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 LAW LIBRARY 
 
 Of 9 
 LOS ANGELES COUNTY ,
 
 
 A TREATISE 
 
 OH TUB '"<— i 
 
 LAW OF PRIVATE COR^BttTIONS 
 
 BY 
 
 HENRY OSBORN TAYLOR 
 
 in 
 
 OF THE NEW YORK BAH 
 
 FIFTH EDITION 
 
 THE BANKS LAW PUBLISHING CO. 
 
 21 MURRAY STREET, NEW YORK 
 1905
 
 r 
 
 Entered according tp;Jl<cVof Congress, in the year 1384, 
 
 By HENRY**0. TAYLOR, 
 •ftt^Jje Office of the LibrariaH*»f.fcongress at Washington. 
 
 Entertd according te A.oI of Congress, in the year 1888, 
 
 By HENRY O. TAYLOR, 
 in the Office of the Librarian of Congress at Washington. 
 
 Entered according to Act of Congress, in the year 1894, 
 
 By HENRY O. TAYLOR, 
 in the Office of the Librarian of Congress at Washington. 
 
 Entered according to Act of Congress, in the year 1898, 
 By HENRY O. TAYLOR, 
 In the Office of the Librarian of Congress at Washington. 
 
 Copyright 1902 
 By The Banks Law Publishing Co.
 
 
 PEEFACE TO THE FIFTH EDITION. 
 
 The preface to the third. edition refers to certain features of 
 corporation law which are still of present interest. Besides 
 these, the matter of ' trusts and monopolies ' has been for some 
 years of great importance. Its latest phase is the ' Securities 
 Company,' which is briefly discussed in § 309d of this edition. 
 The decisions of the higher courts regarding the legality of 
 this plan are awaited with interest. It may be remarked in 
 passing that the term ' trust-fund,' as applied to the capital of 
 a corporation, is falling into disfavor. 
 
 Mr. J. Alfred Kay, the sole surviving member of the publish- 
 ing firm of Kay & Brother, died in January. I take this op- 
 portunity to record my esteem for that high-minded gentleman. 
 Mr. Kay published the previous four editions of this book. It 
 has now been transferred to The Banks Law Publishing 
 Company, who have spared neither pains nor money in the 
 preparation of this edition. On my part the work has been 
 done with care. Some eight hundred selected cases of the last 
 four years upon corporation law have been inserted. The book 
 has been thoroughly examined, and has been revised wherever 
 recent adjudications have suggested some modification of state- 
 ment. 
 
 My sincere thanks are due to Professor Robert D. Petty, of 
 the New York Law School, for many valuable suggestions, 
 which I have utilized in this edition ; and to my brother Howard 
 Taylor for writing an appendix on the present methods of 
 forming corporations. 
 
 H. O. Taylor. 
 
 New York, September, 1902. 
 
 iii 
 
 740027
 
 PREFACE TO THE THIRD EDITION. 
 
 It is generally recognized that, while legislatures may 
 endeavor to direct, courts should follow the business habits of 
 the people, and, without thwarting what custom has found 
 convenient, render decisions in accordance with scientifically 
 adjusted principles of justice. Even then the law must be 
 somewhat behind the practice of the business community ; for 
 questions cannot be litigated until the transactions giving rise 
 to them have been engaged in, and although business men 
 seek to act with reference to the law, occasions for novel 
 methods of business continually arise, and novel questions 
 come before the courts. It is clear, moreover, that though a 
 court bring the decision of the novel point within recognized 
 legal principles, some extension or modification of the law has 
 occurred. And thus courts continually change the law by en- 
 deavoring to keep it abreast of the people's life. 
 
 In deciding a case, judges apply the rules which best fit 
 the facts. These rules will usually depend on broader legal 
 principles lying back of them, one stage further from direct 
 application to the case. Consequently, novel facts tend to 
 modify the rules directly applied to them, and have less effect 
 on legal principles in the background ; and it may be that 
 through application to novel instances of fact, the more special 
 rules of law will become so modified as no longer to accord 
 with the broader principle from which they were originally 
 deduced. And 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, to which it is no longer organic, unless it 
 chance to be expressed in some apt phrase. Thus it is at 
 present with the rule or fiction that a corporation is a legal 
 person : it still represents a convenient phrase, nay, a con- 
 venient point of view ; but it is dead as a principle because 
 legal propositions are no longer deduced from it, nor is it in 
 
 v
 
 PREFACE TO THE THIRD EDTTTON. 
 
 logical connection with the great mass of legal rules which 
 have been called forth by controversies relating to railroad and 
 other business corporations. 1 
 
 However, though it is proper for the law to follow closely, 
 and so to conform itself as to facilitate the transaction of busi- 
 ness, there are further considerations. The law takes cogni- 
 zance of public policy, it refuses to sanction acts contra bonos 
 mores ; for example, dishonest modes of business. The law has 
 heretofore regarded the amount of stock named in the charter 
 or articles of incorporation as a representation of the amount 
 of its capital, and the further representation which is made when 
 stock is increased is of the same character. Heretofore courts 
 have refused to recognize fictitious payments for stock ; that 
 is to say, they have refused to sanction the organization or 
 prosecution of corporate enterprises on the basis of misrepre- 
 sentation. The reasoning of the Supreme Court of the United 
 States in Handley v. Stutz, 2 and of the Minnesota Court in 
 Hospes v. Northwestern Manufacturing Co., 3 is strongly put. 
 The former case emphasizes the inconvenience it would cause 
 if corporations could not issue stock below par ; the latter case 
 asserts that it is all a question of actual fraud, and if any sub- 
 sequent creditors have been misled by the fictitious issue, the 
 court will consider their rights. But these decisions tend to 
 remove the element of honesty from the fundamental reason for 
 corporate organization, which is, that liability may not extend 
 beyond the funds subscribed. For they ignore the fact that 
 stock and subscriptions to stock constitute capital, and that 
 there is no true analogy between the issue of stock and the 
 borrowing of money on the best terms the borrower can make ; 
 and they ignore the fact that the amount of stock originally 
 set is a representation of the amount of the corporation's 
 capital, and that a subsequent issue of stock is a representa- 
 tion that this capital — whether impaired by loss or not — is 
 thereby to be added to by a definite amount. Are courts to 
 recognize as valid, because usual, this method of organizing 
 and carrying on corporate business by the issue of " bonus " or 
 partly paid stock ? Are they prepared to say that the formal 
 
 1 See the judicial utterances in People v. North River Sugar Refining Co., 
 and State v. Standard Oil Co., post, § 51, note. 
 
 2 Post, § 5226. 8 Post, § 7026. 
 
 vi 

 
 PREFACE TO THE THIRD EDITION. 
 
 misrepresentation involved in such an issue is proper because 
 widely known to be untrue ? State legislatures show a 
 sounder sense of ethics in forbidding the issue of stock except 
 for a full par equivalent. But have courts fairly seconded 
 the legislative intent ? or have they, in endeavoring to recog- 
 nize common business methods, made these statutes of no 
 effect ? 
 
 The above seem to the writer features of present interest in 
 corporation law. There is another, — the matter of ultra 
 vires. Here courts throughout the United States disagree, 
 and their disagreement is more pronounced in their reasonings 
 than in their decisions. This means that they have not yet 
 reached satisfactory principles by which these cases may be 
 decided. Sometimes a court avoids the matter by saying " the 
 principle is well settled," or "the doctrine of ultra vires is 
 never to be applied when it would not advance the ends of 
 justice." But this rustic method is not always adopted, and 
 undoubtedly the courts and the profession know that some 
 time and in some way the rules relating to ultra vires trans- 
 actions must be thought out and based on principles and prop- 
 ositions which will not on analysis disclose contradictions and 
 solecisms of reasoning. 
 
 H. O. Taylor. 
 
 New Yobk, June, 1894. 
 
 vii
 
 PREFACE TO THE FIRST EDITION. 
 
 The object of this Treatise is to give an accurate statement 
 of the law regulating business enterprises which are prosecuted 
 through the instrumentality of corporate organization ; to de- 
 fine the rights and liabilities of the different classes of persons 
 interested ; and to treat of those rights and liabilities accord- 
 ing to the manner in which they come before the courts for 
 determination. To accomplish this the writer, having briefly 
 noticed the views regarding corporations held in the Roman 
 and in the older common law, submits in the third and fourth 
 chapters an analysis of the idea of a corporation, with some 
 remarks on the resemblances between corporations and certain 
 other legal institutions. There follows, in the fifth and sixth 
 chapters, a discussion of the rights and liabilities arising 
 through the promotion and formation of a corporation. These 
 chapters, which to a large extent are of an introductory char- 
 acter, are succeeded by a detailed discussion of corporate 
 powers, and the legal effect of acts done by or on behalf of 
 a corporation in occasioning legal relations between it and 
 outsiders. The subsequent portion of the work treats of the 
 rights and liabilities of the persons having interests in the 
 corporate enterprise, treats, that is to say, of the legal rela- 
 tions subsisting with respect to it. These relations fall under 
 three heads : First, those between the corporation on the one 
 hand, and, on the other, the state, the shareholders, the officers, 
 or the creditors of the corporation. Secondly, those between 
 the different classes of persons interested, — between share- 
 holders and officers, between shareholders and creditors, and 
 between officers and creditors. Thirdly, those among persons 
 of the same class ; that is, among shareholders, among officers, 
 and among creditors. 
 
 It is the opinion of the writer that the fiction of the " legal 
 person" has outlived much of its usefulness, and is no longer 
 adequate for the purposes of an accurate treatment of the legal 
 
 ix
 
 PREFACE TO THE FIRST EDITION. 
 
 relations arising through the prosecution of a corporate enter- 
 prise. By dismissing this fiction, a clearer view may be had of 
 the actual human beings interested, whose rights may then be 
 determined without unnecessary mystification. There will re- 
 main the body corporate, an organized body of men, exercising, 
 directly or through agents, certain authority in a certain 
 manner ; there will remain the individual shareholders, the 
 corporate officers and agents, the creditors of the corporation, 
 and the public. To litigation arising from transactions respect- 
 ing corporate interests there must be parties. The parties may 
 be the corporation on the one hand, standing often as the 
 representative of the rights of all persons in the corporate 
 enterprise, and, on the other, some outsider, or the state, or 
 some shareholder, officer, or creditor ; or the plaintiffs may be 
 shareholders, the defendants officers, or the plaintiff a creditor, 
 the defendant a shareholder. Suits may also be prosecuted in 
 which names of shareholders or of creditors appear on both sides 
 of the case. And the result of the suit will be affected by the 
 position occupied by the parties towards the transaction oc- 
 casioning the litigation. 
 
 In view of these considerations, the arrangement adopted in 
 this Treatise is thought suited to an accurate exposition of 
 corporation law. 
 
 H. O. Taylor. 
 
 New York, May 1, 1884. 
 X
 
 TABLE OF CONTENTS. 
 
 CHAPTER I. 
 
 SECTION 
 
 The Idea of a Corporation in the Roman Law . 1-9 
 
 CHAPTER II. 
 The Idea of a Corporation in the Common Law . 10-22/" 
 
 CHAPTER III. 
 Analysis of the Idea of a Corporation . . . 23-51 
 
 CHAPTER IV. 
 
 Resemblances between Corporations and certain 
 
 other Legal Institutions 52-71 
 
 CHAPTER V. 
 Legal Relations arising through the Promotion 
 
 of a Corporation 72-90 
 
 CHAPTER VI. 
 
 Legal Relations Consequent upon an Agreement 
 to take Shares in the Stock of a Corporation to 
 be Organized 91-112 
 
 CHAPTER VII. 
 Legal Effect of Acts done by or on behalf of 
 a Corporation. 
 
 Preliminary 113-119 
 
 PART 
 
 I. Construction of Corporate Powers . . 120-166 
 
 II. Acts within the Corporate Powers . . 167-263 
 
 III. Acts beyond the Corporate Powers . . 264-334 
 
 xi
 
 xn 
 
 TABLE OF CONTENTS. 
 
 IV. Liability of a Corporation for the Torts of 
 
 its Agents and Servants .... 335-378 
 V. 1. Legal Effect of Acts done without the 
 
 State incorporating the Corporation . 379-402 
 
 2. Status of a Body of Men incorporated by 
 
 the Legislation of two or more States 403-409 
 
 3. Citizenship of Corporations with respect ' 
 
 to the Jurisdiction of the Federal Courts 410-413 
 
 4. Succession 414-418 
 
 5. Consolidation 419-427 
 
 6. Dissolution 428-437 
 
 CHAPTER VIII. 
 Relations between the State and the Corpora- 
 tion ; including Relations between the State 
 and (a) Shareholders, (b) Officers, and (c) Cred- 
 itors of the Corporation 438-507 
 
 CHAPTER IX. 
 Legal Relations between the Corporation and 
 
 its Shareholders 508-611 
 
 CHAPTER X. 
 Legal Relations between the Corporation and its 
 
 Officers '. . 612-650 
 
 CHAPTER XL 
 
 Legal Relations between the Corporation and its 
 
 Creditors 651-682 
 
 CHAPTER XII. 
 
 Legal Relations between Shareholders and Offi- 
 cers of a Corporation 683-699 
 
 CHAPTER XIII. 
 Legal Relations between Shareholders and Cred- 
 itors of a Corporation ..... 700-751
 
 TABLE OF CONTENTS. xiii 
 
 SECTION 
 
 CHAPTER XIV. 
 Legal Relations between Officers and Creditors 
 of a Corporation 752-775 
 
 CHAPTER XV. 
 Legal Relations among the Shareholders of a 
 Corporation 776-801 
 
 CHAPTER XVI. 
 Legal Relations among the Officers of a Corpo- 
 ration 802-809 
 
 CHAPTER XVII. 
 
 Legal Relations among the Creditors of a Corpo- 
 ration 810-826 
 
 Appendix. Present Methods of forming a Corpo- 
 ration.
 
 THE 
 
 LAW OF PRIVATE CORPORATIONS. 
 
 CHAPTER I. 
 
 THE IDEA OF A CORPORATION IN THE ROMAN LAW. 1 
 
 Early Roman view, § 1. 
 
 A corporation not a person, § 2. 
 
 Later Roman view, § 3. 
 
 Special authority to form a corpora- 
 tion necessary only in later times, 
 §4. 
 
 Varieties of Roman corporations, § 5. 
 Illegal corporations. Dissolution, 
 
 §6. 
 Corporate capacities, § 7. 
 Corporate management, § 8. 
 Hereditas jacens, § 9. 
 
 § 1. In the early periods of the Roman law, the idea of a 
 corporation seems to have been that of a collection of 
 individuals among whom, as well as between whom maii^iaw 10 " 
 and outsiders, existed certain special legal relations. 
 If the notion of a corporate whole or unit was present at all, 
 it existed in a rudimentary shape, and was of slight importance. 
 The basis of this view lies in the names of many of the older 
 and more prominent of the Roman corporations ; names which 
 were no other than the names of the members ; as, for instance, 
 gentiles, virglnes vestales, socii vectigalium publicoj'iim. The 
 property, consequently, of these corporations was spoken of as 
 if it belonged to the members, as agri virginum vestaliuvi. 2 
 Later the term universitas became the generic name for cor- 
 porations of all kinds, 3 a term which seems to have conveyed 
 
 1 See Digest, iii. 4, Quod cuiuscum- 
 que uuiversitatis nomine vel contra 
 earn agatur ; Digest, xlvii. 22, De 
 collegiisetcorporibus; Savigny, Sys- 
 tem des heutigen Romischen Rechts, 
 vol. ii. §§ 85-102; Windscheid, Lehr- 
 buch des Pandektenrecbts, i. §§ 57- 
 62 ; Pucbta, Pandekten, §§ 25-28 ; 
 
 1 
 
 Arndts, Pandekten, §§ 41-47; Brinz, 
 Pandekten, § 35 and §§ 59-63. 
 
 2 See Ibering, Gbeist des Romis- 
 chen Rechts, iii. Theil, note 468 to p. 
 344. 
 
 3 The Rubric of Title 4, liber iii., 
 of the Digest reads: "Quod cuius- 
 cum-que universitatis nomine," etc.
 
 §3.] 
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. I. 
 
 in the main the notion of a collection of individuals as opposed 
 to the notion of a singularis persona, or one individual. 1 
 
 § 2. Gaius, in his division of persons, 2 which was afterwards 
 followed in the Digest of Justinian, 3 never hints at 
 
 A corpora- ° 
 
 tion not a corporations ; and, indeed, the statement may be 
 hazarded that in no place in the Pandects are corpo- 
 rations said to be persons ; though it is said that for certain 
 purposes they are to be treated as such, personoe vicefungitur} 
 It seems probable, moreover, that the law did not create this 
 approach to a personification of corporations, but received it 
 from the people, tolerating the fiction through deference to the 
 popular view. 
 
 § 3. Nevertheless, though the Roman law never regarded a 
 corporation as a person begotten of itself, and only 
 said that for certain purposes the law would treat it 
 as such, yet in the periods of the later and more fully 
 developed law a corporation was regarded as a something, as a 
 corporate whole or unit, distinct from its members. 5 To this 
 corporate whole, and not to the individual members, attached 
 the corporate rights and liabilities. " If anything is owed to a 
 corporation it is not owed to the members individually ; nor do 
 they owe what it owes." 6 Consequently, the existence and 
 
 Later Ro- 
 man view. 
 
 See Savigny, System, etc., ii. p. 261. 
 The term seems not to have been in 
 use much before the time of Cicero. 
 Corpus&nd collegium were also used, 
 the former more generally than the 
 latter. 
 
 1 See Dig., iv. 2, lex 9, § 1. Cor- 
 porations sole did not exist at Rome. 
 "Neratius Pi iscus deems that three 
 may make a 'collegium,' and this 
 opinion is to be followed." Dig., 
 1. 16, lex 85. Still the scope of the 
 applicability of this passage is not 
 clear. 
 
 2 Gai. i. 9 et seq. 
 
 8 Dig., i. 5, lex 3. 
 
 4 Dig., xlvi. 1, lex 22. 
 
 6 See Savigny, System, ii. pp. 236- 
 240. 
 
 6 Si quid universitati debetur, sin- 
 gulis non debetur; nee quod debet 
 
 2 
 
 universitas singuli debent. Dig., iii. 
 4, lex 7, § 1. See also Dig., i. 8, lex 
 6, § 1. " Das Wesen aller Corporatio- 
 nen besteht darin, dass das Subject 
 der Rechte nicht in der einzelnen 
 Mitgliedern (selbst nicht in alien 
 Mitgliedern zusammengenommen) 
 besteht, sondern in dem idealen 
 Ganzen," Savigny, System, ii. 144. 
 " Eine Juristische Person ist eine 
 nicht wirklich existirende, nur vor- 
 gestellte Person, welsche als subject 
 von Rechten und Verbindlichkeiten 
 behandelt wild." Windscheid, Pan- 
 dekten, i. p. 147 ; see ib. p. 150. See, 
 also, Sav., ii. 284-288 ; Dig., iii. 4, 
 lex 1, § 1 ; Dig., i. 8, lex 6, § 1 ; Dig., 
 xlviii. 18, lex 1, § 7; Dig., xl. 3, leges 
 1, 2, and 3 ; Dig., ii. 4, lex 10, § 4 ; 
 Dig., vii. 1, lex 56. The statement 
 in the text seems to be upheld by the
 
 CHAP. I.] CORPORATIONS IN THE ROMAN LAW. 
 
 [§5. 
 
 identity of the corporation were not affected by the change of 
 even all its members. 1 
 
 § 4. There is no reason to believe that any special authoriza- 
 tion from the state was necessary in the early time special au- 
 in order to form a corporation. Under the Empire, * hori *y to 
 however, a special permission from the state became poration 
 
 o i i i 'i necessary 
 
 necessary; 2 and, by the pagan emperors, it was only in lat- 
 granted with great reluctance. 3 The requiring of a er times ' 
 special permission, as well as the reluctance of the emperors to 
 grant it, seems to have been due to the evils arising from un- 
 authorized and seditious societies. 
 
 § 5. The first corporations at Rome were formed for the 
 regulation of trade and purposes of religion. 4 Under 
 
 Varieties of 
 
 the Republic municipal corporations come promi- Roman cor- 
 nently into view, while the proportionate import- poia lons ' 
 ance of religious corporations diminishes. The latter re- 
 mained comparatively few in number until the conversion of 
 the Empire to Christianity, to which event was due the aboli- 
 tion of the general rule that a religious corporation could take 
 propert}^ as heres, that is, through universal succession, only by 
 virtue of a privilege specially conferred. 5 This rule had not 
 
 great weight of authority; still Iher- 
 iug, a distinguished jurist, says that 
 the members were the true subjects 
 of the corporate rights and liabilities 
 according to the Roman law, and 
 that the corporation itself was only 
 the form which the mass of these 
 rights and liabilities assumed to- 
 wards outsiders. This form disap- 
 peared when determining the legal 
 relations of the members among 
 themselves. Ihering, Gheist, etc., 
 iii., Theil, pp. 219-220, 343-344. An- 
 other writer thinks the Roman law 
 did not regard the property of a cor- 
 poration as belonging to a person, 
 but to a universitas, i. e., to no one; 
 as res nullius. 1 Brinz, Pandekten, 
 196. See Gai. i. 9, and Dig., i. 8, lex 
 1 pr. 
 
 1 " In decurionibus vel aliis univer- 
 sitatibus nihil refert, utrum omnes 
 
 idem maneant an pars meneat vel 
 omnes immutati sint; sed si univer- 
 sitas ad unum redit, magis admit- 
 titur posse eum convenire, et con- 
 veniri cum jus omnium in unum 
 recciderit et stet nomen universita- 
 tis." Dig., iii. 4, lex 7, § 2. 
 
 2 Dig., iii. 4, lex 1 pr. 
 
 8 See Pliny, Epist. b. 10, letters 42, 
 43. 
 
 4 Sav., System, ii. p. 246. 
 
 6 The principles of the (pagan) Ro- 
 man law on this point are expressed 
 by Ulpian, xxii. §6: "We cannot 
 make gods our heirs, save those to 
 whom a decree of the senate or a 
 rescript of the emperor has granted 
 this privilege." " Es war dem Chris- 
 tenthum vorbehalten," says Savigny, 
 " die Menschenliebe an sich zu einem 
 wichtigen Gegenstand der Thatigkeit 
 zu erhebeu, und in dauernden, unab-
 
 §7.] 
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. I. 
 
 prevented them, however, from receiving legacies or enjoying 
 revenues through fidei commissce, or trusts, created in their 
 favor. 1 
 
 § 6. If the objects of incorporation were illegal, the corpora- 
 tion was liable to be dissolved by the state, 2 which 
 illegal cor- alwavs had the power to dissolve corporations, even 
 
 porations. . * r r ' 
 
 Dissoiu- against the will of the members; though the mem- 
 bers, without the consent of the state, could not 
 bring about a dissolution 3 any more than they could incorpo- 
 rate themselves. Moreover, a dissolution of the corporation 
 was not effected by the death of all its members. 4 
 
 § 7. The right of a corporation to make by-laws for the 
 regulation of its affairs appears to be as old as the 
 SS. Twelve Tables; 5 and, not unlikely, the right to sue 
 and be sued is equally ancient. 6 A municipal cor- 
 poration could have jiossessio, and, therefore, could acquire pro- 
 prietas through usucapio? And a municipal corporation, more- 
 over, through its constitutional representatives, could acquire 
 rights and incur obligations. But, if its representatives bor- 
 rowed money on its behalf, it was liable to repay only the part 
 actually applied to its use. 8 Execution against a corporation 
 took place in the same manner (by a missio in possessio?ie?n) as 
 against the property of au individual. 9 Criminal law did not 
 apply to corporations ; 10 neither could they be held liable in 
 
 hangigen Anstalten gleichsam zu ver- 
 korpern." System, ii. 264. After 
 Constantine pia corpora could take as 
 heres, through universal succession. 
 Sav., System, ii. 301, 308; and by a 
 law of the Emperor Leo, A. D. 469, 
 municipal corporations received the 
 same privilege. See Codex, vi. lex 
 24, § 12. 
 
 1 Dig., xxxviii. 3, lex 1; and Sav., 
 System, ii. 305, and authorities there 
 cited. 
 
 2 But on dissolution of the corpora- 
 tion, the members could divide the 
 corporate funds among themselves. 
 Dig., xlvii. 22, lex 3 pr. See Sav., 
 System, ii. 257, note o. 
 
 8 Sav., System, ii. 280. 
 
 4 Sav., System, ii. 280. 
 
 5 "Gaius, libro quarto ad legem 
 duodecem tabularum. Sodales sunt, 
 qui eiusdem collegii sunt, quam 
 Graeci erect, peiav vocant. His autem 
 potestatem facit lex pactionem quam 
 velint sibi ferre, dum ne quid ex pub- 
 lica lege corrumpant. Sed haec lex 
 videtur ex lege Solonis translata 
 esse." Dig., xlvii. 22, lex 4. 
 
 6 Dig., iii. 4, lex 7 pr. See Dig., 
 iii. 4, lex 2. 
 
 7 Dig., xli. 2, lex 2. 
 
 8 Dig., xii. 1, lex 27; see Sav., Sys- 
 tem, ii. 294. 
 
 9 See Sav., System, ii. 297. 
 
 10 Sav., System, ii, 312.
 
 CHAP. I.] CORPORATIONS IN THE ROMAN LAW. 
 
 [§9. 
 
 actions arising ex delicto, unless they had been enriched through 
 the wrong. 1 
 
 § 8. As to the management of the affairs of corporations 
 under the Roman law, little is known ; and the few „ 
 
 t-» i • i • • Corporate 
 
 passages in the randects relating to this topic seem manage- 
 applicable only to municipal corporations. 2 For the 
 transaction of important business, the presence of two-thirds 
 of the members seems to have been necessary to constitute a 
 quorum, which number present, a majority vote was decisive. 3 
 § 9. From the Roman rule that the heres succeeded to the 
 legal personality of the deceased arose the peculiar 
 conception of what many maintain to have been re- '.'■ -?® r ®^ ltas 
 garded by the Roman law as a legal person, hereditas 
 jacens. This was the sum of the rights and liabilities of the 
 deceased at the time of his death, regarded as subsisting by 
 itself as a unit or a whole, until it should be determined who 
 was to be the heres ; " hereditas personae vice fungitur, sicuti 
 municipium et decurio et societas." 4 
 
 1 Sav., System, ii. 317. " But it is 
 doubted whether an action for fraud 
 lies against cities. I think it should 
 not He; for how can a city be guilty 
 of fraud? But if the city has been 
 enriched through the fraud of its of- 
 ficers, I think an action should lie." 
 Dig., iv. 3 lex 15, § 1. See Grotius, 
 De Jure Belli, ii. xxi. 7. 
 
 2 It is possible that some of the 
 passages already cited as applicable 
 
 generally, were intended by the au- 
 thors of them to refer to municipal 
 corporations only. 
 
 3 See Sav., System, ii. 324 et seq. 
 Dig., 1. 9, leges 2 and 3 ; Codex, x. 
 31, lex 45; Dig., 1. 1, lex 19; Dig., 
 iii. 4, leges 3 and 4; Grotius, De Jure 
 Belli, ii. v. 17. 
 
 * Dig., xlvi. 1, lex 21; Dig., xli. 3, 
 lex 15 pr. See Sav., System, ii. 
 365.
 
 §12.] 
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. II. 
 
 CHAPTER II. 
 
 THE IDEA OF A CORPORATION IN THE COMMON LAW. 1 
 
 Relation of the common to the Ro- 
 man law, § 10. 
 
 Coke's idea of a corporation, §§ 11- 
 13. 
 
 Blackstone's idea of a corporation, 
 §§ 14, 15. 
 
 Perpetual succession, § 16. 
 
 Capacity to sue and use a seal, § 17. 
 
 Capacity to hold lands, § 18. 
 
 Capacity to make by-laws, § 19. 
 
 Dissolution, § 20. 
 
 Doctrine that a corporation is a per- 
 son, §§ 21, 22. 
 
 Classification of Corporations, §§ 22a 
 -22/. 
 
 § 10. The early common law of corporations was largely 
 Relation of k° rrowe( l from the Roman law. 2 In the Roman 
 the com- system, however, there are not to be found the fan- 
 
 mon to the . . . . 
 
 Roman tastic structures ot split hairs, with which the com- 
 mon lawyers, aided by the philosophers of the schools 
 delighted to adorn their system of jurisprudence. The " myste- 
 rious," "intangible," "invisible," "immortal," though "soul- 
 less " qualities of corporations are the creatures of the common 
 law. 
 
 § 11. In Coke on Littleton and Coke's Reports, the common 
 
 law is embodied as in no other volumes. It is, there- 
 
 of°a corpo- fore, in the main, Coke's conception of a corporation 
 
 ration. which is given in this chapter, the modifications and 
 
 developments of later authorities being briefly noted. 
 
 § 12. " A body politic," says Coke, " is a body to take in suc- 
 cession, framed (as to that capacity) by policy, and therefore it 
 is called by Littleton a body politic ; and it is called a corpora- 
 tion or a body incorporate, because the persons are made into a 
 body, and of a capacity to take and grant, etc." 3 
 
 1 See Case of Sutton's Hospital, 10 
 Rep. 1 ; Comyn's Digest, Title 
 " Franchise; " Coke on Lit., Thom- 
 as's Ed., Book I. chap. xiii. ; Viner's 
 Rolle's and Bacon's Abridgments, 
 Title "Corporation ; " Kyd on Cor- 
 porations, Introduction ; Black- 
 stone's Com., Book I. chap, xviii.; 
 2 Kent's Com., Lecture xxxiii. ; 
 
 Angell and Ames on Corporations, 
 Introduction and chaps, i., ii., and 
 iii. 
 
 2 E. g., the passage in Bracton, f. 7, 
 concerning the ownership of public 
 buildings is quoted from the Ins. of 
 Justinian, ii. 1, § 6. 
 
 8 Co. Litt., 250 a.
 
 CHAP. II.] CORPORATIONS IN THE COMMON LAW. [§ 12. 
 
 " And it is to be known that every corporation, or incorpo- 
 ration, 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 col- 
 legium. Now it is to be seen what things are of the essence of 
 a corporation. 1 1. Lawful authority of incorporation, and that 
 may be by four means, sc. by the common law, as the king 
 himself, etc. ; by authority of parliament ; by the king's char- 
 ter; 2 and by prescription. The 2d, which is of the essence of 
 the incorporation, are persons to be incorporated, and that in 
 two manners, sc. persons natural, or bodies incorporate and 
 political. 3. A name by which they are incorporated. 3 4. Of 
 place, for without a place no incorporation can be made. 5. By 
 words sufficient in law, but not restrained to any certain, legal, 
 and prescript form of words." 4 
 
 " . . . . When a corporation is duly created all other inci- 
 dents are tacitly annexed. And for direct authority in this 
 point in 22 E. 4, Grants, 30, it is held by Brian, chief justice, 
 and Choke, that corporation is sufficient without the words to 
 implead and be impleaded, etc., and therefore divers clauses 
 subsequent in the charters are not of necessity, but only de- 
 claratory, and might well have been left out, as 1. 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 im- 
 pleaded. 3. To have a seal, that is also declaratory, for when 
 they are incorporated they may make or use what seal they 
 will. 5 4. To restrain them from aliening or devising but in 
 
 1 " To the essence of a ... . body 
 corporate two things are only req- 
 uisite, sc. an incorporation and a 
 gift, and not any words of fundare, 
 exegire, and stabilere, or words to 
 that effect." Case of Sutton's Hos- 
 pital, 10 Rep. 28 a. 
 
 2 Compare Franklin Bridge Co. v. 
 Wood, 14 Ga. 80. 
 
 3 " A corporation is a body politic, 
 consisting of material bodies, which, 
 joined together, must have a name 
 
 to do things that concern their cor- 
 poration, or otherwise there is no 
 corporation." Viner's Abridgment, 
 Tit. Corp. (A. 2.) 1. 
 
 * Sutton's Hosp., 10 Rep. 29 b. 
 
 5 " A corporation cannot do an act 
 in pais without their common seal, 
 yet they may do an act upon record." 
 Viner's Abt., Tit. Corp. (G. 2.) 9; 
 see Com. Dig. Franchise, F. 13, and 
 1 Kyd, 259-268.
 
 § 13.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. II. 
 
 certain form ; that is an ordinance testifying the king's desire, 
 but it is but a precept and does not bind in law. 5. That the 
 survivors shall be a corporation, that is a good clause to oust 
 doubts and questions which might arise, the number being cer- 
 tain. 6. If the revenues increase, that they shall be used to 
 increase the number of the poor, etc., that is but explanatory. 
 
 7. To be visited by the governors, that is also explanatory. 
 
 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. ... 10. The license to purchase in mortmain is 
 necessary for the maintenance and support of the poor, for 
 without revenues they cannot live, and without a license in 
 mortmain they cannot lawfully purchase revenues, and yet 
 that is not of the essence of the corporation, for the corpora- 
 tion is perfect without it." ' 
 
 " And it is great reason that an hospital, etc., in expectancy 
 or intendment, or nomination, should be sufficient to support 
 the name of an incorporation, when the corporation itself is 
 only in abstracto ; . . . . for a corporation aggregate of many 
 is invisible, immortal, and rests only in intendment and con- 
 sideration of the law ; and therefore in 39 H. 6, 13 b. 14, a dean 
 and chapter cannot have predecessor nor successor, 21 E. 4, 27 
 (72) a, and 30 E. 3, 15. They cannot commit treason nor be 
 outlawed nor excommunicate, for they have no souls, 2 neither 
 can they appear in person, but by attorney. A corporation ag- 
 gregate of many cannot do fealty, for an invisible body can 
 neither be in person nor swear ; and .... it is not subject to 
 imbecilities, death of the body and divers other cases. A thing 
 which is not in esse but apparent expectancy is regarded in 
 law. 3 .... So note, reader, a difference between an estate or 
 interest, which none can take without present capacity, and a 
 power, liberty or franchise, or thing newly created, which may 
 take effect mfuturo."* 
 
 § 13. By implication as well as by express words could a 
 
 i lb. 30 b and 31 a. 
 
 2 Tbat corporations have no souls 
 was clearly demonstrated before the 
 days df railroads. " None can create 
 souls but God; but the king creates 
 corporations; therefore they have no 
 
 souls .... and this was the opinion 
 of Manwood, chief baron, touching 
 corporations." Tippling v. Pexall, 2 
 Buls. 233. 
 
 3 Sutton's Hosp., 10 Rep. 32 b. 
 
 * lb. 27 b.
 
 CHAP. II.] CORPORATIONS IN THE COMMON LAW. [§ 14. 
 
 corporation be created ; for, " it is well observed, that in old 
 times the inhabitants or burgesses of a town or borough were 
 incorporated when the king granted to them to have gildam 
 mercatoriam." 1 
 
 § 14. A century and a half after the time of Coke, Black- 
 stone speaks of the nature of corporations some- 
 what in detail. " As all personal rights," says he, Son?s idea 
 " die with the persons, and as the necessary forms ot * cor P»- 
 
 r . . *• ration. 
 
 of investing a series of individuals, one after an- 
 other, with the same identical rights, would be very inconven- 
 ient, if not impracticable, it has been found necessary, where it 
 is for the advantage of the public to have any particular rights 
 kept on foot and confirmed, 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." 2 
 
 Again, says Blackstone, "The name of the corporation is the 
 very being of its constitution ;" and, he continues, " the rights, 
 capacities, and incapacities, which are necessarily and insepara- 
 bly incident to every corporation, which incidents, as soon as a 
 corporation is duly elected, are tacitly annexed of course are : 
 (1) To have perpetual succession .... and, therefore, all 
 aggregate corporations have a power necessarily implied of 
 electing members in the room of such as go off. (2) To sue 
 and be sued, implead or be impleaded, grant or receive by its 
 corporate name, and do all other acts as natural persons may. 
 (3) To purchase lands and hold them for the benefit of them- 
 selves and their successors, which two are consequential to the 
 former. (4) To have a common seal . . . . (5) To make 
 by-laws or private statutes for the better government of the 
 
 1 lb. 30 a. " By special words the 
 king may make a limited corpora- 
 tion for a special purpose; as if the 
 king grants probis hominibus de Is- 
 lington et successoribus suis render- 
 ing a rent; this is a corporation to 
 render the rent to the king, and not 
 otherwise." Viner's Abt., Tit. Corp., 
 G. 3; see, also, Stebbins v. Jennings, 
 10 Pick. 172, 188. " A corporation 
 
 is good without limiting any number 
 certain of persons to be of the cor- 
 poration." Viner's Abt., Tit. Corp., 
 F. 9. " And one corporation may 
 be made out of another corporation." 
 Sutton's Hosp., 10 Rep. 31 b; see ib. 
 33 b. 
 
 2 1 Bl. ConL, 467.
 
 § 16.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. II. 
 
 Perpetual 
 succession 
 
 corporation, which are binding on themselves, unless contrary 
 to the law of the realm, and then they are void." l 
 
 § 15. Blackstone's statements are usually noteworthy for 
 their perspicuity rather than their logic. Throughout his 
 enumeration of the ordinary incidents of corporations, it is ap- 
 parent, by his indiscriminate use of singular and plural pro- 
 nouns, that he is not able wholly to make up his mind whether 
 the capacities enumerated attach to the corporation as a unit, 
 or to the members. 
 § 16. As Coke says : " A body politic is a body to take in 
 succession ; " 2 so Blackstone regards the capacity of 
 perpetual succession as the quality which, more than 
 any other, constitutes the corporation what it is, and 
 differentiates it from what it is not. " This is the very end of 
 its incorporation," says he, " for there cannot be a succession 
 forever without an incorporation." 3 Mainly to this quality, 
 then, is due the artificial personality of the corporation. 4 
 But is it entirely clear how this quality is a quality of the cor- 
 poration at all '{ for, as Coke himself says, " A dean and chap- 
 ter cannot have a predecessor nor a successor." 5 
 
 Perpetual succession of whom ? how ? and to what ? Appar- 
 ently of the members, who, by fulfilling conditions prescribed 
 by the charter, succeed to the rights and duties of former mem- 
 bers, or acquire similar rights and incur similar duties. These 
 rights and duties relate to the corporate property, purpose, 
 and to the capacity of corporate action ; in fact to the corpo- 
 ration. On the other hand, the corporation has certain rights, 
 
 1 1 Black. Com., 475, 476 ; Kent 
 adds a sixth, the power of amotion 
 or removal of members. 2 Kent, 
 Com., 278; De Yturbideu. Metropoli- 
 tan Club, 11 D. C. App. Ca. 180. 
 
 2 Supra, § 12. 
 
 8 1 Bl. Com.,475. 
 
 4 "The distinguishing feature, far 
 above all others, is the capacity con- 
 ferred by which a perpetual succes- 
 sion of different persons shall be re- 
 garded in the law as one and the 
 same body, and may at all times act 
 in fulfillment of the objects of asso- 
 ciation as a single individual. In 
 
 10 
 
 this way a legal existence, a body 
 corporate, an artificial being, is con- 
 stituted." Nelson, C. J., in Thomas 
 v. Dakin, 22 Wend. 71. 
 
 5 Supra, §12. "Succession, how- 
 ever, is a property of the individuals 
 who exercise the corporate rights. 
 They succeed each other. But to 
 say that the corporation itself has 
 perpetual succession, which is the 
 expression in general use, and suffi- 
 ciently accurate for general pur- 
 poses, appears to be a solecism." 
 S. A. Foote, arguendo, in Thomas v. 
 Dakin, 22 Wend. 32.
 
 CHAP. II.] CORPORATIONS IN THE COMMON LAW. [§ 17. 
 
 to which duties on the part of its members correspond. These 
 duties are the objects of the rights of which the corporation is 
 the subject or possessor. Towards outsiders, however, the 
 corporation appears as the only subject of rights, outsiders 
 taking no cognizance of the legal relations between the corpo- 
 ration and its members. Indeed, a common law corporation, as 
 it appears towards the outside world, may be compared to the 
 human body, which remains, as a whole, continuously the 
 same, while the particles of matter composing it change from 
 day to day. The outside world perceives no change in the 
 particles ; it does not even see thein ; and so can take no cogni- 
 zance of their relations to the body as a whole. Accordingly, 
 it would seem that in so far as a corporation is to be regarded 
 as a person, or as a whole, distinct from the members, the at- 
 tribute of perpetual succession denotes the quality of remain- 
 ing the same while the succession of its members goes on. And 
 the same what? as to its members, the same object of rights 
 belonging to them, as well as the same subject of rights which 
 have for their objects duties on the part of the members ; as to 
 the outside world, the same subject or object, as the case may 
 be, of rights subsisting between outsiders and the corpora- 
 tion. 1 
 
 § 17. The second and fourth of the ordinary incidents of cor- 
 porations mentioned by Blackstone, the capacitv to 
 
 ii i • , t i Capacity to 
 
 sue and be sued in the corporate name, and to use a sue and use 
 corporate seal, are legal contrivances adapted, the asea " 
 one to facilitate the enforcing of corporate rights and liabili- 
 ties, the other to facilitate corporate action. These two inci- 
 dents may be thought out without conceiving the corporation 
 to be a person, though by retaining this fiction one may dis- 
 pense with looking deeper into the matter to discern who it 
 really is that acquires rights and incurs liabilities through the 
 use of the corporate seal, and who it is whose rights and 
 liabilities are enforced by suits in the name of the corpora- 
 tion. 
 
 1 These remarks are offered merely 
 as an attempt to analyze the mean- 
 ing attached by the common law 
 lawyers to the term " perpetual suc- 
 
 cession," a term which, as used by 
 them, is not susceptible of clear 
 analysis. 
 
 11
 
 § 22.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. II. 
 
 § 18. The third of the ordinary incidents — the right to pur- 
 „ , , , chase and hold lands for the benefit of themselves and 
 
 To hold , 
 
 lands. successors — is of importance. r or this, as Coke says, 1 
 
 a special license in the charter is needed because of 
 the statute of mortmain, but he adds that this right is not of 
 the essence of the corporation, for the corporation is perfect 
 without it. 
 
 § 19. The last ordinary and inseparable incident mentioned 
 by Blackstone is the power to make by-laws, " bind- 
 by-iaws. ing upon themselves, unless contrary to the law of 
 the realm." But Coke says that this right is not 
 essential to a corporation, 2 and it is not even ordinarily incident 
 to charitable corporations, whose by-laws are supposed to ema- 
 nate from the founder. 3 The right to make by-laws, moreover, 
 is inconceivable as a capacity appertaining to the corporation 
 as a unit, as an artificial person, and can be conceived only as 
 a capacity of the members acting as a body. 
 
 §20. " When an integral part of a corporation is gone and 
 ^. , . the corporation has no power of restoring it, the cor- 
 
 Dissolution. . r . r oj 
 
 poration is so tar dissolved that the crown may grant 
 a new charter to a different set of men." 4 But, says Coke, 
 " A corporation may be aggregate of many without a head, 
 vide 18 E. 2." 5 By the death of all natural persons of which 
 the corporation consists, it is dissolved ; 6 but it is not dissolved 
 by a mere surrender of the charter. 7 
 
 § 21. It was a logical outcome of the notion of a corporation 
 as a person, as a subject of rights and liabilities distinct from 
 its members, that liability for corporate acts should be limited 
 to corporate funds, and that upon the dissolution of a corpo- 
 ration all its rights and liabilities should become extinct. 8 
 
 § 22. One or two definitions of a corporation, which presum- 
 
 1 Supra, § 12. 
 
 2 Supra, § 12. 
 
 8 See Angell and Ames on Corp., 
 §330, and authorities there cited. 
 
 *Rex v. Passmore, 3 T. R. 199; 
 Bacon's Abt., Tit. Corp. G-. "If a 
 corporation be made of confreres and 
 sisters, and after all the sisters are 
 dead, all grants and acts made by the 
 confreres are void; for when the sis- 
 
 12 
 
 ters are dead this is not any perfect 
 corporation.' 1 Viner's Abt., Tit. 
 Corp. J. 1. 
 
 5 Case of Sutton's Hospital, 10 Rep. 
 30 b. 
 
 6 Viner's Abt., Tit. Corp. J. 14; 
 see 2 Kyd, chap. 5, pp. 440 et seq. 
 
 7 Viner's Abt., Tit. Corp. J 26. 
 
 8 "The debts of a corporation, 
 either to it or from it, are totally ex-
 
 CHAP. II.] CORPORATIONS IN THE COMMON LAW. [§ 22a. 
 
 ably proceed more or less from a common law point of view, 
 may be of interest. " A corporation, or a body politic, or body 
 incorporate, is a collection of many individuals united in one 
 body, under a special denomination, having perpetual succession 
 under an artificial form, and vested by the policy of the law 
 with the capacity of acting 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 po- 
 litical 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 subsequent period of its exist- 
 ence." 1 
 
 " A corporation is an artificial being, invisible, 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 incidental 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 suc- 
 cession of many persons are considered as the same, and may 
 act as a single individual. . . . It is chiefly for the purpose 
 of clothing bodies of men in succession with these qualities and 
 capacities that corporations were invented and are in use. By 
 these means a perpetual succession of individuals are capable of 
 acting for the promotion of the particular object like one im- 
 mortal being." 2 
 
 § 22a. At the close of this chapter a brief classification of 
 corporations will be opportune. It will serve, in the first place, 
 to connect the common law view of a corporation with the an- 
 alysis of the corporate idea, contained in chapter III, and with 
 
 tinguished by its dissolution." 1 
 Bl. Com. 484. Compare the rule of 
 the Roman law, §6, note 3. This old 
 common law doctrine does not ap- 
 ply to stock corporations; see § 437 
 post. 
 
 n Kyd on Corp., 13 (A. D. 1793). 
 
 2 Marshall, C. J., in Dartmouth 
 
 College v. Woodward, 4 Wheat. 636. 
 Compare Andrews v. Union Mut. 
 Fire Ins. Co., 37 Me. 256; Ohio Ins. 
 Co. v. Munnemacher, 15 Ind. 294; 
 Louisville R. R. Co. v. Letson, 2 How. 
 497, 552; Bank of U. S. v. Deveaux, 
 5 Cr. 65, per Binney arguendo. 
 
 13
 
 § 22c] THE LAW OF PRIVATE CORPORATIONS. [CHAP. II. 
 
 the discussion of the resemblances between corporations and 
 other legal institutions, contained in chapter IV. In the sec- 
 ond place, this classification will show which classes of corpo- 
 rations form the subject of this treatise. 
 
 Corporations have served many purposes, and have been re- 
 garded and classified from different points of view. 1 Thus with 
 respect to the number of members, they have been divided into 
 corporations aggregate and corporations sole. A corporation 
 aggregate has many members. It may be an ecclesiastical cor- 
 poration, like the dean and chapter of a cathedral ; it may be a 
 municipal corporation, like a city ; it may be a private corpo- 
 ration, like a manufacturing company. A corporation sole con- 
 sists of a single person and his successors, occupying some par- 
 ticular station or position which the law recognizes and desires 
 to perpetuate. An example is the King of England, or an Eng- 
 lish bishop. In this country, a public official, like the gov- 
 ernor of a state or the President of the United States, might 
 possibly be termed a corporation sole. But the term would be 
 archaic and of questionable propriety. In a few cases a court 
 has seen fit to regard some functionary as a corporation sole. 2 
 But other terms (e. g. " trustee" ) would be more in accord with 
 common speech to-day ; and for practical purposes corporations 
 sole may be ignored. 
 
 § 22&. Again, from the point of view of the different purposes 
 subserved, corporations have been divided into ecclesiastical and 
 lay. To the former class would belong a dean and chapter. 3 
 While a lay corporation might be a public or municipal corpora- 
 tion like a town, an eleemosynary or charitable corporation, 
 like a free hospital or other institution formed to administer a 
 charitable trust ; or finally it might be a railroad or insurance 
 company, a savings bank, a club, or in fact any kind of a cor- 
 poration beyond those previously mentioned. 
 
 § 22c. Likewise, not only with regard to the different pur- 
 
 1 For a legislative classification, 
 see section 2 of the New York Gen- 
 eral Corporation Law (chap. 687, 
 Laws of 1892). 
 
 2 Wescott v. Fargo, 61 N. Y. 542; 
 Brunswick v. Dunning, 7 Mass. 445. 
 
 8 It may be questionable whether 
 
 14 
 
 strictly speaking there exist ecclesi- 
 astical corporations in the United 
 States. An incorporated religious 
 society is not an ecclesiastical corpo- 
 ration in New York. Robertson v. 
 Bullions, 11 N. Y. 243.
 
 CHAP. II.] CORPORATIONS IN THE COMMON LAW. [§ 22e. 
 
 poses subserved, but also with regard to differences in mode of 
 creation and in legal status, corporations are divided into pub- 
 lic (or municipal) and private. This division is of great im- 
 portance in American corporation law. A public corporation 
 is part of the government ; its liabilities in tort and contract 
 are qualified and limited by a number of legal principles ; there 
 is no contractual relationship between it and the state, nor 
 among its members ; and ordinarily the legislative power may 
 abolish it at will. On the other hand, a private corporation 
 although engaged in enterprises in which the public or the state 
 is interested, is not a part of government; a contractual rela- 
 tionship exists among its members and may exist between it and 
 the state ; the state may have no more and may have even less 
 control over it than over other private enterprises ; and its lia- 
 bilities in tort and contract approximate to those of natural per- 
 sons acting without corporate organization. 
 
 § 22d. Accordingly, adhering to the division into public 
 and private corporations as the one which is of practical im- 
 portance, we may speak of the different kinds of private corpo- 
 rations. These would include charitable corporations, above 
 mentioned ; also colleges and other incorporated institutions of 
 learning, save those which are administered by the state or 
 town or school district, and supported by taxation. In our 
 country where there is no " established church," private corpo- 
 rations would also include ecclesiastical, or to use the term more 
 usual at present, religious corporations; they would finally 
 embrace every kind of incorporated social club and benefit 
 society. 
 
 § 22e. The above are examples of private corporations not 
 created for the pecuniary profit of their members. On the 
 other hand a vast number of private corporations are formed 
 for this. purpose, whatever advantage to the public may be ex- 
 pected from them. Such corporations might be called broadly 
 business corporations, though in practice, that term is not usu- 
 ally applied to railroad companies, nor to banks and insurance 
 companies. These three classes of corporations are important. 
 Railroad companies offer the chief examples of the large pri- 
 vate corporation which has duties towards the public, and for 
 that purpose receives special privileges, like the right of emi- 
 nent domain. For these reasons they have even been loosely 
 
 15
 
 § 22/.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. II. 
 
 called quasi-public corporations. 1 Banks and insurance com- 
 panies form a class known as moneyed corporations. Beyond 
 these, great numbers of corporations are formed for manufac- 
 turing and trading purposes, and to them the term " business 
 corporation" is most commonly applied. 
 
 § 22/. With a few exceptions all private corporations formed 
 for profit have a definite capital called the capital stock, divided 
 into shares. 2 Ownership of shares constitutes membership in 
 the corporation, and the owners are called stockholders or share- 
 holders. And the subject of this treatise is the law applicable 
 to these private corporations which have a capital stock. They 
 include, for example, railroad and telegraph companies, banks 
 and insurance companies, and in general all manufacturing, 
 trading, or "business" corporations. Except for purposes of 
 illustration, it does not lie within the scope of this treatise to 
 discuss the law of municipal corporations or of charitable or 
 other private corporations not formed for business purposes 
 and having no capital stock. 
 
 1 But they are not public corpora- 
 tions, and the fact that the state 
 owns shares or even all the shares 
 in such a corporation does not 
 change its status. Bank of United 
 States v. Planters' Bank, 9 Wheat. 
 
 16 
 
 904; Briscoe v. Bank of Kentucky, 
 11 Pet. 257, 324. 
 
 2 A mutunl insurance company af- 
 fords an exception. Its members 
 consist of the insured, who contrib- 
 ute to a common indemnity fund. 
 The company has no other capital.
 
 CHAP. III.] ANALYSIS OF A CORPORATION. 
 
 [§ 23 - 
 
 CHAPTER III. 
 
 ANALYSIS OF THE IDEA OF A CORPORATION. 
 
 The two meanings of the term " cor- 
 poration,' 1 § 23. 
 
 Meaning of the terms " legal institu- 
 tion " and "legal relation, 1 ' §§24- 
 27. 
 
 The constitution of a corporation. 
 Incorporation, §§ 28-30. 
 
 Fundamental agreement between the 
 corporators, § 31. 
 
 The corporate funds, §§ 32, 33. 
 
 Legal relations in respect of the cor- 
 porate funds, §§ 34, 35. 
 
 Result of the analysis, § 36. 
 
 Persons between whom exist the 
 legal relations respecting the cor- 
 porate enterprise, § 37. 
 
 Corporate management, § 38. 
 
 Order of treatment, § 39. 
 
 General nature of the legal relations 
 existing in respect of the corporate 
 enterprise, § 40. 
 
 Trust relations, §§ 41-47. 
 
 The corporation also a body of men, 
 §§ 48-50. 
 
 Conclusion. The "legal person" 
 and the corporate name, § 51. 
 
 § 23. In " a corporation," according to the usual understand- 
 ing of the term by business men as well as lawyers, „,, 
 
 ° * _ J ' The two 
 
 exist elements which are the manifestations of law, meanings 
 
 , , . . , i-i • , .of the term 
 
 and physical elements which are in no sense the mam- "corpora- 
 festations of law ; for a corporation is regarded as a tlon ' 
 legal institution, and at the same time as a collection of per- 
 sons. Indeed, the indiscriminate use of the term " corporation " 
 to denote what exists through the operation of rules of law, as 
 well as to denote physical existences, has caused much confu- 
 sion. The use of the term, however, to convey two meanings, 
 or one twofold meaning, seems unavoidable in the present con- 
 dition of legal terminology ; but much of the confusion result- 
 ing from this equivocal use may be avoided by forming a clear 
 idea of each meaning of the term, or an adequate notion of 
 both sides of its twofold meaning. 1 
 
 1 A few definitions will illustrate 
 the two meanings of the term " cor- 
 poration," and the confusion some- 
 times arising. Kent says (2 Com., 
 267), "« corporation is a franchise 
 possessed by one or more individuals, 
 
 2 
 
 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, 
 however numerous the association 
 
 17
 
 24.] 
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. III. 
 
 §24. Accordingly, in the first place a corporation is to be 
 regarded as a legal institution. In this sense it means 
 the sum of legal relations existing in respect to the 
 corporate enterprise. Let us analyze the term " legal 
 institution." It denotes a body of legal rules in their 
 manifestations in legal relations 1 between persons as 
 
 Meaning of 
 the terms 
 " legal in- 
 stitution " 
 and " legal 
 relation." 
 
 may be, as a single individual." 
 Blackstone (2 Com., 37) also calls a 
 corporation a franchise. 
 
 On the other hand, Kyd (1 Kyd on 
 Corps., 13) says : " A corporation, 
 or a body politic, or a body incor- 
 porate, is a collection of individuals, 
 united in one body," etc. See, also, 
 Kansas Pacific R. R. Co. v. Atchison, 
 T. & S. F. R. R. Co., 112 U. S. 415. 
 Or, as Mr. Jay Gould has said, a cor- 
 poration is "a body of men who 
 unite, associate, concentrate their 
 ability, capital, and intelligence in 
 the undertaking of a work great or 
 small, which any one of them indi- 
 vidually would be unwilling to under- 
 take. If there are losses, they agree 
 to bear each his proportion. If 
 there are profits, they agree to 
 divide them.' 1 
 
 The definitions of Kent and Black- 
 stone convey the one meaning of the 
 term "corporation," and Kyd's and 
 Mr. Gould's the other. The two fol- 
 lowing definitions show how the two 
 meanings may be confused. 
 
 "A corporation is a body created 
 by law, composed of individuals, 
 united under a common name, the 
 members of which succeed each 
 other, so that the body continues the 
 same, notwithstanding the change of 
 the individuals who compose it, and 
 is for certain purposes considered as 
 a natural person." Angell and Ames 
 on Corps., § 1. It is plain that in 
 60 far as a corporation is a body 
 
 created by law, it is not composed 
 of individuals who are not created 
 by law. 
 
 "A corporation is a legal institu- 
 tion devised to confer upon the indivi- 
 duals of which it is composed powers, 
 privileges, and immunities which 
 they would not otherwise possess, 
 the most important of which are 
 continuous legal identity and perpet- 
 ual or indefinite succession under 
 the corporate name, notwitstanding 
 successive changes, by death or 
 otherwise, in the corporators or 
 members of the corporation. It con- 
 veys, perhaps, as intelligible an idea 
 as can be given by a brief definition, 
 to say that a corporation is a legal 
 person, with a special name, and 
 composed of such members, and en- 
 dowed with such powers, and such 
 only, as the law prescribes." 1 Dil- 
 lon, Munic. Corp., 25. 
 
 In having more than one meaning 
 the term "partnership" resembles 
 the term " corporation." For in- 
 stance, Dixon (Law of Partnership, 
 1) says : " A partnership is a volun- 
 tary unincorporated association of 
 two or more persons," etc.; while 
 Kent (3 Com., 23) says: "Partner- 
 ship is a contract of two or more 
 persons," etc. Again the Indian 
 Contract Act (§ 239) says: " Part- 
 nership is the relation which subsists 
 between persons who have agreed," 
 etc. Thus partnership is an asso- 
 ciation of individuals, is a contract, 
 
 1 In the term "legal relation " the 
 word "legal" is used in a broad 
 
 18 
 
 sense, and not as opposed to " equit- 
 able."
 
 CHAP, in.] ANALYSIS OF A CORPORATION. 
 
 [§24. 
 
 to whom certain mutually related conditions of fact may be 
 affirmed. 1 For instance, the rules of law which manifest them- 
 selves in legal relations when a person has agreed to answer for 
 the debt, default, or miscarriage of another, constitute, in their 
 manifestation, the legal institution of suretyship. The facts that 
 one person has made a promise to another, which some third per- 
 son has promised the promisee that the original promisor shall 
 
 (Inst, of Nat. Law, bk. 1, ch. 13, §9) 
 or a relation ; and finally Rutherford 
 gives the following lucid definition: 
 
 " When two or more persons join 
 money, or goods, or labor, or all of 
 these together, and agree to give each 
 other a common claim upon such 
 joint stock, this [?] is partnership.' 1 
 
 On the other hand the term " sure- 
 tyship" has but a single meaning, 
 t. e., the legal relations arising upon 
 an agreement to answer for the debt, 
 default, or miscarriage of another. 
 It never means the individuals be- 
 tween whom these relations subsist. 
 
 1 The writer has looked in vain for 
 a definition of this term. His de- 
 finition is but an attempt to deter- 
 mine a meaning in which he may use 
 the term consistently. The mental 
 process by which this definition was 
 arrived at is somewhat as follows: A 
 right is the power of an individual 
 with the aid of the state to compel 
 another to do or refrain from doing 
 something, and a liability means the 
 liability of being obliged, by the state 
 acting at the instance of the indi- 
 vidual possessing the right, to do or 
 refrain; though the term liability 
 usually denotes a positive duty to do, 
 rather than a negative duty to re- 
 frain. Every right implies a cor- 
 responding liability, and, together 
 with this liability, constitutes a legal 
 relation between two or more per- 
 sons. See, also, § 442. 
 
 Rights and liabilities are called the 
 creatures of law, but, in truth, they 
 are rather manifestations of law than 
 
 its creatures. Consider any ordinary 
 rule of law: "The lessee shall pay 
 the lessor the rent agreed on in the 
 lease.' 1 This general proposition, as 
 stated here, is not accurate, for there 
 is no absolute command from the 
 state to lessees to pay rent (as there 
 is a command from the state to all 
 men to refrain from murder). The 
 correct legal proposition is this: " At 
 the instance of the lessor, the state 
 will compel the lessee to pay the 
 rent," which means that lessors have 
 the right to compel lessees to pay 
 the rent. This, then, is the general 
 rule. Now where certain conditions 
 of fact may be affirmed of A., that 
 is, when A. becomes the lessor of 
 certain premises, and when certain 
 related conditions of fact may be af- 
 firmed of B., that is, when B. be- 
 comes the lessee of those premises, 
 a legal relation arises, to wit, a man- 
 ifestation of law, i. e., a concrete in- 
 stance of law in operation, which 
 may be expressed in the following 
 proposition: "A. has the right to 
 compel B. to pay the rent as agreed 
 on in the lease." But there are other 
 legal relations between A. and B. in 
 respect of the demised premises, 
 which further legal relations are the 
 manifestations of other rules of law, 
 and the sum total of all these legal 
 relations, existing in respect to some 
 definite subject-matter, is what the 
 writer intends by the term legal in- 
 stitution as the manifestation of a 
 group of legal rules in operation. 
 See § 444. 
 
 IS
 
 § 27.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. in. 
 
 fulfill, constitute mutually related conditions of fact which may 
 be affirmed as to the promisor, promisee, and surety, who are 
 the persons between whom the legal relations subsist. 
 
 § 25. It is through fulfilling conditions of fact by doing cer- 
 tain acts, that persons bring themselves within the operation 
 of rules of law which thereupon manifest themselves in rights 
 and liabilities. Every right implies a corresponding liability, 
 and every liability a corresponding right ; which is to say, a 
 right with its corresponding liability constitutes a legal rela- 
 tion. Accordingly, when persons by their acts have brought 
 themselves within the operation of a group of legal rules, and 
 these rules have in their consequent operation manifested them- 
 selves in legal relations between such persons, the sum of these 
 legal relations, i. e., the manifestation of these rules in opera- 
 tion upon individuals, constitutes a legal institution. 
 
 § 26. It is, therefore, little more than an identical proposition 
 to say that rules of law 1 manifest themselves in legal relations 
 only between persons as to whom mutually related conditions of 
 fact may be affirmed. For instance, an enabling statute in con- 
 nection with the general rules of corporation law, roughly speak- 
 ing, may be said to constitute a group of legal rules which may 
 manifest themselves in a legal institution consisting of legal 
 relations (a) among the persons who file the articles of associa- 
 tion and subscribe for shares, and (b) between such persons and 
 others who may afterwards deal with them as a body corporate 
 in respect of the corporate enterprise. Here the agreeing to the 
 articles and the filing of them are the conditions of fact which 
 must be predicable of the corporators before these legal relations 
 can exist among them ; and that other persons have had deal- 
 ings with the corporators in respect to the corporate enterprise 
 are the further conditions of fact which must be predicable of 
 the corporators and such persons before legal relations between 
 these two classes can exist. 
 
 § 27. A corporation, then, is the manifestation of a body of 
 rules of law in legal relations between persons who have fulfilled 
 the prerequisite conditions of fact. But what rules of law ? 
 In general, those applicable to corporate enterprises, constituting 
 what is commonly called " corporation law," and, in especial, 
 
 1 The writer leaves out of consideration rules of criminal law. 
 
 20
 
 CHAP. III.] ANALYSIS OF A CORPORATION. [§ 29. 
 
 those contained in the enabling statute, or in the charter of the 
 corporation, if there is one. For it will be borne in mind, that 
 by filing articles of association in pursuance of statutory pro- 
 visions, or by accepting a charter, persons bring themselves 
 within the operation not only of the rules of law in the enabling 
 statute or charter, but also of rules applicable generally to cor- 
 porate enterprises, including many of the rules of the law of 
 contracts and of agency. 1 
 
 § 28. These more general rules of law, together with those 
 contained in the enabling statute, or in the charter, 
 if there is one, are embraced in what may be called tution of a 
 the constitution a of the corporation ; and the action tio r n° ra "in- 
 of these rules (i. <?., the manifesting of themselves in corpora- 
 
 v ' ° , tion. 
 
 legal relations), as caused by the corporators fulfilling 
 the prerequisite conditions of fact (riling articles of association 
 or accepting a charter), may be called incorporation, the result 
 of which is a legal institution, to wit, a corporation. 
 
 § 29. But the legal relations which arise immediately conse- 
 quent upon incorporation are not its entire consequences. In- 
 corporation has the further indirect result that future acts in 
 respect to the corporate enterprise will give rise to legal rela- 
 tions different from those which such acts would have occa- 
 sioned had there been no incorporation. Had there been no in- 
 corporation, the corporators might have proceeded to carry out 
 the same business enterprise which they intend to prosecute 
 after incorporation. They might have subscribed an amount 
 of capital equal to the capital stock mentioned in the articles 
 of association, and they might have done business on this capi- 
 tal, although not incorporated. But, doing business as an un- 
 incorporated firm, they would have incurred liabilities which, 
 through incorporation, they avoid. The legal relations arising 
 in respect to their enterprise, for instance through contracts 
 
 i See Relfe v. Rundle, 103 U. S. 
 222. 
 
 2 See Relfe v. Rundle, 103 U. S. 
 222. It will be noticed that the term 
 "constitution of the corporation" 
 conveys a notion similar to that con- 
 veyed by the term " corporation," 
 meaning a legal institution. As was 
 said, some pages back, "the term 
 
 legal institution denotes a body of 
 legal rules in their manifestation," 
 etc. By the term constitution is in- 
 tended the same body of rules, but 
 considered as passive without regard 
 to their manifestation in legal rela- 
 tions; without regard, that is, to 
 whether individuals are within their 
 operation or not. 
 
 21
 
 § 31.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. III. 
 
 entered into in its prosecution, would have been the manifesta- 
 tion, not of corporation, but of partnership law. 
 
 § 30. Incorporation, however, far from changing the legal 
 effect of any and all acts which may be done by the persons who 
 are corporators, changes the legal effect 1 only of acts done in 
 respect to the corporate enterprise. The constitution of a cor- 
 poration is operative only in relation to the purposes of incor- 
 poration and the means of their attainment. It is only as to 
 these purposes that the corporators, through incorporation, are 
 enabled to act as an incorporated body ; and it is only acts in 
 relation to the corporate enterprise that occasion the rules of 
 law embraced in the constitution" of the corporation to operate 
 upon the actors. Phrasing the whole matter somewhat differ- 
 ently, it may be said that the corporators by incorporation ac- 
 quire the legal competency to employ certain funds or other 
 property for the attainment of a certain object in a manner in 
 which it would not have been legally competent for an unin- 
 corporated company to act. 
 
 § 31. By far the most important of the acts which on the 
 part of the corporators brin^ about incorporation, is 
 mental the agreement, contained in the charter or articles or 
 between 11 association, whereby the parties thereto agree that the 
 rators rp °" ie g a ^ relations constituting the corporation shall arise 
 between them. This agreement is fulfilled through 
 incorporation, which causes certain of the contemplated legal 
 relations to arise, and provides for the coming into existence of 
 further legal relations upon the doing of further acts in respect 
 to the corporate enterprise. Upon incorporation this agree- 
 ment receives the sanction of the rules of law in the constitu- 
 tion of the corporation, its terms becoming a part of the legal 
 rules which manifest themselves in legal relations in respect to 
 the corporate enterprise. Whether, and in what sense, the state 
 may be regarded as a party to this agreement will be discussed 
 in another chapter. 2 Here, it suffices to say, that the agree- 
 ment thus embodied in the constitution of the corporation can- 
 not be changed by the state unless the state reserves the power 
 to change it ; and this amounts to saying that the constitution 
 
 1 Legal effect, i. e., the legal rela- 1 2 Infra, chap, viii., §§438 et seq. 
 tions which an act occasions. ' 
 
 22
 
 CHAP. III.] ANALYSIS OF A CORPORATION. [§ 33. 
 
 of the corporation cannot be changed in any material respect by 
 the state, unless the power to change it is reserved. 1 If this 
 power is reserved, the agreement between the corporators, em- 
 bodied in the constitution, must be regarded as made subject to 
 the power of the state to alter the constitution and the agree- 
 ment which it contains. 
 
 § 32. The legal relations resulting from incorporation subsist 
 in respect to the object of incorporation specified in the charter 
 or articles of association and the means of attaining this object, 
 i. e., the corporate funds and property. Roughly 
 speaking, the general result of these relations is that porate 
 
 funds 
 
 the corporate funds become a so-called trust fund set 
 
 apart for the attainment of the object of incorporation, as will 
 
 be explained. 
 
 § 33. What is the legal situation of these funds ? Can any 
 one be said to own them ? Austin says : 2 " The proprietor or 
 owner is empowered to turn or apply the subject of his property 
 or ownership to uses or purposes which are not absolutely ua- 
 limited, but which are incapable of exact circumscription with 
 regard to class or number." And again, the owner " may not 
 use his own so that he injure another, or so that he violate a 
 duty, relative or absolute, to which he himself is subject. But 
 he may turn or apply his own to every use or purpose which is 
 not inconsistent with that general or vague restriction." 
 
 From the idea of ownership conveyed by these passages from 
 Austin, it is plain that corporate funds cannot with propriety 
 be said to be owned by any one ; 3 that is to say, the legal rela- 
 tions subsisting in respect of corporate funds are unlike those 
 subsisting in respect of property which is mine. Using the 
 term "corporation" in the sense of a legal institution, to say 
 that the corporation owns the corporate funds is meaningless, 
 for the legal relations in respect to the corporate funds are 
 nothing but the major part of the legal relations composing 
 the corporation ; and consequently to make this assertion is to 
 say that a mass of legal relations owns the major part of itself, 
 
 1 Except in the exercise of certain 
 powers which the state is held al- 
 ways to reserve, see §§ 465, 466. 
 
 2 Lect. xlvii. on law as to its pur- 
 poses and subjects. 
 
 3 "Strictly speaking, ownership is 
 the right of a natural person or per- 
 sons only." State v. Bank of Louis- 
 iana, 9 La. 745, 759; see also Angell 
 and Ames on Corp., § 160. 
 
 23
 
 § 34.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. III. 
 
 which is nonsense. On the other hand, using the term corpo- 
 ration in the second sense before referred to, 1 as meaning a body 
 of men, to assert that the corporation owns the corporate funds 
 is to make not a meaningless, but an incorrect assertion. The 
 term ownership connotes an indefinite multitude of rights in 
 respect of the thing owned, including the right to destroy it. 
 This multitude of rights is not possessed by the corporators 
 either singly or as a body corporate; 2 and, accordingly, with 
 no propriety can they be said to own the corporate funds. 
 
 § 34. The discussion of the legal relations respecting the cor- 
 L j rela _ porate funds, i. e., the funds standing in the name of 
 tions in re- the corporation, will constitute a large part of this 
 
 spectofthe ' . ° l 
 
 corporate volume. Ihe general outline is this : The state has 
 
 f 1 
 
 the power or right to enforce the application of these 
 funds to the objects of incorporation, at least so far as the pub- 
 lic is interested in their attainment ; the shareholders have the 
 right that these funds shall be applied to these objects ; and 
 the creditors of the corporation have the right to prevent the 
 diversion of these funds from the objects of incorporation to 
 the injury of creditors. The result of the respective rights of 
 these different classes of persons is that corporate property be- 
 comes a fund set apart for the attainment of certain purposes 
 from which it cannot be diverted without the consent of all 
 whose legally protected interests would be injured by such di- 
 version. It becomes a " Zweckvermogen," — fund devoted to 
 an object — as a German writer, Brinz, has aptly termed it. 
 
 3 
 
 i See § 23. 
 
 2 Compare §§ 48-50. 
 
 3 It is not intended to assert that a 
 corporation, in whatever sense the 
 term be used, is technically, or in 
 all respects substantially, a "trus- 
 tee;" nor are corporate funds " trust 
 funds" in the sense that there is a 
 "direct and express trust attached 
 to the property." See Graham v. 
 Railroad Co., 102 U. S. 148, 160. In- 
 deed, it is said by the highest au- 
 thority that "a corporation" holds 
 its property as absolutely as an in- 
 dividual, lb., cited in Hollins v. 
 Brierfield Coal Co., 150 U. S. 371, 
 
 24 
 
 382 et seq. The phrase " trust f und " 
 undoubtedly is vague, and perhaps 
 the courts might have chosen a bet- 
 ter one. The object of the above 
 analysis is to indicate how the term 
 '• ownership " does not substantially 
 and fully describe the legal situation 
 of funds " belonging to a corpora- 
 tion." In one case, with reference 
 to certain circumstances, a court 
 may speak of corporate property as 
 a "trust fund;" in another, it may 
 say that a corporation owns its prop- 
 erty as absolutely as an individual. 
 One should be careful in applying 
 such general phrases under circum-
 
 CHAP. III.] ANALYSIS OF A CORPORATION. [§ 37. 
 
 § 35. Persons, not shareholders, bring themselves within the 
 operation of the rules of law in the constitution of the corpo- 
 ation by contracting with the corporate representatives. The 
 rights of such persons are the manifestations of these rules, 
 which, in their operation, exclude the operation of other rules ; 
 as, for instance, rules whose operation would have been occa- 
 sioned by contracting with the agent of an unincorporated firm. 
 
 § 36. The result of the analysis reached at this point is briefly 
 this : a corporation, considered as a legal institution, 
 is the sum of the legal relations resulting from the ^tfauaiy- 
 operation of rules of law in its constitution upon the sis at this 
 
 1 L , point. 
 
 various persons, who, by fulfilling the prerequisite 
 conditions, bring themselves within the operation of these rules. 
 The general effect of these legal relations is to convert the corpo- 
 rate funds, in respect to which, through the operation of the con- 
 stitution of the corporation, ownership properly speaking ceases, 
 into a fund for the attainment of the objects of incorporation. 
 
 § 37. It is needful here to state more specifically between 
 whom these legal relations subsist. There is first 
 the state, which is to be viewed in two characters : between 
 (a) as the political superior from whom emanate the Sthe 6 *" 
 rules of law which manifest themselves in lesral rela- ! e £. al re ~ 
 
 ° lations ra- 
 
 tions m respect to the corporate enterprise ; and (b) as specting 
 
 a party between whom and others, through incorpo- porate 
 ration, arise legal relations of a peculiar nature pro- enter P nse - 
 tected by the constitution of the United States. 1 Secondly, 
 there are the shareholders ; thirdly, it will be convenient to re- 
 gard the persons who ordinarily manage the corporate affairs — 
 the directors and other officers — as a distinct class. Creditors 
 constitute the remaining class of persons interested in the cor- 
 porate enterprise. Their only interest is to be paid what is due 
 them, and their only right is that the corporate funds shall not 
 be wasted or misapplied so as to endanger the payment of their 
 claims. 
 
 It will be necessary, moreover, to consider the legal relations 
 subsisting between individuals of the same class ; and, finally, 
 
 stances differing from those with 
 reference to which they were used. 
 It is vain to think to cover by any 
 single phrase the various aspects of 
 
 the legal situation of corporate prop- 
 erty. 
 1 See chap, viii., §§438 et seq. 
 
 25
 
 § 38.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. HI. 
 
 there is still another and somewhat different view, which it will 
 be convenient if not necessary to take of the legal relations in 
 respect to the corporate enterprise. They must be regarded as 
 subsisting between individuals of a class and the body corporate 
 as representative of the interests of all persons in the corporate 
 enterprise. 
 
 § 38. The very notion of any organized body of men, or body 
 Co orate P on ^ c or corporate, implies the existence of certain 
 
 manage- rules for the management of the affairs of the body, 
 lhe constitution of a corporation always contains rules 
 for the management of the corporate enterprise ; providing, as 
 it does, that acts within the scope of the purposes of incorpora- 
 tion shall, if done by certain persons, have the same legal effect 
 as if done or assented to by every one interested in the corpo- 
 rate enterprise. These certain persons are said to exercise the 
 corporate powers. By filing articles of association, or accept- 
 ing a charter, shareholders agree that the corporate enterprise 
 shall be managed as provided for in the charter, or in the en- 
 abling statute and articles of association. Their individual right 
 to manage the funds subscribed they surrender into the hands 
 of a majority of themselves, and into the hands of the officers 
 of the corporation, as provided for in the constitution. To the 
 provisions in regard to the corporate management creditors im- 
 pliedly assent in contracting with the corporation. 
 
 Thus the body corporate, consisting of the shareholders as an 
 organized body acting through the will of the majority and com- 
 posing the corporation (regarded not as a legal institution, but 
 as a body of men ! ), is an agency with plenary authority to em- 
 ploy the corporate funds for the purposes of incorporation, and 
 the acts of directors within the scope of their authority to act 
 for the corporation are to be regarded as the acts of the body 
 corporate. The remedy of persons aggrieved through the mis- 
 application of corporate funds lies ordinarily against the body 
 corporate; and the majority of questions litigated in court arise 
 between some person or persons and the body corporate as rep- 
 resenting all persons in any way interested in the corporate en- 
 terprise. 
 
 * §§ 48-50. 
 26
 
 CHAP. III.] ANALYSIS OF A CORPORATION. [§ 41. 
 
 § 39. In accordance with the foregoing remarks, the legal 
 relations constituting the corporation will, in the 
 chapters which follow the chapter on the legal effect treatment, 
 of acts done on behalf of a corporation, 1 be treated 
 in the following order : First, relations between the state and 
 the body corporate as representing all persons interested in the 
 corporate enterprise, and between the state and the different 
 classes of these persons ; secondly, the legal relations between 
 the body corporate and these different classes of persons; 
 thirdly, the legal relations between these different classes of 
 persons ; and, lastly, the legal relations among persons of the 
 same class. 
 
 § 40. Here a few remarks must be made on the general na- 
 ture of these relations. They exist for the most part General 
 in respect of a certain fund, as to which various per- nature of 
 sons have rights. But not all of these various per- tions exist- 
 
 iii°* in re- 
 
 sons (the creditors, for example) have ordinarily a spectofthe 
 voice in the management of this fund ; and conse- enterprise, 
 quently these different persons have not equal oppor- 
 tunity to protect their respective interests. Some of these per- 
 sons, moreover, on account of rules which may exist in the consti- 
 tution of the corporation, may be temporarily unable to enforce 
 certain of their rights ; 2 as, for instance, creditors may be tem- 
 porarily disabled by the rule of general application that no 
 creditor of the corporation can bring an action against the 
 shareholders individually to enforce either unpaid subscrip- 
 tions or statutory liability, until he has obtained judgment 
 against the corporation, and execution thereunder has been 
 returned unsatisfied. From these and other considerations, it 
 would seem that many of the relations in respect of the corpo- 
 rate enterprise are what are loosely called " trust relations," a 
 species of legal relation the essential peculiarities of which it 
 would be well to determine before proceeding further. 
 
 § 41. When one man owes a legal duty to another, which 
 other actually or presumably is not in a position to 
 enforce, at least for the time, the law imposes on the reEons." 
 person owing the duty a stricter accountability to the 
 
 1 Chap. vii. 
 
 3 Or we may say their rights are 
 
 temporarily in abeyance, or not yet 
 consummate. 
 
 27
 
 § 44.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. in. 
 
 person to whom the duty is owed than ordinarily exists between 
 man and man. That is to say, the circumstances are such that 
 rules of law apply to the two persons, which manifest them- 
 selves in peculiarly advantageous rights in the person under a 
 disability. These are rights which, were it not for the circum- 
 stances causing the disability as a compensation for which they 
 are given, the person under the disability would not have had. 
 For instancej through inexperience and on account of other cir- 
 cumstances, an infant is presumed incapable of protecting itself 
 against the acts of its guardian. Accordingly, not all the rules 
 of law applying ordinarily to transactions of sale, for instance, 
 apply when the guardian purchases his ward's property ; but 
 certain other rules of law apply, which create further rights 
 in the ward, and impose a most stringent accountability on the 
 guardian, preventing the latter from taking advantages and 
 profits to which he would have been entitled had the seller not 
 been his ward. 
 
 § 42. Accordingly, wherever there exists what is called a 
 trust relation, there will be found an inability on the part of 
 the cestui que trust to protect himself against the improper acts 
 of the trustee ; an inability arising either from the status of the 
 former, as infancy or insanity, or from the special circumstances 
 of the case. A client cannot adequately guard against the im- 
 positions of his attorney, nor an absent principal against the 
 improper acts of his agent. 
 
 § 43. Again, where a trust relation exists, there will usually 
 be an actual confiding in the trustee by the cestui que trust, who 
 intrusts his affairs to the former, or whose property may be con- 
 fided to the trustee by others, as in testamentary guardianship. 
 And the law will protect such confidence from abuse. The 
 element of actual confidence does not exist when a person is 
 held to the duties of a trustee by reason of his wrongful act, as 
 the wrongful taking of another's property. 
 
 § 44. A trust relation arises between directors and share- 
 holders, because it is impracticable for the latter to keep them- 
 selves adequately informed of the state of the corporate busi- 
 ness, and because they have put confidence in the directors. The 
 directors are in a position to do the shareholders injuries against 
 which the latter can protect themselves only through the aid 
 of the rules of law which manifest themselves in trust relations 
 28
 
 CHAP, in.] ANALYSIS OF A CORPORATION. [§ 48. 
 
 between these two classes of persons. Trust relations exist also 
 between the directors and the creditors of the corporation, on 
 account of the inability of the creditors to protect their inter- 
 ests in the funds which the directors manage. 
 
 § 45. Possibly it may also be said that shareholders, to the 
 extent of their unpaid subscriptions to the capital stock, are 
 affected with duties towards creditors, which constitute trust 
 relations between them ; for unpaid subscriptions, just as much 
 as those paid in, are held to form part of the corporate funds, 
 of the trust funds, to be devoted to the objects of incorporation ; 
 objects which include the payment of liabilities contracted in 
 their pursuit. Yet this proposition is questionable, and there 
 is a decision to the contrary. 1 
 
 § 46. The reason last stated points to the third element often 
 present when a trust relation exists, to wit, possession by one 
 person of property of which another is the legal or equitable 
 owner, or in respect of which the other has rights. This element 
 occasions a trust relationship when one person has wrongfully 
 taken the property of another ; and the same element may be 
 regarded as occasioning a trust relationship between bailor and 
 bailee in respect of the property bailed ; and thus a person may 
 be held as trustee for another in certain respects, or in respect 
 of certain property, while in other respects he owes the latter 
 no special duty. 
 
 §47. In short, the circumstances ordinarily occasioning a 
 trust relationship are : First, actual or presumptive inadequacy 
 of the legal rules applicable to transactions of the same kind 
 with the transaction occasioning the relation in question, to 
 bring about what the law regards as just or expedient ; an in- 
 adequacy which may be due either to status or the peculiar 
 circumstances of the case ; secondly, confidence invited by one 
 person, and by another actually reposed, in the discretion, hon- 
 esty, and ability of the former ; and thirdly, possession, right- 
 ful or wrongful, of property belonging to another, or in respect 
 to which the other has rights. 2 
 
 § 48. Thus far a corporation has been regarded solely as a 
 
 1 Morrison v. Savage, 56 Md. 142. 
 
 2 It appears at a glance that the 
 term trust relation is vague and un- 
 
 suitable, except for the roughest clas- 
 sification. 
 
 29
 
 § 51.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. III. 
 
 mass of legal relations. It is now necessary to deter- 
 poration mine who are the individuals composing the corpo- 
 ofmen. y ration regarded, not as a mass of legal relations, but 
 as a body of men. Can it be said that the corpora- 
 tion, 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 en- 
 terprise ; it would embrace the state as representing the public, 
 and, beside the shareholders and directors, it would also em- 
 brace the creditors of the corporation. No doubt this concep- 
 tion would be adequate ; but, in the first place, it is repugnant 
 to any popular or technical meaning of the term corporation ; 
 and, moreover, the conception of such an undefined body of 
 men, if not hopelessly indefinite, would be at least too unwieldy 
 for use. 
 
 § 49. On the whole, it is more in accordance with the ordi- 
 nary use of terms, and a clearer and more serviceable con- 
 ception, to regard the corporation as consisting of the share- 
 holders, who may with propriety be said to constitute the body 
 corporate, as it is through their acts, or the acts of their prede- 
 cessors, that incorporation is caused. The management of the 
 corporate enterprise is in their hands, or in the hands of per- 
 sons chosen by them ; and on them and their appointees the 
 constitution confers the competency to do acts which occasion 
 legal relations in respect of the corporate enterprise ; in them 
 and their appointees, that is to say, are vested the corporate 
 powers. 
 
 § 50. The shareholders, then, vested with the corporate pow- 
 ers, are the body corporate, corporation, or company. It is 
 their acts, when done in the manner prescribed in the consti- 
 tution of the corporation, that are, properly speaking, acts of 
 the corporation. The main feature of their organization, as a 
 body corporate, is that by virtue of their organization acts done 
 in pursuance of its terms and within the scope of its purposes 
 are in effect the acts of all ; and, accordingly, such acts of a 
 majority of a requisite quorum are to be regarded as the acts 
 of the whole body. 
 
 § 51. Such, then, are the two meanings of the term corpora- 
 tion : the one, the sum of legal relations subsisting in respect 
 to the corporate enterprise; the other, the organic body of 
 30
 
 CHAP. III.] ANALYSIS OF A CORPORATION. 
 
 [§51. 
 
 shareholders whose acts cause the operation of the rules of 
 law in the constitution. In these two meanings of the term 
 the old idea of the " legal person " has no place. 1 There is, 
 
 1 How persons could succeed each 
 other in the enjoyment of the same 
 rights was a puzzle iu the early law, 
 to be solved only through regarding 
 the successor as continuing in some 
 way the legal personality of his prede- 
 cessor. See the chapters on Succes- 
 sion in Holmes, "On the Common 
 Law." The best known instance of 
 the continuance of legal personality 
 is the universal succession of the 
 Roman law. But the early common 
 law notions of succession resemble 
 those of the Roman law more closely 
 than is ordinarily supposed. 
 
 The fiction of a legal person was 
 largely due to the difficulties of the 
 early lawyers regarding the succes- 
 sion of oue person to the rights of 
 another. Even to-day we help out 
 our thought by saying that an as- 
 signee "stands in the shoes" of his 
 assignor. However useful this fic- 
 tion may once have been, it is to-day 
 inadequate for the purpose of doing 
 justice among persons interested in 
 corporate enterprises. And even 
 where it can still be used, matters 
 may be frequently simplified by 
 avoiding it. Take, for instance, the 
 following passage: " If a person be- 
 comes surety to several people for 
 the conduct of a servant in their em- 
 ploy, and those people are after- 
 wards incorporated, the surety is dis- 
 charged; for the person created by 
 the act of incorporation is different 
 from the persons in whose employ the 
 servant was, and with whom the 
 surety contracted." 1 Lindley on 
 Part., 214; see Bensingeru. Wren, 100 
 Pa. St. 500. In this passage a fiction is 
 used to prove a legal proposition, the 
 plain reasons of which lie on the sur- 
 
 face. The contract of suretyship is 
 strictly construed in favor of the 
 surety. In the passage quoted, the 
 liability of the corporators for acts of 
 their servants, as well as their rela- 
 tions to the latter, were changed by 
 their own incorporation. Any such 
 change discharges the surety, who 
 made a certain distinct contract, 
 which was not a contract to guaranty 
 the fidelity of a servant of an in- 
 corporated body of men. 
 
 It is in respect of the doctrine of 
 ultra vires, that the fiction of a legal 
 person is most pernicious, as this fic- 
 tion involves regarding a corporation 
 as a unit, and retards the proper dis- 
 crimination of the rights of different 
 persons in regard to ultra vires acts. 
 Moreover, in the present condition of 
 business enterprises in this country, 
 this fiction may give rise to insol- 
 vable problems. For instance, a rail- 
 road company, whose road extends 
 through two states, is organized un- 
 der charters from both, each charter 
 being the counterpart of the other. 
 Is the result one or two " legal per- 
 sons"? Since as much may be said 
 on one side as the other, the problem 
 is as insolvable as it is gratuitous. 
 The question of real importance is: 
 What are the rights and liabilities 
 arising under these charters in re- 
 spect of the corporate enterprise? 
 And this question may be answered 
 without reference to whether this 
 raiload company is one or two " per- 
 sons," or Siamese twins born of dif- 
 ferent mothers. 
 
 Two recent judicial utterances re- 
 garding the fiction of a " legal per- 
 son" are of interest: "The abstract 
 idea of a corporation, the legal entity, 
 
 31
 
 §51.] 
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. HI. 
 
 however, a third meaning of the term corporation which, 
 though not entirely fortunate, is so much in the minds of 
 courts and business men that it cannot be overlooked. In 
 business and in the courts the term corporation is often used 
 as if it were synonymous with the name by which action is usu- 
 ally taken in regard to corporate matters. A name is employed 
 for purposes of suit in the courts, and a name is employed for 
 ordinary business dealings. The corporate name and the term 
 corporation have thus become synonymous in practical usage. 
 This is not always for the best. The corporate name in one 
 lawsuit, or appended to one contract, may stand for very dif- 
 ferent interests from what it stands for in another lawsuit or 
 another contract. In treating the name of the corporation as 
 synonymous with the term corporation the results have been 
 at times as misleading as the continuance of the fiction of the 
 legal person. This last method of employing the term must, 
 however, be borne in mind in any consideration of corporation 
 law. 
 
 the impalpable and intangible crea- 
 tion of human thought is itself a fic- 
 tion, and has been appropriately de- 
 scribed as a figure of speech. It 
 serves very well to designate in our 
 minds the collective action and 
 agency of many individuals as per- 
 mitted by the law; and the substan- 
 tial inquiry always is what in a given 
 case has been that collective action 
 and agency? " People v. North River 
 Sugar Refining Co., 121 N. Y. 582, 
 621, Opin. of Ct. per Finch, J. " The 
 general proposition that a corpora- 
 tion is to be regarded as a legal 
 entity, existing separate and apart 
 from the natural persons composing 
 it, is not disputed; but that the state- 
 ment is a mere fiction .... is well 
 
 32 
 
 understood. ... It has been intro- 
 duced for the convenience of the com- 
 pany in making contracts, in acquir- 
 ing property for corporate purposes, 
 in suing and being sued, and to pre- 
 serve the limited liability of the 
 stockholders, by distinguishing be- 
 tween the corporate debts and prop- 
 erty of the company, and of the 
 stockholders in their capacity as in- 
 dividuals." State v. Standard Oil 
 Co., 49 O. St. 137, 177, Opin. of Ct. 
 per Minshall, J. For the matters 
 decided in these two cases see § 309 b. 
 As to the popular business way of 
 regarding a partnership as an entity, 
 see Bank of Buffalo v. Thompson, 
 121 N. Y. 280.
 
 CHAP. IV.] RESEMBLANCES TO OTHER INSTITUTIONS. [§ 53. 
 
 CHAPTER IV. 
 
 RESEMBLANCES BETWEEN CORPORATIONS AND 
 TAIN OTHER LEGAL INSTITUTIONS. 
 
 CER- 
 
 Object of the chapter, §52. 
 
 What law applicable to corpora- 
 tions, § 53. 
 
 New York "full liability corpora- 
 tions," §54. 
 
 New York joint-stock associations, 
 §55. 
 
 Comparison, §§56, 57. 
 
 Limited partnerships, §58. 
 
 Partnerships: dissimilar from cor- 
 porations at common law, § 59. 
 
 Points of difference remaining, 
 §§60,61. 
 
 The element common to these 
 various legal institutions, § 62. 
 
 Material questions, § 63. 
 
 Law applicable to corporations, how 
 determinable, §§64, 65. 
 
 Changes in corporation law, § 66. 
 
 The use of analogy, §§ 67-69. 
 
 The application of general princi- 
 ples, §§70, 71. 
 
 § 52. The object of this chapter is to point out some of the 
 elements which corporations have in common with 
 certain other legal institutions, and to determine some- the chapter. 
 what more specifically than was attempted in the 
 preceding chapter the rules of law which manifest themselves 
 in the legal institutions called corporations. The danger of 
 reasoning unguardedly as to questions of corporation law from 
 the analogy of other legal institutions will be referred to in- 
 cidently. 
 
 § 53. The common law notion of a partnership was sharply 
 differentiated from the common law notion of a cor- 
 poration. Nowadays it would not be easy to find a a^pHcabie 
 business corporation corresponding to the common t° n ° rporar 
 law notion of a corporation. On the other hand, we 
 find everywhere a great multitude of legal institutions, in great 
 part the manifestations of statutory law, which resemble part- 
 nerships in some respects, while in other respects they resemble 
 common law corporations. The law of these legal institutions, 
 however, is not the law of partnership, nor is it altogether the 
 common law of corporations. It is rather the statutory law 
 under which they are organized, together with the later phases 
 of the common law of corporations, construed and interpreted 
 3 33 *
 
 § 55.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IV. 
 
 in accordance with the general rules of the law of contracts 
 and of torts. 
 
 To notice here a few of the statutory provisions applying to 
 some of these institutions will give point to the remarks which 
 will follow. 
 
 § 54. Under a statute at present in force in the state of New 
 „ „ , York, 1 any "three or more persons may become a 
 
 New York ' J . * , J 
 
 "full lia- stock corporation for any lawful business purpose 
 porations"" [with certain important exceptions] by executing and 
 filing a proper certificate. A corporation may be or- 
 ganized under this statute as a " full liability corporation," by 
 inserting in its certificate a statement to that effect. In which 
 case " all the stockholders of the corporation shall be severally 
 individually liable to its creditors for all its debts and liabilities, 
 and may be joined as defendants in any action against it. No 
 execution shall issue against any stockholder individually until 
 execution has been issued against the corporation and returned 
 unsatisfied, and all the stockholders shall contribute a propor- 
 tionate share, according to the number of shares of stock owned 
 by each, of the amount paid by any stockholder on a judgment 
 recovered against him individual^ for a debt of the corpora- 
 tion, and he may recover from the other stockholders in the 
 corporation, in a joint or several action, the proper portion due 
 by them and each of them of the amount paid by him on any 
 such judgment." 2 
 
 § 55. A comparison of these " full liability " corporations with 
 „,. „ , certain joint-stock companies, which are not called 
 
 New York J . 
 
 "joint- "corporations," will show the difficulty of using the 
 ciations S "" term "corporation" in classifying legal institutions. 
 Chapter 258 of the New York laws of 1849 provided : 
 (1) that any joint-stock company or association of seven or more 
 shareholders or associates may sue and be sued in the name of 
 the president or treasurer for the time being of such joint-stock 
 company or association ; (2) that such suit shall not abate by 
 reason of the death or removal of the president or treasurer ; 
 (3) that the president or treasurer shall not be personally liable 
 for any such suit (though this provision is not to exempt him 
 
 1 Chap. 520, laws of 1901, amending safe to say that very few corporations 
 prior statutes. i under this act are organized as "full 
 
 ^ Laws of 1892, chap. 691, § 6\ It is j liability corporations." 
 
 34
 
 CHAP. IV.] RESEMBLANCES TO OTHER INSTITUTIONS. [§ 56. 
 
 from any liability to which he is subject as a stockholder in the 
 company) ; (4) that suits against the company shall be prose- 
 cuted in this manner in the first instance ; but that, after judg- 
 ment entered and return of execution thereon unsatisfied, suits 
 may be brought against the stockholders individually. 1 Chap- 
 ter 245 of the laws of 1854 contained the following provisions: 
 " 1. Whenever, in pursuance of its articles of association, the 
 property of any joint-stock association is represented by shares 
 of stock, it shall be lawful for said association to provide by 
 their articles of association that the death of any stockholder, 
 or the assignment of his stock, shall not work a dissolution of 
 the association, but it shall continue as before ; nor shall such 
 company be dissolved, except bj^ judgment of a court for fraud 
 in its management, or other good cause to such court shown, 
 or in pursuance of its articles of association. 2. Said associa- 
 tions may, also, by said articles of association, provide that the 
 shareholders may devolve upon any three or more of the part- 
 ners the sole management of their business. 3. This act shall 
 in no court be construed to give said associations rights and privi- 
 leges as corporations" Chapter 289 of the laws of 1867 pro- 
 vided that it should be lawful for any joint-stock association to 
 purchase, hold, and convey such real estate (1) as shall be neces- 
 sary for its immediate accommodation in its business ; (2) as 
 shall be mortgaged to it in good faith ; (3) as it shall purchase 
 at sales under judgments, decrees, or mortgages held by it. 
 " The said joint-stock company shall not purchase, hold, or con- 
 vey real estate for any other purpose ; and all conveyances of 
 such real estate shall be made to the president of such joint- 
 stock company, as such president, and who, and his successors, 
 from time to time, may sell, assign, and convey the same, free 
 from any claim thereon against any of the shareholders, or any 
 person claiming under them." 2 
 
 § 56. It appears at a glance how closely these joint-stock 
 associations resemble the "full liability corporations" above 
 
 1 These provisions, modified in 
 language by various amendments, 
 still substantially constitute §§ 1919- 
 1922 of the New York Code of Civil 
 Procedure. 
 
 2 See, also, chap. 937 of laws of 
 
 1867; chap. 290, laws of 1868, chap. 
 599, laws of 1881, and chap. 235, laws 
 of 1894. The last repeals chapter 245 
 of the laws of 1854, and chapter 289 
 of the laws of 1867, which are cited 
 above merely for illustration. 
 
 35
 
 § 57.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IV. 
 
 referred to ; yet the latter are called " corporations," while, as 
 to the former, the legislature, in the same breath in 
 
 Compan- ...... . .. ... 
 
 son. which it gives them similar privileges and capacities, 
 
 declares that in no court shall the statutory provisions 
 regulating these associations " be construed to give them rights 
 and privileges as corporations." 1 
 
 § 57. The New York Court of Appeals, after some uncer- 
 tainty of mind, 2 held that joint-stock associations were not taxa- 
 ble under certain statutes taxing " monied or stock corporations." 
 Referring to the statutes authorizing joint-stock associations, 
 Judge Finch, who gave the opinion of the Court, remarked that 
 since their passage " the legislature, while steadily preserving 
 the distinction of names, has with equal persistence confused 
 the things by obliterating substantial and characteristic marks 
 of difference, until it is now claimed that joint-stock associations 
 have grown into and become corporations by force of the con- 
 tinual bestowal upon them of corporate attributes." The Court, 
 however, recognized its duty to give effect to this legislative in- 
 tent to preserve the distinction between the two classes of organ- 
 izations, and at the close of the opinion the learned judge for- 
 mulated their distinguishing characteristics as follows : " The 
 formation of the one involves the merging and destruction of 
 the common law liability of the members for the debts, and re- 
 quires the substitution of a new, or retention of the old, liabil- 
 ity by an affirmative enactment which avoids the inherent effect 
 of the corporate creation ; in the other, the common law liabil- 
 ity remains unchanged and unimpaired, and needing no statu- 
 tory intervention to preserve or restore it ; the debt of the cor- 
 poration 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 joint-stock 
 company leaves unharmed and unchanged the liability of the 
 associates ; the one derives its existence from the contract of 
 
 1 The Massachusetts courts hold courts hold them to he corporations, 
 the New York joint-stock associa- 
 tions not to be corporations, and that 
 their members may be sued as part- 
 ners. Boston & Albany R. R. Co. v. 
 Pearson, 128 Mass. 445. New Jersey 
 
 36 
 
 Edgeworth v. Wood, 58 N. J. L. 4G3. 
 See as to actions against them, Van 
 Aernam v. Bleistein, 102 N. Y. 355. 
 
 2 See People v. Wemple, 117 N. Y. 
 136.
 
 CHAP. IV.] RESEMBLANCES TO OTHER INSTITUTIONS. [§ 58. 
 
 individuals, 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 cannot say that the joint-stock company is a cor- 
 poration, 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.'' : 
 
 § 58. Limited partnerships afford another illustration of the 
 difficulty of saying what constitutes a corporation. Limited 
 Such a partnership exists where one or more of the partner- 
 
 sliiiJS 
 
 partners are liable individually for the firm debts, and 
 one or more, provided the requirements of the statute are com- 
 plied with, incur no personal liability for such debts beyond 
 the amount contributed by them to the capital of the firm. 
 Thus in limited partnerships exists a liability restricted to cer- 
 tain funds, as is the case with most corporations. There are, 
 moreover, corporations in which there is no restricted liability ; 
 and so a limited partnership, which is not called a corporation, 
 possesses an ordinary corporate attribute which some corpora- 
 tions lack. 2 
 
 1 People ex rel. Winchesters. Cole- 
 man, 133 N. Y. 279, 286. Compare 
 Barndollar y. Dubois, 142 Pa. St. 505, 
 569; Willis v. Chapman, 68 Vt. 459. 
 As to the principles of agency appli- 
 cable to members of a joint-stock as- 
 sociation, see McCabe v. Goodfellow, 
 133 N. Y. 89. 
 
 2 A limited partnership bas been 
 called a g item-corporation; see Angell 
 and Ames on Corp., § 45. In Thomas 
 v. Dakin, 22 Wend. 9, 112 (1839), it 
 was decided by the Supreme Court of 
 the state of New York, whose chief 
 justice at the time was the venerated 
 Nelson, that certain banking institu- 
 tions, formed under "an act to 
 authorize the business of banking," 
 passed April eighteenth, 1838, were 
 corporations. The year following 
 this decision, the case of Warren v. 
 Beers, 23 Wend. 103, 196, was decided 
 in the Court for the Correction of 
 Errors in the same state. In this 
 
 case, after the greatest deliberation, 
 it was held that these same banking 
 institutions were not corporations. 
 The difficulty of saying, more than 
 forty years ago, what constitutes a 
 corporation is shown by the argu- 
 ments and decisions in these two 
 cases. 
 
 Likewise, in respect of public cor- 
 porations, it is hard to say what con- 
 stitutes them corporations. A city 
 witli a special charter has more ex- 
 tensive powers of corporate action 
 than a town, or a county, or " dock 
 commissioners." In Downing y. In- 
 diana State Board, 129 Ind. 443, the 
 " Indiana State Board of Agricul- 
 ture" was held to be a private cor- 
 poration, it having a specifically 
 granted right of perpetual succes- 
 sion. 
 
 Perhaps the following extracts will 
 show what a e/uasi-corporation is. 
 " There may be also private corpora- 
 
 37
 
 § 60.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IV. 
 
 Partner- 
 ships: dis- 
 similar 
 from corpo- 
 rations at 
 common 
 law. 
 
 § 59. Baron Lindley, in his "work on Partnership, quotes 
 many definitions of that term, but prudently refrains 
 from giving one himself, remarking pertinently that 
 " to frame a definition of any legal term which shall 
 be both positively and negatively accurate, is possible 
 only to those who, having legislative authority, can 
 adapt the law to their own definition." * Still, every one has an 
 idea of an ordinary business partnership ; and an ordinary part- 
 nership differs from a corporation at common law chiefly in 
 the following points : first, it is not an artificial person ; sec- 
 ondly, a change of partners dissolves the firm ; thirdly, the 
 partners are personally liable for all the firm debts ; fourthly, 
 they are each other's agents in respect to the firm business; 
 and, fifthly, a partnership requires no special sanction for its 
 existence. 
 
 § 60. Not all of these points of difference remain to-day. It 
 is no long-er clear that a corporation is a distinct per- 
 
 Points of n ° , , . , T , • , 
 
 difference son ; and as to the third of these points it may be 
 remaining. ga j ( ^ ^.^ m matl y corporations the members are per- 
 sonally liable, and that in some (limited) partnerships not all 
 
 tions created with powers sub rnodo, 
 and for a few specified purposes only, 
 and which are properly Quasi-cor- 
 porations. The joint-stock banks in 
 England of modern creation, called 
 into existence by the act of 7 Geo. IV., 
 are considered gun.st-corporations, as 
 that act provides for a continuance 
 of the partnership, notwithstanding 
 a change of partners. In this case 
 the partnership has the corporate at- 
 tribute of succession. And a mining 
 joint-stock association was deemed a 
 guasi-corporatioii, because a suit for 
 a demand against the company 
 might, by virtue of an act of Parlia- 
 ment, be brought against the direct- 
 ors. Here is attached the corporate 
 liability of being sued without the 
 names of each individual partner 
 composing the company. 1 ' Angell 
 and Ames on Corp., § 25, citing Har- 
 rison v. Simmins, 4 M. & W. 510. 
 
 38 
 
 Again, it is said in the same work 
 at §40: "A trading association may 
 be but a mere partnership; or it may 
 have corporate powers to a small ex- 
 tent and sub niodo; or it may be in- 
 vested with corporate functions to a 
 considerable and yet limited extent; 
 or it may exist with all the incidental 
 functions and peculiar privileges 
 which a grant of unconditional [?] 
 corporate power confers." It would 
 be hard to conceive of anything more 
 conditional than a grant of the most 
 "unconditional" corporate power. 
 See also 2 Kent, Com., 274. 
 
 Of course, in all these cases of 
 "guasi-corporations," whether pub- 
 lic or private, the real questions are 
 what joint or corporate action can 
 be taken ? and what are the legal re- 
 lations arising? See Liverpool Ins. 
 Co. v. Massachusetts, 10 Wall. 566. 
 
 1 Lindley on Part., p. 1.
 
 CHAP. 1V.J RESEMBLANCES TO OTHER INSTITUTIONS. [§ 61. 
 
 the partners are personally liable. Moreover, under the gen- 
 eral enabling statutes, the importance of the " special sanction" 
 has passed away, and a corporation usually requires no more 
 special sanction than a limited partnership. No legal institu- 
 tion exists save through the sanction or operation of the rules 
 of law of which it is a manifestation. 
 
 § 61. The differences which still exist, however, between a 
 corporation and a partnership make the application to the one 
 of rules of law regulating the other likely to lead to error. 
 Two points of radical difference remaining to-day are these : 
 (1) In a partnership, each partner is the agent of the other 
 partners in respect of the partnership business, while this is 
 not true of shareholders in a corporation. (2) The members of 
 a corporation may transfer their shares at will, and thereby, 
 with certain exceptions, relieve themselves from all liability in 
 regard to the corporate enterprise, the transferee of the shares 
 succeeding to all the rights and liabilities of the transferror. 
 But a partner cannot thus relieve himself from his liability, and 
 a transfer of his interest ordinarily necessitates a winding up 
 of the partnership business. 1 
 
 x In many respects, an unincorpo- 
 rated joint-stock association resem- 
 bles an ordinary partnership. " The 
 fundamental distinction between 
 partnerships and unincorporated 
 companies is, that a partnership 
 consists of a few individuals known 
 to each other, bound together by 
 ties of friendship and mutual confi- 
 dence, and who, therefore, are not 
 at liberty without the consent of all 
 to retire from the firm, and substi- 
 tute other persons in their place; 
 whilst a company consists of a larger 
 number of individuals, not necessa- 
 arily acquainted with each other at 
 all, so that it is a matter of compara- 
 tive indifference whether changes 
 amongst them are effected or not. 
 . . . Indeed it may be said that the 
 law of unincorporated companies is 
 composed of little else than the law 
 of partnership modified and adapted 
 
 to the needs of a large and fluctuat- 
 ing number of members. 1 ' 1 Lind- 
 ley on Part., 5. See, generally, for 
 distinctions between partnerships, 
 joint-stock associations, and corpo- 
 rations, Lindley's introductory 
 chapter ; also Gibb's Estate, 157 Pa. 
 St. 59. 
 
 " Commercial men and account- 
 ants are apt to look upon a firm in 
 the light in which lawyers look upon 
 a corporation, i. e., as a body dis- 
 tinct from the members composing 
 it, and having rights and obligations 
 distinct from those of its members. 
 . . . But this is not the legal no- 
 tion of a firm; . . . speaking 
 generally, the firm, as such, has no 
 legal recognition. This non-recog- 
 nition of the firm, in the mercantile 
 sense of the word, is one of the 
 most marked differences between 
 partnerships and incorporated com- 
 
 39
 
 § 64.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IV. 
 
 § 62. In one respect, all these various institutions resemble 
 The ele- ea °k °^ ner 5 though not very closely. In connection 
 ment com- with all of them are certain funds and property con- 
 
 mon to . . „ , , . i • ■ 
 
 these va- stituting a " trust fund to be devoted in a certain 
 instuu^ ga manner to the accomplishment of certain objects. 1 
 tions. j n ^-} ie jj ea Q f a trust fund there are many gradations ; 
 
 but the essential quality running through them all is that which, 
 viewed negatively, consists in the absence of complete owner- 
 ship with the power of arbitrary disposal in any person ; or, 
 viewed positively, consists in this, that certain persons, other 
 than the possessor or apparent owner, have rights in regard to 
 the fund. These rights differ greatly, being of more import- 
 ance in respect of a limited partnership, 2 or a corporation, than 
 in respect of an ordinary partnership, or an unincorporated joint- 
 stock association of unlimited liability. 
 
 § 63. In all instances, the material questions nowadays aris- 
 ing in connection with any of the legal institutions 
 questions, mentioned will be : What are the means and capaci- 
 ties of corporate action ? and what are the rights and 
 liabilities arising among the persons interested ? These are the 
 real questions of vital importance, the decision of which will 
 not ordinarily depend on whether or not a given institution is 
 to be called a corporation, which indeed is little more than a 
 question of how far a mediaeval nomenclature is applicable to 
 modern institutions. 
 
 § 64. Such being the resemblances between corporations, 
 joint-stock associations, and partnerships ; and the 
 cahie'to designation of the class to which any given institu- 
 tionsThow tion belongs being so difficult, as well as barren of 
 ahie fmm results when accomplished, how may the rules of law 
 which manifest themselves in the mass of legal rela- 
 tions constituting a corporation be determined ? These rules, 
 as stated in the preceding chapter, are contained in the consti- 
 tution of the corporation. Some of them, and the legal rela- 
 tions in which they manifest themselves, may be readily deter- 
 mined, as they are embraced in the enabling statute, or in the 
 
 panies." 1 Lindley, ib. 206-207. See 
 Bank of Buffalo v. Thompson, 121 N. 
 Y. 280, 283. 
 
 40 
 
 1 Compare Hollins v. Brierfield 
 Coal, etc., Co., 150 U. S. 371, 385. 
 
 2 Innes v. Lansing, 7 Paige, 583.
 
 CHAP. IV.] RESEMBLANCES TO OTHER INSTITUTIONS. [§ 64. 
 
 special charter, should there be one. Complementary to the 
 rules of law in the enabling statute, exist, as constituent ele- 
 ments of the corporate constitution, the rules of law embraced 
 in what may roughly be called corporation law, a term which 
 signifies the mass of legal rules which have come into exist- 
 ence through the requirements of society with respect to joint 
 action for a common object. A corporation, like any other 
 legal institution, corresponds to a certain need of society ; and 
 the rules of law manifesting themselves in it are those which 
 this need has called forth. These rules cannot always be rea- 
 soned out, or, in logical sequence, deduced from one another, 
 because they do not compose a logically consistent whole ; 
 neither do they always appear reasonable in relation to the 
 needs of society to-day. There is no reason to believe, however, 
 that these apparently illogical rules were not, in their incep* 
 tion, logical and consistent with the mass of other rules of law 
 then manifesting themselves in the institution in question. 
 Many legal institutions of ancient origin, whose growth is ob- 
 scured through lapse of time, can no longer be analyzed into 
 their constituent elements ; nor can the process through which 
 was attained the known resultant of their combined factors be 
 traced historically or reasoned out from general principles. 
 This process cannot, as it were, be reasoned out backwards, 
 because many* of the rules manifesting themselves in these in- 
 stitutions, at least in their application to these particular in- 
 stitutions, are of historical origin and technical. To say that a 
 legal rule is of historical origin and therefore not reducible to 
 logical principles, means that it is the resultant of a combina- 
 tion of different maxims of diverse origin, each of which in its 
 own origin was perhaps logical and consequent enough, but ap- 
 pears in the present combination quite anomalous because of 
 the obliteration of some step in the process of combination. 
 Again, to say a rule is technical and not logical, is saving in 
 most instances substantially the same thing, that it is an old 
 rule, which at its origin was the outgrowth of other rules, in 
 connection with which it was likely logical ; that now these 
 other rules are forgotten, and the " technical " rule remains a 
 sort of logical anachronism, which is as impracticable to fit in 
 with the present system of law, as to use the flint of an old 
 " Queen Anne " in a modern " Winchester." 
 
 41
 
 § G8.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IV. 
 
 § 65. Consequently, the constitution of a corporation, to which 
 we must turn for the answer to legal questions arising in respect 
 of the corporate enterprise, far from being so logical and con- 
 sistent that some of its elements being known, the rest may 
 be inferred with the certainty with which the structure of a 
 fossil bird may be inferred from its footprints; far from being 
 a logical and consistent whole, the constitution of a corpora- 
 tion is a conglomerate of rules the union of which was due not 
 to chance, for there is no chance, but to causes and occasions of 
 which we may be ignorant. 
 
 § 66. In the course of time, some of the rules of corporation 
 law, their adaptability to the needs of corporate en- 
 corporation terprises ceasing, have been silently dropped by the 
 courts, or abolished by legislation. The new rules 
 needed in their place have been either patently created by the 
 legislature in the shape of statutes, or formed through a more 
 obscure and intangible process. When not enacted by the 
 legislature, new rules which come into being seem to be 
 formed by the courts reasoning them out in two methods ; 
 first b}' analogy, and, secondly, by applying general principles 
 of law and common sense to the case in question. 
 
 § 67. When to the solution of a question of law arising in 
 respect of some legal institution, as, for instance, a 
 analogy ° f corporation, a rule of law applicable to some other 
 kind of legal institution, as, for instance, partner- 
 ship, is applied by reason of the analogy between a corporation 
 and a partnership, what has been done is this. A rule, for 
 the application of which to one legal institution there are prob- 
 ably sound reasons, has, because of some resemblance between 
 this and another legal institution, been applied to the latter, in 
 respect of which the reasons for the application of the rule may 
 fail, for not unlikely the two institutions resemble each other 
 in points which the rule in question does not touch. The appli- 
 cation, then, of the rule to the latter institution having been 
 caused by a misleading analogy, will likely be found unwise, 
 and in this application the substantial reasons, which are the 
 roots of any rule of law, failing, the rule itself will shortly like 
 dead wood drop away. 
 
 § 68. Analogies between legal relations constituting corpora- 
 tions and legal relations constituting partnerships may be at 
 42
 
 CHAP. IV.] RESKMBLANCES TO OTHER INSTITUTIONS. [§ 69. 
 
 times advantageously, if guardedly, used for purposes of il- 
 lustration. But if inferences are to be drawn from such anal- 
 ogies, too great care cannot be taken to determine wherein the 
 analogy consists ; an inquiry which may often resolve itself 
 into an inquiry how far the reasons for the application of the 
 rule to the one legal institution hold good for the application 
 of the rule to the other. To illustrate Jtakelhe instance of a 
 corporation, the shareholders of which^an^ affected with per- 
 sonal liability for the debts of the corporation, judgment hav- 
 ing first been obtained against the corporation, execution levied 
 thereunder and returned unsatisfied. Suppose suit to have been 
 brought against the corporation, judgment obtained, the execu- 
 tion thereunder returned unsatisfied, and that suit is brought 
 against the shareholders personally. Some courts, reasoning 
 from analogy, have held the shareholders liable as guarantors, 
 while in other courts they have been held liable as partners. 
 But the general analogy between the liability of a surety and 
 that of a shareholder is as misleading as the analogy between 
 the liability of a shareholder and that of a partner. On the one 
 hand, acts may be clone which would discharge a surety from 
 his liability, which do not discharge a shareholder from his ; 
 and, on the other hand, by a bona fide transfer of shares the 
 liability of the shareholder may cease, while a partner, by sell- 
 ing out his interest in the firm, cannot free himself from his 
 liability to partnership creditors. No ; the liability of a share- 
 holder in respect of his shares in such a corporation is the lia- 
 bility neither of a surety nor of a partner, for the reasons which 
 led to the formation of the rules regulating the liability of a 
 surety or of a partner are not necessarily, or even probably, 
 present. The liability in question is, properly speaking, the 
 liability of a shareholder in that particular corporation, and is 
 determined by the rules contained in the corporate constitu- 
 tion. 1 
 
 § 69. There are, however, elements in the liability of a share- 
 holder in such a corporation which are in truth analogous to 
 certain elements in the liability of a surety or partner. But 
 these elements are the manifestation of legal rules common to 
 all three kinds of institutions, and, therefore, to be regarded 
 
 1 See, for a fuller discussion of this question, §§ 712-720. 
 
 43
 
 § 71.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IV. 
 
 no more as rules of corporation law than as rules of the law of 
 partnership or suretyship. They are rather legal rules of al- 
 most universal application, reasons for which exist in respect 
 to almost all legal institutions. They are rules which, like the 
 rule that for a valid contract there must be a consideration, 
 form the basis of the law of contracts, or, like the rule that a 
 man is responsible for the acts of his agent within the scope 
 of his authority form the basis of the law of agency. 
 
 § 70. The second method by which courts may form new 
 
 rules of law, is by applying to the case in question 
 eatfcmoi 1 " general principles of law of extended application, 
 principles The objection to this method is that it is well nigh 
 
 impracticable on account of the difficulty in determin- 
 ing what are these general principles of law. Still, this objec- 
 tion is not insurmountable. However much jurists may differ 
 in regard to the science of jurisprudence, that there is some 
 such science founded on general principles in themselves logi- 
 cal, just, or farseeingly expedient, according as one may phrase 
 it, few would deny. It is not necessary for jurisprudence that 
 it should be based on principles, true, just, or expedient for all 
 time. It is enough for such a science that it be based on founda- 
 tions that will last out a generation or two. As such, it will 
 be the expression of the systematized common sense or intelli- 
 gence of men specially trained in law. 
 
 § 71. Indeed, to form a new rule based on general principles 
 of law is no more than forming a rule which shall not shock 
 the trained intelligence of jurists ; and such a rule will be con- 
 sistent with the law as a whole, in so far as any rule can be 
 consistent with a huge body of rules, some of which are incon- 
 sistent with the rest. Forming a new rule of law amounts to 
 little more than deciding a novel case in accordance with what 
 seems to the court, considering the general state of the law and 
 of society, to be on the whole most expedient or just. The 
 danger arising from reasoning from the analogy of different 
 legal institutions is, lest a rule of law be applied where the rea- 
 sons for its application fail; and in truth, where a rule of law 
 already identified with one legal institution is advantageously 
 applied to another, it will be because good reasons for the ap- 
 plication of the rule exist, and not because of the resemblance 
 of one institution to a fancied prototype. 
 44
 
 CHAP. V.] PROMOTION OF A CORPORATION. 
 
 [§72. 
 
 CHAPTER V. 
 
 LEGAL RELATIONS ARISING THROUGH THE PROMOTION 
 OF A CORPORATION. 1 
 
 The law applicable, § 72. 
 
 Two classes of persons interested, 
 §73. 
 
 Liability of promoters. General 
 principles, §§ 74, 75. 
 
 Legal relations between promoters 
 and parties contracting with them, 
 §76. 
 
 Responsibility of promoters for the 
 acts of other promoters, § 77. 
 
 Liability of contracting promoter 
 whose contract binds, or is adopted 
 by, other promoters or the corpora- 
 tion, §§ 78, 79. 
 
 Legal relations between promoters, 
 §§ 80, 81. 
 
 Legal relations between promoters 
 and the corporation subsequently 
 formed; promoter's secret profits, 
 §§ 82-84. 
 
 Right of promoters to indemnity 
 from the corporation subsequently 
 formed, § 85. 
 
 Liability of corporation to compen- 
 sate promoters, § 86. 
 
 Legal relations between the corpora- 
 tion when organized and persons 
 with whom the promoters have 
 contracted on its behalf, §§ 87-90. 
 
 § 72. A general remark may be premised in regard to the 
 group of topics under consideration in this and the 
 succeeding chapter : Incorporation not having as yet J h l/cabie 
 taken place, the rules of law in the constitution of the 
 corporation are not yet in operation, and " corporation law" as 
 such will usually be found inapplicable. Consequently, the 
 various rights and liabilities arising through the promotion of 
 a corporation will be determinable in accordance with the gen- 
 eral principles of the law of contracts, of agency, and of part- 
 nership. We are, for the most part, dealing with contracts 
 made by certain persons with certain others, which, to be sure, 
 have some ulterior end in view, as contracts usually have ; but 
 the fact that this ulterior end is the incorporation of a company 
 does not necessarily affect the rules of law by which these con- 
 
 1 This and the next chapter lead up I tiou by or on behalf of the body cor- 
 to the discussion of the legal effect of , porate. 
 acts done subsequent to incorpora- 1 
 
 45
 
 § 75.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. V. 
 
 tracts are to be regulated, and the relations arising from them 
 determined. The preceding statement, however, must be taken 
 with this qualification : the fact that the ulterior end of these 
 contracts was the formation of a corporation may give such 
 corporation, when formed, rights, and even subject it to duties 
 in regard to such contracts and their subject-matter. 
 
 § 73. The ' persons interested in the formation of a corpora- 
 tion may be roughly divided into two classes : (1) 
 
 Two cl<lSS6S 
 
 of persons Persons who actively take part in the scheme of or- 
 ganization, and (2) persons who merely subscribe for, 
 or agree to take, shares in the stock of the corporation to be 
 formed. Very often, perhaps usually, the same persons who 
 promote the scheme of organization subscribe for shares in the 
 stock of the future corporation ; but their functions as pro- 
 moters and as subscribers are distinguishable, and for a proper 
 determination of the legal relations arising through the pro- 
 motion and formation of a corporation these two classes of 
 functions should be kept distinct. 
 
 § 74. Persons acting in concert to bring about the formation 
 
 of a corporation are responsible for their acts as a mat- 
 Liability of . » , .,,; , . , 
 promoters, ter of course, and, it they have given good reason to 
 
 principles, infer that the}' will be responsible for the acts of each 
 other, then on the ground of estoppel, if on no other, 
 they will be so responsible to any person acting on the faith of 
 the inference which their acts have occasioned. Accordingly, 
 if they have held themselves out as each other's principals, or 
 as each other's partners, although no relationship of agency or 
 partnership in fact exists between them, they will be estopped 
 from taking advantage of the real state of affairs to the detri- 
 ment of persons who have acted, and with reason, on a belief 
 in the existence of such agency or partnership. 
 
 §75. In fine, on the general principle that a man is to be 
 held responsible for the natural and ordinary results of his 
 acts, the following propositions may be laid down as govern- 
 ing many of the rights and liabilities of the promoters of a 
 corporation : 
 
 I. A man is bound for the fulfillment of a contract entered 
 into by him, and is, of course, personally liable thereunder 
 when the other contracting party has no reason to suppose him 
 to be acting merely as agent. 
 46
 
 CHAP. V.] PROMOTION OF A CORPORATION. [§ 75. 
 
 II. A. will be liable for all acts done by B. within the scope 
 of any authority which A. by his acts or representations has 
 induced other persons to suppose that B. has received from A., 
 at least towards those persons who have acted reasonably and 
 in good faith on belief so occasioned ; and in such case, A.'s 
 liability for B.'s acts will be identical whether the relationship, 
 which A. has caused to be believed to exist between himself 
 and B., actually exists or not. 1 
 
 III. If A. contracts as agent, when in fact he has no principal 
 or no authority from his principal to make the contract in ques- 
 tion, A. will be personally liable, not necessarily on the con- 
 tract, but on an implied warranty of authority ; 2 except where 
 the extent of A.'s authority is known to the other contracting 
 party, 3 or is a matter with knowledge of which the other con- 
 tracting party is affected by some rule of law. 4 
 
 I Y. If A. contracts as agent, when in fact he has no authority 
 to make the contract in question, and yet the circumstances are 
 such that some one is held liable as principal (in accordance 
 with Proposition II.) to the other contracting party, or if the 
 person or body for whom A. purported to contract ratifies the 
 contract, 5 A. will not be personally liable to the other contract- 
 ing party, unless there is evidence that credit was given to A. 
 personally ; 6 for any implied warranty of authority is unbroken. 
 
 V. In the instance stated in that part of the preceding prop- 
 osition governed by Proposition II., A. might be liable in dam- 
 ages to his principal or partner. 7 
 
 YI. When A. contracts as principal and agent as well, that 
 is, as a partner, he will be liable personally on the contract, and 
 the liability of those for whom he contracts will be governed 
 by the rules stated in Proposition II. 
 
 YII. When an act has been done by A. as agent, when in 
 fact A. either had no principal, or, having a principal, had no 
 authority from him to do the act in question, and nothing had 
 been done by the person or body on behalf of whom the act was 
 
 1 See Story on Agency (9th ed.), 
 §443. 
 
 2 Story on Agency, §§ 264, 264 or. 
 
 3 Story on Agency, § 265. 
 
 4 See Jefts u. York, 4 Cusli. 371; 
 S. C, 10 Cush. 392 ; Thompson on 
 
 the Liability of Officers and Agents 
 of Corporations, pp. 77-80. Compare 
 §§ 752-754. 
 
 5 Story on Agency, § 251. 
 
 6 See Story on Agency, §§ 263, 423. 
 
 7 Story on Agency, § 217 c. 
 
 47
 
 § 76.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. V. 
 
 done by A., from which authority to do the act could have been 
 inferred, — in neither case can such person or body adopt or 
 ratify the act of A. without incurring all the liability which 
 would have attached to such person or body had the requisite 
 authority from him or it to do the act in question in fact ex- 
 isted at the time when the act was done. 1 
 
 VIII. The preceding proposition holds good as to the liability 
 incurred by the subsequently ratifying principal towards the 
 other contracting party only in the absence of express agree- 
 ment in regard thereto ; and in like manner, by express agree- 
 ment between the agent and his principal subsequently ratify- 
 ing, the liability of the latter to indemnify the former may be 
 varied. 
 
 IX. An agreement to enter into partnership at some future 
 time does not make the parties thereto partners, at least before 
 the arrival of the time specified. 2 
 
 § 76. Except in the case of illegal contracts, or where the 
 Legal reia- authority of an agent is known to the other contract- 
 ions be- ing party, or is a matter with knowledge of which 
 
 tween pro- ° r J ' e 
 
 moters and the other contracting party is affected, there is no 
 tracting question that when a person contracts with another 
 W1 em ' he is liable personally for the damages arising from 
 the non-performance of his side of the contract, unless he con- 
 tracts so as to bind some one else to perform his side of the 
 contract, and the other contracting party knows, or should 
 know, that the contract is made on behalf of that outside per- 
 son, and so may fairly be presumed to give credit to him. It 
 follows that a promoter of a future corporation ordinarily is 
 personally liable to the other contracting party, because the 
 promoter has no principal; 3 and the subsequent adoption of the 
 
 i See Story on Agency, §§ 242-244, 
 250, 251, 419, 445; also Lindley on 
 Partnership (Am. ed. ), vol. ii. pp. 
 755-758, star paging. Ratihabitio 
 mandato comparatur, Dig. lib. 46, tit. 
 3; Del. Sol. Sen. 12, § 4. Si quis 
 ratuin habuerit quod gestum est, ob- 
 stringitur mandati actione. Dig. lib. 
 50, tit. 17; De div. reg. jur., § 60. 
 See Year Book, H. 7 (H. 4), fo. 34, 
 pi. 1. 
 
 48 
 
 2 See Lindley on Partnership (Am. 
 ed.), vol. i. pp. 27-3:]. 
 
 8 If officers of a corporation pur- 
 port to sign a note on its behalf be- 
 fore its organization, they will be 
 personally liable thereon. Hurt v. 
 Salisbury, 55 Mo. 310 ; see Hopcroft 
 v. Parker, 16 L. T. N. S. 561 ; Mun- 
 son v. S. G. & C. R. R. Co., 81 N". Y. 
 58, 76.
 
 CHAP. V.] PROMOTION OF A CORPORATION. 
 
 [§76. 
 
 contract by the corporation when organized will not free the 
 promoter from his liability to the other contracting party with- 
 out the consent of the latter, 1 because it cannot be presumed 
 that a party contracting gives credit to a corporation not yet 
 organized, and therefore not yet capable of being bound." Of 
 course, it is competent for the promoter to stipulate that the 
 contract shall not be binding unless the corporation is subse- 
 quently organized ; but in this case the promoter simply makes 
 a conditional contract. So, further, it might be agreed between 
 the contracting parties that in no event should the promoter 
 incur any personal liability, but that the contract should be 
 binding only on the corporation to be subsequently formed. 2 
 In such case the promoter would not be liable ; the other party 
 could at any time withdraw as long as his side of the contract 
 remained executory, unless he had in the meanwhile received 
 some valid consideration for his promise ; and as for the corpora- 
 tion, ordinarily it would not be bound by the contract unless it 
 adopted the same after its organization. 3 It is plain that any 
 contract like the last would be of a very doubtful and condi- 
 tional nature, and such as a court would never imply, or allow 
 a jury to imply, unless all other interpretations were excluded 
 by the terms of the contract itself. 
 
 1 " There must be two parties to a 
 contract, and the rights and obliga- 
 tions which it creates cannot be 
 transferred by one of them to a 
 third person who was not in a condi- 
 tion to be bound by it at the time 
 when it was made." Erie, C. J., in 
 Kelner v. Baxter, L. R. 2 C. P. 174. 
 It is plain that while a party may as- 
 sign his rights under a contract, he 
 may not thereby free himself from 
 his liabilities ; but it might be infer- 
 red from the words of the chief jus- 
 tice that it was incompetent for a 
 corporation to adopt any contract 
 made on its behalf by one of its pro- 
 moters prior to its organization, 
 which seems unreasonable. Still, 
 Scott v. Lord Ebury, 36 L. J. C. P. 
 161, holds that a corporation subse- 
 
 quently formed cannot ratify the 
 acts of a promoter so as to relieve 
 him of his liability arising from 
 them, because the corporation "was 
 not in existence " when the liability 
 was incurred. In this latter case, 
 however, the court, who by agree- 
 ment were allowed to draw inferen- 
 ces of fact, considered that the con- 
 tract was made on the credit of the 
 promoters and that there was no evi- 
 dence of a consent on the part of the 
 other contracting party to substitute 
 the liability of the corporation. 
 
 2 Landman v. Entwistle, 7 Exch. 
 632; see Higgins v. Hopkins, 3 Exch. 
 163; Rennie v. Clarke, 5 Exch. 292. 
 
 3 As to the responsibility of the 
 corporation in regard to contracts 
 of its promoters, see §§ 87-90. 
 
 49
 
 § 77.] THE LAW OP PRIVATE CORPORATIONS. [CHAP. V. 
 
 Responsi- 
 bility of a 
 promoter 
 for the acts 
 of other 
 promoters. 
 
 § 77. Thus far in regard to the personal responsibility of the 
 promoter who himself makes the contract in regard 
 to which the question of his liability arises. As to 
 his responsibility for the acts of his co-promoters 
 other principles of law are involved, which it was 
 attempted to formulate in Propositions II., VII., 
 VIII., and IX. Promoters of a corporation are not presump- 
 tively partners, 1 and they do not become such merely by becom- 
 ing bound on the same instrument. Accordingly, a promoter 
 is not responsible for the contracts of other promoters in the 
 absence of evidence that he has authorized the others to con- 
 tract for him or pledge his credit. 2 Nevertheless, applying 
 principles stated in the propositions referred to, if promoter A. 
 causes any person, acting reasonably, to believe that promoter B. 
 is his agent, A. will be held liable as principal for whatever B. 
 does within the scope of whatever agency A. by his conduct 
 has caused to be inferred to exist between himself and B. 3 
 Likewise, promoters will be held liable as partners if they have 
 held themselves out as such, or negligently or fraudulently 
 allowed themselves so to be held out by their co-promoters. 
 Thus a prospectus of a projected company, to be formed for 
 the conveyance of immigrants to British Columbia, contained 
 statements calculated to induce belief that arrangements had 
 been perfected for carrying passengers overland, and invited 
 persons to take passage tickets. The defendants allowed their 
 names to be inserted in this prospectus as directors in the con- 
 
 1 Reynell v. Lewis, 15 Mees. & W. 
 517; Bailey v. Macaulay, 13 Q. B. 
 815; 1 Lindley on Part., pp. 31-33. 
 
 2 Patrick v. Reynolds, 1 C. B. N. 
 S. 727; Burbridge v. Morris, 3 H. & 
 C. 664; Wilson v. Curzon, 5 Eng. 
 Railway Cas. 24. A fortiori a pro- 
 moter is not responsible for the con- 
 tracts of other promoters entered 
 into before be became in any way con- 
 nected with tbe enterprise. Beale v. 
 Mouls, 5 Eng. Railway Cas. 105. 
 
 In an action against a provisional 
 committee-man on a contract entered 
 into by tbe committee of manage- 
 ment, appointed by the provisional j 
 
 50 
 
 committee, it is a question for the 
 jury whether the defendant ap- 
 pointed the managing committee bis 
 agent to pledge his credit. Where, 
 however, nothing else appears than 
 that there is a managing committee 
 appointed by tbe provisional com- 
 mittee, the jury ought not to con- 
 clude that the former has authority 
 to pledge tbe credit of the" latter: 
 Williams v. Pigott, 5 Eng. Railway 
 Cas. 544; see Dawson v. Morrison, 
 ib. 62. 
 
 8 Roberts M. Co. v. Schlick, 62 
 Minn. 332.
 
 CHAP. V.] PROMOTION OF A CORPORATION. [§ 78. 
 
 templated company, receiving for the use of their names two 
 hundred paid-up shares and a promise of indemnity. The 
 prospectus, with their names attached, was published in the 
 Times. It was held that a jury was warranted in inferring 
 that a person who contracted for his passage with the secretary 
 did so on the faith of these representations in the prospectus ; 
 and that such a person could recover damages from the defend- 
 ants, the representations proving untrue. 1 
 
 § 78. One other statement in regard to the liability of pro- 
 moters may be ventured. When a promoter makes 
 a contract merely as agent for the other promoters, contracting 
 who have not as a matter of fact authorized him to ^™™e con- 
 make the contract in question, but who have acted tra . ct binds 
 
 . . . or is 
 
 in such a way as to justify others in believing that adopted by 
 such authority had been given, so that the party moters P or~ 
 contracting with the promoter is enabled to hold ration* 1 ' " 
 the other promoters on the contract, he cannot hold 
 the promoter personally who contracted merely as agent ; not 
 on the contract, for the contract purported to bind the other 
 promoters only, and not on the breach of any implied warranty 
 of authority, for the other promoters were in fact bound by the 
 contract. 2 This, in practice, would prevent the party with 
 whom the promoter contracted as agent from choosing whom 
 to sue. It would not be competent for him to proceed against 
 the agent on the ground that the agent had actually no author- 
 ity to make the contract ; for that is something with which 
 such contracting party has nothing to do, provided he can 
 hold the principals. His interest is in no way affected, as he 
 gave credit to the principals, not to the agent ; and as long as 
 the very persons to whom he gave credit are bound to him, 
 what more can he claim? All else is merely a matter to be 
 settled between the agent and his principals. Moreover, when 
 promoters adopt acts of one of their number, in regard to which 
 no liability would otherwise have attached to them, they as- 
 
 1 Collingwooclu. Berkeley, 15 C. B. 
 N. S. 145; see also Maddick v. Mar- 
 shall, 17 C. B. N. S. 829; Lake v. 
 Argyll, 6 Q. B. 477; Wood v. Argyll, 
 6 M. & G. 928. For the present law 
 
 of England in this matter see Di- 
 rectors' Liability Act 1890, 53 and 54 
 Vic. ch. 64. 
 
 2 See Proposition IV., §75. 
 
 51
 
 § 79.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. V. 
 
 sume all liability which would have attached to them had the 
 act been authorized by them before it was done. They must 
 ratify in toto, if at all, unless of course the other contracting 
 party, with full knowledge of the situation, agrees to a vari- 
 ation from the original liability. 1 
 
 § 79. Seasoning by analogy from the above, it would seem 
 that in so far as the subsequently formed corporation assumes 
 the liability of the promoter, who contracted as its agent, 
 towards the other contracting party, who contracted with the 
 promoter as the agent of the corporation, and gave credit to 
 the corporation, knowing that it had not yet been organized — 
 something highly improbable, 2 the personal liability of the 
 promoter would cease ; and for the same reasons as before ; for 
 it was to the corporation that the other contracting party gave 
 the credit, and the corporation has assumed the liability. To 
 be sure, if the other contracting party did not know that the 
 corporation was unorganized at the time, he cannot justly be 
 presumed to have contracted on its credit; and therefore no 
 subsequent ratification by the corporation would free the pro- 
 moter from personal liability; and, if the promoter represented 
 that the corporation was organized when the contract was made, 
 he would be liable in an action for deceit. 
 
 Finally, while it may be true that the subsequently formed 
 corporation agrees by implication, on adopting the contract of 
 its promoter, to indemnify him from all liability under the 
 same, and this because the corporation is entitled to the full 
 benefit of the contract, 3 yet this reason fails when considering 
 the rights of the other contracting party, who may have good 
 grounds for refusing to accept the exclusive liability of a body 
 which had not been organized at the time of making the con- 
 tract. 
 
 1 See Propositions VII. and VIII., 
 §75. 
 
 2 It could never be presumed that a 
 party contracting with a promoter 
 gave credit to a body not yet organ- 
 ized. Therefore evidence would be 
 required to establish the fact that 
 
 52 
 
 credit was given to the corporation; 
 and, unless the whole transaction had 
 been reduced to writing, this would 
 be a question for the jury. See 
 §76. 
 3 See §§ 82-84.
 
 CHAP V.] PROMOTION OF A CORPORATION. 
 
 [§8L 
 
 § 80. Promoters are bound to observe good faith in their 
 dealings with each other, and one promotor must in- 
 demnify the others for damages arising from any latfons™" 
 unauthorized acts of his affecting their rights and promoters, 
 interests. Should, for instance, one promoter with- 
 out authority attach the names of his co-promoters to any pro- 
 spectus or other document, he would be liable for their damages 
 resulting. Moreover, although promoters may have acted in 
 such a manner as to induce belief in outsiders that the relation- 
 ship of agency or partnership exists among them, so that as to 
 outsiders they have made themselves responsible for each other's 
 acts, still, if no such relationship in truth exists, any promoter 
 doing any act by which liability! attaches to his co-promoters 
 may be held to indemnify them. If, as a matter of fact, the 
 relationship of agency or partnership exists between promoters, 
 they will be held, as among themselves, to the strict account- 
 ability of trustees ; and the legal and equitable rules, regulating 
 agency and partnership, will be applicable. 
 
 § 81. The principles of law applicable to persons becoming 
 jointly bound on one instrument apply to promoters, and in 
 such case, should one of them be obliged to pay the whole 
 debt, he can enforce contribution from his co-debtors. 1 So, 
 where promoters have made an agreement to share expenses, 
 such agreement will hold good between them, and will be en- 
 forceable at the suit of any one of their number who may in 
 good faith have paid more than his share of the expenses of the 
 scheme. Promoters, or provisional committee-men, although 
 not partners, are not entitled, in the absence of any special 
 agreement, to remuneration from each other for their services 
 in promoting the organization of the corporation. 3 
 
 1 Several provisional committee- 
 men became jointly liable on the 
 same contract. One of their num- 
 ber was forced to pay the whole 
 debt. Subsequently he brought suit 
 for contribution, some of his as- 
 sociates having died in the mean 
 time. It was held, provisional com- 
 mittee-men not being partners, that 
 each was liable to contribute to the 
 one who had paid the whole debt 
 
 only the same aliquot part that each 
 would have been obliged to contrib- 
 ute had there occurred no deaths. 
 Batard ». Hawes, 2 El. & B. 287. 
 
 2 Parkin v. Fry, 2 C. & P. 311. The 
 case of Holmes v. Hi«gins, 1 B. & Cr. 
 74, decides the same point in the 
 same way, hut on the ground that 
 promoters are partners; in this re- 
 spect the case is no longer law; see 
 §77. 
 
 53
 
 § 82.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. V. 
 
 § 82. The relationship existing between the promoters and 
 Legal rela- tne corporation as subsequently organized is a fidu- 
 tionsbe- ciary relationship, regulated by legal and equitable 
 
 tween pro- J , . l ' ° Jo l 
 
 moters and principles in many respects similar to those applica- 
 mtioirsub- ble to the relationship of agency. 1 Strictly speaking, 
 fortned Uy a promoter cannot be called the agent of the corpora- 
 
 ^c°ret° ters ' ^ un wn i° n has n °t y e ^ Deeri organized. It is never- 
 profits. theless true that if a person acts in such a way as to 
 give rise to the reasonable presumption that he is acting in the 
 interests of a corporation about to be formed, and other men 
 act, relying on his acts and representations, believing him to 
 be acting as he appears to be acting, such a person will be es- 
 topped from denying that he was acting in the interests of the 
 future corporation, when such a denial would injure others 
 who have acted upon the faith of his acts and representations. 
 Moreover, if the facts correspond to the appearances, which 
 correspondence he will not be allowed to controvert, and he is 
 really acting in the interests of the future corporation, his rela- 
 tions thereto can be regulated only by rules similar to those pre- 
 vailing in the law of agency. Therefore, speaking elliptically, 
 he will be estopped from denying that he acted as the agent of 
 the corporation. Accordingly, as against a person acting as 
 promoter, the corporation is entitled to the full benefit of all 
 acts done and contracts made by him while acting in that 
 capacity ; and the promoter, as between himself and the corpo- 
 ration, is entitled to no secret profits ; he may not purchase 
 property for the corporation, and then sell the same to the cor- 
 poration at an advance. 2 And if a promoter, in payment for 
 
 1 But not in every respect; for the 
 corporation, in the nature of things, 
 not having entrusted its property to 
 the promoter, never having employed 
 the promoter to act for it, and not 
 being bound by his contracts unless 
 it ratifies or voluntarily accepts the 
 benefit of them after its incorpora- 
 tion, could ordinarily bring no such 
 action against a promoter for misfeas- 
 ance as a corporation could bring 
 against one of its officers. A promo- 
 ter, to be sure, would be liable to the 
 
 54 
 
 corporation in damages for any fraud 
 committed by him in contracting 
 with it of a nature that would render 
 one individual liable under ordinary 
 circumstances to another. But usu- 
 ally the only action maintainable by 
 a corporation against its promoters 
 is an action to make them disgorge 
 secret profits. See generally Yale 
 G. S. Co. v. Wilcox, 64 Conn. 101. 
 
 2 Simons v. Vulcan Oil Co., 61 Pa. 
 St. 202; Short v. Stevenson, 63 Pa. St. 
 95; Chandler v. Bacon, 30 Fed. Rep.
 
 CHAP. V.] PROMOTION OF A CORPORATION. 
 
 [§83. 
 
 property belonging to him or in which he is pecuniarily inter- 
 ested, receives from the corporation moneys which, as being 
 secret profits, he is not entitled as against the corporation to 
 retain, and distributes a portion of these profits among his co- 
 promoters or associates, he will be liable to refund to the corpo- 
 ration, not only the profits retained by himself, but also those 
 
 A*- t*0* wr *- 
 
 iece or property^dpe- 
 
 Xtrtr* 
 
 which he has thus distributed^ 
 
 § 83. If, however, a person^nvning a piece ul 
 comes a promoter in a scheme of incorporation, even when the ^ 
 scheme relates to the development of this very piece of prop- 
 erty, he may sell the property to the corporation, and have his 
 price paid without regard to the original cost of the property 
 to him ; 2 for, when he acquired the property, ex hypothese he did 
 
 538; Burbankv. Dennis, 101 Cal. 90; 
 Land Co. v. Obenchain, 92 Va. 130; 
 Park Co. v. Roberts, 92 Wis. 345; 
 Exter v. Sawyer, 146 Mo. 302 ; Hick- 
 ens v. Congreve, 1 R. & M. 150; Beck 
 v. Kantorowicz, 3 K. & J. 230; New 
 Sombrero Phospbate Co. v. Erlanger, 
 L. R. 5 Cb. D. 73; aff'd, 3 App. Cas. 
 1218; Phospbate Sewage Co. v. Har- 
 mont, L. R. 5 Cb. D. 394; Bagnal v. 
 Carlton, L. R. 6 Cb. D. 371. See 
 Dickerman v. Northern Trust Co., 
 176 U. S. 181. "Nothing is more 
 common than for persons to acquire 
 property, to form a company on pur- 
 pose to buy it, and to conceal their 
 own true position from the company 
 they so form. Such a transaction 
 can never stand." 2 Lindley on 
 Part., 580. The same principles hold 
 in transactions looking towards the 
 formation of an ordinary partnership. 
 See Fawcett v. Whitehouse, 1 R. & 
 M. 132; and, in general, Tyrrell v. 
 Bank of London, 10 H. L. C. 26. 
 
 1 Getty v. Devlin, 70 N. Y. 504; 
 Semble, contra, Loudenslager v. 
 Woodbury Heights Land Co., 58 N. 
 J. Eq. 556, rev'g, 55 N. J. Eq. 78; S. C. 
 56 N. J. Eq. 411. 
 
 2 See Cover's Case, 1 Ch. D. 182, 
 which discusses how far a person pro- 
 
 moting the formation of a company to 
 develop property belonging to him- 
 self may act towards the company, 
 in selling his property to them, as 
 towards an outsider to whom he owes 
 no special duties. The case did not 
 decide the point under discussion in 
 the text, i. e., that such a person 
 could sell at profit and retain the 
 profit, but merely that his having 
 done so was no ground to sustain an 
 application on the part of a share- 
 holder for the removal of her name 
 from the list of shareholders on the 
 winding up of the company. The 
 case was not considered to conflict 
 with the cases cited in the last note. 
 See James, L. J., in 5 Ch. D. 118. 
 Dorris v. French, 4 Hun, 292, resem- 
 bles Gover's Case, and decides the 
 same point the same way. It was 
 held in a recent English case that if 
 a promoter sell bis own property to 
 the corporation without declaring 
 the fact that it is his, the corporation 
 may rescind if in a position to do so, 
 but cannot compel the promoter to 
 pay over the difference between what 
 he paid for the property at a time 
 when he was not the promoter and 
 what the corporation paid him for it. 
 In re Cape Breton Co., 2 Ch. Div. 221; 
 
 55
 
 § 83.] THE LAW OP PRIVATE CORPORATIONS. [CHAP. V. 
 
 not act as promoter. Nevertheless, if at the time of making 
 the sale to the corporation, he occupies towards the corporation, 
 as promoter or otherwise, a position of trust and confidence, 
 while he may sell without reference to the original cost of the 
 property to him, yet it would seem, on general principles of law 
 and equity applicable to persons holding positions of trust, that 
 he should not be permitted to sell at an unfair or exorbitant price. 1 
 
 aff'd, 29 Cb. Div. 795; Warren Ehret 
 
 ,v 
 
 which affects them with any trust."i 
 
 Co. v. Ice Co., 198 Pa. St. 412; Rich- The last, sentence seems to contain ai 
 ardson v. Graham, 45 W. Va. l&i J non sequitur ; i. e., A. did not occupy! 
 The corporation is the proper plain-- a position of trust towards B. when[ 
 tiff in suit to set aside promoters' '.A. acquired the property, therefore, 
 acts, etc. Ex-Mission Land Co. v.i A. does not hold such a position to- 
 Flash, 97 Cal. 610. The corporation wards B. when A. sells the property 
 may compel its promoters to account- to him. The original cost is imma- 
 for secret profits, although at the^terial; the property may have been 
 time when the promoters tiu-ned the ^given to the promoter; but it does 
 property over to the corporation the 1 'not follow that he may sell to his as- 
 promoters were the only stockhold- fsociates at an exorbitant price, 
 ers, they being at the time under 1 Moreover, the sentence referred to is 
 contract to sell their shares tosubse- fhardly consistent with the following 
 quent purchasers, who were the real [Sfrom the same opinion. "Where 
 persons defrauded. Pittsburgh Mg. /persons form such an association, or 
 Co. v. Spooner, 74 Wis. 307. ftbegin or start the project of one, from 
 
 "" w '"?ale tr'cs. Co. v. VvTTcox, 64 Conn." that tune they do stand in a confiden 
 
 101. See cases in last two notes. 
 
 The last sentence in the text may 
 
 not accord with the view of Shars- 
 
 wood, C. J., in Densmore Oil Co. v. 
 
 Densmore, 64 Pa. St. 43, 49. " . . . . 
 
 Any man or number of men who are 
 
 the owners of any kind of property 
 
 may form a partnership or associa- j disclosure of the facts. They must 
 
 account to the company for the profit, 
 because it is legitimately theirs." 
 The learned judge seems to think 
 
 tial relation to each other, and to all 
 others who may subsequently be- 
 come members or subscribers; and it 
 is not competent for any one of them 
 to purchase property for the pur- 
 poses of such a company, and then 
 sell it at an advance, without a full | 
 
 tion with others, and sell that prop- 
 erty to the association at any price 
 I which may be agreed on between 
 them, no matter what it may have 
 originally cost, provided there be no 
 fraudulent misrepresentations made 
 by the vendors to their associates. 
 They are not bound to disclose the 
 profit they may realize by the trans- 
 
 that the property must have been ac- f 
 quired during the existence of the i 
 fiduciary relation, in order to charge 
 the seller with any of those duties 
 towards his vendee which persons 
 standing in a confidential relation 
 
 action. They were in no sense agents i owe each other; but this seems 
 
 or trustees in the original purchase, ' not essential, for the maxim caveat 
 
 <and it follows that there is no confi- j emptor, and the rules of law proceed- 
 
 dential relation between the parties | ing from it, never apply between per- 
 
 56
 
 CHAP. V.] PROMOTION OF A CORPORATION. 
 
 [§84. 
 
 According^, it becomes of importance to determine, as nearly 
 as the nature of the case will permit, the point of time when 
 any person begins to act as a promoter, and so presumably in 
 the interests of a company to be organized. This can be deter- 
 mined only from his acts and representations. Does he hold 
 himself out generally in what he says and does as promoting 
 the formation of a corporation ? and does he represent himself 
 as acting and contracting on its behalf or for its ultimate bene- 
 fit? It would seem that the character of promoter should be 
 held to have been assumed at any time when these questions 
 could have been answered generally in the affirmative. 1 
 
 § 84. The application of the foregoing principles is illustrated 
 by McElhenny's Appeal. 2 McElhenny, not acting as a promo- 
 ter, sold some property to persons who were getting up a com- 
 pany, to which they in turn intended selling the property. He 
 then united with the promoters, and they all together turned 
 the property over to the corporation at a large advance. Af- 
 terwards the corporation, discovering these facts, brought suit 
 against McElhenny, or rather against his executors, as he had 
 died in the mean time, to make his estate refund the profits he 
 had made from the two sales of his property. The Supreme 
 Court of Pennsylvania held, that the estate was entitled to re- 
 tain the profits which McElhenny had made from his first sale 
 to the promoters, but should pay back the profits he had de- 
 
 sons occupying positions of mutual 
 trust and confidence; see also Lun- . 
 >gren v. Pennel, 10 Weekly Notes o 
 ^asesJPaO^OT 
 
 1 
 
 ^ Se"eot.^L6uis7"etc., R. R. Co. v. 
 Tiernan, 37 Kan. 606 ; South Joplin 
 Land Co. v. Case, 104 Mo. 572. " On 
 the one hand, it is plain that a fidu- 
 ciary relation between a promoter 
 and a company may exist long be- 
 fore the actual formation of a com- 
 pany by registration. On the other 
 hand, it is obvious that something 
 must be done beyond a purchase and 
 a resale to constitute such a relation ; 
 something must, it is submitted, be 
 done by the promoter to impose upon 
 him the duty of protecting the inter- 
 
 est of those who ultimately form the 
 company. He assumes this duty, if 
 he assumes to act for them, or if he 
 induces them to trust him, or to 
 trust persons who are under his con- 
 trol, and who are practically himself 
 in disguise ; he also assumes this 
 duty if he calls the company into ex- 
 istence in order that it may buy what 
 he has to sell ; but he does not 
 assume such duty by negotiating 
 with persons who have themselves 
 assumed that duty, and who are in 
 no way under his influence." 2 Lind- 
 ley on Part., 585. See Albion Steel 
 and Wire Co. v. Martin, 1 Ch. D. 580. 
 2 61 Pa. St. 188 ; Ace. South Jop- 
 lin Land Co. v. Case, 104 Mo. 572. 
 
 57
 
 § 85.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. V. 
 
 rived from his interest in the subsequent sale from the promot- 
 ers to the corporation. 
 
 § 84«. It has recently been held " a fraud for promoters to 
 undertake to decide for the future stockholders in the corpo- 
 ration to be organized that one third of the whole capital stock 
 of that corporation is a fair remuneration for their services as 
 promoters, to issue one third of the capital stock to themselves 
 as such remuneration, and then to invite the public to subscribe 
 to the stock of the corporation, without disclosing the fact to 
 the subscribers and without getting their consent to the pay- 
 ment of that remuneration." Also: " Payment to promoters 
 of remuneration for their services is not made valid by a vote 
 passed by the corporation, when the corporation is in the sole 
 control of the promoters before the capital has been issued to 
 the public." In such case the corporation, and not its receiver 
 is the proper party to bring suit ; and it may follow the shares 
 received by the promoters, or the proceeds thereof, or may 
 recover damages. 1 
 
 § 85. It is probably true, as a general legal proposition, that 
 - D . , . , when A. makes a contract for B., who is not as vet 
 
 Right of . J 
 
 promoters A.'s principal, while A. becomes responsible from 
 
 to indem- . / , , « r> i i 
 
 nityfrom the outset for the performance or the contract made 
 poratkm by him, B., by assuming the contract as principal, 
 subse- therebv assumes to indemnify A. from anv liability 
 
 quently • ■/•/•/ 
 
 formed. under the contract towards the other contracting 
 party. This agreement to indemnify would be implied, and B. 
 would become principal as from the time of making the con- 
 tract. Where B., however, who subsequently as principal 
 assumes the contract made by A. as agent, is a corporation 
 which was not organized at the time of making the contract, 
 apparent difficulties arise. It would seem illogical to imply — 
 and the discussion at present is confined to cases where no ex- 
 press assumption of liability is made — any agreement on the 
 part of the corporation, which at the time of making the con- 
 tract could have had no agent, to indemnify any one who at 
 that time attempted to act on its behalf. Nevertheless, as under 
 such circumstances the corporation would be entitled to the full 
 
 1 Hay ward v. Leeson, 176 Mass. I language of the court by Judge Lor- 
 310. The passages quoted are the | ing. 
 
 58
 
 H 
 
 CHAP. V.] PROMOTION OF A CORPORATION. [§ 86. 
 
 benefit of the contract made by its promoter, and, as towards 
 the corporation, the promoter would be charged with the duties 
 and liabilities of an agent, it seems no more than equitable that 
 an agreement should be implied on the part of the corporation 
 to indemnify the promoter, in so far as the corporation has vol- 
 untarily accepted the benefit of the contract, against any lia- 
 bility towards the other contracting party. 1 This would hold 
 good, however, only in those cases where the original contract 
 as made by the promoter would not have been ultra vires the 
 corporation after its organization. 2 
 
 The corporation, moreover, could expressly agree to assume 
 any liability incurred by the promoter contracting on its be- 
 half ; but such an agreement, were it other than the law under 
 the circumstances would imply, would be a new contract, and 
 would have to be supported by a valid consideration and be 
 within the powers of the corporation. 
 
 § 86. In England by statute many companies are required to 
 pav the expenses which are incurred in their for- 
 
 r . \ , . t . , Liability of 
 
 mation ; and when such a statute applies, a member corpora- 
 of the company will be entitled to be paid for his cmnpen- 
 trouble and time in forming it. 3 In the absence, sat ® P ro " 
 
 ° « — ■ ' moters. 
 
 however, of any statute, it is the law thro ughout_ the 
 United States tha t the corporation subsequently formed is no t 
 liable to compe nsate its promoters for their services in form ing 
 it and p rocuring subscriptions to its stock ** for, aside from the 
 technical difficulties in the way arising from the fact that the 
 corporation was not incorporated at the time when the services 
 were rendered, it is thought reasonable to regard such services 
 as having been given in view of the benefit expected from the 
 organization of the company. 4 If, however, after its incorpo- 
 ration, the corporation recognizing the services of its promoters 
 expressly promises to pay for them, an action will lie against 
 
 1 See Parsons v. Spooner, 5 Hare, 
 102. 
 
 2 Thus a corporation is not liable 
 to repay money advanced for the pur- 
 pose of influencing the legislature to 
 incorporate it. Marcband v. Loan 
 and Pledge Association, 26 La. Ann. 
 389. See, generally, also §§ 87-90. 
 
 3 Carden v. General Cemetery Co., 
 
 5 Bing. N. C. 253; see In re Bramp- 
 ton v. Longtown R'y Co., L. R. 10 
 Ch. 177; Hitchens v. Kilkenny R'y 
 Co., 9 C. B. 536. 
 
 4 Rockford Rock Island, etc., R. R. 
 Co. v. Sage, 65 111. 328; Bell's Gap 
 R. R. Co. v. Christy, 79 Pa. St. 54; 
 New York and New Haven R. R. Co. 
 v. Ketcbum, 27 Conn. 171; Hall v. 
 
 59
 
 §87.] 
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. V. 
 
 it on this express promise ; ! and likewise, if, after its incorpo- 
 ration, it ratifies the promises of its promoters to pay for the 
 services of other persons performed for it before its incorpora- 
 tion, an action will lie on this ratification. 2 And such a ratifi- 
 cation will arise if the corporation, after notice that the serv- 
 ices were rendered on promises of the promoters that they 
 should be paid for, voluntarily accepts the benefit. 3 
 
 § 87. It may be said, generally, that a corporation when 
 
 organized, in the absence of ratification on its part, 
 
 tionsbJ- 6 *" is not responsible for the acts nor bound by the con- 
 
 conwr* 6 tracts of its promoters, 4 unless made so by its charter, 
 
 tiou when which it has accepted and thereby agreed to. 5 But 
 
 organized ... . ■, ■ ■, . ■, ■, . . 
 
 and persons this is not identical with the proposition that the cor- 
 
 witu whom ,. .-, , -, . , , 
 
 the promo- poration may ignore the engagements entered into by 
 contracted ^ ts promoters when it has had the benefit of them. 
 on its be- it cannot be said that the promoters were the agents 
 
 of the corporation ; but, nevertheless, the corporation 
 may adopt such acts of its promoters intended for its benefit, 
 and may ratify such of their contracts made on its behalf as 
 would have been within the powers of the corporation after its 
 organization ; and this it may do notwithstanding that it was 
 
 Vermont and Mass. R. R. Co., 28 Vt. 
 401; Marchand v. Loan and Pledge 
 Association, 26 La. Ann. 389. Com- 
 pare Perry v. Little Rock, etc., R'y 
 Co., 44 Ark. 383. 
 
 1 Smith v. New Hartford Water Co., 
 73 Conn. 626. See Western Screw 
 and Mfg. Co. v. Cousley, 72 111. 531; 
 Franklin Fire Ins. Co. v. Hart, 31 
 Md. 59. 
 
 2 McDonough v. Bank of Houston, 
 34 Tex. 309; but see Railway Co. v. 
 Granger, 86 Tex. 350 and cf. Safety 
 Dep. Life Ins. Co. v. Smith, 65 111. 
 309. 
 
 8 Low v. Connecticut and P. R. R. 
 R. Co., 46 N. H. 284; Morton v. 
 Hamilton College, 100 Ky. 281; 
 Kaeppler v. Redfield Creamery Co., 12 
 S. Dak. 483. 
 
 4 Gent v. Insurance Co., 107 111. 
 
 60 
 
 652; Penn Match Co. v. Hapgood, 
 141 Mass. 145; Munson v. Syracuse, 
 etc., R. R. Co., 103 N. Y. 58; Payne 
 v. New South Wales Coal Co., 10 Ex. 
 283; Gunn v. London and Lancashire 
 Fire Ins. Co., 12 C. B. N. S. 694. 
 See 1 Lindley on Part., 395; Hutchin- 
 son v. Surrey Consumers' Gas Light 
 Ass'n, 11 C. B. 689; Pittsburgh, etc., 
 Mg. Co. v. Quintrell, 88 Tenn. 693; 
 Long v. Citizcus' Bank, 8 Utah, 104; 
 Oldham v. Mt. Sterling Imp't Co., 
 103 Ky. 529; Chase v. Redfield Cream- 
 ery Co., 12 S. Dak. 529; cf. Ireland 
 v. Globe Milling Co., 20 R. I. 190. 
 
 6 Tilson v. Warwick Gaslight Co., 
 4 B. & C. 962. See Shaw's Claim, 
 L. R. 10 Ch. 177; and Caledonian, 
 etc., R. Co. v. Helensburgh, 2 Mac- 
 queen, 391.
 
 CHAP. V.] PROMOTION OF A CORPORATION. 
 
 [§ 87. 
 
 not organized when those contracts were made. 1 And if it 
 ratifies their contracts, then, in the absence of express agree- 
 
 i Whitney v. Wyman, 101 U. S. 392; 
 Spiller v. Paris Skating Rink Co., 7 
 Ch. D. 368; Davis Bros. v. Montgom- 
 ery, etc., Co., 101 Ala. 127; Alexan- 
 der v. Winters, 23 Nev. 475; Wall v. 
 Mining & Smelting Co., 20 Utah, 474. 
 See Perm Match Co. v. Hapgood, 141 
 Mass. 145, 149; Smith o. Parker, 148 
 Ind. 127; Scadden Flax G. M. Co. o. 
 Scadden, 121 Cal. 33. A number of 
 English cases, criticised in Spiller v. 
 Paris Skating Rink Co., have held 
 that a corporation could not ratify 
 the acts of its promoters, because 
 not in existence when the acts were 
 done. See Kelner v. Baxter, L. R. 2 
 C. P. 174 (ante, §76); Scott v. Lord 
 Ebury, 36 L. J. C. P. 161 (ante, §76); 
 and Melhado v. Porto Alegre R. Co., 
 9 C. P. 503. In the last case Cole- 
 ridge, C. J., seemed to think such 
 cases should be decided differently, 
 but could " find no legal principle" 
 upon which an action brought against 
 a corporation on a contract made by 
 its promoters before, and ratified by 
 it after, its organization could be 
 
 maint ained. _ _ _ . 
 
 k * It may be true, according to the 
 common law, that no mere stranger, 
 on whose behalf an agent did not 
 even pretend to act, may ratify the 
 contracts of such an agent so as to 
 require rights or incur liabilities in 
 regard thereto, towards the other 
 contracting party. See Wilson v. 
 Lumman, 6 Man. & Gr. 236. And it 
 is said in the Digest: " Ratihabitio 
 constituet tuum negotium, quod ab 
 initio tuum non erat, sed tua cou- 
 templatione gestum." Dig. lib. 3, 
 ,tit. 5; De Neg. Ges 5, § 11. (Momm- 
 'sen's ed.; otherwise cited as 6, §9.) 
 But at common law a chose in action 
 rwas regarded as non-assignable; and 
 yu the Roman law the competency to 
 
 acquire rights and incur liabilities 
 through an agent was of late growth. 
 Moreover, a promoter does purport 
 to act on behalf of the future cor-' 
 poration; and the future corpora- 
 tion, as between itself and its pro- 
 moter, is entitled to the full benefit 
 of his acts (see §§82-84); and it is 
 only through the acts of its pro- 
 moters that a corporation is formed. 
 To say that the corporation when or- 
 ganized cannot adopt and ratify such 
 contracts of its promoters made on 
 its behalf, as would have been within 
 its powers to enter into after its or- 
 ganization, is to say that a body of 
 men, when incorporated and acting 
 as a corporation, cannot ratify those 
 contracts (of some of their number, 
 probably) which it would be compe- 
 tent for them, acting as a corpora- 
 tion, to make, and which were made 
 on their behalf, and in order that 
 they might subsequently act as a cor- 
 poration. Instances would seem hard 
 to find where ratification could more 
 properly take place. ^ _ 
 
 'There is, However, another ques- 
 tion, which has nothing to do with 
 the doctrines of ratification in them- 
 selves considered. Suppose that a 
 corporation has been formed, and 
 that a given act is within its powers 
 of corporate action. This act was 
 done on behalf of the corporation, 
 by its promoters prior to its organi- 
 zation. May it not be said in such a 
 case that, although it may be within 
 the powers of the corporation to do 
 such an act after its organization, 
 yet, nevertheless, the corporate pow- 
 ers took their beginning at a certain 
 time, and it may not have been the 
 intention of the legislature to allow 
 a body of men to act as a corpora- 
 tion prior to their incorporation, or 
 
 61
 
 §87.] 
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. V 
 
 ment with the other contracting party, the corporation must be 
 held to have assumed the liabilities which would have attached 
 
 to allow them to ratify acts done 
 prior to their incorporation, as that 
 might amount to the same thing ? 
 In other words, is it not ultra vires 
 the corporation to adopt acts done 
 prior to its organization, even though 
 they he such acts as the corporation 
 since its organization could legally 
 perform ? A reasonable view of this 
 question should be taken. Undoubt- 
 edly a corporation cannot legally act 
 as such before its organization, and, 
 therefore, cannot legally adopt a long 
 series of acts of the same nature as 
 those which it was organized to per- 
 form. It cannot begin its corporate 
 action and take up its corporate busi- 
 ness as from a time long anterior 
 to its organization. But, properly 
 speaking, only such acts can be re- 
 garded as acts of promoters which 
 have for their final object the forma- 
 tion of a corporation. It does not 
 come within the functions of pro- 
 moters to carry on a business, but 
 only to form a corporation to carry 
 one on. It would be absurd to hold 
 acts, extending through years, done 
 in a business similar to that to be 
 carried on by the corporation when 
 formed, to have been done on behalf 
 of a future corporation. At the 
 same time it would be a strained, 
 not to say absurd, doctrine to hold it 
 ultra vires a corporation to adopt 
 those acts of its promoters done on 
 its behalf, which it could itself le- 
 gally perform since its organization, 
 and which were proper and reasona- 
 ble acts for its promoters to do in or- 
 der to bring about the formation of 
 a company and start it on its corpo- 
 rate career. The proper test to ap- 
 ply to such cases is not: — would the 
 contract in question have been within 
 the powers of the corporation had it 
 
 62 
 
 been organized when the contract 
 was made ? but, is it within the pow- 
 ers of the corporation to make the 
 same contract now, supposing it had 
 not been made then ? or, can the 
 company legally carry out that very 
 contract ? As Lord Chancellor Cran- 
 worth says, in Preston v. Liverpool 
 and Manchester R. Co., 5 H. L. C. 
 605: " It can only be that contracts 
 which the railway company might 
 lawfully have entered into after the 
 company had been formed shall be 
 binding, if they were entered into 
 by those who might be considered 
 as agents for the company before the 
 company came into corporate exist- 
 ence." To illustrate: Suppose cer- 
 tain persons, with a view of forming 
 an insurance company, and wishing 
 to find out for certain how much 
 business such a company would get 
 from the beginning, go about making 
 contracts of insurance on behalf of 
 the future company, the insurance 
 to begin at a point of time anterior 
 to the formation of the company ; 
 the company is afterwards organ- 
 ized. These were contracts which 
 the company could legally have made 
 had it been organized at the time; 
 yet it seems doubtful whether the 
 company could assume those con- 
 tracts so as to render itself liable for 
 losses which occurred before it was 
 organized. If the promoters had 
 contracted that the company should 
 insure, the insurance to begin with 
 the formation of the company, in 
 that case the company could have 
 adopted and ratified the contracts; 
 for, after its organization, it could 
 legally have made those very con- 
 tracts. Compare Gent v. Insurance 
 Co., 107 111. 652. Again, suppose 
 promoters agree that the corporators
 
 CHAP. V.] PROMOTION OF A CORPORATION. 
 
 [§88. 
 
 to it had its promoters been its agents at the time when they 
 contracted on its behalf. 1 The English courts, moreover, have 
 gone a step further, and have held, even where there has been 
 no ratification by the corporation, that a corporation should not 
 be allowed to use its powers, which it has been enabled to ob- 
 tain through the engagements of its promoters, in disregard of 
 those engagements and to the prejudice of the persons with 
 whom those engagements were made. 
 
 § 88. On this point, the leading case is Edwards v. The Grand 
 Junction Eailway Co. 2 There the promoters of a railway 
 company met with opposition from the trustees of a turnpike 
 road. It was agreed between them that the trustees should 
 withdraw their opposition to the company's bill, and that the 
 company should, if the bill passed, carry the turnpike road over 
 a bridge of certain dimensions. The trustees withdrew their 
 opposition, and the bill passed ; but the company refused to 
 perform. An injunction was granted to restrain the company 
 from violating the agreement, and sustained on appeal. In 
 giving judgment in the case, Lord Cottenham said: " But the 
 question is not whether there be any binding contract at law, 
 but whether this court will permit the company to use their 
 powers under the act, in direct opposition to the arrangement 
 made with the trustees prior to the act, upon the faith of which 
 they were permitted to obtain such powers." 
 
 This case has been repeatedly questioned, 3 and its authority 
 
 shall pay the reasonable legal ex- 
 penses of its organization. This 
 agreement, undoubtedly, the corpo- 
 ration can adopt and ratify; for, not 
 only can it legally fulfil this agree- 
 ment, but it could itself compe- 
 tently agree to pay those very ex- 
 penses. 
 
 As to what will not constitute a 
 ratification by the company, it is held 
 in England that articles of associa- 
 tion are a contract of the sharehold- 
 ers inter se, and therefore an out- 
 sider cannot base an action against 
 the company on any of their provi- 
 sions. Eley v. Positive Assurance 
 Co., 1 Ex. D. 20 and 88; but see 
 
 Touche v. Metropolitan Warehousing 
 Co., L. R. 6 Ch. 671. 
 
 1 Rogers v. New York, etc., Land 
 Co., 134 N. Y. 197, 211; Stanton v. 
 New York, etc., R. R. Co., 59 Conn. 
 272; Battelle v. Pavement Co., 37 
 Minn. 89; Mc Arthur v. Times Print- 
 ing Co., 48 Minn. 319; Shreyer v. 
 Flouring Co., 29 Oreg. 1. See Propo- 
 sitions VII. and VIII., § 75. 
 
 2 1 M. & Cr. 650 ; ace. Petre v. 
 Eastern Counties R. Co., 1 Eng. R'y 
 Cas. 462. See In re Hereford Wagon 
 Co., 2 Ch. D. 621; 1 Lindley on Part., 
 398-400. But compare In re Rother- 
 ham Alum, etc., Co., 25 Ch. Div. 103. 
 
 3 See Preston v. Liverpool aud Man- 
 
 63
 
 § 90.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. V. 
 
 is doubtful. It may be hard for the party contracting with the 
 promoter to have no remedy against the corporation ; but he 
 should have known that the promoter could not bind the future 
 company, and it would work great injustice and hardship if the 
 company were to be held liable on contracts made by its pro- 
 moters which the charter or articles of association did not 
 mention, and which persons taking shares in the stock of the 
 company had no means of discovering. 1 
 
 § 89. In determining the liability of a corporation in regard 
 to any contract made by its promoters on its behalf, the essen- 
 tial points to consider will be these : Was the contract one that 
 the corporation as actually organized could legally have made 
 after its incorporation ; and, if so, has the corporation since its 
 incorporation ratified the contract expressly, or impliedly by 
 voluntarily accepting the benefit of the same in such a manner 
 as to estop it from denying that it has ratified the contract? 2 
 
 § 90. The following propositions are submitted as an attempt 
 to embody the law on the subject, supposing the contract made 
 by the promoters to be one which the corporation after its in- 
 corporation could competently have made : 
 
 I. As long as the contract remains executory on both sides, 
 the party who contracted with the promoter cannot enforce 
 the contract against the corporation, unless the corporation has 
 ratified the same; and the corporation cannot enforce the con- 
 tract against the other contracting party without carrying out 
 all the engagements entered into with the other contracting 
 party at the time of making the contract. 3 
 
 II. When a contract made by a promoter on behalf of a 
 future corporation has been ratified and performed by the latter, 
 
 Chester R. Co., 5 H. L. C. 605 ; Cale- 
 donian, etc., R. Co. o. Helensburgh, 
 2 Macqueen, 391; Leominster Canal 
 Co. v. Shrewsbury, etc., R. Co., 3 K. 
 & J. (354; Shrewsbury v. North Staf- 
 fordshire R. Co., L. R. 1 Eq. 593. 
 Still, the particular agreement in Ed- 
 wards v. Grand Junction R. Co. would 
 have satisfied the test of contracts 
 ratifiable by the corporation in note 
 2 to p. 57; and see Williams v. St. 
 George's Harbor Co., 2 DeG. and J. 
 
 64 
 
 547. But the contract never was 
 rat ified, and therein lies the difficulty 
 with the decision. 
 
 1 See Caledonian, etc., R. Co. t>. 
 Helensburgh, 2 Macqueen, 391, 405- 
 407. 
 
 - Despatch Line v. Bellamy Mfg. 
 Co., 12 N. H. 205; see Fister v. La 
 Rue, 15 Barb. 323; Railway Co. v. 
 Granger, 86 Tex. 350. 
 
 » Burrows v. Smith, 10 N. Y. 550.
 
 CHAP. V.] PROMOTION OF A CORPORATION. 
 
 [§90. 
 
 it may force the party who contracted with the promoter to 
 perform on his side. 1 
 
 III. When the contract has been executed by the other con- 
 tracting party, the corporation should be held to perform on its 
 side, if (1) it has ratiiied the contract, 2 or (2) voluntarily ac- 
 cepted the benefit arising from the performance of the contract 
 in such a manner as to estop the corporation from denying that 
 it has ratified the contract. 3 But, on the other hand, if the 
 benefit from the contract came to the corporation without any 
 voluntary action on its part, or on the part of those whose acts 
 in regard to the subject-matter of the contract are to be re- 
 garded as the acts of the corporation, then there is no principle 
 in law or equity on which it can be compelled to carry out en- 
 gagements entered into without its authority, and which it has 
 never even impliedly ratified. 4 
 
 1 See Bedford and Cambridge R'y 
 Co. v. Stanley, 32 L. J. Eq. GO; Cot- 
 ton Press Co. v. McKellar, 86 Tex. 
 694. 
 
 2 Bonds issued by promoters before 
 incorporation may, after incorpora- 
 tion, be ratified by tbe directors so 
 as to become valid obligations of the 
 corporation. Wood v. Wheelen, 93 
 111. 153. See Richwald v. Commer- 
 cial Hotel Co., 106 111. 439, 448. 
 
 8 Bonner v. American Spiral Hinge 
 
 5 
 
 Mfg. Co., 81 N. Y. 468; Grape Sugar, 
 etc., Mfg. Co. v. Small, 40 Md. 395; 
 Little Rock and Fort Smith R. R. Co. 
 v. Perry, 37 Ark. 164; Paxton Cattle 
 Co. v. First Nat. Bank, 21 Neb. 621; 
 Moore, etc., Hardware Co. v. Towers 
 Hardware Co., 87 Ala. 206. 
 
 * Zang v. Adams, 23 Col. 408, held 
 that a corporation was not affected 
 with notice of facts known to its pro- 
 
 moters. 
 
 y?&> 
 
 65
 
 § 91.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VI. 
 
 CHAPTER VI. 
 
 LEGAL RELATIONS CONSEQUENT UPON AN AGREE - 
 MENT TO TAKK SHARES IN THE STOCK OF A COR- 
 PORATION TO BE ORGANIZED. 
 
 Is the agreement binding ? §91. 
 Consideration, §§ 92-95. 
 Conditional agreement to take shares, 
 
 §§ 96, 97. 
 When deposits may he withdrawn, 
 
 §98. 
 Certain defences, § 99. 
 Legal relations arising from a valid 
 
 agreement to take shares, § 100. 
 Assignment of subscriber's interest, 
 
 §§ 101, 102. 
 Legal relations between subscribers 
 
 and promoters, § 103. 
 
 When promoters are liable to sub- 
 scribers for deposits, § 104. 
 
 Fraudulent subscriptions, § 105. 
 
 Misapplication of deposits, § 106. 
 
 Subscriptions in general enforceable 
 by the corporation when organ- 
 ized, §§ 107-109. 
 
 Rights of subscribers against the 
 corporation, § 110. 
 
 Effect of subscriber's laches, §§ 111, 
 112. 
 
 Is the 
 agreement 
 binding ? 
 
 § 91. In the first place, is an agreement to take shares in 
 the stock of a corporation binding upon the parties 
 thereto ? 1 If the agreement is made as prescribed by- 
 statute and with persons, usually called commis- 
 sioners, who, for the purpose of receiving subscriptions, are 
 constituted by statute the representatives of the corporation 
 while it is in the process of formation, the right acquired by 
 the subscriber to shares in the company when formed, or, what 
 is the same thing, viewed from the opposite point of view, the 
 obligation which the company when formed will be under to 
 allot shares to the subscriber, is a valid consideration for a sub- 
 scription ; if indeed it may not be said, that, when a statute 
 specifies certain persons with whom agreements to subscribe 
 are to be made, those agreements, provided the requirements of 
 the statute are complied with, are good " by force of the act 
 
 1 See generally, Kidwelly Canal 
 Co. v. Raby, 2 Price, 93; Selma and 
 Tennessee R. R. Co. v. Tipton, 5 
 
 66 
 
 Ala. 787; Eastern Plank Road Co. v. 
 Vaughan, 20 Barb. 155; S. C, 14 
 N. Y. 546.
 
 CHAP. VI.] AGREEMENTS TO TAKE STOCK. 
 
 [§92. 
 
 itself," without any further consideration ; for the rule of law 
 requiring a consideration is but a rule of law which like other 
 rules may be modified by statute or impliedly abrogated in 
 respect of certain contracts. 1 
 
 § 92. \\naen7^owever7the agreemenTtotakeshares is made 
 simply by the subscribers among themselves, then , 2 
 
 taking for granted that the parties to the agreement tion? ldera "/a^w>*' 
 are capable of contracting, and that the proposed ob- ^2^»~ 
 
 jects of the contemplated corporation are not illegal, the ques-$ &£ _ 
 tion whether the agreement is binding resolves itself into a 
 question as to the mutual sufficiency of consideration between 
 
 i Union Turnpike Co. v. Jenkins, 
 1 Caines Cas. 381; Hamilton and 
 Deansville Plankroad Co. v. Rice, 7 
 Barb. 157. In the former of these 
 cases Radcliffe, J., said, giving the 
 opinion of the court at p. 389: " The 
 subscription was taken by commis- 
 sioners who were authorized to re- 
 ceive it, and in the form prescribed 
 by the act. That form contains an 
 absolute promise to pay the money 
 to the president, directors, and com- 
 pany. On the one hand, the inter- 
 est of the company in selling the 
 shares, and the public advantage 
 to be derived from the success of the 
 institution; and on the other, the 
 expected profits to accrue from the 
 stock, were sufficient considerations 
 to uphold the promise. By force of 
 the act itself, also, it must be con- 
 sidered as good. The legislature 
 also must have intended that it 
 should be obligatory, for else the 
 formal manner in which it was pre- 
 scribed to be taken would be sense- 
 less and nugatory." This case was 
 reversed in Jenkins v. Union Turn- 
 pike Co., 1 Caines Cas. in Error, 386, 
 mainly on the ground that the terms 
 of the statute had not been complied 
 with. See, also, Selma and Tennes- 
 see Railroad Co. v. Tipton, 5 Ala. 
 787, 809; Thorp v. Woodhull, 1 Sand. 
 
 Ch. 411; Danbury and Norwalk R. 
 R. Co. v. Wilson, 22 Conn. 435; and 
 opinion of Bowie, C. J., in Taggart 
 v. Western Maryland R. R. Co., 24 
 Md. 563. In Angell and Ames on 
 Corp., §527, it is said: "It seems 
 that the criterion of the liability of 
 a subscriber to stock in a corpora- 
 tion is whether any act has been 
 done by which the corporation has 
 been forced to receive the sub- 
 scriber." 
 
 On the other hand, where signing 
 a subscription paper is not an essen- 
 tial part of the machinery devised by 
 the legislature for forming a corpo- 
 ration, it has been held that signing 
 such a paper imposes no obligation 
 on the subscriber which the corpora- 
 tion can enforce. Troy and Boston 
 R. R. Co. v. Tibbits, 18 Barb. 297; 
 Same v. Warren, ib. 310; Sedalia W. 
 & S. R. Co. b. Wilkerson, 83 Mo. 235; 
 see Erie and N. Y. City R. R. Co. v. 
 Owen, 32 Barb. 616; Dorris v. Swee- 
 ney, 64 Barb. 636; S. C, 60 N. Y. 
 463; compare Auburn Bolt Works v. 
 Schultz, 143 Pa. St. 257; Muncy Co. 
 v. Green, 143 Pa. St. 269. But see 
 §§ 107-109. 
 
 As to the allotment by commis- 
 sioners, see Crocker v. Crane, 21 
 Wend. 211; Walker v. Devereux, 4 
 Paige, 229. 
 
 67
 
 § 92.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VI. 
 
 the different parties. 1 It is often said, rather loosely, that the 
 mutual promises of the different contracting parties constitute 
 the consideration for each other; 2 but to this it is answered 
 with apparent pertinency, that, when the binding force of 
 these very promises is in question, to say that they constitute 
 valid considerations for each other is reasoning in a circle^ 
 still, perhaps, this objection is more specious than real. It is 
 usually said that consideration is either benefit received, or 
 trouble or detriment caused ; but if the nature of consider- 
 ation be looked into a little more closely, it will appear that, 
 in reality, the detriment caused is at the present day the es- 
 
 1 See Eastern Plank Road Co. v. 
 Vaughan, 14 N. Y. 546, 553 et seq. 
 The promise to take the shares im- 
 plies a promise to pay for them; 
 Spear v. Crawford, 14 Wend. 90; ap- 
 proved in Rensselaer, etc., Plank 
 Road Co. v. Barton, 16 N. Y. 457, 
 note. See, also, generally as to this 
 last, §§513, 514. 
 
 2 West v. Crawford, 80 Cal. 19; 
 Marysville, etc., Co. v. Johnson, 93 
 Cal. 538; Twin Creek, etc., Turn- 
 pike Co. v. Lancaster, 79 Ky. 552; 
 Watkins v. Eames, 9 Cush. 537; New 
 Lindell Hotel Co. v. Smith, 13 Mo. 
 App. 7: Osborn v. Crosby, 63 N. H. 
 583. " The agreement to associate 
 together under the act to accomplish 
 the purposes designed would seem a 
 sufficient consideration. The con- 
 sideration need not move from the 
 party with whom the contract is 
 made. The consideration of one 
 promise is that others will make 
 like promises." Shepley, C. J., in 
 Kennebec and Portland R. R. Co. v. 
 Palmer, 34 Me. 366. See Edinboro 1 
 Academy u. Robinson, 37 Pa. St. 
 210; Thompson v. Page, 1 Mete. 
 565. 
 
 8 Methodist Episcopal Church v. 
 Kendall, 121 Mass. 528, holds that a 
 gratuitous subscription to promote 
 the objects for which a corporation 
 
 68 
 
 is established cannot be enforced 
 unless the promisee has done some- 
 thing or incurred some liability re- 
 lying on the promise; and it is not 
 sufficient that others were led to 
 subscribe by the subscription sought 
 to be enforced. See Poughkeepsie, 
 etc., Plank Road Co. v. Griffin, 24 
 N. Y. 150; Phillips Limerick Acad- 
 emy v. Davis, 11 Mass. 113; Essex 
 Turnpike Co. v. Collins, 8 Mass. 291; 
 Burt v. Farrar, 24 Barb. 518; Am- 
 herst Academy v. Cowles, 6 Pick. 
 427. But see Bryant v. Goodnow, 5 
 Pick. 228, 229, where it is said: 
 " Where one subscribes with others 
 a sum of money to carry on some 
 common project, lawful in itself, 
 and supposed to be beneficial to the 
 projectors, and money is advanced 
 upon the faith of such subscription, 
 an action for money paid, laid out, 
 and expended may be maintained to 
 recover the amount of the subscrip- 
 tion, or such portion of it as will be 
 equal to the subscriber's proportion 
 of the expense incurred.'" See, also, 
 Homes v. Dana, 12 Mass. 190; Trus- 
 tees of Farmington Academy v. 
 Allen, 14 Mass. 172; Whitsitt v. 
 Trustees Presbyterian Church, 110 
 111. 125; Osborn v. Crosby, 63 N. H. 
 583.
 
 CHAP. VI.] AGREEMENTS TO TAKE STOCK. 
 
 [§93. 
 
 sential part of the consideration, 1 for where detriment has been ^^ ^ 
 caused to the promisee it is immaterial whether the promisor mJLe** 
 has been benefited or not; as, for instance, in the ordinary &k?m 
 case of a guaranty the promisor is not benefited, but the prom- • 
 isee acting upon the promise, in lending money or performing 
 services, suffers detriment in legal intendment. As a usual 
 thing, where detriment has been caused to the promisee, bene- 
 fit will have accrued to the promisor ; but it is nevertheless to 
 the detriment caused that we must look, as that is always suffi- 
 cient to constitute a valid consideration. 2 Moreover, the con- 
 sideration is presumed equal to the promise made therefor; 
 and, however unequal in reality these two may be, the law will 
 take no notice of their inequality, unless the inadequacy of the 
 consideration is such as to raise a presumption of unfair ad- 
 vantage or fraud. 3 
 
 § 93. Let us now apply these principles to an agreement to / (Zf* 
 take shares in the stock of a corporation to be organized. If Arr^s. 
 the agreement to take shares is entered into by all the parties 
 at the same time, it would, at least if drawn so that the parties 
 purported to agree with each other, usually contain an ample 
 consideration, the consideration for the promise of A. being the 
 detriment caused B., C, D., etc., the other parties, in promising 
 to take shares, the simple act of signing 4 such an agreement 
 being sufficient detriment caused to support a promise. It may 
 
 a See Langdell's Summary of the 
 Law of Contracts, § 53. 
 
 2 It has been the writer's opinion 
 that benefit received at the time of 
 making the promise is also a good 
 consideration, whether detriment be 
 caused to the promisee or not; that 
 is, whether or not the consideration 
 move from the promisee. But this is 
 not universally accepted as law. See 
 2 Wharton on Contracts, § 784 et 
 seq., and an article by the writer in 
 the April, 1881, number of the 
 American Law Review on " The 
 Right of a Third Person to Sue on a 
 Contract made in his Favor." 
 
 3 There is an exception to the rule 
 stated in the text. Where the 
 
 promise is to pay money absolutely, 
 and the consideration is money given, 
 the law will take notice of inequality 
 between the consideration and the 
 promise; and, therefore, money paid 
 will not support a promise to pay 
 more than the same sum with in- 
 terest. See Langdell's Summary, 
 etc., §55. A court of equity, more- 
 over, will sometimes regard the 
 actual adequacy of consideration in 
 deciding whether or not to decree 
 the specific performance of a con- 
 tract. 
 
 * See Haigh v. Brooks, 10 Ad. & El. 
 309, 323; Brooks v. Ball, 18 Johns. 
 337. 
 
 69
 
 § 93.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VI. 
 
 be said further that the detriment caused B., C, D., etc., in 
 promising to take shares, or in merely signing an agreement, is 
 ample consideration to support the promise of A., irrespective 
 of the question whether the promises of B., C, D., etc., in them- 
 selves considered, are valid promises or not. 1 In other words, 
 where it is expressly stipulated in the agreement, or where, 
 from the tenor of the same, it may appear that the making of 
 the mutual or respective promises contained in the agreement 
 is to constitute the consideration for the agreement, it will not 
 be the fact that the promises when made are enforceable, but 
 the making of them which will constitute the consideration ; 
 though it follows that the promises when made will be binding, 
 because founded on a valid consideration. 
 
 The question, then, will be, in any given instance, was the 
 consideration of the promise of A. the^nakino- of the promises 
 by B., C, D., etc., or the^gej^ojunjince of their promises by the 
 latter ? In the former case the agreement is as clearly binding 
 as in the latter case it is, in itself considered, worthless ; because, 
 until the promises of B., C, D., etc., have been performed, there 
 is no consideration for the promise of A., which, therefore, until 
 such performance, is in legal contemplation nothing more than 
 an offer, which may be withdrawn at any moment. Through 
 perforinance.Jiowever, on the part of B., C, D., etc., the prom- 
 ise of A. ma»vbecome binding, lor lnstance^the corporation 
 having been formed, and A., not having in the mean time with- 
 drawn from the agreement, if B., C, D., etc., take and pay for 
 their shares as agreed, they (or the corporation, if it shall ap- 
 pear to have been the intention that the corporation should 
 have the right to enforce the promise 2 ) can then force A. to 
 take and pay for his shares as well ; for if relying on A.'s prom- 
 
 1 It is, of course, quite possible for 
 an agreement of this kind to be drawn 
 so as to be little more than worthless; 
 e. g., the promise of each might be 
 made conditional on the actual tak- 
 ing of the shares by the others. Here, 
 plainly, there is no binding contract. 
 Such an invalid instrument would be 
 the following: "It is mutually cove- 
 nanted and agreed by and between 
 the parties hereto, that each of the 
 
 70 
 
 said parties will take five shares in 
 the stock of the X. Co. when organ- 
 ized, in consideration of each of the 
 other parties hereto taking five 
 shares," etc. This form might be 
 binding were it not for the words 
 "in consideration," etc. 
 
 2 See Eastern Plank Road Co. v. 
 Vaughan, 14 N. Y. 546.
 
 CHAP. VI.] AGREEMENTS TO TAKE STOCK. [§ 94. 
 
 ise, or, more strictly speaking, un with drawn offer, 1 to take 
 shares, B., C, D., etc., have actually taken shares themselves, 
 they have thereby accepted A.'s unwithdrawn offer, by per- 
 forming that act, which was intended to be, when performed, 
 a valid consideration, which should convert A.'s unwithdrawn 
 offer into a binding promise ; and in truth, therefore, they have 
 thus transformed A.'s unwithdrawn offer into a binding promise, 
 the performance of which may be enforced by the parties who 
 have themselves performed, or by the corporation if such was 
 the intention. 2 
 
 § 94. The foregoing discussion has proceeded on the assump- .\ 
 tion that the agreement to take shares was entered into by all 
 the parties thereto at the same time ; that it was, properly 
 speaking, one agreement. AVhere, however, as is frequently 
 the case, a subscription-agreement is signed by different persons 
 at different times, or where " books are open for subscribers," 
 who subscribe at different times, the foregoing remarks will be 
 hardly applicable. For instance, in the case above conceived, 
 where the making of the respective promises was plainly in- 
 tended to be the consideration of the agreement, if we suppose 
 that A., B., and C. sign together, and that some days after- 
 wards D. signs, while A., B., and C. may be bound, yet as to 
 D., if the consideration of his promise was the making of the 
 promises of A., B., and C, it will be but a past consideration. 
 
 It might be said that all parties are to be presumed to sign 
 at the same time ; but when several days intervene between 
 the times of actual signing, and especially where dates are an- 
 nexed to the different signatures, such a presumption becomes 
 too glaringly contrary to fact to exist even in legal contempla- 
 tion. In such a ease further consideration should be found for 
 D.'s promise. Here, as we must presume all the parties to act 
 
 x This unwithdrawn offer is not 
 even a conditional promise, because 
 it may be withdrawn at any time be- 
 fore the performance of the consid- 
 
 2 If the paper were so drawn that 
 the consideration of each promise 
 was the performance of all tlie other 
 promises, the paper would practically 
 
 eration ; and a true conditional prom- amount to very little ; as it would not 
 ise may not be withdrawn, because become enforceable against any one 
 
 founded on a consideration when 
 made; although it may not be en- 
 forced until the condition has been 
 performed. 
 
 subscriber until all the rest had vol- 
 untarily taken their shares. 
 
 71
 
 § 90.] THK LAW OF PRIVATE CORPORATIONS. [CHAP. VI. 
 
 in good faith and to wish to join, in a valid agreement, the ques- 
 tion would be merely as to the form of the same. Therefore, 
 some consideration should be expressed to pass to D. from the 
 other parties to the instrument at the time of his executing it. 
 To this end, each promise could be expressed to be made in 
 consideration of the making of the other promises, made or to 
 be made, and of one dollar paid by some party on behalf of all 
 present and future parties to the agreement, to the promisor at 
 the time of his executing the same ; which, for greater security, 
 should be under seal. 1 
 
 § 95. It may be added, in passing, that if any of theparties 
 to the instrument are infants, their promises will notoeTpnd- 
 ing on them, unless ratified by them after coming of age ; 2 and 
 that if the object of incorporation, as expressed in the agree- 
 ment, is illegal, the agreement to take shares will bind no one. 
 § 96. When there are conditions in an agreement to take 
 shares in a corporation to be formed, the instrument 
 is to be construed with reference to them, so as to 
 give them due effect. 3 Moreover, in construing such 
 conditional agreements, it must be noticed closely 
 whether the condition relates to the promise or to the perform- 
 ance of the promise. If the promise of one party is made con- 
 ditional upon the Snaking' of the promises by the other parties, 
 such promise becomes absolute as soon as the other promises 
 are made. But if a promise is made conditional upon the per- 
 forman ce' of the other promises, such a condition, as before 
 pointed out, would go far towards making the whole agree- 
 ment nugatory. 4 
 
 The usual condition in an agreement to take shares in a cor- 
 poration to be formed is that the promises shall not be enforced 
 until all or a certain amount of the stock of the future com- 
 
 Conditional 
 agree- 
 ments to 
 take shares. 
 
 x It will be noticed that cases like 
 Methodist Episcopal Church v. Ken- 
 dall, 121 Mass. 528, and other cases 
 cited in the same note with it to § 92, 
 were mostly cases of "gratuitous' 1 
 subscriptions, made to promote some 
 object in which the subscribers had 
 no direct pecuniary interest. Such 
 cases, therefore, are of questionable 
 application in discussing the binding 
 
 72 
 
 force of subscri ptions made to further 
 some private money-making business 
 scheme of the subscribers. Compare 
 Haskell v. Sells, 14 Mo. App. 91. 
 
 2 See Lumsden's Case, L. R. 4 Ch. 
 31; and Reaveley's Case, 1 De Gex 
 & Sm. 550. 
 
 3 See North Stafford Steel, etc., 
 Co. v. Ward, L. R. 3 Ex. 172. 
 
 * See § 93.
 
 CHAP. VI.] AGREEMENTS TO TAKE STOCK. 
 
 [§97. 
 
 pany is agreed to be taken. 1 Such a condition would be more 
 apt to be present where the parties to the agreement sign at 
 different times; in which case, as beforepointed out, a con- 
 sideration shoulabe T^xpr^i^^o mcfvefrom' the representatives 
 of all other parties to each party upon his signing the instru- 
 ment. If this were done, the promises would be binding con- 
 ditionally as soon as made ; and upon the fulfillment of the con- 
 dition, that is, upon promises to take the requisite number of 
 shares being made, they would become absolute. Should this 
 condition, however, relate to the performance of the promises, 
 the promises might amount to no more than offers, which could 
 be withdrawn at any time before the fulfillment of the condi- 
 tion, for it may be said that until then they never had any 
 even conditionally binding quality, except as above pointed 
 out. 2 
 
 § 97. If the condition be one to be performed by the corpora- 
 tion when organized, then generally the agreement to subscribe 
 made prior to its organization cannot be enforced before the 
 
 1 When the amount of the capital 
 stock is inserted in the subscription^ 
 agree m ent, subscribers may refuse to 
 pa y auy part of their subscription s 
 until the full amount is subscribe d 
 for. Cabot and West Springfield 
 Bridge v. Chapin, 6 Cush. 50; Salem 
 Mill Dam Co. v. Ropes, 6 Pick. 23. 
 See Norwich, etc., Navigation Co. v. 
 Theobald, 1 Moo. & M. 151; Water- 
 ford, etc., R. Co. v. Dalbiac, 6 Ex. 
 443; Penobscot R. R. Co. v. Dum- 
 mer, 40 Me. 172; Penobscot, etc., 
 R. R. Co. v. Bartlett, 12 Gray, 244; 
 Burt v. Farrar, 24 Barb. 518; Hughes 
 v. MTg Co., 34 Md. 316; Boston, 
 Barre, etc., R. R. Co. v. Wellington, 
 113 Mass. 79; Erie, etc., R. R. v. 
 Owen, 32 Barb. 616; Pierce v. Jer- 
 sey Water Works Co., L. R. 5 Ex. 
 209; Elder v. New Zealand Land 
 Improvement Co., 30 L. T. N. S. 
 285; California Southern Hotel Co. 
 v. Russell, 88 Cal. 277; Fair Assn. 
 v. Walker, 88 Mich. 62; Hards v. 
 
 Platte Valley Imp. Co., 35 Neb. 263; 
 Macfarland u. West Side Imp't Assn. 
 53 Neb. 417; but see Rensselaer, 
 etc., Plank Road Co. v. Wetzel. 21 
 Barb. 56; McDougall v. Jersey Im- 
 perial Hotel Co., 10 Jur. N. S. 1043. 
 See §§ 517-521. 
 
 The_ £rospectus of a c ompany -to 
 be forme d__s tated that the proposed 
 capital stockjwas_to_consist of tan 
 thousand shares of twenty-five 
 pounds each. Only fourteen_lmn^ 
 died of these shares were taken. 
 Held, that the agreement of a person 
 subscribing for shares was condi- 
 tional on the fulfillment of the terms 
 of flie prospectus. PitchforcL- v. 
 Davis, 5 Mees. & W. 2; Acc^ Fox v. 
 CTTTton, 6 Bing. 779; but see Hutt v. 
 Giles, 12 Mees. & W. 492. When the 
 subscription-contract is part oi the 
 prospectus, the terms of the latter 
 are conditions. Norwick ,. Lock. 
 MTg Co. v. Hockaday, 89 Va. 557. 
 
 2 See § 93. 
 
 73
 
 § 97.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VI. 
 
 performance of the condition, 1 unless it is the promisors them- 
 selves who, as a matter of fact, prevent the fulfillment of the 
 condition in order to invalidate their own promises. 2 In the 
 last case the promisor who is concerned in preventing the ful- 
 fillment of the condition may take no advantage of its non-ful- 
 fillment ; and this on general principles of good faith and equity, 
 and in accordance with the law relating to the performance of 
 conditions o-enerallv. 3 
 
 1 Effect should be given to condi- 
 tions in a letter accepting a position 
 as provisional committee-man, and 
 agreeing to take shares. Robert's 
 Case, 3 De Gex & S. 205; affirmed, 2 
 Mac. & G. 192; see Wood's Case, 3 
 De G. & J. 85; Burrows v. Smith, 10 
 N. Y. 550; Union Hotel Co. v. Hersee, 
 15 Hun, 371. It has been held, where 
 persons acting as agents for a contem- 
 plated turnpike company obtained 
 subscriptions on certain conditions 
 as to the location of the road, that 
 the corporation cannot afterwards 
 recover on those subscriptions with- 
 out complying with the conditions; 
 and that on the definite failure of the 
 corporation to comply with them pay- 
 ments already made may be recovered 
 back. Frankfort and Shelbyville 
 Turnpike Co. v. Churchill, 6 T. B. 
 Monroe (Ky.), 427. The agreement 
 in this case was separate from the 
 subscription, but was formally drawn 
 in writing, and contained a covenant 
 to return the moneys received unless 
 the road was run as agreed. 
 
 On the other hand, it has also been 
 held, where a general turnpike act 
 conferred no power on the commis- 
 sioners to acceptconditional subscrip- 
 tions, that asubscription conditioned 
 on the laying of the road through a 
 specified place is contrary to public 
 policy and void. Butternuts, etc., 
 Turnpike Co. v. North, 1 Hill, 518; 
 Fort Edward, etc., Plank Road Co. v. 
 
 74 
 
 Payne, 15 N. Y. 583. Parol declara- 
 tions made by officers of the company 
 can only avail a subscriber seeking 
 to invalidate his subscription for 
 shares where they amount to fraud. 
 Vicksburg, etc., R. R. Co. v. McKean, 
 12 La. Ann. 638; Martin v. Pensacola, 
 etc., R. R. Co., 8 Fla. 370; Missis- 
 sippi, etc., R. R. Co. v. Cross. 20 Ark. 
 443. So parol declarations made by 
 promoters as to route will not, unless 
 they amount to fraud, avail the sub- 
 scriber. Braddock v. Philadelphia 
 M. & M. R. R. Co., 45 N. J. L. 363. 
 And parol agreements made at the 
 time of subscribing for shares, and 
 inconsistent with the written terms 
 of the subscription, are void. Con- 
 necticut and Passumsic Rivers R. R. 
 Co. v. Bailey, 24 Vt. 465; Whitehall, 
 etc., R. R. Co. v. Myers, 16 Abb. Pr. 
 (N. S.) 34; Haskell v. Sells, 14 Mo. 
 App. 91; Galena & S. W. R. R. Co. 
 v. Ennor, 116 111. 55. It is a defence 
 to an action upon asubscription that 
 the corporation has already issued 
 all the stock which it was authorized 
 to issue. Railroad v. Knoxville, 98 
 Tenn. '_'; Newport Cotton Mill Co. v. 
 Mims, 103 Tenn. 465. See §521. 
 
 2 See Upton v. Hansbrough, 3 Bis- 
 sell, 417, 423. 
 
 3 See Raynay v. Alexander, Yelv. 
 66; Hotham v. East India Co., 1 T. 
 R. 638.
 
 CHAP. VI.] AGREEMENTS TO TAKE STOCK. 
 
 [§ 100. 
 
 When de- 
 posits may 
 be with- 
 drawn. 
 
 § 98. It may be said, as incidental to the preceding discussion, 
 that where a number of persons intending to form a 
 corporation and through that means carry on some 
 business, raise a common fund, eventually to be in- 
 creased, but beginning with deposits placed in the 
 hands of a committee with authority to do certain acts, it is not 
 competent for any one of such subscribers to withdraw his funds 
 so deposited until it has become evident that the carrying out 
 of the scheme is impracticable. 1 
 
 § 99. If a person agrees to pay a deposit, and the considera- 
 tion of that agreement fails, he need not perform ; 2 
 but, nevertheless, should he agree to pay deposits by SSSnces. 
 a certain day, he cannot plead to an action for not 
 paying them on or before that day that the projected company 
 has become abortive since that day ; for that might not have 
 happened had he paid his deposits as agreed, and circumstances 
 intervening after he broke his promise are no excuse for such 
 breach. 3 Where, however, a person subscribes for stock in a 
 future corporation, as the contract does not purport to be with 
 an existing corporation, the subscriber is not estopped, in a suit 
 to enforce his subscription, from denying that the corporation 
 ever came into existence. 4 
 
 § 100. Having considered the general question of the valid- 
 ity and construction of an agreement to take shares L ega i reia,. 
 in the stock of a future corporation, there remain j^"^.*^ 
 for consideration the legal relations arising- from such valid agree- 
 
 TTlPTlt to 
 
 an agreement. Prima facie these relations are such take 
 as may be inferred from the terms of the instrument ; s ares ' 
 for the courts ordinarily, as among the parties to the instru- 
 ment, will enforce its provisions according to their tenor and 
 import. Such agreements differ much from each other. One 
 might readily be drawn so as to constitute the parties thereto 
 partners, at least in regard to the scheme of incorporation ; as, 
 
 i Baird v. Ross, 2 Macqueen, 51 ; 
 compare Kent v. Jackson, 14 Beav. 
 367; Kidwelly Canal Co. v. Raby, 2 
 Price, 93. 
 
 2 See Duke v. Andrews, 2 Ex. 290. 
 
 3 Duke v. Dire, 1 Ex. 36; Oldham 
 v. Brown, 7 Ellis & B. 163; S. C, 2 
 Ellis & E. 398. 
 
 4 Rikhoff v. Brown's Sewing Ma- 
 chine Co., 68 Ind. 388; Indianapolis 
 Furnace, etc., Co. v. Herkimer, 46 
 Ind. 142; see Reed v. Richmond 
 Street R. R. Co., 50 Ind. 342; §§ 537, 
 538. 
 
 75
 
 § 101.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VT. 
 
 for example, if the instrument should provide that the parties 
 thereto should act as each other's agents in the furtherance of 
 the scheme, and share any profits or losses arising before the 
 incorporation of the company. Such provision, however, would 
 ordinarily be absent, and by merely entering into a binding 
 agreement to take shares in a corporation to be formed, persons 
 do not become partners, nor liable as principals for each other's 
 acts as agents. 1 
 
 To be sure, after the agreement is executed, supposing it to 
 be a mere agreement to take shares, the parties thereto may so 
 act that outsiders are justified in concluding that the relation- 
 ship of principal and agent or of partners exists among them; 
 and this on principles before discussed in relation to promoters. 2 
 Therefore, while in fact, as among themselves, no relationship 
 of agency or partnership exists, they may be held responsible 
 to outsiders for the acts of each other, either as principals or as 
 partners, according to the circumstances. 
 
 § 101. To what extent a party to an agreement to take shares 
 in the stock of a corporation to be formed may, by 
 
 Assign- l .... 
 
 meiit of assigning his interest m the agreement, relieve min- 
 er's inter- self from future liability, will depend on a proper 
 est ' construction of the instrument itself, qualified by the 
 
 general maxim, that while a man may assign or waive any 
 rights accruing to him under an agreement, he cannot divest 
 himself of his liabilities arising therefrom. 3 It would be most 
 unjust to hold, where responsible persons have joined in an 
 agreement to furnish funds for the advancement of a scheme 
 of incorporation, and to take shares in the stock of the future 
 company, that under such circumstances any one of them may 
 avoid fulfilling his contract, by assigning his interest to some 
 irresponsible person. It must be admitted, however, that un- 
 der somewhat analogous circumstances the' English cases hold 
 that a shareholder, even in a company of unlimited liability, 
 may free himself from any future liability by transferring his 
 shares to a man of straw for that very purpose, provided the 
 
 iShibley v. Angle, 37 N. Y. 626. 
 See Fay v. Noble, 7 Cush. 188. 
 Thrasher v. Pike County R. Co., 25 
 111. 393; and compare Garnett v. 
 Richardson, 35 Ark. 144. 
 
 76 
 
 2 See § 77. 
 
 3 Graff v. Pittsburgh and Steuben- 
 ville R. Co., 31 Pa. St. 489.
 
 CHAP. VI.] AGREEMENTS TO TAKE STOCK. [§ 103. 
 
 transfer be absolute. 1 The American law is different on this 
 point. 2 
 
 § 102. Moreover, by assigning his interest in a contract to 
 take shares in the stock of a future corporation, a person may 
 incur liability to his assignee, at least if he purports to sell shares 
 in the stock of a future corporation, 3 for, should such a corpora- 
 tion never be organized, he might have to refund any money 
 paid him by his vendee. Still, in the absence of fraud, the 
 vendor would incur no liability to his vendee by selling him 
 merely his right to shares in the stock of the corporation when 
 formed ; for here there is no failure of consideration even though 
 the corporation be never formed, because the vendor sold only 
 his right to shares in the stock of a certain corporation should 
 it thereafter be organized. 
 
 103. Persons agreeing to take shares in the stock of a cor- 
 poration to be formed necessarily come in contact with 
 the promoters of the scheme of incorporation ; they tions bef- *" 
 usually subscribe on the faith of the acts and repre- scribers Ub " 
 sentations of the latter, and nidge as to the ultimate and promo- 
 
 ' Jo ters. >yJ*" 
 
 success of the undertaking from the opinion they ^m^lA*****- 
 have formed of its promoters. The promoters of the plan are 
 in a better position to judge of the feasibility and desirableness 
 of the scheme than are persons who merely agree to take shares 
 in the concern when it shall have started. Because of these 
 and similar considerations a fiduciary relationship arises be- 
 tween the promoters and persons who agree to subscribe for 
 shares in the stock of the future corporation ; 4 and the latter 
 are in consequence entitled to fair and open treatment from the 
 former. It follows that promoters are liable to persons who 
 subscribe for shares in the stock of the future company for 
 damages caused by any fraudulent misrepresentation or con- 
 cealment on their part, where the subscribers have relied on 
 their representations, 5 and to recover such damages the sub- 
 
 1 Jessop's Case, 2 De G. & J. 638; 
 DePass's Case, 4 De G. & J. 544; 
 Harrison's Case, L. R. 6 Ch. 286; 
 Williams's Case, 1 Ch. D. 546. See 
 §§586,749. 
 
 2 Nathan v. Whitlock, 9 Paige, 152; 
 Marcy v. Clark, 17 Mass. 330. See 
 §§ 586, 749. 
 
 3 Kempson v. Saunders, 4 Bing. 5. 
 See Street a. Bailis, 2 P. Wms. 217. 
 
 4 Williams v. Page, 24 Beav. 654, 
 611. See Brewster v. Hatch, 122 N. 
 Y. 349. 
 
 5 Hornblower v. Crandall, 7 Mo. 
 App. 220; aff'd 78 Mo. 581. 
 
 77
 
 § 104.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VI. 
 
 When pro- 
 moters lia- 
 ble to sub- 
 cribers for 
 deposits. 
 
 scriber can bring an action in law for deceit, 1 and may have 
 a right in equity to have his subscription cancelled, 2 provided 
 by such cancellation the rights of other and innocent persons 
 are not infringed. Promoters may also be responsible to sub- 
 scribers for the misrepresentations of their fellow-promoters, if 
 the relationship of agency or partnership existed between the 
 promoters ; or if they had acted in a way to justify subscribers 
 in inferring the existence between them of either of these rela- 
 tionships. 3 
 § 104. That, upon the failure of the scheme of incorporation, 
 subscribers may recover back from the promoters de- 
 posits paid on subscribing for shares in the contem- 
 plated corporation, is a proposition which is not 
 always true. In such a case the rights of the sub- 
 scriber who has paid the deposit depend on the intention and 
 meaning of the parties to the scheme, as expressed in the sub- 
 scription-agreement and viewed in the light of surrounding 
 circumstances. 4 If, judging of the matter in this way, it ap- 
 pears to have been the intention that the deposits should be 
 applied to the furtherance of the scheme, then, although the 
 scheme proved abortive, the moneys will have been applied to 
 the purpose for which they were presumably destined ; 5 and the 
 subscribers can recover back only such moneys as either have 
 not been expended and so remain in the hands of the promoters, 
 or such as have been spent by the promoters after all reasonable 
 hope for the success of the undertaking had passed away, and 
 under such circumstances as to imply wilful mismanagement or 
 fraud on their part. 6 But fraud on the part of the promoters 
 
 1 Paddock v. Fletcher, 42 Vt. 389; 
 Gerhard v. Bates, 2 El. & B. 476. See 
 Twycross v. Grant, 2 C. P. Div. 469. 
 
 2 Kent v. Freehold Land Co., L. R. 
 4 Eq. 588. An innocent misrepre- 
 sentation, in order to release the sub- 
 scriber, must extend to the funda- 
 mental nature of the enterprise. 
 Kennedy v. Panama, etc., Mail Co., 
 L. R. 2 Q. B. 580. False statements 
 in the prospectus issued by promoters 
 release the subscriber. Metr. C. Crs' 
 Ass'n in re, [1892] 3 Ch. 1; Land Co. 
 v. Haupt, 90 Va. 533. 
 
 78 
 
 3 Hornblower v. Crandall, 7 Mo. 
 App. 220; afFd 78 Mo. 581. For the 
 liability of promoters for false state- 
 ments iu the prospectus, see § 77 and 
 note. 
 
 4 See Moore v. Garwood, 4 Ex. 681. 
 
 6 Garwood v. Ede, 1 Ex. 264; 
 Clements v. Todd, 1 Ex. 286; Jones 
 v. Harrison, 2 Ex. 52; Willey v. Par- 
 ratt, 3 Ex. 209. 
 
 e Watts y. Salter, 10 C. B. 477. See 
 Ship v. Crosskill, L. R. 10 Eq. 73; and 
 compare Vane v. Cobbold, 1 Ex. 798; 
 Watson v. Charlemont, 10 Q. B. 856.
 
 '/^^f^^-Q^tJ^^>f^^i^ / 
 
 (P^nr\y^^ yj^l^^P^fT^t 
 
 CHAP. VI.] AGREEMENTS TO TAKE STOCK. 
 
 [§ 105. 
 
 in procuring the deposits would change the situation and entitle 
 the depositors to recover back the whole amount, at least as 
 between them and the fraudulent promoters. 1 
 
 If, however, the deposits were made merely in order to com- 
 ply with some resolution or statutory requirement, and without 
 any intention on the part of the subscribers, or right on the part 
 of the promoters, to apply the money in furthering the organi- 
 zation of the company, then the subscribers would be entitled 
 to have their entire deposits returned. 2 Under such circum- 
 stances, whether the promoters would be accountable for de- 
 posits received by others of their number must be decided ac- 
 cording to principles already often referred to ; 3 generally they 
 would not be. 4 
 
 § 105. It goes without saving that whoever agrees to take 
 shares in the stock of a future corporation merely in „ 
 
 i i • -i -, n Fraudulent 
 
 order that others may be induced to agree as well, subscrip- 
 having a secret understanding with the promoters of 
 the scheme that no liabilities shall attach themselves to him by 
 reason of his contract, will be bound to fulfill his agreement, at 
 least in so far as the non-fuliillment thereof would injure inno- 
 cent persons who have acted on the faith of it. 5 And, more- 
 over, in so far as the promoters carry out this fraudulent secret 
 
 1 See Colt v. Woolaston, 2 P. Wins. 
 153; Twycross ». Grant, 2 C. P. Div. 
 469. But see St. Johns Mfg. Co. v. 
 Hunger, 106 Mich. 90. A subscriber, 
 whose subscription has been obtained 
 through the fraudulent representa- 
 tions of a promoter, cannot maintain 
 an action for money had and received 
 against other subscribers who are not 
 implicated in the fraud. Perry v. 
 Hale, 143 Mass. 540. 
 
 2 Nockels v. Crosby, 3 Barn. & Cr. 
 814; Ashpitel v. Sercombe, 5 Ex. 147. 
 So if directors (promoters) under- 
 take to return deposits without de- 
 duction in case the scheme proves 
 abortive, as, for instance, through 
 failure to obtain an act of parlia- 
 ment, they will be liable personally. 
 Ward v. Londesborough, 12 C. B. 
 252. 
 
 3 See Walstab v. Spotteswood, 15 
 H. & W. 501. 
 
 4 See Burnside v. Dayrell, 3 Ex. 
 224, commented on in Thompson on 
 the " Liabilities of Agents of Corpo- 
 rations,' 1 p. 215. 
 
 . 5 White Mountains R. R. Co. v. 
 Eastman, 34 N. H. 134; Custar v. 
 Titusville Gas Co., 63 Pa. St. 381; 
 Minneapolis Threshing M. Co. v. Da- 
 vis, 40 Minn. 110. See Litchfield 
 Bank v. Church, 29 Conn. 137; Wil- 
 son v. Handley, 96 Va. 96; Hardy v. 
 Swigant, 25 Col. 136, and § 521. But 
 an agreement between a subscriber 
 and another subscriber who was ac- 
 tive in procuring the subscription, 
 that the former shall have the priv- 
 ilege of selling his shares to the lat- 
 ter at any time within a year at the 
 price originally paid, is not void or 
 
 79
 
 § 108.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VI. 
 
 understanding will they render themselves personally liable to 
 persons defrauded and injured thereby. 1 
 
 § 106. One thing further as to the relationship between the 
 promoters, and persons agreeing to take shares and 
 tioiTof* 1Ca " making deposits. Such persons enter into such an 
 deposits. agreement and pay their preliminary deposits, ex- 
 pecting that a corporation, with the nature and general pur- 
 poses of which they have been made acquainted by the pro- 
 spectus and representations of the promoters, will be organized ; 
 and they have contracted and paid their money with this spe- 
 cial scheme in view. Clearly, if the promoters apply the funds 
 so deposited in any other way than that which the subscribers 
 were justified in contemplating, the subscribers' moneys have 
 been misapplied, and each of them has a plain claim to recover 
 back such funds from any promoter responsible for their mis- 
 application. Such a misapplication would be a conversion of 
 the funds of the subscribers, for which wrong an appropriate 
 action would lie. It would seem, moreover, that any depositor 
 should have a remedy, not only to obtain damages from the 
 promoters for any misapplication of deposits, but, in cases where 
 justice could not otherwise be done, that a depositor might com- 
 pel the promoters to apply such funds to the furtherance of the 
 scheme for which they were subscribed, at least so far as it 
 would be practicable for a court of equity to enforce such ap- 
 plication. -__^-^ — . 
 
 107. V7e~come now to the relations between a person who 
 
 , *2/* v Subscrip- has agreed to take shares in the stock of the future 
 
 '<*0l' tions gen- 
 
 -t~ eraiiy'en- corporation, and that corporation itself when organ- 
 
 l*mt*r» foroeable ■ \ • 
 
 by the cor- lZeu. 
 
 w°henor- § 108. First, i n regard to enforcing the agreement 
 
 ganized. to subscribe for shares. This was an agreement be- 
 tween the parties thereto to do a certain thing, to wit, to sub- 
 scribe for shares in the stock of a certain corporation when or- 
 ganized ; that is, it was an agreement to invest a certain amount 
 of capital in a certain manner, to be used for a certain purpose. 
 If we regard the corporation when formed as a distinct person, 
 a legal difficulty will at once arise. This "person" was not a 
 
 contrary to public policy, if not ac- 
 tually tainted with fraud. Morgan 
 v. Struthers, I3l U. S. 246. 
 80 
 
 i See Hall's Case, L. R. 5 Ch. 707; 
 Getty v. Devlin, 70 N. Y. 504.
 
 ^2<&&fc>S44&1S £p/-rU?6' ^/ZyCt^tz^t^rr^, ^W- 
 
 CHAP. VI.] AGREEMENTS TO TAKE STOCK. 
 
 [§ 108. 
 
 party to the agreement, did not even exist at the time when the 
 agreement was made ; what standing has it in court to compel 
 the performance of the agreement? 1 
 
 But this difficulty is entirely gratuitous, and arises only from 
 the conception of a company as an entity, which at the very 
 moment of the completion of its organization, and thereby, be- 
 comes a " person " distinct from all persons interested in the 
 corporate enterprise. If we regard the company at the time of 
 its incorporation merely as the aggregate of its members act- 
 ing and bound to act in a certain way, and to employ certain 
 funds in a certain manner for a certain purpose, 2 all difficulty 
 
 1 " A sub s cription tfljfcake 
 
 tVjft_jatng ]f: nf a, pnrpnrart nn to hft 
 
 formed enures t o_the_b_gn£fit_ofJ;hat 
 corporation \vlieii_fojrrneiLJ2__Iiiis- 
 wold v. Peoria University, 26 111. 41; 
 Cross v. Pinckneyville Mill Co., 17 
 111. 57; see Eastern Plank Road Co. 
 v. Vaughan, 20 Barb. 155; S. C, 14 
 N. Y. 546; and Angell and Ames on 
 Corp., § 523. The insolvencyjxf the_ 
 corporation is no ground to restrain 
 the collection of subscriptions to its 
 slb^rTHiTrTWabash Valley R. R. 
 Co., 21 111. 91. Before the^orgajijza- 
 tion of a corporation, a person sub- 
 scribed for shares as trustee for said 
 corporation; held that he was liable 
 individually in an action brought af- 
 ter the*TCorpoiation had become in- 
 solvent. Johnston, Trustee, v. Allis, 
 71 Conn. 207. Penobscot, etc., R. R. 
 Co. v. "Bummer, 40 "Me. 172, seems 
 to ho 1(3 an agreement to take shares 
 inthe stock of a future corporation, 
 to Tie as to the corporation a proposal, 
 which is Taindingly accepted by" the 
 corporation when organized recog- 
 nizing the shares so subscribed for 
 as ""shares of its stock. Again it is 
 held that a subscription to shares is 
 a mere offer which may be withdrawn 
 at any time before the corporation is 
 organized; because there is no other 
 party as yet in existence. Hudson 
 
 6 
 
 Real Estate Co. v. Tower, 156 Mass. 
 .82; Mill Co. v. Felt, 87 Me. 234. See 
 .Thompson v. Page, 1 Mete. 565 ; Stan- 
 ton v. Wilson, 2 Hill, 153; Kennebec, 
 etc., R. R. Co. v. Palmer, 34 Me. 366; 
 Cleaves v. Brick Church T. Co., 1 
 Sneed (Tenn.), 491; Buffalo, etc., R. 
 R. Co. v. Gifford, 87 N. Y. 294. An 
 unconditional subscription becomes 
 binding upon the formation of the 
 corporation within a reasonable time, 
 if not withdrawn. Balfour v. Gas 
 Co., 27 Oreg. 300. Cf. Badger P. Co. 
 u. Rose, 95 Wis. 145. The right of 
 the corporation to sue is not always 
 well thought out. To say that the 
 agreement enures to the benefit of 
 the corporation when formed raises 
 the disputed question of the compe- 
 tency of a person not party to a con- 
 tract to sue thereon. To be sure, the 
 doctrines of ratification may be re- 
 sorted to where the agreement to 
 subscribe was entered into with per- 
 sons authorized or purporting to act 
 on behalf of the future company. 
 See § 87. 
 
 2 Persons may agree with each 
 other as to the terms on which they 
 will take stock in a corporation to be 
 formed by them. Under our system 
 the corporation following such an 
 agreement would be the mere agency 
 of the associates created for the sake 
 
 81
 
 § 109.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VI. 
 
 will be avoided ; and we shall then have the contract enforced 
 by the parties thereto acting in precisely the manner con- 
 templated, to wit,, as a corporation, through the/medium of cor- 
 porate machinery and organization. By means-of this natural 
 conception all difficulty is avoided, and no violence is done to 
 the strictest requirements of logical or legal thought. 
 
 § 109. Accordingly, the proposition may be regarded as law 
 throughout the United States, that when several persons mutu- 
 ally agree to subscribe for shares in a corporation to be formed 
 by the subscribers for the advancement of their interests, the 
 corporation when organized may recognize the subscribers as 
 shareholders, and enforce the subscriptions ; * and especially is 
 this true when the subscription-agreement is made with persons 
 who by statute represent the future corporation for the purpose 
 of receiving subscriptions. 2 If, however, the parties to the 
 subscription-agreement are not themselves the organizers of 
 the corporation, and in no sense represent the future company, 
 and are a different body of men from those composing the 
 corporation when formed, then is certainly raised the difficult 
 question of the right of a third person to sue on a contract. 3 
 
 of convenience in carrying out the 
 bargain. Chater v. San Francisco 
 Sugar Refining Co., 19 Cal. 219. 246. 
 1 Atbol Music Hall Co. v. Carey, 
 116 Mass. 471; Marysville, etc., Co. 
 v. Johnson, 93 Cal. 538; San Joaquin 
 Land, etc., Co. v. West, 94 Cal. 399; 
 Same v. Beecher, 101 Cal. 70; Minne- 
 apolis T. M.Co. v. Davis, 40 Minn. 110; 
 Richelieu Hotel Co. v. Military E. 
 Co., 140 111. 248; Buffalo & James- 
 town K. R. Co. v. Clark, 22 Hun, 359; 
 aff'd 87 N. Y. 632; Twin Creek, etc., 
 Turnpike Co. v. Lancaster, 79 Ky. 
 552; Boot and Shoe Co. v. Hoit, .">(> 
 N. H. 548; Tonica, etc., R. R. Co. v. 
 McNeely, 21 111. 71; Johnston v. 
 Ewing Female University, 35 111. 518; 
 Red Wing Hotel Co. v. Friedrich, 26 
 Minn. 112; Whitsitt V. Presbyterian 
 Church, 110111.125; Haskell r. Sells, 
 14 Mo. App. 91. See Peninsular Ky. 
 Co. v. Duncan, 28 Mich. 130, 134; 
 
 82 
 
 Fair Ass'n v. Walker, 83 Mich. 386, 
 and authorities cited in note 1 to § 91. 
 Compare Burt v. Farrer, 24 Barb. 518; 
 Howe v. Flagg, 72 111. 397; Marseilles 
 Land Co. v. Aldrich, 86 111. 504, and 
 the cases cited in notes to § 91. 
 
 2 Delaware and Atlantic R. R. Co. 
 v. Irick, 23 N. J. L. 321; Hughes v. 
 M'f g Co., 34 Md. 316. 
 
 3 See Lake Ontario Shore R. R. Co. 
 v. Curtiss, 80 N. Y. 219, where de- 
 fendant and others signed the follow- 
 ing instrument: "We, the under- 
 signed, citizens of Unionville and vi- 
 cinity, pledge ourselves to subscribe 
 for and take stock iu and for the con- 
 struction of the Lake Ontario Shore 
 R. R. Co., to the amount set opposite 
 our names respectively, on condition 
 said road be located and built through 
 or north of the village of Unionville." 
 
 The railroad was built so that it ful- 
 filled the condition above, but it was
 
 <^ 
 
 CHAP. VI.] AGREEMENTS TO TAKE STOCK. 
 
 [§ no. 
 
 § 110. It remains to consider the rights of the parties to the 
 original agreement as against the corporation. If „. , 
 
 ° . , . , . ii»i Rights of 
 
 the corporation when organized is composed or the subscribers 
 subscribers, or if the agreement to subscribe is made corpora- 
 with persons who by statute represent the corpora- tlon " 
 tion while it is being organized, a subscriber acquires by his 
 agreement the right to have the shares subscribed for by him 
 allotted to him, unless his subscription is made after the full 
 amount of the capital stock authorized by the charter of the 
 corporation is subscribed for. 1 
 
 It will be remembered that all the parties to the subscription- 
 agreement have agreed to invest certain funds for the accom-,^,,^-,^ 
 plishment of a certain object, and that these funds should bej£>r*++-. 
 managed and applied for the furtherance of that object through^^*-,©^ 
 the medium of corporate organization; suppose that this agree-' 
 ment is violated, citho» through the managers of the scheme 
 procuring a charter different from the one contemplated, or by « 
 
 gHg^gds aa lly n punpplymff ^ inj^ nlrnnrl y nnn i i il ml JTl l ; that is,> 
 
 t^*& 
 
 
 applV'W^ffLfleii i^ y^m^iieTaTKTfor purposes other than those 
 contemplated by the original agreement. In other words, it 
 becomes apparent that the purposes for which the corporation 
 is actually being organized differ from those justifiably contem- 
 plated ; that another scheme, differing from the original plan, 
 is being gone into. It is plain that any one of the original 
 parties, or his representatives, can say, " I never paid deposits 
 to be used for any such purpose." And it is further evident, 
 that, as between him and any body or individual acting in 
 violation of the terms of the original agreement, he may claim 
 to be released from his contract, and perhaps to have moneys 
 paid or expended by him reimbursed. Thus, as between a 
 party to the original agreement to take shares and the corpora- 
 
 held that this agreement did not 
 amount to a subscription to plaintiff's 
 stock, and that, being no party to 
 the agreement, the plaintiff could 
 maintain no action on it. See also 
 California Sugar M'f 'g Co. v. Schaf er, 
 57 Cal. 396; Strasburg R. R. Co. v. 
 Echternacht, 21 Pa. St. 220. Com- 
 pare Eastern Plank Road Co. v. 
 Vaughan, 14 N. Y. 546, 555. 
 
 1 This right of the subscriber con- 
 stitutes in the main the consideration 
 by virtue of which the corporation 
 may enforce his subscription; see 
 notes to § 91, and cases in last three 
 notes. See, generally, §§ 515, 516; 
 also Birmingham Nat. Bk. v. Roden, 
 97 Ala. 404. 
 
 83
 
 § 111.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VI. 
 
 tion when organized, any material divergence of the corporate 
 scheme from the plan justifiably contemplated by a party to 
 the agreement to take shares at the time of his signing the 
 same, or paying deposits in accordance therewith, will release 
 him from his contract, and may entitle him to recover any 
 moneys paid or expended by him in pursuance of its terms. 1 
 If the divergence alluded to is immaterial, or such as was con- 
 templated in the original agreement as a possibility (i. e., no 
 divergehce at all) ; or if a party has acquiesced in the diver- 
 gence, which may be implied from long-continued neglect to 
 repudiate, he will not be released from his agreement to take 
 shares. 2 But usually from mere lapse of time, unless very 
 great, acquiescence cannot be inferred ; there must be some 
 reason to infer knowledge on the part of the dissenting party 
 of the violation, and neglect to repudiate after that knowledge 
 had been obtained. 3 
 
 § 111. The qualification, " as between the party to the agree- 
 ment and the corporation when organized," is to be 
 noted ; for, should such a party refrain from enforc- 
 ing his rights for any considerable length of time, 
 
 Effect of 
 subscrib- 
 ers' laches 
 
 1 Knox v. Childersburg Land Co., 
 86 Ala. 180; Maysville, etc., Co. v. 
 Johnson, 109 Cal. 192. So failure to 
 organize within a reasonable time 
 releases the subscriber. lb. " A 
 person who agrees to take shares in 
 a company formed for a given pur- 
 pose and with a given capital, is not 
 bound to accept shares in a company 
 formed for another purpose or with 
 a different capital; a material varia- 
 tion from the original scheme, if un- 
 assented to by a subscriber to it, 
 affords an answer to any application 
 for calls which may be made upon 
 him." 2 Lindley on Part., G25, 
 citing Galvanized Iron Co. v. Wes- 
 toby, 8 Ex. 17. See Rye's Case, 3 
 Jur. N. S. 460; Ship's Case, 2 De G., 
 J. & Sm. 544; Stewart's Case, L. R. 
 1 Ch. 574; Webster's Case, L. R. 2 
 Eq. 741. 
 
 2 London, etc., Assurance Soc. v. 
 
 84 
 
 Redgrave, 4 C. B. N. S. 524. " But 
 if a subscriber to a company binds 
 himself to take shares in a company 
 which may differ more or less 
 from that originally proposed to be 
 formed, he cannot set up a variation 
 in the original scheme as an answer 
 to a demand for payment of the 
 capital he has undertaken to con- 
 tribute." 2 Lindley on Part., 625. 
 See Midland, etc., R. Co. v. Gordon, 
 16 M. & W. 803; Nixon v. Brownlow, 
 2 H. & N. 455; S. C, 3 H. & N. 686; 
 Norman v. Mitchell, 5 De G., M. & 
 G. 648. 
 
 8 See cases cited in last note but 
 one, and Nichol's Case, 2 W. N. 77; 
 Bailey's Case, L. R. 3 Ch. 592. The 
 repudiation was held too late in Law- 
 rence's Case, L. R. 2 Ch. 412; Brigg's 
 Case, L. R. 1 Eq. 483; Whitehouse's 
 Case, L. R. 3 Eq. 790; Taite's Case, 
 L. R. 3 Eq. 795.
 
 CHAP. VI.] AGREEMENTS TO TAKE STOCK. [§ 112. 
 
 the corporation, or the other shareholders or subscribers, might 
 claim that he had waived his rights, or at least was estopped 
 from asserting them to the injury of any one who had reason- 
 ably acted on the supposition, occasioned by the delay, that he 
 had waived them. And should the rights of any outsiders who 
 had contracted with and become creditors of the corporation 
 intervene, the subscribers should certainly not be allowed to 
 withdraw funds or claim a release from their agreements to the 
 detriment of persons outside the corporation, who very likely 
 contracted with the corporation on the credit of those funds or 
 agreements to subscribe. Such outside creditors could well say 
 that the original contracting parties, in entering on such an 
 enterprise, took upon themselves, at least as regards outsiders 
 acting in good faith, the risk of internal mismanagement of the 
 affairs of the corporation and misapplication of its funds. So 
 it behooves a dissenting party or subscriber to dissent actively 
 at once, and better before than after the organization of the 
 corporation ; and if after, then at the earliest possible moment. 1 
 § 112. It may be added, finally, that not only may a party 
 acting promptly claim a rescission of the contract, but a court 
 of equity will ordinarily aid him with an injunction, restrain- 
 ing the other parties to the contract or the corporation from 
 acting in violation of his rights. 2 
 
 1 Laches begins when the sub- 
 scriber is chargeable with notice. 
 Laud Co. v. Hauft, 90 Va. 533. 
 
 2 See Lord Eldon's valuable judg- 
 ments in Natusch v. Irving, Gow on 
 
 Part. App. 576 (American ed. of 
 1830), and in Coust v. Harris, Turn. 
 & R. 496. Compare Stocker v. Wed- 
 derburn, 3 K. & J. 393. 
 
 85
 
 § 114.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 CHAPTER VII. 
 
 LEGAL EFFECT OF ACTS DONE BY OR ON BEHALF OF 
 A CORPORATION. 
 
 -Explanation of terms: "Legal ef- 
 fect," § 113. 
 
 " Corporate powers," § 114. 
 
 Considerations regarding them, 
 § 115. 
 
 Divergency of interests, §§ 116, 117. 
 All persons may look to the corpo- 
 rate constitution, § 118. 
 Purpose of this chapter, § 119. 
 
 Preliminary. 
 
 § 113. It has been shown in a previous chapter 1 that a cor- 
 poration, regarded as a legal institution, is the sum 
 tion of of the legal relations in which the rules of law con- 
 
 " Legal tained in the constitution of the corporation manifest 
 effect." themselves, and which subsist between the state, the 
 shareholders, the officers, and the creditors of the corporation 
 in respect to the corporate enterprise, and mainly in respect to 
 the corporate funds. It was also pointed out, that the term 
 corporation has another and distinct meaning ; i. e., the body 
 of men and their successors whose acts caused incorporation, 
 and who thereby became a corporation or body corporate. Ac- 
 cordingly, by the phrase " legal effect of acts done by or on 
 behalf of a corporation," is meant the legal relations which acts 
 done by or on behalf of this body corporate occasion. 2 
 
 § 111. As the phrase "corporate powers" will often be used 
 
 in this chapter, to explain what will be meant by it 
 
 powers " 1 e is not out of place. By the contract embodied in 
 
 the constitution of the corporation, the corporators 3 
 
 1 Chapter III. 
 
 2 See § 445. 
 
 3 The term "corporators," as here 
 used, is intended to signify the orig- 
 inal body of subscribers or share- 
 holders who take part in the organi- 
 
 86 
 
 zation of the corporation. The term, 
 however, as used in some enabling 
 acts, denotes the persons who exe- 
 cute the certificate of incorporation, 
 and thereby become a body corpo- 
 rate. Such persons, it seems, need
 
 CHAP. VII.] LEGAL EFFECT OF CORPORATE ACTS. [§ 114. 
 
 agree, under the express sanction of the state, that the corpo- 
 rate enterprise shall be organized and managed in a certain man- 
 ner, and that the highest authority in regard to the corporate 
 affairs shall be vested in certain persons. These persons usually 
 are a majority JLof the corporators themselves, and the way in 
 which they ordinarily act is by a vote in a duly summoned meet- 
 ing of the bodyjcorporate. This majority elect directors, whose 
 authority when elected to represent the corporation is either 
 derived directly from the constitution, or is bestowed by the 
 vote of the majority of shareholders. In the original contract, 
 or in the constitution in which it is embodied, the object of in- 
 corporation and the means of attaining it are specified ; and 
 t^fe specificalRRr indicates the^xtent of discretion and powex. 
 competently 2 conferred by all the corporators acting as indi- 
 viduals, on themselves as a body corporate, or on the board of 
 directors. 
 
