetually staying proceedings in said action in the court of common pleas. On review, it was held that the supreme court acquired jurisdiction of the proceed- ings by the presentation of the petition of the attorney general and of the corporation on the appearance by its attorney and, therefore, had jurisdiction to grant decree appointing a receiver ; that the right of action to recover said assets vested in the receiver upon his appointment ; that the supreme court had power, in its discretion, to grant the order staying proceedings of the policy AMERICAN CORPORATION CASES. 537 holders ; and, that the court of appeals could not interfere with the exercise of that discretion. Id. 17. Powers. Where a receiver is appointed of the effects of a corporation, he succeeds to all its rights in all its property, claims and demands, to sell and dispose of these and reduce them to money, to be paid, under order of the court, to the creditors of the com- pany, according to their rights. He does not become a trustee for creditors to manage, settle and enforce their claims against the in- dividual stockholders, in enforcement of their several habihty under statute ; Wincock et al. v. Turpin, 6-473. 18. . A receiver appointed for a corporation represents the corporation, the creditors and the stockholders and, in his character as trustee for the latter, he may dis-aflSrm and maintain an action, as receiver, to set aside illegal or fraudulent transfers of the pro- perty of the corporation made by its officers or agents, or to recover its funds or securities invested or mis-applied; Att'y Gen. v. Guardian Mut. L. Ins. Co., 8-609. 19. . Receivers succeed to all the rights of the corporation, and may assert all corporate rights against unfaithful officers as well they may, also, for the protection of creditors, attack and im- peach the transactions of the corporation itself ; Raymond v. Pal- mer, 10-482. 20. . But they may not exercise actions which belong to creditors singly and not ut universi. Id. 20J. . An action may be maintained by the receiver of a national bank, against its directors, to recover damages sustained by reason of the gross negligence and inattention of such di- rectors to the duties of their trust. In the event such receiver is one of the directors chargeable with neglect of duty the action may be maintained by the stockholders and when the stockholders are numerous the action may be instituted and conducted by one, or more, in behalf of all ; Brinckerhoff v. Bostwick, rec'r, 9-610. 21; . The latest exposition of the law of the state of New York maintains the right of a receiver of a corporation, appointed under a judgment creditor's bill to recover the balance unpaid upon subscriptions to the capital stock of such corpora- tions, without any previous call for the payment of such subscrip- tions having been made by such corporation ; Winaus v. M'Kean R.R. & Nav. Co., 1-104. 22. In federal court. The last exposition by the state courts will be followed by the federal courts in that state. Id. 23. Removal of assets to another state. While a receiver of a private corporation, will not be permitted, as against the claims of creditors, to remove from this state the assets of the debtor, yet, when resident creditors have no legal claim to the property, he may be allowed, as a matter of comity, to remove the same; Patterson v. Lynde, 10-239. 68 538 DIGEST OF THE 24. Right to sue. Where a receiver has been duly appointed by a court having jurisdiction of a corporation and the subject matter of the controversy, and is empowered to collect and in- stitute all proceedings, at law or in equity, as may be necessary for enforcing the corporate rights, he will be authorized, inde- pendently of statute, to sue for the enforcement of such rights in his own name ; Frank v. Morrison et al., rec'rs, 9-390. 25. -. A statute made it the duty of a public officer (named), when an insurance company should appear to him to be insolvent, or in such condition as to render its further proceedings hazardous to the public, to file a bill, setting forth the company's condition and praying for injunction to restrain its doing business. The statute charged the court to appoint agents to take and con- trol the company's effects and, by final decree, in a proper case, to dissolve the corporation and wind up its affairs. Under such authority the court may appoint receivers, and, in making needful orders in winding up the affairs of such company, the court may direct the receiver to prosecute, in his own name, for the recovery of assets, inclusive of unpaid subscriptions for stock ; Gill v. Balis, 8-257. 26. . An action to recover an unpaid subscription com- menced by a corporation may be carried on by a receiver, in be- half of creditors, should the company become insolvent pendente lite; Phoenix Warehouse Co. v. Badger, 5-588. 27. . The individual liability of the stockholder created by statute is to be enforced at law, unless the statute provides a remedy in equity. This is in no wise changed by reason that the affairs of the corporation have passed into the hands of a receiver ; Wincock et al. v. Turpin, 6-473. 28. EECEIVEE AGAINST MAKER OF STOCK NOTES. Where Suit is brought for the use of a receiver of an insolvent corporation, against a stockholder, to enforce payment of his subscriptfon, or a note given therefor, no recovery can be had without an averment of the amount of the debts of the corporation. The receiver can recover no more than is sufficient to discharge the debts and lia- bilities of the corporation. The declaration should also show that the capital stock paid in has been exhausted ; Lamar Ins. Co. v. Moore, 6-390. 29. . In an action, by receivers of a corporation against a subscriber, to recover his subscription to the stock of the com- pany, a book of by-laws, produced by himself, upon request of plaintiffs, and testified to be the by-laws under which the corpora- tion acted, is admissible. As against a member of the company such by-laws are always admissible; Frank v. Morrison et al., rec'rs, 9-390. 30. . A decree, in a cause in equity, appointing receivers to wind up the affairs of a corporation and directing them, as such receivers, among other things, to make all collections of outstand- AMERICAN CORPORATION CASES. 539 ing indebtedness to the corporation and to institute all such pro- ceedings, at law and in equity, as might be necessary for the pur- pose of enforcing the corporate rights, is admissible in evidence, in a suit to recover from a subscriber to the stock of the company the amount due upon his stock, to prove the due appointment of plaintiffs as receivers and their authority to institute and conduct the suit. Id. 31. Suit in another state. A receiver of an insolvent cor^ poration may bring a suit in the name of the corporation, to re- cover an indebtedness due such corporation, in a state other than that in which he was appointed ; the suit not being brought in his official capacity; Lycoming Fire Ins. Co. v. Langley, 10-542. 32. Can not sue, when. A receiver can not sue in a foreign jurisdiction for the property of the debtor ; Farmers & Merchants Ins. Co., to use of etc., v. ^Needles, 8-92. 33. SuccESSORSHip to action. An action brought by a corpora- tion, to recover an unpaid balance of a subscription to stock, may be continued by a receiver, subsequently appoined, in the name of the original party ; Phoenix Warehousing Co. «. Badger, 8-476. 34. Prooess in garnishment. In the absence of some specific statutory direction, where the property and business of a corpora- tion is in the hands and under the control of a receiver, such re- ceiver is the proper person upon whom process should be served to bring the corporation in to court as garnishee ; Phelan, im- pleaded etc., v. Ganebin, 6-286. 35. . It is immaterial that the receiver, in such case, is non resident of the state and appointed by a court of another state. It is sufficient that the receiver is conducting business of the cor- poration within the jurisdiction of the court issuing the process of garnishment and where the sum due the judgment debtor is pay- able. Id. 36. . A receiver of a corporation is amenable to process of garnishment in the absence of statute to the contrary and when the process does not tend to disturb his rights of possession under the general orders of the appointing court. Id. 37. . It is not incumbent on a court to obtain leave, to proceed against a receiver, as garnishee, from an appointing court without the jurisdiction of the state. Id. 38. Jurisdiction over. Whether particular land or property should pass in to the hands of a receiver or be discharged there- from could be determined only by the court which appointed such receiver; Eobinson v. Atl. & G. W. Ey. Co., 4-118._ 39. Unauthorized appointment. A corporation being solvent, .when it is made to appear that the parties in charge of its pro- perty and affairs, have been elected as such by the stockholders of the corporation, and their election,has npt^een set aside," and^ no charge of apprehended fraud is made against such parties^no^court 540 DIGEST OF THE is authorized to displace them and appoint a receiver in their stead ; Follett et al. v. Field, president etc. et al., 7-206. 40. Unauthorized appointment. The appointment of a re- ceiver for .a corporation and grant of an injunction ex parte, whereby control of the corporate business is taken from the directors, are void acts ; People, ex rel., v. Judge etc., 5-478. 41. Questioning appointment or. The regularity of the ap- pointment of a receiver of the assets of a corporation — in this case a hfe insurance company — upon petition of the attorney general, can not be questioned by any other tribunal than the one by which he was appointed ; Att'y Gen. v. Guardian L. Ins. Co., 8-609. 42. Pleading feaud in judgment. In a complaint in an action it was not expressly averred that the judgment was fraudulent in fact, or that the officers of the corporation colluded with the plain- tiff therein ; but facts were averred which, if proved, authorized the inference that the judgment was without consideration and fraudulently and collusively obtained. This was held to be suffi- cient after judgment. If the complaint was technically defective the objection should have been taken, by demurrer or otherwise, before issue on the facts, and, it was not necessary to employ the word "fraud" or "fraudulent" to characterize the transaction; Whittlesey, rec'r etc., v. Delaney, 8-528. 43. Instance. Defendant sold to the Excelsior Hay Carrier Company a patent right for the sum of $25,000 ; $10,800 was paid down and 500 shares of the stock of the corporation trans- ferred. The corporation gave back a power of attorney autho- rizing defendant to sell rights and machinery, and it was agreed that it should receive all the net proceeds of sales made by defen- dant .until it was reimbursed, from such sales and the sales of the stock, the money paid down and that, thereafter, defendant should be entitled to one-half the proceeds of sales coming to his hands, until the residue of $25,000 was paid and all the balance should be paid to the corporation. In an action brought by a receiver of the corporation, obtained by defendant, for a balance of the purchase price, it appeared that the summons and complaint in defendant's action were served upon an officer of the company, who brought it to the notice of the board of trustees and, with the assent of the board, they were delivered to the attorney who brought the action, to protect the interests of the corporation ; no answer was interposed and the judgment was by default. As to the contract, while it was in form a sale for $25,000, the pay- ment of all save the sum paid down was dependent upon its being realized from sales, in the manner stated ; no absolute obligation on the part of the corporation to pay the balance was intended and no promise to pay the balance upon request could be implied ; wherefore, the evidence justified a finding that the judgment was without consideration and was suffered to be entered by fraud AMERICAN CORPORATION CASES. 541 and collusion between defendant and the officers and trustees of the corporation. Id. 44. Sale by eeceivee. A statute provided that where the property of an insolvent corporation, in the hands of a receiver, is incumbered by mortgages, or other liens, the legahty of which is brought in to question, the court of chancery may order the receiver to sell the same clear of incumbrances etc. It was not intended by the words, "the legality of which is brought into question," to confine the remedy to mischief arising from litiga- tion of any particular character, but to all litigation, between incumbrancers, respecting the validity, extent, or priority of their liens; Randolph et al., trustees, v. Lamed, receiver etc., et al., 8-408. 45. Vacating judgment. An action to set aside and vacate a judgment against a corporation, on the ground that it was ob- tained without consideration, by collusion with the officers of the corporation, and in fraud of creditors, may properly be brought in the name of and by a receiver of the corporation. Whittlesey, rec'r, v. Delaney, 8-528. 46. Estoppel. A borrower making payments to a receiver, appointed for his creditor in proceedings to which he was not a party, can not, afterward, in proceedings against himsplf for the enforcement of his debt, question the validity of the appointment ; Burton, rec'r, v. Schildback et al., 7-566. See Equitv; Liquidation. EECOEDING LAW. 1. Notice of eeooeded deed. The record of a deed, of real estate, to a corporation, reciting that the consideration thereof is a certain number of shares of its capital stock, is not constructive notice, to creditors, that the stock subscriptions have been paid by the conveyance of that amount of land ; Moss «. King, 6-514. RE-INCORPORATION ; see Re-oeganization. RELIGIOUS SOCIETY. 1. Peesumption. a religious society is presumed to have been legally incorporated, if for ten years it has exercised the privi- leges of a corporation. A new incorporation, unless practically acquiesced in by the members, can not displace the old one ; Trns- tees of First Evang. Luth. Oh. v. Rechlin et al., 9-485. 2. . Under the statute in Michigan a religious society, that in good faith has for ten years exercised corporate powers, bought and sold property etc., will be treated as a legal incor- poration, though the proceedings to incorporate are in themselves fatally defective ; Trustees ■». Webber, 10-636. 3. ExEECisE OF POWEES. A rchgious society, being a corpora- tion aggregate, and having a board of trustees to manage its aflEairs, can contract only through the aggregate body, by vote, 542 DIGEST OF THE the trustees or select body by vote, or through an agent authorized by vote of one body, or the other, or both ; Meth. Epis. Ch. of Sun Prairie v. Sherman, 5-651. 4. Subscription. A minister, having no special authority from the corporation or its trustees, solicited subscription to aid the society in paying the debt of its church and defendant promised to subscribe. Upon demand he refused to pay. Held, that he could retract his promise at any time before it had been accepted by a vote of the corporation or its trustees ; the minister had no authority for the corporation to accept a subscription. Id. 5. . A promise by the owner of land, that if a building should be erected thereon for public worship, he would, as soon as the legal organization of the church could be effected, convey such church and the lot of land on which it was built, and church was so erected with money raised by the subscription, and the religious body organized and incorporated, is supported by a suf- ficient consideration ; Whitsitt -y. Trustees etc., 10-223. 6. SuBSCEiPTioN BEFORE ORGANIZATION. A Subscription made to a religious corporation, prior to the proper organization of such corporation, inures to the benefit of the company thereafter cre- ated, and payment may be enforced ; Willard v. Trustees etc., 4^370. 7. Corporation de facto. There being an association of per- sons, who elect ofiScers and proceed with the duties of the organi- zation, as the building of a church, this constitutes a corporation de facto, and proves user ; and the attempt to incorporate having been, at first, abortive, a subsequent formal certificate, referring to the original organization, relates back to such organization, and cures its defects. Id. 8. Rights of member. A member of a corporation, not being its financial officer, can not, without authority, make hinjself a creditor of the association by the voluntary payment of its debts ; Blanchard v. First Ass'n of Spiritualists, 4-419. 9. Ratification. A bare vote of a corporation, accepting the report of a committee of its members, can not be construed to be such a ratification of the acts of a member in the voluntary pay- ment of the debts of the association as to authorize him to bring and maintain suit to recover the sum paid. Id. 10. Right of voting ; should not be confined to members. Upon questions affecting the property of a religious corporation, the right to vote thereon should not be confined to persons only who are members of the church. Those who have contributed to its support, although not members, should be allowed a voice in such matters ; Niccolls et al. v. Eugg et al. , 1-409. 11. Appointmbnt of trustees — eligibility. An objection that one was not a legal trustee of a church, because he did not reside in the parish, not sustained. He was an officer de facto, and besides, it must be assumed that when the electing body AMERICAN CORPORATION CASES. 543 choose a trustee, they determine that he is in fact eligible ; Cicotte V. Anciaux, 10-629. 12. Customs and usages. When the statute defines the pow- ers of trustees in a religions body, customs and usages of the church in conflict therewith will not be upheld ; M'Crary v. M'Farland, 10-310. 13. Relation to superior bodies. A parish of the Protes- tant Episcopal Church, by its admission into union with the dio- cese of a state, and its connection through that with the Protes- tant Episcopal Church of the United States, acknowledges the authority of the constitution and canons of that church, and be- comes amenable thereto; Bird v. St. Mark's Church, 10-363. 14. ; removal of rector. According to the canons of that church, a rector, canonically elected, and in charge, may not be removed by his parish against his will ; nor can this be done, indirectly, by reduction of his salary as contracted for at his elec- tion. Id. 15. ; SALARY OF RECTOR. Until the paatoral relation is dissolved in some manner provided by the canons of the church, the rector may recover his salary, as provided for in the original contract. Jd. 16. Interference of civil courts. The civil court will not revise decisions of religious organizations in ecclesiastical matters. Id. 17. Authority of trustees. The trustees of an incorporated church, as the representatives of all the members of the church, may, in the corporate name, enforce agreements made for the use and benefit of the society before its legal organization, and on a bill for specific performance, it is immaterial with whom the agreement was made, and it is not necessary to state the name of such persons, as the agreement is enforceable in the corporate name; "Whitsitt «. Trustees, 10-223. 18. Jurisdiction. The civil courts will not interfere with the jurisdiction of ecclesiastical courts in matters of conscience, faith or discipline ; but the civil courts have a superior jurisdiction in all matters involvring liberty of property, or the enforcement of the contract entered into between religious organizations and their members ; Gartin et al. v. Penick et al., l-i93. 19. Contract of organization. The organic law of a church is a compact entered into between all its members. Id. 20. Presbyterian church. In the Presbyterian church the purpose of this contract is the guidance and protection of each constituent church and member, and is inviolable by any power of the aggregate church. Id. 21. TRLiL BY.' A religious corporation, organized under the statute of New York, 1813, vested with the property and control of the affairs of the corporation, has no power to trya corporator for any moral delinquency or to disfranchise him in 544 DIGEST OF THE consequence thereof ; People, ex rel., v. German United Evang*! Church of Buffalo, 4-594. 22. PowEE OF EXPTTLSioif. A church is a voluntary associa- tion, not recognized by law, having power to adopt its own rules for admission and discipline and to administer them in its own way, independent of any control by the courts, while free from any intention to injure its members or those not belonging to it. Mandamus will not lie to re-instate one expelled. Id. 23. JtTEISDICTIOH OF ECCLESIASTICAL COUET ; COMMISSION. A mis-recital in a commission issued by a bishop of the Protestant Episcopal church, appointing persons as prfesenters to investigate alleged offenses and misconduct of a presbyter and presentment make, does not impair the jurisdiction of the ecclesiastical court constituted to try charges and specifications set out in the pre- sentment ; Chase et al. v. Cheney, 1-471. 24. . When an ecclesiastical court has jurisdiction of the subject matter and the person, it has power to proceed with the trial upon the charges made. Id. 25. Challenge. The common law right to challenge the jurors has not been recognized by the canonical laws of the Epis- copal church, and, until recognized by the canons, can not be en- forced by the courts of law. Id. 26. Rights of ministees and membees. Ministers and mem- bers of a voluntary religious association assume the obligation to be governed by its laws, rules and canons. The right to preach the gospel is secured to every citizen, but the right to preach as a member of a particular denomination is qualified by the rules, doctrines and modes of worship of the denomination. In the ad- ministration of ecclesiastical discipline, when no other right is in- volved than the loss of the clerical office, the ecclesiastical court is the judge of its own jurisdiction under the laws and canons.of the church, and its decision on that question is binding on the secular courts. Id. 21. Jueisdiction of EQmTv. Church property, vested in the trustees of a religious society, is held under a trust. A court of chancery will only interfere to enforce the trust and hold the trust property to the purposes for which it was originally given ; it will not lend its aid to pervert it from the purpose for which it was acquired, so as to withdraw it, in part, from use, for the pur- poses of religious worship. Id. 28. Tenuee of peopeett. In the state of Michigan religious societies are incorporated in the name of the trustees, and, even though a society be a corporation by virtue merely of the use of corporate franchises for a period of ten years, it has the title to all property conveyed to trustees for its use, and need not file a bill to reach such property ; Trustees etc. v. Rechlin et al., 9-485. 29. LiMriATioN ON eight to aoquiee land. By statute (of Illinois) any corporation that may be formed for religious pur- AMERICAN CORPORATION CASES. 545 poses may receive, by gift, devise, or purchase, land not exceeding ten acres. The limitation was — in other words — contained in the revised laws of 1845, and it applies to such societies as were formed under an act of 1869, though the act contains no words of limitation, and hence when a religious society, organized under the act of 1869, has acquired ten acres of land, all contracts and con- veyances to it of any other real estate are void, as falling within the statutory limitation upon its capacity ; St. Peter's Kom. Cath. Cong. V. Germain, 9-185. 30. Bequest to corporation not in esse. The testator be- queathed, in trust, to " the first Calvinist Baptist society that may be organized in " a certain school district, the sum of $1,000 for the purpose of buying a lot of land and erecting thereupon a meeting house. Upon objection to the validity of the bequest that there is no such incorporated society, held, that a devise to an unincorporated religious society will be regarded as a bequest to charitable uses and will be enforced ; Swasey, adm'r etc., v. Amer. Bible Society et al., 3-352. 31. Acquisition of real property. Where the officers and members of a new society, set off from the parent organization, take possession of the property allotted it on the separation, not, however, being formally incorporated, claiming to own such premises, under a written resolution of separatioli and allotment and, subsequently, a corporation is duly organized, under general law, such corporation succeeds, without formal conveyance, to the property of the unincorporated society, and it has the benefit of the former adverse possession ; Kef ormed Church v. Schoolcraft etal., 5-581. 32. Alienation. It seems the only way by which a reKgious corporation can divide its real estate and vest a portion of it in a part of the congregation, set off from the parent organization, would be by act of the legislature. Id. 33. . A resolution of a religious corporation dividing the property of the corporation, and setting off and transferring to a part of its congregation a portion thereof, though inoperative, as a conveyance, for want of a grantee named, and because there was no corporation to take, and although unauthorized by law, will be sufficient to lay the foundation of an adverse possession. Id. 34. Adverse possession. A society of persons which can not take title by grant can not acquire title by adverse possession, but the individuals who compose such society may, and when such jjer- sons become incorporated the corporation may tack to its possession the prior possession, so as to enable it to establish its title by adverse possession. Id. 35. . Statutes of limitations, as to real estate, operate against corporations, as well as natural persons, and, even, against the state; wherefore, although the alienation of the realty of a 546 DIGEST OF THE religious coi-poration may be contrary to public policy, yet such a corporation may lose its title by adverse possession. Mere inca- pacity to convey is not one of the excepted disabilities preventing the operation of the statute of limitations. Id. 36. Chueoh peopeett. In 1857, P. conveyed to C. and others, in trust for the use of " Bethel Union Church," several acres of land, on which that church, then affiliated with the new school branch of the Presbyterian church, erected a new house of wor- ship. Nearly a year after the execution of the deed, the members of this church unanimously joined the old school organization. The deed was duly acknowledged and recorded, and in 1863 was accidentally destroyed by fire. In 1865 P. conveyed the house and land to other trustees, for the use of the " Bethel Union Church adhering to the general assembly." In 1867 a separation occurred in the church, as a national organization. P. and his as- sociates adhered to the assembly ; G. and his associates co-operated with the protesting party. Each party embraced about naif of the membership. P. asserted the right to the exclusive use of the church ; G. claimed the right to an equal and alternate use of the same. Held, (1) that the question raised is for the civil and not the ecclesiastical courts ; the usufructory rights involved de- pend upon the laws of the land, and not upon the ruling of the general assembly of the church; (2) it conveyed the property m controversy to the organization as a Presbyterian church, with- out reference to external connection with the old school general assembly ; (3) that some time after the conveyance of 1857 the members of the church unanimously left the new and joined the old school organization, did not affect the identity of the church, or subject their property to the jurisdiction of the general assem- bly, or change the tenure in sucn manner as to make it dependent upon adherence to that council ; (4) if the parties held their in- terest in the church property by the tenure of adherence to the general assembly, a severance of that connection, because of the unauthorized action of the general assembly with reference to the late war and the subject of slavery, did not affect their title to the property; (5) the re-organized church, consisting of G. and others and called " Bethel Union," has not lost its identity as the church entitled to the use of the church property ; as to whether P. and his associates, adhering to the general assembly, are entitled to any portion of its use, can not be determined un- der the issues ; Gartin et al. v. Penick, 1-493. 37. In 1854 M., for valuable consideration, conveyed to four persons a parcel of land and a house thereon, situated near a house of worship of the Methodist Episcopal Church South, The property was purchased as a parsonage, and pursuant to a parol agreement, a portion of the price paid for the property was raised by subscription and refunded to the grantees named in the deed. The property was used, save at short intervals, as a parsonage. AMERICAN CORPORATION CASES. 547 The title was not purchased or held for the use of the church generally, but for that congregation. During tlie late civil war the grantees remaining in the state, and their associates, embrac- ing a large majority of the congregation, severed their connection with the " Methodist Episcopal Church South," and organized themselves into a congregation in connection with "The Metho- dist Episcopal Church of the United States : " Held, (1) the pur- chase and appropriation of the property, as a home for the minister of that congregation, was a dedication of the property to the use and benefit of those who then composed that organized congrega- tion, or who might thereafter compose it ; (2) a dedication of land for public purposes may be made by parol and established by parol ; (3) it is not essential that the title should be vested to the uses intended. A dedication concludes the party making it from re-asserting any right so long as the use remains ; (4) the use can not be diverted to another or different use, unless by a division or disruption of the society ; a partition or apportionment of the pro- perty is authorized by express law ; (5) " schism or division," as con- templated by subsection 4 of section 3 of chapter 14 of the re- vised statutes of Kentucky, imports no more than a separation of the society into two parts, without any change of faith or ulterior relations ; (6) a majority of a society separating therefrom and from the entire ecclesiastical body with which it is connected (the Metho- dist Episcopal Church South), and uniting with another distinct religious organization (the Methodist Episcopal Church of tlie United States), can not be regarded as a party within the meaning of the statute, occasioned by a schism or division of a society, and entitled to a proportion of the use of the property ; M'Kinney et al. V. Griggs et al., 1-634:. 38. Disturbance of enjoyment. "Where the majority of a con- gregation, pretending, contrary to the fact, that some of the trus- tees have resigned and refused to act, proceed to elect others in their places, without notice to the minority of the association, and the parties elected proceed so to act, as to exclude the minority from the use and enjoyment of the church property, the remedy as to the illegal election is by quo warranto, or in equity by injunc- tion, and as to the disturbance of use and enjoyment, it is not by bill for partition of the common property ; I^elson et al. v. Benson et al., 5-231. 39. Secession ; peopeety. A majority of the members of a con- gregation seceding therefrom forfeit their interest in and control over the church property ; Lewis et al. v. Watson et al., 1-569. 40. Division of; eights of majoepty and minoeity. In the case of a division of a religious corporation, both parties still ad- hering to the tenets and discipline of the organization, the pro-; perty should be divided between them in proportion to their numbers at the time of such separation ; Niccolls et al. v. Eugg etal., 1-409. 548 DIGEST OF THE 41. Division of ; judicial notice. The plan of the separation of the Methodist Episcopal Church in 1844: ; that the separation was accomplished bj competent authority ; that the southera confer- ences assumed an independent organization under the name of the " General Conference of The Methodist Episcopal Church South" — are adjudged questions of which the courts will take judicial notice ; Humphrey et al. ■». Burnside et al., 1-560. 42. . In said division the local society and church pro- perty in Kentucky passed to the Methodist Episcopal Church South, excepting those churches and societies bordering on the Ohio river, which were allowed to choose which they would go with, by a vote of the respective societies. Id. 43. Division in case op schism. Property being acquired by an incorporated religious society, by the constitution of which a division in agreed proportions was to be made in case of a schism, it was held that by the word " schism " was meant a division or separation of the church into two religious bodies, occasioned by diversity of opinions on religious subjects, and that a difficulty growing out of an illegal election of directors, and the exclusion of the minority from the use and enjoyment of the common pro- perty, would not justify a partition thereof ; ^Nelson et al. «. Ben- son et al., 5-231. 44. Partition. The constitution of the society providing for division of the property in the event of a schism, there must be a division or separation of the church into two religious bodies and a separate organization of the seceding members, in order to warrant a partition of the church property. It is not competent for individual members of the congr^ation, as such, to invoke the aid of chancery to make partition, but only an organized body seek- ing to devote the property to the uses to which it is devoted. Id. 45. . In making partition of the property of a religious corporation, in case of a division, mathematical nicety is neither attainable nor important. The only satisfactory mode would be to count church members by virtue of their membership, and, in addition, to count as members of the congregation all pew holders ; Niccolls et al. «. Kugg et al., 1-409. 46. Action ; parties. A suit may be maintained in behalf of a church congregation in reference to church property, by the trustees of the church or by a committee appointed for that pur- pose ; Humphrey et al. «. Burnside et al., 1-560. 47. Qualification of members of committeb. It is not neces- sary that the members of the committee appointed to prosecute a suit should be members of the congregation. Id, See Church Orgaijization. EEMEDIES. _ 1. Against consolidated companies. "When lawful consolida- tion has been effected, the rights and properties of the constituent AMERICAN CORPORATION CASES. 549 companies transferred and their liabilities assumed, the new com- pany may be considered so far the old company, as to authorize} generally, the like remedies by and against the new company, in respect of the rights and liabilities of the old companies, as would have been proper as to the old companies, had the consolidation never taken place ; Miller et al. v. Lancaster et al., 4-170. 2. Bond of rNDEMNrrr. Upon a bond or covenant to indemnify, or save harmless against damages or debt, chancery will maintain the bill, of the covenantee, to compel the covenantor to pay the damages or debt and, that, before the covenantee has been com- pelled to pay or been molested by suit. It matters nothing that the covenant sounds in damages. In snch case the court, may direct a trial at law, or in [Tenn.] practice, impanel a jury to ascertain the amoimt of the damages. Id. 3. Cbeditoe's bill. Where property of a corporation had been divided among its stockholders before all its debts have been paid, a judgment creditor, after return of an execution unsatisfied, may maintain an action, in the ^nature of a creditor's bill, against a single stockholder, to reach whatsoever was received by him under the distribution. It is immaterial whether he received it by fair agreement with his associates or by his wrongful act ; Bartlett v. Drew, 4-634. 4. . In snch case the creditor is not required to bring his suit on behalf of himself and such other creditors as may choose to come in, or to make all the stockholders parties to the ac- tion. The fact that th& debtor is a foreign corporation is imma- terial. Id. See Action ; Attachment; Cbeditoe's Bill : Equity ; Liabilities. EEMOVAL OF CAUSE. 1. Foe oeetain pueposes. A corporation may be a citizen of a state, for the purpose of suing and being sued in the courts of the United States, and the laws of the state can not withdraw a citizen of another state from the operation of an act of congress nor deprive him of a right of removal of his cause to the federal court; Herryford«. ^tna Ins. Co., 3-511. 2. Qu^EE. Whether by the act of March 2, 1867, for the re- moval of causes, the congress of the United States intended by the use of the words " citizen of another state " to include " arti- ificial beings ; " such as corporations are; Dodge, adm'r etc., v. Northwestern Union Packet Co., S-502. 3. Citizenship foe. Corporations are citizens for the purposes of suing and vbeing sued and are embraced within the federal legislation with reference to the removal of causes from_ state to federal courts; Stanley v. Chicago, Kock Island & Pacific II.K. Co., 8-154. 4. By coepoeation. As a corporation is a citizen of the state of its creation, it may be a " citizen of another state " within the 550 DIGEST OF THE meaning of those words as used in the act of congress, of March 2, 1867, regulating the removal of causes from state to federal courts. If it be such citizen of another state, it would certainly, upon complying with the requirements of the statute, be entitled to have the suit removed ; Quigley v. Central Pacific E.K. Co., 8-343. 