UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY rBRARY TV\J PARTNERSHIP AND PRIVATE CORPORATIONS One of a Series of Lectures Forming a Part of the Course in Law ALBERT E. WILSON, A. B., A. M., LL. B. Professor of Partnership and Private Corporations E INTENSION (NON-RESIDKNT INSTRUCTION) CHICAGO PARTNERSHIP AND PRIVATE CORPORATIONS ALBERT E. WILSON, A. B., A. M., LL. B. Professor of Partnership and Private Corporations INTENSION I INIVERSITY \SBLP-INSTKUCTION UNDER EXPERT GUIDANCE) CHICAGO 1912- Copyright, 1912, LASALLE EXTENSION UNIVERSITY Introduction to the Study of PARTNERSHIP AND CORPORATIONS BY ALBERT E. WILSON, A. B., A. M., LL. B. Partnership. The law of partnership, with but few exceptions, is the law of contracts and agency. A knowledge of these two subjects will explain practically every characteristic. The foundation of a partnership is an agreement ; its operation is an exposition of the law of agency. Certain individuals come together and agree upon a certain way of doing a joint business. A written agreement is usually drawn, in which their respective rights are defined. The agreement, however, may be oral. Unlike the case of a corporation, the state has nothing to do with the creation of partnerships, although the agreement is sometimes recorded. No new thing is created by the agree- ment. The individuals are as much individual as before, in the eye of the law. They have merely created for themselves a new and particular set of duties each to the other, which their former relations did not give rise to. When sued the firm is brought into court not as a firm but as individuals doing business under a certain name. If a member of a firm dies, the firm automatically is dissolved, its affairs closed up, and a settlement of the interests of the deceased is made with his heirs and personal representatives. If a person desiring to join an existing partnership buys out the interest of one of its members he does not thereby become a partner. The consent of the other partners must be first had. If this consent cannot be obtained the firm must dissolve and the in- terest acquired by the would-be member must be ascertained and turned over to him. Whereas, in a corporation the death 4 ALBERT E. WILSON of a member affects in no way the existence of a corporation; and any individual who is able to legally acquire title to a ma- jority of its shares may carry on its business as suits his fancy. As the corporate entity is the fundamental essential of a cor- poration, so the duty of absolute good faith is the cardinal prin- ciple of a partnership. Not that good faith is not always re- quired by the law in dealings between man and man; but in partnerships good faith is required in a much higher degree and in many more particulars than it is called for by the ordi- nary dealings of men. Partners in matters of their mutual business can never be said to deal at arm's length. Their rela- tion is intimate and personal in character. They have, by their agreement, so placed their affairs and fortunes in each other's keeping that constant association, absolute good faith, and per- sonal confidence must exist. How different from a corporation, where ordinarily the stockholders rarely meet each other; are but slightly, if at all, acquainted; and where, when they do meet, they are very likely to engage in bitter controversies over matters of policy or in desperate struggles for the acquisition of a greater power in the management of the common business. Intimate association and friendly co-operation demand limited members. Partners are never many: "Many men of many minds" will disrupt any partnership. It is a matter of busi- ness history that partnerships which begin small and keep ad- mitting others to an "interest in the business," shortly split up into smaller associations. The successful partnership rarely has more than three or four partners. Six or seven partners are unusual. A greater number is almost unheard of. Fewer individuals interested means smaller aggregate capital invest- ed. And herein lies, no doubt, a partial explanation of the ina- bility of partnerships to handle the gigantic business of today. But a far more potent factor is also present, that is, the liabil- ity of each partner to the firm's creditors. By the term "liable as partners" is meant, that each partner is personally liable to creditors for all the debts of the partner- ship. This individual liability may be regarded as the charac- teristic of partnerships next in importance to absolute mutual good faith. If all the partners but one should become insolvent, PARTNERSHIP AND CORPORATIONS 5 the one solvent partner would have to pay all the debts. He may have had nothing to do with incurring the indebtedness. He may have advised against it and opposed it strenuously. Neverthe- less he would be liable if it had to do with the business of the firm. It is true that if one partner is compelled to pay the firm's debts, he may have contribution thereafter from the other mem- bers. That is, the others may be compelled to reimburse him for what he has paid over and beyond his share. But if for any reason the other partners cannot pay, he must bear the bur- den alone. A third characteristic of a partnership is the mutual agency that the relation creates. Each partner is the agent of the other partner or partners in everything properly within the scope of the partnership, unless by agreement, made known to the public with which it deals, the firm has specifically fixed, for each mem- ber, the field of his activities. Such a limitation, however, is not usual and all legal presumptions, where third parties are con- cerned, are against any such limitation. Between the partners themselves, their partnership agreement would be conclusive. It would only be necessary to offer sufficient proof of the agree- ment if it was oral; or to interpret it, if it was written. But third parties have a right to presume a mutual agency in the absence of sufficient notice to the contrary. A limitation that is not uncommon is that which touches not the liability itself, but the extent of it. You have, no doubt, frequently seen under a firm name the statement that certain persons are " general partners" and certain others are " limited or special partners." "General partners" are those who are liable in any event and to an amount limited only by the firm's debts; while "special partners" are those who are only liable at all under certain conditions (this is very rare) or who are liable for the firm's debts only up to a certain amount. If it can be proved that a creditor had the fact brought home to him before he became a creditor of the firm, that certain mem- bers were "special partners," he is then, though not in all cases, precluded from enforcing his claim against such partners be- vond the limitation thev have fixed. 6 ALBERT E. WILSON "Silent partner" is a term frequently heard. It is not a legal term, but is one that the courts have often dealt with. An able business man without capital may obtain financial backing of another and share with him profits earned. If there are profits no difficulty can arise except between the partners, in which case their agreement will control. If there are no profits, the ' ' silent partner" is sought by the creditors. Too frequently the "silent" and usually solvent partner tries to hide behind the insolvent partner. His name not having appeared as a member of the firm, it is often no easy matter to determine whether or not he should answer to the creditor. On the one hand it is said that the creditor cannot be regarded as having extended credit to the firm on the faith of a membership of which he is ignor- ant. On the other hand it is said that a partner cannot be a partner for profits only. With the exposition that the text will give on the questions of good faith, partnership liability, agency and the interpreta- tion of the fundamental agreement, the student will find the subject of partnership unusually free from complexity, the diffi- culties lying for the most part in complications arising from doubtful or involved sets of facts. Private Corporations. In these days of great corporations, whose operations are so minute as to enter into the personal life and happiness of