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Full text of "Cases on the general principles of the law of private corporations"

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THE LIBRARY 

OF 

THE UNIVERSITY 

OF CALIFORNIA 

LOS ANGELES 

SCHOOL OF LAW 



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siTBURN & Washburn 
ijCTORNEYS AT LAW 
Wilcox Building 
L,os Angeles, Cal. 



CASES 

ON 

THE GENERAL PRINCIPLES 

OF THE 

LAW OF 
PRIVATE CORPORATIONS 

SELECTED AND ARRANGED WITH NOTES 
BY 

HORACE L WILGUS, M. Sc. 

Professor of Law in the University of Michigan 

In Two Volumes 
VOLUME 1 



"A substantial and compendious report of a case rightly adjudged doth produce 
three notable effects ; lirst, it openeth the understanding of the reader and hearer ; 
secondly, it breal<eth through difficulties ; and thirdly, it bringeth home to the hand 
of the studious, variety of pleasure and profit ; I say It doth open the window of 
the laws, to let in that gladsome light, whereby the right reason of the rule (the 
beauty of the law) may be clearly discerned ; it breaketh the thick and hard shell, 
whereby with pleasure and ease, the sweetness of the kernel may be sensibly 
tasted, and adorneth with variety of fruits, both pleasant and profitable, the store- 
houses of those by whom they were never planted nor watered." 

Lord Coke, in Preface to 9th Report. 



INDIANAPOLIS 

THE BOWEN-MERRILL COMPANY 

1902 



/ 






Copyright 1902 

BY 

HORACE L. WILGUS 



THE HOLLENBECK PRESS 
INDIANAPOLIS 



ft 



THIS WORK IS DEDICATED TO 

j. G. P. W.. 

WITHOUT WHOSE HELP. IN INNUMERABLE WAYS, 

IT COULD NOT HAVE BEEN COMPLETED 



G67G20 



Digitized by the Internet Archive 

in 2007 with funding from 

IVIicrosoft Corporation 



http://www.archive.org/details/casesongeneralpr01wilgiala 



PREFACE. 



Mr. Justice Swayne said the Common Law is " Reason dealing 
by the light of 'experience with human affairs"; and Mr. Justice 
Holmes says " The life of the law has not been logic; it has been 
experience." This work is designed to furnish those interested in 
the study of Corporation Law, — whether practitioner, teacher or stu- 
dent, — such material from the original sources, and in such order, as 
will show how reason and experience have dealt with the subject. 
Effort has been made in the selection to secure the best expression of 
the underlying reason or theory; to place these in such order as to 
develop, in a natural way, the general theory of Corporation Law, 
set forth in the table of contents ; to insert such notes as will present 
a more comprehensive view of some of the topics; and to furnish, in 
chronological order, such a list of cases bearing upon the principles 
as will enable the investigator to make a reasonably complete study 
of the same. 

The editor has had no special theories to advance, but some effort 
has been made to bring back into light, and put in their proper places, 
the "personal" and "franchise" theories of corporate existence, so 
much obscured by the "collection of individuals" theory in the excel- 
lent works of Mr, Morawetz and Mr. Taylor. 

The Law of Corporations cuts across nearly the whole body of the 
Law. In addition, intricate and peculiar relations arise between a 
corporation and the State, the Promoters, the Members, the Officers, 
the Creditors, or others, as well as amongst themselves. Recently 
the volume of corporate litigation has been enormous, resulting in 
numerous discordant decisions of inordinate length. All these make 
the choice of illustrative cases on the subject especially difficult. 
During the four years of preparation, many thousand cases have been 
examined and compared in order to make this selection. Some top- 
ics are not here worked out in such detail as in other collections ; bnf 

(V) 



VI PREFACE. 

many others, such as, the Corporation as a Franchise, Constitutional 
Limitations on the Power to Create, Functions of Promoters, Subscrip- 
tions, Incorporation, Organization, Corporations De Facto and By 
Estoppel, Name, Power to Sue and Be Sued, Taxation, Visitation, 
National Corporations, the National Government and State Corpora- 
tions, etc., etc., not found, or merely touched upon, in other works, 
are here given due prominence. An appendix of forms is also added. 
By continual cross references, many cases have been used to do dou- 
ble service, and thereby add to the completeness of the view. 

It is believed that a constant reference by the student to the out- 
line given in the table of contents will be of material service in help- 
ing him to understand and appreciate the bearing and relation of the 
cases to one another and to the general theory of corporation law. 

Acknowledgments are due to Oscdr Bader, Esq., R. G. Schulder, 
Esq. and Mr. H. F. Jacobs, for help in reading proof and verifying 
citations. 

The work is submitted to the judgment of those who have occasion 
to use it, with the hope that it may be found of service. 

H. L. W. 

Ann Arbor, Michigan, 

February i, igo2. 



CONTENTS. 



VOLUME I. 

PAGE. 

PART I. THE IDEA OF A CORPORATION 1 

PART II. THE BODY CORPORATE 258 

Title I. Parentage — State and Promoters 258 

Subdivision I. The State's Power to Create 258 

Subdivision II. The Promoters— Their Functions 374 

Title II. Formation — Charter — Association 397 

Title III. Birth and Organization 560 

Title IV. Anatomy, Internal Structure and Constitu- 
tion 682 

Title V. Name 816 

Title VI. Life— Mode of Existence and Action 830 

Title VII. Death — Dissolution 866 

PART III. THE CORPORATION AS A SUBJECT AND SOURCE OF 
RIGHTS AND OBLIGATIONS 914 

Title I. Powers, Rights and Duties in General 914 

Title II. Particular Powers 937 



VOLUME II. 

Title III. Doctrine of Ultra Vires 1176 

Title IV. General Duties and Liabilities 1236 

PART IV. SPECIAL RELATIONS ARISING FROM THE EXIST- 
ENCE OF A CORPORATION 1291 

Division I. Corporate Relations 1291 

Title I. The Corporation and the State 1291 

Subdivision I. Governmental Control, General Doc- 
trines , 1291 

Subdivision II. The State and its Own Corporations. 1294 
Subdivision III. The State and National Corpora- 
tions 1476 

(vii) 



VIU CONTENTS. 

PAGE. 

Subdivision IV. The State and Foreign Corporations . 1480 
Subdivision V. The National Government and State 

Corporations 1527 

Title II. The Corporation and Various Classes of 

Persons 1546 

Subdivision I. The Corporation and its Promoters . 1546 
Subdivision II. The Corporation and its Members ... 1559 
Subdivision III. The Corporation and its Officers. . .1727 
Subdivision IV. The Corporation and its Creditors. 

1760, 1808 
Subdivision V. The Corporation and Outside Parties. 1760 

Division II. Individual Relations 1767 

Title I. Internal Relations 1767 

Subdivision I. Promoters 1767 

Subdivision II. Shareholders 1770 

Subdivision III. Officers 1790 

Title II. External Relations, — Creditors 1805 

Subdivision I. The State and Corporate Creditors . 1805 
Subdivision II. The Corporation and its Creditors .. 1808 
Subdivision III. The Creditors and Corporate Offi- 
cers 1874 

Subdivision IV. Creditors and Shareholders 1899 

I. Rights of Creditors 1899 

A. Arising from Imperfect Incorporation ... 1899 

B. Common Law or Equitable Liability of 

-Shareholders 1900 

C. Statutory Liability op Shareholders 1987 

II. Rights op Shareholders 2034 

Subdivision V. Rights of Creditors Inter Se 2035 

Appendix of Forms 2065 



VOLUME I. 

PART I. 
THE IDEA OF A COBPOBATION. 

CHAPTER 1. 

iDescription and Classes of Corporations 1 

Article I. Definition and Tests 1 

Sec. 1. Definitions, — the corporation as a person, — as a collection of in- 
dividuals, — as a franchise 1 

Sec. 2. Tests (1) Merger of individuals 2 

Sec. 3. (2) The legislative intent 15 

Sec. 4. (3) The powers conferred 19 

Sec. 5. (4) In foreign jurisdictions, powers conferred control 28 



CONTENTS. IX 

PAGE. 

Notes : 1. Definitions 31 

2. The New York bank cases 31 

3. The Michigan discussion 32 

4. Later holdings 32 

6. The fourth test 32 

Article II. The Corporation as a Person 33 

Sec. 6. For most purposes the corporation is so considered 33 

(1) And particularly as having rights 33 

(a) Under the common law 33 

Sec. 7. (b) Under the United States constitution 36 

Sec. 8. (2) And as subject to duties 44 

(a) Of a public nature 44 

Sec. 9. (b) And of a private nature 47 

Sec. 10. This artificial personality is recognized particularly — 

(1) In interpreting statutes, "person" is usually held to in- 
clude corporations 51 

Note : Illustrations 51 

Sec. 11. (2) As to the ownership of its property 58 

Sec. 12. (3) As to contracts between it and its members . 60 

Sec. 13. (4) As to contracts between the members themselves 65 

Sec. 14. (5) As to suits by or against third persons 70 

Note: Evidence, — shareholder as judge, juror, witness, 

etc 71 

Sec. 15. (6) As to suits between it and its members 71 

Note : 1. Ancient ideas of personality 72 

2. In the Roman law 73 

3. In the canon law 74 

4. In the early common law 74 

5. In the modern law 77 

Article III. The Corporation as a Collection of Individuals 79 

Sec. 16. The corporation is considered as a collection of individuals — 

(1) In the management of corporate affairs 79 

Sec. 17. (2) When agreement, reason, or policy so requires 80 

Note: Specific performance of stock agreement; 

waiver of statutory liability 86 

Sec. 18. (a) Particularly in matters relating to the constitution of 

the corporation or changes therein 87 

Sec. 19. (b) In determining the rights of members among them- 
selves in equity 88 

Sec. 20. (c) When corporate organization is used as a cloak to aid 

in the commission of frauds 97 

Sec. 21. (d) When corporate sin^ result from the concerted, but 

apparently individual, actions of the members 100 

Note : The corporation as a collection of individ- 
uals,— history and definitions 109-113 



X CONTENTS. 

PAGE. 

Article IV. The Corporation as a Franchise 113 

Sees. 22-3. In its relation to the state it is considered as a primary fran- 
chise 113 

(1) General nature of a franchise 113 

Sees. 24-5. (2) And particularly, this primary franchise belongs to the 

members in their individual capacities 136 

Sec. 26. (3) There may be secondary franchises, etc., owned by the 

corporation itself 143 

Note : Power to mortgage franchise 149 

Sees. 27-8. (4) The offer and acceptance of a franchise make a grantor 

executed contract 150 

Sec. 29. (5) Franchises are property and can not be taken without 
cause or compensation, but may be forfeited for mis- 
user or non-user 152 

Note : The corporation as a franchise 157-167 

Article V. Corporations as Distinguished from Other Institutions . . . 167 

Sec. 30. (1) From partnerships 167 

Note : Corporations and partnerships 170 

Sec. 31. (2) From joint stock companies 171 

Note : Nature of joint stock companies 175 

Sec. 32. (3) From fraternity or society 176 

Sec. 33. (4) From stock exchange 178 

Sec. 34. (5) From cost-book companies 182 

Sec. 35. (6) From unincorporated associations 187 

Sec. 36. (7) From state institutions 191 

Note : Nature of state institutions 192 

Akticlb VI. Classes op Corporations 193 

Sec. 37. (a) As to number of members: 1. Sole; 2. Aggregate 193 

Note : OflBcers ; one-man companies 200 

Sees. 38-9. (b) As to purpose • 201 

1. Ecclesiastical, or religious 201 

2. Lay, which are 201 

(a) Eleemosynary 201 

(b) Civil, which are 201-3 

Sec. 40. (1) Quasi 214 

(2) Pure or complete 214 

Sees. 41-43. (c) As to relation to the state, corporations are 221 

1. Purely public 221-9 

2. ^asi-public 222-9 

3. Private, which are 222-9 

Sec. 44. (1) As to method of acquiring membership 234 

1. Stock, or 234 

2. Non-stock 234 

Sees. 45-47. (2) As to perfection of organization 239-53 

1. De jure 239 

2. De facto 244 

3. By estoppel 253 



CONTENTS. XI 



PART U. 



THE BODY COBPORATE, ITS PARENTAGE, CONCEPTION, BIBTH, 
ANATOMY, LIFE, AND DEATH. 

PAGE. 

Title I. Parentage, — The State and Promoters 268 

Subdivision I. The State, — Its Power to Create 258 

CHAPTER 2. 

Nature of the Power and Method of Exercise 258 

Article I. Nature of the power 258 

Sec. 48. (a) The power to create is an incident of sovereignty 258 

Sec. 49. ( b) None but the sovereign can create 263 

Article II Methods op Exercise, — Evidence op Sovereign's Consent. 264 

Sec. 50. (a) In general 264 

Sec. 51. (b) King's or queen's charter 266 

Note : King's power to create corporations 269 

Sec. 52. (c) Common law 270 

Note : The states and national government as corporations. 275 
Sec. 53. (d) Prescription 275 

Note 278 

Sec. 54. (e) Legislative bodies whose powers are 278 

U ) Inherent 279 

Sec. 55. (2) Exclusive 279 

Sec. 56. (3) Plenary 283 

Sees. 57-57b. And as to the form or method of exercising this power, they 
act by — 

(1) Special or general law 287 

(a) Policy of general corporation laws 287-295 

Sec. 58. (b) Difference between method by general and by 

special law 296 

Sec. 59. (2) Implication 298 

Note 300 

Sec. 59a. (3) Consolidation 301 

CHAPTER 3. 

Limits on the Power op the State to Create Corporations 302 

Article I. From the Nature op Legislative Power 302 

Sec. 60. (a) Delegation,— there can be no general delegation of legisla- 
tive authority 302 

Sec. 61. (b) Exceptions, or apparent exceptions, in cases of 302 

1. Territorial legislatures 302 

Sec. 62. 2. Regents of University of New York 304 

Note : Delegation of power to create corporations 306 

Article II. From Nature op a Franchise 306 

Sec. 63. (a) Can not be forced on any one 306 

Sec. 64. (b) May be exclusive, but not so unless expressly made so 309 

Article III. Constitutional Limits 320 

Sec. 65. (a) In the national constitution 320 



XU CONTENTS. 

PAGE. 

(1) On congress 320 

Note : National corporations 325 

Sec. 66. (2) On state legislatures 326 

Sec. 67. (3) On territorial legislatures 332 

Sec. 68. (b) In the state constitutions 333 

(1) General and special laws, what are within the provis- 
ion, — " the legislature shall pass no special act creat- 
ing corporations, or conferring corporate powers". . 333 
Note : What are general and special laws 337 

Sees. 69-72. (2) Creating: "The legislature shall pass no special or 

local act creating corporations" 338-360 

Sec. 73. (3) Conferring corporate powers: " The legislature shall 
pass no special or local act conferring corporate 
powers" 360 

Sec. 74. (4) Title and special privilege : "The legislature shall pass 
no bill embracing mere than one subject, and no 
private or local bill shall be passed, granting any ex- 
clusive privilege" 363 

Sec. 75. (5) Two-thirds vote: "The assent of two-thirds of the 
members elected to each branch of the legislature 
shall be requisite to every bill creating corpora- 
tions" 2, 19, 287, 292, 373 

Subdivision II. The Body Corporate, its Parentage,— the Promoters. 374 

CHAPTER 4. 

Functions and Classes op Promoters 374 

Sec. 76. Definitions ' 374 

Sees. 77-8. Self-constituted, functions generally, illustrations 375 

Sec. 79. Statutory : Commissioners 385 

Note : Authority and functions of commissioners 390 

Sec. 80. Incorporators, under general statutes 391 

Title II. The Body Corporate : Its Formation, or its Conception and 

Incubation , 397 

CHAPTER 5. 
The Corporate Charter 397 

Article I. Nature and Purpose op the Charter 397 

Sec. 81. In general 397 

Sec. 82. More particularly, the charter is both a law and a contract 397 

Sec. 83. The charter as a law and as a contract 398 

Note : The charter as a law '. . 406 

Sec. 84. The charter is a license of authority to convert persons or an as- 
sociation of persons into the designated corporation 406 

Article II. Its General Form — An Offer and Acceptance 409 

Sec. 85. The offer may be by parties, and acceptance by tlie state ; or it 
may be a special or general offer by the state, and an accept- 
ance by individuals or an association of individuals 409 

Sec. 86. The offer may be withdrawn before acceptance ; acceptance is 

essential 412 



CONTENTS. Xm 

PAGK. 

Sec. 87. Acceptance may be inferred from signing articles, holding meet- 
ings, organizing and acting as a corporation 414 

Sec. 88. Acceptance must be within the state offering the charter 417 

Sec. 89. Renewals, extensions and amendments must also be accepted to 

make them effective 417 

Article III. The Charter — Its Contents , 426 

Sec. 90. In general 426 

Sec. 91. Under special charter from the king, — illustration 426 

Sec. 92. Under speqial act of the legislature, — illustration 427 

Sec. 93. Under general laws 429 

(a) The charter consists of: 

(1 ) The provisions of the general corporation law, and 

(2) Articles of incorporation, authorized thereby, and 

consistent therewith 429 

Note 434 

Sec. 94. (b) Usual provisions in the general law 435 

Sec. 95. (c) Articles of incorporation, form and contents 435 

Form of application for incorporation 436 

Sec. 95a. (d) Deed of settlement 440 

Sec. 95b. Interpretation of charters 441 

CHAPTER 6. 

The Association, — Its Necessity, Nature, Forms and Parties 442 

Article I. Necessity, Nature, Consideration and General Form op 

THE Association 442 

Sec. 96-7. Necessity, — an association of persons is necessary to or results 

from the creation of a corporation aggregate 442 

Sec. 98. General nature of such association contract 445 

Sec. 99. Consideration of the agreement 448 

Sec. 100. General form of such contract, — may be either a statutory or 

common-law contract 456 

Note 458 

Article II. Forms of Association Contracts; Statutory Subscrip- 
tions 459 

Sec. 101. An exclusively statutory contract 459 

Sec. 102. The state may make those who incorporate and not those who 

take stock, members 464 

Sec. 103. The state may require signing articles of incorporation by orig- 
inal shareholders 469 

Article III. Forms op Association Contracts; Common Law Sub- 
scription Contracts 471 

Sees. 104-5. (1) Agreements to subscribe for stock in a corporation to be 

formed 471 

Sec. 106. (2) Agreements subscribing to stock in a corporation to be 

formed : Theories 474 

(a) A mere withdrawable offer before accepted by the 

corporation 474 

Sec. 107. Notice of withdrawal 478 



xiv CONTENTS. 

PAGE. 

Sec. 108. (b) Offer until acted upon in accordance with its pro- 
visions 482 

Sec. 109. (c) Binding contract from time of making 491 

Sec. 110, (d) Offer to the corporation, and a binding contract 

between the parties subscribing 492 

Sees. 111-2. (3) Subscription to agent or trustee 497 

Sec. 113. (4) Underwriting 502 

Sec. 114. (5) Application, allotment and notice 504 

Sec. 115. (6) Estoppel .510 

Form of subscription to stock in a corporation to be 

formed 510 

Article TV. Conditional Subscriptions 511 

Sec. 116. Conditions may be express or implied 511 

Sec. 117. Express conditions may be attached to subscriptions made (1) 

before, or (2) after incorporation ; payment of deposits 514 

Note : Payment of deposits 521 

Sec. 118. (1) Prior to incorporation, theories : 622 

(a) Subscription valid, condition void 522 

Sec. 119. (b) Subscription and condition both void 525 

Sec. 120. (2) After incorporation, theories : 526 

(a) Valid contract, to await time of performance 526 

Sec. 121. (b) Mere offer until performance 528 

Sec. 122. Subscriptions may be upon conditions precedent or subsequent. 532 
Sec. 123. Conditional delivery of subscriptions. Escrows, theories of: .. 536 

(a) Delivery can not be to company's agent 536 

Sec. 124. (b) Delivery may be to company's agent 538 

Article V. Fraud and Mistake in Subscriptions 539 

Sec. 125. Fraud 639 

Note 644 

Sec. 126. Mistake 545 

Note : Mistakes of fact and of law 547 

Article VI. Parties to the Agreement 547 

Sec. 127. Infants 547 

Note 548 

Sees. 128-9. Married women 549 

Note .-552 

Sec. 130. Aliens 552 

Note 552 

Sec. 131. Private corporations 553 

Sec. 132. Municipal corporations 554. 

Note 557 

Sec. 133. State or national governments 558 

Title III. The Body Corporate : Its Birth and Organization 560 

CHAPTER 7. 

Organization and Compliance with Conditions 560 

Article I. Schemes of Organization 660 

Sec. 134. (1) Under the king's charter 560 



CONTENTS. XV 

PAGE. 

Sec. 135. (2) In special acts 660 

(a) The act itself provides the original orgfanization ; illus- 
tration 560 

Sec. 136. (b) The law provides for the organization to be made by 

the stock subscribers ; illustration 561 

Sec. 137. (3) Under general incorporation laws 561 

(a) Deed of settlement 561 

Sees. 138-9. (b) License plan, — Illinois and Kansas laws. 561-2 

Sec. 140. (c) Organization completed before application is made, — 

Massachusetts law 562 

Sec. 141. (d) Organization by stock subscribers after filing articles 

of incorporation 563 

Article II. Proof op Organization 563 

Sec. 142. General presumption of regularity 663 

Article III. When Does Corporate Birth Occur: Theories 565 

Sees. 143-4, (a) Only upon complete organization 565 

Sec. 145. (b) Immediately upon filing articles, without stock subscrip- 
tion or organization 571 

Sec. 146. (c) At time of filing articles ; but adult corporate capacity 

does not exist until the capital stock is provided 574 

Sec. 147. (d) As soon as the first meeting is held and ofiicers chosen . 581 

Sec. 148. (e) Under special acts 585 

Article IV. Compliance with Conditions. De Jure Existence 585 

Sec. 149. (1) As to de jure existence conditions are 

(a) Precedent, require a substantial compliance 585 

Sec. 150. (b) Subsequent 586 

Sec. 151. (2) Conditions may be also 588 

(c) Directory merely 588 

Sec. 152. (d) Mandatory, which may be 590 

(1) Implied — good faith in securing corporate privi- 
leges 590 

Sec. 153. (2) Express 594 

(a) A certain number of incorporators 594 

Sec. 154. (b) Written articles of agreement 597 

Sec. 155. (c) Names and residence of subscribers to stock 600 

Sec. 156. (d) Place of business 603 

Sec 157. (e) Purpose of incorporation 605 

Note 607 

Sec. 158. (f) Subscribing and acknowledging articles. .*. . 607 

Sec. 159. (g) Acknowledging articles 609 

Sec. 160. (h) Filing articles 611 

Article V. Conditions of De Facto Existence 614 

Sees. 161-2. (1) Conditions precedent 614 

Sec. 163. (2) Reasons for not allowing collateral attack upon de facto 

corporate organization 626 

Note : De facto corporationa 629 



XVI CONTENTS. 

PAOB. 

Article VI, Conditions op Corporatb Existence by Estoppel 630 

Sees. 164. A. Theories : 

(1) The doctrine is one of equity 630 

(a) Will be applied where it would be inequitable 

not to do so 631 

Sec. 165. (b) Will be applied only when equitable to do so. . . 632 

Sec. 166. (2) Estoppel arises on matter of fact only, and not of law . . 634 

Sec. 167. (3) Estoppel applies only where there is at least de facto 

existence 637 

Sec. 168. (4) Public policy forbids the creation or recognition of cor- 
porations by estoppel 642 

Sec. 169. B. Parties estopped 644 

(1) The pretended corporation itself 644 

Sec. 170. (2) The associates 646 

(a) Among themselves 646 

Sec. 171. (b) As to the corporation or its creditors 647 

1. Upon subscription liability 647 

Note : Estoppel of subscribers 649 

Sec. 172, 2. Upon statutory liability 650 

Sec. 173. (3) The promoters and oflScei-s of the apparent corporation . 660 
Sec. 174. (4) Dealers with knowledge of claim of corporate capacity . 652 
(a) Who seek to evade liability to the apparent corpo- 
ration 652 

Sec. 175. (b) Who seek to hold members liable as partners 656 

Sec. 176. (c) Dealers without knowledge of claim of corporate 

capacity are not estopped 662 

Sec. 177. (6) Non-dealers, who injure the corporation, are estopped 
(a) In cases of torts against the apparent corpora- 
tion 664 

Sec. 178. (b) Or crimes affecting the apparent corporation 668 

Note : Extent of doctrine of estoppel 671 

Article VII. Effect op Failure to Comply with Conditions, and 
No Estoppel upon Liability of Members. Theories : 

Sec. 179. (1) Makes associates partners 673 

Sec. 180. (2) Does not make a partnership 677 

Title IV. The Body Corporate: Its Anatomy, Internal Structure 

AND Constitution 682 

CHAPTER 8. 
Members, Parts, Organs op Action, with Their Functions and Mu- 
tual Relations 682 

Subdivision I. Members, Integral Parts and Organs op Action 682 

Article I. Members 682 

Sec. 181. Necessity of members 682 

Sec. 182. Acquisition of membership 682 

(1) Non-stock companies 682 

Sec. 183. (2) Stock companies 687 

A. By subscription 687 

(1) Statutory contract 687 



CONTENTS. XVn 

/■ 

PAGE. 

Sec. 184. (2) Common law contract 687 

1. Agreements to subscribe 687 

2. Agreements subscribing 687 

3. Agreement with promoter 687 

4. Underwriting 687 

5. Application, allotment, etc 687 

Sec. 185. B. Transfer 687 

Sec. 186. C. Estoppel 687 

Article II. Integral Parts 687 

Sees. 187-8. In general 687 

Sec. 189. Directors are not integral parts 688 

Article III. Organs op Action 690 

Sees. 190-1. In general 690 

Note 691 

Sec. 192. Qualification of agents and officers 692 

Note : Qualification of agents and officers 693 

Subdivision II. Functions of Members, Directors and Officers 694 

Article I. Members and Directors 694 

Sec. 193. Members wield the extraordinary powers, and directors the 

ordinary business powers 694 

Note : Functions of shareholders and directors 702 

Article II. Other Officers 703 

Sec. 194. The president 703 

Note : Various officers 704 

Subdivision III. Internal Relations and Constitution 705 

Article I. The Corporate Franchises , . 705 

Sec. 195. Franchises of the corporation itself 705 

Note 706 

Sec. 195. Franchises of the members 706 

Article II. Contracts Contained in the Charter of a Corporation . . 707 

Sees. 197-8. 1. In general 707 

Note : The Dartmouth College decision 746 

Sec. 199. 2. Contract between the state and the corporation 760 

Sec. 200. 3. Contract between the state and corporate creditors, and 
between stockholders and creditors, in case of statutory 

liability 752 

Sec. 201. 4. Contract between the state and the members 754 

Sec. 202. 5. Contract between the corporation and the members, or 

among the members themselves 757 

(a) As to the amount to be contributed 757 

Sec. 203. (b) That subscriptions are made in good faith 768 

Article III. The Corporate F^nds. Capital Stock 760 

Sec. 204. In general 760 

Sec. 205. Right to create a capital stock 761 

Sec. 206. Power to increase the capital stock 763 

Note 763 

Sec. 207. Power to decrease the capital stock 764 

ii — WIL. CAS. 



XVUl CONTENTS. 

PAGE. 

Sees. 208-9. Nature, function and purpose of capital stock 766 

Note : Definitions of various kinds of stock 771 

Sec. 210. Capital, capital stock, surplus and franchise distinguished 778 

Note : Capital stock, capital, shares, property 781 

Sec. 211. Capital stock, — kinds, common and preferred 785 

Sec. 212. Preferred stock, power to issue 790 

Note : Power to issue preferred stock generally 793 

Sec. 213. Shares of stock,— nature of 794 

(1) Personal property 79-1 

Note , 798 

Sec. 214. (2) Statute of frauds,— "goods, wares, or merchandise" 799 

Note 801 

Sec. 215. (3) Choses in action 801 

Sec. 216. (4) As subjects of conversion 804 

Note 807 

Sec. 217. (5) Negotiability of shares 807 

Note 810 

Sec. 218. (6) As subjects of attachment or execution 810 

Sec. 219. (7) Location of shares for attachment 81 1 

Sec. 220. (8) Seizure in equity 815 

Title V. The Body Corpoeate : Its Name 816 

CHAPTER 9. 

The Corporate Name 816 

Sec. 221. Necessity of a name 816 

Sec. 222. Acquisition of a name 817 

Note 818 

Sees. 223-4. Rights in the corporate name 819 

Note : Rights in a corporate name 823 

Sec. 225. Effect of misnomer 825 

Note : Effect of misnomer 826 

See. 226. Change of corporate name 827 

Note : Change of name 828 

Title VI. The Corporate Life 830 

CHAPTER 10. 

The Mode op Corporate Existence and Action 830 

Article I. Mode of Existence 830 

Sec. 227. Perpetual succession 830 

Note 833 

Article II. Mode op Action; Shareholders and Directors 833 

Sec. 228. Shareholders' meeting,— necessity 833 

Sees. 229-30. Shareholders* meeting, — notice 835 

Note : Notice of corporate meetings 837 

Sec. 231. Shareholders' meeting, — quorum 839 

Note : Quorum 840 

Sees. 232-4. Place of meeting 841 

Note ; Place of corporate meetings , 847 



CONTENTS. XIX 

PAGE. 

Sees. 235-6. Directors' meeting, necessity, notice, quorum . 848 

Note : Delegation of powers by directors 850 

Article III. Mode of Action Generally 854 

Sec. 237. Presumptions 854 

Sec. 238. Execution of contracts 862 

Note: Corporate acts,— record of; deeds; acknowledg- 
ments ; notes, etc 862 

Title VII. Corporate Death — Dissolution 866 

CHAPTER 11. 

Modes and Effect of Dissolution '. 866 

Article I. Methods of Dissolution 866 

Sec. 239. In general 866 

Note : Modes of dissolution 868 

Sec. 240. Expiration of charter 868 

Sec. 241. Happening of a condition or contingency prescribed in the 

charter 871 

Sec. 242. Death of members 873 

Sec. 243. Loss of integral part 875 

Sees. 244-5. Surrender 877 

Sec. 246. Non-user, insolvency and surrender 881 

Note : Surrender 886 

Sec. 247. Repeal 887 

Sec. 248. Forfeiture 887 

Sec. 249. Ownership of stock by one member 887 

Note : One man companies 889 

Article II. Effect of Dissolution 891 

Sec. 250. Lands, chattels and debts at common law 891 

Sec. 251. Contracts of shareholders 895 

Sec. 252. Contracts of creditors 896 

vSec. 253. Executory contracts 897 

Sec. 254. Generally, upon rights and liabilities in equity 899 

Sec. 255. Reversion of land 903 

Sec. 256. Reversion of property of a mutual company 904 

Sec. 257. Reversion of property, charitable corporation 906 

Note : Effect of dissolution, — franchises, contracts, debts, per- 
sonal property, real property, actions, judgments 910 



PART IIIo 

THE COBPOBATION AS A SUBJECT AND SOUBCE OF BIGHTS 
AND OBLIGATIONS. 

Title I. Rights and Duties op the Corporation in General 914 

CHAPTER 12. 

Powers and Authority in General 914 

Article I. Theories of Corporate Capacity 914 

Sec. 258. Corporate powers 914 



XX CONTENTS. 

PAGE. 

Sec. 259. Special capacities 915 

Note 918 

Sec. 260. General capacity 919 

Note 924 

Article II. Classes op Corporate Powers 925 

Sec. 261. 1. Incidental powers 925 

Sec. 262. 2. Express powers 926 

3. Implied powers 926 

Note: Implied powers. Rules of construing corporate 

charters 933 

Title II. Particular Powers and Liabilities 937 

CHAPTER 13. 

Particular Powers 937 

Article I. Perpetual Succession 937 

Sec. 263. Perpetual succession 937 

Article II. Name 937 

Sec. 264. Name 937 

Article III. Power to Contract 937 

Sec. 265. (A) As to form 937 

1. In general 937 

2. As to seal 938 

Sec. 266. (B) As to subject-matter.. 938 

(1) In general 938 

Sees. 267-8. (2) Contract debts and borrow money 938 

Sees. 269-71. (3) Negotiable instruments 940 

Note : Power to issue negotiable instruments 946 

Sees. 272-3. Accommodation paper 949 

Sec 274. (4) Surety or guarantor 952 

Note : Power to be surety or guarantor 956 

Sec. 275. (5) Partnership 957 

Note : Power to enter into partnership 959 

Sees. 276-7. (6) Trade combinations 960 

(a) Pools 960 

Sec. 278. (b) Contracts restraining trade and competition. . 967 

Note: Corporate combinations; anti-trust 

acts 973 

Sec. 279. (c) Unincorporated trusts 977 

Sees. 280-1. (d) Incorporated trusts 978 

Sees. 282-4. (7) Consolidation 984 

(a) Power to consolidate 984 

Sec. 285. (b) Interstate consolidation 988 

Sec. 286. (c) Consolidation or merger 989 

Sec. 287. (d) Effect of consolidation upon creditor's rights . . 995 

Note: Consolidation — meaning, consent of state, con- 
sent of shareholders, effect on former companies — 
their existence, rights, privileges and liabilities. .1003 



CONTENTS. XX i 

PAGE. 

Article IV. Power to Acquire, Hold and Alienate Property .... 1007 

Sec. 288. 1. Acquire and hold real property 1007 

(A) By purchase 1007 

(a) Presumptions 1007 

Sees. 289-90. (b) Extent of power topurchase and hold 1008 

Sec. 291. (c) Consequences of nUra vires purchase 1014 

Note: Acquisition of property by corpora- 
tion, — common law, statutes of mortmain, 

real property, who can complain 1015 

Sec. 292. (d) Estates that may be acquired 1018 

) Fee-simple 1018 

Sec. 293. (2) Estates in common and joint tenancy. .1019 

Sec. 294. (B) By devise .*. .1021 

(a) History and general doctrines 1021 

Sec. 295. (b) Restrictions in charters, and restrictions in 

statutes of wills 1026 

Note : Statutes of wills 1029 

Sees. 296-7. (c) Who may object when limit is exceeded 1029 

See. 298. 2. To acquire personal property 1040 

(1) In general 1040 

Note 1041 

Sec. 299. (2) Power to acquire its own shares 1041 

(1) The English rule 1041 

Note 1044 

Sec. 300. (2) American rule, — theories 1045 

(a) May (with some exceptions) acquire 
its own shares unless expressly or 

impliedly restrained 1045 

Note 1046 

Sec. 301. Exceptions to rule allowing acquisition 

of its own shares 1047 

Note " 1048 

Sec. 302. (b) May not, unless necessary to prevent 

loss to the company 1048 

Sec. 303. (3) Power to acquire shares of stock in other 

corporations 1051 

(1) The English rule 1051 

Sec. 304. (2) General rule in the United States 1054 

Sec. 305. t3) Exceptions to the general rule 1060 

Note : Acquiring stock in other cor- 
porations 1062 

Sec. 306. 3. Power to alienate property 10()5 

(a) General doctrine 1^5 

Note 1066 

Sec. 307. (b) Limits 10''6 

Sees. 308-9. (c) Property charged with a public trust can not be 

sold without special authority 1070 

Sec. 310. (d) Contrary view 1074 



xxii CONTENTS. 

PAGE, 

Sec. 311. (e) Power to mortgage 1078 

Note 1081 

Sec. 312. (f ) Power to dispose of franchise 1081 

1. Not without special authority 1081 

Sec, 313. 2. Theory of sale when authority to convey fran- 
chise is given 1 082 

Article V. Power to Act in a. Personal Relation. 1087 

Sen. 314. 1. Power to take as a trustee 1087 

Sec. 315. 2. Power to act as administrator or executor 1088 

Sec. 316. 3. Power to act as agent or attorney in fact 1090 

Article VI. Power to Sue and be Sued 1092 

Sec, 317. Right to sue, at common law, anywhere 1092 

Sec. 318. Unoker statutes, conditions imposed do not generally prevent 

suing 1093 

Sec. 319. But statutes may exclude from suing, except as to interstate or 

foreign commerce 1095 

Sec, 320, But such statutes can not exclude from suing in the United 

States courts 1097 

Sec. 321. Federal corporations can sue in the federal courts 1098 

Sec. 322, Liability to be sued 1099 

In the United States courts, citizenship 1099 

Sec. 323. In what district , 1106 

Note : Residence of corporations for purpose of suits against 

them 1110 

Sec. 324. Alien corporation 1111 

Sec. 325. In the state courts — where found doing business 1 115 

Note : Service of process, domestic corporations, foreign cor- 
porations 1120 

Sec, 326. What is doing business so as to authorize service of process 1121 

Sec, 327. Pleading 1122 

Corporation plaintiff, — need not allege corporate existence. .1122 

Sec. 328. Contra, — must allege corporate existence 1124 

Sec. 329. Corporation defendant, — plaintiff need not allege defendant is 

a corporation, if name implies it is not a natural person. 1125 

Sec. 330. Contra, — plaintiff should allege corporation is such 1126 

Sec, 331, General issue, at law does not raise question of corporate ex- 
istence ; otherwise in equity 1128 

Sec. 332. Contra, — under general issue corporate existence must be 

proved * 1129 

Sec, 333, General denial under the code 1130 

Sec. 334. Proof of corporate existence — special charter 1131 

Sec. 335. Under general incorporation laws 1132 

Sec. 336. Power to confess judgment 1134 

Sec. 337. What may be taken on execution 1136 

Article VII. Right to Have and Use a Seal 1136 

Sees. 338-9. 1. Necessity of a seal 1136 

(a) At common law 1136 



CONTENTS. xxiii 

PAGE. 

Sec. 340. (b) Now generally unnecessary, except where required 

of a natural person also 1137 

Note 1138 

Sec 341. (c) In deeds conveying land, the corporate seal is re- 
quired in some states 1138 

Sec. 342. (d) Signing in some way is now generally of more im- 
portance than sealing 1142 

Note ^ 1144 

Sec. 343. 2. Sufficiency and effect of a seal 1145 

(a) Presumptions 1145 

Note 1146 

Sec. 344. (b) As evidence of agents' or officers' authority 1147 

Note 1148 

Sec. 345. (c) As evidence of a consideration 1148 

Sec. 346. (d) Upon a negotiable instrument .1150 

Article VIII. Power to Make By-Laws 1153 

Sec. 347. 1. Definition and purpose, — differs from regulation 1153 

Sec. 348. 2. Power to make 1156 

(a) Incidental to corporate existence 1156 

Sec. 349, (b) This power resides in the shareholders or members 

unless otherwise provided 1166 

Note 1157 

Sec. 350, (c) Limits on power to make 1157 

1 . Forfeitures 1157 

Sec. 351, 2, Transfers 1159 

Sees. 352-3. 3. Liens ' 1161- 

Note 1164 

Sec. 354. 4. Expulsion of members 1165 

Note 1171 

Sec. 355. 3. Validity of by-laws in general 1171 

Note 1173 

Sec. 356. 4. Effect of by-laws 1174 

Note : Members, third parties 1175 

Article IX. Disfranchisement of Members 1175a 



VOLUME II. 

Title III. The Doctrine of Ultra Vires 1176 

CHAPTER 14. 

General Therory of Ultra Vires Transactions 1176 

Article I. Meaning of the Term 1176 

Sec. 357. Senses in which the term is used 1176 

Article ll. Theories as to Underlying Principles 1177 



xxiv CONTENTS. 

PAGE. 

Sees. 358-60. (1) Ultra vires acts are void because of legal incapacity to 

make them 1177 

Note 1183 

Sec. 361. (2) Ultra vires acts are not necessarily illegal 1183 

(3) Ultra vires acts are illegal and void 1183 

Sec. 362. (4) Ultra vires acts are valid if all the shareholders con- 
sent, and creditors are not injured 1197 

Sec. 363. (5) Ultra vires acts are valid except as against the state 1197 

Article III. Various Interests Affected 1200 

Sec. 364. The state, the parties, the shareholders, the creditors 1200 

Article IV. Applications op the Doctrine 1203 

Sees. 365-6. 1. Contracts 1203 

(a^ Wholly executed by both parties 1203 

Sec. 367 (b) Wholly executory 1205 

(1) Corporation complainant 1205 

See. 368. (2) Other party complainant 1207 

Sec. 369. (c) Partly executed 1211 

(1) Fully performed by the corporation, enforci- 

ble by it 1211 

Sec. 370. Co7itra 1212 

Sec. 371. (2) Fully performed by other party, notenforci- 

ble by him 1214 

Sec. 372. Contra 1217 

Sec. 373. (d) Specific performance 1224 

Sec. 374. (e) Leases 1224 

(1) Recovery of damages for breach 1224 

Sec. 375. (2) Recovery of unpaid rentals under the con- 
tract 1224 

Sec. 376. (3) Recovery for use of property 1225 

Sec. 377. (4) Re-entry 1225 

Sec. 378. (5) Recovery of possession in equity 1228 

Sec. 379. (6) Recovery of property in an action for unlaw- 
ful detention 1231 

Sec. 380. 2. Ultra vires devises and bequests ; theories 1232 

(a) Valid as to everybody except the state, which alone 
can complain in quo warranto for violation of 

charter 1232 

Sec. 381. (b) Void as to excess and heirs may have set aside 1232 

Sec. 382. 3. Ultra vires torts 1232 

Article V. Who Can Complain of Ultra Vires Acts 1233 

Sec. 383. 1. The state 1233 

See. 384. 2. The parties 1233 

Sec. 386. 3. The shareholders 1233 

Sec. 386. 4. The creditors : 1233 

Sec. 387. 6. Third parties 1233 



CONTENTS. XXV 

PAGE. 

Title IV. General Duties and Liabilities 1236 

CHAPTER 15. 

Liabilities Other Than Upon Contracts 1236 

Article I. Torts 1236 

Sec. 388. (1) Conversion 1236 

Note : Liability for torts in general 1239 

Sec. 389. (2) Nuisance, obstructing a stream 1239 

Sec. 390. (3) Trespass to property 1243 

Sec. 391. (4) Assault and battery 1244 

Note : The old doctrine 1246 

Sec. 392. Joinder of corporation and servant as defendants 1249 

Sec, 393. (5) False imprisonment 1250 

Sec. 394. (6) Libel and slander 1253 

Note : Libel ; slander 1255 

Sec. 395. (7) Malicious prosecution 1256 

Sec. 396. (8) Fraud, deceit and conspiracy 1262 

Sec. 397. (9) Negligence — ultra vires torts 1268 

Sec. 398. (10) Charitable corporations 1272 

Note . . : 1278 

Sec. 399. (11) Exemplary damages 1279 

Note 1282 

Article II. Crimes 1283 

Sec. 400. (1) Non-feasance 1283 

Sec. 401. (2) Misfeasance 1284 

Sec. 402. (3) Libel 1286 

Note 1286 

Article III. Contempts 1287 

Sec, 403. Liability for contempts 1287 



PART IV. 

SPECIAL BE L ATI ON S ABISING FBOM THE EXISTENCE OF A 

COBPOBATION. 

Division I. Corporate Relations 1291 

Title I. The Corporation and the State 1291 

CHAPTER 16. 

Governmental Control op Corporations 1291 

Subdivision I. General Doctrines 1291 

Article I. By the Courts 1291 

Sec. 404. 1 . Generally,— by actions at law, and suits in equity 1291 

Sec. 405. 2. Particularly,— by visitation 1291 

Article II. By Legislative Bodies 1292 

Sec. 406. Constitutional limitations 1292 

1. Powers of congress 1293 

Sec. 407. 2. Limits on powers of congress 1293 

Sec. 408. 3. Limits on powers of the states 1293 



XX vi CONTENTS. 

PAGE. 

Sec. 409. 4. General provisions 1294 

5. State constitutional limitations 1294 

Subdivision II. The State and Its Own Corporations 1294 

Article I. Control by the Courts 1294 

Sec. 410. (1) Methods in general 1294 

Sec. 41 1 . (2) Power of courts to issue the necessary writs 1295 

Sec. 412. A. By courts of law 

(1) By quo warranto, scire facias, or information in nature 

of quo warranto 1298 

Sec. 413. Abuse and misuse, meaning of 1300 

Sec. 414. Illustrations, abuse, misuse or perversion 1300 

(a) Unlawful combinations 1300 

(b) Illegal insurance 1301 

(c) Illegal banking 1301 

(d) Fraudulent organization 1301 

(e) Willful or negligent non-user 1301 

Sec. 415. Ouster for usurpation. Proceedings 1302 

Sec. 416. Illustrations of ouster for usurpation 1305 

(a) Unlawful purpose 1305 

(b) Imperfect organization 1305 

(c) Exercise of corporate powers after expira- 

tion of charter 1305 

(d) Intrusion into corporate office 1305 

Sec. 417. Statute of limitations 1305 

Sec. 418. Waiver 1306 

Sees. 419-20. (2) Mandamus 1308 

(a) Specific duty 1308 

Sec. 421. (b) No specific doty 1313 

Sec. 422. (c) Who may complain 1317 

Note : Mandamus to corporations 1318-21 

Sec. 423. (3) Indictments 1321 

Sec. 424. B. In courts of equity 1321 

(1) Dissolution, — general rule 1321 

Sec. 426. Exception 1323 

Sec. 426-7. (2) Injunction 1327 

Note 1331 

Article II. Visitation of Corporations 1332 

Sec. 428. 1. Private visitor 1332 

Note : Visitation of corporations 1336 

Sec. 429. 2. Public visitor or officer 1337 

Article III. Control by Legislative Action 1337 

Sec. 430-3. 1. Ordinary 1337 

(1) Eminent domain proceedings 1337 

Note : Eminent domain 1344 

Sec. 434-5. (2) Police control 1344 

(a) In general 1344 

Sec. 436. (b) Regulation of rates 1352 



CONTENTS. XXVii 

PAGE. 

Sec. 437. (c) Requiring reports 1363 

Note : Police power 1364-70 

Sec. 438. (3) Taxation 1370 

(a) Corporate elements subject to taxation 1370 

Note ' 1373 

Sec. 439. (b) Capital and capital stock 1373 

Note : Methods of taxing capital stock 1373 

Sec. 440. (c) Tangible property, and movable property 1374 

Note : Taxation of railroads ; rolling stock ; 

migratory property 1381 

Sec. 441. (d) Intangible property 1381 

Note : Taxation of patents, copyrights, etc. .1387 

Sec. 443. (e) Special franchises. 1388 

Note : Taxation of corporate franchises, pri- 
mary ; secondary ; property connected with 
use of special franchises; methods of 

valuation 1388 

Sec. 444. (g) Gross receipts 1389 

Sec. 445. (h) Excise 1390 

Sec. 446. (1) License 1392 

Sec. 447. (j) Privilege of engaging in interstate commerce . .1393 

Sec. 448. (k) Equal protection of the laws in taxation 1396 

Sec. 449. (1) Government agencies 1397 

Note : Taxation of telegraph companies ; 

interstate bridges ; national banks 1398 

Sec. 450. (m) Situs of shares for taxation 1399 

Note : Situs of shares, bills, notes and bonds ; 

corporate debts 1402 

Sec. 451. (n) Taxation of shares held by aliens 1402 

Sec. 452. (o) National taxation of state corporations 1404 

Sec. 453. 2. Legislative control, — extraordinary 1404 

(1) Repeal 1404 

(a) Power of parliament 1404 

Sees. 454-6. ' (b) Power of congress 1404 

Sec. 456. (c) Power of state legislatures,— no reserve power. 1412 

Sec. 457. Extent of doctrine of Dartmouth College case. . . 1413 

Sec. 458. (d) Power of legislature,— under reserve power to 

repeal 1422 

Sees. 459-61. (e) Effect of repeal upon vested rights 1426 

Sees. 462-3. (g) Repeal of general corporation laws 1445 

Sec. 464. (2) Legislative power to amend 1447 

(a) When there is no reservation of a power to 

alter or amend, — offer of an amendment 1447 

Sec. 465. Acceptance is essential 1447 

Sec. 466. Material amendment requires unanimous con- 
sent 1448 

Sec. 467. An immaterial amendment can be accepted by 

a majority 1464 



xxviii CONTENTS. 

PAGE. 

Sec. 468. (b) Power to amend under a reserved power to 

to amend, — extent of authority 1458 

Sec. 469. General limits of legislative authority under 

the reserved power to amend 1458 

Sec. 470. Acceptance is essential 1461 

Sees. 471-2. Power of majority to accept, — may 1461 

Sec. 473. Power of majority to accept, — may not accept 

a material amendment agaiijst protest of mi- 
nority 1466 

Note : Amendment of corporate charters. 1472-6 

Subdivision III. The State and National Corporations 1476 

Sees. 474-5. Status of national corporation within the states 1476 

Subdivision IV. The State and Foreign Corporations 1480 

Article I. Rights of Foreign Corporations 1480 

Sec. 476. (1) Protection of its property 1480 

Sees. 477-8. (2) To do business out of the state creating it. Doctrine of 

comity 1480 

Note 1485, 1489 

Sec. 479, (3) To sue in state courts 1489 

(a) Generally 1489 

Sec. 480. (b) To sue non-residents 1490 

Sec. 481. (c) In the United States courts 1490 

Article II. Eights of the State as to Foreign Cobpokations 1491 

Sec. 482. (1) To exclude, general rule 1491 

Sec. 483. (2) Retaliatory laws 1494 

Sec. 484. (3) Discrimination 1498 

Note 1502 

Sec. 485. (4) Limits on power to exclude, — government agency 1502 

Sec. 486. (5) Limits on power to exclude, — interstate commerce 1503 

Note : Interstate or foreign commerce 1504-7 

Sec. 487. (6) Limits on power to exclude, — what is interstate com- 
merce ; insurance 1507 

Sec. 488. (7) Effect of failure to comply with statutory provisions per- 
mitting doing business in the state by foreign corpora- 
tions 1510 

Note : Effect of failing to comply with statute, when 

there is a penalty ; when there is no penalty. . 1511 
Sees. 489-90. (8) What is "doing business" in violation of such statutes . .1513 
Note : What is doing business ; tests ; illustrations ... 1514 
Sec 491. Owning and using real estate by a foreign corporation is 

doing business 1516 

Sec. 492. (9) Statutes discriminating against non-resident corporations 

as creditors 1517 

Article III. Visitorial Power Over Foreign Corporations 1517 

Sec. 493. (1) Forfeiture of charter 1517 

Sec. 494. (2) Ouster from the state 1517 



CONTENTS. Xxix 

PAGE. 

Sec. 495. (3) In general there is no visitorial power over foreign corpo- 
rations, out of the jurisdiction 1619' 

(a) Reinstatement of a member 1519 

Sec. 496. (b) To compel issue of certificate 1521 

Sec. 497. (c) To compel inspection of books 1524 

Sec. 498. (4) Receivers in state courts 1524 

Subdivision V. The National Government and State Corporations . 1527 

Sec. 499. 1. Under the taxing power 1527 

Sec. 500. 2. Reorganization of state corporation as a national corpora- 
tion 152^ 

Sec. 501. 3. Interstate commerce, regulation according to state laws 1530 

Note 1533 

Sec. 502. 4. Interstate commerce commission 1534 

Sec. 503. 5. Interstate commerce, anti-trust acts 1536 

Sec. 504. 6. Control of mails 1541 

Sec. 505. 7. Receivers in United States courts 1542 

Title II. The Corporation and Various Classes of Persons 1546 

CHAPTER 17. 
The Relation op the Corporation to its Promoters, Officers, Share- 
holders, Creditors and Others 1546 

Subdivision I. The Corporation and its Promoters 1546 

Sec. 506. Definitions and functions of promoters 1546 

Sec. 507. Rights of corporation, duties of promoters 1546 

Sec. 508. Liability of promoters to the corporation and shareholders. . . .1548 

Sec. 509. Promoters' liability to shareholders 1550 

Sec. 510. Liability of the corporation upon promoters' contracts 1551 

Sec. 511. Liability of promoters to parties with whom they contract. . .-. .1553 
Sec. 512. Liability of corporation to promoter for expenses incurred in 

promoting corporation 1558 

Subdivision II. The Corporation and its Members or Shareholders. .1559 

Article I. Rights of the Corporation 1559 

Sec. 513. 1. To corporate existence, — estoppel of members to deny cor- 
porate existence 1559^ 

Sec. 614. 2. To issue preferred stock, or increase or decrease the capital 

stock 1559 

Sec. 616. 3. To enforce contracts of subscription 1669 

(a) General relation of shareholders to the corporation, to 
^ other shareholders, and to creditors ; subscription in- 
duced by fraud 1559 

Sec. 516. (b) Assumpsit, misrepresentations, release, change of 

amount of stock, subscription of the whole amount. . 1563 

Sec. 617. (c) Forfeiture for non-payment 1567 

Sec. 618. (d) Calls, how made ; forfeiture 1569 

Sec. 519. (e) Notice of calls 1673 

Sec. 520. (f ) Calls must operate equally 1574 

Sec. 621. (g) Calls must be uniform 1575 

Sec. 622. (h) Calls must be made by legal directors 1576 



XXX CONTENTS. 

PAGE. 

Sec. 523. 4. Assessments beyond full payment of amount subscribed 1579 

Sec. 524. 5. Right to reserve a lien upon shares 1580 

Sec. 525. 6. Right to regulate transfers 1580 

Sec. 526. 7. Right to carry on the corporate enterprise through its proper 

representatives 1580 

Sec. 527. 8. Right to accept amendments 1580 

Sec. 528. 9. Right to dissolve itself 1581 

Article II. Rights of Shareholders 1581 

Sec. 529. 1. Who are shareholders 1581 

(a) Certificate ; subscription ; payment. 1581 

Sec. 530. (b) Certificate and payment in case of increase of 

stock 1582 

Sec. 531. (c) Shares held as collateral security 1585 

Sees. 532-3. (d) Corporate books as evidence of membership 1585 

Sec. 534. 2. Right to vote 1591 

(a) Residence, proxy, and number of votes 1591 

Note : Proxy voting 1596 

Sec. 535. (b) Personal interest of shareholder 1597 

Sec. 536. (c) Pledgor and pledgee 1598 

Sec. 537. (d) Executors 1600 

Sec. 538. (e) Corporation holding its own shares 1601 

Sec. 539. (f) Cumulative voting 1603 

Sees. 540-1. (g) Voting trusts 1604 

Note 1613 

Sec. 542. 3. Right to dividends 1614 

(a) Definition 1614 

Sec. 543. (b) Out of what dividends may be declared ; provis- 
ion for payment of permanent debts 1616 

Note 1621 

Sec. 544. (c) Stock dividends 1622 

Sees. 545-6. (d) What is a severance of the dividend fund from 

other corporate funds 1628 

Sees. 547-8. (e) Who are entitled to dividends, option contracts 1631 

Sec. 549. (f) Rights of life-tenant and remainder-man to divi- 
dends 1638 

Sec. 650. (g) Remedy of shareholders for withholding payment 

of dividends 1643 

Note 1645 

Sec. 551. 4. Right to inspect books ,. 1645 

(a) In general 1645 

Sec. 552. (b) In case of foreign corporations ; general rule 1651 

Sec. 553. Exception 1653 

Sec. 554. 6. Right to transfer shares of stock 1654 

(a) Basis of the right 1654 

Sec. 555. (b) General doctrine as to transfer; nature of certifi- 

cates and how transferred ; refusal of corporation 
to transfer; remedy of holder at law and in 
equity; liability of corporation on old and new 



CONTENTS. xxxi 

PAGE. 

certificates; who is owner; bona fide transferee; 

theft, fraud, etc 1655 

Sec. 566. (c) General limit on right to transfer ; transfers for pur- 
pose of evading liability 1661 

Sec. 557. (d) Fraud, forgery, etc 1663 

Sec. 558. (e) Registration of transfers on corporate books — 

theories 1663 

(I) Not necessary ; attaching creditor of seller. .1663 
Sec. 659. (2) Registration is necessary; attaching cred- 
itor of seller 1668 

Note : Rules as to registration of transfers ; 

attachment of shares 1673 

Sec. 560. (3) Fraudulent transfer by pledgee 1674 

Sec. 561. (4) Fraudulent transfer by agent 1680 

Sec. 562. (5) Fraudulent transfer in breach of trust 1682 

Sec. 563. (6) Fraudulent transfer in breach of trust, — lia- 
bility of the corporation 1685 

Sees. 564-5. (7) Gift of shares 1688 

Sec. 566. (f) Effect of transfer upon liability of transferrer and 

transferee ; general rule 1692 

Note 1694 

Sec. 567. Transfer of unpaid shares to a bona fide pur- 
chaser ; liability of transferee 1695 

Sec. 568. (g) Refusal to transfer, — remedy 1698 

Sec. 569-70. Mandamus 1701 

Sec. 571. 6. Right to participate in issue of new stock 1703 

Sec. 572. 7. Right to be released from corporate liability 1705 

(a) For fraud or mistake in inducing subscription 1705 

Sec. 573. (b) In case the requisite amount of stock is not sub- 
scribed 1705 

Sec. 574. (c) By material change in business 1705 

Sec. 575. (d) By forfeiture of shares for non-payment 1705 

Sec. 576. (e) By valid and completed transfer of shares 1705 

Sec. 577. 8. Right to enjoin a change in corporate enterprise unless 

such power is reserved to the state 1705 

Sec. 578. 9. Right to share in distribution of surplus assets upon dis- 
solution 1 706 

Sec. 579. 10. Right to sue for wrongs done to the corporation 1706 

(a) General doctrine, as to action at law 1706 

Sec. 580. (b) Suits in equity 1709 

Sees. 581-2. General rule and exceptions 1709 

Sec. 583. (c) Restrain nltra vires acts 1715 

Sec. 584. (d) Causes for which, and circumstances under which 

shareholders may sue 1716 

Note 1723 

Sec. 585. (e) Good-faith shareholder only 1724 

Subdivision III. The Corporation and its Officers 1727 

Artice I. Rights ok the Corporation 1727 



XXXii CONTENTS. 

PAGE^ 

Sec. 586. 1. General doctrine 1727 

Sec. 687. 2. Theories of the relation of the directors to the corporation. .1727 
(a) Agents of the corporation, not trustees of sharehold- 
ers 1727 

Sec. 588. (b) Trustees 1729 

Sec. 589. (c) Mandataries 1731 

Sec. 590. 3. General rules as to duties and liabilities of directors to the 

corporation 1735 

Sec. 591. 4. Right of corporation to all profits made by officers by virtue 

of their office 1735 

Sec. 592. 5. Right of corporation to careful service by its officers, degree 

of care due 1737 

Note : Care required of officers 174S 

Sec. 593. 6. Right of corporation to remove officers 1744 

Article II. Rights of Officers 1746 

Sees. 594-5. 1. To manage the ordinary business of the corporation 1746 

Sec. 596. 2. Right to deal with the corporation. Theories 1750 

(a) Dealings are not necessarily void 1750 

Note 1753 

Sec. 597. (b) Corporation can refuse to perform or may have 

contract set aside 1753 

Sec. 598. 3. Right of officer to compensation 1755 

(a) General doctrine 1755 

Note 1757 

Sees. 599-600. (b) Strict rule 1758 

Subdivision IV. The Corporation and Creditors 1760 

Sec. 601. (See the topic the Creditors and the Corporation) 1805 

Subdivision V. The Corporation and Outside Parties 1760 

Sec. 601a. General duties and liabilities 1760 

Article I. Notice to the Corporation 1760 

Sec. 602. 1. Notice to a director 1760 

Sec. 603. 2. Notice to an officer, when he is acting in his own behalf 1763 

Note 1765 

Sec. 604. 3. Notice to a servant 1765 

Division II. Individual Relations 1767 

Title I. Internal Relations 1767 

CHAPTER 18. 
Relation of Promoters, Shareholders, Officers, Etc., Among Them- 
selves, to One Another, and to Other Parties 1767 

Subdivision I. Promoters 1767 

Sec. 605. 1. Relation to the state 1767 

Sec. 606. 2. Relation to the corporation, the shareholders and to third 

parties 1767 

Sec. 607. 3. Relation among themselves 1767 

Subdivision II. Shareholders or Members 1770 

Sec. 608. 1. Relation to the state 1770 

Sec. 609. 2. Relation to the corporation, promoters and officers 1770 



CONTENTS. XXXlil 

PAGE. 

Sec. 610. 3. Relation among themselves 1770 

(a) Right to good faith upon the part of fellow-sub- 
scribers to the stock 1770 

Sec. 611. (b) Right to equality, in proportion to stock owned 1770 

(1) In management : Voting ; notice of meetings, 

etc 1770 

Sec. 612. (2) In distribution of profits 1770 

Sec. 613. (3) In contributing to the corporate enterprise, — 

equality and uniformity of calls 1771 

Sec. 614. (4) In discharging corporate debts 1771 

Note : Statutory liability 1772 

Sec. 615. (5) In distribution of corporate assets upon dis- 
solution 1773 

Sec. 616. In case of preferred shareholders 1775 

Sees. 617-8. (c) Right to good faith upon the part of the major- 
ity : Power of the majority 1775 

(1) In the management of the corporate affairs. .1775 

Sees. 619-20. (2) In selling all the corporate property 1780 

Sec. 621. (3) In surrendering the corporate charter 1789 

Sec. 621a. (4) In accepting material amendments 1790 

Sec. 622. 4. Relation of shareholders and creditors 1790 

Sec. 623. 5. Relation of shareholders and third parties 1790 

Subdivision III. Officers 1790 

Sec. 624. 1. Relation to the corporation 1790 

Sec. 625. 2. Relation to the shareholders 1790 

(a) Rights of shareholders 1790 

(1) Individual, — vote, dividends, inspect books, 

transfer shares, etc 1790 

Sec. 626. (2) Collective, secondary 1790 

Sec. 627. (b) Rights of officers ' 1791 

(1) To deal with shareholders ; officers are not trus- 
tees for shareholders 1791 

Sec. 628. (2) To contribution or indemnity, where they are 

required to discharge corporate debts for which 

shareholders are also liable 1794 

Sec. 629. 3. Relation of officers among themselves 1796 

Sec. 630. 4, Relation to creditors 1796 

Sec. 631. 5. Relation to third parties 1796 

(a) False warranty of authority, ultra vires 1796 

Sec. 632. (b) Torts in general 1799 

Sec. 633. (c) Negligence 1800 

Title II. External Relations 1805 

CHAPTER 19. 

The Corporate Creditors 1805 

Subdivision I. The State and Corporate Creditors 1805 

Article I. Rights op the State, 1805 

iii — wiL. CAS. 



xxxiv CONTENTS. 

PAGB. 

^ec. 634. 1. To change remedies 1805 

Sec. 635. 2. To dissolve the corporation 1807 

Sec. 636. 3. To amend corporate charters; repeal statutory liability 1807 

Sec. 637. 4. To protect, or discriminate in favor of, resident creditors.. . .1807 

Article II. Rights of Creditors 1808 

Sec. 638. To have their security and remedy against corporate assets sub- 
stantially preserved without impairrnent 1808 

Subdivision II. The Corporation and its Creditors 1808 

Article I. Rights of the Corporation 1808 

Sec. 639. 1. To manage its own business 1808 

Sec. 640-1. 2. To dispose of its property 1809 

Sec. 642. 3. To accept amendments 1814 

Sec. 643. 4. To surrender the charter 1815 

Sec. 644. 5. To consolidate with other corporations 1815 

Sec. 645. 6. Right to prefer creditors. Theories 1815 

(a) Can 1815 

Sec. 646. (b) Can not after insolvency 1819 

Sec. 647. (c) Going concern, — attachment 1827 

Sec. 648. , (d) Extra-territorial effect of preferences 1828 

Sec. 649. 7. Right to prefer oflBcer — creditors. Theories 1832 

(a) Can not 1832 

Sec. 650. Reasons 1835 

Sec. 651. (b) Can 1836 

Article II. Rights of Creditors 1841 

Sec. 652. 1. In general 1841 

Sec. 653. 2. At law ; execution 1842 

Sec. 654. 3. In equity. Theories : 1847 

(a) Assets are a trust fund for creditors 1847 

Sec. 655. (b) Assets are not a trust fund ; liability is based on fraud . 1852 

Sec. 656-7. 4. Right to enjoin waste 1862 

Sec. 658. 5. Right to enjoin threatened wrong 1865 

Sec. 659. 6. Right to set aside fraudulent corporate conveyance 

Sec. 660. 7. Conditions precedent to creditor's rights to maintain suit 

in equity 1868 

Subdivision III. The Creditors and Corporate Officers 1874 

Article I. Rights of Creditors 1874 

Sees. 661-2. A. Common law liability of officers 1874 

1. Directors' responsibility 1874 

Sec. 663. 2. Care required of officers 1884 

Sec. 664. 3. Ultra vires transactions 1888 

Sec. 665. B. Statutory liability 1888 

1. General nature of 1888 

Note 1892 

Sec. 666. 2. When contractual and when penal. Enforcement in 

foreign state 1892 

Article II. Rights of Officers 1899 

Sec. 667. 1 To manage corporate affairs within their powers, and in good 

faith, without interference bv creditors 1899 



CONTENTS. XXXV 

PAGE. 

Sec. 668. 2. To contract or deal with the corporation 1899 

Sec. 669. 3. To obtain a preference as creditor 1899 

Subdivision IV. Creditors and Shareholders 1899 

I. Rights of Creditors 1899 

Sec. 670. A. Arising From Imperfect Incorporation 1899 

B. Common Law or Equitable Liability of Shareholders 1900 

Article I. Arising From Ownership of Shares 1900 

Sec. 671. 1. Who are shareholders 1900 

Note 1900 

Sec. 672. 2. Creditors iiave no right, at common law or in equity, to 

have more than the face value of shares paid up 1900 

Sec. 673. 3. Right of creditors to have the full face value of shares 

paid, if necessary to pay creditors, — general rule 1902 

Note : Unpaid subscriptions ; set off 1906 

Sec. 674. 4. Theories as to the basis of this right 1907 

(a) Trust-fund doctrine ; set-off, statute of limitations. . . 1907 

Sec. 676. (b) Fraud in equity 1911 

Sec. 676. (c) Fraud at law ; joint tort-feasors 1917 

Sec, 677. 5. Exceptions to the general rule 1919 

(a) By payment of a corporation debt by issue of stock 

in good faith 1919 

Sec. 678. (b) To save a "going concern" 1923 

Sec. 679. (c) In case of a gift of shares 1933 

Sees. 680-1. 6. Payment of shares in property 1936 

(a) Good-will 1936 

Sec. 682. (b) Valuation of property : True value rule. Notice.. .1943 

Note .....* 1947 

Sec. 683. Notice of value tj;om articles of incorporation 1947 

Sec. 684. Statute, notice of value 1949 

Sec. 685. (c) Actual fraud rule 1950 

Note 1951 

Sec. 686. 7. Fictitious issue of stock 1951 

(a) Meaning of the term 1951 

Note 1952 

Sec. 687. (b) Liability upon fictitiously issued stock: "No cor- 
poration shall issue stock or bonds, except for 
money paid, labor done, or property actually re- 
ceived, and all fictitious increase of stock or in- 
debtedness shall be void" 1953 

Sec. 688. 8. Remedy of creditors I960 

(a) Conditions precedent; in general, exhaust remedies 

against corporation I960 

Sec. 689. (b) At law and in equity I960 

Sec. 690. (c) In the United States courts 1962 

Sec. 691. (d) Mandamus, or suit in equity, to have calls made . . .1964 

Sec. 692. (e) Parties 1966 

Note 1967 



XXXVi CONTENTS. 

PAGK. 

Sec 68S. CO Assignee or recover in a foreign state 1968 

Note 1972 

Sec 694. (g) Extara-territorial effect of a judgment. Statute of 

limitationB 1972 

Note 1976 

Aancix II. Liabilttt Akisikg From Witkobawai. op Assists 1977 

Sec. 695. 1. What is a withdrawal of aas^s. 1977 

Sec. 696. 2. Withdrawing assets which creates insolvency 1979 

Note 1979 

Sec. 697. 3. Paying dividends after insolvency 1980 

Sec. 698. 4. Dividends received in good &dth which were paid out of 

capital 1981 

Sec. 699. 5. Remedy only in equity, — not at law 1985 

C. Statttort Liabiutt of Shakbholdbss 1987 

AsncLB I. Gexsbal Chabactkristics 1987 

Sec. 700. 1. Kinds: Contractual and penal 1987 

Note 1989 

Sec. 701. 2. General nature of contractual ^atutory liability 1990 

Note ; surtival ; set-off 1991 

Sees. 708-3. 3. To what it applies ; interpretation; debts 1992 

Sec 704. 4. Cieneral nature of penal liability . : 1996 

Note 1996 

AjCnCXS n. PABnCTLAB KeSDS op CoSTBACTTAL LlABILITT 1997 

Sec. 705. 1. As to legal character — 

(a) Secondary, limited and joint 1997 

Sec. 706. (b) Secondary, unlimited and several 1997 

Sec. 707. (c) Primary, unlimited, partnership 1998 

Sec. 708. (d) Primary, limited, joint, enforceable only in equity. . .2000 

Sec. 709. (e) Primary, limited, several, enforceable at law 2001 

Sec. 710. 2. Astoamount 2003 

(a) TTnlimited 2003 

Sec. 711. (b) Double- Who liable 2003 

Sec. 712. Double liability; assignee can not enforce; suit only 

after corporation can not pay 2005 

Sec. 713. (c) Proportional 2009 

Sec. 714. (d) For labor and services 2010 

AbTICLB m. EXPOBCKJIEST OP THK STATUTORY LlABEUTT 2012 

Sec. 715. 1. In general 2012 

Note: Special remedies; receiver or assignee; secondary 

liability ; parties ; statute of limitations 2013 

Sec. 716. 2. Constitutional provisions, when self -executing 2013 

Sec. 717. 3. Self-executing provisions ; special remedy ; remedy in equity 

or at law ; repeal 2014 

Sec. 718. 4. Self-executing provisions. When enforceable in other states. 2018 

Sec. 719. 5. Enforcement in other states 2021 

(a) When it will not be enforced 2021 

Sec 720. (b) When and how it will be enforced in other states 2029 



CONTENTS. XXXVll 

PAGB. 

Sec. 721. (c) Penal liability 2033 

II. Rights of Shareholders 2034 

Sec. 722. 1. To receive dividends from profits earned 2034 

Sec. 723. 2. To keep dividends received in good faith, though paid out of 

capital when solvent 2034 

Sec. 724. 3. To be released from liability 2034 

(a) By fraud in securing subscription 2034 

Sec. 725. (b) By forfeiture of shares for non-payment 2034 

Sec. 726. (c) By acceptance, by corporation, of a material amend- 
ment, when not assented to by the shareholder 2034 

Sec. 727. (d) By completed transfer of shares 2035 

Subdivision V. Rights of Corporate Creditors Among Themselves. . .2035 

Article I. Priority 2035 

Sec. 728. 1. In general by promptness of action 2035 

Sec. 729. 2. In case of unpaid subscriptions, or withdrawal of assets. .2035 
Sec. 730. 3. In case of statutory liabiUty of shareholders or oflBcers. . .2035 

Sec. 731 . 4. By voluntary preference by corporation 2035 

(a) General creditors 2035 

Sec. 732. (b) Director-creditors 2036 

Sees. 733-5. 5. By statutory provisions. Resident and non-resident 

creditors 2036 

(a) Natural and artificial non-resident persons as cred- 
itors 2036 

Sec. 736. (b) Power to subject corporate assets within the state 

to the payment of home creditors 2050 

Sec. 737. 6. Power of the court to provide for the payment of the 

claims of certain creditors in preference to prior liens. . .2053 

Article II. Contribution as to Expense op Enforcing Remedies 2062 

Sec. 738. Contribution is allowed 2062 



APPENDIX. 

Form I. Subscription to capital stock prior to organization 2065 

II. Subscription to stock in corporation to be formed 2065 

III. Statutory subscription 2066 

IV. Conditional subscriptions 2066 

V. Application for incorporation 2066 

VI. Certificate of incorporation 2066 

VII. Charter of United States steel corporation 2069 

VIII. Waiver of notice of first meeting 2074 

IX. Proxy of subscribers, first meeting 2074 

X. Assignment of subscription to stock 2075 

XI. Waiver of notice of meeting to increase stock 2075 

XII. Waiver of notice of assessment of unpaid stock 2076 

XIII. By-laws 2077 

XIV. General scheme for by-laws 2079 



XXXviii CONTENTS. 

PAGE. 

XV. Minutes of first meeting 2083 

XVI. Directions for using forms 2086 

XVII. Option contract ^ 2089 

XVIII. Underwriting contract 2095 

XIX. Agreement between corporation and promoter 2097 

XX. Unincorporated trust 2098 

XXI. Prospectus 2098 

XXII. Certificate of stock 2098 

XXIII. Preferred and guaranteed stock 2100 

XXIV. Voting trust 2100 

XXV. Corporate notes, signatures and acknowledgments 2103 



TABLE OF REPORTED CASES. 



[References are to Pages.1 

Adams Express Co. v. Ohio State Auditor, 165 U. S. 194 1381 

Addyston Pipe & Steel Co. v. United States, 176 U. S. 211 1535 

Allen V. Curtis, 26 Conn. 456 1727 

Allen V. Montgomery R. Co., 11 Ala. 437 (extract) 1960 

American Live Stock C. Co. v. Chicago L. S. Ex., 143 111. 210 682 

American National Bank v. Dallas T. W. Mfg. Co., 39 S. W. Rep. (Tex.) 

955 (extract) 1827 

American Ry.-Frog Co. v. Haven, 101 Mass. 398 J601 

American Union Telegraph Co. v. Union Pacific Railroad Co., 1 McCrary 

188 1225 

Anderson v. Middle & E. T. Cent. R. Co., 91 Tenn. 44 511 

Anglo-Continental Corp. of Western Australia, Limited, 67 L. J. Ch. 179, 

78 L. T. R. (N. S.) 157 1773 

Armington v. Palmer, 21 R. I. 109, 42 Atl. 308 820 

Armstrong v. Karshner, 47 Ohio St. 276 526 

Ashton V. Burbank, 2 Dillon (U. S. Circuit) 435 87 

Astor V. Arcade Railway Co., 113 N. Y. 93 363 

Attorney-General v. Fidelity and Casualty Ins Co., 39 Minn. 538 (extract) 1517 
Attorney-General v. The Legrand Roller Skating Rink Co., 143 111. 118. .1321 

Attorney-General, Ex rel. Minor, v. Lorman, 59 Mich. 157 605 

Attorney-General v. Tudor Ice Co., 104 Mass. 239 1326 

Aurora Agricultural and Horticultural Society of Aurora v. Paddock, 80 

111. 263 1065 

B 

Bacon v. Robertson, 18 How. (59 U. S.) 480 899 

Baltimore City Passenger R. Co. v. Hambleton, 77 Md. 341 1582 

Baltimore and Potomac R. Co. v. Fifth Baptist Church, 137 U. S. 568 1132 

Bank of Augusta v. Earle, 13 Peters (38 U. S.) 519 1480 

Bank of Jamaica v. Jefferson, 92 Tenn. 537 1128 

Bank of Little Rock v. McCarthy, 55 Ark. 473 848 

Bank of Poughkeepsie v. Ibbotson, 24 Wend. (N. Y.) 473 2001 

Bank of the State of South Carolina v. Gibbs, 3 McCord (S. C.) *377 .... 221 

Bank of United States v. Dandridge. 12 Wheat. 64 854 

(xxxix) 



xl TABLE OF REPORTED CASES. 

[References are to Pages.} 

Bank of United States v. Planters' Bank, 9 Wheat. 904 558 

Bank of Utica v. Smalley, 2 Cowen (N. Y.) 770 (extract) 1129 

Bardstown and Louisville Railroad Company v. Metcalfe, 4 Met. (Ky.) 199, 

81 Am. Dec. 541 (extracts) 1074 

Barned's Banking Company, In re, L. R. 3 Ch. App. Cas. 105 1051 

Barrow Steamship Company v. Kane, 170 U. S. 100 1111 

Barry v. Merchants' Exchange Company, 1 Sandford's Chancery (N. Y.) 

280 766 

Bateman v. The Mid- Wales Railway Co., 35 L. J. (C. P.) 205 947 

Behre v. National Cash Register Co., 100 Ga. 213 1253 

Belfast and Moosehead R. Co. v. City of Belfast, 77 Me. 445 1616 

Bell V. The Bank of Nashville, Peck (Tenn.) 269 279 

Belton V. Hatch, 109 N. Y. 593 178 

Benbow V. Cook, 115 N. C. 324 414 

Bennison v. McConnell, 56 Neb. 46 1771 

Bergeron v. Hobbs, 96 Wis. 641 611 

Bissell V. The Michigan Southern and N. I. Railroad Companies, 22 N. Y 

259 1183 

Bjorngaard v. Goodhue Co. Bank, 49 Minn. 483 1596 

Blake v. McClung, 172 U. S. 239 2036 

Blake v. McClung, 176 U. S. 59 2045 

Bloede Co. v. Bleode. 84 Md. 129 1159 

Board of Commissioners of Hamilton County v. Mighels, 7 Ohio State, 

109 214 

Bolander v. Stevens, 23 Wend. (N. Y.) 103 2 

Bond V. Terrell Cotton and Woolen Manufacturing Co., 82 Tex. 309 1211 

Boston Glass Manufactory v. Langdon, 24 Pick. (Mass.) 49 866 

Boyce v. Trustees of Towsontown Station of the M. E. Church, 46 Md. 

359 642 

Boyd V. Peach Bottom Railway Co., 90 Pa. St. 169 522 

Bradbury v. Boston Caaoe Club, 153 Mass. 77 940 

Bradley v. Reppell, 133 Mo. 545 868 

Broadway Bank v. McElrath, 13 N. J. Eq. 24 1663 

Brokaw v. New Jersey R., etc., Co., 32 N. J. Law (3 Vroom) 328 1249 

Bronson v. La Crosse and Milwaukee R. Co., 2 Wall. (69 U. S.) 283 1713 

Brooklyn Steam Transit Co. v. City of Brooklyn, 78 N. Y. 524 871 

Bright V. Lord, 51 Ind. 272 1635 

Brinkerhoff-Farris Trust & Savings Co. v. Home Lumber Co., 118 Mo. 447. 1162 
Brunswick Gas Light Company v. United Gas, Fuel and Light Company, 

85 Me. 532 1071 

Bryant's Pond Steam Mill Co. v. Felt, 87 Maine 234 474 

Buck v. Ross, 68 Conn. 29 1977 

Budd V. Multnomah St. R. Co., 15 Ore. 413 1569 

Buffalo and N. Y. City R. Co. v. Dudley, 14 N. Y. 336 1461 

Busenback v. The Attica and Bethel Gravel Road Co., 43 Ind. 265 600 

Butternuts and Oxford Turnpike Co. v. North, 1 Hill (N. Y.) 518 525 



TABLE OF REPORTED CASES, xU 

[References are to Pages.'] 

c 

California v. Pacific R. Co., 127 U. S. 1 (extract) 1478 

Camden and Atlantic R. Co. v. May's Landing, etc., R. Co., 48 N. J. L. 

530 (extracts) 1176 

Camden v. Stuart, 144 U. S. 104 (extract) 1942 

Cameron v. Kenyon-Connell Com. Co., 22 Mont. 312. 1800 

Canfield v. Gregory, 66 Conn. 9 647 

Capps & McCreary v. Hastings Prospecting Company, 40 Neb. 470 239 

Carey v. Williams, 79 Fed. Rep. 906 1586 

Case V. Kelly, 133 U. S. 21 1012 

Case of Suttton's Hospital, 10 Coke 23a (extracts) 264 

Casey v. Galli, 94 U. S. (4 Otto) 673 1529 

Cass V. Pittsburg, Virginia and Charleston Railway Co., 80 Pa. St. 31 538 

Catlin V. Eagle Bank, 6 Conn. 233 1815 

Central Pacific R. Co. v. Gallatin, 99 U. S. 700 1405 

Central Transportation Co. v. Pullman Palace Car Co., 139 U. S. 24 1178 

Chandlery. Bacon, 30 Fed. Rep. 538 1546 

Chapman v. Iron Clad Rheostat Co., 62 N. J. Law 497 1045 

Chase National Bank v. Faurot, 149 N. Y. 532 1150 

Chater v. San Francisco Sugar Ref. Co., 19 Cal. 219 80 

Chestnut Hill Co. v. Rutter, 4 Serg. & R. (Pa.) *6 1239 

Chicago, R. I. & P. R. Co. v. Union Pacific R. Co., 47 Fed. Rep. 15 (extract)1177 

Child V. Boston & F. I. Works, 137 Mass. 516 1992 

Child V. Hudson's Bay Co., 2 P. Wms. 207 1161 

Christensen v. Eno, 106 N. Y. 97 1933 

Cincinnati Cooperage Company v. Bate, 96 Ky. 356 827 

Cincinnati, Lafayette and Chicago R. Co. v. The Danville and Vincennes 

R. Co., 75 HI. 113 664 

City and County of San Francisco v. Spring Valley Water-Works, 48 

Cal. 493 346 

City of Denver v. Sherret, 88 Fed. Rep. 226 1765 

City of Detroit v. Detroit and Howell Plank Road Co., 43 Mich. 140 . . . .1458 

Clearwater v. Meredith, 1 Wallace (68 U. S.) 25 984 

Cleveland, Columbus, Cincinnati and Indianapolis Railway Company v. 

Closser, 126 Ind. 348 960 

Cochran v. Arnold, 68 Pa. St. 399 625 

Cole V. LaGrange, 113 U. S. 1 554 

Cole v. Millerton Iron Co., 133 N. Y. 164 1866 

Coleman v. White, 14 Wis. 700 2000 

Colonial Bank v. Whinney, L. R. 30 Ch. Div. 261 801 

Commercial Fire Insurance Co. v. Board of Revenue, 99 Ala. 1 773 

Commonwealth v. Crompton, 137 Pa. St. 138 1688 

Commonwealth v. Cullen, 13 Pa. St. 133 417 

Commonwealth v. Detwiler, 131 Pa. St. 614 1591 

Commonwealth v. Hemmingway, 131 Pa. St. 614 1591 

Commonwealth v. New York, etc.. Railroad Co., 132 Pa. St. 591 (extract). 101 4 
Commonwealth v. Smith, 10 Allen (Mass.) 448 (extracts) 1070 



xlii T^BLE OF REPORTED CASES. 

[References are to Pages. ~\ 

Commonwealth v. Texas and Pacific R. Co., 98 Pa. St. 90 1476 

Compton V. Railway Company, 45 Ohio St. 502 995 

Contract Corporation, Ex parte, L. R. 3 Ch. App Cas. 105 1051 

Cooke V. Marshall, 191 Pa. St. 315 761 

Cooper Mfg. Co. v. Ferguson, 113 U. S. 727. (Extract.) 1503 

Coppage V. Button, 124 Ind. 401 469 

Coppin V. Greenlees & Ransom Co., 38 Ohio St, 275 1048 

Corey v. Wadsworth, 118 Ala. 488 (extract) 1836 

County of San Mateo v. Southern Pacific R. Co., 13 Fed. Rep. 722 36 

Crafford v. Supervisors, etc., 87 Va. 110 51 

Curtis V. Tracy, 169 111. 233 650 

Cushman v. Thayer Mfg. Jewelry Co., 76 N. Y. 365 1698 

D 

Dalton & M. R. Co. v. McDaniel, 56 Ga. 191 (extract). . .- 1964 

Dartmouth College v. Woodward, 4 Wheat. 518 708 

Davenport v. Lines, 72 Conn. 118 1980 

Davis V. Nebraska National Bank, 51 Neb. 401, 6 Am. & Eng. Corp. 

Cas. (N. S.) 593 1130 

Deaderick v. Wilson, 8 Baxt. (67 Tenn.) 108 1791 

Demarest v. Flack, 128 N. Y. 205 1486 

Denny Hotel Co. v. Schram, 6 Wash. 134 553 

Denver Fire Insurance Co. v. McClelland, 9 Colo. 11 1217 

DeWitt V. The City of San Francisco, 2 Cal. 289 1019 

Dexter Savings Bank v. Friend, 90 Fed. Rep. 703 1796 

Directors of the Long Island R. Co., In re, 19 Wend. (N. Y.) 37 1157 

Distilling and Cattle Feeding Company v. People, 156 111. 448 978 

Dodge v. Woolsey, 18 How. (59 U. S.) 331 88 

Donworth and Behan v. Coolbaugh, 5 Iowa 300 1445 

Dousman v. The Wisconsin and Lake Superior Mining and Smelting Co., 

40 Wis. 418 1703 

Doyle V. Continental Ins. Co., 94 U. S. 535 1491 

Doyle V. Mizner, 42 Mich. 332 632 

Droitwich Salt Co. v. Curzon, L. R. 3 Exch. 35 764 

Dronfield Silkstone Coal Company, In re, L. R. 17 Ch. Div. 76 1041 

Duke v. Markham, 105 N. C. 131, 18 Am. St. Rep. 889 833 

Dunn v. University of Oregon, 9 Ore. 357 298 

Durfee v. Old Colony and Fall River R. Co., 5 Allen (Mass.) 230 1462 

E 

Eagle Insurance Co. v. Ohio, 163 U. S. 446 1363 

East Birmingham Land Co. v. Dennis, 85 Ala. 565 807 

Eastern Counties Railway Co. v. Broom, 6 Exch. (Welsby, H. & G.) 314, 

2 Eng. L. & Eq. 406 1244 

Edgerly v. Emerson, 23 N. H. 555 851 

Edgeworth v. Wood, 58 N. J. L. 463 28 



TABLE OF REPORTED CASES. xliii 

[References are to Pages.] 

Edinboro' Academy v. Robinson, 37 Pa. St. 210 445 

Edwards v. Warren Linoline and Gasoline Works, 168 Mass. 564 171 

Ellis V. Marshall, 2 Mass. 269, 3 Am. Dec. 49 306 

Ellis V. Ward, 137 111. 509 1729 

Enterprise Ditch Co. v. Moffitt, 58 Neb. 442, 76 Am. St. Rep. 122 1579 

Erie & Northeast R. v. Casey, 26 Pa. St. 287 .1435 

Erwin v. Oldham, 6 Yerger (14 Tenn.) 185 • 815 

Estey Manufacturing Company v. Runnels, 55 Mich. 130 631 

Evans v. The Philadelphia Club, 50 Pa. St. 107 1165 

Exchange National Bank v. Capps, 32 Neb. 242 1122 

Ex parte, see name of party. ^ 

F 

Fairfield Savings Bank v. Chase, 72 Maine 226 1760 

Falconer & Higgins v. Campbell, 2 McLean (U. S. Circuit Ct.) 195 287 

Farmers' Loan & Trust Co. v. N. Y. & Northern R. Co., 150 N. Y. 410 . . .1776 

Farrington v. Putnam, 90 Maine 405 1029 

Farrington v. Tennessee, 95 TJ. S. 679 1370 

Farrior v. New Eng. Mortgage Security Co., 88 Ala. 275 1615 

Farwell Co. v. Wolf, 96 Wis. 10 1197 

Fay V. Noble, 7 Cush. (Mass.) 188 677 

Fidelity Insurance, Trust, etc., Co. v. Niven, 5 Houst. (Del.) 416 1088 

Fietsam v. Hay, 122 111. 293 141 

Finnegan v. Noerenberg, 52 Minn. 239 614 

Fire Insurance Patrol v. Boyd, 120 Pa. St. 624 1272 

First National Bank v. Peavey, 69 Fed. Rep. 455 (extract) 1962 

Fisher v. Essex Bank, 5 Gray (Mass.) 373 1668 

Fiske's Estate, In re. Ill N. Y. 66 1034 

Fitzpatrick v. Rutter, 160 111. 282 644 

Flinn v. Bagley, 7 Fed. Rep. 785 1902 

Flint & F. P. R. Co. v. Woodhull, 25 Mich. 99 398 

Flint V. Pierce, 99 Mass. 68 1174 

Florence Land and Public Works Co., In re, v. Nicol's Case, L. R. 29 

Ch. Div. 421 604 

Florsheim Bros. Dry Goods Co. v. Lester, 60 Ark. 120 1513 

Forrester v. Boston & M. Cons. C. S. & M. Co., 21 Mont. 544 1780 

Foster v. Borax Co., 80 L. T. R. (N. 8.) 461 1863 

Foster v. Chase, 76 Fed. Rep. 797 547 

Foster v. Essex Bank, 16 Mass. 245 895 

Foster v. Moulton, 35 Minn. 458 646 

Foster & Sons v. Commissioners, etc., L. R. 1 Q. B. D. 516 (1894) 60 

Fowler v. Bell, 90 Tex. 150 (extract) 1828 

Franklin Bridge Co. v. Wood, 14 Ga. 80 279 

Franklin Company v. Lewiston Institution for Savings, 68 Maine' 43 938 



xliv TABLE OF REPORTED CASES. 

IBeferences are to Pages. Ji 

G 

Garrett v. Belmont Land Co., 94 Tenn. 459 1138 

Garratt Ford Co. v. Vermont Manufacturing Co., 20 R. I. 187 1093 

Gent V. Manufacturers' and M. M. Ins. Co., 107 IlL 652 668 

Gibbs' Estate, W. Halstead's Appeal, 157 Pa. St. 69 244 

Gleason v. McKay, 134 Mass. 419 167 

Glenn v. Orr, 96 N . C. 413 1589 

Globe Accident Ins. Co. v. Reid, 19 Ind. App. 203 1142 

Goodspeed v. East Haddam Bank, 22 Conn. 530 1256 

Governor v. Allen & McMurdie, 8 Humph. (27 Tenn.) 176 270 

Graham v. Boston, Hartford and Erie*R. Co., 118 U. S. 161 846 

Graham v. Railroad Co., 102 U. S. 148 1809 

Grand Lodge of Alabama v. Waddill, 36 Ala. 313 1212 

Graves v. Brooks, 117 Mich. 424 1950 

Great Western Tel. Co. v. Burnham, 79 Wis. 47 1574 

Great Western Tel. Co. v. Purdy, 162 U. S. 329 1972 

Greenberg v. Whitcomb Lumber Co., 90 Wis. 226 1799 

Greene v. Dennis, 6 Conn. 292 275 

Green v. Graves, 1 Douglass (Mich.) 851 (extracts) 292 

Green v. Knife Falls Boom Corporation, 35 Minn. 155 339 

Greenwood v. Freight Co., 105 U. S. 13 1422 

Griffing Iron Co., In re, 63 N. J. Law 168 1744 

Griffith v. Blackwater Boom and Lumber Co., 47 W. Va. 56, 33 S. E. Rep. 

125 897 

Guckert v. Hacke, 159 Pa. St. 303 662 

Guilford v. Western U. Tel. Co., 59 Minn. 332 1521 

H 

Hahns & Bros.' Appeal, 16 Am. & E. C. C. 537, 18 W. L. N. 294 549 

Haley v. Reid, 16 Ga. 437 810 

Hamlin v. Continental Trust Co., 47 U. S. App. 422, 78 Fed. Rep. 664. .. . 786 

Handley v. Stutz, 139 U. S. 417 1923 

Hanson v. Donkersley, 37 Mich. 184 1997 

Hardin v. Trustees of Second Baptist Church, 51 Mich. 137 201 

Harger v. McCullough, 2 Denio (N. Y.) 119 1998 

Harris and Stickle v. McGregor, 29 Cal. 124 603 

Harrod v. Hamer, 32 Wis. 162 686 

Harvey v. Linville Improvement Co., 118 N. C. 693 1604 

Hawes v. Anglo-Saxon Petroleum Co., 101 Mass. 385 581 

Hawes v. Oakland, 104 U. S. 450 1716 

Hawthorne v. Calef, 2 Wall. (69 U. S.) 10 752 

Hatch V.Dana, 101 U. S. 205 1965 

Heaston v.-Cincinnati & Ft. Wayne R. Co., 16 Ind. 275 1573 

Hebgen v. Koeffler, 97 Wis. 313 1548 

Helm v. Smith-Fee Co., 79 Minn. 297 2062 

Higgins V. Downward, 8 Houst. (Del.) 227 152 



TABLE OF REPORTED CASES. xlv 

[.References are to Pages.'\ 

Holman v. The State, 105 Ind. 669 690 

HoUins V. Brierfleld Coal and Iron Co., 150 IT. S. 371 1868 

Holloway v. The Memphis, El Paso and Pacific R. Co. 23 Tex. 466 1124 

Hooper V. California, 155 U. S. 648 1507 

Hoppin V. Bufium, 9 R. I. 613 1598 

Home V. Ivy, 1 Mod. 18 1136 

Hospes V. Northwestern Mfg., etc., Co., 48 Minn. 174 1911 

Howarth v. Angle, 162 N. Y. 179 2028 

Howe, Brown & Co. v. Sandford F. & T. Co., 44 Fed. Rep. 231 (extract) . 1835 

Hudson Real Estate Company v. Tower, 161 Mass. 10 478 

Hughes V. Antietam Mfg. Co., 34 Md. 316 1663 

Hunt V. O'Shea, 69 N. H. 600 1628 

Huntington v. Attrill, 146 U. S. 657 1892 

I 

In re, see name of the party. 

Insurance Company v. Morse, 87 U. S. (20 Wall.) 445 (extract) 1097 

Interstate Commerce Commission v. Cincinnati, N. O. & T. P. Co., 167 

U. S. 479 (extract) 1534 

In the matter of (see name of party). 

Irwin V. Granite State Provident Assn., 56 N. J. Eq. 244 1524 

Ireland v. The Palestine, etc., Turnpike Co., 19 Ohio St. 369 757 

J 

Jackson's Administrators v. Newark Plank-Road Co., 31 N. J. Law 277. .1643 

Jackson v. Walsh, 75 Md. 304 (extract). 1447 

Jacksonville, Mayport, Pablo R. & Nav. Co. v. Hooper, 160 U. S. 514. . . .1146 

Jermain v. Lake Shore & Mich. Southern R. Co., 91 N. Y. 483 1631 

Jones V. The Aspen Hardware Company, 21 Colo. 263 637 

Jones V. Guaranty and Indemnity Company, 101 U. S. 622 1078 

Johns V. Johns, 1 Ohio St. 350 794 

Johnston Fife Hat Co. v. The National Bank of Guthrie, 4 Okla. 17 1262 

K 

Kaiser v. Lawrence Savings Bank, 56 Iowa 104 607 

Kearns v. Leaf, 1 Hem. & Mill 681 (extract) 1862 

Keller v. Eureka Brick Machine Manufacturing Co., 43 Mo. App. 84 1665 

Kent V. Quicksilver Mining Co., 78 N. Y. 159 790 

Keokuk and Western Railroad Company v. Missouri, 152 U. S. 301 989 

Killingsworth v. The Portland Trust Co., 18 Ore. 351, 17 Am. St. Rep. 737. . 1090 

King v. London, Carth. 217 (extract) 705 

King v. Mayor of London, Show. 280 (extract) 152 

King V. Passmore, 3 T. R. 246 (extract) 150 



xlvi TABLE OF REPORTED CASES. 

[References are to Pages. '\ 

L 

Lake Shore and Michigan Southern R. Co. v. Chicago and Western In- 
diana R. Co., 97 I]l. 506 (extract) 1342 

Larrabee v. Baldwin, 35 Cal. 155 (extract) 2009 

Lawrence v. Greenup, 97 Fed. Rep. 906 (extract) 1985 

Leazure v. Hillegas, 7 Serg. & R. (Pa.) 313 1008 

Le Roy v. Globe Insurance Co., 2 Edw. Ch. (N. Y.) *657 1629 

Lewis V. Tilton, 64 Iowa 220 176 

Licensed Victuallers' Mutual Trading Assn., Ex parte Audain, L. R. 42 

Ch. Div. 1, 26 A. & E. C. C. 217 502 

Little Saw Mill Valley Turnpike Co. v. Federal Street and P. V. P. R. 

Co., 194 Pa. St. 144 1147 

Long V. Georgia Pacific Railway Co., 91 Ala. 519 1203 

Loring v. Salisbury Mills, 125 Mass. 138 1685 

Lothrop V. Stedraan, 42 Conn. 563 (extract) 1865 

Louisville Banking Company v. Eisenman, 94 Ky. 83 887 

Louisville, New Albany & C. R. Co. v. Boney, 117 Ind. 501 •. . . 1842 

Lucus V. White Line Transfer Co., 70 Iowa 541 1207 

Luxton V. North River Bridge Co., 153 U. S. 525 320 

M 

Maine v. Grand Trunk R. Co., 142 U. S. 217 (extract) 1390 

Maisenbacker v. Society Concordia, 71 Conn. 369 1279 

Mallory v. Hanaur Oil Works, 86 Tenn. 598 957 

Manchester Fire Ins. Co. v. Herriott, 91 Fed. Rep. 711 1498 

•Manchester and Lawrence Railroad v. Concord Railroad, 66 N. H. 100. . . 963 

Man wood v. Lovelace, 6 Vin. Abr. 282 688 

Marchand v. Loan and Pledge Assn., 26 La. Ann. 389 383- 

Marshall v. F. & M. Savings Bank, 85 Va. 676 1879 

Marshall v. Sherman, 148 N. Y. 9 2021 

Martin v. Fewell, 79 Mo. 401 .673 

Martin v. South Salem Land Co., 94 Va. 28 539 

Matter of Rappleye, 43 App. Div. (N. Y.) 84 1651 

Maund v. The Monmouthshire Canal Co., 4 Mann. & Gr. (43 Engl. C. L.) 

*452 1243 

Mayor, etc., of Norwich v. Norfolk R. Co., 82 Eng'. C. L. (4 El. & Bl.)*367 

(extract) 1148 

McArthur v. Times Printing Co., 48 Minn. 319 1551 • 

McCarthy v. Lavasche, 89 111. 270 253 

McCartee v. Orphan Asylum Society of New York, 9 Cowen (N. Y.) 437. .1021 

McClure v. Law, 161 N. Y. 78 1735 

McDonald v. Williams, 174 U. S. 397 1981 

McGinty v. Athol Reservoir Co., 155 Mass. 183 873 

McGraw's Estate, In re, 111 N. Y. 66 1034 

McLouth V. Hunt, 154 N. Y. 179 1638 

McKim V. Odom, 3 Bland Ch. (Md.) 407 222 

McNeil V. Tenth Nat'l Bank, 46 N. Y. 325 1674 



TABLE OF REPORTED CASES. xlvH 

[References are to Pages.'] 
Medical Institution of Geneva College v. Patterson, 1 Denio (N. Y.) 61. . 263 

Medway Cotton Manufactory v. Adams, 10 Mass. 360 825 

Memphis, etc., R. Co. v. Railroad Commissioners, 112 U. S. 609 143 

Mechanics' Bank v. Heard, 37 Ga. 401 87" 

Merchants' Bank of Canada v. Livingston, 74 N. Y. 223 16 

Merchants' Nat'l Bank of Kansas City v. Lovitt, 114 Mo. 519 17().j 

Merchants' & Planters' Line v. Waganer, 71 Ala. 581 880 

Metcalf v. Arnold, 110 Ala. 180 97 

Methodist Episcopal Church v. Sherman, 36 Wis. 404 691 

Metropolitan Elevated R. Co. v. Manhattan Elevated R. Co., 11 Daly 

373, 14 Abb. New Cas. 103 694 

Miller v. Ewer, 27 Maine 509 841 

Miller v. Insurance Co., 92 Tenn. 167 1214 

Mills v. Northern R. Co., L. R. 5 Ch. App. Cas. 621 1813 

Miner v. The Belle Isle Ice Co., 93 Mich. 97 1323 

Miners' Ditch Co. v. Zellerbach, 37 Cal. 543 (extract) 1200 

Minneapolis Threshing Machine Co. v. Davis, 40 Minn. 110 492 

Missouri Lead M. & S. Co. v. Reinhard, 114 Mo. 218 844 

Mobile and Girard R. Co. v. Alabama Midland R. Co., 87 Ala. 501 (ex- 
tract) 1340 

Mobile and Ohio R. Co. v. Tennessee, l.'^3 U. S. 486 1614 

Mokelumne Hill Canal and Mining Co. v. Woodbury, 14 Cal. 424 296 

Montgomery v. Forbes, 148 Mass. 249 594 

Monument National Bank v. Globe Works, 101 Mass. 57 949 

Mormon Church, etc., v. United States, 136 U. S. 1 906 

Morrill v. Little Falls Manufacturing Co., 53 Minn. 371 839 

Morrill v. Smith County, 89 Tex. 529 (extract) 987 

Morton Gravel Road Co. v. Wysong, 51 Ind. 4 1156 

Moses V. Tompkins, 84 Ala. 613 1576 

Moxhamv. Grant, 69 L. J. (Q. B.) 97 1794 

Mumma v. The Potomac Company, 8 Peters (33 U. S.) 281 896 

Munson v. Syracuse, Geneva and Corning R. Co., 103 N. Y. 58 1753 

Murphy v. Arkansas & L. Land Improvement Co., 97 Fed. Rep. 723 950 

Muscatine Water Co. v. Muscatine Lumber Co., 85 Iowa 112 1137 

N 

Nassau Bank v. Jones, 95 N. Y. 115 1205 

National Bank v. Case, 99 U. S. 628 1661 

National Commercial Bank v. McDonnell, 92 Ala. 387 549 

National State Bank v. Vigo County National Bank, 141 Ind. 352 703 

National Loan and Investment Co. v. Rockland Co., 94 Fed. Rep. 335 1755 

National Telephone Manufacturing Co. v. DuBois, 165 Mass. 117 1490 

Neil V. The Board of Trustees of The O. A. & M. College, 31 Ohio St. 15.. 191 
Newby v. The Oregon Central Railway Co., Deady 609, Fed. Cas. 10144. . 819 

Newcomb v. Reed, 12 Allen (Mass.) 362 588 

Nickum v. Bnrckhardt. 30 Ore. 464 391 

Nims V. Mt. Hermon Boys' School, 160 Mass. 177 1268 



xlviii TABLE OF REPORTED CASES 

[References are to Pages.] 

Nix V. Miller, — Colo. — , 57 Pac. Rep. 1084 1874 

Norfolk and Western R. Co. v. Pennsylvania, 136 TJ. S. 114 1393 

Norris v. Staps, Hobart 211a (extract) 1166 

North Hudson B. & L. Assn. v. Childs, 82 Wis. 460 1737 

North State Copper and Gold Mining Co. v. Field, 64 Md. 151 1519 

Northwestern Union Packet Company v. Shaw, 37 Wis. 655 1040 

Nulton V. Clayton, 54 Iowa 425 456 

o 

O'Bear Jewelry Co. v. Volfer, 106 Ala. 205 1852 

Oiney v. Conanicut Land Co., 16 R. I. 597 1832 

Oregon R. Co. v. Oregonian R. Co., 130 U.S.I 429 

Overseers of Poor v. Sears, 22 Pick. (Mass.) 122 193 

P 

Pacific National Bank v. Eaton, 141 U. S. 227...., 1581 

Packard v. Old Colony Railroad Co., 168 Mass". 92 563 

Parsons v. Joseph, 92 Ala. 403 1724 

Payne v. Elliot, 54 Cal. 339 804 

Pearsall v. Great Northern R. Co., 161 U. S. 646 1413 

Pearson v. Concord Railroad Corporation, 62 N. H. 537 1060 

Peninsular Railway Co. v. Duncan, 28 Mich. 130 482 

Pennington v. Gitting's Executor, 2 Gill & J. 208 1690 

Pennsylvania Co. v. Bauerle, 143 111. 459 (extract) 1516 

Penobscot Boom Corporation v. Lamson, 16 Me. (4 Shepley) 224 283 

Pensacola Telegraph Company v. Western Union Telegraph Co., 96 U. S. 1 326 

People V. Ballard, 134 N. Y. 269 1066 

People V. Chicago Gas Trust Co., 130 111. 268 1054 

People V. Chicago Live Stock Exchange, 170 111. 556 1171 

People V. Coleman, 126 N. Y. 433 778 

People V. Coleman, 133 N. Y. 279 15 

People V. The Dashaway Association, 84 Cal. 114 1298 

People V. Fire Ins. Assn. of Philadelphia, 92 N. Y. 1311 1494 

People V. Granite State, etc., Assn., 161 N. Y. 492 2050 

People V. Montecito Water Co., 97 Cal. 276 609 

People V. Morris, 13 Wendell (N. Y.) 325 229 

People V. N. Y. Central & Hudson River R. Co., 28 Hun (N. Y.) 543 1308 

People v. North River Sugar Refining Co., 121 N. Y. 582 100 

People v. O'Brien, 111 N. Y. 1 1426 

People v. Phoenix Bank, 24 Wend. (N. Y.) 431 1306 

People V. Pullman's Palace Car Company, 175 111. 125 926 

People, ex rel., v. Roberts, 159 N. Y. 70 1385 

People V. Utica Ins. Co., 15 Johnson (N. Y.) 358 113 

Perkins v. Sanders, 56 Miss. 733 409 

Philadelphia Savings Institution, In re, 1 Wharton (Pa.) 461 464 



TABLE OF REPORTED CASES. xlix 

IReferences are to Pages. 1 

Philadelphia & Southern Steamship Co. v. Pennsylvania, 122 U. S. 326 

(extract) 1389 

Philips V. Wickham, 1 Paige Ch. (N. Y.) 590 875 

Pierce v. Commonwealth, 104 Pa. St. 150 1603 

Pittsburg, C. & St. L. R. Co. v. Keokuk Bridge Co., 131 U. S. 371 (extract). 1182 

Plimpton V. Bigelow, 93 N. Y. 592 811 

Pond V. Framingham & Lowell R. Co., 130 Mass. 194 1808 

Pratt V. Boston & Albany R. Co., 126 Mass. 443 1702 

President, Directors, etc., of Bank of the United States v. Dandridge, 12 

Wheat. (25 U. S.) 64 854 

Price V. Pine Mountain Iron and Coal Co. (Ky.), 32 S. W. Rep. 267 1047 

Proprietors of The Piscataqua Bridge v. The New Hampshire Bridge, 7 

N. H. 35 309 

Prospect Park & C. I. R. Co., In re, 67 N. Y. 371 (extract) 987 

Pullman's Palace Car Co. v. Pennsylvania, 141U. S. 18 1374 

Q 

Queen v. Arnaud, 25 L. J. Rep. (16 N. S.) 50 58 

Queen v. The Birmingham & Gloucester R. Co., 3 Adol. & El. N. S. 223, 

43 Eng. C. L. 708 1283 

Queen v. The Great North of England R. Co., 9 Adol. & El. (N. S.) *315, 

58 Eng. C. L. 314 1284 

Quincy Railroad Bridge Company v. Adams County, 88 111. 615 988 

R 

Rahrer, In re, 140 U. S. 545 1530 

Rapier, In re, 143 U. S. 110 1541 

Railroad (Paducah and Memphis) v. Parks, 86 Tenn. 654 532 

Railroad Tax Cases, 13 Fed. Rep. 722 36 

Railway Co. v. Allerton, 85 U. S. (18 Wall.) 233 442 

Read v. Frankfort Bank, 23 Maine (10 Shep.) 318 1805 

Reeve v. Harris (Tenn. Ch. App.), 50iS. W. Rep. 658 1758 

Regina, see Queen. 
Rex, see King. 

Richardson v. Graham, 45 W. Va. 134 (extract) 1550 

Richardson v. Swift, 7 Houst. (Del.) 137 (extract) 1653 

Riche V. The Ashburv Railway Carriage and Iron Co., Ltd., L. R. 9 

Ex.224 * 919 

Richmond Railway and Electric Co, v. Brown, 97 Va. 25 131 7 

Riddick v. Amelin, 1 Mo. 5 302 

Riddle v. Proprietors, etc., 7 Mass. 169 T. 47 

Rider v. Fritchey, 49 Ohio St. 285 1994 

Roberts Mfg. Co. v. Schlick, 62 Minn. 332 1767 

Robertson v. Bullions, 9 Barbour (N. Y.) 64 203 

Rockford, Rock Island and St. Louis R. Co. v. Shunick, 65 111. 223 545 

Romney v. United States, 136 U. S. 1 906 



1 TABLE OF REPORTED CASES. 

[References are to Pages.'] 

Root V. Sinnock, 120 111.350 2003 

Rose V. Turnpike Co., 3 Watts (Pa.) 46 688 

Rouse V. Merchants' Bank, 46 Ohio St. 493 1819 

Ruse V. Bromberg, 88 Ala. 619 1575 

Russell V. Wakefield Water- Works Co., L. R. 20 Eq. Cas. 474 1709 

Rutter V. Chapman, 8 Mees. & W. 1 266 

Ryerson v. Wayne Circuit Judge, 114 Mich. 352 1121 

S 

San Antonio Street R. Co. v. State of Texas, 90 Tex. 520 1313 

San Joaquin Land and Water Co. v. West, 94 Cal. 399 497 

Sasser v. The State of Ohio, 13 Ohio 453 668 

Scovill V. Thayer, 105 U. S. 143 1907 

Sedalia, Warsaw and Southern R. v. Wilkerson, 83 Mo. 235 459 

Sellers V. Greer, 172 111. 549 65 

Sharon R. Co.'s Appeal, 122 Pa. St. 533 (extract) 1342 

Shaw V. Quincy Mining Co., 145 U. S. 444 1106 

Shinney v. North American Sav., Loan and Building Co., 97 Fed. Rep. 9.1542 

Shipley v. The Mechanic's Bank, 10 Johns. (N. Y.) 484 1701 

Shute V. Keyser, 37 Am. & Eng. Corp. Cas. 61 (Ariz.) 1134 

Silver Lake Bank v. North, 4 Johns. Ch. (N. Y.) 370 1092 

Singer Manufacturing Co. v. Peck, 9 S. D. 29 571 

Sinking Fund Cases, 99 U. S. 700 1405 

Skillman v. Lachman, 23 Cal. 198 182 

Sleev. Bloom, 19 Johns. Ch. (N. Y.) 456 881 

Small V. Herkimer Mfg. and Hydraulic Co., 2 N. Y. 330 1567 

Smith V. Hurd, 12 Mete. (Mass.) 371 1706 

Smith V. San Francisco and North Pacific R. Co., 115 Cal. 584 1606 

Smith V. Tallassee Branch of Central Plank-Road Co., 30 Ala. 650 817 

Smyth V. Ames, 169 U. S. 466 1352 

Smyth V. Visitors of the Theological Institution in Phillips Academy in 

Andover, 154 Mass. 551 1332 

Sniders Sons' Co. v. Troy, 91 Ala. 224 656 

Snyder v. Studebaker, 19 Ind. 462 634 

Society Perun v. Cleveland, 43 Ohio St. 481 *. 617 

Southern Pacific R. Co. v. Orton, 32 Fed. Rep. 457 354 

Southern Railway Co. v. Carnegie Steel Co., 176 U. S. 257 (extracts). . . .2053 

Sprague v. Illinois River R. Co., 19 111. *174 1454 

Sprague v. National Bank, 172 111. 149 (extract) 1949 

Spring Valley Water-Works v. Schottler, 62 Cal. 69 120 

Standard Underground Cable Co. v. Attorney-General, 46 N. J. Eq. 270. .1392 

State V. Atchison, 3 Lea (Tenn.) 729, 31 Am. Rep. 663 1286 

State V. Bank of New England, 70 Minn. 398 1585 

State V. Chicago, Milwaukee and St. Paul Railway Co., 4 S. D. 261 1126 

State V. City of Cincinnati, 20 Ohio St. 18 360 

State V. Cunningham, 83 Wis. 90 1296 

State V. Curtis, 35 Conn. 374 258 

State V. Dawson, 16 Ind. 40 412 



TABLE OF REPORTED CASES. U 

[References are to Pages. 1 

State V. Debenture Guarantee & Loan Co., 51 La. Ann. 1874 1302 

State V. The Dodge City, Montezuma and Trinidad R. Co., 53 Kan. 377. .1330 

State V. The Georgia Medical Society, 38 Ga. 608 136 

State V. Insurance Co., 49 Ohio St. 440 406 

State V. Milwaukee Chamber of Commerce, 47 Wis. 670 (extracts) 1294 

State V. Northeastern R. Co., 9 Rich (S. C. Law) 247 44 

State V. Overton, 24 N. J. Law (4 Zabr.), 435 1153 

State V. Pacific Brewing and Malting Co., 21 Wash. 451 1645 

State V. Parsons, 40 N. J. L. 1 333 

State V. Pawtuxet Turnpike Co., 8 R. I. 521 1305 

State V. Payne, 129 Mo. 468 830 

State V. Standard Life Association, 38 Ohio St. 281 234 

State V. Sherman, 22 Ohio St. 411 1082 

State V. Travelers' Insurance Co., 70 Conn. 590 1402 

State Bank v. The State, 1 Blackf. (Ind.) 267 891 

State Trust Co. v. Turner, 111 Iowa 664 1943 

St. Clair v. Cox, 106 U. S. 350 1115 

St. Louis F. S. & W. R. Co. v. Tiernan, 37 Kan. 606 375 

St. Louis and San Francisco Railway Co. v. James, 161 U. S. 545 1099 

St. Louis, V. & T. H. R. Co. v. Terre Haute & I. R. Co., 145 U. S. 393. . . .1228 

Steam Stone-Cutter Co. v. Scott, 157 Mo. 520 1917 

Stein v. Howard, 65 Cal. 616 (extract) 1951 

Stevens v. Eden Meeting-House Society, 12 Vt. 688 < 836 

Stevens v. Rutland and Burlington R. Co., 29 Vt. 545 1448 

Stewart v. Trustees of Hamilton College, 2 Denio (N. Y.) 403 448 

Stockport District Water- Works Co. v. The Mayor, etc., of Manchester, 9 

Jurist. (N. S.) 266 1233 

Stockton Savings Bank v. Staples, 98 Cal. 189 1007 

Stoddard V. Lum, 159 N. Y. 265 1968 

Stone V. Mississippi, 101 U. S. 814 1348 

Stout and McHenry v. Hubbell, 104 Iowa 499 1947 

Stowe V. Wyse, 7 Conn. 214 836 

Strasburg Railroad Company v. Echternacht, 21 Pa. St. 220 473 

Stryker, In the matter of, 158 N. Y. 526 2010 

Sully V. American National Bank, 178 TJ. S. 289 2046 

Supreme Lodge of Knights of Pythias v. Hill, 76 Fed. Rep. 468 1098 

Swentzell v. Penn Bank, 147 Pa. St. 140 1884 



Taber v. Interstate Building and Loan Assn., 91 Tex. 92 1095 

Taggart v. The Western Maryland R. Co., 24 Md. 563 514 

Tappan v. Merchants' National Bank, 86 U. S. (19 Wall.) 490 1399 

Telegraph Co. v. Texas, 105 U. S. 460 1397 

Telegraph Newspaper Co. v. Commonwealth, 172 Mass. 294 1287 

Thomas v. Dakin, 22 Wend. (N. Y.) 9 19 



Hi TABLE OF REPORTED CASES. 