 The corporate powers, then, are the powers of the corpora- 
 tion or body corporate to act as such ; and 'are to be deduced 
 from the object'of incorporation and the means of attaining it 
 authorized by^the constitution of the corporation. 3 Conse- 
 
 not themselves be shareholders. See, 
 e. fir., the New Yotk General Corpo- 
 ration Law, Laws, 1892, ch. 687, § 4. 
 " Corporators," in, this hitter sense, 
 acting in pursuance of some enabling 
 act, decide on the "object of incorpo- 
 ration, and start the corporation. 
 Shareholders, Wto are not of their 
 number, by taking shares in the stock 
 of the corporation,. assent to the acts 
 of the corporator^. The gist of the 
 matter lies herein: that whether or 
 .not the main body of shareholders 
 take part in organising the corpora- 
 
 those holding a majority of shares; 
 which will be intended hereafter 
 when a "majority of shareholders" 
 is spoken of. 
 
 2 I. e., with the sanction of law. 
 
 3 The purposes of incorporation are 
 always important in determining the 
 scope of the corporate powers. Thus 
 a corporation may purchase an inven- 
 tion tending to facilitate the purposes 
 of its incorporation as indicated by 
 the corporate name. Dorsey Har- 
 vester Rake Co. v. Marsh, 6 Fish Pat. 
 Cas. 387. Again, it may be properly 
 
 tion^they ratify its_ organization by._within the powers of a corporation 
 
 becoming shareholders; and agree to 
 be bound by the provisions of the 
 certificate of incorporation and by 
 those of the enabling act in pursuance 
 of which the certificate is executed 
 anjlrfiled. 
 1 1, e., a majority "in interest;" 
 
 running an iron furnace, to have a 
 supply store. Searight v. Payne, 6 
 Lea ( Tenn. ), 283. And a corporation 
 may employ an agent to perform ser- 
 vices consonant to its general design, 
 without any specific autbority to do 
 so. Kitchen v.* Cape Girardeau, etc., 
 
 87
 
 § 115.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Considera- 
 tions re- 
 garding the 
 corporate 
 powers. 
 
 quently, whether a given act is within the corporate powers, 
 depends on whether it is an act authorized by the constitution 
 to be done for the attainment of the object of incorporation. 1 
 § 115. It is not merely for the convenience of the corporators 
 that the state, by giving the force of law to the con- 
 tract between the corporators, sanctions the corporate 
 powers. In the creation or recognition of every rule 
 of law in the constitution of a corporation, and con- 
 sequently of every rule the function of which is to regulate the 
 corporate powers, the state has continually in view the security 
 of persons dealing with the corporation, as well as the welfare 
 of the public so far as the public may be interested in the 
 ^bject of incorporation. The oontract embodied in the consti- 
 tution is a contract made with the intention that persons other 
 than the contracting parties shall act relying on its terms. 2 
 Indeed many of the provisions of this contract, which through 
 incorporation become rules of law, are evidently such as will 
 manifest themselves in the rights of persons other than share- 
 holders. Accordingly, every one will have a right, correspond- 
 ing to his interests in the corporate enterprise, to insist on a 
 proper exercise of the corporate powers, and to restrain the 
 corporation from improper and ultra vires action. 
 
 R. R. Co., 59 Mo. 514. See, also, 
 Spangler v. Butterfield, 6 Col. 356, 
 364. In Bank v. Flour Co., 41 O. St. 
 552, the court reasoned thus: In 
 determining whether an act is within 
 the powers of a corporation, regard 
 is to be had to its effect and the real 
 object in view; e. g., though a cor- 
 poration may not ordinarily, unless 
 specially authorized, make contracts 
 of suretyship, yet it may guaranty a 
 debt of its president to a third per- 
 son when the real object sought is to 
 secure its own indebtedness to him. 
 1 It follows that a charter or ena- 
 bling act of a corporation is in its 
 general nature enabling and not res- 
 trictive; conferring powers which 
 may be exercised, rather than enu- 
 
 88 
 
 merating those which may not be 
 exercised. Accordingly, where the 
 charter or enabling act is silent in 
 regard to any class of acts, the pre- 
 sumption will be that the corpora- 
 tion lias no authority to do them, un- 
 less tbey are incidental to the exer- 
 cise of the powers expressly granted. 
 See Thomas v. Railroad Co., 101 U. S. 
 71; Head v. Providence Ins. Co., 2 
 Cranch, 127, 166; »lso §§ 120, 121. 
 
 2 A corporation, organized pursu- 
 ant to an agreement authorized by 
 competent legislation, is bound by 
 all the liabilities imposed by the 
 agreement in favor of third persons. 
 Welsh v. First Div. St. Paul and Pac. 
 R. R. Co., 25 Minn. 314.
 
 CHAP. Vn.] LEGAL EFFECT OF CORPORATE ACTS. [§ 118. 
 
 § 116. It must be borne in mind that the interests of some 
 
 persons in the corporate enterprise will be opposed Divergency 
 
 to the interests of others. While it is for the inter- of inter- 
 ests, 
 ests of shareholders that the corporate enterprise 
 
 shall be managed so as to insure the continuing solvency of the 
 corporation, it is also for their interests that dividends may be 
 had from the business. The interests of creditors, on the other 
 hand, are exclusively that the corporation shall continue able 
 to pay the principal and interest of its indebtedness ; so the in- 
 terests of shareholders may readily conflict with those of cred- 
 itors. Again, it is possible that the interests of the state, or 
 the public at large, may be opposed to the interests of share- 
 olders and creditors alike ; and, in certain cases, where usually 
 improper elements would be present, the interests of directors 
 might diverge from those of the public, of shareholders, and of 
 creditors. Finally, not only may the interests in the corporate 
 enterprise of one class of persons be opposed to the interests of 
 another class, but a divergency of interest may readily arise 
 within the limits of a single class ; as* for instance, when the 
 corporate solvency is not assured, it will be for the interests of 
 one set of creditors to oppose the payment of debts alleged to be 
 due another set. 
 
 § 117. In short, incorporation, and subsequent acts in respect 
 to the corporate enterprise, give rise to a conflict of opposing 
 interests and to complicated legal relations, all of which inter- 
 ests and relations must be regarded in applying the corporate 
 funds. And to say that these funds must be managed with 
 due regard to the interests of all, implies the further propo- 
 sition that the managers of the corporate enterprise are account- 
 able for the proper disposition of these funds to all persons 
 interested, to the extent of the respective interests of such per- 
 sons. In determining the legal relations arising from acts done 
 by or on behalf of a corporation, the importance of bearing in 
 mind that the legally protected interests of different persons in 
 the corporate enterprise are distinguishable will be apparent 
 throughout this chapter. 
 
 § 118. In subscribing for shares, in managing the corporate 
 enterprise, and in contracting on the credit of the corporate 
 funds, everybody may rely on the constitution of the corpora- 
 
 89
 
 § 119.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. . 
 
 tion, by which everybody interested in the corporate enterprise 
 A11 is bound, and with knowledge of which every one 
 
 All persons J 
 
 may look is affected. 1 Therefore, the acts of the body corpo- 
 
 to the cor- . . . tj1 . . . . r . 
 
 pomte con- rate done in accordance with this constitution, and 
 s i u ion. j.j ie ac j. g Q j! directors anc i other corporate agents^ 
 within the scope of their authority are valid 2 and binding 3 on all 
 persons. The management of the corporate enterprise in pursu- 
 ance of tRe "constitution of the corporation is thefvroper man- 
 agement by which every one is bound and to which no one can 
 object. 4 
 
 § 119. The purpose of the present chapter is to give a view 
 „ . of the legal relations which acts done by or on behalf 
 
 Purpose of ° J 
 
 this chap- of a corporation occasion between the corporatio 
 
 (including all its shareholders and existing creditors) 
 and the person dealing with it or its representative. 
 
 1 See § 195. 
 
 2 An act is valid when it occasions 
 the apparently intended legal rela- 
 tions. 
 
 s To say that the act of one person 
 is binding on another, means that it 
 occasions the legal relations 'which 
 would have been occasioned had 
 such other person done the act him- 
 self. It may occasion legal rela- 
 
 90 
 
 tions affecting the person doing it aa 
 well. 
 
 4 The propriety of acts may often 
 depend on the condition of the corpo- 
 rate affairs. What would have been 
 a lawful and proper use of the corpo- 
 rate funds when the corporation was 
 solvent, may be both "improper and 
 unlawful when the corporation be- 
 comes insolvent. 
 
 W
 
 PART I. J CONSTRUCTION OF CORPORATE POWERS. [§ 120. 
 
 PART I. 
 
 CONSTRUCTION OF CORPORATE POWERS. 
 
 General rules regarding corporate 
 
 powers, § 120. 
 Corporate powers to be construed rea- 
 sonably, § 121. 
 Certain powers and privileges to be 
 
 construed narrowly, § 122. 
 Power to raise money, § 123. 
 By issue of stock, § 124. 
 By borrowing. Corporations may 
 
 mortgage tbeir property. Excep- 
 tions, § 125. 
 "Deferred income-bonds," § 126. 
 Power to guaranty, § 127. 
 Power to bold land. Statutes of 
 
 mortmain, § 128. 
 Power to acquire personal property, 
 
 § 129. 
 Power to alienate, § 130. 
 Power to transfer franchises, §§ 131, 
 
 132. 
 Power to increase or decrease the 
 
 capital stock, § 133. 
 Power of a corporation to purchase 
 
 its own stock, §§ 134, 135. 
 A corporation may reissue its shares 
 
 purchased by it, but cannot vote on 
 
 them, § 136. 
 Capacity of a corporation to sue, 
 
 §137. 
 Suits must in general be brought in 
 
 the name of the corporation, § 138. 
 
 When a shareholder may sue on be- 
 half of the corporation, § 139. 
 
 Sbareholder must allege demand on 
 the corporation to sue, §§ 140, 141. 
 
 Right of sbareholder to sue in re- 
 spect of injuries already accrued, 
 §142. 
 
 Service of process on corporations, 
 §143. 
 
 Effect of appointment of receiver, 
 §144. 
 
 Corporate franchises cannot be ques- 
 tioned collaterally. General rule, 
 §145. 
 
 Scope of the rule when an estoppel 
 affects the case, §§ 146-150. 
 
 Scope of the rule when no estoppel 
 exists, §§ 151-156. 
 
 Defective organization remediable, 
 §157.. 
 
 Right to corporate name, § 158. 
 
 Effect of misnomer, § 159. 
 
 Powers of banking corporations, 
 §161. 
 
 Powers of railroad corporations. 
 Eminent domain, §§ 162-164. 
 
 Rights of the corporation as to land 
 acquired by eminent domain, § 165. 
 
 Eminent domain not transferable, 
 §166. 
 
 § 120. General rules regarding the powers of corporations 
 have often been laid down, both in text books and in 
 adjudicated cases. In regard to these rules them- 
 selves there is less difference of opinion than in re- 
 gard to their application. In the first place, corpora- 
 tions ordinarily have still the common law capacities which 
 
 91 
 
 General 
 rules re- 
 garding 
 corporate 
 powers.
 
 § 120.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 were specified and discussed in Chapter II. Further, it is es- 
 tablished as a universal rule that a corporation has the powers 
 which are expressly granted to it by its constitution, as well as 
 those powers which are incidental or necessary to the exercise 
 of its express powers in attaining the objects of its incorpora- 
 tion. Consequently, whether a given act is within the powers 
 of a corporation depends on the construction of its constitution. 
 These questions of construction, however, are often difficult, as 
 the constitution of a corporation may be obscure ; and how a 
 court will decide a question of the construction of corporate 
 powers may even depend on the temperament of the judges, 
 and whether they are disposed towards a liberal construction, 
 or consider it in general the wiser policy for the law to keep 
 corporations well within the apparent scope of their powers. 1 
 
 Giving the opinion of the Supreme Court of the United 
 States in Thomas v. Railroad Co., 2 Justice Miller said : " We 
 take the general doctrine to be in this country, though there 
 may be exceptional cases and some authorities to the contrary, 
 that the powers of corporations organized under legislative 
 statutes are such and such only as those statutes confer. 3 Con- 
 ceding the rule applicable to all statutes, that what is fairly 
 implied is as much granted as what is expressed, it remains 
 that the charter of a corporation is the measure of its powers, 
 and that the enumeration of these powers implies the exclusion 
 of all others." Few cases consciously militate against this 
 general statement. 4 
 
 1 The remark in the text is illus- 
 trated by the difference of opinion 
 which for a century has raged about 
 the meaning of the words " necessary 
 and proper " as used in the Federal 
 constitution; a difference of opinion 
 which has often drawn the lines be- 
 tween political parties. Is a measure 
 " necessary and proper " to carry out 
 the powers of congress ? The answer 
 of most persons will depend partly on 
 whether they think the measure a 
 desirable one, and partly on whether 
 they believe in extending or narrow- 
 ing the powers of the central govern- 
 ment. 
 
 92 
 
 2 101 U. S. 71, 82. 
 
 3 Ace. Oregon Ry. Co. v. Oregonian 
 Ry. Co., 130 U. S. 1. In construing 
 the powers of a corporation, refer- 
 ence is to be had, not only to its 
 charter or enabling act, but to all 
 statutes affecting the corporation. 
 See Relfe v. Rundle, 103 U. S. 222 ; 
 Dorsey Harvester Rake Co. v. Marsh, 
 6 Fish. Pat. Cas. 387 ; State v. Lin- 
 coln Trust Co., 144 Mo. 562. 
 
 4 " The charter of a corporation, 
 read in connection with the general 
 laws applicable to it, is the measure 
 of its powers, and a contract mani- 
 festly beyond those powers will not 

 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 121. 
 
 § 121. It is also pretty well established that charters and 
 enabling statutes (except in so far as they purport to 
 confer extraordinary franchises or exclusive privi- powers to 
 leges) should be construed fairly and not strictly ; struedrea- 
 as Chief Justice Bigelow of Massachusetts said in sonabl y- 
 Brown v. "Winnisimmet Co. : 1 " We know of no rule or princi- 
 ple by which an act creating a corporation for certain specific 
 objects, or to carry on a trade or business, is to be strictly con- 
 strued as prohibitory of all other dealings or transactions not 
 coming within the exact scope of those designated. Undoubt- 
 edly the main business of a corporation is to be confined to that 
 class of operations which properly appertain to the general 
 purposes for which its charter was granted. But it may also 
 enter into contracts and engage in transactions which are inci- 
 dental or auxiliary to its main business, or which may become 
 necessary, expedient, or profitable in the care and management 
 of the property which it is authorized to hold under the act by 
 which it was created." 2 
 
 sustain an action against the corpo- 
 ration. But whatever under the 
 charter and general laws, reasonably 
 construed, may fairly be regarded as 
 incidental to the objects for which 
 the corporation is created, is not to 
 be taken as prohibited. 1 ' Justice 
 Gray giving the opinion of the Uni- 
 ted States Supreme Court in Green 
 Bay and Minn. R. Co. v. Union S. B. 
 Co., 107 U. S. 98. See also, Fort 
 Worth C. Co. v. Bridge Co., 151 U. S. 
 294; People v. Utica Ins. Co., 15 
 Johns. 358; New York F. Ins. Co. v. 
 Sturgess, 2 Cow. 164 ; Same v. Ely, 
 2 Cow. 678 ; Commonwealth v. Erie, 
 etc., R. R. Co., 27 Pa. St. 339 ; Dili- 
 gent Fire Co. v. Commonwealth, 75 
 Pa. St. 291; Ely o. Water Co., 197 
 Pa. St. 81; Steiner v. Steiner Land & 
 Lumber Co., 120 Ala. 128. 
 
 A railroad company may contract 
 with a city regarding a permission 
 to use the latter's streets. Indian- 
 ola o. Gulf, W. T., and P. R'y, 56 
 Tex. 554. A corporation may have 
 
 a trademark and may sue for its in- 
 fringement. Insurance Oil Tank Co. 
 v. Scott, 33 La. Ann. 946. When a 
 bank takes property for a debt, it 
 can make the expenditure necessary 
 to put it into a productive condition. 
 Reynolds v. Simpson, 74 Ga. 454. A 
 corporation created under the laws 
 of a state of the Union, whose mem- 
 bers are citizens of the United 
 States, may locate a mining claim 
 upon public lands of the United 
 States. McKinley v. Wheeler, 130 
 U. S. 630; compare United States v. 
 Trinidad Coal Co., 137 U. S. 160. 
 
 But a power expressly excepted 
 from a grant cannot be claimed 
 as incidental to a power expressly 
 granted. Plummer v. Penobscot 
 Lumbering Ass'n, 67 Me. 363. And 
 general words in a charter are not to 
 be construed to authorize a corpora- 
 tion to do what is indictable. State 
 v. Krebs, 64 N. C. 604. 
 
 1 11 Allen, 326, 336. 
 
 2 See, also, Railway c. Hooper, 160 
 
 93
 
 § 122.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Certain 
 powers and 
 privileges 
 to be con- 
 strued nar- 
 rowly. 
 
 § 122. On the other hand, courts have decided, as exceptions, 
 it may be said, to the general rule that corporate 
 constitutions are to be fairly construed, that all ex- 
 clusive privileges, 1 and all powers granted in deroga- 
 tion of public rights'- 2 or of the rights and franchises 
 of other corporations, 3 and all provisions whereby 
 the state restricts its own action,' 1 are to be construed strictly 
 against the corporation ; nothing passing by implication. 
 
 "Every public grant of property, or of privileges or fran- 
 chises, if ambiguous, is to be construed against the grantee and 
 in favor of the public ; because an intention on the part of the 
 government to grant to private persons, or to a particular cor- 
 poration, property or rights in which the whole public is in- 
 terested cannot be presumed, unless unequivocally expressed 
 or necessarily to be implied in the terms of the grant ; and be- 
 cause the grant is supposed to be made at the solicitation of 
 the grantee and to be drawn up by him or by his agents, and 
 therefore the words used are to be treated as those of the gran- 
 tee. . . . This rule applies with peculiar force to articles of 
 association, which are framed under general laws, and which 
 are a substitute for a legislative charter, and assume and define 
 the powers of the corporation by the mere act of the associates, 
 
 U. S. 514; Toledo, etc., R. R. Co. v. 
 Rodrigues, 46 111. 188; Railway Co. 
 McCarthy, 99 U. S. 258; Clark v. 
 Farrington, 11 Wis. 306, 324. In 
 Michigan a bank chartered with 
 power to locate its business in one 
 county has no power to establish a 
 branch agency in another. This is 
 an act fatal in quo warranto. People 
 v. Oakland County Bank, Dougl. 
 (Mich.) 282. See Detroit Fire, etc., 
 Ins. Co. v. Judge of Saginaw Circuit, 
 23 Mich. 492. In Chapman v. Colby, 
 47 Mich. 46, 50, Campbell, J., says, 
 giving opinion of the Court, " It has 
 uniformly been held in this state 
 that corporations cannot remove 
 from place to place, or establish 
 branches for the transaction of their 
 regular corporate business, unless 
 authorized by law." 
 
 94 
 
 1 See Richmond, etc., R. R. Co. v. 
 Louisa R. R. Co., 13 How. 71; Per- 
 rine v. Chesapeake and Delaware 
 Canal Co., 9 How. 172; People v. 
 Broadway R. R. Co., 126 U. S. 29. 
 Exclusive privileges and monopolies 
 are not to be presumed. Charles 
 River Bridge Co. v. Warren Bridge 
 Co., 11 Pet. 420; DeLancey v. Insu- 
 rance Co., 52 N. H. 581; Gaines u. 
 Coates, 51 Miss. 335; Indianapolis 
 Cable R. R. Co. v. Citizens' R. R. 
 Co., 127 Ind. 369; Turnpike Co. v. 
 Montgomery County, 100 Tenn. 417. 
 
 2 See Fertilizing Co. v. Hyde Park, 
 97 U. S. 059; Turnpike Co. v. Illi- 
 nois, 96 U. S. 63. 
 
 3 Pennsylvania R. R. Co.'s Appeal, 
 93 Pa. St. 150; Packer v. Sunbury 
 and Erie R. R. Co., 19 Pa. St. 211. 
 
 4 See § 489.
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 124. 
 
 Power to 
 
 raise 
 
 money. 
 
 'I without any supervision of the legislature or of any public au- 
 thority." 1 - C/a+£e«/**~ £/5»*rT^ - 
 
 - § 123. ^\iore definite statements may now be made respect- 
 ing the particular powers of corporations. And first 
 of all as to their implied power to raise money. Un- 
 questionably, in the absence of express restrictions, 
 
 **% Corporation has impliedly the power to raise money 2 in order 
 to carry on its business, i. e., effect the purposes of its incor- 
 poration. 3 But by what means may it raise money ? Certainly 
 not by any means that an -individual might employ, as, for in- 
 stance, by speculating in cotton or in stocks. 4 Rather, the con- 
 • stitution of a corporation being in its general nature enabling 
 
 - rather tha-n restrictive, the correct rule would seem to be that 
 a corporation may raise money only by the means expressly or 
 impliedly authorized by its constitution. 
 
 § 12-1. It goes without saying that in order to raise money a 
 
 _ corporation may issue its own stock to the amount 
 
 allowed by its charter or articles of association ; and, ^ ( ,^ ssue of 
 ^a u thorized to do so, ti^an issue preferred stock. 5 
 BuUt canrSft vaiwlyissue its stock below par as full-paid stock. 6 flc* 
 A corporation may also sell its property in order to raise money. 7 ^Wl i 
 
 
 1 Central Transp. Co. v. Pullman's 
 Car Co., 139 U. S. 24, 49, Opiu. of 
 Court per Justice Gray. See Oregon 
 Ry. v. Oregonian Ry., 130 U. S. 26, 
 27; Rockbold v. Canton Society, 129 
 111. 440. 
 
 2 E. g., in order to raise money, a 
 railroad company may assign its 
 claim for unpaid subscriptions to its 
 stock. Morris v. Cheney, 51 111. 451. 
 
 3 But only for purposes properly 
 within the scope of the corporate 
 objects. See In re Durham County 
 Building Society, Davis's and Wil- 
 son's Cases, L. R. 12 Eq. 516; In re 
 National Permanent Benefit Build- 
 ing Society, ex parte Williamson, 
 L. R. 5 Ch. 309. But the lender of 
 money to a corporation is not obliged 
 to see that its officers apply it to 
 proper corporate purposes. Wright 
 v. Hughes, 119 Ind. 324. 
 
 4 See Curtis v. Leavitt, 15 N. Y. 9, 
 268; Jemison v. Citizens' Svgs. Bk., 
 122 N. Y. 135. 
 
 But it has been held that a cor- 
 poration is not restricted to means 
 " usual and necessary " in carrying 
 on its business; but may choose 
 among the means convenient and 
 adapted to the end contemplated by 
 its charter. Madison, etc., Plank 
 Road Co. v. Watertown, etc., Plank 
 Road Co., 5 Wis. 173; see Clark v. 
 Farrington, 11 Wis. 306, 324. 
 
 5 See §§571, 572. 
 
 6 Oliphant v. Woodburn Coal & 
 M'g Co., 63 Iowa, 332; Kimball v. 
 Grate Co., 69 N. H. 485; see Bent v. 
 Underdown, 156 Ind. 516. See 
 §§ 522a, 701, 702. - 
 
 ' See § 130. 
 
 95
 
 § 125.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 125. A corporation is impliedly authorized to borrow 
 money, ! and has the incidental power to give se- 
 mg. or co£ curity for its re-payment. 2 As such security a cor- 
 maymort. poration may give its note; 3 may mortgage its 
 gage their property ; 4 and may issue coupon bonds payable to 
 Excep- bearer secured by a mortgage of its property. 5 But 
 
 a corporation that receives from the state special or 
 extraordinary franchises in order that it may the better serve 
 
 i Curtis v. Leavitt, 15 N. T. 9; 
 Clark v. Titcomb, 42 Barb. 122; Kent 
 v. Quicksilver Mining Co., 78 N. Y. 
 159; Oxford Iron Co. v. Spradley, 46 
 Ala. 98; Burr v. McDonald, 3 Gratt. 
 (Va. ) 215; Union Bank v. Jacobs, 6 
 Humph. (Tenn. ) 515; Booth v. Rob- 
 insou, 55 Md. 419; Thompson v. Lam- 
 bert, 44 Iowa, 239; Savannah and 
 Memphis R. R. Co. v. Lancaster, 62 
 Ala. 555 ; Ward v. Johnson, 95 111. 
 215; Bradley v. Ballard, 55 111. 413; 
 Commissioners of Craven v. Atlantic 
 and N. C. R. R. Co., 77 N. C. 289; 
 Lucas v. Pitney, 27 N. J. L. 221; 
 Phila. and Reading R. R. Co. v. Stich- 
 ter (Sup. Ct. of Penn.), 21 Am. Law 
 Reg. N. S. 713; Wright v. Hughes, 
 119 Ind. 324; Bank of Australasia v. 
 Breillat, 6 Moo. P. C. 152, 193, etc. ; 
 In re International Life Assurance 
 Soc, L. R. 10 Eq. 312; Australian, 
 etc., Co. v. Mounsey, 4 K. & J. 733. 
 See, also, authorities in succeeding 
 notes. 
 
 2 Fifth Ward Savings Bank v. First 
 Nat. Bank, 48 N. J. L. 513. As in- 
 cidental to its implied power to bor- 
 row money, an insurance company 
 has power to transfer its assets in 
 trust for the security of lenders. 
 Nelson v. Eaton, 26 N. Y. 410; see 
 Hope Mut. Life Ins. Co. v. Perkins, 
 38 N. Y. 404. And a mutual insur- 
 
 ance company may transfer its pre- 
 mium notes as collateral security for 
 its debts. Brookman v. Metcalf, 32 
 N. Y. 591. Authority given by the 
 charter of a corporation to its board 
 of directors to execute a mortgage or 
 deed of trust of its property and 
 franchises, in order to secure its 
 bonds, does not negative other meth- 
 ods. Uncas Nat. Bk. v. Rith, 23 Wis. 
 339. 
 
 8 A business corporation has im- 
 plied power to make negotiable notes, 
 and to indorse accommodation notes 
 loaned to it. Auerbach v. La Seur 
 Mill Co., 28 Minn. 291; Rockwell v. 
 Elkhorn Bank, 13 Wis. 653; Lucas v. 
 Pitney, 27 N. J. L. 221; Hamilton v. 
 New Castle, etc., R. R. Co., 9 Ind. 
 359; Hardy v. Merri weather, 14 Ind. 
 203; Frye v. Tucker, 24 111. 181. But 
 see James v. Rogers, 23 Ind. 451; 
 Bacon v. Miss. Ins. Co., 31 Miss. 116. 
 The note of a corporation signed by 
 its treasurer may be negotiable al- 
 though the corporate seal is attached. 
 Bank v. Railroad Co., 5 S. C. 156; 
 Clark v. Read, 12 D. C. App. Cas. 
 343. 
 
 4 Savannah and Memphis R. R. Co. 
 0. Lancaster, 62 Ala. 555; Kelly v. 
 Alabama and Cincinnati R. R. Co., 58 
 Ala. 489; Elec. Lt. Co. of Mobile v. 
 Rust, 117 Ala. 680; Thompson v. 
 
 5 See Commissioners of Craven v. bonds below par. Gamble v. Water 
 
 Atlantic and N. C. R. R. Co., 77 N. C. 
 289. A corporation may issue its 
 
 96 
 
 Co., 122 N. Y. 91. See Nelson v. 
 Hubbard, 96 Ala. 238.
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 125. 
 
 the public in some employment in which the public has a pro- 
 j nounced interest, cannot without express authority mortgage 
 f/Mftffimnchises. 1 As Justice Gray said in Richardson v. Sibley, 2 
 a case which held that a horse-railroad could not mortgage its 
 road and franchises : " A corporation created for the very pur- 
 pose of constructing, owning, and managing a railroad, for the 
 accommodation and benefit of the public, cannot, without dis- 
 tinct legislative authority, make any alienation, absolute or 
 conditional, either of the general franchise to be a corporation, 
 or of the subordinate franchise to manage and carry on its cor- 
 porate business, without which its franchise to be a corporation 
 can have little more than a nominal existence." 3 When, how- 
 
 Lambert, 44 Iowa, 239 ; Susquehanna 
 Bridge Co. v. General Ins. Co., 3 Md. 
 305; Lehigh Valley Coal Co. v. Agri- 
 cultural Works, 63 Wis. 45; Wright 
 v. Hughes, 119 Ind. 324; Fitch v. 
 Steam Mill Co., 80 Me. 34. 
 
 The power to mortgage, when not 
 expressly given or denied, may be re- 
 garded as incidental to the power to 
 take and hold real estate and make 
 contracts. Aurora Agricultural Soc. 
 v. Paddock, 80 111. 2G3; West v. Madi- 
 son County Agricultural Board, 82 
 111. 205; Taylor v. Agricultural, etc., 
 Asso., 68 Ala. 229; Jackson v. Brown, 
 5 Wend. 590; Central Gold Mining 
 Co. v. Piatt, 3 Daly, 263; Watts's Ap- 
 peal, 78 Pa. St. 370, 391. Authority 
 in the charter of a railroad company 
 "to acquire, alien, transfer, and dis- 
 pose of property of every kind," in- 
 cludes the power to mortgage. Mc- 
 Allister v. Plant, 54 Miss. 106. 
 
 A corporation having authority to 
 mortgage its property for the pur- 
 pose of carrying on its business, may 
 execute a mortgage to secure the pay- 
 ment of future advances. Jones v. 
 Guaranty and Indemnity Co., 101 
 U. S. 622. But a corporation formed 
 under the New York Manufacturing 
 Companies' Act of 1848 has authority 
 to mortgage its property only to se- 
 
 7 
 
 cure the payment of a debt; not to 
 raise money. Carpeuter v. Black 
 Hawk Gold Mfg. Co., 65 N. Y. 43; 
 see Davidson v. Westchester Gas- 
 light Co., 99 N. Y. 559. The scope 
 of Carpenter v. Black Hawk Gold 
 Mg. Co. is narrowed down to very 
 little by Lord v. Yorker Fuel Gas Co., 
 99 N. Y. 547. 
 
 1 Coe v. Columbus, etc., R. R. Co., 
 10 Ohio St. 372; Atkinson v. Marietta, 
 etc., R. R. Co., 15 Ohio St. 21; State 
 v. Morgan, 28 La. Ann. 482; Pullan 
 v. Cincinnati, etc., R. R. Co., 4 Biss. 
 35; Daniels v. Hart, 118 Mass. 543; 
 Palmer y. Forbes, 23111. 301; Frazier 
 v. Railway Co., 88 Tenn. 138. See 
 Carpenter v. Black Hawk Gold Mg. 
 Co., 65 N. Y. 43. 50; Lord v. Yon- 
 kers Gas Co., 99 N. Y. 547. But see 
 Kennebec, etc., R. R. Co. v. Portland, 
 etc., K. R. Co., 59 Me. 9, 23; Shepley 
 v. Atlantic, etc., R. R. Co., 55 Me. 
 395, 407. 
 
 2 11 Allen, 65, 67. 
 
 3 See Commonwealth v. Smith, 10 
 Allen, 448. Power to sell its property 
 conferred on a corporation in strong 
 and general terms, includes the power 
 to mortgage. Willamette Mg. Co. v. 
 Bank of British Columbia, 119 U. S. 
 191. Compare East Boston R. R. Co. 
 v. Eastern R. R. Co., 13 Allen, 422, 
 
 97
 
 § 127.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 income 
 bonds.' 
 
 ever, authority to pledge the franchises of a corporation exists, 
 there is implied, as incidental thereto, the power to pledge 
 everything necessary to their enjoyment, including property 
 not yet acquired by the corporation. 1 
 
 § 126. Sometimes a corporation, as for instance a railroad 
 , in . a com pan v, issues securities of a peculiar nature, like 
 
 " Deferred r - ' r 
 
 " deferred income bonds ; " which may be irredeem- 
 able, and entitled to interest only after a certain 
 percentage of dividends has been paid on the stock. In a re- 
 cent Pennsylvania case, a railroad corporation was held to have 
 the implied power to issue such securities. 2 
 
 § 127. Finally, in order to raise money, a corporation is not re- 
 stricted to borrowing on its own securities ; for it has 
 guaranty. ^ een ne ^ tnat a railroad corporation, having power 
 to raise money on its own bonds, may guaranty the 
 bonds of cities and counties which have been lawfully issued to 
 aid the company to build its road; 3 and also that a railroad cor- 
 poration may guaranty the bonds of another railroad company 
 whose road it competently leases. 4 
 
 With respect to the amount of money that a corporation may 
 borrow, no more definite rule can be laid down than this general 
 proposition : in the absence of express restriction, 5 it is legally 
 competent for a corporation to borrow Avhatever mone3 T s may 
 be required for its business. 6 A^t^ *f ^&CkL ^£<t, <?<*&. 
 
 ^<v 
 
 where it was said that the right to 
 mortgage might be inferred from the 
 terms of a statute not expressly au- 
 thorizing it. See §§ 304, 305. 
 
 1 Phillips v. Winslow, 18 B. Mon. 
 (Ky.) 431; see §§676, 817. 
 
 2 Phila. and Reading R. R. Co. v. 
 Stichter, 21 Am. Law Reg. N. S. 713. 
 But in Taylor v. Phila. and Reading 
 R. R. Co., 7 Fed. Rep. 386 (U. S. 
 Cir. Ct. ), it was decided to be beyond 
 the power of the same corporation to 
 issue these very bonds; the court tak- 
 ing the view that the transaction was 
 not a loan, there being no promise to 
 return the principal. See Kent t;. 
 Quicksilver Mining Co., 78 N. Y. 
 159, 177. 
 
 98 
 
 3 Railroad Co. v. Howard, 7 Wall. 
 392; see Bonner v. City of New Or- 
 leans, 2 Woods, 135; Ellerman v. Chi- 
 cago Junction Rys., 49 N. J. Eq. 218. 
 
 4 Low v. Cal. Pacific R. R. Co., 52 
 Cal. 53. But see Northside Ry. Co. 
 o. Worthington, 88 Tex. 562; Mining 
 Co. v. Iron Co., 22 U. S. App. 334. 
 Compare Bank v. Flour Co., 41 O. St. 
 525; Holm v. Brewing Co., 21 N. Y. 
 App. 204. 
 
 5 See Ossipee H. and W. Co. v. 
 Canney, 54 N. H. 295; Auerbach v. 
 LaSeur Mill Co., 28 Minn. 291; also 
 § 286. 
 
 Barry v. Merchants' Exchange 
 Co., 1 Sandf. Ch. 280, 308.
 
 f**yi'* 
 
 **7 
 
 xzri- 
 
 &-r%r7«<H*4 r+ +>>". 
 
 PAET I.] CONSTRUCTION OF CORPORATE POWERS. [§ 128. 
 
 § 128. At common law every corporation aggregate had in- 
 cidentally the power to purchase, hold, and alienate 
 such real estate as the purposes of its incorporation hoiTiand. 
 required. 1 But this common law capacity was an- statutes of 
 
 1 . mortmain. 
 
 nulled as far back as the time of Henry III., by the 
 beginning of the series of statutes of mortmain, of which the 
 latest was passed in the ninth year of George II. These statutes 
 were at first intended merely to prevent the accumulation of 
 real estate in the hands of the Church ; but by later enact- 
 ments, 2 civil or lay corporations as well as ecclesiastical were 
 forbidden to purchase lands. 3 In this country the statutes of 
 mortmain have not been re-enacted nor generally assumed to 
 be in force. 4 Accordingly, the law would seem to be that a 
 stock corporation may purchase such real estate as is essential 
 or reasonably necessary in its business for carrying out the 
 purposes of its incorporation ; and this proposition applies es- 
 pecially to corporations formed under general enabling stat- 
 utes. 5 Further, a corporation authorized to hold land, may 
 take a fee although its own term of existence is limited to a 
 
 1 See Chap. II; Angell and Ames 
 on Corp., § 145; 1 Kyd on Corp., 69; 
 2 Kent's Com., 277; McCartee v. 
 Orphan Asylum, 9 Cow. 437, 462; 
 People v. La Rue, 67 Cal. 526. 
 
 2 15 R. II, c. 5. 
 
 8 For a history and discussion of 
 the statutes of mortmain, see 1 Kyd, 
 78-104. 
 
 4 2 Kent's Com., 282; see, also, 
 Page o. Heineberg, 40 Vt. 81 ; Odell 
 v. Odell, 10 Allen, 1, 6; Perin v. 
 Carey, 24 How. 465, 507; Potter v. 
 Thorntou, 7 R. I. 252. These sta- 
 tutes are in force in Pennsylvania, 3 
 Binney, 626. But how far they would 
 be applied to business or stock cor- 
 porations is questionable; see Miller 
 v. Porter, 53 Pa. St. 292. 
 
 6 State v. Mansfield, 23 N. J. L. 
 510; State v. Newark, 1 Dutch. 315; 
 2 Kent's Com., 282; see Riley v. 
 Rochester, 9 N. Y. 64; Bostock v. 
 North Staffordshire R'y, 4 El. & Bl. 
 798; compare Page v. Heineberg, 40 
 
 Vt. 81; Coleman v. San Rafael Turn- 
 pike Co., 49 Cal. 517; People v. Pull- 
 man Car Co., 175 111. 149. 
 
 A turnpike company may hold 
 under lease premises necessary for 
 storing implements used in road re- 
 pairs, and sheltering its servants. 
 Crawford v. Longstreet, 43 N. J. L. 
 325. A corporation, e. g. a railroad 
 company, has no implied power to 
 purchase lands except for the pur- 
 poses of its incorporation; it has no 
 indefinite power to purchase for any 
 purpose. Case v. Kelly, 133 U. S. 20. 
 See, also, S. &. N. Ala. R. R. Co. v. 
 Highland Ave. & Belt R. R. Co., 119 
 Ala. 105. 
 
 But when a corporation is author- 
 ized to hold land for some specified 
 purpose, the presumption is that land 
 acquired by it was acquired for that 
 purpose. Mallet v. Simpson, 94 N. 
 C. 37; Stockton Svgs. Bank i>. Sta- 
 ples, 98 Cal. 189. 
 
 " Corporations when considered 
 
 99
 
 § 130.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 period of years : i. e., for purposes of alienation it takes the 
 fee, while for the purposes of enjoyment of the land, in the 
 nature of things its estate must be limited in time to the term 
 of its own existence. 1 
 
 § 129. The power of a corporation to acquire per- 
 sonal property is unlimited, unless there are special 
 restrictions in its constitution. 2 
 
 § 130. In the course of its business, and for the 
 furtherance of the ends of its incorporation, a cor- 
 poration may alienate, 3 or lease, 4 a portion or even 
 the whole of its property ; and may assign its property in 
 trust for the benefit of its creditors. 5 But the proposition, that 
 to accomplish the ends of its incorporation a corporation may 
 deal with its property just as an individual, is too broad. 6 And 
 
 Power to 
 acquire 
 
 personal 
 property. 
 
 Power to 
 alienate. 
 
 with reference to their powers to 
 take and hold real estate may be 
 classified as follows: — 
 
 " First, those whose charter or law 
 of creation forbids that they should 
 acquire or hold real estate. In which 
 case a corporation cannot take or 
 hold real estate ; and a deed or devise 
 to it passes no title. 
 
 " Secondly, those whose charter or 
 law of creation is silent on the sub- 
 ject. In such case, as a general rule, 
 there is no power to acquire and hold 
 such property. But if the objects 
 for which the corporation was formed 
 cannot be accomplished without ac- 
 quiring and holding the title to real 
 estate, the power to do so is implied. 
 
 "Thirdly, those corporations whose 
 charter, etc., authorizes them in 
 some cases, or for some purposes, to 
 take and hold the title to real estate. 
 In these cases, as the corporation may 
 for some purposes acquire and hold 
 title, it cannot be questioned by any 
 party, except the state, whether the 
 real estate has been acquired for the 
 authorized purposes or not. 
 
 "Fourthly, those whose charter, 
 etc., confer a general power to acquire 
 and hold real estate. Such corpora- 
 
 100 
 
 tions may take and hold real estate as 
 freely and as fully as natural per- 
 sons." Hay ward v. Davidson, 41 
 Ind. 212. 
 
 For the effect of a conveyance to a 
 corporation of property which it is 
 unauthorized t'o take, see § 303. 
 
 1 Nicoll v. New York and Erie R. 
 R., 12 N. Y. 121; People v. O'Brien, 
 111 N. Y. 1; Rives v. Dudley, 3 
 Jones Eq. (N. C.) 126. 
 
 2 1 Kyd, 104; Barry v. Merchants' 
 Exchange Co., 1 Sandf. Ch. 280. 
 Statutes of mortmain do not apply to 
 personal property. 1 Kyd, 104. 
 
 3 Wilson v. Miers, 10 C. B. N. S. 
 348; Hancock v. Holbrook, 9 Fed. 
 Rep. 353. 
 
 * See Featherstonhaugh v. Lee Moor 
 Porcelain Clay Co., L. R. 1 Eq. 318. 
 Plant v. Macon O. & 1. Co., 103 Ga. 
 666; Coal Creek Co. v. Tennessee, 
 etc., Coal Co., 106 Tenn. 661. 
 
 5 State v. Bank of Maryland, 6 Gill 
 & J. (Md.) 205; Union Bank v. Elli- 
 cott, ib. 363; Ardesco Oil Co. v. North 
 Am. Oil Co., 66 Pa. St. 375; Fouche 
 v. Brower, 74 Ga. 251; Boynton v. 
 Roe, 114 Mich. 401. 
 
 u For instance, it is held that a cor- 
 poration cannot form a partnership
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 130. 
 
 the preceding statements regarding the power of a corporation 
 to alienate its property are subject to the following qualifica- 
 tions : a corporation cannot alienate or assign its property re- 
 gardless of the rights of its creditors, or of a dissenting minority 
 of shareholders ; ! and a corporation owing duties to the public 
 cannot, without special authority, alienate, lease, or mortgage 
 its franchises, or do any act that may disable it from perform- 
 ing its public duties in the manner indicated by its constitution.* 
 
 with another corporation or with an 
 individual. People v. North River 
 Sugar Refining Co., 121 N. Y. 582; 
 Mallory v. Oil Works, 86 Tenn. 598; 
 Marine Bank v. Ogden, 29 111. 248; 
 Whittenton Mills v. Upton, 10 Gray, 
 582; compare Allen v. Woonsocket 
 Co., 11 R. I. 288; French v. Donohue, 
 29 Minn. Ill; So. Car. & Ga. Ry. Co. 
 v. Aug. So. R. R. Co. 107 Ga. 164. 
 This proposition certainly holds true 
 when the business for which the 
 partnership is formed is ultra vires 
 the corporation; thus a railroad cor- 
 poration has no power to form a 
 partnership with an individual to 
 run a line of boats. Gunnw. Central 
 Railroad, 74 Ga. 509; compare Cleve- 
 land Paper Co. v. Courier Co., 67 
 Mich. 152. But one manufacturing 
 company can take shares in another 
 in payment of a debt. Howe v. Bos- 
 ton Carpet Co., 16 Gray, 493; al- 
 though forbidden to purchase stock 
 in other corporations. Holmes, etc., 
 Mfg. Co. v. Holmes, etc., Metal Co., 
 127 U. S. 252. Whether the purchase 
 of shares in another corporation is 
 ultra vires or not depends on the 
 purpose for which it was made, and 
 whether, under the circumstances, 
 it was a reasonable or necessary 
 means of carrying out corporate ob- 
 jects. Hill v. Nisbet, 100 Ind. 341. 
 There is great difference of opinion 
 on this point. It is frequently held 
 that a corporation cannot, without 
 statutory authority, purchase shares 
 
 of stock in another corporation; nor 
 can it give itself such power by its 
 articles of incorporation. People v. 
 Chicago Gas Trust Co., 130 111. 268; 
 Railway Co. v. Iron Co., 46 O. St. 44. 
 See also Commercial Fire Ins. Co. v. 
 Board of Revenue, 99 Ala. 1. Lanier 
 Lumber Co. v. Rees, 103 Ala. 622; 
 Hotel Co. v. Schram, 6 Wash. 134. 
 Compare Byrne v. Schuyler, etc., 
 Co., 65 Conn. 336; Nassau Bank v. 
 Jones, 95 N. Y. 115; Military I. 
 Assn. v. S. T. & I. Ry. Co., 105 Ga. 
 420; State v. Newman, 51 La. An. 
 833; Means v. Imp't Co., 126 N. C. 
 662; McAlester Mfg. Co. u. Florence 
 C. & I. Co., 128 Ala. 240; So. B. & L. 
 Assn. v. Casa Grande Stable Co., 128 
 Ala. 624; De la Vergne Co. v. Germ. 
 Sav. Inst., 175 U. S. 40. Contra, Davis 
 v. U. S., etc., Co., 77 Md. 35; Booth 
 v. Robinson, 55 Md. 419. It has been 
 held that power to take stock in an- 
 other corporation gives no power to 
 transfer all the assets of the corpora^ 
 tionto such other corporation in pay- 
 ment for such stock. Morris v. Ely- 
 ton Land Co., 125 Ala. 263. 
 
 1 See §§ 608 and 609 for a discussion 
 of the right of a majority to dispose 
 of the corporate assets and close the 
 business of the corporation. And, 
 for a discussion of assignments by 
 corporations for the benefit of credi- 
 tors, with or without preferences, 
 see § 668. 
 
 2 See §§ 304, 305, 125. 
 
 101
 
 § 132.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 131. The general statement is often made, that a corpora- 
 tion cannot transfer its franchises to another corpora- 
 
 Power to 
 
 transfer tion, or to an individual. 1 Especially, it is said, a 
 
 franchises. ,• p • , p ■ • , i 
 
 cor poration cann ot transfer its franchise to be a c or- 
 po ration . 2 And this on the ground that a grant of franchises 
 or privileges from the legislature to a body of men gives to that 
 body no authority to transfer these franchises and privileges to 
 others. In effect, such a transfer would be a conferring of the 
 power to act as a corporation, 3 a power which, it is needless to 
 say, only the legislature can confer. If a corporation is ex- 
 pressly authorized to transfer its franchises, then its grantee 
 receives them indirectly from the legislature by virtue of ex- 
 press power conferred on the corporation to authorize another 
 body of men to exercise its franchises or similar ones. 4 
 
 § 132. These statements are all correct enough. The trouble 
 with them is that, except in regard to a single class of corpora- 
 tions, they have little practical import. The class of corpora- 
 tions referred to are railroad and other corporations charged 
 with the performance of public duties, and receiving special 
 franchises the better to enable them to fulfill these duties. 
 And in regard to such corporations there is a further reason 
 why it is incompetent for them to transfer their franchises, i. e., 
 the general rule forbidding them to do any act that may put it 
 out of their power to serve the public as they were intended to 
 serve it. 5 But what do the franchises of an ordinary business 
 
 1 See Carpenter v. Black Hawk Gold 
 Mg. Co., 65 N. Y. 43, 50; Branch v. 
 Jessup, 106 U. S. 468, 484. 
 
 2 Meyer v. Johnston, 53 Ala. 237; 
 Coe v. Columbus, etc., R. R. Co., 10 
 Ohio St. 372 ; Eklridge v. Smith, 34 
 Vt.484; Willamette Mfg. Co. v. Bank, 
 119 U. S. 191; Snell v. Chicago, 133 
 111. 413, 430; Pennison v. Railroad 
 Co., 93 Wis. 344. Franchises to 
 build, own, and manage a railroad 
 are not necessary corporate rights, 
 but may be enjoyed by natural per- 
 sons; and mny be assigned by the 
 corporation possessing them. Not 
 so as to the franchise to be a cor- 
 poration. Ragan v. Aiken, 9 Lea 
 
 102 
 
 (Tenn.), 609; State v. Ry. Co., 140 
 Mo. 539; State v. Water Co., 61 Kan. 
 547. 
 
 8 State of Ohio v. Sherman, 22 Ohio 
 St. 411, 428; Memphis & L. R. R. R. 
 Co. v. Railroad Commissioners, 112 
 U. S. 609, 622. 
 
 4 How far the first corporation could 
 exercise its franchises after a trans- 
 fer of them would depend on the con- 
 struction of its constitution, and es- 
 pecially on the construction of tlie 
 power therein contained to transfer 
 the corporate franchises. 
 
 6 See §§304, 305, 125, and §§490, 
 491, as to transferring special im- 
 munities. As a matter of fact, ques-
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 133. 
 
 or manufacturing corporation amount to ? To nothing but a 
 legal competency to act in a certain manner, which they have 
 acquired by complying with certain formalities. There is 
 nothing special or extraordinary about their franchises. In 
 truth, their franchises are hardly worth transferring. Persons 
 acquiring their property by purchase or under foreclosure may 
 readily form themselves also into a corporation, if corporate or- 
 ganization is desired. Unquestionably the particular competency 
 which a body of men by complying with certain statutory pro- 
 visions have acquired is not transferable to another body who 
 have not complied with those provisions ; any more than may 
 be transferred the competency to act as a limited partnership, 
 which persons may have acquired through compliance with the 
 statute authorizing limited partnerships. Just as in regard to 
 limited partnerships, so in regard to corporations, the general 
 intention of enabling statutes is that persons who have com- 
 plied with certain formalities may act as a corporation ; that 
 others may not. 1 
 
 § 133. When the capital stock is fixed in amount by the con- 
 stitution of the corporation, as is ordinarily the case, the cor- 
 
 tions regarding the validity of a 
 transfer or mortgage of franchises 
 almost always arise in relation to 
 corporations of this class. 
 
 *See Fietsam v. Hay, 122 111. 293. 
 "The franchise of becoming and 
 being a corporation, in its nature, is 
 incommunicable by the act of the 
 parties and incapable of passing by 
 assignment." Memphis & L. R. R. R. 
 Co. v. Railroad Commissioners, 112 
 U. S. 609, 619, Opin. of Court per 
 Matthews, J. See §131. Validly 
 mortgaging the charter, property, 
 and franchises of a railroad corpo- 
 ration does not transfer the right or 
 capacity to be that identical corpora- 
 tion; though it would transfer such 
 franchises as are more appropriate to 
 the construction, maintenance, and 
 operation of the railroad as a public 
 highway and the right to make profit 
 
 therefrom. The only right of cor- 
 porate existence that could pass 
 would be the right to organize under 
 the then laws of the state. " The 
 franchise to be a corporation re- 
 mained in and was exercised by the 
 old corporation, notwithstanding the 
 mortgage of its charter, until the new 
 corporation was formed and organ- 
 ized; it was then surrendered to the 
 state, and by a new grant then made, 
 passed to the corporators of the new 
 corporation, it was held and exer- 
 cised by them under the constitu- 
 tional restrictions then in being." 
 lb. p. 623. See, with above, El- 
 dridge v. Smith, 34 Vt. 484; State v. 
 Irrigating Co., 40 Kan. 96. 
 
 Indirectly a transfer of the fran- 
 chises of a corporation can be ac- 
 complished by a purchase of all the 
 stock by the would-be transferees. 
 
 103
 
 § 13^.] 
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Power to 
 increase or 
 decrease 
 the capital 
 stock. 
 
 poration has no power to increase or diminish its stock, unless 
 expressly authorized so to do ; x nor has it the power 
 to increase or decrease the number of shares into 
 which the capital stock is divided. 2 And when power 
 is given to increase or decrease the capital stock or 
 the number of shares into which it is divided, the mode of pro- 
 ceeding indicated by the statute or articles of association must 
 be substantially adhered to. 3 
 
 § 134. In regard to the power of a corporation to purchase 
 shares of its own stock, there is a difference of opin- 
 ion. The English decisions seem unanimously to 
 negative the possession of this power by corpora- 
 tions ; and Mr. Brice's proposition — " Corporations 
 cannot, whatever the nature of their business, with- 
 out an express and very clear power in that behalf, 
 deal in their own shares " — may be regarded as expressing, 
 though somewhat vaguely, from his use of the word " deal." 
 the English law on this subject. 4 
 
 Power of a 
 corpora- 
 tion to pur- 
 chase 
 shares of 
 its own 
 stock. 
 
 i New York and N. H. R. R. Co. v. 
 Schuyler, 34 N. Y. 30; Sutherland ». 
 Olcott, 95 N. Y. 93; Einstein v. R. G. 
 & E. Co., 146 N. Y. 46; Grangers,' 
 etc., Ins. Co. v. Kamper, 73 Ala. 325; 
 Smith v. Goldsworthy, 4 Q. B. 430; 
 see Railway Co. v. Allerton, 18 Wall. 
 233, 235; Droitwitch Patent Salt Co. 
 v. Curson, L. R. 3 Ex. 35; Cooke v. 
 Marshall, 191 Pa. St. 315; and com- 
 pare In re Financial Corporation, 
 Holmes's Case, L. R. 2 Ch. 714. 
 
 2 Oldtown R. R. Co. v. Veazie, 39 
 Me. 571; Salem Mill Dam Co. v. 
 Ropes, 6 Pick. 23, 32. 
 
 3 Spring Co. v. Knowlton, 103 U. S. 
 49; Knowlton v. Congress Spring Co., 
 57 N. Y. 518. See State v. McGrath, 
 86 Mo. 239, and compare Columbia 
 N. Bk.'s App., 16 Weekly Notes of 
 Cases (Pa.), 357; and cases cited in 
 the two preceding notes. Share- 
 holders may waive formalities in- 
 tended for their protection. Nelson 
 v. Hubbard, 96 Ala. 238. 
 
 However, a corporation having 
 
 104 
 
 earned a dividend, and possessing the 
 power to increase its capital stock, 
 may declare a stock dividend. How- 
 ell v. Chicago and N. W. R'y Co., 
 51 Barb. 378. AVhen an increase of 
 stock is contemplated by the articles 
 of association, and made in the exer- 
 cise of a power given by statute, and 
 in the manner prescribed by statute, 
 if the new stock is properly disposed 
 of, so that in the disposition plain- 
 tiff's rights are observed, the motives 
 leading the majority of shareholders 
 (and directors) to vote for it are im- 
 material. Jones v. Morrison, 31 
 Minn. 140. See, also, § 568. 
 
 4 "Ultra Vires," 2d Am. ed. 94; 
 Zulueta's Claim, L. R. 5 Ch. 444; In 
 re Marseilles Extension R'y Co., ex 
 parte Credit Foncier of England, L. 
 R. 7 Ch. 161; see Evans v. Coventry, 
 25 L. J. Ch. 489; Hall's Case, L. R. 5 
 Ch. 707. Compare Hope v. Interna- 
 tional Financial Soc'y, L. R. 4 Ch. D. 
 327; Teasd ale's Case, L. R. 9 Ch. 54. 
 Even though the corporation has
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 135. 
 
 § 135. In America, on the other band, the weight of author- 
 ity clearly indicates that there is nothing in itself illegal or 
 ultra vires in the purchase of its own shares by a corporation ; 
 and that whether the purchase is valid depends on the condi- 
 tion of the corporate affairs, the purpose for which the pur- 
 chase was made (or the shares received by the corporation), and 
 on the relation to the corporation of the persons questioning the 
 validity of the transaction. 1 Thus a solvent corporation may 
 receive fully paid-up shares of its own stock in payment of or 
 as security for a debt owing the corporation. 2 But an insol- 
 vent corporation can neither purchase, nor receive in payment 
 of debts owing it, shares of its own stock : especially when the 
 
 power to purchase shares in other 
 corporations. Same cases. Coppin 
 v. Greenless & Co., 38 Ohio St. 275, 
 follows the English rule, and holds 
 that an executory contract between 
 a corporation and a shareholder for 
 the purchase of its own stock by the 
 former cannot be enforced, and will 
 not sustain an action for damages 
 against the corporation. For the 
 power of a corporation to purchase 
 shares in the stock of another cor- 
 poration, see § 130, note. 
 
 1 Vail o. Hamilton, 85 N. Y. 453, 
 457; Dupee v. Boston Water-power 
 Co., 114 Mass. 37, 43; Clapp v. Peter- 
 son, 104 111. 26; Chicago, Pekin, etc., 
 R. R. Co. v. Marseilles, 84 111. 145; 
 S. C, 84 111. 643; Fraser v. Ritchie, 
 8 111. App. 554; Republic Life Ins. 
 Co. v. Singert, 135 111. 150; Blalock 
 v. M'f'g Co., 110 N. C. 99; Hartridge 
 v. Rockwell, R. M. Charton (Ga.), 
 260; Iowa Lumber Co. v. Foster, 49 
 Iowa, 25; Verplanck v. Mercantile 
 Ins. Co., 1 Edw. Ch. (N. Y.) 84. 04; 
 City Bank v. Bruce, 17 X. Y. 507; 
 Dock v. Cordage Co., 167 Pa. St. 
 370; Coleman v. Columbia Oil Co., 
 51 Pa. St. 74; compare Morgan v. 
 Lewis, 46 O. St. 1; Bank v. Wicker- 
 sham, 99 Cal. 655; Chapman v. Iron- 
 clad Co., 62 N. J. L. 497. Unissued 
 
 stock of a corporation was by an 
 agreement of all the shareholders 
 (who were also directors), there be- 
 ing no creditors, paid for with the 
 funds of the corporation and issued 
 to one of their number in trust for 
 them all. Held, the issue could not 
 be impeached. Jones v. Morrison, 
 31 Minn. 140. Agreement held 
 valid, whereby corporation in selling 
 its shares, agreed, upon a given no- 
 tice, to repurchase at a given price; 
 rights of creditors not being in- 
 volved. Vent v. Dul u th, etc., Co., 
 64 Minn. 307. Statutes regarding the 
 purchase by a corporation of its stock 
 are collected, with authorities, by 
 Mr. E. C. Moore, Jr., in 8 Southern 
 Law Rev. N. S. 369. 
 
 2 Taylor ». Miami Exporting Co., 
 6 Ohio, 177; State Bank v. Fox, 3 
 Blatchf. 431 ; City Bank v. Bruce, 17 
 N. Y. 507; Ex parte Holmes, 5 Cow. 
 426; Barto v. Nix, 15 Wash. 563. 
 See Cooper v. Frederick, 9 Ala. 738; 
 Barton r. Port Jackson, etc., Plank 
 Road Co., 17 Barb. 307. Compare 
 First National Bk. v. Nat. Exchange 
 Bk., 92 U. S. 122. So it is said a 
 corporation may receive its shares 
 in exchange for property owned by 
 it. Clapp o. Peterson, 104 111. 26. 
 
 105
 
 § 137.] Till': LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 shares are not fully paid-up or when individual liability exists 
 respecting them ; for, under such circumstances, the effect would 
 be to impair the corporate assets to the detriment of creditors 
 and holders of other shares. 1 In general, no purchase by a 
 corporation of its stock can relieve the prior holder from his 
 statutory individual liability to creditors. 2 
 
 § 13(>. When a corporation has competently purchased shares 
 a corpora- °f its own stock, it may hold them unextinguished 
 reissue^ an ^ re i ssue them; 3 but while the corporation holds 
 shares the shares, it cannot exercise in regard to them privi- 
 
 puifhasea , . ° r 
 
 by it ; but leges which pertain to an ordinary shareholder. Ks- 
 voteon pecially it cannot vote on them ; and this last prop- 
 them. osition is not affected by the fact that the shares 
 
 stand in the name of some trustee for the corporation, or in the 
 names of the directors. 4 
 
 § 137. In the enforcement of its rights, a corporation has 
 equal capacity with an individual to bring actions, 5 compro- 
 
 1 Currier v. Lebanon Slate Co., 56 
 N. H. 262; Savings Bank v. Wulfe- 
 kuhler, 19 Kans. 60; Crandall v. Lin- 
 coln, 52 Conn. 73; Columbian Bank's 
 Estate, 147 Pa. St. 422; Adams, etc., 
 Co. v. Deyette, 5 S. Dak. 418. Tbe 
 purchase of its own stock by a cor- 
 poration, made in good faith, with 
 nothing in the apparent condition of 
 the company to suggest insolvency, 
 will be set aside at the suit of cred- 
 itors injured by it. The fact that 
 the shareholder did not know at the 
 time of the indebtedness does not 
 make the transaction valid, for he is, 
 as to creditors, affected with notice 
 of all the equities attaching to the 
 corporate property as a trust fund. 
 Com'l Nat. 15k. v. Burch, 141111.519; 
 Clapp o. Peterson, 104 111. 20. The 
 directors of a corporation which is 
 in process of dissolution cannot pur- 
 chase the shares of some of the stock- 
 holders. Augsburg Land & I. Co. v. 
 Pepper, 95 Va. 92. See §§ 552, 747. 
 
 2 See § 747. 
 
 8 State v. Smith, 48 Vt. 266; City 
 106 
 
 Bank v. Bruce, 17 N. Y. 507; Wil- 
 liams o. Savage Mfg. Co., 3 Md. Ch. 
 418; Rivanna Navigation Co. v. Daw- 
 son, 3 Gratt. (Va. ) 19, 25; Clapp v. 
 Peterson, 104111. 26; Commonwealth 
 v. Boston and A. R. R. Co., 142 
 Mass. 146. 
 
 4 Vail ». Hamilton, 85 N. Y. 453; 
 Ex parte Holmes, 5 Cow. 426; 
 Brewster v. Hartley, 37 Cal. 15; 
 Monsseaux ». Urquhart, 19 La. Ann. 
 482; American Railway Frog Co. v. 
 Haven, 101 Mass. 398. 
 
 The corporation cannot as repre- 
 senting shares held by it give its as- 
 sent to a mortgage of corporate 
 property, in order to make up the 
 assent of two-thirds of the share- 
 holders as required by statute. Vail 
 v. Hamilton, supra. See § 185. 
 
 5 A corporation has the right to 
 sue at common law, see §§12, 14; 
 and has power to execute a bond in 
 a judicial proceeding. Collins v. 
 Hammock, 59 Ala. 448. 
 
 A corporation may take an assign- 
 ment of a judgment in payment of
 
 RART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 137. 
 
 mise them, 1 and refer matters to arbitration. 2 A corporation 
 may sue to recover damages for a libel against it in 
 its business; 3 to restrain a nuisance on its property; 4 a corpora- 
 to enjoin others from using its corporate name to g^ 10 . 
 the injury of its trade; 5 or, in admiralty, to recover 
 for services rendered as a salvor. 6 Pleading the general issue 
 admits the capacity of a corporation plaintiff to sue, and re- 
 lieves it from proving its corporate existence; 7 and going to 
 
 indebtedness to it, and may prose- 
 cute the same. Bailey v. Malheur 
 Irr. Co., 36 Or. 544. 
 
 iSee First Nat. Bk. t:. Nat. Ex- 
 change Bk., 92 U. S. 122; Stewart v. 
 Hoyt, 111 U. S. 373. A corporation 
 may confess judgment. Prouty v. 
 Prouty, etc., Shoe Co., 155 Pa. St. 
 112; Electric Lighting Co. v. Leiter, 
 19 Dis. Col. 575; Snyder Bros. v. 
 Bailey, 165 111. 447. 
 
 2 Alexandria Canal Co. v. Swann, 5 
 How. 83; see Day v. Essex County 
 Bank, 13 Vt. 97; Boston and L. R. 
 R. Co. v. Nashua, etc., R. R. Co., 
 139 Mass. 463; compare Sawyer v. 
 Winnegance Mill Co., 26 Me. 122. 
 
 3 Trenton Mut. Life Ins. Co. v. 
 Perrine, 23 N. J. L. (3 Zab.) 402; 
 Hahnemannian Life Ins. Co. v. 
 Beebe, 48 111. 87; Shoe and Leather 
 Bk. v. Thompson, 23 How. Pr. ( N. Y. ) 
 253; Knickerbocker Life Ins. Co. v. 
 Ecclesine, 42 How. Pr. (N. Y.) 201; 
 Same o. Same, 2 J. & S. (N. Y. 
 Super. Ct.) 76; Metropolitan Omni- 
 bus Co. v. Hawkins, 4 H. & N. 87; 
 Morton County Bank v. Day, 73 
 Minn. 195; Morrison-Jewell Filtra- 
 tion Co. v. Lingaine, 19 R. I. 316. 
 
 4 Central Bridge Co. v. Lowell, 4 
 Gray, 474. 
 
 6 Newby v. Oregon Cent. R. Co., 
 Dearly, 609; Holmes v. Holmes, MTg 
 Co., 37 Conn. 278; Higgins Co. v. 
 Higgins Soap Co., 144 N. Y. 462; of. 
 Hygeia Ice Co. v. N. Y. Hygeia Ice 
 Co., 140 N. Y. 94; Lamb Knit Goods 
 
 Co. o. Lamb Glove & Mitten Co., 
 120 Mich. 159; Red Polled Cattle 
 Club v. Red Polled Cattle Club, 108 
 Iowa, 105. Not, however, if the 
 plaintiff corporation is engaged in 
 an illegal business. Portsmouth 
 Brewing Co. v. Portsmouth B. & B. 
 Co., 67 N. H. 433. It seems a foreign 
 corporation cannot enjoin a domestic 
 corporation from using the same 
 name. Hazleton B. Co. v. Hazleton 
 T. B. Co., 142 111. 494. But a domes- 
 tic corporation may enjoin a foreign 
 corporation. Amer. Clay M'f'g Co. 
 v. Idem, 198 Pa. St. 189. An indi- 
 vidual may restrain a corporation 
 from using a name which violates 
 his rights. Armington et al. v. 
 Palmer, 21 R. I. 109. A corporation 
 may recover damages for false repre- 
 sentations, acted upon by it, al- 
 though such representations were 
 made to individuals before the 
 formation of the corporation; such 
 individuals subsequently becoming 
 the sole stockholders and directors 
 of the corporation. Scolfield Gear 
 & Pulley Co. v. Scolfield, 71 Conn. 2. 
 
 8 The Camanche, 8 Wall. 448; The 
 Blackwall, 10 Wall. 1. A corporation 
 may acquire a lien for materials fur- 
 nished as an individual. Fagan v. 
 Boyle Ice Machine Co., 65 Tex. 324. 
 
 7 Morse Arms M'f'g Co. v. United 
 States, 16 Ct. of Claims, 296; Mc- 
 Intire v. Preston, 10 111. 48; Phoenix 
 Bank o. Curtis, 14 Conn. 437; Prince 
 v. Commercial Bank, 1 Ala. 241; 
 
 107
 
 x» ^t^~r& >^V^ &*ZO . %%?. 32 <?# 
 
 § 138.] THE LAW OP PRIVATE CORPORATIONS. [CHAP. VII. 
 
 trial on the merits has a similar effect. 1 In some states it is 
 not necessary for a corporation plaintiff to allege its incorpo- 
 ration. 2 ^ 
 /^w§ 138. When in order to enforce corporate rights or avert 
 wrongs threatening the corporate interests it is neces- 
 tii'^rJnjr sarv to sue, the rule is thai the suit must be brought 
 fnthename DV tne corporate management in the name of the cor- 
 20!i<LS2j^ poration. This rule applies to suits both at law and 
 
 poration . l . . L * 
 
 in equity. 3 Individual shareholders are not the proper 
 parties to sue or defend on behalf of corporate interests. 4 If, 
 however, the corporate management refuses or fails to enforce 
 
 Mississippi, etc., R. R. Co. v. Cross, 
 20 Ark. 443; Rockland, etc., Steam- 
 boat Co. v. Sewall, 78 Me. 167. But 
 this was not the English rule, nor 
 has it been so held in all the states. 
 See Williams v. Bank of Michigan, 7 
 Wend. 540, and, generally, Angell 
 and Ames on Corp., §§ 632 et seq. 
 
 1 United States v. Insurance Cos., 
 22 Wall. 99; Conard v. Atlantic Ins. 
 Co., 1 Pet. 386, 450; Lehigh Bridge 
 Co. v. Lehigh Coal Co., 4 Rawle, 9; 
 First Parish v. Cole, 3 Pick. 232, 
 245. 
 
 2 German Reformed Church v. 
 Von Puechelstein, 27 N. J. Eq. 30; 
 Phoenix Bank v. Donnell, 40 N. Y. 
 410; compare Baltimore & O. R. R. 
 Co. v. Sherman, 30 Grat. (Va.)602, 
 But see §§ 1775-6 of the New York 
 Code of Civil Procedure, and Con- 
 cordia Savings Ass'n v. Reed, 93 
 N. Y. 474. Where the name used by 
 the plaintiff in pleading " argues a 
 corporation," corporate organization 
 need not be averred. Sayers v. First 
 Nat. Bk., 89 lnd. 230. 
 
 3 Bradley v. Richardson, 2 Blatchf. 
 343; Mauney v. High Shoals M'f'g 
 Co., 4 Ired. Eq. (N. C.) 11)5; see 
 Insane Hospital u. Higgins, 15 111. 
 185; Campbell v. Brunk, 2.". 111. 225. 
 
 4 Silk M'f'g Co. a. Campbell, 27 N. 
 J. L. 539; Blackman v. Central R. R. 
 
 108 
 
 Co., 58 Ga. 189; Henry v. Elder, 63 Ga. 
 347; see Bronson u. LaCrosse, etc., R. 
 R. Co., 2 Wall. 283; Park v. Petroleum 
 Co., 25 W. V. 108; Mayer v. Bristol 
 Hotel Co., 163 Mo. 59. Shareholders 
 who have been allowed to put in an- 
 swers in the name of the corporation 
 cannot be regarded as answering for 
 the corporation itself. In a special 
 case, where there is an allegation that 
 the directors fraudulently refused to 
 attend to the interests of the cor- 
 poration, a court of equity will in 
 its discretion allow a shareholder to 
 become a party defendant in order 
 to protect from unfounded claims 
 against the corporation his own in- 
 terests and those of such other share- 
 holders as choose to join him in the 
 defence. Bronson v. LaCrosse, etc., 
 R. R. Co., 2 Wall. 283. See, also, 
 Kanawha Coal Co. v. Ballard, etc., 
 Coal Co., 43 W. Va. 721. A share- 
 holder cannot prosecute an appeal 
 from a judgment against the cor- 
 poration. State of Florida v. Florida 
 Central I J. R. Co., 15 Fla. 690. On 
 the other hand, a stockholder is 
 ordinarily bound by decrees against 
 the corporation, although not per- 
 sonally a party. Hawkins v. Glenn, 
 131 U. S. 319; Howard v. Glenn, 85 
 (la. 238; Heggie v. Bldg. Ass'n, 107 
 N. C. 581.
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 139. 
 
 corporate rights, and an irreparable injury to the corporate 
 interests is threatened, a shareholder, in a case where the cor- 
 poration itself would be entitled to an injunction, may bring 
 suit on behalf of himself and others interested who may join, 
 to enjoin the threatened injury. 1 In such case the shareholder 
 should set forth in his complaint or bill the efforts that he has 
 made to induce the corporation to act in the matter, should 
 allege its refusal or failure to sue, and should make it a party 
 defendant in the action. 
 
 § 139. The first leading case on the right of a shareholder to 
 sue under such circumstances is Dodge v. Woolsey, 2 
 where the Supreme Court of the United States when a 
 
 1 . . share- 
 
 held that a shareholder in a bank could maintain a holder may 
 
 bill to enjoin the collection of an unlawful state tax half of the 
 
 on the bank, the directors having declined to sue tion° ra " 
 
 under circumstances that rendered their refusal a 
 
 breach of trust. 3 
 
 \ 
 
 1 A bill may be filed by share- 
 holders to enjoin the setting up of a 
 claim for purchase-money against 
 the lands of a company, the ground 
 of the bill being that the party 
 setting up the claim induced the 
 complainants to buy shares by 
 fraudulently representing that the 
 property sold to the company was 
 unincumbered, and that he had no 
 interest in it, the ageuts of the com- 
 pany joining in such misrepresenta- 
 tions. The company should be made 
 a party defendant, although the 
 relief prayed is really in its favor. 
 Jones v. Bolles, 9 Wall. 364. Share- 
 holders were admitted to defend on 
 behalf of the corporation in Morrill 
 v. Little Falls M'f'g Co., 46 Minn. 
 260. See, Fitzwater v. Bank, 62 Kas. 
 163. 
 
 2 18 How. 331. The present discus- 
 sion relates to actions by sharehold- 
 ers against outsiders; and has but 
 incidental reference to the right of 
 shareholders to sue the corporation 
 and restrain it by legal process (for 
 
 which see §§553-557); or to their 
 right to sue the officers for a breach 
 of duties owing primarily to the cor- 
 poration (for which see §§ 683-691). 
 3 " The judgment of the court in 
 Dodge v. Woolsey authorizes the 
 stockholder of a company to institute 
 a suit in equity in his own name 
 against a wrongdoer whose acts oper- 
 ate to the prejudice of the interests 
 of stockholders, such as diminishing 
 their dividends, and lessening the 
 value of their stock, in a case where 
 application has first been made to the 
 directors of the company to institute 
 a suit in its own name, and they have 
 refused. This refusal of the board 
 of directors is essential in order to 
 give to the stockholder any standing 
 in court, as the charter confers upon 
 the directors representing the body 
 of shareholders the general manage- 
 ment of the business of the company. 
 There must be a clear default on 
 their part, involving a breach of duty, 
 within the rule established in equity, 
 to authorize a stockholder to insti- 
 
 109
 
 § 140.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 140. Unless the facts stated in the complaint clearly show 
 the corporation to be in no position to protect itself, 
 Share- so th a t an y attempt of the shareholder to procure it 
 
 must allege to act for its own protection would be utterly useless, 1 
 thecorpo- the shareholder must allege a demand by him on the 
 sue.° n t0 corporate management to bring suit ; z and should set 
 forth in his complaint facts showing to the court 
 that his endeavors have been real and earnest, and that he has 
 left undone nothing which in reason he might have done to pre- 
 vail on the corporate management to bring the action. 3 More- 
 over, it must be shown in the complaint that the refusal of the 
 
 tute the suit in his own behalf, or 
 for himself and other stockholders 
 who may choose to join." Opinion 
 of the Court per Nelson, J., in Mem- 
 phis Cityc. Dean, 8 Wall. 64, 73; see, 
 also, People v. State Treasurer, 24 
 Mich. 468; and see Hawes v. Oak- 
 land, 104 U. S. 450, 459; cf. Dicker- 
 man v. Northern Trust Co., 176 U. S. 
 181. 
 
 1 Barr v. New York, L. E. & W. R. 
 R. Co., 96 N. Y. 444; S. C, 125 N. Y. 
 163; Perry v. Tuscaloosa Co., 93 Ala. 
 364. Where the corporation is prac- 
 tically dissolved, and all its officers 
 have absconded, a shareholder may 
 sue a person to whom the officers 
 have fraudulently and without con- 
 sideration conveyed the corporate 
 property; and under such circum- 
 stances need not allege a previous 
 application to the corporation. Wil- 
 cox v. Bickel, 11 Neb. 154. See, 
 also, People v. Hektograph Co., 10 
 Abb. N. C. (N. Y.) 358; Davis v. Rail- 
 road Co., 1 Woods, 661; Crumlish v. 
 Railroad Co., 28 W. Va. 623. Yet the 
 United States Supreme Court holds 
 that even where a corporation has 
 passed the term of its corporate exist- 
 ence — its existence, however, under 
 the enabling act continuing for the 
 purpose of winding up its business — 
 a shareholder, to entitle him to bring 
 suit, must allege efforts to prevail on 
 
 110 
 
 the corporation to sue. Taylor v. 
 Holmes, 127 U. S. 489. 
 
 2 Detroit v. Dean, 106 U. S. 537; 
 Hawes v. Oakland, 104 U. S. 450; 
 Shawhan v. Zinn, 79 Ky. 300; Morgan 
 v. Railroad Co., 1 Woods, 15; Ware 
 v. Bazemore, 58 Ga. 316; Tubwiler 
 v. Tuscaloosa Coal Co., 89 Ala. 391; 
 Mack v. Coal Co., 90 Ala. 396; Roman 
 v. Woolfolk, 98 Ala. 219; State v. 
 Mitchell, 104 Tenn. 336; Ulmer v. 
 Real Estate Co., 93 Me. 324; Wolf v. 
 K. R. Co., 195 Pa. St. 91; Harding v. 
 Amer. Glucose Co., 182 111. 551; cf. 
 Kennedy v. Gibson, 8 Wall. 498. This 
 proposition, it is said, does not apply 
 to a bill filed by a creditor of the cor- 
 poration against a wrongdoer. Loth 
 rop v. Stedman, 42 Conn, 583 (U. S. 
 Cir. Ct). 
 
 3 Hawes v. Oakland, 104 IT. S. 450. 
 461; Dimpfell v. Ohio, etc., R. Co., 
 110 U. S. 209; Bacon v. Irvine, 70 
 Cal. 221; Dannineyer ». Coleman, 11 
 Fed. Rep. 97; Pacific Railroad v. 
 Missouri Pacific R. R. Co., 2 McCrary, 
 227; Boyd v. Sims, 87 Tenn. 771; 
 Rathbone v. Gas Co., 31 W. Va. 798; 
 Home Mining Co. v. McKibbin, 60 
 Kas. 387; Morgan v. King, 27 Colo. 
 539; L. & N. R. R. Co. v. Neal, adm., 
 128 Ala. 149. See, also, the cases in 
 the preceding note. To give a small 
 minority of shareholders a standing 
 in equity to contest and set aside an 
 
 /
 
 PART I.J CONSTRUCTION OF CORPORATE POWERS. [§ 141. 
 
 directors to sue is a breach of trust on their part, and not a 
 mere error of judgment in a matter properly within their dis- 
 cretion. 1 Finally, it is always essential that the corporation 
 itself should be made a party defendant. 2 
 
 § 141. In Hawes v. Oakland, 3 where the rules under discus- 
 sion received the most careful consideration, the following state- 
 ment was made by Justice Miller, giving the opinion of the 
 court : — 
 
 " We understand [the doctrine of the English and American 
 cases, including Dodge v. Woolsey] to be that to enable a stock- 
 holder in a corporation to sustain in a court of equity in his 
 own name a suit founded on a right of action existing in the 
 corporation itself, and in which the corporation itself is the 
 appropriate plaintiff, there must exist as the foundation of the 
 suit — 
 
 " Some action or threatened action of the managing board of 
 directors or trustees of the corporation w T hich is beyond the au- 
 thority conferred on them by their charter or other source ofy -*■ 
 
 " Or such a fraudulent transactiorrcompletea or conxeinplatedy^j^i 
 
 by the acting managers, in connection with some other party,-'***^ 
 or among themselves, or with other shareholders, as will result-'^V^t?! 
 in serious injury to the corporation, or the interests of the x 
 other shareholders ; ,y- _J 
 
 " Or where the board of directors, or a majority of them, are p y 
 acting for their own interest in a manner destructive of the 
 
 corporation itself, or the rights of other shareholders; (?* 
 
 " Or where the majority of shareholders themselves are op- *Jr**v* 
 
 ultra vires act of directors to which 
 a large majority of shareholders 
 make no objection, it must appear 
 that complainants were shareholders 
 at the time of the transactions com- 
 plained of, or that the shares have 
 devolved on them since by operation 
 of law. Dimpfell v. Ohio & Miss. R. 
 Co., 110 U. S. 209. 
 
 1 See the cases in last note but one ; 
 also Memphis Gas Co. v. Williamson, 
 9Heisk. (Tenn.) 314, 337; Dodger. 
 
 Woolsey, supra ; Memphis City v. 3 /V/r* 
 Dean, supra (§ 139, note). 
 
 2 See cases in preceding notes. It 
 has even been said that the failure to 
 make the corporation a party is not a 
 mere defect of parties to be taken 
 advantage of by special demurrer, 
 but leaves the shareholder without a 
 cause of action; the part}' entitled to 
 the relief, i. e., the corporation, not 
 being before the court. Shawhan v. 
 Zinn, 79 Ky. 300. 
 
 s 104 U. S. 450, 460. 
 
 Ill
 
 § 142.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 pressively and illegally pursuing a course in the name of the 
 corporation which is in violation of the rights of the other share- 
 holder, and which can only be restrained by the aid of a court 
 of equity. 1 
 
 " Possibly other cases may arise in which, to prevent irre- 
 mediable injury or a total failure of justice, the court would be 
 justified in exercising its powers, but the foregoing may be re- 
 garded as an outline of the principles which govern this class 
 of cases. 
 
 " But, in addition to the existence of the grievances which 
 call for this kind of relief, it is equally important that before 
 the shareholder is permitted in his own name to institute and 
 conduct a litigation which usually belongs to the corporation, 
 he should show to the satisfaction of the court that he has ex- 
 hausted all the means within his reach to obtain within the 
 corporation itself the redress of his grievances, or action in con- 
 formity to his wishes. He must make an earnest, not a simu- 
 lated, effort with the managing body of the corporation, to 
 induce remedial action on their part, and this must be made 
 apparent to the court. If time permits, or has permitted, he 
 must show, if he fails with the directors, that he has made an 
 honest effort to obtain action by the stockholders as a body, in 
 the matter of which he complains. And he must show a case 
 if this is not done, where it could not be done, or it was not 
 reasonable to require it." 2 
 
 § 142. The cases hitherto cited are scarcely authority for the 
 proposition that a shareholder, on the improper refusal of 
 
 1 That stockholders may sue under 
 the conditions stated in these last 
 two paragraphs was held in Barr v. 
 New York, L. E. &. W. R. R. Co, 96 
 N. Y. 444 ; Slatterly v. St. Louis, 
 etc., News Co., 91 Mo. 217. See 
 Sheridan v. Sheridan Electric Light 
 Co., 38 Hun (N. Y.) 396. 
 
 2 The doctrines of Hawes v. Oak - 
 land were approved and reiterated in 
 Detroit v. Dean, 100 U. S. 537^ See, 
 also, Moore v. Silver Valley Mfg. Co., 
 104 N. C. 534; State v. Railway Co., 
 45 S. C. 470. 
 
 Rule 94 of the Rules of Practice 
 
 112 
 
 for Courts of Equity of the United 
 States expresses the Federal doc- 
 trine. It is as follows: — 
 
 "Every bill brought by one or 
 more stockholders in a corporation 
 against the corporation and other 
 parties, founded on rights which may 
 properly be asserted by the corpora- 
 tion, must be verified by oath, and 
 must contain an allegation that the 
 plaintiff was a shareholder at the 
 time of the transaction of which he 
 complains, or that his share had de- 
 volved on him since by operation of 
 law; and that the suit is not a collu-
 
 PART I.] CONSTRUCTION OP CORPORATE POWERS. [§ 143. 
 
 the corporation to act, may bring a suit against an outsider on 
 any ordinary right of action pertaining to the cor- 
 poration, to recover damages for injuries which have S hare-° 
 already been suffered. 1 The shareholder must show 
 that he would suffer irremediable loss were he not 
 allowed to bring suit ; 2 and this will be more difficult 
 to show when the right of action results from past 
 injuries. 
 
 § 143. Kegarding service of process on corporations, little 
 may be said of general applicability, as this is largely 
 a matter of local practice, regulated in nearly all the process on 
 states by statutes which designate the mode of ser- JJKf 8 " 
 vice and the officer to whom it may be made. 3 A 
 corporation may appear voluntarily by attorney, and such ap- 
 
 holder to 
 sue in 
 respect of 
 injuries 
 already 
 accrued. 
 
 sive one to confer on a court of the 
 United States jurisdiction of a case 
 of which it would not otherwise have 
 cognizance. It must also set forth 
 with particularity the efforts of the 
 plaintiff to secure such action as he 
 desires on the part of the managing 
 directors or trustees and, if neces- 
 sary, of the shareholders, and the 
 causes of his failure to obtain such 
 action." 104 U. S. IX. See Quincy 
 v. Steel, 120 U. S. 241. Possibly with 
 a view to protecting Federal courts 
 from a mass of cases in which the 
 request and refusal are collusive, 
 and gone through with merely that 
 the suit may be brought in a Federal 
 court, the Supreme Court of the 
 United States limits strictly the right 
 of shareholders to sue for the corpo- 
 ration. The state courts are not so 
 strict. In the majority of cases 
 where this question arises, suit is 
 brought by shareholders against the 
 corporation or its officers to prevent 
 improper or ultra vires acts, or ob- 
 tain damages for the same. For the 
 competency of shareholders to sus- 
 tain suits against the corporation 
 under such circumstances, see §§ 554 
 -560; and for the competency of 
 
 8 
 
 shareholders to sue the wrongfully 
 acting officers of a corporation, see 
 §§ 685-691. 
 
 1 Samuels ». Central Overland Ex- 
 press Co., McCahon (Kaus. ), 214; S. 
 C. under name of Samuel v. Holla- 
 day, 1 Woolw. 400. Compare Carter 
 o. Ford Plate Glass Co., 85 Ind. 180. 
 Yet this distinction seems question- 
 able. It is disapproved in City of 
 Chicago v. Cameron, 120 111. 447, 458, 
 in which case the lapse of eleven 
 years was held, under the circum- 
 stances, not to constitute laches on 
 the part of the shareholders. 
 
 2 See Detroit v. Dean, 106 U. S. 
 537, 542. In general, the English 
 authorities accord with what has 
 been stated in the text; see Russel 
 v. Wakefield Waterworks Co., L. R. 
 20 Eq. 474; Gray v. Lewis, L. R. 8 
 Ch. 1035 ; Foss v. Harbottle, 2 Hare, 
 461; Mozley v. Alston, 1 Phill. 790. 
 They are more fully discussed in 
 §§ 553-557. 
 
 3 See, e. g., Great West. M'g Co. v. 
 Woodmas, etc., Co., 11 Col. 46. For 
 a discussion of the validity of ser- 
 vice on foreign corporations, see 
 §§ 395-399. 
 
 113
 
 § 145.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 pearance gives jurisdiction to the same extent as actual service 
 
 of process. 1 And a corporation may be punished for contempt 
 
 in disobeying an injunction. 2 
 
 § 144. So long as a corporation is not dissolved, the appoint- 
 ment of a receiver of its assets does not prevent 
 bringing suit against it on a cause of action arising 
 from transactions which took place prior to the ap- 
 pointment of the receiver. 3 
 § 145. The following is a rule of wide application. When a 
 body of men are acting as a corporation under color 
 of apparent organization in pursuance of some charter 
 or enabling act, their legal authority to act as a cor- 
 poration cannot be questioned collaterally, but only in 
 a direct proceeding in the nature of a quo warranto. 
 Under such circumstances, if their organization is 
 
 irregular, they constitute a corporation de facto} Although this 
 
 Okerstrom, 70 Minn. 303. "As 
 
 Effect of 
 appoint- 
 ment of 
 receiver. 
 
 i?*'»^ Corporate 
 franchises 
 cannot be 
 questioned 
 collate- 
 rally. 
 General 
 rule. 
 
 1 Attorney-General v. Guardian 
 Mutual Ins. Co., 77 N. Y. 272. 
 
 2 Golden Gate, etc., M'g Co. v Su- 
 perior Court, 65 Cal. 187; compare 
 Hedges v. Superior Court, 67 Cal. 
 405; Sercomb v. Catlin, 128 111. 556. 
 
 3 Pringle v. Woolwortb, 90 N. Y. 
 502; Kincaid v. Dwinelle, 59 N. Y. 
 548. Suits pending against a corpo- 
 ration are not abated by the appoint- 
 ment of a receiver in the same court. 
 Mercantile Ins. Co. v. Jaynes, 87 111. 
 199; Toledo, etc., R. Co. v. Beggs, 85 
 111. 80. Appointment of a receiver 
 does not dissolve prior valid liens, 
 acquired by attachment or otherwise. 
 Graham v. Mat. Aid Soc, 161 Mass. 
 357. An attachment by a domestic 
 creditor of the assets of a foreign 
 corporation will not be defeated by 
 a prior appointment of a receiver in 
 the state of its domicile. Solis, Rec'r, 
 v. Blank, 199 Pa. St. 600. 
 
 4 Society Perun v. Cleveland, 43 O. 
 St. 481; Stout o. Zulick, 48 N. J. L. 
 599, 601 ; Baltimore & P. R. R. ». Fifth 
 Baptist Church, 137 U. S. 568; Bibb 
 v. Hall, 101 Ala. 79; Harris v. Gate- 
 way Land Co., 128 Ala. 652; Johnson 
 
 114 
 
 against all persons who have entered 
 into contracts with bodies assuming 
 to act in a corporate capacity, it is 
 sufficient for such bodies to .show 
 themselves corporations de facto. 
 This cannot be done by showing 
 that they have acted as corporations 
 for any period of time, however long. 
 Two things are necessary to be 
 shown in order to establish the ex- 
 istence of a corporation de facto, 
 viz : 1. The existence of a charter, 
 or some law under which a corpora- 
 tion with the powers assumed might 
 lawfully be created; and 2, a user by 
 the party to the suit of the rights 
 claimed to be conferred by such 
 charter or law." Selden, J., in 
 Methodist Episcopal Union Church 
 v. Pickett, 19 N. Y. 482, 485. See 
 St. Louis, etc., R. R. Co. v. Belleville 
 Ky. Co., 158 111. 390. Compare Uni- 
 ted States Bank v. Stearns, 15 Wend. 
 314; St. Paul Fire Ins. Co. v. Allis, 
 24 Minn. 75; De Witt v. Hastings, 69 
 N. Y. 518; Factors, etc., Ins. Co. v. 
 New Harbor Protection Co., 37 La. 
 Ann. 233; Hicks v. Converse, 37 La.
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 146. 
 
 general rule is of all but universal applicability when the per- 
 son seeking to question the validity of the corporate organiza- 
 tion is affected with some estoppel arising from his own acts, 
 yet even then it is subject to limitations ; and a fortiori is it 
 subject to limitations when no such estoppel exists. Its appli- 
 cation when there exists an estoppel affecting the party attack- 
 ing the corporate organization will first be considered. 
 
 § 146. When a body of men have been acting as a corpora- 
 tion de facto, under color of apparent organization, 
 and it is sought to hold them to the legal consequences the rule, 
 which would have attended their actions had they ^toppei 
 been legally organized as a corporation, they will be affectsthe 
 estopped from denying the legality of their corporate 
 organization. l C On the other hand, when a person has con- 
 tracted with such a body as a corporation, he also will be> r ' 
 estopped from denying their legal incorporation when sued on > p 
 his contract. 2 As Justice Gray said in a recent decision of the 
 
 5 
 
 ft 
 
 
 ^ 
 
 ^ 
 
 V 
 
 Ann. 484; Hudson v. Green Hill 
 Seminary, 113 111. 618; Rose Hill, etc., 
 Road. Co. v. People, 115 111. 133; 
 Brown v. Atlantic Ry. Co., 113 Ga. 
 462; Taylor v. St. Ry. Co., 91 Me. 
 193. 
 
 1 Georgia Ice Co. v. Porter, 70 Ga. 
 637. To a suit on a contract to pay 
 money, or on its note, a corporation 
 cannot plead nul tiel corporation. 
 McCullough v. Talladega Ins. Co., 
 46 Ala. 376; Empire M'f'g Co. v. 
 Stuart, 46 Mich. 482. Even though 
 the contract be made after the expi- 
 ration of the defendant's charter. 
 Brady ». Insurance Co., 2 Pennewell, 
 237. A corporation by appearing in 
 a suit admits its corporate existence. 
 Missouri River, etc., R. R. Co. v. 
 Shirley, 20 Kans. 660. A corpora- 
 tion is estopped from setting up, in 
 defence to an action, the falsity of 
 its certificate of organization or the 
 fact that no certificate had been filed. 
 Dooley i\ Cheshire Glass Co., 15 Gray, 
 494; Merrick v. Reynolds Engine, 
 etc., Co., 101 Mass. 381; Humphrey 
 
 v. Patrons' Mercantile Ass'n, 50 
 Iowa, 607; see Hawes v. Anglo-Saxon 
 Petroleum Co., 101 Mass. 385; Kelly 
 v. Newburyport Horse R. R., 141 
 Mass. 496. When a corporation ac- 
 cepts a charter from Tennessee, and 
 acts as a Tennessee corporation, it 
 will be estopped, in a suit against it 
 on its obligations, from ousting the 
 jurisdiction of a Federal court by 
 denying its Tennessee citizenship. 
 Blackburn v. Selma M. and M. R. R 
 Co., 2 Flippin, 525. But see Heini 
 v. Adams, etc., M'f'g Co., 81 Ky. 300, 
 overruled in Walton v. Riley, 85 Ky. 
 413. 
 
 2 Frost v. Frostburg Coal Co., 24 
 How. 278; Commercial B'k v. Pfeif- 
 fer, 108 N. Y. 242; Booske c. Gulf 
 Ice Co., 24 Fla. 551; French v. Dono- ^ 
 hue, 29 Minn. Ill; Job 
 vester Co. v. Clark, 30 
 Fianz v. Teutonia Building Ass'n, 
 24 Md. 259; Keene v. Van Reuth, 48 
 Md. 184; Ramsey v. Peoria Mariner- 
 Ins. Co., 55 111. 311; Stoutmore v - 
 
 
 Clark, 70 Mo. 471; 
 
 Studebaker v 
 
 115 
 
 ^^
 
 § 146.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Supreme Court of the United States : l " One who deals with a 
 corporation as existing in fact, is estopped to deny as against 
 the corporation that it has been legally organized." Or as Judge 
 Cooley expressed the same principle more at length in Swart- 
 wout v. Michigan Air Line Railroad Co. : 2 " Where there is 
 thus a corporation de facto with no want of legislative power 
 to its due and legal existence ; where it is proceeding in the 
 performance of corporate functions, and the public are deal- 
 ing with it on the supposition that it is what it professes to be, 
 and the questions suggested are only whether there has been 
 exact regularity and strict compliance with the provisions of 
 the law relating to incorporation ; it is plainly a dictate of 
 justice and of public policy, that in controversies between the 
 de facto corporation and those who have entered into contract 
 relations with it, as corporators or otherwise, such questions 
 should not be suffered to be raised." 3 
 
 Montgomery, 74 Mo. 101; Ryan v. 
 Vallandingham, 7 Ind. 416; Beatty 
 v. Bartholomew County Agricultural 
 Soc, 76 Ind. 91; Jones v. Kokomo 
 B'ld'g Ass'n, 77 Ind. 340; Smelser v. 
 Wayne Turnpike Co., 82 Ind. 417; 
 Jones v. Cincinnati Type Foundry 
 Co., 14 Ind. 89; Butchers and Dro- 
 vers' Bank v. McDonald, 130 Mass. 
 264; Spahr v. Farmers' Bank, 94 Pa. 
 St. 429; Jones v. Bank of Tennessee, 
 8 B. Mon. (Ky.) 122; Cahill v. Citi- 
 zens' Mut. B'ld'g Ass'n, 61 Ala, 232; 
 Imboden v. Etowah, etc., M'f'g Co., 
 70 Ga. 86; Christian, etc., Grocery 
 Co. v. Fruitdale Lumber Co., 121 
 Ala. 340; Petty v. Brunswick Ry. 
 Co., 109 Ga. 666; Equitable B. & L. 
 Ass'n v. Bidwell, 60 Neb. 169; Wash- 
 ington Ins. Ass'n v. Stanley, 38 Or. 
 319. Compare Brown v. Mortgage 
 Co., 110 111. 235; Hudson v. Green 
 Hill Seminary, 113 111. 618; Town of 
 Searcy v. Yarnell, 47 Ark. 269. A 
 person who has conveyed land to a 
 corporation is estopped from suing 
 to recover it on the ground that at 
 the time of his conveyance the cor- 
 
 116 
 
 poration had not been duly organ- 
 ized, and so was incapable of taking. 
 Baker v. Neff, 73 Ind. 68; Jones ». 
 Hale, 32 Or. 465. These principles 
 are embodied in a statute in Iowa 
 Code, § 1089; see Carrothers v. New- 
 ton Spring Co., 61 Iowa, 681. 
 
 1 Close v. Glenwood Cemetery, 107 
 U. S. 466. 
 
 2 24 Mich. 389, 393. 
 
 3 See, also, City of St. Louis v. 
 Shields, 62 Mo. 247; Boise City Canal 
 Co. v. Pinkham, 1 Idaho, 790; Good- 
 rich v. Reynolds, 31 111. 490; German 
 Ins. Co. v. StraW, 13 Phila. 512; Mer- 
 chants and Planters' Line v. Waga- 
 ner, 71 Ala. 581; Bates v. Wilson, 
 etc., Co., 14 Col. 140. See, also, 
 Marsh v. Matliias, 19 Utah, 350. 
 This estoppel applies even when it 
 is sought to allege that the corpora- 
 tion was formed under an unconsti- 
 tutional law. Winget v. Building 
 Ass'n, 128 111. 67. Compare Eaton 
 v. Walker, 76 Mich. 579. 
 
 Contracting with a corporation un- 
 der its amended charter, by the name 
 which the amended charter author-
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 148. 
 
 § 147. Consequently, fraud in obtaining the charter of a cor- 
 poration cannot be interposed as a defence by one of its debt- 
 
 allege that it has done acts forfeiting its franchises. 2 
 
 § 148. Further, persons who have contracted with a corpora- 
 tion as such, and have thus acquired claims against it, are es- 
 topped from denying its corporate existence for the purpose of 
 holding its shareholders liable as partners. 3 This last proposi- 
 tion, however, does not hold where the enabling act under 
 which the corporation is formed expressly provides, or by the 
 general tenor of its terms clearly indicates, that the sharehold- 
 ers shall receive no protection from their organization unless 
 the requirements of the act are fully complied with. 4 Nor does 
 
 ized it to take, estops a person from 
 denying the acceptance of the amend- 
 ment. Eppes v. Miss., Gainesville, 
 etc., R. R. Co., 33 Ala. 33. A person 
 claiming title under a deed which re- 
 cites that it is suhject to a mortgage 
 to a corporation, is estopped from 
 questioning the legal organization of 
 such corporation. Hasenritter v. 
 Kirchhoffer, 79 Mo. 239. 
 
 1 Pattison v. Albany Building Ass'n, 
 63 Ga. 373; Kishacoquillas, etc., 
 Turnpike Co. v. McConaby, 16 S. & 
 R. (Penn. ) 140; Kayser v. Trustees 
 of Bremen, 16 Mo. 88. But only on 
 quo warranto. Charles River Bridge 
 B.Warren Bridge, 7 Pick. 344; see Au- 
 rora, etc., R. R. Co. v. Lawrence- 
 burgh, 56 Ind. 80. 
 
 2 Chubb v. Upton, 95 U. S. 665; 
 Slocum v. Providence Steam & Gas 
 Pipe Co., 10 R. I. 112; Freeland v. 
 Pennsylvania Central Ins. Co., 94 
 Pa. St. 504; compare Swartwout v. 
 Michigan Air Line Co., 24 Mich. 389; 
 Toledo and Ann Arbor R. R. Co. v. 
 Johnson, 49 Mich. 148; and see in 
 detail with full authorities, §§ 537- 
 539, 738, 739. 
 
 8 Sniders' Sons Co. v. Troy, 91 Ala. 
 224; Rutherford v. Hill, 22 Oreg. 218; 
 
 Fay v. Noble, 7 Cush. 188; Trow- 
 bridge v. Scudder, 11 Cush. 83; First 
 Nat. Bk. v. Almy, 117 Mass. 476; 
 Humphreys v. Mooney, 5 Colorado, 
 282; Merchants and Manufacturers' 
 Bk. u. Stone, 38 Mich. 779; Second 
 Nat. Bk. v. Hall, 35 Ohio St. 158; 
 Planters', etc., Bank v. Padgett, 69 
 Ga. 159; Stout v. Zurich, 48 N. J. L. 
 599. See New York Iron Mine v. 
 First Nat. Bk. 39, Mich. 644; Stafford 
 Nat. Bk. v. Palmer, 47 Conn. 443; 
 Doty u. Patterson, 155 Ind. 60; Saw- 
 tell v. Hewitt, 50 La. Ann. 3; Los An- 
 geles Holiness Band v. Spires, 126 Cal. 
 541. See § 739. 
 
 4 See Singer v. Given, 61 Iowa, 93; 
 Marshall v. Harris, 55 Iowa, 182; Eis- 
 feld v. Kenworth, 50 Iowa, 389; 
 Kaiser v. Lawrence Savings Bk., 56 
 Iowa, 194; Garnet v. Richardson, 35 
 Ark. 145; Ferris v. Thaw, 72 Mo. 446. 
 See Smith v. Colorado Fire Ins. Co., 
 14 Fed. Rep. 399. When there is no 
 " organization " beyond filing arti- 
 cles, no subscriptions, no adoption of 
 by-laws, no properly elected officers, 
 the parties taking part are individu- 
 ally liable. Walton v. Oliver, 49 Kan. 
 107. See § 739, notes. 
 
 117
 
 § 150.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 it hold where the authority under which the would-be share- 
 holders have attempted to form themselves into a corporation 
 is no authority at all, so that their organization never had even 
 the appearance of validity : as. if, for instance, a body of men 
 in New Jersey should attempt to form themselves into a corpo- 
 ration under the laws of New York. 1 Such a body would not 
 constitute a de facto corporation. 
 
 § 149. The foregoing rules, as resting on principles of estoppel, 
 are subject to still further qualifications. 2 The principle of es- 
 toppel cannot be carried so far as to bar the plea that the con- 
 tract on which suit is brought is illegal : malum prohibitum or 
 malum in se ; for, from motives of public policy the law will 
 not lend itself to enforce such a contract. 3 Likewise the law 
 will not aid an illegal enterprise b} r enforcing a contract at the 
 suit of a corporation incorporated for an illegal purpose. 4 If, 
 however, there is nothing illegal in the purposes for which a 
 corporation has been formed, the illegal nature of the de facto 
 legislature that incorporated or purported to incorporate it will 
 not so infect it with illegality as to render it incapable of suing 
 in its corporate name. 5 
 
 § 150. As a final and obvious limitation on these rules as 
 resting on estoppel, it must appear that there is an estoppel 
 affecting the party who would deny the corporate existence. 
 As was said in Dojde v. JSTizner : 6 " There are certainly many 
 
 iHill v. Beach, 12 N. J. Eq. 31. 
 Compare Methodist Episcopal 
 Church v. Pickett, 19 N. Y. 483, 485; 
 Lewis v. Tilton, 64 Iowa, 220. A 
 corporation organized under a void 
 law cannot enforce a mortgage made 
 to it. But, if not organized for an 
 unlawful purpose, its receiver can 
 demand an accounting for the debt 
 in a court of equity. Burton v. 
 Schildbach, 45 Mich. 504. 
 
 2 An estoppel cannot be relied on 
 in the face of a statute. Thus where 
 the civil code prescribes that an un- 
 authorized corporation canuot ap- 
 pear in court, a defendant may plead 
 that the corporation cannot sue. 
 World ngmen's Bank «. Converse, 29 
 
 118 
 
 La. Ann. 369; see Nat. B'k v. Phoenix 
 Warehousing Co., 6 Hun, 71. 
 8 See §§297 et seq. 
 
 4 Detroit Schuetzen Bund v. De- 
 troit Agitations Verein, 44 Mich. 
 313. A shareholder is not estopped 
 by his subscription from denying the 
 lawful existence of a corporation 
 prohibited by the state constitution. 
 St. Louis Colonization Ass'n v. Hen- 
 nessy, 11 Mo. App. 555; see, also, 
 Chicora Co. v. Crews, 6 S. C. 243, 
 and, semble contra, Importing and 
 Exporting Co. v. Locke, 50 Ala. 332. 
 
 5 United States v. Insurance Cos., 
 22 Wall. 99. 
 
 « 42 Mich. 332, 336. See, also, 
 Mansfield, etc., R. R. Co. v. Drinker,
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 151. 
 
 cases in which a recognition of corporate existence by dealing 
 with the corporation will estop from questioning it. But this 
 doctrine rests on the ground that such action creates relations 
 and encourages conduct which there may be difficult}' in un- 
 doing. In ordinary cases such recognitions have been consid- 
 ered as binding. But this rule is one originating in equitable 
 principles, and cannot be applied universally. There would 
 be no sense in applying it where no new rights have intervened, 
 and where such recognition has itself been brought about by 
 fraudulent dealing carried on for the very purpose of entrapping 
 a party into the action on which such recognition is rested. 
 If there was no corporation in fact, and if there are no facts 
 which make it legally unjust to permit its denial, it is difficult 
 to understand what room there is for an estoppel." 
 
 § 151. The application of the general rule against collateral 
 attacks on corporate franchises to cases where there ~ 
 
 r Scope of 
 
 is no estoppel affecting the person seeking to impugn the rule 
 them, may now be considered. Under such circum- estoppel 
 stances the rule applies whenever one or both of the exists - 
 following reasons hold good. The first reason lies in the ob- 
 vious principle that a person to be entitled to maintain a legal 
 proceeding questioning the rights, immunities, or privileges of 
 others, must himself have some title, or legal or equitable 
 interest, in the subject in regard to which the rights, privileges, 
 or immunities exist. Otherwise he has no standing in court. 1 
 When one man is exercising a right of way over another's land, 
 a third person with no interest in the land cannot maintain an 
 action to try the validity of the right of way, for in plain Eng- 
 
 30 Mich. 124; Day v. Insurance Co., 
 75 Iowa, 694. After the charter has 
 expired a person is not estopped from 
 pleading nul tiel corporation to a suit 
 brought by the defunct corporation. 
 The action must be brought in some 
 other manner. Krutz b. Paola Town 
 Co., 20 Kans. 297; contra St. Louis 
 Gas Light Co. v. St. Louis, 11 Mo. 
 App. 55 ; aff'd 84 Mo. 202. West 
 Mo. Land Co. v. Kansas City Sub. 
 Belt R'y Co., 161 Mo. 595; Compare 
 Brooklyn Steam Transit Co. v. Brook- 
 
 lyn, 78 N. Y. 524; Newton MTg Co. 
 v. White, 42 Ga. 148. 
 
 1 A junior mortgagee cannot defeat 
 the rights of a senior mortgagee, a 
 corporation, by setting up defects in 
 the latter's organization. William- 
 son v. Kokomo B'ld'g Ass'n, 89 Ind. 
 389. See § 146 and note. A transfer 
 of land by a de facto corporation is 
 valid against everyone except the 
 state. Crenshaw v. Ullman, 113 Mo. 
 633. 
 
 119
 
 § 152.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 lish it is none of his business. Likewise, the question whether 
 a body of men acting as a corporation are legally incorporated, 
 is not the affair of a person whose rights are in no way affected. 
 That a body of men shall not without due incorporation act as 
 a body corporate is undoubtedly public policy. According-ty, 
 any one may bring the matter to the attention of the attorney- 
 general, who, on receiving the information, may institute, on 
 behalf of the state, a proceeding in the nature of &quo warranto. 
 But a private person cannot do this in his own name. 1 
 
 A case well illustrating the hardship and injustice which 
 might result could any one at his will impugn the legality of 
 corporate organization, is that of the Cincinnati, Lafayette, etc., 
 Railroad Co. v. Danville and Vincennes Railway Co. 2 The de- 
 fendant corporation, relying on technical defects in the organ- 
 ization of the plaintiff, had instituted proceedings to acquire, 
 by virtue of defendant's delegated right of eminent domain, 
 the land on which the plaintiff's road was built, and in these 
 proceedings had entirely ignored the plaintiff and its right of 
 way, acquired by purchase over this land, the defendant's hope 
 being thus to avoid making compensation to the plaintiff for 
 the plaintiff's right of way. The plaintiff brought suit to 
 restrain these proceedings, and the court sustained the action, 
 holding that, notwithstanding the plaintiff's defective organi- 
 zation, the defendant could not appropriate its property without 
 making compensation. 
 
 § 152. Accordingly, where two railroad companies have each 
 authority to build and run a railroad between the same termini, 
 neither can take exceptions to any irregularity in the exercise 
 of the other's franchises, unless it can show a particular injury 
 to itself. 3 If, however, a railroad company is chartered with 
 the exclusive right to build a railroad between two given points, 
 
 1 Louisiana Savings Bank, Matter 
 of, 35 La. Aim. 196 ; North v. State, 
 107 Ind. 356. See § 460. 
 
 2 75 111. 113. Compare Union 
 Branch R. R. Co. v. East Tenn., 
 etc., R. R. Co., 14 Ga. 327. 
 
 3 Erie R'y Co., v. Delaware, L. & 
 W. R. R. Co., 21 N. J. Eq. 2S3. See 
 West Jersey R. R. Co. v. Cape May, 
 etc., R. R. Co., 34 N. J. Eq. 164 ; 
 
 120 
 
 Market St. R'y Co. v. Central R'y 
 Co., 51 Cal. 583. 
 
 A chartered turnpike company has 
 no right of action against a railroad 
 company subsequently chartered to 
 run between the same termini and 
 along the same line of travel for di- 
 verting its custom. Washington, etc., 
 T. Road v. Baltimore & O. R. R. Co., 
 10 G. & J. (Md.) 392; White River
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 153. 
 
 it may enjoin another company, possessing no adequate and 
 constitutional authority, from building a road between the same 
 points. 1 Likewise, where a street railway company has the 
 right that no other parallel railway shall be built within three 
 blocks, it may enjoin an invasion of its rights without further 
 proof of damage than that its right is invaded. 2 0^o?*r-< 
 
 YY^lf^ § 153. The second reason why a person, although affected by /\ % 
 no estoppel, may not collaterally question the validity of cor- - 
 porate franchises lies in the great hardship to which corpora- ^*=- 
 tions would be subject if they could be forced in any proceeding, 
 in order to enforce their rights, to prove the absolute legal reg- 
 ularity of their organization. And thus it is, that only in a 
 direct proceeding brought in proper form to test the validity of 
 its franchises, or in a proceeding where the corporation is itself 
 seeking to exercise a special franchise, which the other party 
 denies to exist, or which the corporation is entitled to exercise 
 only by virtue of its regular and complete organization, can the 
 corporation be compelled to prove anything more than a de 
 facto organization. 
 
 Mackall v. Chesapeake, etc., Canal Co. 3 is an instructive case 
 in point. There the property of the canal company, by its 
 charter exempted from taxation, had been sold under a tax sale, 
 and the purchaser, to sustain the valid ity of the sale, pleaded 
 that the company had forfeited its privileges. But the court 
 held, that the question of the company's forfeiture of its right 
 to hold, free from taxation, property no longer in use for canal 
 purposes, could be judicially determined only in a direct pro- 
 ceeding by the public authorities, and could not be made an is- 
 sue for the first time in the trial of a question of private right 
 between the company and a purchaser under a tax sale. 4 
 
 T. Co. v. Vermont Central R. R. Co., 
 21 Vt. 590; Thorpe v. Rutland & B. 
 R. R. Co., 27 Vt. 140, 152. See §453. 
 
 1 Raritan & D. B. R. R. Co. o. Del- 
 aware, etc., Canal Co., 18 N. J. Eq. 
 546; Boston & L. R. R. Co. v. Salem, 
 etc., R. R. Co., 2 Gray (Mass.), 1; 
 Pontchartrain R. R. Co. v. New Or- 
 leans, etc., R. R. Co., 11 La. Ann. 253. 
 
 2 St. Louis R. R. Co. v. Northwest- 
 ern St. L. R'y Co., 69 Mo. 65. Such 
 
 exclusive franchises are, of course, 
 to be construed strictly against the 
 grantee; see Louisville & P. R. R. 
 Co. v. Louisville City R'y Co., 2 Duv. 
 (Ky. ) 175, and §453; and may be 
 taken by eminent domain. See 
 §470. 
 
 3 94 U. S. 308. 
 
 4 See, also, Toledo & Ann Arbor 
 R. R. Co. v. Johnson, 49 Mich. 148; 
 Osborne v. People, 103 111. 224; New 
 
 121
 
 § 155.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VH. 
 
 § 154. It is evident that no reason heretofore stated for the 
 rule against allowing collateral attacks on corporate franchises 
 applies where the corporation is seeking to enforce against a 
 person affected by no estoppel some right which the corpora- 
 tion possesses only by virtue of its regular and legal organiza- 
 tion ; for in such cases the legal, not the de facto, organization 
 of the corporation forms the basis of its rights, and there is no 
 hardship in putting the corporation to the proof of the validity 
 of its franchises, when it is itself in the same proceeding basing 
 its right directly on them. 
 
 Thus, in a Michigan case, a subscription had been made to 
 the stock of a certain railroad company, and subsequently from 
 this company and others a consolidated compan}^ was formed. 
 The consolidated company then brought suit to recover the 
 subscription, basing its action on its succession, under the stat- 
 ute authorizing the consolidation, to the rights of the former 
 companies ; and the court allowed the plea, that the consoli- 
 dated company had not complied with the terms of the statute 
 under which it had been formed. 1 
 
 § 155. Again, on the regular incorporation and continuing 
 validity of the franchise of a railroad company depends its 
 right by the delegated power of eminent domain to take prop- 
 erty for its use. Accordingly, if by non-fulfillment of condi- 
 tions in its charter, the corporation has forfeited its franchises, 
 
 Jersey Southern R. R. Co. v. Long 
 Branch Commissioners, 39 N. J. L. 
 28 ; Truckee, etc., Turnpike Co. v. 
 Campbell, 44 Cal. 89 ; Freeland v. 
 Pennsylvania Central Ins. Co., 94 Pa. 
 St. 504, 513; Keene v. Van Reuth, 48 
 Md. 184; Denver and Swansea R'y 
 Co. v. Denver City R'y Co., 2 Col. 
 673; Montgomery v. Merrill, 18 Mich. 
 339, 343 ; Hackensack Water Co. 
 o. De Kay, 36 N. J. Eq. 548; Asso- 
 ciation v. Fenner, 13 Phila. 107; Pix- 
 ley v. Roanoke Nav. Co., 75 Va. 320; 
 Lagrange, etc., R. R. Co. v. Rainey, 
 7 Coldw. (Tenn.) 420; and compare 
 Schulenberg v. Harriman, 21 Wall. 
 44; Van Wyck v. Knevals, 106 U. S. 
 360. 
 
 A plea to an action brought by a 
 
 122 
 
 corporation, that it has forfeited its 
 charter, is demurrable, unless a judi- 
 cial declaration of the forfeiture is 
 alleged. West v. Carolina Life Ins. 
 Co., 31 Ark. 476; Logan v. Vernon, 
 etc., R. R. Co., 90 Ind. 552 ; see 
 § 432. 
 
 1 Mansfield, etc., R. R. Co. v. 
 Drinker, 30 Mich. 124. The subscrib- 
 er had done no acts recognizing the 
 consolidated company, and so was 
 affected by no estoppel. See, also, 
 New Orleans Gas Light Co. v. Lou- 
 isiana Light, etc., Co., 11 Fed. Rep. 
 277. Compare Deaderick v. Wilson, 
 8 Bax. (Tenn.) 108, 128; Maryland 
 Tube Works v. West End Imp. Co., 
 87 Md. 207.
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 157. 
 
 this may be pleaded by any one whose property the corporation 
 is seeking to condemn. 1 And in a proceeding to condemn land 
 for a railroad, it has been held that an owner ma}*- den}^, and 
 thus force the corporation to prove, its due legal incorporation. 2 
 
 §156. Likewise a person, affected by no estoppel, against 
 whom a special separately granted franchise is sought to be 
 exercised, may, without questioning the general validity of the 
 corporate organization, deny the right of the company to exer- 
 cise that particular franchise. Thus, a corporation was organ- 
 ized to construct a bridge over a navigable stream, and by dis- 
 tinct action on the part of the county supervisors received the 
 franchise to take tolls for twenty years. It was held that a 
 person sued for tolls could plead that its right to demand them 
 had expired by the lapse of the twenty years. 3 
 
 § 157. If a corporation is defectively organized at the begin- 
 ning, legislative recognition of it as a corporation Defective 
 will cure the defects, 4 which often may be cured by ( 
 proper measures taken on the part of the corporation. 3 
 
 tion re- 
 mediable. 
 
 1 Matter of Brooklyn, W. and N. 
 Railway Co., 72 N. Y. 245; see § 166. 
 
 2 Powers v. Hazleton, etc., R'y Co., 
 33 Ohio St. 429; Atkinson v. Marietta, 
 etc., R. R. Co., 15 O. St. 21. Contra, 
 McAuley r. Columbus, Cbicago, etc., 
 R'y Co., 83 111. 348; Peoria & P. W. 
 R'y Co. v. Peoria & F. R'y Co., 105 
 111. 110; Reisner v. Strong, 24 Kan. 
 410; Schroeder v. Detroit, etc., R'y 
 Co., 44 Mich. 387; St. Joseph, etc., 
 R'y Co. v. Sbambaugh, 106 Mo. 557. 
 Compare Buncombe T. Co. v. Mc- 
 Carson, 1 Dev. & Bat. (N. C.) Law, 
 306; Railroad Co. v. Lumber Co., 
 114 N. C. 690; Farham v. D. & H. 
 Canal Co., 61 Pa. St. 265; National 
 Docks R. R. Co. v. Central R. R. Co., 
 32 N. J. Eq. 755. A court of equity 
 will enjoin a railroad company im- 
 properly and fraudulently organized 
 from condemning land. Niemeyer 
 v. Little Rock, etc., R'y Co., 43 Ark. 
 111. Compare East & West R. R. 
 
 Co. v. East Tennessee, etc., R. R. 
 Co., 75 Ala. 275. 
 
 3 Grand Rapids Bridge Co. v. 
 Prange, 35 Mich. 400. See Denver 
 and Swancy R'y Co. v. Denver City 
 R'y Co., 2 Col. 673. Compare Truc- 
 kee, etc., Turnpike Co. v. Campbell, 
 44 Cal. 89; Pixley v. Roanoke Navi- 
 gation Co., 75 Va. 320; Attorney- 
 General v. Utica Ins. Co., 2 Johns. 
 Ch. 371. 
 
 4 Comanche County v. Lewis, 133 
 U. S. 198; Kanawha Coal Co. v. 
 Kanawha and Ohio Coal Co., 7 
 Blatchf. 391 ; Basshor v. Dressel, 34 
 Md. 503; People v. Perrin, 56 Cal. 
 345; White v. Coventry, 29 Barb. 305; 
 Cochran v. Arnold, 58 Pa. St. 399; 
 State v. Lincoln Trust Co., 144 Mo. 
 562. A statute curing the defects in 
 the organization of a de facto corpora- 
 tion is not repugnant to a constitu- 
 tional provision prohibiting the crea- 
 tion of corporations by special act. 
 
 6 See Augur Steel Axle, etc., Co. 
 
 Whittier, 117 Mass. 451. 
 
 123
 
 § 159.] THE LAW OF PRIVATE CORPORATIONS. [(JHAP. VIL 
 
 § 158. It may be mentioned here that even where there is 
 no statute forbidding the formation of corporations 
 
 Right to . ° r 
 
 corporate with names similar to those of corporations already 
 in existence, 1 a corporation will be protected in 
 the exclusive use of its name; 2 especially when its namVTlesig- 
 nates the nature of the goods which it manufactures. 3 A cor- 
 poration has no implied power to change its name; 1 though it 
 would seem that a corporation may acquire a name by usage or 
 reputation, 5 and may even have more names than one. 6 
 
 § 159. The misnomer of a corporation in contracting or 
 
 pleading has an effect similar to the misnomer of an 
 
 Effect of a individual. If, from the body of a written contract 
 
 misnomer. ' J 
 
 in which a corporation is misnamed, the corporation 
 intended can be ascertained, the misnomer is immaterial. 7 
 
 Central Agricultural Ass'n v. Ala- 
 bama Gold Life Ins. Co., 70 Ala. 120; 
 see, Brown v. Atlanta Ry. Co., 113 
 Ga. 462. 
 
 1 See, e. g., New York Laws of 
 1875, chap. 611, § 4. 
 
 2 In Tennessee a petition to chan- 
 cery for incorporation may be op- 
 posed if the proposed name for the 
 corporation is similar to that of an 
 existing corporation; and the court 
 may require the name to be modified. 
 Ex parte Walker, 1 Teun. Ch. 97. 
 Compare Diummond Tobacco Co. 
 v. Handle, 114 111. 412; In re First 
 Presbyterian Church, 111 Pa. St. 156. 
 
 3 Holmes v. Holmes M'f'g Co., 37 
 Conn. 278; compare Newby v. Ore- 
 gon Cent. R. R. Co., Deady, 60'J; see 
 §137. 
 
 * Sykes v. People, 132 111. 32; Cin- 
 cinnati C. Co. v. Bate, 96 Ky. 356; nor 
 acquire a new name by usagr. ib. Sec 
 Reg. v. Registrar, etc., 10 Q. B. 839. 
 But where the name of a corporation 
 is changed by the legislature, and by 
 its new name it is made the succes- 
 sor of all its rights and liabilities, it 
 may under the new name sue on a 
 note made to it under the old name; 
 although the note is not indorsed. 
 
 124 
 
 Trustees of Northwestern College v. 
 Schwagler, 37 Iowa, 577. As to the 
 right of a corporation to change its 
 name under the New York statute of 
 1870, see United States Mercantile, 
 etc., Ass'n, in re, 115 N. Y. 176; un- 
 der the Illinois statute, see Illinois 
 Watch Case Co. v. Pearson, 140 111. 
 423. Under California Statute, see 
 Matter of La Societe Francaise d' 
 Epargnes, 123 Cal. 525. 
 
 5 Smith v. Plank Road Co., 30 Ala. 
 650; Dutch West India Co. v. Van 
 Moses, 1 Stra. 612, 614; South School 
 District v. Blakeslee, 13 Conn. 227. 
 
 6 Minot v. Curtis, 7 Mass. 441. 
 Knight o. Mayor of Wells, 1 Ld; 
 Raym. 80. 
 
 7 Ryan v. Martin, 91 N. C. 464; 
 Asheville Division v. Aston, 92 N. C. 
 578. See Hoboken Building Associa- 
 tion v. Martin, 13 N. J. Eq. 427; 
 Boisgerard v. New York Banking Co., 
 2 Sandf. Ch. 23; Mott v. Hicks, 1 
 Cowen, 513; Brockway v. Allen, 17 
 Wend. 40. When a deed is made to 
 a corporation under a name varying 
 from its true one, the corporation 
 may sue in its true name, averring 
 that the defendant made the deed to 
 it under the name mentioned in the
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 161. 
 
 Where this cannot be done, parol evidence may be introduced 
 under proper averments in the pleadings. 
 
 160.~The powers more - especially incident or usual with"«^ 
 certain important classes of corporations may now be spoken of. /q^v, 
 § 161. To banking corporations 2 the powers to loan money (***~ 
 and take security therefor, 3 to deal in exchange, pur- ~Q^ 
 
 chase, discount 4 and collect 5 notes and bills, and to banking 
 receive deposits are incidental. 6 An ordinary bank tfons > . ra " 
 has incidentally the power as gratuitous bailee to re- 
 ceive a special deposit for safe-keeping ; and, as the enumera- 
 tion of banking powers in the National Banking Act is not an 
 enumeration of incidental powers, and places no special restric- 
 tion on national banks in this respect, a national bank may 
 receive a special deposit, and will be liable for its loss occurring 
 through gross negligence attributable to the bank. 7 It has 
 
 deed. Northwestern Distilling Co. v. 
 Brant, 69 111. 658. 
 
 1 Medway Cotton M'f'g Co. v. 
 Adams, 10 Mass. 360; Melledge v. 
 Boston Iron Co., 5 Cash. 158; Berks, 
 etc.', Turnpike Co. v. Myers, 6 S. & 
 R. 12; Milford, etc., Turnpike Co. v. 
 Brush, 10 Ohio, 111. 
 
 2 The right of banking is a common 
 law right ; but in New York, since 
 the restraining act of 1804, it has be- 
 come a franchise exercisable only by 
 persons authorized by the legisla- 
 ture. People v. Utica Ins. Co., 15 
 Johns. 358. 
 
 8 A national bank may loan on ne- 
 gotiable notes secured by collateral. 
 Shoemaker v. National Mechanics' 
 Bank, 1 Hughes, 101. It may take a 
 chattel mortgage to secure a pre- 
 viously contracted debt. Spafford 
 v. First Nat Bank, 37 Iowa, 181. It 
 may receive stocks and bonds as 
 collateral to secure present as well 
 as future indebtedness ; and will be 
 liable when such collateral is stolen 
 through its lack of reasonable care; 
 even where the collateral remains in 
 its custody after the debt is dis- 
 charged. Third Nat. Bk. v. Boyd, 
 
 44 Md. 47. As to the liability of a 
 bank on the certifications and accom- 
 modation indorsements of its offi- 
 cers, see §§ 242-245. A bank has im- 
 plied power to borrow money. Don- 
 nell o. Lewis C'y S. Bk., 80 Mo. 165. 
 Cf. West. Nat. Bk. v. Armstrong, 152 
 U. S. 346; Aldrich v. Chemical Nat.'l 
 Bank, 176 U. S. 618. 
 
 4 Smith v. Exchange Bank, 26 
 Ohio St. 141; Atlantic State Bank v. 
 Savery, 18 Hun, 36. 
 
 5 As to the liability of banks in 
 making collections for the misfeas- 
 ance of notaries and correspondent 
 banks, see Exchange Nat. Bk. v. 
 Third Nat. Bk., 112 U. S. 276 ; Davy 
 v. Jones, 42 N. J. L. 28; Ayrault v. 
 Pacific Bank, 47 N. Y. 570; Bank of 
 New Hanover v. Kenan, 76 N. C. 340; 
 Angell and Ames on Corp., §§ 249 et 
 seq.; Morse on Banking, third ed., 
 ch. 6. 
 
 6 In regard to the relations between 
 a bank and its depositors, see §§ 672, 
 673. 
 
 7 National Bank v. Graham, 100 U. 
 S. 699; Wylie U.Northampton Bank, 
 119 U. S. 361; Pattison v. Syracuse 
 Nat. Bank, 80 N. Y. 82. See Preston 
 
 125
 
 § 161.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 further been held within the powers of a bank to receive a de- 
 posit under an agreement to hold it as collateral security for 
 the performance of a contract between the depositor and a third 
 person. 1 
 
 A national bank may lawfully engage in the business of ex- 
 changing and dealing in government securities ; 2 but not in that 
 of dealing in stocks, 3 or selling railroad bonds on commission. 4 
 JNor is it within the powers of a state bank to subscribe for the 
 stock of a railroad corporation. 5 Any bank may assign or 
 convey property owned by it, and enter into the common 
 covenants of warranty. 6 And a national bank in selling real 
 estate competently acquired by it may take back a purchase- 
 money mortgage. 7 
 
 
 v. Prather, 137 U. S. 614, where 
 bankers were held liable, tbe bonds 
 on special deposit being stolen by 
 their cashier. But only if the loss 
 occur through gross negligence. 
 First Nat. Bank v. Rex, 89 Pa. St. 
 308; Lloyd v. West Branch Bank, 15 
 Pa. St. 172. In Bank v. Gent, 39 O. 
 St. 10."), it was held that a national 
 bank is liable for the loss of a spe- 
 cial deposit " occurring through the 
 want of that degree of care which 
 good business men would exercise in 
 keeping property of such value." 
 That the safe of a national bank is 
 broken and bonds stolen by burglars 
 is not evidence of negligence. Wylie 
 v. Northampton Bank, 119 U. S. 361; 
 First Nat. Bank v. Graham, 79 Pa. 
 St. 106. But see Wylie v. First Nat. 
 Bank, 47 Vt. 546; Whitney v. Same, 
 50 Vt. 388; S. C, 55 Vt. 154; First 
 Nat. Bank v. Ocean Nat. Bank, 60 
 N. Y. 278; and compare Foster v. 
 Essex Bank, 17 Mass. 479; Comp v. 
 Carlisle Deposit Hank, 94 Pa. St. 409. 
 In Greeley v. Nashua Savings Bank, 
 63 N. H. 145, the (savings) bank was 
 held not to be liable for bonds re- 
 ceived by its clerk on its behalf, 
 there being no further proof that 
 
 126 
 
 the bonds or their proceeds had 
 come into its possession. See, also, 
 §337. 
 
 iBushnell v. Chautauqua County 
 Nat. Bank, 74 N. Y. 290. 
 
 2 Van Leuven v. First Nat. Bank, 
 54 N. Y. 671; Yerkes v. Nat. Bank, 
 69 N. Y. 382. 
 
 3 First Nat. Bk. v. Nat. Ex. Bk., 92 
 U. S. 122; California Bk. v. Kennedy, 
 167 U. S. 362. 
 
 4 Weckler v. First Nat. Bank, 42 
 Md. 581; First Nat. Bank v. Hoch, 
 89 Pa. St. 324. 
 
 5 Nassau Bank v. Jones, 95 N. Y. 
 115; see § 130, note. 
 
 6 Talman v. Rochester City Bank, 
 18 Barb. 123. 
 
 7 New Orleans Nat. Bank v. Ray- 
 mond, 29 La. Ann. 355. Unauthor- 
 ized conveyances and mortgages to a 
 national bank are valid for all pur- 
 poses until questioned by the United 
 States. National Bank v. Matthews, 
 98 U. S. 621; Mapes v. Scott, 94 111. 
 379; Winton v. Little, 94 Pa. St. 64; 
 Oldham v. First Nat. Bank, 85 N. C. 
 240; see §303. 

 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 162. 
 
 § 162. In regard to railroad companies, the only capacities 
 requiring mention here * are their powers to locate 
 and construct their roads, and the power ordinarily railroad 
 granted to them to take property by compulsory tions ™" 
 process, there being delegated to them for this pur- -Eminent 
 pose a limited special right of eminent domain. 
 
 When, within certain limits, the course and manner of con- 
 structing a railroad are entrusted to the railroad company, or 
 to railroad commissioners, their discretion will not be controlled 
 or revised by a court so long as they act in good faith and 
 within their powers. 2 A court of equity will not interfere to 
 control the location of a railroad where the corporation has 
 exercised within the prescribed termini of its route its ac- 
 corded discretion ; 3 the court will not interfere, for instance, on 
 the ground that another site would better subserve public 
 interests. 4 But a railroad company is not justified in sacrificing 
 the public interest to its own advantage, and must regard the 
 interests of the public in locating its route and stations. 5 Fail- 
 ing in this, it cannot be regarded as acting in good faith. 
 Accordingly, on grounds of public policy, contracts to locate a 
 station at a certain spot, coupled with an agreement to estab- 
 lish no other stations in the same vicinity, are void. Ordi- 
 
 1 As to the power of railroad com- 
 panies to enter into traffic arrange- 
 ments, or give special facilities to 
 certain customers, see §§ 308, 309. 
 For their liability as carriers, see §§ 
 347, et seq. 
 
 In the ordinary course of its busi- 
 ness a railroad company may take 
 and negotiate a promissory note. 
 Goodrich v. Reynolds, 31 111. 490. 
 
 2 Fall River Iron Works Co. v. Old 
 Colony, etc., R. R. Co., 5 Allen 
 (Mass.), 221; Mayor, etc., of Wor- 
 cester v. Railroad Commissioners, 
 113 Mass. 161, 171; New York H. & 
 N. R. R. Co. v. Boston H. & E. R. R. 
 Co., 36 Conn. 196, 201. 
 
 8 Southern Minnesota R. R. Co. v. 
 Stoddard, 6 Minn. 150; Walker u. 
 Mad River & L. E. R. R. Co., 8 Ohio, 
 38. 
 
 4 Parker's Appeal, 64 Pa. St. 137 ; 
 Anspach c. Mahanoy, etc., R. R. Co., 
 5 Phila. (Penn.) 491. 
 
 5 A contract which causes the rail- 
 road compauy to disregard its duty 
 to the public, as by unduly lengthen- 
 ing its line for the private advantage 
 of its officers and of various persons, 
 is illegal. Woodstock Iron Co. v. 
 Extension Co., 129 U. S. 643. 
 
 6 Texas & St. L. R. R. Co. v. Ro- 
 bards, 60 Tex. 545; St. Louis J. & C. 
 R. R. Co. v. Mathers, 104 111. 257; S. 
 C, 71 111. 592; St. Joseph & D. R. R. 
 Co. v. Ryan, 11 Kan. 602; Pacific 
 R. R. Co. v. Seely, 45 Mo. 212; Ful- 
 ler v. Dame, 18 Pick. (Mass.) 472; 
 Bestor v. Wathen, 60 111. 138; Linder 
 v. Carpenter, 62 111. 309; Marsh v. 
 Fairbury, etc., R. R. Co., 64 111. 414; 
 People v. Chicago & A. R. R. Co., 130 
 
 127
 
 § 162)!.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VL1. 
 
 narily, however, a railroad company may use its discretion in 
 locating its stations, as it may in selecting its route, and, for 
 instance, is not bound to stop at the junction of a connecting 
 road and there interchange business, although it may have 
 established joint depot accommodations with another company 
 elsewhere. 1 
 
 § 162<z. After a railroad company has once located and built 
 its track, it has no power to change the location materially, 2 
 unless a statute give it special authority. 3 It can never be pre- 
 sumed that a legislature will pass a law to the detriment of the 
 public ; but it does not follow that from oversight or ignorance 
 of all the circumstances a law may not have been passed which 
 might be improved by amendment. Consequently a contract 
 by a railroad company, conditioned on its receiving power 
 from the legislature to change the location of its road, is not in- 
 valid as against public policy. 4 
 
 When a railroad company has located its road and obtained 
 title to the land, either the fee or the requisite easement, the 
 mode of occupation and degree of exclusiveness necessary and 
 proper for the convenient use of its functions are within its dis- 
 
 u 
 
 r 
 
 111. 175; Mobile & O. R. R. Co. v. Peo- 
 ple, 132 111. 559; Florida Central, etc., 
 R. R. Co. o. State, 31 Fla. 482; Hol- 
 laday v. Patterson, 5 Oreg. 177; com- 
 pare Harris v. Roberts, 12 Neb. 631 ; 
 Wooters v. International & G. N. R. 
 R. Co., 54 Tex. 294; Cleveland C. C. 
 & I. Ry. Co. v. Coburn, 91 Ind. 557; 
 Workman v. Campbell, 46 Mo. 305; 
 Berrymau v. Cincinnati Southern R. 
 R. Co., 14 Bush (Ky.), 755. But see 
 Cedar Rapids, etc., Ry. Co. v. Spof- 
 ford, 41 Iowa, 292; First Nat. Bank 
 v. Hendrie, 49 Iowa, 402. 
 
 i Atchison T. & S. F. R. R. Co. 
 v. Denver & N. O. R. R. Co., 110 U. 
 S. 6ti7. See, also, Martindale v. Kan- 
 sas City, St. Jo. & C. B. R. R. Co., 
 60 Mo. 508; Kinealy v. St. Louis K. 
 ('. & X. Ry. Co., 69 Mo. 658. 
 
 2 Little Miami R. R. Co. v. Naylor, 
 2 0. St. 235; WIrth v. Philadelphia 
 City Pass'r Ry. Co., 2 Weekly Notes 
 128 
 
 of Cases (Penn. ), 650 ; Brigham v. 
 Agricultural Branch R. R. Co., 1 
 Allen (Mass), 316; State v. New- 
 Haven & N. Co., 45 Conn. 331 ; Hart- 
 ford Ry. Co. v. Wagner, 73 Conn. 506 ; 
 No. Pac. Ry. Co. v. Doherty, 100 
 Wis. 39. But compare Mahaska 
 County R. R. Co. v. Des Moines Val- 
 ley R. R. Co., 28 Iowa, 437 ; Gear v. 
 Dubuque & S. C. R. R. Co., 20 Iowa, 
 523 ; Hestonville, etc., R. R. Co. v. 
 Philadelphia, 89 Pa. St. 210. 
 
 3 Eric R. R. Co. v. Steward, 170 
 N. Y. 172; see Toledo & U. Ry. Co. v. 
 Daniels, 16 O. St. 390 ; Atkinson v. 
 Marietta & C. R. R. Co., 15 O. St. 21; 
 Matter of New York, L. & W. Ry. 
 Co., 88 N. Y. 279. 
 
 4 Supervisors v. Wisconsin Central 
 R. R. Co., 121 Mass. 460 ; New Haven 
 and Northampton Co. v. Heyden, 107 
 Mass. 525 ; see § 305, last note.
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. 
 
 [§ 163. 
 
 cretion. 1 Nevertheless, when it takes but an easement, sufficient 
 interest remains in the owner of the fee to prevent the railroad 
 company from extending its use beyond the reasonable terms of 
 its easement, since that would be an encroachment on his re- 
 siduary rights. 2 
 
 An unrestricted grant to a railroad company of power to con- 
 struct a road between two points, carries with it the right 
 to cross navigable waters, if they intervene in a course or route 
 which is otherwise proper, and the road can be constructed 
 over them without destroying the public easement or seriously 
 impairing it. 3 
 
 § 163. The legislature cannot authorize the taking of private 
 property for private use, even on just compensation. 4 More- 
 over, the determination by the legislature that a purpose for 
 which it directs private property to be taken is a public pur- 
 pose is not conclusive, but open for determination by the courts ; 
 although if the use be public, legislative decision is conclusive 
 as to the public exigency requiring the property to be taken. 5 
 
 1 Brainard v. Clapp, 10 Cush. 
 (Mass.) 6 ; Hagen v. Boston & M. R. 
 R. Co., 2 Gray (Mass.), 577, 580 ; see 
 Prather v. Western Un. Tel. Co., 89 
 Ind. 501. Compare Hudson River 
 Tel. Co. v. Watervliet Turnpike, etc., 
 Co., 135 N. Y. 393. Although a rail- 
 road company takes but an ease- 
 ment, it may maintain ejectment. 
 Rutland R. R. Co. v. Chaffee, 71 Vt, 
 84. See § 165. 
 
 2 See Proprietors of Locks and Ca- 
 nals v. Nashua & L. R. R. Co., 104 
 Mass. 1 ; Aldrich v. Drury, 8 R. I. 
 554 ; Blake v. Rich, 34 N. H. 282 ; 
 Chapin v. Sullivan R. R. Co., 39 N. 
 H. 564 ; Jessup v. Loucks, 55 Pa. St. 
 350. 
 
 8 Miller v. Prairie du Chien, etc., 
 Ry. Co., 34 Wis. 533 ; Fall River Iron 
 Works Co. v. Old Colony, etc., R. R. 
 Co., 5 Allen (Mass. ) 221 ; Hamilton v. 
 Vicksburg S. & P. R. R. Co., 34 La, 
 Ann. 970. See § 163a for the taking 
 by a railroad company of land al- 
 
 9 
 
 ready devoted to a public use, as a 
 street or another railroad. 
 
 * Matter of Eureka Basin, etc., Co., 
 96 N. Y. 42 ; Lorenz v. Jacob, 63 Cal. 
 73 ; Scudder v. Trenton Delaware 
 Falls Co., Saxton (N. J.), 695 ; Con- 
 tra Costa Coal Mines R. R. Co. v. 
 Moss, 23 Cal. 323; Consolidated 
 Channel Co. v. Central Pacific R. R. 
 Co., 51 Cal. 269 ; Sadler v. Langham, 
 34 Ala. 311 ; County Court v. Gris- 
 wold, 58 Mo. 175 ; Palairet's Appeal, 
 67 Pa. St. 479. See Bass v. Roanoke 
 Nav. Co., Ill N. C. 439 ; Contra Har- 
 vey v. Thomas, 10 Watts., (Pa.), 63. 
 The taking by a state of private 
 property, without the owner's con- 
 sent, for a private use is not due 
 process of law, and is repugnant to 
 Amendment XIV. of the Federal 
 Constitution. Missouri, Pac. Ry. 
 Co. v. Nebraska, 164 U. S. 403. 
 
 6 Niagara Falls, etc., R. R. Co., in 
 re, 108 N. Y. 375 ; Talbot v. Hudson, 
 16 Gray (Mass.), 417 ; Chicago, R. I. 
 
 129
 
 § 163.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 The following uses have been held public purposes for which 
 the legislature may delegate to a private corporation the pow^r 
 to take private property : to supply a village with wholesome 
 water ; 1 build a bridge which by the same statute is declared a 
 public highway; 2 develop the mineral resources of the state; 3 
 irrigate large tracts of arid land ; 4 build (public) telegraph 
 lines ; 5 build and operate a railroad as a common carrier. 6 No 
 matter how apparently necessary to a corporation the right of 
 eminent domain may be to enable it to fulfill its corporate pur- 
 poses, the possession of this right can never be implied or pre- 
 sumed ; and express authority for its exercise must always be 
 shown. 7 The right of eminent domain of a railroad company, 
 
 & P. R. R. Co. v. Town of Lake, 71 
 111. 333 ; Sadler v. Langham, 34 Ala. 
 311 ; County Court v. Griswold, 58 
 Mo. 175 ; Concord R. R. v. Greely, 17 
 N. H. 47 ; Baltimore & O. R. R. Co. 
 v. Pittsburg, W. & K. R. R. Co., 17 
 W. Va. 812. 
 
 See Boston Water Power Co. v. 
 Boston & W. R. R Co., 23 Pick. 
 (Mass.) 360 ; Riche v. Bar Harbor 
 Water Co., 75 Me. 91 ; Tidewater 
 Co. v. Coster, 18 N. J. Eq. 518 ; 
 National Docks R. R. Co. v. Central 
 R. R., Co., 32 N. J. Eq. 755. Cf. 
 N. Y., N. H. & H. R. Co. v. Long, 69 
 Conn. 424. 
 
 But see Pratber v. Jeffersonville 
 M. & I. R. R. Co., 52 Ind. 16 ; Mims v. 
 Macon & W. R. R. Co., 3 Ga. 333, 
 338. 
 
 1 Ricbe v. Bar Harbor Water Co., 
 75 Me. 91. 
 
 2 Arnold v. Covington Bridge Co., 
 1 Duv. (Ky.) 372. 
 
 8 Hand Gold M'g Co. v. Parker, 
 59 Ga. 419 (perbaps extreme). 
 
 4 Irrigation Dist. v. Bradley, 164 
 U. S. 112. 
 
 6 New Orleans, etc., R. R. Co. v. 
 Southern, etc., Tel. Co., 53 Ala. 211. 
 
 6 National Docks R. R. Co. v. Cen- 
 tral R. R. Co., 32 N. J. Eq. 755; 
 Bloodgood v. Mobawk & H. R. R. 
 
 130 
 
 Co., 18 Wend. (N. Y.) 9; Beckman 
 v. Saratoga, etc., R. R. Co., 3 Paige 
 (N. Y.), 45; Buffalo & N. Y. C. R. 
 R. Co. v. Braiuard, 9 N. Y. 100; Ald- 
 ridge v. Tuscumbia R. R. Co., 2 Stew 
 & Port. (Ala.) 199; Davis v. Tuscum 
 bia R. R. Co., 4 Stew. & Port. (Ala. 
 421; Sadler v. Langbam, 34 Ala. 311 
 O'Hara v. Lexington & O. R. R. Co. 
 1 Dana (Ky.) 232; Concord R. R. Co 
 v. Greely, 17 N. H. 47; San Francisco 
 etc., R. R. Co. v. Caldwell, 31 Cal 
 367; Raleigh & G. R. R. Co. v. Da 
 vis, 2 Dev. & Bat. L. (N. C.) 451 
 Walther v. Warner, 25 Mo. 277; Swan 
 v. Williams, 2 Mich. 427. Compare 
 Niagara Falls, etc., R. R. Co., in re, 
 108 N. Y. 375. The power of emi- 
 nent domain, together with large 
 discretion as to route, may be given 
 railroad corporations by a general 
 enabling act. Buffalo & N. Y. C. R. 
 R. Co. v. Brainard, 9 N. Y. 100; Weir 
 v. St. Paul, etc., R. R. Co., 18 Minn. 
 155; National Docks R. R. Co. v. 
 Central R. R. Co., 32 N. J. Eq. 755. 
 See Chicago B. & Q. R. R. Co. v. 
 Chamberlain, 84 111. 333; Boston 
 Water Power Co. v. Boston & W. R. 
 R. Co., 23 Pick. (Mass.) 360. 
 
 7 Thacher v. Dartmouth Bridge 
 Co., 18 Pick. 501; Phillips v. Dun- 
 kirk, etc., R. R. Co., 78 Pa. St. 177. 

 
 PART I.J CONSTRUCTION OF CORPORATE POWERS. [§ 163. 
 
 moreover, extends only to property reasonably necessary to en- 
 able it to fulfill the purposes of its incorporation. 1 
 
 When the legislature has not declared that the property sought 
 to be condemned is necessary for the company, such necessity, 
 if contested is a question for the court ; for the determination 
 of the company in this matter is not conclusive ; 2 and the scope 
 of the right is always to be construed strictly against the cor- 
 poration, so as carefully to protect the property of individuals 
 from its exercise except for a public use. 3 Nevertheless, stat- 
 utes conferring the rights of eminent domain are not to be con- 
 strued so literally as to frustrate the evident intent of the leg- 
 islature. 4 
 
 See Allen v. Jones, 47Ind. 438; Rens- 
 selaer, etc., R. R. Co. v. Davis, 43 N. 
 Y. 137. And the right always re- 
 mains conditioned on the legality of 
 the corporate organization. See 
 § 155. 
 
 1 Tracy v. Elizabethtown, etc., R. 
 R. Co., 80 Ky. 259; Chicago and 
 Western Indiana R. R. Co. v. Dun- 
 bar, 100 111. 110. Railroad compan- 
 ies cannot thus acquire lands for 
 speculative purposes. Rensselaer, 
 etc., R. R. Co. b. Davis, 43 N. Y. 137. 
 See N. Y. and Canada R. R. Co. v. 
 Gunnison, 1 Hun, 496. But they 
 may take more than is necessary for 
 their present needs, provided it be 
 no more than reasonably anticipated 
 future business will require. Lodge 
 v. Phila., Wilm. and Bait. R. R. Co., 
 8 Phila. 345. Compare Proprietors 
 of Locks and Canals v. Nashua and 
 Lowell R. R. Co., 104 Mass. 1. 
 
 2 Matter of New York Central R. 
 R. Co., 66 N. Y. 407; S. C, 77 N. Y. 
 248; Rensselaer and S. R. Co. v. 
 Davis, 43 N. Y. 137; Tracy v. Eliza- 
 bethtown, etc., R. R. Co., 80 Ky. 
 259. St. Mary's Gas Co. v. Elk, 191 
 Pa. St. 458; See In re Rhode Isl. Sub. 
 Ry. Co., 22 R. I. 457. 
 
 3 Erie R. R. Co. v. Steward, 170 N. 
 Y. 172. Alexandria and F. Ry. Co. 
 
 v. Alexandria and W. R. R. Co., 75 
 Va. 780; Doughty v. Somerville, etc., 
 R. R. Co., 21 N. J. L. 442; Moorhead 
 v. Little Miami R. R. Co., 19 Ohio, 
 340; Merritt v. Portchester, 71 N. Y. 
 309; Pueblo, etc., R. R. Co. v. Rudd, 
 5 Cal. 270; Spofford v. Bucksport, 
 etc., R. R. Co. 66 Me. 26; East and 
 West R. R. Co. v. East Tennessee, 
 etc., R. R. Co., 75 Ala. 275; Alabama 
 Gt. Southern R. R. v. Gilbert, 71 Ga. 
 591. See § 122. 
 
 4 In re New York and Harlem R. 
 R. Co. v. Kip, 46 N. Y. 546. When 
 for some reason a railroad company 
 has no authority to condemn a cer- 
 tain right of way, it may cause an- 
 other company to be formed of its 
 own shareholders, and to be so or- 
 ganized as to have the requisite 
 power; and after the subsidiary com- 
 pany has condemned the right of 
 way, it may lease the same to the 
 other company. Lower v. C. B. and 
 Q. R. Co., 59 Iowa, 563. But one 
 railroad company cannot condemn 
 land for another. Swinney v. Ft. 
 Wayne, etc., R. R. Co., 59 Ind. 205. 
 It is no bar to the exercise of the 
 power of eminent domain that a 
 railroad company has the same stock- 
 holders as a private business cor- 
 poration, and is alleged to be subsid- 
 
 131
 
 § lG3a.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 In accordance with these principles it is held that a railroad 
 company may condemn land for proper places to keep cars and 
 locomotives when not in use, and for places to store merchan- 
 dise between the time of its receipt and dispatch, and after its 
 arrival till called for ; ' and generally for proper terminal facili- 
 ties, 2 for necessary depots and workshops. 3 
 
 § 163a. An individual, by devoting property to a public use, 
 acquires no higher rights in that property than he had before. 
 On the contrary, his rights as private owner become more pal- 
 pably subservient to the rights of the public and to the police 
 power of the state. 4 Accordingly, as far as concerns the rights 
 of the owners of property devoted to a public use, there is no 
 reason why the legislature should not authorize it to be taken 
 by compulsory process, and as for the rights of the people, the 
 compulsory proceedings are authorized by themselves acting 
 through their plenary political agent, the legislature. 5 Conse- 
 quently, the legislature can authorize property already devoted 
 to a public use to be taken for another public use by compul- 
 sory proceedings ; 6 it can, for instance, authorize one railroad 
 
 iary to it. That cannot be inquired 
 into upon an application to condemn 
 land, and the railroad company may 
 be compelled to perform the duties 
 imposed upon it. Kansas & Texas 
 Coal R'y v. Northwestern Coal & 
 Mining Co., 161 Mo. 288. 
 
 1 In re New York and H. R. R. R. 
 Co. v. Kip, 46 N. Y. 546. 
 
 2 New York Central and H. R. R. 
 R. Co. v. Metropolitan Gas Light Co., 
 63 N. Y. 326; Matter of New York 
 Central and H. R. R. R. Co., 77 N. 
 Y. 248. 
 
 8 Nashville and C. R. R. Co. v. 
 Corvardin, 11 Humph. (Tenn.) 348; 
 Gilsy v. Cincinnati U. & S. R. R. Co., 
 4 O. St. 308; Hamilton v. Annapolis 
 and E. R. R. Co., 1 Md. 560; Han- 
 nibal and St. Jo. R. R. Co. v. Muder, 
 49 Mo. 165; Chicago, B. & Q. R. R. 
 Co. v. Wilson, 17 111. 123; Southern 
 Pacific R. R. Co. v. Raymond, 53 
 Cal. 223. 
 
 4 See § 475, post. 
 
 132 
 
 5 See Lake Shore and M. S. Ry. 
 Co. v. Chicago and W. I. R. R. Co., 
 97 111. 506; Northwestern T. E. Co. 
 b. Chicago, M. & St. P. Ry. Co., 76 
 Minn. 334. 
 
 6 Boston Water Power Co. v. Bos- 
 ton and N. R. R. Co., 23 Pick. (Mass.) 
 360; Chicago, R. I. and P. R. R. Co. 
 v. Town of Lake, 71 111. 333; Ala- 
 bama and F. R. R. Co. v. Kenney, 
 39 Ala. 307; Lafayette Plank Road 
 Co. v. New Albany, etc., R. R. Co., 
 13 Ind. 90; New York H. and N. R. 
 R. Co. v. Boston H. and E. R. R. 
 Co., 36 Conn. 196; Northern R. R. v. 
 Concord and C. R. R., 27 N. H. 183; 
 White River T. Co. v. Vermont Cen- 
 tral R. R. Co., 21 Vt. 590; Thorpe 
 v. Rutland and B. R. R. Co., 27 Vt. 
 140; Wood v. Macon, etc., R. R. Co., 
 68 Ga. 539; Matter of Prospect Park 
 and C. I. R. R. Co., 67 N. Y. 371. 
 See Iron R. R. Co. v. Irouton, 19 O. 
 St. 299; Commonwealth v. Essex Co., 
 13 Gray (Mass.), 239, 247. Compare
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 163a. 
 
 company to take the property of another, although the same be 
 used by the latter for railroad purposes. 1 But the power to 
 take property actually devoted to a public use is not implied 
 by a simple grant to a railroad company of the power of em i- 
 nent domain . 3 Power to take such property arises only by a 
 grant in express terms or by such necessary implication as 
 
 &f 
 
 exists whe re t he powers expressly granted cannot otherwise be jy t 
 exercised ; an implication which must have been unavoidable 
 and necessary ah origine and not made so by any act of the ' ^ l 
 corporation. 3 All grants of eminent domain are to be con- &J>, 
 strued strictly against the grantee, especially when it is at- 
 tempted to construe the grant so as to interfere with the exer- 
 cise of a previous grant of the same kind. 4 
 
 Lake Shore and M. S. Ry. Co. v. Chi- 
 cago and N. I. R. R. Co., 97 111. 506. 
 
 1 Eastern R. R. Co. v. Boston and 
 M. R. R. Co., Ill Mass. 125; Lake 
 Shore and M. S. Ry. Co. v. Chicago 
 and W. I. R. R. Co., 97 111. 506; Ore- 
 gon, Ry. Co. v. Portland, 9 Ore- 
 gon, 231; Sixth Avenue R. R. Co. v. 
 Kerr, 72 N. Y. 330; Kinsman Street 
 R. R. Co. v. Broadway R. R. Co., 36 
 O. St. 239; and cases in preceding 
 note. So, too, a telegraph company 
 can condemn a portion of the right 
 of way of a railroad company not in 
 actual use. Mobile & O. R. R. Co. v. 
 Postal Tel. C. Co., 120 Ala. 21. 
 
 2 Rutland Can. R. R. Co. v. Cen- 
 tral Vt. Ry. Co., 72 Vt. 128; Contra 
 Costa Coal Mines R. R. Co. v. Moss, 
 23 Cal. 323; State v. Montclaire Ry. 
 Co., 35 N. J. L. 328. 
 
 8 Pennsylvania R. R. Co.'s Appeal, 
 93 Pa. St. 150; Groff's Appeal, 128 
 Pa. St. 621; Matter of Boston and 
 Albany R. R. Co., 53 N. Y. 574; Mat- 
 ter of City of Buffalo, 68 N. Y. 167; 
 Prospect Park and C. I. R. R. Co. v. 
 Williamson, 91 N. Y. 552; Oregon 
 Ry. Co. v. Portland, 9 Oregon, 231; 
 Inhabitants of Springfield v. Con- 
 necticut River R. R. Co., 4 Cush. 
 (Mass.) 63; Housatonic R. R. Co. v. 
 
 Lee, etc., R. R. Co., 118 Mass. 391; 
 Boston and M. R. R. Co. v. Lowell, 
 etc., R. R. Co., 124 Mass. 368. See 
 Suburban Rapid Transit Co. v. Mayor, 
 etc., of New York, 128 N. Y. 510; 
 Rutland Can. R. R. Co. ?;. Central Vt. 
 Ry. Co., 72 Vt. 128; Scranton G. & 
 W. Co. v. Northern C. & I. Co., 192 
 Pa. St. 80. But these strict rules do 
 not apply where the property sought 
 to be taken, though owned by a rail- 
 road company, is not used for rail- 
 road purposes. Boston Water Power 
 Co. v. Boston and N. R. R. Co., 23 
 Pick. (Mass.) 360; North Carolina, 
 etc., R. R. Co. v. Carolina Central 
 Ry. Co., 83 N. C. 489; Peoria P. and 
 I. R. R. Co. v. Peoria and S. R. R. 
 Co., 66 111. 174; Baltimore and O. R. 
 R. Co. v. Pittsburg W. and K. R. R. 
 Co., 17 W. Va. 812. Compare Mar- 
 ket Co. v. Railroad Co., 142 Pa. St. 
 580. A state cannot compel a rail- 
 road company to surrender part of 
 its property to private persons to be 
 used as grain elevators; this is to 
 take private property for a private 
 use, and therefore is not due process 
 of law. Missouri Pac. Ry. v. Ne- 
 braska, 164 U. S. 403. 
 
 4 Pennsylvania R. R. Co.'s Appeal, 
 93 Pa. St. 150. See §§ 470-473. 
 
 133
 
 § 164.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 It is competent for a state to compel a railroad company to 
 ^ 7 allow another railroad company to connect with it, 1 or to cross 
 <^£ its track. 2 And if a company is chartered to build a railroad 
 ff£> between two termini in a line that will cross the tracks of prior 
 railroads, the right to cross those tracks will arise by impli- 
 cation. 3 But no more than the property of other owners can 
 the property of a railroad company be taken or injured without 
 just compensation ; nor without just compensation can a rail- 
 road company be forced to allow its tracks to be used or even 
 crossed by another railroad company. And it is not competent 
 for the legislature to fix the compensation. 4 
 
 § 164. As to whether and in what respect a single exercise 
 of the power of eminent domain by a railroad corporation ex- 
 hausts its rights, there is a conflict of authorities. Undoubtedly 
 a railroad company chartered with power to build its road on 
 a certain route, has no authority to lay its road elsewhere ; nor 
 has a company that has actually selected its route and built its 
 road, authority to change its route subsequently. 5 It has also 
 
 iSee Louisville & N. R. R. Co. v. 
 State, 9 Baxt. (Tenu.) 521. Compare 
 North Branch Passenger R'y Co. v. 
 City Passenger R'y Co., 38 Pa. St. 
 361; Branson v. City of Philadelphia, 
 47 Pa. St. 329. 
 
 2 Lake Shore & M. S. R'y Co. v. Cin- 
 cinnati, S. & C. R'y Co., 30 O. St. 
 604; Pittsburgh & C. R. R. Co. v. 
 Southwest Pennsylvania R. R. Co., 
 77 Pa. St. 173; Baltimore, etc., T. 
 Co. v. Union R'y Co., 35 Md. 224; 
 Western Pennsylvania R. R. Co.'s 
 Appeal, 99 Pa. St. 155. 
 
 3 Morris & E. R. R. Co. v. Central 
 R. R. Co., 31 N. J. L. 205; State v. 
 Eastern & A. R. R. Co., 36 N. J. L. 
 181; Contra Costa Coal Mines v. Moss, 
 23 Cal. 323. 
 
 4 Pennsylvania R. R. Co. v. Balti- 
 more & O. R. R. Co., 60 Md. 263; 
 Southwestern R. R. Co. v. Southern, 
 etc., Tel. Co., 46 Ga. 43. Compare 
 with last case New Orleans, etc., R. 
 R. Co. v. Southern, etc., Tel. Co., 53 
 Ala. 211; Baltimore, etc., T. Co. v. 
 
 134 
 
 Union R'y Co., 35 Md. 224; Northern 
 Central R'y Co. v. Mayor, etc., of 
 Baltimore, 36 Md. 425; Metropolitan 
 R. R. Co. v. Highland St. R'y Co., 
 118 Mass. 290. It is held in Massa- 
 chusetts that a railroad company is 
 entitled to compensation for a public 
 highway laid out across its track. 
 Old Colony, etc., R. R. Co. v. County 
 of Plymouth, 14 Gray, 155. Contra 
 Albany Northern R. R. Co. v. Brown- 
 ell, 24 N. Y. 345; Boston & A. R. R. 
 Co. ». Greenbush, 52 N. Y. 510. 
 
 6 Erie R. R. Co. v. Steward, 170 
 N. Y. 172; Mason v. Brooklyn City, 
 etc., R. R. Co., 35 Barb. 373; Brook- 
 lyn Central R. R. Co. v. Brooklyn 
 City R. R. Co., 32 Barb. 358; Hudson 
 and Del. Canal Co. v. New York and 
 Erie R. R. Co., 9 Paige, 323; Kenton 
 County Court v. Bank Lick Turnpike 
 Co., 10 Bush (Ky.), 529; Brigham v. 
 Agricultural Branch R. R. Co., 1 Al- 
 len, 316. See Moorhead v. Little 
 Miami R. R. Co., 17 Ohio, 340. But 
 see Mississippi and Tenn. R. R. Co.,
 
 <y 
 
 tS 
 
 2^ 
 
 PART I.] CONSTRUCTION OF CORPORATE POWERS. [§ 165. 
 
 been said that a railroad corporation by laying out to its satis- 
 faction its road with the appendages, entirely exhausts all the 
 powers conferred on it to take land. 1 But, it is submitted, it is 
 the right of the railroad company to re-locate its road that is 
 wanting, 2 and not its right of eminent domain that is exhausted. 3 
 And there is ample authority sustaining the rule that, notwith- 
 standing a railroad corporation has already exercised its right 
 of eminent domain, it may make whatever further appropria- 
 tions are necessary for its road or stations, provided the mak- 
 ing of any given appropriation is not in itself an act unauthor- 
 ized by the constitution of the corporation. 4 
 
 § 165. In the exercise of its right of eminent domain a cor- 
 poration may take the fee or whatever interest in the 
 land ma} 7 be necessary to accomplish its purpose. 5 If 
 it takes the fee, it acquires an exclusive right to the 
 property. 6 And whatever interest it may take, it 
 may have r ights, privileg es^ or immu nities in regard 
 thereto not ordinarily possessed by indivi duals. * For 
 instance, real estate thus acquired by a railroad company, which 
 
 Rights of 
 the corpo- 
 ration as to 
 land 
 
 acquired by 
 eminent 
 domain. 
 
 v. Devaney, 42 Miss. 555; Ex parte 
 South Carolina R. R. Co., 2 Rich. L. 
 (S. C.) 434. 
 
 1 Morris and Essex R. R. Co. v. Cen- 
 tral R. R. Co., 31 N. J. L. 205, 210. 
 Compare Erie R. R. Co. v. Steward, 
 170 N. Y. 172. 
 
 2 See § 162a. 
 
 3 " Strictly speaking there is no 
 such thing as an extinction of the 
 right of eminent domain." New 
 York, Housatonic, etc., R. R. Co. v. 
 Boston, Hartford and Erie R. R. Co., 
 36 Conn. 196, 198. 
 
 4 Dietrichs v. Lincoln, etc., R. Co., 
 13 Neb. 361; Central Branch IT. P. 
 R. R. Co. v. Atchison T. and S. F. 
 R. R. Co., 26 Kans. 669; Chicago, B. 
 and Q. R. R. Co. r. Wilson, 17 111. 
 123; Fisher v. Chicago and Spring- 
 field R. R. Co., 104 111. 323; Miss, 
 and Tenn. R. R. Co. o. Devaney, 42 
 Miss. 555; Virginia and Truckee R. 
 R. Co. v. Lovejoy, 8 Nevada, 100; 
 
 Prather v. Jeffersonville, etc., R. R. 
 Co., 52 Ind. 16; Toledo and Wabash 
 R'y Co. v. Daniels, 16 Ohio St. 390; 
 Hamilton v. Annapolis, etc., R. R. 
 Co., 1 Md. 553; Ex parte South Caro- 
 lina R. R. Co., 2 Rich. L. (S. C.) 433. 
 See Western Pennsylvania R. R. Co.'s 
 Appeal, 99 Pa. St. 155. 
 
 5 Sixth Ave. R. R. Co. v. Kerr, 72 
 N. Y. 330. Long Isl. R. R. Co. v. 
 Garyey, 159 N. Y. 334, see also, Gar- 
 vey v. L. I. R. R. Co., 159 N. Y. 323. 
 See Cballiss v. Atchison, etc., R. R. 
 Co., 16 Kan. 117. 
 
 6 See Isabel v. Hannibal and St. 
 Jo. R. R. Co., 60 Mo. 475; Cauley v. 
 Pittsburgh, etc., R. R. Co., 95 Pa. St. 
 398; Jersey City and Bergen R. R. 
 Co. v. Jersey City and Hoboken R. 
 R. Co., 20 N. J. Eq. 61; reversed in 
 part, 21 N. J. Eq. 550; Camden 
 Horse R. R. Co. v. Citizens' Coach 
 Co., 31 N. J. Eq. 525; Rutland R. R. 
 Co. v. Chaffee, 71 Vt. 84. 
 
 135
 
 § 166.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 is necessary for uses in which the public is interested, cannot 
 be sold on execution apart from the franchises of the corpora- 
 tion. 1 
 
 § 166. The right of eminent domain is not transferable. 2 
 After the time has expired within which a railroad corpora- 
 tion is required to complete its road, it cannot exercise the 
 right of eminent domain ; 3 nor can it do so after the expiration 
 of the time to which the exercise of the right is ex- 
 demiainnot pressly limited. 4 In condemning land the statute 
 authorizing the proceedings must be strictly com- 
 plied with, and this compliance must appear by the 
 record of the proceedings. 5 
 
 transfer- 
 able. 
 
 1 Gooch v. McGee, 83 N. C. 59; Rut- 
 land R. R. Co. v. Chaffee, 72 Vt. 404. 
 
 2 Mahoney v. Spring Valley Water 
 Co., 52 Cal. 159. A lease for one 
 hundred years of a railroad does not 
 vest in the lessee the right of eminent 
 domain of the lessor. Mayor, etc., of 
 Worcester v. Norwich, etc., R. R. Co., 
 109 Mass. 103. But the person whose 
 property has been taken cannot ques- 
 tion the right of the railroad com- 
 pany to transfer that. Crolley v. 
 Minneapolis & St. L. Ry. Co., 30 Minn. 
 541. And the fact that a railroad 
 company has leased its road for the 
 full period of its corporate life does 
 not affect its right to take land by 
 eminent domain: and that the lessee 
 is a foreign corporation is immate- 
 rial. Matter of Petition of New York, 
 Lackawanna, etc., R. R. Co., 99 N. Y. 
 12. 
 
 8 Peavy v. Calais R. R. Co., 30 Me. 
 
 136 
 
 498; New York, Housatonic, etc., R. 
 R. Co. v. Boston, Hartford and Erie 
 R. R. Co., 36 Conn. 196; Atlantic & 
 P. R. R. Co. v. St. Louis, 66 Mo. 228; 
 see § 155. 
 
 * Morris and Essex R. R. Co. v. 
 Central R. R. Co., 31 N. J. L. 205. 
 See ante, § 155. 
 
 6 Nichols v. Bridgeport, 23 Conn. 
 189; Pueblo, etc., R. R. Co. v. Rudd, 
 5 Col. 270 ; Mobly v. Breed, 48 Ga. 
 44; Ellis v. Pacific R. R. Co., 51 Mo. 
 200; Cunningham v. Pacific R. R. 
 Co., 61 Mo. 33; Kansas City, St. Jo., 
 etc., R. R. Co. v. Campbell, 62 Mo. 
 585; Hyslop v. Finch, 99 111. 171; 
 Southern Pacific R. R. Co. v. Wilson, 
 49 Cal. 396; Mitchell v. Illinois* St. 
 L. R. R. Co., 68 111. 286; Oregonian 
 Ry. Co. ». Hill, 9 Oregon, 377; Her- 
 cules Iron Works v. Elgin, etc., Ry. 
 Co., 141 111. 491 ; San Francisco, R. 
 R. Co. v. Gould, 122 Cal. 601.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. 
 
 PART II. «*. • " "^ S '# c 
 
 ACTS WITHIN THE CORPORATE POWERS. 
 
 When a corporation is not liable for 
 loss occurring by reason of its acts, 
 §167. 
 
 Corporate franchises not to be ques- 
 tioned collaterally, § 168. 
 
 But for their improper use the corpo- 
 ration liable to injured individuals, 
 § 169. 
 
 Continuation of liability after a dele- 
 gation of franchises, § 170. 
 
 Corporation always liable when its 
 acts amount to a taking of private 
 property, § 171. 
 
 Meanings of the term "property," 
 §172. 
 
 What constitutes a taking, § 173. 
 
 When the person injured is not the 
 full owner, § 174. 
 
 Railroad tracks in streets, §§ 175, 176. 
 
 Distinction between private and 
 public corporations, § 177. 
 
 Measure of compensation, § 178. 
 
 What benefits may be set off, § 179. 
 
 Acts of the body corporate ; when 
 binding, § 180. 
 
 Acts of the body corporate ; when 
 held invalid, §§ 181-183. 
 
 Manner in which the body corporate 
 should act, § 184. 
 
 Formalities required by statute. 
 Consent of shareholders, § 185. 
 
 Certification of the performance of 
 formalities, § 186. 
 
 Individual shareholders cannot act 
 for the corporation, § 187. 
 
 Validity of the acts of de facto offi- 
 cers, § 188. 
 
 Principles on which rests the validity 
 of the acts of de facto officers, 
 §189. 
 
 Limitations, § 190. 
 
 General rules regulating the respon- 
 sibility of corporations for the acts 
 of their agents, §§ 191, 192. 
 
 Rules of the law of agency appli- 
 cable. Acts within the ordinary 
 scope of the agent's authority 
 valid, § 193. 
 
 Effective limitations on the author- 
 ity of corporate agents, § 194. 
 
 Class I., § 195. 
 
 Effect of by-laws, §§ 196, 197. 
 
 Class II., §§ 198, 199. 
 
 Class III., §§ 200, 201. 
 
 Authority of agent depends on his 
 actual functions rather than on the 
 name of his office, § 202. 
 
 Validity of agent's acts; when not 
 affected by extrinsic facts, § 203. 
 
 Presumptions in favor of the validity 
 of the acts of corporate agents, 
 §204. 
 
 Negotiable paper. Money borrowed 
 in excess of statutory limit, § 205. 
 
 Assumption of unusual facts unwar- 
 ranted, § 206. 
 
 Certification by agent of facts on 
 which his authority is conditioned, 
 §§ 207, 208. 
 
 Not binding on the corporation when 
 the other party knows its falsity, 
 § 209. 
 
 Admissions of corporate agents. 
 Notice to them, § 210. 
 
 Ratification of unauthorized acts, 
 §211. 
 
 Formal ratification not necessary, 
 §§212, 213. 
 
 Ratification through accepting ben- 
 efit of unauthorized act. Kuowl- 
 
 137
 
 § 167.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 edge or implied notice essential, 
 §§ 214-216. 
 
 Lapse of time no ratification, §217. 
 
 Authority of special classes of cor- 
 porate agents, § 218. 
 
 Powers of the board of directors, 
 §219. 
 
 Statement of general rule, § 220. 
 
 Statement of first general limitation, 
 §221. 
 
 Statement of second general limita- 
 tion, § 222. 
 
 Scope of the general rule, §§ 223, 224. 
 
 Power of directors to borrow, § 225. 
 
 First general limitation, §§226-230. 
 
 Second general limitation, § 231. 
 
 Qualification to it, §232. 
 
 Delegation of authority by directors, 
 § 233. 
 
 Delegation of powers by the board 
 to a committee, § 234. 
 
 Authority of agents does not expire 
 with that of the directors who ap- 
 point them, § 235. 
 
 Authority of a president, § 236. 
 
 Enlarged by custom, §§ 237, 238. 
 
 Authority of a cashier, §§239, 240. 
 
 Cashier's powers restricted to the 
 transaction of ordinary business, 
 §241. 
 
 Certification of checks, §§242, 243. 
 
 Certifications by teller. Accommo- 
 dation certifications, § 244. 
 
 Effect of a certification. " Raised 
 checks," §§ 245, 246. 
 
 Validity of the acts of corporate 
 agents as dependent on formali- 
 ties, § 247. 
 
 Use of corporate seal, § 248. 
 
 Implied contracts, § 249. 
 
 Non-observance of prescribed form- 
 alities, § 250. 
 
 Formalities imperative or directory, 
 §251. 
 
 Approval by other officers, § 252. 
 
 When contracting party has notice 
 of the formalities required, §§253, 
 254. 
 
 When corporate agent and contract- 
 ing party do not stand on equal 
 terms, § 255. 
 
 Ratification, § 256. 
 
 Party contracting with corporate 
 agent cannot plead non-observance 
 of formalities by the latter. Sure- 
 ties on official bonds, § 257. 
 
 Formalities to be observed by di- 
 rectors. They should act as a 
 board, § 258. 
 
 Exceptions, § 259. 
 
 Directors 1 meetings. Quorums, §260. 
 
 Presumptions, § 261. 
 
 Special provisions, § 262. 
 
 Rules of evidence applicable to cor- 
 porations. Corporate books, § 263. 
 
 § 167. 
 
 When a 
 corpora- 
 tion is not 
 liable for 
 loss occur- 
 ring by 
 reason of 
 its acts. 
 
 So long as a corporation neglects no duty which it 
 owes the public, acts within the scope of its compe- 
 tently conferred powers, and in so acting uses due care 
 not to injure others, it will not be liable for the in- 
 convenience or even damage which its actions may 
 cause, provided they do not constitute a taking of pri- 
 vate property. 1 This proposition requires elucidation. 2 
 
 1 Hudson River Tel. Co. v. Water- 
 vliet Turnpike, etc., Co., 135 N. Y. 
 
 393. This case held that a railway 
 company which adopted the trolley 
 
 2 It is well to remember that grants I against the grantee, and in favor of 
 of special franchises and privileges i the public. Turnpike Co. v. Illinois, 
 are always to be construed strictly I 96 U. S. 63. See ante, § 122. 
 
 138
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 168. 
 
 § 168. The manner in which a corporation may be compelled 
 to discharge the duties it owes the public is discussed 
 in Chapter VIII. 1 If a corporation is chartered to fraSLs 
 subserve a public convenience, and receives special questioned 
 privileges and powers to be used by it in fulfilling collaterally. 
 the purposes of its incorporation, it would seem but logical that 
 those powers and privileges should cease to constitute a protec- 
 tion to the corporation as soon as the corporation itself ceases 
 to fulfill its purposes. Such would undoubtedly be the law, 
 were it not for the rule that the franchises of a corporation 
 cannot be questioned collaterally. 2 Consequently, franchises 
 
 system, and by such use of electric- 
 ity impeded the electrical currents 
 of certain telephone lines, was not 
 liable to the telephone company for 
 damages, it appearing that the rail- 
 way company had the power so to 
 use electricity and did use it properly 
 in the exercise of its franchise for the 
 benefit of the public. See Booth v. 
 Rome, etc., R. R. Co., 140 N. Y. 267; 
 Gilbert o. Savannah, etc., R. R., 69 
 Ga. 396. " Whenever the exercise 
 of a right, conferred by law for the 
 benefit of the public, is attended 
 with temporary inconvenience to 
 private parties, in common with the 
 public in genei-al, they are not enti- 
 tled to any damages therefor." Ham- 
 ilton v. Vicksburg, etc., R. R. Co., 119 
 U. S. 280, 285. Opinion of the court, 
 per Field, J. Compare Cogswell v. 
 New York, N. H. & H. R. R. Co., 103 
 N. Y. 10. Thus a telegraph company, 
 which has the right to place its line 
 in the streets of a city, is not liable 
 for a personal injury resulting from 
 the breaking of atelegraph pole, save 
 upon proof of culpable negligence on 
 its part. The company is bound to 
 use reasonable care in the construc- 
 tion and maintenance of its line, but 
 is not bound so to erect and manage 
 its line as to guard against storms, 
 which, on account of their extraor- 
 
 dinary severity, could not reasonably 
 have been anticipated. The company 
 is no insurer of travelers against in- 
 juries from its poles lawfully placed 
 in the streets. Ward v. Atlantic and 
 Pac. Tel. Co., 71 N. Y. 81. See Bor- 
 chardt v. Wausau Boom Co., 54 Wis. 
 107: Sumner v. Richardson Lake Dam 
 Co., 71 Me. 106; City of Georgetown 
 v. Alexandria Canal Co., 12 Pet. 91. 
 Compare Smith v. Corporation of 
 Washington, 20 How. loo. 
 
 By making a negligent or improper 
 use of its franchises, a corporation 
 may become a public nuisance. Thus 
 it is an indictable public nuisance for 
 a railroad company to run its trains 
 across a turnpike at the rate of fif- 
 teen or twenty miles an hour, with- 
 out giving sufficient warnings. Lou., 
 Cin., and Lex. R. R. Co. v. Common- 
 monwealth, 80 Ky. 143. Likewise it 
 constitutes a public nuisance for a 
 railroad company to raise its tracks 
 so high at a public crossing that it 
 is dangerous to drive over them. 
 Paducah, etc., R. R. Co. v. Common- 
 wealth, ib. 147. A corporation may 
 be indicted for a nuisance. State ». 
 Western, etc., R. R. Co., 95 N. C. 602. 
 
 1 §§ 454 et seq. 
 
 * See ante, §§ 145-157. Compare 
 Newell v. Minneapolis, etc., Ry. Co., 
 35 Minn. 112. 
 
 139
 
 § 170.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 But for 
 their im- 
 proper use 
 the corpo- 
 ration lia- 
 ble to in- 
 jured indi- 
 viduals. 
 
 ordinarily subsist as valid, and afford protection until they are 
 declared forfeited in a proceeding instituted for that purpose. 1 
 § 169. On the other hand, the fact that a corporation is vio- 
 lating a duty owed by it primarily to the public, for 
 a violation of which the state might forfeit its fran- 
 chises ; or the fact that a corporation is exceeding its 
 corporate powers, and is thereby rendering itself lia- 
 ble to a forfeiture of its franchises, does not prevent 
 an individual who has suffered special damage 
 through its wrongful acts or omissions from maintaining an 
 action against it on his own behalf. 2 Indeed, a corporation will 
 be liable in damages to any person who suffers injury peculiar 
 to himself from the negligent or improper use of its franchises. 3 
 For instance, the right of a railroad company to lay its tracks 
 in a street or highway imposes on it the obligation to lay them 
 properly and keep them in repair, and if an injury by reason of 
 its neglect in either of these respects is occasioned to any one, 
 the company will be liable. 4 
 
 § 170. Furthermore, a corporation that has received special 
 franchises ordinarily continues liable for injuries occurring 
 through the negligent exercise of powers originally conferred 
 on it, although it may have delegated or assigned a portion or 
 the whole of its powers to another corporation or to 
 an individual. Thus, a railroad corporation which 
 has granted the use of its road to another company 
 will be liable for accidents to passengers carried by it- 
 self, caused by the negligent management of the trains 
 
 Continua- 
 tion of lia- 
 bility after 
 a delega- 
 tion of 
 franchises. 
 
 1 Logan v. Vernon, etc., R. R. Co., 
 90 Ind. 552; see Atlantic and P. R. R. 
 Co. v. St. Louis, 66 Mo. 228; New- 
 York Cable Co. v. Mayor, etc., of 
 New York, 104 N. Y. 1, 43, 
 
 2 Riddle v. Proprietors of Locks and 
 Canals, 7 Mass. 109. See Mayor of 
 Lynn v. Turner, Cow per, 86; Mersey 
 Docks v. Gibbs, 11 H. L. C. 686; S. 
 C, L. R. 1 H. L. 93; Winch v. Con- 
 servators of the Thames, L. R. 7 C. 
 P. 458; Conrad v. Trustees of Ithaca, 
 16 N. Y. 158. 
 
 3 A railroad company is liable in 
 damages for establishing its engine 
 
 140 
 
 houses so near an incorporated 
 church as to constitute a nuisance by 
 reason of the noise and smoke. Bal- 
 timore and P. R. Co. v. Fifth Baptist 
 Church, 108 U. S. 317. Compare 
 Bohan v. Port Jervis Gas Light Co., 
 125 N. Y. 18; Snell v. Buresh, 123 
 111. 151; Ridge v. Penna. R. R. Co., 58 
 N. J. Eq. 172. 
 
 4 Worcester r. Forty-second Street 
 R. R. Co., 50 N. Y. 203. See, also, 
 Baltimore, etc., Turnpike Co. v. Cas- 
 sell, 66 Md. 419. No notice to the 
 company of a patent defect is neces- 
 sary. The presumption of negli-
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 170. 
 
 of the other company. 1 And a railroad company is not ex- 
 empted from liability for the loss of goods delivered to it to be 
 carried over a part of its road by the fact that it had previously 
 leased that part to another corporation ; for, as the court said, 
 to have allowed this exemption " would be to authorize them 
 by their own act to divest themselves of the duties and liabili- 
 ties imposed upon them by law, and the performance of which 
 was the consideration upon which their charter was granted, 
 and which thus entered into their contract with the common- 
 wealth." 2 
 
 There is good authority for the proposition that by leasing 
 its road a railroad company does not escape liability for injury 
 to goods transported by its lessee, 3 nor for injuries to the les- 
 see's passengers occasioned by the lessee's negligence. 4 On the 
 
 gence is complete when it appears 
 that the defect existed and caused an 
 injury, lb. As to prima facie evi- 
 dence of negligence, compare Stokes 
 v. Saltonstall, 13 Pet. 181; Railroad 
 Co. v. Pollard, 22 Wall. 3-41. 
 
 1 Railroad Company v. Baron, 5 
 Wall. 90; Pinkerton v. Penu. Trac- 
 tion Co., 193 Pa. St. 229; see Abbott 
 v. Johnstown Horse R. R. Co., 80 N. Y. 
 27; Feital v. Middlesex R. R. Co., 10!) 
 Mass. 398; Lakin v. Railroad Co., 13 
 Oreg. 436. 
 
 2 Langley v. Boston and Maine R. 
 R. Co., 10 Gray, 103; see McCluer v. 
 Manchester and Lawrence R. R., 13 
 Gray, 124; Quested v. Newburyport 
 Horse Railroad, 127 Mass. 204; Bower 
 v. B. & S. W. R. Co., 42 Iowa, 546. 
 See State p. Railroad Commissioners, 
 41 N. J. L. 235. In the absence of 
 statutory provisions, a railroad com- 
 pany after leasing its road remains 
 liable for injuries caused by defects 
 in its tracks at a highway crossing. 
 Freeman v. Minneapolis and St. Louis 
 R'y Co., 28 Minn. 443; but see Ditch 
 ettw. Spuyten Duyvil, etc., R. R. Co., 
 67 N. Y. 425. So, where the railroad 
 is operated by persons who are trus- 
 tees for the corporation as well as 
 
 for its bondholders, the corporation 
 may be sued. Grand Tower M'f'g, 
 etc., Co. v. TJllman, 89 111. 244; Wis- 
 consin Cent. R. R. Co. v. Ross, 142 
 111. 9. Otherwise if the road is in 
 the hands of a receiver. Turner c. 
 Hannibal and St. Jo. R. R. Co., 74 
 Mo. 602; Heath u. Missouri, etc., 
 R'y Co., 83 Mo. 617; Metz v. Buffalo, 
 etc., R. R. Co., 58 N. Y. 61; Hicks v. 
 International, etc., R. R. Co., 62 Tex. 
 38. But see Ohio & M. R'y Co. v. 
 Russell, 115 111. 52. As to the power 
 of a railroad corporation to lease or 
 otherwise transfer its franchises, see 
 §§ 125, 132, 304, 305. 
 
 s Ohio & M. R. R. Co. v. Dunbar, 
 20 111. 623: Peoria & R. I. R. R. Co. 
 p. Lane, 83 111. 448. 
 
 4 Braslin v. Railroad Co., 145 Mass. 
 64; Singleton v. Southwestern R. R., 
 70 Ga. 464; see Nugent v. Railroad 
 Co., 80 Me. 62; Little Rock & F. S. 
 Ry. Co. v. Daniels, 68 Ark. 171; 
 Perry v. R. R. Co., 128 N. C. 471; 
 Pierce v. R. R. Co., 124 N. C. 83. To 
 the contrary, Missouri Pac. R'y Co. 
 v. Watts, 63 Tex. 549; Carruthers v. 
 Kansas City etc., R. R. Co., 59 Kas. 629 ; 
 Driscoll o. Norwich, etc., R. Co., 65 
 Conn. 230; and Pinkerton v. Traction 
 141
 
 § 170.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 other hand, when one railroad company competently takes a 
 lease of the road of another, its liabilities springing from the 
 operation of the leased road are determined, not by its own 
 charter, but by the charter of the lessor company. 1 
 
 As a corporation cannot escape responsibility for the per- 
 formance of its duties by leasing its property or franchises, 2 so 
 it cannot, by delegating matters to a contractor, escape from 
 the fulfillment of its undertakings or from responsibility for 
 the observance of due care in the exercise of its franchises. 3 
 Accordingly, where a corporation contracted to lay water- 
 pipes in a city, agreeing to " protect all persons against dam- 
 ages by reason of excavations made by them in laying pipes, 
 and to be responsible for all damages which might occur by 
 reason of the neglect of their employes on the premises," it 
 was held, although the corporation had let the work out to a 
 contractor, that it was liable for injuries incurred by a person 
 passing over the street caused by the negligence of the con- 
 tractor's servants. 4 So a railroad company may be responsible 
 to adjacent land-owners for the trespasses of its contractors in 
 constructing its road, 5 and will ordinarily be liable for the acts 
 of its contractors, as if they were its servants, where the con- 
 tractors in their work are under the direction of the company, 6 
 
 Co., 193 Pa. St. 229, hold, that after an 
 authorized lease of its road the les- 
 sor is not liable for the torts of the 
 lessee. See § 305 and note. Since 
 leases of railroads are so usual, it 
 may be that the weight of authority 
 does not uphold the proposition in 
 the text. Thus Harper v. New Port 
 News, etc., Co., 90 Ky. 359, holds, 
 that not the corporation which owns, 
 but the one which has exclusive con- 
 trol and management of the railroad 
 is liable for injuries caused to a per- 
 son on the track by a locomotive. 
 See, Banks v. Ga. R. R., etc., Co., 112 
 Ga. 655. 
 
 1 McMillan v. Michigan Southern, 
 etc., R. R. Co., 1(3 Mich. 79. See 
 Stone v. Illinois Central R. R. Co., 
 116 U. S. 347. A railroad company 
 cannot dispute its liability for goods 
 
 142 
 
 carried by it over a leased road on 
 the ground that the lease is void. 
 McCluer v. Manchester, etc., R. R., 
 13 Gray ( Mass. ), 124. See § 416. 
 
 2 See Chicago & N. W. Ry. Co. v. 
 Crane, 113 U. S. 424. 
 
 :i Lakiu v. Railroad Co., 13 Oreg. 
 436. See McDonald v. Railroad, 93 
 Tenu. 281. 
 
 * Water Co. v. Ware, 16 Wall. 566. 
 
 5 Rockford, etc., R. R. Co. v. Wells, 
 66 111. 321; Chicago & R. I. R. R. 
 Co. v. Whipple, 22 111. 105. But see 
 Hitte v. Republican Valley R. R. 
 Co., 19 Neb. 620, and Atlanta, etc., 
 R. R. Co. v. Kimberly, 87 Ga. 161, 
 which hold that a railroad company 
 is not liable for the acts of an inde- 
 pendent contractor in building its 
 road. 
 
 6 Railroad Co. v. Hanning, 15
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 171. 
 
 or where the company itself is the real cause of the injuries 
 occasioned by the acts or omissions of the contractor. 1 
 
 § 171. If the acts of a corporation within the scope Corpora- 
 
 ° . y tion always 
 
 of its powers amount to a taking of private property, liable when 
 then that the corporation is acting within its powers amount to 
 has the effect of preventing its action from amount- p\.^atepro- 
 ing to a public or private nuisance, 2 but does not ex- P ert y- 
 empt it from the duty to compensate the owner for 
 his property. 3 
 
 In the first place, regarding the force of the word private. 
 If a railroad company, or other corporation with public duties, 
 is authorized to use or take property belonging to the public, 
 that is, property which is vested in some political body or de- 
 partment, the question whether compensation is to be made de- 
 pends on the terms of the authority ; it is merely a question of 
 legislative intention. 4 It is always competent for the legislature 
 to change property from one public use to another without com- 
 pensating any public (e. g., municipal) body. 5 It has even been 
 held that authority from the state to a corporation or an indi- 
 vidual to build roads or bridges upon public property, implies 
 the right to proceed without compensation, since the function 
 to be performed is that of the sovereign, though delegated to a 
 
 Wall. 649. In Chattanooga, etc., 
 R. R. Co. v. Liddell, 85 Ga. 4S2, the 
 railroad company was held liable for 
 injuries sustained on its road while 
 operated by tlie construction com- 
 pany. But see St. Louis, etc., R. R. 
 Co. v. Willis, 38 Kan. 330. 
 
 1 See Philadelphia, etc., R. R. Co., 
 v. Phila., etc., Towboat Co., 23 How. 
 209. 
 
 2 See City of Georgetown v. Alex- 
 andria Canal Co., 12 Pet. 91; Grand 
 Rapids, etc., R. R. Co. v. Heisel, 38 
 Mich. 62. Compare the Clinton 
 Bridge, 10 Wall. 454; State of Penn- 
 sylvania v. Wheeling, etc., Bridge Co., 
 18 How. 421; Danville, etc., R. R. 
 Co. v. Commonwealth, 73 Pa. St. 29; 
 Ingram v. C. D. & M. R. R. Co., 38 
 
 Iowa, 669. Watson v. FairmountRy. 
 Co. , 49 W. Va. 528. 
 
 3 " This power to take private prop- 
 erty reaches back of all constitutional 
 provisions ; and it seems to have been 
 considered a settled principle of uni- 
 versal law, that the right to compen- 
 sation is an incident to the exercise 
 of that power; that the one is so in- 
 separably connected with the other, 
 that they may be said to exist, not as 
 separate aud distinct principles, but 
 as parts of one and the same prin- 
 ciple." Sinnickson v. Johnson, 17 
 N. J. Law (2 Harrison), 129, 145. 
 See § 473. 
 
 4 Commonwealth v. Boston & M. 
 Railroad, 3 Cush. (Mass.) 25. 
 
 5 People v. Kerr, 27 N. Y. 188. 
 
 143
 
 § 173.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Meanings 
 of the term 
 " prop- 
 erty. " 
 
 control. 
 
 citizen. 1 If, however, private rights exist in property held by 
 the public, compensation for them must be provided on a change 
 of its use. * Thus, when land is conveyed to a city in trust for 
 a public park, the legislature cannot authorize a railroad com- 
 pany to build its road across it without providing compensation 
 for the right of the original proprietors that the land should 
 continue to be used according to the trust on which they con- 
 veyed it. 2 
 
 § 172. But what is property ? and what constitutes a taking 
 of it? "Property " means a thing owned, and, also, 
 something entirely different, i. e., the rights of the 
 owner respecting the thing owned, or the rights of a 
 person respecting a thing in any way subject to his 
 In this latter sense the term embraces rights in action 
 as well as rights in possession. 3 
 
 § 173. To constitute a taking of property, it is not necessary 
 that anv material thing be actually taken ; it is 
 
 What con- J , ., ?,, * , . , , 
 
 stitutesa enough if any right or the owner respecting the 
 thing owned be impaired, so that he cannot apply 
 the thing to all the uses of which it was formerly capable. 4 
 The legislature cannot authorize either a direct or a conse- 
 quential taking or injury to property without compensation ; 
 and if a corporation voluntarily, for its own benefit, so con- 
 structs a work as necessarily to injure the property (i. e., the 
 thing owned) of an individual, or deprive him of any right he 
 may possess regarding a thing which he owns or has rights in, 
 it will be bound to compensate him for his damages, even 
 though the work be properly and lawfully constructed. 5 
 
 1 Pennsylvania R. R. Co. v. New 
 York & L. B. R. R. Co., 23 N. J. Eq. 
 157. But see County of Blue Earth v. 
 St. Paul, etc., R. R. Co., 28 Minn. 503. 
 
 2 City of Jacksonville v. Jackson- 
 ville Ry. Co., 67 111. 540. 
 
 8 United States v. Reynes, 9 How. 
 127, 151. A common law right of 
 action (not based on a penalty) is 
 property. Dunlap v. Toledo, A. A., 
 etc., R'y Co., 50 Mich. 470. See also 
 Garvey v. Long Island Railroad, 159 
 N. Y. 323 ; Long Island Railroad 
 Company v. Garvey, 159 N. Y. 334, 
 
 144 
 
 4 Pumpelly v. Green Bay Co., 13 
 Wall. 166; which held the backing 
 of water so as to overflow the lands 
 of individuals to be such a taking. 
 Ace. Alton Horse R'y Co. v. Deitz, 
 50 111. 210; Little Rock, etc., R'y Co. 
 v. Chapman, 39 Ark. 463; Grand 
 Rapids Booming Co. v. Jarvis, 30 
 Mich. 308. Compare O'Connor v. 
 Fon du Lac, etc., R'y Co., 52 Wis. 
 526. 
 
 5 Evansville, etc., R. R. Co. v. Dick, 
 9 Ind. 433; Terre Haute Gas Co. v. 
 Teel, 20 Ind. 131; Baltimore & Poto-
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 174. 
 
 Thus it is the better opinion that a railroad company is liable 
 for throwing back surface water by the erection of an embank- 
 ment on its land ; x and also is liable if it collects surface water 
 in one channel, and in this manner discharges it upon plain- 
 tiff's land, although the total volume of the flow is not thereby 
 increased. 2 Likewise railroad companies are liable for damages 
 caused by obstructing drains and closing ditches, whereby the 
 flow of water is impeded and crops are destroyed. 3 
 
 § 174. If the person claiming compensation is not the full 
 owner of the property appropriated, it is sufficient Wh , 
 to entitle him to compensation that he have some person al- 
 right or privilege therein secured by grant, which the full 
 right or privilege is injured or abridged by the ap- owner - 
 propriation. 4 But that he should have some legal rights in the 
 property is necessary ; 5 and it has accordingly been held that 
 unavoidably obstructing the navigation of a river during the 
 
 mac R. R. Co. v. Reany, 42 Md. 117; 
 Ten Eyck v. Del. & R. Canal Co., 18 
 N. J. L. 200; Story v. New York El. 
 R. R. Co., 90 N. Y. 122; Telegraph 
 Co. v. Electric R'y Co., 93 Tenn. 492. 
 
 1 Shane v. Kansas City, St. Jo. & 
 C. B. R. R. Co., 71 Mo. 237 ; Car- 
 riger v. East Tennessee V. & G. R. R. 
 Co., 7 Lea (Tenn.), 388 ; Indianapo- 
 lis B. & W. R. R. Co. v. Smith, 52 
 Ind. 428 ; Toledo W. & W. Ry. Co. 
 v. Morrison, 71 111. 616 ; Weaver v. 
 Mississippi, etc., Boom Co., 28 Minn. 
 534 ; Balto. & S. P. Ry. Co. v. Hac- 
 kett, 87 Md. 224 ; see Rau v. Minne- 
 sota Valley R. R. Co., 13 Minn. 442. 
 Contra, Morrison v. Buckport & B. 
 R. R. Co., 67 Me. 353 ; Hamlin ». 
 Chicago & N. W. Ry. Co., 61 Wis. 
 515. See Benson v. Chicago & Q. R. 
 R. Co., 78 Mo. 504 ; and compare 
 Mover v. N. Y. C. & H. R. R. R. Co., 
 88 N. Y. 351. 
 
 2 McCormick v. Kansas City, St. 
 Jo. & C. B. R. R. Co., 70 Mo. 360 ; 
 S. C, 57 Mo. 433 ; G. C. & S. F. Ry. 
 Co. v. Donahoo, 59 Tex. 128. Com- 
 
 10 
 
 pare Eaton ». Boston, C. & M. R. R., 
 51 N. H. 504. 
 
 3 Bourdierc. Morgan L. & T. R. R. 
 Co., 35 La. Ann. 947 ; Waterman v. 
 Connecticut & P. Rivers R. R. Co., 
 30 Vt. 610 ; Mississippi Central R. R. 
 Co. v. Caruth, 51 Miss. 77. Also, 
 for draining wells by excavations 
 along its line, although no part of 
 plaintiff's land is taken, Sheldon v. 
 B. & A. R. R. Co., 172 Mass. 180. 
 
 4 Story v. New York Elevated R. 
 R. Co., 90 N. Y. 122, 168. 
 
 When a water company is charter- 
 ed with the right to take and use the 
 waters of a stream on making com- 
 pensation, the owner of a mill-race 
 who has purchased the right to use 
 the water, of which the flow is di- 
 minished by the action of the water 
 company, has an incorporeal right for 
 which he is entitled to compensation. 
 Lycoming Gas and Water Co. v. 
 Moyer, 99 Pa. St. 615. 
 
 6 See St. Louis R. R. Co. v. North- 
 western St. Louis Ry. Co., 69 Mo. 65. 
 
 145
 
 § 175.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 construction of a railroad bridge is damnum absque injuria y l 
 and riparian owners on a navigable river cannot recover dam- 
 ages for a diversion of its waters by a corporation acting under 
 authority from the legislature. 2 On the other hand, riparian 
 owners on navigable rivers or lakes have the right of unob- 
 structed access to the navigable channel, and this right cannot 
 be taken from them without compensation. 3 
 
 § 175. One of the most important classes of cases where per- 
 sons have claimed compensation for the taking of 
 property over which they have not unqualified owner- 
 ship, or in which they have only an easement, are 
 cases where railroad companies have been authorized to lay 
 tracks in public streets or highways. The building of a horse 
 railroad is held not to be an appropriation of the street to a 
 new use, for which adjoining lot owners are entitled to com- 
 pensation, even though they own the fee of the street. 4 The 
 same rule is held to apply to tracks of an electric street railway 
 
 Railroad 
 tracks in 
 streets. 
 
 1 Hamilton v. Vicksburg, etc., R. 
 R. Co., 119 U. S. 280. 
 
 2 Rundle v. Delaware and R. Canal 
 Co., 14 How. 80 ; Black River Im- 
 provement Co. v. La Crosse Booming, 
 etc., Co., 54 Wis. 659 ; Rogers v. 
 Kennebec & P. R. R. Co., 35 Me. 
 319. 
 
 See Fitcbburg R. R. Co. v. Boston & 
 M. Railroad, 3Cusb. (Mass.) 58 ; and 
 compare Arnold v. Hudson River R. 
 R. Co., 55 N. Y. 661 ; Kinealy v. St. 
 Louis, etc., Ry. Co., 69 Mo. 658 ; 
 semble contra, Tinsman v. Belvidere 
 Delaware R. R. Co., 26 1ST. J. L. 148. 
 
 3 Yates v. Milwaukee, 10 Wall. 
 497 ; Delaplaine v. Chicago & N. W. 
 Ry. Co., 42 Wis. 214 ; Chapman v. 
 Oshkosh & M. R. R. Co., 33 Wis. 
 629 ; Union Depot, etc., Co. ». Bruns- 
 wick, 31 Minn. 297 ; see Drury v. 
 Midland R. R. Co., 127 Mass. 571 ; 
 Alexandria & F. Ry. Co. i\ Faunce, 
 31 Grat. (Va. ) 761; Brisbine v. St. 
 Paul & S. E. R. R. Co., 23 Minn. 114; 
 and compare Tliayeru. New Bedford 
 R. R. Co., 125 Mass. 253 ; and Rail- 
 
 146 
 
 way Co. v Renwick, 102 U. S. 180. 
 But, semble contra, Stevens v. Pater- 
 son & N. R. R. Co., 34 N. J. L. 532 ; 
 Boston & W. R. R. Co. v. Old Colony 
 R. R. Co., 12 Cush. (Mass.) 605. 
 
 4 Attorney-General v. Metropolitan 
 R. R. Co., 125 Mass. 515; Hobart v. 
 Milwaukee City R. R. Co., 27 Wis. 
 194; Hodges v. Baltimore Passenger 
 Ry. Co., 58 Md. 603; Mabady v. 
 Bushwick R. R. Co., 91 N. Y. 148; 
 Railway Co. v. Lawrence, 38 O. St. 
 41; Faust v. Passenger Ry. Co., 3 
 Phila. (Pa.) 164; Cincinnati and S. 
 G. Ave. Ry. Co. v. Cumminsville, 14 
 O. St. 523; Hinchman v. Patterson 
 Horse R. R. Co., 17 N. J. Eq. 75; 
 Finch v. Riverside Ry. Co., 87 Cal. 
 597; see People v. Kerr, 27 N. Y. 188; 
 Killinger v. Forty-Second St. R. R. 
 Co., 50 N. Y. 206. Compare Carli v. 
 Stillwater Street Ry. Co., 28 Minn. 
 373; Carson v. Central R. R. Co., 35 
 Cal. 325; Roberts v. Easton, 19 O. 
 St. 78.
 
 PART TI.] ACTS WITHIN THE CORPORATE POWERS. [§ 115a. 
 
 in a city. 1 This seems correct, and on the principles stated by- 
 Chief Justice Shaw : " Where under the authority of the legis- 
 lature, in virtue of the sovereign power of eminent domain, 
 private property has been taken for a public use, and a full com- 
 pensation for a perpetual easement in land has been paid to the 
 owner therefor, and afterwards the land is appropriated to a 
 public use of a like kind, as where a turnpike has by law been 
 converted into a common highway, no new claim for compen- 
 sation can be sustained by the owner of the land over which it 
 passes." 2 
 
 § 175«. Obviously an ordinary steam railway is very dif- 
 ferent from street cars. Such a steam railway placed in a city 
 street without due authorization is a nuisance. 3 The track can- 
 not be used by wagons, and driving by the side of it is danger- 
 ous. Unquestionably such a railway obstructs the use of a 
 street as a street. Many of the cases adjudicating the right 
 of abutting owners to compensation for the use of a street by a 
 steam railroad have turned on the ownership of the fee of the 
 street. It has been held that an adjoining owner who owns 
 
 i Taylor v. St. Ry. Co., 91 Me. 193; 
 Canastota Knife Co. v. Newington 
 Tramway Co., 69 Conn. 146; Pool v. 
 Falls Road Ry. Co., 88M'd 533; La 
 Crosse City Ry. Co. v. Higbie, 107 
 Wis. 389; contra, Pecku. Schenectady 
 Ry. Co., 170 N. T. 298; an electric 
 street railroad upon a country road is 
 held to constitute an additional ser- 
 vitude. Zehren v. Mil. E. & L. Co., 
 99 Wis. 83. Cf. Ehret v. Camden & 
 Trenton Ry. Co., 60 X. J. Eq. 246. 
 
 2 Chase v. Sutton M'f'g Co., 4 Cush. 
 (Mass.) 152, 157. But it accords with 
 these principles, and has been held, 
 that the owner is entitled to compen- 
 sation when the horse railroad com- 
 pany changes the grade of the street 
 and obstructs its use. Cincinnati 
 and S. C Ave. Ry. Co. v. Cummins- 
 ville, 14 O. St. 523. The owner of 
 the fee of a highway is entitled to 
 compensation for laying gas pipes 
 under a highway, and parallel with 
 it. Sterling's Appeal, 111 Pa. St. 35. 
 
 The use of a highway by a telegraph 
 company as authorized by law, and 
 subject to the supervision of the 
 local municipal authorities, is a pub- 
 lic use similar to that for which the 
 highway was originally taken, or to 
 which it was originally devoted, and 
 the owner of the fee is entitled to no 
 further compensation. Pierce v. 
 Drew, 136 Mass. 75; two judges dis- 
 senting. Contra, Eels v. Telegraph 
 Co., 143 N. Y. 133; Board of Trade 
 Telegraph Co. v. Barnett, 107 111. 
 507, in which last case it was held 
 that trespass would lie at suit of the 
 owner of the fee. The Illinois Con- 
 stitution provides that " private 
 property shall not be taken or dam- 
 aged without just compensation." 
 See, also, Postal Tel. Co. v. Eaton, 
 170 111. 513. 
 
 3 Burlington v. Penn. R. R. Co., 56 
 N. J. Eq. 259, but see, Fobes v. 
 Rome, etc., R. R. Co., 121 N. Y. 505. 
 
 147
 
 § 175a.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 the fee of the street has a right of action for the consequential 
 injury to his abutting freehold, resulting, for instance, from the 
 decrease of its selling or rental value; but that to entitle the 
 adjoining owner who does not own the fee of the street to 
 compensation, some misconduct on the part of the railroad 
 company must be shown, such, for instance, as leaving cars 
 for an unreasonable time in front of his premises, or run- 
 ning locomotives at a dangerous rate of speed. 1 Many cases 
 support the proposition that an abutting owner owning the fee 
 of the street is entitled to compensation for a steam railroad 
 built thereon, 2 though there are opposing decisions. 3 On the 
 other hand, cases hold that when a railwa} 7 is built properly on 
 a street, the abutting owner who does not own the fee of the 
 street is not entitled to compensation for the injury resulting 
 to his property. 4 
 
 1 Grand Rapids and I. R. R. Co. v. 
 Heisel, 38 Mich. 02; S. C, 47 Mich. 
 393. 
 
 2 Williams v. New York Central R. 
 R. Co., 16 N. Y. 97; Wager v. Troy 
 Union R. R. Co., 25 N. Y. 526; 
 Presbyterian Society v. Auburn and 
 R. R. R. Co., 3 Hill (N. Y.), 567; 
 Schurneier v. St. Paul and P. R. R. 
 Co., 10 Minn. 82; Harrington v. St. 
 Paul and S. C. R. R. Co., 17 Minn. 
 215; Hastings and G. I. R. R. Co. v. 
 Ingalls, 15 Neb. 123; Kucheman v. C. 
 C. and D. Ry. Co., 46 Iowa, 366; 
 Terre Haute and S. E. R. R. Co. v. 
 Rodel, 89 Ind. 128; Iralay v. Union 
 Branch R. R. Co., 26 Conn. 249; 
 Southern Pacific R. K. Co. v. Reed, 
 41 Cal. 256; Mumma v. Harrisburg, 
 etc., R. R. Co., 1 Pearson (Pa.), 24; 
 Mining v. New York C. and St. L. R. 
 It. Co., 11 Weekly Notes Cases (Pa.), 
 297; Phillips v. Dunkirk, W. & P. R. 
 R. Co., 78 Pa. St. 177; Indianapolis 
 B. and W. R. R. Co. v. Hartley, 67 
 111. 439; Chicago and W. I. I. R. R. 
 Co. v. Ayres, 106 111. 511; Cox v. 
 Louisville N. A. and C. R. R. Co., 48 
 Ind. 178; Sherman v. Milwaukee L. 
 S. and W. R. R. Co., 40 Wis. 645; see 
 
 148 
 
 Starr v. Camden and A. R. R. Co., 24 
 N. J. L. 572. 
 
 3 See Brainard v. Missisquoi R. R. 
 Co., 48 Vt. 107; Morris and E. R. R. 
 Co. v. Newark, 10 N. J. Eq. 352; and 
 some of the older Penn. cases, e. g., 
 Snyder v. Pennsylvania R. R. Co., 55 
 Pa. St. 340. 
 
 4 Fobes o. Rome, etc., R. R. Co., 
 121 N. Y. 505; Drake v. H. R. R. 
 R. Co., 7 Barb. (N. Y.) 508; Grand 
 Rapids and I. R. R. Co. ». Heisel, 38 
 Midi. 62; S. C, 47 Mich. 393; Davis 
 v. C. and N. W. R. Co., 46 Iowa, 
 389; Houston and T. C. R. R. Co. v. 
 Odwin, 53 Tex. 343; Stetson v. Chi- 
 cago and E. R. R. Co., 75 111. 74; 
 Moses v. Pittsburg, Ft. W. and C. 
 R, R. Co., 21 111. 516; Milburn v. 
 City of Cedar Bapids, 12 Iowa, 246; 
 Atchison and N. R. R. Co. v. Garside, 
 10 Kan. 552; Nottingham v. Balti- 
 more and P. R. R. Co., 3 MacArthur 
 (Dist. of Col.), 517; Koelmel v. New 
 Orleans M. and C. R. R. Co., 27 La. 
 Ann. 442. But see Central Branch 
 W. P. R. R. Co. v. Andrews, 30 Kan. 
 590; but the abutting owner, though 
 not owning the fee of the street, is 
 entitled to damages if the railroad
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 176. 
 
 After all, this question of the ownership of the fee of the 
 street is barren. Even if the abutting owner owns the fee of 
 the street, the use of the street by the public absorbs and con- 
 stitutes the whole value of it, and the possibility of reverter in 
 case of the cessation of such use is remote. 1 The substantial 
 rights of the abutting owner are no greater when he owns the 
 fee of the street than when he does not. In whomsoever may 
 be vested the fee of the street, the abutting owner is damaged, 
 if at all, with respect to his abutting premises. Accordingly, a 
 number of recent cases ignore the question of ownership of the 
 fee of the street, and award the abutting owner whatever special 
 damages he has suffered by reason of the building of the rail- 
 road in front of his premises. 2 
 
 § 176. The rights of abutting owners regarding the use of a 
 public street in a city were carefully considered in Story v. New 
 York Elevated R. R. Co., 3 where the New York Court of Ap- 
 peals assumed that the plaintiff did not own the fee of the 
 
 company is unlawfully or improperly 
 constructed or operated. Stange v. 
 Hill, etc., Street Ry. Co., 54 Iowa, 
 669; Burlington and M. R. R. R. Co. 
 v. Reimpackle, 15 Neb. 279; Cain v. 
 C. R. I. and P. R. Co., 54 Iowa, 255; 
 Atchison and N. R. R. Co. v. Carside, 
 10 Kan. 552; Cadle v. Muscatine W. 
 R. R. Co., 44 Iowa, 11. Compare 
 Buchner v. Chicago M. and N. W. 
 Ry. Co., 69 Wis. 264; aff'g S. C, '>C 
 Wis. 403; Bradley v. New York and 
 N. H. R. R. Co., 21 Conn. 294. 
 
 1 See People v. Kerr, 27 N. Y. 188, 
 211. 
 
 2 Hot Springs R. R. Co. v. Wil- 
 liamson, 136 U. S. 121; Railway Co. 
 v. Lawrence, 38 O. St. 41; Railroad 
 Co. v. Hambleton, 40 O. St. 496; G. 
 C. & S. P. R. R. Co. v. Eddins, 60 
 Tex. 656; Gottschalk v. Chicago B. 
 & Q. R. R. Co., 14 Neb. 550; Jeffer- 
 sonville M. & I. R. R. Co. v. Esterle, 
 13 Bush (Ky.), 667; Elizabethtown, 
 etc., R. R. Co. v. Combs, 10 Bush 
 (Ky.), 382 
 
 See, also, Roberts v. New York El. 
 
 R. R. Co., 155 N. Y. 31; Central 
 Branch W. P. R. R. Co. v. Twine, 23 
 Kan. 585; Indianapolis B. & W. R. 
 R. Co. v. Smith, 52 Ind. 428; Cross 
 v. St. Louis K. C. & N. Ry. Co., 77 
 Mo. 318; compare Porter v. Northern 
 Missouri R. R. Co., 33 Mo. 128; 
 Pittsburgh & L. E. R. R. Co. v. 
 Bruce, 102 Pa. St. 23; Hussner v. 
 Brooklyn City R. R. Co., 114 N. Y. 
 433. 
 
 3 90 N. Y. 122; S. C, 11 Abb. 
 N. C. 236. This case was affirmed 
 and authoritatively expounded in 
 Lahr v. Metropolitan Elevated Ry. 
 Co., 104 N. Y. 268. Abutting owners 
 were held entitled to damages be- 
 cause of the erection of the elevated 
 road, whether owners of the fee or 
 not, in Abendroth r. Manhattan Ry. 
 Co., 122 N. Y. 1; Kane v. N. Y. El. 
 Co., 125 N. Y. 164. See, also, Ker- 
 nochan v. Manhattan Ry. Co., 161 
 X. Y. 339; Shepard v. Man. Ry. Co. 
 169 N. Y. 160; Western Union Tel. 
 Co. v. Shepard, 169 N. Y. 170. 
 
 149
 
 § 176. J THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 street, but had only an easement based on a covenant made by 
 the city with the plaintiff's grantor, whose deed was from the 
 city, that the street should forever "continue and be for the 
 free and common passage of, and as a public street and way for, 
 the inhabitants of the said city, and all others passing through 
 or by the same, in like manner as other streets of the same city 
 now are or lawfully ought to be ; " and, on this assumption, the 
 court held that the building of an elevated railroad, which 
 obscured to some extent the light of the plaintiff's abutting 
 premises, and to some extent impaired their general usefulness 
 and depreciated their value, deprived the plaintiff of rights for 
 which he was entitled to compensation. The legislature might 
 regulate the uses of a street as a street, but had no power to 
 authorize a corporation to build thereon, without compensating 
 the plaintiff, a structure subversive of and repugnant to the 
 uses of the street as an open public street. Their decision 
 would have been the same, the court said, if the fee of the 
 street had been conveyed by the deed from the city to the 
 plaintiff's grantor; for then the plaintiff would have possessed 
 a private easement of a right of way in the street, with an 
 express covenant that the entire street should be forever kept 
 as a public street; though under such construction the covenant 
 referred to would have been the covenant, not of the city, but 
 of the city's grantee. No matter who was the covenantor, the 
 plaintiff could not without compensation be deprived of his 
 easement derived from the covenant. And even if the city 
 held the fee to the street, the street was, nevertheless, held in 
 trust to be used only as a public street. 1 
 
 § 177. In some cases a distinction is drawn between the lia- 
 bility of a private corporation, organized with a view to the 
 gain of the stockholders, to compensate for the inconvenience 
 and damage it mav cause individuals while acting 
 
 Distinction 
 
 between within the scope of its powers ; and the liability of 
 pubnlfcor- a public corporation or officer to persons damaged 
 porations. through acts done bj r him or it in the performance 
 of a purely public trust or office. 2 This distinction, whether 
 
 x See Railroad Co. v. Schurmeir, 7 I G. Ave. Ry. Co. v. Cumniinsville, 14 
 Wall. 272, 289; Yates v. Milwaukee, Ohio St. 523, 546. 
 10 Wall. 497, 504; Cincinnati & S. I 2 Tinsmant>. Belvidere Delaware R. 
 150
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 178. 
 
 proper or not, renders some of the decisions respecting the re- 
 sponsibility of municipal corporations for damages caused, for 
 instance, in paving and grading streets, inapplicable to private 
 corporations. 1 
 
 § 178. In determining the value of property taken by a cor- 
 poration, the same considerations are to be regarded „ 
 
 r ' . ° Measure of 
 
 as in the sale of property between private persons, compensa- 
 The inquiry should be what is the property worth in 
 the market, not merely with reference to the uses to which it 
 is at the time applied, but also with regard to those to which 
 it is plainly adapted. 3 And the measure of compensation should 
 be the difference between the market value of the property 
 which is injured or taken, before and after the injury or tak- 
 ing. 3 
 
 When a portion of a tract of land belonging to one owner is 
 taken, the just compensation should equal the fair market value 
 of the land taken and the damage done to the rest of the tract 
 by taking the land which is taken and operating a railroad 
 
 R. Co., 26 N. J. L. 148; Baltimore 
 and Potomac R. R. Co. i\ Reaney, 42 
 Md. 117. A public corporation is one 
 created for apolitical purpose. Tins- 
 man v. Belvidere Delaware R. R. Co., 
 26 N. J. L. 148. The whole interest 
 in it must belong to the government. 
 Rundle v. Delaware, etc., Canal, 1 
 Wall. Jr. 275, 290. See § 335, note. 
 
 1 See Baltimore and Potomac R. R. 
 Co. ». Reaney, supra ; Smith v. Cor- 
 poration of Washington, 20 How. 135; 
 Transportation Co. v. Chicago, 99 U. 
 S. 635. 
 
 2 Boom Co. v. Patterson, 98 U. S. 
 403; Hooper v. Savannah, etc., R. R. 
 Co., 69 Ala. 529; Shenango & A. R. 
 R. Co. v. Braham, 79 Pa. St. 447; 
 Mississippi Bridge Co. v. Ring, 58 
 Mo. 491; Henry r. Dubuque & P. R. 
 R. Co., 2 Iowa, 288. See Stinson v. 
 Chicago St. P. & M. Ry. Co., 27 
 Minn. 284; Selma R. & D. R. R. Co. 
 v. Keith, 53 Ga. 178; Gear v. C. C. & 
 D. R. Co., 39 Iowa, 23. Compare 
 
 Jacksonville & S. E. Ry. Co. v. Walsh, 
 106 111. 253. 
 
 3 Pittsburgh, etc., R. R. Co. v. Rob- 
 inson, 95 Pa. St. 426; Pittsburgh, 
 etc., R'y Co. v. Bentley, 88 Pa. St. 
 178; Hooper v. Savannah, etc., R. R. 
 C, 69 Ala. 529. See Indianapolis, 
 etc., R. R. Co. v. Pugh, 85 Ind. 279; 
 compare Everett v. Union Pac. R. 
 Co., 59 Iowa, 243; Dreher v. I. S. W. 
 R. Co., ib.599; Leber v. Minneapolis, 
 etc., R'y Co., 29 Minn. 256; Phillips 
 v. Phila. & R. R. R. Co., 182 Pa. St. 537; 
 Fiick Coke Co. v. Painter, 198 Pa. St. 
 468. Where property taken by a cor- 
 poration, by its right of eminent 
 domain, is already deteriorated in 
 value through the exercise of the 
 right of eminent domain by another 
 corporation, the damages must be 
 estimated with reference to the exist- 
 ing deterioration. Lycoming Gas and 
 Water Co. v. Moyer, 99 Pa. St. 615. 
 See, generally, Mills on Eminent Do- 
 main, Chap. XVI. 
 
 151
 
 § 178.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 thereon in a proper manner. 1 And the measure of this com- 
 pensation is the difference between the fair market value of the 
 whole tract before and after the railroad is built upon the strip 
 taken. 2 Thus, when the construction of a railroad through a 
 farm or other tract of land renders the use or cultivation of the 
 remaining portions more inconvenient and expensive, this is an 
 element of damage. 3 
 
 1 Bangor & P. R. R. Co. v. Mc- 
 Comb, 60 Me. 290; Hooper v. Savan- 
 nah, etc., R. R. Co., 69 Ala. 529; 
 Robbins v. Milwaukee & H. R. R. 
 Co., 6 Wis. 636; Cincinnati & S. Ry. 
 Co. v. Longworth, 30 O. St. 108; 
 Wyandotte K. C. & N. W. Ry. Co. 
 v. Waldo, 70 Mo. 629; Raleigh & A. 
 Air Line R. R. Co. p. Wicker, 74 N. 
 C. 220; Virginia & T. R. R. Co. v. 
 Henry, 8 Nev. 165; White Water 
 Valley R. R. Co. v. McClure, 29 Ind. 
 536; Baltimore P. & C. R. R. Co. v. 
 Lansing, 52 Ind. 229; Hartshorn v. 
 
 B. C. R. & N. R. Co., 52 Iowa, 613; 
 St. Louis, etc., R. R. v. Anderson, 39 
 Ark. 167; Texas & St. L. R. R. Co. 
 v. Matthews, 60 Tex. 215. 
 
 2 Pittsburgh & L. E. R. R. Co. v. 
 Robinson, 95 Pa. St. 426; Pittsburgh 
 V. & C. Ry. Co. o. Bentley, 88 Pa. 
 St. 179; Danville H. & W. R. R. Co. 
 o. Gearhart, 81* Pa. St. 260; She- 
 nango & A. R. R. Co. v. Braham, 79 
 Pa. St. 447; Hornstein v. Atlantic & 
 Gt. W. R. R. Co., 51 Pa. St. 87; 
 Harvey v. Lackawanna & B. R. R. 
 Co., 47 Pa. St. 428; East Pennsyl- 
 vania R. R. Co. v. Hottenstein, 47 
 Pa. St. 28; Watson v. Pittsburgh & 
 
 C. R. R. Co., 37 Pa. St. 469; Schuyl- 
 kill Navigation Co. v. Thoburn, 7 S. 
 & R. (Pa.) 411; Henry v. Dubuque 
 & P. R. R. Co., 2 Iowa, 288 ; Sater 
 v. Burlington, etc., Plank Road Co., 
 1 Iowa, 386; Brooks v. Davenport & 
 St. P. R. R. Co., 37 Iowa, 99; Page 
 v. Chicago M. & St. P. Ry. Co., 70 
 111. 324; Bangor & P. R. R. Co. v. 
 
 152 
 
 McComb, 60 Me. 290; Ham v. Wis- 
 consin I. & N. Ry. Co., 61 Iowa, 716; 
 Black River, etc., R. R. Co. v. Bar- 
 nard, 9 Hun (N. Y.), 104; Fleming v. 
 Chicago D. & M. R. R. Co., 34 Iowa, 
 353; Powers v. Hazelton, etc., Ry. 
 Co., 33 O. St. 429. Compare St. 
 Louis J. & S. R. R. Co. v. Kirby, 104 
 111. 345; St. Louis, etc., R. R. Co. v. 
 Anderson, 39 Ark. 167; Reisner v. 
 Atchison, etc., R. R. Co, 27 Kan. 
 382; Henderson, etc., R. R. Co. v. 
 Dickerson, 17 B. Mon. (Ky.) 173; 
 Price v. Milwaukee & St. Louis Ry. 
 Co., 27 Wis. 98; Cincinnati & S. Ry. 
 Co. v. Longworth, 30 O. St. 108; 
 Hatch v. Vermont Central R. R. Co., 
 35 Vt. 49; S. C, 28 Vt. 142; Par- 
 ker v. Boston & M. R. R., 3 Cush. 
 (Mass.) 107; Proprietors of Locks 
 and Canals v. Nashua & L. R. R. Co., 
 10 Cush. 385. 
 
 3 Tucker v. Massachusetts Central 
 R. R., 118 Mass. 546; Presbrey v. 
 Old Colony & N. Ry. Co., 103 Mass. 
 1; McReynolds v. Burlington & O. R. 
 Ry. Co., 106 111. 152; Robbins v. Mil- 
 waukee & H. R. R. Co., 6 Wis. 636; 
 St. Louis, etc., R. R. v. Anderson, 39 
 Ark. 167; Watson v. Pittsburgh & C. 
 R. R. Co., 37 Pa. St. 469; Sherwood 
 v. St. Paul & C. Ry. Co., 21 Minn. 
 127; White Water Valley R. R. Co., 
 v. McClure, 29 Ind. 536; Baltimore P. 
 & C. R. R. Co. v. Lansing, 52 Ind. 229; 
 Missouri Pacific R'y Co. v. Hays, 15 
 Neb. 224; Raleigh, etc., R. R. Co. v. 
 Wicker, 74 N. C. 220. Compare 
 Atchison & D. Ry. Co. v. Lyons, 24
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 179. 
 
 § 179. When the property of a person is taken or injured, 
 and the question is as to the amount of compensa- 
 tion, certain species of benefits which, concurring benefits! 
 with the injury, may have lessened the actual de- 
 preciation of his property, are to be taken into consideration. 
 If the whole of an owner's property in the vicinity is taken, 
 manifestly no question can arise as to set off of benefits. When 
 a portion only of a tract or piece of land is taken, the benefits 
 accruing to the rest of the tract may be set off as against the 
 damage done to it, but not as against the value of the portion 
 taken; 1 and the benefits which may be set-off are those only 
 that are direct and peculiar to the tract of which a part is taken, 
 and not shared by that tract in common with lands in the vi- 
 
 Kan. 745; Curtis v. St. Paul, etc., R. 
 R. Co., 20 Minn. 28; Ham v. Wis- 
 consin I. & N. Ry. Co., 61 Iowa, 716; 
 Bangor & P. R. R. Co. v. McCorab, 
 60 Me. 290; Western Pennsylvania 
 R. R. Co. v. Hill, 56 Pa. St. 460; 
 Selma R. & D. R. Co. v. Camp, 45 
 Ga. 180; Pfleger v. Hastings & D. 
 Ry. Co., 28 Minn. 510. 
 
 1 Robbins v. Milwaukee & H. R. 
 R. Co., 6 Wis. 636; Chapman v. 
 Oshkosb & M. R. R. R. Co., 33 Wis. 
 629; Neilson v. Chicago M. & N. Ry. 
 Co., 58 Wis. 516; Fremont E. & ;M. 
 V. R. R. Co. v. Whalen, 11 Neb. 
 585; Elizabethtowu & P. R. R. Co. 
 15. Helm, 8 Bush (Ky.), 681; Hayes 
 v. Ottawa, etc., R. R. Co., 54 111. 
 373; Wilson v. Rockford, etc., P.. R. 
 Co., 59 111. 273; Todd y. Kankakee, 
 etc., R. R. Co., 78 111. 530; Mayor, 
 etc., of Atlanta v. Central Ry. Co., 
 53 Ga. 120; Jones v. Wills Valley R. 
 R. Co., 30 Ga. 43; Shipley v. Balti- 
 more, etc., R. R. Co., 34 Md. 336; 
 Woodfolk v. Nashville, etc., R. R. 
 Co., 2 Swan (Tenn.), 422; East Ten- 
 nessee & V. R. R. Co. v. Love, 3 
 Head (Tenn.), 63; Mississippi Ry. 
 Co. v. McDonald, 12 Heisk. (Tenn.) 
 54; Grafton & G. R. R. Co. v. Fore- 
 man, 24 W. Va. 662; San Francisco, 
 
 etc., R. R. Co. v. Caldwell, 31 Cal. 
 367; Henderson & N. R. R. Co. v. 
 Dickerson, 17 B. Mon. (Ky.) 173; 
 Alabama & F. R. R. Co. v. Burkett, 
 46 Ala. 569; Philadelphia & E. R. R. 
 Co. v. Cake, 95 Pa. St. 139. Cases 
 which do not sustain this rule are 
 Britton v. D. M. O. & S. R. Co., 59 
 Iowa, 540; Brooks v. Davenport & 
 St. P. R. R. Co., 37 Iowa, 99; Giesy 
 v. Cincinnati, etc., R. R., 4 O. St. 
 308; Cincinnati & S. Ry. Co. v. Long- 
 worth, 30 O. St. 108; St. Louis, etc., 
 R. R. v. Anderson, 39 Ark. 167; 
 Isom v. Mississippi Central R. R. Co., 
 36 Miss. 300 ; New Orleans J. & G. 
 N. R. R. Co. v. Moye, 39 Miss. 374; 
 Brown v. Beatty, 34 Miss. 227. In 
 these cases the set-off of benefits was 
 held excluded by language of the 
 state constitutions. The Massachu- 
 setts cases, on the other hand, per- 
 mit set-off, even as against value of 
 the portion of land taken. Meacham 
 v. Fitchburg R. R. Co., 4 Cush. ( Mass. ) 
 291; Upton v. South Branch Reading 
 R. R. Co., 8 Cush. (Mass.) 600; 
 Whitman v. Boston & M. R. R., 7 
 Allen (Mass.), 313; Childs v. New 
 Haven & N. Co., 133 Mass. 253; also 
 a Minnesota case, Winona & St. P. R. 
 R. Co. v. Waldron, 11 Minn. 515. 
 153
 
 § 180. J THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 p<*t 
 
 cinity belonging to other owners. 1 The general rise of land 
 in the neighborhood caused by building the railroad is not to 
 be regarded, nor the benefits accruing to the owner of the tract 
 through having the use of the railroad, when no greater privi- 
 lege is given him than the railroad as a common carrier would 
 be bound to furnish. 2 
 
 180. An act within the scope of the corporate powers done 
 by the body corporate acting as such in the manner 
 U) ( dvcorp<> prescribed by the constitution of the corporation is 
 rate; when binding on all persons in any way interested in the 
 corporate enterprise ; for the bod} 7 corporate, express- 
 ing its will through a vote of a majority (in interest) of its mem- 
 bers, or of a two-thirds or three-fourths majority if that major- 
 ity is necessary in respect of any class of acts, possesses the 
 ultimate power and discretion which the corporators as indi- 
 viduals, through incorporation, vested in themselves as a body 
 corporate. This broad statement, however, which seems and 
 is logical enough, is practically of less general application than 
 
 1 Childs v. New Haven, etc., Co., 
 132 Mass. 253; Meacham v. Fitch- 
 burg R. R. Co., 4 Cusb. (Mass.) 291; 
 Upton v. South Branch Reading R. 
 R. Co., 8 Cush. (Mass.) 600; Shipley 
 v. Baltimore, etc., R. R. Co., 34 Md. 
 336; Lake Roland R. Co. v. Flick, 
 86 Md. 259; Fremont, E. & M. V. R. 
 R. Co. v. Whalen, 11 Neb. 585; 
 Woodfolk v. Nashville & C. R. R. 
 Co., 2 Swan (Tenn.), 422; East Ten- 
 nessee & V. R. R. Co. v. Love, 3 
 Head (Tenn.), 63; Winona & St. P. 
 R. R. Co. v. Waldron, 11 Minn. 515; 
 Hornstein ». Atlantic & Gt. W. R. R. 
 Co., 51 Pa. St. 87; Freedle v. North 
 Carolina R. R. Co., 4 Jones, L. 
 (N. C.) 89; Raleigh & A. Air Line 
 R. R. Co. v. Wicker, 74 N. C. 220; 
 Hosher v. Kansas City, St. Jo., etc., 
 R. R. Co., 60 Mo. 303; Pacific R. R. 
 Co. v. Crystal, 25 Mo. 544; St. Louis 
 & St. Jo. R. R. Co. v. Richardson, 45 
 Mo. 466; Alden v. White Mountains 
 R. R., 55 N. II. 413; Nicholson r. 
 New. York & N. H. R. R. Co., 22 
 
 154 
 
 Conn. 74, 88; St. Louis, etc., R. R. 
 Co. ». Morris, 35 Ark. 622; Missis- 
 sippi Ry. Co. o. McDonald, 12 Heisk. 
 (Tenn. ) 54; St. Louis, etc., R. R. Co., 
 v. Kirby, 104 111. 345; Upham v. 
 Worcester, 113 Mass. 97; Peoria P. 
 & J. R. R. Co. v. Black, 58 111. 33; 
 Todd v. Kankakee, etc., R. R. Co., 
 78 111. 530. Contra Henderson, etc., 
 R. R. Co. v. Dickerson, 17 B. Mon. 
 (Ky. ) 173; see California Pacific R. 
 R. Co. v. Armstrong, 46 Cal. 85. 
 
 2 Drury v. Midland R. R. Co., 127 
 Mass. 571. Compare Pittsburgh & L. 
 E. R. R. Co. v. Robinson, 95 Pa. St. 
 420. 
 
 If the state constitution provides 
 that when eminent domain is exer- 
 cised by a railroad company com- 
 pensation must first be made the 
 owner, the entry of a railroad com- 
 pany without the owner's permis- 
 sion is a trespass; except when the 
 entry is made for a preliminary sur- 
 vey. New Orleans, etc., R. R. Co. v. 
 Jones, 68 Ala. 48.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 182. 
 
 what may be regarded as exceptions or qualifications to it. For 
 the management of the affairs of a corporation is ordinarily 
 vested by the corporate constitution in the board of directors ; 
 and this constitution embodying the original contract among 
 the corporators is the final determinant of all rights and liabil- 
 ities subsisting in respect of the corporate enterprise. Accord- 
 ingly, if all the corporators or shareholders originally agreed 
 that the management of the corporate enterprise should rest 
 with the directors, it is incompetent for a majority of the share- 
 holders to divest the directors of the management ; at least as 
 long as a single shareholder objects ; for in such case to change 
 the management of the corporate enterprise would violate the 
 rights of the shareholders under the original agreement. And 
 there is much reason in this, for manifestly the body of share- 
 holders are incapable of managing the corporate business with 
 efficiency. It is also to be remembered here, that as all persons 
 dealing with a corporation are affected with knowledge of its 
 constitution, x every one has notice of whatever incapacity the 
 constitution has imposed on the body of shareholders. 
 
 § 181. Accordingly, in one case where the enabling act con- 
 tained the following provision : " the powers of the 
 corporation shall be exercised by a board of trustees," 
 a conveyance of real estate belonging to the corpo- 
 ration was held invalid because authorized by a 
 shareholders' meeting; 2 and in another case, a lease of cor- 
 porate property, authorized in the same manner, was set aside 
 on the ground that the management having been vested in the 
 board of directors, a shareholders' meeting was incompetent to 
 authorize the lease. 3 
 
 § 182. It is submitted, however, that any general rule which, 
 from these cases, might be deduced as to the incapacity of 
 shareholders to act in a corporate meeting, when the manage- 
 
 Acts of the 
 body corpo- 
 rate; when 
 held in- 
 valid. 
 
 1 See § 195. 
 
 2 Gashwiler v. Willis, 33 Cal. 12. 
 
 8 Conro v. Port Henry Iron Co., 12 
 Barb. 27. But in this case the lease 
 had been made to the principal share- 
 holder for a nominal consideration, 
 and was set aside at the suit of cred- 
 itors on whom it was a fraud. It 
 should have been set aside had its 
 
 execution been perfectly regular. 
 See, also, Union Gold Mining Co. v. 
 Rocky Mn. Nat. Bk., 2 Col. 565; Mc- 
 Cullough v. Moss, 5 Den. 567, 575; 
 Union Mut. Ins. Co. v. Keyser, 32 
 N. H. 313, 315 ; Dana v. Bank of U. S., 
 5 W. & S. 223, 245-247; Dayton, etc., 
 R. R. Co. v. Hatch, 1 Disney (Cin- 
 cinnati Sup'r Ct.), 84. 
 
 155
 
 § 184.] THR LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 ment is vested in a board of directors, is to be applied most 
 cautiously. 1 A shareholders' meeting would rarely act except 
 in regard to matters of vital importance to corporate interests; 
 and there are certainly acts which the corporate constitution 
 may authorize, that are beyond the authority of the board of 
 directors, although the management is vested in the board. 2 
 Such acts — even if a shareholders' meeting would not by itself 
 have been sufficient authority for them — if done by the direct- 
 ors, at least require for their validity the shareholders' ratifi- 
 cation. 3 And certainly the final authority of all in a corpora- 
 tion, to say whether the business shall be carried on or wound 
 up, rests with the shareholders and not with the directors. 4 
 
 § 183. Unquestionably all the shareholders, or all the share- 
 holders and creditors, acting unanimously, have more exten- 
 sive powers than the body corporate acting by a majority, and 
 may validly do acts which would have been invalid had they 
 been done by the body corporate through an ordinary vote. 
 Such acts, however, are rarely acts within the scope of the cor- 
 porate powers ; and it is only w T ith doubtful propriety that they 
 may be called acts of the corporation ; for they are rather acts 
 whereby the individuals interested in the corporate enterprise 
 authorize or ratify what it was legally incompetent for the cor- 
 poration as such to do. 5 
 
 § 184. To be valid in themselves, acts done by the body cor- 
 porate must be done in a corporate meeting duly 
 
 Manner in ' x ~ J 
 
 which the assembled; 6 though any irregularity may be cured 
 
 rate should by the acquiescence of those who would have had 
 
 the right to complain of it. 7 In considering the re- 
 
 1 Although the management be 
 vested in the directors, a sharehold- 
 ers' meeting may appoint a commit- 
 tee to investigate the affairs of the 
 corporation and incur the necessary 
 expenses; for which the corpora- 
 tion will be liable. Star Line v. Van 
 Vliet, 43 Mich. 364. 
 
 2 E. g., directors have no power to 
 increase the capital stock, or lease 
 
 the entire property of the corpora- 
 tion; see §§ 226-229. 
 
 3 See Hancock v. Holbrook, 3 Fed. 
 Rep. 353. 
 
 4 See §§ 229, 230. 
 
 5 Compare Railroad Co. v. Howard, 
 7 Wall. 392. A conveyance of the 
 land of a corporation as a donation 
 to a public improvement, if assented 
 to by all the stockholders is valid, 
 
 6 As to the manner of holding cor- 
 porate meetings and elections, see 
 §§ 573-576. 
 156 
 
 Nelson v. Hubbard, 96 Ala. 238.
 