the humblest citizen, and so comprehensive as to control the desti- nies of nations and the progress of civilization, it is interesting to note that condemnation, not gratitude, is characteristic of the attitude of the general public toward them. From all parts of the land come cries for regulation, suppression, annihilation, and prosecution of corporations. No annoyance is so small, no crime is so great that corporations may not be, and in most cases are, held responsible directly or indirectly for their per- petration. The sense of oppression from these great mercan- tile giants is so universal that it may be said to be the motive behind nine-tenths of the legislation now being considered in Congress and in the various state legislatures. PARTNERSHIP AND CORPORATIONS 7 In consequence of this widespread agitation, every person, educated or uneducated, knows something about corporations. Unfortunately the most that is known is evil. In fact, in many minds naught but evil is known of corporations. This knowl- edge of evil is nourished and developed, if not implanted, by po- litical agitators traveling under various colors, but having, in many instances, but one end in view, viz., their own aggrandize- ment. Results are beginning to appear, and these results are not always the ones to be desired. At the present time, those who have had most to do with the recent prosecutions of cor- porations are far from satisfied that their course has been the right one. Not that they are listening to the cry of "big busi- ness" of "let us alone." The highwayman and the pickpocket utter a similar cry and for a similar reason. It disturbs their business. What has given pause to thinking men is the fact that their most drastic methods have been least effective. One menacing head is stricken off only to be replaced by two others as dangerous as the first. Statesmen have also found that there are two kinds of cor- porations, the good and the bad, and that it is almost impossible to distinguish them. The government is dismayed. It is in doubt as to whether or not its whole course has been wrong. The laws calling for the dissolution of corporations are ineffect- ive, and they can only be made effective by destroying good cor- porations with the bad. This is recognized to be undesirable. The only other course, unless we let them alone, is to regulate them. But how? This is the great political and economic prob- lem of the day. There is such a diversity of opinion upon it that but one course seems to be open : ' ' Appeal to the People. ' ' This course may be the best or the worst. It all depends upon one thing, education. If the electorate act thoughtfully and in- telligently the remedy will be found and will be effective. If ignorance controls, and passion, envy, and hatred sway the pub- lic mind, disaster and consternation alone will result. It, there- fore, is most proper that the private citizen, young or old, law- yer or layman, should set himself seriously to the study of cor- porations. It is his duty as a citizen to fit himself to assume the grave responsibilities that will come to him in the near future. It is his duty as an American to maintain before the world, 8 ALBERT E. WILSON the ability of his country, to meet and handle sanely, wisely and intelligently this problem as it has other great political and economic problems. As has been said, the most that the average citizen knows of corporations and their methods is evil. Perhaps many of those who read this course of study will approach it from a hostile rather than a friendly point of view. This is to be avoided. The lawyer is an incipient judge, and the citizen, in a demo- cratic government such as ours, as the final arbiter of all law, should approach its study with an open mind. With a view to diverting the attention of those whose study of corporations has been slight and whose knowledge may be largely of the evil, it is proper to point out as you enter into this field of study, that the advocates and supporters of corpora- tions have a reason for the faith that is in them. Corporations have been and are today great public benefactors. They are business agencies, the power and utility of which far surpass that of any machine that was ever invented greater than the steam engine, the telegraph, the telephone, for, lacking the needed development, exploitation, and distribution, these won- derful contrivances could accomplish little and benefit few. For instance, consider the railroad. Have you ever stopped to consider what it costs to build a railroad"? We all read of the bonded indebtedness of railroads with a curious lingering over the eight and nine figures that take up so much horizontal space on the page we are reading. But few of us realize, or can rea- lize, what those figures mean. Suppose you are the unquestioned owner of patents that cover every part of a locomotive; of the cars it draws, the track it runs over, and the roadbed on which it rests. Your monopoly is complete. No railroad can be built or operated without your consent. Suppose also that your knowledge of these appliances is essential to their correct con- struction and successful operation. Suppose also that corpora- tions are unknown. How would you raise the money to build your road, and how would you operate it after you built it? Do you suppose that the public would come by the thousands to entrust their money to your personal care, to be disbursed by you as you saw fit, and the income from its investment to be PARTNERSHIP AND CORPORATIONS 9 dependent upon your care of it? Could any agents of yours, however clever, be able to persuade large and small investors alike to put their money into an enterprise over which they had no control and in which they had no more evidence of inter- est than your personal obligation? And yet if you could not get many interested, each in proportion to his means, you could never accumulate the vast sum your project would require. For what man could you find who could personally give you the $10,000,000 you required, or, if he did have such an amount, would be willing to risk it all in a single venture? Yet, without such an enormous amount, your wonderful patents could not be advantageously utilized. But corporations could and did handle such a condition. The patents, locomotive, cars, and equipment became the property of a corporation. In this corporation each investor, however small, owned a fixed ascertainable interest. In the management of the property he had a voice. In the distribution of profits he had a share. The government itself created the corporation, limited and defined its powers, and protected the interests of its members. Through the medium of these corporations were de- veloped the resources of the country and the inventive genius of the people. Less than fifty years ago there was no trans-con- tinental railroad; today there are half a dozen. Fifty years ago it took three months to go from New York to San Fran- cisco; today it takes four days. One hundred and fifty years ago a man made his will and departed from the bosom of his family amid much weeping and lamentation, when undertaking a journey of a couple of hundred miles; today, on the eve of such a journey, he calls up his home from his office and says he will be back for dinner tomorrow. Take the industrial field. Sixty or seventy years ago they began to manufacture steel. It cost the purchaser ninety dollars a ton. Today an infinitely superior steel can be bought under $30 a ton. Before the Civil War, and even afterwards, we burned oil for illuminating purposes. We were in constant dan- ger for fear the crudely refined liquid would explode, and were far from satisfied with the quality of the light obtained. Yet we then paid over 25 cents a gallon, where now we pay 10 and 12 cents for a vastly superior product. 