5. By coepoeation. A national bank is a citizen of the state in which it exists and, as such, may, in a proper case, exercise the right of applying for a removal of a cause, pending against it, from state to federal jurisdiction ; Cooke v. Nat. Bk., 4-571. 6. When not eemoved. A suit in a state court in which a foreign corporation is joined with other defendants who are re- sidents of the state can not be removed to the federal courts, unless such residents are merely nominal parties ; but when the action is against the corporation and its officers, and no relief is prayed for as to any of such officers that is not prayed for, as against the corporation, and no relief is prayed for against any officer in his individual capacity, such officers are merely nominal parties ; and the action may, by proper proceedings, be removed ; Hatch V. Chi., K. I. & P. R.E. Co., 1-79. 7. EoKEiGN ooRPOEATioN. An actiou brought by a citizen of the state against a foreign corporation, and involving a sum exceeding $500, may, on a motion seasonably filed, and on good and suffi- cient security offered, be removed for trial from the courts of the state to the circuit court of the United States for the proper dis- trict ; Hobbs et al. v. Manhattan Ins. Co., 1-583. 8. Time within which moved. A petition for the removal of a cause to the circuit court of the United States, for any of the causes mentioned in the act of congress, of March 8, 1875, must be tiled at the first term, or it will be too late, and must be rejected ; Inhabitants of School Dist. v. Mtna. Ins. Co., 7-280. 9. Chaetee consteued as to. The act of congress (13 Stat, at Large, 104) incorporating the defendant, declares it capable "of suing and being sued in the district and circuit courts of the United States, in law or in equity." This does not vest in those courts exclusive jurisdiction of suits by, or against the corporation, nor confer upon the corporation a right of removal to the federal courts. The right of removal, in sudi cases, is controlled by sec- tion 640, revised statutes of the United States ; Scheffer et al.. exec'rs, v. Nat'l Life Ins. Co., 7-632. 10. Application foe. An application for the removal of a cause, which complies with the requirements of the law in rela- tion thereto, in force, is not invalid because it prays for a removal under a law which has been repealed : Stanley v. Chicago, E. 1. & P. E.E. Co., 8-154. 11. Affidavit. An affidavit made by authority of a resolution of the board of directors of a corporation, at a regular meeting of the board, declaring that the corporation has reason to and does AMERICAN CORPORATION CASES. 551 believe that, from prejudice and local influence, it will not be able to obtain justice in such state court, will be a sufficient affidavit whereon to base a removal of cause ; Quigley v. Cent. Pac. R.R. Co., 8-343. ^ ^ 12. Affidavit. Authority from the corporation to make the affidavit, the basis of the removal of a cause from state to federal jurisdiction, must, in some manner, affirmatively appear. Id. 13. . An application under the act of congress of March 2, 1867 (14 U. S. Stat, at L., 558) to remove a cause from a state court in to the circuit court of the United States may be made by a corporation of another state. The corporation may make the affidavit, required for such purpose, by its authorized agent. Overruling Cooke v. State National Bank, 4 Amer. Corp. Cas., 671 ; S. O., 52 IST. Y., 96, so far as this point is concerned ; Mix V. Andes Ins. Co., 8-434. 14. Insufficient affidavit. An affidavit made by a vice presi- dent of a corporation, " that he has reason to believe and does believe that, from prejudice and local influence, said defendant corporation will not be able to obtain justice in said court," is in- sufficient to authorize the state court to transfer the cause to the federal court ; Quigley v. Central Pacific R.E. Co., 8-343. 15. Jiteisdiction of state cotjets. After an application regu- larly made for the removal of a cause from state to federal juris- diction, the state court loses all jurisdiction and can not allow pleadings to be amended : Stanley v. Chicago, Eock Island & Pa- cific E.K. Co., 8-154. 16. Waivee of, bt teial. By participating in the tiial of a cause, after the court has improperly refused an application for its removal from the state to a federal court, the defendant does not waive the question of jurisdiction ; nor does the fact that he might have pursued another remedy prejudice his right to have the judgment of the lower court reversed on appeal. Id. 17. Eight absolute. No thing done by a corporation in regard to the place or manner of transacting its business, and no statute of a state in which it transacts such business, can deprive it of its rights and privileges when sued in a state foreign to the one in which it was created, to remove such action, in the manner pre- scribed by the acts of congress, from the state court to the proper court of the United States ; Hatch v. Chi.. E. I. & P. E.E. Co., 1-79. 18. Statute. The statute of the state of Maine, imposing upon foreign insurance companies, as a condition to their right to transact business in the state, that they shall submit to the jurisdiction of the state courts, does not, in terms nor by impli- cation, limit or restrict the jurisdiction of the courts of the United States ; Hobbs et al. v. Manhattan Ins. Co., 1-683. 553 DIGEST OF THE KE-ORGANIZATION. 1. Aftee foeeclosuee. a railroad corporation re-organized under an act of legislature of Ohio, regulating the sale of railroads and the re-organization of companies. In its agreement it was stipulated that certain mortgage bonds of the original organization should be assumed by the new company and that the owner of such bonds should be entitled to vote at all meetings of stock- h.olders, upon the performance of certain conditions, as to the extension of time in which such bonds should become due. Such conditions being fulfilled, by the holder of the bonds, he becomes entitled to vote and the company is liable to pay the bonds, with- out further action of the new company ; State, ex rel. Att'y Gen., V. M'Daniel et al, 4-20. 2. . An executory agreement to sell and deliver such bonds to a corporation, made subject to ratification by its direc- tors and stockholders, does not until consummated by ratification, divest the holder of his title thereto nor of his right to vote by virtue of their ownership. Id. 3. . In Michigan, a statute of 1859 (Laws 1859, 262), permits purchasers, at foreclosure sale, of railway track and its appurtenances, to re-organize the corporation, with new stock, newly elected directors and succession to charter rights and pow- ers. It is a condition precedent, to the acquisition of such rights and powers, that such purchasers shall provide all necessary means for the performance of the duties imposed by the grant to the original corporation and transfer all which is necessary to that end to the re-organized company. The conditions being complied with and re-organization perfected, the purchasers take and trans- fer, and the new company receives, the property free from lia- bility for any debts, excepting such as are evidenced by prior mortgage or lien. All property of the old company not included in the foreclosure sale remains liable for existing debts ; Cook v. Detroit, Grand Haven & Milwaukee Ry. Co., 6-645. 4. Action not lie. If such re-organized company shall come into possession of any property, of tne old corporation, which is not embraced in the foreclosure nor exempt from liability for existing debts, the trust can not be worked out by an action in common law form on the debt. Jd. 6. Effect. The constitution of an agricultural society de- clared its object to be " to improve the condition of agriculture, horticulture and the mechanical and household arts," and pro- vided for holding annual fairs. The society was re-organized as a joint stock company, the object being, as expressed, " to improve the condition of agriculture, horticulture, floriculture, mechanical and household arts " and the new articles, also, provided for hold- ing annual fairs. The name was changed by substituting the word "board" in lieu of the word " society." It was held that there was no essential change in the objects of the society and AMERICAN CORPORATION CASES. 55a that the new board was not a separate and independent society frort) the elder one, but was the same under a slight change of name and on such re-organization the later corporation succeeded to all the rights and liabilities of the elder society ; Livingston Co. Agric. Soc. V. Hunter, 10-229, 6. Ageicultueal society. The re- organization of an agricul- tural society, under statute, adopting a stock plan does not render the corporation one of private gain or profit or change the public character of the association. Id. 7. Individual LiABiLrtT. It was provided, by constitution of the state of Missouri, that each stockholder in a corporation should be " individually liable for its debts, over and above the stock owned by him." A corporation was created which incurred debts. By a subsequent re-incorporation it became authorized to receive subscriptions for and issue additional stock, which it did not presently do. The constitution was, afterward, amended, to provide that " in no case shall any stockholder be individually liable in any amount over or above the amount of stock owned by him." The corporation then issued its new stock to sub- scribers. The holders of such new stock are not liable personally under the repealed clause ; Ochiltree v. R.E. Co., S-78. 8. Infeeencb as to. A legislative intent, upon change or re-organization of a corporation, to absolve it from existing liabili- ties, or to interfere with corporate contracts can not rest on infe- rence or presumption ; Trustees of University «. Moody, 6-166. See Societies. RES ADJUDICATA. 1. Final judgment. A decision and judgment of the supreme court, reversing and remanding a cause, is the law of the case upon the questions involved and adjudged in all subsequent stages ; even in supreme court on another appeal ; Richmond Street R.R. Co. V. Reed, 9-243 ; Newbury v. Blatchford, 9-243, note. 2. When a bae. Where a matter has been once litigated, and a judgment or decree rendered, in a court of competent jurisdic- tion, the judgment or decree must be regarded as final between the parties to the litigation, and those who claim under them, after the rendering thereof; Cooper et al.v. Corbin et al., 9-192. 3. When not. Where a receiver of a railroad company, ap- pointed and acting under the direction of the circuit court of the United States, in 1877, filed a bill in the circuit court of Peoria county to enjoin the collection of the taxes levied upon the capital stock of the company for the years 1873, 1874 and 1875, which, on a hearing, was dismissed, it was held, that the decree in such case was no bar to another biU filed by the purchasers of the rail- road and its propertv, under a deed of trust, and whose title was acquired long after, the filing of the first bill, to enjoin the collec- tion of the same taxes by the sale of the rolling stock of the rail- 70 554 DI&EST OF THE road company after its purchase, such purchasers not claiming under the receiver, for the reason that neither the parties nor the subject matter are the same. The latter bill presented the ques- tion that the purchasers acquired the property, by their purchase, free and clear of the taxes, which was not litigated in the former suit. Id. 4. Former judgment binding when. If a court having juris- diction of the parties and subject matter in a suit, makes a de- cision upon the merits as to questions of law or fact, its judgment and decree will be conclusive upon such question in subsequent suit with the same parties ; Atty. Gen. v. Chicago & Evanston E.K. Co., 10-240. 5. . Where any specific fact or question has been deter- mined in a former suit, the parties are concluded from raising the same question in a subsequent suit, if properly pleaded, whether the cause of action is the same or not, and this rule applies not only to matters necessarily involved in the prior litigation, but also to those which were incidental only, but still necessary to the decision of that point ; so where a bill sought to enjoin the per- formance of certain threatened acts on several distinct grounds, and the court denied all relief and dismissed the bill on its merits, it must be taken that each and every specific ground alleged as cause for relief was considered and held insuflBcient, and the de- cree will be a bar to the investigation of each of such grounds in any subsequent suit against the same or either one of the parties. 6. !New fact. In a former action an objection was made to an assessment. In the present action an objection was made to the same assessment supported by a new fact not alleged in the former proceeding. Held, that the former action was conclusive ; Sullivan •!;. Triunfo Gold etc. Mining Co., 3-132. KESOLUTION". 1. Having force of by-law. By the articles of incorporation it was provided that the company should have, " the right to purr chase, sell, mortgage, control and lease property, either real or personal, and to exercise all other incidental powers as shall be necessary in conducting such business," and also provided that the stockholders at any annual meeting, might adopt such by-laws for the government of directors as they might deem necessary, and a resolution was adopted that they deemed it not necessary to adopt by-laws, for the reason that the articles of incorporation provided that the control and management of the corporation should be in the board of directors. Held, that such resolution amounted to an expression of the stockholders to leave the entire control and management of the corporation with the directory, the same as the stoolcholders themselves might do : Eeichwald v. Commercial Hotel Co., 10-203. AMERICAN CORPORATION CASES. 555 EIGHT OF ACTION. 1. Suits by and against. A corporation, its directors, and stockholders are, within themselves, different parties, and may- sue and be sued inter se, on case made, as well as sue, or be sued by third parties; Board of Com'rs et al. v. Lafayette etc. E.R. Co. et al., r-26. 2. Stockholders. While it is true, as a general rule, that suit will not lie against an agent, or trustee, by the principal, or cestui que trust, until after demand or refusal, yet, where it is known that the party can not, or will not, comply with the demand if made, the other party is excused from making the demand. Id. 3. . In a suit by stockholders of a corporation against the corporation, for the avoidance of a contract, alleged to be ultra vires the charter, it is not a good answer to the original complaint, that, after suit commenced, the directory, having be- come changed and being brought into accord with the stockholders suing, have filed a cross coinplaint, on the same cause of action and asking, substantially, the same relief. This will not preclude the stockholders from pursuing their private remedy. Id. 4. . An action \dll lie in favor of a stockholder of a cor- poration, for relief, against the wrongful acts of the president thereof, when it is shown that large profits have been made by the corporation ; that the president will not suffer the books of the company to show the same ; that he is largely indebted to the corporation for the use of its property for his individual purposes and profit ; that he has received all the emoluments of the com- pany and accounted for none ; that a majority only of the direc- tors, not being bona fide stockholders but only by his voluntary gift of stock, are under his influence and control, instruments to do his bidding, who have abdicated their proper functions and surrendered the entire charge of the corporate affairs to him ; and in such case there need be no averment of demand, made on the board of directors, to bring suit, prior to suit instituted by the stockholder ; Rogers et al. v. Lafayette Agric. "Works et al., 7-67. See Action; Attaohmbnt; Ceeditoe's Bill; Eqoitt; Lia- bilities. s. SALARY ; see Compensation ; Offices and OEncEES. SALTAGE. 1. A corporation may maintain a suit for salvage, and recover the sam'e compensation allowed private persons, for like ser- vice, though the persons actually performing the service receive 556 DIGEST OF THE liberal salaries but no shares of the profits of the enterprise ; The Camanche, 1-34 ; The Blackwall, 1-53. 2. KuLE OF COMPENSATION. A Corporation had, by its charter, authority to own vessels to be employed in aiding vessels wrecked or in distress, and to take all " compensation to wages and sal- vages which are customary and usual, and which, hj law and usage, inure to private persons." It was employed by the owner of a vessel which had gone ashore in a fog, to relieve her from a situation of peril. It was held, that compensation ought to be allowed to the corporation, on the principle of allowing a liberal compensation for the use of the apparatus furnished, and for the skill with which it was handled in the service performed ; but not on the principle governing compensation in a case of salvage service ; The Morning Star, 1-91. SAVINGS BANK. 1. Not a benevolent association. A savings association, formed for the pecuniary profit of its members, is not a benevo- lent or charitable society, within the meaning of public statutes, which authorize two or more persons desirous of forming any benevolent or charitable society to become a corporation ; Sheren V. Mendenhall et al., 7-607. 2. CoNSTiiuTioNAL LAW. The constitution of the state of Kan- sas contains an article (13), by the title " banks and currency." It consists of eight sections. The first requires a general banking law ; the second and third make provision for securing circulating notes ; the fourth prescribes what such notes shall be redeemable in ; the fifth provides the state shall not become a stockholder ; the sixth requires all banks to keep offices and agents to issue and redeem circulation within the state ; the seventh prohibits smaller ' notes than of the denomination of one dollar (originally ^five dol- lars) ; and, the eighth prescribes that no banking law shall have any force unless approved by a majority of the voters, at a gen- eral election. This article of the constitution applies to banks of issue ; it does not prohibit the legislature from creating banks of deposit and discount ; Pape v. Capital Bank of Topeka, 7-130. 3. Incoepoeation of. By the general law of Kansas, it is re- quired, as a condition precedent of the doing of the business of a sayings bank by a corporation, that there be an organization un- der the law as in the case of any other corporation ; Kaiser V. Lawrence Savings Bank, 6-574. 4. . It is an essential of the lawful incorporation that its articles of association, in the statute also designated as the char- ter, shall be subscribed and acknowledged by at least five persons, three of whom must be citizens of the state of Kansas. Omis- sion hereof is fatal to a right to organize and do business as a cor- porate body. Id. AMERICAN CORPORATION CASES. 557 5. Power. It is not competent for the trustees of a savings bank to purchase on credit property of any kind not needed for immediate use, or the investment of existing funds; Franklin Co. V. Lewiston Institution, 7-307. 6. . Under the general power of discounting negotiable notes and notes not negotiable, granted to a savings bank, such an institution has power to purchase such notes ; Pane v. Capitol Bank of Topeka, 7-130. 7. LiABiLiTT. An action for malicious prosecution will lie against a savings bank ; Eeed v. Hoine Savings Bank, 7-5M. 8. Eelation op depositor to. a depositor in a savings bank becomes a creditor of that bank as really and as effectually as a depositor in a bank of discount or deposit. There is no relation of trustee and cestui que trust between bank and depositor, any more than in any other case of debtor and creditor. Id. 9. . A lien in favor of a depositor can only be created by mortgage or pledge. A promise by the officers of a bank, to savings depositors, to keep and use the securities taken on loans, or by way of investment, for their benefit, can not be held to create a mortgage or pledge of such securities, nor as creating a trust ; Ward, ree'r, v. Johnson, 6-462. 10. . A by-law authorising a savings deposit to be with- drawn, after giving a certain notice, without regard to the condi- tion of the investment at the time, indicates that the depositor has no trust in the investment. If he had a trust in the investment he could not withdraw his deposit without regard to the invest- ment ; for, if loaned on note secured, he must await its maturity and collection or withdraw the note and security. So an agree- ment to pay interest, semi-annually, on such deposit, at all events, clearly shows the deposits are not in trust. Id. 11. Officers' bond. It is a reasonable by-law, on the part of a savings bank, to require its cashier to furnish bond with surety for the faithful discharge of the duties of his office. Such a by- law is not inconsistent with law ; Savings Bank v. Hunt, 8-271. 12. . Where the cashier of a savings bank gave a bond with sureties, which was silent as to the term of his office and as to the period of the liability of suretyship, but, the organic law of the corporation fixed the terms of his office at one year and until his successor was duly elected and qualified, and at the expi- ration of each of two annual terms he was re-elected and con- tinued to discharge the duties of the office, but gave no new bond, and during the third year of his cashiership he became a defaulter, the sureties were not liable, the bond being without force when the defalcation occurred. Id. 13. Evidence ; account. The treasurer of a forei^ savings bank having answered to an interrogatory, in a deposition, that the books of the bank, which were in his custody, showed that the bank had had business with a certain person, was asked to give 558 DIGEST OF THE an exact transcript of the entries in the book relating to the busi- ness. His answer was " see statement annexed." What purported to be a transcript of the books relating to the business was annexed to the deposition. It was held that it sufficiently appeared that the transcript had been compared with the originals and was a true copy ; Ide v. Pierce, exec'r, 9-458. See Bank and Banking ; Bond. SEAL ; see Cobpobatb Seal. SECEETAEY. 1. Agency in subsceiption to stock. The owners of undivided interests in property having agreed, among themselves, to form, immediately, a special partnership for the purpose of improving the same until a charter could be procured and an organization perfected under the same, when the property was to be transferred to the corporation so formed and each owner to take stock in prp- Eortion as he had title to the property thus to be converted, it was eld that upon the formation of the company, as contemplated, and the conveyance of the legal title to it, the secretary of the association was authorized to subscribe the name of the owner of an interest for the stock of such corporation, when it was organ- ized ; Marseilles Land and "Water Power Co. v. Aldrich, 6-406. 2. — — . Secretary, of an organization authorized to proceed to incorporation, may be empowered to subscribe for shares for individuals, according to their interests. Id. 3. CoEPOEATE DEED. If the testatum clause shall set fortn that the company, as such, has caused its corporate seal to be aifixed and the instrument to be signed by its president and secretary, and it is so signed and ensealed, and if the ensealing and delivery be attested by two subscribing witnesses the deed wiU be executed ; Kelly V. Calhoun, 6-26. 4. Peomissoet NOTE. The secretary of a corporation executed a promissory note in which were the words " we promise '' etc. and to which was affixed the seal of the corporation and his own name, with the word " secretary " appended. It was held to be the note of the corporation, on which the secretary was not per- sonally liable ; Means et al. v. Swormstedt, 1-370. 5. Katieioation of pledge. Where the secretary of a cor- poration, without express authority, pledged the bonds of his com- pany, secured by deed of trust, which was recorded, for an exis- ting indebtedness and future advances, the directors of the com- pany having knowledge of and acquiescing in such pledge, the act was held to be binding in the absence of proof of fraud ; Darst V. Gale et al., 6-380. 6. Estoppel to deny conteact. The secretary of a corporation was, in fact, one of two " managing men " of such corporation. His authority was assumed, by the court, to be equivalent to that AMERICAN CORPORATION CASES. 559 of a general agent. He informed a contracting party that the contract executed signed by the president, " was duly executed to bind " the company. The party relied and in good faith acted upon such information. Held, that the corporation was estopped to deny the contract ; Perry v. Simpson Waterproof Manuf. Co., 4-309. Y. Deolaeation of. The superintendent and secretary of a corporation, being its general agents for the transaction of its business, their declarations concerning a debt previously contracted and within the scope of their authority is admissible in evidence, under the exception to the rule excluding the declarations of an agent made subsequent to the transactions to which they relate ; Webb, rec'r, v. Smith, 9-43. 8. Service of summons. Acceptance of the service of summons and complaint, by one who signs such acceptance as secretary of the corporation, is not, of itself, sufficient evidence that he bears the relation by him claimed to the company ; TaUadega Ins. Co. V. Woodward, 3-116. See MraiMG Company ; Offices and Officees. SEMINARY ; see Academt ; College ; Educational Institu- tion. SERVICE OF PROCESS ; see Fokbign Coepobation ; Peocess. SET OFF. 1. Feaud. To an action by a corporation against a stockholder, defendant may plead and recover, as set off, any sum of money obtained from him, by fraud, as a subscription to stock ; unless, being a subscriber, there are debts of the corporation unpaid, in- curred after his subscription was made, to the amount of the sum so paid ; Hamilton et al. v. Grangers L. & H. Ins. Co., 9-56. See Peesonal Liability (59-61); Pleading. SEWERS. 1. Statute of Massachusetts. A sewer built between Garden brook and the Connecticut river, under the authority of chapter 107, section 1, statutes of 1863, " for the purpose of protecting private property and the streets of the city from damage by water during the seasons of freshet," and, under section 6, " to housed, controlled, maintained and repaired in the same manner as drains constructed wholly at the expense of the city," is not necessarily restricted from uses for which the city may receive pay from per- sons entering it with their private drains ; Patton et al. v. City of Springfield, 2-484. 2. . A jury impaneled under section 3 of the statute to revise a determination of the city council of Springfield under section 2, of the division between the city and the owners of the 560 DIGEST OF THE benefited land, and of the cost of building a sewer between Gar- den brook and the Connecticut river, under the statute, may in such revision take into consideration whether the city derives, or has means to derive any revenue from the use of the sewer by persons who may pay for draining directly into it from land through which it passes, but which is not included in the district for the benefit of which it is built and on which its cost is in part assessed ; and if it be so located and built as to take and carry off sewage brought to it by other sewers or drains already built, or likely to he required to drain lands situated beyond or higher up on Garden brook, they may, also, take into consideration the interest of the city in such other sewers and drains. Id. 3. Statute of Massachusetts. On the revision by a jury, impaneled on the petition of persons who alleged that their land was not benefited, of a determination of the city council of Springfield, under said statute, of the extent of land benefited by the building of a sewer, and of the division of the cost of the sewer between the city and the land owners, the presiding officer refused the request of the city to instruct the jury that they " were not to determine whether or not the amount of benefit was equal to the probable cost to the petitioners, but, only, whether or not the premises included were benefited." It was held that this refusal was erroneous, although he did instruct them that the objection that the land of the petitioners was not benefited should be sustained unless they should find that it might receive some appreciable substantial benefit from the sewer. Id. 4. . After the acceptance by the superior court of the verdict of a jury impaneled under the statute, an appeal lies to the supreme judicial court on questions of law appearing from the records of the proceedings ; and, if oti such an appeal it ap- pears that the findings of the jury were upon distinct and sepa- rate issues, in reference to part of which errors of law are mani- fest, a new trial should be ordered of such part only and the ac- ceptance of the Verdict affirmed as to the residue, id. 5. In Haetfoed. Under the charter of the city of Hartford, the whole expense of a sewer may be assesse(i upon the parties specially benefited ; Clapp et al. ■». City of Hartford, ^-107. 6. Appeal. When on appeal the assessment of any person is reduced, it does not necessarily follow that the amount of the re- duction shall be added to the assessment of the others ; and an appeal by one of the several parties assessed does not bring up the whole assessment for revision. Id. 1. Rule of assessment. The value of the land benefited should be considered in assessing against the owner the expenses of making a sewer. An arbitrary rule, by which the expense is apportioned among the adjoining owners, according to the num- ber of the front feet of their lots,. without reference to other con- siderations, is unreasonable and can not be sanctioned. Id. AMERICAN CORPORATION CASES. 561 8. EuLB OF ASSESSMENT. That the property in front of which a sewer passed was a church, and the sewer would be of no present benefit to it and probably would not be for many years, may properly be taken into consideration in making the assessment. Id. 9. . When a lot already has means of drainage, either natural or airtificial, this fact should be considered in making the assessment. Id. 10. . A vacant lot is immediately increased in value by the construction of a sewer, and the fact that the sewer will not be used at once constitutes no ground for abatement of the assess- ment ; Meuser «. Eidson et al., 9-110. SOCIETIES. 1. Laws. Societies may make their own constitutions and by- laws, and so long as they remain unchanged, each member is alike bound and shielded by them. The society, too, must observe them until they are changed in legal form ; Weatherlv v. Medical Society, 10-44. 2. ExpuLsioif OF MEMBER. Where a by-law designated the first regular meeting in April as that for the revision of the rolls of members and reporting members delinquent in dues, such revision can not be had at a called meeting held at another time, and a member be expelled for delinquency in payment of dues. Id. 3. Ee-oeganization. The constitution of an agricultural so- ciety declared that the object of the society should be, " to im- prove the condition of agriculture, horticulture and the mechani- cal and household arts," and provided for holding annual fairs. The society was re-organized as a joint stock company, and the new constitution declared the object of the society should be, " to improve the condition of agriculture, horticulture, floriculture, mechanic and household arts," and also provided for holding an- nual fairs. The name was changed by substituting the word " board," in place of the word " society." Held that there was no essential change in the object of the society, and that the new board was not a separate and independent society from the old one, but was the same under a slight change in name ; Livingston Co. Agr'l Soc. V. Hunter, 10-2^9. 4. ; SUOCESSOB to all eights and LIABILITIES OF OLD SO- CIETY. Held, further, that upon the re-organization of this society under section 9, chapter 5, of the revised statutes of 1874, the corporation succeeded to all the rights and liabilities of the former society as they existed at the time of the change, and the credi- tors of the society would have the same right to sue the company under its new name and organization that they did under the old. Id. 5. . Held, further, that the creditors of such society, whether their clairas accrued before or after the re-organization of 71 562 DIGEST OF THE the institution, stand upon the same footing, and the only way one can gain an advantage over another, is by the exercise of superior diligence in prosecuting his claim to judgraentand thereby obtaining a judgment or execution lien upon the company's pro- perty. Id. 6. E.E-0EGANI7.ATI0N ; S0OOE88OE TO ALL EIGHTS AND LIABILITIES OF OLD SOCIETY. The re-organization of an agricultural society under the statute, on the stock plan, does not render the corporation onu for private gain or profit, or change the public character of the in- stitution. Its property still can only be "applied to the payment of its debts and to the promotion of the joint object of the asso- ciation. Id. SOCIETIES — BENEFIT. 1. By-laws and eules binding. One who becomes a mem- ber of an organization, such as the Knights of Pythias, is charge- able with knowledge of its laws and rules ; and if they are not in themselves illegal, or require the performance of acts contrary to law, he can not refuse obedience to them ; Bauer v. Sampson Lodge, 10-336. 2. Rule peohibiting suit of law foe benefits. There is some conflict of opinion as to the extent to which such organiza- tions may restrict actions for benefits provided to its members ; but, the reasonable rule is, that they may provide methods for re- covery of benefits, and compel members to resort thereto, before invoking the power of the courts, though they may not entirely prohibit members from suing to recover benefits accruing to them. Id. 3. . It is not within the power of individuals or corpora- tions to create judicial tribunals for the final and conclusive settle- ment of controversies. Id. See Benefit Societies. SOCIETIES — BENEVOLENT. 1. By-laws. A person, by becoming a member of a benevo- lent society, assents to the provisions of its constitution and by- laws, and is bound by them ; Eobinson v. Irish Amer. Ben. Soc, 10-88. 2. Benefits, suit foe. "Where the by-laws of a benevolent society required all claims for benefits to be examined by the board of trustees, a claim must pass such examination before a member can sue thereon. Id. See Benevolent Association. SOCIETIES — CHAEITABLE. 1. Not liable fob toet. An institution for charitable pur- poses only, can not be made liable for an assault coinmitted by one AMERICAN CORPORATION CASES. 563 of its officers. Damages in sucli eases must be sought agamst the wrong doer; Periy v. House of Refuge, 10-560. See Chaeitable OboANizATioNS. STATUTE. 1. Rule of coNSTRircTioisr. It is a maxim, generally true, that if an affirmative statute, which is introductive of a new law, directs a thing to be done in a certain manner, that thing shall not be done in any other manner, even though there be no negative words. Hence, a provision that certain things shall be done to constitute a license of authority, is equivalent to an express pro- hibition against the license or authority unless these things shall be done; Diversyw. Smith, 9-155; Burkett et al. v. Plankinton et al., 9-155. 2. . Where a statute is one which the legislature had the power to enact, the question of its justice or expediency is for the legislature, not for the courts ; Hockett v. State, 10-349. 3. . A law admitting of but one penalty, and that of the harshest possible character, will, necessarily, be subjected by the courts to close criticism and a strict construction ; Chicago & Alton R.R. Co. v. People, ex rel. Koerner et al., Com'rs, S-196. 4. . The rules of construction which govern in constru- ing acts of the legislature are equally applicable to the legislative acts of a municipal corporation ; State of Maryland, ex rel. City of Baltimore, v. Kirkley et al.; S-406. 5. Amendatoet acts ake also public. If an original act char- tering a corporation be declared to be a public act, at all times to " be recognized as such in all courts and places whatsoever," and such act te amended by other and supplemental acts, such amen- datory acts also become and are to be treated as public acts, inas- much as they are but modifications thereof or additions thereto ; Stephens & Oondit Transportation Co. v. Central R.R. Co., 3-558. 6. Repeal. When there is a clear repugnance between two laws, and the provisions of both can not be carried into effect, the later law must prevail and the former yield to the last expression of the legislative will ; Dingman v. People etc., 3-256. 6^. . The repeal of a general statute, for the incorpora- tion of companies, by a statute which substantially re-enacts and extends its provisions, does not terminate the existence of corpo- rations organized under it; United Hebr. Benef. Ass'n v. Ben- shimol, 7-536. 7. Repeal; mispkint. The statutes of California of 1851, page 448, section 31, as printed, repeal the act of April 22, 1850 ; but the enrolled bill shows that only the third chapter was re- pealed ; Brewster et al. v. Hartley et al., 1-233. 8. Act not repealed. Section 15 of the act of the legisla- ture of the state of Indiana of May 20, 1852, for the incorpora. tion of manufacturing and mining companies, was not repealed 564 DIGEST OF THE by the supplemental act of March 4, 1863; Traber et al. v. Brown et al., 1-366. 9. Statute consteued. Under the statutes of the state of California the legal existence of a corporation can not be assailed by a defendant to an action on a promissory note, in which the plaintiff is proved to be a de facto corporation, and claims, in food faith, to have a legal existence under the laws of the state ; 'acific Bank v. De Roe, 1-246. 