[References are to Pages.'] 

Thomas v. Railroad Company, 101 U. S. 71 915 

Thorpe v. The Rutland and Burhngton R. Co., 27 Vt. 140 1344 

Thrasher v. Hke County Railroad Co., 25 111. 393 (Orig. ed.), 340 Gross's 

ed., 1876 471 

Titcomb v. Kennebunk Mut. F, Insurance Co., 79 Maine 315 904 

Tisdale v. Harris, 20 Pick. (Mass.) 9 799 

Tod V. Kentucky Union Land Co., 57 Fed. Rep. 47 952 

Toledo Tie & L. Co. v. Thomas, 33 W. Va. 566 1510 

Tomkinson v. Southeastern R. Co., L. R. 35 Ch. Div. 675 1715 

Tomlinson v. Jessup, 15 Wallace (82 U. S.) 454 754 

Tonica and Petersburg Railroad Co. v. McNeely, 21 111. 71 491 

Treadwell v. Salisbury Mfg. Co., 7 Gray (Mass.) 393 1787 

Trenton Potteries Company v. Oliphant, 58 N. J. Eq. 507, 46 L. R. A. 255. . 981 
Trustees of Dartmouth College v. Woodward, 4 Wheaton (17 U. S.) 518. . 708 

Trustees of f'ree Schools in Andover v. Flint, 13 Mete. 539 1900 

Trustees Mut. B. F., etc., Bank v. Bossieux, 4 Hughes 387 (extract) 1735 

Trustees of Phillips Academy v. Attorney-General, 154 Mass. 551 2133 

Trustees of Univ. of N. C. v. Foy, 1 Mur. (N. C.) 58 33 

Tunis V. Hestonville M. & F. Pass. R., 149 Pa. St. 70 1600 

Twin-Lick Oil Co. v. Marbury, 91 U. S. 587 1750 

U 

Umsted v. Buskirk, 17 Ohio St. 113 1990 

Union Bank v. Jacobs, 25 Tenn. (6 Humph.) 515 941 

Union Pacific R. Co. v. United States, 99 U. S. 700 1405 

United States v. Addyston Pipe and Steel Co. 85 Fed. Rep. 271 967 

U. S. Bank v. Dandridge, 12 Wheat 64 854 

United States Bank v. Stearns, 15 Wend. (N. Y.) 314 1131 

Upton V. Englehart, 3 Dillon 496 1559 

Utley V Union Tool Co., 11 Gray (Mass.) 139 597 

V 

Van aeve v. Berkey, 143 Mo. 109 1953 

Van Cott V. Van Brunt, 82 N. Y. 535 1919 

Veazie Bank v. Fenno, 8 Wall. (75 U. S.) 533 1527 

Vidal V. Girard's Executors, 2 How. (43 U. S.) 126 (extract) 1087 

VisaUa & Tulare R. Co. v. Hyde, 110 Gal. 632 1692 

w 

Wales V. Stetson, 2 Mass. 143, 3 Am. Dec. 39 150 

Walker v. Devereaux, 4 Paige Ch. (N. Y.) 229 385 

Wallace v. Lincoln Savings Bank, 89 Tenn. 630 1731 

Wallace v. Loomis, 97 U. S. 146 338 

Wallace v. Pierce- Wallace Pub. Co., 101 Iowa 313 1747 

Walton V. Oliver, 49 Kan. 107 565 



TABLE OF REPORTED CASES. liii 

[References are to Pages. ^ 

Waring v. Catawba Co., 2 Bay (S. Car.) 109 71 

Warner v. Beers, 23 Wend. (N. Y.) 103 2 

Washburn v. National Wall-Paper Co., 81 Fed. Rep. 17 1936 

Weatherford M. W. & N. W. R. Co. v. Granger, 86 Tex. 360 1553 

Webb V. The Baltimore & Eastern Shore R. Co., 77 Md. 92 528 

Wechselberg v. Flour City National Bank, 24 U. S. App. 308 574 

Wells, Fargo & Co. v. Northern Pacific R. Co., 23 Fed. Rep. 469 (extracts) . 295 

West V. Crawford, 80 Cal. 19 (extracts) 500 

West Nashville Planing Mill Co. v. Nashville Savings Bank, 86 Tenn. 262.1695 

West River Bridge Co. v. Dix, 47 U. S. (6 How.) 507 1337 

West Winsted Sav. Bank and Building Assn. v. Ford, 27 Conn. 282 652 

Wheeler & Wilson Mfg. Co. v. Boyce, 36 Kan. 350 1250 

White V. Brownell, etc., 2 Daly 329 187 

White v. Howard, 38 Conn. 342 1026 

White Mountains Railroad Co. v. Eastman, 34 N. H. 124 758 

Whitman v. Oxford National Bank, 176 IT. S. 559 2018 

Wight V. Shelby Railroad Company, 16 B. Mon. (Ky.) 4 536 

Wight V. Springfield & New London R. Co., 117 Mass. 226 692 

Wiles V. Suydam, 64 N. Y. 173 1987 

Williamson v. Smoot, 7 Martin (La.) 31 70 

Williams v. Western Union Telegraph Co., 93 N. Y. 162 1622 

Willis V. Mabon, 48 Minn. 140 (extract) 2013 

Wilson V. Leary, 120 N. C. 90 903 

Wilson V. Tesson, 12 Ind. 285 1446 

Winchester v. Mabury, 122 Cal. 522 1888 

Winter v. Montgomery Gas Light Co., 89 Ala. 544 1682 

Wood V. Dummer, 3 Mason 308 1847 

Woodworth v. Bowles, 61 Kan. 569 2014 

Woolf V. The City Steamboat Company, 7 Man., Gr. & S. (62 Eng. C. L.) 
*103 1125 



Yarborough v. The Governor & Co. of the Bank of England, 16 East 6. ..1236 
Yeaton v. Bank of the Old Dominion, 21 Grattan (Va.) 693 750 

z 

Zabriskie v. Hackensack & N. Y. R. Co., 18 N. J. Eq. (3 C. E. Green) 

178 1466 

Zang V. Wyant, 25 Colo. 651 2005 

Zoller V. Ide, 1 Neb. 439 862 



CASES 



ILLUSTRATING 



THE GENERAL PRINCIPLES 

OF THE 

Law of Private Corporations 



PART I. 
THE IDEA OF A CORPORATION. 



CHAPTER 1. 

DESCRIPTION AND CLASSES. 

ARTICLE I. DEFINITIONS AND TESTS. 

Sec. 1. Definitions.* A Person^ "A corporation is an artifi- 
cial being, invisible, intangible, and existing only in contem- 
plation of law." 

1819. Chief Justice Marshall, in Trustees of Dartmouth College 
V. Woodward, 4 Wheat. (U. S.) 618, on 636. 

A Collection of Individuals': "The word 'corporation' 
is but a collective name for the corporators or members who 
compose an incorporated association ; and where it is said 
that a corporation is itself a person, or being, or creature, 
this must be understood in a figurative sense only." 

1886. Victor Morawetz, Law of Private Corporations, 2d ed., § 1, 

et seq. 

A Franchise* : "A corporation is a franchise created by the 
king." 

c. 1745. Comyn's Digest, Franchise (F) F. 1. 

»Angell & A. Corp., §§ 1-65; Beach, § 1; 1 Bl. Com., *467; Boone, ch. 1; 
Clark, ch. 1; Cook, ch. 1; Elliott, §§ 1-20; Field, ch. 1; Grant, p. *l-*9; 2 
Kent Com., p. *267 ; 1 Kyd Corp., Int. ; Taylor, ch. 1-5; 1 Thomp., ch. 1. 

• See §§ 6-15 infra, and note, p. 72. 

' See §§ 16-21 ivfra, and note, p. 109. 

* See §§ 22-29 infra, and note, p. 157. 

(1) 



2 WARNER AND RAY V. BEERS BOLANDER V. STEVENS. § 2 

Sec. 2. Tests. As to whether a particular institution is a corpora- 
tion or not the tests are : 

( I ) " The merging of the individuals composing the aggre- 
gate body into one distinct, artificial existence." 

WARNER AND RAY v. BEERS.* 
BOLANDER v. STEVENS. 

1840. In the Court for the Correction of Errors. 23 
Wendell (N. Y.) Reports, pp. 103-190. 

[In the first above entitled cause, the declaration commenced in the 
name of "Joseph D. Beers," described as "President of the North 
American Trust and Banking Company, an association doing busi- 
ness in the city of New York, under and by virtue of an act of the 
legislature of the state of New York, entitled 'an act to authorize 
the business of banking,' passed April i8th, 1838, who prosecutes 
for and on behalf of the said association;" and then was set forth in the 
usual form a count on a promissory note by the third endorsee against 
Warner and Ray, as endorsers. The declaration also contained the 
common money counts, and the instjmil cotnputassent, alleging the 
debts to have arisen, and the promises to have been made to "the 
said association," and concluded with the words "to the damage of 
the said association of five hundred dollars ; and therefore the said 
plaintiff, as president as aforesaid, brings suit," etc. 

The declaration in the second suit was like the preceding, except 
that it contained only the common money counts, and the count on 
the insimul cotnputassent. To these declarations, demurrers were 
put in by the defendants respectively. In the first suit, the following 
cause, among others, of demurrer was assigned, viz. : 

V. The institutions or associations authorized and intended to be 
created by the act entitled "An act to authorize the business of bank- 
ing" are corporations or bodies politic, and the act expressly allows 
the creation of an indefinite and unlimited number of such corpora- 
tions, at the pleasure of any persons who may associate for that pur- 
pose. The act is, therefore, a violation of the ninth section of the 
seventh article of the constitution of this state, and is absolutely void. 

The defendant in the second cause also interposed a demurrer assign- 
ing special causes similar to the special causes in the first count ; the 
fourth special cause being in these words: "For that the act in 
the declaration mentioned, entitled 'An act to authorize the busi- 

' Statement of facts partly omitted. Arguments omitted. Opinions by 
Bradish, president of the senate, Walworth, chancellor, and Root, senator, 
omitted; a/so, part of the opinion of Senator Verplanck. A brief analysis of 
each of the opinions given in this case is given in a note by the reporter on 
pp. 103-105. 



§2 TESTS: MERGER INTO ARTIFICIAL BODY. ^ 

ness of banking,' so far as the same proposes to authorize this suit, 
is a violation of the provisions of the constitution of this state re- 
specting the creations of incorporations, and is void ; and also that 
the said act is void, because the same did not receive the assent of 
two-thirds of all the members elected to the legislature of this state, 
by which legislature the said act purports to have been passed."* 

The two demurrers were brought to argument before the supreme 
court, at the January term, 1840, and judgment given in both cases 
for the plaintiffs. The court referred, for the reasons of the judg- 
ment, to the opinions delivered by Chief Justice Nelson, Mr. Justice 
Bronson and Mr. Justice Cowen, in the case of Thomas v. Dakin, 22 
Wendell 9 et seq. 2 Both causes were removed by writs of error to the 
court for the correction of errors, and were brought on to argument on 
the 1 8th February, 1840.] 

By Senator Verplanck. The decision of these causes seems to 
me to depend wholly upon that of the question, whether or no asso- 
ciations with constitutions, powers and incidents, similar to those 
authorized under the general banking law, are bodies corporate and 
politic; or, in other words, whether the general banking law of 1838 
is void, because it was not passed with the express assent of two-thirds 
of all the members of the legislature. 

The supreme court think that they "must, on these records, presume 
the general banking law to have been passed by two-thirds of all the 
members of the legislature." Judge Cowen adds : "We must clearly 
do so until the fact is denied by plea. The requisite constitutional 
solemnities must always be presumed to have taken place until the 
contrary shall be clearly shown. Should the defendant withdraw his 
demurrer, and plead specially that the law in question did not receive 
the assent of two-thirds as required by the constitution, it will then be 
in order to pass upon the validity of such an objection." Judge 
Bronson concurs more briefly to the same effect. 

Now, it appears to me that this point was rightly presented on the 
demurrers in these cases, so as to authorize and demand the decision 
of the court. * * * 

From our official knowledge of the facts of the law — from those facts 
being spread out on our journals — from the actual inspection of the 
record by some of us, we all well know that the act was not passed 
by the vote of two-thirds of each house of the legislature. We must 
then meet directly, and settle the question whether the associations 
formed under the general banking laws are, or are not, "bodies politic 
and corporate."* 

[Definition— Artificial personality.] — What, then, is the strict defini- 
tion of the phrase bodies ■politic and corporate? 

Definitions differ in their character according to the nature of the 
thing to be defined. * » * 

'Seein/m, p. 373. 
^ Infra, p. 19. 

* For statement of provisions of the general banking law of 1838, see 
Thomas v. Dakin, injra, p. 21. 



4 WARNER AND RAY V. BEERS BOLANDER V. STEVENS. § 2 

Strict and essential definitions can generally be given of the terms 
of positive jurisprudence, and particularly so in the extremely techni- 
cal and artificial system of the ancient English law. This is remark- 
ably the case, for instance, in regard to our common law terms of real 
estate, as fee, lease, warranty, grant, covenant, reversion, remainder, 
etc. ; all of which are defined precisely and essentially, not explained 
by mere attributes. Bodies corporate belong to that system, and 
thence do we immediately derive them. What, then, is a body cor- 
porate.? What is its necessary and essential meaning? "It is called 
a body corporate," says Lord Coke, "because the persons composing 
it are made into one body." "It is only tn abstractor and rests only 
in contemplation of law." 10 R. 50. So again, he says, i Inst. 202, 
250, "Persons capable of purchasing are of two sorts — persons natural 
created of God, a.nA persons created by the policy of man, as persons 
incorporated into a body politic." If, leaving the quaint scholastic 
teaching of the father of English law, we come to the clearer and di- 
recter sense of our own Marshall, we find the same prevailing idea. 
"A body corporate is an artificial being, invisible, intangible, exist- 
ing only in contemplation of law. Being the creature of law, it pos- 
sesses only the properties conferred upon it by its charter. Among 
the most important of these are immortality, and, if the expression 
may be allowed, individuality." 4 Wh. R. 636; i Peters' R. 46. 
Again; "It is precisely what the act of incorporation makes it ; de- 
rives all its powers from that act, and is capable of exerting its facul- 
ties only in the manner which that act authorizes." "Within the 
limits of the properties conferred by its charter, it can," says Black- 
stone, "do all acts as natural persons may." "In corporations," 
says Prof. Woodeson, "individuals are invested by the law with a 
political character and personality, wholly distinct from their natural 
capacity." "A corporation," says Kyd on Corporations, 13, "is not 
a mere capacity, but a political person in which many capacities re- 
side." Thus, then, the essential legal definition that covers the whole 
ground, and expresses the very essence of the being of a body corpo- 
rate, is this: '■'■It is an artificial legal person ^ a succession of indi- 
viduals^ or an aggregate body considered by the law as a single 
continuous person r limited to one peculiar mode of action, and having 
the power only of the kind and degree prescribed by the law which 
confers them." Such is the established notion of our common law. 
Such, too, as far as I can trace it, is the doctrine of the modern civil 
law, as modified by the jurisprudence of the European continent. 
"Communities that are lawfully established {i. e., corporations)," says 
Domat, one of the great teachers of the ante-revolutionary French 
civil law, "are in the place of persons, and their union, which renders 
common all their interest, makes them to be considered as one single 
person." Domat, Civil Law, Lib. i, tit. 15. To the same effect a 
somewhat older Italian civilian speaks, Oldradus De Ponte, as quoted 
by Sir Robert Sawyer, in his very able and learned argument in the 
case of the city of London, 8 St. Tr. 1175. '■'■Licet nan habent 
veram personam., habent personam fictione juris. ^^ So the older 



§ 2 TESTS : MERGER INTO ARTIFICIAL BODY. 5 

German jurisprudence, as founded on the Roman law, also held the 
idea of persona/tty as essential to corporations. Heineccius, one of the 
most distinguished civilians of that school in the last century, in his 
instructive essay on the legal history of the corporate guilds or socie- 
ties of trade so common in Germany, speaks of this personality as an 
attribute of all corporations. '■'■ Universitates et contrahere fossunt et 
dclinquere, guippe quae nioraliter unam representant personam.** De 
CollegiisOpificum, in Germania, cap. 77, § 19. This doctrine of the 
modern civilians of France, Italy and Germany, may be traced up 
even to the jurists of the Code and Pandects. '•'•Personce vice fungitur 
7nunicipiuin et decuria.*' Pan. i, 22, de fide juss. I do not cite 
these civilians as direct authorities, biit mainly to show how deeply and 
generally this pervading idea of legal personality and artificial individu- 
ality entered into and formed the characteristic of all corporate bodies, 
in those systems of law which might indirectly affect or govern our 
own, or tend to influence even the popular use of our legal terms. 

So far was this principle of corporate personality carried in our old 
common law that reasons were expressly assigned why a corporation 
could not be excommunicated or punished for crime. "Because it 
has no soul," said Lord Coke, which, however ludicrously it may now 
sound, was but saying quaintly, and in the style of that day, what in 
modern times would be expressed by saying that a corporation, being 
an artificial and not a moral person, must be incapable of guilt. The 
very able argument in the celebrated historical case of the charter of 
London, in 1682, went a good deal into these refinements, and it was 
held on one side that a political person had a mind and reason, ac- 
cording to Lord Chief Justice Hobart, and that its reason was ex- 
pressed by its by-laws, whilst the attorney-general (whom Bishop 
Burnet has egregiously wronged in calling him "a hot, dull man"), 
argued most acutely, as well as very learnedly, in support of the ca- 
pacity of a corporation to incur political, if not moral, guilt and pun- 
ishment. 

All these, it is true, are refinements of technical reasoning, in a 
taste and fashion of thought which have passed away ; but they prove 
conclusively how strong and undoubted was that legal principle of 
personality upon which these mere inferences and nice distinctions 
were founded. 

In order to continue the existence of such an artificial person, per- 
petual succession is ordinarily necessary, though it was not strictly 
essential, for it may be confined to any given number of lives in 
being, holding in a sort of corporate joint tenancy, of which I think 
examples may be found. As a legal person, it has only the powers 
and properties specifically confeired upon it; and can possess and ex- 
ercise no others, except such as are absolutely necessary to the exer- 
cise of the powers expressly given. This is the enactment of our re- 
vised statutes, which, as our revisers rightly said in their report on 
that title of the law, is "declaratory of a principle of law frequently 
recognized by our courts, and which it was deemed useful to confirm 
by legislative authority." To these are added certain legal incidents 



6 WARNER AND RAY V. BEERS — BOLANDER V. STEVENS. § 2 

by the common law, also declared in our statute, and common to all 
corporations, as to sue and be sued, hold and convey real and per- 
sonal property, to appoint officers for its services, and to make by- 
laws for the management of its affairs. To these more important 
rights, the law adds the external evidence of a name and a common 
seal. This last, though apparently a matter of form, is not without 
effect any more than the legal consequences of seals to instruments in 
England and this state, so widely different from those of other legal 
systems, where the distinction between sealed and unsealed instruments 
is unknown. It is only through a common seal and name that any 
grant of lands or covenant touching them can be made by a corpora- 
tion. 

[Powers incidental to corporate existence.] — There are several very 
useful and beneficial accessary powers or attributes, very often 
accompanying corporate privileges, especially in moneyed cor- 
porations, which, in the existing state of our lav\r, as modified by 
statutes, are more prominent in the public eye, and perhaps some- 
times in the view of our courts and legislatures, than those which are 
essential to the being of a corporation. Such added powers, however 
valuable, are merely accessary. They do not in themselves alone 
confer a corporate character, and may be enjoyed by unincorporated 
individuals. 

Such a power is the transferability of shares^ whereby investments 
may be made, without the owner losing the future control of his funds 
under changes of circumstances. Such, too, is the limited responsi- 
bility by which the stockholder, having once fairly paid up his share 
of the capital, is exempted from further personal liability. So, too, 
the convenience of holding real estate for the common purposes, exempt 
from the legal inconveniences of joint tenancy or tenancy in cotnmon. 
Again, there is the continuance of the joint property for the benefit 
and preservation of the common fund, indissoluble by the death or 
legal disability of any partner. Every one of these attributes or 
powers, though commonly falling within our notions of a moneyed 
corporation, is quite unessential to the legality of a corporation, may 
be found where there is no pretense of a body corporate, nor will they 
make one if all were combined, without the presence of the essential 
quality of legal individuality. This distinction has been observed and 
marked by Mr. Kyd, Kyd on Corporations, 13, with logical acuteness 
and precision: "A corporation is a political person, capable, like a 
natural person, of enjoying a variety of franchises. It is to a franchise 
as the substance to its attribute. It is something to which many at- 
tributes belong, but it is itself something distinct from those attri- 
butes:' 

Thus, the transferability of shares is not essential to a corporation. 
For instance, it does not enter into the constitution of our chartered 
colleges, academies, hospitals and other corporate institutions founded 
by public endowment, or private beneficence. It does not enter into the 
charters oi incorporated scientific and literary societies for mutual ben- 
efit or charity, in the funds of which the members have a beneficial in- 



§ 2 TESTS : MERGER INTO ARTIFICIAL BODY. 7 

terest. On the other hand, such a right of transfer may be incorporated 
into partnership articles, and become a fundamental condition of them. 
The general rule, in absence of any express stipulation, is indeed the 
reverse of this, and in practice it is comparatively rare amongst us. 
Hence it has become common to consider such transferability as a 
clear indication of a corporate character. "We have seen," says 
Collyer on Partnership, 647, "that in common cases a partner is pre- 
cluded from assigning his interest to a stranger, so as to make that 
stranger a partner. To prevent this rule" from affecting the stock- 
holder of a trading company, there must be provision in the deed of 
settlement enabling each stockholder to assign or transfer his share." 
He then adds the limitations rendered necessary in England by the 
Bubble act, which has no corresponding statute here, and the con- 
clusion of the English decisions is that, by the common law, shares 
may be made transferable absolutely. King v. Webb, 14 East 406; 
Pratt V. Hutchinson, 15 East 515 ; Nichols v. Crosby, 2 Barn. & Cres. 
814. See also other cases collected by Wordsworth on Joint Stock 
Companies. Again, the joint stock companies authorized by statutes 
in England are avowedly and confessedly not corporations ; and, 
there, says Wordsworth on Joint Stock Companies, 183, "It is the 
object of all companies to render their shares as negotiable as pos- 
sible, so that in fact the restrictions imposed by the deedof settlement 
upon the transfer of shares are generally very few, and seldom extend 
beyond requiring the transferer's name, etc., being registered in the 
books of the company. The language of two or three of the later 
acts of pai'Iiament is specially worthy of attention on this subject. 
They declare, as strongly as words can declare legislative intention, 
that transferability of shares^ and the consequent succession, can be 
authorized in common law copartnerships, without giving to such 
companies any corporate existence, or rendering them less copartner- 
ships in the strict legal sense of the term. In the statute of 6 Geo. IV, 
ch. 43, it is enacted, "that it shall be lawful for any member of any 
such society or copartnerships their respective executors, adminis- 
trators or assigns, to sell and transfer any share or shares, or portion 
or portions of, or the entire stock or interest which any such member 
may possess in such society or copartnerships and the property or 
funds thereof, subjected to such regulations and restrictions as may 
be required by the constitution of such society or copartnership." 
This statute is entitled "An act for the better regulation of copartner- 
ships of certain bankers in Ireland." The preamble and recitals, and 
all the sections speak of these banking firms as mer6 copartnerships. 
This strongly marked and repeated recognition of them as such, in 
the very sections authorizing that transferability and its consequent 
succession, which have been insisted on as infallible marks of cor- 
porate character, leave no doubt in my mind as to the intention and 
understanding of the British parliament, that in authorizing associa- 
tions with these and other powers similar to those granted by our 
banking law, they were not creating bodies politic or corporate 

But this is not all ; parliament has not left this meaning and inten- 



8 WARNER AND RAV V. BEERS — BOLANDER V. STEVENS. § 2 

tion to be a matter of inference. In 1838, another act was passed 
amendatory of the one just cited, and of another in relation to bank- 
ers in England, which gave similar powers. That amendatory stat- 
ute, after reciting and referring to the titles of these prior acts, adds 
in the preamble, "and whereas, it is expedient that the said act should 
be amended, so far as relates to the powers enabling any such copart- 
nership, not being a body corporate^ to sue any of its own members, 
and the powers enabling any member of any such copartnership, not 
being a body corporate^ to ^ue the said copartnership. Be it therefore 
enacted, etc., that any person now being, or who hereafter may be, a 
member of any copartnership carrying on the business of banking 
under the provisions of the said recited acts may commence and 
prosecute any action," etc. 

There can then be no reasonable doubt, that in these most deliber- 
ately considered and very technically drawn acts of parliament, recog- 
nizing copartnerships as having transferable stock, and giving them 
the authority of suing in the name of their officers and other persons, 
similar to those of the associations formed under our act, no bodies 
corporate were intended or supposed to be created. 

But, on this head of transferability we need not rely upon English 
authority alone. We have as strong authority in our own usages and 
decisions. 

In the articles of the Merchants' Bank Association, before our re- 
straining act, a similar transferability of shares was provided, and 
these articles have the authority of Alexander Hamilton for their 
validity. I shall have occasion to refer to them more fully here- 
after. 

S« again, in the case of the Albany Exchange, before it received 
its present charter, the validity of the partnership or joint stock com- 
pany for a public enterprise, with transferable shares, was expressly 
recognized. By the court — Cowen, J. — "The objection taken on the 
argument, that this association was illegal, as being in the nature of 
a corporation, issuing scrip and providing for a transfer of stocky is 
not well founded. The act of association in this way is, we think, 
properly characterized by the exception taken at the trial. It consti- 
tutes a partnership valid, as being formed for the purposes of a law- 
ful, honest enterprise." Townsend v. Goewey, 19 Wendell 427. 
The learned judge then refers to, and adopts, the authority of Collyer 
on Partnerships, p. 624, and the cases he cites. 

Again, this transferability may be found in many sorts of trusts. 
A well-known instance of this may be seen in the Tontine of New 
York, originally built for the purposes of a merchants' exchange. It 
is a trust of real estate, with transferable shares as personal property ; 
it was originally settled by the most eminent counsel of this state, and 
its validity has been attested by nearly fifty years' experience, during 
which, above two hundred shares have passed through courts, assign- 
ments, insolvencies, bankrupt commissions, distribution of estates, 
etc., without their legal transferability having ever been impeached. 
See printed articles of the Tontine, N. Y., 1793. 



§ 2 TESTS : MERGER INTO ARTIFICIAL BODY. 9 

In both of these last examples, as in other instances of trusts and 
partnerships, lands were held exempt by operation of law from the legal 
incidents of joint tenancy or tenancy in common, and the estate contin- 
ued for the common purposes. This has been noted as a mark of cor- 
porate character; yet most corporations are limited in the extent of its 
exercise, some are expressly excluded from the privilege, and very 
many exist legally without its actual exercise or enjoyment. 

The non dissolution by death or by legal disability is also noted in 
the opinion of the supreme court in these cases as a mark of a corpo- 
rate body. But that also may be found in the trusts just mentioned, 
and others of a similar nature, and it may be adopted as an article of 
ordinary partnership. It is the settled law of England that it may be 
stipulated that death shall not dissolve the partnership, and further, 
that the executors of the deceased shall become partners. Collyer on 
Partnership, p. 5,648; Pease v. Chamberlain, 2 Vesey Rep. 33; 
Haggerman v. Spears, 7 Pick. Rep. 235 ; Wrexham v. Huddleton, i 
Swanst. 514. 

Again, a common name has been regarded as a corporate criterion. 
To this Lord Ellenborough gives a full answer in Rex v. Webb. 
"As to the fourth point, that the subscribers have presumed to act as 
if they were a body corporate — how is this made out? It was urged 
that they assumed a common name, that they have a committee, etc. 
But are these the unequivocal evidence and characteristics of a corpo- 
ration ? How many unincorporated assurance companies and other 
descriptions of persons are there that use a common name, and have 
their committees, general meetings and by-laws.? Are these all ille- 
gal .? Or which of these particulars can be stated as being of itself 
the distinctive and peculiar criterion of a corporation.?" Thence he 
infers that "these subscribers have not acted peculiarly as a body 
corporate." Rex v. Webb, 14 East's Rep. 406. 

But, perhaps, in the general and popular understanding, the most 
familiar distinction between corporate bodies and common partner- 
ships, or other joint undertakings, is the exemption of the associates 
from personal liability beyond the actual amount of their respective 
proportions of the capital. The regarding this very frequent and 
important incident of a corporation as an essential characteristic 
seems not to be confined to popular opinion. Judge Cowen says, in 
the decision of the cases now before us: "Among other peculiar 
privileges conferred on these associations, and not enjoyed by natural 
persons, I allude to that of the exemption of members from personal 
liability for debt. This is mentioned by Angell & Ames, in their 
treatise, as peculiar to a private corporation ; they notice it as a strik- 
ing characteristic between a corporation and a partnership." Yet our 
own statute of limited partnerships affords sufficient evidence that an 
alteration of the existing law may be made by statute, so as to exempt 
from personal liability beyond the stipulated share in the joint funds, 
for the debts of a firm, without the remotest thought of converting 
such firms into bodies corporate. Besides, the right of making a con- 
tract, whereby those who tender it stipulate not to be bound beyond 



lO WARNER AND RAY V. BEERS — BOLANDER V. STEVENS. § 2 

the amount of some specific pledged fund, must be a natural right 
growing out of the very nature of contracts. If a company, or asso- 
ciation, or an individual, offers to contract to make certain payments 
only to the amount of certain specific funds, and others choose to ac- 
cept that contract on those conditions, there can be nothing to prevent 
the validity of such a contract, except some positive rule of lav\^ founded 
on policy or an arbitrary enactment. In the absence of such a restric- 
tion, it is and must be good. Such a limitation, then, must be bind- 
ing on all who accept the conditions. The policy of our law and the 
usages of business have, indeed, rightly fixed the prestimption the 
other way, so that the stipulation and the burden of proof of the 
limited indebtedness are thrown upon those who expect to be bene- 
fited by them. This right has been substantially admitted by the 
highest tribunals in Great Britain, in the case of Minnett v. Whin- 
nery, 3 Brown's Pari. Cas. 323, and it was held to be good by Lord 
Ellenborough, in Alderson v. Clay, i Camp. 404. The doctrine has 
been received as settled law by one of the best elementary writers of 
the day, often cited by our own supreme court. "When a creditor," 
says Collyer on Partnership, 214, "has notice, that by an arrangement 
between partners, one of them, though appearing to the world as a 
partner, shall not participate in the loss, and shall not be liable for it, 
the creditor will be bound by the arrangement." 

" The original articles of the Merchants' Bank, in the city of New 
York, as an imincorporated association, with limited liability, as well 
as transferable shares, which were read in argument by Mr. Kent, 
have the great professional authority of Alexander Hamilton, who 
prepared them, and of the many eminent men who joined in them, and 
whose professional distinction gives to their approbation the character 
of a sort of judicial sanction ; whilst the restraining act passed soon 
after proves, as was unanswerably argued, that the legislature and 
its legal advisers considered such a voluntary association, thus re- 
straining its own liability, not as a violation of common law, but 
merely as contradicting the financial policy of the state. 

A similar analysis of such of the customary accessary powers of 
specially chartered moneyed corporations, as from being most con- 
ducive to ends of profit or convenience are ordinarily considered as 
the essential qualities constituting corporations, will show, that all 
such powers or incidents are merely convenient and desirable authori- 
ties or modes of action, added to and engrafted upon the creation of 
a body politic ; not the legal attributes absolutely essential to a cor- 
poration, and denoting its existence as such. 

Amongst us, as in England, bodies politic or corporate may exist 
where the ultimate personal liability is still retained. The personal 
liability is indeed suspended in such cases, and for a time merged in 
that of the artificial corporate person ; but there may be an ulterior 
recourse to the corporators when the former fails. Many corporate 
banks in other states are so constituted, and with us some chartered 
companies for insurance, etc., some for an indefinite, others to a lim- 
ited extent beyond the capital. Corporate bodies may exist also 



§2 TESTS: MERGER INTO ARTIFICIAL BODY. II 

without transferability of the rights of the corporators ; for a large 
majority of our literary and charitable, as well as all our municipal 
corporations, are so. On the other hand, by our own common law 
as it would exist now, independfently of statutory restrictions, associa- 
tions might be formed and trusts created, having every one of the above 
enumerated characteristics, which have been insisted upon as essential 
to a corporation, except that personality which I before stated as form- 
ing its strict and necessary essential legal definition. The present 
joint stock companies of England afford pregnant examples, showing 
how many of these attributes may be embodied in voluntary associa- 
tions which are confessedly not corporations. 

In fact the line may be very faint, and depending wholly upon the 
purely legal and technical character conferred, whether a joint stock 
association or a trust, freed by law from certain positive restraints im- 
posed by our modern statutes, be a corporation or not. The Tontine 
trust, before mentioned, is managed by directors annually elected by 
stockholders ; its real estate is held by trustees, continuing their trust 
from hand to hand, during the lives of the original nominees and the 
survivors of them, with transferable shares, and wholly without per- 
sonal liability. For the reasons already stated, the eminence of the 
counsel (the late R. Harrison) who prepared the trust, and the fre- 
quency with which its legal character must have passed in review be- 
fore lawyers and courts, and always without objection, it may well be 
regarded as sanctioned judicially. It is a valid trust. Add to it a 
legislative charter, making the associates a body corporate and no 
more, what then is the effect? Simply to give a different technical 
character, an artificial individuality m Chief Justice Marshall's phrase, 
a different mode of standing in courts. 

Such was the actual history of the Albany Exchange. It was a 
joint stock company, formally decided to be valid. 19 Wendell's 
Rep. 427. A year or two after (1837), it appears by our statute 
book to have been incorporated, but there is probably but little differ- 
ence, besides the greater convenience of the corporate body, between 
the former organization and the present. 

The trusts specially permitted by an act of last year. Statutes of 
1839, ch. 174, for the benefit of that singular people called Shakers^ 
were nothing more than exemptions from the recent restrictions of 
trusts. They were authorized to continue, enlarge and manage their 
property, by trusts, as they had done before the change in that title of 
our law effected by the revised statutes. Had the law, in addition to 
this, made every Shakers' United Society a body corporate, without 
•otherwise varying the original trust, the only change would have been 
the conversion of a trust into an artificial legal person, with the same 
effect substantially as to the interests of those beneficially interested. 

Our act for general religious incorporations regulates the incor- 
poration of churches of all religious denominations (other than those 
provided for in the first and second sections) by trustees, who are to 
be a body corporate. 

Those who have had occasion to look into the mode in which dis- 



12 WARNER AND RAY V. BEERS — BOLANDER V. STEVENS. §2 

senting religious trusts are held in England, as I presume they were, 
in the same manner, in New York when a colony, will, I think, per- 
ceive that our statute adds little more than a convenient corporate 
character to powers elsewhere, and formerly here, exercised under 
trusts. 

All these considerations lead me to the conviction that, for the pur- 
pose of constitutional interpretation, we must look to the strict legal 
meaning of the phi-ase body politic or corporate^ and not to those cir- 
cumstances or adjuncts, which amount only to the descriptions of the 
manner in which such bodies are very frequently constituted when 
used for purposes of profit. If this be regarded as a very strict rule 
of interpretation, let it also be remembered, that it is applied where 
such strictness is most appropriate, in the interpretation of a provision, 
restraining the general sovereign power of the state expressing the 
public will through a majority of the people's representatives. 

There is yet another rula of interpretation, which it is proper to 
state before proceeding to examine whether the associations organized 
tmder the banking law are or are not corporations. 

Corporate rights are well defined by Chancellor Kent and others to 
be "franchises or peculiar privileged grants," of the nature of incor- 
poreal property. Such franchises, when they are granted for pecu- 
niary or other purposes valuable to private interests, are of the nature 
of monopolies, and are always granted exclusively by the sovereign 
power, directly or indirectly. It is a well-known fact, admitted on all 
sides, that it was part of the policy and intent of our amended consti- 
tution, to prevent, by a constitutional and fixed limitation of the leg- 
islative authority, the influence of corruption or interest upon the leg- 
islature, as well as the abuse of political favoritism, and the danger- 
ous union of political with pecuniary power. The clause so designed, 
though so general in its terms as to include even academies and vil- 
lage corporations, it is not doubted, referred in its policy wholly to 
the monopoly privileges of chartered capital, and especially to banks. 

Here, then, in my view, arises another branch of inquiry ; and the 
two distinct objects of examination are these: (i) Do these bank- 
ing associations fall within the right legal definition of the word 
"bodies politic or corporate," as before explained and established? 
(2) Do they come' within the policy and intent of the framers of the 
constitution or of the people who ratified it ? 

[Test of corporate existence,] — The most peculiar, and the strictly 
essential characteristic of a corporate body, which makes it to be such , 
and not some other thing in legal contemplation, is the merging 
of the individuals composing the aggregate body into one dis-- 
tinct, artificial individual existence. Now this is not found in the 
associations under the act, A corporatiofi can sue and be sued only 
by its corporate name. It can act only according to the letter of the 
law creating it. "It derives all its powers from that act," says Chief 
Justice Marshall, "and is capable of exercising its faculties only in 
the manner which that act authorizes," It has no natural powers 



§2 TESTS: MERGER INTO ARTIFICIAL BODY. 1 3 

which, in its discretion, it may exercise or not. It can exercise none 
of those other powers, and possesses none of those other rights which 
the individuals composing it could possess and exercise, were it a 
mere society or partnetship. Not so as to these associations. By 
this act, suits on behalf of such associations may be brought in the 
name of the president. Persons having claims against the company 
may maintain their actions against the president. But there is no 
reason, except that of mere convenience, why the association may not 
also sue and be sued under their several real names, as other partners 
may. This reason of convenience, it is obvious, would not apply 
where the company was composed of a few persons, as if, for exam- 
ple, one of our great banking firms were to come under the law. 

It was indeed argued that the technical construction, which gives to 
may the meaning of must or shall^ applies here. But that construc- 
tion holds only when there is a previous duty, to which the statute 
adds some new power or authority, as in the case of a public officer ; 
or where from other reasons it is manifest that (to use Judge Story's 
words) "the legislature meant to impose an absolute duty, not to give 
a discretionary power;" otherwise, as he says, "the ordinary use of 
language must be presumed to be intended, unless it would defeat the 
provisions of the act." i Peters' Rep. 64. The ordinary popular 
discretionary sense of the word may is also the ordinary legal one. 
The other is the exception. In our revised statutes, the words may 
and shall are so used and distinguished. So they are in our annual 
legislation, as when it is said of a company that it may hold real 
estate, may take a certain rate of tolls, may borrow money. 

Moreover, here the right to sue and be sued as other partners is a 
common law right, and can not be taken away by mere implication. 
"A statute made in the affirmative, without negative words," say the 
highest authorities, "does not take away the common law." 2 Inst. 
200. See also Dwarris on Statutes 637, and the authorities there re- 
ferred to. * * * 

Again, these associations do not act by a corporate name and seal, 
but by another mode familiar to our law. They can contract through 
their president, as a limited partnership must through its general 
partner. They are authorized to sue and be sued through him ; as 
Judge Cowen observes : "The power of the legislature to give a right 
of action to one man in his own name for a debt due to another, has 
always been exercised from our earliest legal history, and it is 
now too late to call it in question." I refer to the several legislative 
and judicial authorities which he has collected in his opinion on these 
cases. They can not hold real estate as a corporation does, or con- 
tract concerning it by their own name and common seal ; but, like 
partnerships, they can have an equitable and beneficial interest in land. 
Collyer, 70, 76. Their president takes as a trustee, and the associates 
are but beneficiaries. 

How then are these associations to be regarded in legal contempla- 
tion ? 

I assent fully to the conclusive reasoning of the counsel, who 



14 WARNER AND RAY V. BEERS — BOLANDER V. STEVENS. § 2 

chiefly pressed this part of the argument (Mr. Kent), that they are 
copartnerships relieved from the inhibitions of the restraining act, 
and thus allowed to carry on banking business under certain condi- 
tions. The policy of the state has prohibited its citizens from issuing 
paper for circulation as money, or from associating together for cer- 
tain banking purposes, i R. S. 711. It reserved those privileges 
for corporate banks. The act to authorize the business of banking 
repealed that prohibition pro tanto, as to all individuals or companies 
v\ho would comply with its conditions. The associations in question 
are partnerships complying with those conditions, and thus exempted, 
as any other citizens may be on the same terms, from the operation 
of a statutory restraint of general right, which is still binding on all 
who will not comply with the conditions. This is so far in close an- 
alogy to the law of special partnership, where exemption from the 
general liability imposed by the law is tendered to all who comply 
strictly with the provisions of the statute. The articles and certificate 
in this act correspond to the certificate setting forth the naines of 
partners, amount of capital, time of termination and nature of busi- 
ness, required by the title of "Limited Partnerships," i R. S. 764, 
and with the articles which every such copartnership must have. The 
general partner there is authorized to transact business and contract 
for the rest; so, though with less authority, is the president here. 
The mode of suing and being sued is precisely the same in both 
cases. * * * 

On the question being put, shall these judgments be reversed? all 
the members of the court, with but a single exception {twenty-three 
being present), voted in the negative. Whereupon the judgments of 
the supreme court were affirmed. The court thereupon adopted the 
following resolutions: 

I. "Resolved, That the law entitled 'An act to authorize the busi- 
ness of banking,' passed i8th April, 1838, is valid, and was constitu- 
tionally enacted, although it may not have received the assent of two- 
thirds of the members elected to each branch of the legislature." 
This resolution was adopted by a vote of 23 to i. 

3. "Resolved, That the associations organized in conformity with 
the provisions of the act entitled 'An act to authorize the business of 
banking,' passed April i, 1838, are not bodies politic or corporate, 
within the spirit and meaning of the constitution." This resolution 
was adopted by a vote of 22 to 3. 



§3 TESTS: LEGISLATIVE INTENT. 1 5 

Sec. 3. Tests. (2) The legislative intent. 

THE PEOPLE, Ex Rel. WINCHESTER, Etc., Respondent, v. COLEMAN 
Et Al,, Commissionebs op Taxes, Etc., Appellants.' 

1892. Court of Appeals, New York. 133 N. Y. 279-287, 37 
Am. & Eng. Corp. Cas. i, 31 N. E. 96. 

Appeal from order of the general term of the supreme court, in 
the first judicial department, made February 13, 1891, which affirmed 
a judgment in favor of plaintiff, entered upon a decision of the court 
on trial at special term, vacating an assessment. 

This was a proceeding by certiorari to review the action of the 
commissioners of taxes and assessments of the city of New York, in 
imposing an assessment upon the capital stock of the National Ex- 
press Company, a joint-stock company, of which the relator is treas- 
urer, for the year 1888. 

The facts, so far as material, ai'e stated in the opinion. 

Finch, J. The relator was taxed upon its capital on the ground 
that it had become a corporation within the meaning of the provision 
of the Revised Statutes, which enacts that "all moneyed or stock 
corporations deriving an income or profit from their capital or other- 
wise, shall be liable to taxation on their capital in the manner herein- 
after prescribed." (i R. S., title 4, ch. 13, part i.) The company 
was formed as a joint-stock company or association in 1853 by a 
written agreement of eight individuals with each other, the whole 
force and effect of which, in constituting and creating the organiza- 
tion, rested upon the common law rights of the individuals and their 
power to contract with each other. The relation they assumed was 
wholly the product of their mutual agreement and dependent in no 
respect upon the grant or authority of the state. It was entered into 
under no statutory license or permission, neither accepting nor de- 
signed to accept any franchise from the sovereign, but founded wholly 
upon the individual rights of the associates to join their capital and 
enterprise in a relation similar to that of a partnership. A few years 
earlier the legislature had explicitly recognized the existence and va- 
lidity of such organizations, founded upon contract and evolved from 
the common law rights of the citizens. (Laws of 1849, ch. 258.) 
That act provided that any joint-stock company or association, which 
consisted of seven or more members, might sue or be sued in the 
name of its president or treasurer, and with the same force and effect, 
so far as the joint property and rights were concerned, as if the suit 
should be prosecuted in the names of the associates. But the act 
explicitly disclaimed any purpose of converting the joint-stock ttsso- 
ciations recognized as existing into corporations by a section prohibit- 
ing any such construction. (§ 5.) In 1851 the act was amended in 

' Arguments omitted. 



l6 PEOPLE V. COLEMAN. Jj 

its form and application, but in no respect material to the present in- 
quiry. There is no doubt, therefore, that when the company was 
formed and went into operation the law recognized a distinction and 
substantial difference between joint-stock companies and corporations, 
and never confused one with the other, and that the existing statute 
which taxed the capital of corporations had no reference to or opera- 
tion upon joint-stock companies or associations. 

But two things have since occurred. The legislature, while steadily 
preserving the distinction of names, has with equal persistence con- 
fused the things by obliterating substantial and characteristic marks 
of difference, until it is now claimed that the joint-stock associations 
have grown into and become corporations by force of the continued 
bestowal upon them of corporate attributes. It is said, and very- 
probably correctly said, that the legislature may create a corporation, 
without explicitly declaring it to be such, by the bestowal of a corpo- 
rate franchise or corporate attributes, and the cases of banking asso- 
ciations are referred to as instances of actual occurrence. (Thomas 
V. Dakin, 22 Wend, o;^ Bank of Watertowji v. Watertown, 25 Wend. 
686; People v. Niagara, 4 Hill 20.) It is added that such result 
may happen even without the legislative intent, and because the gift 
of corporate powers and attributes is tantamount to a corporate crea- 
tion. It is then asserted that a series of statutes, beginning with the 
act of 1849, has ended in the gift to joint-stock associations of every 
essential attribute possessed by and characteristic of corporations 
(Laws of 1853, ch. 153; Laws of 1854, ch. 245; Laws of 1867, ch. 
289) ; that the lines of distinction between the two, however far apart 
in the beginning, have steadily converged until they have melted into 
each other and become identical ; that every distinguishing mark and 
characteristic has been obliterated, and no reason remains why joint 
stock associations should not be in all respects treated and regarded 
as corporations. 

Some of this contention is true. The case of People, ex rel. Piatt, 
V. Wemple (117 N. Y. 136), shows very forcibly how almost the 
full measure of corporate attributes has, by legislative enactment, 
been bestowed upon joint-stock associations, until the difference, if 
there be one, is obscure, elusive and difficult to see and describe. 
And yet the truth remains that all along the line of legislation the dis- 
tinctive names have been retained as indicative and representative of 
a difference in the organizations themselves. As recently as the acts 
of 1880 and 1 88 1, which formed the subject of consideration in the 
Wemple case, the legislature, dealing with the subject of taxation and 
desiring to tax business and franchises, imposed the liability upon 
"every corporation, joint-stock company or association whatever now 
or hereafter incorporated or organized under any law of this state." 
It is significant that the words "or organized" were inserted by 
amendment, and evidently for the understood reason that joint-stock 

^Infra, p. 19. 



§3 TESTS: LEGISLATIVE INTENT. 1 7 

companies could not properly be said to be ''incorporated," but 
might be correctly described as' "organized" under the laws of the 
state. This persistent distinction in the language of the statutes I 
should not be inclined to disregard or treat as of no practical conse- 
quence, when seeking to arrive at the true intent and proper con- 
struction of the statute, even if I were unable to discover any practi- 
cal or substantial difference between the two classes of organizations 
upon which it could rest, or out of which it grew, for the distinction 
so sedulously and persistently observed would strongly indicate the 
legislative intent, and so the correct construction. 

But I think there was an original and inherent difference between 
the corporate and joint-stock companies known to our law which leg- 
islation has somewhat obscured, but has not destroyed, and that dif- 
ference is the one pointed out by the learned counsel for the respon- 
dent, and which impresses me as logical and well supported by 
authority. // is that the creation of the corporation merges in the 
artificial body and drowns in it the individual rights and liabilities 
of the members^ while the organization of a joint-stock company leaves 
the individual rights and liabilities unimpaired and in full force. 
The idea was expressed in Supervisors of Niagara v. People, 7 Hill 
512, and in Gifford v. Livingston, 2 Den. 380, by the statement that the 
corporators lost their individuality and merged their individual char- 
acters into one artificial existence ; and upon these authorities a cor- 
poration is defined on behalf of the respondents to be '•'•an artificial 
person created by the sovereign from natural persons and in which 
artificial person the natural persons of which it is composed become 
merged and non-existent.'^ I am conscious that legal definitions in- 
vite and provoke criticism, because the instances are rare in which 
they prove to be perfectly accurate ; and yet this one offered to us 
may be accepted if it successfully bears some sufficient test. In put- 
ting it on trial we may take the nature of the individual liability of 
the corporators on the one hand and of the associates on the other, 
for the debts contracted by their respective organizations, as a suffi- 
cient test of the difference between them, and contrast their nature 
and character. 

It is an essential and inherent characteristic of a corporation that it 
alone is primarily liable for its debts, because it alone contracts them, 
except as that natural and necessary consequence of its creation is 
modified in the act of its creation by some explicit command 
of the statute which either imposes an express liability upon the 
corporators in the nature of a penalty, or affirmatively retains and 
preserves what would have been the common-law liability of the 
members from the destruction involved in the corporate creation. 
In other words, the individual liability of the members, as it would 
have existed at common law, is lost by their creation jnto a corpo- 
ration, and exists thereafter only by force of the statute, upon some 
new and modifying conditions, to some partial or changed ex- 
tent, and so far preventing, by the intervention of an express com- 
2— WiL. Cases. 



1 8 PEOPLE V. COLEMAN § 3 

mand, the total destruction of individual liabilities which otherwise 
would flow from the inherent effect of the corporate creation. The 
penalties sometimes imposed are, of course, new statutory liabilities 
which never at common law rested upon the individual members. 
The retained liability occasionally established is in the nature and a 
parcel of such original liability, as we had occasion to show in Rogers 
v. Decker, 131 N. Y. 490, but is retained by force of the express 
command of the statute, and in that manner saved from the de- 
struction which otherwise would follow the simple creation of the 
corporation. Ordinarily, these individual liabilities exist upon 
other than common-law conditions, and make the corporators rather 
sureties or guarantors of the corporation than original debtors, since 
in general their liability arises after the usual remedies against the 
corporation have been exhausted. But where that is not so, the 
invariable truth is that the creation of the corporation necessarily 
destroys the common-law liability of the individual members for its 
debts, and requires at the hands of the creating power an affirmative 
imposition of new personal liabilities or a specific retention of old 
ones from the destruction which would otherwise follow. Exactly 
the opposite is true of joint-stock companies. Their formation de- 
stroys no part or portion of their common law liability for the debts 
conti'acted. Those debts are their debts, for which they must answer. 
Permission to sue their president or treasurer is only a convenient 
mode of enforcing that liability, but in no manner creates or saves it. 
The statute of 1853 did interfere with it. That act required, in the 
first instance, a suit against the president or treasurer, and so a pre- 
liminary exhaustion of the joint property. But that act was modal, 
and determined the procedure. It suspended the common-law right, 
but recognized its existence. We so held in Witherhead v. Allen, 
4 Abb. Ct. App. Dec. 628, and at the same time said that the asso- 
ciations were not corporations, but mere partnership concerns. Even 
that mode of procedure has been modified by the Code, §§ 1922, 1923, 
so that the creditor, at his option, may sue the associates without 
bringing his action against the president or treasurer. These last and 
quite recent enactments show that the legislative intent is still to pre- 
serve and not destroy the original difference between the two classes 
of organizations ; to maintain in full force the common-law liability 
of associates, and not to substitute for it that of corporators, and pre- 
serving in continued operation that normal and distinctive difference, 
to evince a plain purpose not to merge the two organizations in one or 
destroy the boundaries which separate them. That intent^ once clearly 
ascertained^ determines the construction to be adopted^ and may be the 
only reliable test in view of the power of the state to clothe one or- 
ganization with all the attributes of the other. The drift of legisla- 
tion has been to lessen and obscure the original and characteristic 
difference. On the one hand, corporations have been created with 
positive provisions retaining more or less the individual liability of the 
members, and on the other the joint-stock companies have been 
clothed with most of the corporate attributes, but enough of the 



§ 4 TESTS: POWERS CONFERRED. 



19 



original difference remains to show that our legislation not only care- 
fully preserves the distinction of names, but sufficient, also, of the 
original difference of character and quality to disclose a clear intent 
not to merge the two. 

We may thus see upon what the legislative intent to preserve them 
as separate and distinct is founded and what distinguishing character- 
istics remain. The formation of the one involves the merging and 
destruction of the common law liability of the members for the debts, 
and requires the substitution of a new or retention of the old liability 
by an affirmative enactment which avoids the inherent effect of the 
corporate creation ; in the other, the common law liability remains 
unchanged and unimpaired and needing no statutory intervention to 
preserve or restore it ; the debt of the corporation is its debt and not 
that of its members, the debt of the joint-stock company is the debt 
of the associates however enforced ; the creation of the corporation 
merges and drowns the liability of its corporators, the creation of the 
stock company leaves unharmed and unchanged the liability of the 
associates ; the one derives its existence from the contract of individ- 
uals, the other from the sovereignty of the state. The two are alike 
but not the same. More or less, they crowd upon and overlap each 
other, but without losing their identity, and so, while we can not say 
that the joint-stock company is a corporation, we can say, as we did 
say in Van Aernam v. Bleistein, 102 N. Y. 360, that a joint-stock 
company is a partnership with some of the powers of a corporation. 
Beyond that we do not think it is our duty to go* 

The order should be affirmed, with costs. 

All concur. 

Order affirmed. 



Sec. 4. Tests. (3) The powers conferred. 

THOMAS V. DAKIN.> 

1839. In the Supreme Court of New York. 22 Wendell 

(N. Y.) 9-112. 

Chief Justice Nelson : This is an action brought by the plaintiff, 
as president of the Bank of Central New York, an association formed 
under what is familiarly known as the general banking law, passed 
April 18, 1838, to recover several demands due the institution. 

The defendant has demurred to the declaration, and urges the un- 
constitutionality of the law by way of defense ; and it is insisted, in 
his behalf: (i) That the associations formed under this law are 
corporations; and (2) That a general law authorizing the creation of 
these bodies is inconsistent with the ninth section of the seventh arti- 

' Statement of facts, except what is given in opinions, is omitted; alflo ar- 
guments, and much of the opinions of Nelson, C. J., and Cowen, J. 



20 THOMAb V. DAKIN. § 4 

cle of the constitution. On the part of the plaintiffs, it is urged in 
reply: (i) That the associations are not corporations; (2) That if 
they be, the act authorizing them may be passed by a majority bill; 
and (3) If within the ninth section, still the law may be passed by 
two-thirds of the members elected. 

[Test of Corporate Existence.] — Are these associations corporations ? 
I7i order to determine this question^ ive must Jirst ascertain the 
properties essential to constitute a corporate body^ and compare them^ 
•with those conferred upon the associations^ for if they exist in com- 
mon^ or substantially correspond^ the answer will be in the affirma- 
tive. A corporate body is known to the law by the powers and 
faculties bestowed upon it, expressly or impliedly, by the charter; the 
use of the term corporation in its creation is of itself imimportant, ex- 
cept as it will imply the possession of these. They may be expressly 
conferred, and then they denote this legal being as unerringly as if 
created in general terms. It has been well said by learned expound- 
ers, that a corporation aggregate is an artificial body of men, com- 
posed of divers individuals, the ligaments of which body are the 
franchises and liberties bestowed upon it, which bind and unite all 
into one, and in which consists the whole frame and essence of the 
corporation. 

[Powers Incidental to Corporate Existence.] — The ' ' franchises and lib- 
erties," or, in more modern language, and as more strictly applicable 
to private corporations, the powers and faculties, which are usually 
specified as creating corporate existence, are: i. The capacity of 
perpetual succession ; 2. The power to sue and be sued, and to grant 
and receive in its corporate name ; 3. To purchase and hold real and 
personal estate ; 4. To have a common seal, and 5. To make by- 
laws. These indicia were given by judges and elementary writers 
at a very early day, since which time the institutions have greatly 
multiplied, their practical operation and use have been thoroughly 
tested, and their peculiar and essential properties much better under- 
stood. Any one comprehending the scope and purpose of them, at 
this day, will not fail to perceive that some of the powers above speci- 
fied are of trifling importance, while others are wholly unessential. 
For instance, the power to purchase and hold real estate is no other- 
wise essential than to afford a place of business ; and the right to use 
a comm.on seal, or to make by-laws, may be dispensed with altogether. 
For as to the one, it is now well settled that corporations may con- 
tract by resolution, or through agents, without seal ; and as to the 
other, the power is unnecessary in all cases where the charter sufii- 
ciently provides for the government of the body. The distinguishing 
feature, far above all others, is the capacity confeired, by which a 
perpetual succession of different persons shall be regarded in the 
law as one and the sam.e body, and may at all times act in fulfillment 
of the objects of the association as a single individual. 

In this way, a legal existence, a body corporate, an artificial being, 
is constituted ; the creation of which enables any number of persons 
to be concerned in accomplishing a particular object, as one man. 



§4 TESTS: POWERS CONFERRED. 21 

While the aggregate means and influence of all are wielded in effect- 
ing it, the operation is conducted with the simplicity and individuality 
of a natural person. In this consists the essence and great value of 
these institutions. Hence it is apparent that the only properties that 
can be regarded strictly as essential, are those which are indispensable 
to mold the different persons into this artificial being, and thereby 
enable it to act in the way above stated. When once constituted, 
this legal being created, the powers and faculties that may be con- 
ferred are various — limited or enlarged, at the discretion of the legis- 
lature, and will depend upon the nature and object of the institution, 
which is as competent as a natural person to receive and enjoy them. 
We may, in short, conclude by saying, with the most approved au- 
thorities at this day, that the essence of a corporation consists in a ca- 
pacity : (i) To have a perpetual succession under a special natne^ 
and in an artificial form; (2) to take and grant property^ contract 
obligations^ sue and be sued by its corporate name as an individual; 
and (^^) to receive and enjoy in common^ grants of privileges and 
immunities. 

We will now endeavor to ascertain with exactness the powers and 
attributes conferred upon these associations by virtue of the statute. 
The first fourteen sections ( i to 14) prescribe the duties of the comp- 
troller in furnishing notes for circulation, taking the required securi- 
ties, etc. The fifteenth provides that any number of persons may 
associate to establish offices of discount, deposit and circulation. The 
sixteenth, that they shall tnake and file a certificate, specifying: i. 
The name to be used in the business. 2. The place where the busi- 
ness shall be carried on. 3. The amount of capital stock and num- 
ber of shares into which divided. 4. The names of the shareholders. 
5. The duration of the association. The eighteenth confers upon 
the persons thus associating the most ample powers for carrying on 
banking operations, together with the right "to exercise such inciden- 
tal powers as shall be necessary to carry on such business;" also to 
choose a president, vice-president, cashier and such other officers and 
agents as may be necessary. By the twenty-first and twenty-second 
sections, contracts, notes, bills, etc., shall be signed by the president 
and cashier; and all suits, actions, etc., are to be brought in the 
name of, and also against, the president for the time being; and not 
to abate by his death .^ resignation or removal^ but to be continued in 
the name of the successor. Twenty-fourth section : The association 
may purchase and hold real estate, etc., the conveyance to be made 
to the president, or such other officer as shall be designated, who may 
sell and convey the same free from any claim against shareholders. 
Nineteenth section : The shares of capital stock to be deemed per- 
sonal property, transferable on the books of the association; and 
every person becoming a shareholder by such transfer shall succeed 
to all the rights and liabilities of the prior holder. Twenty-third 
section: No shareholder to be personally liable; and the association 
is not to be dissolved by the death or insanity of any shareholder. 

I. Upon a perusal of these provisions, it will appear that the asso- 



22 THOMAS V. DAKIN. § 4 

ciation acquires the power to raise and hold for common use any given 
amount of capital stock for banking purposes, which, when subscribed, 
is made personal property, and the several shares transferable the 
same and with like effect as in case of corporate stock ; to assume a 
common name under which to manage all the affairs of the associa- 
tion ; to choose all officers and agents that may be necessary for the 
purpose, and remove and appoint them at pleasure. It will, hence, 
be seen, that although the association may be composed of a number 
of different persons, holding an interest in the capital stock, its oper- 
ations are so arranged that they do not appear in conducting its 
affairs ; all are so bound together, so molded into one, as to consti- 
tute but a single body, represented by a common name, or names 
(the knot of the combination), and in which all the business of the 
institution is conducted by common agents. In this way it purchases 
and holds real and personal property, contracts obligations, discounts 
bills, notes and other evidences of debt, receives deposits, buys gold 
and silver bullion, bills of exchange, etc., loans money, sues and is 
sued, etc. It is true some portion of the business is conducted in 
the assumed name, and some in the name of the president for the 
time being; but this in no manner changes the character of the body. 
A corporation may have more than one name; it may have one in 
which to contract, grant, etc., and another in which to sue and be 
sued; so it may be known by two different names, and may sue and 
be sued in either; and the name of the president, his official name, or 
any other, will answer every purpose. 2 Bacon's Abr. 5 ; 2 Salk. 
451 ; 2 Salk. 237; Ld. Raym. 153, 680. The only material circum- 
stance is, a name, or names, of some kind, in which all the affairs of 
the company may be conducted. So much, and no more, is essential 
to give simplicity and effect to the operation. An artificial being is 
thus plainly created, capable of receiving all the ample powers and 
privileges conferred upon the associations, and of managing their di- 
versified concerns in an individual capacity. All business is to be 
conducted in a common or proper name. 

2. This artificial being possesses the powers of perpetual succes- 
sion. Neither sale of shares or death of shareholders affect it; if one 
should sell his interest, or die, the purchaser or representative, by 
operation of law, immediately takes his place. § 19. Nor can the 
insanity of a member work a dissolution. Id. Officers and agents 
for conducting the business of the association are secured. In case 
of vacancy, by death or otherwise, the place may at once be filled. 
§ 18. For the entire duration, therefore, of the association, and which 
may be without limit, § 16, sub. 5, the whole body of shareholders, 
though perpetually shifting, constitute the same uniform, artificial 
being which is to be engaged through the instrumentality of officers 
and agents in conducting the business of the concern, and no member 
is personally liable. § 23. Then, as to the powers conferred, with- 
out again specially recurring to them, it will be seen at once that the 
associations possess all that are deemed essential, according to the 
most approved authorities, to constitute a corporate body. They 



§ 4 TESTS : POWERS CONFERRED. 



23 



have a capacity: i. To have perpetual succession under a common 
name, and in an artificial form. 2. To take and grant property, con- 
tract obligations, to sue and be sued by its corporate name in the 
same manner as an individual. 3. To receive grants of privileges and 
immunities, and to enjoy them in common. All these are expressly 
granted, and many more, besides the general sweeping clause, "/<? 
exercise such incidental powers as shall be necessary to carry on such 
business'^ (meaning the business of banking), under which even the 
seal and right to make by-laws are clearly embraced, if essential in 
conducting the affairs of the institution. * * * 

By CovvEN, J. Independent of authority and general reasoning, 
I have had very great difficulty, on a simple reading, to avoid see- 
ing plain, direct and express enactments in the general banking law, 
conferring all the requisites demanded by counsel, i. I read of a 
collective existence, i. e., a body of men associated under a name 
conierred mediately, i. e., through the certificate of association, by the 
sovereign power, which is the legislature. 2. As such collective ex- 
istence, I read that the association has a standing in court, perhaps in 
its own name, or at least in the name of its president. It recovers 
judgments for debts due to it, and execution is levied on its property, 
upon a recovery against it. $• I read of power to take and convey 
title to property, acquire and give rights ; all this to be done, as it 
must be in every corporation, by its agents, but certainly in its collec- 
tive name and designation ; for the statute demands that the name 
which it assumes shall be used in ail its dealings. 4. I shall have 
occasion to show that under a general provision of the act, there can 
be no doubt of its power to make by-laws. There are various con- 
siderations connected with this short view of the question, which may 
perhaps tend to the illustration, distinctness and strength of that 
view. 

[Difference Between a Partnership and a Corporation'] — The associa- 
tions formed under the act may, like our ordinary banks, elect their 
president, cashier and directors, confer on the latter as I have as- 
sumed and intend to show, the power to make and repeal by-laws, 
to regulate elections, and through their proper agents in the name 
of the association, to exercise all the other functions of our or- 
dinary incorporated banking institutions.* The latter are well known 
as aggregate moneyed corporations.' 

It can not be denied that a voluntary association or partnership 
might, temporarily, also elect the like officers and agents, confer upon 
them nearly the same powers, and perform about the same functions, 
without any charter or act of incorporation whatever. Collyer on 
Partnership, 621, Am. ed. 1834. There is, however, much difference 
between the power, duration and legal effect ; a corporation aggre- 
gate is in law an individual entirely distinct from its members, each 
of whom may hold shares or interests in the corporation, legally 
transferable in virtue of its charter ; whereas a voluntary association 
is made up of individuals not distinct from, but belonging in their 
own names and rights to the company. Their shares or interests are 

' See p. 170, infra. 



24 THOMAS V. DAKIN. J 4 

common to all ; and, except so far as these may be made up of prop- 
erty in possession, they can not be transferred so as to create anything 
more than an equitable right in the assignee. Hence a voluntary 
company, asserting that it is possessed of stock transferable at the 
option of the holder, has been said to be punishable for pretending to 
act as a corporation. Collyer on Partnership, 624. 

The members of a copartnership are joint tenants in the stock and 
all the effects of the company, and, on the death of each, his interest 
in the common choses in action, at law, survives to the other mem- 
bers, w^hile his interest in the common land and choses in possession 
passes, as an undivided share, to his heirs or personal representatives. 
Collyer on Partnership, 4, 5, 68. The nature of these interests and 
the course of succession are, in some respects, modified by the court 
of chancery. Collyer on Partnership, 70, 71. All the members 
must, as we have in part before seen, be named in suits by or against 
the company, the right or liability to which, on the death of one, sur- 
vives to all the others. Collyer on Partnership, 386, 395, 420, 427. 
Each is individually liable for the whole debts due from the company, 
Collyer on Partnership, 212, and may release and discharge all the 
debts due to them. Collyer on Partnership, 239. One may enter 
upon, use or otherwise control all the common property, real or per- 
sonal; indeed, he may, in general, convert it to his own use, subject 
to an account. Collyer on Partnership, 211. All the remedies inter 
se, with few exceptions, are by action of account or bill in equity. 
Collyer on Partnership, 143. The firm can not, in general, sue or 
be sued by any one of its members, for this would involve the absur- 
dity of a man being both plaintiff and defendant on the same record. 
Collyer on Partnership, 143, 644-5, Partnerships are dissoluble, not 
only by death or insanity, but by the bankruptcy of a member ; a 
general sale of his partnership effects by execution ; his attainder of 
felony, if it result in his civil death ; an assignment by himself of all 
his interest, and the marriage of a partner who is ^ feme sole. Indeed, 
the better opinion is, that, however strong the provisions against a 
dissolution may be in the articles of copartnership, the whole concern 
may be dissolved at any time, by the act of a single partner, at his 
own mere pleasure. Even during the continuance of the partnership, 
he may interrupt its proceedings, by interdicting any single measure, 
though agreed on by a majority of the firm. At least this is generally 
so at law, and the power, it is apprehended, can be but partially quali- 
fied by a court of chancery. Collyer on Partnership, 58, § 2. 3 
Kent's Comm., 53-4, 3d ed. It would seem clearly to follow, if it 
has ever been disputed, that any powers, though jointly conferred on 
others, as to act in the direction of affairs, or use a common seal, may 
be revoked at the pleasure of either partner. 

Most of these incidents it is impossible for the partners to avoid by 
any stipulations in their articles of connection ; and in proportion as any 
body of men is authorized by statute to hold property and sue and be 
sued without such incidents, they approach the character of a corpo- 
ration. While they continue partners they are considered as natural 



§4 TESTS: POWERS COiNFERRED. 25 

persons merely, as so many joint tenants or tenants in common, of all 
their property. In proportion as, by statute, they cease to be so they 
become an artificial person. These two are the only persons known 
to the law, according to the language of the great commentator, 
I Black. Comm. 123. "Persons," says he, "are divided by the law 
into either natural persons or artificial. Natural persons are such as 
the God of nature formed us. Artificial are such as are created and 
devised by human laws for the purposes of society and government, 
which are called corporations or bodies politic." In another part of 
his work, i Black. Comm. 467, he shows the advantages of corpora- 
tions over partnerships or voluntary companies. He says: "Corpo- 
rations are formed in order to preserve entire and forever those rights 
and immunities which, if they were granted only to those individuals 
of which the body is composed, would, upon their death, be utterly 
lost and ejltinct." In a mere voluntary assembly he admits the indi- 
viduals that compose it might act up to the purposes for which they 
associated so long as they could agree to do so; "but they could 
neither frame nor receive any laws or rules of their conduct ; none, at 
least, which would have any binding force, for w^ant of coercive power 
to create a sufficient obligation ; and when they are dispersed by death 
or otherwise, how shall they transfer their advantages to others 
equally unconnected with themselves.'' 

"So, also, with regard to holding estates or other property, if land 
be granted for the common purpose to twenty individuals not incor- 
porated, there is no legal way of continuing the property to any other 
persons for the same purpose, but by endless conveyances from one to 
another, as often as the hands are changed. But when they are con- 
solidated and united into a corporation, they and their successors are 
then considered as one person in law; as one person, they have one 
will, which is collected from the sense of the majority of the individ- 
uals ; this one will may establish rules and orders for the regulation 
of the whole, which are a sort of municipal laws of this little republic ; 
or rules and statutes may be prescribed to it at its creation, which are 
then in the place of natural laws ; the privileges and immunities, the 
estates and possessions of the corporation, when once vested in them, 
will be forever vested, without any new conveyance or new succes- 
sions; for all the individual members that have existed from the 
foundation to the present time, or that shall ever hereafter exist, are 
but one person in law, a person that never dies ; in like manner as 
the river Thames is still the same river, though the parts which com- 
pose it are changing every instant." In this quotation, I have taken 
the words of Blackstone as he applied them, by way of example, to 
the case of a college in one of the English universities ; and without 
quoting him literally throughout, have confined myself to such things 
as the learned author considers peculiar to every aggregate corpora- 
tion. These are, in short, the receiving of peculiar laws and the 
making of bv-laws for itself; perpetual succession, both as to its 
privileges and property; the having one will, as collected from the 
power of the majority to make by-laws ; and the being but one per- 



26 THOMAS V. DAKIN. § 4 

son in law, a person that dies not, but continues the same individual, 
though its parts may change. See, also, Ang. & Ames on Corp., 

[The Idea of Perpetual Succession.] — The great and essential object to 
be attained by the creation of a corporation, is continuity (sometimes 
called immortality) and individuality:, "properties," says Ch. J. 
Marshall, "by which a perpetual succession of many persons are con- 
sidered as the same, and may act as the single individual . They 
enable a corporation to manage its own affairs, and to hold property 
without the perplexing intricacies, the hazardous and endless neces- 
sity of perpetual conveyances for the purpose of transmitting it from 
hand to hand." Dartmouth College v. Woodward, 4 Wheat. 636; 
Angel & Ames on Corp., 2. A peculiar sort of individuality^ and a 
peculiar mode of succession^ for a particular purpose, and not allowed 
by the general law to natural persons, enter into every defiftition of a 
corporation that I have seen, i Kyd on Corp., 2-3. With us there 
can be no recent creation of such an artificial person except by stat- 
ute. 2 Kent's Comm., 276, 3d ed. No agreement of individuals 
can so far alter the nature of things ; and, as we have seen of persons, 
there can be only two kinds, natural and artificial, so there can be but 
two modes in which property is transmitted by succession. The one 
takes place between natural persons, of which we have an example in 
descent on the death of the ancestor ; the other is between predeces- 
sors and successors in a corporation aggregate or sole. The one may 
be called a natural, and the other an artificial succession; and it is 
evident that the latter can not exist independent of a corporation, any 
more than the former without natural persons, i Kyd on Corp. 2—3. 

In the associations created by the banking law great care has been 
taken to introduce and maintain corporate succession in every part of 
the system. I have already endeavored to show that the beneficial 
interest in all its real and personal property belongs to any associa- 
tion formed under that law as an individual. If I have succeeded, it 
follows that such association is a corporation. The principle of suc- 
cession is equally maintained in respect to the president for the pur- 
pose of receiving conveyances of real estate and selling it; and so 
when he acts as the organ of maintaining actions in right of the asso- 
ciation and defending actions brought. All these rights, powers and 
duties pass in perpetual succession from president to president during 
the existence of the company. The president and his successors thus 
come to enjoy, in the nature of a sole corporation, a perpetual trustee- 
ship in the real estate, and a perpetual power or control over it, to- 
gether with the suits of the cornpany. "From their \\m\w^ perpetual 
succession^ and suing and being sued in their political character, single 
persons of both these descriptions have (without much propriety, as 
Mr. Kyd thinks) been uniformly, in the books of English law, called 
corporations." Kyd on Corporations, 19, 20. "A sole corporation, 
as its name implies, consists only of one person, to whom and his 
successors belongs that legal perpetuity, the enjoyment of which is 
denied to all natural persons." Angell & Ames on Corporations, iS, 



§4 TESTS: POWERS CONFERRED. 2^ 

19; I Black. Comm., 469. It need scarcely be remarked that the 
president cf the banking associations in question comes fully within 
the general definition. 

In England, sole corporations are mostly employed to hold in suc- 
cession the rights and property of the ecclesiastical establishment ; and 
it is said they can not take personal property in succession, but only 
real. Sole corporations are not common in the United States. Angell 
& Ames on Corp., 19, 20. But it is not perceived why an officer, or 
other person authorized to hold property, real or personal^ to him and 
his successors^ be not a sole corporation within the plain meaning of 
the definition. The chamberlain of London, who may take a recog- 
nizance to him and his successors^ in his political capacity, in trust for 
orphans, was said to be a sole corporation in trust. Byrd v. Wilford, 
Cro. Eliz. 464. It was there said by Gawdy and Fenner, Js., that the 
chamberlain was a special corporation for that purpose ; and an obli- 
gation may as well go in succession as land. So of the comptroller 
who takes an assignment of stocks, bonds and mortgages, to hold 
under the general banking law. Surely these would not, on his death, 
go to his executors. They are holden by him in trust, to pay the 
debts of the aSvSociation ; and would pass to his successors. He is 
equally a corporation sole, for this special purpose, according to the 
English definition. The supervisor of a town may sue or be sued. 
3 R. S. 387, 8, §§ 96 and 100, 2d ed. Suppose he were authorized 
to hold lands and chattels to him and his successors, in trust for his 
town, would he not be a sole corporation, as the board of supervisors 
or loan officers are an aggregate corporation in respect to lands which 
they hold for the county? Denton v. Jackson, 2 Johns. Ch. R. 325. 
The grand test of a corporation is the mode in which property, suc- 
ceeds from one to another. When it does not go to the heirs of the 
holder as a natural person, it passes to the successor or successors, 
because it is holden in a corporate capacity. The holders are there- 
fore said to be a person or body politic and corporate, in opposition 
to their natural capacity. Thus, all property must be holden by 
natural persons or corporations. If the property of an association 
under the general banking law be not holden in the natural capacity 
of the different members as partners, the only alternative remaining 
is a holding by corporations aggregate or sole. No third description 
of person is known to our law. None was known to the Roman law. 
See I Browne's Civil and Adm. Law, 141. None to any system of 
laws with which we are acquainted. 

There are two cases in i Rolle's Abr., 515, which show still more dis- 
tinctly that the president of an association and the state comptroller 
must be considered each as sole corporations. One is where a presi- 
dent of a college of physicians recovers, in that character, a penalty 
against a party for practicing without license. Another is where 
the master of an hospital recovers, in that character, the arrears of 
the annuity due to the hospital. On the death of either the interest 
in the judgment recovered passes to his successor, and not to his ex- 
ecutor; and simply because the debt thus goes in succession, and 



28 EDGEWORTH V. V,'vjOD. § 5 

Toller says they are each a special or sole corporation like the cham- 
berlain of London before mentioned. Toll, on Ex., ch. 4, § 3, p. 
136, ed, of 1803. See also i Wms. Ex. 546, ed. of 1832. Atkins v. 
Gardener, Cro. Jac. 159. This matter is very fully illusti'ated in 2 
Black. Comm.,431, 2. * * * 

By Bronson, J, : I concur fully in the opinions expressed by my 
brethren, that associations formed under the general banking law are 
corporations, and that the assent of two-thirds of all the members 
elected to each branch of the legislature was necessary to the passing 
of the act. But, as at present advised, I can not concur in the 
opinion that the legislature has the constitutional power, although 
two-thirds may assent, to provide by a general law for the creation of 
an indefinite number of corporations at the pleasure of any persons 
who may associate for that purpose. 

It was conceded on the argument, that the demurrer does not reach 
the objection that the act was not passed by a two-thirds vote ; and I 
have not, therefore, considered the question whether we can look be- 
yond the statute book. A plea may render it necessary for us to pass 
upon that question. 

Judgment for plaintiff. 



Sec. 5. Tests. (4) But in foreign jurisdictions the powers con- 
ferred, rather than the legislative declaration, will control.^ 

EDGEWORTH v. WOOD, Tkeasurer op the United States Express 

Company. 

1896. In the Supreme Court of New Jersey. 58 New Jer- 
sey Law (29 Vroom) 463-469, 3 Am. & Eng. 
Corp. Cas. (N. S.) 299, 33 Atl. 940. 

On rule to show cause. 

Argued at November term, 1895, before Beasley, chief justice, 
and Justices Magie and Ludlow. 

The opinion of the court was delivered by Magie, J. This is an 
action in tort in which plaintiff seeks to recover damages for injuries 
suffered by him by reason of his being run over, in a public street in 
Jersey City, by a wagon of the United States Express Company, neg- 
ligently driven by a driver in the employ of that company. The jury 
having rendered a verdict for plaintiff, this rule to show cause why the 
verdict should not be set aside was allowed. Several reasons were 
filed in support of the rule, but only three have been urged in the 
argument. These only will be considered. 

It is first contended that neither plaintiff's declaration nor the evi- 
dence produced by him discloses any liability on the part of Theodore 
F. Wood, treasurer of the United States Express Company, to an- 
swer for plaintiff's injuries, if inflicted as he claimed. 

^ See note (5) at end of Article I, infra, p. 32. 



§ 5 TESTS IN FOREIGN JURISDICTIONS. 29 

Plaintiff claims to have made out his case, in this respect, in the 
following manner: He produced proof that the United States Ex- 
press Company was an association organized April 22, 1854, under 
the laws of New York, and having a principal place of business in 
the city of New York, and that Thomas C. Piatt was its president 
and Theodore F. Wood its treasurer. He put in evidence chapter 
238 of the laws of New York for the year 1849, ^"'^ sections 19 19, 
1924 of the New York code of civil procedure, whereby it appeared 
that any association thus organized was expressly authorized to sue 
and to be sued in the name either of its president or its treasurer for 
the time being. Upon this he contends that he is entitled to an ac- 
tion against Wood, as treasurer, and as Wood is a resident of New 
Jersey, and was served with process here, that our courts, by comity, 
will recognize the liability to suit imposed by the laws of New York. 

In opposition to this, it is contended on the part of defendant 
that if it be conceded that our courts will, by comity, adopt and en- 
force remedies against such associations, in the mode prescribed by 
the law of the state under which they came into existence, yet if the 
law of this state has furnished a mode of procedure by which reme- 
dies against such associations may be enforced, the rule of comity 
ceases and the mode of procedure provided by our laws must be pur- 
sued. The supplement to the Practice act, approved May 23, 1890 
(Pamph. L., p. 353; Gen. Stat., p. 2592, § 342), is conceived by 
counsel to have furnished a mode of procedure under which this ac- 
tion could have been maintained against the United States Express 
Company. 

By that act it is enacted that any "unincorporated company, stock 
company or association," consisting of two or more persons united 
for business purposes and having a recognized name, may be sued by 
that name in any action affecting the common property or the joint 
rights and liabilities of such company or association. Provision is 
made for the service of process and for the issue of an execution upon 
judgment in the same manner as upon judgments against corporations. 
If the United States Express Company is an unincorporated associa- 
tion, within the meaning of the act, it would seem that plaintiff could 
have brought his action under that act. 

Questions concerning the nature of associations formed under the 
laws of New York, such as the United States Express Company, 
have been frequently considered in the courts of that state. The act 
of 1849 speaks of them as joint-slock companies or associations. By 
its certificate, this company calls itself a joint-stock company. 

In the earliest case to which my attention has been directed, the 
question requiring solution was as to the relation between a share- 
holder and such a company. After an exhaustive review of the New 
York statutes on the subject, Judge Barnard declared that such com- 
panies had all the qualities of corporations, except that of having a 
common seal. His conclusion was that in a controversy between a 
shareholder and the company, he was not to be considered as a part- 
ner in a partnership, but the courts must deal with his relation follow- 



30 EDGEWORTH V. WOOD. § 5 

ing the analogy of the law of corporations. Waterbury v. Merchants' 
Union Express Co., 50 Barb. 157. 

In a later case, an action was brought by a shareholder in the same 
company against Fargo, its president, to recover for the loss of articles 
entrusted to it for transportation. The defense was that the owner of 
an interest in the company could not maintain such an action against 
it, which it was claimed was like an action by a partner against the 
partnership. The action was sustained by the court below. West- 
cott V. Fargo, President, 6 Lans. 319. Upon appeal, the opinion was 
delivered by Dwight, one of the commissioners of appeal. Upon a 
review of the statutes, he declared that the president or treasurer of 
one of these joint-stock companies or associations was to be regarded, 
for the purposes of an action against the company, substantially as a 
corporation sole ; that such companies possessed some powers and 
privileges of corporations not possessed by individuals or partnerships, 
and that an action upon a liability of the company might be main- 
tained by one of its members. Westcott v. Fargo, 61 N. Y. 542. 

Later the United States Express Company, the very company whose 
officer is here sued, objected to the imposition of a tax upon its cor- 
porate franchises and business computable upon its capital stock, un- 
der an act taxing corporations, joint-stock companies and associations 
incorporated or organized under any law of the state. Its contention 
was that it was neither so incorporated nor organized. The right to 
impose the tax was sustained. Judge Danforth saying: "The agree- 
ment which brought many persons into one artificial body was so 
framed as to accomplish that end, and in proposing to conduct its af- 
fairs by the power given to it in the mode prescribed b}' the legisla- 
ture, they must be deemed, for the purposes of the act in question, 
to be incorporated — that is, formed or united under the law of the 
state, whether the artificial body be termed a corporation, a joint-stock 
company or association." People, ex rel. Piatt, v. Wemple, 117 
N. Y. 136. 

Questions have also arisen respecting the right to remove to the 
federal courts actions between the president or treasurer of such com- 
panies and other persons. 

In New York, it was held, in a suit by Fargo as president of such 
a company organized in New York, that the company was to be con- 
sidered like a corporation, a citizen of New York, and the action was 
removable to the United States court, if the other party was a citizen 
of another state. Fargo v. McVicker, 55 Barb. 437. 

In the United States Circuit Court for the District of Michigan, 
Judge Brown (now justice of the supreme court) held that such a 
company formed in New York was to be deemed a citizen of New 
York without regard to the citizenship of its members. Maltz v. 
American Express Co., i Flip. 611. 

In another case in the federal courts, the action was brought by 
Fargo as president of such a company against a citizen of a western 
state, and Judge Gresham held that such a company was a citizen of 
New York and could maintain an action in those courts, notwithstand- 



§ 5 NOTES TO ARTICLE I. 3 I 

ing the fact that some of its shareholders were residents of the state 
in which the defendant resided. Fargo v. L., N. A. & C. Ry. Co., 
6 Fed. Rep. 787. 

In the case last cited and in some of the other cases, the conclusion 
reached has not been deemed invalidated by the fact that some of the 
New York statutes speak of such companies and associations as unin- 
corporated. 

In Liverpool Ins. Co. v. Massachusetts, 10 Wall. 566, the supreme 
court of the United States held that an English joint stock associa- 
tion, which was endowed with certain corporate powers, must be con- 
sidered by our courts to be a corporation, notwithstanding the acts of 
parliament declared that such associations should not be held to be 
corporations. 

[Test of Corporate Existence.] — Whether an aggregation of indi- 
viduals united in an artificial body is a corporation or not is to be 
determined rather by the faculties and foyers conferred upon the 
body than by the name or description given to it. 

Upon this review, I have reached the conclusion that the United 
States Express Company is a corporate entity, empowered to sue and 
be sued, not, as is usual, in a corporate name, but in the name of 
designated officers. To such a corporation the act of 1890 does not 
apply, and this action was therefore properly brought against Wood 
as treasurer, whose status in the suit is not that of an individual but 
of a representative of the company. 

This reason can not, therefore, prevail. 

[Points of opinion relating to sufficiency of evidence are omitted.] 

The rule to show cause should be discharged. 



NOTES TO ARTICLE I. 

1 . Definitions: For the authorities favoring one or the other of the defini- 
tions given above, see notes to Articles II, III and IV, infra, pp. 72, 109, 157. 
Definitions of corporations will be found in the following cases : 1804, Head v. 
Providence Ins. Co., 2 Cranch (U. S.) 127, on 167; 1809, Bank of United 
States V. Deveaux, 5 Cranch (U. S.) 61 ; 1819, Trustees Dartmonth Col. v. 
Woodward, 4 Wheaton 618, on 636, 667; 1839, Thomas v. Dakin, 22 Wendell 
(N. Y.) -9, 70, 104, supra, p. 19; 1840, Warner v. Beers, 23 Wendell (N. Y.) 
103, 123, 124, snpra, p. 2; 1841, People, ex rel. Bank of Watertown, v. Asses- 
sors, etc., 1 Hill ^N. Y.) 616, 620; 1844, Louisville C, etc., R. Co. v. I^t- 
son, 2 Howard (IT. S.) 497, 552; 1860, The Ohio Ins. Co. v. Nunemacher, 
15 Ind. 295; 1861, Ohio and Mississippi R. Co. v. Wheeler, 66 U. S. (1 
Black) 286, 295; 1672, Railroad Commissioners v. P. & O. C. R. Co., 63 
Maine 269, 277; 1872, Thompson v. Waters, 25 Mich. 214, 223; 1875, Board 
of Commrs. Tipp. Co. v. L. M. & B. R., 50 Ind. 85, 108; 1878, Stale v. M. 
L. S. & W. R. Co., 45 Wis. 579, 592; 1882, Bait. & P. R. Co. v. Fifth Bap- 
tist Church, 108 U. S. 317, 330; 1890, United States v. Trinidad Coal & C. Co., 
137 U. S. 160; 1898, Andrews Bros. v. Youngstown Coke Co., 86 Fed. R. 686. 

2. The New York Bank Cases: The second resolution adopted by a vote 
of 22 to 3, in the case of Warner v. Beers, sttpra, p. 14, that the associations 
organized under the banking act of 1838, "are not bodies politic or corporate, 
within the spirit and meaning of the constitution," did not settle the law that 



32 NOTES TO ARTICLE I. 

Buch associations were not corporations for any purpose, but only that they 
were not so "toithin the spirit and meaning" of the constitution. See particu- 
larly 1841, People v. Assessors of Watertown, 1 Hill (N. Y.) 616, 618; 1845, 
De Bow V. People, 1 Denio (N. Y.'; 9, 14; 1845, Gifford v. Livingston, 2 Denio 
(N. Y.) 380, 382; 1850, Gillet v. Moody, 3 N. Y. 485. The decisions, generally, 
after Warner v. Beers, treated these institutions for most purposes as corpo- 
rations. The cases are: 1840, Parmly v. Tenth Ward Bank, 3 Edw. Ch. 395; 
1840, Delafield v. Kinney, 24 Wend. 345; 1841, People v. Assessors of Water- 
town, 1 Hill 616; Bank of Watertown v. Assessors of Watertown, 25 Wend. 
•686; 1842, Willoughby V. Comstock, 3 Hill 389; 1842, People v. Supervisors 
of Niagara, 4 Hill 20; 1843, Leavitt v. Tylee, 1 Sandf. Ch. 207; 1844, Super- 
visors of Niagara v. People, 7 Hill 504; 1844,Boisegerard v. New York Bank- 
ing Co., 2 Sandf. Ch. 23; 1844, Matter of Bank of Dansville, 6 Hill 370; 1845, 
Gifford v. Livingston, 2 Denio 380 (Court for Correction of Errors, overrul- 
ing 1845, De Bow v. People, 1 Denio 9 (Supreme Court); 1843, Leavitt v. 
Yates, 4 Edw. Ch. 134; 1846, Sagory v. Dubois, 3 Sandf. Ch. 466, 485; 1848, 
Leavitt v. Blatchford, 5 Barb. 9; 1850, Cuyler v. Sanford, 8 Barb. 225; 1850, 
Gillet V. Moody, 3 N. Y. (Comst.) 479; 1851, Palmer v. Lawrence, 5 N. Y. 
(1 Seld.) 389; 1852, Talmage v. Pell, 7 N. Y. (3 Seld.) 328; Tracy v. Talmage, 
18 Barb. 456; 1855, Gillet v. Philhps, 13 N. Y. (3 Kern.) 114; 1858, Leavitt 
V. Blatchford, 17 N. Y. 521; 1859, Codd v. Rathbone, 19 N. Y. 37. 

3. The Michigfan Discussion: Sec. 2, art. 12, of the constitution of Michi- 
gan, 1835, provided, "The legislature shall pass no act of incorporation, unless 
with the assent of at least two-thirds of each house." In 1837 (Sess. L. 1837, 
p. 76), an "Act to organize and regulate banking associations" was passed. 
The constitutionality of this act came before the United States circuit court 
for Michigan for adjudication in 1840, in the case of Falconer v. Campbell, 2 
McLean C. C. (7th Circuit), 195; Federal Cases, 4620; 10 Myers' Fed. Dec, 
18, infra p. 287 ; the question as to whether the act had received the required 
majority was argued, but it was held not properly raised by the demurrer. 
The court held the law constitutional ; that the associations were corporations, 
and that an indefinite number might be created, or provided for, by one gen- 
eral act. In 1844, in the case of Green, receiver of bank of Niles v. Graves, 
1 Douglass (Mich.) 351, the same points were argued before the supreme 
court of Michigan, and the law was held unconstitutional, because it attempted 
to create corporations, and an indefinite number of them at one time ; this, it 
was held, could not be done, because the constitution meant to require a two- 
thirds vote in the creation of each and every corporation. This holding has 
been followed since, in regard to the banking act of 1837, but not extended to 
other general corporation laws. See 2 Doug. (Mich.) 160, 195; 1 Mich. 119, 
120, 121, 482, 512; 2 Mich. 287; 5 Mich. 259; 13 Mich. 151 ; 16 Mich. 258. and 
45 Mich. 610. Also 1849, Nesmith v. Sheldon, 48 U. S. (7 How.) 812. 

4. Later holding's: Many of the same points have been discussed in.theNew 
York courts as to the nature of their joint-stock associations, as were in the 
bank cases. People v. Coleman, 133 N. Y, 279, supra, p. 16, is the best 
case. Others are: 1867, Waterbury v. Merchants' Union Express Co., 50 
Barb. (N. Y.) 157; 1869, Fargo v. McVicker, 65 Barb. 437; 1876, Westcott v. 
Fargo, 61 N. Y. 642; 1886, Van Aernam v. Bleistein, etc., 102 N. Y. 355, 16 
American and Eng. Corp. Cas. 103; 1889, People, ex rel. Piatt, v. Wemple, 
117 N. Y. 136, 29 American and Eng. Corp. Cas. 610; 1892, McCabe v. Good- 
fellow, 133 N. Y. 89, 37 American and Eng. Corp. Cas. 73. 

5. Note as to the fourth test above sriven: This is qualified in many of the 
states by the rule that the decisions of the courts of the state creating the insti- 
tution in question, as to whether it is a corporation or not, will be deemed 
controlling. See 1871, Taft v. Ward, 106 Mass. 518; 1880, Railroad Co. v. Pear- 
son, 128 Mass. 445; 1883, Gleason v. McKay, 134 Mass. 419, mfm, p. 167: 1895 
Gregg v. Sandford, 12 C. C. A. 626, 66 Fed. Rep. 161, 48 Am. and ICng Corp 
Cas. 292. In Liverpool Insurance Co. v. Massachusetts, 10 Wall. (U S ) 666 
the supreme court appUed the rule given as the fourth test above, and held an 



§ 6 THE CORPORATION AS A PERSON. 33 

English insurance company to be a corporation, notwithstanding the act of 
parliament under which it was created expressly provided it should not be 
so considered. This holding, however, was not necessary to the decision of 
the case. But in 1889, Chapman v. Barney, 129 U. S. 677, the sajne court 
held it would follow the decisions or the statutes of the states in which the 
institution was organized as to its nature. For further upon this point, see 
note to Article V, infra, p. 175; 1900, Great Southern F. Hotel Co. v. Jones, 

177U^,_iia^ 



0^' 



ARTICLE II. THE CORPORATION AS A PERSON. 

Sec. 6. For most purposes a corporation is considered as a per- 
son having, as such, rights, duties and liabilities. 

"For by incorporation it acquires y«5 personce, and becomes per- 
sona politica, and is capable of all civil rights habendi et agendiy 

Per Attorney -General, Quo Warranto, v. London, 3-8 as given in 
Comyn's Digest, Corporation, under Franchises (F) F. 1. Also, 
8 Howell's State Trials, p. 1039, on 1156. 

(i) And particularly , having rights: («) Under the com- 
mon law. 

TRUSTEES OF the UNIVERSITY op NORTH CAROLINA v. FOY 
AND BISHOP.» 

1805. In the Court of Conference of North Carolina, i 
Murphy (N. C.) Reports 58-92, 3 American Dec. 672. 

Locke, J., delivered the opinion of the court. The legislature of 
North Carolina, in the year 1789, granted to the trustees of the uni- 
versity "all the property that has heretofore or shall hereafter escheat 
to the state." And by another act, passed in the year 1794, they 
also granted, "the confiscated property then unsold." By an act 
passed in the year 1800, they declared, "that from and after the pass- 
ing of this act, all acts and clauses of acts, which have heretofore 
granted power to the trustees of the University, to seize and possess 
any escheated or confiscated property, real or personal, shall be and 
the same is hereby repealed and made void. 

^'■And be it further enacted. That all escheated or confiscated prop- 
erty which the said trustees, their agents or attorneys, have not legally 
sold by virtue of the said laws, shall from hence revert to the state, 
and henceforth be considered as the property of the same, as though 
such laws had never been passed." 

' Statement of facts (except as given in opinion), arguments and dissent- 
ing opinion of Hall, J., omitted. Also parts of the opinion of the coart by 
Locke, J. 

3 — WiL. Cases. 



34 TRUSTEES V. FOY & BISHOP. § 6 

The trustees of the university, in pursuance of the powers vested 
in them by the act of 1789, have brought this suit to recover the pos- 
session of a tract of land escheated to the state before the passing of 
the repealing act in the year 1800. The defendants have pleaded 
this repealing act in bar, by which they allege the power of the trus- 
tees to support this action is entirely destroyed. It is therefore now 
to be considered how far the trustees have title under the act of 1789, 
and in the next place, how far they are divested of that title by the 
repealing act of 1800. 

[After holding the act of 1789 passed the title to the trustees, and some re- 
marks as to the general constitutional provisions, proceeds:] 

Some light will be thrown upon this subject by examining the na- 
ture of corporations, how property can be taken from them, and how 
they can be dissolved. Corporations are formed for the advancement 
of religion, learning, commerce or other beneficial purposes. They 
are either aggregate or sole, and created by grant or by law. 

[Rights.] — When they are once erected, they acquire many rights, 
powers, capacities and ^ova^ incapacities^ i Black. 475, as (i) to 
have perpetual succession ; and therefore all aggregate corporations 
have necessarily the power of electing members in the room of those 
who die, to sue and be sued and to do all other acts as natural per- 
sons ; (2) to purchase lands and to hold them for the benefit of 
themselves and successors; (4) to have a common seal; (5) to 
make by-laws for the better government of the corporation. These 
corporations can not commit crimes, although their members may in 
their individual capacity. The duties of those bodies consist in act- 
ing up to the design for which they were instituted. Let us next in- 
quire how their corporate property can be taken from them and how 
they may be dissolved. A member may be disfranchised or lose his 
place by his own improper conduct, or he may resign. A corpora- 
tion may be dissolved by act of parliament, which is boundless in its 
operation ; by the natural death of all its members, in case of an ag- 
gregate corporation ; by surrender of its franchises into the hands of 
the king, which is a kind of suicide ; by forfeitui'e of its charter 
through negligence or abuse of its franchises, in which case the law 
judges the body politic to have broken the condition on which it was 
incorporated, and therefore the incorporation to be void ; and the reg- 
ular course is to bring an information in the nature of a quo warranto^ 
to inquire by what authority the members now exercise their corpo- 
rate power, having forfeited it by such and such proceedings, i 
Black. 485; 3 Black. 263. None of these prerequisites have been 
done in the present case. 

We are then led to inquire into the soundness of an argument 
greatly relied on by the defendant's counsel, that those who create 
can destroy. The legislature have not pretended to dissolve the cor- 
poration, but to deprive them of a part of the funds that were deemed 
to be vested in them, and to transfer those funds to the state. In 
England the king's consent to the creation of any corporation is ab- 
solutely necessary, either given expressly by charter or by act of par- 



§ 6 THE CORPORATION AS A PERSON. 35 

liament, where his assent is a necessary ingredient or implied by 
prescription, i Black. 472, 473. The king may grant to a subject 
the power of erecting a corporation ; and yet it is the king that erects, 
the subject is but the instrument, i Black. 474. Where there is an 
endowment of lands, the law distinguishes and makes two species of 
foundation ; the first, foundatio incipiens., or the corporation, in 
which sense the king is the founder of all colleges and hospitals ; the 
other, fundatio -perjiciens^ or the dotation of it, in which sense the 
first gift of the revenues is the foundation, and who gives them is the 
founder, i Black. 481. The constitution directed the general as- 
sembly to establish this institution and endow it; then it would seem, 
from the principle upon which all this doctrine is predicated, that the 
constitution and not the legislature had erected this corporation, the 
legislature being only the agent or instrument whose acts are valid 
and binding when they do not contravene any of the provisions of the 
constitution. * * * 

But one great and important reason which influences us in deciding 
this question is the loth section of the bill of rights, which declares 
"that no freeman ought to be taken, imprisoned or disseized of his 
freehold, liberties, or privileges, or outlawed, or exiled, or in any 
manner destroyed or deprived of his life, liberty or property, but by 
the law of the land." It has been yielded on the part of the defend- 
ants that if the legislature had vested an individual with the property 
in question, this section of the bill of rights would restrain them from 
depriving him of such right ; but it is denied that this section has any 
operation on corporations whose members are mere naked trustees, 
and have no interest in the donation, and especially on a corporation 
erected for a public purpose. It is also insisted that the term, "Law 
of the Land," does not impose any restrictions on the legislature, 
who are capable of making the law of the land, and was only in- 
tended to prevent abuses in the other branches of government. That 
this clause was intended to secure to corporations as well as to individ- 
uals the rights therein enumerated, seems clear from the word "/i3- 
erties,^^ which peculiarly signifies those privileges and rights which 
corporations have by virtue of the instruments which incorporate them, 
and is certainly used in this clause in contradistinction to the word 
"liberty," which refers to the personal liberty of the citizen. We 
therefore infer that by this clause the legislature are as much restrained 
from affecting the property of corporations, as they are that of a private 
individual, unless the expression, "Law of the Land," should re- 
ceive the construction contended for on the part of the defendant. It is 
evident the framers of the constitution intended the provision as a re- 
straint upon some branch of the government, either the executive, 
legislative or judicial. To suppose it applicable to the executive 
would be absurd on account of the limited powers conferred on that 
officer; and from the subjects enumerated in that clause no danger 
could be apprehended from the executive department, that being en- 
trusted with the exercise of no powers by which the principles thereby 
intended to be secured could be affected. To apply it to the judi- 



36 COUNTY OF SAN MATEO V. SOUTHERN PACIFIC R. CO. § 7 

ciary would, if possible, be still more idle, if the legislature can make 
the '■'-Law of the Land.'^ For the judiciary are only to expound and 
enforce the law and have no discretionary powers enabling them to 
judge of the propriety or impropriety of laws. They are bound, 
whether agreeable to their ideas of justice or not, to carry into effect 
the acts of the legislature as far as they are binding or do not contra- 
vene the constitution. If then this clause is applicable to the legisla- 
ture alone, and was intended as a restraint on their acts (and to pre- 
sume otherwise is to render this article a dead letter), let us next in- 
quire, what will be the operation which this clause will or ought 
to have on the present question ? It seems to us to warrant a 
belief that members of a corporation, as well as individuals, shall not 
be so deprived of their liberties or property, unless by a trial by jury 
in a court of justice, according to the known and established rules of 
decision, derived from the common law, and such acts of the legisla- 
ture as are consistent with the constitution — and although the trustees 
are a corporation established for public purposes, yet their property is 
as completely beyond the control of the legislature as the property of 
individuals or that of any other corporation. Indeed, it seems diffi- 
cult to conceive of a corporation established for merely private pur- 
poses. In every institution of that kind, the ground of the establish- 
ment is some public good or purpose intended to be promoted ; but in 
many, the members thereof have a private interest, coupled with the 
public object. In this case the trustees have no private interest be- 
ybnd the general good ; yet we conceive that circumstance w^ill not 
make the property of the trustees subject to the arbitrary will of the 
legislature. The property vested in the trustees must remain for the 
uses intended for the university, until the judiciary of the country, in 
the usual and common form, pronounce them guilty of such acts, as- 
will, in law, amount to a forfeiture of their rights or a dissolution of 
their body. The demurrer must therefore be allowed, and the plea 
in bar overruled. 

[Note. It should be remembered this case was decided before the case of 
Trustees of Dartmouth College v. Woodward, 4 Wheat. (U.S.) 518, infra, p. 708. ] 
Note. The rights of corporations is the subject of chapter 12, infra, p. 914. 



Sec. 7. Same, {b) Under the United States constitution. 

THE RAILROAD TAX CASES. 

COUNTY OF SAN MATEO v. SOUTHERN PACIFIC R. C0.» 

1882. In United States Circuit Court, District of California. 
13 Federal Reporter 722-782, with note 782-789. 

[Action to recover taxes and penalty of the Southern Pacific Rail- 
road Company, a corporation formed under the laws of California. 

^ Case taken to supreme court of the United States ; settled and disposed of, 
116 U. S. 138. See, also, Santa Clara County v. Southern. Pacific R. Co., 118. 
U. S. 394, on 396. Statement of facts condensed. Only so much of the opin- 
ions as bears directly on the rights of corporations under the 14th amendment 
of the United States constitution is given. 



§ 7 THE CORPORATION AS A PERSON. 37 

By the California constitution all property, with certain exceptions, is 
to be taxed according to its value ; but in ascertaining the value of 
property owned by individuals the amount unpaid of any mortgage 
upon it is to be deducted from the assessed value, and the tax levied 
on the balance, as against the owner. "The franchise, roadway, road- 
bed, rails and rolling stock of all railroads operated in more than one 
county," are to be assessed at their actual value and apportioned to 
the various municipal subdivisions in proportion to mileage, without 
any deductions for any mortgages on the property. Also, the statutes 
provide for notice and hearing by the parties affected before the as- 
sessment is complete, in all cases except railroads operated in more 
than one county. 

The railroal company contended : (i) That the assessment, because 
no deductions for mortgages were allowed, as in other cases, had the 
effect of denying it the equal protection of the laws guaranteed by the 
14th amendment of the United States constitution. (2) Also, that 
the fact that no notice was provided for, deprived it of its property 
without due process of law, contrary to the same amendment. 

The county contended: (i) That the state's authority to tax is un- 
liinited except by the United States constitution. (2) That the United 
States constitution did not forbid the classification of property for tax- 
ation. (3) That the 14th amendment did not apply. (4) That cor- 
porations were not persons within the meaning of the amendment. 
(5) That the statute requiring a statement of property by the railroad 
company was sufficient notice; and (6), that the provisions relative 
to taxation of railroads are to be treated as conditions upon the con- 
tinued existence of the corporations.] 

Field, J. * * * The fourteenth amendment of the constitu- 
tion, in declaring that no state shall deny to any person within its 
jurisdiction the equal protection of the laws, imposes a limitation upon 
the exercise of all the powers of the state which can touch the indi- 
vidual or his property, including among them that of taxation. What 
ever the state may do, it can not deprive any one within its jurisdic- 
tion of the equal protection of the laws. And by equal pi'otection of 
the laws is meant equal security under them to every one on similar 
terms — in his life, his liberty, his property, and in the pursuit of 
happiness. It not only implies the right of each to resort, on the same 
terms with others, to the courts of the country for the security of his 
person and property, the prevention and redress of wrongs and the 
enforcement of contracts, but also his exemption from any greater 
burdens or charges than such as are equally imposed upon all others 
under like circumstances. 

Unequal exactions in every form, or under any pretense, are abso- 
lutely forbidden; and, of course, unequal taxation, for it is in that 
form that oppressive burdens are usually laid. It is not possible to 
conceive equal protection under any system of laws where arbitrary 
and unequal taxation is permissible ; where different persons may be 
taxed on their property of the same kind, similarly situated, at differ- 
ent rates ; where, for instance, one may be taxed at i per cent, on the 
value of his property, another at 2 or 5 per cent., or where one may be 
thus taxed according to his color, because he is white, or black, or 



38 COUNTY OF SAN MATEO V. SOUTHERN PACIFIC R. CO. § / 

brown, or yellow, or according to any other rule than that of a fixed 
rate proportionate to the value of his property. * * * 

If we may now look at the scheme of taxation prescribed by the 
constitution of California for the property of railroad companies, we 
shall perceive a flagrant departure from the rule of equality and uni- 
formity so essential to equality in the distribution of the burdens of 
government. Whenever an individual holds property incumbered 
with a mortgage he is assessed at its value, after deducting from it 
the amount of the mortgage. If a railroad company holds property 
subject to a mortgage, it is assessed at its full value, without any 
deduction for the mortgage ; that is, as though the property were un- 
incumbered. The inequality and discriminating character of the pro- 
cedure will be apparent by an illustration given by counsel. Suppose 
a private person owns a farm which is valued at $100,000, and is in- 
cumbered with a mortgage amounting to $80,000 ; he is, in that case, 
assessed at $20,000; if the rate of taxation be 2 per cent., he would 
pay $400 taxes. If a railroad corporation owns an adjoining tract 
worth $100,000, which is also incumbered by a mortgage for $80,000, 
it would be assessed for $100,000, and be required to pay $2,000 
taxes, or five times as much as the private person. There is here a 
discrimination too palpable and gross to be questioned, and such is 
the nature of the discrimination made against the Southern Pacific 
Railroad Company in the taxation of its property. Nothing can be 
clearer than that the rule of equality and uniformity is thus entirely 
disregarded. * * * 

Is the defendant, being a corporation, a person within the meaning 
of the fourteenth amendment, so as to be entitled, with respect to its 
property, to the equal protection of the laws."* The learned counsel 
of the plaintiff and the attorney-general of the state take the negative 
of this question, and assert with much earnestness that the amendment 
applies, and was intended to apply, only to the newly-made citizens 
of the African race, and should be limited to their protection. * * * 

In the Dartmouth College case it was urged that the charter of the 
college was not a contract contemplated by the constitution, because 
no valuable consideration passed to the king as an equivalent for the 
grant, and that contracts merely voluntary were not within the prohi- 
bition. But Chief Justice Marshall, after showing that the charter was 
a contract upon a valuable consideration, said: 

"It is more than possible that the preservation of rights of this de- 
scription was not particularly in view of the framers of the constitu- 
tion when the clause under consideration was introduced into that in- 
strument. It is pi'obable that interferences of more frequent recur- 
rence, to which the temptation was stronger and of which the mischief 
was more extensive, constituted the great motive for imposing this re- 
striction on the state legislatures. But although a particular and a 
rare case may not, in itself, be of sufficient magnitude to induce a rule, 
yet it must be governed by the rule when established, unless some 
plain and strong reason for excluding it can be given." And again, 
"the case being within the words of the rule must be within its opera- 
tion likewise, unless there be something in the literal construction so 
obviously absurd or mischievous, or repugnant to the general spirit of 



§ 7 THE CORPORATION AS A PERSON. 39 

the instrument, as to justify those who expound the constitution in 
making it an exception." • 4 Wheat. 644. 

Following that authority, we can not adopt the narrow view for 
which counsel contend, and limit the application of the prohibition 
of the fourteenth amendment to legislation touching members of the 
enfranchised race. It has a much broader operation. It does not, 
indeed, place any limit upon the subjects, in reference to which the 
states may legislate. It does not interfere with their police power. 
Upon every matter upon which previously to its adoption they could 
act, they may still act. They can legislate now, as they always could, 
to promote the health, good order and peace of the community; to 
develop their resources, increase their industries and advance their 
prosperity ; but it does require that in all such legislation hostile and 
partial discrimination against any class or person shall be avoided ; 
that the state shall impose no greater burdens upon anyone than upon 
others of the community under like circumstances, nor deprive any- 
one of rights which others similarly situated are allowed to enjoy. It 
forbids the state to lay its hand more heavily upon one than upon an- 
other, under like conditions. It stands in the constitution as a per- 
petual shield against all unequal and partial legislation by the states, 
and the injustice which follows from it, whether directed against the 
most humble or the most powerful ; against the despised laborer from 
China, or the envied master of millions. * * * 

Private corporations are, it is true, artificial persons, but, with the 
exception of a sole corporation, with which we are not concerned, 
they consist of aggregations of individuals united for some legitimate 
business. In this state they are formed under the general laws ; and 
the civil code provides that they "may be formed for any purpose for 
which individuals may lawfully associate themselves." Any five or 
more persons may by voluntary association form themselves into a cor- 
poration. And, as a matter of fact, nearly all enterprises in this state 
requiring for their execution an expenditure of large capital are un- 
dertaken by corporations. They engage in commerce ; they build 
and sail ships ; they cover our navigable streams with steamers ; they 
construct houses; they bring the products of earth and sea to market; 
they light our streets and buildings ; they open and work mines ; they 
carry water into our cities ; they build railroads, and cross mountains 
and deserts with them ; they erect churches, colleges, lyceuras and 
theaters ; they set up manufactories, and keep the spindle and shuttle 
in motion ; they establish banks for savings ; they insure against acci- 
dents on land and sea ; they give policies on life ; they make money 
exchanges with all parts of the world ; they publish newspapers and 
books, and send news by lightning across the continent and under the 
ocean. Indeed, there is nothing which is lawful to be done to feed 
and clothe our people, to beautify and adorn their dwellings, to re- 
lieve the sick, to help the needy and to enrich and ennoble humanity, 
which is not to a great extent done through the instrumentalities of 
corporations. There are over 500 corporations in this state ; there 



40 COUNTY OF SAN MATEO V. SOUTHERN PACIFIC R. CO. § / 

are 30,000 in the United States, and the aggregate vakie of their prop- 
erty is several thousand millions. ' 

It would be a most singular result if a constitutional provision, in- 
tended for the protection of every person against partial and discrimi- 
nating legislation by the states, should cease to exert such protection 
the moment the person becomes a member of a corporation. We 
can not accept such a conclusion. On the contrary, w^e think that it 
is vv^ell established by numerous adjudications of the supreme court of 
the United States and of the several states, that whenever a -provision 
of the constitution, or of a law , guarantees to persons the enjoyment of 
property, or affords to them means for its protection, or prohibits 
legislation injuriously affecting it, the benefits of the provision ex- 
tend to corporations, and that the courts will always look beyond the 
natne of the artificial being to the individuals whom it represents. 

The case of the Society for the Propagation of the Gospel in For- 
eign Parts V. Town of New Haven, 8 Wheat. 464, furnishes an apt 
illustration of this doctrine. The sixth article of the treaty of peace 
with Great Britain of 1783, provided that there should be "no future 
confiscations made, nor any prosecutions commenced, against any per- 
son or persons for or by reason of the part which he or they may have 
taken in the present war, and that no person shall on that account 
suffer any future loss or damage, either in his person, liberty or prop- 
erty." An English corporation claimed the benefit of this article 
with reference to certain lands in Vermont granted to it before the 
revolution, which the legislature of that state had undertaken to give 
to the town where they were situated. It was contended that the 
treaty only applied to natural persons ; that it did not embrace corpo- 
rations, because they were not persons who could take part in the war, 
or could be considered British subjects ; but the position was held to 
be untenable. The court, speaking through Mr. Justice Washington, 
said that the argument proceeded upon an incorrect view of the sub- 
ject, and referred to the case of United States v. Deveaux, 5 Cranch 
%6, to show that the court, when necessary, will look beyond the 
name of a corporation to reach and protect those whom it represents. 

The constitution, in defining the judicial power of the United 
States, declares that it shall extend to "controversies between citizens 
of different states;" and in the case referred to by Mr. Justice Wash- 
ington, the question arose whether a corporation composed of citizens 
of one state could sue, in the circuit court of the United States, a citi- 
zen of another state, and it was held that it could. In deciding the 
question, the court, speaking through Chief- Justice Marshall, said: 

"However true the fact may be that the tribunals of the state will 
administer justice as impartially as those of the nation to parties of 
every description, it is not less true that the constitution itself either 
entertains apprehension on this subject, or views with such indulgence 
the possible fears and apprehensions of suitors, that it has established 
national tribunals for the decision of controversies between aliens and 

^The number of corporations here stated is much less than the number 
actually existing. There are over 5,000 corporations in California alone. 