10 ALBERT E. WILSON And so instances might be multiplied, without making any clearer the fact that all these things became possible not be- cause of the excellence of any one thing in itself, nor because of the genius that discovered or evolved it; but in the corporate method of doing business, that furnished the funds to exploit, to develop, to experiment with, that systematized the management of the industry, and economized rigidly or spent freely with equal indifference to all but the one goal "results." The growth of our country is the growth of corporations. From a position of minor importance among nations of the sec- ond class, we have become the leading producing and industrial nation of the world. And this marvelous development occurred in a little over a generation and has at all times kept pace with the growth of the great corporations. However much we may condemn them, however great the wrongs their unparalleled growth has caused, we must remember that ill-considered laws will accomplish either too little or too much. In either case the result will be serious. Laws that are too drastic either cannot be enforced and thereby arouse contempt, or, if enforced, in de- stroying the machinery will also destroy the prosperity which the machinery produces. Therefore, with eyes seeing both the good and the evil; with minds determined to preserve the one and eliminate the other; and, above all, with hearts beating always for the common good of all, let us approach this absorbing question. Perhaps you will find that a great deal has already been done by way of eliminating evil and preserving good. Perhaps you will decide as many others have already decided, that, though slow, the evolution of the corporation has proceeded along the right lines. Let us direct your attention to certain steps that have already been taken, so that you may judge whether they should con- tinue. It is essential first to get a clear conception, .legally speaking, of what a corporation is. Chief Justice Marshall said: "A corporation is an artificial being, invisible, intangible, and exist- ing only in contemplation of law." It is an entity, a thing exist- ing separate and apart from its members. It is not physical or material. To make clearer this creature, this individuality, so PARTNERSHIP AND CORPORATIONS 11 to speak, consider how it comes into existence. A body of per- sons come together and ask the State to constitute them a cor- poration. The State demands that certain formalities be first gone through with and then does what? It performs an act of creation. It brings something into existence that did not be- fore exist. If a mere agreement between individuals is made, the result produces a partnership. To produce a corporation an act of the sovereign power is necessary. This is performed by the State in granting a charter. A partnership is a mere relation between certain persons who have agreed to act in a certain manner toward each other. A corporation is an individual, a thing, an entity. It is born, cre- ated where nothing formerly existed. It is not the sum of its stockholders, its directors, or its officers. It can still exist whether it has a thousand stockholders or but one. All of its original members may die or withdraw and be succeeded by others, yet the corporation is the same corporation it always was. This conception of something having a legal existence irrespective of that which composes it, is difficult for most laymen and for many lawyers. We are all prone to think that if one person owns a majority of a corporation's stock he thereby becomes the corporation. But in reality he has no more rights in the corporation than any other stockholder. The affairs of the cor- poration must still be conducted by its board of directors, and its by-laws must be obeyed. A majority stockholder has no more power to bind a corporation by contract, unless properly authorized by the directors, than has -the holder of a single share. A stockholder may contract with his corporation, may sue or be sued by it and in general, with regard to corporate affairs and corporate property, may act toward the corporation as he would toward another individual. This conception of a corporate entity separate and apart from its members gave rise to peculiar situations. Among them was that a corporation, being the creature of the State, had no pow- ers except those with which it was expressly or impliedly en- dowed by the State. It could only do those things which it was empowered to do. As a machine made to sew shoes was abso- lutely incapable of forging steel, so a corporation created to 12 ALBERT E. WILSON manufacture clothes was absolutely incapable of operating a railroad. Pursued to its logical conclusion, it was formerly held that the sovereign power, being law itself, could do nothing illegal, and therefore when it conferred powers upon a corporation they were of necessity legal powers. Therefore, said the court, a cor- poration cannot commit a crime, because a crime is an illegal act and this entity created by law had not the power to do any- thing illegal. Still further, a corporation was once said to be incapable of doing any wrong, and therefore it could not be sued in an action of tort. The argument was that a corporation has no power to do an act not authorized by its charter, and, as we have seen, this is true in a sense. However, the Courts construed the word "power" to be used in the sense of " authority," that although the corporation had no right to exceed the powers con- ferred upon it by the State, nevertheless it had the capacity to do so ; and fhat if in doing so it committed a tort, it is as fully liable as a natural person would be under similar circumstances. Taking the next step, it is now held that a corporation is also liable for the negligence of its servants or agents in omitting to perform a duty resting upon the corporation. Thus it may be liable for negligently chaining a vicious dog, through the escape of which third parties are injured. A railroad company is now liable for keeping its premises in an unsafe condition. "It has been contended that, since a corporation is merely an artificial being, without mind or soul, it cannot commit those torts which involve a mental operation, and that it cannot, there- fore, be liable for malicious wrongs, or wrongs involving a spe- cific intent, such as libel, malicious prosecution or fraud. It is now well settled, however, that the mental attitude of its agents, like their acts, may be imputed to a corporation, and that a cor- poration may be guilty of malice in contemplation of law. Cor- porations, therefore, have been held liable for a libel published by their agents; for a malicious criminal prosecution; for a ma- licious and vexatious attachment; for conspiracy; and corpora- tions have repeatedly been held liable for false representations made by their agents. The rule is well settled that, in cases of fraud, a corporation will be held liable whenever an individual would be." PARTNERSHIP AND CORPORATIONS 13 In this same connection there was developed what is known as the doctrine of "ultra vires." . This doctrine, briefly speak- ing, was that for acts done beyond its powers, express or im- plied, a corporation was not liable. Its application is chiefly in the law of contracts. A contract ultra vires of the corporation was held to be absolutely void, and such is still the law in many jurisdictions. Mr. Justice Gray of the United States Supreme Court said that a corporation is not liable upon a contract ultra vires, because of: " (1) The interest of the public that the cor- poration shall not transcend the powers granted; (2) The in- terest of the stockholders that the capital shall not be subjected to the risk of enterprises not contemplated by the charter, and therefore not authorized by the stockholders in subscribing for the stock; (3) The obligation of every one entering into a con- tract with a corporation to take notice of the legal limit of its powers." This rigid position was productive of much hardship. Modifications were at once made. A distinction was drawn be- tween executory and executed contracts. If the ultra vires con- tract was executory, the other party to it could prevent the cor- poration from enforcing it against him; if it was partly ex- ecuted, a halt was called and the party who had received benefits would have properly to pay for them. And finally, where to merely pay back a thing of value would not do full justice, many courts now hold that even specific performance may be compelled. Perhaps the most striking example of the development of the law may be seen in the enforcement of personal liability upon officers, directors, or stockholders, under various conditions. In many corporations the stockholders are personally liable for an amount equal to the par value of their stock holdings, in addi- tion to any unpaid balance due on their subscriptions to those stock holdings. This is notably true of banks. In some States directors are personally liable for all indebtedness incurred in excess of the capital stock of a corporation. In most jurisdic- tions directors are personally liable to creditors for dividends which they have declared and paid, when there were not suffi- cient earnings out of which they might properly be declared. 