10. . The statute is not limited to corporations in exis- tence at the time it took effect. Id. 11. . A statute of Massachusetts, entitled " An act to enable the city of Boston to abate a nuisance therein, and for the preservation of the public health of the city," authorized this city to purchase or otherwise take certain lands with the build- ings and fixtures thereon, and prescribing a method of ascertain- ing their value and the payment thereof, to the owners. It was held that the city, by a compliance with the provisions of the act, acquired a title in fee simple ; Dingley v. City of Boston, 3-603. 12. . It was provided in an act of the legislature, that towns, authorized to issue bonds in payment for railroad stock for which they were empowered to subscribe, might subscribe if a majority of the votes cast " at any annual election or at any special election called for that purpose," be given in favor of is- suing such bonds. The question was presented to the voters of the town at a " town meeting." Held, that inasmuch as a town meeting is an election, within the general meaning of that word, and the evident intention of the legislature was to have a full ex- pression of the voters' opinion, which experience shows is best obtained at such town meeting, the statute was complied with ; Phillips et al. v. Town of Albany et al., 4-220. ^ 13. . If by an act of the legislature, it is required that notices be posted by an officer named, it is not contemplated or required that that officer shall post such notices with nis own hands, or by himself in person. Id. 14. . A statute of Minnesota, of February 28, 1866 (Gen. Stats., 1866, 494), provided that mesne process might be served upon a foreign corporation by delivering a copy thereof to the president, secretary, or any managing or general agent thereof and this act should have " full force and effect, notwithstanding any provisions of the general statutes [chapter 66, approved March 1, 1866,] or other law of the state, inconsistent therewith," and the act was directed to " be published with and as a part of the general statutes." A majority of the court, Wilson, ch, ]'., dissenting, construed this act to mean that delivery of a copy oi summons to a general, or managing, agent of a foreign corporation is a suffi- cient service, notwithstanding the provisions of general statutes (p. 466), section 48, which, providing for service of original process AMERICAN CORPORATION CASES. 565 on domestic corporations, enacts " such service can be made in re- spect to a foreign corporation only when it has property within this state, or the cause of action arose therein," and section 56, which declared " no corporation is subject to the jurisdiction of a court of this state unless it appears in the court, or has been created by or undec the laws of this state, or has an agency established therein for the transaction of some of its business, or has property therein upon which the plaintiff has acquired a lien, by attachment or garnishment, and in the last case only to the extent of such pro- perty at the time of the jurisdiction attached;" Guernsey v. American Ins. Co., 3-490. 15. Statute consteued. The statute of Kentucky imposing " on bank stock, or stock in any moneyed corporation of loan or discount, fifty cents on each share thereof equal to one hundred dollars, or on each one hundred dollars of stock owned therein, by individuals, corporations or societies,'' provides for a tax upon the shares owned by individuals and not upon the capital of the bank ; National Bk. v. Commonwealth etc., 3-12. 16. . A stamp such as the internal revenue act requires, for the acceptance of a draft, is not required on making a check "good," " certified" checks being taxed specifically another way; Merchants Nat. Bk. v. State ISTat. Bk., 3-25. See particular titles. STATUTE OF FKAUDS. • 1. Paeol peomise to convey land. Where the owner of a lot of ground agreed to convey the same when a building should be erected thereon and dedicated to public worship and the society incorporated, and a subscription was raised and building erected, held, that such expenditure by the society was tantamount to the payment of a consideration, and took the promise out of the stat- ute of frauds; Whitsitt v. Trustees etc., 10-223. 2. Conteact foe sale oe stock, a contract for the sale of shares of stock in a corporation is a contract for the sale of goods, wares, or merchandise, within the statute of frauds. The fact that the plaintiff, in an action for the refusal to take the shares, in pursu- ance of an oral agreement to that effect, has been induced to be- come a stockholder by the defendant's promise to buy the stock of plaintiff when he wished to sell, is immaterial ; JSoardman v. Cutter, 7-509. 3. Teansfke of pbopeett. Where a corporate debtor trans- fers his property to another who, in consideration thereof, prom- ises to pay the debts of the former, the promise is not within the statute of frauds; Sullivan et al. v. Murphy et al., 7-606. STATUTE OF LIMITATIONS. 1. Peesonal liability. It is provided, by statute, that actions against directors or stockholders of a corporation, to recover a 566 DIGEST OF THE penalty or forfeiture imposed or to enforce a liability created by law must be brought within three years after the discovery by the aggrieved party of the facts, etc. An action against stockholders to recover money had and received less than three years before action commenced is within the statute and in apt time ; Green V. Beckman et al., 9-24. 2. Personal ijability. A statute which declares stockholders liable individually for the debts of the corporation, contracted while they are stockholders, and provides that the creditor, prosecuting the company for the recovery of the same, may include one or more of the stockholders liable to contribute to its payment, but that, in case of a recovery against the company and -the stockholders, no execution shall be levied on the property of the stockholders except for such deficiency as may remain unsatisfied after the property of the company lias been levied and applied on the judg- ment, so operates that whenever a cause of action accrues against the corporation it, also, accrues against the stockholders ; where- fore, as to the stockholders, as well as the company, the statute of limitations then commences to run ; Conklin v. Furman et al., 4-568. 3. As TO STiBSOEiPTioH FOE STOCK. The statute of limitations does not run as to unpaid balances on stock subscriptions for stock, while the company is in active operation, from the time of the subscription of the stockholders until the commencement of the suit for calls made ; Harmon v. Page et al., 9-29. 4. Pleading. A defendant can not avail himself of the statute of limitations by demurrer to the complaint, unless it affirmatively appears, therefrom, that the action is barred by some provision of that statute. Id. 5. DiscovEEY OF FEAUD. That an innocent party may not suf- fer while in ignorance of his rights, the statute excepts the plain- tiffs from the limitation until a discovery of the fraud ; hut, knowledge on the part of the guilty officers and agents of a cor- poration of the fraudulent acts and conduct of themselves and guilty associates is no notice to the corporation, or its stockhol- ders, so as to give the advantage of such notice to such agents and associates; Ryan et al. v. Leavenworth etc. Ey. Go. et al., 7- 144. 6. "When mot sitspbndbd. The mere fact that the mayor, to whom, in conjunction with a common council, is given the gen- eral management of the affairs of a city, is interested adversely in a cause of action belonging to it, and a necessary -party defen- dant in an action to enforce such cause of action, does not operate to suspend the running of the statute of limitations; City of Fort Scott V. Schulenberg et al., 7-156. T. . Certificates of stock have been issued without the seal of the corporation and by legislative authority, containing a stipulation to pay interest thereon ; it was held, in an action to re- AMERICAN CORPORATION CASES. 567 cover the interest, that the statute of limitations did not applj ; Pittsburg & Con. R.K. Co. v. Co. of Allegheny, 4-92. 8. Mining company ; Califoenia. The statute, of California, provides that " each stockholder in a mining corporation shall he liable for his proportion of all the debts and liabilities, of the company, cpntracted or incurred during the time that he was a stockholder, for the recovery of which joint or several actions may be instituted and prosecuted." The right of action against the stockholder is not contingent on a recovery against the corpo- ration ; but, accrues at the same time against both, stockholder and corporation ; Davidson v. Rankin et al., 1-199. 9. Statute of Nebraska. The code of Nebraska bars actions upon contract in five years, not computing the space of defen- dant's absence from the state. In the case of a foreign corpora- tion, if it has a managing agent in the state, service of process may be made upon such agent. Held, that the statute began to run from the date of the presence of such managing agent in the state ; that is there must be the opportunity during five years before suit brought, for plaintiff to have sued defendant in the state and compelled it to answer, by service upon a managing agent ; Express Co. v. "Ware, 5-72. 10. Statute of New Yoek. The courts of New York have decided that a foreign corporation can not avail itself of the statute of limitations of that state. This, not\^ithstanding the defendant was the lessee of a railroad in and had property within the state, as well as a managing agent residing and keeping an otfice within the state ; Tioga R.E. Co. v. Blossburg & Corning R.R., 4-265. 11. As TO REALTY. Statutes of limitations, as to real estate, operate against corporations, as well as natural persbns, and, even, against the state ; wherefore, although the alienation of the realty of a religious corporation may be contrary to public policy, yet such a corporation may lose its title by adverse possession. Mere incapacity to convey is not one of the excepted disabilities pre- . venting the operation of the statute of limitations; Reformed Church V. Schoolcraft et al., 5-581. See Limitations; Stock and Stockholdeks (69, 1Y9-182). STOCK AND STOCKHOLDERS. 1. Capital stock. The capital stock of a corporation is the money and property put in to the single corporation fund, by the subscribers for such stock, which fund becomes the property of the corporation ; Burrall v. Bushwick R. R. Co., 8-554. 2. . The capital stock of a company consists of the cor- poreal works and property, with the franchises to be used by the corporation for the profit'of the corporation and its stockholders, with the right to acquire and dispose of such property as may be 568 DIGEST OF THE essential in the legitimate exercise of its functions ; Black et al. V. Delaware & Earitan Canal Co. et al., 5-547. 3. Capital stock. The capital stock of a corporation, within the meaning of the statute, embraces the capital on which it tran- sacts business, whether it consists of money, property or other valuable commodities ; Martin v. Zellerbach, 1-170. 4. PEOFira. Capital stock does not include profits realized, by the cbrporation, from its business ; Keid et al. v. Eatonton Manuf. Co., 3-219. 5. Stockholdeks aeb the company. The shareholders con- stitute the company, where there is stock ; not the directors ; Simons et al. v. V ulcan Oil & Mining Co., 6-80. • - 6. Presumption. It is a presumption of law, that a company about to be formed, has no shares of stock to sell ; Cahfornia Sugar Manuf. Co. v. Shafer, 4-271. 7. . Every stockholder is presumed to know the provi- sions of the charter, and the general law and statutes relating to corporations; Crandall «. Allen, 10-102. 8. A teust fund. The capital stock of a corporation is re- garded in equity as a trust fund for the payment of its debts, and courts will prevent its withdrawal beyond the reach of creditors. Id. 9. . The capital stock of a corporation is a trust fund, that the directors may not give away, or mis-appropriate, to the prejudice of parties whom they have invited to deal with the incorporation. The state grants the franchise on the understan- ding the corporation created will have a capital stock ; and the amount is usually fixed before the state parts with the franchise. It is for the security of all persons who deal with the corporation as well as to afford the means to accomplish the objects of the incorporation ; Union Mut. Life Ins. Co. v. Frear Stone Manuf. Co. etal., 6.-481. 10. . The capital stocK of a corporation, especially its unpaid subscriptions, is a trust fund for the benefit of the general creditors of the corporation ; Sawyer v. Hoag, 5-25. 11. . Unpaid subscriptions to the capital stock of a corpo- ration constitute a trust fund, to be held by the corporation for the benefit of creditors and shareholders. Directors have no power to release a subscriber to the jJrejudice of creditors or to the injury of other stockholders; Rider v. Morrison et al., rec'rs etc., 7-415. 12. Status of the capital. The capital stock of a moneyed corporation is a fund for the payment of its debts. It is a trust ■ fund, of which the directors are the trustees, and it is to be managed for the benefit of the shareholders during the life time of the company and for the benefit of creditors in the event of its dissolution. It includes the amount promised to be paid as well as the sum paid in, and the directors, or managers, are under AMERICAN CORPORATION CASES.. 569 obligation to call in what is unpaid and carefully to husband it when the money is received ; Upton, assignee, «'. Tribilcock, 5- 13. Status of the capital ; trust fund. Subscriptions to the capital stock of a corporation constitute a trust fund for the pay- ments of the debts of the corporation. The trust is created for the benefit of creditors as a class. All the creditors of the cor- poration have a common interest in the fund and are entitled to share it ratably ; Wetherbee v. Baker et al., 9-547. 14. . Asa general rule, the property of a corporation is a trust fund for the benefit of its creditors and stockholders, and they may, in all cases in which it has been fraudulently or wrongfully disposed of by the directors, pursue it in to the hands of purchasers with notice, and assert their lien upon it or their claims for its value ; Goodin v. Cincinnati & Whitewater Canal Co., 3-652. 15. . The capital stock of a corporation is a trust fund for the payment of the debts of the corporation, upon the faith of which, alone, the law presumes credit to be given, unless other security was taken at the time by the creditor ; Reid et al. v. Eatonton Manuf. Co., 3-219. 16. Ceeditobs' equitable lien. The capital stock of an in- corporated company is a fund set apart for the payment of its debts, and its creditors have a lien in equity. If diverted, they may follow it so far as it can be traced, and subject it to their claims, except as against holders who have taken it bona fide for a valuable consideration and without notice ; Clapp et al., exec'rs, V. Peterson, 9-172. 17. CoBPOEATioN 18 TEUSTEE. A Corporation is the custodian and trustee of the corporate funds, stock, etc. for the stockhol- ders. If it employ an agent to transfer stock, it is responsible for the acts of such agent and liable for his negligence or fraud; Woodhouse v. Crescent Mut. Ins. Co., 10-472. 18. Shaeeholdees peivies TO THE TEusT. The shareholders of a corporation are conclusively charged with notice of the trust character which attaches to the capital stock. As to it, they can not occupy the status of innocent purchasers, but they are, to all intents and purposes, privies to the trust. When, therefore, they have in their hands any of this trust fund, they hold it cum onere — subject to all the equities which attach to it; Clapp et al., exec'rs, v. Peterson, 9-172. 19. Bona fide puechasee. The capital stock of a corporation is a trust fund for the payment of its debts ; but, where shares of the capital 'stock are issued, by the corporation to the original sub- scribers, as full paid shares and are sold by them as such, one who purchases in good faith, can not be held liable to a creditor of the corporation ; Brant v. Ehlen et al., 9-394. ' 72 570 DIGEST OF THE 20. Bona mde pdechasee. The unpaid subscriptions of an insolvent corporation constitute a trust fund to this extent ; if the corporation ceases to do business, or if it becomes insolvent, then all assets which it then has, or owns, including paid and unpaid subscriptions, cither in tlie hands of the original subscriber or in the hands of his assignee without notice, become a trust fund for the payment of creditors and they may follow the property con- stituting the fund and subject it to the payment of their debts, unless it has passed in to the hands of a bona fide purchaser with- out notice, id. 21. . As between the creditor of the corporation and the original holders of stock, it in no manner affects the rights of the former that the stock has been issued as fully paid np stock. The rights of the creditor do not depend upon the mere appearanqe of tilings, but upon the actual bona fide payment by the stockhol- ders, whether that payment be alleged to have been made in money or other property ; Crawford et al. v. Eohrer et al., 9-407. 22. Shake defined. A share of the capital stock of a corpo- ration is the right to partake, according to the amount put in the corporate fund, of the surplus profits and, upon dissolution of the corporation, of the fund remaining after the payment of debts ; Burrall v. R.E. Co., 8-554. 23. Shaees aeb peesonalty. Shares of stock in incorporated companies, whether the property of such companies be tangible or intangible, are personal property; Seward v. City of Ris- ing Sun et al., 7-111. 24. How ISSUED. Under the statute in Massachusetts, special stock may be issued by a corporation, and when issued, the hol- ders of it are not liable for debts of the corporation beyond the amount of their stock. Such stock can only be issued by a vote of three-fourths of the general stockholders, at a meeting duly caEed for that purpose ; American Tube Works v. Boston Machine Co., 10-58S. 25. Issued out of state. Certificates of stock are not neces- sarily invalid because issued at some place outside the state under the laws of which the company is incorporated and where it has its principal place of business ; Courtright v. Deeds, 5-366. 26. Issue to officers. Where the by-laws of a corporation, lawfully adopted, authorize and require its certificates of stock to be issued under the corporate seal and signed by its president and treasurer, in the absence of any express provision or exception, no other or different form of certificate is required in the case of stock owned by one of the officers named ; but, they are autho- rized to issue certificates to themselves, in the same manner as to other stockholders; Titus v. Great Western Turnpike Eoad, 5-563. ' 27. Instance. Where the treasurer of a corporation, upon the faith and pledge, as collateral, of spurious certificates, drawn up AMERICAN CORPORATION CASES. 571 and executed in the form and manner prescribed by the Dy-laws, purporting on their face to be of stock owned by the treasurer, obtained a loan of one, acting in good faith and in ignorance of the fraud, it was held, that there was no thing, upon the face of the certificates, to notify the lender of any defect in the title, and the corporation was liable. Id. 28. Peopoetion to incorpoeatoe. An original incorporator is not, as such, independent of a contract with the directors of the company, entitled under the charter or the common law, to a proportion of the stock, to be determined by the number of original incorporators named in the articles of incorporation ; Brown v. Florida South. E,y. Co., 10-131. 29. . A grant of land by the state to a corporation hav- ing power to make contracts for the purpose of accomplishing corporate purposes, is not a grant to the original incorporators signing the articles of incorporation, in the proportion for which they have subscribed for stock, nor does it authorize a division of the land to the original incorporators. Id. 30. . Stock is originally acquired by a subscription therefor. This subscription is a contract defined and regulated by the organic law of the corporation. A stockholder can acquire stock only by purchase or subscription therefor, by which he con- tracts to pay calls and assumes the other liabilities to creditor's and the corporation which such relation imposes. He is not enti- tled to stock as a mere gratuity. Id. 31. Feaudulent issue. A corporation, oy its charter, was authorized to issue one million dollars of stock, in payment of real and personal property. By vote of its directors, it issued stock to the extent of one million dollars, which was distributed to five of its officers. No money or property was transferred arid no promise to pay for such stock was made. The stock had no validity and its issue was a fraud and palpable violation of law ; Tobey v. Eobinson, 6-505. 32. Feaud in acoeptance of, and issue. It is gross fraud, on the part of a corporation, to issue paid up certificates of stock, in consideration of property at a valuation or price known and un- derstood to be many times its value. The fraud is greatly inten- sified when, in such a transaction, the officers of the corporation are dealing with themselves as stockholders : Moss -u. King, 6- 514. 33. Equity not aid to eecovee feaudulent shaees. A cor- poration was organized, under charter, with authority to issue stock in payment for real and personal property. The only property it received was from another company, which was secured, as to re-payment, by such security as a mortgage on the property conveyed afforded and the possession of the control of the new organization. The directors voted the issue of all the stock it was authorized to issue, to be used as a corruption fund, 573 DIGEST OP THE and four hundred thousand dollars, of the whole amount of one million, were donated by the directors to themselves, they paying nothing therefor, nor agreeing to pay any thing. The issue of stock was fraudulent, and if the stock issued had any validity it was good only in the hands of the corporation which had fur- nished the property, real and personal, which the company issu- ing the stock was in possession of ; wherefore, when upon a con- troversy as to the ownersliip of the stock, or to recover the pro- ceeds of a share in the division, a bill in equity was filed, it was properly dismissed out of court ; Tobey v. Robinson, 6-505. 31. Who is a stockholdke. One who was an original cor- porator and signer of articles of incorporation ; who subscribed for shares of stock which, however, he did not pay for ; who was a trustee of the corporation and acted as such, the ownership of stock being a matter of qualification for the oflBce ; who was an officer of the company and actively engaged in the management of its affairs ; and, who appeared upon the stock book of the com- pany as a stockholder is a stockholder and liable to respond to creditors under a statute imposing a personal liability, notwith- standing a certificate of the ownership of shares has not been is- sued to or received by him ; Wheeler v. Millar, 9-647. 35. What constitittes a stookholdee. The holder of shares of stock, evidenced by certificate and transferred to him upon the books of the corporation and standing thereon in his name, hav- ing all the muniments of a perfect legal title, is a stockholder ir-' respective of the quality of his ownership ; State of Nevada, ex rel. Rankin, v. Leete, 8-361. 36. Relation OF STOOKHOLDEE, HOW CREATED. The relation of stockholder of a corporation is created by the usual formalities of subscription and the acceptance of stock. It may, also, be created by other acts, which in the contemplation of' law are the legal equivalent of such acts ; that is to say, conduct, on the part of the person sought to be charged, is, of itself, sufficient to accomplish all which might be accompUshed by the rigid obser- vance of formalities, usually, required on becoming a stockholder ; Griswold v. Seligman, 8-247. 37. Ownership. A subscriber may become the owner of a given number of shares, but not in such sense that he may take away those shares out of the corporate fund. The corporation has no power and can not be compelled, while continuing in lawful existence and carrying on the business for which it was created, to issue and deliver such shares. All the corporation can do is to issue written certificates of the existence and ownership of such shares, known as stock certificates ; Burrall v. Bushwick R.R. Co., 8-554. 38. . A company had been organized, composed of in- dividuals owning oil lands, by the name of the EUenville Petro- leum Company and all of its stock subscribed for. It was the in- AMERICAN CORPORATION CASES. 573 tention to incorporate on the basis of the property so held, but, be- fore this was done, defendant, who was a subscriber to the stock, agreed with plaintifE if the latter would pay to the treasurer $500 he would see that plaintiff had half a share of the stock. Plaintiff paid the money, which was credited to defendant. A corporation was afterward incorporated identical as to shareholders and pro- perty, but named the Eoss Farm Petroleum Company. No stock was transferred to plaintiff and no demand therefor was made by him. Tlie corporation becoming embarrassed, its property was, by direction of the directors, sold at auction and bid in by H., for the benefit of the stockholders. Defendant paid his propor- tion of the sum bid. In an action to recover the $500, it was held that, to put defendant in default, a demand by plaintifE of the stock was requisite, or proof that it was out of defendant's power to transfer it ; that defendant's contract would have been performed by a transfer of stock in the corporation succeeding to the property of the EHenville Petroleum Company ; and that a transfer by defendant to plaintiff of an interest in the property held by H. in trust, equal to the interest defendant contracted to convey, would have satisfied any equitable claim of plaintiff and have been a legal performance of the contract ; Weller v. Tuthill, 8-461. 39. Uffeot of owneeship. When one purchases stock in a cor- poration and becomes its owner, in whatever manner he may pay for the same, he becomes entitled to aU the privileges and bene- fits of a stockholder and liable to all the burdens the relation imposes; Chetlain, adm'r, v. Eepublican Life Ins. Co. et al., 6- 397. 40. Meaning of cebtifioate. A corporation by issuing stock declares to the world, by its certificate, that the person in whose name it stands, is the holder of the number of snares which the certificate states him to be, and that it is issued with the intention that it shall be so used and acted upon, and the co.-npany is liable to any one who has accepted the same and acted thereon to his injury; Metropolitan Bank v. Mayor etc., 10-555. 41. . It is only, however, to the extent that loss has actu- ally been incurred by the holder, through the misrepresentation made by the certificate, that it will be held liable. M. 42. . The payment of a subscription entitles the payor to stock. The certificate is merely the evidence of ownership. It may be demanded and obtained, by the owner of stock, whenever he may desire; Miller v. Wild Cat Gravel Eoad Co., 7-58. _ 43. Possession of cebtifioate. The title to and ownership of stock in a national bank can pass only by a transfer of the stock on the books of the corporation ; hence, a mere possession of a certificate of stock, in a national bank, is not such a possession as to constitute the holder a pledgee ; but is, at most, a mere equity ; Koons V. First Nat. Bk. et al., 9-289. 574 DIGEST OF THE 44. Possession of oeetifioate. To constitute one a stocld- holder it is not necessary that he should have any certificate of stock ; Corwith et al. v. Culver, 5-244. 45. . The acceptance and holding of a certificate of shares in an incorporation makes the holder liable to the responsibilities of a shareholder ; Upton, assignee, v. Tribileock, 5-111. 46. Evidence of ownership. As between the corporation and the corporators the stock book is the evidence of their relation ; the certificate is secondary evidence; Bk. of Commerce's Appeal, 5-603. _ ■" 47. Lost oeetifioate. The loss of one's certificate of the owner- ship of shares of stock and advertisement of the loss being estab- lished, the proper olfieers of the corporation can not refuse to issue a new certificate, on the ground that a bond of indemnity is not furnished. There is no good reason for requiring such a bond, the stock can not be transferred, by the owner, except upon the books of the company and on the production of the certifi- cates. This is sufiicient protection for the corporation; State, ex rel. Philhps, v. New Orleans Gas Light Co., 5-404. 48. Stockholders' CONTRACT. Every stockholder contracts, with each other stockholder and the corporation, that the will of the majority shall govern in all matters coming within the scope of the articles of incorporation ; Dudley v. Kentucky High School, 5-382. 49. . Each and every stockholder contracts that the will of the majority shall govern in all cases coming within the limits of the act of incorporation ; and, in cases involving no breach of trust, but, only error or mistake of judgment upon the part of the directors, who represent the company, individual stockholder^ have no right to appeal to the courts to dictate the line of policy to be pursued by the corporation. Id. 50. Relations to company and public. The relations of a stockholder to the corporation and to the public, or strangers who deal with the company, are such as to require good faith and fair dealing, in every transaction of his with the corporation (of which he is a part owner and controller) which may injuriously affect the rights of creditors or the general public. Such transactions should be subject to rigid scrutiny and if it be found to be infected with any thing unfair toward such third person, calculated to injure him, or designed, intentionally and inequitably, to screen the stockholder from loss at the expense of the geineral creditor, it should be disregarded or annulled so farasitmay inequitably affect the latter ; Sawyer v. Hoag, 5-25. 51. Contract between stockholders.' Between themselves, stockholders of a corporation agree by their contract of subscrip- tion etc. that each shall own a proportionate share of the whole property of the company in common and in all its earnings and that the common property shall be so managed as to return a profit, AMERICAN CORPORATION CASES. 575 by its use for the purposes designated in its charter, and that what the raa-jority determines, within the scope of this mutual contract, each shall abide by ; Black et al. v. Delaware etc. Canal Go. et al., 6-547. 52. Limit OF POWEE OF A MAJOEITY. Amajority of stockholders, however large, has no right to divert one cent of the joint capital to any purpose not consistent with and growing out of the original fundamental joint intention. Id. 53. Stockholdee's inteeest. The stockliolders own the property of the corporation in common, to be employed in specified uses. Each owns a share in the whole and is to have a proportionate share in its profits. Each has invested liis capital in it and in it alone, and each has an interest in the whole property and in every do^ar it earns. The directors are their trustees, to employ the joint capital in the management of the property, and that only, to the end that from the investment the stockholders may reap the contemplated profits. Id. 64. HoLDEE OF STOCK NOT A coEPOEATOE. Where a person is merely in possession of the stock of a corporation — in this case, a national bank — as collateral security, for the payment of a debt, and does not participate in the meetings of the ,stockholders and is not recognized by the stockholders as a member, he is not such a part of the corporation as to be bound by the knowledge of the facts in possession of the officers of such corporation : Baker et al. V. Woolston, 9-321. 55. State as stockholdee. A state being a stockholder in a private corporation, like another stockholder, has the right to dis- pose of its interest, if it chooses so to do. Such sale does not dis- solve a corporation ; LaGrange & Memphis K.E. Co. v. Eainey et al., 4-175. 56. As JUEOES. It is not a valid objection to one offering as a juror, that he is a stockholder or director of a kindred corporation, in a case involving a question of interest to a corporation,; Miller V. Wild Oat Gravel Road Co., 7-58. 57. Eelatiox to ceeditoes. Stockholders of a corporation can have no priority over the creditors ; Good v. Sherman et al., trustees, 4-197, 58. . Stockholders of a corporation are not, as regards the creditors of the corporation, sureties but principal debtors ; Sonoma Valley Bank v. Hill, 9-24. 59. Peioeity of ceeditoes. The claims of stockholders in a corporation are subordinate to the claims of creditors and the stockholders are not entitled to any division of the profits and moneys until all its debts are paid ; Ryan et al. v. Leavenworth etc. Ry. Co. et al., 7-144. ,, , ' 60. Share not negotiable. It is now well settled that a certi- ficate of stock is not a credit or evidence of debt. It is merely evidence of ownership of a certain interest in the assets and 576 DIGEST OP THE property of a corporation ; Factors & Traders Ins. Co. v. Marine Dry .Dock & Ship Yard Co., 7-236. 61. Shake not negotiable. A certificate of stock in a cor- poration which expresses upon its face that it is "transferable only on the books of the company by the holder thereof in per- son, or by a conveyance in writing, recorded on said books and surrender of this certificate," and upon which is indorsed a blank transfer, is not a negotiable instrument ; Shaw v. Spencer et al., 1-635. 62. . Certificates of stock m a corporation are not nego- tiable securities, in a commercial sense. They are mere muni- ments and evidences of the holder's title to a given share in the property and franchises of the corporation ; Sherwood v. Meadow Valley Mining Co., 6-22S. 63. Issued in violation of law. Corporate stock issued in contravention of the act of incorporation is illegal and void. Being void the company can not be required to transfer the same upon its books, notwithstanding the consent of all the parties, in interest as stockholders, at the time of its issue ; People of Illi- nois, ex rel. Wallace, v. Sterling Burial Case Manuf. Co., 6-376. 64. Estoppel to dent ceetificatb. If a corporation, having power to issue stock certificates, does, in fact, issue such a certifi- cate, in which it affirms that a designated person is entitled to a certain number of shares, it thereby holds out, to persons who may deal in good faith with the person named in the certificate, that he is an owner and has capacity to transfer the shares. This proposition rests on general principles, appertaining to the law of estoppel; Holbrook v. New Jersey Zinc Co., 4-637. 65. Estoppel, as to organization. The legality of the organiza- tion of a corporation can not be questioned by a stockholder, that he may escape from liability upon his stock note, as by showing that the corporation was not organized in strict conformity to law; per example, by showing that instead of the cash payment re- quired by law to be made, by all subscribers of stoct, the cor- E oration had accepted notes secured by mortgage on real estate ; Lome Stock Ins. Co. v. Sherwood, 8-268. 66. Estoppel. One who accepts and holds certificates for un- paid shares of stock in a corporation, and votes such shares at annual elections, is estopped from denying his liability as a stock- holder to the corporation or its creditors ; although' such shares were issued to him under an agreement in writing that they were to be held in trust or as a security only, and were not subscribed for on the books of the company, or otherwise, in the usual man- ner of making such subscriptions; Griswold v. Sehgman, 8- 67. . A stockholder in a corporation will not be allowed to deny the validity of stock issued by the corporation in consid- eration of the acquisition of property, so long as the corporation AMERICAN CORPORATION CASES. 577 retains the property ; Buford v. Keokuk Northern Line Packet <3o., 8-226. 68. Estoppel. A stockholder who has participated or acquiesced in the action of corporate officers in laying an assessment is estopped, and can not afterward sustain the objection that the assessment was laid without due authority ; Ossipee Hosiery & Woolen Manuf. Co. v. Canney, 5-532. 69. Statute or limitations. Certificate of stock, having been issued under the seal of the corporation and by legislative autho- rity, containing a stipulation to pay interest thereupon ; it was held, in an action to recover the interest, that the statute of limitations did not apply ; Pittsb. & Conn. E.E. Co. b. County of Allegheny, 70. Peefeeeed stock — DISTINGUISHED. Preferred stock as usually understood is some thing quite diflEerent from such special stock. Authority to issue preferred stock is not conferred in express terms by any general statutes ; American Tube Works v. Boston Machine Co., IO-588. 