§ 7 THE CORPORATION AS A PERSON. . 4I 

citizens, or between citizens of different states. Aliens or citizens of 
different states are not less susceptible of these apprehensions, nor 
can they be supposed to be less the objects of constitutional provision 
because they were allowed to sue by a corporate name. That name, 
indeed, can not be an alien or a citizen, but the persons whom it rep- 
resents may be the one or the other, and the controversy is, in fact 
and in law, between those persons suing in their corporate character, 
by their corporate names, for a corporate right, and the individual 
against whom the suit may be instituted. Substantially and essentially 
the parties in such a case, where the members of the corporation are 
aliens or citizens of a different state from the opposite party, come 
within the spirit and terms of the jurisdiction conferred by the con- 
stitution of the national tribunals. Such has been the universal un- 
derstanding on the subject. Repeatedly has this court decided causes 
between a corporation and an individual without feeling a doubt re- 
specting its jurisdiction." 

The same point was presented in another form in the case of Mar- 
shall V. Baltimore & O. R. Co., 16 How. 326. There the question 
was whether a citizen of one state could sue in the circuit court of the 
United States a corporation of another state, and a similar conclusion 
was reached. After referring to the clause of the constitution extend- 
ing the judicial power of the United States to controversies between 
citizens of different states, the court proceeded to consider the objec- 
tions urged to treating a corporation as a citizen, so far as it might be 
necessary to protect the corporators. 

"A corporation," observed Mr. Justice Grier, speaking for the 
court, "it is said is an artificial person, a mere legal entity, invisible * 
and intangible. This is no doubt metaphysically true in a certain 
sense. The inference, also, that such an artificial entity 'can not be a 
citizen' is a logical conclusion from the premises, Ayhich can not be 
denied. But a citizen who has made a contract and has a contro- 
versy with a corporation may also say, with equal tnith, that he did 
not deal with a mere metaphysical abstraction, but with natural per- 
sons; that his writ has not been served on an imaginary entity, but on 
men and citizens, and that his contract was made with them as the 
legal representatives of numerous unknown associates, or secret and 
dormant partners. 

"The necessities and conveniences of trade and business require 
that such numerous associates and stockholders should act by repre- 
sentation, and have the faculty of contracting, suing and being sued 
in a fictitious or collective name. But these important faculties, con- 
ferred on them by state legislation, for their own convenience, can 
not be wielded to deprive others of acknowledged rights. It is not 
reasonable that those who deal with such persons should be deprived 
of a valuable privilege by a syllogism, or rather sophism, which deals 
subtly with words and names, without regard to the things or persons 
they are used to represent." 

The fifth amendment to the constitution declares that — 

"No person shall be held to answer for a capital or otherwise infa- 



42 COUNTY OF SAN MATEO V. SOUTHERN PACIFIC R. CO. § / 

mous crime, unless on a presentment or indictment of a grand jury, 
except in cases arising in the land or naval forces, or in the militia, 
when in actual sei^vice in time of war or public danger; nor shall any 
person be subject for the same offense to be put twice in jeopardy of 
life or limb ; nor shall be compelled in any criminal case to be a wit- 
ness against himself, nor be deprived of life, liberty or property with- 
out due process of law ; nor shall private property be taken for public 
use without just compensation." 

From the nature of the prohibitions in this amendment it would 
seem, with the exception of the last one, as though they could apply 
only to natural persons. No others can be witnesses ; no others can 
be twice put in jeopardy of life or limb, or be compelled to be wit- 
nesses against themselves ; and, therefore, it might be said with much 
force, that the word "person" there used in connection with the pro- 
hibition against the deprivation of life, liberty and property without 
due process or law, is in like manner limited to a natural person. But 
such has not been the construction of the courts. A similar provision 
is found in nearly all of the state constitutions ; and everywhere, at all 
times and in all courts, it has been held, either by tacit assent or ex- 
press adjudication, to extend, so far as their property is concerned, to 
corporations. And this has been because the property of a corpora- 
tion is in fact the property of the corporators. To deprive the cor- 
poration of its property, or to burden it, is in fact to deprive the 
corporators of their property or to lessen its value. Their interest, 
undivided though it be, and constituting only a right during the con- 
tinuance of the corporation to participate in its dividends, and on its 
dissolution to receive a proportionate share of its assets, has an ap- 
preciable value, and is property in a commercial sense, and whatever 
affects the property of the corporation necessarily affects the com- 
mercial value of their interests. If, for example, to take the illustra- 
tion given by counsel, a corporation created for banking purposes 
acquires land, notes, stocks, bonds and money, no stockholder can 
claim that he owns any particular item of this property, but he owns 
an interest in the whole of it, which the courts will protect against un- 
lawful seizure or appropriation by others, and on the dissolution of 
the company he will receive a proportionate share of its assets. Now, 
if a statute of the state takes the entire property, who suffers loss by 
the legislation.? Whose property is taken.'' Certainly, the corpora- 
tion is deprived of its property; but at the same time, in every just 
sense of the constitutional guaranty, corporators are also deprived of 
their property. 

The prohibition against the deprivation of life and liberty in the 
same clause of the fifth amendment does not apply to corporations, 
because, as stated by counsel, the lives and liberties of the indi- 
vidual corporators are not the life and liberty of the corporation. 

Nor do all the privileges and immunities of citizenship attach to 
corporations. These bodies have never been considered citizens for 
any other purpose than the protection of the property rights of the 
corporators. The status of citizenship, entitling the citizen to certain 



§ 7 THE CORPORATION AS A PERSON. 43 

privileges and immunities in the several states, does not belong to cor- 
porations. The special privileges which citizens acquire by becom- 
ing incorporated in one state can not, therefore, be exercised in an- 
other state without the latter's consent, as was held in Paul v. Vir- 
ginia, 8 Wall. i68, although such consent will generally be presumed 
in the absence of positive prohibition. 

. Decisions of state courts, in harmony with the views we have ex- 
pressed, exist in great numbers. But it is unnecessary to cite them. 
It is sufficient to add that in all text writers, in all codes, and in all 
revised statutes, it is laid down that the term "person" includes, or 
may include, corporations; which amounts to what we have already 
said, that whenever it is necessary for the protection of contract or 
property rights, the courts will look through the ideal entity and name 
of the corporation to the persons who compose it, and protect them, 
though the process be in its name. All the guaranties and safe- 
guards of the constitution for the protection of the prof erty possessed 
by individuals may, therefore, be invoked for the protection of the 
property of corporations. And as no discriminating and partial 
legislation, imposing unequal burdens upon the property of indi' 
viduals, would be valid under the fourteenth amendment, so no leg- 
islation itnposing such unequal burdens upon the property of corpo- 
rations can be maintained. The taxation, therefore, of the property 
of the defendant upon an assessment of its value, without a deduction 
of the mortage thereon, is to that extent invalid. 

[The remainder of the opinion of Justice Field, holding that notice was ab- 
solutely essential, and that the constitutional provisions relating to taxation 
were not conditions as to the continued existence of the corporations, is 
omitted.] 

We are satisfied that the assessment upon which they were levied 
is invalid and void, and judgment must be accordingly entered on the 
demurrer for the defendant, and, by stipulation of parties, the judg- 
ment must be made final. 

Sawyer, C. J., concurring. The facts of this case are fully 
stated by Mr. Justice Field, and need not be repeated here. The 
questions presented are of the gravest character, and of the utmost 
importance to the people of California. While I concur, generally, 
in the conclusions and in the line of argument adopted by my associ- 
ate, I shall also state as briefly as I reasonably can, considering the 
gravity of the questions discussed, my conclusions upon the points in- 
volved. 

I. In my judgment, the word "person" in the clause of the four- 
teenth amendment to the national constitution, "No state shall * * * 
deprive any person of life, liberty or property without due process of 
law, nor deny to any person the equal protection of the law," includes 
a private corporation. It must, at least, through the corporation, in- 
clude the natural persons who compose the corporation, and who are 
the beneficial owners of all the property, the technical and legal title 
to which is in the corporation in trust for the corporators. The fact 
that the corporators are united into an ideal legal entity, called a cor- 



44 THE STATE V. THE N. E. RAILROAD CO. § 8 

poration, does not prevent them from having a right of property in 
the assets of the corporation which is entitled to the protection of this 
clause of the constitution. Nor does the intervention of this artificial 
being between the real beneficial owners and the state, for the simple 
purpose of convenient management of the business, enable the state, 
by acting directly upon the legal entity, to deprive the real parties 
beneficially interested, of the protection of these important provisions. 
In the language of Mr. Pomeroy, one of the counsel, which I adopt: 
"Whatever be the legal nature of a corporation as an artificial, 
metaphysical being, separate and distinct from the individual mem- 
bers, and whatever distinctions the common law makes in carrying out 
the technical legal conception between property of the corporation 
and that of the individual members, still, in applying the fundamental 
guaranties of the constitution, and in thus protecting the rights of 
property, these metaphysical and technical notions must give way to 
the reality. The truth can not be evaded that, for the purpose of 
protecting rights, the property of all business and trading corporations 
is the property of the individual corporators. A state act depriving a 
business corporation of its property without due process of law does, 
in fact, deprive the individual corporators of their property. In this 
sense, and within the scope of these grand safeguards of private rights, 
there is no real distinction between artificial persons, or corporations, 
and natural persons." 

[Remainder of opinion of Sawyer, J., omitted.] 

Note. The rights of corporations is the subject of chapter 12, infra, p. 914. 
See also numbers 10, 18 and 21, in note to Crafford v. Board of Supervis- 
ors, etc., 87 Va. 110, infra, pp. 66-57, § 10. 



Sec. 8. Same. (2) And subject to duties: {a) Of a public nature. 

THE STATE, Ex Rbl. BLAKE Et Al., v. THE N. E. RAILROAD C0.» 

1856. In the Court of Appeals of South Carolina. 9 Rich- 
ardson (S. C.) Law 247-254, 67 American Dec. 551. 

[Rule against the railroad company to show cause why mandamus 
should not issue commanding the removal of obstructions placed in 
New Market and Vardell creeks, alleged to be navigable, and pro- 
vide proper viaducts or use steamboats for crossing water-courses, so 
as not to obstruct navigation, as required by the charter of the com- 
pany.] 

Report by Glover, J. [who, after holding the streams were navi- 
gable, proceeded] : 

The last inquiry suggested by the answer of the respondents is, 

^ Part of report of Glover, J. , and arguments, omitted. 



§ 8 THE CORPORATION AS A PERSON. 45 

whether a writ of mandamus is the proper remedy. The removal 
and abatement of a public nuisance is generally effected by indict- 
ment, which affords, in most cases, an ample and a satisfactory rem- 
edy ; but it does not follow that a mandamus will not be issued where 
an indictment may be sustained. The cases referred to in the argu- 
ment show that the remedy by mandamus has been adopted to compel 
a corporation to do its duty to the public and to individuals.' In its 
form, the writ commands the performance of some act or duty therein 
specified, the execution of which is consonant to right and justice. 
(3 Steph. Com. 681.) Although railways have become important 
for public travel and transportation, yet they are private corporations, 
enjoying large privileges, and should strictly comply with the pro- 
visions of their charters. The public is interested in their successful 
operation, and their usefulness should not be impaired by any unneces- 
sary restraints ; but they must not be permitted to abuse the powers 
granted, and should be held to a strict performance of the duties en- 
joined. If the nuisance be abated by a removal of the track of the 
road or the piles which sustain it, the public would suffer in the tem- 
porary delay in destroying the connection. Whereas, the remedy by 
mandamus does not destroy the road or delay its operations, but com- 
mands the company to fulfill its duty to the public by pursuing the 
directions prescribed by their charter for crossing rivers and water- 
courses. 

The remedy by mandamus has been often used in England, in 
cases not unlike the present. The Eastern Counties Railway Com- 
pany obtained an act of Parliament for making a railway from Lon- 
don to Norwich and Yarmouth, and it appearing doubtful if the com- 
pany intended to extend their road to the points indicated, a manda- 
mus was issued calling upon them to complete the whole line of road 
pursuant to the provisions of the act. (Reg. v. Eastern Counties 
Railway Company, i vol. Railway and Canal Cases.) Lord Den- 
man, C. J., delivering the judgment of the court, says: "This inter- 
ference is occasioned by inferior courts or persons refusing to proceed 
in some course prescribed by law, and not in consequence of any mis- 
apprehension or error in their course, provided they have entered 
upon it. And accordingly, if it had appeared that the company were 
substantially complying with the terms of their undertaking, there would 
have been at once a satisfactory answer to that application." The 
writ, in this case, was issued at the instance of stockholders ; but it 
has also been granted to command a railway company to increase the 
height of a bridge erected by them over a public carriage road, accord- 
ing to the provisions of their act of Parliament. (Tapp. on Man. 
243.) The remedy by mandamus will embarrass the company less in 
the progress, completion or use of their road than an indictment to 
abate and remove the obstructions complained of. The result of an 
indictment would be the punishment of the company by fine, and this 
might not afford to the public the relief which is sought, to which 
they are entitled, and which the railroad company are required by the 
provisions of their charter to afford. It is no objection to this mode 



46 THE STATE V. THE N. E. RAILROAD CO. § 8 

of relief, that the relators have another remedy, especially when that 
remedy is not so convenient, complete and beneficial. (Tapp. on 
Man. 24.) 

"It is, therefore, ordered that a writ of mandamus issue." * * * 

The defendants appealed, and moved this court to set aside the 
order granting the mandamus, on the ground, inter alia. 

3. That if the respondents have committed a nuisance, mandamus 
is not the proper remedy. * * * 

The opinion of the court was delivered by 

Glover, J. The appellants have abandoned all the grounds in 
support of their motion, except the third, which submits that if they 
have committed a nuisance mandamus is not the proper remedy. 

It is not necessary for the decision of this question to trace the writ 
of mandamus from its first institution to the present time, and to in- 
quire how far it has been enlarged as a remedial process to advance 
justice and right. Its earliest application seems to have been sug- 
gested in aid of that clause of Magna Charta, which declares that 
'■'•JVulli negabinius aut differemus justiciani vel rectum^ ^ (10 Mod. 
48). There never has been any disposition to abridge the use of the 
writ of mandamus in cases where it is applicable as a remedy either 
by the action of the courts or by the legislature. 

The general doctrine so earnestly insisted on by the appellant's 
counsel, that where there is a specific legal remedy the writ will not 
be granted, or, if granted, will be quashed, is fully sustained by rea- 
son, and by the authorities to which the court has been referred. But 
this general rule has been restricted to cases where the specific legal 
remedy is equally convenient, complete and beneficial. 

The writ of mandamus has always been regarded as an appropriate 
remedy to enforce the performance of duties by artificial bodies. In 
the case of the King v. The Bishop of Chester (i T. R. 396), Bul- 
ler, J., says: "It is peculiarly the duty of this court to see that the 
powers created by the king's charter are properly exercised." How 
far an indictment is a specific remedy, was considered in the case of 
The King v. The Commissioners of Dean Inclosure, 2 M. & Sel. 80. 
The commissioners had neglected to obey an order of the sessions di- 
recting them to set out a road as a public road, and it was held that 
indictment would not be a specific remedy, that is, such as the case 
demands, for it was a proceeding in pcenam for the past, and not a 
remedy for the future. It is admitted that if indictment be equally 
convenient, beneficial and effectual, and such as the particular case 
demands, the court will not grant the mandamus. King v. Severn 
and Wye Railway Company, 2 Barn. & Al. 646. This is not the or- 
dinary case of an obstruction placed in a highway which maybe abated 
as a nuisance by indictment ; but the obstruction of a highway by a 
railway, and in the free use of both, the public interest is involved. 
It is therefore important that in the application of a remedy, public 
travel and transportation should not be stopped or checked, either on the 
highway or railway. "It ought to be the concern of a court of justice 
to take care that whilst they are granting a remedy to one, they do not at 



§ 9 THE CORPORATION AS A PERSON. 47 

the same time expose others to great inconveniences, and likewise that 
the remedy be such as may prove effectual." (lO Mod. 48.) The 
relators do not require that the railway shall be destroyed, but that 
the corporation shall exercise the powers granted in the manner pre- 
scribed by their charter — not that they shall be punished by fine or 
otherwise, but that they shall do their duty to the public. This is a 
reasonable request, and can not be enforced by indictment without 
exposing the railway company to great inconvenience, and in the end 
it would not prove such a remedy as the case demands. Corporate 
bodies must be compelled in the performance of their duties to dis- 
charge their public obligations. 

This court is of opinion that a writ of mandamus is an appropriate 
remedy to compel the defendants in crossing "rivers or other water- 
courses," to pursue the mode prescribed by their charter. The other 
grounds having been abandoned, the court has not considered the 
questions which they suggest. Since the writ of mandamus was 
granted an act has been passed by the general assembly, and has been 
brought to the notice of the court, which declares, "that the existing 
structure of said railway at the points of intersection of said road with 
the creeks known as New Market and Vardell's creeks, is hereby de- 
clared to be lawful, and the said company is hereby authorized to cross 
said creeks without drawbridges or other pi'ovision for the navigation 
of the same." This enactment necessarily supersedes the writ. It is 
therefore ordered, that the motion be dismissed, and that all further 
proceedings on the writ be restrained. 

O'Neall, Wardlaw, Withers, Whitner and Munroe, JJ., con- 
curred. 

Motion dismissed. 

[See note, p. 66. 

Note. The duties and liabilities of corporations will be the subject of later 
chapters. See infra, chs. 13-17, pp. 914-1766. 



Sec. 9. Same, {b) And of a private nature. 

RIDDLE V. THE PROPRIETORS, Etc., ON MERRIMAC RIVER.' 

1810. In the Supreme Judicial Court of Massachusetts. 7 
Mass. Reports 169, 5 American Dec. 35. 

[Action on the case against the proprietors of a canal who were 
bound by their incorporation to construct their canal deep and wide 
enough for rafts of a specific size to pass through when the river be- 
low was navigable for craft of the same size. The proprietors neg- 
ligently permitted the canal to become out of repair to such an extent 
that the plaintiff in attempting to transport a raft of the proper size, 
after paying the toll exacted, was unable to do so, and after his raft 
grounded he returned home for the purpose of waiting until there 

' Statement of facts condensed. Arguments and parts of the opinion omitted. 



48 RIDDLE V. THE PROPRIETORS. § 9 

should be enough water to move the raft; while he was away a storm 
occurred, which occasioned the loss of a quantity of wood, a part of 
the raft, and the value of which the jury was directed to include in 
the damages.] 

Parsons, C. J. [After a brief recital of the declaration.] The 
cause was tried on the general issue, and a verdict was found for the 
plaintiff agreeably to the judge's direction. 

The defendants have moved for a new trial for the misdirection of 
the judge in a matter of law, and they have also moved in arrest of 
judgment for the insufficiency of the declaration. 

[After holding that none of the objections to the verdict could prevail, the 
judge proceeded] : 

We now come to the motion in arrest of judgment, which has been 
made on two grounds. 

The first is, that it is not the duty of the defendants to keep the 
canal in repair, sufficient for the passage of rafts and boats of the de- 
scription mentioned in the declaration. This ground is endeavored to 
be maintained on the supposition that the powers granted to the cor- 
poration were a privilege, which might be waived or exercised at its 
discretion. But we think this supposition is not correct. When the 
act of incorporation first passed, it was optional with the proprietors 
whether they would or would not take the benefit of it, but after they 
had made their election by executing the powers granted, and claim- 
ing the toll, then the duties imposed by the tenth section, to make the 
canals, etc., attached, from which they can not be discharged, but by 
a seizure of the franchise into the hands of the government, or by a 
repeal of the act with their assent. 

But further to maintain this ground, the defendants have argued 
that, from the plaintiff's own showing, it is not the duty of the corpo- 
ration to keep this canal in repair. By the statutes relating to this 
subject, if the corporation did not open this canal in seven years, for 
the passage of rafts and boats, then their powers as to this canal 
ceased. Now the plaintiff alleges, say the defendants, that when the 
injury complained of happened, which was more than seven years 
from the passing of the statutes, the proprietors had then, and for a 
long time before, neglected to open and dig this canal. 

If we were obliged to adopt the construction of the plaintiff's alle- 
gation, on which the defendants insist, the objection ought to prevail. 
But attending to other parts of the declaration, we find it averred that 
this canal belonged to the proprietors, and that they, unmind- 
ful of their duty, neglected to open and dig the same of a suf- 
ficient depth, and permitted it to remain in a decayed state, and out 
of repair, and the passage to become and remain choked and filled 
up. We are now considering the declaration after a verdict, and the 
fair construction of this allegation is not that they never opened and 
dug the canal sufficiently, but that they neglected to open it by dig- 
ging and removing the collection of matters which choked it and ob- 



§ 9 THE CORPORATION AS A PERSON. 49 

structed the passage. We are, therefore, satisfied that the motion in 
arrest can not prevail on the ground we have been considering. 

The other ground is that no action lies against a corporation for a 
breach of its duty by any person specially injured by the breach, and 
that the only remedy is by information or indictment. This point has 
been argued by the defendant's counsel with much ability, and has 
had all the attention we could give it in the short time the constitution 
of this court has allowed us. 

The argument, when compressed, is that corporations, having only 
a legal and not a natural body, no capiatur lies against them ; that in 
all actions of trespass and trespass on the case, where the general 
issue is not guilty, if judgment be against the defendant, a part of the 
judgment at common law is an entry of a capiatur; that, therefore, 
no such actions lie against a corporation at common law ; and the 
statute, taking away the necessity of the entry of a capiatur, does not 
authorize an action which did not lie before. 

That a process to take the body of a corporation does not lie is 
certainly true, but the defendants must show that in all actions of 
trespass a capiatur against the defendant may, from the nature of the 
action, be entered. In 21 Edw. 4, 7, 12, 27, 67, it is holden that a 
corporation can not be beaten, nor beat, nor commit treason or felony, 
nor be imprisoned for a disseizin with force, nor be outlawed, nor a 
capias in debt be awarded against them. These principles result from 
the nature of an aggregate corporation. 

But the defendants have relied on an opinion of Thorp, J., in 22 
Ass. pi. 67. He there says that trespass does not lie against a corpo- 
ration aggregate by its corporate name, for a capias and exigent do 
not lie against it. That a capias and exigent do not lie against a cor- 
poration is evident ; but that no action of trespass lies is questionable. 
For it is agreed that a corporation may be fined on indictment, and 
the fine levied by distress ; and why may not a corporation be amerced, 
and the amercement collected in the same manner.? This has led us 
to look into the ancient law on this subject and we find Thorp's opin- 
ion overruled as to certain trespassess. In 31 Ass. pi. 19 a corpora- 
tion is holden answerable in assize as a disseizor with force. In 8 
H. 6, I, 14, 6, an aggregate corporation was holden answerable in 
trespass for distraining the plaintiff's cattle until he paid a toll, which 
he was not bound to pay. Several other cases are mentioned in The- 
loal's Dig. lib. 4, c. 13, as trespass against a corporation for disturb- 
ing the plaintiff in the profits of his liberties ; or for disturbing him 
in holding a leet. It is therefore very clear, from the examination of 
the old books, that some actions of trespass might, at common law, 
be maintained against aggregate corporations. And, as in these 
actions no capiatur could be entered, the omission of this entry can 
be no objection to actions of trespass on the case. The foundation of 
the defendants' argument seems to fail them. 

Let us now leave the ancient cases and resort to the maxims of the 
common law, which are founded in good sense and substantial justice. 

4 — WiL. Cases. 



50 RIDDLE V. THE PROPRIETORS. § 9 

It is one of these maxims that a man specially injured by the breach 
of diity in another shall have his remedy by action. If the breach 
of duty be by an individual^ there is no question; and why should a 
corporation^ receiving its corporate powers and obliged by its corpo- 
rate duties ^ith its own consent ^ be an exception^ when it has^ or 
must be supposed to have^ an equivalent for its consent? 

We distinguish between proper aggregate corporations, and the in- 
habitants of any district, who are by statute invested with particular 
powers without their consent. These are in the books sometimes 
called ^«^«52-corporations. Of this description are counties and hun- 
dreds in England, and counties, towns, etc., in this state. Although 
j'?^a5Z-corporations are liable to information or indictment for a neg- 
lect of a public duty imposed on them by law, yet it is settled in the 
case of Russel et al. v. Inhabitants of the County of Devon, ^ that no 
private action can be maintained against them for a breach of their 
corporate duty, unless such action be given by statute, and the sound 
reason is, that having no corporate fund, and no legal means of ob- 
taining one, each corporator is liable to satisfy any judgment rendered 
against the corporation. This burden the common law will not im- 
pose, but in cases where the statute is an authority, to which every man 
must be considered as assenting. But in regular corporations, which 
have, or are supposed to have, a corporate fund, this reason does not 

apply- 

Among the modern cases there is one which seems in its principles 
to apply directly to the case before us. It is the case of The Mayor 
of Lynn, in error, v. Turner.^ Turner sued the corporation of 
Lynn Regis for not repairing and cleansing a certain creek, in which 
the tide ebbed and flowed, as from time immemorial they had been used, 
by which he lost the use of his navigation. The declaration contained 
a nurhber of counts, in one of which the special damage alleged was 
that the plaintiff was obliged to carry his corn round about. At the 
common pleas judgment on nil dicit was rendered on all the counts. 
For the plaintiff in error it was argued that the creek as described was 
an highway, and as in one of the counts no special damage was al- 
leged, the action did not lie. But Lord Mansfield and the court said 
that a creek, in which the tide ebbed and flowed, was not necessarily 
a highway; that the corporation were bound by prescription, and it 
might be the very condition or terms of their charter. And the judg- 
ment was aflSrmed. By this decision it is settled that case will lay 
against a corporation for neglect of a corporate duty by which the 
plaintiff suffers. How far a special damage must be alleged we need 
not now decide. 

For the proprietors, in support of their motion, a reference was 
made to the several statutes creating our turnpike corporations, in 
which an action is given to any person specially injured by a neglect 
in repairing the road. This provision was cumulative, and intro- 
duced ex majori cautela by the framers of the bills ; and is no objection 
to our present construction of the law. 

» 2 D & E. 667. 2 Cowp. 86. 



§ lO THE CORPORATION AS A PERSON. 5 1 

There appears to us, upon the whole, no sufficient ground to stay 
judgment, and, as the exceptions to the verdict can not prevail, the 
plaintiff must have judgment. 

Judgment on the verdict. 

Note. The duties and liabilities of corporations will be the subject of later 
chapters. See infra, chs. 13-17, pp. 914-1766. 



See. 10. Same. This artificial personality is recognized par- 
ticularly, (i) In statutes. The word ''person" includes 
private corporations , unless the legislative intention or the rea- 
son of the law is clearly otherwise. 

ORAFFORD v. SUPERVISORS OF WARWICK COUNTY.^ 

1890. In the Supreme Court of Appeals of Virginia. 87 Vir- 
ginia 110-118, 10 L. R. A. 129. 

[In 1888 the general assembly of Virginia enacted: "That it shall 
be the duty of the judge of the county court upon the application oj 
persons paying one-third of the taxes upon real estate in said county.,''^ 
to order the election officers to hold an election "for the purpose of 
ascertaining the sense of the qualijied voters of said county'' ' concern- 
ing the removal of the court-house, etc. Application was accord- 
ingly made by various parties (including many corporations), who 
paid more than one-third of the taxes on real estate in the county, 
whereupon the court ordered the holding of an election ; this was 
done, and a majority of the qualified electors voted for removal ; and 
in pursuance of such vote the supervisors, as provided by the statute, 
commenced to remove the court-house. The appellants, Crafford 
and others, obtained an injunction from the corporation court, re- 
straining the supervisors from proceeding with the removal ; this in- 
junction was dissolved by the circuit court, and appeal from that court 
was taken to the supreme court of appeals.] 

Fauntleroy, J., delivered the opinion of the court. ♦ ♦ * 
The question raised by the pleadings in this cause is, whether or 
not corporations are included or signified in the term '•'■persons," as 
expressed in the first section of the said act of assembly of March 2, 
1888, under which the sense of the qualified voters of Warwick county 
was ordered to be taken, and was so taken, by the election aforesaid. 
The appellants contend that the word '■'■persons" in the said act does 
not embrace or include corporations, and that the said word '■^per- 
sons'' should be construed to mean ^'■voters paying taxes on real estate 
in the county of Warwick," and that the corporations, owning real 
estate in the said county and paying taxes on the same amounting to 
very nearly two-thirds of the whole taxes on real estate in the county, 
were not competent signers to the written petition or application to 

• Statement of facts condensed. Part of opinion omitted. 



52 CRAFFORD V. SUPERVISORS, § lO 

the judge of the county court, upon which he based the order for the 
election to take or test the sense of the qualified voters of the county 
of Warwick, as to the removal of the site of the court-house of the 
said county, under the provisions of the said act. The language of 
the first section of the act under consideration is plain, explicit, posi- 
tive and unambiguous, and neither calls for nor admits of construc- 
tion. If the legislature had intended that the words (which it did 
use) "upon the application of persons paying one-third of the taxes 
upon real estate in said county" should mean "qualified voters pay- 
ing taxes on real estate in the county of Warwick (which it did not 
use), it would presumably have said so; and few, simple and unam- 
biguous as the words are, contained in the said first section, the 
"officers conducting elections in the county of Warwick, on the 
fourth Thursday in May, 1888, are ordered to open a poll for the pur- 
pose of ascertaining the sense of the qualified voters of the said 
county," etc., in the same sentence in which it is said "that it shall 
be the duty of the judge of the county court, upon the application of 
persons paying one-third of the taxes upon real estate in said county^ 
to order the election to be held," etc. It is thus unmistakably and 
undebatably manifest upon the face of the short and plain first sec- 
tion itself, that in the same sentence the legislature discriftiinated 
the phrase "persons paying one-third of the taxes upon real estate in . 
said county" from the phrase "the sense of the qualified voters of said 
county," making the one the condition precedent to warrant the judge 
to order the election, and the other to define and confine the election, 
when held, to the "qualified voters of said county." 

The legislature, like every other oracle, must be held to intend to 
say, what it has explicitly and imperatively said ; and where, by the 
use of clear and unequivocal language, anything is enacted by the 
legislature, effect must be given to it, and it can not be construed^ 
away. The whole amount of the taxes upon real estate in the county 
of Warwick, for the fiscal years of 1887-1888, was $10,009.76, of 
which $6,451.80 was paid by corporations owning real estate in the 
said county; and the fii'st section of the act devised a mode by which 
these heavy tax-paying corporations could, to a certain extent, and in 
the preliminary action prescribed to the election, protect their large 
interests from the expense and burden of the cost of the election, and 
of the removal of the court-house from its present location to Newport 
News. The design of the statute was to protect the tax-payers and a 
designated class of tax-payers — those who paid taxes upon real estate 
in the county — from the imposition of additional taxation upon their 
real estate. The tax-payer on personality could not petition the county 
judge to order the election. Why, nobody knows or can conjecture; 
but so it was enacted. Corporations paid taxes on real estate in the 
county, like as individuals, and had the same interest to protect and a 
like burden to bear should the expense be incurred and the tax im- 
posed to pay it. Why are they not in equal protection of the law.? 
They belong to the designated class, and they are equally within the 
reason, the justice and the intent of the law. They could not vote^ 



§ lo "person" includes corporations. 53 

but they were, designedly and expressly, given a voice in the question 
as to whether or not the election should be ordered, and thereby have 
an additional burden of taxation imposed upon them. 

An intent to do what is unjust, and to discriminate, unjustly 
and without reason, between different cases of a like kind, is not to 
be ascribed to the legislature. Arthur v. Blight, 2 Cranch 390; 24 
Pickering 370.^ The real estate of both the individual and the corpo- 
ration are alike subject to the taxation which may be imposed. Can 
any reason be given why there should be a discrimination against cor- 
porations owning real estate, and paying nearly two-thirds of all the 
taxes on real estate in the county, under this statute, to determine the 
question of whether additional taxation should be made necessary? 
Would not this be an unjust and unreasonable discrimination between 
classes of tax-payers in similar cases? Wherever the governing 
principle is taxation, the term persons in a statute has been held to 
include corporations ; and, under the assessment and tax laws, corpo- 
rations are assessed and taxed, although the word persons is used 
therein, and corporation is not mentioned. 

In the case of Beaston v. Farmers' Bank of Delaware, 12 Peters 
134-5, ^^ supreme court of the United States said: "Corporations 
are to be deemed and considered as '■persons,^ when the circumstances 
in which they are placed are identical with those of natural persons 
expressly included in such statutes." 

In Stribbling v. The Bank of the Valley, 5 Rand., on p. 180, Judge 
Cabell said: "The term 'person,' used in the law, is unquestionably 
sufficiently comprehensive to embrace corporations ; and it must be 
held to embrace them unless there is something in the law showing 
the legislative intention to restrict its application." 

In United States Bank v. Merchants' Bank, i Robinson 589, Judge 
Allen said, "For civil purposes, corporations are, in law, deemed 
persons." United States v. Amedy, 11 Wheaton 393, and quoting, 
with approval, Beaston v. Farmers' Bank of Delaware, 12 Peters 
134, and Stribbling v. Valley Bank, 5 Rand. 132, goes on to say the 
"only doubt has been whether the word (person) would embrace 
(corporations) within penal statutes," etc. 

In Baltimore & Ohio R. Co. v. Gallahue's Adm'r, 12 Graft. 663, 
"When the word persons is used in a statute, corporations, as well as 
natural persons, are included for civil purposes." 2 Inst. 697, 703, 
736. 

In the Code of 1873, ch. 16, § 17, p. loi, it is provided that the 
word persons, in a statute, "may extend to and be applied to bodies 
politic and corporate as well as to individuals, unless it would be in- 
consistent with the manifest intention of the legislature," and the 
same provision is in the Code of 1887. The word persons does cer- 
tainly include corporations unless the intention of the legislature is 
manifest that corporations were intended to be excluded from its op- 
eration. Corporations are not, in terms, excluded from its operation. 
The omission of the word corporations does not exclude them, for 

^ Commissioners v. Kimball. 



54 CRAFFORD V. SUPERVISORS. § lO 

this act uses a word "persons," which may include them, and which 
must include them, unless it was the manifest intention of the legisla- 
ture to exclude them from the operation of the act. Nor is there any- 
thing in the nature of the act to exclude corporations from its opera- 
tion. Miller's Ex. v. The Commonwealth, 27 Graft. 115. See, 
also, Lehigh Bridge Co. v. Lehigh Coal and Navigation Co., 4 
Rawle 9; Field v. New York Central R. Co., 29 Barb. 176; Wright 
V. Tame, 28 Barb. 80; Johnson v. Mcintosh, 31 Barb. 267; Wallace 
V. Mayor of New York, 2 Hilton 440 ; La Forge v. Exchange Fire Ins. 
Co., 22 N. Y. 334; The People v. Utica Ins. Co., 8 Am. Dec. 251 ; 
Pembina Manf'g Co. v. Pennsylvania, 125 U. S. Rep. 181; Provi- 
dence Bank v. Billings, 4 Peters 504. 

To hold, as is the contention of the appellants, that the legislature 
intended, by the use of the word "persons" paying one-third of the 
taxes, etc., to restrict it to voters paying one-third of the taxes, etc., 
would not only exclude corporations, but non-residents, and even res- 
idents who had not resided long enough to become voters — women, 
minors, aliens — none of whom could be a voter, yet many of whom, 
if not, indeed, all, are tax-payers upon real estate in Warwick 
county. 

If we give the other construction contended for by the appellants, 
that "persons" meant natural persons, and that natural persons sign- 
ing the application should represent one-third of the taxes paid upon 
real estate, it would have put it in the power of two persons paying 
one-forty-fifth part of the whole real estate tax in the county to have 
denied the wishes and defeated the will of all the other real estate 
owners, and the whole population of the county united in the applica- 
tion to the judge to order the election. It is not to be imputed to the 
legislature that they had any such an absurdity of intention, and it is 
not consistent with the object and context of the act. 

If corporations paying taxes upon real estate in Warwick county are 
not within the intent of the word "persons" in the act, then they must 
be excluded ; and, if excluded, the individuals paying taxes upon real 
estate in the county, who signed the petition or application to the 
judge to order the election, did pay more than one-third of the taxes 
paid by individuals on real estate in the county of Warwick. The 
amount of taxes upon real estate in the county of Warwick paid by 
corporations was $6,451.80, of which sum the Chesapeake and Ohio 
Railroad Company paid $3,130.47. It is objected by the appel- 
lants that Williams C. Wickham, who signed the application to the 
judge to order the election, did so as receiver, and without authority. 
It is not necessary to decide this question, inasmuch as those corpora- 
tions v/ho did sign, other than the C. & O. R. R. Co., by W. C. 
Wickham, receiver, paid $2,271.33, which, added to the taxes on 
real estate paid by individuals who signed the application, $1,395.46, 
amounts to $3,666.79, which is more than one-third of the whole 
amount of the taxes on real estate paid in Warwick county by $333-53. 

We are of opinion that the election was properly ordered by the 
judge of the county court of Warwick, and that the election was duly 



§ 10 "person" includes corporations. 55 

and properly conducted, and that the circuit court rightfully dissolved 
the injunction which had been granted in the cause, September 4, 
1888, by the judge of the corporation court of the city of Manchester, 
and the decree appealed from is without error, and the same is af- 
firmed. 

Decree affirmed. 

Note. The rule given in this case seems to be the one that now has the 
weight of authority; but in Betts v. Menard, 1 Breese's Appeal (111.), p. 395 
(1831), the rule was announced that "persons" would not include "corporations" 
unless it was absolutely necessary to carry out the objects of incorporation. This 
rule seems to have been followed in State v. Fertilizer Co., 24 Ohio St. 611 
(1874), in interpreting a criminal statute relating to a nuisance. The later 
Ohio cases seem to have laid down a rule in accordance with the one given 
above in the Crafford case. See Springfield v. Walker, 42 Ohio St. 543, and 
Cincinnati Gas Light and Coke Co. v. Avondale, 43 Ohio St. 257. 

Some of the earlier cases followed a rule similar to that in Betts v. Menard, 
supra. See Blair v. Worley, 1 Scam. (111.) 178 (1835); School Directors v. 
Cariisle Bank, 8 Watts (Pa.) 291. And in Fox's Appeal, 112 Pa. St. 337, 14 
Am. & Eng. Corp. Cas. 356 (1886), the rule is stated that unless something in 
the context indicates that "person" shall include "corporation," it will not 
be so held. In the leading English case. Pharmaceutical Society v. London, 
etc., Assn., 5 App. Cas. 857, it was allowed that in an act of Parliament, re- 
lating to persons, corporations were presumptively included, but that the pre- 
sumption was not strong, and the context of the act should determine. 

St,3, particularly, Elliott Corp., § 8; Morawetz Corporations, § 1091; Grant 
on Corp., p. 4, note 5 ; 8 Am. & Eng. Ency. of Law, 626 (franchise) ; 18 Am. 
& Eng. Ency. of Law 405 (person); Cook Stock and Stockholders, § 700; 
note 19 Lawyer's Reports Annotated, p. 222, where the cases are classified. 

ILLUSTRATIONS. 

1. In general, — See Ricker v. Am. L., etc., Co., 140 Mass. 346; TurnbuU 
v. Prentiss Lumber Co., 55 Mich. 387 ; Billings v. State, 107 Ind. 54; Stewart 
V. Waterloo Turn Verein, 71 Iowa 226, 60 Am. Rep. 786 ; Springfield v. Walker, 
42 Ohio St. 543; Forrest v. Henry, 33 Minn. 434; Fagan v. Boyle Ice Mach. 
Co., 65 Tex. 331; Chippeway Vallev, etc., R. R. Co. v. Chicago, etc., R. Co., 
75 Wis. 224; Union Steamship Co. v. Milburne H. Co., 9 App. Cas. 365; Fox's 
App., 112 Pa. St. 337, 14 A. & E. Corp. Cas. 356. 

2. Attachment laws relating to persons, apply also to private corporations. — 
See Planters' Bank v. Andrews, 8 Port. (Ala.) 404; Libby v. Hodgdon, 9 N. 
H. 394; Knox v. Protection Ins. Co., 9 Conn. 430, 25 Am. Dec. 33; Bray v. 
Wallingford, 20 Conn. 416; Baltimore, etc., R. Co. v. Gallahue, 12 Gratt. 
(Va.) 655, 65 Am. Dec. 254; Mineral Point R. Co. v. Keep, 22 111. 9, 74 Am. 
D. 124; Bushel v. Com. Ins. Co., 15 Serg. & R. (Pa.) 173; South Carolina R. 
Co. V. McDonald, 5 Ga. 531 ; Union Bank v. United States Bank, 4 Humph. 
(Tenn.) 369; Martin v. Branch Bank, 14 La. 415. But compare McQueen v. 
Middleton Mfg. Co., 16 Johns. (N. Y.) 5; and Mayor of Baltimore v. Root, 8 
Md. 95. In DoUman v. Moore, 70 Miss. 267, 19 L. R. A. 222, it was held that 
a board of school trustees was not a person within the meaning of attachment 
laws. 

3. Appeals.— Statutes allowing appeals by persons apply to corporations : 
People V. May, 27 Barb. (N. Y.) 238. 

4. Banking-. — Statutes prohibiting persons from banking apply to corpora- 
tions: People V. Utica Ins. Co., 15 Johns. (N. Y.) 368, 8 Am. Dec. 243. 

5. Citizens.— (a) Corporations are notcitizens within the meaning of section 
2, article 4 of theU. S. constitution, saying, "The citizens of each state shall be 
entitled to all the privileges and immunities of citizens in the several states." 
See Paul v. Virginia, 8 Wall. (U. S.) 168; Western Union Tel. Co. v. Mayer, 
28 O. S. 521 ; Norfolk & West. R. Co. v. Pennsylvania, 136 U. S. 114, 10 Sup. 
Ct. Rep. 958; Pembina Con. Silver Min., etc., Co. v. Pennsylvania, 125 U. S. 



56 ILLUSTRATIONS, § lO 

181; Railroad v. Bamhill, 91 Tenn. 395, 30 Am, St. 889; Horn S. M. Co. v. 
New York, 143 U. S, 305; People v. Wemple, 131 N. Y. 64; note to State v. 
Goodwill in 25 Am. St. Rep. 873; Daggs v. Orient, etc., Co., 136 Mo. 382, 58 
Am. St. 638; Commonwealth v. New York, etc., R. Co., 129 Pa. St. 463, 15 
Am. St. R. 724. Compare St. Louis Iron M, T. R. Co. v. Paul, 64 Ark, 83, 
62 Am. St. R. 154, and note p. 167. 

(6) But corporations are citizens of the state creating them within the mean- 
ing of section 2, article 3, of the constitution, that "the judicial power shall 
extend to all cases between citizens of different states." See 1809, Hope Ins. 
Co. V. Boardman, 5 Cranch (9 U. S.) 57; 1809, Bank of U. S. v. Deveaux, 5 
Cranch(9U. S.)61; 1840, Commercial, etc.. Bank v. Slocomb, 14 Pet. (U. S.) 
60, all of which held that the court "would look bej'ond the mere legal be- 
ing, and consider the citizenship of the individuals of whom the company is 
composed." In 1844, Louisville, etc., R. Co. v. Letson, 2 How. (43 U. S.) 
497, 558, the court, after an elaborate review, overruled the former cases and 
announced the rule above given. The later cases are: 1853, Marshall v. B. 
& O. R. Co., 16 How. (57 U. S.) 314; 1861, Ohio & Miss. R. Co. v. Wheeler, 1 
Black. (66 TJ. S.) 286; 1865, County of Allegheny v, Cleveland & P. R. Co., 51 
Pa. St. 228, 88 Am. D. 579; 1870, Railroad Co. v. Harris, 12 Wall. 65; 1871, 
Chicago & M. V. R. Co. v. Whitton, 13 Wall. (80 U. S.) 270; 1876, Muller v. 
Dows, 94 U. S. 444 ; 1881, C. & W. I. R. Co. v. L., S. & M. S. R. Co., 5 Fed. R. 
19; 1882, Memphis, etc., R. Co. v. Alabama, 107 U. S. 581; 1885, Pennsyl- 
vania Co. V. St. L., A. & T. R. Co., 118 U. S. 290; 1890, Nashua & L. R. Co. 
V. Boston & L. R. Co., 136 U. S. 356; 1890, Paul v. B. & O. R. Co., 44 Fed. 
Rep. 513; 1892, Shaw v. Quincy Mining Co., 145 U. S. 444; 1892, Southern 
Pac. R. Co. V. Denton, 146 U. S. 202; 1893, In re Hohorst, 150 U. S. 653; 
1895, Missouri Pac. R. Co. v. Meek, 69 Fed. Rep. 753, 30 L. R. A. 250; 1896, 
St. Louis & San Francisco R. Co. v. James, 161 U, S. 545, infra, p. 1099; 1896, 
Louisville Trust Co. v. L., N. A. & C. R. Co., 75 Fed. Rep. 433. 

(c) As to fourteenth amendment, see infra, No. 10. 

6. Contracts. — Statutes relating to contracts of persons apply to corpora- 
tions also: Mott v. Hicks, 1 Cow. (N. Y.) 513; State v. Nashville Univ., 
4 Humph. (Tenn.) 157; Commercial Bank v. Nolan, 8 Miss. (7 How.) 608; 
Cincinnati Gas Co. v. Avondale, 43 Ohio St. 257. 

7. Death by wrong"fuI act. — Statutes making persons liable for such, in- 
clude corporations: Chase v. Steamboat Co., 10 R. I. 79. 

8. Eminent domain statutes apply to corporations, though persons only are 
named: Lehigh Bridge Co. v. Lehigh Coal Co., 4 Rawle (Pa.) 9, 26 Am. 
Dec. Ill, 

9. Evidence. — A corporation is a "living person" within the meaning of a 
statute giving a party the right to testify when the adverse party is a living 
person: La Farge v. Exchange F. Ins. Co., 22 N. Y. 352. 

10. Fourteenth amendment.— The provisions of section 1, saying "No 
state shall deprive any person of life, liberty or property without due process 
of law ; nor deny to any person within its jurisdiction the equal protection of 
the laws," protects the rights of the corporations, when in the state, the same 
as persons : Pembina Mining Co. v. Pennsylvania, 125 U. S. 181 ; Santa Clara 
Co. V. South Pacific R. Co., 118 U. S. 394, 24 Am. & Eng. Corp. Cas. 523 ; Min- 
neapolis, etc., R. Co. V. Beckwith, 129 U. S. 26 ; Charlotte, etc., R. Co. v. Gill, 
142 U. S. 386; County of San Mateo v. South Pacific R. Co., 13 Fed. Rep. 722, 
supra, p. 36; Covington, etc., R. Co. v. Sanford, 164 U. S. 578; Smvthe v. 
Ames, 169 U. S. 522, 171 U. S. 361. But contrary to the holding in University 
v. Foy, supra, p. 34, the 14th chapter of Magna Charta, that "no freeman shall 
be amerced," etc., was held not to apply to corporations aggregate, but only 
to corporations sole. 2 Inst. 169, 170, 8 Rep. 39. 

11. Foreig"n corporations are not persons within a constitutional provision 
"that no person shall be deprived of the natural rights to life, liberty and the 
enjoyment of the gains of his own industry." Daggs v. Orient Ins Co 136 
Mo. 382, 58 Am. St. 638. See, also, Blake v. McClung, 172 U. S. 239, infra 
p. 2036; Hammond, etc., Co. v. Best, 91 Maine 431, 42 L. R. A. 528. 

12. Incorporation. - Statutes providing that a certain numberof persons may 



§ lo "person" includes corporations. 57 

incorporate do not include corporations as such persons. Factors, etc., Ins. 
Co. V. New Harbor P. Co., 37 La. Ann. 233 ; Humphrey v. Mooney, 5 Colo. 282 ; 
Central R. Co. v. Pa. R. Co., 31 N. J. Eq. 475. See infra, pp. 553, 889. 

13. Jurisdiction of courts. — For this purpose a corporation is a person, in- 
habitant or citizen of the state creating it. See cases cited in this note No. 5, 
(6) above. See, also. Brown v. Mayor, etc., 66 N. Y. 385; Chicago, etc., R. 
V. Bank of North America, 82 111. 493; Eslava v. Ames, etc., 47 Ala. 384. 

14. Limitation of actions. — Statutes of limitation apply to corporations in 
the same way as to persons. People v. Trinity Church, 22 N. Y. 44; North 
Missouri R. Co. v. Akers, 4 Kan. 453. 

15. Misdemeanors. — Statutes making persons liable for, include corpora- 
tions. White V. State, 69 Ind. 273. 

16. Penalties. — Statutes providing penalties for certain acts of persons, per- 
haps do not include corporations unless the context very clearly shows they 
are meant to be so included. This is on account of the strict construction of such 
statutes. See Coats v.. People, 22 N. Y. 245; United States v. Kan. P. R., 4 C. 
L. J. 174; Androscoggin Water Power Co. v. Bethel S. M. Co., 64 Maine 441; 
Benson V. Monson, etc., 9 Mete. (Mass.) 562; Ohio v. Cincinnati Fertilizer Co., 
24 Ohio St. 611 ; Guardians of St. Leonard v. Franklin, 3 C. P. Div. 377. 

17. Promissory notes.— The Statute of Anne providing for the negotiability 
of notes made payable to the order of any person applies to notes by or to 
corporations or to the order of corporations. Indiana v. Woram, 6 Hill. 
(N. Y.) 33; Mott v. Hicks, 1 Cow. (N. Y.) 513. 

18. Property, protection of. — See below. Trespass, No. 23, and No. 10, 
above. United States v. Amedy, 11 Wheat. (U. S.) 392. 

19. Practice and procedure.— People v. May, 27 Barb. (N. Y.) 238. See 
al^o Appeals, No. 3, above, and Jurisdiction, No. 13, above. 

20. Riegfistry laws. — Statutes providing for the registration of vessels or 
other things by persons include corporations. Regina v. Arnaud, 9 Q. B. 806, 
infra, p. 58 ; Durant v. Kennett L. R., 5 C. P. 262. 

21. Real estate. — Statutes relating to real estate of persons apply to that of 
corporations. Lehigh Bridge Co. v. Lehigh Coal Co., 4 Rawle (Pa.) 9; Blair 
V. Worley, 1 Scam. (111.) 178; Cortes v. Kent Water Works Co., 7 B. & C. 
(K. B. Eng.)314. 

22. Taxation. — Statutes relating to the taxation of the property of persons, 
inhabitants, residents, etc., include that of corporations also. See Rex v. Gard- 
ner, Cowp. 79, but see 3 Q. B. 233; Royal Exchange Assurance Co. v. 
Vaughan, 1 Burr. 155; Reg. v. Birmingham, etc., Ry. Co., 3 Q. B. 233; Peo- 
ple V. Utica Ins. Co., 15 Johns. (N. Y.) 358, 382, 8 Am. Dec. 243; Mayor of 
Mobile V. Rowland, 26 Ala. 498; Trenton Bank v. Haverstick, 6 Halst. (N, 
J.) 171; City of St. Louis v. Rogers, 7 Mo. 19; Bushel v. Can. Ins. Co., 15 S. 
& R. (Pa.) 173; Chicago, etc., R. Co. v. Bank of N. A., 82 111. 493; People v. 
McLean, 80 N. Y. 254; Otis Co. v. Inhabitants of Ware, 8 Gray (Mass.) 509; 
Baldwin Inhabitants v. Trustees, 37 Maine 369; Louisville, etc., R. Co. v. 
Com., 1 Bush (Ky.) 250; Compare Fox's Appeal, 112 Pa. St. 337, 14 A. & E. 
C. C. 356; Cherokee Ins. Co. v. Justices, 28 Ga. 121; Hartford Ins. Co. v. 
Hartford, 3 Conn. 15. 

23. Trespasses, protection from.— Statutes protecting the property of per- 
sons apply to corporations also. White v. State, 69 Ind. 273 ; State v. Nashville 
Univ., 4 Humph. (Tenn.) 157; Bartee v. Houston, etc., R. Co., 36 Texas 648. 

24. Usury. — Statutes forbidding usury by persons apply to corporations 
also. Thornton v. Bank of Wash.^ 3 Pet. (U. S.) 36; Grand Gulf Bank v. 
Archer, 8 S. & M. (Miss.) 151. 

25. Voting-.- The English Public Health Act (11 and 12 Vict., sec. 20) 
authorized corporations aggregate to vote by proxy under their common seal 
at the election of local boards of health. Grant on Corp., p. *4, n. s. Of 
course, where corporations may be owners of the stock of other corporations, 
statutes relating to voting by persons would apply to the corporations as well. 



58 THE QUEEN, ETC., V. ARNAUD. § II 

Sec. 11. Same. (2) As to the ownership of its property. 

THE QUEEN ON THE PROSECUTION, Etc., v. ARNAUD Et Al.» 

1846. In the Court of Queen's Bench. 25 Law Journal Re- 
ports (^New Series^ Vol. i6^, for the year 1847, part II, 
Cases at Common Law, pp. 50-55. 

The judgment of the court was delivered by — 

Lord Denman, C. J. The object of the present mandamus is to 
compel the custom-house officers to register a vessel, the property of 
the Pacific Steam Navigation Company. The company is a corpo- 
ration by charter of her present Majesty, for the purpose of providing 
vessels, and employing them in the Pacific ocean. It is admitted by 
the defendants that the company, as a British corporation, might be 
owners of British-built vessels, and prima facie would be, as such 
corporation, entitled to register them, under the provisions of the 
8 and 9 Vict., c. 89, applicable to the registry of vessels by corpora- 
tions.^ 

But it is said that some of the members of the corporation are not 
British subjects, but foreigners ; and, consequently, that the vessel 
does not wholly belong to her Majesty's subjects, as required by the 
5th section of the act, and is within the prohibition contained in the 
1 3th section of the act, against foreigners being entitled to be owners, 
in whole or in part, directly or indirectly, of any vessel requiring to 
be registered. Now, it appears to us that the British corporation is, 
as such, the sole owner of the ship, and a British subject within the 
meaning of the 5th section, as far as such a term can be applicable to 
a corporation, notwithstanding some foreigners may individually have 
shares in the company, and that such individual members of the cor- 
poration are not entitled, in whole or in part, directly or indirectly, to 
be owners of the vessel. The individual members of the corpora- 
tion^ no doubt ^ are interested in one sense in the property of the cor- 
poration^ as they may derive individual benefit from its increase., or 
loss from its destruction; but in no legal sense are the individual 

^ Statement of facts, except as given in the opinion and notes, and argu- 
ments omitted. 
* This act provided, section 5, * * * "That no vessel shall be registered 

* * * except such as are wholly of the build of the United Kingdom, 

* * * and which shall wholly belong or continue to belong to her 
Majesty's subjects * * *" Sec. 12. * * * "That no person who has 
taken the oath of allegiance to any foreign state, * * * ^or any person 
usually residing in any country not under the dominion of her Majesty 

* * * shall be entitled to be the owner in whole or in part, directly or in- 
directly, of any ship or vessel required to be registered, etc." Sec. 13. * * * 
"That if it shall become necessary to register any vessel belonging to any 
corporate body in the United Kingdom, the following declaration shall be 
taken and • subscribed by the secretary, etc.. 'I, A. B., Secretary,' etc., 'do 
hereby declare,' etc., * * * <tliat the' same (ship) doth wholly and truly 
belong to [name of company or corpunitiun].' " 



§ I I THE CORPORATION AS A PERSON. 59 

members the owners. If all the individuals of the corporation were 
duly qualified British subjects, they could not register the vessel in 
their individual names as owners ; but must register it as belonging 
wholly to the corporation as owner. The terms of the 23d section, 
with respect to the condition of the bond to be given upon obtaining 
the registry, as to foreigners purchasing or becoming entitled to any 
part or share of or interest in any ship or vessel, would appear to be 
applicable to a case of purchase or transfer of property in the vessel 
itself, as it provides that the certificate shall be delivered up, "within 
seven days after such purchase or transfer of property in such ship," 
and does not, as it seems to us, bear materially on the present ques- 
tion. It was contended that the effect might be to defeat the object 
and policy of the navigation laws in this respect, inasmuch as the in- 
dividual members of the British corporation might, either originally 
or by transfer, be all foreigners. Such does not appear to be contem- 
plated or provided for by the act in question. If it be casus omissus^ 
and evil consequences arise, they may be remedied by the interfer- 
ence of the legislature, or, possibly (though we do not wish to be 
understood as giving any opinion upon this point), by repealing the 
letters patent, as improvidently giving powers operating to defeat the 
law and public policy, and, in future patents, by providing against 
the objection. But, as the case stands, it seems to us that the British 
corporation is, to all intents, the legal owner of the vessel, and entitled 
to the registry, and that we can not notice any disqualification of an 
individual member, which might disable him, if owner, from register- 
ing the vessel in his own name. There will, therefore, be judgment 
for the prosecutors, and a peremptory mandamus. 
Judgment for the Crown. 

Note. See also, Russell v. Temple, 3 Dane's Abr. (Mass.) 108; Bundy v. 
Iron Co., 38 Ohio St. 300; Button v. Hoffman, 61 Wis. 20, 60 Am. R. 131; 
Baldwin v. Canfield, 26 Minn. 43; Tomlinson v. Bricklavers' Union, 87 Ind. 
308; Wheelock v. Moulton, 15 Vt. 519; Atchison, etc., R". Co. v. Cochran, 43 
Kan. 225, 23 Pac. 151; Central T. Co. v. Kneeland, 138 U. S. 414; Louisville 
Bank Co. v. Eisenman, 94 Ky. 83, 42 Am. St. 335; Humphreys v. McKissock, 
140 U.S. 304 ; Parker v. Hotel Co., 96 Tenn. 252, 34 S. W. 209 ; Pott v. Schmucker, 
84 Md. 535, 57 Am. St. 415 ; Gallagher v. Germania Brewing Co , 53 Minn. 214 ; 
Barrick v. Gifford, 47 O. S. 180, 21 Am. St. R. 798; Engiand v. Dearborn, 141 
Mass. 590; Rough v. Breitung, 117 Mich. 48, 75 N. W. Rep. 147; Warren v. 
Davenport Fire Ins. Co., 31 Iowa 464, holding a stockholder has an insurable 
interest in the corporation. 



6o FOSTER & SONS V. THE COMMISSIONERS. § 12 

Sec. 12. Same. (3) As to contracts between it and its members. 

FOSTER & SONS, LIMITED, v. THE COMMISSIONERS OF INLAND 

REVENUE.i 

1893. In the Court of Appeals. Law Reports (1894), i Q. B. 

Div. 516-532. 

[Case stated by the commissioners of inland revenue under the 
stamp act of 1891, 54 and 55 Vict., ch. 39, § 13. In 1891, eight 
persons named Foster, then partners, extensively engaged in mercan- 
tile, manufacturing, mining and banking business, agreed among 
themselves to form a corporation under the English Limited Compa- 
nies Act, to carry on their business ; they took the proper steps to form, 
and did form, a corporation knov^^n as John Foster & Sons, Limited. 
These same eight persons, acting as parties of the first eight parts, by 
indenture duly executed, conveyed all the partnership property to the 
corporation, John Foster & Sons, Limited (composed of the same 
eight persons) acting as the party of the ninth part. The considera- 
tion for the conveyance was nothing except the preferred, ordinary 
and debenture stock in the corporation, which was apportioned to 
each one of the first eight parties in proportion to his former interest 
in the partnership property. Under the English Stamp Act (requiring 
all conveyances to be duly stamped) the commissioners of Inland 
Revenue levied a duty of jQ^oo los. This act provided, Sec. 70. 
"The term 'conveyance on sale' includes every instrument * * * 
whereby any property upon the sale thereof is legally or equitably 
transfered to or vested in the purchaser or any other person on his be- 
half." * * * Sec. 71. "Where the consideration * * * 
consists of stock * * * such conveyance is to be charged with 
ad valorem duty in respect of the value of such stock * * *." 
Sec. 78 imposed a duty on conveyances "not otherwise charged." 

The question in this case was, was there any real conveyance upon 
which a stamp duty was chargeable } Wright, J. , of the divisional court, 
held there was, but Cave, J., of the same court, held the partners had 
not sold their property, but there had been a mere rearrangement of 
ownership among the same persons, the parties, property, shares and 
consideration had remained the same. Wright withdrew his judg- 
ment and allowed the commissioners to appeal.] 

LiNDLEY, L. J. : I confess that, with great deference to Cave, 
J., I can not see the diflSculty in this case. 

The material sections of the act of 1870 must first be considered. 

[The lord justice then read sections 70 and 71 of the stamp act of 1870, and 
continued.] 

The importance of section 71, to my mind, is this: It shows 
that there may be a conveyance on sale, although the considera- 
tion for it is not cash or money, but may include or consist of stock 
or marketable securities. The definition of "stock" and "marketable 

* Statement of facts condensed. Opinions of Cave and Wright, JJ., of the 
divisional court, and arguments omitted. 



§ 12 THE CORPORATION AS A PERSON. 6l 

securities" will be found in section 2. Then section 78 imposes a stamp 
duty on conveyances not otherwise charged, and the schedule shows what 
the stamps are that are imposed upon conveyances that are charged. 
First, we have "conveyance or transfer, whether on sale or other- 
wise," of certain stocks and dividends. The present case does not 
come within that head. Then we have "conveyance or transfer on 
sale, of any property" * * * "where the amount or value of 
the consideration for the sale does not exceed 5/." That fits in with 
sections 70 and 7 1 . Then we cometo: "Conveyance or transfer by way 
of security of any property or of any security ;" and then we have 
"conveyance or transfer of any kind not hereinbefore described." 
We must accordingly consider under which of these heads the par- 
ticular deed in this case comes. It certainly does not come under the 
first, nor under "conveyance or transfer by way of security of any 
property," and the alternative is between "conveyance or transfer on 
sale" and "conveyance or transfer of any kind not hereinbefore de- 
scribed." 

Now, the document in this case is an indenture made between eight 
gentlemen of the first eight parts and "John Foster & Sons, Limited 
(hereinafter called 'the company'), of the ninth part." Pausing there 
for a moment, although the persons of the first eight parts may be 
and were members, and the only members, of John Foster & Co., 
Limited, John Foster & Co., Limited, is not those eight individuals; 
John Foster & Co., Limited, is a corporation. We have accordingly 
tTJOo parties, one party consisting of several individuals, and the 
other party consisting of a corporation. Whether they are or are 
not the metnbers, or the only members of the corporation, is wholly 
immaterial. The corporation is a totally different person from them 
in any capacity you choose to assign to them, except a corporate one. 

[The lord justice then stated the recitals in the operative part of the con- 
veyances, and continued] : 

Then the parties of the first eight parts put their seals to the instru- 
ment, and the company puts it seal to it. Now, what is that instru- 
ment ? It is certainly a conveyance of property — that is obvious. In 
order to amount to a conveyance of property there must be a person 
conveying and a person taking, and you have them both here. The 
persons conveying are the persons named in the first eight parts, 
and the persons taking are the corporation named in the ninth part. 

Now, what is the consideration } The consideration for the trans- 
fer for this property is, I agree, not money, but it is stocks and secu- 
rities, which for this purpose are to be regarded as equivalent to 
money by reason of section 71 of the act to which I have already alluded. 
Then what have we got? To sum it up shortly, it is a conveyance of 
property from one person to another for money, or what is, according 
to the provisions of the statute, equivalent to money. What is that 
except a conveyance on sale } What else can you call it ? It is cer- 
tainly not a gift ; it is not an exchange ; it is not a partition • it is not 
a mortgage. I do not know what it is unless it is a conveyance on« 



62 FOSTER & SONS V. THE COMMISSIONERS. § 12 

sale. I do not know what is necessary to constitute a sale, except a 
transfer of property from one person to another for money, or for the 
purposes of the stamp act, for stock or marketable securities. 

But then it is argued that it is only a redistribution of property. I 
do not consider it a redistribution at all. It is an entire transfer of 
property from one set of people to another person altogether, and 
whether there are, as there may well be hereafter, additional persons 
taking shares in this company, is perfectly immaterial. 

Again it is argued on behalf of the appellants that this instrument 
is in substance nothing more than a conveyance to a trustee to carry 
on the business in trust for the grantor. Just try that. Suppos- 
ing there is a conveyance by half a dozen people, transferring their 
property to a trustee on trust to carry on the business for them, can 
you in any sense of the word, legal or business-like, or otherwise, call 
that trustee a buyer.? There is no buying; there is no sale to him at 
all, nor is there any money, or stock, or securities, or anything else 
parted with by him. Then it was urged that these shares can derive 
no value unless the company gets this property transferred to them. 
That is possible enough. That is to say, in other words, that the 
shares in the company would be valueless unless the company had 
assets. Of course they would be, but that does not affect the ques- 
tion whether there is a sale or a conveyance or not. I think myself 
that Cave, J., has attached too little importance to the fact that you 
have here a distinct seller and a distinct buyer, and that in point of 
law it is immaterial that in the present case the buyer is a corpora- 
tion, which consists of the eight persons who formed and who are the 
partners. The appeal must be allowed. 

Kay, L. J. I am of the same opinion. With deference to Cave, 
J., it seems to me impossible to hold that this transaction was any- 
thing else than a conveyance on sale. As pointed out on the face of 
the statute, the consideration may be money or money's worth. 
Money's worth certainly is sufficiently expressed by a number of shares 
and debentures of an existing corporation, which, in effect, consti- 
tuted the consideration for the particular transfer in this case. Now, 
that there was a conveyance is beyond all question. The persons who 
are named as vendors in the deed have divested themselves of their 
property in the subject of that conveyance, and all that property is 
vested in an entirely independent and separate body; namely, a cor- 
poration. Suppose that corporation had consisted of altogether dif- 
ferent persons, no one for a moment would doubt that this was a con- 
veyance on sale. Suppose there had been one person in it different, 
there is nothing that I have heard in the argument which induces me 
to suppose that even in that case it could have been doubted that this 
was a conveyance on sale. But the argument, as I understand it, is 
this: that the individual corporators who composed that corporation 
were, in fact, the very identical persons who were conveying this 
property to the corporation, and the corporation had no other property 
except this which it took under its conveyance ; and that, as the only 
value of the shares and debentures was derived from this very property 



§ 12 THE CORPORATION AS A PERSON. 63 

which the individual corporators were conveying to the corporation, 
the conveying partners either got no consideration for that which they 
conveyed other than part of the property actually conveyed, or they 
got no consideration at all. Now, I do not follow that argument in 
the least. I think it is a fallacy from beginning to end. In the first 
place, a corporation is a different thing from the individuals who 
compose it; and, secondly, the shares and debentures of a corpora- 
tion are not the same thing as the property which thai corporation 
owns. 

You may say, in one sense, that the property is a security for the 
value of those shares. The value of those shares in the market, 
which, observe, are immediately transferable, may depend upon the 
solvency of the company, the amount of property it possesses, and its 
chance of carrying on a profitable business. To say that the shares 
and debentures are part of that property seems to me to be a com- 
plete confusion of terms. Suppose the case, which I put during the 
argument of a sale of real estate, and the whole of the purchase- 
money not to be paid at once in cash, but to be secured on mortgage 
on that real estate ; and, if you like, in order to make the analogy 
perfect, suppose the purchaser had no other property than that prop- 
erty, would the transaction be the less a sale for that reason ? Still the 
consideration given would be a certain amount of cash which would 
be left on the security of the estate ; but I have never yet heard that 
because the whole of the purchase-money upon a sale of real estate 
was left on mortgage of the real estate that for that reason the trans- 
action ceased to be, or was prevented from being, a sale. Yet, really, 
that is what the argument in this case comes to. I confess I am not 
able to agree with it. Nothing else was suggested which should pre- 
vent this transaction from being a sale, and it seems to me clearly to 
be, under the words of this statute, "a conveyance on sale" for a con- 
sideration which, if not money, at least is money's worth. I, there- 
fore, with all deference to Cave, J., think that his decision must be 
reversed and the appeal allowed. 

A. L. Smith, L. J. The question in this case is whether the in- 
strument of November 27, 1891, is a conveyance or transfer on sale 
of any of the property mentioned under the second head — "convey- 
ance or transfer" — in the schedule to the stamp act of 1870. 

Now, in order to find out what is, or is not, a conveyance or trans- 
fer on sale of any property in that second head of the schedule, I 
must refer to sections 70 and 71 of the act. And, reading both these sec- 
tions together, it seems to me that the term "conveyance on sale" in- 
cludes every instrument whereby any property, upon the sale thereof, 
is transferred to or vested in the purchaser in consideration of any 
stock or marketable security. That is the definition. 

First of all, then, is this an instrument whereby any property is 
transferred to or vested in the purchaser? I beg to say yes. It is an 
instrument upon the face of which the actual land of the vendors, 
and the trade-marks which are their property, are transferred to a 
limited company. I do not think that this is disputed, and it does not 



64 FOSTER & SONS V. THE COMMISSIONERS. § 12 

appear to me to be disputed so far, in the judgment of my brother 
Cave : but what he says is that this is not an instrument whereby any 
property, upon the sale thereof, is transferred. The real pith of his 
judgment is that the vendors and vendees are the same persons — that 
the agreement as regards the sale was carried out by the members of 
the old fiiTn before any company limited came into existence, and that 
inasmuch as they are the same persons now as then, there is no sale at 
all; and, therefore, there is no instrument whereby any property upon 
the sale thereof is transferred. I must here respectfully differ with 
my brother Cave. It seems to me that the company limited are not 
the same persons as the eight members of the old firm — they are dif- 
ferent altogether. It was admitted by Mr. Finlay in argument, 
though he entirely took away the ground from under my brother 
Cave's feet when he said so, that the cotnpany limited could main- 
tain a suit for specific performance against the old partners. If 
that is so, how can they be the same persons. This really shows that 
they are not the same persons. It is here that I disagree with my 
brother Cave. 

The respondents also contend that there was no consideration. We 
must read the two sections together. Section 70 enacts that: "The 
term 'conveyance on sale' includes every instrument whereby any 
property, upon the sale thereof, is transferred to or vested in the pur- 
chaser." Then section 71 implies that it may be in consideration of any 
stock or marketable security. The land and the trade-marks are 
transferred by this instrument from the eight partners who were the 
old firm to the new company limited. The land and trade-marks 
are transferred by this instrument in consideration of what.'' In con- 
sideration of stock or marketable securities, which undoubtedly are 
not the same things as the land and trade-marks themselves, though 
they may be charges upon the land and trade-marks which are con- 
veyed. It seems to me that it is untrue to say that in this transaction 
there has been no consideration passing from the vendee to the vendor. 
Although charges upon the land and the trade-marks, the considera- 
tion comes within the very terms of section 71 itself — "any stock or 
marketable security." 

For these reasons I prefer the judgment of my brother Wright to 
that of my brother Cave. 

Appeal allowed. 

Note. See also Gordon v. Preston, 1 Watts (Pa.) 385; Polleys v. Insurance 
Co., 14 Maine 141 ; Pope v. Brandon, 2 Stew. (Ala.) 401 ; Lexington Life, F. & 
M. Ins. Co. V. Page, 17 B. Mon. (Ky.) 412; Moore & Handley Hardware Co. 
V. Towers, 87 Ala. 206, 13 Am. St. 23; Davis v. Creamery Co., 48 Neb. 471, 
67 N. W. 436; 1900, Andres v. Morgan, 62 O. S. 236, 78 Am. St. R. 712. 




§ 13 THE CORPORATION AS A PERSON. 65 



Sec. 13. Same. (4) Or to contracts between the members them- 
selves. 

MORRIS SELLERS v. HOWARD GREER.^ 
1898. In the Supreme Court of Illinois. 172 Illinois 549-558. 

Appeal from the appellate court for the first district, heard in that 
court on appeal from the superior court of Cook county, the Hon. 
Theodore Brentano, Judge, presiding. 

This was a bill for specific performance, brought by Howard Greer 
against Morris Sellers, in the superior court of Cook county. The 
cause proceeded to a hearing on the pleadings and evidence, and the 
court entered a decree dismissing the bill. To reverse the decree, 
Greer appealed to the appellate court, where the decree was reversed 
and the cause remanded for the purpose of allowing Greer to recover 
such damages as he may have sustained on account of the failure of 
Sellers to perform the contract. To reverse the judgment of the ap- 
pellate court, Sellers appealed to this court. 

Upon looking into the record it appears that Morris Sellers and 
Howard Greer had been associated together in the business of manu- 
facturing railroad supplies for several years prior to 1891. In June, 
189 1, they formed a corporation under the laws of this state, and 
adopted the name of Morris Sellers & Co., incorporated. The capi- 
tal stock of the corporation was fixed at $100,000, each share being 
of the par value of $100, and 499 shares were subscribed for and 
owned by Morris Sellers and Howard Greer, respectively, each own- 
ing that number of shares from the formation of the corporation to 
the time of filing the bill. The remaining two shares were owned by 
John M. Sellers and Paul E. Greer, who were sons of said principal 
stockholders, each owning one share. No money was paid by any of 
the stockholders for their stock. The 500 shares belonging to Sellers 
and his son were paid for by turning over the plant and their interest 
in certain patents to the corporation ; and the 500 shares issued to the 
Greers were paid for by turning over their interest in certain patents 
controlled by them. All four of the above named parties were stock- 
holders and directors. Morris Sellers acted as president and treas- 
urer and had charge of the office and financial department of the con- 
cern. Howard Greer was secretary and manager or superintendent, 
and had charge of the factory and manufacturing department of the 
business. 

After the organization of the corporation it did a fair business, and 
its management and success seemed to have been satisfactory to the 

*Part of the opinion relating to specific performance of the contract is 
omitted. 

5 — WiL. Cases. 



66 SELLERS V. GREER. § 1 3 

parties interested until the latter part of 1894, when trouble arose be- 
tween the two principal stockholders in regard to the management of 
the business, Greer made an offer to purchase the Sellers interest, 
but the offer was not accepted. Negotiations continued, however, 
between the parties until September 4, 1894, when Morris Sellers 
made a written proposition to buy out Greer. The proposition was 
written and executed by Morris Sellers and by him delivered to Greer. 
It was as follows : 

"Outline of proposition between Howard Greer and Morris Sellers : 
Greer to take all of the Greer patents and all of the special machinery 
attached to punching machines ; all other appliances belonging to the 
making of spikes, he surrendering all of his stock in M. S. & Co., 
and to furnish M. S. & Co. a complete set of templates for splices; 
M. S. & Co. to loan machine No. 4 for six mo. and pay Howard 
Greer $1 ,800 toward a new machine for cutting spikes ; Howard Greer 
to fill all of the present orders so far as the material now on hand will 
complete. This agreement to be put in proper form at as early a date 
as possible, pending the return of the company's attorney to draw up 
the necessary releases. Morris Sellers. 

^^ Tuesday, September 4, 18Q4.'* 

The bill alleged and the evidence tended to prove that the Greer 
mentioned in the proposition was appellee, and the letters "M. S. & 
Co." meant and referred to the corporation known as Morris Sel- 
lers & Co. 

Mr. Justice Craig delivered the opinion of the court. 

The two following grounds are relied upon by counsel for appel- 
lant in the argument to reverse the judgment of the appellate court : 
"We claim, firstly, that the proposition is not a contract binding upon 
appellee or upon appellant ; that it lacks mutuality ; that the subject- 
matter was the property of a corporation, and not of either of the par- 
ties named in the proposition ; that appellee is in nowise bound, and so 
acted as not to legally bind himself in terms to said proposition ; that 
it was made under such circumstances that it was not, and was not 
intended to be, a complete or binding contract or agreement upon 
either appellant or appellee; hence, its specific enforcement was not 
only impossible, but if attempted by way of assessment of dam- 
ages upon appellant, as the appellate court seeks to do, would con- 
travene equitable principles. Secondly, that if all these points are 
negatived, appellee has yet barred himself of all relief in equity by 
his own inequitable conduct." 

It will be observed that appellee did not sign the contract, and 
hence it is contended that the contract is not mutual. It appears, 
however, that the contract was delivered by Morris Sellers, appellant, 
to appellee, on the day it was executed, and appellee accepted the 
contract and agreed to its terms and conditions. The acceptance of 
the contract by appellee assenting to its terms, holding it and acting 
upon it as a valid instrument, may be regarded as equivalent to its 
formal execution on his part, as held by this court in Johnson v. 
Dodge, 17 111. 433, and Vogel v. Pekoe, 157 111. 339. 



^ 13 THE CORPORATION AS A PERSON. 6/ 

But it is said the subject-matter of the contract was the property of 
a corporation, and not of either 6f the parties named therein, and as 
the corporation never executed or ratified the contract it can not be 
enforced in a court of equity. Of the 1,000 shares of capital stock 
of the corporation Greer and Sellers owned equally the entire amount 
except two shares, which were held in the names of the respective 
sons of the two parties. These sons never paid anything for the stock 
placed in their names, and were mere nominal shareholders, and the 
only inference to be drawn from all the evidence is, that the two 
shares were placed in their names in order that the concern might 
have a sufficient number of stockholders to make up a board of di- 
rectors. In the management of the affairs of the concern, whatever 
was done by Greer was assented to by his son, and whatever action 
was taken by Sellers was approved by his son. As between appellant 
and appellee they may be regarded as owners of the property named 
in the contract, and any contract which they may have made in re- 
gard to the property may, as between them, be enforced in a court of 
equity. 

But it is said the proposition was not intended to be a complete and 
binding contract. There is nothing appearing on the face of the con- 
tract, nor is there anything in the evidence introduced on the hearing, 
which will sustain that position. The contract is definite and specific 
in regard to what was to be done by each of the parties. By the con- 
tract Greer was to do three things : First, he was to surrender all of 
his stock in the Morris Sellers & Co. establishment; second, he was 
to furnish a complete set of templates for splices ; third, he was to fill 
all of the present orders, so far as the material then on hand would 
permit. From the terms of the contract there could be no uncertainty 
or doubt in regard to what Greer was required to do in order to com- 
ply with the contract. As to Sellers, he was required by the contract 
to deliver over to Greer all of the Greer patents, and what was meant 
by Greer patents was well understand by both parties. 

It is true that Morris Sellers and Howard Greer owned all of the 
stock of the corporation, except two shares, which belonged to their 
sons. But did this fact confer upon them, or either of them, the 
power to sell the corporate property.'' It is conceded that the patents 
and all the other property named in the contract in question belonged 
to the corporation Morris Sellers & Co. , and the question presented 
is whether Morris Sellers and Howard Greer, two of the stockhold- 
ers, without the consent or authority of the corporation Morris Sellers 
& Co., had the right to divide the corporate property between them- 
selves, or to sell it, as was attempted to be done by the contract in 
question. A corporation is an artificial being created by law. clothed 
with certain powers. It acts through its board of directors and 
officers. Its property is not subject to the control or disposition of 
its members or stockholders. They have no power to sell or encum- 
ber the corporate property. A reference to a few authorities will 
fully sustain what has been said. 

In Cook on Stockholders (3d ed., § 709), it is said: "The 



68 SELLERS V. GREER. § 15 

stockholders can not enter into contracts with third persons. Con- 
tracts between the corporation and third persons must be entered into- 
by the directors and not by the stockholders. The corporation, in 
such matters, is represented by the former and not by the latter. Such 
is one of the main objects of corporate existence. To the directors 
is given the management and formation of corporate contracts. The 
stockholders can not, in meeting assembled, bind the corporation by 
their contracts in its behalf. Although one person owns a majority of 
the stock, or all of it, or all but two shares, he does not, in conse- 
quence thereof, acquire the right to act for the corporation, or as the 
corporation, independently of the directors. One person may own 
all the stock, and yet the existence, relations and business methods of 
the corporation continue. A single stockholder can not make a con- 
tract for and in the name of the corporation which shall have any 
binding force or validity, except by subsequent ratification or adoption 
in the regular manner." 

In Allemong v. Simmons, 124 Ind. 199, it was attempted to hold 
a corporation liable on a contract made by one Crawford, who was a 
director and owner of five-sixths of the stock of the corporation. In 
disposing of the question the court said: "It is true, Crawford was 
one of the directors of the company and held a majority of the stock ; 
but the existence of these facts confers upon him no power to make 
contract for the corporation. It could only be bound by the action of 
its board of directors. The board could have conferred upon Craw- 
ford this power, but there is no evidence that it had done so. Craw- 
ford, as one of the directors, had no more authority or power than 
any other director. The board consisted of five members, and three 
constituted a quorum. Less than three could make no binding con- 
tract for the corporation. * * * The contract which Simmons 
and Aleshire executed with Crawford was the mere personal engage- 
ment of Crawford with the said parties." 

In Humphrey v. McKissock, 140 U. S. 304, the validity of the 
action of all the stockholders of a corporation in transferring its prop- 
erty without corporate action arose, and in disposing of the case the 
court said: "Both the commissioner and the court in confirming 
his report and entering the decree mentioned, seem to have con- 
founded the ownership of stock in a corporation with ownership of 
its property. But nothing is more distinct than the two rights. The 
ownership of one confers no ownership of the other. The property 
of a corporation is not subject to the control of individual members^ 
'whether acting separately or jointly They can neither encumber or 
transfer that property^ nor authorize others to do so. The corpora-^ 
tion — the artificial being created — holds the property^ and alone can 
mortgage or transfer it; and the corporation acts only through its 
officers subject to the conditions prescribed by law. 

In Smith v. Hurd, 12 Mete. 385, the relations of stockholders to 
the rights and property of a banking corporation are stated with his 
usual clearness and precision by Chief Justice Shaw, speaking for 
the supreme court of Massachusetts, and the same doctrine applies ta 



■§ 13 THE CORPORATION AS A PERSON, 69 

the relations of slockholders in all business corporations. Said the 
•chief justice; 'The individual members of a corporation, whether 
they shall all join or each act severally, have no right or power to inter- 
meddle with the property or concerns of the bank, or call any officer, 
agent or servant to account or discharge them from any liability. 
Should all of the stockholders join in a power of attorney to any one, 
he could not take possession of any real or personal estate, any se- 
curity or chose of action^ could not collect any debt, or discharge a 
claim, or release damage arising from any default, simply because 
they are not the legal owners of the property, and datnage done to 
such property is not an injury to them. Their rights and their 
powers are litnited and well defined.^ " 

In this court, in Hopkins v. Roseclai-e Lead Co., 72 111. 373, the 
right of a stockholder of a corporation to transfer certain leases be- 
longing to the corporation arose, and in disposing of the question the 
court" said (p. 379): "It is insisted that La Grave had no power to 
make the sale of the leases, to transfer the control of the suit or to sell 
the twenty acres of land, as they were all owned by the company. He 
was but a stockholder, and as such had no power to make the sale. 
He, although owning the majority of the stock, could not act for the 
company unless specially authorized. He could, no doubt, control 
the action of the company by the election of its officers, but still the 
company could only act through its officers or by expressly delegating 
power to others, whether a stockholder or other persons." See, also, 
England v. Dearborn, 141 Mass. 590; Newton Manf. Co. v. White, 
42 Ga. 148; Russell v. McLellan, 14 Pick. 63. 

From what has been said it is apparent that Morris Sellers, al- 
though he owned one-half of the capital stock of the corporation, had 
no right to sell the corporate property, and any contract he may have 
made would not be obligatory on the corporation. The corporation, 
Morris Sellers & Co., the owner of the letters-patent and other prop- 
erty described in the contract, was not made a party to the bill, and 
no decree could have been obtained against it if it had been made a 
party, for the reason it never executed the contract, nor did it ratify 
the contract after it was made, but, on the other hand, expressly re- 
fused to do so on application of Greer to its board of directors. The 
bill prayed that Sellers might be compelled to convey the letters-pat- 
ent named in the contract to Greer. He had no title, and hence could 
not make a conveyance, and any decree that might have been ren- 
dered would have been nugatory. In a bill for specific performance 
the contract must be of such a character that the court is able to make 
an efficient decree and enforce it when made. 3 Pomeroy's Eq. Jur., 
§ 1405. » * * 

Appellee not being entitled to a decree for a specific performance, 
the next question presented is, did the court err in refusing to retain 
the bill for the purpose of allowing appellee to recover damages for 
the failure of Sellers to perform the contract ? * ♦ ♦ 

In Kennedy V. Hazleton, 128 U. S. 667, it was held that specific 
performance can not be decreed of an agreement to convey property 



70 WILLIAMSON V. SMOOT. § 1 4 

which has no existence or to which the defendant has no title, and if 
the want of title was known to the plaintiff at the time of beginning 
suit, the bill would not be retained for the assessment of damages. 
The same doctrine is declared in Hurlbut v. Kantzler, ii3 111. 482. 
Here, Greer, the appellee, knew when he accepted the contract from 
Sellers that the property named in the contract was owned by Morris 
Sellers & Co., a corporation. He also knew that Sellers had no 
authority to sell the property, and, knowing these facts, he could not 
maintain a bill for specific performance, nor would the bill be retained 
for an assessment of damages for a breach of the contract. 

The judgment of the appellate court will be reversed and the decree 
of the superior court of Cook county will be affirmed. 

Judgment reversed. 



Sec. 14. Same. ( 5 ) Aho as to suits by or against third per- 
sons. 

WILLIAMSON Et Al., Syndics, v. SMOOT Et Al.' 

1819. In the Supreme Court of Louisiana. 7 Martin (La.) 
31-33, or vol. 7 of Louisiana Term Reports. 

Appeal from the court of the first district. 

Matthews, J., delivered the opinion of the court. The plaintiffs 
having caused an attachment to be levied on the steamboat Alabama, 
the St. Stephens Steamboat Company intervened in their corporate 
capacity, and claimed her as their property. The intei-vening party 
are a body politic, created by an act of the legislature of the territory 
of Alabama, the capital stock of which is divided into shares of a cer- 
tain amount, and Smoot, the defendant, owns ten of them, subscribed 
for by him. 

[The questions to be decided are * * * 2. Can the shares or 
stock of any individual stockholder be legally attached ? j * * * 

II. The existence of the claimants being recognized as a body cor- 
porate, and it being admitted that the boat attached belongs to them 
as a part of their common stock, it is clear that Smoot does not pos- 
sess such certain and distinct individual property in it as to make his 
interest attachable. The estate and rights of a corporation belong so 
completely to the body that none of the individuals who cotnpose if 
has any right of ownership in them, nor can dispose of any part of 
them. Civ. Code, 88, art. 11. 

The court is of opinion that the district court erred in disallowing 
the claim of the company. 

It is, therefore, ordered, adjudged and decreed that the judgment 
be annulled, avoided and reversed, and that the attachment of the 

' Part of the opinion relating to the recognition of a foreign corporation by a 
state is omitted. 



§ 15 THE CORPORATION AS A PERSON. 7 1 

plaintiff and appellant be quashed, so far as it relates to the said 
steamboat, the Alabama, and that she be released therefrom. 

Note. 1. Evidence.— Admissions of shareholders are not admissions of 
the corporation. Fairfield County Turnpike Co. v. Thorp, 13 Conn. 173; Pol- 
leys V. Ocean Ins. Co., 2 Shep. (Maine) 14J ; Osgood v. Manhattan Bank, 3 
Cow. (N. Y.) 612 ; Hartford Bank v. Hart, 3 Day (Conn.) 493 ; Mayor of Lon- 
don V. Long, 1 Campb. 22. 

2. Judg"e, by holding stock, is disqualified to try a case in which the 
corporation is a party. Bonham's Case, 8 Rep. 226; Day v. Savadge, Hob. 
85, 87; Washington Ins. Co. v. Price, 1 Hop. Ch. {N. Y.) 1 ; Gregory v. Cleve- 
land, etc., R. Co., 4 Ohio St. 675; Northampton v. Smith, 11 Met. (Mass.) 
390; Newcome v. Light, 58 Texas 141 ; Dimes v. Grand Junction Canal, 3 H. 
L. Cas. 759; State v. Young, 31 Fla. 594, 34 Am. St. 41. But see Stewart v. 
Mech. & F. Bank, 19 Johns. (N. Y.) 501 ; Searsburgh Turnpike Co. v. Cutter, 
6 Vt. 315. 

3. JuroP, who holds stock can not try a case in which the corporation 
is a party. Page v. Contoocook V. R. Co., 1 Fost. (21 N. H.) 438; Peninsular 
R. Co. V. Howard, 20 Mich. 18; Michigan Air Line R. Co. v. Barnes, 40 Mich. 
383; Georgia A. Co. v. Hart, 60 Ga. 550; Butler v. Glens, etc., R. Co., 121 N. 
Y. 112; McLaughlin v. Louisville Elec. L. Co., 100 Ky. 173. 

4. Witness. — At common law a shareholder was disqualified, because of 
interest, to be a witness for the corporation. Porter v. Bank, etc., 19 Vt. 410; 
McAuley v. The York, etc., 6Cal. 80; Mokelumne, etc., Co. v. Woodbury, 14 
Cal. 265. 

5. Sheriff, though a stockholder, is not disqualified to serve process on 
the corporation. Merchants' Bank v. Cook, 4 Pick. (Mass.) 405; Adams v. 
Wiscasset Bank, 1 Greenleaf (Maine) 361, 10 Am. Dec. 88; Barker v. Rem- 
ick, 43 N. H. 235. 



Sec. 15. Same. (6) Or as to suits between it and its members. 

1430. "If mayor and commonalty disseise one of the commonalty 
he shall have assise against them, for they are as several persons, viz., 
body politic and body natural. Per Paston, Br. Corporations, pi. 24, 
cites 8 H. VI, 1, 14," as given in 6 Viner's Abr., Corporations, § 2, 



p. 304. 



WARING v. CATAWBA COMPANY.* 



1797. In the Superior Courts of South Carolina. 2 Bay 
(South Carolina) 109-111. 

Assumpsit for goods sold, and for work and labor, etc. 

Plea in abatement. 

This case came before the court upon a plea in abatement, which 
pleaded that plaintiff was himself a member of the company, and, 
therefore, could not maintain any action against it in his individual 
capacity. ' 

Mr. Trezevant, for the plaintiff, argued that there was a wide dif- 
ference between a copartnership in trade and a corporation. Copart- 
ners, he admitted, must sue and be sued jointly; that they were jointly 
and severally liable, etc. But a corporation (as in the present case) 

* Part of arguments omitted. 



72 NOTES TO ARTICLE II. §15 

must be sued in its corporate name ; that the private property of its 
members were not liable, only the corporate property, so that there 
was a wide difference between a corporation and a copartnership, 
both as to the mode of bringing an action and as to the effect of any 
judgment or decree against them. * * * 

The attorney-general, contra^ said this company ought to be con- 
sidered as an association for gain, or the emolument of its members, 
and therefore in law should only be considered as a kind of copartner- 
ship, and not as a public corporation. * * * 

The court, after hearing the arguments, overruled the plea in abate- 
ment, as containing principles subversive of justice ; but they observed 
that the two cases of Bourdeaux and Drayton against The Santee Canal 
Company had settled this point, as they had both been allowed by this 
court to maintain their actions for their salaries, etc., against the com- 
pany, as well as the cases respecting the other public societies, men- 
tioned in the argument. 

The plaintiff was then allowed to go on and prove his debt to a 
jury. 

Present, Burke, Grimke and Bay; but as Judge Grimke was a 
member of the company, he declined giving an opinion. 

Note. See Culbertson v. Navigation Co., Fed. Cas. 3464 ; Rogers v. Society, 
19 Vt. 187. 



_, NOTES TO ARTICLE II. 

1. Ancient ideas. — The idea of an artificial person seems as old as our race. 
In fact the underlying idea of a person is not that it is an individual human 
being, but rather that part or character which one sustains in the world. The 
word comes from the Latin, meaning "a mask for actors," or "the character 
represented by such mask." See Century Dictionary, Austin's Jurisprudence 
(Campbell's edition), § 438; Holland's Jurisprudence, p. 65 (edition of 1880). 
This being the primary meaning of the word, it was immaterial whether this 
person was composed of a single human being, or many, or not even a human 
being at all, but only a thing or group of things, provided they or it had the 
same status, or was entitled to the same rights or subject to the same duties 
as any single human being was. So, too, the whole hierarchy of gods and 
goddesses that peopled the "heavens and earth" of the ancient world was 
noi\i\ng hnt personifications ot the forces of nature. Morawetz (Private Cor- 
porations, § 1, p. 2), says: "The conception of a number of individuals as a 
corporate or collective entity occurs in the earliest stages of human develop- 
ment, and is essential to many of the most ordinary processes of thought. Thus 
the existence of tribes, village communities, families, clans and nations im- 
plies a conception of these several bodies of individuals as entities having 
corporate rights and attributes." The oldest corporate body or artificial per- 
son seems to have been the family. Hearn, in "The Aryan Household," pp. 
64, 5, 6, thus characterizes the ancient family: "It formed an organized per- 
manent body, distinct from its individual members, owning property, and 
having other rights and duties of its own. * * * jt ^^s a permanent as- 
sociation. It was not intended to pass away and be reformed like the genera- 
tions of men. It was constructed and meant to endure forever. It was, in 
our technical language, a corporation. It had perpetual succession. It in- 
cluded in its members both the living and the dead. These members had 
various degrees of rank ; but the whole number, taken collectively, formed 
one well defined and distinct individuality. Of this corporate entity, the house 
father for the time being was the head, or, as we might say, the managing di- 



THE CORPORATION AS A PERSON. 73 

rector." Mr. Hearn cites the following authorities: Maine's Early History 
of Institutions, p. 78 (the Hindu family); K. O. Miiller's Dorians, vol. 2, 
p. 240 (the Greek family) ; M. Ortolan, History of Roman Law, p. 577 (the 
Roman family ) ; M. de Laveleye, De la Propriety, p. 23 (the Slav family); 
the Editor of Ancient Laws of Ireland, Int., p. 79 (the Irish family) ; Maine's 
•Ancient Law, p. 143 (the German family). 

2. In the Roman civil law.— Although corporations do not seem to be 
mentioned in the Institutes of Gains (c. 180 A. D.) they are in the Institutes 
of Justinian and there are many provisions in the digests (A. D. 633) relat- 
ing to them ; the ideas above expressed were embodied in the Roman law. 
"Every being capable of having and being subject to rights was called in Ro- 
man law a persona. Thus, not only was the individual citizen when looked 
at as having this capacity, a persona, but also corporations and public bodies. 
* * * The word personae has also another sense. It was used not only for 
the being who had the capacity of enjoying rights and fulfilling duties, but 
also for the different characters or parts in which this capacity showed itself; 
or to borrow the metaphor suggested by the etymology of the word, for the 
different masks or faces which the actor wore in playing his part in the 
drama of civic and social life. Thus, for instance, the same man might have 
the persona patris, or tutoris, or mariti; that is, might be regarded in his char- 
acter of /afAer, fwfor, or A?<s6and. * * * ;S'toi?<s (legal standing) is the cor- 
relative of persona. Status is the legal capacity of a persona; persona is that 
which has status." Note of T. C. Sandars in Hammond's Edition of Ban- 
dars' Justinian's Institutes. De Jure Personarum, p. 76. See, also, Mack- 
eldey, Handbook of Roman Law (Dropsie's Translation, 1883, sections 128, 
129, 155.) 

"Auniversitas, or corporate body, exists when a number of persons are so 
united that the law takes no notice of their separate existence, but recognizes 
them only under a common name, which is not the name of any one of them. 
(Digest 3, 4, 2; 3, 4, 7, 1). All the members are considered in law as a sin- 
gle unit or being. (Digest 46, 1, 22.) Such units are sometimes called ficti- 
tious persons, because the corporate body, as such, may sue and be sued, re- 
ceive or part with property, bind itself or bind others, through some agent or 
syndic (Digest 3, 4, 1, 1), who acts in the name of the whole, just as any in- 
dividual may act for himself. (Digest 3, 4, 7, 1.) The chief characteristic of 
such a body is that it does not necessarily die. (Digest 5, 1, 76.) * * * 
There were many such corporations in Rome, chiefly connected with trades, 
such as the guild of bakers, and shipowners, companies of tax-gatherers, 
companies for working mines of gold, silver, salt, etc. The internal govern- 
ment of the corporate bodies was in the hands of the members {sodales}.— 
Hunter's Roman Law, 2d ed., pp. 314-5. 

Sheldon Amos, in his " History and Principles of the Civil Law of Rome," 
p. 118, says: "Such a conception fas that of legal persons) had thoroughly 
penetrated the fabric of Roman law and society long before the time of Jus- 
tinian, and the appropriate legal consequences had worked themselves out 
with considerable exactness. The conception, indeed, was extended for pur- 
poses of legal convenience, even beyond the original sense of an assemblage 
of persons, determinate or indeterminate, treated as integral unity. The 
same hypothesis of a legal personality was made in certain cases where no 
human beings were directly concerned at all, but where it was desired to as- 
sume, provisionally, a fixed center, to which a group of rights and duties 
might for some purposes be referred. Thus, in the case of an inheritance on 
which the heir had not yet entered, it was convenient for the moment to call 
it a person, and to estimate the rights and duties that would attach to a person 
so situated than to be making constant references to all the innumerable 
human beings who might be actually interested in the succession." Taylor, 
in hia work on Corporations, ch. 1, takes a slightly different view, and holds 
that at least in the early period of the Roman law the idea of the artificial 
personalitv of a corporation, if it existed at all, was in a very rudimentary 
shape, though he admits it was present in the later periods, as evidenced by 
such provisions as, "If anything is owed to a corporation, it is not owed to 



) * 

74 NOTES TO ARTICLE II. 

any single [member] ; nor what a corporation owes do the single [mem- 
bers] owe." ["Si quid universitati debetur, singulis non debetur; nee quod 
debet universitas singuli debeiit." Digest iii, 4, lex 7, § 1.] And in the 
notes (p. 3 1 he cites Ihring, to the effect that the members of a corpora- 
tion were the true subjects of corporate rights and liabilities, at least among 
themselves, and the corporation was only the form assumed toward outsiders. 
Gheist, etc., iii, Theil., pp. 219, 220, 343-4. So, too. Pollock and Maitland 
say: "It would be a great mistake to suppose that what we are wont to con- 
sider the true theory of universitates lay so plainly written on the face of the 
Roman law books that no one could read them attentively without grasping 
it. The glossators did not grasp it. Bracton's miaster, Azo, had not grasped 
it." History of English Law, vol. 1, p. 477. 

3. In the Canon law. — The personification of an institution, such as The 
Church, was one of the earliest and most persistent ideas of the early Chris- 
tian world; so, too, the blending of many members into one body was an early 
Christian conception. "The Church of God." Acts xx, 28; 1 Cor. i,l and 2; 
Rev. ii, 7. "He is the head of the body, the church." Colos. i, 18; Eph. i,22, 
23. "For as the body is one and hath many members, and all the members 
of that one body, being many are one body ; so, also, is Christ * * * Now 
ye are the body of Christ, and members in particular." 1 Cor. xii, 12, 27. 
Pollock and Maitland, History of English Law, vol. 1, p. 489, thus summa- 
rises the history on this point: "Within the ecclesiastical sphere there have 
been 'juristic persons' from an extremely remote time. Confining our view 
to England, we may say that they have existed ever since ^thelberht sanc- 
tioned God's property with a twelve-fold hot, and gave lands to St. Andrew. 
God and the saints, it is needless to say, were not regarded as imaginary per- 
sons ; still their property had to be administered for them by 'the church,' and 
the personality of the church is more purely juristic. A personified building 
gives way to a personified institution or a personified purpose. Then the 
worldly business of the church is often conducted for it, not by a single man, 
but by a group of men acting in common ; still these men are not the eccle- 
sia ; no, not though they be all taken together. Thus, canonists have obtained 
a foundation of fact and practical law for their theories. They see and 
proclaim that the universitas is persona ficta, not found in the world of sense, 
but created by law, that it is invisible, immortal, a body that has no body and 
no soul. It can not sin, it can not be excommunicated, it can not commit a 
crime, it can not be punished ; very probably it can not commit a delict. 
These theories are very generally worked out in the thirteenth and the 
following centuries; they bear abundant fruit in our latest Year Books. To 
'the church,' modern law owes its conception of a juristic person, and the 
clear line that it draws between 'the corporation aggregate,' and the sum of 
its members." In fact it has been said that Pope Innocent IV (A. D. 1243- 
1255) was the father of the modern learning of corporations. lb., p. 477. 

4. In the early common law. — The personification of the church, as having 
rights, was a common idea in the Saxon laws. "The property of God and 
the church twelve-fold." Laws of iEthelberht , 1 (c. 600 A. D.). "If any 
carry off a nun from a minster * * * let him pay 120 shillings, half to 
the king and half to the bishop and to the cMirch-hlaford,^' which Stearns 
(Germs and Developments of Laws of England, n. 1, p. 78), translates 
"church corporation," though the word is more frequently rendered tribute. 
See Laws of Alfred, 8 (c. 890 A. D.). Under the Laws of Edward the Confessor 
(c. 1043-1066), there was a peace of the church as there was of the king (1,6); 
lands were held of the church; it had fiefs, and it was entitled to tithes (3, 
4,7). 

These provisions of the laws of Edward were also in the confirmation of 
them by William the Conqueror. London traced some of its liberties to a 
charter granted by the Conqueror, sealed with hisseal, "bitten with his tooth 
in token of sooth." Coke says he had seen a "charter made by Henry I 
(1100-1135), by which he granted them gildam mercatorum, and a confirma- 
tion by Henry II (1154i-1189), by which charters they were incorporated." 
10 Rep. 30. Though corporations seem to have been in existence from the 



THE CORPORATION AS A PERSON. 75 

time of the Conqueror, Bracton's ideas (c. 1263) were not clear, and were 
taken almost wholly from the Roman law. He says: "Things belong to 
corporate bodies, and not to individuals, which are in cities, such as theaters, 
stadia, etc., * * * such as lands and serfs, which are said to belong to 
cities because they so belong to all the citizens as not to belong to any one 
person by himself." F. 8, 1 Twiss's Translation 59. This is substantially 
taken from Justinian's Institutes, Bk. 2, T. 1, § 6. In f. 1716, he speaks 
of the "body corporate of the realm." [Universitas regni.'] 3 Twiss 93. In 
f. 1806. (3 Twiss 151), he adds race grounds, walls and gates of cities, to 
corporate property. From what he says, f. 102 (2 Twiss 133), f. 2286, (3 
Twiss 535), it seems "all may complain or one (only) under the name of the 
corporation {Universitatis') . On f. 374 (5 Twiss, pp. 447-449), he says: "If 
an abbot, or prior, or other collegiate men claim land, etc., in the name of 
their church upon the seysine of their predecessors, ♦ * * the declara- 
tion should not be from abbot to abbot, or from prior to prior, nor should 
there be mention of the intermediate abbots or priors, because in colleges and 
in chapters the same corporation always remains, although they all die suc- 
cessively and others are substituted in their place, as may be said of flocks of 
sheep, where there is always the same flock, although all the sheep or heads 
successively depart, nor does any individual of them succeed to another by 
right of succession, in such manner that the right descends by inheritance 
from one to another, because the right always pertains to the church, and 
remains with the church, according to what may be seen in the charters of 
feoffment of religious orders, * * * and accordingly if the abbot or the 
prior, the monks or the canons successively die, the house remains to eter- 
nity." This comes very near to the modern idea of the existence of the cor- 
poration separate and distinct from its members. 

By 1311 a borough is called a ''corps." Y. B., 4 Ed. II 103, Gross's Gild 
Merchant I, 94, note. But "It was really about the reign of Edward III 
(1327-1377) that the idea of the lay corporation, the lay persona ficta as now 
understood, was painfully elaborated. The doctrine that there could not be a 
writ of capias against a "commonalty" was definitely expressed at least as 
early as 22 Edward III (1349), 22 Ass. 67, and the practice had been in ac- 
cordance with this doctrine considerably earlier. There is a very curious 
case at the end of this reign, which shows not only that the lawyers had come 
to the notion of a "body," afterwards called a "body politic," but also by 
what road they traveled. They had often been troubled by the question 
whether something in dispute was appendant or appurtenant to something 
else, or was a thing by itself and independent, which they called a gross («m 
gross). It was, for instance, a common subject of argument whether, an 
advowson was a gross (according to modern phraseology "in gross"), or ap- 
pendant. By a curious psychological process they realized that what we now 
call a corporation was "a gross," or something which had an existence per 
se; and this something they called alternatively "m« corps." Thus they came to 
the idea of an individuality composed of the members of a corporation, or, as 
we might now say, to the idea of a persona flcta. At the same time it was 
held that the commonalty of a guild which had not been affirmed by a royal 
charter could not be adjudged to be a body inn corps), capable of purchasing 
an estate of freehold." See 49 Li. Ass. 8. Introduction by L. O. Pike to Y. 
B., 16 Ed. Ill, part 1, p. xlvi. Many points turning on or recognizing the 
artificial personality of a corporation were determined during this reign. In 
1335 it was held the head of the corporation could be sued by the corpora- 
tion, as the dean by the chapter of the same church. Y. B., 9 Ed. Ill 466. 
In 1341 it was held that if a corporation disposes of all its property the cor- 
poration yet remains. 15 Ass. 10. In 1349, as indicated above, it was said: 
"The corporation is invisible, incorporeal ; it can not be assaulted, or be 
beaten or imprisoned ; trespass does not lie against it, for capias nor exigent 
lies not against a commonalty." 22 Ass. 100, pi. 67. In 1356, "Nor can they 
commit treason, or be outlawed, or excommunicated, for they have no souls, 
nor can they appear in person, but by attorney." In 1372, however, it was 
held "a corporation can commit a trespass." 45 Ed. Ill 2. 



^6 NOTES TO ARTICLE II. 

In 1375, the taking by the servant of a corporation is a taking by the cor- 
poration. 48 Ed. Ill 17. In 1376, none but the king can make a corpora- 
tion. 49 Ed. Ill 4. In 1377, one corporation can be united to another 
(consolidation?), so as to succeed to the rights of the latter. 60 Ed. Ill 27. 
Pollock and Maitland (History of English Law, vol. 1, p. 473) place the birth 
of the corporate idea a little later than indicated above. They say : "If for 
a moment we take our stand in Edward IV's reign (1461-1483) * * * ^e 
can say that the idea of a corporation is already in the minds of our common 
lawyers; it may trouble them, this is shown by their frequent discussions 
about its nature, but still it is there. First we notice that they already have 
a term for it, namely, ^corporacion^ for which 'coi-ps corporat,' and 'coi-ps 
politik,' are equivalents." Kent says (2Comm., §270, note e), "the terms 
corporation and body corporate first appeared in the reign of Henry IV 
(1399-14il3), in any public document." In 1429, it was unsuccessfully 
contended that when a member and the corporation were sued together, the 
member was twice sued. Y. B., 8 Hen. VI, f. 1. In 1437, "if a man recovers 
a debt or damages against a commonalty he shall have execution only against 
the goods they have in common." Y. B., 16 Hen. VI, Fitz. Abr., Execution 
pi. 128. In 1441, "a release by all the members of a corporation is not the 
release of the corporation." Y. B., 19 Hen. VI 64. So too " if all the 
members of a corporation appear in person to answer a suit against the cor- 
poration it is not sufficient." Y. B. 19 Hen. VI 80. In 1442, "if all the 
members, as abbots and monks, die, the corporation is dissolved." Y. B., 20 
Hen. VI 7, 8. In 1454, "when a city or village is incorporated as bailiff 

and commonalty of , they are by this name a. person corporate, an entire 

body." Y. B., 32 Hen. VI 9. In 1461, "a corporation aggregate of sev- 
eral is invisible, immortal and rests only in intendment and consideration of 
law, and therefore dean and chapter can not have predecessor nor successor." 
Y. B., 39 Hen. VI 13b, 14. In 1470, generally they must act by deed only. 
Y. B., 9 Ed. IV 59, but in 1479, they can appoint ordinary servants and 
agents without a seal. Y. B., 18 Ed. IV 8. 

In 1481 corporate bodies are contrasted with unincorporated bodies. Y. B., 
20 Ed. IV 2. So, too, in this year or the next, a juror was challenged be- 
cause he was a brother to one of the members of the corporation ; it was 
answered that the juror was "a stranger to the chapter, for it is a body of such 
nature that it can have neither brother nor cousin," but conceded that it would 
have been otherwise if the juror had been brother to the Dean, Y. B., 21 Ed. 
IV, f . 28, 1 Pollock and Maitland 474. In this year, too, a corporation is called 
a mere name. Y. B., 21 Ed. IV 13. Perhaps the most interesting case of the 
tiroe is the one of this year summarized by Pollock and Maitland thus : "Ab- 
bot, of Hulme, sued mayor, sheriff and commonalty of Norwich, on a bond, 
and they pleaded that when the bond was made the then abbot had got the 
then mayor in prison and extorted the bond by duress. The lawyers admit- 
ted that the corporation itself can not be in prison or suffer duress, and 
that it would be no defense to urge that when the bond was made some few 
of the citizens of Norwich were in prison. Counsel said : 'Every body politic 
is made up of natural men. And as regards what has been said touching its 
inseverability, I do not admit that, for they allowed that mayor, sheriffs and 
commonalty make up a single body; here, then, are members, namely the 
mayor is one member * * * the sheriff another member * * * the 
third is the commonalty. In this case there is an alleged imprisonment of 
one of the distinct members named in the title of the corporation, to wit, the 
mayor, who is the head and (as in the body natural) the principal member 
* * * and if one member of the body natural be restrained or beaten, that 
is a restraint or battery of the whole body.' " Vol. 1, p. 475. Y. B., 21 Ed. 
IV, f. 7, 12, 27, 67. In 1483, it was held that "if the king makes a general 
corporation by a certain name, all the incidental powers, as to sue, be sued, 
purchase and hold land and other property, contract, have a seal, make 
by-laws, etc., are included." Y. B., 22 Ed. IV, cited in 10 Coke's Rep. 30. 

Littleton, in his Tenures, written about 1481, does not have much to say of 
corporations, but enough to make it certain that their nature and presence 



THE CORPORATION AS A PERSON. -JJ 

•vpere pretty well known, and the distinctions between sole and aggregate 
pretty well recognized. He speaks particularly of "prelates, abbots, priors, 
deans, or of the parson of a church, or of other bodies politike." Section 
413. See, also, §§ 133 and 134. And his statements accord with the holdings 
such as: "Where a bond is made to the Dean of P. and his successors, and it 
is 7iot said dean and chapter, and his successors, this is good to the executors, 
and void to the successors. Contra, if it had been to the dean and chapter and 
his sticcessors ; for he has two capacities, viz., "To him and his heirs, and an- 
other with the corporation." 20 Ed. IV 2 ( 1481). So, "If land be granted to 
a mayor and commonalty, saying to their successors, they have a fee-simple. 11 
Hen. VII 12 (1496). In 1501, where a corporation has a head (as a mayor) 
he may command a thing in person; but a corporation aggregate, which has 
no head, must give their authority, under the seal of the corporation." Y. B., 
16 Hen. VIII 2. In 1523, all acts of a corporation must be by their name of 
corporation, and by writing, otherwise it is not the corporate act. As do a tort 
make a feoffment, enter into an agreement; yet they may elect a dean, mas- 
ter or attorney, which are of record. Y. B., 14 Hen. VIII 2, 29. In 1542, 
corporations aggregate can not do fealty; for a body invisible can not be in 
person, nor can swear. 33 Hen. VIII, Br., Fealty pi. 15. "A body politick 
is not contained in the word person." Plowden, f. 177 (1650-1580). In 1585, 
a corporation consisting of confreres and sisters is dissolved by the death of 
all the sisters. In 1587, "A corporation is a body politick, consisting of ma- 
terial bodies, which, joined together, must have a name to do things that con- 
cern their corporation, or otherwise it is no corporation. Ch. B., in Mariot 
v. Mascall, And. 206 pi. 238, 29 Eliz. In the argument in this case it was said : 
"All the natural persons are not the corporation, but are persons of which 
the corporation consist, but not wholly ; for the name is part also, without 
which the corporation can not be." And. 210. In 1596, it was contended 
that an annuity charged against a corporation was gone when the corporation 
was dissolved, for it is the person charged. 38 Eliz. Viner, Corp. (4, 3) 8. 
Rochester (Bishop's) Case. 

Coke's idea of a corporation was that of an artificial personality. "The 
corporation itself is only in abstracto, and rests only in intendment and con- 
sideration of law." Sutton''s Hospital, 10 Rep. 1, on p. 32. (1613). "Per- 
sons capable of purchase are of two sorts, persons natural, created of God, and 
persons incorporate, or politique, created by the policy of man (and, there- 
fore, they are called bodies politique)." 1 Institutes 2 a. (1628). "It is 
also called a corporation, or body incorporate, because the persons are made 
into a body, and are of a capacity to take and grant." lb. 250 a. Lord Chief 
Justice Hale classed corporations among persons. The 22d section of 
Analysis of the Law (c. 1676) is entitled " Concerning persons or bodies politic, 
i. e., corporations. I have done with the jura persona7-um natnralium * * * 
and I now come to persons politic, or corporations, that is, bodies created bj' 
operation of law." 

5. In the modern law. — There can be no doubt as to the influence of the 
definitions of Blackstone upon our legal ideas, and there can be scarcely less 
doubt as to the influence of Hale's classification upon that of Blackstone. The 
latter says: "Persons are divided by the law into either natural or artificial. 
* * * Artificial are such as are created and devised by human laws for the 
purposes of society and government, which are called corporations or bodies 
politic." 1 Comm. *123 (A. D. 1765). On p. *467 he says: "It has been 
found necessary, when it is for the advantage of the public to have any par- 
ticular rights on foot and continued, to constitute artificial persons, who may 
maintain a perpetual succession and enjoy a kind of legal immortality. These 
artificial persons are called bodies politic, bodies corporate (corpora corporata), 
or corporations, of which there is a great variety subsisting, for the advance- 
ment of religion, of learning and of commerce." Hammond shows that parts 
of this 18th chapter, Book I (containing eighteen small pages), have been 
quoted, cited or criticised nearly 150 times in reports of cases in the United 
States. 

Marshall's definition in the Dartmouth College Case, 4 Wheat. (U. S.), p. 