14 ALBERT E. WILSON In Another direction we see the recent laws passed by many state legislatures and also by the United States Congress, doing away with certain old common law defenses to actions for per- sonal injuries. These laws in many cases provide for fixed compensation to injured employes, where they have fallen by the wayside and are temporarily or permanently incapacitated from performing their labors in the great industries of the coun- try. Of course, such laws apply to employers generally whether they are corporations, partnerships, or individuals, but the great majority of employers to whom they are intended and to whom they actually do apply are corporations. It will be seen from the above that the law has not been stand- ing still. It is in constant change, adapting, enlarging and modi- fying ancient principles, hoary with age, endeavoring to fit them to present conditions. Many believe it is failing to do so; or that at least it is doing so too slowly and needs the assistance of affirmative legislation. Perhaps this position is correct. In any event, intelligent legislation must be founded upon the past. And, therefore, a knowledge of the past is indispensable. Edu- cation, not revolution, is the means to success. Like a mighty army, which cannot move faster than its slowest moving unit, so our great country proceeds upon the path of progress only so fast as the intelligence of its units increases. Those who run on too fast in the great evolution fall victims to their own hardi- hood. Like stragglers and undisciplined guerrilla bodies in an army, they do much harm and are usually cut off and destroyed, often by their own comrades. It is the duty of the disciplined soldier and the patriotic citizen to advance only under orders, only under the law, obeying even if the orders given or the law ordained are ignorantly given or illy conceived. For thus only is order preserved and the dignity and authority of the law maintained. PARTNERSHIP AND CORPORATIONS 15 Nulla impossibilia aut inhonesta sunt praesumenda; vera autem et honesta et possibilia. No things that are impossible or dishonorable are to be presumed; but things that are true and honorable and possible. Legal Maxim 16 ALBERT E. WILSON NOTE. Students who desire only a general knowledge of law as an aid to them in business and do not care for a diploma are not required to answer the following quiz questions and cases. They are required to answer merely the final examination questions. Students who are studying for professional purposes and desire a .diploma at the end of the course should answer in writing all the following questions and cases. The questions should be answered without referring to the text; afterward they may be corrected by such reference. The answer should be written on a typewriter, or, if by longhand, in ink. We advise the use of a large-sized, loose-leaf note book, or separate sheets of uniform size, rather than bound note books. Only the leaves, securely clamped or fastened together, and not the covers, should be sent us. The paper should be substantial but not too heavy. In this way considerable unnecessary postage expense will be saved. It is not necessary to copy the question in each case, but the answer should be carefully numbered to indicate to which question it refers. The name and address should appear on every paper. The answers to these questions should be sent to us at the com- pletion of the subject, and not at the end of each week's work. They will be examined, criticised, graded and returned to the student, and should be kept by him for future reference and review. A large number of these questions are actual cases that have been decided by the courts. When we return to the student his corrected answers to these questions we shall also send him a digest of the hold- ing of the court in each of these cases, together with the name of the case and its citation in the original report. Questions for the final examination on each subject will be sent to the student when his answers to quiz questions are returned. Students who do not send in answers to quiz questions should notify us when they are ready for final examination questions on the first subject and such questions will be sent. Thereafter the examination questions on the succeeding subject will be sent with each returned examination paper. The examination questions should be answered in writing, without consulting the text, and the answers sent to us. Thev will be corrected, graded and returned to the student. PARTNERSHIP AND CORPORATIONS 17 OUTLINE FOR THE STUDY OF PARTNERSHIP AND PRIVATE CORPORATIONS, AND QUESTIONS UPON THE TEXT.* ALBERT E. WILSON, PROFESSOR TEXTS: Partnership, by Eugene Allen Gilmore, A. B., LL.B., Pro- fessor of Law, University of Wisconsin. Private Corporations, by Horace LaFayette Wilgus, S. B., S. M., Professor of Law, University of Michigan. FIRST WEEK. Monday : Read Introductory Lecture, by Professor Wilson. Tuesday: Read paragraphs 1 to 12, inclusive, of text on Part- nership. Questions. 1. Name three tests by which the existence of a partnership can be detected. 2. H purchased a store and employed to manage it, to re- ceive 1/3 of the profits for his services. advanced no part of the capital and was not to be responsible for losses. conducted the business so that the neighborhood thought H and were partners. Assumpsit was brought by H to recover the price of goods made use of by O on his individual account. defended on the ground that he and H were partners and no recovery could be had at law. What judgment " 3. A number of men, the defendants in this case, became mem- bers of an association which required them to pay Five Dollars each into the treasury, and to pay such assessments as should be levied pro rata, on pain of being left out of the association and its privileges. The purpose of the association was to resist legally the claims of a patentee. The officers of the association employed the plaintiff to act as attorney to this end, and the plaintiff now sues the defendants jointly for these services. Are the defendants liable? Wednesday: Review paragraphs 1 to 12, inclusive. Read paragraphs 13 to 21, inclusive. *A large number of these questions are actual cases that have been decided by the courts. When we return your corrected answers to these questions, we shall also send you a digest of the holding of the court in each of these cases, together with the name of the case and its citation in the original report. 18 ALBERT E. WILSON Questions. 4. Explain fully the difference between a corporation and a partnership. 5. A partnership of 10 members agrees to pay certain expenses of a corporation. One of these expenses is the services of an official in procuring a right of way. X, who is a member of the partnership, renders these services as president of the Company, and now sues the Company to recover for the services. Can he recover? If so, what per cent of his claim ? 6. Suit is brought against the subscribers to the stock of a de- fectively organized corporation to recover money borrowed by an offi- cer of the same upon the theory that the subscribers were partners. The organizers had acted in good faith but had not fully complied with the requirements of the incorporative statute. What holding? Thursday: Review paragraphs 13 to 21, inclusive. Read paragraphs 22 to 36, inclusive. Questions. 7. Why may not a corporation become a member of a partner- ship? 8. A & B, a co-partnership, sued out an attachment against C & D, co-partners. C was a minor at the time the firm became indebted to the plaintiff, but immediately on reaching his majority and before the attachment was sued out, he wrote to A & B disaffirming his con- tracts. C files a plea in abatement. D fails to plead. Trial court abated the attachment and released the property attached. Plaintiff appeals. What judgment? 