 PART II.] ACTS WITHIN THE CORPORATE POWER. [§ 185. 
 
 lations between the corporation and outsiders dealing with it 
 in good faith, this general rule requires modification. Great 
 hardship would be worked if an outsider were compelled to see 
 to it at his peril that all the formalities which the corporate 
 body before action or in acting should observe were in fact 
 observed. Accordingly, the non-observance of antecedent for- 
 malities in regard to notifying the meeting will not affect the 
 rights of outsiders acting in good faith on the assumption that 
 the corporate action was regular. 1 On the other hand, it may 
 be said, since ordinarily only acts of great importance are done 
 by the body corporate, outsiders knowing the manner in which 
 corporations usually act, ought carefully to examine the pro- 
 ceedings of the body corporate when their rights are to be 
 based directly on its action. 
 
 § 185. Further, if there are in the constitution of a corpora- 
 tion provisions of an imperative nature relating to 
 the action of shareholders, every one will be affected 
 with notice of them, and bound at his peril to see to 
 it that they are observed. Thus, when a statute re- 
 quires the assent of two-thirds of the shareholders 
 present in a shareholders' meeting as a condition to a lease of a 
 
 Formalities 
 required by 
 statute. 
 Cousent 
 of share- 
 holders. 
 
 although not authorized by any cor- 
 porate action, and will estop the 
 stockholders from claiming the land 
 on the dissolution of the corporation. 
 Aransas P. H. Co. v. Alarming, 94 
 Tex. 558. Such acts are ultra vires ; 
 and their legal effect is the subject 
 of Part III. of the present chapter. 
 
 i See §§ 204, 259, for like principles 
 applying to acts of directors and 
 other corporate officers. 
 
 If the corporate records show that 
 a meeting was duly called on proper 
 notice, and that business was trans- 
 acted at the meeting, it is to be pre 
 sumed, in the absence of direct con- 
 trary evidence, that a quorum was 
 present. Citizens' Ins. Co. v. Short- 
 well, 8 Allen, 217. See Sargent v. 
 Webster, 13 Mete. 497; Chouteau 
 Ins. Co. v. Holmes, 68 Mo. 601. At 
 
 a meeting duly convened, a majority 
 of those present have power to trans- 
 act business, though they are a mi- 
 nority of the whole number. Granger 
 v. Grubb, 7 Phila. 350. 
 
 Still, it has been held that a vote 
 purporting to authorize an agent of 
 the corporation to convey its real es- 
 tate, passed at a meeting which had 
 not been notified to the holders of 
 about one-third of the stock, was 
 void; and gave no validity to a deed 
 executed pursuant to it; but the case 
 was actually decided on another 
 point. Stowe v. Wise, 7 Conn. 214. 
 Failure to enter at the time on the 
 records of the corporation a resolu- 
 tion increasing the capital stock 
 does not invalidate it. Handley v. 
 Stutz, 139 U. S. 417. 
 
 157
 
 § 185.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 railroad, a lease executed without such assent is invalid. 1 In 
 like manner, where under its enabling act a corporation is au- 
 thorized to mortgage its property, having first obtained the 
 written consent of the owners of two-thirds of the capital 
 stock, this written consent is a condition precedent to the valid- 
 ity of a mortgage executed by the corporation ; and the cor- 
 poration itself cannot give consent on behalf of stock held by 
 itself, nor can the assenting shareholders be deemed to rep- 
 resent a proportionate amount of the stock held by the corpo- 
 ration. 2 Still, in another case, 3 it was held by the same court 
 construing the same statute, that where there is no fraud the 
 defects in the execution of the consent must, to invalidate it, 
 be so radical that an intention to consent cannot be inferred. 
 In this case the objection was interposed by the holder of a 
 subsequent mortgage, and the court said : " Without consider- 
 ing the question whether any but stockholders may interpose 
 the objection to the authority exercised in this case, the infer- 
 ence that the general purpose and design of the act was in the 
 interest of stockholders only has some bearing on the question 
 presented as to the proper rule of construction to be adopted 
 of the paper produced as the assent of the stockholders." 4 The 
 
 1 Peters v. Lincoln and N. W. R. 
 R. Co., 2 MeCrary, 275. 
 
 2 Vail v. Hamilton, 85 N. Y. 453. 
 Such a mortgage may be set aside at 
 the suit of a receiver, the corporation 
 being insolvent. 
 
 The last two points stated in the 
 text were not necessary to the deci- 
 sion of this case; for even if the cor- 
 poration could validly have consented 
 on behalf of the shares held by it, or 
 if those shares had been deducted 
 from the total amount of its stock, 
 still there would not have been a 
 representation of two-thirds of the 
 stock; for some of the shares on 
 which the corporation purported to 
 consent, and which were needed to 
 make up the two-thirds, it had re- 
 issued to an individual by a transfer 
 absolute in form, though made as 
 collateral security. Compare Green- 
 
 158 
 
 point Sugar Co. v. Whitin, 69 N. Y. 
 328, 339, infra. Still, it is settled that 
 a corporation cannot vote on shares 
 held by it. § 136. lb. Where for the 
 validity of a mortgage the charter 
 required the consent of the holders 
 of more than seventy per cent of the 
 common and preferred stock, it was 
 held that this provision was for the 
 protection of the stockholders, and 
 that a mortgage executed without 
 such consent could not be set aside 
 by the creditors through the assignee 
 in insolvency. Bishop v. Kent & 
 Stanley Co., 20 R. I. 681. 
 
 3 Greenpoint Sugar Co. v. Whitin, 
 69 N. Y. 328. See Paulding v. 
 Chrome Steel Co., 94 N. Y. 334; 
 Welch v. Importers', etc., Bank, 122 
 X. Y. 177. Compare Lewis v. Jeff- 
 ries, 86 Pa. St. 340. 
 
 *69 N. Y. 333. See Boyce v.
 
 PART H.] ACTS WITHIN THE CORPORATE POWERS. [§ 187. 
 
 consent, of which the validity was before the court, had been 
 signed by the owners of two-thirds of all the stock that had 
 ever been issued ; and, although they were not the holders of 
 two-thirds of the amount of stock specified in the articles of 
 incorporation, they represented, as the court said, " two-thirds 
 of the pecuniary interest and property of the corporation." 1 
 And the consent was held sufficient, notwithstanding other al- 
 leged defects, all of which the court considered immaterial un- 
 der the circumstances of the case. 2 
 
 § 186. Further principles of law are to be taken into con- 
 sideration when it is the function of certain officers „ .„ 
 
 . . , . » r Certifica- 
 
 te certif}" the existence of an assent of shareholders tion of the 
 
 to a measure. Then it would seem, although the ance^ffor- 
 assent might be defective or perhaps entirely want- mallties - 
 ing, that the certification of the proper officer would estop the 
 corporation from setting up either of these facts to the detri- 
 ment of an outsider who had acted in good faith relying on the 
 certification. 3 
 
 § 187. Shareholders separately and individually have no 
 power to act for the corporation : and acts done by T ,. ., , 
 
 1 L * Individual 
 
 them in such a manner will have no validity as cor- sharehoid- 
 
 porate acts; 4 unless, to be sure, a shareholder acts act for the 
 
 under some special authority, in which case he does ^^ orar 
 not act as a shareholder. This statement, however, 
 
 Montauk Gas Co., 37 W. Va. 73, and 
 
 § 813. This same statute provides 
 that the assent " shall first be filed in 
 the office of the clerk of the county 
 where the mortgaged property is 
 situated." Under this, as against a 
 subsequent mortgagee with notice of 
 the prior mortgage, an assent given 
 after the execution of the prior mort- 
 gage validates it, although not filed 
 in the office of the proper county 
 clerk, such assent being prior in 
 time to the subsequent mortgage. 
 Rochester Savings Bank v. Averell, 
 96 N. Y. 467. See, also, Martin v. 
 Niagara Paper Co., 122 N. Y. 165. 
 
 1 69 N. Y. 339. Ace. Castner v. 
 Twitchell Champlin Co., 91 Me. 524. 
 
 2 Where, for the validity of a mort- 
 gage, a statute requires the concur- 
 rence of two-thirds of the sharehold- 
 ers present at a meeting, it is suffi- 
 cient if all the directors assent at a 
 directors' meeting, they being in fact 
 all the shareholder's but one. Thomas 
 v. Citizens' Horse Ry. Co., 104 111. 
 462. The court said that all the 
 shareholders had assented; and the 
 corporation had had the proceeds of 
 the mortgage. Compare Miller v. 
 Rutland, etc., R. R. Co., 36 Vt. 452. 
 
 3 See §§207 and 208 for analogous 
 
 4 For note 4 see p. 160. 
 
 159
 
 § 187.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 requires modification in this respect : shareholders by their 
 separate and individual action or acquiescence may estop them- 
 selves from questioning the validity of an act done on behalf 
 of a corporation. 1 Conversely, a person owning all the capital 
 stock of a corporation is not the legal owner of its property, 
 and, for example, cannot maintain replevin for it in his own 
 name.- 
 
 principles which estop a corporation 
 from denying the existence of a fact 
 certified to by an agent, on the ex- 
 istence of which the authority of the 
 agent to act depends; also, §§ 329- 
 332. 
 
 4 Humphreys v. McKissock, 140 
 U. S. 304, 312; Duke v. Markham, 
 105 N. C. 181; Shay v. Tuolumne 
 County Water Co., 6 Cal. 73; Ruby 
 v. Abyssinian Society, 15 Me. 306; 
 Bartlett v. Kinsley, 15 Conn. 327; 
 Hartford Bank v. Hart, 3 Day 
 (Conn.), 491; Hayden v. Middlesex 
 Turnpike Co., 10 Mass. 397, 403; 
 Harris v. Muskingum Mfg. Co., 4 
 Blackf . ( Iud. ) 267. See Canal Bridge 
 v. Gordon, 1 Pick. 296, 303; Bidwell 
 v. Pittsburgh, etc., Ry. Co., 114 Pa. 
 St. 535; Rough v. Breitung, 117 
 Mich. 48; Sellers v. Greer, 172 111. 
 549. All the shareholders act- 
 ing individually cannot convey the 
 corporate property. Wheelock v. 
 Moultou, 15 Vt. 519; Isham v. Ben- 
 nington Iron Co., 19 Vt. 230, 249; 
 Baldwin v. Canheld, 26 Minn. 43; 
 Parker v. Hotel Co., 96 Tenn. 252. 
 Compare Gordon v. Swan, 43 Cal. 
 504; Castleberry v. State, 62 Ga. 442. 
 So a person who is president, treas- 
 urer, and general manager of a cor - 
 poratio n, and owns all but two share s 
 of itsstock, cannot i^ive a mortgage 
 of the pro perty~oTthe corporation to 
 secure a pre-existing debt; England 
 D. Dearborn, 141 Mass. 590. Semble 
 contra, Swift v. .Smith, 65 Md. 428. 
 S^asjdg of fi(p-pnvn.tft property made 
 in good_faU^i_Jry_the^ assignee of an 
 
 100 
 
 insolvent corporation cannot be, set 
 aside o n account of any frau d com- 
 mitted by a shareholder with which 
 
 the assignee was in no way connected. 
 Trevitt v. Converse, 31 Ohio St. 60. 
 Notice to individu aJLs hareholdg rs is 
 not not ice to th e^corjiQration. Davis 
 Improved Wrought Iron Wagon 
 Wheel Co. u. Davis, etc., Co., 22 
 Blatchf. 221; Nat. Bank v. Anderson, 
 28 S. C. 143; Blood v. La Serena L. 
 & W. Co., 134 Cal. 361; Nor is notice 
 to corporators. Mercantile Nat. Bk. 
 v. Parsons, 54 Minn. 56. 
 
 But if the shareholders covena nt 
 that the corporation shall do certain 
 acts, they will be individually liable , 
 at least in damages, if it do not per- 
 form. Tileston v. Newell, 13 Mass. 
 406; see Wheelock v. Moulton, 15 Vt. 
 519, 524. 
 
 1 Sheldon Hat Blocking Co. v. 
 Eickemeyer Hat Blocking Machine 
 Co., 90 N. Y. 607; Hull v. Glover, 126 
 111. 122; Manhattan Hardw. Co. v. 
 Plialen, 128 Pa. St. 110; Same v. Ro- 
 land, ib. 119; McCaleb v. Goodwin 
 et al., 114 Ala. 615; Nicrosi v. Calera 
 Land Co., 115 Ala. 429. See §§ 213- 
 217. 
 
 2 Button v. Hoffman, 61 Wis. 20; 
 First Nat'l B'k of Gadsden v. Win- 
 chester, 119 Ala. 168. See, also, 
 Compton v. The Chelsea, 128 N. Y. 
 537; Richter ». Henningsan, 110 Cal. 
 530; Exchange Bank v. Macon Cons. 
 Co., 97 Ga. 1; Bridge Co. v. Traction 
 Co., 19(5 Pa. St. 25; Sparks v. Dun- 
 bar, 102 Ga. 129; Harrington v. Con- 
 nor, 51 Neb. 214; Durlacher v. Frazer,
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 188. 
 
 § 188. Before entering on the discussion of what acts of the 
 various classes of corporate officers are binding on 
 the corporation it will be convenient to notice how the actTof* 
 the validity of an act is affected by the circumstance ^ act0 
 that the person acting on behalf of the corporation 
 as a corporate agent or officer is not in point of strict law the 
 officer he purports to be — is an officer de facto, and not an offi- 
 cer de jure. 1 
 
 "An officer de facto" says Lord Ellenborough, " is one who 
 has the reputation of being the officer he assumes to be, and yet 
 is not a good officer in point of law." 2 It is consistent with 
 this definition, and has been so held, that by color of election 
 a person, though clearly ineligible, may be such an officer. 3 
 Moreover, " persons acting publicly as officers of the corporation 
 are presumed to be rightly in office. ... If officers of the 
 corporation openly exercise a power which presupposes a dele- 
 gated authority for the purpose, and other corporate acts show 
 that the corporation must have contemplated the legal existence 
 of such authority, the acts of such officers will be deemed right- 
 ful, and the delegated authority will be presumed. If a person 
 acts notoriously as cashier of a bank, and is recognized by the 
 directors or by the corporation as an existing officer, a regular 
 appointment will be presumed ; and his acts, as cashier, will 
 
 8 Wyo. 58. One corporation is not 
 liable for the debts of another cor- 
 poration merely because the same 
 persons hold the stock in both cor- 
 porations. Waycross R. Co. v. Offer- 
 man R. Co., 109 Ga. 827. 
 
 A promise by a stockholder to pay 
 the debt of the corporation is a prom- 
 ise to pay the debt of another, and 
 so within the Statute of Frauds. 
 Home Nat. Bank v. Waterman, 134 
 111. 4G1. Shareholders, though they 
 own all tlie stock, cannot set off their 
 individual claims against a creditor 
 of the corporation, in an action 
 brought by him against the corpo- 
 ration. Gallagher v. Brewing Co., 
 53 Minn. 214. But a shareholder has 
 an insurable interest in the property 
 11 
 
 of the corporation, and may protect 
 it by an insurance of specific prop- 
 erty of the corporation. Riggs v. 
 Commercial Mutual Insurance Co., 
 125 N. Y. 7. 
 
 1 In regard to setting aside the ap- 
 pointment or election of de facto offi- 
 cers, see §§ 577-581. 
 
 2 King ». Bedford Level, 6 East, 
 356, 368 ; see Parker v. Kett, 1 Lord 
 Raymond, 658, 660. This definition 
 is followed in Mechanics' Nat. Bank 
 v. Burnett Mfg. Co., 32 N. J. Eq. 236. 
 Compare Norton v. Shelby County, 
 118 U. S. 425. 
 
 3 Kuight v. Corporation de Wells 
 Lutw., 508, 519. See, also, O' Brian 
 v. Knivan, Cro. Jac. 552. 
 
 161
 
 § 189.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Principles 
 on which 
 rests the 
 validity of 
 the acts of 
 de facto 
 officers. 
 
 bind the corporation, although no written proof is or can be 
 adduced for his appointment." ! 
 
 Mere general reputation, however, is not evidence as against 
 the corporation, to prove that certain persons were its officers 
 (directors), the ordinary rules of evidence being applicable. 2 
 § 189. The general rule regarding the legal effect of the acts 
 of de facto officers is stated in Angell and Ames on 
 Corporations, as follows : " The act of an officer de 
 facto is good, wherever it concerns a third person, 
 who had a previous right to the act, or has paid a 
 valuable consideration for it." 3 
 It is submitted that this statement of the rule does not give 
 sufficient prominence to the principle of estoppel on which the 
 rule depends ; a principle which, in its application to the re- 
 sponsibility of corporations for the acts of de facto officers, may 
 be stated thus : If a body of men acting as a corporation permit 
 certain persons to act openly as corporate officers — or if it is 
 permitted by the directors, assuming them to have had the 
 power to appoint the officer in question — the corporation will 
 not, to the detriment of persons who in good faith have acted 
 on the assumption that the persons acting as officers were the 
 officers they assumed to be, be permitted to impeach the validity 
 of their acts and contracts on the ground that such persons were 
 not legally corporate officers ; 4 and, on the other hand, persons 
 
 1 Story, J., in Bank of U. S. v. 
 Dandridge, 12 Wheat. 64, 70. In ac- 
 cord with his remarks are Hall v. 
 Carey, 5 6a. 239 ; Despatch Line v. 
 Bellany Jlfg. Co., 12 N. H. 205. 
 
 2 Litchfield Iron Co. u. Bennett, 7 
 Cow. 234. 
 
 3 §287. See Riddle v. Bedford 
 County, 7 S. & R. 386, 392; Zear- 
 foss v. Farmers' Institute, 154 Pa. St. 
 449; Greene v. Sprague M'f'g Co., 
 52 Conn. 330. Of course, an out- 
 sider, having no standing in court to 
 do so, cannot impeach the validity of 
 the acts of a de facto officer. See 
 Simpson v. Garland, 76 Me. 203. 
 
 *Kuser v. Wright, 52 N. J. Eq. 825; 
 Baird v. Bk. of Washington, 11 S. & R. 
 162 
 
 411; Heath v. Silverthorn L. M. Co., 
 39 Wis. 147; Mec. Nat. Bk. v. Burnet 
 Mfg. Co., 32 N. J. Eq. 236; Hacken- 
 sack Water Co. v. De Kay, 36 N. J. Eq. 
 548; Sau Jose Savings Bank v. Sierra 
 Lumher Co., 63 Cal. 179. In re 
 County Life Assurance Co., L. R. 5 
 Ch. 288; see Stratton v. Lyons, 53 
 Vt. 130; Newton M'f'g Co. v. White, 
 42 Ga. 148; Barrell v. Lake View 
 Land Co., 122 Cal. 129; Heinze v. 
 South Green Bay, L. & D. Co., 109 
 Wis. 99. 
 
 A familiar application of this ride 
 is to the case where legally elected 
 officers hold over after the expira- 
 tion of their terms of office. The acts 
 of such officers bind the corporation
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 190. 
 
 Limita- 
 tions. 
 
 who contract with de facto officers as officers of the corporation 
 will not, when sued by the corporation on the contract, be 
 allowed to defend on the ground that such officers were not 
 legall} 7 " the representatives of the corporation. 1 
 
 § 190. Both branches of the foregoing proposition rest on 
 principles of estoppel; and with the limits of the 
 estoppel the scope of their application is determined. 
 Consequently, to an action for calls, a shareholder 
 may plead that the directors making the calls were not legally 
 elected ; 2 and a forfeiture of shares declared by illegally chosen 
 directors may be set aside. 3 It is also held that the principle 
 on which the validity of the acts of de facto officers is sustained 
 against the corporation does not apply where all the persons 
 affected have notice that the officers assuming to act were not 
 legally chosen. 4 
 
 as to outsiders acting in good faith. 
 Thorington v. Gould, 59 Ala. 461; St. 
 Louis Domicile Ass'n v. Augustin, 2 
 Mo. App. 123; Milliken v. Steiner, 56 
 Ga. 251. So persons dealing with an 
 insurance agent may assume the con- 
 tinuance of his authority until in 
 some way informed of its revocation. 
 Insurance Co. v. McCain, 96 U. S. 84. 
 See, also, cases cited in the preceding 
 and following notes. 
 
 1 Delaware, etc., Canal Co. v. Penn- 
 sylvania Coal Co., 21 Pa. St. 131; 
 Cooper v. Curtis, 30 Me. 488; Inibo- 
 den y. Etowah, etc., M'g Co., 70 Ga. 
 86. See Simpson v. Garland, 76 Me. 
 203; Abbott v. Chase, 75 Me. 83. 
 
 2 People's Mutual Ins. Co. v. West- 
 cott, 14 Gray, 440; Howbeach Coal 
 Co. u. Teague, 5 H. &. N. 151. Qu?ere, 
 supposing the only shareholders dis- 
 puting the call had taken part with- 
 out objection in the election of the 
 directors, and voted for them. 
 
 It has been held, where directors 
 were elected at a meeting of share- 
 holders not called by the persons 
 named in the certificate of incorpo- 
 ration, that a subscriber when sued 
 on his subscription cannot plead 
 
 that the directors were not legal offi- 
 cers. The statute in this respect 
 being but directory, the validity of 
 the directors 1 acts could not thus be 
 questioned collaterally. Chamber- 
 lain v. Painesville, etc., R. R. Co., 15 
 Ohio St. 225. See § 540. 
 
 3 Garden Gully Mining Co. v. Mc- 
 Lister, L. R. 1 App. Cas. 39. 
 
 4 State v. Curtis, 9 Nev. 325; Orr 
 Water Ditch Co. v. Reno Water Co., 
 17 Nev. 166. 
 
 It has also been held that, though 
 the acts of a president de facto would 
 be valid "for ordinary purposes," 
 yet when a suit by which he was 
 eventually ousted was pending to try 
 his title to the office, he could not 
 make a valid assignment of securi- 
 ties belonging to the corporation, 
 with a view to making preferences 
 between creditors. Walker y. Flem- 
 ming, 70 N. C. 483. 
 
 But would such an assignment have 
 been in the power of a president de 
 jure ? See §§ 236 et seq. De facto 
 officers cannot avail themselves of 
 their acts in their own favor. Shel- 
 lenberger v. Patterson, 168 Pa. St. 30. 
 
 163
 
 § 193.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 191. There are certain rules of general application regard- 
 ing the responsibility of corporations for the acts of their agents, 
 which it will be well to consider before discussing in detail 
 General tne authority of the different classes of corporate 
 
 rules regu- agents. 
 
 lating the ,. 
 
 respousi- § 192. lhe acts of directors and other corporate 
 
 corpora- agents are valid as to the corporation and all persons 
 thTacteof i nteres ted in the corporate enterprise, when the direct- 
 their ors or other agents act in pursuance of powers origi- 
 
 nally conferred on them by the charter, or enabling 
 statute and articles of association ; or conferred on them 
 through an exercise of power vested in the body corporate or 
 — in the case of agents other than the board of directors — in 
 the board of directors. And where competent authority is ex- 
 pressly conferred on an agent for a certain purpose, he will 
 have incidental authority to do whatever acts are necessary 
 and proper to carry out the purpose of his appointment. 1 
 
 § 193. If directors or other corporate agents do an act which 
 is not beyond the scope of the corporate powers, the 
 ttaiaw'of question whether the act is binding on the corpora- 
 agency ap- ^j on an(: l a ll persons interested in the corporate en- 
 
 phcable. l J 
 
 Acts within terprise may be usually solved by the ordinary rules 
 nary scope of agency. 2 If the act was within the ordinary 
 agent's au- scope of the agent's authority, and the other party 
 valid* 7 acted in good faith, having no notice that the agent 
 had in fact no authority to do the act in question, 
 the corporation will be bound by the act, unless the powers of 
 the agent are contained in some instrument (e. g., the charter), 
 with knowledge of the contents of which the other party was 
 affected ; for a person dealing with a corporate agent is justified 
 in assuming that the agent has authority to do any act or make 
 any contract within the scope of his employment and incidental 
 thereto. 3 As Justice Story said, giving the opinion of the court 
 
 1 A general power conferred on the 
 president of a railroad company to 
 borrow money for it, and purchase 
 rails, locomotives, etc., and, in or- 
 der to do so, to make and deliver 
 obligations, bills of exchange, and 
 contracts of the company, includes 
 
 leuder or a vendor. Hatch v. Cod- 
 dington, 95 U. S. 48. See Rathbun 
 v. Snow, 12:1 X. Y. 343. 
 
 2 New York, P., etc., R. R. Co. v. 
 Dixon, 114 N. Y. 80. 
 
 8 See, e. g., Fletcher v. New York 
 Life Ins. Co., 14 Fed. Rep. 846; 
 
 authority to give securities to a | Adams Exp. Co. v. Schlesinger, 75 
 
 161
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. 
 
 [§ 193. 
 
 in Minor v. Mechanics' Bank, 1 " The officers of the bank are 
 held out to the public as having authority to act, according to 
 the general usage, practice, and course of their business ; and 
 their acts within the scope of such usage, practice, and course 
 of business would, in general, bind the bank in favor of third 
 persons possessing no other knowledge." 2 
 
 Further, from the circumstance that a corporate agent or 
 
 Pa. St. 246; Great Western Ry. Co. 
 v. Miller, 19 Mich. 305; Term. River 
 Trans. Co. v. Kavanaugh Bros., 93 
 Ala. 324; S. C, 101 Ala. 1; Fulton 
 B. <fc L. Ass'n v. Greenlea, 103 Ga. 
 376; Pollock v. Carolina Interstate 
 B. & L. Ass'n, 51 S. C. 420. Station 
 agents are presumed to have author- 
 ity to contract for the transporta- 
 tion of freight; and shippers are not 
 affected with notice of limitations 
 on their powers unless the limita- 
 
 458; Pacific R. R. Co. v. Thomas, 19 
 Kan. 250. Compare Louisville E. & 
 St. L. Ry. Co. 0. McVay, 98 Iud. 391; 
 Union Pacific Ky. Co. v. Beatty, 35 
 Kan. 265. But a station agent or 
 conductor has no such authority; 
 § 201. See, also, Insurance Co. v. 
 McCain, 96 U. S. 84, and cases in the 
 following notes. 
 
 1 1 Pet. 46, 70. 
 
 2 Thus, where a person pays a debt 
 over the bank-counter to an officer 
 
 tions are conveyed to the public in a who was paying and receiving teller 
 manner authorizing the inference ' of the bank, without knowledge that 
 
 that shippers are apprised of them. 
 Pruitt v. Hannibal and St. Jo. R. R. 
 Co., 62 Mo. 527; Harrison v. Mis- 
 souri Pacific Ry. Co., 74 Mo. 364; 
 Watson v. Memphis, etc., R. R. Co., 
 9Heisk.(Tenn. )255; Michigan South- 
 ern & N. I. R. R. Co. ». Day, 20 111. 
 375. But compare Wood o. C. M. & 
 St. P. Ry. Co., 59 Iowa, 196; Bur- 
 roughs o. Norwich, etc., R. R. Co., 
 100 Mass. 26; Missouri Pac. Ry. Co. 
 v. Stults, 31 Kan. 752; Wood v. C. M. 
 & St. P. Ry. Co., 59 Iowa, 196. Pas- 
 sengers may assume that baggage- 
 masters have authority to make all 
 ordinary contracts and arrangements 
 connected with the transportation 
 of baggage. Isaacson v. N. Y. C. & 
 H. R. R. R. Co., 94 N. Y. 278. So 
 general or division superintendents, 
 or general agents of a railroad com- 
 pany, may be presumed to have au- 
 thority to employ a physician to at- 
 tend an employe injured in the ser- 
 vice of the company. Atlantic and 
 Pac. R. R. Co. u. Reisner, 18 Kan. 
 
 he is not authorized to receive 
 money, the bank is bound by the 
 payment. East River National Bank 
 13. Gove, 57 N. Y. 597. See Hotch- 
 kiss v. Artisans 1 Bank, 2 Keyes, 564. 
 So an agent for an insurance com- 
 pany, authorized to take and approve 
 risks and to insure, is authorized by 
 general usage to allow credit for the 
 premium. Its allowance does not 
 impair the validity of the prelimi- 
 nary contract to insure. Insurance 
 Co. v. Colt, 20 Wall. 560. And a cor- 
 poration may be held on promissory 
 notes issued by its treasurer in ac- 
 cordance with usage. In re Great 
 Western Telegraph Co., 5 Biss. 363. 
 Compare, as to treasurer's authority, 
 Atkinson v. St. Croix MTg Co., 24 
 Me. 171; Stark Bank ». U. S. Pot- 
 tery Co., 34 Vt. 144; Davis v. Rock- 
 ingham Investment Co., 89 Va. 290. 
 A treasurer cannot biud his corpora- 
 tion for money borrowed by him and 
 embezzled, when no usage or author- 
 ity in him is shown. Craft ». South 
 165
 
 195.] THE LAW OP PRIVATE CORPORATIONS. [CHAP. VII. 
 
 officer for a space of time has performed certain acts on behalf 
 of the corporation, with its acquiescence or with the acqui- 
 escence of his superior officers, who themselves have authority 
 to do the acts in question, persons dealing with him will be 
 protected in acting on the honest assumption that those acts 
 and acts of a like nature done for a similar purpose are within 
 the scope of his authority. 1 
 
 § 194. It is of importance to determine what limitations on 
 the authority of corporate agents will protect a cor- 
 poration from responsibility for their unauthorized 
 acts. Limitations having this effect may be divided 
 into three classes : first, those with knowledge of 
 which persons transacting business with corporate 
 agents are affected as a matter of law ; secondly, those actually 
 brought to the knowledge of such persons; and, thirdly, those 
 a reasonable man would infer from the character of the agent's 
 employment. 
 
 § 195. It is undisputed that persons dealing with a corpora- 
 
 Effective 
 
 limitations 
 on the au- 
 thority of 
 corporate 
 agents. 
 
 Class I. 
 
 tion are charged with notice of the limitations on the 
 
 authority of its agents contained in its charter or 
 enabling act and articles of association. 2 And a person dealing 
 
 Boston R. R. Co., 150 Mass. 207. 
 (There was, also, a by-law forbid- 
 ding it.) 
 
 1 Mining Co. v. Anglo-Californian 
 Bank, 104 U. S. 192 ; Creswell v. 
 Lanalian, 101 U. S. 347 ; Merchants 1 
 Bank v. State Bank, 10 Wall. G04 ; 
 Beers v. Phoenix Glass Co., 14 Barb. 
 358; Phillips v. Campbell, 43 N. Y. 
 271 ; Talladega Insurance Co. v. Pea- 
 cock, 67 Ala. 253 ; Lester v. Webb, 1 
 Allen, 34 ; McDonald v. Cbisbolm, 
 131 111. 273 ; see Allen v. Citizens 1 
 Steam Navigation Company, 22 Cal. 
 28; Lee v. Pittsburgh Coal, etc., Co., 
 56 How. Pr. (N. Y. ) 373; S. C, 
 affd 75 N. Y. 601; Woman's Chris- 
 tian Temperance Union v. Taylor, 8 
 Col. 75; and, generally, the princi- 
 ples of estoppel apply to corpora- 
 tions. Bank r. Flour Co., 41 O. St. 
 552 ; New York & N. E. R. R. Co. v. 
 166 
 
 New York, etc., R. R. Co., 52 Conn. 
 274, 282 ; Heine v. Pollak, 118 Ala. 
 017; Magowan v. Groveung, 14 S. 
 Dak. 543. 
 
 Compare Elliott Bank v. Western, 
 etc., R. R., 2 Lea (Tenn.), 676. 
 
 2 Pearce v. Madison, etc., R. R. Co., 
 21 How. 441, 443 ; Davis v. Old 
 Colony R. R. Co., 131 Mass. 258; 
 Beatty v. Marine Ins. Co., 2 Johns. 
 (N. Y.) 109; Dabney v. Stevens, 2 
 Sweeney, 415, affd 46 N. Y. 681; 
 Adriance v. Roome, 52 Barb. 399; 
 Silliman v. Fredericksburg, etc., R. 
 Co., 27 Gratt. (Va.) 119 ; Merritt v. 
 Lambert, 1 Hoffman's Ch. (N. Y.) 
 165 ; Root v. Wallace, 4 McLean, 8; 
 Salem Bank ». Gloucester Bank, 17 
 Mass. 1, 29 ; Fitzhngh ». Land Co., 
 81 Tex. 306 ; see Zabriskie v. Cleve- 
 land, etc., R. R. Co., 23 How. 381, 
 398.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 196. 
 
 with a domestic corporation is also charged with knowledge of 
 the general law regulating corporations, statutory as well as 
 unwritten. 1 Further, where a certain class of corporations, for 
 instance banks, have established, recognized, and well-known 
 usages, all persons dealing with their agents will be affected 
 with notice of these usages, and the contracts of such corpora- 
 tions will be construed with reference to them. 2 
 
 § 196. In regard to by-laws, it is impossible to state any rule 
 of universal or even general applicability ; for whether 
 a person dealing with a corporation is affected with j^faws. 1 
 notice of its by-laws depends greatly on the position 
 they fill in the scheme of organization and incorporation of the 
 company prescribed by its enabling act. It has perhaps been 
 held that all persons dealing with corporate agents are charged 
 with notice of the limitations on their authority contained in 
 the by-laws. 3 But this proposition, thus broadly stated, is not 
 generally accepted as law. Indeed, the weight of authority is 
 
 The English law is similar in this 
 respect. In re County Life Assurance 
 Co., L. R. 5 Ch. 288, 293; Royal 
 British Bank v. Turquand, 6 El. & 
 Bl. 327 ; Ernest v. Nicholls, 6 H. L. 
 C. 401, 419 ; Fountains v. Carmar- 
 then Ry. Co., L. R. 5 Eq. 316, 322. 
 
 1 A party dealing with the agents 
 of a foreign corporation must take 
 notice of every limitation in its 
 charter ; but is not affected with 
 notice of statutes of a general nature 
 enacted by the foreign state, though 
 they tend to abridge the corporate 
 powers. Hoyt v. Thompson's Exr. 
 19 N. Y. 207 ; see Bank of Chillicothe 
 v. Doge, 8 Barb. 233. But see City 
 Fire Ins. Co. v. Carrugi, 41 Ga. 660. 
 
 A person dealing with the direct- 
 ors of a foreign (English) corpora- 
 tion is affected with notice of the 
 limitations on their authority con- 
 tained in the articles of association. 
 Davis v. Flagstaff Silver Mining Co., 
 2 Utah, 74 ; compare Flagstaff Silver 
 Mining Co. v. Patrick, ib. 304. 
 
 2 Renner v. Bank of Columbia, 9 
 
 Wheat. 581 ; Lincoln, etc., Bank v. 
 Page, 9 Mass. 155 ; Smith v. Whiting, 
 12 Mass. 6. See Blanchard v. Hilliard, 
 11 Mass. 85 ; Weld v. Gorham, 10 
 Mass. 366; Jones v. Fales, 4 Mass. 
 245 ; Whitwell v. Johnson, 17 Mass. 
 452 ; City Bank v. Cutter, 3 Pick. 
 414; Haddock v. Citizens' Nat. Bank, 
 53 Iowa, 542. Compare Jackson Ins. 
 Co. v. Cross, 9 Heisk. (Tenn.) 283. 
 
 3 Adriance v. Roome, 52 Bai'b. 399, 
 411; Dabney v. Stevens, 2 Sweeny 
 (N. Y.), 415; De Bost v. Albeit 
 Palmer Co., 1 How. Pr. N. S. (N. Y.) 
 501; Bocock v. Coal Co., 82 Va. 913. 
 See, Fowler v. Gt. So. T. & T. Co., 
 104 La. 751. In these cases, how- 
 ever, the decision seems to have 
 turned rather on the fact that the 
 act in question was beyond the scope 
 of the authority of the officers doing 
 it, coupled with the absence of cir- 
 cumstances from which authority 
 might reasonably have been inferred. 
 Compare Wayne Title Co. v. Ry. Co., 
 191 Pa. St. 90; Worthiugton v. Ry. 
 Co., 195 Pa. St. 211. 
 
 167
 
 § 197.] THE LAW OP PRIVATE CORPORATIONS. [CHAP. Vll. 
 
 in favor of the general rule that outsiders are not charged with 
 knowledge of the by-laws of a corporation. 1 An examination 
 of the ratio decidendi of a few cases may point to some rule on 
 this important point. Smith v. Smith 2 holds that outsiders are 
 not affected by the bylaws of a corporation, because " these 
 are private, and only accessible to the officers of the company." 
 So in Samuel v. Holladay 3 it was held that a by-law made by a 
 board of directors for their own government, providing how 
 special meetings of the board should be called, could not affect 
 contracts made with third persons having no actual notice of 
 the by-law ; Justice Miller saying that the effect of such a by- 
 law on outsiders differed from the effect of " by-laws made by 
 the stockholders at the annual or stated meeting, under author- 
 ity and direction of a provision of the charter." 4 
 
 § 197. The principle underlying these decisions seems to be 
 that a stranger should not be charged with knowledge of by- 
 laws because of the difficulty he would have in acquainting 
 himself with them, and because the authority of the corpora- 
 tion to make by-laws was not intended to affect the rights of 
 outsiders. 5 But if the statutes regulating the organization of 
 the company should require by-laws to be passed at the first 
 meeting of the subscribers or shareholders, and be filed with 
 the articles of association in some public office, it would seem 
 reasonable that persons dealing with the corporation should be 
 charged with notice of such by-laws filed in pursuance of statute 
 in a public place for public inspection. 
 
 Finally, whether outsiders are charged with notice of the 
 by-laws or not, if a course of action is unauthorized by reason 
 of some by-law, but is acquiesced in by the corporation, the 
 
 1 Fay v. Noble, 12 Cush. 1; Ten 
 Broeck v. Boiler Compound Co., 20 
 Mo. App. 19; and cases in the fol- 
 lowing notes. See, also, Kingsly v. 
 New England Ins. Co., 8 Cush. 393, 
 403; Mechanics' etc., Bank o. Smith, 
 19 Johns. 11."); In re Asiatic Bank- 
 ing Corp., Royal Bank of India's 
 Case, L. R. 4 Ch. 252; Anglo-Cali- 
 fornia Bank v. Grangers' Bank, 63 
 Cal. 359; Barnes Bros. v. Coal Co., 
 
 168 
 
 101 Tenn. 354; Gordon v. Muchler, 
 34 La. Ann. 604. Last case holding 
 depositor in hank not bound by by- 
 law. 
 
 2 62 111. 493, 497. 
 
 3 1 Woolw. 400, 408; S. C. Mac- 
 Cahon, 214. 
 
 4 See Cummings v. Webster, 43 
 Me. 192. 
 
 5 See Mechanics' etc., Bank v. 
 Smith, 19 Johns. 115, 124.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 199. 
 
 by-law will not affect the rights of an outsider acting in good 
 faith. 1 
 
 § 198. The next cl ass of resj^ctions_ on the authority- j*Lcor- 
 porate agents which are effectual in protectin g the 
 corporation from the cons equen c es of an agent's ex- 
 ceeding his authority, are_t hose wh ich are brought, to the actual 
 kuowledgeofjheparty dealing with t he corporate agent befo re 
 the act is done wherein it is alleged that the agent ex c eeded his 
 authority. An exp ress limitation on the authoritv ^of_a_coi'po- 
 mte^a^iijt^ojjght^othe actual not ice of any person de aling 
 w ith him w ill, in respect of the matter to which the limitation 
 refers, protect the corporation fro m an y liability arising ex con- 
 tractu fro m its agent's unaut horjzeiLacts^- The efficacy for the 
 protection of the corporation of this class of limitations depends 
 on the actual knowledge of the person contracting with the 
 corporate agent ; 3 and the burden is on the corporation to prove 
 knowledge on the part of such person, unless the circumstances 
 are such that his knowledge may reasonably be presumed. 4 
 Any special or private instructions to the corporate agent, un- 
 communicated to the person dealing with him, will not affect 
 the rights of such person against the corporation. 5 
 
 § 199. It may be added here, that when reasonable regula- 
 tions have been competently made by the proper corporate 
 authority with special reference to the dealings of outsiders 
 faith the corporation through its agents, all persons having 
 knowledge of the regulations will be bound by them in con- 
 tracting and dealing with the corporation. Thus where, in 
 making a deposit in a savings bank, the depositor receives a 
 pass-book containing a printed rule that no depositor shall be 
 paid without producing the pass-book, and that payments made 
 
 1 Phillips v. Campbell, 43 X. Y. 
 271 ; Emery v. Boston Marine Ins. 
 Co., 138 Mass. 398; Donovan v. Hal- 
 sey Fire Engine Co., 58 Mich. 38; 
 Gray v. Nat. Benefit Ass'n, 111 Ind. 
 531; compare Knight v. Lang, 4 E. 
 D. Smith (N. Y.), 381; Jackson v. 
 Campbell, 3 Wend. 572 ; Martin v. 
 Niagara Paper Co., 122 N. Y. 105; 
 Underbill v. Santa Barbara Land 
 
 Co., 93 Cal. 300; Produce Excbange 
 Co. v. Bieberbach, 176 Mass. 577. 
 
 2 Marvin v. Universal Life Ins. Co., 
 85 N. Y. 278. 
 
 3 Insurance Co. o. McCain, 96 U. S. 
 84. 
 
 4 See § 193, and compare §§ 358, 
 359. 
 
 5 Insurance Co. v. McCain, supra; 
 Fay v. Noble, 12 Cusb. 1 : Brown v. 
 Insurance Co., 165 Mass. 565. 
 
 169
 
 § 201.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 to the bearer of the pass-book shall be deemed good and valid 
 payments to the depositor, a payment made in accordance with 
 the rule binds the depositor, although his signature to a draft 
 or order may have been forged ; providing the officers of the 
 bank are guilty of no negligence. 1 But if an} T circumstance 
 is brought to the notice of the officers to put them on inquiry 
 or arouse the suspicion of an ordinarily careful person, their 
 failure to make inquiry raises a question of negligence for the 
 jury. 2 
 
 § 200. The third class of effective restrictions arise from the 
 nature of the agent's emplovment as indicating the 
 
 Class III. or. e> 
 
 scope of his authority. If an act is beyond the ordi- 
 nary scope of the agent's emplovment and authority, and was 
 not in fact authorized by the corporation, nor by superior 
 officers who themselves have authority to do or authorize it, 
 the corporation will not be bound ; for the power to bind the 
 corporation may be presumed to exist in its agents and officers 
 only in regard to acts within the scope of its ordinary business 
 and their ordinary duties. 3 And when a corporate agent, with- 
 out actual authority, exceeds the powers which an outsider 
 from the agent's employment may reasonably suppose him to 
 possess, the corporation is not estopped from repudiating the 
 unauthorized act. 4 
 
 § 201. The following are instances of the last class of re- 
 strictions : A general insurance agent will not bind his com- 
 pany by accepting articles of personal property in satisfaction 
 of a premium payable in money. 5 Station agents and conduct- 
 
 1 Schoenwald v. Metropolitan Sav- 
 ings Bk., 26 N. Y. 418; Appleby v. 
 Erie County Savings Bk., 02 N. Y. 
 15; Sullivan v. Lewiston Institution 
 of Savings, 56 Me. 507. Compare 
 Manhattan Co. v. Lydig, 4 Johns. 
 377; Kimball v. Norton, 59 N. H. 1. 
 
 Likewise the depositors may rely 
 on the by-laws in such case; and 
 when a savings bank pays money to 
 the wrong person, and, in so doing, 
 acts in contravention of its by-laws, 
 it will be liable. People's Savings 
 Bk. v. Cupps, 91 Pa. St. 315. In this 
 case the forged, order was not wit- 
 
 170 
 
 nessed as required by the by-laws. 
 Compare State v. Atherton, 40 Mo. 
 209 ; Morris Canal, etc., Co. v. Van 
 Voist, 21 N. J. L. 100. 
 
 2 Gearns v. Bowei'y S'v'gs B'k, 135 
 N. Y. 557. 
 
 3 First Nat. Bk. v. Ocean Nat. 
 Bk., 60 N. Y. 278; West Nat. Bk. v. 
 Armstrong, 152 U. S. 346. 
 
 4 Fawcett v. New Haven Organ Co., 
 47 Conn. 224. 
 
 8 Hoffman v. Hancock Mut. Life 
 Ins. Co., 92 U. S. 161. Compare 
 Hackney ». Allegheny County Mut. 
 Ins. Co., 4 Pa. St. 185.
 
 
 -etv : AK 
 
 / 
 
 PART n.] ACTS WITHIN THE CORPORATE POWERS. [§ 201. 
 
 ors of a railroad company have no authority, by virtue of their 
 positions, to employ a physician at the expense of the company 
 for a brakeman injured by its cars. 1 Nor has a ticket agent at 
 a way station authority to modify the terms of a through _ 
 
 ticket. 2 No r_ is a railroad company li able for a dvances made x/fc*^ 
 by a _commission merchant o n the faith of a bill o f lading ^rt&S »■ 
 fraudulently signed by one of its station agents, when the goods, 
 described i n the bill had not been received at the station for tfty ' 
 transportation ; for every one must be held to know that a g> 
 station agent has no power to give bills of lading for goods not ~je>/- 
 received bv him, and must ascertain whether the goods have in A , * ^ 
 fact been shipped. 3 Proof that a person was the general agent .^ 
 of a corporation in charge of its business at a certain place, 
 shows no authority in him to execute a bill or note on behalf \ $ x ^ ' 
 of the corporation. 4 A "general agent " has no implied au- ' ^ Si 
 thority to transfer the real estate° of the corporation ; 5 nor has 
 a general superintendent and manager. 6 A secretary of a min- 
 ing company has no authority, ex officio, to assign a note be- 
 longing to the company; 7 nor the secretary of an insurance 
 company to sign a draft on its behalf. 8 And officers of a bank 
 
 1 Tucker v. St. Louis, K. C. aud N. 
 Ry. Co., 54 Mo. 177. But see Terre 
 Haute & I. R. R. Co. v. McMurray, 
 93 Ind. 358. But a division superin- 
 tendent has. Ante, § 193, note. 
 
 2 McClure v. Philadelphia, etc., R. 
 R. Co., 34 Md. 532. 
 
 3 Friedlander v. Texas, etc., Ry. 
 Co., 130 U. S. 416 ; Balto. and Ohio 
 R. R. Co. ». Wilkens, 44 Md. 11. 
 Compare § 193, note. 
 
 4 Atkinson v. St. Croix M'f'g Co., 
 24 Me. 171; New York Iron Mine v. 
 First Nat. Bank, 39 Mich. 644; see 
 Benedict v. Lansing, 5 Denio, 283. 
 
 5 Stow v. Wyse, 7 Conn. 214. In 
 Thayer v. Nehalem Mill Co., 31 Or. 
 437, it was held that a " general 
 agent " might execute a mortgage of 
 the corporate property, when he is 
 given general power to manage the 
 business and is far from the place 
 
 where the directors are, and com- 
 munication is difficult. 
 
 6 Standifer u. Swann, 78 Ala. 88. 
 
 7 Blood b. Marcuse, 38 Cal. 590. 
 See Read v. Buffum, 79 Cal. 77. Au- V 
 thority in a secretary to renew notes 
 does not impliedly authorize hi 
 renewing a note made by two pe 
 to release one of them. Moshannon ^ « 
 Land Co. v. Sloan, 109 Pa. St. 532. ^i J 1 
 
 8 First Nat. Bk. v. Hogan, 47 Mo. t\> * J 
 472. Nor has a secretary authority * ^fi 1 
 to sign a due-bill. Gregory v. Lamb,V. T^Q^ 
 16 Neb. 205. Compare, generally, * 
 Fay v. Noble 
 Enquirer Co 
 
 (Va.)584. The secretary of a life \ $ . j 
 insurance company has power to ^ \ yO 
 waive prompt payment of premiums. ' J * «' 
 Hastings v. Brooklyn Life Ins. Co., 
 138 N. Y. 473. As to a treasurer's 
 authority, see § 193, note. 
 
 171 
 
 k" 
 
 i, 12 Cush. 1; RiehmoncL K\K 
 . v. Robinson, 24 Graft. }^ K ^ 

 
 § 202.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 have no authority to waive service of a petition tiled by the at- 
 torney-general to forfeit its franchises. 1 
 
 § 202. It is important to bear in mind that the authority 
 Authority °f an officer, as indicated by his office, does not de- 
 depfnds on P en( ^ so mu ch on his title or the theoretical nature of 
 
 his actual hj s office, as on the duties he is in the habit of per- 
 functions, . ■ • ,«. 
 
 ratiierthau forming/ Accordingly, the general managing oin- 
 
 name of his cer of a corporation, be he styled " president," " su- 
 offlce. perintendent," or "agent," from the circumstance 
 
 that he has general charge of the business, will possess exten- 
 sive powers that might not be possessed b} r an officer of another 
 company holding the same title. 3 Thus, where compromises 
 of debts are matters of common occurrence with a certain 
 bank, a court will presume, in the absence of affirmative 
 proof to the contrary, that the cashier and the president, 
 who are its active managers,~have power together to compro- 
 mise a claim. 1 So the officers managing the affairs of a corpo- 
 ration have authority, without a formal vote of the board of 
 directors, to employ counsel. 5 And it has been held that a 
 general managing agent, in whose charge were placed the 
 affairs of a corporation, might, without authority from the 
 directors, assign choses in action belonging to the corporation 
 in payment of its debt. 6 A mining superintendent, however, 
 is held to have no implied authority to borrow money; 7 nor 
 
 1 State v. Citizens 1 Savings Bk., 31 
 La. Ann. 83G. 
 
 2 Stokes v. New Jersey Pottery Co., 
 46 N. J. L. 237; Chicago, T. & T. Co. 
 v. Bank, 176 Wis. 224. The trustees 
 of a newspaper corporation are pre- 
 sumed to know the extent of the 
 power usually exercised by its man- 
 aging editor. Sun Pr. & Pub. Assn. 
 ». Moore, 183 U. S. G42. See Nich- 
 olson v. Randall Banking Co., 130 
 Cal. 533. 
 
 3 See Spangler v. Butterfield, 6 
 Col. 356, 363. 
 
 4 Chemical Nat. Bk. v. Kohner, 85 
 N. Y. 189. 
 
 6 Western Bank v. Gilstrap, 45 Mo. 
 419; Southgate v. Atlantic and Pac. 
 
 172 
 
 R. R. Co., 61 Mo. 89; Frost v. Do- 
 mestic Sewing Machine Co., 133 
 Mass. 563. See Holmes v. Board of 
 Trade, 81 Mo. 137. But subordinate 
 officers and agents have not implied 
 authority to employ counsel. Mau- 
 pin v. Virginia Lead MTg Co., 78 
 Mo. 24. 
 
 G McKiernan v. Lenzen, 56 Cal. 61. 
 
 7 Union Gold Mining Co. v. Rocky 
 Mt. Nat. Bk., 2 Col. 565 ; compare 
 Same r. Same, 1 Col. 531; Consoli- 
 dated Gregory Co. v. Raber, 1 Col. 
 511. A railroad superintendent has 
 power to conduct ordinary business 
 transactions, e. g., accept cord-wood, 
 Sacalaris v. Eureka, etc., R. R. Co., 
 18 Nev. 155, or offer a reward for the
 
 Validity of 
 agent's act 
 when not 
 affected by- 
 extrinsic 
 facts. 
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 203. 
 
 has the treasurer of a savings bank ; x though it has been de- 
 cided to be within the powers of a president of a mill company, 
 who was also its superintendent and general agent, to execute 
 for the company its promissory notes, for money paid by one 
 of its directors to satisfy a debt due from the corporation to a 
 creditor who was threatening suit. 2 
 
 § 203. A corporate agent sometimes makes a contract which 
 is apparently within his authority, yet which, taken 
 in connection either with the existence or non-exist- 
 ence of some fact extrinsic to the contract, or with 
 the intention of the agent, is beyond his authority, 
 and perhaps ultra vires the corporation. If the im- 
 propriety of the contract consists in the unexpressed intention 
 of the corporate representative, and the other contracting party 
 acts in good faith, having no cause to suspect any such improper 
 intention, the contract will be binding on the corporation. 3 As 
 far as concerns the other contracting party, the contract is 
 within the agent's authority ; and if the agent intends some- 
 thing further and unauthorized, that intention, if carried out, 
 is a violation of duty towards a principal with which the other 
 contracting party is not connected, for a person dealing in good 
 faith with an agent, who is apparently acting within the scope 
 of his authority, is not responsible for any breach of trust the 
 agent may intend or perpetrate in regard to his own principal. 
 As between the other contracting party and the corporation, 
 
 conviction of persons injuring prop- 
 erty of the railroad. Central R. R. 
 etc., Co. ». Cheatham, 85 Ala. 292. 
 
 1 Fifth Ward Savings Bank i\ First 
 Nat, Bank, 48 N. J. L. 513. 
 
 2 Seely v. San Jose Mill Co., 59 
 Cal. 22. As in this case, the act of 
 the president was ratified both by 
 the directors and at a shareholders 1 
 meeting, the court need not have de- 
 cided it to have been within the 
 power of the president. The powers 
 of directors, presidents, and cashiers 
 are particularly discussed below. 
 
 3 Even though the contract viewed 
 in connection with the purposes of 
 the agent was ultra vires the corpo- 
 
 ration; thus, if a contract to guar- 
 anty the bonds of another railroad 
 company is on its face such as a cer- 
 tain railroad company has power to " 
 make, the fact that the guaranty 
 was made for an unauthorized pur- 
 pose, e. g., the accommodation of 
 the other road, will not affect the 
 right of a bona fide holder of the 
 bonds without notice, to recover on 
 the guaranty. Madison and Indian- 
 apolis R. R. Co. v. Norwich SVgs 
 Society, 24 Ind. 457. See, also, 
 Farmers and Mechanics 1 Bk. r. * 
 Butchers and Drovers 1 Bk., 16 N. Y. 
 125. See §§ 284-286. 
 
 173
 
 *1 
 
 &p .y/v/f-w-'^-'^' 
 
 § 204.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 « 
 
 the rule applies that where one of two innocent parties must 
 suffer from the unauthorized act of an agent, the loss should 
 ^ fall on him who selected the agent, and whom the agent repre- 
 sents. It is certainly not the business of persons dealing with 
 ^^gents to be on the watch lest the agents wrong their principals. 
 . V -Thus, in a case where the plaintiff delivered certain moneys to 
 >\ Mthe president, who was the general manager of the defendant 
 ^corporation and had often borrowed money for it before, the 
 \s ^ court held that, in the absence of anything to show bad faith 
 K i on the part of the plaintiff, the corporation could not defend by 
 ^ showing that the moneys had not been used in the corporate 
 business. 1 
 
 S ! 
 
 1 
 
 § 204. The maxim rnnia prcesumuntur rite esse acta applies 
 sVresump- t° acts done on behalf of corporations ; and it can 
 never be presumed that a corporate agent is acting 
 wrongfully ; 2 or that an act which might have been 
 a proper act to do on behalf of the corporation, was 
 done under circumstances rendering it improper. 
 
 1 
 
 0* "i 'tions in 
 
 X ■> ^ favor of the 
 
 r > J > validity of 
 ' * Hjthe acts of 
 . corporate 
 «0 agents. 
 
 \ - ^ : Kraft o. Freeman Printing Ass'n, 
 ^5 s|^7 N. Y. 628; Ace. Thompson v. Lam- 
 bert, 44 Iowa, 239. 
 
 2 " When the common seal of a cor- 
 poration appears to be affixed to an 
 ^instrument, and the signatures of the 
 . v. ^ proper officers are proved, the courts 
 » <$ -jture t° presume that the officers did 
 t- not exceed their authority, and the 
 * seal itself is prima facie evidence that 
 ^S it was affixed by proper authority." 
 ^Angell and Ames on Corp., §224; 
 Trustees of Canaudaigua Academy v. 
 McKechnie, 90 N. Y. 618; Solomon's 
 Lodge v. Montmollin, 58 Ga. 547; 
 Can. v. Ga. L. & T. Co., 108 Ga. 757; 
 . Wood b. Whelen, 93 111. 153; Ander- 
 Vfc^son Transfer Co. o. Fuller, 174 111. 
 T ^221; Ellison i\ Branstrater, 153 Ind. 
 146; Lovett v. Steam Saw Mill Assn., 
 ^ Paige's Ch. 54; Flint v. Clinton 
 Company, 12 N. H. 430; In re West 
 *> Jersey Traction Co., 59 N. J. Eq. 63; 
 ^ \ Evans v. Lee, 11 Nev. 194; Chou- 
 quette v. Barada, 28 Mo. 491; Mickey 
 Sawyer, 475; Bliss v. 
 
 
 Kaweali Co., 65 Cal. 502; Mills v. 
 Boyle Mining Co., 132 Cal. 95; Wharf, 
 etc., Co. v. Simpson, 77 Cal. 286; 
 Parker v. Washoe Mfg. Co., 49 N. J. 
 L. 465; see New England Iron Co. v. 
 Gilbert, etc., R. R. Co., 91 N. Y. 153; 
 Turnpike Co. v. Pass. Ry. Co., 194 
 Pa. St. 144. Compare Osborne v. 
 Tunis, 25 N. J. L. 633; Bank of the 
 United States v. Dandridge, 12 Wheat. 
 64, 70; Hilliard v. Gould, 34 N. H. 
 230, 239; Mass. r. Missouri, K. and T. 
 Ry. Co., 83 N. Y. 223; C. B. & Q. R. 
 Co. ». Lewis, 53 Iowa, 101; Atlantic 
 and P. R. R. Co. o. St. Louis, 66 Mo. 
 228; Goodnow v. Oakley, 68 Iowa, 
 25 : Morse v. Beale, 68 Iowa, 463; Hall 
 v. Bank, 145 Mo. 418; contra, Morri- 
 son v. Wilder Gas Co., 91 Me. 492. 
 
 3 Chatauque County Bank v. Ris- 
 ley, 19 N. Y. 369, 381; Yates v. Van 
 De Bogert, 56 N. Y. 526; Olcott v. 
 Tioga R. R. Co., 27 N. Y. 546; De 
 Groff v. American Linen Thread Co., 
 21 N. Y. 124; Farmers' Loan and 
 Trust Co. v. Perry, 3 Sandf. Ch. 339; 
 
 I 
 
 r 
 
 x 
 
 
 alJh^!n>^<*
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 205. 
 
 Accordingly, if, under circumstances which a party dealing 
 with a corporate agent has no reason to suppose not to exist, 
 the corporate agent has authority to make the contract or do 
 the act in question, the party dealing with him is justified in 
 assuming the existence of the circumstances, and, acting in 
 good faith on such assumption, will be protected. 1 As Justice 
 Swayne said, giving the opinion of the Federal Supreme Court 
 in Merchants' Bank v. State Bank: 2 "Where a party deals 
 with a corporation in good faith — the transaction is not ultra 
 vires — and he is unaware of any defect of authority or other 
 irregularity on the part of those acting for the corporation, and 
 there is nothing to excite suspicion of such defect or irregu- 
 larity, the corporation is bound by the contract, although such 
 defect or irregularity in fact exists. If the contract can be 
 valid under any circumstances, an innocent party in such a case 
 has a right to presume their existence and the corporation is 
 estopped to deny them." 3 
 
 § 205. Accordinglv^when the agent of a corporation has power 
 yr.to make negotiable paper on its behall, a party re- 
 ceiving such paper in good faith may assume that it p^ e p e ° r tiat)le 
 was issued by the agent for an authorized purpose in Money bor- 
 
 <»ii- i rowed in 
 
 the ordinary course 01 the business of the corpora- excess of 
 tion. 4 So, if an agent has authority to borrow for his limit. " 7 
 corporation moneys not exceeding a certain amount, 
 
 Same v. Clowes, 3 N. Y. 470; Same 
 v. Curtis, 7 N. Y. 466; New York 
 Firemen Ins. Co., v. Sturges, 2 Cow. 
 664; Ex parte Peru Iron Co., 7 Cow. 
 540; Blake v. Holley, 14 Ind. 383; 
 Dockery v. Miller, 9 Humph. (Tenn.) 
 731; Mitchell v. Rome R. R. Co., 17 
 Ga. 574; Morris and Essex R. R. Co. 
 v. Sussex R. R. Co., 20 N. J. Eq. 
 542; Oxford Iron Co. v. Spradley, 46 
 Ala. 98; Hart v. Missouri State Ins. 
 Co., 21 Mo. 91. 
 
 1 Bank of Batavia v. N. Y., etc., 
 R. R. Co., 106 N. Y. 195; Steamboat 
 Co. v. McCutcheon, 13 Pa. St. 13; 
 Royal British Bk. v. Turquand, 6 El. 
 & Bl. 327; Eastern Counties Ry. y. 
 Hawkes, 5 H. L. C. 331; McDonald 
 o. Chisholm, 131 111. 273. See Moss 
 
 y. Rossie Lead Mg. Co., 5 Hill, 137, 
 and cases in following notes. 
 
 2 10 Wall. 604, 644. 
 
 3 See, also, Gano v. Chicago, etc., 
 Ry. Co., 60 Wis. 12; Schallard v. Eel 
 River N. Co., 70Cal. 144; Louisville, 
 N. A. & C. Ry. Co. v. Louisville Tr. 
 Co., 174 U. S. 552. 
 
 4 Monument Nat. Bank v. Globe 
 Works, 101 Mass. 57; Commercial 
 Bank v. St. Croix Mfg. Co., 23 Me. 
 280; Lafayette Bank v. St. Louis 
 Stoneware Co., 2 Mo. App. 299; 
 Madison and Indianapolis R. R. Co. v. 
 Norwich Saving Society, 24 Ind. 457; 
 Ridgeway v. Farmers' Bank, 12 S. & 
 R. 256; Philadelphia, etc., R. R. Co. 
 v. Lewis, 33 Pa. St. 33; Mclntire v. 
 Preston, 10 111. 48; Stoney v. Ameri- 
 
 175
 
 § 207.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Assump- 
 tion of un- 
 usual facts 
 
 unwar- 
 ranted. 
 
 the corporation will be liable to a person lending money to the 
 agent in ignorance that the amount limited had already been 
 borrowed. 1 
 
 § 206. The circumstances, however, the existence of which 
 an outsider is protected in assuming, must be such as 
 he has no ground to suppose not to exist ; they must 
 not be extraordinary and unusual. Thus, an outsider 
 is not justified in assuming that the cashier of a bank 
 has authority to bind it as an accommodation indorser on his 
 own individual note. 2 Nor is an outsider justified in assuming 
 authority in corporate officers to issue negotiable paper in the 
 name of the corporation, when the issuance of such a paper is 
 altogether foreign to the purposes for which the corporation 
 was organized. 3 
 
 § 207. If from the mere doing of the act by the corporate 
 agent on behalf of the corporation, the person deal- 
 ing with him is entitled to infer the existence of cir- 
 curastances on which the agent's authority depends, 
 then the case becomes stronger in favor of such per- 
 son when the agent expressly affirms the existence of 
 the circumstances in question. Here the person deal- 
 ing with him has an express assertion to rely on, and not merely 
 the implication arising from the presumption that the agent is 
 not acting wrongfully. Accordingly, if it is within the power 
 
 Certifica- 
 tion by 
 agent of 
 facts on 
 which his 
 authority 
 is condi- 
 tioned. 
 
 can Ins. Co.. 11 Paige, 635; Mechanics' 
 Banking Ass'n v. White Lead Co., 35 
 X. Y. 505 ; Ex parte Estabrook, 2 
 Lowell. 547; National Bank v. Young, 
 41 N. J. Eq. 531; Credit Co. v. Home 
 Machine Co., 54 Conn. 357. Com- 
 pare McCullough v. Moss, 5 Denio, 
 507. See §§ 204, 284-28G, 329-332. 
 
 1 Ossipee M'f'g Co. v. Canney, 54 
 N. H. 295; see Gordon v. Sea Fire 
 Life Assurance Soc'y, 1 H. & N. 599. 
 In Garret v. Burlington Plow Co., 70 
 Iowa, 097, it was held that money 
 loaned by directors to a corporation 
 in excess of the statutory limit on 
 the capacity of the corporation to 
 borrow could be recovered, although 
 the directors knew that the limit was 
 exceeded. 
 
 176 
 
 2 West St. Louis Savings Bank ». 
 Shawnee Bank, 95 U. S. 557. Cf. 
 Cheever v. Railroad Co., 150 N. Y. 59. 
 See § 241. It cannot be presumed 
 that directors have authority to sell 
 property of a corporation essential to 
 its business. Rollins v. Clay, 33 Me. 
 132. 
 
 3 Bacon v. Mississippi Ins. Co., 31 
 Miss. 116. See § 329. An officer of 
 a corporation has no authority to give 
 its notes to take up the outstanding 
 obligations of shareholders; and such 
 notes will not bind the corporation in 
 the hands of a person having knowl- 
 edge of the facts. McLellan v. Detroit 
 File Works, 56 Mich. 579.
 
 PART H.] ACTS WITHIN THE CORPORATE POWERS. [§ 209. 
 
 of the corporate agent to certify to the existence of any fact, 
 e. g., the circumstances on which his authority to act depends, 
 and he does certify to its existence, his certification will bind 
 the corporation as towards persons who have acted thereon in 
 good faith ; and the corporation cannot plead the fraud of its 
 own agent acting within the scope of his authority. 1 
 
 § 208. Further, the general proposition is submitted, that it 
 is within the authority of a corporate agent to certify to the 
 existence of any fact not unusual or extraordinary in itself, nor 
 rendered improbable from special circumstances known to the 
 person dealing with him, which is peculiarly within his knowl- 
 edge and on which his authority to act in that particular case 
 depends ; provided to act in such cases be within the ordinary 
 scope of the agent's powers. As Judge Davis said, giving the 
 opinion of the New York Court of Appeals in New York and 
 New Haven R. R. Co. v. Schuyler, 2 " Where the principal has 
 clothed his agent with power to do an act upon the existence 
 of some extrinsic fact necessarily and peculiarly within the 
 knowledge of the agent, and of the existence of which the act 
 of executing the power is itself a representation, a third person 
 dealing with such agent in entire good faith pursuant to the 
 apparent power may rely on the representation, and the prin- 
 cipal is estopped from denying its truth to his prejudice." And 
 again, as stated by Judge Selden in Griswold v. Haven, 3 and 
 approvingly cited by Judge Davis in the opinion last referred 
 to : 4 " When the authority of an agent depends upon some fact 
 outside the terms of his power, and which, from its nature, rests 
 particularly within his knowledge, the principal is bound by 
 the representation of the agent, although false, as to the exist- 
 ence of such fact." 5 
 
 § 209. If, however, the person contracting with the corpo- 
 rate agent has notice of any intended violation of Not bind- 
 his duty on the part of the agent, or of the existence j."£ ^tion 
 of circumstances negativing his authority to act, the when the 
 corporation will not be bound ; for such a person, far knows its 
 from acting in good faith, has been privy to a breach a Slty ' 
 
 i Whiting i\ Wellington, 10 Fed. 
 Rep. 810. 
 
 2 34 N. Y. 30, 73. Ace. Willis v. 
 Fry, 13 Phila. 33. 
 
 12 177 
 
 3 25 N. Y. 595, 602. 
 
 4 34 N. Y. pp. 68 and 73. 
 
 5 See, also, Farmers and Mechan-
 
 § 210.] 
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 of trust. And evidently no estoppel can exist in his favor, be- 
 cause he cannot have relied on representations, express or im- 
 plied, known to him to be untrue. Thus, a corporation is not 
 liable for money borrowed by its directors in its name, when 
 the corporation has not received the consideration, and the 
 lender knew that the money was to be applied to the individual 
 purposes of the officers. 1 And since the officers of a corpora- 
 tion have no power to execute its note to secure a debt bearing 
 no relation to the corporate business, due from a third person 
 to the payee of the note, neither the payee nor any other person 
 with knowledge of the circumstances under which the note was 
 insured, can recover on it against the corporation. 2 
 
 § 210. Just as agents of natural persons, the agents of a cor- 
 poration in contracting or otherwise acting on its 
 of corpo- behalf have incidental authority to make admissions 
 Noticfto 3 ' or declarations, which within the scope of the agent's 
 them. ordinary employment, or of the authority specially 
 
 conferred on him for the matter in hand, will bind the corpora- 
 tion or be evidence against it, according to the nature of the 
 admission. 3 Likewise, notice to directors or other corporate 
 
 ics' Bk. v. Batchers and Drovers' 
 Bk., 16 N. Y. 125, 142. 
 
 1 Culver v. Reno Real Estate Co., 
 91 Pa. St. 367. 
 
 2 Hall v. Auburn Turnpike Co., 27 
 Cal. 255. See, also, Ehrgott v. Bridge 
 Manufactory, 16 Kan. 486; Rahm v. 
 Same, 16 Kan. 277. 
 
 8 Xenia Bank v. Stewart, 114 U. S. 
 224; Northrup v. Mississippi Valley 
 Ins. Co., 47 Mo. 435; Western Boat- 
 men's Benevolent Ass'n v. Kribben, 
 48 Mo. 37; Toll Bridge Co. v. Bets- 
 worth, 30 Conn. 380; Morris and 
 Essex R. R. Co. v. Green, 15 X. J. 
 Eq. 469; Malecek v. Tower Grove, 
 etc., Ry. Co., 57 Mo. 17; Hoag v. 
 Lamont, 60 N. Y. 96; Webb a. Smith, 
 6 Col. 365; Merchants' Despatch 
 Trans. Co. v. Leysor, 89 111. 43; Hunt- 
 ington, etc., R. R. Co. v. Decker, 82 
 Pa. St. 119; Brush Elec. L. & P. Co. 
 v. Montgomery, 114 Ala. 433. For 
 
 178 
 
 instance, declarations of a freight 
 agent made in performance of his 
 duty are evidence against a railroad 
 company. Lane v. Boston & A. R. 
 R. Co., 112 Mass. 455. Declarations 
 of brakemen, engineers, conductors, 
 etc., to be admissible against the cor- 
 poration must be made at the time 
 of the occurrence so as to constitute 
 part of the res gestae. Vicksburg & 
 M. R. R. Co. v. O'Brien, 119 U. S. 99; 
 Michigan Central R. R. Co. v. Cole- 
 m;m, 28 Mich. 440; Hannibal & St. 
 Jo. R. R. Co. v. Martin, 11 111. App. 
 386; Dietrich v. Baltimore, etc., Ry. 
 Co., 58 Md. 347; Michigan Central 
 It. R. Co. v. Carrow, 73 111. 348; Pitts- 
 burgh C. & St. L. R. R. Co. v. Theo- 
 bald, 51 Ind. 246. Compare McLeod 
 v. Ginther, 80 Ky. 399; O'Connors. 
 Chicago, etc., Co., 27 Minn. 166. 
 The acts of an agent within his pow- 
 ers may estop a corporation as they
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 210. 
 
 agents, or knowledge on their part, regarding matters within 
 the scope of their authority or the range of their ordinary 
 occupations, received or possessed while transacting corporate 
 business, will be the knowledge of or notice to the corporation. 1 
 But, on the other hand, the admissions or statements of cor- 
 porate agents regarding matters beyond their authority to act 
 for the corporation, 2 or matters in which they are not acting on 
 
 would an individual principal. Rail- 
 road Co. v. Schutte, 103 U. S. 118; 
 Little Rock & N. R. R. Co. v. Little 
 Rock, etc., R. R. Co., 36 Ark. 663. 
 
 i Keith v. Globe Ins. Co., 52 111. 
 518; Pont-Chartrain R. R. Co. v. 
 Heirn, 2 La. Ann. 129; Pittsburgh, 
 etc., R. R. Co. v. Ruby, 38 Ind. 294; 
 Egerton v. Fulton Nat. Bk., 43 How. 
 Pr. (N. Y.) 216; Ex parte Stewart, 11 
 Jur. N. S. 25; Lovell v. St. Louis 
 Mutual Life Ins. Co., Ill TJ. S. 204; 
 New York & N. E. R. R. Co. v. New 
 York, etc., R. R. Co., 52 Conn. 274, 
 280; Cragie v. Hadley, 99 N. Y. 131; 
 Loring ». Biodie, 134 Mass. 453; 
 Hunts ville, etc., Ry. Co. v. Corpening 
 97 Ala. 681 ; Granite Co. v. Mulliken, 
 66 Vt. 465; Sherry v. Wakefield In- 
 stitute, 21 R. I. 162; Harris v. Am. 
 B. & L. Ass'u, 122 Ala. 545; Central 
 of Ga. Ry. Co. v. Joseph, 125 Ala. 
 313. See, Morris v. Ga. L. S. & B. 
 Co., 109 Ga. 12; Fouche v. Merchants 
 Nat. B'b, 110 Ga. 827; State ex inf. 
 Crow v. Firemen's Fund Ins. Co., 152 
 Mo. 1. Notice of the dangerous 
 condition of the mines to the super- 
 intendent is notice to the mining 
 company. Quincy Coal Co. v. Hood, 
 77 111. 68. Knowledge of the presi- 
 dent of a bank received or possessed 
 while discounting a note on its be- 
 half, is the knowledge of the bank; 
 and his accidental absence at any 
 particular time is no legal excuse 
 to the bank for its failure to act on 
 such knowledge. Central National 
 Bank v. Levin, 6 Mo. App. 543. No- 
 
 tice to a board of directors is notice 
 to the bank, and no subsequent 
 change of directors can require a 
 new notice. Mechanics' Bank v. 
 Seton, 1 Pet. 299. If notice is given 
 to a director officially, to the end 
 that it may be communicated to the 
 board, the corporation is affected 
 with notice, although the director 
 does not communicate it to the board. 
 Boyd v. Chesapeake and Ohio Canal 
 Co., 17 Md. 195. Compare National 
 Security Bank v. Cushman, 121 Mass. 
 490, and the cases in the following 
 notes. Knowledge of an officer of a 
 corporation acquired long prior to 
 the formation of the corporation and 
 not present to his mind at the time 
 of a transaction will not bind the 
 corporation. Red River V. L. & I. 
 Co. v. Smith, 7 N. Dak. 236. 
 
 2 Bishop v. Globe Co., 135 Mass. 
 132; Commonwealth v. Reading Sav- 
 ings Bank, 137 Mass. 431, 444; Tripp 
 v. New Metallic Packing Co., 137 
 Mass. 499; Johnston v. Elizabeth 
 Building Ass'n, 104 Pa. St. 394. That 
 an individual is a director, and a 
 member of the discount board of a 
 bank, will not, in the absence of 
 special authority to act as its agent 
 in a particular transaction regarding 
 the renewal of a note, authorize him 
 to make admissions or statements 
 concerning such transaction which 
 will be binding on the corporation. 
 East River Bk. v. Hoyt, 41 Barb. 
 441 ; ace. Florida Midland R. R. Co. 
 v. Varnedoe, 81 Ga. 176. The treas- 
 
 179
 
 § 210.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 its behalf, are not evidence against it ; 1 nor is a corporation 
 affected with notice to a corporate agent or with his knowledge 
 acquired under such circumstances. 2 According^, when an 
 officer of a corporation sells it his own property, he does not 
 represent the corporation in the transaction so as to affect it 
 with knowledge which he possesses, but does not communicate, 
 of tacts derogatory to his title to the property. 3 And the fact 
 that the cashier of a bank was a director in another corporation, 
 which was the payee and indorser of a note, will not affect the 
 bank with notice of equities subsisting between the maker and 
 
 urer of a manufacturing company 
 lias no authority virtute officii to 
 bind it by written admissions as to 
 the amount due on a disputed claim 
 for salary of the superintendent. 
 Kalamazoo Novelty Mfg. Co. ». Mc- 
 Alister, 3o Mich. 327; see Henry v. 
 Northern Bk., 63 Ala. 527. Nor to 
 confess judgment on behalf of his 
 corporation. Stevens v. Carp River 
 Iron Co., 57 Mich. 417. Nor to ex- 
 ecute a promissory note. Cracker 
 Co.'s Estate, 161 Pa. St. 157. Contra, 
 Merc's Bk. v. Gas L. Co., 159 Mass. 
 505. 
 
 1 Gilmorev. Mittineague Paper Co., 
 169 Mass. 471. Declarations or state- 
 ments of individual directors, made 
 when the board is not in session, 
 and not accompanying any official 
 act, are not competent evidence 
 against the corporation. Peck v. 
 Detroit Novelty Works, 29 Mich. 
 313. Cf. Richardson v. Watson, 51 
 La. An. 1390; Knoblock v. Germ. 
 Sav. B'k, 50 S. C. 259. 
 
 2 Bank of United States v. Davis, 2 
 Hill (N. Y.), 451; Casco Nat. Bk. r. 
 Clark, 139 N. Y. 307; Corcoran v. 
 Snow Cattle Co., 151 Mass. 74 ; Johns- 
 ton v. Shortridge, 93 Mo. 227; Com- 
 mercial Bk. v. Burgwin, 110 N. C. 
 267; Piatt v. Birmingham Axle Co., 
 41 Conn. 255; Savannah Bank v. 
 Hartridge, 73 Ga. 22:); Fairfield Sav- 
 ings Bank i\ Chase, 72 Me. 226; 
 
 180 
 
 Shaw v. Clark, 49 Mich. 384; Farrel 
 Foundry v. Dart, 26 Conn. 376; Mer- 
 cier v. Canonge, 8 La. Ann. 37; Uni 
 ted States Ins. Co. v. Shriver, 3 Md 
 Ch. 381; Wells v. American Exp, 
 Co., 44 Wis. 342; Winchestei v. Balti 
 more & S. It. R. Co., 4 Md. 231; Gun 
 ster v. Scranton Co., 181 Pa. St. 327 
 Compare Hoffman Coal Co. v. Cum 
 berland C. Co., 16 Md. 456; Smith v 
 South Royalton Bk., 32 Vt. 341; Ter 
 rell v. Branch Bank, 12 Ala. 502 
 Whelan v. McCreary, 64 Ala. 319 
 First Nat. B'k v. Briggs Ass., 71 Vt 
 594; Express Co. v. Walker, 9 N 
 Mex. 456. 
 
 3 Barnes v. Trenton Gas Light Co., 
 27 N. J. Eq. 33; Peckham v. Hendren, 
 76 Ind. 47; Wickersham v. Chicago 
 Zinc Co., 18 Kan. 481; Davis Im- 
 proved Wrought Iron Wagon Wheel 
 Co. v. Davis, etc., Co., 22 Blatchf. 
 221; Merchants' Nat. Bk. v. Lovitt, 
 114 Mo. 519; Koehler v. Dodge, 31 
 Neb. 328; Eng. Am. L. & T. Co. v. 
 Hiers, 112 Ga. 823. Compare Tar- 
 box v. Gorman, 31 Minn. 60; Mihill's 
 Mfg. Co. v. Camp. 49 Wis. 130; Seav- 
 erns v. Presbyterian Hospital, 173 
 111. 414. But when an agent is prac- 
 tically the corporation, and does 
 business in its name or his own as 
 suits him, his knowledge in regard 
 to a conveyance by him of property 
 to it is imputable to the corporation. 
 Anderson v. Kinley, 90 Iowa, 554.
 
 PART II.] ACTS WITHIX THE CORPORATE POWERS. 
 
 [§ 211. 
 
 the payee. 1 Nor will knowledge by one of several corporators 
 of the existence of an incumbrance on property purchased by 
 the corporation, affect his associates when he does not act as 
 their agent in forming the company. 2 
 
 § 211. If an unauthorized act is done on behalf of a corpora- 
 tion, although the corporation may not be bound by the act as 
 done, yet, if the corporation or that corporate authority which 
 would have been competent originally to do the act, knowingly 
 ratifies it or accepts the benefit of it, or if all the per- Ratifica- 
 sons having a right to object to the act knowingly ^u° f 
 acquiesce in it, the act will be as binding on the thonzed 
 corporation as if it had been originally authorized. 3 
 This proposition is but an application of the doctrine of the 
 law of agency, that when a person ratifies the unauthorized 
 act of another who has purported to act on his behalf, the 
 legal effect of the act will be the same as if it had been author- 
 ized before it was done. True, in applying this doctrine to 
 corporations, circumstances and the complicated legal relations 
 subsisting in respect of corporate enterprises must be taken into 
 consideration. Nevertheless, the doctrine applies to corpora- 
 tions in its fullest scope, 4 and with them, as with natural prin- 
 cipals, subsequent ratification is equivalent to antecedent au- 
 thority. 5 The important principle to be borne in mind is this : 
 
 1 First Nat. Bk. v. Loyhed, 28 Minn. 
 396. Compare National Bk. v. Wal- 
 lan, 37 Minn. 404; Martin v. South 
 Salem Land Co., 94 Va. 28. See 
 §641. 
 
 2 Burt v. Batavia Paper Mfg. Co., 
 86 111. 66. So, on the other hand, 
 when a person is merely in posses- 
 sion of bank stock as collateral se- 
 curity, does not participate in 
 shareholders' meetings, and is not 
 recognized by shareholders as a 
 member, he is not such a member of 
 the corporation as to be bound to 
 have knowledge of facts known to 
 the corporation or its officers. Baker 
 v. Woolston, 27 Kan. 185. 
 
 3 The effect of acquiescence in 
 ultra vires acts, by persons entitled 
 to object, is discussed in Part III, of 
 
 the present chapter. The discussion 
 here relates only to acts within the 
 scope of the corporate powers. 
 
 4 Kelsey ». Nat. Bk., 69 Pa. St. 
 426; Ace. German Nat. Bank ». First 
 Nat. Bank, 59 Neb. 7; Dedrick v. 
 Ormsly Land & Mort. Co., 12 S. Dak. 
 29; Phillips ». Sanger Lumber Co., 
 130 Cal. 431. 
 
 5 First Nat. Bk. v. Fricke, 75 Mo. 
 178; Planters' Bk. v. Sharp, 12 Misc. 
 75; Mt. Washington Hotel Co. v. 
 Marsh, 63 N. H. 230; Greenleaf v. 
 Norfolk Southern R. R. Co., 91 N. C. 
 33; Wash. Times Co. v. Wilson, 12 
 D. C. App. Ca. 62. 
 
 In re West Jersey Traction Co., 59 
 N. J. Eq. 63. The corporation by 
 ratifying the act of its agent becomes 
 charged with notice of what such 
 
 181
 
 § 212.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 W 
 
 the ratification to be binding on the corporation must be the 
 act or acquiescence of some corporate agency which itself 
 would have had the power to do or authorize the unauthorized 
 acts; for a ratification cannot arise from the action either of 
 the officers who did the unauthorized acts 1 or of those who 
 would have had no authority to do them. 2 But unquestionably 
 a valid ratification can take place through the action of superior 
 corporate agents, for instance directors, who could competently 
 have done the act themselves or authorized it to be done. 3 
 And the body corporate, in a duly summoned meeting, may 
 ratify any act of the directors which it was competent for the 
 body corporate acting as such to perform. 4 
 
 §212. A formal ratification is not requisite. If there is no 
 express ratification by the action either of the body 
 ratification corporate, or of superior agents having authority 
 whether or not an act has been ratified is a question 
 of fact for the jury. And, in general, it may be said, 
 that whether the alleged ratification be that of the body cor- 
 porate or of superior corporate agents, it may be proved by 
 continued acquiescence on the part of the persons competent 
 
 not neces- 
 
 agent learned in the course of the 
 transaction. Morris v. Ga. L. S. & 
 B. Co., 109 Ga. 12; Fouche v. Mer- 
 chants Nat. Bank, 110 Ga. 827. See 
 Valdetero v. Citizen's Bank of Jen- 
 nings, 51 La. An. 1651 ; Morisette v. 
 Howard, 62 Kns. 463. 
 
 The maxim Omnia ratihdbitio retro 
 trahitur et mandato priori o&quipara- 
 tur applies. Fleckner e. Bank of the 
 U. S., 8 Wheat. 338, 363. But it has 
 been held that a subsequent ratifica- 
 tion of unauthorized conveyance of 
 property is inoperative as to rights 
 of creditors arising before said rati- 
 fication. Norton v. Alabama Nat. 
 Bk., 102 Ala. 420. See Jordan & 
 Co. v. Collins, 107 Ala. 572. 
 
 1 Tracy v. Guthrie County Agricul- 
 tural Society, 47 Iowa, 27. 
 
 2 Even directors cannot ratify the 
 act of the president, which they 
 themselves had no authority to per- 
 
 182 
 
 form. Crum's Appeal, 66 Pa. St. 
 474. 
 
 3 Scott v. Middletown, etc., K. R. 
 Co., 86 N. Y. 200; Fleckner v. Bank 
 of U. S., 8 Wheat. 338, 363; Sherman 
 v. Fitch, 98 Mass. 59; Lyndeborough 
 Glass Co. v. Massachusetts Glass 
 Co., Ill Mass. 315; Reichwald v. 
 Commercial Hotel Co., 106 111. 439; 
 Ubbyv. Land Co., 68 N. 11.444. 
 
 4 For example, if it is within the 
 power of the body corporate to issue 
 further stock, but not within the 
 power of the directors, an unauthor- 
 ized issue made by the directors 
 may be ratified by a vote of the body 
 corporate. In re New Zealand Bank- 
 ing Co., Sewell's Case, L. R. 3 Ch. 
 131; In re British Provident, etc., 
 Assurance Society, Lane's Case, 1 
 DeG. J. & S. 504; see Payson v. 
 Stoever, 2 Dill. 427, § 213.
 
 PART H.] ACTS WITHIN THE CORPORATE POWERS. [§ 213. 
 
 to ratify, when knowledge of the facts may be shown, reason- 
 ably inferred, or presumed to have been had by the persons ac- 
 quiescing. 1 
 
 Thus, if the president of a manufacturing company, in excess 
 of his authority, executes a mortgage, the mortgage will be 
 binding on the company if the directors who could competently 
 have authorized it knowingly acquiesce for a considerable time. 2 
 So, in another case where a master mechanic on a railroad 
 without authority employed a physician to attend an injured 
 employe, and sent the ph\'sician's bill in a letter to the division 
 superintendent, who would have had authority to employ the 
 physician, it was held that a jury might find a ratification on 
 the part of the superintendent from his neglect to pay any at- 
 tention to the bill and letter sent him. 3 
 
 § 213. In a similar manner the ratification on the part of the 
 body corporate or shareholders may be proved. Thus, the 
 capital stock of a company had been increased by the directors 
 without authority. At a regular annual meeting, however, 
 the matter was reported to the shareholders, who did not then 
 object, and the holders of the shares improperly issued voted 
 at the meeting as shareholders. These facts, it was held, 
 amounted to a ratification. 4 Again, the trustees of a manufac- 
 turing corporation in good faith conveyed all its property to 
 
 1 Indianapolis Rolling Mill v. St. 
 Louis, etc., R. R. Co., 120 U. S. 256. 
 See Merrill v. Consumers 1 Coal Co., 
 114 N. Y. 216; Campbell v. Pope, 96 
 Mo. 468; Stokes v. Detrick, 75 Md. 
 256; Manhattan Hardware Co. v. 
 Phalen, 128 Pa. St. 110; Western H. 
 & I. Co. v. Bank, 9 N. Mex. 1; Al- 
 exander v. Culbertson I. & W. P. Co., 
 61 Neb. 333; Libby v. Land Co., 68 N. 
 H. 444. To constitute a valid ratifi- 
 cation, the principal must bave had 
 at the time of the ratification full 
 knowledge of the circumstances at- 
 tending the performance of the un- 
 authorized act. Benninghoff v. Agri- 
 cultural Ins. Co., 93 N. Y. 495. See 
 §§214, 215, 216. 
 
 2 Sherman v. Fitch, 98 Mass. 59; 
 Lyndeborough Glass Co. v. Massa- 
 
 chusetts Glass Co., Ill Mass. 315; 
 Lester v. Webb, 1 Allen, 34; Wal- 
 worth County Bank v. Farmers' Loan 
 and Trust Co., 16 Wis. 629; Darst v. 
 Gale, 83 111. 136; Chicago Building 
 Society v. Crowell, 65 111. 453; Perry 
 v. Simpson Waterproof M'f'g Co., 
 37 Conn. 520; see Texas and St. L. 
 R. R. Co. v. Robards, 59 Tex. 545; 
 West Salem Land Co. v. Montgomery 
 Land Co., 89 Va. 192; Peterborough 
 R. R. Co. v. Nashua and L. R. R. 
 Co., 59 N. H. 385. 
 
 3 Pacific R. R. Co. v. Thomas, 19 
 Kan. 256. See, also, Lewis v. Alber- 
 marle, etc., R. R. Co., 95 N. C. 179. 
 
 4 Payson v. Stoever, 2 Dill. 427; 
 Phosphate of Lime Co. v. Green, L. R. 
 7 C. P. 43. See Martin v. Niagara 
 Paper Co., 122 N. Y. 165; Mineral 
 
 183
 
 § 214.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 settle a judgment debt which the corporation had no other 
 means of paying. The value of the property conveyed did not 
 exceed the amount of the judgment, and all the shareholders 
 had notice of the conveyance about the time when it was made. 
 The court held, that after the lapse of four years no action 
 would lie either by the corporation or its shareholders to set 
 aside the conveyance. 1 
 
 § 214. An implied ratification may also arise if the corpo- 
 ration accepts the benefit of the unauthorized act. 2 
 Ratification T ^ . . 
 
 through Uut a corporation will not be held to have ratified 
 
 benefited an a °t impliedly by accepting the benefit of it, un- 
 i/ni't't 01 " ^ ess knowledge of the act was actually possessed by 
 Knowledge some corporate agent who would have had authority 
 
 or implied ... . 
 
 notice es- to act for the corporation m the matter, 3 or whose 
 function it was to report it to the proper authorities ; 
 or unless knowledge of the act would have been possessed by 
 some such agent had there not been neglect of duty on his part, 
 the consequences of which are to be borne by the corporation, 
 rather than by the party from whose performance it has been 
 benefited. 4 
 
 Springs Co. v. De Bautte, 50 La. Ann. 
 1281. Compare Miller v. Rutland, 
 etc., R. R. Co., 36 Vt. 452. 
 
 1 Sheldon Hat Blocking Co. v. 
 Eickmeyer Hat Blocking Machine 
 Co., 90 N. Y. 607. See, also, Stokes 
 v. Detrick, 75 Md. 256: Underbill v. 
 Santa Barbara Land Co., 93 Cal. 312. 
 
 2 Railway Companies v. Keokuk 
 Bridge Co., 131 IT. S. 371; Taylor v. 
 Agricultural, etc., Ass'n, 68 Ala. 229; 
 Bezan r. Pike, 23 La. Ann. 788; 
 Medoniak Bank v. Curtis, 24 Me. 36; 
 Grape Sugar MTg Co. v. Small, 40 
 Md. 395; Wood Hydraulic MTg Co. 
 v. King, 45 Ga. 34. 
 
 a Gilman, etc., R. R. Co. v. Kelly, 
 77 111. 426; Murray v. Nelson Lum- 
 ber Co., 143 Mass. 250. 
 
 Thus, where the president of a cor- 
 poration executed an unauthorized 
 lease of mining property, and the 
 corporation accepted tbe rent, but as 
 
 184 
 
 " money for ores sold," not knowing 
 of the lease, it was held that there 
 was no ratification. Yellow Jacket 
 Silver M'g Co. v. Stevenson, 5 Nev. 
 224. See § 212, note. 
 
 4 Where a railroad company re- 
 ceives railroad material bought with- 
 out authority by the president on its 
 credit and for its use, and the mate- 
 rial is used for corporate purposes 
 with the assent of the directors, that 
 is an adoption and ratification of tbe 
 president's act; and the directors 
 using the purchased material were 
 bound to inquire and were presumed 
 to know whether it was paid for or 
 not; it is not essential to tbe adop- 
 tion of tbe acts of an officer that the 
 directors should know tbe terms of 
 his contracts. Scott v. Middletown, 
 etc., R. R. Co., 80 N. Y. 200. See 
 Blen v. Bear River, etc., Water Co., 
 20 Cal. 602; Hazelhurst v. Savannah,
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 216. 
 
 § 215. Consequently, in order to constitute an implied ratifi- 
 cation on the part of the corporation, arising from acquiescence 
 or from accepting the benefit of an act, it may not be necessary 
 that the circumstances should be such as to warrant a jury in 
 finding actual knowledge on the part of the corporation or cor- 
 porate agents competent to ratify. For the knowledge of one 
 agent may, at least in the absence of proof to the contrary, be 
 imputed to other agents who have authority to do the acts in 
 question, or even to the corporation. Thus, where certain un- 
 authorized loans were made by a person on behalf of a corpora- 
 tion with banking powers, who notified the cashier, it was held, 
 although the cashier himself had no power to ratify the unau- 
 thorized acts, that notice to him was notice to the board of 
 directors, who had power to ratify ; and accordingly a ratifica- 
 tion was inferred through their neglect to repudiate ; the court 
 saying: " It was the duty of the managers at those meetings to 
 inform themselves of the affairs of the company, and to take 
 the same care of its funds and property as a prudent man would 
 take of his own. The cashier was an officer selected and ap- 
 pointed by themselves, in whom they must be supposed to have 
 entire confidence. An important part of his duty was to keep 
 the managers informed of the state and condition of the com- 
 pany's funds, and to communicate to them everything affecting 
 the interests of the company. Without presuming a gross neg- 
 lect of duty on the part of the managers in meeting and mak- 
 ing the inquiries in relation to the funds in New York, and a 
 like neglect of duty on the part of their cashier in giving them 
 information, it cannot be supposed that the managers remained 
 ignorant of the loan now in controversy, or of the entire dis- 
 position which had been made of their funds in the defendants' 
 bank during the month of June. The plaintiffs themselves can- 
 not call on a court or jury to presume such a neglect on their 
 part." l 
 
 § 216. Likewise notice to an agent who himself has no au- 
 thority to ratify, may be notice to the corporation : and if 
 
 etc., R. R. Co., 43 Ga. 13; Indian- 
 apolis Rolling Mill v. St. Louis, etc., 
 R. R. Co., 120 U. S. 256. Compare 
 Benniughoff y. Agricultural Ins. Co., 
 93 N. Y. 495, § 212, note. 
 
 : New Hope, etc., Bridge Co. v. 
 Phoenix Bank, 3 N. Y. 156, 164; see 
 Chicago, etc., Ry. Co. v. James, 24 
 Wis. 388; Martin v. Webb, 110 U. S. 
 7. 
 
 185
 
 § 218.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 within a reasonable time after such actual and implied notices 
 there is no repudiation, an implied ratification from acquies- 
 cence may be presumed. Thus, in Gold Mining Co. v. Na- 
 tional Bank, 1 a person acting as the agent of the company 
 borrowed money on its account. The president accepted the 
 accounts of the agent, thus acquiring actual knowledge of the 
 transactions; and the court said that the president "was the 
 suitable man to receive the information." Accordingly, the 
 company failing to disavow the loan made to its agent within 
 a reasonable time after its president had received information 
 in the matter, was held to have assented to the acts of its 
 agent as originally done in its name. 2 
 
 § 217. Mere lapse of time does not in itself constitute a rati- 
 fication ; though in connection with the circumstan- 
 ces of the case lapse of time may be competent evi- 
 dence of a ratification arising from acquiescence. 3 
 And when the corporation has had the full benefit of 
 the unauthorized acts of its agents, from very slight evidence a 
 ratification may be inferred, 4 as may be inferred from slight 
 evidence the ratification of an act plainly beneficial to the cor- 
 poration, like the acceptance of a grant. 5 
 
 § 218. The rules governing the powers of corporate agents 
 . .. in general to act for their corporations having now 
 
 Authority ° ' ° 
 
 of special been discussed, as well as the legal effect of their acts 
 corporate as between the corporation and persons with whom 
 agents. they contract, it remains to consider more specifi- 
 
 Lapse of 
 time no 
 ratifica- 
 tion. 
 
 1 96 U. S. 640. 
 
 2 See, also, Bennett v. Maryland 
 Fire Ins. Co., 14 Blatchf. 422; Hil- 
 liard v. Goold, 34 N. H. 230. What 
 directors ought by proper diligence 
 to have known as to the general 
 course of business of their corpora- 
 tion, they may be presumed to have 
 known in any contest between the 
 corporation and those who are justi- 
 fied by the circumstances in dealing 
 with its officers upon the basis of 
 that course of business. Martin v. 
 Webb, 110 U. S. 7; see Kissam v. 
 Anderson, 145 U. S. 435; and § 240. 
 See, also, Merchants' Union Barb 
 
 186 
 
 Wire Co. v. Rice, 70 Iowa, 14; 
 Lowry Banking Co. v. Empire, etc., 
 Co., 91 Ga. 624; Field v. Investment 
 Co., 123 Mo. 603. Directors are 
 chargeable with notice of the con- 
 tents of the books of the corpora- 
 tion. Hanover Bk. v. Dock Co., 148 
 N. Y. 612. 
 
 3 See Evans v. Smallcombe, L. R. 
 3 H. L. 249, 253, 260. See, also, 
 especially §§ 269 et seq.. 
 
 4 See, generally, cases in the pre- 
 ceding notes ; also, §§ 279 and 280. 
 
 5 Bank of U. S. v. Dandridge, 12 
 Wheat. 64, 70.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 220. 
 
 cally the authority of certain prominent classes of corporate 
 agents. And first of all as to the authority of the board of 
 directors. 
 
 § 219. As a usual thing, the entire management of the busi- 
 ness of a corporation is by its constitution vested in 
 the board of directors ; so that from the beginning the board 
 the shareholders have little to do with the corporate oL ireCt " 
 management, their main function being to elect the 
 directors. It may be, however, that according to the original 
 organization of the company the corporate powers are left to a 
 large extent in the hands of the shareholders, to be exercised by 
 themselves if they see fit. Under such circumstances the share- 
 holders by resolution or by-law may delegate authority to the 
 directors ; and may at will revoke it, provided thereby no 
 vested rights are affected. This latter style of organization is 
 infrequent, and usually the powers of the directors emanate 
 directly from the constitution of the corporation. Accordingly, 
 whether or not any given act is within the scope of their au- 
 thority is, in most instances, to be ascertained by a construction 
 of the charter, or enabling acts and articles of association, in- 
 cluding any statutes that may be applicable. 
 
 The common phrase is something like this : " The business of 
 the corporation shall be managed by the board of directors ; " 
 or " The powers of the corporation shall be exercised by the 
 board of directors." In consequence, the directors for ordinary 
 purposes have full authority to act for the corporation and rep- 
 resent it in all matters pertinent to the corporate enterprise. 1 
 
 § 220. The first and most general rule as to the extent of the 
 power conferred by "authority to manage the busi- 
 ness of the corporation," is that such power extends of general 
 to the doing of any ordinary act conducive to the 
 
 1 See Hoyt ». Thompson's Ex'r, 19 
 N. Y. 207, 216; Burrill v. Nahant 
 Bank, 2 Mete. (Mass.) 163, 166; 
 Wood o. Whelen, 93 111. 153; Sims 
 v. Street Railroad Co., 37 Ohio St. 
 556; Maynard v. Firemen's Fund 
 Ins. Co., 34 Cal. 48; Wright v. Oro- 
 ville M'g Co., 40 Cal. 20; Dana v. 
 Bank of U. S., 5 W. & S. 246; Bank of 
 U. S. u. Danbridge, 12 Wheat. 113 (per 
 
 Marshall, C. J.); Tripp v. Swanzey 
 Paper Co., 13 Pick. 291; Leavitt v. 
 Oxford, etc., M. Co., 3 Utah, 265. 
 When the directors and shareholders 
 of a corporation are not identical, it 
 is incompetent for the directors to 
 bind the corporation by an agree- 
 ment with a certain person that he 
 shall be a director. Seymour v. De- 
 troit Rolling Mills, 56 Mich. 117. 
 
 187
 
 § 223.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 success or required by the exigencies of the business ; and, since 
 any person vested with authority to act for another must neces- 
 sarily act largely according to an honest discretion, which un- 
 der certain circumstances warrants acts that under different 
 circumstances would constitute a flagrant breach of trust, so it 
 may be said, that in critical emergencies the discretionary au- 
 thority of directors justifies the doing of many acts which would 
 be unauthorized under ordinary circumstances. 
 
 § 221. The next general rule regarding the construction of 
 the authority of directors is a negative one. Au- 
 
 St'itGiiiGnt """ "~ 
 
 of firat gen- thojrity_to_mana ! ge._the affairs_.of ..a coxporation does 
 tion. imi *" not authorize the directorJTto change the scheme of 
 
 tFe corporate enterprise or the nature of the corpo- 
 rate business ; nor does it authorize them to bring the business 
 to a conclusion either directly, or indirectly through acts which 
 render the further carrying on of it as planned impossible. 
 
 § 222Trhirdly and finally, since the constitution and all au- 
 thority thereby conferred relate to a specific enterprise and cor- 
 porate purpose, no authority is conferred on directors to bind 
 
 the corporation in regard to matters having no con- 
 
 Statement 
 
 of second nection with the objects of incorporation. : 
 UmHation. The three preceding rules outline the law regulat- 
 ing the power of directors to bind by their acts the 
 corporation and its property ; and the cases and instances now 
 to be referred to will be but illustrations of their application ; 
 but of their application as affected by rules previously discussed 
 in regard to presumptions and estoppels and by special provi- 
 sions in the constitution or by-laws of the corporation. 
 
 § 223. How is the scope of the first general rule deter- 
 gc of mined, — that directors may do any regular or ordi- 
 the gen- nary act within the corporate powers, in the man- 
 
 cril rule. ii' 
 
 agement of the corporate business \ The word 
 "ordinary" here is by no means synonymous with "routine;" 
 it is in no sense limited to dairy clerical or ministerial manage- 
 ment. It has a far more comprehensive meaning ; and a trans- 
 
 Compare Wilbur v. Stoebel, 82 Mich. 
 344; King r. Barnes, 109 N. Y. 267. 
 
 1 See Bathe v. Decatur Agric. Soc, 
 73 Iowa, 11. That directors have no 
 power to organize a second corpora- 
 
 188 
 
 tion in another state, and bind their 
 home company for the expenses, was 
 held in Eakins v. White Bronze Co., 
 75 Mich. 568.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 224. 
 
 action may still be " ordinary " although of great importance, 
 involving a large amount of money. In construing the term 
 "ordinary business," which a by-law empowered a quorum 
 composed of less than a majority of directors to transact, 
 Judge Comstock said, giving the opinion of the New York 
 Court of Appeals in Hoyt v. Thompson's Executor : l " The 
 ordinary business of the corporation had, I think, no limit 
 short of the varied and extensive affairs in which it was author- 
 ized by its charter to engage. It could construct and operate a 
 canal, deal in stocks and in trusts, and it could carry on the 
 business of banking in all its departments. If the due execu- 
 tion of these powers did not constitute the ordinary business of 
 the company, then it seems to me impossible to suggest any 
 definition of the term, and the by-law becomes senseless and un- 
 meaning ; and if these express powers of the corporation were 
 embraced in the terms of the by-law, it must necessarily follow 
 that the quorum designated took all the incidental authority 
 which the whole board would possess in the execution of the 
 same powers. In the operation of banking, which constituted 
 one portion of the ordinary business, it might become necessary 
 to borrow money, and the power to do so existed. As debts 
 could be contracted, the incidental power of paying them can- 
 not be doubted. So, the condition of the company's affairs 
 might require a negotiation with creditors, and the postpone- 
 ment and securing of their demands. To secure a debt, and 
 procure its forbearance in a period of embarrassment, would 
 not by any means be an extraordinary act, in the sense of the 
 by-law, although it might be unusual in the magnitude and im- 
 portance of the transaction." 2 
 
 § 224. Accordingly, all business relating to the legitimate 
 objects of incorporation, not involving a departure from the 
 original plan, may be transacted by the directors. 3 They have 
 
 i 19 N. Y. 206, 217. 
 
 2 Compromises to avoid and reduce 
 losses come within the general scope 
 of the powers of a board of directors 
 of a national bank, and are submitted 
 to their discretion, except in so far 
 as there may be restrictions in the 
 charter and by-laws. Banks may do 
 
 in this behalf whatever natural per- 
 sons could do under like circum- 
 stances. First Nat. Bank v. Nat. 
 Exchange Bank, 92 U. S. 122. See 
 Keyser v. Hitz, 2 Mackey (Dist. of 
 Col.), 513. 
 3 Wood v. Whelan, 93 111. 153. 
 
 189
 
 § 225.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 full power to manage the concerns of the company. 1 Thus, 
 bank directors have authority to make discounts, and fix the 
 discount rate. 2 And with directors rests the power to place 
 unsubscribed stock. 3 Directors of a railroad company may 
 competently contract to transport freight for a fixed term at 
 a certain rate ; 4 and it has been held to be within the discre- 
 tionary power of the boards of two connecting roads to make 
 an agreement for the division of earnings proportioned to the 
 distance that each corporation carries the passengers or freight 
 for which the money is paid. 5 Again, in a case where the deed 
 of settlement of a joint-stock bank gave its directors extensive 
 powers to carry on the business of banking and to act in such 
 manner as might appear to them best calculated to promote the 
 interest of the bank, it was held that they had power to guar- 
 anty the payment of interest on debentures of another com- 
 pany issued for the purposes of its formation, when that was 
 of importance to the bank. 6 Directors are the proper officers 
 to institute legal proceedings on behalf of the corporation, and 
 i4i*/ s t that end have unquestioned authority to employ counsel, 7 
 and compromise litigation. 8 
 
 § 225. To carry on the corporate business, directors have 
 
 2 
 
 1 Sims u. Street Railroad Co., 37 
 Ohio St. 556; see Dana v. Bank of 
 United States, 5 W. & S. 223, 246; 
 Bank of Kentucky v. Schuylkill Bank, 
 1 Pars. Sel. Cas. (Pa.) 236; Wright 
 v. Oroville M'g Co., 40 Cal. 20; com- 
 pare Beaty v. Knowler's Lessee, 4 
 Pet. 152; Bargate v. Shortridge, 5 
 H. L. Cas. 297. 
 
 2 Bank of United States v. Dunn, 6 
 Pet. 51 ; Bank Commissioners v. Bank 
 of Buffalo, 6 Paige, 497. 
 
 3 Sims v. Street Railroad, 37 Ohio 
 St. 556. 
 
 4 Railroad Co. v. Furnace Co., 37 
 Ohio St. 321. 
 
 5 Elkins v. Camden and Atlantic 
 R. R. Co., 36 N. J. Eq. 241. 
 
 6 In re West of England Bank, 
 Ex parte Booker, L. R. 14 Ch. D. 317. 
 So, where a lease was made of its road 
 
 190 
 
 by one railroad corporation to an- 
 other, which lease was executed by 
 the share-holders and provided for a 
 guaranty by the lessee corporation of 
 a ten per cent, annual dividend on 
 the stock of the lessor corporation, 
 it was held that the respective boards 
 of directors had power to modify the 
 terms of the lease and reduce the 
 amount guaranteed. People v. Met- 
 ropolitan Ry. Co., 26 Hun, 82; Flagg 
 v. Manhattan Ry. Co., 10 Fed. Rep # 
 413; S. C, 20 Blatchf. 142. (Quaere 
 as to the propriety of these two de- 
 cisions. ) See Sheffield Nickel Co. v. 
 Unwin, 36 L. T. N. S. 246; S. C, L. 
 R. 2 Q. B. Div. 214. 
 
 7 See Pollock v. Shultze, 1 Hun, 
 320. 
 
 8 Donohue v. Mariposa Land, etc., 
 Co., 66 Cal. 317. See § 223, note.
 
 PART IT.] ACTS WITHIN THE CORPORATE POWERS. [§ 225. 
 
 power to borrow money for the corporation, 1 and in 
 the absence of express restriction on their power in of directors 
 this respect, 2 may secure the corporate indebtedness ° orrow- 
 by a pledge of its personal property or a mortgage of its real 
 estate. 3 Likewise directors may assign any choses in action or 
 transfer any property of the corporation, 4 provided the property 
 transferred be not essential to the carrying out of the objects 
 of incorporation. 5 And authorities hold that the directors of an 
 insolvent corporation may assign all its property for the pay- 
 ment of its debts, when to make such an assignment is within 
 the powers of the corporation. 6 Thus, according to a Massa- 
 
 1 Ridgway v. Farmers' Bk., 12 S. & 
 R. 256, and cases in following notes. 
 But a single director has no such 
 power by virtue of being a director. 
 Lawrence p. Gebhard, 41 Barb. 575. 
 
 2 See Davis v. Flagstaff Silver Mg. 
 Co., 2 Utah, 74; compare Flagstaff 
 Silver Mg. Co. v. Patrick, ib. 304. 
 An enabling statute may contain a 
 specific restriction on the power of 
 trustees or directors to mortgage the 
 corporate property. 
 
 Capital not paid up is only sub mo do 
 property of the corporation ; the due 
 makiug of a call being a condition 
 precedent to the absolute proprietary 
 right of the company therein. Con- 
 sequently, a power given to the di- 
 rectors to mortgage the property of a 
 corporation does not authorize them 
 to include in such mortgage future 
 calls, i. e., the unpaid capital of the 
 company. Bank of South Australia 
 v. Abrahams, L. R. 6 P. C. 265. 
 
 3 Wood v. Whelen, 93 111. 153; 
 Burrilla. NahantBk.,2 Mete. (Mass.) 
 163; Hendee v. Pinkerton, 14 Allen, 
 381; Saltmarsh v. Spaulding, 147 
 Mass. 224. See Tripp v. Swanzey 
 Paper Co., 13 Pick. 291; Hopson v. 
 Aetna Axle, etc., Co., 50 Conn. 597. 
 The executive committee of the 
 board of directors, having been au- 
 thorized by the board to procure a 
 loan, and possessing according to the 
 
 constitution of the corporation 
 power to transact "any official busi- 
 ness," may execute a mortgage. 
 Taylor v. Agricultural, etc., Ass'n, 
 68 Ala. 229. Compare, as to author- 
 ity of the directors of a railroad com- 
 pany to execute a mortgage of its 
 property and franchise, McCurdy's 
 Appeal, 65 Pa. St. 290, which seems 
 to proceed on the assumption that 
 they have such power, at least when 
 the mortgage is not repudiated soon. 
 Directors of a manufacturing com- 
 pany may mortgage practically all 
 its property to enable it to go on. 
 Hopson v. Aetna Axle, etc., Co., 50 
 Conn. 597. See also, Arms v. Con- 
 ant, 36 Vt. 745, 748. 
 
 4 Marvine v. Hymers, 12 N. Y. 223. 
 But power to sell bonds is not in a 
 single director virtute officii. Titus 
 v. Cairo and Fulton R. R. Co., 37 N. 
 J. L. 98. Compare New Haven and 
 Northampton Co. v. Hayden, 107 
 Mass. 525. 
 
 5 See § 229. 
 
 6 Chamberlain p. Bromberg, 83 Ala. 
 576; Descombes v. Wood, 91 Mo. 196 
 Hutchinson v. Green, 91 Mo. 387 
 Tripp v. National Bank, 41 Minn 
 400; Huse v. Ames, 104 Mo. 91 
 Union Bank i\ Ellicott, 6 G. & J. 363 
 Dana o. Bank of U. S.,. 5 W. & S 
 223, 247; Catlin o. Eagle Bank, 6 
 Conn. 233; Gibson o. Goldthwaite, 7 
 
 191
 
 § 227.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 cbusetts case, directors of a corporation, suddenly rendered in- 
 solvent by the burning of its works, have authority to convey 
 to a creditor all the corporate property provisionally, upon con- 
 dition to pay or provide for the payment of the just debts of 
 the corporation to himself ; he giving proper security to apply 
 no more than necessary and pay over the remainder to the treas- 
 urer of the corporation for the benefit of other creditors. 1 
 § 226. Under the second general rule, that directors cannot 
 
 First ^ene- cnan o e ^ ne scneme °f the corporate enterprise nor 
 rai liiaita- bring- the business to a conclusion, there are four 
 
 tion. i . i • i t 
 
 things which directors cannot do. 
 
 § 227. First, they cannot change the nature or plan of the 
 
 corporate business, nor, in the absence of special authorization, 
 
 can they accept from the legislature any substantial alteration 
 
 or amendment in the corporate constitution. 2 But the rule de- 
 
 Ala. 281 ; Rogers v. Pell, 154 1ST. Y. 
 518. See Merrick v. Bank of the 
 Metropolis, 8 Gill, 59; Sheldon Hat 
 Blocking Co. v. Eickemeyer Hat 
 Blocking Machine. Co., 90 N. Y. 607; 
 Duneomb v. New York, H. & N. R. 
 R. Co., 88 N. Y. 1; S. C, 84 N. Y. 
 190; Boynton v. Roe, 114 Mich. 401; 
 Cf. Parker v. Bank, 53 S. C. 583; 
 Contra, Bk. Com'rs v. Bank of Brest, 
 Harrington's Ch. (Mich.) 100; Kyle 
 v. Wagner, 45 W. Va. 349. An as- 
 signment made, without the consent 
 of shareholders, by the directors of 
 a bank of all its assets is voidable at 
 the suit of shareholders; but a cred- 
 itor cannot object to the directors' 
 lack of power. Eppright i\ Nicker- 
 son, 78 Mo. 482. See § 230, note. 
 
 1 Sargent v. Webster, 13 Mete. 
 (Mass.) 497. 
 
 2 Baker's Appeal, 109 Pa. St. 461; 
 Commonwealth v. Cullen, 13 Pa. St. 
 133; Brown v. Fairmount Gold Mg. 
 Co., 10 Phila. 32; Marlborough Mfg. 
 Co. p. Smith, 2 Conn. 579; Hope Mat. 
 Fire Ins. Co. ». Beckmann, 47 Mo. 93, 
 96; Mississippi, etc., R R. Co. v. Cas- 
 ter, 24 Ark. 96. See Venner ». Atchi- 
 son, etc., R. Co., 28 Fed. Rep. 581. 
 
 192 
 
 But see semble contra, Dayton, etc., 
 R. R. Co. v. Hatch, 1 Disney (Cin. 
 Sup. Ct. ), 86; Matter of Excelsior 
 Fire Ins. Co., 16 Abb. Pr. (N. Y.) 8; 
 Illinois River R. R. Co. v. Zimmer, 20 
 111. 654; Banet v. Alton, etc., R. R. 
 Co., 13 111. 504, 508. Compare Case of 
 St. Mary's Church, 6 S. & R. 498; 
 S. C, 7 S. & R. 517; Railway Co. v. 
 Allerton, 18 Wall. 233, 235. In some 
 of the cases in this note holding it 
 beyond the power of directors to ac- 
 cept an amendment, the assent of all 
 the shareholders might have been 
 necessary. See § 532. 
 
 In the absence of express power in 
 the deed of settlement, it is not com- 
 petent for the directors to amalga- 
 mate with auother company carrying 
 on the same business, and assume on 
 behalf of their own corporation the 
 liabilities of the other company. A 
 clause in the deed of settlement au- 
 thorizing the directors "generally, 
 where these presents are silent, or 
 do not otherwise provide, to act in 
 the direction of the concerns of the 
 society in such manner as at their 
 absolute discretion they shall think 
 most conducive to the interests of
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 228. 
 
 nying the authorit}^ of directors to accept any legislation mate- 
 rially changing the constitution is not to be construed to pre- 
 clude them from accepting the benefit of a statute which effects 
 no changes, but which merely facilitates the exercise of fran- 
 chises already conferred. 1 
 
 § 228. Secondly, directors have no power to increase or de- 
 crease the capital stock of the corporation. 2 In the leading 
 case on this point, Railway Company v. Allerton, Justice Brad- 
 ley said: 3 "A change so organic and fundamental as that of 
 increasing the capital stock of a corporation beyond the limit 
 fixed by the charter cannot be made by the directors alone, 
 unless expressly authorized thereto. The general power to 
 perform all corporate acts refers to the ordinary business 
 transactions of the corporation, and does not extend to a recon- 
 struction of the body itself, or to an enlargement of its capital 
 stock." 4 
 
 the society," is not an authority for 
 the purpose. In re Era Assurance 
 Society, Ex parte Williams, 30 L. J. 
 Eq. 137. Directors have no power to 
 consolidate with auother corporation. 
 Greenville Co. o. Planters' Press, 70 
 Miss. 669. See Blachford ». Ross, 5 
 Abb. Pr. N. S. (N. Y.) 434. Direct- 
 ors of a railroad company have no 
 authority to purchase the road of an- 
 other company. Deaderick v. Wil- 
 son, 8 Bax. (Tenn.) 108. 
 
 1 A statute was passed authorizing 
 a railroad company to take for a pas- 
 senger station land belonging to an- 
 other railroad company. The by-laws 
 provided that the directors might 
 purchase what real estate they 
 deemed necessary for the railroad, 
 and exercise all powers granted to 
 the company by the charter, for the 
 purpose of locating, constructing, 
 and completing the road, and all 
 other powers necessary and proper 
 to carry out the objects of the corpo- 
 ration : Field, that an acceptance of 
 the statute by shareholders was not 
 necessary to authorize directors to 
 
 13 
 
 take land in pursuance of it. East- 
 ern R. R. Co. ». Boston and Maine 
 R. R. Co., Ill Mass. 125. See Joy v. 
 Jackson, etc., Plank Road Co., 11 
 Mich. 155, 170. 
 
 2 When a corporation has the power 
 to increase or diminish its capital 
 stock, the mode of doing it and the 
 conditions under which it may be 
 done are usually prescribed by stat- 
 ute. But when the statute is silent 
 the power rests in the body corpo- 
 rate, not in the board of directors. 
 Eiduian o. Bowman, 58 111. 444; Mc- 
 Nulta v. Corn Belt Bk., 164 111. 427. 
 On the general principle that the 
 powers of a corporation not specially 
 vested in any particular officers re- 
 main in the body corporate, see Mat- 
 ter of Wheeler, 2 Abb. Pr. N. S. (N. 
 Y.) 361; People i\ Twaddel, 18 Hun, 
 427, 432 ; State v. Merchant, 37 Ohio 
 St. 251. 
 
 3 18 Wall. 233, 234. 
 
 4 Gill v. Balis, 72 Mo. 424; Finley 
 Shoe and Leather Co. o. Kurtz, 34 
 Mich. 89; Eidman r. Bowman, 58 111. 
 444; Percy v. Millaudon, 3 La. 569. 
 
 193
 
 § 230.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 229. Thirdly, directors cannot transfer property of fcfee cor- 
 poration which is essential to the continuance of the corporate 
 business; 1 nor have they power to give away the corporate 
 funds or deprive the corporation of the means which it possesses 
 to accomplish the purposes of its incorporation. 2 Accordingly, 
 directors cannot ordinarily lease the whole plant of a corpora- 
 tion ; 3 nor can the directors of a railroad company lease its road 
 without special authority. 4 
 
 § 230. Fourthly, if directors have no power to sell corporate 
 property which is essential to the continuance of the business, 
 
 And directors cannot increase 
 
 the 
 
 capital stock indirectly, e. g., by 
 agreeing to pay in stock for services 
 and for money loaned, when the cor- 
 poration has no stock in its treasury. 
 Finley Shoe and Leather Co. v. Kurtz, 
 supra. 
 
 1 Abbot v. American Hard Rubber 
 Co., 33 Barb. 578; Rollins v. Clay, 33 
 Me. 132; Balliet v. Brown, 103 Pa. 
 St. 546; Forrester v. B. & M. Min. 
 Co., 21 Mont. 544. Compare Sheldon 
 Hat Blocking Co. v. Eickemeyer Hat 
 Blocking Machine Co., 90 N. Y. 607; 
 Reichwald v. Commei - cial Hotel Co., 
 106111. 439; Temp. Ass'n v. Friendly 
 Soc, 187 Pa. St. 38; and see §225. 
 
 2 Burke v. Smith, 16 Walt. 390, 
 395; Bedford R. R. Co. v. Bowser, 48 
 Pa. St. 29, 37; Jones v. Morrison, 31 
 Minn. 140; Field v. Investment Co., 
 123 Mo. 603. See Penobscot, etc., R. 
 R. Co. v. Dunn, 39 Me. 587, 601. 
 
 But it has been held that directors 
 have power to apply £1,500 out of 
 the undivided profits of a manufac- 
 turing company, as a gratuity of one 
 week's extra pay to each worker in 
 the factory who had worked with a 
 good character throughout the year. 
 Hampson ». Price's Patent Candle 
 Co., 44 L. J. Eq. 437. The point 
 came up on a motion by a shareholder 
 to restrain the payment. But see 
 Jones v. Morrison, 31 Minn. 140. 
 
 194 
 
 3 Library Hall Co. v. Pittsburg 
 Assn., 173 Pa. S. C. 30; Cass v. Man- 
 chester Iron and Steel Co., 9 Fed. 
 Rep. 640. In the last case the holder 
 of a majority of stock had protested. 
 
 * Stevens v. Davison, 18 Gratt. 
 819; Mills v. Central R. R. Co., 41 
 N. J. Eq. 1; Board, etc., Tippecanoe 
 County v. Lafayette, etc., R. R. Co., 
 50Ind. 85, 112; Martin v. Continental 
 Passenger Ry. Co., 14 Phila. (Pa.) 
 10. Nor can directors change the 
 termini of a railroad. See Board, 
 etc., Tippecanoe County v. Lafayette, 
 etc., R. R. Co., supra. 
 
 When the lease of the railroad of 
 ono company has been made to an- 
 other railroad company, and ratified 
 by the shareholders, the directors 
 have no power, as against objecting 
 shareholdei's, to change its provi- 
 sions. March v. Eastern R. R. 
 Co., 43 N. H. 515. Compare S. C, 
 40 N. H. 548. See Kersey Oil Co. v. 
 Oil Creek, etc., R. R. Co., 12 Phila. 
 374. Compare Black v. Delaware 
 and Raritan Canal Co., 22 N. J. Eq. 
 130, 407 et seq., and § 224, note. Iu 
 Beveridge v. N. Y. E. R. Co., 112 N. 
 Y. 1, it was held that when to lease 
 its road was within the powers of a 
 railroad corporation, the directors 
 had authority to make the lease, the 
 powers of the corporation being by 
 its charter vested in them.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 232 
 
 a fortiori they have no power to wind up the affairs of the^or- 
 poration. 1 
 
 § 231. The last of the three general rules above mentioned, 2 
 is that directors have no authority to bind the cor- „ 
 
 . J Second 
 
 poration in matters not relating to the corporate general 
 business. On the face of it, this rule seems self- 
 evident. All the powers of directors to represent the corpora- 
 tion, whether derived directly from the corporate constitution 
 or conferred by a vote of the body corporate, have their ulti- 
 mate basis in that constitution and in the agreement of the 
 associates embodied in it. Consequently, directors have no 
 power to do any act ultra vires the corporation ; 3 and as the 
 corporate constitution and the agreement embodied in it relate 
 only to the corporate enterprise, any acts having no relation to 
 the corporate enterprise must be beyond the authority of di- 
 rectors. As Yice Chancellor Wickens said in Pickering v. 
 Stephenson : 4 " The special powers, given either to the directors 
 or to a majority by statutes or other constituent documents of 
 the association, however absolute in terms, are always to be 
 construed as subject to a paramount and inherent restriction 
 that they are to be exercised in subjection to the special pur- 
 poses of the bond of association." Accordingly, directors have 
 no p^ro 1 to give the note of the corporation for a debt having 
 no relation to its business, due to the payee of the note ; and 
 the note will be void in the hands of any person having notice 
 of the circumstances under which it was given. 5 
 
 § 232. On the other hand, if directors acting within the ap- 
 
 1 Bank Commissioners ». Bank of 
 Brest, Harrington's Ch. (Mich.) 106; 
 Smith v. Smith, 3 Des. Ch. (S. C. ) 
 547; Angell and Ames on Corp., 
 §772. See, State v. Mitchell, 104 
 Tenn. 336. But it is held that direct- 
 ors may make an assignment of the 
 corporate property for the equal 
 benefit of all creditors, when the cor- 
 poration is insolvent. Descombes v. 
 Wood, 91 Mo. 196; Hutchinson v. 
 Green, 91 Mo. 367. But a minority 
 
 of the diiectoi - s cannot make such 
 an assignment. Calumet Paper Co. 
 v. Haskell Show Pr. Co., 144 Mo. 331. 
 See § 225. 
 
 2 § 222. 
 
 3 § 267. 
 
 * L. R. 14 Eq. 322, 340. See, also, 
 Minor v. Mechanics' Bank, 1 Pet. 46, 
 71. 
 
 3 Hall ». Auburn Turnpike Co., 27 
 Cal. 255. See Salem Bk. v. Glou- 
 cester Bk., 17 Mass. 30. 
 
 195
 
 § 233.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 parent scope of their authority, commit or intend a 
 tioifto^tT breach of trust, the rights of an innocent person 
 
 dealing with them will not be affected thereby. 1 
 Thus, if directors borrow money for their corporation, having 
 authority to do so, the lender is not bound at his peril to see 
 that the money is not applied to purposes ultra vires the cor- 
 poration, 2 nor embezzled by the directors. And if a person 
 sells to directors for their corporation such property as it is au- 
 thorized to buy, he need not ascertain whether it requires his 
 particular property 7 . 3 In this last case, Eastern Counties Rail- 
 way Co. v. Hawkes, Lord St. Leonards said that the English 
 decisions 4 did "not authorize directors to bind their companies 
 by contracts foreign to the purposes for which they were es- 
 tablished, but they do hold companies bound by contracts duly 
 entered into by their directors for purposes which they have 
 treated as within the objects of their Acts, and which cannot 
 clearly be shown not to fall within them ; and they further 
 hold companies to be bound by a continual course of dealing 
 by their directors with third persons in relation to their shares, 
 although that mode of dealing is contrary to the regulations of 
 their deed of management." 5 
 
 § 233. As to what portion of their authority directors may 
 
 delegate to some of their own number or to other 
 o/amhor- 11 officers of the corporation it is difficult to state any 
 rectors' 11 " rme °* general application more specific than this: 
 
 Directors may not delegate authority which it was 
 intended that the board should exercise. From some cases it 
 might indeed be inferred that it was ordinarily competent for 
 them to delegate authority to perform mere ministerial acts, but 
 not authority to do acts involving discretion. 6 Thus, it has been 
 held that the power of directors to lease property of the corpo- 
 
 jgLJ j & / o 
 
 1 See §§ 203 et seq. *+ 6*^ Gst 'Drew, 2 Macq. 103; Bargate ». Short- 
 
 2 In re Marseilles Extension Rail- 
 way and Land Co., 20 W. R. 254; 
 North Hudson B'ld'g Ass'n v. Bank, 
 79 Wis. 31. 
 
 3 Eastern Counties R'y Co. v. 
 Hawkes, 5 H. L. Cas. 831. 
 
 4 7. e., National Exchange Co. v. 
 
 196 
 
 ridge, 5 H. L. Cas. 29G. 
 
 5 5 H. L. Cas. 381. 
 
 6 Silver Hook Road v. Greene, 12 
 R. I. 164; Farmers' Mutual Ins. Co. 
 ». Chase, 56 N. H. 341; Temple v. 
 Dodge, 89 Tex. 68. Compare Sheri- 
 dan Elec. L. Co. v. Nat. Bank, 127 
 N. Y. 517.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 234. 
 
 ration could not be delegated to an agent. 1 But this view is 
 not borne out by the authorities. 2 
 
 Directors may undoubtedly appoint subordinate officers, and 
 empower them to do all acts which properly come within the 
 scope of their respective offices. 3 Such appointments, however, 
 are rather an exercise than a delegation of their powers by di- 
 rectors ; for clearly it was not intended that the board of direct- 
 ors should perform the duties of subordinate officers. Directors 
 may also regulate the authority of whatever officers they have 
 the power to appoint. Accordingly, they may authorize the 
 president, or president and cashier, or the general agent, to 
 borrow money and draw and indorse negotiable paper in the 
 name of the corporation ; 4 or may authorize a treasurer to 
 assign mortgages belonging to the corporation. 5 
 
 § 234. Powers involving a wide discretion — wider than 
 should be vested in any single officer or subordinate ^ , 
 
 •J o Delegation 
 
 agent — may be delegated by directors to a committee of powers 
 of their own number, especially when the member- board to a 
 ship of the board is large. In New York it is held comnu ee - 
 that a board of twenty-three directors may delegate to a " quo- 
 rum" of any live of their number authority to transact all 
 ordinary business. Likewise, a board may delegate to a com- 
 
 i Gillis v. Bailey, 21 N. H. 149; see 
 Tippets v. Walker, 4 Mass. 595. 
 
 2 See Burrill v. Nahant Bank, 2 
 Mete. (Mass.) 163; Iloyt v. Thomp- 
 son's Ex'r, 19 N. Y. 207; Wood v. 
 Wiley Cons'n Co., 56 Conn. 87; 
 Mercer County Ins. Co. v. Stranalian, 
 104 Pa. St. 246; Metropolitan Tel. 
 Co. v. Domestic Tel. Co., 44 1ST. J. Eq. 
 568, 571. 
 
 8 Kitchen v. Cape Girardeau, etc., 
 R. R. Co., 59 Mo. 514. Unless, to be 
 sure, the power of appointment re- 
 mains with the body corporate. Di- 
 rectors usually receive express au- 
 thority to appoint the higher officers, 
 as, e. g., the cashier. See Fleckner 
 v. Bank of the U. S., 8 Wheat. 338, 
 356. 
 
 * Ridgway v. Farmers' Bank, 12 S. 
 & R. 256; Spear v. Ladd, 11 Mass. 
 
 94; Northampton Bank v. Pepoon, 
 11 Mass. 288; Fleckner v. Bank of the 
 IT. S., 8 Wheat. 338, 356; Preston v. 
 Missouri, etc., Lead Co., 51 Mo. 43; 
 see Merrick v. Bank of the Metropolis, 
 8 Gill (Md.), 59; Bank Commission- 
 ers v. Bank of Buffalo. 6 Paige, 497; 
 Manchester and Lawrence R. R Co. 
 v. Fisk, 33 N. H. 297. 
 
 5 Commonwealth v. Reading Sav- 
 ings Bank, 137 Mass. 431. 
 
 6 Hoyt b. Thompson's Ex'r, 19 N. 
 T. 207; see §223. See Leavitt p. 
 Oxford, etc., M. Co., 3 Utah, 205. 
 But it has also been held that the au- 
 thority possessed by a portion of the 
 directors to do " ordinary business," 
 did not authorize them to compro- 
 mise a large debt due the corporation. 
 Kirk ». Bell, 16 Q. B. 290. 
 
 197
 
 § 236.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 raittee of their own number authority to alienate or mortgage 
 real estate of the corporation, 1 or to transfer its personal prop- 
 erty. 2 The power to do certain acts, however, the board of 
 directors cannot delegate, even to a committee of their own 
 number. They cannot delegate authority to allot shares, 3 to 
 make calls, 4 to declare dividends, 5 or to order a sale of shares 
 for the nonpayment of assessments. 6 
 
 § 235. It may be added that the power of agents, appointed 
 Authority by the board of directors, to act for the corporation, 
 doefno* 8 1S n °t terminated by the expiration of the authority 
 expire -with f the directors appointing them. 7 
 directors § 236. To lay down any general rule, sufficiently 
 
 point them, definite to be of practical value, as to the powers of 
 
 presidents of corporations is well nigh impossible. 
 Virtute officii a president has very little authority to 
 
 act for his corporation, and can bind it only by such 
 contracts as plainly come within its most ordinary routine busi- 
 ness. 8 Thus, it is held that a president without special author- 
 
 Authority 
 
 of a presi- 
 dent. 
 
 1 Burrill v. Nahant Bauk, 2 Mete. 
 (Mass.) 163; Augusta Bauk v. H am- 
 ble t, 35 Me. 491; Taylor v. Agricul- 
 tural, etc., Ass'n, 68 Ala. 229; Hoyt 
 v. Thompson's Ex'r, supra. 
 
 2 Mitchell v. Deeds, 49 111. 418 ; 
 compare Palmer v. Yates, 3 Sandf. 
 (N. Y.)137. 
 
 8 In re Leeds Banking Co., How- 
 ard's Case, 36 L. J. Eq. 42; S. C, 
 L. R. 1 Ch. 561; In re County Pala- 
 tine Loan, etc., Co., Cartmell's Case, 
 43 L. J. Eq. 588; compare Crocker 
 v. Crane, 21 Wend. 211. But au- 
 thority to delegate this power to a 
 committee of their own number may 
 be given in the corporate constitution. 
 Harris's Case, L. R. 7 Ch. 587. 
 
 4 Silver Hook Road v. Greene, 12 
 R. I. 164; Farmers' Mutual Ins. Co. 
 v. Chase, 56 N. H. 341 (in both the 
 cases the delegation was to the treas- 
 urer); compare Read v. Memphis 
 Gayoso Gas Co., 9 Heisk. (Tenn. ) 
 545. 
 
 5 This power is especially confided 
 
 198 
 
 to the discretion of the board; see 
 §562. 
 
 6 York and Cumberland R. R. Co. 
 v. Ritchie, 40 Me. 425. 
 
 7 Anderson v. Langdon, 1 Wheat. 
 85; Northampton Bk. v. Pepoon, 11 
 Mass. 288, 294 ; Dedham Bank v. 
 Checkering, 3 Pick. 335; Union Bank 
 v. Rklgely, 1 Har. & G. (Md.) 324, 
 431-2. 
 
 In regard to the authority of direct- 
 ors to release shareholders from their 
 subscriptions, see §§ 549-551, 745, 
 746, 780. 
 
 8 First Nat. Bk. v. Hoch, 89 Pa. St. 
 324; Blen v. Bear River, etc., Water 
 Co., 20 Cal. 602; Risley o. Indian- 
 apolis, etc., R. R. Co., 1 Hun, 202; 
 Templin r. Chicago, etc., Ry. Co., 73 
 Iowa, 548; Griffith v. Chicago, etc., 
 Ry. Co., 74 Iowa, 85; Nat. State Bk. 
 v. Vigo Bk., 141 Ind. 352. See 
 Crump ». U. S. Mining Co., 7 Gratt. 
 352; Dawes b. North River Ins. Co., 
 7 Cow. 462; Hodges v. Rutland, etc., 
 R. R. Co., 29 Vt. 220; Calteaux v.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 236. 
 
 ity cannot borrow money and bind the corporation to repay it ; a 
 nor can he mortgage corporate property, or confess judgment 
 on behalf of the corporation ; 2 nor has he authority to begin 
 an action in the name of the corporation, 3 or employ counsel. 4 
 Neither has the president of a railroad corporation power to 
 appoint an agent to sell its lands ; and sales made by an agent 
 appointed by the president will not bind the corporation ; 5 nor 
 has the president authority himself to sell lands of the corpo- 
 ration. 6 Likewise, the president of an insurance company has 
 no authority ex officio to indorse and negotiate a note belonging 
 to it. 7 And when by the charter the management is intrusted 
 to the board of directors, the president and cashier, unless 
 specially authorized, have no power to assign choses in action 
 of the corporation in payment of an antecedent debt, or to do 
 any act requiring the use of the corporate seal, 8 and the lack of 
 authority in the affixing of the seal may be shown by the cor- 
 
 Muller, 102 Wis. 525. But compare 
 Hayiier v. Am. Popular Life Ins. 
 Co., 3 J. & Sp. (X. Y.) 266; Eureka 
 Iron Works v. Bresuaban, 60 Mich. 
 332. 
 
 1 Life and Fire Ins. Co. v. Mechanic 
 Fire Ins. Co., 7 Wend. 31; Fifth Ward 
 Savings Bk. v. First Nat. Bk., 47 
 N. J. L. 357. See City El. Ry. Co. v. 
 Nat. Bk., 62 Ark. 33. In an action 
 against an incorporated bank, decla- 
 rations or admissions of its presi- 
 dent are not admissible to establish 
 liability against it. Henry v. North- 
 ern Bank, 63 Ala. 527. See Hodge 
 v. First Nat. Bk., 22 Gratt. 51. 
 
 2 Stokes v. New Jersey Pottery Co., 
 46 N. J. L. 237; Benuett v. Keen, 59 
 N. J. Eq. 634; England v. Dearborn, 
 141 Mass. 590; Alta Silver M'g Co. v. 
 Mining Co., 78 Cal. 629; although he 
 own most of the stock; same cases. 
 
 8 Ashuelot Mfg. Co. v. Marsh, 1 
 Cosh. 507. But see American Ins. 
 Co. v. Oakley, 9 Paige, 496; Mumford 
 v. Hawkins, 5 Denio, 355. 
 
 4 Brightly v. Metairie Cemetery 
 Ass'n, 33 La. Ann. 58; see Bridge- 
 
 port Savings Bk. v. Eldridge, 28 
 Conn. 556; Pacific Bank o. Stone, 121 
 Cal. 202; and cases in the last note. 
 Contra, Coleman v. Oil Co., 25 W. Va. 
 148; Nat. Bk. v. Berry, 53 Kan. 696; 
 Beebe v. Beebe Co., 64 N. J. L. 497. 
 See Wetherbee v. Fitch, 117 111. 67. 
 Later cases recognize the authority 
 of a president to institute suit. Reno 
 Water Co. v. Leete, 17 Nev. 203; 
 Guernsey v. Coal Co., 99 Iowa, 471. 
 
 5 Chicago, etc., R. R. Co. v. James, 
 22 Wis. 194. 
 
 6 Bliss v. Kaweah Co., 65 Cal. 502; 
 McKeag v. Collins, 87 Mo. 164. 
 
 7 Marine Bank v. Clements, 3 Bos. 
 (N. Y.) 600. But see Clark v. Tit- 
 comb, 42 Barb. 122; Scott v. John- 
 son, 5 Bos. (N. Y.) 213. 
 
 8 Hoyt v. Thompson, 5 N. Y. 320; 
 see England v. Dearborne, 141 Mass. 
 590; Norton v. Ala. Nat. Bk., 102 Ala. 
 420. Compare Hadden u. Linville, 
 86 Md. 210. But it is held that a 
 president may satisfy a judgment in 
 favor of the corporation. Booth v. 
 Farmers and Mechanics 1 Nat. Bk., 
 50 N. Y. 396. 
 
 199
 
 § 236.] THE LAW OF I'KIVATK CORPORATIONS. [CHAP. Vlt. 
 
 poration. 1 An agreement, moreover, by the president and 
 cashier of a bank, that the indorser of a promissory note shall 
 not be liable to the bank on his indorsement, is invalid. 2 In- 
 deed, in a case where a respected court held a president incom- 
 petent to authorize a director to sell bonds of the corporation, 
 the learned judge giving the opinion said : " In the absence of 
 anything in the act of incorporation bestowing special power 
 on the president, he has from his mere official station no more 
 control over the corporate property and funds than any other 
 director. The affairs of corporate bodies are within the exclu- 
 sive control of their boards of directors, from whom authority 
 to dispose of their assets must be derived." 3 
 
 1 Koeliler v. Black River Falls Iron 
 Co., 2 Black. 715; Hoyt v. Thompson, 
 5 N. Y. 320. 
 
 2 Bank of the United States v. 
 Dunn, 6 Pet. 51; Bauk of the Metro- 
 polis y. Jones, 8 Pet. 12; First Nat. 
 Bk. v. Tisdale, 18 Hun, 151. See 
 United States v. City Bauk, 21 How. 
 356; Hodge ». First Nat. Bk., 22 
 Gratt. 51. Compare Booth v. Farm- 
 ers and Mechanics' Nat. Bk., 50 N. Y. 
 390; First Nat. Bk. v. Kimherlands, 
 16 W. Va. 555. One who is presi- 
 dent and general manager of an in- 
 surance company has no authority 
 to hind it by an accommodation in- 
 dorsement. Aetna Nat. Bk. v. Insur- 
 ance Co., 50 Conn. 167; Dobson v. 
 Moore, 164 111. 110; or by an accom- 
 modation acceptance of a draft. 
 National Bank v. Knitting Works, 
 68 Mich. 620. A president and treas- 
 urer of a savings hank has no implied 
 power to purchase building mate- 
 rials. Slattery v. North End Savings 
 Bank, 175 Mass. 380. 
 
 3 Titus o. Cairo and Fulton R. R. 
 Co., 37 N. J. L. 98, 102, per Van 
 Syckel, J. Ace. Wickersham v. Crit- 
 tenden, 93 Cal. 17, 30; Lyndon Mill 
 Co. v. Lyndon Ins'n, 63 Vt. 581. See 
 Fulton Bank v. New York Sharon 
 Coal Co., 4 Paige, 127, 134; Brush 
 Elec. L. & P. Co. v. Montgomery, 
 
 200 
 
 114 Ala. 433; Des Moines M. & S. Co. 
 v. Tilford M. Co., 9 S. Dak. 542; and 
 Walworth County Bank v. Farmers' 
 Loan and Trust Co., 14 Wis. 325, 
 where it was held that a president 
 could not give a valid bill of sale for 
 railroad ties in payment of an ante- 
 cedent debt of his corporation. See, 
 also, LTnion Gold Mining Co. i\ Rocky 
 Mountain Nat. Bank, 2 Col. 565. 
 
 The affairs of the bank being by 
 statute placed in hands of directors, 
 the president and cashier have not 
 power together, virtute officii, to sell 
 the safe of a bank for an antecedent 
 debt. Asher v. Sutton, 31 Kan. 286. 
 
 The president of a corporation or- 
 ganized under the New York Act of 
 1848 cannot bind it by the purchase 
 of goods required in its business, 
 when a resolution forbidding such 
 acts appears on the corporate books, 
 although the seller had no notice of 
 it. There was no regular course of 
 business in the corporation to the 
 contrary, by which the president 
 had habitually made such purchases. 
 Westerfield v. Radde, 7 Daly, 326. 
 A president of a railroad company 
 has no authority to consent that a 
 (municipal) subscription absolute 
 on its face shall become conditional. 
 Morgan County v. Thomas, 76 111. 
 120.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 238. 
 
 § 237. It is submitted, however, that the above decisions are 
 to be relied on with great caution ; for presidents of 
 corporations are usually empowered either expressly, {f nl c rg ? d 
 or impliedly by acquiescence and the nature and 
 course of the business which they transact for their corporations, 
 to do many acts which, according to any rule deducible from 
 these cases, would be beyond their authority. Very likely in 
 order that the agreement of a president may bind the corpora- 
 tion, the agreement must in some way be shown to have been 
 within the scope of his authority ; x but this may be shown from 
 the general course of his acts acquiesced in by the corporation 
 or its directors. 2 
 
 § 238. When a president is authorized to make contracts for 
 the corporation, he receives impliedly the power to do acts in- 
 cidentally necessary in the matter. 3 Thus, a president em- 
 powered to sell property of his corporation, may agree to pay 
 a broker a commission. 4 So, a resolution of the board of 
 directors that the president have full power and control of the 
 
 1 Farmers Bank v. McKee, 2 Pa. St. 
 318. 
 
 2 Ragland v. McFall, 137 111. 81; 
 Fitzgerald Construction Co. v. Fitz- 
 gerald, 137 U. S. 98; Fifth Nat. Bk. v. 
 Phosphate Co., 119 N. Y. 256; Oakes 
 v. Water Co., 143 N. Y. 430; Cham- 
 bers b. Lancaster, 160 N.Y. 342; Petti- 
 bone v. Lake View Town Co., 134 
 Cal. 227; Tuscaloosa Cotton Seed Oil 
 Co. 13. Perry, 85 Ala. 158; Burch v. 
 West, 134 111. 258; Sherman Center 
 Town Co. v. Swigart, 43 Kan. 292; 
 Sparks v. Dispatch Co., 104 Mo. 531; 
 Fitzhugh v. Land Co., 81 Tex. 306; 
 Dougherty v. Hunter, 54 Pa. St. 380; 
 McElroy v. Minn. P. H. Co., 96 Wis. 
 317; Africa v. Duluth Tribune Co., 
 82 Minn. 283. See Westerfield v. 
 Radde, 7 Daly (N. Y.), 326; Western 
 R. R. Co. v. Bayne, 11 Hun, 166; 
 Solomon R. R. Co. v. Jones, 30 Kan. 
 601; Nash v. Minn. Title, etc., Co., 
 159 Mass. 438. The president and 
 superintendent of a boom company 
 have authority to hire laborers. 
 
 Hardy v. Boom Co., 52 Mich. 45; 
 Vilas Nat. Bk. v. Strait, 58 Yt. 448. 
 
 When a president, who is also the 
 general manager of the corporate 
 business, mortgages personal prop- 
 erty of the corporation without spe- 
 cial authority, the acquiescence of 
 the directors may make the mortgage 
 valid. Sherman v. Fitch, 98 Mass. 
 59. Compare Crum's Appeal, 66 Pa. 
 St. 474; Edellioff v. Horner & Miller 
 M'f'g Co., 86 Md. 595; § 212. 
 
 3 A president of a corporation who 
 has general authority to contract for 
 the sale of its goods, has authority to 
 release from contract of sale. In- 
 dianapolis Rolling Mill v. St. Louis, 
 etc., R. R. Co., 120 U. S. 256. See, 
 also, Ceeder v. Lumber Co., 86 Mich. 
 541; Smith v. Wells M'f'g Co., 148 
 Ind. 333. 
 
 4 Northern Central R'y Co. v. Bas- 
 tian, 15 Md. 494; Lee v. Pittsburg, 
 Coal Co., 56 How. Pr. 373, affirmed 
 75 N. Y. 601. Under a power given 
 to the president of a turnpike com- 
 
 201
 
 238.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 corporate business, authorizes him to purchase materials to be 
 used in its business, and to borrow money for the corporation, 
 giving its note for the loan. 1 Indeed, the custom of investing 
 presidents with extensive powers is so general as to have ob- 
 tained judicial recognition in at least one state, Illinois, where 
 the following language was used by the judge giving the opinion 
 of the court in Smith v. Smith : a "In absence of legislative 
 enactment or provision made in the by-laws, corporations us- 
 ually act through their president, or those representing him. 
 He being the legal head of the body, when an act pertaining 
 to the business of the company is performed by him, the pre- 
 sumption will be indulged that the act is legally done, and is 
 binding upon the body. And, as a general rule, in the absence 
 of the president, or when a vacancy occurs in the office, the 
 vice-president may act in his stead, and perform the duties 
 which devolve upon the president." 3 
 
 pany to mortgage the road, he may 
 mortgage a part thereof. Greens- 
 burg, etc., Co. v. McCormick, 45 Ind. 
 239. Where process can be served 
 on the president, he can confess judg- 
 ment for the corporation. Cliam- 
 
 thority, mortgage its personal prop- 
 erty. Luse v. Isthmus Transit R'y 
 Co., 6 Oreg. 125. 
 
 2 62 111. 493, 496. See, also, Mitch- 
 ell v. Deeds, 49 111. 410, 424; Union 
 Mutual Ins. Co. v. White, 106 111. 
 
 berlin v. Mammoth M'g Co., 20 Mo. 07; Glover v. Lee, 140 111. 102; Fitch 
 96. Sed queer e. j o. Constantino Hydraulic Co., 44 
 
 1 Castle v. Belfast Foundry Co., Mich. 74; Gooduow v. Oakley, 68 
 72 Me. 167; Siebe v. Machine Works, Iowa, 25; Morse v. Beale, 68 Iowa, 
 86 Cal. 390. Quwre, as to the extent j 463; Mathias v. White Sulphur 
 to which such a sweeping resolution Springs Assn., 19 Mont. 359. 
 
 would be valid in view of the re- 
 stricted competency of directors to 
 delegate their powers, see §§ 233, 
 234. A by-law providing that the 
 "president shall have the general 
 charge and direction of the business 
 of the company, as well as all mat- 
 ters connected with the interests and 
 objects of the corporation," does 
 not give him authority in matters 
 expressly confided to the finance 
 committee. Twelfth Street, Market 
 Co. v. Jackson, 102 Pa. St. 269. 
 
 It has, however, been held that a 
 president who was the "business 
 and financial agent'* of the corpora- 
 tion, could not, without further au- 
 
 :! This case upheld, as against a 
 subsequent purchaser under a tax 
 sale, a deed of corporate lauds exe- 
 cuted by the vice-president, during 
 a vacancy in the presidency, under a 
 resolution authorizing the president 
 to convey the property. Compare, 
 also, Curry v. Supervisors of Decatur 
 County, 61 Iowa, 71. When a con- 
 tract made by a president is one 
 which the directors might properly 
 have authorized him to make, the 
 burden of proof is on the corporation 
 to show that the directors had not 
 authorized or acquiesced in it. Pat- 
 terson v. Robinson, 116 N. Y. 193. 
 
 202 
 
 4rf
 
 PART n.] ACTS WITHIN THE CORPORATE POWERS. [§ 240. 
 
 of a cash- 
 ier. 
 
 § 239. Fully as important in his functions as a president is 
 the cashier of a bank or other moneyed corporation. A h . 
 The cashier is the financial officer of the bank, hav- 
 ing, in accordance with general custom, authority to 
 transact its ordinary current business, 1 and in the performance 
 of his duties his acts bind the bank. 2 As Justice Story said, in 
 Wild v. Bank of Passamaquoddy : 3 " The cashier of a bank is, 
 virtute officii, generally intrusted with the notes, securities, and 
 other funds of the bank, and is held out to the world by the 
 bank as its general agent in the negotiation, management, and 
 disposal of them. Prima facie, therefore, he must be deemed 
 to have authority to transfer and indorse negotiable securities 
 held by the bank for its use, and in its behalf. No special au- 
 thority for this purpose is necessary to be proved. If any bank 
 choose to depart from this general course of business, it is cer- 
 tainly at liberty so to do ; but in such case it is incumbent on 
 the bank to show that it has interposed a restriction, and that 
 such restriction is known to those with whom it is in the habit 
 of doing business." 4 
 
 § 240. Accordingly, a bank will be liable to an outsider act- 
 ing in good faith, for the contracts as well as for the frauds of 
 its cashier made or committed while acting within the ordinary 
 
 1 It is not negligent for a bank to 
 intrust its cashier to select and pay 
 out of his salary all the clerks and 
 other servants employed in the bank- 
 ing room ; no negligence appearing 
 in the selection of the cashier. Smith 
 o. First National Bank, 99 Mass. 605. 
 
 2 Lloyd v. West Branch Bank, 15 
 Pa. St. 172 ; First Nat. Bk. of Bir- 
 mingham v. First Nat. Bk. of New- 
 port, 116 Ala. 520. 
 
 3 3 Mason, 505, 506. 
 
 4 See, also, State v. Commercial 
 Bank, 14 Miss. 218. That a cashier 
 has authority to transfer and indorse 
 negotiable paper belonging to his 
 bank is undoubted. City Bank v. 
 Perkins, 29 N. Y. 554 ; Hartford 
 Bank v. Barry, 17 Mass. 94. See 
 Caldwell v. Nat. Mohawk Valley 
 Bank, 64 Barb. 333 ; Robb v. Ross 
 
 County Bank, 41 Barb. 586 ; Burn- 
 ham v. Webster, 19 Me. 234 ; Potter 
 v. Merchants' Bank, 28 N. Y. 641. 
 Cf. Re Assignment of Bank of Ore- 
 gon, 32 Or. 84. Likewise a cashier 
 has general authority to superintend 
 the collection of notes under pro- 
 test. Bank of Pennsylvania v. Reed, 
 1 Watts & S. 101. 
 
 Where a vice-president who was 
 also a director, with the knowledge 
 of the president and the cashier, but 
 without notice to the board of direct- 
 ors, guarantees on behalf of the bank 
 the payment of a note belonging to 
 it, the bank, by using the proceeds 
 of the note, renders the act of the 
 vice-president as binding as if ex- 
 pressly authorized. People's Bank 
 ». National Bank, 101 U. S. 181. See, 
 also, Hutchins v. Bank, 128 N. C. 72. 
 
 203
 
 § 240.] THE LAW OP PRIVATE CORPORATIONS. [CHAP. VII. 
 
 scope of the powers and duties pertaining to his office, 1 or 
 within the scope of such further authority as may have been 
 conferred on him by the constitution of the bank, or by the 
 action or acquiescence of the directors or shareholders. 2 Con- 
 sequently, notice to the cashier in regard to the ordinary busi- 
 ness dealings of the bank is notice to it; 3 and it is affected 
 with the knowledge of its cashier who takes a note knowing 
 
 1 See e. g., Phillips v. Mercantile 
 Nat. Bank, 140 N. Y. 556. A cashier 
 h;is the implied power to borrow on 
 behalf of his bank and pledge its 
 property to secure the repaymeut of 
 the loan. Coats v. Donnell, 94 N. Y. 
 168. In order to show a cashier's 
 authority to borrow for his bank, 
 special power from the directors is 
 not essential. His acts in the ordi- 
 nary course of his employmeut are 
 evidence. Ringling v. Kohn, 6 Mo. 
 App. 333; Donnell v. Lewis County 
 Savings Bank, 80 Mo. 165. Sernble 
 contra, West. Nat. Bk. v. Armstrong, 
 152 U. S. 346; First Nat. Bk. of 
 Corunna v. Michigan City Bk., 8 
 N. Dak. 608. But see Aldrich v. 
 Chemical Nat. Bk. 176 U. S. 618, 
 distinguishing Western Nat. Bk. v. 
 Armstrong, 152 U. S. 346. The cash- 
 ier of a bank as its executive officer 
 has authority to take such measures 
 as he deems proper for the securing 
 and eventual collection of a debt, 
 and to compromise a debt according 
 to the course of business. Briden- 
 becker ». Lowell, 32 Barb. 9; see 
 Wakefield Bank v. Truesdell, 55 
 Barb. 602. But see Sandy River Bank 
 v. Merchants', etc., Bank, 1 Biss. 146. 
 The fact that a cashier of a national 
 bank, at the time of receiving a de- 
 posit, makes an agreement that the 
 bank shall invest the same in stocks 
 and bonds, is no defence to an ac- 
 tion to recover the money without 
 interest, even though the agreement 
 was invalid, and the money was in 
 fact appropriated by the cashier. 
 
 204 
 
 L'Herbette v. Nat. Bk., 162 Mass. 
 137; see, Hanson v. Heard, 69 N. H. 
 190. 
 
 It is, in general, within the au- 
 thority of a cashier to sign a blank 
 transfer on a certificate of stock 
 held by the bank as collateral se- 
 curity, and to deliver the certificate 
 to the pledgor; and thus signing a 
 transfer warrants the genuineness 
 of the certificate, so that a bona fide 
 transferee for value from the fraudu- 
 lent pledgor can hold the bank liable. 
 Matthews v. Massachusetts Nat. Bk. 
 1 Holmes, 396. So a bank was held 
 liable where a cashier negotiated, 
 through an agent, a certificate of de- 
 posit, although no deposit had been 
 made and the cashier embezzled the 
 proceeds of the transaction. Barnes 
 v. Ontario Bank, 19 N. Y. 152. Com- 
 pare Reynolds u. Kenyon, 43 Barb. 
 515; Mapes ». Second Nat. Bk., 80 
 Pa. St. 163; Foster v. Essex Bk., 17 
 Mass. 479 ; State v. Atherton, 40 Mo. 
 209; Morris Canal, etc., Co. v. Van 
 Vorst, 21 N. J. L. (1 Zab.) 100; Lor- 
 ing r. Brodie, 134 Mass. 453. 
 
 2 Thus, when the cashier has gen- 
 eral charge of stock transfers, his 
 acts in regard thereto bind the hank, 
 which will be liable for his wrong- 
 ful refusal to permit a transfer. 
 Case v. Bank, 100 U. S. 446; see Na- 
 tional Bank v. Watsontown Bank, 105 
 U. S. 217. Cf. Wing v. Bank, 103 
 Mich. 565. 
 
 3 New Hope, etc., Bridge Co. v. 
 Phoenix Bank, 3 N. Y. 156; Harris v. 
 Am. B. & L. Assn., 122 Ala. 545;
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 24] . 
 
 the same to have had a fraudulent inception. 1 Accordingly, if 
 a cashier takes securities for his bank from a trustee to secure 
 a loan made to the trustee individually, knowing that the trus- 
 tee holds them in trust, the bank is affected with the knowledge 
 of its cashier. 2 
 
 § 241. But the duties and powers of a cashier, as recognized 
 judicially, are restricted to the transaction of the 
 ordinary business of the bank and to the care and p^ifr^ 
 management of its affairs in the usual way. 3 Thus, strictedto 
 
 . „ ... transac- 
 
 tbe cashier (and president) of a bank cannot bind it tion of 
 by their agreement with an indorser of a promissory business. 
 note that he shall not be liable to the bank on his in- 
 dorsement. 4 The cashier has no power to bind his bank as an 
 accommodation indorser on his individual note; and the payee 
 failing to prove that the cashier had authority to make the in- 
 dorsement cannot recover against the bank. 5 Likewise a cashier 
 
 Bank v. Penland, 101 Tenn. 445. As 
 to declarations of cashier, see Xenia 
 Bank ». Stewart, 114 U. S. 224. 
 
 1 Fall River Union Bk. v. Sturte- 
 vant, 12 Cash. 372. So, by the knowl- 
 edge of a director who takes a note. 
 Nat. Sec'y Bank v. Cushman, 121 
 Mass. 490. 
 
 2 Loring v. Brodie, 134 Mass. 453. 
 
 8 First Nat. Bank v. Ocean Nat. 
 Bank, 60 N. Y. 278. The word " or- 
 dinary," as here used, will be seen to 
 be more restricted in its meaning 
 than as applied to transactions falling 
 within the powers of directors. See 
 §223. 
 
 *Bank of the U. S. ». Dunn, 6 
 Pet. 51; Bank of the Metropolis v. 
 Jones, 8 Pet. 12. See Cocheco Nat. 
 Bank v. Haskell, 51 N. H. 116. Com- 
 pare Payne v. Commercial Bank, 6 
 Smedes & M. 24; Hodge v. First Nat. 
 Bank, 22 Gratt. 51; Ryan v. Dunlop, 
 17 111. 40. So, the plea that before 
 indorsing, the cashier and a director 
 falsely and fraudulently assured the 
 indorser that the drawer was good, 
 and that it would be safe to indorse, 
 
 is bad; as such representations are 
 not within the course of the duties of 
 such officers, and therefore, though 
 wilfully false, will not affect the 
 rights of the bank. Mapes v. Second 
 Nat. Bank, 80 Pa. St. 163. "A 
 cashier, as such, has no power to ac- 
 cept a note signed by two parties 
 only, in payment and discharge of a 
 note upon which another party was 
 also bound with the two, so as to 
 relieve such third party from his 
 indebtedness to the bank. Such an 
 act does not fall within the well- 
 known range of powers and duties 
 naturally and necessarily pertaining 
 to the office of cashier. He cannot 
 virtute officii release a surety upon a 
 note even though the bank holds 
 other security to which it might re- 
 sort, nor make collateral contracts or 
 agreements of any kind." Ecker v. 
 First Nat. Bank, 59 Md. 291, 303. A 
 cashier has no authority to release a 
 debt. Delta Lumber Co. v. Williams, 
 73 Mich. 86. 
 
 5 West St. L. Savings Bank v. 
 Shawnee County Bank, 95 U. S. 557. 
 205
 
 § 241.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 cannot on behalf of his bank guarantee the performance of a 
 contract by an outsider in which the bank had no interest. 1 
 
 And it was held in United States v. City Bank of Columbus 2 
 that a cashier had no authority to empower a director to con- 
 tract with the secretary of the treasurer for the transportation 
 of moneys belonging to the United States, and consequently 
 that the bank was not liable to reimburse money delivered by 
 the secretary to the director in pursuance of such contract. Giv- 
 ing the opinion of the court, Justice Wayne said : " In the case 
 of Bank of the United States v. Dunn (6 Pet. 51) the court 
 would not permit the president and cashier of the bank to bind 
 it by their agreement with the indorser of a promissory note 
 that he should not be liable on his indorsement. It said it is 
 not the duty of the cashier and president to make such con- 
 tracts, nor have they power to bind the bank except in the dis- 
 charge of their ordinary duties. All discounts are made under 
 the authority of the directors, and it is for them to fix any con- 
 ditions which they may think proper in loaning money. The 
 court defines the cashier of a bank to be an executive officer, by 
 whom its debts are received and paid, and its securities taken 
 and transferred, and that his acts, to be binding upon a bank, 
 must be done within the ordinary course of his duties. His 
 ordinary duties are to keep all the funds of the bank, its notes, 
 bills, and other choses in action, to be used from time to time 
 for the ordinary and extraordinary exigencies of the bank. He 
 usually receives directly, or through the subordinate officers of 
 the bank, all moneys and notes of the bank, delivers up all dis- 
 counted notes and other securities when they have been paid, 
 draws checks to withdraw the funds of the bank when they 
 have been deposited, and, as the executive officer of the bank, 
 transacts most of its business. 
 
 " The term ordinary business with direct reference to the 
 duties of cashiers of banks occurs frequently in English cases, 
 and in the reports of the decisions of our state courts, and in 
 no one of them has it been judicially allowed to comprehend a 
 contract made by a cashier, without an express delegation of 
 
 A cashier cannot certify his own I x Norton v. Derby Nat. Bank, 61 
 check. Lee v. Smith, 84 Mo. 304. N. H. 589. 
 Compare People's Bank v. Nat. Bank, 2 21 How. 356. 
 101 U. S. 181; §239. ' 
 
 206
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 241. 
 
 power from a board of directors to do so, which involves the 
 payment of money, unless it be such as has been loaned in the 
 usual aud customary way. Nor has it ever been decided that 
 a cashier could purchase or sell the property, or create an 
 agency of any kind for a bank, which he had not been author- 
 ized to make by those to whom has been confided the power to 
 manage its business, both ordinary and extraordinary." l In a 
 recent case the Federal Supreme Court expressed its views re- 
 garding the powers of a cashier substantially as follows : Al- 
 though a cashier has no power by virtue of his office to bind 
 the bank, except in the discharge of his ordinary duties, and 
 the ordinary business of a bank does not comprehend a con- 
 tract made by a cashier involving the payment of money not 
 loaned by the bank in the customary way, and a cashier may 
 not, in the absence of authority conferred by the directors, can- 
 cel its deeds of trust given as security for money loaned, cer- 
 tainly not, unless the debt is paid ; still a bank may be repre- 
 sented by its cashier, at least where its charter does not other- 
 wise provide, in transactions outside of his ordinary duties, 
 without his authority to do so being in writing or appearing 
 upon the record of the proceedings of the directors. His au- 
 thority may be proved by parol and collected from circum- 
 stances, or inferred from the general manner in which, for a 
 period sufficiently long to establish a settled course of business, 
 he has been allowed without interference to conduct the af- 
 fairs of the bank. It may be implied from the conduct or ac- 
 quiescence of the corporation, as represented by the board of 
 directors. When during a series of years, or in numerous busi- 
 ness transactions, he has been permitted, without objection, 
 and in his official capacity, to pursue a particular course of con- 
 duct, it may be presumed, as between the bank and those who 
 in good faith deal with it upon the basis of his authority to 
 represent the corporation, that he has acted in conformity 
 
 1 United States v. City Bank, 21 
 How. 364. Without authority from 
 the bank, evidenced by a resolution 
 of the board of directors, usage in 
 similar cases, or in some other way, a 
 cashier has no authority to assigu a 
 non-negotiable note. Barrick v. Aus- 
 tin, 21 Barb. 241; Holt v. Bacon, 25 
 
 Miss. 567. But see Bank of Ver- 
 gennes v. Warren, 7 Hill, 91. Nor 
 to pledge assets of the bank for the 
 payment of an antecedent debt. 
 State of Tennessee v. Davis, 50 How. 
 Pr. ( N. Y. ) 447. Nor to release the 
 bank's security. Ellis v. First Nat. 
 B'k of Woonsocket, 22 R. I. 565. 
 
 207
 
 § 243.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 with instructions received from those who have the right to 
 control its operations. 1 
 
 § 242. In concluding the discussion of the powers of cashiers, 
 it will be convenient to consider the liability of banks Certifica . 
 on checks certified by the cashier, or, as nowadays is ti,,n i,f 
 
 checks. 
 
 more usual, by the paying teller. 2 
 
 § 243. The leading case on the power of a cashier to certify 
 checks is Merchants' Bank v. State Bank. 3 That case decided 
 that if a cashier is shown to have frequently pledged in writing 
 the credit of his bank for large amounts in the usual course of 
 business, with the knowledge of the directors — borrowing and 
 lending its money, and buying and selling exchange — doing all 
 this usually on the cashier's own checks, though sometimes by 
 certificates of deposit, and sometimes by memoranda, the trans- 
 actions being uniformly made on the faith of the implied powers 
 of the cashier, without inquiry as to special authorization, and 
 such is shown to be the usage of other banks, this is evidence 
 from which a jury may infer that the cashier is authorized to 
 pledge the bank's credit by certifying a check to be " good ; " 
 even though it is not shown that any cashier of any bank in 
 the place where the transaction occurred ever made such a cer- 
 tification. In this case the certified check was given by the 
 cashier of the defendant bank to the cashier of the plaintiff 
 bank, on receipt by the defendant's cashier from the plaintiffs 
 cashier of the equivalent of the check in gold. Whether the 
 gold actually went into the defendant bank did not appear; 
 but the plaintiff bank acted in entire good faith, and the cir- 
 cumstances of the transaction warranted the assumption that 
 the gold was destined for the defendant bank. Giving the opin- 
 ion of the majority of the court, Justice Swayne said : 4 "The 
 cashier is the executive officer, through whom the whole finan- 
 cial operations of the bank are conducted. He receives and 
 
 i Martin v. Webb, 110 U. S. 71, 
 which held that the cancellation by 
 the cashier of trust deeds belonging 
 to the hank, without receiving for it 
 payment in full, bound the bank un- 
 der the circumstances. A cashier 
 has no authority to assign discount- 
 ed bills and notes to a depositor in 
 
 208 
 
 payment of his deposit. Lamb v. 
 Cecil, 25 W. Va. 288. 
 
 2 The liability of banks for special 
 deposits and for the frauds or felon- 
 ies of their cashiers regarding the 
 same, is discussed in §§ 161, 337. 
 
 3 10 Wall. 604. 
 * 10 Wall. 650.
 
 PART H.] ACTS WITHIN THE CORPORATE POWERS. [§ 244. 
 
 pays out its moneys, collects and pays its debts, and receives 
 and transfers its commercial securities. Tellers and other sub- 
 ordinate officers may be appointed, but they are under his di- 
 rection, and are, as it were, the arms by which designated por- 
 tions of his various functions are discharged. A teller may 
 be clothed with the power to certify checks, but this in itself 
 would not affect the right of the cashier to do the same thing. 
 The directors may limit his authority as they deem proper, but 
 this would not affect those to whom the limitation was un- 
 known." 
 
 § 244. It has been held in Massachusetts that a teller has no 
 authority, by virtue of his office, to certify a check ; ' but at 
 present for tellers to certify checks seems to be a general cus- 
 tom, which obtains recognition in the courts. 2 Neither 
 a cashier nor a teller, however, has power to certify, 
 unless the drawer has funds in the bank sufficient to 
 cover ; and no person knowing the drawer not to have 
 funds in the bank can recover on the certification. 3 
 But a bona fide holder for value of a certified check without 
 notice can hold the bank on its teller's certification, although 
 the drawer had no funds in the bank at the time, and the teller 
 certified the check in violation of his duty for the mere accom- 
 modation of the drawer ; 4 for a person is entitled to assume that 
 the facts exist on which depends the right of the teller or 
 cashier to exercise his powers ; and may presume that such 
 officers are doing, not violating, their duty. As Judge Selden 
 
 Certifica- 
 tion by 
 teller. 
 Accommo- 
 dation cer- 
 tifications. 
 
 1 Mussey v. Eagle Bank, 9 Mete. 
 (Mass. ) 306. 
 
 2 See Farmers and Mechanics' Bank 
 v. Butchers and Drovers 1 Bank, 16 
 N. Y. 125. 
 
 3 F. and M. Bank v. B. and D. 
 Bank, 16 X. Y. 125; S. C, 14 N. Y. 
 623. A bank is usually not author- 
 ized to make an accommodation in- 
 dorsement, and is not liable to any 
 one taking the paper with notice of 
 the character of the indorsement. 
 Bank of Genesee v. Patchin Bank, 
 13 N. Y. 309; Morford r, Farmers' 
 Bank, 26 Barb. 568. Compare Na- 
 tional Park Bank o. Warehousing 
 
 14 
 
 Co., 116 N. Y. 281. Other corpora- 
 tions as well as banks have no au- 
 thority to make accommodation en- 
 dorsements. Carney v. Duniway, 
 35 Or. 131. That a cashier has no 
 power to certify unless in funds is 
 presumed to be known generally; 
 and that a postdated check was cer- 
 tified before the day on which it was 
 payable, is a fact sufficient to put 
 any one with knowledge of it on his 
 inquiry. Clarke Nat. Bank v. Bank 
 of Albion, 52 Barb. 592. See Pope 
 v. Bank of Albion, 57 N. Y. 126. 
 
 *F. and M. Bank r. B. and D. 
 Bank, supra. 
 
 209
 
 § 245.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 said, giving the opinion of the court in Farmers and Mechanics' 
 Bank v. Butchers and Drovers' Bank: 1 "A citizen who deals 
 directly with a corporation, or who takes its negotiable paper, 
 is presumed to know the extent of its corporate powers. But 
 when a paper is upon its face in all respects such as the corpo- 
 ration has authority to issue, and its only defect consists in 
 some extrinsic fact, such as the purpose or object for which it 
 was issued, to hold that the person taking the paper must in- 
 quire as to such extraneous fact, of the existence of which he 
 is in no way apprised, would obviously conflict with the whole 
 policy of the law in regard to negotiable paper." 2 
 
 § 245. By certifying a check in the usual form a bank cer- 
 tifies to the genuineness of the drawer's signature, 
 represents that he has funds in the bank sufficient to 
 meet the check, and engages that those funds shall 
 not be withdrawn by him to the prejudice of any 
 bona fide holder of the check. But the certification is not an 
 absolute guaranty that the body of the check — the amount and 
 name of the payee — is genuine ; nor is it a guaranty that at all 
 events the precise check certified shall be paid from funds of 
 the drawer in the bank, or at all. 3 Therefore, when a bank cer- 
 tifies a check which was raised before certification (the bank 
 not being negligent in the matter) it cannot in consequence of 
 its certification be held to pay the amount of the raised check ; 
 and when, without negligence, a bank pays the amount of a 
 raised check which it has certified, it can recover the money 
 thus paid as money paid by mistake. 4 So, if subsequently to 
 the certification the check is raised, and then sent by some one 
 
 Effect of a 
 certifica- 
 tion. 
 
 " Raised " 
 checks. 
 
 1 16 N. Y. 129. 
 
 2 Ace. Meads v. Merchants' Bank, 
 25 N. Y. 143; Cooke v. State Nat. 
 Bank, 52 N. Y. 96. 
 
 A corporation is bound by its ac- 
 commodation indorsement to a bona 
 fide holder for value of a note, who 
 discounts it before maturity on the 
 faith of its being business paper. 
 Mechanics' Banking Ass'n v. New 
 York, etc., White Lead Co., 35 N. Y. 
 505. 
 
 3 See, e. <y., Goshen Nat. B'k v. 
 Bingham, 118 N. Y. 349. 
 
 210 
 
 4 Clews v. Bank of New York, 89 
 N. Y. 418; Marine Nat. Bank v. Nat. 
 City Bauk, 59 N. Y. 67; Security 
 Bank v. Nat. Bank, 67 N. Y. 458; 
 Espy v. Bank of Cincinnati, 18 Wall. 
 604. See Nat. Bank of Commerce v. 
 Nat. Mechanics' B'k'g Ass'n, 55 
 N. Y. 211. Second Nat. Bank v. 
 Western Nat. Bank, 51 Md. 128; and 
 compare Helwege v. Hi hernia Nat. 
 Bank, 28 La. Ann. 520. But see, 
 contra, Louisiana Nat. Bank v. Citi- 
 zens' Bank, 28 La. Ann. 189.
 
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 246. 
 
 to the bank to ascertain whether the certification is correct, and 
 the teller says that it is, this answer will cover no more than 
 the certification of a check already raised would have covered, 
 and will not render the bank liable to pay the amount of the 
 check. 1 
 
 § 246. The legal effect is similar when an uncertified check 
 is sent to the bank for information. The law presumes knowl- 
 edge on the part of the bank only of the drawer's signature 
 and the state of his account ; and a verbal statement that the 
 check is " good," or " all right," extends only to the matters of 
 which the bank is presumed to have knowledge, unless the 
 teller's attention is especially directed beyond those matters. 
 And if the bauk subsequently pays the check to the person 
 who sent it to the bank for information (or sernble to any one 
 else), it may recover back the money if the check turns out to 
 have been raised. For the general principle is that money 
 paid by mistake on a raised check ma\^ be recovered back. 2 
 
 1 Clews v. Bank of New York, 89 
 N. Y. 418. (See a criticism on this 
 case in the following note.) 
 
 2 Espy v. Bank of Cincinnati, 18 
 Wall. 604; Corn Exchange Bank v. 
 Nassau Bank, 91 N. Y. 74; Frank v. 
 Lanier, ib. 112. See § C72 for the 
 responsibility of a bank that pays a 
 check to which the drawer's or in- 
 dorsees signature is forged. 
 
 A teller is an ageut acting under a 
 special or express authority, and not 
 one so appointed by a principal that 
 there can arise any implication of 
 undefined powers; aud a teller's 
 statement that an indorsement on a 
 check is goodwill not bind the bank, 
 when the indorser is not a customer 
 of the bauk, aud the statement is 
 made at the request of a stranger, 
 and not in the ordinary course of de- 
 fendant's business. Walker o. St. 
 Louis Nat. Bank, 5 Mo. App. 214. 
 When there is a receiving as well as 
 a paying teller, the former alone has 
 authority, by virtue of his office, to 
 receive deposits. A paying teller 
 
 (when there is a receiving teller) in 
 receiving funds from a stranger upon 
 a promise to apply them in payment 
 of a bill or note; is the agent of the 
 stranger, not of the bank; and con- 
 sequently, the bank will not be liable 
 for a breach or neglect of the duty 
 which the teller assumes. Thatcher 
 v. Bauk of the State of N. Y., 5 Sand. 
 121 (said to have been affirmed in the 
 Court of Appeals). 
 
 The situation where a pei-son sends 
 an uncertified check to a bank to in- 
 quire whether it is good, as in Espy 
 v. Bank of Cincinnati, differs from 
 Clews o. Bank of New York in a 
 point that leads the writer to doubt 
 the correctness of the decision in the 
 latter case, in which, indeed, Judge 
 Danforth gave an able dissenting 
 opinion. Since the bank is presumed 
 to know only its depositor's signa- 
 ture and the state of his account, 
 anything further that a teller might 
 s ly in regard to an uncertified check 
 would presumably, as well as in the 
 nature of things, be merely the ex- 
 
 211
 
 CZorf3or<*~t<2, T^rWjrfJ^J^&s. 
 
 § 248.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Validity of 
 the acts of 
 corporate 
 agents as 
 dependent 
 on formali- 
 ties. 
 
 § 247. Having considered the powers of corporate agents and 
 the legal effect, between the corporation and persons 
 with whom they transact business, of their acts as 
 depending on their actual power, and on such power 
 as the corporation is estopped to deny that they pos- 
 sess, it is now necessary to consider the legal effect of 
 acts done on behalf of a corporation as depending on the 
 manner in which these acts are done, and on the observance 
 of formalities required or directed to be observed in doing 
 them. 1 
 
 The old common law notion that a corporation can 
 
 act only by deed under its corporate seal has long 
 
 since dropped from the law ; 2 and to-day a corporation 
 
 need use its seal only when it would be essential for 
 
 an individual to use one. 3 Accordingly, the use of the corpo- 
 
 §248. 
 
 Use of cor- 
 porate seal 
 
 pression of his opinion (e. y., as to 
 whether the check had been raised). 
 But when a certified check is sent to 
 the bank for information, the case is 
 different, as by turning to his book 
 the teller may ascertain whether on 
 the day when the check is dated he 
 certified a check for the drawer, for 
 the face of the check shown him. 
 If the teller had done this in the 
 Clews case, he would not only have 
 found that he had certified no such 
 check, but would also have seen an 
 entry made of a letter received by the 
 bank notifying it not to pay the 
 check which on that day it had cer- 
 tified for the drawer, which was the 
 check afterwards raised. The court 
 relied on the point that the bank 
 owed no duty to Clews & Co. in the 
 matter. But, admitting that the 
 bank was under no duty to Clews & 
 Co. to give them any information at 
 all, it still seems to the writer that, 
 since it did give them information, it 
 owed them the duty to take reason- 
 able care that the information was 
 correct. The teller ought to have 
 looked in his book. 
 
 In the above case, on subsequent 
 
 212 
 
 appeals, the plaintiff finally recov- 
 ered. Hence the proposition in the 
 the last sentence of § 245 of the text 
 is to be taken very narrowly; and 
 the grounds of the decision — that 
 the bank owed no duty to the plain- 
 tiffs — are hardly to be considered 
 law. See Clews v. Bank of New 
 York, 114 N. Y. 70; S. C, 105 N. Y. 
 398. 
 
 1 The manner in which the body 
 corporate should act is discussed, 
 § 184. 
 
 2 See Bank of Columbia v. Patter- 
 son, 7 Cranch, 299; Bank of U. S. v. 
 Dandridge, 12 Wheat. 04; Savings 
 Bank v. Davis, 8 Conn. 191; Flaherty 
 v. Atlantic Lumber Co., 58 N. J. Eq. 
 407; Dist. of Columbia v. Camden 
 In m Works, 181 U. S. 453. Cf. Pullis 
 r. Pullis, 157 Mo. 505. 
 
 3 Crawford v. Longstreet, 43 N. J. 
 L. 325; Allen v. City of Portland, 35 
 Or. 420. But see Williams Co. v. 
 U. S. Baking Co., 80 Md. 475. Com- 
 pare Amer. Sav. L. Assn. v. Smith, 
 122 Ala. 502. A scroll instead of the 
 corporate seal on a mortgage was 
 held to be sufficient iu Thayer v. 
 Nehalem Mill Co., 31 Or. 437.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 248. 
 
 rate seal is not essential to the valid appointment of an agent ;' 
 and a corporation may be bound by the oral or written con- 
 tracts of its agents, which are neither authorized nor executed 
 under the corporate seal. 2 Further, a contract may bind the 
 corporation although the officers making it use their private 
 seals. 3 But a contract so executed is not the deed of the cor- 
 poration ; and if suit is brought on it against the corporation in 
 a court where the old forms of action are preserved, the proper 
 action is assumpsit and not covenant;* while, if the contract 
 had been under the corporate seal, assumpsit would not lie. 5 
 Indeed not a few cases hold that a corporation may bind itself 
 in any way in which an individual can. 6 
 
 1 Bank of Columbia v. Patterson, 7 
 Cranch, 299, 305; Randall v. Van 
 Vechten, 19 Johns. 60; Reynolds v. 
 Collins, 78 Ala. 9-4; Leekins v. The 
 Nordyke, etc., Co., 66 Iowa, 471; 
 Bancroft v. Wilmington Conference 
 Acad., 5 Houst. (Del.) 577; Angell 
 and Ames on Corp., § 283. This 
 holds true, although the agent be 
 appointed to convey or mortgage real 
 estate of the corporation. Despatch 
 Line v. Bellamy M'f'g Co., 12 N. H. 
 205 ; Cook v. Kuhn, 1 Neb. 472 ; Fitch 
 v. Steam Mill Co., 80 Me. 84. 
 
 2 Fleckner v. U. S. Bank, 8 Wheat. 
 358; Bank of the Metropolis v. Gutts- 
 chlick, 14 Pet. 19; Chesapeake and 
 Ohio Canal Co. v. Knapp, 9 Pet. 541; 
 Trustees of Christian Church v. John- 
 son, 53 Ind. 273; Racine aud Miss. R. 
 R. Co. v. Farmers' Loan and Trust 
 Co., 49 111. 331; Hoag i\ Laraont, 
 60 N. Y. 96; Speirs v. Union Drop 
 Forge Co., 174 Mass. 175; Angell and 
 Ames on Corp., § 237. 
 
 Unless prohibited by statute or 
 other positive regulation, a valid 
 contract of insurance may be made 
 by parol. Relief Fire Ins. Co. v. 
 Shaw, 94 U. S. 574. 
 
 " Whenever a corporation is acting 
 within the scope of the legitimate 
 purposes of its institution, all parol 
 contracts made by its authorized 
 
 agents are express promises of the 
 corporation; and all duties imposed 
 on them by law, and all benefits con- 
 ferred at their request, raise implied 
 promises for the enforcement of 
 which an action may well lie." 
 Story, J., in Bank of Columbia v. 
 Patterson, 7 Cranch, 299. 
 
 3 Eureka Co. v. Bailey Co., 11 Wall. 
 488; Randall v. Van Vechten, 19 
 Johns. 60. See Whitford v. Laidler, 
 94 N. Y. 145, 151. 
 
 4 Bank of the Metropolis v. Gutts- 
 chlick, 14 Pet. 19; Whitford v. Laid- 
 ler, supra. The deed of a corpora- 
 tion can be proved only by proving 
 that the seal affixed is the seal of the 
 corporation, or that it was affixed as 
 the corporate seal by an officer of the 
 corporation or other person, there- 
 unto duly authorized. Osborne v. 
 Tunis, 25 N. J. L. (1 Dutch.) 633. 
 See, Dist. of Columbia v. Camden 
 Iron Works, 181 U. S. 453. 
 
 6 Marine Ins. Co. v. Young, 1 
 Cranch, 332. 
 
 6 Kelly v. Board of Public Works, 
 75 Va. 263; Blunt v. Walker, 11 Wis. 
 334. "Corporations, with the ex- 
 press and substantive powers con- 
 ferred by their charters, take by im- 
 plication all the reasonable modes of 
 execution which a natural person 
 may adopt in the exercise of similar 
 
 213
 
 250.] THE LAW OP PKIVATE CORPORATIONS. [CHAP. VII. 
 
 Non-obser- 
 vance of 
 prescribed 
 formalities 
 
 § 249. Moreover, not only by the express contracts of its 
 agents may a corporation be bound. When, had the 
 contracts agent been acting for ;i natural principal his acts 
 would have raised implied promises on the part of 
 the latter, or would have affected him with implied obligations, 
 similar implied promises and obligations will be held to arise 
 on the part of the corporation. 1 Thus, if labor is performed 
 for a corporation at the request of its general agent, the corpo- 
 ration may be held to pay for it on a quantum meruit? 
 
 § 250. When a provision in the constitution of a corporation 
 prescribes either the manner of doing an act or cer- 
 tain formalities as prerequisite, careful distinctions 
 must be drawn ; for the legal effect of omitting the 
 formalities, or of doing the act in a manner other 
 than that indicated, will depend on whether the provision was 
 imperative or only directory ; whether it provided a manner in 
 which the act must be done, or only indicated a manner in 
 which it might be done; 3 whether the formalities prescribed 
 were conditions precedent to the validity of the act or not. 4 
 
 A corporation owes to sureties on 
 the bonds of its officers good faith, 
 but not diligence. Sparks v. Farm- 
 ers 1 Bank, 3 Del. Cb. 274; Wilming- 
 ton, etc., K. K. Co. v. Ling, 18 S. C. 
 116; Batcbelor ». Planters' Nat. Bk., 
 78 Ky. 435; Mutual Loan, etc., Ass'n 
 v. Price, 16 Fla. 204; Bennett v. S. A. 
 R. E. B. & L. Ass'n, 57 Tex. 72; 
 Cbew v. Ellingwood, 86 Mo. 260. For 
 tbe liability of sureties on the bonds 
 of corporate officers, see American 
 Surety Co. v. Pauly, No. 1, 170 U. S. 
 133; id. No. 2, idem, 160; Barry v. 
 Screwmen's Association, 67 Tex. 250. 
 
 2 Goodwin v. Union Screw Co., 34 
 N. H. 378. Similarly in selling ma- 
 terials a corporation may be held on 
 implied warranties, like an individ- 
 ual. See Kellogg Bridge Co. v. Ham- 
 ilton, 110 U. S. 108. 
 
 3 It needs no authority to estab- 
 lish, that if a general statute prescribe 
 tbe mode or modes in which corpora- 
 
 powers." New England Fire Ins. 
 Co. v. Robinson, 25 Ind. 536, 541. 
 
 1 See Bank of Columbia v. Patter- 
 son, supra ; Hayden v. Middlesex 
 Turnpike Co., 10 Mass. 397; Gowen 
 Marble Co. v. Tarrant, 73 111. 608; 
 Foulke v. San Diego, etc., R. R. Co., 
 51 Cal. 365; Pixley v. Western Pa- 
 cific R. R. Co., 33 Cal. 183: Tyler v. 
 Trustees, 14 Greg. 485. When a per- 
 son is induced to become surety by 
 the representations of the secretary 
 of a building association, the associa- 
 tion cannot allege want of authority 
 in its agent to bind it by his repre- 
 sentations, and at the same time take 
 the benelit of the contract made by 
 him. Jones v. Nat. BTd'g Ass'n, 94 
 Pa. St. 215. Compare Gass v. Citi- 
 zens' Building Ass'n, 95 Pa. St. 101. 
 To render a surety liable no formal 
 evidence of the acceptance of tbe 
 bond is necessary. Bostwick v. Van 
 Voorhis, 91 N. Y. 353. 
 
 4 See Bank of U. S. e. Dandridge, 12 Wheat. 64. 
 
 214
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 251. 
 
 § 251. It is impossible to state any general rule by which, in 
 every instance, or even in most instances, may be de- „ 
 
 J , . .- % • Formah- 
 
 termined whether a provision of this character is ties, imper- 
 imperative or directory. It is clear, however, that if rectory. 
 the provision is contained in some instrument, of f ion s s ump ~ 
 which the person dealing with the corporate agent 
 has no knowledge, and with knowledge of which he is in no 
 way affected, the provision will not affect his rights ; 1 and so if 
 the formality prescribed is one that, under the circumstances, 
 the person dealing with the corporate representative is justified 
 in assuming to have been performed, his rights will not be 
 affected by its non-performance. 2 Just as a person dealing with 
 5, corporate agent is entitled to assume, in regard to the sub- 
 stance of the transaction, that the agent is not acting wrong- 
 fully, 8 so such a person is entitled to assume that the corporate 
 agent is acting regularly, and that the antecedent formalities 
 and the regulations relating to the internal management of the 
 affairs of the corporation have been complied with. 
 
 The law on this subject has been lucidly stated in a recent 
 case in the New Jersey Court of Errors and Appeals, 4 as fol- 
 lows : " Persons taking securities of this character 5 are charge- 
 able with knowledge of the power to make them as conferred 
 by the charter. If the power granted by the charter is subject 
 to a condition relating either to the form in which the security 
 shall be made in order to be valid, or to some preliminary pro- 
 ceeding extraneous to the acts of the corporation or its officers, 
 securities issued not in the prescribed form, or without the pre- 
 liminary proceedings had, are subject to defences in consequence 
 thereof, even in the hands of bona fide holders. Thus, where 
 the statute required such bonds to be certified across their face, 
 and to be registered, and declared that no bonds should be 
 valid unless so registered, bonds issued without such registry 
 
 tions must contract, a contract made 
 in any other mode will not be bind- 
 ing upon tbe corporation or the party 
 contracting with it, unless the stat- 
 ute, as it sometimes does, provides 
 to the contrary." Angell and Ames 
 on Corp., §253. 
 
 1 See § 198. 
 
 2 See § 203. 
 
 3 See § 204. 
 
 4 Hackensack Water Co. v. De Kay, 
 36 N. J. Eq. 548, 562. 
 
 5 Negotiable securities issued by a 
 corporation. 
 
 215
 
 § 252.] THE LAW OF 1'KIVATE CORPORATIONS. [CHAP. VII. 
 
 and certificate were held to be void. Morrison v. Inhabitants 
 of Bernards, 7 Vroom, 219. & » , alao, whuro tho statute re- 
 q airoo, aa a preliminary to the issuing ' of bonds by a cou n ty, 
 
 tawj n ) nn ntlin.n nm-pnvitinn^ that, thp ;i«cnf. nf a. j^rtain pivt p or- 
 tion nf vntntT i nr t . M . v pay ers s hall fii-gt. lio nhfnimv^ thj s req uisite 
 i f, on nr.nt.ial r ft-ml- t,l rP , akftwp of it w ill n.voi r l the hnndgj prpn as 
 a gainot i npocreTftrthird parties. 1 
 
 " But this doctrine does not prevail in those instances in 
 which the right to issue such securities is by the charter condi- 
 tioned upon the performance of acts by the corporation or its 
 officers relating to the management of the affairs of the com- 
 pany. In such cases, as said by Vice-Chancellor Wood, ' if the 
 party contracting with the directors finds the acts to be within 
 the scope of their power under the deed of settlement, he has 
 a right to assume that all such conditions have been complied 
 with.' 2 .... 
 
 " The doctrine which validates securities within the apparent 
 powers of the corporation, but improperly, and therefore ille- 
 gally, issued, applies only in favor of bona fide holders for value. 
 A person who takes such a security with knowledge that the 
 conditions on which alone the security was authorized were not 
 fulfilled, is not protected, and in his hands the security is in- 
 valid, though the imperfection is in some matter relating to the 
 internal affairs of the corporation, which would be unavailable 
 against a bona fide holder of the same security." 3 
 
 . , requiring the contracts of certain coxperatea^ents to 
 
 Approval ^ © ^__^— *t © 
 
 be approved by other corporate agents. Such provi- 
 sions will not affect the rights of a person acting in 
 good faith in^ignorance that the agent with whom he deals is 
 rem: 
 
 by other 
 officers. 
 
 1 Citing Hudson v. Inhabitants of 
 Winslow, 6 Vroom, 437, a case of 
 municipal bonds. See §§315 et seq. 
 
 2 7/i re Athenaeum Society ex parte 
 Eagle Co., 4 K. & J. 549. See, also, 
 Connecticut Mut. Life Ins. Co. v. 
 Cleveland, C. and C. and C. K. R. Co., 
 41 Barb. 9; Berks, etc., Turnpike 
 Road v. Myers, 6 S. & R. 12; Royal 
 
 216 
 
 British Bank v. Turquand, 6 El. & 
 Bl. 327; Webb v. Commissioners, L. 
 R. 5 Q. B. 642; Mahouy v. East Holy- 
 ford M'g Co., L. R. 7 H. L. 893, 894. 
 
 3 36 N. J. Eq. 505. See, also, 
 Nichols v. Mase, 94 N. Y. 160. 
 
 4 Medbury v. New York and Erie 
 R. R. Co., 26 Barb. 564.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 254. 
 
 § 253. So far as to the effect of the non-observance of for- 
 malities when the person dealing with the corporate 
 agent does not know of them, or reasonably assumes 
 
 tracting 
 
 If, however, a P art y has * 
 
 notice of 
 
 that they have been complied with. 
 
 person actually knows or is affected with notice of the formal- 
 formalities, and his contract with the corporate rep- quired, 
 resentative is in a form indicating their non-observ- 
 ance, he acts at his peril, 1 and may be unable to hold the cor- 
 poration, unless the formality required was trivial or had been 
 systematically disregarded in the course of the corporate busi- 
 ness. 2 For the corporation may rightfully plead that it is not 
 bound to a party contracting with its agent knowing of the 
 neglect of formalities which it or the legislature has established 
 for its protection. Accordingly, if the contracting party is in 
 any way affected with knowledge that the contract to bind the 
 company should be signed by certain officers, unless it is signed 
 by those officers the corporation will not be bound. 3 
 
 § 254. On the other hand, if by a reasonably liberal construc- 
 tion in favor of a person who acts in good faith, although 
 affected with notice of the provisions requiring the formalities, 
 those provisions may be construed to be inapplicable to the 
 contract on which his rights are based, courts will gladly avoid 
 holding the contract invalid. 4 Moreover, if the variance be- 
 tween the manner prescribed and the manner in which the con- 
 
 1 See Dana v. Bank of St. Paul, 4 
 Minn. 385 ; Hackensack Water Co. v. 
 De Kay, supra, § 251. 
 
 2 Leonard v. American Ins. Co., 97 
 Ind. 299 ; Bulkley v. Derby Fishing 
 Co., 2 Conn. 252 ; Kilgore v. Bnlkley, 
 14 Conn. 362 ; compare In re Royal 
 British Bank, Walton's Case, 26 L. J. 
 Ch. 545. 
 
 3 Head v. Providence Ins. Co., 2 
 Cranch, 127 ; Holbrook v. Fauquier, 
 etc., Turnpike Co., 3 Cranch, Cir. 
 Ct., 425 ; Henning v. United States 
 Ins. Co., 47 Mo. 425 ; Salem Bank v. 
 (Gloucester Bank, 17 Mass. 1 ; Badger 
 v. American Popular Ins. Co., 103 
 Mass. 244 ; Beatty v. Marine Ins. 
 
 Co., 2 Johns. 109. Compare Barnes 
 v. Ontario Bank, 19 N. Y. 152 ; Saf- 
 ford v. Wyckoff, 4 Hill, 446 ; Melvin 
 v. Lisenby, 72 111. 63 ; Dana v. Bank 
 of St. Paul, 4 Minn. 385 ; and cases 
 in the last note. 
 
 4 See Trustees' First Baptist Church 
 v. Brooklyn Fire Ins. Co., 19 N". Y. 
 305; Relief Fire Ins. Co. v. Shaw, 94 
 U. S. 574; New England Ins. Co. v. 
 De Wolf, 8 Pick. 56; Dana v. Bank 
 of St. Paul, 4 Minn. 385; Insurance 
 Co. v. Colt, 20 Wall. 560; Sanborn v. 
 Fireman's Ins. Co., 16 Gray, 448; 
 Mechanics' Bank v. Bank of Colum- 
 bia, 5 Wheat. 326; Rockwell v. Elk- 
 horn Bank, 13 Wis. 653. 
 
 217
 
 § 257.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 tract was actually executed is obviously immaterial, his rights 
 will not be affected. Thus, the charter of a corporation required 
 a certain number of managers " to constitute a quorum with 
 power to enter into a contract." The contract before the court 
 was actually sealed and executed by a less number ; but the 
 court held it valid, there being no evidence to show that it had 
 not been authorized by the requisite number. 1 
 
 § 255. In certain cases where, as a matter of fact, the person 
 w , contracting 1 with the corporate agent is far less con- 
 
 V\ lien cor- ° i 
 
 i>. .rate versant with the nature of the business in hand than 
 
 contracting the corporation and its agent, the court has permitted 
 nofstand him, when he has in entire good faith performed his 
 trams 1 * 1 S ^ e °^ ^ ne con tract, to hold the corporation ; although 
 some formality with knowledge of which he must be 
 held affected is not complied with, and he knows or is affected 
 with notice of its non-observance. Thus, an insurance policy- 
 contained a provision that if any subsequent insurance should 
 be made on the same property, the policy should become null 
 and void, unless a consent to the further insurance should pre- 
 viously have been given in writing. The insurance agent orally 
 consented, and the insured in good faith paid out his mone} r 
 in reliance thereon. A loss occurring, the court held that the 
 company could not defend on the ground that the consent was 
 not in writing ; because such a defence would be a fraud on the 
 insured. 2 
 
 § 256. If after an act is irregularly done, even in a manner 
 which would not have held the corporation, the cor- 
 tion! Ca ~ poration ratifies or acquiesces in the act as done, the 
 corporation will be bound. 3 
 
 § 257. As provisions requiring the observance of formalities 
 
 1 Berks, etc., Turnpike Co. v. Myers, 
 6 S. & R. 12. 
 
 The defective execution of a mort- 
 gage by an agent who has authority 
 to execute it, will not invalidate the 
 mortgage when the intent is plain. 
 Taylor v. Agricultural, etc., Ass'n, 68 
 Ala. 229. See, also, Bernards Town- 
 ship v. Stebbins, 109 U. S. 341, § 328. 
 
 218 
 
 2 Carrugi v. Atlantic Fire Ins. Co., 
 40 Ga. 135. Compare Wheeler v. 
 Smith, 9 How. 55. 
 
 8 Chouteau v. Allen, 70 Mo. 290; 
 State of Florida v. Florida Central R. 
 R. Co., 15 Fla. 690. 
 
 I
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 258. 
 
 Party con- 
 tracting 
 with corpo- 
 rate agent 
 cannot 
 plead non- 
 
 by corporate agents exist for the protection of the 
 corporation, there is obviously no justice in allowing 
 a party who has himself contracted with the cor- 
 porate agent to plead the neglect of any formality on 
 the part of the latter, provided the corporation has observance 
 
 » . . ■, of formali- 
 
 perlormed its side ot the contract, or is ready to do ties by the 
 so. Consequently, except when the requirement is sureties on 
 statutory, and expressly declares that unless it is ^"g 1 
 complied with, the contract or other act shall be 
 void, the other contracting party will not be allowed to take 
 advantage of its non-fulfillment. 1 Thus, sureties on the official 
 bond of a cashier, conditioned for the faithful performance of 
 his duties, will be bound, although the bond was not approved 
 on the part of the bank in the manner required by its charter. 2 
 § 258. The formal requisites necessary to make the acts of 
 the directors or trustees binding on the corporation Formaii- 
 require particular notice. Where the management i^ s e r V elbv 
 of the affairs of a corporation is vested in a board of directors, 
 directors, the legal effect is to vest the directors with should act 
 authority to act only when assembled as a board. 
 Therefore, when a claim against a corporation is based on any 
 particular contract alleged to have been executed by the di- 
 rectors (to the validity of which the assent of a quorum of the 
 directors was necessary), it is essential that the directors should 
 have acted as a board in executing it. 3 Accordingly, a deed 
 
 1 Moreland v. State Bank, 1 Breese 
 (111.), 263; Bates v. Bank of Ala- 
 bama, 2 Ala. 451; Bond v. Central 
 Bank, 2 Ga. 92. See Bank of South 
 Carolina o. Hammond, 1 Rich. L. (S. 
 C.)281. 
 
 2 Bank of TJ. S. v. Dandridge, 12 
 Wheat. 64; State Bank v. Chatwood, 
 3 Halsted (N. J.), 1; Bostwick v. 
 Van Voorhis, 91 N. Y. 353; see 
 § 249, note. 
 
 3 Baldwin v. Canfield, 26 Minn. 43; 
 Stoystown, etc., Turnpike Road Co. 
 v. Craver, 45 Pa. St. 386; Hillyer v. 
 Overman Silver M'g Co., 6 Nev. 51; 
 Lockwood v. Thunder Bay River 
 Boom Co., 42 Mich. 536, 539; Gash- 
 wiler v. Willis, 33 Cal. 12; D'Arcy 
 
 v. Lamar, etc., R'y Co., L. R. 2 Ex. 
 158; S. C, 4 H. & C. 463. See 
 Junction R. R. Co. v. Reeve, 15 Ind. 
 236; Yellow Jacket Silver M'g Co. v. 
 Stevenson, 5 Nev. 224; First Nat. 
 Bank v. Christopher, 40 N. J. L. 435, 
 437; Despatch Line of Packets v. 
 Bellamy M'f'g Co., 12 N. H. 205, 
 224; Edgerly v. Emerson, 23 N. H. 
 555, 567; Noblesville Gas Co. v. 
 Loebr, 124 Ind. 79; Allemong v. Sim- 
 mons, ib. 199; Monroe Mercantile 
 Assn. v. Arnold, 108 Ga. 449; Calu- 
 met Paper Co. v. Haskell Show Pr. 
 Co., 144 Mo. 331; Alabama Nat. Bk. 
 v. O'Neil, 128 Ala. 192; Broughton v. 
 Jones, 120 Mich. 462. Compare 
 Limer v. Traders Co., 44 W. Va. 175; 
 219
 
 § 259.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Excep- 
 tions. 
 
 executed on behalf of the corporation by all the directors act- 
 ing separately, which they never authorized while acting as a 
 board, is invalid. 1 And the parol declarations of individual di- 
 rectors are not competent evidence of an agreement to appro- 
 priate for a specific purpose a certain fund of money, which in 
 a contract made by the directors as a board had been reserved 
 to the use of the corporation. 2 
 
 § 259. But this rule does not invalidate a contract made with 
 a person acting in good faith in ignorance that the 
 directors had taken no action as a board, if the cir- 
 cumstances entitled him to assume that the directors 
 had acted in the proper manner. 3 Nor does the rule apply 
 when the contract relied on by the person claiming to have ac- 
 quired a right against the corporation was actually made, not 
 by the directors, but by an officer deriving his authority from 
 them. In such a case, if the assent of the majority of directors 
 be shown to have been given in any way to the execution of 
 the contract by the officer, or if the directors subsequently 
 acquiesce, the corporation will not be heard to plead that the 
 directors had never taken action as a board in the matter. 4 
 And even where the contract relied on was executed separately 
 
 New Boston F. I. Co. v. Upton, 67 N. 
 H. 469; Hamlin v. Union Brass Co., 
 68 N. H. 292; Morrison v. Wilder Gas 
 Co., 91 Me. 492; Pierce v. Morse- 
 Oliver Co., 94 Me. 406; Sias v. Con- 
 sol. Lighting Co., 73 Vt. 35. Contra, 
 In re Bonelli's Electric Telegraph 
 Co., 40 L. J. Eq. 507. A director 
 cannot vote by proxy at a directors' 
 meeting. Perry v. Tuscaloosa Co., 
 93 Ala. 364, 371. 
 
 For analogous rules regarding the 
 manner in which the managing 
 boards of municipal and religious 
 corporations should act, see Cam- 
 meyer v. United German Churches, 
 2 Sandf. Ch. 186; Dey r. Jersey City, 
 19 X. J. Eq. 412; Schumm v. Sey- 
 mour, 24 N. J. Eq. 153; Shortz v. 
 Unangst, 3 W. & S. 45; German 
 Evangelical Congregation v. Pressler, 
 14 La. Ann. 811. 
 220 
 
 1 Baldwin v. Canfield, 26 Minn. 43. 
 
 2 Grayville and Mattoon R. R. Co. 
 v. Burns, 92 111. 302. See East Line, 
 etc., R. R. Co. v. Garrett, 52 Tex. 
 133. Compare Benton v. Springfield 
 Y. M. C. A., 170 Mass. 534. 
 
 8 See §§251, 203. None of the 
 cases cited in the last two notes are 
 authority for the application of the 
 rule under such circumstances; and 
 see Tenney ». East Warren Lumber 
 Co., -j:; X. H. 343. 
 
 4 Bank of Middlebury v. Rutland, 
 etc., R. R. Co., 30 Vt. 159; St. James 
 Parish v. Newburyport Horse R. R., 
 141 Mass. 500; Wheeler v. Land Co., 
 14 Wash. 630. See, also, Longmont 
 Ditch Co. v. Coffman, 11 Col. 551; 
 Eureka Iron Works v. Bresuahan, 60 
 Mich. 332. See § 212. 
 
 I
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 260. 
 
 by a majority of the directors, the rule requiring them to act 
 as a board will not apply if the contract is an ordinary contract 
 acquiesced in for years by all the directors, and is performed on 
 the part of the other contracting party. Thus, where a person 
 was employed by three directors (a majority) acting separately, 
 to render services to a bank, and he rendered services for five 
 years, to the knowledge of all the directors, none of whom 
 objected, it was held that the employment was binding on the 
 bank. 1 
 
 Of course, the rule cannot apply where the contract relied 
 on by the other party is made by one or two directors having 
 authority to make it: and how far the rule may apply to the 
 action of directorial committees and sub-committees is ques- 
 tionable. 
 
 § 260. Assuming now that the directors acting together as a 
 board have done an act within their powers, the act 
 will be valid, in the absence of any provision to the meetings.' 
 contrary in the constitution or by-laws of the corpora- Q uor uni. 
 tion, if it is done or authorized by a majority vote of the direct- 
 ors present at the meeting, when there is present a majority 
 of the total number of directors ; provided the meeting was 
 assembled either in pursuance of some provision in the con- 
 stitution or by-laws, or upon due notice to all the directors. 
 The different parts of this proposition require discussion. 
 
 In the first place, a majority of all the directors must be 
 present to constitute a quorum for the transaction of business. 2 
 Such being the case, a majority vote of those actually present 
 decides, and is valid. 3 
 
 1 Bradstreet v. Bank of Royalton, 
 42 Vt. 128; see Waite v. Mining Co., 
 37 Vt. 608; Bank of New London v. 
 Ketchum, 64 Wis. 7. 
 
 2 In the absence of special pro- 
 vision, less than a majority of all 
 the directors composing the board 
 have no power to transact the busi- 
 ness of the corporation. Price v. 
 Grand Rapids, etc., R. R. Co., 13 
 Ind. 58; Stringham v. Oshkosh & M. 
 R. R. Co., 33 Wis. 471; Ex parte 
 Willcocks, 7 Cow. 402; 2 Kent's 
 
 Com. 283 ; Angell and Ames on 
 Corp., §§ 501, 502. 
 
 Cram v. Bangor House Proprie- 
 tary, 12 Me. 354; Despatch Line v. 
 Bellamy Mfg. Co., 12 N. H. 205; 
 Wells v. Rahway White Rubber Co., 
 19 N. J. Eq. 402; Booker v. Young, 
 13 Gratt. (Va.) 303; Lockwood v. 
 Mechanics' Nat. Bk., 9 R. I. 308; Ca- 
 hill v. Kalamazoo Ins. Co., 2 Dougl. 
 (Mich.) 124; Ex parte Willcocks, 7 
 Cow. 402; Sargent v. Webster, 18 
 Mete. (Mass.) 497; Edgerly r. Emer- 
 221
 
 § 261.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Unless the meeting is one that assembles at stated times pur- 
 suant to some provision in the constitution or by-laws, 1 it must 
 be duly notified to all the directors. 2 For, even if a majority 
 of a total number of directors are present and the vote is 
 unanimous, so that the votes of the absentees could not have 
 changed the result, it does not follow that those actually pres- 
 ent would not have voted differently had they heard what the 
 absentees, if present, might have said. To make the proceed- 
 ings regular, all should have had an opportunity to be present, 
 and take part in them. 3 Where there is no special provision 
 as to the notice, it should be reasonable in point of time; 4 and 
 should be personal if the directors reside in the same place. 
 
 § 261. As the usual presumptions in favor of regularity apply 
 
 to directors' meetings, it is always to be presumed 
 
 tious Ump " tnat the meeting was regular; and the burden of 
 
 proof to show a want of due notice of the meeting is 
 
 son, 23 N. H. 555; Buell v. Bucking- 
 ham, 16 Iowa, 284; Leavitt v. Ox- 
 ford, etc., M. Co., 3 Utah, 265; 2 
 Kent's Com., 293. Compare Hol- 
 combe's Exr. v. Managers N. H. D. 
 B. Co., 9 N. J. Eq. 457. 
 
 1 Of such a meeting no notice is 
 necessary, or notice is presumed. 
 See Despatch Line v. Bellamy Mfg. 
 Co.. 12 N. H. 205, 226; Edgerly v. 
 Emerson, 23 N. H. 555, 567; Angell 
 and Ames on Corp., § 488. 
 
 2 Panly v. Pauly, 107 Cal. 8; Curtin 
 v. Salmon River, etc., Co., 130 Cal. 
 345; Cupit v. Park City Bank, 20 
 Utah, 292; Hill v. Mining Co., 119 
 Mo. 9; Gordon p. Preston, 1 Watts, 
 385; Farwell v. Houghton Copper 
 Works, 8 Fed. Rep. 66; Doyle v. 
 Mizner, 42 Mich. 332, 341; Kersey 
 Oil Co. v. Oil Creek, etc. R. R. Co., 
 12 Phila. 374; Doernbecher v. Lum- 
 ber Co., 21 Oregon, 573; Singer v. 
 Salt Lake Copper M. Co., 17 Utah, 
 143. Compare Jackson v. Hampden, 
 20 Me. 37; Simon v. Sevier Ass'n, 
 54 Ark. 58; Bank of Little Rock v. 
 
 222 
 
 McCarthy, 55 Ark. 473. Compare 
 Smith v. Dorn, 95 Cal. 73. But if 
 all the directors actually consult to- 
 gether, and a majority concur, it 
 seems no notification is necessary. 
 Despatch Line v. Bellamy Mfg. Co., 
 12 N. H. 205, 227; Benbow v. Cook, 
 115 N. C. 324. When a regular meet- 
 ing of directors, from which some 
 are absent, is adjourned to a future 
 day, no hour fixed, notice of the 
 adjourned meeting must be given. 
 Thompson v. Williams, 76 Cal. 153. 
 
 3 In the case of Edgerly v. Emer- 
 son, 23 N. H. 555, it was stated " that 
 where a quorum of the directors of 
 a bank meet, and unite in any de- 
 termination, the corporation are 
 bound, whether the other directors 
 are or are not notified." 23 N. H. 
 569. The proposition, thus broadly 
 stated, it is submitted, is not law. 
 But compare Chase v. Tuttle, 55 
 Conn. 455. 
 
 * See Covert v. Rogers, 38 Mich. 
 363. As to the meetings of directors 
 outside of the state, see § 381.
 
 PART II.] ACTS WITHIN THE CORPORATE POWERS. [§ 262. 
 
 on the party impeaching its regularity. 1 Further, the recital 
 in a resolution that notice of a meeting of the board was 
 served on all the directors, is evidence, though not under all 
 circumstances conclusive, of the regularity of the notice. 2 
 
 Finally, although want of the service of due notice on all the 
 directors may be pleaded by the corporation as against any 
 person acting with knowledge of the facts, 3 yet such omission, 
 according to principles already stated, will not affect the rights 
 of a person dealing with the directors on the bona fide and 
 reasonable assumption that their action has been regular. 4 
 
 § 262. The general rules above stated regarding the notice of 
 directors' meetings, tind the number of directors 
 necessary to concur in the acts of the board, may be provisions, 
 modified by provisions in the constitution or by-laws 
 of the corporation, and also, it seems, by custom. 5 Thus, if the 
 constitution requires the concurrence of a certain number of 
 directors to the doing of a given action or the making of a con- 
 tract, the act or contract, if not concurred in by the requisite 
 number, will not in itself bind the corporation. 6 
 
 1 Sargent e. Webster, 13 Mete. 
 (Mass.) 497; Lane v. Brainerd, 30 
 Conn. 565; Chouteau Ins. Co. v. 
 Holmes, 68 Mo. 601 ; Levitt v. Oxford, 
 etc., M. Co., 3 Utah, 265; Singer v. 
 Salt Lake Copper M. Co. 17 Utah 
 143; Barrell v. Lake View Land Co., 
 122 Cal. 129; Budd v. Walla Walla 
 Printing Co., 2 Wash. Ter. 347; Wells 
 v. Rodgers, 60 Mich. 525. 
 
 2 Granger v. Original Empire Mill 
 Co., 59 Cal. 678. 
 
 3 Kersey Oil Co. v. Oil Creek, etc., 
 R. R. Co., 12 Phila. 374; Far well v. 
 Houghton Copper Works, 8 Fed. 
 Rep. 66. 
 
 4 See § 251. There seems no reason 
 to doubt that the general rules stated 
 in regard to notice and the requisite 
 majority will ordinarily apply to the 
 meeting of directors 1 committees. 
 A directors 1 committee may act by a 
 majority. McXeil v. Chamber of 
 Commerce, 154 Mass. 277; Barrell v. 
 Lake View Land Co., 122 Cal. 129. 
 
 Contra, Liverpool Household Stores 
 Ass'n in re, 59 L. J. Ch. 616. 
 
 5 Thus, it is held in England that 
 when the articles do not state the 
 number of directors necessary to con- 
 stitute a quorum, the number usually 
 acting in the business of the corpora- 
 tion will suffice. In re Tavistock 
 Iron Works Co., Lyster's Case, L. R. 
 4 Eq. 233. 
 
 6 Beatty v. Marine Ins. Co., 2 Johns. 
 109; Ridley v. Plymouth Baking Co., 
 2 Exch. 711; see Daws v. North River 
 Ins. Co., 7 Cow. 462, overruled in 
 Conover v. Mutual Ins. Co., 3 Denio, 
 254; Kirk v. Bell, 16 Q. B. 290; Card 
 v. Carr, 1 C. B. N. S. 197. But it 
 seems where a statute prescribes the 
 whole number of directors, and also 
 what number shall constitute a quo- 
 rum, that the quorum may act, 
 although the whole number is defi- 
 cient. Thames Haven Dock Co. v. 
 Rose, 4 M. & G. 552. 
 
 223
 
 § 263.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Rules of 
 evidence 
 applicable 
 to corpora- 
 tions. Cor- 
 porate 
 books. 
 
 I'd:'.. In evidence, the presumptions applicable to individuals 
 apply to corporations ; J and as a general rule the acts 
 of corporations may be proved in the same manner 
 as the acts of individuals. 2 Often the charter or by- 
 laws may provide that regular records of the pro- 
 ceedings of the managing boards shall be kept by 
 some designated officer. And when the record exists, the rules 
 of evidence require its production as constituting the best evi- 
 dence. But the breach of a provision requiring acts of the board 
 to be recorded, whatever may be the effect of the omission in 
 rendering certain officers derelict in their duties, does not im- 
 pair the validity of the unrecorded acts. 3 /f'u^ <v/3~*^ ?f?*- 36$ 
 
 The books of the corporation are competent evidence to prove 
 the number of shares subscribed for and the names of the sub- 
 scribers; 4 they are competent evidence of the meeting held to 
 organize the corporation and of the action taken thereat. 5 They 
 are competent to prove the acceptance by the corporation of 
 a subscription contract, though it has been held that they are 
 not competent to prove such contract as against the subscriber. 6 ^ 
 
 1 Bank of the U. S. v. Dandridge, 
 12 Wheat. 64. Compare Johnson v. 
 Bush, 3 Barb. Ch. 207. 
 
 2 Southern Hotel Co. v. Newman, 
 30 Mo. 118. Compare Leonard v. 
 Burlington Mnt. Loan Ass' n, 55 Iowa, 
 594. 
 
 3 Bank of U. S. v. Dandridge, 12 
 Wheat. 64; Burgess v. Pue, 2 Gill 
 (Md. ), 254 ; Bank of Kentucky v. 
 Schuylkill Bank, 1 Parson's Sel. Cas. 
 (Penn.) 180, 251, 263; Trott v. War- 
 ren, 11 Me. 227; Cram v. Bangor 
 House Proprietary, 12 Me. 354; Rus- 
 sell v. McLellan, 14 Pick. 63; Mid- 
 dlesex Husbandmen v. Davis, 3 Mete. 
 (Mass.) 133; Davidson v. Bridgeport, 
 8 Conn. 472; Sehallard v. Eel River 
 Nav. Co., 70 Cal. 144 ; Tickett v. 
 Abney, 84 Tex. 645. See Hurd r. 
 Hotchkiss, 7"-' Conn. 472; New Boston 
 Fire Ins. Co. ». Saunders, 67 N. H. 
 249. 
 
 4 Evans c. Bailey, 66 Cal. 112; Pe- 
 nobscott R. R. Co. v. Dummer, 40 Me. 
 
 224 
 
 ■3 
 
 172 ; Glenn v. Orr, 96 N. C. 413. V" 
 See, also, Macon, etc., R. R. Co. v. >* 
 Vasour, 57 Ga. 314; Washer v. Al- 
 lensville, etc., T. P. Co., 81 Ind. 78; 
 Fox v. Allensville, etc., T. P. Co., 46 
 Ind. 31; Lehman o. Glenn, 87 Ala. 
 618; Semple v. Glenn, 91 Ala. 245. 
 Compare Fish v. Smith, 73 Conn. 377. 
 When commissioners are provided for 
 by statute, their books are official 
 registers, and are admissible in evi- 
 dence to prove a subscription. Mon- 
 roe v. Ft. Wayne, etc., R. R. Co., 28 
 Mich. 272. 
 
 5 Duke v. Cahawba Nav. Co., 10 
 Ala. 82. See Blake v. Griswold, 103 
 N. Y. 429; Glenn v. Orr, 96 N. C. 
 413. Their competency as evidence 
 against the corporation is not im- 
 paired by the fact that they have 
 been in the possession of its attor- 
 neys. McCullough?). Talladega Ins. 
 Co., 46 Ala. 376. 
 
 6 Colfax H. Co. v. Lyon, 69 Iowa, 
 683. 

 
 PART II. j ACTS WITHIN THE CORPORATE POWERS. [§ 263. 
 
 They are not competent to establish a right in the corporation 
 against an outsider. 1 And as to outsiders, a corporation is not 
 bound by interpolations fraudulently inserted in its records, 
 when such outsiders have not seen, acted on, or known of the 
 existence of such interpolations. 2 But if outsiders have acted 
 on the faith of the records, the corporation will be estopped 
 from alleging the falsity of interpolations fraudulently made 
 in its books by its own secretary. 3 Said Chief Judge Earl, giv- 
 ing the opinion of the New York Court of Appeals, in Rudd v. 
 Robinson : " The books of corporations for many purposes are 
 evidence, not only as between the corporation and its members, 
 and between members, but also as between the corporation or 
 its members and strangers. They are received in evidence gen- 
 erally to prove corporate acts of a corporation, such as its in- 
 corporation, its list of stockholders, its by-laws, the formal pro- 
 ceedings of its board of directors, and its financial condition 
 when its solvency comes in question." 4 
 
 1 Jones v. Trustees Florence Univ., 
 46 Ala. 626 ; Dolan v. Wilkerson, 57 
 Kan. 758. 
 
 2 Holden v. Hoyt, 134 Mass. 181. 
 See Parker v. Nickerson, 137 Mass. 
 487. The reports of officers of the 
 corporation to the shareholders or to 
 the board of directors, in which cer- 
 tain claims for which the corporation 
 is not bound are enumerated among 
 its liabilities, will not bind the cor- 
 poration to pay such claims, or pre- 
 vent it from changing its purpose 
 with regard to them. Hall v. Mobile, 
 etc., Ry. Co., 58 Ala. 10. 
 
 15 
 
 3 Commonwealth v. Reading Sav- 
 ings Bank, 137 Mass, 431. 
 
 4 126 N. Y. 113, 117. This case 
 held, however, that the books were 
 not evidence of themselves to estab- 
 lish a claim against a director or 
 shareholder, in an action brought on 
 behalf of the corporation. It is held 
 in Rhode Island that parol proof of 
 the declaration of a dividend is in- 
 competent. The remedy of a stock- 
 holder claiming that a dividend has 
 been declared, where the books do 
 not show it, is mandamus to compel 
 the correction of the records. Dennis 
 v. Joslin Mfg. Co., 19 R. I. 666. 
 
 225
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 PART III. 
 ACTS BEYOND THE CORPORATE POWERS. 
 
 Questions of ultra vires. Three ways 
 of solving them, § 264. 
 
 The analytical method, § 264a, sqq. 
 
 General rule, § 265. 
 
 Subordinate rules denoted by it, 
 §266. 
 
 First subordinate rule, § 267. 
 
 Second subordinate rule, § 268. 
 
 Third subordinate rule, § 269. 
 
 Ratification by shareholders, § 270. 
 
 Not always sufficient, § 271. 
 
 Illustration, § 272. 
 
 Rights of creditors, §§ 273, 274. 
 
 The New York Rule. Opinions in 
 Bissell v. Railroad Cos., § 275. 
 
 Party contracting with corporation 
 cannot plead ultra vires when lat- 
 ter has performed, § 276. 
 
 Converse of this proposition involves 
 a fallacy, § 277. 
 
 Examination of certain cases, §§ 279, 
 280. 
 
 Ultra vires cannot be pleaded by 
 persons whose rights are not in- 
 fringed, §§ 281, 282. 
 
 The Federal rule, § 283. 
 
 Qualification to the general rules, 
 §284. 
 
 Negotiable instruments, § 285. 
 
 Further application of the qualifica- 
 tion, § 286. 
 
 The illegality of ultra vires acts, §§ 
 287, 288. 
 
 Public policy, §§ 289, 290. 
 
 English view, § 291. 
 
 Classes of ultra vires acts which are 
 also illegal, § 292. 
 
 First class. Acts contra bonos mores, 
 §293. 
 226 
 
 Second class. Acts forbidden by 
 
 statute, § 294. 
 General prohibitions, § 295. 
 English companies' act, § 296. 
 Effect of statutory prohibitions. 
 
 Rule, § 297. 
 Illustrations. Body of the rule. 
 
 Excessive interest, § 298. 
 First qualification, § 299. 
 Second qualification, § 300. 
 Third qualification. Excessive loans 
 
 by national banks, § 301. 
 Prohibitions by implication, § 302. 
 Unauthorized conveyances of real 
 
 estate to corporations, § 303. 
 Third class of illegal ultra vires acts. 
 
 Corporations with public duties, 
 
 §304. 
 Transfer, lease, or mortgage of fran- 
 chises, §§ 305-3056. 
 Other acts, § 306. 
 Traffic arrangements, § 307. 
 Carriers' contracts to carry beyond 
 
 their lines, § 308. 
 Pooling arrangements. Grant of ex- 
 clusive privileges, § 309. 
 "Trusts" and monopolies, §§ 309a- 
 
 309c. 
 The "securities company," § 309o\ 
 Liability of corporations to account 
 
 for benefits received under an ultra 
 
 vires contract, § 310. 
 Special chattels must be returned. 
 
 Money, § 311. 
 Basis of the liability, § 312. 
 Illegal ultra vires contracts, § 313. 
 Liability of other party to account, 
 
 §314. 
 Municipal corporations, §§ 315, 316.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 264. 
 
 Railway aid bonds, § 317. 
 
 Federal decisions, § 318. 
 
 Municipality has no inherent power 
 to issue railway aid bonds, §319. 
 
 Special authority requisite. Holders 
 charged with notice, § 320. 
 
 Constitutional limitations, §321. 
 
 Railroad not yet in existence, § 322. 
 
 Effect of a consolidation of the rail- 
 road company, §§ 323, 324. 
 
 Municipal bonds may be validated, 
 §325. 
 
 Bonds and coupons negotiable, 326. 
 
 Holder not affected with notice of lis 
 pendens, §327. 
 
 Presumptions, §328. 
 
 Effect of recitals, §§329-331. 
 
 Recitals. Recent decisions, § 332. 
 
 Power of municipal corporations to 
 tax. Mandamus, § 333. 
 
 Municipal property exempt from ex- 
 ecution, §334. 
 
 § 264. So far as to responsibility for acts within the scope of 
 the corporate powers. Yery different questions arise Questions 
 as to whether acts beyond the corporate powers are °* ? .gf m 
 binding and on whom. 
 
 i 
 
 vires. 
 
 These are questions of ultra three ways 
 
 1 of solving 
 
 them. 
 
 x The term ultra vires, like most 
 other legal terms, has been used in 
 more senses than one ; and objections 
 have been taken to it on the ground 
 that so-called questions of ultra vires 
 — "beyond the powers" — are not 
 really questions of the power, but of 
 the legal right of corporations to act. 
 Lt seems proper, however, in legal 
 writing to use words in a legal sense; 
 and, in a legal sense, the term 
 " power" signilies legal competence, 
 capacity, or right. 
 
 The term ultra vires is convenient, 
 pretty well imbedded in the law, and 
 may be used to advantage if care is 
 taken to apply it only in respect of 
 corporate powers, and not in respect 
 of the powers of corporate officers. 
 The term, moreover, should not be 
 used in the sense of illegal. See the 
 dissenting opinion of Blackburn, J., 
 in Taylor v. Chichester and Midhurst 
 R'y Co., L. R. 2 Ex. 356. As Judge 
 Allen said, in Whitney Arms Co. v. 
 Barlow, 63 N. Y. 62, 68: " When acts 
 of corporations are spoken of as 
 ultra vires, it is not intended that 
 they are unlawful or even such as 
 
 the corporation cannot perform, but 
 merely those which are not within 
 the powers conferred upon the cor- 
 poration by the act of its creation, 
 and are in violation of the trust re- 
 posed in the managing board by the 
 shareholders, that the affairs shall 
 be managed, and the funds applied 
 solely for carrying out the objects 
 for which the corporation was 
 created." See, also, Nat. Pemberton 
 Bank v. Porter, 125 Mass. 333, 335. 
 A different view is taken by the Su- 
 preme Court of Illinois: " The word 
 ' unlawful ' as applied to corpora- 
 tions, is not used exclusively in the 
 sense of malum, in se or malum pro- 
 hibitum. It is also used to desig- 
 nate powers which corporations are 
 not authorized to exercise, or con- 
 tracts which they are not authorized 
 to make, or acts which they are not 
 authorized to do, — or, in other 
 words, such acts, powers, and con- 
 tract as are ultra vires.'''' People ex 
 rel. v. Chicago Gas Trust Co., 130 
 111. 268, 292, quoted approvingly in 
 Nat. Home B'ld'g. Ass'n v. Bank, 
 181 111. 35, 41. 
 
 227
 
 § 264rt.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 This subject has been approached in three ways; in its con- 
 sideration three different lines of reasoning have been followed ; 
 and three doctrines have been formulated which differ in prin- 
 ciple, yet offer points of contact and accord. (1) The rules of 
 ultra vires as applicable to corporations may be worked out 
 analytically, and questions arising- under them may be solved 
 through the application of general and familiar principles of 
 agency and estoppel. (2) Paramount weight ma} r be given to 
 the demand of common justice, that whoever, in reliance on a 
 contract has to his cost performed his side of it, may look to 
 the other party to perform. Thus the question is regarded 
 from the standpoint of the just rights of the party who has 
 performed his side ; and the decisive consideration is whether 
 the contract be still executory or have been wholly or partly 
 executed. (3) The powers of a corporation may be regarded 
 as absolute limits which it cannot pass; every attempt on its 
 part to transcend them is futile, the contract or other transac- 
 tion is void, and whether still executory or already executed by 
 the corporation or by the other party, it cannot directly and 
 affirmatively form the basis of an action. 
 
 The preceding paragraph is not intended as a definite state- 
 ment of these diverging views, but solely as a suggestion of the 
 three ways of approaching the subject of ultra vires. Fre- 
 quently the same decision would be reached whichever way 
 the matter is regarded. For example, there is no conflict of 
 decision in the instances where the contract is still wholly ex- 
 ecutory on both sides. 
 
 The first, which may be termed the analytical method, has 
 the support of a number of decisions; the second is supported 
 by the courts of New York and other states ; the third finds 
 in the United States Supreme Court its chief exponent. We 
 will begin with the first view, as it will assist to a due appre- 
 ciation of the two others. 
 
 § 264r«. The analytical method never loses sight of the con- 
 ;>„,, flicting interests and legal relations which may com- 
 
 / J!^J? } Tlie anSr 1 • • » 7 • I • 1 
 
 'yyy*' lyticai plicate questions of ultra vires ; and it assumes that 
 
 !,&"& these questions cannot properly be solved so long as 
 
 the conception of a corporation as a unit, as a legal person, is 
 
 retained in the discussion of them. The first prerequisite to 
 
 their proper solution is to recognize that by the term "corpo- 
 
 228
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 264a. 
 
 ration " is denoted a mass of rights and liabilities subsisting as 
 legal relations between persons whose interests in the corpo- 
 rate enterprise are divergent if not connecting, and whose re- 
 sponsibility for any given ultra vires act is not always the 
 same. 1 " In applying the doctrine of ultra vires, in a particu- 
 lar case, regard must be had not only to the unauthorized 
 agreement or transaction, but also to the relation which the 
 litigating parties sustain to it." 2 The second prerequisite is 
 the recognition of the principle that the constitution of a cor- 
 poration, and, consequently, the corporate powers, are pre- 
 sumed to be known as matters of law to all persons interested 
 in the corporate enterprise, or dealing with the corporation. 3 
 
 iSee Chap. III. 
 
 2 Ehrman v. Union Central Life 
 Ins. Co., 35 Ohio St. 324, 337. In 
 Miners' Ditch Co. v. Zellerbach, 37 
 Cal. 543, Sawyer, C. J., said, giving 
 the opinion of the court: "In con- 
 sidering the cases in which the law 
 applicable to corporations is dis- 
 cussed, it must be always borne in 
 mind that there are several classes 
 of rights to which they apply, and 
 that upon the same general state of 
 facts the legal consequences mi^ht 
 be different with reference to the 
 different classes of riglits. Thus 
 they [there?] are corporate rights — 
 that is to say, rights which pertain 
 to corporations as such — the artifi- 
 cial legal entity created by the act of 
 incorporation considered as a single 
 distinct person; individual rights of 
 the stockholders as such, and rights 
 of the creditors of the corporation. 
 The riglits of strangers dealing with 
 the corporation may vary as they 
 are considered with reference to the 
 corporation itself, the stockholders, 
 or the creditors of the corporation." 
 Compare Bacon v. Robertson, 18 
 How. 480. 
 
 8 Davis v. Old Colony R. R., 131 
 
 Mass. 258; Relfe v. Rundle, 103 U. 
 S. 222, 226; Salt Lake City v. Hollis- 
 ter, 118 U. S. 256, 263; Railway Co.'s 
 v. Keokuk Bridge Co., 131 U. S. 371, 
 384; Central Transp'n Co. v. Pull- 
 man's Palace Car Co., 139 U. S. 24; 
 Bohmer v. City Bank, 77 Va. 445; 
 Leonard v. Ameri. Ins. Co., 97 Ind. 
 299 ; Haden v. Farmers', etc., Fire 
 Ass'n, 80 Va. 683; Spence r. Mobile, 
 etc., Ry. Co., 79 Ala. 576; Kraniger 
 ». Build iug Soc, 60 Minn. 94; First 
 Nat. Bk. v. Kiefer Co., 95 Ky. 97; 
 Senour M'f'g Co. v. Church, etc., 
 Co., 81 Minn. 294. This is, of course, 
 entirely distinct from the question 
 whether courts will take judicial no- 
 tice of the powers of a corporation, 
 which largely depends on whether 
 the corporation is incorporated by 
 special charter or under a general 
 law. For courts will not take judi- 
 cial notice of a special charter. 
 Kelly v. A. & C. R. R. Co., 58 Ala. 
 489. " Persons dealing with the 
 managers of a corporation must take 
 notice of the limitations imposed 
 upon their authority by the act of 
 incorporation." Pearce v. Madison, 
 etc., R. R. Co., 21 How. 441, 443. 
 See §§ 195 and 320. 
 
 229
 
 § 267.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 265. The following proposition may now be submitted : 
 An act beyond the scope of the corporate powers, if 
 General done on behalf of a corporation, or if done by the 
 body corporate itself, affects the rights of persons in 
 respect of the corporate enterprise only in so far as the pos- 
 sessors of those rights by their own acts or omissions have 
 estopped themselves from asserting their rights ; provided the 
 act be of such a character that the party dealing with the cor- 
 poration' or its agents could, from an examination of the charter, 
 or enabling statute and articles of association, have ascertained 
 that the act was ultra vires} 
 
 § 266. The truth and import of this proposition may be illus- 
 trated by three series of cases, the three series re- 
 nate°ruies spectively furnishing authorities for the three folio w- 
 denoted m g propositions, which, taken together, have the 
 same import with the general proposition just stated. 
 (1) An act beyond the corporate powers, if done by any corpo- 
 rate agent, does not bind the corporation. (2) Such an act can- 
 not be executed or ratified by a majority vote of the body cor- 
 porate so as to bind the corporation. (3) But, as the different 
 classes of persons interested ratify or acquiesce in such an act 
 they become estopped from alleging that it was not authorized 
 or binding on the corporation and their interests in the corpo- 
 rate enterprise. A fourth series of cases will illustrate the 
 proviso or qualification to the general proposition. 
 
 § 267. An act beyond the scope of the corporate powers, if 
 done by the board of directors or any other corporate 
 ordinate agency, is not binding on the corporation ; for per- 
 rule ' sons dealing with a corporation through its agents 
 
 are affected with notice of its powers, and cannot assume that 
 any agent has authority to transact business which the corpo- 
 ration was not authorized to engage in.' Accordingly, it has 
 been held that the trustees of a savings bank, when to the 
 knowledge of persons dealing with them there are no funds in 
 the bank for investment, cannot bind the bank by a contract to 
 
 1 This proposition, as well as the 
 reasoning of the following para- 
 graphs, seems fully supported by 
 Lucas v. White Line Transfer Co., 
 70 Iowa, 541, 545-547. See, also, In 
 
 230 
 
 re National Permanent Building 
 Society, ex parte Williamson, L. R. 
 5 Ch. 309 ; Knoxville ». Knoxville, 
 etc., R. R. Co., 22 Fed. Rep. 758. 
 
 Franco-Texas Land Co. v. Mc-
 
 PART in.] ACTS BEYOND THE CORPORATE POWERS. [§ 269. 
 
 take shares in a manufacturing corporation. 1 Neither can the 
 board of directors of a national bank bind their bank by guar- 
 anteeing to a banking house issuing a letter of credit, the obli- 
 gation of the person receiving the letter. 2 JSTor can the direct- 
 ors of a railroad corporation, or of a corporation organized to 
 manufacture and sell musical instruments, bind their respective 
 corporations by an agreement to guarantee the expenses of a 
 musical festival. 3 
 
 § 268. An act beyond the corporate powers cannot validly be 
 done by the body corporate acting as such (i. e., 
 through the vote of a majority in a duly assembled ordinate 
 meeting), nor can it be thus ratified. For the major- ru e ' 
 ity have no authority by such an act or ratification to bind 
 absent or dissentient shareholders ; and persons dealing with 
 the corporation are affected with knowledge of this. 4 The 
 majority cannot make a disposition of the corporate property 
 unauthorized by the constitution of the corporation. 3 
 
 § 269. As the different classes of persons interested in the 
 corporate enterprise ratify or acquiesce in the unau- 
 thorized act they estop themselves from questioning ordinate 
 its validity. 
 
 An ultra vires contract is invalid because enforcing' it would 
 
 Cormick, 85 Tex. 417 ; Alexander v. 
 Cauldwell, 83 N". Y. 480; Elevator Co. 
 v. Memphis, etc., R. R. Co., 85 Tenn. 
 703. See Downing v. Mount "Wash- 
 ington Road Co., 40 N. H. 230 ; City 
 Elec. St. R'y Co. v. First Nat. Bk., 
 65 Ark. 543. 
 
 1 Franklin Co. v. Lewistonlnst. for 
 Savings, 68 Me. 43. See Wilbur v. 
 Stockholders, 18 Bankr. Reg. 178. 
 So the officers of a corporation au- 
 thorized to do a general insurance 
 agency, commission, and brokerage 
 business, cannot on its behalf sub- 
 scribe to stock in a savings bank, and 
 the bank cannot enforce the sub- 
 scription. Mutual Savings Bank v. 
 Meriden Agency Co., 24 Conn. 159. 
 