78 NOTES TO ARTICLE II. 

518 (A. D. 1819), seems to have come from Coke and the Year Beoks. He 
says: "A corporation is an artificial being, invisible, intangible and existing 
only in contemplation of law. Being the mere creature of the law, it possesses 
only those properties which the charter of its creation confers upon it, either 
expressly, or as incidental to its very existence. These are such as are sup- 
posed best to effect the object for which it was created. Among the most 
important are immortality, and if the expression may be allowed, individual- 
ity; properties by which a perpetual succession of many persons are con- 
sidered as the same and may act as a single individual." Although in this 
case Judge Story seemed to favor the view that a corporation was essentially 
a collection of individuals (see infra, p. 727), yet he summed up his definition 
thus: "It is, in short, an artificial person, existing in contemplation of law, 
and endowed with certain powers and franchises, which, though they must 
be exercised through the medium of its nat iral members, are yet considered 
as subsisting in the corporation as distinctly &^ ii li yiere a. real personage ." 
4 Wheat. (U. S.) 667. Justice Washington quotes Blackstone, and looks 
upon a corporation as & franchise, 4 Wheat. (U. S.) 657; (see infra, p. 723). 

The Louisiana civil code of 1824 defined a corporation as "an intellectual 
body, created by law, composed of individuals united under a common name 

* * * and for certain purposes, considered a natural person." Tit. 10, ch. 
1, art. 418, 427. This is approved and substantially adopted by Angell and 
Ames Corporations, p. 1 (1831). Walker, American Law, §90 (1837), says: 
"Persons are either natural or artificial,^' the latter consisting "of natural 
persons clothed by law with an artificial character and capacity." So, too, 
in 1839 (22 Wend. 70, Thomas v. Dakin, supra, p. 19), and 1841 (1 Hill 
(N. Y.) 620), corporations are defined to he persons. Grant on Corporations, 
p. *4 (1850), says: "The ideal being called a corporation we may thus de- 
fine to be a continuous identity, endowed at its creation with capacity for end- 
less duration ; residing in the grantees of it and their successors, its acts being 
determined by the will of a majority of the existing body of its grantees or their 
successors at any given time * * * having a name, and under such name 
a capacity for taking, holding and enjoying all kinds of property, a qualified 
right of disposing of its possessions, and also a capacity for taking, holding and 
enjoying but inalienably, liberties, franchises, exemptions and privileges, 

* * * of suing and being sued." In 19 N. Y. 39 (1859), a corporation is 
treated as a person. Sir Nathaniel Lindley, in his Treatise on tlie Law of 
Partnerships, p. 66 (1860), says: "A corporation is a fictitious person, cre- 
ated by special authority, and endowed by that authority with a capacity to 
acquire rights and incur obligations, as a means to the end for the attainment 
of which the corporation is created. A corporation, it is true, consists of a 
number of individuals, but the rights and obligations of these individuals are 
not the rights and obligations of the body corporate exercisable by or en- 
forcible against the individual members thereof, either jointly or separately, 
but only collectively as one fictitious whole." 

The California code of 1872 calls it "a creature of the law having certain 
powers and duties of a natural person." Section 283. This is repeated in the 
codes of South Dakota (1883), § 373 ; and Oklahoma, § 944. The Georgia code 
of 1882 says: "A corporation is an artificial person created bvlaw for specific 
purposes." Section 1670. Lowell, Transfer of Stock, §§ 1, 2 (1884), says: "A 
corporation is an imaginary person, who, by a fiction of law, possesses certain 
rights, and is made subject to certain duties. * * * The corporation is 
something distinct from its members. Its life is independent of theirs. Its 
will may, at times, be different from that of any member, or of any given 
proportion of its members, and it may be bound by conduct'which binds no 
one of its members as an individual. Of course, there are, in reality, no rights 
or duties but those of natural persons ; but the rights and duties of natural 
persons who deal with a corporation arise from a fiction, and their nature 
and extent are determined by that fiction. A person, therefore, who con- 
founds a corporation with its stockholders, who says that they are the cor- 
poration, or that it consists of its members, not only misstates the legal view 
of the matter, but is in danger of falling into endless confusion and error. A 



§ 1 6 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. 79 

corporation is distinct from its members in the same sense that a state is dis- 
tinct from its citizens." 

Austin Abbott, in the Century Dictionary (1889) defines a corporation as 
"An artificial person, created by law, or under authority of law, from a group 
or succession of natural persons, and having a continuous existence irrespec- 
tive of that of its members, and powers and liabilities different from those of 
its members." Cook, Stock and Stockholders (3ded., 1894), § 1, says: "A 
corporation is an artificial person like the state. It is a distinct existence— 
an existence separate from that of its stockholders and directors." This is 
repeated in the 4th ed., 1898. Reese, The True Doctrine of Ultra Vires, 1897, 
says, §2: "It will be assumed in the examination of the doctrine to be 
hereafter discussed, that a corporation both under the common law and as 
now organized and created under our state laws, is- a legal entity, separate and 
distinct from the members who compose it; that in the corporation, the creature 
of the law, is vested all the property and powers of the company ; that it can 
only be affected by such acts and agreements as are done or executed in its 
behalf by the corporate agencies, acting loithin the legitimate scope of its char- 
tered powers; and that no acts or contracts by the officers or agents of the 
company beyond the scope of the powers as prescribed and designated in the 
charter or articles of association, can be ascribed to the corporation, though 
done and concurred in by each and all of the stockholders." Elliott Cor- 
porations, 1899. §2, gives and approves the definitions of Abbott, supra, and 
Kyd, infra, p. 109. 

The nature of the corporate personality has been the subject of much 
speculation. At present, in the United States, the theory is generally held 
that the personality is artificial, or fictitious, has no existence in fact. On the 
other hand, in Germany, the theory is the reverse of this — that the person- 
ality of a corporation is organic — a real person, with a will and capacityto act, 
and that this is different from, but just as real, as tlie individual personality 
of each of its members. Recently Dr. Freund, of Chicago University, has 
put forth a view that seems to be between these — ^that the personality is a 
representative one, limited to a special purpose, but within that purpose ex- 
hibiting a real capacity of acting and willing that has substantially all the 
legal elements of responsibility that pertain to an individual. Like the state, 
it is a real legal existence, that expresses the will of its members through 
representatives selected in a definite way, and is as near a reality as the 
state is. 



ARTICLE III. THE CORPORATION AS A COLLECTION OF INDIVIDUALS. 

Sec. 16. The corporation is considered as a collection of individ- 
uals, 

( I ) In the management of corporate affairs: ^ 

"Where an act is to be done by a corporation, all of the members 
ought to be assembled together to consent, but this can not be separately 
and apart by them at several times, for then it \% -a factum singulorum. 
Case of the Dean and Chapter of Femes, 5 Jac. B. R. (1608)." 6 
Viner's Abr. Corporations (G. 3), 6. "In a trial * « « where 
there are twelve canons besides the dean, which in all make thirteen 
of the corporation, it was held: ist. That prima facie ^ in all acts 
done by the corporation^ the major number must bind the lesser^ or 
else differences could never be determined. 2d. That acts done by 
the corporation ought to be done by the consent of the major number, 

» See note at the end of this article. 000 , 

"^ The management of corporations is treated in en. 10, wfra, p. twd, a seq. 



8o CHATER V. SAN FRANCISCO SUGAR REFINING CO. § 1/ 

or else they are not valid, and therefore, where the corporation con- 
sists of thirteen, there ought to be seven to make a chapter; but the 
act of the major number of these seven is binding to the corporation. 
But if the ancient usage hath been that acts have been done from 
time to time by the major part of those that are present, although 
they are but three or four, it shall be then intended that that was part 
of their constitution at the beginning, and so what is done by them is 
binding to the rest." 6 Viner's Abr. Corporations (G. 3), 7, citing 
Haschard v. Somany, Freem. Rep. 504 (1693). "If an act to be 
done be referred to the constitvient members of a corporation, nothing 
can be done but by those who are the constituent part of the corpora- 
tion ; but where a thing is referred to be done by the commonalty, 
there the majority of those who are present (all being summoned) 
will determine and bind the rest, but in the other case the majority of 
those who are present will not do." 6 Viner's Abr. Corporations 
(G. 3), 8, citing The Queen v. Lock, 6 Ann. B. R. (1708). 



J 



Sec. 17. (2) When, by agreement or otherwise, reason, policy , or 

justice requires, the artificial personality of the corporation will 

be ignored, and the rights and duties of those composing it 

alone considered. 
v~ 

^ CHATER v. THE SAN FRANCISCO SUGAR REFINING CO., Et Al.i 
1861. In the Supreme Court of California. 19 Cal. 219-248. 

[This was a bill filed by the plaintiff for the specific performance of 
an agreement between plaintiff and Gordon and Bond, for the forma- 
tion of a company to be called the "San Francisco Sugar Refining 
Company," to consist of 1,000 shares, of $100 per share, providing 
that one-third of the stock was to be issued to J. B. Bond or his 
assigns, upon him or them paying $12,500, Bond to convey back to 
the company 835/^ shares, into the common stock of the company. A 
like provision is made in reference to Gordon. And also " one-third 
[of the shares] are to be issued to Nathaniel Chater or his assigns, 
upon him or them executing two notes — one of $6,250 to J, B Bond, 
collaterally secured by 125 shares of stock, having two years to run, 
bearing 2 per cent, per month interest; and another note of $6,250 to 
George Gordon, collaterally secured by 125 shares of stock, having 
same time to nm, and bearing the same interest, and said Chater is 
also to transfer back to the company 83^ shares of stock into the 
common stock of the company." 

"It is agreed that the two hundred and fifty shares of stock thus 
given back to the company shall be sold only by a majority vote of 
the company, and J. B. Bond guarantees to the extent of the note of 

> Statement of facts condensed, arguments and part of opinion omitted. 



§ 17 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. 8 1 

said Chater held by him ($6,250), that from one hundred and twenty- 
five of the shares he will raise the sum of $12,500, as needed, and 
George Gordon guarantees to the extent of the note of said Chater 
held by him, that he will, on one hundred and twenty-five shares, also 
raise the sum of $12,500. 

"And it is further agreed, that the shares not sold belonging to the 
common stock of the company, as above recited, shall, if it be not 
found necessary to sell them, be divided equally among the three par- 
ties hereto, but not until the company's works have been in operation 
for at least twelve months. 

"It is agreed that George Gordon shall organize the company in 
San Francisco by taking out articles of incorporation according to law, 
and that the first trustees shall be Charles W. Bond, Nathaniel Chater 
and George Gordon. 

"That upon the organization of the company and on the enactment 
of its by-laws, the trustees shall issue stock as herein set forth, to the 
parties, upon their furnishing the respective amounts they herein agree 
to furnish, or in proportion as they furnish said amount. 

"Each certificate of stock to be signed by two trustees and counter- 
signed by the secretary. 

"The stock of N. Chater to be issued to him, as herein provided, 
on the execution of the agreement to manage the works, a memoran- 
dum of which agreement is made simultaneous with this. 

"The said Gordon and Chater agree that, to the extent of the in- 
terest which they may control, they will vote for the said Bond to act 
as agent of the company in San Francisco, attending to the commer- 
cial affairs of said company there, for which service he shall receive 
a salary of $1,800 per annum." 

Afterwards, another agreement was made, of the same date, as fol- 
low: 

"Whereas, N. Chater has induced the said Bond and Gordon to 
enter into the organization of a company in San Francisco for the pur- 
pose of sugar refining and its collateral branches ; and the said Bond 
and Gordon do so on the representation of said Chater and on his 
promise to manage the same for five years, and to retain his interest 
therein during that time, and upon his further representation that he 
can skillfully manage a sugar refinery ; with a view of engaging the 
services of said Chater, the said Bond and Gordon, by an agreement 
of even date herewith, have agreed to set apart to said Chater two 
hundred and fifty shares of the capital stock of the company, at the 
rate of fifty cents on the dollar of the par value of the shares, and to 
take therefor the notes of said Chater (two, and $6,250 each), hav- 
ing two years to run, collaterally secured by the two hundred and fifty 
shares, and also to give the said Chater one-third of the reserved or 
paid back shares which may not be sold, as provided for in agreement 
of this date made between the present contracting parties. 

"Now, the said Chater agrees with and to the said Gordon and 
Bond (which agreement they make for the company they propose to 
6— WiL. Cases. 



82 CHATER V. SAN FRANCISCO SUGAR REFINING CO. §1/ 

form, and with the understanding that they shall be at liberty to trans- 
fer the said agreement to the company when it shall be formed) that 
he, the said Chater, will proceed to San Francisco and there superin- 
tend the erection of the sugar refineiy and construct the same as he 
may be directed by the company, with regard to location, cost and 
extent, and get the same into working order, and that after the same 
is in order, he shall superintend the business of sugar refining for the 
said company for the period of five years from the date of first of 
May, 1856 (eighteen hundred and fifty-six). 

"That he shall engage in no other business during the period of 
his engagement with this company, but devote his entire time to the 
business of the company during the time he is manager. 

"And the more effectually to secure the performance by him, the' 
said Chater, of this agreement, he hereby agrees that during the 
period of his engagement above named, of five years, he will not dis- 
pose of such of his shares of stock in the company (or sell or transfer 
them) as he may have been enabled to pay for out of the dividends 
made upon the stock issued to him, and the said Chater agrees that 
the stock shall be issued to him with such restrictions as shall prevent 
him selling it during the above named period. 

"He, the said Chater, also agrees with the said Bond and Gordon 
that the dividends declared from time to time upon the stock issued 
to him shall go to the payment of the notes hereinbefore referred to. 

"The said Bond and Gordon undertake that the proposed company 
shall, in consideration of the premises, agree to pay the said Chater 
the yearly salary of $3,000, in monthly sums of $250 per month, to 
commence at the time the works go into operation, and shall also pay 
him the monthly sum of $150 during the time his services may be re- 
quired in erecting the works prior to commencing operations, and up 
to the time of commencing operations. 

"That said Chater also agrees, that if at any time the company 
become dissatisfied with his management, they may remove him with- 
out prejudice to this agreement, in which event his yearly salary of 
$3,000 shall cease and determine, but he, the said Chater, shall not 
be at liberty to engage in California in the business of sugar refining 
either for himself or for others. 

"Interest on the notes given by said Chater to commence on the 
first day of September of this present year. 

"It is agreed that said Bond and the said George Gordon shall pro- 
cure for the said Chater, within sixty days of being notified by him 
of his readiness to pay the notes herein specified, the said notes and 
collaterals, though the notes shall not have matured, and that in the 
event of the said Gordon and Bond respectively failing to procure the 
said notes, the interest upon same shall, from such date, be reduced 
to one per cent, per month. 

"It is further agreed, until dividends shall have been declared by the 
company of sufficient amount so that those due on the stock of said 
Chater, hypothecated to secure said notes, shall be sufficient to pay 
the interest due and accruing monthly on those notes, that the company 



§ 17 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. 83 

shall advance to said Chater the interest so upon due until the ma- 
turity of the notes as a loan to him." * * * 

Chater, afterwards, on the 17th of October, 1856, was seized with 
paralysis, and was rendered incapable of attending to the business. 

The notes mentioned in the agreement as those to be made by the 
plaintiff were never given, nor, so far as appears, demanded. 

The defense seems to rest principally upon the point that these 
notes were not made as contemplated by the agreement, that the 
plaintiff, therefore, did not comply with the contract on his part, and 
consequently has no right to insist on performance by defendants, 
that one of the principal, if not the leading, inducements to the con- 
tract was the rendition of the services of the plaintiff, and that the 
failure to render these, though caused by his sickness, was a failure 
of the consideration of the agreement ; and that the agreement was 
that of the individual members or stockholders, Gordon and Bond, 
and not of the corporation.] * * « 

Baldwin, J., delivered the opinion of the court. Field, C. J., and 
Cope, J., concurring. 

The whole case in this view of it may be thus summed up : Three 
men enter into an agreement to form a corporation for commercial 
purposes. By this agreement, and the corporate act, each corporator 
is entitled to an equal proportion of the stock ; two contribute to the 
capital in money — the third has no money ; he proposes and is allowed 
to give his note in lieu of money, pledging his stock as security ; the 
other two agree that on this stock they will raise him the money. It 
is agreed that the stock due him shall be issued on a given event ; the 
event happens. The note is not made nor the stock issued to him, 
but the company, controlled by the other two corporators, goes on recog- 
nizing the third as a corporator; no demand is made for his note or 
the stock issued to him. The corporation makes profit enough to pay 
the debts, and the share coming to the third partner pays his contribu- 
tion. No stock is issued to him, and he now claims it. If the two 
who were to raise the amount to be contributed by the third, having 
by the agreement the right to demand his note and stock, do not de- 
mand them or issue the stock to him, but without this form of 
security advance the money which was to be raised, they are to be 
considered as waiving this formal right, and are not at liberty to plead 
the want of a mere literal compliance as a forfeiture — for such it 
would be — of the interest of the third partner in the common enter- 
prise. In equity the substance of the whole transaction is fulfilled ; 
the object of the security answered, and the original right of the 
plaintiff here to his stock is not lost by a mere failure on his part to 
giv*e a particular form of security, upon which those beneficially in- 
terested in demanding it did not insist. What, in such a state of 
things, was not insisted upon was waived ; and equity, not regarding 
mere modes or forms, but looking at the very substance of the trans- 
action, is satisfied when the substantial purpose is effected, though 
not effected in the precise way contemplated by the parties ; and this 
is the more especially true if this failure to follow the prescribed mode 



S4 CHATER V. SAN FRANCISCO SUGAR REFINING CO. § 1 7 

be owing to the laches, or be by the waiver or acquiesence of the 
party entitled in strict right to insist upon it. 

The notes of Chater were merely to represent his debt, and the 
money to pay this debt Bond and Gordon were to raise on the secu- 
rity of his stock, they being interested in using it ; and whether the 
stock was issued in the form of a certificate or not, it was bound by 
the agreement; and if they chose, they could as safely advance the 
money without the note, and the substance of the whole arrangement 
be attained. It is not necessary for us, therefore, to consider the other 
points urged, to say the least, with plausibility, in avoidance of the 
ground taken by the appellants to sustain the proposition just dis- 
cussed. 

This view distinguishes this case from mere executory agreement, 
through a performance of the terms of which a party becomes entitled 
to property, of which class Green v. Covillaud (lo Cal. 317), and the 
other cases cited by appellants, are examples. Here Chater was en- 
titled, as of original right, to his stock, and the conditions annexed to 
the issuance of the certificates to him, even if not waived, at most 
were mere qualifications in favor of his associates of that right, and 
in the nature of security to them, the substance of which security they 
enjoyed, and a failure of the precise process prescribed, neither by the 
general principles of law applicable to such contracts, nor by the ex- 
press terms of the agreement, worked a forfeiture of his interest in the 
stock, nor in the business of the corporation. 

We think there is nothing in the point that the rendering of plaint- 
iff's services for the five years was a condition precedent to the vesting 
of the plaintiff's title to the stock. Nothing in the agreement so de- 
clares. The provision for the employment of plaintiff as superintend- 
ent 'seems to be an independent term of the agreement. * * * 

Baldwin, J., delivered the opinion of the court upon the petition 
for rehearing. Field, C. J., and Cope, J., concurring. * * * 

It is next insisted that we erred in holding that this agreement bound 
the corporation. That point was barely suggested on the oral argu- 
ment, and in the learned and able briefs of the counsel no great 
stress seemed to be laid on it. We gave it no very elaborate consid- 
eration, for we really supposed — erroneously, perhaps — that the coun- 
sel placed but little reliance upon it. The argument now on this point 
is very full and very ingenious, but as applied to the facts of this rec- 
ord is not sound. 

Every opinion, as Chief Justice Marshall well observes, must be 
considered with reference to the particular facts upon which it is 
made ; for it is impossible so to use language as that general expres- 
sions apply in every instance with the same meaning to every condi- 
tion of facts. We asserted no such doctrine as that, by force of a 
secret agreement between the original corporators in a commercial 
corporation, whether made before or after the act of incorporation, 
the stock issued by the corporation to innocent parties without notice 
of the agreement could be charged or affected by it. There was no 
case before us for the application of such a principle. But the right 



§ 1/ THE CORPORATION AS A COLLECTION OF INDIVIDUALS. 85 

to incorporate for such a purpose as that here is a statutory right, 
which is free to everybody. The rights in the corporation can be 
adjusted by contract, and the terms fixed by contract. The cor- 
poration is little more, under our laws, than a joint stock company 
under the English laws, indeed, in its true nature more nearly resem- 
bling a limited partnership under special articles than a corporation 
at common law. This corporation was organized under an agree- 
ment, whieh was in itself legal and binding. The original corpora- 
• tors were really the men (except one — if, indeed, he were not the 
assignee of one) who made the agreement, and were bound to execute 
it. They had the power to execute it ; for they had on the organiza- 
tion the power, subject to restrictions which we do not apply here, to 
control their own business in their own way. A man may as well 
make an agreement with another for certain stock in a corporation to 
be organized hereafter, as an agreement for stock in a presently ex- 
isting corporation. If A, B and C agree to form a corporation for a 
railroad with a capital of so much, to be represented by so many 
shares of stock, why may not they contract that each is to have so 
many shares on such and such terms? What rule of law forbids.'' Is 
there anything immoral in the contract, or opposed to public policy? 
Can not a man as well subscribe one time as another for stock, if all 
interested consent? Indeed, asunder this particular agreement they 
organized, so far as the then members are concerned^ the agreement 
becomes as effectual as if a part of the corporate act. 

As there is in this respect no restriction upon the terms on which 
they associate or do business, or to the time of making them, why not 
find those terms in an antecedent agreement as well as a present adop- 
tion, if the preceding agreement is connected by clear proof with the 
act of incorporation and its affairs? Suppose A, B and C agree to 
form a corporation for running stages, and put in, each, $10,000, but 
there are to be no certificates of stock issued and no debts incurred. 
This agreement precedes, of course, the incorporation ; and suppose 
the money is paid before the corporate act is consummated. The cor- 
poration is formed and proceeds to do business. Will it be contended 
that these men are not entitled to their respective shares of the profits, 
etc., from the mere fact that all this occurred before the technical 
ideal thing — the corporation — was called into existence ? The truth is, 
the corporation, under our system, following such an agreement, would 
be the mere agency of the associates created for the sake of conve- 
nience in carrying out the agreement, as between those who made the 
bargain — the different characters or forms in which or by which the 
bargain was made, and the order in which the several parts of it were 
executed, makes no substantial difference in the obligation. But if 
it did, and this ideal thing, the corporation, be something essential, dis- 
tinct and exclusive, making the men inside of it and controlling it 
wholly different from the same men just before they went into it; yet 
these shares are interests and property in esse or posse. This interest, 
or those shares, entitle the holder to certain privileges of value, and 
may entitle him to profits. VVhether, therefore, the corporation is 



86 CHATER V. SAN FRANCISCO SUGAR REFINING CO. § 1/ 

bound of itself, and as a separate entity, to recognize a right in a 
claimant to this interest, a private person holding these shares or 
interests would be bound to such claimant for them. 

But apart from all this, when the corporation became such, it or- 
ganized with Chater, Bond and Gordon as trustees, and these were 
really the sole corporators also ; and they organized with full knowl- 
edge of this agreement, which not only contemplated the formation 
of the company or corporation, but prescribed the terms and rights of 
the members in the corporation and corporate business. Chater was 
not only superintendent under this agreement, but trustee, too ; and 
the corporate business was commenced and for a longtime prosecuted 
with reference to this agreement, which recited these terms and affirmed 
these rights. If anything could be, this was an adoption by the cor- 
poration of these terms. It is not necessary to inquire whether an in- 
nocent purchaser of the stock, buying subsequently without notice, 
would be affected by any such acts — for no such question is before us 
now. If the coiporation be bound by this agreement, and the court, 
proceeding to enforce it by ordering the issuance of stock, should af- 
fect injuriously any innocent holder of stock, it will be time enough 
to consider his rights, legal or equitable, when the facts and proper 
parties are before the court. 

If, on taking the account, it should appear that Chater is not en- 
titled to anything, but that the corporation is so indebted as to make 
it inequitable for him to receive his shares, the court below, on the 
final hearing, can make the proper decree, unaffected by anything in 
the decree imder review. 

With these modifications, the decree is affirmed and the cause re- 
manded. 

Note. (1) Specific performance of stock agreements may be had when 
damages would be inadequate. See: 1746, Buxton v. Lister, 3 Atkyns, Ch. 
383; 1804, Lady Arundell v. Phipps, 10 Vesey 148; The Mechanics', etc., 
Bank v. Seton, 1 Peters (U. S. Sup. C.) 299; 1828, Cowles v. Whitman, 10 
Conn. 121; 1839, Clark v. Flint, 22 Pick. (Mass.) 281 ; 1863, Treasurer v. Com- 
mercial Mmmg Co., 23 Cal. 390; 1879, Cushman v. Thayer Mfg. I. Co., 76 
N. Y. 365, 32 Am. Rep. 315; 1886, Eckstein v. Downing, 64 N. H. 248, 10 Am. 
St. Rep. 404; 1888, Goodwin Gas S. & M. Co.'s Appeal, 117 Pa. St. 514; 1891, 
Bumgardner v. Leavitt, 35 W. Va. 194, 12 Law. Rep. Ann. 776; 1894, New 
England Trust Co. v. Abbott, 162 Mass. 148, 27 Law. Rep. Ann. 271. 

(2) Waiver ot statutory liability, by creditors, may be made by express 
agreement: 1839, Kerridge v. Hesse, 9 Carr. & Payne 200; 1863, Robinson v. 
Bid well, 22 Cal. 379; 1872, Basshor v. Forbes, 36 Md. 154; 1883, Brown v. 
Eastern Slate Co., 134 Mass. 590. 

(3) Generally an informal agreement among members of a corporation, 
without corporate action in the prescribed mode, does not bind the corporation : 
1891, Independent Order of Foresters v. Zak, 136 111. 186, 29 Am. St. Rep. 
318; 1896, Dennis v. Joslin Mfg. Co., 19 R. I. 666, 61 Am. St. Rep. 805. 

(4) Provisions in articles of association contrary to law or public policy 
are void: 1889, People v. Gas Trust Co., 130 111. 268, 17 Am. St. Rep. 319; yet 
they may be considered as surplusage, and not vitiate the organization : 1896, 
Shick V. Citizens' Enterprise Co., 15 Ind. App. 329, 57 Am. St. Rep. 230; un- 
less there is no sanction in law at all for the purposes proposed : 1894, State 
V. Inter-National Investment Co., 88 Wis. 512, 43 Am. St. 920. 



§ I 8 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. 8/ 

Sec. 18. Same. Particularly, (a) In matters relating to the 
constitution of the corporation itself, or changes therein. 

ASHTON V. BURBANK Et Al.» 

1873. In the United States Circuit Court, Eighth Circuit, Dis- 
trict of Minnesota. 2 Dillon (U. S. Cir. Ct.) 
435-441, Fed. Cas. No. 582. 

[This is an action on a promissory note, dated August 19, 1867, for 
$3,000, made by the defendants to the Provident Life Insurance and 
Investment Company. The defendants were subscribers of that com- 
pany, and the note in suit was given for an assessment upon their 
stock. The original charter of said company authorized it to transact 
a "life and accident insurance" business. After the defendants' sub- 
scription to the stock, the charter was amended, and the name of the 
company changed to the Eagle Insurance Company, and it was also 
authorized, by the amended charter, to transact the business of "fire, 
marine and inland insurance." The amended charter was accepted, 
but, in point of fact, the company took no risks during the short period 
it afterwards did business, except such as were authorized by its orig- 
inal charter. Subsequently, the company, being then in possession 
of the note in suit, forfeited, under authority given in its charter, the 
stock of the defendants therein. The note in suit, when long past 
due, was transferred by the company to the plaintiff. * * * 

The defendants neither procured nor assented to said last men- 
tioned act [amending the charter], nor did they know of it until after 
its passage, and thereupon they pi"otesed against it, and refused to 
pay the note in suit on this ground. Subsequently the said Eagle 
Insurance Company ceased to do business, and this note, among 
other assets, was sold to the plaintiff in the year 187 1, in payment of 
a debt due from the Eagle Insurance Company to him. After the 
said amendment of the charter of March 3, 1869, the Eagle Insurance 
Company did not, in fact, transact any fire, marine or inland insur- 
ance business, or do any other business than such as was authorized 
by the original charter.] 

Dillon, C. J. We hold the following propositions: * * * 

The change in the charter, by which a life and accident company 
was authorized to transact fire, marine and inland insurance, is an 
organic change of such a radical character as to discharge previous 
subscribers to the stock of the company from any obligation to pay 
their subscription, unless the change is expressly or impliedly assented 
to by them. Here there was no such assent, and no acquiescence in 
the structural change made in the charter of the company. The" com- 
pany could not, against such a subscriber, maintain a suit to collect 
his subscription, and take the money and use it as capital for the 
transaction of business under the charter as altered. We think, in 

^ Statement of facts condensed. Part of opinion omitted. 



88 DODGE V. WOOLSEY. § 19 

such a case, the subscriber is not bound to enjoin action under the 
amended charter, but may, if he elects, defend against an action to 
recover on his subscription to the stock. 

If the company accepted the amended charter, as it did, by adopt- 
ing the new name, it is not essential to such a defense to show that at 
the time of the trial the corporation had actually exercised the en- 
larged powers conferred upon it. The defendants are not bound, 
on their subscription, to pay to the company money which, if paid, 
may be used as capital to carry on the business authorized by the 
amended charter. 

Judgment for the defendants. 

Nelson, J., concurs. 

Note. The power of the majority to modify the constitation of a corpora- 
tion is discussed in eh. 16, see p. 1447, infra. See, particularly: 1820, Livings- 
ton V. Lynch, 4 Johns. Ch. 573; 1824, Natusch v. Irving, 2 Cooper's Ch. 358, 
appendix to Gow on Partnership, p. 398 ; 1862, Durfee v. Old Colony &' F. R. 
R. Co., 5 Allen (Mass.) 230; 1867, Zabriskie v. H. & N. Y. R. Co., 18N. J.Eq. 
(3 C. E. Green), 178, 90 Am. Dec. 617; 1887, Dow v. Northern R. Co., 67 N. 
H. 1, 36 Atl. 510. 



Sec. 19. Same. {b) In determining the rights of members 
among themselves in equity. 

DODGE, Appellant, v. WOOLSEY.^ 

1855. In the Supreme Court of the United States. 18 How- 
ard (59 U. S) 331-380. 

[Appeal from the circuit court of the United States for the district 
of Ohio. 

Suit in chancery by Woolsey, a citizen of Connecticut, and holder 
of thirty shares in the Commercial Bank of Cleveland (an Ohio cor- 
poration, and branch of the State Bank of Ohio) against the tax col- 
lector (Dodge), the bank directors and the bank itself (all citizens of 
Ohio) to enjoin the collection of the tax assessed by the state of Ohio 
against the bank. The bank's charter of 1845 provided that semi- 
annually it should pay six per cent, of its net profits for the preceding 
six months to the state of Ohio "in lieu of all taxes to which said com- 
pany or the stockholders, on account of stock owned therein, would 
otherwise be subject." In 185 1 the new state constitution was adopted, 
and this provided that laws should be passed taxing "the notes and 
bills discounted or purchased, money loaned and all other property, 
effects or dues whatever, without deduction, of all banks now existing 
or hereafter created, and of all bankers, so that all property employed 
in banking shall always bear a burden of taxation equal to that im- 
posed on the property of individuals." In 1852 the legislature of 
Ohio, in accordance with this constitutional provision, made it the duty 

^ Statement of facts condensed. Arguments and parts of opinions omitted. 



§ 19 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. 89 

of the president and cashiei- of every bank (under a severe penalty) to 
make report of the various items indicated to the county auditors, who 
were to place the same upon the tax duplicate, to be taxed as other 
property. In 1852, the president and cashier of the Commercial Bank 
of Cleveland, did this, under protest, the tax assessed and collected 
by distress being over $10,000, and more than $7,500 more than it 
would have been under the charter plan. Like proceedings were had 
in 1853, when the tax assessed was nearly $12,000 more than the 
charter plan would have made. Woolsey alleged that "if the taxes 
are permitted to be assessed and collected * » * jt Yvill virtually 
destroy and annul the contract between the state and the bank, in re- 
spect to the tax which the state imposed upon it by the charter * * * 
in lieu of all other taxes, the stock will be thereby lessened in value, 
dividends diminished, and the bank be compelled to suspend business; 
that, as a stockholder, he had requested the directors of the bank to 
take measures to prevent the collection of the tax." 

The material allegations, except the unconstitutionality of the law, 
and the application to the directors to prevent the collection of the 
tax, were admitted. Upon the latter point it was agreed that Woolsey 
had by his attorney addressed a letter to the bank requesting it to take 
proper proceeding to prevent the collection of the tax, the answer to 
which was: "Resolved, that we fully concur in the views named, 
and believe it to be in no way binding upon the bank ; but in consid- 
eration of the many obstacles in the way of testing the law in the 
courts of the state, we can not consent to take the action which we 
are called upon to take, but must leave the said (Woolsey) to pursue 
such measures as he may deem best in the premises." Upon the 
foregoing, the circuit court granted the injunction with costs against 
Dodge, who appealed, his counsel relying upon the following points: 

"i. The complainant does not show himself to be entitled to relief 
in a court of chancery, because the charter of the bank provides that 
its affairs shall be managed by a board of directors, and that they 
are not amenable to the stockholders for an error of judgment merely. 
And that in order to make them so, it should have been averred that 
they were in collusion with the tax collector in their refusal to take 
legal steps to test the validity of the tax."] 

[2 and 3, relating to the jurisdiction of the court, and the constitutionality 
of the tax, omitted,] 

Mr. Justice Wayne (after stating the facts) delivered the opinion 
of the court. * * * 

We will consider the points in their order. The first comprehends 
two propositions, namely ; that courts of equity have no jurisdiction 
over corporations, as such, at the suit of a stockholder for violations 
of charters, and none for the errors of judgment of those who manage 
their business ordinarily. 

There has been a conflict of judicial authority in both. Still, it has 
been found necessary, for prevention of injuries for which common- 
law courts were inadequate, to entertain in equity such a jurisdiction 



90 DODGE V. WOOLSEY, § 1 9 

in the progressive development of the powers and effects of private 
corporations upon all the business and interests of society. 

// is now no longer doubted^ either in England or the United 
States, that courts of equity^ in both, have a jurisdiction over cor- 
porations; at the instance of one or more of their members, to apply 
preventive remedies by injunction,, to restrain those who administer 
them from doing acts which would amount to a violation of charters,, 
or to prevent any misapplication of their capitals or profts which 
tnight result in lessening the dividends of stockholders or the value 
of their shares, as either tnay be protected by the franchises of a 
corporation, if the acts intended to be done create what is in the law 
denominated a breach of trust. And the jurisdiction extends to inquire 
into, and to enjoin, as the case may require that to be done, any pro- 
ceedings by individuals, in whatever character they may prefess to act, 
if the subject of complaint is an imputed violation of a corporate fran- 
chise, or the denial of a right growing out of it, for which there is not 
an adequate remedy at law. 2 Russ. & Mylne Ch. Rep., Cunliffe 
V. Manchester and Bolton Canal Company, 480, n. ; Ware v. Grand 
Junction Water Company, 2 Russ. & Mylne 470 ; Bagshaw v. East- 
em Counties Railway Company, 7 Hare Ch. Rep. 114; Angell & 
Ames, 4th ed., 424, and the other cases there cited. 

It tvas ruled in the case of Cunliffe v. The Manchester and Bolton 
Canal Company, 2 Russ. & Mylne Ch. R. 481, that where the legal 
remedy against a corporation is inadequate, a court of equity will in- 
terfere, and there were cases in which a bill in equity will lie against 
a corporation by one of its members. '•'•It is a breach of trust toward 
a shareholder in a joint-stock incorporated company, established for 
certain definite purposes prescribed by its charter,, if the funds or 
credit of the company are, without his consent,, diverted from such 
purpose, though the misapplication be sanctioned by the votes of a 
majority ; and, therefore, he may file a bill in equity against the com- 
pany in his own behalf, to restrain the company by injunction from 
any such diversion or misapplication." In the case of Ware v. Grand 
Junction Water Company, 2 Russ. & Mylne, a bill filed by a member 
of the company against it, Lord Brougham said: "It is said this is 
an attempt on the part of the company to do acts which they are not 
impowered to do by the acts of parliament, meaning the charter of the 
company; 'so far I restrain them by injunction.' Indeed, an in- 
vestment in the stock of a corporation must, by every one, be consid- 
ered a wild speculation, if it exposed the owners of the stock to all 
sorts of risk in support of plausible projects not set forth and author- 
ized by the act of incorporation, and which may possibly lead to ex- 
traordinary losses. The same jurisdiction was invoked and implied 
in the case of Bagshaw v. The Eastern Counties R. Co. ; so, also, in 
Coleman v. The Eastern Counties R. Co., 10 Beavan's Ch. Rep. i. 
It appeared in that case that the directors of the company, for the pur- 
pose of increasing their traffic, proposed to guarantee certain profits, 
and to secure the capital of an intended steam-packet company, which 
was to act in connection with the railway. It was held, such a trans- 



§19 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. 91 

action was not within the scope of their powers, and they were re- 
strained by injunction. And in the second place, that in such a case 
one of the shareholders in the railway company was entitled to sue in 
behalf of himself and all the other shareholders, except the directors, 
who were defendants, although some of the shareholders had taken 
shares in the steam-packet company. It was contended in this case 
that the corporation might pledge, without limit, the funds of the com- 
pany for the encouragement of other transactions, however various 
and extensive, provided the object of that liability was to increase the 
traffic upon the railway and thereby increase the traffic to the share- 
holders. But the master of the rolls, Lord Langdale, said, "there 
was no authority for anything of that kind." 

But further^ it is not only illegal for a corporation to apply its 
capital to objects not contemplated by its charter, but also to apply 
its projits. And therefore a shareholder may maintain a bill in equity 
against the directors and compel the company to refund any of the 
profits thus improperly applied. It is an improper application for a 
railway company to invest the profits of the company in the purchase 
of shares in another company. The dividend (says Lord Langdale, 
in Solamons v. Laing, 14 Jurist for December, 1850), which belongs 
to the shareholders, and is divisible among them, may be applied 
severally as their own property: but the company itself or the direct- 
ors, or any number of shareholders, at a meeting or otherwise, have 
no right to dispose of his shares of the general dividends, which belong 
to the particular shareholder, in any manner contrary to the will, or 
without the consent or authority of, that particular shareholder. 

We do not mean to say that the jurisdiction in equity over corpora- 
tions at the suit of a shareholder has not been contested. The cases 
cited in this argument show it to have been othei"wise, but when the 
case of Hodges v. The New England Screw Company et al. was 
cited against it (we may say the best argued and judicially considered 
case which we know upon the point, both upon the original hearing 
and rehearing of that cause), the counsel could not have been aware 
of the fact that, upon the rehearing of it, the learned court, which had 
decided that courts of equity have no jurisdiction over corporations as 
such at the suit of a stockholder for violations of charter, reviewed and 
recalled that conclusion. The language of the court is: "We have 
thought it our duty to review in this general form this new and unset- 
tled jurisdiction, and to say, in view of the novelty and importance 
of the subject and the additional light which has been thrown upon it 
since the trial, we consider the jurisdiction of this court over corpora- 
tions for breaches of charter at the suit of shareholders, and how far 
it shall be extended, and subject to what limits, is still an open ques- 
tion in this court. i Rhode Island Reports 312 — rehearing of the 
case September term, 1853." 

The result of the cases is well stated in Angell & Ames, paragraphs 
39^' 393' ''''In cases where the legal remedy against a corporation 
is inadequate, a court of equity will interfere, is well settled, and 
there are cases in which a bill in equity will lie agaist a corporation 



92 DODGE V. WOOLSEY. § 19 

by one of its members. ^^ '•'■Though the result of the authorities 
clearly is, that in a corporation, -when acting within the scope of 
and in obedience to the provisions of its constitution, the will of 
the majority, duly impressed at a legally constituted meeting, tnust 
govern; yet beyond the limits of the act of incorporation, the will 
of the majority can not make an act valid; and the powers of a 
court of equity may be put in motion at the instance of a single share- 
holder, if he can show that the corporation are employing their stat- 
utory powers for the accomplishment of purposes not within the scope 
of their institution. Yet it is to be observed that there is an important 
distinction between this class of cases and those in which there is no 
bi^each of trust, but only error and misapprehension, or simple negli- 
gence on the part of the directors."^ 

We have then the itile and its limitation. It is contended that this 
- case is within the limitation ; or that the directors of the Commercial Bank 
of Cleveland, in their action in respect to the tax assessed upon it, under 
the act of April 18, 1852, and in their refusal to take proper measures for 
testing its validity, have committed an "error of judgment merely." 
It is obvious, from the rule, that the circumstances of each case 
must determine the jurisdiction of a court of equity to give the relief 
sought. That the pleadings must be relied upon to collect what they 
are, to ascertain in what character, and to what end a shareholder in- 
vokes the interposition of a couit of equity, on account of the mis- 
management of a board of directors. Whether such acts are out of 
or beyond the limits of the act of incorporation, either of commission 
contrary thereto, or of negligence in not doing what it may be their 
chartered duty to do. 

' So it has been repeatedly decided that a private corporation may be sued 
at law by one of its own members. The text upon this subject is so well 
expressed, with authorities to support it, that we will extract the paragraph 
390 from Angell and Ames entire. "A private corporation may be sued by one 
of its own members. This point came directly before the court, in the state 
of South Carolina in an action of assumpsit against the Catawba Company. 
The plea in abatement was, that the plaintiff himself was a member of that 
company, and therefore could maintain no action against it in his individual 
capacity. The court, after hearing argument, overruled the plea as containing 
principles subversive of justice ; and they moreover said, that the point had 
been settled by two former cases, wherein certain officers were allowed to 
maintain actions for their salaries due by the company. In this respect, the 
cases of incorporated companies are entirely dissimilar from those of ordinary 
co-partnerships, or unincorporated joint-stock companies. In the former, the 
individual members of the company are entirely distinct from the artificial 
body endowed with corporate powers, A member of a corporation who is a 
creditor has the same right as any other creditor to secure the payment of 
his demands, by attachment or by levy upon the property of the corporation, 
although he may be personally liable by statute to satisfy other judgments 
against the corporation. An action was maintained against a corporation on 
a bond securing a certain sum to the plaintiff, a member of the corporation, 
the member being deemed by the court a stranger. Pierce v. Partridge, 3 
Met. (Mass.) 44; so of notes and bonds, accounts and rights to dividends. 
Hill v. Manchester and Salford Water- Works, 5 Adol. & Ellis 866; Dunston 
v. Imperial Glass Company, 3 B. & Adol. 125; Geer v. School District, 6 Vt. 
76; Methodist Episcopal Society, 18 Vt. 405; Rogers v. Danby Universalist 
Society, 19 Vt. 187." 



§ 19 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. 93 

This brings us to the inquiry, as to what the directors have done in 
this case, and what they refused to do upon the application of their 
co-corporator, John M. Woolsey. After a full statement of his case, 
comprehending all of his rights and theirs also, alleging in his bill 
that his object was to test the validity of a tax upon the ground that 
it was unconstitutional, because it impaired the obligation of aeon- 
tract made by the state of Ohio with the Commercial Bank of Cleve- 
land, and the stockholders thereof; he represents in his own behalf, 
as a stockholder, that he had applied to the directors, requesting them 
to take measures, by suit or otherwise, to prevent the collection of 
the tax by the treasurer, and that they refused to do so, accompanying, 
however, their refusal with the declaration that they fully concurred 
with Woolsey in his views as to the illegality of the tax; that they 
believed it no way binding upon the bank, but that, in consideration 
of the many obstacles in the way of resisting the collection of the tax 
in the courts of the state, they could not consent to take legal meas- 
ures for testing it. Besides this refusal, the papers in the case dis- 
close the fact that the directors had previously made two protests 
against the constitutionality of the tax, because it was repugnant to 
the constitution of the United States, and to that of Ohio also, both 
concluding with a resolution that they would not, as then advised, 
pay the tax, unless compelled by law to do so, and that they were 
determined to rely upon the constitutional and legal rights of the bank 
under its charter. 

Now, in our view, the refusal upon the part of the directors, by 
their own showing, partakes more of disregard of duty than of an 
error of judgment. It was a non-performance of a confessed official 
obligation, amounting to what the law considers a breach of trust, 
though it may not involve intentional moral delinquency. It was a 
mistake, it is true, of what their duty required from them, according to 
their own sense of it, but, being a duty by their own confession, their 
refusal was an act outside of the obligation which the charter imposed 
upon them to protect what they conscientiously believed to be the 
franchises of the bank. A sense of duty and conduct contrary to it is 
not "an error of judgment merely," and can not be so called in any 
case. It amounted to an illegal application of the profits due to the 
stockholders of the bank, into which a court of equity will inquire to 
prevent its being made. 

Thinking, as we do, that the action of the board of directors was 
not "an error of judgment merely" but a breach of duty, it is our 
opinion that they were properly made parties to the bill, and that the 
jurisdiction of a court of equity reaches such a case to give such a 
remedy as its circumstances may require. This conclusion makes it 
unnecessary for us to notice further the point made by the counsel that 
the suit should have been brought in the name of the corporation, in 
support of which they cited the case of the Bank of the United States 
V. Osborn. The obvious difference between this case and that is, 
that the Bank of the United States brought a bill in the circuit court 
of the United States for the dijtrict of Ohio, to resist a tax assessed 



94 DODGE V. WOOLSEY. § 1 9 

under an act of that state, and executed by its auditor, and here the 
directors of the Commercial Bank of Cleveland, by refusing to do 
what they had declared it to be their duty to do, have forced one of 
its corporators, in self-defense, to sue. If the directors had done so 
in a state court of Ohio, and put their case upon the unconstitution- 
ality of the tax act, because it impaired the obligation of a contract, 
and had the decision been against such claim, the judgment of the 
state court could have been re-examined, in that particular, in the su- 
preme court of the United States, under, the same authority or juris- 
diction by which it reversed the judgment, of the supreme court of 
Ohio, in the case of the Piqua Branch of the State Bank of Ohio v. 
Jacob Knoop, treasurer of Miami County, 16 How. 369. * * * 

Mr. Justice Campbell (with whom concurred Justices Daniel 
and Catron), dissenting. * * * 

The court has assumed this jurisdiction, and I am therefore called 
to inquire whether a court of chancery can take cognizance of the 
bill? The act of incorporation of the bank charges the board of di- 
rectors with the care of the corporate affairs, subject to an annual re- 
sponsibility to the stockholders. The principle of a court of chancery 
is, to decline any interference with the discretion of such directors, or 
to regulate their conduct or management in respect to the duties com- 
mitted to them. 

The business of that court is to redress grievances illegally inflicted 
or threatened, not to supply the prudence, knowledge or forecast re- 
quisite to successful corporate management. The facts of this case 
involve, in my opinion, merely a question of discretion in the per- 
formance of an official duty. In 1852, the taxes were withdrawn from 
the treasurer of Cuyahoga county, by an assignee of the bank, and 
were never passed into the state treasury. The supreme court of Ohio, 
subsequently to this, pronounced the taxes to be legally assessed upon 
these banks, and that there was no contract between the state and the 
banks, and there was no exemption froin the tax by anything apparent 
in the act of 1845. Some of these judgmeftts were pending in this 
court upon writs of error then undecided, no judgment having been 
given contrary to that of the authorities, legislative, executive and ju- 
dicial, as well as by the people of Ohio. It was under these condi- 
tions that this stockholder, who purchased stock after the controversy 
had arisen in Ohio, some five days before the taxes were payable, ad- 
dressed the directors of the Commercial Bank to take preventive 
measures — that is, I suppose, to file a bill for an injunction instantly 
— and, upon their suggestion of difficulties, proceeds to take charge 
of the corporate rights of the bank by this suit, in the circuit court of 
the United States. The directors were elected annually; they were, 
collectively, owners of one-tenth of the stock of the bank, and no evi- 
dence is shown that any other stockholder supposed that "preventive 
measures," under the circumstances, could be sustained. There is 
no charge of fraud, collusion, neglect of duty or of indifference by the 
directors, save this omission to take some undefined "preventive 
measures," which the plaintiff affected to suppose might be proper. 



§ 19 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. 95 

I understand the rule of chancery in reference to such a case to be 
that no suit can be maintained by an individual stockholder for a 
wrong done, or threatened, to such a corporation, unless it appears 
that the plaintiff has no means of procuring a suit to be instituted in 
the name of the corporation ; and that the rule is universal, applicable 
as well to the cases where the acts which afford the ground for com- 
plaint were either such as a majority might sanction, or whether it be- 
longed to the category of those acts by which no stockholder could be 
bound, except by his own consent. This principle has the highest sanc- 
tion in the decisions of that court. (Foss v. Harbottle, 2 Hare 461 — af- 
firmed I Phil. 790; 2 Phil. 740; 7 Hare 130.) The principle is an ob- 
vious consequence from the relations between the officers and members of 
a chartered coi-poration and the corporation itself. These are explained 
in Smith v. Hurd, 12 Met. 371. The court says: "There is no legal 
privity, relation or immediate connection between the holders of shares 
in a bank in their individual capacity on the one side and the directors 
of the bank on the other. The directors are not the bailees, the fac- 
tors, agents or trustees of such individual stockholders. The bank is 
a corporation and body politic, having a separate existence as a dis- 
tinct person in law, in whom the whole stock and property of the 
bank are vested, and to whom all agents, debtors, officers and servants 
are responsible for all contracts, express or implied, made in reference 
to such capital, and for all torts and injuries diminishing or impairing 
it." The corporation, therefore, must vindicate its own wrongs and 
assert its own rights, in the modes pointed out by law. 

I do not say that a court of chancery will never permit an individual 
stockholder to come before it to assert a right of the corporation in 
which he is a shareholder, where there is an obstacle of such a nature 
that the name of the corporation can not be employed before legitimate 
tribunals in their regular modes of proceeding, but the burden is 
thrown upon the plaintiff to establish the existence of an urgent neces- 
sity for such a suit. 

The consideration of analogous cases will strengthen this conclusion ; 
cases where courts of chanceiy are more free to intervene, from the 
fiduciary relations between the parties and the extent of its general 
jurisdiction over them. Such are cases of danger to the interests of a 
creditor of an estate from the collusion of an executor with the debtor 
of the estate, or the insolvency of the executor ; or where an executor 
wrongfully fails to make a settlement with a surviving partner, and a 
residuary legatee seeks one entire settlement of the estate against the 
executor and partner; or where a decedent in his life has fraudulently 
conveyed assets, and his executor is estopped to impute fraud, and 
there are creditors ; or where the managers of a joint stock company 
have been guilty of fraud, illegality, waste, and their stockholders 
desire relief. In all these cases the court of chancery will suffer a 
party remotely interested to institute the suit which his trustee, or 
other representative, should have brought, and will grant the relief on 
that suit which would have been appropriate to the case of him who 



g6 DODGE V. WOOLSEY. § 19 

should have commenced it. Sir John Romilly, in a late case belong- 
ing to one of these categories, says : 

"To support such a bill as this it is not sufficient to prove that it 
may be an unpleasant duty to the executors and trustees to take the 
necessary steps for protecting the property intrusted to them. It is 
not sufficient to show that it will be for their interests not to take such 
steps. It is necessary to show that they prefer their own interests to 
their duty, and that they intend to neglect the performance of the obli- 
gation incidental to the office imposed upon them, and which they as- 
sumed to perform ; or, as said in Travis v. Mylne, that a substantial 
impediment to the prosecution by the executors of the rights of the 
parties interested in the estate against the surviving partner exists." 
Stainton v. Carron Co., 23 L. & Eq. 315; Travis v. Mylne, 9 Hare 
141; Hersey v. Veazie, 11 Shep. i; Colquitt v. Howard, 11 Geo. 

556. 

These cases afford no support to this suit. The Cleveland Bank 
has betrayed no purpose to abandon its corporate duty. The interests 
and obligations of the directors coincide to support its pretensions. 
There is no supineness in their past conduct, nor indifference to the 
existing peril. The evidence, at the most, convicts them only of a 
present disinclination to commence suits, which were likely to be un- 
productive, at the request of a single shareholder. The answer shows 
that the taxes for 1852 had not been recovered by the state, but had 
been retaken by an assignee of the bank. Nor does the correspond- 
ence show that the directors had decided to abandon the contest. The 
case here does not at all fulfill the conditions on which the interposi- 
tion of a shareholder is allowable. Elmslie v. McAulay, 3 Bro. 
C. C. 224, I Phil. 790; Law V. Law, 2 Coll. 41; Walker v. Trott, 
4 Ed. Ch. Rep. 38. 

But the evidence does not allow me to conclude that any impedi- 
ment whatever existed to a suit in the name of the corporation, from 
any disposition of the directors to resist the claims of the state. Their 
protest appears at every successive stage of the action of the fiscal 
officers. This suit is evidently maintained with their consent ; there 
has been no appearance either by the directors or the corporation, 
but they abide the case of the stockholder. The decree is for the 
benefit of the corporation. The question then is, can a coiporation 
belonging to a state, and whose officers ai'e citizens, upon some hope 
or assurance that the opinions of the courts of the United States are 
more favorable to their pretensions, by any combination, contrivance 
or agreement with a non-resident shareholder, devolve upon him the 
right to seek for the redress of corporate grievances, which are the 
subjects of equitable cognizance in the courts of the United States, by 
a suit in his own name ? In my opinion, there should be but one 
answer to the question. * * * 

Decree of circuit court affirmed. 

Note. The rights of members of a corporation is the subject of chapter 17, 
infra. See page 1706, et seq., where this topic is further discussed. A few refer- 
ences are here given : 1843, Foss v. Harbottle, 2 Hare (EngUsh Vice Chancel- 



\ 






§ 20 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. 97 

lor's Court) 461 ; 1844, Hersey v. Veazie, 24 Maine 9, 41 Am. Dec. 364; 1847, 
Smith V. Hurd, 12 Met. (Mass.) 371 ; 1867, Seaton v. Grant, L. R. 2 Chan. 
App. 459; 1881, Hawes v. Oakland, 104 U. S. 450, infra, p. 1716; 1890, Esc^h- 
wefler v. Stowell, 78 Wis. 316, 23 Am. St. Rep. 411; 1896, Decatur M. L. Co. 
V. Palm, 113 Ala. 531, 59 Am. St. 140. 
Pleading, see Quincy v. Steel Co., 120 U. S. 241. 

Sec. 20. Same. (^) When the corporate organization is used as 
a cloak to aid in the commission of frauds. 

METCALF V. ARNOLD.i 

1895. In the Supreme Court of Alabama, i 10 Ala. 180-185; 
55 Am. St. Rep. 24. 

Appeal from the chancery court of Montgomery. 

Heard before the Hon. Jere N. Williams. 

The bill in this case was filed by the appellees, who were judgment- 
creditors, for the benefit of themselves and all other creditors of the 
Metcalf Drug Company who might desire to come in and make them- 
selves parties. 

The bill avers that complainants recovered a judgment against H. 
B. Metcalf and F. G. Weatherly, who were doing business under the 
firm name of H. B. Metcalf, and that executions on each of said judg- 
ments were issued and returned no property found. It was further 
averred in the bill that after the debts which were the basis of the judg- 
ment in favor of each of the complainants were contracted, and while 
said H. B. Metcalf and F. G. Weatherly were indebted to complain- 
ants and other creditors, the said H. B. Metcalf and F. G. Weatherly 
were conducting a drug business in the city of Montgomery, Alabama, 
and had a large stock of goods and assets in said business, none of 
which were exempt to them, or either of them ; that after the creation 
of the indebtedness to the complainants, but prior to the rendition of 
the judgment in their favor, "the said H. B. Metcalf and F. G. 
Weatherly, with the intention to hinder, delay and defraud complain- 
ants and others of their creditors, attempted to form a corporation, 
with a capital stock of $8,000," and put into the said corporation 
as its only capital stock, the stock of goods, wares and merchandise 
and notes and accounts, which were the assets of the firm of H. B. 
Metcalf; that "said H. B. Metcalf and F. G. Weatherly, carrying 
out their hitherto formed intention of hindering, delaying and defraud- 
ing complainants and their other creditors, had the stock of said cor- 
poration, consisting of eighty shares, of the par value of $100 each, 
issued as follows: thirty-six shares of par value of $3,600, to A. P. 
Metcalf, the wife of H. B. Metcalf; eighteen shares of par value of 
$1,800, to H. B. Metcalf; seventeen shares of the par value of $1,700, 
to M. M. Weatherly, the wife of F. G. Weatherly; and nine shares 
of the par value $900, to F. G. Weatherly." 

^ Arguments omitted. 
7— WiL. Casks. 



98 METCALF V. ARNOLD. ^ § 20 

It was further averred that the corporation so attempted to be formed 
was known and called the "Metcalf Drug Company," but that the 
said A. P. Metcalf and M. M. Weatherly had no interest whatever in 
the effects put into the formation of the capital stock of said corpora- 
tion ; that all of said property put into the said corporation belonged 
to H, B. Metcalf and F. G. Weatherly, doing business in the firm 
name of H. B. Metcalf; and that the property so put into the corpo- 
ration constituted all, or substantially all, of the property belonging to 
said firm and to each member thereof, upon which property the com- 
plainants had an equitable lien for the payment of their debts. 

It was further averred "that on, to wit, April i8, 1894, by a collu- 
sion between H. B, Metcalf and F. G. Weatherly and a small creditor 
of theirs, a judgment was allowed to be taken against the said defend- 
ants, H. B. Metcalf and F. G. Weatherly, in a justice court, for an 
amount less than one hundred dollars, upon which judgment execution 
was issued and levied upon seventeen shares of stock in the name of 
H. B. Metcalf and eight shares in the name of F. G. Weathei"ly, and 
the said H. B. Metcalf and F. G. Weatherly, with the still further 
fraudulent intent of placing all their property beyond the reach of 
their creditors, allowed all of said shares to be sold at public outcry, 
and they pretended that said shares were bought in by their respective 
wives, but your orators allege that in truth and in fact the amount so 
bid at such sale for said stock was paid by the said H. B. Metcalf and 
F. G. Weatherly. 

The bill further averred "that according to the stock-books of the 
Metcalf Drug Company, the said H. B. Metcalf now owns one share of 
stock and the said F. G. Weatherly owns one share of stock, but upon 
said stock-books, notice is given that the one share of H. B. Metcalf 
is transferred as collateral security to his wife for a pretended debt, 
and the one share of F. G. Weatherly is transferred to his wife as 
collateral security for a pretended debt." 

The prayer of the bill was for the issuance of an injunction restrain- 
ing the defendants and each of them from disposing of, transferring 
or incumbering any of the property referred to in the bill, and for the 
appointment of a receiver of the goods, wares, merchandise and the 
notes, accounts and books of the Metcalf Drug Co., and "that on a 
final hearing of this cause, your honor will decree that the formation 
of said coi-poration was fraudulent and void as to your orators, and 
that the issue of stock and pretended interest therein of A. P. Met- 
calf and M. M. Weatherly is illegal and void as to your orators, and that 
your orators have a lien upon said property to the extent of debts due 
them, and that your honor will order a reference to ascertain the 
amount of debts due your orators and any other creditors who may 
come in and make themselves parties hereto ; and will order the re- 
ceiver to sell and dispose of said stock of goods, and to collect the 
notes and accounts, and pay your orators out of the proceed thereof," 

The respondents demurred to the bill, and assigned many grounds, 
the substance of which were the following: (i) The said bill seeks to 
forfeit the charter of the Metcalf Drug Company, and fails to show 



§ 20 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. 99 

that it was not duly organized according to law. (2) The bill seeks 
to forfeit the charter of the Metcalf Ding Company, and fails to set 
forth any grounds for the forfeiture of said charter. (3) The bill 
seeks to condemn the assets of the Metcalf Drug Company to the pay- 
ment of debts for which it is not liable. (4) The bill shows on its 
face that the debts which are sought to be collected in this suit are due 
from H. B. Metcalf and F. G. Weatherly, as partners, under the firm 
name of H. B. Metcalf, and are not due from the Metcalf Drug Com- 
pany, and yet the bill seeks, to condemn the property of the Metcalf 
Drug Company, and not the property of said debtors. (5) The bill 
seeks to fasten a specific lien on the goods, wares, merchandise, notes 
and accounts delivered in payment of the corporate stock in the Met- 
calf Dnig Company, but fails to state that all, or any part, or what 
part of said assets were in the possession of the defendants, or anyone 
of them, at the time of the filing of the bill in this cause. 

On the submission of the cause on the demurrer, the chancellor 
overruled the said demurrer. The defendants appeal from this decree, 
and assign the same as error. 

Brickell, C. J. The demurrer was properly overiniled. The bill 
is not, as is supposed by several of the causes of demurrer, a bill as- 
sailing collaterally the incorporation of the Metcalf Drug Company 
and seeking a forfeiture of its charter. It is a bill by judgment cred- 
itors, seeking the aid of a court of equity to remove obstacles and 
hindrances to the enforcement of their judgments, which the judgment 
debtors have fraudulently interposed. Whatever maybe the character 
of the obstacle or hindrance ; whatever may be the scheme or device 
to which the debtor resorts, it lies within the province of a court of 
equity to remove it. The formation of a corporation, investing it with 
the legal title to all_^ the property and rights of property of the judg- 
ment-debtors, and parcelling out the stock of the corporation to the 
debtors and their wives, may be a new device for hindering, delaying 
and defrauding creditors. The novelty of the device is not of conse- 
quence ; the fraud of its conception and consummation vitiates it, as 
fraud vitiates all transactions tainted with it. The bill does pray that 
the formation of the corporation be deemed fraudulent and void as to 
the complainant's. Such a decree would be proper in granting to the 
complainants the full measure of relief to which they are entitled if 
the allegations of the bill be true. But it would not work a forfeiture 
of the charter, or a dissolution of the corporation ; it would simply be 
ancillary to the divestiture of the title to the property, liable to the 
debts of the complainants, with which it had been invested by the 
ju dgment-debtors . 

Let the decree of the chancellor be affirmed. 

Note. See also: 1865, Booth v. Bunce, 33 N. Y. 139, 88 Am. Dec. 372; 
1878, Des Moines Gas Co. v. West, 50 Iowa 16; 1882, Hibernia Insurance Co. v. 
St. Louif*., etc., Trans. Co., 13 Fed. Rep. 516; 1886, Slatterly v. St. Louis, etc., 
T. Co., 91 Mo. 217, 60 Am. Rep. 245; 1890, Montgomery Web Co. v. Dienelt, 
133 Pa. St. 585; 1891, Breman, etc., Bank v. Branch, etc., Co., 104 Mo. 425, 
16 S. W. 209; 1892, Vance v. McNabb, 92 Tenn. 47; 1892, Miner v. Belle Isle 
Ice Co., 93 Mich. 97, 53 N. W. 218; 1896, Austin v.Tecumseh Natl. Bank, 49 



lOO PEOPLE V. NORTH RIVER SUGAR REFINING CO. § 21 

Neb. 412, 68 N. W. 628, 5 A. & E. Corp. Cas. N. S. 382, 35 L. R. A. 444; 
1897, Ewing v. Composite, etc., Co., 169 Mass. 72; 1897, Gates v. Tippecanoe 
Stone Co., 57 O. S. 60, 48 N. E. Rep. 285, 7 A. & E. Corp. Cas. N. S. 431. 



Sec. 21. Same. (^) When corporate sins result from the con- 
certed, but apparently individual, actions of the corporation 
members. 

THE PEOPLE, Etc., Respondent, v. THE NORTH RIVER SUGAR 
REFINING COMPANY, Appellant.^ 

1890. In the Court of Appeals of New York. 121 N. Y. 
582-626, 18 Am. St. Rep. 843, 32 Am. & E. Corp. Cas. 149, 
24 North Eastern Rep. 834; also in the lower court, 54 Hun 
354, 7 N. Y. Supp. 406, 22 A. & E. Corp. Cases 511, 5 Ry. & 
Corp. L. J. 56, 6 Ry. & Corp. L. J. 442. 

Appeal from judgment of the general term of the supreme court in 
the first judicial department, entered upon an order made November 
7, 1889, which affirmed a judgment in favor of plaintiff entered upon 
a verdict directed by the trial court, and affirmed an order denying a 
motion for a new trial. 

This action was brought by the attorney-general to have the defend- 
ant "dissolved, its charter vacated and its corporate existence an- 
nulled." This complaint alleged, and it was found that defendant is 
a corporation organized under the general manvif acturing act ; that it, 
together with other corporations and firms, in violation of law and in 
abuse of its powers, became a party to and carried^ out an agreement 
which among other things provided in substance as follows : 

Deed: The undersigned, nameh', Havemeyers & Elder [and fourteen 
other sugar refining partnerships "and corporations named, including the 
North River Sugar Refining Co.], for the purpose of forming the board, here- 
inafter provided for, and the other purposes hereinafter set forth, enter into 
the following agreement: Name, the board shall be designated the Sugar 
Refineries Company. Objects: (1) To promote economy of administration, 
reduce the cost of refining, and keep the price of sugar as low as is consistent 
with reasonable profit. (2) To give each refining company benefit of all 
appliances and processes known or used by the others, useful to improve qual- 
ity, and diminish cost of sugar. (3) To protect against unlawful combinations 
of labor. (4) To prevent the lowering of the standard of refined sugars, and 
(5) Generally to promote the interests of the parties hereto in all lawful and 
suitable ways. Board: All parties hereto not corporations, to become such 
before deed goes into effect ; all shares of stock of each corporation to be trans- 
ferred to a hoard, consisting of eleven persons, any member to be removable 
by two-thirds of the entire board for incapacity or refusal to serve, vacancies 
in term to be filled by vote of board, at end of terms by election of certificate 
holders, at an annual meeting in New York City. Board to make by-laws 
for themselves, act by proxy if they choose, majority to be a quorum, and 
majority of quorum to control, except in appropriating money, a majority of 
all, required ; members of board to be members of boards of directors of the 

^ Statement of facts condensed. Arguments and parts of the opinion omitted. 



§21 THE CORPORATION AS A COLLECTION OF INDIVIDUALS, lOI 

several companies ; shares in such companies to be transferred to them in 
order to qualify them, if necessary ; members of board to be divided into three 
classes, first to serve seven years (each being named), second, five years 
(each named), and third, three years (naming them). Officers: Board tc 
appoint a president, vice-president and treasurer from the members of the 
board, and a secretary (not necessarily a member of the board), and such 
other officers as necessary, fixing their duties. Plans: The several parties 
hereto to maintain their separate organizations, and carry on and conduct their 
own business. Capital stock of each corporation to be transferred to the 
board, and certificates not exceeding $50,000,000 (500,000 shares of $100 each) 
to be issued by the board to each refinery in proportion to the value of its 
plant as fixed by appraisers to be selected, and each stockholder in each 
refinery to have such proportion of the certificates issued to each refinery as 
his stock bore to the stock of that refinery, except 15 per cent, of the shares 
allotted to each refinery to be left with the board to be disposed of for the 
purchase of other refineries or increasing the refining capacity of the parties 
hereto. 

The certificate provided that the holder was entitled to shares in the 

sugar refineries company, subject to the provisions of the deed, transfera- 
ble on the books of the board upon surrender, subject to right to increase the 
total stock, or change this deed, and the assignee, by accepting the certificate 
to be held to agree to the terms of the deed, or changes made therein. The 
title to the stock of the corporations to be in the members of the board as 
trustees, strictly as joint tenants and having all the rights and powers inci- 
dent to stockholders in the several corporations, subject to the provisions of 
this deed. Profits of each corporation to be paid to the board, and dividends 
distributed by the board to certificate holders. Changes in the deed to be 
made by a majority of certificate holders. Other refineries to be added upon 
terms provided by "the board. Custody of the deed to be in the president of 
the board, with sole and independent control, and not to be shown to any cor- 
poration, firm or person whatsoever except by express direction of the board. 

The stockholders of the North River Sugar Refining Company in April, 
1887, at a meeting when all the trustees were present, appointed a committee 
to make arrangements to consolidate the sugar refineries of New York, and 
directed the president and secretary to sign such contract as the committee 
should make for that purpose. The secretary, on behalf of the company, in 
September signed the foregoing deed to go into effect in October. In Novem- 
ber, at a stockholders' meeting, the powers of the committee and the presi- 
dent and secretary were revoked, but it was recited that one John Searles, 
Jr., had offered to purchase all of the stock for $325,000, and it was unani- 
mously resolved that a committee be appointed to deliver it to him, the pro- 
ceeds to be divided in proportion to the ownership of shares by the stock- 
holders. Accordingly, the members individually, transferred their shares, 
indorsed in blank, to Searles, who was a member and the secretary and treas- 
urer of the board created by the deed above set forth ; the stock was by 
Searles transferred to the board, and it issued certificates to the shareholders 
to the amount of $700,000, less 15 percent., as provided by the deed; new 
directors were chosen by the board, Searles became president, and shortly 
afterward the works of the North River Sugar Refineries Company were 
closed, and never run thereafter, though it was allotted its share of dividends 
for its certificate holders. 

Finch, J. The judgment sought against the defendant is one of 
corporate death. The state, which created, asks us to destroy; and 
the penalty invoked represents the extreme rigor of the law. Its in- 
fliction must rest upon grave cause, and be warranted by material mis- 
conduct. The life of a corporation is indeed less than that of the hum- 
blest citizen, and yet it envelopes great accumulations of property, 
moves and carries in large volume the business and enterprise of the 



I02 PEOPLE V. NORTH RIVER SUGAR REFINING CO. §21 

people, and may not be destroyed without clear and abundant reason. 
That would be true, even if the legislature should debate the destruc- 
tion of the corporate life by a repeal of the corporate charter ; but is 
beyond dispute where the state summons the offender before its judi- 
cial tribunals, and submits its complaint to their judgment and review. 
By that process it assumes the burden of establishing the charges which 
it has made, and must show us warrant in the facts for the relief which 
it seeks. * * * 

Two questions, therefore, open before us, first, has the defendant 
corporation exceeded or abused its powers; and second, does that ex- 
cess or abuse threaten or harm the public welfare. 

The first question requires us to ascertain what the defendant cor- 
poration has done in violation of its duty, or omitted to do in perfor- 
mance of its duty. We find disclosed by the proof that it has become 
an integral part and constituent element of a combination which 
possesses over it an absolute control, which has absoi'bed most of its 
corporate functions, and dictates the extent and manner and terms of 
its entire business activity. Into that combination, which drew into 
its control sixteen other corporations engaged in the refining of sugar, 
the defendant has gone, in some manner and by some process, for, as 
an unquestionable tiiith, we find it there. All its stock has been trans- 
ferred to the central association of eleven individuals denominated a 
"Board;" in exchange it has taken and distributed to its own stock- 
holders certificates of the board carrying a proportionate interest in 
what it describes as its capital stock ; the new directors of the defen- 
dant corporation have been chosen by the board, made eligible by its 
gift of single shares, and liable to removal under the terms of their 
appointment at any moment of independent action. It has lost the 
power to inake a dividend, and is compelled to pay over its net earn- 
ings to the master whose sei*vant it has become. Under the orders of 
that master it has ceased to refine sugar, and, by so much, has lessened 
the supply upon the market. It can not stir unless the master approves, 
and yet is entitled to receive from the earnings of the other refineries, 
massed as profits in the treasuiy of the board, its proportionate share 
for division among its own stockholders holding the substituted certifi- 
cates. In return for this advantage it has become liable to be mort- 
gaged, not for its own corporate benefit alone, but to supply with funds 
the controlling board when reaching out for other and coveted refineries. 
No one can look these facts fairly in the face without being compelled 
to say that the defendant is in the combination and in to stay. In-, 
deed, so much is with great frankness admitted on the part of the ap- 
pellant. Its counsel concedes that the stock was transferred "to the 
board mentioned in the agreement and on the terms and for the pur- 
poses mentioned in the agreement ; and that this action effectually 
lodged the control of the defendant company, so far as such contol 
can be secured by the voting power in that board." 

But that truth does not alone solve the problem presented. We 
are yet to ascertain whether the corporation became the subordinate 
and servant of the board by its own voluntary action, or the will and 



§ 21 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. I03 

power of others than itself ; by force of a contract to which it was in 
reality a party, or as the simple consequence of a change of owners; 
by its fault or its misfortune ; by a sale or by a trust. For, if it has 
done nothing, if what has happened, and all that has happened, is as- 
certained to be that the stockholders of the defendant, one or many, 
sold absolutely to the eleven men who constituted the board their 
entire stock, and the latter, by force of their proprietorship and as 
owners, have merely chosen directors, in their own interest, and are 
only managing their property in their own way as any absolute own- 
ers may; if that is the truth, and the entire and exact truth, it is dif- 
ficult to see wherein the corporation has sinned, or what it has done 
beyond merely omitting for a time to carry on its business. That is 
the theory upon which the appellant stands, and which it submits to 
our examination. 

On the other hand it is contended that there never was a sale, but a 
trust constituted by mutual agreement; that they who agreed were 
the whole body of stockholders in each corporation necessarily repre- 
senting and binding the corporation itself ; that they transferred their 
shares to the board upon the trusts declared in the deed ; that the cer- 
tificates issued by the board were the formal declaration of the trust; 
that the corporate stockholders parted with the legal title of their stock 
to the chosen trustees with the power to vote upon it, but retained, 
nevertheless, its beneficial ownership through the operation of the cer- 
tificates ; and so the corporations entered into a partnership with each 
other, vesting the partnership power in a board of control. 

I have brought these two theories face to face, where they may con- 
front each other, because, when a choice is made between them, we 
have gone a long distance towards the end of the controversy. 

[After reviewing the provisions of the deed and indicating that a sale im- 
plies existing vendors and vendees, a negotiation between them, signing of 
the formal contract by both, a vesting of the entire dominion in the vendee, 
with the accompanying rights of ownership, in all of which points the deed 
was peculiarly deficient ; and on the other hand that the board was expressly 
made trustees, with managing powers of stockholders only by the express 
terms of the deed, and not as an incident of real ownership ; that the right to 
mortgage was derived from the deed alone, and not as owner; that payment 
was to be made not by money but by certificates of the board created by the 
deed, who were not to create any liability either as a whole, or by its mem- 
bers, all of which indicated a trust and nothing more, the opinion proceeds:] 

The combination, therefore, framed by the deed was a trust; and, 
if created by the corporations, or in any respect the consequence or 
product of their action, some inevitable results would be certain to 
follow. But here we encounter the stronghold of the appellant's argu- 
ment which is, that if the corporations are in some manner in the com- 
bination, they are there solely as the result of a contract other than 
their own ; are there without corporate action on their part ; and so 
are sufferers and not sinners. The reasoning leading to that result is 
so severely technical as to have suggested a justification almost remind- 
ing one of an apology. We are called upon to sever the corporation, 
the abstract legal entity, from the living and acting corporators ; as it 



I04 PEOPLE V. NORTH RIVER SUGAR REFINING CO. §21 

were, to separate in our thought the soul from the body, and admit- 
ting the sins of the latter to adjudge that the former remains pure. 
Let us first recall the facts in the order of their occurrence. 

[After stating the facts in relation to the surrender to the board, substan- 
tially as above set forth, p. 101, the opinion proceeds:] 

And yet it is argued that the corporation, the legal entity, has done 
nothing; that Searles was guilty, but the corporate robe that enveloped 
him was innocent, and so he must be left to wear it undisturbed ; that 
while all that was human and could act had sinned, yet the impalpa- 
ble entity had not acted at all and must go free. I believe that the 
history of what occurred, as I have already described it, furnishes a 
sufficient answer, assuming that stockholders and trustees acting to- 
gether can do a corporate act at all. There was corporate action in 
making the combination agreement which bound the defendant. The 
revocation of an executed authority left the contract standing. The 
corporation thus helped to make the tnist and became an element of 
it. If there was anything imperfect in its action, the new stockholder 
and his associates waived the imperfection by acting upon the agree- 
ment of the corporation, and so confirming it in all particulars. 

But the assumption underlying the view I have expressed is itself 
contested, and a proposition asserted which denies the possibility of 
any corporate action, except by the trustees or directors acting for- 
mally as such; a proposition which, if sound, dominates the whole 
field of controversy, and, establishing that there has been no corpo- 
rate action at all, effectually shuts out every question of illegality or 
public injury. I can not admit that proposition. I think there may be 
actual corporate conduct which is not formal corporate action; and where 
that conduct is directed or produced by the whole body, both of officers 
and stockholders, by every living instrumentality which can possess and 
wield the corporate franchise , that conduct is of a corporate character, 
and if illegal and injurious m.ay deserve and receive the penalty of dis- 
solution. 

There always is, and there always must be, corporate conduct with- 
out formal corporate action where the thing challenged is an omission 
to act at all. A corporation organized in the public interest, with a 
view to the public welfare, and in the expectation of benefit to the 
community, which is the motive of the state's grant, may accept the 
franchise and hold it in sullen silence, doing nothing, resolving noth- 
ing, furnishing no formal corporate action upon which the state can 
put its finger and say, this the corporation has done by the agency 
through which it is authorized to act. That is corporate conduct 
which the state may question and punish without searching for a for- 
mal corporate act. The directors of a corporation, its authorized and 
active agency, may seethe stockholders perverting its normal purposes 
by handing it over, bound and helpless, to an irresponsible and for- 
eign authority, and omit all action which they ought to take, offer no 
resistance, make no protest, but silently acquiesce as directors in the 
wrong which, as stockholders, they have themselves helped to com- 



4 21 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. IO5 

mit. That again is corporate conduct, though there be an utter ab- 
sence of directors' resolutions. 

Is it asked what they could have done to prevent the organization 
of the trust, how they were negligent and unfaithful as corporate of- 
ficers by their omission to act; what good a mere protest or objection 
would have accomplished ; what effective form their resistance could 
have assumed ? The answer is that they could have refused to recog- 
nize the illegal trust transfer of the stock; they could have declined to 
register the new ownership upon their stock books; they could have 
said, and acted upon their words, that the original stockholders re- 
mained not only the beneficial, but the legal owners of the stock; 
and, if the board of trustees appealed to the law, the resisting directors 
could challenge the legality of the transfer as molded by the combina- 
tion agreement, and might have defeated the tnist and shattered it at 
the outset of its career. So much they could have done as coiporate 
officers ; so much it was their duty to have done as representatives of 
the corporation, and when beyond that corporate neglect they recog- 
nized the validity of the stock transfers in trust, put the new and un- 
lawful ownership upon their books, and accepted its votes in the 
choice of new directors, who were to throttle the independence of the 
corporation and chain it to the will of the tioist, I think we must shut 
our eyes in willful blindness if we fail to see both corporate neglect 
and corporate action. 

It is true, as we are reminded, that the statute confers upon trustees 
and directors general authority to manage the stock, property and con- 
cerns of manufacturing corporations ; and equally true that, as a gen- 
eral rule and as between the companies and those with whom they 
deal, the corporate action must be manifested through and by the di- 
rectors ; but other statutes indicate with equal plainness that there are 
corporate acts which the trustees can not perform, and which affect 
and bind the corporation only upon the condition that they proceed 
from the stockholders, or from them and the trustees acting together. 
In increasing or diminishing the capital stock, the corporate act is 
wholly that of the corporators, and in consolidating two or more com- 
panies into one, there must be the joint action of both trustees and 
stockholders. The tnist of the refineries, in substance and effect, ap- 
proached very near to these two coi-porate acts, so far as the resultant 
consequences affected the corporators acting. The tnist stipulations 
practically doubled their coiporate stock through the agency of the 
certificates issued, and the combination in its result is largely the equiv- 
alent of a substantial consolidation. If these things had been done 
lawfully, they would have been accomplished by the united action of 
trustees and corporators, and beyond any question would have been 
corporate acts. Having been done unlawfully, but by the same united 
agency aiming at similar results, they must still constitute corporate 
conduct, unless the bare fact of their illegality takes away their corpo- 
rate character. To say that would disarm the state in every case of 
misuse or abuse of chartered powers. 

The abstract idea of a corporation, the legal entity, the impalpable 



I06 PEOPLE V, NORTH RIVER SUGAR REFINING CO. § 21 

and intangible creation of human thought is itself a fiction , and has been 
appropriately described as a figure of speech. It serves very well to 
designate in our minds the collective action and agency of many indi- 
viduals as permitted by the law; and the substantial inquiry always is 
what in a given case has been that collective action and agency. As 
between the corporation and those with whom it deals the manner of its 
exercise usually is m.aterial, but as between it and the state, the sub- 
stantial inquiry is only what that collective action and agency has done, 
2vhat it has, in fact, accomplished, what is seen to be its effective work, 
7vhat has been its conduct. It ought not to be otherwise. The state 
gave the franchise, the charter, not to the impalpable, intayigible and 
almost nebulous fiction of our thought, but to the corporators, the indi- 
viduals, the acting a7id living -men to be used by them, to redound to 
their benefit, to strengthen their hands and add energy to their capital. 
If it is taken away, it is taken from them as individuals and corpora- 
tors, and the legal fiction disappears. The benefit is theirs, the pun- 
ishme?it is theirs, and both must attend and depend upon their conduct; 
ayid when they all act collectively , as an aggregate body, without the 
least exception, and so acting, reach results and accomplish purposes 
clearly corporate in their character, and affecting the vitality, the inde- 
pendence, the utility of the corporation itself, we can not hesitate to co?i- 
clude that there has been corporate conduct which the state may review, 
and not be defeated by the assumed innocence of a convenient fiction. 
As was said in People, ex rel., v. K. & M. T. R. Co. (23 Wend. 
193)? "thougli the proceeding by information be against the corpo- 
rate body, it is the acts or omissions of the individual corporators that 
are the subject of the judgment of the court." 

It remains to determine whether the conduct of the defendant in 
participating in the creation of the trust, and becoming an element of 
it was illegal and tended to the public injury and we may consider the 
two questions together and without formal separation. 

It is quite clear that the effect of the defendant's action was to divest 
itself of the essential and vital elements of its franchise by placing 
them in trust ; to accept from the state the gift of corporate life only 
to disregard the conditions upon which it was given ; to receive its 
powers and privileges merely to put them in pawn ; and to give away 
to an irresponsible board its entire independence and self-control. 
When it had passed into the hands of the trust, only a shell of a cor- 
poration was left standing, as a seeming obedience to the law, but 
with its internal structure destroyed or removed. Its stockholders, 
retaining their beneficial interest, have separated from it in their voting 
power, and so parted with the control which the charter gave them 
and the state required them to exercise. It has a board of directors 
nominally and formally in office, but qualified by shares which they 
do not own, and owing their official life to the board which can end 
their power at any moment of disobedience. It can make no dividends 
whatever may be its net earnings, and must encumber its property at 
the command of its master, and for purposes wholly foreign to its own 
corporate interests and duties. At the command of that master it has 



§ 21 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. lO/ 

ceased to refine sugar, and without any doubt for the purpose of so 
far lessening the market supply as to prevent what is termed "over- 
production." In all these respects it has wasted and perverted the 
privileges conferred by the charter, abused its powers, and proved 
unfaithful to its duties. But graver still is the illegal action substituted 
for the conduct which the state had a right to expect and require. It 
has helped to create an anomalous trust which is, in substance and 
effect, a partnership of twenty separate corporations. 

The state permits in many ways an aggregation of capital, but mind- 
ful of the possible dangers to the people overbalancing the benefits, 
keeps upon it a restraining hand, and maintains over it a prudent 
supervision, where such aggregation depends upon its permission and 
grows out of its corporate grants. It is a violation of law for corpo- 
rations to enter into a partnership. N. Y. & S. C. Co. v. F. Bank, 
7 Wend. 412; Clearwater v. Meredith, i Wall. 29; Whittenton 
Mills V. Upton, 10 Gray 596. The case last cited furnishes the rea- 
sons with precision and at length. It shows the utter inconsistency 
of a double allegiance by those who act for the corporation to two dif- 
ferent principals, and demonstrates that the vital characteristics of the 
corporation are of necessity drowned in the parainount authority of 
the partnership. That the combination of the refineries partakes of 
the nature of a partnership is not denied. Indeed, in one of the papers 
added to the appellant's brief, it is not only admitted, but asserted 
and defended. That paper shows quite clearly that by force of the 
arrangement there was a community of interest in the fund created by 
the corporate earnings before division, and that each member of the 
ti"ust shared in the profit and loss of all. It is said, however, that a 
consolidation of manufacturing corporations is permitted by the law, 
and that the trust, or combination, or partnership, however it may be 
described, amounts only to a practical consolidation, which public 
policy does not forbid, because the statute permits it. Laws of 1867, 
ch. 960; Laws of 1884, ch. 367. The refineries did not avail them- 
selves of that statute. They chose to disregard it, and to reach its 
practical results without subjection to the prudential restraints with 
which the state accompanied its permission. 

If there had been a consolidation under the statute, one single cor- 
poration would have taken the place of the others dissolved. They 
would have disappeared utterly, and not, as under the trust, remained 
in apparent existence to threaten and menace other organizations 
and occupy the ground which otherwise would be left free. Under 
the statute the resultant combination would itself be a corporation de- 
riving its existence from the state, owing duties and obligations to the 
state, and subject to the control and supervision of the state, and not, 
as here, an unincorporated board, a colossal and gigantic partnership, 
having no corporate functions and owing no corporate allegiance. 
Under the statute the consolidated company taking the place of the 
separate corporations could have as capital stock only an amount equal 
to the fair aggregate value of the rights and franchises of the compa- 
nies absorbed ; and not as here a capital stock double that value at the 



108 PEOPLE V. NORTH RIVER SUGAR REFINING CO. § 21 

outset and capable of an elastic and irresponsible increase. The dif- 
ference is very great and serves further to indicate the inherent ille- 
gality of the trust combination. 

And here, I think, we gain a definite view of the injurious tenden- 
cies developed by its organization and operation, and of the public 
interests which are menaced by its action. As corporate grants are 
always assumed to have been made for the public benejit^ any conduct 
which destroys their normal functions, and jnaims and cripples their 
separate activity, and takes away their free and independent action, 
must so far disappoint the purpose of their creation as to affect un- 
favorably the public interest; and that to a much greater exte?ttxvhen 
beyond their own several aggregations of capital they compact them 
all into one combination which stands outside of the ward of the state, 
which dominates the range of an entire industry, and puts upon the 
market a capital stock proudly defiant of actual values, and capable 
of an tcnlimited expansion. It is not a sufficient answer to say that 
similar results may be lawfully accomplished ; that an individual hav- 
ing the necessary wealth might have bought all these refineries, manned 
them with his own chosen agents, and managed them as a group at 
his sovereign will ; for it is one thing for the state to respect the rights 
of ownership and protect them out of regard to the business freedom 
of the citizen, and quite another thing to add to that possibility a fur- 
ther extension of those consequences by creating artificial persons to 
aid in producing such aggregations. 

The individuals are few who hold in possession such enormous 
wealth, and fewer still who peril it all in a manufacturing enterprise ; 
but if corporations can combine, and mass their forces in a solid tmst 
or partnership, with little added risk to the capital already embarked, 
without limit to the magnitude of the aggregation, a tempting and 
easy road is opened to enormous combinations, vastly exceeding in 
number and in strength and in their power over industiy any possibili- 
ties of individual ownership ; and the state by the creation of the 
artificial persons constituting the elements of the combination, and 
failing to limit and restrain their powers, becomes itself the responsi- 
ble creator, the voluntary cause of an aggregation of capital which it 
simply endures in the individual as the product of his free agency. 
What it may bear is one thing, what it should cause and create is quite 
another. 

And so we have reached our conclusion, and it appears to us to 
have been established, that the defendant corporation has violated its 
charter and failed in the performance of its corporate duties, and that 
in respects so material and important as to justify a judgment of disso- 
lution. Having reached that result, it becomes needless to advance 
into the wider discussion over monopolies and competition and re- 
straint of trade and the problems of political economy. Our duty is 
to leave them until some proper emergency compels their considera- 
tion. Without either approval or disapproval of the views expressed 
upon that branch of the case by the courts below, we are enabled to 
decide that in this state there can be no partnerships of separate and 



§ 21 THE CORPORATION AS A COLLECTION OF INDIVIDUALS. IO9 

independent corporations, whether directly, or indirectly through the 
medium of a trust ; no substantial consolidations which avoid and dis- 
regard the statutory permissions and restraints, but that manufactur- 
ing corporations must be and remain several as they were created, or 
one under the statute. 

The judgment appealed from should be affirmed with costs. 

All concur. 

Judgment affirmed. 

Note. (1) The right of the state to forfeit the charter of a corporation for a 
violation of it injuriously affecting the public, is treated in ch. 16, infra, p. 
1294, et seq. 

(2) Also the power of a corporation to become a member of a paitneish : 
is treated in ch. 13, infra, p. 957. 

(3) As to the "fiction of the legal entity of the corporation" see particularly,. 
1892, State v. Standard Oil Co., 49 Ohio St. R. 137, 34 Am. St. R. 641, and 
the quotations from Morawetz and Taylor, in the note to this article, infra, 
p. 110. Also 1895, Ford v. Chicago Milk Shippers' Association, 155 111. 166; 
1895, Belden v. Burke, 147 N. Y. 542; 1888, Wood v. Trust Co., 128 U. S. 416. 

(4) As to validitv of trusts or combinations in restraint of trade. See 1889, 
Richardson v. Buhl, 77 Mich. 632, 27 Am. & E. C. C. 256; 1889, People v. 
Chicago Gas Trust, 130 111. 268, 17 Am. St. R. 319, 29 Am. & E. C. C. 257; 
1889, Gibbs v. Consolidated Gas Co., 130 U. S. 396, 25 Am. & E. C. C. 369 ; 1890, 
Emery v. Ohio Candle Co., 47 Ohio St. 320, 32 Am. & E. C. C. 165 ; 1890, State 
V. Nebraska Distilling Co., 29 Neb. 700, 29 Am. & E. C. C. 656; 1891, Huston 
V. RentUnger, 91 Kv. 333, 34 Am. St. R. 225 ; 1893, People v. Sheldon, 139 N. Y. 
251, 36 Am. St. R. 690; 1894, Nester v. Continental Brewing Co., 161 Pa. St. 
473, 41 Am. St. R. 894; 1895, Distilling & Cattle F. Co. v. People, 156 111. 448, 
47 Am. St. R. 200; 1895, People v. Milk Exchange, 145 N. Y. 267, 45 Am. St. 
R. 609; 1897, People v. Chicago Live Stock Exchange, 170 111. 556, 62 Am. St. 
R. 404 ; 1897, United States v. Joint Traffic Association, 76 Fed. R. 895, s. c. 
in 171 U. S. 505. 



NOTES TO ARTICLE III. 



The corporation as a collection of individuals, history and definitions: 
Mr. Kyd (Corporations, vol. 1, p. 13, 1793) says: A corporation, or body 

Eolitic, or body incorporate is a collection of many individuals united in one 
ody, under a special denomination, having perpetual succession under an 
artificial form, and vested by the policy of the law with the capacity of act- 
ing in several respects as an individual, particularly of taking and granting 
property, of contracting obligations, and of suing and being sued, of enjoying 
privileges and immunities in common, and of exercising a variety of political 
rights, more or less extensive, according to the design of its institution, or 
the powers conferred upon it, either at the time of its creation or at any sub- 
sequent period of its existence." 

In Hope Insurance Co. v. Boardman, 5 Cranch (9 U. S.) 57, 1809, and in 
Bank of United States v. Deveaux, 5 Cranch (9 U. S.) 61, same year, it was 
held, in regard to the citizenship of corporations for the purpose of jurisdic- 
tion, that the court "would look beyond the mere legal being which the 
charter created, and consider the character as to citizenship, of the individ- 
uals of whom the company is composed." This, of course, ignored the cor- 
porate personality, and continued to be the law till 1844, when the case of 
Louisville, etc., R. R. Co. v. Letson, 2 Howard (43 LT. S.) 497, 558. announced 
that a corporation "is to be deemed to all intents and purposes as a person, 
although an artificial person," and a citizen of the state creating it. In the later 
case of Ohio and Mississippi R. Co. v. Wheeler, 1 Black (66 U. S.) 286, 1861, 
the Deveaux and Letson cases were attempted to be reconciled, by inventing 
another strange fiction that the members of any corporation were to be conj. 



no NOTES TO ARTICLE III. 

clusively presumed to be citizens of the state creating the corporation, and 
"no averment or evidence to the contrary is admissible," though the truth is 
otherwise, and though the suit of a corporation "is to be considered as a suit 
by the individuals who compose it." This seems to be the theory yet. 

In Muller v. Dows, 94 U. S. 444, 1876, it is said : "A suit may be brought 
in the federal courts by or against a corporation, but in such a case it is re- 
garded as a suit brought by or against the stockholders of the corporation," 
all of whom are conclusively presumed to be citizens of the state creating the 
corporation. 

(See further on this point, Shaw v. Quincy Mining Co., 145 U. S. 444, infra, 
p. 1066, and St. Louis & S. F. R. v. James, 161 U. S. 645, infra, p. 1099. ) 

Judge Story, jn the Dartmouth College case, 1819 (4 Wheat. 667, infra, 
p. 727), while recognizing the artificial personality of the corporation, yet 
seemed to emphasize the collective or associate character more particularly 
He says: ' A corporation aggregate is a collection of individuals united into 
one collective body, under a special name, and possessing certain immunities 
privileges and capacities in its collective character, which do not belong to the 
natural persons composing it." 

Chief Justice Shaw, of Massachusetts, in Overseers of the Poor v. Sears 22 
Pick. (Mass.) 122 on 128, infra, p. 193, 1889, says; "A corporation aggregate 
consists of many persons united together into one society, and kept up by a 
perpetual succession of members so as to continue forever." 

Lumpkin, J., in Hightower v. Thornton, 8 Ga. 492, 1850, says: "Corpora- 
tions are but associations of individuals." So Baldwin, J., in Chater v. San 
Francisco, etc., Co., 19 Cal. 219, 1861 {supra, p. 80), says: "A corporation 
organized under general laws is scarcely more than a partnership, or an asso- 
ciation of individuals." Similarly Law, J., in Gelpcke v. Blake. 19 Iowa 263 
on 268, 1865, asks: "Who in law constitutes the company, if it be not the 
stockholders?" 

Mr. Morawetz, in the preface to the second edition of his Treatise on the 
Law of Private Corporations, 1886, says the first edition (which appeared in 
1882) was prepared according to a plan differing from that follow^ed in any 
previous treatise on the same subject, and specifies particularly : "The author 
was of the opinion that the law relating to private business corporations could 
not be clearly understood, unless the fact were recognized that such a corpo- 
ration IS really an association formed by the agreement of its stockholders, and 
that the existence of a corporation as an entity, independently of its mem- 
bers, IS a fiction ; and that while the fiction of a corporate entity has im- 
portant uses and can not be dispensed with, it is nevertheless essential to 
bear in mind distinctly that the rights and duties of an incorporated associa- 
tion are, in reality, the rights and duties of the persons who compose it, and 
not of an imaginary being." He retains the same view throughout the sec- 
ond edition. In section 227 he savs: "A corporation is really an association 
of persons, and no judicial dictum or legislative enactment can alter this fact." 
And "In equity the conception of a corporate entity is used merely as a 
formula for working out the rights and equities of the real parties in interest, 
while at law this figurative conception takes the shape of a dogma, and is 
often applied rigorously without regard to its true purpose and meaning. In 
equity the relationship between the shareholders is recognized whenever this 
becomes necessary to the attainment of justice ; at law this relationship is not 
recognized at all." He particularly enumerates that the unanimous actions 
of the members, within corporate powers, are the actions of the corporation; 
notice to all members is notice to the corporation; property of associations 
subject to debts can be followed, when vested in a corporation organized by 
their members; also in the questions relating to constitutionality of laws 
affecting corporations, and laws of consolidations and dissolutions of corpora- 
tions, the rights of creditors and the rights of members as against the corpo- 
ration, and in similar cases the fiction is necessarily overlooked or ignored. 
See sections 228, 229. 230 and 231. 

Mr. Taylor, Treaties on the Law of Private Corporations, in the preface to 
his first edition in 1884, says: "It is the opinion of the writer that the fie- 



THE CORPORATION AS A COLLECTION OF INDIVIDUALS. I I I 

tion of the 'legal person' has outlived its usefulness, and is no longer adequate 
for the purposes of an accurate treatment of the legal relations arising through 
the prosecution of a corporate enterprise. Bv dismissing this fiction a clearer 
view may be had of the actual human beings interested, whose rights may 
then be determined without unnecessary mystification." In the preface to 
his third edition, 1894, he says: "When special rules cease to accord with 
the general rule once back of them,— if no further convenient rules can be 
drawn from the general rule,— it drops from the body of the law. * * ♦ 
Thus it is at present with the rule or fiction that a corporation is a legal per- 
son ; it still represents a convenient phrase, nay, a convenient point of view ; 
but it is dead as a principle because legal propositions are no longer deduced 
from it, nor is it in logical connection with the great mass of legal rules which 
have been called forth by controversies relating to railroad and other busi- 
ness corporations," citing People v. North Riv. S. R. Co. (snpra, p. 100), and 
State v.Standard Oil Co., 49 O. S. 137. In the text, section 36, he says : "A corpo- 
ration, considered as a legal institution, is the sum of the legal relations re- 
sulting from the operation of rules of law, in its constitution upon the various 
persons, who, by fulfilling the prerequisite conditions, bring themselves within 
the operation of these rules." In section 48 he adds : "It is now necessary 
to determine who are the individuals composing the corporation regarded not 
as a mass of legal relations, but as a body of men. Can it be said that the 
corporation, or body corporate, is composed of all the persons between whom 
these legal relations subsist? This conception would embrace all persons in 
any way interested in the corporate enterprise, * * * the state * * * 
the shareholders and directors, * * * and creditors." But, he says, sec- 
tion 49, "It is more in accordance with the ordinary use of terrasj^ and a 
clearer and more serviceable conception, to regard the corporation as consist- 
ing of the shareholders, who may, with propriety, be said to constitute the 
body corporate, as it is through their acts, or the acts of their predecessors, 
that incorporation is caused." Section 50: "The shareholders, then, vested 
with the corporate powers, are the body corporate, corporation or company." 
Section 61 : "Such, then, are the two meanings of the term corporation ; the 
one, the sum of legal relations subsisting in respect to the corporate enter- 
prise; the other, the organic body of shareholders, whose acts cause the 
operation of the rules of law in the constitution. These two concep- 
tions include all that is really connoted by the term in whatever sense 
used. And, if so, what has become of the venerable 'legal person?' Is he 
still somewhere, as he has always been imagined? Or is he nowhere 
as he has always actually been? * * * Shall we say he is the combination, 
the mystic unification of our two conceptions? Better not; better forget him. 
For he is a conception, which, if it amounts to anything, is but a stumbling- 
block in the advance of corporation law towards the discrimination of the 
real rights of actual men and women. And then, after all, what has he ever 
been but an abstraction materialized in a name?" He says, also, note 1, § 51 : 
"It is in respect of the doctrine of ultra vires, that the fiction of a legal per- 
son is most pernicious, as this fiction involves regarding a corporation as a 
unit, and retards the proper discrimination of the rights of different persons 
in regard to tiltra vires acts." Compare the definition of Reese, supra, p. 79. 
Prof. Pomerov, in reviewing Mr. Taylor's work, under the title, "Legal 
Idea of a Corporation," 19 Am. Law Rev., pp. 114-116 (1885), says: "The 
common law conception of the 'legal personality' of the metaphysical entity 
constituting the corporation entirely distinct from its individual members 
arose at a time when corporations were all created by special charters, gen- 
erally granted by the crown ; when very few * * * were 'stock' corpora- 
tions, * * » and were necessarily monopolies. * * * In the United 
States * * * almost all private corporations * * * are formed under 
general laws * * * for almost any business purpose. * • * The asso- 
ciations thus formed * * * differ very little in their essential attributes 
from partnerships. * * • Of late years parliament has enacted statutes 
similar in their scope and effect to our general laws for the formation of pri- 
vate corporations. The English courts have never treated the joint-stock 



112 NOTES TO ARTICLE III. 

companies with limited liability, formed under these statutes, as being identi- 
cal with common law corporations, but have always carefully distinguished 
between them. In our opinion, tlie American courts must, in time, recognize 
and enforce the same distinction." 

In Pembina Mining Co. v. Pennsylvania, 125 U. S. 181, on 189 ( 1888), Field, 
J., says : "A private corporation is merely an association of individuals united 
for a special purpose and permitted to do business under a particular name, 
and have a succession of members without dissolution." He said the same 
in Baltimore, etc., R. Co. v. Fifth Baptist Church, 108 U. S. 317, 330 (1883). 

The Am. & Eng. Ency. (4 vol. 185) (1888), says: "A corporation is a body 
consisting of one or more persons, established by law for certain specific pur- 
poses, with the capacity of succession (either perpetual or for a limited 
period) and other special privileges not possessed by individuals, yet acting 
in many respects as an individual." 

Mr. Beach, Commentaries on the Law of Private Corporations, vol. 1, § 1, 
1891, after noting the conflicts in definitions given, says: "Although a cor- 
poration is, in a certain sense, something distinct from its members, having a 
life independent of theirs, the truth would seem to lie between these conflict- 
ing views of its nature. * * * The effort of practical jurisdiction should 
be to regard it as a unit or as a collection of persons according to the relation 
in which it acts in a given instance. As has been aptly said to this point 
(quoting Professor Pomeroy, 19 Am. Law Rev. 114) 'the shield will be either 
white or red accordingly as it is viewed from the one side or the other.' " 

Mr. Thompson, Commentaries on Corporations, 1895, §1, says: "The 
most usual conception of a corporation is that it is a collection of natural per- 
sons, joined together by their voluntary action or by legal compulsion, by or 
under the authority of an act of the legislature, to accomplish some purpose, 
pecuniary, ideal, or governmental, authorized by the legislature, under a 
scheme of organization and by methods thereby prescribed or permitted : 
with the faculty of having a continuous succession during the period pre- 
scribed by the legislature for its existence, of having an individual name by 
which it may make and take contracts and sue and be sued, and of acting as 
a unit in re*spect of all matters within the scope of the purposes for which it 
was created." 

Mr. Clark, Handbook of the Law of Private Corporations, 1897, §§ 1, 2, 3, 
says : "A corporation aggregate is a collection of individuals united, by author- 
ity of law, into one body, under a special denomination, with the capacity of 
perpetual succession. Every corporation aggregate consists of, (a) A collec- 
tion of individuals, (b) A legal entity, which is, for many purposes, in con- 
templation of law, separate and distinct from the members who compose it. 
For the purpose of acquiring, holding, and conveying property, contracting 
obligations, incurring liabilities, suing and being sued, a corporation is 
regarded in law as a legal entity separate and distinct from the members who 
compose it. * * * That a corporation is thus a legal entity, separate and 
distinct from the members who compose it, is a mere legal fiction introduced 
for the convenience of the corporation in transacting business, and of those 
who do business with it; and when urged to an intent and purpose not within 
its reason and policy, it will be disregarded, and the fact that the corporation 
is really a collection of individuals will be recognized, even at law. Courts 
of equity, in numerous instances, look behind the corporate entity, and recog- 
nize the individual members and will do so whenever justice requires." 

It seems from the foregoing, and still more from the further treatment of 
the subject by Mr. Beach, Mr. Thompson and Mr. Clark, that "the collection 
of individuals" is emphasized only by being placed first in their definitions 
as Mr. Kyd did, and is not made especially prominent as a principle from 
which to deduce theories of corporate rights and liabilities, as is the case with 
Mr. Morawetz and Mr. Taylor. 

Mr. Trapnell in "The Logical Conception of a Corporation," — a paper 
read before the West Virginia Bar Association in 1896, defines a corporation 
as "an association of individuals formed under the sanction of the state, for 
a distinct and definite purpose." He specifies particularly that the associa- 



§ 22 THE CORPORATION AS A FRANCHISE. II 3 

tion originates in an agreement between individuals, which becomes effective 
only through a special charter or general enabling act, the provisions of 
which are accepted by the execution of the agreement; the peculiar mode of 
existence is perpetual, actual or potential ; the distinct feature of its termina- 
tion is the state's power to dissolve for violation of the law ; the distinctive 
features as to membership are the effect of assignment of stock, and the confin- 
ing of rights and liabilities strictly to the proper purposes of the corporation ; 
as to the state's sanction, it must be an express legislative one, which operates 
both as a grant of poioers forming a contract with the state, and as a law, pre- 
scribing certain forms and modes of action, and, as to the purpose, it must be 
a definite one, and no corporate power is to be exercised outside of this ex- 
press or necessarily implied purpose, under penalty of forfeiture, and no 
corporate liability will arise therefrom except by way of estoppel ; the cor- 
porate actions must be tiirough the forms and by the parties or officers pre- 
scribed, and the funds must be applied only to the purposes indicated, with- 
out diversion or dissipation to the prejudice of members or creditors. The 
foregoing is the substance of what he submits "as a logical statement of all 
the elements essential to a modern business corporation, with such analysis 
of each as is necessary to differentiate a corporation from all other associa- 
tions known to law, as regards that particular," in other words "<o exhibit the 
anatomy of a healthy corporation.''' He says further: "It seems worth while 
to attempt to embody a clear conception of a corporation — immortality, 
'corporate identity,' 'perpetual succession,' and all — without any aid from 
the 'artificial' person whom Coke and Blackstone regarded so lovingly, and 
who is such a bugbear to, at least, one modern text writer." 



ARTICLE IV. THE CORPORATION AS A FRANCHISE. 

Sec. 22. In its relation to the state a corporation is considered 
as a primary franchise held by the members in their individual 
capacity, enabling them in their collective or corporate capac- 
ity to have and exercise other or secondary franchises, rights 
or privileges. 
(i) General nature of a franchise. 

THE PEOPLE, Etc., Ex Rel. The Attorney-General, v. THE UTICA 
INSURANCE COMPANY.* 

i8i8. In the Supreme Court of New York. 15 Johnson (N. 

Y.) *358-*395- 

[Information in the nature of quo warranto against the Utica In- 
surance Company, — a company authorized to do all kinds of insur- 
ance business, and "in general of doing and performing, in these op- 
erations, all the business generally performed by insurance companies, 
excepting therefrom that this corporation shall not engage in loaning 
any money upon bottomry and respondentia nor in making any in- 
surance upon any life or lives,"— for using without any warrant, 

> See note at end of this article, p 157. 

* Statement of facts condensed, parts of arguments, and parts of opinion 
omitted. 

8 — WiL. Cases. 



114 PEOPLE V. UTICA INSURANCE COMPANY. §22 

charter or grant the following liberties, privileges and franchises to 
wit, that of becoming proprietors of a bank or fund for the purpose of 
issuing notes, receiving deposits, making discounts, and transacting 
other business which incorporated banks may and do transact by vir- 
tue of their respective acts of recorporation, all of which liberties, 
privileges and franchises the said company have usurped and still do 
usurp upon the people of the state. The bank pleaded authority 
under their act of incorporation and the people demurred.] 

Attorneys \^Harrison and T. A. Emnief^ for the insurance com- 
pany maintained: i. The acts charged against the defendants aic 
not the exercise of franchises ; and therefore an information in the 
nature of a writ of quo warranto will not lie against them. Fran- 
chise or not is a question of law and is not admitted by the de- 
murrer. A franchise is a royal privilege, or branch of the royal pre- 
rogative, subsisting in the hands of the subject, by grant from the 
crown. A writ of quo warranto is the king's writ of right and 
and issues where a franchise is usurped, or forfeited by misuser. (2 
Bl. Com. 37, Finch's Law 38, 164, 166; 3 Cruises' Dig. 278, tit. 27, 
§ I.) The word "franchises" is often used, in common parlance, in 
a very broad sense, for all liberties, but its legal or technical signifi- 
cation is more confined. A franchise was, always, in England, a 
gem in the royal diadem. It was inherent in the crown from the first 
institution of monarchy. But the right of banking was never a fran- 
chise or branch of the royal prerogative. The bank of England was 
established in 1694, pursuant to an act of parliament (5 W. & M., 
cap. 20), which authorized their majesties, William and Mary, to 
grant a commission to take subscriptions from individuals, and to in- 
corporate them. Had the power of banking been a royal franchise, 
this special authority from parliament would not have been necessary. 

In 1697 (8 & 9 W. & M., ch. 20, § 28) it was enacted that during 
the continuance of the bank of England, no other bank, or any other 
corporation, society, fellowship, company or constitution, in the na- 
ture of a bank, should be erected or established, etc., by act of parlia- 
ment. 

This still left individuals and ancient corporations free to bank. But 
in 1708 (7 Anne, ch. 7, § 61), it was enacted, that during the continu- 
ance of the bank of England, it should not be lawful fcr any corpora- 
tion erected, or to be greeted (other than said bank), or for any other 
persons in partnership, exceeding the number of six persons, to take 
up money on their bills or notes, etc. It is clear, then, that if parlia- 
ment had not interfered, all corporations might lawfully have carried 
on banking business; the act of 7 Anne, restraining them, does not 
declare it unlawful, but merely prohibits the exercise of the power 
while the bank of England continued. It is manifest, therefore, that 
in England, banking was not considered as a royal franchise; and 
private banking is now carried on in that country by associations of 
partnership of not more than six persons. 

If we look to the acts of our legislature, we shall find that they 



§ 22 THE CORPORATION AS A FRANCHISE. 11$ 

speak the same doctrine. Numerous acts of incorporation have been 
passed since the restraining act of April ii, 1804, each of which con- 
tains a special clause to restrain the corporation from banking. 

[Here the counsel enumerated more than fifty acts passed since 1804, which, 
he said, contained a special restraining clause.] 

It is remarkable, also, that in the same session in which the restrain- 
ing act was passed there was an act of incorporation passed containing 
a special prohibition against banking. What stronger evidence can 
be wanted of the sense of the legislature that the right of banking is 
not a franchise, but exists at large in every citizen, and may be freely 
exercised, unless expressly restrained by the legislature.'* 

The right was open to every individual, and the defendants, being 
created a corporation, have, as its inseperable incidents, a perpetual 
succession, a capacity to sue and be sued, a right to purchase and hold 
land, to have a common seal, and to make by-laws, etc. (Kyd on 
Corp., 69, 70.) They might therefore, as well as any individual, 
carry on banking business, unless expressly prohibited. If, then, 
this is not a royal franchise, no information in the nature of a writ of 
quo warranto lies ; for these informations have been substituted in the 
place of that ancient prerogative writ. (2 Co. Inst. 496, i Bulst. 55, 
56; Rex V. Marsden, 3 Burr. 1817, per Wilmot, J.) 

Not a case can be found in which a writ of quo ivarranto has been 
brought, or an information in the nature of one filed for exercising the 
right of banking. 

In The King v. Shepherd (4 Term Rep. 381), Lord Kenyon said, 
that the old writ of quo ■warranto lay only where there was a usurpa- 
tion on the rights and prerogatives of the crown ; and that an infor- 
mation in the nature of a quo ivarranto could be only granted in such 
cases. So, in The King v. The Corporation of Bedford Level (6 
East 359), Lawrence, J., says it has been always understood that a 
quo warranto only lay for encroachments on franchises created by the 
crown. 

Again, for the exercise of any power incidental to a corporation or 
association, a writ of quo warranto does not lie. As well might it lie 
to ascertain by what authority individuals assembled for political pur- 
poses. A person entitled to a manor need not show by what title he 
holds a court baron, for that is incident to a manor. (Rex v. Stan- 
ton, Cro. Jac. 259, 260.) 

But it is said the restraining act has made banking a franchise, and 
that no person can now exercise the right, without showing a legisla- 
tive grant. Suppose in England^ after the restraining act, more than 
six persons had associated as bankers, would an information, in nature 
oi 2i quo 'Warranto ^\i2i\e. been filed against them? No. Their acts 
would have been illegal and void. How have the legislature assumed 
this prerogative and franchise .? How have they taken to themselves 
what was before the common right of every citizen ? By prohibiting 
all unincorporated banking associations. Is ever)^hing which is made 
the subject of exclusive right or grant a franchise, and to be tried by 



Il6 PEOPLE V. UTICA INSURANCE COMPANY. § 22 

a quo "Warranto} Ferries, ninning of stages^ and steamboats diX^ made 
exclusive rights, yet it has never been supposed that an information 
in nature of quo warranto would lie in case of any invasion of these 
rights. 

Again, the restraining act is not in conjunctive; it declares that "no 
person unauthorized by law shall subscribe to, or become a member 
of, any association, institution or company, or proprietor of any 
bank or fund for the purpose of issuing notes, receiving deposits, mak- 
ing discounts, or transacting any other business which incorporated 
banks may or do transact, by virtue of their respective acts of incor- 
poration." By this act the legislature assume the rights specified. 
They do not resume a franchise. If the legislature can thus assume 
all rights common to the citizen, there is no commercial business what- 
ever which they may not prohibit ; and so the chamber of commerce 
apprehended. And on their petition the sections to the act, 27th 
session, chapter 1 10, sections 8 and 9, were passed in explanation of 
the restraining act. It was, in effect, an act to restrain commercial 
partnerships or companies, but the explanatory sections do virtually 
repeal the restraining act. 

It may be said that banking is quasi a franchise or branch of preroga- 
tive. But when every individual has a right to bank, how can it be, 
in any degree or shape, a franchise.'' The act merely restrains asso- 
ciations. Every citizen, or inhabitant, may, if he pleases, be a banker. 
Can it be possible that the legislature may assume to itself the rights 
of every citizen ? Such is not the law of England, If it is the law of 
any country, it is that of Turkey, where, alone it can be imagined that 
the common rights of man should be doled out for the purposes of 
gain. The mind revolts at the idea of a legislature bargaining out 
the common rights of the citizen for money. If the exercise of the 
right be injurious, prohibit it. What is granted should be given 
freely. A contrary doctrine would be attended with the most per- 
nicious effects. * * * 

Van Buren in reply. * * * The general demurrer admits, that 
the power exercised by the defendants is a franchise ; and it follows, 
that this is the proper remedy. But is it not a franchise? The 
chancellor had no doubt on the question. He says, that "the right 
of banking was formerly, a common law right belonging to indi- 
viduals, and to be exercised at their pleasure. 