71. Instance. A corporation at a meeting not duly called, voted to issue special stock, and stock was issued to plaintifE for a debt due it. Afterward at a meeting duly called, but at which it does not appear three-fourths of the general stockholders voted, it was voted to issue special stock, and such stock was issued and taken by plaintiff in lieu of the first stock issued. Plaintiff re- ceived dividends on the same for some time. The company be- came insolvent, and plaintiff offered to surrender such stock and return the dividends received and proved its debt against the estate of the corporation in insolvency ; Held, (1) that the issue of such special stock was void, and being open to repudiation by the corporation or any dissenting stockholder, the plaintiff had an election to rescind the contract, and be restored to its original position ; (2) that plaintiff was not estopped by the receipt of dividends from making such rescission ; (3) that notwithstanding plaintiff had held such stock and received dividends thereon for come years, the election to rescind was made in a reasonable tima; (4) the offer of the plaintiff to restore the dividends received was sufficient. Under the circumstances, the dividends received, not being equal to the amount of plaintiff's debt, no offer to return was necessary. Id. 72. Peefeeeed. CFpon the purchase of the stock of a corpo- ration and the issue, to the purchaser, of a certificate therefor, he acquires a vested right. Any action of the corporation which divides the shares of its stock sold and in the hands of lawful owners into classes and gives to one class a preference over the other in sharing in the earnings of the corporation materially and injuriously affects the rights of the owners of the latter class and, if without their assent or acquiescence, is illegal ; Kent v. Quick- silver Mining Co. et al., 8-613. 73 578 DIGEST OF THE 73. Peefeeeed. The issue of preferred stock with the privi- lege annexed, that stockholders may subscribe for and take it upon the payment of a stipulated sum per share, can not be considered as an executory contract. Id. 74. . Nor can such transaction be considered as a borrow- ing by the corporation; it is a preferring of one class of stock- holders to another. Id. 75. . There is no power in a corporation, or in the ma- jority of its stockholders, to provide for the creation of a pre- ferred stock, so as to bind the minority of the stockholders not assenting thereto or acquiescing therein. Id. 76. . A holder of common stock has an equitable right to restrain a privileged payment to a preferred stockholder, from the profits of the company and to have the contract therefor de- clared illegal. It is, however, his duty to be prompt in his appli- cation for relief, before innocent third persons can be injured. Id. 77. Instance. The Quicksilver Mining Company, a corpora- tion, by its charter (Laws, N. T., 1866, eh. 470), was authorized to issue certificates of stock, representing the value of its pro- perty, in such form and subject to such regulations as it might, from time to time, by its by-laws prescribe. A by-law was adopted declaring the whole value of its property and the whole amount of its capital stock, which was divided into equal shares, and directing the issuing of certificates of stock therefor, which was done. Subsequently, at an annual meeting of the stock- holders by a vote of stockholders owning a majority of the capital stock, it was resolved, and by-laws were adopted to the effect, that holders of the company's stock who would sur- render their certificates and pay five dollars on each share should be entitled to the same number of shares of preferised stock, which should be entitled to interest at seven per cent, per annum, to be paid out of the net profits of the company, any surplus of earnings, after payment of such interest, to be divided pro rata among the holders of preferred and common stock. The preferred stock was at once, after said meeting, offered for subscription to all the stockholders, and a circular informing them thereof was issued and distributed to them. A large number subscribed and paid the sum prescribed, which money went into the assets and business of the company. Certifi- cates for the old stock were surrendered and certificates for the preferred stock were issued to such subscribers ; and it, as well as the common stock, was dealt in and sold openly at the stock ex- change, the former for the higher price. They were quoted in the daily public prints and for four years the two kinds of stock were spoken of in the annual reports of the directors. During this time there was no action of the company, or of any individual stockholder, to have a judicial declaration that the creation of the AMERICAN CORPORATION CASES. 579 preferred stock was unauthorized. In actions afterward brought by holders of the common stock, for that purpose, it was held that such holders were chargeable with notice of the issuing of the preferred stock and that by acquiescence during so long a space of time, they had ratified and assented thereto, and the same was binding on them, at least as against such holders of the preferred stock as had purchased after it had been placed on the market and dealt with as a valid and recognized issue, and that as, in the particular suit, the prayer for relief was, in effect, that all the preferred stock should be called in and cancelled and it was not practicable to adjudge that a portion of the shares of the pre- ferred stock should be called in and cancelled, or equalized with the common stock, without all being so treated, there was no cause of action. Id. 78. Phbfeekbd stock; jhvidend. "Where a corporation adopted a by-law that its net earnings should be divided semi-annually among its stockholders, first paying upon the preferred stock six per cent., and then, if a surplus, as much upon the non preferred, stock, dividing the surplus, if any, among all stockholders alike, held, that subscribers for preferred stock took their shares upon the conditions named ia the by-laws as a contract between them- selves and the corporation ; Belfast etc. R.R. Co. v. City of Bel- fast, 10-634. 79. . A preferred stockholder is not a creditor, nor is a dividend guaranteed to him ; he is entitled thereto by the by-lawe provided there are net earnings. Id. 80. . A corporation was authorized, by statute, to issue preferred stock, giving its guaranty that such stock should receive a semi-annual dividend of a stated amount. The corporation for the most part of the time after its organization did an unprofitable business, and finally became insolvent. Upon a bill by the assignee in insolvency to compel the holders of such preferred stock to refund dividends paid to them when there had no profits accrued to the corporation, from which dividends could rightfully be paid, held, that the guaranty of dividends was an absolute one, and not conditioned upon the earnings of profits by the corporation; Williams v. Parker, 10-566. 81. CoEPORATE SALE OF SHAKES. The employment of a broker to sell stock at the board of brokers is within an authority con- ferred by a resolution directing the president of the company to .sell the same for the best interest of the company, without farther delay, the board of brokers being a recognized market for the sale of stocks at the habitat of the corporation. The direction is in the nature of an injunction, but it leaves a discretion in the officer to determine how the corporate rights shall be protected, and the corporation as the owner of the stock may sell it, as any other owner of similar property may, and may employ a broker to that end. In the case, however, of a savings bank, there can be no 580 DIGEST OF THE doubt that speculative contracts for the sale of stock, by the bank, subject to the hazard of contingencies of gain or loss, would be ultra vires ; Sistare v. Best, rec'r, 9-626. 82. CoEPOEATB SALE OF SHARES. A salc of stock in a company at its par value, the consideration to be paid out of the net receipts of earnings of the stock received quarterly by the company, and a note given therefor, with the condition that the principal should become due if the instalments were not regularly paid; held, a valid sale under the circumstances. Such a condition in the note is not a penalty, but it is of the substance of the contract ; Dean V. Nelson and May, 1-66. 83. Sale bt coepoeation on option. An optional sale by a corporation — in this case a savings bank — of stock owned by it is not an act beyond the general scope of its corporate powers, and, if the corporation, as between the agent empowered to sell and itself, was the owner of the stock which the plaintiff was em- ployed to sell, and his employment to make the sale was an em- ployment by the corporation, a private sale of the stock subse- quently, without notice to the plaintiff's agent, or revocation of his authority, by which the corporation became disabled from furnish- ing the stock to meet the contract of sale made by the plaintiff, is no defense to an action to recover the amoimt of a difference of price such agent had to pay at the expiration of the option for a failure to deliver the shares ; Sistare v. Best, rec'r, etc., 9-8. 84. Sale on option. An agreement, for a valuable considera- tion, by A. to purchase from or sell to B., at the option of the latter at a specified price, is not per se a gaming contract. An illegal intent will not be presumed and, in the absence of proof that the parties were merely speculating upon the fluctuations in the price of the stock, without any intent that A. should de- liver or accept, but simply should pay differences, the contract is valid and may be enforced ; Story v. Salomon, 8-505. 85. ExEOUTOET sale; gambling oonteacts. Short sales, as they are called, when made by persons who do not own the stock sold, are mere speculations in the chances and fluctuations of the market. A sale upon " seller's option " when the seller owns the stock contracted to be sold, has no feature of hazard, or chance, except the ordinary risk incurred in all executory sales, that the purchaser may not complete his contract ; Sistare v. Best, rec'r, 9-626. 86. Repeesentation as to conditions, a person buying stock from a corporation — in this case a bank — is entitled to rely upon assurances of an officer of the corporation as to its financial con- dition. If he be already a stockholder he is not bound to avail himself of the right to examine the corporate books ; Union Nat. Bank «. Hunt, 9-528. 87. . A representation by an officer of a corporation — in this case a banking corporation — that the stock of his company AMERICAN CORPORATION CASES. 581 is worth $100 per share is a mere expression of opinion, or com- mendation of the stock. If it turns out to be false a note taken, by him, for the price of the stock will not, thereby, be avoided, nevertheless it was relied on by his purchaser. It is otherwise with a representation that the corporation is in a solvent condition and doing a good business. Id. 88. Refusal to deliveb ceetificate to equitable ownee. A. was the equitable owner of certain shares of the capital stock of a railroad corporation. Certificates for this stock were outstanding in the name and possession of another party claiming title. The defendant railroad corporation refused to acknowledge A. as a member or stockholder. A. demanded of the corporation to trans- fer and deliver to him the shares of which he was the equitable owner. The defendant refused to comply with the demand. Held, this does not make a case for judgment against the corpora- tion for the value of the stock. The remedy hes in another di- rection ; Nat. Bank v. Lake Shore & M. S. Ey. Co., 4-13. 89. Selling stock to company. As a rule, a stockholder who conveys his stock to the corporation, and receives in return a por- tion of its capital, holds the moneys so received, subject to the superior equities of creditors; Crandall v. Allen, 10-102. 90. . The liability of a stockholder in such cases is not dependent upon the existence of a conspiracy to defraud, or of any fraudulent intent on his part. Id. 91. ; INSTANCE. Where a corporation whose capital was impaired, was buying in its own stock through an agent, who did not disclose the party for whom he was buying, but the sales were in fact made to the corporation, held, that this arrangement did not protect the sellers, since they had in fact received money from the capital of the corporation, and were not only bound to make inquiry, but were chargeable with the knowledge of the agent, who became their agent for the purpose of sale ; and especially would it not protect stockholders who were trustees of the corpo- ration and members of the executive committee. Id. 92. Void contract as to. A contract, by which a shareholder in a corporation, in consideration of the purchase of a part of his stock, at a price named, agrees to secure to the purchaser the otfice of treasurer of the corporation, with a fixed salary, and in case of his removal to re-purchase the stock at par, is void as against public policy and as a fraud on the other members of the corpora- tion, in the absence of evidence that the transaction was not for the private benefit of the shareholder, or that it was consented to by the other members of the corporation ; Guernsey v. Cook, 7- 466. 93. Suit foe payment. An original subscriber to the capital stock of a corporation is bound to pay for the stock as shall be re- quired by regular assessments. When there are no assessments, 682 DIGEST OF THE an action will not lie against him for any part of the sum due for such stock; Halsey Fire Engine Co. v. Donovan, 10-652. 94. Evidence that amount is subsceibed. The articles of asso- ciation, of a corporation, certified by the secretary of state, afford prima facie evidence that the full amount of capital stock, re- quired by such articles to be subscribed before the company shall become a legally organized body, has been subscribed, and, in the absence of evidence tending in a contrary direction, such evidence will be conclusive : Jewell et al. v. Rock River Pauer Co. et al., 0-71. 95. Payment foe. Under the California statutes, railroads can not issue certificates of stock until they are paid for in full ; Brewster v. Hartley, 1-233. 96. . A corporation may receive, in payment of shares of its capital stock, any property which it may lawfully purchase and so long as the transaction stands unimpeached for fraud courts will treat as a payment that which the parties themselves have re- garded as such. This, too, although the rights of creditors are involved; Brant v. Ehlen et al., 9-394. 97. . As between the company and its stockholders the corporation may take payment in any thing it sees fit ; but, as be- tween the company and creditors it must so deal as to receive value, so that the amount of its capital stock shall be, in good faith, paid in or subject to lawful call to meet liabilities incurred upon the faith of the stock ; Moss v. King, 6-514. 98. Stock notes. Notes, secured by mortgage on real estate, being accepted by a corporation in payment for shares of its capi- tal stock, subscribed for, constitute, as between the subscriber and the company, a good consideration for the stock issued ; Pro- tection Life Ins. Co. v. Osgood, 6-439. 99. Eeaud, in paying foe, by secueitibs. That securities given by a party, to a corporation, in payment for subscription to stock prove valueless, does not constitute such fraud as to in- validate the certificates of stock issued anid delivered, when it does not appear that the party knew the securities to be valueless, represented them to be good, or resorted to any means whatever, to mislead, deceive or defraud the company, or to prevent it from inquiring into the facts. Id. 100. Rights of cekditoes. Neither the stockholders, nor their agents — the directors — can rightfully withhold any por- tion of the stock from the reach of those who have lawful claims against the company, wherefore no contract can be made which will limit the liability of a subscriber, or his assignee, to pay the par value of his stock ; Webster v. Upton, assignee, 5-120. 101. Issue foe less than pae. The directors of a corpora- tion have no power to issue stock for less than its par value, or with an understanding that the unpaid balance shall not be called for. This is a fraud upon the other stockholders and creditors. AMERICAN CORPORATION CASES. 583 and the person so securing stock will be liable for the unpaid bal- ance to any creditor of the corporation : Jackson v. Trauer et al.. 10-393. _ 102. Issue for less than par. It is not necessary to the lia- bility of a holder of stock so issued, that he should have sub- scribed for the same. His acceptance of the stock, with know- ledge of the facts, determines his liability. Id. 103. Sale below par. It seems that the officers of a corpo- ration can not properly sell corporate stock at less than par ; Oli- phant V. Woodburn Coal Co., 10-374. 104. --. A sale of special stock at its then market value, although below par, is not within the prohibition of the constitu- tion; Stein V. Trustees of Spring Yalley Water "Works, 10-64. 105. False issue of, as paid up. The issue by a corporation of stock as paid up, when in fact only a pro rata portion has been paid in, may be ground for a proceeding by the state to wind up the concern, but is not ground for a stockholder, and a party to the illegal issue, to have his contract of subscription set aside, and his pro rata payment refunded: Goff v, Hawkeye Pump Co., 10-370. J- f 106. LiMimfG LIABILITY ON. It is uot within the power of directors to limit the liability of stockholders as to unpaid stock and any such transaction attempted is void ; Gill v. Balis, 8-257. 107. . When the charter has fixed the minim,um amount •of capital stock, the stockholders can not, by their private agree- ment, abrogate that provision of the charter ; any device, by which the members of a corporation seek to avoid the Hability which the law imposes on them is void, as to creditors, whether binding or not between themselves. "Wherefore an agreement among stockholders that the shares of the capital stock of the corporation shall be regarded as fully paid up is void. It is not in the power of the stockholders to make the shares of stock is- sued to them non assessable, so as to excuse payment, for such stock, at its par value ; Union Mut. Life Ins. Co. v. Frear Stone Manuf. Co. et al., 6-481. 108. . A private corporation organized under a special charter, which did not make the stockholders liable for the debts of the corporation. Its capital stock was fixed at $200,000, in shares of $100 each, by the charter, with the privilege of increas- ing the same to $300,000. Yarious persons subscribed for stock under an agreement in writing, incorporated as part of the con- tract of subscription, that no assessment should ever be made upon the stock of the company, and that $10 upon each share subscribed should be the sum total each should be hable to pay ; it was held that, while such contract might be binding between the corporation ' and stockholder, by doctrine of estoppel, it was void as against creditors of the corporation, and as against public policy and justice, and creditors might enforce payment of such 584 DIGEST OF THE stock, to the extent of their demands, against the corporation. m. 109. Eelease of liability. A release of a stockholder by a. creditor from all personal liability for the debt of the corporation discharges the corporation and all of the stockholders as fully as the party to whom the release is executed. If the release be of the releasee's proportion of the indebtedness, the corporation and remaining stockholders are thereby released only pro tanto. Such release is sufficient to sustain a plea of payment in an action against a stockholder for his proportion of the debts of a corporation under the act of the legislature of California of 1863 ; Prince v. Lynch, 1-186. 110. The governing officers of a corporation can not, by agreement or other transaction with the stockholder, release the latter from his obligation to pay, to the prejudice of the creditors of the company, except by fair and honest dealing and for a valu- able consideration ; Sawyer v. Hoag, S-25. 111. . An alteration in the organization, or purposes, of a company, which will operate to release a subscriber, to its stock,, from Ids subscription, must be fundamental and an alteration not provided for, or contemplated, by either its charter or the gen- eral laws of the state ; Nugent v. Supervisors, 5-52. 112. . Changes in matters of detail, not affecting the sub- stantial nature and material features of the engagement, as in- tended and entered into by a subscriber to the stock of a railroad corporation will not release him. Id. 113. Invalid payment fob. An arrangement by which stock is nominally paid for, even though the money passed, by which the money is returned as a loan to the stockholder, changes the character of the debt from one of a stock subscription unpaid to that of a loan of money, wherefore, it is not a valid payment for the stock, as against creditors ; Sawyer v. Hoag, 5-25. 114. Liability of stockholdee. The printing of the words " non assessable," upon a certificate of stock, does not cancel or impair the obligation to pay the amount due upon the shares created by the companies held by any individual. A t most the legal effect of the use of such words upon a certificate is but a stipulation against liability from assessment or taxation after the entire subscription has been paid ; Upton, assignee, v. Tribilcock,. 116. PuECHASE BY coEPOEATioN. Uuless in some special cases, a corporation may not buy its own stock and pay for it from its capital; Crandall -w. Allen, 10-102. 116. . The funds of an insolvent corporation can not be taken to buy in a portion of its capital stock at the expense of the remaining stockholders ; and, in the state of New Hampshire, such purchase is expressly prohibited, under penalty, by general statute (chapter 135, §§ 3, 7); Currier v. Lebanon Slate Co., 8-377. AMERICAN CORPORATION CASES. 585 117. Purchase et ooepoeation. A corporation which is sol- vent, whose capital stock is fixed and limited, but which has not been fully paid in, can not relieve a delinquent stockholder from the payment of assessments upon his stock, levied or subject to be called in, by a purchase of such stock, especially against the pro- test of another stockholder, urged in apt time. Id. 118. . Private corporations may purchase their own stock in exchange for money or other property, and hold, re-issue or retire the same, if it is done in entire good faith, and the exchange is of equal value, and is free from all fraud, actual or constructive, and if the corporation is not insolvent or in process of dissolution ;, and the rights of creditors are not affected thereby ; Clapp et al., exec'rs, v. Peterson, 9-172. ' 119. . The purchase of its own stock by a corporation, by the exchange of its property of equal value — in this case real estate — though made in good faith and without any element of fraud admixed, there not being any thing in the apparent condi- tion of the company to interfere with the making of the exchange, will not be allowed where it injuriously affects a creditor of the company ; even though the fact of indebtedness was not, at the time, established or known to the stockholder. Id. 120. Instance. Where a stockholder of a corporation surren- dered $55,500 of his stock to the company, and received r«al estate of equal value therefor, and the stock was cancelled, and it ap- peared that prior to that the company had purchased property of a third person, in which fraud was afterward discovered and estab- lished, and a decree rendered against the company for over $5,000, and that an execution issued after such a decree was made was re- turned nulla bona, it was held, that the exchange of the stock for the real estate, and the cancellation of the stock, was a withdrawal by the stockholder of his share of the capital stock, leaving the creditor's debt unpaid ; that the transaction was to the injury of the creditor ; that the property so taken by the stockholder stood charged with a trust for the payment of the decree ; that the stock- holder could not be held an innocent purchaser, and that the pro- perty in his hands was in equity liable for the payment of such decree. It may be different where the corporation exchanges pro- perty for other property of equal value, or sells for money ; for, in such case it receives an equivalent which is liable for its debts. Id. 121. . There are numerous cases which hold that a corpo- ration may purchase the shares of stock it has issued to indivi- duals and violate no duty to the stockholders, unless such purchase be prohibited by charter ; Chetlain, adm'r, v. Kepublic Life Ins. Co. et al., 6-397. 122. . A corporation — in this case a railroad company — may, for legitimate purposes and when not, by charter, forbidden 74 . 586 DIGEST OF THE purchase shares of stock which it has issued to individuals or cor- porations, and such a sale is suflBcient consideration to support an agreement to pay money ; Chicago, Pekin & Sou. W'n R.R. Co. V. Town of Marseilles, 6-387. 123. Instance. A corporation, organized under the general law of the state of Iowa, which, by the words of its articles of incor- poration, assumes, among others, the power to purchase, sell, or exchange any real estate or other property deemed desirable in the transaction of its business, has power to make a valid and binding contract for the purchase of shares of its own stock; Iowa Lumber Co. v. Foster et al., 6-542. 124. Bought with corporate ^'unds ; in trust for stock- holders. Where unissued stock of a corporation was, by agree- ment of the stockholders, there being no creditors, paid for with funds of the corporation, and the stock issued to one of the stock- holders to be held in trust for all in proportion to the stock held by them, held, such issue was valid, and the directors had no au- thority afterward to direct the stock to be sold ; Jones v. Mor^ Tison, 10-657. 125. "Withdrawal of capital stock. Any arrangement, the «fFect of which would be to withdraw the capital stock of a cor- poration, and turn it over to the stockholders, except in the man- ner provided by law, is in violation of that provision of the sta- tute of California, which forbids the trustee of a corporation " to divide, withdraw, or in any way pay, to the stockholders, or any of them, any part of the capital stock of the company," and is void as to any creditor of the corporation, either prior or subse- quent, who had no notice of the arrangements at the time the credit was given ; Martin v. Zellerbach, 1-170. 126. Equitable relief. A court of equity will not lend its aid to the enforcement of a contract prohibited by law and will not enforce, as against a creditor, an arrangement made for the withdrawal of the capital stock of a corporation to the prejudice of creditors. Id. 127. Power to change. Corporations have not, either at com- mon law or under the statute, any implied power to effect a change in their capital stock ; Grangers Life & Health Ins. Co. V. Karnper, 10-21. 128. How allowed. An increase of capital stock can only be made in conformity with the provisions of law, by the body of the corporators, convened in meeting for that purpose; Finley Shoe & Leather Co. v. Kurtz, 6-593. 129. Officers can not cause. It is not within the implied powers of any corporate officer to obligate the corporation to an increase of the capital stock. Therefore, such officer could not make a binding agreement with an employe of the company, that he should receive stock of the corporation, in payment of money advanced, or for his services. Id. AMERICAN CORPORATION CASES. 587 130. Eight of rescission. An increase of capital stock was voted by the stockholders of a corporation, out of the surplus earnings of the corporatioh, which were ample for a special pur- pose, which purpose soon after became impracticable ; the vote was rescinded ; no stock was issued, and no certificate of increase was filed, according to law. There was no increase of stock ; the vote to increase is not per se an increase ; there was full power to rescind ; and, if the vote gave any rights, acquiescence would -waive them ; Terry v. Eagle Lock Co. et al., 6-319. 131. Who mat question it. The question whether the capital stock of a corporation has been properly increased is one the state only can properly raise ; Pullman v. Upton, 6-34. 132. Amendment of chaetees. Authority to increase the capi- tal stock of a corporation may, undoubtedly, be conferred by a law passed subsequent to the charter ; but, such a law should, reg- ularly, be accepted by the stockholders. Assent might be inferred by subsequent acquiescence, but, in some form or other, it must be given to render the increase vaKd and binding on them ; Ry. Co. V. AUerton, 5-39. 133. Increase of. Where the charter, of a corporation, de- clares that the capital stock of the corporation shall be a certain amount, named, and that it " may be increased, from time to time, at the pleasure of the said corporation," and, further provides, that " all the corporate powers of the said corporation shall be vested in and exercised by a board of directors and such officers and agents as said board shall appoint," the directors, without express authority, have no power to increase the capital, without submitting the matter to the stockholders in a regular way. Id. 134. . A power given to a corporation to increase its capital stock can not be exercised by the directors, except they be specially authorized so to do, either by clear expression of the charter, or by the shareholders ; Eidman et al. v. Bowman et al., 4^347. 135. . When a corporation determines to increase its capi- tal stock, within the limits of its charter, each of the previous shareholders has a right to a proportionate number of the new shares, or a proportionate amount of the new stock, if it should be added to the old shares. He may waive this right, but if he does not, and is deprived of it, he may sue the company, by a special count in assumpsit, and recover for the loss. It has been held, the measure of damages is the excess of the market value of the stock above par value at the time of payment of the last in- stalment, with interest on the excess. Id.. 136. . A corporation being empowered to increase its capital stock, when such increase is determined upon, the right to the remainder of the stock, when it shall be issued, vests in the original stockholders, in proportion to the amount each holds of 588 , DIGEST OF THE the original stock, if they will pay for it, and is as fully theirs as is the stock already held, and for which they have paid. Id. 137. Inoeease of. W"here a corporation has power to increase its capital stock, such power is in trust for the subsisting stockhold- ers in proportion to the original stock held by them, and each stock- holder has a right to an opportunity to subscribe for and take the new or increased stock in proportion to the old stock held by him. And a vote at a stockholders' meeting directing the new stock to be sold, without giving a stockholder such opportunity, unless he consents to it, is void, as to him ; Jones v. Morrison, 10-657. 138. . Under a constitutional clause prohibiting a "ficti- tious increase of stock," an increase of stock necessary to carry on and extend the business of the corporation, is lawful ; Stein V. Trustees Spring Valley Water Works, 10-64. 139. . Where the statute provides the manner in which the capital stock may be increased that method must be pursued ; Grangers Life & Health Ins. Oo. v. Kamper, 10-21. 140. . Any attempt to increase the capital stock beyond the limit named in the charter, without legislative sanction, is ultra vires, the stock itself is void, and confers on its holder no rights, and subjects him to no habilities. Id. 141. ; INSOLVENCY OF ooEPOEATioN. The rulc is not changed if the corporation is insolvent and its stock of doubtful value, and the stock is issued to a creditor in settlement of a de- mand which it had no other means of paying ; Jackson v. Trauer, 10-393. 142. . The charter of a corporation provided that the capital stock of the company might be increased and that if it should be increased, the stockholders, at such time,' should have the privilege of taking shares of the new stock, proportioned to the amount of stock they, at the time of the increase, held, within sixty days of the publication of notice of the increase. On the expiration of that number of days, the stock not taken by the original owners, might be disposed of by the directors for the benefit of the association. To entitle the stockholder, in such case, to demand such additional shares^-shares of the new stock — it must be that he shall apply for the shares and pay over, or tender the money necessary to purchase and pay for the same, before the expiration of the sixty days, or before the expiration of any additional time allowed under the discretion given to the directors, during which the stockholders may exercise their privi- lege; Hart et al. v. St. Charles Street E.R. Co., 7-209. 143. Decefase of. a statute (Gen. Stat., If. H., eh. 134, § 6)^ which authorizes a corporation at any meeting called for the purpose, to reduce its capital stock and the number of shares therein, does not empower such corporation to effect such reduc- tion by purchasing the shares of a particular subscriber. Unless a course is adopted which will work exact and even justice to all AMERICAN CORPORATION CASES. 589 the owners of stock, the statute is inoperative ; Curner v. Leba- non Slate Co., 8-377. 144. Diminishing stock. Power devolved on directors to prose- cute the business of a corporation and to make contracts will not authorize such directors either to increase or diminish the capital stock; GiU v. Bahs, 8-257. 145. . Where a corporation agrees with its stockholders to issue certificates of stock for the amount of their subscriptions paid in and cancel the subscription as to the amount not paid, this is not a diminishing of its capital stock, as the remaining stock still belongs to the company, to be disposed of ; Chetlain, adm'r, V. Republic Life Ins. Co. et al., 6-397. 146. SuKKENDEE OF STOCK. The board of directors of a corpo- ration passed a resolution, in effect, that all stockholders who would pay five per cent, on their respective shares of stock and surrender their stock certificates to the company, should have the privilege of retiring from the company and withdrawing their stock notes. In an action to recover the several amounts of un- paid subscriptions to stock from the stockholders, held that a compliance with such terms proposed would not be effectual to release their obligations on the stock. Such action on the part of the directors was ultra vires the corporation and fraudulent as to creditors and stockholders, inasmuch as its effect was to diminish the capital stock, which was beyond the power of directors save by vote of the stockholders ; GiU v. Balis, 8-257. 147. Lien or coepoeation on. In the absence of contract or provisions of the charter or by-laws, a corporation has no impHed lien upon the shares of a stockholder indebted to it, to secure such indebtedness ; Farmers & Mechanics Bank of Lineville v. Wasson, 6-538. 148. Nature of individual liability. A personal liability of stockholders, for the debts of a corporation, in virtue of the charter, is not in the nature of a penalty or forfeiture and does not exist solely as a liability imposed by statute. It is not en- forced simply as a statutory obligation, but is regarded as volun- tarily assumed, by the act of becoming a stockholder ; Lowry et al. V. Inman, 4:-549. 149. Extent of peesonal liability. The operation and effect of the statute, or the liability of the stockholder, which is meas- ured by it, can not be extended by implication. There is no im- plied undertaking of the party as a stockholder; there is no obli- gation resulting from that relation, other than such as is expressed in terms, or by necessary implication, in the act of incorporation. Jd. „ ^ 150. Peesonal liability; eulb of consteuotion. By the common law the individuality of the members of a corporation" ■was merged in the associated body, so far as liability for debts was concerned. Whenever there is a clause in this particular, in the 590 DIGEST OF THE act of incorporation, it is, so far, in derogation of the common law and is to be strictly construed ; it is not to be extended by implication ; Moyer v. Penn. Slate Co. et. al. and Keller v. The Same, 4-136. 151. Personal liability. The individual liability of stock- holders in a corporation, for the payment of debts, is always a creature of statute. At common law it does not exist. The stat- ute which creates it may, also, declare the purposes of its creation and provide for the manner of its enforcement ; Pollard v. Bailey, 5-68. 152. . The constitution of California requires that the debts of corporations be secured by the personal liability of the stockholders, and makes each stockholder liable for his propoi'tion of such debts ; this leaves to the legislature the power to regulate such liability, and to prescribe the rule by which each stock- holder's proportion of such debts shall be ascertained ; Larabee v. Baldwin et al., 1-207. 153. Statute. An act making each stockholder liable for his share of all its debts while he was a stockholder is a suflScient compliance with the requirements of the constitution. Jd. 154. Constitution ; existing debts. The provisions of the constitution do not render a stockholder liable for a proportion of the debts of the corporation existing at the time he became a stockholder. Id. 155. . The act of 1860 (California) concerning corpora- tions has no application to corporations formed under the act of 1853, for "manufacturing, mining, mechanical or chemical pur- poses, or for the purpose of engaging in any species of trade or commerce." The act of 1853 repealed the act of 1850, so far as these classes of corporations are concerned ; Larabee v. Baldwin et al., 1-207. 156. Mining coepobation. The statute of California concer- ning mining corporations provides, that " each stockholder shall be individually and personally liable for his proportion of all the debts and liabilities of the company, contracted or incurred du- ring the time that he was a stockholder, for the recovery of which joint or several actions may be instituted and prosecuted." Held, that the right of action against the stockholder is not contingent upon a recovery against the corporation, but accrues at the same time against both the stockholder and the corporation ; Davidson V. Kankin et al., 1-199. 