 2 Seligman v. Charlottesville Nat. 
 Bk., 3 Hughes C. Ct. 647. See John- 
 ston v. Same, ib. 657. 
 
 3 Davis v. Old Colony R. R., 131 
 Mass. 258. See, also, Lucas v. White 
 Line Transfer Co., 70 Iowa, 541. 
 
 4 Bird v. Bird's Patent, etc., Co., 
 L. R. 9 Ch. 358 ; Steiner v. Steiner 
 Land and Lumber Co., 120 Ala. 128. 
 
 5 Kean v. Johnson, 9 N. J. Eq. 401; 
 Taylor v. Earle, 8 Hun, 1 ; Forrester 
 v. B. & M. Min. Co., 21 Mont. 544. 
 A single dissenting shareholder may 
 enjoin the majority from applying 
 the corporate property to unauthor- 
 ized purposes. Natusch v. Irving, 
 Gow on Part. App. ii. ; Lyde v. East- 
 ern Bengal Ry. Co., 36 Beav. 10. See 
 §§ 556, 557. A shareholder in a rail- 
 road corporation may bring suit to 
 set aside an ultra vires lease of the 
 road. Board, etc., Tippecanoe Coun- 
 ty v. Lafayette, etc., R. R. Co., 50 
 Ind. 85. 
 
 231
 
 § 2G9.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 injure some one's rights. If the persons whose rights would 
 have been injured assent to the contract, it thereupon becomes 
 valid, since thus the reasons for its invalidity cease. 1 If, how- 
 ever, the contract, besides being ultra vires, is also illegal, the 
 rights of the public may be regarded as affected, and the assent 
 of all the individuals especially interested in the corporate 
 enterprise will not make the contract valid. 2 As Judge Folger 
 said, giving the opinion of the New York Court of Appeals in 
 Kent v. Quicksilver Mining Co., 3 "In the application of the 
 doctrine of ultra vires, it is to be borne in mind that it has two 
 phases : one where the public is concerned ; one where the 
 question is between the corporate body and the stockholders in 
 it, or between it and its stockholders, and third parties dealing 
 with it and through it with them. When the public is con- 
 cerned to restrain a corporation within the limits of the power 
 given to it by its charter, an assent by all the stockholders to the 
 use of unauthorized power by the corporate body will be of no 
 avail. When it is a question of the right of a stockholder to 
 restrain the corporate body within its express or incidental 
 powers, the stockholder may in many cases be denied on the 
 ground of his express assent, or his intelligent though tacit con- 
 sent to the corporate action. If there be a departure from 
 statutory direction, which is to be considered merely a breach 
 of trust to be restrained by a stockholder, it is pertinent to con- 
 sider what has been his conduct in regard thereto. A corpora- 
 tion may do acts which affect the public to its harm, inasmuch 
 as they are per se illegal or are malum prohibitum. Then no 
 assent of stockholders can validate them. It may do acts not 
 thus illegal, though there is want of power to do them, which 
 affect only the interest of the stock-holders. They may be made 
 good by the assent of the stockholders, so that strangers to the 
 stockholders, dealing in good faith with the corporation, will 
 be protected in a reliance on those acts." 4 
 
 1 The act of incorporation furnishes 
 no security to persons assenting to 
 unauthorized acts. Kearny v. But- 
 tles, 1 Ohio St. 362. Accordingly 
 when a mortgage is executed hy the 
 directors, who own all the stock of 
 the corporation, the corporation can- 
 
 232 
 
 not plead ultra vires. Witter v. 
 Grand Rapids, etc., Co., 78 Wis. 543. 
 
 2 The illegality of ultra vires acta 
 is discussed in §§ 2S7 et seq. 
 
 3 78 N. Y. 159, 185. 
 
 4 Compare Andrews v. Union Mut. 
 Fire Ins. Co., 37 Me. 256. "I think
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 271. 
 
 §270. Accordingly, if all the shareholders ratify the con- 
 tract, or impliedly assent to it by not dissenting after 
 they know of it, no shareholder can object, or claim t^nby 3 "" 
 that the contract, being beyond the corporate powers, ^trs. 
 does not bind the corporate funds ; for he can make 
 such claim only in so far as his interests are concerned, and 
 just to that extent is he estopped by his own action. 1 
 
 § 271. It does not follow, however, that acquiescence or 
 ratification by all the shareholders will, under all cir- Not always 
 cumstances, validate for all purposes an act which, sufficient, 
 though not illegal, is ultra vires. Other persons besides share- 
 holders possess direct pecuniar}' interests in the corporate enter- 
 prise, or at least in the continuing solvency of the corporation. 
 These are corporate creditors. They have rights, and may not 
 have waived them. 
 
 that any objection made only on the 
 ground that it affects tbe interests of 
 a shareholder, can only be made by or 
 on behalf of the sharebolders .... 
 The seemingly technical point .... 
 raises the question whether the small- 
 est excess of authority renders the 
 whole contract illegal, and so enti- 
 tles those who have the management 
 of the corporation (and who, there- 
 fore, presumably were, as individuals, 
 consenting parties to the contract) to 
 repudiate the contract in the name of 
 the company, however long it has 
 been acquiesced in, and however se- 
 riously the position of the plaintiff 
 has been altered in consequence of 
 that acquiescence, or whether the 
 objection should be held to lie only 
 in the mouths of those shareholders 
 who were not consenting parties to 
 the contract sought to be set aside, 
 or have not by laches or otherwise 
 rendered it inequitable in them to set 
 it aside. It is obvious that an ad- 
 herence to this distinction will pre- 
 vent those scandalous cases which 
 have rendered the word repudiation 
 a term of opprobrium." Black- 
 
 burn, J., in Taylor v. Chichester, etc., 
 Ry. Co., L. R. 2 Ex. 356, 380. 
 
 1 Branch v. Jesup, 106 U. S. 468; 
 Tyrell ». Cairo, etc., R. R. Co., 7 Mo. 
 App. 294; Taylor v. S. & N. A. R. 
 Co., 13 Fed. Rep. 152; Benseic v. 
 Thomas, 27 IT. S. App. 765. See 
 Peoria & S. R. R. Co. r. Thompson, 
 103 111. 187; Kelley o. Horse R. R., 
 141 Mass. 496; Burden v. Burden, 
 169 N. Y. 287; Heironimus v. 
 Sweeney, 83 Md. 146. Compare 
 Zabriskie v. Cleveland, etc., R. R. 
 Co., 23 How. 381, a case where 
 (semble) a shareholder could have 
 restrained an act beyond the original 
 powers of the corporation, but au- 
 thorized by a statute passed subse- 
 quently to the charter. The proxy 
 of the shareholder, however, had 
 been present at the shareholders' 
 meeting which ratified the act, and 
 did not vote, when his vote in the 
 negative would have controlled. It 
 was held that the shareholder could 
 not dispute the validity of the act 
 under the circumstances, the bonds 
 havingbeen issued and having passed 
 into the hands of outsiders. 
 
 233
 
 Illus- 
 tration 
 
 § 273. J THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 272. Suppose, for example, that A. has made a contract 
 with a corporation which was beyond its powers ; but 
 the contract has been ratified by all the shareholders. 
 It may also be assumed that A. has performed his 
 part, so that all that remains is for the corporation to pay 
 money, or otherwise perform on its side. The corporation may 
 be insolvent, and there ma} 7 be creditors whose claims have 
 arisen from transactions clearly within the corporate powers. 
 If the claim of A. is satisfied, those creditors will lose part or 
 all of the monev due them. The funds of the corporation are 
 funds to be applied to the corporate objects, which are known 
 to all ; and every one contracts and is entitled to do so on the 
 faith that these funds will be applied exclusively to these ob- 
 jects. The corporate objects include the discharge of liability 
 properly contracted in their attainment ; and the funds of the 
 corporation are funds set apart for this among other purposes. 
 Under such circumstances, who has the better claim to have 
 his debt paid from the corporate funds ? A., who contracted, 
 knowing that the objects for which those funds were set apart 
 excluded the payment of his debt % or the other creditors who 
 contracted, knowing that the objects for which the funds were 
 set apart included the payment of their debts? There can be 
 no doubt that the other creditors have a far clearer right, and 
 that by an appropriate action the payment of any money to A. 
 may be restrained. 1 
 
 § 273. Accordingly, it is held that as against the rights of 
 creditors of the corporation a contract not within the 
 creditors, corporate powers cannot be made valid by the assent 
 of all the shareholders, nor can it, by partial perform- 
 ance on the side of the person contracting with the corporation, 
 become the foundation of a right of action. 2 And when a cor- 
 poration has entered into an ultra vires contract, a claim founded 
 
 1 As between creditors of an insol- 
 vent bank, tbose whose debts were 
 created under lawful power given by 
 the charter must be preferred to 
 tbose who claim under a contract 
 which the bank had no power to 
 make. In such caseas^he bank is not 
 estopped to set up th» illegality or 
 
 234 
 
 want of power. Bk. of Chtno'ga v. 
 Bk. of Memphis, 9 Heisk. (Tenn.) 
 408. See First Nat. Bk. v. Kiefer 
 Co., 95 Ky. 97. 
 
 2 National Trust Co. ». Miller, 33 
 N. J. Eq. 155; Washington Mill Co. 
 v. Lumber Co., 19 Wash. 165.
 
 PART III. J ACTS BEYOND THE CORPORATE POWERS. [§ 275. 
 
 thereon will be disallowed when there is a concourse of creditors 
 and the corporation is insolvent in the hands of a receiver. 1 
 
 Since the only interest of a creditor is that the funds of the 
 corporation shall suffice for the payment of debts due him, and 
 as his only right in respect of the funds is that they shall not 
 be used, in contravention of the constitution of the corporation, 
 in a way to imperil his interests, it follows that, should the 
 corporation be clearly solvent and the debt due a creditor 
 claiming under an ultra vires contract but small in comparison 
 with the resources of the corporation, the corporate creditors 
 would have no rights which would justify the disallowance of 
 the debt arising from the ultra vires contract. 
 
 § 27i. Summing up, it may be said that to hold that a con- 
 tract ultra vires a corporation binds or affects the rights of per- 
 sons who neither expressly nor impliedly have assented to it, 
 is to hold as to shareholders that funds subscribed for a cer- 
 tain purpose, in pursuance of direct authorization from the 
 state, may, against the will of the subscribers, be applied to 
 other purposes ; is to hold, as to creditors, that funds set apart 
 for the payment of their claims, on the faith of which they 
 contracted and were invited to contract, may without their 
 assent be applied to purposes other than the satisfaction of their 
 legal claims. Such a decision disregards vested rights and im- 
 pairs the obligations of a contract. — 
 
 § 2t£. We now pass to a consideration of the second mode of 
 viewing ultra vires transactions. It may be formu- 
 lated in this rule : When a corporation has made a Yo rk rukT. 
 contract beyond its powers {ultra vires), and has per- Opinion in 
 formed its side of the contract, the other contracting- Railroad 
 
 Co 
 
 party cannot plead in an action on the contract that 
 it was ultra vires the corporation ; nor, conversely, if the other 
 party has performed, and the corporation has had the benefit of 
 his performance, may the corporation plead that the contract 
 was ultra vires. The reasons for this rule lie in its apparent 
 
 1 lb.; Abbott v. Balto., etc., St. P. 
 Co., 1 Md. Ch. 542. See First Nat. 
 Bk. v. Kiefer Co., 95 Ky. 97. A re- 
 ceiver of an insolvent corporation 
 may repudiate a transfer of mort- 
 gages owned by the corporation, if 
 
 the transfer was made to secure the 
 obligations of the corporation arising 
 from an ultra vires transaction. Tal- 
 mage v. Pell, 7 N. Y. 328; Bank Com- 
 missioners v. St. Lawrence, ib. 513. 
 
 235
 
 § 275.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 justice and convenience of application. The authority for it 
 would seem to rest, in the first instance, upon dicta contained 
 in the leading case of Bissell y. Michigan Southern and North- 
 ern Indiana K. II. Cos. 1 In the course of an elaborate opinion 
 Judge Comstock said: 3 "I think this doctrine of theoretical 
 perfection in corporations would convert them practically into 
 most mischievous monsters. A bank, through its board of di- 
 rectors, may invest its funds in the purchase of stock, and every 
 holder of the stock may acquiesce, expecting to profit by the 
 speculation. If the enterprise is successful, the corporation and 
 the shareholders gain by the result. If a depression occurs in 
 the market and disaster is threatened, the doctrine that a cor- 
 poration can never act outside of its charter enables it to say, 
 'this is not our dealing,' and the money used in the adventure 
 may be unconditionally reclaimed from whatever parties have 
 received it in exchange for value ; while the injured dealer 
 must seek his remedy against agents, perhaps irresponsible and 
 unknown. Corporations may thus take all the chances of gain 
 without incurring the hazards of loss." 
 
 The same judge said on the same page : 3 " In the relations of 
 private principal and agent, the adoption of an agent's unau- 
 thorized dealing is equivalent to an original authority, and the 
 adoption is perfect when the principal receives the proceeds of 
 the dealing. Corporations may practically act in the same 
 manner." Here the difficulty is, that in a corporate enterprise 
 no one has authority to ratify ultra vires acts so as to bind any 
 one else, because the ratification of ultra vires acts is beyond 
 the scope of any agency in the directors or in the body corpo- 
 
 1 22 N. Y. 258. Approved in Buf- 
 fet v. Troy & Boston R. R. Co., 40 
 N. Y. 168. 
 
 2 22 N. Y. 264. 
 
 3 Logically these statements are 
 open to criticism. The shareholders 
 who assent certainly should not be 
 allowed to object to the contract ; 
 but suppose that the bank owes a 
 creditor a large sum of money; if 
 the bank pays the losses from the 
 stock operations, this creditor will j 
 
 236 
 
 lose part of his claim. He has a bet- 
 ter right to be paid than the creditors 
 whose claims arise from transactions 
 known to have been beyond the cor- 
 porate powers. The inquiry should 
 be, is there any person whose rights 
 would be impaired by carrying out 
 the ultra vires contract who is not 
 estopped fiom claiming the contract 
 to have been ultra vires ? It is right 
 to say, however, that the interests of 
 creditors were not before the court.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 276. 
 
 rate ; l and that such ratification is beyond the scope of any 
 agency existing in respect of the corporate enterprise, every 
 one dealing with the corporation is held to know. 
 
 The only point actually decided in this celebrated case was 
 that two corporations, created respectively by the states of 
 Michigan and Indiana, with power to each to build and operate 
 a railroad within the state granting the charter, having united 
 in the business of transporting passengers over a third railroad 
 in the state of Illinois, beyond the limits authorized by the 
 charter of either, are jointly liable for injuries to a passenger 
 resulting from the negligence of their employe's occurring in 
 the state of Illinois. The decision is unobjectionable, for the 
 shareholders must have known of the operations in Illinois, and, 
 not having objected to them, they would have been estopped 
 from objecting to the results ; and no suggestion was made to 
 the court that the payment of the comparatively small sum of 
 twenty-five hundred dollars, the amount of damages found by 
 the jury, would prejudice the rights of creditors. 2 
 
 § 276. The rules which this case and sundry others in New 
 York 3 and elsewhere have tended to establish may Partvcon . 
 be considered here. If the corporation has performed feting 
 
 , •.•ill ■ witn corpo- 
 
 the contract on its side, the other contracting party ration can- 
 
 cannot plead that the corporation was not authorized uitmttres 
 
 to make such a contract. This is held by Whitney hiTper-" 61 
 
 Arms Co. v. Barlow, 4 and does not seem open to ob- f ° r med. 
 
 1 The notion of a body corporate 
 ordinarily implies the right of a ma- 
 jority to act for all. But the right 
 of a majority to act for all does not 
 extend beyond the purposes of or- 
 ganization. See Pickering v. Ste- 
 phenson, L. R. 14 Eq. 322, 340. 
 
 2 Similarly it was held correctly in 
 Magee v. Pacific Imp. Co., 98 Cal. 
 678, that a corporation which engages 
 in the business of iunkeeper cannot 
 plead ultra vires when sued by a guest 
 for loss of his property. See, also, 
 Linkauf v. Lombard, 137 N. Y. 417. 
 
 3 E. y., Parish v. Wheeler, 22 N. Y. 
 494. 
 
 ♦63 N. Y. 62; Ace. National Bank 
 
 i: Whitney, 103 U. S. 99; Linkauf v. 
 Lombard, 137 N. Y. 417; Bath Gas 
 Light Co. ». Claffy, 151 N. Y. 24; 
 Union Water Co. v. Murphy's Flat 
 Pluming Co., 22 Cal. G21; Hall M'f'g 
 Co. v. American, etc., Supply Co., 
 48 Mich. 331; Franklin Ave. German 
 SVgs Inst. v. Board of Education, 
 7"> Mo. 408; Oil Creek, etc., R. R. Co. 
 v. Penna. Trans'n Co., 83 Pa. St. 160; 
 Goundie v. Northampton Water Co., 
 7 Pa. St. 233; Leazure v. Hillegas, 
 7 S. & R. 313; Leavitt v. Pell, 27 
 Barb. 322; Steam Nav. Co. v. Weed, 
 17 Barb. 378; Germantown Farmers' 
 Mut. Ins. Co. v. Dhein, 43 Wis. 420; 
 Edwards v. Fairbanks, 27 La. Ann.
 
 § 277.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 jection. "One who has received from a corporation the full 
 consideration of his engagement to pay money .... cannot 
 avail himself of the objection that the contract thus fully per- 
 formed by the corporation was ultra vires, and not within its 
 chartered privileges and powers." 1 Such a person, having 
 himself made the contract and received its benefit, is clearly 
 estopped from making any such allegation. 
 
 This rule rests on the corporation's performance. It does 
 not apply so long as the ultra vires contract remains executory 
 on both sides. While that is the case neither party can com- 
 pel the other to perform. 2 
 
 § 277. The converse of the above rule is also held to be law. 
 If the other contracting pa rt y lias performed his side 
 of the contract, the corporation cannot j?lead that its 
 charter gave it no power to enter into the contract; 
 at least if the corporate property has been benefited 
 by the performance? It is submitted in the way of logical 
 
 Converse of 
 this propo- 
 sition in- 
 volves a fal- 
 lacy. 
 
 449; Allen o. Freedman's Savings Co., 
 14 Fla. 418; Brown v. Mortgage Co., 
 110 111. 235; Eckmau v. C. B. & Q. R. 
 Co., 169 111. 312; Chicago & A. Ry. 
 Co. ». Derkes, 103 Ind. 520; Chester 
 Glass Co. v. Dewey, 16 Mass. 94; 
 Union Nat. Bk. o. Hunt, 76 Mo. 439; 
 Bond v. Terrell Mfg. Co., 82 Tex. 309. 
 See Goodin v. Evans, 18 Ohio St. 150; 
 Goodin v. Cincinnati, etc., C. Co., ib. 
 169; Kelly v. People's Trans. Co., 3 
 Oregon, 189; Shewalter v. Pinter, 55 
 Mo. 218; Third Avenue Savings Bk. 
 v. Dimock, 24 N. J. Eq. 26; Dutchess 
 Cotton Manufactory v. Davis, 14 
 Johns. 238, 245; Reynolds v. Craw- 
 fordsville First National Bank, 112 
 U. S. 405, 413. Contra, Chambers ». 
 Falkner, 65 Ala. 449; compare 
 Screven Hose Co. v. Philpot, 53 Ga. 
 625; Mutual Benefit Life Ins. Co. v. 
 Davis, 12 N. Y. 569; North River Ins. 
 Co. v. Lawrence, 3 Wend. 482; Beach 
 v. Fulton Bank, 3 Wend. 573. 
 
 Regarding contracts forbidden by 
 statute, see §§ 297 et seq. 
 
 1 Whitney Arms Co. c. Barlow, 63 
 
 238 
 
 N. Y. 70; Building Ass'n v. Lamson, 
 60 Minn. 422; Bath Gas Co. v. Claffy, 
 151 N. Y. 24. 
 
 2 Nassau Bank ». Jones, 95 N. Y. 
 115; Bosshardt Co. r. Oil Co., 171 Pa. 
 St. 109; Wilkes v. Pacific R. R. Co., 
 79 Ala. 180; First Nat. B'k r. Win- 
 chester, 119 Ala. 168; Day i\ Spiral 
 Springs Buggy Co., 57 Mich. 146. 
 See Camden & A. R. R. Co. v. May's 
 Landing, etc., R. R. Co., 48 N. J. L. 
 530, 561; Simpson v. Bldg. Ass'n, 38 
 O. St. 349. Compare R. R. Co. v. Tel. 
 Co., ib. 31; Jemison v. City's Sav. 
 B'k, 122 N. Y. 135. 
 
 3 Linkauf v. Lombard, 137 N. Y. 
 417 ; Camden & Atl. R. R. Co. v. 
 May's Landing, etc. R. R. Co., 48 N. J. 
 L. 530; Chapman v. Iron Clad Co., 62 
 N. J. L. 497 ; Railroad v. Railroad, 
 m N. H. 100, 127 ; International Tr. 
 Co. o. Company, 70 N. H. 118 ; Denver 
 Fire Ins. Co. v. McClelland, 9 Col. 11 ; 
 Sherman Center Town Co. v. Morris, 
 43 Kan. 282 ; He i ins Brg. Co. o. Flan- 
 nery, 137 111. 309; Towers, etc., Co. 
 v. Inmau, 96 Ga. 506 ; Pindleton
 
 PART III.] ACTS BEYOXD THE CORPORATE POWERS. [§ 277. 
 
 criticism that this last proposition involves a fallacy. If the 
 other contracting party had contracted through an agent whose 
 instructions were contained in a written instrument which the 
 corporation knew to contain all the authority which the agent 
 possessed ; and if the contract in question was unauthorized by 
 this instrument, could any one maintain that the principal would 
 be bound because the corporation had performed its side of the 
 contract ? x Yet, in reality, it is in analogy with this to hold the 
 corporation bound because the other contracting party has per- 
 formed. 2 
 
 Hardware Co., in re, 24 Oreg. 330 ; 
 Tootle v. Bank, 6 Wash. 181. " The 
 rule may not be strictly logical, but it 
 prevents a great deal of injustice.' 1 
 Seymour ». Chicago Guaranty, etc., 
 Soc, 54 Minn. 147, 149. 
 
 1 To be sure, the principal could not 
 disavow the unauthorized portion of 
 a contract, and hold the other con- 
 tracting party with respect to the 
 rest. And on similar principles, 
 when the agent of a corporation has 
 purchased for it certain chattels, and 
 given back a purchase-money mort- 
 gage thereon, the enforcement of the 
 mortgage cannot be enjoined on the 
 ground that the mortgage was ultra 
 vires. Amerman v. Wiles, 24 X. J. 
 Eq. 13; see Parish v. Wheeler, 22 
 N. Y. 494; Whitney v. Leominster 
 Savings Bank, 141 Mass. 85. See 
 §§310-312. 
 
 2 To illustrate, let us imagine that 
 
 B. is a landowner, A. his agent, and 
 
 C. a manufacturer of fertilizers. If 
 C, knowing that A. has no authority 
 from B. to purchase fertilizers, sells 
 a large amount of them to be applied 
 on B.'s lands, and they are so applied, 
 but without B.'s knowledge, C. has 
 executed the contract on his side, 
 and B.'s lands have had the benefit. 
 Yet it is clear that C. has no valid 
 claim against B. Apply this to the 
 case of a corporation. Let B. be the 
 shareholders and creditors ; let A. be 
 
 the board of directors, and C. the 
 other contracting party. A. makes 
 a contract with C. beyond the powers 
 of the corporation — beyond A.'s 
 powers to represent the corporate 
 interests. In legal intendment C. 
 knows this contract to be beyond A.'s 
 authority, but nevertheless performs 
 his side of it, and the results of his 
 performance are applied to the bene- 
 fit of the corporate enterprise, but 
 without the knowledge of the share- 
 holders or creditors. Here the inter- 
 ests of shareholders and creditors 
 have been benefited ; but through no 
 voluntary action or acquiescence on 
 their part, and through acts which 
 C. knew they had not authoi'ized. 
 It is again clear that C. by his per- 
 formance acquires no rights which 
 can affect the interests of share- 
 holders and creditors. And the same 
 reasoning would apply even if the 
 corporation by a vote in corporate 
 meeting ratified the contract ; the 
 rights of absent or dissentient share- 
 holders would not thereby be affect- 
 ed, provided they were guilty of no 
 laches in asserting their rights. Un- 
 doubtedly, if the shareholders know 
 that ultra vires contracts are being 
 entered into and performed, and that 
 the proceeds are being applied to the 
 corporate enterprise, they cannot 
 with honesty stand quietly by, but 
 must do all in their power to prevent 
 
 239
 
 § 279.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 279. If one examines with care the cases which are regarded 
 Examina- as au thority for this rule that sounds so just — if the 
 tdonofcer- other contracting party has performed, and by his 
 performance benefited the property of the corpora- 
 tion, the latter cannot plead ultra vires — it will appear that the 
 recovery of the other party often does not rest on the fact that 
 he has performed, nor on the fact that his performance has 
 benefited the corporate property : though undoubtedly he would 
 not have had his cause of action had he not performed ; and 
 that corporate interests were benefited may very likely have 
 been a material point in establishing his case. It is submitted, 
 that in these cases the plaintiff's recovery rests on the circum- 
 stance that all the persons who would have been entitled to 
 object to the contract allowed the plaintiff to go on and per- 
 form under the reasonable assumption on his part of general 
 acquiescence in the contract. To be sure, shareholders are not 
 generally supposed to be continually exercising an active super- 
 vision over the affairs of the corporation. But they have a 
 right to inspect its books, and, if they choose, may keep them- 
 selves acquainted with what is being done by the corporate 
 management. At any rate, unless they keep a watch over the 
 course of the corporate affairs, they will not be entitled on the 
 plea of their own ignorance to come forward at their pleasure 
 and cause the repudiation of corporate obligations. Sharehold- 
 ers wishing to prevent illegal or ultra vires acts, or to absolve 
 the corporation from responsibility for them, must be vigilant 
 and swift. 1 
 
 such application. Therefore, through 
 acquiescence after they know, or, if 
 they had heeu at all observant of 
 corporate affairs, would have known 
 of the contracts, they would be es- 
 topped from objecting. And so per- 
 haps might creditors estop them- 
 selves. 
 
 The preceding argument leads to 
 this unavoidable conclusion : the 
 mere facts that the other contracting 
 party has executed his side of the 
 ultra vires contract, and that the cor- 
 porate property has thereby been 
 benefited, do not affect the rights of 
 
 240 
 
 persons who have done nothing from 
 which assent to the contract can in 
 any way be inferred. This reason- 
 ing accords, as fully as the proposi- 
 tion controverted disaccords, with a 
 most universal principle of law : a 
 person cannot by his own act acquire 
 aright against another ; the other 
 must in some way have bound him- 
 self. 
 
 1 Thompson v. Lambert, 44 Iowa, 
 239. " A court of equity may refuse 
 to interfere witli a corporation at the 
 instance of a stockholder, in respect 
 to an unauthorized contract which
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 280. 
 
 § 280. Take, for instance, the leading case of Bissell v. Rail- 
 road Companies, 1 on which this alleged rule is said to rest. In 
 the first place, not all the judges who concurred in the result 
 based their decision on that rule at all ; and in the second place, 
 it would have been preposterous not to assume that all the share- 
 holders were acquainted with the fact that the corporations were 
 running a railroad where their charters did not authorize them 
 to run one. Or take the leading Illinois case often referred to 
 as establishing this rule, Bradley v. Ballard. 2 There a share- 
 holder sought to restrain the prosecution of a suit against the 
 corporation brought to recover on an ultra vires contract, which 
 had been performed by the plaintiff in the suit against the cor- 
 poration. But the shareholder seeking the injunction was also 
 a director, and, as the court said, had been willing enough that 
 the contracts should be made as long as he expected profits to 
 arise from them. 3 So in other Illinois cases more or less based 
 on Bradley v. Ballard, but in which the corporation itself re- 
 sisted the suit on the plea of ultra vires, it is evident that the 
 decisions proceed on the assumption, and there was no sugges- 
 tion to the contrary, that the contracts sued on, and the trans- 
 
 has been fully executed, when if the 
 same stockholder had applied in 
 season for an order to restrain the 
 execution of the contract, equity 
 might have felt bound to grant the 
 relief prayed for. Especially is this 
 so where the complainant has stood 
 by and allowed the illegal transac- 
 tion to be consummated, and has 
 allowed and induced others to be- 
 come interested in the corporation 
 on the supposition that the existing 
 state of things is legal and proper." 
 Terry v. Eagle Lock Co., 47 Conn. 
 141, 161. 
 
 In St. Louis, etc., R. R. Co. v. 
 Terre Haute, etc., R. R. Co., 145 U. 
 S. 393, the court refused to entertain 
 a bill in equity to set aside an ultra 
 vires lease of a railroad after it had 
 been acted on for seventeen years. 
 
 1 §275. See, also, Savings Bank v. 
 Elevator Co., 90 Mich. 550. 
 
 2 55 111. 413. 
 
 16 
 
 3 55 111. 419. For instance, it has 
 been held that the holder of a note 
 for value may enforce it against the 
 maker, a corporation, although it was 
 ultra vires the corporation to pur- 
 chase the property in payment for 
 which the note was given, and the 
 holder knew the consideration of the 
 note. The defendant retained the 
 property, and did not offer to give it 
 up. Wright v. Pipe Line Co., 101 
 Pa. St. 204. Compare Union Trust 
 Co. v. Library Hall Co., 189 Pa. St. 
 263. See, also, Pittsburg R. R. Co. v. 
 Altoona Co., 196 Pa. St. 452. The 
 note was given to pay for stock pur- 
 chased by defendant in contravention 
 of a statutory prohibition. The court 
 said this was a matter for the at- 
 torney-general. See, also, Tajdor v. 
 North Star M'g Co., 79 Cal. 285; 
 Woodcock v. Bank, 113 Mich. 236. 
 But see, semble contra, Westinghouse 
 I Machine Co. v. Wilkinson, 79 Ala. 312. 
 
 241
 
 § 281.J THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 actions in the course of which the contracts were performed, 
 had been generally acquiesced in. 1 
 
 Darst v. Gale 2 is another case frequently cited in support of 
 the alleged rule — which is indeed stated in so many words in 
 the opinion of the court — " that a private corporation cannot 
 avail of the defence of ultra vires where the contract has been 
 in good faith fully performed by the other party, and the cor- 
 poration has had the benefit of the contract and the perform- 
 ance.'' But in this case the defence was not set up by or on 
 behalf of the corporation, nor on behalf of any person inter- 
 ested in it. A subsequent grantee of premises belonging to the 
 corporation attempted to have a prior deed of trust covering 
 the same property set aside, on the ground that such deed was 
 ultra vires the corporation ; he having bought with full notice 
 of the prior deed. The ultra vires nature of the prior deed had 
 infringed no right of his ; and, consequently, he had no stand- 
 ing in court to interpose the plea of ultra vires. 
 
 § 281. The decision, if not the reasoning, in this case points 
 to an important principle respecting the plea of ultra vires. 
 According to the rules under discussion, the plea cannot be in- 
 terposed by the party contracting with the corpora- 
 tion when the corporation has performed : 3 and the 
 reason for this lies not only in the estoppel with 
 which, under the circumstances, such a person is 
 affected, but in the following reason as well : That 
 the transaction was ultra vires infringed none of his 
 
 Ultra vires 
 cannot be 
 pleaded by 
 a person 
 whose 
 rights are 
 not in- 
 fringed. 
 
 1 Peoria and Springfield R. R. Co. 
 v. Thompson, 103 111. 187; Ward ». 
 Johnson, 95 111. 215. It is thought 
 that the foregoing remarks will often 
 apply to cases relied on in support of 
 this alleged rule, in some of which, 
 indeed, the rule is stated in so many 
 words. See Oil Creek, etc., R. R. Co. 
 v. Penna. Trans' n Co., 83 Pa. St. 1G0; 
 State Brd. of Agriculture v. Citz.'s 
 Street R'y Co., 47 Ind. 407. Compare 
 Arnot v. Erie R'y Co., 67 N. Y. S15; 
 Zabriskie v. Cleveland, etc., R. II. Co.. 
 23 How. 381; Main v. Casserly, 67 
 Cal. 127; Blood v. La Serena, L. & 
 W. Co., 134 Cal. 361. 
 242 
 
 2 83 111. 136. Since the decision in 
 National Home B'ld'g Ass'n v. Bank, 
 181 111. 35, the cases of Darst v. Gale 
 and Bradley v. Ballard cannot be con- 
 sidered authority for this proposi- 
 tion in support of which they have 
 so often been cited. See also Kadiole 
 v. Loan Ass'n, 151 111. 531. Compare 
 Grant t>. Henry Clay Coal Co., 80 Pa. 
 St. 208. And for the validity of un- 
 authorized conveyances of real or per- 
 sonal property to a corporation, see 
 § 303. 
 
 3 § 276.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 282. 
 
 rights ; be cannot, therefore, interpose the defence. There 
 is a plain principle which is not only law, but common sense. 
 "\Yith a few special exceptions, no one can represent another 
 before the courts or elsewhere, without authority, express or 
 implied, to do so. To an action brought against himself, a man 
 cannot ordinarily plead that the rights of another, whom he is 
 not authorized to represent, will be affected by the prosecution 
 of the suit. If the court consider that hardship and injustice 
 will result unless the interests of such outside person are re- 
 garded, the court — at least a court of equity — may require him 
 to be made a party to the suit, in order to afford him oppor- 
 tunity to protect his interests. Accordingly, when a contract 
 ultra vires a corporation is entered into, it is not competent for 
 persons whose rights are not infringed, any more than for 
 those who by their actions have estopped themselves from com- 
 plaining, to restrain the fulfillment of the contract on the ground 
 that the interests of others, which they are not authorized to 
 represent, will be injured. It may therefore be stated as a 
 rule, that a person whose rights are in no way infringed b} r the 
 fact that a given act is ultra vires a corporation, can found no 
 action or defence on that fact. 1 
 
 § 282. There are a number of decisions in accord with this 
 rule. Thus, a corporation incorporated " for the purpose of 
 manufacturing fabrics of wool and worsted or of a mixture 
 thereof with other textile materials," may maintain an action 
 against the purchaser of groceries sold by a person who was 
 keeping a store as the undisclosed agent of the corporation. 2 
 On similar principles it is held that when a corporation has, in 
 an unauthorized manner, purchased a note, its title thereto 
 
 1 Belcher Sugar Ref Co. v. Elevator 
 Co., 101 Mo. 192; Baker v. Loan Co., 
 36 Minn. 185. Compare Wherry v. 
 Hale, 77 Mo. 20; Farmers', etc., 
 Bank v. Detroit, etc., R. R. Co., 17 
 Wis. 372; St. Louis Drug Co. v. Rob- 
 inson, 81 Mo. 18; XewEng. R. R. Co. 
 v. Central R'y Co., 69 Conn. 47; 
 Beek v. No. Neb. F. & D. P. Ass'n, 
 54 Neb. 226; Butterworth v. Lowe, 
 115 Mich. 1; semblc contra, Salmon 
 River M'g Co. v. Dunn, 2 Idaho, 30. 
 
 A release executed by a contract- 
 
 ing party to a corporation (a county) 
 of his rights relating to the unful- 
 filled portion of an ultra tires con- 
 tract, the release being executed at 
 the request of defendant, who had a 
 personal interest in getting the con- 
 tract discharged, is a good consider- 
 ation to support a promise made by 
 the defendant to the party executing 
 the release. Wile v. Wilson, 93 N. Y. 
 255. 
 
 2 Slater Woolen Co. r. Lamb, 143 
 Mass. 420. 
 
 243
 
 § 283.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 cannot be questioned by the promisor. 1 Nor can irregularities 
 in a mortgage made by a corporation betaken advantage of by 
 a subsequent grantee of the mortgaged premises. 2 Likewise, 
 the power of a corporation to assign a chose in action cannot 
 be questioned in an action thereon by the assignee ; 3 and although 
 the purchase of a piece of land may have been ultra vires a rail- 
 road company, still when the railroad company sells the land 
 the title of its vendee is good. 4 Again, when both plaintiff 
 and defendant claim under a common source, — from a rail- 
 road corporation, — the plaintiff by conveyance at an execution 
 sale of its property, the defendant under deeds of trust exe- 
 cuted by it, neither can set up that the acquisition of the 
 property was ultra vires the corporation. 5 And, finally, where 
 the president with other officers of a corporation bought stock 
 for the company, and subsequently converted it unlawfully to 
 their own use, they cannot plead when sued for the conversion 
 
 7/ that the original purchase made by them on behalf of the cor- 
 
 poration was ultra vires. 6 
 
 <*ret?%,e § 283. We pass now to the third view taken of the doctrine 
 
 J- The °^ u ^ ra vires, which is held by the Supreme Court 
 
 Federal Q f the United States. According to this view a cor- 
 
 2,>V poration cannot make a contract be}~ond its pur- 
 
 pose and powers as defined and conferred by the legislature 
 creating it. Such a contract is a nullity ; it cannot be ratified, 
 nor can it through performance on either side, or by the 
 application of any principles of estoppel, become the foundation 
 of a right of action upon the contract. 
 
 A corporation thus is viewed as a creation of the law ; it 
 derives its powers from the charter of its creation ; in the eye 
 of the law it has no other or further powers, and its attempted 
 acts outside of them are a vain beating of the air. This doctrine 
 was primarily formulated by the Supreme Court with respect 
 to corporations, like railroad companies, having public duties 
 
 1 Ehrman v. Union Cent. Life Ins. 
 Co., 35 Ohio St. 324. 
 
 2 Beecher v. Marquette, etc., Mill 
 Co., 45 Mich. 10:); Darstv. Gale, ante, 
 § 280. 
 
 3 Small >■. C. R. I. and P. R. R. Co., 
 55 Iowa, 582. 
 
 244 
 
 * Walsh?). Barton, 24 Ohio St. 28; 
 Ragan v. McElroy, 98 Mo. 349. 
 
 5 Morgan v. Donovan, 58 Ala. 241. 
 
 6 St. Louis Stoneware Co. v. Part- 
 ridge, 8 Mo. App. 217.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 283. 
 
 to perforin, as in the leading case of Central Transportation Co. 
 v. Pullman's Palace Car Co. 1 and other cases preceding it. 2 It 
 has since been extended to national banks, and the language of 
 the court warrants the assumption, that this doctrine applies to 
 all private corporations. Nevertheless at least a portion of the 
 reasons on which the court has based its doctrine apply with 
 lessened force to manufacturing or trading corporations which 
 owe no definite duties to the public. The language of the fol- 
 lowing citations from the opinion of the court through Justice 
 Gray in Central Transportation Co. v. Pullman's Palace Car 
 Co., has frequently been repeated and affirmed by the Supreme 
 Court. It is authoritative, and will also show how this rule 
 was formulated with a view to corporations affected with public 
 duties. 
 
 " The clear result of these decisions may be summed up thus : 
 The charter of a corporation, read in the light of any general 
 laws which are applicable, is the measure of its powers, and the 
 enumeration of those powers implies the exclusion of all others 
 not fairly incidental. All contracts made by a corporation 
 beyond the scope of those powers are unlawful and void, and 
 no action can be maintained upon them in the courts, and this 
 upon three distinct grounds : the obligation of every one con- 
 tracting with a corporation to take notice of the legal limits of 
 its powers; the interest of the stockholders not to be subjected 
 to risks which they had never undertaken ; and, above all, the 
 interest of the public that the corporation shall not transcend 
 the powers conferred upon it by law. A corporation cannot, 
 without the assent of the legislature, transfer its franchise to 
 another corporation, and abnegate the performance of the duties 
 to the public imposed upon it by its charter as the consideration 
 for the grant of the franchise. Neither the grant of a franchise 
 to transport passengers, nor a general authority to sell and dis- 
 pose of property, empowers the grantee, while it continues to 
 exist as a corporation, to sell or to lease its entire property and 
 franchise to another corporation. These principles apply 
 equally to companies incorporated by special charter from the 
 
 1 139 U. S. 24. I v. St. Louis, etc., R. R. Co., 118 U. S. 
 
 2 E. g., Oregon Ry. Co. i\ Oregonian 290 ; Thomas v. R. R. Co., 101 U. S. 
 Ry. Co., 130 U. S. 1 ; Pa. R. R. Co. I 71. 
 
 245
 
 § 283.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 legislature, and to those formed by articles of association under 
 general laws. . . . 
 
 "The plaintiff was not an ordinary manufacturing corpora- 
 tion, such as might, like a partnership or an individual engaged 
 in manufactures, sell or lease all its property to another corpo- 
 ration." [It was a quasi public corporation with duties to the 
 public] "the performance of which, by the corporation itself, 
 was the remuneration that it was required by law to make to 
 the public in return for its franchise. . . . 
 
 " The contract sued on being clearly beyond the powers of 
 the plaintiff corporation, it is unnecessary to determine whether 
 it is also ultra vires of the defendant, because, in order to bind 
 either party, it must be within the corporate powers of both. 
 
 " It was argued in behalf of the plaintiff that, even if the 
 contract sued on was void, because ultra vires and against pub- 
 lic policy, yet that having been fully performed on the part of 
 the plaintiff, and the benefits of it received by the defendant, 
 for the period covered by the declaration, the defendant was 
 estopped to set up the invalidity of the contract as a defence 
 to this action to recover the compensation agreed on for that 
 period. 
 
 " But this argument, though sustained by decisions in some of 
 the states, finds no support in the judgments of this court. . . . 
 
 " The view which this court has taken of the question pre- 
 sented by this branch of the case, and the only view which ap- 
 pears to us consistent with legal principles, is as follows: — 
 
 " A contract of a corporation which is ultra vires in the 
 proper sense, that is to say, outside the object of its creation as 
 defined in the law of its organization, and therefore beyond the 
 powers conferred upon it by the legislature, is not voidable 
 only, but wholly void and of no legal effect. The objection to 
 the contract is not merely that the corporation ought not to 
 have made it, but that it could not make it. The contract can- 
 not be ratified by either party, because it could not have been 
 authorized by either. ISo performance on either side can give 
 the unlawful contract any validity, or be the foundation of any 
 right of action upon it." ' 
 
 As already said, the Supreme Court has apparently extended 
 
 1 139 U. S. 24, 48 sqq. See the I in California Bank v. Kennedy, 167 
 reiteration of much of this language I U. S. 362. 
 240
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 284. 
 
 the application of this stringent rule to private corporations 
 generally, irrespective of whether or not they have public 
 duties to perform. It has been applied in all its strictness to 
 the contracts of national banks. The court has held, for ex- 
 ample, that, as it is ultra vires a national bank to deal in the 
 stocks of other corporations, the shares so acquired by it create 
 no liability on its part to the creditors of the corporation issu- 
 ing them. It makes no difference that the bank has received 
 dividends ; for the transaction was void, and not merely void- 
 able and capable of ratification. The principle of estoppel can- 
 not apply ; and the bank may plead the nullity of its ultra 
 
 vires act. 1 ___ _ — . ., -, — ,- ^ 
 
 §1284. Thus, in regard to ultra vires contracts which have 
 been executed by the party dealing with the corpora- /&*■ 
 
 tion, the rule of the United States Supreme Court is ^or^to the /£*-<^ 
 opposed to the rule of the courts of New York and general ^ -? 
 
 , rules. Cp<~.~4v^ 
 
 certain other states. 2 On the other hand there is no 
 conflict respecting ultra vires contracts which neither party has 
 executed ; such will not sustain an action in any court. More- 
 over American courts are in accord on the proposition which 
 
 1 California Bank v. Kennedy, 167 I The same rule is held in Nat. 
 U. S. 3*32; Concord First Nat'l Bk. | Home B'ld'g Ass'n v. Bank, 181 111. 
 v. Hawkins, 174 U. S. 364; followed 35; Best Brewing Co. v. Klassen, 185 
 in Robinson v. Southern Nat'l Bk. | 111. 37; Fritze v. Equitable B. & L. 
 180 U. S. 295, in which, however, Soc., 186 111. 183; Franklin Nat. Bank 
 the court remarked that while it r. Whitehead, 149 Ind. 560; Chewacla 
 was " not disposed as at present ad- Lime Works v. Dismakes, 87 Ala. 
 vised, to push the principle of these 344; see Penna., etc., Nav. Co. v. 
 cases so far as to exempt such banks Dandridge, 8 Gill & J. (Md.) 248. 
 fx'om liability as other shareholders, I But when the act is one forbidden 
 where they have accepted and hold i by a state statute, and the highest 
 stock in other corporations as col- court of the state has held that such 
 lateral security for money advanced act is not void but merely voidable, 
 (a consideration which we withhold at the suit of the state, the Federal 
 
 from discussion) we think there is a 
 presumption in such cases against 
 any intention on the part of the 
 lending bank to become the owner 
 of the collateral shares." See, also, 
 Louisville, N. A. & C. Ry. Co. v. 
 Louisville Tr. Co., 174 U. S. 552; De 
 la Vergne Co. v. Germ. Sav. Inst. 
 175 IT. S. 40; Chemical Nat. Bank v. 
 Havemale, 120 Cal. 601. 
 
 Supreme Court will follow that de- 
 cision. Sioux City R. R. Co. v. N. 
 A. Ti. Co., 173 U. S. 99. It has been 
 held in a state court that a national 
 bauk may take stock in another cor- 
 poration in payment of a debt. 
 Tourtelet, Rec'r, v. Whithed, 9 N. 
 Dak. 467. 
 'Ante, §277. 
 
 247
 
 § 284.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 was put as a qualification to the general rules as stated in §§ 205 
 and 2G6. The principle that neither the officers of a corpora- 
 tion, nor the body corporate itself, can bind dissenting share- 
 holders or creditors by ultra vires contracts, is mainly based on 
 the fundamental principle of corporation law, that all persons 
 dealing with the corporation or its agents are affected with 
 notice of the corporate powers as indicated by the corporate 
 constitution. It is accordingly evident that, the main reason 
 for the rule failing, this principle does not apply to contracts 
 apparently within the corporate powers, but in reality ultra 
 vires on account of extraneous facts. A person dealing with 
 a corporation may assume that acts done on its behalf are 
 proper ; and circumstances especially within the knowledge of 
 the corporate representative will not ordinarily affect the rights 
 of such a person acting in good faith. 1 Accordingly, if an act 
 done by a corporate agent, or by the body corporate, be appar- 
 ently within the scope of the corporate powers, the rights of the 
 party dealing with the corporation or its agent will not be af- 
 ected by the circumstance that the act in question was rendered 
 ultra vires either by extraneous facts, or by the secret purpose 
 of the corporation or its agent respecting the act ; provided the 
 party acted in good faith and as a careful man. 2 
 
 " When a corporation is acting within the general scope of 
 the powers conferred upon it by the legislature, the corporation 
 as well as persons contracting with it may be estopped to deny 
 that it has complied with the legal formalities which are pre- 
 requisites to its existence or to its action, because such requisites 
 might in fact have been complied with. But when the contract 
 is beyond the powers conferred upon it by existing laws, neither 
 the corporation nor the other party to the contract can be es- 
 topped, by assenting to it, or by acting upon it, to show that it 
 was prohibited by those laws." 3 
 
 " The distinction between the doing by a corporation of an 
 act beyond the scope of the powers granted to it by law, on the 
 one side, and an irregularity in the exercise of the granted 
 
 1 § 203. 
 
 2 See Express Co. v. R. R. Co., 99 
 U. S. 191, 199; Charleston, etc., Turn- 
 pike Co. v. Willey, 16 Ind. 34; Ward- 
 ner, etc., Co. v. Jack, 82 Iowa, 435; 
 
 248 
 
 Luttrell v. Martin, 112 N. C. 592; 
 Kennedy v. Savings Bk., 101 Cal. 495. 
 3 Opinion of court per Justice Gray 
 in Central Trans. Co. v. Pullman's 
 Pal. Car Co., 139 U. S. 24, 60.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 286. 
 
 powers, on the other, is well established and has been constantly 
 recognized by this court." 1 
 
 § 285. This principle is particularly applicable to negotiable 
 instruments issued by a corporation. A negotiable Neo . otiable 
 corporate security, which upon its face appears to instm- 
 have been duly issued in conformity with the cor- 
 porate constitution, is valid in the hands of a bona fide holder 
 for value without notice, although the security was in fact is- 
 sued for a purpose and at a place not authorized by the cor- 
 porate constitution. 2 If the agent had power to issue a cor- 
 porate security for any purpose, anyone receiving it in the 
 ordinary course of business is justified in assuming that it was 
 properly issued. 3 Under this principle, moreover, accommoda- 
 tion indorsements and certifications of banks, which may be 
 beyond the bank's powers, will bind the bank in favor of any 
 bona fide holder for value without notice of the character of 
 the indorsement or certification. 4 
 
 § 286. The application of this principle, however, is not re- 
 stricted to negotiable instruments. If a corporation 
 borrows money or purchases property, having the pi^tioi^of 
 power to do so, the rights of the lender or vendor the . quaiifi- 
 
 r ' ° cation. 
 
 will not be affected by the circumstance, unknown 
 
 to him, that the money is borrowed or the property purchased 
 
 for an unauthorized purpose. 5 Accordingly, if a person sells to 
 
 1 Opinion of the court per Justice 
 Gray in Louisville, etc., Ii. R. Co. v. 
 Louisville T. Co., 17-4 U. S. 552, 570. 
 See, also, e. g., Nat. Home B'ld'g 
 Ass'n v. Home S'vgs B'k, 187 111. 
 35, 44. 
 
 2 Stoney v. Ameri. L. Ins. Co., 11 
 Paige, 635; Galveston R. R. v. Cow- 
 drey, 11 Wall. 459 ; Alexander v. 
 Rollins, 84 Mo. 657; Leh. Val. Coal 
 Co. o. Agricul. Works, 63 Wis. 45. 
 See, also, Safford v. Wyckoff, 4 Hill, 
 442; Main v. Casserly, 67 Cal. 127; 
 cf. Steiner ». Steiner Land & Lum- 
 ber Co., 120 Ala. 128; §§ 203, 204. 
 
 3 Genesee Savings Bk. v. Michigan 
 Baye Co., 52 Mich. 438. Railroad 
 companies have a general power to 
 make contracts and borrow money, 
 
 and persons dealing in securities is- 
 sued by them may, in the absence of 
 notice to the contrary, assume that 
 restrictions upon this power have 
 not been violated. Ellsworth v. 
 St. Louis, etc., R. R. Co., 98 N. Y. 
 553. See §§ 205, 328. 
 
 4 National Bank v. Young, 41 N. J. 
 Eq. 531; Jacobs Pharmacy Co. v. 
 Trust Co., 97 Ga. 573. See §§ 242- 
 244. 
 
 5 See Thompson v. Lambert, 44 
 Iowa, 239; Oxford Iron Co. o. Sprad- 
 ley, 51 Ala. 171; Brewer Brewing 
 Co. v. Boddie, 181 111. 622; and §§ 
 204-207. 
 
 " If the contract is ultra vires with 
 the knowledge of the party making 
 it, he cannot afterwards enforce it; 
 
 249
 
 § 286.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 a corporation such property, real or personal, as it is author- 
 ized to purchase, he is under no obligation to inform himself 
 whether, under the circumstances, the particular purchase was 
 proper for the corporation to make. 1 Indeed, it is held that 
 even if the vendor of goods or the lender of money to a corpo- 
 ration knows that the goods are bought or the money bor- 
 rowed to be used for some unauthorized or even illegal pur- 
 pose, he may still recover the price or the loan; provided it 
 was no part of his contract that the goods or money were to 
 be used for that purpose, and provided, also, that he has done 
 nothing to further the unlawful design. 2 The principle re- 
 ferred to also covers cases where a corporation, authorized to 
 borrow money to a certain amount, borrows in excess. If a 
 person lends money to it in ignorance that the limit has been 
 already reached, he will be entitled to recover. 3 And, finally, 
 under this principle arises the obvious distinction between the 
 exercise by a corporation of a power not possessed by it and 
 in no way incidental to the objects of its incorporation, as set 
 forth in its constitution, of which every one must take notice, 
 and the abuse of a general power possessed by the corporation, 
 or the failure to comply with prescribed formalities in exercis- 
 ing its powers, when such abuse or failure is not known to the 
 other contracting party. 4 
 
 but if he has no such knowledge, it 
 would be binding in his favor." 
 Eastern Counties Railway Co. v. 
 Hawkes, 5 H. L. C. 331, 338, per Lord 
 Campbell. 
 
 1 Eastern Counties Railway Co. v. 
 Hawkes, 5 H. L. C. 331. See Cowell 
 v. Springs Co., 100 U. S. 55; Natoma 
 Water and Mfg. Co. v. Clarkin, 14 
 Cal. 544, 552; Moss u. Rossie Lead 
 Mfg. Co., 5 Hill, 137. 
 
 2 Tracy v. Talmadge, 14 N. Y. 162; 
 and see cases in the last note, and 
 § 293. This last proposition may be 
 questionable. Very likely it would 
 and should hold when goods are sold 
 directly to a principal, the vendor 
 knowing that they will be put to 
 some illegal use. But suppose the 
 vendor knows that an agent, to 
 
 250 
 
 whom he is selling the goods, is go- 
 ing to use them in some way not au- 
 thorized by the principal, or is go- 
 ing to embezzle them: should the 
 vendor then be allowed to recover 
 against the principal, e. g., a corpora- 
 tion ? 
 
 3 Humphrey v. Patrons' Mercantile 
 Ass'n, 50 Iowa, 607; Aueibach v. 
 Le Sueur Mill Co., 28 Minn. 291; Os- 
 sipee Mfg. Co. v. Canney, 54 N. H. 
 295; Connecticut River Savings Bk. 
 v. Fiske, 60 N. H. 363; (a suit against 
 a shareholder. ) Beach & Weld v. 
 Wakefield, 107 Iowa, 567. See §§ 127 
 and 205. But the lender is affected 
 with notice when his loan by itself 
 exceeds the charter limitation. First 
 Nat. Bk. v. Kiefer Co., 95 Ky. 97. 
 
 * See Davis v. Old Colony Railroad,
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 288. 
 
 § 287. The discussion has so far ignored the question of the 
 illegality of ultra vires contracts, proceeding rather 
 on the assumption that a contract is not illegal in T ^ t m ^ 
 any proper sense of that term merely because made ultra vires 
 by or on behalf of a corporation not authorized to 
 make it. 1 An invalid contract is one which does not bring the 
 parties to it within the operation of the contemplated rules of 
 law, and so fails to occasion the desired legal relations. An 
 illegal contract is an invalid contract which is such because 
 some rule of law forbids it to be made. Invalid contracts, which 
 are not illegal, can usually be validated ; but illegal contracts 
 cannot ordinarily be validated. If A. orders a set of tools of 
 B. at a price exceeding fifty dollars, and no money is paid down 
 and no note or memorandum in writing made, the contract will 
 be invalid under the Statute of Frauds; but will be capable of 
 subsequent validation on complying with the terms of that stat- 
 ute. On the other hand, if the tools happen to be counterfeiters' 
 dies, the contract is illegal and incapable of subsequent vali- 
 dation, because of the law against possessing or manufacturing 
 such instruments. Again, if a contract is made on behalf of A. 
 by B., who has no authority to represent him, the contract will 
 not bring A. within the operation of rules of law which will 
 manifest themselves in liabilities on his part ; that is to say, the 
 contract will uot bind him, and in that respect will be invalid ; 
 but no one would call such a contract illegal. 
 
 § 288. We have seen that corporate funds are set apart for 
 certain purposes from which no one has authority to divert them 
 
 131 Mass. 258, 260; Central Trans- 
 portation Co. v. Pullman's Palace 
 Car Co., 139 U. S. 24, 60; Zabriskie 
 v. Cleveland, etc., R. R. Co., 23 How. 
 381, 398; Haynes p. Covington, 21 
 Miss. 408; City Fire Ins. Co. v. Car- 
 rugi, 41 Ga. 660, 673; Screven Hose 
 Co. v. Philpot, 53 Ga. 625. A corpo- 
 ration authorized to loan for one 
 year on bond and mortgage may fore- 
 close a mortgage given to secure a 
 note for a debt running two years. 
 Germantown Farmers' Mut. Ins. Co. 
 v. Dhein, 43 Wis. 420. 
 
 1 " The words ultra vires and ille- 
 gality represent totally different and 
 distinct ideas." Comstock, C. J., in 
 Bissell v. Mich. S. and N. I. Railroad 
 Cos., 22 N. Y. 258, 269. " There is 
 a manifest distinction between cases 
 arising under contracts which are 
 contrary to public policy or )iiala in 
 seor mala prohibita, and those which 
 are claimed to be ultra vires alone." 
 Woodruff v. Erie Railway Co., 93 
 X. Y. 609, 618. Opin. of Ct. per Ru- 
 ger, C. J. See § 264, note. 
 
 251
 
 § 289.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 so as to impair the legally protected interests of an}' person. 1 
 Accordingly, if the persons having the management of these 
 funds make a contract respecting them, whereby they would 
 be diverted from the objects for which they are set apart, such 
 contract would be invalid in this respect, that it would not bind 
 the rights of dissenting shareholders or creditors. These re- 
 strictions, however, on the powers of the managers of these 
 funds, on the powers, that is to say, of the corporate agents 
 and of the body corporate itself, exist mainly for the security 
 of the subscribers of the funds and of those who may deal with 
 the corporation on the credit of them. If, then, the persons 
 for whose security these restrictions exist authorize or acquiesce 
 in a diversion of the funds from the objects to which they are 
 restricted, no one remains who can object to transactions in 
 disregard of these restrictions. Such transactions are not il- 
 legal, for illegal means unlawful or forbidden by law ; these 
 transactions were merely unauthorized in that certain persons 
 could have restrained the corporation from engaging in them. 2 
 
 § 289. This reasoning accords with the general rules relating 
 Public to ultra vires transactions as deduced through the 
 
 policy. analytical method, 3 and also with the New York 
 
 rule. 4 Whether it accords with the Federal rule is more ques- 
 tionable. Also the point may be raised, that to restrain cor- 
 porations within the scope of the purposes of incorporation is 
 clearly defined public policy ; that any contract contrary to 
 public policy is illegal ; therefore, contracts ultra vires a cor- 
 poration are illegal. This requires consideration. 
 
 An argument based on public policy is at best vague and 
 unsatisfactory. If the courts are to give weight to such argu- 
 ments, in many cases they will have to determine for them- 
 selves what public policy is in regard to the question before 
 them ; and, to some extent, they will have to base their decision 
 on their notion of what public policy should be. 5 Consequently, 
 in their deliberations they will have to weigh the same con- 
 siderations that a legislative body weighs in considering the 
 
 1 §§ 32, 33. 
 
 2 See Kent ». Quicksilver M'g Co., 
 78 N. Y. 159, §269; and Vermont 
 & C. R. R. Co. v. Vermont Central 
 R. It. Co., 34 Vt. 2, 47. 
 
 252 
 
 3 Ante, §§ 264a— 274. 
 
 4 Ante, §§ 275 sqq. 
 
 5 For ex hypothese, as it were, pub- 
 lic policy is what it should be.
 
 PART HI.] ACTS BEYOND THE CORPORATE POWERS. [§ 290. 
 
 advisability of a law, and their decision will likely amount to 
 the creation of a new legal proposition. To determine what 
 public policy is, is the province of the legislature ;* and if acts, 
 which would have been unobjectionable if done by individuals 
 on their own behalf, are done by or on behalf of a corporation, 
 are courts to declare such acts illegal merely because unau- 
 thorized by the constitution of the corporation, when the state 
 in its discretion may at any time interfere and restrain their 
 commission or forfeit the franchises of the corporation ? Shall 
 the court of its own motion, or at the suggestion of an individ- 
 ual, declare illegal and void as against public policy the very 
 act which the exponent of public policy at any time may have 
 annulled, and yet refrains from interfering with? 2 By refrain- 
 ing from bringing an action to restrain the commission of such 
 acts, or to forfeit the franchises of the corporation as a penalty 
 for their commission, the state seems impliedly to admit that 
 they are not illegal as against public policy. 
 
 § 290. In a case referred to before, Bissell v. Railroad Com- 
 panies, Chief Judge Comstock said : 3 " But is it true that all 
 contracts of corporations, for purposes not embraced in their 
 charters, are illegal in the appropriate sense of that term ? 
 This proposition I must deny. Undoubtedly such engagements 
 may have the vices which sometimes infect the contracts of 
 individuals. They may involve a malum, in se or a malum 
 prohibitum, and may be void for any cause which would avoid 
 the contract of a natural person. But where no such vices 
 exist, the only defect is one of power, 4 the contract cannot be 
 void because it is illegal or immoral. 
 
 " So a church corporation may deal in exchange. This, al- 
 though ultra vires, is not illegal, because dealing in exchange 
 is, in itself, a lawful business, and there is no state policy in 
 
 1 " This court can know nothing 
 of public policy, except from the 
 constitution and the laws, and the 
 course of administration and deci- 
 sion. It has no legislative power. 
 It cannot amend or modify any legis- 
 lative act. It cannot examine ques- 
 tions as expedient or inexpedient, 
 as politic or impolitic. Considera- 
 tions of that sort must, in general, 
 
 be addressed to the legislature." 
 Chase, C. J., in License Tax Cases, 
 5 Wall. 462, 469. 
 
 2 See § 457. 
 
 3 22 N. Y. 269-270. 
 
 4 Quaere, whether the use of this 
 word here is consistent with the re- 
 marks of the same learned judge 
 on the distinction between " power" 
 and " right." 22 N. Y. 264. 
 
 253
 
 § 291.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 restraint of that business." It must be admitted that the last 
 statement of the learned judge contains a petitio jprincipii ; for 
 the question is not whether the business of exchange is lawful, 
 but whether it is lawful for a church corporation to carry it 
 on. Again, the learned judge says : " The illegality of an act 
 is determined in its quality, and does not depend on the person 
 or being which performs it." This seems rather a hasty gen- 
 eralization, for assuredly it would not be legal for an unauthor- 
 ized person to execute the sentence of the law on a condemned 
 felon, even at the time, place, and in the manner ordered for 
 the hanging. Moreover, in the same case, Judge Selden makes 
 a remark not in accordance with the expressions of the chief 
 judge : " Although the authorized contract may be neither 
 malum in se nor malum prohibitum, but, on the contrary, may 
 be for some benevolent or worthy object, as to build an 
 almshouse or a college .... yet, if it is a violation of public 
 policy for corporations to exercise powers which have never 
 
 t— been granted to them, such contracts, notwithstanding their 
 
 — praiseworthy nature, are illegal and void." 1 
 
 § 291. A leading English case, in regard to the illegality of 
 
 y . / ultra vires acts, is East Anglian Rail way Company v. 
 
 English Eastern Counties Railway Company; 2 a case which 
 
 is still law in England, though parts of the opinion 
 
 'fY of the court have been unfavorably commented on. The fol- 
 lowing passages are from the opinion of Jervis, C. J. : " It is 
 clear that the defendants have a limited authority only, and 
 are a corporation only for the purpose of making and main- 
 taining the railway sanctioned by the act ; and that their funds 
 can only be applied for the purposes directed by the statute. 
 .... Every proprietor, when he takes shares, has a right to 
 expect that the conditions upon which the act was obtained will 
 be performed, and it is no sufficient answer to a shareholder ex- 
 pecting his dividend, that the money has been expended upon 
 an undertaking which, at some remote period, may prove 
 
 1 N. Y. 285. Just as Judge Corn- 
 stock bad done, Judge Selden de- 
 cided in favor of the plaintiff, but 
 on a different ground. He held that 
 as the contract for transportation 
 was ultra vires, no action would lie 
 
 254 
 
 on it; but that the plaintiff could 
 recover on the ground of tort. See 
 §§335ef seq., as to liability for the 
 torts of corporations. 
 2 11 C. B. 775.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 291. 
 
 highly beneficial to the line. The public also has an interest in 
 the proper administration of the powers conferred by the act. 
 .... If the contract is illegal, as being contrary to the act of 
 parliament, it is unnecessary to consider the effect of dissentient 
 shareholders, for if the company is a corporation only for a 
 limited purpose, and a contract like that under discussion is not 
 within their authority, the assent of all the shareholders to such 
 a contract, though it may make them all personally liable to 
 perform such contract, would not bind them in their corporate 
 capacity, or render liable their corporate funds." 
 
 It is submitted, however, that the law is not as clearly stated in 
 this case as in some of the following citations, and that passages 
 in the opinion of the court may be open to the following criti- 
 cism in a remark of Justice Blackburn in Taylor v. Chichester 
 and Midhurst Railway Company : l " I think it very unfortunate 
 that the same phrase of ' ultra vires' 1 has been used to express 
 both an excess of authority as against the shareholders, and 
 the doing of an act illegal as being malum prohibitum, for the 
 two things are substantially different, and I think the use of 
 the same phrase for both has produced confusion." 2 
 
 From the following citations it would seem to be the better 
 opinion in England that an act which is ultra vires in the sense 
 of unauthorized, is not necessarily illegal ; but that to render it 
 so it must be ultra vires, meaning by the term that which is 
 forbidden expressly or by implication. 3 
 
 " Where a corporation is created by an act of parliament for 
 particular purposes, with special powers .... their deed, 
 though under their corporate seal, does not bind them if it ap- 
 pear by the express provisions of the statute creating the corpo- 
 ration, or by necessary or reasonable inference from its enact- 
 ments, that the deed was ultra vires, that is, that the legislature 
 meant that such a deed should not be made." 4 As used by 
 Baron Parke, the phrase ultra vires means forbidden at least by 
 implication, as is shown by the last line in the citation just made, 
 
 1 L. R. 2 Ex. 356, 379. 
 
 2 See remark of Vice-Chancellor 
 Kindersley, in Shrewsbury v. North 
 Staffordshire R'y Co., 35 L. J. Ch. 
 156, 172. 
 
 3 This last meaning is not the one 
 
 in which ultra vires is used by the 
 present writer, § 264, note. 
 
 4 Baron Parke in South Yorkshire 
 Ry. Co. v. Great Northern Ry. Co., 9 
 Ex. 55, 84. 
 
 255
 
 § 292. J THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 as well as by the following citation from the opinion of the same 
 learned judge when Lord Wensleydale, in Scottish North East- 
 ern Railway Co. v. Stewart: 1 "There can be no doubt that a 
 corporation is fully capable of binding itself by any contract 
 under its common seal in England, without it in Scotland, ex- 
 cept when the statute by which it is created or regulated ex- 
 pressly or b} r necessary implication prohibits such contract 
 between the parties. Prima facie all its contracts are valid, and 
 it lies on those who impeach any contract to make out that it is 
 avoided. This is the doctrine of ultra vires, and is no doubt 
 sound law, though the application of it to the points of each 
 particular case has not always been satisfactory to my mind." 
 Within its scope the following is also a satisfactory statement 
 of the law : " If a contract made by a company incorporated 
 by act of parliament for defined and limited objects, discloses 
 on the face of it a covenant which, if enforced, would cause the 
 funds to be appropriated to purposes other than those to which 
 the act says they shall ' only ' be applied, such an agreement 
 cannot be made the foundation of an action. In the case of 
 railway companies it is necessary not only for the shareholders, 
 but for the public, that this should be so." 2 
 
 § 292. In our American jurisprudence lines of distinction 
 may be drawn between acts of corporations which 
 are merely ultra vires, and acts which, besides be- 
 ing ultra vires, are for some reason unlawful. The 
 latter may be divided into three classes : First, acts 
 immoral in themselves, as contra honos mores; secondly, acts 
 which corporations are forbidden to do by some statutory pro- 
 vision ; and, thirdly, acts which on grounds of public policy 
 corporations intrusted with the performance of a public trust 
 or duty are held prohibited from doing. 
 
 Classes of 
 ultra vires 
 acts which 
 are also 
 illegal. 
 
 1 3 Macqueen, 382, 415. 
 
 2 Montague Smith, J., in Taylor v. 
 Chichester, etc., Ry. Co., L. R. 2 Ex. 
 356, 370. This case will repay care- 
 ful reading, not omitting the dissent- 
 ing opinion of Judge Blackburn. It 
 was reversed in the House of Lords, 
 L. R. 4 H. L. 628. See also espe- 
 
 256 
 
 cially the later authoritative exposi- 
 tion of the doctrine of ultra vires in 
 Ashbury Railway Carriage, etc., Co. 
 v. Riche, L. R. 7 H. L. 653; §296; 
 and compare Yorkshire Railway 
 Wagon Co. v. Maclure, 21 Ch. Div. 
 309.
 
 PART HI.] ACTS BEYOND THE CORPORATE POWERS. [§ 293. 
 
 § 293. Acts of the first class, by common law principles, are 
 branded as mala in se ; or are prohibited by statute, Fi rst class, 
 and thereby become mala prohibita. To them applies ^ O c ^ s contra 
 the maxim, Ex turpecausa non oritur actio. Accord- mores. 
 ingly, a contract containing an immoral object, or a contract 
 of which the consideration is immoral, is illegal, and may be 
 avoided by either party. Such a contract a court will never 
 lend itself to enforce. Thus, an agreement to pay a certain 
 sum for obtaining the passage of a law in a state legislature is 
 void ; x as is an agreement for contingent compensation for pro- 
 curing a contract to furnish supplies to the government. 2 So a 
 bill of exchange drawn in one state upon a party in another, 
 the known and common purpose of both parties being to carry 
 on a business of private banking, declared unlawful by a statute 
 of the first state, is void in the hands of a party to the bill with 
 notice of its true character. 3 
 
 It is essential, however, that the illegality should inhere in 
 the very act or contract sought to be declared illegal. 4 Accord- 
 ingly, it is no defence to a suit for a debt, that it arose from the 
 receipt of the bills of a bank illegally chartered for fraudulent 
 purposes, and that the bills were void in law, and finally proved 
 worthless in fact. 3 Moreover, it is held that the mere knowl- 
 edge of the one party that the other is going to use the proceeds 
 of the contract for some illegal purpose, will not render the 
 contract void, as against the party who does not himself par- 
 ticipate in the illegal undertaking. 6 Thus, knowledge on the 
 part of a bank lending money that it is to be used to carry out 
 a contract to supply arms to the Confederate government, will 
 not prevent the bank from recovering the loan. 7 
 
 1 Marshall v. Baltimore and Ohio 
 R. R. Co., 16 How. 314. 
 
 2 Tool Co. v. Norris, 2 Wall. 45. 
 
 8 Davidson v. Lanier, 4 Wall. 448. 
 Compare People v. Utica Ins. Co., 15 
 Johus. (N. Y.) 358. 
 
 4 See Nat. Pemberton Bk. v. Porter, 
 125 Mass. 333; Atlas Nat. Bk. v. 
 Savery, 127 Mass. 75; Attleborough 
 Nat. Bk. v. Rogers, 125 Mass. 339. 
 
 5 Orchard v. Hughes, 1 Wall. 73. 
 
 17 
 
 The bills themselves were actually 
 current at the time when the defend- 
 ant received them, and did not prove 
 worthless in his hands; nor had he 
 been forced to take them back from 
 persons to whom he had paid them. 
 
 e Tracy v. Talmage, 14 N. Y. 162; 
 §286. 
 
 7 Jones v. Planters' Bank, 9 Heisk. 
 (Tenn.) 455; Bank of Tennessee V. 
 Cummings, ib. 465. 
 
 257 
 
 &~*
 
 § 296.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 294. Secondly, as to the effect of a statutory prohibition, 
 
 Second forbidding the doing of certain acts by corpora- 
 class. Acts t^no 
 forbidden L1 « I1!5 - 
 
 by statute. g 295. To general prohibitions against the doing 
 General by corporations of acts beyond the scope of the cor- 
 tions! ~ porate powers courts appear to give little effect. 
 And. this perhaps on account of the hardship that might 
 arise from giving full effect to such statutes. There exists 
 in New York, for instance, the following statute: "In addi- 
 tion to the powers enumerated in the first section of this 
 title, and to those expressly given in its charter, or in the act 
 under which it is or shall be incorporated, no corporation shall 
 possess or exercise any corporate powers, except such as shall 
 be necessary to the exercise of powers so enumerated and 
 given." * To this statute the New York courts give little ef- 
 fect, construing it as merely declarator)' of the common law. 2 
 The New Jersey courts, however, have held a very similar 
 statute, which they regard as declaring the public policy of 
 that state, to render illegal and void any contract beyond the 
 scope of* the corporate powers. 3 
 
 § 296. The English companies' act of 1862 4 contains the fol- 
 lowing provision : " Any company limited by shares 
 " compa- may so far modify the conditions contained in its 
 mes ac ' memorandum of association, if authorized, to do so 
 by its regulations as originally framed, or as altered by special 
 resolution in manner hereinafter mentioned, as to increase its 
 capital by the issue of new shares of such amount as it thinks 
 expedient, or to consolidate and divide its capital into shares of 
 larger amount than its existing shares, or to convert its paid-up 
 shares into stock ; but, save as aforesaid, and save as hereinafter 
 provided in the case of a change of name, no alteration shall be 
 made by any company in the conditions contained in its mem- 
 orandum of association." 5 One of the conditions required by 
 
 i 3 N. Y. Rev. Stat., 8th ed., 1723; 
 cf. N. Y. Laws of 1892, ch. 687, 
 §10. 
 
 2 See Curtis v. Leavitt, 15 N. Y. 9, 
 54; Halsted v. Mayor, etc., of New 
 York, 3 N. Y. 430, 433; Bond v. 
 Terrell M'f'g Co., 82 Tex. 309. 
 
 8 Morris and Essex R. R. Co. ». 
 
 258 
 
 Sussex R. R. Co., 20 N. J. Eq. 542; 
 cf. Steiner v. Steiner L. & L. Co. 
 120 Ala. 128; So. B. & L. Assn. v. 
 Casa Grande Stable Co., 128 Ala. 
 624. 
 
 4 25 and 26 Vict., c. 89. 
 
 5 §12.
 
 PART HI.] ACTS BEYOND THE CORPORATE POWERS. [§ 298. 
 
 this act to be stated is " the objects for which the proposed 
 company is to be established." 1 In view of these statutory 
 provisions, it was held in Ashbury Railway Carriage and Iron 
 Co. v. Riche, 2 that a contract not included in the memorandum 
 of association could not be enforced against the company, even 
 if the whole body of shareholders had assented to it. 3 
 
 § 297. To formulate a rule by which may be determined 
 the effect of a statutory prohibition contained in the Effect of 
 constitution of a corporation, on the validity of acts statutory 
 
 proliibi- 
 
 thereby forbidden is most difficult. Undoubtedly tions. 
 the intention of the legislature is to be followed by 
 the courts : 4 but how determine that intention ? With diffi- 
 dence the following rule is submitted: 5 If a statute expressly 
 forbids a corporation to make a certain contract, the contract 
 is void, even though not expressly declared to be so, and is in- 
 capable of ratification ; and that the contract is void as unlaw- 
 ful, may be pleaded by any one to an action founded directly 
 and exclusively on the contract ; unless (1) the statute expressly 
 states what the consequences of violating it shall be, and those 
 consequences are other than that the contract is void ; or (2) the 
 statutory prohibition was evidently imposed for the protection 
 of a certain class of persons who alone may take advantage 
 of it ; or (3) to adjudge the contract void and incapable of form- 
 ing the basis of a right of action would clearly frustrate the evi- 
 dent purposes of the prohibition itself. 
 
 § 298. The rule just stated may be illustrated by decisions. 
 First, as to the body of the rule; the prohibited con- niustra- 
 tract is void, and its illegality may be pleaded by any oTthe rail. 
 one to an action founded directlv and exclusivelv on Excessive 
 
 • . rate of rn- 
 
 the contract itself. 6 If the charter of a bank forbids terest. 
 
 i§8. 
 
 2 L. R. 7 H. L. 653. 
 
 8 Lord Cairns said he did not wish 
 to consider such a contract illegal, 
 but " extra vires and wholly null and 
 void," and incapable of ratification. 
 (L. R. 7 H. L. 673). But whether or 
 not the contract should be called 
 illegal, the court certainly construed 
 
 the statute as prohibiting it; and, 
 consequently, the contract was con- 
 trary to law. 
 
 4 See Harris v. Runnels, 12 How. 
 79. 
 
 5 Forbidden acts will of course be 
 ultra vires the corporation; and in 
 that respect their validity will de- 
 pend on principles heretofore stated. 
 
 6 For note 6 see p. 260. 
 
 259
 
 § 298.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 the bank to take more than a certain rate of interest, a note 
 taken by it in violation of this prohibition is void ; even 
 though the statute does not expressly declare void contracts in 
 which a rate of interest greater than allowed is stipulated for. 1 
 So if a statute prohibits banks from issuing or circulating any 
 bill or note that is not payable on demand without interest, 
 notes issued in contravention of it are illegal and void, even in 
 the hands of a bona fide purchaser for value. 2 And when a cor- 
 
 Here this is not the point under con- 
 sideration; but whether, and in 
 what respect, the illegality of the 
 act may be taken advantage of even 
 by those persons who, had the act 
 not been forbidden, might not have 
 been iu a position to complain of it. 
 
 6 Barton v. Port Jackson, etc., 
 Plauk Road Co., 17 Barb. 397; Sibell 
 v. Renisen, 33 N. Y. 95; Franklin 
 Bank o. Commercial Bank, 36 Ohio 
 St. 350; McCormick v. Nat. Bank, 
 102 111. 100. The Roman law states the 
 principle thus: "Nullum enim pac- 
 tum, nullam conventionem, nullum 
 contractual inter eos videri volumus 
 subsecutnm, qui contrahunt lege 
 contrahere prohibente." Codex, I. 
 14, lex 5. A person cannot recover 
 from a corporation for services in 
 negotiating on its behalf a contract 
 which it was forbidden by statute to 
 make. Gibbs v. Bait. Gas Co., 130 
 U. S. 396. 
 
 1 Bank of U. S. v. Owens, 2 Pet. 
 527; Bank of Salina v. Alvord, 31 
 N. Y. 473; Bank of Chillicothe v. 
 Swayne, 8 Ohio, 257; Kilbreth v. 
 Bates, 38 Ohio St. 187; Miami Ex- 
 porting Co. o. Clark, 13 Ohio, 1; Orr 
 v. Lacey, 2 Dougl. (Mich.) 230. Sue 
 Hitchcock's Heirs v. United States 
 Bank, 7 Ala. 386, 434. If, however, 
 the usury laws of the state do not 
 render usurious contracts void, 
 courts, in construing provisions in 
 the constitution of a corporation 
 which prohibit taking more than a 
 
 260 
 
 given rate of interest, may follow the 
 analogy of the construction put on 
 the usury laws. Philadelphia Loan 
 Co. v. Towner, 13 Conn. 249; Com- 
 mercial Bank v. Nolan, 8 Miss. 508; 
 Planters' Bank v. Sharp, 12 Miss. 75; 
 Grand Gulf Bank v. Archer, 16 Miss. 
 151; Larwell v. Hanover Savings 
 Fund Society, 40 Ohio St. 244. In 
 the absence of special legislative ex- 
 ception, corporations are embraced 
 in usury statutes just as persons, 
 and may plead usury. Commission- 
 ers of Craven v. Atlantic & N. C. R. 
 R. Co., 77 N. C. 289. The penalties 
 of the usury laws apply to the acta 
 of corporations done without the 
 state; e. r/., when suit is brought 
 within the home state on a note taken 
 by the corporation outside of the 
 home state, and this although the 
 laws of the state where the contract 
 was made authorized the rate of in- 
 terest stipulated for. Ewing v. To- 
 ledo S'v'gs Bk., 43 Ohio St. 31. See 
 Farmers and Traders' Bank v. Har- 
 rison, 57 Mo. 503; Perkins v. Watson, 
 2 Baxt. (Tenn.) 173. Compare Buk- 
 ingham v. McLean, 13 How. 151; 
 Bank of United States v. Waggener, 
 9 Pet. 378. 
 
 2 Leavitt v. Palmer, 3 N. Y. 19, 
 Root v. Godard, 3 McLean, 102; Hay- 
 den v. Davis, ib. 276; Weed v. Snow, 
 ib. 265 ; Root v. Wallace, 4 McLean, 
 8; Davis v. Bank of River Raisin, 
 ib. 387. See Western Bank v. Mills, 
 7 Cush. 539; Mills v. Western Bank,
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 300. 
 
 poration without banking powers discounts a note in direct vio- 
 lation of a statute, it cannot recover on the note. 1 
 
 § 299. Next, as to the first qualification of the general rule: 
 the forbidden contract will not be void if the statute 
 which the contract violates specifies the consequences fication. 
 of its violation, and those consequences are other 
 than that the contract is void and incapable of forming the 
 basis of an action. As was said in Pratt v. Short: 2 " A pro- 
 hibitory statute may itself point out the consequences of its 
 violation, and if, on a consideration of the whole statute, it ap- 
 pears that the legislature intended to define such consequences, 
 and to exclude any other penalty or forfeiture than such as is 
 declared in the statute itself, no other will be enforced, and if 
 an action can be maintained on the transaction of which the 
 prohibited transaction was a part without sanctioning the ille- 
 gality, such action will be entertained." 3 In this case the 
 statute declared that " no incorporated company without being 
 authorized by law, shall employ any part of its effects, or be 
 in any way interested in any fund that shall be employed for 
 the purpose of receiving deposits, making discounts or issuing 
 notes, or other evidences of debt, to be loaned or put in circu- 
 lation as money.' 1 And it further declared that all notes or 
 other securities for the payment of money " made or given to 
 secure the payment of any money loaned or discounted by any 
 incorporated company contrary to the provisions of the [statute], 
 shall be void." The court held the notes or securities so taken 
 to be void, but that the money loaned on them could be recov- 
 ered. 4 
 
 § 300. The second qualification to the general rule is that the 
 contract will not be absolutely void when the pro- g , 
 hibition exists plainly for the protection of a certain quaiifica- 
 class of persons, who alone may take advantage of it. 
 
 3 See Robinson ». Bland, 2 Burr. 
 1077; Lister v. Howard Bank, 33 
 Md. 558. 
 
 4 See, also, Utica Ins. Co. v. Kip, 
 8 Cow. 20; Same v. Cadwell, 3 Wend. 
 290; Underhill ». Santa Barbara Land 
 Co.. 93 Cal. 300, 311. Compare Life, 
 etc.. Ins. Co. v. Mecb. Fire Ins. Co., 
 7 Wend. 31; New Hope Delaware 
 
 261 
 
 10 Cush. 22; compare Faneuil Hall 
 Bank v. Bank of Brighton, 16 Cray, 
 534. 
 
 1 New York State Loan and Trust 
 Co. v. Helmer, 77 N. Y. 64; In re 
 Jaycox, 12 Blatcbf. 209; Utica Ins. 
 Co. v. Scott, 19 Johns. 1. See Pratt 
 v. Short, 79 N. Y. 437. 
 
 2 79 N. Y. 437, 445.
 
 § 301.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VH. 
 
 As Judge Cooley said, in Beeeher v. Marquette and Pacific 
 Rolling Mill Co., 1 " Courts often speak of acts and contracts 
 as void, when they mean no more than that some party con- 
 cerned has a right to avoid them. Legislators sometimes use 
 language with equal want of exact accuracy ; and when they 
 say that some act or contract shall not be of any force or effect, 
 mean perhaps no more than this : that at the option of those 
 for whose benefit the provision was made it shall be voidable, 
 and have no force or effect as against his interests. 2 .... If 
 it is apparent that an act is prohibited and declared void on 
 grounds of general policy, we must suppose the legislative 
 intent to be that it shall be void to all intents; while if the 
 manifest intent is to give protection to determinate individuals 
 who are mi juris, the purpose is sufficiently accomplished if 
 they are given the liberty of avoiding it." 3 
 
 § 301. Finally, as to the third qualification, the contract will 
 not be held void and incapable of constituting the 
 basis of an action, if to do so would frustrate the 
 manifest intent of the statute. The National Bank- 
 ing Act provides that " the total liabilities to any 
 association of any person .... shall at no time 
 exceed one-tenth of the amount of the capital stock of such 
 association actually paid in." In view of this section the 
 Supreme Court of the United States holds that a defendant 
 sued by a national bank for moneys loaned him cannot plead 
 that in making him the loan the bank violated this provision. 4 
 " We do not think that public policy requires, or that Congress 
 intended that an excess of loans be} r ond the proportion specified 
 should enable the borrower to avoid the payment of the money 
 actually received by him. This would be to injure the interests 
 of creditors, stockholders, and all who have an interest in the 
 safety and prosperity of the bank." 5 
 
 Third qual 
 
 ification. 
 
 Excessive 
 
 loans by 
 
 national 
 
 banks. 
 
 Bridge Co. v. Poughkeepsie Silk Co., 
 25 Wend. 648; Tracy v. Talmage, 14 
 X. Y. 162, 189; Curtis v. Leavitt, 15 
 N. Y. 98. 
 
 1 45 Mich. 103, 108; Ace. Ricsterer 
 v. Land & Lumber Co., 160 Mo. 141. 
 
 2 See Green v. Kemp, 13 Mass. 515. 
 8 Compare Johnson v. Underbill, 
 
 52 N. Y. 203; Greenpoint Sugar Co. 
 
 262 
 
 v. Whitin, 69 N. Y. 328; Paulding v. 
 Chrome Steel Co., 94 N. Y. 334; An- 
 derson v. Bullock County Bank, 122 
 Ala. 275; § 185. 
 
 4 Gold Mining Co. v. National 
 Bank, 96 U. S. 640. 
 
 5 96 U. S. 642, followed in Dun- 
 comb v. New York, H. and N. R. R. 
 Co., 84 N. Y. 190. See Union Gold
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 302. 
 
 In another instance where a statute provided that savings 
 banks should make no loans on the security of names alone, it 
 was held that the statute should not be construed so as to defeat 
 its own purpose, and that a loan made by a savings bank in 
 contravention of it could be recovered, and the security given 
 (a note) enforced. 1 Again, a provision in the charter of a bank 
 prohibiting any director or other officer, under penalty of fine 
 or imprisonment, from borrowing money from the bank, does 
 not exempt a director from liability for money loaned to him 
 in violation of the prohibition ; 2 and a corporation can retain 
 negotiable securities given at the time to secure the repayment 
 of such a loan, but belonging to an innocent cestui que trust for 
 whom the borrower was trustee; the corporation having no 
 notice of the trust. 3 
 
 § 302. The last-mentioned qualification, that an act will not 
 be held void when to hold it so would frustrate the 
 intention of the statutory prohibition, is of common ^onslay 
 application where the prohibition is not express, but ippiica- 
 arises by clear implication from the language of the 
 charter or enabling statute of the corporation. Here the lead- 
 ing authority is National Bank v. Matthews, 4 which decided 
 that real estate security taken by a national bank for a loan 
 made at the time is not void, although by implication national 
 banks are clearly forbidden to loan money on such security. As 
 Justice Swayne said, giving the opinion of the court : u The 
 object of the restrictions was obviously threefold. It was to 
 keep the capital of the banks flowing in the daily channels of 
 commerce, to deter them from embarking in hazardous real 
 estate speculations, and to prevent the accumulation of large 
 masses of such property in their hands, to be held, as it were, 
 in mortmain. The intent, not the letter, of the statute consti- 
 
 M'g Co. v. Rocky Mt. Nat. Bank, 2 
 Col. 248; Allen v. First Nat. Bank, 
 23 Ohio St. 97. 
 
 1 Farmington Savings Bank v. Fall, 
 71 Me. 49. A corporation authorized 
 to loan on bond and mortgage may re- 
 cover a debt secured by a promissory 
 note and mortgage. National Bank 
 v. Insurance Co., 41 O. St. 1. 
 
 2 Lester v. Howard Bank, 33 Md. 
 558; Bowditch v. New England Life 
 Ins. Co., 141 Mass. 292; see Richmond 
 Bank v. Robinson, 42 Me. 589. 
 
 3 Bowditch v. New England Life 
 Ins. Co., 141 Mass. 292. 
 
 4 98U. S. 621. 
 
 263
 
 § 302.] THE LAW OF PRIVATE COBPORATIONS. [CHAP. VII. 
 
 tutes the law. A court of equity is always reluctant in the last 
 degree to make a decree which will affect a forfeiture." 1 
 
 " . . . . The statute does not declare such a security void. 
 It is silent upon the subject. If Congress so meant, it would 
 have been easy to say so, and it is hardly to be believed that 
 this would not have been done, instead of leaving the question 
 to be settled by the uncertain result of litigation and judicial 
 decision. Where usurious interest is contracted for, a forfeiture 
 is prescribed and explicitly defined." 2 
 
 " . . . . We cannot believe it was meant that stockholders, 
 and perhaps depositors and other creditors, should be punished 
 and the borrower rewarded, by giving success to this defence 
 wherever the offensive fact shall occur. The impending danger 
 of judgment of ouster and dissolution was, we think, the check, 
 and none other contemplated by Congress." 3 Accordingly, a 
 national bank may enforce against a mortgagee, and parties 
 claiming under him with notice, a mortgage of lands executed 
 to it as collateral security for his then existing as well as his 
 future indebtedness. An objection to taking such a mortgage 
 as security for future advances can be urged only by the United 
 States. 4 
 
 198 U. S. 626. 
 
 2 lb. 627. 
 
 3 lb. 629. This case was followed 
 in Graham o. National Bauk, 32 N. J. 
 Eq. 804 ; Thornton v. Nat. Exch. Bk., 
 71 Mo. 221 ; Winton v. Little, 94 Pa. 
 St. 64 (overruling previous Pennsyl- 
 vania decisions) ; Oldham v. First 
 Nat. Bk., 85 N. C. 240. Compare 
 Silver Lake Bauk v. North, 4 Johns. 
 Oh. 370. 
 
 * National Bank v. Whitney, 103 
 U. S. 99 ; Ace. Fortier i\ New Or- 
 leans Nat. B'k 112 U. S. 439, fol- 
 lowed in Simons r. First Nat. Bk., 93 
 N. Y. 269 ; Myers v. Campbell, Col- 
 lector, 64 N. J. L. 186. See Reynolds 
 r. Crawfordsville First Nat. Bk., 112 
 U. S. 405 ; Fiitts v. Palmer, 132 U. 
 S. 282 ; Thompson v. St. Nicholas 
 Xat. Bk., 146 l T . S. 240; Cheffee c. 
 Middlesex R. R. 14(3 Mass. 224; 
 
 264 
 
 Wherry v. Hale, 77 Mo. 20 ; Fifth 
 Nat'l B'k, v. Pierce, 117 Mich. 376 ; 
 Batty v. Eureka Bank, 62 Kas. 384. 
 The following cases, in so far as in- 
 consistent with Nat. Bk. v. Mat- 
 thews, and Nat. Bk. v. Whitney, are 
 not authority. Crocker v. Whitney, 
 71 N. Y. 161 (reversed in Nat. Bk. v. 
 Whitney) ; Fridley v. Bowen, 87 111. 
 151. 
 
 A note secured by mortgage on 
 real estate was assigned by a state 
 bank to the national bank organized 
 as its successor : held, that the na- 
 tional bank could foreclose the mort- 
 gage. Scofield v. State Nat. Bk., 9 
 Neb. 316. A national bauk which 
 purchases a promissory note from 
 an indorsee may maintain an action 
 thereon against a prior party thereto, 
 without regard to whether the pur- 
 chase was one the national bank was
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 304. 
 
 § 303. It is in accordance with this reasoning that a deed of 
 real estate to a national bank, or other corporation, 
 rendered incompetent by its charter or enabling act ized con- 
 to hold the real estate conveyed, is not void, but void- Je^estate* 
 able only at the suit of the government ; for to make tf £s rpora " 
 such conveyances void would work the greatest hard- 
 ship and uncertainty of title in subsequent purchasers, and all 
 purposes of public policy are amply subserved by holding the 
 deed voidable at the suit of the government. 1 The same ap- 
 plies to unauthorized conveyances of personal property to a 
 corporation. 2 
 
 § 304. We proceed now to consider the third of the three 
 general classes into which ultra vires acts which are 
 also illegal were divided; 3 i. e., those acts which, 
 though neither immoral in themselves, nor forbidden 
 by statute, certain corporations cannot do for reasons 
 of public policy. 
 
 Third class 
 of illegal 
 ultra vires 
 acts. Cor- 
 porations 
 with public 
 duties. 
 
 authorized to make. Nat. Pember- 
 ton Bk. ». Porter, 125 Mass. 333 ; 
 Atlas Nat. Bk. v. Savery, 127 Mass. 
 75 ; see Attleborough Nat. Bk. v. 
 Rogers, 125 Mass. 339 ; Merchants' 
 Nat. Bk. v. Hanson, 33 Minn. 40, 
 overruling First Nat. Bk. v. Pierson, 
 24 Minn. 140. 
 
 1 National Bank v. Matthews, 98 
 U. S. 621, 628; Mapes v. Scott, 94 111. 
 379; Warner v. De Witt County Nat. 
 Bank, 4 111. App. 305; Leazure v. 
 Hillegas, 7 S. & R. 313; Goundie v. 
 Northampton Water Co., 7 Pa. St. 
 233; Runyan ». Coster, 14 Pet. 122; 
 The Banks b. Poitiaux, 3 Rand.( Va. ) 
 136; Litchfield ». Preston, 98 Va. 
 530; Kelly v. People's Trans'n Co., 
 3 Oreg. 189; C. B. and Q. R. Co. v. 
 Lewis, 53 Iowa, 101 ; Barrow v. Nash- 
 ville, etc., T. C, 9 Humph. (Tenn.) 
 304; Mallett o. Simpson, 94 N. C. 37; 
 Barnes v. Suddard, 117 111. 237; Long 
 v. Georgia Pac. Ry. Co.. 91 Ala. 519; 
 Raganv. McElroy, 98 Mo. 349; S. & 
 
 N. Ala. R. R. Co. v. Highland Ave. 
 
 6 Belt R. R. Co., 119 Ala. 105; Big- 
 bee, etc., P. Co. v. Moore, 121 Ala. 
 379; First Nat. B'k of Sutton v. 
 Grosshaus, 61 Neb. 575. See Grant 
 v. Henry Clay Coal Co., 80 Pa. St. 
 208; Burden v. Burden, 159 N. Y. 
 287; Voltz v. Nat. Bk., 158 111. 532; 
 Watts v. Gantt, 42 Neb. 869; Land 
 Co. v. R. R. Co., 93 Va. 274; Cooney 
 o. Pack'g Co., 169 111. 370. Compare 
 Fairfax's Devisee v. Hunter's Lessee, 
 
 7 Crancb, 604; Madison Ave. Bap. 
 Chr. v. Oliver St. Bap. Church, 73 
 N. Y. 82. Contra, Theveatt ». Bank, 
 81 Ky. 1; Gas, etc., Co. r. Dairy Co., 
 60 Oh. St. 96; Water Supply, etc., 
 Co. v. Tenney, 24 Colo. 344; Hall ». 
 Bank, 145 Mo. 418; George v. Somer- 
 ville, 153 Mo. 7. 
 
 After a corporation that has the 
 power to hold land has made a pur- 
 chase, the collateral question 
 whether it was a violation of the 
 charter for it to receive the convey- 
 
 2 For note 2 
 
 3 For note 3 
 
 see p. 266. 
 see p. 266. 
 
 265
 
 § 304.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 When, in order to accomplish objects in which the welfare 
 of the public is concerned, a corporation is organized and 
 powers and privileges are granted to it "which would be un- 
 constitutional for the state to grant for private objects, any 
 act of a contractual nature that the corporation attempts to do, 
 which, if done, would render the corporation incapable of ful- 
 filling the purposes of its incorporation, as contemplated in its 
 constitution, is illegal and void. 1 Such acts are void because 
 repugnant to the public welfare, and therefore against public 
 policy. Under such circumstances public polic\' is pretty clearly 
 defined, and in order to determine it a court will hardly have 
 to deliberate as a legislative assembly. It is a public policy 
 already pointed out by the legislature. For instance, certain 
 persons are incorporated to build and operate a railroad, and 
 the right to take land b} 7, compulsory process is given them ; a 
 right which it would be unconstitutional to grant for a private 
 purpose. By such an act of incorporation the legislature plainly 
 indicates its view that the welfare of the public demands the 
 building and operation of such a railroad as directed in the 
 charter, and impliedly asserts that any act, as a transfer of the 
 road, which w r ould render impracticable the carrying out of 
 the provisions in the charter in the manner prescribed, is con- 
 trary to public policy. 
 
 ance, cannot be raised in a suit in 
 ejectment by the corporation. Shew- 
 alter v. Pirner, 55 Mo. 218; Land v. 
 Coffrnan, 50 Mo. 243; Chambers v. 
 St. Louis, 29 Mo. 576. Compare Cole- 
 man v. San Rafael Turnpike Co., 49 
 Cal. 517; City of Natchez v. Mallery, 
 54 Miss. 499; see § 276. 
 
 2 Edwards v. Fairbanks, 27 La. 
 Ann. 449; compare Parish v. Wheeler, 
 22 N. Y. 494. 
 
 8 § 292. 
 
 1 Gulf, etc., R'y Co. v. Morris, 67 
 Tex. 692; Chicago Cas Light Co. v. 
 People's Gas Light Co., 121 111. 530; 
 Visalia Gas Co. v. Sims, 104 Cal. 320. 
 A contract whereby a street railroad 
 company transfers to an individual 
 
 266 
 
 for his private use the practically ex- 
 clusive use of its tracks is void as 
 against public policy. The right to 
 construct and operate a street rail- 
 road is a franchise which must have 
 its source in the sovereign power; 
 and it is a franchise which the legis- 
 lature can grant only for the public 
 benefit, and not for private use. 
 Fanning v. Osborn, 102 N. Y. 441. 
 In Sapp v. Northern Central Ry. Co., 
 51 Md. 115, it was held that an ease- 
 ment of a private right of way could 
 not be acquired against a railroad 
 company by prescription; for pre- 
 scription presupposes a grant, and a 
 railroad company could not grant 
 such an easement.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 305. 
 
 § 305. The grounds on which acts of this nature are held 
 illegal and void are clearly stated by Justice Miller 
 in Thomas v. The Railroad Company : l " AVhen a cor- ^n^kises* 
 poration, like a railroad company, has granted to it by 
 charter a franchise intended in large measure to be exercised for 
 the public good, the due performance of those functions being 
 the consideration of the public grant, any contract which dis- 
 ables the corporation from performing those functions, which 
 undertakes, without the consent of the state to transfer to 
 others the rights and powers conferred by the charter, and to 
 relieve the grantees of the burdens which it imposes, is a viola- 
 tion of the contract with the State, and is void as against public 
 policy.'' 2 Accordingly, in the absence of express authority, a 
 corporation like a railroad or canal company, with public duties 
 to perform, cannot lease or transfer its franchises to another 
 corporation or an individual; 3 nor mortgage its franchises; 4 
 nor consolidate with another corporation. 5 
 
 1 101 u. S. 71. 
 
 2 See, also, Driscoll v. Norwich, 
 etc., R. R. Co., 65 Conn. 230; Union 
 Pac. Ry. Co. v. Ry. Co., 163 U. S. 
 564; Peoria and Rock I. Ry. Co. v. 
 Coal Valley Mg. Co., 68 111. 489; New 
 Orleans, etc., R. R. Co. v. Delaniure, 
 34 La. Ann. 1225; Pierce v. Emery, 
 32 N. H. 484; Singleton v. South- 
 western R. R., 70 Ga. 464; McGregor 
 v. Dover and Deal Ry., 17 Jur. 21; 
 Chambers v. Manchester, etc., Ry. 
 Co., 5 Best & Sm. 588; In re Nat. 
 Permanent Bldg. Soc, ex parte Wil- 
 liamson, L. R. 5 Ch. 309; London, 
 Brighton, etc., Ry. Co. v. Lond. and 
 S. \V. Ry. Co., 5 Jur. N. S. 801; also, 
 East Anglian Railway Co. v. Eastern 
 Counties Railway Co., § 291. 
 
 8 Thomas v. R. R. Co., 101 U. S. 
 71; Oregon Ry. Co. v. Oregonian Ry. 
 Co., 130 U. S. 1; Van Steuben v. Cen- 
 tral R. R. Co., 178 Pa. St. 367; Mem- 
 phis, etc., R. R. Co. v. Grayson, 88 
 Ala. 572; State v. Atchison and N. 
 
 R. R. Co., 24 Neb. 143; Brunswick 
 Gas Light Co. v. United Gas, etc., 
 Co., 85 Me. 532; Black v. Delaware 
 and Raritan Canal Co., 24 N. J. Eq. 
 456; Middlesex R. R. Co. v. Boston, 
 etc., R. R. Co., 115 Mass. 347; Abbott 
 e, Johnstown, etc., Horse R. R. Co., 
 80 N. Y. 21; Troy and Boston R. R. 
 Co. y. Boston, Hoosac Tunnel, etc., 
 R. R. Co., 86 N. Y. 107; Stewart's 
 Appeal, 56 Pa. St. 413; Wood v. Bed- 
 ford, etc., R. R. Co., 8 Phi la. 94; 
 Board, etc., Tippecanoe County v. 
 Lafayette M. and B. R. R. Co., 50 
 Ind. 85; Eel River R. R. Co. v. State, 
 155 Ind. 433; Amer. Union Tel. Co. 
 v. Union Pac. Ry. Co., 1 McCrary, 
 188; Pittsburgh and C. R. R. Co. v. 
 Bedford, etc., R. R. Co., 81* Pa. St. 
 104; Archer v. Terre Haute, etc., R. 
 R. Co., 102 111. 493, 502; State v. Con- 
 solidation Coal Co., 46 Md. 1; Winch 
 v. Birkenhead, etc., Ry. Co., 5 De G. 
 & Sm. 562: Dow v. Northern R. R. 
 Co., 67 N. H. 1. 
 
 * For note 4 see p. 268. 
 5 For note 5 see p. 268. 
 
 267
 
 § 305a.] THE LAW OK PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 305a. In accordance with its previous decisions, 1 the Su- 
 preme Court of the United States recently held that a corpora- 
 tion having public duties to perform, as, for example, organized 
 to transport passengers in its cars, cannot lease its entire prop- 
 erty ; such a lease is ultra vires and void, and the lessor corpo- 
 ration can sustain no suit upon it even for rent due at the time 
 of bringing suit, although the lessee has had the benefit of the 
 lease. 2 
 
 Authority to consolidate and con- 
 nect with a road of a foreign corpo- 
 ration is not authority to lease to 
 that corporation. Archer v. Terre 
 Haute and I. R. R. Co., 102 111. 493. 
 Authority given by statute to one 
 railroad company to buy the road of 
 another, is authority to the latter 
 company to sell. New York and N. 
 E. R. R. Co. v. N. T., etc., R. R. Co., 
 52 Conn. 274. Compare State v. Con- 
 solidation Coal. Co., 46 Md. 1. See 
 §420. 
 
 Authority in the charter of a tele- 
 graph company to lease its line, fix- 
 tures, and apparatus, does not au- 
 thorize a lease of its franchises, and 
 a lease of its franchises is void. 
 Philadelphia o. Western Union Tel. 
 Co., 11 Phila. 327. 
 
 A railroad company cannot escape 
 the performance of any duty or obli- 
 gation imposed by its charter or the 
 general law, by a voluntary surrender 
 of its road into the hands of lessees; 
 and the corporation remains liable 
 for injuries occurring when its road 
 is being run jointly by its receiver 
 and its lessees. Railroad Co. v. 
 Brown, 17 Wall. 445; Whitney v. At- 
 lantic, etc., R. R. Co., 44 Me. 362; 
 Wyman v. Penobscot, etc., R. R. Co., 
 46 Me. 162; York and Maryland Line 
 R. R. Co. v. Winans, 17 How. 30; 
 Ricketts r. Birmingham Street Ry. 
 Co., 85 Ala. 600; Van Steuben v. Cen- 
 tral R. R. Co., 178 Pa. St. 367. In 
 Parr r. Railroad Co., 43 S. C. 197, a j 
 268 
 
 railroad company was held liable for 
 an injury occurring while its road was 
 being operated by the receiver of its 
 lessees. See §§ 131, 132, 170. 
 
 4 Richardson v. Sibley, 11 Allen, 65; 
 Commonwealth v. Smith, 10 Allen, 
 448; Daniels v. Hart, 118 Mass. 543. 
 See Richards v. Merrimack, etc., R. 
 R. Co., 44 N. H. 127; see State v. 
 Sherman, 22 Ohio St. 411, 428. Au- 
 thority to a railroad company to 
 mortgage its " road, income, and 
 other property " does not authorize 
 a mortgage of its franchises. Pullan 
 v. Cincinnati, etc., Air Line R. R. 
 Co., 4 Biss. 35. As to what has been 
 construed as authority to a railroad 
 company to sell or mortgage its road, 
 see Branch v. Jesup, 106 U. S. 468. 
 
 It has been held that a railroad 
 company, expressly authorized to 
 borrow, has implied power to mort- 
 gage its road and its right to build 
 and use the same; though the court 
 said it "could not (they supposed) 
 mortgage its corporate existence or 
 any other prerogative franchise." 
 Bardstown & L. R. R. Co. v. Metcalf, 
 4 Mete. (Ky.) 199. 
 
 5 Pearce v. Madison, etc., R. R. 
 Co., 21 How. 441; Adams v. R. R. 
 Co., 77 Miss. 194; Topeka Paper Co. 
 0. Oklahoma Pub. Co., 7 Okl. ^20. 
 
 1 Oregon Ry. Co. r. Oregonian Ry, 
 Co., 130 U. S. 1; Pa. R. R. Co. v. St. 
 Louis, etc., R. R. Co., 118 U. S. 290. 
 
 2 Central Transportation Co. v. 
 Pullman's Palace Car Co., 139 U. S.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 3056. 
 
 § 3055. Such are the decisions. Nevertheless in the United 
 States it would be difficult to find a railroad company that has 
 not mortgaged its road and franchises, and in most instances 
 under express legislative authority. And perhaps the majority 
 of railroad companies either lease their own roads or hold 
 leases of the roads of other companies. The words of Chief 
 Justice Ruger, giving the opinion of the New York Court of 
 Appeals in Woodruff v. Erie Railway Co., seem more in accord 
 with present railroad customs and the tendency of legislation : 
 " Whatever may be the rule in other states or in England, the 
 public policy of this state, as manifested by numerous acts of 
 the legislature, has always been, not only to afford the fullest 
 scope for the consolidation and reorganization of non-coin peting 
 railroads and railroad corporations, but also for the transfer of 
 the use of such roads and their franchises by one corporation 
 to another." x 
 
 In regard to corporations with public duties to perform, ques- 
 tions of ultra vires and illegality are apt to run into each other. 
 In chartering a corporation of this character, the legislature 
 may be presumed to have in view mainly the interests of the 
 public ; and may further be presumed to express in the charter 
 or enabling act the legislative conception of what is and what 
 is not conducive to the public interests. Accordingly, an act 
 done by such a corporation which is plainly unauthorized by its 
 constitution may readily be held by the courts to be illegal and 
 void as against public policy." Nevertheless, corporations with 
 
 24. See Jacksonville, etc., Ry. ». 
 Hooper, 160 U. S. 514; and ante 
 §283. 
 
 1 93 N. Y. 609, 618. Accord with 
 this remark, Vermont & C. R. R. Co. 
 v. Vermont Central R. R. Co., 34 Vt. 
 2, 49; Shepley v. Atlantic, etc., R. R. 
 Co., 55 Me. 395, 407. The point de- 
 cided in Woodruff v. Erie Railway 
 Co. was that the lessee of a railroad 
 could not plead that the lease was 
 ultra vires the lessor company. It 
 was held in Camden & A. R. R. Co. 
 v. May's Landing, etc., R. R. Co., 48 
 N. J. L. 530, that the lessee could not 
 plead to an action for rent due under 
 
 a lease that the lease was beyond its 
 powers. 
 
 2 It is not, however, against public 
 policy for a railroad corporation to 
 agree to do what it possesses no 
 power to do, provided the agreement 
 be conditioned on its receiving the 
 requisite authority from the legisla- 
 ture. Thus, it has been held that a 
 corporation may agree to extend its 
 road provided certain outsiders, rep- 
 resenting business interests along the 
 line of such proposed extension, will 
 secure the requisite authority from 
 the legislature. " It was in sub- 
 stance an agreement to do something 
 
 269
 
 § 307. J THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 public duties to discharge, like other corporations, have un- 
 doubtedly all powers and capacities necessary or incidental to 
 the accomplishment of the objects of their incorporation and 
 the successful carrying out of their business. 
 
 § 30G. That such corporations can do no act which does or 
 may disable them from serving the public as it was 
 
 Other acts 
 
 intended they should serve it, and that, therefore, 
 they cannot without special authority transfer or mortgage 
 their franchises, or the property which is necessary to enable 
 them to use their franchises, seems settled. But in regard to 
 many contracts and arrangements made by railroad companies, 
 the rights of the public are to be considered ; and, while the 
 vague statement may be made, that if any such contract in- 
 fringes the rights of the public it will be void as against public 
 policy, every one knows that public rights and public policy 
 are not easily ascertainable; and just what view a court will 
 take of any given contract, counsel may find difficult to prog- 
 nosticate. 
 
 § 307. The various traffic and business arrangements of rail- 
 roads may now be considered ; but, beforehand, a 
 
 Traffic 
 
 arrange- general rule may be submitted that seems fairly de- 
 ducible from the decisions and sound as far as it goes. 
 A business or traffic arrangement or contract entered into by a 
 railroad or other corporation charged with the performance of 
 public duties, which is fairly necessary, incidental, or ancillary to 
 the carrying out of its purposes of incorporation, will be valid 
 (assuming the contract to be entered into in the proper manner), 
 provided the contract is not injurious to the public (1) by 
 necessarily or potentially rendering the corporation incapable 
 of performing its public duties or enabling it to shirk its public 
 obligations, or (2) by creating a monopoly in the contracting 
 parties, through the stifling of competition or in other ways, 
 
 not at that time legal, but which the 
 passing of an expected statute would 
 render legal; and both parties must 
 have understood that, if the sanction 
 of the legislature should be withheld, 
 the contract would not go into effect. 
 The contract does not import that 
 plaintiffs bound themselves to con- 
 
 270 
 
 struct the road at all events and with- 
 out legislative authority." New 
 Haven and Northampton Co. v. Hay- 
 den, 107 Mass. 522. See, also, Super- 
 visors v. Wisconsin Central R. R., 121 
 Mass. 460; and compare Burbank v. 
 Jefferson City Gas Light Co., 35 La. 
 Ann. 444. See § 162 a. 

 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 308. 
 
 contracts 
 to carry 
 beyond 
 their lines. 
 
 or (3) by giving exclusive or unfair advantages to certain in- 
 dividuals over the general public. 
 
 § 308. It is in accordance with this rule, and is generally ac- 
 cepted law, that railroad companies may make con- Carriers . 
 tracts with passengers and shippers for carriage be- 
 yond their own lines ; l and in order to fulfill such 
 contracts may make suitable arrangements with 
 connecting railroad and steamboat lines, 2 including contracts 
 whereby passenger fares and freights are divided between the 
 connecting companies in certain proportions. 3 When a rail- 
 road company does more than make an ordinary contract with 
 a connecting line for the transportation of passengers and mer- 
 chandise and a division of receipts, and contracts to give the 
 other company control or extensive running powers over its 
 road, such contract may be of questionable validity in view of 
 the rule forbidding railroad companies to transfer their fran- 
 chises or put it out of their power to serve the public as it was 
 intended they should serve it ; namely, through their own cor- 
 porate management, and not by handing their property and 
 franchises over to another corporation. 4 Accordingly, it would 
 
 1 For authorities, see § 362. 
 
 2 Stewart v. Erie and Western 
 Trans'n Co., 17 Minn. 372; Wiggins 
 Ferry Co. v. Chicago and Alton R. R. 
 Co., 73 Mo. 389; Munhall v. Penn- 
 sylvania R. R. Co., 92 Pa. St. 150. 
 See Green Bay and Minn. R. R. Co. 
 v. Union Steamboat Co., 107 U. S. 
 98; Railway Companies v. Keokuk 
 Bridge Co., 131 U. S. 371; Aruot v. 
 Erie R'y Co., 5 Hun, 608; Buffet v. 
 Troy and B. R. R. Co., 40 X. Y. 
 168; Parish v. Wheeler, 22 X. Y. 
 494; Wheeler v. San Francisco and 
 
 A. R. Co., 31 Cal. 46; Rutland and 
 
 B. R. R. Co. v. Proctor, 29 Vt. 93; 
 Shawmut Bank v. Plattsburgh, etc., 
 R. R. Co., 31 Vt. 491; Olcott v. 
 Tioga R. R. Co., 27 N. Y. 546; 
 South Wales R. Co. v. Redmond, 10 
 
 C. B. N. S. 675; Bartlette v. Nor- 
 wich and Worcester R. R. Co., 33 
 Conn. 560. Compare Fitch v. New 
 Haven, etc., R. R. Co., 30 Conn. 38. 
 
 Or may purchase a steamboat. Shaw- 
 mut Bank v. Plattsburgh, etc., R. R. 
 Co., 31 Vt. 491. But see Hoagland 
 v. Hannibal & St. Jo. R. R. Co., 39 
 Mo. 451; Central R. R., etc., Co. v. 
 Smith, 76 Ala. 572. 
 
 3 Elkins v. Camden and Atlantic R. 
 R. Co., 36 N. J. Eq. 241; Sussex R. 
 R. Co. v. Morris and Essex R. R. Co., 
 19 N. J. Eq. 13; S. C, 20 N. J. Eq. 
 542; Hare y. London and Northwest- 
 ern R'y Co., 2 Johns. & Hem. 80. 
 See Hartford and N. H. R. R. Co. v. 
 New York and N. H. R. R. Co., 3 
 Rob. (N. Y.) 411; Columbus. P. and 
 I. R. R. Co. v. Indianapolis and B. R. 
 R. Co., 5 McLean, 450; Androscog- 
 gin, etc., R. R. Co. v. Androscog- 
 gin R. R. Co., 52 Me. 417; Chicngo, 
 P. & St. L. Ry. Co. o. Ayres, 14 111. 
 644. 
 
 4 See Johnson v. Shrewsbury, etc., 
 R'y Co., 3 De G. M. & G. 914; Gard- 
 ner v. London, Chatham, etc., R'y 
 
 271
 
 § 309.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 seem that a contract whereby one railroad company gives up 
 all practical control over its own road, and in effect leases it to 
 the other company, would be void. 1 Besides, the other com- 
 pany might on its side have no power thus to extend its busi- 
 ness. 2 
 
 § 309. Different considerations arise regarding the validity 
 of pooling arrangements or other contracts, the object 
 of which is to prevent competition between parallel 
 and, in the natural order of things, competing roads. 
 In the absence of special authority, such contracts 
 are ultra vires, and on grounds of public policy 
 are illegal and void. 3 Thus, it is ultra vires and illegal for one 
 railroad company to purchase the stock of another with a view 
 to obtain a controlling interest in the latter, and thus prevent 
 competition between itself and the other company. 4 So a con- 
 tract whereby a railroad company' agrees to give an express 
 company exclusive privileges on its road is void ; and the rail- 
 road company may be enjoined from carrying it out ; "' and 
 
 Pooling ar- 
 range- 
 ments. 
 Grants of 
 exclusive 
 privileges. 
 
 Co., L. R. 2 Ch. 212; State v. Hart- 
 ford and N. H. R. R. Co., 29 Conn. 
 538. 
 
 1 It was so held in Ohio and Missis- 
 sippi R. R. Co. v. Indianapolis, etc., 
 R. R. Co. (Superior Ct. of Cin.), 5 
 Am. Law Reg. N. S. 733. See Simp- 
 son ». Denison, 10 Hare, 51. Com- 
 pare Midland R'y Co. v. Great West- 
 ern R'y Co., L. R. 8 Ch. 841 ; Attorney- 
 General o. Great Eastern R'y Co., L. 
 R. 11 Ch. D. 449. 
 
 2 See cases in last note, also Nau- 
 gatuck R. R. Co. v. Waterbury Button 
 Co., 24 Conn. 468, 482. 
 
 a Hartford and N. H. R. R. Co. v. 
 New York and N. H. R. R. Co., 3 
 Rob. (X. Y.) 411; Stewart v. Erie 
 and Western Trans'n Co., 17 Minn. 
 372; Gulf, etc., Ry. Co. v. State, 72 
 Tex. 404; Charlton v. "Newcastle and 
 Carlisle R'y Co., 5 Jur. N. S. 1096. 
 
 4 Central R. R. Co. v. Collins, 40 
 Ga. 582; Hazlehurst v. Savannah, 
 etc., R. R. Co., 43 Ga. 13; Elkins o. 
 Camden and Atlantic R. R. Co., 36 
 
 272 
 
 N. J. Eq. 5; Pearson v. Concord R. 
 R. Co., 62 N. H. 537; Buckeye 
 Marble, etc., Co. v. Harvey, 20 S. W. 
 Rep. (Tenn.) 427. See, De La 
 Vergne Co. v. German Sav. Inst., 
 175 U. S. 40. 
 
 5 Sandford v. Railroad Co., 24 Pa. 
 St. 378; New England Express Co. v. 
 Maine Central R. R. Co., 57 Me. 188. 
 See Cumberland Valley R. R. Co.'s 
 Appeal, 62 Pa. St. 218. 
 
 A common carrier is as much bound 
 to carry for other carriers as for other 
 persons. Dinsmore v. Louisville C. 
 and L. R'y Co., 2 Flippen, 672. See 
 Atchison, T. and S. F. R. R. Co. r. 
 Denver and N. O. R. R. Co., 110 U. 
 S. 667. And cannot discriminate 
 against an express company. South- 
 ern Express Co. v. Memphis, etc., R. 
 R. Cos., 2 McCrary, 570; see Express 
 Cos. v. Railway Cos., 3 McCrary, 147. 
 But a contract whereby a railroad 
 company agreed with a telegraph 
 company to allow no other telegraph 
 line to be constructed along the line
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 309. 
 
 equally void is a contract giving exclusive advantages to certain 
 shippers over all others. 1 " Every common carrier must carry 
 for all to the extent of his capacity, without undue or unreason- 
 able discrimination either in charges or facilities." 2 
 
 of its railroad was held valid; there 
 oeing several other lines of railroads 
 between the important points on the 
 road, and no necessity for construct- 
 ing a telegraph line along it. West- 
 ern Union Tel. Co. v. Atlantic and 
 Pac. Tel. Co., 7 Biss. 367; see, also, 
 Western Union Tel. Co. v. Chicago, 
 etc., R. R. Co., 86 111. 246. Contra, 
 Western Union Tel. v. Burlington, 
 etc., R'y Co., 3 McCrary, 130. See 
 Atlantic and Pac. Tel. Co. v. Union 
 Pac. R. R. Co., 1 McCrary, 541. 
 Compare Wright v. Ryder, 36 Cal. 
 342; Morris Run Coal Co. v. Barclay 
 Coal Co., 68 Pa. St. 173. 
 
 1 Messenger v. Pennsylvania R. R. 
 Co., 37 N. J. L. 531; S. C, 36 N. J. 
 L. 407; Chicago and A. R. R. Co. v. 
 Suffern, 129 111. 274. The contract 
 of a common carrier to allow draw- 
 backs on freight to a party, and not 
 to allow them to any other person, 
 is against public policy and void. 
 Stewart v. Lehigh Valley R. R. Co., 
 38 N.J. L. 505. An injunction can 
 be had to restrain a railroad com- 
 pany from agreeing not to transport 
 goods at rates fixed by law. Rogers' 
 Locomotive Works v. Erie R'y Co., 
 20 N. J. Eq. 379. But, though it 
 seems a common carrier can in no 
 event charge more than a reasonable 
 price, it is held that he may charge 
 less to one person than to another: 
 Fitchburg R. R. Co. v. Gage, 12 Gray 
 (Mass.), 393; Johnson v. Pensacola, 
 etc., R. R. Co., 16 Fla. 623, 667; Ra- 
 gan v. Aiken, 9 Lea (Tenn.), 609; 
 Munhall v. Pennsylvania R. R. Co., 
 92 Pa. St. 150; Ex parte Benson, 18 
 S. C. 38; Houston, etc., R'y Co. v. 
 Rust, 58 Tex. 98. See Atchison, T. 
 18 
 
 and S. F. R. R. Co. v. Denver and N. 
 O. R. R. Co., 110 U. S. 667. A rail- 
 road company is under a duty to 
 transport merchandise on equal 
 terms for all parties, where the carry- 
 ing for some shippers at a lower 
 price than for others will create 
 monopoly or destroy the business of 
 those less favored. Scofield v. R'y 
 Co., 43 Ohio St. 571; Brundred v. 
 Rice, 49 Ohio St. 640. 
 
 So a contract to grant privileges 
 for the withdrawal of opposition, 
 based on public grounds, to proposed 
 legislation concerning a railroad, is 
 void. Pingry v. Washburn, 1 Aiken 
 (Vt. ), 264. Otherwise if the opposi- 
 tion rests on private grounds. Low 
 v. Conn. P. R. R. Co., 46 N. H. 284. 
 As to contracts to locate stations, 
 see § 162. 
 
 2 Atchison, T. and S. F. R. R. Co. 
 v. Denver and N. O. R. R. Co., 110 
 U. S. 667, 674. Ace. Root v. L. I. R. 
 Co., 114 U. S. 300; Indian River S. 
 Co. v. East Coast Trans. Co., 28 Fla. 
 387, 435; State v. C. N. O., etc., R. 
 R. Co., 47 Ohio St. 130. Contracts 
 between railroad and telegraph com- 
 panies, vesting in the latter the ex- 
 clusive right to use the railroad's 
 right of way for telegraph poles, etc., 
 are void, as against public policy, 
 being in restraint of trade and tend- 
 ing to create monopolies. Railroad 
 companies cannot convey to another 
 company for its exclusive interests, 
 and in antagonism to the public in- 
 terests, property acquired by the 
 railroad company through its right 
 of eminent domain. Western Union 
 Tel. Co. v. American Union Tel. Co., 
 65 Ga. 160. See § 350 ami notes. 
 273
 
 § 300rt.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 In 1889, the Supreme Court of New Hampshire rendered a 
 decision holding that a contract between competing railway 
 companies, made to prevent competition, but not for the purpose 
 of raising prices of transportation above a reasonable standard, 
 is not void as against public policy. 1 " While, without doubt, 
 contracts which have a direct tendency to prevent a healthy 
 competition are detrimental to the public, and consequently 
 against public policy, it is equally free from doubt that when 
 such contracts prevent an unhealthy competition, and yet fur- 
 nish the public with adequate facilities at fixed and reasonable 
 rates, they are beneficial and in accord with sound principles of 
 public policy. For the lessons of experience .... demon- 
 strate that the public interest is not subserved by competition 
 which reduces the rate of transportation below the standard of 
 fair compensation ; and the theory which formerly obtained, 
 that the public is benefited by unrestricted competition between 
 railroads, has been so emphatically disproved by the results 
 which have generally followed its adoption in practice, that the 
 hope of any permanent relief from excessive rates through the 
 competition of a parallel or rival road may, as a rule, be justly 
 characterized as illusory and fallacious." 2 
 
 § 309a. Notwithstanding the force of its reasoning, this de- 
 " Trusts" cision of the New Hampshire court is out of accord 
 oiies m ° nop " w * tn tne tren d of decisions throughout the United 
 States. Many of these are based upon recent stat- 
 utes forbidding all contracts which prevent competition and 
 create combinations or monopolies. 3 The Act of Congress of 
 July 2, 1890, is of this character. It is entitled "An act to pro- 
 tect trade and commerce against unlawful restraints and mo- 
 nopolies." By this act " every contract, combination, in the 
 form of trust or otherwise, or conspiracy, in restraint of trade 
 
 1 Railroad v. Railroad, 66 N. H. 100. 
 
 2 Railroad v. Railroad, 66 N. H. 
 100, 127. Opinion of Court per Blod- 
 gett, J. 
 
 8 The Illinois statute was held un- 
 constitutional, because it exempted 
 combinations of farmers, and so de- 
 nied the equal protection of the laws. 
 Connolly v. Union Sewer Pipe Co., 
 184 U. S. 540. The Tennessee statute 
 
 274 
 
 was sustained in People exrel. Astor 
 v. Schlitz Brew. Co., 104 Tenn. 715, 
 but the decision is inconsistent with 
 the Connolly case. The New York 
 statute was construed in Matter of 
 Davies, 168 N. Y. 89. As to Missouri 
 statute, see State ex rel. Crow v. Fire- 
 men's Fund Ins. Co., 152 Mo. 1; State 
 ex rel. Star Pub. Co. v. Associated 
 Press, 159 Mo. 410. 
 
 i
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 309a, 
 
 or commerce among the several states or with foreign nations, 
 is hereby declared to be illegal." This provision is held to ap- 
 ply to common carriers by railroad, and to prohibit a contract 
 between them in restraint of interstate trade ; even though such 
 contract is entered into between competing lines, and only for 
 the purpose of affecting rates of transportation. It renders 
 illegal all such agreements, making no exception in favor of 
 those the terms of which may be reasonable, and which estab- 
 lish only reasonable rates. It need not be shown that the agree- 
 ment was entered into for the purpose of restraining trade, if 
 such restraint is its necessary effect. 1 
 
 The general principle may be regarded as established that 
 corporations cannot, in a manner calculated to stifle competition 
 and create a monopoly, combine their properties and interests, 
 except by means of competently authorized and regularly car- 
 ried out consolidation. This principle applies not only to cor- 
 porations having public duties to perform, or in whose enter- 
 prises the public has a tangible interest ; it also applies to any 
 combination of corporations of any kind when the result would 
 be a monopoly in any branch of business. 2 That is to say, in 
 popular language, corporations may not form a " trust," for a 
 "trust" is ultra vires, illegal, and void, and a ground of for- 
 feiture of corporate franchises, whether the agreement be en- 
 tered into by formal corporate action, the corporations appear- 
 ing as the contracting parties, or whether it be entered into bv 
 the shareholders of the several corporations in their individual 
 capacity as shareholders, but with a view of bringing under one 
 management the interests and properties of the several corpora- 
 tions. 
 
 1 U. S. v. Freight Ass'n, 166 U. S. 
 290, White, Field, Gray, Shiras, JJ., 
 dissenting, followed in U. S. v. 
 Joint Traffic Assn., 171 U. S. 505. 
 See U. S. v. Pipe Co., 85 Fed. Rep. 
 271. But this act does not prohibit 
 a monopoly in the manufacture of a 
 commodity. U. S. v. Knight Co., 
 156 U. S. 1. Compare Dueber Watch 
 Case Mfg. Co. v. Howard Co., 35 U. 
 8. App. 16. Nor has it any applica- 
 tion to a combination among commis- 
 
 sion merchants dealing in live stock, 
 such combination having only an in- 
 direct influence on interstate com- 
 merce. Hopkins v. U. S., 171 U. S. 
 578. See, also, Anderson v. IT. S., 171 
 IT. S. 604. In Addyston Pipe & Steel 
 Co. v. U. S., 175 U. S. 211, the statute 
 was held applicable as interstate 
 commerce was affected. 
 
 2 Bailey v. Master Plumbers, 103 
 Tenn. 90; State ex rel. Crow v. Fire- 
 men's Fund Ins. Co., 152 Mo. 1; 
 
 275
 
 § 3096.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 30%. These principles were discussed and exemplified in 
 the cases of People /\ North River Sugar Refining Co., 1 and 
 State v. Standard Oil Co. 2 In the former of these cases it was 
 held that the corporations who entered the " Sugar Trust " 
 thereby rendered themselves liable to forfeiture of franchises 
 and that judgment of forfeiture and dissolution was properly 
 given by the court below; and further, that it was immaterial 
 how the improper combination was effected, whether by formal 
 corporate action of the several corporations, or by action nom- 
 inally taken by the holders of all the stock : there can be " no 
 partnership of separate and independent corporations, whether 
 directly or indirectly through the medium of a trust ; no sub- 
 stantial consolidations which avoid and disregard the statutory 
 permissions and restraints, .... manufacturing corporations 
 must be and remain several, as they were created, or one, under 
 the statute." 3 
 
 In the latter case, of the Standard Oil Trust, the same prin- 
 ciples were decided under similar circumstances. The case is 
 authority for the two following propositions, taken respectively 
 from the judge's headnote and from the opinion of the court : 
 
 " An agreement by which all or a majority of the stockholders 
 of a corporation transfer their stock to certain trustees, in con- 
 sideration of the agreement of the stockholders of other com- 
 panies and of members of limited partnerships, engaged in the 
 same business, to do likewise ; and by which all are to receive 
 in lieu of their stocks and interests, so transferred, trust certifi- 
 cates to be issued by the trustees, equal at par to the par value 
 of their stocks and interests ; and by which the trustees are em- 
 powered as apparent owners of the stock to elect directors of the 
 several companies, and thereby control their affairs in the inter- 
 ests of the trust so created ; and are to receive all dividends 
 made by the several companies and limited partnerships, from 
 which, as a common fund, dividends are to be made by the trus- 
 
 Tuscaloosa Ice Mfg. Co. v. Williams, 
 127 Ala. 110. But that a corporation 
 is party to a monopoly is no defence 
 to an action brought by it for goods 
 sold. Connolly v. Union Sewer Pipe 
 Co., 184 U. S. 540. See, also, Att'y- 
 
 276 
 
 Gen'l v. American Tobacco Co., 55 
 N. J. Eq. 3o2; 56 N. J. Eq. 847. 
 
 1 121 N. Y. 582 (Sugar Trust). 
 
 2 49 Ohio St. 137 (Standard Oil 
 Trust). 
 
 a 121 N. Y. 582, 626. Opinion of 
 the Court per Finch, J. 

 
 PART III.] ACTS WITHIN THE CORPORATE POWERS. [§ 3096'. 
 
 tees to the holders of the trust certificates, tends to the creation 
 of a monopoly to control production as well as prices, and is 
 against public policy." 
 
 " Where all, or a majority, of the stockholders comprising a 
 corporation, do an act which is designed to affect the property 
 and business of the company, and which, through the control 
 their numbers give them over the selection and conduct of the 
 corporate agencies, does affect the property and business of the 
 company in the same manner as if it had been a formal resolu- 
 tion of its board of directors ; and the act so done is ultra vires 
 of the corporation and against public policy, and was done by 
 them in their individual capacity for the purpose of concealing 
 their real purpose and object, the act should be regarded as the 
 act of the corporation ; and to prevent the abuse of corporate 
 power, may be challenged as such by the state in a proceeding 
 in quo warranto" l 
 
 § 309<2. These matters took different forms in other cases; 
 but the principle applied was the same, i. e., that monopolies 
 are against public policy. Thus the agreement of two gas com- 
 panies doing business in Chicago to divide the territory of the 
 city between them, surrender their respective gas-mains to each 
 other within the district mutually abandoned, and bind them- 
 selves not to sell gas within ea.ch other's districts, is void be- 
 cause creating a monopoly. 2 Subsequently the Supreme Court 
 of Illinois, laying down the broad principle that whatever tends 
 to create a monopoly or prevent competition between those 
 engaged in a business of a public character is unlawful, held it 
 to be against public policy and unlawful to form a corporation 
 for the purpose of controlling all the corporations engaged in 
 the same kind of business ; the court sustained a quo warranto 
 against a corporation formed to buy up the stock of and control 
 the gas companies of Chicago. 3 And it is held in New York, 
 
 1 State v. Standard Oil Co., 49 O. 
 St. 137, 184. 
 
 2 Chicago Gas Light Co. v. People's 
 Gas Light Co., 121 111. 530. See, 
 also, State v. Portland Natural Gas 
 Co., 153 Ind. 483. 
 
 8 People v. Chicago Gas Trust Co., 
 130 111. 268. See, also, Harding ». 
 
 v. Nebraska Distilling Co., 29 Neb. 
 700; and compare Scranton Electric 
 Co.'s Appeal, 122 Pa. St. 154 ; Bruns- 
 wick Gas Light Co. v. United Gas, 
 etc., Co., 85 Me. 532; Buckeye Mar- 
 ble, etc., Co. v. Harvey, 20 S. W. 
 Rep. (Tenn. ) 427; Stater. American 
 Cotton Oil Trust, 40 La. Ann. 8; 
 
 Am. Glucose Co., 182 111. 551; State I Richardson v. Ruhl (Diamond Match 
 
 277
 
 § 309'?.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 as well as in Illinois, that a corporation formed for the purpose 
 of controlling within a city the prices of important commodi- 
 ties like milk or coal, is formed for an illegal purpose, being 
 contrary to public policy, which is to allow free competition : 
 and it need not be shown that the prices were excessive. 1 
 
 § 309d. The term " trust " has continued in popular use to 
 express the idea of a very large and wide reaching enterprise. 
 But after the decisions in People v. North River Sugar Refin- 
 ing Co. and State v. Standard Oil Co., and other cases men- 
 tioned in the two last sections, corporation lawyers acquiesced 
 in the view that "trusts' 1 were illegal and could not be sus- 
 tained as a means of effecting corporate consolidation. In 
 order, however, to bring about a like result in a legal manner, 
 corporation lawyers, as it were, went back and resorted to the 
 
 Trust), 77 Mich. 632; Cum tilings v. 
 Union Blue Stone Co., 164 N. Y. 401; 
 Cohen ». Berlin-Jones Co., 166 X. Y. 
 292; Trenton Potteries Co. o. Oli- 
 phant, 56 N. J. Eq. 680. 
 
 1 People v. Milk Exchange, 145 
 N. Y. 267; People v. Sheldon, 139 
 N. Y. 251; Judd v. Harrington, ib. 
 105; Harrow Co. v. Bement, 21 N. Y. 
 App. 290; Ford v. Chicago Milk 
 Shippers' Ass'n, 155 111. 166; Dis- 
 tilling Co. v. People, 156 111. 448. 
 Compare Bishop v. American, etc., 
 Co., 157 111. 284; U. S. V. Co. v. 
 Schlegel, 143 N. Y. 537; Same v. 
 Foehrenbach, 148 N. Y. 58. These 
 decisions are rendered with more or 
 less direct reference to statutes for- 
 bidding monopolies. 
 
 There are a number of cases in the 
 Texas courts construing the Texas 
 statute against trusts and combina- 
 tions. A contract was held illegal, 
 under this statute, whereby a coal 
 company gave exclusive privileges 
 to a liquor dealer on its premises, 
 and agreed to pay its employes in 
 time-checks redeemable weekly by 
 him on his premises, he agreeing to 
 pay the coal company as rent two- 
 thirds of the profits of his saloon 
 
 278 
 
 business, and to make monthly re- 
 turns. Texas & Pac. Coal Co. o, 
 Lawson, 89 Tex. 394. See, also, 
 Welch v. Mill Co., 89 Tex. 653; Gates 
 v. Hooper, 90 Tex. 563; Brewing Co. 
 v. Templeman, ib. 277; Fuqua v. 
 Brewing Co., ib. 298; Insurance Co. 
 ». State, 86 Tex. 250. Exclusive 
 privileges granted by a city to lay 
 water piping were held void. Bren- 
 ham ». Water Co., 67 Tex. 542; Ed- 
 wards Co. v. Jennings, 89 Tex. 618. 
 But see Laredo v. Bridge Co., 30 
 U. S. App. 110. 
 
 On the other hand, the Rhode 
 Island court has declared that not 
 all contracts in restraint of trade are 
 void; and it upheld one where par- 
 ties, including a corporation, pooled 
 their oleomargarine plants, and 
 agreed not to carry on a like busi- 
 ness for five years. Oakdale Mfg. 
 Co. v. Garst, 18 R. I. 484. Coin pare 
 Williams v. Montgomery, 148 N. Y. 
 519. And it is held in California 
 that a contract making a water com- 
 pany the sole agent of a flume com- 
 pany for the distribution of water 
 in a city, is not illegal, as creating a 
 monopoly. San Diego Water Co. v. 
 Flume Co., 108 Cal. 549.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 310. 
 
 plan of a single corporation with enormous issues of stock and 
 bonds. Usually they organized such corporations in the State 
 of New Jersey. Soon it was found that this method might be in- 
 convenient because of the severity of the statutes in many states 
 relating to foreign corporations. 1 Some states even required 
 them to take out charters and become domestic corporations sub- 
 ject to taxes and other burdens like ordinary domestic corpora- 
 tions. To obviate these difficulties the scheme of the so-called 
 " Securities Company " has now been devised. Its legality with 
 respect to the Federal statute referred to in § 309a and similar 
 state statutes is still subjudice. Here the plan is to organize a 
 corporation with comparatively low capitalization, which shall, 
 however, hold enough stock in the various operating corpora- 
 tions to make it the majority stockholder in them all. The 
 funds to carry this out are sometimes raised by a large issue of 
 bonds by the " Securities Company," which are often secured 
 by the pledge of the stocks of the operating corporations ; or, 
 again, those stocks may be pledged to other parties than the 
 bondholders for a like purpose of raising necessary funds. 
 Thus, as majority stockholder, a " Securities Company " may 
 control and manage a number of operating corporations of vast 
 capitalization. Whether such an organization will be held legal 
 is likely to depend in each instance on whether the court regards 
 it as a cloak under which a prohibited combination is achieved, 
 — or takessomeother blinder view. 3 
 
 """ §"£ iloTThis examination of Ihe^egarreTatTonslmsing LiabintjTof " 
 from ultra vires transactions may be closed with an corpora- 
 
 • ; tions to ac- 
 
 inquiry into the liability of a corporation to account count for 
 for benefits which it has received under an ultra vires ceived un- 
 contract when it is seeking to repudiate the obliga- vfreT n con- 
 tions thereof. tract - 
 
 Some years ago the New Hampshire court stated the general 
 principle : " However the contractual power of the defendants 
 may be limited under their charter, there is no limitation of 
 their power to make restitution to the other party whose money 
 or property they have obtained through an unauthorized con- 
 
 1 Cf. post, §§ 400 et seq. I ney in the Yale Law Journal, June, 
 
 2 See a paper by Edward B. Whit- 1 1902. 
 
 279
 
 § 310.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 tract," 1 The words of the court here recognize a right on the 
 part of the other contracting party, not to compel the corpora- 
 tion to perform, but to compel it to make restitution of what it 
 has received. Certainly, if the corporation refuses to perform 
 its side of the contract, property may have come into its pos- 
 session to which it has no right ; and it is not ultra vires a cor- 
 poration to restore that which it has no legal right to keep. 
 And often the performance on the part of the other party will 
 be the measure of the restitution to which he is entitled from 
 the corporation. 2 
 
 Accordingly, some courts state the following rule : The fact 
 that an ultra vires contract has been executed by the other con- 
 tracting party and that the corporation has received the benefit 
 will not sustain a suit against the corporation on the contract ; 
 the remedy is a suit in disaffirmance and for an accounting for 
 benefits received ; in which case the plaintiff's right rests on an 
 implied contract on the part of the corporation to return prop- 
 erty received or make compensation for what it is not entitled 
 gratuitously to retain. 3 
 
 There is nothing in these propositions repugnant to the gen- 
 eral doctrine of the Federal Supreme Court upon the subject 
 of ultra vires. Indeed in the case of the Central Transporta- 
 tion Co. v. Pullman's Palace Car Co., the court, through Jus- 
 tice Gray, intimated that the court would permit property to 
 be recovered back : " In such case, however, the action is not 
 maintained upon the unlawful contract, nor according to its 
 terms : but on an implied contract of the defendant to return, 
 or, failing to do that, to make compensation for, property or 
 money which it has no right to retain. To maintain such an 
 action is not to affirm, but to disaffirm, the unlawful contract." 4 
 And in a subsequent suit in equitj 7 between the same parties, 
 
 1 Railroad v. Railroad, 66 N. H. 
 100, 129; see also International Tr. 
 Co. v. Company, 70 N. II. 118. 
 
 2 Tliere may be cases where no res- 
 titution can be made. For instance, 
 in a recent Massachusetts case, the 
 plaintiff agreed to procure a cus- 
 tomer for a national bank, and in re- 
 turn was to have certain business put 
 into bis bands. Tbe court held that 
 
 280 
 
 the contract was ultra vires, and 
 could not be enforced. The plaintiff 
 had performed. Dresser v. Traders 1 
 Nat. Bank, 165 Mass. 120. 
 
 3 Miller v. American, etc., Ins. Co., 
 21 S. W. Rep. 39 (Tenn.); Brunswick 
 G. L. Co. v. United G., etc., Co., 85 
 Me. 532; Railway Co.'s v. Keokuk 
 Bridge Co., 131 U. S. 371, 389. 
 
 4 139 U. S. 60.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 310. 
 
 the action was brought by the lessee to cancel the ultra vires 
 lease, and the court held that relief would be granted upon its 
 returning the property or paying the value of what it could 
 not return. 1 The court said, however, with reference to a line 
 of cases which it cited approvingly : " They are substantially 
 unanimous in expressing the view that in no way and through 
 no channels, directly or indirectly, will courts allow an action 
 to be maintained for the recovery of property delivered under 
 an illegal contract where, in order to maintain such recovery, 
 it is necessary to have recourse to that contract. The right of 
 recovery must rest upon a disaffirmance of the contract, and it 
 is permitted only because of the desire of courts to do justice 
 as far as possible to the party who has made payment or de- 
 livered property under a void agreement, and which in justice 
 he ought to recover. But courts will not in such endeavor 
 permit any recovery which will weaken the rule founded upon 
 public policy already noticed.'- 3 
 
 Unquestionably in such instances many courts would dis- 
 tinguish between contracts merely ultra vires and those which 
 are also illegal. In regard to the former the general principle is 
 stated by Mr. Brice as follows : 3 " But though a corporation can- 
 not be sued, any more than any other citizen, directly upon a 
 contract or analogous transaction which does not bind it, yet if 
 it sets up this defence it must restore to the other party what 
 it has obtained from him. It may repudiate the transaction if 
 it chooses, but if so it must repudiate altogether — it cannot 
 reprobate and approbate — it cannot reject and yet keep what in 
 another form it has rejected." i Clear as this statement seems, 
 it requires qualification in this respect : that the corporation 
 may repudiate the contract without rendering up the benefits 
 which through the contract have accrued to the corporate prop- 
 erty, when such benefits have become amalgamated with the 
 corporate property and cannot be rendered up without infring- 
 ing the rights of persons who have never assented to the con- 
 
 1 Pullman Palace Car Co. v. Central 
 Trans. Co., 171 U. S. 138. The 
 opinion discusses the way to arrive 
 at the value. See, also, Aldrich v. 
 Chemical Nat. Bk., 176 U. S. 618. 
 
 2 171 U. S. 151. 
 
 3 Ultra Vires, 2d Eng. ed. p. 769. 
 
 4 See Miinville v. Belden M'g Co., 5 
 McCrary, 301; Panhandle Nat. Bk. v. 
 Emery, 78 Tex. 498. 
 
 281
 
 § 311.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 tract nor in any way acquiesced in it. 1 In ascertaining the 
 liability of tbe corporation, either directly on the contract, or 
 indirectly for the benefits which through the contract have ac- 
 crued to the corporate property, it must continually be borne 
 in mind that the rights of different persons regarding the cor- 
 porate property are distinguishable. Some persons may be in 
 a position to say to the other contracting party, " take back 
 what you can reach without disturbing my rights." The above- 
 mentioned qualification, however, is applicable only where the 
 benefits from the ultra vires contract have become indistinguish- 
 ably interwoven with the corporate property, so as to make 
 impossible a restitution in integrum. 
 
 § 311. The simplest conceivable case for the application of the 
 general rule is where a corporation has received specific property, 
 Specific rea l or personal, the distinguishing characteristics of 
 chattels which remain unimpaired after it has come into the 
 
 must be . L 
 
 returned. possession of the corporation. In such case the prop- 
 erty must be returned upon the repudiation of the 
 contract in pursuance to which the corporation received it. 3 If 
 money has been loaned to a corporation in furtherance of some 
 scheme known to the lender to be ultra vires, it does not neces- 
 sarily follow that the corporation will have to return the money, 
 which may never have been applied to corporate purposes. 
 Thus, where the directors of a building society, the rules of 
 which gave directors no power to borrow, borrowed money 
 for the purpose of advancing it to the members on the security 
 of their shares, the lender's claim was disallowed on the wind- 
 ing up of the society. 3 In this case there was no proof that the 
 money was ever applied to the proper purposes of the society 
 or to the payment of any debt for which the society was liable. 
 On the other hand, when through an ultra vires transaction 
 money has come into the possession of a corporation and has 
 been applied to proper corporate purposes, the corporation in 
 repudiating the transaction will have to refund the money so 
 
 iSee Hill's Case, L. R. 9 Eq. 605. 
 
 2 A national bank, on being repaid 
 a loan, must return property which 
 came into its hands in pursuance of 
 a contract it had no authority to 
 make. Logan County Nat. Bank v. 
 
 282 
 
 Townsend, 139 U. S. G7. Compare 
 §277. 
 
 3 In re Nat. Permanent Benefit 
 B'ld'g Asso., ex parte Williamson, 
 L. R. 5 Ch. 309. 
 
 I
 
 PART in.] ACTS BEYOND THE CORPORATE POWERS. [§ 312. 
 
 applied. 1 Thus, in Burges and Stock's Case 2 the holders of 
 marine insurance policies, which the company was not author- 
 ized to issue, were allowed on winding up the company to re- 
 cover the premiums paid by them on such policies ; but were 
 not allowed to recover the value of the policies, Page-Wood, 
 V. C, saying : " They have had no consideration for the pre- 
 miums they paid. The directors, it is true, had no power to 
 issue marine policies ; but they had power to receive money 
 and apply it to the benefit of the company. It is proved that 
 they did so receive and apply these premiums, and the amount 
 might have been recovered even at law as money had and re- 
 ceived." 3 
 
 § 312. The liability of a corporation to account for benefits 
 received by it under an ultra vires transaction, does Basis of the 
 not rest on the circumstance that the other party has liaDlllt y- 
 rendered services or parted with property, 4 nor on that circum- 
 stance combined with the further circumstance that the prop- 
 erty of the corporation has received a benefit. The still 
 further circumstance must exist that the benefit itself was 
 appropriated to the uses of the corporation through some cor- 
 porate agency acting within the scope of its express or implied 
 authority. 5 j^o more than an individual can a corporation be 
 compelled to account for money, property, or benefits thrust 
 upon it without its consent. In such case the only remedy of 
 the owner is to recover the identical property or its proceeds, 
 if one or the other can be traced. Moreover, from the mere 
 retention and use of a benefit, where there is no freedom of 
 
 1 German Nat. Bk. v. Butcher's, 
 etc., Co., 97 Ky. 34 ; Union Hard- 
 ware Co. v. Plume, etc., Co., 58 Conn. 
 219. A corporation cannot repudi- 
 ate a mortgage, made in disregard 
 of statutory provisions, without re- 
 turning the money. Williams v. 
 Bank, 71 Miss. 858 ; So. B. &. L. 
 Ass'n v. Casa Grande Stable Co., 128 
 Ala. 624. 
 
 2 2 J. & H. 441. 
 
 8 See, also, White v. Franklin 
 Bank, 22 Pick. 181 ; Hawken v. 
 Bourne, 8 M. & W. 703 ; Port of 
 
 Lond. Assur. Co.'s Case, 5 De G. M. 
 & G. 465 ; S. C, sub nom. Ernest 
 v. Xicholls, 6 H. L. C. 401; Hall v. 
 Mayor, etc., of Swansea, 5 Q. B. 526; 
 In re Cork, etc., R'y Co., L. R. 4 Ch. 
 748, 760 ; Humphrey v. Patrons' 
 Mercantile Ass'n, 50 Iowa, 607. 
 
 4 Except where a specific piece of 
 property may be handed back. 
 
 6 Franco-Texan Land Co. r. McCor- 
 mick, 85 Tex. 417; Hawtayne v. 
 Bourne, 7 M. & W. 595 ; Ex parte 
 Cropper, 1 De G. M. & G. 147. 
 
 283
 
 313.] TIIK LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 choice to reject or accept, no promise to pay or account for the 
 same can be implied. 1 
 
 § 313. The rules already stated are not always nor altogether 
 
 applicable to restitutions on the repudiation of con- 
 
 uitm vires tracts which, besides being ultra vires, are also un- 
 
 con tracts. •. ~ -, 
 
 lawful. 
 
 A party to a contract, the making of which, though pro- 
 hibited by law, is not malum in se, may, while it remains ex- 
 ecutory, rescind it and recover monev advanced by him thereon 
 to the other party who has performed no part thereof. Per- 
 mitting the plaintiff to recover back is not carrying out the 
 illegal transaction, but the effect is to put everybody in the 
 situation they were in before the illegal contract was deter- 
 mined on. 2 Thus, where a deposit was made in a bank, and 
 the depositor received a book containing the cashier's certificate 
 that the money was to remain on deposit a certain length of 
 time, it was held that such stipulation was void as amounting 
 to a contract on the part of the bank for the payment of money 
 at a future day certain, a contract prohibited by statute. But 
 the court held that, though no action could be maintained by 
 the depositor on the stipulation, still he could recover back the 
 money before the expiration of the time for which it was to 
 remain on deposit, and that, too, without any previous demand 
 on the bank. 3 It will be noticed that in this case, though the 
 express contract was beyond the cashier's authority, yet receiv- 
 ing the money on deposit was not, and so the money was actu- 
 ally applied to the purposes of the bank by its agent acting 
 within his powers. 
 
 Sometimes a harsher doctrine is applied. Undoubtedly the 
 right of a party to an illegal contract to have it rescinded rests 
 on public policy rather than on any rights of the party him- 
 self. And so a corporation, without regard to the fact that it 
 
 1 In re Worcester Corn Exch. Co., 
 3 De G. M. & G. 180 ; Zottman v. 
 San Francisco, 20 Cal. 96 ; Murphy 
 v. City of Louisville, 9 Bush (Ky. ), 
 189 ; In re Kent Benefit B'ld'g Soc, 
 1 Dr. & Sm. 417. 
 
 2 Spring Co. v. Knowlton, 103 U. 
 S. 49 ; Oneida B'k v. Ontario B'k, 
 21 N. Y. 490; White v. Franklin 
 
 284 
 
 B'k, 22 Pick. 181 ; Dill v. Wareham, 
 7 Mete. (Mass. ) 438 ; Whitney v. 
 Peay, 24 Ark. 22 ; Foulke v. San 
 Diego, etc., R. R. Co., 51 Cal. 365; 
 Philadelphia Loan Co. ». Towner, 13 
 Conn. 249. Compare Brooks v. Mar- 
 tin, 2 Wall. 70. 
 
 3 White v. Franklin B'k, 22 Pick. 
 181.
 
 PART HI.] ACTS BEYOND THE CORPORATE POWERS. [§ 314. 
 
 is particeps oriminis, may invoke the aid of a court to relieve 
 it from an illegal contract ; for the relief is regarded as given 
 to the public through the party in whose name it is sought. 
 Thus, in a New York case, it was held that a lease taken by a 
 railroad company for the purpose of extending its road beyond 
 its chartered terminus was ultra vires and void, and would be 
 set aside on the application of a party to it. But it was also 
 held that the court would not relieve the parties any further 
 than the public interest required, and accordingly no recovery 
 was permitted for the use of the leased property previous to 
 the time when the lease was declared invalid. 1 
 
 § 314. Persons who at the expense of a corporation have 
 received benefit from an ultra vires transaction, even _. ... mj _ m 
 
 ' . Liability of 
 
 a transaction that is illegal as against public policy, other party 
 may have to refund to the corporation to the extent 
 of the benefit they have received. 2 Where, however, both the 
 corporation and the other contracting party have received bene- 
 fits under a partially executed ultra vires contract, the corpora- 
 tion, it is held, cannot retake its property, which under the 
 contract has passed to the other contracting party, without 
 offering to return the property of the other party, which, 
 through the same contract, has come into the possession of the 
 corporation ; and, at all events, a corporation will be enjoined 
 from taking possession of its former property under such cir- 
 cumstances till a judicial settlement and accounting can be 
 had. 3 
 
 The litigation in the cases cited in the note arose from trans- 
 actions which were not only ultra vires, but, on grounds of pub- 
 lic policy, illegal. In one of them, American Union Tel. Co. v. 
 Union Pacific Eailway Co., Judge McCrary said: 4 "Many 
 cases hold that a corporation which has made a contract ultra 
 
 1 Union Bridge Co. ». Troy, etc., 
 R. R. Co., 7 Lans. (X. Y.) 240. 
 
 2 Briee, Ultra Vires, 2d Eng. ed. 
 p. 814. See Bryson v. Warwick, etc., 
 Canal Co., 1 Sm. & G. 447; S. C, 4 
 De G. M. & G. 711; Ernest v. Croys- 
 dill, 2 Be G. F. & J. 175; Zulueta's 
 Claim, L. R. 5 Ch. 444; Hardy v. 
 Metropolitan Land Co., L. R. 7 Ch. 
 427. 
 
 3 American Union Tel. Co. v. Union 
 Pac. Ry. Co., 1 McCrary, 188; Atl. 
 & Pac. Tel. Co. v. Union Pac. Ry. 
 Co., ib. 541; Central Branch U. P. 
 R. R. Co. v. West'n Union Tel. Co., 
 ib. 551; West'n Union Tel. Co. v. 
 Burlington, etc., Ry. Co., 3 McCrary, 
 130. 
 
 * 1 McCrary, 188, 201. 
 
 285
 
 § 315.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VU. 
 
 vires, which has not been fully performed, is not estopped from 
 pleading its own want of power ; but that doctrine does not 
 apply to a case where a party comes into a court of equity, and, 
 while retaining all that he has received upon such a contract, 
 asks to be permitted to retake what he has parted with under 
 it. I take it there is nothing in the law, as there is certainly 
 nothing in the principles of equity, to estop the court from 
 saying that the obligation to return the property transferred 
 under these contracts is mutual, and shall not be enforced 
 against one of the parties without being, at the same time, 
 enforced against the other. As the parties and the subject- 
 matter are now before the court, it is the duty of the court, so 
 far as is possible, to place them in statu quo" 1 
 
 § 315. In a treatise on the law of stock corporations very 
 
 little of the law relating to municipal corporations 
 corpora/ will be included ; the latter being very different legal 
 
 institutions and subserving very different purposes. 
 " A municipal corporation, 1 ' says Justice Hunt, " in the exer- 
 cise of all its duties, including those most strictly local or 
 internal, is but a department of the state. The legislature may 
 give it all the powers such a being is capable of receiving, 
 making it a miniature state within its locality. Again, it may 
 strip it of every power, leaving it a corporation in name only ; 
 and it may create and recreate these changes as often as it 
 chooses, or it may exercise directly within the locality any or 
 all of the powers usually committed to a municipality." 2 The 
 case from which this citation is taken held a municipal corpo- 
 ration responsible for negligence in the management of its 
 streets ; and the decision is undoubted law. Nevertheless, a 
 municipal corporation is not liable for misfeasance or non- 
 
 1 See, also, Madison Ave. Baptist 
 Church o. Oliver Street Bap. Church, 
 73 N. Y. 82. When an illegal con- 
 tract of consolidation has been exe- 
 cuted and the defendant has derived 
 all the benefits from the contract, 
 its illegality is no defence to a bill 
 in equity for an accounting and re- 
 turn to the plaintiff of the consider- 
 ation of the contract. Railroad v. 
 
 286 
 
 Railroad, 66 N". II. 100. When a per- 
 son enters into an illegal "trust" be 
 cannot come into equity seeking an 
 accounting for the jirofits arising un- 
 der such trust (i. e., not suing in dis- 
 affirmance and to get back his prop- 
 erty). Uncles v. Colgate, 148 N. Y. 
 529. 
 
 2 Barnes v. District of Columbia, 
 91 U. S. 540, 544.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 317. 
 
 feasance in all respects like a private corporation, 1 and to 
 reason by analogy from the one kind of corporation to the 
 other may cause error. 
 
 § 316. Municipal corporations have little if any inherent ju- 
 risdiction to make laws or adopt governmental regulations. 
 The} 7 can exercise no powers in this respect not given them 
 expressly or impliedly by their charters, or by other statutes 
 or the constitution of the state. 2 There is no contract implied 
 between municipal corporations and the state; and the state 
 may alter their constitutions in any way, may divide one munic- 
 ipal corporation into two or more, and may apportion between 
 the new corporations the property and burdens of the former 
 corporation. When a municipal corporation is legislated out 
 of existence and its territory is annexed to other corporations, 
 the latter, unless the legislature otherwise provides, become 
 entitled to its property and immunities, and severally liable for 
 a proportionate share of all its subsisting legal debts, as well as 
 vested with its powers of taxation to raise revenue to pay them. 
 The remedy of creditors of an extinguished municipal corpora- 
 tion is in equity against the corporation succeeding to its prop- 
 erty and powers. 3 A change in its charter, by amendment or 
 the substitution of a new one, will not be deemed to affect the 
 identity of the corporation or relieve it from its previous lia- 
 bilities, when substantially the same corporators and territory 
 are embraced under the new charter. 4 
 
 § 317. Still, however much in their organization and purposes 
 municipal corporations may differ from stock corporations, the 
 liability of the former on their bonds issued in aid of railroad 
 and other business enterprises of public importance is in many 
 respects similar to the liability of the latter on their 
 contracts. In especial, the rules governiug the effect JdbraSs. 
 of recitals in municipal bonds are analogous to the 
 rules determining the liability of stock corporations for the acts 
 
 1 Post, § 335, note; and see Fowle Detroit Citizens' St. Ry. Co.u. Detroit 
 v. Common Council of Alexandria, 3 Ry., 171 U. S. 48. 
 
 Pet. 398, 409; and § 177. Compare, 3 Mount Pleasant v. Beckwith, 100 
 generally, Vidal v. Girard's Exec- U. S. 514. See Newton v. Commis- 
 utors, 2 How. 127. si oners, ib. 548 ; East Hartford v. 
 
 2 A municipal corporation cannot Hartford Bridge Co., 10 How. 511. 
 grant an exclusive privilege to a street 4 Broughton i\ Pensacola, 93 U. S. 
 railway unless expressly authorized. , 266. 
 
 287
 
 § 318.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 of their agents, when the authority of the agent to act is con- 
 ditioned on facts peculiarly within his knowledge. 1 Moreover, 
 the rule that every person dealing -with a corporation, private 
 or municipal, is affected with notice of the corporate powers, is 
 strikingly exemplified in the law of municipal bonds. For 
 these reasons municipal bonds will be the subject of discussion 
 in the next few pages. 
 
 § 318. Since a large proportion of the suits on municipal 
 bonds are brought in the Federal courts, the deci- 
 dedsions sions of the Supreme Court of the United States upon 
 the validity of municipal bonds are of wide author- 
 ity and application. 2 The Federal courts will follow an un- 
 broken line of decisions of the highest court of a state constru- 
 ing its constitution and statutes. 3 But the rights of bona fide 
 holders of municipal bonds are to be determined by the law as 
 judicially construed when the bonds in litigation were put on 
 the market ; and the United States Supreme Court will not 
 follow the later decisions of a state tribunal in conflict with de- 
 cisions under which the rights of such holders arose. 4 Accord- 
 ingly, when by a series of decisions the highest court of a state 
 has held that the state legislature could competently author- 
 ize municipal corporations to issue bonds in aid of railroads ex- 
 tending beyond the limits of the town or county issuing the 
 bonds, and those decisions have been approved by the Federal 
 Supreme Court, the fact that subsequently the highest court of 
 the same state has held its former decisions erroneous, will, in 
 a Federal court, have no effect on the rights of bona fide hold- 
 ers arising from transactions which occurred before the change 
 in state judicial opinion had been promulgated. Under such 
 circumstances Federal courts will not follow the oscillations of 
 state courts. 5 Moreover, when the question of the validity of 
 
 i See §§ 203-207. 
 
 2 Regarding the jurisdiction of the 
 Federal Circuit Courts, see Bernard's 
 Township v. Stebhins, 109 U. S. 341. 
 
 "Township of Elm wood v. Marcy, 
 92 U. S. 289; Claiborne County r. 
 Brooks, 111 U. S. 400. 
 
 4 Douglass d. Couuty of Pike, 101 
 U. S. 677; Green County r. Conness, 
 109 U. S. 104; Anderson r. Santa 
 
 288 
 
 Anna, 116 U. S. 356; Knox County v. 
 Ninth Nat. Bank, 147 U. S. 91. 
 
 5 Gelpcke v. City of Dubuque, 1 
 Wall. 175; Haverneyer v. Iowa Coun- 
 ty, 3 Wall. 294. See Columbia Coun- 
 ty v. King, 13 Fla. 451. Compare 
 Wade i\ Travis Couuty, 174 U. S. 
 499. See Lock v. Columbia Town- 
 ship Trustees, 179 U. S. 472; Wilkes 
 County v. Coler, 180 U. S. 506.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 319. 
 
 municipal bonds held by an innocent holder comes before the 
 Supreme Court of the United States, that court in its discre- 
 tion may disregard the decisions of a state court, although 
 they involve the construction of a statute of the state, if those 
 decisions are not deemed satisfactory. Such a question be- 
 longs to the domain of general jurisprudence, and the Federal 
 courts will not be controlled by state decisions. 1 
 
 § 319. A municipal corporation has, of course, no implied or 
 inherent power to issue bonds in aid of railroad _ 
 
 enterprises, 2 nor any implied power to utter commer- ity has no 
 cial paper of any kind. 3 State legislatures, however, power to 
 unless prohibited by some constitutional provision, ^f^jd " 
 may authorize a town or county to aid in the con- Con- 
 struction of a railroad by subscribing for shares in the stock 
 of a railroad corporation and issuing bonds in payment there- 
 for, or by issuing its bonds as a simple gift to the corporation. 4 
 
 1 Township of Pine Grove o. Tal- 
 cott, 19 Wall. 666; Town of Venice 
 o. Murdock, 92 U. S. 494; see Swift 
 v. Tyson, 16 Pet. 1; Oates v. Nation- 
 al Bank, 100 U. S. 239; Railroad Co. 
 o. National Bank, 102 U. S. 14; Pana 
 v. Bowler, 107 U. S. 529; Carroll 
 County v. Smith, 111 U. S. 506. See, 
 also, § 468. 
 
 2 Kenicott v. Supervisors, 16 Wall. 
 452; Thomson v. Lee County, 3 Wall. 
 327; Barnum v. Okolona, 148 U. S. 
 393; Provident Trust Co. v. Mercer 
 County, 170 U. S. 593; Hancock v. 
 Chicot County, 32 Ark. 575; see City 
 of Lynchburg v. Slaughter, 75 Va. 57. 
 Compare Bell v. Railroad Co., 4 Wall. 
 598. 
 
 An injunction lies to restrain an 
 issue of bonds where there has been 
 a material departure from the stat- 
 ute. Union Pac. R. R. Co. v. Lincoln 
 Co., 3 Dillon, 300; City of Madison 
 v. Smith, 83 Iud. 502. See Noesen v. 
 Town of Port Washington, 37 Wis. 
 168; and compare Rogers v. Burling- 
 ton, 3 Wall. 654, 667. A taxpayer 
 has a standing in court to maintain 
 
 nessee & P. R. R. Co., 1 Bax. (Tenn.) 
 82. But bonds of a municipal corpo- 
 ration which are void in the hands of 
 an innocent holder are no charge 
 against the public, and a taxpayer 
 has no right to enjoin their circula- 
 tion. McCoy v. Briant, 53 Cal. 247. 
 
 3 Claiborne County v. Brooks, 111 
 U. S. 400. 
 
 4 Thomson v. Lee County, 3 Wall. 
 327; Railroad Co. v. County of Otoe, 
 16 Wall. 667; Town of Queensbury v. 
 Culver, 19 Wall. 83; Clarke v. City 
 of Rochester, 28 N. T. 605 ; Davidson 
 o. County Commissioners, 18 Minn. 
 482; Chicago, Danville, etc., R. R. 
 Co. v. Smith, 62 111. 268; Leaven- 
 worth County c Miller, 7 Kan. 479 
 ( in which last case a full review of au- 
 thorities is given); Stockton, etc.,R. 
 R. Co. v. City of Stockton, 41 Cal. 
 147; Petty v. Myers, 49 Ind. 1; Leav- 
 enworth, etc., R. R. Co. v. Douglass 
 County, 18 Kan. 169; New Orleans, 
 etc., R. R. Co. v. McDonald, 53 Miss. 
 240. See Township of Pine Grove o. 
 Talcott, 19 Wall. 666, 677; Dillon on 
 Municipal Corps., 3d ed. § 153. note. 
 
 such an injunction, Winston v. Ten- 1 Compare City of Ottawa r. Carey, 
 
 19 289
 
 § 320.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 And this it is competent for a legislature to do, with or with- 
 out the popular vote of the municipality, 1 although the pro- 
 jected railroad lie outside of the county or even the state ; pro- 
 vided the building of the road will give the county a desirable 
 connection with some other region. 2 The constitutionality of 
 such legislation is based on the view that the construction of a 
 railroad is of such general utility that taxation in aid thereof 
 is constitutional, being for a public purpose. 3 
 
 § 320. In order that municipal bonds issued in aid of a rail- 
 road may have any validity in the hands of any one, 
 special authority must have been given by the legis- 
 lature to the municipality to issue them. This is un- 
 with notice, questionable law. 4 And every holder of municipal 
 
 Special 
 
 authority 
 
 requisite. 
 
 Holders 
 
 charged 
 
 103 U. S. 110. Contra, People v. 
 Salem, 20 Mich. 452; Whiting v. She- 
 boygan, etc., R. R. Co., 25 Wis. 167; 
 Hanson v. Vernon, 27 Iowa, 28. The 
 last case was virtually overruled in 
 Stewart v. Polk County, 30 Iowa, 1. 
 In the cases cited in the following 
 notes the constitutionality of such 
 legislation is affirmed or assumed. 
 The power to issue municipal bonds 
 imports the power to sell and make 
 them payable beyond the limits of 
 the state. Lynde v. The County, 16 
 Wall. 6. 
 
 1 Railroad Co. v. County of Otoe, 
 16 Wall. 667; Otoe County v. Bald- 
 win, 111 U. S. 1. 
 
 2 Railroad Co. v. County of Otoe, 
 16 Wall. 667. See Kirkbride v. La- 
 fayette County, 108 U. S. 208. 
 
 3 See Olcott v. Supervisors, 16 Wall. 
 678; and cases in last note but one. 
 Accordingly, legislation authorizing 
 an issue of municipal bonds to aid a 
 private business enterprise is uncon- 
 stitutional, and the bonds are void. 
 Loan Ass'n v. Topeka, 20 Wall. 655; 
 Parkersburg v. Brown, 106 U. S. 487; 
 Osborne v. County of Adams, 106 U. 
 S. 181; Cole v. Lagrange, 113 U. S. 1. 
 Where, however, a statute declares 
 all custom grist-mills to be " public 
 
 290 
 
 mills," and regulates their manage- 
 ment, the legislature may authorize 
 a municipal corporation to issue 
 bonds in aid of such a mill, although 
 it is owned by a private individual. 
 Township of Burlington v. Beasley, 
 94 U. S. 310; Blair v. Cuming County, 
 111 U. S. 363; but compare C. B. U. 
 P. R. Co. v. Smith, 23 Kan. 745. 
 
 4 Wells o. Supervisors, 102 U. S. 
 625; Welch v. Post, 99 111. 471; 
 Hayes v. Holly Springs, 114 U. S. 120; 
 Jonesboro City v. Cairo, etc., K. R. 
 Co., 110 U. S. 192; Concord v. Robin- 
 son, 121 U. S. 165. See Allen v. 
 Louisiana, 103 U. S. 80; and cases in 
 next note. Where there is a total 
 want of authority to issue municipal 
 bonds, there can be no bona fide hold- 
 ing of them. Township of East Oak- 
 land v. Skinner, 94 U. S. 255. See 
 Welch v. Post, supra. And the au- 
 thority must not have been revoked 
 before the actual issue of the bonds. 
 Town of Concord v. Portsmouth Sav- 
 ings Bank, 92 U. S. 625. The charter 
 of a railroad company authorized the 
 county commissioners of a county 
 through which the railroad passed, to 
 subscribe for stock and issue bonds, 
 provided a majority of qualified 
 voters of the county should vote in 

 
 PART in.] ACTS BEYOND THE CORPORATE POWERS. [§ 320. 
 
 bonds, whether he receive them directly from the town or 
 county, or from the railroad corporation to which they may 
 have been delivered, or take them from some prior holder in the 
 ordinary course of business, is chargeable with notice of the 
 statutory provisions under which they were issued. 1 More- 
 over, that which is not a valid law can give no validity to mu- 
 nicipal bonds which purport to be issued by virtue of it, even 
 when those bonds have passed into the hands of bona fide 
 holders for value. 2 
 
 favor of such action. A favorable 
 vote was had; but before the sub- 
 scription was made the state adopted 
 a new constitution which prohibited 
 such subscriptions unless paid in cash 
 and forbade counties to loan their 
 credit to any corporation or to bor- 
 row money in order to take stock. 
 It was held that the provisions in 
 the railroad charter authorizing the 
 commissioners to subscribe, con- 
 ferred a power ou a public corpora- 
 tion which could be modified by 
 legislative authority; that the char- 
 ter did not import a contract on the 
 part of the state with the railroad 
 corporation that counties should 
 continue competent to issue bonds; 
 and that the bonds issued after the 
 new state constitution had gone into 
 effect were void. Aspinwall v. Com- 
 missioners of the County of Daviess, 
 22 How. 364; confirmed in Wads- 
 worth p. Supervisors, 102 U. S. 534. 
 Compare Supervisors v. Galbraith, 
 99 U. S. 214. Power to subscribe 
 to stock in a railroad company does 
 not confer on a municipal corporation 
 power to issue negotiable bonds in 
 payment, unless the power to issue 
 such bonds is expressly or by impli- 
 cation conferred by the statute. 
 Kelley v. Milan, 127 U. S. 139; Norton 
 b. Dyersberg, 127 U. S. 160; Hill 
 v. Memphis, 134 U. S. 198; Brenham 
 v. German Am. Bk., 144 U. S. 173. 
 See Young v. Clarendon Township, 
 
 132 U. S. 340; Merrill v. Monticello, 
 138 U. S. 673. But the express 
 power to issue bonds bearing inter- 
 est carries the power to attach inter- 
 est coupons. Atchison Board u. De- 
 Kay, 148 U. S. 591. 
 
 1 Ogdena. County of Daviess, 102 
 U. S. 634; United States v. County of 
 Macon, 99 U. S. 582; Anthony v. 
 County of Jasper, 101 U. S. 693; 
 Town of South Ottawa o. Perkins, 94 
 U.S. 260; McClure v. Township of 
 Oxford, 94 U. S. 429; Ottawa v. 
 Casey, 108 U.S. 110; Lewis v. City 
 of Shreveport, 108 U. S. 282; Hoff v. 
 Jasper County, 110 U. S. 53; Wood- 
 ruff v. Town of Okolona, 57 Miss. 
 806; Tax Payers v. Tennessee Central 
 R. R. Co., 11 Lea (Tenn.), 329; 
 Potter v. Greenwich, 26 Hun (N. Y. ), 
 326; S. C, 92 N. Y. 662; Johnson 
 City v. Railroad, 101 Tenn. 138. Al- 
 though the law authorizing the sub- 
 scription be silent on the subject, 
 the municipality in voting may im- 
 pose conditions on which the sub- 
 scription is to depend. People v. 
 Glann, 70 111. 232; see People v. 
 Holden, 91 111. 446. 
 
 2 Post v. Supervisors, 105 U. S. 
 667. Whether a seeming act of the 
 legislature is a law, is a judicial ques- 
 tion for the court, not for the jury. 
 lb. In Norton v. Shelby County, 
 118 U. S. 425, 442, Field, J., said, giv- 
 ing the opinion of the court: " An 
 unconstitutional act is not a law ; it 
 
 291
 
 § 321.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VH. 
 
 To constitute a " subscription " by a county to stock in a 
 railroad company it is not necessary that there be an actual 
 subscribing in the books of the company. If a county passes 
 a resolution declaring a subscription made, which the company 
 accepts, notifying the county : and the county delivers its bonds 
 in payment, accepts shares of stock, votes as a shareholder, and 
 levies a tax to pay the interest on its bonds, it will be estopped, 
 as against 'dbonajide holder of the bonds, from denying its sub- 
 scription ; assuming that it had power to subscribe. And the 
 county will not be released by a subsequent alteration in the 
 organization or purposes of the railroad company, unless the 
 alteration is fundamental, and, in addition, is not provided for or 
 contemplated either by the charter of the company or the gen- 
 eral laws of the state. 1 As Chief Justice Waite said, giving the 
 opinion of the Federal Supreme Court in Bates County v. Win- 
 ters : " An actual manual subscription on the books of a rail- 
 road company is not indispensably necessary to bind a munici- 
 pality as a subscriber to the capital stock. If the body or 
 ageney having authority to make such subscription passes an 
 ordinance or a resolution to the effect that it does thereby, in 
 the name and on the behalf of the municipality, subscribe a 
 specified amount of stock, and presents a copy of that ordinance 
 or resolution to the company for acceptance as a subscription, 
 and the company does in fact accept, and notifies the munici- 
 pality, or its proper agent, to that effect, the contract of sub- 
 scription is complete, and binds the parties according to its 
 terms." 3 
 
 § 321. State bonds, as well as municipal bonds, issued in ex- 
 r, .., cess of a constitutional limitation, are void. 3 Accord- 
 
 Constitu- ' 
 
 tionai limi- inffly, when a state constitution declares that no city 
 
 tations. 
 
 or other municipal corporation shall become indebted 
 
 confers no rights; it imposes no 
 duties; it affords no protection; it 
 creates no office; it is, in legal con- 
 templation, as inoperative as though 
 it had never been passed." 
 
 1 Nugent «. Supervisors, 19 Wall. 
 241. That the municipality subse- 
 quently returns to the railroad com- 
 pany the stock for which the munic- 
 ipal bonds were issued, will not 
 
 292 
 
 invalidate the bonds. Cairo v. Zane, 
 149 U. S. 122. 
 
 - 112 TJ. S. 325, 327. Compare 
 Atchison Board v. De Kay, 148 U. S. 
 591. 
 
 3 Williams v. Louisiana, 103 U. S. 
 G37. Where a county court issues 
 bonds in excess of the amount au- 
 thorized by the statute, the over- 
 issue is void. The bonds delivered
 
 PART III.] ACTS BEfOtfD THE CORPORATE POWERS. [§ 322. 
 
 in any way for any purpose to an amount, including existing 
 indebtedness, in the aggregate exceeding five per cent, on the 
 value of the taxable property therein, bonds issued in excess 
 cannot be recovered on. 1 Further, a constitutional provision 
 prohibiting the creation of indebtedness by a direct loan of 
 municipal credit does not permit an indirect use of such credit 
 for the same purpose. 2 
 
 § 322. A statute authorizing a municipal corporation to lend 
 its credit to a specified railroad company and "to R ., , 
 any other railroad company duly incorporated and not yet in 
 organized for the purpose of constructing railroads' 1 
 leading in a direction specified, empowers the corporation to 
 lend its credit to a railroad company duly incorporated sub- 
 sequently to the passage of the act, as well as to one in ex- 
 istence when the act was passed. 3 And municipal bonds will 
 
 before the limit was reached are the 
 valid ones. Daviess County v. Dick- 
 inson, 117 U. S. 657. 
 
 i Buchanan v. Litchfield, 102 U. S. 
 278. See School District v. Stone, 
 106 U. S. 83 ; § 332. But if the bouds 
 expressly recite that the issue is 
 not in excess of the limitation, and 
 nothing in the bonds shows it to be 
 in excess, the recital is conclusive, 
 unless the purchaser knows the limit 
 to have been passed (Doon Township 
 o. Cummins, 142 U. S. 366), or is 
 bound to take notice of records 
 which would show the fact to be 
 otherwise than as recited in the 
 bouds. Chaffee County v. Potter, 
 142 U. S. 355; Gunnison County 
 Com. v. Rollins, 173 U. S. 255; Waite 
 u. Santa Cruz, 184 U. S. 302; Nesbit 
 v. Riverside Independent Dist., 144 
 U. S. 611; Sherman County v. Si- 
 mons, 109 U. S. 735; Dallas County 
 i\ McKenzie, 110 IT. S. 686; Marcy v. 
 Township of Oswego, 92 U. S. 637; 
 HumboldtTownship v. Long, 92 U. S. 
 642. See as to effect of recitals, 
 §§ 329, etc. 
 
 In Louisiana v. Wood, 102 U. S. 
 294, it was held when a city borrows 
 
 money on its bonds concededly in- 
 valid for want of registration, the 
 money paid for them may be recov- 
 ered back with lawful interest. 
 Qucere, whether this last decision 
 would apply if the bonds for which 
 the money was paid had been issued 
 in contravention of a constitutional 
 restriction ? 
 
 2 Jarrolt v. Moberly, 103 U. S. 580. 
 An act forbidding, under certain pen- 
 alties, the officers of a municipal 
 corporation from subscribing for 
 railroad stock, without the previous 
 assent of two-thirds of the qualified 
 voters, is in itself no authority to 
 loan money when such assent is 
 given. lb. 
 
 3 James v. Milwaukee, 16 Wall. 159. 
 A city authorized " to obtain money 
 on loan, on the faith and credit of 
 said city, for purposes of contribut- 
 ing to works of internal improve- 
 ment," may guarantee bonds of a 
 railroad company whose road runs 
 through the city. City of Savannah 
 v. Kelly, 108 U. S. 184. In regard to 
 the meaning of the phrase " corpo- 
 rate purposes," see City of Ottawa v. 
 Carey, 108 U. S. 110. 
 
 293
 
 § 323.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 not be rendered invalid in the bands of a bona fide holder by 
 the fact that the railroad company, in payment for whose stock 
 the bonds were issued, was not in existence when the vote was 
 passed authorizing the subscription. 1 But where a statute au- 
 thorized a town to appropriate money to aid in constructing a 
 certain railroad as soon as its track should havebeen located and 
 constructed through the town, it was held that the town could 
 make no appropriation until the road was so located and con- 
 structed. 2 Likewise where the popular vote, taken in accord- 
 ance with the statute, authorized a subscription to one railroad 
 company, and the bonds were issued to another railroad com- 
 pany, this appearing on the bonds themselves, the lack of au- 
 thority is evident from the face of the bonds, and there can be 
 no bona fide holder of them. 3 
 
 § 323. In the case of March v. Fulton County, 4 a railroad 
 company subsequent to its incorporation was divided 
 into three divisions, and each division incorporated 
 as a distinct corporation. A vote of the people of 
 the county had authorized the bonds whose validity 
 was before the court, to be issued to the original corporation ; 
 and the court held that they could not under this vote be validly 
 issued to one of three new corporations. It is to be noticed, 
 however, that the statute which in this case permitted counties 
 to issue their bonds in aid of railroad enterprises, required the 
 notices of election to specify the corporation to which it was 
 proposed to issue them. 5 The Federal Supreme Court has also 
 held that although a subscription to the stock of a railroad 
 company be duly authorized by the requisite vote, yet if before 
 the subscription be actually made the company becomes con- 
 solidated with another, thereby forming a third, a subscription 
 to the stock of the new corporation and the issue of bonds 
 therefor are unauthorized. 6 
 
 Effect of a 
 consolida- 
 tion of the 
 railroad 
 company. 
 
 1 County of Daviess v. Huidekoper, 
 98 U. S. 98. 
 
 2 Town of Concord v. Portsmouth 
 Savings Bank, 92 U. S. 625. See 
 County of Moultrie e. Savings Bank, 
 92 U. S. 631; Railroad Co. v. Falco- 
 ner, 103 U.S. 821. Compare County 
 of Randolph v. Post, 93 U. S. 
 502. 
 
 294 
 
 8 County of Bates v. Winters, 97 
 U. S. 83. 
 4 10 Wall. 676. 
 
 5 Municipal bonds voted and deliv- 
 ered to a corporation under a changed 
 name are not by such change invali- 
 dated. Town of Reading v. Wedder, 
 66 111. 80. 
 
 6 Harshman v. Bates County, 92 

 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 325. 
 
 § 324. It may be questioned whether the case last referred 
 to, Harshman v. Bates County, would be followed now by the 
 Supreme Court ; for that court has since held in more than one 
 instance, that when a municipal corporation is authorized to 
 issue its bonds to a railroad company, the consolidation of that 
 company with another does not destroy the power of the county 
 to issue its bonds nor the right of the railroad company to re- 
 ceive them. 1 And bonds voted in aid of one company, which 
 under the law then in force was subsequently consolidated with 
 another, may be delivered to the consolidated company. 2 
 
 § 325. Municipal bonds, invalid in their inception, may be 
 validated by legislative sanction or even recognition. 3 
 For, in the absence of constitutional restrictions, a bond^may 
 legislature may competently validate, by retro- ^atld 11 " 
 spective statutes, an irregular or defective execution 
 of a power by a municipal or other public corporation. 4 More- 
 
 U. S. 569. See Wagner v. Meety, 
 69 Mo. 150. 
 
 1 Menasha ». Hazard, 102 IT. S. 81 ; 
 County of Scotland v. Thomas, 94 U. 
 S. 682; Town of East Lincoln v. 
 Davenport, 94 U. S. 801 ; County of 
 Henry v. Nicolay, 95 U. S. 619; Liv- 
 ingston County v. Portsmouth Bank, 
 128 U. S. 102, substantially disap- 
 proving Harshman v. Bates County. 
 See County of Cass v. Gillett, 100 
 U.S. 585; County of Schuyler v. 
 Thomas, 98 U. S. 169; Wilson v. Sala- 
 manca, 99 U. S. 499; County of Tip- 
 ton v. Locomotive Works, 103 U. S. 
 523; Harter v. Kernochan, 103 U. S. 
 562; Scott v. Hansheer, 94 Ind. 1; 
 Edwards v. People, 88 111. 340, and 
 § 536. 
 
 2 New Buffalo v. Iron Company, 
 105 U. S. 73; Chickaming v. Carpen- 
 ter, 106 U. S. 663; Nugent v. Super- 
 visors, 19 Wall. 241; Bates County » 
 Winters, 112 U. S. 325; Niantic Sav- 
 ings Bank v. Town of Douglas, 5 111. 
 App. 579. 
 
 3 Grenada County Supervisors v. 
 Brogden, 112 U. S. 261; Campbell v. 
 
 City of Kenosha, 5 Wall. 194; Utter 
 v. Franklin, 172 U. S. 416. 
 
 *Otoe County v. Baldwin, 111 U. 
 S. 1; Gelpcke v. Dubuque, 1 Wall. 
 175, 203; Tifft v. City of Buffalo, 82 
 N. Y. 204; Keithburgu. Frick, 34 111. 
 405; Copes v. Charleston, 10 Rich. L. 
 (S. C.) 491; McMillen v. Boyles, 6 
 Iowa, 304; McMillen v. Judge of Lee 
 County, ib. 391; Bass v. City of Co- 
 lumbus, 30 Ga. 845; Steines v. Frank- 
 lin County, 48 Mo. 167; Knapp v. 
 Grant, 27 Wis. 147 ; Town of Duanes- 
 burg ». Jenkins, 57 N. Y. 177. Com- 
 pare White Mountains R. R. Co. v. 
 White Mountains R. R., 50 N. H. 50; 
 Gross v. United States Mortgage Co., 
 108 U. S. 477; Alexander v. Commis- 
 sioners of McDowell County, 70 N. 
 C. 208; Single v. Supervisors, 38 Wis. 
 363. But see Cairo and St. L. R. R. 
 Co. v. City of Sparta, 77 111. 505. 
 But a legislature cannot validate 
 municipal bonds by a statute passed 
 after a constitutional amendment 
 has forbidden the legislature to au- 
 thorize municipal bonds. Katzen- 
 berger v. Aberdeen, 121 U. S. 172. 
 
 295
 
 § 326.] 
 
 THE LAW Otf PK1VATK COttPOttATlONS. [CHAP. VII. 
 
 over, the levy of a tax and the payment of interest by the 
 proper municipal authorities have been held to validate, in the 
 hands of burnt fide holders for value, county bonds irregular in 
 
 their origin. 1 
 
 § 326. Municipal bonds, made payable to bearer (or, as is 
 unusual, to order) are negotiable;- they are transferable by 
 delivery without indorsement, 3 and the holder may sue in his 
 
 A law requiring a municipal cor- 
 poration to pay a demand which is 
 without legal obligation, but which 
 is equitable and just in itself, being 
 founded on a valuable consideration 
 received by the corporation, is not a 
 retrospective law, any more than 
 would be an appropriation for the 
 payment of a pre-existing claim. 
 Read v. Plattsmouth, 107 U. S. 568. 
 But compare Coosa River Steamboat 
 Co. v. Barclay, 30 Ala. 120. 
 
 1 Gelpcke v. City of Dubuque, 1 
 Wall. 176; Havemeyer v. Iowa 
 County, 3 Wall. 294; Supervisors v. 
 Schenck, 5 Wall. 772; Lee County ». 
 Rogers, 7 Wall. 181; Commissioners 
 of Johnson County v. January, 94 
 U. S. 202; County of Jasper v. Ballon, 
 103 U. S. 745; see, also, Hannibal and 
 St. Jo. R. R. Co. v. Marion County, 
 30 Mo. 294; Barrett v. County Court, 
 44 Mo. 197. A municipality, author- 
 ized to subscribe for railroad shares 
 and to issue its bonds in payment, 
 issued its bonds with a condition, 
 which was never complied with, and 
 subsequently waived the condition, 
 accepted certificates of stock, and 
 then refunded its bonds; held the 
 new bonds were valid, as were the 
 old ones also. Graves r. Saline Co., 
 161 U. S. 359. 
 
 2 Commissioners of Marion Coun- 
 ty v. Clark, 94 U. S. 278 ; Oubre v. 
 Donaldsonville, 33 La. Ann. 386; City 
 of Mount Vernon v. Hovey, 52 Ind. 
 563 ; Blackman v. Lehman, 63 Ala. 
 547. And this although the corpo- 
 rate seal is attached. Mercer Coun- 
 
 296 
 
 ty v. Hackett, 1 Wall. 83. But coun- 
 ty warrants are not negotiable. 
 Wall v. County of Monroe, 103 U. S. 
 74 ; County of Ouachita v. Wolcott, 
 103 U. S. 509. A purchaser of bonds 
 before maturity, unless he is person- 
 ally chargeable with fraud in procur- 
 ing them, can recover the full amount 
 of their par value, although he has 
 paid less, and the bonds were origi- 
 nally affected by some infirmity. 
 Cromwell ». County of Sac, 96 U. S. 
 51. Where an original issue of its 
 bonds may have been illegal, and a 
 city redeems them with legal bonds, 
 the illegality of the original issue 
 does not prejudice the holder of legal 
 bonds, which he has received on sur- 
 rendering the illegal bonds. Little 
 Rock v. National Bank, 98 IT. S. 308. 
 The legality of the original claims 
 against a town cannot be inquired 
 into in a suit on bonds issued to com- 
 promise them. Dugas v. Town of 
 Donaldsonville, 33 La. Ann. 668 ; S. 
 C. and St. P. R. Co. v. Osceola Coun- 
 ty, 52 Iowa, 26. 
 
 The court will not readily construe 
 a municipal bond to contain a condi- 
 tion making it payable on a contin- 
 gency, and so non-negotiable. Hum- 
 boldt Township v. Long, 92 U. S. 642. 
 The holder of a municipal bond is 
 presumed to have acquired it in good 
 faith. He need not have given value 
 for it if au intermediate holder did, 
 and he succeeds to all the latteris 
 rights. Montclair v. Ramsdell, 107 
 r. S. 147. 
 
 3 If a municipal bond affected with
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 327. 
 
 own name. 1 Likewise, the interest coupons attached B , , 
 to municipal bonds payable to bearer are themselves coupons 
 negotiable and transferable by delivery when sepa- 
 rated from the bonds.- An overdue and unpaid interest coupon, 
 attached to a bond which has several years to run, does not 
 render the bond and the subsequently maturing coupons dis- 
 honored paper, so as to subject them in the hands of a pur- 
 chaser for value to defences good against the original holder. 8 
 § 327. The rule that all persons are affected with notice of a 
 suit pending in regard to the title to property, and H ld 
 that every one buys the same at his peril from any of affected 
 the litigating parties, does not apply to municipal ot lis pen- 
 bonds and other commercial securities, purchased ens ' 
 before maturity. 4 But a person who buys overdue municipal 
 
 some infirmity passes to the hands of 
 a holder for value without notice, so 
 that he could collect, all his rights 
 pass to a subsequent purchaser with 
 notice. Scotland County v. Hill, 132 
 U. S. 107. 
 
 1 Ottawa y. National Bank, 105 U. 
 S. 342. 
 
 2 City of Lexington v. Butler, 14 
 Wall. 282 ; Grande Chute v. Winegar, 
 15 Wall. 355; Clark v. Iowa City, 20 
 Wail. 583 ; Walnut v. Wade, 103 U. 
 S. 023 ; Ohio v. Frank, ib. 697. 
 
 3 Cromwell v. County of Sac, 96 U. 
 S. 51. And overdue interest coupons 
 detached from a bond not yet ma- 
 tured are negotiable. Thompson v. 
 Perrine, 106 U. S. 589. Quazre, as to 
 the scope of the decision in this last 
 case ; for the statute of limitations 
 runs against coupons from the time 
 they are due, whether they are de- 
 tached from their bonds or not. 
 Amy v. Dubuque, 98 II. S. 470 ; 
 Koshkonong ». Burton, 104 U. S. 
 668. 
 
 In a suit on municip.nl bonds, the 
 holder of the bonds and the unpaid 
 coupons is entitled to interest on un- 
 paid interest from the time it fell 
 
 due. Rich v. Town of Seneca Falls, 
 19 Blatchf. 558 ; cf. Bailey v. County 
 of Buchanan, 115 N. Y. 297; although 
 there has been no demand for pay- 
 ment, McLendon v. Commissioners, 
 71 N. C. 38 ; but there must have 
 been default on the part of county, 
 either in the payment of the prin- 
 cipal debt or the coupons. See Au- 
 rora City v. West, 7 Wall. 82; Gelpcke 
 v. Dubuque, 1 Wall. 175. Overdue 
 interest coupons bear interest at the 
 legal rate of the place where they are 
 payable. Scotland County v. Hill, 
 132 U. S. 107. The right to interest 
 on interest, whether arising on an 
 express or on an implied agreement, 
 if allowed by statutes in force when 
 the bonds were issued, cannot be im- 
 paired by subsequent legislation de- 
 claring the true intent and meaning 
 of those statutes. Koshkonong v. 
 Burton, 104 U. S. 668. 
 
 4 Couuty of Warren v. Marcy, 97 
 U. S. 96; County of Cass v. Gillett, 
 100 U. S. 585; Carroll County w. 
 Smith, 111 U. S. 556; Enfield v. Jor- 
 dan, 119 U. S. 680. See, also. County 
 of Macon v. Shores, 97 U. S. 272; 
 Leitch v. Wells, 48 N. Y. 585; Stone 
 297
 
 § 329.] THE LAW OF PBIVATE CORPORATIONS. [CHAP. VII. 
 
 328. 
 
 Presump 
 tions. 
 
 bonds which have been adjudged void, is bound by the judg- 
 ment. 1 
 
 An important consequence of the principle that mu- 
 nicipal bonds payable to bearer are negotiable, is that 
 " the omission of formalities and ceremonies or the 
 existence of fraud on the part of the agents of the 
 municipality issuing their bonds cannot be urged against a bona 
 fide holder seeking to enforce them." 2 For " when a corpora- 
 tion has power under any circumstances to issue negotiable se- 
 curities, the bona fide holder has a right to presume that they 
 were issued under the circumstances that give the requisite au- 
 thority, and they are no more liable to be impeached for any 
 infirmity in the hands of such a holder than any other com- 
 mercial paper." 3 
 
 § 329. The last statement in the text is the reiterated lan- 
 guage of the Supreme Court of the United States, 
 recital Yet ^ seems broader than was required for the de- 
 cision of any case in which it w r as applied to munic- 
 
 v. Elliott, 11 Ohio St. 252; Kieffer v. 
 Eliler, 18 Pa. St. 388; Winston v. 
 Westfeldt, 22 Ala. 760. 
 
 1 Louis v. Brown Township, 109 
 U. S. 162. And persons buying ne- 
 gotiable securities with actual notice 
 of the pendency of a suit affecting 
 the title or validity act at their peril, 
 and must abide the result and will be 
 concluded by the judgment. Scot- 
 land County v. Hill, 112 U. S. 183. 
 See Lytle v. Lansing, 147 U. S. 59. 
 
 2 Kenicott v. Supervisors, 16 Wall. 
 452, 465; Grand Chute v. Winegar, 
 15 Wall. 355; Meyer p. City of Mus- 
 catine, 1 Wall. 384; State v. Saline 
 County Court, 48 Mo. 390. But com- 
 pare Jacksonville, etc., R. R. Co. v. 
 Town of Virden, 104 111. 339. The 
 absence of a seal does not affect the 
 right of a bona fide holder to recover. 
 Draper v. Springport, 104 U. S. 501. 
 Compare Bank v. Statesville, 84 N. 
 C. 169. When commissioners author- 
 ized to issue town bonds are directed 
 by the statute to affix their seals, and 
 
 298 
 
 omit to do so, a bill in equity lies by 
 the bona fide holders to restrain the 
 township from pleading the want of 
 seals. Bernard's Township v. Steb- 
 bins, 109 U. S. 341. All qualified 
 voters, who absent themselves from 
 an election held on public notice duly 
 given, are presumed to assent to the 
 expressed will of the majority of 
 those voting; unless the law provid- 
 ing for the election otherwise de- 
 clares. County of Cass v. Johnston, 
 95 U. S. 360; Carroll County v. Smith, 
 111 U. S. 556. 
 
 3 Gelpcke r. Dubuque, 1 Wall. 175, 
 203; City of Lexington v. Butler, 14 
 Wall. 282; see § 205. But if the 
 plaintiff is the railroad company, or 
 is not an innocent holder, the inquiry 
 whether formalities and conditions 
 precedent have been complied with 
 remains entirely open. Chambers 
 County v. Clews, 21 Wall. 317. When 
 an act is done which can be done 
 legally only after the performance 
 of some prior act, proof of the later 
 
 I
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 330. 
 
 ipal bonds. 1 If a corporation has a general power to issue ne- 
 gotiable securities, any person may purchase them on the as- 
 sumption that they were competently issued in the course of 
 authorized transactions. 2 But when a corporation — at least a 
 municipal corporation — has but a special and conditioned power 
 to issue negotiable securities for a specified purpose, the Su- 
 preme Court has never actually decided that from the simple 
 bald fact that the securities were issued, and signed by the proper 
 officers, the commercial public is entitled to assume them to 
 have been issued for the special purpose authorized by law, and 
 that all conditions precedent to the authority of the officers to 
 issue them had been fulfilled. 3 
 
 § 330. Knox County v. Aspinwall 4 is authority for the propo- 
 sition that from the mere issue of bonds with a recital that 
 they were issued in pursuance of the statute, a purchaser might 
 assume that the conditions on which the county was authorized 
 to issue them had been complied with. Although this has been 
 reaffirmed in the Supreme Court, 5 it is safer to say: "Where 
 
 act carries the presumption of the 
 due performance of the prior act. 
 Knox County v. Ninth Nat. Bank, 
 147 U. S. 91. 
 
 1 For instance, in City of Lexington 
 v. Butler, 14 Wall. 282, where this 
 general language is used, there were 
 recitals in the bonds importing that 
 the bonds were issued for the purpose 
 authorized by the statute, and in com- 
 pliance therewith. A complaint on a 
 bond issued by a town having au- 
 thority to issue bonds for certain pur- 
 poses, should state the purpose for 
 which the bond was issued. Hopper 
 v. Covington, 118 U. S. 148. 
 
 2 See § 205. 
 
 3 See Merchants' Bank v. Bergen 
 County, 115 U. S. 384. The con- 
 trary of this proposition was substan- 
 tially held in Barnett v. Denison, 145 
 U. S. 135. 
 
 4 Knox County v. Aspinwall, 21 
 How. 539. Compare Kenicott v. Su- 
 pervisors, 16 Wall. 452; St. Joseph 
 Township p. Rogers. IB Wall. 644: 
 
 Marcey v. Township of Oswego, 92 U. 
 S. 638; Humboldt Township «. Long, 
 92 U. S. 642; Commissioners, etc., v. 
 Bolles, 94 U. S. 104; Township of 
 Rock Creek v. Strong, 96 U. S. 271 ; 
 San Antonio v. Mehaffy, 96 U. S. 
 312 ; County of Warren v. Marcy, 97 
 U. S. 96; Nauvoo v. Ritter, 97 U. S. 
 389; Hackett w. Ottawa, 99 U. S. 86; 
 Town of Weyanwega v. Ayling, 99 U. 
 S. 112; Supervisors v. Galbraith, 99 
 U. S. 214; Brooklyn v. Insurance Co., 
 99 U. S. 362; Block v. Commission- 
 ers, 99 U. S. 686; Pana v. Bowler, 
 107 U. S. 529; Oregon v. Jennings, 
 119 U. S. 74; Dodge v. County of 
 Platte, 16 Hun, 285 ; Shurtleff v. 
 Wiscasset, 74 Me. 130 ; Anderson 
 County v. Houston & G. N. R. R. 
 Co., 52 Tex. 228; compare Jackson- 
 ville, etc., R. R. Co. v. Town of Vir- 
 den, 104 111. 339. 
 
 5 Mercer County v. Hacket, 1 Wall. 
 83 ; Moran v. Commrs. of Miami 
 County, 2 Black, 722, 732; Supervi- 
 sors o. Schenck, 5 Wall. 772, 784; 
 299
 
 § 331.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 legislative authority has been given to a municipality, or to its 
 officers, to subscribe for the stock of a railroad company, and 
 to issue municipal bonds in payment, but only on some prece- 
 dent condition, such as a popular vote favoring the subscription, 
 and where it may be gathered from the legislative enactment 
 that the officers of the municipality were invested with power 
 to decide whether the condition precedent has been complied 
 with, their recital that it has been made in the bonds issued by 
 them and held by a bona fide purchaser, is conclusive of the 
 fact and binding upon the municipality, for the recital is itself 
 a decision of the fact by the appointed tribunal." l 
 
 § 331. Officers executing the bonds are sometimes expressly 
 authorized to certify to the fulfillment of conditions prece- 
 dent, 2 or the authority may be held to rise by implication. As 
 Justice Svvayne said, in Commissioners of Johnson County v. 
 JsinuaYy : 3 " This act .... authorized the commissioners to 
 issue the bonds, when the requirements of the law had been 
 complied with. They were thus constituted a tribunal for the ad- 
 justment of all questions touching the subject. They were clothed 
 with the power and charged with the duty to decide them. 
 No appeal or review w r as provided for. Their issuing the bonds 
 was the reflex and embodiment of their judgment that it was 
 proper to do so. 1 ' 4 
 
 
 Meyer v. City of Muscatine, 1 Wall. 
 384. 
 
 1 Town of Coloma v. Eaves, 92 U. 
 S. 484, 491; op'n of c't per Strong. J., 
 ace. Town of Venice v. Murdock, 92 
 U. S. 494; Anderson Cy. Com mis. v. 
 Beal, 113 U. S. 227; Evansville v. 
 Dennett, 161 U. S. 434; Provident 
 Trust Co. v. Mercer County, 170 U. 
 S. 593; Gunnison County Com. v. 
 Rollins, 173 U. S. 255; Waite v. 
 Santa Cruz, 184 U. S. 302; contra, 
 Cogwin v. Town of Hancock, 84 X. 
 Y. 532. 
 
 See, also, Pompton i>. Cooper Union, 
 101 U. S. 196; Bonliam v. Needles, 
 103 U. S. 648; Walnut v. Wade, ib. 
 683; County of Clay i\ Society for 
 Savings, 104 U. S. 579; Insurance 
 Co. v. Bruce, 105 U. S. 328; Grenada 
 300 
 
 County Supervisors v. Brogden, 112 
 U. S. 261; County of Ralls o. Doug- 
 lass, ib. 728; Lewis ». Commission- 
 ers, ib. 739; Dallas County v. Mc- 
 Kenzie, 110 U. S. 686. 
 
 2 As, e. f/., in Lynde v. The 
 County, 16 Wall. 6. 
 
 3 94 U. S. 202, 205. See Bissell ». 
 Jeffersonville, 24 How. 287; Van 
 Hostrup v. Madison City, 1 Wall. 
 291; Mercer County v. Hacket, ib. 
 83; also §§ 205 et seq. 
 
 'The municipality is estopped from 
 setting up the non-fulfillment of a 
 condition precedent "if certified to 
 by the authorities whose primary 
 duty is to ascertain it. 11 Pana t>. 
 Bowler, 107 U. S. 529.
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 332. 
 
 § 332. The more recent decisions of the Supreme Court of 
 the United States, either deciding new points or „ . 
 interpreting former decisions, place the following Recent de- 
 limitations or conditions on the operation of recitals 
 in municipal bonds as estoppels. First : the recital will not 
 conclude the municipality when from the face of the bond or 
 from some record with notice of which the holder is affected, 
 it appears that the statute authorizing the issue has not been 
 complied with. 1 Thus, where a statute directs the county com- 
 missioners, when the electors shall have voted to issue bonds in 
 aid of a railroad, to order the county clerk to make the sub- 
 scription, and to cause the bonds to be issued in the name of 
 the township, signed by the chairman of the board and attested 
 by the clerk under the seal of the county, the signature of the 
 clerk is essential to the valid execution of the bonds, even though 
 he has no discretion to withhold it ; and the town will not be es- 
 topped from disputing their validity by reason of recitals in the 
 bonds to the effect that the terms of the statute have been com- 
 plied with. 2 
 
 In another case, under the constitution and laws of Nebraska, 
 a county had authority to issue bonds to the extent of ten per 
 cent, of the assessed valuation of the property in the county. 
 The bonds stated on their face that they were part of a series 
 amounting in the aggregate to a specified sum, which exceeded 
 ten per cent, of the assessed valuation of the property in the 
 county, as any one could have ascertained by examining the 
 assessment rolls on hie. It was held that the officers issuing 
 the bonds had no authority to conclude the county by a recital 
 in the bonds to the contrary of what could thus have been as- 
 
 x Of course no recital will conclude 
 the municipality where there was no 
 authority to issue the bonds; for 
 every one is bound to take notice of 
 the rule that municipal corporations 
 have no implied authority to issue 
 negotiable bonds; and also every one 
 is bound to take notice of the terms 
 of the legislative authority under 
 which the bonds purport to be is- 
 sued. See §§ 319, 320. The Federal 
 Supreme Court "has never intended 
 
 to adjudge that mere recitals by the 
 officers of a municipal corporation in 
 bonds issued in aid of a railroad cor- 
 poration precluded an inquiry, even 
 where the rights of a bona fide holder 
 were involved, as to the existence of 
 legislative authority to issue them." 
 Northern Bank v. Porter Township, 
 HOLT. S. 608, 615, opinion of Court 
 per Harlan, J. 
 
 - Bisscll i\ Spring Valley Township. 
 110 U. S. 162. 
 
 301
 
 § 332.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 certained. 1 " If the fact necessary to the existence of the 
 authority was by law to be ascertained, not officially by officers 
 charged with the execution of the power, but by reference to 
 some express and definite record of a public character, then the 
 true meaning' of the law would be, that the authority to act at 
 all depended upon the actual objective existence of the requisite 
 fact, as shown by the record, and not upon its ascertainment 
 and determination by any one ; and the consequence would 
 necessarily follow that all persons claiming under the exercise 
 of such a power might be put to proof of the fact made a condi- 
 tion of its lawfulness, notwithstanding any recital in the in- 
 strument." 2 Recitals that bonds are issued in pursuance of a 
 statute and city council ordinances do not put a purchaser on 
 inquiry as to those ordinances ; nor does a recital that they 
 were issued " by virtue of a resolution " of the city council put 
 him on inquiry as to the terms of that resolution. 3 
 
 Secondly : recitals in municipal bonds are conclusive only as 
 far as they relate to facts within the authority of the officers 
 making the recitals to determine and certify to the existence 
 of. 4 " The adjudged cases, examined in the light of their 
 special circumstances, show that the facts which a municipal 
 corporation, issuing bonds in aid of the construction of a rail- 
 road, was not permitted, against a. bona fide holder, to question, 
 in face of a recital in the bonds of their existence, were those 
 connected with or growing out of the discharge of the ordinary 
 duties of such of its officers as were invested with authority to 
 execute them, and which the statute conferring the power made 
 it their duty to ascertain and determine before the bonds were 
 issued ; not merely for themselves, as the ground of their own 
 action in issuing the bonds, but equally as authentic and final 
 evidence of their existence, for the information and action of 
 all others dealing with them in reference to it." 5 Or, as Justice 
 
 1 Dixon County v. Field, 111 U. S. 
 83. See § 321. 
 
 2 Opinion of Court in Dixon County 
 v. Field, 111 U. S. 83, 93, quoted in 
 Lake County v. Graham, 130 U. S. 
 674, 682, in which case the bonds is- 
 sued in excess of constitutional limi- 
 tation were held void. "The cases 
 just cited show that the records are 
 
 302 
 
 the only source of information," ib. 
 683. Ace. Sutliff v. Lake County, 
 147 U. S. 230. 
 
 8 Evansville v. Dennett, 161 U. S. 
 434. 
 
 4 See §§330, 331. 
 
 5 Northern Bank v. Porter Town- 
 ship, 110 U. S. 608, 619, opinion of 
 the court, per Harlan, J. Compare
 
 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 332. 
 
 Matthews said, giving the opinion of the court in Dixon County 
 v. Field : " Where the validity of the bonds depends on an 
 estoppel claimed to arise upon the recital of the instrument, 
 the question being as to the existence of power to issue them, 
 it is necessary to establish that the officers executing the bonds 
 had lawful authority to make the recitals and to make them 
 conclusive. The very ground of the estoppel is that the recitals 
 are the official statements of those to whom the law refers the 
 public for authentic and final information on the subject." 1 
 
 Thirdly : the recital or fact to be conclusive on the munici- 
 pality must be the act of municipal officers empowered to cer- 
 tify to it, or to take final action in the matter, and not the act 
 of some outside tribunal before whom the municipality has 
 had no opportunity of appearing ; or at least the fact or recital 
 must be based on the action of such municipal officers. Thus, 
 a statute provided that the holder of certain municipal bonds 
 mio-ht have them registered in the office of the auditor of state, 
 whose duty it should then be to notify the town officers issuing 
 them, who in their turn should record the fact of the auditor's 
 registration ; and the bonds should thereafter be considered 
 registered bonds. The mere registration by the auditor, with- 
 out further steps, was held ineffectual and not to estop the 
 town. 2 Giving the opinion of the court, Justice Matthews said : 
 " If complete and conclusive effect were, on the contrary, given 
 to the ex parte record of the auditor of state, as is claimed for 
 it, the obvious design and just purpose of the statute would 
 be not secured, but subverted ; and municipal corporations 
 might be subjected to liability for bonds purporting to be is- 
 sued by them, which, in fact and in law, were not their ob- 
 ligations, by virtue of a proceeding of which they had no notice, 
 resulting in an adjudication which they had no opportunity of 
 contesting. A construction of the statute that necessarily leads 
 to that conclusion is not warranted by its terms, and would be 
 repugnant to fundamental principles of common right. If the 
 registration of bonds issued under the act itself is to have the 
 force of an adjudication by the auditor, the preliminary record 
 
 Town of Springport v. Teutonia Sav- 
 ings Bank, 75 N. Y. 397; S. C, 84 
 N. Y.403; Craig v. Town of Andes, 
 93 N. Y. 405. 
 
 1 111 U. S. 83, 94. 
 
 2 Bissell v. Spring Valley Town- 
 ship, 110 U. S. 162. 
 
 303
 
 § 332.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 by the officers of the municipal corporation transmitted to him 
 must be the indispensable foundation of his jurisdiction, without 
 which he cannot lawfully act; and as to bonds issued as were 
 these now in suit, under previous statutes, the action of the 
 auditor is itself but the preliminary proceeding, of which con- 
 firmation by the subsequent record of the officers issuing them 
 is essential to its efficacy as a registration. If these officers 
 refuse to recognize the registry of the auditor, whether right- 
 fully or wrongfully, the holder loses no rights. He has the 
 bonds as he acquired them, and may test the liability of the 
 corporation by judicial proceedings. If, on the other hand, 
 the statute is construed to allow him, b} T a proceeding before 
 the auditor, conclusively to fix the liability of the municipal 
 corporation, without notice and without a hearing, certainly, in 
 respect to bonds previously issued, it would be open to the 
 gravest objection on constitutional grounds, for, if a law cannot 
 impair the obligation of a contract, neither can it create one, 
 nor, by a mere fiat, take from a party an existing and meri- 
 torious defence." x 
 
 Fourthly : recitals will not estop the county from showing 
 the invalidity of the bonds on grounds not properly covered 
 by them. Thus, a recital in a municipal bond that it was 
 " authorized by the following styled acts," giving their titles 
 and dates, does not estop the municipality from showing that 
 the issue was not authorized by a two-thirds vote, as required 
 bv the state constitution. 2 In another case 3 the bonds recited 
 that they were " issued by the board of school directors by au- 
 thority of an election of voters of said school district, held on 
 the thirty-first day of July, 1869, in conformity with the pro- 
 
 1 Bissell v. Spring Valley Town- 
 ship, 110 U. S. 162, 173. Compare 
 Lewis v. Commissioners, 105 U. S. 
 730. 
 
 When the constitution or a statute 
 of a state requires as essential to the 
 validity of municipal bonds that they 
 shall be registered by the secretary 
 and auditor of state, who shall also 
 certify on them the fact that they 
 have been issued according to law, 
 yet does not give any conclusive effect 
 to such registration or certificate, the 
 
 304 
 
 municipality is not concluded by the 
 certificate from denying the facts 
 certified to. Dixon County v. Field, 
 111 U. S. 83; see, also, Crow i>. Ox- 
 ford, 119 U. S. 215. Compare Hoff 
 v. Jasper County, 110 U. S. 53; Cairo 
 d. Zane, 149 U. S. 122. 
 
 2 Carroll County v. Smith, 111 U. 
 S. 550. Compare § 329 and authori- 
 ties cited in the last note to it. 
 
 3 School District v. Stone, 106 U. 
 S. 183. 
 
 J
 
 PART III. J ACTS BEYOND THE CORPORATE POWERS. [§ 333. 
 
 visions of chap. 98 of acts 12th general assembly of the state 
 of Iowa." The constitution of Iowa declares that no munic- 
 ipal corporation "shall be allowed to become indebted in any 
 manner, or for any purpose, to an amount in the aggregate 
 exceeding five per centum of the value of the taxable property 
 within such county or corporation, to be ascertained by the last 
 state and county tax lists, previous to the increasing of such 
 indebtedness." The court held that the recital above men- 
 tioned " necessarily implied nothing more than that the bonds 
 were issued by authority of the electors, and that the election 
 was held in conformity with the statute. The statute may have 
 been pursued as to the notice required to be given of the time 
 and place of the election, and as to the manner in which the 
 will of the voters was to be ascertained, and yet it may have 
 been disregarded in respect to the limit it imposes upon dis- 
 trict indebtedness. The declaration, therefore, that the election 
 was held in conformity with the statute, does not with suffi- 
 cient distinctness imply that the indebtedness voted was less 
 than five per cent, on the value of the taxable property of the 
 district, as shown by the state and county tax lists." Accord- 
 ingly, the bonds, having been issued in excess of the constitu- 
 tional limit, were held void. The court concluded with saying, 
 that " where the holder relies for protection upon mere recitals, 
 they should, at least, be clear and unambiguous, in order to 
 estop a municipal corporation, in whose name such bonds have 
 been made, from showing that they were issued in violation, or 
 without authority of law." * 
 
 § 333. If not restrained by some valid special limitation upon 
 the exercise of its taxing power, a county authorized p 
 to contract an extraordinary indebtedness by the municipal 
 issue of negotiable securities, may levy a tax to meet to tax. 
 principal and interest as they accrue. 2 And when a Mandamus - 
 state has authorized a municipal corporation to contract, and 
 to exercise the power of local taxation to the extent necessary 
 
 UOe U. S. 187. Compare with 
 this decision Marcy o. Township of 
 Oswego, 92 U. S. 637, and see § 321. 
 The municipality may set up non- 
 performance of condition on which 
 the bonds were voted to be issued, 
 
 when recitals do not cover that point. 
 Citizens, etc., Asso'n v. Perry Co., 
 156 U. S. 693. 
 
 - Ralls County Court r. United 
 States, 105 U. S. 733; Quincy v. 
 Jackson, 113 U. S. 332. 
 
 20 305
 
 § 333.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 to meet its engagements, the power of taxation thus given can- 
 not be withdrawn until the contract is satisfied. The state and 
 the corporation are equally bound to respect the claims of the 
 creditors of the latter ; and the power given becomes a trust 
 which the donor cannot annul and the donee is bound to exe- 
 cute. " By the obligation of a contract is meant the means 
 which, at the time of its creation, the law affords for its en- 
 forcement. The usual mode by which municipal bodies obtain 
 funds to meet their pecuniary engagements is taxation. Ac- 
 cordingly, when a contract is made upon the faith that taxes 
 will be levied, legislation repealing or modifying the taxing 
 power of the corporation, so as to deprive the holder of the con- 
 tract of all adequate and efficacious remedy, is within the con- 
 stitutional inhibition." 1 Accordingly, a mandamus will issue 
 to a municipal corporation commanding it to levy taxes to 
 the amount requisite to meet its valid engagements. 2 It is 
 well established that after judgment at law for a sum of money 
 against a municipal corporation and the return of execution 
 unsatisfied, mandamus, not a bill in equity, is the proper mode 
 to compel the levy of a tax which the corporation is bound to 
 levy to pay the judgment. 4 And when judgment has been 
 
 1 Nelson v. St. Martin's Parish, 
 111 U. S. 716, 721; opinion per 
 Field, J., Ace. Scotland County Court 
 v. Hill, 140 U.S. 41. And see Seibert 
 v. Lewis, 122 U. S. 284, and cases in 
 next note. 
 
 2 Von Hoffman v. City of Quincy, 
 4 Wall. 535; United States v. New 
 Orleans, 98 U. S. 381; Brodie v. 
 McCabe, 33 Ark. 690; Columbia 
 County v. King, 13 Fla. 451. As 
 long as a city exists, laws are void 
 which withdraw or restrict her tax- 
 ing power so as to impair the obliga- 
 tion of her contracts made upon a 
 pledge expressly or impliedly given 
 that it shall be exercised for their 
 fulfillment. Mandamus will lie, not- 
 withstanding such laws. Wolff v. 
 New Orleans, 103 U. S. 358, approv- 
 ing Von Hoffman v. Quincy. Com- 
 pare Louisiana v. Mayor of New Or- 
 leans, 109 U. S. 285; Rahway v. 
 
 306 
 
 Munday, 44 N. J. L. 395. Where 
 the relator has a judgment, on rail- 
 way aid bonds, against a township, 
 aud is otherwise entitled to a writ of 
 mandamus, a mandamus to compel 
 the levy of a tax lies against all the 
 officers whose co-operation in tax 
 levies is by law required, whether 
 they are town or county officers. 
 Labette County Commissioners v. 
 Moulton, 112 U. S. 217. But judg- 
 ment on the bonds must first have 
 been had. Davenport v. County of 
 Dodge, 105 U. S. 237; County of 
 Greene v. Daniel, 102 U. S. 187. Re- 
 garding mandamus as a remedy of 
 the holder of municipal bonds, see 
 Dillon on Mud. Corps., 3d ed. §§ 849 
 et seq. 
 
 3 Thompson v. Allen County, 115 
 U. S. 550. 
 
 4 Walkley v. City of Muscatine, 6 
 Wall. 481. 
 
 ,
 
 PART in.] ACTS BEYOND THE CORPORATE POWERS. [§ 334. 
 
 duly obtained against a county on its bonds or coupons, no de- 
 fence questioning their validity can be pleaded to a mandamus. 1 
 Conversely, when in an action for a mandamus a judgment is 
 rendered against the relator on the ground that the bonds are 
 invalid, that judgment is conclusive of their invalidity as against 
 the vendee of the relator who purchases the bonds after ma- 
 turity. 2 If a municipality by the statute authorizing the issue 
 of bonds receives power to levy taxes to a certain amount, the 
 implication arises that the legislature did not intend to authorize 
 taxation beyond that amount, and a court has no power by 
 mandamus to compel a municipal corporation to levy a tax un- 
 authorized by law ; nor to compel it to levy a larger tax than 
 is authorized expressly or by implication. 3 A mandamus can 
 only enforce existing laws ; it confers no new power on those to 
 whom it issues. 4 
 
 § 334. Property held for public uses, such as public build- 
 ings, squares, parks, promenades, wharves, landing . . 
 places, fire-engines, hose and hose-carriages, engine- property- 
 houses, engineering instruments, and generally every- ffonfexe- 
 thing held for governmental purposes, cannot be sub- cutlon - 
 
 1 Ralls County Court v. United 
 States, 105 U. S. 733. Compare 
 State v. Mayor of Manitowoc, 52 Wis. 
 423. 
 
 A county subscribed for the stock 
 of a railroad corporation, and issued 
 bonds in payment therefor pursuant 
 to a law that authorized the levy of 
 a special tax to pay them, " not to 
 exceed one-twentieth of one per 
 cent, upon the assessed value of tax- 
 able property for each year," but 
 which contained no provision that 
 only the fund so derived should be 
 applied to their payment. Held, 
 that the bonds were debts of the 
 county as fully as any other of its 
 liabilities, and that for any balance 
 remaining due on account of princi- 
 pal or interest after the application 
 thereto of the proceeds of such tax, 
 the holders were entitled to pay- 
 ment out of the general funds of the 
 county. United States v. County of 
 
 Clark, 96 U. S. 211; Knox County v. 
 United States, 109 U. S. 229. Com- 
 pare East St. Louis v. Zebley, 110 
 U. S. 321. Contra, State v. Macon 
 County, 68 Mo. 28. When the re- 
 lator has obtained judgment on 
 county bonds issued in aid of a rail- 
 road, and his only means of obtain- 
 ing satisfaction is through the levy 
 of a tax, a mandamus from a Federal 
 court to the county officers directing 
 them to levy a tax to pay the interest 
 on the bonds, can in no way be con- 
 trolled by an injunction from a state 
 court enjoining a levy. Supervisors 
 v. Durant, 9 Wall. 415; Hawley v. 
 Fairbanks, 108 U. S. 543. 
 
 2 Louis v. Brown Township, 109 
 U. S. 162. 
 
 3 United States v. County of Ma- 
 con, 99 U. S. 582. See Quincy v. 
 Jackson, 113 U. S. 332, 338. 
 
 4 United States v. County of Clark, 
 96 U.S. 769. 
 
 307
 
 § 334.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 jected to the payment of the debts of the municipality. The 
 public character of such property forbids this. Upon the repeal 
 of the charter of the city, such property passes under the imme- 
 diate control of the state, the power once delegated to the city 
 in that behalf having been withdrawn; neither can the private 
 property of individuals within the limits of the territory of 
 the city be subjected to the payment of its debts, except through 
 taxation. The doctrine of some states that such property can 
 be reached directly on execution against the municipality has 
 not been generally accepted. 1 
 
 1 Merriweather v. Garrett, 102 U. 
 S. 472 ; Darling v. Mayor, etc., of Bal- 
 timore, 51 Md. 2. In towns in Con- 
 necticut (as in Massachusetts and 
 Maine), the property of any inhabi- 
 308 
 
 tant may, by common law or imme- 
 morial usage, be taken on execution 
 upon a judgment against the town. 
 Bloom field v. Charter Oak Bank, 121 
 U. S.121.
 
 PART IV.] LIABILITY' FOR TORTS OF AGENTS. 
 
 [§ 335. 
 
 PART IV 
 
 ? 
 
 LIABILITY OF A CORPORATION FOR THE TORTS OF ITS 
 AGENTS AND SERVANTS. 
 
 Corporations liable like natural prin- 
 cipals. Grounds of the principal's 
 liability, § 335. 
 
 An underlying principle. Applica- 
 tion of the doctrines of ultra vires, 
 §§ 336-338. 
 
 Liability when corporation is under 
 no special obligation to the injured 
 person, § 339. 
 
 Corporations also liable for torts on 
 principles rendering them liable 
 for contracts, § 340. 
 
 Summary. Rules, § 341. 
 
 First rule. Liability resting on 
 agent's authority, § 342. 
 
 Second rule. Liability resting on 
 course of tort-feasor's employ- 
 ment, §§ 343, 344. 
 
 Third rule. Liability where tort 
 causes violation of duty owed by 
 the corporation, § 345. 
 
 Violation of special obligation, § 346. 
 
 Common carriers of passengers, 
 §347. 
 
 May make reasonable regulations, 
 §348. 
 
 Liability of carriers for negligence, 
 §349. 
 
 Carrier's fundamental obligations, 
 §350. 
 
 Modification of carrier's common law 
 liability, §351. 
 
 Carrier cannot stipulate against lia- 
 bility for negligence, §§ 352-354. 
 
 Carrier's liability for baggage, § 355. 
 
 Limitations of carrier's liability in 
 amount, § 356. 
 
 Telegraph companies, § 357. 
 
 Evidence of assent to limitations of 
 carrier's liability, §§ 358, 359. 
 
 When carrier's liability begins and 
 ceases, § 360. 
 
 Delay in transportation, § 361. 
 
 Carrier's liability for losses on con- 
 necting lines, §5 362-364. 
 
 Corporation's liability for injuries to 
 employes, §§ 365, 366. 
 
 Liability of corporation where it owes 
 no special duty, § 367. 
 
 Railroad companies, §§ 368, 369. 
 
 Liability when lessened, § 370. 
 
 Trespassers, §§ 371, 372. 
 
 Contributory negligence, §§ 373-375 
 
 Burden of proof, § 376. 
 
 Damages recoverable. Exemplary 
 damages, §§ 377, 378. 
 
 § 335. It may be stated as a general rule that corporations ' 
 
 1 It is to be understood that the I different. (Compare ante, §315.) The 
 following sections have in view only following frequently-cited, general 
 private corporations formed for bus- statement is from the opinion of the 
 iness purposes. The liability in tort New York Court of Appeals, through 
 of municipal corporations is quite ' Judge Folger, in Maxmilian v. Mayor, 
 
 309
 
 § 335.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 are responsible 1 for the torts 2 of their agents and servants upon 
 the same ground and to the same extent as individual princi- 
 
 etc, of New York : "There are two 
 kinds of duties which are imposed 
 upon a municipal corporation ; one 
 is of that kind which arises from 
 the grant of a special power, in the 
 exercise of which the municipality 
 is as a legal individual ; the other is 
 of that kind which arises, or is im- 
 plied, from the use of political rights 
 under the general law, in the exer- 
 cise of which it is as a sovereign. 
 The former power is private, and 
 is used for private purposes ; the 
 latter is public and is used for public 
 purposes ; the former is not held by 
 the municipality as one of the politi- 
 cal divisions of the state ; the latter 
 is. In the exercise of the former 
 power, and under the duty to the 
 public which the acceptance and use 
 of the power involves, a municipal- 
 ity is like a private corporation, and 
 is liable for a failure to use its power 
 well, or for an injury caused by 
 using it badly. But where the power 
 is intrusted to it as one of the politi- 
 cal divisions of the state, and is con- 
 ferred not for the immediate benefit 
 of the municipality, but as a means 
 to the exercise of the sovereign 
 power for the benefit of all citizens, 
 the corporation is not liable for non- 
 user, nor for misuser by the public 
 agents. ... [ Such agents ] are 
 not then the agents or servants of 
 the municipal corporation, but are 
 public officers, agents or servants of 
 the public at large, and the corpora- 
 tion is not responsible for their acts 
 or omissions." 62 N. Y. 160, 164, 
 citing Eastman v. Meredith, 36 N. 
 H. 284 ; Fisher v. Boston, 104 Mass. 
 87. See also § 177, ante. The same 
 rule applies to counties, Hughes v. 
 
 310 
 
 County of Monroe, 147 N. Y. 40, and 
 villages, Fire Ins. Co. v. Keeseville, 
 148 N. Y. 46. The whole subject 
 was exhaustively treated by Chief 
 Justice Gray giving the opinion of 
 the Massachusetts Supreme Court in 
 Hill v. Boston, 122 Mass. 354, a case 
 which held a city free from liability 
 for an accident to a child due to the 
 unsafe condition of a public school. 
 Cf. Lichtensteiu v. Mayor, etc., of 
 New York, 159 N. Y. 500. Statutes 
 usually require the fulfillment of 
 preliminary formalities (e.g., certain 
 demands or filing of notices) before 
 commencing suit against a munici- 
 pality. See e. g., Missano i\ Mayor, 
 etc., of New York, 160 N. Y. 123. 
 
 Likewise the liability in tort of 
 public charitable institutions, like a 
 hospital, or a large "Boys' Club" 
 open to all, is not as great as that of 
 a corporation formed for profit. If 
 due care is used in the selection of 
 agents and servants such charitable 
 corporations will not be liable for 
 the special acts of neglect of the 
 latter. McDonald v. Massachusetts 
 General Hospital, 120 Mass. 432. See 
 Ward ». Saint Vincent's Hospital, 65 
 App. Div. ( N. Y. ) 64, and compare 
 Nims u. Mount Hermon Boys' School, 
 160 Mass. 177. 
 
 1 That is to say, legal relations oc- 
 casioned by the tort will subsist be- 
 tween the injured person and the 
 corporation. 
 
 2 A tort is a fact with legal effect, 
 other than a contract or agreement; 
 a fact, that is, which occasions legal 
 rules to manifest themselves in legal 
 relations. Such fact may consist in 
 an act or in an omission.
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. [§ 335. 
 
 pals or masters. 1 The liability of principals or masters for the 
 
 torts of their agents or servants does not rest in every ~ 
 
 o J corpora- 
 
 respect on the rules which constitute the basis of the tj°ns liable 
 
 responsibility of principals for the contracts of their principals, 
 agents. The liability of a principal for the contract the^rinc?- 
 of his agent depends altogether on whether the con- ^ t s y ha " 
 tract was within the scope of the agent's actual 
 authority, or of such authority as the other contracting party 
 acting as a careful and honest man was justified in inferring to 
 exist from the course and general scope of the agent's employ- 
 ment. But in regard to the principal's liability on the contract 
 of his agent, the course and scope of the agent's employment are 
 material only in determining whether the other contracting 
 party was justified in relying on the agent's assumed authority. 
 On the other hand, in regard to the principal's liability for 
 the torts of his agent or servant, the course and scope of the 
 employment become material in themselves apart from their 
 materiality as evidence of implied authority: for a principal 
 may be liable for torts of his employe, committed in the course 
 of the latter's employment, which the injured person could 
 never have imagined that the principal had authorized. Thus, 
 in Craker v. Chicago and Northwestern Railway Co., 2 a rail- 
 road company was held liable to pay damages to a young lady 
 passenger whom the conductor kissed ; a tort which she was 
 not justified in supposing to have been committed pursuant to 
 instructions from the company. It might, indeed, be suggested 
 that kissing passengers was not properly within the scope of 
 the conductor's employment ; but it is within the scope of his 
 employment and duty to protect them from insult ; and if he 
 violates this duty by insulting them himself, the company will 
 be responsible. For a railroad company is responsible to pas- 
 sengers even for the wilful and malicious acts of its conductors 
 
 1 Philadelphia, etc., R. R. Co. v. 
 Quigley, 21 How. 202, 209 ; Fishkill 
 Savings Ins' a v. National Bank, 80 
 N. Y. 162 ; Denver and R. G. Ry. v. 
 Harris, 122 U. S. 597 ; Angell and 
 Ames on Corp., § 310. See Ramsden 
 v. Boston and Albany R. Co., 104 
 Mass. 117 ; Brokaw ». N. J. R. Co., 
 32 N. J. L. 328 ; South and North 
 
 Alabama R. R. Co. v. Chappell, 61 
 Ala. 527 ; Merchants' Bank v. State 
 Bank, 10 Wall. 645 ; Salt Lake City 
 v. Hollister, 118 U. S. 256 ; Ranger o. 
 Great Western R'y Co., 5 H. L. C. 
 72, 86 ; State ex inf. Crow v. Fire- 
 men's Fund Ins. Co., 152 Mo. 1. 
 2 36 Wis. 657. 
 
 311
 
 § 336.J THE LAW OF PRIVATE CORPORATIONS. [CHAP. Vll. 
 
 and train hands committed while they are employed in curry- 
 ing out the contract between the passenger and the company. 1 
 §336. An underlying principle here is this : if the corpora- 
 tion, acting within the scope of its corporate author- 
 
 An under- . , l . , 
 
 lying prin- ity, employs agents or servants in such a manner as 
 plication of to put it within their power to cause a violation of a 
 trinesof duty owed by the corporation, the corporation will 
 ultra vires. no i De sustained in the defence that the violation 
 complained of was not authorized by it. And thus it is, if the 
 tort was committed in the course of an employment, or in con- 
 nection with transactions which the corporation had compe- 
 tently authorized or acquiesced in, and any duty owed by the 
 corporation is violated by the tort, it will be no valid defence 
 to the corporation that the tort itself was not only unauthor- 
 ized, but was even ultra vires the corporation. To the tort it- 
 self, under such circumstances, the doctrines of ultra vires have 
 no application; but they do apply where the employment in 
 the course of which, or the transaction in connection with 
 which, the tort was committed, was ultra vires the corpora- 
 tion. 
 
 Ordinarily, to render a corporation liable for the torts of its 
 officers, agents, or employes, it must appear that the tort was 
 in some way connected with the business which the corpora- 
 tion was incorporated to carry on ; 2 and a corporation will not 
 be liable for a tort committed in the course of a transaction 
 clearly ultra vires; 3 unless on principles of acquiescence and 
 ratification heretofore discussed. 4 
 
 1 Stewart v. Brooklyn and Cross- 
 town K. R. Co., 90 N. Y. 588; 
 Dwindle v. N. Y. C, etc., R. R. Co., 
 120 N. Y. 117 ; Central of Ga. Ry. 
 Co. v. Brown, 113 Ga. 414. Accord- 
 ingly, that the tortious act of the 
 employe" was done in direct violation 
 of orders will not exonerate the cor- 
 poration. Phila. and Reading R. R. 
 Co. v. Derby, 14 How. 408. See 
 §347. 
 
 2 Miller v. Burlington, etc., R. R. 
 Co., 8 Neb. 219. Compare Helfrich 
 v. Williams, 84 Ind. 5.33. 
 
 3 Central R. R., etc., Co. v. Smith, 
 
 312 
 
 70 Ala. 572. Compare Hern v. Agri- 
 cultural Soc, 91 Iowa, 97. A na- 
 tional bank is not authorized to en- 
 gage in the business of selling rail- 
 road bonds on commission; and con- 
 sequently is not liable in an action 
 for deceit for the false statements of 
 its teller made while selling sucl) 
 bonds. Weckler v. First Nat. Bank. 
 42 Md. 581. However, if a corpora- 
 tion reaps and retains the benefits of 
 a false representation, it cannot set 
 up the plea of ultra vires. Amer. 
 Nat. B'k v. Hammond, 25 Colo. 367. 
 4 See § 269. For instance, a cor-
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. [§338. 
 
 § 337. It has been frequently said that " corporations are 
 liable for every wrong they commit, and in such cases the doc- 
 trine of ultra vires has no application." 1 This phrase contains 
 endless ambiguities. In two of the cases cited in the note, the 
 remark was unnecessary, if not inapplicable, to the decision of 
 the case. In Merchants' Bank v. State Bank, 2 whatever wrong 
 was committed, was committed by the cashier in the course of 
 what the court decided the injured party was entitled to regard 
 as the scope of the cashiers employment and authority. In 
 National Bank v. Graham the bank was sued for the loss of a spe- 
 cial deposit occurring through the gross negligence of its officers 
 and emplo3 T es. All the stock was owned by the directors, who 
 knew of the receipt of the special deposit, and had acquiesced 
 in it for years, and the court said, " it is now well settled that 
 if a bank be accustomed to take such deposits as the one here 
 in question, and this is known and acquiesced in by the direct- 
 ors, and the property is lost by the gross carelessness of the 
 bailee, a liability ensues in like manner as if the deposit had 
 been authorized by the terms of the charter." 3 And to clinch 
 the irrelevancy of the dictum, the court held that the bank was 
 authorized by its charter to receive the deposit. 
 
 § 338. An exposure of the ambiguities or inaccuracies of the 
 phrase above mentioned may be found in an opinion where a 
 similar phrase is used. "A corporation is liable to the same 
 extent, and under the same circumstances, as a natural person 
 for the consequences of its wrongful acts, and will be held to 
 respond in a civil action at the suit of an injured party for 
 every grade and description of forcible, malicious, or negligent 
 
 poration which runs a ferry boat for 
 hire, and accepts fares, etc., is liable 
 in an action in tort for personal in- 
 juries to a passenger, though running 
 a ferry was ultra vires. Nims v. Mt. 
 Ilermon School, 160 Mass. 177 ; & 
 & O. By. Co. p. Howard, 178 U. S. 153 . 
 
 1 National Bank v. Graham, 100 U. 
 S. 699, 702 ; Merchants' Bank v. State 
 Bank, 10 Wall. 604, 645 ; Hussey v. 
 Norfolk R. R. Co., 98 N. C. 34 ; Pron- 
 ger p. Old Nat. B'k, 20 Wash. 618. 
 
 2 See § 243 for a fuller statement of 
 this case. 
 
 3 Citing Foster v. Essex Bank, 17 
 Mass. 479 ; Lancaster County Nat B'k 
 v. Smith, 62 Pa. St. 47 ; Scott v. Nat. 
 B'k of Chester Valley, 72 Pa. St. 471; 
 First Nat. B'k v. Graham, 79 Pa. St. 
 106 ; Turner v. First Nat. Bank, 26 
 Iowa, 562 ; Smith v. First Nat. B'k. 
 99 Mass. 605 ; Chattahoochee Nat, 
 B'k v. Schley, 58 Ga. 369. Contra, 
 Wiley o. First Nat. B'k, 47 Vt. 54(5 ; 
 Whitney v. First Nat. B'k, 50 Vt. 389. 
 See § 161. 
 