But the legislature thought proper, by the restraining act of 1804, 
which has since been re-enacted, to take away that right from all per- 
sons not specially authorized by law. Banking has now become a fran- 
chise derived from the grant of the legislature, and subsisting in those 
only who can produce the grant ; if exercised by other persons, it is 
the usurpation of a privilege for which a competent remedy can be 
had by the public prosecutor in the supreme court." This ought, 
perhaps, to be a sufficient authority on this question. But to pursue 
it further: A franchise is a liberty or privilege. There is a distinction 
between royal and common franchises — between those of the sov- 
ereign and those of the people, as the right of trial by jury. When 



§ 22 THE CORPORATION AS A FRANCHISE. II7 

the colony became a sovereign and independent state the people suc- 
ceeded to all the rights and privileges of English subjects, and more, 
they succeeded to all the rights and privileges of the crown or sov- 
ereign. The legislature have, accordingly, from time to time granted 
various exclusive liberties and privileges, or franchises, to citizens. 
By the restraining act of the nth of Aprils 1804, the legislature did 
take to itself the right or liberty of banking. What was before com- 
mon to all ceased to be so, and became a franchise or privilege in the 
government, not to be exercised by citizens, unless by grant. Whether 
this was a franchise in England or not, it is made a franchise here, 
and the legislature were competent to make it so. It is true that pri- 
vate individuals may bank, but the defendants are an association car- 
rying on banking business in violation of the act of the i ith of April, 
1804, passed expressly to prevent any unauthorized or unincorporated 
association from banking. Being a privilege, then, which the defend- 
ants could not lawfully exercise without a grant from the legislature, 
it comes within the very definition which has been given of a franchise. 
W^e could not proceed by indictment, for the act gives a penalty, and 
not to the people, but to the informer. If this remedy does not lie, 
there is no remedy, civil or criminal. It is, at least, a liberty in the 
nature of a franchise ; and this is the only and proper remedy. * * * 

Thompson, Ch. J., delivered the opinion of the court. * * * It may 
safely be admitted, that formerly the right of banking was a common 
law right belonging to individuals and to be exercised at their pleasure. 
It can not, however, admit of a doubt that the legislature had author- 
ity to regulate, modify or restrain this right. This they have done by 
the restraining act of 1804 (sess. 27, ch. 117), and which has since 
been re-enacted and continued in full force (3 N. R. L. 234).' The 
construction which has been given by this court to the act is, that 
it extends only to associations or companies formed for banking pur- 
poses, and not an individual who carries on banking operations alone, 
and on his own credit and account (14 Johns. Rep. 205). The right 
of banking, therefore, by any company or association, has, since the 
restraining act, become a franchise , or privilege , derived from the grant 
■of the legislature, and subsisting only in such companies or associations 
as can show such grant. The defendants have, accordingly, set up, 
as their authority or charter, for the exercise of this privilege, an act 
passed the 29th of April, 1816, entitled "an act to incorporate the 
Utica Insurance Company." The real inquiry is whether this act 
contains any such grant of banking privileges. * « ♦ 

Many powers and capacities are tacitly annexed to a corporation duly 
created ; but they are such only as are necessary to carry into effect 
the purposes for which it was established. The specification of certain 
powers operates as a restraint to such objects only, and is an implied 
prohibition of the exercise of other and distinct powers, A contrary 
doctrine would be productive of mischievous consequences, especially 
with us, where charter privileges have been so alarmingly rmiltiplied. 
* * * I am, accordingly, of opinion that the defendants are un- 

1 1 R. S. 712. 



Il8 PEOPLE V. UTICA INSURANCE COMPANY. §22 

authorized, by law, to enter into such business, and that judgment of 
ouster ought to be rendered against them. 

Spencer, J. Two questions have been brought forward in the ar- 
gument : ( I ) Whether an information in the nature of quo warranta 
will lie in this case. (2) Whether the defendants have authority, 
under the act incorporating the Utica Insurance Company, to carry on 
banking operations in the mariner set forth in their plea. 

The statute (i N. R. L. 108) (3 R. S, 581) gives this writ against 
any person who shall usurp, intrude into or unlawfully hold and execute 
any office or franchise within this state ; and if the right set up by the 
defendants is a franchise, and the act under which they claim to exercise 
it does not confer it, then the defendants are subject to this prosecution. 

A fi'anchise is a species of incorporeal hereditainent ; it is defined 
by Finch (164) to be a royal privilege, or a branch of the king's pre- 
rogative subsisting in the hands of a subject ; and he says that fran- 
chises being derived from the crown, they must arise from the king's 
grant, or, in some cases, may be held by prescription, which presup- 
poses a grant ; that the kinds are various, and almost infinite, and 
they may be vested in natural persons or in bodies politic. 

All the elementary writers agree in adopting Finch's definition of a 
franchise, that it is a royal privilege or branch of the king's preroga- 
tive, subsisting in the. hands of a subject. 

An information, in the nature of a writ of quo warranto ^ is a sub- 
stitute for that ancient writ, which has fallen into disuse ; and the 
information which has superseded the old writ is defined to be a 
criminal method of prosecution, as well to punish the usurper by a 
fine for the usurpation of the franchise, as to oust him, and seize it for 
the crown. It has, for a long time, been applied to the mere puipose 
of trying the civil right, seizing the franchise or ousting the wrongful 
possessor, the fine being nominal only. (3 Inst. 281, pi. 13; 3 Burr. 
1817, 4 Term Rep. 381, i Bulst. 55.) 

If there are certain immunities and privileges in which the public 
have an interest, as contra-distinguished from private rights, and 
which can not be exercised without authority derived from the sover- 
eign power, it would seein to me that such iminunities and privileges 
must be franchises ; and the act for rendering the proceedings upon 
writs of mandamus, and informations in the nature of quo warranto, 
more speedy and effectual, presupposes that there are franchises, other 
than offices, which may be usurped and intruded into. 

If in England^ a privilege in the lands of a subject, which the king 
alone can grant, would be a franchise, with us a privilege, or immun- 
ity of a public nature, which can not legally be exercised without 
legislative grant, would be a franchise. The act commonly called the 
restraining law (sess. 27, ch. 114), (i R. S. 712) enacts, that no per- 
son, unauthorized by law, shall subscribe to, or become a member of, 
any association, or proprietor of any bank or fund, for the purpose 
of issuing notes, receiving deposits, making discounts or transacting 
any other business which incorporated banks do, or may transact, by 
virtue of their respective acts of incorporations. 



§ 22 THE CORPORATION AS A FRANCHISE. I 1 9 

Taking it for granted, at present, for the purpose of considering 
whether the remedy adopted is appropriate, that the defendants have 
exercised the right of banking, without authority, and against the 
provisions of the restraining act, they have usurped a right which the 
legislature have enacted should only be enjoyed and exercised by 
authority derived from them. The right of banking, since the re- 
straining act, is a privilege or immunity subsisting in the hands of 
citizens, by grant of the legislature. The exercise of the right of 
banking, then, with us, is the assertion of a grant from the legisla- 
ture to exercise that privilege, and consequently it is the usurpation 
of a franchise, unless it can be shown that the privilege has been 
granted by the legislature. An information, in the nature of a writ 
of quo warranto ^ need not show a title in the people to have the par- 
ticular franchise exercised, but calls on the intruder to show by what 
authority he claims it, and if the title set up be incomplete, the peo- 
ple are entitled to judgment. (2 Kyd on Corp., 399 ; 4 Burr. 2146-7.) 

This position is illustrated by the nature and form of the informa- 
tion ; the title of the king is never set forth ; but after stating the fran- 
chise usurped, the defendant is called upon to show his warrant for 
exercising it. 

This consideration answers the argument urged by the defendant's 
counsel, that banking was not a royal franchise in England^ and that 
it is not a franchise here which the people, in their political capacity, 
can enjoy ; for if their title to enjoy it need not be set out in the infor- 
mation, it is not necessary that it should exist in them at all. In the case 
of The King v. Nicholson and Others (i Str. 303), it appeared that 
by a private act of parliament for enlarging and regulating the port of 
Whitehaven, several persons were appointed trustees, and a power 
was given to them to elect others upon vacancies by death or other- 
wise. The defendants took upon them to act as trustees without such 
an election ; and upon motion for an information in the nature of a 
quo warranto against them, it was objected, by the counsel for the de- 
fendants, that the court never grants these informations but in cases 
where there is usurpation upon some franchise of the crown ; whereas, 
in that case the king alone could not grant such powers as are exer- 
cised by the trustees, the consequence of which was, that this author- 
ity was no prior franchise of the crown. To this it was answered, 
and resolved by the court, that the rule laid down was too general, for 
that informations had been constantly granted when any new jurisdic- 
tion or public trust was exercised without authority ; and leave to file 
an information was, accordingly, granted. This case is a strong au- 
thority in favor of this proceeding. 

Many cases might be cited, in which informations, in the nature of 
quo -warranto^ have been refused, whei-e the right exercised was one 
of a private nature to the injury only of some individual. In the 
present case, the right claimed by the defendants is in the nature of a 
public trust; they claim, as a corporation, the rights of issuing notes, 
discounting notes and receiving deposits. The notes they issue, if 
their claim be well founded, are not obligatory on the individuals who 



I20 SPRING VALLEY WATER-WORKS V. SCHOTTLER. § 23 

compose the direction or are proprietors of the stock of the corpora- 
tion. These notes pass currently, on the ground that the corporation 
have authority to issue them, and that they are obligatory on all their 
funds : the right claimed is one, therefore, of a public nature, and, as 
I conceive, deeply interesting to the community ; and if the defendants 
can not exercise these rights without a grant from the legislature ; if 
they do exercise them as though they had a grant, they are, in my 
judgment, usurping an authority and privilege of a public kind ; and 
we perceive that it is not necessary that the right assumed should be a 
prior franchise of the crown, or of the people of the state. 

Had the defendants claimed and exercised the right of banking as 
private individuals, I agree that an information would not lie against 
them ; they would have been subject only to the penalties inflicted by 
the act; but they claim the privilege as a corporation, and under a 
grant from the legislature. If they have not that grant, they have 
exercised and usurped a franchise, and the remedy pursued is well 
adapted to the case. * * * 

Judgment of ouster. 

Note. See 1896, Meadowcroft v. People, 163 111. 66, 54 Am. St. 447 ; State v. 
Woodmansee, 1 N. Dak. 246. But see 1892, State v. Scougal, 3 S. Dak. 55, 44 
Am. St. R. 756, holding that "Banking was not a franchise at common law, 
and except as to the privilege of issuing notes to circulate as money, can not 
be made such by the legislature. See also 1885, In Matter of Jacobs, 98 N. Y. 
98, 50 Am. Rep. 636 (act forbidding manufacture of cigars in certain ways and 
places held unconstitutional) ; 1885, People v. Marx, 99 N. Y. 377, 52 Am. Rep. 
34 (prohibiting sale of oleomargarine). Also 1893, Braceville Coal Co. v. 
People, 147 111. 66, 37 Am. S. R. 206, as to the constitutional restrictions upon 
the police power of the legislature. As to corporate franchises particularly see 
cases in addition to those given in text: 1838, Regents v. Williams, 9 Gill & 
J. (Md.) 365, 31 Am. D. 72; 1886, Appeal of Pittsburgh, etc., R. R. Co., 122 
Pa. St. 611, 9 Am. St. 128 ; infra, p. 1342 ; 1846, Enfield Toll Bridge Co. v. Hart 
ford, etc., R. R. Co., 17 Conn. 454, 44 Am. Dec. 566; 1892, Mayor, etc., v. 
Houston, etc., Rv. Co., 83 Tex. 548, 29 Am. St. R. 679; 1890, Macon, etc., R. 
R. Co. v. Gibson, 85 Ga. 1, 21 Am. St. R. 135; 1846, Miners' Bank v. United 
States, Morris (Iowa) 482, 43 Am. D. 115. 



^M Sec. 23. Same. 

' SPRING VALLEY WATER- WORKS v. SCHOTTLER Et Ax.} 

1882. In the Supreme Court of California. 62 Cal. 69-119.* 

[Appeal by plaintiff from judgment of the superior court of the city 
and county of San Francisco, denying a writ of review, and confirm- 
ing the action of the board of equalization of that city and county, in 
raising the assessment of the franchise of the water-works company 
from $5,000 to $5,000,000. The state constitution (art. 13, § i) 
provided: "All property in the state * * * shall be taxed in pro- 
portion to its value, to be ascertained as provided by law. The word 
'property,' as used in this article and section, is hereby declared to in- 

' Statement of facts condensed. Parts of arguments and opinion omitted. 
« Affirmed by U. S. Sup. Ct., Spring Valley W. W. v. Schottler, 110 U. S. 347. 



§ 23 THE CORPORATION AS A FRANCHISE. 121 

elude moneys, credits, bonds, stocks, dues, franchises and all other 
matters and things, real, personal and mixed, capable of private own- 
ership." The water-works company was organized under general 
acts of 1850, 1853, 1858, etc., giving it the power of perpetual suc- 
cession for fifty years, to sue and be sued, to make and use a seal, 
hold, purchase and convey necessary real and personal property, ap- 
point necessary officers and agents, divide its stock into shares, make 
by-laws to regulate its management and regulate the transfer of stock; 
to exercise power of eminent domain, to use streets, alleys, ways, etc., 
necessary for laying its pipes, to furnish Mater to the inhabitants at 
rates fixed in a prescribed way, and the further right to "all the privi- 
leges, immunities and franchises that might be thereafter granted to 
any individual or corporation relating to the introduction of fresh 
water into any city or town of the state for the use of the inhabitants 
thereof." The state constitution also provided (art. xi, § 19): "In 
cities where there are no public works owned by the municipality * * * 
any individual or company duly incorporated for that puipose shall 
(subject to certain provisions as to damages) have the privilege of 
using the streets for laying down pipes, etc."] 

jFox <& Kellogg^ for appellant, argued : 

* * * In making up the assessment, the revenue' officers seem to 
have taken it for granted that because franchises may be property, they 
are ex necessitate liable to assessment ; and to have overlooked the pro- 
vision of the constitution and the statute, that they can only be prop- 
erty and subject to taxation when "capable of private ownership." 
According to their theory, the elective franchise, the freedom of speech, 
the freedom of the press, the most valuable of all franchises, are liable 
to assessment and subject to taxation. But these and a hundred other 
franchises are not "capable of private ownership," and therefore not 
"property," and, not being property, are not subject to taxation. 

We submit that nothing but "property" is subject to assessment and 
taxation, in the form now under consideration, under the constitution 
or laws of this state. Only those "franchises" can be classed as 
"property * * * capable of private ownership," which are de- 
fined by the supreme court of the United States, in Bank of Augusta 
V. Earle, 13 Pet. 519, as being "special privileges conferred by gov- 
ernment on individuals, which do not belong to the citizens of the 
country generally, or by common right." Wherever we find a fran- 
chise held to be property, we find it to be of the class thus clearly 
defined by the highest tribunal in the land. Of these are street rail- 
roads, turnpike roads, bridges, ferries, wharves and the like. 

But the appellant in this case possesses no such franchise. There 
is no right or privilege which it can name, or upon which it can place 
its hand and say, "This is mine;" none that is or can be held by 
it in "private ownership." It owns no franchise; it simply enjoys 
the privileges conferred by law. Its privileges are these and these 
onlv: (i) The rig-ht of corporate existence. This is a privilege 
granted by the legislature to all the people of the state, and any five 
of its inhabitants may enjoy that franchise at any time, when they see 



122 SPRING VALLEY WATER-WORKS V. SCHOTTLER. § 23 

fit to incorporate for any purpose for which men may contract or asso- 
ciate themselves together. (Civil Code, § 286.) (2) The rig-ht to 
acquire property, when it is absolutely necessary, and can not other- 
wise be acquired for certain of its corporate uses, by condemnation. 
This is a right which can never be exercised without enormous cost, 
proportioned to the value of the thing acquired, and which is not, and 
can not be held in private ownership. 

It is a right held in common by all corporations organized for the 
purpose of supplying cities and towns with water as well as many 
others, and there is no limit to the number of corporations which 
may organize and actually engage in the business of supplying the 
same city or town. (See Statute, 1858, p. 218; Code of Civil Pro- 
cedure, § 1237.) (3) The rig-ht to lay and maintain pipes in the streets 
and to collect water rates. Like the two preceding, so of this. It 
is not a right which is or can be held "in private ownership." By 
the statute of 1858, above cited, and under which the appellant is 
organized, it is a right guaranteed to every corporation organized 
for the pui'pose of supplying water in cities and towns, with no limi- 
tation upon the number that may engage in the same business in the 
same city or town. By the codes the same right is also guaranteed to 
any corporation organized for such purpose; but under them it could 
only be exercised when thereunto authorized by ordinance of the city. 
But by the same section of the code, the city authorities were pro- 
hibited from granting any exclusive privilege of the kind. (See Civil 
Code, §§ 548, 549.) But since the passage of both the statute and 
the code, the people, in the majesty of their power, have taken away 
even the limitations of those laws, by which the right to exercise the 
privilege was limited to corporations, and now it is a right common 
to every person in the state whether incorporated or not. 

[After quoting provisions of art. xi, § 19, of the constitution above given:] 

Thus it will be seen that under the constitution of the state it is im- 
possible that there should be a franchise of this kind — that is "capable 
of private ownership." It is one which belongs to everybody, and 
whoever sees fit to use it need not even say to the municipal author- 
ities, "by your leave." All they have to do is to be subject to gen- 
eral regulations for damages and indemnity for damages, and to 
supervision of the street superintendent, as to the mode and manner 
of using the street. It is true that article xiv of the constitution 
declares the right to collect water rates to be a franchise which can 
only be exercised by authority and in the manner prescribed by law. 
But that does not militate against the proposition that it is a privilege 
common to all, and not "capable of private ownership." It is 
declared to be a franchise solely for the purpose of making it subject 
to regulation by law, and without giving it the character of property 
or private ownership. These are all the franchises, if they can be 
called such, enjoyed by the appellant. They are all franchises which are 
enjoyed by every inhabitant of the state, which are not "capable of private 
ownership," and therefore not liable to assessment under the law. 



§ 23 THE CORPORATION AS A FRANCHISE. 1 23 

F. G. JVewland, for appellant, argued : 

The term '■'■franchise^'" in its broad sense ^ means '■'■exemption from 
constraint or oppression , liberty, freedom . " ( Webster. ) In this sense 
the right to vote is termed a '•'•franchise;'' so also the right of trial by 
jury, freedom of speech and freedom of the press are termed '•'franchises. ' ' 
The declaration of the constitution that the word ^'■property''' includes 
^franchises,'' certainly was not intended to apply to those general privi- 
leges and rights which society has guaranteed and secured to individuals. 
The '•'•franchises" declared by the constitution to be property , must be 
those special privileges, exclusive in their nature, conferred by the gov- 
ernm,ent on individuals, and having the incidents and attributes of 
property; that is to say, they m.ust be capable of private ownership, of 
assignment and of being i7ihcrited. In this sense they are included in 
that division of property called ^''incorporeal hereditaments;" they are 
things without body, capable of being inherited, stich as the right of 
'•ferry," or the right of '•'•fishery," or the right to maintain a '•'•toll" 
road, conferred upon the grantee, his heirs or assigns. It is evidently 
in this sense that the word is used in the constitution, for in it the word 
"property" is declared to include "moneys, credits, * * * fran- 
chises and all other matters and things real, personal and mixed, 
capable of private ownership." The last words attach to and qualify 
all the taxable things referred to in the above quotation. 

[After quoting the provisions of the constitution and general laws relating 
to the formation of the corporations:] 

Under these acts the petitioner has the following rights and privileges : 
I. The I'ig-ht to be a corporation— that is to say, the right as an arti- 
ficial being, to act under an artificial name, and to exercise certain 
powers and duties of a natural person, among others, to sue and be 
sued, and to purchase, hold, sell and convey real and personal prop- 
erty. Under the act of 1853, any three or more persons could asso- 
ciate themselves together and form a water-company, by signing and 
filing the proper certificate. This was a privilege made by the laws 
of common right and general enjoyment. All persons could exercise 
it. Under the civil code, section 386, "Private corporations may be 
formed for any purpose for which individuals may lawfully associate 
themselves," and any five persons may associate themselves together 
and form such corporation. 

It appears, then, that the right to be a corporation is simply a 
privilege conferred by the general law upon any number of persons, not 
less than three in the one case or five in the other, whoever they may 
be, who may wish to associate themselves together, to exercise, as an 
associated body, under an artificial name, certain powers and perform 
certain duties of a natural person. In other words, a corporation js a 
bundle of faculties. Could the faculty of a natural person to sue and 
be sued, or his faculty to acquire and possess property, be assessed as 
property.? The right to the things sued for, which constitute choses 
in action, or the property acquired and possessed could be assessed 
both to natural and artificial beings, but not mere faculties or pow- 
ers. The right to be a corporation is simply the right to exist at the 



124 SPRING VALLEY WATER-WORKS V. SCHOTTLER. § 23 

will of the creator. Can the right to exist either as a natural or arti- 
ficial being be valued as property ? 

2. Under the act of 1858 water companies are granted the privilege 
of exercising the power of eminent domain; but they exercise this privi- 
lege simply as the agents of the state, for the pui'pose of serving a 
public use, to which their powers and property are delegated. This 
agency may be revoked at any time. It is a naked power — not a 
power coupled with an interest. Can the agency of the agent, whether 
natural or artificial, be assessed as property? ♦ * * 

3. The only other right or privilege conferred by the general law of 
1858, upon water companies, is the rigfht of laying- down pipes in the 
streets of the city, and supplying the inhabitants with water at rates 
fixed by law ; but this right is not only common to all water corr^- 
panies, but is also confen-ed by art. xi, § 19, and art. xiv, of the new 
constitution, on all individuals, so that this right which, if granted 
absolutely and exclusively to a single individual or a single corpora- 
tion, and his or its assigns, might be regarded as property, has been 
by the fundamental law of the state made a matter of common right 
and general enjoyment. It is true that everybody does not exercise 
this right or privilege, just as everybody does not exercise the rights to 
vote, but eveiybody has the right to exercise it, and it is even more 
unlimited and general than the right to vote, for the latter right is 
conferred only upon native-boi'n inhabitants over twenty-one years 
of age, and upon naturalized citizens, whilst the former right can 
be exercised by anybody, whether adult or minor, citizen or alien. 
This right or privilege has none of the incidents of ownership ; no one 
can sell it, for every body has it, and no person can gain by the acces- 
sion of the right of another. 

We have thus classified all the rights and privileges of water com- 
panies under the general law, and the constitution of the state, and we 
find that they are all subject to alteration and entire revocation by the 
state ; they are privileges enjoyed, not property owned. Webster de- 
fines property to be : "4. The exclusive right of possessing, enjoy- 
ing and disposing of a thing, ownership. 6. An estate, whether in 
lands, goods or money." Blackstone, book i, page 138, speaks of 
property as an absolute right "which consists in the free use, enjoy- 
ment and disposal of all his acquisitions without any control or 
diminution save only by the laws of the land," and in another place, 
book 2, page 2, speaks of the right of property as "that sole and de- 
spotic dominion which one man claims and exercises over the exter- 
nal things of the world in total exclusion of the right of any other 
individual in the universe." Bouvier, in his Law Dictionary, in de- 
fining the word property, says: "It is the right to enjoy and to dis- 
pose of certain things in the most absolute manner, * * * so 
that property, considered as an exclusive right to things contains not 
only a right to use those things, but a right to dispose of them, either 
by exchanging them for other things, or by giving them away to any 
other person without any consideration, or even throwing them away." 

Can it be said that any of the rights or privileges conferred on the 



§ 23 THE CORPORATION AS A FRANCHISE. 125 

petitioner by general laws, subject to alteration, amendment or repeal, 
come within the definition of the term "property" ? * « » Under' 
the new constitution it is impossible to grant a franchise, in the property 
sense of that term, to either natural or artificial persons, for it declares 
(art. 1, § 2i); "No special privileges or immunities shall be granted 
which may not be altered, revoked or repealed by the legislature. 
Nor shall any class of citizens be granted privileges or immunities 
which upon the same terms shall not be granted to all citizens." And, 
again (art. 4, § 25) : "The legislature shall not pass local or special 
laws in any of the following enumerated cases, that is to say : Grant- 
ing to any corporation, association or individual any exclusive right, 
privilege or immunity in all cases where a general law may be made 
applicable." 

It is evident, therefore, that the day of "franchises" as property is 
over. The whole tendency of the civilized government, is to do away 
with special or exclusive privileges, and wherever a right is extended by 
the government to make it common to all. Equality of right, equality of 
privilege, and equality of burden, are now the crowning franchises of 
all persons, natural and artificial, in this state. The great diflJiculty 
in construing a word like "franchise," which has figured extensively 
in the evolution of government, is that the attributes of a by-gone age 
are likely to be given to it notwithstanding the modifications that may 
have taken place in its character, and scope. 

As already stated the power of society over the individual is abso- 
lute. It is called the power of government, or the police power. 
Every privilege which the individual, either specially or as a member 
of a class or in common with all other individuals enjoys, may be 
regarded in one sense as a grant from the government. 

The despot who rules with the consent or by the sufferance of society 
has absolute power over the vocation of life. He can grant to a cer- 
tain individual the right to pursue a special trade exclusively, or he can 
throw open such trade or occupation to all. When such a grant is 
made to an individual, his heirs and assigns, it may be regarded as 
his property, and when such a grant is made to all individuals it is no 
less a franchise; it is a freedom, a liberty, but not "property." If 
we look back to the times of Elizabeth, James I and Charles I, we 
will find many examples of special grants which partook of the nature 
of property. Hallam, in his Constitutional History of England, vol. 
I, ch. V, speaking of the reign of Elizabeth, says: "The crown either 
possessed or assumed the prerogative of regulating almost all matters 
of commerce at its discretion." 

"Patents to deal exclusively in particular articles, generally of for- 
eign growth, but reaching in some instances to such important neces- 
saries of life as salt, leather and coal, had been lavishly granted to the 
courtiers, with little direct advantage to the revenue. They sold them 
to companies of merchants, who, of course, enhanced the price to the 
utmost ability of the purchaser." 

"In 1601 parliament made a bolder and more successful attack on 
the administration than this reign had witnessed. The grievance of 



126 SPRING VALLEY WATER-WORKS V. SCHOTTLER. § 2$ 

monopolies had gone on continually increasing ; scarce any article 
was exempt from these oppressive patents. When the list of them 
was read over in the house a member exclaimed : 'Is not bread among 
the number?' The house seemed amazed. 'Nay,' said he, 'if no 
remedy is found for these, bread will be there before the next parlia- 
ment.''" 

It was in those times that the East India Company was organized 
under letters patent from the crown, and vested with the exclusive 
right to trade in India. Monopolies were granted by letters patent, 
conferring the exclusive right to deal in necessaries of life, such as 
coal, iron, soap, salt, leather, tobacco, beer, hops, linen, etc. (Bright's 
English Hist., vol. ii, p. 629.) Rights of ferry, rights of wharfage, 
rights of fishing, rights of chase and of toll-roads, etc., were also 
granted. All these grants, as a rule, were made by letters patent, 
running to an individual, his heirs or assigns, and exclusive in their 
nature. They were protected by the courts as property, and it was 
held by the courts that no grant could be made by the sovereign 
which would interfere with or impair the exercise of the previous 
grant. They were therefore termed incorporeal hereditaments, and, 
Kent, in speaking of such franchises, says (Kent's Com., vol. 3, page 
45S): ''Another class of incorporeal hereditaments are franchises, 
being certain privileges conferred by grant from government, and 
vested in individuals. In England they are very numerous and are 
understood to be royal privileges in the hands of a subject. They 
contain an implied covenant on the part of the government not to 
invade the rights vested. * « * The government can not resume 
them at pleasure or do anv act to impair the grant without a breach of 
contract. » * • ^^ estate in such a franchise and an estate in 
law rest upon the same principle, being equally grants of a right or 
privilege for an adequate consideration. If the creation of a franchise 
be not declared to be exclusive, yet it is necessarily implied in the 
grant, as in the case of the grant of the ferrv'. bridge, or turnpike, or 
railroad, that the government will not, either directly or indirectly, 
interfere with it, so as to destroy or materially impair its value. 
Every such interference, whether it be bv the creation of a rival fran- 
chise or otherwise, would be in violation or in fraud of the grant." 

Such was the nature of franchises in England, and also in this 
country at the time Chancellor Kent wrote. In the celebrated case 
of Dartmouth College v. Woodward, 4 Wheaton 519, it was decided 
that the charter granted by the British Crown to Dartmouth College 
was a contract, and that an act of the legislature of New Hampshire 
altering the charter was an act impairing the obligation of a contract, 
and was unconstitutional and void. Justice Washington said (page 
657): "To this grant or this franchise the parties are the king, and 
the {>erson for whose benefit it is created or trustees for them. The 
assent of both is necessary. The subjects of the g^ant are not only 
privileges and immunities, but property. * • * Certain obliga- 
tions are created, binding both on the grantor and grantee. On the 
part of the former, it amounts to an extinguishment of the king's pre- 



§ 23 THE CORPORATION AS A FRANCHISE. 12/ 

rogative to bestow the same identical franchise on another corporate 
body, because it would prejudice his prior gjant. It implies, diere- 
fore, a contract not to reassert the right to grant the franchise to an- 
other, or to impair it." 

Justice Story says (p. 700) : '*In respect to corporate franchises 
they are, properly speaking, legal estates vested in the corporation it- 
self as soon as it is in esse. They are not mere naked powers granted 
to the corporation, but powers coupled with an interest." 

Mr. Webster, in his memorable argument in that case said: "Hume 
gives the reason : It is that such franchises were regarded in a most 
emphatic sense as private property. If it could be made to appear 
that the trustees and the president and professors held their oflSces and 
franchises during the pleasure of the legislature and that the property 
holden belonged to the state, then indeed the legislature have done no 
more than they had a right to do. But this is not so. The charter is 
a charter of privileges and immunities, and these are holden by the 
trustees expressly against the state forever." 

The decision of this case attracted great attention. Its effect was 
feared ; it placed the creature beyond the power of the creator, and as 
a result of it the various states adopted constitutional amendments, 
providing for the formation of corporations under general laws, which 
should be subject to alteration, amendment or ref)eal. The courts 
themselves in a measure shrank back from the doctrine of that case, 
and in a subsequent case, argued in the supreme court of the United 
States, entitied Charles River Bridge v. Warren Bridge et al. (ii 
Peters 420), they modified the doctrine which had previously existed 
as to the exclusiveness of franchises, and declared '*that a franchise 
conferred by the government was not exclusive unless so expressed in 
the grant." This remained the settied doctrine of the American 
courts since that decision. 

It will be obser\'ed, therefore, that the tendency of the people, act- 
ing through constitutional conventions and representative legislatures 
and of the courts, has been to modify the doctrine of the Dartmouth 
College case, and to make powers conferred by the government upon 
persons, natural or artificial, mere privileges enjoyed, not property 
owned. This tendency has reached its highest development in our 
state, where the legislature is not permitted to grant any special privi- 
lege to any person, natural or artificial, and where all privileges con- 
ferred by the sovereign power are made of common right and general 
enjo3rment. * * ♦ 

The only case which has been called to our attention in which a 
tax has been imposed upon the franchise of a corporation as property, 
separate and apart from the property in connection with which it is 
exercised is the case of Exchange Bank of Columbus v. Hines, 3 
Ohio St. 7, in which the court declared the tax invalid, in the follow- 
ing language : * • * 

Does a corporate franchise, in sober truth and reality, possess the 
essential qualities of property? It is said that the corporate franchise 
of a bank, conferring a peculiar legal capacity, and the high function 



128 SPRING VALLEY WATER-WORKS V. SCHOTTLER. § 23 

of making and circulating paper money, is valuable — indeed, a thing 
of great value. But value is not the distinguishing attribute of prop- 
erty. The right of suffrage is esteemed valuable ; a public office, 
with its emoluments, is valuable ; a license to keep a tavern, as 
formerly granted in this state, or a license to carry on any special 
business vv^hich is prohibited without a special grant of authority from 
the government, may be valuable, and a right to either of these things 
may be asserted and maintained in a court of justice, yet neither of 
them possesses the essential qualities which constitute property. Our 
right to the free use and enjoyment of things which are in common, 
such as air, light, water, etc., is valuable; and our right to the free 
use of the public highways, and to many of the privileges and ad- 
vantages derived from the government may be valuable, and may be 
maintained by legal process. Yet none of these things come within 
the denomination of property. Those things which constitute the sub- 
ject-matter of private property are such as the owner may exercise 
exclusive dominion over, in the use, enjoyment and disposal of them, 
without any control or diminution save only by the laws of the land, 
(i Wend. Blackstone, 138.) It is a fundamental principle that prop- 
erty considered as an exclusive right to things contains not only a right 
to use those things, but a right to dispose of them, either by exchang- 
ing them for other things, or by giving them away to any other person, 
without any valuable consideration in return, or even of throwing" 
them away, which is usually called relinquishing them." (Ruther- 
ford's Institutes 20; Puffendorff, c. 9, b. 7.) 

"It is said that capability of alienation, or disposal, either by sale, 
devise, or abandonment, is an essential incident to propei'ty. " (2 
Kent's Com. 317.) "^ corporate franchise^ therefore^ being a mere 
privilege^ or grant of authority by the government^ is not property 
of any description^ and consequently not subject to taxation under 
the above provision of the constitution.^'' * * * 

The constitution not only provides that "all property shall be taxed 
in proportion to its value," but that such value is "to be ascertained 
as provided by law." The only rule laid down in the Political Code 
for the assessment of property is that contained in section 3637, to wit: 
"All taxable property must be assessed at its full cash value," which 
latter term is defined (§ 3617, subd. 5) as follows: "The terms 
value and cash value mean the amount at which the property would 
be taken in payment of a just debt due from a solvent debtor." * * 

The rule applied was one which it was declared had the approval 
of the supreme court, in the case of San Jose Gas Co. v. January, 
viz., by ascertaining, first, the market value of the stock of the 
corporation ; and secondly, the assessed value of the property thereof, 
and deducting the latter from the former, the difference was declared 
to be the value of the franchise. * * * 

The rule applied does not operate equally and uniformly upon all 
franchises, for in the case of a franchise enjoyed by an individual, 
there would be no stock from the aggregate market value of which 
could be deducted the value of the tangible property in order to 



§ 23 THE CORPORATION AS A FRANCHISE. 129 

ascertain the value of the franchise, nor is it an equal or uniform 
rule in any sense, for it applies only to corporations, whereas the 
business of private individuals and firms should be subjected to 
the same mode of assessment. A mercantile firm may have a stock 
of goods on hand worth $100,000, and yet its business, the good will, 
so called, with the advantages which years of skillful and honorable at- 
tention to business united with fortunate circumstances may have given, 
mav be worth five times as much as the stock, and yet the assessor asses- 
ses only the tangible property, and lets the good-will go free. The law 
provides that "private corporations may be formed for any purpose 
for which individuals may lawfully associate themselves." (C. C, 
§ 286.) Such a mercantile firm could, if it chose, form itself into a 
mercantile corporation. With a stock of goods on hand never ex- 
ceeding $100,000 it might earn, with a skill and ability of its mem- 
bers through the large custom acquired, a liberal rate of interest 
on $500,000, and the stock would sell in the market for that sum. In. 
such cases, the assessor, pursuing the rule contended for here, would 
determine the value of the franchise to be $400,000; whereas, as a 
matter of fact, the right to be a corporation would be utterly valueless 
to a firm, and the difference between the mai-ket value of the stock 
and the value of the tangible property would simply be the good-will 
of the business ; this would exist whether the concern was incorpo- 
rated or not ; and yet the difference is assessed only to corporations 
and not to individuals. 

A more glaring instance of the absurdity of the rule applied is 
that of a newspaper whose value is almost entirely made up of skill, 
ability, enterprise and good-will. Take the case of the two leading 
newspapers of this city, the Chronicle and Call, owned by private pro- 
prietors. Each is valued at about $300,000, and probably yields its 
proprietors a liberal interest upon that amount. Probably the only 
property connected with either of these papers which the assessor would 
assess are the printing presses and fixtures, worth, say, $30,000 ; but 
if either paper should be incorporated into a joint-stock company, 
with a capital stock of $300,000, its stock would probably sell for 
that amount, as the value of the stock in the market is largely de- 
termined by the rate of interest paid as dividends upon it. The as- 
sessor then, in that case, would assess the franchise, that is, the privi- 
lege of conducting the same business in the name of an artificial being, 
at the difference between the value of the printing press and fixtures, 
and the market value of the stock, namely: $270,000. So the mere 
change in the conduct of the business of such a newspaper, from the 
hands of a natural person to those of an artificial person, would result 
in an assessment upon the latter ten times greater than upon the for- 
mer, and yet this artificial person is a purely business corporation ; it 
does not have the power of eminent domain, or exercise the royal 
prerogative of collecting tolls ; the only franchise it possesses is the 
right to be a corporation. ♦ • » 

Thornton, J. « » * Blackstone says, in relation to franchises: 
9— WiL. Casks. 



130 SPRING VALLEY WATER-WORKS V. SCHOTTLER. § 23 

"Franchises and liberty are used as synonymous terms, and their defini- 
tion is a royal privilege, or branch of the king's prerogative, subsisting 
in the hands of a subject. Being, therefore, derived from the crown, 
they must arise from the king's grant, or in some cases may be held 
by prescription, which, as has been frequently said, presupposes a 
grant. The kinds of them are various and almost infinite," and adds 
"that they may be vested in either natural persons or bodies politic, 
in one man or in many." And again on this subject he says: "To be 
a county palatine is a franchise, vested in a number of persons. It 
is likewise a franchise for a number of persons to be incorporated^ 
and subsist as a body politic^ with a power to maintain perpetual 
succession^ and do other corporate acts ; each individual member of 
such corporation is also said to have a franchise or freedom." (2 Bl. 
Com. 37.) 

Kent defines franchises as "privileges conferred by grant from gov- 
ernment, and vested in individuals." (3 Kent's Com. 458.) He 
also says: "Corporations or bodies politic are the most usual fran- 
chises known in our law." (Id. 459.) 

In Pierce v. Emery, 32 N. H. 507, Perley, C. J., speaking for the 
court, remarks: '■'■A corporation is itself a franchise belonging to 
the members of the corporation; and a corporation^ being itself a 
franchise^ may hold other franchises as rights and franchises of the 
corporation.^^ And further: '•'•A corporation .^ being itself a fran- 
chise., consists and is made up of its rights and franchises." 

In City of Bridgeport v. N. Y. & N. H. R. Co., 36 Conn. 266, 
Butler, J., speaking for the court, uses this language in regard to a 
railroad corporation: "The term 'franchise' has several significations, 
and there is some confusion in its use. The better opinion deduced 
from the authorities seems to be that it consists of the entire privileges 
embraced in and constituting the grant." (See title "Franchise" in 
Abbott's Law Diet., and cases there cited.) 

It is true that the privileges so granted by the government do not 
pertain to the citizens of the state by common right. But what is the 
"common right" here referred to? Is it not a right which pertains to 
the citizens by the common law, the investiture of which is not to be 
looked for in any special law, whether established by a constitution 
or an act of the legislature? Coke says: '■'•De commun droit — of 
common right — this is by the common law, because the common law 
is the best and most common birthright that the subject hath for the 
safeguard and defense not only of his goods, lands and revenues, but 
of his wife and children. * * * This common law of England is 
sometimes called right, sometimes common right, and sometimes com- 
munis justitia." (Coke's Inst. 142a.) The definition of franchises 
as special privileges conferred by government upon individuals, and 
which do not belong to the citizens of the country generally of com- 
mon right, had its origin in Bank of Augusta v. Earle, 13 Pet. 575. 
A very learned and accurate writer, Mr. Emory Washburn, in his 
work on Real Property (2d vol. 267), adopts this definition, and cites 
as authority the case above referred to from 13 Peters. The same 



§ 23 THE CORPORATION AS A FRANCHISE, I31 

definition is quoted by Angell & Ames, in their work on Corporations, 
from the case referred to. (See Ang. & Ames on Corp., § 4.) 

In the case in 13 Peters it was contended that under the laws and 
constitution of Alabama the right of banking was a franchise. The 
court refused to so hold, on the ground that the right of banking, at 
common law, belonged to every citizen. (See, also, Curtis v. Leavitt, 
15 N. Y. 170, opinion of Shanklin, J.) The discussion on the point 
in the opinion shows clearly that "common right" is used with the 
signification of common law." 

We are of opinion that the common right refers to the right of citi- 
zens, generally at common law. Such rights of citizens, though 
frequently spoken of as franchises, are not the franchises here 
meant ; and it ma}' be conceded that where such rights are granted 
to corporations, they are not franchises. But independent of the right 
to exist as a corporation, and to exercise powers in its corporate ca- 
pacity, there are privileges granted to the water-works, which do 
not, by the common law, belong to citizens generally ; such as the 
right to lay down pipes in the streets, ways and alleys of a city, and 
to collect rates for water furnished, which was held to be a franchise 
in San Francisco v. Spring Valley Water-Works, 48 Cal. 493, and in 
San Jose Gas Co. v. January, 57 Cal. 616. Conceding for the argu- 
ment that the constitution, by section 19 of article xi, grants this right 
to every person, it does not follow that it is not a franchise. They 
are vested by a grant of the sovereign power, and not by the common 
law ; and the generality of the grant does not deprive them of the 
character of franchises. 

The right to collect rates for use of water supplied to the city and 
county of San Francisco, or the inhabitants thereof, which the appel- 
lant has possessed at least ever since the act of 1858 went into effect, 
is expressly declared to be a franchise by the constitution of the state 
in the second section of article xiv, thereof. As has been said above, 
the very existence of a corporation as such is a franchise, and it exer- 
cises its franchise in every act which it performs as a corporation. In 
the Bank of Augusta v. Earle, above cited, the supreme court of the 
United States, speaking through Taney, C. J., in relation to the 
making of contracts by corporations, which, by common right, indi- 
viduals could make, said: "/« making such contracts, a corporation, 
no doubt, exercises its corporate franchise. But it must do this 
whenever it acts as a corporation, for its existence is a franchise. ^^ 

A corporation, whose existence is a franchise, may possess powers 
and privileges, which, in themselves, are not franchises (such as the 
right to bank, discussed in Bank of Augusta v. Earle, above cited, or 
the right to buy and sell property, real and personal), but it usually 
owns, along with such privileges, some that are franchises; but 
whether the powers be entirely of the kind which are franchises or 
not, its existence and right to employ its corporate powers is a fran- 
chise. This we think abundantly established by the cases above cited. 

We have no doubt that it was the intention of those who framed 
and ratified the constitution to place such franchises in the category of 



132 SPRING VALLEY WATER-WORKS V. SCHOTTLER. § 23 

property to be taxed. The word "franchises, "as used hi the first 
section of article 13, is used generally without any qualifying" words, 
and is intended to embrace all franchises of the character above re- 
ferred to, whether vested in individuals or bodies politic. A fran- 
chise conferred on an individual to lay down pipes in the streets of a 
city and to collect rates for water furnished a city or its inhabitants is 
to be taxed in the same way as when vested in corporations. The law 
in this respect is the same in regard to all persons, whether natural or 
artificial. 

It is contended that the clause, "and all other matters and things 
real, personal and mixed, capable of private ownership," in section i 
of article 13, qualifies the word "franchises" which precedes it. We 
do not think so. The structure of the sentence forbids any such con- 
struction. What is said before the employment of these words is 
complete of itself, and needs nothing to show what was signified. 
The words used show clearly that they were intended to add some- 
thing to what preceded them, to refer to kinds of property not pre- 
viously mentioned, not to qualify anything. They w^ere doubtless in- 
serted out of abundant caution to show that all kinds of property, 
whether specifically enumerated or not, were intended to be included 
in the property to be taxed, though not embraced in the specific 
classes previously mentioned. They constitute a declaration that in 
enumerating the property to be taxed it was not intended to confine 
the enumeration to "moneys, credits, bonds, stocks, dues, franchises," 
but to include all other kinds of property, and that by no construction 
of the word property, as used in the section, were any kinds of prop- 
erty to be left out. 

But it is immaterial whether these words qualified "franchises" or 
not, for the reason that the franchises so referred to are capable of 
private ownership. To hold that a private corporation does not own 
its franchise right, power and privileges would be both novel and un- 
tenable. Admitting that under the law of the state there may be leg- 
islation which might impair their value, it does not follow that it is 
not owned as property, with all the rights which attach thereto. All 
these rights exist until the legislative authority has acted so as to im- 
pair them or take them away ; and until such legislation is enacted 
the rights of property remain unimpaired. There has been no legis- 
lation yet of the character as regards the appellant that has been called 
to our attention, or that we have been able to discover. 

This franchise of a corporation is sometimes classed as real estate — 
of that kind styled incorporeal hereditam^ents. (Enfield Toll Bridge Co. 
V. Hartford and New Haven R. Co., 17 Conn. 40; s. c, 17 Conn. 
462; Price V. Price's Heirs, 6 Dana 107; i Blackstone's Com., 20— 
22, 37, 38.) In the case cited from 17 Conn. 40, this was said of a 
bridge corporation. The shares of stock of the water- works are by 
statute made personal estate. (See act of 1853.) But whether real 
or personal estate, they are property. Such franchises, as long as 
they exist, are protected as property by the guarantee universal in the 
states of the Union, which forbids their being taken except for public 



§ 23 THE CORPORATION AS A FRANCHISE. 1 33 

purposes and on compensation being made, (i Cooley's Con. Lim., 
4th ed., 655, and cases cited in note 4.) During their existence tliey 
are as fully protected by law as any other species of property. On 
this subject see Wilmington R. Co. v. Reid, 13 Wall. 268; 3 Kent's 
Com. 458; Hamilton County v. Massachusetts, 6 Wall. 633; People 
V. Selfridge, 52 Cal. 331 ; T. & T. R. Co. v. Campbell, 44 Cal. 89; 
O. R. Co. V. O. B. & F. V. R. Co., 45 Cal. 365. (See cases just 
above cited from 17 Connecticut, and Norwich Gas-light Co. v. Nor- 
wich City Gas Co., 25 Conn. 36.) 

The franchise of a corporation is and can be ivell defined to be the 
right of the corporation to exist and exercise the powers and privi- 
leges vested in it by its charter. (Burr, on Tax., § 83.) The fran- 
chise is the faculty of the corporation. As said by Redfeld in his 
work on railways: '•'•The faculty of a corporation is its organic 
life; its corporate existence by which it is enabled to carry on busi- 
ness; that which it derives from its charter of incorporation its cor- 
porate franchise.^^ (2 Redf. on Railways, 3d ed., 452.) In this 
state ^ the charter is the statute or statutes granting and defining the 
powers of the corporation^ under which it is constituted and exists, 
together with the instruments required to be executed by the provis- 
ions of such statute or statutes. These are sometimes called the constat- 
ing instruments. (Field on Corp., § 34, n. 3.) Such franchises are 
legal estates., not mere naked powers ^ and are powers coupled with an in- 
terest, which vest in the corporation by virtue of its charter or constat- 
ing instruments. (Society for Savings v. Coite, 6 Wall. 606 ; Provi- 
dent Institution v. Massachusetts, 6 Wall. 622 ; Hamilton Co. v. Massa- 
chusetts, 6 Wall. 638; Porter V. R. R. I. & St. L. R. Co., 76 111. 
561.) That the state has full power to tax them, see same cases, 
and State R. R. Tax Cases, 92 U. S. 603. In the case from 76 
Illinois, above cited, it is said: "It is clear upon authority that the 
franchise of a corporation is property, and as such it may be a proper 
object of taxation." (P. 573.) In Veazie Bank v. Fenno, 8 Wall. 
547, Chase, C. J., used this language: "Franchises are property, 
often very valuable and productive property, and seem to be as 
properly objects of taxation as any other property." Daniel, J., de- 
livering the opinion of the court in West River Bridge Co. v. Dix et 
al., 6 How. 529, said: "We are aware of nothing peculiar to a 
franchise which can class it higher, or render it more sacred than 
other property. A franchise is property, and nothing more." (See 
also Wilmington R. Co. v. Reid, 13 Wall. 264, and Monroe Savings 
Bank v. The City of Rochester, 37 N. Y. 367.) In this last case 
Fullerton, J., delivering the opinion of the court, said, in regard to a 
statute declaring the privileges and franchises granted by the legisla- 
ture to savings banks or institutions for savings, personal property, 
and liable to taxation as such: "In declaring the privileges and 
franchises of a bank to be personal property, the legislature has 
adopted no novel principle of taxation. The powers and privileges 
which constitute the franchise of a corporation are in a just sense 
property, and quite distinct and separate from the property, which. 



134 SPRING VALLEY WATER-WORKS V. SCHOTTLER. § 23 

by the use of such franchise^ the corporation may acquire. They are 
so regarded by the law^ and so regarded by co7nmon acceptation.'^ 

That such franchises can be taxed according to the valuation arrived 
at through an assessment is recognized in the case of the Freight Tax, 
15 WalL 282, and in the case of the State Tax on Railway Gross 
Receipts, 15 Wall. 296. In the case of the State Railroad Tax Cases, 
above cited from 92 U. S. Reports, a tax on the assessed value of 
franchise and capital stock by the state of Illinois was sustained, 
approving the decision to that effect in Porter v. R. R. I. & St. L. 
R. R. Co., above cited from 76 Illinois. (See also Gordon v. Appeal 
Tax Court, 3 How. (U. S.) 133, and Judge Redfield's comment on 
this case in 2 Redf. on Railways, 453.) As to the extent of the power 
of the state to tax, see Providence Bank v. Billings, 4 Pet. 562, and 
Hamilton Co. v. Massachusetts, 6 Wall. 639. In the case in 4 Pet- 
ers, Marshall, C. J., said: "All powers * * * over which the 
sovereign power of a state extends are subjects of taxation. The 
sovereignty of a state extends to everything which exists by its author- 
ity, or is introduced by its permission." (4 Pet. 563.) The same 
doctrine was declared in Osborne v. Bank of the United States, 9 
Wheat. 738. From the foregoing cases, it would seem that there 
can be no doubt of the power of a state to tax the franchise at its 
assessed value. There may be more difficulty in an'iving at its value 
than that of a parcel of land or personal chattels, but still its value may 
be estimated. When it is condemned for public use, the compen- 
sation to be paid can be fixed. As is justly said in Porter v. R. R. I. 
& St. L. R. R. Co., 76 111. 578: "We have never known it to be as- 
serted that the value of a franchise is so indefinite and uncertain that 
it can not be made the measure of a recovery when it is wrongfully 
invaded ; or that when it is taken and condemned for pubic use, it can 
not be ascertained what compensation shall be made to its owner. It 
is recognized in those respects as being capable of a definite valuation. 
* * * If its value may be ascertained for those purposes, it may as 
readily be ascertained for the purposes of taxation." As to value of 
franchises, and that they possess a value beyond that belonging to the 
tangible property of the corporation, see cases just above cited. 
(Commonwealth v. Hamilton Mfg. Co., 12 Allen 298, and Com- 
monwealth V. Cary Improvement Co., 98 Mass. 23.) 

In this state, the constitution having declared that franchises are 
property, and that all property in the state not exempt from taxation 
shall be assessed in proportion to its value, to be ascertained as pro- 
vided by law (Const., r.rt. xiii, § i), it would seem to follow that the 
tax must be according to the valuation made by the officer appointed 
for that purpose. If the state can impose a tax on the franchise of a 
corporation in the nature of an excise or duty, it does not exclude the 
taxation by a valuation made by an assessor. 

That such a franchise as that held by the appellant was taxable in 
this state, we think has been held by this court in two cases : Burke 
V. Badlam, 57 Cal. 594; and San Jose Gas Company v. January, 57 
Cal. 614. * * * 



§ 23 THE CORPORATION AS A FRANCHISE. I35 

When the matters in controversy in Burke v. Badlam originated, 
the legislature had acted in regard to the assessments of property, and 
enacted as follows: 

"Shares of stock in corporations possess no intrinsic value over and 
above the actual value of the property of the corporation which they 
stand for and represent, and the assessment and taxation of such 
shares and also of the corporate property would be double taxation. 
Therefore all property belonging to corporations shall be assessed and 
taxed, but no assessment shall be made of shares of stock; nor shall 
any holder thereof be taxed therefor." (Pol. Code, § 3608.) (It 
may be remarked here that the constitutional validity of this section 
was affirmed in Burke v. Badlam. (See 57 Cal. 602.) * * ♦ 
"The terms 'value' and 'full cash value' mean the amount at which 
the property would be taken in payment of a just debt due from a 
solvent debtor;" and "the term 'personal property' includes every- 
thing which is the subject of ownership not included within the mean- 
ing of the term real estate." 

[Each person (including corporations) also must furnish a state- 
ment of all property (including franchises) to the assessor, who is to 
enter the franchise and its value separate from the other property ; the 
assessor is to turn this statement over to the board of supervisors, who 
is to equalize all assessments.] * * * 

It appears from the record in this case that the board of supervisors, 
in the exercise of its power of equalization, assessed the franchise of 
the water-works by taking the aggregate of the market value of the 
shares of stock in the company on the 7th of March, 1881, and de- 
ducting therefrom the value of the real and personal property of the 
company, and held the difference to be the value of the franchise. 
The market value of the shares was shown to the board by the testi- 
mony of witnesses. Such a mode of arriving at the value of the fran- 
chise appears to have been adopted by the assessor in San Jos^ Gas 
Co. V. January, 57 Cal. 614, and this mode was held to be within the 
powers vested in the assessor. It was also impliedly approved as a 
correct mode in Burke v. Badlam, above cited. (See Commonwealth 
V. Hamilton Mfg. Co., 12 Allen 306.) * * * 

There is a further point which we think it proper to notice. It is 
contended that good-will enters into and forms an element in the 
value of the shares of stock. No case has been produced to us, nor 
have we been able to find any holding or even intimating that this is 
so. We find no such element of value in the least hinted at, by any 
one who has written on the subject, nor has any such been called to 
our attention. We can not recognize any such element as giving value 
to shares in a trading corporation. It would be strange to predicate good- 
will as pertaining to or extending to an abstraction, to an "artificial 
being, invisible, intangible, and existing only in contemplation of law." 

Our conclusion is that the board of supervisors, in its capacity of a 
board of equalization, had jurisdiction of the person and subject-mat- 
ter in the matters involved in this cause, and the judgment of the court 
below is affirmed. 



136 THE STATE V. THE GEORGIA MEDICAL SOCIETY. § 24 

Ross, Myrick, McKinstry, McKee and Sharpstein, JJ., con- 
curred. 

Morrison, C. J., took no part is this decision. 

Note. See South Pacific R. Co. v. Orton, 32 Fed. Rep. 457, infra, p. 354, 
an. 1 §§441-3, 680-1, «t/ra. 



Sec. 24. (2) And particularly: This primary franchise belongs 
to the members in their individual capacity rather than to the 
corporation itself, and is inalienable except by consent of the 
state. 

THE STATE, Ex Rel. J. WARING, Plaintiff in Ekeor, v. THE GEOR- 
GIA MEDICAL SOCIETY, Defendant in Error.^ 

1869. In the Supreme Court of Georgia. 38 Ga. 608-631 ; 95 

Am. Dec. 408. 

[Waring filed a petition for writ of mandamus, to restore him to 
membership in the Georgia Medical Society, upon the ground that 
the action of the society "in expelling him from membership and de- 
priving him of his right and franchise as a corporator in said corpo- 
ration is unconstitutional and contrary to law." The society had 
authority to make such a constitution and by-laws not repugnant to the 
laws of the state or the United States, and these provide (among other 
things) that members "shall be gentlemen of respectable social posi- 
tion;" and "any member who shall be guilty of ungentlemanly con- 
duct during the session of the society, or who shall conduct himself, 
out of the society, in such a manner as would render him ineligible 
to membership, shall be expelled from the society according to the 
wishes of two-thirds of the members of the society present, provided 
that in every instance specific charges be set forth and handed to the 
individual at least one month before the society takes action thereon." 
The charges made were that Waring had become surety for Richard 
White, 0. person of color, under indictment for larceny, who had been 
elected clerk of the court, in opposition to the wishes of the entire re- 
spectable community; and that he had also become surety for certain 
other persons of color, who were charged with riot, in such manner 
as would render him ineligible to membership ; also for charging for 
a dispensary prescription, which was allowed gratis by the city ; also 
consulting with a physician not a member of the society, contrary to 
one of the rules forbidding this. Dr. Waring was given proper notice 
and expelled by the proper vote. The society answered, claiming the 
court had no jurisdiction, and also setting forth the facts as to the 
charges, notice and expulsion, as above given. Waring moved to 
quash this answer as being insufficient ; the lower court overruled the 
motion, and Waring sued out his bill of exceptions to this court.] 

* Statement of facts condensed ; arguments omitted. 



§ 24 THE CORPORATION AS A FRANCHISE. 1 37 

Brown, C. J. i. It was insisted, in this case, that the Georgia 
Medical Society was in existence long before it was incorporated, 
and that its objects were in no way changed by its application for and 
acceptance of its present charter from the state. This may be very 
true, but its legal responsibilities were changed by the acceptance of 
the charter. While it remained a voluntary society, the courts had no 
jurisdiction over it, if it violated no law of the state, and its members 
had no property in their membership which the law could protect. 
But its acceptance of the charter subjected it to the supervision of the 
proper legal authorities having jurisdiction in such cases: 4 Wheat. 
674-5, 6 Conn. 544-5. 

3. When the voluntary society accepted the charter, it became a 
private, civil corporation, and the corporators, then in being, ac- 
quired a property in the franchise, and every person who has since 
become a corporator has acquired a like property. The property 
which the corporator acquires is not visible, tangible property; but it 
is none the less property, because it is invisible and intangible. It is 
not a corporeal hereditament; but it is incorporeal. Blackstone, in his 
Commentaries, volume 2, page 21, says: That incorporeal heredita- 
ments are divided into ten sorts; one of these consists of franchises. 
Bouvier, in his Law Dictionary, volume i, page 593, says the word 
franchise has several meanings, one of which he gives as follows: 
" It is a certain -privilege conferred by grant from the government 
and vested in individuals. Corporations or bodies politic arc the 
most usual franchise known to our law.^' The law books are full of 
the doctrine that persons may have a property in incorporeal heredita- 
ments, franchises, etc. Property, says Bouvier, volume 2, page 381, 
is divided into corporeal and incorporeal. The former comprehends 
such property as is perceptible to the senses, as lands, houses, goods, 
merchandise and the like ; the latter consists in legal rights as choses 
in action, easements and the like. Blackstone says, volume 2, page 37, 
it is likewise a franchise for a number of persons to be incorporated 
and subsist as a body politic, with power to maintain perpetual suc- 
cession, and to do other corporate acts, and each individual member 
of such corporation is also said to have a franchise of freedom. We 
think it well settled by these and other authorities ^ that a corporator 
in a private^ civil corporation, has a property in the franchise., of 
which he can not be deprived without due process of law. 

3. It was insisted by the learned counsel for the plaintiff in error, 
that the ninth by-law of this corporation is unauthorized by the char- 
ter, and that the corporation is not justifiable in expelling a member 
for its violation ; that to deprive a corporator of his property in the 
franchise under it is to deprive him of his property without due pro- 
cess of law. We think the ninth by-law a proper one in view of the 
objects of the society, and we hold that the charter conferred upon the 
corporation the power to ordain and establish it, and that they have 
the power to expel a member when a proper case arises under it. 

But we hold that the society has not an uncontrollable discretion in 
its construction and enforcement. They can not, under pretext of 



138 THE STATE V. THE GEORGIA MEDICAL SOCIETY. § 24 

enforcing this mle, take personal or private revenge, or make it the 
instrument of religious intolerance, or political proscription. When 
a member feels that he is aggrieved or injured by the illegal or op- 
pressive action of the body, it is his right to appeal to the courts for 
redress and protection ; and it is the right and duty of the court to in- 
vestigate such charges, when properly before it, and to judge of the 
legality of the action of the society in expelling a member or depriv- 
ing him of any other legal right. 

4. The rule of law on this subject is thus stated by Judge Black- 
stone, volume I, page 381. The king being thus constituted by law, 
visitor of all civil corporations^ the law has also appointed the place 
where he shall exercise this jurisdiction, which is the court of king's 
bench, where, and where only, all misbehaviors of this kind of corpo- 
rations are inquired into and redressed, and all their controversies 
decided. In this state the same visitorial power of correcting the mis- 
behaviors of these corporations, and deciding their controversies, is 
vested in the superior courts of the counties where they are located, 
which in England belongs to the king's bench. See 5 John. Ch, R. 

335- 

It was contended, with much zeal and ability, by the able counsel 

for the defendant in error, that mandamus is not the proper remedy, 
even if we admit that the rights of Dr, Waring have been infringed, or 
that he has been deprived of them by the illegal action of the society. 
The rule, as laid down by this court in a number of cases is that a 
person having a clear legal right, under the laws of this state, is en- 
titled to the writ of mandamus, if he has no other remedy to enforce 
it, 4 Ga. 26 and 116, 12 Ga, 170, 26 Ga, 665, 

But it is insisted that the code, section 3143, has changed this rule, 
and that mandamus does not now lie as a private remedy between in- 
dividuals to enforce private rights. We do not think this section of the 
code was intended to deny the writ to the corporator, who is deprived 
of his rights by the corporation, when he has no other adequate remedy 
for their enforcement, A corporation having been created^ invested 
with certain powers, and charged with certain duties to be performed 
for the benefit of the public, is not a private individual in the sense 
of the word as used in said section of the code, and a corporator 
whose rights are withheld or violated by the corporation, who is with- 
out other remedy, is entitled to the writ. 

In the Commonwealth, ex rel,, etc., v. The Mayor of Lancaster, 
5 Watts 152, Gibson, C. J., says: "An action to enforce the right 
could not be maintained against the corporation because performance 
of a corporate function is not a duty to be demanded by action, and 
unless recourse could be had to the functionary in the first instance, 
the relator might have a cause for redress without a remedy." See 
4 Ga, 44, 

Here the discharge of a corporate duty is treated as an office or 
function, and the corporation as a functionary. In this sense, no 
doubt, the legislature, in the adoption of the Code, intended to treat 
them. 



§ 24 THE CORPORATION AS A FRANCHISE. I39 

The object of this society, as cited in their charter, was "for the 
purpose of lesseninj^ the fatality induced by climate and incidental 
causes, and improving the science of medicine." The whole com- 
munity have an interest in the success of this laudable undertaking; 
and if the functions conferred by th'e charter, for the benefit of the 
public, are not faithfully performed, and one of the corporators, who 
has no other adequate redress, is injui*ed by the conduct of the cor- 
poration (the functionary), the courts will grant him relief by manda- 
mus. 

6. The record in this case shows no sufficient cause to justify the 
society in expelling Dr. Waring from his rights and privileges as a 
corporator. He was expelled for doing that which the law of this 
state not only authorizes but encourages. His offending consists in 
the fact that he became one of the sureties on the official bond of a 
colored citizen of his county, who had been elected clerk of the superior 
court of the county, by a majority of the legal votes cast at the elec- 
tion for that office, and in the further fact that he became surety on 
the bonds of certain other colored citizens who were charged with the 
offence of riot, for their appearance at court to answer the charge as 
the law directs. The very fact that the law requires the clerk of the 
superior court to give bond and security for the faithful discharge of 
his duties, is sufficient to justify any citizen of the county in becoming 
one of his sureties, and to protect him, in contemplation of law, from 
the imputation of having forfeited his position as a gentleman by so 
doing. 

Again, it is not the object of law to punish citizens of this state, 
whether white or black, by imprisonment, for offenses of which they 
have never been convicted. When they are charged with violations 
of the penal code, the requirement of the law is, that they appear at 
the proper time and place, and answer the charge ; and to secure such 
appearance, they are required to give bond and security, and it is only 
on failure to give the bond that they can be imprisoned. As inno- 
cent persons are often confined in prison under charges, because of 
their inability to give bond, the law favors bail whenever the offense 
is, by law, bailable. And the law favors this even in the case of the 
guilty, till the trial. This is not only best for the public, as it saves 
the tax-payers the expense of keeping them in jail, but is just to the 
accused, who receive the legal punishment for their crimes, if guilty, 
under the sentence of the court after legal conviction. How, then, 
does a citizen forfeit his corporate rights as a member of a civil corpo- 
ration, or his position as a gentleman, by doing an act that is not only 
encouraged by the laws of his state, but is a positive public benefit? 

But it is said Dr. Waring was not expelled from becoming surety 
on the bonds above mentioned, but for ungentlemanly conduct in the 
presence of the society. What ungentlemanly conduct.? The ninth 
by-law requires that "specific charges" be set forth and handed to the 
accused at least one month before the society takes action thereon. 
What specific charges of ungentlemanly conduct in presence of the 
society, were ever handed to Dr. Waring? What did he say or do in 



I40 THE STATE V. THE GEORGIA MEDICAL SOCIETY. § 24 

the presence of the society, to forfeit his position as a gentleman? 
The record is silent. That silence is significant. That which is ma- 
terial and is not averred by the society in their answer is presumed 
not to exist. No ungentlemanly conduct in presence of the society is 
set forth in their response, and this court must presume none existed. 

Dr. Waring was convicted of the charges first mentioned in refer- 
ence to the suretyship, and brought formally before the society and 
censured. To this illegal and unauthorized proceeding he submitted. 
But, not satisfied with this, at the next meeting of the society he was 
again brought up, and his resignation demanded, and he was given 
till the succeeding meeting to comply with the imperious and unau- 
thorized demand. This he declined to do. And a preamble and 
resolutions were then passed, setting a future day when the society 
would vote on his expulsion for refusing to resign, and for discourteous 
behavior towards the society at two former meetings. In what the 
discourteous behavior consisted we are not informed by the record. 
In the meantime, however, the gracious privilege of avoiding ex- 
pulsion by resignation was still held out to Dr. Waring. When the 
time came for the much-cherished object by the infliction of the ex- 
treme penalty of expulsion. Dr. Waring was at home sick, and unable 
to attend, but he wrote the society, disclaiming all intentional dis- 
courtesy to it or its members, and protested against the irregularity 
and illegality of the course resolved upon, as set forth in said pre- 
amble and resolutions. But all to no effect. His expulsion was pre- 
determined, and that determination was executed. A more illegal 
or unjustifiable proceeding has seldom been brought before a court. 

After argument had, and a thorough examination of this case, it is 
the unanimous judgment of this court that the judgment of the court 
below be reversed, and the judge of the superior courts of said county 
is hereby instructed and ordered to grant a peremptory mandamus, 
commanding and compelling the said "The Georgia Medical Society" 
to restore the said Dr. James J. Waring to all his rights and privi- 
leges as a corporator in said society. 

Note. See, infra, p. 1171 ; Evans v. Philadelphia Club, 50 Pa. St. 107-127, and 
cases cited; and Belton v. Hatch, 109 N. Y. 593, 4 Am. St. 495, infra, p. 178. 
Also 1896, Board of Trade of Chicago v. Nelson,' 162 111. 431, 44 N. E." 743; 
1892, Spilman v. Supreme Council of Home Circle, 157 Mass. 128; 1887, 
Pitcher v. Board of Trade, 121 111. 412; 1844, Commonwealth, ex reh, v. Pike 
Beneficial Soc, 8 W. & S. (Pa.) 247; 1883, Medical & Surg. Soc. of Mont. Co. 
V. Weatherlv, 75 Ala. 248, 253; 1875, Meyer v. Johnson, 53 Ala. 237, 325; 
1878, Board of Trade v. People, 91 111. 80; 1863, Sayre v. Louisville, etc.. As- 
sociation, 1 Duval (Kv.) 143, 85 Am. Dec. 613; 1864, National M. F. Ins. Co. 
V. Yeomans, 8 R. I. 25, 86 Am. Dec. 610 ; 1855, Hiss v. Bartlett, 3 Gray 468, 
63 Am. Dec. 768, note 773; 1857, Austin v. Searing, 16 N. Y. 112, 69 Am. Dec. 
665, note 677; 1866, Society v. Commonwealth, ex rel., 52 Pa. St. 125, 91 Am. 
Dec. 139; 1866, Dane v. Derby, 54 Maine 95, 89 Am. Dec. 722, note 736. 



§ 25 THE CORPORATION AS A FRANCHISE. I4I 

Sec. 25. Same. 

FIETSAM V. HAY Et Al.» 

1887. In the Supreme Court of Illinois. 122 111. 293-297, 3 

Am. St. R. 492. 

Appeal from the circuit court of St. Clair county. 

Mr. Justice Mulkey delivered the opinion of the court: 

The People's Bank of Belleville, incorporated under a special act 
of legislature, approved and in force March 27, 1869, having become 
insolvent on the 17th of April, 1878, made a general assignment of 
all its property and effects for the benefit of creditors. The assignee 
presented a petition to the county court of St. Clair county, at its 
March term, 1887, for leave to sell "all the rights, privileges, powers 
and immunities which were granted by the said act incorporating 
said bank." The judge of the county court being interested in the 
result of the proceeding, the venue was changed to the circuit court 
of St. Clair county, where, upon due consideration of the petition, 
that court entered an order dismissing the same. The present appeal 
is from the order of dismissal. 

The correctness of the decision of the circuit court depends entirely 
upon whether the title to the franchise created and conferred by the 
bank charter passed as an asset of the bank, to the assignee, under 
the assignment. That its language is sufficiently comprehensive, and 
adequate to pass the franchise to the assignee, if, as matter of law, 
the bank could transfer it at all, we have no doubt. This is not ques- 
tioned. The question, therefore, is whether a corporate franchise, 
in the absence of statutory authority, is in law capable of being as- 
signed or transferred. Differently put, the question, as formulated 
by the parties themselves, is, "did the franchise of the said bank pass 
with the deed of assignment to the assignee as a salable asset of the 
said bank?" 

The word '■''franchise^'' is often used in the sense of privileges gen- 
erally^ hut in its more appropriate and legal sense the term is co7i- 
jined to such rights and privileges as are conferred upon corporate 
bodies by legislative grant. It is in the latter sense, alone, the word 
is now to be considered. 

The franchise proposed to be sold is a corporate franchise, and the 
artificial body or political entity to which it pertains is what is known 
to the law as an aggregate corporation. Such a corporation has been 
well defined to be "an artificial being created by law, and composed 
of individuals who subsist as a body politic under a special denomina- 
tion, with the capacity of perpetual succession, and of acting, within 
the scope of its charter, as a natural person." Now, a franchise is 
nothing more than the right or privilege of being a corporation, and 
of doing such things, and such things only, as are authorized by the 

* Arguments omitted. 



142 FIETSAM V, HAY. § 25 

corporation' s charter. This right of a body of men to be and act as 
an artificial person, without, as a general rule, incurring individual 
responsibility, is declared by Blackstone to be "a royal privilege, or 
branch of the king's prerogative, subsisting in the hands of a subject." 
(2 Blackstone, 37.) Such right or franchise is defined by Bouvier 
to be "a certain privilege conferred by grant from government, and 
vested in individuals." (i Bouvier, 545.) Noiv^ it is clear from 
these definitions ^ and from the very nature of a corporation^ Oiat a 
franchise or the right to be and act as an artificial body ., vests in the in- 
dividualswho compose the corporation .and not in the corporation itself. 
This fact, we think, is not without significance in reaching a conclu- 
sion upon the main question to be determined, outside of the numer- 
ous authorities bearing directly on the subject. 

It will be kept in mind that the corporate body, for purposes of 
ownership, and, indeed, for most purposes, has a distinct iden- 
tity from that of the individual corporators. The latter may be 
wealthy, when at the same time the former is insolvent, and vice versa. 
The corporation has no right to appropriate., sell or otherwise dispose 
of any of the property or effects of a corporator. The relation of debtor 
and creditor may subsist between them in the same manner as be- 
tween the company and other persons. The company's entire prop- 
erty may be swept away from it by sequestration, or other means, and 
yet its franchises will remain vested in the corporators, until they are 
either abandoned or forfeited to the state. All these propositions are 
familiar to the courts and the profession, and are all well sustained 
by authority. 

If, then, the franchise is vested in and belongs to the corporators, 
and not to the corporation itself, how could the latter transfer or as- 
sign it to another? On the plainest of principles this covild not be 
done without legislative authority for that purpose, and we find noth- 
ing, either in the statute or the company's charter, conferring such 
authority. While it is conceded the legislature might confer on the 
artificial body the power to sell or assign the franchise to strangers, 
yet this would be, in effect, to authorize it to commit a species of sui- 
cide, for it is manifest the coiporation could not exist a moment after 
the franchise conferred upon its members had been transferred to 
others. Indeed, when we consider the attributes and essential ele- 
ments of corporate existence, resulting from the grant of the fran- 
chise, and without which the artificial body could not accomplish the 
objects of its creation or perform the duties imposed upon it by law, 
the sale or assignment of the franchise without special legislative au- 
thority would seem to be wholly inadmissible. It is proposed here, 
it will be noted, to sell simply the franchise of the bank. Assuming 
this can be done, the question arises what would be the effect of such 
a sale ? It clearly could not have the effect of making the purchasers, 
if more than one, an aggregate corporation, with the general banking 
powers conferred by the bank charter. To assert such a proposition 
would be simply startling; and yet, if in such case the purchasers 
would take anything at all, they certainly could not take less than the 



§ 26 THE CORPORATION AS A FRANCHISE. I43 

right to be a banking corporation, with all the powers and privileges 
conferred by the charter, for these rights are of the very essence of 
the franchise ; and consequently the one could not be thus acquired 
without, by the same act, securing the others — a view which, as already 
indicated, has no sanction in reason or authority. 

While statements are to be found on this subject in some of the text- 
books, as well as in some of the decided cases, which can not be recon- 
ciled with the conclusion we have reached, yet we are clearly of 
opinion that a corporation, in the absence of statutory authority, has 
no right to sell or transfer its franchise or any property essential to its 
exercise, which it has acquired under the law of eminent domain. 
This proposition, in our judgment, is sustained both by reason and 
the decided weight of authority. Black et al. v. Delaware and Rari- 
tan Canal Co., 24 N. J. Eq. 455; Freeman on Executions, §§ 179, 
180; Pearce on Railroads, 496—1 ; Jones on Mortgages, § 161 ; Rorer 
on Judicial Sales (2d ed.), 222; Archer v. Terre Haute and Indian- 
apolis R. Co., 102 111. 493; Bruffett v. Great Western R. Co., 25 
111. 353; Chicago and Rock Island R. Co. v. Whipple, 22 111. 105; 
Ottawa, Oswego and Fox River Valley R. Co. v. Black, 79 111. 262. 

The circuit court having reached this conclusion, its order and judg- 
ment will be affirmed. 

Judgment affirmed. 

Note. 1867, Cleveland, etc., R. Co. v. Speer, 56 Pa. St. 325, 94 Am. Dec. 
84; 1869, Miner's Ditch Co. v. Zellerbach, 37 Cal. 543, 99 Am. Dec. 300; 1887, 
Chicago Gas Light Co. v. People's Gas L. Co., 121 111. 530, 2 Am. St. 124; 
1864, Caldwell v. Alton, 33 111. 416, 85 Am. Dec. 282; 1863. Storv v. Plank 
Road Co., 16 N. J. Eq. 13, 84 Am. Dec. 134; 1862, People v. Railroad Co., 24 
N. Y. 261, 82 Am. Dec. 295; 1859, Coe v. Railroad Co., 10 Ohio St. 372, 75 
Am. Dec. 518; 1825, Ammant v. Turnpike Road, 13 S. & R. (Pa.) 210, 15 Am. 
Dec. 593; 1877, Hudson v. Cuero Land, etc., Co., 47 Tex. 56, 26 Am. Rep. 
289; 1865, Commonwealth v. Smith, 10 Allen (Mass.) 448, 87 Am. Dec. 672, 
infra, p. 1070; 1862, Bardstown & L. R. Co. v. Metcalfe, 4 Met. (Ky.) 199, 81 
Am. Dec. 54 >, infra, p. 1074; 1893, Brunswick G. L. & Co. v. United Gas, etc., 
Co., 85 Me. 532, 35 Am. St. R. 385, note, p. 390; Jones v. Guarantee Co., 101 
U. S. 622, infra, p. 1078; 1872, State of Ohio, ezrel., etc., v. Sherman, 22 Ohio 
St. 411, infra, p. 1082; 1892, Overton Bridge Co. v. Means, 33 Neb. 857, 29 Am. 
St. R. 614. 



Sec. 26. ( 3 ) The secondary franchises and privileges as well as 
I i Ifh^^^ other rights except the primary franchise, belong to the 
i^/^ corporation, or artificial being, rather than to the individual 
members. 

MEMPHIS AND LITTLE ROCK RAILROAD COMPANY v. RAILROAD 

COMMISSIONERS.' 

1884. In THE Supreme Court OF THE United States, i 12 U.S. 

609-623. 

[This was a bill in equity filed in the chancery court of Pulaski 
county, Arkansas, seeking to enjoin the board of railroad commis- 



Statement of facts condensed, arguments omitted. 



144 MEMPHIS, ETC., R. CO. V. RAILROAD COMMISSIONERS. §26 

sioners of the state from appraising', for the purposes of taxation, any 
part of the property of the plaintiff in error, on the ground that it is 
exempted from taxation by a contract with the state contained in its 
charter of incorporation. The supreme court of the state, on appeal, 
affirmed the decree of the chancery court dismissing the bill. That 
decree of the supreme court was brought here by writ of error, for 
review, on the allegation that it enforced a law of the state impairing 
the obligation of a contract in violation of the rights of the plaintiff 
in error under the constitution of the United States. 

The Memphis and Little Rock Railroad Company was incorporated 
in 1853, with power to borrow "money on the credit of the company, 
and on the mortgage of its charter and works" (§ 9) ; and its capital 
stock was to be exempt from taxation until its road paid a dividend of 
6 per cent., and its road, fixtures, etc., were to be exempt from taxes 
until twenty years after it was completed. (Sec. 28.) At the time 
of its incorporation the constitution of Arkansas permitted coipora- 
tions to be created by special acts, and there was no restriction as to 
the power to exempt such corporations from taxation. The supreme 
court of the state, in Oliver v. Memphis and Little Rock Railroad Com- 
pany, 30 Ark. 128, had held that the exemption from taxation in the 
charter of this road was a contract between it and the state, that was 
not to be impaired. The railroad company in i860 issued its bonds, 
secured by mortgage covering "the charter by which said company 
was incorporated and under which it was organized, and all the rights 
and privileges and franchises thereof," and also all lands, etc., be- 
longing to said company. October 13, 1874, a new constitution of 
the state went into effect providing that corporations should be formed 
only under general laws, and no special act should be passed confer- 
ring corporate powers ; that all property should be taxed according to 
its true value ; that all laws exempting from taxation (except churches, 
etc., especially named and not including railroad companies) should 
be void ; that the power so to tax corporations should never be sur- 
rendered or suspended by any contract on the part of the state, and 
that the legislature shall not pass any general or special law for the 
benefit of any corporation then existing, except upon condition that 
such corporation should thereafter hold its charter subject to the pro- 
visions of the constitution. 

December 9, 1874, the legislature passed a law "whereby the pur- 
chasers of a railroad of any corporation of the state, and their asso- 
ciates, acquiring title thereto by virtue of a judicial sale, or of a sale 
under a power contained in a mortgage or deed of trust, were author- 
ized to organize themselves into a body corporate, vested with all the 
corporate rights, liberties, privileges, immunities and franchises of 
and concerning the railroad so sold, not in conflict with the constitu- 
tion of the state, as fully as the same were held, exercised and en- 
joyed by the corporation before such sale." A certificate of such 
organization was to be filed with the secretary of state. The road 
was not completed till November, 1874. In 1876, a bill to foreclose 
the mortgage was brought by the trustees under the same, and a de- 



§ 26 THE CORPORATION AS A FRANCHISE. I45 

cree rendered, ordering a sale embracing the property, franchises 
and charter of said Memphis and Little Rock Railroad Company, 
and a sale was so made to certain trustees for the bondholders. In 
April, 1877, these bondholders organized themselves into a company 
under the name of "The Memphis and Little Rock Railroad Com- 
pany as reorganized," and a few days later, the trustees named in 
the sale, conveyed to said reorganized company "the property and 
franchises, including the charter of 1853," and under this it claims 
exemption fi'om taxation in any way different from the provisions of 
the charter of 1853.] 

Mr. Justice Matthews delivered the opinion of the court. [After 
reciting the facts substantially as above stated, he continued:] 

The case of the plaintiff in error rests entirely upon the words of 
the ninth section of the act of incorporation of the Memphis and Little 
Rock Railroad Company of January 11, 1853, by which it was em- 
powered to borrow money "on the credit of the company and on the 
mortgage of its charter and works." It is argued that these words 
confer power upon the company to convey to its bondholders, by way 
of mortgage and on foreclosure, to purchasers absolutely, all the prop- 
erty of the company, and all its franchises, including the franchise of 
becoming and being a corporation, in the sense of acquiring the right 
to organize as such under the act as successor to, and substitute for, 
the original company, precisely as if the act had named them as cor- 
porators and endowed them with the corporate faculty. And this 
being assumed, it is thence inferred that the exemption contained in 
section 28 of the act applies to the substituted corporation as though 
no change of corporate existence had taken place ; and thus, it is in- 
sisted, the case is taken out of rule of decision established in Morgan 
V. Louisiana, 93 U. S. 217; Wilson v. Gains, 103 U. S. 417, and 
Louisville and Nashville R. Co. v. Palmes, 109 U. S. 244. Accord- 
ing to the principle of those decisions, the exemption from taxation 
must be construed to have been the personal privilege of the very cor- 
poration specifically referred to, and to have perished with that, unless 
the express and clear intention of the law requires the exemption to 
pass as a continuing franchise to a successor. This salutary rule of in- 
terpretation is founded upon an obvious public policy, which regards 
such exemptions as in derogation of the sovereign authority and of 
common right, and, therefore, not to be extended beyond the exact 
and express requirement of the grants, construed stridissimi juris . 

It is not claimed that the assignment of the charter, by way of mort- 
gage and subsequent judicial sale, constituted the purchasers to be the 
identical corporation that the mortgager had been ; for that would in- 
volve an assumption of its obligations and debts as well as an acqui- 
sition of its privileges and exemptions ; but, it is insisted, that it re- 
sulted in another corporation in lieu of the original one, entitled to 
all the provisions of the charter, by relation to its date, as though it 
had been originally organized under it. 

But such a construction of the words, authorizing a mortgage of the 
10— WiL. Cases. 



146 MEMPHIS, ETC., R. CO. V. RAILROAD COMMISSIONERS. § 26 

charter and works of the company, is, in our opinion, beyond the 
intention of the law and altogether inadmissible. 

There is no express grant of corporate existence to any new body. 
At the time when this charter was granted, in 1853, there was no 
general law in existence in Arkansas authorizing the formation of 
corporations. All such grants were by special act. Neither was 
there any law authorizing the purchasers of railroads at judicial sale 
under mortgages of the property and franchises of the company, to 
organize themselves into corporate bodies, such as was first passed in 
1874. There is not in the act of January 11, 1853, for the incorpo- 
ration of the Memphis and Little Rock Railroad Company, any refer- 
ence to such a right as vested in the mortgage bondholders or other 
purchasers at a sale under a foreclosure of the mortgage, nor is there 
any mode or machinery prescribed in the act for such an organization. 
The desired conclusion rests entirely on the inference deduced from 
the mortgage of the charter, and is an attempt to create a corpora- 
tion by a judicial implication. But, as was said by this court in Cen- 
tral Railroad and Banking Co. v. Georgia, 92 U. S. 665, 670, "it is 
an unbending rule that a grant of corporate existence is never implied. 
In the construction of a statute every presumption is against it." 

The application of this rule is not avoided by the claim that the 
present is not the case of an original creation of a corporate body, but 
the transfer, by assignment of a previously existing charter and of the 
right to exist as a corporation under it. The difference is one of 
words merely. The franchise of becoming and being a corporation, 
in its nature, is incommunicable by the act of the parties and incapa- 
ble of passing by assignment. "The franchise to be a corporation," 
said Hoar, J., in Commonwealth v. Smith, 10 Allen 448, 455, 
"clearly can not be transferred by any corporate body of its own will. 
Such a franchise is not, in its own nature, transmissible." In Hall 
V. Sullivan Railroad Co., 21 Law Reporter 138 (2 Redfield's Am. 
Railway Cases 621 ; i Brunner's Collected Cases 613), Mr. Justice 
Curtis said: "The franchise, to be a corporation, is, therefore, not a 
subject of sale and transfer, unless the law, by some positive provis- 
ion, has made it so, and pointed out the modes in which such sale 
and transfer may be effected." No such positive provision is con- 
tained in the act under consideration, and no mode for effecting the 
organization of a series of corporations under it is pointed out, either in 
the act itself or in any other statute prior to that of December 9, 1874. 

The franchise of being a corporation need not be implied as neces- 
sary to secure to the mortgage bondholders, or the purchasers at a 
foreclosure sale, the substantial rights intended to be secured. They 
acquire the ownership of the railroad, and the property incident to it, 
and the franchise of maintaining and operating it as such ; and the 
corporate existence is not essential to its use and enjoyment. All 
the franchises necessary or important to the beneficial use of the rail- 
road could as well be exercised by natural persons. The essential 
properties of corporate existence are quite distinct from the frati- 
chises of the corporation. The franchise of being a corporation be- 



§ 26 THE CORPORATION AS A FRANCHISE. 147 

longs to the corporators^ while the 'powers and privileges .^ vested in 
and to be exercised by the corporate body as such, are the franchises 
of the corporation. The latter has no power to dispose of the fran- 
chise of its members, which may survive in the mere fact of corpo- 
rate existence, after the corporation has parted with all its property 
and all its franchises. If, in the present instance, we suppose that a 
mortgage and sale of the charter of the railroad company created a new 
corporation, what becomes of the old one? If it abides for the pur- 
pose of responding to obligations not satisfied by the sale, or of own- 
ing property not covered by the mortgage nor embraced in the sale, 
as it may well do, and as it must if such debts or property exist, then 
there will be two corporations coexisting under the same charter. 
For, "after an act of disposition which separates the franchise to 
.maintain a railroad and make profit from its use, froirf the franchise 
of being a corporation, though a judgment of dissolution may be 
authorized, yet, until there be such judgment, the rights of the cor- 
porators and of third persons may require that the corporation be 
considered as still existing." Coe v. Columbus, Piqua and Indiana 
Railroad Co., lo Ohio St. 372, 386, per Gholson, J. 

If, as required by the argument for the plaintiff in error, we regard 
and treat the franclaise of being a corporation as an incorporeal hered- 
itament, and an estate capable of passing between parties by deed, 
or of being charged by way of mortgage and of being sold under a 
power or by virtue of judicial process, the logical consequences will 
be found to involve insuperable difficulties and contradictions. In 
the present case, for example, after the execution of the first mort- 
gage, we should have the railroad company continuing as a corpora- 
tion «'« esse, and the trustees for the bondholders, or their beneficiaries, 
or assigns, a corporation in posse; and, after condition broken, the 
company would hold the title to its own existence as a mere equity of 
redemption. That equity it makes the subject of a second mortgage, 
and, in default, the beneficiaries under the power of sale became pur- 
chasers of the franchise, and organize themselves, by virtue of it, into 
the Memphis and Little Rock Railway Company. The latter can 
hardly claim the status of a corporation at law, as the legal title to 
the franchise of being a corporation had never passed to it, on the 
supposition that it might pass by a private grant ; and, if a corpora- 
tion at all, it could only be regarded as the creature of equity, accord- 
ing to the analogy of equitable estates, a nondescript class hitherto 
unknown in any system of law relating to the subject. 

It finally was displaced by the judicial sale, under which the plaint- 
iff in error organized as successor to both. In the meantime, the 
original corporation has never been dissolved, and, for all purposes 
not covered by the mortgage, still maintains an existence as a corporate 
body, capable of contracting, and of suing and being sued. A concep- 
tion which leads to such incongruities must be essentially erroneous. 

If we concede to the argument for the plaintiff in error the position, 
that the language used, which authorizes the mortgage of the charter, 
may be taken in a literal sense, still the assignment would transfer it, 



148 MEMPHIS, ETC., R. CO. V. RAILROAD COMMISSIONERS. § 26 

in the very state in which it might be at the date of the transfer. But 
at that date the only corporation which the charter provided for had 
already been organized. The only powers conferred upon corpora- 
tors to that end had already been exercised and exhausted. The bond- 
holders, under the mortgage, and their assignees, the purchasers at 
the sale, therefore took, and could take, nothing else than the charter, 
so far as it remained unexecuted, with such franchises and powers as 
were capable of future enjoyment and activity, and not such as, hav- 
ing already spent their force by having been fully exerted, could not 
be revived by a conveyance. This would include, by the necessity of the 
case, the franchise to organize a corporation, which can only be exerted 
once for all ; for the simple act of organization exhausts the authority, 
and, having once been effected, is legally incapable of repetition. 

It is a inistake, however, to suppose that the mortgage and sale of 
a charter by a corporation, in any proper sense which can be legally 
imputed to the words, necessarily conveys every power and authority 
conferred by it, so far, at least, as to vest a title in them, as franchises, 
irrevocable by reason of the obligation of a contract. In many, if 
not in most, acts of incorporation, however special in their nature, 
there are various provisions which are matters of general law and not 
of contract, and are, therefore, subject to modification or repeal. 

Such, in our opinion, would be the character of the right in the 
mortgage bondholders, or the purchasers at the sale under the mort- 
gage, to organize as a corporation, after acquiring title to the mort- 
gaged property, by sale under the mortgage, if, in the charter under 
consideration, it had been conferred in express terms, and particular 
provision had been made as to the mode of procedure to effect the 
purpose. It would be matter of law, and not of contract. At least, 
it would be construed as conferring only a right to organize as a cor- 
poration, according to such laws as might be in force at the time when 
the actual organization should take place, and subject to such limita- 
tions as they might impose. It can not, we think, be admitted that a 
statutory provision for becoming a corporation in futuro can become 
a contract, in the sense of that clause of the constitution of the United 
States which prohibits state legislation impairing its obligation, until 
it has become vested as a right by an actual organization under it, 
and then it takes effect as of that date, and subject to such laws as 
may then be in force. Such a contract, so far as it seems to assume 
that form, is a provision merely that, at the time, or on the happen- 
ing of the event specified, the parties designated may become a cor- 
poration according to the laws that may then be actually in force. 
The stipulation, whatever be its form, must be construed as subject 
and subordinate to the paramount policy of the state, and to the sov- 
ereign prerogative of deciding, in the meantime, what shall constitute 
the essential characteristics of corporate existence. The state does 
not part with the franchise until it passes to the organized corpora- 
tion; and, when it is thus imparted, it must be what the government 
is then authorized to grant and does actually confer. 

It is immaterial that the form of the transaction is that of a mort- 



§ 26 THE CORPORATION AS A FRANCHISE. I49 

gage, sale or other transfer inter partes of the franchise to be a cor- 
poration. "The real transaction, in all such cases of transfer, sale 
or conveyance," as was said by the supreme court of Ohio in the case 
of The State v. Sherman, 23 Ohio St. 411, 428, "in legal effect, is 
nothing more or less, and nothing other, than a surrender or aban- 
donment of the old charter by the corporators, and a grant de novo of 
a similar charter to the so-called transferees or purchasers. To look 
upon it in any other light, and to regard the transaction as a literal 
transfer or sale of the charter, is to be deceived, we think, by a mere 
figure or form of speech. The vital part of the transaction, and that 
without which it would be a nullity, is the law under which the trans- 
fer is made. The statute authorizing the transfer and declaring its 
effect is the grant of a new charter couched in a few words, and to 
take effect upon condition of the surrender or abandonment of the old 
charter ; and the deed of transfer is to be regarded as mere evidence 
of the surrender or abandonment." 

It is, of course, the law in force at the time the transaction is con- 
summated and made effectual that must be looked to as determining 
its validity and effect. This is the principle on which this court pro- 
ceeded in deciding the case of Railroad Co. v. Georgia, 98 U. S. 
359. The franchise to be a corporation remained in, and was exer- 
cised by, the old corporation, notwithstanding the mortgage of its 
charter, until the new corporation was formed and organized ; it was 
then surrendered to the state, and by a new grant then made passed to 
the corporators of the new corporation, and was held and exercised by 
them under the constitutional restrictions then existing. 

Our conclusions, then, are that the exemption from taxation con- 
tained in the 28th section of the act of January 11, 1853, was intended 
to apply only to the Memphis and Little Rock Railroad Company as 
the original corporation organized under it ; that it did not pass by 
the mortgage of its charter and works, as included in the transfer of 
the franchise to be ai corporation, to the mortgagees or purchasers at 
the judicial sale ; that the franchises embraced in that conveyance were 
limited to those which had been granted as appropriate to the con- 
struction, maintenance, operation and use of the railroad as a public 
highway and the right to make profit therefrom ; and that the appellant, 
not having become a corporate body until after the restrictions in the 
constitution of 1874 took effect, was thereby incapable in law of having 
or enjoying the privilege of holding its property exempt from taxation. 

The decree of the supreme court of Arkansas is accordingly affirmed. 

NoU.. Power to mortgage franchises must he expressly given, or it does not ex- 
ist. 1856, Pierce v. Emery, 32 N. H. 484; 1859, Coe v. C, C, etc., R. Co., 10 
O. S. 372; 1858, Lauman v. Lebanon Val. R., 30 Pa. St. 42; infra, p. 1081; 
1875, Daniels v. Hart, 118 Mass. 543; 1888, People v. Cook, 110 N. Y. 443; 
1890, Snell v. City, 133 111. 413, 8 L. R. A. 858, 24 N. E. 632; contra, 1867, 
Hall v. Sullivan R., 11 Fed. Cas. 257 (No. 5,948) ; 1863, Miller v. Rutland, etc., 
R. Co., 36 Vt. 452; 1862, Bardstown, etc., R. Co. v. Metcalfe, 4 Met. (Ky.) 
199, infra, p. 1074. 

The legislature may expressly authorize the mortgage of the franchise. 1864, 
Atkinson v. Marietta, etc., R. Co., 15 O. S. 21 ; 1866, East Boston, etc., R. 
Co. V. East. R. Co., 13 Allen (Mass.) 422. 



I50 WALES V. STETSON. § 2/ 

Exemption from taxation, effect of transfer. 1896, Pearsall v. R. Co., 161 U. S. 
646; iH/'-a.P- 1413; 1894, Keokuk R. Co. v. Missouri, 152 U. S. 301; 1888, Rail- 
road Company v. Commw., 87 Ky. 661 ; 1884, Railroad Co. v. Berry, 44 Ark. 1 7. 

Sec. 27. (4) When a franchise is offered by the state and ac- 
cepted by those to whom it is offered, it is in the nature of a 
grant or executed contract. 

1789, BuLLER, J., in King v. Passmore, 3 T. R. 246. "And I 
do not know how to reason on this point better than in the manner 
urged by one of the relator's counsel, who considered the grant of 
incorporation to be a compact between the crown and a certain num- 
ber of subjects, the latter of whom undertake, in consideration of the 
privileges which are bestowed, to exert themselves for the good gov- 
ernment of the place. Now, if those persons have so far violated their 
trust by negligence or misconduct that they are no longer capable of 
governing the place, there is an end of the compact. The ground of 
the charter was the government of the place, and when that can not 
be carried on, I see no reason why the crown can not grant another 
charter to a different set of persons." 

Note. See also : 1694, Philips v. Bury, 1 Ld. Raym. 6, s. c. 2 T. R. 346 ; 1815» 
Terrett v. Taylor, 9 Cranch (U. S.) 43. 

Sec. 28. Same. 

WALES, Treasurer, Etc., v. STETSON.^ 

1806. In the Supreme Judicial Court of Massachusetts. 2 
Mass. 143-146, 3 Am. Dec. 39. 

The declaration was in trespass and contained two counts. The 
first was for passing the turnpike gate without payment of the legal 
toll ; and the second was for cutting down the gate. 

The parties submitted the cause to the court on a statement of facts, 
in substance as follows: 

That the corporation was duly authorized by law to make the road, 
and, when made and approved by the court of sessions for the county 
of Norfolk, to erect a gate thereon, near the dwelling-house of Joseph 
Hunt ; that the road was so made and approved ; that by the act of 
incorporation, "If any person shall cut, break down, or otherwise in- 
jure or destroy the said turnpike gate, or shall forcibly pass, or attempt 
to pass, by force without first paying the legal toll at such gate, such 
person shall forfeit and pay a fine not exceeding $50, nor less than 
$5, to be recovered by the treasurer of said corporation, to their use 
in an action of trespass." 

That the gate was erected on a part of the turnpike road where was 
before an ancient public highway; that it was near the house of 
Joseph Hunt, but that it might have been placed nearer to the said 
house, and in a part of the turnpike road which was not before a 
public highway. 

That said Stetson did, on the twenty-ninth day of March, 1806, 

^ Arguments omitted. 



§ 28 THE CORPORATION AS A FRANCHISE. 151 

forcibly pass the said gate without payment of toll, and in the even- 
ing of said day did cut down said gate. 

If, upon these facts, the court are of opinion that the corpora- 
tion had a right by law to erect said gate at the place where it was 
erected, then the defendant agrees to be defaulted; if otherwise the 
plaintiff is to become nonsuit. 

The opinion of the court was delivered by Parsons, C. J. After 
considering the several points made in this cause by the counsel, we are 
satisfied that the question submitted must be decided according to the 
legal construction of the act incorporating the proprietors of this turn- 
pike. We are not prepared to deny a right in the general court to 
discontinue by statute a public highway. It is an easement common 
to all the citizens, who are represented in the legislature. The au- 
thorizing of the erection of bridges over navigable waters is, in fact, an 
exercise of a similar right. We are also satisjied that the rights le- 
gally vested in this, or in any corporation^ can not be controlled or 
destroyed by any subsequent statute^ unless a -power for that purpose 
be reserved to the legislature in the act of incorporation. 

In the consideration of the provisions of any statute, they ought to 
receive such a reasonable construction, if the words and subject-mat- 
ter will admit of it, as that the existing rights of the public, or of in- 
dividuals, be not infringed. And we are of opinion that this act of 
incorporation reasonably admits such construction. The corporation 
had a right to make the turnpike over such parts of the old road as lay 
in their way. This affects no existing rights, as the easement re- 
mains. But before we construe the statute as giving an authority to ob- 
struct a former highway by erecting a gate thereon, it should appear 
that such construction is necessary to give a reasonable effect to the 
statute. In this case no such necessity appears; but from the case 
as stated it appears that the corporation might have exercised their 
right to erect a gate, and to receive the toll, as empowered by the 
statute, without impeding the travel on the old highway. The stat- 
ute authorizes the corporation to erect a gate on the turnpike road 
near the dwelling-house of Joseph Hunt ; and it is agreed in the case 
that a gate might have been erected on the turnpike, and near the 
dwelling-house of J. Hunt, and not upon any part of the old highway. 
This gate being on the old highway is a public nuisance, and the de- 
fendant had a right to abate it. Let the plaintiff be called. 

Note,. 1853, State Bank of Ohio v. Knoop, 16 How. (U. S.) 369; 1854, 
Thorpe v. Rutland & Bur. R. Co., 27 Vt. 140; 1819, Dartmouth College v. 
Woodward, 4 Wheat. (U. S.) 518, tn/ra, p. 708; 1857, Nichols v. Somerset, 
etc., R. Co., 43 Me. 356; 1805, Trustees v. Foy, 1 Murphy (N. C.) 58, 3 Am. 
Dec. 672, supra, p. 34; 1865, Dodge v. Woolsey, 18 How. (U. S.) 331, supra, 
p. 88; 1867, Zabriskie v. Hackensack, etc., R. Co., 18 N. J. Eq, 178, 90 Am. Dec. 
617, infra, p. 1466; 1850, Commonwealth v. Cullen, 13 Pa. St. 133, 53 Am. Dec. 
450, infra, p. 417; 1862, Durfee v. Old Colony R. Co., 5 Allen (Mass.) 230, in- 
fra, p. 1462; 1872, Yeaton v. Bank of Old Dominion, 21 Grattan (Va.) 593, 
infra, p. 750; 1872. Tomlinson v. Jessup, 15 Wallace (U. S.) 454, infra, p. 754; 
1864, Hawthorne v. Calef, 2 Wallace (U. S.) 10, infra, p. 752; 1856, White 
Mountain li. Co. v. Eastman, 34 N. H. 124, infra, p. 758. Compare, 1809, Cur- 
rie V. Mut. Ass. Soc, 4 Henning & Munf. (Va.) 315. 



152 HIGGINS V. DOWNWARD. §29 



Sec. 29. (S ) These franchises are property, and can not be taken 
without cause, but may be forfeited for misuser or nonuser. 

1691. Holt, J., in King v. Mayor of London, Show. 280. "I 
am of the opinion that a corporation may be forfeited, if the trust be 
broken, and the end for which it is instituted be perverted." 

HIGGINS Et Al. v. DOWNWARD.^ 

1888. In the Court of Errors and Appeals of Delaware. 8 
Hous. (Del.) 227-257, 40 Am. St. Rep. 141. 

Saulsbury, Chancellor. "A corporation is an artificial being, in- 
visible, intangible and existing only in contemplation of law. Being 
the mere creature of law, it possesses only those properties which the 
charter of its creation confers upon it, either expressly or as inciden- 
tal to its very existence. These are such as are supposed best calcu- 
lated to effect the object for which it was created. Among the most 
important are immortality, and, if the expression may be allowed, 
individuality ; properties by which a perpetual succession of many 
persons are considered as the same, and may act as the single indi- 
vidual. They enable a corporation to manage its own affairs, and to 
hold property without the perplexing intricacies, the hazardous and 
endless necessity of perpetual conveyance for the purpose of trans- 
mitting it from hand to hand. It is chiefly for the purpose of cloth- 
ing bodies of men in succession with these qualities and capacities 
that corporations were invented and are in use." Chief Justice Mar- 
shall's opinion in the case of College v. Woodward, 4 Wheat. 626. 
A franchise is a certain privilege conferred by grant from the govern- 
ment, and vested in individuals. Corporations or bodies politic are 
the most usual franchises known to our law. Bouv. Law Diet., 545. 
By section 17, article 2, of the constitution of this state, it is declared 
that "no act of incorporation, except for the renewal of existing cor- 
porations, shall be hereafter enacted without the concurrence of two- 
thirds of each branch of the legislature, and without a reserved power 
of revocation by the legislature ; and no act of incorporation which 
may be hereafter enacted shall continue in force for a longer period 
than twenty years without the re-enactment of the legislature, unless 
it be an incorporation for public improvement." 

The Wilmington and Reading Railroad Company was a private 
corporation for public improvement, and therefore its existence was 
not limited to the period of twenty years under this provision of the 
constitution. There was no time fixed by positive provision in the 
charter of the Wilmington and Reading Railroad Company when the 
corporation should cease to exist. Had there been, the corporation, 
in the absence of a renewal of its charter before that period, would 

^ Facts suflSciently stated in the opinion of the court. Arguments, and opin- 
ion of Comegys, J., concurring, omitted. 



§ 29 THE CORPORATION AS A FRANCHISE. 153 

have become dissolved without either a representative or the possibil- 
ity of one, as no provision is made by our laws for a representative in 
such a case ; and at the instance of its dissolution the debts due to it 
would have become extinguished, not the right to or the remedy for 
the debts suspended, merely, but the debt itself annihilated. Bank 
V. Lockwood's Adm'r, 2 Har. (Del.) 14. A judgment, being No. 181 
to the November term, 1869, was recovered by the Wilmington and 
Reading Railroad Company, a corporation then existing under the 
laws of Delaware and Pennsylvania, against the defendants. Kji.fa. 
was issued, being No. 224 to the November term, 1870, on this judg- 
ment, and levy made on goods and chattels. Subsequent executions 
were issued on this judgment, the last being an alias vend, exp.^ 
No. 92, to September term, 1887. On May 29, 1886, the judgment 
was marked for the use of the Wilmington and Northern Railroad 
Company, by the direction of the attorney of the plaintiff, and the 
judgment was afterwards, on June 12, 1886, marked for the use of 
John C. Higgins by direction of the president of the Wilmington and 
Northern Railroad Company. The defendants allege that at or about 
the year 1877 the Wilmington and Reading Railroad Company had 
ceased to have any legal existence as a corporation, or any right to 
perform or do any act whatever, and that the said judgment which 
had been recovered by it became void and of no effect. 

The sixth reason assigned for setting aside the sheriff'-s sale is that 
the transfers or assignments alleged to have been made by indorse- 
ments on the record, and by and through which the said John C. Hig- 
gins claims title thereto, were illegal, unauthorized and void, and 
ineffectual to vest in said John C. Higgins any right or title what- 
ever. This reason, so far as it relates to the authority of the attorney 
directing the judgment to be marked to the use of the Wilmington 
and Northern Railroad Company is not before us. exceptions thereto 
having, for the sake of expediting the hearing of the questions re- 
served, been abandoned, so that the real and only question before us 
is, was the Wilmington and Reading Railroad Company dissolved by 
the act in relation thereto passed February 22, 1877? Or, in other 
words, did the legislature, by passing that act, revoke the charter of 
the Wilmington and Reading Railroad Company.? On the 3d of 
March, 1868, the Wilmington and Reading Railroad Company exe- 
cuted a mortgage upon its road, etc., for the payment of money. A 
suit was afterward instituted in the United States Circuit Court for the 
foreclosure of this mortgage. The final decree in the case was made 
April 25, 1876, directing the sale by the trustees of the railroad and 
property. The sale was made under the decree November 4, 1876. 
The deed made by the trustees to the purchasers conveyed "the rail- 
road of the Wilmington and Reading Railroad Company, extending 
from a point on the Philadelphia and Reading Railroad at or near 
Birdsboro, in the county of Berks, state of Pennsylvania, to the city 
of Wilmington, in the state of Delaware, with all the rights, privi- 
leges, immunities and franchises of the said Wilmington and Reading 
Railroad Company, under any and all grants of the state of Pennsyl- 



154 HIGGINS V. DOWNWARD. § 29 

vania, but exclusive of the franchises granted by the state of Dehi- 
ware." These franchises granted by the state of Delaware were not 
included in the mortgage for which foreclosure was decreed, and, of 
course, were not included, but excluded, by the decree of foreclosure. 
They were not sold by the trustees to the purchasers of said road. Of 
course, therefore, the purchasers of said Wilmington and Reading 
Railroad did not by such sale become entitled to said franchises granted 
by the state of Delaware. 

On the 22d of February, 1877, the legislature of Delaware passed 
an act to incorporate the purchasers of the Wilmington and Reading 
Railroad. This act, after reciting in its preamble that the railroad of 
the Wilmington and Reading Railroad Company, with its appurte- 
nances, was sold in pursuance of a mortgage executed by said com- 
pany under authority of laws of this state, and that it was necessary 
to the proper enjoyment of the rights acquired by said sale that the 
purchaser should be incorporated with authority to consolidate with any 
company organized or to be organized under the laws of the state of 
Pennsylvania, operating such portion of the road so sold as is situated 
within the state of Pennsylvania, incorporated the persons purchasing 
the said Wilmington and Reading Railroad, under a decree of the circuit 
court of the United States for the eastern district of Pennsylvania, a body 
politic and corporate, by the name of the "Wilmington and Northern 
Railroad Company." By this act the company were vested with all 
the right, title, interest, property, possession, claim and demand at 
law or in equity of, in and to such railroad, to v/it, the railroad of the 
Wilmington and Reading Railroad Company, with its appurtenances, 
and with all the rights, powers, immunities, privileges and franchises 
of the corporation as whose property the same was sold, and which 
may have been granted thereto or conferred thereupon by any act or 
acts of assembly whatsoever in force at time of such sale. These 
franchises, granted by the state of Delaware, not being included in 
the mortgage executed by the Wilmington and Reading Railroad 
Company, and consequently not sold under the decree of foreclosure 
thereof made by the circuit court of the United States for the eastern 
district of Pennsylvania, the purchasers at such sale acquired no title 
thereto, and no property therein. If they acquired any such title or 
property it could only have been vmder and by virtue of the act to in- 
corporate the purchasers of the Wilmington and Reading Railroad 
before referred to. This act purported to vest such purchasers, among 
other things, with the privileges and franchises of the corporation as 
whose property the same was sold, and which may have been granted 
thereto or conferred thereupon by any act or acts of assembly what- 
ever in force at time of such sale. 

The condition of a corporation whose charter has expired is not 
the same as that of a corporation which has failed to elect its officers, 
and, as the consequence of that failure, is rendered inactive. The 
life of the one is out of it by its own constitution, and not from a fail- 
ure to do what its charter enabled them to do, to give them active 
being ; the other was entitled by its charter to a continued active life, 



§ 29 THE CORPORATION AS A FRANCHISE. 1 55 

but It has failed to continue that activity by the election of its neces- 
sary officers. Its active powers, but not its being, are gone. The one 
is dead; the other is dormant. The principles of law which apply 
to the rights of a corporation thus dormant or disabled are not the 
same as those which are applicable to the rights of a corporation 
which is dissolved, or civilly dead. In the former case debts due 
are extinguished; not so in the latter case. No judgment of ouster 
or other similar judgment, or judgment of like effect, has ever been 
judicially declared against the Wilmington and Reading Railroad. 
The act to incorporate the purchasers of the Wilmington and Reading 
Railroad did not in express terms revoke the charter of the Wilming- 
ton and Reading Railroad, nor necessarily deprive the latter of its 
franchises granted by the acts of assembly of the state of Delaware. 
The Wilmington and Reading Railroad had never forfeited its char- 
ter as judicially ascertained by any judgment of a court of law; and 
even the former act did not so declare. A franchise is property^ 
and it can not wantonly or of -whim be taken away by a legislative 
act a?td transferred to another. 

The act of February 22, 1877, must receive areasonable interpre- 
tation. It must be interpreted to mean that which the legislature of 
the state of Delaware had a right to do, and not that which the legisla- 
ture had not a right to do. The rights, powers, immunities, privi- 
leges and franchises conferred by the legislature on the purchasers of 
the Wilmington and Reading Railroad must be interpreted to be such 
rights, powers, immunities, privileges, and franchises as those con- 
ferred by the legislature on the Wilmington and Reading Railroad by 
any act or acts of the general assembly which the Delaware legislature 
had the right to confer, and to vest the same in said purchasers, 
because the legislature had the right to make such a grant ; but the 
legislature had no authority to take from the Wilmington and Read- 
ing Railroad rights^ powers^ immunities ^ privileges and franchises^ 
the saffie never having been judicially declared forfeited ^ nor revoked 
constitutionally by legislative authority . If the legislature had re- 
voked the charter of the Wilmington and Reading Railroad ^ it could 
have granted rights^ powers, i7nmunities ^ privileges and franchises 
of the same nature and kind as those which the Wilmington and 
Reading Railroad had theretofore possessed, but not the same iden- 
tical rights, powers, immunities, privileges and franchises, be- 
cause the charter being revoked, it would follow that the rights, powers., 
immunities , privileges and franchises ceased and determined , and 
were not the subject of transference to another company by legislative 
grant. The words, "of the corporation as whose property the same 
was sold, and which may have been gianted thereto or conferred 
thereupon by any act or acts of assembly whatsoever in force at the 
time of such sale," must be interpreted as having relation to what 
was sold, and not to that which was not sold, and could not have been 
legally sold under the said decree of foreclosure. According to this 
interpretation, the words used would have force and effect. A con- 



156 HIGGINS V. DOWNWARD. § 29 

trary interpretation, would render the words of the act of assembly 
inoperative and void. 

It appears from the case stated that the judgment in respect to 
which controversy exists in this case was on May 29, 1886, marked 
for the use of the Wilmington and Northern Railroad Company by 
Victor Du Pont, attorney for plaintiff, and on June 12, i886, for the 
use of John C. Higgins, by direction of H. A. Du Pont, president of 
the Wilmington and Northern Railroad Company. It also appears 
in like manner that there had been no meeting of the stockholders of 
the Wilmington and Reading Railroad Company after the sale 
thereof under the decrees of foreclosure aforesaid. If these facts be 
so, the Wilmington and Reading Railroad as a corporation was not 
dead, nor the debts due it extinguished, so far, at least, as it existed 
under the laws of the state of Delaware. In this respect it was only 
dormant; capable of being revived, but incapable of action without 
such revival. Its life or death rested with the legislature. The 
views above expressed in reference to extinct and dormant corpora- 
tions are in accordance to the opinion of the court in the case of Bank 
V. Lockwood's Adm'r. "There is," says Morawetz (Priv. Corp., 
§§ 1002, 1003), "a broad and fundamental distinction between the 
dissolution of the corporation and the loss of its franchise or legal 
right to exist. Much confusion may be avoided," he says, "by bear- 
ing in mind this distinction." Again, he says: "If the charter of a 
corporation limits its existence to a definite period of time, the fran- 
chise or right to exist would expire at the time limited." Again: 
* ' The franchise to exist and carry on business as a corporation con- 
tinues hidefinitely unless the time of its duration is expressly limited in 
ike grant. ' ' If the corporation should be guilty of any wrongful act, 
or neglect of duty, which would give the state a right to declare the 
franchise forfeited , the franchise would nevertheless continue until the 
forfeiture has been claim-ed and enforced by the state through the proper 
legal proceedings^ The commission of a wrongful act or neglect of duty 
by a corporation would evidently not per se put an end to the actual ex- 
istence of the corporate association. After a long -continued non-user 
it may be presumed that a corporation has surrendered its franchises to 
the state; but the mere fact that a corporation has been without officers 
or organization, and has performed no corporate acts during a number 
of years, does not put an end to its franchises , although this may be a 
good ground for declaring them, forfeited by judicial proceedings.'' 