157. Liability of, foe debts. It is not clear that section 4 of the act of the legislature of the state of Indiana of 1859, relat- ing to ditching associations, does not impose upon the members of such associations an absolute liability for the debts thereof. If the liability is collateral, nothing more can be required of the creditor than to show that he has been unable to compel payment by the ordinary process of law ; Todhunter et al. v. Kandall, 1-349. AMERICAN CORPORATION CASES. 591 158. Pbesohtal liability ; language construed. An act in- corporating a slate company, provided that the stockholders should "be, jointly and severally, liable in their individual capacity, for debts due mechanics, workmen and laborers, employed by said company, and for materials furnished said company." This did not include hauling of slate, repairing wagons, lumber for erec- ting machinery, provender for horses used for the company, pow- der for blasting, tools etc. The words " materials furnished," had reference only to such as form part or portions of the pro- ducts of the establishment; Moyer v. Penn. Slate Co. et al., 4r-136. 159. — — . In Illinois the stockholders of all insurance com- panies, which are subject to the general .insurance law of 1869, are_ liable for the debts of the company to the full amount of their respective shares of stock, where the full amount of the capital subscribed has not been paid in ; Butler v. "Walker, 5-333. 160. . It was provided by the constitution of a state (Missouri) that each stockholder in a corporation should be " indi- vidually liable for its debts, over and above the stock owned by him," in a further sum, at least equal in amount to such stock. A corporation was created which incurred debts. By a subse- quent re-incorporation it became authorized to receive subscrip- tions for and issue additional stock, which it did not presently do. The constitution was afterward amended, to provide, that " in no case shall any stockholder be individually liable in any amount over or above the amount of stock owned by him." ThQ corpo- ration then issued its new stock to subscribers. The holders of such new stock are not liable personally under the constitutional clause repealed ; Ochiltree v. R.K. Co., 5-78. 161. . Such an amendment of the constitution does not impair the obligation of a contract. Id. 162. . In Missouri the creditor of a corporation nas no claim against the individual stockholder, until he has exhausted his remedy against the company ; or, rather, his claim commences at the time he issues his execution against the company ; Miller et al. V. Great Republic Ins. Co. et al., 4-507. 163. . Where, before any execution is issued, the stock- holder shall have, honestly and without any intention to defeat the creditors of the company, sold and transferred his stock, the mere fact that the purchaser was insolvent at the time, is not suf- ficient to hold such stockholder still liable for the debts. The question, in such case, is whether the transfer was fraudulent and void as to the creditors of the company. If the stockholders knew of the insolvency of his alienee at the time of the transfer, it would be very strong evidence of fraud. Id. 164. -; CONSTITUTIONAL EKPEAL. The adoption of a constitu- tional amendment abolishing the laws imposing personal liability upon the stockholders for the debts of a corporation does not ope- rate to discharge the liability of a stockholder on an indebtedness S93 DiaEST OF THE incurred prior to such- adoption. To give the amendment such effect, as to creditors of the corporation existing at the time of "the repeal, would be to sanction a law impairiag the obligation of contracts and void; Provident Savings Institution v. Jackson Place Skating and Bathing Rink, 4-521. 165. Peesonal liability ; constitutional repeal. A statute creating the personal liability of stockholders in banking corpora- tions, provided that " the holders of stock in any bank, at the expiration of its charter, . . . shall be liable in their indi- vidual capacities, for the redemption and payment of all bills issued by said bank," etc. In order to give effect to the pro- vision, it is not necessary that the charter of a bank should have expired by limitation. It is sufficient if it has expired by opera^ tion of law ; Dane et al. v. Young et-al,, 4-425. 166. . If there be a statute imposing a personal liability upon a shareholder for the debts of a corporation, a member of the association who would be liable, to the creditors of the com- pany, if he continued such membership, will still be treated as a member, should he dispose of his interest to an insolvent person, or to another, with a view of exonerating himself from present respon- sibility. Otherwise, if before execution against the corporation, the stockholder hopestly and without any intention to defeat the creditors of the company, sold and transferred his stock, notwith- standing the insolvency of the purchaser ; Provident Savings In- stitution V. Jackson Place Skating and Bathing Rink etc., 4-524. 167. . The charter of a corporation containing no indi- vidual liability clause, and no general statute of the state, in existence at the time the charter was granted, imposing such lia- bility, it was held to be without the power of a majority of the stockholders, by any by-law, to impose any such liability. Nor will equity sustain a bill to impose such Kability agains| indi- viduals as stockholders. If there be a remedy in such case it is against the individual upon the fraudulent misrepresentations made to those who may have lent money etc. upon the faith of them; Reid et al. v. Eatonton Manuf. Co., 3-219. 168. . The stockholders of a bank are primarily debtors to the depositors, and are liable co-ordinately with the corpora- tion ; Mitchell v. Beckman, 10-55. 169. Indoesembnt on notes op issue. A banking corporation printed upon the face of its notes the words " individual property of stockholders liable," the object being to give credit and cur- rency to the bills. No personal liability attaches to a stockholder, albeit he signed the notes, as an officer of the corporation, other than such as the statute creating the corporation designated. The indorsement, upon the bills, is but a notice to the public of the charter liability ; Lowry et al. v. Inman, 4-549. 170. For judgment debts. As stockholders in a corporation are not sureties of the corporation, but principal debtors, their AMERICAN CORPORATION CASES. . 593 liability is Dot extinguished, merged or suspended by the rendi- tion of a judgment against the corporation. Such liability ceases only when the debt is satisfied or extinguished ; Young v. Kosen- baum et al., 3-139. lYl. Notes to abandoned enteepeise. Where subscribers to the stock of a railroad company had given their notes for the amounts of subscriptions, payable when the road should be com- pleted, but were subsequently induced to take up these notes, and to give new ones, payable in four years, in order to enable the company to carry out a contract for the completion of the road, and upon the confident but honest expression of opinion by its officers, that if they would do so, the road would be completed under such contract in less than four years : Held, that, although the said contract for building the road was, afterward and before any thing had been done under it, abandoned by the contractor, and the road has never been completed, yet the subscribers are liable upon their said new notes ; Four Mile Valley Co. v. Bailey etal., 3-659. 172. LiABiLmr on stock. The liability of a stockholder on his stock unpaid for is not affected by the fact that, notwithstanding his withdrawal from the company, by assent of directors, the un- paid stock notes of other subscribers, who did not withdraw or retire, are sufficient to pay all creditors ; Gill v. Balis, 8-257. 173. Liability, how enfoeced. If the charter makes the pri- vate property of stockholders liable for the fulfilment of the contracts of the company and points out no mode in which this liability naay be made available, and the courts of other states may give effect to the provision, the course of proceeding must , be regulated by the law of the state where the remedy is sought to be enforced ; Lowry et al. v. Inman, 4-549. 174. -^ . If the effect of the charter and the substance of the obligation of the corporation is not to charge the property of the stockholder generally, but only to an amount equal to his stock, upon prescribed conditions and by a specific process, the remedy of the creditor must be sought according to the terms and by the means provided by the charter. Id. 175. . The charter of a corporation provided that it " shall not, at any time, contract debts exceeding three-fourths of the amount of its capital stock paid in, and, if such indebtedness shall exceed the amount aforesaid, the directors and stockholders shall be personally holden to the creditors of said company." The act provided no means of enforcing the habihty. Held, (1) the creditor may resort to the common law remedy; (2) the clause rendered the directors and stockholders jointly liable ; the word " personally " is used to distinguish their joint liability as indi- viduals from their liability as directors and stockholders ; (3) the liability attaches at once when the indebtedness exceeds the legis- lative limitation and to such persons as were then directors and. 75 594 DIGEST OF THE stockholders, and not on those who may have become such at a subsequent period, as when suit was brought ; Windham Provi- dent Institute for Savings v. Sprague et al., 4-199. 176. Liability, how enfoeced. A joint and several action may be maintained against stockholders of a corporation for cor- porate debts; Larabee v. Baldwin et al., 1-207. 177. . Under a statute making each stockholder "indi- vidually personally liable for his proportion of all the debts and liabilities of the company," any creditor is entitled to sue any stockholder for such proportion of the indebtedness of the com- pany to such creditor, as the stock of such shareholder bears to the whole stock of the company; Morrow v. Superior Court, 10 -62. 178. . The stoppage of payment by a bank gives a de- positor an immediate cause of action against the bank and the stockholders for the amount of his deposit ; Mitchell v, Beckman, 10-55. 179. Sun FOE BAx,Aif0E DUE ; STATUTE OF LIMITATION. The ac- tion of a corporation against a stockholder for the balance due on stock, where the debt is not evidenced by any writing, is barred by the statute of limitations in five years and this limit can not be extended in favor of a creditor of the corporation who seeks to subject such unpaid balance to the satisfaction of his debt ; First Nat. Bank of Grarrettsville v. Greene, 10-384. 180. ; WHEN CAUSE OF ACTION AcoEUES. The right of action which the code gives the creditor of a corporation against a stockholder, to the extent of the unpaid balance due upon the stock, accrues whenever it is clear [that the corporation has no property from which the claim may be collected, and not from the time judgment is recovered against the corporation. Such judgment is not necessary to the beginning of an action against the stockholder, though it may be necessary as evidence to deter- mine the amount to be recovered. Id. 181. CoNTEiBUTioN ; STATUTE OF LiMFTATiONs. A claim by a corporation for contribution from its stockholders is prescriptible like other debts. Prescription begins to run from the time the call is made ; President etc. v. Lord, 10-491. 182. . The state loaned its credit to a certain banking in- stitution, and afterward, upon the insolvency of the corporation, assv^med control of its affairs in winding up. Subsequently, the state, by legislative act, permitted the stockholders to share in its management, and by the same act it was proposed that a certain fixed contribution should be paid by each shareholder for a stated number of years, to realize a fund whereby to re-imburse the state and pay its debt. Held, that when the stockholders accepted the act and levied the assessment, a contract was thereby made with the state, which neither could violate. Held, further, that a sub- sequent attempt by the state to impose a further contribution, AMERICAN CORPORATION CASES. 595 upon each shareholder, was in violation of that contract and could not be enforced. Id. 183. Subscription to pat indebtedness. Where the stock- holders of a corporation, the corporation having become indebted beyond the amount subscribed, subscribed to an agreement prom- ising to pay the sum set opposite their names etc., for the purpose of _ liquidating the debt against the corporation, and all but one paid -their subscription, and the business of the corporation was continued for three years after, held, that assumpsit would lie against the delinquent subscriber in the name of the treasurer for the benefit of those who were creditors at the time of the sub- scription ; Haskell v. Oak, 10-517. 184. Personal LiABiLrrr ; defense. In an action, by a de- positor against a stockholder in an insolvent incorporated savings bank, under a provision of the charter of the association, that the stockholders " shall be held and bound in their private capacity, in proportion to the number of shares held by each and every one of them, for the ultimate redemption of all deposits made with said company," brought to recover the amount of plaintiff' s de- posit, the stockholder may defend the suit by showing that, pre- viously to the commencement of the suit, he has discharged his obligation by paying to depositors, other than the plaintiff, an amount equal to the full proportion his stock bears to the whole amount due the depositors. Such payment can not, after one de- positor has commenced suit against such stockholder on his lia- bility, defeat such suit, even though the stockholder pay to the full amount of his liability. Such payment, after notice of suit, is in fraud of plaintiff's claim and contrary to the policy of the statute creating the liability; and, if allowed, would practically defeat the object of the legislature in imposing the obligation ; Jones, trustee, v. Wiltberger, 4-338. 185. . In a proceeding, by a judgment creditor, to sub- ject the property of an individual stockholder to the payment of the judgment, it is a sufficient defense that by the articles of incorporation the stockholders are not liable beyond the amount of unpaid stock subscribed by them, and the defendant's sub- scription has been fully paid ; Spense et al. v. Iowa Yalley Con- struction Co. et al., S-364. 186. Extent of recovery. Under the act of 1853, entitled "An act to provide for the formation of corporations for certain purposes," each stockholder is liable for his proportion of the cor- f)orate debts ; but any creditor whose claim is sufficient may col- ect from him the entire amount of his liability on all the corporate debts, leaving him to seek contribution from his co-stockholders ; Larabee v. Baldwin et al., 1-^207. 187.. Judgment. A judgment rendered against a corporation while a party is a stockholder, upon a contract entered into before the relation of stockholder existed, is not a contract within the 596 DIGEST OF THE meaning of the act wliich makes a stockholder liable for the debts of the corporation contracted while he was a holder of stock. Id. 188. Contribution. To ascertain the proportion for the pay- ment of which a stockholder is liable, it is necessary to ascertain the whole amount of existing indebtedness created while he was a stockholder. Id. 189. . Where stock and property has been divided be- tween stockholders, before all the debts of the corporation have been discharged, if any one stockholder is compelled to pay more than his fair share of any unpaid debt, he may resort to his asso- ciates for equitable contribution. With that proceeding the creditor has nothing to do, unless he chooses to intervene to settle equities that may exist between his debtors ; Bartlett v. Drew, 4r-634. 190. . On a decree in a suit by a stockholder who has paid debts of a corporation, brought under the Massachusetts statute for contribution, against one who holds such stock as guardian, the real estate of such of the wards as are minors at the time of the levy can be taken on execution, but not the real estate of such as have come of age before the decree ; Mansur et al. v. Pratt, 3-397. 191. . To render a subscriber to stock an owner, so as to be- come liable for debts of the corporation, it is not necessary that he should have paid for his stock, nor that a certificate therefor should have been issued. A corporation may give credit for its stock, and when it has agreed that a person shall be entitled to certain shares of its stock, to be paid for in a certain manner, and he consents to take the stock, he becomes owner ; Mitchell v. Beckman, 10-55. 192. EvBDENOE OF OWNERSHIP. In an action against a stock- holder to recover a proportional share of one of the corporate debts, the evidence must show that he was a stockholder at the time the debt was contracted. A judgment against the corpora^ tion does not prove when the debt uiaon which it was recovered was contracted. Id. 193. . A creditor of a corporation, seeking to fasten a personal liability on a stockholder, is not compelled to prove the ownership of stock by record evidence. The admissions of the de- fendant and the testimony of corporate oflBcers is amply sufficient to that end ; Dows v. Naper, 6-424. 194. . In an action to charge one as a stockholdef under section 9 of the act of February 18, 1857 (of Illinois), it appeared, in evidence, that no certificate of stock ever issued to defendant ; that at the organization meeting he, with others, signed a paper agreeing to take and pay for shares ; that he was elected and for seven months acted as president of the company and that, while so acting, he deliberately admitted his interest to several persons. It was held that these facts showed the defendant to be a stock- AMERICAN CORPORATION OASES. 597 holder, so far as the rights of third persons were concerned ; Cor- with et al. v. Culver, 5-244. 195. Equttable owneeship. The mere fact that the plaintiff is the equitable owner of shares of the stock of a corporation may not subject him to the liabilities or disabilities of a stockholder ; Thompson v. Bemis Paper Co. et al., 7-506. 196. Instance. A. made a contract with B., for the purchase of a certain number of shares of the capital stock of a corporation and paid part of the stipulated price ; but, the stock was not then transferred to him. While the stock stood in B.'s name on the books of the corporation, A. attended meetings of the corpora- tion and voted as a stockholder. At one of these meetings a vote was passed to divide the cash assets among the stockholders, A. voting in the affirmative. After this a settlement was had be- tween A. and B., the stock was transferred to A. and he was credited with dividends received, including that from the with- drawal of the cash assets. A. then brought an action against the corporation for a debt due from it to him, recovered judgment, and, the corporation neglecting to pay for thirty ^iays after a de- mand duly made upon it, brought a bill in equity, under a statute giving such remedy, for the benefit of such creditors as may join in the proceedings to enforce the personal liability of the other stockholders, on the ground of the withdrawal of the capital stock while there were debts outstanding. The bill could not be main- tained. Id. 197. In hand of executor. Executors of the estate of one de- ceased take stock in a corporation, the property of deceased, sub- ject to any liability which existed on account of it ; wherefore, if testator was liable to a creditor upon such stock, the executors, as his representatives, will be liable ; Chase v. Lord et al., executors etc., 8-575. 198. YoTiNG. A stockholder may vote stock standing in his own name on the books of the company, notwithstanding he may have sold some of said stock prior to the meeting at which the vote is cast, if such stock has not at the time been transferred on the books of the company ; People v. Kobinson, 10-59. 199. Stock held foe coepoeation. Stock of a corporation held in trust for the benefit of the corporation, is subject to its order and, so far as the right of voting on the shares is concerned, the holding is the same as if it were by the corporation itself. "Wherefore, until they are sold and transferred, by the corporate authority, the right of voting upon them is suspended : American Ey. Frog Co. v. Haven et aL, 3-418. 200. Stock held in common. In a case where execution against a corporation was returned nulla bona, it was admitted _ that no part of the capital stock of the corporation had been assigned to subscribers or paid in, and no certificate thereof had been recorded, the corporation having, however, been called into existence by the 598 DIGEST OF THE signing of articles of association, the holding of a first meeting and election of officers. Held, that the associated members were the holders of the whole capital stock in common and, semble, liable in equal proportions of the judgment indebtedness ; Harris V. Anglo Saxon Petroleum Co., 3-408. 201. Held as collateeal. "Whether a party to whom stock is hypothecated as collateral security, thereby becomes a stock- holder in, and member of the corporation, is not decided ; National Exchange Bank v. Sibley, 10-166. 202. . But a party receiving from the directors such stock in hypothecation, is not, because of having subsequent dealings with tne corporation, thereby estopped from prosecuting a suit against the persons comprising its board of directors, for their alleged deceit in procuring the loan of worthless stock. Id. 203. Pledge. When shares of the capital stock of the cor- poration are issued to a trustee to secure the payment of a debt, the transaction constitutes a pledge of the stock, and the title to it remains in the corporation ; Brewster et al. v. Hartley et al., 1-233. 204. . A trustee has prima facie no right to pledge certi- ficates of stock held by him as a part of his trust fund to secure his own debt growing out of transactions independent of the trust ; Shaw v. Spencer, 1-625. 205. Notice to pueohasee. If a certificate of stock expressed to " A. B., trustee," is by him pledged to secure his own debt, the pledgee is, by the terms of the certificate, put on inquiry as to the character and limitations of the trust, and if he accept the pledge without he does so at his peril. Id. 206. Status foe pueposes of taxation. For the purposes of taxation, the capital stock is the representative of its property and, in the state of Maryland, both can not be taxed. The exemption of the one carries with it the exemption of the other ; State of Maryland v. "WUson, president etc., 7-404. 207. Taxation of. A corporation having a capital stock divided into shares, is not liable to be taxed for its cash in treasury ; City of Fall River v. County commissioners etc., 7-482. 208. . In Indiana there can be no assessment of the capital stock of a f oreign^corporation as against the corporation itself ; Seward v. City of Eising Sun et al., 7-111. 209. . The shares of capital stock of a foreign corporation are taxable when owned by individual citizens of the state. In the absence of a statute to the contrary, although a corporation may be taxable for its corporate property, the owners of shares of its stock may be taxed therefor where they reside. Id. 210. . The property or interest of an individual in a bank, commonly called a share of capital stock, is a different thing from the capital of the bank owned and held by the corporation. "When the latter is invested in the securities of the government AMERICAN CORPORATION CASES. 599 of the United States it is exempt from taxation by state authority, but this does not exempt the share of the individual from taxa- tion; Nat. Bk. V. Commonwealth of Kentucky, 3-12. 211. Taxation of. The shareholders in national banks are subject to taxation, although the entire capital of the bank is invested in the securities of the federal government ; lionberger V. Rouse, 3-17. 212. . A bank can not maintain an action to restrain the collector of taxes from levying upon the shares of individual stock- holders for taxes assessed on such shares ; Waseca Bk. v. M'Kenna, 10-676. 213. Cancellation of stock. Plaintiff is a stockholder in the defendant association. Defendant's eighth article of incorporation provides that " upon the termination of the corporation, the funds and assets of the same, after paying all debts and expenses, shall be divided among the stockholders in such proportion as each may be justly entitled to, in accordance with the number of shares held by each, after deducting all assessments, fines, dues and other charges, then due by such stockholders. Under this article plaintiff, so long as he performs his duty as a stockholder, is en- titled to retain his stock and his place as a stockholder until the termination of the corporation, and to a right to share of net funds and assets, as in such article provided. So long as he performs his duty as a stockholder, he can not, save by his own consent, be forced out of the association — in this case a building association — as respects the whole or any part of his stock, by any action of the association, through its board of directors or by the combined action of the other stockholders. Hence, the association has no authority to retire or cancel any part of his stock against his will and without any default on his part, any such retiring or cancell- ing being ultra vires ; Bergman v. St. Paul Mut. Building Ass'n,, 9-492. 214. FoEFEiTUEE OF SHAKES. Repeated declarations, by reso- lutions of the corporation, that the stock of delinquent subscribers will be forfeited unless payment be made by a time fixed, do not amount to a forfeiture of the shares. To work a forfeiture there must be an actual declaration thereof; Water Yalley Manuf. Co. «. Seaman, 8-32. ' 215. Confiscation; seizuee. A seizure of stock in a raUroad company may be made by giving notice- to the president or vice president of the company, and such a seizure, made in obedience to a warrant and monition, is sufficient to give the district court jurisdiction ; Miller v. United States, 3-63. ' 216. . The aid of a state statute is not necessary to the seizure of stocks and credits, in admiralty and revenue cases. Id. 217. Confiscation of stock by authority of confederate states, a decree of confiscation of shares of the capital stock 600 DIGEST OF THE of a corporation " by the district court of the confederate states of America, for the southern district of Georgia," on the ground that it was the property of alien enemies, its owners being citizens of the United States, not engaged in the effort to establish the government of the confederate states, is null and void ; a pur- chaser thereunder acquired no title ; and the company can not be compelled to issue to him certificates for such stock ; Central Kailroad & Banking Co. v. Ward et al., 1-299. 218. Alienation of companies' peopeett. Corporate acts, by means of which corporate property is alienated, if not ultra vires and when performed according to the mode prescribed by law, are, in point of law, binding upon the corporation and, through that title, equally binding upon the interests of stockholders ; Wright V. Orovilie Gold etc. Mining Co. et al., 3-146. 219. CoNVBESioN OF STOCK. One who has not the legal right to stock of a corporation can not sustain an action against the cor- poration for converting it ; Morrison v. Gold Mountain Gold Min- ing Co., 6-24:0. 220. What is not a conveesion. It is not a conversion of stock, by the corporation, where its president draws an order, upon himself as president, to transfer, to a person named, a certain number of the shares of the company which he as president and the secretary of the company refuse to deliver. Id. 221. Eemedt foe weongful sale of stock. If a corporation unwarrantably disposes of the shares of a stockholder, the latter may recover the value of the stock at the time of such sale or, in some case, the money received by reason of the sale ; Marseilles Land & Water Power Co. v. Aldrich, 6-406. 222. Title to stolen ceetifioates. Where the owner of shares of the capital stock of a corporation causes the certificate thereof to be transferred, on the books of the company, to another, as trustee, and the transferee indorses the same, by his signature, and delivers the same to the original owner ; but, afterward, steals it from such original owner and sells it, one who in good faith, for full value, in the ordinary course of business and without notice of any claim of the original owner, purchases it from the thief, takes a valid title to the stock as against such original owner; Winter v. Belmont Mining Co., 6-248. 223. Casual finding and pueohase. Where a corporation issues its certificate of shares of stock, transferable on the books of the company by indorsement and surrender of the certificate, and its owner loses the same after he shall have indorsed it, and it shall come into the hands of a bona fide purchaser for value, such purchaser acquires no interest in the stock ; Sherwood v. Meadow , Yalley Mining Co., 6-228. 224. At common law. Shares of stock in incorporated com- panies are not leviable at common law and positive provisions of statute are requisite to enable a court of common law to apply its AMERICAN CORPORATION CASES. 601 power to them ; Yan Norman v. Circuit Judge of Jackson Co.. 6-663. ' 226 ._ Levy on shakes. Shares of stock in corporations are intangible entities and incapable of caption by the methods of the common law. In the absence of specific provision, by statute, affording means of the subjection of such shares to mesne pro- cess, the only safe proceeding against them is in equity. Id. 226. . Statutes subjecting shares of stock in corpora- tions to levy and sale on execution or attachment, are in deroga- tion of the common law ; Nabring ■». Bank of Mobile, 6-124. 227. . Shares of stock, in an incorporated company, are choses in action. As such they were not liable, by the common law, to levy and sale under execution, nor will they be made so liable by a statute which provides for a levy on personal property of a defendant, except things in action and an equity of redemp- tion in either land or personal property. Id. 228. Levy on shakes pledged ok mobtgaged. Shares of the capital stock of incorporated companies, pledged or mortgaged and so situated, are not liable to execution sale, unless expressly so made by statute. Such statute does not exist in Alabama ; and, a purchaser takes no title, from an execution sale, against the pledgor or mortgagor, nor does he succeed to the rights of such pledgor or mortgagor in such shares of stock. Id. 229. Levy on. Attachments and executions can not be levied on shares of a corporation, as property of a debtor, when such shares stand on the corporate books, in the name of another, regu- larly assigned and transferred within the knowledge of the com- pany ; Yan J^orman v. Circuit Judge of Jackson Co., 6-6G3. 230. Unpaid balance due on. The stock book of a corpora- tion, containing subscriptions for unpaid stock, does not contain such evidences of debt, belonging to a debtor corporation, as are subject to seizure under execution issued against the corporation ; Hannah v. Moberly Bank, 8-192. 231. . The liability of a stockholder, to a corporation, for unpaid stock which is not due according to the terms of his subscription and for which no calls have been made by the proper corporate oflEicers, can not be seized and collected under an execu- tion against the corporation ; and, in a proceeding at law, for the satisfaction of a judgment against the corporate debtor, such lia- bility can only be reached by special execution awarded against the stockholder himself, in default of assets of the corporation whereon to levy. Id. 232. . Where a stockholder is in default to the corpora- tion for instalments of stock, or for sales made by the proper corporate authority, he stands in the attitude of a debtor to the corporation, and such debt may be seized and collected by suit under execution against the bank or be reached by garnishment. Id. 76 602 DIGEST OF THE 233. Attachment of shares of non eesident. Thougli a cor- poration does not own the shares of its capital stock, nor have any control over it, except as to the manner of transferring its legal title, yet, by force of the statute of Ohio (Code, §§ 194, 200), such shares in a corporation of that state, belonging, in law or in equity, to a non resident debtor, may be as effectively attached by making the corporation a garnishee, as if the stock were in its possession and under its conti-ol ; l^ational Bank of New London V. Lake Shore & Michigan Southern Ey. Co., 4-13. 234. Teansfee to wife. An attachment issued against the property of a debtor can not be levied upon shares of stock in a corporation which he had previously and in form at least, suffi- ciently transferred to his wife, so that they stand on the corporate books in her name. Therefore, a bill in equity will not lie to pro- tect any supposed lien of such an attachment nor can an iujimction issue to restrain, in such case, the owner of the legal title to the shares from prosecuting a suit for the collection of dividends de- clared upon such shares of stock. If such injunction issue, and be not dissolved on motion, mandamus will be granted to vacate the injunction ; Van Norman v. Circuit Judge etc., 6-663. 235. Stockholder not bound by deoeee to which he is not a PAETT. A stockholder in an insolvent corporation is not liable to an action on an assessment made by the court on his notes, exe- cuted and delivered upon subscription to capital stock, in a pro- ceeding by the creditors against the company in which a receiver is appointed, on the petition of the receiver and creditors, where he is not made a party to either proceeding. Such an assessment is not binding on him ; Lamar Ins. Co. v. Gulick, 9-109. 236. Judgment sale. Under a judgment against a county, stock she held in a railroad corporation was sold by the marshal. Held, that the purchaser took the stock as such but not any right in or to a collateral contract by which it was stipulated the rail- road company would pay interest upon the stock; Pittsburg & Connellsville E.E. Co. v. County of Allegheny, 4-92. 237. Sale undeb execution. A sale of shares of stock, in an incorporated company, belonging to a defendant in execution, under the execution, will not vest a title in the purchaser, if the defendant in the execution had none; nor will such purchaser acquire any greater or other rights than the seller had • Mechanics Bank v. Merchants Bank, 3-539. 238. CoNTEACTS BETWEEN STO0KHOLDEE8. Three pcrsons, own- ing a majority of the stock of a corporation, have the unques- tioned right to combine to control the election of the officers and the management of the company, and, if they could not agree, then, that they would ballot for directors and officers, when a majority should rule and the vote of the three should be cast as a unit, so as to control the election ; Faulds v. Yates, 3-285. 239. ; VOID. A contract between two stockholders in a AMEKICAN CORPOKATION CASES. 603 corporation, by which one, in consideration of a sum of money paid to him by the other, agrees to vote for a certain person as manager o± the corporation, and to vote to increase the salaries of the oftcers of the corporation, inchiding that of the manager, is void, as against public policy, unless it be assented to by all the stockholders of the corporation. Whether it be valid if so as- sented to, quaere ; Woodruff v. Wentworth, 9-432. 240. Contracts between stockholdees ; void. It was al- leged, in a declaration filed, that in consideration that plaintiff would do a certain act in relation to a corporation, of which the plaintiff and defendant were both members, defendant agreed to pay the plaintiff a sum named when certain bonuses were paid to defendant by the corporation ; that the plain- tiff did the act and the bonuses were paid to defendant by the corporation ; and, that the defendant refused to pay the plaintiff the sum promised. Evidence, introduced on the trial, showed that defendant assigned the bonuses to a person to whom the corpora- tion paid a portion of the amount due thereon ; that the assignee sold the bonuses remaining for a sum less than the balance due, and that the purchaser was paid the full amount of such balance by the treasurer of the corporation, to whom, according to a pre- vious agreement between them, the purchaser paid the difterence between the total value of the bonuses and the whole amount paid to the assignee. The trial judge instructed the jury if they found that the corporation actually paid the whole amount of the bonuses to any agent of the defendant, this was such a payment of the bonuses to the defendant that the action could be main- tained ; but, if they found that the corporation had not paid the bonuses in full, but had succeeded, by any means, in purchasing them for a less sum than was due upon them, that would not be such a payment of them as would sustain the action. The court held defendant had no ground of exception. Id. 241. Stockholders may contract with corporation. There is no rule of law which prohibits a shareholder from dealing with, or from suing or being sued by, the company of which he is a member. The president of such company has the right, with his own funds, to purchase notes and drafts of the company maturing and, when he does so, he succeeds to all of the rights of the holders, or he, upon taking up, with his own means, such indebt- edness, has a right to maintain an action, against the corporation, for money paid, laid out and expended for its use ; Merrick v. Peru Coal Co., 4-360. 