 313
 
 § 338.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 tort or wrong which it commits, however foreign to its nature 
 or beyond its grunted powers the wrongful transaction or act 
 may be. 1 .... But in this case the false certificates were 
 issued and the spurious stock transferred by an. officer of the 
 corporation. A corporation aggregate being an artificial body 
 — an imaginary person of the law, so to speak — is, from its 
 nature, incapable of doing any act except through agents to 
 
 1 New York and New Haven R. R. 
 Co. v. Schuyler, 34 N. Y. 30, 49, 
 citing the following cases, not one of 
 which sustains the proposition as 
 stated: Life and Fire Ins. Co. v. Me- 
 chanic Fire Ins. Co., 7 Wend. 31, 
 which held that a corporation author- 
 ized to loan on bond and mortgage 
 could not recover money loaned in 
 any other way [?] ; and that when an 
 illegal loan is made by the officers of 
 the corporation who have power to 
 loan for it, the company is affected 
 with the illegality of the transaction. 
 Albert v. Savings Bank, 2 Md. 1G9, 
 a case where, in violation of a pro- 
 vision in its charter, a savings bank 
 made a loan to one of its directors 
 on the security of stock which the 
 borrower held in a fiduciary capacity. 
 The suit was brought by the cestui 
 que trust to set aside the transfer 
 to the bank, and recover the divi- 
 dends received by it. The court said 
 that any loan made to a director was 
 void, and could not be recovered (on 
 this point this case seems overruled in 
 Lester v. Howard Bank, 33 Md. 558). 
 It will be noticed that the suit was 
 brought to set aside an illegal trans- 
 action arising out of the abuse of a 
 
 general power conferred on the bank, .Philadelphia, etc., K. R. Co. v. Quig 
 
 a transaction which, though illegal, 
 was clearly connected with the ordi- 
 nary course of the bank's business ; 
 and certainly was not a transaction 
 "foreign to the nature" of the bank. 
 Goodspeed v. East naddam Bank, 22 
 Conn. 530, 541, a case where a bank 
 was held liable for a vexatious suit in- 
 
 314 
 
 stituted by its directors. But it is 
 clearly within the province of direct- 
 ors to institute suits on behalf of their 
 bank, and so this was but the abuse 
 of a general power confided to an 
 agent. Bissell v. Mich. So., etc., Rail- 
 road Cos., 22 N. Y. 305, 309, a case re- 
 ferred to elsewhere, §§ 275, 290. In 
 this case Judge Selden did hold the 
 contract ultra vires and incapable of 
 sustaining an action, but that plain- 
 tiff could recover on the ground of 
 tort, on account of the " duty to ob- 
 serve care' 1 which " in these cases 
 arises, not upon any contract, but 
 from the obligation which rests upon 
 all persons, whether natural or arti- 
 ficial, so to conduct as not through 
 their negligence to inflict injury on 
 others." But to this it may be said 
 that, except as the persons interested 
 in the corporate enterprise acqui- 
 esced in the transactions in the course 
 of which the tort was committed, 
 and so were estopped from objecting, 
 they owed the plaintiff no duty which 
 would give him any right to funds in 
 which they had rights. Frankfort 
 Bank v. Johnson, 24 Me. 490. In this 
 case the officers wore acting within 
 the general scope of their powers. 
 
 ley, 21 How. 209. Here, also, the 
 officers were acting within the scope 
 of their employment. Green v. Lon- 
 don Omnibus Co., 7 C. B. N. S. 290. 
 And in this case, too, the acts were 
 connected with the objects of incor- 
 poration, and done in the course of 
 the employment of the servant.
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. [§ 338. 
 
 whom is given by its fundamental law, or in pursuance of it, 
 every power of action it is capable of possessing or exercising. 
 Hence the rule has been established .... that a corporation 
 is responsible for the acts or negligence of its agents while 
 engaged in the business of the agency, to the same extent, and 
 under the same circumstances, that a natural person is charge- 
 able with the acts and negligence of his agent." 1 
 
 Granted that a corporation is liable to the same extent as a 
 natural person for the torts of its agents. Nevertheless, it is 
 not liable for any tort they may commit, however foreign to 
 the nature of the corporate business the tort may be. 2 But, say 
 the court, a corporation can act only through agents. Truly : 
 and the binding quality of the acts of the body corporate itself 
 acting as such, i. e., through a majority vote, is determined by 
 a construction of its powers and the principles of agency. As- 
 suredly there exists no universal agency in the corporation 
 which will render any act of the majority binding. Accord- 
 ingly, to hold the corporation liable for any wrong it might 
 authorize would be to hold the corporate funds, in which are 
 interested dissenting shareholders and innocent creditors, bound 
 by the acts of an agent {i. e., the majority) clearly beyond the 
 scope of his authority and business : a liability far beyond that 
 attaching to individuals for the acts of their agents. There is 
 no decision known to the writer holding a corporation liable 
 for a tort committed in the course of an ultra vires transaction 
 on its face foreign to the corporate business, where the persons 
 who could have objected to the transaction had not acquiesced 
 init.O i?v„ €*0fatft2* * 2>f~~~*>l /7# 2*4 /<s^ 
 
 As before stated, the question is not whether the wrongful 
 act itself was ultra vires • any more than the question would be 
 whether the act itself had been authorized by the corporation. 3 
 The question is whether the employment or general transaction, 
 in the course of which the tort was committed, was ultra vires ; 
 and if this is answered in the affirmative, the corporation should 
 
 1 34 N. Y. 50. The point decided 
 in this case was that the corporation 
 was liable in damages to a bona fide 
 holder of shares issued by the proper 
 officer, but in excess of the amount 
 limited by the charter; undoubted 
 law, but not calling for any statement 
 
 like that contained in the first part of 
 the citation. 
 
 2 Langan v. Iowa, etc., Construc- 
 tion Co., 49 Iowa, 317; § 342, note 1. 
 
 3 See Butler v. Watkins, 13 Wall. 
 456. 
 
 315
 
 § 339.] THE LAW OF PBIVATE CORPORATIONS. [CHAP. VII. 
 
 not be held liable for the act, except on principles of acquies- 
 cence and ratification of the employment or transaction which 
 undoubtedly make the decision in the Bissell case correct. 1 
 § 339. When the tort is committed by an employe on some 
 person between whom and the corporation no con- 
 tractual relations exist, so that the tort causes the 
 violation of no special duty or obligation on the part 
 of the corporation, its responsibility will be governed 
 by the rule expressed as follows in the Kew York 
 case of Mott v. Consumers' Ice Co. : 2 " For the acts of 
 the servant, within the general scope of his employment, while 
 engaged in his master's business, and done with a view to the 
 
 Liability 
 w 1 1 rii cor- 
 poration is 
 uniler no 
 special 
 obligation 
 to tlie in- 
 jured per- 
 son. 
 
 1 See § 275. Nothing in the Bissell 
 case except the actual decision has 
 the sanction of the court. Hutchin- 
 son v. Western and Atlantic It. R. 
 Co., 6 Heisk. (Tenn.) 634; New York, 
 L. E. and W. Ry. Co. i>. Having, 47 
 N. J. L. 137; and Gruber ». R. R. 
 Co., 92 N. C. 1, are similar to the 
 Bissell case, approve of the phrase 
 objected to in the text, and were de- 
 cided in the same way. Hood v. New 
 York and New Haven R. R. Co., 22 
 Conn. 502, is contra. 
 
 In Alexander v. Relfe, 74 Mo. 495, 
 517, the language of Judge Davis in 
 the Schuyler case, quoted above, is 
 cited approvingly, and a suggestion 
 made that a corporation is not an- 
 swerable for ultra circs contracts, 
 but is for ultra vires torts. The court 
 refers to Cooley on Torts, 119. Judge 
 Cooley, however, says nothing coun- 
 tenancing any such rule. He does 
 say, a corporation "must, indeed, 
 act through agents and officers; but 
 if these undertake to do what the 
 corporation is not empowered to do, 
 their action cannot impose a liability 
 on the corporation." And then 
 Judge Cooley refers to Weckler v. 
 First Nat. Bank, 42 Md. 581, cited 
 § 330, and goes on to qualify the sen- 
 tence quoted from him, giving a gen- 
 
 316 
 
 eral view of the liability of a corpo- 
 ration for torts which in no way 
 supports any proposition like that 
 approved by the Missouri court. 
 
 "To fix the liability of a corpora- 
 tion for the tortious act of one of its 
 employes, done in obedience to the 
 commands of its officers, the act must 
 be connected with the transaction of 
 the business for which the company 
 was incorporated. If the directors 
 should order an agent to take a per- 
 son out of his house and beat him, 
 the corporation could not be held for 
 the assault and battery; or if the di- 
 rectors of a banking company should 
 purchase a steamboat, and engage in 
 transporting passengers, the corpo- 
 ration would not be liable^ for the 
 misfeasance or non-feasance of agents 
 employed in that business. But if 
 the directors of a corporation having 
 power to hold lands, order an agent 
 to enter on lands and take possession 
 of them for the legitimate uses of the 
 company, his entry, if unlawful, will 
 be the trespass of the corporation." 
 Brokaw v. N. J. R., etc., Co., 32 N. 
 J. L. 328, 332. 
 
 2 73 N. Y. 543, 547. Compare Gir- 
 vin v. N. Y. C. & H. R. R. Co., 166 
 N. Y. 289.
 
 PART IV.] LIABILITY FOR TORTS OF AGEXTS. [§ 341. 
 
 furtherance of that business and the master's interest, the 
 master will be responsible, whether the act be done negli- 
 gently, wantonly, or even wilfully. . . . But if a servant goes 
 outside of his employment, and without regard to his service, 
 acting maliciously, or in order to effect some purpose of his own, 
 wantonly commits a trespass, or causes damages to another, the 
 master is not responsible ; so that the inquiry is whether the 
 wrongful act is in the course of the employment, or outside of 
 it, and to accomplish a purpose foreign to it. In the latter 
 case the relation of master and servant does not exist so as to 
 hold the master for the act." 1 
 
 § 340. So far as to the general liability of a corporation for 
 the torts of its agents, as based on principles not corpora- 
 wholly applicable to a corporation's responsibility for ^bfe^or 
 its agent's contracts. It must not be inferred, how- torts on 
 
 priiiciplGS 
 
 ever, that a corporation is not also liable for the torts rendering 
 of its agents and servants on principles which regu- for e con- a ° 
 late its liability for its agent's contracts. For, subject tracts - 
 to the qualification regarding ultra vires acts above mentioned, 
 a corporation is liable for any tort which it authorizes expressly, 
 or which is fairly within the general scope of the authority of 
 the agents who do the wrongful act. 
 
 § 341. To sum up : a corporation will be responsible for the 
 torts of its servants and agents, (1) if the corporation 
 or corporate management acting within the scope of |™" ary ' 
 its powers, authorized or ratified the tort, or the tort 
 was fairly within the scope of the tort-feasor's authority to act 
 for the corporation ; or (2) if the tort was committed in the 
 course of the tort-feasor's employment by the corporation ; or 
 (3) if the tort occasioned a violation of any duty or obligation 
 owed by the corporation to the injured person. And in apply- 
 ing the doctrines of ultra vires to the liability of corporations 
 for the torts of their agents and servants, it must be remembered 
 that those doctrines are never applicable to the actual tort ; 
 though they may operate to relieve a corporation from respon- 
 sibility where the entire employment of the agent or servant, 
 
 1 See, also, Poulton v. London and I western R'y Co., L. R. 5 C. P. 445 ; 
 Southwestern R'y Co., L. R. 2 Q. B, Allen v. London and Southwestern 
 534; Edwards v. London and North- ' R'y Co., L. R. 6 Q. B. 65. 
 
 317
 
 § 342.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 or the whole transaction in regard to which the tort was com- 
 mitted, is evidently ultra vires. 
 
 Illustrations will now be given of the three general rules. 
 § 342. If the corporation or the corporate management, act- 
 ing within the scope of its powers, authorized or 
 ratified the tort, or if the tort was fairly within the 
 scope of the agent's authority to act for the corpora- 
 tion, the latter will be responsible. 1 
 This rule is applicable to the torts of officers and agents, 
 rather than to those of the corporation's servants and employes. 
 A corporation is liable for any fraud 2 committed by an agent 
 in the course of a transaction in regard to which he actually 
 has authority to act for the corporation, or where authority to 
 act for it may be inferred from the course and scope of his 
 position and employment. 3 An action for deceit will lie 
 
 First rule. 
 Liability 
 resting on 
 agent's 
 authority. 
 
 1 See Washington Gas Light Co. v. 
 Lansden, 172 U. S. 534. A corpora- 
 tion is liahle for an overpayment 
 made by mistake to its general man- 
 ager, he acting at the time in the 
 course of his employment and au- 
 thority. Kansas Lumber Co. v. Cen- 
 tral Bank, 34 Kan. 635. 
 
 2 A corporation may be in a legal 
 sense guilty of a fraud, and in such 
 case ordinary rules permitting re- 
 scission of contracts induced by 
 fraud, and reclamation of property 
 ■when the owner is induced to part 
 with it through fraud, apply in favor 
 of persons dealing with the corpora- 
 tion. Cragie v. Hadley, 99 N. Y. 131. 
 See Dorsey M. Co. v. McCaffrey, 139 
 Ind. 545. 
 
 3 Butler v. Watkins, 13 Wall. 456; 
 Lamm. v. Port Deposit Homestead 
 Ass'n, 49 Md. 233; Scofield Rolling 
 Mill Co. v. Georgia, 54 Ga. 635; Bank 
 of Greensboro v. Clapp, 76 N. C. 482; 
 Mackay v. Commercial Bank, L. R. 5 
 P. C. 394; Hunter v. Hudson River 
 Iron Co., 20 Barb. 507; New York 
 and N. H. R. R. Co. v. Schuyler, 34 
 N. Y. 30; Erie City Iron Works v. 
 Barber, 106 Pa. St. 125 ; Western 
 
 318 
 
 Maryland R. R. Co. v. Franklin Bank, 
 60 Md. 36; Shaw v. Port Philip, etc., 
 Mg. Co., 132 B. Div. 603; Binghamp- 
 ton Trust Co. v. Auten, 68 Ark. 299. 
 
 "It is urged that a corporation 
 will not be affected by any represen- 
 tation made by an agent, unless the 
 agent was directly authorized to 
 make the particular statement. The 
 principal is liable for the false rep- 
 resentations of the agent made in 
 and about the matter for which he 
 was appointed agent, not on the 
 ground of express authority given to 
 the agent to make the statement, 
 but on the ground that as to the par- 
 ticular matter for which the agent is 
 appointed he stands in the place of 
 the principal, and whatever he does 
 or says in or about that matter is 
 the act or declaration of the princi- 
 pal, for which the principal is just 
 as liable as if he had personally done 
 the act or made the declaration." 
 Sharp v. Mayor, etc., of New York, 
 40 Barb. 256, 273. 
 
 A bank cannot set up the fraud of 
 its own officers to a demand by a de- 
 positor for repayment. Steckel v. 
 First Nat. Bk., 93 Pa. St. 376 ; Ziegler
 
 PART IV.] LIABILITY FOR TOUTS OF AGENTS. 
 
 [§ 342. 
 
 against a corporation, 1 or an action of trover for conversion. 2 
 So a corporation will be liable in damages for the publication of 
 a libel by its agents, 3 unless the libel and the matter to which 
 
 v. Same, ib. 393 ; Citizens' Savings 
 Bank v. Blakesley, 42 O. St. 645. 
 Compare First Nat. Bank v. Williams, 
 100 Pa. St. 123 ; Lewis v. Meier, 4 
 McCrary, 286 ; Commonwealth v. 
 Beading Savings Bank, 137 Mass. 431. 
 Defendaut borrowed six thousand 
 dollars from a bank and deposited 
 collaterals, which the president of 
 the bank converted to his own use. 
 The bank trustees appeared to have 
 been negligent in inspecting its secu- 
 rities, and the president had charge 
 of the collaterals. Held, that the 
 receiver of the bank could not re- 
 cover without allowing defendant the 
 value of his collaterals. Cutting v. 
 Marlor, 17 Hun, 573 ; see Williamson 
 v. Mason, 12 Hun, 97. Compare 
 Barksdale v. Finney, 14 Gratt. (Va.) 
 338 ; Commonwealth v. Reading Sav- 
 ings Bk., 133 Mass. 16. If a treas- 
 urer be a defaulter, and take money 
 from a third person, and place it 
 with the funds of the corporation in 
 order to conceal and make good his 
 defalcation, and the corporation use 
 the money, no other officer knowing 
 of the facts, the plaintiff from whom 
 the money is obtained may recover 
 from the corporation, although the 
 plaintiff be another corporation of 
 which the defaulting treasurer was 
 also treasurer, and the money was 
 drawn by him from plaintiff corpora- 
 tion and transferred to defendant. 
 Atlantic Mills v. Indian Orchard 
 Mills, 147 Mass. 268. 
 
 But officers cannot render the cor- 
 poration liable for fraudulent mis- 
 representations regarding matters 
 not connected with the corporation. 
 Thus, where one company becomes a 
 shareholder in another, the officers 
 
 of the former have no authority to 
 make representations as to the pe- 
 cuniary condition of the latter, so as 
 to render the former company liable, 
 although the representations be 
 fraudulent and untrue. Langan v. 
 Iowa, etc., Construction Co., 49 Iowa, 
 317. 
 
 1 Peebles v. Patapsco Guano Co., 
 77 N. C. 233. But compare Western 
 Bank of Scotland v. Addie, L. K. 1 
 H. L. Sc. 145, 157. 
 
 The fraudulent representations of 
 the corporate agent may also give the 
 other party the right to annul the 
 contract. McClellau v. Scott, 24 Wis. 
 81 ; Derrick v. Lamar Ins. Co., 74 
 111. 404 ; Henderson v. Railroad Co., 
 17 Tex. 560 ; Wickham v. Grant, 28 
 Kan. 517. As to the avoidance of a 
 contract to take shares on account of 
 the fraud of the corporate agent, see 
 §§ 523-526. 
 
 2 Beach v. Fulton Bank, 7 Cow. 
 (N. Y.)485. 
 
 3 Philadelphia, etc., R. R. Co. v. 
 Quigley, 21 How. 202 ; Washington 
 Gas Light Co. v. Lansden, 172 U. S. 
 534 ; Vance v. Erie R. Co., 3 Vroom 
 (N. J.), 334 ; McDermott v. Evening 
 Journal, 43 N. J. L. 488 ; S. C, 44 
 N". J. L. 430 ; Maynard v. Firemen's 
 Fund Ins. Co., 34 Cal. 48 ; S. C, 47 
 Cal. 207 ; Vinas v. Merchants' Mut. 
 Ins. Co., 27 La. Ann. 367 ; Howe 
 Machine Co. v. Souder, 58 Ga. 64 ; 
 Fenton v. Wilson Sewing Machine 
 Co., 9 Phila. 189 ; Bacon v. Michigan 
 Central R. R. Co., 55 Mich. 224 ; 
 Boogher v. Life Association, 75 Mo. 
 319 (overruling Gillett v. Missouri 
 Valley R. R. Co., 55 Mo. 315, and 
 semhle Childs v. Bank of Missouri, 17 
 Mo. 213) ; Johnson v. St. Louis Dis- 
 
 319
 
 § 344.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 it related were beyond the scope of the express and implied 
 authority of the agents ; in which case it will not be liable. 1 
 Likewise an action for false imprisonment,'- or for malicious 
 prosecution, will lie against a corporation, provided the prose- 
 cution was authorized or ratified by the corporation, or was 
 instituted by some officer or agent acting within the scope of 
 his authority or the course of his employment. 3 
 
 § 343. The second ride — that the corporation is responsible 
 for a tort committed in the course of the tort-feasor's 
 rule. Lia- employment by the corporation — is of a tenor similar 
 Kgon ieSt " to tnat of the first rule, but applies to the torts of em- 
 course of ployes and servants, rather than to those of officers 
 
 tort- if "is- 
 
 and agents. Employes and servants have, properly 
 speaking, no authority to represent the corporation 
 or to contract for it. Hence, the course of their employment 
 is all-important in determining the liability of the corporation 
 for their torts. 
 
 § 344. A corporation, as, for instance, a railroad company, is 
 
 or's em- 
 ployment. 
 
 patch Co., 2 Mo. App. 565 ; cf. 
 Behre c. National Cash Register Co., 
 100 Ga. 213. 
 
 The communications of an officer 
 to the members of the corporation 
 in the course of his duty are privi- 
 leged. But this privilege does not 
 extend to the presentation of a re- 
 port and evidence in the permanent 
 form of a book for distribution 
 among the persons belonging to the 
 corporation, and members of the 
 community. Exemplary damages, 
 however, should not be allowed when 
 there is no evidence of malice. Phila- 
 delphia, etc., R. R. Co. v. Quigley, 21 
 How. 202. On the question of privi- 
 lege, see, also, Lawless v. Anglo- 
 Egyptian Co., L. R. 4 Q. B. 2(52. 
 
 1 Southern Express Co. v. Fitzner, 
 59 Miss. 581. 
 
 2 Lynch v. Metropolitan Elevated 
 R. R. Co., 90 N. Y. 77. 
 
 ;; Williams p. Planter's Ins. Co., 57 
 Miss. 759; Reed v. Home Savings 
 Bank. 130 Mass. 443; Woodward v. 
 320 
 
 St. Louis, etc., Ry. Co., 85 Mo. 142; 
 Willard v. Holmes, 142 N. Y. 492; 
 Wheeler, etc., Co. v. Boyce, 36 Kan. 
 350; Copley v. Grover & Baker S'g 
 M. Co., 2 Woods, 494; Carter v. Howe 
 Machine Co., 51 Md. 290; Turnpike 
 Road v. Green, 86 Md. 161; Jordan v. 
 Alabama, G. S. R. R. Co., 74 Ala. 85, 
 overruling Owsley v. Montgomery, 
 etc., R. R. Co., 37 Ala. 560; and South 
 and North Ala. R. R. Co. v. Chappell, 
 61 Ala. 527; see Ricord v. Central 
 Pac. R. R. Co., 15 Nev. 167; Good- 
 speed i\ EastHaddam Bank, 22 Conn. 
 530; Wheless v. Second Nat. Bk., 1 
 Baxt. (Tenn.) 469; Lovick v. Atl. 
 Coast Line R. R. Co., 129 N. C. 427. 
 A corporation may be punished by 
 fine for contempt, for publishing 
 matter, pending a trial, not compe- 
 tent, and not introduced at the trial, 
 and of such a nature that it might 
 improperly influence the justice and 
 the jury in the determination of the 
 cause. Telegram Newspaper Co. V. 
 Comra., 172 Mass. 294.
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 345. 
 
 liable for the assaults and batteries 1 and trespasses 2 of its ser- 
 vants committed while acting within the general scope of their 
 employment in the business of the corporation ; or for a public 
 nuisance created by them under like circumstances. 3 And the 
 circumstance that the act of the servant was wilful will not, in 
 itself, preclude the liability of the corporation. 4 But the as- 
 sault of the servants must in some way be connected with their 
 employment in the business of the corporation. And thus it 
 has been held that a railroad company is not liable for an as- 
 sault and battery committed by its employes on a person who, 
 they thought, had placed obstructions on the railroad track ; 
 the assault being in no way connected with their employment. 5 
 § 345. We come now to the consideration of the third rule 
 regulating the liability of corporations for the torts „,, . , , 
 
 00 J l Third rule. 
 
 of their servants and agents. A corporation is liable Liability 
 
 - - , t . , , where tort 
 
 for any wrongful or negligent act or omission on the causes vio 
 part of any of its servants or agents which causes a ^utyowed 
 violation of any duty or obligation owed by the cor- b y p° r P°- 
 
 J , J ° J ration. 
 
 poration to the injured person : and this is true 
 whether the corporation owes to the injured person special 
 duties arising from contract, so that the tort occasions a breach 
 of contract ; or whether it is a duty owed to the injured person 
 merely as a member of the community ; a duty mainly based 
 on the maxim, Sic utere tuo ut alienum non Icedas. It will be 
 convenient to consider first the liability of a corporation for 
 the torts of its agents and employes which cause the breach of 
 
 1 Hewitt v. Swift, 3 Allen, 420; 
 Holmes v. Wakefield, 12 Allen, 580. 
 See §§ 347, 348. 
 
 2 Whiteman , s Exr. v. Wilmington, 
 etc., R. R. Co., 2 Hair. (Del.) 514; 
 Hazen v. Boston and Maine R. R. Co., 
 2 Gray, 574; Mobile, etc., R. R. Co., 
 v. McKellar, 59 Ala. 458; Palmer v. 
 Maine Cent. R. R. Co., 92 Me. 399. 
 
 3 Ford v. Santa Cruz R. R. Co., 59 
 Cal. 290. 
 
 4 Mott v. Consumers 1 Ice Co., 73 X. 
 Y. 543; Nashville & C. R. R. Co. t>. 
 Starnes, 9 Heisk. (Tenn.) 52; Banis- 
 ter v. Pennsylvania Co., 98 Iud. 220. 
 A railroad company is liable for the 
 
 21 
 
 wilful acts of its servants in running 
 a train over a person on the track. 
 Terre Haute, etc., R. R. Co. v. Gra- 
 ham, 46 Ind. 239. Contra, Illinois 
 Central R. R. Co. v. Downey, 18 111. 
 259; Pennsylvania Co. v. Toomey, 
 91 Pa. St. 256. 
 
 5 Porter v. C. R. I. and P. R. R. 
 Co., 41 Iowa, 358. See, also, Marion 
 o. C. R. I. and P. R. Co., 59 Iowa, 
 428. A railroad company is not re- 
 sponsible for the acts of its employes 
 in creating a nuisance by using a cul- 
 vert under its railroad, near the plain- 
 tiff's residence, as a privy. Hopkins 
 v. Western Pac. R. R. Co., 50 Cal. 
 
 321
 
 § 347.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 some special or contractual obligation owing from the corpora- 
 tion to the injured person. The illustrations will be almost 
 entirely drawn from the law relating to common carriers, and 
 in especial to railroad companies ; but of course other classes of 
 corporations will at times have to respond in damages for omis- 
 sions and neglects of their servants and agents, which cause 
 the breach of a duty owing from the corporation. 
 
 § 346. Thus, a bank is liable for the loss, through the gross 
 Violation negligence of its officers or employes, of a special de- 
 of special posit received by it for safe- keeping ; l and for the 
 
 obligation. 1 . . . J? L 
 
 neglect of its officers to protest or present at matu- 
 rity a promissory note deposited with it for collection. 2 And a 
 bank will be liable if its teller receives a deposit unaccompanied 
 by the customary deposit ticket or pass-book, and credits it by 
 mistake to the wrong person. 3 
 
 § 347. To the contract of a common carrier of passengers 
 „ the law from the motives of public policy adds certain 
 
 Common l . 
 
 carriers of implied covenants or obligations ; or it may be said, 
 in somewhat different words, the carrier impliedly 
 agrees to do more than simply to carry the passenger. He 
 agrees, as we shall hereafter see in regard to negligence, to use 
 every reasonable precaution for the passenger's safety ; 4 and 
 while a carrier does not insure his passengers against every 
 conceivable danger, he is held absolutely to agree that his own 
 servants engaged in transporting the passenger shall commit no 
 wrongful act against him. Accordingly, any tort committed 
 on a passenger by servants of the carrier who come in contact 
 with him in the ordinary performance of their duties and 
 labors, causes a breach of contract between the passenger and 
 the carrier, for which the latter is liable. Recent cases state 
 this liability in the broadest and strongest language ; and, with- 
 out going beyond the actual decisions, it may be said that the 
 
 190. See, also, Edwards v. London 
 and N. W. R'y Co., L. R. 5 C. P. 
 445; Allen v. London and S. W. R'y 
 Co., L. R. 6 Q. B. 65; but compare 
 Goff v. Great Northern R'y Co., 3 E. 
 & E. 672. 
 
 1 National Bank ». Graham, 100 U. 
 S. 699; Chattahoochee Nat. Bk. v. 
 Schley, 58 Ga. 369; §§161, 337. 
 
 322 
 
 2 Chapman v. McCrea, 63 Ind. 360; 
 Bank of New Hanover v. Kenan, 76 
 N. C. 340; Steele v. Russell, 5 Neb. 
 211; Capital State Bank v. Lane, 52 
 Miss. 677. See § 161. 
 
 3 Jackson Ins. Co. v. Cross, 9 Heisk. 
 ( Tenn. ) 283. 
 
 4 See § 350.
 
 PART IV. J LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 347. 
 
 carrier is liable for every conceivable wrongful act done to a 
 passenger by its train-bands and other employes while they are 
 engaged in transporting him ; no matter how wilful and ma- 
 licious the act may be, or how plainly may be apparent from 
 its nature that it could not have been done in furtherance of 
 the carrier's business. The rule limiting the responsibility of 
 the master to acts of his servants done within the scope of the 
 servants' employment, does not apply to the relations between 
 common carriers and passengers. 1 
 
 A carrier's liability extends even further. He is bound to 
 use every endeavor to protect his passengers, as long as they 
 are under his charge, from the assaults of persons other than 
 his own servants, for instance, fellow-passengers. And if his 
 servants fail to use their best endeavors to protect passengers, 
 the carrier will be responsible. 2 
 
 1 Stewart v. Brooklyn and Cross- 
 town R. R. Co., 90 N. Y. 588 (prac- 
 tically overruling Isaacs v. Third Av. 
 R. R. Co., 47 N. Y. 122); Pendleton 
 v. Kinsley, 3 Cliff. 416; Goddard v. 
 Grand Trunk Railway, 57 Me. 202; 
 Bryant b. Rich, 106 Mass. 180; Chi- 
 cago and Eastern R. R. Co. v. Flex- 
 man, 103 111. 546; Hanson v. Euro- 
 pean, etc., R. Co., 62 Me. 84; Craker 
 v. Chicago and X. W. R'y Co., 36 
 Wis. 657; Passenger R. R. Co. v. 
 Young, 21 Ohio St. 518; Terre Haute 
 and I. R. R. Co. ». Jackson, 81 Ind. 
 19; Jeffersonville R. R. Co. v. Rog- 
 ers, 38 Ind. 116; Indianapolis, P. 
 and C. R. R. Co. v. Anthony, 43 Ind. 
 183; Terre Haute and I. R. R. Co. v. 
 Fitzgerald, 47 Ind. 79; New Orleans, 
 St. Louis, etc., R. R. Co. v. Burke, 53 
 Miss. 201; Nieto v. Clark, 1 Cliff. 145; 
 Sherleyw. Billings, 8 Bush (Ky.), 147; 
 Moore o. FitchburgR. R. Co., 4 Gray, 
 465; Lampkin v. R. R. Co., 106 Ala. 
 287; cf. Perkins i>. Missouri, etc., R. 
 R. Co., 55 Nev. 201; Smith v. Nor- 
 folk & W. R. R. Co., 48 W. Ya. 69; 
 Williams v. Gill, Rec'r, 122 N. C. 967; 
 Trabing u. Calif. Nav. & Imp't Co., 
 
 121 Cal. 137. But see Allegheny R. 
 R. Co. v. McLain, 91 Pa. St. 422. Nor, 
 on the other hand, will it in all cases 
 protect the corporation that the em- 
 ploye in committing the tort acted in 
 good faith. Thus in Palmeri v. Man- 
 hattan R'y Co., 133 N. Y. 261, a 
 ticket agent arrested a passenger, 
 thinking he had passed a counter- 
 feit coin; the company was held lia- 
 ble. Compare Mulligan v. N. Y., etc., 
 R'y Co., 129 N. Y. 506. But, of course, 
 the conduct of the passenger may be a 
 good defence; e. g., a railroad com- 
 pany is not liable to a passenger for 
 an injury done him by the conductor 
 in self-defence. New Orleans, etc., 
 R. R. Co. v. Jopes, 142 U. S. 18. 
 
 2 Pittsburgh, Ft. W. and C. R'y Co. 
 v. Hinds, 53 Pa. St. 512 ; Flint v. 
 Norwich and N. Y. Trans'n Co., 34 
 Conn. 554; Holly v. Atlanta Street 
 R. R. Co., 61 Ga. 215 (a statute af- 
 fected this decision); Weeks v. N. Y., 
 N. II. and H. R. R. Co., 72 N. Y. 50; 
 Hendricks v. Sixth Ave. R. R. Co., 
 12 J. & Sp. (N. Y.) 8; Britton v. At- 
 lanta, etc., R'y Co., 88 N. C. 536; 
 New Orleans, St. L. and C. R. R. Co. 
 323
 
 § 348.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 May make 
 reasonable 
 regula- 
 tions. 
 
 § 34S. A carrier has the right to make reasonable regulations 
 for the management and ordering of his business ; 
 and no cause of action will arise against him for the 
 reasonable acts of his servants done in carrying out 
 such regulations. But a regulation will be no pro- 
 tection to the carrier if it is unreasonable, or if his servants use 
 undue force or violence in enforcing it. 1 A regulation by a 
 railroad company setting apart in the first instance a car for 
 females and their escorts, is proper and reasonable, and the 
 company has a right to enforce it. 2 Likewise, in order to pre- 
 serve order and prevent collisions from well-known race repug- 
 nances, a carrier may seat passengers according to color. 3 And 
 
 v. Burke, 53 Miss. 200; Pittsburgh 
 & C. R. R. Co. v. Pillow, 76 Pa. St. 
 510; Spohn v. Missouri Pac. R'y Co., 
 87 Mo. 74. See Putnam v. Broadway, 
 etc., R. R. Co., 55 N. Y. 108; Barrett 
 v. Maiden, etc., R. R. Co., 3 Allen, 
 101. 
 
 It is said that sleeping-car com- 
 panies are not liable either as inn- 
 keepers or as common carriers for 
 goods stolen from the person of an 
 occupant of a berth in a sleeping-car. 
 Pullman Palace Car Co. v. Smith, 73 
 111. 360. See Welch v. Pullman 
 Palace Car Co., 16 Abb. Pr. N. S. 
 (N. Y.) 352; Pullman's Pal. Car Co. 
 v. Hall, 106 Ga. 765, and cases below. 
 But it is the duty of a sleeping-car 
 company vigilantly to protect in 
 their persons and property the occu- 
 pants of berths when asleep; and the 
 company is liable to them for goods 
 stolen from their persons while 
 asleep, through want of care on its 
 part and on the part of its servants. 
 Woodruff Sleeping, etc., Co. v. Diehl, 
 84 Ind. 474; Pullman's Pal. Car Co. 
 v. Adam, 120 Ala. 581 ; Cooney v. 
 Pullman Pal. Car Co., 121 Ala. 368; 
 Lewis v. N. Y. S. C. Co., 143 Mass. 
 267. A palace car company is 
 "bound so to manage its cars as not 
 unreasonably to expose a passenger's 
 
 324 
 
 property to risk of loss by theft or 
 otherwise." Dawley v. Wagner Pal- 
 ace Car Co., 169 Mass. 315. See, 
 also, Whicher v. B. & A. R. R. Co., 
 176 Mass. 275. 
 
 1 Peck v. N. Y. C. and H. R. R. R. 
 Co., 70 N. Y. 587; Chicago, B. and 
 Q. R. R. Co. v. Griffin, 68 111. 499; 
 Pennsylvania R. R. Co. v. Vandiver, 
 42 Pa. St. 365; Chicago, B. & Q. 
 R. R. Co. u. Byran, 90 111. 126. A 
 passenger should inform himself of 
 the carrier's regulations. McRae v. 
 Wilmington, etc., R. R. Co., 88 N. C. 
 526; Britton v. Atlanta, etc., R'y 
 Co., ib. 536. 
 
 2 Peck v. N. Y. C. & H. R. R. R. 
 Co., 70 N/. Y. 587. So a regulation 
 that no man, unaccompanied by a 
 woman, shall enter the ladies' private 
 room is reasonable. Toledo, Wabash 
 and W. R'y Co. v. Williams, 77 111. 
 354. See also, McRae v. Wilming- 
 ton, etc., R. R. Co., 88 N. C. 526. 
 
 3 West Chester, etc., R. R. Co. v. 
 Miles, 55 Pa. St. 209. See Derry v. 
 Lowry, 6 Phila. 30. Changed by act 
 of Pennsylvania legislature in 1867. 
 And see, as opposed to the Penn- 
 sylvania decisions, Chicago and N. 
 W. R'y Co. v. Williams, 55 111. 185. 
 A passenger must observe proper 
 decorum and reasonable rules, and 
 
 I
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 349. 
 
 gamblers and raonte-men, who travel on a train to ply their 
 vocation, may be excluded ;' ora person who is so drunk as to 
 be offensive. 2 
 
 A regulation by a railroad company requiring passengers to 
 exhibit their tickets whenever requested by the conductor, and 
 directing the ejection from the cars of those who refuse to com- 
 ply, is reasonable and proper. A passenger is bound to comply, 
 and by refusing forfeits his right to be carried farther. 3 On the 
 other hand, it is unreasonable to require that a passenger shall 
 not leave the train or station without showing a ticket or pay- 
 ing his fare ; and if in carrying out this regulation a passenger 
 is detained or arrested by the employes of the carrier, the car- 
 rier will be liable for damages in a suit for false imprisonment. 4 
 
 § 349. The most numerous and on that account the most 
 
 is not justified in resisting every 
 trivial imposition to which he may 
 be exposed, so that his resistance 
 must be overcome by counter-force 
 to preserve subordination. Chicago, 
 B. and Q. R. R. Co. v. Griffin, 68 111. 
 499. 
 
 1 Thurston v. Union Pac. R. R. Co., 
 4 Dill. 321. See, also, Pearson v. 
 Duane, 4 Wall. 605. A regulation 
 forbidding hackmen, peddlers, ex- 
 pressmen, and loafers from coming 
 within a passenger depot is reasona- 
 ble. Summitt v. State, 8 Lea(Tenn.), 
 413. 
 
 2 Pittsburgh, C. and St. L. R'y 
 Co. v. Vandyne, 57 Ind. 576. See 
 Railway Co. v. Valleley, 32 O. St. 
 345; Murphy v. Union R'y Co., 118 
 Mass. 228. 
 
 3 Hibbard v. N. Y. and Erie R. R. 
 Co., 15 N. Y. 455 ; Crawford v. Cin- 
 cinnati, etc., R. R. Co., 26 O. St. 580. 
 Carriers may require passengers to 
 purchase and show tickets. Pullman 
 Palace Car Co. ». Reed, 75 111. 125 ; 
 Lane v. Railroal Co., 5 Lea (Tenn.), 
 124 ; Price v. C. & O. R'y Co., 46 W. 
 Va. 538. A carrier may discriminate 
 between the amount of fare when a 
 
 ticket is purchased, and when the fare 
 is paid on the train. Swan v. Man- 
 chester, etc., R. R., 132 Mass. 116 ; 
 Indianapolis, etc., R. Co. v. Rinard, 
 46 Ind. 293 ; Toledo, W. and W. R. 
 R. Co. ». Wright, 68 Ind. 586 ; Du 
 Laurens v. First Division St. P. and 
 P. R. R., 15 Minn. 49 ; see Jefferson- 
 ville R. R. Co. v. Rogers, 38 Ind. 116. 
 A regulation requiring stop-over tick- 
 ets is reasonable. Yorton v. Milwau- 
 kee, etc., R'y Co., 54 Wis. 234; Stone 
 v. C. and N. W. R. Co., 47 Iowa, 82. 
 A regulation requiring the purchase 
 of tickets before entering the cars is 
 unreasonable, unless proper facilities 
 for the purchase of tickets are fur- 
 nished. Evans v. Memphis, etc., R. 
 R. Co., 56 Ala. 246 ; Du Laurens v. 
 First Division St. P. and P. R. R. Co., 
 15 Minn. 49 ; St. Louis, A. and C. R. 
 R. Co. v. Dalby, 19 111. 353. Com- 
 pare Thorpe v. New York C. and H. 
 R. R. R. Co., 76 N. Y. 402. 
 
 4 Lynch v. Metropolitan Elevated 
 R'y Co., 90 N. Y. 77. Under such 
 circumstances the carrier may have 
 an action to recover the fare, but no 
 right to arrest or imprison the pas- 
 senger, lb. 
 
 325
 
 § 350.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 important class of cases in which carriers are held liable for 
 . misfeasance of their employes which causes a breach 
 
 Liability of , , ,,. ,: ; , .. 
 
 carriers for of the carrier s obligations, are cases 01 negligence. 
 And here we may consider, first, the responsibility 
 of carriers for negligence towards persons to whom they owe 
 some special duty, 1 and, secondly, their responsibility to per- 
 sons towards whom they are affected only with the general 
 duty arising under the maxim, Sic utere tuo ut alienum non 
 Icedas. 
 
 § 350. The primary or fundamental obligations and liabilities 
 of a common carrier are imposed on him by law, on 
 account of the nature of his employment ; and do not 
 arise exclusively from the expressed contract between 
 the carrier and the person dealing with him ; although 
 these obligations may be modified and limited by contract.* 
 The preceding proposition requires explanation. 
 
 When a common carrier is incorporated, the law, from 
 motives of public policy, imposes on it certain duties. Its 
 primary duty is to carry ; and to carry whatever freight is 
 offered, and whatever passengers present themselves, to the 
 extent of its capacity. 3 Moreover, common carriers of freight 
 
 Carrier's 
 fundanien 
 tal obliga- 
 tions. 
 
 1 In actions by passengers against 
 railroad companies for personal inju- 
 ries caused by negligence, whether 
 the action is in tort or on contract, 
 the burden is on the plaintiff either 
 to prove negligence of the company 
 or show facts which raise a presump- 
 tion of such negligence. Stokes v. 
 Saltonstall, 13 Pet. 181. A passenger 
 makes out a prima facie case by show- 
 ing that he was injured through a de- 
 fect in the road, in the cars, or in any 
 portion of the apparatus used by the 
 company in carrying passengers. 
 Curtis v. Rochester, etc., R. R. Co., 
 18 N. Y. 534 ; Meier v. Pennsylvania 
 R. R. Co., 04 Pa. St. 225 ; Pittsburgh, 
 C. and St. L. R'y Co. v. Thompson, 
 56 111. 138; Toledo, W. and N. R. R. 
 Co. v. Beggs, 85 111. 80; George v. 
 St. Louis, etc., Ry. Co., 34 Ark. 613; 
 Yonge v. Kinney, 28 Ga. Ill; Hig- 
 
 326 
 
 gins v. Hannibal and St. Jo. R. R. 
 Co., 36 Mo. 418; Wilson v. Northern 
 Pac. R. R. Co., 26 Minn. 278; Wall 
 v. Livezay, 6 Col. 465; Railroad Co. 
 v. Waliath, 38 O. St. 461; Pittsburgh, 
 C. and St. L. R. R. Co. v. Williams, 
 74 Ind. 462. Proving injury from a 
 collision of trains raises prima facie 
 presumption of negligence. Iron R. 
 R. Co. v. Mowery, 36 O. St. 418 ; 
 New Orleans J. and G. N. R. R. Co. 
 v. Allbiitton, 38 Miss. 242. 
 
 2 Hannibal R. R. Co. v. Swift, 12 
 Wall. 262. 
 
 3 A common carrier is bound to 
 carry when called on, and to charge 
 only a reasonable compensation. 
 Winona, etc., R. R. Co. v. Blake, 94 
 U. S. 180. See § 309, note. In some 
 states this is provided for by statute. 
 But a carrier is not bound to allow a 
 business interfering with his interest
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 350. 
 
 are bound to take what goods are offered, and transport them 
 safely, insuring them against all loss and damage except that 
 arising from the act of God or of the public enemy, 1 or from the 
 inherent damnifying or perishable qualities of the goods them- 
 selves. 2 And a common carrier of passengers is bound to use 
 every care and precaution for the safety of passengers carried by 
 it. 3 This duty or obligation on the part of the carrier has its 
 
 to be transacted on his vehicles; e. g., 
 he may refuse passage to an express 
 agent who persists in transacting ex- 
 press business on his boat. The D. 
 R. Martin, 11 Blatch. 233; Barney v. 
 Oyster Bay Steamboat Co., 67 N. T. 
 301. Railroad companies are not re- 
 quired by usage or by common law 
 to transport the traffic of independ- 
 ent express companies in the manner 
 in which such traffic is usually car- 
 ried and handled. Express Cases, 
 117 U. S. 1. See §309 and notes. 
 Compare Thurston v. Union Pac. R. 
 R. Co., 4 Dill. 321, §348. 
 
 1 Propeller Niagara v. Cordes, 21 
 How. 7; Merritt v. Earle, 29 N. Y. 
 115; Colt v. McMechen, 6 Johns. (N. 
 Y.) 160; Fillobrown v. Grand Trunk 
 R. Co., 55 Me. 462; South and North 
 Ala. R. R. Co. v. Wood, 66 Ala. 167. 
 A carrier is bound to use due dili- 
 gence to prevent the destruction of 
 goods by the act of God or the public 
 enemy; and if his negligence occa- 
 sions the loss of goods through one 
 of these causes he is liable. Holla- 
 day v. Kennard, 12 Wall. 254; Micha- 
 els v. N. Y. Central R. R. Co., 30 ST. 
 Y. 564; Read v. Spalding, ib. 630; 
 Packard ». Taylor, 35 Ark. 402; 
 Caldwell v. Southern Express Co., 1 
 Flip. C. Ct. 85; Wallace v. Clayton, 
 42 Ga. 443. Compare Gillespie v. St. 
 Louis, etc., R'y Co., 6 Mo. App. 554. 
 Where liquors were shipped to 
 Maine, and were there seized and 
 destroyed under the Maiue laws, the 
 carrier was not held liable. Wells 
 
 v. Maine Steamship Co., 4 Cliff. C. 
 Ct. 228. But the carrier should im- 
 mediately notify shipper of seizure. 
 Ohio, etc., R. Co. v. Yohe, 51 Ind. 
 181. 
 
 2 Illinois Central R. R. Co. v. Mc- 
 Clellan, 54 111. 58. 
 
 8 Philadelphia* Reading R. R. Co. 
 v. Derby, 14 How. 468; Pennsylvania 
 Co. v. Roy, 102 U. S. 451; Warner v. 
 B. & O. R. R. Co., 168 U. S. 339; Mc- 
 Elroy v. N. & L. R. R. Co., 4 Cush. 
 400; Meier v. Pennsylvania R. R. Co., 
 64 Pa. St. 225; Louisville City R'y v. 
 Weams, 80 Ky. 420; Brunswick, etc., 
 R. R. Co. v. Gale, 56 Ga.322; Kansas 
 Pac. R'y Co. v. Miller, 2 Col. 442; 
 Sherlock v. Ailing, 44 Ind. 184; Gil- 
 lenwater o. Madison, etc., R. R. Co., 
 5 Ind. 339; Indianapolis B. and W. R. 
 Co. v. Beaver, 41 Ind. 493; Gilson v. 
 Jackson County Horse R'y Co., 76 
 Mo. 282; Taylor v. Grand Trunk R'y 
 Co., 48 N. H. 304; Chicago, B. and 
 Q. R. R. Co. v. George, 19 111. 510; 
 McCurrie v. So. Pac. R. R. Co., 122 
 Cal. 558. The railroad company re- 
 mains liable although the car in 
 which the plaintiff was injured be- 
 longed to the Pullman Palace Car 
 Co. Pennsylvania Co. v. Roy, supra. 
 To same effect is N. Y.,etc, R. R. 
 Co. v. Cromwell, 98 Va. 227. The 
 care which the carrier is bound to use 
 is not affected by the fact that the 
 person is travelling in a cattle train. 
 Indianapolis, etc., R. R. Co. v. Hoist, 
 93 U. S. 291. See Ohio & M. R. R. 
 Co. v. Dickerson, 59 Ind. 317; Edger- 
 327
 
 § 351.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 complement in a right on the part of the public and of every in- 
 dividual citizen ; a right by comity extended to persons who are 
 not citizens. In respect of carriers of goods this right of every 
 person is to have carried whatever harmless and lawful goods he 
 may offer for carriage, 1 and to have them, during the carriage, 
 insured by the carrier against all loss and damage, except such 
 as may arise from one of the causes excepted above ; and in re- 
 spect of carrier of passengers it is the right of every one to be 
 carried, and to have every precaution used to insure his personal 
 safety during the passage. These rights do not depend on any 
 specific agreement, but belong to every person placing himself, 
 in regard to the carrier, in the position of shipper or passenger. 2 
 The contractual element in the causation of these rights is the 
 voluntary act whereby a person places himself in such a posi- 
 tion. That, without further stipulation, occasions them. 
 
 § 351. These legal relations are as it were stereotyped ; and 
 from motives of public policy courts hold that with- 
 out the consent of the person dealing with the car- 
 rier, they may not be materially varied; 3 and that 
 even with his consent certain modifications in them 
 may not be made. With the consent of such person 
 
 Modifica- 
 tions of 
 carrier's 
 common 
 law liabil- 
 ity. 
 
 ton v. New York, etc., R. R. Co., 39 
 N. Y. 227; Dunn v. Grand Trunk 
 R'y Co., 58 Me. 187; Creed v. Penn- 
 sylvania R. R. Co., 86 Pa. St. 139. 
 But see Player v. Burlington, etc., 
 R'y Co., 62 Iowa, 723. And it is no 
 defence that the plaintiff, a passen- 
 ger, was pregnant, and her injuries 
 were due rather to her condition 
 than to the accident. Sawyer v. 
 Dulany, 30 Tex. 479. 
 
 1 Pittsburgh, Cincinnati, etc., R. 
 Co. v. Morton, 61 Ind. 539; Chicago 
 & A. R. R. Co. v. Erickson, 91 111. 
 613. See Western Un. Tel. Co. v. 
 Ferguson, 57 Ind. 495; Evansville, 
 etc., R. R. Co. v. Duncan, 28 Ind. 441, 
 446. Compare Pittsburgh, etc., R. 
 Co. v. Hollowell, 65 Ind. 188; 
 Phelps v. Illinois Central R. R. Co., 
 94 111. 548; Illinois Central R. R. Co. 
 V. Cobb, 64 111. 128. 
 
 328 
 
 2 To constitute a passenger it is not 
 necessary that a person should pay 
 fare eo nomine, when he is riding on 
 a train with consent of the company 
 and some form of consideration 
 moves to the company from him. 
 Railroad Co. v. Lockwood, 17 Wall. 
 357; Railway Co. v. Stevens, 95 U. S. 
 655; Commonwealth v. Vermont, 
 etc., R. R. Co., 108 Mass. 7; Yeomaus 
 v. Contra Costa Steam Nav. Co., 44 
 Cal. 71 ; Kentucky Central R. R. Co. v. 
 Thomas, 79 Ky. 160; Pennsylvania 
 Co. v. Woodworth, 26 O. St. 585. 
 
 3 A carrier may by special agree- 
 ment restrict his liability for goods 
 carried. The consent of the shipper, 
 however, is necessary; for he can 
 compel the carrier to carry with all 
 responsibilities. New Jersey Steam 
 Navigation Co. v. Merchants' Bank, 
 6 How. 344, 378; Hollister v. Nowlen,
 
 PART IV.] LIABILITY FOR ACTS OF AGENTS. 
 
 [§ 352. 
 
 the carrier may stipulate that it shall not be responsible for losses 
 arising from lire; 1 and indeed for any loss not occasioned by 
 its negligence or that of its employes. 2 
 
 § 352. But neither a carrier of passengers nor a carrier of 
 goods can competently stipulate for immunity from 
 liability for losses or injuries caused by negligence cannot 
 for which it is responsible. Such a stipulation is f^Tmstfua- 
 void as against public policv. On this point the bili *y for 
 
 o r r . r negligence. 
 
 leading case is Railroad Company v. Lockwood. 3 Its 
 reasoning is unanswerable ; and the importance of the matter 
 warrants somewhat extended quotation from the opinion of the 
 court, which was given by Justice Bradley. 
 
 " As the duties and responsibilities of public carriers were 
 prescribed by public policy, it has been seriously doubted 
 whether the courts did wisely in allowing that policy to be de- 
 parted from without legislative interference, by which needed 
 modifications could have been introduced into the law. But the 
 great hardship on the carrier in certain special cases, where 
 goods of great value or subject to extra risk were delivered to 
 him without notice of their character, and where losses hap- 
 pened by sheer accident without any possibility of fraud or collu- 
 sion on his part, such as collisions at sea, accidental fire, etc., led 
 to a relaxation of the rule to the extent of authorizing certain 
 exemptions from liability in such cases to be provided for, either 
 
 19 Wend. 234; Cole v. Goodwin, ib. 
 251; Clark v. Faxton, 21 Wend. 153; 
 Dorr v. New Jersey Steam Naviga- 
 tion Co., 11 N. Y. 485; Western 
 Transn. Co. v. Newhall, 24 111. 466; 
 Merchants' Despatch Trans. Co. v. 
 Theilbar, 86 111. 71 ; Michigan Central 
 R. R. Co. v. Hale, 6 Mich. 243; Kansas 
 Pac. Ry. Co. v. Reynolds, 17 Kan. 251 ; 
 York Co. v. Central R. R., 3 Wall. 
 107. 
 
 1 Lamb v. Camden and Amboy R. 
 R. Co., 46 N. Y. 271; Steinweg v. 
 Erie Railway, 43 N. Y. 123; Squire 
 v. N. Y. Central R. R. Co., 98 Mass. 
 239; Grace v. Adams, 100 Mass. 505; 
 Hoadley v. Northern Trans. Co., 115 
 Mass. 304. 
 
 When a loss arises from a cause in 
 
 respect of which the carrier has stipu- 
 lated for freedom from liability, a 
 person damaged may show that had 
 it not been for the negligent or other- 
 wise improper conduct of the carrier, 
 that cause would not have operated. 
 Transportation Co. v. Downer, 11 
 Wall. 129; see Holladay v. Kennard, 
 12 Wall. 254; Railroad Co. v. Reeves, 
 10 Wall. 176; Propeller Niagara v. 
 Cordes, 21 How. 7; Nelson v. Wood- 
 ruff, 1 Black, 156; Little Rock, etc., 
 R'y Co. v. Talbot, 39 Ark. 523; com- 
 pare Stokes v. Saltonstall,13 Pet. 181; 
 Railroad Co. v. Pollard, 22 Wall. 341. 
 
 2 York Co. v. Central Railroad, 3 
 Wall. 107. See Camp v. Hartford, 
 etc., Steamboat Co., 43 Conn. 333. 
 
 3 17 Wall. 357. 
 
 329
 
 § 352.] THE LAW OF PK1VATE CORPORATIONS. [CHAP. VII. 
 
 by public notice brought borne to the owners of the goods or 
 by inserting exemptions from liability in the bill of lading, or 
 other contract of carriage. A modification of the strict rule 
 of responsibility, exempting the carrier from liability for acci- 
 dental losses where it can be safely done, enables the carrying 
 interest to reduce its rates of compensation. . . . 
 
 " The question is, whether such modification of responsibility 
 by notice or special contract may not be carried beyond legiti- 
 mate bounds, and introduce evils against which it was the direct 
 policy of the law to guard ; whether, for example, a modifica- 
 tion which gives license and immunity to negligence and care- 
 lessness on the part of the public carrier, or his servants, is not 
 so evidently repugnant to that policy as to be altogether null 
 and void ; or at least null and void under certain circum- 
 stances. . . . 
 
 "It is a favorite argument in the cases which favor the ex- 
 tension of the carrier's right to contract for exemption from 
 liability, that men must be permitted to make their own agree- 
 ments, and that it is no concern of the public on what terms 
 an individual chooses to have his goods carried. . . . 
 
 " Is it true that the public interest is not affected by the 
 individual contracts of the kind referred to? Is not the whole 
 business community affected by holding such contracts valid ? 
 If held valid, the advantageous position of the companies exer- 
 cising the business of common carriers is such that it places it 
 in their power to change the law of common carriers in effect, 
 by introducing new rules of obligation. 
 
 " The carrier and his customer do not stand on a footing of 
 equality. 1 The latter is only one individual of a million. 
 He cannot afford to higgle or stand out and seek redress in 
 the courts. His business will not admit such a course. He 
 prefers rather to accept any bill of lading, or sign any paper 
 the carrier presents; often, indeed, without knowing what the 
 one or the other contains. In most cases he has no alternative 
 but to do this or abandon his business. ... If the customer 
 had any real freedom of choice, if he had a reasonable and 
 practicable alternative, and if the employment of the carrier 
 was not a public one, charging him with the duty of accommo- 
 
 1 See Mobile and Montgomery R'y Co. v. Steiner, 61 Ala. 559. 
 
 330
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 352. 
 
 dating the public in the line of his employment ; then, if the 
 customer chose to assume the risk of negligence, it could with 
 more reason be said to be his private affair, and no concern of 
 the public. 
 
 " But the condition of things is entirely different, and espe- 
 cially so under the modified arrangements which the carrying 
 trade has assumed. The business is mostly concentrated in a 
 few powerful corporations, whose position in the bod} 7 politic 
 enables them to control it. They do, in fact, control it, and 
 impose such conditions upon travel and transportation as they 
 see fit, which the people are compelled to accept. . . . 
 
 " The conclusions to which we have come are : — 
 
 " First. That a common carrier cannot lawfully stipulate for 
 exemption from responsibility when such exemption is not just 
 and reasonable in the eye of the law. 
 
 " Secondly. That it is not just and reasonable in the eye 
 of the law for a common carrier to stipulate for exemption 
 from responsibility for the negligence of himself or his ser- 
 vants. 
 
 " Thirdly. That these rules apply both to carriers of goods 
 and to carriers of passengers for hire, and with special force to 
 the latter. 
 
 " Fourthly. That a drover travelling on a pass, such as was 
 given in this case, for the purpose of taking care of his stock 
 on the train, is a passenger for hire. 1 
 
 " We purposely abstain from expressing any opinion as to 
 what would have been the result of our judgment had we con- 
 sidered the plaintiff a free passenger instead of a passenger for 
 hire." 2 
 
 1 Railroad Co. v. Lockwood, 17 
 Wall. 357, 384. This case, also, dis- 
 approves distinctions between de- 
 grees of negligence. 
 
 2 See, also, Railway Co. v. Stevens, 
 95 U. S. 655; Bank of Kentucky v. 
 Adams Ex. Co., 93 U. S. 174; Ex- 
 press Co. v. Kountze Bros., 8 Wall. 
 342; Chicago, M. & St. P. R'y Co. 
 v. Solan, 169 U. S. 133 ; Calderon v. 
 Atlas St'mship Co., 170 U. S. 272. 
 Compare Philadelphia and Read- 
 
 ing R. R. Co. v. Derby, 14 How. 
 468; Steamboat New World v. King, 
 16 How. 469; Molton v. Western R. 
 R. Co., 15 N. Y. 444. In Jacobus v. 
 St. P. and Chi. R'y Co., 20 Minn. 
 125, it was held that a railroad com- 
 pany could not exempt itself from 
 liabilities caused by its negligence 
 to a person travelling on a free pass. 
 Contra, as to an express messenger 
 travelling under a contract between 
 the railroad and the express com- 
 
 331
 
 § 353.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 353. With one or two exceptions, the reasoning in Rail- 
 road Company v. Lockwood has been followed in every state 
 where decisions conformable to the principles therein stated had 
 not previously been rendered. Tlie authorities for the propo- 
 sition that a common carrier cannot validly stipulate for ex- 
 emption from liability for its negligence and that of its servants 
 are given in the note. 1 
 
 pany. Bait. & O., S. W. Ry. Co. v. 
 
 Voight, 176 U. S. 498. But the doc- 
 trine of the case of R. R. Co. v. 
 Lockwood has no application to a 
 stipulation in a lease given by the 
 railroad, releasing it from the lia- 
 bility imposed by statute for dam- 
 ages caused by fires. Hartford Ins. 
 Co. v. Chicago, etc., Ry. Co., 175 U. 
 S. 91. 
 
 1 Alabama: Alabama Gt. Southern 
 R. R. Co. v. Thomas, 89 Ala. 294; 
 South and North Ala. R. R. Co. v. 
 Henlein, 52 Ala. 606; Southern Ex- 
 press Co. v. Crook, 44 Ala. 468; Mo- 
 bile and Ohio R. R. Co. v. Hopkins, 
 41 Ala. 486; Steele v. Townsend, 37 
 Ala. 247. Arkansas: Taylor & Co. 
 v. Little Rock, etc., R. R. Co., 39 
 Ark. 148; Little Rock, etc., R'y Co. 
 v. Talbot, id. 523. California: Pierce 
 v. So. Pac. R. R. Co., 120 Cal. 156. 
 Colorado: Merchants' Despatch 
 Trans. Co. v. Cornforth, 3 Col. 280. 
 Connecticut: Welch v. Boston & Al- 
 bany R. R. Co., 41 Conn. 333. See 
 Camp v. Hartford, etc., Steamboat 
 Co., 43 Conn. 333. Delaware: See 
 Flinn v. Phila., W. and B. R. R. Co., 
 1 Houston, 472. Georgia: Borry v. 
 Cooper, 28 Ga. 543; Purcell v. South- 
 ern Exp. Co., 34 Ga. 315; Georgia 
 R. R. Co. v. Gann, 68 Ga. 350. Indi- 
 ana: Indianapolis, etc., R. R. Co. v. 
 Allen, 31 Ind. 394; Ohio and Miss. R. 
 Co. v. Selby, 47 Ind. 471; Michigan 
 Southern, etc., R. R. Co. v. Heaton, 
 37 Ind. 448; Rosenfeld v. Peoria, etc., 
 Ry. Co., 103 Ind. 121. (Earlier Indi- 
 332 
 
 ana cases holding contrary doctrines 
 overruled. ) A carrier may, however, 
 limit his extreme common law lia- 
 bility. Adams Express Co. v. Fen- 
 drick, 38 Ind. 150; provided the limi- 
 tation is reasonable. Adams Express 
 Co. v. Reagan, 29 Ind. 21. See 
 Evansville, etc., R. R. Co. v. Young, 
 28 Ind. 516. Iowa: Rose v. Des 
 Moines Valley R. R. Co., 39 Iowa, 
 246. Kansas: St. Louis, K. C. & N. 
 R'y Co. v. Piper, 13 Kan. 505. See 
 Kansas Pac. R. R. Co. v. Reynolds, 8 
 Kan. 623, 641. Kentucky: Orndorff 
 v. Adams Express Co., 3 Bush, 194; 
 Louisville, etc., R. R. Co. v. Brown- 
 lee, 14 Bush, 590. Maine: Willis v. 
 Grand Trunk R. Co., 62 Me. 488; 
 Sager v. Portsmouth, etc., R. R. Co., 
 31 Me. 228. Massachusetts: See 
 Commonwealth v. Vermont, etc., R. 
 R. Co., 108 Mass. 7; School District 
 v. Boston, Hartford and E. R. R. Co., 
 102 Mass. 552. Minnesota: Shriver 
 v. Sioux City, etc., R. R. Co., 24 
 Minn. 506; Christenson v. American 
 Express Co., 15 Minn. 270; Jacobus 
 v. St. Paul, etc., R'y Co., 20 Minn. 
 125. Mississippi: Mobile and Ohio 
 R. R. Co. v. Weiner, 49 Miss. 725; 
 Southern Express Co. v. Moon, 39 
 Miss. 822. Missouri: Clark v. St. 
 Louis, etc., R'y Co., 64 Mo. 440; 
 Reed v. Same, 60 Mo. 199; Ketchum 
 v. American Merch. Union Exp. Co., 
 52 Mo. 390; Lupe v. Atlantic, etc., 
 R. R. Co., 3 Mo. App. 77. Nebraska: 
 Atchison and Neb. R. R. Co. v. Wash- 
 burn, 5 Neb. 117. New Hampshire:
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 354. 
 
 § 354. It is also held that when a railroad or an express com- 
 pany agrees to transport a package beyond its terminus, or over 
 
 See Hall v. Cheney, 36 N. H. 26. 
 North Carolina: Smith v. North Caro- 
 lina R. R. Co., 64 N. C. 235. Ohio: 
 Welsh v. Pittsburgh, Ft. W. and C. 
 R. R. Co., 10 Ohio St. 65; Cleve- 
 land, Painsville, etc., R. R. Co. v. 
 Curran, 19 Ohio St. 1; Cincinnati, 
 etc., R. R. Co. v. Pontius, 19 Ohio St. 
 221; Union Exp. Co. v. Graham, 26 
 Ohio St. 595, 598. Pennsylvania: 
 American Express Co. v. Second Nat. 
 13k., 69 Pa. St. 394; Camden and 
 Amboy R. R. v. Baldauf, 16 Pa. St. 
 67; Pennsylvania R. R. Co. v. Hen- 
 derson, 51 Pa. St. 315. See Lancas- 
 ter Co. Nat. Bk. v. Smith, 62 Pa. St. 
 47; Delaware, etc., Tow Boat Co. v. 
 Starrs, 69 Pa. St. 36. South Carolina : 
 Swindler v. Hilliard, 2 Rich. L. 286. 
 Tennessee: Dillard v. L. and N. R. 
 R. Co., 2 Lea, 288. Vermont: Mann 
 v. Birchard, 40 Vt. 326. See Farmers 
 and Mec. Bk. v. Champlain Trans'n 
 Co., 23 Vt. 205. Virginia: Virginia 
 and Tenn. R. R. Co. v. Sayers, 26 
 Gratt. 328. West Virginia: Maslin 
 v. Bait, and Ohio R. R. Co., 14 West 
 Va. 180; Brown v. Adams Express 
 Co., 15 West Va. 812. Wisconsin: 
 Black v. Goodrich Trans'n Co., 55 
 Wis. 319. (Gross negligence or 
 fraud. ) 
 
 Out of accord with the better and 
 generally accepted doctrine are the 
 courts of New York, Illinois, Louisi- 
 ana (semble), and, perhaps, New Jer- 
 sey. New York : A carrier may 
 exempt himself from liability for 
 personal injuries occasioned by its 
 negligence to a person travelling gra- 
 tuitously or on a drover's pass. 
 Poucher v. New York C. R. R. Co., 
 49 N. Y. 263; Bissell ?;. N. Y. C. R. R. 
 Co., 25 N. Y. 442; Wells v. N. Y. C. 
 R. R. Co., 24 N. Y. 181. See Per- 
 kins c. N. Y. C. R. R. Co., ib. 196. 
 
 Likewise, carriers of goods may ex- 
 empt themselves from liability even 
 for negligence. Knell v. U. S. and 
 Brazil Steamship Co., 1 J. & Sp. 423; 
 Lee v. Marsh, 43 Barb. 102; Boswell 
 v. Hudson River R. R. Co., 5 Bos. 699; 
 Prentice v. Decker, 49 Barb. 21. But 
 the New York courts have narrowed 
 their decisions down to the smallest 
 possible scope; and unless exemption 
 from liability for negligence is ex- 
 pressly stipulated for, no general ex- 
 emption, however sweeping, will be 
 held to include losses arising from 
 negligence. Mynard v. Syracuse, 
 etc., R. R. Co., 71 N. Y. 180; Blair v. 
 Erie R'y Co., 66 N. Y. 313; Magnin v. 
 Dinsmore, 56 N. Y. 168; Holsapple 
 v. Rome, etc., R. R. Co., 86 N. Y. 
 275, 277; Nicholas v. N. Y. Cent, and 
 H. R. R. R. Co., 89 N. Y. 370. Com- 
 pare Goldey v. Pennsylvania R. R. 
 Co., 30 Pa. St. 242; Canfield v. Balti- 
 more & Ohio R. R. Co., 93 N. Y. 532; 
 Powell v. Same, 32 Pa. St. 414; Penn- 
 sylvania R. R. Co. v. Butler, 57 Pa. 
 St. 335; Empire Trans'n Co. v. Wam- 
 sutta Oil Co., 63 Pa. St. 14. And 
 exemptions cover only losses arising 
 from lack of ordinary care ; not 
 those arising from gross negligence 
 or fraud. Westcott v. Fargo, 63 
 Barb. 349; Heiueman v. Grand Trunk 
 R. Co., 31 How. Pr. 430. 
 
 In Illinois "the doctrine is settled 
 that railroad companies may by con- 
 tract exempt themselves from liabil- 
 ity on account of the negligence of 
 their servants, other than that which 
 is gross or wilful." Arnold v. Illi- 
 nois Cent. R. R. Co., 83 111. 273, 280; 
 Illinois Cent. R. R. Co. v. Read, 37 
 111. 484; Same v. Morrison, 19 111. 136; 
 Western Trans'n Co. v. Newhall, 24 
 111. 466; Illinois Cent. R. R. Co. v. 
 Adams, 42 111. 474; Adams Exp. Co. 
 
 333
 
 § 355.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VH. 
 
 roads belonging to others, it cannot exempt itself from liability 
 for losses arising from the negligence of another carrier over 
 whose road it has contracted to transport the goods. 1 
 
 § 355. A carrier may establish reasonable regulations for the 
 safety of baggage, and is not liable when a passen- 
 
 Carrier's 
 
 liability for ger, knowing of such regulations, loses his baggage 
 through failure to comply with them. 2 Giving the 
 opinion of the Federal Supreme Court, in Railroad Co. v. Fra- 
 loff, 3 Justice Harlan said : " It is undoubtedly competent for 
 carriers of passengers by specific regulations, distinctly brought 
 to the knowledge of the passenger, which are reasonable in 
 their character, and not inconsistent with any statute or their 
 duties to the public, to protect themselves against liability, as 
 insurers, for baggage exceeding a fixed amount in value, ex- 
 cept upon additional compensation proportioned to the risk. 
 And, in order that such regulations may be practically ef- 
 fective, and the carrier advised of the full extent of its re- 
 sponsibility, and consequently of the degree of precaution nec- 
 essary on its part, it may rightfully require, as a condition 
 
 v. Haynes, ib. 89; compare, however, 
 Boscowitz v. Adams Exp. Co., 93 111. 
 523, 534; and Adams Exp. Co. v. 
 Stettaners, 61 111. 184. (Illinois de- 
 cisions seem hardly consistent on 
 this point.) When a person rides on 
 a non-transferable free pass issued to 
 another, he commits a fraud that 
 will relieve the railroad company 
 from responsibility for injuries to 
 him, except for such as arise from 
 gross or reckless negligence. Toledo, 
 W. and W. R'y Co. v. Beggs, 85 111. 
 80. New Jersey : A railroad com- 
 pany is not liable for the negligent 
 killing of a person accepting a free 
 pass with a stipulation against liabil- 
 ity for negligence. Kinney v. Cen- 
 tral R. R. Co., 32 N. J. L. 407; aff' d 
 34 N. J. L. 513. But see Ashmore v. 
 Penn Steam Tow Co., 28 N. J. L. 
 180, 192. Louisiana: A carrier may 
 stipulate for exemption from liabil- 
 ity for personal injuries to a news 
 agent on the train, arising through 
 
 334 
 
 the negligence of its servants; pro- 
 vided the servants are guilty of no 
 fraudulent, wilful, or reckless mis- 
 conduct. Higgins v. New Orleans, 
 etc., R. R. Co., 28 La. Ann. 133. 
 
 1 Bank of Kentucky v. Adams Exp. 
 Co., 93 U. S. 174; Cincinnati, etc., 
 R. R. Co. v. Pontius, 19 Ohio St. 221; 
 Galveston, etc., Ry. Co. v. Allison, 59 
 Tex. 193. Contra, Gibson v. Amer- 
 ican Merchants' Union Exp. Co., 1 
 Hun (N. Y.), 387. For liability of a 
 carrier for losses occurring at con- 
 necting lines, see §§ 362-304. 
 
 2 Gleason v. Goodrich Trans'n Co., 
 32 Wis. 85. Or through his own 
 act. E. r/., a passenger dropped her 
 bag from a car window. The con- 
 ductor refused to stop the train in 
 order to let the passenger recover it, 
 and the bag was lost. Held, that 
 the railroad company was not liable. 
 Henderson v. Louisville, etc., R. R., 
 123 U. S. 61. 
 
 3 100U. S. 24, 27.
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. [§ 355. 
 
 precedent for any contract for the transportation of baggage 
 information from the passenger as to its value ; and if the 
 value thus disclosed exceeds that which the passenger may 
 reasonably demand to be transported as baggage without ex- 
 tra compensation, the carrier, at its option, can make such 
 additional charge as the risk fairly justifies. And the carrier 
 may be discharged from liability for the full value of the pas- 
 senger's baggage, if the latter, by false statements, or by any 
 device or artifice, puts off inquiry as to such value, whereby is 
 imposed upon the carrier responsibility beyond that which it 
 was bound to assume in consideration of the ordinary fare 
 charged for the transportation of the person [so far obiter]. 
 But in the absence of legislation limiting the responsibility of 
 carriers for the baggage of passengers ; in the absence of rea- 
 sonable regulations upon the subject by the carrier, of which 
 the passenger has knowledge ; in the absence of inquiry of the 
 passenger as to the value of articles carried, under the name of 
 baggage, for his personal use and convenience in travelling ; 
 and in the absence of conduct upon the part of the passenger 
 misleading the carrier as to the value of his baggage, the court 
 cannot in law declare that the mere failure of the passenger to 
 disclose, unasked, the value of his baggage is a fraud upon the 
 carrier, which defeats all rights of recovery." 
 
 There is in law no fixed limit to the value of bao-p-ap-e for 
 which the carrier is responsible, when he does not limit his re- 
 sponsibility by special contract. But his responsibility as in- 
 surer is limited to such articles as it is customary or reasonable 
 for travellers of the same class in life to which the passenger 
 may belong to take for the journey in hand, and does not ex- 
 tend to those which the caprice of a particular passenger might 
 lead him to take; and it rests with the jury to determine the 
 special case in accordance with these principles. 1 
 
 1 Railroad Co. v. Fraloff, 100 IT. S. 
 24, supra. In this case the carrier 
 was held liable for laces stolen from 
 the baggage of a Russian countess, 
 and valued by the jury at ten thou- 
 sand dollars. See, also, Del Valle v. 
 Steamboat Richmond, 27 La. Ann. 
 90; Rutland R. R. Co. v. Ramchau, 
 71 Vt. 142. 
 
 A carrier is liable for money in 
 baggage to an amount bona fide 
 taken for travelling purposes, and 
 not more than a prudent person 
 would deem necessary and proper to 
 take. Jordan v. Fall River R. R. 
 Co., 5 Cush. 69; Merrill v. Grinnel,30 
 N. Y. 594. See Dunlap v. Interna- 
 tional Steamboat Co., 98 Mass. 371; 
 
 335
 
 § 356.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Limita- 
 tions of 
 carrier's 
 liability in 
 amount. 
 
 § 356. Just as carriers of passengers may place a limit on the 
 value of baggage for which they will be liable, unless 
 the value is disclosed and additional compensation 
 paid, so carriers of goods may limit their liability in 
 the same respect. And when the value of goods is 
 agreed on, the railroad company is not liable above that amount 
 even when the loss is caused by its negligence. " Where a con- 
 tract of this kind, signed by the shipper, is fairly made agree- 
 ing on the valuation of the property carried, with the rate of 
 freight based on the condition that the carrier assumes liability 
 only to the extent of the agreed valuation, even in cases of loss 
 or damage by the negligence of the carrier, the contract will be 
 upheld as a proper and lawful mode of securing a due propor- 
 tion between the amount for which the carrier may be respon- 
 sible and the freight he receives, and of protecting himself 
 against extravagant and fanciful valuations." x When, however, 
 there is no notice of such limitation, a person delivering goods 
 to a carrier is not bound to state their value. 2 Restrictions as 
 
 Orange County Bank v. Brown, 9 
 Wend. 85; Hawkins v. Hoffman, 6 
 Hill (N. Y.), 586; Doyle v. Kiser, 6 
 Ind. 242; Toledo, W. and W. R. R. 
 Co. v. Hammond, 33 Ind. 379. A 
 carrier is not liable as such for 
 sixteen thousand dollars' worth of 
 bonds violently taken from the per- 
 son of a passenger. Weeks v. N. Y., 
 N. H. and H. It. R. Co., 72 N. Y. 50; 
 nor for thirty thousand dollars' 
 worth of jewelry in baggage. Mich- 
 igan Central R. R. Co. u. Carrow, 73 
 111. 348. See Humphreys v. Perry, 
 148 U. S. 627. Nor for a loss of mer- 
 chandise carried as baggage. Stim- 
 son v. Connecticut River R. R. Co., 
 98 Mass. 83; Ailing v. Boston and 
 Albany R. R. Co., 126 Mass. 121; 
 Pardee u. Drew, 25 Wend. 459. Un- 
 less, having been advised of the 
 merchandise, it charges and receives 
 a sum in addition to the passenger's 
 fare for the extra weight. Perley v. 
 N. Y. C. and H. R. R. R. Co., 65 N. 
 Y. 374. 
 
 336 
 
 1 Hart v. Pennsylvania R. R. Co., 
 112 U. S. 331, 343; op'n of court per 
 Blatchford, J. ; Graves v. Lake Shore, 
 etc., R. R. Co., 137 Mass. 33; Graves 
 v. Adams Express Co., 170 Mass. 280; 
 Harvey v. Terre Haute, etc., R. R. 
 Co., 74 Mo. 538; Magnin v. Dinsmore, 
 70 N. Y. 410; S. C, 62 N. Y. 65; Con- 
 tra, Chicago, St. L. & N. O. R. R. Co. v. 
 Abels, 60 Miss. 1017; Pierce v. So. Pac. 
 R. R. Co., 120 Cal. 156. But a clause 
 limiting liability will not hold good 
 after the carrier has disregarded the 
 shipper's order to stop the goods in 
 transit. Rosenthal v. Weir, 170 N. Y. 
 148. 
 
 2 Little v. Boston and Maine R. R., 
 66 Me. 239; Phillips v. Earle, 8 Pick. 
 182; see, also, Chicago and Alton R. 
 R. Co. v. Shea, 66 111. 471; Houston, 
 etc., R. R. Co. v. Burke, 55 Tex. 323. 
 But the carrier may inquire as to 
 value, and the shipper is bound by 
 his answer. Same cases. 
 
 i
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 357. 
 
 to the time within which a loss must be notified to the carrier 
 in order to render him liable, are generally held reasonable and 
 valid. 1 
 
 § 357. Although telegraph companies, according to the gen- 
 erally accepted view, are not common carriers, 2 they 
 exercise a function of great public importance ; 3 and ^ffames. 
 the reasoning on which, in Railroad Company v. 
 Lockwood, 4 the court based the rule that common carriers can 
 not validly stipulate for immunity from responsibility for their 
 negligence, applies to telegraph companies with equal force. 5 
 Accordingly, the better and more salutary view seems to be, 
 that any stipulation inserted in a telegraph blank, restricting 
 the liability of the company unless the message is repeated, 
 will not exempt it from responsibility for errors occasioned by 
 the negligence of its employes. 6 But many authorities oppose 
 
 1 Within five days valid, Black v. 
 Wabash, etc., R'y Co., Ill 111. 351; 
 contra, Cox v. Central Vt. R. R. Co., 
 170 Mass. 129; within ninety days 
 valid, Express Co. v. Caldwell, 21 
 Wall. 264; within thirty days, United 
 States Express Co. v. Harris, 51 Ind. 
 127; Weir v. Express Co., 5 Pliila. 
 355. Contra, Southern Exp. Co. v. 
 Caperton, 44 Ala. 101. A stipulation 
 in a bill of lading that damage must 
 be adjusted before the articles are 
 taken from the station, and a claim 
 presented within thirty days to "a 
 trace-agent," is unreasonable and 
 void. Capehart v. Seaboard, etc., R. 
 R. Co., 81 N. C. 438. 
 
 2 Leonard v. N. Y., etc., Tel. Co., 
 41 N. Y. 544; Breese v. U. S. Tel. 
 Co., 48 N. Y. 132; Schwartz v. At- 
 lantic, etc., Tel. Co., 18 Hun, 157; 
 Pinckney v. Western Un. Tel. Co., 
 19 S. C. 71; Ellis v. American Tel. 
 Co., 13 Allen, 226; Birney v. N. Y., 
 etc., Tel. Co., 18 Md. 341; Western 
 Union Tel. Co. v. Fontaine, 58 Ga. 
 433; Same v. Carew, 15 Mich. 525; 
 Western Union Tel. Co. v. Nei.ll, 57 
 Tex. 283. Contra, Parks v. Tel, Co, 
 
 22 
 
 13 Cal. 422. Compare Western Union 
 Tel. Co. v. Meyer, 61 Ala. 158. 
 
 3 The right of eminent domain may 
 properly be granted to a telegraph 
 company; property taken by such a 
 company is taken for a public use. 
 Pierce v. Drew, 136 Mass. 75. Com- 
 pare Central Union Telephone Co. v. 
 Bradbury, 106 Ind. 1; Hockett v. 
 State, 105 Ind. 250. 
 
 4 § 352. 
 
 5 See Telegraph Co. v. Griswold, 
 37 O. St. 301, 313. 
 
 6 Western Union Tel. Co. v. Blanch- 
 ard, 68 Ga. 299; Telegraph Co. v. 
 Griswold, 37 O. St. 301; Western 
 Union Tel. Co. v. Fontaine, 58 Ga. 
 433; Sweatland v. 111. and Miss. Tel. 
 Co., 27 Iowa, 433; Manville v. West- 
 ern Union Co., 37 Iowa, 214; West- 
 ern Union Tel. Co. v. Graham, 1 
 Col. 230; Tyler v. Western Union 
 Tel. Co., 60 111. 421; S. C, 74 111. 
 168; United States Tel. Co. v. Gil- 
 dersleeve, 29 Md. 232; Western Un- 
 ion Tel. Co. v. Neill, 57 Tex. 283; 
 Same v. Short, 53 Ark. 434; Same v. 
 Linn, 87 Tex. 7; W. U. Tel. Co. v. 
 Beals, 56 Neb. 415. Even though it 
 
 337
 
 § 357.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VTI. 
 
 this view, holding that a telegraph company may thus exempt 
 itself, except for such errors as arise from " gross negligence" 
 or wilful misconduct on the part of its employes. 1 
 
 The failure to transmit and deliver the message as received 
 is prima facie negligence, rendering the company liable; and 
 the burden of proof rests on it to clear itself from fault. 2 
 
 be a "night message," company li- 
 able for errors from negligence 
 (nothing contained in blank as to 
 repeating). Bartlett v. Western Un- 
 ion Tel. Co., 62 Me. 209; Hibbard v. 
 Western Union Tel. Co., 33 Wis. 558; 
 Candee v. Same, 34 Wis. 471. Contra, 
 Schwartz v. Atlantic, etc., Tel. Co., 
 18 Hun, 157; or a cipher message, 
 W. U. Tel. Co. v. Eubauks, 100 Ky. 
 591. Nor can the company stipulate 
 that the damages arising from mis- 
 takes in unrepeated messages shall 
 not exceed the price of the message. 
 Western Union Tel. Co. v. Blanch- 
 ard, 68 Ga. 299; Thompson v. West- 
 ern Union Tel. Co., 64 Wis. 531. A 
 telegraph company cannot avoid the 
 penal liability imposed by statute for 
 failure to transmit a message cor- 
 rectly, by a contract fixing its liabil- 
 ity at a less sum. Western Union 
 Tel. Co. v. Adams, 87 Ind. 598. See 
 Same v. Young, 93 Ind. 118. Com- 
 pare Same v. Jones, 95 Ind. 228; 
 Same v. Meredith, ib. 93; Same v. 
 Pendleton, ib. 12. 
 
 1 Primrose v. W. U. Tel. Co., 154 
 U. S. 1; Grinnell v. Same, 113 Mass. 
 299; Kiley v. Same, 109 N. Y. 231; 
 Breeze v. U. S. Tel. Co., 48 N. Y. 132; 
 Becker v. Western Union Tel. Co., 
 11 Neb. 87; Ellis v. Amer. Tel. Co., 
 13 Allen, 226; Passmore v. Western 
 Union Tel. Co., 78 Pa. St. 238; AVest- 
 ern Union Tel. Co. v. Carew, 15 
 Mich. 525; Camp v. Western Union 
 Tel. Co., 1 Mete. (Ky.) 164; Wann 
 v. Western Union Tel. Co., 37 Mo. 
 338 
 
 472; MacAndrew v. Electric Tel. Co., 
 17 C. B. 3. It may be said, however, 
 that in these cases no negligence 
 appeared beyond the fact that there 
 was an error; and perhaps they are 
 not to be regarded as express au- 
 thorities for the statement that these 
 stipulations cover negligence on the 
 part of the telegraph company or its 
 employes. A stipulation in a tele- 
 graph blank that the company will 
 not be responsible for mistakes in 
 unrepeated messages is reasonable; 
 but would not cover gross negligence 
 or wilful misconduct. Lassiter v. 
 Western Union Tel. Co., 89 N. C. 
 334; Hart v. Western U. Tel. Co., 
 66 Cal. 579. See Redington v. Tel. 
 Co., 107 Cal. 317. 
 
 2 Telegraph Co. v. Griswold, 37 
 Ohio St. 301 ; Bartlett v. Western 
 Un. Tel. Co., 62 Me. 209 ; Ritten- 
 house v. Independent Line of Tele- 
 graph, 44 N. Y. 263 ; Baldwin v. U. 
 S. Tel. Co., 45 N. Y. 744 ; Western 
 Un. Tel. Co. v. Carew, 15 Mich. 525, 
 533 ; Tyler v. Western Un. Tel. Co., 
 60 111. 421 ; De La Grange v. South 
 Western Tel. Co., 25 La. Ann. 383 ; 
 Western Un. Tel. Co. v. Meek, 49 
 Ind. 53 ; Turner v. Hawkeye Tel. 
 Co., 41 Iowa, 458 ; Western Un. Tel. 
 Co. u. Short, 53 Ark. 434. Compare 
 Koons v. Western Union Tel. Co., 
 102 Pa. St. 164 ; Western Union Tel. 
 Co. v. Reynolds, 77 Va. 173. Contra, 
 Aiken v. Western Union Tel. Co., 69 
 Iowa, 31. 
 
 .
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. [§ 359. 
 
 § 358. At this point it will be well to consider what evidence 
 will show an agreement, consent, or acquiescence on 
 the part of a passenger or shipper to limitations on of assent 
 the liability of the carrier. As there is rarely an tionsof^ 
 express assent in such cases, whether there was any j^?^ s 
 assent at all becomes a question for the jury to guess 
 at under the guidance of the court, unless the circumstances are 
 such as to estop the person dealing with the carrier from deny- 
 ing his assent. The cardinal distinction seems to lie here : the 
 passenger or shipper will be presumed — though the presump- 
 tion will not always be conclusive — to have agreed to whatever 
 lawful terms are expressed on the face of a paper received by 
 him from the agent of the carrier, when that paper contains 
 the contract between the carrier and the person dealing with 
 it. If, however, the paper so received does not express the con- 
 tract of the parties, and is but a mere check, or ticket given by 
 the carrier, there will arise no presumption that the person 
 dealing with the carrier assented to its terms. The general 
 idea is well expressed by Judge Boardman in Kirkland v. Dins- 
 more : x " When a person, from the nature of the business, the 
 manner in which it is transacted, and all the circumstances sur- 
 rounding it, knows or has reason to believe he is receiving a 
 contract that will bind him, he will be bound whether he reads 
 or not. But where he may honestly, and in good faith, sup- 
 pose he is receiving a check, token, receipt, or voucher of some 
 kind, or ticket, as evidence of money paid, he will not be bound 
 by a contract attached thereto, forming no necessary part 
 thereof, to which his attention is not called, and which through 
 ignorance, haste, or inadvertence, he neglects to read or assent 
 to." 
 
 § 359. In accordance with this rule, a shipper of goods will 
 be presumed to have agreed to the terms of a bill of lading or 
 "receipt" received by him ; as this ordinarily contains the con- 
 tract between the shipper and the carrier. 2 Indeed, it is held 
 
 1 2 Hun, 46, 51. See, also, Blos- 
 som v. Dodd, 43 N. Y. 264 ; Madan 
 v. Sherard, 73 N. Y. 329. 
 
 Magnin v. Dinsmore, 70 N. Y. 
 410 ; S. C, 62 N. Y. 35 ; Cincinnati, 
 etc., R. R. Co. v. Pontius, 19 Ohio St. 
 
 221 ; Hill v. Syracuse, etc., R. R. 
 Co., 73 N. Y. 351; Grace v. Adams, 
 100 Mass. 505; Louisville, etc., R. R. 
 Co. v. Brownlee, 14 Bush (Ky.),590; 
 Farnham v. Camden and Amhoy R. 
 R. Co., 55 Pa. St. 53; Patterson V. 
 339
 
 § 359.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 that the terms of a bill of lading cannot be contradicted by 
 parol evidence. 1 But there are many authorities adverse to the 
 two propositions last stated. 2 
 
 There is no presumption that a shipper knows of or assents 
 to mere published notices ; and accordingly they will not be 
 effectual in limiting the liability of the carrier; 3 except as to 
 the amount beyond which he will not be liable when not in- 
 formed of the value of the goods. 4 A notice printed on the 
 
 Clyde, 67 Pa. St. 500; Fibel v. Livin- 
 ston, 64 Barb. 179; Belger v. Dins- 
 niore, 51 N. Y. 166; Newburger v. 
 Howard & Co.'s Express, 6 Pbila. 
 174; Steers v. Liverpool, etc.,Steam- 
 sbip Co. 57 N. Y. 1; Huntingdon v. 
 Dinsmore, 4 Hun, 66; Prentice v. 
 Decker, 49 Barb. 21; Knell v. U. S. 
 and Brazil Steamship Co., 1 J. & Sp. 
 (N. Y.) 423; Lee v. Marsh, 43 Barb. 
 102; Boswell o. Hudson River R. R. 
 Co., 5 Bos. (N. Y.) 699; Muser v. 
 Holland, 17 Blatchf. 412; Wertheiraer 
 v. Pennsylvania R. R. Co., ib. 421; 
 Robinson v. Merchants' Despatch 
 Trans. Co., 45 Iowa, 470; Louisville 
 and N. R. R. Co. v. Brownville, 14 
 Bush (Ky.), 590; McMillan v. Michi- 
 gan Southern, etc., R. R. Co., 16 
 Mich. 79. See Pemberton Co. v. N. 
 Y. C. R. R. Co., 104 Mass. 144; Ger- 
 mania Fire Ins. Co. v. M. and C. R. 
 R. Co., 72 N. Y. 90; compare Wood- 
 ruff v. Sherrard, 9 Hun, 322. But a 
 bill of lading delivered subsequently 
 to the shipment may not have this 
 effect. Bostwick v. Baltimore, etc., 
 R. R. Co., 45 N. Y. 712; Gaines v. 
 Union Trans. Co., 28 O. St. 418; 
 American Express Co. v. Spellman, 
 90 111. 455. Compare Wilde v. Mer- 
 chants' Dispatch Trans. Co., 47 Iowa, 
 272. 
 
 1 Cincinnati, etc., R. R. Co. v. Pon- 
 tius, 19 Ohio St. 221; Hill v. Syra- 
 cuse, etc., R. R. Co., 73 N. Y. 351. 
 Compare Marian u. Sherard, ib. 329. 
 Contra, Dillard v. L. and N. R. R. j 
 
 340 
 
 Co., 2 Lea (Tenn.), 288; Erie and 
 Western Trans. Co. v. Dater, 91 111. 
 195. 
 
 2 Southern Express Co. v. Arm- 
 stead, 50 Ala. 350; Merchants' Des- 
 patch Trans. Co. v. Theilbar, 86 111. 
 71; Same v. Leysor, 89 111. 43; Field 
 v. Chicago and R. I. R. Co., 71 111. 
 458; Erie and N. Trans. Co. v. Dater, 
 91 111. 195. See Railroad Co. v. Manu- 
 facturing Co., 16 Wall. 319; Verner 
 v. Sweitzer, 32 Pa. St. 208; Erie and 
 Western Trans. Co. v. Dater, 91 111. 
 195; Merchants' Despatch Transn. 
 Co. v. Joesting, 89 111. 152; Dillard 
 v. L. and N. R. R. Co., 2 Lea (Tenn.), 
 288. 
 
 3 New Jersey Steam Nav'n Co. v. 
 Merchants' Bank, 6 How. 344, 378; 
 Judson v. Western R. R. Co., 6 Allen, 
 486; Hollister v. Nowlen, 19 Wend. 
 (N. Y.) 234; Cole v. Goodwin, ib. 
 251; Dorr v. New Jersey Steam Nav. 
 Co., 11 N. Y. 485; Steele v. Town- 
 send, 37 Ala. 247; Michigan Central 
 R. R. Co. ». Hale, 6 Mich. 243; Pitts- 
 burgh, C. & St. L. Ry. Co. v. Barrett, 
 36 O. St. 448. See Perry v. Thomp- 
 son, 98 Mass. 249; Baltimore & Ohio 
 R. R. Co. v. Brady, 32 Md. 333; Cam- 
 den and Amboy R. R. Co. v. Baldauf, 
 16 Pa. St. 67. 
 
 4 Oppenheimer p. United States 
 Exp. Co., 69 111. 62; Erie Ry. Co. v. 
 Wilcox, 84 111. 239. Compare Mag- 
 nin v. Dinsmore, 70 N. Y. 410; S. C, 
 62 N. Y. 35; S. C, 56 N. Y. 168; 
 Alabama Gt. Southern R. R. Co. v.
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 360. 
 
 back of a passenger ticket is not effectual to limit the value of 
 the baggage for which the carrier will be liable ; at least in the 
 absence of proof that the passenger's attention was called to 
 it ; and reading such a notice after he has entered on his jour- 
 ney does not affect his rights. 1 
 
 § 360. The liability of a common carrier, as such, begins as 
 soon as goods are delivered to it for transportation ; 
 nothing remaining to be done on the part of the rier's liabn- 
 shipper. Under such circumstances the carrier's lia- JSd^fases. 
 bility is not that of a warehouseman while the goods 
 are waiting in his depot before transportation. 2 The carrier's 
 liability, as such, continues until he has performed his duties as 
 carrier, which, in the case of railroad companies, are to carry 
 the goods to the point on the road to which the goods are 
 directed, 3 then to deliver them to the consignee if he is present, 
 or notify him of their arrival if he is absent and his address is 
 known ; and if the consignee is not ready to accept the goods, 
 to warehouse them in a proper warehouse. Thus, the liability 
 of the railroad company becomes that of a warehouseman as 
 soon as the consignee has had reasonable time and opportunity 
 to remove the goods. 4 In Massachusetts the liability of a rail- 
 
 Little, 71 Ala. 611 ; United States Exp. 
 Co. v. Backman, 28 O. St. 144; Bos- 
 cowitz v. Adams Exp. Co., 93 111. 
 523; Kansas City, St. Jo., etc., R. R. 
 Co. v. Simpson, 30 Kan. 645. 
 
 1 Rawson v. Pennsylvania R. R. 
 Co., 48 N. Y. 212; see Li m burger v. 
 Westcott, 49 Barb. 283; Sunderland 
 v. Westcott, 40 How. Pr. ( N. Y. ) 
 468; Brown v. Eastern R, R. Co., 11 
 Cush. 97; Malone v. Boston, etc., R. 
 R. Co., 12 Gray, 388. Compare Cam- 
 den and Amboy R. R. Co. v. Baldauf, 
 16 Pa. St. 67. 
 
 2 Grand Trunk M'f'g, etc., Co. v. 
 Ullman, 89 111. 244; Clark v. Needles, 
 25 Pa. St. 338; O'Neill v. N. Y. C. & 
 H. R. R. R. Co., 60 N. Y. 138; Pitts- 
 burgh, C. & St. L. Ry. Co. v. Barrett, 
 36 O. St. 448. See Grosvenor v. N. 
 Y. C. R. R. Co., 39 N. Y. 34; Baron 
 v. Eldredge, 100 Mass. 455; Judson 
 
 v. Western R. R. Co., 4 Allen, 520; 
 St. Louis, A. & T. H. R. R. Co. v. 
 Montgomery, 39 111. 335. 
 
 3 Railroad companies are not held 
 to make a personal delivery. South 
 & North Ala. R. R. Co. v. Woods, 66 
 Ala. 167; Norway Plains Co. v. Bos- 
 ton & M. R. R. Co., 1 Gray (Mass.), 
 263. Otherwise as to express com- 
 panies. American Un. Exp. Co. v. 
 Robinson, 72 Pa. St. 274. In the 
 absence of provision in the bill of 
 lading, the usage and custom at the 
 port of delivery will control the 
 mode of delivery of goods carried by 
 water. Richmond v. Union Steam- 
 boat Co., 87 N. Y. 240. As to a rail- 
 road company's duties respecting 
 the delivery of live stock carried by 
 it, see Covington Stockyards Co. v. 
 Keith, 139 U. S. 128. 
 
 4 Fenner v. Buffalo, etc., R. R. Co., 
 
 841
 
 § 360.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 road company as a common carrier is held to cease as soon as 
 the transportation is accomplished and the goods have been 
 stored by the railroad company, although the consignee may 
 have had no notice of their arrival, nor opportunity to remove 
 them. 1 
 
 Delivery of the goods to a person other than the consignee or 
 owner is a conversion, for which, as a general rule, the carrier 
 will be liable. 2 Where, however, the carrier is to deliver the 
 
 44 N. Y. 505; Roth i>. Buffalo, etc., 
 R. R. Co., 34 N. Y. 548 ; McKinney 
 v. Jewett, 90 N. Y. 267; Hedges v. 
 Hudson River R. R. Co., 49 N. Y. 
 223; Sprague v. New York Central 
 R. R. Co., 52 N. Y. 637; Pelton v. 
 Rensselaer, etc., R. R. Co., 54 N. Y. 
 214; Welsh v. Concord R. R. Co., 68 
 N. H. 206; Berry v. W. Va. & P. R. 
 Co., 44 W. Va. 538. Compare Buck- 
 ley v. Great Western Ry. Co., 18 
 Mich. 121; L. L. & G. R. R. Co. v. 
 Maris, 16 Kan. 333; Culbreth v. 
 Phila., W. & B. R. R. Co., 3 Houston 
 (Del.), 392; Hirshfield v. Central 
 Pac. R. R. Co., 56 Cal. 484; Jeffer- 
 sonville R. R. Co. v. Cleveland, 2 
 Bush (Ky.), 468; Louisville, C. & L. 
 R. R. Co. v. Mahan, 8 Bush (Ky.), 
 184; Graves v. Hartford, etc., Steam- 
 boat Co., 38 Conn. 143; Alabama & 
 Tennessee Rivers R. R. Co. v. Kidd, 
 35 Ala. 209; Mobile, etc., R. R. Co. 
 v. Prewitt, 46 Ala. 63; South & 
 North Ala. R R. Co. v. Woods, 
 66 Ala. 167; Butler v. Railroad 
 Co., 8 Lea (Tenn.), 32; Blumen- 
 thal v. Brainerd, 38 Vt. 402; Derosia 
 v. Winona, etc., R. R. Co., 18 Minn. 
 133; Pinney v. First Division St. P., 
 etc., R. R. Co., 19 Minn. 251. 
 
 1 Norway Plains Co. v. Boston & 
 M. R. R., 1 Gray (Mass.), 263; Rice 
 v. Boston & W. R. R. Co., 98 Mass. 
 212; Thomas v. Boston & P. R. R. 
 Co., 10 Met. (Mass.) 472; Rice v. 
 Hart, 118 Mass. 201; compare Ste- 
 vens v. Boston & M. R. R., 1 Gray 
 
 342 
 
 (Mass.), 277. In Illinois the rule is 
 the same as in Massachusetts. Chi- 
 cago & N. W. Ry. Co. v. Beusley, 69 
 111. 630; Cahn v. Michigan Central 
 R. R. Co., 71 111. 96; Rothschild v. 
 Michigan Central R. R. Co., 69 111. 
 164; Illinois Central R. R. Co. v. 
 Friend, 64 111. 303; Porter v. Chicago 
 & R. I. R. R. Co., 20 111. 407. See, 
 also, Bansemer v. Toledo, etc., R. R. 
 Co., 25 Ind. 434; Chicago & C. A. L. 
 R. R. Co. v. McCool, 26 Ind. 140; 
 Pittsburgh, C. & St. L. Ry. Co. v. 
 Nash, 43 Ind. 423; Francis v. Du- 
 buque, etc., R. R. Co., 25 Iowa, 69; 
 Moln o. C. & N. W. R. R. Co., 40 
 Iowa, 579; Southwestern R. R. Co. v. 
 Felder, 46 Ga. 433. 
 
 2 Forbes v. Boston and Lowell R. 
 R. Co., 133 Mass. 154; Winslow v. 
 Vermont, etc., R. R. Co., 42 Vt. 700; 
 Viner v. N. Y., etc., Steamship Co., 
 50 N. Y. 23; Price v. Oswego, etc., R. 
 R. Co., ib. 213; Scheuu. Erie R'y Co., 
 10 Hun, 498; Little Rock, etc., R'y 
 Co. v. Glidewell, 39 Ark. 487; Balto. 
 and Ohio R. R. Co. v. Pumphrey, 59 
 Md. 390. See Jellett v. St. Paul, etc., 
 R'y Co., 30 Minn. 265. Carrier is 
 liable for a delivery on a forged or- 
 der. American Merchants' Un. Exp. 
 Co. v. Milk, 73 111. 224; Southern Exp. 
 Co. v. Van Meter, 17 Fla. 783. When 
 the carrier knows the goods to be 
 the property of shipper, it is liable 
 to him for their value, when without 
 his knowledge it delivers them at the 
 place of shipment to a third person
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 361. 
 
 goods to a succeeding carrier for further transportation, it 
 remains liable as carrier until it has actually delivered them to 
 the next carrier ; and its liability does not become that of a 
 warehouseman simply because the next carrier fails for an un- 
 reasonable time to take the goods after notice and request to 
 do so. 1 
 
 § 361. The duty to deliver, and the duty to deliver in due 
 time, are distinct obligations. The time of deliver} 7 D j . 
 may be made a matter of express contract ; 2 but when transporta- 
 this is not so, a carrier must deliver within a reason- 
 able time, i. e., the time within which it can deliver, using all 
 reasonable exertion, and taking all reasonable precaution to 
 avoid delay. 3 To excuse a carrier for unusual delay in trans- 
 porting goods, the cause of dela} T must be something which the 
 law regards as beyond the carrier's control. 4 A strike of its 
 
 on the order of the consignee. 
 Southern Exp. Co. v. Dickson, 94 
 U. S. 549. 
 
 So a carrier instructed to deliver 
 only C. O. D. is liable to the shipper 
 for damages, if it violates the in- 
 struction. Tooker v. Gormer, 2 
 Hilt. (N. Y.) 71. See Rathbun v. 
 Citizens 1 Steamboat Co., 7(5 N. Y. 
 376. Misdirection of goods may re- 
 lieve carrier; see Southern Exp. Co. 
 v. Kaufman, 12 Heisk. (Tenn.) 161. 
 
 1 Railroad Co. v. Manufacturing 
 Co., 16 Wall. 319; Goold v. Chapin, 
 20 N. Y. 259; Irish v. Milwaukee, 
 etc., R'y Co., 19 Minn. 376; see Mills 
 ». Michigan Cent. R. R. Co., 45 N.Y. 
 622; Pratt v. Railway Co., 95 U. S. 
 43; compare Louisville, etc., R. R. 
 Co. v. Campbell, 7 Heisk. (Tenn.) 
 253: Van Lindley v. Richmond, etc., 
 R. R., 88 N. C. 547; Texas & Pac. 
 R'y Co. v. Clayton, 173 U. S. 348. 
 See, Tex. & Pac. R'y Co. v. Reise, 
 183 U. S. 621; Tex. & Pac. R'y Co. 
 v. Callender, 183 IT. S. 632; Morande 
 v. Tex. & Pac. R'y Co., 184 U. S. 
 173. 
 
 2 See Place v. Union Exp. Co., 2 
 Hilt. (X. Y.) 19. 
 
 3 Philadephia, W. and B. R. R. 
 Co. v. Lehman, 56 Md. 209; Wibert 
 ». New York and E. R. R. Co., 12 N. 
 Y. 245; Cobb v. Illinois Central R. R. 
 Co., 38 Iowa, 601; Rome R. R. Co. 
 v. Sullivan, 32 Ga. 400. Similar ob- 
 ligation exists towards passengers. 
 Weed v. Panama R. R. Co., 17 N. Y. 
 362. For measure of damages for 
 failure to deliver, see Balto. and 
 Ohio R. R. Co. v. Pumpbrey, 59 Md. 
 390. 
 
 4 See Tierney v. N. Y. C. and H. 
 R. R. R. Co., 76 N. Y. 305. But if 
 a railroad company knows of any 
 cause of delay on its lines beyond its 
 control, in order to free itself from 
 liability it must inform the sbipper 
 and stipulate against liability from 
 delay. Illinois Central R. R. Co. v. 
 Cobb, 54 111. 128; Same v. Same, ib. 
 143; Illinois Central R. R. Co. v. Ash- 
 mead, 58 111. 487; Cobb v. 111. Central 
 R. R. Co., 88 111. 394. 
 
 343
 
 § 361.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 locomotive engineers is not such an excuse, 1 nor an increased 
 charge by a connecting carrier. 2 But a carrier is not responsi- 
 ble for delay occurring without its fault, when there is no ex- 
 press agreement to transport within a specified time. 3 In the 
 absence of special contract and notice to the carrier of special 
 circumstances, the measure of damages for delay in the trans- 
 portation of merchandise is the difference between its value at its 
 destination at the time when it ought to have been delivered in 
 the ordinary course of transportation, and its value there at 
 the time when actually delivered. 4 The ordinary measure of 
 damages when goods are lost or injured is their value at the 
 place of destination, deducting freight, if unpaid. 5 
 
 i Blackstock v. N. Y. and Erie R. 
 R. Co., 20 N. Y. 48; Read v. St. 
 Louis, etc., R. R. Co., 60 Mo. 199; 
 compare Pittsburgh, etc., R. R. Co. v. 
 Hollowell, 65 Ind. 188; Pittsburgh, 
 Ft. W. and C. R. R. Co. v. Hazen, 84 
 111. 36. 
 
 For the liability of a telegraph com- 
 pany for delay in transmitting a mes- 
 sage, see Logan v. Western Un. Tel. 
 Co., 84 111. 468; Mackey v. Same, 16 
 Nev. 222. 
 
 2 Condict v. Grand Trunk R. Co., 
 54 N. Y. 500. 
 
 3 Wibert ». N. Y. and Erie R. R. 
 Co., 12 N. Y. 245; see Pittsburgh, 
 Ft. W. and C. R. R. Co. v. Hazen, 
 supra. For damages arising from a 
 mere delay occasioned by a tempo- 
 rary excess of business, a carrier is 
 not responsible, if he is not in fault 
 regarding the equipment of his road 
 and facilities for doing the ordinary 
 business. Galena and C. N. R. R. 
 Co. v. Rae, 18 111. 488; Michigan 
 Central R. R. Co. v. Burrows, 33 
 Mich. 6; Thayer v. Burchard, 99 
 Mass. 508. But temporary excess of 
 business is no excuse when a carrier 
 has contracted to deliver within a 
 specified time. Deming v. Grand 
 Trunk R. R. Co., 48 N. H. 455. In 
 
 344 
 
 regard to the effect of time tables, 
 see Gordon v. Mauchaster, etc., R. R., 
 52 N. H. 596; Le Blanche v. London, 
 etc., Railway Co., 24 W. R. 808. 
 
 4 Ward v. New York Central R. R. 
 Co., 47 N. Y. 29; Cutting v. Grand 
 Trunk Ry. Co., 13 Allen (Mass.), 
 381; lngledew v. Northern Railroad, 
 7 Gray (Mass.), 86; Galena and C. N. 
 R. R. Co. v. Rae, 18 111. 488; Sher- 
 man v. Hudson River R. R. Co., 64 
 N. Y. 254; see Devereux v. Buckley, 
 34 O. St. 16; Illinois Central R. R. 
 C. v. Cobb, 72 111. 148. Compare 
 Priestley v. Northern Indiana, etc., 
 R. R. Co., 26 111. 205. See as to per- 
 ishable goods, Place v. Union Exp. 
 Co., 2 Hilt. (N. Y.), 19; American 
 Exp. Co. v. Smith, 33 O. St. 511; 
 Michigan Central R. R. Co. v. Bur- 
 rows, 33 Mich. 6. 
 
 5 Northern Trans. Co. v. McClary, 
 66 111. 23:5; Ringgold v. Haven, 1 Cal. 
 108; Taylor v. Collier, 26 Ga. 122; 
 Michigan Southern, etc., R. R. Co. v. 
 Caster, 13 Ind. 164; McGregors. Kil- 
 gore, 6 Ohio, 359; Robinsons. Mer- 
 chants' Dispatch Trans. Co., 45 Iowa, 
 470. Compare Winne v. Illinois Cen- 
 tral R. R. Co., 31 Iowa, 583; Breed 
 v. Mitchell, 48 Ga. 533.
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 363. 
 
 § 362. Prima facie a railroad company or other carrier is 
 responsible only for the negligence and misfeasance . , 
 of its own servants, and consequently is liable only liability for 
 
 „ . . . . . , , losses on 
 
 for losses or injuries occurring on its own road, or on connecting 
 a road which it leases or otherwise controls. 1 But it mes " 
 may contract to transport passengers or goods to a point be- 
 yond its terminus, 2 and having made such a contract will be 
 liable as carrier for the whole trip, whether the loss occur on 
 its own or on a connecting line. 3 
 
 § 363. So far the authorities may be regarded as unanimous. 
 But in regard to the evidence from which a jury may be allowed 
 to infer a contract on the part of the carrier to transport be- 
 yond its terminus, there is a difference of judicial opinion. 4 In 
 England and a few of the states, it is held that from the mere 
 receipt of goods directed to a point beyond its own line, a con- 
 tract to carry the whole distance may be inferred. 5 This is not, 
 
 1 Pennsylvania R. R. Co. v. Jones, 
 155 U. S. 333. Cf. Nashville, etc., 
 R. R. Co. v. Carroll, 6 Heisk. (Tenn.) 
 347; Mallory v. Tioga R. R. Co., 39 
 Barb. 488; De Mott v. Laraway, 14 
 Wend. 225; Macon, etc., R. R. Co. v. 
 Mayes, 49 Ga. 355; Illinois Central 
 R. R. Co. t>. Kanouse, 39 111. 272, and 
 §170. 
 
 2 This proposition is universally 
 accepted in the United States. Rail- 
 road Co. ». Pratt, 22 Wall. 123; 
 Wheeler v. San Francisco, etc., R. R. 
 Co., 31 Cal. 46; Peet v. Chicago and 
 N. W. Ry. Co., 19 Wis. 118; Kyle v. 
 Laurens R. R. Co., 10 Rich. L. (S. C.) 
 3S2; Baltimore, etc., Steamboat Co. 
 v. Brown, 54 Pa. St. 77; St. Louis 
 and I. M. R. R. Co. v. Larned, 103 
 111. 293. Unless perhaps in Connecti- 
 cut. See Hood v. X. Y. and N. H. R. 
 R. Co., 22 Conn. 502. 
 
 3 Railway Co. v. McCarthy, 90 U. 
 S. 258; Railroad Co. v. Androscoggin, 
 Mills, 22 Wall. 594. Cases in the 
 following notes. Compare Wilson 
 v. Harry, 32 Pa. St. 270; Germain 
 Fruit Co. v. Cal. So. R. R. Co., 133 
 
 Cal. 426. A railroad company is lia- 
 ble as a common carrier to anotber 
 railroad company for a car of the lat- 
 ter, and the contents hauled by the 
 former over its road. Peoria and P. 
 V. Ry. Co. v. Chicago, etc., Ry. Co., 
 109 111. 135; Same v. United States 
 Rolling S'k Co., 136 111. 643. 
 
 4 When a carrier receives express 
 goods, the question whether he con- 
 tracts to carry them to their destina- 
 tion, or only to deliver safely to the 
 next carrier, is one of fact for the 
 jury, dependent on the circumstan- 
 ces. Phila. and Reading R. R. Co. v. 
 Ramsey, 89 Pa. St. 474. Compare 
 Penn. R. R. Co. v. Berry, 68 Pa. St. 
 272; see, also, Talcott v. Wabash R. 
 R. Co., 159 N. Y. 461; Kimball v. N. 
 Y. C. & H. R. R. Co., 162 N. Y. 84; 
 Lissard v. B. & M. R. R. Co., 69 N. 
 H. 648. 
 
 5 Muschamp v. Lancaster Ry. Co., 
 8 M. & W. 421; Webber v. Great 
 Western Ry. Co., 3 H. & C. 771; Wa- 
 bash, St. L. & P. Ry. Co. v. Jagger- 
 man, 115 111. 407; Mobile and Girard 
 R. R. Co. v. Copeland, 63 Ala. 219; 
 
 345
 
 § 363.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 however, the prevailing doctrine in this country, where the rule 
 generally followed is as stated by Justice Field, delivering the 
 opinion of the Supreme Court of the United States, in Myrick 
 v. Michigan Central R. II. Co. 1 
 
 " A railroad company is a carrier of goods for the public, 
 and, as such, is bound to carry safely whatever goods are in- 
 trusted to it for transportation, within the course of its busi- 
 ness, to the end of its route, and there deposit them in a suit- 
 able place for their owners or consignees. If the road of the 
 company connects with other roads, and goods are received for 
 transportation beyond the termination of its own line, there is 
 superadded to its duty as a common carrier that of a forwarder 
 by the connecting line ; that is, to deliver safely the goods to 
 such line — the next carrier on the route beyond. This forward- 
 ing duty arises from the obligation implied in taking the goods 
 for the point beyond its own line. The common law imposes 
 no greater duty than this. If more is expected from the com- 
 pany receiving the shipment, there must be a special agreement 
 for it. This is the doctrine of this court, though a different 
 rule of liability is adopted in England and in some of the 
 states. . . . The general doctrine, then, as to transportation 
 by connecting lines, approved b} T this court, and also by a ma- 
 jority of state courts, amounts to this : that each road confining 
 itself to its common law liability is only bound, in the absence 
 of a special contract, to safely carry over its own route and 
 safely to deliver to the next connecting carrier, but that any 
 one of the companies may agree that over the whole route its 
 liability shall extend. In the absence of a special agreement to 
 that effect such liability will not attach, and the agreement will 
 not be inferred from doubtful expressions or loose language, but 
 
 Louisville, etc., R. Co. v. Weaver, 9 
 Lea(Tenn.), 38. See, also, East Tenn. 
 and Va. R. R. Co. v. Rogers, 6 Heisk. 
 (Tenn.) 143; Western and Atlantic 
 R. R. Co. v. McElwee, ib. 208; Mosher 
 o. Southern Exp. Co., 38 Ga. 37; 
 Southern Exp. Co. v. Sliea, 38 Ga. 
 519; Cohen v. Southern Exp. Co., 45 
 Ga. 148. If goods are delivered to a 
 carrier to be carried to a place be- 
 yond its terminus, and no receipt is 
 
 346 
 
 taken, but freight is paid for the 
 whole distance, the carrier will be 
 liable for a loss occurring beyond its 
 own line. Adams Exp. Co. v. Wilson, 
 81 111. 339. A carrier checking bag- 
 gage beyond his line remains liable 
 as insurer if he forwards baggage by 
 a route other than that by which he 
 has agreed. Isaacson v. N. Y. C. <fe 
 H. R. R. R. Co., 94 N. Y. 278. 
 i 107 U. S. 102.
 
 PAKT IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 363. 
 
 only from clear and satisfactory evidence." * The same general 
 doctrine is also clearly stated by Judge Rapallo, of the New- 
 York Court of Appeals, in Root v. Great Western R. R. Co. 2 
 " The receipt of goods marked for a place beyond the terminus 
 of the carrier's route does not import a contract to carry them 
 to their final destination ; but, in the absence of a special con- 
 tract, and of a partnership between the connecting lines, the 
 carrier is only responsible to the extent of his own route, and 
 for the safe delivery to the next succeeding carrier ; in such a 
 case the carrier is merely a forwarder from the terminus of his 
 own line, and where goods thus marked are delivered to a 
 carrier, unaccompanied by any particular directions, except such 
 as might be inferred from the marks themselves, the carrier is 
 only bound at the terminus of his own line, to deliver them 
 according to the established usage of the business in which he 
 is engaged." 3 On the other hand, from the bill of lading taken 
 in connection with the circumstances of the case, a court may 
 allow a jury to find a contract for through transportation, 
 which will render liable the carrier who received the goods, no 
 matter w r here the loss occurs. 4 
 
 1 Myrick v. Michigan Central R. R. 
 Co., 107 U. S. 102, 106. 
 
 2 45 N. Y. 524, 530. 
 
 8 Accord Van Santvoord v. St. 
 John, 6 Hill, 158; Railroad Co. v. 
 Pratt, 22 Wall. 123; Jenneson v. 
 Railroad Co., 4 Am. Law Reg. 234 
 and note; Rome R. R. Co. v. Sulli- 
 van, 25 Ga. 228; Piedmont M'f'g Co. 
 v. Columbia, etc., R. R. Co., 19 S. C. 
 353; Brintnall v. Saratoga, etc., R. R. 
 Co., 32 Vt. 665; Lawrence v. Winona, 
 etc., R. R. Co., 15 Minn. 390; Irish v. 
 Milwaukee, etc., R. R. Co., 19 Minn. 
 376. See Mullarkey ». P. W. and B. 
 R. R. Co., 9 Phila. 114 (with which 
 last case compare St. Louis and I. M. 
 R. R. Co. v. Larned, 103 111. 293); 
 Skinner v. Hall, 60 Me. 477; Hadd v. 
 U. S. and Can. Exp. Co., 52 Vt. 335; 
 Clyde v. Hubbard, 88 Pa. St. 358; 
 Penn. R. R. Co. v. Schwarzenberger, 
 45 Pa. St. 208 ; Burroughs v. Nor- 
 wich, etc., R. R. Co., 100 Mass. 26; 
 
 Mitting v. Conn. River R. R. Co., 1 
 Gray, 502; Montgomery, etc., R. R. 
 Co. v. Moore, 51 Ala. 394; Crawford 
 v. Southern R. R. Ass'n, 51 Miss. 
 222; Gray v. Jackson, 51 N. H. 9; 
 Darling v. Boston and Worcester R. 
 R. Co., 11 Allen, 295; Washburn, etc., 
 M'f'g Co. v. Providence, etc., R. R. 
 Co., 113 Mass. 490. Compare Newell 
 v. Smith, 49 Vt. 255 ; Goodrich v. 
 Thompson, 44 N. Y. 324. 
 
 4 See Railroad Co. v. Pratt, 22 
 Wall. 123; Clyde v. Hubbard, 88 Pa. 
 St. 358; Peet v. Chicago and N. W. 
 Ry. Co., 19 Wis. 118; Kyle v. Lau- 
 rens R. R. Co., 10 Rich. L. (S. C.) 
 3S2. Compare Insurance Co. v. Rail- 
 road Co., 104 IT. S. 146; Philadelphia 
 and R. R. R. Co. v. Ramsey, 89 Pa. 
 St. 474; Washburn M'f'g Co. v. Prov- 
 idence, etc., R. R. Co., 113 Mass. 490; 
 Hill M'f'g Co. v. Boston and L. R. R. 
 Co., 104 Mass. 122; Cincinnati H. 
 and D. R. R. Co. v. Pontius, 19 O. St. 
 347
 
 § 364.] THE LAW OF PRIVATE COUP ORATION 8. [CHAP. VII. 
 
 § 364. And it has been also held, though with some adverse 
 judicial opinion, that where several carriers owning connecting 
 lines make general agreements, under which they act in con- 
 cert and as each other's agents in receiving and carrying 
 freight and passengers, any one of them over whose route have 
 been transported the goods which are lost or damaged, may be 
 held liable ; or they may all be sued jointly. 1 
 
 221; Clyde v. Hubbard, 88 Pa. St. 
 358; Baltimore and P. Steamboat Co. 
 v. Brown, 54 Pa. St. 77; Pennsylvania 
 R. R. Co. v. Berry, 68 Pa. St. 272. 
 But compare Converse v. Norwicb, 
 etc., Trans. Co., 33 Conn. 166; El- 
 more ». Naugatuck R. R. Co., 23 
 Conn. 457; Lawrence v. New York, 
 etc., R. R. Co., 36 Conn. 63. The 
 way-bill also is admissible as evi- 
 dence of a through contract. Rail- 
 road Co. v. Androscoggin Mills, 22 
 Wall. 594. The doctrine of a num- 
 ber of cases is that the acceptance 
 of goods for carriage marked for a 
 point beyond the terminus of the 
 carrier's line, is prima facie evidence 
 of a contract for through transporta- 
 tion; but the carrier may limit its 
 responsibility to its own line; e. gr., 
 by a clause in the receipt given for 
 the goods, although not signed by 
 the shipper. Erie Ry. Co. b. Wilcox, 
 84 111. 239; Illinois Central R. R. Co. 
 v. Frankenberg, 54 111. 88; Illinois 
 Central R. R. Co. v. Johnson, 34 111. 
 389; Field v. Chicago and R. I. R. R. 
 Co., 71 111. 458; Adams Exp. Co. v. 
 Wilsou, 81 111. 339; Mulligan v. Illi- 
 nois Central Ry. Co., 36 Iowa, 181; 
 Angle u. Mississippi, etc., R. R. Co., 
 9 Iowa, 487. Compare Merchants' 
 Despatch Trans. Co. v. Moore, 88 111. 
 136; Berg v. Atchison, etc., R. R. 
 Co., 30 Kan. 561. 
 
 1 Barter v. Wheeler, 49 N. H. 9 ; 
 Wyman v. Chicago and Alton R. R. 
 Co., 4 Mo. App. 35 ; Hart v. Rensse- 
 laer, etc., R. R. Co., 8 N. Y. 37 ; 
 Monell v. Northern Central R. R. Co., 
 
 348 
 
 67 Barb. 531. See Quimby v. Van- 
 derbilt, 17 N. Y. 306 ; Nashua Lock 
 Co. v. Worcester, etc., R. R. Co., 48 
 N. H. 339 (contains review of author- 
 ities by Judge Perley); Cincinnati, 
 H. and D. R. R. Co. v. Spratt,2 Duv. 
 ( Ky. ) 4. But compare Insurance Co. 
 v. Railroad Co., 104 U. S. 146; Milnor 
 v. N. Y. and N. H. R. R. Co., 53 N. 
 Y. 363; Ricketts v. Bait, and O. R. R. 
 Co., 59 N. Y. 637 ; Shiff v. N. Y. C. 
 and H. R. R. R. Co., 16 Hun, 278 ; 
 Darling v. Boston and Worcester R. 
 R. Co., 11 Alleu, 295; Railroad Co. v. 
 Brumley, 5 Lea (Tenn.), 401; Gass 
 v. New York, etc., R. R. Co., 99 
 Mass. 220 ; Ellsworth v. Tartt, 26 
 Ala. 733 ; Coates v. United States 
 Exp. Co., 45 Mo. 238 ; Hot Springs 
 R. R. v. Trippe, 42 Ark. 4G5. Where 
 the combination extends through sev- 
 eral states, the law of the state where 
 the loss occurred is applicable. Bar- 
 ter v. Wheeler, 49 N. H. 9. Com- 
 pare Hale v. N. J. Steam Nav. Co., 
 15 Conn. 539. The law of the state 
 where the contract for carriage be- 
 yond the state is made must control 
 as to the nature, interpretation, and 
 effect of the contract. Michigan 
 Central R. R. Co. v. Boyd, 91 111. 
 268 ; McDaniel v. Chicago and N. W. 
 R'y Co., 24 Iowa, 412. But see Cur- 
 tis v. Delaware, etc., R. R. Co., 74 
 N. Y. 116. It is only where the con- 
 tract is for through transportation 
 that the succeeding carriers will be 
 entitled to the benefits and exemp- 
 tions of the contract between the 
 shipper and the first carrier. Mer-
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. [§ 365. 
 
 § 365. A railroad or other corporation owes special duties to 
 its employes ; and if these duties are not fulfilled, Cor ora ^ 
 and injury occurs to an employe in consequence, the tion'siia- 
 
 • -,i i. -i i i- ii ■ j • m bilityfor 
 
 corporation will ordinarily be liable m damages, lo injuries to 
 render a corporation liable to one of its servants for emp oy<5s " 
 a personal injury sustained by the latter, the injury must have 
 resulted from a breach of one of the following duties which the 
 corporation owes its servants : first, to use reasonable care in 
 selecting co-servants and to employ a reasonably sufficient num- 
 ber of them to make the employment safe ;* secondly, to use 
 reasonable diligence and care in supplying the servants with 
 safe machinery and inspecting the same ; a thirdly, to apprise 
 
 chants' Despatch Trans'n Co. v. 
 Bolles, 80 111. 473 ; Camden and Am- 
 boy R. R. Co. 0. Forsyth, 61 Pa. St. 
 81. See Halliday v. St. Louis, etc., 
 R'y Co., 74 Mo. 159 ; Manhattan Oil 
 Co. v. Camden aud Amboy R. R. Co., 
 54 N. Y. 197 ; Whitworth v. Erie Ry. 
 Co.. 87 N. Y. 413 ; ^Etna Ins. Co. v. 
 Wheeler, 5 Lans. (N. Y.) 480 ; Mag- 
 bee v. Camden, etc., R. R. Co., 45 N. 
 Y. 514 ; Railroad Co. v. Androscog- 
 gin Mills, 22 Wall. 594. Compare 
 Taylor v. Little Rock, etc., R. R. 
 Co., 39 Ark. 148 ; St. Louis Ry. Co. 
 v. Weakly, 50 Ark. 397. The pre- 
 sumption is that injury to baggage 
 "checked through" occurs while it 
 is in the custody of the last carrier. 
 Moore v. N. Y. N. H. & H. R. R. Co., 
 173 Mass. 335. 
 
 1 Wabash Ry. Co. v. McDaniels, 
 107 U. S. 454; Laning v. X. Y. Cent. 
 R. R. Co., 49 N. Y. 521; Chicago 
 and Alton R. R. Co. v. Sullivan, 63 
 111. 293 Harper v. Indianapolis, etc., 
 R. R. Co., 47 Mo. 567; Besel v. N. Y. 
 C. and H. R. R. R. Co., 70 N. Y. 171, 
 173; Booth v. Boston and Albany R. 
 R. Co., 73 N. Y. 38; Huntington, 
 etc., R. R. Co. v. Decker, 82 Pa. St. 
 119; see Atchison, etc., R. R. Co. v. 
 Moore, 29 Kans. 632 ; Kansas Pac. Ry. 
 Co. v. Peavey, ib. 169. 
 
 2 Hough v. Railway Co., 100 U. S. 
 213; Washington, etc., R. R. Co. v. 
 McDade, 135 U. S. 554; Railroad Co. 
 v. Babcock, 154 U. S. 190; Texas & 
 P. R. Co. v. Archibald, 170 U. S. 665; 
 Patton v. T. & P. R. Co., 179 U. S. 
 658; Keegan v. Western R. R. Co., 
 8 N. Y. 175; Vosburgh v. L. S., etc., 
 R. Co., 94 N. Y. 374; Mullanu. Phila- 
 delphia, etc., S. S. Co., 78 Pa. St. 25; 
 Noyes v. Smith, 28 Vt. 59. Compare 
 Louisville and Nashville R. R. Co. v. 
 Orr, 84 Ind. 50; Wonder v. Balto. 
 and Ohio R. R. Co., 32 Md. 411; Mo- 
 bile and Ohio R. R. v. Thomas, 42 
 Ala. 673; Chicago and N. W. R. R. 
 Co. v. Ward, 61 111. 130; Atchison, 
 etc., R. R. Co. v. Holt, 29 Kans. 149; 
 Fay v. Minneapolis, etc., R'y Co., 30 
 Minn. 231 ; Lasure v. Graniteville 
 M'f g Co., 18 S. C. 275; McDonald v. 
 N. & W. R. Co., 95 Va. 98. See In- 
 ternational, etc., R. R. Co. v. Kindred, 
 57 Tex. 491; Missouri Pac. R. R. Co. 
 v. Lyde, ib. 505; Vosburgh v. Lake 
 Shore and Mich. So. R. Co., 94 N. Y. 
 374. Although a railroad company 
 employ competent men to inspect 
 its machinery, it will be liable for 
 their negligent performance of their 
 duty. Kirkpatiick v. N. Y. C. and 
 H. R. R. R. Co., 79 N. Y. 240; Ford 
 v. Fitchburg R. R. Co., 110 Mass. 240; 
 
 349
 
 § 365.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VH. 
 
 the servants of latent dangers connected with, their employ- 
 ment, or concealed defects in the machinery used by them, 
 when the corporation knows or is affected with notice of such 
 dangers or defects; 1 fourthly, to protect the servant against 
 the negligence or incompetence of those who as to the servants 
 represent the corporation ; i. e., superior agents who have au- 
 thority over them; 2 and, fifthly, to protect the servant from 
 the negligent acts of other persons employed by the corporation 
 in an employment different and distinct from that of the injured 
 servant. 3 
 
 In Flike v. Boston and Albany R. R. Co., giving the opinion 
 of the New York Court of Appeals, Chief Judge Church said : 
 " The true rule, I apprehend, is to hold the corporation liable 
 for negligence or want of proper care in respect to such acts 
 and duties as it is required to perforin and discharge as master 
 or principal, without regard to the rank or title of the agent 
 intrusted with their performance. As to such acts the agent 
 occupies the place of the corporation, and the latter should be 
 deemed present and consequently liable for the manner in which 
 they are performed." 4 And these acts and duties which the 
 
 Drymala v. Thompson, 26 Minn. 40. 
 Compare Murphy v. Boston and A. 
 R. R. Co., 88 N. Y. 146; Bailey v. 
 Rome, etc., R. R. Co., 139 N. Y. 302. 
 If the employe continues to use ma- 
 chinery which he knows to be defec- 
 tive, and does not notify the corpo- 
 ration, he is guilty of contributory 
 negligence. Washington, etc., R. R. 
 Co. v. McDade, 135 U. S. 554. 
 
 1 Keegan v. Western R. R. Co., 8 
 N. Y. 175; Williams v. Clough, 3 H. 
 & N. 258; Paulmier v. Erie R. R. Co., 
 34 N. J. L. 151; Malone v. Hawley, 46 
 Cal. 409 ; Ryan v. Fowler, 24 N. Y. 
 410. See Baxter v. Roberts, 44 Cal. 
 187. Compare Wonder v. Bait, and 
 Ohio R. R. Co., 32 Md. 411. 
 
 2 Hough v. Railway Co., 100 U. S. 
 213; Little Miami R. R. Co. v. Ste- 
 vens, 20 Ohio, 415; Hoosier Stone 
 Co. v. McCain, 133 Ind. 231; see 
 Booth o. Boston, etc., R. R. Co., 73 
 
 350 
 
 N. Y. 38; Besel v. N. Y. C, etc., R. 
 R. Co., 70 N. Y. 171, 173; Northern 
 Pac. R. R. v. Peterson, 162 U. S. 346. 
 Cf. Brabbits v. Chic, etc., Ry. Co., 
 38 Wis. 289; Bunnell v. St. Paul, etc., 
 Ry. Co., 29 Minn. 305. 
 
 3 Nashville and C. R. R. Co. v. Car- 
 roll, 6 Heisk. (Term.) 347; Chicago, 
 B. and Q. R. R. Co. v. Gregory, 58 111. 
 272; Ryan v. Chicago, etc., Ry. Co., 
 60 111.171; Toledo, W. and W. Ry. 
 Co. v. Moore, 77 111. 217; Anderson 
 Brick Co. v. Sobkowick, 148 111. 573; 
 Lewis v. St. Louis, etc., R. Co., 59 
 Mo. 495; Baird v. Pettit, 70 Pa. St. 
 477; Cooper v. Mullins, 30 Ga. 146. 
 See Atchison, etc., R. R. Co. v. 
 Moore, 29 Kans. 632; Chicago and N. 
 W. Ry. Co. v. Morauda, 93 111. 302; 
 Dobbin v. Richmond, etc., R. R. Co., 
 81 N. C. 446. Compare Tunney v. 
 Midland Ry. Co., L. R. 1 C. P. 291. 
 
 * 53 N. Y. 549, 553.
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 366. 
 
 corporation as master is bound to perform for the safety and 
 protection of employes cannot be delegated so as to exonerate 
 it from liability to the employes for omissions in the discharge 
 thereof. 1 This seems the true principle, though many author- 
 ities do not hold to it. 2 
 
 § 366. The corporation will not be liable unless the servant's 
 injury arises from a breach of one of these obligations. 3 All 
 other risks connected with his employment, as between himself 
 and the corporation, the servant is held to assume ; as, for 
 instance, the negligence of co-servants who have been properly 
 selected, and the ordinary risks connected with the use of dan- 
 gerous machinery. 4 If, however, negligence imputable to the 
 
 1 Fuller v. Jewett, 80 N. Y. 46; 
 Northern Pac. R. R. Co. v. Herbert, 
 116 U. S. 642; see, Story v. Concord 
 & M. R. R. Co., 70 N. H. 364. A con- 
 tract by a railroad company with the 
 next of kin of a person about to enter 
 its employment, by which, in con- 
 sideration of such employment, the 
 next of kin agrees to release the rail- 
 road company for all liability for 
 damages that might occur to such 
 person by reason of the company's 
 negligence during the employment, 
 is contrary to public policy and void. 
 Tarbell, Admr., v. Rutland R. R. Co., 
 73 Vt. 347. 
 
 2 Some decisions hold that when 
 one employe is placed under the di- 
 rection of another, the two are not 
 co-employes, and the corporation is 
 liable to the inferior employe for in- 
 juries resulting from the negligence 
 of the superior employe. Thus, a 
 railroad company has been held lia- 
 ble to an engineer or a brake man for 
 injuries caused by the negligence of 
 the conductor of the same train. 
 Chicago and M. R. R. Co. v. Ross, 
 112 U. S. 377 (Justices Bradley, Mat- 
 thews, Gray, and Blatchford dissent- 
 ing); Cleveland, C. and C. R. R. Co. 
 V. Keavy, 3 O. St. 201; Little Miami 
 R. R. Co. v. Stevens, 20 Ohio, 415. 
 
 See Pittsburgh, Ft. W. and C. Ry. Co. 
 v. Lewis, 33 O. St. 196; Jackson v. N. 
 & W. R. R. Co., 43 W. Va. 380. Con- 
 tra, Lawler v. Androscoggin R. R. 
 Co., 62 Me. 463; O'Connell v. Balti- 
 more and O. R. R. Co., 20 Md. 212; 
 Shanck v. Northern Central Ry. Co., 
 25 Md. 462; and Chicago and M. R. 
 R. Co. v. Ross, 112 IT. S. 377, was 
 overruled in Baltimore and O. R. R. 
 Co. v. Baugh, 149 U. S. 368, which 
 holds an engineer and fireman of a 
 locomotive to be co-employes within 
 the rule. Ace. N. E. R. R. Co. v. 
 Conroy, 175 U. S. 323; Welsh v. P. R. 
 R. Co., 192 Pa. St. 69. A track layer 
 and an engineer are fellow servants. 
 Benignia v. P. R. R. Co., 197 Pa. St. 
 384. Inspectors and brakemen are 
 not fellow servants. Eaton v. N. Y. 
 C. & H. R. R. Co., 163 N. Y. 391. 
 
 3 Henry v. Lake Shore, etc., Ry. 
 Co., 49 Mich. 495. Compare Kansas 
 Pac. Ry. Co. v. Peavy, 29 Kans. 169. 
 
 * Gibson v. Erie Ry. Co., 63 N. Y. 
 449; Coon t\ Syracuse, etc., R. R. 
 Co., 5 N. Y. 492; Randall v. Balti- 
 more and O. R. R. Co., 109 U. S. 478; 
 Morse v. Minneapolis, etc., Ry. Co., 
 30 Minn. 465; Wood v. New Bedford 
 Coal Co., 121 Mass. 252; Kelley v. 
 Norcross, ib. 508; Ryan v. Cumber- 
 land Valley R. R. Co., 23 Pa. St. 384; 
 351
 
 § 3G8.J THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Liability of 
 corporation 
 where it 
 owes no 
 special 
 duty. 
 
 corporation is the cause of the servant's injury, the carelessness 
 of a co-servant in the same matter will be no defence. 1 
 
 § 367. Hitherto we have been considering the liability of 
 corporations for negligence or misfeasance of their 
 employes, which causes the breach of some special 
 duty owing by the corporation. To render a corpo- 
 ration liable for the negligence of its employes, how- 
 ever, it is not essential that the duty, a breach of 
 which is caused by the negligence, should be a special duty 
 arising from the contract. Enough, if it be the general duty 
 owed by a corporation to all the world : sic utere tuo ut alienum 
 non Icedas. A corporation will be liable for all injuries and 
 losses occasioned to any one by the negligence of its employes 
 in any matter connected with their employment. 2 
 
 § 368. For instance, it is the duty of a railroad corporation, 
 
 for a breach of which it will be responsible, to warn 
 
 companies persons on a highway crossing its road, by proper and 
 
 timely signals, of the approach of trains. 3 And if a 
 
 flagman has been uniformly stationed by the company at a 
 
 street crossing, his neglect to give warnings will be imputable 
 
 Holden v. Fitc'nburg R. R. Co., 129 
 Mass. 268; Farwell v. Boston and N. 
 R. R. Co., 4 Met. (Mass.) 49; How- 
 land e. Milwaukee, etc., Ry. Co., 54 
 Wis. 226; Osbourne v. Knox, etc., R. 
 R. Co., 68 Me. 49; Blake v. Maine 
 Central R. R. Co., 70 Me. 60; Pitts- 
 burgh, Ft. W. and C. Ry. Co. t>. 
 Devinney, 17 Oh. St. 197; N. & W. 
 R. R. Co. v. Houchins, 95 Va. 398; 
 McDonald v. N. & W. R. R. Co., 95 
 Va. 98. See Haugh v. Railway Co., 
 100 U. S. 213; Rounds v. Carter, 
 91 Me. 535. Also, Wharton on Negli- 
 gence, 2d ed. §§ 224 et seq. A day 
 laborer at work on the road under 
 direction of section boss, is a fellow 
 servant with conductor and engineer 
 of a passenger train. Railroad Co. 
 v. Ilambly, 154 U. S. 349. See N. E. 
 R. R. Co. v. Couroy, 175 U. S. 323. 
 
 1 Grand Trunk R. Co. v. Cumniings, 
 106 U. S. 700; Keegan v. Western R. 
 352 
 
 R. Co., 8 N". Y. 175; Booth v. Boston, 
 etc., R. R. Co., 73 N. Y. 38; Stetler 
 v. Chicago, etc., Ry. Co., 46 Wis. 497; 
 S. C, 49 Wis. 609. 
 
 2 See Denver S. P. and P. R. R. Co. 
 «. Conway, 8 Col. 1. 
 
 s Dyer v. Erie Ry. Co., 71 N. Y. 228. 
 But compare Vandewater v. New 
 York, etc., R. R. Co., 135 N. Y. 583. 
 It is not enough to absolve the com- 
 pany in all cases that the signals 
 required by statute have been given; 
 other precautions may be necessary 
 under the circumstances. lb. Com- 
 pare Chicago, B. and Q. R. R. Co. v. 
 Stumps, 69 111. 409; Continental Im- 
 provement Co. v. Stead, 95 U. S. 161 ; 
 Railroad Co. v. Houston, ib. 697. But 
 a failure to give the warning required 
 by statute constitutes negligence. 
 Central R. R., etc., Co. v. Litcher, 69 
 Ala. 106.
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 369 - 
 
 to the company. 1 Likewise, a railroad company is bound to 
 use the most approved methods to prevent the escape of sparks 
 from its locomotives; 2 and the fact that sparks escaped and set 
 fire to property, has been held prima facie evidence of its 
 negligence. 3 But the weight of authority, when no statute 
 affects the case, places the burden on the plaintiff to show neg- 
 ligence on the part of the railroad company. 4 
 
 § 369. In the absence of statute, a railroad company is not 
 bound to fence its road to keep off cattle ; still, if cattle get on 
 the track and the company's servants negligently run them 
 down, the company will be liable, provided the accident could 
 
 1 Doland v. Del. and Hud. Canal Co., 
 71 N. Y. 285. Compare as to duties 
 of railroad company to give warning 
 of its approaching trains, Parsons v. 
 N. Y. Central, etc., R. R. Co., 113 
 N. Y. 355. 
 
 2 Wiley u. West Jersey R. R. Co., 
 44 N. J. L. 247; St. Louis, A. & T. H. 
 R. R. Co. v. Gilham, 39 111. 455; Illi- 
 nois Central R. R. Co. v. McClelland, 
 42 111. 355; Pittsburgh, C. & St. L. R. 
 R. Co. u. Nelson, 51 Ind. 150. See 
 Hoff v. West Jersey R. R. Co., 45 N. 
 J. L. 400; West Jersey R. R. Co. v. 
 Abbott, 60 X. J. L. 150. 
 
 3 Simpson v. Railroad Co., 5 Lea 
 (Teun. ), 456; International and G. N. 
 Ry. Co. v. Towusend, 61 Tex. 660; 
 Burke v. Louisville and X. R. R. Co., 
 7 Heisk. (Tenn.) 451; Coates v. Mis- 
 souri, K. and T. Ry. Co., 61 Mo. 38. 
 See Spaulding v. Chicago and N. W. 
 Ry. Co., 30 Wis. 110; Farrington v. 
 Rutland R. R. Co., 72 Vt. 24. But 
 if it appears that the railroad com- 
 pany was not negligent, it will not be 
 liable. Burroughs v. Housatonic R. 
 R. Co., 15 Conn. 124; Hinds v. Barton ? 
 25 X. Y. 544; Frankford, etc., Turn- 
 pike Co. v. Phila., etc., R. R. Co., 54 
 Pa. St. 345; Vaughn v. Taff Vale Ry. 
 Co., 5 H. & N. 679. 
 
 4 Albert v. Northern Central Ry. 
 Co., 98 Pa. St. 316; Railroad Co. v, 
 
 23 
 
 Yeiser, 8 Pa. St. 366; Huyett v. 
 Phila., etc., R. R. Co., 23 Pa. St. 
 373; Phila. and Reading R. R. Co. 
 v. Yeager, 73 Pa. St. 121; Gandy v. 
 Chicago and N. W. R'y Co., 30 
 Iowa, 420; McCutnmaus v. Same, 33 
 Iowa, 187; Burroughs v. Housatonic 
 R. R. Co., 15 Conn. 124; Morris and 
 Essex R. R. Co. v. State, 36 N. J. 
 L. 553; Indianapolis and Cin. R. R. 
 Co. v. Passmore, 31 Ind. 143; Smith 
 v. Hannibal, etc., R. R. Co., 37 Mo. 
 287; McCready t\ Railroad Co., 2 
 Strob. L. (S. C.) 356; Firo v. Buffalo, 
 etc., R. R. Co., 22 N. Y. 209; Ruff- 
 ner v. Cincinnati, etc., R. R. Co., 34 
 O. St. 96; Jefferies v. Philadelphia, 
 etc., R. R. Co., 3 Houston (Del.), 447. 
 See Kans. Pac. R. R. Co. o. Butts, 7 
 Kans. 308. But see Fitch v. Pacific 
 R. R. Co., 45 Mo. 322; Bedford v. 
 Hannibal and St. Jo. R. R. Co., 46 
 Mo. 456; Palmer p. Missouri Pac. Ry. 
 Co., 76 Mo. 217. But this burden may 
 readily be shifted by circumstances 
 showing that, without negligence, the 
 accident would not have happened. 
 Field v. N. Y. C. R. R. Co., 32 N. 
 Y. 339; Garrett v. Chicago and X. W. 
 R'y Co., 36 Iowa, 121. Compare 
 Lindsay v. Winona, etc., R. R. Co., 
 29 Minn. 411: Woodson v. Milwaukee, 
 etc., R. R. Co., 21 Minn. 60. 
 
 353
 
 § 371.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 have been avoided by using due care. 1 Common carriers are 
 not chargeable, in cases free from suspicion with notice of the 
 contents of packages carried by them, nor are they authorized 
 in such cases to require information as to the contents. Under 
 such circumstances it is not negligence for a carrier to handle a 
 package in the usual way, and when it appears damaged to 
 bring it into his place of business for examination ; accordingly, 
 if a package containing a dangerous substance, of which the 
 carrier has no knowledge, explodes, injuring premises leased 
 by him, he will not be liable for the damage to his lessor. 2 
 The measure of care which should be observed by a carrier 
 against accident to premises leased by him, is the care which 
 a person of ordinary prudence and caution would use in his 
 affairs. 3 
 
 The responsibility of a corporation for injuries caused 
 by the acts or omissions of its servants may be les- 
 sened by the fact that the injured person was a tres- 
 passer at the time when the injury occurred ; or by 
 the fact that he contributed to his injury by his own negligence. 
 These two facts often conjoin. 
 
 § 371. Except at public crossings, where the public has a 
 right of way, a railroad company has the exclusive 
 right to its track, trestle-works, and bridges ; and ac- 
 cordingly (it has been held) any person walking on 
 the track is a trespasser, who cannot hold the company liable 
 
 § 370. 
 
 Liability ; 
 when les- 
 sened. 
 
 Trespass- 
 ers. 
 
 1 Railroad Co. v. Skinner, 19 Pa. 
 St. 298; Continental Improvement 
 Co. v. Phelps, 47 Mich. 299; Perkins 
 v. Eastern R. R. Co., 29 Me. 307; 
 Price v. New Jersey R. R. Co., 31 N. 
 J. L. 229; Knight v. New Orleans, 
 etc., R. R. Co., 15 La. Ann. 105; 
 Oilman, etc., R. R. Co. v. Spencer, 
 76 111. 192; see Illinois Cent. R. R. 
 Co. v. Phelps, 29 111. 447; Galpin v. 
 Chicago and N. W. R'y Co., 19 Wis. 
 604; Brown v. Hannibal, etc., R. R. 
 Co., 33 Mo. 309. Compare North 
 Penn. R. R. Co. v. Rehman, 49 Pa. 
 St. 101; Munger v. Tonawanda R. R. 
 Co., 4 N. Y. 349. Throughout the 
 states of the Union, railroad corapa- 
 
 354 
 
 nies are now required by statutes to 
 fence their roads, and if they fail in 
 this duty, are generally liable for 
 cattle killed on their tracks. 
 
 2 Nitro-Glycerine Case, 15 Wall. 
 524. Compare Boston and Albany 
 R. R. Co. v. Shanly, 107 Mass. 568. 
 The defendants, at their own ex- 
 pense, repaired the portions of the 
 premises occupied by them; as they 
 were bound to do under the terms of 
 their lease; and it was for damage 
 done by the explosion to other por- 
 tions of the same premises that the 
 court absolved them from liability. 
 
 3 Nytro-Glycerine Case, supra.
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 371. 
 
 for injuries received by him, unless be sbows it to bave been 
 guilty of negligence so gross as to amount to wantonness. 1 A 
 Pennsylvania decision, Baltimore and Obio R. R.. Co. v. 
 Scbwindling, 2 carries to an extreme tbe doctrine tbat a cor- 
 poration is not liable for tbe negligence of its employes wbicb 
 causes injury to trespassers. Tbe court beld tbat tbe company 
 owed no duty to tbe plaintiff, a child of five years, who was 
 upon tbe platform of a railroad station when injured, but not 
 as a passenger, nor upon any business connected with tbe com- 
 pany ; and accordingly that the company was not liable for 
 injuries incurred by him through negligence imputable to it. 
 Tbe court may have overlooked a principle which seems not 
 inapplicable to this case, and which might have altered the de- 
 cision bad it been applied. It is this : If a railroad company 
 acquiesces in the custom of the public in using or crossing its 
 stations or track at certain places, it will be held by its acqui- 
 escence or quasi-invitation to have held the premises out as 
 reasonably safe ; and will accordingly be liable to a person for 
 injuries caused b} r their unsafe condition, if he himself was 
 guilty of no contributory negligence. 3 A railroad company 
 has a right to exclude the general public from its stations, 4 ex- 
 cept such persons as offer themselves as passengers or shippers ; 
 but if it acquiesces — as appears to have been the case in Balti- 
 more and Ohio R. R. Co. v. Schwindling — in tbe use of its sta- 
 tions by the general public, it should keep them safe. 5 
 
 1 Mason v. Missouri Pac. R'y Co., 
 27 Kans. 83. See Cauley v. Pitts- 
 burgh, C. and St. L. R'y Co., 95 Pa. 
 St. 398; Omaha, etc., R. R. Co. v. 
 Martin, 14 Neb. 295; Highland Ave., 
 etc., R. R. Co. v. Robbins, 124 Ala. 
 113. 
 
 2 101 Pa. St. 258. 
 
 8 Bennett v. Railroad Co., 102 U. 
 S. 577; Barry v. New York Cent, 
 and H. R. R. R. Co., 92 N. Y. 289. 
 See Brown v. Hannibal, etc., R. R. 
 Co., 50 Mo. 461; Murphy u. C. R. I. 
 and P. R. R. Co., 38 Iowa, 539; 
 Fitts v. Cream City R. R. Co., 59 
 Wis. 323; Illinois Central R. R. Co. 
 v. Dick, 91 Ky. 434; Calderson v. Nav. 
 
 Co., 38 Or. 343. Compare Murphy v. 
 Boston & A. R. R. Co., 133 Mass. 121; 
 Sweeny v. Old Colony, etc., R. R. Co., 
 10 Allen (Mass.), 368; Johnson v. 
 Boston, etc., R. R. Co., 125 Mass. 75; 
 Illinois Central R. R. Co. v. Godfrey, 
 71 111. 500. Adverse to the statement 
 in the text is Sutton v. N. Y. C. & H. 
 R. R. R. Co., 66 N. Y. 243. 
 
 4 Commonwealth v. Power, 7 Met. 
 (Mass.) 596. See Summit v. State, 
 8 Lea (Tenn.), 413. 
 
 5 Tobin v. Portland, etc., R. R. Co., 
 59 Me. 183; Nagel v. Missouri Pac. 
 Ry. Co., 75 Mo. 653; Evansich v. G. 
 C. & S. F. Ry. Co., 37 Tex. 123; S. C, 
 61 Tex. 3; Keffeu. Milwaukee and St. 
 
 355
 
 § 372.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 372. Undoubted^, as we have seen, there is authority for 
 the proposition that a railroad company owes no duty to tres- 
 passers, except not wantonly to injure them. 1 But the weight 
 of authority seems to be in favor of the rule stated by the 
 Federal Supreme Court as follows : " While a railway company 
 is not bound to the same degree of care in regard to mere 
 strangers who are unlawfully upon its premises that it owes to 
 passengers conveyed by it, it is not exempt from responsibility 
 to such strangers for injuries arising from its negligence or from 
 its tortious acts." 2 
 
 Accordingly, it would seem that a trespasser who is not 
 guilty of contributory negligence should be allowed to recover 
 if his injuries are caused by the negligence of the servants of 
 the corporation. But there must have been negligence imput- 
 able to the corporation, for if no duty on its part is violated, 
 there is no cause of action against it. And the circumstances 
 are to be considered. Thus, to run a train rapidly and without 
 signals across a highway crossing is in itself negligent ; but not 
 so to run the train at full speed and without continual whistling 
 along the ordinary track. 3 Except when crossing a highway, 
 or passing through the streets of a town, the engineer of a train 
 has no reason to expect persons on the track. Moreover, to be 
 walking on a railroad track may itself constitute contributory 
 negligence, barring recovery if the person is an adult. 4 If, on 
 the other hand, the person injured is a child, and its parents are 
 
 P. Ry. Co., 21 Minn. 207; Texas and 
 St. L. Ry. v. Orr, 46 Ark. 182. But 
 see Pittsburgh, Ft. W. & C. Ry. Co. 
 v. Bingham, 29 O. St. 364. 
 
 1 See, also, Morrissey v. Eastern R. 
 R. Co., 126 Mass. 377; McAlpin v. 
 Powell, 55 How. Pr. (N. Y.) 163; 
 Hughes v. Macfie, 2 H. & C. 744; 
 Mangan v. Atterton, 4 H. & C. 388; 
 Brague v. No. Cent. R'y Co., 192 Pa. 
 St. 242; Alabama Gt. So. R'y Co. v. 
 Moorer, 116 Ala. 642. 
 
 2 Railroad Co. v. Stout, 17 Wall. 
 657, 661; Benton v. C. R. I. and P. 
 R. R. Co., 55 Iowa, 496 ; Daley v. 
 Norwich, etc., Railroad Co., 26 Conn. 
 591; Whirley v. Whiteman, 1 Head. 
 
 356 
 
 610; Keffe v. Milwaukee, etc., Rail- 
 road Co., 21 Minn. 207; Koons v. St. 
 Louis, etc., Railroad Co., 65 Mo. 
 592; T. and P. R'y Co. v. O'Dunnell, 
 58 Tex. 27; Lynch v. Nurden, 1 Q. 
 B. 29; Williams v. Great Western 
 Railway Co., L. R. 9 Exch. 157. 
 Compare Opsahl v. Judd, 30 Minn. 
 126; Gradin v. St. Paul, etc., R'y Co., 
 30 Minn. 217; Boyden ». Fitchburg 
 R. R. Co., 70 W. 125; Mitchell v. B. 
 & M. R. R. Co., 68 N. H. 96. 
 
 8 See St. Louis, etc., R'y Co. t>. 
 Payne, 29 Kans. 166. 
 
 * Baltimore and Potomac R. R. Co. 
 v. State, 54 Md. 648; Northern Cen- 
 tral R'y Co. v. State, ib. 113.
 
 PART IV.] LIABILITY FOR TOUTS OF AGEXTS. 
 
 [§ 374. 
 
 free from fault, still, if it is walking on a railroad track, away 
 from the public crossing, an engineer running over it might be 
 entirely free from negligence under circumstances that would 
 have rendered the conduct of the engineer negligent indeed, 
 had the accident occurred in a place where he was bound to 
 keep a special lookout for travellers. 1 
 
 § 373. The responsibility of corporations for injuries done by 
 their employes, as disminished by the fact that the „ 
 
 r J . J Contribu- 
 
 injured person was a trespasser, is closely connected torynegii- 
 with their liability as released by the contributory * 
 negligence of the injured person. The principle is, he whose 
 own negligence occasions his injury cannot recover damages 
 therefor. 2 
 
 This rule implies a statement often made as a qualification 
 to it. Between the negligence of the plaintiff and his injury 
 there must be the relation of ordinary and immediate antece- 
 dent and consequent, or what is usually called a causal relation. 
 This qualification is also connoted by the term contributory. 
 The plaintiff's negligence must have been the proximate not 
 the remote cause or occasion of his injury. 3 
 
 § 374. The question of the negligence of the defendant, and 
 the contributory negligence of the plaintiff, is ordinarily for the 
 jury, under the direction of the court, to determine from the 
 
 1 Philadelphia and Reading R. R. 
 Co. v. Spearen, 47 Pa. St. 300, 303; 
 Prendergast v. N. Y. C. & H. R. R. 
 R. Co., 58 N. Y. 652; Alabama Gt. 
 So. R. Co. v. Moorer, 116 Ala. 642. 
 
 2 " Quod quis ex culpa sua damnum 
 sentit, non intelligitur damnum sen- 
 tire," Dig. lib. 50, tit. 17, § 203; see 
 Wharton on Negligence, 2d ed. §§ 300 
 et seq., where the subject of contrib- 
 utory negligence is fully and satis- 
 factorily treated. 
 
 Where a telegraph company incor- 
 rectly transmitted a message so that 
 as transmitted it was unintelligible 
 jargon, yet the receiver (the sender's 
 agent) acted on it, the sender cannot 
 hold the company for the loss, which 
 was due to the negligent act of his 
 own agent in acting on the message. 
 
 Hart v. Direct U. S. Cable Co., 86 
 N. Y. 633. 
 
 Not every degree of negligence, 
 however slight, will bar a recovery; 
 the negligence of the plaintiff to have 
 this effect must amount to an absence 
 of ordinary care. Strong v. Sacra- 
 mento, etc., R. R. Co., (51 Cal. 326. 
 Compare Kansas Pac. R'y Co. v. Pea- 
 vey, 29 Kans. 169. 
 
 s Kline v. Central Pac. R. R. Co., 
 37 Cal. 400; Flynn v. San Francisco, 
 etc., R. R. Co., 40 Cal. 14; Murphy 
 v. Deane, 101 Mass. 455; Trow v. 
 Vermont Cent. R. R. Co., 24 Vt. 487; 
 Pennsylvania R. R. Co. v. Richter, 
 42 N. J. L. 180. See Indianapolis 
 and St. L. R. R. Co. v. Stout, 53 Ind. 
 143; Houston and T. C. Ry. Co. v. 
 Smith, 52 Tex. 178. 
 
 357
 
 § 374.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 circumstances of the case. 1 The circumstances of negligence 
 cases are so diverse that a discussion of them would be of little 
 practical value unless the greatest detail were gone into. On 
 general principles, a person is not guilty of negligence or of 
 contributory negligence for doing what he has a right to do. 2 
 Thus, every one has a right to cross the railroad track at a pub- 
 lic crossing. To do so is not negligence. But if in so doing, 
 a person does not make a vigilant use of his eyes and ears, he 
 is negligent and cannot recover for injuries which would not 
 have happened had he been vigilant. 3 
 
 1 Railroad Co. v. Stout, 17 Wall. 
 657; see Hays v. Miller, 70 N. Y. 
 112; Lambert v. Staten Island R. R. 
 Co., ib. 104; Thurberr. Harlem, etc., 
 R. R. Co., 60 N. Y. 331. 
 
 A statute may render inapplicable 
 the general principles of the law of 
 contributory negligence. Thus, in 
 Michigan, it is held that the liability 
 of a railroad company for injuries 
 to cattle resulting from its failure to 
 fence its track, is not affected by 
 the contributory negligence of the 
 owner of the cattle. Grand Rapids, 
 etc., R. R. Co. v. Cameron, 45 Mich. 
 451. 
 
 2 Thus, a person is not guilty of 
 contributory negligence in pasturing 
 his horses — as he has a right to do — 
 on a town-common, even though it 
 be dangerous; and he may still re- 
 cover from a railroad company, if the 
 latter injures them through its fault. 
 Chicago R. R. Co. v. Jones, 59 Miss. 
 465; compare Lindsay v. Winona, 
 etc., R. R. Co., 29 Minn. 411. Like- 
 wise a railroad company has a right 
 to use its own land for any legitimate 
 purpose in the prosecution of its 
 business. Such a use cannot be re- 
 garded as unlawful or negligent be- 
 cause it may obstruct the vision of 
 those crossing the track. Cordell ». 
 N. Y. C. and H. R. R. R. Co., 70 N. 
 Y. 119. A passenger is not ordinarily 
 guilty of contributory negligence in 
 
 358 
 
 acting on the assumption that the 
 carrier is not negligent. Brassell v. 
 New York C. & H. R. R. R. Co., 84 
 N. Y. 241 ; Chaffee v. Boston & L. 
 R. R. Co., 104 Mass. 108; Baltimore 
 & O. R. R. Co. v. State, 60 Md. 449. 
 
 It is not contributory negligence 
 for a passenger, in a railroad car, 
 with a headache, to support his head 
 on his hand with his elbow resting 
 on the sill of an open window. Far- 
 low v. Kelly, 108 U. S. 288; German- 
 town Passenger Ry. Co. v. Brophy, 
 105 Pa. St. 38. But to ride with his 
 arm outside the window is contribu- 
 tory negligence. Todd v. Old Colony, 
 etc., R. R. Co., 3 Allen (Mass.), 18; 
 S. C, 7 Allen (Mass.), 207. 
 
 8 Salter v. Utica, etc., R. R. Co., 
 75 N. Y. 273; Lake Shore and M. S. 
 R. R. Co. v. Miller, 25 Mich. 274; 
 International and G. N. Ry. Co. v. 
 Graves, 59 Tex. 330; Pennsylvania 
 R. R. Co. v. Richter, 42 N. J. L. 180; 
 Terre Haute and I. R. R. Co. v. Clark, 
 73 Ind. 168; C. C. C. & St. L. R'y 
 Co. v. Miller, 149 Ind. 490; New Or- 
 leans, J. and G. R. R. Co. v. Mitchell, 
 52 Miss. 808; Gahagan v. B. & M. R. 
 R. Co., 70 N. H. 441; Carter v. Cen- 
 tral Vt. R. R. Co., 72 Vt. 190; Cen- 
 tral R. R. Co. v. Smalley, 61 N. J. L. 
 277; Berkeley v. C. & O. Ry. Co., 43 
 W. Va. 11; Phila. & Balto. R. R. Co. 
 o. Holden, 93 Md. 447; Cole v. N. Y., 
 N. H. & H. R. R. Co., 174 Mass. 537.
 
 PART IV.] LIABILITY FOR TORTS OF AGENTS. 
 
 [§ 376. 
 
 § 375. Further, an act will not be negligent if at the time 
 the person doing it was not a free agent ; 1 or was a little child. 
 This applies to persons who in a panic caused by an imminent 
 collision on a railroad leap from the cars ; 3 or to any person who 
 instinctively does a sudden act to escape an imminent peril. 3 
 In regard to a child, the caution and discretion required are 
 according to its age and capacity. 4 But in some instances the 
 negligence of the persons having him in charge is held to bar a 
 suit by his family, or his personal representatives, or perhaps 
 by the child himself. 5 
 
 § 376. Kegarding the burden of proof where contributory 
 negligence is relied on by a defendant, the weight of 
 authority is, that contributory negligence is matter pr oof? n ° 
 of defence to be alleged and proved by the defend- 
 ant. 6 But a number of decisions hold a contrary doctrine. 7 
 
 0**^ 
 
 Compare Cleveland, C. and C. R. R. 
 Co. v. Crawford, 24 O. St. 631. 
 
 If a railroad crosses a common road 
 on the same level, those travelling on 
 either have a legal right to pass over 
 the point of crossing, and to require 
 due care from those travelling on the 
 other to avoid collisions. The train 
 has the preference and right of way; 
 but is bound to give due warning. 
 Continental Improvement Co. v. 
 Stead, 95 U. S. 161. See Railroad 
 Co. v. Houston, ib. 697; Shaw v. Bos- 
 ton and W. R. R. Co., 8 Gray (Mass.), 
 45; Black v. Burlington, etc., Ry. Co., 
 38 Iowa, 515; Nor. Pac. R. R. Co. v. 
 Freeman, 174 U. S. 379. Compare 
 B. & P. R. R. Co. v. Cumberland, 176 
 U. S. 232. 
 
 1 See Wharton on Neg., 2d ed. §§ 
 301 et seq. 
 
 2 Frink v. Potter, 17 111. 406. 
 
 8 Larrabee v. Sewall, 66 Me. 376 ; 
 
 Indianapolis, etc., R. R. Co. v. Carr, 
 35 Ind. 510 ; Stokes v. Saltonstall, 13 
 Pet. 181. See Eckert v. Long Island 
 R. R. Co., 43 N. Y. 502. 
 
 4 Railroad Co. v. Gladmon, 15 Wall. 
 401 ; Same v. Stout, 17 Wall. 657 ; 
 Chicago and A. R. R. Co. v. Becker, 
 76 111. 25; Daniels v. Clegg, 28 Mich. 
 33 ; Dowd v. Chicopee, 116 Mass. 93 ; 
 Wendell v. New York Cent, and H. 
 R. R. R. Co., 91 N. Y. 420. 
 
 5 Fitzgerald v. St. Paul, etc., R'y 
 Co., 29 Minn. 336. 
 
 Here the authorities are very con- 
 flicting. The question is discussed 
 at length, with a full citation of au- 
 thorities in Wharton on Neg., 2d ed. 
 §§ 310 et seq. 
 
 6 Railroad Co. v. Gladmon, 15 Wall. 
 401 ; Indianapolis, etc., R. R. Co. v. 
 Horst, 93 U. S. 291 ; Durant v. Pal- 
 mer, 29 N. J. L. 544 ; Penn. Canal 
 Co. v. Bentley, 66 Pa. St. 30 ; Cleve- 
 
 7 Murphy v. Deane, 101 Mass. 457 ; 248 ; Warner v. New York Cent. R 
 
 Lake Shore, etc., R. R. Co., v. Miller, 
 25 Mich. 274; Daniels v. Clegg, 28 
 Mich. 33 ; Tolman v. Syracuse, etc., 
 R. R. Co., 98 N. Y. 198 ; Button v. 
 Hudson River R. R. Co., 18 N. Y. 
 
 R. Co., 44 N. Y. 465 ; Owens v. Rich- 
 mond, etc., R. R. Co., 88 N. C. 502. 
 See Wheelock v. Boston and Albany 
 R. R. Co., 105 Mass. 203. 
 
 359
 
 § 378.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Damages 
 recover- 
 able. Ex- 
 emplary 
 damages. 
 
 § 377. In assessing damages against a corporation for per- 
 sonal injuries caused by the negligence or other 
 wrongful acts of its servants, the measure of damages 
 is the same as in actions against individual principals 
 or masters. According to the law as declared in the 
 majority of the states, exemplary damages may be allowed 
 against a corporation ; 1 but ouly when the wrongful act was 
 clone wilfully, or with that indifference to the rights of others 
 which is equivalent to an intentional violation of them. 2 
 
 § 378. The doctrine of other cases, however, is to the general 
 
 land and Pittsburgh R. R. Co. v. 
 Rowan, 66 Pa. St. 393 ; Pennsylvania 
 R. R. Co. o. Weber, 76 Pa. St. 157 ; 
 Weiss v. Pennsylvania R. R. Co., 79 
 Pa. St. 387 ; Freeh ». Phila., W. and 
 B. R. K. Co., 39 Md. 574 ; State v. 
 Balto. and Potomac R. R. Co., 58 
 Md. 482 ; Smoot v. Wetiunpka, 24 
 Ala. 112 ; Strablendorf v. Rosenthal, 
 30 Wis. 675 ; Kansas Pac. R'y Co. v. 
 Pointer, 14 Kaus. 37 ; Kansas City 
 L. and S. R. R. Co. v. Phillibert, 25 
 Kan. 582 ; Baltimore and O. R. R. Co. 
 v. Whittington, 30 Grat. (Va.) 805 ; 
 Thompson v. Duncan, 76 Ala. 334 ; 
 Thompson v. North Missouri R. R. 
 Co., 51 Mo. 190 ; St. Anthony Falls 
 Co. v. Eastman, 20 Minn. 277 ; Mc- 
 Quilken v. Cent. Pac. R. R. Co., 50 
 Cal. 7 ; MacDougal v. Central R. R. 
 Co., 63 Cal. 431 ; Paducah, etc.,R. R. 
 Co. v. Hoehl, 12 Bush (Ky.), 42; 
 Texas and Pac. R. R. Co. v Murphy, 
 46 Tex. 356 ; Evansville, etc., R. R. 
 Co. v. Hiatt, 17 Ind. 102 ; Hathaway 
 v. Toledo, etc., R. R. Co., 46 Ind. 25 ; 
 Jackson v. Indianapolis, etc., R. R. 
 Co., 47 Ind. 454; Higgins v. Jeffersou- 
 ville, etc., R. R. Co., 52 Ind. 110 ; 
 Galena, etc., R. R. Co. v. Fay, 16 111. 
 558 ; Baird v. Morford, 29 Iowa, 531 ; 
 Reynolds v. Hind man, 32 Iowa, 14(5 ; 
 Patterson v. B. and M. R. R. Co., 38 
 Iowa. 279 ; Fowler v. Baltimore and 
 O. R. R. Co., 18 W. Va. 579 ; Street 
 R. R. Co. v. Nolthenins, 40 O. St. 
 360 
 
 376. Compare Hinckley i\ Cape Cod 
 R. R., 120 Mass. 257. 
 
 Circumstances may make out a 
 prima facie case of contributory neg- 
 ligence, thus throwing on the plaintiff 
 the burden of proving due care. See 
 Allyn v. Boston and Albany R. R. 
 Co., 105 Mass. 77 ; Johnson v. Hud- 
 son River R. R. Co., 20 N. Y. 65. 
 
 1 Phila., W. and B. R. R. Co. v. 
 Larkin, 47 Md. 155; Gasway v. At- 
 lanta, etc., R'y Co., 58 Ga. 216; 
 Western Un. Tel. Co. v. Eyser, 2 Col. 
 141 ; Hinckley v. Chicago, etc., R'y 
 Co., 38 Wis. 194 ; Taylor v. Grand 
 Trunk R'y Co., 48 N. H. 304 ; Male- 
 cek v. Tower Grove, etc., R'y Co., 57 
 Mo. 17 ; Beale v. Railway Co., 1 Dill. 
 568 ; Singer M'f'g Co. v. Holdfodt, 
 86 111. 455 ; Atlantic, etc., R'y Co. v. 
 Dunn, 19 Ohio St. 162 ; Hopkins v. 
 Atlantic, etc., R. R. Co., 36 N. H. 9 ; 
 Allbritton v. J. & G. N. R. R. Co., 38 
 Miss. 242 ; Jefferson County Savings 
 Bk. v. Eborn, 84 Ala. 529 ; compare 
 C raker v. Chicago and N. W. R'y Co., 
 36 Wis. 657; Pittsburgh, Ft. W. and 
 C. R. R. Co. v. Slusser, 19 Ohio St. 
 157; Chicago R. R. Co. v. Scurr, 59 
 Miss. 456; Same v. Jarrett, ib. 470; 
 Trigg v. St. Louis, etc., R'y Co, 74 
 Mo. 147; Memphis Packet Co. v. 
 Nagel, 97 Ky. 9; L. &. N. R. R. Co, 
 v. Kelly, 100 Ky. 421. 
 
 2 Milwaukee, etc., R. R. Co. v. 
 Arms, 91 U. S. 489; Holmes v. Caro-
 
 PART IV.] LIABILITY FOR TORTS OP AGENTS. [§ 378. 
 
 effect that to justify the allowance of exemplary damages against 
 a corporation, the superior corporate agents must either have 
 been negligent in their choice of employes, or must have rati- 
 fied the act in some way ; e. g., by retaining the servant in the 
 employ of the company. As said by the late Chief Judge 
 Church, giving the opinion of the New York Court of Appeals 
 in Cleghorn v. New York Central Railroad Co. : l " For injuries 
 by the negligence of a servant while engaged in the business of 
 the master, within the scope of his employment, the latter is 
 liable for compensatory damages ; but for such negligence, how- 
 ever gross or culpable, he is not liable to be punished in puni- 
 tive damages, unless he is also chargeable with gross miscon- 
 duct. Such misconduct may be established by showing that 
 the act of the servant was authorized or ratified, or that the 
 master employed or retained the servant, knowing that he was 
 incompetent, or, from bad habits, unfit for the position he occu- 
 pied. Something more than ordinary negligence is required ; 
 it must be reckless and of a criminal nature, and clearly estab- 
 lished. Corporations may incur this liability as well as private 
 persons. 2 If a railroad company, for instance, knowingly and 
 wantonly employs a drunken engineer, or switchman, or retains 
 one after knowledge of his habits is clearly brought home to 
 the company, or to a superintending agent authorized to em- 
 ploy and discharge him, and injury occurs by reason of such 
 habits, the company may and ought to be amenable to the 
 severest rule of damages ; but I am not aware of any principle 
 which permits a jury to award exemplary damages in a case 
 which does not come up to this standard, or to graduate the 
 amount of such damages by their view of the propriety of the 
 conduct of the defendant, unless such conduct is of the character 
 before specified." 3 
 
 lina Central R. R. Co., 94 N. C. 318. 
 See Baltimore, etc., Turnpike Co. v. 
 Boone, 45 Md. 344; Belknap v. Bos- 
 ton and M. R. R. Co., 49 N. H. 358; 
 Louisville, etc., R'y Co. v. Shanks, 94 
 Ind. 598; South & North Ala. R. R. 
 Co. v. McLendon, 63 Ala. 2(36. 
 
 1 56 N. Y. 44, 47. 
 
 2 Citing Caldwell v. N. J. Steam- 
 boat Co., 47 N. Y. 282. 
 
 3 Accord, Goddard v. Grand Trunk 
 R'y, 57 Me. 202; Lake Shore, etc., 
 Ry. Co. v. Prentice, 147 U.S. 101; 
 Perkins o. Missouri, etc., R. R. Co., 
 55 Mo. 201; Hays v. Houston, etc., 
 R. R. Co., 46 Tex. 272; New Orleans, 
 etc., R. R. Co. v. Burke, 53 Miss. 
 201; Hinckley v. Chicago, M. & St. 
 P. R'y Co., 38 Wis. 194. Compare 
 Townseud v. N. Y. C. and H. R. R. 
 301
 
 § 378.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 R. Co., 56 N. Y. 295; Edleman v. St. 
 Louis Transfer Co., 3 Mo. App. 503. 
 A legislature cannot by statute re- 
 strict the amount recoverable from 
 railroad companies for personal in- 
 juries caused by their negligence. 
 Passenger R'y Co. v. Boudrou, 92 
 Pa. St. 475. (Of course, a very dif- 
 ferent case from that where a legis- 
 
 362 
 
 lature creates the right of action for 
 injuries resulting in death and limits 
 the amount of damages recoverable.) 
 A statute giving double damages for 
 cattle killed by a railroad company, 
 through its failure to fence, is con- 
 stitutional. Minneapolis Ry. Co. v. 
 Beckwith, 129 U. S. 26.
 
 PAliT V.] CORPORATE ACTS WITHOUT THE STATE. [§ 380. 
 
 PART V. 
 
 LEGAL EFFECT OF ACTS DONE WITHOUT THE STATE 
 INCORPORATING THE CORPORATION. 
 
 The two questions, § 379. 
 
 Legal effect of the act within the 
 
 limits of the home state, §§ 380- 
 
 382. 
 Legal effect of the act in the foreign 
 
 state, § 383. 
 Comity among states, § 384. 
 Limits to this comity, § 385. 
 Foreign corporations cannot exercise 
 
 special franchises, § 386; 
 Nor act contrary to the laws or pub- 
 lic policy of the state, §§ 387, 388; 
 Nor do acts beyond their powers, 
 
 §§ 389-391. 
 Actions against foreign corporations, 
 
 § 392. 
 
 Penal provisions, when enforced out- 
 side the state enacting them. 
 Statutory liability, § 393. 
 
 Jurisdiction over assets of foreign 
 corporations, § 394. 
 
 Service on foreign corporations, §§ 
 395, 396. 
 
 Statutes regulating service, § 397. 
 
 New York doctrine, § 398. 
 
 Proceedings in rem, § 399. 
 
 Statutes imposing terms on foreign 
 corporations, § 400. 
 
 Effect of non-compliance with these 
 statutes, § 401. 
 
 Statute of limitations, § 402. 
 
 § 379. This topic relates to the territorial extent of corporate 
 powers, and involves a consideration of two distinct 
 questions. When an act is done by or on behalf of questions. 
 a corporation outside of the state incorporating it, 
 what is the legal effect of that act (1) in the state incorporating 
 the corporation ; (2) in the state where act was done? 
 
 § 380. Within the limits of the state incorporating the cor- 
 poration, the legal effect of an act done without the 
 limits of that state depends primarily on a construc- 
 tion of the provisions in the corporate constitution JT 1 ** 1 ™ 1 *" 5 
 regarding the corporate powers. The question will the home 
 be, do they authorize the given act to be done beyond 
 the limits of the state ? " It may safely be assumed that a 
 corporation can make no contract, and do no acts, either within 
 or without the state which creates it, except such as are author- 
 ized by its charter ; and these acts must also be done by such 
 officers or agents, and in such manner, as the charter author- 
 
 3G3 
 
 Legal effect 
 of the act
 
 § 381.J THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 izes. r 1 If the corporate powers authorize the act to be done 
 outside the state, it will be valid as to all persons within the 
 jurisdiction of the state. 2 If they do not authorize the act to 
 be so done, the rules applicable to ultra vires acts generally will 
 apply ; though the fact that the act was done outside of the 
 state will not prejudice any person, acting on the faith of the 
 act, who had no reason to know that it was done outside the 
 state. 3 
 
 § 381. It may be stated as a proposition of general truth and 
 applicability, that with respect to the jurisdiction of the state 
 incorporating the corporation, acts done on behalf of the cor- 
 poration, if done outside the state, are valid, in the absence of 
 special restriction ; 4 for a grant of franchises without restric- 
 tion is equivalent to a specific authority to exercise them 
 wherever the corporation may find it convenient or profitable 
 to do so. 5 Accordingly, directors may act as a board outside 
 the state limits. 6 
 
 1 Taney, C. J., in Bank of Augusta 
 v. Earle, 13 Pet. 588. " Its residence 
 in oue state creates no insuperable 
 objection to its power of contracting 
 in another." lb. See Evving v. Tol- 
 edo S'v'gs Bk., 43 O. St. 31; State v. 
 So. Pac. R. R. Co., 52 La. Ann. 1822; 
 Angell and Ames on Corp., § 104. 
 
 The two cases of Middle Bridge 
 Co. v. Marks, 26 Me. 326, and Miller 
 v. Ewer, 27 Me. 509, seem to imply 
 that it is incompetent for a legisla- 
 ture to authorize a corporation to 
 act outside the boundaries of the 
 state. But this seems incomprehen- 
 sible. Merrick v. Van Santvoord, 
 34 N. Y. 208, holds that the charter 
 of a corporation may confer powers 
 without territorial limitation, which, 
 accordingly, may be exercised be- 
 yond the jurisdiction of the sovereign 
 granting the charter. 
 
 2 Hutchins v. New England Coal 
 M'gCo., 4 Allen, 580. 
 
 8 Galveston Railroad v. Cowdrey, 
 11 Wall. 459. This on principles re- 
 gulating the effect of acts appar- 
 
 364 
 
 ently within the scope of the cor- 
 porate powers, §§ 284-286. 
 
 4 Bank of Augusta u. Earle, 13 Pet. 
 519, 588; Hutchins v. New England 
 Coal M'g Co., 4 Allen, 580; Blair v. 
 Perpetual Ins. Co., 10 Mo. 559; New 
 York Floating Derrick Co. v. New 
 Jersey Oil Co., 3 Duer (N. Y.), 648; 
 Tombigbee R. R. Co. v. Kneeland, 4 
 How. 16; Wood Hydraulic Hose M'g 
 Co. v. King, 45 Ga. 34; Dodge v. 
 City of Council Bluffs, 57 Iowa, 560. 
 See Mumford v. Am. Life Ins., etc., 
 Co., 4 N. Y. 463. 
 
 6 Merrick v. Van Santvoord, 34 N. 
 Y. 208; Day v. Ogdensburgh, etc., R. 
 R. Co., 107 N. Y. 129; Kerchner v. 
 Gettys, 18 S. C. 521; Atchison, T. & 
 S. F. R. R. Co. v. Fletcher, 35 Kan. 
 236. 
 
 6 Galveston Railroad v. Cowdrey, 
 11 Wall. 459; Bellows ». Todd, 39 
 Iowa, 209; Thompson v. Natchez 
 Water Co., 68 Miss. 423; Missouri 
 Lead M'g Co. v. Reinhard, 114 Mo. 
 218; Arms v. Conant, 36 Vt. 745; 
 Bassett v. Monte Christo M. Co., 15
 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 382. 
 
 § 382. The rule is otherwise in regard to the acts of the body 
 corporate itself. These, when clone beyond the limits of the 
 state, are ordinarily held invalid. 1 It is submitted, however, 
 that the reason of this does not lie in the imaginative notion 
 that a corporation " must dwell in the place of its creation, and 
 cannot migrate to another sovereignty ;" 2 but rather in the 
 hardship and fraud it might entail on shareholders to permit 
 corporate meetings to be held outside the state. 3 Accordingly, 
 there seems to be no reason for holding invalid acts done at cor- 
 porate meetings assembled without the state, if all the share- 
 holders acquiesce in the holding of such meetings. 4 
 
 Nev. 293; Ohio & M. R. R. Co. v. 
 MePherson, 35 Mo. 13; Wright v. 
 Bandy, 11 Ind. 398; McCall v. Byram 
 Mfg. Co., 6 Conn. 428; Wood Hy- 
 draulic Hose Mfg. Co. v. King, 45 Ga. 
 34; Smith v. Alvord, 63 Barb. 415; 
 Reichwald v. Commercial Hotel Co., 
 106 111. 439, 450; Singer v. Salt Lake 
 Copper M. Co., 17 Utah, 143. See 
 Franco-Texan Land Co. v. Laigle, 
 59 Tex. 339; Saltmarsh v. Spaulding, 
 147 Mass. 224; Smith v. Silver Valley 
 Mfg. Co., 64 Md. 86. But see Hilles 
 v. Parrish, 14 N. J. Eq. 380; Ormsby 
 v. Vt. C. Mfg. Co., 56 X. Y. 623. A 
 statute forbidding directors to hold 
 meetings outside the state may be 
 availed of by creditors of the corpo- 
 ration: it is not for the benefit of 
 shareholders only. Sta. Nat. Bk. v. 
 Union Nat. Bk., 168 111. 519. 
 
 1 Miller v. Ewer, 27 Me. 509 ; Aspin- 
 wall v. Ohio, etc., R. R. Co., 20 Ind. 
 492 ; Freeman v. Machias W. P. Co., 
 38 Me. 343 ; Ormsby v. Vermont C. 
 M'g Co., 56 N. Y. 623 ; Jones v. Pearl 
 M'g Co., 20 Col. 417. Cf. Copp v. 
 Lamb, 12 Me. 312. No legal or- 
 ganization of a corporation can be 
 affected by action taken outside of 
 the state granting the charter. Free- 
 man v. Machias W. P. Co., supra; 
 Smith v. Silver Valley M'g Co., 64 
 Md. 86; Taylor v. Branham, 35 Fla. 
 
 j 297. Compare Camp v. Byrne, 41 
 Mo. 525. Authority in charter to 
 
 ■ transact business at points without 
 1 the state does not authorize acts by 
 ! the corporation directly, such as cor- 
 I porate meetings. An election of di- 
 rectors by a corporate meeting held 
 outside the state is void. A share- 
 
 j holder is not bound by a by-law passed 
 | by directors elected without the 
 state, although his own shares were 
 voted, by proxy, at the meeting 
 which elected the said directors. 
 Franco-Texan Land Co. v. Laigle, 
 j 59 Tex. 339 ; ace. Hodgson ». Du- 
 luth, etc., R. Co., 46 Minn. 454. 
 
 2 Bank of Augusta v. Earle, 13 Pet. 
 519, 588, per Taney, C. J. It is held 
 that a corporation dwells in the place 
 where its business is carried on. 
 Taylor i\ Gas and Coke Co., 11 Ex. 
 1 ; see Connecticut and Passumsic 
 Rivers R. R. Co. v. Cooper, 30 Vt. 
 476, 481 ; Stout p. Sioux City, etc., R. 
 R. Co., 3 McCrary, 1 ; but see Plimp- 
 ton 15. Bigelow, 93 N. Y. 592, revers- 
 ing S. C, 12 Abb. N. C. (N. Y.) 
 
 i 202. 
 
 3 Derby Council v. State Council, 
 j 197 Pa. St. 413 ; Sovereign Camp W. 
 ! O. W. v. Fraley, 94 Tex. 200. 
 
 4 Missouri Lead M'g Co. v. Rein- 
 I hard, 114 Mo. 218. See Camp v. 
 
 ■ Byrne, 41 Mo. 525. Resolutions (to 
 
 365
 
 § 383.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 383. 
 
 Legal effect 
 of the act 
 in the for- 
 eign state. 
 
 poration. 
 
 A different question is the one regarding the legal 
 effect of the act within the limits of the state where 
 it was done. There the legal effect depends ordina- 
 rily on whether that state will give effect to provi- 
 sions in the laws of the state incorporating the cor- 
 For corporations are not citizens within the meaning 
 of the provisions in the Federal constitution guaranteeing to the 
 citizens of each state all the privileges and immunities of citi- 
 zens in the several states ; 1 and, accordingly, a state may pro- 
 hibit a corporation incorporated by another state from contract- 
 ing within the limits of the former, 2 or may exact a license fee 
 from the corporation for the privilege of having an office within 
 the state, unless that corporation be engaged in interstate 
 commerce, or the service of the Federal government; 3 or may 
 deny to a foreign corporation the right to share in the assets of 
 an insolvent corporation, in course of distribution in its courts. 4 
 
 increase capital stock) passed at a 
 stockholders 1 meeting held without 
 the state are binding on all taking 
 part or profiting by them (as e. <)., 
 by accepting the new shares). Hand- 
 ley v. Stutz, 139 U. S. 417. 
 
 1 Art. IV., § 2. 
 
 2 Paul o. Virginia. 8 Wall. 168 ; 
 Lafayette Ins. Co. v. French, 18 How. 
 404, 407 ; Ducat o. Chicago, 10 Wall. 
 410; Liverpool Ins. Co. v. Massachu- 
 setts, ib. 566 ; Doyle p. Continental 
 Ins. Co., 94 U. S. 535 ; Pembina 
 Mining Co. v. Pennsylvania, 125 U. 
 S. 181; Orient Ins. Co. v. Daggs, 172 
 U. S. 557; Warren M'f'g Co. v. ^Etna 
 Ins. Co., 2 Paine, 501 ; Home Ins. Co. 
 v. Davis, 29 Mich. 238; Common- 
 wealth v. Milton, 12 B. Mon. (Ky.) 
 212 ; Phoenix Ins. Co. v. Common- 
 wealth, 5 Bush (Ky.), 68; Gill's 
 Adm. v. Kentucky, etc., Gold M'g 
 Co., 7 Bush, 635 ; Matthews v. Trus- 
 tees, 2 Brewst. (Pa.) 541 ; Fire Dept. 
 v. Noble, 3 E. D. Smith (N. Y.), 449 ; 
 Slaughter v. Commonwealth, 13 
 Gratt. ( Va. ) 767 ; Western Union 
 Tel. Co. o. Mayer, 28 Ohio St. 521. 
 
 366 
 
 See Milnor v. N. Y. and N. H. R. R. 
 Co., 53 N. Y. 363 ; People v. Fire 
 Ass'n, 92 N. Y. 311 ; Tatem v. 
 Wright, 23 N. J. L. 429 ; cf. Sandal 
 v. Atlanta L. I. Co., 53 S. C. 241 ; 
 also § 480. 
 
 But it is doubtful, when congress 
 has conferred on a railroad corpora- 
 tion created by a state the power to 
 construct its road within an organ- 
 ized territory, whether such terri- 
 tory after it has become a state can 
 impose any impediment to the full 
 enjoyment of the right thus con- 
 ferred. Van Wyck v. Knevals, 106 TJ. 
 S. 360, 369 ; Railroad Co. v. Baldwin, 
 103 TJ. S. 426. " It could only do 
 this on the same terms that it could 
 refuse a recognition of its own pre- 
 viously granted right, for in such 
 matters the state would succeed 
 only to the authority of congress 
 over the territory." Railroad Co. ». 
 Baldwin, 103 U. S. 426, 431. 
 
 8 Pembina Mining Co. v. Penn- 
 sylvania, 125 U. S. 181. See Southern 
 B'ld'g Ass'n v. Norman, 98 Ky. 294. 
 
 « Blake v. McClung, 172 U. S. 239.
 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 384. 
 
 " Every power which a corporation exercises in another state 
 depends for its validity upon the laws of the sovereignty in 
 which it is exercised, and no corporation can make a valid 
 contract without the sanction, expressed or implied, of such 
 sovereignty ; unless a case should be presented in which the 
 right claimed by the corporation should appear to be secured 
 by the constitution of the United States." 1 
 
 § 384. The right, however, of a state to exclude foreign 
 corporations and prevent them from making con- 
 tracts or transacting business within the state is not among 
 ordinarily exercised ; and the general rule may be 
 stated, subject to qualifications hereafter to be mentioned, that 
 the various states of the Union will permit foreign corpora- 
 tions, which are not expressly or impliedly forbidden by their 
 respective constitutions to transact business outside of the state 
 incorporating them, to contract and transact such business as 
 their constitutions authorize them to execute ; and to resort 
 to the state courts for the enforcement of their rights. 2 This 
 general rule was first authoritatively expressed in Bank of 
 Augusta v. Earle, 3 as follows : " We think it is well settled 
 that by the law of comity among nations, a corporation created 
 by one sovereignty is permitted to make contracts in another, 
 and to sue in its courts ; and that the same law of comity pre- 
 vails among the several sovereignties of this Union. The 
 public and well-known and long-continued usages of trade, the 
 general acquiescence of the states, the particular legislation of 
 
 1 Runyan v. Coster's Lessee, 14 
 Pet. 122, 129. A state cannot deny 
 to a corporation any right protected 
 by the Federal constitution ; see Erie 
 R. Co. v. State, 31 N. J. L. 531; State 
 v. American Exp. Co., 7 Biss. 230; 
 and see § 400. Nor can state legisla- 
 tion restrict foreign corporations 
 when by so doing it interferes with 
 Federal powers, as, e. g., the power 
 to regulate interstate commerce. 
 See Pensacola Tel. Co. v. Western 
 Un. Tel. Co., 96 U. S. 1 ; American 
 Un. Tel. Co. v. Western Un.Tel. Co., 
 67 Ala. 26; Pembina Mining Co. v. 
 Pennsylvania, 125 U. S. 181 ; Western 
 
 Union Tel. Co. v. Massachusetts, 125 
 U. S. 530 ; also § 480. 
 
 2 A foreign corporation in suing 
 need not set out in its pleading the 
 terms of its charter showing its 
 capacity to maintain the action. 
 Smith v. Weed Sewing Machine Co., 
 26 Ohio St. 563. But see Savage v. 
 Russell, 84 Ala. 103. It is not 
 against public policy to organize a 
 corporation to act as the agent with- 
 in the state of a foreign corporation. 
 Day v. Postal Telegraph Co., 66 Md. 
 355. 
 
 8 13 Pet. 519, 592, per Taney, C. J. 
 
 367
 
 § 384.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 some of them, as well as the legislation of Congress, all concur 
 in proving the truth of this proposition." In Christian Union 
 v. Yount, 1 the rule was restated thus: "In harmony with the 
 general law of comity, obtaining among the states composing 
 the Union, the presumption should be indulged that the cor- 
 poration of one state, not forbidden by the law of its being, 
 may exercise within any other state the general powers con- 
 ferred by its own charter, unless it is prohibited from so do- 
 ing either in the direct enactments of the latter state, or by 
 its public policy to be deduced from the general course of its 
 legislation or from the settled adjudications of its highest 
 court." 2 
 
 i 101 U. S. 352, 356, per Harlan, J. 
 
 2 In accordance with these princi- 
 ples are the following authorities: 
 Tombigbee R. R. Co. v. Kneelantl, 4 
 How. 16; Cowell v. Spring Co., 100 
 TJ. S. 55; Williams v. Creswell, 51 
 Miss. 817; Silver Lake Bank v. North, 
 4 Johns. Ch. (N. Y.) 370; Bard v. 
 Poole, 12 N". Y. 495; Merrick v. Van 
 Santvoord, 34 N. Y. 208; British Am. 
 Land Co. v. Ames, 6 Mete. 391; 
 Martin v. Mobile, etc., R. R. Co., 7 
 Bush (Ky.), 116; Guaga Iron Co. v. 
 Uawson, 4 Blackf. (Ind.) 202; Lea- 
 sure v. Union Mut. Life Ins. Co., 91 
 Pa. St. 491; Dodge v. City of Council 
 Bluffs, 57 Iowa, 560; Life Ass'n v. 
 Levy, 33 La. Ann. 1203; Kennebec 
 Co. v. Augusta Ins. Co., 6 Gray, 204; 
 Flash ». Conn, 16 Fla. 428; Newburg 
 Petroleum Co. v. Weare, 27 Ohio St. 
 343; Bank of Washtenaw b. Mont- 
 gomery, 3 111. 422; Lycoming Fire 
 Ins. Co. «. Langley, 62 Md. 196. See 
 Mut. Ben. Life Ins. Co. v. Davis, 12 
 N. Y. 569; Eslava b. Ames Plow Co., 
 47 Ala. 384; Floyd v. Nat. Loan Inv. 
 Co., 49 W. Va. 327; State v. Water 
 Co., 61 Kas. 547. A foreign corpora- 
 tion may sue as administrator in Del- 
 aware when authorized by the state 
 creating it (Pennsylvania) to admin- 
 ister decedents 1 estates. Deringer's 
 
 368 
 
 Adm'r v. Deringer's Adm'r, 5 Houst. 
 (Del.) 410; see ib., 6 Houst. 64. 
 
 When there is nothing to the con- 
 trary in the policy of the state as de- 
 clared by its legislature, a foreign 
 corporation may purchase real estate. 
 Cowell v. Springs Co., 100 U. S. 55; 
 Christian Union v. Yount, 101 U. S. 
 352; Lancaster v. Amsterdam Imp. 
 Co., 140 N. Y. 576; State p. Boston, 
 etc., R. R. Co., 25 Vt. 433; Claremont 
 Bridge Co. v. Royce, 42 Vt. 730; 
 Thompson v. Waters, 25 Mich. 214; 
 Lumbard v. Aldrich, 8 N. H. 30; 
 Santa Clara Female Academy v. Sul- 
 livan, 116 111. 375; Taylor v. Trust 
 Co., 71 Miss. 694. See Runyan v. 
 Coster's Lessee, 14 Pet. 122; Whit- 
 man M'g Co. v. Baker, 3 Nev. 386. 
 A foreign corporation may take a 
 lease of premises for its business. 
 Steamboat Co. v. McCutcheon, 13 Pa. 
 St. 13; Northern Trans'n Co. v. Chi- 
 cago, 7 Biss. 45; Black v. Dela- 
 ware and R. Canal Co., 22 N. J. 
 Eq. 130, 422. Or a mortgage on real 
 estate. National Trust Co. v. Mur- 
 phy, 30 N. J. Eq. 408 ; Lebanon Sav- 
 ings Bank v. Hollenbeck, 29 Minn. 
 322; American Mut. Life Ins. Co. v. 
 Owen, 15 Gray, 491; Silver Lake 
 Bank v. North, 4 Johns. Ch. 370; 
 Lathrop v. Commercial Bank, 8
 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 386. 
 
 § 385. The general rule is subject to the following qualifica- 
 tions : The comity between states does not extend so 
 far that a state will allow a foreign corporation to J£fe comity. 
 (1) exercise any extraordinary franchise, or (2) do 
 any act contrary to the laws, or the public policy of the state 
 as indicated by its legislation, or (3) any act unauthorized by 
 the constitution of the corporation. Moreover, in applying 
 general principles of corporation law to contracts made or to be 
 performed by a foreign corporation within the state, its courts 
 will not necessarily follow the decisions of the state that incor- 
 porated the corporation. 1 
 
 § 386. (1) A foreign corporation cannot exercise any extra- 
 ordinary franchise or special privilege granted by 
 the state incorporating it ; as, for instance, the right of 
 eminent domain, or the privilege of exemption from 
 taxation.' 2 It has even been said that a contract of a 
 foreign corporation to be valid " must be one which 
 
 Foreign 
 corpora- 
 tions can- 
 not exer- 
 cise special 
 franchises ; 
 
 Dana (Ky.), 114; New York Dry 
 Dock v. Hicks, 5 McLean, 111; 
 Farmers' Loan and Trust Co. v. Mc- 
 Kinney, 6 McLean, 1; Life Ins. Co. 
 v. Overholt, 4 Dill. 287. See Leasure 
 v. Union Mut. Life Ins. Co., 91 Pa. St. 
 491. A foreign corporation, in whose 
 favor a foreclosure decree is render- 
 ed, may hold and convey real estate 
 purchased under the decree, when 
 there is no prohibitory statute. Els- 
 ton v. Piggott, 94 Ind. 14. Though 
 a statute forbid foreign corporations 
 to purchase real estate, only the 
 state can take advantage of it. Car- 
 low v. Aultman, 28 Neb. 672. See 
 § 388, n. 5. 
 
 This rule does not enable a cor- 
 poration to exercise in a foreign 
 state powers not granted to it by its 
 constitution. Pierce v. Crompton, 
 13 R. I. 312. See Thompson v. 
 Waters, 25 Mich. 214, and §§ 389-391, 
 post. 
 
 The comity of a state does not ex- 
 tend so far as to allow a foreign cor- 
 poration, authorized by its constitu- 
 
 24 
 
 tion to do business in any state 
 except the state incorporating it, to 
 transact business within the limits 
 of the former state. Land Grant 
 Ry. Co. v. Commissioners, 6 Kan. 
 245; Compare Hanna i\ International 
 Petroleum Co., 23 Ohio St. 622. But 
 no principle of public policy forbids 
 citizens of New York to form a cor- 
 poration in another state and do 
 business in New York as a foreign 
 corporation. Demarest v. Flack, 128 
 N. Y. 205 ; Lancaster v. Amsterdam 
 Imp. Co., 140 N. Y. 576. Oakdale 
 Mfg. Co. v. Garst, 18 R. I. 484. No 
 principle of law requires all or any 
 of the shareholders to be residents 
 of the state incorporating the cor- 
 poration. Rolling Stock Co. v. Peo- 
 ple, 147 111. 234. 
 
 1 Milnor v. N. Y., etc., R. R. Co., 
 53 N. Y. 303. 
 
 2 Foreign railroad company can- 
 not exercise the right of eminent 
 domain. Holbert v. St. L. R. C. and 
 N. R. Co., 45 Iowa, 23. See State v. 
 Boston, Concord, etc., R. R. Co., 25 
 
 369
 
 § 388.] THE LAW OF PIUVATE CORPORATIONS. [CHAP. VU. 
 
 would be valid if made at the same place by a natural person 
 not a resident of the state." -1 
 
 § 387. (2) The act or contract must not be contrary to the 
 Nor act laws of the state. Accordingly, if those laws forbid 
 
 contrary to , • , ,• i « ' • 
 
 the laws or devises to corporations, a devise to a foreign corpo- 
 Fcy'of "the" rat i° n * s invalid, although by its constitution it may 
 state; De authorized to take in that manner. 2 
 
 On similar principles foreign corporations in transacting 
 business must conform to the usury laws of the state; although 
 by their constitutions they are permitted to take a higher 
 rate of interest. 3 Likewise a foreign corporation is subject to 
 the penal laws of the state in which it carries on its operations. 4 
 
 § 388. Neither will a state permit foreign corporations by 
 their acts to contravene its public policy as evinced by its legis- 
 lation. 5 But this public policy must be clear and positive. 
 
 Vt. 433, 442; Middle Bridge Co. v. 
 Marks, 26 Me. 326. It was held in 
 S. A. & A. P. R'y Co. v. S. W. T. & 
 T. Co., 93 Tex. 313, that a foreign 
 telegraph and telephone company 
 complying with the statutory re- 
 quirements to do business in the 
 state could exercise the power of 
 eminent domain. 
 
 1 Bard v. Poole, 12 N. Y. 495, 505. 
 Without express permission a foreign 
 corporation cannot carry on a busi- 
 ness not open to individuals. People 
 v. Howard, 50 Mich. 239. 
 
 2 Starkweathers. Amer. Bible Soc, 
 72 111. 50; Boyce v. St. Louis, 29 Barb. 
 650 ; White v. Howard, 46 N. Y. 144 ; 
 United States v. Fox, 94 U. S. 315 ; 
 cf. Union Nat. Bank v. State Nat. 
 B'k, 155 Mo. 95. Compare § 391. 
 
 3 Hitchcock's Heirs v. United 
 States Bank, 7 Ala. 386, 425 ; U. S. 
 Savings, etc., Co. v. Scott, 98 Ky. 
 695. 
 
 4 McGregor qui tarn v. Erie Ry. Co., 
 35 N. J. L. 115 ; Hinesv. Wilmington, 
 etc., R. R. Co., 95 N. C. 434. 
 
 5 See Ewing v. Toledo Savings Bk., 
 43 O. St. 31. In Illinois the public 
 policy is declared against perpetui- 
 
 370 
 
 ties in lands, and the Illinois courts 
 hold that a foreign corporation, 
 which is authorized by its charter to 
 buy and sell lands, without any pro- 
 vision to compel it to sell within a 
 certain time, cannot purchase land 
 in Illinois, as that might tend to cre- 
 ate a perpetuity. Carroll v. East St. 
 Louis, 67 111. 568 ; U. S. Trust Co. v. 
 Lee, 73 111. 142. But it has since been 
 held by the Illinois Supreme Court 
 that this rule does not apply to cor- 
 porations incorporated to loan 
 money on real estate securities. 
 United States Mortgage Co. v. Cross, 
 7 Central L. J. 226 (1878). The 
 Illinois policy against trusts applies 
 to the acts of foreign corporations 
 within the state. Bishop v. Amer. 
 P. Co., 157 111. 284. A foreign loan 
 association can impose no greater re- 
 strictions on the right of a resident 
 member to withdraw than can be 
 imposed by a domestic corporation 
 of the same nature. St. Louis Loan 
 & Inv. Co. v. Yantes, 173 111. 321. 
 To be able to take advantage of the 
 exemption from the usury laws, al- 
 lowed to a domestic loan association, 
 the foreign loan association must 

 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 389. 
 
 "If the policy of the state or territory does not permit the 
 business of the foreign corporation within its limits, or allow 
 the corporation to acquire or hold real property, it must be ex- 
 pressed in some affirmative way ; it cannot be inferred from the 
 fact that its legislature has made no provisions for the forma- 
 tion of similar corporations, or allows corporations to be formed 
 only by general law." 1 
 
 § 389. (3) The third qualification is often stated thus : " The 
 contract must be one which the foreign corporation 
 is permitted by its charter to make.' 
 noticed that the word " charter " is used here in a 
 manner to imply that any disability imposed on a 
 foreign corporation by the general laws of the state creating it, 
 would be disregarded by the courts of another state. And, 
 indeed, this distinction is expressly taken in Hoyt v. Shelden, 3 
 where it is said : " There is a plain distinction between acts of 
 the foreign corporation, which the charter does not authorize, 
 or which it may forbid, and acts which upon the face of the 
 charter are authorized, but which the general laws of the for- 
 eign state may prohibit." From the context, however, it is 
 apparent that the court did not mean to lay down any general 
 rule to the effect that courts would not recognize restrictions 
 
 Nor do acts 
 It Will be beyond 
 
 their pow- 
 ers. 
 
 show that it is organized under a 
 statute identical with, or substan- 
 tially like, the domestic statute. 
 Rhodes v. Mo. Sav. Co., 173 111. 621. 
 An insolvent foreign corporation can- 
 not make a preferential assignment 
 in Texas, where such are held void, 
 although it could have done so ac- 
 cording to the law of its own state. 
 Fowler v. Bell, 90 Tex. 150. See 
 contra, Vanderpool r. Gorman, 140 
 N. Y. 563. Cf. Pair point Mfg. Co. 
 D. Watch Co., 161 Pa. St. 17. An in- 
 solvent foreign corporation can pre- 
 fer creditors by mortgaging its real 
 estate in Indiana where it is for- 
 bidden to do so by the laws of its 
 own state. Nathan v. Lee, 152 Itid. 
 232. A statute limiting the amount 
 of land which foreign corporations 
 may hold can be taken advantage of 
 
 only by the state. Amer. Mtge. Co. 
 v. Tennille, 87 Ga. 28. See, also, 
 cases in the next note. 
 
 i Covvell o. Spring Co., 100 U. S. 
 55, 59; approved in Christian Union 
 v. Yount, 101 U. S. 352, 356. Accord 
 Stevens v. Pratt, 101 111. 206 ; Com- 
 mer. Union Assurance Co. v. Scam- 
 mon, 102 111. 46. And see Carroll v. 
 East St. Louis, 67 111. 568 ; People v. 
 Fidelity, etc., Co., 153 111. 25. 
 
 2 Bard v. Poole, 12 N. Y. 495, 505; 
 Hitchcock's Heirs v. United States 
 Bk., 7 Ala. 386, 435; Morris v. Hall, 
 41 Ala. 510. See, also, Pierce v. 
 Crompton, 13 R. I. 312; Thompson 
 v. Waters, 25 Mich. 214. See Der- 
 inger v. Deringer, 5 Houston (Del.), 
 416, ante, last note to § 384. 
 
 8 3 Bos. (N. Y.) 267, 299. 
 
 371
 
 § 390.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VU. 
 
 on the powers of foreign corporations contained in the general 
 laws of the state incorporating them ; but only that persons 
 dealing with the corporation would not be affected with notice 
 of such provisions. The court continue, as follows : " Our citi- 
 zens acting here in dealing with or in relying upon the acts of 
 such a corporation, are bound to notice and regard the provisions 
 of such charter, but are not affected by or bound to notice the 
 general laws of the foreign state, although they may restrain 
 the powers of such corporations under the charter." ' An ex- 
 amination of the same case on appeal 2 will show that if the 
 citizen of JS'ew York, in this instance, had had notice of the 
 foreign law, the New York court would have given full effect 
 to it, and would have recognized the disabilities imposed by it 
 on the foreign corporation. 3 
 
 § 390. Admitting it to be proper for the courts of a state to 
 protect its own citizens from the hardships they might suffer 
 were they bound to know the laws of a foreign state, 4 it is sub- 
 mitted that the distinction indicated above is neither conven- 
 ient nor correct on principle. It is not convenient, for now- 
 adays the vast majority of corporations are incorporated under 
 general statutes, and have no " charters " properly speaking ; 
 so the distinction is fast losing its applicability. And the dis- 
 tinction seems incorrect on principle ; it being a curious comity 
 which will recognize in corporations powers which, under their 
 own constitutions, they do not possess. The constitution of a 
 
 1 lb. See, also, Pairpoint Mfg. Co. 
 v. Watch Co., 161 Pa. St. 17. A court 
 will not take judicial notice of the 
 powers of a foreign corporation. 
 Chapman v. Colby, 47 Mich. 46. The 
 corporation must prove its powers. 
 Diamond Match Co. v. Powers, 51 
 Mich. 145. 
 
 2 10 N. Y. 207, 222, sub nom. Hoyt 
 v. Thompson's Executor. Compare 
 Hoyt u. Thompson, 5 N. Y. 320, 353. 
 
 3 The New York Court of Appeals 
 seems not to have adhered to the 
 above distinction in the case of Ells- 
 worth v. St. Louis, etc., R. R. Co., 08 
 N. Y. 553. There it was decided 
 that wlien a railroad company incor- 
 porated by another state enters into 
 
 372 
 
 a contract in New York, which, by 
 its terms, is to be performed in New 
 York, and is legal under New York 
 laws, prohibitions in the charter 
 which would render the contract il- 
 legal in the state incorporating the 
 company, do not render it illegal in 
 New York; but operate only as re- 
 strictions on the power of the cor- 
 poration and its officers. 
 
 4 See § 389. But compare Relfe v. 
 Rundle, 103 U. S. 222, 224; and 
 Bockover v. Life Association, 77 Va. 
 85, which holds that every one deal- 
 ing with a corporation, even in a 
 foreign state, must take notice of its 
 powers. See, also, Republican, etc., 
 Mines v. Brown, 19 U. S. App. 203.
 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 391. 
 
 corporation is composed of all the laws affecting the corpora- 
 tion ; and embraces just as much statutes affecting corporations 
 generally, as the particular statute — enabling act or special 
 charter — immediately under which the corporation was organ- 
 ized. 1 
 
 § 391. The correct distinction seems rather as follows : If 
 the validity of an act, forbidden b} 7 the legislature of the state 
 incorporating the foreign corporation on whose behalf or in 
 regard to which the act was done, is to be passed on by the 
 court of another state, by the true rule of comity the court 
 should give effect to the prohibition according to the intent of 
 the legislature enacting it. If the prohibition were apparently 
 intended to inhere in the corporation, and to apply to all its 
 acts wherever done, the court should give effect to it. 2 But if 
 it was rather part of the local policy of the state enacting it, 
 of local policy which there is no reason for extending beyond 
 state limits, nor even any reason for supposing the legislature 
 would have desired to see thus extended, then the prohibition 
 should not be enforced by the courts of other states, at least in 
 regard to acts and matters outside of the state enacting it. 3 
 The true rule was stated by Justice Christiancy in Thompson 
 
 > Relfe v. Rundle, 103 U. S. 222. 
 Compare Canada Southern R. R. Co. 
 v. Gebhard, 109 U. S. 527, 537. 
 
 The ordinary presumptions in 
 favor of the legality of actions, how- 
 ever, apply to foreign corporations. 
 Thus, where a court has no judicial 
 knowledge of the constitution of the 
 foreign corporations, as, e. g., when 
 it is chartered by a private law, the 
 court will presume authority to do 
 any reasonable act, until absence of 
 authority be shown. Charleston, 
 etc., Turnpike Co. v. Willey, 10 Ind. 
 34. See, also, Express Co. v. Rail- 
 road Co., 99 U. S. 191, 199. 
 
 2 See Rue v. Missouri Pac. Ry. Co., 
 74 Tex. 474. 
 
 3 See Ohio Life Ins. Co. v. Mer- 
 chants 1 Ins. Co., 11 Humph. (Tenn.) 
 1, 24. A statute forbidding corpora- 
 
 tions to make assignments in con- 
 templation of insolvency (said pro- 
 vision not being contained in the 
 statute under which the corporation 
 in question was organized) is part 
 of the local policy of the state (New 
 York), and will not be enforced as 
 to an assignment of property made 
 in another state (Ohio), said prop- 
 erty being in Illinois. Warren v. 
 First Nat. Bk., 149 111. 9; ace. Pair- 
 point Mfg. Co. v. Watch Co., 161 Pa. 
 St. 17. The contract between a resi- 
 dent shareholder and a foreign cor- 
 poration is that embodied in the 
 charter; and his rights are not af- 
 fected by the general laws of the 
 foreign state, incorporating the cor- 
 poration, affecting remedies. Guil- 
 ford v. West. Un. Tel. Co., 59 Minn. 
 332. 
 
 373
 
 § 392.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 v. Waters, 1 to the effect that a court will recognize in a foreign 
 corporation "no powers or capacities which would not be re- 
 cognized and sustained by the courts of" the state incorporat- 
 ing it, "had the same question of capacity to take these lands 
 come before them for adjudication." 
 
 This latter distinction finds illustration in decisions constru- 
 ing the validity of devises of lands to foreign corporations. 
 If, for instance, in Ohio, certain corporations are allowed to 
 take land by devise, a prohibition in the laws of the state in- 
 corporating the foreign corporation will not invalidate a devise 
 to it of Ohio land. 2 Indeed, is there any reason to suppose 
 that the courts of the state incorporating the corporation would 
 apply its own statute forbidding devises to corporations, to in- 
 validate a devise to the corporation of land situated in a state 
 where no such prohibition existed ? Would they not rather 
 apply the law of the state where the land was situated ? as- 
 suming such a question to be brought before them, which is 
 improbable. 3 
 
 § 392. As the courts of a state will enforce contracts at the 
 
 suits of a foreign corporation, so they will entertain an action 
 
 against it. 4 But the subject-matter of the suit must 
 
 Actions 
 
 against not be such that the court will decline to assume 
 portions 01 " jurisdiction, as, for instance, on account of its in- 
 ability to do complete justice in the matter. 5 
 
 i 25 Mich. 214, 218. 
 
 2 Amer. Bible Soc. v. Marshall, 15 
 Ohio St. 537; White v. Howard, 38 
 Conn. 342. Contra, House of Mercy 
 v. Davidson, 90 Tex. 529. Compare 
 §386. 
 
 3 On the other hand, it has been 
 held that when a corporation is char- 
 tered to do business in another state, 
 the liabilities of its shareholders 
 should be governed by the statutes 
 of the foreign state fixing the liability 
 of shareholders. Pinney v. Nelson, 
 183 U. S. 144. 
 
 4 N. O. J. and G. N. R. Co. v. Wal- 
 lace, 50 Miss. 244; North Missouri R. 
 R. Co. v. Akers, 4 Kans. 453; City 
 
 Fire Ins. Co. v. Carrugi, 41 Ga. 660; 
 Bushel v. Commonwealth Ins. Co., 15 
 S. & R. 176; St. Louis Perpetual Ins. 
 Co. v. Cohen, 9 Mo. 416, 441; Newby 
 v. Colt's Patent Fire Arms Co., L. R. 
 7 Q. B. 293; Libby v. Hodgdon, 9 N. 
 H. 394; Equitable Life Ass. Soc. v. 
 Vogel's Executrix, 76 Ala. 441; 
 Selma, etc., R. R. Co. v. Tyson, 48 
 Ga. 351; Amer. Casualty Co. v. Lea, 
 56 Ark. 539; Alabama Gt. S. Ry. Co. 
 v. Fulghum, 87 Ga. 263. 
 
 The stock (i. e., shares) of a foreign 
 corporation having its office aud prin- 
 cipal business within this state (New 
 York) is not subject here to attach- 
 ment as property within this state, 
 
 6 Kansas and E. R. R. Cons. Co. v. Topeka, etc., R. R. Co., 135 Mass. 34. 
 
 374
 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 392. 
 
 In New York, section 1780 of the Code of Civil Procedure 
 provides that a foreign corporation may be sued on any cause 
 of action by a resident of the state or a domestic corporation, 
 but when the plaintiff is a non-resident or a foreign corpora- 
 tion, only in the following cases : (1) when the action is brought 
 to recover damages for the breach of a contract made within 
 the state, or relating to property situated within the state at 
 the time when the contract was made ; (2) when the action is 
 brought to recover real property situated within the state, or a 
 chattel replevied within the state ; (3) when the cause of action 
 arose within the state, except where the object of the action is 
 to affect the title to real property situated without the state. 
 Before the passage of this, and other and former statutes which 
 it supplements or is a substitute for, a foreign corporation could 
 not be brought in invitum into a New York court. 1 And the 
 present rule in New York is that in cases other than those pro- 
 vided for in the above-mentioned sections of the code, the court 
 
 the owner being a non-resident, and 
 his certificate never having been 
 within this state. Plimpton v. Bige- 
 low, 93 N. Y. 592, reversing S. C, 12 
 Abb. N. C. (N. Y.) 202; Ireland v. 
 Globe Milling Co., 19 R. I. 180. 
 Compare Schmidlapp v. La Confiance 
 Ins. Co., 71 Ga. 246. Contra, Young 
 v. Iron Co., 85 Tenn. 189. Shares of 
 stock in a foreign corporation cannot 
 be attached by seizure of the stock 
 certificate. Armour Brothers v. Nat. 
 Bank, 113 Mo. 12. Foreign corpora- 
 tions are subject to garnishment only 
 where an original action could be be- 
 gun against them in the same courts 
 to recover the debt garuisheed. Myer 
 v. Liverpool, etc., Ins. Co., 40 Md. 
 595; Compare Haddon v. Linville, 86 
 Md. 210; Linville v. Haddon, 88 Md. 
 594; Hodgson v. Southern B'ld'g 
 Assn., 91 Md. 439. See Biause v. 
 New England Fire Ins. Co., 21 Wis. 
 509. A foreign corporation having 
 no property of the debtor within the 
 state, nor owing money to him pay- 
 able within the state, cannot be gar- 
 
 uisheed in the state. Wright v. Chi- 
 cago, etc., R. R. Co., 19 Neb. 175; 
 Nat. Bk. v. Frutick, 2 Marv. (Del.) 
 35. A domestic corporation has its 
 exclusive residence in the jurisdic- 
 tion of origin and cannot be gar- 
 nisheed in another jurisdiction for 
 debts owing by it to home creditors, 
 so as to make the attachment effec- 
 tual against such a creditor in the 
 absence of jurisdiction acquired over 
 his person. Douglass v. Phoenix Ins. 
 Co., 13'8 N. Y. 209. When a foreign 
 corporation sues in Massachusetts a 
 citizen of another state on a cause of 
 action arising in that other state, the 
 Massachusetts court may decline 
 jurisdiction when the amount is 
 trifling and the defendant would be 
 put to great inconvenience, and there 
 is no reason why suit should not be 
 brought in his state. Nat. Tele- 
 phone, etc., Co. v. Du Bois, 165 Mass. 
 117. 
 
 1 See Gibbs v. Queen Insurance Co., 
 63 N. Y. 114; aud compare Ervin v. 
 Railway Co., 28 Hun (N. Y.), 269. 
 
 375
 
 § 392.] THE LAW OF PRIVATE CORPORATIONS. [cHAP. VII. 
 
 will refuse jurisdiction if the non-residence of the corporation 
 is brought to its attention at any stage of the proceedings. 1 
 
 Under Michigan statutes, one foreign corporation may sue 
 another in that state if the cause of action arose there, and both 
 corporations are doing business there. 2 In Massachusetts a non- 
 resident may sue a foreign insurance company, which does 
 business in that state, on a contract made in another state, 
 where the subject-matter of the contract is also situated, 
 although the only service made is on the insurance commis- 
 sioner, whom all foreign insurance companies are required to 
 appoint as their attorney for service of process. 15 
 
 Courts will not, however, determine controversies relating to 
 the internal management of a foreign corporation, arising be- 
 tween one set of shareholders and persons claiming to be the 
 officers, as well as shareholders, of the corporation. 4 But the 
 legal relations between a corporation and its shareholders are 
 to be determined by the law of the home state ; and accordingly 
 a state will recognize and apply a statute of the home state 
 
 1 Robinson v. Nav. Co., 112 N. Y. 
 315. Compare as to the rule in the 
 Federal courts, Barrow St'mship Co. 
 v. Kane, 170 U. S. 100. An action on 
 a foreign judgment is not within the 
 third clause of section 1780 of the 
 New York Code. Anglo-Amer. Prov. 
 Co. o. Davis Prov. Co., 169 N. Y. 
 506. 
 
 2 Emerson, Talcott& Co. v. McCor- 
 mick Havesting Machine Co., 51 
 Mich. 5. For the rule under the 
 South Carolina statute, see Central 
 R. R. Co. v. Georgia Co., 32 S. C. 
 319. For the rule in Washington, 
 see Carstons v. Leidigh, etc., Lumber 
 Co., 18 Wash. 450.- . 
 
 3 Johnston v. Trade Ins. Co., 132 
 Mass. 432. (The insurance company 
 had appointed the commissioner in 
 accordance with the statute.) See, 
 also, Wilson v. Fire Alarm Co., 149 
 Mass. 24. And see Abell v. Penn. 
 Mutual Life Ins. Co., 18 W. Va. 400; 
 Desper ». Continental Water Meter 
 
 376 
 
 Co., 137 Mass. 252. It is held, on the 
 other hand, that a court will not take 
 jurisdiction of- an action for personal 
 injuries caused by a foreign corpo- 
 ration in its own state, although the 
 corporation operates a railroad in the 
 state where the suit is brought. 
 Central R. R., etc., Co. v. Carr, 76 Ala. 
 388. 
 
 4 Wilkins v. Thorne, 60 Md. 253; 
 North State Copper, etc., Co. v. Field, 
 64 Md. 151; Madden v. Electric Light 
 Co., 181 Pa. St. 617; id., 199 Pa. St. 
 454; Condon v. Mut. Res. Ass'n, 89 
 Md. 90; Clark v. Mut. Res. Ass'n, 14 
 D. C. App. Cas. 154; Barley v. Git- 
 tings, 15 D. C. App. Cas. 427; Stock- 
 ley v. Thomas, 89 Md. 392; Taylor v. 
 Mut. Res. Ass'n, 97 Va. 60. A court 
 will sometimes inquire into the affairs 
 of a foreign corporation, if the for- 
 eign corporation is so situated that 
 the court can give full relief. State 
 ex rel. Watkins v. Land & Timber 
 Co., Ltd., 106 La. 621.
 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 393. 
 
 giving a corporation a lien on its shares for debts due to it 
 from shareholders. 1 
 
 § 393. It is stated, as a general rule, that penal provisions 
 will not be enforced outside of the jurisdiction of the Penal pro _ 
 state enacting them. 2 The Federal Supreme Court, jjjjjf^. 
 however, has recently held that a statute making forced out- 
 directors personally liable to creditors of the corpo- state enact- 
 ration for makiug and signing false reports ma}^ be statutory 
 enforced without a state. " As the statute imposes hablllt y- 
 a burdensome liability on the officers for their wrongful act, 
 it may well be considered penal, in the sense that it should 
 be strictly construed. But as it gives a civil remedy at the 
 suit of the creditor only, and measured by the amount of his 
 debt, it is as to him clearly remedial. To maintain such a suit 
 is not to administer a punishment imposed upon an offender 
 against the state, but simply to enforce a private right secured 
 under its laws to an individual. We can see no just ground, 
 on principle, for holding such a statute to be a penal law in 
 the sense that it cannot be enforced in a foreign state or 
 country." 3 
 
 The liability of shareholders in a foreign corporation, arising 
 under the statutes of the state in which the corporation is in- 
 corporated, is of a contractual nature, and will be enforced in 
 any court of competent jurisdiction. In the leading case of 
 
 1 Bishop v. Globe Co., 135 Mass. 
 132. A court will entertain a suit by 
 a resident against a foreign corpora- 
 tion to compel it to issue a new cer- 
 tificate of stock to him, Guilford v. 
 Western U. Tel. Co., 59 Minn. 332. 
 
 2 See Story, Conflict of Laws, §§ 620, 
 621; Wharton's Conflict of Laws, 
 §833. 
 
 A statute of Indiana giving a right 
 to recover a penalty for the failure of 
 a telegraph company to transmit a 
 message, has no extra-territorial 
 force, and therefore is not applica- 
 ble to messages delivered to the 
 company in anotber state to be sent 
 to tins state (Indiana). Carnahan v. 
 Western Un. Tel. Co., 89 Ind. 526. 
 But if the message is delivered to 
 
 the telegraph company within the 
 state, to be sent to a point without, 
 the fact tbat the act of negligence 
 preventing the message from reach- 
 ing its destination occurred outside 
 of the state will not defeat a recov- 
 ery. Western Un. Tel. Co. v. Ham- 
 ilton, 50 Ind. 181. The determining 
 circumstance, according to these two 
 cases, is whether the contract with 
 the telegraph company was entered 
 into within the state. 
 
 3 Huntington u. Attrill, 146 U. S. 
 657, 677. Opinion of the court per 
 Gray, J. Accord, with respect to 
 personal statutory liability of direct- 
 ors for creating debts in excess of 
 the capital stock. Farr v. Briggs's 
 Estate, 72 Vt. 225. See §§ 764, 765. 
 
 377
 
 § 393.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Whitman v. Oxford National Bank 1 upon the Kansas statute, 
 Justice Brewer said, giving the opinion of the Federal Supreme 
 Court : " The liability which by the constitution and statutes 
 is thus declared to rest upon the stockholder, though statutory 
 in its origin, is contractual in its nature. It would not be 
 doubted that if the stockholders in this corporation had formed 
 a partnership, the obligations of each partner to the others and 
 to creditors would be contractual, and determined by the gen- 
 eral common law in respect to partnerships. If Kansas had 
 provided for partnerships, with limited liability, and these par- 
 ties, complying with the provisions of the statute, had formed 
 such a partnership, it would also be true that their obligations 
 to one another and to creditors would be contractual, although 
 only in the statute was to be found the authority for the crea- 
 tion of such obligations. And it is none the less so when these 
 same stockholders organized a corporation under a law of Kan- 
 
 1 176 U. S. 559. Accord Ferguson 
 v. Sherman, 116 Cal. 169; Aldrich v. 
 Coal Co., 24 Oreg. 32; Bell v. Far- 
 well, 176 111. 489; Hancock Nat. 
 Bank v. Ellis, 172 Mass. 39; Broad- 
 way Nat. Bank v. Baker, 176 U. S. 
 294; Western Nat. Bank v. Law- 
 rence, 117 Mich. 669; Guerney v. 
 Moore, 131 Mo. 650. Marshall v. 
 Sherman, 148 N. Y. 9, and Crippen 
 v. Leighton, 69 N. H. 540, contra, 
 arose prior to the decision in the 
 Whitman case cited in the text. All 
 of the above cases arose under the 
 Kansas statutes. The Pennsylvania 
 court, under the same Kansas stat- 
 utes, holds that a creditor can sue a 
 shareholder at law in Pennsylvania 
 after a receiver has been appointed in 
 Kansas. Ball v. Anderson, 19(5 Pa. 
 St. 86, overruling Cushing v. Perot, 
 175 Pa. St. 66. 
 
 It is the tendency of recent state 
 decisions, upon grounds of comity, 
 to allow receivers of foreign corpo- 
 rations to maintain suits to enforce 
 the statutory liability of resident 
 stockholders. Childs u. Cleaves, 95 
 
 378 
 
 Me. 498; Tomkins v. Blakely, 70 N. 
 H. 585; Howard v. Angle, 162 N. Y. 
 179; Howard v. Lombard, 175 Mass. 
 570. Compare Swing v. Bentley Co., 
 45 W. Va. 283. But see Wyman v. 
 Eaton, 107 Iowa, 214. 
 
 The liability of a shareholder in an 
 insolvent foreign corporation for his 
 unpaid subscription may be enforced 
 in an action brought by the receiver 
 of the foreign corporation. Castle- 
 man v. Templeton, 87 Md. 546; Stod- 
 dard v. Lum, 159 N. Y. 265. Upon 
 the general question of enforcing in 
 other states the statutory liability 
 of shareholders in a foreign corpora- 
 tion compare the following earlier 
 cases: Rule v. Omega, 64 Miun. 326; 
 New Haven Horse Nail Co. v. Lin- 
 den, 142 Mass. 349; Flash v. Conn, 
 109 U. S. 371; Aultman's Appeal, 98 
 Pa. St. 505; Erickson v. Smith, 4 
 Allen, 233; Same v. Same, 15 Gray, 
 221; Smith v. Mutual Life Ins. Co., 
 14 Allen, 336; Bank of North Amer- 
 ica v. Rindge, 154 Mass. 203; Fowler 
 V. Samson, 146 111. 472; Russell v. 
 Pacific Ry. Co., 113 Cal. 258.
 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 393. 
 
 sas, which prescribed the nature of the obligations which each 
 thereby assumed to the others and to the creditors. While the 
 statute of Kansas permitted the forming of the corporation un- 
 der certain conditions, the action of these parties was purely 
 voluntary. In other words, they entered into a contract au- 
 thorized by statute." It is held in Massachusetts that a for- 
 eign corporation may maintain in the Massachusetts courts a 
 bill against the officers of another foreign corporation, against 
 which it holds a judgment obtained in the state where both 
 corporations were organized, for discovery of the names of 
 its stockholders and the number of shares held by each, when 
 the officers of the debtor corporation reside in Massachusetts 
 and its books are kept there, the ultimate object of the bill 
 being to enable the plaintiff, by a suit in its home state, to en- 
 force the statutory liability of the stockholders of the debtor 
 corporation. 1 
 
 In the subsequent case of Hancock National Bank v. Farnum 2 
 the Federal Supreme Court held that under the Constitution of 
 the United States the court of the state in which the share- 
 holders are sued, must give the same effect to a judgment 
 against the corporation rendered in the home state, Kansas, that 
 would have been accorded it in Kansas, and therefore that 
 such judgment is in every court conclusive against shareholders 
 upon those matters as to which it would have been conclusive 
 in Kansas. Giving the opinion of the court, Justice Brewer 
 said : " What then is the faith and credit given by law or usage 
 in the courts of Kansas to a judgment against a corporation ? 
 What is the effect of such a judgment as there established? 
 This is a question not answered by referring to general princi- 
 ples of law, by determining what at common law was the sig- 
 nificance and effect of a judgment, but can be answered only 
 by an examination of the decisions of the courts of Kansas. 
 The law and usage in Kansas, prescribed by its legislature and 
 enforced in its courts, make such a judgment not only conclu- 
 sive as to the liability of the corporation, but also an adjudica- 
 tion binding each stockholder therein. We do not mean that 
 
 iPost v. Toledo, etc., R. R. Co., 
 144 Mass. 341. 
 
 2 176U. S. 640. Followed in Tomp- 
 kins, Rec'r, v. Blakey, 70 N. H. 584; 
 
 Childes v. Cleaves, 95 Me. 498; How- 
 ard v. Lombard, 175 Mass. 570; 
 Broadway Nat. Bank v. Baker, 176 
 Mass. 294. 
 
 379
 
 § 394.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 it is conclusive as against any individual sued as a stockholder 
 that he is one, or if one, that he has not already discharged by 
 payment to some other creditor of a corporation the full meas- 
 ure of his liability, or that he has not claims against the corpo- 
 ration, or judgments against it, which he may, in law or equity, 
 as any debtor, whether by judgment or otherwise, set off against 
 a claim or judgment, but in other respects it is an adjudication 
 binding him. He is so far a part of the corporation that he is 
 represented by it in the action against it. 1 .... 
 
 " Now, as the judgment rendered in the Kansas court is in 
 that state not only conclusive against the corporation but also 
 binding upon the stockholder, it must, in order to have the 
 same force and effect in other states of the Union, be adjudged 
 in their courts to be binding upon him, and the only defences 
 which he can make against it are those which he could make 
 in the courts of Kansas. The question to be determined in this 
 case was not what credit and effect are given in an action against 
 a stockholder in the courts of Khode Island to a judgment in 
 those courts against the corporation of which he is a stockholder, 
 but what credit and effect are given in the courts of Kansas, in 
 a like action to a similar judgment there rendered. Thus and 
 thus only can the full faith and credit prescribed by the con- 
 stitution of the United States and the act of Congress be se- 
 cured.'' 
 
 § 394. A court has no jurisdiction either to dissolve a foreign 
 T . 3 . . corporation, 2 or compel a distribution of its assets. 
 
 Jurisdiction ~ > i _ ^ 
 
 over assets even though its trustees are residents; 3 or to enjoin 
 corpora? 1 the directors of such a corporation from paying a 
 tlons ' dividend, where no debt is due the plaintiff, and his 
 
 ground of complaint is merely a supposed error on the part of 
 the directors in declaring the dividend, 4 or to appoint a re- 
 ceiver of a foreign corporation. 5 But it has been held that a 
 
 1 Citing Ball v. Reese, 58 Kan. 614. shareholder in a foreign corporation. 
 
 2 Dodge v. Pyrolusite Manganese 
 Co., 69 Ga. 605. 
 
 a Redmond v. Enfield Mfg. Co., 13 
 Abb. Pr. N. S. (N. Y.) 332. See 
 Wilkins v. Thorne, 60 Md. 253 ; North 
 State Copper, etc., Co. v. Field, 64 
 Md. 151. A state court will not 
 entertain a creditor's bill against a 
 
 380 
 
 Young v. Farwell, 139 111. 326. See 
 §706. 
 
 4 Howell v. Chicago, etc., Ry. Co., 
 51 Barb. 378. But see De Bemer v. 
 Drew, 57 Barb. 438; Prouty v. Mich. 
 So., etc., R. R. Co., 1 Hun, 658. 
 
 5 Stafford v. American Mills Co., 
 13 R. I. 310; Green v. Williams, 22
 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 395. 
 
 court (of chancery) has jurisdiction to wind up the affairs of an 
 insolvent foreign corporation, doing business in the state, so far 
 as to administer its assets within the jurisdiction of the court. 1 
 But a statute which seeks to limit the distribution of such 
 assets to resident creditors and to deny to individual creditors 
 resident in other states the right to share therein is unconsti- 
 tutional and void. 2 
 
 § 395. In order that a judgment in personam against a foreign 
 corporation shall be valid, so as to obtain recogni- . 
 tion in other states, it is prerequisite that the cor- foreign cor- 
 poration should have appeared voluntarily, 3 or that por 
 a valid service of process should have been made within the 
 jurisdiction of the court, upon an agent of the corporation 
 representing it in the state. This rule has been stated by the 
 Federal Supreme Court, as follows : 4 " We are of opinion that 
 when service is made within the state upon an agent of a foreign 
 corporation, it is essential, in order to support the jurisdiction 
 of the court to render a personal judgment that it should appear 
 somewhere upon the record — either in the application for the 
 writ, or accompanying its service, or in the pleadings or the 
 findings of the court — that the corporation was engaged in 
 business in the state. The transaction of business by the cor- 
 poration in the state, general or special, appearing, a certifi- 
 cate of service by the proper officer on a person who is its agent 
 there would, in our opinion, be sufficient prima facie evidence 
 that the agent represented the company in the business. It 
 would then be open, when the record is offered as evidence in 
 another state, to show that the agent stood in no representative 
 character to the company, that his duties were limited to those 
 
 R. I. 547. See Pierce v. Crompton, 
 ib. 312. 
 
 1 Smith v. St. Louis Mut. Life Ins. 
 Co., 6 Lea (Tenn.), 564. See Hol- 
 brook v. Ford, 153 111. 633. Compare 
 Paige v. Smith, 99 Mass. 395. Bus- 
 well v. Order of the Iron Hall, 161 
 Mass. 224. 
 
 2 Blake v. McClung, 172 U. S. 239. 
 A foreign corporation not doing bus- 
 iness in the state, may, however be 
 denied the right to share in such 
 assets, (idem). See People y. Granite 
 
 State Prov. Ass'n, 161 N. Y. 492; 
 Bank Com. v. Granite State Prov. 
 Ass'n, 70 N. H. 557. 
 
 3 See Attorney -General v. Guardian 
 Mut. Life Ins. Co., 77 N. Y. 272 ; 
 Townes v. City Council, 46 S. C. 15; 
 Central Trust Co. v. McGeorge, 151 
 U. S. 129. 
 
 * St. Clair v. Cox, 106 U. S. 350, 
 359, following the principles of Pen- 
 noyer v. Neff, 95 U. S. 714. See 
 Hohorst, in re, 150 U. S. 653. 
 