9. P sells lumber to W & S, W having informed P that W and S had formed a co-partnership. As a matter of fact, W and S were not partners, although S allowed W to introduce him to various trades people in the neighborhood as his partner and even allowed him to sign their joint names on drafts, of which fact P was aware. There was some evidence that S after the goods in question were bought had ratified the purchase. P sues W & S as co-partners for the lumber. Can he recover? SECOND WEEK. Monday: Review paragraphs 22 to 36, inclusive. Read paragraphs 37 to 49, inclusive. Questions. 10. In what two instances does the action of the majority of the members of a partnership fail to bind the minority? 11. A, B and C are equal partners and engage in the business of locating and developing mines. On March 19, 1878, B & C, who were doing the active field work, bought out A's interest in the three PARTNERSHIP AND CORPORATIONS 19 mines acquired by the partnership for $400. On the same day B & C were negotiating and did sell shortly thereafter to a third party, one of these mines for $1.800. A on discovering those facts brings his bill in equity to recover $200 from B & C. Will the bill lie ? 12. A and B were engaged in a mercantile co-partnership as equal partners on July 23, 1911. They dissolved, A being committed to wind up the concern. Thereafter B executed two notes to A for $400 and $450 respectively. Judgments were recovered on these notes by A. and B brings his bill in chancery to enjoin their collection and for an accounting. It appeared from the testimony taken by the master, that A h'ad expended over $2,000 in paying debts of the firm, B having paid nothing. A credited B with payment of $850, 1 he amount of the tAvo notes. Should the injunction be granted? Tuesday: Review paragraphs 37 to 49, inclusive. Read paragraphs 50 to 58, inclusive. Questions. 13. Under what circumstances are partners agents of each other? 14. A, B & Co., conducting a partnership business under the name of A, B & Co., sold goods to D & B. co-partners. Before suit was started the partnership of A, B & Co. was dissolved and B as- signed all his interest in this account to A. A, B & Co. sue D & B at law to recover the amount due for the goods sold. What judgment? 15. Action brought by P vs. A, B, C and D, partners as A & Co., on a note signed by A & Co. payable to X and assigned by X to P. The articles of co-partnership provided that A was not to sign the firm name to any note without B's consent. The note in question was signed by A without B's consent. C acted as X's agent in mak- ing the loan to A & Co. and in securing the note. There was no evi- dence that C remembered the provision limiting A's authority at the time he negotiated the loan, and it further appeared that B had al- lowed A to sign notes without his consent for a long time prior to the execution of this note without objection. Before the making of the note, B had retired from the firm C was to pay all firm's debts for which B would be liable, and B's name was to continue as a member of the firm. What judgment? Wednesday: Review paragraphs 50 to 58, inclusive. Read paragraphs 59 to 69, inclusive. . Questions. 16. May the fraudulent unauthorized act of one partner bind the firm? Explain your answer. 17. A is indebted to P in the sum of $2,000. He forms a part- nership with B, who agrees tn sissuine half of the indebtedness. A & B as co-pjirt ners execute a note to P. B sells out to C, who succeeds to all of B's rights and liabilities. A sells out to D under similar 20 ALBERT E. WILSON conditions. C executes new notes when the old ones become due, signed by C & D and also by A & B. D dies. P sues his estate on the new notes. What judgment ? 18. A and B are co-partners. C, the husband of B, who conducts the business of the firm, A being a non-resident, causes the arrest of P on behalf of the firm under a writ of ne exeat. The bill was dis- missed. C appeals. A then for the first time learns of the proceed- ing, condemns C's action and orders the appeal dismissed. P brings suit against A & C for false imprisonment and malicious prosecution. Is C liable? Thursday: Review paragraphs 59 to 69, inclusive. Read paragraphs 70 to 80. inclusive. Questions. 19. What must a partner show to force a court of equity to dis- solve the partnership ? 20. Defendant and one Hovey made a secret agreement by which the former was to furnish the capital to run a jewelry business and the latter was to furnish the store, transact the business with customers in his own name, and purchase additional goods in his own name. They were to share the profits equally. Plaintiffs sold goods to Hovey. not knowing that defendant was interested in the business. Later they found out defendant's relationship to same and sued to recover the sale price of the goods. Was defendant liable? 21. The representatives of a deceased partner attempted to have a receiver appointed to conduct the business as against the surviving partner. No showing was made of mismanagement or improper con- duct on the part of the surviving partner. What decree? THIRD WEEK. Monday: Review paragraphs 70 to 80, inclusive. Read paragraphs 81 to 93, inclusive. Questions. 22. Explain the points of difference and of similarity between joint stock companies and partnerships. 23. A & B, co-partners, become insolvent. Both are adjudicated bankrupt by separate petitions. X is a creditor on a note of A & B. X proves his claim against the estate of A, whose estate consists mainly of partnership assets, he having carried on the business alone for some time prior to bankruptcy, and receives a dividend. X then seeks to prove up as to the balance against B's estate. When, if at all, should X be permitted to prove up against B ? 24. A, B, C and D formed a partnership for the purpose of buy- ing a drove of cattle and selling the same. A furnished all the money. 'They were to share equally in profits and losses. C sold some of the PARTNERSHIP AND CORPORATIONS 21 cattle and deposited the- money with B to be turned over to A, who had taken all the rest of the cattle to New Orleans and sold them. C before A's return went to B and asked him for $500 out of the fund deposited by him with B to purchase some sheep, which B gave him. On A's return, C told him of this transaction and received no reply. There was no understanding between A, B, C and D as to purchase of sheep. A sues B for the $500. Can he recover? Tuesday: Review paragraphs 81 to 93, inclusive. Read paragraphs 1 to 6, inclusive. Questions. 25. Explain the theory of a corporate entity. -26. What is a private corporation? 27. In point of time how far back has the idea of corporate per- sonality been traced? Wednesday: Review paragraphs 1 to 6, inclusive. Read paragraphs 7 to 12. inclusive. Questions. 28. The Constitution of the United States provides that the citi- zens of one State shall be entitled to all the privileges and immunities of citizens of the several States. Does this apply to corporations? W T hy? 29. Defendant, a private corporation, owning coal beds adjacent to plaintiff's land, placed one Stewart as mine boss in charge of a gang of .miners and defendant's president warned Stewart to be careful not to let the men get across the dividing line into plaintiff's coal beds. The miners did cross said line, however, and actually removed coal from plaintiff's beds. Plaintiff sued in tort in an action of trespass and recovered a judgment against both defendant and Stewart. On appeal defendant insisted that it should not be liable since the corpora- tion itself did not do the act of trespass and could not be held liable for the negligence of Stewart, which negligence never was authorized or approved. Was the defense good? 30. Two individuals owning all the stock of a corporation exe- cuted a mortgage upon property belonging to the corporation and signed their individual names to the mortgage deed. Complainant mortgagee brought a bill against the corporation to foreclose the mortgage. What decree? Thursday: Review paragraphs 7 to 12, inclusive. Read paragraphs 13 to 21, inclusive. Questions. 