242. Dealing with company. A stockholder or officer of a corporation has the right to deal with the company of which he is a member in the same manner as strangers may. When either does so, he acquires the same rights and incurs the same liabilities as a stranger would. Id. 604 DIGEST OF THE 243. Stockholdee as ceeditoe of oompant. A creditor of a corporation, who is also a stockholder, may maintain an action, at law, to charge a trustee with a debt of the corporation, such lia- bility being imposed by the statute under which the company is organized,"by reason of the failure of trustees to make annual report of the financial condition of the company. The liability, of such trustees, is not affected by the knowledge of the creditor as to the financial condition and embarrassments of the company ; Sanborn v. Lefferts, 4-647. 244. . A member of a corporation, who is a creditor of such corporation, has the same right as any other creditor to se- cure the payment of his demands, by attachment or levy on the property of the corporation ; although he may be personally liable to satisfy other judgments against the corporation ; Life Ass'n of America v. Levy etc., 7-264. 245. . A stockholder may, certainly, become a creditor of the corporation in which he owns stock. As such creditor he may proceed to recover his debt ; and, if his declaration discloses he is relieved from responsibihty as a stockholder by the payment in full for all stock taken by him, he may maintain suit as a credi- tor against a fellow stockholder; Weber v. Fickey, jr., use of etc., r-385. 246. Disability. A creditor who is also stockholder of a cor- poration, and as such Hable for its debts, is not entitled to statu- tory remedies afforded creditors agaijist stockholders for the debts of the corporation ; Thomson v. Bemis Paper Co. et al., 7-506. 247. . A creditor who is also a member of a corporation can not maintain a bill, in equity, to enforce the personal liability of stockholders, for debts due by the corporation before capital stock paid in, under a statute which authorizes a proceeding for the benefit of a plaintiff and such other creditors as may come in and become parties to the proceeding ; and, one to whom a stock- holder has transferred a promissory note executed by the corpora- tion, for the sole purpose of enabling him to obtain judgment upon it in his own name, and to bring a bill in equity to enforce the personal liability of the stockholder, stands in no better posi- tion than his assignor ; Potter v. Stevens Machine Co., 7-504. 248. Suit foe depeeciation of stock. A stockholder can not maintain an action against the corporation for damages in the de- preciation of his stock resulting from t;he mismanagement of the officers, unless he shows that such injury is peculiar to him alone, and does not fall equally upon other holders of stock ; Oliphant v. Woodburn Coal Co., 10-374. 249. Resteaining issue op. Plaintiffs and certain directors of a corporation owned stock therein in partnership. At a meeting of the directors they consented to the making, by the corporation, of a contract, the directors being induced to give their consenly relying upon assurances exacted by them on behalf of the part- AMERICAN CORPORATION CASES. 605 nership, and with its knowledge that they should be allowed to participate in the transaction to which the contract related, and share in the profits thereof, and the partnership subsequently sought to avail itself of the benefits of the same. In an action to avoid the contract on the ground that it was fraudulent as to stockholders, held, that the plaintiffs being in pari dehcto, the relief would not be granted ; Weed v. Little Falls & Dakota E.R., 10-669. 250. County ; powee. A county which owns stock in a rail- road company has the same rights as to the management of the affairs of the company, and the selection of officers, as any other stockholder ; and may enforce those rights by the same remedies which any stockholder may employ; Horn blower v. Duden, 2-86. 251. Sale of ooepoeate estate. It appears to be settled, as a general rule, that the officers of a corporation can not, against the wishes of a single stockholder, convey away the entire property from which the corporation derives its emoluments and which is essential to the business purposes of its organization. This rule is, however, subject to certain modifications in its application. The right of the stockholder in this regard is founded upon con- tract ; but the contract can not imply that the business oi the cor- poration must be persistently kept up to the ruin of all concerned ; Buford V. Keokuk N. Wn. L. Packet Co., 8-226. 252. . It is not against public policy, for the majority of stockholders of a corporation which is on the eve of dissolution, by the efflux of time and operation of law, in the exercise of a sound discretion, to cause the transfer of its assets to another like corporation and take in payment therefor the stock of such other corporation and to convert the same into money for the purposes of liquidation. Id. 253. Eemedt against officees etc. A stockholder of a cor- poration has a remedy in chancery against the directors of the com- pany to prevent them from doing acts which would amount to violation of the charter, or to prevent any mis-application of the corporate capital, or profits, which may lessen the value of the shares of stock, if the acts intended to be done and complained of amount to what, in law, is called a breach of trust or duty ; Wil- cox V. Bickel et al., 8-329. 254. Remedy against iNDivrotrALS. A stockholder of a corpo- ration has his remedy against individuals, in whatever capacity they profess to act, if the subject matter of the complaint shall be an imputed violation of a corporate franchise, or a denial of a right growing out of it, for which there is no adequate remedy at law. Id. 255. . In such case an allegation in the petition to the effect that all of the officers of the corporation have absconded and their whereabouts is unknown, is a sufficient showing that it was impossible for the complaining stockholder to make demand on the officers, or managing directors, of the company, that proper 606 DIGEST OF THE proceedings be taken in the name of the corporation for the pro- tection of the property. Id. 256. Diversion of funds. A majority of stockholders, no mat- ter how great, have not the right to divert the funds of an incor- porated company to any other than the purposes for which it was organized ; and, if such funds are about to be so diverted, a stock- holder may file a bill in equity, against the company, to restrain it, by injunction, from such diversion or mis-application. Relief, how- ever, will not be granted unless the corporation is about to do some act outside the scope of its authority, or in disobedience to the provisions of its constitution. So long as it exercises the power granted by the charter, the acts of the company must be treated, by the courts, as the acts of all the stockholders ; Dudley v. Ken- tucky High School, 5-382. 257. Estoppel to complain. of mis-appeopeiation. If stock- holders, one or more of them, have knowledge of the purpose to appropriate funds, about to be borrowed, otherwise than to corpo- rate purposes, and when it is borrowed participate in the advan- tages derived from the misappropriation, they will not be, there- after, permitted to set up such mis-application of the fund as a defense to an action by the lender who seeks to recover his money from the corporation ; Thompson et al. v. Lambert et al., 6-523. 258. Eight to maintain action. A stockholder may institute a suit in equity, in his own name, against a wrong doer whose acts operate to the prejudice of the stockholders, such as diminishing the dividends and lessening the value of their stock, in a case in which an application has been made to the directors of the com- pany to institute suit in the name of the corporation, and they have refused ; City of Memphis v. Dean, 3-1. 259. Action by. A stockholder or creditor of a corporation can not maintain a suit for an injury to corporate rights, without showing by the allegations of his biU that the corporation has refused to take proper measures to, protect such rights. An alle- gation that the corporation has refused to bring "this suit" is not sufficient; Ilfewby v. Oregon Cent. E.y. Co., 1-155. 260. In suit against trustees. In an action by parties as stockholders of a corporation against their trustees, it is sufficient to maintain the action if either one of them was a stockholder ; Parrott et al. v. Byers et al,, 4-282. 261. Action against officers for feaud. As the corpora- tion, itself, holds its property as trustee for the stockholders who have a joint interest in all its property and effects, and each of whom is related to it as cestui que trust, if the corporation refuses to call to account, by proper legal proceedings, its directors and officers who are abusing their trust, mis-applying the funds of the corporation, and receiving profits from contracts made by other parties with the corporation, through their aid ; or if such corpo- ration is still under the control of those who necessarily must be AMERICAN CORPORATION CASES. 607 made defendants to such proceeding, so that it wonld be a mockery to require, or permit, a suit against them to be brought and prosecuted under their management, the stockholders, who are the real parties in interest, or a part of them, may maintain an action to make such ofiBcers, and all parties who have participated with said officers in their unlawful transactions, account for their wrongs and frauds ; and the corporation is a proper party defen- dant with them ; Ryan et al. v. Leavenworth etc. Ry. Co. et al., 7-144. ' . 262. Action against offioees for feaud. Where one rail- road corporation is the owner of a large amount of stock in a connecting railroad corporation and both of the cor- porations are under the potential control of the same persons, as officers of the corporations, and the officers of the connect- ing line of road are guilty of a mis-application of the corporate funds, for their personal benefit, the stockholders of the former corporation, or a part of them, may institute a suit to compel the officers to account for such mis-application ; and when the stock of the first corporation in the connecting road has been fraudu- lently cancelled by the officers of the two corporations, and a like amount of stock in the connecting road issued, without considera- tion, to S. and N., as trustees for the former corporation, and such corporation is the equitable owner of the same, the stock- holders of said first corporation, or a part of them, may maintain a suit to compel the officers of such connecting corporation to restore to said corporation the funds and property wrongfully taken by them, without first bringing an action to compel a transfer of the stock from S. and N. to the corporation equitably owning the same, if both of said corporations and said S. and N. are joined as defendants in the suit, and S. and 'N. have refused, on request, to institute a suit to protect the property and interests of the corporation equitably owning the stock in the name of S. and N. as trustees. Id. 263. Intervention in coepoeate smx. Where a mortgage executed by the officers of a corporation has been foreclosed, an individual stockholder can not interfere, by injunction, to restrain levy and sale, under the mortgage fieri facias, without showing suAcient reason why the corporation itself is not the party com- plainant ; Henry et al. v. Elder, adm'r, 7-19. 264. To PEEVENT lEEEPARABLE INJURY. A Stockholder in a corporation has such an interest as will entitle him to prevent the sale of the corporate property by persons who have no lawful power, or mandate, to sell ; State, ex rel. Morey, v. Judge etc., 7-247. 265. Ieeepaeablb injuey. An interlocutory decree ordering a sale of corporate property to be made by persons who have no lawful power to sell, may inflict irreparable injury on a sharehol- 608 DIGEST OF THE der of a corporation. Hence, he may suspensively appeal from such decree. Id. 266. Iekepakable injubt. The fact that a corporator, or shareholder, might seek recourse on the bond of the persons, act- ing as liquidators of the corporation, on account of any sale of the corporate property they might unlawfully make, demonstrates the right of such shareholder to appeal from the decree of court ordering the sale. Id. 267. Suit by. In order to enable a stockholder to sue for the corporation of which he is a member, or for his associate stockhol- ders, where the rights of the corporation are involved, he must allege that the directors decline to sue, or refuse to permit him to sue in the name of the corporation and the corporation must be a party to the suit either as plaintiff or defendant ; Shawhan etc. v. Zinn etc., 7-186. 268. Action against. The corporation is the proper and primary party to call its directors to an account, in a court of equity, for fraud or breaches of trust in the management of its affairs. To enable a shareholder, either for himself alone or for himself and others, to maintain a bill against directors, for fraud or breaches of trust in the management of ,the corporate affairs, he must allege and show not only the violations of duty or breach of trust on the part of the directors charged, but, as well, that he, as a stockholder, has been damnified thereby and that the corpora- tion has failed or refused to take the proper legal steps for the redress of the wrong. If, however, a bill be filed by stockholders and the proof shall sustain allegations made that a majority of the shares are owned by another company and that a majority of the directors are adverse to the interest of the plaintiffs, and are com- bined against them, and would frustrate and defeat any attempt to induce the corporation to take action for the wrongs com- plained of, such facts would be a sufficient excuse for not making or alleging a formal demand upon the corporation to take action ; Booth et al. v. Robinson et al., 7-419. 269. Stockholder's suit against coeporation. To restrain acts the principle involved in the leading case of Dpdge v. Wool- sey (18 Howard, 33), permits the stockholder of a corporation to step in between the corporation and a party with whom it has been dealing, and institute and control a suit in which the rights involved are the rights of the corporation and the controversy, one really between that corporation, entirely capable of asserting its own rights, and the other party who is equally capable ; Hawes •0. Contra Costa Water Co., 6-98. 270. . To enable a stockholder in a corporation to sus- tain, in a court of equity, in his own name, a suit founded on a right of action existing in the corporation itself, and in which the corporation itself is the appropriate plaintiff, there must exist, as the foundation of the suit, (1) some action, or threatened action AMERICAN CORPORATION CASES. 609 of the managing board of directors, or trustees, or the corporation, which is beyond the authority conferred on them by their charter, or other source of organization ; or (2) such a fraudulent transac- tion,_ completed or contemplated, by the acting managers in con- nection with some other party, or among themselves, or with other shareholders, as will result in; serious injury to the corpora- tion, or to interests of the other shareholders; or (3) where the board of directors, or a majority of them, are acting for their own iaterest, in a manner destructive to the corporation itself, or of the rights of the other shareholders ; or (4) where the majority of the shareholders, themselves, are oppressively and illegally pursuing a course, in the name of the corporation, which is in violation of the rights of the other shareholders and which can only be restrained by the aid of a court of equity. It is possible other cases may arise in which, to prevent irremediable injury or a total failure of justice, the court would be justified in exercising its powers ; but, the foregoing is to be regarded as an outline of the principles which govern this class of cases. Id. 271. Stockholdee's sttit against coepoeation. In addition to the existence of grievances which call for relief, before a stockholder will be permitted, in his own name, to insti- tute and conduct a litigation which usually belongs to the corporation, he should show, to the satisfaction of the court, that (1) he has exhausted, all means within his reach to obtain, within the corporation itself, the redress of his grievances; (2) he has made an earnest effort with the managing body of the corporation, to induce remedial action on his part ; or (3) in the event of failure with the directors, if time has permitted, that he has made an honest effort to obtain action in the matter of com- plaint, by the stockholders as a body ; or (4) he must show a case, if this be not done, where it could not be done, or in which it would be unreasonable to require it to be done ; and, (5) he must verify the fact that he was a shareholder at the time of the tran- saction of which he complains or that his shares have devolved on him since by operation of law, and, if the suit be instituted in a federal court; (6) that it is not a collusive one, for the purpose of conferring jarisdiction it should not take. Id. See, also, Action ; Assessment of Stock ; Consolidation ; Ceeditoe's Bill; Dkbtoe astd Ceeditoe; Dividend; Elec- tion; Equity; Estoppel; Foefeituee; Judicial Disquali- fication ; Lien ; Mandamus ; Meeting ; National Bank ; Oeganization ; Peesonal Liability ; Pledge ; Subsceiption TO Stock ; Taxation ; Teansfee of Stock. STOLEN OEETIFICATE OF STOCK. 1. Title theeeto. Where the owner, of shares of stock, causes the certificate thereof to be transferred, on the books of the corporation, to another as trustee and the transferee indorses the 77 610 DIGEST OF THE same, by his signature, and delivers the same to the original owner, but, afterward, steals it from such owner and sells it, to one who in good faith purchases it, in the ordinary course of business and without notice of any claim of the original owner, from the thief, takes a valid title to such stock as against such original owner ; Winter v. Belmont Mining Co., 6-248. 2. Jurisdiction. A court of equity will take jurisdiction of a bill which avers that certificates of stock of a corporation have been stolen, the name of the true owner forged to a power to transfer and the stock sold and transferred on the corporate books, to compel the issue of new certificates of stock and an accounting for dividends declared, or in default thereof, to compel the pur- chasers to replace the stock. Such a bill is not demurrable for want of equity ; Blaisdell et al. v. Bohr et al., 9-64 ; see, also, Mach. Nat. Bk. v. Field et al., 7-486. STKEETS. 1. Dedication; acobptanoe. Xue act of 1862, relating to the city of San Francisco, provides that " all the original streets . . . and all other streets, lanes, alleys, places or courts, now dedicated to public use, or which shall hereafter be dedicated to public use ... are hereby declared to be open pubhc streets " etc. Held, that a mere dedication of land to such public use, without any formal accep- tance of the'same by the board of supervisors, authorized the board to improve the same as a public street, lane, alley or court, although the municipal corporation would not be bound, before this was done, to keep it in a safe and passable condition for public use ; Stone V. Brooks, 3-70. 2. OuL DE SAC. A street or court which is a mere cul de sac may be dedicated to the public use in like manner as a thorough- fare. Id. 3. What amounts to a dedication. The owner of a tract of land caused it to be platted into lots of the size and proportion of city lots, fronting on an extension of a public street of the city through such tract. Lots were sold at public sale by said map. Held, that this was a dedication of the land embraced in the extension of the street to the public use as a street, subjecting it to the jurisdic- tion of the board of supervisors for purposes of its improvement. Id. 4. What acceptance. The improvement of a street thus dedicated by the board of supervisors operates as a complete acceptance of the dedication, and perfects the right of the public to use it as a highway for all purposes. Id. 5. Dedication; evidence. To establish a dedication of a street, the proof must be clear of an actual intent so to do, or of such acts and declarations as will equitably estop the owner from denying such intention ; Kelly v. City of Chicago, 2-190. 6. . During the absence of the owner from the state a roadway was opened over his land, without his knowledge, by AMERICAN CORPORATION CASES. 611 digging ditches on either side of such road. After his return he permitted it to be used by omitting to inclose the premises, or to institute actions of trespass against persons so using it. Held, not to be conclusive evidence of an intention to dedicate. Id. 7. DEDioATioif ; EvroENCE. And, in such case the placing upon record, during the same year, of a formal instrument of dedica- tion, opening a street through a portion of the same property, but stopping at that part so in use by the public, and which part had always been laid out into lots, was regarded as sufficient to rebut any presumption which might be drawn from user by the public of such roadway of an intention to dedicate. Id. 8. Statute construed. The statute of the state of Iowa, re- lating to village plats, provides that the acknowledgment and re- cording of the plat shall be equivalent to a deed in fee simple of the portion of the land therein set apart for public use. In a vil- lage plat the streets and alleys therein marked were declared to be conveyed to the county for the use of the public. Held, that the conveyance to the county was without legal significance or effect, and that the plat and the acknowledgment thereof operated to convey the streets and alleys to the town for the use of the public ; City of Des Moines v. Hall, 2-233. 9. AooEPTAHOE or DEDICATION. An acceptance by a town or city of an amended charter, which includes an addition previously laid off and platted, amounts to an acceptance of such addition, and the streets and alleys therein. Id. 10. The eight to mine. After a dedication of streets and alleys to the use of the public, by acknowledging and recording a village or town plat, under the statute of Kiwa, the grantor has no right to mine coal from such streets and alleys, and an action to restrain the same may be maintained by the corporation. Id. 11. Opening street; notice. A. acquired land in a city where proceedings were in progress before the mayor and alder- men to open a way over it. B., who was A.'s " full agent with respect to " the land, was fully informed concerning the proceed- ings, and as owner in his own right of another lot of land on the same street, was served with written notices, as provided by the statute. The mayor and aldermen, no one of them knowing that A. had become owner of the land, adopted an order laying out the way. It was held that A. having neither formal nor actual notice of the proceedings, was no ground for certiorari to quash the same; Pickford v. Mayor and aldermen of Lynn, 2-453. 12. CoNCUBEENT ACTION. Under a statute of Massachusetts which provided that the mayor and aldermen of a city, " with the concurrent vote of the common council, shall have exclusive au- thority and power to lay out any street," if, in concurring with the mayor and aldermen for laying out a street, the common council propose amendments to the order in matters incidental to and not modifying the location, with which amendments the 612 DIGEST OF THE mayor and aldermen agree, it is no ground for certiorari to quash the proceedings. Id. 13. Who mat object. The statute of Massachusetts of 1862 gives no right to avoid the laying out of a way by a city or town to any person, except the owner of the land over which it is lo- cated, whose damages remain unpaid and untendered for two years after the date of such location. Id. 14. Appeopeiation to use of eaileoad. When the fee of the streets in a city are vested iji the corporation, in trust for the pubUc, their use in the construction and operation of a railroad may be authorized by the legislature without the consent of the city and without, compensation ; City of Clinton v. Cedar Rapids & Missouri R. R.R. Co., 3-253. 15. Not private peopeety. The streets of a city are not the private property of a corporation in such sense as to necessarily entitle it to compensation for an additional pubhc use, the same as a private proprietor holding the fee. Id. 16. Rule applied. Legislative authority to build a railroad from the city of Lyons to a point of intersection with the Chicago, Iowa and Nebraska railroad, within the corporate limits of the city of Clinton, conferred upon the railroad company all requisite power to use so much of the streets of the city of OHnton as was necessary in the construction of said road as designated, without the consent of the city, and without awarding it compensation. It appearing that the railroad company had, in the selection of its route within the city, duly respected the grades of streets, and avoided the use of them so far as practicable, an injunction, re- straining! the company from constructing its road on the streets within the city, was dissolved. Id 17. Right of way. It was held, per Weight and Beck, that the same result was reached under the general right of way act. lA. 18. . And by Cole, that while the right to thus use the streets exists, the city has such an interest therein as to be enti- tled to compensation for any damages resulting from such occu- pation. Id. 19. Who liable foe assessments, in Louisiana a widow who owns one-half of the property of her deceased husband in com- munity, and has a usufruetory right over the other half, is per- sonally liable for assessments made for the improvement of the streets on which it fronts ; and an action may be maintained against her therefor in any court of competent jurisdiction ; City of New Orleans etc. v. Wise, 3-379. 20. Damages to peopeety ownee. When a contractor, in lay- ing a pavement in the banquette in one of the streets of the city of New Orleans, destroys or takes up shade trees which have been planted there, he is liable in damages to the owner of the pro- perty. Id. AMERICAN CORPORATION CASES. 613 21. Yacationof. a municipal corporation, under the aathority conferred by its charter, to " locate and establish streets and alleys and vacate the same," may rightfully and constitutionally order the vacation of a street ; and, when this power is discreetly exer- cised and with due regard to private rights, will not be restrained at the instance of a citizen claiming that, as a land owner, he is interested in keeping open the streets dedicated to the public ; Gray v. Iowa Land Co., S-310. 22. CoNSTEucTioN OF SIDEWALK. A Statute of Massachusetts pro- vided that if the owner of land abutting on a street in a city shall neglect to build against his lot, to the acceptance of the mayor and aldermen, " a sidewalk," with brick or flat stone, supported on the outer edge with edge stone, within thirty days after notice from the city so to do, the city may construct " the same " at his ex- pense. It was held that such an abutter was not liable for such a sidewalk built against his lot by the city, if the notice with which he neglected to comply did not indicate the dimensions of the sidewalk which the city required him to build ; and it is immaterial that the city council had given to a committee authority to set the edge stones at the expense of the city, if the notice to the abutter did not inform him who would set them, nor when nor where they would be set ; Tufts v. City of Charlestown, 2-469. 23. Power to remove awnings. The statute of Massachusetts, which authorizes the surveyors of highways in towns to " dig up and remove whatever obstructs or incumbers a highway or town- way, or hinders, incommodes or endangers persons traveling thereon," empowers them to remove an awning projecting over a sidewalk ; Heald v. Lang, 3-467. 24. Decision final. The decision of such surveyors is final, and will not be reviewed by the court. Id. 25. AuTHOKiTY TO iMPEOVE. The charter of the city of Cov- ington conferred upon the city council " full power and authority to procure all the streets, alleys, market spaces and lanes m said city to be improved, re-improved or repaired, in whole or in part, in any manner they may deem advisable, at the expense and cost of the owners of the property fronting the same, . . ._ and to do, or cause to be done, either, any or all of said kinds of improve- ments with bowlders or any other sort of stone, at the expense and cost of the owners fronting on such streets, alleys, market spaces, public squares, or ground or lanes. And a petition in writing to the said council of the owners of the larger part of the ground be- tween the points to be improved, . . . shall be sufficient to au- thorize the said council to contract for either, any or all of the above mentionedkinds of improvement. . . . Provided, further, that the said council, by a vote of all the members elect, may cause any street etc. to be improved as aforesaid, at the cost and expense of the owners . . . without petition or consent.' Held, (1) that to authorize the apportionment of the expense of im- 614 DIGEST OP THE proving a street upon the lots fronting such street and establish a nen therefor, the ordinance directing the work to be done must have been enacted upon such a petition or by the unanimous vote of all the members elect of the council ; (2) that for work done by order of the council, without such petition or vote, the corporation is liable ; City of Covington etal. v. Casey et al., 2-338. 26. Ke-letting conteaots. "When it becomes necessary to re- let a contract for the improvement of a street in San Francisco, because of the failure of the first contractor to perform the work, the same course must be pursued as to advertising and opening bids as in the first instance ; Meuser v. Risdon et al, 3-101. 27. ; DEMAiiTD. When more than one person, either by original contract or by assignment, is interested in a contract for the improvement of a street in San Francisco, the demand re- quired by statute for the payment of the assessment before the lot can be charged with a lien for the same, may be made by one of the parties so interested ; Gaffney v. Gough, 3-100. 28. Lien; peesonal judgment. An assessment for the im- provement of a street may be charged as a hen on the lot in front of which it is made ; but a personal judgment can not be rendered against the owner of the lot. Id. 29. OcotrPANCT BY CITY. An ,ordinance by the city of St. Louis provided that " whenever the city of St. Louis, as the owner or occupant of property, shall become charged with the cost of any work done," under the provisions of an ordinance referred to, " the auditor shall pay the same and charge it to appropria- tions for streets and alleys." Held, that setting apart a portion of a certain street, by ordinance, as a stand for market wagons during certain hours of the day, did not render the city an " oc- cupant " within the meaning of the first mentioned ordinance ; Bixler v. Hagan et al., 3-585. , 30. Ebmedy ; eepbal. The repeal of a law under which an improvement in a street has been made, after the work has been done, and a precept ordering a sale of the property has been is- sued, does not take away the remedy of the contractor. His claim is merged unto what is equivalent to a judgment and exe- cution levied upon the property, and is a vested right which can not be taken from him ; Palmer v. Stumph, 3-216. 31. CoNTEOL. Municipal corporations may have control of streets for certain purposes, but- unless it is specially granted, they can not, as against a private corporation having a charter from the same legislative power, with permission to lay gas mains in the streets, prohibit the laying of such mains, there being no condi- /tion in the charter of the latter requiring it to obtain permission from the municipahty ; City of Atlanta ». Gate City Gas Light Co., 10-150. AMERICAN CORPORATION CASES, 615 STJBSORIPTION FOR STOCK. 1. Capital stock. Subscriptions make up the capital stock of corporations and constitute a trust fund for the security of the creditors of the company ; Lamar Ins. Co. v. Moore, 6-390. 2. Trust fund. IJnpaid subscriptions constitute a trust fund for the benefit of creditors ; and the subscriber can not be released from his obligation to pay, by any agreement or arrangement with stockholders, to the prejudice of creditors : Moss «. King, 6-514. 3. . Unpaid subscriptions are a trust fund for the pay- ment of the debts of the corporation. Where a corporation has ceased to exist a court of equity will take jurisdiction and compel their payment ; Patterson v. Lynde, 10-239. 4. Peesumption. Subscribers for stock must be presumed to knQw the law of the state and to contract in view of it; Nugent v. Supervisors, S-52. 5. . The presumption is, that each subscriber, for stock, knows at the time of subscription, the contents of the company's charter ; M' Carthy v. Lavasche, 6-419. 6. ■. A subscription to stock must be regarded as having been made, with reference to the powers granted the company ; Ottawa, Oswego Fox Eiv. Val. R.E. Co. v. Black et al., 6-359. 7. Paeticulak foem not eequisite. It matters not how informal the writing may be, if the intent of the parties can be collected from it. If the parties intended to adopt articles of incorporation and become subscribers to the stock, thereunder, they are under obligation to pay according to the contract made by such articles; this without any promise to pay in so many words ; Milton v. Clayton, 6-569. 8. Subscription ; how made. "When the charter of the com- pany defines the terms of subscription for stock, it is only neces- sary that the writing, signed by subscribers, should show an intention to become stockholders and the number of shares sub- scribed for; Gill's administratrix u. Kentucky & Colorado Gold and Silver Mining Co., 3-346. 9. Sufficient. A subscription in the articles of association, with a statement of the number of shares taken placed opposite it, is a sufficient subscription and takes effect simultaneously with the filing of the certificate ; Phoenix "Warehouse Co. v. Badger, 5-588. 10. Manner of making. Subscriptions to the capital stock of a corporation were made on a loose sheet of paper, which was de- posited in a bound book, used as a record of the company. The contents of the paper, with the names of the subscribers and the amounts subscribed, were entered in the book, by the commission- ers appointed to open books of subscription. This was a sufficient subscription to the stock; "Woodruff v. M'Donald et al., 6-193. 616 DIGEST OP THE 11. SuESOEiPTioN msTAiircED. A promise to pay a sum of money, certain, to a corporafion — in this case a railroad company — when a certain amount of the work of construction is done, with an agreement, on the part of the company, to deliver to the party, on payment of the money in full, upon demand, a certificate for a like amount of its capital stock, is a subscription to stock and not a purchase thereof ; Ottawa, Oswego & Fox Eiv. Val. E.E. Co. V. Black et al., 6-359. 12. . A statement read : '' We, the undersigned, having associated ourselves together, for the purpose of organizing a banking association and transacting the business of banking, under chapter 52 of the revision of 1860, do declare and state as fol- lows : . . . . Third, the name and residence of the share- holders of this association, with the number of shares held by each, are as follows," and the association became incorporated. It was held this was a subscription to stock, on the part of sign- ers, and that, as stockholders, each one was bound to pay for the number of shares set opposite his name, in the manner prescribed by the articles ; Milton v. Clayton, 6-569. 13. . An act of assembly of Pennsylvania authorized a county of that state to subscribe for stock in a railroad company and to pay for the same in bonds of the county, bearing interest at the rate of six per cent, per annum. The railroad company, on its part, was empowered to receive such bonds in payment of its stock, and, by another act, to pay to the shareholders entitled to receive the same, interest at the rate of six per cent, per annum on all instalments paid by them, which interest shall be charged to the cost of construction, and continue to pay the same until the road shall be completed." The company accepted the terms as to the county and stipulated to pay interest " semi-annually . . . by applying the same to the semi-annual interest coming due on the bonds so issued by the county aforesaid" during the lifetime of the bonds, viz.: thirty years. Held, (1) in the absence of express authority from the legislature the contract would be ultra vires ; (2) the provision of the authorizing act applied to all stockholders, otherwise, it authorized a fraud on shareholders who paid their money but did not receive interest ; (3) the stipulation to pay interest during thirty years was in excess of the power of the company. Its authority to pay such interest ceased when the road, authorized by its original act of incorporation, was com- pleted, that being the only undertaking enforceable against the company by the commonwealth ; Pittsburg & Connellsville E.R. Co. V. County of Allegheny, 4-92. 14. Peefbbekd stock, a subscription to stock, in the follow- ing words and figures, to wit ; " We, the undersigned, do, hereby, subscribe to the preferred capital stock of the St. Paul, Stillwater and Taylor's Falls Eailroad Company, and promise to pay for the number of shares set opposite our respective names ; these sub- AMERICAN CORPORATION CASES. 617 scriptions not to be binding until sixty-five thousand dollars of said stock is subscribed for. Date : October, 1872 ; name of sub- scriber, Daniel M. Bobbins; No. of shares, 20; par value, $2,000j" taken in the stock subscription book of the company, authorized by it to be opened to receive such subscriptions aiid the issuance of such preferred stock having been duly authorized by it, constitutes — the $65,000 having been subscribed for — a valid contract, on the part of the company, to issue the stock and, on the part of subscribers, to receive and pay for the stock ; St. Paul, S. & T. F. E.E. Co. v. Bobbins, 7-614. 