 381
 
 § 396.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 of a subordinate employe, or to a particular transaction, or that 
 his agency had ceased when the matter in suit arose." * 
 
 § 396. It thus appears that, in order to bind the corporation 
 by the judgment, the person on whom service is made must be 
 the agent of the corporation representing it there within the 
 state whose process is served on him. And the agents of a cor- 
 poration are not its representatives for the purpose of receiving 
 service of process in a state where the corporation transacts no 
 business. 2 When a foreign corporation has a regular office for 
 
 1 See, also, Freeman v. Alderson, 
 119 U. S. 185; Fitzgerald Construc- 
 tion Co. u. Fitzgerald, 137 U. S. 98; 
 Societe Fonciere v. Milliken, 135 U. 
 S. 304; Barrow St'mship Co. v. 
 Kane, 170 U. S. 100; Conn. Mut. L. 
 I. Co. v. Spratley, 172 U. S. 602; Far- 
 rell v. Oregon Gold Co., 31 Or. 463; 
 Blanc v. Paymaster Mg. Co., 95 Cal. 
 524; American Exp. Co. v. Conant, 
 45 Mich. 642; Lathrop v. Union Pac. 
 R'y Co., 1 McArthur, 234; Dallas v. 
 Atlantic, etc., R. R. Co., 2 McArthur, 
 146; Weight v. Liverpool, etc., Ins. 
 Co., 30 La. Ann., Part II., 1186 ; 
 McNichol v. United States, etc., 
 Agency, 74 Mo. 457 ; Weymouth v. 
 Washington, etc., R. R. Co., 1 Mc- 
 Arthur, 19; Georgia Southern R. R. 
 Co. v. Bigelow, 68 Ga. 219; Moore v. 
 Wayne Circuit Judge, 55 Mich. 84; 
 Tillinghast v. Boston Co., 39 S. C. 
 484; Firemen's Ins. Co. v. Thompson, 
 155 111. 204,- Germ. Ins. Co. v. First 
 Nat. B'k, 58 Kas. 86. For certain 
 purposes of procedure a foreign cor- 
 poration has a residence in a county 
 where it has an office or agent for 
 transacting business. Harding v. 
 Chicago, etc., R. R. Co., 80 Mo. 659. 
 But, even then insolvency proceed- 
 ings will not discharge a debt owing 
 to a foreign corporation. Bergner & 
 Engel Br'w'g Co. v. Dreyfus, 172 
 Mass. 154; Hammond Beef Co. v. 
 Best, 91 Me. 431. 
 
 An Illinois statute required foreign 
 
 382 
 
 insurance companies doing business 
 in that state, to appoint in writing a 
 resident attorney on whom process 
 could be served. The insured took 
 out a policy in Michigan, died, and 
 an Illinois court appointed an ad- 
 ministrator, the policy of insurance 
 being the only asset. Held, the ad- 
 ministrator could sue the Insurance 
 Co. in Illinois. "In view of this 
 legislation and the policy embodied 
 in it, when this corporation, not or- 
 ganized under the laws of Illinois, 
 has, by virtue of those laws, a place 
 of business in Illinois, and a general 
 agent there, and a resident attorney 
 there for the service of process, and 
 can be compelled to pay its dehts 
 there by judicial process, and has 
 issued a policy payable on death to 
 an administrator, the corporation 
 must be regarded as having a domi- 
 cile there, in the sense of the rule 
 that the deht on the policy is assets 
 at its domicile, so as to uphold the 
 grant of letters of administration 
 there." New England Mut. Life 
 Ins. Co. v. Woodworth, 111 U. S. 138, 
 145. An agent of a foreign corpora- 
 tion cannot, on his own behalf, begin 
 an action against his corporation by 
 serving himself. George v. Ginning 
 Co., 46 S. C. 1. 
 
 2 McQueen v. Middleton Mfg. Co., 
 16 Johns. (N. Y.) 5, 7; Peckham v. 
 North Parish, 16 Pick. 274, 286; 
 Newell v. Great Western Ry. Co., 19 

 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 397. 
 
 the transaction of business within a state, service on the head 
 officer of such office will be a valid service on the corporation 
 in respect of causes of action arising within the jurisdiction, 1 
 but not in respect of causes arising outside of the jurisdiction 
 of the court whose process is served on the resident agent. 2 
 
 § 397. It is customary, however, for state legislatures by 
 statute to designate the persons on whom service 
 shall or may be made in actions against foreign cor- regulating 
 porations doing business within the state. Service service - 
 in accordance with the statute will be valid, for by coming 
 within the state to do business, a foreign corporation submits 
 itself to the state laws ; and it may thus submit itself expressly 
 by filing a certificate pursuant to the statute designating an 
 agent on whom service may be made. 3 
 
 Mich. 336; Latimer v. Union Pac. Ry. 
 Co., 43 Mo. 105; Moulin v. Ins. Co., 
 24 N. J. L. 222; Camden Rolling Mill 
 Co. v. Swede Iron Co., 32 X. J. L. 15; 
 State v. District Court, 26 Minn. 233, 
 234; Phillips v. Library Co., 141 Pa. 
 St. 462; Blanc v. Paymaster Mg. Co., 
 95 Cal. 524; Crook u. Girard Iron Co., 
 87 Md. 138; Watkins Land Co. v. El- 
 liott, 62 Kas. 291. 
 
 1 Tuchband v. Chicago, etc., R. R. 
 Co., 115 N. Y. 437; Newsby v. Colt's 
 Patent Fire Arms Co., L. R. 7 Q. B. 
 293; City Fire Ins. Co. v. Carrugi, 41 
 Ga. 66, 671; Western Union Tel. Co. 
 v. Pleasants, 46 Ala. 641 ; Atlantic and 
 G. R. R. Co. v. Jacksonville P. and M. 
 R. R. Co., 51 Ga. 458; see Libbey v. 
 Hodgdon, 9 X. H. 394. Compare 
 Norton v. Bridge Co., 51 N. J. L. 442. 
 
 2 Bawknight o. Liverpool, etc., Ins. 
 Co., 55 Ga. 194; see National Con- 
 densed Milk Co. v. Bradenburgh, 40 
 N. J. L. Ill; Parke v. Commonwealth 
 Ins. Co., 44 Pa. St. 422. A verified 
 answer that defendant is a corpora- 
 tion created by the laws of another 
 state, and not by the laws of the state 
 where suit is brought; that the per- 
 son upon whom process was served 
 was its agent only in the county 
 
 where the action was commenced, 
 and that the contract sued on was 
 made out of the state, and not by the 
 agent served, and was not connected 
 with the business of his office, is 
 good on demurrer to abate the action 
 for want of jurisdiction of the person 
 of the defendant. iEtna Ins. Co. v. 
 Black, 80 Ind. 513. But when the 
 subject-matter of the suit is one over 
 which the court has jurisdiction, and 
 the defendant, a foreign corporation, 
 appears and goes to trial on the 
 merits, without objection, it cannot 
 except to the jurisdiction of the 
 court over it. North Missouri R. R. 
 Co. v. Akers, 4 Kan. 453. 
 
 3 See Reyer v. Odd Fellows' Ass'n, 
 157 Mass. 367; Lafayette Ins. Co. v. 
 French, 18 How. 404; Gibbs y. Queen 
 Ins. Co., 63 N. Y. 114; Warren Mfg. 
 Co. v. ^Etna Ins. Co., 2 Paine, 501; 
 Benwood Iron Works v. Hutchinson, 
 101 Pa. St. 359; Iron Co. v. Construc- 
 tion Co., 61 Mich. 226; Firemen's Ins. 
 Co. v. Thompson, 155 111. 204; Green 
 v. Life Ass'n, 105 Iowa, 628. A 
 " managing agent" of a foreign cor- 
 poration on whom by statute process 
 may be served, means some person in- 
 vested by the corporation with gen- 
 
 383
 
 § 398.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 398. In New York it is held that when a foreign corpora- 
 tion has done business in that state, and suit is brought 
 docTriue rk on a cause °f action arising there, service on one of 
 its directors temporarily in the state on its own busi- 
 ness is a valid service on the corporation; and this, on the 
 ground that "any service must be deemed sufficient which 
 renders it reasonably probable that the party proceeded against 
 will be apprised of what is going on against him, and have an 
 opportunity to defend." 1 The New York court has certainly 
 gone very far in upholding the validity of service on a foreign 
 corporation. Section 1780 of the New York Code of Civil 
 Procedure provides that " an action against a foreign corpora- 
 tion may be maintained by a resident of the state, or by a 
 domestic corporation, for any cause of action." Section 432 
 provides that personal service of the summons upon a foreign 
 corporation may be made by delivering a copy within the state 
 to the president, secretary, or treasurer. In the case referred 
 to, Pope v. Terre Haute Car Manufacturing Company,- it ap- 
 peared that a foreign corporation had transacted no business 
 within the state, and had neither property nor a place of busi- 
 ness there. The plaintiffs were residents, and the cause of 
 action arose on contract. The summons was served on the de- 
 fendant's president while he was temporarily within the state 
 on his way to a seaside resort, and not in his official capacity 
 nor on any business connected with the corporation. The court 
 held the service sufficient, and that a judgment rendered in the 
 action would be valid for every purpose within the state, and 
 could be enforced against any corporate property within the 
 state at any time : " The object," said the court, " of all service 
 of process for the commencement of a suit or any other legal 
 proceeding is to give notice to the party proceeded against, and 
 any service which reasonably accomplishes that end answers 
 the requirements of natural justice and fundamental law; and 
 
 eral powers involving the exercise of 
 judgment and discretion. Taylor v. 
 Granite Ass'n, 136 N. Y. 343. As to 
 who is not a "local agent' 1 of a for- 
 eign corporation, on whom process 
 may he served according to statute, 
 see Mexican Central Ey. v. Pinkney, 
 149 U. S. 194. 
 384 
 
 1 Hiller v. Burlington, etc., R. R. 
 Co., 70 N. Y. 223. See, also, Gibbs v. 
 Queen Ins. Co., 63 N. Y. 114; Lafay- 
 ette Ins. Co. v. French, 18 How. 404, 
 407. See § 392. 
 
 2 87 N. Y. 137.
 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 400. 
 
 what service shall be deemed sufficient for that purpose is to be 
 determined by the legislative power of the country in which the 
 proceeding is instituted, subject only to the limitation that the 
 service must be such as may reasonably be expected to give the 
 notice aimed at." The court said they did not determine what 
 would have been the effect outside the state of the judgment 
 rendered upon such service, and from the authorities heretofore 
 cited and the principles heretofore stated, it is clear that such 
 a service and a judgment rendered thereon would have no 
 validity whatsoever or be recognized in the courts of any other 
 state. 1 A judgment, however, rendered in a suit in which the 
 foreign corporation is brought within the jurisdiction of the 
 court, must under the Federal constitution be recognized in all 
 the states. 3 
 
 § 399. Finally, although the defendant foreign corporation is 
 not brought within the jurisdiction of the court, a 
 
 . Proceed- 
 
 valid judgment in re?n may be entered against any mgsinrem. 
 property attached within the state. 3 But no valid 
 personal judgment against the corporation could be rendered in 
 an action commenced in this way. 4 
 
 § 400. In a number of the states exist statutes prescribing 
 the terms upon which foreign corporations shall be statutes 
 permitted to do business. These terms ordinarily are termson 
 that a corporation before commencing business shall porpora- 
 file a certificate in the prescribed public office, desig- tions - 
 nating the principal place of business of the corporation within 
 the state and a resident agent on whom process may be served. 5 
 
 1 Goldey b. Morning News, 156 U. S. 
 518; See Phillips B. Library Co., 141 
 Pa. St. 462; Branson b. Trum Bros. 
 Machine Co., 16 Phila. (Pa.) 112. 
 
 2 Lafayette Ius. Co. v. French, 18 
 How. 404. 
 
 3 Bushel v. Commonwealth Ins. 
 Co., 15 S. & R. 174; see Warren 
 Mfg. Co. v. ^Etna Ins. Co., 2 Paine, 
 501; Latimer v. Union Pac. Ry. Co., 
 43 Mo. 105; Barnett v. Chicago, etc., 
 R. R. Co., 4 Hun, 114. 
 
 * St. Clair b. Cox, 106 U. S. 350. 
 5 By soliciting and receiving sub- 
 scriptions for a newspaper published 
 
 25 
 
 by it in another state, a foreign cor- 
 poration is not doing business in 
 Alabama within the meaning of the 
 section of the Alabama constitution, 
 which prohibits foreign corporations 
 from doiug any business in the state 
 without having at least one known 
 place of business and an authorized 
 agent therein. Beard v. The Union, 
 etc., Publishing Co., 71 Ala. 60. A 
 mining company which owns land 
 and leases it for agricultural pur- 
 poses is not doing business in the 
 state. Mo. C. & M. Co. b. Ladd, 160 
 Mo. 435. But making a loan of 
 
 385
 
 § 400.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Some states have attempted to impose the further condition 
 that no suit against the corporation brought by a resident of 
 the state shall be removed into the Federal courts. But this is 
 unconstitutional. A state may exclude foreign corporations 
 entirely ; but if she admits them to do business within her lim- 
 its, she cannot impose on them conditions repugnant to the 
 Federal constitution. 1 So a state statute which declares that 
 
 money in the state secured by note 
 and mortgage is " doing business " 
 there. Ginn v. New England Mtge. 
 Co., 92 Ala. 135. Compare Dundee 
 Mtge. Co. v. Nixon, 95 Ala. 318; In- 
 ternational C. S. O. Co. v. Wheelock, 
 124 Ala. 3(37; Railway Co. v. Fire 
 Ass'n, 55 Ark. 163 ; Scruggs v. 
 Scottish Mtge. Co., 54 Ark. 566; 
 White River Lumber Co. v. Improve- 
 ment Ass'n, 55 Ark. 625; People v. 
 American Bell Telephone Co., 117 
 N. Y. 241. See Trust Co. v. Ger- 
 mania Ins. Co., 106 La. 669. But see 
 Commercial Bk. v. Sherman, 28 Oreg. 
 573. 
 
 The doing of a single act of busi- 
 ness within the state does not bring 
 a corporation within the operation 
 of the Colorado statute. Cooper 
 Mfg. Co. v. Ferguson, 113 U. S. 727; 
 Colorado Iron Works v. Mining Co., 
 15 Col. 499. See Florsheim v. Lester, 
 60 Ark. 120; S. S. L. Co. v. Neiineyer 
 L. Co., 63 Ark. 268; Milan Milling 
 Co. v. Gorten, 93 Tenn. 590. Com- 
 pare Hacheny v. Leary, 12 Ore. 40; 
 D. & H. Canal Co. v. Mablenbook, 63 
 N. J. L. 281. Such a statute does not 
 apply to a corporation which merely 
 sells in the state through travelling 
 agents. Toledo Com. Co. v. Glen 
 Co., 55 O. St. 217; Mearshon v. Potts- 
 ville Lumber Co., 187 Pa. St. 12; 
 Wolff Dryer Co. v. Bigler Co., 192 
 Pa. St. 466; cf. Hovey's Estate, 198 
 Pa. St. 385. A foreign corporation 
 which becomes a special partner in 
 a limited partnership within the 
 state is held to be engaged in busi- 
 
 386 
 
 ness there. People v. Roberts, 152 
 N. Y. 59. 
 
 Where the complaint of a foreign 
 corporation is silent on the subject, 
 the court will presume on demurrer 
 that the statute requirements en- 
 abling it to do business in the state 
 have been complied with. Sprague 
 v. Cutler, etc., Co., 106 Ind. 242; 
 Cassaday v. American Ins. Co., 72 
 Ind. 95; Nickels v. Building Ass'n, 
 93 Va. 380. In Texas, complying 
 with the law as to filing a certificate 
 is a condition precedent to main- 
 taining an action, and that fact must 
 be alleged and proved. Taber v. In- 
 terstate B. & L. Ass'n, 91 Tex. 92. 
 
 A decree and sale on foreclosure 
 by a foreign corporation (which be- 
 came the purchaser at the sale) is 
 not invalidated by the fact that its 
 agent had not filed a power of at- 
 torney, as required by statute. This 
 should have been pleaded in abate- 
 ment in the foreclosure suit. Elston 
 v. Pigott, 93 Ind. 14. 
 
 1 Lafayette Ins. Co. v. French, 18 
 How. 404. Commonwealth v. Coal 
 Co., 97 Ky. 238. Compare Bedford 
 v. Eastern B. & L. Ass'n, 181 U. S. 
 227. Amendment XIV. to the Fed- 
 eral constitution, which forbids a 
 state to deny to any person the equal 
 protection of its laws, does not ap- 
 ply to conditions imposed in foreign 
 corporations on entering the state; 
 though it may apply to such corpo- 
 rations after they have performed 
 the conditions entitling them to come 
 in. People v. Fire Ass'n, 92 N. Y. 

 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 400a. 
 
 every foreign insurance company before transacting business in 
 the state shall agree not to remove any case into the Federal 
 courts, is unconstitutional ; and an agreement filed in pursuance 
 thereof, derives no support therefrom and is void. 1 
 
 § AOOa. By complying with such statutes and doing business 
 in a state other than that of its creation, the foreign corpora- 
 tion subjects itself to all of the laws in force in such state, and 
 will not thereafter be heard to question them. Any statute 
 then in force affecting the corporation becomes a condition of 
 the grant of the privilege to do business in that state. 2 " What 
 ever its limitations were upon the power of contracting, what- 
 ever its discriminations were, they became conditions of the 
 permit and were accepted with it." 3 For any violation of the 
 statute law of such state, the state may revoke the license of 
 such corporation, and it is immaterial whether the statute which 
 was violated was or was not unconstitutional as applied to 
 
 311 ; affirmed Philadelphia Fire Ass'u 
 v. New York, 119 IT. S. 110. See 
 Phoenix Ins. Co. v. Welch, 29 Kans. 
 672. In some states foreign corpora- 
 tions are made domestic by requiring 
 them to take out charters, not li- 
 censes. See Debnam v. Telephone 
 Co., 126 N. C. 831; Layden v. Knights 
 of Pythias, 128 N. C. 546. Thereaf- 
 ter they cannot remove to the Fed- 
 eral courts. Allison v. Southern 
 Railway Co., 129 N. C. 336; Mathis 
 v. So. Ry. Co., 53 S. C. 246, §§ 479-481. 
 
 A state legislature may lay a fran- 
 chise or license tax on foreign cor- 
 porations for the privilege of doing 
 business within the state. Common- 
 wealth v. Standard Oil Co., 101 Pa. 
 St. 119; Scottish-Union, etc., Ins. 
 Co. v. Herriott, 109 Iowa, 606. See, 
 New York State v. Roberts, 171 U. 
 S. 658, holding valid a franchise tax 
 on a foreign corporation although 
 foreign corporations wholly engaged 
 in manufacture in the state were not 
 taxed. See Reyman Bi'g Co. v. 
 Brister, 179 U. S. 445. 
 
 It is held, moreover, that a person 
 
 may waive a constitutional provision 
 in his favor. Embury v. Conner, 3 
 N. Y. 511; Sherman v. McKeon, 38 
 N. Y. 266; Vose v. Cockcroft, 44 N. 
 Y. 415; Phyfe v. Eimer, 45 N. Y. 103; 
 Matter of the Application of Cooper, 
 
 93 N". Y. 507. 
 
 1 Insurance Co. v. Morse, 20 Wall. 
 445; Doyle v. Continental Ins. Co., 
 
 94 U. S. 535, reversing State v. Doyle, 
 40 Wis. 175; Barron v. Burnside, 121 
 U. S. 1S6; Southern Pac. Co. v. Den- 
 ton, 146 U. S. 202. Approved in 
 Barrow, etc., Co. v. Kane, 170 U. S. 
 100. Compare Home Ins. Co. v. 
 Davis, 29 Mich. 238; and see Railway 
 Co. v. Whitton, 13 Wall. 270; Elston 
 v. Piggott, 93 Ind. 14. 
 
 2 Orient Ins. Co. v. Daggs, 172 
 U. S. 557; N. Y. L. I. Co. v. Cravens, 
 178 U. S. 389; Hancock Mat. L. I. 
 Co. v. Warren, 181 U. S. 73; Fi- 
 delity Mut. L. I. Co. v. Mettler, 185 
 U. S. 308. 
 
 3 Waters-Pierce Oil Co. v. Texas, 
 177 U. S. 28, and repeatedly quoted 
 in "later cases cited under this sec- 
 tion. 
 
 387
 
 § 401.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 natural persons. 1 So, whatever regulations the state may im- 
 pose upon corporations of its own creation, it may impose upon 
 foreign corporations. 2 And, if a foreign corporation complies 
 with a statute which would be unconstitutional as to it, by 
 reason of impairing the obligations of contracts, it waives the 
 right thereafter to claim that such statute is unconstitutional. 3 
 These decisions rest ultimately on the rule that a corporation 
 is not a citizen within the meaning of Article IV., section 1 
 of the Federal constitution. 
 
 § 401. In regard to the effect of non-compliance with these 
 
 statutes the decisions of the different states are not 
 non-com- harmonious. In Colorado, where the statute pro- 
 piiance with v ides that foreign corporations shall file a certificate 
 utes. designating the principal place of business where the 
 
 business within the state is to be carried on, 4 before 
 " they are authorized or permitted to do any business in the 
 state," a corporation that has not complied with the statute 
 may still sue for a trespass. 5 In Indiana it is held that a note 
 executed there to a foreign insurance company is not void be- 
 cause the company has not complied with the statute, but that 
 
 1 Waters-Pierce Oil Co. v. Texas, 
 177 U. S. 28, approved in Chicago, 
 R. I. & P. Ry. Co. v. Zernecke, 183 
 U. S. 582, holding that a domestic 
 corporation could not contest the 
 validity of a statute in force at the 
 time of its incorporation, as such 
 statute was one of the conditions 
 upon which it accepted its charter. 
 See Insurance Co. v. Craig, 106 
 Tenn. 623; State v. Standard Oil Co., 
 61 Neb. 28. 
 
 2 Dayton Coal & Iron Co. v. Barton, 
 183 U. S. 23, requiring the redemp- 
 tion in cash of store orders issued in 
 payment of wages. The same stat- 
 ute was sustained as to domestic 
 corporations in Knoxville Iron Co. 
 0. narbison, 183 U. S. 13. 
 
 3 Hale v. Lewis, 181 U. S. 473. 
 
 4 A certificate signed and acknowl- 
 edged by the president and secretary 
 of a foreign corporation and filed 
 
 388 
 
 with the secretary of state and in 
 the office of the recorder of deeds for 
 the county in which it is proposed 
 to carry on business, stating that 
 " the principal place where the busi- 
 ness shall be carried on in the state 
 of Colorado shall be at Denver, in 
 the county of Arapahoe, in said 
 state, and that the general manager 
 of said corporation, residing at the 
 said principal place of business, is 
 the agent upon whom process may 
 be served in all suits that may be 
 commenced against said corpora- 
 tion," is a sufficient compliance 
 with the constitution and laws of 
 Colorado. Goodwin v. Colorado 
 Mortgage Co., 110 U. S. 1. 
 
 5 Utley v. Clark-Gardnir Mfg. Co., 
 4 Col. 369. Cases are collected in 
 Miller v. Williams, 27 Colo. 34. See 
 Powder River Cattle Co. v. Custer 
 Co., 9 Montana, 145.
 
 PART V.] CORPORATE ACTS WITHOUT THE STATE. [§ 401. 
 
 the remedy on the note is suspended until compliance. 1 In Il- 
 linois and Alabama, however, contracts entered into before 
 compliance cannot be enforced. 2 And in Oregon a mortgage 
 taken by a foreign corporation before compliance is void, at 
 least as to all persons other than the mortgagor having an inter- 
 est or liens on the premises. 3 Construing this Oregon statute 
 
 1 Amer. Ins. Co. v. Wellman, 69 
 Ind. 413; Security Sav. Ass'n. v. El- 
 bert, 153 Ind. 198; Lamb u. Lamb, 
 13 Bankr. Reg. 17; Wiestling v. War- 
 then, 1 Ind. App. 217. Compare 
 Union Ins. Co. v. Smart, 60 N. H. 
 458. Tbe reasonable construction of 
 New York statute (sec. 15 of the 
 General Corporation Law of 1892) 
 was that remedy was merely sus- 
 pended until foreign corporation 
 complied. Neuchatel Asphalt Co. 
 B. Mayor, 155 N. Y. 373; Goddard I). 
 Crefeld Mills, 45 U. S. App. 84; see, 
 also, Dearborn Foundry Co. v. Au- 
 gustine, 5 Wash. 67; Edison, etc., 
 Co. v. Navig'n Co., 8 Wash. 370. Thfc 
 above section of the New York stat- 
 ute has recently been amended 
 (chapter 538 of the laws of 1901) so 
 that now the certificate must be 
 procured before the contract is en- 
 tered into. 
 
 The statute provided that no for- 
 eign corporation could "maintain" 
 an action, if they fail to comply with 
 the statute. Held, that compliance 
 after suit was brought, but before 
 motion to dismiss was made, was 
 sufficient. Carson Rand Co. v. Stern, 
 129 Mo. 381. See Huttig Co. v. Ho- 
 tel Co., 6 Wash. 122; Mutual B. L. I. 
 Co. y. Winne, 20 Mont. 20; M'd Tube 
 Works v. W. E. Imp. Co., 87 M'd 207. 
 
 2 Cincinnati Mut. Health Assur- 
 ance Co. v. Rosenthal, 55 111. 85; Su- 
 preme Order Iron Hall v. Grigsby, 
 178 111. 57; Sherwood v. Alvis, 83 
 Ala. 115; Farrier v. New England 
 Mtge. Co., 88 Ala. 275; Craddock v. 
 American Mtge. Co., 88 Ala. 281; 
 
 Christian v. American Mtge. Co., 89 
 Ala. 198; Ware v. Hamilton Brown 
 Shoe Co., 92 Ala. 145; Colliere v. 
 Davis Brothers, 94 Ala. 456. But iu 
 Alabama this defence cannot prevail 
 when the corporation has execut- 
 ed the contract. Diefenbach v. 
 Vaughn, 116 Ala. 150; Kindred v. 
 New England, etc., Co., ib. 192; 
 Electric Lighting Co. v. Rust, 117 
 Ala. 680; see Russell v. Jones, 107 
 Ala. 262. Moreover, a mortgage 
 given in another state to a corpora- 
 tion of that state is valid even 
 though the mortgagee has not com- 
 plied with the requirements to do 
 business in the state where the land 
 is situated. Elec. Lighting Co. v. 
 Rust, supra. 
 
 3 Bank of British Columbia v. Page, 
 6 Oreg. 431. See In re Comstock, 3 
 Sawyer, 218; S. C, 14 Bankr. Reg. 
 169. 
 
 Where a statute makes it " unlaw- 
 fuL" for any foreign corporation to 
 do business or acquire property be- 
 fore compliance, its contracts are 
 void and cannot be recovered on; 
 it cannot collect insurance premiums. 
 Insurance Co. v. Kennedy, 96 Tenn. 
 711 ; Lumber Co. v. Thomas, 92 Tenn. 
 587. A curative statute was after- 
 ward passed making valid contracts 
 where there was a subsequent com- 
 pliance. See Butler v. U. S., etc., 
 Ass'n, 97 Tenn. 679. 
 
 When foreign insurance compa- 
 nies are forbidden to do business 
 within a state (Iowa) unless they 
 have a certain amount of capital, 
 such a company, which does not ful- 
 
 389
 
 § 402.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Judge Deady, of the Federal Circuit Court, has rendered the 
 most extreme decision of all on this subject. He held that land 
 foreclosed under a mortgage made to a foreign corporation, and 
 bought in by it, might be recovered back by the mortgagor, 
 on the ground that the corporation had not complied with the 
 statute. 1 Undoubtedly foreign corporations must comply with 
 the statutes of the states in which they do business. 2 But un- 
 less the statute explicitly declares that contracts entered into 
 before compliance shall be void, 3 it would seem the better 
 legal policy to find the result in the liability of agents to in- 
 dictment, 4 or in the liability of the foreign corporation to be 
 ousted from its privilege of doing business within the state. 5 
 § 402. A foreign corporation may not itself take advantage 
 of its own non-compliance with one of these statutes ; 
 suit may be brought against it notwithstanding. 6 
 When a foreign corporation has complied with the 
 prescribed conditions, it acquires most of the ordinary privileges 
 of domestic corporations, and, for instance, may plead the statute 
 of limitations like a domestic corporation or resident citizen. 7 
 It does not follow, however, that a foreign corporation will be 
 
 Statute of 
 limita- 
 tions. 
 
 fill this condition, cannot recover 
 premiums for insurance on property 
 situated in Iowa, although the insur- 
 ance contract was made in the state 
 incorporating the corporation. Sea- 
 mans v. Zimmerman, 91 Iowa, 363. 
 
 1 Semple v. Bank of British Colum- 
 bia, 5 Sawyer, 88. It is impossible 
 to agree with a decision sustaining 
 this dishonest defence. The Wis- 
 consin court, more in conformity to 
 the view that debtors should pay 
 their just debts, holds that a foreign 
 insurance corporation which has not 
 complied with the statute prescrib- 
 ing conditions on which it may do 
 business in the state, may still take 
 mortgage security fur a debt due 
 there and enforce it in the courts of 
 the state. Charter Oak Life Ins. Co. 
 13. Sawyer, 44 Wis. 387; see, also, 
 Rogers v. Simmons, 155 Mass. 259. 
 
 2 See Hartford Fire Ins. Co. v. Ray- 
 mond, 70 Mich. 485. 
 
 390 
 
 3 A contract made by a foreign 
 corporation before it has complied 
 with the statute will not be held 
 void unless the statute expressly so 
 declares; and if the statute impose a 
 penalty, that will be held exclusive 
 of other results. Toledo Tie Co. ». 
 Thomas, 33 W. Va. 566; cf. Gar- 
 rett Ford Co. v. Vermont Mfg. Co., 
 20 R. I. 187. 
 
 4 See People v. Formose, 131 N. Y. 
 478. 
 
 5 See State v. W. U. M. Life Ins. 
 Co., 47 O. St. 167. 
 
 6 Hagerman v. Empire State Co., 97 
 Pa. St. 534; Foster v. Lumber Co., 5 
 S. Dakota, 57; see Sparks v. Acci- 
 dent Assn., 100 Iowa, 458. 
 
 7 Huss v. Central R. R., etc., Co., 
 66 Ala. 472; Turcott v. R. R. Co., 101 
 Tenn. 102. Compare Barr v. King, 
 96 Pa. St. 485.
 
 PART V.] INCORPORATION BY TWO OR MORE STATES. [§ 404. 
 
 entitled to plead the statute of limitations merely because it 
 has continuously through its agents done business in the state. 1 
 
 STATUS OF A BODY OF MEN INCORPORATED BY THE 
 LEGISLATION OF TWO OR MORE STATES. 
 
 One or two corporations ? §§ 403-408. 
 
 Jurisdiction of courts of either state. 
 Meetings, § 409. 
 
 § 403. Perplexing questions have arisen and seem likely to 
 arise in regard to corporations incorporated or con- 
 solidated by the concurrent legislation of more than corpora- 
 one state; and, it is submitted, these questions can tlons - 
 be properly solved only by applying the analysis of the idea of 
 a corporation given above in Chapter III. The two entirely 
 different notions conveyed by the term corporation must be 
 borne in mind ; the one, a body of men ; the other, a legal in- 
 stitution or group of laws relating to the corporate enterprise 
 in their manifestation in legal relations. Perhaps the funda- 
 mental question in regard to incorporation by the concurrent 
 legislation of two states, is whether, and in what respects, there 
 results one or two corporations. It is plain, using the terra 
 corporation to denote a body of men, that there is but one cor- 
 poration ; for evidently there is but one body of shareholders 
 who meet and vote ; and this body is the same whether acting 
 in the one state or the other. 
 
 § 404. But is there one or are there two legal institutions ? 
 *. <?., one or two groups of laws which have manifested them- 
 selves in legal relations. A law has no force beyond the limits 
 of the state enacting it. A legal right is the power which a 
 person has through the aid of a law to compel another to do or 
 forbear ; and, as before pointed out, a legal right with its cor- 
 responding liability constitutes a legal relation, which is the 
 
 1 Hubbard v. United States Mort- 
 gage Co., 14 111. A pp. 40; Mallory v. 
 Tioga R. R. Co., 3 Abb. Dec. (X. Y. ) 
 139. But in Montana, where a for- 
 eign corporation has owned property 
 and openly maintained a place of 
 business, with a managing agent, in 
 the state, a personal judgment can 
 be rendered against it, and it can 
 
 plead the statute of limitations, 
 though it has failed to comply with 
 the Montana statute, by filing its 
 charter; such failure merely reliev- 
 ing any party suing the corporation 
 from proving its incorporation, ex- 
 cept by reputation. (The statute is 
 express herein.) King v. National 
 M. T. E. Co., 4 Montana, 1. 
 
 391
 
 § 405.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 manifestation of a rule of law in operation. 1 It is consequently 
 evident that the identical legal relation cannot subsist in two 
 states, except in so far as it is the manifestation of a law ope- 
 rating in both ; i. e., the manifestation of a law of Congress or 
 a provision in the Federal constitution. In so far as a person 
 has a right which is the manifestation of a constitutional pro- 
 vision, or of a law of Congress competently enacted, the identity 
 of the right is not affected by the fact of its possessor being in 
 New York or New Jersey. 2 
 
 § 405. To illustrate, suppose New York and New Jersey to 
 incorporate a railroad corporation by precisely similar legisla- 
 tion ; each state enacting among other provisions that the 
 shareholders shall be individually liable for debts due the em- 
 ployes of the company. Suppose A. to be an employe, and B. 
 a shareholder. In New Jersey A.'s right against B. depends 
 on the New Jersey enactment backed by the physical power 
 of the New Jersey government ; and in New York A.'s right 
 against B. depends on the New York enactment. A.'s right 
 in New York is the manifestation of a law different from the 
 law which manifests itself in A.'s right in New Jersey ; and 
 would be enforced by a different set of courts, whose decrees 
 in their turn would be enforced by different physical backings. 
 However, a right of A. against B. having once vested in respect 
 of a debt due from the corporation, neither state can pass a law 
 depriving A. of his right; for such an enactment would be 
 void under the Federal constitution, as impairing the obligation 
 of a contract. This further guaranty of A.'s right, that he 
 shall not be deprived of it, is not the manifestation of a state 
 law ; but of a rule of law contained in the Federal constitution, 
 and thus operating in both states ; and would in the last resort 
 be enforced in either state by the same power. Consequently, 
 this further right of A. is identical in both states. 
 
 Accordingly, it may be said, that the legal relations subsist- 
 
 1 Chap. III. 
 
 2 Accordingly, a corporation cre- 
 ated by act of Congress and doing 
 business in Pennsylvania is not a 
 "foreign corporation" under the 
 Pennsylvania statutes which provide 
 for the taxation of foreign corpo- 
 rations. Commonwealth v. Texas, i exists in Pennsylvania, 
 
 392 
 
 etc., R. R. Co., 98 Pa. St. 90. See 
 Eby v. Northern Pac. R. R. Co., 13 
 Phila. 144, which holds that a cor- 
 poration created by act of Congress 
 may be sued anywhere in Pennsyl- 
 vania where proper service of process 
 can be made, as the corporation
 
 PART V.] INCORPORATION BY TWO OR MORE STATES. [§ 406. 
 
 ing in respect of any corporate enterprise, which extends 
 throughout two or more states, in so far as in each state they 
 are manifestations of different groups of laws, are different 
 groups of legal relations, and constitute not identical, though 
 perhaps precisely similar legal institutions. Thus there may 
 be said to be two corporations. 1 
 
 § 406. Justice Breese said, giving the opinion of the Supreme 
 Court of Illinois in Quincy Bridge Company?;. Adams County, 2 
 " But, it is said by the appellants, this corporation, although 
 it derived some of its powers, and in part its corporate exist- 
 ence, from this state, derived an equal part from the sovereign 
 state of Missouri, and therefore they are not a corporation 
 created under the laws of either state. To this it is answered, 
 and we think satisfactorily, that the legislatures of this state 
 and of Missouri cannot act jointly, nor can any legislation of 
 the last named state have the least effect in creating a corpora- 
 tion in this state. Hence, the corporate existence of appellants 
 considered as a corporation of this state must spring from the 
 legislation of this state, which, by its own vigor, performs the 
 act. The states of Illinois and Missouri have no power to unite 
 in passing any legislative act. It is impossible in the very 
 nature of their organization that they can do so. They cannot 
 so fuse themselves into a single sovereignty, and as such create 
 a body politic which shall be a corporation of the two states, 
 without being a corporation of each state or of either state. 
 As argued by appellee, the only possible status of a company 
 acting under charters from two states is that it is an association 
 incorporated in and by each of the states, and when acting as a 
 corporation in either of the states, it acts under the authority of 
 the charter of the state in which it is then acting, and that 
 
 1 The same body of persons can, 
 by accepting charters from two 
 states, become " constituted into 
 two distinct corporate entities in the 
 two states, acting in each according 
 to the powers locally bestowed, as 
 distinctly as though they had noth- 
 ing in common, either as to name, 
 capital, or membership." Clark v. 
 Barnard, 108 U. S. 436. See, also, 
 Kahl v. Memphis, etc., R. R. Co. 
 
 95 Ala. 337. Yet the Supreme Court 
 has said in a later case that when a 
 corporation is chartered under the 
 same name by several states, it has 
 but one set of shareholders, and each 
 shareholder is interested in all its 
 property. Graham v. Boston, etc., 
 R. R. Co., 118 U. S. 162. 
 2 88 111. 615, 619. 
 
 393
 
 § 400.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 only ; the legislation of the other state having no operation be- 
 yond its territorial limits." * 
 
 Speaking with reference to the consolidation of corporations 
 organized under the laws of different states, Judge Cooley said 
 in a Michigan case : — 
 
 " It is familiar law that each corporation has its existence 
 and domicile, so far as the term can be applied to the artificial 
 person, within the territory of the sovereignty creating it ; it 
 comes into existence there by an exercise of the sovereign will ; 
 and though it may be allowed to exercise corporate functions 
 within another sovereignty, it is impossible to conceive of one 
 joint act, performed simultaneously by two sovereign states, 
 which shall bring a single corporation into being, except it be 
 by compact or treaty. There may be separate consents given 
 for the consolidation of corporations, separately created ; but 
 when the two unite they severally bring to the new entity the 
 powers and privileges already possessed, and the consolidated 
 company simply exercises in each jurisdiction the powers the 
 corporation there chartered has possessed, 2 and succeeds there 
 to its privileges. It may well happen, as indeed it often has, 
 that the consolidated company will be a corporation possessing 
 in one state very different rights, powers, privileges, and im- 
 munities to those possessed in another, and subject to very dif- 
 ferent liabilities. And after the consolidation each state legis- 
 lates in respect to the road within its own limits, and which 
 was constructed under its grant of corporate power, the same 
 as it did before. And it cannot follow the new organization 
 with its legislation into another state. It has been said that 
 the consolidated company exists in each state under the laws 
 of that state alone ; and this is the effect of the decision in Del- 
 aware Railroad Tax, 18 Wall. 206, and in many other cases. 
 
 1 See, also, States. Northern Cen- 
 tral Ry. Co., 18 Md. 193, 213; Farnum 
 v. Blackstone Canal Co., 1 Sumner, 47; 
 Port Royal R. R. Co. v. Hammond, 
 58 Ga. 523; County of Allegheny v. 
 Cleveland, etc., I!. R. Co., 51 Pa. St. 
 228; Missouri Pac. Ry. v. Meek, 32 
 U. S. App. 691. In Covington Bd'g 
 Co. v. Mayer, 31 Ohio St. 317, 325, it 
 was said that a corporation created 
 
 394 
 
 hy two states, receiving similar 
 charters from both, " is a single cor- 
 poration clothed with the powers of 
 two corporations. It. acts under two 
 (diarters, which, in all respects, are 
 identical, except as to the source 
 from which they emanate." Cf. 
 Keokuk Bridge Co. v. People, 161 
 111. 132. 
 2 How about interstate comity?
 
 PART V.] INCORPORATION BY TWO OR MORE STATES. [§ 407. 
 
 It also follows necessarily from the doctrine maintained by the 
 Federal Supreme Court in respect to the citizenship of corpora- 
 tions. That doctrine is that a corporation is deemed to be a 
 citizen of the state which has created it, and an organization of 
 members who are citizens of that state. When, therefore, two 
 corporations created in different states consolidate, though for 
 most purposes, they are not therefore to be separately regarded, 
 yet in each state the consolidated company is deemed to stand 
 in the place of the corporation to which it there succeeded, and 
 of its members, and consequently to be a citizen of that state 
 for many purposes, while in the other state it would stand in 
 the place of the other corporations in respect to citizenship 
 there." J 
 
 §407. Still, perhaps, the question whether there is one or 
 two corporations may be regarded as mainly one of definition. 
 Thus, if we define a corporation, meaning a legal institution, 
 as the sum of the legal relations subsisting in respect of a 
 given corporate enterprise, it may be said that this sum in- 
 cludes all the legal relations, whether they be the manifesta- 
 tions of the laws of New York or of New Jersey. But the sum 
 of all these legal relations cannot subsist in either state ; part 
 of them- subsisting in one and part in the other ; though the 
 two parts may be so precisely similar that for most purposes 
 they can be regarded as identical. And thus, though there 
 may be said to be but one corporation, it does not subsist in 
 its sum total in either state. 2 On the other hand, the group of 
 legal relations subsisting in either state may there, if the courts 
 so choose, be regarded as the corporation, without reference to 
 the group of legal relations which subsist in respect of the same 
 corporate enterprise in the other state. And viewing the mat- 
 
 1 Chicago and N. W. Ry. Co. v. 
 Auditor-General, 53 Mich. 79, 92. 
 Opinion of the court per Cooley, C. 
 J., citing many cases. 
 
 The contracts of such a corpora- 
 tion will be construed " as if made 
 by the corporation of each state in 
 which the subject-matter lies; ut res 
 magis valeat quam pereat." Racine, 
 
 etc., R. R. Co. v. Farmers' Loan, etc., 
 Co., 49 111. 331, 352. 
 
 2 In Newport and Cincinnati Bridge 
 Co. t>. Wooley, 78 Ky. 523, it was 
 held two states could not by partial 
 legislation create a corporation which 
 should have a complete legal exist- 
 ence in either. A corporation can- 
 not have two domiciles. But see 
 §409. 
 
 395
 
 § 408.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VTI. 
 
 ter in this way, there may be said to be two groups of legal 
 relations ; i. e., two legal institutions, or corporations. 1 
 
 § -iOS. The preceding remarks seem to accord with the de- 
 cisions of the Federal Supreme Court. 2 For instance, in Ohio 
 and Mississippi Railroad Co. v. Wheeler, 3 it was held that there 
 could not be a corporation endowed with corporate capacities 
 by the co-operating legislation of two states, so as to be one 
 and the same legal being in both ; for a corporation has no legal 
 existence in a state except by the laws of that state. No state 
 can confer corporate existence in another. In accordance with 
 this, a court in either state would limit the range of its legal 
 vision to the group of legal relations subsisting there. To be 
 sure, in Railroad Co. v. Harris, 4 Justice Swayne said, giving 
 the opinion of the court : " We see no reason why several states 
 cannot by competent legislation unite in creating the same cor- 
 poration, or in combining several pre-existing corporations into 
 one." 5 It does not necessarily follow, however, that the whole 
 of such a corporation would exist in any one state. But view- 
 ing the corporation in this light, a court would extend its vision 
 to the legal relations subsisting in all the states through which 
 the corporate enterprise might extend. The point which the 
 court in Railroad Company v. Harris actually decided, was that 
 a railroad corporation chartered by several states and by Con- 
 gress as well, was amenable to the courts of the District of 
 Columbia for personal injuries received on its road in Virginia. 
 In a later case the Supreme Court held that although one cor- 
 
 1 See Clark v. Barnard, 108 U. S. 
 436, and compare Heuenw. Baltimore, 
 etc., H. R. Co., 17 W. Va. 881. 
 
 " It is true that the Erie Railway 
 Company is a foreign corporation, yet 
 at the same time it is domestic to the 
 full extent of the powers and fran- 
 chises of New Jersey. A corporation 
 may have a twofold organization, 
 and be, so far as its relations to our 
 state is concerned, both foreign and 
 domestic. It may have a corporate 
 entity in each state, yet in its gen- 
 eral character be of a bifold organiza- 
 tion." McGregor, qui tarn, v. Erie 
 
 396 
 
 Ry. Co., 35 N. J. L. 115, 118. Opin- 
 ion of court per Bedle, J. Cf. Bern- 
 hardt v. Brown, 119 N. C. 506. 
 
 2 See Nashua R. R. v. Lowell R. R., 
 136 U. S. 357. 
 
 3 1 Black, 286. 
 
 4 12 Wall. 65, 82; perhaps modify- 
 ing the language of the court in Ohio 
 and Miss. R. R. Co. v. Wheeler. But 
 see the latest expression of the 
 Federal Supreme Court, in note to 
 §405. 
 
 5 Ace. Bishop v. Brainard, 28 Conn. 
 289.
 
 PART V.] INCORPORATION BY TWO OR MORE STATES. [§ 409. 
 
 tion of 
 courts of 
 either 
 state. 
 Meetings. 
 
 poration be consolidated with another incorporated by a differ- 
 ent state, still in its own state it exists under the laws thereof. 1 
 § 409. Corporations owing part of their corporate existence 
 to a state, and exercising their franchises within its Jurisdic- 
 limits, may be there restrained from expending their 
 funds for other than corporate purposes anywhere. 2 
 But a state court of chancery has no jurisdiction to 
 compel a domestic corporation to go into another state, from 
 which it may also have received a charter, and there specifically 
 execute a contract, by opening ditches on the complainant's 
 land, and keeping them open to a certain depth ; and on its 
 failure thus to perform, to enforce the decree by attachment 
 and sequestration of its property in the former state. 3 A cor- 
 poration created by charters from two states may competently 
 hold shareholders' meetings in either ; 4 and a meeting held in 
 one of the states is valid with respect to all the property of the 
 corporation wherever situated. Such a corporation has a domi- 
 cile in each state. 5 
 
 i Muller v. Dows, 94 U. S. 444; 
 Ace. Railway Co. v. Whitton, 13 
 Wall. 270. Compare Kahl v. Mem- 
 phis, etc., R. R. Co. 95 Ala. 337. A 
 corporation formed by the consolida- 
 tion of foreign and domestic corpora- 
 tions held a domestic corporation. 
 St. Paul & ST. R'y Co., in re, 36 Minn. 
 85; compare Railroad v. Barnhill, 91 
 Tenn. 395. See §§ 411, 412. 
 
 A charter granted by two states to 
 a corporation is not only a compact 
 with it, but also a contract between 
 the two states; and the same con- 
 struction must be put on it by both. 
 Cleveland and Pittsburgh R. R. Co. v. 
 Speer, 56 Pa. St. 325; Brocket v. 
 Ohio, etc., R. R. Co., 14 Pa. St. 241, 
 244. But Art. 1, sec. 10, of the Fed- 
 eral constitution forbids compacts 
 between states; hence quaere? 
 
 2 State v. Northern Central R'y 
 Co., 18 Md. 193, 213. See Wilmer 
 p. Atlanta, etc., R'y Co., 2 Woods, 
 409; Fisk v. Chicago, etc., R. R. Co., 
 53 Barb. 513. A Connecticut court 
 
 has jurisdiction to foreclose a mort- 
 gage made by a consolidated corpo- 
 ration created by New York and 
 Connecticut, although part of the 
 mortgaged property lies in New 
 York. Mead v. New York, H. and N. 
 R. R. Co., 45 Conn. 199. 
 
 3 Port Royal R. R. Co. v. Ham- 
 mond, 58 Ga. 523. See Eaton, etc., 
 R. R. Co. v. Hunt, 20 Ind. 457; Hart 
 v. Boston, H. and E. R. R. Co., 40 
 Conn. 524. 
 
 4 Covington Bridge Co. v. Mayer, 
 31 Ohio St. 319; Graham v. Boston, 
 etc., R. Co., 14 Fed. Rep. 753. 
 
 5 Graham v. Boston, etc., R. R. Co., 
 118 U. S. 162; Guinault v. Louisville, 
 etc., R. R. Co., 41 La. Ann. 571; 
 Ohio & M. R'y Co. v. People, 123 
 111. 467; Ga. & Ala. R'y v. Stolle- 
 merck, 122 Ala. 539. But authority 
 from a state to a foreign railroad 
 corporation to extend its road into 
 such state, does not make the cor- 
 poration a corporation of that state, 
 unless the language of the statute 
 
 397
 
 § 411.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 3. CITIZENSHIP OF CORPORATIONS WITH RESPECT TO 
 THE JURISDICTION OF THE FEDERAL COURTS. 
 
 Earlier rule, § 410. 
 Overruled, §§ 411, 412. 
 
 Averments in pleading, § 413. 
 
 § 410. The questions just discussed regarding the status of a 
 corporation incorporated by two states have, in large 
 Earlier measure, arisen with respect to that jurisdiction of 
 the Federal courts which depends on the citizenship 
 of the parties to a suit. 1 The earliest case in the Supreme Court 
 on this jurisdiction, when a corporation is a party, is Bank of 
 United States v. Deveaux, 3 which held that, though a corpora- 
 tion aggregate composed of citizens of one state might sue a 
 citizen of another state in a Federal Circuit Court, yet such a 
 corporation could not in its corporate capacity be a citizen of 
 the state incorporating it so as to be competent to sue in a Fed- 
 eral Circuit Court without regard to the citizenship of its mem- 
 bers. 3 
 
 § 411. This case was overruled in Louisville, Cincinnati, etc., 
 li. R. Co. v. Letson, 4 where the court said that a cor- 
 Overmied. p 0ra tion created by a state to perform its functions 
 under the authority of that state, and only suable there, though 
 it may have members out of the state, seemed to them a per- 
 son, though an artificial one, inhabiting and belonging to that 
 
 implies the creation of a corpora- 
 tion. Pennsylvania R. R. Co. v. St. 
 Louis, etc., R. R. Co., 118 U. S. 
 290; Goodlett v. Louisville, etc., R. 
 R., 122 U. S. 391; Louisville, N. A. 
 & C. R'y Co. v. Louisville Trust Co., 
 174 U. S. 552. This is a question of 
 legislative intent; i. e., did the state 
 mean the foreign corporation to be- 
 come a domestic corporation? An- 
 gier v. East Tennessee, etc., R. R., 74 
 Ga. 633. Franchises granted by a 
 state to a foreign corporation will not 
 make it a domestic corporation, 
 where it does not accept the fran- 
 chises or act under them. Philadel- 
 phia, W. & B. R. R. Co. v. Kent 
 398 
 
 County R. R. Co., 5 Houst. (Del. ) 127. 
 
 1 A corporation may be entitled on 
 other grounds to sue in a Federal 
 court. See Fed. Cons., Art. III. § 2. 
 Compare Miners' Bank e. Iowa, 12 
 How. 1. A national bank can, by 
 reason of its character as such, sue in 
 a Federal court. Bank of Omaha v. 
 Douglas County, 3 Dill. 298. 
 
 2 5 Cranch, 61. 
 
 3 Accord, Commercial, etc., Bankr. 
 Slocomb, 14 Pet. 60; Irvine v. Lowry, 
 14 Pet. 293. 
 
 4 2 How. 497. This was the first 
 case in the Supreme Court reports 
 where a railroad corporation was a 
 party.
 
 PART V.] CITIZENSHIP OF A CORPORATION. 
 
 [§ 412. 
 
 state, and therefore entitled, for the purpose of suing and being 
 sued, to be deemed a citizen thereof. It was accordingly held, 
 that a citizen of one state could sue a corporation created by 
 another in the Federal Circuit Court for the latter state, al- 
 though some of the members were not citizens of the state 
 where the suit was brought, and the state itself was a member 
 of the corporation. 
 
 The last case was followed, after some years, by Railway Co. 
 v. Whitton, 1 where the court again held that although a corpo- 
 ration, being an artificial body created by legislation, was not a 
 citizen within the meaning of several provisions of the consti- 
 tution, still where rights of action were to be enforced, it would 
 be regarded as a citizen of the state where it was created, 
 within the meaning of the clause extending the judicial power 
 of the United States to controversies between citizens of differ- 
 ent states. 
 
 § 412. Railway Co. v. "Whitton was affirmed in Muller v. 
 Dows, 2 though the reasoning of the court was somewhat modi- 
 fied in the latter case ; where it was said that a corporation 
 could not itself be a citizen of a state in the sense in which the 
 word " citizen " is used in the Federal constitution. But they 
 held that a suit might be brought in a Federal court by or 
 against a corporation, and that in such a case the suit would be 
 regarded as if brought by or against the shareholders, all of 
 whom for jurisdictional purposes would be conclusively pre- 
 sumed to be citizens of the state incorporating the corporation. 3 
 
 i 13 Wall. 270. 
 
 * 94 IT. S. 444. 
 
 8 See St. Louis, etc., Ry. v. James, 
 161 U. S. 545; Barrow Steamship Co. 
 v. Kane, 170 U. S. 100; Steamship 
 Co. v. Tugman, 106 U. S. 118; Maltz 
 v. Amer. Exp. Co., 1 Flip. 611. Un- 
 der § 11, of the judiciary act of 1789, 
 a corporation cannot be made a party 
 defendant to a civil suit in a Federal 
 Circuit or District Court by original 
 process, in any other district than a 
 district of the state by which it was 
 created. Myers v. Dorr, 13 Blatchf. 
 22. A corporation by doing business 
 in a state as permitted by the laws 
 
 thereof, having a resident agent, etc., 
 does not become a citizen of that 
 state for the purposes of Federal 
 jurisdiction. Insurance Co. v. Fran- 
 cis, 11 Wall. 210; Martin v. R. R., 151 
 U. S. 673. See Brownell v. Troy, etc., 
 R. R. Co., 18 Blatohf. 243; Callahan 
 o. Louisville, etc., R. Co., 11 Fed. 
 Rep. 536; Guinn v. Iowa Cent. Ry. 
 Co., 14 Fed. Rep. 323. But see B. & 
 O. R. R. Co. v. Wightman's Adm'r, 
 29 Gratt. (Va.) 431; Same v. NoeU's 
 Adm'r, 32 Gratt. 394; Stout v. Sioux 
 City, etc., R. R. Co., 3 McCrary, 1; 
 N. Y. & Erie R. R. Co. v. Shepard, 5 
 McLean, 455. For instance, a railroad 
 
 399
 
 § 412.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 The plaintiff in Muller v. Dows was a resident of Missouri, and 
 sued the corporation in the United States Circuit Court for 
 Iowa. The corporation was incorporated by both Missouri and 
 Iowa; and it was held that as to suits brought in Iowa the Mis- 
 souri corporation could not be regarded, and the Circuit Court 
 for Iowa had jurisdiction of the suit. 1 On similar principles, 
 applied under reversed circumstances, it was held in Ohio *fe 
 Miss. K. It. Co. v. Wheeler, 2 that a corporation created by Ohio 
 and Indiana could not sue a citizen of Indiana in a United 
 States Circuit Court for the district of Indiana. 
 
 The Federal Supreme Court has recently enunciated the fol- 
 lowing proposition : a railroad corporation ma} r , when author- 
 ized by its own state, accept authority from another state to 
 extend its road into such state, and subject itself to rules, etc., 
 prescribed by the second state. This is not within the prohi- 
 bition of the Federal constitution against compacts between 
 states. Such corporations may be treated by each of the states 
 as domestic corporations. 
 
 The presumption that a corporation is composed of citizens 
 of the state creating it, accompanies it when it does business in 
 another state, and it may sue or be sued in the Federal courts 
 in such other state as a citizen of the state of its original crea- 
 
 corporation created by Maryland 
 does not become a citizen of Virginia 
 by taking a lease of a Virginia rail- 
 road, and can still remove to the 
 Federal court a suit brought against 
 it by a citizen of Virginia. R. R. Co. 
 v. Koontz, 104 U. S. 5. A domestic 
 corporation created by a state divided 
 into more than one Federal district, 
 is for purposes of determining Fed- 
 eral jurisdiction, a citizen of that 
 district where it has its headquarters, 
 etc. Galveston, etc., Ry. Co. v. Gon- 
 zales, 151 U. S. 496. 
 
 Where by the local law a foreign 
 corporation is amenable to suit in 
 the courts of the state, service being 
 made upon an agent within the state, 
 the Federal courts may be regarded 
 as courts of the state, and may take 
 jurisdiction on a service that would 
 
 400 
 
 be good in a state court. Ex parte 
 Schollenberger, 96 U. S. 369; Eaton 
 v. St. Louis, etc., Mfg. Co., 2 McCrary 
 362. Even if the state statutes do 
 not authorize suits by persons not 
 resident of that state, a Federal 
 court may take jurisdiction of an ac- 
 tion begun by a citizen of another 
 state by service upon an agent of a 
 foreign corporation designated by it 
 pursuant to a state statute. Barrow 
 Steamship Co. v. Kane, 170 U. S. 100. 
 
 1 See § 408. Also, Marshall v. Bal- 
 timore, etc., R. R. Co., 16 How. 314. 
 
 2 1 Black. 286, § 408; accord, Mem- 
 phis, etc., R. R. Co. v. Alabama, 107 
 U. S. 581; County of Allegheny v. 
 Cleveland, etc., R. R. Co., 51 Pa. St. 
 228. Compare R. R. Co. v. Harris, 
 12 Wall. 65.
 
 PART V.] CITIZENSHIP OF A CORPORATION. 
 
 [§ 413. 
 
 tion. But though such corporation be endowed in the second 
 state with all the privileges of a domestic corporation, it shall 
 not be deemed to be composed of citizens of such second state 
 so as to confer jurisdiction in the Federal courts at the suit of 
 a citizen of the state of its original creation. 1 
 
 § 413. In order to give jurisdiction to the Federal court, it 
 should appear by the pleadings that the corporation Averments 
 was incorporated by a state other than that of which impleading, 
 the other party is a citizen. 2 An averment that a drawbridge 
 company were citizens of Indiana is sufficient to give jurisdic- 
 tion to a Federal Circuit Court, the company having been in- 
 corporated by a public statute, of which the court is bound 
 judicially to take notice. 3 Likewise, that the defendant " is a 
 foreign corporation formed under and created by the laws of 
 the state of New York," is a sufficient averment of citizenship. 4 
 But in a suit brought against a corporation by a state, an aver- 
 ment that the defendant is " a body politic in the law of and 
 doing business in" another state is insufficient to give jurisdic- 
 tion to the Federal Supreme Court. 5 An averment that the 
 defendant is a " corporation created by an act of the legislature 
 of New York, located in Aberdeen, Mississippi, and doing busi- 
 ness under the laws of the state," is no averment that the de- 
 fendant is a citizen of Mississippi!' 
 
 1 St. Louis, etc., Ry. v. James, 
 161 U. S. 545. 
 
 2 Mansfield C. & L. M. Ry. Co. v. 
 Swan, 111 U. S. 379; Muller v. Dows, 
 94 U. S. 444. See Marshall r. Balti- 
 more, etc., R. R. Co., 16 How. 314. 
 Compare N. Y. & Erie R. R. Co. v. 
 Shepard, 5 McLean, 455. A corpora- 
 tion created by a territorial legisla- 
 ture is, after the territory becomes 
 a state, a citizen of that state within 
 the clause defining the jurisdiction 
 of the Federal courts. Kansas Pa- 
 cific R. R. Co. v. Atchison, T. and S. 
 F. R. R. Co., 112 U. S. 414. 
 
 Corporations created by Congress 
 can remove cases to the Federal 
 courts on the ground that the suits 
 against them are suits "arising un- 
 der the laws of the United States." 
 
 26 
 
 Pacific R. R. Removal Cases, 115 U. 
 S. 2. 
 
 3 Covington Drawbridge Co. v. 
 Shepherd, 20 How. 229. But see 
 Lafayette Ins. Co. v. French, 18 How. 
 404. 
 
 4 Express Co. v. Kountze Brothers, 
 8 "Wall. 342. 
 
 5 Pennsylvania v. Quicksilver Co., 
 10 Wall. 553. 
 
 6 Insurance Co. v. Francis, 11 
 Wall. 210. N. Y. and Erie R. R. Co. 
 v. Shepard, 5 McLean, 455, seems 
 at variance with this case. See 
 §412. 
 
 Under the act of March 3, 1875, to 
 entitle a party to remove a suit, his 
 citizenship relied on must have 
 existed when the suit was begun and 
 also when the petition for removal 
 
 401
 
 § 415.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 4. SUCCESSION. 
 
 Succession; consolidation; dissolu- 
 tion, § 414. 
 
 Succession, wherein differing from 
 consolidation, § 415. 
 
 Property passes subject to restric- 
 tions, § 416. 
 
 Successor assumes position of former 
 
 corporation, § 417. 
 Special exemptions may not pass, 
 
 §418. 
 
 § 414. There are certain transactions or proceedings by which 
 the legal relations subsisting in respect of a corporate 
 sion ; con- enterprise are affected radically or even as a whole ; 
 dissohi- 0n; the first, a sort of succession, where the rights, fran- 
 tion. chises, and property of a corporation are acquired by 
 
 an individual or by another corporation ; * the second, a con- 
 solidation, where two or more corporations are united; the 
 third, a dissolution, where a final liquidation of the legal rela- 
 tions subsisting in respect of a corporate enterprise takes place. 
 The three proceedings have much in common, indeed run into 
 each other. A consolidation rarely occurs without a succession 
 as well as a dissolution. Succession, the simplest of these pro- 
 ceedings, may be considered first. 2 
 
 § 415. What is here called a succession takes place when the 
 Succession, property and franchises of a corporation are bought, 
 for instance on the foreclosure of a mortgage. 3 A 
 succession differs from a consolidation in this respect, 
 among others, that the purchaser acquiring the prop- 
 erty and franchises of the corporation, does not become re- 
 sponsible for its liabilities already accrued ; 4 while, on the other 
 
 wherein 
 differing 
 from con- 
 solidation 
 
 was filed. Houston and T. C. R'y 
 Co. v. Shirley, 111 U. S. 358. 
 
 Under the Federal acts of 1887 and 
 1888 a corporation incorporated in 
 one state only cannot be compelled 
 to answer in a Circuit Court of the 
 United States held in another state in 
 which it has a usual place of business, 
 to a civil suit at law or in equity 
 brought by a citizen of a different 
 state. Shaw v. Quincy M'g Co., 145 
 U. S. 444. 
 
 1 For the rights of creditors when 
 the property of an insolvent corpo- 
 
 402 
 
 ration is transferred, say to another 
 corporation composed of the same 
 shareholders, see §§ 657, 667, 708. 
 
 2 For the power of a corporation to 
 transfer its franchises, see §§ 131, 
 132, 304. 
 
 3 For the right of a corporation to 
 mortgage its franchises, see § 304. 
 
 A power in the corporation to mort- 
 gage or transfer its franchises is as- 
 sumed for the purposes of the present 
 discussion. 
 
 4 Hoard v. Chesapeake & O. Ry., 
 123 U. S. 222; Wright v. Milwaukee,
 
 PART V.] 
 
 SUCCESSION. 
 
 [§ 415. 
 
 hand, it is usually held that the consolidated corporation 
 assumes all the liabilities of the corporations of which it is 
 composed. 1 Thus, when the property and franchises of a rail- 
 road company are sold out under the foreclosure of a mortgage, 
 the purchasers are not liable on a judgment against the corpo- 
 ration, 2 although they organize and form a corporation under 
 the name used by the old company. 3 And a company which 
 purchases the railroad of another corporation, sold for the pay- 
 ment of its debts, is not responsible for the damages which, at 
 the time of the sale, had already accrued to adjoining lands 
 through failure of the former company to maintain proper drain- 
 age. 4 So when a railroad company competently purchases at a 
 foreclosure sale the franchises and property of another corn- 
 pan} 7 , it will be affected only by such contracts of the other as 
 constitute a lien upon or otherwise bind the property and 
 franchises thus acquired. The purchasing company will not be 
 bound, for instance, by a contract of the former company not to 
 extend the railroad in a certain direction. 5 
 
 etc., Ry. Co., 25 Wis. 46; Peunison 
 v. R. R. Co., 93 Wis. 344, and cases in 
 next notes. Compare Pfeifer v. She- 
 boygan, etc., R. R. Co., 18 Wis. 155; 
 McLellan u. Detroit File Works, 56 
 Micb. 579; Campbell ». Farmers, etc., 
 Bk., 49 Neb. 143; Reed Bros. v. Nat. 
 Bk., 46 Neb. 168; see Archambeau v. 
 N. Y., etc., R'y Co., 169 Mass. 272; 
 Sherwood v. A. & D. R. Co., 94 Va. 
 291. But by special provision a suc- 
 cessor may be liable. New Bedford 
 R. R. Co. o. Old Colony R. R. Co., 
 120 Mass. 397. Thus, a corporation 
 organized under and pursuant to an 
 agreement sanctioned by competent 
 legislation, is bound by its provisions, 
 and by all the liabilities it imposes in 
 favor of third persons. Welsh v. 
 First Div. St. Paul, etc., R. R. Co., 25 
 Minn. 314. See, also, St. Louis, A. & 
 T. R. R. Co. ». Miller, 43 111. 199. If 
 the succeeding corporation assumes 
 them, it will be bound. Island City 
 Sav. Bk. v. Sachtleben, 67 Tex. 420. 
 Cf. Fernschild v. Brewing Co., 154 
 
 N. Y. 667. Otherwise, to render the 
 new corporation liable, it must 
 affirmatively appear that it is but a 
 continuation of the old. Austin v. 
 Tecumseh Bk., 49 Neb. 412. Of. 
 Reed Bros. v. Nat. Bk., 46 Neb. 168. 
 See § 416, note. 
 
 1 Sappington v. L. R. M. R. & T. R. 
 R. Co., 37 Ark. 23. See §§ 425-427. 
 
 2 Pennsylvania Transportation 
 Co.'s Appeal, 101 Pa. St. 576; Vilas 
 o. Milwaukee, etc., R. R. Co., 17 Wis. 
 497; Smith v. Chicago & N. W. Ry. 
 Co., 18 Wis. 17; Hatcher ». Toledo, 
 etc., R. R. Co., 62 111. 477; Gil man u. 
 Sheboygan, etc., R. R. Co., 37 Wis. 
 317; Cook v. Detroit, etc., Ry. Co., 
 43 Mich. 349. See Lake Erie & N. 
 Ry. Co. v. Griffin, 92 Ind. 487. 
 
 8 Memphis Water Co. v. Magens, 
 15 Lea (Tenn.), 37. 
 
 4 Hammond v. Port Royal, etc., R. 
 R. Co., 15 S. C. 10; Same v. Same, 16 
 S. C. 567. See Neff v. Wolf River 
 Boom Co., 50 Wis. 585. 
 
 6 City of Menasha v. Milwaukee, 
 
 403
 
 § 416.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 On the other hand, a railroad company whose road has been 
 sold out under foreclosure, is not liable for injuries received on 
 the road after it had passed from the control of the company. 1 
 
 § 416. Since the purchaser can acquire no further or more 
 unrestricted franchises than were possessed by the 
 passeTsub- original corporation, in availing himself of its fran- 
 strictions" chises he will be bound by all the restrictions to 
 which they were subject in its hands. Thus, when 
 in pursuance of a statute the railroad of one company is pur- 
 chased by another, unless there is some express provision of law 
 to the contrary, the road passes to the purchaser subject to the 
 restrictions, as to the rates chargeable for transportation, which 
 attached to it in the hands of the vendor. 2 And the corpora- 
 tion competently purchasing the property, privileges, rights, 
 and franchises of another railroad company thereby assumes 
 the continuing obligations and responsibilities imposed by the 
 constitution of the other. 3 Reversely, when a railroad company 
 takes a lease of another road, it will be subject in regard to the 
 taking of tolls thereon only to the restrictions contained in the 
 charter of its lessor, and not to those contained in its own. 4 
 
 etc., R. R. Co., 52 Wis. 414. See 
 Tawas, etc., R. R. Co. v. Circuit 
 Judge, 44 Mich. 479; Morgan County 
 v. Thomas, 76 111. 120. But see 
 Rome, etc., R. R. Co. v. Ontario, etc., 
 R. R. Co., 16 Hun (N. Y.), 445; and 
 compare Chicago and A. R. R. Co. v. 
 Chicago, etc., Coal Co., 79 111. 121. 
 
 1 Western R. R. Co. v. Davis, 66 
 Ala. 578. 
 
 2 Campbell v. Marietta, etc., R. R. 
 Co., 23 Ohio St. 168. 
 
 8 Daniels v. St. Louis, etc., R. R. 
 Co., 62 Mo. 43. See Montgomery, 
 etc., R. R. Co. ». Boring, 51 Ga. 582; 
 Sherwood v. A. & D. R. Co., 94 Va. 
 291. And in case of a lease of a rail- 
 road, the performance of the obliga- 
 tion to maintain and operate the 
 road may be specifically decreed at 
 the suit of the lessor. Southern R. 
 Co. v. Franklin, etc., R. Co., 96 Va. 
 404 
 
 693. When a state bank pays a con- 
 tinuing bonus to the state for its 
 privileges and franchises the state 
 cannot exact the bonus after the bank 
 has reorganized under the national 
 banking act. State v. National Bank, 
 33 Md. 75. But the reorganized bank 
 is liable for the liabilities of the state 
 bank. Metropolitan Nat. Bk. v. 
 Claggett, 141 U. S. 520; Coffey v. 
 Nat. Bk., 46 Mo. 140. When a state 
 hank is transformed into a national 
 bank, it is but a continuance of the 
 same body under a changed jurisdic- 
 tion, and the national bank can en- 
 force contracts made with the state 
 bank. City Nat. Bk. v. Phelps, 97 
 N. Y. 44; Michigan Insurance Bk. v. 
 Eldred, 143 U. S. 293. See §415, 
 note. 
 
 4 Pennsylvania R. R. Co. v. Sly, 65 
 Pa. St. 205. See § 170.
 
 PART V.] 
 
 SUCCESSION. 
 
 [§ 418. 
 
 § 417. It is in accordance with these principles that when a 
 corporation or an individual, be he an ordinary pur- „ 
 
 1 . i Successor 
 
 chaser or one who receives the property in the car- assumes 
 rying out of some trust, comes into the possession of former^or- 
 the property and franchises of a corporation, like a P° ratlon - 
 railroad company, exercises the franchises and uses the prop- 
 erty, he thereby assumes towards outsiders a position and re- 
 sponsibility similar to those of the former company. Thus, 
 trustees under a railroad mortgage, who have bought in the 
 road on foreclosure, and are operating it for the benefit of the 
 bondholders, will be regarded, as towards the public, as owners 
 in possession and will be liable as common carriers for all goods 
 transported over the road during their management. 1 Likewise 
 a receiver operating a road, sustains towards the public the re- 
 lation of common carrier, and will be amenable to the common 
 law courts in actions for negligence. 2 
 
 §418. A person purchasing the property of a corporation 
 does not necessarily acquire the special privileges of 
 exemptions, 3 and franchises possessed by the corpora- em e p C tions X " 
 tion with respect to its property. 4 Especially the ™^ 110t 
 franchise of being a corporation may not pass ; 5 and 
 
 1 Rogers v. Wheeler, 43 1ST. Y. 598; 
 Pearson v. Wheeler, 55 N. H. 41; 
 Sprague v. Smith, 29 Vt. 421. See 
 Farrell v. Union T. Co., 77 Mo. 475. 
 Compare Beeson v. Lang, 85 Pa. St. 
 197; Stratton v. Europ'n, etc., Ry., 
 74 Me. 422. 
 
 2 Newell v. Smith, 49 Vt. 255. 
 Compare Hopkins v. Taylor, 87 111. 
 436; Little v. Dusenberry, 46 N. J. 
 L. 614; Klein v. Jewett, 26 N. J. Eq. 
 474; S. C, 27 N. J. Eq. 550; Blumen- 
 thal v. Brainerd, 38 Vt, 402; Sloan 
 v. Central Iowa Ry. Co., 62 Iowa, 
 728; Wall v. Piatt, 169 Mass. 398; 
 Burke v. Ellis, 105 Tenn. 702. Seems 
 contra, Cardot v. Barney, 63 N. Y. 
 281. A claim for personal injuries 
 sustained while the road is in the 
 hands of a receiver is against the 
 funds of the receivership; and the 
 
 receiver is not personally liable after 
 he has turned over such funds to the 
 purchasers and received his dis- 
 charge. Ryan v. Hays, 62 Tex. 42; 
 Archambeau v. Piatt, 173 Mass. 335. 
 And it seems that the corporation 
 itself will not be liable for injuries 
 received on its road, after the road 
 had passed under the control of a 
 receiver duly appointed, and taking 
 active charge. Bell ». Indianapolis, 
 etc., R. R. Co., 53 Ind. 57; State v. 
 Wabash Ry. Co., 115 Ind. 466; Texas 
 & Pac. Ry. Co. v. Huffman, 83 Tex. 
 286; Lock v. Turnpike Co., 100 Tenn. 
 163. But see Indianapolis, etc., R. 
 R. Co. v. Ray, 51 Ind. 269. See § 170. 
 
 3 See §§ 487-491. 
 
 4 Special privileges conferred on a 
 railroad corporation by special 
 charter, e. g., the right to demand 
 
 6 See §§ 131, 132. 
 
 405
 
 § 419.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 thus, where certain persons purchased at a sheriff's sale all the 
 rights, privileges, franchises, and property of a railroad corpo- 
 ration, and then operated the road themselves, they were held 
 jointly liable on an obligation issued by them in the name of 
 the corporation. 1 
 
 5. CONSOLIDATION. 
 
 No implied power to consolidate, 
 
 §419. 
 Authority to consolidate, §420. 
 Effect of consolidation, §421. 
 Meaning of phrases, §422. 
 
 Essential questions, §423. 
 Capacities of consolidated corpora- 
 tion, §424. 
 Its liabilities, §§425-427. 
 
 § 419. It is almost self-evident that a corporation has no im- 
 plied power to consolidate with another. 3 Special 
 w)wer?o ied authority from the legislature is necessary. 3 Reasons 
 
 consoli- for this are twofold. In the first place, since a con- 
 date. ... 
 
 solidation ordinarily brings a new corporation into 
 
 existence, 4 the authority of the legislature is as necessary for 
 the incorporation of a company out of pre-existing corporations 
 as it is under other circumstances. And in the second place, 
 the rights of dissenting shareholders would be impaired ; for 
 the implied agreement made by every one subscribing for shares 
 that the corporate affairs shall be subject to the will of the 
 majority and of the corporate management, does not extend 
 beyond the doing of acts contemplated in the original consti- 
 tution. 5 
 
 special rates of fare, are not so in- 
 herent in the road as to pass to any 
 corporation or person authorized to 
 work it. Pittsb., Cin., etc., Ry. Co. 
 v. Moore, 33 Ohio St. 384. But com- 
 pare Detroit v. Mutual Gas Co., 43 
 Mich. 594. 
 
 1 Chaffe v. Ludeling, 27 La. Ann. 
 607; compare Beesen v. Lang, 85 Pa. 
 St. 197. 
 
 2 An unauthorized consolidation 
 does not create a corporation de facto. 
 Amer. L. & T. Co. v. Minn., etc., 
 R. R. Co., 157 111. 641. 
 
 8 Pearce v. Madison, etc., R. R., 21 
 
 406 
 
 How. 442; Clearwater v. Meredith, 1 
 Wall. 25; Cole v. Millerton Iron Co., 
 133 1ST. Y. 164. Power to connect or 
 unite with another road refers 
 merely to physical connection of the 
 tracks; it does not authorize pur- 
 chase, lease, or consolidation. Louis- 
 ville, etc., R. R. v. Kentucky, 161 
 U. S. 677. As to "Trusts" and 
 monopolies, see §§ 309a-309c. 
 
 « §421. 
 
 5 Clearwater v. Meredith, 1 Wall. 
 25, 40. See § 536 for the right of a 
 shareholder to prevent a consolida- 
 tion.
 
 PART V.] 
 
 CONSOLIDATION. 
 
 [§ 421. 
 
 § 420. The authority to consolidate may exist in the original 
 constitution of the corporation ; x or it may be given Authoriw 
 by a subsequent statute passed before consolidation ; 2 to consoii-' 
 or an unauthorized consolidation may be ratified by 
 statute after it has taken place. 3 And power given to a cor- 
 poration to consolidate with any other is sufficient to another 
 corporation, if it choose, to unite with the former, although the 
 latter is not named in the statute. 4 Corporations incorporated 
 by different states may be united by consolidation. 5 
 
 § 421. When two or more corporations are consolidated, the 
 legal relations thereby occasioned depend primarily Effect f 
 on the intention of the legislature as expressed in the consoiida- 
 statute authorizing the consolidation. 6 Generally the 
 effect is to dissolve all the corporations consolidating, and to 
 create a new corporation out of their elements. 7 But consolida- 
 tion does not necessarily work a dissolution of all the consolidat- 
 ing corporations; and one may become merged in the other, 
 the latter continuing its corporate existence. 8 
 
 1 Nugent v. Supervisors, 19 Wall. 
 241. 
 
 2 See Black v. Delaware and Rar. 
 Canal Co., 24 N. J. Eq. 455. A state 
 may authorize two or more existing 
 corporations to organize themselves 
 into a new corporation just as much 
 as it may authorize individuals to in- 
 corporate themselves. State Treas- 
 urer v. Auditor-General, 46 Mich. 
 224, 233. 
 
 8 Bishop v. Brainerd, 28 Conn. 289 ; 
 Mead v. New York, Housatonic, etc., 
 R. R. Co., 45 Coun. 199. See Mc- 
 Auley v. Columbus, etc., Ry. Co., 83 
 111. 348. 
 
 4 Matter of Prospect Park, etc., R. 
 R. Co., 67 N. Y. 371. See New 
 York and N. E. R. R. Co. v. New 
 York, etc., R. R. Co., 52 Conn. 274 ; 
 contra, Morrill v. Smith Co., 89 Tex. 
 529, 552. 
 
 5 See Muller v. Do ws, § 408, and gen- 
 erally for status of such corporation, 
 see §§ 403 et seq. ; also Racine, etc., 
 
 R. R. Co. v. Farmers' L'n & Trust 
 Co., 49 111. 331. 
 
 6 Central R. R., etc., Co. v. Georgia, 
 92 U. S. 665; Railroad Co. v. Georgia, 
 98 U. S. 359 ; Keokuk, etc., R. R. Co. 
 v. Missouri, 152 U. S. 301 ; Adams v. 
 R. R. Co., 77 Miss. 194 ; State ex rel. 
 Houck v. Lesuer, 145 Mo. 322. 
 
 7 Railroad Co. v. Georgia, 98 U. S. 
 359; Clearwater ». Meredith, 1 Wall. 
 25 ; McMahon v. Morrison, 16 Ind. 
 172 ; State v. Bailey, ib. 46 ; Shields 
 v. Ohio, 95 U. S. 319 ; Ridgway Town- 
 ship v. Griswold, 1 McCrary, 151 ; 
 Cheraw, etc., R. R. Co. v. Commis- 
 sioners, 88 N. C. 519 ; Fee v. New 
 Orleans Gas Light Co., 35 La. Ann. 
 413 ; Kansas, O., etc., Ry. Co. v. 
 Smith, 40 Kan. 192 ; Board of Ad- 
 ministrators v. Gas Light Co., 40 La. 
 Ann. 382 ; Adams v. R. R. Co., 77 
 Miss. 194. 
 
 8 Philadelphia, etc., R. R. Co. v. 
 Maryland, 10 How. 376 ; Central R. 
 R., etc., Co. v. Georgia, 92 U. S. 665 ; 
 
 407
 
 § 423.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. Vll. 
 
 § 422. The phrases used in the preceding paragraph require 
 analysis. When it is said, that whether or not a dis- 
 parages 8 ° f solution of both corporations and a creation of a new 
 one are occasioned, depend on the intention of the 
 legislature, the word " corporation " is obviously used as mean- 
 ing legal institution, or the sum of the legal relations subsisting 
 in respect of the corporate enterprise. 1 Evidently questions 
 arising on consolidation are questions as to what already sub- 
 sisting legal relations continue, and what new legal relations are 
 occasioned through the consolidation. Hence, by saving that a 
 new corporation is created, is meant that the legal relations are 
 substantially changed as a body ; and that future legal relations 
 will depend on a different corporate constitution. And by say- 
 ing that corporation B. is merged into corporation A., is meant 
 that the constitution of A., as an organic group of laws, remains 
 unchanged ; though it may be modified by bringing into it 
 certain legal rules from the constitution of B. 
 
 § 423. In accurate and minute discussions, however, of special 
 questions arising on consolidation, usually but small 
 assistance will be derived from considering whether 
 or not a new corporation is created. The essential 
 matter will be to determine from the statutes authorizing the 
 consolidation how far the already subsisting legal relations are 
 modified ; and how far are altered the legal rules under which 
 legal relations in respect of the corporate enterprise will come 
 into existence upon the doing of further acts. 
 
 Essential 
 questions. 
 
 Tompkins v. Augusta So. R. R. Co., 
 101 Ga. 436 ; Pingree v. Mich. Ceu. 
 R. R. Co., 118 Mich. 314 ; Chicago, 
 etc., Ry. Co. v. Ashling, 160 111. 373. 
 See this last case for what was held 
 to be a consolidation. "When the 
 rights, franchises, and effects of two 
 or more corporations are by legal au- 
 thority and agreement of the parties 
 combined and united into one whole 
 and committed to a single corpora- 
 tion, the shareholders of which are 
 composed of those (so far as they 
 choose to become such) of the com- 
 panies thus agreeing, this is in law 
 and according to common under- 1 
 
 408 
 
 standing a consolidation of such 
 companies, whether such single cor- 
 poration, called the consolidated 
 company, be a new one then created, 
 or one of the original companies con- 
 tinuing in existence with only larger 
 rights and capacities and property." 
 Meyer v. Johnston, 64 Ala. 603, 656 ; 
 opinion of court, per Manning, J. 
 Because the consolidated company 
 has a new name does not make it a 
 new corporation. lb. In this case it 
 was held that no new corporation was 
 created. See, also, Capital Traction 
 Co. v. Offutt, 17 D. C. App. Cas. 292. 
 i See Chap. III. 

 
 PART V.] 
 
 CONSOLIDATION. 
 
 [§ 425. 
 
 of the con- 
 solidated 
 corpora- 
 tion. 
 
 § 424. All the rights and franchises of the consolidated cor- 
 poration are subject to the provisions of the statute Capacities 
 authorizing the proceeding. 1 Usually, however, all 
 the franchises of the consolidating companies vest in 
 the new corporation ; as well as all the rights which 
 before consolidation had accrued or vested in the former corpo- 
 rations under the exercise of their franchises. 2 Thus, author- 
 ity to mortgage the franchises may pass to the consolidated 
 company ; 3 and likewise the power of eminent domain. 4 
 
 § 425. On the other hand, the consolidated corporation not 
 only assumes duties and obligations similar to those 
 of the former corporations, but as a general rule will Unities 
 be held liable on the very identical liabilities and 
 
 i Shields v. Ohio, 95 U. S. 319; 
 affirming S. C, 26 O. St. 86. When 
 the state constitution imposes liabil- 
 ity upon the stockholders for corpo- 
 rate debts, the stockholders of the 
 consolidated company are so liable, 
 although such liability did not exist 
 as to any of the constituent com- 
 panies before consolidation. Minne- 
 apolis & St. L. R'y Co. v. Gardiner, 
 177 IT. S. 332. 
 
 2 Payne v. Lake Erie, etc., R. R. 
 Co., 31 Ind. 283; Miller v. Lancaster, 
 5 Coldw. (Tenn.) 514; Cooper v. Cor- 
 bin, 105 111. 224. Thus, the new cor- 
 poration may lawfully use a patent 
 which the prior companies had been 
 licensed to use. Lighter v. Boston 
 and Albany R. R. Co., 1 Lowell, 
 338; Ridgway Township v. Griswold, 
 1 McCrary, 151. So when the officers 
 of a corporation are exempt from 
 jury duty, and the corporation con- 
 solidates, the consolidated corpora- 
 tion receiving all the immunities 
 of the former corporations, its officers 
 will be exempt from jury duty; and 
 that they should be so is a valuable 
 franchise of the corporation. Zim- 
 mer v. State, 30 Ark. 677. See, also, 
 Fisher v. N. Y. C. and H. R. R. R. 
 
 Co., 46 N. Y. 644. It is to be pre- 
 sumed, when two or more railroad 
 companies are authorized to consoli- 
 date, that the franchises and priv- 
 ileges of each continue to exist with 
 respect to the several roads so con- 
 solidated. Authority to consolidate 
 " upon such terms as may be deemed 
 just and proper" includes the power 
 to transfer to the consolidated com- 
 pany the franchises and privileges 
 connected with the road; if, indeed, 
 the law itself did not have that ef- 
 fect. Green County v. Conness, 109 
 U. S. 104, citing Tomlinsonu. Branch, 
 15 Wall. 460; see § 491. 
 
 As to whether special exemptions, 
 as, e. g., from taxation, pass to the 
 consolidated corporation, see §§ 487- 
 491. As to the right of the consoli- 
 dated corporation to municipal bonds 
 voted in aid of one of the former 
 companies, see § 323. As to consoli- 
 dation releasing subscribers, see 
 § 536. 
 
 3 Mead v. N. Y., Housatonic, etc., 
 R. R. Co., 45 Conn. 199. 
 
 4 South Carolina R. R. Co. v. 
 Blake, 9 Rich. L. (S. C.) 228, 233; 
 Trester v. Missouri P. R. Co., 33 
 Neb. 171. 
 
 409
 
 § 426.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 obligations incurred by either of the former companies. 1 Ac- 
 cordingly, the new corporation may be held liable for the 
 torts of the consolidating companies committed before con- 
 solidation. 2 
 
 § 42G. Evidently the consolidated company, by the statutes 
 allowing or ratifying the consolidation, may be made to assume 
 all the liabilities of the former companies to their creditors, 3 
 or the terms of the consolidation and the statutes authorizing 
 it may expressly or by implication prevent such liability from 
 arising. 4 In the absence of provision, however, by which the 
 consolidated corporation is made to assume or is kept free from 
 such liabilities, it has been held that where two or more rail- 
 road corporations are consolidated, the consolidated company, 
 so far as the creditors of one of the original companies are 
 concerned, is a successor of that particular company only in 
 respect of the property formerly belonging to it ; and in re- 
 spect of the properties of the other companies, the consolidated 
 company is a new and independent compaii}', on which such 
 creditors have no claim upon their original contracts, but only 
 by virtue of its assumption of the obligations of the old com- 
 panies. 5 
 
 1 Board of Administrators v. Gas 
 Light Co., 40 La. Ann. 382. See 
 Berry o. K. C, etc., R. R. Co., 52 
 Kan. 774; Carutliers v. Kas. City 
 R. R. Co., 59 Kas. 629; Greene v. 
 Woodland Ave. St. R. Co., 62 Oh. St. 
 67; Lincoln St. Ry. Co. v. Lincoln, 
 61 Neb. 109. 
 
 2 Chicago, R. I. and Pac. R. R. Co. 
 v. Moffatt, 75 111. 524; Coggin v. Cen- 
 tral R. R. Co., 62 Ga. 685; Texas 
 and P. R. R. Co. v. Murphy, 46 Tex. 
 356; Louisville, N. A., etc., Ry. Co. 
 v. Boney, 117 Ind. 501. See Colum- 
 bus, Chicago, etc., Ry. Co. v. Skid- 
 more, C)9 111. 566; Indianola R. R. Co. 
 v. Fryer, 50 Tex. 609; compare Hous- 
 ton, etc., R. R. Co. v. Shirley, 54 Tex. 
 125; St. Louis and S. F. R. R. v. 
 Marker, 41 Ark. 542. 
 
 8 See Western Un. R. R. Co. v. 
 Smith, 75 111. 49G; Warren v. Mobile, 
 410 
 
 etc., R. R. Co., 49 Ala. 582; John 
 Hancock Ins. Co. v. Railroad Co., 
 149 Mass. 214; e. g., the consolidated 
 company may have to carry out a 
 contract to exchange stock for bonds 
 made by one of the consolidating 
 companies, and so may have to de- 
 liver its own stock. Day v. Wor- 
 cester, etc., R. R. Co., 151 Mass. 302. 
 
 4 Shaw v. Norfolk county R. R. 
 Co., 8 Allen (Mass.), 407; Whipple v. 
 Union Pac. Ry. Co., 28 Kan. 474. 
 
 5 Prouty v. Lake Shore, etc., R. R. 
 Co., 52 N. Y. 363. Similarly, in re- 
 gard to the officers of the consoli- 
 dated company, in so far as the trust 
 devolves upon them of managing the 
 property of the old company, they 
 are the successors of its officers and 
 bound by proceedings against them. 
 Prouty v. Lake Shore, etc., R. R. Co., 
 supra.
 
 PAKT V.] 
 
 CONSOLIDATION. 
 
 [§ 427. 
 
 § 427. The rationale of these different cases, and especially 
 of Prouty v. Lake Shore, etc., R. R. Co., will be more apparent 
 if the matter be considered from the point of view of the rights 
 of the former corporations' creditors as against the consolidated 
 company and the property which it has acquired through con- 
 solidation, rather than from the point of view of that corpora- 
 tion's liability to them. A creditor cannot prevent a corpora- 
 tion which owes him money from consolidating with another ; 
 but, on the other hand, his rights respecting the property of 
 his debtor — which constitutes a fund for the payment of its 
 debts — cannot be affected by its consolidation with another 
 corporation. 1 He can follow this fund into the hands of the 
 consolidated corporation ; and his rights in regard to the prop- 
 erty of his debtor are certainly prior to the rights of the cred- 
 itors of the other consolidating companies. The idea of con- 
 solidation seems to imply responsibility on the part of the 
 consolidated corporation for the debts of the former companies : 
 the rights of the creditors of each consolidating company are 
 unaffected by the consolidation : the outcome is, that the con- 
 solidated corporation is personally liable for all the debts of the 
 former companies ; but the equitable lien which each group of 
 creditors has on the property of their debtor corporation pre- 
 serves its validity and priority as against the creditors of the 
 other corporations. 2 
 
 Although the (Michigan law) sub- 
 jects consolidated companies to the 
 obligations of their constituents, yet 
 the consolidation creates a new and 
 distinct corporation, and a declara- 
 tion against it for a cause of action 
 arising hefore consolidation should 
 show against what company it arose, 
 and aver such facts as will subject 
 the new company to be sued on it. 
 Marquette, H. and O. R. R. Co. v. 
 Langtou, 32 Mich. 251. 
 
 1 See Shackleford v. Miss. Central 
 R. R. Co., 52 Miss. 159. Compare 
 Indianola R. R. Co. v. Fryer, 56 Tex. 
 609; Houston, etc., R. R. Co. v. Shir- 
 ley, 54 Tex. 125; Whipple v. Union 
 Pacific Ry. Co., 28 Kan. 474; Hamlin 
 v. Jerrard, 72 Me. 62. 
 
 2 See Shackleford v. Miss. Central 
 R. R. Co., 52 Miss. 159. See further 
 as to the rights of creditors on con- 
 solidation, §§665, 666. A consoli- 
 dated company is affected with no- 
 tice of an unrecorded mortgage on 
 the property of the corporations from 
 which it is formed; and such mort- 
 gage will be good as against judg- 
 ment creditors of the consolidated 
 company who buy the mortgaged 
 premises on execution. Mississippi 
 Valley Co. v. Chicago, etc., R. R. Co., 
 58 Miss. 846; cf. Cordova Coal Co. v. 
 Long, 91 Ala. 538. A shareholder, 
 by provisions of the consolidating 
 agreement, to which he was a party, 
 may be precluded from collecting 
 from the consolidated company a 
 
 411
 
 § 430.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 6. DISSOLUTION. 
 
 Definition, § 428. 
 Causes, §§ 429, 430. 
 Power to dissolve. Decree of dissolu- 
 tion, when necessary, §§ 431, 432. 
 
 Surrender of franchises, §§ 433, 434. 
 Effect of a dissolution, §§ 435-437. 
 
 Definition. 
 
 Causes. 
 
 § 428. The dissolution of a corporation is that condition of 
 law and fact which ends the capacity of the body 
 corporate to act as such, and necessitates a final liqui- 
 dation and extinguishment of all the legal relations subsisting 
 in respect of the corporate enterprise. The causes and general 
 effect J of a dissolution may be considered in order. 
 
 § 429. It is obvious that many common law rules regarding 
 the causes of the dissolution of the older sorts of cor- 
 porations, municipal, eleemosynary, and ecclesiastical, 
 have no application to stock corporations at the present day. 
 Thus, the rule that a dissolution is caused by a death of all the 
 members cannot apply to a stock corporation ; in which, if the 
 shareholders die, their shares pass to other persons, either by 
 bequest or under statutes of distributions.- Likewise are inap- 
 plicable cases like that in Rolle's Abridgment, in which a cor- 
 poration was said to be dissolved by the loss of an integral part ; 
 as when in a corporation composed of brothers and sisters, all 
 the latter die. 3 
 
 § 430. A stock corporation is dissolved by (1) forfeiture of 
 its franchises ; (2) repeal of its charter or enabling act, 4 when 
 
 debt owing by one of the constituent 
 companies. Utica National Brewing 
 Co., Matter of, 154 N. Y. 268. 
 
 1 The particular relations, arising 
 on dissolution between the corpora- 
 tion and the different classes of per- 
 sons interested, and among the mem- 
 bers of each class, are noticed in 
 subsequent chapters. See §§ 610, 
 611, 664, 750, 751, 786. 
 
 2 Mathis v. Morgan, 72 Ga. 517; 
 Boston Glass Mfg. v. Lnngdon, 24 
 Pick. 49, 52; Russell v. McLellan, 14 
 Pick. 63, 69; Belton, in re, 47 La. 
 Ann. 1614. Compare Newton Mfg. 
 Co. v. White, 42 Ga. 148; McGinty v. 
 
 412 
 
 Athol Reservoir Co., 155 Mass. 183. 
 Though (semble) one person cannot 
 organize a corporation, a corpora- 
 tion is not dissolved by the fact that 
 one person has purchased all the 
 stock. Louisville Bkg. Co. v. Eisen- 
 mann, 94 Ky. 83; Parker v. Hotel 
 Co., 96 Tenn. 252. 
 
 3 1 Rolle, Abr. 514. Likely it 
 would have been otherwise in this 
 case, had the brothers possessed the 
 capacity of electing further sisters. 
 See Rose v. Turnpike Co., 3 Watts 
 (Pa.), 46. 
 
 4 The repeal of the general enab- 
 ling act, however, will not work a
 
 PART V.] 
 
 DISSOLUTION. 
 
 [§ 431. 
 
 the power to repeal is reserved to the state ; (3) surrender of its 
 franchises to the state; (4) compliance with whatever statute 
 may exist authorizing a voluntary dissolution ; and (5) expira- 
 tion of the time limited by the charter, or by the enabling act 
 and articles of association for the continuance of the corpora- 
 tion. 1 The first two of these causes of dissolution are con- 
 sidered in the chapter on the relations between the corporation 
 and the state. 2 Some states, for instance New York 3 and 
 Massachusetts, have enacted statutes authorizing the voluntary 
 dissolution of corporations; and when such a statute is complied 
 with a judgment of dissolution may be obtained. 4 
 
 § 431. In an ordinary business corporation, where the rights 
 of the public do not intervene, it is within the power 
 of the bod}' corporate, by a vote of the majority of dissolve, 
 shareholders, to discontinue the corporate business. 5 dissolution 
 But, as will appear by reference to the cases and in- when nec " 
 stances hereafter cited, such action in itself would 
 not ordinarily effect a dissolution so as, for instance, to pre- 
 vent the corporation from being sued. A decree of dissolu- 
 
 dissolution of existing corporations, 
 unless such an intention be clearly 
 indicated in the repealing act. See 
 §504. 
 
 1 Knights of Pythias v. Weller, 
 93 Va. 605. See Asherville Division 
 v. Aston, 92 N. C. 578; Marysville 
 Invest. Co. v. Munson, 44 Kan. 491; 
 State v. Mitchell, 104 Tenn. 336. 
 Where a statute provided that cor- 
 porations formed under it should 
 have succession for a period of 
 twenty years, when no period was 
 limited in their charters, and a cor- 
 poration was formed with " perpet- 
 ual succession," it was held only to 
 mean unbroken continuity, and that 
 the corporation ceased in twenty 
 years. Scanlan v. Crawshaw, 5 Mo. 
 App. 337. But in its natural signifi- 
 cation, when not limited by the con- 
 text, " perpetual succession" denotes 
 indefinite duration, and the corpora- 
 tion has the right to exist forever. 
 Fairchild v. Masonic Hall Ass'n, 71 
 
 Mo. 526. Overruled (semble) States. 
 Payne, 129 Mo. 468, where, in view of 
 other parts of the statute, a grant of 
 " perpetual succession " was held not 
 to extend the statutory limit of ex- 
 istence. State ex rel. v. Leseur, 141 
 Mo. 29. A corporation is dissolved 
 upon the expiration of its charter; 
 after that, it is not a de facto cor- 
 poration, it cannot convey its prop- 
 erty, and its deeds thereafter exe- 
 cuted may be questioned collateral- 
 ly. Bradley v. Reppell, 133 Mo. 545. 
 
 2 §§ 457 et seq., and §§ 496 et seq. 
 See also § 664, for the rights of cred- 
 itors. 
 
 3 N. Y. Code of Civil Procedure, 
 §§ 2419 et seq. See Matter of Pyro- 
 lusite Manganese Co., 29 Hun, 429. 
 
 4 For a construction of the New 
 York statute, see Herring v. N. Y., 
 etc., R. R. Co., 105 N. Y. 340. 
 
 5 Treadwell v. Salisbury Mfg. Co., 
 7 Gray, 393, 404. See §§ 610, 611. 
 
 413
 
 § 432.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 tion from a court of competent jurisdiction is necessary in such 
 cases. 1 
 
 § 432. If a corporation is dissolved by the repeal of its charter 
 pursuant to an unconditional power of repeal reserved to the 
 state, or if its term of existence has expired, no judicial decree 
 is necessary to effect a dissolution. 2 And when the corpora- 
 tion is to cease upon the happening of some contingency, it is 
 held that thereupon a dissolution takes place without any de- 
 cree. 3 But to effect this the intention of the statute must be 
 very clear ; for, although a certain event may expressly be 
 made a ground of forfeiture, the forfeiture must be judicially 
 declared. 4 And, indeed, the better opinion would seem to be 
 that, for most purposes, the happening of the contingency 
 upon which the corporation is to cease should also be judicially 
 declared. 5 
 
 Subject to the exceptions already stated, the general rule is 
 that the decree of a court of competent jurisdiction is necessary 
 to effect the dissolution of a corporation. 6 Accordingly, a fail- 
 ure to elect corporate officers, 7 or a discontinuance of busi- 
 
 1 As to the doubtful authority of a 
 court of equity to dissolve a corpora- 
 tion, see Hitch v. Hawley, 132 N. Y. 
 212; Huut v. Le Grand Skating Co., 
 143 111. 118; Wheeler v. Pullman Iron 
 Co., ib. 197; Supreme Sitting, etc., 
 v. Boker, 134 Ind. 293; Law v. Rich, 
 47 W. Va. 631. 
 
 2 See §503. Sturgess v. Vander- 
 bilt, 73 N. Y. 384; People v. Walker, 
 17 N. Y. 502; Bank of Galliopolis v. 
 Trimble, 6 B. Mon. ( Ky. ) 599, 601 ; 
 Terry v. Merchants', etc., Bank, 6(3 
 Ga. 117; Bank of Miss. v. Wrenn, 3 
 Sm. & M. (Miss.) 791; see Lagrange, 
 etc., R. R. Co. v. Rainey, 7 Coldw. 
 (Tenn.) 420. The dissolution of a 
 corporation by the expiration of its 
 charter is no ground for the appoint- 
 ment of a receiver. Anderson v. 
 Buckley, 126 Ala. 623. 
 
 8 In re Brooklyn, Winfield, etc., 
 R. R. Co., 75 N. Y. 335; Brooklyn 
 Steam Transit Co. v. Brooklyn, 78 
 N. Y. 524. 
 
 414 
 
 4 Lagrange, etc., R. R. Co. v. 
 Rainey, 7 Coldw. (Tenn.) 420. See 
 §153. 
 
 5 § 458, also § 153. 
 
 6 Kincaid v. Dwinelle, 59 N. Y. 
 548; Moore v. Schoppert, 22 W. Va. 
 282; but see Van Pelt v. Home 
 B'ld'g Ass'n, 87 Ga. 370. See § 458. 
 
 7 Rose v. Turnpike Co., 3 Watts 
 (Pa.), 40; Lehigh Bridge Co. v. 
 Lehigh Coal Co., 4 Rawle (Pa.), 8, 
 23; Commonwealth v. Cullen, 13 
 Pa. St. 133; Blako v. Hiukle, 10 
 Yerg. (Tenn.) 218; Nashville Bank 
 v. Petway, 3 Humph. (Tenn.) 522; 
 Boston Glass Manufactory v. Lang- 
 don, 24 Pick. 49; Russell 0. McLellan, 
 14 Pick. 63; Knowlton v. Ackley, 8 
 Cush. 93; Cahill v. Kalamazoo Mut. 
 Ins. Co., 2 Dougl. (Mich.) 124, 140; 
 Philips b. Wickham, 1 Paige (N. Y.), 
 590; Slee v. Bloom, 5 Johns. Ch. 
 (N. Y.) 366, 377; S. C, 19 Johns. 
 456; People u. Twaddell, 18 Hun, 
 427; Evarts v. Killingworth M'f'g
 
 PART V.] 
 
 DISSOLUTION. 
 
 [§ 432. 
 
 ness by the corporation, 1 does not effect its dissolution ; nor 
 does its insolvency. 2 Neither does a dissolution result where 
 the corporation is insolvent, and has ceased to do business as 
 well ; 3 even when it has assigned all its property for the benefit 
 of its creditors, 4 or a receiver has been appointed. 5 It has even 
 been held that the fact that a corporation is insolvent will not 
 authorize it to apply to a court of equity for a receiver to wind 
 up its affairs, in order to prevent one creditor from acquiring 
 by suit a preference over others ; the court saying, that a re- 
 ceiver might be appointed at the instance of a creditor, but 
 not at the instance of an insolvent debtor. 6 
 
 Co., 20 Conn. 447; Harris v. Miss. 
 Valley, etc., R. R. Co., 51 Miss. 602; 
 Smith v. Smith, 3 Dessaur (S. C. ), 
 557; Parker v. Hotel Co., 96 Tenn. 252. 
 
 1 Kansas City Hotel Co. v. Saner, 65 
 Mo. 279, 288; Nimmons v. Tappan, 2 
 Sweeny (X. Y. ), 652; Mickles v. 
 Rochester City Bk., 11 Paige (N. Y.), 
 118; Moseby o. Burrow, 52 Tex. 396; 
 State v. Barron, 58 N. H. 370; Weig- 
 and o. All. Sup. Co., 44 W. Va. 133; 
 Law o. Rich, 47 W. Va. 634; Richards 
 v. Minn. Sav. B'k, 75 Minn. 196; Com- 
 pare Matter of Jackson Marine Ins. 
 Co., 4 Sand. Ch. (N. Y.) 559; Conro 
 v. Gray, 4 How. Pr. (N. Y. ) 166; Troy 
 & Rutland R. R. Co. v. Kerr, 17 Barb. 
 581; Sleeper v. Norris, 59 Kas. 555; 
 Salem Nat. B'k v. Prescott, 60 Kas. 
 490. A railroad company is not dis- 
 solved by a sale of its road. State v. 
 Rives, 5 Ired. L. (N. C.) 297. 
 
 2 Moseby v. Burrow, 52 Tex. 396; 
 Shenandoah Valley R. R. Co. v. 
 Griffith, 76 Va. 913; cases in the fol- 
 lowing notes. 
 
 8 Valley Bank v. Sewing Society, 28 
 Kan. 423; Electric Lighting Co. v. 
 Leiter, 19 Dist. Col. 575; see Davis v. 
 Memphis, etc., R. R. Co., 87 Ala. 633. 
 A national bank in voluntary liquida- 
 tion under § 5220 of the U. S. Rev. 
 Stat, is not thereby dissolved as a cor- 
 poration, but may sue and be sued by 
 name for the purpose of settling dis- 
 
 puted claims against its assets, even 
 though the plaintiff may have filed a 
 creditor's bill to enforce the individ- 
 ual liability of shareholders. Na- 
 tional B'k v. Insurance Co., 104 U. S. 
 54. 
 
 4 Boston Glass Manufactory v. 
 Langdon, 24 Pick. 49; Town v. Bank 
 of River Raisin, 2 Dougl. (Mich. ) 530; 
 De Camp v. Alward, 52 Ind. 468; 
 State v. Bank of Maryland, 6 G. & J. 
 205. 
 
 6 Kincaid o. Dwiuelle, 59 N. Y. 548; 
 Lea o. America, etc., Canal Co., 3 Abb. 
 Pr. N. S. (N. Y.) 1, 11; City Ins. Co. 
 u. Commercial Bank, 68 111. 348; 
 Bank of Bethel v. Pahquioque Bank, 
 14 Wall. 383; Green v. Walkill Nat. 
 Bank, 7 Hun, 63; Moseby v. Burrow, 
 52 Tex. 396; State v. Railroad Com- 
 missioners, 41 N. J. L. 235; Heath v. 
 Missouri, etc., Ry. Co., 83 Mo. 617; 
 State v. Butler, 86 Tenn. 614; Jones 
 v. Bank of Leadville, 10 Col. 464. 
 Compare Bell v. Indianapolis, etc., R. 
 R. Co., 53 Ind. 57; Indianapolis, etc., 
 R. R. Co. v. Ray, 51 Ind. 269; Hol- 
 lingshead v. Woodward, 107 U. S. 96; 
 Hutchison v. Crutcher, 98 Tenn. 421. 
 
 There is nothing in the statutes re- 
 lating to national banks that takes 
 them out of the operation of this 
 general rule. National Bank v. De- 
 posit Co., 161 U. S. 1. 
 
 6 Hugh v. McRae, Chase's Dec. 466. 
 
 415
 
 § 434.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 Surrender 
 of fran- 
 chises. 
 
 § 433. It is said very generally in older cases, that a corpo- 
 ration cannot validly surrender its franchises unless 
 the state accepts them. " Charters are in many re- 
 spects compacts between the government and the 
 corporators. As the former cannot deprive the latter of their 
 franchises in violation of the compact, so the latter cannot put 
 an end to the compact without the consent of the former. It 
 is equally obligatory on both parties. The surrender of a 
 charter can only be made by some formal act of the corporation, 1 
 and will be of no avail until accepted by the government. 
 There must be the same agreement to dissolve that there was 
 to form the compact. It is the acceptance which gives efficacy 
 to the surrender. The dissolution of a corporation, it is said, 
 extinguishes all its debts. The power of dissolving itself by 
 its own act would be a dangerous power, and one which cannot 
 be supposed to exist." 3 It is also said that " the modes in 
 which a surrender is to be made, and as to what facts consti- 
 tute a surrender, have been a fruitful subject of discussion in 
 the courts of this country. In England, the surrender is by 
 deed to the king, by whom corporations are usually created by 
 charter. In this country, corporations are created by an act 
 of the legislature, and it would seem to follow, in the absence 
 of any statute prescribing the mode in which a surrender is to 
 be made, that to become available, it must be accepted by the 
 authority which created the corporation." 3 
 
 § 434. The present applicability of the preceding citations to 
 stock corporations is somewhat doubtful. Formerly, corpora- 
 tions usually received special charters ; but now stock corpora- 
 tions at least are almost universally organized under general 
 enabling acts. A mode of dissolution is ordinarily provided ; 
 
 See Kimball v. Goodbum, 32 Mich. 
 10; New York Marbled Iron Works 
 v. Smith, 4 Duer (N. Y. ), 362. 
 
 1 Not the officers, but only the 
 shareholders of a corporation can 
 surrender its franchise. Jones v. 
 Bank of Leadville, 10 Col. 464. 
 
 2 Boston Glass M'f'y v. Langdon, 
 24 Pick. 49, 53. Accord, Town v. 
 Bank of River Raisin, 2 Dougl. 
 (Mich.) 530, 538; Lagrange, etc., R. 
 
 416 
 
 R. Co. v. Rainey, 7 Coldw. (Tenn.) 
 420, 438; Revere v. Boston Copper 
 Co., 15 Pick. 351; Mechanics' Bank v. 
 Heard, 37 Ga. 401; Wilson ». Propri- 
 etors, etc., 9 R. I. 590; Norris v. 
 Mayor of Smithville, 1 Swan. (Tenn.) 
 164; 2 Kent's Com., 311. Cf. Attor- 
 ney-Gen. v. R. R. Co., 93 Wis. 604. 
 
 3 Town v. Bank of River Raisin, 2 
 Dougl. (Mich.) 530, 538.
 
 PART V.] 
 
 DISSOLUTION. 
 
 [§ 435. 
 
 and if no such provision exists, the most experienced legal ad- 
 viser might be puzzled to advise how an acceptance of the sur- 
 render of franchises could be brought about, unless by lobbying 
 a special bill through the legislature. Besides, the idea of the 
 necessity of the acceptance of a surrender of franchises on the 
 part of the authority granting them, seems intimately connected 
 with the old doctrine — now certainly a thing of the past — that 
 on the dissolution of a corporation all its debts were extin- 
 guished. There seems to be no valid reason why an ordinary 
 stock corporation, charged with the performance of no public 
 duty, should not be allowed to close up its business at any time, 
 and dissolve. 1 
 
 § 435. The consequences of a dissolution are both substan- 
 tial and formal. The substantial consequences are Effect of a 
 that the business is wound up, and all the legal dlssolutlon - 
 relations subsisting in respect of the corporate funds are 
 liquidated. The formal consequences are that the corpora- 
 tion can no longer act as such either before the courts or in 
 business transactions. 2 Accordingly, the liquidation of its 
 affairs will ordinarily have to be conducted by a receiver or 
 other officer appointed for that purpose. After its dissolution 
 the corporation can institute no suit, nor be made a party 
 defendant; 3 and all suits already brought by or against it are 
 abated. 4 And judgment cannot be entered against it. 3 
 
 1 Holmes, etc., M'f gCo. v. Holmes, 
 etc., Metal Co., 127 N. Y. 252; Elyea 
 v. Lehigh S. M. Co., 169 K Y. 29. If 
 the rights of the public intervene, 
 the state would seem at least to have 
 the right to compel the corporation 
 to continue its business; however 
 impracticable the actual assertion of 
 any such right might be. See §§ 454, 
 455, and State v. Western, etc., R. R. 
 Co., 95 N. C. 602. 
 
 2 Saltmarsh v. Planters', etc., Bank, 
 17 Ala. 761. See Schleider v. Diel- 
 man, 44 La. Ann. 462; Weatherley v. 
 
 Capital City Water Co., 115 Ala. 156. 
 See § 504. 
 
 3 Saltmarsh v. Planters', etc., Bank, 
 17 Ala. 761; City Ins. Co. v. Com- 
 mercial Bank, 68 111. 348; Bank of 
 La. v. Wilson, 19 La. Ann. 1; Mus- 
 catine Turn Verein v. Funck, 18 Iowa, 
 469; Miami Exporting Co. v. Gano, 
 13 Ohio, 269. See Cooper v. Oriental 
 Savings Association, 100 Pa. St. 402; 
 contra, Schmitt & Bro. Co. v. Ma- 
 honey, 60 Neb. 20. 
 
 4 National Bank v. Colby, 21 Wall. 
 609; Terry v. Merchants', etc., Bank, 
 
 5 Dobson v. Simonton, 86 N. C. 492. 
 See cases in last note. Where the 
 answer shows that the plaintiff was a 
 corporation at the date of the contract 
 
 27 
 
 sued on, the fact of its subsequent 
 dissolution will not avail to reverse a 
 judgment in its favor. Kansas City 
 Hotel Co. v. Sauer, 65 Mo. 279. 
 
 417
 
 § 437.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. 
 
 § 436. It is the legislative policy of some states to prolong 
 the existence of the corporation after the expiration of its 
 charter, for the purposes of winding up its affairs, though not 
 for the purpose of continuing its business. 1 Under such cir- 
 cumstances, whether any given legal proceeding should be 
 instituted in the corporate name, or in the name of a receiver 
 or of trustees appointed to wind up the corporate affairs, de- 
 pends on the statutory provisions. 2 
 
 § 437. In regard to the substantial effects of a dissolution, 
 clearly the common law rule that upon the dissolution of a 
 corporation, its real estate reverts to the grantor, its personal 
 property to the sovereign, and all debts due from and to it 
 become extinguished, 3 has no longer any application to stock 
 corporations. And that it has no application is the combined 
 
 66 Ga. 177; Greely v. Smith, 3 Story, 
 657; Merrill v. Suffolk Bank, 31 Me. 
 57; Ingraham v. Terry, 11 Humph. 
 (Tenn. ) 572; Mumma u. Potomac 
 Co., 8 Pet. 281; Farmers', etc., Bank 
 v. Little, 8 W. & S. (Pa.) 207; Bank 
 of Miss. v. Wrenn, 3 Sm. & M. 
 (Miss.) 791; May v. State Bank, 2 
 Rob. (Va.) 56; Thornton v. Mar- 
 ginal Freight R'y Co., 123 Mass. 32; 
 McCulloch v. Norwood, 58 N. Y. 566; 
 Taylor v. Gray, 59 N. J. Eq. 621 ; Ins. 
 Com. v. U. S. Fire Ins. Co., 22 K. I. 
 377; compare Shayne v. Evening Post 
 Pub. Co., 168 N. Y. 70; Piatt v. 
 Archer, 9 Blatchf. 559; Fiskr. Union 
 Pac. R. R. Co., 10 Blatchf. 518; Wil- 
 cox v. Continental Life Ins. Co., 56 
 Conn. 468; Life Ass'n v. Goode, 71 
 Tex. 90; Shore Line R. R. Co. v. 
 Maine Cen. Ry. Co., 92 Me. 476; 
 Morgan v. N. Y. Nat. Bldg. Assn., 73 
 Conn. 151. Contra, Lindell v. Ben- 
 ton, 6 Mo. 361. So it is also held in 
 Missouri that consolidation — which 
 causes dissolution — does not abate a 
 pending suit. Evans v. Interstate R'y 
 Co., 106 Mo. 594. 
 
 1 See Life Ass'n of America u. Fas- 
 sett, 102 111. 315; St. Louis, etc., Coal, 
 etc., Co. v. Sandoval Coal Co., Ill 
 
 418 
 
 111.32; Folger v. Chase, 18 Pick. 63; 
 Herron v. Vance, 17 Ind. 595 ; Tusca- 
 loosa Scientific, etc., Ass'n v. Green, 
 48 Ala. 346; Nelson v. Hubbard, 96 
 Ala. 238; Stiles v. Laurel Fork, etc., 
 Co., 47 W. Va. 838. As to extra- 
 territorial recognition of such a stat- 
 ute, see Rodger§.«. Ins. Co., 148 N. Y. 
 34. 
 
 2 See Mariners' Bank c. Sewall, 50 
 Me. 220; Blake v. Portsmouth, etc., 
 R. R. Co., 39 N. H. 435; Tuscaloosa, 
 etc., Ass'n v. Green, 48 Ala. 346; Re 
 Independent Ins. Co., 1 Holmes, 103; 
 Von Glahn v. De Rosset, 81 N. C. 
 467; Muscatine Turn Verein v. 
 Funck, 18 Iowa, 469; Pomeroy's Les- 
 see v. State Bank, 1 Wall. 23; Lo- 
 throp v. Stedman, 13 Blatchf. 134, 
 143; Owen v. Smith, 31 Barb. 641; 
 Heath v. Barmore, 50 N. Y. 302; 
 Wright v. Nostrand, 94 N. Y. 31; 
 State e. Bk. of Washington, 18 Ark. 
 554; Cooper v. Oriental Sav. Asso., 
 100 Pa. St. 402; Gray v. Lewis, 94 
 N. C. 392. 
 
 3 See Ang. and Ames on Corp., 
 §779; Life Ass'n of American. Fas- 
 sett, 102 111. 315; Mott v. Danville 
 Seminary, 129 111. 403; Danville Sem- 
 inary v. Mott, 136 111. 289. See Seixas
 
 PART V.] 
 
 DISSOLUTION. 
 
 [§ 437. 
 
 result of statutes and equitable principles. 1 On the dissolu- 
 tion of a stock corporation its assets become a trust fund for 
 the discharge of its liabilities, including those not yet ma- 
 tured, 2 and the surplus belongs to the shareholders. 3 Equity 
 will alwa} r s furnish a means by which debts due a corporation 
 can be collected after its dissolution, for the benefit of parties 
 interested, creditors or shareholders, 4 and in equity the gen- 
 eral assignee of a defunct corporation can collect its claims. 5 
 
 v. New Orleans, 51 La. Ann. 1. But 
 this rule was applied in Commercial 
 Bauk v. Lockwood, 2 Harr. (Del. ) 8. 
 1 See Owen v. Smith, 31 Barb. 641; 
 Heath v. Barmore, 50 N. Y. 302; Mc- 
 Coy v. Farmer, 65 Mo. 244. 
 
 2 People v. Nat'l Trust Co., 82 N. Y. 
 283. The dissolution of a corpora- 
 tion does not terminate a lease to it. 
 lb. Compare People v. Flint, 64 Cal. 
 49. 
 
 3 Heman v. Britton, 88 Mo. 549. 
 See St. Louis, etc., Coal, etc., Co. v. 
 Sandoval Coal, etc., Co., 116 111. 170; 
 AVheeler v. Pullman Iron Co., 143 
 111. 197; Burrall v. Bushwick R. R. 
 Co., 75 N. Y. 211; and see §§ 750, 
 
 751. When a mutual insurance com- 
 pany, which has no shareholders, is 
 dissolved, the assets remaining after 
 the discharge of its liabilities, vest 
 in the state. Titcomb v. Insurance 
 Co., 79 Me. 315. 
 
 4 See Hightower v. Thornton, 8 
 Ga. 486; Currant. State of Arkansas, 
 15 How. 304, 311; Von Glahn v. De 
 Rosset, 81 N. C. 467. 
 
 5 Lenox v. Roberts, 2 Wheat. 373; 
 Lum y. Robertson, 6 Wall. 277. See 
 Bacon u. Cohea, 12 Sm. & M. (Miss.) 
 516. Compare Fox v. Horah, 1 Ired. 
 £q. (N. C.) 358; Asheville Division v. 
 Aston, 92 N. C. 578. See, also, §504. 
 
 419
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 CHAPTER VIII. 
 
 RELATIONS BETWEEN THE STATE AND THE CORPORA- 
 TION, 1 INCLUDING RELATIONS BETWEEN THE STATE 
 AND (a) SHAREHOLDERS, (b) OFFICERS, AND (c) CRED- 
 ITORS OF THE CORPORATION. 
 
 Dual nature of the constitution of a 
 
 corporation, § 438. 
 Austin's analysis of a law, § 439. 
 Holland's and Kent's definitions, 
 
 § 440. 
 The term "command" misleading, 
 
 §441. 
 Definition of a " legal right," § 442. 
 Definition of a" legal relation," §443. 
 The manifestation of rules of law in 
 
 legal relations, § 444. 
 Legal effect of an act, § 445. 
 The constitution of a corporation, in 
 
 what respect a law, § 446. 
 Notion of a contract. Two classes of 
 
 acts, § 447. 
 How the constitution of a corpora- 
 tion embodies a contract, § 448. 
 Acceptance necessary on the part of 
 
 the corporators, § 449. 
 Contract between the state and the 
 
 corporation, § 450. 
 Enabling acts and special charters, 
 
 §451. 
 Two kinds of relations between the 
 
 state and the corporation, § 452. 
 A charter a contract: outline of the 
 
 doctrine, § 453. 
 Consideration moving to the state. 
 
 Its rights. Mandamus, § 454. 
 
 Railroads, § 455. 
 
 Through acceptance of the charter on 
 
 the part of the corporators the 
 
 state acquires the right to enforce 
 
 the fulfillment of the corporate 
 
 duties. Absolute sovereignty, 
 
 §456. 
 Right of the state to restrain an abuse 
 
 of corporate powers. Forfeiture, 
 
 §457. 
 Judicial decree necessary, § 458. 
 Grounds of forfeiture, § 459. 
 Grounds of forfeiture not to be taken 
 
 advantage of collaterally. Waiver, 
 
 §460. 
 Rights of the corporation against 
 
 the state arising from the contract, 
 
 §461. 
 How enforceable, § 462. 
 Limitations on the rights acquired 
 
 by the corporation against the 
 
 state through contract, § 463. 
 Restrictions in state constitutions on 
 
 state legislatures, § 464. 
 Other restrictions on legislative 
 
 powers, §§ 465, 466. 
 Corporations created by Congress, 
 
 §467. 
 Jurisdiction of the Federal courts, 
 
 §468. 
 
 1 Relations, that is to say, between i rate enterprise, and representing all 
 the state and the organic body of I persons in any way interested in it. 
 shareholders controlling the corpo- 1 
 
 420 

 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 438. 
 
 Relations between the state and the 
 corporation other than legal rela- 
 tions occasioned by contract, §§ 
 469-4696. 
 
 Eminent domain. Restrictions, § 
 470. 
 
 " Due process of law, 1 ' §§ 471, 472. 
 
 Just compensation, § 473. 
 
 Police power, § 474. 
 
 Police power. Commerce clause, §§ 
 474a-474d. 
 
 Police power. Its limits. Property 
 in which the public have interest, 
 §§ 475, 476. 
 
 Elevator cases. Railroad charges, §§ 
 476a, 4766. 
 
 The taxing power, § 477. 
 
 Double taxation, § 477 a. 
 
 Power of Congress, § 478. 
 
 Power of states. Restrictions, §§ 
 479, 480. 
 
 Restrictions on the power of the 
 states to tax arising from the exi- 
 gencies of the Federal government, 
 §481. 
 
 Federal agencies, § 482. 
 
 State taxation of national banks, §§ 
 483, 484. 
 
 Restrictions on state taxation arising 
 from the power of Congress to 
 regulate commerce, § 485. 
 
 Telegraph companies, § 486. 
 
 Chartered exemptions from taxation, 
 §§ 487, 488. 
 
 Never arise by implication, § 489. 
 
 Immunity from taxation not trans- 
 ferable, § 490. 
 
 Effect of consolidation, § 491. 
 
 Taxation, due process of law, §§ 492, 
 492a. 
 
 Jurisdiction of equity to restrain the 
 collection of a tax, § 4926. 
 
 Distinction between "rights'' and 
 " remedies," §§ 493-495. 
 
 The power reserved to alter and 
 repeal, § 496. 
 
 No vested right in a rule of law, 
 §497. 
 
 Effect of the reservation of the right 
 to alter and repeal on the contract 
 between the corporators, § 498. 
 
 Limits of the reserved power, § 499. 
 
 Illustration. Relations between 
 shareholders and creditors, §§ 500, 
 501. 
 
 Further limits on the reserve power, 
 § 502. 
 
 Whena judicial proceeding prerequi- 
 site to the repeal, § 503. 
 
 Effect of a repeal, § 504. 
 
 Relations between the state and the 
 individuals interested in the corpo- 
 rate enterprise, §§ 505-507. 
 
 § 438. The constitution of a corporation is of a dual nature: 
 it is law in that it consists of rules for conduct 
 
 , , , ... , . ,..,... . Dual nature 
 
 set by a political superior to political inferiors, and of the con- 
 it embodies a contract the obligation of which is a corpora? 
 the self-same constitution regarded as law. The tlon- 
 contract embodied in the constitution always subsists among 
 the corporators as parties thereto, and it may subsist between 
 the corporation and the state, for the state is sometimes a 
 party to it. 1 On account of the dual nature of the constitu- 
 
 1 " A charter is a law, but it is also 
 something more than law, in that it 
 contains stipulations which are terms 
 of compact between the state as the 
 
 one party, and the corporators as the 
 other, which neither party is at 
 liberty to disregard or repudiate, and 
 which are as mucb removed from the 
 
 421
 
 § 439.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 tion of a corporation it will be necessary, in order to analyze 
 the relations between the state and the corporation, to deter- 
 mine in what respect this constitution, besides being law, is to 
 be regarded as a contract. To this determination accurate 
 notions of law and contract are prerequisite. 
 
 § 439. " Every law," says Austin ' " or rule is a command. 
 .... Or rather laws or rules properlv so called are 
 
 Austin's i i 4/ 
 
 analysis of a species of commands." Analyzing the nature of 
 a command, he proceeds : " If you express or inti- 
 mate a wish that I shall do or forbear to do some act, and if 
 you will visit me with some evil in case I comply not with 
 your wish, the expression or intimation of your wish is a com- 
 mand. . . . The ideas then comprehended by the term com- 
 mand are the following: 1. A wish or desire conceived by a 
 rational being that another rational being shall do or forbear ; 
 2. An evil to proceed from the former and to be incurred by 
 the latter, in case the latter comply not with the wish ; 3. An 
 expression or intimation of the wish by words or other signs." 
 Then, continues Austin, when a command " obliges generally 
 to acts or forbearances of a class, a command is a law or rule. 
 .... A law properly so called is therefore a command which 
 obliges a person or persons, and as distinguished from a par- 
 ticular or occasional command, obliges generally to acts or for- 
 bearances of a class. . . . Laws and other commands are said 
 to proceed from superiors, and to bind or oblige inferiors, .... 
 the term superiority here signifies might." 
 
 In another part of the same work, Austin, analyzing the na- 
 ture of sovereignty, says: "Every positive law, or every law 
 simply and strictly so called, is set by a sovereign person or a 
 sovereign body of persons, to the member or members of the 
 independent political society wherein that person or body is 
 sovereign or supreme. . . . The superiority which is styled sov- 
 ereignty, and the independent political society which sover- 
 eignty implies, is distinguished from other superiority, and from 
 other society by the following marks or characters : 1. The 
 bulk of the given society are in the habit of obedience or sub- 
 
 
 modifying and controlling power of 
 legislation as would be the contracts 
 of private parties." Flint, etc., Plank 
 
 422 
 
 Road Co. v. Woodhull, 25 Mich. 99, 
 101, per Cooley, J. 
 
 1 Province of Jurisprudence. Lec- 
 i ture I.
 
 CHAP. VIII.] CORPORATION AND STATE. [§ 441. 
 
 mission to a determinate or common superior, let that common 
 superior be a certain individual person, or a certain body or 
 aggregate of individual persons. 2. That certain individual or 
 the certain body of individuals is not in the habit of obedience 
 to a determinate human superior." 1 
 
 § 440. So far Austin. An acute writer, Professor Holland, 
 gives the following definition of law : " A law in the Holland > s 
 proper sense of the term is a general rule of human and Kent's 
 
 r l . to i definitions. 
 
 action taking cognizance onlv of external acts, en- 
 forced by a determinate authority, which authority is human, 
 and among human authorities is that which is paramount in a 
 political societ} 7- . More briefly, a general rule of external hu- 
 man action enforced by a sovereign political authority." 2 And, 
 finally, the definition given by Kent is this : " Municipal law 
 is a rule of civil conduct prescribed by the supreme power of 
 the state." 3 
 
 In one respect, perhaps, these various definitions may be 
 found fault with. It may be said that they are not univer- 
 sally and historically correct, *. e., that they correspond only 
 to the conception of law, current among those nations of the 
 Aryan race who have developed their institutions under the 
 influence of the Roman law. 4 But this objection amounts to 
 little, as any definition of law not so vague as to be useless 
 would be obnoxious to it; and for the present purpose the 
 objection has no force, as we are only concerned with law as 
 conceived to-day in America and England. 
 
 § 441. Austin's definition of a law, however, as a " command 
 which obliges a person, or persons, to acts or for- 
 bearances of a class," while, perhaps, unexception- u^Jf™ 1 
 able when limited in its application to Roman and mand '' 
 modern European and American notions of law, 
 and when understood as Austin meant it, is, nevertheless, in 
 respect of laws which manifest themselves in civil rights, 
 somewhat misleading. Holland, as we have seen, calls a law 
 " a general rule of external human action enforced by a sover- 
 eign political authority," a definition which resembles Kent's 
 
 1 Province of Jurisprudence, Lec- 
 ture VI. 
 
 2 System of Jurisprudence, 2d ed. 
 p. 34. 
 
 3 1 Com., 507. 
 
 4 See Maine's Early History of In- 
 stitutions, chaps. 12 and 13. 
 
 423
 
 § 442.] THE LAW OF PRIVATE CORPORATION'S. [CHAP. VIII. 
 
 definition of municipal law as " a rule of civil conduct pre- 
 scribed by the supreme power of a state." ' If we look closely 
 into Austin's use of the term " command," it will appear that 
 he means by it very much what Holland and Kent mean by 
 the term " rule." But the term " command," except as applied 
 to criminal law, is misleading in this respect, that a law which 
 manifests itself in civil rights and liabilities is not an absolute 
 or unconditional command to do or refrain ; but its effect is 
 merely to enable some one with the aid of the state to compel 
 some one else to do or refrain. Within the field of criminal 
 law it is eminentl} T proper to call a law a command ; for a 
 criminal law — " thou shalt not kill " — is a command pure and 
 simple, sanctioned or enforced by its giver of his own motion, 
 and not at the request of some individual. But a civil law 
 creates rights just as much as it imposes obligations, 2 and con- 
 sequently to regard such a law as a command is seeing but one 
 side of it. 
 
 § 442. As Austin says, " Every legal right is the creature of 
 Definitions a P os itive law ; and it answers to a relative duty im- 
 of a 'Megai posed by that positive law, and incumbent on a per- 
 son or persons, other than the person or persons in 
 whom the right resides. To every legal right there are, there- 
 fore, three several parties ; namely, a party bearing the right, 
 a party burdened with the relative duty, and a sovereign gov- 
 ernment setting the law through which the right and the duty 
 are respectively conferred and imposed." 3 " We may define a 
 legal right," says Holland very clearly, " as a capacity residing 
 in one man of controlling with the assent and assistance of the 
 state the actions of others. That which gives validity to a legal 
 
 1 Holland says a law is a rule en- 
 forced by the sovereign, while Kent 
 says, it is prescribed by the sovereign. 
 Holland's phrase seems preferable, 
 as laws may not always, with pro- 
 priety, be said to be prescribed by 
 the sovereign, unless the word "pre- 
 scribed " is used in the sense of 
 recognized ; which is improper. 
 Rules of the common law, grown up 
 as they have from custom, have 
 been recognized, but in no proper 
 
 424 
 
 sense prescribed by the state. The 
 state recognizes them, sanctions 
 them, i. e., enforces them; as it also 
 enforces rules which by legislation 
 it properly speaking prescribes. 
 
 2 Or, as I prefer to say, a civil law 
 manifests itself in rights and liabil- 
 ities, i. e., in legal relations. See 
 § 24. 
 
 3 Province of Jurisprudence. Lec- 
 ture VI.
 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 444. 
 
 right is in every case the force which is lent it by the state. 
 Anything else may be the occasion, but it is not the cause of its 
 obligatory character." 1 And Austin says again: "A party 
 has a right when another, or others, are bound or obliged by 
 the law to do or forbear towards or in regard to him." 2 
 
 § 443. A right then, with its corresponding duty or liabil- 
 ity, constitutes a legal relation, which, as it was at- ^ _ . 
 
 J ' ° ' ' Definition 
 
 tempted to show before, 3 rather than a " creature " of a " legal 
 may properly be called a concrete instance or mani- 
 festation of law, subsisting between persons as to whom corre- 
 lated conditions of fact may be asserted. 
 
 § 444. How do rules of law manifest themselves in legal rela- 
 tions? Let us illustrate. The following, roughly 
 speaking, are rules of law : " to constitute a binding 
 agreement there must be a consideration ; " "a con- 
 tract for the sale of chattels at a price exceeding fifty 
 dollars must be in writing." The two rules may be combined 
 into the following proposition : a written agreement to sell, for 
 which there is a consideration, as for instance an agreement to 
 buy, the state will enforce at the request of either party. 4 This 
 compound rule of law manifests itself in legal relations between 
 A. and B. as soon as the following correlated conditions of fact 
 may be asserted of them : that A. has agreed with B. to sell 
 certain chattels to B. for a specified price (over $50) ; that B. 
 has agreed with A. to buy those chattels of A. at that price : 
 and that this mutual agreement has been put in writing. "With 
 reference to its operation on A. and B. this rule may now be 
 
 The mani- 
 festation of 
 rules of law 
 in legal re- 
 lations. 
 
 1 Jurisprudence, second ed. p. 62. 
 
 2 "Pervading Notions Analyzed." 
 Another writer, viewing a right more 
 exclusively from the standpoint of 
 the possessor of it, says : "A legal 
 right is nothing but a permission to 
 exercise certain natural powers, and 
 upon certain conditions to obtain 
 protection, restitution, or compen- 
 sation by the aid of the public force. 
 Just so far as the aid of the public 
 force is given a man, he has a legal 
 right, and this right is the same 
 whether his claim is founded in 
 righteousness or iniquity." Holmes, 
 
 " The Common Law," p. 214. It is, 
 perhaps, hard to see how a right in 
 personam can be a " permission to 
 exercise certain natural powers." 
 The author seems rather to have in 
 view rights in rem. 
 
 3 See § 24, note. 
 
 4 For simplicity's sake all refer- 
 ence as to how the state "will enforce 
 the agreement, as by awarding dam- 
 ages or specific performance, is 
 omitted; as is also omitted reference 
 to conditions precedent, which either 
 party may have to perform before 
 he can compel the other to peiform. 
 
 425
 
 § 446.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VI11. 
 
 expressed thus : A. having agreed to sell to B., and B. having 
 agreed to buy of A. certain goods for a certain price, and this 
 agreement having been put in writing, at the instance of either 
 party the state will compel the other to perform as agreed. 
 The last proposition may be separated into the following prop- 
 ositions expressing the rights and liabilities— the legal rela- 
 tions — between A. and B., in which the general rule of. law 
 before stated has manifested itself: A.'s right is with the aid 
 of the state to compel B. (i. e., A. can compel B.) to pay the 
 price agreed on, and B.'s corresponding liability is to pay that 
 price, A.'s right and B.'s liability constituting a legal relation 
 between them. On the other hand, B.'s right is with the aid 
 of the state to compel A. to deliver the chattels ; and A.'s 
 liability is to deliver them ; B.'s right and A's liability again 
 constituting a legal relation between them. 
 
 § 445. It thus appears that rules of law which manifest 
 themselves in private or civil rights and liabilities, 
 o/anact 60 are no unconditional commands- from the state; the 
 state merely standing ready to aid the person pos- 
 sessing the right. And it appears, moreover, that the only 
 legal effect of an act (except in criminal or public law) is to 
 bring the actor within the operation of rules of law, which 
 thereupon manifest themselves in legal relations between the 
 actor, and other persons affected by the act. 1 
 
 § 446. As a conclusion of the foregoing remarks, a definition 
 of law adequate for the purposes of this chapter may be sub- 
 mitted. A law is a rule for conduct which manifests itself in 
 a right and a liability — a legal relation — between 
 
 The consti- j<i 'i , i 5 • , • c n 
 
 tution of a persons of whom correlated conditions of facts may 
 t(on°in* be asserted, and is enforced by the state at the in- 
 what re- stance of the person in whose favor it has manifested 
 
 spect a law. . . \ . , . 
 
 itself in a right. And, m accordance with this 
 definition, the constitution of a corporation may be said to be 
 law, or to consist of rules of law, in so far as it is a rule, or 
 consists of rules, for conduct manifesting itself or themselves 
 
 1 As to the legal effect of acts, see 
 Holland's Jurisprudence, 2d ed. 
 chap. 12; and an interesting discus- 
 sion in a work by Dr. August Thon, 
 
 426 
 
 entitled " Rechtsnorm und Subjec- 
 tives Recht," chap. 1. " Die Norm 
 und die Rechtsfolgen ihrer Uebertre- 
 tung."
 
 CHAP. VIII.] CORPORATION AND STATE. [§ 448. 
 
 in legal relations between persons of whom correlated condi- 
 tions of fact may be asserted. 
 
 §447. It remains to determine on some proper notion of a 
 contract, which shall be consistent with the notion Notion of a 
 reached of law. tor the present purpose, all acts x^ciasses 
 may be divided into two classes : (a) acts whose of acts- 
 effect is to bring the actors within the operation of rules of 
 law, which thereupon manifest themselves in legal relations; 
 acts, in other words, which occasion (not cause) legal relations ; 
 (b) all other acts. Acts of the first class may be called acts 
 having legal effect. 
 
 Now many acts which have legal effect are not done for the 
 purpose of occasioning legal relations. For instance, if A. 
 strikes B., A.'s object is not to occasion legal relations between 
 them, but, nevertheless, such is the result of the blow, for B. 
 thereby acquires a cause of action against A. Certain acts on 
 the other hand are done with the immediate purpose of occa- 
 sioning legal relations. Of these latter acts the chief variety * 
 are called contracts, which are acts whereby the parties express 
 their intention of occasioning legal relations between them. 
 If the contract is what is called valid or binding, it effectuates 
 the expressed intention of the parties, in that it occasions the 
 legal relations which the parties expressed their intention to 
 occasion. By the contract the parties have brought them- 
 selves within the operation of rules of law, which at the mo- 
 ment of the execution of the contract manifest themselves in 
 the presumably desired legal relations. 2 
 
 § 448. Now may be explained what was meant at the be- 
 ginning of this chapter by saying that the consti- How the 
 tution of a corporation, besides being the group of c . onsti * u - 
 legal rules which manifest themselves in legal rela- corpora- 
 tions in respect of the corporate enterprise, always bodies a 
 embodies a contract among the corporators, and contract - 
 sometimes a contract between the corporation and the state. 
 To say that it embodies a contract between the corporators 
 
 1 A tort may be committed in 
 order to occasion legal relations; as 
 when one man trespasses on an- 
 other's land in order to acquire by 
 user a right of way. 
 
 2 An invalid contract, taken by 
 itself, is not an act having legal ef- 
 fect. 
 
 427
 
 § 449.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 means that it embodies the terms of an agreement whereby 
 the parties have expressed their intention of occasioning legal 
 relations which are manifestations of the rules of law compos- 
 ing the very constitution which embodies the contract. The 
 rule of law which ordinarily manifests itself in legal relations 
 upon the making of a valid contract, is simply that each con- 
 tracting party may compel the others to perform their parts 
 according to the intent and meaning of the agreement. But 
 in this particular contract that causes incorporation, the terms 
 through incorporation become themselves rules of law; and 
 thus the constitution of a corporation embodies the expression 
 of the intention of parties which causes these rules to operate. 
 Further, to say that the state, from which emanate most of the 
 rules of law composing the constitution, is a party to the agree- 
 ment which the constitution embodies, means that the state has 
 done an act whereby it has expressed its intention to bring it- 
 self within the operation of some law superior to itself, which 
 thereupon manifests itself in legal relations between the state 
 and the corporation, legal relations which the state cannot alter 
 at its will, 1 since they are the manifestations of law superior 
 to itself. That paramount law is expressed in the constitution 
 of the United States. 
 
 § 449. The constitution of a corporation is law which the 
 state could not impose on the corporators without 
 
 Acceptance r r 
 
 necessary their consent, and this because of certain restric- 
 of the cor- tions on the power of a state contained in the 
 porators. Federal constitution or existing in the common 
 law. 2 By accepting a charter the corporations subject them- 
 
 1 See Danolds v. State of New York, 
 89 N. Y. 36. 
 
 2 See §456, and note, in the present 
 chapter. The king could not incor- 
 porate a body of men, except as a 
 municipal corporation, without their 
 consent. See Rex v. Passmore, 3 
 T. R. 199, 240. A charter must be 
 accepted before incorporation can 
 take place. A grant of a charter to 
 those who have not applied for it is 
 but an offer on the part of the state, 
 which may be withdrawn before 
 acceptance. State v. Dawson, 16 
 
 428 
 
 Ind. 40; Riddle v. Proprietors, 7 
 Mass. 169, 184; Ellis v. Marshall, 2 
 Mass. 269, 277; Smith v. Silver Val- 
 ley M'g Co., 64 Md. 86. Compare 
 Bonaparte v. Baltimore, etc., R. R. 
 Co., 75 Md. 340. But it is not nec- 
 essary to show a written instrument, 
 or even a note of acceptance. Ac- 
 ceptance may be inferred from the 
 exercise of corporate powers under 
 the act; e. g., the election of officers, 
 the holdiug of meetings, the adop- 
 tion of by-laws, etc. Acceptance 
 by directors acquiesced in by the
 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 449. 
 
 selves to duties, which, without their consent, the state could 
 not have imposed upon them. 1 Accordingly, the grant and 
 acceptance of a charter are held to constitute an act whereby 
 the actors have expressed their intention to occasion legal re- 
 
 corporation is sufficient. Bank of 
 United States v. Dandridge, 12 
 Wheat. 64, 71 ; Mutual Fire Ins. 
 Co. v. Stokes, 9 Phila. (Penn.) 80; 
 Trustees of School District v. Gibbs, 
 2 Cush. (Mass.) 39; Androscoggin 
 Bridge v. Bragg, 11 N. H. 102; 
 Sumrall v. Sun Mutual Ins. Co., 40 
 Mo. 27; Augusta M'f'g Co. v. Ver- 
 tices, 4 Lea (Tenn.), 75; St. Joseph, 
 etc., R'y Co. v. Shambaugh, 106 
 Mo. 557; Fertilizer Co. v. Clute, 112 
 N. C. 440. See State v. Dawson, 22 
 Ind. 272; applying for an amend- 
 ment raises a presumption of accept- 
 ance of the original charter. Farns- 
 worth v. Lime Rock R. R. Co., 83 
 Me. 440. Slight irregularities in 
 mode of acceptance by directors, 
 when by the charter they have 
 power to accept an amendment, do 
 not vitiate the acceptance. Dead- 
 erick v. Wilson, 8 Bax. (Tenn.) 108, 
 126. So no formal acceptance of 
 an amendment or of an act confer- 
 ring new franchises need be shown. 
 Bangor, Oldtown and M. R. R. Co. 
 v. Smith, 47 Me. 34; Wetumpka and 
 Coosa R. R. Co. v. Bingham, 5 Ala. 
 657; Illinois River R. R. Co. v. Zim- 
 mer, 20 111. 654; Palfrey v. Paulding, 
 7 La. Ann. 363 ; Lyons v. Orange, 
 etc., R. R. Co., 32 Md. 18; Cincin- 
 nati, Hamilton, etc., R. R. Co. v. 
 Cole, 29 Ohio St. 126. See Vermont 
 and C. R. R. Co. v. Vermont Central 
 R. R. Co., 34 Vt. 2, 49, where the ac- 
 tion of a stockholders 1 meeting in 
 making contracts authorized by the 
 amendment, no one objecting, was 
 held an acceptance of it. But see 
 State v. Accommodation Bank, 26 
 La. Ann. 288 ; Commonwealth v. 
 
 Cullen, 13 Pa. St. 133. But a reso- 
 lution to accept an amendment does 
 not constitute an acceptance, unless 
 it purport to accept unconditionally. 
 Mulloy v. Nashville and Decatur 
 R. R. Co., 8 Lea (Tenn. ), 427. A cor- 
 poration already in existence may 
 receive a new charter without relin- 
 quishing its old one, and may act 
 partly under the new and partly the 
 old charter. Woodfork v. Union 
 Bank, 3 Coldw. (Tenn.) 488. Stat- 
 utes may provide that upon the ac- 
 ceptance by existing corporations 
 of their provisions, such corporations 
 shall be held to have abandoned 
 rights under their charters inconsist- 
 ent with such statutes. Such ac- 
 ceptance need not be formal, but 
 may be inferred from action in ac- 
 cordance with the provisions of such 
 statutes. Cincinnati, II. and D. R. 
 R. Co. v. Cole, 29 O. St. 126. A cor- 
 poration is not estopped by the acts 
 of individual officers or members in 
 procuring legislation; when it does 
 not appear that they had authority 
 to procure such legislation or that 
 the corporation had accepted it. Mis- 
 sissippi, etc., Boom Co. v. Prince, 34 
 Minn. 79. Compare Baker's Appeal, 
 109 Pa. St. 461. As to surrender of 
 franchises, see §§ 433, 434. 
 
 1 By accepting a charter or by in- 
 corporating under a general statute, 
 the incorporators subject themselves 
 to whatever conditions the state may 
 impose, and cannot afterwards be 
 heard to assail any statute then in 
 force imposing conditions on the cor- 
 poration as unconstitutional. Chi- 
 cago, R. I. & Pac. Ry. Co. v. Zernecke, 
 183 U. S. 582. 
 
 429
 
 § 450.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 lations between them ; that is to say, a contract has been made 
 to which the state is a party. 
 
 § 450. The state cannot alter any of its laws so as to affect 
 Contract legal relations in which the law has already mani- 
 thHtate fested itself, for such alteration would be unconsti- 
 andthecor- tutional, in that it would impair the obligation of a 
 
 poration. ' l j • • 
 
 contract, 1 or at least deprive some one of his " vested 
 rights." Therefore, the state cannot alter the constitution of a 
 corporation regarded simply as law, so as to affect any legal 
 relations in which it has manifested itself. 2 But as to the 
 corporators, the state cannot alter this constitution so as to 
 affect legal relations not yet arisen, because on the accepting 
 of the charter by the corporators the state is held impliedly 
 to agree that it will not alter the charter as a law, and this 
 implied agreement is the contract between the state and the 
 corporation. Thus, the corporation acquires a right under the 
 protection of the Federal constitution, that the rules of law 
 in its own constitution shall remain unaltered ; i. e., it acquires 
 the right that acts in respect of the corporate enterprise, which 
 
 1 E. g., a state law passed after 
 the execution of a mortgage, which 
 declares that the equitable estate of 
 the mortgagee shall not be extin- 
 guished for twelve months after a 
 sale under a decree of chancery, and 
 which prevents any sale unless two- 
 thirds of the amount at which the 
 property has been valued by apprais- 
 ers shall be bid therefor, impairs the 
 obligation of a contract and is void. 
 Bronson v. Kinzie, 1 How. 311; ace. 
 McCracken v. Hay ward, 2 How. 608; 
 compare Curtis v. Whitney, 13 Wall. 
 68; Connecticut Mut. Life Ins. Co. 
 v. Cushman, 108 U. S. 51. A con- 
 tract between a state and a party 
 whereby he is to perform certain 
 duties for a specific period for a 
 stipulated compensation, is within 
 the protection of the Federal con- 
 stitution. Hall v. Wisconsin, 103 
 U.S. 5; see Davis v. Gray, 16 Wall. 
 203; Chicago, etc., R'y Co. v. United 
 States, 104 U. S. 680. A constitu- 
 
 430 
 
 tional amendment providing that no 
 tax shall be levied for certain state 
 railway aid bonds, already negoti- 
 ated, until the law levying the tax be 
 submitted to a vote of the people, 
 and be adopted by a majority of 
 those voting, is void, as impairing 
 the obligation of a contract. State 
 v. Young, 29 Minn. 474. But a 
 retroactive act validating contracts 
 does not impair the obligation of 
 them. Canal Co. v. Vallette, 21 
 How. 414; Gross v. United States 
 Mortgage Co., 108 U. S. 477; see 
 § 325. Thus, a statute which, by 
 repealing a usury law, validates a 
 voidable contract, is constitutional. 
 Ewell v. Daggs, 108 U. S. 143. 
 
 2 E. g., the state could not abolish 
 the personal liability of shareholders 
 for corporate indebtedness so as to 
 affect legal regulations already sub- 
 sisting between them and creditors 
 of the corporation. Hawthorne v. 
 Calef, 2 Wall. 10. See § 501. 

 
 CHAP. VIII.] CORPORATION AND STATE. [§ 450. 
 
 bring the actors under the operation of rules of law contained 
 in the constitution of the corporation, shall continue to have 
 that effect ; shall continue to bring the actors within the oper- 
 ation of those same rules of law and occasion the same legal 
 relations. 
 
 Much confusion seems to have arisen from the omission of 
 courts and law writers to specify more definitely what the 
 contract between the corporation and the state really is. It is 
 said that the charter of a corporation is a contract between the 
 corporation and the state. But it is clear that the terms and 
 provisions of the charter are not the terms and provisions of a 
 contract between the state and the corporation in the sense in 
 which the terms and provisions of a written agreement be- 
 tween A. and B. are the terms and provisions of a contract 
 between them. Ordinarily in a charter or enabling act the 
 state does not purport to contract with the corporation nor 
 the corporation with the state. The terms and provisions of 
 the charter or enabling act are rather rules of law which will 
 manifest themselves in legal relations among the corporators, 
 and between them and other persons contracting in respect of 
 the corporate enterprise. The agreement on the part of the 
 state is that it will not alter or repeal these rules of law. 
 
 Apply the ordinary definition of a (executory) contract — 
 an agreement to do or not to do a particular thing — to a char- 
 ter or enabling act, and it will appear that the state does not 
 agree to do anything, except (impliedly) not to alter the char- 
 ter or enabling act as a rule of law, and (impliedly) to 
 enforce it as a rule of law. For instance, a statute authoriz- 
 ing the building of a toll-bridge over a navigable river by a 
 corporation " with two suitable draws, which shall be at least 
 thirty feet wide," was held to constitute when accepted a con- 
 tract between the state and the corporation, which the state 
 could not constitutionally alter by a subsequent statute re- 
 quiring the corporation to maintain larger draws. 1 It is ap- 
 parent that the contract in this case between the corporation 
 and the state was simply that the state would not repeal or 
 modify the former statute. To be sure a state may make other 
 and further contracts with a corporation ; e. g., it may agree 
 
 1 Commonwealth v. New Bedford Bridge, 2 Gray, 339. 
 
 431
 
 § 451.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 not to permit a similar corporation to establish itself near the 
 former. 
 
 One may well raise the question whether this implied con- 
 tract not to alter the constitution of a corporation would be 
 held to exist, did the matter arise as res nova in regard to a 
 general enabling statute. If the right to repeal were not 
 reserved, presumably, under the authority of past decisions, 
 courts would hold that the statute could not be repealed or 
 changed so as to affect the right of existing corporations to 
 continue to carry on their business as under the statute. But 
 would courts so hold in regard to a statute sanctioning limited 
 partnerships ? Is there any implied contract between the 
 state and a limited partnership any more than between the 
 state and an ordinary firm ? No citizen by acting under a 
 statute any more than by acting under a rule of common law 
 acquires a right that the statute shall remain unrepealed so 
 that he may always act under it and be protected by its terms. 1 
 And why should there be held to exist an implied contract 
 between the state and an ordinary business corporation any 
 more than between the state and a limited partnership? Still, 
 who to-day is rash enough to hint that the decision in the 
 Dartmouth College Case was based on the false analogy be- 
 tween a grant of a franchise (i. e., the passage of a special 
 law), and the grant of property? As Justice Davis said 
 in The Binghamton Bridge : 2 " Courts to-day are estopped 
 from questioning the doctrine of the Dartmouth College Case." 
 
 § 451. That the constitution of a corporation is law is more 
 
 apparent in respect of corporations formed under 
 
 actsand 8 general enabling statutes, while the characteristics 
 
 special f a contract appear more prominently where a spe- 
 
 ctiarters. l l l ^ L 
 
 cial charter is granted by the state to the corporators. 3 
 The differences between an enabling statute and a charter are, 
 
 i See Munn v. Illinois, 94 U. S. 
 113, opinion of Waite, C. J. 
 
 * 3 Wall. 51, 73. 
 
 3 A number of state constitutions 
 prohibit tbe passage of special acts 
 conferring corporate francbises. See 
 Atkinson v. Marietta, etc., R. R. Co., 
 15 O. St. 21; School District v. In- 
 surance Co., 103 U. S. 707. But it 
 
 432 
 
 is held such a prohibition does not 
 prevent a legislature from extending 
 by special act the duration of corpo- 
 rate franchises. Colton v. Mississippi, 
 etc., Boom Co., 22 Minn. 372; or from 
 altering the charter of an existing 
 corporation. Attorney-General v. 
 North America Life Ins. Co., 82 N. 
 Y. 172; St. Paul Fire, etc., Ins. Co.
 
 CHAP. Vin.] CORPORATION AND STATE. 
 
 [§ 452. 
 
 i 
 
 however, mainly differences in form. 1 A charter as well as an 
 enabling statute prescribes rules for conduct ; the difference 
 being that these rules in the case of a charter have a more lim- 
 ited application. And an enabling statute, as well as a charter, 
 proffers terms and facilities of action which are accepted by the 
 corporators by filing their articles of association ; only in the 
 case of an enabling statute the terms are offered to the citizens 
 of the state at large, any sufficient number of whom may accept 
 them and incorporate themselves by complying with them. 2 
 
 § 452. Accordingly, the constitution of a corporation being 
 of a dual nature — a law embodying a contract — it Two kinds 
 follows that the relations between the state and between" 18 
 the corporation are of two kinds : (a) relations such ^thecor- 
 as exist between the lawgiver and the citizen, and poratkm. 
 (b) legal relations occasioned by contract. 3 It will be convenient 
 to discuss the latter first. 
 
 v. Allis, 24 Minn. 75; or from chang- 
 ing the name of a corporation. 
 Wallace v. Loomis, 97 U. S. 146. 
 Compare Southern Pac. R. R. Co. v. 
 Orton, 6 Sawyer, 157, 186. 
 
 1 Except that enabling statutes 
 are almost universally subject to 
 alteration and repeal, through ex- 
 press reservation of that power by 
 the state; while many charters exist 
 wherein that power is not reserved. 
 
 3 A substantial compliance with 
 the terms of an enabling act is 
 necessary to form a corporation 
 thereunder; e. g., the filing of the 
 certificate is essential. Stowe v. 
 Flagg, 72 111. 397; Bigelow v. Greg- 
 ory, 73 111. 197; Harris v. McGregor, 
 29 Cal. 124; but see Vanneman v. 
 Young, 52 N. J. L. 403; Way v. 
 American Grease Co., 60 N. J. Eq. 
 263. And the articles of association 
 must comply with the statute; see 
 Reed v. Richmond St. R. R., 50 Ind. 
 342; People v. Self ridge, 52 Cal. 331; 
 State v. Central Ohio Relief Ass 1 u, 
 29 O. St. 399. Compare In re Spring- 
 Valley Water Works, 17 Cal. 132; 
 28 
 
 Eastern Plank Road Co. v. Vaughan, 
 14 N. Y. 546; Mokelumne Hill M'g 
 Co. v. Woodbury, 14 Cal. 424, and 
 §§ 148, 739. 
 
 3 Legal relations occasioned by 
 contract may subsist between the 
 lawgiver and the citizen. "The 
 government sustains two distinct 
 relations to the railroad company, 
 and in considering her rights under 
 this statute it is important to keep 
 them separate. The company is 
 organized under, and owes its corpo- 
 rate existence to, an act of Congress. 
 The government has all the rights 
 which belong to any other govern- 
 ment as a sovereign, and legislative 
 power over this creature of that 
 power. That this power should not 
 be too much crippled by the doctrine 
 that a charter is a contract, the 
 eighteenth section declares that Con- 
 gress may at any time, having due 
 regard to the rights of the companies 
 named therein, add to, alter, amend, 
 or repeal the act. The power of 
 Congress, therefore, in its sovereign 
 and legislative capacity over this 
 
 433
 
 § 453.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 § 453. That a grant from a state is a contract within the 
 a charter a purview of Article I. section 10 of the Federal 
 OutHneof constitution was decided by Fletcher v. Peck; 1 that 
 the doc- the charter of a corporation is a arrant and therefore 
 
 trine. l ° 
 
 a contract, was decided by Dartmouth College v. 
 
 corporation is very great. The gov- 
 ernment, however, holds another 
 very important relation, namely, 
 that of contract. It has loaned to 
 the company twenty-seven million 
 dollars, and granted it on certain 
 terms many million acres." United 
 States v. Union Pacific R. R. Co., 98 
 U. S. 569, 613. It is to be noticed, 
 however, that the contractual rela- 
 tions referred to in this extract arose 
 from a loan by the government to 
 the company. 
 
 1 6 Cranch, 87. " Is the power of 
 the legislature competent to the an- 
 nihilation of such title, and to the 
 resumption of the property held ? 
 The principle asserted is that one 
 legislature is competent to repeal 
 any act which a former legislature 
 was competent to pass, and that one 
 legislature cannot abridge the powers 
 of a succeeding legislature. The cor- 
 rectness of this principle, so far as 
 affects general legislation, can never 
 be controverted. But if an act be 
 done under a law, a succeeding leg- 
 islature cannot undo it. The past 
 cannot be recalled by the most ab- 
 solute power. Conveyances have 
 been made, those conveyances have 
 vested legal estates, and if those es- 
 tates may be seized by the sovereign 
 authority, still that they originally 
 vested is a fact, and cannot cease to 
 be a fact. 
 
 " When, then, a law is in its na- 
 ture a contract, when absolute rights 
 have vested under that contract, a 
 repeal of that law cannot divest 
 those rights; and the act of annul- 
 
 434 
 
 ling them, if legitimate, is rendered 
 so by a power applicable to the case 
 of every individual in the commu- 
 nity. . . . 
 
 " What is a contract ? Is a grant 
 a contract ? A contract is a compact 
 between two or more parties, and is 
 either executory or executed. An 
 executory contract is one in which a 
 party binds himself to do or not to 
 do a particular thing; such was the 
 law under which the conveyance was 
 made by the governor. A contract 
 executed is one in which the object 
 of contract is performed; and this, 
 says Blackstone, differs in nothing 
 from a grant. The contract between 
 Georgia and the purchasers was exe- 
 cuted by the grant. A contract exe- 
 cuted as well as executory contains 
 obligations binding on the parties. 
 A graut in its own nature amounts 
 to an extinguishment of the right of 
 the grantor, and implies a contract 
 not to reassert that right. A party 
 is therefore always estopped by its 
 own grant. Since then, in fact, a 
 grant is a contract executed, the ob- 
 ligation of which still continues, and 
 since the constitution uses the gen- 
 eral term 'contracts,' without distin- 
 guishing between those which are 
 executory and those which are exe- 
 cuted, it must be construed to com- 
 prehend the latter as well as the 
 former. ... It would be strange 
 if a contract to convey was secured 
 by the constitution, while an abso- 
 lute conveyance remained unpro- 
 tected." Marshall, C. J., 6 Cranch, 
 135-7.
 
 chap, vni.] 
 
 CORPORATION AND STATE. 
 
 [§ 453. 
 
 "Woodward ; l and that in respect of the constitutional provision 
 against the enacting of a law by a state impairing the obliga- 
 tion of contracts, the grant is to be construed strictly in favor 
 of the state, and as giving no rights against the public by 
 implication, was decided by The Charles River Bridge v. The 
 Warren Bridge. 2 These three cases outline the constitutional 
 doctrines on this subject. 
 
 14 Wheaton, 518. "The objects 
 for which a corporation is created 
 are universally such as the govern- 
 ment wishes to promote. They are 
 deemed beneficial to the country; 
 and this benefit constitutes the con- 
 sideration, and in most cases the 
 sole consideration of the grant. 1 ' 
 Marshall, C. J., 4 Wheaton, p. 637. 
 "The opinion of the court, after 
 mature deliberation, is, that this is 
 a contract, the obligation of which 
 cannot be impaired without violat- 
 ing the Constitution of the United 
 States. This opinion appears to us 
 equally supported by reason and by 
 the former decisions of this court." 
 lb., p. 650. Accord, The Bingham- 
 ton Bridge, 3 Wall. 51, where, at 
 p. 73, Davis, J., says, giving the opin- 
 ion of the court : " We have sup- 
 posed, if anything was settled by an 
 unbroken course of decisions in the 
 Federal and state courts, it was that 
 an act of incorporation was a con- 
 tract between the state and the stock- 
 holders.'" It would be a work of 
 supererogation to cite cases in sup- 
 port of the above proposition. Still 
 the following may be referred to: 
 Planters' Bank v. Sharp, 6 How. 
 301; State Bank of Ohio v. Knoop, 
 16 How. 369; Bank of the State v. 
 Bank of Cape Fear, 13 Ired. (N. C.) 
 Law, 75; Jemison v. Planters', etc., 
 Bank, 23 Ala. 168; Aurora, etc., 
 Turnpike Co. v. Holthouse, 7 Ind. 
 59; Hamilton v. Keith, 5 Bush. (Ky.) 
 458; Regents of the University of 
 
 Maryland v. Williams, 9 Gill & J. 
 365; Norris v. Trustees of Abing- 
 ton Academy, 7 Gill & J. 7; People 
 v. Manhattan Co., 9 Wend. 351; Com- 
 monwealth v. Cullen, 13 Pa. St. 133; 
 State v. Noyes, 47 Me. 189. Contra, 
 Mechanics and Traders' Bank v. De- 
 bolt, 1 Ohio St. 591; Toledo Bank v. 
 Bond, ib. 622; Skelly v. Jefferson 
 Branch Bank, 9 Ohio St. 606. 
 
 The legislature may alter the 
 charter with the assent of all the 
 corporators. Smead v. Indianapolis, 
 P. and C. R. R. Co., 11 Ind. 104. 
 
 In construing the charter contract 
 between the corporation and the 
 state, reference is also to be had to 
 existing statutes. Thus, a charter 
 granted the franchise to construct a 
 toll-bridge; at the time, there exist- 
 ed a law forbidding the erection of 
 one toll-bridge within three miles of 
 another. Held, subsequent legisla- 
 tion permitting another toll-bridge 
 within three miles of the first was 
 unconstitutional. Micou v. Tallas- 
 see Bridge Co., 47 Ala. 652; com- 
 pare The Binghamton Bridge, 3 
 Wall. 51. 
 
 2 11 Peters, 420; see Pearsall v. Rail- 
 way, 161 U. S. 647; Skaneateles 
 Water Co. v. Skaneateles, 184 U. S. 
 354; Hartford Br. Co. v. Union Ferry 
 Co., 29 Conn. 210; Fitch v. New 
 Haven, New London, etc., R. R. Co., 
 30 Conn. 38; Mills v. St. Clair Co., 8 
 How. 569; Fanning v. Gregoire, 16 
 How. 524; Shorter u. Smith, 9 Ga. 
 517; Collins v. Sherman, 31 Miss. 
 
 435
 
 § 454.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 Considera- 
 tion mov- 
 ing to the 
 state. Its 
 rights. 
 Mandamus 
 
 § 454. The consideration moving from the corporators to 
 the state, is either the supposed public benefit 
 which the state or people acquires from the acts 
 which are to be performed by the corporation ; or 
 the acting upon the terms of the charter by the cor- 
 poration. Thus, the state acquires the right to 
 enforce the application of the corporate property to the attain- 
 ment of the objects of incorporation, at least in so far as the 
 public is interested in their attainment. " There is an implied 
 undertaking on the part of every corporation that it will render 
 to the public, so far as it reasonably can, that service for which 
 it was incorporated, and that it will not voluntarily disable 
 itself to serve the purpose for which it was created." ' And 
 there is the further implied agreement on the part of the 
 grantees to exercise their franchises within a reasonable time. 2 
 Accordingly, a mandamus will issue at the suit of the people 
 of the state to compel a railroad company to operate its road, 3 
 
 679; Ruggles v. Illinois, 108 U. S. 
 626; Laket). Virginia, etc., R. R. Co., 
 7 Nev. 294; Brooklyn, in re, 143 N. Y. 
 596. 
 
 Where a state charters a turnpike 
 company without expressly granting 
 it any exclusive privileges, the state 
 may constitutionally charter a rail- 
 road company to run its road by the 
 side of the turnpike, to the damage 
 of the latter. Turnpike Co. v. The 
 State, 3 Wall. 210; Lafayette Plank 
 Road Co. v. New Albany, etc., R. R. 
 Co., 13 Ind. 90; Bush v. Peru Bridge 
 Co., 3 Ind. 21; Tuckahoe Canal Co. 
 v. Tuckahoe R. R. Co., 11 Leigh 
 (Va.), 42; see Water Co. v. Water 
 Co., 80 Me. 544; compare Micou v. 
 Tallassee Bridge Co., ante ; similarly, 
 to run alongside of a canal; Illinois 
 and M. Canal ». Chicago and R. I. 
 R. R. Co., 14 111. 314, or one railroad 
 to run parallel with a prior railroad 
 between the same termini. Connect- 
 
 436 
 
 ing Ry. Co. v. Union Ry. Co., 108 111. 
 459. 
 
 The strict construction in favor of 
 the state is especially exemplified in 
 cases of granted immunity from tax- 
 ation. See §§ 487-491; see Wiggins 
 Ferry Co. v. East St. Louis, 107 U. S. 
 305. 
 
 1 Kenton County Court v. Bank 
 Lick Turnpike Co., 10 Bush(Ky.), 
 529, 532. Compare American Rapid 
 Telegraph Co. v. Connecticut Tele- 
 phone Co., 49 Conn. 352; Common- 
 wealth v. Fitchburg R. R. Co., 12 
 Gray (Mass.), 180; Gates v. Boston, 
 etc., R. R. Co., 53 Conn. 333; Peo- 
 ple's Gaslight Co. v. Chicago Gas- 
 light Co., 20 111. App. 473. 
 
 2 Chincleclamouche Lumber Co. v. 
 Commonwealth, 100 Pa. St. 438. 
 
 3 State v. Hartford and N. H. R. 
 R. Co., 29 Conn. 538; see People v. 
 Albany and Vermont R. R. Co., 24 
 N. Y. 261; Sherwood v. A. & D. R. 
 Co., 94 Va. 291.
 
 chap, vni.] 
 
 CORPORATION AND STATE. 
 
 [§ 455 ' 
 
 or to erect suitable stations, 1 or to build a drawbridge provided 
 for in its charter. 2 
 
 § 455. In a New York case, 3 where the complaint alleged 
 the failure of certain railroads to receive and trans- 
 port freight (on account of a general freight hand- 
 lers' strike), Presiding Justice Davis said, giving the opinion of 
 the court : " The question presented by this motion is one of 
 
 Railroads. 
 
 1 Railroad Commissioners v. Port- 
 land and Oxford C. R. R. Co., 63 
 Me. 269, where, at p. 278, Dickerson, 
 J., said, giving the opinion of the 
 court: "Railroad charters are con- 
 tracts made by the legislature on 
 behalf of every person interested in 
 anything to be done under them. 
 In consideration of the franchise 
 they receive from the state, railroad 
 companies agree to perform certain 
 duties towards the public. The 
 power of determining those duties 
 and enforcing their performance is 
 vested in the appropriate tribunals 
 of the state. Being creatures of the 
 law, intrusted with the exercise of 
 sovereign powers to subserve public 
 necessities and uses, railroad com- 
 panies are bound to conduct their 
 affairs in furtherance of the public 
 objects of their creation." 1 But in 
 People v. New York, L. E. and W. 
 R. R. Co., 104 N. Y. 58, the court 
 refused a mandamus to compel a 
 railroad company to erect a station. 
 
 Mandamus does not lie to compel 
 a railroad company to do an act, as 
 to build a station at a particular 
 place, unless there is a specific legal 
 duty on its part to do that act, and 
 clear proof of a breach of that duty. 
 Northern Pacific R. R. v. Dustin, 
 142 U. S. 492, Brewer, Field, Harlan, 
 JJ., dissenting. 
 
 And a mandamus will issue at the 
 suit of a private person to enforce a 
 public duty not due to the govern- 
 ment as such. Union Pacific R. R. 
 Co. v. Hall, 91 U. S. 343, 355 ; People 
 
 v. Manhattan Gas Light Co., 45 Barb. 
 136; State v. Telephone Co., 36 Ohio 
 St. 296; State v Dayton and South- 
 eastern R. R. Co., 36 Ohio St. 434; 
 State v. Paterson, Newark and N. Y. 
 R. R. Co., 43 N. J. Law, 505. Man- 
 damus lies to compel a railroad com- 
 pany to deliver grain at a particular 
 elevator. Chicago and Northwestern 
 R. R. Co. ». People, 56 111. 365. A 
 telephone company may be compel- 
 led by mandamus to furnish facili- 
 ties to plaintiff. Webster Telephone 
 Case, 17 Neb. 126. A mandamus was 
 granted at the suit of an individual to 
 compel a street car company to issue 
 a transfer as required by its charter. 
 Richmond Ry., etc., Co. v. Brown, 97 
 Va. 26. See, also, § 475. 
 
 2 New Orleans, M. and T. Ry. Co. 
 v. Mississippi, 112 U. S. 12. 
 
 8 People v. New York Central and 
 Hudson River R. R. Co., 28 Hun, 
 543, 547. Semble, substantially over- 
 ruling People v. New York, Lake 
 Erie and Western R. R. Co., 22 
 Hun, 533. 
 
 In general mandamus lies where 
 there is a clear legal right in the 
 relator, a corresponding duty in the 
 defendant, and a want of any other 
 appropriate and specific remedy. 
 Borough of Easton v. Lehigh Water 
 Co., 97 Pa. St. 554, 560. A corpo- 
 ration cannot be compelled by man- 
 damus to do what it has no right 
 to do. See American Rapid Tele- 
 graph Co. v. Connecticut Telephone 
 Co., 49 Conn. 352. 
 
 437
 
 § 455.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VHI. 
 
 signal importance. It is whether the people of the state can 
 invoke the power of the courts to compel the exercise by rail- 
 road companies of the most useful public functions with which 
 they are clothed. ... As bodies corporate, their ownership 
 may be, and usually is, altogether private, belonging to the 
 holders of their capital stock, and their management may be 
 vested in such officers or agents as the stockholders and direct- 
 ors under the provisions of law may appoint. In this sense 
 they are to be regarded as trading or private corporations, 
 having in view the profit or advantage of the corporators. 
 But these considerations are in no just sense in conflict with 
 their obligations and duties to the public. The objects of 
 their creation are from their very nature largely different from 
 those of ordinary private and trading corporations. Railroads 
 are in every essential quality public highways, created for pub- 
 lic use, but permitted to be owned, controlled, and managed by 
 private persons. But for this quality the railroads of the re- 
 spondent could not lawfully exist. Their construction de- 
 pended on the right of eminent domain which belongs to the 
 state in its corporate capacity alone, and cannot be conferred 
 except upon a ' public use.' .... 
 
 " The acceptance of such trusts on the part of a corporation 
 by the express or implied contracts already referred to, makes 
 it an agency of the state to perform public functions which 
 might otherwise be devolved upon public officers. . . . The 
 analogy between such officials and railroad corporations in re- 
 gard to their relations to the state is strong and clear, and so 
 far as affects the construction and proper and efficient main- 
 tenence of their railroad will be questioned by no one. It is 
 equally clear, we think, in regard to their duties as carriers of 
 persons and property. This springs sharply out of the exclu- 
 sive nature of their right to do these things. On other public 
 highways every person may be his own carrier, or he may hire 
 whomsoever he will to do that service. ... In such a case the 
 carrier has not contracted with the state to assume the duty as 
 a public trust, nor taken power to do it from the state, by be- 
 coming the special donee and depositary of a trust. A good 
 reason may therefore be assigned why the state will not by 
 mandamus enforce the performance of his contract by such a 
 carrier. But the reason for such a rule altogether fails when 
 •138
 
 CHAP. VIII.] CORPORATION AND STATE. [§ 456. 
 
 the public highway is the exclusive property of a body corpo- 
 rate which alone has power to use it in a manner which of ne- 
 cessity requires that all management, control, and user, for the 
 purposes of carriage, must be limited to itself, and which, as a 
 condition of the franchise that grants such absolute and exclu- 
 sive power over a user of a public highway, has contracted with 
 the state to accept the duty of carrying all persons and prop- 
 erty within the scope of its charter as a public trust. . . . 
 
 " We cannot bring our minds to entertain a doubt that a 
 railroad corporation is compellable by mandamus to exercise 
 its duties as a carrier of freight and passengers, and that the 
 power so to compel it rests equally firmly on the ground that 
 that duty is a public trust, which having been conferred by 
 the state, and accepted by the corporation, may be enforced for 
 the public benefit, and also upon the contract between the cor- 
 poration and the state expressed in its charter, or implied by 
 the acceptance of the franchises, and also upon ground that the 
 common right of all the people to travel and carry upon every 
 public highway of the state has been changed by the legisla- 
 ture, for adequate reasons, in this special instance, into a corpo- 
 rate franchise to be exercised solely by a corporate body for 
 the public benefit, to the exclusion of all other persons, whereby 
 it has become the duty of the state to see to it that the fran- 
 chise so put in trust be faithfully administered by the trustee." 
 Accordingly, the court held that the fact that injured indi- 
 viduals may have private remedies for damages does not ex- 
 clude the state from its remedy by mandamus, and that a peace- 
 able strike of its freight handlers does not exclude a railroad 
 company from operating its road and carrying freight. 1 
 
 § 456. The right to enforce the application of the corporate 
 property to the purposes of incorporation the state Through 
 clearly would not have had but for the acceptance of ^f the^har- 
 the charter by the corporation. The state could not teronthe 
 
 1 A peculiarity of the rights ac- 
 quired by the state through the con- 
 tract with the corporation lies in the 
 fact that the possessor of these 
 rights, the state itself, enforces 
 them. They are, to be sure, deter- 
 mined through a judicial proceed- 
 ing, but it is the power of the state 
 
 that enforces judicial proceedings. 
 If the state cannot enforce its own 
 laws, the assistance of the Federal 
 government may be invoked under 
 the Federal constitution; but such 
 necessity would occur only in cases 
 of extraordinary emergency. 
 
 439
 
 § 456.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. Vlll. 
 
 part of the 
 corpora- 
 tion, the 
 
 State ac- 
 quires the 
 right to en- 
 force the 
 fulfillment 
 of the cor- 
 porate du- 
 ties. Abso- 
 lute sov- 
 ereignty. 
 
 force individuals to apply their property without 
 compensation to the building of a railroad, because 
 such action would be against common right, 1 and 
 because the Federal constitution forbids a state to 
 take private property without due process of law. 2 
 Clearly, if the state were absolutely sovereign, it 
 could acquire no rights or further powers over a 
 citizen through contract, or through the assumption 
 
 1 "It may well be doubted whether 
 the nature of society and of govern- 
 ment does not prescribe some limits 
 to the legislative power; and if any 
 be prescribed, where are they to be 
 found if the property of an individ- 
 ual, fairly and honestly acquired, 
 may be seized without compensa- 
 tion?" Marshall, C. J., in Fletcher 
 v. Peck, 6 Cranch, 135. "We enter- 
 tain an high opinion of the legisla- 
 tive authority; but we have never 
 dreamt that Parliaments had any 
 right to violate property." Burke, 
 French Revolution. And Bracton 
 said centuries before, " Oinnis nova 
 constitutio futuris formam imponere 
 debeat et non prseteritis." De Leg., 
 4 fol. 228a. 
 
 " And it appears on our own 
 books," says Coke, "that in many 
 cases the common law will controul 
 acts of Parliament, and sometimes 
 adjudge them to be utterly void ; 
 for when an act of Parliament is 
 against common right and reason, 
 or repugnant or impossible to be 
 performed, the common law will 
 controul it, and adjudge such act to 
 be void." Bonham's Case, 8 Rep. 
 118a, in which case instances are 
 cited where statutes were declared 
 null by courts. See also Calvin's 
 Case, 7 Rep. 14 a. 
 
 " And what my Lord Coke says in 
 Dr. Bonham's Case in his 8 Co. is far 
 from an extravagancy, for it is a very 
 reasonable and true saying that if an 
 
 440 
 
 act of Parliament should ordain that 
 the same person should be party and 
 judge, or, which is the same thing, 
 judge in his own case, it would be a 
 void act of Parliament." Holt, C. J., 
 in City of London v. Wood, 12 Mod. 
 669, 687. 
 
 "Even an act of Parliament made 
 against natural equity, as to make a 
 man a judge in his own case, is void 
 in itself, for jura naturalia sunt im- 
 mobilia, and they are leges legum." 
 Day v. Savage, Hobart, 87. 
 
 In the American system of gov- 
 ernment there exists no absolute 
 power. "The theory of our gov- 
 ernments, state and national, is op- 
 posed to the deposit of unlimited 
 power anywhere. The executive, 
 the legislative, and the judicial 
 branches of these governments are 
 all of denned and limited powers. 
 There are limitations on such power 
 which grow out of the essential na- 
 ture of all free governments. Im- 
 plied reservations of individual 
 rights, without which the social 
 compact could not exist, and which 
 are respected by all governments 
 entitled to the name." Loan Asso- 
 ciation v. Topeka, 20 Wall. 655; ace. 
 Parkersburg i\ Brown, 106 U. S. 
 487. Compare License Cases, 5 How. 
 588; Ablemanw. Booth, 21 How. 516; 
 Tarble's Case, 13 Wall. 406; United 
 States v. Cruikshank, 92 U. S. 542. 
 
 2 Amendment XIV.
 
 CHAP. Vni.] CORPORATION AND STATE. 
 
 [§ 456. 
 
 of a duty, or the waiver of constitutional right on his part, for 
 the state would, in such case, already have power to do what- 
 ever any citizen could agree that it should do. 1 But in truth, 
 in no Anglo-Saxon community has there ever existed absolute 
 sovereignty, 2 any power so supreme or absolute that it could do 
 anything not in itself impossible. Although it may be hard to 
 conceive any body politic wherein there is not some force supe- 
 rior to all other forces, the fact, nevertheless, remains that 
 there is no unqualified supreme power in any state. 3 And by 
 this proposition no mere truism is meant, that there is no power 
 in a state that can make two and two equal to five. The prop- 
 osition means that there never exists unqualified political su- 
 premacy. The sum total of the physical force of a nation 
 exists in the people thereof. But this sum total of physical 
 force is far from constituting any unqualified political suprem- 
 acy, because it is incapable of unqualified organization ; in- 
 capable through its humanity, of unconditional subjection to 
 any will. And as no man ever absolutely subjects himself to 
 the common will, there can be no unqualified common will. 
 Accordingly, it is impossible for any state to do all that a 
 single being could, who possessed in himself the entire physical 
 force of the members of the state. Never did there exist any 
 political sovereignty so absolute that it might not wreck itself 
 in attempting what it could not do. 
 
 There are certain things which men of any given race will 
 not submit to, things which shock general notions of right 
 and wrong, of justice and injustice, expediency and inexpedi- 
 ency, however one may phrase it ; and the result of action by 
 government in disregard of these notions is revolution ; 4 though 
 
 1 See Austin, Province of Juris- 
 prudence. Lecture VI. 
 
 2 If the learned reader will appre- 
 ciate the truth of this remark, let 
 him peruse Stubb's Constitutional 
 History of England, in which he will 
 find the growth of English govern- 
 ment traced by a master's hand. 
 From that work may he learn how 
 hardly a government acquires 
 powers. Indeed the history of the 
 English constitution, as well as the 
 
 history of the development of our 
 own system of government, exem- 
 plifies the fact that the early factor 
 in the development of political power 
 is the necessity of becoming a com- 
 munity, and that the later factor in 
 the same development, is the neces- 
 sity of becoming a nation. 
 
 3 The term "state" is not used 
 here as meaning one of the United 
 States. 
 
 4 Witness our own Revolution. 
 
 441
 
 § 457.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 government will rarely act in disregard of them, as it is itself 
 part of the people to whom these notions are common. As 
 said in the citation in the note, an act of Parliament against 
 common equity is void, and these general notions of common 
 equity and common right may well be called the leges legion. 1 
 
 " I must beg leave to observe," says Burke, " that it is not 
 only the invidious branch of taxation that will be resisted, but 
 that no other given part of legislative rights can be exercised 
 without regard to the general opinion of those who are to be 
 governed. That general opinion is the vehicle and organ of 
 legislative omnipotence. Without this, it may be a theory to 
 entertain the mind, but it is nothing in the direction of affairs. 
 The completeness of the legislative authority of Parliament 
 over this kingdom is not questioned ; and yet many things in- 
 dubitably included in the abstract idea of that power, and 
 which carry no absolute injustice in themselves, yet being con- 
 trary to the opinions and feelings of the people, can as little be 
 exercised as if Parliament in that case had been possessed of 
 no right at all. I see no abstract reason that can be given, 
 why the same power which made and repealed the High Com- 
 mission Court and the Star Chamber, might not revive them 
 again ; and these courts, warned by their former fate, might 
 possibly exercise their powers with some degree of justice. 
 But the madness would be as unquestionable as the competence 
 
 of that Parliament which should attempt such things 
 
 In effect to follow, not to force public inclination; to give a 
 direction, a form, a technical dress, and a specific sanction to 
 the general sense of the community is the true end of legisla- 
 tion." 2 
 
 § 457. The state may also restrain the improper or illegal 
 Right of exercise of corporate powers; 3 and when a corpora- 
 te state to tj on f a jjg £ p er form duties which it was incorpo- 
 
 restrain an r " 
 
 abuse of rated to perform, and in which the public have 
 
 corporate . .. ....... , 
 
 powers. an interest, or does acts which it is not author- 
 or eiture. ^^ or j g f orD j c ] c i en ^ Q c | 0) £ ne s tate may forfeit its 
 
 franchises and dissolve the corporation by a proceeding or in- 
 
 1 Day v. Savage, Hobart, 87. See 
 former notes to this section. 
 
 2 Letter to the Sheriffs of Bristol 
 on the affairs of America (1777). 
 
 442 
 
 8 For a discussion of authorities 
 upon the right of the state to restrain 
 ultra vires acts by injunction, see 
 Trust Co. v. Georgia, 109 Ga. 736.
 
 chap, vm.] 
 
 CORPORATION AND STATE. 
 
 [§ 458. 
 
 formation, in the nature of a quo warranto, ' for a grant of 
 corporate franchises is always subject to the implied condition 
 that they will not be abused. 2 The proper officer to tile the 
 information or make application for the writ is the attorney- 
 general. In New York, for instance, the attorney-general 
 may maintain an action upon his own information, or upon 
 the complaint or relation of a private person, against one or 
 more persons who act as a corporation within the state without 
 being duly incorporated ; or who exercise within the state 
 any corporate rights, privileges, or franchises not granted to 
 them by the law of the state. 3 
 
 § 458. It is a rule generally recognized, that a legislature 
 cannot itself declare a forfeiture of the franchises of 
 a corporation ; for a forfeiture should be enforced decree 
 through some judicial proceeding. 4 But, where it nec(>ssar y- 
 
 The attorney-general may maintain 
 an information in equity to restrain 
 a corporation possessing the right of 
 eminent domain from any abuse or 
 perversion of its powers that might 
 create a public nuisance or endanger 
 public interests. Attorney-General 
 v. Jamaica Pond Aqueduct, 133 Mass. 
 361. By their attorney-general the 
 people may enjoin an attempted il- 
 legal consolidation. People v. Bos- 
 ton, etc.. Ry. Co., 12 Abb. N. C. (N. 
 Y. ) 230. The jurisdiction, however, 
 of a court of equity is questionable, 
 in the absence of special statutory 
 enablement. See Pixley v. Roanoke 
 Nav. Co., 75 Va. 320 ; Attorney-Gen- 
 eral v. Utica Ins. Co., 2 Johns. Ch. 
 (N. Y.)371. 
 
 1 People v. Utica Insurance Co., 
 15 Johns. 358 ; People v. Pittsburgh 
 R. R. Co., 53 Cal. 694 ; Golden Rule 
 v. People, 118 111. 492. "In its rela- 
 tions to the government, and when 
 the acts or neglects of a corporation, 
 in violation of its charter or the gen- 
 eral law, become the subject of pub- 
 lic inquiry with a view to a forfeiture 
 of its charter, the wilful acts and 
 
 neglects of its officers are regarded 
 as the acts and neglects of the corpo- 
 ration, and render the corporation 
 liable to a judgment or decree of 
 dissolution." Angell and Ames on 
 Corp., § 310 ; see Bank Commis- 
 sioners v. Bank of Buffalo, 6 Paige, 
 497 ; Ward v. Sea Insurance Co., 7 
 Paige, 294 ; Bank Commissioners v. 
 James Bank, 9 Paige, 457. 
 
 " To a writ of quo warranto, or an 
 information in the nature of one, the 
 defendant must either disclaim or 
 justify, and the state is bound to 
 show nothing." Angell and Ames 
 on Corp., § 756 ; State v. Vanderbilt, 
 37 O. St. 591. 
 
 2 Chicago Life Ins. Co. v. Needles, 
 113 U. S. 574. Compare Cbincle- 
 clamouche Lumber Co. v. Common- 
 wealth, 100 Pa. St. 438. 
 
 3 Code of Civil Procedure, § 1948. 
 It is competent for the legislature to 
 confer on private parties the right to 
 institute proceedings to forfeit a 
 charter. Stater. Consolidation Coal 
 Co., 46 Md. 1. 
 
 4 Bruffett v. Great Western R. R. 
 Co., 25 111. 353; and a court of law 
 
 443
 
 § 459.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 is expressly provided in the charter of the corporation that un- 
 less certain things are done by the corporation within a certain 
 time, the franchises of the corporation shall cease and become 
 forfeited, it has been held that the legislature may declare its 
 franchises forfeited on failure by the corporation to perform 
 within the time specified, and may grant them to another 
 corporation. 1 Nevertheless, in accordance with the funda- 
 mental principles of our system of government, while it is 
 the province of the legislature to make laws, it is the province 
 of the courts to say whether the laws have been observed or 
 violated ; and accordingly it would seem proper that a judicial 
 tribunal should determine whether or not that condition of 
 fact exists which the legislature has declared shall forfeit the 
 franchises of a corporation. 2 
 
 § 459. When a corporation is found guilty of acts which by 
 statute are declared to be a cause of forfeiture of its 
 franchises, a court has no discretion to refuse judg- 
 ment of ouster therefrom; 3 but in other cases a 
 court has discretion in the matter to refuse a judgment of 
 ouster if in the opinion of the court the interests of the public 
 do not call for it ; 4 for it is generally held that the state or the 
 
 Grounds of 
 forfeiture. 
 
 is the proper court to determine the 
 question of the forfeiture. Presi- 
 dent, Managers, etc., v. Trenton City 
 Bridge Co., 13 N. J. Eq. 46; Attor- 
 ney-General v. Utica Ins. Co., 2 
 Johns. Ch. (N. Y.) 371. In absence 
 of statute chancery has no jurisdic- 
 tion to forfeit the franchise of a 
 corporation. Chicago Mutual Life 
 Ass'n v. Hunt, 127 111. 257. 
 
 1 Oakland R. R. Co. v. Oakland, 
 etc., R. R. Co., 45 Cal. 365. See Mat- 
 ter of Brooklyn, etc., R. R. Co., 75 
 1ST. Y. 335; Brooklyn Steam T. Co. 
 v. Brooklyn, 78 N. Y. 524; Farnsworth 
 v. Minnesota, etc., R. R. Co., 92 U. 
 S. 49; Mobile & O. R. R. Co. v. State, 
 29 Ala. 573. To make the forfeiture 
 clause self-executing, the language 
 must be clear. New York & L. I. 
 R. R. Co. in re, 148 N. Y. 540. Cf. 
 §432. 
 
 444 
 
 2 See Flint, etc., Pk. Rd. Co. v. 
 Woodhull, 25 Mich. 99. A charter 
 provided that unless a certain road 
 was begun and completed within 
 specified periods "this corporation 
 shall cease and this act shall be void." 
 Held, this was not intended to de- 
 clare a forfeiture but a cause of for- 
 feiture, and that judicial action was 
 necessary. Vermont & C. R. R. Co. 
 v. Vermont Central R. R. Co., 34 
 Vt. 2. See Day v. Ogdensburgh, etc., 
 R. R. Co., 107 N. Y. 129; People v. 
 Los Angeles Ry. Co., 91 Cal. 338; 
 Ohio Nat. B'k v. Construction Co., 
 17 D. C. App. Cas. 524. 
 
 3 State v. Building Association, 35 
 O. St. 258. 
 
 4 State v. Bhlg. Asso., 35 Ohio St. 
 258; State v. Essex Bk., 8 Vt. 489; 
 State v. Railway & B. Co., 91 Iowa, 
 517. See People u. North Chicago
 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 459. 
 
 public should have some real interest in procuring a forfeit- 
 ure of corporate franchises. 1 The following have been held 
 grounds of forfeiture : a constant and wilful violation by a 
 bank of the fundamental articles of its charter, by discounting 
 paper at higher rates than those prescribed ; 2 that the princi- 
 pal office of the corporation and its books and records are kept 
 out of the state, and that none of its general officers reside 
 within the state; 3 a sale by a turnpike company of a portion 
 of its road, and its neglect thereafter to keep that portion in 
 repair ; 4 non-compliance by a turnpike company with the re- 
 quirements of its act in regard to the construction of its road ; 5 
 an unauthorized assumption by an insurance company of bank- 
 ing privileges ; 6 and, in general, any substantial non-compliance 
 on the part of a corporation, in respect of its organization, with 
 the provisions of its enabling act. 7 The following have been 
 
 Ry. Co., 88 111. 537; People v. Ulster, 
 etc., R. R. Co., 128 N. T. 240. 
 
 1 Harris b. Mississippi Valley, etc., 
 R. R. Co., 51 Miss. 602; see King v. 
 Howell, Hardwicke's Cases, 235 ; 
 Ibbottson's Case, ib. 248; Attorney- 
 General b. Tudor Ice Co., 104 Mass. 
 239; People v. Bogart, 45 Cal. 73; 
 Commonwealth b. Arrison, 15 S. & R. 
 127; Commonwealth b. Union Fire 
 and Marine Ins. Co., 5 Mass. 230; 
 State v. Minnesota Thresher Mfg. 
 Co., 40 Minn. 213. Compare State v. 
 Rio Grande R. R. Co., 41 Tex. 217. 
 As to when a state has such an in- 
 terest as will entitle it to move in 
 the Federal courts against a corpo- 
 ration, see State of Pennsylvania v. 
 Wheeling, etc., Bridge Co., 13 How. 
 618. Compare People v. Atlantic 
 Ave. R. R. Co., 125 N. Y. 513. 
 
 2 Commonwealth v. Commercial 
 Bk., 28 Pa. St. 383; see Commercial 
 Bk. v. State of Mississippi, 14 Miss. 
 599. 
 
 8 State b. Milwaukee, etc., Ry. Co., 
 45 Wis. 579. See Simmons v. Steam- 
 boat Co., 113 N. C. 147. 
 
 * State b. Pawtuxet Turnpike Co., 
 8 R. I. 182. 
 
 5 People b. Kingston, etc., Turn- 
 pike Co., 23 Wend. 193; see People 
 b. Fishkill, etc., Plank Road Co., 27 
 Barb. 445. 
 
 6 People v. Utica Ins. Co., 15 Johns. 
 358. 
 
 7 State b. Central Ohio Relief As- 
 sociation, 29 Ohio St. 399; State v. 
 Vanderbilt, 37 Ohio St. 591 ; State b. 
 Hazleton, etc., Ry. Co., 40 O. St. 504; 
 State b. Capital City Dam Co., 62 
 Oh. St. 350; State b. Equitable L. & 
 I. Co., 142 Mo. 325; People b. Cheese- 
 man, 7 Col. 376; People v. Buffalo 
 Stone Co., 131 N. Y. 140. Where 
 the statute requires a specified 
 amount to be subscribed for a rail- 
 road company, the subscription must 
 be made in good faith by persons 
 having a reasonable expectation of 
 being able to pay; or the state may 
 forfeit the franchises, and is not con- 
 cluded by the articles of incorpora- 
 tion filed, showing that the requisite 
 amount has been subscribed for. 
 Holman b. State, 105 Ind. 569. 
 
 Substantial compliance with con- 
 ditions attached to a grant of corpo- 
 rate franchises is all that is neces- 
 sary. Thus, where a corporation is 
 
 445
 
 § 460.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VHI. 
 
 held not to be grounds of forfeiture : insolvency of the corpora- 
 tion; 1 the mere omission of a corporation to use its powers; 2 
 that the corporation has obtained a charter from another state. 3 
 § 460. Grounds of forfeiture cannot be taken advantage of 
 or enforced collaterally or incidentally, or in any 
 other mode than by a direct proceeding for that 
 purpose against the corporation. 4 And the state 
 may waive a forfeiture by express legislation to 
 that effect or by legislation recognizing the exist- 
 ence of the corporation. 5 But mere lapse of time is not a 
 
 Grounds of 
 forfeiture 
 not to be 
 taken ad- 
 vantage of 
 collater- 
 ally. 
 Waiver. 
 
 required by statute to have paid up 
 one-half its capital stock " in lawful 
 money of the United States," it suf- 
 fices if the corporation has received 
 as payment property whose market 
 value exceeds the par value of the 
 stock. State v. Wood, 8-4 Mo. 378 
 (quaere ?). See State ex inf. Crow 
 v. Hogau, 163 Mo. 43. 
 
 1 State v. Bailey, 16 Ind. 46; but 
 see State v. Real Estate Bank, 5 Ark. 
 595; Commercial Bank of Natchez 
 v. State, 6 Sin. & M. (Miss.) 617; 
 but see People v. Milk Exchange, 133 
 N. Y. 565. 
 
 2 Attorney-General v. Bank of Ni- 
 agara, Hopkins Ch. (N. Y. ) 354; 
 see State v. Barron, 58 N. H. 370; 
 People v. Dasbaway Ass'n, 84 Cal. 
 114. Non-user of franchises held a 
 ground of forfeiture in State v. Min- 
 nesota Cent. Ry. Co., 36 Minn. 246; 
 Edgar Collegiate Inst. v. People, 142 
 111. 363. 
 
 8 Commonwealth v. Pittsburgh 
 and Connellsville R. R. Co., 58 Pa. 
 St. 26. An unauthorized consolida- 
 tion of two turnpike companies, en- 
 tered into in good faith, hut subse- 
 quently declared void, is not a ground 
 of forfeiture of the original charters; 
 and the property reverts to the two 
 original companies. State v. Craw- 
 fordsville T. P. Co., 102 Ind. 283; 
 Crawfordsville, etc., T. P. Co. v. 
 State, ib. 435. 
 
 446 
 
 4 Duke v. Cahawba Navigation Co., 
 16 Ala. 372; Briggs v. Cape Cod Ship 
 Canal Co., 137 Mass. 71; Pet. of P. & 
 M. R'y Co., 187 Pa. St. 123; Gas Co. 
 v. Borough of Downington, 193 Pa. 
 St. 255; Olyphant Sewage Co. v. Oly- 
 phant Borough, 196 Pa. St. 553; see 
 Cowell v. Springs Co., 100 U. S. 55; 
 Bacon v. Robertson, 18 How. 480; 
 Atty. Gen'l v. Am. Tobacco Co., 55 
 N. J. Eq. 352; S. C, 56 N. J. Eq. 847; 
 Ga. Nor. R'y Co. v. Tifton, T. & G. 
 R'y Co., 109 Ga. 762; cf. State v. 
 Spartanburg, etc., R. R. Co., 51 S. C. 
 129; and cases in the following note. 
 Except where the act or omission 
 produces in itself a forfeiture; Brook- 
 lyn Steam Transit Co. v. Brooklyn, 
 78 N. Y. 524; and indeed this last is 
 taking advantage of a forfeiture, not 
 a ground of forfeiture. See, gener- 
 ally, §§ 145 et seq. 
 
 & Davis v. Gray, 16 Wall. 203; 
 State v. Mississippi, etc., R. R. Co., 
 20 Ark. 495; People v. Manhattan 
 Co., 9 Wend. 351; In re New York 
 Elevated R. R. Co., 70 N. Y. 327; 
 Central, etc., Road Co. v. People, 5 
 Col. 39, 46; People v. Ottawa Hy- 
 draulic Co., 115 111. 281. A statute 
 waiving a forfeiture of corporate 
 rights confers no new rights upon 
 the corporation, but is simply a sur- 
 render or waiver by the sovereign of 
 its right to claim the forfeiture. So 
 a statute to extend the time within
 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 460. 
 
 bar to the enforcement of a forfeiture by the state. 1 " Duties 
 required by the act of incorporation are in the nature of 
 conditions annexed to the grant of the franchise. Such condi- 
 
 which corporate rights may be ex- 
 ercised, gives no new substantial 
 rights. In re New York Elevated 
 R. R. Co., supra. Compare Matter 
 of Brooklyn W., etc., R. R. Co., 75 
 N. Y. 335. Legislative waiver of a 
 forfeiture, by acts of recognition, 
 cures defects in the original organ- 
 ization of the corporation. Bashor v. 
 Dressel, 34 Md. 503; Kanawha Coal 
 Co. v. Kanawha and Ohio Coal Co., 
 
 7 Blatchf. 391; see also Attorney- 
 General v. Petersburg, etc., R. R. Co., 
 6 Ired. L. 470; State v. Fourth N. H. 
 Turnpike, 15 N. H. 162. E. g., by 
 granting an amendment to the char- 
 ter. Farnsworth v. Lime Rock R. R. 
 Co., 83 Me. 440. But the doctrine of 
 waiver of a forfeiture does not apply 
 when by the terms of the charter 
 the franchise absolutely determines 
 on failure to perform the conditions; 
 in such case the corporation has 
 ceased to exist. State v. Old Town 
 Bridge Co., 85 Me. 17; State v. 
 Fourth N. H. Turnpike, 15 N. H. 
 162, 166. 
 
 1 People v. Pullman Co., 175 111. 
 125; State v. Pawtuxet Turnpike Co.. 
 
 8 R. I. 521. These cases may seem 
 not to accord with the English cases, 
 which hold that informations in the 
 nature of a quo warranto cannot be 
 maintained against a person who 
 has enjoyed a corporate office or the 
 privilege of being a corporator, for a 
 number of years. The number of 
 years was first fixed at twenty, and 
 subsequently reduced to six. Win- 
 chelsea Causes, 4 Burr. 1962, 2022, 
 2121; Rex v. Dicken, 4 T. R. (Durn. 
 & East) 282; Rex v. Peacock, ib. 
 684; but Lord Mansfield, who de- 
 cided the Winchelsea Causes, inti- 
 
 mated that this rule did not apply 
 where the action was brought by the 
 crown; as he said: "Indeed no 
 length of usurpation shall affect the 
 crown. Nullum tempus occurrit regi 
 . . . . the crown may still bring a 
 quo warranto." Rex v. Wardroper, 
 4 Burr. 1965. 
 
 In regard to the questions under 
 discussiun in the last few pages, see 
 generally the chapters in Angell and 
 Ames on Corp. on " Mandamus " and 
 " Quo Warranto; " see, also, State v. 
 Southern Pacific R. R. Co., 24 Tex. 
 80; Danville, etc., Plank Road Co. v. 
 State, 16 Ind. 456; State v. Council 
 Bluffs Ferry Co., 11 Neb. 354; Peo- 
 ple o. Improvement Co., 103 111. 491. 
 An action in the nature of a quo 
 warranto is in effect a civil not a 
 criminal action. Ames v. Kansas, 
 111 U. S. 449. Quo warranto should 
 be brought in the name of the state 
 against the corporation. Neither 
 stockholders nor officers need be 
 made parties. New Orleans Deben- 
 ture Redemption Co. v. Louisiana, 
 180 U. S. 320. When the suit is 
 brought for usurping powers not 
 granted, it should be against the 
 corporation and not against an offi- 
 cer. Smith v. The State, 21 Ark. 
 294. Quo warranto will not lie 
 against the members of the corpo- 
 ration alone; the corporation must 
 be a party. State v. Taylor, 25 Ohio 
 St. 280; People v. Montecito Water 
 Co., 97Cal. 276. 
 
 As to the mode in which proceed- 
 ings or informations in the nature of 
 quo warranto are carried on, little of 
 general value can be said here. It is 
 a matter of practice, and usually of 
 local or statutory practice. When a 
 
 447
 
 § 461.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 tions may be precedent or subsequent, and like other condi- 
 tions may be released by the power granting, or a new grant 
 may be made free from any limitation or condition by the 
 same power. In accordance with well-settled rules, the intent 
 to waive or release conditions, or to make a new grant, must 
 be expressly declared or plainly to be inferred from some act 
 of the granting power." ' 
 
 § 461. On the other hand, what are the rights of the cor- 
 poration against the state, occasioned by the con- 
 tract between them ? In brief, that the state shall 
 pass no law changing the legal effect of acts in 
 respect of the corporate enterprise ; i. e., that the 
 state shall not materially alter the constitution of 
 the corporation (unless it has reserved the right to 
 do so) except in the exercise of powers which the state cannot 
 alienate or restrict itself in the exercise of. To be sure, the 
 corporation may have other rights against the state occasioned 
 by contract, if the state makes any special contract with it ; 
 as for instance that the corporate property shall be taxed only 
 at a certain rate. 2 And this special contract may be so entered 
 
 Rights of 
 the corpo- 
 ration 
 
 against the 
 state aris- 
 ing from 
 the con- 
 tract. 
 
 statute declares how corporate fran- 
 chises shall be forfeited, this super- 
 sedes the common law mode. Green 
 v. St. Albaus Trust Co., 57 Vt. 340. 
 As to necessary averments in the 
 pleadings, see Territory v. Virginia 
 Road Co., 2 Montana, 90; Chicago 
 City Ry. Co. ». People, 73 111. 541; 
 Attorney-General v. Chicago, etc., 
 R. R. Co., 112 111. 520. When to a g?to 
 warranto a charter regular on its face 
 is pleaded, it is competent for the 
 relator to show by way of replication, 
 that the charter has been forfeited 
 by the act of the defendant, or that 
 the charter does not confer upon the 
 defendant the particular franchise in 
 dispute. State of Ohio v. Pennsyl- 
 vania and Ohio Canal Co., 23 Ohio 
 St. 121. Compare State v. Cincin- 
 nati, 2:5 Ohio St. 445. In proceed- 
 ings for dissolution of a railroad 
 company and the forfeiture of its 
 franchises, one who has taken a 
 
 448 
 
 lease of a portion of its road for the 
 term of its corporate existence, 
 should be made a party (under the 
 Code of Civil Procedure). People 
 v. Albany and Vermont R. R. Co., 77 
 N. Y. 232. 
 
 1 State v. Godwiusville, etc., Road 
 Co., 44 N. J. L. 496, 499, opinion of 
 Ct. per Magie, J. As to effect of 
 forfeiture of franchises, see §§ 437, 
 504. 
 
 2 See §§ 488-491. So a special 
 monopoly may be granted in such a 
 way as to constitute a contract be- 
 tween the corporation and the state; 
 e. y., an enactment by a state in 
 incorporating a company to build a 
 toll-bridge, that it should not be 
 lawful for any person to erect any 
 bridge within two miles of the said 
 bridge, is an inviolable contract 
 between the corporation and the 
 state; and this though the charter 
 of the corporation is without limit 

 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ ^2. 
 
 
 into as to remain irrevocable by the state, although the state 
 has reserved the general right to alter and repeal the enabling 
 statute or charter of the corporation. 1 But ordinarily the 
 only contract between the state and the corporation is the 
 implied one that the state will not alter the corporate consti- 
 tution. 
 
 Of what law are these rights a manifestation ? The consti- 
 tution of the United States, and especially its provisions that 
 no state shall pass a law impairing the obligation of contracts, 
 nor shall deprive any one of his property without due process 
 of law. Accordingly, the power sanctioning the rights of the 
 corporation against the state differs from that whereby the 
 rights of the state against the corporation are enforced. 2 
 
 § 462. In what manner are the rights of the corporation 
 against the state enforced? Here a peculiarity in 
 this contract is encountered ; for these rights often ^rceabie. 
 can be enforced only negatively as it were ; and this 
 on account of the inability of private individuals or incorpo- 
 rated bodies to sue a state or enforce a judgment against it. 3 
 
 as to duration. The Binghamton 
 Bridge, 3 Wall. 51; Bridge Com- 
 pany v. Hoboken Land and Improve- 
 ment Co., 13 N. J. Eq. 81, affirmed 
 under the name of Bridge Proprie- 
 tors v. Hoboken Co., 1 Wall. 116. 
 Compare, however, as to granting a 
 special privilege to a corporation, 
 Gordon v. Winchester Building 
 Ass'n, 12 Bush (Ky.), 110. 
 
 1 See New Jersey v. Yard, 95 U. 
 S. 104; and compare University v. 
 People, 99 U. S. 309; Citizens Sav. 
 Bank v. Oweusboro, 173 U. S. 63(5; 
 Hancock, Comptroller, v. Singer 
 M'f'g Co., 62 N. J. L. 289. 
 
 2 These two powers differ at least 
 in their immediate source, the one 
 being the power of the state, the 
 other the power of the United 
 States. But ultimately these two 
 powers may become united; for, if 
 the power of a state is insufficient, 
 it will be supported by that of the 
 United States; and the power of the 
 
 29 
 
 United States is but the power of 
 the people of all the states. The 
 states are part and parcel of a nation, 
 of which the Federal government 
 exercises some of the powers. Com- 
 pare License Cases, 5 How. 588; 
 Ableman v. Booth, 21 How. 516; 
 Tarble's Case, 13 Wall. 406; United 
 States i'. Cruikshank, 92 U. S. 542. 
 
 3 Where a state provides for a suit 
 against itself in its own courts, a 
 subsequent statute nullifying such 
 provision cannot impair the obliga- 
 tion of a contract, because there 
 never was any power to enforce 
 such suit in the court, and so the 
 provision was no remedy in the legal 
 sense of the term. Railroad Co. v. 
 Tennessee, 101 U. S. 337 ; Railroad 
 Co. v. Alabama, 101 U. S. 832; see 
 Beers v. Arkansas, 20 How. 527. 
 And one state cannot sue another 
 state in the United States Supreme 
 Court when the former is merely the 
 assignee, for the purposes of bring- 
 
 449
 
 § 4G2.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VHI. 
 
 Accordingly, the corporation can defend its rights, not through 
 a suit brought directly against the state, but by an action 
 against any one acting, pursuant to the unconstitutional state 
 law, in violation of the rights of the corporation. To such a 
 person, whether acting as agent of the state, or as a private in- 
 dividual, the unconstitutional state law, being void, will be no 
 protection. And a state officer may be enjoined from execut- 
 ing a state law in conflict with the constitution or laws of the 
 United States. 1 
 
 A late decision in regard to the right of an individual to sue 
 the officers and agents of the Federal government, is United 
 States v. Lee. 2 There the defendants, making no claim as in- 
 dividuals, held as agents for the Federal government by a title 
 arising from a defective tax sale, lands which the government 
 had converted into a national cemetery. The defendants as- 
 serted, and it was asserted by the attorney -general on behalf 
 of the United States, that, though it had been ascertained by 
 a verdict of a jury, in which was no error, that the plaintiff 
 had the title to the land in controversy, and that what was set 
 up on behalf of the United States was no title at all, the court 
 could render no judgment in favor of the plaintiff against the 
 
 ing suit, of debts owing by the latter 
 state to citizens of the former state. 
 New Hampshire v. Louisiana, 108 U. 
 S. 76. 
 
 A state, without its consent, can- 
 not be sued by an individual; and a 
 court may not substitute its own 
 discretion for that of executive offi- 
 cers in matters belonging to the 
 proper jurisdiction of the latter. 
 But when a plain official duty, re- 
 quiring no exercise of discretion, is 
 to be performed, and performance 
 is refused, any person who will sus- 
 tain personal injury by such refusal 
 may have a mandamus to compel its 
 performance; and when such duty 
 is threatened to be violated by some 
 positive official act, any person who 
 will sustain personal injury thereby, 
 for which adequate compensation 
 cannot be had at law, may have an 
 
 450 
 
 injunction to prevent it. Board of 
 Liquidation v. McComb, 92 U. S. 531; 
 compare Louisiana v. Jumel, 107 U. 
 S. 711, infra. 
 
 A state waives its immunity from 
 suit by appearing and intervening as 
 a party defendant in a suit brought 
 in a Federal court. Clark v. Barnard, 
 108 U. S. 436. 
 
 1 Davis v. Gray, 16 Wall. 203. In 
 this case the receiver of a railroad 
 company restrained by injunction 
 the governor and certain other offi- 
 cers of the state of Texas from issu- 
 ing patents for lands which had 
 been granted to the company. Da- 
 vis v. Gray was questioned in Cun- 
 ningham v. Macon and Brunswick 
 R. R Co., 109 U. S. 440. 
 
 2 106 U. S. 196. See, also, In re 
 Ayers, 123 U. S. 443.
 
 CHAP. VIII.] CORPORATION AND STATE. [§ 462. 
 
 defendants in the action, because the latter held the property 
 as officers and agents of the United States, and the property 
 was appropriated to lawful public uses. 
 
 This proposition, say the majority of the court through Jus- 
 tice Miller, rests on the principle that the United States can- 
 not be lawfully sued without its consent in an}' case, and that 
 no action can be maintained against any individual without 
 such consent, where the judgment must depend on the right of 
 the United States to property held by such persons as officers 
 or agents for the government. " The first branch of this prop- 
 osition is conceded to be the established law of this country 
 and of this court at the present day ; the second, as a necessary 
 or proper deduction from the first, is denied." 1 " The doctrine 
 [that the United States or a state cannot be sued] if not ab- 
 solutely limited to cases in which the United States are made 
 defendants by name, is not permitted to interfere with the 
 judicial enforcement of the established rights of plaintiffs when 
 the United States is not a necessary party to the suit." 2 When 
 a citizen in a court " of competent jurisdiction has established 
 his right to property, there is no reason why deference to any 
 person, natural or artifical, not even the United States, should 
 prevent him from using the means which the law gives him for 
 the protection and enforcement of that right." 3 Then Justice 
 Miller, after examining numerous cases, continues : " This ex- 
 amination of the cases in this court establishes clearly this result, 
 that the proposition that when an individual is sued in regard 
 to property which he holds as an officer or agent of the United 
 States, his possession cannot be disturbed when that fact is 
 brought to the attention of the court, has been overruled and 
 denied in every case where it has been necessary to decide it." 4 
 And the court added, that it made no difference that the prop- 
 erty was devoted to a public use ; as, indeed, such an objection 
 would be repugnant to the fifth amendment to the Constitu- 
 tion, that no person shall be deprived of property without due 
 process of law and just compensation. "Courts of justice are 
 established, not only to decide upon the controverted rights of 
 
 1 106 u. S. 204. 
 2 106 U. S. 207. 
 8 106 U. S. 208. 
 
 4 106 U. S. 215. See also Tindal v. 
 Wesley, 167 U. S. 204. 
 
 451
 
 § 462.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 the citizens as against each other, but also upon rights in con- 
 troversy between them and the government." ' 
 
 Justice Gray (with whom concurred Justices Waite, Brad- 
 ley, and Woods) dissented, saying : " The sovereign is not lia- 
 ble to be sued in any judicial tribunal without its consent. The 
 sovereign cannot hold property except by agents. To main- 
 tain an action for the recovery of the possession of property 
 held by the sovereign through its agents, not claiming any 
 right or title in themselves, but only as the representatives of 
 the sovereign and in its behalf, is to maintain an action to re- 
 cover possession of the property against the sovereign ; and to 
 invade such possession of the agents, by execution or other 
 judicial process, is to invade the possession of the sovereign, 
 and to disregard the fundamental maxim that the sovereign 
 cannot be sued." 2 " The view in which this court appears con- 
 stantly to have acted, which reconciles all its decisions, and is 
 in accordance with the English authorities, is this : the objec- 
 tion to the exercise of jurisdiction over the sovereign or his 
 property, in an action in which he is not a party to the record, 
 is in the nature of a personal objection, which, if not suggested 
 by the sovereign, may be presumed not to be intended to be 
 insisted upon. ... If property is in the possession of the 
 defendants and not of the sovereign, an informal suggestion 
 that it belongs to the sovereign will not defeat the action. 
 But if the sovereign in proper form, and by sufficient proof, 
 makes known to the court that he insists upon his exemption 
 from suit, and that the property sued for is held by the nom- 
 inal defendants exclusively for him and in his behalf as public 
 property, the right of the plaintiff to prosecute the suit, and 
 the authority of the court to exercise jurisdiction over it cease, 
 and all further proceedings must be stayed." 3 The reasoning 
 in this case applies to suits brought against state officers. 
 
 In a still later case, however, the Supreme Court held that 
 the creditors of a state, although their rights against it were 
 secured by a clear contract, could not compel state officers to 
 carry out the provisions of a statute, securing the rights of 
 creditors, when the state, by an amendment to its constitution, 
 
 1 106 U. S. 220. 3 106 U. S. 249. 
 
 2 106 U. S. 226. 
 
 452
 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 464. 
 
 had undertaken to prohibit its officers from acting under the 
 statute, and when the court, if it required the officer to pro- 
 ceed, could not protect him with a judgment to which the state 
 was a party. 1 " The court, when a state cannot be sued, can- 
 not set up its jurisdiction over the officers in charge of the pub- 
 lic moneys, so as to control them, as against the political power, 
 in their administration of the finances of the state." 2 This 
 decision pointed towards the proposition which the Supreme 
 Court has finally declared ; that whenever, in order to enable 
 a court to grant the relief sought, it appears that a state is an 
 indispensable party to the suit, the court has no jurisdiction. 3 
 
 § 463. Here must be noticed further and important limita- 
 tions on the rights, which a corporation can acquire , . . . 
 
 . -ii • • Limitations 
 
 through its contract with the state, arising from lim- on the 
 itations on the powers of the state legislatures. For acquirable 
 the purposes of government, except as its powers are corporation 
 restricted by the Federal constitution, a state may, against the 
 perhaps, be regarded as sovereign. Bnt the legisla- through 
 ture of the state is not the state, and its powers are 
 restricted (a) by the state constitution, and (b) by certain doc- 
 trines of constitutional law. 
 
 § 464. If the state constitution provides that the power to 
 alter, amend, and repeal shall always be reserved to 
 the state in enabling statutes or in charters of incor- 
 poration, the legislature cannot act in violation of 
 this provision; it cannot contract with the corpora- 
 tion not to change the corporate constitution. 4 Such 
 a contract would be void, for constitutional provisions are im 
 perative. Likewise, if the state constitution provides that rail 
 
 Restrictions 
 in state con- 
 stitutions 
 on state 
 legisla- 
 tures. 
 
 1 Louisiana v. Jumel, 107 U. S. 711, 
 distinguishing United States v. Lee, 
 supra. See also In re Ayers, 123 U. S. 
 443. Compare Board of Public Works 
 v. Gaunt, 76 Va. 455; U. S. Bank v. 
 Planters 1 Bk., 9 Wheat. 904; Bank of 
 Kentucky v. Wister, 2 Pet. 318. 
 
 2 107 U. S. 728. See Belknap v. 
 Schild, 161 U. S. 10. 
 
 8 Cunningham v. Macon, etc., R. R. 
 Company, 109 U. S. 446; Stanley v. 
 Schwalby, 147 U. S. 508. When a 
 state begins suit against a person or 
 
 corporation, the defendant may set 
 off, but cannot have judgment over, 
 in absence of a statute authorizing 
 it. Commonwealth v. Owensboro, 
 etc., R. R. Co., 81 Ky. 572. 
 
 4 Spring Valley Water Works v. 
 Schottler, 110 U. S. 347, 355. When 
 a reservation to the legislature of 
 the power to revoke charters (or re- 
 peal enabling statutes), is contained 
 in the constitution of a state, a char- 
 ter is subject to this power, though 
 not expressly made so. Spring Val- 
 
 453
 
 § 465.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 road corporations shall not be created by special charter, a 
 special charter, if granted by the state legislature, will be void, 
 and the corporation will acquire no rights therefrom. 1 
 
 It was said that the power of the state legislature is restricted 
 by the state constitution. The phrase seems proper, for, un- 
 like the constitution of the United States, state constitutions 
 are restrictive or regulative, rather than enabling in their gen- 
 eral nature. 2 Some special power or capacity of action may be 
 granted to the legislature by the state constitution ; but ordi- 
 narily legislatures are held to possess all the powers of the state 
 except as restricted by the state constitution or by certain doc- 
 trines of constitutional law which may now be considered. 
 § 465. There are certain powers necessary to the welfare, 
 if not to the existence, of the state as a self-govern- 
 ing community, and to justify the doctrine that 
 these powers override all private rights, one need 
 not look beyond the maxim, Salus populi suprema 
 lex. The powers themselves fall under the general heads of 
 eminent domain and what is loosely called the " police power " 
 of the stated It is a well-known doctrine of constitutional law 
 that these powers cannot be granted away or abridged by one 
 legislature so as in any way to bind its successors or even it- 
 
 Otker re- 
 strictions 
 on legis- 
 lative 
 powers. 
 
 ley Water Works v. Schottler, 110 
 U. S. 347, 352 ; Delaware R. R. Co. v. 
 Tharp, 5 Har. (Del.) 454; State v. 
 Person, 32 N. J. L. 134; Griffin v. 
 Kentucky Ins. Co., 3 Bush (Ky.), 
 592; so when the reservation is con- 
 tained in some statute of general ap- 
 plication. State v. Commissioner of 
 Railroad Taxation, 37 N. J. L. 228. 
 
 1 See Ames v. Lake Superior and 
 Mississippi R. R. Co., 21 Minn. 241. 
 
 2 See Davis v. State, 68 Ala. 58; 
 Dorman v. State, 34 Ala. 216, 236; 
 Lynn v. Polk, 21 Am. Law Reg. N. 
 S. 321, 326; People v. Draper, 15 N. 
 Y. 532; Thorpe v. Rutland and Burl- 
 ington R. R. Co., 27 Vt. 140; Sawyer 
 v. City of Alton, 4 111. 127; Winch v. 
 Tobin, 107 111. 212; Concord R. R. 
 Co. v. Greeley, 17 N. H. 47; State v. 
 
 454 
 
 Nashville R. R. Co., 12 Lea (Tenn.), 
 583. Still the words of Judge Story 
 in a dissenting opinion are worthy of 
 attention. " But the legislature of 
 Massachusetts is .... in no just 
 sense the sovereign of the state. 
 The sovereignty belongs to the peo- 
 ple of the state in their original char- 
 acter as an independent community; 
 and the legislature possesses those 
 attributes of sovereignty, and those 
 only which have been delegated to 
 it by the people of the state under 
 its constitution." Charles River 
 Bridge v. Warren Bridge, 11 Pet. 
 644. 
 
 3 A discussion of the extent of 
 these powers comes properly in a 
 subsequent part of this chapter. 
 §§ 470 et seq.
 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 466. 
 
 self. 1 Consequently, the power to alter the rights of a corpora- 
 tion through the exercise of the right of eminent domain or the 
 police power, and to take its property for public purposes, can 
 never be surrendered by the legislature ; any law or charter 
 purporting to surrender it would in that respect be void. There- 
 fore, taking the property of a corporation by the exercise of the 
 power of eminent domain or of the police power can never im- 
 pair the obligation of a contract, as these powers must in all 
 cases be held to have been reserved to the legislature. 2 
 
 § 4:66. The legislature of the state, however, as before re- 
 marked, is not the state, and although the legislature cannot 
 surrender the eminent domain or the police power of the 
 state, it does not follow that the ultimate power of the state 
 cannot do so. This ultimate power exists in a majority of 
 the people of the state, and at first sight it would seem com- 
 petent for them to do any political act which the Federal 
 constitution does not forbid the states to do. Accordingly, 
 would it not be competent for the people by direct vote to 
 surrender the right of eminent domain as to the property of 
 any given corporation ? If so, and such corporation accepted 
 a charter with such provision in it, would not that acceptance 
 create a contract the obligation of which would be impaired 
 by the exercise as to any property of that corporation of the 
 power of eminent domain % These are questions of theoreti- 
 cal interest mainly. No partial surrender, it is thought, of 
 its right to exercise its eminent domain has ever been made 
 by a state, and such a surrender would never be implied. 
 "Whether the courts would hold such a surrender to be a valid 
 contract, and as such within the protection of the Federal 
 
 1 " When the existence of a par- 
 ticular power in the government is 
 recognized on the ground of neces- 
 sity, no delegation of the legislative 
 power by the people can be held to 
 vest authority in the department 
 which holds it in trust to bargain 
 away such power or to so tie up the 
 hands of the government as to pre- 
 clude its repeated exercise as often 
 and under such circumstances as the 
 
 needs of the government may re- 
 quire." Cooley, Cons. Lim., p. 525. 
 2 See Twenty-second Street, In re, 
 102 Pa. St. 10S; Philadelphia Pas- 
 senger Ry. Co.'s Appeal, 102 Pa. St. 
 123. Chicago, etc., Ry. Co. v. Ne- 
 braska, 170 U. S. 57, holding that an 
 ordinance requiring the railroad to 
 repair a viaduct did not violate any 
 contract between the state and the 
 company. See, also, Laclede Gas 
 Light Co. v. Murphy, 170 U. S. 78. 
 455
 
 § 468.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 constitution ; or whether they would hold that, as states are 
 integral parts of the United States, the Federal constitution 
 cannot sanction an act which might tend towards the disinte- 
 gration or extinction of one of these integral parts remains an 
 open question. 
 
 § 467. A word may be added here in regard to corporations 
 
 organized under authority from Congress. Al- 
 tions° ra " though the constitutional provision against passing 
 Congress 7 a ^ aw i m P a i rm g the obligation of contracts does not 
 
 apply to Congress, the prohibition against depriv- 
 ing any one of his property without due process of law and 
 just compensation does; and as rights which have already 
 vested under a contract are held to be property, Congress 
 seems nearly as restricted as if the provision against passing 
 a law impairing the obligation of contracts applied to it. 1 It 
 will be seen, however, that any rights of a corporation against 
 the United States would lack any sanction except the comity 
 of the government, which, strictly speaking, is no sanction. 2 
 § 468. Questions whether or not particular state statutes, 
 
 or particular acts done on behalf of a state, impair 
 tiono/the the obligation of any contract between a state and 
 courts* 1 a corporation, come up properly for discussion in 
 
 the following pages of this chapter, in connection 
 with the topics of eminent domain, police power, taxation^ 
 and the right which a state may reserve to alter and amend 
 the constitution of a corporation. Questions of this character 
 are often decided in the Federal courts ; and as the final deci- 
 sion, whether the obligation of a contract is impaired by a state 
 law, rests with the Supreme Court of the United States, 3 the 
 utterances of that court are of universal authority. 
 
 1 County of Cass v. Morrison, 28 
 Minn. 257; see Chicago, etc., R'y Co. 
 v. United States, 104 U. S. 680; and, 
 for the construction of a contract 
 between the United States and a cor- 
 poration, see Lake Superior and 
 Mississippi R. R. Co. v. U. S., 93 U. 
 S. 442. 
 
 2 Compare generally United States 
 v. Lee, 106 U. S. 196, and Louisiana 
 d. Jumel, 107 U. S. 711. 
 
 456 
 
 8 Where a party to a suit sets up 
 that under one statute a state made 
 a contract with him, and that by a 
 subsequent statute it violated the 
 contract, and the highest court of 
 law or equity of the state has held 
 the subsequent act to be a valid act, 
 and decreed accordingly, the Su- 
 preme Court of the United States 
 has jurisdiction under sec. 25 of the 
 Judiciary Act. The Binghamton
 
 CHAP. Vin.] CORPORATION AND STATE. 
 
 [§ 469. 
 
 Iu construing the statutes of a state, the Federal Supreme 
 Court will follow as far as may be the courts of the state 
 whose statute it is construing ; J but when the highest court 
 of a state has held repeatedly that certain state statutes are 
 valid, and when rights have vested under them, the Federal 
 Supreme Court will not follow in construing such statutes 
 any oscillations of the state court ; at least when the Supreme 
 Court is deciding upon the legal effect of transactions taking 
 place before the change in state judicial opinion had tran- 
 spired. 2 
 
 § 469. We now come to the relations between the state and 
 the corporation other than the legal relations occa- 
 sioned by the contract between them ; to relations, between 
 that is, existing between the lawgiver as such and a ndthecor- 
 citizens. Reverting for an instant to the distinc- P°r atlon 
 
 o other than 
 
 tion before mentioned between the state considered legal reia- 
 
 • • • <■ tions occa- 
 
 as the ultimate political power thereof and the state sioned by 
 
 legislature, it may be added that, though the powers 
 
 of the legislature are more restricted than those of the state, 
 
 Bridge, 3 Wall. 51. And when a 
 state statute creates a contract, and 
 a subsequent statute is alleged to 
 impair the obligation of that con- 
 tract, and the highest court of law 
 or equity in the state construes the 
 first statute in such a manner that 
 the second statute does not impair 
 the contract, whereby the second 
 statute remains valid under the 
 United States constitution, the Fed- 
 eral Supreme Court may pass on the 
 decision. Bridge Proprietors v. Ho- 
 boken Co., 1 Wall. 116. The Fed- 
 eral question relied on must have 
 been raised on the trial in the state 
 court. Susquehanna Boom Co. v. 
 West Branch Boom Co., 110 U. S. 
 57; Brown v. Colorado, 106 U. S. 95. 
 The question whether a state may 
 tax the franchises of a corporation 
 derived from acts of Congress is re- 
 movable to the Federal courts. 
 Southern Pacific R. R. Co. v. Cali- 
 fornia, 118 U. S. 109. 
 
 The constitution of a state is a 
 "law" within the meaning of the 
 clause in the Federal constitution 
 which forbids a state to pass a law 
 impairing the obligation of contracts. 
 Railroad Co. v. McClure, 10 Wall. 
 511. 
 
 1 See Wright ». Nagle, 101 U. S. 
 791; Secombe v. Railroad Co., 23 
 Wall. 108; but compare Burgess v. 
 Seligman, 107 U. S. 20; see, also, 
 Beauregard v. New Orleans, 18 How. 
 497, 502; Bank of Hamilton v. Dud- 
 ley's Lessee, 2 Pet. 492, 524; Elmen- 
 dorf v. Taylor, 10 Wheat. 152, 159; 
 Green v. Neal's Lessee, 6 Pet. 291, 
 298. A decision by a state court 
 that a statute of the state is in ac- 
 cordance with the state constitu- 
 tion binds the Federal courts. Rail- 
 road Co. v. Georgia, 98 U. S. 359. 
 
 2 Gelpcke v. City of Dubuque, 1 
 Wall. 175 ; Havemeyer v. Iowa 
 County, 3 Wall. 294; see Olcott v. 
 Supervisors, 16 Wall. 678; Douglas 
 
 457
 
 •469a.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VTII. 
 
 still the legislature for ordinary purposes may be regarded as 
 the state itself; and for the purposes of the following discus- 
 sion, except as restrained by the state and Federal constitu- 
 tions, and by the constitutional doctrines before referred to, 
 the power of the state legislature over corporations may be 
 regarded as unlimited in law ; for persons interested in a cor- 
 porate enterprise are, in respect of the same, subject to the 
 laws of the state just as in all other respects. 
 
 § 409a. The political powers possessed by the Federal and 
 state governments over corporations may be grouped under 
 the general heads of police power, power to tax, and eminent 
 domain. These three powers have their common source in 
 the function of government to provide for the welfare of the 
 people. Their distinguishing characteristics may be thus 
 stated : 
 
 By virtue of its police power the state regulates the use of 
 property, but takes nothing. 
 
 By virtue of its power to tax, the state, according to a ratio 
 proportioned as evenly and justly as may be, takes property 
 for public uses without making direct compensation. 1 
 
 By virtue of its power of eminent domain, the state takes 
 the property of individuals for a public purpose, making just 
 compensation, but without regard to whether it takes more of 
 one man's property than another's. 
 
 It is essential to the existence of these powers that they 
 should override private rights. Yet our system of institutions 
 places limitations on them. These limitations are of two dis- 
 
 v. Pike County, 101 U. S. 677. Com- 
 pare Wade v. Travis County, 174 U. 
 S. 499. But the Federal courts will 
 not follow a state court in deciding 
 upon questions of general commer- 
 cial law not depending on local usage 
 or statutes. Swift v. Tyson, 16 Pet. 
 1; Railroad Co. v. National Bank, 
 102 U. S. 14; nor, of course, in de- 
 ciding whether a state statute con- 
 flicts with the Federal constitution. 
 Jefferson Branch Bank v. Skelly, 1 
 Black, 436. See § 318. 
 
 1 There would often be manifest 
 injustice in subjecting the whole 
 
 458 
 
 property of a city or of any district 
 to taxation for a local improvement. 
 The rule of equality and uniformity 
 prescribed in cases of taxation for 
 state and county purposes, does not 
 require that all property or all per- 
 sons in a county or district should 
 be taxed for local purposes. He 
 who reaps the benefit should bear 
 the burden. Hagar v. Reclamation 
 District, 111 U. S. 700, 705; Louisi- 
 ana v. Pillsbury, 105 U. S. 278, 295; 
 County of Mobile v. Kimball, 102 
 U. S. 691, 704.
 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 46%. 
 
 tinct classes, between which the division is fundamental. The 
 first class springs from the relations between the Federal 
 government and the states ; the second from the relations be- 
 tween the individual or corporation whose property is regu- 
 lated or taken, and the government, state or Federal, taking 
 or regulating it. The one class is based on political considera- 
 tions, the other on requirements of justice. 
 
 § 4:69b. Limitations of the first class apply to the exercise 
 of all three powers. Within the range of its constitutional 
 powers the Federal government is superior to the state gov- 
 ernments. 1 The constitution declares this ; 2 and that it 
 should be so is essential to the existence of the Federal gov- 
 ernment as the government of a nation of which the states are 
 constituent parts. Consequently, wherever there is concur- 
 rent authority in the Federal and state governments, and the 
 Federal government legislates, state laws in so far as incon- 
 sistent must yield. Certain powers moreover, conferred on 
 Congress, are essentially exclusive, even while unexercised, 
 as for instance the power to regulate commerce with foreign 
 nations and among the states. Therefore state legislation can 
 not extend within their domain, and besides this, the Federal 
 constitution in close connection with these exclusive powers of 
 Congress, places certain express prohibitions on the states, for- 
 bidding them, for instance, to lay imposts or duties on exports 
 and imports. Nevertheless, the Federal government, though 
 supreme within its sphere, possesses only such powers as are 
 conferred on it by the constitution ; and Federal legislation 
 beyond the scope of these powers is void. 3 
 
 The second class of restrictions is summed up in the two 
 
 1 Gibbons v. Ogden, 9 Wheat. 1, 
 210; Tennessee v. Davis, 100 U. S. 
 257,263; Railway Co. v. Hafley, 158 
 U. S. 98. See Trans. Co. v. Wheel- 
 ing, 99 U. S. 273, 281. 
 
 2 Art'. VI. § 2. 
 
 3 An act of Congress making it a 
 misdemeanor to mix for sale naphtha 
 and illuminating oils, or to sell or 
 offer such mixture for sale, is a 
 police regulation, relating exclusively 
 to the internal trade of the states, and 
 
 can only have effect where the legis- 
 lative authority of Congress excludes 
 territorially all state legislation, as, 
 e. g., in the District of Columbia. 
 Within state limits it can have no 
 constitutional operation. United 
 States v. Dewitt, 9 Wall. 41. Prop- 
 erty covered by letters-patent is sub- 
 ject to regulation by police powers 
 of a state, like other property. Pat- 
 terson v. Kentucky, 97 U. S. 501. 
 
 459
 
 § 470.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 fundamental rules that no man's property shall be taken with- 
 out (1) due process of law, and (2) just compensation. The 
 first is a restriction on the power of eminent domain and the 
 power to tax, the second only on the power of eminent domain 
 and on such instances of the exercise of the police power as 
 raise the question whether property has been taken, and not 
 merely regulated. 1 
 
 § 470. By the exercise of its power of eminent domain, 2 the 
 Eminent state may take the property of corporations for 
 Restrict public purposes, on making due compensation, just 
 tions. as the state may take other property. 3 The exer- 
 
 1 No compensation need be made 
 when private property is regulated 
 by the police power. Talbot v. Hud- 
 son, 10 Gray (Mass.), 417. 
 
 2 Eminent domain (or the right 
 or power of eminent domain) "is 
 the rightful authority which exists 
 in every sovereignty to control and 
 regulate those rights of a public na- 
 ture which pertain to its citizens in 
 common, and to appropriate and con- 
 trol individual property for the 
 public benefit as the public safety, 
 necessity, convenience, or welfare 
 may demand." Cooley, Cons. 
 Lim'ns, 524; People v. Humphrey, 
 23 Mich. 471. It will be noticed 
 that the notion of eminent domain 
 given by this definition resembles in 
 some respects notions of the police 
 power. See infra, §§ 474 et seq.; 
 also §§ 171 et seq. 
 
 The power of eminent domain is 
 not granted by the state constitution 
 to the legislature, but is inherent 
 in the legislature, limited only by 
 constitutional restrictions. Central 
 Branch U. P. R. R. Co. v. Atchison, 
 T. and S. F. R. R. Co., 28 Kan. 45:5. 
 A state may condemn property for 
 the use of the United States. Orr v. 
 Quimby, 53 N. H. 590. 
 
 8 A bridge held by an incorporated 
 
 460 
 
 company under a charter from a 
 state may be condemned and taken 
 as part of a public road, under the 
 laws of that state. This charter, 
 although a contract between the 
 state and the company, is, like all 
 other private property, subject to 
 the right of eminent domain. The 
 Federal constitution does not take 
 away this right, the exercise of which 
 does not interfere with the inviola- 
 bility of contracts. All property 
 and contracts are subject to eminent 
 domain, and property held by an in- 
 corporated company stands on the 
 same footing with that held by an 
 individual, and a franchise cannot be 
 distinguished from other property. 
 West River Bridge Co. v. Dix, 
 How. 507. Accord, Central Bridge 
 Co. v. City of Lowell, 4 Gray, 474; 
 Metropolitan City R'y Co. v. Chicago 
 West Div. R'y Co., 87 111. 317; Sixth 
 Avenue R. R. Co. v. Kerr, 72 N. Y. 
 330; Backus «. Lebanon, 11 N. H. 
 10; Philadelphia Passenger R'y Co. 'b 
 Appeal, 102 Pa. St. 123; Boston and 
 L. R. R. Co. v. Salem, etc., R. R. Co., 
 2 Gray (Mass.), 1; compare Enfield 
 Toll Bridge Co. v. Hartford and New 
 Haven R. R. Co., 17 Conn. 453; S. C, 
 17 Conn. 40; Pennsylvania R. R. Co.'s 
 Appeal, 93 Pa. St. 150.
 
 CHAP. Vni.] CORPORATION AND STATE. 
 
 [§ 471. 
 
 cise of this power either by the United States 1 or by a state, 
 is subject to two restrictions contained in the Federal consti- 
 tution (as well as in state constitutions) : (1) no person shall be 
 deprived of his property without due process of law ; (2) nor 
 shall private property be taken for public use without just com- 
 pensation. 2 
 
 §471. The phrase "due process of law" is one that seems 
 likely for many years to remain without adequate .. Duepro . 
 definition. It means the "law of the land," as cess of 
 those words are used in Magna Carta; 3 and, conse- 
 quently, it means something which is continuously undergoing 
 modification and development. The provision in Magna 
 Carta is a restriction on the power of the Crown rather than 
 on that of Parliament ; but the provision in our constitution 
 that no person shall be deprived of his property without due 
 
 1 The United States, directly or 
 through a railroad corporation char- 
 tered by it, may in the exercise of 
 its constitutional powers take lands 
 by eminent domain in the territories 
 (even lands held by Indians) or in a 
 state. Cherokee Nation v. Kansas 
 Ry. Co., 135 U. S. 641. See Darling- 
 ton v. United States, 82 Pa. St. 382. 
 