The charter of a corporation does not expire by reason of the omis- 
sion or commission of acts on the part of the company for declaring 
a forfeiture, but the franchises continue in full force until the penalty 
of forfeiture is claimed by the state granting the franchise, and this 
can be done only through a legal proceeding by which the cause of 
forfeiture is judicially ascertained, and not in a purely collateral pro- 
ceeding. Says Pierce (R. R. 11): "The non-use or misuse of its 
franchises by a corporation, or its breach of the conditions on which 
its duration is by the law of its creation made to depend, is a cause of 
forfeiture. Such defaults, however, do not of themselves work a 



§29 THE 'CORPORATION AS A FRANCHISE. 1 57 

forfeiture, but they take effect only when judicially determined in a 
direct proceeding instituted for the purpose. A non-user or mis- 
user is a ground of forfeiture, although not expressly declared to be 
such by statute." The same writer says : "A cause of forfeiture which 
has not been judicially declared in a direct proceeding can not be 
taken advantage of collaterally." The legal modes of proceeding 
against a corporation for usurpation — non-user or misuser of a fran- 
chise — is scire facias^ or an information in the nature of a quo war- 
ranto, each prosecuted at the instance and on behalf of the state. 

What becomes of the corporate property of a corporation in the 
event of its dissolution.'' The court in the case of Bank v. Lockwood's 
Admr's, before referred to, say that on the dissolution of a corpora- 
tion as by the expiration of the period of its charter, its real estate re- 
verts to the grantor, its personal estate to the people, and the debts 
due to it are extinguished. This is doubtless so at the common law, 
and in a proceeding at law as a scire facias on a judgment; but the 
more modern doctrine upon this subject seems to be that the capital 
of a corporation becomes upon its dissolution a fund to be adminis- 
tered in equity for the payment of its creditors, and afterwards for 
distribution among its stockholders. The creditors have a lien on the 
assets, and may follow them into the hands of stockholders and per- 
sons who are indebted to the corporation. The rights of stockholders 
in the assets are subordinate to those of creditors. See Pierce R. R. 
13, and authorities cited. In my opinion, when the constitution of 
this state speaks of the reserved power of revocation of a corporation 
by the legislature, it means an express revocation by the legislature, 
and not otherwise. 

It will be seen from what I have already said that the judgment set 
forth in the case stated, being No. 181 to the November term. 1869, 
of the superior court, whether it be a valid and subsisting judgment or 
not, did not pass to the Wilmington and Northern Railroad Company 
by virtue of the acts of assembly, mortgage foreclosure proceeding, 
sale and conveyance recited in the case stated, so as to give the said 
Wilmington and Northern Railroad Company the right to enforce said 
judgment by execution issued against the defendants, and that John 
C. Higgins, who claims to be the assignee of said company to said 
judgment, has not the right to enforce said judgment against the de- 
fendants. * * * 

Note. See 1886, Appeal of Pittsburgh R. Co., 122 Pa. St. 511. 9 Am. St. 
R. 128; infra, p. 1342; 1887, Fietsam v. Hay, 122 111. 293; 3 Am. St. R. 492, 
supra, p. 141; 1844, State v. Real p]state Bank, 5 Ark. 595, 41 Am. Dec. 109; 
infra, p. 1298; 1890, People v. North Riv. Sug. Ref. Co., 121 N. Y. 582, 18 Am. 
St. R. 843, supra, p. 100; 1889, State v. Minnesota Thresher Co., 40 Minn. 213, 
27 Am. & E. C. Cas. 286; 1892, People v. Buffalo, etc., Co., 131 N. Y. 140; 
1888, State v. Madison, etc., R., 72 Wis. 612, 40 N. W. 487; 1891, People v. 
Broadway R., 125 N. Y. 29; 1884, State v. Railway Co., 40 O. S. 504 . 



NOTES TO ARTICLE IV. 



Corporation as a franchise.— Pollock and Maitland, History of English 
Law, p. 493, say: "Between [the universities] and the boroughs, however. 



158 NOTES TO ARTICLE IV. * 

there was just this likeness : neither the borough nor the university was to 
any great degree an owner of lands or of goods ; on the other hand it was 
a holder of franchises. * * * The English temporal corporations, when 
they first appear as ideal persons, appear not in the character of mere private 
persons, but in the character — we may almost say it — of governmental oflBcers 
and magistrates who hold property in right of their offices. Their lands, their 
goods are few; what they own is jurisdiction, governmental powers and 
fiscal immunities. This is a characteristic feature of our temporal corpora- 
tions in the first stage of their existence ; the artificial person comes into being 
in order that he may govern and do justice. * * * This is well marked 
in the history of Oxford. * ♦ * This is so also with the merchant gilds. 
They look to a modern eye now like voluntary associations of traders, and 
now like organs of municipal government. * * * "We may well suppose 
that the juristic person made its appearance at a comparatively early time in 
the gild hall of the brethren. Not that the gild was a trading corporation in 
the modern sense. In mercantile transactions with outsiders it appears rather 
as a societas than a universitas. It had no property engaged in trade. * * * 
But the main property of the gild, as of the university, consists not of lands 
and goods, but of franchises, jurisdictional powers and fiscal immunities." 

In argument, Serjeant Pemberton, in King v. London, 1 Show. 275, 6, 1692, 
said: "A corporation is an artificial body, consisting of particular persons, 
as members constituent thereof, and like unto a natural body to many pur- 
poses; that which doth unite them is the liberties and privileges granted for 
that purpose. It is but a. franchise granted originally to them by king or par- 
liament. In all concessions of liberties and franchises, there is a tacit condi- 
tion annexed to them, that they use them well ; which upon doing otherwise 
determines them; an abuse forfeits them all. 20 Ed. 4, pi. 5, pi. 6, 2 Inst. 
222. The way for the king to take an advantage of such an abuser is a quo 
warranto, or information in nature of it, that is the king's writ of right; here 
these abusers are examined, and then judgment is either given for acquittal 
or for the king." "But here [after judgment of seizure] it is otherwise, and 
therefore I conclude that the franchise by which they claim to be a corpora- 
tion was out of them, and in the king, as extinct; for it is such a franchise 
as the king can not have by way of user, and therefore it must be gone, and 
determined, and if so, the corporation is dissolved ; that which ties them 
together is their franchise; take away that, and they are so many single 
persons; for the franchise not only unites them, but distinguishes them, one 
as mayor, and another as an alderman, and the like; then that being gone, 
none of them are such." 20 Ed. 4, pi. 5, pi. 6, 2 Inst. 222. 

In Carth. 217, this same argument is said to have stated these views as fol- 
lows: "A corporation is an artificial body, composed of divers constituent 
members, ad instar corporis humani, and the ligaments of this body politic or 
artificial body are the franchises and liberties thereof, which bind and unite 
all its members together; and the whole essence and frame of the corporation con- 
sist therein." 

Blackstone says: "It is likewise a franchise for a number of persons to be 
incorporated and subsist as a body politic ; with power to maintain perpetual 
succession, and do other corporate acts; and eacti individual member of such 
corporation is also said to have a franchise or freedom." Commentaries, 
Book II, p. *37, 1766. Judge Cooley, in his note to this statement, in his edi- 
tion of Blackstone's Commentaries, 1870, p. *40 note, says: "Among the 
most important of modern franchises are the franchise to be a corpora- 
tion. * * * And not only is the right to be a corporation a franchise, but 
so'is every particular right or privilege possessed by a corporation under its 
charter, which could only he exercised by legislative permission." Blackstone 
says further, citing Finch 164 (1613) : "Franchises and liberty are used as 
synonymous terms; and their definition is, a royal privilege or branch of the 
king's prerogative, subsisting in the hands of the subject * * * they may 
be vested in either natural persons or bodies politic; in one man, or in many; 
but the same identical franchise that has before been granted to one can not 



THE CORPORATION AS A FRANCHISE. 1 59 

be bestowed on another, for that would prejudice the former grant." (But as 
to this, see, Piscataqua Bridge v. N. H. Bridge, 7 N. H. 35, infra, p. 309, contra.) 

Mr. Kyd, Law of Corporations, p. 14 ( 1793), says: "A corporation has also 
been called a franchise ; the propriety of this appellation depends on the 
more or less extensive meaning in which the word 'franchise' is used; in its 
most extensive sense it expresses every political right which can be enjoyed 
or exercised by a freeman ; in this sense the right of being tried by a jury, 
the right a man may have to an office, the right of voting at elections, may, 
with propriety, be called franchises ; and in this sense the right of acting, as a 
corporation, may be called a franchise, existing collectively in all the individuals 
of whom the corporation is composed ; in this sense, and in this sense alone, 
'the franchise of being a corporation' can have any precise meaning. 

"In a less general and more appropriate sense, the word 'franchise' means 
a royal privilege in the hands of a subject, by which he either receives some 
profit or has the exclusive exercise of some right ; of the first kind are the goods 
of felons, waifs, estrays, wrecks or the like ; of the second are courts, gaols, re- 
turn of writs, fairs, markets and many others. They are estates and inheritances, 
which may be granted and conveyed from one to another, as other estates, 
which is not the case with a corporation ; in this sense a corporation can not 
be called a franchise ; the latter is a privilege, or liberty, which can have no 
existence without reference to some person to whom it may belong; the 
former is a political person, capable, like a natural person, of enjoying a 
variety of franchises ; it is to a franchise as the substance to its attribute ; it 
is something to which many attributes belong, but is itself something dis- 
tinct from those attributes." 

Justice Washington, in Dartmouth College v. Woodward, 4 Wheat. (TJ. S.) 
518, 1819, on p. 657, says: "A corporation is defined by Mr. Justice Black- 
■ stone, 2 Bl. Com. 37, to be a franchise. It is, says he, "a franchise for a 
number of persons to be incorporated and to exist as a body politic, with a 
power to maintain perpetual succession and to do corporate acts, and each 
individual of such corporation is also said to have a franchise, or freedom." 
This franchise like other franchises is an incorporeal hereditament issuing 
out of something real or personal, or concerning or annexed to, or exercisable 
within a thing corporate. To this grant or this franchise, the parties are the 
king, and the persons for whose benefit it is created, or trustees for them. 
The assent of both is necessary." (See Skelly v. The JeSerson Bank, 9 Ohio 
St. 606, on 623, where the court shows how this definition of a franchise was 
used in the decision of the Dartmouth College case.) 

In People v. Tibbets, 4 Cow. (N. Y.) 358, 380 ( 1825), it is said : "To be a 
corporation is a franchise (2 Bl. Com. 37), for the usurpation of which an in- 
formation always lies (citing People v. IJtica Ins. Co., 15 Johns. (N. Y.) 386, 
389, supra, p. 113; R, v. Nicholson et al., 1 Str. 299). And the question is 
whether the intrusion into offices created for the government or exercise of 
the franchise is equally within the act as an usurpation of the franchise 
itself?" Held, it was, and that quo warranto would be allowed against persons 
who intrude themselves into the office of directors of an insurance company. 
(To same effect see: 1833, State v. Buchanan, Wright (Ohio) 233; State v. 
Harris, 3 Ark. 570; 1862, Smith v. State Bank, 18 Ind. 327; 1837, Common- 
wealth v. Gill, 3 Whart. (Pa.) 228; 1881, Creek v. State, 77 Ind. 180; 1887, 
State V. Mayor, etc., 10 Atl. (N. J.) 377. 

Kent, Commentaries, vol. ii, p. 267, 1827, says: "A corporation is a fran- 
chise possessed by one or more individuals, who subsist, as a body politic, 
under a special denomination, and are vested by the policy of the law, with 
the capacity of perpetual succession, and of acting in several respects, how- 
ever numerous the association may be, as a single individual." He says, 
also, vol. iii, p. 458, "Another class of incorporeal hereditaments are fran- 
chises, being certain privileges conferred by grant from government, and 
vest«d in individuals. In England they are very numerous, and are under- 
stood to be royal privileges in the hands of a subject. They contain an im- 
plied covenant on the part of the government not to invade the rights vested, 
and on the part of the grantees to execute the conditions and duties prescribed 



l6o NOTES TO ARTICLE IV. 

in the grant, * * and they are necessarily exclusive in their nature. The 
government can not resume them at pleasure, or do any act to impair the 
grant, without a breach of contract." (But as to this, see infra,p. 309, contra.) 

The exclusive nature of corporate franchises (in these cases to build and 
maintain a bridge) was the subject of much discussion in the cases of Charles 
Eiver Bridge v. Warren Bridge, 7 Pick. (Mass.) 344, on 520 (1829 1, where the 
nature of franchises are discussed. The supreme court of the United States 
in the same case, 11 Peters (U. S.) 420 (1837), determined that the mere grant 
of a franchise did not make it exclusive. In Enfield Bridge Company v. The 
Connecticut River Company, 7 Conn. 28, it was held the state could not grant 
to another company the right to erect a bridge in the exact location previously 
granted to another company. In the Americant Jurist, vol. 6, p. 87 et seq. 
(1831), there is an article discussing these two cases, and going into the nature 
of franchises somewhat in detail. In Trustees of Maysville v. Boon, etc., 2 
J. J. Marsh. ( Ky.) 225, on 228, it is said : "A ferry is a franchise real, and may 
be forfeited for non-user." See, also, Trustees of New Gloucester School Fund 
v. Bradbury, 11 Maine 118, on 124, 26 Am. Dec. 515, on 518 (1834), where 
justice Washington's statement in Dartmouth College Case (supra) is given 
and relied on. 

In Price v. Price's Heirs, 6 Dana (Ky.) 107, it is said: "The right conferred 
upon each shareholder [in a railroad company] is unquestionably an incor- 
poreal hereditament. It is a right of perpetual duration ; and though it 
springs out of personalty, as well as lands and houses, this matters not. It 
is a franchise which has ever been classed in that class of real estate denom- 
inated an incorporeal hereditament." "It will descend as realty, and is sub- 
ject to dower as such." Citing 2 Bl. 20, 1, 2, 37-8; Co. Litt. 19, 20. Com. 
Digest, Franchise. 

In Montpelier Academy v. George, 14 La. 395, 33 Am. Dec. 585, on 590 
(1840), Carleton, J., says, as to the franchise, after quoting Blackstone: 
"There is a grantor and grantee whose assent is necessary ; the king parts 
from his prerogative under an implied promise not to bestow the same fran- 
chise on another corporate body. It, therefore, involves a contract not to re- 
assert the right, grant it to another, or impair it." Citing King v. Passmore, 
3T. R. 246; Fletcher v. Peck, 6 Cranch (U. S.) 87; Philips v. Bury, 1 Ld. 
Raym. 5, s. c. 2 T. R. 346, 1 Kyd Corp. 25. To the same effect substantially is 
Regents of Univ. of Md. v. Williams, 9 Gill & J. (Md.) 366, on 407, 31 Am. 
Dec. 95 (1838). 

In Enfield Toll Bridge Co. v. Hartford & N. H. R. Co., 17 Conn. 454, 44 Am. 
Dec. 556 (1846), the bridge company had the exclusive right to build and 
maintain a bridge over the Connecticut river at Enfield, and collect the tolls. 
After the bridge had been taken by the railroad company under the power of 
eminent domain, the bridge company claimed that, though this could be done, 
there still existed "something beyond the bridge franchise which had been 
invaded, — a contract has been impaired." The court, by Church, J., replied: 
"The contract constitutes the franchise. All franchises emanating from the 
government are the results of contracts between the state and individuals. 
To say, therefore, that although such franchises may be taken for public use 
upon compensation, and at the same time to insist that the contract or cove- 
nant by which thev are created is unconstitutionally impaired, is an absur- 
dity. 

That a contract may as well exist between the state and corporate bodies 
as between individuals, which are beyond their franchises, and beyond legis- 
lative control, is true; but the contract creating the corporation and defining its 
powers and privileges, is not of this character. This is identical with the franchise 
itself, and subject to the same laws." 

In Yarmouth v. North Yarmouth, 34 Maine 411, on 418, 56 Am. Dec. 666, on 
670 (1852). it seemed funds derived from the sale of a school farm were 
vested in trustees who were incorporated, in trust for school purposes in 
North Yarmouth. Afterward the legislature divided this town into two, Yar- 
mouth and North Yarmouth, the former of which claimed part of the funds, 
under the act of the legislature which directed the funds to be so divided. 



THE CORPORATION AS A FRANCHISE. l6l 

The trustees resisted and it was held, Howard, J. : "This fund was never in 
the town, but was vested by the act, in the trustees as a corporation for the 
use mentioned, forever. They did not constitute a municipal, or pubHc cor- 
poration, ahhough the object of its creation might have been a pubHc benefit. 
Their charter was a grant from the state, partaking of the nature of a contract, 
which they accepted, and in which the government had no interest. This was 
a franchise, which involved the right to possess and control property, and the right 
to perpetuate a corporate immortahty. 2 Bl. Com. 37. Though springing 
from the grant, the franchise and the rights flowing from it were no more 
subject to the control or interference of the legislature than were private 
rights of property, unless on default of the corporation judicially determined." 
Cites: Co. Litt., §413; Viner's Abr. Corp. A. 2; PhiHps v. Bury, 2 T. R. 346; 
Allen V. McKean, 1 Sumn. 276; Dartmouth Col. v. Woodward, 4 Wheat. 518 
infra, p. 708; People v. Morris, 13 Wend. 325 (infra, p. 229) ; Penobscot Boom, 
etc., V. Lamson, 16 Maine 224 (infra, p. 283).' 

In Toledo Bank v. Bond, 1 O. S. 623 (1853), Bartley, J., says : "The franchise 
of a private corporation is a trust of civil authority, which, under our system 
of government, must remain at all times subservient to the public welfare, the 
chief end and object of the delegation of all civil power by the people, and is, 
therefore, not the legitimate subject-matter of contract Or sale." 

See also State, ex rel., etc., v. Medical Society, 38 Ga. 608, 95 Am. Dec. 408 
(1869), supra, p. 136, where the nature of the members' right in a corpora- 
tion is called a franchise. Compare with Board of Trade v. People, 91 111. 80, 
below. 

In Morgan v. Louisville, 93 U. S. 217, on 223 (1876), Justice Field says: 
"Much confusion of thought has arisen in this case and in similar cases from 
attaching a vague and undefined meaning to the term franchises. It is often 
used as synonymous with rights, privileges, and immunities, though of a per- 
sonal and temporay character; so that, if any one of these exists, it is loosely 
termed a "franchise," and is supposed to pass upon a transfer of the fran- 
chises of the company. But the term must always be considered in connec- 
tion with the corporation or property to which it is alleged to appertain. The 
franchises of a railroad corporation are rights or privileges which are essential 
to the operations of the corporation, and without which its road and works 
would be of little value ; such as the franchise to run cars, to take tolls, to ap- 
propriate earth and gravel for the bed of its road, or water for its engines, 
and the like. They are positive rights or privileges, without the possession 
of which the road of the company could not be successfully worked. Im- 
munity from taxation is not one of them. The former may be conveyed to a 
purchaser of the road as a part of the property of the company ; the latter is 
personal, and incapable of transfer without express statutory direction." To 
the same effect are Wilson v. Gaines, 103 U. S. 417 ; Louisville & N. R. Co. v. 
Palmes, 109 U. S. 244 ; Memphis R. Co. v. Commissioners, 112 U. S. 609 (supra, 
p. 143). 

In Smith v. Mayor, etc., of New York, 68 N. Y. 562, on 556 (1877), the 
court, in distinguishing a franchise from property held under a franchise, said : 
"Under the laws of our state a mere franchise or incorporeal hereditament of 
any kind is not taxable, except by special statute. The plaintiflE has a fran- 
chise to construct and maintain this pier, and take wharfage for its use. The 
pier itself is a structure built under his franchise. It is tangible, bulky prop- 
erty, and in no sense incorporeal. It is not like a mere right or privilege, 
which has no physical existence. A person may have a franchise to build and 
maintain a bridge, and take toll for its use. The bridge, as a structure, is not 
a franchise. He may not be taxed on his franchise, but he can be taxed upon 
the structure or real estate." 

See, also, Spring Valley Water Works v. Schottler, 62 Cal. 69, 106 (supra, 
p. 120). 

1878, The Board of Trade of Chicago v. The People, 91 111, 80. Relator 
was expelled from the board of trade and brought mandamus to compel that 
body to restore him to membership; a peremptory mandamus was issued, and 
11 — WiL. Cases. 



1 62 NOTES TO ARTICLE IV. 

the respondent brings the suit directly to the supreme court, under a statu- 
tory provision that "Appeals and writs of error shall lie from final orders of 
tlie circuit court to the supreme court in cases involving a franchise or a free- 
hold." Relator moved to dismiss as no franchise was involved. The court, 
by Mr. Justice Scott, says: "The inquiry, then, must be, does the member- 
ship of the relator come within the definition of a franchise as that term is 
used in the statute? Our conclusion is, it does not." After quoting Black- 
stone's definition, which was adopted in 73 111. 541, and several other cases 
cited, to the effect that "corporate franchises in the American states emanate 
from the government or sovereign power, owe their existence to a grant, or, 
as at common law, to prescription, which presupposes a grant, and are 
vested in individuals or a body politic," the court continues: "It must have 
been in this restricted sense the term "franchise" was used by the general 
assembly in the statute we are considering, and not in that broad sense con- 
tended for. No doubt the word "franchise" is sometimes used as synony- 
mous with privileges and immunities of a personal character; but in law its 
appropriate meaning is understood to be something which the citizen can not 
enjoy without legislative grant. Many of our religious, benevolent, literary 
and scientific societies and associations are incorporated under general or 
special laws, but it was never understood that members of such societies or as- 
sociations possessed or exercised any franchise. What they obtain is what is 
most appropriately termed "membership," which means freedom of the priv- 
ilege it confers, and nothing more. That is precisely the case at bar. Rela- 
tor had membership in this corporation and the freedom of its privileges, 
whatever they were, but in no just sense did he exercise any franchise granted 
to him or the corporation by the general assembly. It is lawful for any per- 
son or association of persons to transact commercial business without legisla- 
tive grant for that purpose. A corporation for such purposes is a mere con- 
venience and nothing more. A member of such corporation exercises no 
other right in the buying or selling of commodities than what any citizen of 
common right may do, except as in the present instance, by virtue of his 
membership he may transact such business in a room belonging to the corpo- 
ration, which is a mere privilege and not a franchise, in the sense that term is 
used in the statute. One test that might well be applied is that in case of the 
non-user or misuser by the party owning membership in such a corporation 
an information would not lie against him at the suit of the people." 

In Memphis & L. R. Co. v. Berry, 112 U. S. 609, on 619 (18841, supra, p. 143, 
Mr. Justice Matthews gives a description of corporate franchises, and shows 
that "the franchise of becoming and being a corporation, in its nature, is in- 
communicable by the act of the parties, and incapable of passing by assign- 
ment," citing Commonwealth v. Smith, 10 Allen 448, 455; Hall v. Sullivan 
R. Co., 2 Redfield's Am. Ry. Cases 621, and Coe v. Columbus, P. & I. R. Co., 
10 O. S. 372, 386. 

In New Orieans, S. F. & L. Co. v. Delamore, 114 U. S. 501 (1885), it is said : 
"A franchise to use and occupy the streets of a municipality by a railroad 
corporation, granted by the municipality, is such a franchise as may be mort- 
gaged and pass to the purchaser at a sale under foreclosure of the mortgage." 

So. too, in State v. East Fifth St. R. Co., 140 Mo. 539, 62 Am. St. R. 742, 38 
Xi. R. A. 218, infra, p. 706 (1897), quo warranto was brought in the lower court 
to oust the street railway company of its privilege of operating its railway 
upon certain streets in Kansas City, because of non-user, the city having un- 
der authority of the state granted the privilege to said company. The de- 
fense was no franchise of the state, if any franchise at all, had been violated 
by the non-user. The court of review says: "It may be said that corporate 
existence is as much a franchise as the franchises of the corporation. The 
former is not property in the ordinary acceptation of the term, can not be 
transferred by ordinary conveyance or sale under execution, unless the stat- 
utes of the state so provide; while corporate franchises are property, can be 
transferred by voluntary conveyance or by sale, under execution against the 
corporation." Held, suit was properly brought by the state, and ouster was 
declared. Compare People, ex rel. Jackson, v. Suburban R. Co., 178 111. 694 



THE CORPORATION AS A FRANCHISE. 163 

(1899); Tower v. Tower & S. S. R. Co., 68 Minn. 500, 64 Am. St. R. 493 
(1897) ; Wright v. Milwaukee Elec. R., etc., Co., 95 Wis. 29, 60 Am. St. R. 
74 (1897); Milwaukee Electric R. Co. v. Milwaukee, 95 Wis. 39, 60 Am. St. 
R. 81 (1897); Belleville v. Citizens' Home R. Co., 152 111. 171, 26 L. R. A. 681 
(1894), and People v. Mutual Gas L. Co., 38 Mich. 154 (1878). 

In New Orleans Water- Works Co. v. Rivers, 115 U. S. 674 (1885), the court 
says: "An exclusive franchise granted by the legislature to supply water to 
the inhabitants of a municipality by means of pipes and mains laid through 
the public streets is violated by a grant to an individual in the municipality 
of the right to supply his premises with water by means of a pipe or pipes so 
laid, and is a contract protected by the United States constitution." To the 
same effect in regard to gas pipes for lighting, etc., are Louisville Gas Co. v. 
Citizens' Gas L. Co., 115 U. S. 683, and New^ Orleans Gas Co. v. Louisiana 
Light Co., 115 U. S. 650. 

Perhaps the best definition of franchises is that given by Bradley, J., in 
California v. Central Pacific R. Co., 127 U. S. 1, on 40 (1887), as follows: 
"What is a franchise? Under the English law, Blackstone defines it 'as a 
royal privilege, or branch of the king's prerogative subsisting in the hands of 
a subject,' 2 Bl. Com. 37. Generalized and divested of the special form which 
it assumes under a monarchical government based on feudal traditions, a 
franchise is a right, privilege, or power of public concern, which ought not to 
be exercised by private individuals at their mere will and pleasure, but should 
be reserved for public control and administration, either by the government 
directly, or by public agents, acting under such conditions and regulations as 
the government may impose in the public interest, and for the public security. 
Such rights and powers must exist under every form of society. They are 
always educed by the laws and customs of the community. Under our system, 
their existence and disposal are under the control of the legislative depart- 
ment of the government, and they can not be assumed or exercised without 
legislative authority. No private person can establish a public highwaj% or a 
public ferry, or railroad, or charge tolls for the use of the same, without 
authority from the legislature, direct or derived. These are franchises. No 
private person can take another's property, even for a public use, without 
such authority; which is the same as to say that the right of eminent domain 
can only be exercised by virtue of legislative grant. This is a franchise. No 
persons can make themselves a body corporate and politic without legislative author- 
itij. Corporate capacity is a franchise.^' 

Mr. E. R. A. Seligman, in his Essays on Taxation, ch. vii, p. 180, criticises 
this definition as being too narrow, since, in his judgment, it unduly em- 
phasizes the element of public control and public interest. He defines a fran- 
chise as "simply a right conferred by government of conducting an occupation 
either in a particular way or accompanied with particular privileges." We 
prefer the definition of the supreme court, as given by Justice Bradley, and 
believe it is desirable to emphasize the element of public control. 

A very short but clear definition is given by Justice Field in Home Ins. Co. 
V. New York, 134 U. S. 594 on 599 (1889), as follows: By the term corporate 
franchise, we understand is meant the right or privilege given by the state to 
two or more persons of being a corporation, that is, of doing business in a 
corporate capacity, and not the privilege or franchise which, when incorpo- 
rated, the company may exercise. The right or privilege to be a corporation, 
or to do business as such body, is one generally deemed of value to the corpo- 
rators, or it would not be sought in such numbers as at present." 

In Macon, etc., R. Co. v. Gibson, 85 Ga. 1, 21 Am. St. R. 135 (1890), under 
the Geoi^ia Code providing that, "In all cases of private charters hereafter 
granted, the state reserves the right to withdraw the franchise, unless such 
right was expressly negatived in the charter," the court said: "It is quite 
too narrow a definition of the word 'franchise^ used in this statute to hold it 
as meaning only the right to be a corporation. The word is generic, covering 
all the rights granted by the legislature.^' 

So, too, in State v. Boston, etc., R. Co., 25 Vt. 442, it is said: "All the 
functions of a corporation are in one sense franchises. The right to hold 



\ 



164 NOTES TO ARTICLE IV. 

property in the corporate name, to sue and be sued in that capacity, to have 
and use a corporate seal, and by that to contract, and some others, perhaps, 
are franchises, which constitute the very definition of a corporation." Simi- 
larly in Pierce v. Emery, 32 N. H. 507, it is said : "The different powers of a 
private corporation, like the right to hold and dispose of property, are its 
franchises." Compare State v. Minnesota T. M. Co., 40 Minn. 213 (1889). 
For other definitions and statements describing franchises, see State, Kan- 
sas V. Corrigan Con. St. R., 85 Mo. 263, 55 Am. R. 361; Homestead St. R. 
Co. V. Pittsburgh & H. E. St. R. Co., 166 Pa. St. 162, 27 L. R. A. 383; 
Detroit Citizens' St. R. v. Detroit, 22 U. S. App. 570, 64 Fed. R. 628, 26 L. B. 
A. 667; People v. O'Brien, 111 N. Y. 1, 2 L. R. A. 255; Wilmington Water 
Power Co. v. Evans, 166 111. 548; M. & S. Societv of Montgomery County 
V. Weatherly, 75 Ala. 248, 253; Port of Mobile v. Louisville & N. R. 
Co., 84 Ala. 119; Williams v. Citizens' R. Co., 130 Ind. 71, 15 L. R. A. 64; 
Baltimore Trust G. Co. v. Baltimore, 64 Fed. R. 153; Wheat v. Alexandria, 
88 Va. 743; Bank of Augusta v. Earle,13 Pet. (U.S.) 519, 595; Huff v. Winona^ 
etc., R. Co., 11 Minn. 180, 192; Chesapeake, etc.. Canal Co. v. B.& O. R. Co., 
4 Gill & J. (Md.) 1, 191 ; Society for Sav. v. Coite, 6 Wall. (U. S.) 594, 606; 
Adams v. Yazoo & M. V. R. Co., 24 So. (Miss., 1898) 200. Also particularly 
Justice Story's and Justice Washington's opinions in Dartmouth College v. 
Woodward, 4 Wheat. 518, infra, pp. 723-741. 

Mr. Morawetz, Treatise on Law of Private Corps., 2d Ed., 1886, says, § 8: 
"Under the common law of England and the United States, a corporation 
can not be formed like a partnership, merely by a contract between the in- 
dividuals composing it. The right of forming a corporation and of acting in a 
corporate capacity must be treated as a franchise, or special privilege, which 
may not be assumed without a grant of authority from some governing 
power," In § 922, he says: "The word 'franchise' is generally used to des- 
ignate a right or privilege conferred by law. Thus, when the legislature 
grants a charter of incorporation, it confers upon the grantees of the charter 
the right or privilege of forming a corporate association, and of acting within 
certain limits in a corporate capacity, and this right or privilege is called the 
corporate franchise." In §923: "What is called the franchise of forming a 
corporation is really but an exemption from a general rule of common law 
prohibiting the formation of corporations. In former times, this exemption 
was granted only in exceptional cases, by a special charter in each instance. 
It was, therefore, looked upon as something valuable — as a gift of a special 
privilege to the grantees of the charter — and was called a franchise. At the 
present day, however, the prohibition of the common law has been in a great 
measure repealed by the general incorporation laws. What was formerly 
the exception has now become the general rule. All persons have now the 
right of forming corporate associations, upon complying with the simple 
formalities prescribed by statute. The right of forming a corporation and of 
acting in a corporate capacity, under the general incorporation laws, can be 
called a franchise, only in the sense in which the right of forming a limited 
partnership or of executing a conveyance of land by deed is a franchise." In 
note 3, § 922, he says: "The corporate franchises are sometimes said to be- 
long to the corporation; but this is not accurate. They belong to the share- 
holders." See also §§ 648, 649, 650, 651, 652, 653. These views of Morawetz 
are cited approvinglv in State v. Western Irrigating Canal Co., 40 Kan. 96, 
10 Am. St. R. 166 (1888), holding that the sale of the franchise of being a 
corporation is inoperative to invest the purchaser with corporate power. 

Judge Thompson, Commentaries on Corporations, section 5353 (1895), 
says: "In respect to the pfower of a corporation to alien its franchises, a dis- 
tinction has been taken by the courts between what may be regarded as pri- 
mary and what as secondary franchises. The franchise of being a corporation 
— of having a corporate existence— is a franchise of the former character; and 
the franchise of carrying on a particular business or holding particular prop- 
erty is of the latter character. * * * jjo one but the sovereign can create 
a corporation ; and hence one corporation can not create another, by selling 
to the latter its own privilege of having a corporate existence; though, as al- 



THE CORPORATION AS A FRANCHISE. 165 

ready seen, the members who compose the corporation may, after it has been 
organized and its shares have been issued, by transferring their shares to 
others, introduce a totally new membership into the corporate body and re- 
tire therefrom themselves. * * * The rule had a very substantial value 
when the franchise to be a corporation was generally granted by the king in 
his council * * * when such grants could not be obtained except in con- 
sideration of the rendition of important services to the king or to the state. 
But under our American constitutions, under which a body of co-adventurers 
may freely organize themselves into a corporation by complying with certain 
statutory forms and paying a moderate tax, the franchise of being a corpora- 
tion is scarcely more valuable than the franchise, — if there could be such a 
thing, — of being a partnership. It is a myth ; and the rule under considera- 
tion would.be the silliest casuistry except for its value as a rule of interpre- 
tation of railwaj/ and other corporate mortgages." 

Judge Elliott in his Law of PriVate Corporations (1900), devotes one 
chapter (5) to "Franchises and privileges," giving an excellent condensed 
view of the subject. 

It is submitted that the above statements of Judge Thompson and Mr. 
Morawetz in regard to the corporate franchise are very much overdrawn, if 
not entirely incorrect. It might be pertinent to inquire, why is it, if the right 
to be a corporation is of no value, that so many corporations are formed? Why 
is it that four-fifths of the wealth of the United States is held under corporate 
organization? Why is no great enterprise undertaken except under a cor- 
porate form of organization? The franchise of being a corporation is valuable; 
the fact that the state makes it easy to obtain this franchise does not take 
from its value, any more than the fact that every male over twenty-one can 
vote makes the right to vote of no value. The corporate form of organiza- 
tion is the most efficient form of business organization yet discovered by the 
business world, and is consequently considered the most valuable by busi- 
ness men. It furnishes the greatest possibility of concentration of means, the 
completest unity of management, and the least individual personal responsi- 
bility both financially and morally of any business machine yet invented, to 
say nothing of the possibility of fraud, speculation, and exploitation that lax 
corporation laws, both now and heretofore, have made possible if not actually 
invited. 

But, after all, are our general incorporation laws a mere repeal of the com- 
mon law — a mere exemption from the common law prohibition of forming 
corporations without consent of the king or state? Or was a special charter 
itself a mere repeal of or exemption from such rule of the common law? The 
legal theory — the doctrine of the legislature, or the doctrine of the courts, is 
not so, and never has been so, and it is hoped never will be so. The common 
law prohibition is not repealed, or in fact modified in any essential particular, 
but is the same as it was in Blackstone's time or before. A franchise at com- 
mon law was something more than a license— it could not be revoked by the 
king after granting it, except for a justifiable cause judicially determined. It 
was something more than a law, also ; it was an estate or interest like an estate 
in land ; a repeal of the law granting it did not take it away in any other way 
than the repeal of a law granting land, by the transcendent power of parlia- 
ment, took away the estate in the land — that is, by a forfeiture or bill of at- 
tainder, or something of that kind. A franchise to be a corporation was of the 
same character — a grant of a privilege — might be many, or only one, but at 
least one, that is, the right to do the designated business under the corporate 
form of organization. But it was still more than this: it was a grant upon a 
condition, a kind of condition subsequent — the condition being the faithful 
performance of the business to be conducted under the corporate form of or- 
ganization — in other words, that there be no "non-user, misuser or abuser" of 
the privilege. It was very much the same as the condition always annexed to 
the grant of a freehold estate in land — it was in the theory of the common law 
always held from the king upon the condition that the holder do not commit 
treason or felony ; if he did, the land would then be forfeited upon conviction 
after indictment and trial in the king's bench. So, too, the corporate franchise 



1 66 NOTES TO ARTICLE IV. 

was held upon a like condition — non-user or misuser led to forfeiture upon judg- 
ment in scire facias or quo warranto proceedings in the king's bench. This 
theory of a. franchise yet remains with us, and is in no way repealed. Under 
our United States constitution, and the decisions of the supreme court, the 
transcendent power of parliament to declare forfeitures of either land or fran- 
chises, is taken from our legislative bodies — of the states at least (Fletcher v. 
Peck, 6 Cranch 87, and Dartmouth College v. Woodward, 4 Wheat. 518). But 
the right to forfeit franchises for misuser or non-user, in the proper judicial 
proceedings, yet remains. It perhaps matters but little to the state whether 
A., B. and C., either separately, jointly, or in a partnership, refine sugar or 
petroleum. If they engage in this business they may do so when and where 
they please, stop when they please, or agree not to make any more — the 
latter contract, under some circumstances being simply unenforcible, but not 
a cause of forfeiture or punishment. But if A., B., C., D., etc., form a corpo- 
ration for making or refining sugar or oil, the case is different; the business 
is not different — it is neither more nor less public, nor more nor less a fran- 
chise than it was before; the privilege is not in making sugar or oil, but 
bringing into existence and using in this business the valuable, efficient, im- 
personal and in many ways morally less responsible, agency or organization 
known as the corporation; this is the privilege, a privilege of "public concern," 
a franchise, always having as an inseparable incident, always granted upon 
the implied condition that it will not be misused or abused. For not making 
oil, or sugar, or even agreeing not to do so, the charter, the franchise of being 
a corporation for such purpose, can be taken away by the state. (See People v. 
North River Sugar Ref. Co., 121 N. Y. 682, 18 Am. St. R. 843, supra, 100; State 
V. Standard Oil Co., 49 O. S. 137.) Herein lies the essential difference between 
a corporation and a partnership or joint stock company. (See Gleason v. 
McKay, 134 Mass. 419, infra, p. 167. 

The franchise to conduct any business as a corporation, or through a corpo- 
rate organization, is now, and has always been since the time of the Romans, 
"a matter or pnvilege of public concerti," given by the state only on condition 
that it be not abused. Kent says: "Solon permitted private companies 
to institute themselves at pleasure, provided they did nothing contrary to 
the public law. But the Romans were not so indulgent as the Greeks. 
They were very jealous of such combinations of individuals, and they 7-e- 
strained those that icere not especially authorized, and eveiy corporation was 
illicit that was not ordained by a decree of the senate or emperor. Collegia 
lieita, in the Roman law were, like our incorporated companies, societies 
of men united for some useful business or purpose with power to act like a 
single individual, and if they abused their right, or assembled for any other 
purpose than that expressed in their charter, they were deemed illicita, and many 
laws from the time of the Twelve Tables down to the times of the emperors 
were passed against all illicit or unauthorized companies. In the age of 
Augustus, certain corporations had become nurseries of faction and disorder : 
and that emperor interposed, as Julius Caesar had done before him, and 
dissolved all but the ancient and legal corporations. * * * And the Em- 
peror Trajan, in refusing to incorporate a fire company, said, 'that societies of 
that sort had greatly disturbed the peace of the cities; and whatever name lie 
gave them, or for whatever purpose they might be instituted, they would not 
fail to be mischievous,'" citing Taylor's Elements of Civil Law, 567-570; 
Suetonius, Ad. Aug. 32, and J. Caesar 42, vol. 2, pp. 268-9. 

Does not this experience of the old Romans, the experience of England in 
the early part of the last century, with John Law's schemes and the South Sea 
Bubble, and the experience of our own day attest the wisdom of the common 
law rule that the "right to be a corporation is a franchise of public concern, 
held upon the implied condition that it will not be abused, under penalty of 
forfeiture," and that it is well to hold fast to such rule? It, of course, has been 
the policy of corporations and corporation counsel to minimize the franchise 
as much as possible, under nearly every circumstance, except where they 
have had to fight for their existence; and the above expression.^ of the lead- 
ing text writers of the day have helped (perhaps unwittingly) to make ob- 



§ 30 CORPORATION AND PARTNERSHIP. 1 6/ 

scure this wholesome doctrine, both in the minds of the people and of many 
judges as well. The legislatures, too, of several states have substantially abdi- 
cated the power of the state to retain control over the creatures of its bounty 
by authorizing the formation of joint-stock companies with nearly all the 
powers of corporations, without the liability to render an account at the hands 
of the state in quo warranto proceedings. The older writers— Blackstone, Kyd, 
Kent, Angell & Ames and Grant— all hold fast to these old and tried doctrines, 
and are, therefore, better guides in these matters than later writers. 



XE V. 



ARTICtE V. CORPORATIONS AS DISTINGUISHED FROM OTHER INSTI- 
TUTIONS, 

Sec. 30. (i) From partnerships. 

GLEASON V. McKAY.i 

1883. In the Supreme Judicial Court of MassacSusetts. 
134 Mass. 419-426. 

[In 1866 McKay was the owner of certain letters-patent for improve- 
ments in machinery used in the manufacture of shoes ; from the pro- 
ceeds of the business he had built a machine shop for the manufacture 
of these machines. He was the legal owner, but others were 
equitably interested in various amounts. He executed an instrument 
of trust, declaring himself to hold the business in trust for all who 
were, or might become, interested therein, upon condition that those 
so interested who accepted the declaration of trust and had a certain 
certificate evidencing their interest, should constitute and be an associa- 
tion, to be known as the McKay Machine Association, but no member 
shall have any right or authority to make any contract or bargain, or 
transact any business whatever for the association, without special 
authority ; it was to continue thirty years ; death of members was not 
to dissolve or have any effect on the association, except that those 
who succeeded to ovvnership of shares should succeed to the rights of 
the decedent ; that the association should be the equitable owner of 
the business, which- was to be divided into 50,000 shares, to be dis- 
tributed among the members in proportion to their interests, which 
were to be evidenced by certificates indicating the number of shares, 
the same to be transferable, by assignment in writing and surrender 
to the trustee, who was to issue a new certificate, keeping record of 
the same ; the general management was to be in an executive committee 
of three or five, to be chosen by the whole body of shareholders ; and 
this committee was to divide proceeds from time to time in proportion 
to the respective interests ; provision was also made whereby the 
business might be transferred to a corporation, when a majority should 
so determine, and thereafter no member was to have or claim any 
right to the property or business, and the declaration of trust was to 
cease ; provision was also made for choosing a new trustee in case of 
death or resignation of McKay. McKay was taxed, as trustee of said 

' f^tatement of facts condensed, and compiled partly from Hoadley v. County 
Commissioners of Essex, 105 Mass. 519; arguments omitted. 



1 68 GLEASON V. M'KAY. § 30 

association, upon its real estate, machinery, tools and all personal 
property. The commonwealth, in addition to the foregoing taxes, 
sought to collect a tax upon the aggregate value of the shares of the 
association. This was resisted.] 

Morton, C. J. The principal question in this case is whether the 
statute of 1878, chapter 275, as applied to the defendant, is constitu- 
tional. The first section of the statute provides that "chapter 283 of 
the acts of the year 1865, and the acts in amendment thereof, are 
hereby extended to apply, so far as applicable to companies, copart- 
nership and other associations having a location or place of business 
within this commonwealth, in which the beneficial interest is held in 
shares which are assignable "without consent of the other associates 
specifically authorizing such transfer. And the tax provided for in 
said chapter 283 shall be paid by such company, copartnership or as- 
sociation upon the aggregate value of the shares of said capital stock, 
in the manner provided in said chapter for taxes upon corporations." 

The power of taxation, using the word in its generic sense as in- 
cluding all rates and impositions laid or levied upon the people, is 
conferred upon the legislature by the constitution, and is to be held 
and exercised subject to the limitations imposed by the constitution. 
Oliver V. Washington Mills, ii Allen 268. The legislature is given 
the power "to impose and levy proportional and reasonable assess- 
ments, rates and taxes upon all the inhabitants of, and persons resident, 
and estates lying within the said commonwealth," and also power "to 
impose and levy reasonable duties and excises upon any produce, 
goods, wares, merchandise and commodities whatsoever, brought 
into, produced, manufactured or being within the. same." Const, of 
Mass., chap, i, art. 4. 

It is clear that the statute in question was not intended to lay a tax 
upon property within the first of these clauses. It does not purport 
to do this. It merely extends to certain copartnerships and associa- 
tions the provisions of the St. of 1865, c. 283, which chapter has been 
held to levy an excise upon corporate franchises, and not to lay a 
tax on property, and which chapter can be sustained as constitutional 
only upon the ground that it levies an excise. Murray v. Berkshire 
Ins. Co., 104 Mass. 586. Commonwealth v. Hamilton Manfg. Co., 
12 Allen 298. Regarded as a tax on property, the tax we are con- 
sidering would be invalid because not proportional ; it would be an 
imposition upon certain property at a rate different from that to which 
other property in the commonwealth is subject. But, as we have 
said, it does not purport to be a tax on property. In levying an im- 
position under this statute, no inquiry is made as to what property 
liable to taxation any copartnership, or other association which comes 
within its terms, has. Such property remains liable to taxation under 
the general laws. This imposition is based "upon the aggregate 
value of the shares of said capital stock." Such shares, if they can be 
said to be property, are not the property of the copartnership or asso- 
ciation which is taxed, but of the individual partners or shareholders. 
It is very clear that this was intended as an excise upon some 



§ 30 CORPORATION AND PARTNERSHIP. 1 69 

franchises or privileges sought to be held by the copartnerships or 
associations in supposed analogy to the franchises of coiporations. 
And the question is whether this imposition can be upheld as such 
excise within the second clause of the constitution, cited above. In 
this clause, there are two limitations upon the power of the legislature 
in imposing excises. They must be reasonable, and they must be 
excises upon some produce, goods, wares, merchandise or commodi- 
ties, brought into, produced, manufactured or being within the com- 
monwealth. 

It will not be seriously contended that the privileges or rights which 
are taxed by this statute can be properly described as either pro- 
duce, goods, wares or merchandise. Do they fairly come within 
the term "commodities," in the sense in which it is used in the con- 
stitution.-' Ever since the adoption of the constitution, the legisla- 
ture in its practice, and this court in its adjudications, have given a 
very broad and extensive meaning to this term. It has been repeat- 
edly held that corporate franchises enjoyed by grant from the govern- 
ment are commodities, and subject to an excise. So with corporate 
franchises granted by a foreign government, which by comity are 
permitted to be exercised within this commonwealth. So where the 
legislature has thought, upon considerations of public policy, that 
certain occupations or callings, of a public or quasi public character, 
should be carried on under governmental regulation it has been usual 
to impose a reasonable fee for a license. Portland Bank v. Apthorp, 
12 Mass. 252; Commonwealth v. People's Five Cents Saving Bank, 
5 Allen 428; Commonwealth v. Hamilton Manuf. Co., ubi supra; 
Commonwealth v. Cary Improvement Co., 98 Mass. 19; Connecti- 
cut Ins. Co. V. Commonwealth, 133 Mass. 161. 

This imposition is clearly not in the nature of a license fee, but is 
an excise upon a franchise or privilege. The right to levy excises 
upon franchises has never been extended further than to corporate 
franchises specially granted by the government, or enjoyed and ex- 
ercised by its permission. 

The defendant in this case is not a corporation. It is merely a 
partnership, with all the incidents and responsibilities of a partnership. 
The firm property is taxable at its business domicile. Hoadley v. 
County Commissioners, 105 Mass. 519. It enjoys no franchises con- 
ferred upon it by the legislature. It does not ask for or enjoy any 
corporate or special privileges . It has constituted its partnership 
under its common law rights and such legal agreements as it chooses 
to make. The peculiar feature that the interest of each m.em.ber may 
be transferred without the special assent of the other members^ is cre- 
ated by agreement of the partners under their natural rights at com- 
mon law. We do not see how this' peculiar feature can be called a 
commodity ^ subject to a special excise^ any more than the agreement 
of copartnership itself or any clause or part of it^or any other agree- 
ment, right or mode of transacting any business, can be called a com- 
modity, and so liable to taxation at the will of the legislature. 

If this tax can be upheld, it seems to us that the necessary result 



I/O 



GLEASON V. M'KAY. 



§ 30 



will be that the legislature has the power to select any business, occu- 
pation or calling carried on, or any natural right enjoyed, under the 
protection of our laws, and impose upon it at its will a special tax or 
excise. This would be extending the meaning of the word "com- 
modities" beyond any reasonable limits. Its effect would be to break 
down the limitations which the constitution intended to impose upon 
the power of the legislature, for the purpose of securing the end that 
all sums necessary for the defense and support of the government 
should, as far ag practicable, be raised by the equal taxation of the 
people. 

We are therefore of opinion that the statute of 1878, chapter 275, 
so far as it applies to the defendant, is unconstitutional. 

Judgment for the defendant. 

Note. See 1830, Pratt v. Bacon, 10 Pick. (Mass.) 123; 1833, Russell v. Mc- 
Lellan, 14 Pick. (Mass.) 63; 1888, Pittsburg Melting Co. v. Reese, 118 Pa. 
St. 355 ; and see Warner v. Beers ; People v. Coleman, Thomas v. Dakin ; 
Edgeworth v. Wood, supra, pp. 2, 15, 19, 28. 

The word partner is a contracted form of partitioner, and this indicates 
somethingof its meaning. Partnershipswere known to the Roman law underthe 
name of Societas, which was a contract based on the law which "natural rea- 
son establishes between all men," i. e., the j?ts gentium. Most of the Roman 
law of the subject is found in Dig. xvii, tit. 2, Pro Socio. Title 25, Book iii 
of Justinian's Institutes relates to partnerships, and part of that is found in 
Gaius iii, 148-154. The trade or commercial partnerships were the most com- 
mon, though other kinds were recognized. The Roman laws of partnership, 
so far as trade is conducted now as then, are still applicable. In England 
the partnership law was introduced by the merchants as a part of the law or 
custom of merchants, being one of the particular customs of the realm, some- 
what in derogation of the common law, and consequently allowed, where the 
rights of others were involved, only upon strict proof of the existence and 
knowledge of the custom. In this way, many of the rules of the common 
law were made applicable to partnerships. But the peculiar doctrines of no 
survivorship; of the partners' act being that of all, if in reference to partner- 
ship matter; and of dissolution by death of a partner, were from the law mer- 
chant, and through it from the Roman law, and were contrary to the common 
law rules of joint tenancy, and tenancy in common. The same difference be- 
tween a partnership and a corporation, i. e., that the latter is a distinct entitj' 
having rights and owing duties as such, as now recognized, was made in the 
Roman law, and continued throughout the development of the common law 
of England. 

These differences perhaps can be classified as follows : 



As to creation : 

As to franchise : 
As to management : 



As to powers: 



Corporation. 

Only under special au- 
thority of the state. 

Has a franchise. 

Only in the way indicated 
by law of its creation, 
and by the agents there 
provided for. 

Has none, except neces- 
sary to carry out purpose 
indicated in charter, and 
this can not be changed 
except by consent of the 
state. 



Partnership. 
By contract alone. 

Has no franchise. 

Each member has au- 
thority to bind with- 
in the limits oi the 
purpose. 

May be enlarged, or di- 
minished, at any- 
time, or extended to 
any other business, 
by consent of all cnn- 
cerned. 



§ 31 



CORPORATION AND JOINT STOCK COMPANY. 



171 



Corporation. 
Has no effect on corpo- 
rate existence. 



As to succession of mem 

bership, death, with' 

drawal, or insolvency : 
As to property, owner- In the corporation 

ship: 
As to conveyance : 
As to suits, by or against 



As to shares : 



Ab to liability of mem- 
bers: 
As to termination : 



By the corporation only. 

In name of corporation 
only. 

Transferable without con- 
sent of corporation. 



Limited. 

Only upon surrender by 
consent of the state, loss 
of integral part, or for 
non use or misuse of 
franchise on complaint 
of the state. 



Partnership. 
Dissolves. 



In the members. 

By the members only. 

In name of members 
only. 

Not transferable with- 
out consent of others, 
or if so, dissolves 
partnership. 

Unlimited. 

At the option of all the 
parties or by the 
death or withdrawal 
of any member, — not 
by the state except 
for illegal acts. 



Sec. 31. (2) From joint-stock companies. 
EDWARDS V. WARREN LINOLINE AND GASOLINE WORKS. 



1897. In the Supreme Judicial Court of Massachusetts. 
Mass. Rep. 564-569, 38 Lawyer's Rep. Ann. 791. 



168 



Trustee Process. The principal defendant was described in the 
writ as "a joint-stock company organized under the laws of Pennsyl- 
vania." The trustee, which was a Massachusetts corporation, filed 
an answer setting forth reasons why it should not be charged, and, on 
interrogatories propounded by the plaintiff, made answers, the nature of 
which appears in the opinion. The trustee moved that it be discharged. 
The superior court allowed the motion, discharged the trustee with 
costs, and dismissed the action ; and the plaintiff appealed to this court. 

The case was argued at the bar in November, 1896, and afterwards 
was submitted on briefs to all the justices. 

Lathrop, J. It is conceded by the plaintiff that, as the jurisdic- 
tion of the court depends upon charging the Walworth Manufacturing 
Company as trustee, inasmuch as there was no service upon the 
principal defendant, the action was properly dismissed upon discharg- 
ing the trustee. 

The question then is whether the trustee was properly discharged, 
and this depends upon whether the principal defendant, an association 
formed under the laws of the state of Pennsylvania, is a partnership 
or a corporation. 

The trustee's answers to interrogatories refer to Brightly's Purdon's 
Digest (i2th ed), 1086-1088, and to the cases of Eliot v. Himrod, 
108 Pa. St. 569, and Sheble v. Strong, 12S Pa. St. 315, as containing 
the law relative to the statement in the answer, that the principal de- 
fendant was a partnership and not a corporation. 

From the digest it appears that such an association is styled a "part- 



172 EDWARDS V. WARREN LINOLINE, ETC., WORKS. § 3 I 

nership association," and not a corporation. By the terms of the various 
acts which have been passed upon the subject, such an association 
may be formed by three or more persons. The capital is alone to be 
liable for the debts. There is no personal liability of the members, 
except to the extent of any unpaid subscription, if certain provisions 
of the act are complied with. "Interests in such partnership associa- 
tions" are declared to be personal estate and are transferable, under 
such rules and regulations as shall from time to time be prescribed; 
but if there are no such rules and regulations, the transferee of any 
interest in any such association is not entitled to any participation in 
the subsequent business of the association, unless elected to member- 
ship therein by a vote of a majority of the members in number and 
value of their interests. The business is to be conducted by a board 
of managers. The duration of the association may be fixed by the 
articles of association, but is not to exceed twenty years. 

Power to adopt and use a common seal is given in case the associa- 
tion has occasion to execute a deed of conveyance or bonds and inort- 
gages. Land sold to the association, or by it, is required to be 
conveyed in the name of the association. It is further provided: 
"Said association shall sue and be sued in their association name ; 
and when suit is brought against any such association, service thereof 
shall be made upon the chairman, secretary or treasurer thereof, which 
service shall be as complete and effective as if made upon each and 
every member of such association." In Eliot v. Himrod, io8 Pa. St. 
569, 580, it is said by Mr. Justice Trunkey, in delivering the opinion 
of the court: "The formation of a limited partnership association is 
materially different from the creation of a coiporation. Such association 
is treated in the statute as a partnership which, upon the performance 
of certain acts, shall possess specified rights and immunities. In con- 
templation that the association may consist of many members, for 
convenience it is clothed with many of the features and powers of a 
corporation, such as the right to sue and be sued, grant and receive 
in the association name. But no man can purchase the interest of a 
member and participate in the subsequent business, unless by a vote 
of a majority of the members in number and value of their interests. 
No charter is granted to the persons who record their statement." 
Sheble v. Strong, 128 Pa. St. 315, 318, is to the same effect. 

If the question presented were an open one in this commonwealth, 
it might well be held that such association could be considered to have 
so many of the characteristics of a corporation that it might be treated 
as one. 

At common law, a joint-stock company formed for business pur- 
poses is considered in this commonwealth merely as a partnership. 
Tappan v. Bailey, 4 Met. 529; Tyrrell v. Washburne, 6 Allen 466. 

The same rule has been applied to joint-stock associations formed' 
under the laws of the state of New York, which do not differ, in any 
essential respect, from the laws of Pennsylvania. Taft v. Ward, 106 
Mass. 518, and iii Mass. 518; Bodwell v. Eastman, 106 Mass. 525, 
526; Gott v. Dinsmore, 11 1 Mass. 45, 51 ; Boston and Albany Rail- 



§ 31 CORPORATION AND JOINT STOCK COMPANY. 1/3 

road V. Pearson, 128 Mass. 445. See, also, Frost v. Walker, 60 
Maine 468 ; Dinsmore v. Philadelphia and Reading Railroad, 32 Leg. 
Int. 388, and 11 Phila. 483. 

In Taft V. Ward, 106 Mass. 518, 524, speaking of the New York 
statutes, it was said by Chief Justice Chapman : 

"These statutes provide, in substance, that any association, con- 
sisting of seven or more shareholders or associates, may sue and be 
sued in the name of the president or treasurer; that in such suit a 
judgment may be rendered against the company; and until an execu- 
tion is issued against the company and returned unsatisfied, no action 
shall be maintained against individuals. These statutes seem to apply 
to all copartnerships consisting of seven or more members. The 
members of such companies are authorized to hold their interests in 
shares, which are assignable like shares of stock in a corporation, and 
the action against the members is regarded as supplementary to the 
action against the company. Waterbury v. Merchants' Union Ex- 
press Co., 50 Barb. 157; Robbins v. Wells, i Robertson 666. 

"So far as these statutes relate to the procedure in courts for the 
recovery of debts, they are limited to the state of New York ; for 
each state adopts its own forms of remedy. Story Confl. Laws, 
sections 556—558. The plaintiff could not in this commonwealth 
bring an action against the president or secretary, and obtain a 
judgment against the company by its name ; nor could he bring an 
action against the members, or any of them, as a supplement to such 
an action. In order to do so, we must hold that the statutes of New 
York prescribing forms of action are in force here. In this common- 
wealth, such a company is a mere copartnership." 

There is nothing inconsistent with an association being a partner- 
ship that it has shares, or that the shares are transferable, or that the 
death of a member shall not work a dissolution of the partnership. 
Phillips V. Blatchford, 137 Mass. 510. See, also, Hoadley v. County 
Comms., 105 Mass. 519; Gleason v. McKay, 134 Mass. 419. 

The case mostly relied upon by the plaintiff is Liverpool Ins. Co. 
V. Massachusetts, 10 Wall. 566, which was taken to the supreme 
court of the United States on a writ of error from this court. See 
Oliver v. Liverpool and London Ins. Co., 100 Mass. 531. It was a 
bill in equity, filed by the treasurer of the commonwealth under the 
statute of 1862, c. 224, section 11, to restrain the defendant from 
prosecuting its business until the tax assessed upon it by section 2 
of the statute had been paid. This section provided that "each fire, 
marine, and fire and marine insurance company incorporated or as- 
sociated under the laws of any government or state other than one of 
the United States," should annually pay a certain tax. The defend- 
ant was an English company formed for the business of insurance, 
and organized under a deed of settlement. Its property was divided 
into transferable shares. It had power to sue and be sued by the name 
of its chairman, and a suit did not abate by reason of the death of 
such officer. The company could sue its own members, and be sued 
by them. Execution on any judgment recovered against the com- 



174 EDWARDS V. WARREN LINO LINE, ETC., WORKS. § 3 I 

pany could be issued against any proprietor. The statute under which 
it was formed, and subsequent statutes declared that it should not be 
deemed to be incorporated. The company was composed in part of 
British subjects and in part of citizens of the state of New York. 

This court, after stating that it was not a pure corporation nor a 
pure partnership, but was an association intermediate between corpo- 
rations known to the common law and ordinary partnerships, and was 
so far clothed with corporate powers that it might be treated, for the 
purposes of taxation, as an artificial body, proceeded to say: "We 
think the defendants are an association of the kind to which the statute 
of 1862 was expressly intended to apply, as well as to bodies wholly 
corporate in their character, and that, being permitted by the comity 
of our laws to exercise their functions within this commonwealth, they 
can claim no exemption from regulations appropriate to their collective 
action on account of the citizenship or nationality of their individual 
members." 

In the supreme court of the United States the decree of this court 
was affirmed on the ground that the company was a foreign corpora- 
tion, but Mr. Justice Bradley, while agreeing in the result, differed 
on the question whether the company was a coiporation. He was of 
opinion that it was one of those special partnerships called joint-stock 
companies, and that it could not sue or be sued in this country with- 
out legislative aid. 

This view of Mr. Justice Bradley is in accord with the view of this 
court, and we are not aware that the view taken by the supreme court 
of the United States has been followed in this commonwealth. The 
decisions which we have already cited show that a foreign joint-stock 
company is considered as an association or partnership, and not as a 
corporation. 

An examination of the statutes further shows that the legislature 
has clearly recognized the distinction between foreign corporations 
and associations ; and that where it has deemed it best that an act 
should apply to an association as well as to a corporation, it has said 
so in plain language. Thus, the statute of 1882, c. 106, relating to the 
taxation of foreign mining, quarrying, and oil companies, and requiring 
the appointment of an agent here upon whom process may be served, 
uses the language, "every corporation, company, or assopiation." 

The statute of 1887, c. 214, in section i, provides: "When con- 
sistent with the context, and not obviously used in a different sense, 
the term ' company ' or ' insurance company ' as used herein includes 
all corporations, associations, partnership, or individuals engaged as 
principals in the business of insurance." The language is the same 
in the statute of 1894, c. 522, section i. 

By the statute of 1888, c. 429, section 11, "fraternal beneficiary 
corporations, associations, or societies," organized under the laws of 
another state and then doing business here, were allowed to continue 
business without incorporation under the act. But by the statute of 
1892, c. 40, section i, this was amended by striking out the words 
"associations or societies." 



§ 31 CORPORATION AND JOINT STOCK COMPANY. 1 75 

The statute of 1884, c. 330, requires " Every corporation established 
under the laws of any other state or foreign country," and hereafter 
having a usual place of business here, before doing business, to appoint 
in writing the commissioner of corporations, or his successor in office, 
to be its true and lawful attorney, upon whom process might be served. 

The statute of 1888, c. 321, allows "Manufacturing corporations 
established under the laws of other states," which have complied with 
the provisions of the statute of 1884, c. 330, to purchase and hold 
such real estate here as may be necessary for conducting their busi- 
ness. 

By the statute of 1895, ^' S^^* "Foreign corporations engaged in 
the business of selling or negotiating bonds, mortgages, notes or other 
choses in action," are made subject to the provisions of the statute 
of 1884, c. 330. 

The statute of 1896, c. 391, section i, contains a provision relating 
to the personal liability, under certain circumstances, of "the officers 
and members or stockholders in any corporation established under the 
laws of any other state or foreign country." See also St. 1895, c. 157. 

Many other instances of legislation might be given where the dis- 
tinction between a corporation proper and a mere association or 
organization is shown to be clearly in mind. 

Unless the principal defendant can be considered a corporation^ 
it can not be sued here under the name which the laivs of Pennsyl- 
vania authorize it to use. Such laws have no extra-territorial force 
or effect. The trustee, therefore., was properly discharged. 

In the opinion of a majority of the court, the order discharging the 
trustee and dismissing the action must be affirmed. 

Note. Joint stock companies with transferable shares perhaps could be 
formed at common law, or under the law merchant, without special authority. 
(See Harrison v. Heathorn, 6 M. & 6. 79; Mexican & S. A. Co., 5 Jur. N. S. 
615, 27 Beav. 480.) But it has been said that acting as a corporation, without 
authority, was an indictable offense at common law. (Kinder v. Taylor, 3 L. 
J. 68; Duvergier v. Fellows, 5 Bing. 248, 5 M. & P. 403, 4 Am. & E. Enc. 185, 
note 2.) But acting a.s a corporation a\so included the idea of a limited lia- 
bility of members, and so far as innocent third parties were affected, this could 
not be done without authority. By the Bubble act of 1719 (6 Geo. 1, c. 18), 
joint stock companies were declared to be common nuisances, members were 
subjected to penalties, and it was an offense for brokers to deal in their shares. 
This act was repealed in 1825 (6 Geo. IV, ch. 91), though perhaps not often, if 
ever, enforced for a long period before. In 1826, banking companies were 
allowed to sue in the name of a certain officer, after complying with certain 
rules, and in 1834, the crown was permitted to extend this privilege generally 
to joint-stock companies. In 1844 (7 & 8 Vict., c. 110) all companies were 
allowed to be incorporated, but the partnership liability was continued, but in 
1855, they were permitted to organize with a limited liability (18 & 19 Vict., 
and 19 & 20 Vict., c. 47). In 1862, all former acts relating to companies were 
consolidated into one act for the incorporation of companies, which, with some 
modifications, is still the law in England. In the United States, most of the 
states have provided for joint stock companies, with transferable shares, and 
in some cases with limited liability, but the rules of partnership are applied 
so far as possible where the statutes under which they are formed are silen!. 

1. As to suits— 1896, State v. Adams Express Co., 66 Minn. 271, 38 L. R. 
A. 225, (Service of summons may be made on local agent of such foreign 



1 76 LEWIS V. liLTON. § 32 

joint stock company)? 1889, Imperial Ref. Co. v. Wyman, 38 Fed. Rep. 574, 3 
L. R. A. 503 (limited partnership created in Pennsylvania can not sue in 
the United States courts, as a "citizen" of that state, citizens of other states) ; 
1881, Fargo v. L., N. A. & C. R. Co., 6 Fed. R. 787 (is a citizen of state cre- 
ating for purpose of suing and being sued in United States courts) ; 1876, Maltz 
V. American Ex. Co., 1 Flip. (U. S.) 611, Fed. Cas. 9002, 3 C. L. J. 784 (is a 
citizen of creating state for purpose of being sued in United States courts) ; 
1875, Wescott v. Fargo, etc., Co., 61 N. Y. 542 (president of such an institu- 
tion is a corporation sole for purpose of suits.) 

2. As to failure to comply strictly with statute— 1896, Staver, etc., A. 
Mfg. Co. V. Blake, 111 Mich. 282, 38 L. R. A. 798 (technical non-compliance 
with law does not make members liable as general partners, but see next 
case) ; 1889, Vanhorn v. Corcoran, 127 Pa. St. 255, 4 L. R. A. 386 (failure to 
comply makes members liable as general partners). 

3. As to taxation — 1886, State v. State Board of Assessors, 47 N. J. L. 36, 
27 L. R. A. 684, 13 Am. & Eng. Corp. Cas. 403, 31 Atl. 220 (Pennsylvania 
partnership association may be taxed in New Jersey as foreign corporation) ; 
1892, People, etc., v. Coleman, 133 N. Y. 279, 16 L. R. A. 183, 37 Am. & Eng. 
Corp. Cas. 1, supra, p. 15 (joint-stock companies in New York, are not cor- 
porations for purposes of taxation) ; 1889, People, etc., v. Wemple, 117 N. Y. 
136, 6 L. R. A. 303, 29 Am. & Eng. C. C. 610 (the United States Express 
Company, a joint stock company, may be taxed in New York as an incorpo- 
rated company.) 

4. As to status generally — 1896, Rouse, Hazard & Co. v. Detroit C. C. Co., 
Ill Mich. 251, 38 L. R. A. 794; 1891, Allen v. Long, 80 Texas 261, 26 Am. St. 
Rep. 735, 38 Am. & Eng. Corp. Cas. 68 (joint stock companies are governed 
by general principles of partnership) ; 1890, Oliver's Estate, 136 Pa. St. 43, 20 
Am. St. Rep. 894 (partnership association is an artificial person, members do 
not own the property, and death of member does not dissolve). See also, 1890, 
Fifth Avenue Bank v. Colgate, 120 N. Y. 381, 8 L. R. A. 712; 1889, Abbott v. 
Hapgood, 150 Mass. 248, 5 L. R. A, 586, 22 N. E. Rep. 907 ; 1889, Tilge v. Brooks, 
124 Pa. St. 178, 2 L. R. A. 796 ; 1888, Jennings' Appeal, 2 Monaghan 184 (Pa.), 
2 L. R. A. 43. 



Sec. 32. (3) From fraternity or society. 

LEWIS v. TILTON Et Al. 

1884. In the Supreme Court of Iow^a. 64 lov^^a 220-223, 5^ Am. 

Rep. 436. 

The petition, as amended, states that the defendants and others 
formed a benevolent society for the prevention and suppression of in- 
temperance, known and designated as the Ottumv^^a Temperance Re- 
form Club, and that they were chosen to represent such society as its 
executive committee; that in March, 1878, the defendants entered into 
a written contract of lease with plaintiff, by the terms of which said 
Ottumwa Temperance Reform Club was to and did occupy the prem- 
ises described in said lease, at the yearly rental of fifteen hundred dol- 
lars (a copy of said lease is attached to the petition) ; that by virtue 
of said lease the defendants, and the society of which they were mem- 
bers, occupied said premises from March i, 1878, to July i, 1879, 
and enjoyed all the benefits resulting from such occupancy; that these 
defendants verbally contracted with the Ottumwa Gas Light Company 
to furnish said Ottumwa Temperance Reform Club the gas required 



§ 32 CORPORATION AND FRATERNITY. 177 

to light said opera house and rooms thereunder ; that by virtue of said 
verbal understanding the gas company did from time to time, and as 
required, furnish said club a large amount of gas; that said club was 
not incorporated at the time the above contracts were made, and is 
not now ; and that said account for gas has been assigned to plaintiff. 
Upon the grounds above stated, the plaintiff sought to make the 
defendants individually liable. To the petition there was a demurrer, 
which was sustained, and the plaintiff filed an amended petition, 
stating various acts and things done, and reaffirming all the allega- 
tions of the petition, and thereupon asked judgment against the 
defendants individually. To the amended petition the defendants de- 
murred. The demurrer was sustained, and the plaintiff excepted, 
and, electing to stand thereon, appealed. 

Seevers, J. I. As we understand the petition, the verbal contract 
entered into with the gas company is an original undertaking on the 
part of the defendants. At their request the gas was furnished the 
club, and, of course, it seems to us the defendants are bound to pay 
for the gas so furnished. It matters not to whom it was furnished. 
The gas company had the right to expect that the defendants would 
pay for whatever was furnished at their request. There is no allega- 
tion that credit was extended to the club, and the only presumption 
which can be indulged in is that the credit was extended to the de- 
fendants. As they contracted, they must pay. 

2. The more serious question is whether the defendants are indi- 
vidually liable under the lease, which, on its face, shows that it was 
entered into between the plaintiff, as party of the first part, and the 
Ottumwa Temperance Reform Club, party of the second part, and is 
signed by the plaintiff, and by the defendants as follows : 

rR. L. Tilton, 

"Executive Committee of the Ottumwa J S. B. Thrall, 

Temperance Reform Club, j David Eaton, 

[Joseph Sloan." 
It is insisted that the lease shows that credit was extended to the 
club, and that the contract was made with it; that the principal was 
named, and therefore the defendants can not be made individually 
liable. This line of argument possibly would be conclusive if there 
was a principal. But there is none. The club is a myth. It has 
no legal existence^ and never had. It can not sue or be sued. The 
defendants contracted in the name of a supposed principal ; that is, 
they claimed there was a principal for whom they were acting, but 
it now appears that there was no principal known to the law. But, 
under the allegations of an amended petition, it should be assumed, 
we think, that there was, as a matter of fact, a body of men associated 
together for a benevolent purpose, who had assumed the name above 
stated, for the avowed purpose, by their united efforts, of suppressing 
intemperance. There is, however, some doubt in our minds whether 
it can be said that the plaintiff extended credit to an organization that 
had no legal existence. As the law does not recognize such an organ- 
12— WiL. Cases. 



178 BELTON V. HATCH. § 33 

ization, we are at a loss to know how or why it can be said as a mat- 
ter of law that the plaintiff contracted with and extended credit to a 
mere myth. In legal parlance, the organization can not be named. 
It has no habitation or place of abode. 

It is also insisted that a fund was provided for the payment of debts, 
and hence it must be presumed that the plaintiff contracted in reliance 
upon such fund, and therefore the defendants can not be made indi- 
vidually liable. What the fact may be we are not advised, but cer- 
tainly this does not appear on the face of the petition, and we have 
looked into the lease, and there is no provision in it from which such 
an inference can be drawn. 

It is also insisted that there is no known legal principle or rule un- 
der "which the defendants can be made liable. It is said that they are 
not parties. This is true; that is to say^ these defendants could not 
bind any other members of the organization as a partner in a joint 
enterprise., or a contract as to which he had no knowledge., and to 
which he did not assent. But we think "those who engaged in the 
enterprise (that is, became members of the organization) are liable 
for the debts. They contracted, and all are included in such liability 
who assented to the undertaking or subsequently ratified it." It was 
so held in Ash v. Guie, 97 Pa. St. 493; Fredendall v. Taylor et al., 
26 Wis. 286; and this rule is supported to some extent by what was 
said by this court in Keller v. Tracy, 1 1 Iowa 530, and Drake v. The 
Board of Trustees, 1 1 Iowa 54. 

But, it is said, these defendants did not contract. They certainly 
represented that they had a principal for whom they had authority to 
contract. They, for or on behalf of an alleged principal, contracted 
that such principal would do and perform certain things. As we have 
said, there is no principal, and it seems to us that the defendants should 
be held liable., and that it is immaterial whether they be so held be- 
cause they held themselves out as agents for a principal that had no 
existence., or on the ground that they must., under the contract., be re- 
garded as principals., for the simple reason that there is no other 
principal in existence. We think the demurrer should have been 
overruled. 

Reversed. 

Note. See cases cited under White v. Brownell, infra, p. 187. 



Sec. 33. (4) From stock exchange. 

BELTON v. HATCH. 

1888. In the Court of Appeals of New York. 109 New York 
593-594> 4 Am. St. R. 495. 

Appeal from judgment of the general term of the supreme court in 
the first judicial department, entered upon an order made May 29, 
1885, which affirmed a judgment in favor of defendant, entered upon 
an order overruling a demurrer to certain portions of the answer. 



§ 33 CORPORATION AND STOCK EXCHANGE. 1/9 

Gray, J. Plaintiff, as the assignee of one Des Marets, formerly a 
member of the New York Stock Exchange, sues to recover the pro- 
ceeds received by that organization from a sale of the membership, 
or, as it is sometimes technically termed, the seat of said Des Marets. 
It is alleged by plaintiff in his complaint that Des Marets, for many 
years a member of the New York Stock Exchange, in October, 1883, 
became insolvent, and, under the laws governiivg that body, was sus- 
pended ; that subsequently its governing committee determined that 
the failure was caused by doing business in a reckless and unbusiness- 
like manner, and resolved that Des Marets was ineligible for re- 
admission, and in December following the failure the stock exchange, 
pursuant to its constitution and by-laws, disposed of his membership 
and seat for the sum of $25,000, which sum it retained and refused 
to pay over to plaintiff, who demanded 'A as Des Marets' assignee. 
The complaint also alleges ':hat the New York Stock Exchange is an 
unincorporated association, organized and located in New York city ; 
that its members have voluntarily established certain rules, conditions 
and articles of association or copartnership, which are designated as 
their constitution and by-laws, which are signed and consented to by 
the members and which govern them, their officers and committees, 
and which control in the conduct of the transactions and concerns of 
the association and are binding and obligatory upon the members. 

The answer of the defendant, after admitting the allegations of the 
complaint which I have mentioned, sets forth much of the constitu- 
tion and by-laws of the exchange, and alleges the distribution of the 
proceeds of the sale of Des Marets' membership to have been made 
among his creditors in the exchange, pursuant to their provisions. 
The plaintiff demurred to this portion of the answer on the ground 
that it was insufficient in law upon its face. Although this matter 
was not stated as a separate defense, totidem verbis^ yet as it was 
affirmative in its nature and constituted the defense and justification of 
the association in disposing of Des Marets' membership and in retain- 
ing the proceeds arising from such disposition, we shall not consider 
the demurrer as improperly interposed and will dispose of the ques- 
tions raised by these pleadings. 

Their decision involves the legal relations to each other of the mem- 
bers composing the association of the New York Stock Exchange, and 
the extent and validity of the powers reserved by its constitution and 
by-laws, and conferred upon its officers and committees in the man- 
agement of its affairs and in the control over a member. The New 
York Stock Exchange is a voluntary association of individuals, 
united, without a charter, in* an organization for the purpose of afford- 
ing to the members thereof certain facilities for the transaction of their 
business as brokers in stocks and securities, and a convenient exchange 
or sales-room for the conduct of such transactions. It can not be 
said to be strictly a copartnership, for its objects do not come within 
the definition of one. A copartnership results from a contract be- 
tween the parties by -which they agree to combine their property or 
labor, or both, in some common enterprise and for a common profit, 



l80 BELTON V. HATCH. § 35 

to be shared in the proportion stated in their agreement. The objects 
of a voluntary association of brokers do not^ however., involve any stick 
combination .1 or any communion of profts from the business trans- 
acted by the members. Like a business club, its principal object is the 
promotion of the convenience of its members by furnishing facilities 
which aid them in doing their business, and are, therefore, of benefit 
to them. It may be said, however, that the rights of the associates 
are not substantially different from those of partners, so far as their 
rights in the property of the association are concerned. The interest 
of each member in the property of the association is equal, but it is 
subject to the constitution and by-laws, which are the basis on which 
is founded the association. They express the contract by which each 
member has consented to be bound, and which measures his duties, 
rights and privileges as such. 

It seems most clear to me that this constitution and the by-laws de- 
rive a binding force from the fact that they are signed by all the mem- 
bers, and that they are conclusive upon each of them in respect of the 
regulations of the mode of transaction of his business, and of his 
right to continue to be a member. Whatever are the rights acquired 
by a member and created by his admission to membership, the rules 
by which the membership is created or dissolved, and which control 
the affairs of the organization and the relations of members, entered 
into those rights when created and remained a part of them. In this 
proposition there is nothing against public policy, for the reason that 
whatever a member acquires is subject to the self-imposed condition 
that his title and the rights which accrue from his membership are 
regulated by, and are dependent upon, the laws adopted by the asso- 
ciation, and expressly consented to by him when he joined. When 
Des Marets, plaintiff's assignor, joined the exchange, it may be per- 
fectly true that he acquired property ; but it was property given by 
the act of those who, in giving it, accompanied the gift with conditions 
which were incident to and a part of the property ; and it was in no 
sense property created by the individual's act. I consider that there 
is an obvious distinction between property of the individual's own 
creation, to which he attaches conditions, or in the disposal of which 
he exerts a direction, whereby the claims of others are affected, and 
property which comes to him subject to conditions which may deprive 
him of its use or enjoyment. And so here, if the constitution, which 
forms the basis of this association, appropriates to his creditors in the 
association, or to any of its corporate objects, the peculiar property of 
the member, who, by force of constitutional provisions, has lost his 
membership, that w^as an incident entering into his title to it. When 
membership and the rights belonging to that status were conferred 
upon him., the gift was accompanied by a condition that the rights, of 
whatever nature., should revert to the association upon the happening 
of certain events, and he can not be heard to complain ; nor can third 
persons., claiming to derive under him. He should be held to his 
contract, which was reasonable, and when entered into prejudiced no 
rights of others, nor conflicted with any statutory or common-law 



§ 33 BELTON V. HATCH. l8l 

right. A person acquires by his admission to membership only such 
rights as the constitution and by-laws of the association give him. ; 
and upon ceasing to be a member ^ by the competent judgment of the 
governing committee, he ceases to have any further coftcern or interest 
in the association, except it is given by its laws. 

The New York Stock Exchange, by the accumulation of a great fund 
from a large membership, by the wise and successful management of 
the members, and by the acquisition of valuable facilities for the 
transaction of business, has given to membership an important pecun- 
iary value. It is fair to presume that this prosperity and success were, 
in an important degree, due to the regulations adopted looking to the 
conduct by a member of his business, and the restraints imposed upon 
reckless or dishonest methods. Membership may be property; but it 
is not property in every sense. If it is property, it is incumbered 
with conditions when purchased, without which it could not be 
obtained. (Hyde v. Woods, 94 U. S. 523.) 

By the constitution of this association, the powers of government 
are vested in a governing committee, whose decision, after the trial 
of a member for offenses under its laws, is final. Standing committees 
are appointed by them, and the committee on insolvencies is charged 
with the duty of immediately investigating every case of insolvency 
and of reporting whether the same was occasioned by reckless dealing 
or by doing business for improper parties. Should the governing 
committee, upon this report, determine that a member's failure was 
caused by doing business in a reckless and unbusinesslike manner, 
he may be declared ineligible for readmission by a majority vote of 
the entire governing committee. By section 2 of article 13 of the 
constitution, it is provided that "in every case where a member is 
deprived of his membership, or declared ineligible for readmission by 
the governing committee by reason of any offense against or under 
the laws of the exchange, his membership may be disposed of forth- 
with by the committee on admissions." 

The plaintiff, appellant, contends that in such a case as this of Des 
Marets' severance from membership, there was no power under the 
constitution to distribute the proceeds arising from the sale of his 
membership, and that, in the absence of some express reservation of 
the right to dispose of those proceeds, they are the property of the 
member. The vice in plaintiff's argument is in the assumption that 
a member has any absolute property of his own in such a case. As 
we have before seen, the rules of the association were an incident to 
the rights acquired by a person upon admission ; and one. of those 
rules was that for conviction of an offense against or under the laws 
of the exchange, a suspended member might be deprived of right to 
readmission to membership. When expelled he ceases to have any 
interest in the association. His privilege to transact his business at 
that place has been lost. The association may fill the vacancy caused 
by his expulsion, or not, as they please. They can not be compelled 
to do so; but if they elect to admit a new member, and can derive, 
from so doing, any profit, that is their unquestionable right, with the 



r82 SKILLMAN V. LACHMAN. § 34 

exercise of which others are not concerned. They may do with their 
own as they like. As I construe section 2 of article 13, above cited, 
its effect is that of an express reservation of the right to deprive a 
member, found guilty of an offense under its provisions, of all rights, 
interest and claim whatever. 

The right is given to a member in good standing to propose for ad- 
mission in his stead some one acceptable to the committee on admis- 
sions, and any profit he derives from his negotiations with the candi- 
date is his. So if a member becomes honestly insolvent and fails to 
qualify under the rules for readmission, or if he dies, after the claims 
of the association are discharged, the proceeds may be paid to him or 
his legal representatives, as the case may be. But in the case of a 
member who, by misconduct cognizable by the laws of the association, 
forfeits his right to continue to remain a member, there is resei-ved 
by the constitution the right to dispose of his membership. These 
rules are reasonable, and do not contravene any rule of public policy, 
and having been consented to by the plaintiff's assignor, deprived him 
of any interest or rights in the association, of which he had ceased to 
be a member. These views lead to an affirmance of the judgment 
appealed from. 

All concur. 

Judgment affirmed. 

Note. See Board of Trade of Chicago v. Nelson, 162 111. 431, 53 Am. St. 312 ; 
American Live Stock CJo. v. Chicago Live Stock Exchange, 143 III. 210, 32 N. 
E. Rep. 274; Green v. Board, etc., 174 111. 586, 51 N. E. Rep. 599 (and see 
Evans v. Phil. Club, infra, p. 1165, and note). 



Sec' 34. (5) From cost book mining companies. 

SKILLMAN V. LACHMAN Et Al.» 

1863. In the Supreme Court of California. 23 California 

198-208. 

Appeal from the county court, Nevada county. 
The facts are stated in "the opinion of the court. 

Crocker, J., delivered the opinion of the court — Norton, J., con- 
curring, and Cope, C. J., concurring specially. 

This is an action upon a promissory note for $102, with interest at 
3 per cent, per month, against the defendants, as members of the 
"Gold Hill Company," originally brought before a justice of the 
peace, where a judgment was rendered against the defendants, from 
which they appealed to the county court, where judgment was again 
rendered against them for $260.46 cents, besides costs, that sum being 
the principal and interest of the note, and from which they appeal to 
this court. » * * 

* Arguments and opinion of the court on question of jurisdiction omitted. 



§ 34 CORPORATION AND COST BOOK COMPANY. 1 83 

The principal point raised by the appellant is that the owners of the 
claim are tenants in common and not partners ; that Sprout was one 
of the owners, and that one co-tenant can not bind his co-tenants bj 
a note given in the name of the company. This question of the re- 
lation which exists between persons owning several interests in a mine, 
and engaged in working the same, is a very important one. What- 
ever may be the rights and liabilities of tenants in common of a mine 
not being worked, it is clear that where the several owners unite and 
co-operate in working the mine, then a new relation exists between 
them, and, to a certain extent, they are governed by the rules relating 
to partnerships. They form what is termed a mining partnership, 
which is governed by many of the rules relating to ordinary partnerships, 
but which has also some rules peculiar to itself — one of which is that 
one person may convey his interest in the mine and business, without 
dissolving the partnership. (Ferreday v. Wightwick, i Russ. & Mylne 
49.) Still, there may be a partnership in the working of the mine, 
subject to the rules relating to an ordinary partnership in trade. (Story 
on Part., § 82.) And this relation of partnership may be constituted 
either by express stipulation or by implication deduced from the acts 
of the parties. (Rockw. on Mines, 575.) But in the case of an ordi- 
nary mining partnership, something more will be required to raise the 
presumption of liability arising from persons holding themselves out 
to the world as partners than would be necessary in the case of an or- 
dinary partnership. Such persons, in the absence of other circum- 
stances, can not fairly be presumed to have intended to render them- 
selves liable to all consequences of a commercial partnership. (Rockw. 
on Mines, 575.) The same author concludes his examination of this 
question as follows: "If the works are carried on by persons as mere 
owners of land, concurring in a general system of management for 
their common benefit, the shares of each person will only be liable for 
his individual engagement, and to the payment of debts contracted by 
himself, or his authorized agent, without interfering with the shares 
of the other tenants in common." (Rockw. on Mines, 579.) 

There have been several decisions relative to the rights and liabilities 
of shareholders in mining companies to the public and among them- 
selves, which it may be well to examine. In the case of Vice v. Lady 
Anson (7 B. & C. 409), which was an action for goods sold and 
materials furnished for working a mine, in which the defendant held 
one share, evidenced only by a certificate issued by the secretary of 
the company, the plaintiff, at the time he furnished the goods, had no 
knowledge that she was a shareholder. She had paid the deposit on 
some shares, and had spoken and written of herself (in private letters) 
as a shareholder of the company. The judge held that the plaintiff 
did not actually give credit to the defendant, and was not misled by 
her, and that she never held herself out to the world as a partner, and 
therefore she could only be chargeable on the ground of being really 
interested. The fact that she thought she had an interest did not 
make her interested; and he held that the certificate conveyed no 
interest in the mine, and therefore she was not liable. The correct- 



1 84 SKILLMAN V. LACHMAN. § 34 

ness of this decision, that it was necessary to prove a conveyance of 
an interest in the mine, has been doubted. 

The case of Dickinson v. Valpy (10 B. & C. 128) was an action 
by an indorsee of a bill of exchange, drawn and accepted by a mining 
company, against the defendant as a member of the company. The 
defendant had applied for and obtained shares in the company, on 
which he had paid several installments. The business of the company 
was transacted by a board of directors, and the bill had been drawn 
and accepted in pursuance of a resolution passed by them. It was 
held necessary for the plaintiff to show that the directors had power 
to bind the shareholders by drawing bills of exchange ; and for that 
purpose, evidence should have been given of the nature and character 
of the business of the company, to show that in order to carry into 
effect the purposes for which it was instituted the drawing and accept- 
ing of bills was necessary, or to show from the practice of similar 
companies that it was usual to draw such bills. It was also held^ 
that although in ordinary trading ■partnerships the law implied that 
one partner had power to bind another by drawing and accepting 
bills^ yet that rule did not apply to minitig partnerships^ without 
showing that it was necessary to carry on its business. 

In Judson v. Bourne (6 M. & W. 461), it was held that the mem- 
bers of a mining company have authority by law (in the absence of 
any proof of a more limited authority) to bind each other by dealings 
on credit for the purpose of working the mines, if that appears to be 
necessary or usual in the management of the mines. In Hawtayne v. 
Boui'ne (7 M. & W. 595), the managing agent of the mining company 
had borrowed money from a bank to pay debts due to laborers who 
had levied distress warrants upon the materials of the mine, and it 
was held that there was no rule of law that such an agent could, even 
in case of an emergency suddenly arising, raise money and pledge the 
credit of his principals for its repayment; that the authority of the 
agent was only that he should conduct and carry on the affairs of the 
mine in th^ usual manner, and there was no proof of express authority 
to borrow money, or that it was necessary in the ordinary course of the 
undertaking. 

A joint-stock company was formed to work a mine, in which the 
defendant became a shareholder and took part in its proceedings. The 
prospectus, issued on the formation of the company, stated that all 
supplies for the mine were to be purchased at cash prices, and no debt 
was to be incurred, and the scrip certificates also bore an indorsement 
to the same effect. The plaintiff supplied goods for the necessary 
working of the mine on the order of a resident agent appointed by the 
directors to manage the mine, which was the customary course in such 
concerns. Held, that the defendant was liable to the plaintiff for the 
price of such goods, notwithstanding the statements in the prospectus 
and certificates, imless it were shown that the agent had, in fact, no 
authority from the defendant, and that the plaintiff had notice thereof. 
(Hawkin v. Bourne, 8 M. & W. 703.) 

Where a defendant is charged with a debt in an action for work and 



§ 34 CORPORATION AND COST BOOK COMPANY. 1 85 

labor as a partner in a mining company, but is not shown to have 
either contracted such debt personally or represented himself to the 
plaintiff as a partner, the fact of his having been partner may never- 
theless be shown by evidence short of strict proof that he had executed 
a deed of copartnership, or was legally interested in the mine. The 
fact may be proved by his admission made before or after the debt 
was incurred. (Ralph v. Hai"vey, i Q. B. 845.) One of several co- 
adventurers in a mine has not, as such, any authority to pledge the 
credit of the general bo^y for the money borrowed for the purposes 
of the concern. And the fact of his having the general management 
of the mine makes no difference, in the absence of circumstances from 
which an implied authority for that purpose can be inferred. (Ricketts 
V. Burnett, 4 Q. B. 686.) 

Such is the uncertainty of mining operations that few are willing 
to risk all their means in such undertakings ; and it is therefore cus- 
tomary for a number of persons to unite in the enterprise ; and often 
the interests owned by each differ greatly in amount, according as 
each is able to furnish means, or is willing to take the risk. As a 
general rule^ it is impracticable for each proprietor to work his in- 
terest in the mine separate from the others^ hence arises the necessity 
for an organization of some kind to work the mines ^ such as a corpo- 
ration^ joint stock company^ or mining partnership. The company in 
the present case is one of the latter class. As each owner has a right 
to sell and convey his interest at any time., and as in ordinary part- 
nerships such sale would dissolve the partnerships and compel a 
-winding up and settlement of the business^ which would be most dis- 
astrous to the mining enterprise, it has become an established princi- 
ple that such sale does not dissolve a mining partnership, but it con- 
tinues on as before. Such a radical change in the law of partner- 
ship necessitates other changes. One result is, that nczv m.embers 
are thus introduced into the company without the consent, and often 
against the wishes, of the other jnembers ; and it would be most unjust 
to subject each proprietor to personal liabilities, which might sweep 
away all his property, created against his consent, by those who be- 
came mefnbers against his wishes. Hence arises the necessity of 
establishing new rules for such partnerships, differing from those 
regulating ordinary partnerships, especially those relating to the 
power of any one member, or a majority of the members, or of the 
superintendent or managing agent, to make contracts binding upon 
the company or its members, and also regulating the extent and na- 
ture of the liability of each proprietor for the company debts, as be- 
tween themselves and third persons. The rules regulating ordinary 
partnerships, will, to some extent, form a proper guide, but do not 
necessarily determine these questions. It is impossible to lay down a 
perfect code of rules upon this subject; but, like other legal rules, 
they must be settled as they arise in cases requiring their determina- 
tion. Such rules must be governed by the peculiar condition and 
circumstances of the country, and must be founded upon sound prin- 
ciples of justice, and such as will protect the rights of individual pro- 



1 86 SKILLMAN V. LACHMAN. § 34 

prietors against the unauthorized acts of others, and at the same time 
properly secure the claims of creditors and insure the successful work- 
ing of the mine. 

In the present case it appears that the defendant Lachman, for a 
long time prior and up to June 25, 1858, held a mortgage on the in- 
terest in the mine of one Prior ; that on that day he took a conveyance 
of that interest in satisfaction of the mortgage, and conveyed the same 
interest to one of the defendants. Sprout, on the twenty-eighth day of 
June, and received a mortgage on Sprout's interest in the mine to se- 
cure payment of the purchase-money. This appears to be, in fact, all 
the interest he had ; but it was proved that both prior to and after the 
date of the note, which was dated June 20, he admitted to two per- 
sons, one of whom was a brother of the plaintiff, and who delivered 
most of the lumber, that he owned an interest in the mine. It does 
not appear that any of these statements of Lachman were the means 
of inducing the plaintiff to sell or deliver the lumber. These state- 
ments of the defendant Lachman do not operate as an estoppel upon 
him, unless it appears that the plaintiff was induced thereby to sell and 
deliver the lumber to the company. Neither the evidence nor the 
findings of the court contain any facts or evidence establishing this 
point. 

But there is still a more important objection to the findings and 
judgment in this case. There was no evidence of any authority hav- 
ing been given by the company, or Lachman, to Sprout, a member of 
the company and the managing agent, or foreman, to execute a prom- 
issory note in the name of and binding the company for the indebted- 
ness due the plaintiff, or any general authority to that effect. In fact, 
several members, including Lachman, testified that they never gave 
him any such authority. It is clear that the law does not, in the case 
of mining partnerships, imply any such authority either to a member 
of such partnership or to its managing agent. In this respect the rule 
of law is different from that of ordinary commercial partnerships. It 
was clearly the duty of the plaintiff to prove that the person executing 
the note in the name of the company had power and authority to do 
so. He might have had power to purchase the lumber for the use of 
the mine, but that is very different from authorizing him to execute a 
note in the name of the company, bearing interest at the rate of 3 per 
cent, per month. In this case the county court failed to draw the 
proper distinction between the liability of members of a mining part- 
nership and ordinary trading partnerships, and in this it erred. 

The judgment is, therefore, reversed and the cause remanded. 

Cope, C. J. I think the conclusion arrived ac ty Justice Crocker 
is correct, and I, therefore, concur in the judgment. 

Note. 1884, Bissell v. Foss, 114 U. S. 252 on 261; 1880, Kahn v. Smelting 
Co.. 102 U. S. 641 ; 1871, Jones v. Clark. 42 Cal. 180 



§ 35 CORPORATION AND UNINCORPORATED ASSOCIATION. 1 8/ 

Sec. 35. (6) From unincorporated associations. 

WHITE V. BROWNELL, President, Etc., Et Al.» 

i868. In the Court of Common Pleas, City and County of New 
York. General Term. 2 Daly (New York Common Pleas) 

329-366. 

Appeal to general term from an order dissolving an injunction to 
restrain the Open Board of Brokers from interfering with plaintiff's 
privileges as a member of that board. 

By the court, Daly, F. J. The organization known as the Open 
Board of Stock Brokers, which the plaintiff asks this court to restrain 
from depriving him of his rights and privileges as a member of it, is 
not a partnership, and the plaintiff is not entitled, as has been argued, 
to the equitable remedies which courts afford for the protection of the 
rights of a copartner. It is not a union of persons joining together 
property, labor or skill for their common benefit, in any pursuit or 
business having a communion of profit and loss, and distinguishable 
by the feature that, if earned, there is to be a division of gains. It 
may be described as an association of persons engaged in the same 
kind of business, who have organized together for the purpose of es- 
tablishing certain rules, by which each agrees to be governed in the 
conduct and management of his separate transactions or business; 
which is not a partnership. 

The objects of the organization are set forth in the articles of asso- 
ciation, which declare that greater facilities are requisite for the ex- 
change and negotiation of commercial securities, a business which can 
be successfully transacted only where there is the utmost confidence ; 
that, as such confidence is begotten only by public, open, fair and up- 
right transactions, so that each party interested can know not only 
where, but how such business is done, the spirit of the age demands 
for such transactions a great public mart, open to all ; and that, for 
the purpose of supplying these requirements, the persons signing their 
names associate themselves together, and adopt a constitution for an 
association to be known as the Open Board of Stock Brokers, each 
pledging himself to abide by the constitution, and by all by-laws, 
rules and resolutions which may be passed by the board. To carry 
out this object, the constitution provides that there shall be a room 
where the members of the board shall have seats and desks, conveni- 
ently inclosed within a railing, and that outside the railing, and in a 
gallery, seats shall be provided for the public; certain officers are 
designated who are to call stocks at the board, and a standing com- 
mittee to arrange the order in which such securities are called. A 
record is to be kept by the secretary of all sales and purchases made 

' Statement of facts except as given in opinion omitted. Arguments omitted 
and only a part of the opinion given. 



1 88 WHITE V. BROWNELL. § 35 

at the board. He is required to prepare an account of the same for 
the newspapers, and no fictitious sales are to be allowed. It is, in fact, 
the creation of a public mart for the sale of stocks or other commercial 
securities, each purchase or sale of which is not for the joint benefit of 
the body, but is, as it would be in any other place, an individual trans- 
action between the parties making it. It is analogous to what, in 
other branches of commerce, has long been familiarly known by the 
word "change," a fixed place, where merchants meet at certain hours 
for the transaction of business with each other, subject to such general 
rules or understanding as they think proper to be governed by. There 
may be property belonging to this body, derived from the payment of 
dues or fines, or consisting of the furniture of the room where the 
board meets ; but the possession of it is a mere incident, and not the 
main purpose or object of the association. A member has no sev- 
erable proprietary interest in it, or a right to any proportionable part 
of it upon withdrawing. He has merely the enjoyment and use of it 
while he is a member, but the property remains with and belongs to 
the body while it continues to exist, like a pew, the ultimate and dom- 
inant property in which is in the congregation, and not in the pew- 
holder; and when the body ceases to exist, those who may then be 
members become entitled to their proportionate share of its assets. 
(In re The St. James Club, 13 Eng. Law and Eq. Rep. 592 ; Fassett 
V. The First Parish in Boylston, 19 Pick. 361.) This board of stock 
brokers is, in fact, analogous to the organization which came under 
consideration in Caldicott v. Griffith (8 Exchq. Rep. 898), called The 
Midland Counties Guardian Society for the Protection of Trade, 
which was decided not to be a partnership. 

So far, therefore, as the plaintiff claims the equitable interference 
of this court upon the assumption that this association is a co-partner- 
ship, or upon the ground that the rules which regulate the action of 
courts of equity in cases of partnership are to be applied to it, the 
claim can not be supported. 

It is not an incorporated body, and as a number of cases have been 
cited upon the argument in which courts of equity have interfered and 
restored a member of a corporation who had been expelled or ob- 
structed in the exercise of his franchise by the acts of the corporation, 
which are relied upon by the plaintiff as authorities applicable to the 
present case, it will be necessary to inquire into the reasons why cor- 
porations can not expel members except in certain extreme cases, and 
to show that these reasons do not apply to a voluntary unincorporated 
body, which comes into existence by the mutual agreement of the per- 
sons forming it, and is thereafter carried on under rules which the body 
adopts for "its government. A member of a corporation^ -whether it 
be municipal^ eleemosynary or private^ is in the enjoyment of a fran- 
chise^ the right to which is not derived from the body, but is created 
by statute, or exists by prescription, and therefore can not be taken 
away by the act of the corporation, except, as I have said, in certain 
extrejne cases. As it is a right conferred by statute, or derived from 
imfnemorial custom, which implies the existence of a grant, it can 



§35 CORPORATION AND UNINCORPORATED ASSOCIATION. 1 89 

neither be taken away by the act of the corporation or withheld by the 
act of the corporation^ from any one eligible to the enjoyment of it. 
Thus, in The People v. The Medical Society of the County of Erie 
(32 N. Y. R. 187), an incorporated medical society was compelled 
by mandamus to admit a licensed physician to membership, who was 
excluded under a by-law which had been adopted by the corporation. 

In a corporation, there is a distinction between what is called amo- 
tion^ or the right to remove an officer, which is a power inherent in 
every coiporation, and disfranchisement. The former may be exer- 
cised without interfering with the franchise, as the officer, when re- 
moved, still continues a inember; but disfranchisement is an absolute 
expulsion of the member from the body, and the taking away of his 
franchise, which can not be done unless the power is given by the 
charter creating the coi-poration, or the member has been guilty of 
crime, a conviction of which would work a forfeiture of all civil rights, 
including the corporate franchise, or has committed acts which tend to 
the destruction of the corporation, such as the defacing of its charter, 
the obliteration or alteration of its records, or other acts tending to im- 
pair or destroy its title to its rights or privileges; in which case, the 
expulsion of the member is but the exercise of a power incident to the 
right of self-preservation. Evans v. The Philadelphia Club, 50 Pa. 
St. R. 107;^ Bagg's Case, 11 Coke R. 93; Earle's Case, Carthew's 
R. 173; Commonwealth v. St. Patrick's Benevolent Society, 2 Bih- 
ney R. 441 ; Fuller v. The Trustees of Plainfield Academy, 6 Conn. 
532 ; People v. The Medical Society of Erie, 24 Barb. 570; Willcock 
on Mimicipal Corporations, 270; Grant on Corporations, pp. 263, 
264, 265, 266). 

But in an unincorporated voluntary association^ like the one now 
under consideration^ the privilege of membership is not given by 
statute or derived through prescription^ as in a corporation^ but is 
created by and conferred by the organization itself. It is not a 
franchise — a franchise bcitig a partictilar privilege vested in in- 
dividuals^ which is conferred by grant from a sovereign or gov- 
ernment (Finch's Law, 164; 3 Kent's Com., 458) ; while on the con- 
trary^ the privilege of membership in a voluntary association is de- 
rived exclusively from the body that bestows it, and may be conferred 
or withheld at its pleasure. The law can not compel such an organ- 
ization to admit an individual to membership, as may be done in the 
case of a corporation, nor can it interfere to restore a member who 
has been deprived of the privilege for not complying with the condi- 
tions upon which the enjoyment of it was made to depend. A mem- 
ber of a body of this description has, as such, undoubtedly, rights which 
the law will protect, but they do not rest upon the same ground, and 
are by no means coextensive with the franchise enjoyed by a mem- 
ber of a corporation. They depend upon the nature of the organiza- 
tion, upon the object for which it was formed, and upon the rules, 
regulations, constitution or by-laws which are explanatory of its pur- 
pose, and which the body has adopted for its government. 

^ Infra, p. 1165. 



I90 WHITE V. BROWNELL, § 35 

Individuals who form themselves together into a voluntary associa- 
tion for a common object may agree to be governed by such rules as 
they think proper to adopt, if there is nothing in them in conflict with 
the law of the land ; and those who become members of the body are 
presumed to know them, to have assented to them, and they are bound 
by them (Innes v. Wylie, i Car. & Kir. R. 262 ; Brancker v. Roberts, 
7 Jur. N. S. 1 185; Hopkinson v. The Marquis of Exeter, London 
Times, Dec. 31st, 1867, Law R., 5 Eq. Ca. 63). 

Such an organization may prescribe the conditions upon which per- 
sons will be admitted to membership, as well as the conditions upon 
which the continuance of membership will depend ; and where they 
have no regulation upon the subject, they may expel a member by a 
vote of the majority, if he has been notified of the charge against him, 
and afforded an opportunity of being heard in his defense (Innes v. 
Wylie, I Car. & Kir. R. 262). Voluntary bodies of this kind will be 
held to the fair and honest administration of the rules which are in 
force when any proceeding is instituted against a member ; but where 
a member is expelled in conformity with the rules, and the proceed- 
ings are regular and in good faith, it is final, and no judicial tribu- 
nal can interfere. (The Commonwealth v. The Pike Beneficial So- 
ciety, 8 Watts & Serg. 350). The only question, therefore, that can 
arise in the present case is whether the plaintiff was suspended from 
the privileges of a member of this Open Board of Stock Brokers in 
accordance with the constitution and by-laws which that body has 
adopted for its government; for if he was, he has no ground of com- 
plaint. 

[The court held that plaintiff was expelled in accordance with the 
by-laws, and so affirmed the decree dissolving the injunction.] 

Note. 1887, Davison v. Holden, 55 Conn. 103, 10 Atl. Rep. 515; 1881, Ash 
V. Guie, 97 Pa. St. 493, 39 Am. Rep. 818; 1855, Pipe v. Bateman, 1 Iowa (1 
Clarke) 369 ; 1893, Burt v. Oneida Community, 137 N. Y. 346, 33 N. E. Rep. 
307, 19 L. R. A. 297; 1893, McDowell v. Joice, 149 111. 124; 1888, Liggett v. 
Ladd, 17 Ore. 89, 21 Pac. Rep. 133; 1891, Crawford v. Gross, 140 Pa. St. 297, 
21 Atl. Rep. 356; 1891, Wicks v. Monihan, 130 N. Y. 232, 14 L. R. A. 243, 29 
N. E. Rep. 139; 1889, Lawler v. Murphy. 58 Conn. 294, 8 L. R. A. 113, 20 Atl. 
Rep. 457; 1896, Cheney v. Goodwin, 88 Maine 563, 34 Atl. Rep. 420; 1895, 
Society of Shakers v. Watson, 68 Fed. Rep. 730, 15 C. C A. 632, 37 U. S. App. 
141 ; 1893, Grand Rapids Guard v. Bulkley, 97 Mich. 610, 57 N. W. Rep. 188; 
1883, Ray v. Powers, 134 Mass. 22; 1883, Burt v. Lathrqp, 52 Mich. 106; 1883, 
Heath v. Goslin, 80 Mo. 310, 50 Am. Rep. 505 ; 1843, Eichbaum v. Irons, 6 
Watts & S. (Pa.) 67, 40 Am. Dec. 540; 1841, Todd v. Emly, 7 M. & W. 427, s. 
'^. 8 M. & W. 505. 



§ 36 CORPORATION AND STATE INSTITUTIONS. I9I 

Sec. 36. (7) From state institutions. 

NEIL V. THE BOARD OF TRUSTEES OF THE 0. A. & M. COLLEGE.' 

1876. In the Supreme Court of Ohio. 31 Ohio State, 15-23. 

Motion for leave to file a petition in error to reverse the judgment 
of the district court of Franklin county. 

[Action in lower court by the college board of trustees to collect 
subscription made by Rudisill and others and guaranteed by Neil, to 
contribute to a fund to be raised in order to secure the location of 
the college in Franklin county, the sums subscribed to be paid to the 
treasurer of the college at the times indicated. The college was lo- 
cated in Franklin county, as proposed, and the board sued for the 
sums so subscribed. Neil demurred to the petition on the ground 
(among others) that the board of trustees had not the legal capacity 
to sue.] 

BoYNTON, J. * * * It is claimed by the plaintiff that the board of 
trustees of the college has not legal capacity to sue, and, therefore, that 
the judgment was improperly rendered in its favor. It is not, however, 
denied that the fourth section of the act establishing the college (6"] 
Ohio L. 20) expressly confers upon the board the "right of suing and 
being sued, of contracting and being contracted with;" but it is con- 
tended that such act, "in so far as it attempts to constitute the defend- 
ant in error the board of trustees of said college, and clothe it with 
the power therein mentioned," is in conflict with the first section of the 
thirteenth article of the constitution, which declares that the "general 
assembly shall pass no special act conferring corporate powers," the 
claim being that the board is, to all intents and purposes, created a 
corporation and clothed with corporate functions and privileges. We 
are not able to yield our assent to this construction of the statute. The 
act is entitled "An act to establish and maintain an agricultural and 
mechanical college in Ohio." It creates a board of tnistees, to be ap- 
pointed by the governor, by and with the advice and consent of the 
senate, and commits to such board the government, control and gen- 
eral management of the affairs of the institution ; and while the 
statute authorizes the board to make contracts for the benefit of the 
college, and to maintain actions, if necessary, to enforce them, and to 
exercise other powers similar to those conferred on bodies corporate, 
it does not assume to, nor does it in fact, create or constitute such 
board of trustees a corporation, and hence does not clothe it with 
corporate functions or powers. The State, ex rel. the Attorney-Gen- 
eral, V. Davis, 23 Ohio St. 434. The college is a state institution, 
designed and well calculated to promote public educational interests, 

' Arguments of counsel ana opinion of court on other points omitted. State- 
ment of facts condensed. 



192 NEIL V. THE BOARD. § 36 

established for the people of the whole state, to be managed and con- 
trolled by such agencies as the legislature in its wisdom may provide. 
Similar powers, but perhaps less extensive, because less required, are 
conferred on the tiustees of the various hospitals for the insane (73 
Ohio L. 80), and on the board of managers of the Ohio Soldiers' and 
Sailors' Orphans' Homes (67 Ohio L. 53), and other institutions of 
the state. The powers thus conferred are essentially necessary to ac- 
complish the objects for which these institutions were established. 
The power to establish them is found clearly granted in the seventh 
article of the constitution. 
Leave refused. 

Note. There is considerable difficulty in determining the character of these 
institutions, whether they are corporations or not. Several cases hold they 
are, and several hold they are not. Perhaps, it is not improper to call them 
public corporations, but they are obviously not the same as municipal cor- 
porations, or public quasi corporations such as counties, townships, school 
boards, etc. (See infra, pp. 214, 221, 222, 229.) They have, in the case of 
banks, at least in one state, been held to be private corporations. (See infra, 
p. 221.) The fullest information to be had on the character of these institu- 
tions is to be found in a note to State v. Regents of Univ. of Kan., 55 Kan. 
389 (1895), in 29 Lawyer's Rep. Ann., p. 378. Here information is given un- 
der the heads Banks, Educational Institutions, Other State Institutions — Lia- 
bilities of Such, and Directors, Trustees and Officers of Such. 

1. Universities, etc. Regents of University of Maryland v. Williams, 9 
Gill & J. (Md.) 365, 31 Am. Dec. 72; Oklahoma Agr. & M. Coll. v. Willis 
(Minn.), 40 L. R. A. 677; State v. Carr, 111 Ind. 335 (University of Indiana 
is not a public corporation); State v. White, 82 Ind. 278, 42 Am. Rep. 496 
(Pardue University is subject to mandamus); State v. Regents of University, 
55 Kan. 389 (subject to quo warranto); Weary v. State University, 42 Iowa 
335 (University is not a corporation) ; University of Alabama v. Winston, 5 
Stew. & P. (Ala.) 17 (University of Alabama is a public corporation) ; Lewis 
V. Whittle, 77 Va. 415 (Medical College of Virginia is a public corporation); 
Tulane Ed. Fand v. Board of Assessors, 38 La. Ann. 292 (University of Louisi- 
ana is a corporation) ; Regents of University of Michigan v. Det. Bd. of Ed., 
4 Mich. 213 (University is a public corporation) ; to same effect. Regents of 
University of Michigan v. Y. M. Society, 12 Mich. 138; Sterling v. Regents 
of University of Michigan, 110 Mich. 369, 34 L. R. A. 150; Regents of Uni- 
versity of Nebraska v. McConnell, 5 Neb. 423 (University of Nebraska is a 
public corporation) ; University of North Carolina v. Maultsby, 43 N. C. (8 Ir. 
Eq.) 257 (University of North Carolina is a public corporation); State v. 
Knowles, 16 Fla. 577 (Florida Agricultural College is a public corporation); 
Dunn V. University of Oregon, 9 Ore. 357 (Directors of University of Oregon 
are a corporation) ; State v. Lindsley, 3 Wash. 125 (University of Washington 
Is a state institution) ; Butler v. Regents of University of Wisconsin, 32 Wis. 
124 (University is a state institution); State Institutions, 9 Colo. 626 (Agri- 
cultural College and School of Mines are state institutions by the constitution 
and can not be moved) ; Lundy v. Delmas, 104 Cal. 655, 26 L. R. A. 651 (Re- 
gents not individually liable for damages). 

2. Banks, state. See Bank of Tennessee v. Woodson, 5 Coldw. (Tenn.) 
176; Bank of Kentucky v. Wister, 27 U. S. (2 Pet.) 318; Briscoe v. Bank of 
Commonwealth of Kentucky, 36 U.S. (11 Pet.) 257 ; Woodruff v. Trapnall, 51 
U. S. (10 How.) 190; Darrington v. Branch Bank of Alabama, 54 U. S. (13 
How.) 12; Curran v. Arkansas, 56 U. S. (15 How.) 304; Barings v. Dabney, 
86 U. S. (19 Wall.) 1; Jones v. Bank of Tennessee, 8 B. Mon. 122, 46 Am. 
Dec. 540; McFarland v. State Bank, 4 Ark. 44,* 37 Am. Dec. 761; Linn v. 
State, 2 111. 87, 25 Am. Dec. 71. 

3. Other institutions. Cleaveland r. Stewart, 3 Ga. 283 ; Illinois Board of 



§ 37 SOLE AND AGGREGATE CORPORATIONS. 193 

Education v. Greenebaum, 39 111. 610 ; Downing v. State Board of Agriculture, 
129 Ind. 443, 12 L. R. A. 664; Liggett v. Ladd, 23 Ore. 26 (Ag. Soc.) ; Selinas 
V. Vermont Agricultural Society, 60 Vt. 249; Hern v. Iowa State Agricul- 
tural Society, 91 Iowa 97, 24 L. R. A. 655. See, especially, the full notes upon 
the subject of state institutions generally, in 29 L. R. A. 378, and 40 L. R. A. 
677. 



ARTICLE VI. CLASSES OF CORPORATIONS. 

Sec. 37. Every body politike, or corporate, is either ecclesiastical 
or lay; ecclesiastical, either regular, as abbots, priors, etc., 
or secular, as bishops, deans, archdeacons, parsons, vicars, 
etc. ; lay, as maior or communaltie, baylifes and burgesses, 
etc. * * * And againe it is either sole, or aggregate of 
many. * * * And this body politike, or corporate, 
aggregate of many, is by the civilians called collegeium or 
universitas 

Coke's Littleton, § 413, c. 1613. 

(a) As to number of members, corporations are: 

1. Sole. 

2. Aggregate. 

OVERSEERS OF THE POOR OF THE CITY OF BOSTON v. SEARS 

Et Ux.i 

1839. In the Supreme Judicial Court of Massachusetts. 22 
Pickering (Mass.) Rep. 122-135. 

[Writ of right by plaintiff against defendants to recover certain lands 
in Boston, claiming upon the seizin of ihovc predecessors Wx^kixn the 
last forty years. Defendants demurred.] 