16. Effect of subsoeiption. The taking of stock in a corpo- ration creates a contract, express or implied, to pay for it, in the mode prescribed by the charter ; Gill's adm'r v. Kv. & Col. M. Co., 3-346. 16. Implied promise of stnescBiBBB. A promise to take shares of stock imports a promise to pay for them ; Upton, assiarnee, v. Tribilcoek, 5-111. ' t > S > lY. Obligation of subsceibee. The obligation of actual pay- ment is created, in all cases, by a subscription to a capital stock, unless the terms of the subscription are such as plainly to exclude it ; Busey v. Hooper et al., 4-430. 18, CoHSiDBEATioir. A subscription for stock is a contract, and must be supported by a consideration. The consideration is the right secured by it, of membership and the interests accruing therefrom. When these can not legally result from the subscrip- tion, it is wanting in consideration, as are all notes or other obliga- tions for its payment ; Grangers Life & Health Ins. Co. v. Kam- per, 10-21. 19. . Mutual subscriptions for a common object where money had been expended in the accomplishment of that object are binding, and such subscriptions constitute a valid contract ; Whitsitt V. Trustees etc., 10-223. 20. ; HOW enfoeoed. A subscription made in anticipa- tion of the formation of a corporation, if the corporation is after- ward formed, is binding, and payment of such subscription is enforceable in the name of the corporate body. Id. 21. : . Where a person, for the purpose of aiding in the erection of a building for religious worship, and to form a church society at a certain place, circulated a subscription paper for the purpose of obtaining the necessary funds, payable to himself, in which he subscribed $1,000, collected the subscription a,nd built the church mainly from such subscription, he paying in addi- tional means of his own to complete the same and for repairs, afterward, stated to the church officials that the church was all paid for, held, that what .he expended in building and repairing the church, in addition to his formal subscription, should be re- garded as a gratuity. Id. 78 618 DIGEST OF THE 22. "What is binding. A subscription to the articles of incor- poration, with a statement of the number of shares opposite the name, is a sufficient and binding subscription for the stock and takes e£Eect upon the filing of the certificate ; Phoenix Warehous- ing Co. V. Badger, 8-i76. 23. . Where a subscriber promises, without any condi- tions, to take and pay for a certain number of shares of stock, at their par value, such promise is binding, notwithstanding the amount of the capital stock was not fixed, and the minimum number of shares named in the charter were not subscribed; Skowhegan etc. E.R Co. v. Kinsman, 10-531. 24. In ATUEE OF suBSCEiPTioN. A Subscription to stock is a con- tract between the subscriber and the company, governed by the same rules of honesty and fairness, in its enforcement, that apply to ordinary contracts ; Custar v. Titusville Gas & "Water Co., -t- 101. 26. CoNTEAOT 01" STOCKHOLDER. By becoming a stockholder in a corporation, the subscriber contracts that a majority of the stock- holders shall manage the affairs of the company within its proper sphere as a corporation, but no further. Any attempt to use the funds, or pledge the credit of the company, not within the legiti- mate scope of the charter, is a violation of the contract which the stockholders have made with each other and of the contract rights of the unwilling stockholder; Central R.K. Co. et al. v. Collins et al., 3-224. 26. Liability on subscription. A stockholder is not relieved of this liability by paying in the amount subscribed by him, but it is the interest of each stockholder to see that the whole amount of the capital is paid in and a certificate of the fact made and recorded, as provided by statute, and until this is done, each stockholder is liable, to the amount of his stock, for the debts of the company ; Butler v. "Walker, 5-333. 27. Effect of subscription. The mere fact of subscribing to the stock of an incorporated company does not constitute the sub- scriber a stockholder. Such subscription puts it in his power to become a stockholder, by compelling the corporation to give him the legal evidence of his being a stockholder, upon his complying with tne terms of the subscription ; Busey et at. v. Hooper et al., 28. Stock subscription by realty. Previous to the passage of the general railroad act of February 11, 1 848, of Ohio, a railroad company was chartered by a special act of the legislature, empow- ering the directors to transact all the business of the company, but did not expressly authorize subscriptions to the capital stock in real estate. This privilege was conferred by the 14th section of the act of 1848, upon all railroad corporations then existing that might accept the power so conferred. After the passage of that act, the directors entered on the records of the company a AMERICAN CORPORATION CASES. 619 resolution that subscriptions to tlie capital stock might be made in real estate. The company then received real estate subscrip- tions to its stock, and sold and conveyed the same to bona fide purchasers, with the knowledge of such subscribers and without objection on their part, until many years after, when the stock had become worthless, and the enterprise for which the company was organized had been abandoned. Held, that, in a suit by a subscriber against a vendee of the company, to recover back the land conveyed by him to the company on such subscription, proof of the exercise of the privileges conferred in the 14th section of the act of 1848, by the company, under a resolution of the directors, and with the acquiescence of the parties to the suit, was sufficient evidence, as between them, of the acceptance of the powers conferred in that section, and that the company was thereby authorized to take and convey land received on subscrip- tion to its capital stock ; Goodin v. Evans et al., 3-645. 29. Invalid. An instrument in writing by which the sub- scribers thereto, "mutually agree to purchase and take of the original proprietors," each a certain number of shares of stock of a corporation and to pay a certain price therefor, and in which is expressed, as a condition of the subscription, that a specified num- ber of shares of the capital stock " shall be paid to trustees, to be held by them for the benefit of and subject to the direction of the company," can not be enforced against subscribers, thereto, for want of a valid consideration, where it is not alleged that any thing was done or promised, or that any liability was assumed by any person on account of or relying on the signing or agreement of such subscribers. The fact that others signed the paper, under such circumstances, does not constitute any consideration. The placing of its own stock, by the company, in the hands of trustees, to be held for its benefit and subject to its direction, is not such a benefit to the subscribers, nor such an injury, incon- venience or detriment to the company, as the law considers a suf- ficient consideration for such an agreement ; New York & Min- nesota Gold Mining Co. v. Martin et al., 3-499. 30. Featjd in. where a person signs his name to the subscrip- tion list of a proposed corporation, in the list of subscribers to the stock, but does not carry out any amount of subscription, but, to that extent, leaves a blank, the object would seem to be to ena- ble the promoters of the organization to represent him as a sub- scriber when he is not, and this is a palpable fraud. Any arti- fice, or trick, tending to mislead a subscriber, in this respect, is a moral wrong and a legal fraud. "Wherefore, if a person shall have so signed, it will be held that, as to creditors of the company, he, thereby, implicitly authorized those empowered to take subscrip- tions to fill up the blanks and is estopped from questioning their authority so to do ; Jewell et al. v. Eock Kiver Paper Co. et al., 9-71. 620 DIGEST OF THE 31. Withdrawal of subsceiption. A person subscribing be- fore the organization of a corporation raises a mutuality in his contract which will render him liable to the company after incor- poration. A subscriber to an agreement to take measures to carry out the incorporation, can not discharge himself of liability or repudiate the concern to which he may have thus pledged him- self, nor can he be released from his subscription without the consent of all the co-subscribers ; Hughes v. Antietam Manuf . Co. etc., 3-377. 32. Membeeship of subsoeibee. When a corporation has been created, according to law, the incorporated associates who hold the corporate franchise are members of the corporation ; and a subscriber for shares, although he has received no certificate of stock, or the stock has not even been divided into shares, is a member of the corporation and a stockholder within the meaning -of the statute of Massachusetts making the stockholders of the corporation personally liable for its debts ; Harris v. Anglo Saxon Petroleum Co., 3-408. 33. Subsoeibee not a stoceholdee when. A subscriber to the capital stock who never paid any thing for the stock and suf- fered forfeiture for non payment, can not be regarded as a stock- holder in any such sense as to permit him to object to any dispo- sition the court may make of the assets of the corporation ; St. L. & Sand. Coal Co.?;. Sand. Coal Co., JO-292. 34. ; DELiVEET. Defendant, being the president of a cor- poration, had, with others, signed a paper agreeing to take cer- tain shares of stock ; retained the paper in his possession, but it was produced at corporate meetings, and was at some times in the Eossession of the secretary. It was held that such retention by im, he being the chief oflBcer of the company, did not tend to show he had not become a stockholder as against a creditor of the corporation ; Corwith et al. v. Calver, 5-244. 35. Implied peomise. Whether or not there is any express promise to pay for stock, at the time of subscription, the law im- plies such promise, by the acceptance of such stock, on the part of the holder ; Union Mut. Life Ins. Co. v. Frear Stone Manuf. Co. et al., 6-481. 36. Liability upon. Upon subscribing each party becomes a several debtor to the company, as much so as if he had given his promissory note for the amount of subscription ; Hatch v. Dana, 6-63. 37. . A subscription agreeing and binding subscribers to take the amount of shares set opposite subscriber's name, imports no promise, on his part, to pay for them directly. He can be neld for their price, in such case, only under the contract taken in con- nection with the charter ; Belfast & M. L. R.R. Co. v. CottreU, 7-276. AMERICAN CORPORATION CASES. 621 38. Promise to pat. Where the stock of a corporation is de- fined in its charter or articles of association, and is divided into shares of a definite amount in money, a subscription for shares is equivalent to a promise to pay therefor, as it is lawfully called for, to the amount of the face value of the shares. The subscrip- tion inures to the benefit of the corporation when its organization is perfected ; Miller v. "Wild Cat Gravel Eoad Co., 7-58. 39. . The original holder of stock in a corporation is liable for unpaid assessments thereon, without an express promise to pay them. Any contract between the corporation, or its agents, and the stockholder, limiting his liability therefor is void as to creditors of the company and therefore, as to the assignee of a company in bankruptcy ; Upton, assignee, v. Tribilcock, and Web- ster V. IJpton, assignee, 5-111, 120. 40. Not to be qualified bt ageebments of subsceibees. The legal effect of subscriptions to the capital stock of a private joint stock company, which are absolute and unconditional on their face, can not be qualified or limited by any general understan- ding among the subscribers that the same should be abandoned and not collected unless a given amount was subscribed, as against creditors of the company, for debts incurred after a permanent organization of the corporation, by the election of directors, and engaging in the enterprise contemplated by the charter and or- ganization; Hickling v. Wilson et al., 9-177. 41. Secret ageeement. A secret agreement made with a sub- scriber to the stock of a corporation, that he shall pay only a part of his subscription, is fraudulent as to the other subscribers, and void, and the subscription will be regarded as valid for the amount subscribed; Galena & S. W. E.E. Co. v. Ennor, 10-285. 42. Peivate conditions. Creditors of a corporation can not be affected by mere private understandings between the subscri- ber and the subscription agent of the company, by which the former is sought to be exonerated from the performance of that which his subscription, in terms, requires ; Jewell et al. v. Eock Eiver Paper Co. et al., 9-71. 43. . That the promoter of a corporation should enter into private agreements with some of the subscribers to its stock, which are inconsistent with the contract of subscription actually signed, is not to be tolerated in the law ; all such agreements are inoperative and void as to other subscribers to the stock and creditors dealing with the company on the faith of its capital sub- scribed. Td. 44. . Eepresentations, by an agent of a corporation, as to the non assessability of its stock beyond a certain fixed per centage of its value, constitute no defense to an action, against the holder of the stock, to enforce payment of the entire amount subscribed, where the subscriber has failed to use diligence to ascertain the 622 DIGEST OP THE truth or falsity of such representations; Upton, assignee, v. Tribilcock, 5-111. 45. Agency m subsceiption. Where one has subscribed for stock as the agent of another, and such subscription has been ac- cepted, by the corporation in good faith; and, the company has become duly incorporated and organized and, relying upon such subscription, has incurred liabilities etc., the parties subscribing will be personally liable to the corporation should it appear the subscription was without authority of the party named as prin- cipal ; Baile v. Calvert College Educat'l So., 7-379. 46. . The owners of undivided interests in property hav- ing agreed, among themselves, to form, immediately, a special partnership for the purpose of improving the same until a charter could be procured and an organization perfected under the same, when the property was to be transferred to the corporation so formed and each owner to take stock in proportion in the pro- perty thus to be conveyed, it was held that, upon the formation of the corporation, as contemplated, and the conveyance of the legal title to it, the secretary of the association was authorized to sub- scribe the name of the owner, of an interest, to the stock of such corporation when it was organized; Marseilles Land & "Water Power Co. v. Aldrich, 6-406. 47. Mode of subsceiption. A meeting was held in the town- ship in which defendant lived, at which he was present. It was held for the purpose of procuring subscriptions to the stock of the plaintiff company. The objects of the subscription and its tenns and conditions were fully made known and those preseut were solicited to subscribe. The names of subscribers and the amount of their subscriptions were written down in a small book, or on sUps of paper, by the parties soliciting, they being au- thorized so to do by the subscribers. Afterward these subscrip- tions were transcribed by an officer of the company into a proper book, under authority conferred at the meeting. It was held that the book became original evidence of subscription and that a sub- scription so made was binding ; Iowa & Minnesota R.E. Co. v. Perkins, 3-320. 48. Maeeied women. Even if, in Illinois, a married woman can enter into a contract so as to be bound as a member of an asso- ciation for business purposes, yet her husband can not, without authority from her, make a binding contract for her by signing her name to articles of association ; Boyd v. Merriell, S-260. 49. Peioe to incoepoeation. A subscription for shares of stock made prior to the organization of the corporation to be promoted is inchoate and incomplete until organization complete or a mutual agent constituted to represent the association of individuals ; Athol Music Hall Co. v. Carey, 7-441. 50. Agekement to subsoeibb. An agreement, or written pro- mise to subscribe for stock, in the future, upon the happening of an AMERICAN CORPORATION CASES. 623 event, as the organization of a corporation is not a subscription to stock ; Mount Sterling Coal Eoad Co. v. Little, 7-181. 51. Stjbsoription befoee license. An executory agreement to take stock in a manufacturing company made before necessary license is issued is not a subscription to stock ; Stowe v. Flag;e et al, 5-292. ^^ 52. . Subscriptions can not be taken (in the state of Micbigan) or if taken create no obligation, until by-laws, directing the manner of subscribing, have been adopted, if the charter pro- vides that the persons subscribing the original articles and those who subscribe to the stock in a manner to be provided by the by- laws, shall be a body corporate ; CarKsle v. Saginaw Yalley & St. Louis E.K. Co., 5-456. 53. As BETWEEN iNDrvmcTALS. The promise of each subscriber, " to and with each other," in an agreement entered into before or- ganization of a corporation is formed, is not a contract capable of being enforced or intended to operate literally as a contract to be enforced between each subscriber, present or future ; Athol Music Hall V. Carey, 7-441. 54. On aeticles or association. A subscription for shares made, upon articles of association, in contemplation of being in- corporated under a general incorporation law, is binding, and may be enforced after the organization of the company ; Hughes v. Antietam Manufacturing Co. etc., 3-377. 55. Before organization. Where persons have signed an agreement to take and pay for a number of shares, set opposite their respective names, of the capital stock of a corporation to be thereafter organized under the provisions of a general law autho- rizing the incorporation for the purpose of carrying on a manu- facturing business, on conditions therein specified, such agreement is binding on the subscribers ; Ashuelot Boot & Shoe Co. v. Hoit, 8-383. 56. . Where several persons jointly undertake to sub- scribe to the capital stock of a corporation to be organized for the prosecution of a common enterprise, which has for its object the advancement of the interests of the several subscribers, the pro- mise by each is a good consideration for the promise of others ; and, it is too late, after the act of incorporation takes place, to with- draw from the association, whether the work contemplated has, or has not, been undertaken ; Twin Creek etc. Turnpike Koad Co. v. Lancaster, 7-189; Same «. Eenneckar, 7-189. 57. . A contract to subscribe for stock of a corporation to be brought into existence in the future, does not estop the maker thereof to deny the existence of the corporation ; Eikhoff et al. V. Brown's Eotary Sewing Machine Co., 7-100. 58. . A written agreement to take and secure a certain number of shares in a corporation, before the organization of such corporation, is an ofEer, or proposal, to take that number of shares 624 DIGEST OP THE and subscribers are not thereby constituted stockholders in the corporation upon its organization. Without accepting the pro- posal so made tlie company is powerless to compel the subscriber to take the stock ; and, the subscriber can not compel the issue, to him, of a certificate of stock save upon tender of payment, or se- curity therefor ; Starrett v. Hockland Fire & Mar. Ins. Co., 7- 271. 59. Acceptance of pkoposal to take stock. By the preparation of a list of amount of stock taken and secured, in a corporation, containing the name of a subscriber who signed prior to organi- zation, entering that list in the stock ledger of the company, and by returning such list as required by law, the company recognizes and holds out such subscriber to the world as a stockholder and, thereby, accepts his proposal to take stock. Otherwise, if it ap pears that these acts were done under mistake of fact. Id. 60. . Pending the statutory proceedings for the incorpo- ration of the plaintiff company, defendants, with others, signed and executed a written instrument, in terms as follows : We, the subscribers, each for himself and not for the others, do, hereby, subscribe and agree to pay for the number of shares of the capital stock of the corporation known as the Red Wing Hotel Company, set opposite our respective names, said shares to be . . . paid for at such times and in such amounts as the board of directors of said corporation may, from time to time, require ; . . . pro- vided, nevertheless, and our subscription is expressly upon the condition that the hotel to be built by said corporation shall be by it built and located upon . . . block 44 in Red Wing, otherwise this instrument to be and remain void. Upon the com- pletion of its organization, this instrument and the subscriptions it contained were reported to the company and accepted by it', at the first meeting of its board of directors. Held, (1) that defen- dants' subscription took effect, as an agreement with the company, at the time of its acceptance by the latter ; (2) that defendants then became obligated to take the number of shares so subscribed for by them and to pay therefor in such instalments and at such times as the board of directors might duly require ; (3) that the building of the hotel was not a condition precedent to the right of the company to assess the stock and collect the assessment ; Red Wing Hotel Co. v. Friedrich et al., 8-1. 61. . Defendant, with others, subscribed an instrument, written in a pocket memorandum book/, which stated that " in consideration and for the purpose of becoming stockholders in " the Buffalo and Jamestown Railroad Company, they " do hereby subscribe and take the number of shares ... of the capital stock of said company set opposite their respective names " ; and they agreed to pay therefor " as required by said company." At that time the company was not organized. Subsequently, articles of association were filed and plaintiff was organized, under the AMERICAN CORPORATIOK CASES. 635 general rail road act (Laws of 1850, ch. 140). Defendant was not named in the articles, as one of the corporators. After the organi- zation of plaintiff, defendant's name was entered as a stock- holder on its stock ledger. Calls were made of instalments upon its stock, of which notice was given to defendant, and, in response, he paid two instalments, of ten per cent. each. In an action to recover the other instalments called for, the court held there was a substantial compliance with the provision of the act, quoted infra (§ 4), in reference to subscriptions for stock, wherefore de- fendant was liable ; and it seems that it was not intended, by such provision, to prescribe a fixed statutory mode of making a subscription, and, that any contract of subscription, good and valid at common law, is valid notwithstanding it; Buffalo & Jamestown R.R. Co. v. Gifford, 9-605. 62. AccEPTAiTCE OF PROPOSAL TO TAKE STOCK. Where there is an agreement to take shares of the stock of a corporation to be formed and such corporation is, in fact, organized, the correspond- ing agreements of other subscribers, the organization of the com- pany and the allotment to the promisor of the shares for which he has subscribed, furnish sufficient consideration for his promise to take and pay for shares ; Athol Music Hall Co. v. Carey, 7—441 . 63. . When the organization of an intended corporation is completed, the contract of persons subscribing for shares of its stock will be construed to have legal effect according to its pur- pose and intent. Id. 64. . Where an agreement of association contemplates the organization of a corporation and refers the payment of subscrip- tion for stock to the proper officers of such corporation when or- ganized, the company is constituted payee and promisee under the agreement. Id. 65. Defective aoceptajstoe. A number of persons signed a paper purporting to be an agreement to take shares of the work- ing stock of a corporation, which, the paper recited, was about to be formed. Subsequently the signatures of the president and -secretary, and common seal of a corporation of the name used in the paper were added. Action was brought to recover from one of the subscribers the amount named as his subscription in the paper. The complaint did not show the date of the company's incorporation. It was not shown that either of the subscribers joined in the organization or incorporation of the company, or was a member thereof, or that it owned any of its stock. The plaintiff corporation could not recover ; California Sugar Manuf. €o. V. Schafer, 6-271. QQ, . If the paper above described were signed after the incorporation of the company was effected, still, the corporation had no power to treat one subscriber differently from another ; wherefore, as this was not an action to recover on an assessment ■of stock lawfully made, there could be no recovery. Id. 79 636 DIGEST OP THE 67. Conditional stjbsceiption. The condition upon whicli a. subscription to stock is made, if it be lawful, must be fuEy com- plied with to authorize an assessment ; Ticonic Water Power & Manuf. Co. v. Lang et al., 5-414. 68. . It is not within the power of a corporation to make any agreement with a subscriber to its capital stock, in regard to his subscription, in violation of its charter ; Baile v. Calvert Col- lege Educat'l So., 7-379. 69. . A subscription to stock of a corporation upon con- ditions not expressed in the writing, is a fraud upon the other subscribers, and the subscription should be enforced without re- gard to it ; Corwith et al. v. Culver, 5-244. -70. . Where one subscribes for stock, the corporation to be organized when subscriptions to a certain amount named are secured, this is a binding stipulation. An organization being com- pleted in advance ef that 6vent happening the subscriber is re- leased, at his option, from proceeding further in the business ;. Santa Cruz E.R. Co. v. Schwartz, 6-243. 71. . Where a subscription is made to the capital stock of a corporation — in this case an insurance company — upon the condition that the amount thereof unpaid shall not be payable until a certain specified amount has been subscribed, such condi- tion is a condition precedent, performance of which is essential before the company can enforce the payment of a note given for such subscription ; M'Oann v. American Central Ins. Co. of St. Louis, 8-303. 72. -. A subscription to take a certain part of the first mortgage bonds of a railway company, which contains a clause that it is not to be binding unless 100 of such bonds are subscribed for, is not binding until 100 of the bonds are so subscribed ; Galena & S. W. R.R. Co. v. Etinor, 10-285. 73. . A subscription to be paid for when the track of the road shall be graded to a point within five miles of a village named, such subscription to be in force only until September 20, 1879, can not be enforced without performance of the condition before the date named. Id. 74. . One subscribed to an agreement, to take the amount of shares set against his name in the capital stock of a railroad company, agreeably to foregoing conditions; one condition was no assessment, except for preliminary survey and location, should be made nor any work upon the road commenced until the full amount was secured for the completion of the road to a given point. The subscriptions were less than the actual cost. There could be no recovery; Belfast & M. L. E.E. Co. v. CottreU, 7-276, 75. . Where subscribers to the capital stock of a company, which they sought to incorporate, agreed that their subscriptions should be subject to a call of ten per cent, so soon as the corpora- tion should be organized, their undertaking was some thing more AMERICAN CORPORATION CASES. 627 than an agreement to subscribe. It was, in fact, a subscription, subject to no other condition than that the company should be organized. So soon as that was completed and the call made it was the duty of subscribers to pay ; Twin Creek etc. Turnpike Road Co. V. Lancaster, 7-189 ; Same v. Kennekar, 7-189. 76. Violation of ageeembnt. If a special agreement by which stock subscribed for was to be treated and registered as fully paid up, is to be rejected in a suit by the corporation to recover upon the original subscription, the law will supply, by intendment, no special terms by which the ordinary legal duties of the party claiming the benefit of the contract, will be dispensed with ^ Granite Roofing Co. v. Michael, 7-407. 77. Waiver of oondition. In an action by the receiver of an incorporated company, against a stockholder thereof, to recover the amount due upon his subscription to the capital stock, it is too late for the stockholder to deny his liability on the ground that the whole capital stock was not taken, it appearing that he was and continued to be a stockholder during several years — in this case three — that he had regularly paid his dues and received his proportion of the profits earned by the company, and had given power of attorney to another to vote his shares at all meetings ; Musgrave v. Morrison et al., receivers etc., 7-411. 78. . In such a case actual knowledge of the fact that but part of the stock had been subscribed was neither necessary to prove a waiver or an estoppel. Id. 79. Parol evidence to vary. "Where a subscription to the capital stock of a corporation is absolute on its face, parol evi- dence is inadmissible to explain it — as to show it was conditional ; Corwith et al. v. Culver, 5-244. 80. Calls. "Where, by the terms of subscription to capital stock, it is to be paid in instalments within twenty days after call by the proper authorities, a subscriber is entitled to twenty days' notice of each call before he can he sued for the instalment due under such call ; Cole v. Joliet Opera House Co., 6-357. 81. Conditional. "Where a subscriber to stock of a corpora- tion subscribes, engaging to pay the amount which, at time of subscription, is left unpaid " on the call of the directors, as they can be had, it must be shown the required call was i^iade ; Lamar Ins. Co. V. Moore, 6-390. 82. Preliminary payments. A payment of a certain propor- tion of the capital stock of a corporation subscribed for, required, by law, to be made "in cash," is sufficiently made, if made, m good faith, by checks drawn by the subscriber, payable in pre- senti and drawn against a sufficient sum, on deposit, to meet them ; People etc. v. Stockton etc. R.R. Co., 5-142. 638 DIGEST OF THE 83. Payment of peb centage on. Where the charter of a cor- poration does not require the payment of a certain amount at the time of subscription made, but the agreement of subscription does, the failure to make such payment does not vitiate the sub- scription ; Water Valley Manuf. Co. v. Searman, 8-32. 84. Payment not in money. Transactions under statutes, au- thorizing corporations to purchase property and issue stock in payment for it, or to accept property in payment of subscrip- tions to capital stock, are upheld only where the agreement to purchase property and pay for it in stock has been made in good faith, and the property taken in payment of stock subscriptions has been put in at a fair bona fide valuation; Wetherbee v. Baker et al., 9-547. 85. . Courts have inflexibly enforced the rule that pay- ment of stock subscriptions is good, as against creditors, only where payment has been made in money or what may be fairly considered as money's worth. Id. 86. . A statute enacted that payment of the capital stock of corporations organized under that act might be made either in money or in land ; the land to be appraised by the board of direc- tors, and taken at such value. This provision does not supersede the obligation of subscribers to pay their subscriptions, as they appear in the certificate of organization ; it simply provides the manner in which payment shall be made. In a suit by creditors against a stockholder, to compel him to pay his subscription, the inquiry is, has he paid in money or in the money's worth? In such case the directors, in the appraisement of land taken in pay- ment of subscriptions, act in a fiduciary capacity, and are bound to discharge the duties of the trust with fidelity. Id. 87. ScBSOEiPTiON FOE CASH PAID IN LABOR. Subscriptions to stock were made it being specified, in the agreement, such* sub- scriptions should be " payable in cash." The fact that, afterward, labor was received by the corporation in lieu of cash, does not invalidate the agreement or excuse subscribers from the perfor- mance of their promise ; Ashuelot Boot & Shoe Co. v. Hoit, 8-383. 88. Settlement in depreciated money. It is ultra vires the corporation to receive the amount of subscriptions to stock in any depreciated currency — in this case confederate scrip — and a subscriber who is called upon to pay in full, but who might have paid in such depreciated currency, not being bound to pay save upon regular and lawful assessment, is not precluded from objec- ting to such illegal action. Such illegal payments are no pay- ment, wherefore the action is no defense in behalf of one sued upon his subscription; but, in another proceeding, on showing damage to himself, such stockholder can cause the parties sup- posed to have been released to pay up, in good money, all the loss which accrued by payment in bad; Macon & Augusta Ey. Co. V. Vason et al., 7-4. AMEEICAN COEPORATION CASES 629 89. Sham payment. Unpaid subscriptions to the capital stock of a corporation constitute a trust fund, for the benefit of the general creditors of the corporation. This trust can ^ not be de- feated, or the fund impaired, by a simulated or pretended pay- ment for the stock taken, nor by any device short of actual payment in good faith ; Crawford et al. v. Kohrer et al., 9-407. 90. — — . Any arrangements among the subscribers for stock, or those in charge of the affairs of a corporation, by which the stock is but nominally paid for, whether in money or property, the corporation not, in fact, receiving the benefit of the price in good faith, will be regarded as a sham, and not as a valid, pay- ment, as against the creditors of the corporation, however it may be regarded as between the corporation and the subscriber. Id. 91. Simulated payments. The officers and managers of a corporation are trustees of the subscriptions to its stock. They hold them as a trust fund for creditors. This trust can not be defeated by any simulated payment of the stock subscription, nor by any device short of actual payment in good faith ; Wether- bee «, Baker et al., 9-547. 92. Instance. Five persons agreed for the purchase of a tract of land and organized themselves into a aorporation, under a statute empowering the incorporation of land improvement com- , panics. Such corporation was authorized to receive payment for stock in land, to be appraised by the directors. In the certificate of incorporation the capital was fixed at $100,000. These persons subscribed for all the capital stock and became the directors of the company. The consideration of the purchase was $50,000 ; the deed was made directly to the corporation and it gave its ob- ligations for the purchase price. The directors then appraised the land at $100,000 and credited $50,000 of that valuation as a payment of fifty per cent, on the subscriptions to the capital stock. The lands were not worth to exceed the original purchase price, and the company acquired no other property. Suit was brought by a creditor of the corporation against the subscribers to the capital stock, to compel them to pay their subscription to satisfy debts of the corporation. It was held that, as against creditors of the corporation, the allowance of the credit on the subscriptions of the stockholders was invalid, and the stockholders were hable for the whole amount of their subscriptions to the capital stock, as they appeared in the certificate of organization. la. 93. Default in payment foe stock. The law raises a promise to pay for stock subscribed for as it is lawfully assessed and deman- dable. The common law affords a remedy for recovery by action of assumpsit ; subsequent enactments authorizing forfeiture and sale of the stock are cumulative as to the remedy ; Hughes v. Antietam Manuf. Co., 3-377. 94. NoN payment. The subscribing for shares and the payment of a per centage only of their par value thereon, does not vest any 680 DIGEST OF THE title, to the shares, in the subscriber ; Chetlain, adm'r, v. Eepublic Life Iqs. Co. et al., 6-39T. 95. EQtrTTT WILL BNFOEOE PAYMENT. It is Well Settled^ that a court of equity may enforce payment of stock subscriptions though there have beer no calls, for them, by the company ; Hatch v. Dana, 6-63. 96. Collection of amount. One wno receives a certificate of stock at a given price per share becomes liable to pay therefor when called upon ; and, it is no defense if the whole amount named in the articles of association, is not subscribed ; Chubb v. Upton, 6-23. 97. Unpaid strBSOEiPTioN ; lien upon. Where a railroad com- pany assigns unpaid subscriptions to its stock to its president, in trust for certain definite purposes which have been fulfilled ; and the company being insolvent, one of its judgment creditors brings an action under the 4:58th section of the code, to subject the amount due on such unpaid subscriptions to the payment of his judgment : Held, that, as to the amount due on such subscriptions after the fulfillment of the trust and the payment of all costs and expenses of its administration, the trustee is not entitled to retain from such fund the .amount of indebtedness of the company to him, for his salary as president thereof, the plaintiff by his action having established a specific lien on the fund as against less dili- gent general creditors, and being entitled in equity to a prefer- ence over them in its distribution ; Dunbar v. Harrison et al., 3-634. 