 2 Am'd't V., which does not apply 
 to the states; Withers v. Buckley, 20 
 How. 84; and Am'd't XIV., which 
 does apply to the states. The provi- 
 sion that private property shall not 
 be taken without just compensation 
 is not in Am'd't XIV.; but is con- 
 tained in most of the state constitu- 
 tions. And the Federal Supreme 
 Court holds that for a state to take 
 private property for a public use 
 without compensation is " wanting 
 in the due process of law required 
 by the Fourteenth Amendment." 
 Chicago, B. & Q. R. R. Co. v. Chicago, 
 166 U. S. 226, 241. See Matter of 
 Tuthill, 36 App. Div. (N. Y.) 492, 
 498, aff'd, 163 N. Y. 163. The state 
 cannot take private property on pay- 
 ment of less than its value. Opinion 
 of the Justices, 66 N. H. 629. 
 
 That the right of eminent domain 
 exists in the government of the 
 United States, and may be exercised 
 by it within the states so far as is 
 necessary to the exercise of the 
 powers conferred on the Federal 
 government by the constitution, was 
 held in Kohl v. United States, 91 
 U. S. 367. The state cannot delegate 
 a right to take property by eminent 
 domain, for a private purpose. § 163, 
 ante. 
 
 3 Murray's Lessee v. Hoboken 
 Land Co., 18 How. 272. Magna 
 Carta was granted or enacted by 
 John "per consilium" of his pri- 
 mate, his barons, and the papal 
 legate. The thirty-ninth section, 
 which contains the phrase in ques- 
 tion, runs thus: " Nullus liber homo 
 capiatur, vel imprisonetur, aut dis- 
 saisiatur, aut utlagetur, aut exule- 
 tur, aut aliquomodo destruatur, nee 
 super eum ibimus, nee super eum 
 mittimus, nisi per legale judicium 
 parium suorum vel per legem ter- 
 rae." Stubb's Select Charters, 276- 
 291. See § 492. 
 
 461
 
 § 473.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 process of law is a restriction on the power of the state govern- 
 ments acting in any manner whatsoever, and on the power of 
 the Federal government. 1 
 
 § 472. When applied to judicial proceedings, the term " due 
 process of law " means a course of legal proceedings according 
 to the rules and principles which have been established in our 
 systems of jurisprudence for the protection and enforcement 
 of private rights. To give such proceedings validity, there 
 must be a tribunal competent by the law of its creation to pass 
 upon the subject-matter of the suit, and, if the suit involves 
 merely a determination of the personal liability of the defend- 
 ant, he must be brought within the jurisdiction of the court 
 by service of process within the state, or by his voluntary ap- 
 pearance. 2 
 
 § 473. The other constitutional restriction on the power of 
 
 eminent domain is that private property shall not 
 
 peuLtion" De taken without just compensation. 3 To bring a 
 
 case within the protection of this provision, it is 
 
 not necessary that property should be taken in the narrowest 
 
 1 It seems that even before the 
 passage of Amendment XIV., a state 
 cuuld not through its legislature 
 have made anything due process of 
 law. See Murray's Lessee v. Hobo- 
 ken Land Co., 18 How. 272. 
 
 2 Pennoyer v. Neff, 95 U. S. 714, 
 733; see St. Clair o. Cox. 106 U. S. 
 350; and compare American Express 
 Company v. Conant, 45 Mich. 642; 
 McNichol v. United States Mercan- 
 tile Reporting Agency, 74 Mo. 457; 
 Pope v. Terre Haute Car Co., 87 N. 
 Y. 137. Notice is essential. Camp- 
 bell v. Campbell, 63 111. 402. 
 
 " Due process of law," requires 
 that a party shall be properly brought 
 into court, and that he shall have 
 an opportunity when there to prove 
 any fact which according to the con- 
 stitution, and the usages of the com- 
 mon law, would be a protection to 
 him and his property. But the legis- 
 lature may take away any particular 
 form of remedy, and give a new one. 
 
 462 
 
 And the "law of the land" means 
 about the same as "due process of 
 law." People v. Supervisors, 70 N. 
 Y. 228. " By the law of the land is 
 most clearly intended the general 
 law; a law which hears before it 
 condemns; which proceeds upon in- 
 quiry and renders judgment only 
 after trial. The meaning is that 
 every citizen shall hold his life, lib- 
 erty, property, and immunities un- 
 der the protection of the general 
 rules which govern society." Web- 
 ster arguendo in Dartmouth College 
 v. Woodward, 4 Wheat. 519, 581. 
 
 3 See Garrison v. City of New 
 York, 21 Wall. 196. "The power 
 to take private property for public 
 uses, generally termed the right of 
 eminent domain, belongs to every 
 independent government. It is an 
 incident of sovereignty, and requires 
 no constitutional recognition. The 
 provision found in the fifth amend- 
 ment to the Federal constitution and 

 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 474. 
 
 sense of the word : it is enough that some private right be 
 materially impaired. 1 In determining the value of property 
 taken for public purposes, the same considerations are to be 
 regarded as in the sale of property between private persons. 
 The inquiry should be, what is the property worth in the market, 
 not merely with reference to the uses to which it is at the time 
 applied, but with reference to those to which it is plainly 
 adapted. 2 
 
 In the absence of any specific provision in the constitution 
 of a state, a state legislature may regulate in its discretion the 
 mode of exercising the right of eminent domain. 3 The power 
 to exercise this right may be delegated to private citizens or 
 to corporate bodies, public or private ; 4 but, in the absence 
 of special provision, the right of eminent domain may not be 
 delegated by the person or body receiving it from the state. 5 
 
 § 474. As by virtue of its power of eminent domain a state 
 may take the property of corporations, so may a 
 state modify corporate constitutions, and regulate p°^°® 
 corporate property, by virtue of its police power ; 
 which is the power necessarily inherent in the state as a self- 
 governing community to pass laws for the public welfare. 6 
 
 in the constitutions of the several 
 states, for just compensation for the 
 property taken, is merely a limita- 
 tion on the use of the power. It is 
 no part of the power itself, but a 
 condition upon which the power may 
 be exercised." United States v. 
 Jones, 109 U. S. 513, 518, opinion of 
 court per Field, J. 
 
 1 The backing of water so as to 
 overflow the lands of individuals is 
 such a taking. Pumpelly v. Green 
 Bay Co., 13 Wall. 166. See §§ 171- 
 176 for a fuller discussion of what 
 constitutes such a taking of private 
 property or impairment of private 
 rights (by a corporation) as to re- 
 quire compensation. 
 
 2 Boom Co. v. Patterson, 98 U. S. 
 403. See for cases on the rule of 
 damages for property taken by a rail- 
 road or other corporation, § 178. 
 
 3 Secombe v. Railroad Co., 23 Wall. 
 108. 
 
 4 Brayton v. Fall River, 124 Mass. 
 95, 97. Compare United States v. 
 Joues, 109 U. S. 513. But this 
 power can never be presumed to 
 exist either in municipal or private 
 corporations. Phillips v. Dunkirk, 
 Warren, etc., R. R. Co., 78 Pa. St. 
 177; Allen v. Jones, 47 Ind. 438. Com- 
 pare Pennsylvania R. R. Co.'s Appeal, 
 93 Pa. St. 150. See § 163. 
 
 5 See §166, ante. 
 
 6 See Chicago Life Ins. Co. v. 
 Needles, 113 U. S. 574. Compare 
 Lake View v. Rose Hill C. Co., 70111. 
 191. A state can compel an insur- 
 ance company to make detailed re- 
 turns. Eagle Ins. Co. v. Ohio, 153 
 U. S. 446. 
 
 463
 
 § 474.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 Thus, in a case where a corporation was chartered with the 
 rig-lit to hold lotteries for twenty-five years, and subsequently 
 the state which had chartered it adopted a new constitution 
 containing a provision forbidding lotteries, it was held that 
 this constitution, operating as it did to annul the right of the 
 corporation to hold lotteries, was not repugnant to the Fed- 
 eral constitution as impairing the obligation of the charter, 
 but was a valid exercise of the police power of the state, which 
 the legislature could not grant away. "No legislature can 
 bargain away the public health or the public morals. The 
 people themselves cannot do it, much less their servants. 
 The supervision of both these subjects of governmental power 
 is continuing in its nature, and they are to be dealt with as 
 the special exigencies of the moment may require. Govern- 
 ment is organized with a view to their preservation, and can- 
 not divest itself of the power to provide for them." x But a 
 legislature may grant a franchise, as for instance the exclu- 
 sive right to supply gas or water to a municipality, and can- 
 not revoke it through the exercise of its police power after the 
 grantee has performed the conditions of the grant : yet by 
 granting such franchises the legislature does not part with its 
 power to regulate them so as to protect the public health and 
 morals. 2 
 
 1 Stone v. Mississippi, 101 U. S. 
 814 ; approved, Douglas v. Kentucky, 
 168 U. S. 488 ; accord, State «. Morris, 
 77 N. C. 512 ; see Slaughter House 
 Cases, 16 Wall. 36 ; Crescent City, 
 etc., Co. v. New Orleans. 33 La. Ann. 
 934: Richmond, etc., R. R. Co. v. 
 Richmond, 26 Gratt. (Va.)83 ; Chi- 
 cago, etc., R. R. Co. p. Haggerty, 67 
 111. 113. In matters relating to the 
 public health and the public morals 
 the legislature of a state cannot by 
 any contract limit the exercise of its 
 police power to the prejudice of the 
 general welfare. Legislation abro- 
 gating valid exclusive privileges of 
 slaughtering animals held constitu- 
 tional. Butchers' Union Slaughter 
 House, etc., Co. v. Crescent City Co., 
 Ill U. S. 746. The legislation held 
 464 
 
 valid in this case destroyed the ex- 
 clusive nature of the privileges held 
 valid iu Slaughter House Cases, 16 
 Wall. 36. A law prohibiting the em- 
 ployment of women and persons 
 under eighteen in any manufacturing 
 establishment more than sixty hours 
 a week violates no contract of this 
 commonwealth implied in granting 
 the charter of a manufacturing com- 
 pany. Commonwealth v. Hamilton 
 M'f'g Co., 120 Mass. 383. See Wood- 
 lawn Cemetery v. Everett, 118 Mass. 
 354. 
 
 2 New Orleans Gas Co. v. Louisi- 
 ana Light Co., 115 U. S. 650 ; New 
 Orleans Water Works Co. v. Rivers, 
 115 U. S. 674 ; Louisville Gas Co. v. 
 Citizens' Gas Co., 115 U. S. 683 ; Tam- 
 many Water Works v. New Orleans,
 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 4746. 
 
 Police 
 power. 
 Commerce 
 clause. 
 
 §474«. In the exercise of its police power a state must 
 avoid infringing the restrictions before referred to : 1 (1) it 
 must not enter the domain of legislation exclusively reserved 
 to Congress by the constitution, or interfere with Federal 
 regulations constitutionally made ; and (2) it must not take 
 the property of an individual or a corporation without just 
 compensation determined by due process of law. 
 
 §474&. The opinion of the Supreme Court of the United 
 States in Gibbons v. Ogden, 2 delivered by the great 
 Chief Justice, is still " the accepted canon of con- 
 struction " of the commerce clause in this consti- 
 tution. 3 The main point decided in that case was 
 that the New York statutes giving to Fulton and Livingston 
 the exclusive right to navigate by steam all waters within the 
 territorial jurisdiction of New York state were unconstitu- 
 tional in so far as they excluded from those waters vessels li- 
 censed for the coasting trade under United States laws. 4 Mar- 
 shall expounded the clause broadly, and Gibbons v. Ogden is 
 recognized as authority for the following propositions : 
 
 The power of Congress to regulate commerce has no limita- 
 tions other than those prescribed in the constitution. 3 
 
 The power to regulate is the power " to prescribe the rule by 
 which commerce is to be governed." 6 
 
 Commerce among the states cannot stop at the boundary of 
 each state ; so the power of Congress to regulate commerce 
 among the states reaches into their interiors, although it does 
 not extend to the regulation of commerce entirely confined to 
 one state. 7 " The power of Congress, then, comprehends navi- 
 gation within the limits of every state in the Union ; so far as 
 
 120 U. S. 64 ; Walla Walla v. Walla 
 Walla Water Co., 172 U. S. 1 ; State 
 v. Murphy, 130 Mo. 10. 
 i-Ante, §§469a, 4696. 
 
 2 9 Wheat. 1. 
 
 3 Henderson v. Mayor of New York, 
 92 U. S. 259, 270. 
 
 * Compare Pensacola Tel. Co. v. 
 Western Un. Tel. Co., 96 U. S. 1, 
 which held that a state could not 
 give a telegraph company a monop- 
 oly within certain of its own coun- 
 
 30 
 
 ties, when Congress had regulated 
 interstate telegraphing. 
 
 5 Gibbons v. Ogden, 9 Wheat. 1, 
 196; approved in Brown v. Mary- 
 land, 12 Wheat. 419, 446. 
 
 6 lb. 9 Wheat. 196. 
 
 7 lb. 9 Wheat. 194, approved in 
 Brown ». Maryland, 12 Wheat. 419. 
 See United States v. Forty-three 
 Gallons of Whiskey, 93 U. S. 188; 
 Guy v. Baltimore, 100 U. S. 434. 
 
 465
 
 § 474<7.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 that navigation may be in any manner connected with com- 
 merce with foreign countries or among the several states or with 
 the Indian tribes." l 
 
 The power of Congress to regulate commerce extends to car- 
 riers of passengers, 2 and comprehends every species of com- 
 mercial intercourse between the United States and foreign 
 nations. 3 " Commerce undoubtedly is traffic, but it is some- 
 thing more; it is intercourse. It describes the commercial 
 intercourse between nations, and parts of nations, in all its 
 branches, and is regulated by prescribing rules for carrying on 
 that intercourse. The mind can scarcely conceive a system 
 for regulating commerce between nations, which shall exclude 
 all laws concerning navigation, which shall be silent on the 
 admission of the vessels of the one nation into the ports of the 
 other, and be confined to prescribing rules for the conduct of 
 individuals, in the actual employment of buying and selling, 
 and of barter." 4 But " inspection laws, quarantine laws, health 
 laws of every description, as well as laws for regulating the 
 internal commerce of a state, and those which respect turnpike 
 roads, ferries, etc.," are within the proper scope of state legis- 
 lation. 5 
 
 § ±7±c. Regarding commerce by water, it is held that a 
 state may authorize a city to build wharves on navigable 
 waters and to charge fees for their use, 6 but in so doing must 
 not discriminate against interstate commerce in favor of 
 commerce wholly internal to the state. 7 And a state may 
 regulate the management of vessels within its harbors. 8 It 
 
 Gibbons v. Ogden, 9 Wheat. 1, 
 197. See United States v. Coombs, 
 12 Pet. 72. 
 
 2 Gibbons v. Ogden, 9 Wheat. 1, 
 215. 
 
 3 lb. 9 Wheat. 1, 190 et seq. 
 *Ib. 9 Wheat. 1, 189, 190. 
 
 8 lb. 9 Wheat. 1,203; Card well v. 
 Bridge Co., 113 U. S. 205; Mor- 
 gan's Steamship Co. v. Louisiana 
 Board of Health, 118 U. S. 455. See 
 Conway v. Taylor's Executor, 1 
 Black, (503. 
 
 6 Packet Co. v. St. Louis, 100 
 U. S. 423; Packet Co. v. Keokuk, 
 466 
 
 95 U. S. 80; Vicksburg v. Tobin, 
 100 U. S. 430; Packet Co. v. Cat- 
 lettsburg, 105 U. S. 559; Ouachita 
 Packet Co. v. Aiken, 121 U. S. 444. 
 Compare Sands v. Manistee River 
 Imp. Co., 123 U. S. 288. 
 
 7 Guy v. Baltimore, 100 U. S. 434. 
 
 8 Cooley v. Board of Wardens, 12 
 How. 299; County of Mobile v. Kim- 
 ball, 102 U. S. 691; Wilson v. Mc- 
 Narnee, 102 U. S. 572. But compare 
 Foster v. Master, etc., of New Or- 
 leans, 94 U. S. 246; Steamship Co. v. 
 Portwardens, 6 Wall. 31.
 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 474tf. 
 
 may be that by proper and just regulations a state can protect 
 itself against objectionable immigrants, and to that end re- 
 quire full information regarding all immigrants ; ' but a state 
 cannot lay a tax on immigrants, however veiled in the form 
 of harbor or quarantine regulations; 2 and a law prescribing 
 terms or conditions on which alone a vessel can discharge its 
 passengers is a regulation of commerce, and is a regulation 
 of commerce with foreign nations if the vessel comes from a 
 foreign port ; it is no argument to call the power to pass such 
 regulations the police power, for a state cannot exercise that 
 power in matters confided exclusively to the jurisdiction of 
 Congress. 3 
 
 § 4:7±d. "Commerce on land between the different states is 
 so strikingly dissimilar, in many respects, from commerce by 
 water, that it is often difficult to regard them in the same 
 aspect in reference to the respective constitutional powers and 
 duties of the state and Federal governments. No doubt com- 
 merce by water was principally in the minds of those who 
 framed and adopted the constitution, although both its lan- 
 guage and spirit embrace commerce by land as well." 4 State 
 legislation seeking to impose a direct burden on interstate 
 commerce by land or water, or to interfere directly with its 
 
 1 See City of New York v. Miller, 
 11 Pet. 102. 
 
 2 Passenger Cases, 7 How. 283 ; 
 Henderson v. Mayor of New York, 
 92 U. S. 259; Chy Lung v. Freeman, 
 92 U. S. 275; People v. Compagnie 
 Generate Transatlantique, 107 U. S. 
 59. 
 
 3 Henderson v. Mayor of New 
 York, 92 U. S. 259, 271, 272. See 
 Gloucester Ferry Co. v. Pennsylvania, 
 114 U. S. 196. 
 
 By examining the cases in the Su- 
 preme Court, in which state legis- 
 lation has been adjudged invalid in 
 regard to the commerce clause, "it 
 will be found that the legislation 
 adjudged invalid imposed a tax upon 
 some instrument or subject of com- 
 merce, or exacted a license fee from 
 parties engaged in commercial pur- 
 
 suits, or created an impediment to 
 the free navigation of some public 
 waters, or prescribed conditions in 
 accordance with which commerce in 
 particular articles or between par- 
 ticular places was required to be con- 
 ducted. In all the cases, the legis- 
 lation condemned operated directly 
 upon commerce, either by way of 
 tax upon its business, license upon 
 its pursuits in particular channels, 
 or conditions for carrying it on." 
 Sherlock v. Ailing, 93 U. S. 99. 
 Opinion of the court per Field, J., 
 p. 102; as to the power of Congress 
 to pass such laws, see Head Money 
 Cases, 112 U. S. 580. 
 
 * Railroad Co. v. Maryland, 21 
 Wall. 456, 470; Opin. of Ct. per Brad- 
 ley, J. 
 
 467
 
 § 474'/.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 freedom, encroaches on the exclusive power or Congress. 1 
 Thus, a statute of Missouri prohibiting driving or conveying 
 Texan, Mexican, or Indian cattle into the state between the 
 first days of March and November is an unconstitutional reg- 
 ulation of interstate commerce. 2 But, Congress not having 
 acted on the subject, it is held not to conflict with the powers 
 of Congress to regulate interstate commerce, for several states 
 by concurrent legislation to consolidate railroad companies so 
 as to create a consolidated corporation running a continuous 
 line of road through several states, 3 and state statutes regulat- 
 ing the tolls of railroad companies within state limits, making 
 no discrimination between local and interstate rates, are con- 
 stitutional police regulations, so far as regards the commerce 
 clause in the Constitution, even though they affect a railroad 
 company operating a road through several states. 4 Thus, as 
 
 *Hall v. DeCuir, 95 U. S. 485. 
 See Western Union Tel. Co. v. Pen- 
 dleton, 122 U. S. 347. So long as 
 Congress does not pass any law 
 regulating commerce among the 
 states, it indicates its will that inter- 
 state commerce should be free and 
 untrammelled. Brown v. Houston, 
 114 U. S. 622. 
 
 2 Railroad Co. v. Husen, 95 U. S. 
 465. See Minnesota v. Barber, 136 
 U. S. 313; Brimmer o. Rebman, 138 
 U. S. 78; cf. Kimmish v. Ball, 129 
 U. S. 217; Missouri, K. & T. Ry. Co. 
 v. Haber, 169 U. S. 613. A statute 
 authorizing the governor, upon as- 
 certaining that disease is epidemic 
 among sheep in any place, to desig- 
 nate such place and to prohibit im- 
 portation therefrom, except upon 
 such restrictions as he and the state 
 sheep inspector should impose, is 
 valid. Rasmussen v. Idaho, 181 U. S. 
 198. See, also, Smith v. St. Louis 
 & S. W. Ry. Co., 181 U. S. 248. But 
 an act forbidding railroad and ex- 
 press companies to bring intoxicat- 
 ing liquors within the state, except 
 under certain conditions, was held 
 
 468 
 
 void. Bowman v. Chicago, etc., Ry. 
 Co., 125 U. S. 465. Rhodes v. Iowa, 
 170 U. S. 412. A state cannot for- 
 bid the sale of oleomargarine brought 
 into the state from another state. 
 Schollenberger v. Penna., 171 U. S. 1; 
 Collins v. New Hampshire, 171 U. S. 
 30. Nor can a state forbid the sale 
 of intoxicating liquors in the orig- 
 inal kegs or packages in which they 
 were imported. Leisy v. Hardin, 135 
 U. S. 100. Otherwise as to retailing. 
 See Crowley v. Christensen, 137 U. 
 S. 86 ; cf. In re Rahrer, 140 U. S. 
 545. For the power of states to au- 
 thorize bridges over their navigable 
 waters, see Oilman v. Philadelphia, 3 
 Wall. 713; Escanaba Co. v. Chicago, 
 107 U. S. 678; People v. Saratoga, 
 etc., R. R. Co., 15 Wend. (N. Y.) 113; 
 Railroad Co. v. Richmond, 19 Wall. 
 584. 
 
 3 Boardman v. Lake Shore, etc., 
 Ry. Co., 84 N. Y. 157. This seems 
 tacitly recognized in many cases in 
 the Federal Supreme Court. 
 
 4 Railroad Co. v. Fuller, 17 Wall. 
 560. Cf. Covington Bridge Co. v. 
 Kentucky, 154 U. S. 204. 

 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 475 - 
 
 far as regards this clause, a state may constitutionally pre- 
 scribe a maximum charge for the transportation of passengers 
 and merchandise carried within the state, or taken up outside 
 the state and brought into it, or taken up inside and carried 
 out — at least until Congress legislates concerning interstate 
 commerce. 1 
 
 § 475. Turning now to a consideration of the restrictions 
 placed on the police power by the requirements of police o ^ er 
 justice, it may be remarked that the term " police its limits. 
 power " is not well chosen, as the power in question wE^L" 1 
 extends some what beyond the scope of what are J^^Jf e ^S. 
 ordinarily regarded as police regulations. 2 The 
 limits of this power are necessarily undefinable, as, in 
 
 1 Peik v. Chicago, etc., Ry. Co., 94 
 U. S. 164; Chicago, etc., R. R. Co. v. 
 Iowa, 94 U. S. 155; People v. Wabash, 
 etc., Ry. Co., 104 111. 476; S. C, 105 
 111. 236. But see Carton & Co. v. 
 Illinois Cent. R. R. Co., 59 Iowa, 148. 
 But a state statute regulating rail- 
 road charges for a transportation 
 which constitutes a part of commerce 
 among the states is void. Wabash, 
 St. L. & P. Ry. Co. v. Illinois, 118 
 U. S. 557; Railway Co. v. Hefley, 158 
 U. S. 98; L. & N. R. R. Co. o. Eu- 
 bank, 184 U. S. 27. A state statute 
 compelling railroad companies to 
 stop their trains at county seats, con- 
 strued by the state court to include 
 fast interstate passenger and mail 
 trains, is void. Illinois C. R. R. ». 
 Illinois, 163 U. S. 142. But such a 
 statute applying only to regular 
 passenger trains running wholly 
 within the state, is a valid exei'cise 
 of the state's police power. Gladson 
 v. Minnesota, 166 U. S. 427. And it 
 is held that a statute requiring every 
 railroad to stop three trains a day, if 
 so many are run, at places having 
 
 3,000 inhabitants, is not repugnant 
 to the Federal Constitution, as ap- 
 plied to interstate trains, in the 
 absence of legislation by Congress. 
 Lake Shore & M. S. Ry. Co. v. Ohio, 
 173 U. S. 285. But a state statute 
 requiring all trains to stop a certain 
 length of time at county seats was 
 held invalid, as applied to a through 
 express train, when four trains a day 
 stopped. Cleveland, C. C. & St. L. 
 R'y Co. ». Illinois, 177 U. S. 514. A 
 statute requiring two railroads to 
 provide at their intersection facili- 
 ties for transferring cars, is not a 
 regulation of interstate commerce. 
 Wisconsin, M. & P. R. R. Co. v. 
 Jacobson, 179 U. S. 287. Congress 
 has now passed an " Interstate Com- 
 merce Bill." As to its construction 
 see Inter-State Commerce Com'rs v. 
 Baltimore, etc., R. R. Co., 145 U. S. 
 263 ; Charlotte, etc., R. R. Co. v. 
 Gibbes, 142 U. S. 386; New York v. 
 Squire, 145 U. S. 175; Cincinnati, 
 etc., Ry. v. Inter. Com. Com., 162 U. 
 S. 184; Texas & Pac. Ry. v. Same, 
 ib. 197; Inter. Com. Com. v. Railway, 
 
 2 "Police is in general a system of 
 precaution for the prevention of 
 crimes and calamities." J. Ben- 
 
 tham, Edinburgh Ed. of Works, part 
 ix. p. 157; quoted in Kansas Pacific 
 Ry. Co. v. Mower, 16 Kan. 571. 
 
 469
 
 § -4:75. ] THE LAW OF PRIVATE CORPORATIONS. [CHAP. \ III. 
 
 accordance with its essential nature and purposes, its exer- 
 cise must depend on circumstances. Whether any given enact- 
 ment or regulation comes properly within its limits is a question 
 resting for decision in the first instance with the legislature, 
 but reviewable by the courts. Its scope is greater with respect 
 to property in the management of which the public has a 
 plain interest, as a railroad, 1 or a ferry, or even a grain eleva- 
 
 167 U. S. 479; Same v. Same, ib. 633; 
 Same v. Same, 168 U. S. 144; Louis- 
 ville & N. K. R. Co. v. Belli mer, 175 
 U. S. 648. East Tenn., Va. & Ga. 
 R'y Co. v. Inter. Com.Commissiouers, 
 181 U. S. 1. State statutes (similar 
 iu intent to the Federal Interstate 
 Commerce Act) recognizing and en- 
 forcing as to traffic within the state 
 the duty of railroad companies to 
 put all their patrons on absolute 
 equality, are quite proper; it is no 
 business of railroad companies to 
 foster particular enterprises by re- 
 bates and discriminations. Union 
 Pac. Ry. v. Goodridge, 149 U. S. 680. 
 1 The legislature can compel a rail- 
 road company to fence its road. 
 Thorpe v. Rutland & BmTg'n R. R. 
 Co., 27 Vt. 140; Gorman v. Pacific 
 R. R., 26 Mo. 441; Kansas Pac. R. R. 
 Co. v. Mower, 16 Kan. 573; New Al- 
 bany & Salem R. R. Co. v. Tilton, 12 
 Ind. 3; Ohio & Miss. R. R. Co. v. Mc- 
 Clelland, 25 111. 140; see Hayes v. 
 Mich. Cent. R. R. Co., Ill U. S. 228; 
 and make it liable in double dam- 
 ages for stock killed till it is fenced; 
 Minneapolis & St. L. Ry. v. Emmons, 
 149 U. S. 364; Missouri Pac. Ry. Co. 
 v. Humes, 115 U. S. 512; Humes v. 
 Missouri Pac. Ry. Co., 82 Mo. 221; 
 or make it liable for all damages by 
 fire along its route; St. Louis, etc., 
 Ry. Co.fl. Mathews, 165 IT. S. 1; 13. & 
 O. R'y Co. v. Kreager, 61 Oh. St. 312; 
 to ring bells or whistle before cross- 
 ing a road; Galena, etc., R. R. Co. v. 
 Loomis, 13 111. 548; to erect a bridge 
 necessary for travellers along a turn- 
 
 470 
 
 pike; People v. Boston & Alb. R. R. 
 Co., 70 N. Y. 569; to stop trains at a 
 certain station (right to alter and 
 repeal being reserved); Railroad Co. 
 v. Hammersley, 104 U. S. 1 ; Chicago 
 & Alton R. R. Co. v. People, 105 111. 
 657; State v. New Haven & North- 
 ampton Co., 43 Conn. 351; Penna. 
 Co. b. Wentz, 37 Ohio St. 333; Com- 
 monweal tli v. Eastern R. R. Co., 103 
 Mass. 254: to light their tracks in 
 cities; Cincinnati H. & D. R. R. Co. 
 v. Sullivan, 32 O. St. 152. So the 
 legislature may regulate the speed 
 of locomotives in passing through 
 cities and towns; Mobile & Ohio R. 
 R. Co. v. State, 51 Miss. 137; Myers 
 v. C. R. I. & P. R. II. Co., 57 Iowa, 
 555; State v. East Orange, 41 N. J. L. 
 127 ; or at highways and crossings; 
 see Roc kf ord, etc., R. R. Co. v. Hi 11- 
 mer, 72 111. 235; Horn v. Chicago, 
 etc., R. R. Co., 38 Wis. 403; Toledo 
 P. & W. Ry. Co. v. Deacon, C3 111. 
 91; and may regulate the grade of 
 railways, and prescribe how railway 
 tracks shall cross each other; Fitch- 
 burg R. R. Co. v. Grand Junc't R. R. 
 Co., 1 Allen, 552; Pittsburg, etc., R. 
 R. Co. v. South West Penn. R. R. 
 Co., 77 Pa. St. 173; Chicago, M. & 
 St. P. R'y Co. v. Milwaukee, 97 Wis. 
 418; compare State v. Noyes, 47 Me. 
 189; may impose upon railroads the 
 entire expense of a change of grade 
 at highway crossings; R. R. Co. v. 
 Bristol, 151 U. S. 556; and a city may 
 forbid a railroad company to run its 
 trains by steam within certain parts 
 of the city; R. R. Co. v. Richmond,
 
 CHAP. Vlir.] CORPORATION AND STATE. 
 
 [§ ^5. 
 
 tor. The following extract is from the opinion of the majority 
 of the court by Chief Justice Waite, in Munn v. Illinois: 1 
 " Looking then to the common law from whence came the 
 right which the constitution protects, we find that when 
 private property is ' affected with a public interest it ceases 
 to be juris privati only.' This was said by Lord Chief Jus- 
 tice Hale more than two hundred years ago in his Treatise 
 De Portibus Maris, 1 Harg. Law Tracts, 78, and has been 
 accepted without objection as an essential element of the law 
 of property ever since. Property does become clothed with 
 a public interest when used in a manner to make it of public 
 consequence, and affect the community at large. When, 
 therefore, one devotes his property to a use in which the pub- 
 lic has an interest, he, in effect, grants to the public an inter- 
 est in that use, and must submit to be controlled by the 
 public for the common good, to the extent of the interest he 
 has thus created. He may withdraw his grant by discon- 
 tinuing the use ; but so long as he maintains the use, he must 
 submit to the control." 2 
 
 96 U. S. 521. The legislature may 
 impose penalties for delays in for- 
 warding freight. McGowan v. Wil- 
 mington, etc., R. R. Co., 95 N. C. 
 417; a state may forbid the running 
 of freight trains within the state on 
 Sundays. Hennington v. Georgia, 163 
 U. S. 299. Such regulations as the 
 above, in order to be a valid exer- 
 cise of the police power, must be 
 reasonable. Toledo, W. & N. Ry. 
 Co. o. Jacksonville, 67 111. 37. A 
 statute providing that railroad com- 
 panies shall be liable for the attor- 
 ney fees up to $10 of parties success- 
 fully litigating claims against them, 
 is unconstitutional as depriving 
 them of the equal protection of the 
 laws and of their property without 
 due process of law. Gulf, etc., Ry. v. 
 Ellis, 165 U. S. 150; but see Atchison, 
 T., etc., Ry. Co. v. Matthews, 174 
 U. S. 96. An act compelling certain 
 corporations (and not all) to pay 
 their employes' wages every week, 
 
 is unconstitutional, as depriving 
 them of property (of the right to 
 contract freely) without due process 
 of law; Braceville Coal Co. o. People, 
 147 111. 66. A statute requiring the 
 redemption in cash of store orders, 
 etc., issued in payment of wages, is 
 valid. Knoxville Iron Co. v. Har- 
 bison, 183 U. S. 13. A statute regu- 
 lating the liability of railroads for 
 injuries to its employes is valid. 
 Tullis v. Lake Erie & W. R. R. Co., 
 175 U. S. 348. 
 
 1 94 U. S. 113, 126 (Elevator Cases). 
 
 2 The property of a telephone 
 company is property in the use of 
 which the public is interested — it is 
 property devoted to a public use — 
 and its rates may be fixed by statute. 
 Hockett v. State, 105 Ind. 250; Cen- 
 tral Union Telephone Co. v. Brad- 
 bury, 106 Ind. 1; so, the business of 
 supplying water. City of Danville v. 
 Danville Water Co., 178 111. 299. 
 
 471
 
 § 476.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 § 476. These remarks are undoubtedly sound as far as they 
 go. The real difficulty, however, is to draw a line between 
 property in the management of which the public has a 
 clearly defined interest, and property in regard to which it 
 has none. "Where the property in question is that of a cor- 
 poration, the interest of the public might be roughly said to 
 be coextensive with the grant to the corporation of powers 
 which it would be unconstitutional or improper for the legis- 
 lature to grant, except for purposes in the attainment of which 
 the public was directly concerned. For instance, it is ordi- 
 narily incompetent for the legislature to grant the right of 
 taking private property on compulsory process except for the 
 attainment of an object of public importance. 1 Accordingly, 
 as this right is ordinarily granted to a railroad corporation, 
 the possession of the right by such corporation would seem to 
 indicate a clear interest on the part of the public in its affairs. 
 This is a clear case of a defined public interest in a private 
 enterprise. But such a test, taken by itself, is not applica- 
 ble to all cases ; for the public is sometimes held to have an 
 interest in enterprises where no such extraordinary powers 
 have been granted, as, for instance, in the grain elevator case, 
 whence the foregoing extract is taken. The truth of the mat- 
 ter seems to be, that what may constitute such an interest of 
 the public in private enterprises as will warrant the regulation 
 of them by the police power of the state, is essentially incapa- 
 ble of definition. The Chief Justice says: "When, there- 
 fore, one devotes his property to a use in which the public has 
 an interest, he in effect grants to the public an interest in 
 that use." What is "a use in which the public has an inter- 
 est" ? To this question the remarks of the Chief Justice give 
 no answer. In any private business, as the manufacture of 
 soap, the public has always at least this negative interest that 
 the business shall not be carried on in such a way as to become 
 a public nuisance. Yet the business of manufacturing soap 
 is as private as any business can be. Take for another exam- 
 ple, the business of supplying milk in a city. This is a 
 
 1 See Beekman v. Saratoga and 
 
 Schenectady R. R. Co., 3 Paige, 73; 
 
 Ten Eyck u. Delaware, etc., Canal 
 
 Co., 18 N. J. Law, 200; Bloodgood 
 
 472 
 
 v. Mohawk and Hudson R. R. Co., 
 18 Wend. 9, 55; Edgewood R. R. 
 Co.'s Appeal, 79 Pa. St. 257. 

 
 CHAP. VIII. J CORPORATION AND STATE. 
 
 [§ 476. 
 
 business in which the public is held to have an interest to this 
 extent, that the milk supplied shall be pure and wholesome. 1 
 In truth, the interests of a societ} 7 , be they called public or 
 private, are so correlated and interwoven that it is impossible 
 to pick out the life or occupation of any individual and say : 
 that is an occupation in which the public has no conceivable 
 interest. 2 Whatever the public welfare calls for, the police 
 power of the state exists to afford, and whether any given 
 exercise of this power is a proper one, is a question for the 
 discretion of the legislature, subject to review in some w T ay by 
 the courts. 3 
 
 1 See Commonwealth v. Evaus, 132 
 Mass. 11. 
 
 2 The business of supplying gas is 
 one in which the public is interested. 
 Gibbs v. Baltimore Gas Co., 130 
 U. S. 396. " The sovereign police 
 power which the state possesses is 
 to be exercised only for the general 
 public welfare, but it reaches to 
 every person, to every kind of busi- 
 ness, to every species of property 
 within the Commonwealth." People 
 u. Salem, 20 Mich. 452, 478, per 
 Cooley, J. See Mugler o. Kansas. 
 123 U. S. 623, 660; Cin., B. & Q. R. K. 
 v. Chicago, 166 U. S. 226. 
 
 3 " As a general proposition it may 
 be stated, it is the province of the 
 law-making power to determine 
 when the exigency exists, calling 
 into exercise this (police) power. 
 What are the subjects of its exercise, 
 is clearly a judicial question. 11 Lake 
 View v. Rose Hill Cemetery Co., 70 
 111. 191, 195, opinion of court per 
 Scott, J. See, also, Toledo, W. and 
 N. R'y Co. v. City of Jacksonville, 67 
 111. 37; Jamieson v. Indiana Nat. Gas 
 Co., 128 Ind. 555. A few more deci- 
 sions on the exercise of the police 
 power are given in this note. 
 
 If the public safety or the public 
 moi'als require the discontinuance of 
 any manufacture or traffic, the legis- 
 lature cannot be stayed from provid- 
 
 ing for its discontinuance by any 
 incidental inconvenience which in- 
 dividuals or corporations may suffer. 
 All rights are held subject to the 
 police power of the state. The court 
 said, that they did not mean to hold 
 that property actually in existence, 
 in which the right of the owner had 
 become vested, could be taken for 
 the public good without just com- 
 pensation; but that they did hold, 
 in accordance with Bartemeyer v. 
 Iowa, 18 Wall. 129, that as a measure 
 of public regulation, a state law pro- 
 hibiting the manufacture and sale of 
 intoxicating liquors is not repugnant 
 to the constitution (the charter of 
 the corporation in this case was sub- 
 ject to alteration and repeal). Beer 
 Co. v. Massachusetts, 97 U. S. 25. 
 See also Mugler v. Kansas, 123 U. S. 
 623; Kidd v. Pearson, 128 U. S. 1. 
 The appropriate regulation of the 
 use of property is not a " taking 1 ' of 
 property within the meaning of the 
 Federal constitution. Railroad Co. 
 o. Richmond, 96 U. S. 521. The 
 charter of a fertilizing company, or- 
 ganized to make dead animals into 
 manure, is a sufficient license until 
 revoked. But it cannot be regarded 
 as a contract guarantying exemption 
 from the exercise of the police power 
 of the state, however serious the 
 nuisance may become by reason of 
 
 473
 
 § 476a.] THE LAW OF PRIVATE CORPORATION'S. [CHAP. VIII. 
 
 § 47G«. Munn v. Illinois 1 is the leading case on the power of 
 the state to regulate charges for the use of property devoted 
 Elevator t° a public use. It decided that the legislature 
 road Rail " C0lH( l regulate the charges for storing grain de- 
 charges, manded by the owners of grain elevators in large 
 cities. Similar considerations arise with regard to the right of 
 legislatures to limit tolls charged by railroad companies. 
 
 " Railroad companies are carriers for hire. They are incor- 
 porated and given extraordinary powers in order that they 
 may the better serve the public in that capacity. They are, 
 therefore, engaged in a public employment affecting the public 
 interest, and (under the decision in Munn v. Illinois) subject 
 to legislative control as to their rates of fare and freight, un- 
 less protected by their charters. . . . This company in the 
 transaction of its business has the same rights, and is subject 
 to the same control as private individuals under the same cir- 
 cumstances. It must carry when called upon to do so, and 
 can charge only a reasonable rate for the carriage. In the 
 absence of any legislative regulation upon the subject, the 
 courts must decide for it, as they do for private persons, 
 when controversies arise, what is reasonable. But when the 
 legislature steps in, and prescribes a maximum of charge, it 
 operates upon this corporation the same as it does upon indi- 
 viduals engaged in a similar business. It was within the 
 
 the growth of population. Fertiliz- 
 ing Co. ». Hyde Park, 97 U. S. 
 659. 
 
 The legal tender acts are constitu- 
 tional, whether applied to contracts 
 made before or after their passage. 
 Legal Tender Cases, 12 Wall. 457, 
 overruling Hepburn v. Griswold, 8 
 Wall. 603; Chase, C. J., and Clifford, 
 Field, and Nelson, JJ., dissenting. 
 Giving the opinion of the majority 
 of the court, Strong, J., said: "As in 
 a state of civil society property of a 
 citizen or subject is ownership sub- 
 ject to the lawful demands of the 
 sovereign, so contracts must be un- 
 derstood as made in reference to the 
 possible exercise of the rightful au- 
 thority of the government, and no 
 
 474 
 
 obligation of a contract can extend 
 to the defeat of the legitimate gov- 
 ernment authority." 12 Wall. 551. 
 And see the constitutionality of 
 these acts reaffirmed (Field, J., only, 
 dissenting) in Legal Tender Case, 110 
 U. S. 421. 
 
 1 94 U. S. 113. Affd Budd v. New 
 York, 143 U. S. 517. Brass v. Stoeser, 
 153 U. S. 391. Munn v. Illinois is 
 criticized at length in State ex rel. 
 Star Pub. Co. v. Associated Press, 
 159 Mo. 410, holding that the gather- 
 ing of news is not such a public em- 
 ployment that the court could com- 
 pel it to render service to one with 
 whom it declines to contract. 
 Contra, Inter-Ocean Co. v. Associ- 
 ated Press, 184 111. 438.
 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 476A. 
 
 power of the company to call upon the legislature to fix per- 
 manently this limit, and make it a part of the charter ; and, 
 if it was refused, to abstain from building the road and estab- 
 lishing the contemplated business. If that had been done, 
 the charter might have presented a contract against future 
 legislative interference. But it was not ; and the company 
 invested its capital, relying upon the good faith of the people 
 and the wisdom and impartiality of legislators for protection 
 against wrong under the form of legislative regulation." l 
 
 § 476 b. The Federal Supreme Court has recently held that 
 when legislation establishes a tariff of rates so unreasonable as 
 practically to destroy the value of the property of companies 
 engaged in the carrying business, courts may treat the question 
 as a judicial one, and may hold such acts to be in conflict with 
 the Federal constitution, as depriving the companies of their 
 property without due process of law, and as depriving them of 
 the equal protection of the laws. 2 Moreover, when power has 
 
 1 Chicago, etc., R. R. Co. v. Iowa, 94 
 U. S. 155, 161, 162; opinion of court 
 per Waite, C. J. These remarks are 
 authoritative. Accord, Peik v. Chi- 
 cago, etc., Ry. Co., 94 U. S. 164; Chi- 
 cago, etc., R. R. Co. v. Ackley, 94 U. 
 S. 179; Ruggles v. State of Illinois, 
 108 U. S. 526; Dow ». Beidelman, 125 
 U. S. 680; Chicago, etc., Ry. Co. u. 
 Wellman, 143 U. S. 339; Blake v. 
 Winona, etc., R. R. Co., 19 Minn. 
 418; aff'd sub nom. Winona, etc., 
 R. R. Co. v. Blake, 94 U. S. 180; Illi- 
 nois Cent. R. R. Co. v. People, 95 111. 
 313; City of Indianapolis v. Navin, 
 151 Ind. 139. Cf. Reagan v. L. & T. 
 Co., 154 U. S. 362. In the absence 
 of legislation by Congress, the power 
 of the state to regulate charges within 
 its borders extends to railroads in- 
 corporated by the United States, 
 Smyth v. Ames, 169 U. S. 466. A 
 license tax upon grain elevators situ- 
 ated along the railroads was sus- 
 tained in Cargill Co. v. Minnesota, 
 180 U. S. 452. And the state may 
 attach a penalty for taking more tolls 
 
 than allowed by statute. State of 
 Minn. v. Winona, etc., R. R. Co., 19 
 Minn. 434; Mobile & M. Ry. Co. v. 
 Steiuer, 61 Ala. 559. Compare Chi- 
 ago & A. R. R. Co. v. People, 67 111. 
 11; Wabash, St. L. & P. Ry. Co. v. 
 People, 105 111. 236. But such a 
 penalty cannot constitutionally be at- 
 tached to past acts and omissions. 
 Wilson v. Ohio, etc., Ry. Co., 64 111. 
 542. A statute establishing a com- 
 mission to regulate railroad charges, 
 and making its decisions final and 
 giving the railroad companies no op- 
 portunity for a judicial hearing was 
 held to be unconstitutional in Chi- 
 cago, etc., Ry. Co. v. Minnesota, 134 
 U. S. 418. 
 
 2 Railway Co. v. Gill, 156 U. S. 649; 
 Covington, etc., T. Co. v. Sandford, 
 164 U. S. 578; Smyth v. Ames, 169 
 U. S. 466, holding that the reason- 
 ableness of the rates must be deter- 
 mined without reference to interstate 
 business. The reasonableness of the 
 charges is to be determined by the 
 fair value of the property of the cor- 
 
 475
 
 § 476/'. J THE LAW OP PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 been expressly given a railroad company to take tolls in its dis- 
 cretion, without any legislative reservation, the state cannot 
 regulate its tolls and charges, as that would impair the obliga- 
 tion of the contract between the corporation and the state ; and 
 the police power does not extend so far as to impair or destroy 
 a franchise or a power essential to its exercise. 1 But "grants 
 of immunity from legitimate governmental control are never to 
 be presumed. On the contrary, the presumptions are all the 
 other way, and unless an exemption is clearly established the 
 legislature is free to act on all subjects within its general juris- 
 diction, as the public interest may seem to require." 2 Accord- 
 ingly, only w T hen the terms are clear and express will the leg- 
 islature be held to have granted away its rights to regulate 
 tolls. 3 Thus, an amendment in a charter gave the directors of 
 a railroad company power to establish rates of toll as they 
 should by their by-laws determine, but provided that their by- 
 laws should not be repugnant to the laws of the state. It was 
 held that the amendment did not release the company from 
 restrictions upon rates of toll contained in the laws of the state. 4 
 In this case in a concurring opinion, Harlan, J., said, after re- 
 
 poration. A railroad cannot issue 
 stock and bonds far in excess of its 
 value, and then impose upon the 
 public the burden of producing a 
 profit thereon. Smyth v. Ames, 
 (supra). See Chicago, M. & St. P. 
 Ry. Co. ». Tompkins, 176 U. S. 167; 
 L. & N. Ry. Co. v. K'y, 183 U. S. 503; 
 Steenerson v. Gt. Northern Ry. Co., 
 69 Minn. 353. A statute requiring a 
 railroad to issue mileage books at 
 certain rates is invalid. Lake Shore 
 & M. S. Ry. Co. v. Smith, 173 U. S. 
 684, followed Beardsley v. N. Y., L. 
 E. & W. Ry. Co., 162 N. Y. 230; cf. 
 Purdy v. Erie R. R. Co., 162 N. Y. 42. 
 And a statute so framed as to apply 
 to only one company is invalid. 
 Cotting v. Kansas City Stock Yards 
 Co. et al., 183 U. S. 79. 
 
 1 Phila., W. & B. R. R. Co. v. Bow- 
 ers, 4 Houst. (Del.) 506; Attorney- 
 Gen, i'. Railroad Cos., 35 Wis. 425; 
 
 476 
 
 Sloan v. Pacific R. R. Co., 61 Mo. 24; 
 Iron R. R. Co. v. Lawrence Furnace 
 Co., 29 O. St. 208; Pingree v. Mich. 
 C. R'y Co., 118 Mich. 314; see Pingry 
 v. Washburn, 1 Aiken (Vt.), 264; 
 semble contra, Illinois Central R. R. 
 Co. v. People, 95 111. 313. 
 
 2 Ruggles v. State of Illinois, 108 
 U. S. 526, 531. 
 
 3 Railroad ComVs Cases, 116 U. S. 
 307; Georgia Bkg. Co. v. Smith, 128 
 U. S. 174; Illinois Cent. R. R. Co. v. 
 People, 95 111. 313; Georgia R. R. v. 
 Smith, 70 Ga. 694; Shields v. Ohio, 
 95 U. S. 319; Winchester, etc., T. R. 
 Co. v. Croxton, 98 Ky. 739. Com- 
 pare Los Angeles v. Los Angeles City 
 Water Co., 177 U. S. 558; Freeport 
 Water Co. v. Freeport City, 180 U. 
 S. 587; Detroit v. Detroit Citizens' 
 St. Ry. Co., 184 U. S. 368. 
 
 4 Ruggles v. State of Illinois, 108 
 U. S. 526.
 
 CHAP. Vni.] CORPORATION AND STATE. [§ 477. 
 
 viewing the cases on the subject, that the cases established these 
 principles : " 1. That the charter of a railroad corporation is a 
 contract within the meaning of the contract clause in the Fed- 
 eral constitution. 2. That such corporation may be protected 
 by its charter against absolute legislative control in the matter 
 of rates for the carriage of passengers and freight. 3. That 
 when the charter is granted subject to such regulations as the 
 legislature from time to time may provide, or subject to the 
 authority of the legislature to alter or repeal it, in either of such 
 cases the legislature has the same power over rates or tolls that 
 it had when the charter was granted. 4. In the absence of 
 statutory regulations upon the subject, it is necessarily implied 
 from the occupation of a railroad corporation that it shall exact 
 only reasonable compensation for carriage." 1 
 
 § 477. Another power necessary to the existence of the 
 state, which, while it may perhaps be regarded as 
 incidental to the police power, is important enough Jower** 1118 
 for detailed discussion, is the power to tax, that is 
 to take the property of individuals for a public use, 2 without 
 making compensation. 3 Perplexing questions arise in the con- 
 struction of statutes imposing taxes on corporate property, 
 because of the equivocal use of such phrases as " capital stock," 
 " shares of stock," " stock," " franchises," " earnings," 4 etc. 
 Yery likely no one has a clear understanding of all these 
 phrases. At all events their meaning, as they are used in tax 
 statutes, is so ambiguous that it can only be determined from 
 the context, and accordingly a decision construing any of these 
 terms is apt to be of doubtful application in any other case 
 than that in which it was rendered. 
 
 Said Chief Justice Waite, giving the opinion of the Federal 
 Supreme Court in Tennessee v. Whitworth : 5 "In corporations 
 four elements of taxable value are sometimes found : 1, fran- 
 chises ; 2, capital stock in the hands of the corporation ; 3, cor- 
 
 1 108 U. S. 537. 
 
 2 There can be no lawful tax which 
 is not levied for a public purpose. 
 Loan Association v. Topeka, 20 Wall. 
 655; Parkersburg v. Brown, 106 U. 
 S. 487. 
 
 3 See Gilman v. City of Sheboygan, 
 2 Black, 510; and § 469a. 
 
 4 As to earnings and profits, see 
 § 565. Also Memphis and C. R. R. 
 Co. v. United States, 108 U. S. 228. 
 
 s 117 U. S. 129. 
 
 477
 
 § 477a.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 porate property; 1 and 4, shares of the capital stock in the 
 hands of the individual stockholders. Each of these is, under 
 some circumstances, an appropriate subject of taxation ; and 
 it is no doubt within the power of a state, when not restrained 
 by constitutional limitations, to assess taxes upon them in a 
 way to subject the corporation or the stockholders to double 
 taxation. Double taxation is, however, never to be presumed." 2 
 § 477rt. A construction of tax laws that will impose double 
 taxation is not to be adopted unless required by the 
 taxation. express words of the statute or by necessary impli- 
 cation. 3 The franchise of a corporation is plainly 
 distinct from its capital or property ; consequently, a tax on 
 the franchise coupled with a tax on the capital or property of 
 a corporation is not double taxation. 4 And the franchise of a 
 railroad company, for instance, may be valued for taxation 
 
 1 A tax upon the capital stock of 
 a company is a tax upon its property 
 and assets. Commonwealth v. Stan- 
 dard Oil Co., 101 Pa. St. 119; Fox's 
 Appeal, 112 Pa. St. 337; Com. v. R. 
 R. Co., 188 Pa. St. 169. Cf. People 
 v. Barker, 146 N. Y. 304; Hancock, 
 Comp. v. Singer Mfg. Co., 62 N. J. L. 
 289. There is no double taxation 
 where a corporation is assessed on 
 its tangible property, and also on the 
 value of its capital stock in excess 
 of the value of its tangible property. 
 Porter v. Rockford, etc., R. R. Co., 
 76 111. 561 ; Chicago, B. & Q. R. R. 
 Co. v. Siders, 88 111. 320. 
 
 2 See Commissioners v. Tobacco 
 Co., 116 N. C. 441; Commonwealth 
 v. Gas Co., 162 Pa. St. 603. For the 
 purposes of taxation, property of a 
 corporation may consist of three dis- 
 tinct things — its capital stock, its 
 surplus, its franchise; but these 
 three tilings, several in the owner- 
 ship of the company, are united in 
 the ownership of the shareholders. 
 Under the N. Y. Statute of 1857 the 
 "capital stock of every company" 
 shall be assessed at its actual value. 
 
 478 
 
 This value is not to be ascertained 
 by multiplying the nominal capital 
 by the market price of the shares, 
 and then deducting the value of its 
 non-taxable property. People v. 
 Coleman, 126 N. Y. 433. 
 
 3 Salem Iron Factory v. Danvers, 10 
 Mass. 514; Amesbury Woolen, etc., 
 Co. v. Amesbury, 17 Mass. 461; Bank 
 of Georgia v. Savannah, Dudley ( Ga. ), 
 130; Iron City Bk. v. Pittsburg, 37 
 Pa. St. 340; Light & Heat Co. v. Elk 
 County, 191 Pa. St. 465; Cooley on 
 Taxation, 2d ed. 227. 
 
 4 Carbon Iron Co. v. Carbon Co., 
 39 Pa. St. 251; Lackawanna Iron, 
 etc., Co. v. County of Luzerne, 42 
 Pa. St. 424; Delaware R. R. Tax, 18 
 Wall. 206; Commonwealth v. Lowell 
 Gas L. Co., 12 Allen (Mass.), 75; 
 Commonwealth v. Hamilton Mfg. 
 Co., 12 Allen (Mass.), 298; Monroe 
 Sav. Bk. v. Rochester, 35 N. Y. 365; 
 Spring Valley Water Wks. v. Schot- 
 tler, 62 Cal. 69. But cf. Common- 
 wealth v. Railroad, 165 Pa. St. 44. 
 See, also, Pheuix Carpet Co. v. State, 
 118 Ala. 143; R. R. v. Harris, 99 
 Tenn. 684.
 
 chap, vni.] 
 
 CORPORATION AND STATE. 
 
 [§ 477a. 
 
 separately from its property. 1 Further, the capital stock of a 
 corporation is distinct from the shares of its capital stock, 
 which represent or constitute the legal interest of the share- 
 holders in the corporate property; 2 consequently, both the 
 capital stock and the shares thereof in the hands of share- 
 holders may be taxed, and still there be no double taxation. 3 
 As Justice Nelson said, giving the opinion of the Federal 
 Supreme Court in Tan Allen v. Assessors : " The tax on shares 
 is not a tax on the capital of the bank. The corporation is 
 the legal owner of all the property of the bank. . . . The 
 interest of the shareholder entitles him to participate in the 
 net profits earned by the bank in the employment of its capital, 
 during the existence of its charter, in proportion to the number 
 of his shares ; and upon its dissolution or termination, to his 
 proportion of that which may remain of the corporation after 
 the payment of its debts. This is a distinct independent inter- 
 est or property held by the shareholder, like any other property 
 that may belong to him." 4 
 
 1 Wilmington, C. and A. Railroad 
 Company v. Board of Commissioners, 
 72 N. C. 10. For cases on the valua- 
 tion of capital stock and franchises, 
 see State Railroad Tax Cases, 92 U. 
 S. 575; Railroad Co. v. Vance, 96 U. 
 S. 450; Railway Co. v. Backus, 154 
 U. S. 421; Adams Exp. Co. v. Ohio, 
 166 U. S. 185; Boston & L. R. R. Co. v. 
 Commonwealth, 100 Mass. 399; Peo- 
 ple v. Equitable Trust Co., 96 N. Y. 
 387; People v. Coleman, 107 N. Y. 
 541. 
 
 When the statute requires the capi- 
 tal stock of a corporation to be as- 
 sessed at its "actual value," it 
 should be estimated above or below 
 par, according to the fact. Oswego 
 Starch Factory v. Dolloway, 21 N. Y. 
 449. 
 
 2 Farrington v. Tennessee, 95 U". S. 
 679, 686; New Orleans v. Houston, 
 119 U. S. 265; State Bk. o. City of 
 Richmond, 79 Va. 113; Porter v. 
 Rockford, etc., R, R. Co., 76 111. 561; 
 Greenleaf v. Board of Review, 184 
 
 111. 226; State v. Bank, 95 Tenn. 222; 
 Commonwealth v. Building Co., 90 
 Va. 790; Allen v. Com., 98 Va. 80; 
 Jefferson Co. Sav. B'k v. Hewitt, 
 112 Ala. 546. A tax upon the undis- 
 tributed surplus of a railroad com- 
 pany is not a tax upon a stock divi- 
 dend thereafter declared, and a mu- 
 nicipal corporation holding stock in 
 such railroad is not entitled to re- 
 cover back a proportion of the tax 
 so paid. Logan County v. United 
 States, 169 U. S. 255. 
 
 3 Cases in last note. But see Che- 
 shire County Telephone Co. v. State, 
 63 N. H. 167. A statute requiring 
 the corporation to pay a tax on the 
 shares of its stock irrespective of the 
 fact whether there are dividends or 
 not, is substantially a tax on the 
 corporation. New Orleaus v. Hous- 
 ton, 119 U. S. 265. 
 
 4 3 Wall. 573, 583. See §§ 483, 484. 
 For purposes of taxation the situs of 
 shares is at the residence of the 
 owner, unless otherwise declared by 
 
 479
 
 § 479.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 §47S. The Federal Congress, in the exercise of powers 
 conferred on it by the constitution, may tax the 
 Congress. property of corporations : " The Congress shall have 
 power to lay and collect taxes, duties, imposts, and 
 excises, to pay the debts and provide for the common defence 
 and general welfare of the United States." ' But the power 
 of Congress to tax is restricted to the scope of the purposes 
 thus specified, and also by the following provisions : — 
 
 "All duties, imposts, and excises shall be uniform through- 
 out the United States. 2 
 
 "No capitation or other direct tax shall be laid, unless in 
 proportion to the census or enumeration hereinbefore directed 
 to be taken. 
 
 " No tax or duty shall be laid on articles exported from any 
 state. 
 
 " No preference shall be given by any regulation of com- 
 merce or revenue to the ports of one state over those of an- 
 other ; nor shall vessels bound to or from one state be obliged 
 to enter, clear, or pay duties in another." 3 
 
 § 479. Unlike the taxing power of Congress, the power of 
 
 a state to tax the property of corporations is not re- 
 
 u!e V states. stricted in the scope of its purposes and objects by 
 
 Restric- the Federal constitution ; nor do the specific re- 
 
 tions. ' l 
 
 strictions above referred to, on the taxing power of 
 Congress, apply to the states. But, on the other hand, the 
 
 statute. Ogdeu ». City of St. Joseph, 
 90 Mo. 522; Mercantile Trust Co. v. 
 Mellon, 19G Pa. St. 176. But the 
 statute may fix it at the place where 
 the corporation is located. Street 
 Railroad Company v. Morrow, 87 
 Tenn. 406. 
 
 1 Cons., sec. 8, art. I. 
 
 The ninth section of the act of 
 Congress of July 13, 180G, providing 
 that every national hank, state bank, 
 or state banking association shall 
 pay a tax of ten per cent, on the 
 amount of the notes of any state 
 bank or state banking association 
 paid out by them after August 1, 
 1866, does not lay a direct tax with- 
 in the meaning of the constitution, 
 
 480 
 
 and is constitutional. Congress, 
 having undertaken in the exercise of 
 undisputed constitutional power to 
 provide a currency for the whole 
 country, may constitutionally secure 
 the benefit of it to the people by 
 appropriate legislation, and to that 
 end may restrain the circulation of 
 any notes not issued under its au- 
 thority. Veazie Bank v. Fenno, 8 
 AVall. 533; see National Bank v. 
 United States, 101 U. S. 1. 
 
 2 Cons., sec. 8, art. I. 
 
 3 Cons., sec. 9, art. I. Direct 
 taxes within the meaning of the 
 constitution are only capitation 
 taxes and taxes on land. Springer 
 v. United States, 102 U. S. 586.
 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 479. 
 
 power of a state to tax is subject to restrictions to which the 
 taxing power of Congress is not ; and, in the first place, is lim- 
 ited by the territorial limitations to the political jurisdiction 
 of the state. 1 Thus, a state cannot tax the interest on bonds 
 held by a non-resident, secured by a railroad mortgage, al- 
 though the railroad lies within the limits of the state ; for 
 such bonds are property in the possession of their owners, and 
 when held by non-residents, are property beyond the jurisdic- 
 tion of the state, and, consequently, not subject to her tax 
 laws, which can have no extra-territorial operation. 2 Neither 
 can a state tax the entire track and equipment, or the total 
 capital stock of a railroad company whose track lies partly 
 without the boundaries of the state; but may tax only the 
 portion of the road within its limits, or such proportion of the 
 total capital stock as represents that portion. 3 
 
 i Commonwealth v. Standard Oil 
 Co., 107 Pa. St. 119; cf. State v. 
 Stephens, 146 Mo. 622. 
 
 2 Case of the State Tax on Foreign 
 Held Bonds, 15 Wall. 300. It makes 
 no difference that the mortgaged 
 property lies within the state, for a 
 debt has no situs apart from the 
 domicile of the creditor. lb. See 
 Kirtland v. Hotchkiss, 100 U. S. 491; 
 Bonaparte v. Appeal Tax Court, 21 
 Am. Law Reg., N. S. 290 (U. S. 
 Supr. Ct.); Railroad Co. v. Jackson, 
 7 Wall. 262; Commonwealth v. Ches- 
 apeake, etc., R. R. Co., 27 Gratt. 
 (Va.) 344; Valle v. Zeigler, 84 Mo. 
 214. It has, however, been recently 
 held, that bonds belonging to a non- 
 resident decedent, issued by a for- 
 eign corporation, but which are 
 actually in a box in the state, are 
 subject to taxation by the Transfer 
 Tax Act, because physically present 
 in the state. Whiting, in re, 150 N. 
 Y. 27. On the other hand, bonds of 
 a domestic corporation, belonging to 
 non- resident decedent, and actually 
 outside of the state, and passing by 
 will to non-residents, are not sub- 
 ject to this tax. Bronson. in re, 150 
 
 31 
 
 N. Y. 1. Personal property other 
 than a debt may have a situs apart 
 from the domicile of the owner, at 
 least for the purposes of taxation. 
 Thus, the legislature of a state may, 
 for the purpose of taxation, locate 
 shares of stock in a national bank at 
 the bank's place of business, though 
 the shareholders reside elsewhere. 
 Tappan v. Merchants 1 Nat. Bk., 19 
 Wall. 491; see, also, North Car. R. R. 
 Co. v. Commissioners, 91 N. C. 454; 
 St. Albans v. Nat. Car Co., 57 Vt. 68; 
 Crossley v. East Orange, 62 N. J. L. 
 583; compare Miller v. U. S., 11 
 Wall. 269. However, shares may be 
 taxed at the residence of the owner 
 also. Thus, a city may tax its citi- 
 zens on shares owned by them in the 
 stock of a foreign corporation; and 
 it may do this, although the state 
 incorporating the corporation also 
 taxes the shares. Seward v. City 
 of RisiDg Sun, 79 Ind. 351 ; see 
 Cm'wealth v. Gloucester Ferry Co., 
 98 Pa. St. 105; McKeen v. North'ton 
 Co., 49 Pa. St. 519; Worth v. Com- 
 missioners, 90 N. C. 409 ; State v. 
 Kidd, 125 Ala. 413. 
 3 State Treasurer v. Aud'r-Gen'l, 
 
 481
 
 § 479.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 A state may lay a tax on the " corporate franchise or busi- 
 ness" of a foreign corporation doing business within the state j 1 
 and when a tax is imposed on the " business " of a foreign 
 corporation doing business in the state, the court will not pre- 
 sume that the tax is imposed on the business done outside the 
 state (which might be unconstitutional), although the tax is 
 computed on the capital stock of the corporation. 2 A foreign 
 corporation, by doing business within a state, does not bring 
 its capital into the state constructively, so as to subject to taxa- 
 tion its property outside of the state. 3 But it is held that a 
 state can tax the entire capital stock of a corporation formed 
 
 46 Mich. 224. See Ohio & M. R. R. 
 Co. v. Weber, 90 111. 443; Pullman's 
 Car Co. v. Pennsylvania, 141 U. S. 
 18; Massachusetts v. West. Un. Tel. 
 Co., 141 U. S. 40; West. Un. Tel. 
 Co. d. Taggart, 163 U. S. 1 ; cf. Com. 
 v. Old Dom. Stm. Co., 128 N. C. 558. 
 Where a corporation brings part of 
 its movable property (railway cars) 
 into a state, and there uses it, a 
 state may levy a tax upon the aver- 
 age amount of such property, al- 
 though its identity is constantly 
 changing, and although it is used 
 in interstate commerce. American 
 Ref. Transit Co. v. Hall, 174 U. S. 
 70; Union Refrigerator Transit Co. 
 v. Lynch, 177 U. S. 149. But the 
 United States may tax the interest 
 payable on railroad bonds held by 
 alien non-resident owners; and may 
 compel the corporation to withhold 
 such tax from the bondholders. U. 
 S. v. Erie Ry. Co., 106 U. S. 327. 
 But it is held that in assessing the 
 value of stock for the purposes of 
 state taxation, it is not illegal to in- 
 clude real estate owned by the cor- 
 poration, but situated outside of the 
 state. Amer. Coal Co. v. County 
 Commissioners, 59 Md. 185. A stat- 
 ute provided that the personal prop- 
 erty of corporations should be taxed 
 in the town " in which it has its 
 principal place of business or exer- 
 
 482 
 
 cises its corporate powers." Held, 
 that the principal place of business, 
 within the meaning of this statute, 
 is the place where the governing 
 power of the corporation is exer- 
 cised. Middletown Ferry Co. v. 
 Middletown, 40 Conn. 65. Not where 
 the principal labor of the employes 
 of the corporation is done. lb. Com- 
 pare Oswego Starch Factory v. Dol- 
 loway, 21 N. Y. 449. 
 
 1 Horn Silver Mng. Co. v. New York, 
 143 U. S. 305; Com'l Elec. L. & P. 
 Co. v. Judson, 21 Wash. 49; Edison 
 Elec. Co. v. Spokane Co., 22 Wash. 
 168; but see People v. Equitable 
 Trust Co., 96 N. Y. 387. As to when 
 a corporation may be said to be " do- 
 ing business," see State v. Auniston 
 Rolling Mills, 125 Ala. 121. 
 
 2 People v. Equitable Trust Co., 96 
 N. Y. 387; see Maine v. Grand Trunk 
 Ry. Co., 142 U. S. 217. A railroad 
 company is "doing business" in a 
 state where part of its road is situ- 
 ated. Erie Ry. Co. v. Pennsylvania, 
 21 Wall. 492. Compare People v. 
 Horn Silver Mining Co., 105 N. Y. 76. 
 
 3 Commonwealth v. Standard Oil 
 Co., 101 Pa. St. 119. A corporation 
 will be regarded as " doing business" 
 in a state where its officers have their 
 offices, where its directors hold their 
 meetings, where its dividends are de- 
 clared and paid, and large portions 
 
 :
 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 480. 
 
 by the consolidation of corporations created by it and by an- 
 other state. 1 
 
 § 480. The power of a state to tax is expressly restricted by 
 section 10, article I. of the Federal constitution : viz. : " No 
 state shall, without the consent of the Congress, lay any imposts 
 or duties on imports or exports, except what may be absolutely 
 necessary for executing its inspection laws, 2 .... nor lay any 
 duty on tonnage." 3 And the taxing power of a state is also 
 restricted by the clause in Amendment XIV. to the Federal 
 constitution, which forbids any state to deny to any person 
 within its jurisdiction the equal protection of the laws. 1 Thus, 
 when a state allows individuals to deduct the amount of the 
 mortgages on their property in estimating its tax valuation, it 
 is unconstitutional for the state to provide that in assessing the 
 property of railroad companies the amount of the mortgages 
 therein shall not be deducted. 5 And further, to make no pro- 
 vision for giving the company notice of the assessment, and to 
 allow it no chance to be heard in respect thereof, deprive it of 
 its property without due process of law. 6 
 
 On the other hand, as corporations are held not to be citi- 
 zens within the meaning of the clause in the constitution 
 which secures to the citizens of each state the privileges and 
 immunities of the citizens in the several states, 7 a state may 
 
 of its property are sold from time to 
 time. It is not essential that all its 
 business be clone in the state. Peo- 
 ple v. Horn Silver Mining Co., 105 
 N. Y. 76. 
 
 i Keokuk Bdg. Co. v. People, 161 
 111. 132; ace. Ashley v. Ryan, 153 U. 
 S. 437. 
 
 2 See Brown v. Maryland, 12 Wheat. 
 419; Turner o. Maryland, 107 IT. S. 
 38; People v. Compagnie Generale 
 Transatlantique, 107 U. S. 59 ; Wood- 
 ruff v. Parham, 8 Wall. 123; Pace ». 
 Burgess, 92 U. S. 372; Guy v. Balti- 
 more, 100 TJ. S. 434; Tiernan v. 
 Rinker, 102 TJ. S. 123; Higgins ». 
 Three Hundred Casks of Lime, 130 
 Mass. 1. 
 
 3 See Peete v. Morgan, 19 Wall. 581; 
 Cannon v. New Orleans, 20 Wall. 577; 
 
 Inman Steamship Co. v. Tinker, 94 
 TJ. S. 238; State Tonnage Taxes, 12 
 Wall. 204. 
 
 4 This provision applies to and 
 protects corporations. Santa Clara 
 County o. Southern Pacific R. R. Co., 
 118 TJ. S. 394; Hammond Beef Co. v. 
 Best, 91 Me. 431. But does not pro- 
 tect foreign corporations until they 
 have entered the state. See § 400. 
 
 5 Railroad Tax Cases, 13 Fed. Rep. 
 722. See People v. Fire Ass'n, 92 N. 
 Y. 311. Contra, Central Pac. R. R. 
 Co. v. State Board, 60 Cal. 35; San 
 Francisco, etc., R. R. Co. v. State 
 Board, 60 Cal. 12. 
 
 6 lb. See People v. Supervisors, 
 70 N. Y. 228; post, § 492. 
 
 7 Cons., sec. 2, ar. IV.; Pyrolusite 
 Manganese Co. v. Ward, 73 Ga. 491; 
 
 483
 
 § 481.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 ordinarily discriminate in its taxation between foreign and 
 domestic corporations, 1 and may lay additional taxes on a 
 foreign corporation as a condition of its being allowed to trans- 
 act business within the limits of the state. 2 
 
 § 481. But the most important of the restrictions in the 
 Federal constitution on the power of the states to 
 tax arise by implication from the exigencies of the 
 Federal government, and from the nature of certain 
 powers granted to Congress. Within the scope of 
 tile exigen- its constitutional powers the Federal government is 
 Federal 116 superior to the state governments. 3 And, since a 
 men" 1 power to tax the agencies and instruments of a gov- 
 
 ernment involves a power to trammel and destroy 
 them, it is evident that any power in the state to tax the agen- 
 
 Restric- 
 tions on the 
 power of 
 the states 
 to tax aris- 
 
 Anglo-American Prov. Co. v. West 
 India Iinp't Co., 169 N. Y. 506; 
 Hawley v. Hurd, 72 Vt. 122. 
 
 1 Ducat v. Chicago, 48 111. 172; 
 Phoenix Ins. Co. v. Commonwealth, 
 5 Bush (Ky.), 68; Tatem v. Wright, 
 23 N. J. L. 429; see Commonwealth 
 v. Gloucester Ferry Co., 98 Pa. St. 
 105, and compare Commonwealth v. 
 Texas and Pacific R. R. Co., 98 Pa. 
 St. 90. It is not entirely clear to the 
 writer that these decisions are in 
 accord with the Federal Circuit 
 Court decision of Railroad Tax 
 Cases, supra. With that decision, 
 however, the view of the New York 
 Court of Appeals, in People v. Fire 
 Ass'n, 92 N. Y. 311, is perfectly 
 reconcilable; i. e., that the Amend- 
 ment XIV., which prohibits states 
 from denying to any person the 
 equal protection of the laws, does 
 not apply to conditions imposed on 
 foreign corporations on entering the 
 state, although it may afford them 
 security after they have complied 
 with such conditions. See § 400. 
 At all events, corporations are " per- 
 sons " within the meaning of the 
 clause in the Fourteenth Amend- 
 ment to the Federal constitution, 
 
 484 
 
 | forbidding states to deprive any per- 
 son of property without due process 
 of law, or deny to any person the 
 equal protection of its laws. Min- 
 neapolis Ry. Co. v. Beckwith, 129 
 U. S. 26; Pembina Mfg. Co. v. Penn- 
 sylvania, 125 U. S. 181; Santa Clara 
 County v. Southern Pac. R. R., 118 
 U. S. 394. 
 
 2 People v. Fire Ass'n, 92 N. Y. 
 311; Phoenix Ins. Co. o. Welch, 29 
 Kans. 672; State ». Western Un. Tel. 
 Co., 73 Me. 518; Western Un. Tel. 
 Co. v. Mayer, 28 Ohio St. 521; but see 
 Clark v. Port of Mobile, 10 Ins. Law 
 Journal, 357; Scottish Union, etc., 
 lus. Co. v. Herriot, 109 Iowa, 606; 
 except where such taxation would 
 conflict with the exercise of powers 
 granted to Congress by the Federal 
 constitution, see § 486. The state 
 may levy a franchise tax upon a cor- 
 poration doing business in that state 
 from which are exempted corpora- 
 tions foreign and domestic wholly 
 engaged in manufacture in that state. 
 New York State v. Roberts, 171 U. S. 
 658. See, also, §§ 379 et seq., on 
 the territorial extent of corporate 
 powers. 
 
 3 See ante, § 4696. 

 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ -±82. 
 
 cies and instruments of the national government would be 
 incompatible with that government's existence. Since the 
 greatest of constitutional decisions, McCulloch v. Maryland, 1 
 these propositions have not been questioned. 
 
 § 482. The exemption of Federal agencies from state taxa- 
 tion is held to depend, not upon the nature of the 
 agencies, nor upon the manner in which they are j^f^i 
 constituted, nor even upon the fact that they are 
 such agencies. Does the tax, in truth, impair their power to 
 serve the Federal government as they were intended to serve 
 it? this is the material question. 2 Accordingly, while a state 
 tax on the operations of a Federal agency or instrument would 
 be void as a direct obstruction to the exercise of the powers of 
 the Federal government, yet if such agency or instrument be a 
 stock corporation, a state tax upon its property may be valid, 
 provided the tax leaves the corporation free efficiently to dis- 
 charge its duties to the Federal government, and in no way 
 impairs the functions of the corporation as a Federal agency. 3 
 If these propositions are correct, a fortiori the employment of 
 a corporation, originally chartered by a state, in the service of 
 the Federal government, does not exempt it from state taxa- 
 tion ; at least in the absence of legislation on the part of Con- 
 gress indicating that such exemption is deemed by Congress 
 
 1 4 Wheat. 405. Franchises granted 
 to a corporation by Congress cannot 
 be taxed by a state. California v. 
 Pacific R. R. Co., 127 U. S. 1. A state 
 cannot tax the capital stock of a cor- 
 poration issued for patent rights 
 granted by the United States. Com- 
 monwealth v. Philadelphia County, 
 157 Pa. St. 527; Peo. ex rel. Edison 
 Co. v. Assessors, 156 N. Y. 481 ; copy- 
 rights are likewise exempt from the 
 taxing power of the state. Peo. ex 
 rel. A. J. Johnson Co. v. Roberts, 159 
 N. Y. 70. 
 
 2 Railroad Co. v. Peniston, 18 
 Wall. 5. 
 
 3 Railroad Co. v. Peniston, supra; 
 Central Pac. R. R. v. California, 1G2 
 U.S. 91; Adams Exp. Co. v. Ohio, 
 165 U. S. 194; National Bk. v. Com- 
 
 monwealth, 9 Wall. 353; see Bank of 
 Commerce v. New York City, 2 
 Black, 620; Bank Tax Case, 2 Wall. 
 200; Society of Savings v. Coite, 6 
 Wall. 594; Provident Institution ». 
 Massachusetts, 6 Wall. 611; Hamil- 
 ton Co. v. Massachusetts, 6 Wall. 633. 
 A state tax on the capital stock is 
 not a tax on franchises granted by 
 the Federal government, and is valid. 
 Keokuk and Hamilton Bridge Co. v. 
 Illinois, 175 U. S. 626. It may be 
 assumed, however, inasmuch as Con- 
 gress has power to charter corpora- 
 tions only in furtherance of some 
 Federal object, that any state tax on 
 the property of corporations so char- 
 tered, in any way discriminating 
 against them, would be held uncon- 
 stitutional. 
 
 485
 
 § 483.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII 
 
 essential to the full performance on the part of the corporation 
 of its obligations to the Federal government. 1 
 
 § 483. The most numerous and important class of corpo- 
 rations incorporated by Congress are the national 
 state taxa- j^^g . wi^h are instruments designed to aid the 
 national Federal government in the administration of an 
 
 banks. ° 
 
 important branch of the public service. Being such 
 means and brought into existence for that purpose, the states 
 can exercise no control over them, nor in any way affect their 
 operations, except in so far as Congress may permit. 2 To what 
 extent national banking interests may be taxed by the states, 
 Congress has provided as follows : — 
 
 " Nothing herein shall prevent all the shares in any asso- 
 ciation from being included in the valuation of the personal 
 property of the owner or holder of such shares, in assessing 
 taxes imposed by authority of the state within which the asso- 
 ciation is located ; but the legislature of each state may deter- 
 mine and direct the manner and place of taxing all the shares 
 of national banking associations located within the state, sub- 
 ject only to the two restrictions, that the taxation shall not be 
 at a greater rate than is assessed upon other moneyed capital 
 in the hands of individual citizens of such state, and that the 
 shares of any national banking association owned by non- 
 residents of any state shall be taxed in the city or town where 
 the bank is located, and not elsewhere. Nothing herein shall 
 be construed to exempt the real property of associations from 
 either state, county, or municipal taxes, to the same extent, 
 according to its value, as other real property is taxed." 3 
 
 i Thompson v. Pac. R. R., 9 Wall. 
 579. 
 
 - Fanner's, etc., National Bank v. 
 Dearing, 91 U. S. 29; Pollard v. State, 
 65 Ala. 628; City of Carthage v. First 
 National Bank, 71 Mo. 508; Maguire 
 v. Board of Revenue, 71 Ala. 401; 
 Peo. v. Nat. B'k of D. O. Mills & Co., 
 123 Cal. 53; First Nat. B'k v. San 
 Francisco, 129 Cal. 96. See Linton 
 v. Childs, 109 Ga. 567, where a tax 
 upon bank presidents was held not 
 to apply to presidents of national 
 banks. 
 
 486 
 
 It is within the constitutional 
 power of Congress to establish a na- 
 tional bank in any state, and provide 
 that its sbares shall be exempt from 
 taxation by other states. Flint v. 
 Board of Aldermen, 99 Mass. 141. 
 See McCulloch v. Maryland, 4 Wheat. 
 405. 
 
 3 U. S. Rev. Stat. § 5219. See Boyer 
 v. Boyer, 113 U. S. 689. 
 
 The power of a state to tax national 
 banks comes from the act of Con- 
 gress, which must be obeyed in thor- 
 ough good faith. First National Bank 

 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 484. 
 
 § 484. With reference to these statutory provisions, it was 
 held that the New York statute, passed March 9, 1865, by 
 which it was enacted that shares in a national bank held by 
 any person or body corporate should be " included in the valu- 
 ation of the personal property of such person or body corporate 
 in the assessment of taxes in the town or ward where such bank- 
 ing association is located, and not elsewhere," but which did 
 not provide that the tax imposed should not exceed the rate 
 imposed on the shares of any of the banks organized under 
 state authority, is unwarranted and void, no tax having been 
 laid by the state on shares in the stock of state banks, though 
 there was a tax on the capital of such banks. 1 It was held, 
 however, that, within the limits of the National Banking Act, 
 a state mi^ht tax the entire interest of the shareholder in 
 national banking shares ; and that, too, without regard to the 
 fact that a part or the whole of the capital of the bank was 
 invested in Federal bonds exempted from state taxation by 
 act of Congress. Such a tax the court considered but a tax 
 on the new uses or privileges conferred by the charters of 
 national banks in respect of the bonds, and a valid condition 
 annexed to their new use. 2 If the rate of taxation by a state 
 on the shares in national banks is not greater than the rate 
 upon the moneyed capital of individuals which is subject to 
 taxation ; that is, if no greater proportion or percentage of 
 tax is levied on the valuation of such shares than is levied 
 upon other taxable moneyed capital in the hands of citizens 
 
 v. St. Joseph, 46 Mich. 526. The ter- 
 ritories possess the same power as 
 the states to tax national banks. 
 Talbott v. Silver Bow County, 139 
 U. S, 438. See, Owensboro Nat. 
 Bank o. Owensboro, 173 U. S. 664, 
 holding that a tax on the franchise 
 of a national bank is invalid. Third 
 National Bank v. Stone, 174 U. S. 432. 
 The legislature may tax the prop- 
 erty of a corporation and also tax 
 the shareholders separately on their 
 shares. Cook v. City of Burlington, 
 59 Iowa, 251. 
 
 1 Van Allen v. The Assessors, 3 
 Wall. 573. 
 
 2 Van Allen v. The Assessors, 3 
 
 Wall. 573, Chase, C. J., and Wayne 
 and Swayne, J J., dissenting. Ac- 
 cord, Bradley v. People, 4 Wall. 459; 
 Nat. Bank v. Commonwealth, 9 Wall. 
 353 ; in which last case the court held 
 that a tax might, properly speaking, 
 be a tax on shares, though it was 
 collected from the bank instead of 
 from the individual shareholders. 
 See, also, Mercantile B'k v. New 
 York, 121 U. S. 128; People v. Home 
 Ins. Co., 92 N. Y. 328; Union Bank 
 v. City of Richmond, 94 Va. 316; 
 Cleveland Trust Co. v. Lander, 62 
 Oh. St. 266; compare Philadelphia 
 Contributionship v. Commonwealth, 
 98 Pa. St. 48. 
 
 487
 
 § 484.] THF LAW OK PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 of the state, the tax conforms with the National Banking 
 Act. 1 And the state tax law will be valid unless an inten- 
 tion to discriminate against national banks or actual and ma- 
 terial discrimination against them be shown. 2 It has further 
 been held under the act of Congress of February 10, 1868, 3 per- 
 mitting the state legislatures to direct the manner of taxing 
 shares, that shares in national banks may be valued for taxa- 
 tion at an amount above their par value. 4 
 
 1 People v. The Commissioners, 4 
 Wall. 244, affirming Van Allen v. The 
 Assessors, supra. The fact that the 
 state, in the charters of two state 
 hanks, has disahled itself from tax- 
 ing them, does not prevent the state 
 from taxing shares in other state 
 banks and in national banks. Lion- 
 berger v. Rouse, 9 Wall. 468; com- 
 pare First National Bank v. Waters, 
 19 Blatclif. 242. A grant to owners 
 of a certain class of property called 
 "credits" (Ohio) of the right to 
 deduct certain debts, not granted to 
 other owners of moneyed capital 
 does not invalidate a tax on national 
 bank shares. First Nat'l B'k of Wel- 
 lington v. Chapman, 173 U. S. 205. 
 See, also, Commercial Bank v. 
 Chambers, 182 U. S. 556. 
 
 2 Davenport B'k v. Davenport, 123 
 U. S. 83; B'k of Redemption v. Boston, 
 125 U. S. 60. Unless there is an in- 
 tention to discriminate, the mere fact 
 that the national bank is not allowed 
 to deduct stock in other corporations 
 which are taxable upon their capital 
 stock in Washington, does not violate 
 §5219. Pacific Nat. B'k v. Pierce 
 County, 20 Wash. 675. Money in- 
 vested in railroad and manufactur- 
 ing enterprises which do not com- 
 pete with the banking business is 
 not within the meaning of § 5219, for- 
 bidding taxation upon shares in 
 national banks at a greater rate than 
 " upon other moneyed capital in the 
 hands <>f individual citizens of the 
 
 488 
 
 state." Aberdeen Bank v. Chelialis 
 Co., 166 U. S. 440; nor is money in- 
 vested in trust companies organized 
 under the laws of New York. Jen- 
 kins v. Neff, 163 N. Y. 320; cf. Me- 
 chanics' Nat. B'k v. Baker, Rec'r, 65 
 N. J. L. 113. 
 
 3 Ante, §5219, U. S. Rev. Stat. 
 
 4 Hepburn v. The School Directors, 
 23 Wall. 480; see People v. Commis- 
 sioners of Taxes, 94 U. S. 415; Staf- 
 ford National Bank v. Dover, 58 N. 
 II. 316. 
 
 But the provision of § 5219 of the U. 
 S. Rev. Stat., that state taxation on 
 the shares of any national banking 
 association shall not bo at a greater 
 rate than is assessed on other mon- 
 eyed capital, has reference to the 
 entire process of assessment, and in- 
 cludes the valuation of the shares as 
 well as the rate of percentage charged 
 thereon. A New York statute which 
 permits a person to deduct his just 
 debts from the valuation of all his 
 personal property, except from so 
 much thereof as consists of national 
 banking shares, taxes them at a 
 greater rate than other moneyed capi- 
 tal, and is void as to them. People v. 
 Weaver, 100 U. S. 539; Supervisors v. 
 Stanley, 105 U. S. 305; Whitbeck v. 
 Mercantile National Bank, 127 U. S. 
 193; Newport v. Mudgett, 18 Wash. 
 271. See Pelton v. National Bank, 
 101 U. S. 143; Cummings v. National 
 Bank, 101 U. S. 153. 
 
 The personal property of an insol- 

 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 485. 
 
 § 485. Of great interest are the restrictions on the power 
 of the state to tax corporations which arise from the R es tric- 
 essentially exclusive power or Congress to regulate Jgjg JJ^ 
 commerce with foreign nations and among the tion arising 
 
 -it from the 
 
 states. 1 The power of a state to authorize railroads power of 
 and other highways is unrestricted, and the dispo- to°reguia!te 
 sition of revenues from them lies in its discretion. 2 commerce. 
 A state may license and tax occupations extending beyond 
 its borders, provided it does not discriminate in favor of simi- 
 lar occupations that are carried on entirely within its borders. 3 
 But a state cannot impose a tax on the movement of persons 
 or commodities from one state to another. 4 A state tax on 
 freight transported from state to state is void, as amounting 
 to a regulation of commerce between the states ; for, whenever 
 a subject, over which a power regulative of commerce is 
 asserted, is in its nature national or interstate, it may be said to 
 require exclusive regulation by Congress ; and the transporta- 
 tion of passengers or merchandise through a state is of this 
 nature. 5 On the other hand, a state tax on the gross receipts 
 
 vent national bank in the hands of a 
 receiver is exempt from state tax- 
 ation. Rosenblatt v. Johnston, 104 
 U. S. 462. A national bank may, on 
 behalf of its shareholders, maintain 
 a suit to enjoin the collection of a 
 state tax unlawfully assessed on 
 their shares. Hills v. Exchange 
 Bank, 105 U. S. 319; Evansville 
 Bank v. Britton, 105 U. S. 322; Cum- 
 mings v. National Bank, 101 U. S. 
 153; National Albany Exchange 
 Banku. Wells, 18 Blatchf. 498; City 
 National Bank v. Padncah, 2 Flip- 
 pin, 61; Citizens Nat. Bank v. Co- 
 lumbia County, 23 Wash. 441. But 
 see § 4926, note. 
 
 1 See for the effect of these exclu- 
 sive powers of Congress in restrict- 
 ing the police power of the states, 
 ante, §§ 4746-474d. 
 
 2 Railroad Co. v. Maryland, 21 
 Wall. 456. 
 
 8 Machine Co. v. Gage, 100 U. S. 
 676; Osborne v. Mobile, 16 Wall. 
 
 479. Compare Ward v. Maryland, 
 12 Wall. 418; Erie Ry. Co. ». State, 
 31 N. J. L. 531; Jackson Mining Co. 
 v. Auditor-General, 32 Mich. 488; 
 Chicago & E. I. R. R. Co. v. State, 
 153 Ind. 134. 
 
 4 Crandall v. State of Nevada, 6 
 Wall. 35 ; Railroad Co. v. Maryland, 
 21 Wall. 456. Compare Moran v. 
 New Orleans, 112 U. S. 69; Coe v. 
 Errol, 116 U. S. 517; Pickard v. Pull- 
 man Southern Car Co., 117 U. S. 34. 
 A state cannot tax a foreign railroad 
 corporation upon its business within 
 the state when that is exclusively a 
 business of interstate commerce; it 
 cannot tax the foreign corporation 
 for the privilege of carrying on in- 
 terstate commerce within the state 
 borders. People v. Wemple, 138 N. 
 Y. 1. Compare Lehigh Valley R. R. 
 Co. v. Pennsylvania, 145 U. S. 192; 
 State v. Stephens, 146 Mo. 662. 
 
 5 Case of the State Freight Tax, 
 15 Wall. 233. But the court said 
 
 489
 
 § 485.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 of a railroad company is not such a regulation of interstate com- 
 merce as to be repugnant to the constitution, even though the 
 gross receipts are made up in part from freights received for the 
 transportation of merchandise from the state laying the tax to 
 another state, or for transportation from another state into the 
 state laying the tax ; nor is such a tax a tax on imports or 
 exports. 1 And it is further held a state may tax the vehicles 
 of commerce like other property owned by its citizens. 2 
 
 A state cannot impose a tax on commodities by reason of 
 their foreign origin ; nor in any way discriminate in its tax 
 laws against the products of other states brought within its 
 boundaries. 3 The power of Congress to regulate commerce 
 " continues until the commodity has ceased to be the subject 
 of discriminating legislation by reason of its foreign charac- 
 ter. That power protects it, even after it has entered into the 
 state, from any burden imposed by reason of its foreign ori- 
 
 that it recognized fully the power 
 of a state to tax its own internal 
 commerce, and the franchises, prop- 
 erty, and business of its own corpo- 
 rations, provided interstate trade 
 and commerce were not thereby em- 
 barrassed or restricted. lb. Com- 
 pare Passenger Cases, 7 How. 283; 
 Delaware Railroad Tax, 18 Wall. 
 206; Fargo v. Michigan, 121 U. S. 
 230; Philadelphia, etc., S. S. Co. v. 
 Pennsylvania, 122 U. S. 326. 
 
 1 State Tax on Railway Gross Re- 
 ceipts, 15 Wall. 284. See Ohio and 
 Mississippi R. R. Co. v. Weber, 96 
 111. 443; see Maine v. Grand Trunk 
 Ry. Co., 142 U. S. 217; Cumberland 
 & Pa. R. R. Co. v. State, 92 Md. 668. 
 
 Maryland granted to a railroad 
 company a franchise to build a road 
 from Baltimore to Washington, stip- 
 ulating that the company should 
 charge not more than two and a 
 half dollars per passenger, and that 
 at the end of every six months the 
 company should pay to the state 
 one-fifth of the amount received for 
 the transportation of passengers. 
 
 490 
 
 Held, that such stipulation was not 
 unconstitutional as being a restrict- 
 ion on free intercourse and traffic 
 between the states, and that it dif- 
 fered from a tax or duty on the 
 movements or operations of com- 
 merce between the states. Railroad 
 Co. v. Maryland, 21 Wall. 456; com- 
 pare Osborne v. Mobile, 16 Wall. 
 479. 
 
 2 Wiggins Ferry Co. v. East St. 
 Louis, 107 U. S. 365; compare 
 Transportation Co. v. Wheeling, 99 
 U. S. 273; Passenger Cases, opinion 
 of McLean, J., 7 How. 283, 402; 
 Commonwealth v. Gloucester Ferry 
 Co., 98 Pa. St. 10.-) ; Transit Co. v. 
 Lynch, 18 Utah, 378. The fact that 
 a bridge over a river is used for in- 
 terstate commerce does not prevent 
 a state from taxing so much of it as 
 is within its borders. Pittsburg, 
 etc., Ry. Co. v. B'd of Public Works, 
 167 U. S. 32; see Henderson Bridge 
 Co. v. Henderson City, 173 U. S. 592. 
 
 3 Walling u. Michigan, 116 U. S. 
 446.
 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 487. 
 
 gin. . . . The fact that Congress has not seen fit to prescribe 
 any specific rules to govern interstate commerce does not affect 
 the question. Its inaction on this subject, when considered with 
 reference to its legislation with respect to foreign commerce, is 
 equivalent to a declaration that interstate commerce shall be 
 free and untrammelled." 1 
 
 § 486. In respect of its foreign and interstate business a 
 telegraph company is, as an instrument of commerce, subject 
 to the regulating power of Congress, and if it ac- _, , 
 
 ° ? . . . Telegraph 
 
 cepts the provisions of title sixty-five, of the companies. 
 Revised Statutes of the United States, it becomes 
 a Federal agent in so far as the business of the Federal gov- 
 ernment is concerned. Accordingly, when such a company 
 has accepted those provisions, state laws, in so far as they 
 impose a specific tax on each message which the company 
 transmits beyond the- state, or on messages sent by a United 
 States officer over its lines on public business, are unconstitu- 
 tional. 2 Nor can a state impose a license tax on such a corpo- 
 ration. 3 
 
 § 487. It will be noticed that the restrictions so far dis- 
 cussed on the power of a state to tax corporations, depend on 
 the relation that a state under the constitution bears to the 
 United States government, rather than on any special relations 
 that a corporation bears to the state incorporating it, or to 
 
 1 Welton v. State of Missouri, 91 
 U. S. 275, 282. See, also, Weber v. 
 Virginia, 103 IT. S. 344; Guy v. 
 Baltimore, 100 U. S. 434; Tiernan v. 
 Rinker, 102 U. S. 123; Cook v. Penn- 
 sylvania, 97 U. S. 566; Higgins ». 
 Three Hundred Casks of Lime, 130 
 Mass. 1. Compare Turner v. Mary- 
 land, 107 U. S. 38. 
 
 Congress has now passed an inter- 
 state commerce bill, in the construc- 
 tion of which many questions are 
 likely to arise; see § 474a-474tZ. 
 
 2 Telegraph Co. v. Texas, 105 U. S. 
 460; Ratterman v. Western Un. Tel. 
 Co., 127 U. S. 411; Western Un. Tel. 
 Co. v. Alabama, 132 U. S. 472. See 
 American Union Telegraph Co. v. 
 
 Western Union Telegraph Co., 67 
 Ala. 26. Such a law would be un- 
 constitutional, not only as being a 
 regulation of interstate commerce, 
 but also as interfering with a Fed- 
 eral agency. 
 
 3 Leloup v. Port of Mobile, 127 U. S. 
 640. See Norfolk, etc., R. R. Co. v. 
 Pennsylvania, 136 U. S. 114; Crutcher 
 v. Kentucky, 141 U. S. 47. But a city 
 may make the telegraph company 
 pay for the use of its streets. St. 
 Louis o. Western Un. Tel. Co., 148 
 U. S. 92; ib. 149 U. S. 465; and can 
 impose a license tax on business done 
 within city limits. Postal Tel. Co. 
 v. Charleston, 153 U. S. 692. 
 
 491
 
 § 488.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 other states. These restrictions derive their importance in 
 regard to corporations from the fact that enterprises of great 
 magnitude, like the building and working of railroads and 
 telegraphs extending through several states, are ordinarily- 
 undertaken by corporations, the means of single individuals 
 rarely sufficing for the successful carrying out of such enter- 
 prises. On the other hand, the restrictions remaining for 
 discussion on the power of a state to tax corporations, arise 
 from special contractual relation between a corporation and 
 the state incorporating it, and from the application of the rule 
 that no man shall be deprived of his property without due 
 process of law. 
 
 § 488. In incorporating a corporation, a state legislature 
 may exempt from taxation the corporate property 
 for a specified time, or forever ; and this exemption 
 may be from taxation beyond a certain amount, or 
 from any taxation whatsoever. Such an exemption, 
 when made by the legislature at the time of incorporating the 
 corporation, and when expressed in clear and unmistakable 
 terms, 1 constitutes a contract between the corporation and the 
 state, the obligation of which would be impaired by any 
 subsequent state law at variance with its terms. 2 Thus, in 
 
 Chartered 
 exemptions 
 from taxa- 
 tion. 
 
 1 To sustain against a state a con- 
 tract not to tax a corporation, the 
 terms must be clear and unequivocal. 
 North Missouri Railroad v. Maguire, 
 20 Wall. 46; Memphis Gas Co. v. 
 Shelby County, 109 U. S. 398; St. 
 Louis v. Manufacturers 1 Savings 
 Bank, 49 Mo. 574. That a state has 
 chartered a corporation without 
 reserving the right to alter and re- 
 peal does not prevent the state from 
 taxing the franchises and property 
 of such corporation. Providence 
 Bank v. Billings, 4 Pet. 519. See 
 Portland Bank v. Apthorp, 12 Mass. 
 252; Commonwealth v. Lancaster 
 Savings Bank, 123 Mass. 493. 
 
 2 When a state in chartering a 
 charitable corporation exempts its 
 property from taxation, a subsequent 
 law taxing its property is void. 
 
 492 
 
 Washington University v. Rouse, 8 
 Wall. 439; Home of the Friendless 
 v. Rouse, ib. 430; University v. 
 People, 99 U. S. 309; Asylum ». New 
 Orleans, 105 U. S. 362; Mobile and 
 S. H. R. R. Co. v. Kennerly, 74 Ala. 
 566. The same is true of a railroad 
 corporation. Humphrey v. Pegues, 
 1(> Wall. 244; Farrington v. Tennes- 
 see, 95 U. S. 679; Pacific Railroad 
 Co. v. Maguire, 20 Wall. 36; Stearns 
 v. Minn., 179 U. S. 223; Duluth & 
 I. R. R. Co. v. St. Louis County, 179 
 U. S. 302. And of other stock cor- 
 porations; Jefferson Branch Bank v. 
 Skelly, 1 Black, 436; Franklin 
 Branch Bank v. Ohio, 1 Black, 474; 
 ace. Mobile and Ohio R. R. Co. v. 
 Moseley, 52 Miss. 127; Atlantic and 
 Gulf R. R. Co. v. Allen, 15 Fla. 637; 
 Bank of Commerce v. McGowan, 6
 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 489. 
 
 1845, the legislature of Ohio chartered a bank, stipulating that 
 the bank should pay a certain tax, which should be in lieu of 
 all other taxes ; in 1852 an act was passed, levying taxes on 
 the bank to a greater amount, and this last act was held void 
 as impairing the obligation of a contract. 1 
 
 § 489. Exemptions from taxation constituting a contract on 
 the part of the state not to tax, are held never to Never arise 
 arise by implication; 2 and are construed narrowly byl1 
 
 Lea (Term.), 703; Neustadt v. 
 Illinois Central R. R. Co., 31 111. 484. 
 But these doctrines have not been 
 universally acquiesced in by the 
 state courts, or even by all the 
 judges of the Federal Supreme 
 Court. That a state cannot bargain 
 away its taxing powers was held in 
 Mechauics and Traders' Bank v. 
 Debolt, 1 Ohio St. 591; Toledo Bank 
 v. Bond, ib. 622; Skelly v. Jefferson 
 Branch Bank, 9 Ohio St. 606; Mott 
 v. Pennsylvania R. R. Co., 30 Pa. St. 
 9. See Brewster v. Hough, 10 N. H. 
 138; West Wisconsin R. R. Co. v. 
 Supervisors, 35 Wis. 257; State v. 
 Nor. Cen. Ry. Co., 90 Md. 447: 
 Washington University v. Rouse, 8 
 Wall. 439, per Chase, C. J., Miller 
 and Field, JJ., dissenting. Com- 
 pare the remarks of Marshall, C. J., 
 in Providence Bank v. Billings, 4 
 Pet. 519, 563, and the strong adverse 
 criticism of this case in Angell and 
 Ames on Corp., §§465-469. 
 
 1 Dodge v. Woolsey, 18 How. 331; 
 Accord, State Bank of Ohio v. 
 Kuoop, 16 How. 369. See Gordon v. 
 Appeal Tax Court, 3 How. 133; 
 State v. Berry, 2 Harrison (N. J.), 
 80. A charter exempting the prop- 
 erty of a railroad company, and the 
 shares therein from taxation, ex- 
 empts not only the rolling stock and 
 real estate, but also the franchise of 
 the corporation ; and a subsequent 
 law taxing the franchise impairs the 
 obligation of a contract, and is void. 
 
 tion. 
 
 Wilmington Railroad v. Reid, 13 
 Wall. 264 ; Raleigh and Gaston 
 R. R. Co. v. Reid, 13 Wall. 269; 
 Worth v. Wilmington, etc., R. R. 
 Co., 89 N. C. 291; Worth v. Peters- 
 burg R. R. Co., 89 N. C. 301. In 
 Tennessee v. Whitworth, 117 U. S. 
 129, the exemption of " capital stock " 
 from taxation was construed to ex- 
 empt the shares in the hands of share- 
 holders. 
 
 2 Wilmington, etc., R. R. Co. v. 
 Alsbrook, 146 U. S. 279. A provi- 
 sion in an act consolidating two rail- 
 road companies, requiring the con- 
 solidated company to pay a tax of 
 one-quarter per cent, on its stock, 
 does not prevent the legislature from 
 imposing further and different taxes. 
 Delaware Railroad Tax, 18 Wall. 206. 
 See, also, People v. Commissioners of 
 Taxes, 82 N. Y. 459; Lincoln St. Ry. 
 Co. v. Lincoln, 61 Neb. 109. 
 
 The charter of a street railroad 
 company provided that the company 
 should pay a license of $30 for each 
 car run by the company ; subse- 
 quently the legislature raised the 
 license to $50. Held, that there 
 was no contract to require only $30. 
 Railway Co. v. Philadelphia, 101 
 U. S. 528. The court said that even 
 if this provision had constituted a 
 contract, under its constitutional 
 power reserved to alter and amend 
 the legislature could have imposed 
 the additional license. Ib. Ace. John- 
 son v. Philadelphia, 60 Pa. St. 445; 
 
 493
 
 § 489.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 in favor of the state. 1 Thus a clause in a charter requiring 
 the corporation "to pay to the state an annual tax of one- 
 half of one per cent, on each share of capital stock which 
 shall be in lieu of all other taxes," while it limits the tax 
 on each share of stock in the hands of shareholders, does not 
 cover the capital stock of the corporation or its surplus or 
 
 Frankford & P. Pass'r Ry. Co. v. 
 Philadelphia, 5S Pa. St. 119. The 
 grant to a corporation of a privilege to 
 manufacture and vend gas in a city 
 for a certain term of years, which 
 places restrictions on the prices that 
 may be demanded by the corporation, 
 does not exempt the corporation from 
 the imposition of a license tax. Mem- 
 phis Gas Co. v. Shelby County, 109 
 U. S. 398. 
 
 When a corporation is chartered 
 with the unconditional right to in- 
 crease its capital stock (power to 
 alter, etc., not reserved), the state 
 cannot exact a bonus (not a tax) on 
 the corporation increasing its stock. 
 Commonwealth v. Erie, etc., Trans. 
 Co., 107 Pa. St. 112. But when a 
 charter, which is subject to altera- 
 tion and repeal, provides that the 
 corporation shall not be taxed until 
 its dividends amount to a certain per 
 cent., the state may still tax the cor- 
 poration before that condition of 
 affairs exists. Commonwealth v. 
 Fayette County R. R. Co., 55 Pa. St. 
 452. See Gulf & Ship. I. R. R. Co. 
 v. Hewes, 183 U. S. 66. Compare 
 § 461, ante, and § 497, note. See, 
 also, cases in the following note. 
 
 1 Railroad Cos. v. Gains, 97 U. S. 
 697; Railroad Co. v. Commissioners, 
 103 U. S. 1; Hoge v. Railroad Co., 
 99 U. S. 348; Bailey v. Magnire, 22 
 Wall. 215; Morgan v. Louisiana, 93 
 U. S. 217; Roosevelt Hospital v. City 
 of New York, 84 N. Y. 108; Academy 
 v. Exeter, 58 N. H. 306; Tucker v. 
 
 494 
 
 Ferguson, 22 Wall. 527; Memphis & 
 L. R. R. R. Co. v. Railroad Commis- 
 sioners, 112 U. S. 609; Yazoo R. R. 
 Co. v. Thomas, 132 U. S. 174; Vicks- 
 burg, etc., Ry. Co. v. Dennis, 116 
 U. S. 605; New Orleans City, etc., 
 R. R. Co. v. New Orleans, 143 U. S. 
 192; R. R. v. Harris, 99 Tenn. 684; 
 Harkreader v. Turnpike Co., 101 
 Tenn. 680. A general statute ex- 
 empting charitable corporations 
 from certain taxes held to apply 
 only to domestic corporations. Es- 
 tate of Prime, 136 N. Y. 347. An 
 exemption from taxation exempts 
 from ordinary taxes ; and does not 
 exempt from special assessments for 
 local improvements. Illinois Cent. 
 R. R. Co. v. Decatur, 147 U. S. 190; 
 Ford v. Laud Co., 164 U. S. 662. 
 
 Exempting the capital stock and 
 dividends from taxation does not 
 exempt lauds granted to the corpo- 
 ration by the state creating it. Rail- 
 road Co. v. Loftin, 98 U. IS. 559; see 
 Railway Co. v. Loftin, 105 U. S. 258; 
 Central R. R. Co. v. Wright, 164 U. 
 S. 327. Where the purposes for 
 which a corporation may hold prop- 
 erty are specified in connection with 
 an exemption of its property from 
 taxation, the exemption applies only 
 to property acquired for such pur- 
 poses. Bank v. Tennessee, 104 U. S. 
 493. Exemption from taxation of 
 the stock and property of a railroad 
 company applies only to property 
 used for its business. Ford v. Land 
 Co., 164 U. S. 662.
 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 490. 
 
 accumulated profits; and the state may tax them further. 1 
 Moreover, to give rise to such a contract there must be 
 some consideration therefor from the corporation ; as a statute 
 passed subsequently to the creation of a corporation, providing 
 that the corporation shall not be taxed beyond a certain rate, 
 is a mere gratuity, and may be repealed b} r the state at any 
 time. 2 So a statute of one state permitting a corporation of 
 another state to exercise part of its franchises in the former 
 state, and laying a tax on the corporation at the same time, 
 does not preclude further taxation on the part of the former 
 state. 3 And an exemption from taxation in the nature of a 
 " bounty " has been held repealable, even as to corporations 
 formed subsequently to its passage and with a view to its pro- 
 visions. 4 
 
 § 490. An exemption of the property and franchises of a corpo- 
 ration from taxation is a privilege pertaining to the corporation, 
 which does not follow its property and franchises into 
 the hands of subsequent owners ; unless subsequent ^"^axa^ 
 owners succeed to the property and franchises of the tion not 
 corporation under special authority from the state se- able, 
 curing to them all the rights and privileges of the cor- 
 poration. 5 Thus, upon the sale of the property and franchises 
 
 1 Shelby Co. v. Union, etc., Bk., 
 161 U. S. 149. Cf. Bank of Com- 
 merce v. Tennessee, ib. 134; Farring- 
 tun v. Tennessee, 95 U. S. 679. So 
 exempting the capital stock does 
 not exempt shares in hands of share- 
 holders. New Orleans v. Citizens' 
 Bank, 167 U. S. 371; contra, as to 
 same bank, Penrose v. Chaffraix, 
 106 La. 250. 
 
 2 Christ Church v. County of Phila., 
 24 How. 300. An act of the legisla- 
 ture exempting property from tax- 
 ation is not a "contract" unless 
 there is a consideration for it, but a 
 nude pact and revocable. Tucker 
 v. Ferguson, 22 Wall. 527 ; West Wis- 
 consin R. R. Co. v. Supervisors, 93 
 U. S. 595 ; Penna. R. R. Co. v. Bow- 
 ers, 124 Pa. St. 183. But if the ex- 
 emption be contained in an amend- 
 
 ment to the charter accepted by the 
 corporation, the exemption consti- 
 tutes a contract binding on the state. 
 University v. People, 99 U. S. 309 ; 
 Commonwealth ». Pottsville Water 
 Co., 94 Pa St. 516. 
 
 3 Erie Railway Co. v. Pennsylvania, 
 21 Wall. 492 ; Home insurance Co. v. 
 City Council, 93 U. S. 116. 
 
 4 Salt Co. v. E. Saginaw, 13 Wall. 
 373. 
 
 5 Railway Co. v. Gill, 156 U. S. 649. 
 See Tennessee v. Whitworth, 117 U. S. 
 139 ; Nichols v. New Haven and N. 
 Co., 42 Conn. 103 ; State Board of As- 
 sessors v. Morris & E. R. R. Co., 49 
 N. J. L. 193. A mortgage by a rail- 
 road company of its charter, rights, 
 privileges, and franchises, made in 
 pursuance of authority to mortgage 
 "its charter and works," does not 
 
 495
 
 § 490.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 of a railroad corporation under a mortgage, in terms covering the 
 franchises of the corporation, immunity of the property of 
 the corporation from taxation does not accompany the prop- 
 erty in its transfer to the purchaser. The court held that the 
 franchises of a railroad corporation are positive rights and priv- 
 ileges without which the road could not be successfully worked, 
 and that immunity from taxation is not one of them. Franchises 
 may pass to the purchaser as part of the property ; immunity 
 from taxation is personal, and incapable of transfer, without 
 express statutory direction. 1 When a railroad comes into the 
 possession of the state, whatever immunity from taxation may 
 have existed in respect to it ceases ; and will not pass to the 
 grantee of the state, if the state at the time of taking pos- 
 session is forbidden by the state constitution to grant immunity 
 from taxation. 2 And when by reason of restrictions in a state 
 constitution it is incompetent for the legislature to make an 
 original grant of exemption from taxation, it is also incompe- 
 tent for the legislature to provide that the assignee of a rail- 
 road company which had enjoyed a personal non-assignable 
 immunity from taxation shall enjoy the immunity possessed by 
 
 pass an exemption from taxation to 
 a corporation formed out of the bond- 
 holders after foreclosure. Memphis 
 & L. R. R. R. Co. v. Railroad Com- 
 missioners, 112 U. S. 609. 
 
 1 Morgan v. Louisiana, 93 U. S. 217; 
 followed in Louisville & Nashville 
 R. R. Co. ». Palmes, 109 U. S. 244; 
 Chesapeake and O. Ry. Co. v. Miller, 
 114 U. S. 176; Picard 8. Tennessee, 
 etc., R. R. Co., 130 U. S. 637; Rail- 
 road v. Pendleton, 156 U. S. 667; 
 Mercantile Bank v. Tennessee, 161 
 U. S. 161 ; B. C. & A. R'y Co. v. Ocean 
 City, 89 M'd 89; B. C. & A. R'y Co. 
 v. Wicomico Co., 93 M'd 113; see 
 Phoenix Ins. Co. v. Same, ib. 174; 
 Railroad Cos. v. Gaines, 97 U. S. 697; 
 State v. Morgan, 28 La. Ann. 482; 
 Railroad Co. v. County of Hamblen, 
 102 U. S. 273; Humphrey v. Pegues^ 
 16 Wall. 244; Wilson v. Gaines, 103 
 496 
 
 U. S. 417; Memphis & L. R. R. R. 
 Co. v. Railroad Commissioners, 112 
 U. S. 609; compare City of Bridge- 
 port v. New York & N. H. R. R. Co., 
 36 Conn. 255, 266; and Trnckee 
 Turnpike Co. v. Campbell, 44 Cal. 89. 
 Compare County of Traverse v. St. 
 P., M. & M. R'y Co., 73 Minn. 417. 
 
 2 Trask v. Maguire, 18 Wall. 391. 
 A corporation was organized to do 
 an insurance business, with a partial 
 exemption from taxation. There- 
 after the state constitution was 
 passed prohibiting such exemptions. 
 Still later the state by legislation 
 changed the business of the corpora- 
 tion from insurance to banking. 
 Held that the exemption ceased. 
 Memphis City Bank v. Tennessee, 
 161 U. S. 186. Under the same cir- 
 cumstances, the immunity was held 
 not to survive a change of name and
 
 chap, vm.] 
 
 CORPORATION AND STATE. 
 
 [§ 491. 
 
 his assignor. 1 This reasoning was afterwards followed in the 
 case of a consolidation creating a new corporation ; and it was 
 held that the new corporation could not have received im- 
 munity from taxation because of an amendment to the state 
 constitution in force at the time of the consolidation forbidding 
 the exemption of corporations from taxation. 2 
 
 § 491. Some of the most interesting questions respecting 
 chartered immunity from taxation have arisen upon the con- 
 solidation of corporations ; and in solving these questions the 
 Supreme Court of the United States has strongly exempli- 
 fied the doctrine that the intent of the legislature to exempt 
 the property of a corporation from taxation must be 
 explicit. An early case is Philadelphia and Wil- consoiida- 
 mington Railroad Co. v. Maryland, 3 which was the 
 case of a railroad company formed by the union of several com- 
 panies chartered by different states. One of the original com- 
 panies had been chartered by Maryland, and its charter con- 
 tained no exemption from taxation. The court held that the 
 property of the consolidated company in Maryland could be 
 taxed by that state, although the charter of another of the 
 original companies, given by another state, contained an 
 exemption from taxation. 4 So, where one railroad company 
 
 domicile and an authorized increase 
 of stock. Insurance Co. v. Tennes- 
 see, 161 U. S. 193. 
 
 1 Louisville & Nashville R. R. Co. 
 v. Palmes, 109 U. S. 244. 
 
 2 St. Louis, I. M. and S. Ry. Co. v. 
 Berry, 113 U. S. 465; Adams ». R. R. 
 Co., 77 Miss. 194. 
 
 3 10 How. 376. 
 
 4 Two acts of Delaware and Mary- 
 land authorized the consolidation of 
 two railroad companies, one in Del- 
 aware and one in Maryland. Both 
 acts contained a provision whereby 
 the shareholders of the two compa- 
 nies should, when consolidated, en- 
 joy all the rights and privileges, and 
 exercise all the powers vested in 
 either company. It was held that 
 the purpose of the two provisions was 
 to vest in the new company the 
 
 32 
 
 rights and privileges which the orig- 
 inal companies had previously en- 
 joyed under their respective charters; 
 the rights and privileges in Maryland 
 which the Maryland company had 
 there enjoyed, and in Delaware the 
 rights and privileges which the Del- 
 aware company had there enjoyed, 
 and that it was not the purpose to 
 transfer to either state and enforce 
 therein the legislation of the other. 
 And, therefore, since a provision in 
 the charter of the original Maryland 
 corporation exempting its shares 
 from taxation, exempted them only 
 in Maryland, the privilege of the new 
 company in this matter only extend- 
 ed to an exemption in that state and 
 did not exempt its shares from taxa- 
 tion in Delaware. Delaware Rail- 
 road Tax, 18 Wall. 206. Two cor- 
 497
 
 § 491. J THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 was merged in another created by the same state, which latter 
 company became invested with all the property, rights, and 
 privileges of the former, it was held that an exemption from 
 taxation in the charter of the latter company did not, in the 
 absence of express words or necessary intendment, extend to 
 the property of the former railroad acquired through the con- 
 solidation. 1 A consolidated company acquires no greater 
 immunities from taxation than the constituent companies had 
 prior to the consolidation, and holds their immunities distrib- 
 utive^ ; that is to say, whatever privileges and advantages 
 either of the former companies possessed, inure to the benefit 
 of the new company to the extent of the road occupied by each 
 of the former companies respectively at the time of the con- 
 solidation. 2 And when two corporations subjected to a certain 
 special tax, with immunity from other taxation, are consoli- 
 dated into a new corporation under such conditions as to 
 render the special tax impossible, the new corporation is not 
 entitled to immunity from general taxation. 3 
 
 porations enjoying respectively cer- 
 tain immunities from taxation were 
 consolidated by a statute passed 
 after the passage of a general law 
 reserving generally the right to the 
 state to withdraw corporate fran- 
 chises granted by subsequent char- 
 ters unless expressly negatived in the 
 charter; the effect of the consolida- 
 tion was to dissolve the two corpora- 
 tions and create a new one; it was 
 held the consolidated corporation 
 was subject to taxation. Railroad 
 Co. v. Georgia, 98 U. S. 3.">9. Ace. 
 Keokuk, etc., R. R. Co. v. Missouri, 
 152 U. S. 301; Yazoo & M. V. R'y 
 Co. o. Adams, 180 U. S. 1. 
 
 1 Chesapeake, etc., R. R. Co. v. 
 Virginia, 94 U. S. 718. 
 
 2 Tomlinson v. Branch, 15 Wall. 
 460 ; see Central Railroad, etc., Co. 
 v. Georgia, 92 U. S. 665 ; State v. 
 Commissioners, 37 N. J. L. 240 ; 
 
 498 
 
 Tennessee v. Whitworth, 117 U. S. 
 139. When a new corporation is 
 formed out of two or more pre- 
 viously existing corporations, and 
 by the act creating it is to have the 
 powers, privileges, and immunities 
 possessed by each of the corporations 
 whose union constitutes the new 
 corporation, the new corporation 
 will have the privileges, powers, and 
 immunities which they all (i. e. 
 every one of them) had ; and will 
 not have those powers, privileges, 
 and immunities which some had 
 and some did not. This construc- 
 tion was put on a consolidating act 
 in regard to exemption from taxa- 
 tion ; the former charters, moreover, 
 were subject to alteration and re- 
 peal. State v. Maine Central R. R. 
 Co., 66 Maine, 488, 514. 
 
 3 Railroad Co. v. Maine, 96 IT. S. 
 499.
 
 CHAP. VIII.] CORPORATION AND STATE. [§ 492. 
 
 § 492. The rule that no man shall be deprived of his prop- 
 erty without due process of law applies to taxa- Taxation, 
 tion; but a mode of procedure may be "due process cessof Pr °" 
 of law " in matters of taxation, which would not be law - " 
 "due process of law " in other proceedings. " Taxes have not, 
 as a general rule, in this country since its independence, nor in 
 England before that time, been collected by regular judicial 
 proceedings. The necessities of government, the nature of 
 the dut} r to be performed, and the customary usages of the 
 people, have established a different procedure, which, in re- 
 gard to that matter, is, and always has been, due process of 
 law." * Accordingly, at least as regards taxation, the phrase 
 does not necessarily imply a regular proceeding in a court of 
 justice, or after the manner of courts of justice. 2 In deliver- 
 ing the opinion of the court in Davidson v. New Orleans, 3 
 Justice Miller said in regard to the term : " Apart from the 
 eminent risk of a failure to give any definition which would 
 be at once perspicuous, comprehensive, and satisfactory, there 
 is wisdom we think in the ascertaining of the intent and ap- 
 plication of such an important phrase in the Federal con- 
 stitution by the gradual process of judicial inclusion and ex- 
 clusion, as the cases presented for decision shall require, with 
 the reasoning on which such decisions may be founded. This 
 court is, after an experience of nearly a century, still engaged 
 in defining the obligation of contracts, the regulation of com- 
 merce, and other powers conferred on the Federal government, 
 or limitations imposed upon the states." .... As contrib- 
 utory to this process we hold " that whenever by the laws of 
 a state, or by state authority, a tax, assessment, servitude, or 
 other burden, is imposed upon property for the public use, 
 wmether it be for the whole state, or for some more limited 
 portion of the community, and these laws provide for a mode 
 of confirming or contesting the charge thus imposed, in the 
 ordinary courts of justice, with such notice to the person, or 
 such proceeding in regard to the property as is appropriate to 
 the nature of the case, the judgment in such proceedings can- 
 not be said to deprive the owner of his property without due 
 
 i Kelly v. Pittsburgh, 104 U. S. 
 
 78, 80; opinion of court per Miller, J. 
 
 2 Davidson v. New Orleans, 9o' U. 
 
 S. 97, citing Murray's Lessee v. Ho- 
 boken Land Co., supra. 
 3 96 U. S. 97, 104. 
 
 499
 
 § 492^.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 process of law, however obnoxious it may be to other objec- 
 tions." ' 
 
 § 492«. Giving the opinion of the court in Hagar v. Recla- 
 mation District (after quoting approvingly from Davidson v. 
 New Orleans), Justice Field said : " It is sufficient to observe 
 here that by ' due process ' is meant one which, following the 
 forms of law, is appropriate to the case, and just to the parties 
 to be affected. It must be pursued in the ordinary mode 
 prescribed by the law ; it must be adapted to the end to be 
 attained ; and wherever it is necessary for the protection of 
 the parties, it must give them an opportunity to be heard 
 respecting the justice of the judgment sought. The clause 
 in question means, therefore, there can be no proceeding 
 against life, liberty, or property which may result in the 
 deprivation of either, without the observance of those general 
 rules established in our system of jurisprudence for the secu- 
 rity of private rights.- Unless restrained by provisions of the 
 Federal constitution, the power of the state, as to the mode, 
 form, and extent of taxation, is unlimited, where the subjects 
 to which it applies are within her jurisdiction." 3 
 
 " Of the different kinds of taxes which the state may impose, 
 there is a vast number of which, from their nature, no notice 
 can be given the taxpayer, nor would notice be of any possible 
 advantage to him, such as poll taxes, license taxes (not depend- 
 ent upon the extent of his business), and generally, specific 
 taxes on things, or persons, or occupations. In such cases the 
 legislature, in authorizing the tax, fixes its amount, and that 
 is the end of the matter. If the tax be not paid, the property 
 of the delinquent may be sold, and he be thus deprived of his 
 property. Yet there can be no question that the proceeding 
 is due process of law, as there is no inquiry into the weight of 
 evidence, or other element of a judicial nature, and nothing 
 could be changed by hearing the taxpayer. No right of his is, 
 therefore, invaded. . . . 
 
 " But where a tax is levied on property, not specifically, but 
 according to its value, to be ascertained by assessors appointed 
 
 1 See, also, Kentucky R. R. Tax 
 Cases, 115 U. S. 321. 
 
 2 Citing Hurtado v. California, 
 110 U. S. 516, 530. 
 
 500 
 
 3 Quoted from State Tax on For. 
 eigu Held Bonds, 15 Wall. 300, 319.
 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 492*. 
 
 for that purpose upon such evidence as they may obtain, a dif- 
 ferent principle comes in. The officers in estimating the value 
 act judicially ; and in most of the states provision is made for 
 the correction of errors committed by them, through boards of 
 revision or equalization, sitting at designated periods provided 
 by law to hear complaints respecting the justice of the assess- 
 ments. The law in prescribing the time when such complaints 
 will be heard, gives all the notice required, and the proceeding 
 by which the valuation is determined, though it may be fol- 
 lowed, if the tax be not paid, by a sale of the delinquent's prop- 
 erty, is due process of law." 1 
 
 § 4:92b. In order to obtain the aid of a court of equity to 
 restrain the collection of a tax, the case must be T 
 
 i -i- pi -i« i ■ Junsdic- 
 
 brought within some or the recognized foundations tion of 
 of equity jurisdiction, and mere error, or excess in restrain°the 
 valuation, or hardship or injustice of the law, or any of^tax 11 
 grievance which can be remedied by a court of law, 
 either before or after payment of the tax, will not warrant a 
 court of equity to interpose by injunction to stay the collec- 
 tion of a tax. 2 And as a general rule, the owner of taxable 
 property who would enjoin the collection of a tax thereon, 
 must first pay or tender so much as is due. 3 
 
 1 Hagar v. Reclamation District, 
 111 U. S. 701, 709, 710. (There is 
 appended at the end of this case a 
 note of the legislation of the colouies 
 before the Revolution, and of the 
 states since, giving the taxpayer the 
 right to be heard before the assess- 
 ment becomes final.) See Railway- 
 Co. v. Backus, 154 U. S. 421. Com- 
 pare Porter v. Rockford, etc., R. R. 
 Co., 76 111. 561; Railroad Tax Cases, 
 13 Fed. Rep. 722. 
 
 2 State Railroad Tax Cases, 92 U. 
 S. 575; see Union Pacific Ry. Co. v. 
 Cheyenne, 113 U. S. 516; Allen v. 
 Baltimore and Ohio R. R. Co., 114 
 U. S. 311. One of the reasons why a 
 court should not thus interfere, as 
 it would in a matter between individ- 
 uals, is that it has no power to ap- 
 portion the tax, or make a new as- 
 
 sessment, or order a new assessment 
 to be made by the proper officers of 
 the state. The levy of taxes is not a 
 judicial function, but by the consti- 
 tutions of all the states, and by the 
 theory of our English origin, is ex- 
 clusively legislative. If there is an 
 overvaluation of the franchise, or 
 of the capital stock, or of both, it is 
 an error of judgment in the officers 
 to whose judgment the law confided 
 that matter ; and it does not lie with 
 a court to substitute its- own judg- 
 ment for that of the tribunal ex- 
 pressly created for that purpose. 
 lb. Compare Wright v. Southwest- 
 ern R. R. Co., 64 Ga. 783; South- 
 western R. R. Co. ». Wright, 68 Ga. 
 811. 
 
 3 National Bank i\ Kimball, 103 U. 
 S. 732; compare Supervisors r. Stan- 
 
 501
 
 § 493.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 § 493. The discussion of the powers which a state has over 
 Distinction corporations by virtue of its police power (in the 
 between broadest sense), would be incomplete without raen- 
 
 " rights" ....... . . l . 
 
 and "reme- tioning the distinction taken in many cases between 
 " rights " and " remedies." It has been, for instance, 
 decided that the abolishment of imprisonment for debt, or dis- 
 tress for rent, even as to debts already contracted or leases 
 already in force, is not unconstitutional as impairing the obli- 
 gation of a contract, because such a law is held to operate only 
 as a modification of the remedy. 1 These cases have been ques- 
 tioned, 2 and indeed the distinction between a right and a rem- 
 edy is probably of comparatively recent growth. Going back 
 to early periods of legal history we find that what are now 
 regarded as the substantial rights of persons were simple and 
 easy of determination, while the more difficult, but equally 
 important, questions were as to the proper means of enforcing 
 these rights. This is illustrated by the extraordinary promi- 
 nence of the law of distress in the Brehon (old Irish) and Salic 
 systems. 3 At Rome, moreover, the right to bring a certain 
 actio was not distinguished, as at present, from the rights 
 which by means of that actio were sought to be enforced. 4 Still, 
 the law of procedure is in most respects to-day readily distin- 
 guishable from the law regulating material rights, and with 
 reference to our present legal notions the distinction on prin- 
 ciple may be sufficiently justifiable, if not so historically. 5 Be- 
 
 ley, 105 U. S. 305. A bank cannot 
 enjoin a tax collector from selling 
 the shares of individual sharehold- 
 ers. Waseca County Bank v. Mc- 
 Kenna, 32 Minn. 468. But see § 484, 
 note. 
 
 1 Sturges v. Crowninshield, 4 
 Wheat. 122 ; Mason v. Haile, 12 
 Wheat. 370; Penniman's Case, 103 
 U. S. 714; Van Rensselaer v. Snyder, 
 13 N. Y. 299 ; Conkey v. Hart, 14 
 N. Y. 22. 
 
 2 "Any law which in its operation 
 amounts to a denial or obstruction 
 to the rights accruing by contract, 
 though professing to act only on 
 the remedy, is directly obnoxious to 
 
 502 
 
 the provision of the constitution.' 1 
 Pritchard ». Norton, 106 U. S. 124, 
 132; see McCracken p. Hayward, 2 
 How. 608, 612 ; Gunn v. Barry, 15 
 Wall. 615 ; Edwards v. Kerzey, 96 
 U. S. 595, 607. The last two cases 
 held that increased exemptions un- 
 der a new homestead act affecting 
 the remedy under contracts already 
 entered into, were unconstitutional. 
 See, also, Louisiana v. New Orleans, 
 102 U. S. 206. 
 
 8 See Maine's Early History of 
 Institutions. 
 
 4 See, generally, Windscheid, Die 
 Romische Actio. 
 
 6 See United States v. Union Pa-
 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 495. 
 
 sides, the power to regulate procedure may perhaps be regarded 
 as a portion of the police power of the state, of which a sur- 
 render could never be presumed. 1 
 
 § 494. A late statement of the general law on this subject 
 may be found in Penniman's Case, 2 where Justice Woods said, 
 giving the opinion of the Supreme Court of the United States : 
 " The general doctrine of this court on this subject may be 
 thus stated : in modes of proceediug and forms to enforce the 
 contract the legislature has the control, and may enlarge, 
 limit, or alter them, provided it does not deny a remedy or 
 so embarrass it with conditions or restrictions as seriously to 
 impair the value of the right." 3 It would seem, however, 
 that when a new remedy is authorized after a contract has 
 been made, such remedy may be wholly taken away by the 
 legislature before any vested rights have been acquired under 
 it ; for such remedy could have formed no part of the contract 
 as made. But if the creditor proceeds, and acquires any vested 
 rights under the new remedy, it may then be incompetent for 
 the legislature by repealing the new remedy to affect his 
 rights. 4 
 
 § 495. In creating a corporation the legislature may impose 
 upon it, and upon parties dealing with it, such restrictions as 
 the legislature may deem proper in regard to subjecting its 
 assets to the discharge of its obligations ; and, further, may 
 provide that any one of the usual remedies of creditors shall 
 in certain cases be withheld. 5 And after a corporation has 
 been incorporated, a statute which prescribes a mode of judicial 
 service on the corporation different from that provided for in 
 
 cific R. R. Co., 98 U. S. 569, G08. A 
 reduction in the time prescribed by 
 the statute of limitations in force 
 when the right of action accrued is 
 not unconstitutional, provided a 
 reasonable time be left for the com- 
 mencement of a suit before the bar 
 takes effect. Terry v. Anderson, 95 
 U. S. 628; compare Blount v. Wind- 
 ley, 95 U. S. 173. 
 
 1 See Railroad Co. v. Hecht, 95 
 U. S. 168. 
 
 2 103 U. S. 714, 720. 
 
 3 See, also, Tennessee v. Sneed, 96 
 U. S. 69; Crawford v. Branch Bank 
 of Mobile, 7 How. 279; Antoni v. 
 Greenhow, 107 U. S. 769; Railroad v. 
 New Orleans, 157 U. S. 219. Com- 
 pare, generally, Virginia Coupon 
 Cases, 114 U. S. 270. 
 
 * Memphis v. United States, 97 
 U. S. 293; South Carolina v. Gaillard, 
 101 U. S. 433. 
 
 5 National Shoe and Leather Bank 
 v. Mechanics' Nat. Bank, 89 N. Y. 
 467. 
 
 503
 
 § 490.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 its charter affects only the remedy and is constitutional. 1 Like- 
 wise provisions in the charter of a railroad company regulating 
 the manner of taking land;' or a summary remedy against 
 defaulting stockholders given to a corporation by its enabling 
 act, may be changed by subsequent legislation. 3 
 
 § 496. Having discussed the powers which a state has over 
 
 corporations and their property by virtue of eminent 
 reservedTo domain, police, and taxing powers ; by virtue, that 
 repeai. nd * s > 01 ° P owers inherent in the state as the political 
 
 superior of the corporation, the exercise of which is 
 not incompatible with the concurrent legal relations between 
 the state and the corporation occasioned by the implied con- 
 tract between them ; we come now to consider the further 
 powers of the state over corporations when, by reserving the 
 right to alter and amend or repeal the charter or enabling act 
 of the corporation, the state prevents such charter or enabling 
 act from impliedly creating as between itself and the corpora- 
 tion a contract within the purview of the Federal constitu- 
 tion. 4 The state occupies towards the corporation the position 
 
 1 Railroad Co. v. Hecht, 95 U. S. 
 168. 
 
 2 Mississippi R'y Co. v. McDonald, 
 12 Heisk. (Tenn.) 54; Gowen v. Pe- 
 nobscot R, R. Co., 44 Me. 140; Chat- 
 teroi R'y Co. v. Kinner, 81 Ky. 221; 
 see Baltimore and Susquehanna R. R. 
 Co. v. Nesbit, 10 How. 395. 
 
 3 Ex parte North East and S. W. 
 Ala. R. R. Co., 37 Ala. 679. The leg- 
 islature can alter the mode of as- 
 sessing banks. Bank of Republic v. 
 County of Hamilton, 21 111. 53; see 
 Reapers' Bank v. Willard, 24 111. 433. 
 A statute authorizing the sale of its 
 road for payment of the debts of the 
 corporation is constitutional, even if 
 the right to alter and repeal is not 
 reserved. Louisville, etc., Turnpike 
 Co. v. Ballard, 2 Mete. (Ky.) 165. 
 
 Even when the power to alter and 
 repeal the charter is not reserved, a 
 state may constitutionally provide 
 that a state officer may file a peti- 
 tion to have unsound insurance com- 
 
 504 
 
 panies wound up. This is a valid 
 exercise by the state of its unalien- 
 able police power, and does not im- 
 pair the obligation of the contract 
 between the corporation and the 
 state, nor deprive shareholders of 
 their vested rights. Ward v. Far- 
 well, 97 111. 593; Chicago Life Ins. 
 Co. v. Auditor, 101 111. 82. See For- 
 stall v. Consolidated Association, 34 
 La. Ann. 770; Rockover v. Life Asso- 
 ciation, 77 Va. 85. 
 
 4 " The reserved power of amend- 
 ment and repeal is not anything more 
 than the legislature would have had 
 without a reservation, if statutes of 
 incorporation had been held to be 
 possessed of the ordinary amendable 
 and repealable qualities of other 
 statutes." Ashuelot R. R. Co. v. 
 Elliot, 58 N. H. 451, 454. The right 
 to alter and repeal may be reserved 
 in a general statute so as to apply 
 to charters subsequently granted. 
 Thornton v. Marginal Freight Ry.
 
 CHAP, vm.] CORPORATION AND STATE. 
 
 [§ 497. 
 
 of lawgiver, from whom emanate most of the rules of law con- 
 tained in the constitution of the corporation. It is held to con- 
 tract with the corporation not to alter these rules, thus agree- 
 ing that acts in respect of the corporate enterprise shall always 
 have a certain legal effect. This, as we have seen, 1 is the only 
 contract ordinarily existing between the corporation and the 
 state ; and if the state reserves the right to alter or repeal these 
 rules of law, that reservation prevents the existence of this con- 
 tract. 
 
 § 497. Accordingly, when the state reserves this power, the 
 charter or enabling act of the corporation, as be- 
 tween the state and the corporation, subsists simply right in a 
 
 . „ , , , , . rule of law. 
 
 as a rule for conduct, as law properly speaking, 
 which, like other law, may be altered or repealed at the will 
 of the legislature, provided the obligation of no contract is 
 thereby impaired, and no one is deprived of his property with- 
 out due process of law. No one has any property or vested 
 right in a rule of law, except in so far as the rule has mani- 
 fested itself in legal relations between himself and others who 
 are within the scope of its operation ; and, accordingly, pro- 
 vided le^al relations alreadv existing are not affected, the law 
 may be changed at the will of the legislature. 2 As Chief Jus- 
 tice Waite said, in Munn v. Illinois : 3 " A mere common law 
 regulation of trade or business may be changed by statute. A 
 person has no property, no vested interest, in any rule of the 
 common law. That is only one of the forms of municipal 
 law, and is no more sacred than any other. Rights of prop- 
 erty which have been created by the common law cannot be 
 taken away without due process ; but the law itself, as a rule 
 of conduct, may be changed at the will, or even at the whim 
 
 Co., 123 Mass. 32; Roxbury v. Bos- 
 ton and P. R. R. Co., 6 Cush. (Mass.) 
 424. Where a corporation receives 
 its charter subject to the generally- 
 expressed right of the state to alter 
 and repeal or impose further legisla- 
 tion, exemption from future general 
 legislation will not exist unless ex- 
 pressly given or by necessary impli- 
 cation. Pennsylvania R. R. Co. v. 
 Miller, 132 U. S. 75. 
 
 1 § 450. 
 
 2 When a state reserves the uncon- 
 ditional right to alter and repeal, the 
 question whether an amendment is 
 wise, consistent with public interests 
 and the prosperity of the company, 
 is for the legislature, not for the 
 courts. American Coal Co. v. Con- 
 solidation Coal Co., 46 Md. 15. 
 
 3 94 U. S. 113, 134, affirming S. C, 
 69 111. 80 
 
 505
 
 § 497.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 of the legislature, unless prevented by constitutional limita- 
 tions. Indeed, the great office of statutes is to remedy defects 
 in the common law as they are developed, and to adapt it to 
 the changes of time and circumstances." 1 
 
 1 A railroad company was incor- 
 porated, its charter being subject to 
 alteration and repeal. Subsequently 
 the state legislature amended the 
 charter by exempting the property 
 of the corporation from taxation. 
 After the passage of this amend- 
 ment, the people of the state adopted 
 a new constitution, one of the pro- 
 visions of which required corpora- 
 tions to be taxed; and, carrying out 
 this provision, the legislature levied 
 a tax on the property of said corpo- 
 ration. The tax was held constitu- 
 tional, the Supreme Court saying per 
 Field, J. : " The original corporators, 
 or subsequent stockholders, took 
 their interest with knowledge of the 
 existence of this power, and of the 
 possibility of its exercise at any time 
 in the discretion of the legislature. 
 .... The reservation affects the 
 entire relation between the state and 
 the corporation, and places under 
 legislative control all rights, privi- 
 leges, and immunities derived by 
 its charter directly from the state. 
 Rights acquired by third parties, and 
 which have become vested under the 
 charter, in the legitimate exercise of 
 its powers, stand upon a different 
 footing; but of such rights it is un- 
 necessary to speak here. The state 
 only asserts in the present case the 
 power under the reservation to 
 modify its own contract [?] with the 
 corporators; it does not contend for 
 a power to revoke the contracts of 
 the corporation with other parties, 
 or to impair any vested rights thereby 
 acquired." Tomlinson v. Jessup, 15 
 Wall. 454, 458. Ace. Louisville 
 Water Co. v. Clark, 143 U. S. 1 ; fol- 
 506 
 
 lowed in Louisville Water Co. v. 
 K'y, 170 U. S. 127; Hamilton Gas 
 Light Co. v. Hamilton City, 140 U. S. 
 258; Union Improvement Co. v. Com- 
 monwealth, 09 Pa. St. 140; Coving- 
 ton o. Kentucky, 173 U. S. 231; Citi- 
 zens' Savings Bank p. Oweusboro, 
 173 U. S. 0:30; Kentucky Bank Tax 
 Cases, 174 U. S. 408. 
 
 A bridge company accepted from 
 Congress the right to build a bridge 
 across navigable waters, on condition 
 that such right or franchise might be 
 revoked, or alterations required in 
 the bridge at any time, if the bridge 
 should be found detrimental to navi- 
 gation. Held, that this condition 
 was an essential element of the 
 grant, and that the company, in ac- 
 cepting the privileges, assumed all 
 risk of loss from the exercise of the 
 power Congress had reserved; and 
 that Congress might require altera- 
 tions in the bridge without incurring 
 for the United States liability to pay 
 for them. Bridge Co. v. United 
 States, 105 U. S. 470. 
 
 The constitution of California of 
 1849 provided that corporations 
 might be formed under general laws, 
 but should not be created by special 
 act, except for municipal purposes; 
 and that all general laws and special 
 acts passed pursuant to this provision 
 might be altered from time to time 
 or repealed. The legislature after- 
 wards enacted a general law for the 
 formation of corporations for sup- 
 plying cities and counties with 
 water, which provided that the rates 
 to be charged for water should be 
 fixed by a board of commissioners to 
 be appointed partly by the corpora-
 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 498. 
 
 Effect of 
 
 reserva- 
 tion of the 
 right to 
 alter and 
 repeal on 
 the con- 
 tract be- 
 tween the 
 corpora- 
 tors. 
 
 § 498. But the charter of a corporation, or the enabling 
 statute and articles of association filed in pursuance 
 thereof, embody the terms of a contract between the ^" 
 corporators. This contract, however, is subject to 
 the reserved power in the state to alter or repeal 
 it : for it is a contract which is not only sanctioned 
 by, but embodied in laws which the state has re- 
 served the right to alter and repeal. Consequently, 
 the legal relations among the corporators, in so far 
 as they are occasioned solely by this contract, may be changed 
 at the will of the state, without thereby impairing the obliga- 
 tion of the contract or depriving any one of '.' vested rights." 
 The obligation of a contract consists in the rules of law which 
 manifest themselves in legal relations between the parties to 
 it ; x and, in this instance, one of these very rules would be 
 that the state might change or repeal any of the rules of 
 law constituting this obligation ; might change, that is, any 
 of these legal relations. It is accordingly implied in the 
 agreement of the corporators among themselves, that in so far 
 as their legal relations are occasioned solely by their contract 
 embodied in the constitution of the corporation, they may 
 be altered at the will of the state. The obligation of this 
 contract, then, consists either in the rules of law manifesting 
 themselves in legal relations upon the execution of the con- 
 
 tions and partly by the municipal 
 authorities. Subsequently the con- 
 stitution and laws of California were 
 changed so as to take away from 
 water companies organized under 
 the old constitution and laws the 
 power to appoint members of the 
 boards of commissioners, and to give 
 the municipal authorities the sole 
 power to fix the rates for water. It 
 was held that these changes violated 
 no provision of the Federal consti- 
 tution, and that to vest such sole 
 authority in the municipal author- 
 ities was within the legislative power. 
 Spring Valley Water Works v. 
 Schottler, 110 U. S. 347. 
 ll 'The laws which exist at the 
 
 time and place of the making of a 
 contract, and where it is to be per- 
 formed, enter into it and form part 
 of it. This embraces alike those 
 which affect its validity, construc- 
 tion, discharge, and enforcement. 
 . . . . The obligation of a con- 
 tract is the law which binds the 
 parties to it to perform their agree- 
 ment." Walker v. Whitehead. 16 
 Wall. 314, 317, 318. See Von Hoff- 
 man v. City of Quincy, 4 Wall. 550; 
 Louisiana v. New Orleans, 102 U. S. 
 20G. Compare Connecticut Mutual 
 Life Ins. Co. v. Cushman, 108 U. S. 
 51 ; Smith v. Eastwood Wire Co., 58 
 N. J. Eq. 331. 
 
 507
 
 § 499.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 tract, or in those rules as modified by subsequent legislation 
 and such other rules as the state changing the constitution of 
 the corporation may make. 1 Consequently, the state by chang- 
 ing the corporate constitution does not impair the obligation 
 of this contract. 2 
 
 § 499. Although the state may change the legal relations 
 
 arising solely from the contract of the corporators 
 there! embodied in the corporate constitution, it by no 
 
 power. means follows that the state may change any and all 
 
 legal relations subsisting in respect of the corporate 
 enterprise. The contract embodied in the constitution is an 
 act which itself occasions legal relations among the parties to 
 it ; and it is only the legal relations which arise solely from 
 this contract as a contract that the state may change. The 
 constitution of a corporation, besides embodying a contract 
 between the corporators, contains rules of law which will mani- 
 fest themselves in legal relations upon the doing of other and 
 further acts in respect of the corporate enterprise ; and the 
 legal relations which are not occasioned solely bv the contract 
 embodied in the constitution, but which arise only upon the 
 doing of other and further acts which bring the actors within 
 the operation of that constitution regarded as law, the state 
 cannot change. In respect of such acts, the state may only 
 provide what legal relations they shall occasion in the future ; 
 but the acts having been done, no constitutional legislation 
 can alter the legal relations which they have occasioned. As 
 Strong, J., said in the Sinking Fund Cases, 3 the power reserved 
 by a legislature to alter and repeal the charter of a corpora- 
 
 1 Compare Supreme Commaudery 
 v. Ainsworth, 71 Ala. 436, 450. 
 
 2 To the stock of a railroad corpo- 
 ration, whose charter was subject to 
 alteration and repeal, the city sub- 
 scribed, having the right to appoint 
 a certain number of the directors of 
 the railroad. Individuals also sub- 
 scribed, but did not pay their sub- 
 scriptions. Some years later the 
 legislature authorized the city to 
 appoint a greater number of direc- 
 tors; and the legislation was held 
 constitutional under the reserved 
 
 508 
 
 power to alter and amend. Miller v. 
 State, 15 Wall. 478; Bradley and 
 Field, JJ., dissented on the ground 
 that this was a modification of a con- 
 tract outside of the charter. See 
 also Close v. Glenwood Cemetery, 
 107 U. S. 466; Spring Valley Water 
 Works v. San Francisco, 61 Cal. 3; 
 Chincleclamouche Lumber Co. v. 
 Commonwealth, 100 Pa. St. 438, 444. 
 But, see, Enterprise Ditch Co. v. 
 Moffett, 58 Neb. 642. 
 3 99 U. S. 700, 740.
 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 500. 
 
 tion, " is one over the act itself, not over anything that may 
 have lawfully been done under the act before its repeal or 
 alteration. It is only by great confusion of things essentially 
 distinct, that this power can be construed as applicable to a 
 contract made after the corporation came into existence." 1 
 The following passage from the opinion of Chief Justice Waite 
 in the same case, may also be quoted : " Whatever rules Con- 
 gress might have prescribed in the original charter for the 
 government of the corporation in the administration of its 
 affairs, it retained the power to establish by amendment. 2 In 
 so doing, it cannot undo what has already been done, and it 
 cannot unmake contracts that have already been made ; but it 
 may provide for what shall be done in the future, and may 
 direct what preparation shall be made for the due performance 
 of contracts already entered into. It might originally have 
 prevented the borrowing of money, or it might have said that 
 no bonded debt should be created without ample provision by 
 sinking fund to meet it at maturity. Not having done so at 
 first, it cannot now by direct legislation vacate mortgages al- 
 ready made under the powers originally granted, nor release 
 debts already contracted. A prohibition now against contract- 
 ing debts will not avoid debts already incurred. . . . All such 
 legislation will be confined in its operation to the future." 3 
 
 § 500. For further illustration of the application of these 
 principles let us suppose a corporation formed under 
 a general enabling act (or with a special charter, this tion. Reia- 
 is immaterial); the state reserving the right to tween 6 " 
 amend or appeal the enabling act. Let us suppose errand 015 * 
 that the shareholders under this enabling act are creditors. 
 
 1 See Oldtown, etc., R. R. Co. v. 
 Veazie, 39 Me. 571. 
 
 The reservation of the right to 
 alter and repeal does not authorize 
 the legislature to do a judicial act, 
 such as foreclosing a mortgage by 
 legislation cutting off the mort- 
 gagor's right to redeem (the mort- 
 gagor being a corporation with a 
 charter subject to alteration and 
 repeal). Asbuelot R. R. Co. v. 
 Elliot, 58 N. H. 451. 
 
 2 Quoted in Spring Valley Water 
 Works v. Schottler, 110 U. S. 347, 
 353. See St. Louis, I. M. R., etc., R'y 
 Co. v. Paul, 173 U. S. 404; Johnson v. 
 Goodyear M'g Co., 127 Cal. 4; Lin- 
 coln St. R. Co. v. Lincoln, 61 Neb. 
 109. 
 
 8 Sinking Fund Cases, 99 U. S. 700, 
 721. See, also, Close v. Glenwood 
 Cemetery, 107 U. S. 466. 
 
 509
 
 § 500.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 not personally liable for the corporate debts after they have 
 fully paid their subscriptions. Here the state may alter the 
 enabling act so as to make the shareholders liable personally 
 for all debts contracted by the corporation after such amend- 
 ment; 1 but not so as to make them liable for debts contracted 
 before such amendment, as such retroactive legislation would 
 (a) impair the obligation of a contract, and (b) deprive share- 
 holders of their property without due process of law. To 
 change the legal effect of a contract so as to impose additional 
 burdens on the person already liable thereunder, impairs its 
 obligation, for constitutional provisions exist as much for the 
 protection of debtors as of creditors. 2 The contract of which 
 the obligation is impaired by making shareholders liable for 
 debts already contracted, is the contract by which the indebt- 
 edness was incurred. Upon the making of this contract, which 
 was not embodied in the charter or enabling act of the corpora- 
 tion, and so subject to alteration, legal relations arose in respect 
 of the corporate enterprise between shareholders and creditors ; 
 and one of the rights of shareholders occasioned by the con- 
 tract was that they should not be liable thereunder beyond the 
 extent of their interest in the corporate funds. Consequently, 
 imposing increased liability on the shareholders in respect of 
 this contract would impair (alter) its obligation. In the second 
 place, it is clear that the imposing of increased liability on the 
 shareholders would give a creditor a right against them which 
 he had not when the contract was made ; and as every right 
 implies a corresponding liability or duty, which in its turn (at 
 least in a case of this nature) implies the giving up of a right, 
 such amendment would deprive a person of a right, i. e., of 
 property without due process of law. 3 
 
 1 Sherman v. Smith, 1 Black, 587. 
 
 2 " The objection to a law on the 
 ground of its impairing the obliga- 
 tion of a contract, can never depend 
 on the extent of the change which 
 the law effects in it. Any deviation 
 from its terms, by postponing or ac- 
 celerating the period of performance 
 which it prescribes, imposing condi- 
 tions not expressed in the contract, 
 or dispensing with the performance 
 
 510 
 
 of those which are, however minute 
 or apparently immaterial in their 
 effect upon the contract of the par- 
 ties, impairs its obligation." Wash- 
 ington, J., in Green v. Biddle, 8 
 Wheat. 1, 84. 
 
 3 " Whatever modification of the 
 liability of stockholders in banks 
 may be legally made that shall oper- 
 ate upon future stockholders, or 
 upon the present stockholders pro-
 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 501. 
 
 § 501. On the other hand, since the charter or enabling act 
 of the corporation, when the right to alter and repeal is re- 
 served, is to be regarded as between the state and the corpo- 
 ration only as law, it is clear that the corporation has no vested 
 or contract right to have the charter or enabling act remain 
 unchanged so that in the future the corporation may continue 
 to acquire by similar acts the same rights. The state may 
 certainly impose individual liability on the shareholders as to 
 future debts because of the concurrence of three reasons : first, 
 as between the state and the corporation the enabling act em- 
 bodied no contract ; secondly, in so far as the enabling act 
 embodied the contract among the corporators, it embodied a 
 contract the terms of which by the implied assent of the par- 
 ties thereto could be changed at the will of the state ; thirdly, 
 the supposed change being as to future indebtedness only, ex 
 hypothese no other contract had been entered into, the obliga- 
 tion of which would be impaired by the supposed legislation. 
 It seems clear, however, that even as to future indebtedness, 
 the state cannot impose increased liability on the shareholders, 
 if the state has not reserved the right to alter and repeal ; for 
 such change would {a) impair the obligation of the contract 
 between the state and the corporation, and (b) that of the con- 
 tract among the corporators, which, in this instance, was not 
 made with the implied consent that it might be changed at the 
 will of the state. 1 
 
 On the other hand, when by the enabling act, which the 
 
 epectively, no constitutional legisla- 
 tion can operate to impose retrospec- 
 tively increased personal liabilities 
 upon the stockholders." Dewey, J., 
 in Commonwealth v. Cochituate 
 Bank, 3 Allen, 42, 44. It is held, 
 however, that a general banking 
 law is not unconstitutional in its 
 application to corporations already 
 in existence, because it provides that 
 the original shareholders shall re- 
 main liable to the extent of their 
 stock until it has been fully paid 
 up, notwithstanding they may have 
 transferred it. Such a provision is 
 merely regulative of the transfers, 
 
 and is such as was competent for 
 the state to pass. Marr o. Bank of 
 West Tennessee, 4 Lea (Tenn. ), 578. 
 1 Ireland v. Palestine Co., 19 Ohio 
 St. 369, 372; limiting Palestine Co. 
 v. Wooden, 13 Ohio St. 395. Contra, 
 Gray v. Coffin, 9 Cush. 192; Coffin 
 v. Rich, 45 Me. 507 ; Stanley v. 
 Stanley, 26 Me. 191. Compare 
 Longley v. Little, 26 Me. 162 ; 
 Wheeler v. Frontier Bank, 23 Me. 
 308; Commonwealth v. Cochituate 
 Bank, 3 Allen, 42 ; McGrowan v. 
 McDonald, 111 Cal. 57. In these 
 Maine cases the right to amend seems 
 to have been reserved to the state. 
 
 511
 
 § 502.] THE LAW OP PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 Further 
 limits oil 
 the re- 
 served 
 power. 
 
 state reserves the right to alter and amend, the shareholders 
 are individually liable for corporate debts, it is clear that the 
 state cannot repeal this personal liability so as to affect the 
 security of existing debts, without impairing the obligation of 
 the contract between the creditor and the corporation; 1 and it 
 hardly requires statement, that the state may repeal this per- 
 son;! 1 liability as to debts not yet contracted. 2 
 
 § 502. The question arises whether there are no limits be- 
 sides those already discussed on the power of the 
 state to change the constitution of a corporation 
 when it has reserved the ri^ht to do so. It has 
 been pointed out, 3 that when the charter of a cor- 
 poration embodies a contract between the corporation and the 
 state, the state through such contract acquires certain rights 
 and powers over such funds of the corporators as become cor- 
 porate property, powers which it would have been unconstitu- 
 tional for the state to exercise, had the corporators not accepted 
 the charter. The rights thus acquired by the state may be 
 summed up, as the right, in so far as the interests of the public 
 are concerned, either to compel the corporation to fulfill the 
 purposes of its incorporation, or, if the state sees fit, to forfeit 
 the franchises of the corporation. When, however, a corpora- 
 tion is formed under an enabling statute or accepts a charter, 
 which the state reserves the right to alter or repeal, what is 
 the limit to the right of the state to alter such statute, and 
 then either compel the corporation to fulfill its altered objects 
 of incorporation, or forfeit the franchises of the corporation for 
 its failure to do so ? As we have seen, there is no contract in 
 such a case between the state and the corporation, for the state 
 agrees to nothing. The corporators, however, assume the duty 
 towards the public to fulfill the purposes of their incorporation, 
 as far as the public may be interested in the fulfillment of such 
 
 1 Hawthorne v. Calef, 2 Wall. 22; 
 Corning v. McCullough, 1 N. Y. 47; 
 Provident Savings Institution v. 
 Jackson Skating Rink, f>2 Mo. 552; 
 St. Louis Railway Supplies Co. v. 
 Harbine, 2 Mo. App. 134 ; Grand 
 Rapids Sav'gs Bank r. Warren, 52 
 Mich. 557; Nat. Commercial Bank v. 
 
 512 
 
 McDonnell, 92 Ala. 388; Barton Nat. 
 IV k v. Atkins, 72 Vt. 33; Woodworth 
 v. Bolles, 61 Kas. 569; but compare 
 Woodliouse v. Commonwealth Insur- 
 ance Co., 54 Pa. St. 307. 
 
 2 Compare Curran v. Arkansas, 15 
 How. 304, § 507. 
 
 3 § 456.
 
 CHAP. VIII.] CORPORATION AND STATE. 
 
 [§ 502. 
 
 purposes, and this duty the state may enforce, 1 or, at its option, 
 forfeit the franchises of the corporation. But in these respects, 
 and especially in respect of enforcing the fulfillment of the pur- 
 poses of incorporation, the word " alter " must be reasonably 
 construed, and the power of the state held restricted to legisla- 
 tion fairly amendatory of the original constitution. 2 The state 
 may at any time repeal the constitution of the corporation, but 
 the state cannot, under the reserved power to alter, substitute 
 
 1 The assumption by the corpora- 
 tors of a duty towards the public does 
 not imply any contractual relations 
 between the corporation and the 
 state. Every member of a commu- 
 nity is affected with duties towards 
 it, and by changing his occupation he 
 usually assumes duties with which 
 he was not affected prior to the 
 change. Duties to the public are 
 mostly negative, and may be summed 
 up in the maxim, Sic utere tuo ut 
 alienum non Icedas; but in the case 
 of a (private) corporation incorpo- 
 rated for a public purpose its duties 
 towards the public may be positive. 
 The point to be regarded is that the 
 state does not contract, but simply 
 passes a law, expressly reserving the 
 rightto alter or appeal. Davis, P. J., 
 says in People v. New York Cent. & 
 H. R. R. Co., 28 Hun, 543: "The 
 power of the state to compel a rail- 
 road company by mandamus to per- 
 form its duties, rests as firmly on 
 the ground that that duty is a public 
 trust, which having been conferred 
 by the state, and accepted by the 
 corporation, may be enforced for the 
 public benefit, as upon the contract 
 between the corporation and the 
 state." 
 
 2 The right of the legislature under 
 reservation of power to amend, alter, 
 or repeal the charter of a railroad 
 company, includes authority to with- 
 draw powers already granted, and to 
 confer new powers and require their 
 
 33 
 
 exercise, and is independent of the 
 assent of the corporation. A statute 
 requiring certain railroad corpora- 
 tions to unite in a passenger station 
 in Worcester, and to extend their 
 tracks in that city to such station, 
 and after such extension to discon- 
 tinue certain portions of their pres- 
 ent locations, is a valid exercise of the 
 power to alter and amend. Mayor, 
 etc., of Worcester ». Norwich & Wor- 
 cester R. R. Co., 109 Mass. 103. See 
 English u. New Haven & Northamp- 
 ton Co., 32 Conn. 240; Robinson u. 
 Gardiner, 18 Gratt. (Va. ) 509; Sprigg 
 v. West. Tel. Co., 46 Md. 67; West 
 End, etc., R. R. Co. u. Atlanta, etc., 
 R. R. Co., 49 Ga. 151 ; compare Yeaton 
 v. Bank of the Old Dominion, 21 
 Gratt. (Va.) 593; Dow i\ R. R. Co., 
 67 N. H. 1. Under such reservation 
 rates of toll may be limited. Parker 
 o. Metropolitan R. R. Co., 109 Mass. 
 506; see Fitchburg R. R. Co. o. Grand 
 Junction R. R. and Depot Co., 4 Allen, 
 198; Amer. Coal Co. o. Consolidation 
 Coal Co., 46 Md. 15; see §§ 476a, 
 4766. Where by a railway charter, 
 a general power is given to consoli- 
 date with, purchase, lease, or acquire 
 the stock of other roads, which power 
 has remained unexecuted, the legis- 
 lature may declare, by subsequent 
 acts, that this power shall not ex- 
 tend to the purchase, lease or con- 
 solidation with parallel or compet- 
 ing lines. Pearsall o. Railway, 161 
 U, S. 647. See Louisville, etc., R. 
 
 513
 
 § 503.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 entirely different purposes of incorporation, and compel the 
 fulfillment of them. For instance, under the power to alter 
 and amend, Congress cannot impose upon a railroad company 
 duties foreign to the objects for which it was created. 1 Keither 
 may the state, under the power to alter and amend, deprive 
 the corporation of its property ; for instance, it cannot, by 
 compelling a plank road company to remove a toll-gate, prac- 
 tically deprive it of several miles of the most valuable portion 
 of its road. 2 As Justice Swayne said, giving the opinion of 
 the court in Shields v. Ohio: 3 "The power of alteration and 
 amendment is not without limit. The alterations must be 
 reasonable, they must be made in good faith, and be consistent 
 with the scope and object of the act of incorporation. Sheer 
 oppression and wrong cannot be inflicted under the guise of 
 amendment or alteration. Beyond the sphere of the reserved 
 powers, the vested rights of property of corporations in such 
 cases are surrounded by the same sanctions, and are as inviola- 
 ble as in other cases." 4 
 § 503. When the legislature reserves the right to annul the 
 
 R. v. Kentucky, ib. 677; Galveston, 
 etc., R'y Co. v. Texas, 170 U. S. 226, 
 where it was held that a statute au- 
 thorizing grants of land for miles of 
 railroad constructed might be re- 
 pealed as to lines of road thereafter 
 authorized; but not as to lines au- 
 thorized at the time the companies 
 were incorporated. Houston & 
 Texas Central R'y Co. i>. Texas, 170 
 U. S. 243. The capacity to acquire 
 lands, unexecuted is not a vested 
 right and may be withdrawn. Adi- 
 rondack Ry. v. New York State, 176 
 U. S. 345. See 111. Central R. R. Co. 
 v. Chicago, 176 U. S. 646. 
 
 1 United States v. U. P. Ry. Co., 
 160 U. S. 1. 
 
 2 Detroit v. Detroit, etc., Plank 
 Road Co., 43 Mich. 140; cf. 111. Cent. 
 R. R. Co. v. Chicago, 176 U. S. 64(i. 
 In Orr v. Bracken County, etc., 81 
 Ky. 593, it was held that the legis- 
 
 514 
 
 lature, under its power to alter and 
 amend, could not change the control 
 of corporate affairs by giving to each 
 shareholder as many votes as he held 
 shares. A questionable case, com- 
 pare Looker v. Maynard, 179 U. S. 
 46. 
 
 8 95 U. S. 319, 324. 
 
 4 See, also, Commissioners v. Hol- 
 yoke Water Power Company, 104 
 Mass. 446 (practically overruling 
 Commonwealth v. Essex County, 13 
 Gray, 239); Holyoke Co. v. Lyman, 
 15 Wall. 500 (affirming Commission- 
 ers v. Holyoke Water Power Co., 
 supra); Zabriskie v. Hackensack, 
 etc., R. R. Co., 18 N. J. Eq. 178; 
 Macon, etc., R. R. Co. v. Gibson, 85 
 Ga. 1; see, also, §§ 533-535, and com- 
 pare the New Jersey statute permit- 
 ting alteration of charter, Laws of 
 1896, ch. 185, § 27, and Meredith o. 
 N. J. Zinc. Co., 44 Atl. Rep. 55.
 
 chap, vrn.] 
 
 CORPORATION AND STATE. 
 
 [§ 504. 
 
 charter of a corporation if the corporation misuses 
 
 its powers or fails to begin active operations within ^Ich] 1 a i ll ~ 
 
 a certain time, it has been held that the legislature ceediug 
 
 . . . . ,, prerequi- 
 
 may exercise its right without the interposition of a site to the 
 judicial tribunal. 1 Undoubtedly, if the legislature iepea ' 
 reserves the unconditional right to alter and repeal, it may 
 exercise that right in its discretion; but when that right is 
 conditioned on an abuse of corporate powers, it would seem 
 to be little more than the ordinary right of the state to proceed 
 by quo warranto. Accordingly, that the corporation should 
 have an opportunity to be heard in its defence, and that some 
 judicial tribunal should pass upon the question whether there 
 has been an abuse of corporate powers, or a failure to exercise 
 them, would seem prerequisite, 2 for the legislature is not the 
 proper body to construe a contract between itself and a group 
 of citizens. 3 
 
 § 504. The repeal of a general enabling act does not affect 
 the capacitie 3 of corporations already formed under 
 it, 4 unless the legislative intention to dissolve exist- ^peai ° fa 
 ing corporations is clearly expressed in the repealing 
 
 1 Miners' Bank v. United States, 
 1 Greene (Iowa), 553. The power 
 to repeal for abuse of corporate 
 privileges is a different right from 
 that of demanding a judicial sen- 
 tence of forfeiture. After an abuse 
 has occurred the legislature is in- 
 vested with full power to repeal the 
 charter, and the corporations hold 
 their franchises from the state 
 merely as tenants at will, in the 
 same manner as if there had been 
 an unconditional reservation of the 
 right to repeal. Judicial proceed- 
 ings taken against the corporation 
 by the attorney-general, under which 
 the corporation is compelled to rem- 
 edy certain of its abuses, do not de- 
 prive the state of its power of repeal 
 for the abuse. A repealing statute 
 will be presumed to have been passed 
 on the existence of the fact on which 
 its validity depends. Erie and N. E. 
 
 R. R. Co. v. Casey, 26 Pa. St. 287 
 (decided by a bare majority). But 
 the legislature is not the final judge 
 as to whether the casus judicis, upon 
 which is based its authority to re- 
 peal, has accrued. Commonwealth 
 v. Pittsburgh and C. R. R. Co., 58 
 Pa. St. 26; Erie and W. E. R. R. Co., 
 v. Casey, 26 Pa. St. 287. 
 
 2 Mayor of Baltimore v. Pitts- 
 burgh and Connellsville R. R. Co., 
 1 Abb. U. S. 9; accord, Flint, etc., 
 Plankroad Co. v. Woodhull, 25 Mich. 
 99; compare Grand Gulf R. R. Co. 
 v. State of Mississippi, 18 Miss. 428, 
 and § 458. 
 
 3 Commonwealth v. Proprietors of 
 New Bedford Bridge, 2 Gray, 339; 
 compare City of London v. Wood, 
 12 Mod. 669, 687. 
 
 4 United Hebrew Association v. 
 Benshimol, 130 Mass. 325 ; Don- 
 worth v. Coolbaugh, 5 Iowa. 300. 
 
 515
 
 § 504.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 statute. 1 The legal effect of the repeal by the legislature of 
 a charter of a corporation is clearly stated in the following 
 words of Justice Miller, giving the opinion of the court in 
 Greenwood v. Freight Company: 2 "Whatever force the law 
 may give to transactions into which the corporation entered, 
 and which were authorized by its charter when in force, [after 
 the repeal of its charter] it can originate no new transactions 
 dependent on the power conferred by the charter. If the 
 corporation be a bank, with power to lend money, and to issue 
 circulating notes, it can make no new loan nor issue any new 
 notes designed to circulate as money. If the essence of the 
 grant of the charter be to operate a railroad, and to use the 
 streets of a city for that purpose, it can no longer so use 
 the streets of the city, and no longer exercise the franchise 
 of running a railroad in the city. In short, whatever power 
 is dependent solely upon the grant of the charter, and which 
 could not be exercised by unincorporated private persons under 
 the general laws of the state, is abrogated by repeal of the law, 
 which granted these special rights. Personal and real property 
 acquired by the corporation during its lawful existence, rights 
 of contract, or choses in action so acquired, and which do not 
 in their nature depend upon the general powers conferred by 
 the charter, are not destroyed by such repeal ; and the courts 
 may, if the legislature does not provide some special remedy, 
 enforce such rights by the means within their power. The 
 rights of the shareholders of such a corporation to their interest 
 in its property are not annihilated by such a repeal, and there 
 must remain in the courts the power to protect those rights." 3 
 
 1 Freehold Mutual Loan Associa- 
 tion v. Brown, 29 N. J. Eq. 121 ; 
 Wilson v. Tesson, 12 Ind. 285. 
 
 a 105 U. S. 13, 18. See, also, Peo- 
 ple o. O'Brien, 45 Hun (N. Y.) 519. 
 
 3 " Lawful dissolution of a cor- 
 poration will destroy all its corpo- 
 rate franchises or privileges vested 
 by the act of incorporation ; but if 
 it holds rights, privileges, or fran- 
 chises having the nature of prop- 
 erty, secured by contract based on 
 valuable consideration, these will 
 survive the dissolution of the cor- 
 
 516 
 
 poration for the benefit of those 
 who may have right to or just 
 claim upon its assets." Interna- 
 tional & G. U. R'y Co. v. State, 75 
 Tex. 356, 378. Opinion of court, 
 per Staytou, C. J. 
 
 In the case of the Broadway Sur- 
 face Railroad Co., which was dis- 
 solved by act of the legislature, it 
 was held that its rights derived 
 from grant from New York City, 
 e. g., its street rights and franchise 
 to run a railroad in Broadway, sur- 
 vived, as did also its mortgages and
 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 505. 
 
 § 505. Having considered the relations between the state 
 and the corporation, a few words may be said as to Relations 
 the relations more particularly subsisting between between 
 
 1 • ° the state 
 
 the state and (a) the shareholders, (b) the directors and the 
 and other officers and agents of the corporation, and interested 8 
 (c) the creditors of the corporation. pirate C ° r " 
 
 The contract with the state, when there is one, is enterprise, 
 between the state and the original corporators, who incorporate 
 themselves by accepting the constitution of the corporation. 
 Their incorporation enables them, within the scope of the cor- 
 porate powers, to act as a body corporate, and places their 
 rights and interests in the hands of a majority of their own 
 number and of the corporate agents. Accordingly, it is the 
 province of the body corporate or corporate management, to 
 protect the interests of all the shareholders against the conse- 
 quences of unconstitutional action on the part of the state. 
 Nevertheless, when the corporation fails to act in defence of 
 corporate interests, a shareholder may. 1 As the corporation, 
 however, cannot sue the state directly to compel it to repeal 
 an unconstitutional law, nor to obtain damages from the state 
 for the effects of such a law, 2 it is usually in the legal relations 
 between the shareholders and other persons in any way inter- 
 ested in the corporate enterprise, that the consequences of un- 
 constitutional legislation show themselves. 3 As, for instance, 
 questions arising under a law imposing increased personal lia- 
 bility upon shareholders would come up between shareholders 
 and creditors endeavoring to enforce this improperly increased 
 
 valid contracts ; and that upon its 
 dissolution its property vested in its 
 trustees (under the statutory pro- 
 visions for winding up). People v. 
 O'Brien, 111 N. Y. 1. So in the 
 case of forfeiture of franchises for 
 forming an illegal trust, the cor- 
 porate property after payment of 
 debts belongs to the shareholders. 
 Havemeyer v. Superior Court, 84 
 Cal. 327. See, also, § 437. 
 
 1 Where the legislature of a state 
 has repealed the charter of a street 
 railroad company, and transferred 
 
 its franchises and track to another, 
 and the corporation refuses to seek 
 a remedy in the courts, a stock- 
 holder of the company will have a 
 standing in a court of equity to ob- 
 tain an injunction on the ground 
 that the repealing statute impairs 
 the obligation of a contract. Green- 
 wood v. Freight Company, 105 U. S. 
 13. See §§ 138 et seq. 
 
 2 See § 462. 
 
 3 A statute to the effect that all 
 dividends not claimed within five 
 years shall be paid to a university, 
 
 517
 
 § 507.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 liability of shareholders. 1 It would seem that questions directly 
 between the state and shareholders could arise only when a 
 shareholder is defending his interests against the action of gov- 
 ernment agents seeking to carry into effect the provisions of 
 some unconstitutional law. 2 The usual object and principal ef- 
 fect of laws made by the state are not to create any relations be- 
 tween the state and its citizens, but to affect relations among 
 its citizens ; to enable them to acquire rights and incur liabilities 
 in a manner different from that in which they could have, be- 
 fore the passage of the law. 3 
 
 § 506. Likewise, very seldom would questions arise directly 
 between the state and directors of a corporation. The state 
 may compel directors to perform their duties in so far as a 
 non-performance of them in any way prejudices the public 
 interest ; 4 and directors could resist action by the agents of 
 the state of an improper nature, and in so doing rest their 
 defence on the nullity of the authority relied on by such 
 agents. The state may create penalties for breaches of trust 
 or failure to fulfill their duties on the part of directors ; and 
 here again if the penalties were enforceable at the suit of those 
 persons for whose protection they were created, the questions 
 as to them would arise between those persons and the direct- 
 ors. Penalties, moreover, cannot be constitutionally imposed 
 for past transactions. 5 
 
 § 507. Finally, in regard to creditors of the corporation, 
 questions as to the constitutionality of legislation in respect 
 
 impairs the obligation of a contract. 
 University v. North Carolina R. R. 
 Co., 76 N. C. 103. 
 JSee §§500, 501. 
 
 2 E. y., to restrain the collection 
 of an illegal tax. See Delaware 
 Railroad Tax, 18 Wall. 200. 
 
 When a stockholder sues to re- 
 strain the collection of an illegal tax 
 (when the corporation refuses), a 
 demurrer lies to his complaint un- 
 less the corporation is made a party. 
 Davenport u. Dows. IS Wall. 626. 
 
 3 But a question might arise in an 
 entirely different way between the 
 state or the United States, and a 
 
 518 
 
 corporation, and its shareholders. 
 Thus a shareholder was indebted to 
 his bank, and also to the United 
 States. By its charter the bank had 
 a lien on its stock for the payment 
 of debts due it by shareholders, and 
 insisted on this lien against the claim 
 for priority of payment asserted on 
 the part of the United States. The 
 bank was sustained. Brent v. Bank 
 of Washington, 10 Pet. 596. 
 
 4 E. g., by making given acts or 
 omissions criminal. 
 
 5 Even when the state reserves the 
 right to alter and repeal. White v. 
 How, 3 McLean, 111.
 
 CHAP. VIII.] 
 
 CORPORATION AND STATE. 
 
 [§ 507. 
 
 of the corporate enterprise, would usually come up between 
 creditors and the corporation ; j or between creditors and share- 
 holders or directors; 2 or among creditors. 3 However, when a 
 state, that has provided in the charter of a bank that its bills 
 shall be receivable for state taxes, attempts to repeal this pro- 
 vision, the question of the constitutionality of the repeal would 
 arise directly between the state officers and the billholders. 
 Such a provision is held to constitute a contract between the 
 state and the holders of the bank bills in circulation, and a 
 contract which the state cannot affect by subsequent legisla- 
 tion. 4 
 
 1 E. g., where the legislature of a 
 state authorized commissioners to 
 borrow money to be used in making 
 a canal, and, for the redemption of 
 the loan, pledged the canal, with its 
 tolls and lands, the lien of a lender 
 under the act cannot be divested or 
 postponed by subsequent legislation. 
 Trustees of the Wabash and Erie 
 Canal Co. v>. Beers, 2 Black, 448; 
 compare Curran v. Arkansas, 15 
 How. 304; § 501. 
 
 The legislature may constitution- 
 ally enact a law providing that, un- 
 less a creditor of an embarrassed 
 corporation expresses his dissent 
 within a specified time from meas- 
 ures deemed essential to the com- 
 mon welfare of the corporation and 
 its creditors, he shall be held to have 
 assented to them. Union Canal Co. 
 v. Gilfillin, 93 Pa. St. 95; S. C, aff'd, 
 109 U. S. 401. 
 
 2 See §§ 500, 501. When the state 
 is a shareholder, questions may arise 
 between the creditors of the corpo- 
 ration and the state as shareholder 
 in the corporation or contributor of 
 its capital. See Curran v. Arkansas, 
 15 How. 304. 
 
 8 See Barings v. Dabney, 19 Wall. 
 1. So questions as to the compe- 
 tency of a court to authorize a re- 
 ceiver to issue certificates making 
 
 them liens prior to the lien of a 
 mortgage, would arise among cred- 
 itors. See, e. g., Fosdick v. Schall, 
 99 U. S. 235; Wallace v. Loomis, 97 
 U. S. 146. See §§ 821 et seq. 
 
 4 Woodruff v. Trapnall, 10 How. 
 190. In this case the state was the 
 sole shareholder. See Paup v. Drew, 
 10 How. 218; Furman v. Nichol, 8 
 Wall. 44; Wagner v. Stall, 2 S. C. 
 538. Such bank bills are not " bills 
 of credit" within the meaning of the 
 Constitution. Darrington v. Bank 
 of Alabama, 13 How. 12. 
 
 In 1836 Maryland passed a law di- 
 recting a subscription of $3,000,000 
 to the capital stock of the Baltimore 
 and Ohio R. R. Co., with the follow- 
 ing proviso: "That if the said com- 
 pany shall not locate the said road 
 in the manner provided for in this 
 act, they shall forfeit $1,000,000 to 
 the state of Maryland for the use of 
 Washington County." In 1841 the 
 state repealed so much of the prior 
 act as made it the duty of the rail- 
 road company to locate its road as 
 prescribed, and released the penalty. 
 Held, that the above proviso was a 
 penalty, and measure of state pol- 
 icy, which the state might change; 
 and that neither the county nor any 
 of its citizens acquired any separate 
 or private interest in it. Maryland 
 
 519
 
 § 507.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. 
 
 Similarly, in Curraii v. Arkansas 1 litigation arose directly 
 between the state and the billholders of a bank of which the 
 state incorporating the bank was the sole shareholder. 2 The 
 state had withdrawn the funds of the bank by means of stat- 
 utes at variance with the provisions of its charter ; and these 
 statutes, with the action of the state officers in accordance with 
 them, the Federal Supreme Court held to impair the obligation 
 of the contract between the billholders and the bank, as well 
 as that of the contract between the state and the billholders. 
 Giving the opinion of the court, Justice Curtis said : " It is 
 true that as the state was the sole stockholder in this bank, the 
 charter cannot be deemed to be such a contract between the 
 state and the corporation as is protected by the constitution of 
 the United States. But it is a very different question whether 
 that charter does not contain provisions, which, when acted 
 upon by the state and by third persons, constitute in law a 
 binding contract between them. . . . Now the charter of 
 this bank provides that it shall have a capital stock of one 
 million dollars to be raised by the sale of the bonds of the state, 
 and also that certain other funds, that are specifically described, 
 shall be deposited therein by the state, and constitute a part of 
 the capital stock of the bank. . . . The bank received this 
 money from the state as the fund to meet its engagements with 
 third persons which the state, by the charter, expressly author- 
 ized it to make for the profit of the state. Having thus set 
 apart this fund in the hands of the bank, and invited the pub- 
 lic to give credit to it, under an assurance that it had been 
 placed there for the purpose of paying the liabilities of the 
 bank, whenever such credit was given, a contract between the 
 state and the creditor not to withdraw that fund to his injury 
 at once arose." 3 
 
 v. Baltimore and Ohio R. Co., 3 R. 
 How. 534; compare Chamberlain v. 
 St. Paul, etc., R. R. Co., 92 U. S. 299. 
 
 1 15 How. 304. 
 
 2 A statute authorizing suits, 
 against the state existed. 
 
 3 15 How. 313. Catron, Daniel, 
 and Nelson, JJ., dissented. Com- 
 
 520 
 
 pare Forstall v. Consolidated Asso- 
 ciation, 34 La. Ann. 770. When a 
 state is a stockholder in a private 
 corporation, it is bound by the pro- 
 visions of the charter as an indi- 
 vidual. Marshall v. Western N. C. 
 R. It. Co., 92 N. C. 322.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 CHAPTER IX. 
 
 LEGAL RELATIONS BETWEEN THE CORPORATION AND 
 ITS SHAREHOLDERS. 
 
 Legal relations discussed in this 
 chapter, § 508. 
 
 Legal relations between shareholders 
 and the corporation, how occa- 
 sioned, § 509. 
 
 Contracts to take shares, § 510. 
 
 Issue of certificate not essential, § 
 511. 
 
 Legal relations; general character, 
 §512. 
 
 Implied promise of subscriber to 
 pay for the shares, §§ 513, 514. 
 
 Consideration, § 515. 
 
 Prescribed forms. Failure to pay 
 preliminary deposit, § 516. 
 
 Conditions. Levy of assessment, § 
 517. 
 
 Subscription of total amount named 
 in articles, § 518. 
 
 Waiver of condition. Estoppel, § 
 519. 
 
 Provisions construed not to be con- 
 ditions, § 520. 
 
 Verbal conditions and secret agree- 
 ments void, § 521. 
 
 " Non-assessable," § 522. 
 
 Issue of stock below par; " Bonus " 
 stock, §§ 522a, 5226. 
 
 Issue of stock for property, § 522c. 
 
 Subscriptions obtained by fraud 
 voidable, provided subscriber acts 
 with despatch, § 523. 
 
 English and American views, § 524. 
 
 Rationale, §§ 525, 526. 
 
 Effect of error, § 527. 
 
 Subscriptions, how affected by sub- 
 sequent unauthorized or improper 
 
 action on the part of the corpo- 
 ration, §§ 528, 529. 
 Change in the corporate enterprise 
 
 by legislative action, §§ 530-532. 
 Power reserved to the state to alter 
 
 and repeal, §§ 533-535. 
 Effect of consolidation, § 536. 
 When subscriber cannot plead nul 
 
 tiel corporation, § 537. 
 When he may, §§ 538, 539. 
 Shareholders may plead that officers 
 
 making calls not legally elected, 
 
 § 540. 
 Subscribers to shares irregularly or 
 
 illegally issued, § 541. 
 Insolvency of corporation no defence. 
 
 Capacities of receiver, § 542. 
 Directors cannot delegate authority 
 
 to make calls. When calls unnec- 
 essary, §§ 543, 544. 
 Forfeiture of shares for non-payment 
 
 of calls, §§ 546, 547. 
 Collusive forfeiture, § 548. 
 Release of subscriber void, §§ 549- 
 
 551. 
 Purchase of shares by the corpora- 
 tion, § 552. 
 Right of the corporation to control 
 
 the corporate enterprise, § 553. 
 Courts will not interfere at the suit 
 
 of shareholders, § 554. 
 Unless to restrain acts which are 
 
 ultra wires, or constitute a breach 
 
 of trust, §§ 555, 556. 
 When shareholders may enjoin the 
 
 acceptance of an amendment, § 
 
 557. 
 
 521
 
 § 508.] THE LAW OF PRIVATE CORPORATIONS. [CHA1\ IX. 
 
 Corporate affairs must be managed 
 in the interest of the shareholders 
 
 as such, §§ 558, 559. 
 
 Agreements among shareholders as 
 to control, § 559a. 
 
 Right of shareholders to vote in 
 their own interest, § 5596. 
 
 Right of shareholders to sue the cor- 
 poration and its officers for con- 
 spiracy, § 500. 
 
 Like outsiders, a shareholder may 
 sue the corporation, § 561. 
 
 Shareholders have no unconditional 
 right to a division of profits, § 5G2. 
 
 But courts will sometimes interfere, 
 especially in favor of preferred 
 shareholders, § 563. 
 
 Preferred dividends cumulative, 
 §564. 
 
 Dividends can be paid only out of 
 profits, § 565. 
 
 Recovery of dividends illegally paid, 
 §§ 566, 567. 
 
 Rights of shareholders after a div- 
 idend has been declared, § 568. 
 
 Right to subscribe to additional 
 shares on an increase of the cap- 
 ital stock, §569. 
 
 Rights on a decrease of stock, § 570. 
 
 Power to issue preferred shares, 
 §§571,572. 
 
 Meetings of the corporation. No- 
 tice, §§ 573. 574. 
 
 Who may call meetings, §575. 
 
 Business irregularly transacted, 
 §576. 
 
 Voting; cumulative voting, § 577. 
 
 Election of officers, § 577a. 
 
 Transfer books evidence of right to 
 vote, § 578. 
 
 Voting by proxy, § 579. 
 
 Combinations of shareholders; vot- 
 ing trusts, § 580. 
 
 A court of law the tribunal to de- 
 termine the validity of corporate 
 elections. Injunctions, §581. 
 
 Power to make by-laws, §§ 582-584. 
 
 Right to inspect corporate books, 
 §585. 
 
 Transfer of shares. Effect. When 
 corporation is insolveut, § 586. 
 
 Liability of transferee, §§ 587, 588. 
 
 Irregular transfers, §§589, 590. 
 
 Liability of corporation for exces- 
 sive issues, § 591. 
 
 Liability of corporation in register- 
 ing transfers, § 592. 
 
 Registry of transfers on forged or- 
 ders, § 593. 
 
 In violation of by-laws, § 594. 
 
 In disregard of rights of which the 
 corporation has no notice, § 595. 
 
 Interpleader, § 596. 
 
 Registry of transfers by mistake, 
 §597. 
 
 Estoppel of corporation by its cer- 
 tificate, §598. 
 
 Right of purchaser to a transfer; to 
 damages, § 599. 
 
 Lien of a corporation on its shares, 
 §§ 000-602. 
 
 Effect of lien, § 603. 
 
 Its scope, §§ 604, 605. 
 
 Waiver of lien, §§ 606, 607. 
 
 Right of shareholders in respect of 
 winding up, §§608, 609. 
 
 Power of majority to dissolve ; of 
 minority, § 610. 
 
 Jurisdiction of equity, § 611. 
 
 § 508. It is the purpose of the present chapter to treat of the 
 Legal reia- legal relations subsisting between individual share- 
 tionsdis- holders, or a minority of shareholders, and the 
 
 cussed in ' J * 
 
 this chapter, corporation or body corporate, acting as such and 
 exercising directly or though its constituted agencies the 
 corporate powers in the management of the corporate enter- 
 522
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 510. 
 
 prise. The body corporate, acting through whatever agency 
 constitutes the corporate management, is the representative of 
 the rights of all persons interested in the corporate enterprise. 
 Therefore, ordinarily, to an action brought by the corporation 
 against a shareholder, for instance to enforce his subscription, 
 no defence can be pleaded that would impair the rights of any 
 persons respecting the corporate funds. With a view, however, 
 to a proper arrangement of topics, discussion of legal relations 
 subsisting directly and apparently among shareholders, and 
 between shareholders and corporate officers and creditors will 
 be reserved for future chapters. 
 
 §509. Legal relations between shareholders 1 and the body 
 corporate are occasioned in the first instance by pur- 
 chasing, subscribing for, or contracting to take latfonsbe- 
 shares of stock. The shareholder is thus brought S h^rehoid- 
 within the operation of rules of law entering into corporL the 
 the constitution of the corporation, which thereupon tion ; how 
 manifest themselves in legal relations not only be- 
 tween the shareholder and the body corporate, but also between 
 the shareholder and all other persons in any way interested in 
 the corporate enterprise. But in this chapter, as before re- 
 marked, we are concerned only with the relations of these 
 persons as represented by the corporation. 
 
 § 510. The forms of contracts to take shares in the stock of 
 a corporation may differ, 2 but the legal relations occasioned by 
 them are similar. 3 A contract of this kind is in the main a 
 
 1 " The type .... of a member 
 or shareholder of a company is a 
 person who has agreed to become a 
 member, and with regard to whom 
 all conditions precedent to the ac- 
 quisition of the rights of a member 
 have been duly observed. Where 
 all these circumstances are com- 
 bined, there is membership in its 
 fullest and most accurate sense." 
 1 Lindley on Part, (Am. ed.) 127. 
 
 2 A stock certificate, although con- 
 taining an agreement to pay interest 
 to the holder until the happening of 
 a certain event, may still constitute 
 him a shareholder; and the agree- 
 
 ment to pay interest is a contract 
 between the holder and the corpo- 
 ration, which cannot be varied by 
 the vote of a majority of share- 
 holders to pay such interest in 
 bonds. McLaughlin v. Detroit, etc., 
 R. R. Co., 8 Mich. 100. See, also, 
 Richardson v. Vermont and Mass. 
 R. R. Co., 44 Vt. 613, in which case 
 the interest was payable out of sur- 
 plus earnings. 
 
 3 Mutual insurance companies, in 
 which the insured becomes a mem- 
 ber by the payment of the cash pre- 
 mium, are anomalous. The theory 
 of such companies is that the pre- 
 
 523
 
 § 511.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 contract to subscribe funds for the accomplishment 
 to take of a certain purpose, the subscriber to surrender his 
 siares. rights as owner over the funds subscribed, but to 
 
 retain some of his rights in such funds (as e. g. } to have them 
 applied to no other purposes than the objects of incorporation J ) 
 and acquiring through his contract certain other rights (as e. g., 
 the right to act as a member of a corporation), which other- 
 wise he would not have had. 
 
 § 511. To constitute a person a shareholder, it is not neces- 
 issue of sai T that a certificate of stock should have been issued 
 no^essen- ^° him; 2 though it seems a verbal promise to take 
 tiai. and pay for shares will not be binding, 3 unless a stock 
 
 certificate has been tendered and accepted. 4 Where a sub- 
 
 miums paid by the members for the 
 insurance of their respective prop- 
 erties, constitute a common fund 
 devoted to the payment of any 
 losses that may occur. Union Ins. 
 Co. v. Hoge, 21 How. 35. 
 
 '"When any person takes stock 
 in a railroad company, he has en- 
 tered into a contract with the com- 
 pany that his interest shall be sub- 
 ject to the direction and control of 
 the proper authorities of the corpo- 
 ration to accomplish the object for 
 which the company was organized. 
 He does not agree that the improve- 
 ment to which he subscribes should 
 be changed in its purposes and char- 
 acter, at the will and pleasure of a 
 majority of the stockholders, so that 
 new responsibilities, and it may be 
 new hazards, are added to the origi- 
 nal undertaking." Clearwater v. 
 Meredith, 1 Wall. 25, 40. 
 
 2 Chaffin ». Cummings, 37 Me. 76; 
 Cusick o. Bartlett, 01 Me. 153; Beck- 
 ett v. Houston, 32 Ind. 393; Slipher 
 v. Earhart, 83 Ind. 173; Haynes v. 
 Brown, 36 N. H. 545, 563; Schaeffer 
 v. Missouri Home Ins. Co., 46 Mo. 
 248; Chester Glass Co. v. Dewey, 16 
 Mass. 94; Burr v. Wilcox, 22 X. Y. 
 551; Chesley v. Pierce, 32 N. H. 388, 
 524 
 
 402; Mitchell v. Beckman,64 Cal. 117; 
 Pacific Nat. Bk. v. Eaton, 141 U. S. 
 227; Butler Univ. v. Scoonover, 114 
 Ind. 381; Storage Co. ». Assessors, 
 56 N. J. L. 389; see Thorp v. Wood- 
 hull, 1 Sandf. Ch. (N. Y.) 411; cf. 
 Courtright v. Deeds, 37 Iowa, 503. 
 But see Busey v. Hooper, 35 Md. 15; 
 Mount Sterling Coal Road Co. v. 
 Little, 14 Bush (Ky.), 429. 
 
 3 Fanning v. Insurance Co., 37 Ohio 
 St. 339 ; Vreeland o. New Jersey 
 Stone Co., 29 N. J. Eq. 188. (In 
 these cases the charters indicated 
 that writing was essential.) Pitts- 
 burg and Steubenville R. R. Co. v. 
 Cazzam, 32 Pa. St. 340. A transfer 
 cannot be established by parol. 
 Pittsburg, etc., R. R. Co. v. Clarke, 
 29 Pa. St. 146. But in the cases of 
 Colfax Hotel Co. v. Lyon, 69 Iowa, 
 683; Bullock v. Turnpike Co., 85 Ky. 
 184, and Des Moines Bank v. Hotel 
 Company, 88 Iowa, 4, a verbal sub- 
 scription contract was held valid. 
 See, also, Insurance Co. v. Wall, 105 
 La. 89. Shares are choses in action, 
 and, therefore, contracts to take 
 shares are not within the Statute of 
 Frauds. Webb v. Baltimore, etc., 
 R. R. Co., 77 Md. 92. 
 
 4 Upton v. Tribilcock, 91 U. S. 45.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 513. 
 
 Legal rela- 
 tions ; gen- 
 
 scriber acknowledges the receipt of shares which he agrees to 
 pay for in instalments, one of which he actually pays, he will 
 be liable on his subscription, although no certificate of stock 
 has ever been issued to him ; * and, unless a subscription is ex- 
 pressly made payable on call, no notice to the subscriber is 
 necessary before bringing suit. 2 " A certificate of the shares 
 of stock of a railway company is merely a solemn affirmation 
 under the seal of the company that a certain amount of shares 
 of stock stands in the name of the individual mentioned in the 
 certificate." 3 
 
 § 512. Legal relations occasioned by a contract to take 
 shares, just as legal relations occasioned by any other 
 contract, are the manifestations of the rules of law 
 within the operation of which the parties by their eraicharao- 
 contract have brought themselves. If the contract 
 to take shares is binding, that is, if the desired legal relations 
 are occasioned, the rules of law of which the legal relations so 
 occasioned are the manifestation will be those composing the 
 constitution of the corporation ; or, speaking more definitely, 
 will be those contained in the charter of the corporation, or in 
 the general enabling statute and articles of association filed in 
 accordance therewith, supplemented by the more general rules 
 of corporation law. 4 And a person subscribing for shares is 
 affected with a notice of the obligations which he incurs. 5 
 
 § 513. It is the settled law of the United States Supreme 
 Court, and of most of the states, that a subscription 
 
 j: i • t i • /• ! .-. Implied 
 
 tor snares implies the promise or the subscriber to promise of 
 
 1 Hawley v. Upton, 102 U. S. 314. 
 In these cases the subscriber had not 
 demanded a certificate. Barron v. 
 Burrill, 80 Me. 00. Compare We m pie 
 v. St. Louis, etc., R. R. Co., 120 111. 
 190; A. & S. C. R. Co. v. Hill, 20 
 Oregon, 177. 
 
 2 Lake Ontario, etc., R. R. Co. v. 
 Naason, 10 N. Y. 451; Grubb v. 
 Mahoning Nav. Co., 14 Pa. St. 302; 
 Wilson v. Wills Valley R. R. Co., 33 
 Ga. 400. Personal demand before 
 suit for calls may be made necessary 
 
 by statute. Scarlett u. Academy of 
 Music, 43 Md. 203 ; compare Sheffield 
 R'y Co. o. Woodcock, 7 M. & W. 574; 
 Newry and Enniskillen R'y Co. v. 
 Edmunds, 2 Exch. 118. 
 
 3 Lord Cairns in Shropshire Union 
 R'ys, etc., Co. v. Queen, L. R. 7 H. 
 L. Cas. 490, 509. 
 
 4 See Hoagland v. Cincinnati and 
 Ft. W. R. R. Co., 18 Ind. 452, 454. 
 
 5 McKira ». Glenn, 00 Md. 479; 
 Chesapeake and Ohio Canal Co. v. 
 Dulany, 4 Cranch, Cir. Ct. 85. 
 
 525
 
 § 514.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 subscriber p a ,y f or them. 1 And this implied promise arises, 
 
 to pay for l J , r r 
 
 the shares, although a power to forfeit or sell the shares for non- 
 payment may be expressly given to the corporation. 2 The 
 courts of Massachusetts, Maine, and, possibly, Now Hampshire, 
 follow a contrary doctrine, holding that a subscription for 
 shares in a corporation subjects the subscriber only to the 
 liabilities imposed by the statute under which the corporation 
 was organized ; and when a corporation is authorized by 
 statute to assess the shares, and sell them for non-payment 
 of assessments, and a subscriber has not expressly promised 
 to pay assessments, no promise can be implied which will enable 
 the corporation to maintain an action against him personally, 
 even though the sale of the shares under the statute fails to 
 bring enough to pay the assessment. 3 
 
 § 514. The following statement of the law in New Hamp- 
 shire is at least lucid, whatever objection may be taken to it : 
 
 1 Upton v. Tribilcock, 91 U. S. 45 ; 
 Webster v. Upton, ib. 65 ; Lake On- 
 tario, etc., R. R. Co. v. Mason, 16 
 N. Y. 451 ; Rensselaer, etc., Plank- 
 road Co. i). Barton, ib. 457, note ; 
 Miller v. Wild Cat Gravel Road Co., 
 52 Ind. 51 ; Sagory v. Dubois, 3 
 Sandf. Ch. (N. Y.) 466; Dayton v. 
 Borst, 31 N. Y. 435 ; Fry's Ex'r v. 
 Lexington, etc., R. R. Co., 2 Mete. 
 (Ky. ) 314 ; Beene v. Cabawba, etc., 
 R. R. Co., 3 Ala. 660 ; Gill's Adm'r 
 v. Kentucky, etc., Mining Co., 7 
 Bush (Ky.), 635 ; Chase v. Railroad 
 Co., 5 Lea (Tenn.), 415 ; Waukon, 
 etc., R. R. Co. v. Dwyer, 49 Iowa, 
 121 ; Nulton v. Clayton, 54 Iowa, 425 ; 
 Mansfield, etc., R. R. Co. v. Brown, 
 26 Ohio St. 223 ; Electric Co. v. 
 Tandy, 66 Vt. 248 ; Walter 0. Merced 
 Academy Ass'n, 126 Cal. 582. See 
 Small v. Herkimer Mfg. Co., 2 N. Y. 
 330. Cf. N. H. Cent. R. R. Co. v. 
 Johnson, 30 N. H. 390 ; Mount Ster- 
 ling Coal Co. v. Little, 14 Bush (Ky. ), 
 429 ; Russell V. Bristol, 49 Conn. 251. 
 
 If a person makes a valid contract 
 on sufficient consideration with a 
 
 526 
 
 corporation to take stock in it and 
 refuses to comply without fault on 
 the part of the corporation, it may 
 recover such damages for the breach 
 as it has sustained. Quick v. Lemon, 
 
 105 111. 578. 
 
 2 Dexter, etc., Plankroad Co. v. 
 Millerd, 3 Mich. 91 ; Hughes t>. An- 
 tietam M'f'g Co., 34 Md. 316. Con- 
 tra, Odd Fellows' Hall Co. v. Glazier, 
 5 Harr. (Del.) 172. See § 546. 
 
 3 Mechanics' Foundry, etc., Co. v. 
 Hall, 121 Mass. 272. See, also, Ken- 
 nebec, etc., R. R. Co. v. Kendall, 31 
 Me. 470 ; Belfast, etc., R. R. Co. v. 
 Moore, 60 Me. 561 ; Penobscot, etc., 
 R. R. Co. v. Dunn, 39 Me. 587. An 
 amendment to a charter cannot op- 
 erate to make a subscriber person- 
 ally liable on his subscription when 
 he was not so liable before. Belfast, 
 etc., R. R. Co. v. Moon, 60 Me. 561. 
 But by charter-provisions stocks may 
 be liable to further assessments by 
 the corporation after the full par 
 value has been paid. Price's Appeal, 
 
 106 Pa. St. 421. Compare Dewey v. 
 St. Albans Trust Co., 57 Vt. 332.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 515. 
 
 " "Where a party makes an express promise to pay the assess- 
 ments, he is answerable to the corporation upon such promise 
 for all legal assessments, and may be compelled to its perform- 
 ance by an action at law, before resorting to a sale of the 
 shares. It is a personal undertaking beyond the terms of the 
 charter. Where, on the other hand, he only agrees to take 
 a specified number of shares, without promising expressly to 
 pay assessments, then resort must first be had to a sale of the 
 shares to pay the assessments before an action at law can be 
 maintained. His agreement simply to take the shares is an 
 agreement upon the faith of the charter, and by it alone is he 
 to be governed, so far as his shares are to be affected. He takes 
 them upon the conditions and law of the charter. They exist 
 only by virtue of the charter, and are to be governed by the 
 provisions therein contained." J 
 
 § 515. In the absence of express provisions in the charter 
 or enabling act regulating subscription contracts, 
 whether an implied or express promise to pay for £on Slderar 
 shares may be enforced by the corporation, is to be 
 determined in accordance with the rules of the law of con- 
 tracts. 2 In the first place, and principally, was there a con- 
 sideration ? 3 When no consideration is expressed, a sufficient 
 one to uphold the contract ordinarily exists in the implied 
 counter-promise of the corporation, in accepting the subscrip- 
 tion, to admit the subscriber to all the rights of a shareholder. 4 
 
 1 New Hampshire Central R. R. 
 Co. v. Johnson, 30 N. H. 390, 403. 
 
 2 E. g., to an action ou a subscrip- 
 tion contract, the infancy of the 
 subscriber may be pleaded. Newry 
 and Enniskillen R'y Co. v. Combe, 
 5 Eng. R'y Cas. 633; Dublin, etc., 
 R'y Co. v. Black, 7 Eng. R'y Cas. 
 434. Compare Cork, etc., R'y Co. 
 v. Cazenove, 10 Q. B. 935. Writing 
 one's name in the private memoran- 
 dum book of a person soliciting sub- 
 scriptions, does not give that person 
 authority to sign a stock-subscrip- 
 tion. McClelland v. Whiteley, 15 
 Fed. Rep. 322. 
 
 3 An agreement by a person to 
 
 act as director and to give the busi- 
 ness of his firm to a bank, is a suf- 
 ficient consideration to support a 
 contract on the part of the bank to 
 give him the requisite number of 
 shares to qualify as a director. Rich 
 v. State Nat. B'k, 7 Neb. 201. There 
 is no question that there is a con- 
 sideration for notes given to a cor- 
 poration by a subscriber to secure 
 payments on his shares. Chetlain 
 v. Republic Life Ins. Co., 86 111. 220. 
 4 Kennebec and Portland R. R. Co. 
 v. Jarvis, 34 Me. 360; Stokes v. Leba- 
 non, etc., Turnpike Co., 6 Humph. 
 (Tenn.) 241; Thigpen v. Miss. Cent. 
 R. R. Co., 32 Miss. 347; East Tennes- 
 527
 
 § 516.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 This consideration, however, does not exist unless the agree- 
 ment to subscribe is made either with the corporation or its 
 agent, 1 or is subsequently accepted by the corporation. 2 If at 
 the time of subscribing, the subscribers make a part payment 
 or deposit on account of their subscriptions, the making of 
 these deposits by the different subscribers and the receiving of 
 them by the corporation, which latter must be held by so 
 doing impliedly to agree to apply them to the purposes of in- 
 corporation, will constitute a sufficient consideration to pre- 
 vent any subscriber from withdrawing his deposit, as well as 
 a sufficient consideration to enable the corporation to compel 
 the subscribers to complete the full account of their subscrip- 
 tions. 3 
 
 § 516. When in the constitution of a corporation, any par- 
 ticular form for a contract of subscription is pre- 
 scribed, it may be inferred that that form, if fol- 
 lowed, will constitute a binding contract. 4 But the 
 fact that the form prescribed was not followed, will 
 not necessarily invalidate a subscription; 5 nor will 
 a subscriber be allowed to take advantage of his own non-per- 
 
 see, etc., R. R. Co. v. Gammon, 5 I 2 Walker v. Mobile, etc., It. R. Co., 
 Sneed (Term.), 567. See Starratt v. 34 Miss. 245; Northern Central Micl 
 Rockland Fire Ins. Co., 65 Me. 374. 
 
 Prescribed 
 forms. 
 Failure to 
 pay pre- 
 liminary- 
 deposit. 
 
 Compare University of Des Moines 
 
 R. R. Co. v. Eslow, 40 Mich. 222; 
 
 Stevens v. Corbitt, 33 Mich. 458; 
 v. Livingston, 57 Iowa, 307. When | Michigan, Midland, etc., R. R. Co. v. 
 commissioners are appointed to re- j Bacon, ib. 466. See Mobile and Ohio 
 ceive subscriptions under a statute R. R. Co. v. Yandal, 5 Sueed (Tenn. ), 
 which does not provide for the event I 294. An offer to subscribe to stock 
 of an excess of subscriptions over the ! of a railroad company in case of a 
 authorized capital, and subscriptions | specified extension of its road is re- 
 in excess are made, every subscriber J vocable until delivered to the corn- 
 acquires the right to some stock, pany; and the death of the offerer is 
 Meads i\ Walker, Hopk. Ch. (N. Y.) a revocation. Wallace v. Townsend, 
 
 587. See Clarke v. Brooklyn Bank, 
 lEdw. Ch. (N. Y.)361. 
 
 1 Lake Ontario R. It. Co. v. Cur- 
 tiss, 80 N. Y. 219; Essex Turnpike 
 Co. v. Collins, 8 Mass. 292; Lowe v. 
 E. and K. R. R. It. Co., 1 Head 
 (Tenn.), 659; Parker v. Northern 
 Centr. Mich. R. R. Co., 33 Mich. 23; 
 Wallace v. Townsend, 43 O. St. 537. 
 Compare Workman v. Campbell, 46 
 Mo. 305. 
 
 528 
 
 43 O. St. 537. See § 108. 
 
 3 See § 98, and generally §§ 91-98, 
 for a discussion of the consideration 
 necessary to uphold an agreement to 
 subscribe. 
 
 4 Parker v. Northern Central R. R. 
 Co., 33 Mich. 23. See § 91. 
 
 5 Still the omission of some pre- 
 scribed formality may render a sub- 
 scription incomplete and therefore 
 invalid. See Dutchess, etc., R. R.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 51 ?- 
 
 formance of conditions precedent prescribed by the constitution, 
 in order to invalidate his subscription agreement, at least if any 
 one who has acted on the faith of such agreement would be in- 
 jured by its non-fulfillment. Thus, where the constitution of 
 the corporation requires a preliminary deposit to be paid by 
 the subscriber, and the subscriber fails to pay it, he may not 
 plead his own omission in answer to a suit for calls. 1 This seems 
 entirely correct on principle, though there are decisions to the 
 contrary. 2 
 
 § 517. If the contract of subscription is to be held bind- 
 ing, then must be considered whether it is so abso- Conditions 
 lutely or conditionally. 3 It will be binding abso- Levy of 
 
 iii t • • i i assess- 
 
 lutely when conditions neither exist in the contract merit. 
 itself nor can be imported into it from the constitution of the 
 corporation. Otherwise, it will be binding conditionally until 
 
 Co. v. Mabbett, 58 N. Y. 397; Car- 
 lisle v. Saginaw Valley R. R. Co., 
 27 Mich. 315; Shurtz v. Schoolcraft, 
 etc., R. R. Co., 9 Mich. 269; Coppage 
 v. Hutton, 124 Ind. 401. 
 
 1 Lake Ontario, etc., R. R. Co. v. 
 Mason, 16 N. Y. 451; Rensselaer, 
 etc., Plank Road Co. v. Barton, ib. 
 457, note; Illinois River R. R. Co. 
 v. Zimmer, 20 111. 654 ; Ryder v. 
 Alton, etc., R. R. Co., 13 111. 516; 
 Haywood, etc., Plank Road Co. v. 
 Bryan, 6 Jones (N. C), Law, 82; 
 Home Stock Ins. Co. v. Sherwood, 
 72 Mo. 461; Sedalia W. and S. Ry. 
 Co. v. Abell, 17 Mo. App. 645; 
 Thorp v. Woodhull, 1 Sandf. Ch. 
 (N. Y.) 411; Vicksburg, etc., R. R. 
 Co. v. McKean, 12 La. Ann. 638; 
 Mitchell o. Rome R. R. Co., 17 Ga. 
 574; Wight v. Shelby R. R. Co., 16 
 B. Mon. (Ky. ) 4; Piscataqua Ferry 
 Co. v. Jones, 39 X. H. 491; Pittsburg 
 W. and R. R. R. Co. v. Applegate, 21 
 W. Va. 172; Webb v. Baltimore, etc., 
 R. R. Co., 77 Md. 92; West End Co. 
 v. Claiborne, 97 Va. 734. 
 
 2 Wood v. Coosa, etc., R. R. Co., 
 32 Ga. 273; Jenkins v. Union Turn- 
 pike Co., 1 Caincs Cas. in Er. (N. Y.) 
 
 34 
 
 86; Goshen, etc., Turnpike Co. v. 
 Hurtin, 9 Johns. 217; Boyd v. Peach 
 Bottom R'y Co., 90 Pa. St. 169. See 
 Excelsior Grain Binder Co. v. Stay- 
 ner, 25 Hun, 91; Fiser v. Miss, and 
 Tenn. R. R. Co., 32 Miss. 359. Com- 
 pare Garrett v. Dillsburg, etc., R. R. 
 Co., 78 Pa. St. 465. 
 
 3 Subscribing conditionally to 
 shares does not make the subscriber 
 a shareholder till the condition is 
 performed. Evansville, etc., R. R. 
 Co. v. Shearer, 10 Ind. 244. It is 
 held in Pennsylvania that when one 
 subscribes conditionally to the stock 
 of a railroad company, before the 
 procurement of its charter, the con- 
 dition is void and the subscription 
 is absolute. Bedford R. R. Co. v. 
 Bowser, 48 Pa. St. 29 ; Caley ». 
 Phila., etc., R. R. Co., 80 Pa. St. 
 263; Pittsburgh and S. R. R. Co. v. 
 Biggar, 34 Pa. St. 455. The writer 
 fails to see the correctness of these 
 decisions, which in effect make for 
 the subscriber a contract he never 
 entered into. They did not turn on 
 any question of the condition being 
 verbal or written. 
 
 529
 
 § 518.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 the performance of the conditions, provided they are per- 
 formed within a reasonable time, 1 whereupon it will become 
 binding absolutely. 2 Accordingly, where, by the terms of 
 the subscription, the subscriber agreed to take shares and 
 pay all charges and assessments regularly levied or as- 
 sessed by the board of directors, it was held that the cor- 
 poration could not recover until an assessment had been 
 made ; and, further, that the terms of the subscription could 
 not be contradicted by parol proof of an understanding that 
 payment should be made without calls. 3 Likewise, if the 
 charter of a corporation does not definitely fix the number 
 of shares of which the capital stock is to be composed, this 
 number must be fixed by the proper authority before a valid 
 assessment can be laid on subscribers. 4 
 
 § 518. Again, if the contract to subscribe is conditioned on 
 
 1 See Fountain Ferry T. R. Co. v. 
 Jewell, 8 B. Mon. (Ky.) 141; Cravens 
 v. Eagle Mills Co., 120 Ind. 6. If 
 the corporate enterprise is not 
 started in good faith within the 
 period prescribed by the charter, a 
 subscriber is released. McCully v. 
 Pittsburgh and Connellsville R. R. 
 Co., 32 Pa. St. 25. See, also, Rams- 
 gate Victoria Hotel Co. ». Monte- 
 fiore, 4 H. & C. 164. 
 
 2 Chamberlain v. Painesville, etc., 
 R. R. Co., 15 Ohio St. 225; Ashtabula, 
 etc., R. R. Co. v. Smith, ib. 328; 
 Mansfield, etc., R. R. Co. v. Brown, 
 26 Ohio St. 223; Armstrong v. Karsh- 
 ner, 47 Ohio St. 276; Racine Co. Bk. 
 v. Ayres, 12 Wis. 512; Rutland, etc., 
 R. R. Co. v. Thrall, 35 Vt. 536, 543; 
 Pittsburg and Connellsville R. R. Co. 
 v. Stewart, 41 Pa. St. 54; Caley v. 
 Phila. & Chester Co. R. R. Co., 80 
 Pa. St. 263; Webb v. Baltimore, etc., 
 R. R. Co., 77 Md. 92. 
 
 A corporation suing for the whole 
 subscription may recover what is 
 due unconditionally, though it fail 
 to establish its right to recover the 
 rest. St. Louis and Cedar Rapids 
 R. R. Co. v. Eakins, 30 Iowa, 279. 
 530 
 
 But a conditional subscription has 
 been held a mere offer, revocable 
 until the condition is performed. 
 Garret v. Dillsburg, etc., R. R. Co., 
 78 Pa. St. 465. 
 
 8 Grosse Isle Hotel Co. v. I'Anson, 
 43 N. J. L. 442; North Street R. R. 
 Co. v. Spullock, 88 Ga. 283. But 
 the subscriber cannot dispute the 
 necessity of the assessment. Chou- 
 teau Ins. Co. v. Floyd, 74 Mo. 286. 
 Right of action on a subscription 
 made subject to call does not accrue 
 till the call is made, and conse- 
 quently not till then does the statute 
 of limitations begin to run. Macon 
 and A. R. R. Co. v. Vason, 52 Ga. 
 326. Compare Braddock v. Phila. 
 M. & M. R. R. Co., 45 N. J. L. 363. 
 
 4 Somerset R. R. Co. v. Clarke, 61 
 Me. 379; Same v. Cushing, 45 Me. 
 524; Worcester & Nashua R. R. Co. 
 v. Hinds, 8 Cush. 110. Compare 
 Bucksport, etc., R. R. Co. v. Buck, 
 65 Me. 536 ; Pike v. Bangor, etc., 
 Shore Line R. R. Co., 68 Me. 445. 
 A call upon part of the subscribers 
 only is invalid. Brockway v. Gads- 
 den, etc., Co., 102 Ala. 620. 

 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 518. 
 
 the subscription of a certain amount, it may not be gub . 
 enforced until that amount is subscribed for; 1 and tion of total 
 
 i . . . , amount 
 
 if a certain amount or stock is mentioned in the named in 
 charter or articles of association, a contract to sub- 
 scribe is impliedly conditioned on the subscription of that 
 amount, 2 unless the terms of the subscription contract or 
 of the statute under which the corporation is organized 3 
 are inconsistent with the existence of such implied condi- 
 tions. 4 And the subscriptions, to fulfill this condition, must 
 be valid and made by solvent persons apparently able to pay 
 for the shares subscribed for by them. 5 It may be added gen- 
 erally, that whatever conditions are imposed on the corporation 
 by the subscription contract must be performed before the con- 
 tract can be enforced. 6 But the rule that, when the capital 
 
 1 Philadelphia & West Chester R. R. 
 Co. o. Hickman, 28 Pa. St. 318; Chase 
 v. Sycamore, etc., R. R. Co., 3S 111. 
 215: Morris Canal, etc., Co. v. Nathan, 
 2 Hall (N. Y.), 239; Belfast & M. L. 
 R. R. Co. v. Cothrell, 66 Me. 185; 
 Monadnock R. R. v. Felt, 52 N. H. 
 379. 
 
 2 Atlautic Cotton Mills v. Abbot, 9 
 Cush. 423; Katama Land Co. v. Jer- 
 negan, 126 Mass. 155; Read v. Mem- 
 phis Gayoso Gas Co., 9 Heisk. 
 (Tenn.) 545; Littleton Mfg. Co. v. 
 Parker, 14 N. H. 543; Contoocook 
 Valley R. R. v. Barker, 32 N. H. 363; 
 Peoria & R. I. R. R. Co. v. Preston. 
 35 Iowa, 115; Memphis Branch R. R. 
 Co. v. Sullivan, 57 Ga. 240; Allman 
 v. Havana, etc., R. R. Co., 88 111. 521; 
 Hughes v. Antietam Mfg. Co., 34 
 Md. 316; Hotel Co. v. Schram, 6 
 Wash. 134; Elder v. New Zealand 
 Land Improvement Co., 30 L. T. N. 
 S. 285 ; Hendrix o. Academy of Music, 
 73 Ga. 437; Hale v. Sanborn, 16 Neb. 
 1; Rockland, etc., Steamboat Co. v. 
 Sewall, 78 Me. 167; Exposition R. R. 
 Co. v. Railroad Co., 42 La. Ann. 370; 
 Haskell o. Worthington, 94 Mo. 560. 
 See People's Ferry Co. v. Balch, 8 
 Gray, 303; Pierce v. Jersey Water 
 
 Works Co., L. R. 5 Exch. 209; New- 
 port Cotton Mill Co. v. Minis, 103 
 Tenn. 465. Compare McDougall v. 
 Jersey Imperial Hotel Co., 10 Jur. 
 N. S. 1043; Warwick R. R. Co. v. 
 Cady, 11 R. I. 131; Nutter r, Lexing- 
 ton, etc., R. R. Co., 6 Gray, 85; Haw- 
 kins v. Citizens' Inv. Co., 38 Or. 544. 
 Contra, Nelson v. Blakey, 54 Ind. 29. 
 See, also, § 96. 
 
 3 Lincoln Mfg. Co. v. Sheldon, 44 
 Neb. 279. 
 
 4 Iowa & Minn. R. R. Co. v. Per- 
 kins, 28 Iowa, 281; see Selma, M. & 
 M. R. R. Co. o. Anderson. 51 Miss. 
 829; Skowhegan & A. R. R. Co. v. 
 Kinsman. 77 Me. 370; Sedalia, W. & 
 S. Ry. Co. ». Abell, 17 Mo. App. 645; 
 Arkadelphin Cotton Mills v. Trimble, 
 54 Ark. 316. 
 
 5 Lewey's Island R. R. Co. v. Bol- 
 ton, 48 Me. 451; Phillips v. Coving- 
 ton, etc., Bridge Co., 2 Met. (Ky.) 
 219. See Holman v. State, 105 Ind. 
 569, 571. 
 
 6 Santa Cruz R. R. Co. v. Schwartz, 
 53 Cal. 106; Swartwout v. Mich. Air 
 Line R. R. Co., 24 Mich. 389; Car- 
 lisle v. Cahawba, etc., R. R. Co., 4 
 Ala. 70; Trott v. Sarchett, 10 O. St. 
 241; Thompson u. Oliver, IS Iowa, 
 
 531
 
 § 519.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 stock is fixed by the charter, an action does not lie to enforce 
 a subscription until all the stock is taken, does not apply 
 where, from the face of the charter, it is obvious that the 
 whole of the capital stock was not necessary to the organiza- 
 tion of the company, and the subscriber knew, or had reason 
 to know, this at the time of subscribing; nor does it apply 
 where a subscriber takes part in carrying on the business of 
 the company, and votes on his shares ; at least, when the suit 
 is brought by the receiver of the corporation after it has become 
 insolvent. 1 
 
 § 519. The antecedent obligation of the corporation to per- 
 form the conditions of the subscription contract w r ill 
 cease if the subscribers waive performance, 2 or by 
 acting as if the conditions had been performed es- 
 top themselves from setting up the non-performance of them. 
 Thus, if a commissioner subscribes for shares in a railroad cor- 
 poration to be organized and then joins in a certificate, sent 
 to the governor of the state, which sets forth the performance 
 of the conditions precedent, he will be estopped, in an action 
 brought to recover his subscription, from pleading the non-per- 
 formance of those conditions. 3 Similarly, when the receiver of 
 
 "Waiver of 
 condition. 
 Estoppel. 
 
 417 ; Burlington and M. R. R. R. Co. 
 v. Boestler, 15 Iowa, 555. A sub- 
 scription may be received by a rail- 
 road company conditioned on a spec- 
 ified location of its road; and cannot 
 be enforced unless the condition is 
 complied with. Nashville and N. W. 
 R. R. Co. ». Jones, 2 Cold. (Tenn.) 
 574; Missouri Pac. Ry. Co. v. Tygard, 
 84 Mo. 263, and preceding cases. 
 
 When on subscribing and paying 
 for shares the subscriber makes a 
 contract with the company's agent, 
 under a mutual mistake as to the 
 agent's powers, and the company re- 
 fuses to perform, the subscriber can 
 recover back his money; the con- 
 tract having been part of the sub- 
 scription agreement. Weeden v. 
 Lake Erie and M. R. R. Co., 14 Ohio, 
 563. 
 
 1 Musgrave v. Morrison, 54 Md. 
 
 532 
 
 161. Compare Greenbriar Industrial 
 Expo. v. Ocheltree, 44 W. Va. 626. 
 
 2 Defendant subscribed for shares, 
 making his subscription payable on 
 certain conditions, one of which was 
 that the road should be built to a 
 certain place by a certain date. Sub- 
 sequently he gave notes for his sub- 
 scription payable on the fulfillment 
 of the conditions, except the one 
 above mentioned. It was held that 
 the omitted condition was thereby 
 waived. Slipher v. Earhart, 83 Ind. 
 173. See, also, Lee v. Imbrie, 13 Oreg. 
 510; California Southern Hotel Co. 
 v. Callendar, 94 Cal. 120; Macfar- 
 land v. West Side Imp. Ass'n, 53 
 Neb. 417; S. C, 56 Neb. 277. 
 
 3 Bavington v. Pittsburgh and 
 Steubenville R. R. Co., 34 Pa. St. 
 358.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 520. 
 
 Provisions 
 construed 
 not to be 
 conditions. 
 
 an insolvent corporation sues a shareholder on his subscription, 
 it is no defence that the whole amount of the capital stock had 
 never been subscribed for, if the shareholder, knowing this, has 
 participated in the affairs of the company in a manner which 
 would have been proper only on the assumption that the share- 
 holders intended to carry on business with the stock but par- 
 tially subscribed. 1 The obligation on the part of the corporation 
 to perform the conditions of a subscription contract will also 
 cease, if the subscriber himself prevents the performance. 2 
 
 § 520. At times it may be difficult to determine whether a 
 given provision in the constitution of the corpora- 
 tion, or in the subscription contract, constitutes a 
 condition precedent to the enforcement of the sub- 
 scription. The non-fulfillment, however, of that 
 which is not a condition, is no defence to an action for calls. 
 Thus, to a petition for a mandamus to compel the issue of 
 county bonds in payment for railroad shares, it is no defence 
 that the road had not been completed within the time men- 
 tioned in the subscription contract, time not appearing to have 
 been of its essence, and the benefits expected from the road 
 having accrued. The court said that if injury had resulted, 
 there might be an abatement in the shape of damages, but not 
 an entire release. 3 In another case where a corporation in its 
 prospectus set forth its intention to purchase ten tracts of 
 land, and afterwards failed to purchase two of them, on ac- 
 count of a defective title, it was held that the plaintiff could 
 not on that account rescind his contract to purchase shares, as 
 to permit that would be a great hardship on the other share- 
 holders. 4 
 
 1 Stillman v. Dougherty, 44 Md. 
 380. See, also, Erie, etc., Plankroad 
 Co. v. Brown, 25 Pa. St. 15(i; Craig 
 v. Cumberland Valley State Normal 
 School, 72 Pa. St. 46; May v. Mem- 
 phis Branch R. R. Co., 48 Ga. 101), 
 in which case the company did not 
 appear to be insolvent, and sued in 
 its own name. Compare Somerset 
 and K. R. R. Co. v. Cushing, 45 Me. 
 524, 533. 
 
 2 See Upton v. Hansbrough, 3 Biss. 
 
 417, 423. Compare Gould v. Town 
 of Oneonta, 71 N. Y. 21)8; Perkins v. 
 Union Button-Hole, etc., Machine 
 Co., 12 Allen, 273. 
 
 3 Kansas City, St. Jo., etc., R. R. 
 Co. v. Alderman, 47 Mo. 349 ; see 
 San Antonio v. Jones, 28 Tex. 19. 
 
 4 Kelsey v. Northern Light Oil 
 Co., 45 N. Y. 505. A tender of a 
 stock certificate is not a condition 
 precedent to a suit on a subscrip- 
 tion. Fulgam v. Macon, etc., R. R. 
 
 533
 
 § 521.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 § 521. It is the better and almost universally accepted view 
 „ , , that a condition, in order to be operative, must be 
 
 \ erbal con- 7 . l 
 
 ditionsand expressed in the subscription contract itself; and 
 agreements that any verbal condition varying the terms of the 
 void. written contract is void. 1 It may, indeed, be laid 
 
 down as a general rule, that all parol agreements and secret 
 understandings between the subscriber and the agent of the 
 corporation who procures the subscription, in any way contrary 
 to its terms, are void ; and the subscription is enforceable as 
 if no such agreements or understandings had existed; 2 unless 
 a fraud imputable to the corporation be shown. 3 And a sub- 
 scriber cannot plead that his subscription was feigned and 
 fraudulent, and that the company was party to the fraud ; 
 for his subscription will be enforceable for the benefit of other 
 subscribers and creditors. 4 
 
 Co., 44 Ga. 597. Compare Chelten- 
 ham, etc., R'y Co. v. Daniel, 2 Eng. 
 R'y Cas. 728. But see St. Paul, 
 Stillwater, etc., R. R. Co. v. Robhins, 
 23 Minn. 439. But the tender of a 
 certificate may by the terms of the 
 subscription be made a condition. 
 Courtright v. Deeds, 37 Iowa, 503. 
 See § 511. 
 
 1 Nippenose M'f'g Co. v. Stadon, 
 68 Pa. St. 256 ; Miller v. Hanover 
 Junction, etc., R. R. Co., 87 Pa. St. 
 95 ; Baile v. Educational Society, 47 
 Md. 117 ; see Hendrix v. Academy 
 of Music, 73 Ga. 437 ; Bell v. Ameri- 
 cus, etc., R. R. Co., 76 Ga. 754 ; 
 Masonic Temple Ass'n v. Channell, 
 43 Minn. 353. But see Rinesmith 
 v. People's Freight R'y Co., 90 Pa. 
 St. 262. 
 
 2 Galena and S. W. R. R. Co. v. 
 Ennor, 116 111. 55; Piscataqua Ferry 
 Co. p. Jones, 39 N. H. 491 ; Thigpen 
 v. Miss. Cent. R. R. Co., 32 Miss. 
 347 ; Smith v. Plankroad Co., 30 
 Ala. 650 ; La Grange, etc., Plank- 
 road Co. v. Mays, 29 Mo. 64 ; Con- 
 necticut, etc., Rivers R. R. Co. v. 
 Bailey, 24 Vt. 465 ; Downie v. 
 White, 12 Wis. 176 ; Mississippi, 
 
 534 
 
 etc., R. R. Co. v. Cross, 20 Ark. 
 443 ; New Albany, etc., R. R. Co. v. 
 Fields, 10 Ind. 187 ; Evansville, etc., 
 R. R. Co. v. Posey, 12 Ind. 363 ; 
 Cunningham??. Edgefield, etc., R. R. 
 Co., 2 Head (Tenn.), 23; North 
 Carolina R. R. Co. v. Leach, 4 Jones 
 L. (N. C.) 340 ; Scarlett v. Academy 
 of Music, 46 Md. 132; Vicksburg, etc., 
 R. R. Co. u. McLean, 12 La. Ann. 638 ; 
 Phila., etc., R. R. Co. u. Conway, 177 
 Pa. St. 364 ; Whitehall, etc., R. R. 
 Co. v. Myers, 16 Abb. Pr. N. S. 
 (N. Y.) 34; Chouteau Ins. Co. v. 
 Floyd, 74 Mo. 286 ; Topeka Mfg. Co. 
 o. Hale, 39 Kan. 23. 
 
 3 Martin v. Pensacola, etc., R. R. 
 Co., 8 Fla. 370; Vicksburg, etc., R. R. 
 Co. v. McKean, supra; Mississippi, 
 etc., R. R. Co. v. Cross, supra; Scar- 
 lett v. Academy of Music, supra. See 
 §§ 523 et seq., and Union Nat. Bk. v. 
 Hunt, 76 Mo. 4:59. 
 
 4 Graff v. Pittsburg & Steubenville 
 R. R. Co., 31 Pa. St. 489; Robinson 
 v. Pittsburg & Connellsville R. R. 
 Co., 32 Pa. St. 334; Barto v. Nix, 15 
 Wash. 563; Phcenix Wareh'ing Co. v. 
 Badger, 6 Hun, 293, aff'd 67 N. Y. 
 294. See Bailey v. Pittsburg & Con-
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 522a. 
 
 It has, however, been held that a subscription, made on a 
 blank paper on condition that the paper should not be attached 
 to the articles of association until they should have been pre- 
 sented to the subscriber for approval, does not bind him, if 
 attached without his consent. 1 
 
 § 522. The word " non-assessable " upon a stock certificate 
 does not impair the obligation, created by the accept- 
 ance and holding of the certificate, to pay the amount g^bie!" 
 due upon the shares. At most, it is in legal effect 
 a stipulation against liability from further assessments or taxa- 
 tion after the entire subscription of one hundred per cent, shall 
 have been paid. And representations by the agent of the 
 corporation as to the non-assessability of the shares beyond a 
 certain percentage of their value, constitute no defence to an 
 action against the holder when he has himself failed to use due 
 diligence to ascertain the truth or falsity of such representa- 
 tions. 2 
 
 § 522a. Some recent cases adhere to the rule that a cor- 
 poration cannot issue its shares below par, and con- i ssue f 
 elude itself and its creditors from suing for the pa r ck ^i^ 
 balance. For instance, in one case a provision that nus " stock. 
 on pa} T ment of forty per cent, of the face of the subscription 
 the stock should be issued to the subscriber " as full paid 
 stock " was held not to prevent the corporation from recover- 
 ing ; 3 and in another case a stipulation in the original sub- 
 scription contract that the subscribers in addition to the stock 
 should be given bonds of the corporation to a like amount, 
 was held void. 4 
 
 nellsville GassCoal, etc., Co., 69 Pa. 
 St. 334; Hawkins v. Citizens In v. Co., 
 38 Or. 544. 
 
 1 Bucher v. Dillsburg, etc., R. R. 
 Co., 76 Pa. St. 306. Ace. Ottawa, etc., 
 R. R. Co. v. Hall, 1 111. App. 012; 
 Great West. Tel. Co. v. Loewenthal, 
 154 111. 261. But in such a ense it 
 would seem that the subscriber 
 would be bound, unless he took im- 
 mediate steps to have his name re- 
 moved. Compare §§ 523 et seq. 
 
 2 Upton v. Tribilcock, 91 U. S. 45. 
 See, also, Hall v. Selma, etc., R. R., 
 
 Co., 6 Ala. 741; Great Western Tel. 
 Co. v. Gray, 122 111. 630; Martin v. 
 South Salem Land Co., 94 Va. 28. 
 
 3 Great West. Tel. Co. v. Gray, 122 
 111. 630. The corporation was in the 
 hands of a receiver. A.cc. Bates v. 
 Great West. Tel. Co., 134 111. 536; 
 Coleman v. Howe, 154 111. 458. See, 
 also, Garrett v. Kansas City C'l Mg. 
 Co., 113 Mo. 330; cf. New Haven 
 Trust Co. v. Gaffney, 73 Conn. 480. 
 But see, Dickerman v. Northern 
 Trust Co., 176 U. S. 181. 
 
 4 Morrow v. Iron Co., 87 Tenn. 262. 
 
 535
 
 § 5226.] Till: LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 § 5225. On the other hand, the courts show inclination to 
 recognize as valid the custom of corporations to discharge cor- 
 porate indebtedness by issuing stock at its market value, that 
 is to say, for whatever can be got for it. In the case of Hand- 
 ley v. Stutz 1 the corporate stock was validly increased by reso- 
 lution, and an even amount of stock was issued as an induce- 
 ment to subscribers to purchase the bonds of the corporation, 
 and the bonds and stock were sold together at a price fairly 
 equivalent to their value. It was held that the recipients of 
 the stock could not be compelled to pay in its par value for the 
 benefit of creditors of the corporation. The question, said 
 Justice Brown, giving the opinion of the court, is whether " an 
 active corporation, or, as it is called in some cases, a 'going 
 concern,' finding its original capital impaired by loss or misfor- 
 tune, may not, for the purpose of recuperating itself and pro- 
 viding new conditions for the successful prosecution of its busi- 
 ness, issue new stock, put it upon the market and sell it for the 
 best price that can be obtained. 2 .... 
 
 " To say that a corporation may not, under the circum- 
 stances above indicated, put its stock upon the market and sell 
 it to the highest bidder, is practically to declare that a corpo- 
 ration can never increase its capital by a sale of shares, if the 
 original stock has fallen below par ; " 3 and the court further 
 held in the same case, that even as to persons who had 
 received some of the same shares gratuitously (i. e., not as a 
 direct inducement to purchase bonds), it was only subsequent 
 creditors, who might be presumed to have given credit to the 
 company on the faith of the increased stock, that could enforce 
 any claims against the holders of such stock. 4 
 
 The Federal Supreme Court held in another case, that a 
 corporation might issue its stock below par to a creditor in 
 
 A corporation cannot validly agree 
 with a shareholder that shares issued 
 to him for a nominal consideration 
 shall be treated as full paid. Ex 
 parte Damill, 1 De G. & J. 372; 
 Dent's Case, L. R. 15 Eq. 407. 
 Bailey v. Pittsburgh and Connells- 
 ville Gas, etc., Co., 69 Pa. St. 334, 
 Compare Gamble v. Water Co., 122 
 N. Y. 91. 
 
 536 
 
 1 139 U. S. 417. 
 
 2 139 U. S. 417, 429. 
 
 3 lb. p. 430. 
 
 * Handley v. Stutz, 139 U. S. 417. 
 Fuller, C. J., and Lamar, J., dissented. 
 Accord, Hospes ». Northwes'n Mfg. 
 Co., 48 Minn. 174; First Nat. Bk. v. 
 Mining Co., 42 Minn. 327. See Peter 
 v. Un. M. Co., 56 Ohio St. 181; and 
 §§ 702a, 7026.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 522c 
 
 payment of the debt, and that the creditor thus becoming a stock- 
 holder, would not be liable on the insolvency of the corpora- 
 tion to make up the difference between the par value of the 
 stock and the price at which he received it. 1 
 
 § 522<?. Questions similar to those discussed in the previous 
 paragraphs sometimes arise with regard to shares Igsue o{ 
 issued for property. In payment for its shares a cor- stock for 
 
 i i m. • ■• i o • property. 
 
 poration, unless prohibited by statute,' 1 may receive 
 any property which it is authorized to purchase, and if prop- 
 erty (or services) so received is fairly equivalent to the par 
 value of the shares for which it is taken, the shares will have 
 the status of full-paid stock. 3 Such, transactions may be 
 
 1 Clark v. Bever, 139 U. S. 96. But 
 it seems that a railroad company 
 cannot issue its stock to contractors 
 except for some reasonable equiva- 
 lent — which depends on the actual 
 value of the stock at the time. Fogg 
 v. Blair, 139 U. S. 118. 
 
 For a further consideration of these 
 questions with reference to the rights 
 of creditors, see §§ 701 et seq. 
 
 2 See Baile v. Educational Society, 
 47 Md. 117. 
 
 3 Coffin v. Ransdell, 110 Ind. 417; 
 Searight v. Payne, 6 Lea (Tenn. ), 283 ; 
 Boynton v. Hatch, 47 N. Y. 225; Peck 
 v. Coalfield C'l Co., 11 111. App. 88; 
 Chouteau v. Dean, 7 Mo. App. 210; 
 Drummond's Case, L. R. 4 Ch. 772; 
 Arapahoe Cattle Co. v. Stevens, 13 
 Col. 534; Kelly v. Fletcher, 94 Tenn. 
 1; Bristol, etc., Tr. Co. v. Jonesboro, 
 etc., Tr. Co., 101 Tenn. 545; John R. 
 Proctor Sons Co. v. Cooke, 103 Ky. 96; 
 Richardson v. Graham, 45 W. Va. 
 134. Payment of stock subscriptions 
 " may be in whatever, considering the 
 situation of the corporation, repre- 
 sents to that corporation a fair, 
 just, lawful, and needed equivalent 
 for the money subscribed." Liebke 
 v. Knapp, 79 Mo. 22. A subscriber 
 may pay for stock of a corporation 
 organized to build a bridge across the 
 
 Mississippi River by publishing its 
 articles and favoring the project in his 
 newspaper. Liebke v. Knapp, supra. 
 Subsequent facts demonstrating the 
 small value of property received for 
 shares do not throw the burden of 
 proof on members to show that the 
 property was worth what it was 
 taken at. Iron Co. v. Hays, 165 Pa. 
 St. 489. Van Cott v. Van Brunt. 82 
 N. Y. 535, appears to hold that if a 
 person pays in services or otherwise 
 an amount equal to the actual value 
 of the shares received by him in re- 
 turn, they will be treated as fully 
 paid up, without regard to whether 
 the actual value was equal to their 
 par value or not. Now by statute in 
 New York "in the absence of fraud in 
 the transaction the judgment of the 
 directors as to the value of the prop- 
 erty purchased shall be conclusive." 
 Section 42 of chapter 354 of the laws 
 of 1901, amending chapter 688 of the 
 laws of 1892. Without special stat- 
 utory authority no assessment can be 
 imposed on the fully paid up stock. 
 Atlantic De Laine Co. v. Mason, 5 
 R. I. 463; ace. Enterprise Ditch Co. 
 v. Moffett, 58 Neb. 642. See § 541, 
 notes. 
 