31. Kxplain the similarity and difference between joint stock companies and 22 ALBERT E. WILSON 32. The officers and directors of defendant railway company con- tracted to purchase as a speculation the stock, bonds, and floating debts of another insolvent railway corporation together with rolling stock which defendant could not use on its own road. Defendant had no charter authority to make or carry out such a contract of purchase. Complainant, a single stockholder, filed a bill in equity to enjoin de- fendant and said directors and officers from carrying out said con- tract. What decree? 33. Complainant, a stockholder of a corporation, filed a bill in equity in his own name against defendant to enjoin defendant from publishing defamatory statements about the title to real estate owned by said corporation. Said defamatory statements amounted to a slan- der of title of said real estate and the threatened injury therefrom could not be compensated for by damages in a suit at law. What dis- position should be made of complainant's suit? FOURTH WEEK. Monday: Review paragraphs 13 to 21, inclusive. Read paragraphs 22 to 34, inclusive. Questions. 34. Why has the method of creating corporations by special act of the legislature been superseded by the method by general act? 35. The constitution of Georgia extended power to the legislature to grant corporate powers and privileges to telegraph companies. Plaintiff telegraph company assumed to act as a private corporation and organized itself under a charter granted by the superior court of a certain county. No statute had been passed by the legislature au- thorizing said court to grant said charter. Plaintiff company sued, as a corporation and by its corporate name and without making the persons interested in said company parties, to recover in an action of tort against defendant for injury to cables laid by plaintiff com- pany in a certain river. Should plaintiff recover? 36. A statute created what it termed a "joint stock association" and gave it a distinctive artificial name by which it could make con- tracts; a statutory authority to sue and be sued in the name of the officers as representing the association ; a recognition of the association as an entity distinct from its members, by allowing them to sue it and be sued by it ; and made provision for its perpetuity by transfers of its shares. Was the language of the statute sufficient to create a "cor- poration" within the meaning of a statute imposing a tax on corpora- tions and was said association's plea that it was only a partnership good against an attempt to collect said tax? Tuesday: Review paragraphs 22 to 34. inclusive. Read paragraphs 35 to 45. inclusive. PARTNERSHIP AND CORPORATIONS 23 Questions. 37. What is the double character of a corporate charter from a purely legal point of view? 38. A state constitution gave the legislature power to govern the creation of private corporations. The legislature passed an act con- ferring upon the circuit court of each county the right to receive peti- tions for incorporation and to en'ter decrees creating corporations where the court found that the powers, duties, liabilities, rights or privileges assumed for the prospective corporation, or the provisions contained in a petition, were not repugnant to the laws of the state and of the United States. Said court was vested with discretion to de- termine whether in a given case a decree of incorporation should be granted. Was said act of the legislature valid and was a corporation created by a decree of a circuit court thereunder a valid corporation against a proceeding to question its validity brought by the state? 39. Defendants filed an application for incorporating an amuse- ment company under the laws of West Virginia. The secretary of state of West Virginia duly issued a certificate of incorporation. The West Virginia statute provided for the holding of meetings of the corporation, including the first general meeting for purposes of organi- zation, outside of the state and also provided for keeping the principal office of the corporation in any state or territory of the United States. After said certificate was received, a person acted as president of the company, although it did not appear how or when he was elected. He was a resident of New York. Another person acted as treasurer of the company and also resided in New York. Said treasurer kept a check book and made disbursements for the company by check, received what money came to it, and put it in the bank. No by-laws were en- acted. The treasurer once had charge of the stock book of the com- pany, though at the time of the trial he did not know where it was. Plaintiff sued defendants as individuals on the ground that no incor- poration resulted since defendants did not accept their charter. Were defendants liable as individuals on said ground? Wednesday: Review paragraphs 35 to 45, inclusive. Read paragraphs 46 to 57, inclusive. Questions. 40. What constitutes tlie charter of a corporation incorporated under a ireneral act of the legislature' 41. A general act authori/ed persons to "associate together for the purpose of building and repairing steamboats and other water crafts, and carrying on business usually connected with the' main ob- jects of the corporation aforesaid." Defendant, incorporated under said act, attempted to purchase, own. and use a wharf-boat for the purpose of receiving, storing, and forwarding or delivering general merchandise or freight. The state brought ipio warranto proceedings 24 ALBERT E, WILSON to oust defendant .from exercising said function. Should the state suc- ceed in said ouster suit? 42. Prior to the formation of plaiiitiff as a corporation "defendant signed an agreement which stated that it was proposed to publish a certain newspaper and in furtherance of such purpose to organize a corporation with a specified capital stock to take over said newspaper for which shares were to be issued and that the remaining shares should be offered for subscription. "The agreement then recited : "We, the undersigned,. hereby subscribe for the number of shares set opposite our names." The corporation was duly formed and tendered defend- ant, who signed said agreement, the shares set opposite his name. De- fendant refuse'd to pay for same. Was plaintiff entitled to recover the full amount of said stock subscription or only damages for breach of agreement to take stock? Thursday: Review paragraphs 46 to 57, inclusive. Read paragraphs 58 to 72. inclusive. Questions. 43. What four facts must be proved to establish a corporation de facto? 44. Defendant subscribed to the stock of plaintiff manufacturing company prior to the incorporation of said company. His stock sub- scription was solicited by an agent who represented that certain prop- erty to be acquired by the company would pay 6 per cent on the capi- tal stock for the first year, and that thereafter the company could de- termine whether it would erect a certain building or not. Defendant was familiar with said property and was in as good a position to judge of the success of the enterprise and the profits to be derived therefrom as said agent. There was no evidence that defendant placed faith in said representations, which were false, and no proof that the fact of the value of said property was material to the success of the enterprise. Plaintiff corporation sued to recover on said subscription. Defendant sought to void same on the ground of fraudulent misrepresentations by said agent. Was the defense good? 45. A group of persons organized and w r ent through the steps of incorporating a society to oppose the enforcement of liquor laws enacted by the state. No law was on the statute books providing for such a corporation. The society sued as a corporation to recover money loaned to defendant. Defendant rested its defense solely on the ground that plaintiff was not a corporation. What judgment? FIFTH WEEK. Monday: Review paragraphs 58 to 72, inclusive. Read paragraphs 73 to 85, inclusive. PARTNERSHIP AND CORPORATIONS 25- Questions. 