Shaw, C. J., delivered the opinion of the court. It is a well-settled 
rule of law, applicable to real actions, that it is not necessary, as in 
personal actions, to plead a statute of limitations, and, therefore, if it 
appear, on the face of the record, that the action is not brought within 
the time limited by law, the tenant may avail himself of it by general 
demurrer. Holmes v. Holmes, 2 Pick. 23. 

By statute 1786, ch. 13, § 3, no person or body politic shall sue or 
maintain any action, for any lands, upon his or their own seizin or pos- 
session therein, above thirty years next before the teste of the same 
writ. And by statute 1807, ch. 75, § i, no person shall sue or main- 
tain any writ of right to any lands, upon the seizin of his or their an- 
cestor or predecessor, beyond the term of forty years next before the 
teste of the same writ. 

* Arguments and part of opinion omitted. Statement of facts condensed. 
13— WiL. Cases. 



194 OVERSEERS, ETC., V. SEARS. § 37 

It is therefore manifest that if this writ is taken to be one on which 
the plaintiff corporation count on their own seizin ; or, if they consti- 
tute a corporation of such a character that they could have no prede- 
cessor in legal contemplation, and, of course, could not count on the 
seizin of predecessors, then this action can not be maintained. This 
distinctly presents the question for consideration. On the part of the 
tenant^, it is contended, that this is a common case of a corporation 
aggregate, consisting of many persons, with the usual incidents of an 
aggregate corporation, that as such they must declare upon their own 
seizin within thirty years. On the contrary, it is contended by the de- 
mandants, that although the plaintiff corporation is composed of many 
persons, yet that is more analogous to the case of a sole corporation, 
particularly in this, that they do not elect the members of their own 
body, that they all go out at once and new members come in at once, 
as the necessary consequence of an annual election by others, and, 
therefore, that the corporation of one year and that of another, when 
an election has intervened, bear to each other the legal relation of pred- 
ecessor and successor. 

It becomes, therefore, necessary to distinguish with some care be- 
tween these different kinds of corporations. "The first division of 
corporations," says Blackstone, "is into aggregate and sole. Corpo- 
rations aggregate consist of many persons united together into one 
society^ and are kept up by a perpetual succession of ?)iembers, so as 
to continue forever. Corporations sole consist of one person only, 
and his successors, in some particular station, who are incorporated 
by law in order to give them some legal capacities, particularly that 
of perpetuity. ^^ We are not aware that there is any instance of a 
sole corporation in this commonwealth except that of a person who 
may be seized of parsonage lands to hold to him and his successors, in 
the same office, in right of his parish. There are some instances in 
which certain public officers are empowered by statute to maintain 
actions, as successors, such as judges of probate, county and town 
treasurers ; but it is only where expressly provided by statute. "There 
are," says Chancellor Kent, 2 Commentaries (3d ed.), 273, 274, 
"very few points of corporation law, applicable to a coi-poration sole." 
"The corporations generally in use with us are aggregate or the union 
of two or more individuals in one body politic, with a capacity of suc- 
cession and perpetuity." 

It becomes then necessary to consider what are the distinctions estab- 
lished by law, between a sole and an ag-greg^ate corporation. The first 
and the most important is that a corporation aggregate has a perpetual 
existence without change, so that an estate once vested in it continues 
vested without interruption. Whereas, when a bishop or parson, 
holding estate as a sole corporation, dies or resigns his office, the fee 
is in abeyance until a successor is appointed. From this flows one 
necessary, but obvious legal consequence, which is that a grant to an 
aggregate corporation carries a fee without the word "successors"; 
but a grant to a corporation sole, without including successors, carries 
a life estate only to the actual incumbent, who is the first taker. Co. 



§37 SOLE AND AGGREGATE CORPORATIONS. 195 

Lit., 83, 9<5, 94^; 4 Cmise's Dig., 442. A life estate to an ideal 
being having a perpetual and uninterrupted existence must be coex- 
tensive with a fee or perpetuity, and words of limitation could not ex- 
tend it. But where property vests in a bishop, parson or other sole 
corporation, he holds it to his own use and benefit whilst he holds the 
office, and afterward the estate and the enjoyment of it go together to 
his successor when established. The transmission of the estate is per- 
petual, but the beneficial enjoyment changes at each succession. 

Another well settled distinction is that by the common law a sole 
corporation can not take personal property in succession, and that its 
corporate capacity is confined to real estate. 2 Kent's Com., 273, 
An aggregate corporation may take personal property for themselves 
and successors. The reason why a sole corporation can not, says 
Blackstone, is that such movable property is liable to be lost or em- 
bezzled, and would raise a multitude of disputes between the succes- 
sor and executor, i Comm., 477. 

There are a great variety of other particulars, in which the incidents 
and characteristics which are considered essential to an aggregate cor- 
poration do not extend to a sole corporation because by the reason and 
nature of their respective modes of operation they do not apply ; upon 
the principle that when the reason of a inle ceases the inale ceases. 

All aggregate corporation may have and use a common seal by which 
the will of the body is expressed and its acts executed ; they are to 
take and grant by their appropriate corporate name ; may take and 
hold real and personal property ; may make by-laws for the regulation 
of all matters within the scope of their authority, not contrary to the 
law of the land or repugnant to the provisions of the charter or act of 
incorporation ; they must perform all corporate acts, by deed under 
their common seal, by vote or by the agency of officers or agents duly 
authorized for the purpose ; they must appear by attorney and can not 
appear in person ; the will of the majority, orderly taken at a meeting 
duly called and held, .is the will of the body and must govern unless 
otherwise provided by charter or by-law; they must regularly keep a 
record, journal or other written account of their votes and proceed- 
ings, which is the proper evidence of their acts, and may elect and 
qualify a clerk or secretary for that purpose ; they may elect a presi- 
dent or head, a treasurer, managers, directors and other suitable offi- 
cers, with such powers as the terms import, and such as may be spe- 
cially conferred upon them by vote or deed to manage their affairs; 
they may elect members to fill vacancies when it is not otherwise pro- 
vided by the charter. Indeed this last qualification must be added in 
regard to almost all these enumerated powers, and it may be remarked 
generally that when these are denominated incidents to an aggregate 
corporation, it is to be understood that they are the most common and 
usual characteristics of such a corporation, and that they exist by im- 
plication, in cases where it is not otherwise provided in the charter; 
but that its constitution and organization, the mode in which individu- 
als may become and cease to be members, and also its action in all 
respects, the manner, times, places and occasions on which meetings 



196 OVERSEERS, ETC., V. SEARS. §3/ 

may be held, the members or particular individuals who must be 
present and vote to constitute a valid act, the officers who may or must 
be chosen, the property they may hold, the powers they may exercise, 
the duration of their existence, may all be modified and regulated ad 
libitum^ by the power which constitutes the corporation. Nothing- 
seems essential to a corporation but a capacity to have perpetual suc- 
cession, under a special denomination and in an artificial form, a ca- 
pacity to take, hold and grant property, to sue and be sued by its cor- 
porate name, and in common to exercise powers and enjoy franchises- 
and immunities. 2 Kent's Com., 277. 

In all these respects the distinction between an aggregate and sole 
corporation, growing out of their different modes of constitution and 
forms of action, is striking and obvious. A bishop or parson acting 
in a coi-porate capacity, and holding property to him and his successor 
in right of his office, has no need of a corporate name ; he requires no 
peculiar seal ; he performs all legal acts under his own seal, in his own 
name and name of office ; his own will alone regulates his acts, and he 
has no occasion for a secretary, for he need not keep a record of his 
acts ; no need of a treasurer, for he has no personal property, except 
the rents and proceeds of the corporate estate, and these he takes to 
his own use when received. By-laws are unnecessary, for he regu- 
lates his own action, by his own will and judgment, like any other in- 
dividual acting in his own right. But it is not necessary to pursue the 
comparison into all its details ; the points suggested are sufficient to 
show the legal distinctions between the two classes of corporations. 

With these views of the characters of these two kinds of corpora- 
tions, it becomes necessary to examine the act under which the de- 
mandants were made a corporation, and under which they act, in 
order to ascertain their legal character and rights. This act was 
passed by the provincial government shortly before the revolution, in. 
1772. It recites that many charitably disposed persons had given 
sums of money and other interest and estate to the poor of Boston, 
and others were well inclined to make such charitable donations, but 
the overseers of the poor of the same town, not being incorporated, 
such good intentions had been fiiistrated, or not earned into full 
effect; it then enacts that the said overseers for the time being, be 
made and incoi^porated into a body politic by the name, etc., and that 
they and their successors in said office have a perpetual succession by 
said name. The second section provides that all money and estate, 
real or personal, before given, or which should be afterwards given 
to the poor of said town, not exceeding the amount and value therein 
limited, should be vested in the same overseers, and their successors 
in their said corporate capacity ; and they were enabled to receive 
and manage the same for the use of said poor. The third section 
authorizes them to take and hold moneys, securities and personal 
property to the amount of sixty thousand pounds and no more. The 
fourth section again declares that the said overseers and their succes- 
sors in said office, by the said name, shall have perpetual succession 
and power, by their said corporate name, to purchase and hold lands. 



§ 37 SOLE AND AGGREGATE CORPORATIONS. 19/ 

not exceeding five hundred pounds annual income, to manage, lease 
and sell the same, and do all other acts, as natural persons may, as 
they shall judge best for the use and advantage of said poor. The 
fifth section authorizes them to have a common seal, to make by-laws, 
to choose a treasurer, clerk and other subordinate officers, and at 
pleasure to displace them. The sixth and last section declares that all 
instruments executed under their common seal, and all acts done or 
matters passed upon by consent of a major part of said overseers for 
the time being, shall bind said corporation and be valid in law. 

Here are all the characteristics and incidents of a complete, full, 
aggregate corporation. It was to be composed of several persons. 
They were to hold personal as well as real estate, to make by-laws 
for their government, to have a common seal, to have perpetual suc- 
cession, and to act by the vote of a majority. Indeed it is not denied 
that they are literally an aggregate corporation, consisting of many 
persons, in contradistinction to a sole corporation ; but it is contended, 
that as they have no power of electing their own members, and thereby 
perpetuating their own existence, but all come in by annual election 
and go out at the end of the year, they constitute a body more analog- 
ous to a sole corporation than to an aggregate one. But this analogy 
is not such as wholly to change the character of such a corporation. 
Indeed, the analogy even in this respect is rather slight. 

The strong argument is, that in this corporation there is no provis- 
ion that the body shall perpetuate itself by an election of new mem- 
bers in place of those who die or resign. But this mode of perpetu- 
ating its existence is not essential ; all that is essential is, that some 
mode be provided by the charter, or act by which it is constituted, by 
means of which it shall be so perpetuated. Blackstone, in the defini- 
tion already cited, says, that "corporations aggregate consist of many 
persons, united together into one society, and are kept up by a per- 
petual succession of members, so as to continue forever." i Comm., 
469. If such a succession is effectually provided for, it is all that is 
requisite. Here we are to consider that the legislature, in framing 
this act of incorporation, had in their view the general laws of the 
government, and the manner in which towns in general, and the town 
of Boston in particular, were organized. Those laws provided, that 
that town should annually choose twelve persons to be overseers of 
the poor, and the general laws provided, that if overseers were not 
specially chosen, the selectmen should act as overseers. Towns were 
of themselves corporations, having perpetual succession, consisting of 
all persons inhabiting within certain territorial limits, so that by the 
ordinary operation of the laws, a perpetual succession of overseers 
was secured. The better opinion is, that town officers thus annually 
chosen hold their offices until others are chosen and qualified in their 
place. But this is not essential to the argument ; it is made the duty 
of towns to choose officers annually, it being for their interest to do 
so; and when chosen, they become, by force of the statute, members 
of the corporation, and thus all the purposes contemplated by the in- 
corporation would be attained. And this mode of continuing a sue- 



198 OVERSEERS, ETC., V. SEARS. § 37 

cession of members, without election by the corporation itself, applies 
to the great majority of corporations in this commonwealth. In all 
quasi corporations, as cities, towns, parishes, school districts, mem- 
bership is constituted by living within certain limits. In all bridge, 
railroad and turnpike companies, in all banks, insurance companies, 
manufacturing companies, and generally in corporations having a cap- 
ital stock, and looking to profit, membership is constituted by a trans- 
fer of shares, according to the by-laws, without any election on the 
part of the corporation itself. In some, the assent of the corporation 
is made necessary to such transfer and consequent membership. In 
some instances more nearly resembling the present, all the members 
of the corporation are chosen, annually or otherwise, by a body other 
than itself, as tnistees of ministerial funds, chosen by the parish, dea- 
cons of Congregational churches and wardens and vestry of Episcopal 
churches, by the members of those churches ; and in the latter case, 
the corporators are elected by persons not themselves being a corpo- 
ration, and having a perpetual existence as voluntary associations, 
only by the ancient and established usages of the country. St. 1785, 
ch. 51. . 

In the present case abundant provision was made for perpetuating 
fthe corporation. Supposing the act to be framed with reference to 
the established and perpetual laws then in force, it was equivalent to 
declaring that those persons, who were then overseers of the poor, 
and those who should thereafter be annually and successively chosen 
by the town, forever, as such overseers, should be a body corporate 
and have perpetual succession. And this was an ample provision 
made in the act, for the perpetual succession of members, declared by 
the act itself. It was stated in the argument for the demandants, on 
the authority of Lord Coke, that by the ancient law an abbot or con- 
vent would not take as an aggregate corporation, because, though 
consisting of many, it had not power to perpetuate itself by election, 
but the abbot comes in by appointment. But this argument is not 
sustained by the authority. The reason assigned by Lord Coke is 
that the abbot only is capable of taking ; the convent or monks are 
dead persons in law, and for that reason the estate vests in the abbot 
alone as a sole corporation. Co. Lit., 94^, 94^. 

Some cases were cited from the New York Reports, supposed to 
have a bearing on this subject, in which it was held that overseers 
might sue and be sued upon the acts of their predecessors. Todd v. 
Birdsall, i Cowen 260; Grant v. Fancher, 5 Cowen 369. These 
cases have very little bearing upon the present question. They de- 
pend upon general statute provisions, very different from ours. These 
cases went on the ground that the overseers were not corporations, but 
exercised certain public trusts and duties, which, when done within 
the scope of their authority, devolved upon their successors in the 
same trust, in the nature of corporate obligations. Whatever may be 
the relation of the overseers of the poor in this commonwealth, by the 
general laws, in this respect, these demandants were specially incor- 
porated for the purpose of taking and holding property, for the use of 



§ 37 SOLE AND AGGREGATE CORPORATIONS. 199 

the poor, and their rights and duties, in this respect, do not depend 
upon these general laws. 

If the legislature who granted this act of incorporation, knew and 
recognized the distinction between an aggregate and sole corporation, 
it is very clear that they intended to constitute an aggregate corpora- 
tion, to take and hold personal property, and provided for the appoint- 
ment of a treasurer for that purpose. * * * 

If it be asked what reason can be assigned why a sole corporation 
shall have forty years to bring a writ of right, counting on the seizin 
of a predecessor, and why an aggregate corporation generally, or such 
a coiporation as the demandants, in particular, shall have only thirty 
years, in addition to the technical reasons already assigned, we think 
that there are some others bearing more directly on the merits. 

A parson, acting in the capacity of a sole corporation, comes to the 
estate of his predecessor, as an heir does to his inheritance, a stranger. 
He is usually a young clergyman, knowing nothing of the parsonage, 
till about the time of his settlement. He is dependent on the duty and 
courtesy of the representative of his predecessor, to be furnished with 
the title deeds. Considerable time may elapse before he can become 
acquainted with the amount and condition of the estate, which he is 
bound to preserve and defend for the benefit of himself, his parish, 
and his successors. The condition of a corporation aggregate, situated 
like the demandants, vested with corporate powers for the better 
executing of a public trust, is altogether different. Looking at the 
matter practically, as the legislature may be presumed to have done, 
many, perhaps most of the overseers, will be re-chosen, and the board 
will change gradually. But suppose an entire new board comes in, 
the records, votes, and muniments of title are all in the hands of their 
clerk ; the money, securities and personal property are held by the 
treasurer; confidential officers, the performance of whose duty is 
usually secured by oath and bond. They are in as good a condition 
to execute the tnjsts reposed in them, in regard to these charitable 
funds, as to understand and perform the other duties confided to them. 
They are in the same condition with all other city and town officers, 
and indeed all officers of the state government, and of all corporations, 
where they come in by annual election. In most cases of aggregate 
coiporations, the trustees, directors, managers and executive officers, 
all those who are charged with the duty of investigating and maintain- 
ing the rights of such corporations, either to real or personal property, 
come into office by annual election, and yet they have but thirty years, 
within which to commence writs of right. 

On the whole, the court are all of opinion that the demandants 
were constituted an aggregate corporation, with perpetual and con- 
tinued succession ; that a grant to them of real estate would have 
carried a fee without being to their successors ; that in a writ of right 
they can count only upon their own seizin, within thirty years next 
before the commencement of the action, and that, not having so 
counted in the present case, the demurrer is well taken. 

Note. 1807, Weston v. Hunt, 2 Mass. 500, (Parson as to parsonage lands is 



200 OVERSEERS, ETC., V. SEARS. § 37 

a corporation sole) ; 1811, Brunswick v. Donning, 7 Mass. 445-7, (Same) ; 1889, 
Archbishop v. Shipnian, 79 Cal. 288, (Roman Catholic bishop holding church 
lands is a corporation sole) ; 1875, Westcott v. Fargo, 61 N. Y. 642, (Presi- 
dent and treasurer of a joint stock company for purposes of suits under stat- 
utes are substantially corporations sole) . 

1. Officers. What were formerly classed as corporations sole in the old 
digests with us are now usually classed as officers, and found under that title 
in digests. 

The King of England (Co. Lit. 43, 1 Bl. Com. 469, 1 Kyd 20), the cham- 
berlain of the city of London for purpose of taking certain bonds to himself 
and successors (Fulwood's Case, 4 Coke 64; Cro. Eliz., 464); minister of a 
parish seized of its freehold (Pawlet v. Clark, 9 Cranch, U. S. 292) ; the gov- 
ernor of the state (The Governor v. Allen, 8 Humph. (27 Tenn.) 176, infray 
p. 270); and certain county officers, in taking bonds, recognizances, etc. 
(Kinney v. Sanders, 3 Ired. (N. C. )"360; McDowell v. Hemphill, 60 N. C. 
(1 Winst. Law) 96, have been held to be corporations sole. In Louisville 
Banking Co. v. Eisenman, 94 Ky. 83, 42 Am. St. Rep. 335, it is said there is 
no such being as a sole corporation in this state, and none such allowed to be 
created by the statute. This was said concerning a corporation in which one 
member had become the owner of all the shares, and in some measure mis- 
conceived the difference between a corporation sole and a corporation aggre- 
gate, the latter being one in which there is the capacity of having more than 
one member at a time, and the former one in which there is the capacity of 
having only one member at a time. 

2. One man companies. In corporations with shares of stock, one man 
may become the owner of all the shares of stock, but this does not convert 
the corporation into a corporation sole, for there is yet the capacity to sell 
shares by the owner, and bring in other members. For most purposes, as 
Mr. Cook says (§ 709), "the existence, relations and business methods of the 
corporation continue." But in Maryland and Kentucky it is held that the 
corporate existence or franchise is suspended while one owns all the stock to 
the extent that the corporate property becomes liable for the debts of the sole 
owner in the same way as his own ; but on the other hand, the sole owner 
does not become individually liable for debts created for the corporation and 
in its name. (Swift v. Smith, 65 Md. 428, 57 Am. Rep. 336; Louisville Bank- 
ing Co. V. Eisenman, 94 Ky. 83, 42 Am. St. Rep. 335, 19 L. Rep. A. 684.) But 
such distinction has not usually been made. See 1897, Salomon v. Salomon, 
etc., L. R. App. Cas. 22; 1897, Harrington v. Connor, 51 Neb. 214, 70 N. W. 
Rep. 911; 1897, Randall v. Dudley, 111 Mich. 437, 69 N. W. Rep. 729; 1896, 
Parker V. Bethel Hotel Co., 96 Tenn. 252, 31 L. R. A. 706; 1896, National 
Water- Works Co. v. Kansas City, 78 Fed. Rep. 428; 1895, Bank v. Macon 
Construction Co., 97 Ga. 1 ; 1892, Union Pacific R. v. Chicago, etc., R.,61 Fed. 
Rep. 309; 1891, Humphreys v. McKissock, 140 U. S. 304; 1889, Farmers, etc., 
Trust Co. V. Chicago, P. & S. R. Co., 39 Fed. Rep. 143; 1886, England v. 
Dearborn, 141 Mass. 590; 1884, Button v. Hoffman, 61 Wis. 20, 60 Am. Rep. 
131. 

See note, pp. 889, 890. 



§38 ECCLESIASTICAL AND LAY CORPORATIONS. 201 

Sec. 38. Same, {b) As to purpose, corporations are: 
(i) Ecclesiastical, or religious. 
(2) Lay, which are (a) Eleemosynary, or (b) Civil. 

HARDIN V. TRUSTEES OF SECOND BAPTIST CHURCH. 

1883. In the Supreme Court of Michigan, 51 Mich. Reports, 
PP- 137-139, 47 Am. Rep. 555. 

Error to Wayne. (Jennison, J.) June 13. June 22. 
Case. Plaintiff brings eiTor. Affirmed. 

CooLEY, J. The preliminary objection to the maintenance of this 
action is so unmistakably fatal that there can be no occasion or excuse 
for considering any other. 

The plaintiff, who, previous to February 2, 1881, was a member in 
good standing of the Second Baptist Church of Detroit, brings suit 
against the defendant to recover damages for having been on that day 
unwarrantably and without trial upon charges expelled from member- 
ship. The suit is against the corpoi^ate body known in law as "The 
Trustees of the Second Baptist Church of Detroit," and which was 
organized by voluntary association under authority conferred by the 
Revised Statutes of 1S38. The provision contained in that code is 
substantially the same which has always existed in this state, and 
which is simple and easily understood. Persons desirous of forming 
themselves into a religious society sign articles of association for the 
purpose, agree upon a name, elect trustees and put their articles on 
record when duly perfected. They thereby become a corporation by 
the name agreed upon, and may take, hold and convey property and 
exercise the ordinary functions of corporate bodies. The associates 
are not necessarily professors of any particular belief or faith, or mem- 
bers of any church ; and corporate succession is kept up by conferring 
the privileges of corporators on all who regularly attend worship in 
the society and contribute to its support. And the trustees who are 
to manage the temporal affairs of the corporation may or may not be 
church members. 

Connected with the corporation the statute contemplates that there 
will be a church, though possibly this may not be essential. In this 
case there is one. The church has its members^ who are supposed to 
hold certain beliefs and subscribe some covenant -with each other ^ if 
such is the usage of the denomination to which the church is at- 
tached. The church is not incorporated^ and has nothing whatever 
to do with the temporalities. It does not control the property or the 
trustees; it can receive nobody into the society and can expel nobody 
from it. On the other hand^ the corporation has nothing to do with 
the churchy except as it provides for the church wants. It can not 
alter the church faith or covenant ; it can not receive members ; it 
can not expel members ; it can not prevent the church receiving or 



202 HARDIN V. TRUSTEES, ETC. § 38 

expelling ■whomsoever that body shall see jit to receive or expel. This 
concise statement is amply sufficient to show that this suit has no 
foundation. The corporation is sued for a tort which it neither com- 
mitted nor had any power to prevent, and which has occurred in a 
proceeding where the interference of the corporation would have been 
an impertinence. 

But it is said that the church is an integral part of the corporation, or 
rather, that it is the corporation in its spiritual capacity. Its being an 
integral part of the corporation proves nothing. Counties, towns and 
school districts are integral parts of the state, but the state is not for 
that reason liable for their torts. And as to spiritual capacity, the 
corporation has none ; it is given capacity in respect to temporalities 
only. If the corporation had assumed to expel this plaintiff from the 
church, she might treat its action with contempt. But as she makes 
no complaint of wrongful corporate action, we must assume that the 
corporation has never invaded her rights. If the church has done so,, 
the church alone is culprit. 

The distinction between church and corporation in these cases is 
sufficiently explained in the following authorities: Baptist Church v. 
Witherell, 3 Paige 296, s. c. 24 Am. Dec. 223; Lawyer v. Cip- 
perly, 7 Paige 281 ; Robertson v. Bullions, 1 1 N. Y. 243; Bellportv. 
Tooker, 29 Barb. 256, and 21 N. Y. 267; Burrel v. Associate Re- 
formed Church, 44 Barb. 282; Miller v. Gable, 2 Denio 492; Fer- 
raria v. Vasconcellos, 31 111. 25; Calkins v. Cheney, 92 111. 463; 
Keyser v. Stansifer, 6 Ohio 363 ; Shannon v. Frost, 3 B. Mon. 253 ; 
German, etc., Cong. v. Pressler, 17 La. Ann. 127; O'Hara v. Stack, 
.90 Pa. St. 477 ; Sohier v. Trinity Church, 109 Mass. i ; Walrath v. 
Campbell, 28 Mich. 11 1. See, also. Hale v. Everett, 53 N. H. 9. 

The judgment must be affirmed with costs. 

The other justices concurred. 

Note. 1765, Rex v. Chancellor of Cambridge, 3 Burr. 1656, s. c. 1 W. Black. 
560; 1815, Pawlet v. Clark, 9 Cranch 292; 1868, Hale v. Everett, 53 N. 
H. 9, 16 Am. Rep. 82; 1883, Sale v. First Regular Baptist Church, etc., 62 
Iowa 26, 49 Am. Rep. 136; 1883, Landis v. Campbell, 79 Mo. 433, 49 Am. Rep. 
239; 1890, Lillv v. Tobbein, 103 Mo. 477, 23 Am. St. Rep. 887; 1895, Russia v. 
Brazzell, 128 "Mo. 93, 49 Am. St. Rep. 542; 1832, First Baptist Church v. 
Witherell, 3 Paige Ch. (N.Y.)296,24 Am. Dec. 223; 1890, Connelly v. Masonic, 
etc.. Association, 58 Conn. 552, 18 Am. St. Rep. 296; 1894, Reorganized 
Church of Jesus Christ of Latter Day Saints v. Church of Christ, 60 Fed. Rep. 
937, 45 Am. & Eng. Corp. Cas. 529; 1894, Auracher v. Yerger, 90 Iowa558, 45 
Am. & Eng. Corp. Cas. 554; 1883, White Lick Quarterly Meeting, etc., v. 
White Lick Quarterly Meeting, etc., 89 Ind. 136, 4 Am. & Eng. Corp. Cas. 87; 
1894, Buettnerv. Frazer, 100 Mich. 179, 58 N. W. Rep. 834; 1891, Winnepe- 
saukee Camp Meeting Ass'n v. Gordon, 67 N. H. 98, 45 Am. & Eng. Corp. 
Cas. 576; 1883, Whitecar v. Michenor, 37 N. J. Eq. 6, 1 Am. & Eng. Corp. 
Cas. 268; 1888, Liggett v. Ladd, 17 Ore. 89, 27 Am. & Eng. Corp. Cas. 406. 



§ 39 ECCLESIASTICAL AND LAY CORPORATIONS. 20$ 

Sec. 39. Same. 

ROBERTSON Et Al. v. BULLIONS Et Al.» 

1850. In the Supreme Court of New York. 9 Barbour (N. Y.) 

Rep., pp. 64-150. 

[In equity. Appeal from the vice-chancellor. In 1754 "the As- 
sociate Presbytery of Pennsylvania," subordinate to the Associate 
Synod of Scotland, was organized out of the American congregations 
of the Associate Church. In 1785, a church known as the Associate 
Congregation of Cambridge, N. Y., adhering to the Associate Pres- 
bytery of Pennsylvania, was formed. In 1803, connection with Scot- 
land was dissolved, and the Pennsylvania Presbytery was terminated 
by being divided into four presbyteries, one being called the Associate 
Presbytery of Cambridge, and a synod called "Associate Synod of 
North America," organized. Local churches were called congrega- 
tions. In 1826 the Cambridge Associate Congregation became in- 
corporated. In 1786 certain land was conveyed by F. to seven per- 
sons designated as trustees of the Associate Congregation of Cambridge, 
"adhering to the Associate Presbytery of Pennsylvania," and to their 
successors forever. F/s wife failing to join in the conveyance of 
1786, in 1 8 10 a new deed was made to fourteen persons (three being 
the same as formerly) described as trustees of the same congregation, 
"adhering to the principles of the Associate Synod of North America, 
and now under the inspection of the Associate Presbytery of Cam- 
bridge, belonging to the said synod, and whereof the Rev. Alexander 
Bullions is the present pastor," for the use and in trust for those who 
then were or should thereafter be in full communion, and should com- 
pose the said Associate Congregation. 

In 1786, a church was built on this property, and in 1833, a new 
one. In 1808, Dr. Bullions was called as pastor "by the elders and 
other members of the Associate Congregation of Cambridge, in full 
communion, as professed by the Associate Presbytery of Cambridge, 
as subordinate to the Associate Synod of North America." And Dr. 
Bullions on ordination promised to submit himself to the admonition of 
the Cambridge Presbytery. In 1838, he was deposed and excommuni- 
cated by this Presbytery ; its action was affirmed by the Synod of 
North America, the pastorate declared vacant, and other pastors sent 
by the Synod to preach temporarily, but a majority of trustees refused 
to allow them to preach, but permitted Dr. Bullions to continue. The 
bill prayed that the offending trustees be required to allow a clergy- 
man in good standing to preach, that they be enjoined from using the 
church or its funds in support of any other, be required to account for 
all money so expended, that they be removed, and Dr. Bullions re- 
strained from acting as minister. The answer alleged that the greater 
part of the subscriptions by which the new church was built was con- 

' Statement of facts condensed. Arguments and much of the opinion omit- 
ted. Dissenting opinion of Cady, J., omitted. See decision of court of ap- 
peals, affirming the decree rendered by the supreme court, 11 N. Y. 243. 



204 ROBERTSON V. BULLIONS. § 39 

tributed by supporters of Dr. Bullions, of whom there were 340, in- 
cluding 221 communicants, all the elders and all the trustees at that 
time, while the complainants were only 75 persons including 60 com- 
municants ; that Dr. Bullions had been wrongfully deposed by the 
Presbytery, which was illegally constituted, and that neither he nor 
his supporters had departed from the principles of the Associate 
church. The vice-chancellor held that the property was vested in the 
trustees for the use of the congregation, in accordance with the dis- 
cipline and government of the Associate church of North America, 
which did not allow excommunicated preachers to act as minister, 
and the appropriation of the property for .such use would be enjoined. 
Also that the tiiistees be removed, and new ones be elected by those 
who adhered to the Associate Presbytery of Cambridge, including 
those who statedly worshiped with them ; also that there be an ac- 
counting for the use of the pi'operty. 

The statute under which the corporation was formed provided : 
"That it shall be lawful for the male persons of full age, belonging 
to any church, congregation, or religious society, now or hereafter 
to be established in this state, and not already incorporated, to assem- 
ble at the church, meeting-house, or other place where they statedly 
attend for divine worship, and by plurality of voices, to elect any 
number of discreet persons of their church, congregation or society, 
not less than three nor exceeding nine in number, as trustees, to take 
charge of the estate and property belonging thereto, and to transact 
all affairs relative to the temporalities thereof; and that at such elec- 
tion every male person of full age, who has statedly worshiped with 
.such church, congregation or society, and has formerly been con- 
sidered as belonging thereto, shall be entitled to vote ; and the said 
election shall be conducted as follows: the minister of such church, 
congregation or society, or in case of his death or absence, one of the 
elders or deacons, church wardens or vestrymen thereof, and for want 
of such officers, any other person being a member or a stated hearer 
in such church, congregation or society, shall publicly notify the con- 
gregation of the time when, and place where, the said election shall 
be held, at least fifteen days before the day of election ; that the said 
notification shall be given for two successive Sabbaths, or days on 
which said church, congregation or society, shall statedly meet for 
public worship, preceding the day of election; that on the day of said 
election, two of the elders or church wardens, and if there be no such 
oflficers, then two of the members of the said church, congregation or 
society, to be nominated by a majority of members present, shall pre- 
side at such election, receive the votes of the electors, be the judges 
of the qualifications of such electors, and the officers to return the 
names of the persons who by plurality of voices shall be elected to 
serve as trustees for the said church, congregation or society, and the 
said returning officers shall immediately thereafter certify under their 
hands and seals the names of the persons elected to serve as trustees 
for such church, congregation or society, in which certificate the name 
or title by which the said trustees and their successors shall forever 



§ 39 ECCLESIASTICAL AND LAY CORPORATIONS. 20$ 

thereafter be called and known, shall be particularly mentioned and 
described ; which said certificate being proved or acknowledged as 
above directed shall be recorded as aforesaid ; and such trustees and 
their successors shall also thereupon by virtue of this act be a body 
coiporate by the name or title expressed in such certificate." 

The law also empowered the trustees to take into their custody and 
control all the temporalities belonging to the church, congregation or 
society, to sue and be sued, to purchase and hold property for the use 
of the same, to make repairs, to regulate the renting of pews, etc., 
and all other matters relating to the temporal concerns and revenues 
of such church. Appoint clerk, treasurer, etc. The law provided 
that no one but such as "shall have been a stated attendant on divine 
worship in said church, and shall have contributed to support" of 
same, shall be an elector. Another section provided that the salary of 
the minister should be fixed by a majority of electors, at a meeting 
called for that purpose ; provision was also made for reducing the 
number of trustees to not less than three ; for reporting yearly reve- 
nues to the chancellor, for selling all the property in certain contin- 
gencies, and upon dissolution, "for the religious society which was 
connected with such corporation to reincorporate" in a way prescribed.] 

Hand, j, * * * Then what kind of corporations are they ? The 
answer to this inquiry may be of some importance in this case. Chan- 
cellor Kent, in his Commentaries, denominates them "ecclesiastical cor- 
porations," and Angel & Ames, in their valuable work on corpoi'ations, 
upon this authority adopt the same application. (2 Kent, 274; Angel 
& Ames on Corporations, 33.) Neither cites any decision. Consid- 
ering the high authority from whence the remark emanates, I express 
a dissent with much timidity ; but with deference, I think it correct. 
I doubt whether, in a technical sense, there are any ecclesiastical cor- 
porations in this state, particularly under the third section of this act. 
As an ecclesiastical body they have no legal existence ; they have no 
ecclesiastical power. They are not controlled by and can not control 
the church, or any church judicatory, or interfere in spiritual concerns. 
Their object and purpose is to manage the temporalities of the society. 
"Ecclesiastical corporations," says Blackstone, "are, where the mem- 
bers who compose it are entirely spiritual persons, such as bishops, 
certain deans and prebendaries ; all archdeacons, parsons and vicars, 
which are sole corporations ; deans and chapters at present, and for- 
merly prior and convent, abbots and monks, and the like, bodies 
aggregate." And in describing the class of lay corporations, known 
as eleemosynary, he adds: "And all these eleemosynary corporations 
are, strictly speaking, lay, and not ecclesiastical, even though com- 
posed of ecclesiastical persons, and although they in some things par- 
take of the nature, privileges and restrictions of ecclesiastical bodies." 
(i Bl. 470. And see Phillips v. Bury, i Ld. Ray. 6; Cawdrey's 
Case, 5 Co. fol. 15; 2 Bac. Abr., 2; i Kyd, 22.) 

It is not the profession of piety by the individuals that renders the 
corporation, of which they are the members, ecclesiastical. The cor- 
poration must be spiritual \rv a legal and not in a popular or scriptural 



2o6 ROBERTSON V. BULLIONS. § 39 

sense. Lay corporations may be for the advancement of religion, and 
the members may all be clergymen, even, but that does not make the 
corporation ecclesiastical. The king is said, inCawdrey's case, to be 
"vicar of the highest of kings," and he is a corporation, but I believe 
he is not considered an ecclesiastical corporation. And if he were, 
it would be because he is the head of the church, an ecclesiastical body 
in law. Dartmouth College is an lay and not an ecclesiastical corpo- 
ration, and would be if the individual members were all ecclesiastical 
persons. (Dartmouth College v. Woodward, 4 Wheat. 518. See 
the opinion of Mr. J. Story, Ang. & Ames, 34.) And one distinctive 
feature of ecclesiastical corporations is, that they are subject to the ju- 
risdiction of the ecclesiastical courts or the visitatorial power of the 
ordinary, (i B1.47r,n. i ; Toml.Dic, 436; i Kyd, 22; Holt, C. J., 

1 Show. 252.) Our religious coi-porations have no such amenabilities. 
There the ordinary is the visitor of ecclesiastical corporations, and 
from him there is an appeal. The king, as the "supreme ordinary," 
visits the metropolitan, and the metropolitan the bishop. Church 
wardens (in England) are said to be lay corporations, although insti- 
tuted for the benefit and advancement of religion and to suppress pro- 
faneness and immorality, and to see that public worship be performed 
with due decency and reverence ; and are elected by the parish or the 
minister and parish, (i Bac. Abr., 597; Dawson v. Fowle, Hardr. 
378. Holt, C. J., in Rex v. Rees, 12 Mod. 116. Toml.Dic. 
"Churchwardens." i Lill. Abr. "Church wardens: " i Bum's Eccl. 
L., 378.) It may be added, that our corporations have power to build 
school-houses and dwellings for the minister, and other buildings, etc. 
If these were ecclesiastical corporations, there would be no visitor, for 
the reason that no person or officer, with us, has any such jurisdiction. 
That system is a part of the ecclesiastical polity of England, and does 
not apply to our religious corporations. (2 Kent, 304.) 

If lay corporations then they are either eleemosynary or civil. If 
the former, the visitatorial power is with the founders or their heirs ; 
unless it has been delegated by them to some other person. If a-civil 
corporation, they are not subject to this species of visitation at all. 
(2 Kent, 304.) Perhaps, for the purpose of ascertaining the power 
of a court of chancery in this case, it is not important to decide 
whether they are eleemosynary or civil ; for that court has no visita- 
torial power over a private eleemosynary corporation. Where there 
is a. failure or want of a visitor in such cases, in England, the crown 
becomes the visitor, and that power is exercised by the court of king's 
bench if not a charity (Rex v. Gregory, 4 T. R. 240, i, n.), and if a 
charity, within the statute of charitable uses (43 Eliz., ch. 4), by a 
petition to the great seal and not by bill or information ; and then the 
lord chancellor acts in his visitatorial capacity. (Ex parte Wrangham, 

2 Ves. Jr. 609; Attorney-General v. Earl of Clarendon, 17 Ves. Jr. 
499; Attorney-General v. Dixie, 13 Ves. Jr. 519; Attorney-General 
V. Smart, I Ves. Sen. 92; In re Bedford Charity, 2 Swanst. 524; 
Dann, Ex parte, 9 Ves. 547, 3 Atk. 109, i Jac. i; Hill on Trustees, 
460.) His jurisdiction over charities, it is said, is a personal author- 



§ 39 ECCLESIASTICAL AND LAY CORPORATIONS. 20/ 

ity of the chancellor, and not within the ordinary powers of equity. 
(Corporation of Bedford v. Lenthall, 2 Atk. 553.) I am aware of 
the conflict of opinion in the English courts as to the extent of the 
jurisdiction of the king's bench in cases of private eleemosynary 
foundations. (King v. Cath. Hall, 4 T. R. 233; Eden v. Footer, 2 
P. Wms. 326, 12 Mod. 116, F. N. B.'42; King v. Bishop of Ches- 
ter, 2 Str. 797; Rex V. Gregory, 4 T. R. 240, i, n. ; Green v. Ruther- 
food, I Ves. Sen. 471; King v. Bishop of Ely, 2 T. R. 339; Ex 
parte Wrangham, supra.') Visitatorial power, perhaps, is not now 
professional language when speaking of the law courts; but the king's 
bench has a superintendent authority where other jurisdictions are de- 
ficient. And at all events, the power where it exists on the other side 
of the courts belongs to the great seal and not to chancery as a court 
of equity jurisdiction, except on the ground of ti"ust. 

But I am inclined to the opinion that these corporations are not 
eleemosynary, although occasionally so called. Eleemosynaiy corpora- 
tions "are constituted for the perpetual distribution of the free alms or 
bounty of the founder of them, to such persons as he has directed," 
(i Bl., 471); and are of two general descriptions ; hospitals for the 
maintenance and relief of poor and impotent persons, and colleges for 
the promotion of learning, and the support of persons engaged in 
literary pursuits. Blackstone says, that the universities of Cambridge 
and Oxford are not eleemosynary corporations, "though stipends are 
annexed to particular magistrates and professors, any more than other 
corporations where the acting officers have standing salaries, for these 
are rewards pro opere et labore, not charitable donations only, since 
every stipend is preceded by service and duty." No writer upon 
elementary law uses the term in a different sense than that given by 
Blackstone, which also accords with its etymology. (2 Kent, 274; i 
Wooddes., §474; I Kyd on Corp., 25; Phillips v. Bury, i Ld. Ray. 5, 
s. c. 2 T. R. 346, s. c. Holt, 724; Webst. Die. tit. Eleemosynary; 
Babb V. Reed, 5 Rawle 151.) Those institutions are considered of 
this kind, where the plan is one of bounty, charity, and benevolence 
to others ; not those which are for the use of, and beneficial and make 
return to, the donors. Even a school, unless it be a free school, does 
not come within the statute of charitable uses, 43 Eliz. (Attorney- 
General V. Hewer, 2 Vern. 387.) In this very case, the land was pur- 
chased and paid for by, and conveyed to the society for their own use, 
and the attorney-general is not a necessary party. Religious societies 
may be the means of dispensing the richest bounties, but the bene- 
ficiaries are, in a great measure, the founders themselves. 

If, then, these corporations are not ecclesiastical nor eleemosynary, 
they fall into the remaining class, private and civil. I think they 
possess the nature and qualifications of private, civil corporations, 
created mainly for the purpose of aiding in the promotion and enjoy- 
ment of religion by managing the property of the church. Civil cor- 
porations are subject to no visitation, except in England by the king, 
who exercises this power in the king's bench, which is his representa- 
tive, by mandamus or quo warranto ; and here this power, in a degree, 



208 ROBERTSON V. BULLIONS. § 39- 

belongs to the government and was exercised in our supreme court, 
which is the representative, in our judicial system, of the king's bench, 
and, in the same manner, if such power did formerly exist here at all, 
as the king's bench superintends the civil corporations of the kingdom. 
(3 BL, 42 ; 2 Kyd on Corp., 174; 2 Kent, 304; Ordinance of 1704, 
establishing our Supreme Court; 2d R. L. App. 6.) Our statutes 
now give certain powers over corporations to the supreme court and 
the court of chancery, but religious corporations are expressly ex- 
cepted from their operation, (i R. S. 603, § 5, 605, § 11 ; 2 R. S. 
462, §§ 33, 35 ; 466, § 57.) So the law, as to these, remains as be- 
fore. The king of England and the legislature here, as founders in a 
certain sense of all civil corporations, are said to have visitatorial ca- 
pacity; and they are visited and inspected, where no statute interposes, 
in the court of king's bench according to the rules of common law, 
and not elsewhere or by other authority, (i BL, 481 ; Attorney-Gen- 
eral v. Utica Ins. Co., 2 John Ch. Rep. 371 ; Auburn Academy v. 
Strong, Hopk. R. 278; 2 Kent, 300.) But whether ecclesiastical, 
eleemosynary or civil, our court of chancery has no jurisdiction as 
visitor over these religious corporations. * * * 

Another important inquiry is, who are the corporators? This is not 
without difficulty. Chancellor Walworth, in Lawyer v. Cippei^ly, 
says that the statute of 1784 recognized three distinct classes or bodies 
existing in a religious corporation; "the church or spiritual body, 
consisting of the office-bearers and communicants; the congregation 
or electors, embracing all the stated hearers or attendants on divine 
worship who are competent to vote for trustees; and the trustees of 
the corporation." (7 Paige, 285. See 16 Mass. 503,4; 10 Pick. 
193; II Pick. 494.) * * » 

The chancellor adds, in The Baptist Church in Hartford v. With- 
erell, that, although a church or body of professing Christians is almost 
uniformly connected with such a society or congregation, the members 
of the church have no other or greater rights than any other members 
of the society who statedly attend with them for the purposes of divine 
worship. (3 Paige, 301.) If it be one of the integral parts of the 
corporation, and the church should become extinct, the corporation 
would be dissolved. That was so settled in the well-considered case 
of King V. Pasmore (3 T. R. 199). This would be so clearly, unless 
the corporators have power to restore the church. A neglect to elect 
trustees is provided for by the statute, and is, perhaps, more properly 
a suspension. (Phillips v. Wickham, i Paige 590. And see Angel 
& Ames on Corporations, 464, 734, 5.) The language of the third 
section is that it shall be lawful for the "male persons belonging to 
any other church, congregation or religious society" to choose the 
trustees. The whole statute has reference to religious associations. A 
"church" (ecclesia) may be: First, a temple or building consecrated 
to the honor of God and religion ; or second, an assembly of persons 
united by the profession of the same Christian faith, met together 
for religious worship. (Jac. Law Diet. "Church;" Toml. Die. 
"Church ;" 5 Petersd. Abr., 409 ; Town of Pawlet v. Clark, 9 Cranch 



§ 39 ECCLESIASTICAL AND LAY CORPORATIONS. 209 

292.) These give the legal, though the word has various popular, defi- 
nitions. (Webster's Die. "Church.") In our statute I think it is used 
in the sense of the second definition above. "Congregation" has per- 
haps no settled legal signification. The pleadings in this case state and 
admit that in the Associate Church it is used to designate a local church, 
and it w^ould seem that the word "church" with them implies the 
church of that denomination in its aggregate capacity, the same as the 
term "Church of England," which is not a corporation. (Town of 
Pawlet v. Clark, 9 Cranch 292, Stoiy, J. ; Comm. v. Green, 4 Whart. 
531.) The word "congregation" occurs frequently in the books 
made exhibits in this suit. (See the Ordination Vows, in the book con- 
taining the Narrative and the Declaration and Testimony, 174 et seq.; 
the Form of Church Government, "Of Particular Congregations," p. 
572; Perdivan, b. i, tit. i, and, indeed, throughout; 2 Gib's Display 
76, and Church Government, art. 3.) "Congregation" was an ap- 
pellation given to the Protestants in Scotland in 1559, from their 
imion. (Robertson's History of Scotland, b. 2.) The term is used 
in the penal laws of England against disturbing public worship, par- 
ticularly those to protect the worship of Protestant dissenters. ( i W. 
& M., ch. 18.) . But, as used in this statute, a congregation, I take 
it, is an assembly met, or a body of persons who usually meet in some 
stated place for the worship of God and religious instruction, and 
may or may not include a church or spiritual body. 

And the same may be said of the term "religious society," used in 
the same connection in the third section. The church, congregation 
or society must, to organize, have stated "divine worship," for the 
electors must have attended the same to constitute them such by the 
third and seventh sections. Whether religion and divine Tvorship in 
their broadest sense, or Christian sects only, are intended, it is not 
necessary now to inquire. The statute declares that the persons 
chosen trustees shall be a body corporate. Most of our statutes, in 
similar cases, use different expressions; as in the acts for the incor- 
poration of literary, manufacturing, and medical societies, cities and 
villages, etc. And the 13th and i6th sections speak of the corpora- 
tion being dissolved (not suspended) and authorizes the "religious 
society which was connected therewith" to reincorporate. But the 
9th section permits a religious corporation to reduce the number of 
trustees, and the congregation or society, I think, is there intended. 
The nth section speaks of the "society, to which the real estate 
so sold did belong;" and the act of 1826 declares that if there be an 
omission to elect trustees, the church, congregation or religious society 
shall not be deemed thereby to have been dissolved. Several ambigu- 
ous expressions of this nature are found in the statute. Upon the 
whole, I am inclined to think, all of the electors are corporators. 
They elect the trustees and from their own body, and these are the 
officers of the society. It is true, a right of election is often vested in 
others besides the corporators. This is almost invariably so with sole 
corporations. Church wardens, who are a corporation for certain pur- 
14— WiL. Casks. 



2IO ROBERTSON V. BULLIONS. § 39 

poses, are elected by the parish, or by the minister and parish. But 
several opinions concur in the position that the electors are corpo- 
rators. Those of Chancellor Walworth in the Baptist Church v. 
Witherell,^ and Lawyer v. Cipperly,^ have been stated. A. V. Ch. 
Sandford seems to have entertained the same opinion. (Cammeyer 
V. United German Lutheran Churches, 2 Sandf., ch. 186), and so 
I infer did Gardiner, president, in Miller v. Gable, in the court for 
the correction of errors. (2 Denio 548.) The persons entitled to vote 
are designated by the statute. At the first election, for the purpose 
of organizing, they must be male adults, belonging to the church, 
congregation or society, and must have statedly worshiped with the 
same, or have formerly been considered as belonging thereto. And 
after the first election they must have been stated attendants on divine 
worship in said church, congregation or society, at least one year 
previous, and have contributed to the support of the church, congre- 
gation or society, according to its usages and customs. 

The statute, therefore, declares who are the corporators, and the court 
of chancery can not indii'ectly disfranchise a member by declaring that 
he does not possess the necessary qualifications. That power is ex- 
pressly given to others by the act, and law courts, in case of contro- 
versy, alone can review the matter, if that can be done by any tribunal. 

If the foregoing views are correct, then those parts of the decree 
appealed from in this case, which removed some of the defendants as 
trustees or ofllicers of the corporation, and which declare that the ad- 
herents of Dr. Bullions are not members of the corporation, and who 
are electors therein, and which provide for a new election of trus- 
tees, are erroneous; the court of chancery having no power of amotion 
of an officer of these corporations, or to disfranchise a member thereof , 
or interfere with or control the election of its officers. 

But, although a court of chanceiy has no jurisdiction with regax'd to 
the election or amotion of corporators, it may, in some cases, where a 
corporation is a trustee, take from it the trust fund, if the trust be 
abused. * * * 

In this case the corporation, together with four of the six trustees, 
and Dr. Bullions, claiming to be and officiating as minister, are made 
defendants. It is admitted that the legal estate is in the corpora- 
tion. The officers of the corporation, as individuals, have no more 
beneficial interest than any other corporators. It was said in Ver- 
plank V. The Mer. Ins. Co. that the relation of cestui que trust and 
trustee does not exist between the corporation and stockholders of an 
incorporated company, (i Edw. Ch. Rep, 47, per McCoun, V. C.) 
But the vice-chancellor further added, that a relation was created be- 
tween the stockholders and those directors, who in their character of 
trustees become accountable for any dereliction of duty or violation of 
the trust reposed in them. And he saw no objection to the exercise 
of an equity power over such persons, in the same manner as it would 
be exercised over any other trustees. Now a trustee is a "person in 
whom some estate, interest or power, in or affecting property of any 

13 Paige 296. »7 Paige 281. 



§39 ECCLESIASTICAL AND LAY CORPORATIONS. 211 

description, is vested for the benefit of another." (Hill on Trustees, 
411.) In The People v. Runkle the congregation are said to be the 
constituents of the tinistees. (9 John. 156.) In the case of the 
Dutch Church in Garden Street v. Mott, the chancellor speaks of the 
legislature having power to "transfer the legal title from the naked 
trustees to the cestui que trusty after the latter were incorporated." 
(7 Paige 82.) In Gable v. Miller, the chancellor decided that the 
property of the coi-poration was held in trust for the support of the 
worship of God by a church to be in a particular connection ; and for 
teaching certain particular doctrines. (10 Paige 649.) Senator 
Porter, in the same cause, in deliving an opinion in the court for the 
correction of eiTors, in favor of sustaining the decree, considered those 
members of the church who had remained faithful to their allegiance 
to the government of the church as "the rightful members of the church, 
and the only ccstuis que trust of the property held for the use of the 
church." (3 Denio 568.) In Bowden v. McLeod, Vice-Chancellor 
McCoun thought equity would exercise jurisdiction over the property 
of religious societies, as being trust property. In that case, by a 
special act, the minister, elders and deacons were constituted trustees for 
life, (i Edw. Ch. Rep. 588. And see 16 Mass. 495, 505, 510.) By 
the fourth section of the statute under which religious societies are in- 
corporated, the trustees, as we have seen, take possession of and hold all 
the estate, whether real or personal, and whether befoi-e held directly 
by the church, congregation or society, or by some other person to 
their use, and however acquired, or by whomsoever held; and they 
may purchase and demise, lease and improve the same for the use of 
the church, congregation or society, or other pious uses. * * * 

The legal estate is clearly in the trustees, and they are to manage 
the same, and regulate and order all matters relating to the temporal 
concerns and revenues of the church, congregation or society. It is 
said they hold the property in trust, and this is so stated in the plead- 
ings. But I think not in the ordinary sense of that expression. They 
too, individually, are usually cestuis que trusty only holding the legal 
estate while in office, but in the management of it, and in everything 
relating to their responsibility, they are upon the same footing with 
the officers of any incorporated company, and liable for fraud or neg- 
ligence, or gross mismanagement. Mere trustees are liable for these, 
but in this case the trustees are, as to the management of the prop- 
erty, more properly officers or agents, and with a broader discretion 
in some respects than mere trustees. (Ang. & Ames on Corp., 
306—7.) * * * 

This brings us to the great question in this cause : are the defend- 
ants, or any of them, violating the trust reposed in them, or their 
duty, by adhering to and supporting Dr. Bullions.? For, if that is so, 
although a court of chancery can not remove then\ and can not divest 
them of this property, it can compel them to do their duty in relation 
to it. * * * 

Upon this examination of the subject, it seems to me that certain 
general rules are applicable to these institutions when incorporated 



212 ROBERTSON V. BULLIONS. § 39 

under the third section of the act — that chancery has no power to dis- 
franchise one of the members, nor to remove the trustees or declare 
their election void ; nor direct who shall vote ; or in any way interfere 
with their election. This I have already very fully considered ; that 
the trustees may be restrained from wasting the property, and from 
such management of it as the court can clearly see, unreasonable and 
unconscientiously deprives the society, or some part of it, of its enjoy- 
ment ; and also from applying it to the promotion of tenets clearly op- 
posed and adverse to the fundamental principles of the faith and doc- 
trine professed by the church or society at the time the corporation 
purchased the property. But the exercise of this jurisdiction should 
generally be restrictive, and not mandatory ; for the statute is their 
guide and authority for the future, and gives a very broad margin for the 
exercise of discretion and religious freedom. (Lord Cottenham in 
The Attorney-General v. Shore, ^ in the House of Lords ; Lord Broug- 
ham in Milligan v. Mitchell;^ Lane v.Newdigate, loVes. 193;) that the 
support of particular doctrines, or systems of worship or government, 
or a connection with some particular judicatory, may be made a con- 
dition in a grant or donation, but if no such condition be expressed, 
none should be implied, except as to cardinal points. This last prin- 
ciple, I think, may be deduced from the cases already cited, particu- 
larly The Attorney-General v. Pearson,^ The Attorney-General 
V. Shore, ^ The Attorney-General v. Drummond,* Craigdallie v. 
Aikman,* Milligan v. Mitchell,* Porter v. Clark,^ Miller v. Gable, ^ 
Baptist Church v. Witherell,* Lawyer v. Cipperly,® The Presbyte- 
rian Church v. Johnston.^" It is hardly necessary to remark that, 
in Deun v. Bolton, ^^ the office bearers of the church were, 
by statute, ex officio trustees, and of course a deposition of 
the former would be an amotion of the latter. Another general 
rule is, that the church or spiritual body is authorized to call the min- 
ister, either by itself or by some other mode, according to usage. In 
order to reach the revenues of the corporation, that call must be rati- 
fied by the congregation or body entitled to elect trustees, by fixing 
the salary of the minister ; and then the trustee may apply the reve- 
nues to his support. * * ♦ 

But whether the use of the house by a majority of the congrega- 
tion under the ministry of the defendant, Dr. Bullions, is such an act 
as that the minority can complain in this court, and ask for restrictive 
measures, is a point of much difficulty. * * * It must be remem- 
bered that this associate church adheres to the presbyterial form of 
government. (Dec. and Tes., p. 3, art. 8, Ch. Gov. andDis.,p. i, 
art. 4; p. 3, art. 12.) And after the cases of Diefendorf v. Re- 
formed Calvinistic Church,^* and The Dutch Church v. Bradford,^* I 

J 7 Sim. 309 n, 9 CI. & F. R. 355. ' 2 Denio 492. 

n Myl. & K. 446, S Myl. & C. 72, "3 Paige 296. 

433,511. 97 Paige 281. 

* 7 Sim. 290. "1 Watts & S. 9. 

* 1 Con. & L. 210. " 7 Halst. 206. 
» 1 Dew's P. C. 1. " 20 John. 12. 

« 2 Sim. 520. " 8 Cowen 457. 



§ 39 ECCLESIASTICAL AND LAY CORPORATI(3NS. 213 

do not see how we can look beyond the decision of the synod. All the 
authorities agree that the civil courts can not, upon the merits, over- 
hale the decisions of ecclesiastical judicatories in matters properly 
within their province. Dr. Bullions hinnself took the case to the synod, 
and the deposition of a minister is purely an ecclesiastical matter ; 
though the effect of that deposition upon civil rights is quite another 
thing. The church judicatories had power to depose him, but they 
could not sequester the property of the corporation, nor compel the 
congregation, against the will of a majority, and the trustees, to re- 
ceive a minister. The defendants, in their answer, admit that a min- 
ister who is under rightful sentence of excommunication can not be 
permitted to occupy the pulpit or administer divine ordinances. Our 
courts have, as we have seen, declared that such dissolution of the 
connection between pastor* and flock discharges the civil contract, 
even the individual subscriptions for the support of the former. It is 
true, a majority of the church in those cases were probably opposed 
to the minister, but the decisions were not put upon that ground. Dr. 
Bullions must, for the purpose of this case, be deemed deposed from 
the office of the holy ministry; and, notwithstanding a large majority 
of this enlightened society still consider him in good standing, a mi- 
nority of the corporators are of the opposite opinion, and, giving full 
effect to proceedings against him, insist that his employment is a griev- 
ance that deprives them of a reasonable enjoyment of the corporate 
property, which can be redressed in this court. And with much hesi- 
tation, I have come to the conclusion that, upon this point, the law is 
with them. * * * 

There must be a decree restraining the defendants from using the 
temporalities of the corporation for the support of Dr. Bullions' min- 
istry as long as he is under sentence of deprivation. All the other 
portions of the decree which have been appealed from must be re- 
versed. Neither party can have costs against the other on this 
appeal. The complainants have asked too much, and neither side is 
free from blame. The rule is, where both parties have claimed what 
they are not entitled to, and each has succeeded as to part of the mat- 
ters in litigation between them, to give costs to neither. (Crippen v. 
Hermance, 9 Paige 211.) Nor am I disposed to burden the corpo- 
rate funds with the costs, except the costs of putting in the answer by 
the corpofation. Each party must in all other respects bear their own. 

It was stated on the argument that the complainants, under the 
vice-chancellor's decree, had taken possession of and occupied the 
church edifice. The defendants, who were trustees at the time of the 
commencement of the suit, and their successors, are entitled to the 
possession of the property of the corporation, but, under all the cir- 
cumstances of this case, there should be no accounting for the mere 
use of the property. 

If there has been waste or destruction of property, that should be 
made good. 

Paige, P. J., concurred. 

(Dissenting opinion of Cady, J., omitted.) 



214 THE BOARD, ETC., V. MIGHELS. § 4O 

Note. See particularly 1819, Dartmouth College v. Woodward, 4 Wheat. 
518, infra, p. 708; 1815, Phillips Academy v. King, 12 Mass. 546; 1823, Society 
for Propagating the Gospel v. New Haven, 8 Wheat. (U. S. ) 464; 1864, Board 
of Education v. Greenbaum, 39 111. 610 ; 1893, Bakewell v. Board of Education, 
(111.), 33 N. E. Rep. 186; 1879^ Magdalen Hospital v. Knotts, 4 App. 
Cas. 324; 1872, Gooch v. Association for Relief of Aged Females, 109 Mass. 
558; 1895, Hibernian Benev. Soc. v. Kelly, 28 Ore. 173, 52 Am. St. Rep. 769; 
1894, Philadelphia v. Masonic Home, 160 Pa. St. 572, 40 Am. St. Rep. 736; 
1880, Hennepin Co. v. Brotherhood, etc., 27 Minn. 460, 38 Am. Rep. 298; 
1874, Mitchell v. Treasurer of Franklin Co., 25 Ohio St. 143; 1890, Wagner 
Free Institute v. Philadelphia, 132 Pa. St. 612, 19 Am. St. Rep. 613; 1888, 
Fire Ins. Patrol v. Boyd, 120 Pa. St. 624, 6 Am. St. R. 745; 1822, American 
Asvlum V. Phoenix Bank, 4 Conn. 172, 10 Am. D. 112; 1876, McDonald v. 
Massachusetts Gen'l Hospital, 120 Mass. 432, 21 Am. Rep. 529; 1883, Coit v. 
Comstock, 51 Conn. 352, 50 Am. Rep. 29; 1893, Sears v. Chapman, 158 Mass. 
400, 35 Am. St. Rep. 502; 1889, Coe v. Washington Mills, 149 Mass. 543 ; 1886, 
Howe V. Wilson, 91 Mo. 45, 60 Am. Rep. 226; '1880, Rhymer's Appeal, 93 Pa. 
St. 142, 39 Am. Rep. 736, n. 738; 1881, Manners v. Philadelphia Library Co., 
93 Pa. St. 165, 39 Am. Rep. 741, note 748; 1882, Bangor v. Masonic Lodge, 73 
Me, 428, 40 Am. Rep. 369. 



Sec. 40. Same. Civil corporations are : 

1. Quasi. 

2. Pure or complete. 

THE BOARD OF COMMISSIONERS OF HAMILTON COUNTY v. 

MIGHELS.i 

1857. In the Supreme Court of Ohio. 7 Ohio State Reports 

109-125. 

In error to the superior court of Cincinnati. 

Brinkerhoff, J. The defendant in error brought suit in the 
superior court of Cincinnati against the plaintiffs in error, and, on the 
14th of May, 1855, filed therein the following petition, to wit: "The 
plaintiff, a citizen of the state of Ohio, and a resident of the county of 
Hamilton, says that the defendants, the board of county commission- 
ers of the county of Hamilton, in the state of Ohio, being authorized 
by law, in the exercise of their discretion, to erect a good and con- 
venient court-house, upon such plan as they might project, in the city 
of Cincinnati, the seat of justice of such county, were, on the eleventh 
and twelfth days of December, 1854, engaged in the erection of such 
court-house, in the city of Cincinnati, which building was designed 
and then used for the holding of the courts of the county of Hamil- 
ton, and for the offices of the sheriff, clerk of the courts and certain 
other county officers, under the direction and sanction of the defend- 
ants. On the eleventh and twelfth days of December, 1854, the 
rooms of the northwest corner of said building, on the first floor, were 
used, under the direction of the defendants, for the holding of the 
criminal court of Hamilton county, and a certain trial was then and 
there had, at which the plaintiff was required, by a writ of subpena, 
to appear and testify, and was detained under the order of the court, as 
such witness, till night. In the erection of such court-house, upon the 

* Arguments and part of opinion omitted. 



§ 40 QUASI AND COMPLETE CORPORATIONS. 21$ 

plan projected by the defendants, there was a certain stairway from the 
first to the second floor, opposite to the main entrance into the building, 
which persons in their egress from the said court-room by the usual 
passages into the street must necessarily pass, and under said stair- 
way was a large opening into the cellar, which the defendants wrong- 
fully and unjustly permitted to remain open, unprotected and 
uncovered, and wrongfully and negligently omitted in any manner to 
guard the same, so as to prevent persons passing along said passage 
from falling into such opening, and wholly omitted to light the same 
at night, by reason whereof, and for want of such light and protection 
over said opening, the plaintiff, being such witness required to be 
in such building, and necessarily detained there in obedience to the 
order of said criminal court of Hamilton county, till after nightfall on 
the twelfth day of December, 1854, in passing along said passages on 
his way from the court-room to the street, necessarily and unavoidably 
slipped and fell into said opening, and thereby the thigh and two ribs 
of the plaintiff were fractured and broken, and the plaintiff became 
sick, lame and disordered, and so remained for a long space of time, 
during all which time he suffered great pain, and was prevented from 
attending to and transacting his necessary and lawful business, and 
was obliged to expend and did expend a large sum of money in en- 
deavoring to get healed of said wound, sickness or disorder. The 
plaintiff, therefore, demands judgment against the defendants for 
$10,000 damages." 

To this petition the defendants below demurred on the ground that 
it did not state facts suflScient to constitute a cause of action. On 
hearing, the demurrer was overruled and leave was taken to answer. 
An answer was filed, admitting a part of the material facts alleged 
in the petition, and denying the remainder. The case was tried by a 
jury who found the issues in favor of the plaintiff below, and assessed 
his damages at $7,750. After motions for a new trial, and in arrest 
of judgment were made, heard and overruled, judgment was entered 
on the verdict. No bill of exceptions was taken to any ruling of the 
court below on the trial. 

The case having been reviewed on error by the superior court at 
general term, and the judgment there affirmed, a petition in error is 
filed here to reverse that judgment of aflSrmance. 

All the errors assigned or assignable on the record present but the 
single question which was originally made by the demurrer to the 
petition, i. e., does the petition state facts sufficient to constitute a 
cause of action } If it does, there is no error apparent on this record ; 
if it does not, the judgment is erroneous and must be reversed. 

It will be noticed that this is an action brought by an individual 
plaintiff against the commissioners of a county in their oflicial or 
quasi corporate capacity, to recover damages resulting from the negli- 
gence and misconduct of those officers. No claim is made against 
those officers as individuals, but the recovery is sought against the 
county, and if this judgment can be maintained, it must in somfe way 
be met and paid by the people of Hamilton county. And thus we 



2l6 THE BOARD, ETC., V. MIGHELS.- § ^O 

are presented with the question, is a county, or, in other words, the 
people of a county, liable in an action sounding in tort, for the per- 
sonal misconduct or negligence of the county commissioners while in 
the performance of their official functions ? 

If a county be thus liable, that liability must be derived either ex- 
pressly or by necessary implication from the provisions of some statute, 
or must rest on the principles of the common law. 

[After holding there was no statutory liability proceeds:] 

2. Is the action maintainable on the principles of the common law? 
In entering on this inquiry, it is but justice to ourselves to say, that, 
assisted by the researches of diligent counsel, we have given it an un- 
usual share of labor and attention ; and this not only because of the 
importance of the question itself, but for the reason that the conclusion 
to which our minds have been compelled is in conflict with a case 
(Commissioners of Brown County v. Butt, 2 Ohio Rep. 348) decided 
by judges for whose judgment we entertain that degree of respect 
which renders even involuntary and irresistible dissent from their con- 
clusions reluctant and self-distrustful. 

For the purpose of maintaining this action, an effort has been made 
in argument to assimilate counties to natural persons and municipal 
and other corporations proper. Now it is conceded, that if the neg- 
ligence, and consequent injury to the plaintiff below had been the act 
of a natural person in the construction of a private building, to which 
the plaintiff below had been invited, the party guilty of the negligence 
would properly be liable in damages. So, also, it now seems to be 
well settled that, had the defendants below been the agents of a muni- 
cipal or other corporation proper, and had the plaintiff below been 
injured through like negligence and under like circumstances, the cor- 
poration might be held to answer for the injury. And why? Because 
where there is a wrong there ought to be a remedy ; persons, whether 
natural or artificial, are bound so to use their own property and con- 
duct their own affairs as not to injure others ; and where an act is 
done to the injury of another by a natural person in the pursuit of his 
own interests, or, through its agents, by an artificial person, a corpo- 
ration proper, which is called into existence, either at the direct solici- 
tation or by the free consent of the persons composing it, for the pro- 
motion of their own local and private advantage and convenience, 
and which can work only through agents, such natural or artificial 
person is, on every principle of justice and enlightened reason, bound 
to rectify the consequence of his own misfeasance. And it is freely 
admitted that if counties are in all material respects like municipal 
corporations proper, and may be fairly classed with them, then this 
action ought to be maintained. But how is the fact ? This question 
is vital, and on its solution the case must depend. 

As before remarked, municipal corporations proper are called into 
existence, either at the direct solicitation or by the free consent of the 
people who compose them. 

Counties are local subdivisions of a state created by the sovereign 
power of the state, of its own sovereign will, without the particular 



■§40 QUASI AND COMPLETE CORPORATIONS. 21/ 

solicitation, consent or concurrent action of the people who inhabit 
them. The former organization is asked for, or at least assented to 
by the people it embraces ; the latter is super-imposed by a sovereign 
and paramount authority. 

A municipal corporation proper is created mainly for the interest, 
advantage and convenience of the locality and its people ; a county 
organization is created almost exclusively with a view to the policy of 
the state at large, for the purposes of political organization and civil 
administration, in matters of finance, of education, of provision for 
the poor, of military organization, of the means of travel and trans- 
port, and especially for the general administration of justice. With 
scarcely an exception, all the powers and functions of the county 
organization have a direct and exclusive reference to the general policy 
of the state, and are, in fact, but a branch of the general administration 
of that policy. Ward v. County of Hartford, 12 Conn. 406; Boalt v. 
Commissioners of Williams County, 18 Ohio Rep. 16; C. W. & Z. 
Railroad v. Commissioners of Clinton County, i Ohio St. Rep. 89. 

The idea that the board of county commissioners is the agent of the 
county or of its people is prominently advanced and pressed on our 
attention. That board is, in some sort, the agent of the county, it is 
tme ; inasmuch as it alone is authorized to sue and be sued in respect 
to contracts growing out of the county organization. There is an ad- 
ministrative necessity that some name should be employed as the rep- 
resentative of the public interests involved in such suits ; and that of 
the board of county commissioners has, by law, been designated for 
that purpose ; but the name of the county auditor, or the name of the 
county itself, had the legislature chosen so to prescribe, would have 
answered the same purpose quite as well ; and, in fact, we think, has 
no special weight or significance. 

But, it is said, the members of the board of county commissioners 
are chosen by the electors of the county, and hence the board is to be 
regarded as the agents of the county, for whose torts in the perform- 
ance of artificial duties the county ought to be responsible. True, the 
people of the county elect the board of county commissioners ; but 
they also elect the sheriff and treasurer of the county. Are the peo- 
ple of the county, therefore, responsible for the malfeasance in office 
of the sheriff, or for the official defalcations of the county treas- 
urer? This will not be pretended. And yet, if this case is to rest on 
the principles governing the relation of principal and agent, wherein is 
the distinction between the case at bar and the case supposed.? We 
confess our inability to discover any such distinction. In the case of 
municipal corporations proper, the electors are, mediately or immedi- 
ately, invested with very ample control over their agents, not only as 
to what shall be done, but how it shall be done, and by whom it shall 
be done ; they may exact such guarantees as they deem proper for 
their own indemnity, and may prescribe by-laws for their government. 
As between the commissioners and the electors of a county all this is 
wanting. All his powers and duties are prescribed by the supreme 
legislature ; and the electors can exercise no control over him whatso- 



2l8 THE BOARD, ETC., V. MIGHELS. §40 

ever, except such as springs from the bare fact of election ; and to this 
extent they can control a sheriff or treasurer as well as a commissioner. 

Chancellor Kent (i Com. 572-3) says, that "a great proportion of 
the rules and maxims which constitute the code of the common law, 
grew into use by the application of the dictates of natural justice and 
cultivated reason to particular cases;" and that "the best evidence" 
of what that law is, "is to be found in the decisions of courts of jus- 
tice, contained in books of reports, and in the treatises and digests of 
learned men." 

Now, on what principles of "natural justice," or of "cultivated 
reason," aside from positive statute, the people of a county should be 
held responsible for the personal or official misconduct of a county 
commissioner, we are wholly unable to perceive. 

But how stands the case upon authority, "by the decision of courts 
of justice, and the treatises of learned men?" 

The county organization, substantially similar in all its general 
features and functions, has existed in England from the earliest times, 
and in all the states of this Union, with perhaps one or two exceptions, 
more nominal than real, from the period of their settlement; yet the 
researches of diligent counsel have failed to furnish a single case 
where an action has been maintained against a county in a case like 
the one before us, except that of the Commissioners of Brown County 
V. Butt, before cited, and which was recognized as authoritative in 
Richardson v. Spencer, 6 Ohio Rep. 13, but, apparently without any 
particular examination of the principles on which it was based, or of 
the authorities bearing upon them. 

It is said that the court below sustained the action in the case before 
us, on the authority of Commissioners of Brown County v. Butt ; and 
we concur with the court below in the opinion that if that case was 
properly decided this action must be maintained. We have looked in 
vain for any substantial distinction between them. In that case, the 
debtor, having been surrendered by his appearance bail, and commit- 
ted to the custody of Butt, who was sheriff of Brown county, escaped 
by reason of there being no jail in Brown county, and the sheriff not 
being by law at liberty to imprison the debtor elsewhere than in the 
jail of the county. The creditor having recovered against him, as 
sheriff, for the escape. Butt brought his action on the case against the 
board of commissioners of the county to recover the damages he had 
thus sustained by reason of its neglect of duty to provide a jail. The 
court, Burnet, J., dissenting, held the action to be well brought, on 
the ground that the commissioners were the agents and representatives 
of the county. In that opinion, for the reason before indicated, as 
well as on the authorities about to be noticed, we find ourselves unable 
to concur. We can not but think that county commissioners are not 
agents or representatives of the county in any such sense or manner 
as to render the people of the county justly answerable for their neg- 
lect. The reported opinion of the majority of the court in that case 
may furnish veiy abundant reason why the utter neglect of county 
commissioners to furnish a jail, and. the sheriff himself being in no 



§ 40 QUASI AND ^COMPLETE CORPORATIONS. 219 

fault, a plea of these facts ought to be held a good bar to an action 
for an escape, and the creditor turned over to an action against the 
commissioners personally, or why, if such plea be held bad, the sheriff 
might maintain his action against the county commissioners in their 
individual capacity, for the personal injury resulting to him from their 
neglect — and as to these alternatives, the question not being directly 
before us, we express no opinion — but it affords to our minds no satis- 
factory reason why the people of a county should be held pecuniarily 
responsible for the delinquencies of officers over whose acts that peo- 
ple have no supervision or control whatsoever. And the case itself, 
as before remarked, stands alone. At the time it was made it was 
unsupported by any reported case ; and, so far as we can ascertain, it 
remains still unsupported by any case outside of Ohio, while the cases 
on the other side are uniform and so numerous as to render a particu- 
lar notice of all of them too tedious to be attempted. 

The leading case on this subject seems to be that of Russell v. The 
Men of Devon, 2 T. R. 667, which was an action on the case against 
the men dwelling in the county of Devon ^ to recover satisfaction for an 
injury done to a wagon of the plaintiff in consequence of a bridge 
being out of repair, which ought to have been repaired by the county ; 
to which two of the inhabitants, for themselves and the rest of the 
men dwelling in that county, appeared and demurred generally. On 
hearing, the court of king's bench unanimously sustained the demur- 
rer ; and this, apparently, on three grounds: (i) That there was 
no precedent for such an action. (2) By reason of the inconvenience 
resulting from the multiplicity of actions for contribution to which 
a recovery and levying of the judgment upon the inhabitants of the 
county would give rise ; and, (3) That the county of Devon had no 
fund out of which satisfaction could be made. And this last reason, 
it seems to us, applies with great weight to the case in hand. It is 
true, counties in Ohio have a treasuiy, and in it various funds. But 
those funds are all raised for specific purposes ; to those purposes they 
must be devoted ; the commissioners are authorized to levy no tax, ex- 
cept for such purposes as are authorized by statute ; and we have 
no statute authorizing the levy of a tax to satisfy such a judgment as 
this. And in Boalt v. Commissioners of Williams County, before 
cited, it was decided that a bill in chancery would not lie against a 
county to subject equities, and, in the opinion of the court in that 
case, it is assumed, arguendo^ as indisputable, that county bridges, 
court-house, public offices, jail or poor-house, can not be sold on exe- 
cution at law. 

In Riddle v. The Proprietors of the Locks and Canals on Merri- 
mack River, 7 Mass. Rep.. 169,^ Parsons, C. J., delivering the opin- 
ion of the court, clearly lays down the principle on which we proceed. 
He says : "We distinguish between proper aggregate corporations, and 
the inhabitants of any district who are by statute invested with particular 
powers without their consent. These are in the books sometimes called 
quasi corporations. Of this description are counties and hundreds in 

' f^'nra, p. 47. 



220 THE BOARD, ETC., V. MIGHELS. §40 

England ; and counties, towns, etc., in this state. Although quasi cor- 
porations are liable to information or indictment, for a neglect of 
public duty, imposed on them by law ; yet it is settled in the case of 
Russell et al. v. Inhabitants of the County of Devon, that no private 
action can be maintained against them for a breach of their corporate 
duty, unless such action be given by statute. And the sound reason is 
that having no corporate fund and no legal means of obtaining one, 
each corporator is liable to satisfy any judgment rendered against the 
corporation. This burden the common law will not impose, but in 
cases where the statute is an authority, to which every man must be 
considered as assenting. But in regular corporations, which hav'e, or 
are supposed to have, a corporate fund, this reason does not apply." 

The same doctrine is asserted by the same court in Mower v. In- 
habitants of Leicester, 9 Mass. Rep. 247 ; and is recognized as settled 
law by Angell & Ames on Corporations, section 630, note. So in 
South Carolina, 2 Nott & McCord 537 ; Young v. Commissioners of 
the Roads; and White v. City Council, 2 Hill's Rep. 571. So in 
Connecticut, Ward v. The County of Hartford, 12 Conn. 404. The 
case of the Freeholders of Sussex County v. Strader, 3 Harr. N. J. 
Rep. 158, before alluded to, was an action broughtby Strader against 
the county of Sussex, New Jersey, to recover damages for an injury 
to a team of the plaintiff, on account of a defect in a public bridge 
which the chosen freeholders of the county were bound to keep in 
repair. In that case the court not only sustain the doctrine and dis- 
tinction laid down "in the Men of Devon, and by Chief Justice Parsons 
in 7th Mass. ; but Chief Justice Hornblower, in delivering his opinion, 
supposes, and remarks upon almost the very case before us. He says : 
"It is the duty, for instance, of the board of freeholders, to erect and 
keep in repair court-houses and jails ; a neglect to do so may occasion 
great inconvenience, perhaps positive loss or injury, to some individual 
whose business or duty requires his attendance at court ; the building, 
by being old and out of repair, may give way, and break a man's 
limbs, or occasion him an injury in some other way, but no one will 
pretend that in such a case an action would lie by the person injured 
against the county." 

The same doctrine was recognized and applied in Illinois, in Hedges 
V. The County of Madison, i Oilman's Rep. 567, by the supreme 
court of the United States in Fowle v. Common Council of Alexan- 
dria, 3 Peters 409, and is also applied and strongly urged and approved 
by the supreme court of New York in the able opinion of Selden, 
J., in Morey v. The Town of Newfane, 8 Barb. S. C. Rep. 645. 

It is undoubtedly competent for the legislature to make the people 
of a county liable for the official delinquencies of the county commis- 
sioners, and, if they think it wise and just, without any power in the 
people to control the acts of the commissioners, or to exact indemnity 
from them ; but this has not yet been done, and we think that such lia- 
bility can not be derived from the relation of the parties either on the 
principles or the precedents of the common law. 

In conclusion, and at the risk of the penalties of tautology, I repeat, 



§ 41 PUBLIC, QUASI-PUBLIC AND PRIVATE CORPORATIONS. 221 

that while, both upon principle and authority, we find ourselves com- 
pelled to overrule the case of The Commissioners of Brown County 
V. Butt, as having been erroneously decided, we do so with extreme 
reluctance, and with all respect for the judgment and veneration for 
the memory of the judges who decided it, but, with our convictions, 
we could not do otherwise, and, in overruling it, we are satisfied we 
are contributing to place the law of Ohio upon a footing of sound 
principle, as well as in harmony with that of other states whose juris- 
prudence, like our own, rests on the basis of common law. 

Judgment reversed. 

Bartley, C. J., and Swan, Bowen and Scott, JJ., concurred. 

Note. 1816, Rumford School District v. Wood, 13 Mass. 193 ; 1823, Todd v. 
Birdsall, 1 Cowen (N. Y.) 260; 1834, Andrews v. Estes, 11 Maine 267, 26 Am. 
Dec. 521 ; 1835, McLoud v. Selby, 10 Conn. 390, 27 Am. Dec. 689; 1837, Chase 
v. Merrimac Bank, 19 Pick. (Mass.) 564, 31 Am. Dec. 163; 1841, Connell v. 
Woodward, 5 How. (Miss.) 665, 37 Am. Dec. 173; 1843, Gaskill v. Dudley, ft 
Met. (Mass.) 546, 39 Am. Dec. 750; 1873, Whitney v. Stow, 111 Mass. 368; 
1878, Talbot Co. v. Queen Anne Co., 50 Md. 245. Joint stock companies are 
sometimes called private quasi corporations, i. e., they have some of the feat- 
ures of corporations, but not all. Morawetz Corp., § 6, and cases cited. 
See case cited supra, p. 110. 



Sec. 41. {c) Corporations in their relation to the state are: 

1. Purely public. 

2. Quasi-Fuhlic. 

3. Private. 

THE BANK OF THE STATE OF SOUTH CAROLINA v. GIBBS, 

Executor. 

1825. In the Court of Appeals of South Carolina. 3 McCord 
(S. Car.) Reports *377. 

The question in this case was, whether a simple contract debt due 
to the Bank of the State of South Carolina was a debt due to the 
public, within the provisions of the executor's act (Pub. Laws, 494), 
and as such entitled to a preference, as a public debt. 

NoTT, J. — The act of the legislature, upon the construction of 
■which the decision of this case depends, directing the order in which 
the debts due by a testator or intestate shall be paid, provides, "that 
the funeral and other expenses of the last sickness, charges of probate 
of the will, or of letters of administration, shall be first paid ; next, 
debts due to the public," etc. 

The question now is, whether the debt in this case is in the sense 
of the act a debt due to the public. There is nothing on the face of 
the proceedings which will authorize us to view it in that light, for we 
must look beyond the case itself to see that the state has any interest 
in it. It is not then a debt due to the public ; but it is due to the cor- 
poration, though the money, when received, may be for the use of 
the state. In the case of the United States Bank against the Planters' 
Bank of Georgia (9 Wheat. 907), Chief Justice Marshall, who de- 



222 M'KIM V. ODOM. § 42 

livered the opinion of the court, said: "The suit is against a corpo- 
ration, and the judgment is to be satisfied by the property of the cor- 
poration and not by that of the corporators. The state does not, by 
becoming a corporator, identify itself with the corporation. The 
Planters' Bank of Georgia is not the state of Georgia, although 
the state holds an interest in it. It is," he says, "a sound principle, 
that when a government becomes a partner in a trading company, it 
divests itself, so far as concerns the transactions of that company, of 
its sovereign character, and takes that of a private citizen." I can 
not distinguish that case from the one now under consideration. It is 
true, the state of Georgia held but a part of the interest in that bank, 
and the state of South Carolina owns the whole in this. But, never- 
theless, we may, with truth, say, in the language of that opinion, the 
Bank of the State of South Carolina is not the state of South Caro- 
lina ; it is only a corporation created for particular purposes, possess- 
ing the same powers and privileges of other corporations, and no 
more. The state did not transfer any portion of its sovereignty to 
this corporation, nor communicate to it any of its privileges or prerog- 
atives, but has placed it on the same level with other corporate bodies, 
with the same privilege of suing, and liability of being sued, as an in- 
cident to such corporations. I am of opinion, therefore, that the 
same principle by which the case referred to was governed is appli- 
cable to this case, and that the bank is not entitled to any such prefer- 
ence as is contended for — and that is the opinion of the court. 
The motion is therefore refused. 

Note. See cases cited to People v. Morris, infra, pp. 229, 234. 

Sec. 42. Same. 

McKIM v. ODOM.i 

1831, In the High Court of Chancery of Maryland. 3 Bland 
Chancery (Md.) 407-433. 

[This bill was filed on the 23d of June, 1827, by William S. Moore 
and John McKim, Jr., John Odom, George Law, William G. Har- 
rison, William F. Anderson and the president and directors of the 
Franklin Bank of Baltimore. The bill states that the plaintiff, Moore, 
and the defendant, Odom, being joint and equal owners of the 
schooner Beauty, sent her on a voyage from Baltimore to Montevideo, 
under Odom as master ; that, for the better management of the con- 
cerns of their vessel, they employed the defendants, Law & Harrison, 
then partners in trade, as her ship's husband ; that it was agreed by 
these owners, before their vessel sailed, that she might be sold, and 
she was sold accordingly, at Montevideo, for about $12,000; and 
there were remitted in specie, by the United States ship Cyane, as a 
part of the proceeds of sale, about $9,000, with a bill of lading for 

* Statement of facts abridged. Arguments omitted ; much of the opinion 
omitted. 



§ 42 PUBLIC, QUASI-PUBLIC AND PRIVATE CORPORATIONS. 223 

the defendant Law; that on the loth of April, 1826, the plaintiff 
Moore assigned all his interest in the schooner and her earnings to the 
plaintiff IVfcKim, of which Law was duly notified ; that afterward and 
immediately on the arrival of the ship Cyane, the defendant Law, by 
means of his bill of lading, obtained possession of the specie remitted, 
had it exchanged in Philadelphia, and thence transmitted to Baltimore, 
where he had the greater part of it deposited in the Franklin Bank, 
in the name of the defendant Anderson, in trust for his. Law's, use; 
that the object of the defendant Law in withholding, and thus secretly 
depositing the proceeds of sale, was fraudulently to compel the 
plaintiff McKim to submit to certain unjust and improper charges, 
which he. Law, as ship's husband, claimed a right to have allowed 
and deducted from those proceeds. Upon which the plaintiffs prayed 
relief and an injunction to stay the money so deposited in the hands 
of the bank. An injunction was granted accordingly. 

On the 1 2th of December, 1828, the plaintiffs, by their petition, 
stated that the president and directors of the Franklin Bank of Balti- 
more had been regularly returned summoned, and had refused to 
answer the amended bill, whereupon the plaintiffs prayed that a 
distringas might be issued against that corporation.] 

Bland, Chancellor. * * « xhe mode of proceeding against 
contumacious natural persons, who neglect or refuse to answer, is w^ell 
established and sufficiently energetic, but the course of proceeding for 
that purpose against artificial bodies or corporations is different, more 
feeble and much more tardy, there being no legislative provision for 
enforcing an appearance or answer from such defendants. 

So far as I have been able to ascertain, this is the first instance of 
an application to this court for coercive process against a body politic. 
Coi"porations have latterly become very numerous, and new ones are 
created at almost every session of the legislature ; the matter now sub- 
mitted for determination, therefore, has an importance much above 
the interests of the case out of which it arises, and requires to be care- 
fully considered with a view to the course of proceeding in future. 

Under the provincial government corporations were framed and called 
into existence, as in England, either directly by or with the immedi- 
ate sanction of the lord proprietary or the monarch. But, however 
they may have been originated formerly or elsewhere, it is certain 
that they can now only be established here by the authority of the 
legislature. The multitude of bodies politic that have been created 
either by the government of the province or of the republic, most of 
which still subsist, may be considered, in reference to their objects, as 
belonging to one or other of three distinct classes. 

[Public] The first kind are such as relate merely to the public police, 
which, by assuming upon themselves some of the duties of the state, 
in a partial or detailed form, and having neither power nor property 
for the purposes of personal aggrandizement, can be considered in no 
other light than as the auxiliaries of the government of the Republic; 
and consequently, as the secondary and deputy trustees and servants 
of the people. The right to establish, alter or abolish such corpora- 



224 M'KIM V. ODOM. § 42 

tions seems to be a principle evidently inherent in the very nature of 
the institutions themselves, since all mere municipal regulations 
must, from the nature of things, be subject to the absolute control of 
the government. These institutions, being, in their nature, the auxil- 
iaries of the government in the great business of municipal rule, can 
not have the least pretention to sustain their privileges, or their exist- 
ence, upon any thing like a contract between them and the govern- 
ment, because there can be no reciprocity of stipulation, and because 
their objects and duties are incompatible with everything of the na- 
ture of such a compact. 

The power of acquiring and holding property, although almost 
always given, is by no means a necessary incident to corporations of 
this class; they may be established without any such capacity; as 
in the instance of the commissioners for emitting bills of credit.^ 
The preservation of morals, and the administration of justice are the 
chief ends for which government has been instituted ; and infancy, 
insanity, infirmity and helpless poverty have an undoubted claim 
upon the protecting care of the republic.'^ Bodies politic of this 
class, having these objects in view, are city corporations;* levy 
courts;* county schools for the provincial or state government;* 
public colleges;® hospitals;^ trustees of the poor of several coun- 
ties,* etc. 

[Private.] The second class of corporations are such as have no con- 
cern whatever with the duties of the republic; nor in any manner 
bound to perform any acts for its benefit ; but whose only object is 
the personal emolument of its members. The corporators in such in- 
stitution may also, in some sense, be considered as trustees ; but then, 
even in that character, they are the mere factors of individuals ; and, 
therefore, their resignation or removal can not divest or alter any of the 
rights of the individuals they represented. Each member of such an 
aggregation either was a proprietor at the commencement, or became 
so during the existence of its incorporation ; and consequently, unless 
he has aliened his right, must continue to be so after its dissolution. 
A corporation not being, like a natural person, one of the elements of 
society, of which government is formed, can only be considered as a 
creature of the law. It is the law alone which gives to it a personality 
distinctfrom that of each of its members, and confers on it the right to 
act by its president, directors, or agents, in a manner analogous to 
that in which the government itself acts by its regularly constituted 
functionaries. This individuality of character, and the right so to 
act is, then, nothing more than a portion of the power of the govern- 
ment with which it has been invested. It is this power which is given 
by the creation of a body politic, and which, by its extinguishment, is 
resumed, and nothing more ; the rights of property vested in its 

1 1769, ch. 14, § 6. 5 1696. ch. 17 ; 1723, ch. 19. 

•Montesq. Sp. Laws, b. 23, ch. 29. « April, 1782, ch. 8. 

•1708, ch. 7; 1796, ch. 68. '1797, ch. 102; 1816, ch. 156. 

« 1804, ch. 73. « 1768, ch. 29 ; 1786, ch. 15. 



§ 42 PUBLIC, QUASI-PUBLIC AND PRIVATE CORPORATIONS. 22$ 

several members, in all other respects, remain unaffe-ted by its dis- 
solution. 

It is remarkable that there is no instance of the creation of any 
body politic of this description under the provincial government; but 
since the establishment of the republic they have increased and multi- 
plied to a very large and still rapidly growing family. The examples 
of this class of corporations are the insurance companies;^ the Free 
Mason societies ; ^ the banks;* the manufacturing companies;* the 
library companies,* etc. 

[Quasi-public] The third species of corporations partake, in many 
respects, of the nature of the first two classes; and are such as have a 
concern with some of the expensive duties of the state, the trouble and 
charge of which are undertaken and defrayed by them,- in considera- 
tion of a certain emolument allowed and secured to their members. 
In cases of this kind there is certainly many of the material features 
of a contract between the government and the corporation ; there is 
manifestly a quid ■pro quo. But this contract, if it be so, is, and of ne- 
cessity must be, like all others to which a government or state is a 
party, one of imperfect obligation as regards the state;® and, as such, 
subject to be dealt with by the government of the state as the public good 
may require, on making a just compensation for any private property 
which maybe taken for a public use. No bodies politic of this descrip- 
tion were ever created under the provincial government ; but since our 
independence, a great number of them have been called into existence ; 
such as canal companies;' bridge companies;* turnpike road com- 
panies;® etc. 

In regard to the Irrepealable nature of an act of ineorporation, it may 
be well not only to bear in mind the distinctions as explained above in 
the text, according to which it is quite obvious that at least two out of 
the three kinds of corporations, there described, may be modified or re- 
pealed at the pleasure of the legislature, without the slightest interference 
with the rights of private property of any kind, but that there must also 
be a variety of cases in which corporations of the third class, such as turn- 
pike roads, may have their stock, even considering it as private property, in- 
definitely depreciated, or, in effect, totally annihilated, without, in the opin- 
ion of any one, giving rise to a claim for compensation, as in cases where 
mere private property is taken, by virtue of the government's power of emi- 
nent domain, for public use. Without going into an argument, it will be suflB- 
cient to state a case which has occurred. By the act of 1812, chapter 78, the 
legislature incorporated a company for making a turnpike road from Balti- 
more to Washington ; under which the road was made, and the stock yielded 
a considerable dividend annually. After which the legislature, by the act of 
1830, chapter 158, authorized the construction of a railroad between the same 
cities, and nearly parallel with the turnpike road, which was accordingly put 
in operation. In consequence of which the annual dividends on the rtock of 

» April, 1787, ch, 20. 

* 1821, ch. 147. 

* 1790, ch. 5. 

* 1808, ch. 49. 
« 1797, ch. 36. 

* Vattel Law Nation, Prelim., § 17. 
' November, 1783, ch. 23. 

«1795, ch. 62. 
9 1797. ch. 65. 

16 — WiL. Casks. 



226 M'KIM V. ODOM. § 42 

The right and capacity to sue and be sued is an incident to bodies 
politic of all descriptions ; ^ even to those which have been incor- 
porated by and are located in another state or in a foreign country.^ 
It is held to be incumbent upon every body politic, not being incor- 
porated by a public law of which the court is bound to take notice, 
which comes into a court of justice as a plaintiff, if required, even 
upon the general issue only being pleaded, to show the authority 
under which it has assumed to act as a corporation.* When 
called on as a defendant its corporate capacity is thus admitted, and 
it appears by attorney and responds under its seal, or in the manner 
specially prescribed to it.* But there is no legislative enactment 
which directs in what mode a corporation of any kind may be com- 
pelled to answer in case it should neglect or refuse to do so. 

It is admitted on all hands that in a suit against a corporation none 
of its members can be taken or personally punished, except, perhaps, 
as a last resort, on account of any contumacy in their corporate 
capacity. The only mode of proceeding, either to enforce an answer 
or obedience to a decree, is by a distringas and sequestration of 
the property of the body politic.^ The state itself is regarded 
in many respects as a mere body politic;^ and in the various 
instances where it becomes necessary to have it made a party to 
the litigation, it is represented by its attorney-general ; in which cases 
the course of the court merely allows that he should be attended with 
a copy of the bill ; but he can not be forced to answer in any manner 
whatever;' and therefore, if the bill can not be taken fro confesso 
against the state,* the further progress of the case must await his 
good pleasure. 

Eveiy corporation is and must be composed of, and conducted by, 
natural persons ; yet the distinction between the natural and artificial 
capacities and liabilities of its members has been drawn in such a man- 
ner as to create the most serious inconvenience. A body politic, it 
has been quaintly said, has no soul ; and therefore can not be called on 
to answer under the obligation of an oath by which a natural person 
may be bound. ^ To avoid this difficulty the court of chancery has 

the turnpike road have been very materially diminished. Carrie v. The Mu- 
tual Assurance Society, 4 Hen. & Mun. 315. 
» 1 Blac. Com. 475. 

* 1 Blac. Com. 385; 4 Com. Dig. 487; Henriques v. Dutch West India Com- 
panv, 2 Ld. Raym. 1532; The National Bank of St. Charles v. De Bernales, 
11 Com. Law Rep. 475. 

' 4 Com. Dig. 487 ; McMechen v. The Mayor of Baltimore, 2 H. & J. 41 ; 
Agnew v. The Bank of Gettysburg, 2 H. & G. 479. 

* 1804, ch. 73, § 6. 

^Bac. Abr. tit. Corporations, E. 2; Lynch v. The Mechanic's Bank, 13 
Johns. 127. 

« 1785, ch. 36. 

' WilUs Eq. Plea. 7. 

« 2 Mad. Pr. Chan. 335 ; 1 Fowl. Exch. Prac. 401 ; Nabob of the Carnatic v. 
The East India Companv, 1 Ves., Jun., 371; 8. c. 1 Hoven. Supp. 149. 

9 The case of Sutton's Hospital, 10 Co. 33. 



§ 42 PUBLIC, QUASI-PUBLIC AND PRIVATE CORPORATIONS. 22/ 

had recourse to a singular shift, which it is admitted rests on very 
questionable principles ; it allows the secretary, bookkeeper or some 
one or more of the chief members of the body politic to be made co- 
defendants for the express purpose of obtaining an answer on oath, 
which answer, contrary to the general rule in other cases, is received 
as evidence against the corporation itself.^ Thus allowing the 
plaintiff to select from among the corporators such one or more of 
them as he may think proper to make witnesses, and to extract from 
them only such proof as may be entirely responsive to his case. 

It is said, in one of the very respectable treatises on equity plead- 
ing, that, in the case of a corporation aggregate, where the answer is 
under the common seal, the bill must pray that a writ called a writ 
of distringas may issue under the great seal, which is for the pur- 
pose of distraining them by their goods and chattels, rents and profits, 
until they obey the summons or direction of the court.*. What is 
here said, however, as to the prayer of the bill, is certainly wrong, 
the authorities cited warrant no such assertion.^ And it has also 
been said, that a subpena is not the proper original process against a 
corporation, because it has no conscience.* This is also an error, 
for, in all cases, where a corporation is made defendant, the first and 
proper process for calling it in to appear and answer is the same as 
that used for summoning a natural person, that is, a subpena; and 
accordingly the bill prays for a subpena, and no other process.* 
The bill, it is true, must always ask for that original process which 
is suited to the nature of the case ; against natural and artificial per- 
sons a subpena is prayed for; against non-residents an order of pub- 
lication made the substitute of a subpena, is asked, and against the 
attorney-general it is prayed that he may be attended with a copy of 
the bill;* which form of prayer, as against the attorney-general, 
appears to be recognized by several acts of assembly,^ with only 
two exceptions, in which he is directed to be summoned, or served 
with a subpena.^ These prayers are indispensably necessary, be- 
cause it is an established rule, that no one is to be considered a party 
to the suit, against whom no process or publication is prayed and 
served with it, or the publication made.* 

If the body politic neglects or refuses to appear as required by the 
subpena which has been served on the mayor, president or any director 
or manager, or other officer, then the next process is a distringas , the 

* Fenton v. Hughes, 7 Ves. 289; Dummer v. Corporation of Chippenham, 
14 Ves. 253. 

« Coop. PI. Eq. 16. 

'Harvey v. East India Company, 2 Vem. 395; s. c. Prec. Cha. 128. 

* Com. Dig. tit. Franchises, F. 19. 

« Willis Eq. Plea. 8 ; Lowten v. The Mayor of Colchester, 2 Meriv. 396. 

8 Willis Eq. Plea. 7; 2 Mad. Pra. Chan. 202. 

' 1785, ch. 72, 8. 29, and eh. 78, s. 1 ; April, 1787, oh. 30, s. 4; 1799, eh. 79, 
S. 7. 

8 1786, ch. 49, 8. 8 ; 1794, ch. 60, s. 6. 

'Windsor v. Windsor, 2 Dick. 707; Reilly v. Ward, 5 Bro. P. C. 495; 
Lingan v. Henderson, 1 Bland 245, 



228 M'KIM V. ODOM. § 42 

form of which writ is substantially the same at law as in equity.^ 
By this writ the sheriff is commanded to make a distress upon the 
lands and tenements, goods and chattels of the corporation ; and it is 
indorsed thus: "By the court at the suit of A. B. for want of an ap- 
pearance (or answer, as the case may be)." But in England upon the 
first writ the sheriff generally levies forty shillings issues ; upon the 
alias distringas^ four pounds ; on the -pluries distringas he levies the 
whole property ; and on the return of the pluries a sequestration is 
granted.^ Thus far there appears to be not the slightest difference 
to be found in the books, either as to the form of the process, or in 
reference to the character of the corporation to be affected by it. 

I can, therefore, feel myself at liberty to make no other alteration 
than to settle the amount in reference to the present value of money, 
and to declare, that upon the first distringas to compel an appearance 
or answer, the sheriff shall take issues or personal property of the 
corporation, to the amount of twenty dollars ; and upon the alias dis- 
tringas he shall levy forty dollars ; and on the pluries distringas he 
shall distrain the whole of the personal estate, together with the rents 
and profits of the lands. ^ 

If it shall be ascertained by the return of all these successive writs 
that the corporation has no property upon which a distringas may be 
levied, or which can be taken under a sequestration, then the bill may 
be taken pro confosso^ and the plaintiff may obtain relief accord- 
ingly;* or if, having no property, or after all its property has 
been sequestered, it still stands out, and refuses to appear and answer, 
then, according to what seems to be the better and more reasonable 
opinion, the plaintiff may have an attachment against the members, 
or, at least, those of them who have been duly summoned, or served 
with the subpena^ and thus notified of the institution of the suit.* 

If, after a decree, the corporation neglects to comply therewith, 
upon being served with a copy of it according to the ancient 
practice,® as recognized by the act of assembly,^ now dis- 
pensed with,* the plaintiff may obtain a distringas to enforce 
obedience to it, and after the return of the first writ of distringas he 
may have a sequestration,^ and if the sheriff returns that the body 
politic has nothing upon which the distringas can be levied, then the 
members of the corporation may be attached, or such other proceed- 
ings had according to the nature of the case, and having proper re- 

»2 Harr. Ent. 674; 1 Harri. Pra. Chan. 264; 1832, ch. 306, s. 5. 

« 1 Harr. Prac. Chan. 264. 

' East India Company's case, 1 Salk. 191. 

* Salmon v. The Hamborough Company, 1 Ca. Chan. 204 ; Curson v. African 
Company, 1 Vern. 121. 

* Rex V. Gardner, Cowp. 86; London v. Lynn, 1 H. Blac. 206. 
6 2 Mad. Pr. Chan. 466. 

' 1785, ch. 72, s. 25. 
8 1818, ch. 193, S.4. 

' Harvey v. East India Company, 2 Vern. 395; 8. c. Prec. Chan. 129; Com, 
Dig. tit. Franchises, F. 19. 



■§ 43 PUBLIC AND PRIVATE CORPORATIONS. 229 

gard to the extent of the liability of the members of the body politic 
as may be deemed proper and lawful.^ 

Whereupon it is ordered that a writ of distringas be issued as 
prayed by the said petition of the plaintiffs, which writ is hereby 
directed to be indorsed and levied as above prescribed. 

[Soon after the president and directors of the Franklin Bank of 
Baltimore put in their answer, and, after hearing, the bill of complaint 
was dismissed as to them.] 

(See cases cited to People v. Morris, infra, p. 234.) 

Sec. 43. Same. 

THE PEOPLE V. MORRIS.' 

1835, In the Supreme Court of New York. 13 Wendell (N.Y.) 

325-337- 

[Error from the St. Lawrence oyer and terminer. The defendant 
was tried on an indictment for selling spirituous liquors and "permit- 
ting the same to be drank in his grocery store, without having ob- 
tained a license as a tavern keeper. 

The village charter of 1824 authorized the trustees to regulate and 
"license grocers, and keepers of victualing houses, where fruit victuals 
and liquor shall be sold to be eaten or drank in such houses or grocer- 
ies." In 1830 the revised statutes went into effect and provided 
that only certain excise commissioners could grant licenses to sell 
liquors and wines to tavern and inn-keepers to be drank in their 
houses, and licenses to grocers should be granted to sell only in five- 
gallon quantities or over, but not to be drank in their houses. De- 
fendant had obtained his license from the village authorities under the 
charter, and admitted the selling in his grocery to be drank there, after 
the revised statutes went into effect.] 

By the court., Nelson, J. The defendant insists that the stat- 
ute under which he has been convicted is inoperative, upon the 
grounds, ( i ) That the power or franchise of the corporation of the 
village of Ogdensburgh to grant licenses to grocers to sell spirituous 
liquors to be drank in their houses is a vested rights and can not be 
impaired or taken away; and (2) That if .such power can be taken 
away, it can be done only by bill having the assent of two-thirds of 
the members elected to each branch of the legislature, in conformity 
to the ninth section of the seventh article of the constitution of the 
state. 

As to the first objection urged by the defendant, the only limita- 

^2 Mad. Pr. Chan. 466; Salmon v. The Hamborough Company, 1 Cha. 
Cas. 204; Adley v. The Whitestable Company, 17 Ves. 324; s. c. 1 Meriv. 107. 
^ Statement of facts abridged. Much of the opinion omitted. 



230 THE PEOPLE V. MORRIS. § 43 

tion to the powers of the legislative department that can exist must be 
found either in the constitution of the United States or of this state, 
or in the natural and inherent rights of the citizens, which they can not 
part with or be deprived of by the society to which they belong. * * 

Vested rights are indefinite terms, and of extensive signification, 
not unfrequently resorted to when no better argument exists, in cases 
neither within the reason nor spirit of the principle. Rights in one 
sense vested, that is, vested as it regards every other body or power 
except the government, are numerous, and the subject of common 
regulation and even abrogation. All general and local laws, restrain- 
ing the free action of the citizen as to person or property, the imposi- 
tion of burthens and of duties, partake more or less of this character, 
and may be referred to in illustration of the remark. Government was 
instituted for the purpose of modifying and regulating these rights with a 
view to the general good, and under the constitution the mode by which 
it was thought this great object might best be attained was left to the 
wisdom and direction of the people themselves, acting through the 
medium of their representatives. We may concede to the defendant 
that if any rights vested under the national or state constitutions, or 
others inherent and inalienable, and, therefore, also vested, have been 
violated by any provision of the revised statutes, such provision is in- 
operative and void. But if such rights have not been violated, we do 
not perceive how its penalties can be eluded. Now the defendant's 
rights are in no way improperly interfered with by the revised stat- 
utes, except so far as there may be an infraction of the corporate 
privileges of the village, because it will not be pretended that the 
right to sell spirituous liquors falls within the most extended class of 
vested rights. Nor can it be claimed that the right of any corporator, 
in his individual capacity, has been at all touched by this statute. It 
acts solely and exclusively upon the powers and privileges previously 
conferred upon the whole or aggregate body of citizens by the village 
charter. It is this power, thus previously granted to the corporation, 
which the revised statutes intended to modify, not the private rights 
of an individual member of it. 

What was the power thus conferred by the village charter ? We 
answer that it was wholly political. Instead of prescribing at their 
discretion every duty to be performed, and forbidding every act to be 
avoided, in a word, directing the whole system of government to be 
observed and executed, the legislature have merely defined the out- 
lines and leading principles, and conferred upon the inhabitants, 
within the bounds of the corporation, the power at discretion to fill 
up and carry them into operation. Strictly speaking, individual 
rights or private interests are no more involved in the arrangement 
than they are in the general laws passed with reference to the govern- 
ment of a town, a county or the state. Their rights, as citizens of the 
government, subject to its control, and to be so regulated and directed 
as to harmonize with the general good, are those and those only, 
within the contemplation of the charter. * * * 



§43 PUBLIC AND PRIVATE CORPORATIONS. 23 I 

[The constitution, article 7, section 9, provided: "The assent of 
two-thirds of the members elected to each branch of the legislature 
shall be requisite to every bill, etc., creating, continuing, altering, 
or renewing any body politic or corporate."] 

We are of the opinion the constitutional provision does not apply to 
public corporations.' That the village of Ogdensburgh is "a body 
politic and corporate," is not denied. The charter falls within the 
definition of Lord Coke and of other approved authors. "A body 
politic," he says, "is a body to take in succession, framed as to its 
capacity by policy, and therefore is called by Littleton (section 413) a 
body politic; and it is called a corporation or body corporate because 
the persons are made into a body, and are of capacity to take, grant, 
etc., by a particular name." Viner's Abr. Corp. (a2). A public 
corporation is also defined to be, "an investing the people of the 
place with the local government thereof." This latter description is 
the most appropriate, and is justified by the history of these institu- 
tions, and the nature of the powers with which they were and are in- 
vested. ♦ * * 

The fact conceded that they are "bodies politic and corporate," is 
■not, by fair reasoning, necessarily conclusive. So are towns and 
counties, for they come within one or other of the above or most ap- 
proved definitions. They possess every requisite to constitute them 
corporations, besides being declared to be so by statute, as are also 
superintendents of the poor and trustees of school districts, i R. S. 
337, 42 id. 364, 486, 617, 498. Each town, as a body corporate, has 
capacity to sue and be sued ; to purchase and hold real estate ; to 
make such contracts and hold such personal property as may be neces- 
sary to its corporate and administrative powers ; and to make such 
order for the disposition, regulation and use of its public property as 
may be conducive to the interests of the inhabitants. Large powers 
are also conferred, as has already appeared, in respect to their munic- 
ipal and domestic regulations. So in respect to superintendents of the 
poor. It is expressly declared (i R. S. 617, §16) "they shall be a 
corporation by the name of the superintendents of the poor of the 
county for which they shall be appointed, and shall possess the usual 
powers of a corporation for public purposes." Large powers are 
conferred upon them also to enable them to execute their trust, and 
especially for the "good order and government of the place and poor- 
houses belonging to the county, for the employment, relief, manage- 
ment and government of the persons placed under their care." The 
trustees elected in a town having lands belonging to it for the support 
of the gospel, or of schools, or both, "shall be a corporation for the 
purposes of their oflRce, by the name of the 'Trustees of the Gospel 
and School Lot,' " in the town in which they are elected. They shall 
have power, "besides the ordinary powers of a corporation," to man- 
age these lots, as particularly set forth in the statute, i R. S. 497, 8. 
Other cases might be referred to. That they come within the letter 
of the provision is not enough, unless the different bodies above 

' The subsequent case of Purely v. People, 4 Hill (N. Y.) 384, held that this 
constitutional provision applied to public as well as private corporations. 



232 THE PEOPLE V. MORRIS. § 43 

alluded to are also included, which probably will not be pretended; 
for, if so, most of the legislation of the state must be in conformity 
to this provision of the constitution. 

Are they within the evil this provision was designed to remedy ? 
No one, I think, acquainted with the history of the times, or with the 
introduction of this clause into the constitution, will venture upon this 
ground. It may be fortunate for truth, and what is deemed a sound 
exposition of this provision, that all who may desire to examine it can 
recur to his own recollection and challenge that of others upon this 
point. We think we hazard nothing in asserting that the multiplica- 
tion of cities or villages by the legislature has at no time been a sub- 
ject of complaint. Only Jvur of the former existed in the state at the 
adoption of the constitution. The latter, which were somewhat numer- 
ous, have always been viewed by the people of the state as a matter 
in which the inhabitants of the village were exclusively interested, and 
to be left to their option. But private incorporations had multiplied 
to an extent that had attracted public attention, especially banking in- 
stitutions. These had been sought for with zeal, and their enactment 
attended with circumstances that awakened public suspicion and 
alarm. So extreme had the evil become at one period of our history, 
that the chief magistrate of the state felt it his duty to exercise the 
power then existing in the constitution, of proroguing the legislature, 
and was triumphantly sustained by the people in the execution of this 
high and delicate trust. The fact affords strong evidence of the deep 
impression made upon the public mind as to these and similar private 
corporations, and of the scope and purpose of the clause on this sub- 
ject. If we resort to the history of its introduction into the new con- 
stitution, the above view will be confirmed. Mr. King, chairman of 
the committee of the legislative department, reported the section; and 
when it came under consideration, said that the committee had looked 
upon the multiplication of corporations as an evil; they had been 
created for a great variety of purposes ; they were exceptions to the 
common law ; they could not be proceeded against in the ordinary way 
of prosecutions against individuals in courts of justice ; they ought not 
to be increased, but should be diminished as far as could be done con- 
sistently with the preservation of vested rights. It is obvious, though 
the language used in the clause in question is general, that the honor- 
able chairman had in his mind (and he spoke for the committee) the 
case of private corporations ; that the great inducement to the adoption 
of the clause was a check upon them ; and that the organization of 
communities, and the investing them with the privileges of mere 
municipal jurisdiction and authority, were not at all in contempla- 
tion. 

The distinction between public and private corporations is strongly 
marked, and, as to all essential purposes, they correspond only in 
name. We speak of the erection of a town or a county, and the 
term would be just as appropriate when applied to cities or villages. 
They are severally political institutions, erected to be employed in the 



§43 PUBLIC AND PRIVATE CORPORATIONS. 233 

internal government of the state. There is no contract between the 
government and governed, for but one party is concerned — the public; 
and the inhabitants upon whom the powers and privileges are con- 
ferred are mere trustees, who hold and exercise such powers for the 
public good. The only interest involved is the public interest, and no 
other is concerned in their creation, continuance, alteration or renewal. 
The nature and operation of these corporations repudiate the idea of 
vested rights, and, therefore, no evil arising out of them could have 
influenced the convention. We know of no vested rights of political 
power^ in any citizen or body of citizens^ except those conferred by 
the constitution. That is our bill of rights, and is analogous to those 
granted to kingdoms or minor communities, such as towns and 
cities, by princes and superior lords on the continent, or by the crown 
of England. 

Private corporations are the private property of the corporators. 
They are designed to regulate private interests. Large investments 
are made in pursuance of their authority, and the tenure by which 
such corporate property is held is like that of an individual to his 
farm or personal estate ; and an invasion of such corporate power is 
like a violation of private right. One of the strongest reasons why 
these private corporations should be cautiously granted arises from 
the inviolability of the rights acquired under them ; for notwithstand- 
ing the reserved power in the charter to modify or repeal, an inter- 
ference seriously affecting this species of property is calculated to 
shake public confidence in the security of these corporations gener- 
ally, and might and probably would be immediately disastrous to 
the property invested under their faith, in the particular instance in 
which the legislature exercised its reserved power. This wide dis- 
tinction was well known to the members of the convention, and shows 
that the clause in the constitution may be fully satisfied by confining 
its operation to the case of private corporations. Nor can it be ad- 
mitted that it was intended to restrict the action of the legislature, in 
the municipal regulations of the state, as to one place more than an- 
other, or that less latitude was to be given to such regulations in the 
government of the citizens residing within the bounds of cities and 
villages than of those residing in towns and counties. The nature 
and object of the power exercised and the claims of those concerned, 
are alike, and it is difficult to discover any solid reason for the dis- 
tinction. All our public laws, civil and criminal, however impor- 
tant or severe their operation, enacted for the good government of 
the people throughout the state, are passed by majority votes ; and 
it would be inconceivably strange if laws passed with a view to a 
more perfect government of a particular place (laws better adapted 
to the organization of society and the business and conditions of the 
governed residing in small districts), should depend upon a different 
and greatly restricted rule of action on the part of the legislature. 