98. Assignable quality. Where the amount due on a stock subscription has been regularly called in, by assessment, and stands as a liquidated demand on which suit will lie, it would seem that the claim can be assigned as well before judgment as afterward, though the assignment, like all assignments of ehoses in action, will be subject to equities and can not deprive the debtor of any rights of a stockholder ; Wells et al., surety for costs, v. Rogers, 9-487. 99. . Unpaid balances upon stock subscriptions are cor- porate assets and are assignable ; Shockley v. Fisher, 9-520. 100. . Unpaid balances on subscriptions for stock, being properly assigned, pass to the assiguee, who may collect them. Id. 101. Conditions peecbdent to suit upon. The promises of the respective parties to such a contract are concurrent and de- pendent. Neither can require the other to perform without per- forming, or offering to perform, on his part. A complaint in an action by the company, upon such a subscription, which does not aver that the company has issued, or offered to issue, the stock to the defendant is insufficient ; St. Paul, S. & T. F. E.E. Co. v. Eobbins, 7-614. 102. . A subscription to take stock, agreeably to the conditions therein expressed, is an agreement to take shares upon AMERICAN CORPORATION CASES. 631 a condition precedent. To authorize a recoverj of the price, it must be satisfactority shown the condition has been performed ; Belfast & M. L. K.E. Co. v. Cottrell, 7-276. 103. Tender or certificate. Upon a suit to recover the value of stock subscribed for, it is not necessary to aver the ten- der of certificate of shares in the absence of stipulation made upon subscription to the contrary : Miller v. "Wild Cat Gravel Koad Co., 7-58. 104. Conditioned on amount to be subscribed. In an action on a subscription conditioned upon a certain amount being sub- scribed, the plaintiff is bound to show affirmatively that the amount named had been subscribed before suit ; Galena & S. W. E.E. Co. V. Ennor, 10-285. 105. . Where the capital stock of a manufacturing cor^ poration is fixed at a certain number of shares of a certain value per share no action will lie, against a subscriber, to enforce the payment of his subscription, until the whole capital stock is sub- scribed ; Garling v. Baechtel et al., 7-345. 106. Assessment as precedent to action. By the terms of a subscription to stock, the subscriber agreed to take the stock and to pay all charges and assessments regularly levied or assessed by the board of directors. No assessment or call was made. In an action to recover the whole amount of the price of the stock the court of errors and appeals of New Jersey held, that, by the terms of the subscription, the company could recover only after assessment or call; Grosse Isle Hotel Co. v. Exec'rs of Miles I' Anson, 8-407. 107. . When, by the contract of subscription for stock the price thereof is payable in instalments, as called for by the board of directors, such caills must be clearly proved as to the ' time of the call and the amount called in and recovery is to be liinited to the aggregate amount of the calls, so far as not paid in ; South Georgia & Florida E.E. Co. v. Ayres, 6-349. 108. Proof of notice. Where a subscription to stock is pay- able in instalments, within twenty days after call by the properly authorized agents, in a- suit to recover balances due upon the sub- scription it is essential to prove that notice of each call was given ■ the appellant, of twenty days length of time and that notice was mven twenty ddys before suit brought; Cole «. Joliet Opera House Co., 6-357. 109. When action lies on. An action may oe Drought upon the' original subscription and it is not necessary to aver calls, at least, after the lapse of two. years from the time of incorporation, in the absence of condition contained in the subscription _ and where the statute requires the whole capital stock to be paid m within two years; Phoenix Warehousing Co. w. Badger, 8-476. 110. Solvency of subscribers. In the absence of statutory requirement as to the solvency of subscribers, as an element of 633 DIGEST OF THE legal organization, it is not necessary, in a suit to recover the value- of stock subscribed for, to aver and prove that all subscribers were, at the time of the subscription, solvent ; Miller v. Wild Cat Gravel Eoad Co., 7-58. 111. Condition fulfilled befoeb strrr. Where a subscription to stock is made subject to a condition precedent and suit is- brought upon the same to recover the amount thereof, the right of recovery must exist at the time the action is commenced. It will not avail the corporation that the condition has been complied with after suit brought, but before trial ; M'Cann v. Amer. Centr. Ins. Co., 8-303. 112. Repudiated condition. If a corporation could be al- lowed to repudiate and discard an arrangement upon which thfr stock was taken, rated among the original subscribers and settled for in a manner and extent to which it has been settled for, prior to its entry upon the corporate books as paid up stock upon which certificates issued,upon the ground that such agreement and dealing- among the stockholders operated as a fraud upon the corporation, it could only be done by treating the parties as ordinary subscri- bers for the stock ; Granite Roofing Co. v. Michael, 7-407. 113. Compulsory payment of. The capital stock of a corpora- tion subscribed is a substitute for the personal liability of partners in ordinary co-partnerships; and creditors are entitled to a bona fide exercise of the compulsory powers of the corporation to com- pel subscribers to pay in their subscriptions ; Wetherbee v. Baker et al., 9-547. 114. Right of action on. Where a person enters into a vahd contract with a corporation, by which he agrees to subscribe for a certain number of shares of stock in the company, upon his fail- ure and refusal to comply with that contract, without fault on the part of the corporation, the latter will have a right of action to- recover such damages for the breach of the contract as it may have sustained ; Quick et al. v. Lemon, 9-204. 115. Remedy against delinquent. The remedy against a de- linquent subscriber is to enforce paynlent by a judgment for the money and not by a forfeiture or sale of the stock ; Gill's admin- istratrix V. Kentucky etc. Min. Co., 3-346. 116. . The corporation, consisting of stockholders who have subscribed an agreement to take and pay for shares of its stock when thereafter organized, having become organized, can maintain a suit against a delinquent subscriber to enforce the pay- ment of his subscription ; Ashuelot Boot & Shoe Co. v. Hoit, 8-383. 117. Proof of subscription. It is not necessary to prove that a subscription to capital stock was made in the handwriting of the stockholder. If it was made by his authority, or if made without his authority and he afterward ratified and adopted it,, this is sufficient ; Musgrave v. Morrison et al., rec'rs etc., 7-411- AMERICAN CORPORATION CASES. 63a 118. Proof of subsceiption. A subscription to capital stock of a corporation is snflaciently shown by proof of the entry of the person's name on the proper books of the corporation as a stock- holder, the issuing to him of evidence thereof, the payment by him of his dues, the receipt by him of profits earned, or supposed to be earned, and the appointment by him of a proxy to vote at meetings of the stockholders. Id. 119. • The books for the subscription to stock, opened and kept by commissioners, appointed under a general incorpora- tion act to receive subscriptions to stock, are in the nature of of- ficial registers, and are competent evidence to prove how muck per mile has been subscribed to the capital stock ; Monroe v. Y. W. & Sag. E.E. Co., 4-482. 120. Evidence of assent to acoeptaitoe of charter amend- ment. The burden of showing assent of the stockholders to an act, imposing new burdens, is upon the corporation or party seek- ing to enforce the liability. It will not be presumed from the mere fact that bonds of the company were issued, in pursuance of the statute, by the directors, and their amount^ afterward as- sessed upon its members by a meeting of stockhol'ders, at which the party sought to be charged was not present ; Ireland v. Pal- estine, JBraffitsville etc. Turnpike Co., 4r-l. 121. Estoppel. Semble, after the certificate of incorporation,, recpired by a general law for the incorporation of companies, has been recorded, the company organized, and, liabihties incurred, defects in the certificate of incorporation can not be set up as a defense by a subscriber, in an action against him, by the corpora- tion, to compel payment by him of an assessment of his shares of stock; Baile v. Calvert College Educational So., 7-379. 122. Waiver of illegality of meeting to organize. A sub- scriber to stock of an incorporated company, being a director- participating in the calling of a meeting for the permanent organization of the corporation, who attends such meeting, votes as the owner of stock, is elected a director at that meeting,, and acts as such director, waives his right to object to the legality of the organization effected at the meeting, and thereby to avoid payment on his subscription on the ground of the insufficiency of the notice of the call of the meeting ; Bucksport & B. K.E. Co. V. Buck, 7-318. A T, • .■ 123. Admission of corporate organization. A subscription read : '" We, the undersigned, agree to subscribe the number of shares, of $50 each, to the capital stock of the Mount Sterimg Coal Eoad Company." This is a direct undertaking to pay an incorporated company a sum certain; it admits the existence of the corporation and its organization ; Lail -o. Mount Sterimg Coal Eoad Co., 7-172. -u^+^+i,^ 124 Estoppel to deny existence. One who subscribes to the- capital stock of an organization which has attempted, irregularly, 80 ■634 DIGEST OP THE to create itself into an incorporated company and acted as such, is estopped to deny the regularity of the organization ; Chubb v. Upton, 6-23. 125. Estoppel to dent existence. In an action to recover an unpaid balance of subscription to the capital stock of a corpora- tion, one who has subscribed, actively taken part in the organiza- tion and management of the company, become one of its trustees and dealt with it as a lawful corporation is estopped to deny its lawful existence ; Phoenix 'Warehouse Co. v. Badger, 5-588. 126. . Where subscribers to the stock of a private corpo- ration meet, and elect a board of directors, and thereby effect a permanent organization, and engage in the corporate enterprise for several years, by which debts are incurred, voting and acting as bona fide subscribers, they will not be allowed to dispute the bind- ing effect of their subscriptions, or the legality of the organization of the corporation as against third persons who give credit to the •company, ,on the faith of its being legally organized ; but will be required to pay their subscriptions in favor of creditors, who are entitled, in eauity, to be subrogated to the rights of the compaily ; ■ Hickling v. Wilson «t al., 9-177. 127. . In an action to recover an unpaid balance of a sub- scription to the capital stock of a manufacturing corporation, w;hei'e it appears that defendant subscribed for the stock, acted as a trus- tee of the corporation, took part in its management and contracted witU it as a corporation, he can not dispute the validity of the in- corporation ; Phoenix Warehouse Co. v. Badger, 8-476. 128. SuBsoEiBEE ESTOPPED. Where a stockholder in the old company was instrumental in getting a receiver appointed arid to have a sale made to a new company, and becaine a stockholdfer in the new company, knowing the purpose of its organization, he is estopped from asserting any interest, as a stockholder of the old company, in the assets as against the new company ; St. Louis & Sandoval Coal Co. «. Sandoval Coal Co., 10-292. 129. Immateeial evidence of defense. In a suit to recover the amount of a subscription to capital stock, evidence of its value, •or the value of any other stock, is inadmissible ; nor is it necessary to show a certificate of stock tendered ; or that the corporation ■ has received the amount of stock authorized by charter ; or — in the absence of a plea in abatement — that the company was orga- ' nized and still exists as a corporation ; South Georgia & Florida E,.E. Co. V. Ayres, 6-349. 130. Release of sfbsceibee. The directors of a corporation can not release a subscriber for stock from his liability as a stock- holder ; Choteau Ins. Co. v. Floyd, 8-283. 131. Pleading a eelease. A plea, by a subscriber to the stock of a corporation, in defense of an action to recover the amount of his subscription, that he has been released from his liability by the resolution of the directors is defective where it does not aver that AMERICAN CORPORATION CASES. 635 there was a consideration to support the resolution; Zirkell v. Johet Opera House Co., 6-363. 132. Pleading a release. One pleading a release by the T)oard of directors of his liability upon his subscription to stock, must, at least, aver that the corporation was free from debt at the time such release was executed, inasmuch as such directors could not so release if the company was indebted. Id. 133. Teansfer. Defendant having subscribed for stock of a corporation, a subsequent arrangement was made, with the approval of the corporation, that he, defendant, should transfer a portion of his stock to another — one Egerton — the latter delivering to the corporation his notes therefor, indorsed by defendant, the stock to be transferred when the notes were paid. The notes, so given, were renewed from time to time and one of the renewals was transferred by the corporation to one Power, as collateral security for a claim against the company. Power returned it to the corpo- ration and, with his consent, it was produced and offered for can- cellation on the trial. The court of appeals of New York held defendant was not entitled to have the .amount thereof deducted from the amount due on his subscription ; Phoenix Warehouse Co. V. Badger, 8-476. 134. Cancellation. The cancellation of stock by the secretary of a corporation will not be effectual to release the subscriber frorn liability, if any exists, for unpaid instalments due on the stock. In this respect it is immaterial whether the cancellation was by or without direction of the board of directors. It is not within the power of the secretary or the board of directors to release a stockholder from the payment of his subscription to the stock of the corporation ; Rider v. Morrison et al., rec'r etc., 7-415. 135. NoN PAYMENT BY co-STOCKHOLDEES. An objectiou that other stockholders who have not paid should have been made^ parties, is not available on appeal where the objection was not raised by answer and where there were no findings or requests to find in reference theretb, or exceptions raising the point ; Phoenix "Warehouse Co. v. Badger, 8-476. 136. Lawful iNCOEPOEATioN. When a suit is brought to re- cover upon a subscription to stock made upon original articles of association signed prelimidary to incorporation, it is essential that the company suing shall aver in its complaint, and prove upon the hearing, that it has become lawfully incorporated. The party subscribing, in such case, is not estopped from denying the legality of the incorporation ; Nelson i). Blakey, assignee etc., 7-23. 137. — _. Where a subscription for stock is made, with promise to pay therefor, before the organization of the company, it is necessary to a recovery at law thereon, that it should appear that the subsequent steps, essential to bring the corporation into existence, were duly taken ; Reed v. Richmond Street Ry. Co., 7-49. 636 DIGEST OF THE 138. Lawful incoepobation. Where a statute required that after a specified sum was subscribed, the company might proceed to organize hy electing directors and signing articles of association setting forth certain facts, the adoption of preliminary articles not containing all the requisite facts is not sufficient ; these shoidd be properly drawn and subscribed ; therefore, in suit to recover on preliminary subscription against one who did not be present at the subscribers' meeting, and who did not participate in naming directors, and in the absence of articles signed after organization, the corporation can not recover. Id. 139. Defective articles of association. Defendant subscribed to articles of association which were duly acknowledged and filed. The corporation was organized under these, it elected officers, con- structed its proposed road and put it into operation. The legisla- ture by act recognized the company. Defendant paid in ten per cent, of the stock subscribed for by him ; but, declined to pay the balance when called for. In an action to recover the unpaid balance it was no defense that the articles of association were de- fective in not definitely stating the termini of the road, or the counties through which it should pass, as, notwithstanding the de- fect, the shares of stock to which the subscription entitled the subscriber were shares in a corporation de facto; Caynga Lake R.R. Co. V. Kyle, 8-443. 140. Iebegulae oeganization. a subscriber to the capital stock of a corporation can not defend, in an action upon his subscription, upon any mere irregularity in the organization of the company, provided the company be a corporation de facto, and if he shall have met and contracted with the company, on the footing it was legally incorporated and competent to receive subscriptions, tad gave the weight of his name to the project and pretensions of the company; Monroe v. Fort "Wayne, Jackson & Saginaw R.R. Co., 4-482. 141. Ieebgulaeitt of by-laws. Irregularities in adopting by- laws by a private corporation, or in the election of its officers, where all the stockholders and officers of such corporation recognize and treat such by-laws as legal and valid, will not relieve a stock- holder, who is afterward sued for the amount of his subscription to the capital stock of the corporation, from paying the amount of such subscription ; Ginrich v. Patrons Mill Co., 7-142. 142. Capital not subsceibed. When the amount of capital stock of a corporation is fixed and the number of shares ascer- tained by its charter, a subscriber is not obliged to pay his sub- scription unless the whole capital stock has been taken. This is a condition, however, which a subscriber may waive and the waiver may be either express or implied, as by participation in the affairs of the company; Morrison et al., rec'rs, v. Dorsey, 7-389. 143. . In an action against a stockholder of a corporation to recover a balance due on his subscription, the fact that the AMERICAN CORPORATION CASES. 637 whole amount of the capital stock has pot been subscribed, is no bar to the action, provided the defendant stockholder knew that fact and participated in the affairs of the company, in such way as could only properly be done upon the assumption that the sub- scribers intended to proceed with the stock partially subscribed ; Stillman v. Dougherty, rec'r etc., 7-361. 144. Capital not subsceibed. A subscriber to the capital stock of a corporation, chartered for an enterprise, is not bound to pay assessments unless the whole amount is subscribed; Memphis Branch E.R. Co. v. Sullivan, 7-1 ; Memphis Branch R.R. Co. v. Omberg, 7-1. 145. . A subscriber for stock, sued upon his subscription, may show, in defense, the failure of the company to obtain the requisite amount of capital stock. In view of a law requiring a specified amount of stock, in the organization of a railroad com- pany, per mile of the whole road authorized to be constructed, it will be held to be an implied condition that the aggregate amount required by the statute 'shall be subscribed; Monroe v. F. W., J. of St. Louis v. Wiggins Ferry Co., 3-79. 60. Peopebtt tempoeaeily absent. Assuming that the per- sonal property of a corporation located outside of the state is, ia any event, entitled to exemption from taxation, a temporary absence is not sufficient to create the exemption, the change of location, to effect such object, must be permanent, positive and unequivocal; People, ex rel., v. Comm'rs of Taxes etc., 8-447. 61. Peopeett in couese of consteuction outside the state. The fact that a corporation — in this case a steamship company — located for the purposes of taxation in the state of I^ ew York, had invested a portion of its assets in property — steamships — owned by and being built for it outside the state, does not exempt it from taxation upon such property. Id. 62. On feanohise. The tax of a certain per centage of the par of its capital stock imposed by the statute of Massachusetts on every company or association " having an office or place of business within said commonwealth for the direction of its affairs or ti-ans- fer of shares," and " incorporated elsewhere " " for the purpose of engaging without the limits of the commonwealth in the business of coal mining or other mining, quarrying or extracting carbona- ceous oils from the earth, or for the purpose of purchasing, selling or holding mines or lands without the commonwealtii," is war- ranted by the constitution of the commonwealth, and is not in con- flict with the constitution of the United States ; Att'y Gen. v. Bay State Mining Co., 1-612. 63. . The tax imposed by the statute of 1865, chapter 283, on corporations chartered by the commonwealth of Massachusetts, or organized under the general laws for purposes of business or profit, having a capital stock divided into shares, is a tax on their franchises and not on their property, and it is no reason for abate- ment of any portion of such a tax, that, in computing the market value of the capital stock of the corporation as the true value of its corporate franchise, the tax commissioner omits to make any deduction for a portion of its property invested in bonds of the United States, which are exempt from taxation by any state ; Manufacturers Ins. Co. v. Loud, treas., 1-611. 64. . A statute of the state of Connecticut requires the mutual insurance companies chartered in said state to make an annual return, under oath, to the state comptroller of the total amount of cash capital belonging to them on the first day of October. It also requires that they shall pay, to the treasurer of the state, a sum equal to one per cent, on such capital. Held, that it was upon the franchise of the corporation and not upon its pro. perty as such ; and that, therefore, the corporation was not entitled to deduct from the amount of its capital, so to he returned, the amount of bonds of the state and of the United States iield by it and by law exempt from taxation ; {a) that declared- dividends on 83 658 , DIGEST OF THE Band intended to be applied on premium notes as they should mature, said notes not being included in the cash capital, should not be deducted from the cash capital in ascertaining the basis of the tax ; (5) that ascertained unpaid losses should be deducted from the cash capital in ascertaining such basis; Coite, treasurer etc., i>, Connecticut Mutual Life Ins. Co., 3-198. 65. On franchise. The statute constituted the treasurer and comptroller of the state a board to examine and correct all statements returned to the comptroller, for the purpose above mentioned, and further provided that if such return should not be made, or should in the opinion of the board be incorrect, the board should, within ten days after the time limited for making sucb return, make out such statement upon the best information they can obtain; that a copy of such statement approved, corrected or made out by the board should be sent by them to the corporation interested, and that their de- cision shall be final as to the value and amount of the property of such corporation. The defendants made a return on the 1st day of October, 1865, in the following words; — "Total amount of cash capital (less $3,134,026 United States and state bonds), $1,994,799." It did not appear that any action had been taken by the board ; but it did appear that the defendant had paid the tax to the treasurer upon the basis of the return as made. Held, {a) that there was no presumption that the board had exercised its jurisdiction in the matter, and that the burden of proof upon the point was upon the defendant ; (b) that any approval of the return of the board which might be inferred was to be regarded as an approval of the statement as to the whole amount of the cash capital and was not to be taken as an approval of any de- ductions therefrom, the statement of such deductions not being an appropriate part of such return ; (c) that the provisions of the act with regard to the sending of a copy of the approved or cor- rected statement was merely directory, and the sending of such copy not essential to the proceeding. Id. 66. Act oonsteued. The legislature of Delaware passed an act, taxing railroad and canal companies, April 8, 1869. Section 4 of the act provided that every company of the class designated should, in addition to other taxes, also pay to the treasurer of the state, for the use of the state, annually, a tax of one-fourth of one per cent, upon the actual cash value of every share of its capital stock ; with a proviso that when the line of the railroad or canal belonging to a company liable to the tax lay partly in the state and partly in an adjoining state, or states, the company should only be required to pay the tax on such number of shares of its capital stock as would be in that proportion to the whole number of shares which the length of the road or canal within the limits of the state should bear to the whole length of such road or canal. Held, {a) that the tax was not imposed on the shares of the indi- vidual shareholders or upon the property of the corporation, but AMERICAN CORPORATION CASE8. 659 was a tax upon the corporation itself, measured by a per centage upon the cash vahie of a certain proportional part of the shares of its capital stock.; a rule which, though arbitrary, is approxi- mately just and one which the legislature was at liberty to adopt; (b) such tax did not conflict with the power of congress to regu- late commerce among the several states ; nor interfere with the transit of persons and property from one state to, or through, another, otherwise than by increasing the expense attendant upon the iise or possession of the thing taxed; Delaware K.Il. Tax Cases, 5-30. 67. Capital stock ; peesonaltt. Capital stock of a corpora- tion is personal property, being in its very nature changeable and transitory, and having no element to liken it to real estate. For the purpose of taxation the corporate property stands in the place of shares of capital stock and when the latter is taxed the former is exempt. Snares of capital stock have always been regarded as personal property, in the same manner as promissory notes and bonds ; Cooper et al. v. Corbin et al., 9-192. 68. Lien of tax on capital stock. Taxes on personal property are not a Hen or charge upon anj' specific property until the tax books are delivered to the collector. After such delivery of the tax books, the collector may levy on any personal property found in the hands of the person against whom the taxes have been assessed ; but this levy will be subject to any incumbrance on the property created prior to the time he received the books. So, a tax on the capital stock of a railroad company, being a tax on personal property, is subject to this rule. Id. 69. Lien on eealtt. Taxes upon real estate are a lien or charge upon the land itself, from and after the first day of May in each year they are levied, and if not paid, the land may be sold for their payment, and the title will pass regardless of any incumbrances resting thereon, whether such incumbrances are created before or after the lieu has so attached. Id. 70. Shakes of stock. A statute provided, as to corporations, that real estate belonging to them should be assessed and taxed at its value in the counties in which such property should be situated and that after deducting the value of the real estate, so assessed, from the aggregate value of the total number of shares of capital stock of the corporation, an assessment should he laid upon the ascertained yalue of each share of stock in addition to the assessed value of the real estate. The manifest intention of the statute is to reach, for the purposes of taxation, all the taxable property, having an actual or constructive situs within the hmite of the state. It is competent for the state to tax such shares in the hands of non residents and the assessment of the stock of a corporation is not illegal because its value is determined by including realty in another state, in which the company has 660 DIGEST OP THE invested part of its capital ; American Coal Co. V. County Com- missioners etc., 9-401. 71. Of MiNiNa STOCK. Where the stock in a corporation — in this case a mining company — is assessed to the stockholders, for the respective shares held by them, the assessment of the tangible property of the corporation and the payment of the taxes levied thereon does not relieve the stockholders from liability to pay on the excess of the valuation of the entire stock over the valuation of the tangible property of the corporation ; Ryan v. Board of Comm'rs of Leavenworth Co. et al., 9-359. 72. Eaenings. a tax upon a corporation may be proportioned to the income received as well as to the value of the franchise granted or the property possessed ; Delaware R.R. Tax Cases, 5-30. 73. SuEPLDs PEOFrrs. A corporation issued to its stockholders certificates, each to the effect that the stockholder named therein had an interest in its property in which the surplus profits had been invested. The company stipulated to pay interest upon the amount of each certificate and reserved the right to redeem each in money or stock on notice of ten days. The gross amount of such certificates existed in the hands of the corporation as surplus and, as such, was liable to assessment and taxation ; People, ex rel. Williamsburg Gas Light Co., v. Board of Assessors, 8-56<). 74. . In such case the certificate could not be considered as creating an indebtedness and, as such, to be allowed as a deduc- tion from the value of the surplus profits. Conceding they were valid obligations, enforceable according to their terms, they were not evidences of indebtedness, as a holder could not demand and have from the company a sum of money thereon. If the com- pany elected to redeem them by the issue of stock, the property would still remain in the control of the company and subject to taxation. Id. 75. Dividends. Dividends earned by a railroad company before, but declared after, the 31st of December, 1869, are not taxable under the acts of 1864 and 1867 ; Philadelphia & Reading R.R. Co. V. Barnes, 1-115. 76. ; DOUBLE TAXATION. When a corporation has earned, declared and paid out dividends during the current year, such dividends became income and gains of the shareholder, to whom they were paid and he became liable to have them assessed against him at the next assessment, as gains and income accruing during the preceding year. If these are taxed against the corporation and the shareholder it is double taxation and unlawful ; Board of Revenue etc. v. Montgomery Gas L. Co., 3-175. 77. Stock dividends. A corporation having reserved profits to an amount exceeding twenty per cent, of its capital and having authority to create additional stock, declar'ed a dividend of twenty per cent, on its existing shares, payable, in six years, to their then AMERICAN CORPOUATION CASES. 661 holders, either in money or stock, at the option of the corpora- tion, interest thereon to be paid, meanwhile, on a certain day each year, to the holders, on that day. After declaring this dividend it created new stock of the same par value, but the market value of the old shares, to which the privilege of the dividend was thus attached, were twenty per cent, more than that of the new shares, and the difference was owing wholly to this privilege. Held, that in computing the true value of the corporate franchise, for the purposes of taxation, under the statute of 1865, chapter 283, section 4, the tax commissioner was not in error in estimating the fair cash valuation of all the shares of the capital stock, by add- ing the actual market value of tlie old shares to that of the new shares, without making any deduction on account of the dividend; Boston & Lowell E.E. Co. v. Commonwealth, 1-638. 78. Union Pacific railroad. The interest of the general gov- ernment in the Union Pacific Railroad Company, though chartered and aided by congress, is not such as to exempt the company and its property from taxation by a state through which the road is located and operated ; Union Pacific R.R. Co. v. County of Lin- coln, 1-125. 79. . The doctrine of the implied exemption of federal instrumentalities from state taxation, considered . and applied to this corporation, and the result reached, that it is not such an in- strumentality, and if, in any case, it is such, that the paramount rights of the government would not be affected, and, under the acts of congress, could not be injured by any subordinate right of the state to tax and sell the property of the corporation. Id. 80. . Under the legislation of Nebraska, the county of Lincoln has the right to tax railroads in the ad joining territory at- tached to it for revenue purposes. Id. 81. Taxable pkopbett. A farm purchased, for a supply of gravel, by a railway company, and a branch built from their main line one and three-fourths miles long, leading to it, are subject like other property to taxation, though its charter may provide that such company shall pay in to the treasury of the state, yearly, a tax of one-half of one per cent, upon its capital stock, and that no other tax shall be imposed on said company ; State v. Han- cock, 3-566. 82. Railroad can not be sold in parcels. A railroad and all its appurtenances are treated in law as one entire thing, and can not be taxed or sold to enforce the payment of taxes in parcels consisting of all the road within a particular county ; Applegate et al. V. Ernst et al., 1-552. 83. For payment of subscription. A railroad cannot be taxed by a county to raise money to pay a subscription by such county, to aid in the construction of such railroad. Id. 84. National banks. Congress has power to establish a na- tional bank in any state, and provide that the share of its capital 662 DIGEST OF THE stock shall be exempt from taxation by other states ; and the act of congress of 1864 renders the taxation by state authority of national bank stock unlawful when the bank is situated in another state ; Flint «. Board of aldermen etc., 1-607. 85. ^National banks. A state may impose upon the shares of the stock of a national bank the same taxes imposed upon shares in banks organized under the laws of the state ; and may require the payment of such taxes by the officers of the banks for the shareholders; Commonwealth v. First National Bank of Lonis- ville, lr-554. 86. . The proviso, of the forty-first section of the act of 3d June, 1864, forbidding the states to impose upon national bank stock taxes higher than those imposed upon shares in any of the banks organized under state authority, was intended to apply to banks of issue ; Lionberger v. Rouse, '3-17. 87. . The statute of Michigan authorized the levy and collection of an annual specific tax of one per cent, upon the capital stock paid in of all national banks, less the value of real estate owned by such banks, in commutation of all other taxes upon said banks or the shares owned by individuals. Held, by act of con- gress the state may tax the shares of stock, but not the capital stock itself ; Smith v. First National Bank of Tecnmseh, 3-485. 88. . The national banking act provides that the taxa- tion, in states, of shares under it, shall not be " at a greater rate than is assessed upon any other moneyed capital in the hands of individual citizens of the state." The language of this clause does not require the strict literal and narrow interpretation of a penal statute. It means that such shares shall be taxed xipon a general system and in compliance with a set of rules and princi- ples applied alike, throughout the state, to the taxation of all moneyed capital, and the requirement of the restriction is complied with if the rate upon bank shares is the same as the rate upon moneyed capital in the hands of individual citizens in the town or city where the bank is located ; Providence Inst, for Sav. v. Boston, and Jewell v. Boston, 3-427. 89. . The state of Missouri, prior to the creation of national banks, created ten banks providing in the act, under which they were organized, a limitation upon the power to impose taxes upon them. Tlie legislature provided by a general law for the creation of other banks the property of which should be taxed the same as other property in the state. Held, that shares in the national bank could be taxed by the state at the same rates provided by the general law; Lionberger -y. Rouse, 90. Franchise. An assessment, upon a franchise, is legal if grounded on a direct and immediate benefit, in the increase of the value of the property or stock of a corporation; City of Bridge- port V. N. Y. &TS". H. R.R. Co., 3-189. AMERICAN CORPORATION CASES. 663 91. Tax on business of bank. Under a statute, of the state of Nevada, a tax was levied on and sought to be collected from the " promissorj notes bearing interest and secured by mortgage and otherwise," and " county warrants and scrip," the property of a national bank. Held, that a tax on these choses in action would be 712-714 TABLE OF SUBJECTS. 729 "V. Page. VENUE 714 VICE PEESIDENT 714 VISITOKIAL POWERS 714 VOLUNTARY ASSOCIATION 715 SUBSCRIPTION 715-718 VOTE 718 WINDING UP 718 WITNESS '. 719 9Z