46. What was decided by the famous Dartmouth College case? 47. A stockholder filed a bill in equity to compel the directors of defendant corporation to declare a dividend. The directors themselves were the largest holders of the stock in said corporation and testified that they were anxious to receive dividends whenever they could be paid without injury to the business. They had not diverted or misap- plied any funds of the corporation. Their management had been ju- dicious and they had accumulated a surplus of net earnings from year to year. No evidence was offered that defendant directors had not acted in good faith. "What decree? 48. Defendant railroad was engaged in extending its line, and the president of same was actively employed in overseeing said work of extension. Plaintiff 'sued in an action of assumpsit alleging that de- fendant contracted to furnish him a large quantity of iron to be car- ried by him from Rock Island to Burlington, said iron to be used for construction purposes. To prove the terms of said contract plaintiff offered in evidence the statements made by said president to plaintiff. Was the defendant bound by said statements so as to render them ad- missible in evidence? Tuesday: Review paragraphs 73 to 85, inclusive. Read paragraphs 86 to 95, inclusive. Questions. 49. Name five different designations of corporate stock and ex- plain the meaning of each. 50. A stock certificate stating that plaintiff owned 80 shares of the "guaranteed capital stock" of defendant corporation read: "Said stock is entitled to dividends at the rate of 10 per cent per annum, payable semi-annually on the first day of June and December in each year. The payment of dividends as aforesaid is hereby guaranteed." Plaintiff sued in an action at law as a creditor to recover dividends on the strength of said certificate. Defendant and its directors had re- fused to declare the dividend specified in said certificate. Should plaintiff recover? 51. Defendants as members of an unincorporated oil company owned some gas wells worth $500,000. They organized with a capital stock of $500.000, all of which stock they themselves subscribed. They then borrowed $500,000 on their note from a bank. Said $500,000 w;is checked out by them and paid over to the said corporation in pay- ment of the stock subscriptions of defendants. They then conveyed said gas wells to said corporation which paid to them by check for said wells the sum of $500,000. The receiver sought to collect said stock subscriptions against defendants. The evidence indicated that said wells were reasonably worth the sum of $500,000 and that defend- ants acted in good faith. Were defendants liable in said suit brought on behalf of creditors of said corporation? 26 ALBERT E. WILSON Wednesday: Review paragraphs 86 to 95, inclusive. Read paragraphs 96 to 106, inclusive. Questions. 52. What are proxies? May proxies be used at directors' meet- ings ? Why ? 53. The president of a corporation by its charter and by-laws had no power to convey the real estate of the corporation without the authority of the stockholders. A meeting of the stockholders was con- vened and a vote taken authorizing said president to deed said real estate of the corporation to defendant's predecessor in title. To cer- tain shareholders no notice of said meeting was given. Was defend- ant in a suit in trespass to said realty entitled to set up the fact of said conveyance to his predecessor in title as a valid defense against plain- tiff who held title under said corporation? Neither the charter nor by-laws nor any statute contained any provision as to notice of share- holders' meetings. 54. An officer of defendant lumber company was urgently pressed by a creditor to pay debts due from defendant to said creditor. He called upon three of the five directors of defendant who individually authorized him to convey the property of the company to said cred- itor in payment of said debts. The other two directors were not con- sulted and the said three directors consulted met informally at a place other than the regular meeting place of the corporation and gave to said officer their individual consent to make said transfer. No record of said meeting was kept. Said officer had no power to make said transfer without being authorized by the board of directors. Did said creditor to which said officer conveyed said property of the cor- poration obtain a good title thereto? Thursday: Review paragraphs 96 to 106, inclusive. Read paragraphs 107 to 116, inclusive. Questions. 55. What is meant by the "implied powers" of a corporation? 56. A corporation had by its charter implied authority to incur debts in the transaction of its business. In carrying on its ordinary affairs it incurred a debt and gave a promissory note in connection therewith. Defendant assumed the debts of said corporation and received from it a transfer of its property. Plaintiff sued as the holder of said note to collect same. Was said note valid so as to ren- der defendant liable? 57. One Stockwell, a stockholder in defendant corporation, be- came indebted to plaintiff bank for money loaned by plaintiff to Stockwell to enable him to speculate in the stock market. To satisfy plaintiff bank, Stockwell drew a bill of exchange on defendant, which accepted same. Stockwell turned said bill over to plaintiff, which credited Stockwell on his account to the amount of said bill. Under PARTNERSHIP AND CORPORATIONS 27 the law of New York, where the case arose, plaintiff did not become a bona fide purchaser of said bill merely by crediting Stockwell in said manner on his own account. Defendant was engaged in the busi- ness of manufacturing and selling machines. It accepted said bill in order to confer a favor upon Stockwell. Plaintiff sued defendant on said bill as the acceptor of same. Was defendant liable? SIXTH AVEEK. Monday: Review paragraphs 107 to 116, inclusive. Read paragraphs 117 to 323, inclusive. Questions. 58. Name the principal crimes created by the anti-trust act of the United States Congress of 1890 known as the Sherman Act. 59. The X Co., a R. R. corporation, entered into a contract with A whereby they purchased a steamboat and ran the same under the name of the Central Line of Boats. P, a passenger on this boat, was injured due to the careless management of the steamer by the crew, and he sues the X Co. and A in trespass to recover for the injuries received. Can he recover? 60. X Ry. Co., a street car company in the City of Chicago, enters into a contract with P, a property owner along its right of way, not to build more than a single track railway along Wabash Ave. from Lake to Madisqn Sts., a distance of two blocks, and in the event that X Co. does build more than a single track in violation of its contract, it is to pay P $100,000 as liquidated damages. X Co. builds more than one track in violation of its contract. P sues on the bond for $100,000. Can he recover? Tuesday: Review paragraphs 117 to 123, inclusive. Read paragraphs 124 to 131, inclusive. Questions. 61. What is meant by a "holding company"? 62. The stockholders of seven corporations situated in various parts of the country enter into an agreement whereby the majority of the stock of the seven corporations was transferred to a board of nine trustees who were authorized to purchase the stock, bonds, or property of any corporation engaged in a certain business and to issue trust certificates therefor; to organize companies to carry on such business, and to receive the dividends on all stock and the interest on all bonds held by them, and after paying the expenses of the trust, to declare dividends on the trust certificates. X Co. became a member of this trust and in so doing agreed to discontinue a certain branch of its business, for which it received a certain sum from the trust. X Co. violates this agreement ; the trustees file a bill to enjoin X Co. from violating their agreement. X Co. demurs. What judgment? 28 ALBERT E. WILSON 63. A and B, corporations, consolidate. A corporation takes over B Co. 's assets and in payment thereof transfers a certain amount of its capital stock to the stockholders of B Co. P is a creditor of B Co. and brings this action against A Co. for an accounting and a money judgment. What should the order be? Wednesday: Review paragraphs 124 to 131, inclusive. Read paragraphs 132 to 145, inclusive. Questions. 