Judgment affirmed. 



234 THE STATE V. THE STANDARD LIFE ASSOCIATION. § 44 

Note. 1898, State v. Maryland Institute, etc., 87 Md. 643, 41 Atl. Rep. 126; 
1897, United States v. Trans. Mo. Frt. Assn., 166 U. S. 290, on 320-2; 1894, 
Chicago, etc., R. Co. v. Wabash, St. L., etc., R., 61 Fed. Rep. 993; 1891, 
Downing v. Ind. St. Bd. of Ag., 129 Ind. 443, 35 Am. & Eng. C. C. 216; 1890, 
Wolfe V. Underwood, 91 Ala. 523, 8 So. Rep. 774; 1889, State v. District of 
Narragansett, 16 R. I. 424, 24 Am. & Eng. C. C. 131; 1889, Appeal of Pitts- 
burgh, 123 Pa. St. 374, 25 Am. & Eng. C. C. 364; 1888, Turlock Irrigation 
Dist. V. Williams, 76 Cal. 360, 22 Am. & Eng. C. C. 198 ; 1888, Wambersie v. 
Orange Humane Soc, 84 Va. 446, 28 Am. & Eng. C. C. 83; 1885, Hockett v. 
State, 105 Ind. 250; 1883, Pierce v. Commonwealth, 104 Pa, St. 150; 1876, 
Munn V. Illinois, 94 U. S. 113; 1869, Miners' Ditch Co. v. Zellerbach, 37 Cal. 
543, 99 Am. Dec. 300; 1868, Foster v. Fowler, 60 Pa. St. 27; 1866, Commonw. 
V. Lowell Gas Co., 12 Allen (Mass.) 75 ; 1862, State of Iowa v. Wapello Co., 13 
Iowa 388, on 400-403; 1850, Mills v. Williams, 11 Ire. (N. C.) Law 558; 
1842, Inhabitants of Worcester v. Western R. Co., 4 Met. (Mass.) 564; 1841, 
Ten Eyck v. Canal Co., 18 N. J. L. 200; 1819, Dartmouth College v. Wood- 
ward, 4 Wheat. 518, infra, p. 708. 



Sec. 44. Same. (1) Private corporations, as to the method of 

acquiring or losing membership, are: 

1. Stock, or 

2, Non-stock. 

. THE STATE v. THE STANDARD LIFE ASSOCIATION.* 

1882. In the Supreme Court of Ohio. 38 Ohio State Reports 

281-299. 

[Quo Warranto : The object of this action is, to oust the defend- 
ant, a corporation organized under section 3630 of the Revised 
Statutes, from its franchise to do business, as an insurance company, 
on the co-operative or assessment plan, as authorized by said section. 
The ground alleged is misuser of its corporate privileges, and the 
exercise of rights and privileges not conferred by law. Among other 
things it is specified as grounds for the judgment of ouster, that this 
company has issued certificates of membership for the payment of 
stipulated sums of money for the member's benefit, instead of the 
benefit of his family or heirs as the law authorizes ; that it has issued 
such certificates to very aged and infirm persons without regard to 
their prospects of life ; that it has issued them for the benefit of 
cousins, sons-in-law, and other relatives who are not of the family or 
heirs of such member ; that it has delayed the approval of proofs of 
death, and making the proper assessments to pay in case of death ; 
and that it has treated others than the family or heirs as beneficiaries, 
making assessments against them, and looking to them and not to the 
member for the payment. 

' Statement of facts abridged, part of opinion omitted. 



§44 STOCK AND NON-STOCK CORPORATIONS. 235 

The answer puts in issue these allegations, and avers that the defend- 
ant is doing a business authorized by law.] 

Johnson, J. This association was incorporated September i, 1880. 
The record of the company shows that seven persons, to wit: D. R. 
Johnston, W. H. Carter, J. B. Netscher, Jerry Shank, George W. 
Cole, S. W. Anderson and John F. Wood, met on that day in Mans- 
field for the purpose, as is stated, of organizing an association "to 
furnish mutual protection and relief to its members," under section 
3630 of the Revised Statutes ; Mr. Anderson was made chairman of 
the meeting, and he thereupon presented a plan of operations, which 
was unanimously adopted. What that plan was does not appear from 
the record of the company, but is subsequently disclosed in the pro- 
ceedings and acts of the association. 

At the same meeting, those present drew up, and five of them ex- 
ecuted, articles of incorporation, which were subsequently authenticated 
and filed with the secretary of state, under which they became a body 
corporate. 

Before adjourning, and, of course, before they had become incor- 
porated, these seven persons proceeded to elect themselves "officers 
and trustees" of the association for one year, giving to each an office, 
and also appointed an executive committee from among themselves. 
It appears that by-laws were also adopted, but the record of the trus- 
tees is silent as to their provisions. This record and the books of the 
association show they proceeded to transact business as a corporation 
soon after. 

The certificate of corporation, after stating the name and place of 
business, states the purpose of the association to be "to receive 
money, either by voluntary donation or contribution, or to collect the 
same by assessment of its members, and to distribute and appropriate 
the same to the families or heirs of its deceased members, in such 
manner as may be prescribed by the rules and regulations of the asso- 
ciation, not inconsistent with the laws of Ohio, and so as to carry out 
the objects and purposes of the association as above expressed." The 
section of the Revised Statutes authorizing such a corporation is as 
follows : 

"Section 3630. A company or association may be organized for 
the mutual protection and relief of its members, and for the pay- 
ment of stipulated sums of money to the families or heirs of the de- 
ceased members of such company or association, and may receive 
money, either by voluntary donation or contribution, or collect the 
same by assessment on its members, and may distribute, invest and 
appropriate the same in such manner as it may deem proper; but the 
aggregate sum stipulated to be paid to the family or heirs of any 
member at his decease shall in no case excfeed $7,000, nor shall any 
assessment on account of the death of any member be made against 
any surviving member exceeding one-fifth of one per centum stipu- 
lated to be paid to such survivor at his decease, and such association 
shall not be subject to the preceding sections of this chapter." 



236 THE STATE V. THE STANDARD LIFE ASSOCIATION. § 44 

It will be noticed that this section authorizes such corporation for 
the mutual protection and relief of its members, and also for the pay- 
ment of stipulated sums of money to the family or heirs of the de- 
ceased members. The certificate of incorporation is silent as to 
furnishing mutual protection and relief to members. It limits the 
scheme, so far as relief is concerned, to the distribution of its funds to 
the family or heirs of deceased members. 

It does not purport, therefore, to afford any relief or protection to 
its members, but only to provide for their family or heirs after their 
decease. It is in no sense, therefore, according to the charter, a mutual 
aid association to members, but a mutual insurance company of 
members, for the benefit of the family or heirs of members. 

It has issued what are termed certificates of membership, but the 
real nature of the contract is that of insurance. 

The so-called member, for in fact he is not treated as a member of 
the corporate body, contracts to pay an admission fee, and annual 
dues of specified amounts, and a stated assessment for each death in 
the class to which he belongs, in consideration of which the company 
agrees to pay his beneficiary named the assessment collected (less the 
deductions stated hereafter), not exceeding the amount of insurance 
named in the certificate, which is either $2,000 or $3,000. 

In Commonwealth v. Wetherbe, 105 Mass. 149, it was held, that 
such a contract was one of insurance, whatever be the terms of pay- 
ment of the consideration by the assured, or the mode of payment of 
the sum to be paid in the event of loss, and although the object of the 
insurer, in making the contract, is benevolent and not speculative. 

It was further held in that case that it was none the less a contract 
of mutual insurance because the amount to be paid is not a gross sum, 
but one graduated by the number of members, nor because a por- 
tion of the premiums are to be paid upon uncertain periods of the 
death of members, nor because in case of non-payment of assessments 
the contract provides no mode of enforcing payment thereof but 
merely declares the contract forfeited. 

From the specific terms of the charter, as well as from the tenor of 
certificates of membership, the contract entered into is one of insur- 
ance on the lives of members, and not one for the mutual protection 
and relief of its members. 

Whether it is competent to become a corporation for that single 
purpose when the statute authorizes such corporations for the double 
purpose of mutual protection and relief of its members, and also for 
life insurance for the benefit of the family or heirs of such members, 
is a question we need not now stop to answer, as the petition admits 
that the association was duly incorporated. 

Section 3630 provides, however, that these corporations shall not 
be subject to the preceding sections of the chapter, relating to life 
insurance companies "on the mutual or stock plan." Chapter 10, 
sections 3587 to 3629, Revised Statutes. 

This leads to the inquiry, to what extent they are regulated by law, 



§ 44 STOCK AND NON-STOCK CORPORATIONS. 23/ 

and to what extent such associations may adopt their own rules and 
regulations ? 

Though not subject to the provisions relating to life insurance in 
chapter lo, they are subject to the general provisions relating to cor- 
porations found in chapter i of title 1 1 of the Revised Statutes. 

That chapter provides for two classes of corporations, (i) those for 
frojit^ which must have a capital stock, and (2) those not for profit, 
which need not have a capital stock. 

If it is of the first kind, its name must begin with "The," and end 
with "Company," and in each kind the place of business and purpose 
for which it is formed must be stated in the certificate. R. S., sec- 
tion 3226. By section 3240 a majority of the subscribers to the arti- 
cles of incorporation of a corporation, other than for profit, may elect 
not less than five trustees, who shall hold their offices until the next 
election, or until their successors are elected and qualified. In the 
case at bar, the incorporators elected seven trustees for one year. 

By section 3246, unless the regulations otherwise provide, the annual 
election for trustees or directors shall be held (this section applies as 
well to corporations not for profit as those for profit) on the first 
Monday in January of each year. It further contemplates that the 
elective body consists of the "members" of the corporation in those 
not for profit, and the "stockholders," in those for profit. 

Section 3249 provides that every corporation may adopt a code of 
regulations for its government, not inconsistent with the laws of the 
state. 

Section 3250 authorizes the trustees or directors of a corporation to 
adopt a code of by-laws for their government not inconsistent with 
the regulations of the corporation, or the constitution and laws of the 
state, and may change them at pleasure, but section 3251 requires that 
regulations may be adopted or changed by the assent in writing of two- 
thirds of the stockholders, or, if there is no capital stock, of the mem- 
bers, or by a majority of the stockholders or members, at a meeting 
held for that purpose, of which due notice is given. 

By section 3252, a corporation, by its regulations, when no other 
provision is especially made in this title, may provide, first, for the 
time, place, etc., of meetings; second, the number of stockholders or 
membeis to make a quorum; third, the time for the election of trus- 
tees or directors; fourth, the duties and compensation of officers; 
fifth, the mode of fillirg and tenure of all offices other than trustees 
or directors ; and, sixth, the qualification of members when the corpo- 
ration is not for profit. 

By section 3261, the trustees of corporations, other than for profit, 
are made personally liable for all debts by them contracted. 

These are the chief provisions of the statute relating to corporations 
other than for profit. 

We are of opinion ( i ) That associations incorporated for the pur- 
poses named in section 3630 are corporations other than for profit, 



238 THE STATE V. THE STANDARD LIFE ASSOCIATION. § 44 

and hence any plan or scheme which is intended to earn profits for its 
trustees, managers or agents, is in violation of law. 

(2) That the members of such a corporation, and not the incorpo- 
rators nor the first board of trustees, elected by them, are the elective 
body. These members, and not the trustees or incorporators, are au- 
thorized to elect trustees, and adopt regulations for the government 
of the corporation in the transaction of its business. Hence the trus- 
tees are the chosen agents of the members. They have no authority 
to adopt or alter regulations, nor to prescribe their terms of office, 
though they may make by-laws for their government and change them 
at pleasure. 

The facts in this case show that this association has been organized 
and is doing business in direct violation of these provisions of law. 

I. The members of the corporation have had no voice in the elec- 
tion of trustees or in the management of its affairs. The incorporators, 
at the first meeting to organize, elected themselves trustees for one 
year. At the end of that year these same trustees re-elected them- 
selves; the meeting, as the record shows, was the annual meeting of 
the trustees, and all being present. 

On January 25, 1882, they adopted a new code of "by-laws, rules 
and regulations," by which they provided that they should hold office 
during life^ and in case of vacancy by death or resignation, or re- 
moval for good cause, which could be done by a majority vote, such 
vacancy should be filled by the remaining trustees. Thus they arro- 
gated to themselves all authority. They made regulations, and con- 
ducted the whole businesss on the theory that the members had no 
voice. They were under no obligations to become members, and 
most of them were not. 

They thus became a perpetual body, invested with all the franchises 
and powers which the statute vested in the members. 

II. The plan upon which the business has been done, was to make 
money for these trustees and their agents. 

These self-constituted trustees clothed themselves with supreme 
and perpetual power, and then proceeded to manage this self-imposed 
trust for their own interest, and at the expense of their over-confiding 
members, or their speculative beneficiaries. I am aware this is a 
serious charge, but it is not made without the most convincing evi- 
dence, taken from the books and papers of the company. * * « 

This is not the case of exceptional excess of corporate power. 
The whole plan of operations, and their practical exemplification, 
manifest a carefully formed purpose to make money for the trustees. 
It is a speculative insurance company, in a most objectionable form. 
To prolong its existence and thus enable the trustees to continue in 
such business, would be a failure of duty on the part of the court. 

Judgment of ouster. 

Okky, C. J., took no part in the decision of this case. 

Note. 1868, Union Insurance Co. v. Hoge, 21 How. (62 IT. S.) 35; 1871, 
Bryant v. Ohio Dental College, 1 Cin. Sup. Ct. Rep. (Ohio) 67, 307 ; 1887, 



§ 45 CORPORATIONS DE JURE. 239 

Ohio College of Dental Surgery v. Rosenthal, 45 Ohio St. 183; 1889, Crawford 
V. Gross (Pa. Com. PI.), 7 Pa. Co. Ct. Rep. 419, 7 R. & Corp. L. J. 123. See 
beJow, The Corporate Funds, p. 7G0; Lindley's rurtnershij), vol. 1, p. 5, etseq. ; 
"Stoct, Its Nature and Transfer,'*" by Henry Budd, Jr., "7" So. Law Rev. 430. 
It seems that originally the idea of a stock company was one in which each 
member traded on his individual stock, but in accordance with rules laid 
down by the company. The East India Company, incorporated in 1600, was 
of this character originally — each voyage to the East Indies was on a separate 
joint-stock, to which each member, if he wished, might contribute such sum 
as he chose ; each took shares in each voyage, as had been the immemorial 
shipping customs of merchants. But in 1612 it was determined by the com- 
pany that it would have one joint-stock — the aggregate of the subscriptions of 
the members — all to be managed by the governor and directors of the com- 
pany. Most of the trading companies afterward were either organized upon 
or changed to this plan. See Cunningham's Growth of Eng. Indus., Modern 
Times, pp. 124, 162, 225. In 1731 the colony of Connecticut incorporated the 
New London Society for Trade and Commerce United, with a capital stock to 
be controlled by members voting in proportion to their shares. 



Sec. 45. Same. (2) Private corporations, as to the perfection 
of their organization, are : 

1. De jure. 

2. De facto. 

3. By estoppel. 

CAPPS & McCREARY v. HASTINGS PROSPECTING COMPANY.» 

1894. In the Supreme Court of Nebraska. 40 Nebraska Re- 
ports, 470-478. 

Error from district court of Adams county. 

Ragan, C. J. The Hastings Prospecting Company sued Lucius J. 
Capps and Willis P. McCreary, co-partners, doing business under 
the name, firm and style of Capps & McCreary, in the district court 
of Adams county, on a subscription or writing obligatory signed by 
them, in words and figures, as follows: "For the purpose of organiz- 
ing a corporation, with a capital stock of $15,000, to bore for gas, 
oil or coal, at or near the city of Hastings, Adams county, Nebraska, 
and to buy or lease the land to experiment thereon for such purposes, 
and to buy, lease or hire the necessary machinery and labor for such 
purposes, we, the undersigned, agree to subscribe and pay for the 
amount of stock set opposite our names, said stock to be paid for in 
the manner following, to wit : Ten per cent, within thirty days from 
the organization of said corporation, and the balance at the call of the 
directors; provided, that said directors shall not have power to call 
for more than 10 per cent, of said stock at any one time ; and, pro- 
vided further, that payment shall not be called for oftener than once 

* Arguments omitted. 



240 CAPPS & M'CREARY V. HASTINGS PROSPECTING CO. § 45 

a month. Names, Capps & McCreary ; number of shares, ten shares; 
dollars, $100.00." The case was tried to the court, a jury being^ 
waived, resulting in a finding and judgment in favor of the prospect- 
ing company, and Capps & McCreary bring the case here for review. 

The only errors assigned are that the finding and judgment of the 
court are contrary to the evidence and the law. The undisputed evi- 
dence in the case is that the plaintiffs in error and a number of other 
citizens signed the subscription paper quoted above ; that after the 
$15,000 of stock had been subscribed the subscribers, or some of 
them, met and elected a boai'd of directors, adopted articles of incor- 
poration, and filed a copy of the same in the office of the secretary of 
state and the original in the office of the register of deeds of Adams 
county, the county in which the principal place of business was fixed 
by the articles of association. This incorporation, or attempted in- 
corporation, occurred on the 15th day of April, 1889. The articles of 
incoi-poration were never filed in the office of the county clerk of 
Adams county. We have hei^e then the questions: First, whether 
the prospecting company failed to become, as it attempted, a corpora- 
tion de jure by neglecting to file in the office of the county clerk its 
articles of incorporation; second, and if it did, whether such default 
or failure on the part of the prospecting company is available as a de- 
fense to the plaintiffs in error.? The first inquiry which presents itself 
is as to the nature of the agreement which the plaintiffs in error signed. 
What did they promise to do ? We think a fair construction of the 
writing signed by them amounts to this : That they agreed to accept 
and pay for ten shares of the capital stock of the corporation the sub- 
scribers to the enterprise of boring for gas should organize, such pay- 
ment to be made within thirty days after such corporation should be 
organized. The next inquiry is, what is meant by the expression, 
"when the corporation shall be organized".'' It must be remembered 
that the plaintiffs in error agreed to become stockholders in the corpo- 
ration that should be formed, and a fair construction of this promise 
is that they meant to become stockholders in a corporation de jure 
and not a corporation de facto. A de jure corporation is one whose 
right to exercise a corporate function would prove invulnerable if as- 
sailed by the state in quo warranto proceedings. The plaintiffs in 
error might have been willing to invest a part of their capital towards 
a public enterprise and take their chances of the investment being re- 
munerative, if no further liability would attach to them than that of 
stockholders in a de jure corporation, when they would not have em- 
barked the same money for the same purpose in a partnership or a 
de facto corporation, where they would assume liabilities greater than 
those of stockholders in a de jure corporation. We hold, then, that 
by the subscription signed by the plaintiffs in error they promised to 
take and pay for ten shares of the capital stock of such de jure corpo- 
ration as might be formed for the purpose for which the subscription 
was made. 

Is the Hastings Prospecting Company, or has it ever been, a de jure 



§ 45 CORPORATIONS DE JURE. 24I 

corporation? It is admitted that it did not file in the office of the 
county clerk of Adams county, that being the county in which its 
articles of incorporation fixed its principal place of business, its articles 
of incorporation. Did this default prevent the Hastings Prospecting 
Company from becoming a corporation de jure? The authorities are 
not entirely in harmony on this question, but the weight of authority 
is, that where the statute requires the articles of incorporation to be 
filed with some public oflScer before the commencement by the pro- 
posed corporation of the business for which it is organized, such filing 
is a condition precedent to the right of such corporation to perform 
any corporate function ; consequently, until a compliance with the 
statute, the corporation has no valid existence as a de jure corporation. 
Morawetz, Private Corporations, section 27, says, "A substantial 
compliance with all the terms of a general incorporation law is a pre- 
requisite of the right of forming a corporation under it. Thus where 
it is provided that a certificate or articles of association, setting forth 
the purposes of the corporation about to be formed, the amount of the 
capital, and other details, shall be filed with some public officer, a 
performance of this requirement is essential ; and until it has been 
performed, the association will have no right whatever to assume cor- 
porate franchises." Cook on Stock and Stockholders, section 231, 
speaking to this same subject, says: "Occasionally, however, it 
happens that this certificate is not fully made out, as required by the 
statute, or is not filed, or some other step prescribed by law is not 
complied with. The corporation is then not duly incorporated ; and 
the state, by quo "warranto^ may oust it from its user of corporate 
franchises." In Doyle v. Mizner, 42 Mich. 332, it was ruled: "All 
private corporations must be organized under general laws, and can 
be valid only when strictly conforming to all the conditions imposed 
on their completion." The court says: "The incorporation was 
sought to be shown by asking Doyle, on cross-examination, concern- 
ing the signing of a paper purporting to be articles of incorporation 
which had been filed in the Detroit city clerk's office April 6, 1875. 
This paper was not acknowledged, and was not filed in the county 
clerk's office. * * * Xhe statute concerning manufacturing cor- 
porations expressly requires that the articles shall be 'acknowledged 
before some person authorized by the laws of this state to take 
acknowledgment of deeds.' * * ♦ That before any such corpora- 
tion shall commence business, the articles should be filed with the 
secretary of state and county clerk ; ' ' and the court held that by reason 
of the failure to acknowledge and file in the office of the county clerk 
the articles of incorporation, the association did not become a corpo- 
ration de jure. To the same effect are Stowe v. Flagg, 72 111. 397 ; 
Bigelow V. Gregory, 73 111. 197; Utley v. Union Tool Co., 11 Gray 
(Mass.) 139; Unity Ins. Co. v. Cram, 43 N. H. 636; Childs v. 
Smith, 46 N. Y. 34; Harris v. McGregor, 29 Cal. 125. 

Section 126, chapter 16, Compiled Statutes, 1893, provides: 

16— WiL. Cases. 



242 CAPPS & M'CREARY V. HASTINGS PROSPECTING CO. § 45 

"Every corporation, previous to the commencement of any business 
except its own organization, when the same is not foi'med by legisla- 
tive enactment, must adopt articles of incorporation and have them 
recorded in the office of the county clerk of the county * * * jn 
which the business is to be transacted." * * * Section 132 of 
said chapter provided: "Any corporation formed without legislative 
enactment may commence business as soon as its articles of incorpo- 
ration are filed by the county clerks of the counties as required by 
this subdivision, and shall be valid if a copy of its articles be filed in 
the office of the secretary of state, and the notice required be pub- 
lished within four months from the time of filing such articles in the 
clerk's office." These two sections of the statute, read together, 
leave little room for doubt that the filing of the articles of incorpora- 
tion in the office of the county clerk is one of the things required to 
make the corporation one de jure. To organize a corporation there 
must be subscribers to the stock ; a meeting of said subscribers, or 
some of them ; the adoption of articles of association for the govern- 
inent of the proposed corporation, and such articles must be filed in 
the office of the county clerk of the county in which is fixed the cor- 
poration's principal place of business. These sections of the statute 
quoted above were construed by this court in Abbott v. Omaha 
Smelting and Refining Co., 4 Neb. 416, and it was there said: "In 
this state the filing of articles of incorporation with the county clerk 
is a condition precedent to the existence of any corporate franchise. 
The law and the articles so filed, taken together, are considered in 
the nature of a grant from the state and constitute the charter of the 
company." A corporate franchise is a privilege, a power, aright. 
It is a very different thing from the performance of any step necessary 
to the organization. In Indianapolis Furnace and Mining Co. v. 
Herkimer, 46 Ind. 142, the question we are considering arose and 
was decided by the supreme court of Indiana, under a statute sub- 
stantially like the one we have quoted above, and the court said: 
"The signing of articles of association by parties proposing to form a 
manufacturing corporation does not create such corporation. The 
subscribers must also make, sign, and acknowledge the certificate of 
incorporation prescribed (by the statute) and must file the same in 
the recorder's office of the proper county." We think, therefore, 
that the Hastings Prospecting Company, the name of the corporation 
attempted to be organized by the subscribers who signed the subscrip- 
tion on which the plaintiffs in error are sued, is not, and has never 
been, a corporation de jure. 

Is that fact available to the plaintiffs in error as a defense to this 
suit.-* It is to be borne in mind that the plaintiffs in error did not sub- 
scribe for the stock of any corporation, €\\}i\Qr de facto ox de jure, then 
in existence ; and there is a distinction as to the liability of parties for 
subscriptions to a corporation, or an association which assumes to be 
and is acting as a corporation, and the liability for subscriptions made 
by the parties for the purpose of organizing a corporation from among 



§ 45 CORPORATIONS DE JURE. 243 

.the subscribers. If the subscription made by Capps & McCreary had 
been made to the Hastings Prospecting Company when it was acting 
as a corporation, when it was exercising the functions of a corpora- 
tion, when it was claiming to be a corporation, and had their agree- 
ment been to pay such corporation certain sums of money for certain 
shares of its stock, it seems that they would then be estopped from set- 
ting up as a defense that the prospecting company was not a corpora- 
tion de jure. (Cook Stock and Stockholders, § i86, and cases cited.) 
Morawetz on Private Corporations, section 67, thus lays down the 
rule in such cases: "Every subscription (to the stock of a corpora- 
tion to be organized) by implication refers to and incorporates the 
terms of the charter or general law under which the corporation is 
to be formed ; and eveiy subscriber agrees to become associated with the 
others only upon condition that the formalities prescribed by the char- 
ter shall be obsei*ved in making the mutual contract. Thus, if certain 
preliminaries, such as the filing of a certificate, are required to be per- 
formed after the articles of association have been subscribed, but be- 
fore the corporation shall be in existence, the contract of membership 
does not go into effect until these formalities are complied with, and 
a subscriber to the articles can not until then be made to contribute 
the amount of his subscription." In Rikhoff v. Brown's Rotaiy 
Shuttle Sewing Machine Co., 68 Ind. 388, it was held: "A subscrip- 
tion of stock to preliminary articles of association, not purporting to 
be a contract with an existing corporation, does not estop the sub- 
scriber to afterward deny the existence of the corporation in a suit 
upon the subscription." See, also, Indianapolis Furnace and Mining 
Co. v. Herkimer, 46 Ind. 142, where it is said: "Until the statutory 
requirements to organize a corporation have been complied with, a sub- 
scriber to the articles of association is not estopped to deny the exist- 
ence of the corporation." (See, also, Dorris v. Sweeney, 60 N. Y. 
463.) We think these authorities are decisive of the case under con- 
sideration. The rule they lay down is sound law, good sense and 
exact justice. 

If the plaintiffs in error are to pay for the stock subscribed, it, of 
course, follows that they become entitled to the stock. This would 
make them stockholders in a de facto corporation and liable as co- 
partners, whereas their contract was to become liable as stockholders. 
The plaintiffs in error have not broken their promise. The judgment 
of the district court is reversed. 

NoU. See infra, Conditions precedent to d« jurt existence, p. 585. 



244 GIBBS' ESTATE. HALLSTEAD'S APPEAL. § 46 

Sec. 46. Same. 

GIBBS' ESTATE. HALLSTEAD'S APPEAL. 

1893. In the Supreme Court of Pennsylvania. 157 Pennsyl- 
vania State Reports 59-74; 22 L. R. A. 276. 

Appeal by Hallstead, guardian of Mary E. Clapp et al., from de- 
cree of orphan's court dismissing exceptions to auditor's report in 
estate of Henry Gibbs, deceased. 

Exceptions to report of auditor on exceptions to administrator's ac- 
count. Before Metzger, P. J., twenty-ninth judicial district, specially 
presiding. 

The case was referred to Stanley W. Little, Esq., as auditor. Before 
the auditor, W. F. Hallstead, guardian of Mary E. Clapp et al., 
claimed to recover from the estate of decedent, Henry Gibbs, the sum 
of $2,900.46, the amount of a deposit in the Home Savings Bank, of 
which decedent was a stockholder. The claim was made on the 
ground that the bank was a general partnership, and that its stock- 
holders were liable as partners for its debts. 

The auditor reported in part as follows : 

"The exceptants to the account of the administrator ask to take out 
of the funds for distribution the sum of $36,167.53 and interest. This 
request is based on the position that the 'Home Savings Bank' was 
not a corporation, or a limited partnership, or a joint stock association, 
and therefore was a common partnership. That, being a common 
partnership, and Henry Gibbs having been a stockholder therein, his 
individual estate is liable for the entire amount of money deposited in 
said bank during the time said Gibbs was a member thereof, and un- 
paid, with what interest may be due thereon. 

"This statement of the case at once discloses its importance to the 
parties concerned. The industry of counsel and the research of the 
auditor have failed to find much authority in this state to aid in the 
solution of the question which distinguishes this case. All fair minds 
must agree that a party seeking to divert so large a fund from its 
ordinary channel into the pockets of strangers, should present a case 
strong in the fact and clear in the law. 

"As a starting point in this investigation the auditor can find nothing 
better than the opinion of Mr. Justice Williams, in the case of Hall- 
stead V. Coleman, 143 Pa., at page 364, in these words: 'Now the 
important question in this case, which lay at the threshold of plaintiff's 
cause of action, was whether this bank was a partnership. The plaint- 
iff alleged it and claimed to recover against the defendants as mem- 
bers of the banking firm. The burden of proving the partnership 
was on him, and until this proof was given the defendants were not 
called upon to enter upon their defense.' Applying this law to this 
case, which involves questions very similar to those in the case just 
mentioned, the first question is, have the exceptants proved this was 



§ 46 CORPORATIONS DE FACTO. 245 

a partnership, of which Henry Gibbs was a member at the time they 
deposited their money in this bank, and for all the debts and defalca- 
tions of which his estate is liable? 

"The evidence offered by them shows that in September, 1873, a 
bank was opened at South Waverly, in this state ; that it had over its 
door the name 'The Home Savings Bank;' that it organized by elect- 
ing a board of directors and a president and cashier ; that its capital 
stock was divided into shares of $100; that to each holder of stock it 
issued certificates of stock, saying upon their face that the bank was or- 
ganized under act of the legislature of Pennsylvania ; that its authorized 
capital was $100,000 ; that these certificates had on their back 
blank powers of attorney for transfer, and in all respects were in the 
form and style usually adopted by banks ; (that these certificates when 
issued were signed by the president and cashier, and to some of them 
the seal was affixed;) (17) (that it had a seal, which was affixed to 
all cashier's checks;) (18) that said bank registered in the office of 
the auditor-general under section i of act of June 7, 1879 ; that it 
filed these separate reports in said office of its net earnings or income 
under the tenth section of said act; (that it also filed in said ofiice at 
least six reports for publication, covering the four quarters of the year, 
in accordance with the requirements of the acts of April 16, 1850, 
and April 17, 1861;) (19) that it paid dividends to its stockholders; 
that it failed and passed into the hands of a receiver ; that none of the 
certificates of stock, certificates of deposit, books of account with cus- 
tomers, bills, letters, checks or drafts bore upon their face the names 
of any member other than the president and cashier, and the person to 
whom addressed or issued ; that the transfer of any stockholder's in- 
terest was at his own option, and neither such transfer, nor the death 
of any stockholder worked any change in the name or conduct of the 
business ; that so slight was the effect upon the business of the death 
of Mr. Gibbs that a large amount of claims have been presented be- 
fore the auditor for allowance for money deposited after his death, 
or deposited before and re-deposited and new certificates therefor 
issued after his death. (What is there in all this evidence from be- 
ginning of the business to the failure tending to prove a partnership.? 
What in it all inconsistent with a corporate existence ? Only one 
thing has been urged upon the auditor, and that is to be found in the 
form of the reports made by the bank to the auditor-general of its net 
earnings or income under section 10 of act of 1879; (20) and the 
position was taken that the provisions of this section only apply to un- 
incorporated banks. While it is true that in the printed portion of 
these reports the word 'firm' is used instead of 'corporation,' yet, 
remembering that these printed forms were not made by the bank, 
but were sent to it from the auditor-general's office, and that they 
were made and returned under an act which is not applicable solely to 
unincorporated banks, but applies to those which are incorporated as 
well (and as at most was only the declaration of one member in 
the absence of and without the knowledge of any others, the auditor 
does not deem this single fact sufficient to overcome the preceding 



246 GIBBS' ESTATE. HALLSTEAD'S APPEAL. § 46 

evidence of incorporation, or, more accurately, to prove the partner- 
ship) (21). 

"This comprises the affirmative evidence of the exceptants. It is 
supplemented by some of a negative character, showing that searches 
in the office of the recorder of deeds in this county have failed to find 
any record of this bank as a limited partnership ; and that searches in 
the auditor-general's office have proved equally futile in finding any 
record of its incorporation. From these two negatives the auditor is 
urged to find an affirmative. In other w^ords, as no record can be 
found showing this bank to have been a limited partnership or a cor- 
poration, it must have been a simple partnership. 

"Upon the certificates issued to Mr. Gibbs each time he acquired 
stock in this bank, it declared it was organized under 'act of the leg- 
islature of Pennsylvania.' If this was true, a search among those 
local acts of the legislature which filled our pamphlet laws prior to 
1874 might have been better rewarded. 

"(But is it true that if this was not a corporation or a limited part- 
nership, it follows necessarily that it was a common partnership.'* 
This has been urged with much force, and the auditor admits that he 
entertained that belief at the outset of this case ; but from authority 
consulted, and reflection, he has come to a different conclusion. A 
partnership inter se can not result from any aggregation of negatives. 
The formation of such a partnership is a positive action and can not 
exist without an agreement of some kind among all its members.) 
(22) Parsons in his w^ork on Partnership, in discussing who are liable 
as partners, says: 'The first thing to be remembered is that persons 
may be charged as partners of a firm, on either one or two perfectly 
distinct grounds ; one of them is that the person actually is a partner, 
the other is that he has, with his own knowledge and consent, held 
forth as a partner to the person having a claim, or to the public gen- 
erally.' (Upon which of these two distinct grounds can Mr. Gibbs 
be charged as a partner in this case.'' Certainly not updn the first, 
for no articles of partnership and no agreement to be partners, and 
no agreement of any kind existed between Mr. Gibbs and the other 
stockholders, and no person can be a partner in fact in a partnership 
having no existence. If, then, this estate is to be charged it must be 
upon the second ground above mentioned. But the evidence fails to 
show any holding forth of him as a partner by the bank or by himself. 
His name nowhere appears in any business transaction of the bank 
with others; he took no part in its management or control; he never 
held any official position therein ; no one of these claimants knew that 
he was a stockholder therein at the time of depositing their money ; 
the bank never represented to any one of them that it was a partner- 
ship, and none of them dealt with it as such, and the evidence does 
not show that Mr. Gibbs had any knowledge of the transactions be- 
tween the bank and these claimants, or had a personal acquaintance 
with them. But, on the contrary, the weight of the evidence tends 
to show that this bank held itself out to the world and to Mr. Gibbs 
as a corporation and nothing else.) (23.) 



§ 46 CORPORATIONS DE FACTO. 247 

"But it is said Mr. Gibbs took dividends on his stock, and hence 
his estate is liable in this case. (As tending to discharge the burden 
resting upon the claimants, to prove that this bank was a partnership 
instead of a corporation, the fact of the receipt of dividends does not 
go far;) (24) because the taking of dividends is as consistent with 
the corporate, as with the partnership relation. 

"(Nor does this fact, standing alone and disconnected with any 
agreement between the stockholders, or any holding forth of Mr. 
Gibbs as a partner by the bank or by himself, or with any credit given 
to the bank by the claimants knowing Mr. Gibbs to be in any way 
connected therewith, make his estate liable) (25) in the opinion of 
the auditor. The old doctrine enunciated in Waugh v. Carver, 2 
H. Bl. 235, that one taking a share of profits shall, by operation of 
law, be made liable to losses, upon the principle that, by taking a 
part of the profits, he takes from the creditors a part of that fund 
which is the proper security to them for the payment of their debts, 
is not the accepted law to-day in England, and, as the auditor thinks, 
is not in accordance with the weight of authority in this country : 
Edwards v. Tracy, 62 Pa. 380. (Profits can only exist after pay- 
ment of all liabilities ; and how any one who shares only in what may 
remain after all creditors are secured takes from them any security 
is not quite plain.) (26) This is especially true of the banking 
business. (Every man buying stock in a bank that is conducted upon 
usual and sound banking principles, as he has a right to expect it will 
be, knows that he will get no dividends, only such as may remain after 
all liabilities are deducted.) (27) When a person induces others to 
credit a firm upon the assurance or belief that he is a member thereof, 
his property should make good any loss thereby sustained by such 
creditor, whether such person receives any dividend or not ; (but to 
hold one who puts money into a business and draws out no part of 
the principal, and but a small part of the interest, liable for all debts, 
should rest on better reason than that he has reduced the creditor's 
security. Mr. Gibbs' purchase of this stock and the receipt of divi- 
dends thereon, did nothing to lessen the amount these exceptants 
may, or have realized on their claims. He put in $6,000, and drew 
out $1,820, thereby making the fund for creditors $4,180 larger.) 
(28) That this fund was diverted or misappropriated, does not make 
him liable ; it not having, been done by him or by any agent of his, 
in fact or in law. 

"It has been said in support of these claims that there must be a 
liability somewhere, that persons doing business in this state must do 
it subject to the liability either of incorporators, partners or individ- 
uals. Suppose this is admitted. Is there a want of allliability here? 
If this bank were solvent to-day, and these claimants brought suit 
against it as a corporation, what would prevent their recovery? 
(Having declared to the world for nearly eighteen years that it was a 
corporation, and having induced these parties to trust it as such, what 
court would now permit it to defend on the ground that it was not 
incorporated, and thereby allow it to benefit by its own fraud? 



248 GIBBS' ESTATE. HALLSTEAD'S APPEAL. § 46 

Clearly it would be estopped.) (29) Spahr v. Farmers' Bank, Car- 
lisle, 94 Pa. 429, and authorities there cited. The inability of claim- 
ants to get their pay seems to result more from a want of ability than 
liability on the part of the bank ; a want from which this estate has 
suffered in common with these parties. 

"(The auditor is therefore of the opinion that the demand of the 
claimant is not sustained;) (30) and dismisses the exceptions, feeling 
satisfaction in the knowledge that his decision, if erroneous, can be 
corrected in a higher court. In coming to this conclusion the auditor 
has been influenced to some extent (he hopes not too far) by the 
opinion of Judge Martin of the supreme court of New York, and the 
many authorities cited by him in the case of the Merchants' National 
Bank of Binghamton, New York, v. Charles E. Pendleton et al.,^ 
which is attached to this report ; which opinion has been recently 
affirmed by the court of appeals of the same state." 

Exceptions among others to above findings in brackets were dis- 
missed. Whereupoij exceptant appealed. 

Errors assigned vioxe. (18—30) dismissal of exceptions, quoting them. 

Opinion by Mr. Justice Williams, October 2, 1893. 

This case involves substantially the same question that was heard 
and determined in Hallstead v. Coleman, 143 Pa. 354. The appell- 
ant seeks to charge the estate of Henry Gibbs with money deposited 
by him, as guardian, in the Home Savings Bank, located at South 
Waverly, on the theory that the bank was a general partnership and 
that the decedent was one of the partners. The appellees deny that 
the Home Savings Bank was a partnership, and assert that the dece- 
dent purchased shares of the stock in the bank, as and for the shares 
of the stock in an incorporated bank, and not otherwise. At this point 
it seems desirable to define the words over which this contest extends. 

First. What is a corporation? The several answers given by text 
writers may be reduced to the following formula : A corporation is an 
artificial person created by the law as the representative of those per- 
sons, natural or artificial, who contiibute to, or become holders of 
shares in, the property entrusted to it for a common purpose. As it 
is the creature of positive law, its rights, powers and duties are pre- 
scribed by the law. Beyond the legitimate purposes which it was 
created to serve, and the lines of limitation the law has drawn around 
it, it is without power to act or capacity to take. Thus a banking cor- 
poration, while fully competent to do what is usual and necessary in 
its own business, may not own and operate a railroad or engage per- 
manently in any other business than that for which it was created. It 
has neither the legal capacity, nor the right, to do so ; and if it under- 
takes to go in any direction beyond its corporate powers its acts are 
ultra vires. The creation of a corporation is not within the power of 
the individuals who subscribe to its stock. It is exclusively the work 
of the law ; and the best evidence to the existence of a corporation is 
the grant of corporate powers by the commonwealth. 

Second. What is a corporation de facto? It is an apparent cor- 

^ 20 St. Rep. 891. 



§ 46 CORPORATIONS DE FACTO. 249 

f orate organization ^ asserted to be a corporation by its members and 
actually acting as such, but lacking the creative Jiat of the lavj. In 
Taylor on Private Corporations, 145, it is said that a de facto corpo- 
ration may exist "when a body of men are acting as a corporation 
under color of apparent organization, in pursuance of some charter or 
enabling act." Their organization may be imperfect, so that upon a 
quo warranto they could not show a sufficient compliance with the 
law to justify the exercise of corporate powers, but, as to parties deal- 
ling with them, and as to each other, they are estopped to deny that 
they are what they hold themselves out to be. In a recent case in 
Minnesota, Finnegan v. The Knights of Labor Building Association,^ 
it was held that a de facto corporation exists when these three things 
concur, viz. : A law under which the alleged corporation might be 
created ; an attempt to organize under the law ; an assumption and 
exercise of corporate powers under such attempted organization. In 
Church V. Pickett, 19 N. Y. 482, only two things were held necessary, 
viz : "The existence of a charter or law under which a corporation with 
the powers assumed might be lawfully created ; and the user by the 
party to the suit of the rights claimed to be conferred by such a charter 
or law." Where there has been a substantial compliance with the 
law the corporation is, of course, de jure. Where there has been no 
substantial compliance, but there has been, nevertheless, an assump- 
tion and exercise of corporate powei's in pursuance of an attempted 
organization, the alleged corporation is such de facto only. The 
Minnesota courts hold the correct rule, and three things are necessary 
to create the liability, a law or charter under which an organization 
de jure might be effected, an attempt to organize which falls so far 
short of the requiretnents of the law or charter as to be ineffectual , 
an assumption and exercise of corporate powers notwithstanding the 
failure to comply with the law or charter. 

Third. What is a partnership} Perhaps the best definition is 
that given by Story : a relation created by a '•'•contract between two 
or m.ore persons to place their money, effects, labor, or skill, or some 
or all of them, in lawful cotnmerce and divide the profits betwee?t 
them." Its foundation is a contract express or implied. It results 
from the act of the parties, not from the act of the law. Hedge's 
App., 63 Pa. 273, 17 Am. & Eng. Ency. of Law 829. See, also, 8 
W. & S. 63; 16 Ohio 166; 14 Johns. 318; 49 111. 437. But as to 
third parties one may be held liable as a partner by implication of 
law arising upon his own acts, contrary even to his own intention. 
Thus the officers and acting members of a corporation de facto may 
be liable as partners if their conduct has led others to trust the con- 
cern upon that basis. 47 Conn. 443. But without a contract of part- 
nership, or such acts and declarations as lead others to infer its exist- 
ence and to extend credit on that basis, there is no foundation on 
which liability as a partner can rest. The best evidence of the exist- 
ence of a partnership is the contract creating it. If proof of the 
contract is not within reach, its existence may be inferred from proof 

'/re/ra, p. 614. 



250 GIBBS' ESTATE. HALLSTEAD'S APPEAL. § 46 

of contribution to the partnership stock. If dii'ect proof of contribu- 
tion can not be had, it may be inferred from participation in profits. 
In the absence of all this, the acts and declarations of the parties 
sought to be charged may be resorted to. Participation in profits is 
not conclusive proof of the existence of the partnership relation. 
Edwards v. Tracy, 62 Pa. 374. But both in England and in this 
country it is cogent evidence upon the question, It puts the defendant 
upon his proofs explanatoiy of the fact. If he is able to show that 
such participation vv^as referable to some other reason, such as com- 
pensation for services rendered by an agent, broker, salesman or other- 
wise, "Ca^ prima fades is overcome. So, if the participation in the 
profits is referable to some other relation other than that of partner- 
ship between the participants, such as membership in a joint-stock 
association or a corporation, the effect of proof of participation will 
be overcome. 

In the light of these well settled rules, let us consider briefly the 
position of the parties and the important findings of fact made by the 
learned auditor in this case. The claimant's right to share in the fund 
in court rested on the theory that the Home Savings Bank, in which 
the money of his wards had been deposited, was a partnership, and 
that the decedent was a partner. The burden of proving the fact that 
the bank was a partnership was on him ; and as was said in Hallstead 
v. Coleman, 143 Pa. 364, "until that proof was given, the defendants 
were not called upon to enter upon their defense." The proof made 
upon this subject showed the organization of a bank under the name 
of the Home Savings Bank, with a president, cashier, and a board of 
directors. This is the mode of organization usually adopted by cor- 
porations, and did not tend to prove a partnership. It was then shown 
that the decedent bought and held certificates of stock in the bank, 
after its organization, which recited not the formation of a partnership, 
but the organization of a bank under the laws of the state, and the 
division of its capital into shares of one hundred dollars each. This 
is not the usual way in which partnerships are created and partners 
admitted. It is the usual way in which stocks are issued and trans- 
ferred in corporations. Proof was then made of the receipt by the 
decedent of several dividends upon his stock. These did not purport 
to be shares in the profits of firm business, but dividends, declared in 
the manner usual among corporations, upon the stock of the bank ; 
and were paid by dividend checks drawn under the authority of the 
board of directors. The only other evidence was the returns made 
by the officers of the bank under the tax law of 1879, which threw 
very little light upon the character of the organization of the bank. 
Upon this proof the questions for the auditor were whether the bank 
was shown to be a partnership, and the decedent a partner. The 
bank did business for a number of years and then failed. Its books 
and papers were in the hands, or subject to the control, of the receiver. 
The manner of its organization was not shown ; the partnership agree- 
ment, if any such existed, was not produced. 

No proof was given that the officers or stockholders claimed or held 



§46 CORPORATIONS DE FACTO. 2$ I 

out to the public that the stockholders were partners or the bank a 
partnership enterprise. It is not alleged that the decedent participated 
in any manner in the business, or exercised any control over it. The 
whole case against him rested on the fact that he had purchased shares 
in a bank, then organized and doing business, and received dividends 
declai"ed by the directors and paid to him in a cashier's check. We 
are not surprised that the auditor was led to ask, "What is there in all 
this evidence from the beginning of the business to the failure tend- 
ing to prove a partnership?" Nor that he answered his own question 
by holding that this proof was insufficient to establish, prima facie^ 
the existence of the partnership relation. On the other hand, there 
was much tending to show that Henry Gibbs understood that he was 
the holder of stock in an incorporated bank, and that the bank assumed 
and exercised corporate powers; and was dealt with by the public as 
a corporation. The form of its certificates, the manner of their trans- 
fer, the election of directors by the stockholders, the management of the 
business of the bank by the directors and the officers elected by them, 
the mode of declaring and paying dividends, were all suggestive of a 
corporation. They were not suggestive of a partnership. We are 
unable, therefore, to say that the auditor erred in finding that the bank 
was not shown to be a partnership. The learned judge who heard 
the exceptions to this report seems to have concurred with the auditor, 
and we require imder such circumstances to be satisfied that a mistake 
was made before interfering with the findings. We are not so satis- 
fied ; but are of opinion that the state of the evidence justified the 
auditor's conclusion. This disposes of the whole case. 

It is said with earnestness and energy that this is a case in which 
the depositors deserve protection. We assent to this proposition. 
We can extend protection to them, however, in accordance with the es- 
tablished rules of law, and in no other manner. What the Home Sav- 
ings Bank was in its organization, in what capacity those who held 
its stock were liable to its depositors are questions not now before us. 
It may have been a corporation de jure^ a corporation de facto^ a joint- 
stock association or a general partnership so far as we are able to de- 
clare. What we say is that the evidence in this case is not sufficient to 
make a case, prima facie, against Henry Gibbs as a partner, or the 
bank as a general partnership. It does not appear that the bank was 
organized as a partnership, conducted business as a partnership, or 
held itself out to the public as such. It does not appear that Gibbs 
understood the bank to be other than what his certificates of stock in- 
dicated ; or that he treated the business of the bank as that of a firm, 
or exercised the slightest control over, or influence upon it, or mislead 
the appellant or any other depositor by act or word as to his relation 
to it. What does appear is that he purchased shares of stock in the 
usual manner, and received some dividends thereon. These circum- 
stances are naturally referable to the relation of a stockholder to a 
corporation; and standing alone, arci not proof, prima facie^ of the 
appellant's proposition that the bank was organized as a partnership, 
and that the purchase of shares of stock made Gibbs a partner. If he 



252 GIBBS' ESTATE. HALLSTEAD'S APPEAL. § 46 

had received profits from the business apparently conducted by a 
partnership, he would have been put upon his explanation, and, fail- 
ing to make one, v^'ouldhave been held to be a partner. The burden 
in that case would have been on him. Having received dividends de- 
clared by a board of directors upon the stock into which the capital of 
the bank was divided, he could rest securely upon the apparent char- 
acter of the transaction and the inferences naturally to be drawn from 
it. The burden of explanation necessary to give another character to 
the dividend declared, and to the stock on which it was paid, was on 
him who asserted that such other was the true character of these cir- 
cumstances. 

It was also said in the argument that the recitals in the stock cer- 
tificates are not evidence of actual incorporation as against a 
stranger. This must be granted. They do not prove incorporation. 
But the appellees are not bound, upon the evidence in this case, to 
prove incorporation. The significant question is, where is the proof 
that this bank was organized or conducted as a partnership concern .? 
The certificates do not prove that, but the inferences naturally drawn 
from them tend the other way. It will not do for the appellants to 
say: "We have shown that the decedent was a stockholder in this 
bank and received dividends upon his stock, now you must shovi^ that 
the bank was incorporated or be liable to us as a general partner." 
This is attempting to change the burden of proof. Again the learned 
counsel says: "This is the sole fact (the form of the certificate) that 
is before the court, and if it is sufficient to authorize a court to find an 
incorporation in this case, why is it not in any other .f"' The court 
below did not find that the bank was a corporation. That question 
was not before it. It was alleged by the appellant to be a paitner- 
ship, but the auditor and the judge of the court below regarded the 
evidence in support of that allegation insufficient to justify a finding 
that the bank was not "organized by act of the legislature of 
Pennsylvania," as its certificates alleged, but by the parties as co- 
partners. The appellant failed, not because the bank was held to be 
a corporation, but because it was not shown to be a partnership. Until 
evidence in support of the appellant's position is given sufficient to 
lead fairly to the conclusion that the bank was organized as a partner- 
ship, or that Henry Gibbs contracted to become a partner when he 
bought his stock, or that he led the public by his acts and declara- 
tions to deal with him or the bank on the basis of his being a partner, 
there is nothing that makes it the duty of his representatives to enter 
upon a defense, or that makes it possible for the court to decide upon 
the character of the bank. In such a state of the evidence the court 
can only say, as the court below said in this case, "It is not shown 
that the bank is a partnership," and for that reason the claimant fails. 

The assignments of error are not sustained, and the decree is af- 
firmed. 

Note. See infra, Conditions precfedent to de facto existence, p. 614 



bSEPH 



§ 47 CORPORATIONS BY ESTOPPEL. 253 

Sec. 47. Same. 

McCarthy v. lavasche. 

1878. In the Supreme Court of Illinois. 89 111. Rep. 270- 
277, 31 Am. R. 83. 

Appeal from the superior court of Cook county, the Hon. J 
E. Gary, Judge, presiding. 

Mr. Justice Walker delivered the opinion of the court. 

The National Loan and Trust Company was organized under an 
act of the general assembly, approved on the 9th of March, 1867. 
Under the provisions of an act adopted and approved the 26th of 
March, 1872, the corporation changed its name to the "Bank of Chi- 
cago," and appellee, being a creditor of the bank, brought an action 
of debt against appellant for its recovery. 

The declaration avers that the corporation was, among other things, 
authorized to borrow money, to receive money on deposit, to loan 
money and make discounts, etc. ; that on the 26th of August. 1873, 
the bank owed, and was and still is indebted to appellee in the sum 
of $100 for money received of appellee on deposit; that appellant 
then was, and still is, a stockholder and the owner of one share of 
$100 in the bank; that the bank had become, and still is, utterly in- 
solvent, and that appellant had not assigned or transferred his stock in 
the bank. 

The declaration further avers that the charter of the corporation 
contains this provision: "And each stockholder shall be liable to 
double the amount of the stock held or owned by him, and for three 
months after giving notice of transfer, as hereinafter mentioned," and 
that, by virtue of this provision of the act of incorporation, appellant 
as such stockholder, was individually liable to the creditor or credit- 
ors of the bank in double the amount of the stock held by him, where- 
by he became liable to pay appellee. 

A demurrer was filed to the declaration, which the court overruled, 
and appellant abided by his demurrer; and the court thereupon ren- 
dered judgment in favor of plaintiff, and assessed the damages and 
rendered judgment for $110.50, and defendant appeals, and assigns 
errors. 

It is urged that the corporation was never legally organized, as the 
act under which the stockholders incorporated was unconstitutional 
and void ; that if not, then the clause in the charter rendering stock- 
holders liable is too vague to render them liable to the individual 
creditors of the company ; or if it shall be held that they are so liable 
then the remedy is in equity, against all the stockholders. 

On the other hand, it is contended that the law does not contravene 
the constitution ; but if it should be so held, the stockholders having 
organized the corporation, and held themselves out to the world as 



2 54 m'carthy v. LAVASCHE. § 47 

such, and thereby obtained credit and incurred indebtedness, they are 
estopped to deny the validity of the act of their organization under it, 
and that a reasonable and fair construction of the clause of the act 
quoted renders the shareholders individually liable to each and every 
creditor, and that the remedy for a recovery on the liability is com- 
plete at law. These are the questions raised and discussed on this 
record. 

Even if the law^ is unconstitutional, can the promoters and those 
engaged in its operation be heard to say that they may relieve them- 
selves from liability, and from all their engagements, because the law 
under which they have acted is prohibited by the organic law ? May 
shrewd, intelligent persons go to the general assembly and procure an 
act that they should know is prohibited by the fundamental law, avail 
themselves of its benefits, obtain the money of the uninformed and 
the confiding, and then be heard to say, we are not incoi-porated, our 
charter and organization are void, and we will hold your money.'' Or, 
may those who promoted the enterprise by becoming shareholders, to 
enable the company to organize, and to procure other people's mone}-, 
be heard to interpose such a defense ? The presumption is, that each 
subscriber for stock knew at the time of the subscription that the char- 
ter contained the provision rendering him liable for double the sum he 
subscribed, and such persons could not but have known that this pro- 
vision would contribute largely to give credit to the concern and greatly 
augment its business. 

The subscribers for shares of the stock, no doubt, expected to reap 
large profits, and expected those profits to be greatly enhanced by this 
provision. It enabled them to point to it and assure individuals and 
the public that the institution was safe, as, if the business was not 
lucrative, all the stockholders were severally liable for double the 
amount of their subscriptions. They thus,' no doubt, did increase 
their business, and thus obtained money and credit, which now, when 
the institution has proved a failure, they endeavor to avoid paying by 
urging that their organization, and, consequently, their subscriptions to 
its stock, were void. Fair dealing would say that they should be 
estopped from interposing such a defense. 

The question is by no means new in the jurisprudence of this coun- 
try. The question has been frequently considered in the courts, in 
the form here presented or in analogous cases. See Baker v. Bran- 
nan, 6 Hill 47; Embry v. Conner, 3 N. Y. 511 ; Eaton v. Aspin- 
wall, 19 N. Y. 119; Mead v. Keeler, 24 Barb. 25; Ferguson v. 
Landran, 5 Bush (Ky.) 230. These were all cases where the parties 
were held to be estopped from insisting that the organization was 
illegal, or a law unconstitutional, because of the acts or consent of the 
parties urging the objections. 

In our own court analogous questions have been presented and de- 
termined. In the case of Tarbell v. Page, 24 111. 46, it was held that 
in a suit by a creditor against a stockholder, the former could not 
show that the corporation had failed to file a certificate of organiza- 



§ 47 CORPORATIONS BY ESTOPPEL. 255 

tion with the secretary of state ; that in a collateral proceeding the 
regularity of the corporate organization could not be questioned. And 
this is a rule of uniform application. If, then, the plaintiff, by con- 
tracting with a body exercising the franchises of a corporation, is 
estopped from denying the legality of its organization, the same rea- 
son must apply with increased force to prevent a stockholder in such 
an organization from questioning the legality of the corporation. 

That the legality of an incorporation can not be attacked collater- 
ally, see Rice v. Rock Island and Alton Railroad Co., 21 111. 93. 
Goodrich v. Reynolds et al., 31 111. 490, and numerous subsequent 
cases. In fact, the books abound in adjudged cases which hold that 
a person doing an act or making a statement which misleads another 
to his injury shall not be permitted to question the act or the truth of 
the statement. So, on the same principle, appellant should be estopped, 
as his acts contributed to the organization of this company, and he 
held himself out to the world as a stockholder therein, and liable to 
the extent of double the amount of his subscription. Had the com- 
pany not been organized, appellee would not have lost his money, 
and appellant thus contributed to that loss. 

In Ferguson v. Landran, supra, appellants denied the validity of a 
tax levied under a local law, but the court held they were estopped 
to deny the validity of the law, because they had approved it and 
availed of its benefits and aided in procuring its passage. The court 
held the law unconsitutional, but enforced the tax. The court says, 
"parties are estopped from denying the constitutionality of a local 
statute by participating in the procurement of its passage, and by 
ratifying, acquiescing in, or approving it after its passage, and by 
becoming recipients of benefits under it ; and all such persons are held 
to be liable to the tax authorized by such enactment, although it is 
unconstitutional and invalid to all other persons." 

//ere, appellant approved of the act, and availed himself of its 
benefits by subscribing for stock and becoming entitled to exercise all 
the rights and privileges of a stockholder in the corporation. Justice, 
morality, public policy and precedent all demand that appellant 
should be estopped from denying the constitutionality of the law, 
/f stockholders might shoiv the law unconstitutional, and their 
organization void, and all their acts unauthorized, then all persons 
engaged in the organization of the corporation should be held liable 
for the consequences of their illegal and unauthorized acts, inde- 
pendent of the clause in their charter. So they should, in no event, 
escape liability for obtaining money without authority. 

Suppose these stockholders had formed a partnership, with articles 
of partnership containing precisely the same provisions that are con- 
tained in their charter, and had put in capital stock to the same ex- 
tent, and the same amounts they each subscribed in shares, would any 
one question the legality of the organization, or the legal liability of 
each of the members of the firm ? We apprehend these propositions 
would be conceded. And if so, in principle, what distinction can be 



256 m'carthy v. lavasche. §47 

taken between the supposed case and the one at bar? Had the share- 
holders wi'itten under the charter a statement that it was unconstitu- 
tional and void as a law, but that they adopted it as articles of partner- 
ship, and that each would be bound by its terms and conditions, and 
would pay in, for capital stock, the sums set opposite their several 
names, and they had signed it, and specified the sum to be paid in, 
could it be doubted that each member would have been liable, under 
the articles thus executed? And if so, when stripped of mere form, 
and substance is alone considered, this organization is in effect the 
same. We can perceive no well-grounded distinction. We are 
therefore of opinion that, independent of all constitutional questions, 
each shareholder became liable under the charter as articles of part- 
nership, as it operated as an agreement by each subscriber to be liable 
to creditors to double the amount each subscribed. 

It is urged that under the language of the third section of the char- 
ter, although a liability may be created to double the amount of the 
stock, still it is to the corporation and not to the creditors. The ob- 
vious purpose of the general assembly was to secure the creditors of 
the institution. And if so, why make a provision which the creditor 
could not, and the directors would not, in all probability enforce? 
On their refusal the creditor, if that construction is to be given, 
would be compelled to proceed by mandamus^ had the law been 
valid, to compel suits to be brought by the corporation against share- 
holders, and then in all probability, after years of delay in litigation, 
to get the money into their hands, a further delay would be liable to 
ensue until a recovery could be had against the bank and the money 
realized at the end of a long, obstinate and expensive litigation. Such 
a course could not, we think, have been intended. Such a require- 
ment would greatly iitipair if it did not render the security worthless. 
We must therefore conclude, that as the provision was intended to 
secure the creditor, it was intended that his remedy should be direct 
and effective, and that he might sue in his own name and at law. 

If this association only amounted to a partnership, as we have seen 
it was, then the firm could not sue one of its members to compel the 
payment. Nor do we perceive how the firm could maintain a bill for 
the purpose. Hence we must conclude that it was intended that the 
liability should be direct to the creditor and not to the firm. 

It is next urged that a remedy is in equity and not at law. Actions 
at law were maintained in the cases of Culver v. Third National Bank, 
64 111. 528, and Corwith v. Culver, 69 111. 502, under a statute creat- 
ing a liability of the stockholders. It was then urged that the remedy 
was in equity, but we held that it was a legal liability and could be 
enforced by an action at law. That statute did not determine, in 
terms, in which forum the remedy should be sought. But it being a 
legal right, the remedy was held to be at law. 

It is urged that the liability should be construed to be joint against 
all the stockholders. To do so would, we think, do violence to the 
language of the statute; the language is, "each stockholder shall be 



§ 47 CORPORATIONS BY ESTOPPEL. 2 5/ 

liable to double the amount of stock held or owned by him, for three 
months after giving notice of transfers, as hereinafter mentioned." 
This language renders the stockholders severally and individually 
liable. 

The judgment of the court below must be affirmed. 

Judgment affirmed. 

Note. See infra, Conditions precedent to existence by estoppel, p. 630. 
17— Wiii. Casbs. 



PART II. 

THE BODY CORPORATE, ITS PARENTAGE, CONCEP- 
TION, BIRTH, ANATOMY, LIFE AND DEATH. 



Title I. Parentage — The State and Promoters. 
Subdivision I. The State, Its Power to Create. 



CHAPTER 2. 
NATURE OF THE POWER AND METHODS OF EXERCISE. ' 

ARTICLE I. NATURE OF THE POWER. 

Sec. 48. "The State creates the corporation upon the application 
of individuals, who are called incorporators. The incorpo- 
rators then organize the corporation. The functions of the 
incorporators thereupon cease, and the stockholders proceed 
to contribute the capital and elect directors. The directors 
then start and continue to keep in operation the powers of the 
corporation." i Cook on Stock and Stockholders, § 2, 3d 
ed., p. 4. 

(a) The power to create is an incident of sovereignty, and the 
sovereign's consent is essential. A corporation is the creature of 
the sovereignty that creates it, and to that alone is it amenable for 
violation or usurpation of its purely corporate authority. 

STATE OF CONNECTICUT, Ex Rel. WILCOX, v. CURTIS.* 

1868. In the Supreme Court of Errors of Connecticut. 35 
Conn. 374-384, 95 Am. Dec. 263. 

[Information in the nature of a quo warranto upon the relation of 
Wilcox, who claimed to have been duly elected a director of the First 
National Bank of Meriden, Conn., but who claimed to have been de- 
prived of exercising the franchises thereof by Curtis, who, without 
warrant, exercised the same and wrongfully excluded the relator. The 
suit was brought in the superior court for the county of New Haven. 

* Statement of facts abridged. Arguments omitted. 

(258) 



§ 48 state's power to create. 259 

Defendant demurred, and the case was reserved for the advice of the 
supreme court.] 

Butler, J. The power to create a corporation is an attribute oj 
sovereignty ; and the government of the United States created the 
corporation in question^ in the exercise of that independent and su- 
preme sovereign power which the people delegated to it by the consti- 
tution. It is, therefore, the creature of that sovereignty , and amena- 
ble to, and cotttrollable by it, and by none other. 

An inlormation in the nature of a quo warranto against a corpora- 
tion lies only at the instance and in the name of the sovereign power 
which created it. (5 Wheaton 291.) The original writ so lay against 
any person who usurped any franchise or liberty against the king, or 
for misuser or non-user of franchises or privileges granted by him. 
The information in the nature of a quo warranto, authorized by the 
statute of the 9th Anne, at the relation of any person against any 
other person usurping, intruding into, or unlawfully holding any fran- 
chise or office in any corporation, is but an extension and simplifica- 
tion of the ancient writ, and is grantable only where that would lie. 
In England it lies in the name of the sovereign against those who 
usurp such franchises, because such usurpation is in derogation of the 
rights of the crown. In this country it lies in the name of the gov- 
ernment, against those who usurp such franchises, because grantable 
or granted by the commonwealth. 

'•'•The state, or commonwealth,^^ says Mr. Angell in his work on 
corporations, '■'•stands in the place of the king, and has succeeded to 
all the prerogatives and franchises proper to a republican government. 
With us therefore to assume a power which can not be exercised 
■without a grant from the sovereign authority, or to intrude into the 
office of a private corporation, contrary to the provisions of the stat- 
ute which creates it, is, in a large sense, to invade the sovereign pre~ 
rogative and to assume or violate a sovereign franchise.'''' And the 
cases cited fully sustain his positions. Upon the same principles the 
information can lie only in the name of the United States and in the 
federal courts, against those who invade a franchise grantable or 
granted by the national government. 

As then the corporation in question is the creature of federal sover- 
eignty, and in respect to its internal organization, operation and con- 
tinual existence is amenable to and controllable by that sovereignty 
alone ; and as the writ in question is properly grantable by that sover- 
eignty alone whose franchise has been invaded and violated, it would 
seem upon principle too clear for argument (if thei-e be nothing more 
in the case) that the relator has erred in invoking the interference of 
another uninvaded and unviolated sovereignty, and the court below 
have erred in assuming jurisdiction and granting the writ. 

Such is the obvious prima facie character of the case before us. 
But the plaintiff insists that there is no eiTor and makes several 
claims, founded upon the complex character of sovereignty as it ex- 
ists in this country, divided between the national and state govern- 
ments. 



26o THE STATE V. CURTIS. § 48 

1. He insists in the first place that this institution is amenable to 
state sovereignty, because it is located and its officers discharge their 
duties and perform their Junctions within this state. This claim is 
groundless. 

It is indeed true, in the language of the supreme court of the United 
States (2 Howard 555), that a "corporation created by a state to per- 
form its functions under the authority of that state, and only suable 
there, though it may have members out of the state, is a person, 
though an artificial one, inhabiting and belonging to that state, and, 
therefore, entitled — for the purpose of suing and being sued — to be 
deemed a citizen of the state. " But this is not such a corporation. It was 
not created by us ; it does not perform its functions under our au- 
thority^ and it is the creature of and controllable by another and su- 
perior sovereignty. That other sovereignty is exercised over the whole 
country irrespective of state lines or state authority. It places its 
officers, agents and instruments wherever its necessities or its interests 
require, and necessarily within the limits of the states. With those 
officers, and agents, and instruments, in the exercise of their functions, 
state authority can in no way interfere. The national banks are its 
instruments^ by which it performs its functions in establishing a na- 
tional currency ; on that fact their constitutionality is placed^ and in 
the exercise of the powers conferred upon them they are as indepen- 
dent of state control as the army, or navy, or the officers of the sub- 
treasury and custom-house, or any other instrumentality by which the 
functions of the federal government are performed. No other view is 
compatible with the principles of our own jurisprudence, or those 
recognized and declared by the supreme court of the United States in 
numerous cases, and particularly in the exhaustive opinion of Chief 
Justice Marshall in McCulloch v. Maryland, 4 Wheat. 316. 

2. The relator insists, in the second place, that the superior court 
has jurisdiction of the defense set forth in the information, because 
the judicial power of the federal and state governments is exercised 
concurrently by the courts of either, unless congress has conferred 
exclusive jurisdiction, in respect to the subject-matter, on the federal 
courts, and no such exclusive jurisdiction has been conferred in rela- 
tion to this. This claim is equally unfounded. 

It is undoubtedly true that the state courts retain jurisdiction over 
some matters, to which, by the constitution and laws of the United 
States, jurisdiction is given to the federal government and courts, and 
in respect to which jurisdiction appertained to and was exercised by 
the state courts prior to the adoption of that constitution. On that 
subject the rule seems to be, that the state courts retain the jurisdic- 
tion which they had before that event except where it was taken away by 
an exclusive constitutional grant of jurisdiction to the federal govern- 
ment, or congress have made the jurisdiction exclusive in the federal 
courts, or the exercise of the jurisdiction is repugnant to, and incom- 
patible with such exercise by those courts. 

But the cases where such concurrent jurisdiction can be entertained 



§ 48 state's power to create. 261 

by the courts of the states are few. Most of those where such jurisdic- 
tion has been sustained by the supreme court of the United States, 
and all to which we have been particularly referred, were cases of a 
criminal character where the act was an offense against both sover- 
eignties, and punished by the law of the state. Here there could be 
no jurisdiction anterior to the adoption of the constitution. Nor has 
there been any invasion of the sovereignty of this state or violation 
of its laws, or any offense which the state is called upon to redress in 
its own behalf. It is a clear principle that where there has been no 
offense there can be no judicial jurisdiction; and equally clear that a 
state has no authority to enforce a national law in behalf of the na- 
tional government. 

And this is one of that class of cases where jurisdiction in the state 
court is utterly incompatible with the necessary jurisdiction of the 
national government. The corporation in question being the creature 
and instrument of that government must necessarily be subject to that 
alone. By the common law, and by our statute, an information of 
this character lies as well to deprive a corporation of its charter as to 
determine the rights of its competing officers ; and if the relator is 
right in this claim, its charter can be taken away and its franchises 
seized by the courts of the state. Nothing could be more repugnant 
in character than such an unauthorized interference, for such a pur- 
pose, or for any purpose. 

3. The plaintiff claims in the third place, that concurrent jurisdic- 
tion of the subject-matter is conferred upon the state courts by the 
amended currency act of 1864, section 57, which provides, "that suits, 
action and proceedings against any association, under this act, may 
be had in any circuit, district, or territorial court of the United States, 
held within the district in which such association may be established ; 
or in any state, county or municipal court in the county or city in 
which said association is located, having jurisdiction in similar cases. 
Provided, however, that all proceedings to enjoin the comptroller 
under this act shall be had in a circuit, district or territorial court of 
the United States held in the district in which association is located." 
To this claim also we find it impossible to assent. 

The information in the nature of a quo warranto^ although grant- 
able to determine a private right to an office in a corporation, between 
party and party, as well as to determine the right of the corporation 
to the franchise assumed, and a civil proceeding must be filed and 
issued in the name of the sovereignty which created the corporation, 
and is still so far forth a prerogative writ. Congress, in the exercise 
of its authority to apportion the judicial power among the inferior fed- 
eral courts, has been very cautious in conferring the power to grant 
prerogative writs. That power is nowhere conferred, in express 
terms, upon the circuit or any other federal court located in the states. 
They did attempt to confer the power to grant a mandamus upon the 
supreme court, as a matter of original jurisdiction, but that court, in 
Marbury v. Madison, held the act unconstitutional, on the ground 



262 THE STATE V. CURTIS. §48 

that it was not competent for congress to increase the original jurisdic- 
tion of the supreme court. By the eleventh section of the judiciary 
act of 1789 jurisdiction was given to the circuit courts of all suits of a 
civil nature at common law and in equity to the amount of $500 or 
more between certain parties. This writ, though in its nature grant- 
able at the discretion of the court, is one of right, and constitutes a suit 
within the meaning of that term as used in the act, but it is not of the 
character, or between the parties contemplated by it. 

The 14th section also authorizes the circuit and other federal courts 
"to issue writs of habeas corpus and all other writs not specially 
provided for by statute, which may be necessary for the exercise 
of their respective jurisdictions^ and agreeable to the principles and 
usages of law." . But the supreme court, in Mclntire v. Wood (7 
Cranch 504), and M'Lung v. Silliman (6 Wheaton 598), and Ken- 
dall v. The United States (12 Peters 524), held that the circuit 
courts, within the states, had not power under those sections to grant 
a mandamus^ which is one of those writs, unless necessary for the 
exexxise of their juris<Jiction within the limits prescribed, although the 
power was sustained in the latter case, as having been given to the 
circuit court of the District of Columbia. The granting of those 
writs undoubtedly appertains to the judicial power of the government, 
but that part of the power seems not to have been conferred by con- 
gress upon any of the courts but that of the District of Columbia, in 
prescribing their jurisdiction, except as incident to and necessary for 
the exercise of the other special powers with which they are clothed. 
The circuit court of the United States for this district has not the 
power, therefore, to issue a quo warranto in a case like this, by virtue 
of any general jurisdiction. And is it to be assumed that congress, 
having been thus cautious of entrusting the federal courts with that 
power, intended nevertheless to confer it by the language quoted, and 
not only on the federal, but upon the state courts; to delegate to the 
state courts a part of their sovereignty; to submit a corporation — a 
creature of their creation, and an instrument by which they perform 
one of their functions — to the absolute and unrestrained supei-vision 
and control of the courts of another sovereignty, especially when by 
the act which created it they reserved to Jtheir own officers unusual 
supervisory power and control.? I think not. And if the case turned 
upon that question alone, I should be strongly inclined to the opinion 
that congress intended by the clause quoted to provide a more con- 
venient forum for determining the ordinary questions which must 
naturally arise between the corporations and others in the course of 
their business, and intended no more. 

But there is another and conclusive objection to this claim of the 
plaintiff. The section in question authorizes suits against the cor- 
poration only. This is not a suit against the corporation, but a pro- 
ceeding by one individual against another individual competing for 
the office of director of it, and it is not within the letter or spirit of 
the act. 



§ 49 THE STATE ONLY CAN CREATE. 263 

For these reasons we advise that the information is insufficient and 
the demurrer should be sustained. 

In this opinion the other judges concurred. 

1809, Commonwealth v. Union Ins. Co., 5 Mass. 230, 4 Am. Dec. 50; 1824, 
Commonwealth v. Murray, 11 Serg. & R. (Pa.) 73, 14 Am. Dec. 614; 1836, Peo- 
ple V. Rensselaer, etc., R. Co., 15Wend. 113, 30 Am. Dec. 33, note 44; 1841, 
State V. Harris, 3 Ark. 570, 36 Am. Dec. 460; 1841, State v. Evans, 3 Ark. 586, 
36 Am. Dec. 468 ; 1864, People v. River Raisin, etc., R. Co., 12 Mich. 389, 86 Am. 
Dec. 64; 1867, Commonwealth v. Cluley, 56 Pa. St. 270, 94 Am. Dec. 75; 1888, 
Moore v. Brooklyn, etc., R., 108 N. Y. 98; 1892, Pickett v. Abney, 84 Texas 
645 ; 1893, Republican Mountain Silver Mines v. Brown, 58 Fed. Rep. 644, 24 
L. R. A. 776; 1897, Madden v. Penn. Elec. L. Co., 181 Pa. St. 617, 38 L. R. A. 
638; 1898, Coquard v. National L. O. Co., 171 111. 480, 49 N. E. Rep. 563; 1899, 
Clark V. Mutual Res. F. L. Ass'n, 14 App. Cas. (D. C.) 154, 43 L. R. A. 390. 



Sec. 49. {b) None but the sovereign can create. 

THE MEDICAL INSTITUTION OF GENEVA COLLEGE v. PATTER- 
SON.' 

1845. In the Supreme Court of New York, i Denio (N. Y.) 

61-69. 

[Suit by the medical institution upon a note given by defendant pay- 
able to the Medical Institution of Geneva College. Special verdict 
raising the question as to the plaintiff's corporate existence. ] 

By the Court: Bronson, C. J. If "The Medical Institution of Ge- 
neva College" is not a corporation it has no capacity to sue, and the 
defendant is entitled to judgment. This is the only question made 
by the special verdict. The principal argument for the plaintiffs de- 
pends upon maintaining the following propositions: I. Each of the 
English Universities of Oxford and Cambridge has the power of creat- 
ing subordinate corporations, such as colleges for giving instruction 
in the liberal arts and sciences. 2. Columbia College, in the city of 
New York, has the same power in this respect as the English uni- 
versities. 3. Geneva College has the same powers as Columbia 
College, and, 4. Geneva College, thus having the power, has created 
a corporation by the name of "The Medical Institution of Geneva 
College." If any one link in this chain is broken, the whole argument 
falls to the ground. 

[By the charter Geneva College was given all the corporate rights 
and privileges of Columbia College, the governors of which were 
empowered by their charter from the king to appoint a president, 
professors and other officers, who could exercise their office, as freely 
and fully as any of the like officers in the English universities; the 
governors also had the power to make laws and ordinances for the 
government of the college and students, and to grant degrees the same 
as English universities.] 

^ Statement of facte abridged. Arguments and part of opinion omitted. 



264 THE CASE OF SUTTON'S HOSPITAL. § 50 

These are all the provisions of the charter to which we have been 
referred in support of the plaintiff's case ; and, whatever may be the 
powers of the English universities, I think it entirely clear that Co- 
lumbia College has no power to create corporations of any kind, or 
for any purpose. It can not be necessary to discuss the question. It 
is enough to say that there is nothing in the charter which looks like 
a license or authority to erect corporations. The chancellor of the 
university of Oxford has power by charter to erect corporations. 
( I Kyd on Corp. 50 ; i Black. Comm. 474.) But Columbia College has 
no chancellor. Its principal officer is a president, who has no greater 
powers than are usually conferred on the presidents of other colleges. 
They can not make corporations. 

Although it is now settled that the king may delegate his authority 
to create corporations ; or, in other words, may exercise the power by 
another as his instrument, on the principle qui facit ^er alium^ facit 
fer se, I find no authority for the position that a general power to 
erect corporations has ever been delegated to either of the English 
universities. But, however that may be, I think there is no color for 

saying that such a power has been conferred upon any of our colleges. 

« « » 

Judgment for defendant. 

Note. 1830, People v. Trustees of Geneva College, 5 Wend. (N. Y.) 211; 
1894, State v. International Ins. Co., 88 Wis. 512, 43 Am. St. Rep. 920; 1697, 
Robinson v. Groscot, Comberbach 372; 1704, Cuddon v.Eastwick, 1 Salk. 192; 
1829, McKim v. Odom, 3 Bland Ch. (Md.) 407, supra, p. 222; 1852, Pennsyl- 
vania R. V. Comm'rs, 21 Pa. St. 9; 1853, Franklin Bridge Co. v. Wood, 14 Ga. 
80, infra, p. 279; 1859, State v. Bradford, 32 Vt. 50; 1870, Hoadley v. Essex 
Co., 105 Mass. 519; 1874, Stowe v. Flagg, 72 111. 397. Also cases infra, on 
conditions precedent to corporate existence, dejure, de facto and by estoppel. 



ARTICLE II. METHODS OF EXERCISE EVIDENCE OF SOVEREIGN S CON- 
SENT. 

Sec. 50. (a) In general. 

THE CASE OF SUTTON'S HOSPITAL. 
1613. 10 Coke, 23a, 30a, 30*5, 31a. 

(^Mxtracts from the Report. ) 

44 « « * And it is to be known, that every corporation or incor- 
poration, or body politic or incorporate, which are all one, either 
stands upon one sole person^ as the king, bishop, parson, etc., or 
aggregate of many, as mayor, commonalty, dean and chapter, etc., 
and these are in the civil law called universitas sive collegium. Now 
it is to be seen what things are of the essence of a corporation, i. 
Lawful authority of incorporation ; and that may be by four means, 
sc. by the common law., as the king himself, etc., by authority oi par- 
liament; by the king's charter (as in this case), and hy prescription. 
The 2d, which is of the essence of the incorporation, are persons to 



§ 50 METHODS OF CREATING. 265 

be incorporated^ and that in two manners, sc. persons natural, or 
bodies incorporate and political. 3. A name by -which they are in- 
corporated^ as in this case governors of the lands, etc. 4, Of a place^ 
for without a place no incoi-poration can be made ; here the place is 
the charter-house in the county of Middlesex. Vide 3 Hen. VI 
'Det.,' 20 ; 17 Edw. Ill 59<5, and 45 Edw. Ill 17. 5. By words suf- 
Jicient in law^ but not restrained to any certain legal and prescript form 
of words. And for as much as good pleading is lapis lydius^ the 
touch-stone of the true sense and knowledge of the common law, the 
form of pleading of a corporation by prescription is to be observed, for 
in such case he ought to prescribe in everything which is of the essence 
of the incorporation. * ♦ # jj- appears that incorporo, or any 
derivative thereof, is not in law requisite to create an incorporation, 
but other equivalent words are sufficient, as nominati and cogniti', 
and therewith agree 44 Assizes, p. 9. In Prior of Plimpton's Case 
and 4 Edw. IV 7^, in the case of Abbot of Glastenbury, and in none 
of these books or records was any mention made of these words, 
fundo^ erigo, etc., or any other like words, for, as it hath been said, 
they are only declaratory words, and the effect of them may be done by 
the owner of the land without any grant. And it was well observed 
that in old time the. inhabitants or burgesses of a town or borough 
were incorporated when the king granted to them to have gildam 
mercatoriam . ♦ * * Vide for this word guild or fraternity in the 
Book of Entries, 68 ; 37 Edw. Ill, c. 5 ; 15 Rich. II, c. 5 ; the statute 
of I Edw. VI of Chantries. In which three things were obsei-ved. 
I . How prudens antiquitas did always comprehend much matter in 
a narrow room. 2. That to the creation of an incoi-poi-ation the law 
had not restrained itself to any prescript and incompatible words. 3. 
That when a corporation is duly created, all other incidents are tacite^ 
annexed. And for direct authority in this point, in 22 Edw. IV 
Grants, 30, it is held by Brian, chief justice, and Choke, that corpora- 
tion is sufficient without the words to implead and to be impleaded, 
etc., and therefore divers clauses subsequent in the charters are not of 
necessity, but only declaratory, and might well have been left out. 
As I. By the same to have authority, ability and capacity to purchase, 
but no clause is added that they may alien, etc., and it need not, for it is 
incident. 2. To sue and be sued, implead and be impleaded. 3. 
To have a seal, etc. ; that is also declaratory, for when they are in- 
coi-porated, they may make or use what seal they will. 4. To restrain 
them from aliening or demising but in certain form ; that is an ordi- 
nance testifying th'e king's desire, but it is but a precept, and doth not 
bind in law. 5. That the survivors shall be the corporation ; that is a 
good clause to oust doubts and questions which might arise, the number 
being certain. 6. If the revenues increase, that they shall be employed 
to increase the number of poor, etc. ; that is but explanatory, as appears 
in the Case of Thetford School, in the eighth part of my Reports 
(f. 3irt'). 7. To be visited by the governors, etc. ; that is also explana- 
tory, * * * for if no visitor had been appointed bv the charter, the 
governors should visit ; and the books in 8 Edw. Ill 28, and 8 Assizes, 



266 RUTTER V, CHAPMAN. § 5 I 

29, do not gainsay it, where it is held, that if the hospital be lay, the 
patron shall visit, and if spiritual the bishop shall visit, so that every 
hospital is visitable; it is tnae, but in the case at the bar the poor of 
the hospital are not incorporated, and so no legal hospital. 8. To 
make ordinances ; that is requisite for the good order and government 
of the poor, etc., but not to the essence of the incorporation. 9. The 
exemption from the ordinary is but declaratory, for being a lay incoi'- 
poration he neither can nor ought to visit. 10. The license to pur- 
chase in mortmain is necessary for the maintenance and support of 
the poor, etc., for w^ithout I'evenues they can not live, and without a 
license in mortmain they can not lawfully purchase revenues, and yet 
that is not of the essence of the corporation, for the coi"poi-ation is 
perfect without it, so that by what has been said, it appears what 
things in genere are requisite to a complete body incorporate, and 
which are verba operativa in this case (which are necessary to be 
known in every case), in the resolution whereof it appears how 
necessary it is that the law and experience should join with their 
hands tog^her. * * * " 

Note. See cases following, pp. 266, 270, 275, 279. 



Sec. 51. Same. (<5) King's or Queen's Charter. 

EUTTER v. CHAPMAN.i 

1841. In the English Exchequer Chamber. 8 Mees. & W. (Ex- 
chequer) i-i 17. 

[This was a controversy between two coroners. The plaintiff had 
been one of the coroners of the county palatine of Lancaster, and 
had been entitled to hold inquests, and receive the fees therefrom. 
Upon the sudden death of Bridget Garratty, within the territory form- 
erly within the jurisdiction of the plaintiff, he claimed the right to 
hold the inquest, but was prevented from doing so by the defendant 
who claimed to be a properly selected coroner by the council of Man- 
chester, which he claimed was a borough duly incorporated, by the 
queen's charter, with jurisdiction over the territory where the death 
occurred. By act of parliament it had been provided that the queen, 
upon petition from the inhabitant householders of any town or 
borough, by advice of the privy council, might extend to such inhabi- 
tants "within the district to be set forth in such charter, all the powers 
and privileges" given to municipal corporations, by the 5 and 6 
William IV, c. 76, which included several powers that were beyond 
the prerogative of the queen to grant without parliamentary authority. 
A petition agreed upon at a meeting of the rate-payers of the parlia- 
mentary borough of Manchester, convened by advertisement, and 

^ Statement of facts abridged. Only part of opinion of Bosanquet, J., is 
given, all others omitted. 



§ 51 EXISTENCE BY KING'S CHARTER. 26/ 

attended by i,ooo persons, which petition was signed by 4,000 house- 
holders of the borough, was presented to the queen asking for a char- 
ter incorporating such borough with the powers and privileges of the 
act of 5 and 6 William IV. Afterwards and before the petition was 
acted upon a counter petition was presented, signed by 6,000 house- 
holders, praying the queen not to grant the charter. The whole num- 
ber of householders was 48,000. The queen nevertheless granted the 
charter and the corporation was organized by election of mayor, 
council, etc., and Chapman as coroner for the territory where the death 
occurred. The plaintiff claimed the queen could not create the cor- 
poration, except in strict compliance with the act of parliament, and 
that required a majority of householders to petition to be incorpo- 
rated. The lower court found for defendant, holding that the queen 
by her prerogative could create a corporation without authority of 
parliament.] 

BosANQUET, J. — * * * The next head of objection is, that, 
in granting the charter, the various provisions of the municipal cor- 
poration act with respect to times and modes of proceeding have not 
been pursued. . But there is no provision in the act which requires that 
this should be done. All the matters contained in that act related to 
corporations then in existence, whose constitutions were to be altered 
by authority of parliament, in carrying which object into effect it was 
necessary that all the provisions prescribed should be strictly ad- 
hered to. 

But when a new corporation is to be erected by the authority of the 
crown, the constitution of such new corporation originates in the will 
of the sovereign ; subject, however, to the assent or dissent of the new 
corporations by their acceptance or non-acceptance thereof. And 
such a grant, made by the known prerogative of the crown, requires 
no petition from any particular description of persons, as a condition 
precedent to its validity. 

It has been contended, however, that the queen has exceeded the 
powers which she derived from her common law prerogative, as well 
as those conferred on her by the act of parliament, in delegating her 
authority to others, in matters respecting the selection of persons who 
are to constitute the burgesses of the corporation, particularly David 
Price, who is empowered to make out the burgess list, and Edward 
Rushton to revise it. Now I take it to have been long settled bylaw, 
that the queen, in erecting a corporation, may name, of her own 
authority, all the officers and all the corporators, or may empower a 
subject to do so in her stead. And although no one but the queen 
can make a corporation, yet when it is made under her authority, it is 
deemed in law to have been made by herself. 

"When the king," says Lord Coke, in the case of Sutton's Hospital, 
10 Rep. 33, "reserves as well the nomination of the persons as the 
name of incorporation to a person who shall be the founder, then he 
ought to name the parties and declare by what name they shall be in- 
corporated, and when he has done so in writing, according to his 
authority, they are incorporated by the king's letters patent and not 



268 RUTTER V. CHAPMAN. § $1 

by the common person, for he is but an instrument, and the king 
makes the corporation, in such case, in the same manner as if all had 
been comprehended in the letters patent themselves. It is true," he 
adds, "that none but the king can make a corporation, as it is held, 
49 Ed. 3, 4, 29 Ass. 8; but qui per alium facit^ perse ipsu7n facer e 
videtur." So it is said in Bro. Abr. Prerogative, 53: "Ao/«, the 
king, by his charter, may by express words grant to a corporation or 
commonalty to make another corporation or commonalty." Again, in 
Jenkins' Centuries 88, p. 270, it is said: "Only the king can make 
a corporation;" but, presently after, "the king may give power to 
name a corporation, and where it is named it is the king's corpora- 
tion." 

In Com. Dig., Franchise (F. 5), citing i Roll. Abr. 512, it is said 
that a subject may choose the person, invent the name, etc., for the 
king, also, the king by charter to the East India Company may enable 
them to constitute such persons as shall be incorporated. lb. In 
Bacon's Abr. Corporations (B), it is said: "The king, by virtue of 
his prerogative, is the only person that can erect either an ecclesiasti- 
cal or lay corporation ; yet the king may grant power to a common 
person to name the corporation, and the persons of whom it is to con- 
sist, but when he has done so, the corporation does not take its essence 
from the common person, but from the king." 

I am not aware that the proposition laid down in these authorities 
has ever been disputed since the second Hen. 7. Blackstone, vol. i, 
p. 474, says, "The king, it is said, may grant to a subject the power 
of making corporations (Bi'o. Abr., tit. Frerog. 53; Vin. Abr. 
Prerog. 88, pi. 16), although the contrary was formerly held (Year 
Book, 2 H. 7, 13), that is, he may permit the subject to name the 
persons and powers of the corporation at his pleasure ; but it is really 
the king that erects, and the subject is but the instrument ; for though 
none but the king can make a corporation, yet qui facit alium facit 
per se. In this manner the chancellor of the University of Oxford has 
power by charter to erect corporations, and has actually often exerted 
it, in the erection of several matriculated companies, now subsisting, 
of tradesmen subservient to the students." The same doctrine will 
be found in Kyd on Corporations, 50. No distinction is made in these 
authorities between ecclesiastical and lay, eleemosynary and munici- 
pal corporations. I refer to these authorities for the purpose of show- 
ing in what broad terms the authority of the crown to delegate the 
nomination of corporations and corporate officers has been recognized. 
But it is not necessary to rely upon them to their full extent in this 
case ; for no discretionary power of choice or appointment is given 
either to Mr. Price or to Mr. Rushton. The constitution of the cor- 
poration and the qualification of the burgesses are fixed by the char- 
ter ; and these persons are only required to make a list of those who 
have such qualifications. 

It is to be observed, that no method of proceeding is pointed out by 
the 5 and 6 Will. 4, c. 4, or i Vict., c. 78, for setting the corporation 
in motion: these acts simply provide, that it shall be lawful for her 



§51 EXISTENCE BY KING'S CHARTER. 269 

majesty, under the advice of her privy council, to extend to the in- 
habitants of any town or borough, within the district to be set forth 
in such charter, the powers and provisions in the act contained ; and 
I know no mode by which the crown can confer them except by char- 
ter. If the crown be authorized to grant the powers in question 
(which without the authority of the act could not have been done), 
must it not by necessary inference be authorized to prescribe the 
means by which they are to be made effective ; provided at least that 
the means adopted are not at variance with those which might be re- 
sorted to in a common-law charter of incorporation. Many of the regu- 
lations of the municipal corporation act are inapplicable to a new 
corporation. David Price is appointed to make out the burgess list 
instead of the overseers, who, under the municipal corporation act, 
are required and compelled to make out such a list, but these officers 
would not be compellable to make out a burgess list for a new cor- 
poration. For the purpose, therefore, of securing the attainment of 
the end contemplated by the act, the crown has nominated a person, 
of whose willingness to undertake the duty it may be assured ; Edward 
Rushton is appointed to revise the burgess list instead of a revising 
barrister appointed by the senior judge of assize ; no power to any 
judge to appoint such a barrister being given by the act, after the 
year which had elapsed at the grant of this charter. And to have 
given authority to any other person to appoint a revising barrister would 
be at least as objectionable as a direct appointment by the queen herself. 

It has been contended, indeed, that if the act of parliament be 
defective in prescribing the proper means of carrying its object into 
effect, the object can not be effected ; but the more reasonable inter- 
pretation of the act in such cases appears to be, that where no particu- 
lar means are prescribed, the crown may proceed to accomplish the 
object by the same means which it is authorized by the common law 
to employ in conferring the usual powers upon a new corporation, 
namely, by letters patent under the great seal. * * * 

Judgment affirmed. 

Viner's Abr. Corp. B. 1, 5; Y. B. 2 Henry VII, 13; 1613, Sutton's Hospital 
Case, 10 Coke 27, supra, p. 264; 1819, Dartmouth College v. Woodward, 4 
Wheat. 518, infra, p. 708;1815, Terrett v. Taylor, 9 Cranch (U. S.) 43; 1816, 
Town of Pawlet v, Clark, 9 Cranch (U. S.) 292; 1817, Denton v. Jackson, 2 
Johns. Ch. (N. Y.) 320; 1828, N. Hempstead v. Hempstead, 2 Wend. (N. Y.) 
109; 1830, Society for Propagation of Gospel v. Town of Pawlet, 4 Pet. (U. S.) 
480; 1831, McKim v. Odom, 3Bland Ch. (Md.) 407, note, p. 416; 1889, Baeder 
v. Jennings, 40 Fed. R. 199. 

1. The king''s power formerly. It is said that both before and for some 
time after the Norman conquest, many nobles claimed and exercised the right 
of creating corporations within their own territories. So also the Pope exer- 
cised the privilege of creating university corporations on the continent, and 
claimed a like right in England, which, though exercised, was not recognized 
as conferring legitimate corporate existence. (Greystock College Case, Dyer, 
81, pi. 64,1553.) Bracton (c. 1263) says: "Those things called privileges, al- 
though they pertain to the crown, may nevertheless be separated from the 
crown and be transferred to private persons, but only with the special grace 
of the king; whose grace and special grant if it have not intervened, time 
does not exclude the king from such a claim, for no time runs against a dona- 



2/0 THE GOVERNOR V. ALLEN AND M'MURDIE. § 52 

tion of the king's or contrary to it. * * * But this kind of liherties, when 
they have been granted by the king, are as it were possessed, and he to whom 
they are granted * * * will be in possession * * * until he has lost 
it from abuse ornon-user." 1 Bract. Twiss's Trans., p. 55. By the time of 
Edward III, the absolute necessity of the king's consent to the erection of a 
corporation seems to be fully established, 49 Edward III, 4; 49 Ass. 8; Viner 
Corp. B. ; 1 Kyd Corp. 42, 44; Bro. Corp. 15; Angell & Ames, § 67. By the 
civil laio the sovereign's consent was necessary also, either by statute, senatiis 
consultum, or constitution of the emperor. Digest 47, Lib. 22, 23; also 3, 4, 1 ; 
Hunter's Roman Law, 314; 1 Brown Civil Law, 101, 102; 1 Domat, Civ. Law, 
Title II, § 2, No. 15. 

2. At the present time.— In England, the king or queen alone, when a cor- 
poration is intended with privileges, which, by the principles of the English 
law, may be granted by the king, is qualified to create a corporation by his 
or her sole charter. Thus the city of Annapolis, in Maryland, was incorpo- 
rated by a charter from Queen Anne, when she held the government of the 
province. When, on the other hand, it is intended to establish a corporation 
vested with powers which the king can not himself grant, recourse must be 
had to an act of parliament; as if it be intended, for example, to grant the 
power of imprisonment, as in the case of the College of Physicians; or to 
confer a monopoly, as in the case of the East India Company ; or when a 
court is erected, with a power to proceed in a manner contrary to the rules of 
the common law. Angell & Ames Corp., §68. 

There seems now to be the following methods of creating corporations in 
England : 

1. By royal chartei", now usually exercised by the king, by virtue of his 
prerogative in foreign affairs, for creating companies for governing and trad- 
ing with the colonial possessions in Africa and the East Indies. Recent 
creations of this sort are the North Borneo Company, 1881 (State Papers, vol. 
Ixxiii, p. 932) ; The Royal Niger Company, 1886 ^Hertslet, Treaties, vol. xvii, 
p. 118) ; Imperial British East Africa Company, 1889 (State Papers, vol. Ixxix, 
p. 641) ; and the British South Africa Company, 1889 (Hertslet, Treaties, vol. 
xviii, p. 134^. These are quite similar to, though differing in some respects 
from, the Virginia (1609), Massachusetts Bay (1629), and Hudson's Bay, Com- 
panies (1670), for colonizing and trading in North America, and the East India 
Company (1600), for a like purpose in India. 

2. By parliament, — public companies,— such as railways, canals, water- 
works, etc., — those engaged in a public undertaking that requires the exercise 
of the power of eminent domain. These are incorporated by special act of 
parliament in each case after investigation and report upon the necessity, but 
are regulated (unless expressly excepted) by the general provisions of the 
Companies Clauses Acts of 1845. 

3. By reg"istration. — All private business, social, or benevolent companies 
having more than twenty members (or if banking, more than ten members), 
under the general incorporation law of 1862, called the Companies Act. See 
Ency. of Laws of Eng., Companies, Chartered, vol. iii, p. 148 ; Company, p. 162, 
and Public Company, vol. x, p. 545; also. Railways, vol. xi, p. 1. 



See. 52. Same, {c) Common law. 

THE GOVERNOR v. ALLEN AND McMTJRDIE.> 

1847. In the Supreme Court of Tennessee. 8 Humphrey (27 
Tennessee) 176-184. 

TuRLEY, J., delivered the opinion of the court. 
On the i8th day of August, 1843, G. A. Davie, who had been 
elected trustee for the county of Montgomery, executed his bond, 

* Arguments omitted. 



§ 52 EXISTENCE BY COMMON LAW. 27 1 

with G. P. Allen and Robert McMurdie his sureties, to the governor 
in and over the state of Tennessee, in the penal sum of $3,000, to be 
void upon condition that he received and securely kept and paid over 
the school-funds of said county, as the law directs. This bond was 
acknowledged in open court at the August term, 1843, of the county 
court of Montgomery. The condition of this bond being broken, a 
suit thereon was commenced at the July term, 1846, of the circuit 
court of Montgomery, in the name of Aaron V. Brown, governor, in 
and over the state of Tennessee, against G. P. Allen and Robert 
McMurdie, two of the obligors. To the declaration the defendants 
filed a general demurrer, which was sustained by the circuit judge, and 
judgment given accordingly, from which an appeal in error is prose- 
cuted to this court. 

The question presented for consideration upon this demurrer is 
whether a suit at law can be maintained upon this bond, in the name 
of the governor of the state. By the 43d section of the act of 1838, ch. 
148, and the 41st section of the act 1840, ch. 38, the trustees of the 
different counties of this state, before the reception of the portion of 
common school fund belonging to their counties under the general 
law for distributing it to them, are required to enter into bond, with 
two or more securities, for the proper performance of their duties in 
.relation thereto, to the superintendent of public instnaction and his 
successors in office. The bond sued on then, in this action, is not a 
good statutory bond, according to all the decisions of the state courts 
upon such subjects and the question necessarily is whether it can be 
held to be a good common law bond to be sued upon in the name o^ 
the governor of the state. 

Before entering into a general investigation of this subject we deem 
it proper to premise that the bringing this suit in the name of Aaron 
V. Brown, governor and successor of James C. Jones, gives no addi- 
tional strength to the action which it would not have had, provided 
the suit had been brought merely in the name of the governor of the 
state, and that the question must be examined as if it had been so 
brought, for if the bond be not a good common law bond when made 
payable to the office of the governor as such, the making it payable 
to a particular governor described eo nor^ine and his successors could 
not sustain the action, for in such case, the suit would not enure to 
his successors, but must be brought in his name if alive, and if not, 
in the name of his personal representative. The bond in this case, 
in point of fact, was not executed to any particular governor, eo 
nomine^ but to the governor in and over the state of Tennessee, then 
can an action at law be maintained upon it.'' The solution of this ques- 
tion depends upon the fact whether a bond can upon common law 
principles be executed to the governor of the state. In the case of 
Polk V. Plummer and others, 2 Humph. 506, Judge Reese, who de- 
livered the opinion of the court, says, "that when a statute directs a 
bond for the public benefit to be made payable to the governor or 
other functionary having legal succession, the office is the payee, and 
the successor, whether described eo nomine^ either in the statute or 



2/2 THE GOVERNOR V. ALLEN AND M'MURDIE. § 52 

bond, or not, may yet maintain the action, such officer being made 
by form of the statute and for the public benefit, quod hoc, a corpora- 
tion sole." There is no reason whatever, for questioning the general 
truth of this proposition ; it is sustained by the judgment of the 
supreme court of North Carolina in the case of the Justices of Cum- 
berland V. John Armstrong and others, 3 Dev. 284, where it is 
held that the acts of assembly which direct the justices of the county 
courts to take bonds to themselves in their official capacity confer 
on them, as to such bonds, a corporate character. 

But it must be admitted in both these cases that, if they be only 
quoad corporations, and the bonds be not within the statute authoriz- 
ing them, they will not enure by succession. But is a governor of a 
state only quoad a corporation sole .'' We think not. It is true it is held 
in the case of Polk v. Plummer and others to be quoad that particular 
transaction a corporation sole, but that was all that it was necessary 
to hold him in that case; but it is not determined that he is not a cor- 
poration sole for other purposes besides those in which bonds are 
directed by statute to be made payable to him. Blackstone, in the 
first volume of his Commentaries, page 469, says: '■'•A corporation 
sole consists of one person only, and his successors in some particu- 
lar station, who are incorporated by law, in order to give them sole 
legal capacities and advantages , particularly that of perpetuity , which 
in their natural persons they could not have had.^' In this view the 
king is a sole corporation; so is a bishop, and so is every parson and 
vicar. 

Now the governor constitutes the executive department of the state ; 
he is vested by the constitution of the state with great and important 
powers to be executed for the benefit of the state, and it is absolutely 
necessary that there should be no interregnum in his office, to avoid 
many and great inconveniences ; this can not be unless we apply to 
him the maxim of the common law, applicable to the king, that he never 
dies; this maxim of the common law (like most, if not all, of them) is 
based upon wise conceptions, and not upon any foolish reverence for 
kings or belief in their sanctity or immunity from the common lot of 
mankind, but upon the necessary assumption that the state, which 
protects and cares for all, never ceases to exist, but that it is always 
alive and active in the performance of its duties to the citizen. 
The state, being an ideality, can only be conceived of through the 
public functionaries who constitute the different departments by which 
it exists; therefore, to hold that it never dies is necessarily to hold that 
those who co,nstitute its necessary departments never die. The depart- . 
ments by which the government of Great Britain exists are the king and 
houses of parliament; the king is the executive of the nation, and 
he and the two houses of parliament are the legislature ; there is never 
in contemplation of law an interregnum in either of these depart- 
ments, for the law-making and the law-executing power being abso- 
lutely necessary to the existence of the state, if they cease to be, the 
state pro tem.pore ceases to exist, which would be a solecism in a gov- 



§52 EXISTENCE BY COMMON LAW. 2/3 

emment not destroyed by invasion or rebellion, and thrown back 
upon the primitive principles of society. 

The governor of this state is the executive of it; it is one of his 
duties^ among many others., to see that the laws of the state are exe- 
cuted and obeyed; this is a great and fundamental duty, without the 
proper observance of which society might and would necessarily be 
greatly distracted, and the proper security of life, liberty and property 
seriously endangered for the purpose of enforcing the execution of 
tlie laws, and the protection of the state from rebellion and invasion ; 
he is the commander of the forces of the state ; to hold that there can 
be an interregnum in this office would be to hold to the tempo- 
rary anarchy of the state., and in order to hold that there is no such in- 
terregnum we must hold that the governor, as such, never dies; to do 
this he must be a corporation sole, with succession in office. Such 
we think he is, constituted so by the organization of our state govern- 
ment, and not by any particular statute or statutes ; and therefore 
when bonds are directed to be made payable to him in his official ca- 
pacity, they arc payable to him in his capacity as a corporation sole 
quoad that particular transaction. 

If the governor of the state be a corporation sole, then he may be a 
trustee, and that, too, in things not connected with his office ; for it is 
well settled that corporations, both aggregate and sole, may be trus- 
tees for others. A bond, then, executed to a governor of a state vol- 
untarily, which violates no public policy or private morality, but on 
the contrary is made to secure a public right, maybe sued upon at law 
in the name of the governor, for the benefit and use of those inter- 
ested in it, and that, too, though there be no express statute author- 
izing it. There is no case to be found contradicting this position. 

In the case of The United States v. Thos. Tingley, 5 Pet. 1 14, it 
was held "that a bond voluntarily given to the United States, and not 
prescribed by law, is a valid instrument, upon the parties to it, in 
point of law, because the United States have in their political capacity 
a right to enter into a contract, or take a bond not previously pro- 
vided by law, and the United States, being a body politic, may within 
the sphere of the constitutional power granted to it enter into con- 
tracts not prohibited by law and appropriate to the just exercise of 
those powers." 

In the case of Hibbits v. Canada et al., 10 Yerg. 465, it was held 
by this court that when an administration bond was made payable to 
James Hibbits, chairman of Smith county, and his successors in office, 
instead of the governor, as is directed by law, "that no action at law 
could be maintained on the bond in the name of a successor, but that 
the bond was valid at common law as a voluntary bond, and that a suit 
at law might be maintained upon it in the name of the personal rep- 
resentative of Hibbits." The chairman of the county court is not a 
corporation sole, and, therefore, upon his death he has no successor, and 
a bond executed to him without authority by statute necessarily descends 
to his personal representative, and must be sued upon in his name. 
18— WiL. Casks. 



2/4 THE GOVERNOR V. ALLEN AND M'MURDIE. § 52 

The case of Polk, Governor, v. Plummer etal., in 2 Humph. 500, 
holds, as we have seen, in a too restricted sense, that the governor is 
a corporation sole when a bond has been executed to him by statutory 
provision. In the case of Jones, Governor, v. Wiley et al., 4 
Humph. 146, a bond was taken from the clerk of Roane county 
court, payable to Newton Cannon and his successors in office, but 
taken before the wrong tribunal, it was held that the bond was not a 
good statutory bond, but that it was a good common law bond, and 
might be sued upon in the name of Cannon's personal representative, 
but not in the name of his successor. But Newton Cannon was not 
a corporation sole, and, therefore, could have no successors, and even 
if the bond had been made payable to him calling him governor, it 
is probable it would have been held to be a description personal only. 

In the case of The Justices of Carroll County Court v. Buchanan, 2 
Murph. 40, it is held by the supreme court of North Carolina that a 
guardian bond made payable to the justices of Carroll county is void 
at common law, because it was held that the justices of the county 
court are not a corporation, and their individual names were not used 
in the bond or suit ; but it may be doubted whether, if the bond was 
executed in pursuance of the statute, the justices would not, under the 
authority of the case of The Justices of Cumberland v. Armstrong, 3 
Dev., be considered a corporation quoad that transaction. 

In the case of the governor for use of the State Bank v. Twitty et 
al., I Dev. 153, it was held by the supreme court of North Carolina 
that a sheriff's bond in a sum different from that directed by law, 
made payable to John Branch, governor, and his successors was not 
a good statutory bond, and could not be sued upon in the name of 
Gabriel Holmes, governor, and his successors. This case is the same 
with that of Jones, Governor, v. Wiley et al., 4 Humph. 46, and was 
decided as that was, for the same reason, to wit, that the bond is 
payable to the governor as an individual eo nomine^ and not to his 
office, and, therefore, descends to his personal representative. These 
are all the cases to which we have been referred as conflicting with 
•the view we have taken of this case. We think, as we have endeav- 
ored to show, that they are not in conflict with it. 

Upon the whole, then, we are of opinion that the execution of this 
bond being voluntary, and for the purpose of securing a fund belong- 
ing to the county of Montgomery, donated to it by the state, and for 
which the trustee of the county was bound to enter into bond and 
security before he received it, the mistake of the county court in not 
taking this bond, payable to the superintendent of public instruction, 
but to the governor of the state, though it vitiates it as a statutory 
bond, does not avoid it at common law, but that the governor of the 
state being a corporation sole, a suit may be maintained upon it in his 
name for the benefit of the county of Montgomery. 

We therefore reverse the judgment of the circuit court, overrule the 
demurrer and remand the case for further proceeding. 

Note,. It is frequently said that corporations do not exist by common law 
with us. That, perhaps, is true in regard to private corporations ; but so far 



^53 EXISTENCE BY PRESCRIPTION. 2/5 

as public oflScers, or the state itself, or the National Government are cori)ora- 
tions they are so by common law. 

1. As to officers, see supra, p. 200. 

2. The United States is a corporation.— 1878, Dickson v. United States, 
125 Mass. 311, 28 Am. Eep. 230; United States v. Maurice, 2 Brock (U. S.) 
96, 109; Cotton v. United States, 11 How. (U. S.) 229, 231; United States v. 
Tingey, 5 Pet. (U. S.)-115, 128. 

3. The states are corporations also.— 1843, State of Indiana v. Woram, 6 
Hill (N. Y. )33, 40 Am. Dec. 378; People v. Utica Insurance Company, 15 
Johns. (N. Y.) 358, 8 Am. Dec. 243; People v. Assessors of Watertown, 1 
Hill (N. Y.) 620. 



Sec. 53. Same, (d) Prescription. 

GREENE Et Al. v. DENNIS.* 

1826. In the Supreme Court of Errors of Connecticut. 6 
Conn. 292—305, 16 Am. Dec. 58. 

[This was an action of ejectment, for a tract of land in Pomfret, 
tried at Brooklyn, September term, 1825, before Bristol, J. 

The plaintiffs claimed title to the demanded premises, as the heirs 
at law of Sylvester Wickes ; and the defendant, as the lessee of the 
Yearly Meeting of the people called Quakers, who claimed to be de- 
visees of Wickes and the lessee of Rowland Greene, who claimed as 
a residuary devisee. To prove his title, the defendant exhibited in 
evidence the last will and testament of Wickes, dated the 17th of 
January, 1822. The clause of the will comprising the demanded 
premises was in these words: "I give the Yearly Meeting of the peo- 
ple called Quakers, of New England, my farm in Pomfret, that I 
bought of Clark and Nightingale, the net income of which is to be 
appropriated in aid of the charitable fimd of the boarding school es- 
tablished by Friends in Providence, to them the said people called 
Quakers, and their successors in the same faith forever." After making 
numerous other devises and bequests, the testator disposed of the resi- 
due in the following terms: "Also, I give to my said nephew, Row- 
land Greene, all the rest and residue of my estate, of what kind or 
nature it may be, or wherever found not herein or otherwise disposed 
of on condition that he, the said Rowland, pay or cause to be paid, 
all my just debts, the foregoing legacies, funeral charges and expense 
of settling my estate." The testator died soon afterward, and his 
will was duly proved and approved. The defendant also proved who 
the members of the Yearly Meeting were, viz., Benjamin Freeborn 
and thirty-two others, whose names were specified. To prove that 
the Yearly Meeting was a corporation, capable of taking and holding 
lands by devise, the defendant adduced in evidence certain votes and 
proceedings from the records of that body, beginning in 1683 and ex- 
tending to the commencement of this suit. ♦ • * 

* Arguments omitted. Statement of facts abridged. Parts of opinion on 
other points omitted. 



276 GREENE V. DENNIS. § 55 

The judge instructed the jury that the members of the Yearly Meet- 
mg could not take and hold the farm, as individuals, for the purposes 
mentioned in the will ; that the votes and acts done by the society, 
how^ever long their continuance, would not authorize the presumption 
of a charter of incorporation, with power to purchase and hold real 
estate, unless they were such acts of the society as they could not per- 
form without being incorporated ; that if such devise to the Yearly 
Meeting was void for uncertainty, or because the society was not in- 
corporated, the farm would descend to the heirs at law of the testator, 
would not pass by the residuary clause in the will to Rowland Greene. 
The jury returned a verdict for the plaintiffs, and the defendant moved 
for a new trial on the ground of misdirection.] 

HosMER, Ch. J. * * * 2. The next question that arises in the 
case is, whether the Yearly Meeting was a corporation, capable of 
holding land in trust. 

By a corporation it is understood, in contradistinction from a volun- 
tary association of individuals, a society created by the sovereign 
power. 

At the trial of this cause no charter of incorporation was exhibited. 
It, however, was contended, from a long and continued exercise of 
certain acts, that an incorporation ought to be presumed. 

That a grant of charter is presumable from the long continued ex- 
ercise of authority is indisputable, and has not been disputed, and all 
the cases cited by the defendant's counsel tend only to prove this un- 
questionable principle. The inquiry in this case involves no question 
of law, and turns entirely on a point of fact. Admitting all the acts 
done by the Yearly Meeting for more than a century to have been 
lawful, do they warrant the presumption that they were incorporated? 
This is the precise inquiry, and in his charge to the jury, the judge, 
recognizing the law of presumptions, instructed them that the acts 
done must have been such as an unincorporated Yearly Meeting could 
not have performed. When fairly construed, the following was 
virtually the opinion expressed : If the acts done by the Yearly Meet- 
ing bear on the face of them the impress of corporate acts, such as 
individuals can not, and a corporation alone is competent to perform, 
you may presume the Yearly Meeting to be a corporation. But if 
their acts were within the competency of individuals to perform, they 
furnish no ground to presume that they were other than the acts of 
individuals. The inference to be drawn by the jury was a fact in- 
quired after from facts established, and their reasoning was to be from 
the effect to the cause. The law made no inference on the subject, 
nor gave to the testimony a technical efficacy beyond the simple and 
natural operation. The principle had before been recognized in Hart 
V. Chalker, 5 Conn, Rep. 311. "A usage," said the court," sup- 
posed to be founded on a grant or agreement, determines the extent 
of the supposed grant or agreement. The right granted is supposed 
to be commensurate with the right enjoyed. They are different media, 
proving precisely the same fact ; and it is because of this indentity of 
proof that the usage is supposed to evince the grant. In short, like 



^ 53 EXISTENCE BY PRESCRIPTION. 2/7 

a seal with its correspondent impression, the grant and the usage are 
in a point of proof, precisely and identically the same." 

The principle declared by the judge was unquestionably correct; 
and the verdict of the jury necessarily implies that the Yearly Meet- 
ings was not a corporation. 

From the evidence exhibited, and spread on the motion before us, 
my mind is led to the same results. Every act of the Yearly Meeting 
is entirely reconcilable