64. Name four requirements that by-laws must meet. 65. Executors of a will bring a bill in equity praying advice in the construction of the will devising real estate to X Co., a New York corporation. The land is located in Connecticut, where testator dies and where this action is brought. The statute of wills in New York prohibits a corporation from taking property by devise. The Con- necticut statute does not. What would you advise? 66. At the annual meeting of X Co. a resolution was passed au- thorizing directors to sell land of the company and receive stock iu part payment. The directors advertise the sale of the company's lots to be paid for one-half in cash and one-half in stock of X Co. P, a stockholder of X Co., files a bill to enjoin X Co. from selling land and receiving its own stock in part payment. Will the bill lie? Thursday: Review paragraphs 132 to 145, inclusive. Read paragraphs 146 to 153, inclusive. Questions. 67. What is meant by the expression "ultra vires"? 68. P, a broker, bought cotton in his own name at the request of D Co., a banking corporation having no power to buy cotton. The cotton was never delivered to D Co. and title never passed to it. P sues for commissions and for money claimed to have been expended for D Co. on the purchase and sale of the cotton. What judgment? 69. X Transit Co. by an act of the legislature was given until July, 1876, to organize and build at least a mile of its railway or its powers and rights should be deemed forfeited and terminated. X Co. did not build any portions of its road until June, 1878, when it pro- ceeded to build in the City of B, which refused to allow it to build. X Co. files a bill to restrain the City of B from interfering with it. Should the injunction be granted ? SEVENTH WEEK. Monday: Review paragraphs 146 to 158. inclusive. Read paragraphs 159 to 171, inclusive. Questions. 70. Explain how the State can control a corporation through the exercise of the "police power." PARTNERSHIP AND CORPORATIONS 29 71. A New York corporation doing business in New York was assessed on certain property consisting of steamboats which were being built for it outside of the State. The corporation objected to assessing this property, claiming same was exempt as being without the State. Is the objection well taken? 72. X Co. was organized for the purpose of carrying on a manu- facturing and mechanical business under an act of the state legisla- ture passed in 1849. In 1884 the state's attorney filed an informa- tion in the nature of a quo warranto against X Co. alleging that the incorporators never intended and in fact never did carry on the business set forth in the act of incorporation, but carried on a totally different business, from the date of its organization to the present time, and that only a nominal portion of its capital, if any, was ever paid in. In 1853 the legislature passed an act amending the act of 1849 whereby it in effect permitted X Co. to carry on the business they were actually engaged in. X Co. demurred. Should the demurrer be sustained? Tuesday: Review paragraphs 159 to 171, inclusive. Read paragraphs 172 to 180, inclusive. Questions. 73. When may a corporation extend its field of business into a foreign State without obtaining a license to do business in such for- eign State ? 74. A state statute provides that no foreign insurance company shall do business in the State until it has complied with certain re- quirements. It further provides that no agent of any such company shall transact any business until it has received a certificate of author- ity from the Auditor of Public Accounts. D, in violation of the statute, secured insurance for Y in X Co., a foreign corporation which had not complied with the statute. The statute provides a penalty of $500 for violation of this act. The attorney general brings a penal action to recover this penalty. Will the action lie? 75. A and B promote a corporation for the purpose of dealing in land. They propose with certain prospective stockholders to buy certain lands. A and B at the time had bought some of the lands and had options on other pieces. They sold the land to the corporation at a price greater than it cost them. P becomes a stockholder in this corporation; on discovering these facts he asks the corporation to bring suit to recover back the difference between the price A and B paid for the land and the price charged by them to the corporation. The corporation refuses to bring suit and so he, P, starts suit in his own name, setting up these facts. What judgment? SEVENTH WEEK. Wednesday: Review paragraphs 172 to 180, inclusive. Read paragraphs 181 to 199, inclusive. 30 ALBERT E. WILSON Questions. 76. Under what circumstances is an officer of a corporation en- titled to draw a salary ? 77. A and B are directors in X Railroad Co. They make a con- tract in December, 1869, with Y Co. whereby Y Co. is to assist in the building of the X Railroad. This contract was ratified by a meeting of the stockholders on June 7, 1870. In September, 1870, A and B become members of Y Co. There is no evidence that the contract was not a fair and equitable one for both companies. P, a stock- holder in X Co., files his bill asking that all the profits made by A and B under the contract be paid over to X Co. Is P entitled to this relief? 78. A, a director of X Co., was elected by the board of directors to act as treasurer of 'the company, no provision being made for his compensation. He served for about five years and at the end of that time a warrant was drawn on the company's treasury for $4,000 in payment for his services. He sues X Co. on this warrant. What judg- ment? Thursday: Review paragraphs 181 to 199, inclusive. Read paragraphs 200 to 212, inclusive. Questions. 79. When and how may dividends be declared? 80. Defendant corporation by a legal vote of its directors de- clared a dividend from profits earned, made the same payable with- out interest at such time as might be directed by the board, and ordered the amount to be placed pro rata to the credit of the stock- holders upon its books. Later the directors, fearing they would be pinched for funds in running the corporation's business, declined to pay plaintiff stockholder his share of the dividend declared. Plain- tiff sued the corporation to recover said share. What result ? 81. One Laughton, the owner of a share of stock in a corpora- tion, sold the same to one Robinson, endorsing it in blank, but keeping it in his safety deposit box. No transfer of the share was ever made on the books of the corporation. Later a friend of Laughton, who had access to said box, stole^he share and turned it over to one Lee, an innocent purchaser thereof. Who was entitled to the share ? EIGHTH WEEK. Monday: Review paragraphs 200 to 212, inclusive. Read paragraphs 213 to 231, inclusive. Questions. 82. When may a creditor interfere in the management of a corporation ? PARTNERSHIP AND CORPORATIONS 31 83. One Ingraham was a stockholder in a corporation engaged in running a hotel and from time to time advanced money to the cor- poration and received promissory notes therefor. At a time when said indebtedness amounted to some $22,000, the corporation was also indebted to some thirty other persons for supplies and labor in the sum of $10,860. At said time, with the unanimous consent of the stockholders, all the hotel property subject to a chattel mortgage was transferred to Ingraham, who agreed to pay said mortgage. Said trans- fer was made bona fide as a payment of the indebtedness to Ingraham. Did the other creditors have a right to object to said transfer to Ingraham and to demand that the property be subjected to the pay- ment of the debts due them ? 84. The directors, officers, and stockholders of X corporation organized Y corporation and then secured the transfer to Y of all the assets belonging to X. At the time of the transfer the said per- sons knew of complainant creditor's claim, but made no provision for the payment of same out of the property transferred to Y, nor did Y assume the obligation of paying said claim. Complainant filed a bill to enjoin Y from disposing of said property and to subject same to payment of his judgment founded on said claim. What decree? f j ^^ aulora PAMPHLET BINDER " Syracuse, N. Y. Stockton, Call/.