 A contract by a corporation to sell 
 its stock below par has been held 
 
 537
 
 § 523.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 opened to show fraud, and if the property received is grossly 
 unequal in value to the par value of the shares, the share- 
 holder who received the shares originally, or his subsequent 
 transferee with notice of the circumstances, may be compelled 
 to make up the difference in value in a suit brought by or on 
 behalf of persons injured thereby. 1 But the equivalency of the 
 property taken to the par value of the shares cannot (unless 
 some statute warrants a contrary doctrine 2 ) be inquired into 
 when the shares as fully paid have come into the hands of a 
 bona fide purchaser who has no notice of the value of the prop- 
 erty originally given for them, 3 and even though shares be is- 
 sued for property worth less that their par value, it is only 
 those persons who are injured thereby, and have not waived 
 their rights, that can impeach the transaction. 4 
 
 § 523. A shareholder, however, whose subscription has been 
 induced by a fraud which may be treated as the 
 fraud of the corporation can annul his subscription 
 and thereby free himself from all liability, provided 
 others have not in the meanwhile justifiably acted on 
 the faith of his subscription under such circumstances 
 that as between him and them responsibility for the 
 
 Subscrip- 
 tions ob- 
 tained by 
 fraud void- 
 able, pro- 
 vided sub- 
 scriber acts 
 with de- 
 spatch. 
 
 valid on the face of it ; when it did 
 not appear how the corporation had 
 acquired the stock, and could not be 
 inferred that it was not fully paid 
 stock subsequently acquired. Otter 
 v. Brevoort Petroleum Co., 50 Barb. 
 247. 
 
 1 Coleman v. Howe, 154 111. 458; 
 Hastings Malting Co. v. Iron Range 
 Co., 65 Minn. 28; Gilkie, etc., Co. o. 
 Gas Co., 46 Neb. 333; Jones v. Whit- 
 worth, 94 Tenn. 602; Jackson v. 
 Traer, 64 Iowa, 469; Boulton Carbon 
 Co. v. Mills, 78 Iowa. 460; Bailey v. 
 Pittsburg and ConnellsvilleGas Coal 
 and Coke Co.. 69 Pa. St. 334; Boynton 
 v. Hatch, 47 X. Y. 225; Tallmadge r. 
 Fishkill Iron Co., 4 Barb. 382; Gillin 
 v. Sawyer, 93 Me. 151; see Foreman 
 v. Bigelow, 4 Clifford, 508,543; Pell's 
 Case. L. R. 5 Ch. 11; see Pickering 
 
 538 
 
 n. Townsend, 118 Ala. 351 ; Roman v. 
 Dominick, 115 Ala. 233; Gates, Atlm., 
 v. Tippecanoe Stove Co., 57 Oh. St. 
 GO. See especially §§ 700 et seq. 
 
 2 See § 723. 
 
 3 Phelan v. Hazard, 5 Dillon, 45; 
 Steacy v. Little Rock, etc., R. R. Co., 
 ib. 348; Foreman v. Bigelow, 4 Clif- 
 ford, 508; West Nashville Planing 
 Mill Co. v. Bank, 86 Tenn. 252; Mc- 
 Cracken v. Mclntyre, 1 Duv. (Can- 
 ada) 479. See Waterhouse v. Jamie- 
 son, L. R. 2 H. L. Scotch, 29; Roch- 
 ester Laud Co. v. Roe, 7 N. Y. App. 
 Div. 366; Troup v. Hornbach, 53 
 Neb. 795. And see § 702. 
 
 4 See St. Louis, etc., R. R. Co. v. 
 Tiernan, 37 Kan. 606; Walburn v. 
 Chenault, 43 Kan. 352; Wool folk v. 
 January, 131 Mo. 620. See §§ 5226, 
 700 et seq.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 523. 
 
 fraud attaches to him. 1 Accordingly, when the receiver of an 
 insolvent corporation sues to recover the amount unpaid on a 
 subscription, it is then too late to plead that the subscription 
 was induced by fraudulent misrepresentations. 2 And in Eng- 
 
 1 Oakes o. Turquand, L. R. 2 H. L. 
 325; Knox v. Hayuian, 07 L. T. Rep. 
 137; Scott v. Snyder, etc., Co., ib. 104; 
 Cunningham v. Edgefield, etc., R. R. 
 Co., 2 Head (Tenn.), 23; Grangers' 
 Ins. Co. v. Turner, 61 Ga. 561; Davis 
 v. Dumont, 37 Iowa, 47; Water Valley 
 Mfg. Co. v. Seaman, 53 Miss. 655; 
 Rivers v. Montgomery Plank Road 
 Co., 30 Ala. 92; Montgomery South- 
 ern Ry. Co. ». Matthews, 77 Ala. 357; 
 City Bk. v. Bartlett, 71 Ga. 797; 
 Henderson v. Railroad Co., 17 Tex. 
 560; Savage v. Bartlett, 78 Md. 561; 
 Fear v. Bartlett, 81 Md. 435; Occi- 
 dental Insurance Co. v. Ganzhorn, 2 
 Mo. App. 205; In re Etna Ins. Co., 
 ex parte Shields, 7 Ir. R. Eq. 264. 
 See Walker v. Mobile and OhioR. R. 
 Co., 34 Miss. 245; Waldo v. Chicago, 
 etc., R. R. Co., 1 Wis. 575; Bosher v. 
 Land Co., 89 Va. 455; In re Madrid 
 Bank, Wilkinson's Case, 36 L. J. Eq. 
 489; In re Russian Iron Works Co., 
 Kincaid's Case, ib. 499; Anderson v. 
 Scott, 70 N. H. 350; McClanahan v. 
 Ivauhoe Land Co., 96 Va. 124; Ala- 
 bama Foundry & Machine Works v. 
 Dallas, 127 Ala. 513. Compare Rutz 
 v. Esler, etc., M'f'g Co., 3 111. App. 
 83. It has been held that in a suit 
 brought by a corporation against a 
 shareholder on a note, the defendant 
 may set off money paid by him on a 
 stock subscription induced by fraud; 
 unless the rights of creditors inter- 
 vene. Hamilton r. Grangers' Life, 
 etc., Ins. Co., 67 Ga. 145. To avoid 
 a subscription on the ground of mis- 
 representations of the agent obtain- 
 ing it, the misrepresentations must 
 be of a fact, and not an expression of 
 opinion, and must not relate to mat- 
 
 ters controlled by the charter, as to 
 which the subscriber is affected with 
 knowledge. Selma M. and M. R. R. 
 Co. p. Anderson, 51 Miss. 829; Jack- 
 son v. Stockbridge, 29 Tex. 394; 
 Montgomery Southern Ry. Co. v. Mat- 
 thews, 77 Ala. 357; Jefferson v. 
 Hewitt, 95 Cal. 535; Wingetv. Build- 
 ing Ass'n, 128 111. 67. Compare 
 Haskell v. Worthington, 94 Mo. 561; 
 Armstrong v. Karshner, 47 O. St. 
 276. In an action by a corporation 
 on a subscription which after its 
 execution had been raised without 
 knowledge of the maker, when the 
 execution of the contract as set out 
 is denied, the corporation cannot 
 recover the amount due on the 
 original subscription without show- 
 ing that the alteration was not fraud- 
 ulently made by it. Bery v. Mariet- 
 ta, P. & O. Ry. Co., 26 Ohio St. 673. 
 2 Upton v. Tribilcock, 91 U. S. 
 45 ; Ruggles v. Brock, 6 Hun, 164; 
 Michener v. Payson, 13 Bankr. Reg. 
 49 ; Burgess*s Case, 15 Ch. D. 507; 
 Upton v. Englehart, 3 Dill. 496; How- 
 ard v. Glenn, 85 Ga. 238. Compare 
 Farrar v. Walker, ib. 82. Subscriber 
 must annul at once on discovery of 
 fraud. Weisiger v. Ice Co., 90 Va. 795. 
 Cf. Savage v. Bartlett, 78 Md. 561 
 Tierney v. Parker, 58 N. J. Eq. 117 
 Urner v. Sollenberger, 89 Md. 316 
 Wilson v. Handley, 96 Va. 96. But 
 it is held that the mere insolvency 
 of the corporation is no bar to an 
 action to annul a subscription to 
 shares, where the subscriber has not 
 been guilty of laches and the rights 
 of creditors are not before the court. 
 Ramsey v. Thompson Mfg. Co., 116 
 Mo. 313. See, also, § 744. 
 
 539
 
 § 525.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 land, at least, a person can bring no action for damages against 
 a corporation for fraudulent misrepresentations, which induced 
 him to purchase shares, as long as he remains in the company, 
 and does not offer to rescind. 1 
 
 § 524. In regard to this exceedingly difficult question of an- 
 nulling subscriptions on the ground of the fraud of 
 English and corporate agents, there may be a shade of difference 
 views. ' between the English and American views. In Eng- 
 land a tendency has been shown to regard a contract 
 of subscription as a contract strictly between the subscriber and 
 the company. For instance, in Directors v. Kisch, 2 the court 
 held that a person could dissolve a contract to take shares in a 
 company when the inducement on its part was false, and, when 
 not himself guilty of laches, could withdraw without regard ap- 
 parently to the subsequently accruing rights of creditors, Lord 
 Komilly saying, " that contracts of this description between an 
 individual and a company, so far as misrepresentation or sup- 
 pression of the truth is concerned, are to be treated like con- 
 tracts between any two individuals." 3 The American cases, 
 on the other hand, more generally recognize that a subscription 
 contract is one on which persons other than the contracting 
 parties are entitled to rely. 4 
 
 § 525. It is submitted that to questions regarding the right 
 to rescind a subscription contract or defend in a suit 
 Rationale, for calls, a course of reasoning somewhat like the fol- 
 lowing is applicable. In all matters within the ordi- 
 nary scope of the corporate powers, the corporation acting 
 through whatever agency may constitute the corporate manage- 
 ment represents all persons in any way interested in the corpo- 
 rate enterprise. Consequently, the interests of all are bound by 
 the acts of the corporate management (say, for simplicity, by 
 the acts of the board of directors) within the scope of its 
 
 1 Houldsworth i\ City of Glasgow 
 Bk. 5 App. Cas. 317. !See Western 
 Bk. of Scotland v. Addie, 1 II. L. Sc. 
 App. 145, 157; Nat. Exchange Co. v. 
 Drew, 2 Macq. 103. Transferee of 
 shares cannot plead fraud upon his 
 transferror. Lewis v. Land Co., 90 
 Va. 603. 
 540 
 
 2 L. R. 2 H. L. 99. 
 
 3 See, also, Smith's Case. L. R. 2 Ch. 
 604 ; and compare Houldsworth v. 
 City of Glasgow Bk., 5 App. Cas.317, 
 ante. 
 
 * See § 521, also §§ 701, 702.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 526. 
 
 authority. But the board in no way represents persons whose 
 interests in respect of the corporate enterprise have not yet 
 arisen. When A., for instance, contracts with the directors, 
 the latter represent the persons whose interests have already 
 accrued, i. e., shareholders and existing creditors. But A., 
 until his rights have arisen, is as to the directors an outsider, 
 whom they in no way represent. If, in contracting with A., 
 the directors act fraudulently, then on account of the fraud 
 he would be allowed as between himself and those whom the 
 directors represent, to rescind the contract; because the fraud 
 of the agent is the fraud of the principal, and is in this case, 
 as to A., the fraud of the corporation, and of the persons 
 already interested in it, whom the directors represent. More- 
 over, within the scope of their more restricted powers, other 
 agents, as well as directors, represent the entire mass of cor- 
 porate interests. 1 
 
 § 526. Applying this reasoning to the right of a subscriber 
 to annul a subscription contract induced by a fraud of the 
 agent representing the corporation in the matter, it would seem 
 that the contract might be annulled by the subscriber acting 
 swiftly, unless, after his subscription and before he has taken 
 steps to annul it, some one has acted relying on it in good faith ; 
 that is, unless some one has subscribed subsequently, seeing on 
 the books the name of the subscriber whose subscription was 
 induced by fraud, or some one has contracted with the corpo- 
 ration on the credit of such fraudulently induced subscription. 
 As to such latter persons, carrying out the course of reasoning, 
 it would seem that the subscriber could not rescind so as to 
 prejudice their rights in any way, for the corporate agent in 
 his fraudulent contract with the subscriber in no way repre- 
 sented such persons, who afterwards acted relying on the acts 
 of the subscriber. And if the subscription was induced by 
 fraud, nevertheless the loss should fall on the subscriber rather 
 than on persons who acted subsequently relying on his sub- 
 scription. For the directors, when they afterwards contract 
 with any one, represent the subscriber, and to allow him to 
 rescind so as to affect the rights of a subsequently contracting 
 
 1 It is not improper to regard the directors as representing creditors; 
 see § 756. 
 
 541
 
 § 529.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 party might visit on an innocent head the results of a fraud 
 committed by the corporate agent on a person whom at the 
 time of the subsequent contract the directors represent, and 
 ■who, therefore, should bear the loss rather than the parties 
 subsequently contracting. 1 
 
 § 527. To subscriptions induced by error or justifiable igno- 
 rance of material facts a rule somewhat similar to 
 error.* ° the one above stated in regard to fraudulently in- 
 duced subscriptions, and a course of reasoning some- 
 what similar to the above would apply. " Except where a 
 person has induced others to act on his own representations, 
 ignorance of material facts on his part affords a sufficient 
 reason for not holding him bound by what in such ignorance 
 he may have said or done." 2 
 
 § 528. When a contract between two individuals is violated 
 
 by one of them, the other may often acquire thereby 
 
 tionfhow ^he r igbt to rescind ; but in such case either of the 
 
 affected by contracting parties could have released the other. 
 
 subsequent ° [ 
 
 unautuor- With regard to the contract between the subscriber 
 
 ized or im- . . . .~ 
 
 proper and the corporation the case is manifestly different. 
 
 the'parTof I n the first place, the corporation has ordinarily no 
 Dora°tion power to release the subscriber, for numerous per- 
 sons, creditors, and shareholders, have in regard to 
 the contract rights which a release would infringe. 3 If the 
 corporate management violates the contract with the sub- 
 scriber by diverting the funds of the corporation to unauthor- 
 ized purposes, it does an act which may violate the rights of all 
 non-consenting persons in respect of the corporate enterprise ; 
 but this act is in itself clearly no ground on which one of these 
 injured persons may claim a release from his obligation to the 
 other injured persons. 4 
 
 § 529. Accordingly, after a person has subscribed for shares 
 in the stock of a corporation he will not be released from his 
 
 1 This reasoning is sustained by 
 Howard o. Turner, 155 Pa. St. 349. 
 See, also, Savage v. Bartlett, 78 Md. 
 561; Fear v. Bartlett, 81 Md. 435; 
 Cardwell v. Kelly, 95 Va. 570. 
 
 Lindley on Part., 135. See Salem 
 Mill Dam Co. v. Ropes, 9 Pick. 187; j 443, and the following pages 
 Payson r. Withers, 5 Biss. 269; Four ' 
 
 542 
 
 Mile Val. R. R. Co. v. Bailey, 18 Ohio 
 
 St. 208. 
 
 3 See §§ 549-551 . * 
 
 * The shareholder's remedy is to 
 enjoin unauthorized acts. See Mis- 
 sissippi, etc., R. R. Co. v. Cross, 20 Ark. 

 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 530. 
 
 contract by the mismanagement of the corporate affairs, 1 even 
 though the mismanagement amount to such non-user or mis- 
 user of the corporate franchises as would be a ground for the 
 state to forfeit them. 2 Thus, an illegal election of directors 
 will not release a subscriber; 3 nor a release of other share- 
 holders by the directors ; for if the release was made in pur- 
 suance of competent authority it was valid, and, if not, it was 
 simply void. 4 Similarly, a plea to an action to collect a sub- 
 scription to the stock of a railroad company, that the company 
 has sold or leased its road, is bad on demurrer ; for, if the cor- 
 poration had authority to sell or lease, a subscriber would not 
 be discharged ; and if it had not, the transaction was void and 
 would not affect his rights. 5 
 
 § 530. When a radical change is effected, or is sought to be 
 effected, in a corporate enterprise, through a legisla- 
 tive amendment to the constitution, applied for and tue a corpc£ 
 accepted by the corporation, 6 whether or not a dis- r ^s e e |J ter " 
 senting shareholder is released from his subscrip- legislative 
 
 , . . .... . , action. 
 
 tion contract is a question involving many considera- 
 tions, and in regard to it there is some conflict of authority. 
 If the change is immaterial, or is an alteration or amendment 
 
 1 Chetlain v. Republic Life Ins. 
 Co., 86 111. 220; Southern Life Ins. 
 Co. v. Lanier, 5 Fla. 110. See Mer- 
 rill v. Reaver, 59 Iowa, 404; Oler v. 
 Baltimore, etc., R. R., 41 Md. 583; 
 Oldham v. Mt. Sterling Imp. Co., 103 
 Ky. 529. 
 
 2 Hanover Junction, etc., R. R. Co. 
 v. Haldeman, 82 Pa. St. 36; Connec- 
 ticut, etc., Rivers R. R. Co. v. Bailey, 
 24 Vt. 465; Mississippi, etc., R. R. Co. 
 v. Cross, 20 Ark. 443; Hammett v. 
 Little Rock, etc., R. R. Co., 20 Ark. 
 204; Hannibal, etc., Plankroad Co. 
 v. Menefee, 25 Mo. 547; U. S. V. Co. 
 v. Schlegel, 143 N. T. 537; Same v. 
 Foehrenbach, 148 N. Y. 58. See 
 Cunningham p. Edgefield, etc., R. R. 
 Co., 2 Head (Tenn.), 23; Mechanics' 
 Bhlg. Ass'n o. Stevens, 5 Duer(N.Y.), 
 676. 
 
 8 Eakright v. Logansport, etc., R. 
 
 R. Co., 13 Ind. 404. See Western 
 Plankroad Co. v. Stockton, 7 Ind. 
 500. Compare § 540. 
 
 4 Hall v. Selma, etc., R. R. Co., 6 
 Ala. 741; Macon, etc., R. R. Co. v. 
 Vason, 57 Ga. 314; Bristol Iron Co. v. 
 Selliez, 175 Pa. St. 18. Contra, Rutz 
 v. Esler, etc., Mfg. Co., 3 111. App. 83 
 (a more than questionable case). 
 
 5 Hays v. Ottawa, etc., R. R. Co., 61 
 111. 422; Ottawa, etc., R. R. Co. v. 
 Black, 79 111. 262. Compare Nauga- 
 tuck Water Co. v. Nichols, 58 Conn. 
 403. But see South Georgia, etc., 
 R. R. Co. v. Ayres, 56 Ga. 230. 
 
 6 In order to be valid, a vote ac- 
 cepting an act altering the charter, 
 should be passed at a meeting of 
 the corporation duly convened, after 
 notice to all the members. Com- 
 monwealth v. Cullen, 13 Pa. St. 133. 
 Directors cannot bind shareholders 
 
 543
 
 § 530.] THU LAW OF PBIVATK CORPORATIONS. [CHAP. IX. 
 
 that is conducive in the main to the successful carrying out of 
 the originally contemplated enterprise, a shareholder is not re- 
 leased. 1 It is evident that in a large corporation there must be 
 some surrender of opinion, and even of interest by a minority 
 to the majority. This courts will recognize, and will not per- 
 mit one shareholder to ruin the corporate enterprise by insist- 
 ing on his finically strained rights. Thus, a subscriber is not 
 discharged by an amendment to the charter of a railroad cor- 
 poration, which merely enlarges the powers of the corporation, 
 as, for instance, by allowing it to build a branch road; 2 nor is 
 a subscriber discharged by a slight alteration in the route, 3 
 especially if the location of the road had not been definitely 
 fixed when he subscribed; 4 nor by a change of the corporate 
 name by the legislature. 5 So subscribers are not released by 
 an amendment extending the time for the completion of the 
 railroad, 6 and a subscriber cannot avoid payment because the 
 charter has been modified so as to authorize the corporation 
 to purchase stock in other railroads, even though the real ter- 
 minus of the road is thereby changed.' 
 
 by accepting a substantial altera- 
 tion. Brown v. Fairmouut M'f'g 
 Co., 10 Pbila. (Pa.) 32; Marlborough 
 M'fg Co. y. Smith, 2 Conn. 579; see 
 §227. 
 
 1 Nugent v. Supervisors, 19 Wall. 
 241; New Haven aad Derby R. R. 
 Co. v. Chapman, 38 Conn. 5G; Union 
 Agriculture Ass'n v. Neill, 31 L>wa, 
 95; Clark v. Monongahela Nav'n Co., 
 10 Watts (Pa.), 364; Everhart v. 
 Phila., etc., R. R. Co., 28 Pa. St. 339; 
 Howard v. Glenn, 85 Ga. 238. As to 
 what is a substantial amendment 
 working a material departure from 
 the originally contemplated enter- 
 prise no rule applicable to all cases 
 can be laid down. Witter v. Missis- 
 sippi, etc., R. R. Co., 20 Ark. 463, 493. 
 
 2 Peoria, etc., R. R. Co. v. Preston, 
 35 Iowa, 115. 
 
 : ' Wilson v. Wills Valley R. R. Co., 
 33 Ga. 466; see Buffalo and Pitts- 
 burgh R. R. Co. v. Hatch, 20 N. Y. 
 157; Armstrong p. Karshner, 47 O. 
 
 5U 
 
 St. 276. But a substantial change of 
 the route was held to discharge a 
 subscriber in Middlesex Turnpike 
 Co. v. Locke, 8 Mass. 268; Same v. 
 Swan, 10 Mass. 384; Buffalo, Corn- 
 ing, etc., K. R. Co. v. Pottle, 23 Barb. 
 21; Kenosha, etc., R. R. Co. v. Marsh, 
 17 Wis. 13. Especially if the sub- 
 scription is conditional on its face. 
 Moore v. Hanover Junction R. R. Co., 
 94 Pa. St. 324. 
 
 4 Eppes v. Mississippi, etc., R. R. 
 Co., 35 Ala. 33. 
 
 5 Bucksport, etc., R. R. Co. v. 
 Buck, 68 Me. 81; Commonwealth v. 
 Pittsburgh, 41 Pa. St. 278, munici- 
 pal subscription. 
 
 6 Agricultural Branch R. R. Co. 
 v. Winchester, 13 Allen, 29; see 
 Fry's Ex'r v. Lexington, etc., R. K. 
 Co., 2 Mete. (Ky.) 314; Common- 
 wealth v. Pittsburgh, 41 Pa. St. 278. 
 
 7 Terre Haute, etc., R. R. Co. v. 
 Earp, 21 111. 291. Compare Pacific 
 R. R. Co. v. Hughes, 22 Mo. 291.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 532. 
 
 §531. On the other hand, a great number of cases hold that 
 an alteration of the constitution effecting a radical change in 
 the corporate enterprise releases a shareholder from his sub- 
 scription. 1 These cases proceed on the theory that the corpo- 
 ration cannot enforce the subscription of a dissenting shareholder 
 while the constitution as altered remains in force ; since that 
 would be to enforce a contract which the shareholder never 
 made. 2 
 
 § 532. Still it seems quite possible that many of these de- 
 cisions are wrong on principle ; at least, those of them where 
 the charter was not amended in pursuance of a right reserved 
 to the state to alter and repeal. For it is surely universally 
 recognized law that a charter imports a contract between the 
 corporation and the state ; and the state cannot constitution- 
 ally pass a law radically changing it. 3 Consequently, any such 
 change unaccepted by the corporation would be plainly uncon- 
 stitutional and void. But the corporation, or majority of 
 shareholders, has no power to bind the minority by acts 
 beyond the scope of the original chartered powers, and a for- 
 tiori no authority to bind them by any act causing a radical 
 change in the corporate enterprise, as, for instance, by accept- 
 ing a radical amendment to the corporate constitution. 4 There- 
 fore, the state having no power to amend the constitution 
 against the consent of the corporation, and the corporation 
 having no power to accept an amendment against the consent 
 of any shareholder, it would seem that no shareholder should 
 
 1 Manheim, etc., Turnpike Co. v. 
 Arndt, 31 Pa. St. 317; Ohartiers R'y 
 Co. v. Hodgens, 77 Pa. St. 187; Caley 
 v. Phila. and Chester R. R. Co., 80 
 Pa. St. 363 ; Southern Penn. R. R. 
 Co. v. Stevens, 87 Pa. St. 195; Noesen 
 v. Town of Port Washington, 37 Wis. 
 168; Ashton v. Burbank, 2 Dill. 435; 
 Bank v. City of Charlotte, 85 N. C. 
 433; Supervisors v. Mississippi, etc., 
 R. R. Co., 21 111. 33S; Union Locks 
 and Canals v. Towne, 1 N. H. 44; 
 Marietta, etc., R. R. Co. v. Elliott, 10 
 Ohio St. 57 ; Thompson v. Guion, 5 
 Jones, Eq. (N. C. ) 113; Snook v. 
 Georgia Imp. Co., 83 Ga. 61 ; also 
 
 35 
 
 cases in next note. See Fry's Ex'r 
 v. Lexington, etc., R. R. Co., 2 Mete. 
 (Ky.) 314; Richmond Street R. R. 
 Co. n. Reed, 83 Ind. 9. 
 
 2 Hartford and N. H. R. R. Co. v. 
 Croswell, 5 Hill (X. Y.), 383; Mid- 
 dlesex Turnpike Co. v. Locke, 8 
 Mass. 268; Carlisle v. Terre Haute, 
 etc., R. R. Co., 6 Ind. 316; McCray 
 v. Junction R. R. Co., 9 Ind. 358; 
 Booe v. Same, 10 Ind. 93; Hoey v. 
 Henderson, 32 La. Ann. 1069. 
 
 3 See §§ 450 et seq. 
 
 4 See Chapman v. Mad River, etc., 
 R. R. Co., 6 O. St. 119, 137; and 
 §557. 
 
 545
 
 § 533.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 be allowed to claim a release as long as there are other non- 
 consenting shareholders who do not wish to be released, but 
 desire to have the original corporate enterprise adhered to. 
 The plain remedy in such a case is to enjoin the acceptance of 
 the amendment ;* a step which should be immediately taken, 
 and by those shareholders who wish the original enterprise 
 adhered to, and wish to preserve their rights against other sub- 
 scribers who may dissent from the change, but, rather than 
 enjoin it, prefer a release ; as under such circumstances it 
 would certainly be unreasonable to look to subscribers, who 
 merely desire a release, to take the initiative in expensive 
 litigation to enjoin a change. 2 
 
 § 533. If, however, under a power reserved to itself, the 
 p r r state radically changes the constitution of a corpo- 
 served to ration, it would seem that, unless the change could 
 
 state to 
 
 alter and be held to have been contemplated by the subscriber 
 repea . ^ n su } 3SCr i| ) i n g j sucn altered contract could not be 
 
 enforced against him; 3 for a state cannot make a contract 
 between its citizens. Nevertheless, in order that a right to 
 rescind result, the amendment must radically change the 
 nature of the enterprise. For instance, it has been held in 
 New York, that an alteration by the legislature of the charter 
 of a plank road or railroad corporation, in pursuance of powers 
 reserved, by changing its name, increasing its capital, and 
 extending its road, does not discharge a subscriber from lia- 
 bility on his subscription. 4 These were changes, however, 
 which the shareholder might be held to have contemplated on 
 subscribing. As the court said in Buffalo and New York City 
 
 1 Fry's Ex'r v. Lexington, etc., 
 R. R. Co., 2 Mete. (Ky.^-314. See, 
 also, Mississippi, etc., R. R Co. v. 
 Cross, 20 Ark. 443; Mississippi, etc., 
 R. R. Co. v. Caster, 24 Ark. 96. But 
 see Thompson v. Guion, 5 Jones, Eq- 
 (N. C.) 113. 
 
 2 Where an amendment to a char- 
 ter is passed by the legislature, but 
 its acceptance is enjoined by a share- 
 holder, 'subscribers remain liable; 
 
 546 
 
 not having been injured. Rutland, 
 etc., R. R. Co. v. Thrall, 35 Vt. 536. 
 
 3 But a shareholder (see § 502) 
 will be estopped from objecting if 
 he impliedly assents to the amend- 
 ment by acting (as a director) under 
 the amended charter. Ross v. Chi- 
 cago, B. and Q. R. R. Co., 77 111. 134. 
 
 4 Schenectady, etc., Plank Road 
 Co. v. Thatcher, 11 N. Y. 102; Buffalo 
 and N. Y. City R. R. Co. v. Dudley, 
 14 N. Y. 33G.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 534. 
 
 R. R. Co. v. Dudley: 1 " The change is not fundamental. The 
 new powers conferred are identical in kind with those origi- 
 nally given. They are enlarged merely, the general objects 
 and purposes of the corporation remaining still the same. It 
 may be admitted that under this reserved power to alter and 
 repeal, the legislature would have no right to change the fun- 
 damental character of the corporation and convert it into a 
 different legal being, for instance, a banking corporation, with- 
 out absolving those who did not choose to be bound." 
 
 § 531. With like effect Durfee v. Old Colony, etc., R. R. 
 Co., 3 holds that a shareholder in a corporation, the charter of 
 which is subject to alteration and repeal, cannot maintain a 
 bill in equity to restrain the corporation from engaging in a 
 new enterprise in addition to that contemplated in the charter, 
 but of the same kind, if the new enterprise is sanctioned by 
 express legislation, and by a vote of the majority of share- 
 holders. In this case the "new enterprise" was a consider- 
 able extension of the railroad. Giving the opinion of the court, 
 Chief Justice Bigelow said : — 
 
 " Whatever may be the authority which is [by a reservation 
 of the right to alter, amend, or repeal] retained by the legisla- 
 ture to modify or change the charters of corporations without 
 or against their consent, there would seem to be no reason to 
 doubt that, with the concurrence of the corporation manifested 
 in the mode pointed out by law, the legislature may make any 
 alteration in, or addition to the power and authority conferred 
 by the original act of incorporation, and not foreign to the 
 purposes and objects for which it was enacted, and which it 
 was designed to accomplish, which may seem to be expedient 
 or necessary. No breach of contract would be thereby occa- 
 sioned. Such action would be in precise accordance with the 
 terms on which the grant of the franchise was made. . . . 
 The stockholder cannot say that he became a member of the 
 corporation on the faith of an agreement made by the legisla- 
 ture with the corporation, that the original act of incorporation 
 should undergo no change, except with his assent. . . . The 
 real contract into which the stockholder enters is, that he 
 agrees to become a member of an artificial body, which is 
 
 1 14 N. Y. 348. I 2 5 A ii e n, 230. 
 
 547
 
 § 536. J THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 created and has its existence by virtue of a contract with the 
 legislature, which may be amended or changed with the con- 
 sent of the company, ascertained or declared in the mode 
 pointed out by law. . . . All that we mean to determine is 
 that the obligation of the contract which subsists between the 
 corporation and a stockholder, by virtue of his being a pro- 
 prietor of shares in the corporate stock, is not impaired by an 
 act of the legislature which amends and alters the charter, and 
 authorizes the corporation to undertake new and additional 
 enterprises of a nature similar to those embraced within the 
 original grant of power, if such act is accepted by a majority 
 of the stockholders in the mode provided by law." * 
 
 § 535. A somewhat different view was taken in the New 
 Jersey case of Zabriskie v. Hackensack, etc., R. R. Co., 2 where 
 Chancellor Zabriskie said : 3 " There is no other alternative to 
 the proposition that while the power reserved authorizes the 
 legislature, within certain limits, to make such alterations as 
 they choose to impose, it gives no authority when the legis- 
 lature does not impose them, for the majority to adopt such 
 alterations or enter upon such enterprises as are allowed by the 
 legislature. Again the power of the legislature has its limits. 
 It can repeal or suspend the charter ; it can alter or modify it ; 
 it can take away the charter ; but it cannot impose a new one, 
 and oblige the stockholders to accept it. It can alter or mod- 
 ify the old one ; but the power to alter or modify anything can 
 never be held to imply a power to substitute a thing entirely 
 different. It is not the meaning of the words in their usually 
 received sense." 
 
 Nevertheless, it is hard to see why the power to alter and 
 amend, the power to impose new terms, does not include the 
 power to make the alteration subject to the will of a majority 
 of the shareholders. What the legislature could do without 
 the assent of this majority it surely could do with it, and in 
 this respect Durfee v. Old Colony, etc., R. R. Co. is more satis- 
 factory than Zabriskie v. Hackensack, etc., R. R. Co. 4 
 
 § 536. Without special authority a corporation cannot con- 
 
 
 Durfee v. Old Colony, etc., R. R. 
 Co., 5 Allen, 230, 243 et xeq. See 
 Atchison, T. and S. F. R. R. Co. v. 
 Fletcher, 35 Kans. 236. 
 
 548 
 
 2 18N. J. Eq. 178. 
 3 lb. 192. 
 
 * See, also, Bish». Johnson, 21 Ind. 
 299.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 536. 
 
 solidate with another; and an attempted wrongful 
 consolidation may be enjoined by a shareholder, like eonsoiida- 
 any other ultra vires act. 1 Nevertheless, that an un- 
 authorized consolidation, if actually effected, will release a dis- 
 senting subscriber, has been held in more than one instance. 2 
 Every subscription, however, must be regarded as made with 
 reference to any statute in force at the time allowing consoli- 
 dation, and therefore by a consolidation will not be released ; 3 
 and if the original subscriptions were conditional, the consoli- 
 dated company may entitle itself to sue by performing the con- 
 dition. 4 Further, when a corporation is formed under a law 
 respecting which the right to alter and repeal is reserved to 
 the state, a consolidation authorized by an amendment will not 
 release a subscriber, when the consolidation takes place with 
 
 1 Mowrey v. Indianapolis, etc., R. 
 R. Co., 4 Biss. 78. Though it be 
 authorized by a statute subsequent 
 to the charter. Botts v. Turnpike 
 Co., 88 Ky. 54. See §§ 419 et seq. 
 But the shareholder may be estopped 
 when he has taken part in the con- 
 solidation proceedings. Bradford v. 
 Frankfort, etc., R. R. Co., 141 Ind. 
 383. 
 
 2 McCray v. Junction R. R. Co., 9 
 Ind. 358 ; State v. Bailey, 16 Ind. 
 46 ; Shelbyville, etc., Turnpike Co. v. 
 Barnes, 42 Ind. 498. 
 
 A railroad company authorized to 
 do so, may transfer its property to 
 another company and dissolve ; thus 
 effecting a consolidation. A share- 
 holder cannot prevent this, as he 
 cannot prevent the majority from 
 dissolving. But he cannot be forced 
 into a new enterprise, nor can he be 
 compelled to take in payment for his 
 6tock the stock of the consolidated 
 company, and he may enjoin the pro- 
 ceeding until he has received secu- 
 rity. Lauman v. Lebanon Valley B. 
 R. Co., 30 Pa. St. 42. See Hamilton 
 Mut. Ins. Co. v. Hobart, 2 Gray, 543 ; 
 Gardner v. Hamilton Mut. Ins. Co., 
 33 N. Y. 421. 
 
 When a consolidation is effected 
 wrongfully, and against the protest 
 of a shareholder who has partially 
 paid up his shares, the consolidated 
 company is liable to him for the value 
 of them. International, etc., Rail- 
 road Co. v. Bremond, 53 Tex. 96. 
 See §§ 323, 324. 
 
 3 Bish v. Johnson, 21 Ind. 299 ; 
 Sparrow v. Evansville, etc., R. R. Co., 
 7 Ind. 369 ; Edwards v. People, 88111. 
 340 ; Mansfield, etc., R. R. Co. v. 
 Brown, 26 Ohio St. 233 ; Compare 
 Same v. Stout, ib. 241. Otherwise, 
 if the consolidation effects a radical 
 change in the nature of the enter- 
 prise, and a practical abandonment 
 of the original scheme. Illinois 
 Grand Trunk R. K. Co. v. Cook, 29 
 111. 237. Where a corporation, with- 
 out authority, issues a scrip dividend 
 in fraud of another corporation with 
 which it was about to consolidate, 
 the scrip may be declared void at the 
 suit of shareholders in the latter 
 corporation ; and even bona fide pur- 
 chasers of the scrip may have to re- 
 turn it. Bailey v. Citizens' Gas 
 Light Co., 27 N. J. Eq. 196. 
 
 4 Mansfield, etc., R. R. Co. v. 
 Stout, 26 O. St. 241. 
 
 549
 
 § 538.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 another corporation of the same character, and does not work 
 a fundamental change in the nature of the original objects of 
 incorporation. 1 
 
 § 537. When a person has subscribed for shares in a de 
 When sub- f ac ^° existing corporation, he cannot plead to a suit 
 scriber can- brought on his subscription that there are irregular- 
 
 not plead °. . * ° 
 
 nuitiel lties in the organization or the company ; even 
 aorpor . ^^g^ ^ ne irregularities are such as would be fatal 
 on a quo warranto? Thus, it is no defence to an action by a 
 railroad corporation to recover a subscription that the articles 
 of association were defective in not stating definitely the ter- 
 mini of the road and the counties through which it passed. 3 
 Moreover, the signature of the defendant to a subscription to 
 shares in the stock of an alleged corporation reciting that a cor- 
 poration had been formed under the general enabling act, and 
 that articles of association with the necessary affidavits had 
 been filed, is conclusive evidence of incorporation as against 
 such subscriber. 4 
 
 § 538. When, however, a person signs articles of association 
 
 1 Sprague v. Illinois River R. R. 
 Co., 19 111. 174; Hanna v. Cincinnati, 
 etc., R. R. Co., 20 Ind. 30. See Bishop 
 v. Brainerd, 28 Conn. 289. Compare 
 Illinois River R. R. Co. v. Zimmer, 
 20 111. 654. 
 
 2 Chubb v. Upton, Assignee, 95 
 U. S. 665; Sanger v. Upton, Assignee, 
 91 U. S. 56; Home Stock Ins. Co. v. 
 Sherwood, 72 Mo. 461; Monroe v. 
 Fort Wayne, etc., R. R. Co., 28 
 Mich. 272; Montpelier, etc, R. R. 
 Co. v. Langdon, 46 Vt. 284; Mc- 
 Carthy v. Lavashe, 10 Chi. Leg. N. 
 342; Ossipee Hosiery, etc., Co. v. 
 Cauney, 54 N. H. 295; McHose v. 
 Wheeler, 45 Pa. St. 32; Freeland v. 
 Pennsylvania Central Ins. Co., 94 Pa. 
 St. 504; Buffalo, etc., R. R. Co. v. 
 Cary, 26 N. Y. 75; Eaton v. Aspin- 
 wall, 19 N. Y. 120; Mead v. Keeler, 
 24 Barb. 20; see Oregon Central R. R. 
 Co. v. Scoggin, 3 Oreg. 161; Hunt v. 
 Kansas, etc., Bridge Co., 11 Kans. 
 
 550 
 
 412; Weinman v. Passenger Ry. Co., 
 118 Pa. St. 192; Cotton Mills Co. v. 
 Burns, 114 N. C. 353; Fish, Rec'r, v. 
 Smith, 73 Conn. 377; Anderson v. 
 Thompson, 51 La. Ann. 727. A sub- 
 scriber to shares, who has accepted 
 the charter and assisted in putting 
 it in operation, cannot .plead to a 
 suit on his subscription that the 
 charter had been obtained by fraud. 
 Smith v. Heidecker, 39 Mo. 157. See 
 Slocum v. Providence Steam and Gas 
 Pipe Co., 10 R. I. 112; Slocum v. 
 Warren, ib. 116. Compare Occidental 
 Ins. Co. v. Ganzhorn, 2 Mo. App. 205. 
 See, also, §§ 738, and 145 et seq. 
 
 3 Cayuga Lake R. R. Co. v. Kyle, 
 64 N. Y. 185. 
 
 4 Black River, etc., R. R. Co. v. 
 Clarke, 25 N. Y. 208. Compare 
 Road Co. v. Creeger, 5 Har. & J. 
 (Md.) 122; St. Charles M'f'g Co. v. 
 Britton, 2 Mo. App. 290.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 539. 
 
 and subscribes for shares, the organization of the 
 corporation not being at the time completed, he is ^y enhe 
 not afterwards estopped thereby from pleading to 
 an action on his subscription, that the steps necessary to com- 
 plete the organization of the corporation have not been taken. 1 
 " The ground upon which a party who has contracted with a 
 corporation as such is estopped to deny its existence is, that by 
 his contract he has recognized the existence of the corporation. 
 The contract in question, instead of purporting to be made 
 •with an existing corporation, utterly excludes the idea of pres- 
 ent existence, but contemplates the future organization of the 
 corporation to which he was to pay the amount of his subscrip- 
 tion." 2 
 
 § 539. On not dissimilar principles a subscriber to the stock 
 of a railroad corporation may, in a suit brought against him 
 for assessments by a new corporation formed by the consolida- 
 tion of the original corporation with another, question the con- 
 solidation proceedings in which he has taken no part, although 
 they be sufficient to constitute the consolidated company a 
 corporation de facto? For in an action brought by a consoli- 
 dated corporation to recover subscriptions to the stock of one 
 of the original corporations based on -the right of succession 
 under the statute, it is essential that a consolidation in accord- 
 ance with the statute be proved ; and it is not enough that the 
 consolidated company be shown to be a corporation de facto} 
 
 1 Rikhoff ». Brown's Sewing Mach- 
 ine Co., 68 Ind. 388 ; Indianapolis 
 
 Furnace, etc., Co. v. Herkimer, 46 
 Ind. 142 ; Schloss v. Montgomery 
 Trade Co., 87 Ala. 411; Caps v. Pro- 
 specting Co., 40 Neb. 470. But such 
 subscriber may estop himself by tak- 
 ing part in corporate proceedings. 
 Minnesota Gas Light Company v. 
 Denslow, 46 Minn. 171; see Knight 
 v. Flatrock, etc., Turnpike Co., 45 
 Ind. 134 ; Jackson v. Crown Point 
 Mining Co., 21 Utah, 1. 
 
 2 Indianapolis Furnace, etc., Co. 
 v. Herkimer, 46 Ind. 142, 149. See 
 Bushnell v. Consolidated Ice Co., 
 138 111. 67. 
 
 It has been held that a shareholder 
 is not estopped by his subscription 
 to deny the lawful existence of a cor- 
 poration prohibited by the state con- 
 stitution. St. Louis Colonization 
 Ass'n v. Hennessy, 11 Mo. App. 555. 
 Contra, McCarthy v. Lavashe, 10 
 Chic. Leg. N. 342. 
 
 3 Tuttle v. Michigan Air Line R. 
 R. Co., 35 Mich. 247. See Rodgers v. 
 Wells, 44 Mich. 411. 
 
 4 Mansfield, etc., R. R. Co. v. 
 Drinker, 30 Mich. 124; Same v. 
 Brown, 26 Ohio St. 223; Same v. 
 Stout, ib. 241. 
 
 551
 
 §541.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 Shareholder 
 may plead 
 that officers 
 making 
 
 calls are 
 not legally- 
 elected. 
 
 § 540. To a suit for calls, unless affected with some special 
 estoppel, a shareholder may plead that the officers 
 making them were not legally officers of the corpo- 
 ration. Accordingly, where the notice of a meeting 
 contained nothing about electing directors, directors 
 chosen at that meeting are not validly elected, and 
 an assessment or call made by them is void. These facts a 
 shareholder may plead. 1 
 
 § 541. When a corporation increases its capital stock and 
 issues further shares, a subscriber to them, when 
 sued on his subscription, cannot avail himself of any 
 irregularities in their issue, if he has acquiesced or 
 taken part in the proceedings by which they were 
 issued, 2 or has paid voluntarily an assessment on his new 
 shares, 3 or has subscribed subsequently to their issue and may 
 be presumed to have waived any irregularities. 4 But when 
 the subscriber has done nothing by which he may be held 
 estopped, he may decline to receive stock improperly issued, 5 
 
 Subscribers 
 to shares 
 irregularly 
 or illegally 
 issued. 
 
 1 People's Mut. Ins. Co. v. West- 
 cott, 14 Gray, 440. Accord, How- 
 beach Coal Co. v. Teague, 5 II. & N. 
 151. Compare Ginrich v. Patrons' 
 Mill Co., 21 Kan. Gl ; and § 529. 
 
 In a suit to recover a subscription 
 it will be presumed, in the absence 
 of proof to the contrary, that the 
 meeting of directors authorizing the 
 assessment was legally noticed. 
 Chouteau Ins. Co. v. Holmes, C8 Mo. 
 601 ; see, also, § 190. 
 
 2 Clarke v. Thomas, 34 Ohio St. 
 46; Kansas City Hotel Co. v. Harris, 
 51 Mo. 464; Barrows v. Natchang 
 Silk Co., 72 Conn. 658. So a trans- 
 feree, even one who has taken the 
 shares as collateral, may be estopped. 
 Pullman v. Upton, 96 U. S. 328. 
 
 8 Delano v. Butler, 118 U. S. 634. 
 
 4 Kansas City Hotel Co. v. Hunt, 
 57 Mo. 126. 
 
 5 See American Tube Works v. 
 Boston Machine Co., 139 Mass. 5; 
 Reed v. Boston Machine Co., 141 
 Mass. 454. Holders of increased 
 
 552 
 
 shares have no standing in court to 
 contest the validity of other (pre- 
 ferred) shares issued at the same 
 time, on the ground that formalities 
 required by the statute authoriz- 
 ing the increase had not been com- 
 plied with. Columbia National 
 Bank's Appeal, 16 Weekly Notes of 
 Cases (Pa.), 357. A sale of stock in 
 a railroad company by the directors 
 at a less rate than that fixed by the 
 charter is a fraud in law. The issu- 
 ing of a bond convertible into stock 
 has the same effect as issuing stock; 
 and the sale of such a bond at a dis- 
 count is unlawful; and this though 
 the charter contain no prohibition 
 against taking a subscription at less 
 than the charter price. These facts 
 constitute a defence to an action on 
 an executory contract to take such 
 stock, when the subscriber has acted 
 in good faith and without notice. 
 Sturges v. Stetson, 1 Biss. 246. Com- 
 pare Fosdick v. Sturges, 1 Biss. 255. 
 When a statute exists forbidding
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 542. 
 
 and may be in a position to defend in a suit brought to enforce 
 his subscription to it. 1 Further, when the capital stock is 
 limited by the charter, all stock issued in excess of such limit 
 is void, and a holder thereof is not entitled to the rights of 
 a shareholder, 2 nor is he estopped from setting up its invalidity 
 as a defence to an action in the interest of creditors, brought 
 to recover the balance unpaid thereon. 3 But when the corpo- 
 ration has become bankrupt, the holder of void stock is not 
 entitled to have money paid thereon applied as a credit on the 
 unpaid balance due on authorized stock held by him. 4 In an 
 action by a corporation to recover a subscription, the fact that 
 it has taken subscriptions in excess of its limit does not itself 
 bar a recovery, if the corporation has retained a sufficient 
 amount of its authorized stock which it is ready and able 
 to issue. 5 
 
 § 542. Insolvency of the corporation is no defence to a 
 suit brought to collect a subscription. 6 And the 
 
 IdsoIvgkcv 
 
 assignee or receiver of the corporation succeeds to of corpora- 
 all its rights and may recover unpaid subscriptions tence^G^ 
 for the benefit of shareholders and creditors. 7 But Reiver ° f 
 a receiver cannot enforce the payment of a subscrip- 
 
 the issue of shares below par, and 
 declaring void shares so issued, a 
 subscriber to stock at less than par 
 is in pari delicto with the corporation 
 and cannot sue on the contract to 
 force it to issue such stock to him, 
 nor can he sue to recover back 
 moneys paid on account. Clarke v. 
 Lincoln Lumber Co., 59 Wis. 655. 
 Compare § 522c. 
 
 1 See last note. 
 
 2 N. Y. & N. H. R. R. Co. b. 
 Schuyler, 34 N. Y. 30; Scoville v. 
 Thayer, 105 U. S. 143; Oler v. Balto. 
 & Randallstown R. R. Co., 41 Md. 
 583; Grangers' L., etc., Ius. Co. v. 
 Kamper, 73 Ala. 325. 
 
 8 Scoville v. Thayer, supra ; Clark 
 v. Turner, 73 Ga. 1 ; Kampman v. 
 Tarver, 87 Tex. 491 ; Railroad v. 
 Sneed, 99 Tenn. 1. 
 
 4 Scoville v. Thayer, supra. 
 
 6 Oler v. Balto. & Randallstown 
 R. R. Co., 41 Md. 583. That the cor- 
 poration had illegally increased its 
 stock, is no defence to a note given 
 for a subscription, when it is not 
 alleged that the illegal cannot be 
 distinguished from the legal stock. 
 Merrill v. Reaver, 50 Iowa, 404. But 
 an innocent person buying void stock 
 from a corporation may recover the 
 price. Lincoln v. Express Co., 45 
 La. Ann. 729. 
 
 6 Dill u. Wabash Valley R. R. Co., 
 21 111. 91 ; Shuey v. Holmes, 22 Wash. 
 193. It is no defence to a suit on a 
 subscription to its stock, brought by 
 a railroad company, that the gov- 
 ernor of the state had seized the 
 road. Mull ins v. North and South 
 R. R. Co., 54 Ga. 580. The fact that 
 
 7 For note 7 see p. 554. 
 
 553
 
 § 543.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 tiou which the corporation could not have enforced at the 
 time of his appointment; 1 for the corporation or corporate 
 management, just as much as a receiver, represents the inter- 
 ests of all persons, creditors as well as shareholders, the main 
 difference being that, as a receiver is ordinarily appointed 
 only when the corporation is insolvent, the rights of creditors 
 in the corporate funds are then especially prominent ; and a 
 receiver is more apt to be regarded as the representative of 
 creditors. 2 "A receiver is appointed upon a principle of jus- 
 tice for the benefit of all concerned. Every kind of property 
 of such a nature that, if legal, it might be taken on execution, 
 may, if equitable, be put into his possession. Hence the 
 appointment has been said to be an equitable execution. He 
 is virtually a representative of the court, and of all the parties 
 in interest in the litigation wherein he is appointed." 3 
 
 It has been held that to a suit by a receiver to collect an 
 unpaid subscription, a shareholder may aver that the receiver 
 was improperly appointed by a decree not binding on the 
 shareholder. 4 But this doctrine may perhaps be of question- 
 able correctness, or at least application, since the shareholder 
 could have intervened in the proceeding by which the receiver 
 was appointed. 5 
 
 § 543. The discretionary authority of directors to make 
 
 a railroad has not been and is not 
 likely to be completed is no defence 
 to an action on an unconditional sub- 
 scription. Smith v. Gower, 2 Duv. 
 (Ky.)17. 
 
 7 Sawyer v. Hoag, 17 Wall. 610; 
 Upton v. Tribilcock, 91 U. S. 45; 
 Shockley v. Fisher, 75 Mo. 498; 
 Lionberger v. Broadway SVgs B'k, 
 10 Mo. App. 49'.»; Great Western 
 Tel. Co. v. Gray, 122 111. 630; Gainey 
 v. Gilson, 149 Ind. 58; Belknap, 
 Rec'r, v. Adams & Rice, 49 La. Ann. 
 1350; Wyman v. Williams, 53 Neb. 
 670. 
 
 1 Cutting v. Damerel, 88 N. Y. 
 410; Billings v. Robinson, 28 Hun, 
 122. 
 
 554 
 
 2 A receiver represents not only 
 the corporation, but also creditors 
 and shareholders, and in his char- 
 acter of trustee for the latter, may 
 disaffirm illegal and fraudulent 
 transfers of corporate property, and 
 recover its funds and securities mis- 
 applied. Attorney-General v. Guar- 
 dian Mut. Ins. Co., 77 N. Y. 272. 
 Compare Ellis v. Little, 27 Kan. 707. 
 
 3 Davis v. Gray, 16 Wall. 203, 218. 
 
 * Chandler v. Brown, 77 111. 333. 
 Semble contra, Hemstad v. Hall, 64 
 Minn. 133. 
 
 5 Schoonoverv. Hinckley, 48 Iowa, 
 82; Fish, Rec'r, v. Smith, 73 Conn. 
 377.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 546. 
 
 calls cannot be delegated, for instance, to the treas- 
 
 Directors 
 
 urer of the corporation. 1 And there is also a case cannot 
 in which it is said that although a corporation may authority 
 assign a call already due on a stock note, it cannot canTwhen 
 commit to the assignee the discretion of making calls un- 
 future calls. 2 But the scope of this remark, if 
 sound at all, is very limited, for after a corporation is insol- 
 vent, and has ceased to be a going concern, that a call should 
 be made by the corporate authorities is no longer prerequisite 
 to the collection of a subscription ; 3 and an insolvent corpora- 
 tion can include in an assignment for the benefit of creditors 
 its right to the unpaid balance of subscriptions for which no 
 call has been made. 4 
 
 § 544. [545.] It has also been held that in the absence of 
 special authorization, a railroad company cannot purchase sub- 
 scription notes given by shareholders in another corporation, 
 and enforce them against the subscribers ; and the fact that one 
 railroad company has bought the road-bed of another, intend- 
 ing to complete the road, gives the purchaser no right to buy 
 and enforce the vendor's stock subscriptions. 5 
 
 § 546. The corporation or the corporate management may 
 forfeit shares for non-payment of calls, when power to do so 
 is given bj' the constitution of the corporation. 6 Since, how- 
 ever, by a valid forfeiture of shares the relations Forfeiture 
 between the shareholder and the corporation are ter- of shares 
 
 . . . . . for non- 
 
 minated, the corporation can maintain no subse- payment of 
 quent action for calls. 7 But the power to forfeit as 
 
 calls. 
 
 1 Silver Hook Road v. Greene, 12 
 R. I. 164. See §§ 233, 234. 
 
 2 Schultz v. Sutter, 3 Mo. App. 137. 
 After the whole amount of the sub- 
 scription has been called, it may be 
 assigned. Wells u. Rogers, 50 Mich. 
 294; Schultz v. Sutter, siqyra. See 
 Morris v. Cheney, 51 111. 451. 
 
 3 See §§ 703. 
 
 4 Eppright v. Nickerson, 78 Mo. 
 482. Compare Wooldridge v. 
 Holmes, 78 Ala. 508. 
 
 5 West End R. R. Co. v. Dameron, 
 
 4 Mo. App. 414. See, also, Minne- 
 apolis Harvester Works v. Libbey, 
 24 Minn. 327. Compare Wells v. 
 Rodgers, 50 Mich. 294. 
 
 6 A corporation cannot by a by- 
 law subject shares to forfeiture, un- 
 less the power is expressly granted. 
 Matter of Long Island R. R. Co., 19 
 Wend. 37; compare Bergman v. St. 
 Paul Mutual Building Association, 
 29 Minn. 275; Gorman v. Guardian 
 Savings Bank, 4 Mo. App. 180. See 
 Budd v. Street R'y Co., 15 Oregon, 
 
 7 For note 7 see p. 556. 
 
 555
 
 § 547.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 long as unexercised does not impliedly preclude the corpora- 
 tion from suing for calls instead of declaring a forfeiture. 1 
 
 §547. To the validity of a forfeiture of shares it is essential 
 that all the conditions precedent should have been strictly com- 
 plied with. 2 A reasonable notice, which should specify the 
 place of sale, 3 must first be given to the delinquent share- 
 holder ; 4 and all statutory provisions, and provisions in the by- 
 
 413; Cartwright v. Dickinson, 88 
 Tenn. 476. But it lias been held 
 that a stock corporation not having 
 express power to declare a forfeiture 
 of shares for non-payment of calls, 
 may sue for the amount due, and on 
 failure to collect on its judgment the 
 whole amount, may collect the res- 
 idue by a sale of the shares. Chase 
 u. Railroad Co., 5 Lea (Tenn.), 415. 
 
 7 Small v. Herkimer Mfg. Co., 2 
 N. Y. 330. When a corporation for- 
 feits shares, it cannot recover on a 
 note given for a prior unpaid assess- 
 ment. Ashton v. Burbank, 2 Dill. 
 435. The power to sue a shareholder, 
 after a forfeiture, may be given by 
 statute. Lexington, etc., R. R. Co. 
 v. Chandler, 13 Mete. (Mass.) 311; 
 Troy, etc., R. R. Co. v. Newton, 1 
 Gray, 544; Mandel v. Swan Land Co., 
 154 111. 177; Great Northern Ry. Co. 
 v. Kennedy, 4 Exeh. 417; or by by- 
 law. Cotton Mills v. Dunstan, 121 
 N. C. 12. 
 
 1 Delaware, etc., Navigation Com- 
 pany v. Sansom, 1 Binn. (Pa.) 70; 
 Freeman v. Winchester, 18 Miss. 577; 
 Goshen Turnpike Road r. Ilurlin, 9 
 Johns. 217; Dutchess Cotton Manu- 
 factory v. Davis, 14 Johns. 238; New 
 Hampshire Central R. R. Co. v. 
 Johnson, 30 N. H. 300; Rutland, etc., 
 R. R. Co. v. Thrall, 35 Vt, 536; 
 Beene v. Cahawba, etc., R. Co., 3 
 Ala. 660; Selma, etc., R. R. Co. v. 
 Tipton, 5 Ala. 787; Inst one v. Frank- 
 fort Bridge Co., 2 Bibb (Ky.), 576; 
 Mann v. Cooke, 20 Conn. 178; Stokes 
 v. Lebanon, etc., Turnpike Co., 6 
 
 556 
 
 Humph. (Tenn.) 241; Troy Turn- 
 pike and R. R. Co. v. M'Chesney, 21 
 Wend. 296; Buffalo and N. Y. City 
 R. R. Co. v. Dudley, 14 N. Y. 336; 
 Sagory v. Dubois, 3 Sandf. Ch. 
 (N. Y.) 466. 
 
 Contra, semble, Chester Glass Co. 
 v. Dewey, 16 Mass. 94; though the 
 doctrine of this case is rather to the 
 effect that there is no implied prom- 
 ise to pay, than that any implied 
 promise is excluded by an express 
 power of forfeiture. See, also, 
 Franklin Glass Co. v. Alexander, 2 
 N. H. 380; Giles v. Hutt, 3 Exch. 18; 
 Richboro Dairymen's Association v. 
 Ryan, 16 Weekly Notes (Pa.), 383. 
 Where the charter of a railroad com- 
 pany provides that on the failure of 
 subscribers to pay calls, the company 
 may sell the shares at public auction, 
 and sue the subscriber for the bal- 
 ance, if any, the company may sue 
 the subscriber without making such 
 sale. Western R. R. Co. v. Avery, 
 64 N. C. 491. 
 
 2 Johnson i\ Lyttle's Iron Agency, 
 46 L. J. Eq. 786; see Germantown, 
 etc., R. R. Co. v. Fitler, 60 Pa. St. 
 124; Mitchell v. Vermont M'g Co., 
 40 N. Y. Super. Ct. 406; Eastern 
 Plank Road Co. v. Vaughan, 20 Barb. 
 157; Knight's Case, L. R. 2 Ch. 321. 
 
 3 Lexington, etc., R. R. Co. v. Sta- 
 ples, 5 Gray, 520. 
 
 4 Lewey's Island R. R. Co. v. Bol- 
 ton, 48 Me. 451 ; Hughes v. Antietam 
 M'f'g Co., 34 Md. 317; Matter of 
 Long Island R. R. Co., 19 Wend. 37.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 549. 
 
 laws, that may apply regulating the nature and contents of the 
 notice 1 and the manner of conducting the sale, must be strictly 
 followed. 2 A forfeiture declared by illegally chosen directors 
 may be set aside ; 3 or one declared by a board composed of a 
 less number of directors than are authorized by the articles of 
 association to transact business for the company. 4 And a sale 
 of shares for the nonpayment of several assessments, one of 
 which is illegal, is void. 5 
 
 § 548. The option to declare a forfeiture rests with the cor- 
 poration, and cannot be exercised by the delinquent 
 
 i i i i a ,, mi . . ,, ,.. , Collusive 
 
 shareholder. 6 " lhe power to forfeit, like the power forfeitures. 
 to manage all the affairs of the corporation, is vested 
 in the directors, upon the assumption that they will exercise it 
 in the best manner practicable for the promotion of the inter- 
 ests of the company and its creditors ; that they will not for- 
 feit the stock unless the interest of all will be promoted thereby. 
 Should they forfeit it for the purpose of defrauding the corpo- 
 ration, or any creditor, such forfeiture would, for that reason, 
 be set aside." 7 
 
 § 549. It is incompetent for the directors, 8 or for the body 
 
 1 Morris v. Land Co., 164 Pa. St. 326; 
 Watson v. Eales, 23 Beav. 294; Van 
 Diemen's Land Co. ». Cockerell, 1 
 C. B. N. S. 732. 
 
 2 Portland, etc., R. R. Co. v. Gra- 
 ham, 11 Mete. (Mass.) 1; York, etc., 
 R. R. Co. v. Ritchie, 40 Me. 425. 
 
 3 Garden Gully M'g Co. v. Mc- 
 Lister, L. R. 1 App. Cas. 39. A 
 shareholder may enjoin illegally 
 chosen directors from selling his 
 shares. Moses v. Tompkins, 84 Ala. 
 613. 
 
 i In re Alma Spinning Co., 29 
 W. R. 133. 
 
 6 Stoneham Branch R. R. Co. v. 
 Gould, 2 Gray, 277; Lewey's Island 
 R. R. Co. v. Bolton, 48 Me. 451. 
 
 • Klein v. Alton, etc., R. R. Co., 
 13 111. 514; Railroad Co. ». Rod- 
 rigues, 10 Rich. L. (S. C. ) 278. 
 
 7 Mills v. Stewart, 41 N. Y. 384, 
 
 390. Collusive forfeitures may be 
 set aside. Richmond's Case, 4 Kay 
 & J. 305, 323; Gower's Case, L. R. 
 6 Eq. 77; In re St. Marylebone 
 B'k'g Co., Stanhope's Case, 3 De G. 
 & Sm. 198. 
 
 8 Chouteau Ins. Co. v. Floyd, 74 
 Mo. 286; Hughes v. Antietam M'f'g 
 Co., 34 Md. 316; Bedford R. R. Co. 
 v. Bowser, 48 Pa. St. 29; Cartwright 
 v. Dickinson, 88 Tenn. 476 ; Hall's 
 Case, L. R. 5 Cli. 707 See Thomas's 
 Case, L. R. 13 Eq. 437. 
 
 A plea to an action on a subscrip- 
 tion that the directors released the 
 defendant, is bad on demurrer, un- 
 less it avers a consideration, and that 
 there were no creditors of the corpo- 
 ration at the time. Zirkel v. Joilet 
 Opera House Co., 79 111. 334; World's 
 Fair Ex. Co. v. Gasch, 162 111. 402. 
 
 557
 
 § f)f)0.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 corporate, 1 to permit the holder of partially paid-up 
 subscriber shares, or shares to the ownership of which individ- 
 ual liability attaches, to withdraw in any way not 
 authorized by the constitution of the corporation. Such per- 
 mission is plainly ultra vires, and will ordinarily affect the rights 
 only of those assenting to it. 2 The question, whether the release 
 or withdrawal of a shareholder is valid, may arise between the 
 withdrawing shareholder and the corporation ; or formally be- 
 tween such shareholder and other shareholders; 3 or between 
 such shareholder and creditors of the corporation ; 4 or, finally, 
 as is frequently the case, between such shareholder and a re- 
 ceiver or assignee of the corporation when insolvent, who rep- 
 resents creditors as well as shareholders. 5 
 
 § 550. A leading English case in point is Spackman v. 
 Evans. 6 There the directors granted to a dissenting share- 
 holder leave to retire from the company on conditions which 
 they deemed prudent and advantageous to be granted in his 
 case, but which were not in accordance with the deed of settle- 
 ment. The shareholder performed the conditions, his name 
 was for years removed from the list of shareholders, the 
 company changed its business without his knowledge, and 
 dividends were received, in which he did not participate. 
 Nevertheless, it was held that his name should be inserted in 
 the list of contributories on the final winding up of the com- 
 pany. 7 
 
 So in Tuckerman v. Brown, 8 where for the purpose of increas- 
 
 1 See Maun v. Cook, 20 Conn. 178, 
 188. 
 
 2 See Whitaker v. Grummonrl, 68 
 Mich. 249, a case tending towards 
 recognizing a power in directors to 
 compromise a subscription. The 
 case held that shareholders who 
 complained were under the circum- 
 stances estopped. 
 
 3 See § 779. 
 
 4 As in Slee v. Bloom, 19 Johns. 
 (N. Y.) 450; Chicago B'ld'g & M'f'g 
 Co. v. Summerous, 101 Ga. 820. 
 
 5 E. gr., as in Upton v. Tribilcock, 
 91 U. S. 45. 
 
 6 L. R. 3 H. L. 171. 
 
 558 
 
 7 The decision in Spackman v. 
 Evans is perhaps extreme, and Lords 
 St. Leonard and Rom illy dissented. 
 In this case the real rights demand- 
 ing the insertion of defendant's 
 name as a contributory were those 
 of the shareholders who had not 
 consented to his withdrawal (though 
 they might have been estopped by 
 their laches) and those of creditors. 
 In such cases, however, the rights 
 of creditors seem to be less regarded 
 in England than with us. See Dix- 
 on's Case, L. R. 5 Ch. 79. 
 
 8 33 N. Y. 297.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 552. 
 
 ing the capital stock of the corporation to the amount required 
 by law, in order that the corporation might pass the examina- 
 tion of the commissioners appointed by the comptroller, a pre- 
 mium note was given upon an agreement that after the examina- 
 tion the note might be withdrawn and a lesser one substituted, 
 it was held that the agreement was a fraud, and that the maker 
 of the note continued liable thereon, although it had been with- 
 drawn and destroyed. 1 
 
 § 551. A person who has subscribed for shares cannot annul 
 his subscription by giving notice to the agent with whom he 
 contracted. 2 The circumstances of a late Pennsylvania case, 
 which may be regarded as authority on this point, were note- 
 worthy. A person was active in soliciting subscriptions to build 
 a railroad. He took a subscription book from the agent of the 
 company, subscribed therein, persuaded others to do so, and 
 kept the book about six months. Then, because of a difference 
 with the company's agent in regard to his remuneration, he cut 
 out his own name, and returned the book to the company. The 
 company sued him on his subscription, and it was held, that 
 he had perfected a contract with the company and was bound 
 as much as if he had left his name in the book. 3 
 
 § 552. If the corporation is in failing circumstances, or if 
 for any other reason it cannot legally acquire its own shares, a 
 shareholder will not avoid any liability he may be 
 subject to, by surrendering his shares to it ; even o/Yhares 9 
 though the corporation reissue them ; 4 and whatever poration° r " 
 money or property he receives from the corporation 
 in payment for his shares transferred to it, he will hold subject 
 to the claims of its creditors. 5 
 
 1 It was held in Teasdale's Case, 
 L. R. 9 Ch. 54, that a company 
 might hy special resolution vary its 
 articles so as to give itself the power 
 to accept surrenders of old shares in 
 exchange for new. 
 
 2 Lowe v. E. and K. R. R. Co., 1 
 Head (Tenn.), 659; Rider v. Morri- 
 son, 54 Md. 429; Chicago B'ldg & 
 Mfg. Co. v. Lyon, 10 Okl. 704. 
 
 3 Greer v. ChartiersR'y Co., 96 Pa. 
 St. 391. 
 
 4 Matter of Reciprocity Bank, 22 
 N. Y. 9. For the power of a corpo- 
 ration to purchase its own shares, 
 see § 134, and for the effect of such 
 a purchase on the relations between 
 the shareholder and creditors, see 
 §747. 
 
 6 Crandall v. Lincoln, 52 Conn. 73, 
 100. Compare Columbian Bank's 
 Estate, 147 Pa. St. 422; and see Hall 
 v. Henderson, 126 Ala. 449. 
 
 559
 
 § 553.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 § 553. As against all persons, so as against the individual 
 
 shareholders, or a minority of shareholders, the cor- 
 Rightof , ' . . J 
 
 thecorpo- poration has the right to carry on the corporate en- 
 control the tei'prisc in the manner and for the purposes set forth 
 enterorise m lts constitution ; and within the scope of their 
 
 powers the reasonable and fair discretion of the 
 board of directors can be controlled, if at all, only through 
 action of a majority of shareholders taken in the manner indi- 
 cated by the corporate constitution. 1 " Each and every share- 
 holder contracts that the will of the majority shall govern in 
 all matters coming within the limits of the act of incorpora- 
 tion ; and in cases involving no breach of trust, but only error 
 or mistake of judgment on the part of directors who represent 
 the company, individual stockholders have no right to appeal 
 to the courts to dictate the line of policy to be pursued by the 
 corporation." 2 
 
 Or, as Chief Justice Bigelow said in Durfee v. Old Colony 
 Railroad Co. : 3 "We suppose it may be stated as an indisput- 
 able proposition, that every person who becomes a member of 
 a corporation aggregate by purchasing and holding shares, 
 agrees by necessary implication that he will be bound by all 
 acts and proceedings within the scope of the powers and 
 authority conferred by the charter, which shall be adopted and 
 sanctioned by a vote of the majority of the corporation duly 
 taken and ascertained according to law, This is the unavoid- 
 able result of the fundamental principle that the majority of 
 shareholders can regulate and control the lawful exercise of 
 the powers conferred on a corporation by its charter. A 
 holder of shares in an incorporated body, so far as his individual 
 rights and interests may be involved in the doings of the cor- 
 poration, acting within the legitimate sphere of its corporate 
 power, has no legal control over them save that which he can 
 exercise by his single vote in the meetings of the company." 4 
 
 1 Gravenstine's Appeal, 49 Pa. St. 
 310; Smith v. Prattville M'f'g Co., 
 29 Ala. 503. See chap. 12. 
 
 a Dudley v. Kentucky High School, 
 9 Bush (Ky.), 576, 578. 
 
 3 5 Allen, 230, 242. See § 534. 
 
 4 See, also, New hall ». Galena, etc., 
 
 560 
 
 R. R. Co., 14 111. 273; Joslyn i\ Pa- 
 cific Mail S. S. Co., 12 Abh. Pr. N. 
 S. ( N. Y. ) 329; Gifford v. New Jersey 
 R. R. Co., 10 N. J. Eq. 171, 174; New 
 Orleans, etc., R. R. Co. v. Harris, 27 
 Miss. 517, 537; Fluker v. Railway Co., 
 48 Kan. 577.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 555. 
 
 § 554. Accordingly, a court will not ordinarily interfere 
 with the corporate management in matters respect- 
 ing the internal administration of the corporate not^ter^ 111 
 affairs : 1 nor examine into the affairs of a corpora- ieT . e a * the 
 
 ' r suit of 
 
 tion to determine the expediency of its action, or its share- 
 
 holders 
 
 motives, as long as the action itself is lawful. 2 And 
 a shareholder cannot enjoin the corporation from doing what 
 is in direct furtherance of the objects of its incorporation and 
 beneficial to shareholders as such, because the contemplated 
 action will injure him in another character. 3 
 
 § 555. To warrant the interference of a court, at the instance 
 of a shareholder, to restrain an act intended by the Unless to 
 body corporate or the corporate management, the acts which 
 act should be beyond the corporate powers ; or, if ^res^m 
 intended by the corporate management, a manifestly constitute 
 
 J l ° J a breach of 
 
 improper act which the body corporate is not in a trust. 
 position to prevent, owing perhaps to the fact that the man- 
 agement cannot be changed in time. 4 
 
 The reasons for this are thus stated in Foss v. Harbottle : 5 
 " Whilst the court may be declaring the acts complained of to 
 be void at the suit of the present plaintiffs, w T ho in fact may 
 be the only proprietors who disapprove of them, the governing 
 body of proprietors may defeat the decree, by lawfully resolv- 
 ing upon the confirmation of the very acts which are the sub- 
 ject of the suit. ... In order then that the suit may be 
 
 1 Carlen v. Drury, 1 Ves. & B. 154; 
 Foss v. Harbottle, 2 Hare, 461; Moz- 
 ley v. Alston, 1 Phil. 790; Bailey v. 
 Birkenhead, etc., R'y Co., 12 Beav. 
 433; Bach v. Pac. Mail S. S. Co., 12 
 Abb. Pr. N. S. (N. Y.) 373; Miller 
 «. Murray, 17 Col. 408. See 2 Lind- 
 ley on Part., 895-902; Hawes v. Oak- 
 land, 104 U. S. 450. The power of a 
 shareholder to sue on a right of 
 action belonging to the corporation 
 is discussed in §§ 138 et seq. 
 
 2 Oglesby v. Attrill, 105 U. S. 605; 
 Shaw v. Davis, 78 Md. 308. See 
 Mayor, etc., of Baltimore v. Balto. 
 & O. R. R. Co., 21 Md. 50, 92; Cates 
 ». Sparkraau, 73 Tex. 619; Lamar v. 
 
 36 
 
 Lanier House Co., 76 Ga. 641; Bur- 
 den v. Burden, 159 N. Y. 287. 
 
 3 Baltimore and Ohio R. R. Co. v. 
 Wheeling, 13 Gratt. (Va.) 40. See 
 Thompson v. Erie Ry. Co., 11 Abb. 
 Pr. N. S. (N. Y.) 188. 
 
 4 See Hersey v. Veazie, 24 Me. 9; 
 Cogswell v. Bull, 39 Cal. 324; Leo v. 
 Union Pac. R'y Co., 19 Fed. Rep. 
 283. A shareholder may restrain an 
 act which, if done, would be a ground 
 of forfeiture of the charter. Ren- 
 dall v. Crystal Palace Co., 4 Kay and 
 J. 326. See Ponca Mills Co. v. Mike- 
 sell, 55 Neb. 98. 
 
 5 2 Hare, 493, 494. 
 
 561
 
 § 556.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 sustained, it must be shown either that there is no such power 
 as I have supposed remaining in the proprietors, or at least 
 that all means have been resorted to and found ineffectual to 
 set that body in motion." 1 
 
 § 556. The legal effect of ultra vires acts was discussed in a 
 previous chapter. 2 A single shareholder has ample power to 
 restrain the corporation from diverting the corporate funds 
 from the purposes for which they were subscribed, and ordi- 
 narily can prevent the doing of any ultra vires act ; 3 provided, 
 he is not chargeable with acts or omissions by which his rights 
 can be held waived or forfeited. 4 Thus, a shareholder in a 
 railroad corporation may enjoin the carrying out of an ultra 
 vires lease of the road ; 5 or the performance of an illegal con- 
 tract. 6 
 
 A minority or a single shareholder may restrain the corpora- 
 tion, or the corporate management, from diverting the corporate 
 funds to unauthorized purposes. 7 Accordingly, a shareholder 
 may enjoin a railroad corporation from using its funds or 
 pledging its credit in order to extend its road beyond the 
 
 1 See Railway Co. v. AHerton, 18 
 Wall. 233; Dimpfell v. Ohio, etc., R. 
 Co., 110 U. S. 209, § 140. 
 
 2 Chap. 7, part iii. 
 
 3 Natusch v. Irving, Gow on Part., 
 ed. 3, App. 576; Const v. Harris, 
 Turn. & R. 496; Gifford v. New Jer- 
 sey R. R. Co., 10 N. J. Eq. 171; Dodge 
 v. Woolsey, 18 How. 331; Stewart v. 
 Erie, etc., Trans. Co., 17 Minn. 372, 
 398; Carson v. Gaslight Co., 80 Iowa, 
 638. See Angell and Ames on Corp., 
 § 398; Coleman v. Eastern Counties 
 R'y Co., 10 Beav. 1; March v. Eastern 
 R. R. Co., 40 N. H. 548; Schwarz- 
 wehler v. German Mut. Ins. Co., 59 
 N. J. Eq. 589; Ely ton Fund Co. v. 
 Dowdell, 113 Ala. 177 ; Morris v. 
 Elyton Fund Co., 125 Ala. 263. 
 
 4 See Dimpfell v. Ohio, etc., R. 
 Co., 110 U. S. 209; Cozart v. Georgia 
 R. R. etc., Co., 54 Ga. 379; Gray v. 
 Chaplin, 2 Russ. 126; Graham r. Bir- 
 kenhead R'y Co., 2 Mac. & G. 140; 
 e. g., laches, see above cases, and 
 
 562 
 
 Alexander ». Searcy, 81 Ga. 536; 
 Burgess v. St. Louis Ry. Co., 99 Mo. 
 496; Snow v. Boston Blank Book Co., 
 158 Mass. 325; Rabe v. Dunlap, 25 
 Atl. Rep. 959 (N. J.); Willis v. Porter, 
 132 Cal. 516. Also, § 213. 
 
 6 Board, etc., Tippecanoe County 
 v. Lafayette, etc., R. R. Co., 50 Ind. 
 85; Mills v. Central R. R. Co., 41 
 N. J. Eq. 1. 
 
 6 Morrill v. Boston and Maine 
 R. R., 55 N. H. 531; Sandford v. 
 Railroad Co., 24 Pa. St. 378; Cum- 
 berland Valley R. R. Co.'s Appeal, 
 62 Pa. St. 218; Charlton v. New- 
 castle, etc., R'y Co., 5 Jur. N. S. 
 1096. 
 
 7 March v. Railroad, 43 N. H. 515; 
 Ashton v. Dashaway Ass'n, 84 Cal. 
 61; Rothwell v. Robinson, 39 Minn. 
 1; Simpson v. Westminster Palace 
 Hotel Co., 8 H. L. Cas. 712; Lyde 
 o. Eastern Bengal R'y Co., 36 Beav. 
 10; State v. Holmes, 60 Neb. 39.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 557. 
 
 termini designated by the charter ; J or from purchasing, with- 
 out authority to do so, stock in another railroad company. 2 
 And a company, incorporated to manufacture pig iron, may be 
 enjoined by one of its shareholders from erecting a corn and 
 flour mill. 3 
 
 § 557. Unless the right to alter and repeal is reserved to the 
 state, 4 or some express provision in the original con- 
 
 When 
 
 stating instrument covers the matter, the charter or sharehoid- 
 the articles of association cannot, against the will of enjoTu the 
 a single shareholder, be substantially altered by the ^ c ^ ta,nce 
 legislature, 5 even with the consent of the majority. 6 amend- 
 And a shareholder has his remedy by injunction to 
 restrain the acceptance of a radical amendment. 7 Accordingly, 
 in a case where a person subscribed for shares in the stock of 
 a railroad corporation, which afterwards, by a vote of a major- 
 ity of shareholders, accepted legislation transferring all its fran- 
 chises and rights to another corporation, the legislation and 
 the transfer depending on it were alike held void, and the latter 
 corporation failed to enforce the subscription. 8 But the legis- 
 lature may confer on the corporation such additional powers 
 as tend to facilitate the accomplishment of the original pur- 
 poses of incorporation ; and acts done in pursuance of such 
 powers will ordinarily be binding, unless they conflict with 
 vested rights or impair the obligation of some contract." 
 
 1 Stevens v. Rutland, etc., R. R. 
 Co., 29 Vt. 545. Compare Durfee 
 v. Old Colony, etc., R. R. Co., ante, 
 §534. 
 
 2 Central R. R. Co. v. Collins, 40 
 Ga. 582; see Pratt v. Pratt, 33 Conn. 
 446. 
 
 8 Cherokee Iron Co. v. Jones, 52 
 Ga. 276. 
 
 4 See §§523, 534. 
 
 s See §§ 450 et seq. 
 
 6 New Orleans, etc., R. R. Co. v. 
 Harris, 27 Miss. 517; Black v. Dela- 
 ware and Raritan Canal Co., 24 
 N. J. Eq. 455; Mowrey v. Indianap- 
 olis, etc., R. R. Co., 4 Biss. 78. See 
 Hope Mut. Fire Ins. Co. v. Beck- 
 mann, 47 Mo. 93, 97; Alexander ». 
 Atl. & W. P. R. R. Co., 108 Ga. 151. 
 
 7 Mowrey v. Indianapolis, etc., R. 
 R. Co., 4 Biss. 78. But he must be 
 guilty of no laches. Chapman v. 
 Mud River and L. E. R. R. Co., 6 
 O. St. 119. 
 
 8 New Orleans, etc., R. R. Co. v. 
 Harris, 27 Miss. 517. 
 
 9 Gifford v. New Jersey R. R. Co., 
 ION. J. Eq. 171. See §227. Mower 
 v. Staples, 32 Minn. 284, holds that 
 a majority of shareholders can ac- 
 cept an amendment to the charter 
 increasing the number of directors 
 from five to nine. In this case the 
 charter was subject to alteration and 
 amendment; see Laws of Minn. 1851, 
 p. 22. 
 
 It has been held that shareholders 
 may be bound by provisions not ac- 
 
 563
 
 § 559.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 Corporate 
 affairs must 
 be man- 
 aged in in- 
 terests of 
 the share- 
 holders as 
 such. 
 
 § 558. It is the duty of the corporate management to con- 
 duct the affairs of the corporation in the interests of 
 the shareholders as such ; l and the management is 
 not justified in promoting the outside interests of a 
 majority of shareholders in disregard of the interests 
 in the corporate enterprise of a minority. A court 
 will interfere at the suit of a minority when the ma- 
 jority seek to appropriate the assets of the company, or to 
 obtain for themselves advantages not shared by the minority. 2 
 § 559. In the case of Goodin v. Cincinnati, etc., Canal Co., 3 
 a railroad company, having purchased a majority of the stock 
 of a canal company, elected for the latter a board of directors 
 in their own interest ; and then with the assent of such board 
 appropriated the entire property, including the canal, of the 
 
 tually fouud in the charter, when the 
 charter authorizes the directors to 
 make by-laws, not contrary to the 
 law of the land, for the general ad- 
 ministration of the corporate affairs. 
 Union Bank v. Guice, 2 La. Ann. 249. 
 
 1 Compare Baltimore and Ohio R. 
 R. Co. v. Wheeling, 13 Gratt. (Va.) 
 40. 
 
 2 Menier v. Hooper's Telegraph 
 Works, L. R. 9 Ch. 350. See Jones 
 v. Morrison, 31 Minn. 140; Ervin v. 
 Oregon R'y, etc., Co., 23 Blatchf. 
 517; Gamble v. Water Co., 122 N. 
 Y. 91, 99; Memphis, etc., R. R. Co. 
 v. Woods, 88 Ala. 630; Mack o. Coal 
 Co., 90 Ala. 396; Port Royal, etc., 
 Ry. Co. v. Branch, 78 Ga. 113. A 
 complaint alleged that the officers of 
 a corporation were members of one 
 family, owned a majority of the 
 stock, had combined to appropriate 
 the profits of the corporation in the 
 shape of salaries, and, through a 
 contract with a firm in which some 
 of the officers were partners, had 
 obliged the corporation to take all 
 its contracts in the firm's name; 
 that the plaintiff did not know the 
 terms of this contract, and was ex- 
 cluded from inspecting the corporate 
 
 564 
 
 books, and that, though the profits 
 were large, the dividends were small. 
 The complaint was held to have 
 stated a sufficient ground for equita- 
 ble relief. Sellers v. Phoenix Iron 
 Co., 13 Fed. Rep. 20. See, also, Jones 
 v. Morrison, 31 Minn. 140, and §§608, 
 609. Compare Metropolitan Elevated 
 R. R. Co. v. Manhattan Elevated R. R. 
 Co., 11 Daly (N. Y.), 373, 516. 
 
 In dealing with the relations be- 
 tween the corporation and its officers 
 on the one hand, and shareholders 
 on the other, courts of equity will 
 look beyond the mere observance of 
 the forms of law. At the instance 
 of shareholders they will restrain 
 acts even within the scope of corpo- 
 rate powers, if such acts, when done, 
 would, under the particular circum- 
 stances, amount to a breach of the 
 very trust upon which the authority 
 was conferred. And a court will 
 relieve an injured shareholder even 
 after the act is done, unless the su- 
 perior equities of innocent persons 
 have, in the meanwhile, attached. 
 Wright v. Oroville M'g Co., 40 Cal. 
 20. 
 
 3 18 O. St. 169.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 559. 
 
 canal company as a railroad track, paying a price agreed on 
 between the directors of the two companies, which was far 
 below the value of the property. It was held that the share- 
 holders and creditors of the canal company could not, after the 
 road had been completed, reclaim the property or enjoin its 
 use ; but could compel the railroad company to pay them the 
 difference between the value of the property and the price 
 which the railroad company paid for it. 
 
 Justice Welsh said, giving the opinion of the court : " To 
 undertake by getting control of the company, and then, under 
 pretence of acting as agents and trustees for all the stock- 
 holders and creditors, deliberately to trample under foot the 
 rights of the minority, is rather a sharp practice, and one which 
 a court of equity will never tolerate. A director whose per- 
 sonal interests are adverse to those of the corporation, has no 
 right to act as a director. As soon as he finds that he has 
 interests in conflict with those of the company, he ought to 
 resign, no matter if a majority of stockholders, as well as him- 
 self, have personal interests in conflict with the company. He 
 does not represent them as persons, or represent their personal 
 interest. He represents them as stockholders, and their inter- 
 ests as such. He is trustee for the company, and whenever he 
 acts against its interests — no matter how much he thereby 
 benefits foreign interests of the individual stockholders, or how 
 many of the individual stockholders act with him — he is guilty 
 of a breach of trust, and a court of equity will set his acts 
 aside, at the instance of stockholders or creditors who are dam- 
 nified thereby. Any act of the directors by which they inten- 
 tionally diminish the value of stock or property of the company 
 is a breach of trust, for which any of the stockholders or cred- 
 itors may justly complain, although all the other stockholders 
 and creditors are benefited in some other way more than they 
 are injured as such. " 1 
 
 1 Goodin v. Cincinnati, etc., Canal 
 Co., 18 Ohio St. 169, 182. See Davis 
 v. U. S. Electric, etc., Co., 77 Md. 35. 
 See, also, State v. Brown, 64 Md. 199, 
 206 ; Memphis, etc., R. R. Co. v. 
 Woods, 88 Ala. 630. One corpora- 
 tion cannot purchase majority of 
 stock in another, obtain control of 
 
 its affairs, and so divert business 
 from it as to cause it to default in 
 the payment of its obligations, and 
 then institute an action in equity to 
 enforce those obligations, all for the 
 purpose of obtaining control to the 
 injury of a minority of shareholders. 
 Farmers' L. & T. Co. v. N. Y., etc., 
 565
 
 § 559i.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 § 559a. Frequently a majority of shareholders may be in 
 accord as to a certain corporate policy which the 
 
 Agreements . . . . n 1 • i 
 
 among minority may disapprove, feuch is a not unusual 
 
 holders as state of affairs. And it has been held that when a 
 to control, corporation is to be formed according to statute and 
 with lawful objects, there is no reason why parties starting the 
 enterprise should not enter into an agreement as to its future 
 management and control, provided the modes of corporate 
 management outlined in the statute are not to be thereby con- 
 travened. 1 On the other hand, the courts will not sustain 
 agreements made by a majority of shareholders, who either 
 are themselves directors, or control the board, that the corpo- 
 rate enterprise shall be managed by certain persons. 2 
 
 § 5593. Undoubtedly it is the duty of directors to manage 
 Right of the corporate enterprise for the benefit of the cor- 
 hoiders to poration, and with equitable regard to the interests 
 thefrown °^ a ^ ^ ie shareholders. 3 But as for shareholders, 
 interests. it is neither to be expected nor required that they 
 should not sometimes vote in corporate meetings according to 
 individual interests of their own. 4 
 
 It has been held that a shareholder may vote in a corporate 
 meeting, upon a measure as to which he has a personal interest, 
 apart from the other shareholders ; 5 and that a shareholder in 
 a domestic corporation cannot enjoin a foreign coporation 
 from voting a majority of the domestic corporation's stock, 
 when it does not clearly appear that the interests of the two 
 corporations are antagonistic. 6 The question would seem to 
 be whether the majority have fraudulently or inequitably 
 disregarded the rights and interests of the rest. There is a 
 border line of cases where directors have made contracts with 
 themselves. Can the same persons by their votes as share- 
 holders holding a majority of stock, ratify such contracts when 
 
 R. R. Co., 150 N. Y. 410. See §§ 627 
 et seq. 
 
 1 King v. Barnes, 109 N. Y. 267. 
 
 2 Wilbur v. Stoepel, 82 Mich. 344. 
 See West v. Camden, 135 U. S. 597 ; 
 Fennersy v. Ross, 5 N. Y. A pp. Div. 
 342 ; Snow v. Church, 13 ib. 108 ; but 
 see § 580. 
 
 566 
 
 8 See § 692. 
 
 * See Nye v. Storer, 168 Mass. 53. 
 
 6 Gamble v. Water Co., 123 N. Y. 
 91. Compare Chicago Hansom Cab 
 Co. v. Yerkes, 141 111. 320. 
 
 6 American Refrigerating Co. v. 
 Linn, 93 Ala. 610.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 561. 
 
 otherwise fair and unobjectionable ? The better view is that 
 they cannot ; l but there are cases which hold that they may. 2 
 § 560. A minority of shareholders, on behalf of themselves 
 and other shareholders, may, for conspiracy and 
 fraud, whereby their interests have been sacrificed, shire- ° 
 maintain a bill in equity against the corporation, its sue d the e°r- 
 offlcers and others who have participated in the P ora ti on 
 
 1 * and its 
 
 wrongful acts. 3 But a bill in equitv brought by officers for 
 
 iiii • i . , conspiracy. 
 
 shareholders against the corporation, and persons 
 who were its directors in former years, for fraud and conspiracy 
 whereby the interests of the corporation had been sacrificed, 
 cannot be maintained unless the bill show either that an effort 
 has been made by an application to the directors in office at 
 the time of bringing the bill to set the corporation in motion 
 to redress the wrong, or that such application would have been 
 useless. And this requirement is not satisfied by an allegation 
 that a majority of directors are acting in the interests and 
 under the control of persons charged with the fraud. 4 A 
 formal application and refusal need not be alleged, however, if 
 enough appear to show that such an application would be un- 
 availing. And allegations that individual defendants control 
 the majority of the stock and the proceedings at the corporate 
 meetings, and that a majority of the directors are knowingly 
 and fraudulently colluding with them to continue to them the 
 control of the corporation and its property, sufficiently show 
 that no redress can be obtained through the corporation or its 
 directors. 5 
 
 § 561. A shareholder, in matters outside of his relationship 
 
 1 Chicago Hansom Cab Co. v. 
 Yerkes, 141 111. 320. See §§ 640- 
 644. 
 
 2 Northwest Trans. Co. v. Beatty, 
 L. R. 12 App. Cas. 589; Bjorngaard 
 v. County Bank, 49 Minn. 483. 
 
 3 Peabody ». Flint, 6 Allen, 52. 
 Unless by unreasonable delay they 
 forfeit their right to equitable re- 
 lief, lb. 
 
 4 Cases in next note. But see 
 Wayne Pike Co. v. Hammons, 129 
 Ind. 368. 
 
 5 Brewer v. Boston Theatre, 104 
 
 Mass. 378; Eschweiler v. Stowell, 78 
 Wis. 316; Dunphy v. Newspaper 
 Ass'n, 146 Mass. 495; Rogers v. 
 Lafayette Agricultural Works, 52 
 Ind. 296; Pond v. Vermont Valley 
 R. R. Co., 12 Blatchf. 280. See 
 Heath v. Erie R'y Co., 8 Blatchf. 
 347; Moyle v. Lander's Adm'rs, 83 
 Cal. 579. For the right of share- 
 holders to sue on behalf of the cor- 
 poration, see §§ 138-142; for their 
 right to sue improperly acting offi- 
 cers of the corporation, see §§ 685- 
 691. Compare Cannon v. Trask, L. 
 
 567
 
 § 562.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 Like out- 
 siders, a 
 share- 
 holder may 
 
 sue the cor- 
 poration. 
 
 as such, has the same capacity to sue the corporation 
 as any other person having a right of action against 
 it. 1 Thus a shareholder, who is also an officer, may 
 sue the corporation for injuries caused by the negli- 
 gence of the corporation in allowing a ditch belong- 
 ing to it to break and overflow his lands ; he having often pro- 
 tested against the mode in which the ditch was constructed, 
 and having offered to reconstruct it himself, which the corpo- 
 ration would not permit. 2 
 
 § 562. From what has preceded it appears that, as long as 
 the corporation carries on its business, the general 
 right of individual shareholders in the corporate 
 funds is to have them applied to the purposes of 
 incorporation in a reasonable and proper manner, so 
 that, due regard being had to the continuing sol- 
 vency of the corporation, profits may accrue. When 
 profits have arisen from corporate transactions, shareholders 
 have no unconditional right to their immediate distribution as 
 dividends. 3 For it ordinarily lies within the discretion of the 
 corporate management to decide whether profits shall be dis- 
 tributed among the shareholders, or whether they shall be 
 applied to the payment of the debts of the corporation or be 
 retained as a surplus fund. 4 Should the question arise of ap- 
 plying the profits to a substantial extension of the corporate 
 
 Share- 
 holders 
 have no 
 uncondi- 
 tional right 
 to a divi- 
 sion of 
 profits. 
 
 R. 20 Eq. 669; Merchants and 
 Planters' Line v. Waganer, 71 Ala. 
 581. 
 
 1 Brinliam v. Wellersburg Coal Co., 
 47 Pa. St. 43; Life Association v. 
 Levy, 33 La. Ann. 1203; Barker v. 
 Cairo, etc., R. R. Co., 3 T. & C. 
 (N. Y.) 328. See Criswell's Appeal, 
 100 Pa. St. 488. 
 
 2 Bin bank v. West Walker River 
 Ditch Co., 13 Xev. 431. See also 
 O' Conner v. North Truckee Ditch 
 Co., 17 Nev. 245. 
 
 8 Phelps v. Farmers 1 and Mechan- 
 ics' Bk., 26 Conn. 269; Goodwin v. 
 Hardy, 57 Me. 145; Miuot v. Paine, 
 99 Mass. 101; Beveridge v. N. Y. E. 
 R. Co., 112 N. Y. 1; Spooner v. 
 Phillips, 62 Conn. 62. See Gordon 
 568 
 
 v. Richmond, etc., R. R. Co., 78 Va. 
 501, 518. An unconditional agree- 
 ment to pay a shareholder a specified 
 dividend each year is ultra vires, and 
 cannot be enforced against the cor- 
 poration. Elevator Co. v. Memphis, 
 etc., R. R. Co., 85 Tenn. 703. 
 
 4 Ely o. Sprague, Clarke, Ch. (N. 
 Y. ) 351; State of Louisiana v. Bank 
 of Louisiana, 6 La. 746; see Pratt v. 
 Pratt, 33 Conn. 446; Karnes v. 
 Rochester, etc., R. R. Co., 4 Abb. 
 Pr. N. S. (N. Y.) 107; Barry v. Mer- 
 chants' Exchange Co., 1 Sandf. Ch. 
 (X. Y.) 280, 303; Smith v. Prattville 
 M'f'g Co., 29 Ala. 503; Howell v. 
 Chicago and N. W. R'y Co., 51 Barb. 
 378; Hunter v. Roberts, 83 Mich. 63.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 563. 
 
 business, its decision would probably rest with the body corpo- 
 rate ; and if the extension is within the powers of that body, 
 and a majority in a duly summoned meeting decide in favor 
 thereof, the minority cannot prevent the application of the 
 corporate funds thereto. 1 
 
 § 563. A court of equity, however, may interfere when there 
 is a palpably wrongful refusal to declare a dividend ;« Butcourts 
 especially when a certain percentage of dividends is 
 promised or guaranteed on certain shares. " While, 
 as a general rule, courts of equity will not exercise 
 visitorial powers over a corporation, and its officers 
 are the sole judges of the propriety of declaring 
 dividends, and in this respect the court will not interfere with 
 a proper exercise of their discretion, yet where the right to 
 the dividend is clear and fixed by the contract, and requires 
 the directors to take action before it can be asserted in a court 
 of law, 3 and a restraint by injunction is essential to maintain 
 the right of the stockholder, the injunction of a court of equity 
 is a proper exercise of its power, and should be upheld.'' 4 In 
 general it may be said, with regard to the payment of divi- 
 dends on preferred shares, that the decision of the directors is 
 not conclusive ; and if the corporation has funds applicable to 
 the payment of dividends, preferred shareholders may compel 
 
 will some- 
 times 
 interfere, 
 especially 
 in favor of 
 preferred 
 share- 
 holders. 
 
 1 See Durfee v. Old Colony, etc., 
 R. R. Co., ante, § 534. 
 
 2 Scott v. Eagle Fire Co., 7 Paige 
 (N. Y.), 198, 203. See Beers v. 
 Bridgeport Spring Co., 42 Conn. 17; 
 Browne v. Monmouthshire R'y Co., 
 13 Beav. 32. 
 
 If the body corporate by vote in- 
 structs the directors to pay a divi- 
 dend at some future day specified, 
 if the corporation shall then have 
 sufficient funds applicable to the 
 payment of dividends, though a 
 court will give due weight to the 
 decision of the directors on the point 
 of the corporation's ability to pay 
 the dividend, the court will not treat 
 that decision as conclusive. Barn- 
 ard v. Vermont, etc., R. R. Co., 7 
 
 Allen, 512; Richardson v. Railroad 
 Co., 44 Vt. 613. 
 
 3 In general, a shareholder can- 
 not sustain an action for a dividend 
 without proof of a making of the 
 dividend and a demand of payment. 
 Scott v. Central Railroad, etc., Co., 
 52 Barb. 45. 
 
 4 Boardman v. Lake Shore, etc., 
 Ry. Co., 84 N. Y. 157, 180. See Park 
 v. Grant Locom've Wks., 40 N. J. 
 Eq. 114. Where the certificate of 
 incorporation provides for dividends 
 at a certain rate on the preferred 
 stock and the share certificates are 
 so issued, a stockholder may enjoin 
 the alteration of the organization 
 certificate which reduces the divi- 
 dend rate. Pronick v. Spirits Dist. 
 Co., 58 N. J. Eq. 97. 
 
 569
 
 § 565.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 a payment in accordance with the terms on which the preferred 
 shares were issued. 1 
 
 § 564. That dividends on preferred shares are " guaranteed," 
 
 authorizes the interpretation that they are curnula- 
 
 dividends tive ; and the arrears must be paid before any divi- 
 
 cumu ative. c j em j can rightfully be paid on the common stock. 2 
 
 § 565. Rightfully, dividends can only be paid out of profits; 
 
 1 Boardman v. Lake Shore, etc., 
 Ry. Co., 84 N. Y. 157; Westchester, 
 etc., R. R. Co. v. Jackson, 77 Pa. St. 
 321; Bates v. Androscoggin, etc., R. 
 R. Co., 49 Me. 491; Nickals v New 
 York, L. E. & W. R. Co., 15 Fed. 
 Rep. 575; see St. John v. Erie R. R. 
 Co., 22 Wall. 136; compare Williston 
 v. Michigan South., etc., R. R. Co., 
 13 Allen, 400; Belfast & M. L. R. R. 
 Co. v. Belfast, 77 Me. 445; Field v. 
 Lamson, etc., Co., 162 Mass. 388; 
 McLean v. Plate Glass Co., 159 Pa. 
 St. 112. 
 
 The holders of common stock are 
 not necessary parties to an action by 
 preferred shareholders to compel the 
 payment of dividends claimed to be 
 due the latter. Thompson v. Erie R. 
 R. Co., 45 N. Y. 468. 
 
 It has been held, however, that an 
 agreement between two corporations 
 whereby one guarantees to the other 
 a certain specified annual dividend 
 on its capital stock, is npt a guaranty 
 to the shareholders individually, but 
 only to the corporation; that the 
 respective boards of directors have 
 power to modify such an agreement; 
 and that a court of equity will not 
 interfere if that power is fairly ex- 
 ercised. Flagg v. Manhattan R'y 
 Co., 10 Fed. Rep. 413; S. C, 20 
 Blatchf. 142 and 21 Am. Law Reg. 
 N. S. 775; Beveridge v. N. Y. E. R. 
 Co., 112 N. Y. 1; People v. Metro- 
 politan Ry. Co., 26 Hun, 82. See 
 Sheffield Nickel Plated Co. v. Unwin, 
 36 L. T. N. S. 246; S. C, L. R. 2 Q. 
 B. Div. 214. 
 570 
 
 2 Boardman t>. Lake Shore, etc., 
 R'y Co., 84 N. Y. 157; Westchester, 
 etc., R. R. Co. v. Jackson, 77 Pa. St. 
 321; Bates v. Androscoggin, etc., 
 R. R. Co., 49 Me. 491; Prouty v. 
 Michigan Southern, etc., R. R. Co., 
 1 Hun, 665. Compare Williston v. 
 Same, 13 Allen, 400; New York, L. 
 E. and W. R. R. Co. v. Nickals, 119 
 U. S. 296. 
 
 The right of preferred shareholders 
 is substantially a right to interest at 
 the stipulated rate chargeable ex- 
 clusively on profits, and payable, 
 with arrears, before anything be 
 divided among ordinary sharehold- 
 ers. Henry v. Great Northern R'y 
 Co., 3 Jur. N. S. 1133. But it may 
 be provided expressly that the divi- 
 dends on preferred shares are not to 
 be cumulative. See Bailey v. Rail- 
 road Co., 17 Wall. 96. Or this may 
 be inferred from the language of 
 the by-law providing for the divi- 
 dends on the preferred shares. Bel- 
 fast and M. L. R. R. Co. v. Belfast, 
 77 Me. 445; Hazeltine v. Railroad 
 Co., 79 Me. 411. For the respective 
 rights of preferred and common 
 shareholders on dissolution, see 
 § 786. Where by by-law the divi- 
 dends on preferred stock are not 
 cumulative, but can be paid only 
 from net earnings of each year, 
 the preferred shareholders have a 
 stronger standing to compel directors 
 to declare a dividend when earned. 
 Hazeltine v. Railroad Co., 79 Me. 
 411.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 565. 
 
 and the distribution in dividends of the capital of Dividends 
 the corporation may be enjoined by a shareholder. 1 ™ b e u ^} d 
 "Net earnings," said Judge Blatchford, with refer- .profits, 
 ence to a railroad company, " are, properly, the gross receipts, 
 less the expenses of operating the road to earn such receipts. 
 Interest on debts is paid out of what thus remains, that is, 
 out of net earnings. Many other liabilities are paid out of 
 net earnings. When all the liabilities are paid, either out 
 of gross receipts or out of the net earnings, the remainder 
 is the profit of the shareholders, to go towards dividends, 
 which in that way are paid out of the net earnings." 2 Even 
 
 i Carpenter v. N. Y. & N. H. Ry. 
 Co., 5 Abb. Pr. (N. Y.) 277; Mac- 
 dougall v. Jersey Imperial Hotel Co., 
 2 Hem. and M. 528; Bloxaniz?. Metro- 
 politan Ry. Co., L. R. 3 Cb. 337. See 
 Fawcett v. Laurie, 1 Dr. and Sra. 
 192; Carlisle v. So. Eastern R'y Co., 
 1 Mac. N. and G. 689; Browne v. 
 Monmouthshire Ry. Co., 13 Beav. 
 32; Coates v. Nottingham Water- 
 works Co., 30 Beav. 86. " By loss 
 or misfortune or misconduct of the 
 managing officers of a corporation, 
 its capital stock may be reduced be- 
 low tbe amount limited by its char- 
 ter; but whatever property it has up 
 to that limit must be regarded as its 
 capital stock. When its property 
 exceeds that limit, then the excess 
 is surplus. Such surplus belongs to 
 the corporation, and is a portion of 
 its property, and, in a general sense, 
 may be regarded as a portion of its 
 capital, but in a strictly legal sense, 
 it is not a portion of its capital, and 
 is always regarded as surplus or 
 profits. . . . The surplus may be 
 in cash, and then it may be divided 
 in cash; it may be in property, and 
 if the property is so situated that a 
 division thereof among the stock- 
 holders is practicable, a dividend in 
 property may be declared, and that 
 may be distributed among stock- 
 holders. " Williams v. W. U. Tel. Co. , 
 
 93 N. Y. 162, 188. Cf. Rose v. Bar- 
 clay, 191 Pa. St. 594. A dividend 
 may be paid out of current profits, 
 though the capital of the company 
 is impaired by depreciation of its 
 property. Verner v. General, etc., 
 Trust, L. R. Oh. Div. 1894, II. 239. 
 (The company did not appear to be 
 insolvent.) 
 
 2 St. John c. Erie R'y Co., 10 
 Blatchf. 271, 279; S. C.,22 Wall. 136. 
 See Commonwealth y. Railroad, 164 
 Pa. St. 252; Mobile, etc., R. R. v. 
 Tennessee, 153 U. S. 486. Compare 
 Excelsior Water Co. v. Pierce, 90 Cal. 
 131. It does not necessarily follow 
 that all debts of a floating character 
 should be paid before a dividend is 
 declared; only such need be paid as 
 good judgment requires under the 
 circumstances. Belfast & M. L. R. 
 R. Co. v. Belfast, 77 Me. 445. See 
 also as to payment of dividends when 
 the corporation is indebted, Mills 
 v. Northern R'y Co., L. R. 5 Ch. 631. 
 In estimating j>rofits for purposes of 
 Federal taxation, earnings are not to 
 be included, unless they represent 
 profits of the company in its business 
 as a whole, i. e., the excess of the 
 aggregate of gains from all sources 
 over the aggregate of losses. The 
 burden of proof is on the United 
 States to show what is due. Little 
 Miami, etc., R. R. Co. v. United 
 
 571
 
 § oG5.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 a holder of " preferred and guaranteed " stock is entitled to be 
 paid his guaranteed percentage only out of the profits of the 
 corporation legally applicable to the payment of dividends. 1 
 He is not a creditor, it being really a dividend and not a debt 
 that is guaranteed. 2 Thus, in a recent case in the Federal 
 
 States, 108 U. S. 277. "As a general 
 proposition, net earnings are the ex- 
 cess of the gross earnings over ex- 
 penditures defrayed in producing 
 them, aside from and exclusive of the 
 expenditure of capital laid out in con- 
 structing and equipping the works 
 themselves." Union Pacific R. R. 
 Co. o. United States, 99 U. S. 402, 420; 
 opinion of the court per Bradley, J. 
 See, also, Sioux City and P. R. R. Co. 
 v. United States, 110 U. S. 205. See 
 also regarding what constitutes " net 
 earnings." Union Pac. R. R. Co. v. 
 United States, 99 U. S. 402; United 
 States o. Central Pac. R. R. Co., ib. 
 449; Same v. Kansas Pac. R'yCo., ib. 
 455. A solvent corporation may pay 
 dividends out of its receipts, over 
 and above expenses, in the ordinary 
 course of business, though its assets 
 consist of property which in the na- 
 ture of things will thereby be ex- 
 hausted, like a mine or a patent. 
 Lee v. Neuchatel Asphalte Co., 41 
 Ch. D. 1. 
 
 1 St. John v. Erie Railway Co., 
 supra. Taft «. Hartford, etc., R. R. 
 Co., 8 R. I. 310; Chaffee v. Rutland 
 R. R. Co., 55 Vt. 110. See Miller v. 
 Ratterman, 47 O. St. 141. Compare 
 Gordon v. Richmond, F. and P. R. 
 R. Co., 78 Va. 501, 517. A contract 
 by the corporation to pay annual 
 dividends to preferred shareholders, 
 without reference as to whether 
 there are earnings (i. e., an implied 
 agreement to pay dividends, al- 
 though there are no profits), is op- 
 posed to public policy and void. 
 Lockhart v. Van Alstyne, 31 Mich. 
 76. See Elevator Co. v. Memphis, 
 
 572 
 
 etc., R. R. Co., 85 Tenn. 703. But 
 the terms on which " preferred share- 
 holders" receive their interest may 
 be such that courts will regard them 
 as creditors; e. g. when they have 
 no right to vote, and four per cent, 
 annually is guaranteed them, with 
 repayment of the principal at a time 
 specified, and a mortgage is exe- 
 cuted to secure them. Burt v. Rat- 
 tle, 31 Ohio St. 116; see Totten v. 
 Tison, 54 Ga. 139. Compare West 
 Chester, etc., R. R. Co. v. Jackson, 
 77 Pa. St. 321; Williston v. Michi- 
 gan Southern, etc., R. R. Co., 13 
 Allen, 400. In a late Massachusetts 
 case, a statute authorizing a corpo- 
 ration to issue "preferred stock" 
 provided: (1) " the said company to 
 give its guaranty that each share of 
 said stock shall receive semi-annual 
 dividends of four dollars on each 
 share; provided, that no share of 
 such preferred stock shall be issued 
 until the said company shall receive 
 one hundred dollars therefor." (2) 
 "No dividends more than four dol- 
 lars per share semi-annually to be 
 paid on said stock under any cir- 
 cumstances, but any holder may ex- 
 change for common stock share for 
 share." (3) " In case of dissolution 
 . . . . the holders of preferred stock 
 shall be entitled to payment of the 
 same in full next after payment of 
 the debts of the company, and be- 
 fore any payments to the holders of 
 stock not preferred." Held, that the 
 guaranty of dividends was not con- 
 ditional on the earning of profits. 
 Williams v. Parker, 136 Mass. 204. 
 2 Taft ». Hartford, etc., R. R. Co., 

 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 567. 
 
 Supreme Court, preferred shares had been issued with certifi- 
 cates in the following form : " The preferred stock is to be 
 and remain a first claim upon the property of the corporation 
 after its indebtedness, and the holder thereof shall be entitled 
 to receive from net earnings of the company seven per cent 
 per annum, payable semi-annually, and to have such interest 
 paid in full in each and every year before any payment of divi- 
 dend upon the common stock." The holders of these shares 
 were held to be merely shareholders, and entitled to no lien on 
 the property of the corporation prior to the lien of the corpo- 
 rate indebtedness contracted after their issue ; but were enti- 
 tled only to a priority over the common shares. 1 
 
 § 566. If a dividend has been paid from funds of the cor- 
 poration other than those out of which dividends „ 
 
 r . . Recovery of 
 
 may legally be paid, the corporation may recover it dividends 
 back. Thus an insurance corporation is not justifi- pa id. 
 able in treating premiums received upon unexpired 
 risks as profits subject to division when it has no independent 
 fund sufficient to meet all liabilities that may accrue on pend- 
 ing risks. And dividends paid from such a source may be 
 reclaimed by the corporation. 2 
 
 § 567. A share has been defined as " a right to partake, 
 according to the amount of the party's subscription, 
 of the surplus profits obtained from the use and dis- f t ock. S ° f 
 posal of the capital stock of the company to those 
 purposes for which the company is constituted." 3 It is to 
 be noted that a share is called a right to partake in profits 
 
 8 R. I. 310; Branch v. Jessup, 106 
 U. S. 468; Belfast and M. L. R. R. 
 Co. v. Belfast, 77 Me. 445. Compare 
 preceding note. 
 
 i Warren v. King, 108 U. S. 389. 
 
 2 Lexington Life, etc., Ins. Co. v. 
 Page, 17 B. Mou. (Ky.) 412; Daven- 
 port, Rec'r, v. Lines, 74 Conn. 118. 
 The statute of limitations runs in 
 favor of shareholders bona fide re- 
 ceiving such divideuds, from the 
 time they were declared, as against 
 the corporation and its creditors. Ih. 
 Compare, also, Scott v. Eagle Fire 
 Co., 7 Paige, 198; De Peyster v. 
 
 American Fire Ins. Co., 6 Paige, 486; 
 see, also, § 708. 
 
 3 Angell and Ames on Corp., § 557. 
 
 " The capital stock is that money 
 or property which is put into a sin- 
 gle corporate fund, by those who by 
 subscription therefor become mem- 
 bers of the corporate body. That 
 fund becomes the property of the 
 aggregate body only. A share of 
 the capital stock is the right to par- 
 take according to the amount put 
 into the fund of the surplus profits 
 of the corporation, and ultimately on 
 the dissolution of it, of so much of 
 
 573
 
 § 568.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 " obtained from the use and disposal of the capital stock 
 . ... to those purposes for xohich the company is constituted." 
 Should the capital be employed for unauthorized purposes, the 
 shareholders might not be absolutely entitled to the profits 
 arising from such use even after they had been declared in the 
 form of a dividend ; for circumstances are conceivable under 
 which the shareholders might, at least to the extent of divi- 
 dends received by them, be called on to meet any liability 
 subsequently arising from the improper employment of the 
 capital. And those directors or shareholders who had actively 
 participated in the improper acts might possibly be held liable 
 personally to persons injured thereby. 
 
 § 568. After a dividend has been declared each shareholder 
 has as against the corporation an unconditional right 
 to his portion of it; 1 but cannot sue the corporation 
 for it without a previous demand. 2 The discretion 
 of the corporate management is exhausted in de- 
 claring the dividend ; thereupon their only function 
 is to pay it to the shareholders. 3 But it has been held that 
 
 Rights of 
 share- 
 holders 
 after a divi 
 dend has 
 heen de- 
 clared. 
 
 the fund thus created as remains un- 
 impaired, and is not liable for the 
 debts of the corporation." Burrall 
 v. Bushwick R. R. Co., 75 N. Y. 211, 
 216. Compare State v. Morristown 
 Fire Ass'n, 23 N. J. L. 195; Williams 
 v. Western Union Tel. Co., 93 N. Y. 
 162, 188. 
 
 An attachment of shares does not 
 encumber the property of the com- 
 pany or prevent the company from 
 assigning it. Gottfried v. Miller, 
 104 U. S. 521. Compare Van Nor- 
 man v. Jackson, Circuit Judge, 45 
 Mich. 204. A shareholder has no 
 interest in real estate owned by his 
 corporation tliat will entitle him to 
 a vendor's lien thereon as against a 
 company formed by the consolida- 
 tion of his company with another. 
 Cross u. B. and S. W. R. Co., 58 
 Iowa, 62. 
 
 Shares are not " securities." Camp- 
 bell v. Morgan, 4 111. App. 100; Ogle 
 
 574 
 
 v. Knipe, L. R. 8 Eq. 434; Collins v. 
 Collins, L. R. 12 Eq. 455; Hudleston 
 v. Gouldsbury, 10 Beav. 547. Shares 
 are choses in action. Keyser v. Hitz, 
 2 Mackey (Dist. of Col.), 473; Webb 
 v. Balto., etc., R. R. Co., 77 Md. 92. 
 Shares are personal property. Tre- 
 gear v. Water Co., 76 Cal. 537. 
 
 1 Beers v. Bridgeport Spring Co., 
 42 Conn. 17; King v. Patterson, etc., 
 R. R. Co., 29 N. J. L. 82. See Mat- 
 ter of Le Blanc, 14 Hun, 8; aff'd 75 
 N. Y. 598; Albany Fertilizer Co. v. 
 Arnold, 103 Ga. 145. But when a 
 corporation declares a second divi- 
 dend to be substituted for the former 
 one, a shareholder accepting the sec- 
 ond is estopped to claim the former 
 one. Albany Fertilizer Co. v. Ar- 
 nold, 103 Ga. 145. 
 
 2 State v. Baltimore and O. R. R. 
 Co., 6 Gill (Md.), 363; cf. Armantc. 
 Railroad Co., 41 La. Ann. 1020. 
 
 3 It has recently been held in 

 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 568. 
 
 when a corporation has voted to issue further stock out of 
 surplus profits — in effect to declare a stock dividend x — but 
 has taken no further steps to file a certificate of the increase or 
 to issue certificates of stock, a shareholder who stands by for a 
 year until many shares have changed hands cannot compel the 
 issue to him of his proportionate number of shares. 2 It ap- 
 peared in this case that the increase had been voted for a 
 special purpose which had become impracticable. The com- 
 plainant argued that a stock dividend was like a cash dividend, 
 and that he acquired a vested right to it from the moment of 
 the vote. But the court said : 3 " There is a difference between 
 a cash and a stock dividend. The former is created by a sim- 
 ple vote of the directors, and the amount thereby becomes 
 severed from the general fund and belongs to the stockholders 
 pro rata. The latter can be initiated only by a vote of the 
 stockholders. That is followed by issuing the stock, and the 
 increase can only be completed legally by filing with the town 
 clerk and with the secretary of state the certificates required 
 by law. . . . Again, a cash dividend entitles the stockholder 
 to so much money, the ordinary way in which he receives from 
 time to time the fruits of his investment. Such dividends do 
 not materially affect the value of the stock. A stock dividend 
 is exceptional. It does not add to his ready cash, but changes 
 the form of his investment by increasing the number of shares, 
 therebv diminishing the value of each share, leaving 1 the ag-gre- 
 
 Massachusetts, that after a dividend 
 has been declared by vote of direct- 
 ors, but payable at a future time, 
 the vote may be rescinded at a sub- 
 sequent directors' meeting held be- 
 fore the time when the dividend 
 becomes payable, if the fact that 
 the dividend has been declared has 
 not been made public or communi- 
 cated to the shareholders, and no 
 fund has been set apart for its pay- 
 ment. Ford v. E. Thread Co., 158 
 Mass. 84. But see Dock v. Cordage 
 Co., 167 Pa. St. 370. See, also, Hunt, 
 Recr., v. O'Shea, Assignee, 69 N. H. 
 600, where it is held that the mere 
 declaration of a dividend does not 
 
 create a trust fund. Until some 
 specific sum is set apart for the pur- 
 pose of paying the dividend, the re- 
 lation of the stockholders to the 
 corporation with respect thereto is 
 that of debtor and creditor. 
 
 1 A corporation having earned a 
 dividend, and having power to in- 
 crease its capital stock, may make a 
 stock dividend. Howell v. Chicago 
 and N. W. R'y Co., 51 Barb. 378; 
 Williams v. Western Union Tel. Co., 
 93 N. Y. 162. 
 
 2 Terry v. Eagle Lock Co., 47 Conn. 
 141. 
 
 3 47 Conn. 164. 
 
 575
 
 § 569.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 gate value of his stock substantially the same. It is of no spe- 
 cial importance whether that value be divided into a few or 
 many shares." ' 
 § 569. The power of a corporation to purchase its own 
 shares or increase or decrease its capital stock has 
 already been discussed. 2 If the capital stock is 
 increased by the proper authorities, the right to take 
 the additional shares vests in the shareholders pro 
 rata? This right may be waived ; but the directors 
 cannot deprive a shareholder of it, 4 nor burden it 
 with conditions unauthorized by the charter or enabling act, as 
 for instance, the payment of so much per share for the privi- 
 lege of subscribing. 5 Accordingly, when a corporation is 
 issuing new stock generally and refuses to issue to a share- 
 holder his due proportion, he can compel it to do so by a suit 
 in equity ; at least so long as there remains stock undisposed 
 of. 6 And when new stock is issued to share equally with the 
 
 Risjlit to 
 subscribe 
 to addi- 
 tional 
 shares on 
 an increase 
 of the capi- 
 tal stock. 
 
 1 Still the decision of this case 
 seems really to have turned on the 
 plaintiffs own laches. 
 
 2 § 133. 
 
 8 Real Estate Trust Co. v. Bird, 90 
 Md. 229. When a corporation in- 
 creases its shares on the basis of its 
 property already owned, and not 
 with a view to sell them to raise 
 more money, the increase belongs to 
 the shareholders in proportion to 
 their holdings. Knapp v. Publishers, 
 etc., Co., 127 Mo. 53. 
 
 4 Humboldt Driving Park Ass'n v. 
 Stevens, 34 Neb. 528; Eidman v. Bow- 
 man, 58 111. 444; Hart v. St. Charles 
 St. R. R. Co., 30 La. Ann. Pt. I. 758; 
 Jones v. Morrison, 31 Minn. 140. In 
 the last case the stock of a corpora- 
 tion was all held by a few holders, 
 the plaintiff owning about one-third 
 of it. While he was absent in Europe, 
 a vote was passed (as was competent) 
 to increase the stock, which was 
 worth much more than par, and to 
 allow the old shareholders to sub- 
 scribe in proportion to their shares. 
 
 576 
 
 This privilege was limited in time to 
 a shorter period than was possible 
 for the plaintiff to act in the matter, 
 as the rest knew. It was held that 
 he had a right to subscribe after such 
 period had expired. See also Ark. 
 V. Ag. Soc. v. Eichholtz, 45 Kan. 164. 
 
 5 Cunningham's Appeal, 108 Pa. 
 St. 546. See De La Caesta v. Insur- 
 ance Co., 136 Pa. St. 62; compare 
 Reading Tr. Co. u. Reading I. 
 Works, 137 Pa. St. 282; Electric 
 Co. of Am. o. Edison Electric Co., 
 200 Pa. St. 516. 
 
 Dousman U.Wisconsin, etc., M'g 
 Co., 40 Wise. 418. It seems, also, 
 that the shareholder could have 
 maintained an action for damages 
 against the corporation. lb. Cf. 
 Way v. American Grease Co., 67 N. 
 J. Eq. 263; Merideth v. Zinc & Iron 
 Co., 55 N. J. Eq. 211. 
 
 When a corporation has issued 
 the full number of shares author- 
 ized, no court can compel it to issue 
 further shares unless some of the 
 shares originally issued were void.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 5T1 - 
 
 existing stock, it is the right of each shareholder that it shall 
 be so distributed as not to divest him of his vested proportion- 
 ate right in the corporate property, including the accumulated 
 profits. 1 But this rule is held not to apply to old stock pur- 
 chased by the company, on which the right to vote is merely 
 suspended. Such stock directors in their discretion may re- 
 issue or sell for the benefit of the corporation. 2 A corporation 
 having the power to issue further stock, may issue it in ex- 
 change for an equal amount of its indebtedness ; and no par- 
 ticular form of subscription is necessary. 3 
 
 § 570. Conversely, when a national bank under the United 
 States Revised Statutes, 8 5143, reduces the amount _. . . 
 
 ' ° Rights on a 
 
 of its capital stock, it must return to the shareholders decrease of 
 pro rata the amount of capital set free, and cannot 
 retain a portion of it for a surplus. 4 When a corporation com- 
 petently reduces the amount of its capital stock, a shareholder 
 cannot restrain the division among the shareholders of the 
 surplus over and above the amount to which the stock is 
 reduced, provided that amount exceeds the liabilities of the 
 company ; even though the statute authorizing the reduction 
 makes no provision for such division. 5 
 
 § 571. Whether, when not specially authorized, a corpora- 
 tion on the first issue of its stock may divide the „ 
 
 ^ Power to 
 
 same into classes, and issue a portion as preferred issue 
 stock, is not altogether settled by authority. There fhares. 
 seems to be no decision in this country, however, 
 forbidding a corporation to issue preferred shares provided it 
 keep within the limits of the stock which it is authorized to 
 issue, and does not in any way impair the vested rights of any 
 shareholder. 6 And it has been held that where it appears 
 
 Smith o. North Am. M'g Co., 1 
 Nev. 423. See § 541. 
 
 1 State v. Smith, 48 Vt. 2G6; Gray 
 v. Portland Bank, 3 Mass. 364. 
 
 2 State v. Smith, 48 Vt. 266. See 
 State Bank v. Fox, 3 Blatchf. 431; 
 Williams v. Savage M'f'g Co., 3 Md. 
 Ch. 418. 
 
 3 Lohman v. New York and Erie 
 R. R. Co., 2 Sandf. (N. Y. ) 39. See 
 cases in last note. 
 
 37 
 
 4 Seely v. New York Nat. Exch. 
 Bk., 8 Daly, 400; S. C, 4 Abb. N. 
 C. (N. Y.) 61. 
 
 5 Strang v. Brooklyn Cross-town 
 R. R. Co., 93 N. Y. 426. As to the 
 division of surplus assets of a mu- 
 tual insurance company, see Carlton 
 v. Southern Mutual Ins. Co., 72 Ga. 
 371. 
 
 6 Hazelhurst v. Savannah, etc., R. 
 R. Co., 43 Ga. 13. See for what was 
 577
 
 § 572.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 necessary to raise further capital and to issue preferred shares, 
 the legislature may authorize the issue on a vote of the holders 
 of common shares, and a dissenting shareholder cannot prevent 
 the issue of preferred shares nor the payment of dividends 
 thereon. 1 Nevertheless, unless the right to alter and repeal is 
 reserved to the legislature, it would seem that no constitutional 
 legislation could authorize the issue of preferred shares when 
 such an issue would impair the rights of any shareholder in the 
 corporate funds. 
 
 § 572. A leading case on the power of a corporation to 
 issue preferred shares is Kent v. Quicksilver Mining Co.; 2 a 
 case in which a number of appeals, taken in actions brought 
 to determine the validity of certain preferred shares, were 
 heard together before the New York Court of Appeals. The 
 following somewhat extended citation is from the opinion of 
 that court delivered by Judge Folger : " We know nothing in 
 the constitution or the law that inhibits a corporation from 
 beginning its corporate action by classifying the shares in its 
 capital stock with peculiar privileges to one share over another, 
 and thus offering its stock to the public for subscription there- 
 to. No rights are got until a subscription is made. Each 
 subscriber would know for what class of stock he put down 
 his name, and what right he got when he thus became a stock- 
 holder. There need be no deception or mistake ; there would 
 be no trenching upon rights previously acquired ; no contract, 
 express or implied, would be broken or impaired. 
 
 " This corporation did otherwise. A by-law was duly made, 
 which declared the whole value of its property and the whole 
 amount of its capital stock, and divided the whole of it into 
 shares equal in amount, and directed the issuing of certificates 
 of stock therefor. It is not to be said that this by-law author- 
 ized anything but shares equal in value and in right ; or that 
 the taker of one did not own as large an interest in the corpo- 
 
 held authority to issue preferred 
 shares, Gordon v. Richmond, etc., R. 
 R. Co., 78 Va. 501. 
 
 *City of Covington v. Covington, 
 etc., Bridge Co., 10 Bush (Ky.), 69. 
 This on the principle that such 
 amendments to the charter may be 
 
 578 
 
 made by the legislature as are neces- 
 sary to enable the original enterprise 
 to be carried out. lb. See also Rut- 
 land, etc., R. R. Co. v. Thrall, 35 Vt. 
 536. 
 
 2 78 N. Y. 159.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 572. 
 
 ration, its capital, affairs, and profits to come, as any other 
 holder of a share. Certificates of stock were issued under this 
 bj^-law, that gave no expression of anj^thing different from that. 
 When that by-law was adopted, it was as much the law of the 
 corporation as if its pro visions had been a part of the charter. 
 (Presbyterian Church v. City of New York, 5 Cow. 538.) So 
 it is said in Grant on Corporations, page 80, in a qualified way. 
 Thereby, and by the certificate, as between it and every stock- 
 holder, the capital stock of the company was fixed in amount, 
 in the number of shares into which it was divisible, and in the 
 peculiar and relative value of each share. The by-law entered 
 into the compact between the corporation and every taker of 
 a share ; it was in the nature of a contract between them. 
 The holding and owning of a share gave a right which could 
 not be divested without the assent of the holder and owner ; 
 or unless the power so to do had been reserved in some way. 
 (Mech. Bank v. N. Y. and K H. R. R. Co., 13 K Y. 599-627.) 
 Shares of stock are in the nature of chases in action, and give 
 the holder a fixed right in the division of the profits or earn- 
 ings of a compan}^ so long as it exists, and of its effects when 
 it is dissolved. That right is as inviolable as is any in prop- 
 erty, and can no more be taken away or lessened against the 
 will of the owner than can any other right, unless power is 
 reserved in the first instance, when it enters into the constitu- 
 tion of the right ; or is properly derived afterwards from a 
 superior lawgiver. The certificate of stock is the muniment 
 of the shareholder's title, and evidence of his right. It ex- 
 presses the contract between the corporation and his co-stock- 
 holders and himself ; and that contract cannot, he being un- 
 willing, be taken away from him or changed as to him without 
 his prior dereliction, or under the conditions above stated. 
 Now it is manifest that any action of a corporation which takes 
 hold of the shares of its capital stock already sold and in the 
 hands of lawful owners, and divides them into two classes, one 
 of which is thereby given prior right to a receipt of a fixed 
 sum from the earnings before the other may have any receipt 
 therefrom, and is given an equal share afterwards with the 
 other in what earnings may remain, destroys the equality of 
 
 579
 
 § 572.] THE LAW OF PRIVATE CORPORATIONS. [PHAP. IX. 
 
 the shares, takes away a right which originally existed in it, 
 and materially varies the effect of the certificate of stock. 1 
 
 "It is said that when a corporation can lawfully buy prop- 
 erty or get money on loan, any known assurance may be ex- 
 acted and given, which does not fall within the prohibition, 
 express or implied, of some statute (Curtis v. Leavitt, 15 N. Y. 
 66-67) ; and that is sought to be applied here. But the prohi- 
 bition to such action as this is found, not, indeed, in a statute 
 commonly so called, but in the constitutional provision which 
 forbids the impairment of vested rights, save for public pur- 
 poses and on due compensation. The right which a stock- 
 holder gets on the purchase of his share and the issue to him 
 of the certificate therefor is such a vested right. 
 
 " It is contended that the power so to do is an incidental and 
 implied power necessary to the use of the other powers of the 
 corporation, and is a legitimate means of raising money and 
 securing the agreed consideration therefor. We have already 
 conceded that it is legitimate to borrow money, and to secure 
 the repayment of it, with a compensation for the use of it. 
 But that is when it is done in such way as to put the burthen 
 upon every share of stock alike, and to enable every share of 
 stock to be relieved therefrom alike, in such way as to preserve 
 the equality of right and privilege and value of the shares, 
 and maintain intact the contract thereto with the stockholder. 
 
 " Citations are made to us for the converse of this, but they 
 do not come up — sometimes in their facts, sometimes in their 
 declarations — to the necessity of the proposition. Either it is 
 where the capital is not limited and it is new shares that may 
 be issued with a preference, and where there is express power 
 
 1 In the absence of authority in its 
 articles of association, a company 
 cannot authorize the directors to 
 issue the unallotted shares as pre- 
 ferred stock, against the wishes of 
 a minority; and a shareholder may 
 enjoin such issue. Hutton v. Scar- 
 borough Cliff Hotel Co. (Limited), 
 4 De G., J. & S. 672; Melhado v. 
 Hamilton, 28 L. T. N. S. 578. Com- 
 pare Harrison v. Mexican R'y Co., 
 L. R. 19 Eq. 358. Authority to issue 
 an increased amount of preferred 
 
 580 
 
 stock does not authorize the issue of 
 partly preferred and partly common 
 stock. Covington, etc., Bridge Co. 
 ». Sargent, 1 Cin. Sup. Ct. (Ohio) 
 354. That a corporation has ac- 
 cepted an amendment to its charter, 
 authorizing it to issue preferred 
 shares, besides its common stock, 
 does not release a dissenting sub- 
 scriber to the common stock from 
 his subscription. Everhart v. Phil- 
 adelphia and W. C. R. R. Co., 28 Pa. 
 St. 339. quaere f 
 
 1
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 572. 
 
 to borrow on bond and mortgage (2 Redf. on Railways, chap. 
 33, sec. 4, § 237 ; Harrison v. Mex. R. W., 12 Eng. Rep. 793), 
 or the amount of the capital has not been reached, and such 
 stock is issued therefrom (Hazelhurst v. Savannah R. R., 43 G-a. 
 53 ; Tottan v. Tison, 54 ib. 139), or there was legislative au- 
 thority (Davis v. Proprietors, 8 Metcf. 321 ; Rutland R. R. Co. 
 v. Thrall, 35 Vt. 545), or a restriction to authorized capital, and 
 there was unanimous consent of the stockholders (Prouty v. M. 
 S. and N. I. R. R., 1 Hun, 663 ; 43 Ga. 53, supra), or there was 
 power to redeem, which was a transaction in the nature of a 
 debt (Westchester, etc., R. R. Co. v. Jackson, 77 Penn. St. 321), 
 or the opinion was obiter (Bates v. Androscoggin R. R. Co., 49 
 Maine, 491), or it was the case of a subscription for stock with 
 a condition for interest until the corporation was in operation 
 (Richardson v. Vt. and Mass. R. R. Co., 44 Vt. 613), or it was 
 an action on a subscription more favorable to defendant than to 
 other subscribers, and it was held that defendant could not set 
 up the lack of equality (Evansville R. R. Co. v. Evansville, 15 
 Ind. 395), or a solemn determination of this question was not 
 necessary for the disposaL of the case (Williston v. M. S. and 
 N". I. R. R. Co., 13 Allen, 400), or the issue was authorized by 
 the articles of association (In re A. D. St. Nav. and Col. Co., 20 
 L. R. [Eq.] 339), or there was full knowledge on the part of all 
 concerned (Lockhart v. Van Alstyne, 31 Mich. 81), or the 
 power in the corporate body was conceded, and it was denied 
 that it existed in the directors (McLaughlin v. D. and M. R. R., 
 8 ib. 100). ... It needs not that we consider the position 
 that the issue of the preferred stock was an authorized increase 
 of the capital and so legal. It did not profess to be, nor was 
 it in fact. For each share of preferred stock given out a share 
 of common stock was taken in, so that the gross amount of the 
 capital was still the same, and so were the number of shares 
 and the nominal value of each share." 1 
 
 1 Kent v. Quicksilver Mg. Co., 78 
 N. Y. 159, 179 et seq. 
 
 It is held that a corporation is not 
 a trustee fur preferred any more 
 than for common shareholders, and 
 the former have no special control 
 over the corporation and its man- 
 
 agement. Thompson v. Erie R'y 
 Co., 11 Ahb. Pr. N. S. (N. Y.) 188. 
 
 When a. company disables itself 
 from issuing preferred stock sub- 
 scribed for, the subscriber may re- 
 fuse to take common stock, and may 
 recover his subscription as for a 
 
 581
 
 § 574.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 § 573. Each shareholder has a right to have the corporate 
 
 funds managed and applied in the manner prescribed 
 
 Se e corpo-° f b . v tne constitution of the corporation. It is his 
 
 ration. right that the directors shall act regularly by a 
 
 Notice. ° ° J * 7 
 
 proper quorum : 1 that corporate meetings shall be 
 
 summoned and shall act regularly, 2 and that he shall receive 
 due notice of them. 3 " It is not only a plain dictate of reason 
 but a general rule of law, that no power or function entrusted 
 to a body consisting of a number of persons can be legally 
 exercised without notice to all of the members composing such 
 body." 4 The notice should specify the time and place of the 
 meeting, the nature of the business to be transacted, and, if the 
 constitution of the corporation contains provisions as to the 
 manner of giving notice, they should be followed. 5 
 
 § 574. The time of the meeting should be stated with pre- 
 cision, 6 and no business should be transacted before the time 
 set, 7 nor after the meeting has apparently adjourned. 8 A meet- 
 ing held at a different place from the one notified is irregular; 9 
 and the notice should be reasonable in every respect, and, 
 
 failure of consideration. Coving- 
 ton, etc., Bridge Co. v. Sargent, 1 
 Cin. Sup. Ct. (Ohio) 354. 
 
 i See § 184. 
 
 2 See Langdon v. Patterson, 158 Pa. 
 St. 476; Stow v. Wyse, 7 Conn. 214; 
 Stevens v. Eden Meeting-house Soc'y, 
 12 Vt. (388. Compare Citizens 1 Ins. 
 Co. v. Sortwell, 8 Allen, 217; Sargent 
 o. Webster, 13 Mete. (Mass.) 497; 
 Mutual Fire Ins. Co. v. Farquar, 86 
 Md. 668. 
 
 a The King ». Theodorick, 8 East, 
 543; see Shortz v. Unangst, 3 W. & 
 S. (Pa.) 45; Commonwealth v. Cul- 
 len, 13 Pa. St. 133. 
 
 * People v. Batchelor, 22 N. Y. 
 128, 134; see Rex v. Langhorn, 4 A. 
 & E. 538; Reilley v. Oglebay, 25 W. 
 Va. 36. 
 
 5 Stockholders, etc., v. Louisville, 
 etc., R. R. Co., 12 Bush (Ky.), 62; 
 Johnston v. Jones, 23 N. J. Eq. 216; 
 Stevens v. Eden Meeting-house Soc'y, 
 12 Vt. 688; People's Ins. Co. v. West- 
 
 582 
 
 cott, 14 Gray, 440. " Provisions in 
 statutes and by-laws requiring the 
 election of directors to be bad on a 
 specific day are regarded as direc- 
 tory, and the election, if not held 
 on a regular day, may be held at 
 a later day, and the directors then 
 chosen, if there be no other irregu- 
 larity or infirmity in their title, will 
 be directors de jure.' 1 '' Beardsley v. 
 Johnson, 121 N. Y. 224, 228. Opin. 
 of Ct. per Earl, J. 
 
 6 San Buenaventura M'f'g Co. v. 
 Vassault, 50 Cal. 534. 
 
 7 People v. Albany, etc., R. R. Co., 
 55 Barb. 344. 
 
 8 State v. Bonnell, 35 Ohio St. 10; 
 see South School Dist. v. Blakeslee, 
 13 Conn. 227; compare Hardenburgh 
 i\ Farmers', etc., Bank, 2 Green (3 
 N. J. Eq.), 68. 
 
 9 Miller v. English, 21 N. J. L. 317; 
 Den v. Pilling, 24 N. J. L. 653; com- 
 pare McDaniels v. Flower Brook M. 
 Co., 22 Vt. 274; Corbett V. Wood- 

 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 575. 
 
 unless otherwise provided, served in person on the sharehold- 
 ers. 1 The notice of a special or extraordinary meeting should 
 specify the proposed business, and at such a meeting business 
 not referred to in the notice cannot properly be transacted. 2 
 But no notice of the business to be transacted at a stated 
 meeting is necessary, unless the business be of an extraordi- 
 nary nature. JSTor need further notice be given of an adjourned 
 meeting where there is transacted only such business as was 
 duly notified for the meeting which was adjourned. 3 And in 
 general no notice at all need be given of a stated meeting, for 
 which the time and place are set either by usage or by the 
 constitution of the corporation. 4 
 
 § 575. The meetings must be called by the proper authori- 
 ties. 5 In business corporations when there is no pro- _^ 
 
 . . . Who may 
 
 vision for calling meetings the managing agents may call meet- 
 call them. 6 Generally, however, the charter, arti- 
 cles of association, or by-laws, specify the manner of calling 
 meetings, and such directions should be followed. 7 Conse- 
 quently, the president cannot call a meeting to elect officers 
 when authority to call meetings is vested by the by-laws in 
 the trustees. 8 But even where from the by-laws other officers 
 
 ward, 5 Sawyer, 403. Meetings of 
 shareholders cannot be held outside 
 the state. § 382. 
 
 1 Stow v. Wyse, 7 Conn. 214; Wig- 
 gin v. Freewill Baptist Church, 8 
 Mete. 301; Matter of Long Island 
 R. R. Co., 19 Wend. 37. See Tuttle 
 v. Michigan Central Air Line R. R. 
 Co., 35 Mich. 247, 252. 
 
 2 Atlantic De Laine Co. v. Mason, 
 5 R. I. 463; People's Mut. Ins. Co. v. 
 Westcott, 14 Gray, 440; Howbeach 
 Coal Co. v. Teague, 5 H: & N. 151; 
 In re Bridport Old Brewery Co., 
 L. R. 2 Ch. 191; In re Silkstone Fall 
 Colliery Co., L. R. 1 Ch. D. 38. 
 
 8 Warner v. Mower, 11 Vt. 385. 
 But see Thompson v. Williams, 76 
 Cal. 153. 
 
 4 State v. Bonnell, 35 Ohio St. 10, 
 15 ; People u. Batchelor, 22 New York, 
 128; Morrill v. Manufacturing Co., 53 
 
 Minn. 371. Notice of a meeting is 
 immaterial when the party raising 
 the question was present by proxy 
 and voted. Jones v. Milton, etc., 
 Turnpike Co., 7 Ind. 547; see Zabris- 
 kie v. Cleveland, etc., R. R. Co., 23 
 How. 381; Troy Mining Co. v. White, 
 10 S. D. 475. 
 
 6 Reilly v. Oglebay, 25 W. Va. 36; 
 Congregational Society v. Sperry, 10 
 Conn. 200. The proper officers may 
 be compelled by mandamus to call a 
 meeting. State v. Wright, 10 Nev. 
 167; People v. Board of Governors, 
 61 Barb. 397; McNeely v. Woodruff, 
 13 N. J. L. 352; compare Goulding 
 v. Clark, 34 N. II. 148. 
 
 6 Stebbins v. Mcrritt, 10 Cash. 27. 
 
 : See Evans v. Osgood, 18 Me. 213, 
 and § 573. 
 
 8 State v. Petteinli, 10 Nev. 141. 
 
 583
 
 § 577.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 have power to call meetings, the managing board has also that 
 power. 1 
 
 § 576. The methods of voting and of conducting the meet- 
 By-laws, ings may be regulated by by-laws, 2 provided the by- 
 irreguiariy laws are not inconsistent with the terms of the 
 transacted. c h ar t er or other statutes applicable. 3 And generally 
 business transacted in disregard of the required formalities 
 may be set aside, unless the divergence was trivial, or the rights 
 of outsiders who have acted without notice of the irregularities 
 intervene. 4 
 
 § 577. At common law each member of a corporation was 
 entitled to one vote ; and this rule is still of general 
 Each 1 share- application to corporations other than stock corpora- 
 as°mlny as tions. With regard to the latter, by statute and by- 
 votes as laws, and by custom so general as to amount to 
 
 shares. - ° 
 
 Cumulative accepted law, a shareholder is entitled to as many 
 
 voting. 
 
 votes as he holds shares. 5 Shareholders cannot be 
 deprived of the right to vote, nor can it be changed bv legisla- 
 
 
 1 Citizens' Mat. Fire Ins. Co. v. 
 Sortwell, 8 Allen, 217. Compare 
 Chamberlain ». Painesville, etc., R. 
 R. Co., 15 Ohio St. 225. 
 
 2 Commonwealth v. Woelper, 3 
 S. & R. (Pa.) 29; Jukeru. Common- 
 wealth, 20 Pa. St. 484; People v. 
 Crossley, 69 111. 195. See Matter of 
 Long Island R. R. Co., 19 Wend. 37. 
 
 8 When the statute prescribes the 
 mode of electing directors, it cannot 
 be changed by by-law. Brewster v. 
 Hartley, 37 Cal. 15. When the char- 
 ter provides that annual meetings 
 shall be held by the shareholders 
 or the election of directors, the di- 
 rectors cannot by a by-law so change 
 the time of holding the annual elec- 
 tion that they will continue them- 
 selves in office more than a year 
 against the wishes of a holder of a 
 majority of stock. Elkins v. Cam- 
 den and Atlantic R. R. Co., 36 N. J. 
 Eq. 467. Compare S. C. on Appeal, 
 37 N. J. Eq. 273, which further holds 
 584 
 
 that directors who are in office can- 
 not dispute the rights of shareholders 
 to obtain a new election, in accord- 
 ance with the by-laws, and thus pro- 
 long their own authority, on the 
 ground that the proposed election 
 is a step towards the illegal and im- 
 proper control of the property or 
 business of the corporation, and that 
 the complainant stockholder, who 
 holds a majority of the stock, has 
 bought it with the money of rival 
 companies and means to use his 
 rights for purposes detrimental to 
 the corporation. Camden and A. R. 
 R. Co. v. Elkins, 37 N. J. Eq. 273. 
 Compare Ryder p. Alton, etc., R. R. 
 Co, 13 111. 516; State v. Coonan, 23 
 Nev. 437. 
 
 4 People v. Albany, etc., R. R. Co., 
 55 Barb. 344. See § 184. 
 
 5 See Proctor C'l Co. i\ Finley, 98 
 Ky. 405. The old rule was applied 
 to a stock corporation in Taylor v. 
 Griswold, 14 N. J. L. 222, 237. In
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 511a. 
 
 tion unless the charter of the corporation be subject to altera- 
 tion and repeal. 1 
 
 In some states there are constitutional or legislative provi- 
 sions the object of which is to enable a minority of shareholders 
 to obtain through their votes, a minority representation on the 
 board of directors, and in this way to have some voice in the 
 management of the corporation. This is called cumulative 
 voting. The typical provision is that of the Pennsylvania 
 constitution of 1874, (article 16, sec. 4), which is as follows : " In 
 all elections for directors or managers of a corporation, each 
 member or shareholder may cast the whole number of his votes 
 for one candidate, or distribute them upon two or more can- 
 didates." Commenting upon this section the Pennsylvania 
 Supreme Court say : "This section to us seems very plain and 
 unambiguous. If there are six directors to be elected, the 
 single shareholder has six votes, and, contrary to the old rule, 
 he may cast those six votes for a single one of the candidates, 
 or he may distribute them to two or more of such candidates 
 as he may think proper. He may cast two ballots for each of 
 three of the proposed directors, three for two, or two for one, 
 and one each for four others, or finally he may east one vote 
 for each of the six candidates." 2 
 
 It is clear that legislation cannot impose cumulative voting 
 upon a corporation whose charter is not subject to alteration. 3 
 But when power to alter and repeal is reserved, a state legis- 
 lature may so amend its corporation laws as to permit a share- 
 holder in an existing corporation to "cumulate" his votes. 4 
 
 § 517a. It is the right of every shareholder that the elections 
 
 Illinois, under construction of stat- 
 utes, directors must be stockholders, 
 and must be elected solely by vote 
 of stockholders; a by-law giving 
 bondholders a right to vote at cor- 
 porate meetings is void. Durkee v. 
 People, 155 111. 354. 
 
 1 Hays v. Commonwealth, 82 Pa. 
 St. 518; State v. Greer, 78 Mo. 188; 
 Lowenthal u. Rubber Co., 52 N. J. 
 L. 440. Compare Everhart v. Phila. 
 & W. C. R. R. Co., 28 Pa. St. 339, 
 holding that a shareholder was not 
 released from his subscription by an 
 
 amendment accepted by the corpora- 
 tion, changing the voting power. 
 
 2 Pierce v. The Commonwealth, 
 104 Pa. St. 150. For the New York 
 statute, see section 20 of the General 
 Corporation Law as amended by laws 
 of 1901, chapter 355. 
 
 3 Cases in last note but one. Di- 
 rectors cannot accept such an amend- 
 ment. Baker's Appeal, 109 Pa. St. 
 401. 
 
 * Looker v. Maynard, 179 U. S. 46. 
 For other cases upon special instan- 
 ces of cumulative voting, see Horton 
 
 585
 
 § 577rt.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 Election of °f corporate officers shall be conducted legally ;* and 
 officers. ^at 0Q Yy ^ e shareholders shall vote who are right- 
 fully entitled to do so. But an election of officers will not be 
 set aside because illegal votes were admitted, if their rejection 
 would not have changed the result. 2 Votes cast for an ineligible 
 candidate will not be thrown away, so as to elect a candidate 
 having a minority of votes, unless the persons casting such 
 votes knew that the person for whom they voted was disquali- 
 fied. 3 And persons who at an election have a minority only 
 
 v. Wilder, 48 Kan. 222 ; Cross v. W. 
 Va. R. R. Co., 85 W. Va. 174 ; Wright 
 v. Cent. Cal. C. W. Co., 67 Cal. 532 ; 
 Gregg v. Granby M's Co., 164 Mo. 
 616. In regard to the cumulative 
 voting for public officers, see People 
 B. Kenney, 96 X. Y. 294 ; State v. 
 Coustantine, 42 O. St. 437. 
 
 1 In re Election of St. Lawrence 
 Steamboat Co., 44 N. J. L. 529 ; San 
 Buenaventura M'f'g Co. v. Vassault, 
 50 Cal. 534 ; Matter of Long Island 
 R. R. Co., 19 Wend. 37; Stater. New 
 Orleans, etc., R. R. Co., 20 La. Ann. 
 489. 
 
 The appointment of a receiver does 
 not affect the right of shareholders to 
 elect directors. At a meeting to elect 
 directors the right of choosing in- 
 spectors is in the shareholders, not in 
 the directors. State v. Merchant, 37 
 Ohio St. 251. 
 
 The corporation should be made a 
 party to an application to set aside an 
 election. Matter of Pioneer Paper 
 Co., 36 How. Pr. (N. Y.) 102. 
 
 A person who becomes a share- 
 holder after an election, receiving his 
 certificate of stock from a person 
 who took part therein, has no stand- 
 ing in court (under a certain statute), 
 to compel a new election. In re Ap- 
 plication of Syracuse, etc., R. R. Co., 
 91 N. Y. 1. 
 
 2 Ex parte Chenango County Mut 
 Ins. Co., 19 Wend. 635; McNeely v. 
 Woodruff, 13 N. J. L. (1 Green) 352; 
 
 586 
 
 Argus Company, Petition of, 138 
 N. Y. 557. 
 
 That inspectors were not sworn as 
 prescribed by statute is no ground to 
 set aside an election. Ex parte 
 Mohawk, etc., R. R. Co., 19 Wend. 
 135 ; Ex parte Chenango County Mut. 
 Ins. Co., supra. Nor the fact that 
 votes were received, which, though 
 legal, were not properly proved to be 
 so. Conant v. Millandon, 5 La. Ann. 
 542. Nor that certain persons were 
 excluded from voting by the injunc- 
 tion of a court of competent juris- 
 diction. Brown v. Pacific Mail S. S. 
 Co., 5 Blatchf. 525. 
 
 3 In re Election of St. Lawrence 
 Steamboat Co., 44 N. J. L. 529; 
 Jordy v. Hebrard, 18 La. Ann. 456. 
 See Reg. v. Mayor of Tewkesbury, 
 L. R. 3 Q. B. 629. Yet in Baker's 
 Appeal, 109 Pa. St. 461, it was held 
 that the court should, in determining 
 who were elected, disregard votes im- 
 properly (cumulatively) cast. At a 
 shareholders' meeting a majority 
 vote of those voting is good, though 
 the vote so cast is not a majority of 
 all the stock. State v. Chute, 34 
 Minn. 135. But see In re Election of 
 Cape May, etc., Navigation Co., 51 
 N. J. L. 78; Granger v. Grubb, 7 
 Phila. (Pa.) 350; Manufacturing Co. 
 v. Faunce, 79 Me. 440. When seven 
 directors are voted for, yet only five 
 obtain the requisite pluralities (un- 
 der the cumulative system of voting),
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 578. 
 
 of the votes received by the judges of the election, cannot on 
 a quo warranto proceeding brought to oust the improperly- 
 elected officers, be declared elected and inducted into office, 
 although it appear that enough legal votes to have given them 
 a majority were offered in their favor and rejected by the 
 judges of election. 1 
 
 § 578. The general rule is that the transfer books of the cor- 
 poration are the evidence as to the persons who are entitled 
 to the rights and privileges of shareholders, including the right 
 to vote. 3 And the inspectors of election need not and, per- 
 haps, cannot go behind the transfer books to ques- Transfer 
 tion the right to vote of one who appeal's by them to books eYi - 
 be a holder of legally issued stock. 3 But the books right to 
 are not under all circumstances or for all purposes 
 
 their election is valid. Wright v. 
 Commonwealth, 109 Pa. St. 560. Un- 
 less otherwise provided, those who 
 assemble at a shareholders' meeting 
 constitute a quorum, although a 
 minority of the stock. Morrill b. 
 M'f'g Co., 53 Minn. 371. 
 
 1 State v. McDaniel, 22 Ohio St. 
 354. Persons who take part in the 
 election of officers and the formation 
 of the company, knowing of the non- 
 fullillment of conditions precedent, 
 cannot afterward bring quo loarranto 
 on these grounds against the officers. 
 Cole v. Dyer, 29 Ga. 434. 
 
 2 In re Election of St. Lawrence 
 Steamboat Co., siqwa ; People v. 
 Robinson, 64 Cal. 373; State v. 
 Ferris, 42 Conn. 560, 568; Hopkin 
 v. Buff urn, 9 R. I. 513. See Wilson 
 v. Proprietors, ib. 590; In re Cedar 
 Grove Co., 61 N. J. L. 422. A regis- 
 tered shareholder may vote though 
 he has not paid for his shares. 
 Savage v. Ball, 17 N. J. Eq. 142; 
 Downing v. Potts, 23 N. J. L. 66. 
 Transferee of shares cannot vote 
 until the transfer is registered. 
 McNeil b. Tenth Nat. Bk., 46 N. Y. 
 325, 332. An assignment of shares, 
 with power of attorney, executed 
 
 by a foreign executor, is valid, and 
 the company is bound to record the 
 transfer; it is not necessary that 
 letters testamentary should be taken 
 out here. Middlebrook v. Merchants' 
 Bank, 3 Keyes (N. Y.), 135. 
 
 3 In re Electiou of St. Lawrence 
 Steamboat Co., supra ; Ex parte Long 
 Island R. R. Co., 19 Wend. 37; 
 Morrsseaux b. Urquhart, 19 La. Ann. 
 482; Morrill b. Mfg. Co., 53 Mich. 
 371. 
 
 A shareholder may vote though 
 he has hypothecated his shares. Ex 
 parte Willcox, 7 Cow. (N. Y.) 402; 
 Ex parte Barker, 6 Wend. 509. But 
 the pledgee may vote when the 
 shares have been transferred to his 
 name. In re Argus Printing Co., 1 
 Nor. Dak. 434; cf. State of Oregon 
 v. Smith, 15 Oregon, 98. A person 
 may vote on shares standing in his 
 name as trustee. Ex parte Barker, 
 supra. See Ex parte North Shore, 
 etc., Ferry Co., 63 Barb. 556. 'See 
 also McHenry v. Jewett, 90 N. Y. 
 58; Johnston v. Jones, 23 N. J. Eq. 
 216, 228. An administrator can vote. 
 In the Matter of the North Shore 
 State n Island Ferry Co., 63 Barb. 
 (N. Y. ) 556. A bankrupt mav vote 
 
 587
 
 § 580.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 Voting by 
 proxy. 
 
 conclusive as to the right to vote ; l nor are they conclusive 
 evidence of the qualification of directors, where a statute re- 
 quires that directors shall be bona fide holders of stock. 2 
 Shares held by the corporation, or in trust for it, cannot be 
 voted on. 3 
 
 § 579. It is held that shareholders have no implied right to 
 vote by proxy, 4 but it is competent for a corporation 
 by a by-law to authorize votes to be cast in that man- 
 ner. 5 And inspectors cannot reject a vote offered by 
 proxy because the written proxy is not acknowledged. A 
 shareholder must give his agent such written evidence of the 
 agent's right to act as will reasonably assure the inspectors that 
 the agent is acting by the authority of the principal. But the 
 power of attorney need not be in any particular form, or exe- 
 cuted with any particular formality. 6 A shareholder repre- 
 sented by proxy at a meeting is chargeable with knowledge of 
 facts connected with the proceedings of that meeting known to 
 his proxy. 7 
 
 § 580. A number of shareholders may by agreement combine 
 
 on shares standing in his name, with 
 the assent of his assignee in bank- 
 ruptcy. State v. Ferris, 42 Conn. 
 560. 
 
 strong v. Smith, 15 Hun, 222. 
 A shareholder cannot vote on shares 
 previously assigned, but not trans- 
 ferred on the books of the company, 
 even with the assent and in the 
 presence of the assignee. Common- 
 wealth v. Woodward, 4 Phila. 124. 
 Compare U. S. R. S., §5144. 
 
 Holders of illegally issued stock 
 are not entitled to vote thereon. 
 McManus v. Philadelphia, etc., R. 
 R. Co., 58 Pa. St. 330. 
 
 2 In re Election of St. Lawrence 
 Steamboat Co., supra. 
 
 s McNeely v. Woodruff, 13 X. J. 
 L. (1 Green) 352; Brewster v. Hart- 
 ley, 37 Cal. 15; Ex parte Holmes, 5 
 Cow. (N. Y.) 426; Ex parte Des- 
 doity, 1 Wend. 98. See §§ 136, 185. 
 
 4 Commonwealth r. Bringhurst, 
 103 Pa. St. 134; Philips ». Wickham, 
 
 588 
 
 1 Paige (N. Y.), 590, 598; People v. 
 Twaddle, 18 Hun, 427; Craig v. First 
 Presbyterian Church, 88 Pa. St. 42; 
 Taylor v. Griswold, 14 N. J. L. 222. 
 None of these cases, except the first 
 and last, were cases of stock corpo- 
 rations. 
 
 5 People i\ Ciossley, 69 111. 195; 
 State v. Tudor, 5 Day (Conn.), 329. 
 See Philips v. Wickham, 1 Paige, 
 590, 598; Walker v. Johnson, 17 D. 
 C. App. C, 144. Contra, Taylor v. 
 Griswold, 14 N. J. L. 222, 228. 
 
 6 In re Election of St. Lawrence 
 Steamboat Co., supra ; Matter of 
 Cecil, 30 How. Pr. (N. Y.) 477. 
 
 An irrevocable power of attorney 
 or proxy to a trustee, executed by 
 a number of shareholders, is not 
 against public policy. Brown v. 
 Pacific Mail S. S. Co., 5 Blatchf. 
 525. 
 
 7 Thames v. Central City Ins. Co., 
 49 Ala. 577.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 581. 
 
 to control a corporate election and elect proper 
 officers in the best interests of the corporation. 1 But ^on^o?*" 
 it has been held that such agreements must not con- f 11 *"; 6 " 
 
 ° _ holders ; 
 
 tain provisions restricting the right of shareholders voting 
 to alienate their shares and vote by proxy. 2 And in 
 Massachusetts it is held that an agreement between sharehold- 
 ers to vote for one of them or for a third person as manager, 
 and to vote to increase the salaries of all the officers, including 
 the manager, is void as against public policy ; at least unless 
 assented to by all the shareholders. 3 
 
 § 581. A court of law is the proper tribunal to determine 
 the validity of a corporate election. For, unless 
 specially authorized by statute, a court of equity has 
 no authority to try this question, and pronounce 
 judgment of amotion. 4 But when the question of 
 the validity of a corporate election necessarily arises 
 in the determination of a suit properly cognizable 
 by a court of equity, it will determine that question as it would 
 any other question of law or fact necessary to be decided in 
 order to settle the rights of the parties. 5 And a court of equity 
 has jurisdiction of a bill brought by a shareholder to procure the 
 cancellation of illegal shares and incidentally to restrain the 
 
 A court of 
 law the tri- 
 bunal to de- 
 termine the 
 validity of 
 corporate 
 elections. 
 Injunctions 
 
 iFaulds v. Yates, 57 111. 516; 
 Havemeyer ». Havemeyer, 11 J. & 
 S. 506; affirmed 86 New York, 618; 
 Beitman v. Steiner, 98 Alabama, 241: 
 see Barnes v. Brown, 80 New York, 
 527, 537. Shareholders may place 
 their stock in the hands of a deposi- 
 tary, with directions to vote it as di- 
 rected by a committee appointed by 
 themselves and subject to their con- 
 trol. Railway Co. v. State, 49 O. St. 
 668. See, also, Chapman v. Bates, 60 
 N. J. Eq. 17; Clowes v. Miller, ib. 
 179; Kreissl 0. Distilling Co., 47 Atl. 
 Rep. 471. Compare Brightmau v. 
 Davis, 175 Mass. 105. See § 559a. 
 
 2 Fisher v. Bush, 45 Hun (N. Y.), 
 641. But see Argus Company, Peti- 
 tion of, 138 N. Y. 557. 
 
 3 Woodruff r. Wentworth, 133 
 Mass. 309; Guernsey v. Cood, 120 
 
 Mass. 501. See § 788. On so-called 
 "voting trusts," see article by R. L. 
 Cutting in Albany Law Journal, 
 June, 1902. For New York statute 
 on this subject see section 20 of the 
 General Corporation Law as amended 
 by chapter 355 of the laws of 1901. 
 
 * Mechanics' National Bk. v. Bur- 
 nett Manuf. Co., 32 N. J. Eq. 236 
 Owen o. Whitaker, 20 N. J. Eq. 122 
 Kean v. Union Water Co., 52 N. J 
 Eq. 813; Neall e. Hill, 16 Cal. 146 
 Supreme Lodge v. Simering, 88 Md 
 276; Triesler v. Wilson, 89 Md. 169; 
 Whitehead v. Sweet, 126 Cal. 67. 
 
 5 Mechanics' Nat. Bank v. Burnett 
 Manufr'ing Co., supra. Compare 
 New England Mut. Life Ins. Co. v. 
 Phillips, 141 Mass. 535; Walker V. 
 Johnson, 17 D. C. App. Ca. 144. 
 
 589
 
 § 583.] THE LAW OP PRIVATE CORPORATIONS. [CHAP. IX. 
 
 holders from voting on them. 1 Similarly, an injunction may 
 be granted, at the suit of shareholders, restraining other share- 
 holders from voting shares in a manner contrary to the purport 
 of a provision in the charter. 2 But, it is submitted, courts 
 should be chary of granting injunctions at the suit of share- 
 holders restraining other shareholders from voting at corporate 
 elections; and certainly a preliminary injunction should not be 
 granted so near the time of an election as to take away the 
 votes of shareholders without giving them a chance to be 
 heard. 3 
 
 § 582. Every stock corporation has the implied power to 
 make by-laws for the regulation of its affairs; 4 and 
 
 Power to 
 
 make by- the majority may competently pass any reasonable 
 by-law within the general scope of the corporate 
 purposes that is calculated to effect them. 3 The power to 
 make by-laws is in the shareholders (not in the board of 
 directors) when there is no law or valid usage to the con- 
 trary. 6 
 
 § 583. Ify-laws must be reasonable, 7 and not in contraven- 
 tion of the law, written or unwritten, and particularly must 
 
 1 Wood o. Church B'ld'g Ass'n, 63 
 Wis. 9. But it has been held that 
 an injunction will not be granted 
 restraining shareholders from vot- 
 
 specified is invalid regardless of its 
 reasonableness. Ireland i>. Globe 
 Milling Co., 19 R. I. 180. 
 5 See Carne v. Brigham, 39 Me. 
 
 ing on alleged illegal stock, at least 35; State v. Tudor, 5 Day (Conn.), 
 
 unless irreparable (threatened) in- 
 jury to the plaintiff or the company 
 be shown. Reed v. Jones, G Wis. 
 680. 
 
 2 Webb v. Ridgely, 38 Md. 364. 
 An election of officers may be legal 
 though less than one-half of the 
 stock be voted thereat, the other 
 shares being excluded by injunc- 
 tion. Brown v. Pacific Mail S. S. 
 Co., 5 Blatchf. 525. 
 
 3 llilles r. Parish, 14 N. J. Eq. 
 380. Compare § 794. 
 
 4 Martin v. Nashville B'ld'g Ass'n, 
 2 Coldw. ( Tenn. ) 418. See, also, §§ 6, 
 12, 15, 20. Where a general statute 
 gives corporations power to make 
 by-laws for certain specified pur- 
 poses, a by-law for a purpose not 
 
 590 
 
 329; McFatlden v. County of Los 
 Angeles, 74 Cal. 571. By-laws con- 
 tained in a book issued to share- 
 holders are evidence against a 
 shareholder in an action by the re- 
 ceiver of the corporation to collect a 
 subscription. Frank v. Morrison, 58 
 Md. 423. 
 
 6 Morton Gravel Road Co. v. Wy- 
 song, 51 Ind.4; Carroll v. Mullanphy 
 S'v'gs B'k, 8 Mo. App. 249. 
 
 7 Cartan v. Father Matthew Soc'y, 
 3 Daly, 20; State v. Merchants' Ex- 
 change, 2 Mo. App. 96. Whether a 
 by-law is unreasonable or not is a 
 question solely for the court; but its 
 unreasonableness must be demon- 
 strated. Hibernia Fire Engine Co. 
 u. Harrison, 93 Pa. St. 264.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 584. 
 
 not contravene the charter or enabling act and articles of asso- 
 ciation. 1 A by-law that would deprive a shareholder of vested 
 rights is invalid, 2 as, for instance, one prohibiting a share- 
 holder from alienating his shares. 3 And a majority cannot by 
 a by-law impose on shareholders individual liability for corpo- 
 rate indebtedness. 4 A by-law consisting of several distinct 
 and independent parts may be valid in one part and void in 
 another. 5 
 
 § 5S4. The authority which is competent to enact by-laws is 
 competent to repeal them; 6 but no more can their repeal than 
 their passage affect a vested right. 7 
 
 1 Martin v. Nashville B'ld'g Ass'n, 
 2 Coldw. (Term.) 418; State v. Cur- 
 tis, 9 Nev. 325; Andrews v. Union 
 Mut. Fire Ins. Co., 37 Me. 256; 
 Seneca County Bank v. Lamb, 26 
 Barb. 595; Bergman v. St. Paul 
 Mut. B'ld'g Ass'n, 29 Minn. 275. 
 See Adley v. Reeves, 2 Maule & S. 
 53; Gordon v. Muchler, 34 La. Ann. 
 604. Compare Goddard v. Mer- 
 chants' Exchange, 9 Mo. App. 290; 
 aff'd 78 Mo. 609; Kolff v. St. Paul 
 Fuel Exchange, 48 Minn. 215. As 
 to by-laws in restraint of trade, see 
 Matthews y. Associated Press, 136 
 N. Y. 333; Trowbridge v. Hamilton, 
 18 Wash. 686; Bailey v. Master 
 Plumbers, 103 Tenn. 99. 
 
 2 See Kent v. Quicksilver M'g Co., 
 78 N. Y. 159, 182; Peutz v. Citizens' 
 Fire Ins. Co., 35 Md. 73; Holyoke 
 Bldg. Ass'n v. Lewis, 1 Col. App. 127. 
 But it is held that a person becoming 
 a member of a corporation (not a 
 stock corporation), may be bound by 
 an agreement that his relations 
 thereto shall be subject to by-laws 
 then in force or thereafter to be en- 
 acted. Supreme Commandery v. 
 Aiusworth, 71 Ala. 436; cf. May- 
 nard v. Interstate Ass'n, 112 Ga. 
 443, overruled in Interstate Ass'n v. 
 Wooten, 113 Ga. 247. Pain v. Societe 
 St. Jean Baptiste, 172 Mass. 319. 
 
 But see Parish v. N. Y. Produce Ex- 
 change, 169 N. Y. 34. 
 
 3 Moore v. Bk. of Commerce, 52 Mo. 
 377; In re Klaus, 67 Wis. 401; Ire- 
 land v. Globe Milling Co., 21 R. I. 9. 
 Compare Spurlock v. Pacific Rail- 
 road, 61 Mo. 319. See McNulta v. 
 Corn Belt Bk., 164 111. 427. A by- 
 law providing that a shareholder who 
 wishes to sell his shares must first 
 give other shareholders an oppor- 
 tunity to buy at the price which he 
 can get, is invalid. Bloede Co. v. 
 Bloede, 84 Md. 129. See, also, Trust, 
 etc., Co. v. Lumber Co., 118 Mo. 447. 
 Compare New Eng. T. Co. v. Abbott, 
 162 Mass. 148. 
 
 4 Reid v. Eatonton M'f'gCo., 40 Ga. 
 98; Trustees v. Flint, 13 Mete. 539. 
 As to the reasonable construction 
 that should be placed on by-laws, see 
 In re Dunkerson, 4 Biss. 227; State 
 v. Conklin, 34 Wis. 21. 
 
 5 Amesbury ». Bowditch Mut. Fire 
 Ins. Co., 6 Gray, 596; State v. Curtis, 
 9 Nev. 325, 337. 
 
 6 Smith v. Nelson, 18 Vt. 511 ; Un- 
 derbill v. Santa Barb. Land Co., 93 
 Cal. 300. 
 
 7 See Kent v. Quicksilver M'g Co., 
 78 N. Y. 159, 182; Parish v. N. Y. 
 Produce Exchange, 169 N. Y. 34; 
 Savage ». People's B. & L. Assn., 45 
 W. Va. 275. 
 
 591
 
 § 586.] 
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 Right to 
 
 inspect 
 
 corporate 
 
 books. 
 
 § 585. A shareholder has a right to inspect the corporate 
 books at reasonable intervals; 1 and may enforce this 
 right by mandamus? His right of inspection may 
 be exercised through an expert or an agent when he 
 is himself too ignorant to exercise it intelligent!} 7 . 3 
 And where shareholders are permitted by the articles to in- 
 spect the register, a shareholder (an attorney) may inspect it, 
 although he is really acting in the interests of his clients who 
 are in litigation with the company. 4 
 
 § 586. On a transfer of shares legal relations ordinarily 
 cease to subsist between the corporation and the 
 shareholder transferring his shares, and — a nova- 
 tion taking place — attach themselves to the trans- 
 feree. 5 It is the American doctrine, however, that 
 a transfer of shares in an insolvent corporation, 
 
 Transfer 
 of shares. 
 Effect. 
 When cor- 
 poration is 
 insolvent. 
 
 1 Deoderick ». Wilson, 8 Bax. (Tenn.) 
 108; Stone c. Kellogg. Ib5 111. 192; 
 State ex rel. v. Pacific Brew'g Co., 21 
 Wash. 451. See Angell and Ames on 
 Corp., §681; 2 Lindley on Part., 809- 
 814. Cases in next note. Penalties 
 are sometimes attached by statute to 
 a refusal of corporate officers to al- 
 low a shareholder to inspect the 
 books. See Lewis v. Brainard, 53 
 Vt. 510. 
 
 2 Cockburn v. Union Bk., 13 La. 
 Ann. 289; Commonwealth v. Phco- 
 nix Iron Co., 105 Pa. St. Ill; 
 Stettauer v. N. Y. etc., Cons. 
 Co., 42 N. J. Eq. 46; Matter of 
 Steinway, 159 N. Y. 250; People v. 
 Lake Shore, etc., R. R. Co. 11 Hun, 
 1; People v. Pacific Mail S. S. Co., 50 
 Barb. 280; Foster v. White, 86 Ala. 
 467; Weihenmeyer v. Bittner, 88 
 Md. 325. See, Boundette i\ Sreinard, 
 52 La. Ann. 1333; Cinn. Volksblatt, 
 Co. o. Hoffmeister, 62 Ob. St. 189. 
 The granting of the writ is discre- 
 tionary and not reviewable on ap- 
 peal. Matter of Sage, 70 X. Y. 221; 
 Matter of Tuttle v. Iron Nat. B'k, 
 170 N. Y. 9. See Lyon v. Amer. 
 Screw Co., 16 R. I. 472. But the 
 502 
 
 shareholder is not entitled to an 
 action for damages against a corpo- 
 ration for an improper refusal of its 
 officers to permit him to inspect the 
 books. Legendre v. Brewing Ass'n, 
 45 La. Ann. 669. 
 
 3 States. Bienville Oil Works Co., 
 28 La. Ann. 204; Phoenix Iron Co. v. 
 Coinmouwealth, 113 Pa. St. 563. 
 
 4 Reginav. Wilts, etc., Caual Navi- 
 gation, 29 L. T. N. S. 922; Weihen- 
 meyer v. Bittner, 88 Md. 325. 
 
 5 This principle is sometimes de- 
 clared by statute, as in regard to na- 
 tional banks, U. S. Rev. Stat. § 5139. 
 " When an original subscriber to the 
 stock of an incorporated company, 
 who is bound to pay the instalments 
 on his subscription from time to 
 time as they are called in by the 
 company, transfers his stock to an- 
 other persou, such other person is 
 substituted not only to the rights, 
 but to the obligations of the original 
 subscriber; and he is bound to pay 
 up the instalments called for after 
 the transfer to him. The liability 
 to pay up instalments is shifted from 
 the outgoing to the incoming share- 
 holder. A privity is created between
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 586. 
 
 made to an irresponsible person for the purpose of getting rid 
 of liability on the shares, is void both as to the corporation 
 and as to its creditors. 1 The English cases, on the other hand, 
 hold that a shareholder, for the sole purpose of escaping liabil- 
 ity, may transfer his shares to a man of straw for a nominal 
 consideration or as a mere gift, even when the company is in 
 a failing condition ; and if the transfer be absolute, the trans- 
 ferrer will be freed from his liability. 2 Not so, however, if the 
 transfer be merely colorable, so that the transferee as between 
 himself and his transferrer remains a trustee for the latter. 3 
 
 the two by the assignment of the one 
 and the acceptance of the other; and 
 also between them aud the corpora- 
 tion, for it would be absurd to say 
 upon general reasoning, that if the 
 original subscribers have the power 
 of assigning their shares, they should, 
 after- disposing of them, be liable to 
 the burdens which are thrown upon 
 the owners of the stock." Angell 
 and Ames on Corp., §534; Hartford, 
 etc., R. R. Co. v. Boorman, 12 Conn. 
 530; Mann v. Currie, 2 Barb. 294; 
 Isham v. Buckingham, 49 N. Y. 216; 
 Cowles v. Cromwell, 25 Barb. (N. Y.) 
 413. See Billings v. Robinson, 94 
 N. Y. 415 ; Rochester & K. F. Ry. Co. 
 v. Raymond, 158 N. Y. 576; Rafferty 
 v. Donald, 197 Pa. St. 423; Stewart©. 
 Printing Co., 1 Wash. 521. 
 
 1 Nathan v. Whitlock, 9 Paige (N. 
 Y.), 152; Marcyv. Clark, 17 Mass. 
 330; Rider v. Morrison, 54 Md. 429; 
 Welch v. Sargent, 127 Cal. 72. See 
 § 749. A corporation was indebted 
 beyond the amount of its assets. 
 The defendant, an original subscriber 
 to its stock, and a director, objected 
 to the management, threatening to 
 bring proceedings for a winding up. 
 Thereupon, with the consent of the 
 trustees and all the shareholders who 
 had made any payments on their 
 shares, he transferred his shares, 
 which were not fully paid up, and 
 resigned from his position as trustee, 
 
 38 
 
 which was taken by his transferee, 
 who on his part agreed to indemnify 
 defendant from further liability on 
 his subscription or to creditors, and 
 loaned to the corporation enough 
 money to make it solvent. The 
 transfer was recorded on the books 
 of the corporation. That the pur- 
 pose of the whole transaction was to 
 free defendant from all further lia- 
 bility was understood by all. Held, 
 that the receiver could not recover 
 from the defendant the unpaid por- 
 tion of the shares subscribed for by 
 him. The court said that there were 
 no creditors having equities against 
 defendant by virtue of his having 
 been a shareholder, and that the re- 
 ceiver represented only the corpora- 
 tion which had assented to the sub- 
 stitution of the transferee's liability 
 for that of defendant. Billings v. 
 Robinson, 94 N. Y. 415. 
 
 2 In re London, etc., Assurance 
 Co., Jessopp's Case, 2 De Gr. & J. 
 638; In re Mexican, etc., Co., De 
 Pass's Case, 4 De (i. & J. 544; Har- 
 rison's Case, L. R. 6 Ch. 286; King's 
 Case, ib. 196; Master's Case, L. R. 
 7 Ch. 296, note; Williams's Case, 1 
 Ch. Div. 576. See Thompson's "Li- 
 ability of Stockholders," § 213. 
 
 3 Chinnock's Case, Johns. (Eng. 
 Ch.) 714; In re Mexican, etc., -Co., 
 Hyman's Case, 1 De G., F. & J. 75; 
 In re Mexican, etc., Co., Costello's 
 
 593
 
 § 587.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 Liability 
 of trans- 
 feree. 
 
 A transfer to an infant does not divest the transferrer of his 
 liability ; ' nor a transfer to the company or to its directors on 
 its account, 2 or to a mere nominee of the directors. 3 
 
 § 587. The transferee (on the books of the corporation) of 
 shares that are not fully paid up is liable for calls 
 made for the unpaid portion during his ownership. 4 
 A person becomes legally entitled to shares by hav- 
 ing them transferred to him on the books of the corporation ; 
 a certificate being but evidence. 5 It is also held that an assign- 
 ment and delivery of the stock certificate will pass the legal 
 title to shares transferable only on the books of the company, 
 though there be no such transfer. 6 And a transferee of shares, 
 who procures a transfer to be made to himself on the books of 
 the corporation, is liable to the assignee in bankruptcy of the 
 corporation, for the unpaid balance on the shares, although he 
 merely holds them as collateral security for the debt of his 
 transferrer. 7 
 
 Case, 2DeG., F. & J. 302; Payne's 
 Case, L. R. 9 Eq. 223; In re Bank 
 of Hindustan, Ex parte Kintrea, L. 
 K. 5 Ch. 95; Gilbert's Case, ib. 559. 
 
 JSymon's Case, L. R. 5 Ch. 298; 
 Weston's Case, ib. 614; Costello's 
 Case, L. R. 8 Eq. 504. 
 
 2 Richmond's Ex'rs' Case, 3 De G. 
 & Srn. 96; In re Newcastle, etc., Ins. 
 Co., Ex parte Henderson, 19 Beav. 
 107; Daniell's Case, 22 Beav. 43. 
 In America, however, unless the cor- 
 poration were insolvent, a transfer 
 to it would be valid for most pur- 
 poses. See §§ 134, 135. 747. 
 
 8 Eyre's Case, 31 Beav. 177. 
 
 4 Webster o. Upton, 91 U. S. 65; 
 Hartford and N. H. R. R. Co. v, 
 Boorman, 12 Conn. 530; Bend v. 
 Susquehanna Bridge Co., 6 Har. & 
 J. (Md.) 128; Hall v. United States 
 Ins. Co., 5 Gill (Md.), 484; Merri- 
 mac M'g Co. v. Bagley, 14 Mich. 
 501; Hnddersfield Canal Co. v. 
 Buckley, 7 T. R. 36; Cowles v. 
 Cromwell, 25 Barb. 413; Fouche v. 
 Merchants Nat. B'k, 110 Ga. 827; 
 
 594 
 
 Efird v. Piedmont, etc., Land Co., 
 55 S. C. 78. 
 
 A contrary doctrine seems to pre- 
 vail in Pennsylvania. Pittsburgh, 
 etc., Coal Co. v. Otterson, 4 Weekly 
 Notes of Cases, 545; Frank's Oil Co. 
 v. McCleary, 63 Pa. St. 317; Palmer 
 v. Ridge M'g Co., 34 Pa. St. 288; 
 Canal Co. v. Sansom, 1 Binney, 70, 75. 
 See Messersmith d. Sharon S'v'gs 
 Bk., 96 Pa. St, 440; Finletter v. Ap- 
 pelton, 195 Pa. St. 349. Compare 
 Pittsburgh and Connellsville R. R. 
 Co. v. Clarke, 29 Pa. St. 146; Graff v. 
 Pittsburgh and Steubenville R. R. 
 Co., 31 Pa. St. 489. 
 
 5 Hawley v. Upton, 102 U. S. 314; 
 Agricultural Bank v. Burr, 24 Me. 
 256. See Agricultural Bank v. Wil- 
 son, ib. 273; First Nat. Bk. v. Gif- 
 ford, 47 Iowa, 575, 583; Russell, 
 Rec'r, v. Easterbrook, 71 Conn. 50. 
 
 6 Leitch v. Wells, 48 N. Y. 585; 
 Robinson v. National Bank, 95 N. Y. 
 637; Ashton v. Zeila Mining Co., 134 
 Cal. 408. 
 
 7 Pullman v. Upton, 96 U. S. 328;
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 589. 
 
 § 588. In a recent New York case a person transferred his 
 shares by delivery of the certificate with a power of attorney, 
 the name of the transferee was entered on the dividend book, 
 and the corporation paid him dividends for four years. The 
 stock was not transferred on the transfer book, but no pro- 
 vision in the constitution or by-laws required it. The court 
 held that the corporation could not recover of the transferrer, 
 having so long recognized the transfer, and, the corporation 
 being insolvent, the receiver stood in no better position. 1 
 
 § 589. The constitution or by-laws of the corporation may 
 contain provisions regulating the transfer of shares. 
 If these provisions are not observed, neither the Jenifers, 
 shareholder nor his transferee may take advantage 
 of their non-observance, 2 though on the one hand the corpora- 
 tion may refuse to recognize an irregular transfer, 8 and in most 
 cases of irregular transfers the shareholder will not divest him- 
 self of any liability toward creditors, 4 although liability may 
 
 National Bank v. Case, 99 U. S. 628; 
 Fouche v. Merchants Nat. B'k, 110 
 Ga. 827. So the executor of a share- 
 holder may become liable. See 
 Diven v. Duncan, 41 Barb. 520. See 
 §741. 
 
 1 Cutting v. Damerel, 88 N. Y. 410. 
 Compare Vale Mills v. Spalding, 62 
 N. H. 605. 
 
 2 Johnson v. Underbill, 52 N. Y. 
 203; Bank of Utica v. Smalley, 2 
 Cow. (N. Y.) 770; Quiner v. Marble- 
 head Social Ins. Co., 10 Mass. 476; 
 Parrott v. Byers, 40 Cal. 614; New- 
 berry v. Detroit, etc., M'f'g Co., 17 
 Mich. 141; Duke v. Cahawba Nav. 
 Co., 10 Ala. 82; Cheltenham, etc., 
 R'y Co. v. Daniel, 2 Eng. R'y Cas. 
 728. Compare Weston v. Bear River, 
 etc., Water and M'g Co., 5 Cal. 186; 
 S. C, 6 Cal. 425; Naglee v. Pacific 
 Wharf Co., 20 Cal. 529. 
 
 Holbrook v. Fauquier, etc., Turn- 
 pike Co., 3 Crancb, Cir. Ct. 425; Hall 
 v. Rose Hill Road Co., 70 111. 673; 
 Helm b. Swiggett, 12 Ind. 196; com- 
 pare State v. New Orleans Gas Light, 
 
 Co., 25 La. Ann. 413; Townsend v. 
 Mclver, 2 S. C. 25. A consent of the 
 board of directors to the transfer of 
 stock must, when made necessary, 
 be evidenced by a recorded resolu- 
 tion of the board. Pittsburgh and 
 Connellsville R. R. Co. v. Clarke. 29 
 Pa. St. 146; semble contra, Ellison v. 
 Schneider, 25 La. Ann. 435. See, 
 also, regarding the consent of direct- 
 ors to a transfer, Shepherd's Case, 
 L. R. 2 Eq. 564; Slee v. International 
 Bank, 17 L. T. N. S. 425; In re 
 Greshaui Life Assurance Soc. ; Ex 
 parte Penney, L. R. 8 Ch. 446. 
 
 4 Shellington v. Howland, 53 N. Y. 
 371; see § 748. Still it is held in 
 England that if the transferrer has 
 done all in his power to perfect the 
 transfer, he is discharged from his 
 liability as shareholder. Shortridge 
 v. Bosanquet, 16 Beav. 84; Nation's 
 Case, L. R. 3 Eq. 77; Fyfe's Case, 
 L. R. 4 Ch. 768; Ward & Garfit's 
 Case, L. R. 189. But see § 748. 
 
 Prima facie a person whose name 
 appears on the books of tho corpo- 
 
 595
 
 [§ 500. THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 attach to his transferee. 1 If, however, the corporation, or 
 those of its officers who have charge of the transfers of shares, 
 recognize a transfer made in good faith, though irregularly, 
 the corporation raa} r be estopped from denying its validity. 2 
 And if the corporation, on the demand of a transferee of 
 shares, refuses without legal reason, i. e., wrongfully, to reg- 
 ister a transfer, it will be deemed to have waived the require- 
 ment that transfers shall be registered, and the transferee, as 
 against the corporation, will have the full rights of a share- 
 holder. 3 
 
 § 590. The following is from the opinion of the New York 
 Court of Appeals by Judge Davis in New York and New 
 Haven R. R. Co. v. Schuyler : 4 " Where the stock of a corpora- 
 tion is by the terms of its charter or by-laws transferable only 
 on its books, the purchaser who receives a certificate with 
 power of attorney, gets the entire title, legal and equitable, as 
 between himself and his seller, with all the rights the latter 
 possessed ; but as between himself and the corporation he ac- 
 quires only an equitable title which they are bound to recog- 
 nize and permit to be ripened into a legal title, when he presents 
 himself, before any effective transfer on the books has been 
 made, to do the acts required by the charter or by-laws in order 
 to make a transfer. 5 Until those acts be done he is not a stock- 
 holder, and has no claim to act as such, but possesses as between 
 himself and the corporation, by virtue of the certificate and 
 power, the right to make himself, or whomsoever he chooses, a 
 stockholder by the prescribed transfer. The stock not having 
 passed by the delivery of the certificate and power of attorney, 
 the legal title remains in the seller, so far as affects the com- 
 pany and subsequent bona fide purchasers who take by transfers 
 duly made on the books. And hence a buyer in good faith of 
 
 ration is a shareholder as to it and 
 as to the public. State v. Ferris, 42 
 Conn. o60; Holyoke Bank v. Hurn- 
 ham, 11 Cash. 183; Skowhegan Bank 
 v. Cutler, 49 Me. 315; Matter of 
 Empire City Bank, 18 N. Y. 200; 
 Stanley v. Stanley, 26 Me. 191 ; 
 Wm rail b. Judson, 5 Barb. 210. 
 
 1 Upton o. Burnham, 3 Biss. 431; 
 Straffon's ExVs Case, 1 De C, M. & 
 
 596 
 
 G. 576; Cheltenham, etc., R'y Co. v. 
 Daniel, 2 Eng. R'y Cas. 728. 
 
 2 Isham v. Buckingham, 49 N. Y. 
 216; Bargate v. Shortridge, 5 H. L. 
 C. 297 ; Scripture v. Francestown 
 Soapstone Co., 50 X. H. 571. 
 
 3 Robinson v. National Bank, 95 
 N. Y. 637. 
 
 « 34 N. Y. 30, 80. 
 
 6 Townsend v. Mclver, 2 S. C. 25.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 591- 
 
 a person in whose name the stock stands on the books, who 
 takes a transfer in conformity to the charter or by-laws, per- 
 mitted to be made by the authorized officer of the corporation, 
 becomes vested with a complete title to the stock, and cuts off 
 all the rights and equities of the holder of the certificate to the 
 stock itself. AVhat other rights and equities he may possess is 
 another question, but if the transferee has taken in good faith, 
 and for value, the stock is gone beyond his reach, and beyond 
 recall by the corporation." 
 
 § 591. The case from which the above citation is taken 
 decided that a corporation is liable in damages to the 
 bona fide holder of certificates of shares issued by the 
 proper corporate officers in due form, but fraud- 
 ulently and in excess of the amount of capital stock 
 authorized by its charter. 1 
 
 Liability of 
 corporation 
 for exces- 
 sive issues. 
 
 1 New York and N. H. R. R. Co. 
 v. Schuyler, 34 N. Y. 30 ; accord, 
 Willis v. Fry, 13 Phila. (Pa.) 33; 
 Titus v. Great Western Turnpike 
 Road, 5 Lans. (N. Y. ) 251. See, also, 
 Allen v. South Boston R. R., 150 
 Mass. 200; First Ave. Land Co. 
 v. Parker, 111 Wis. 1. Compare 
 Wright's Appeal, 99 Pa. St. 425. See 
 § 598. 
 
 But a corporation cannot be com- 
 pelled to transfer stock issued in 
 contravention to the act of incorpo- 
 ration. People v. Sterling Mfg. Co., 
 82 111. 457. A corporation is liable 
 to a bona fide holder for value of a 
 stock certificate on which the name 
 of the president was forged by a per- 
 son who was the secretary, treasurer, 
 and transfer agent of the corpora- 
 tion, having charge of its books re- 
 lating to the issue and transfer of 
 stock. The said person had also 
 countersigned the certificate as treas- 
 urer and transfer agent, and the cer- 
 tificate seemed regular. The holder 
 had made inquiry at defendant's of- 
 fice, and was told by the person in 
 
 charge (the forger) that the certifi- 
 cate was good. Fifth Av. Bk. v. 
 Forty-Second St. R. R. Co., 137 N. Y. 
 231. See Jarvis v. Manhattan Beach 
 Co., 148 N. Y. 652. 
 
 But the same court held that a cor- 
 poration is not liable when its presi- 
 dent signs as transfer agent, and 
 dates the certificate at a time in the 
 past when he was transfer agent; it 
 was forgery. Manhattan Life Ins. 
 Co. d. Forty -Second St. R. R. Co., 
 139 N. Y. 146. See, also, Hill v. 
 Jewett Pub. Co., 154 Mass. 172. A 
 corporation is not liable to an inno- 
 cent purchaser for reissue of surren- 
 dered stock certificates by manager 
 who has no authority to issue certi- 
 ficates for any purpose, and who has 
 not been invested with apparent au- 
 thority or indicia of ownership by 
 the corporation. Knox v. Eden 
 Musee, 148 N. Y. 441. The fact that 
 in this instance a by-law requiring 
 immediate cancellation of surren- 
 dered certificates was not observed, 
 does not make the company liable. 
 lb. 
 
 597
 
 § 593.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 § 592. In registering transfers the corporation owes to the 
 Liability of individual shareholders the duty to act carefully, 
 corporation an j if ft fails to exercise proper vigilance it will be 
 iug trans- liable to the shareholder injured. 1 Likewise if the 
 corporation has notice that the nominal holder is an 
 executor or trustee, it will be affected with notice of the terms 
 of his trust and will be liable to the beneficiaries if it permit 
 a wrongful transfer to be entered on its books. 2 But when an 
 executor has unrestricted power to transfer the assets of his 
 estate, a corporation is not bound to see that he is not defraud- 
 ing the estate in making transfers of its stocks. 3 
 
 § 593. A corporation is liable to the lawful owner if it 
 transfers shares on a forged order. 4 Thus, a bank 
 which has permitted a transfer of shares to be made 
 on a forged power of attorne} r , may be compelled to 
 issue new certificates to the shareholder to whom 
 the shares belonged, and account to him for dividends paid on 
 
 Registry of 
 transfers 
 on forged 
 orders. 
 
 1 Pennsylvania R. R. Co.'s Appeal, 
 86 Pa. St. 80; Caulkins v. Gas Light 
 Co., 85 Tenn. 683; Wood house v. 
 Crescent Mut. Ins. Co., 35 La. Ann. 
 238. Plaintiff need not sue to have 
 the transfer set aside, but may sue 
 the corporation for the value of his 
 stock. lb. See Keppel's Ad mi's v. 
 Petersburg R. R. Co., Chase's Dec. 
 167; Tel. Co. v. Davenport, 97 U. S. 
 369; Sewall v. Boston Water Power 
 Co., 4 Allen, 277. 
 
 2 Stewart v. Firemen's Ins. Co., 53 
 Md. 564; Lowry v. Commercial, etc., 
 Bk., Taney's Dec. 310; Webb v. 
 Graniteville Mfg. Co., 11 S. C. 396; 
 Caulkins v. Gas Light Co., 85 Tenn. 
 683; Magwood v. Railroad Bk., 5 S. 
 C. 379. See Peck v. Providence Gas 
 Co., 17 R. I. 275. Compare Smith v. 
 Railroad, 91 Tenn. 221. A corpora- 
 tion is not liable in damages for re- 
 fusal to transfer stock, standing in 
 name of decedent, where the right 
 of the executors to sell is doubtful, 
 or where they have impeached their 
 
 598 
 
 right to transfer. Livezey v. Pacific 
 R. R. Co., 157 Pa. St. 75. 
 
 3 Crocker v. Old Colony R. R. Co., 
 137 Mass. 417; Hughes v. Drovers 
 Bank, 86 Md. 418. Compare Peck v. 
 Providence Gas Co., 17 R. I. 275. A 
 corporation cannot require an execu- 
 tor to leave with it certified copies 
 of the will, etc., which he furnishes 
 as proof of his authority. Bird v. 
 Chicago, etc., R. R. Co., 137 Mass. 
 428. 
 
 4 Brisbaue v. Delaware, etc., R. R. 
 Co., 94 N. Y. 204; Midland R'y Co. 
 v. Taylor, 8 H. L. C. 751; Sewall v. 
 Boston Water Power Co., 4 Allen, 
 276; Pratt v. Taunton Copper Co., 
 123 Mass. 110; Loring v. Salisbury 
 Mills, 125 Mass. 138; Machinists' 
 Nat. Bk. v. Field, 126 Mass. 345; 
 Pratt v. Boston and Albany B. K. 
 Co., ib. 443; Chicago Edison Co. v. 
 Fay, 164 111. 323; Swan v. North 
 British, etc., Co., 7 H. & N. 603; S. C, 
 on Appeal, 2 H. & C. 175; Kraft 
 County Bank v. Bank, 133 Cal. 64.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 595. 
 
 them. 1 And if A. in good faith purchases shares from a share- 
 holder who himself has bought on the faith of forged transfers 
 which the company had registered, and the company registers 
 A. as a shareholder, but, subsequently, discovering the forgery, 
 erases his name, he will be entitled as against the company to 
 be placed in as good a position — by award of damages or 
 delivery of other shares — as he would have been in had the 
 transfers been valid. 2 But the simple fact that the company 
 has registered a forged transfer, using due care, does not estop 
 it from contesting the validity of the certificate which it has 
 forwarded to the purchaser, 3 for in such a case the purchaser 
 did not act on the faith of the company's action. 4 
 
 § 594. A corporation will also be liable to the holder of a 
 stock certificate for damages arising from a transfer 
 which it permits to be made in violation of it own oFby-^aVs! 11 
 regulations. Thus, where stock is transferable on 
 the books of the company only on surrender of the certificates, 
 and a by-law further provides that no new certificate shall be 
 issued until the previous certificate shall have been cancelled, 
 if the corporation issues new certificates to a former holder 
 w r ho represents that he has lost his certificates, but who has 
 really transferred them for a valuable consideration, the cor- 
 poration will be liable to the transferee for the value of the 
 stock, but not for dividends, as a production of certificates 
 was not required for their collection. 5 
 
 § 595. If, however, a corporation using proper care and vio- 
 lating none of its regulations, transfers shares un- i n( ji Sr6 _ 
 wittino-ly in disregard of rights with notice of which g. ar . d ° f . 
 
 m o j o o rights of 
 
 it is in no way affected, it will not be liable. 6 Thus, winch cor- 
 where shares standing on the books of the corpora- has no 
 tion in the name of a judgment debtor, are sold by T10tlce- 
 
 1 Pollock v. National Bank, 7 N. Y. 
 274; Blaisdell v. Bohr, 6* Ga. 56; 
 Penna. Co. v. Ins. Co., 181 Pa. St. 40. 
 
 2 In re Bahia, etc., R'y Co., 37 L. 
 J. Q. B. 176. See Savings Bank v. 
 Baltimore, 63 Md. 6. 
 
 3 Waterhouse v. London and S. W. 
 R. Co., 41 L. T. N. S. 553; see, also, 
 
 Si mm o. Anglo-American Telegraph 
 Co., 5 Q. B. Div. 188. 
 
 4 Simm ». Anglo-American Tele- 
 graph Co., supra ; see §§ 507, 508. 
 
 6 Cleveland and Mahoning R. R. 
 Co. v. Robbins, 35 Ohio St. 483; 
 Bank v. Lanier, 11 Wall. 360; Conk- 
 lin v. Second Nat. Bk., 45 N. Y. 655; 
 
 6 For note 6 see page 600. 
 
 599
 
 § 596.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 the sheriff as the debtor's property, and a court of last resort, 
 after a fair contest by the corporation, orders the stock to be 
 transferred to the purchaser under the sheriff's sale, the corpo- 
 ration is not liable to the holder of the certificate who took no 
 steps to protect himself. 1 Again, if the plaintiff is the equita- 
 ble owner of shares standing in the name of another who 
 claims to be the absolute owner of them, the plaintiff cannot 
 recover their value from the corporation on its refusal to issue 
 certificates to him. Under such circumstances the corporation 
 is not bound to take on itself the peril of issuing the certifi- 
 cates, and thus deciding between rival claimants. 2 In a suit 
 against a corporation by a person who claims to be the owner 
 of stock standing in the name of another, and alleged to have 
 been illegally transferred on the books of the company, the 
 demand, if for damages, must be based on allegations of wrong- 
 ful acts on the part of the corporation ; and if the demand is 
 for the recovery of the stock itself, the person to whom it has 
 been transferred is a necessary party. 3 
 
 § 596. Accordingly, a corporation may maintain a bill of 
 interpleader against two opposing claimants of a 
 pleader. dividend due on shares of its capital stock origi- 
 nally held in trust for one of them by a third person 
 who had fraudulently transferred them to the other through 
 mesne conveyances. Upon such bill the court may determine 
 which claimant is entitled to the dividend, but not whether the 
 corpdration is liable to the one defrauded, for permitting the 
 transfer to be made. 4 A corporation cannot, however, sustain 
 
 Strange v. H. and T. C. R. R. Co., 
 53 Tex. 162 ; Tafft v. Pifesidio, etc., 
 R. R. Co., 84 Cal. 131 ; Supply Ditch 
 Co. v. Elliot, 10 Col. 327. See Baker 
 v. Wasson, ib. 150 ; Cusliman v. 
 Thayer M'f'g Co., 76 N. Y. 365 ; 
 Joslyn v. Distilling Co., 44 Minn. 
 183. 
 
 6 See Williams v. Mechanics' Bank, 
 5 Blatchf. 59 ; Smith v. Railroad, 01 
 Tenn. 221. Compare Dickinson v. 
 Central National Bank, 129 Mass. 
 279. 
 
 1 Friedlander v. Slaughter House 
 Co., 31 La. Ann. 523. 
 600 
 
 2 National Bank v. Lake Shore, 
 etc., R. R. Co., 21 Ohio St. 221. 
 Compare Baker "v. Marshall, 15 
 Minn. 177. 
 
 A judgment decreeing against a 
 corporation that the plaintiff is the 
 owner of stock evidenced by a lost 
 certificate, should provide for indem- 
 nity from the plaintiff to the corpo- 
 ration. Galveston City Co. v. Sibley, 
 56 Tex. 269. 
 
 3 Reid v. Commercial Ins. Co., 32 
 La. Ann. 546. 
 
 4 Salisbury Mills v. Townsend, 109 
 Mass. 115.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 597. 
 
 a bill of interpleader to force opposing claimants to contest 
 with each other the ownership of shares, when the corporation 
 has already issued a certificate to one of them ; since, under 
 such circumstances, having to admit that as to one of the con- 
 testants it is a wrong-doer, it is not entitled to that form of 
 remedy. 1 
 
 § 597. If a corporation by mistake or in ignorance of ma- 
 terial facts registers an improper transfer or issues a 
 certificate, it is not precluded from denying as against Registry of 
 
 I • o t-. transfer by 
 
 the transferee his title as shareholder. 2 But it can- mistake. 
 not impugn his title under such circumstances to the injury of 
 subsequent purchasers who, on the faith of the company's ac- 
 tion, have bought the shares without notice of any impro- 
 priety. 3 In a recent Maryland case a savings bank made a 
 loan on the security of a stock certificate on which the indorse- 
 ment for transfer was forged. The borrower afterwards ap- 
 plied for a further loan, and the bank assented on condition 
 that the corporation should make out a new certificate to the 
 bank. This the corporation did, and the bank on the security 
 
 1 Mount Holly Turnpike Co. v. 
 Ferree, 17 N. J. Eq. 117. 
 
 2 Wright" s Appeal, 99 Pa. St. 425; 
 Houston, etc., R'y Co. u.Van Alstyne, 
 56 Tex. 439; Central R. R Co. v. 
 Ward, 37 Ga. 515; Hare u. London 
 and N. W. R'y Co., Johns. (Eng.) 
 722. 
 
 In a Massachusetts case the de- 
 fendant, in good faith, presented to 
 plaintiff for a transfer a certificate 
 of plaintiff's stock, on which the 
 owner's name to the power of at- 
 torney on the back had been forged. 
 Afterwards defendant sold the stock 
 to a third person, to whom, on de- 
 fendant's request, the plaintiff issued 
 a new certificate. Thus the plain- 
 tiff had no remedy against such 
 third person, being estopped as to 
 him ; and having been forced to 
 issue equivalent certificates to the 
 real owner, was damaged. Held, it 
 could maintain an action against de- 
 fendant, and as damages could 
 
 recover the costs and expenses of the 
 suit (exclusive of counsel fees) by 
 which plaintiff had been forced to 
 issue new certificates to the real 
 owner, plaintiff having notified de- 
 fendant to defend that suit; also the 
 amount paid in good faith by plain- 
 tiff for the equivalent shares with 
 which it replaced the shares trans- 
 ferred on the forgery, and this 
 although the stock was then of a 
 higher value in the market than at 
 the time when the forgery was com- 
 mitted; and also the dividends which 
 plaintiff had had to pay the real 
 owner. Boston and A. R. R. Co. v. 
 Richardson, 135 Mass. 473. 
 
 3 See Ward v. South Eastern R'y 
 Co., 2 E. & E. 812; Hart v. Fron- 
 tino, etc., Mining Co., L. R. 5 Ex. 
 Ill; Boston and A. R. R. Co. v. 
 Richardson, 135 Mass. 473; Metro- 
 politan Savings Bank v. Baltimore, 
 63 Md. G. 
 
 601
 
 § 598.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 of the new certificate made a further loan. "When the forgery 
 was discovered the bank brought suit against the corporation, 
 and was allowed to recover the amount of the second loan, but 
 not the amount of the first. 1 
 
 § 598. Accordingly, a certificate of stock in a corporation, 
 under the corporate seal, and signed by the officers 
 authorized to issue certificates, estops the corpora- 
 tion to deny its validity as against one who has 
 taken it for value without knowledge or notice of 
 any fact tending to show that it has been irregularly issued. 2 
 
 Estoppel of 
 corpora- 
 tion by its 
 certificate. 
 
 1 Metropolitan Savings Bank v. 
 Baltimore, 63 Md. 6. 
 
 2 Moores v. Citizens' National 
 Bank, 111 U. S. 156, 165. In this 
 case the plaintiff lent money to the 
 cashier of a bank for his own use, 
 and took from him as security a 
 certificate of stock written by him 
 on one of the printed forms which 
 the president had signed and left 
 with the cashier to be used if needed 
 in the president's absence. The cer- 
 tificate certified that the plaintiff 
 was the owner of the stock "trans- 
 ferable only on the books of the 
 bank on the surrender of this cer- 
 tificate," and the by-laws did in fact 
 provide that certificates should be 
 issued only on surrender of the 
 former certificate. The cashier 
 falsely represented to the plaintiff 
 that he owned the stock in question 
 and had transferred it to the plain- 
 tiff. The cashier did not surrender 
 any certificate to the bank, or make 
 any transfer on its books to the 
 plaintiff; he never repaid the money 
 loaned and was insolvent. The 
 bank never rati lied or received any 
 benefit from the transaction. Held, 
 on the refusal of the bank to recog- 
 nize the certificate as valid, the 
 plaintiff could not recover from the 
 bank its value, and could not sus- 
 tain her case by evidence that in one 
 or two other instances the cashier 
 
 602 
 
 had issued certificates without any 
 certificate being surrendered. 
 
 The court further held that the 
 representations of the cashier, be- 
 yond those in the certificate, were 
 made by him personally, and not on 
 behalf of the bank. " The duty of 
 transferring his stock to the plaintiff 
 before taking out a new certificate 
 in her name was a duty that he and 
 not the bank owed to the plaintiff. 
 The making of such a transfer was 
 an act to be done by him in his own 
 behalf as between him and the plain- 
 tiff, and in the plaintiff's behalf as 
 between her and the bank. The 
 very form of the certificate was such 
 as to put her on her guard." Plain- 
 tiff "was not applying to the bank 
 to take stock as an original sub- 
 scriber or otherwise; but she was 
 bargaining with the cashier for his 
 stock, which she supposed him to 
 hold as his own; she knew that she 
 had not held or surrendered any cer- 
 tificate, and she never asked to see 
 his certificate or a transfer thereof 
 to her; and he in fact made no sur- 
 render to the bank or transfer on its 
 books; she relied on his personal 
 representation as the party with 
 whom she was dealing that he had 
 such stock; and she trusted him as 
 her agent to see the proper transfer 
 thereof made on the books of the 
 bank. Having distinct notice that
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 599. 
 
 And consequently, as a general rule, a person purchasing 
 
 shares need not, in the absence of circumstances putting him 
 
 on his inquiry, look beyond the certificate delivered to him 
 
 for the title of his vendor. 1 For if a corporation competently 
 
 issues a certificate in which it affirms that the person named 
 
 therein is entitled to a certain number of shares, it holds out 
 
 to all who may deal with him in good faith, that he owns and 
 
 has capacity to transfer them. 2 
 
 § 599. The purchaser of a stock certificate regular on its 
 
 face, who is willing to comply with the corporate Ri htof 
 
 regulations respecting the transfer of shares, may purchaser 
 
 to a trans- 
 maintain an action in equity against the corporation fer; to 
 
 to compel it to transfer the shares to him. 3 Or, on ama s es - 
 
 the surrender and transfer of a 
 former certificate were prerequisites 
 to the lawful issue of a new one, and 
 having accepted a certificate that she 
 owned stock, without taking any 
 steps to assure herself that the legal 
 prerequisites to the validity of her 
 certificate, which were to be fulfilled 
 by the former owner and not by the 
 bank, had been complied with, she 
 does not, as against the bank, stand 
 in the position of one who receives a 
 certificate of stock from the proper 
 officers without notice of any facts 
 impeaching its validity." Moores v. 
 Citizens' National Bank, 111 U. S. 
 156, 164, opinion of court per Gray, J. 
 Ace. Farrington v. South Boston R. 
 R. Co., 150 Mass. 406. 
 
 Salisbury Mills v. Townsend, 109 
 Mass. 115; Lowry v. Commercial, 
 etc., Bank, Taney's Dec. 310; Ameri- 
 can Wire Nail Co. v. Bayless, 91 Ky. 
 94. See Western Maryland R. R. 
 Co. o. Franklin Bank, 60 Md. 36; 
 Souder v. Columbia Nat. Bk., 156 
 Pa. St. 374. But see Shropshire 
 Union R'y Co. v. The Queen, L. R. 
 7 H. L. 496. A stock certificate is 
 transferable by a blank indorsement 
 which the holder may fill up by 
 writing an assignment and power 
 
 of attorney above it. Kortright v. 
 Buffalo Commercial Bank, 20 Wend. 
 91; Leavitt v. Fisher, 4 Duer (N. Y.), 
 1. But see Dunn v. Commercial 
 Bank, 11 Barb. 580. Compare Shaw 
 v. Spencer, 100 Mass. 382. A power 
 of attorney executed in blank is au- 
 thority to the holder to fill up the 
 blank and demand a transfer. Ger- 
 man Un. B'ld'g Ass'n v. Sendmeyer, 
 50 Pa. St. 67. 
 
 2 Holbrook ». New Jersey Zinc 
 Co., 57 N. Y. 616; Tome v. Parkers- 
 burg Branch R. R. Co., 39 Md. 36; 
 Shaw v. Port Philip, etc., M'g Co., 
 13 Q. B. Div. 103. See Western 
 Maryland R. R. Co. v. Franklin Bank, 
 60 Md. 36. Compare Mechanics' 
 Bank v. New York and N. H. R. R. 
 Co., 13 N. Y. 599; Central R. R. Co. 
 o. Ward, 37 Ga. 515; Kisterbock's 
 Appeal, 127 Pa. St. 601; Northwood 
 Union Shoe Co. v. Pray, 67 N. H. 435; 
 see § 591. 
 
 3 Driscoll r. West Bradley, etc., 
 M'fg Co., 59 N. Y. 96; Cushman v. 
 Thayer M'fg Co., 76 N. Y. 365; 
 Hill n. Rockingham Bank, 44 N. H. 
 567; Dayton Nat. Bk. v. Merchants' 
 Nat. Bk., 37 Ohio St. 208; Sibley v. 
 Quinsigamond Nat. Bk., 133 Mass. 
 515; Iron R. R. Co. v. Fink, 41 Ohio 
 
 603
 
 § 599.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 the refusal of the corporation to make the transfer, he may sue it 
 for damages, 1 and as damages recover the market value of the 
 shares at the time of its refusal. 2 If, however, the relief de- 
 manded is in the alternative for specific performance or for 
 damages, a judgment for damages is improper unless it appears 
 that the corporation is unable to deliver the shares or similar 
 ones. 3 And when a person whom a corporation refuses to 
 recognize as a shareholder, elects to treat such refusal as a 
 conversion of the shares and sues for damages in trover, he 
 can maintain no action for dividends declared after the com- 
 mencement of his suit. 4 The great preponderance of authority 
 
 St. 321. And a corporation, or an 
 organization like one, cannot refuse 
 a transfer on the ground that the 
 person asking to become a share- 
 holder is hostile to the corporation. 
 Rice v. Rockefeller, 134 N. Y. 174. 
 (At least if a recovery of damages 
 for a refusal to transfer would be 
 inadequate.) See Towusend v. Mc- 
 Iver, 2 S. C. 25. The corporation 
 and the person in whose name the 
 shares stand are always necessary 
 parties to a suit to compel a transfer. 
 St. Louis & S. F. Ry. Co. v. Wilson, 
 114 U. S. 60. A bill in equity to 
 compel a transfer of shares on the 
 books of a corporation does not lie 
 when by statute plaintiff's title is 
 complete without a transfer. Lip- 
 pett v. American Wood Paper Co., 
 14 R. I. 301. 
 
 1 Kortright v. Buffalo Com. Bk., 
 20 Wend. 91; S. C, 22 Wend. 348; 
 Bk. of Attica v. Manuf'rs Bk., 20 N. 
 Y. 505; De Coineau v. Guild Farm 
 Oil Co., 3 Daly, 218; N. Amer. Bldg. 
 Ass'n v. Sutton, 35 Pa. St. 463; Ger- 
 man Union Bldg. Ass'n v. Sendmeyer, 
 50 Pa. St. 67; Helm v. Swiggett, 12 
 Ind. 194; Galbraith v. Bldg. Ass'n, 
 43 N. J. L. 389; Durham v. Monu- 
 mental Silver Mfg. Co., 9 Oreg. 41; 
 State v. Rombauer, 46 Mo. 155 ; Balti- 
 
 604 
 
 more City Pass. Ry. Co. v. Sewell, 35 
 Md. 238; Protection Life Ins. Co. v. 
 Osgood, 93 111. 69; Case v. Bank, 100 
 U. S. 446. See Arnold v. Suffolk 
 Bank, 27 Barb. 424. An improper 
 refusal of a corporation to transfer 
 shares is a conversion. Ralston v. 
 Bk., 112 Cal. 208, and cases above 
 cited. 
 
 2 German Union Building Ass'n v. 
 Sendmeyer, 50 Pa. St. 67; Van Die- 
 men's Land Co. v. Cockerell, 1 C. B. 
 N. S. 732; Cattle Co. v. Barns, 82 
 Tex. 50. See West Branch, etc., 
 Canal Co.'s Appeal, *81 Pa. St. 19. 
 Trover lies against a corporation for 
 the conversion by it of shares of its 
 stock belonging to plaintiff. Budd v. 
 Street Ry. Co., 12 Oreg. 271. The 
 measure of damages when the con- 
 version is not fraudulent is the high- 
 est value of shares between the time 
 of conversion and a reasonable time 
 after the owner has received notice 
 of it. Galigher v. Jones, 129 U. S. 
 193; Wright v. Bk. of Metropolis, 
 110 N. Y. 237; Citizens' St. R. R. Co. 
 v. Robbins, 144 Ind. 671. 
 
 3 Otter v. Brevoort Petroleum Co., 
 50 Barb. 247. 
 
 4 Hughes v. Vermont Copper M'g 
 Co., 72 N, Y. 207.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 601. 
 
 is that mandamus will not lie to compel a corporation to trans- 
 fer shares. 1 
 
 § 600. A corporation has no implied lien on its shares for 
 calls or other debts owing it from shareholders, and LieQ 
 consequently no implied right to refuse to register a corporation 
 transfer because the transferrer is indebted to it. 2 It shares. 
 has been held, however, that a shareholder in a bank 
 who borrows money of it with full notice of its usage not to 
 permit a transfer of shares while the holder is indebted to 
 it, is bound by such usage, and neither he nor his assignees 
 under a voluntary general assignment can maintain an action 
 against the bank for refusing to permit a transfer under such 
 circumstances. 3 
 
 § 601. As to whether a corporation has the implied power to 
 pass a by-law giving itself a lien on its shares for the holders' 
 indebtedness to it, the authorities conflict. A number of 
 decisions hold it competent for a corporation to pass such a 
 
 i The King v. Bk. of England, 2 
 Dougl. 524; Ex pa rte Fireman's Ins. 
 Co., 6 Hill, 243; Galbraitk p. Bldg. 
 Ass'n, 43 N. J. L. 389; State v. 
 Rombauer, 46 Mo. 155; Baker v. 
 Marshall, 15 Minn. 177; Townes v. 
 Nichols, 73 Me. 515; Freon v. Car- 
 riage Co., 42 Ohio St. 30; State v. 
 Carpenter, 51 Ohio St. 83. 
 
 Contra, Green Mount, etc., T'pk 
 Co. v. Bulla, 45 Ind. 1; Burnsville 
 T'pk Co. v. State, 119 Ind. 382. Per- 
 haps a mandamus might be sustained 
 if the plaintiff's right to the shares 
 ■were clear, and it appeared that he 
 ■would be injured unless lie were al- 
 lotted the very shares demanded. 
 Durham v. Monu. Silver M'g Co., 9 
 Oreg. 41; Townes v. Nichols, 73 Me. 
 515. In State v. Cheraw, etc., R. R. 
 Co., 16 S. C. 524, mandamus was 
 granted to compel a railroad com- 
 pany to issue shares of preferred 
 stock to a county. 
 
 2 Steamship Dock Co. v. Heron's 
 Admr'x, 52 Pa. St. 280; Driscoll v. 
 
 W. Bradley, etc., Mfg. Co., 59 N. Y. 
 96; Mobile Mut. Ins. Co. v. Cullum, 
 49 Ala. 558; Farmers', etc., Bk. v. 
 Wasson, 48 Iowa, 336; Gemmell v. 
 Davis, 75 Md. 546; Dearborn v. Wash- 
 ington Sav. B'k, 18 Wash. 8; Wil- 
 liams v. Lowe, 4 Neb. 382, 398, and 
 cases in following notes. A share- 
 holder in a bank died insolvent and 
 indebted to the bank. After his 
 death the bank went into liquidation 
 and asserted a right to retain the 
 decedent's pro rata share of its as- 
 sets on account of his indebtedness. 
 But it was held that the bank, hav- 
 ing no lien by its charter, could not 
 hold the money as against the ad- 
 ministrator of the decedent's estate, 
 who claimed it for distribution 
 among decedent's creditors. Mer- 
 chants' Bank v. Shouse, 102 Pa. St. 
 488. 
 
 3 Morgan v. Bank of North Amer- 
 ica, 8 S. & R. ( Pa. ) 73. See, also, 
 Vausands v. Middlesex County 
 Bank, 26 Conn. 144. 
 
 605
 
 § 002.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 by-law, 1 and the preponderance of authority is certainly to the 
 effect that a general power possessed by a corporation to regu- 
 late the transfer of its shares authorizes it to create by a by-law 
 a lien on them in its own favor. 2 But even this last proposi- 
 tion has been disapproved ; 8 and many cases strenuously deny 
 any implied power in a corporation to pass a by-law which 
 creates a lien on its shares, or in any material way interferes 
 with their transferability. 4 But in order to decide some of the 
 cases where the opinion of the court in terms denies the power 
 of a corporation to pass a by-law of this character, it was only 
 necessary to hold (what these cases also hold with perfect 
 justice on their side, and little or no authorit}^ against them), 
 that the rights of a person purchasing shares without actual 
 notice of such a by-law are not affected by it. 5 
 
 § 602. It may also be held contrary to public policy to allow 
 certain corporations to acquire a lien on their shares. Thus, a 
 national bank organized under the act of 186i, cannot even by 
 provisions in its articles of association and by-laws, acquire a 
 lien on its own shares for debts owing it from shareholders ; 
 
 
 1 Child ». Hudson's Bay Co., 2 P. 
 Wms. 207; In re Bachman, 12 Nat- 
 B'k'y Reg. 223; Tiittle v. Walton, 1 
 Ga. 43 ; Gever 15. Insurance Co., 3 
 Pittsburgh, 41. See Brent v. Bank 
 of Washington, 10 Pet. 596, 616 ; 
 Costello v. Brewing Co., 69 N. H. 405. 
 
 2 Lockwood v. Mechanics 1 Nat. 
 B'k, 9 R. I. 308; Pendergast v. Bank 
 of Stockton, 2 Sawyer, 108 ; Cun- 
 ningham v. Alabama Life Ins Co., 
 4 Ala. 652; Geyer 15. Ins. Co., 3 Pitts- 
 burgh, 41; Graflin County 15. Wood- 
 side, 87 Md. 146. 
 
 3 See Driscoll 15. West Bradley, 
 etc., M'f'g Co., 59 N. Y. 90; Chou- 
 teau Spring Co. 15. Harris, 20 Mo. 
 382; Moore 15. Bank of Commerce, 
 52 Mo. 377. 
 
 4 Mobile Mutual Insurance Com- 
 pany 15. Cnllum, 49 Alabama, 558; 
 Bank r. Durfee, 118 Missouri, 431; 
 Driscoll 15. West Bradley, etc., M'f'g 
 Co., supra ; Bank of Attica v. Manu- 
 
 606 
 
 facturers 1 Bank, 20 N. Y. 505; Byron 
 15. Carter, 22 La. Ann. 98; People v. 
 Crockett, 9 Cal. 112; Moore v. Bank 
 of Commerce, 52 Mo. 377; Farmers', 
 etc., Bank v. Wasson, 48 Iowa, 336. 
 See Steamship Dock Co. 15. Heron's 
 Administratrix, 52 Pa. St. 280; Nes- 
 mith v. Washington Bank, 6 Pick. 
 324; Weston's Case, L. R. 4 Ch. 20; 
 Robinson 15. Chartered Bank, L. R. 1 
 Eq. 32; Anglo California Bank 15. 
 Granger's Bank, 63 Cal. 359. Com- 
 pare Walker's Case, L. R. 2 Eq. 554. 
 5 Farmers', etc., Bank v. Wasson, 
 48 Iowa, 536; Driscoll v. West Brad- 
 ley, etc., M'f'g Co., 59 N. Y. 96; 
 Bank of Attica v. Manufacturers' 
 Bank, 20 N. Y. 505; Bank of Holly 
 Springs 15. Pinson, 58 Miss. 421. See 
 People 15. Crockett, 9 Cal. 112. For 
 the general rule is that outsiders are 
 not affected with notice of the by- 
 laws of a corporation. See §§196, 
 197.
 
 CHAP. IX. J CORPORATION AND SHAREHOLDERS. 
 
 [§ 604. 
 
 as that would be against the spirit and policy of the act. 1 
 But a national bank may have a right to hold a cash dividend 
 as pledged for a debt owing it from a shareholder. 2 
 
 § 603. When by statute a corporation has a lien on its 
 shares for debts owing it from shareholders, its lien 
 is binding as to shareholders, their creditors and ij en ec 
 assignees in insolvency, and also as to persons who 
 purchase shares from prior holders 3 or take them as collateral 
 security ; 4 and every purchaser of a certificate is affected with 
 notice of the lien. 5 Accordingly, if a corporation has a statu- 
 tory lien on its shares for unpaid subscriptions, it may refuse 
 a certificate to a purchaser for value from a prior holder until 
 the subscription due on the shares purchased is paid. Under 
 such circumstances the purchaser acquires as against the cor- 
 poration only the rights of the prior holder. 6 
 
 § 604. Unless expressly restricted to a certain class of debts, 
 a statutory lien covers all debts owing from the 
 shareholder to the corporation. 7 A provision in the s ' cope ' 
 articles of a bank that the shares of its stock should not be 
 transferable until the shareholder should discharge all debts 
 
 1 Bullard v. Bank, 18 Wall. 589; 
 Buffalo Germ. Ins. Co. v. Third Nat. 
 B'k, 162 N. Y. 171; Delaware, L. & 
 W. R. R. Co. v. Oxford Iron Co., 38 
 N. J. Eq. 340. But see Young v. 
 Vougb, 23 N. J. Eq. 325. Compare 
 Bank v. Lanier, 11 Wall. 369; Conk- 
 lin v. Second Nat. B'k, 45 N. Y. 655. 
 
 2 Hager v. Union Nat. Bank, 63 
 Me. 509. A corporation may set 
 off a debt due from a shareholder 
 against his right to a dividend, but 
 not as against the assignee (a 
 pledgee) of the shares, if the divi- 
 dend is declared after the assign- 
 ment. Gemmell v. Davis, 75 Md. 
 546. 
 
 3 Union Bank v. Laird, 2 Wheaton, 
 390; McCready v. Rumsey, 6 Duer 
 (N. Y.), 574; Tuttle v. Walton, 1 
 Ga. 43. See Dobbins v. Walton, 37 
 Ga. 614. Compare St. Louis Per- 
 
 petual Ins. Co. v. Goodfellow, 9 Mo. 
 149; Bryon v. Carter, 22 La. Ann. 98. 
 
 4 Mount Holly Paper Co.'s Appeal, 
 99 Pa. St. 513; Piatt e. Birmingham 
 Axle Co., 41 Conn. 255; Bradford 
 Banking Co. v. Briggs, 31 Ch. Div. 
 19. Such a lien, given by statute, 
 will be recognized and given effect 
 to in another state. Bishop v. Globe 
 Co., 135 Mass. 132. 
 
 5 Hammond v. Hastings, 134 U. S. 
 401. The same holds when the lien 
 is given by the charter (i. e. by a 
 special statute), Kenton Ins. Co. v. 
 Bowman, 84 Ky. 430. 
 
 6 McCready v. Rumsey, 6 Duer, 
 574. See, also, Spurlock v. Pacific 
 Railroad, 61 Mo. 319; cf. Dorr v. 
 Life Ins. CI. Co., 71 Minn. 38. 
 
 7 Mobile Mut. Ins. Co. v. Cullom, 
 49 Ala. 558. See Schmidt v. Hen- 
 nepin, etc., Co., 35 Minn. 511. But 
 see Boyd v. Redd, 120 N. C. 335. 
 
 607
 
 § 606.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 due by him to the bank, includes liabilities not yet matured, 
 and creates a valid lien as against an assignee of the shares, 
 who takes with notice while the shareholder is under a contin- 
 gent liability as indorser, and does not inform the bank of his 
 claim until after the indorsees liability has become fixed. 1 
 And when a bank has a lien on its shares for all indebtedness 
 of the shareholder, its lien covers not only the indebtedness of 
 the legal holder, but also of a subsequent transferee whose 
 title has not yet been perfected, but who has become the 
 equitable owner. 2 
 
 § 605. After a bank, which has, by its charter, a lien on its 
 shares, has applied the proceeds arising from a sale of shares 
 to the satisfaction of a debt due from the holder, it will be 
 postponed until the general creditors of the holder shall have 
 been made equal out of his other estate, the residue of which 
 will thereupon be distributed pro rata? 
 
 § 606. By issuing a new certificate to a transferee of shares 
 in which certificate is expressly stated that the 
 Waiver of snares are transferable after the liabilities of 
 the holder to the bank are discharged, a bank 
 waives any lien it may have had for the debts of the prior 
 holder. 4 But when a bank has a lien by its charter, it does not 
 waive its lien by using stock certificates (on their face trans- 
 ferable only on the books of the bank) which make no mention 
 of the lien ; for a person purchasing or lending money on the 
 security of the shares is affected with notice of the lien/' AVhen 
 a bank releases its lien for a specified time, and within that time 
 the shares are pledged for a debt, the right of the bank after 
 the expiration of the time to re-acquire its lien is subordinate 
 to the right of the pledgee, until the debt for which the shares 
 were pledged is paid, or the pledge released. 6 
 
 1 Leggett v. Bank of Sing Sing, 24 
 N. Y. 283. Compare Eahn r. Bank 
 
 of St. Joseph, 70 Mo. 262; Bank of 
 K'y r. Bonnie Bros., 102 Ky. 343; 
 Battey v. Eureka Bank, 02 Kas. 384. 
 
 2 Planters', etc., Mut. Ins. Co. v. 
 Selma Savings Bank, 63 Ala. 585. 
 
 3 German Security Bank r. Jeffer- 
 son, 10 Hush (Ky.), 326. Compare 
 
 608 
 
 Petersburg Savings, etc., Co. v. Lums- 
 den, 75 Va. 327. 
 
 4 Hill v. Pine K'r Bk., 45 N. II. 300. 
 
 6 Bohmer v. City Bank, 77 Va. 445. 
 
 6 Bank of Amer. v. McNeil, 10 Bush 
 (Ky. ), 54. When a corporation is 
 affected with notice of a pledge of 
 shares it cannot enforce its lien for a 
 debt to itself subsequently arising.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 607. 
 
 § 607. In another case a bank charter contained the follow- 
 ing provision : k ' The stock of the bank shall be assignable and 
 transferable on the books of the corporation only, and in the 
 presence of the president or cashier, in such manner as the by- 
 laws shall ordain ; but no stockholder indebted to the bank for 
 a debt actually due and unpaid shall be authorized to make a 
 transfer or receive a dividend until such debt is discharged, or 
 security to the satisfaction of the directors given for the 
 same.'" A., a shareholder indebted to the bank, delivered his 
 stock certificate with power of sale to B. as collateral security 
 for a debt. On default of payment, B. sent the certificate to 
 the cashier, who made the requisite entries on the stock- 
 ledger, where it was his practice to keep account of transfers 
 without consulting in each case the directors, who had adopted 
 no by-law regulating the matter. The cashier then sold a por- 
 tion of the shares for B. on B.'s power of attorney, having told 
 B. that he needed no certificate. Subsequently A. became 
 insolvent, being indebted to the bank. It was held that as 
 between A. and B. the title to the shares passed by A.'s 
 delivery of the certificate ; also, that the acts of the cashier 
 were binding on the bank, and the transfer made by him on the 
 stock-ledger vested in B. a complete and unincumbered title 
 to the shares with a right to the usual certificate; and it was 
 further held that even if B. had acquired merely an equity 
 based on an executory contract for a transfer, the right of the 
 bank to assert its lien was lost by its laches, and the enforce- 
 ment of its lien would have operated as a fraud. 1 
 
 Birmingham T. & S. Co. v. Louisiana 
 Nat. Bk., 99 Ala. 380. See, also, 
 Loan & Trust Co. v. Bank, 97 Iowa, 
 6G8. A clause in a charter that no 
 shareholder shall sell his shares 
 without giving the corporation ten 
 days' refusal of them, applies only 
 to voluntary sales ; and does not 
 affect the rights of a purchaser at a 
 sheriffs sale on an execution. Bar- 
 rows i\ National Rubber Co., 12 R. I. 
 173. A railroad company issued 
 conditional stock certificates, for 
 which ordinary stock certificates 
 were to be exchanged when the 
 
 39 
 
 notes given to secure the payment 
 of the subscription were paid. It 
 negotiated these notes, and after- 
 wards issued unconditional certifi- 
 cates to the original subscribers, 
 who were the makers of the notes. 
 The makers failed to pay the notes, 
 and the company was held liable to 
 pay the judgments recovered by the 
 holders against the makers, to the 
 extent of the value of the uncon- 
 ditional certificates. Houston, etc., 
 Ry. Co. i). Bremond, 66 Tex. 159. 
 
 1 National Bank o. Watsontown 
 Bank, 105 U. S. 217. 
 
 609
 
 § 608.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 Rights of 
 share- 
 holders in 
 respect of 
 winding 
 up. 
 
 § 608. Although it would seem that there is no method by 
 which a shareholder can, against the will of the ma- 
 jority, force the corporation to continue its opera- 
 tions, a shareholder has important rights respecting 
 the manner of discontinuing the business and winding 
 up the corporate affairs. 1 On the dissolution of a 
 corporation, as by expiration of its charter, any shareholder 
 ordinarily may insist that its assets shall be turned into 
 money ; 2 and where a statute provides a way for winding up a 
 company or reducing its capital stock, the company cannot in 
 a way unauthorized by the statute, against the will of a dis- 
 sentient shareholder, purchase its own shares with a view to 
 dividing its assets ; and in such a case a clause in the articles 
 of association, that the shares of any shareholder who begins 
 directly or indirectly a suit against the company or the 
 directors, shall be forfeited on payment to him of their full 
 market value, cannot avail the company. 3 It has also been 
 held that the directors and a majority of shareholders cannot 
 sell out the entire property of a solvent and paying railroad 
 company against the consent of a minority. 4 And a railroad 
 
 1 But a subscriber who has never 
 paid anything on his shares, and 
 whose shares have been forfeited, 
 has no standi ng as a shareholder to 
 object to the disposition made of 
 corporate funds on dissolution. St. 
 Louis, etc., Coal, etc., Co. v. Sando- 
 val Coal, etc., Co., 116 111. 170. 
 
 2 Mason v. Pewabic M'g Co., 133 
 U. S. 50. 
 
 8 Hope v. International Financial 
 Society, L. 11. 4 Ch. Div. 327. 
 
 4 Kean v. Johnson, 9 N. J. Eq. 
 401. See People v. Ballard, 134 
 N. Y. 269; Morris v. Ely ton Land 
 Co., 125 Ala. 263; Plant v. Macon Oil 
 & Ice Co., 103 Ga. 666; Forresters 
 B. & M. Min. Co., 21 Mont. 544. 
 But see Waldoborough v. Railroad 
 Co., 84 Me. 469. 
 
 The owners of a majority of shares 
 
 of a corporation under the form of 
 
 dissolving it and disposing of its 
 
 property and distributing the pro- 
 
 610 
 
 ceeds, became the purchasers of such 
 property at an unfair price, through 
 a new corporation, in which they 
 were shareholders, to the exclusion 
 of the minority shareholders in the 
 old corporation. In a suit in ecpiity 
 by the latter against the new corpo- 
 ration, it was held that plaiutiffs had 
 a lien, to the extent of the moneys 
 of which they had been deprived by 
 the sale, on the property of the old 
 corporation in the hands of the new. 
 Ervin v. Oregon Ry., etc., Co., 23 
 Blatchf. 517. The court followed 
 the idea that when a majority com- 
 bine, they constitute themselves the 
 corporation, and so are bound to ex- 
 ercise their powers with due regard 
 to the interests of the minority. 
 See, also, Meeker v. Winthrop Iron 
 Co., 17 Fed. Rep. 48; cf. Phillips v. 
 Providence S. E. Co., 21 R. I. 302; 
 Bartholomew v. Derby Rubber Co., 
 69 Conn. 521.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. 
 
 [§ 610. 
 
 company has no authority to sell, or lease in perpetuum, all 
 its property and business to another corporation, and compel a 
 dissenting shareholder to accept stock in the other company, 
 or a fixed and arbitrary price per share of its own stock. 1 
 
 § 609. Nevertheless, if under the authority of the board of 
 directors, whose action is ratified by the holders of all the stock 
 represented at a shareholders' meeting, a conveyance is made 
 of the total assets of a corporation in payment of its sole debt, 
 the conveyance will be valid as against other shareholders, 
 when there is no fraud and a continuance of the business' would 
 have been ruinous. 2 
 
 § 610. The majority of shareholders, moreover, acting as the 
 body corporate, may, when the rights of the state power of 
 do not prevent, dissolve the corporation and wind ^soi"*/- of 
 up its affairs. 3 Likewise it is held competent for minority, 
 the shareholders by a by-law adopted at their first meeting 
 to limit the term of the corporate existence. 4 But a minority 
 cannot compel a dissolution unless there exist more substantial 
 reasons against the further prosecution of the corporate enter- 
 prise ; 5 nor has the minority, in the absence of fraud or wrong- 
 
 1 Boston & Prov. R. R. Co. v. New 
 York & N. E. R. R. Co., 13 R. I. 260; 
 Mason v. Pewabic M'g Co., 25 Fed. 
 Rep. 882; Byrue v. Schuyler, etc., 
 Co., 65 Conn. 336. See, also, Froth- 
 ingham v. Barney, 6 Hun, 366; Tay- 
 lor v. Earle, 8 Hun, 1; Lauman c. 
 Lebanon Valley R. R. Co., 30 Pa. St. 
 42; In re Empire Assur. Co., Ex 
 parte Bagsbaw, L. R. 4 Eq. 341; 
 Clinch v. Financial Co., L. R. 4 Ch. 
 117; McCurdy v. Myers, 44 Pa. St. 
 535. Compare Buford v. Keokuk 
 Nortbern Packet Co., 3 Mo. App. 
 159. But see Sawyer v. Dubuque 
 Printing Co., 77 Iowa, 242. 
 
 2 Hancock v. Hoi brook, 9 Fed. 
 Rep. 353. See, also, Buford v. Keo- 
 kuk Northern Packet Co., 3 Mo. 
 App. 159; Sheldon Hat Blocking, 
 Co. v. Eickemeyer Hat Blocking, 
 etc., Co., 90 N. V. 607. 
 
 3 Treadwell r. Salisbury M'f'g Co., 
 7 Gray, 393; Lauman v. Lebanon 
 
 Valley R. R. Co., 30 Pa. St. 42; 
 Merchants,' etc., Line v. Wagner, 71 
 Ala. 581; Trisconi v. Winship, 43 
 La. Ann. 45; Berry v. Broach, 65 
 Miss. 450; Skinner v. Smith, 134 N. 
 Y. 240. See Webster v. Turner, 12 
 Hun, 264; Ervin v. Oreg. Ry., etc., 
 Co., 23 Blatchf. 517; Price v. Hol- 
 comb, 89 Iowa, 123; Pringle v. Elt- 
 iugham Cons. Co., 49 La. Ann. 301. 
 In regard to national banks the stat- 
 ute (U. S. Rev. St., § 5220) provides 
 that they may go into liquidation 
 and be closed by a vote of the share- 
 holders owning two-thirds of the 
 stock. 
 
 4 Merchants,' etc., Line v. Wagner, 
 71 Ala. 581. 
 
 5 See Matter of Pyrolusite Man- 
 ganese Co., 29 Hun, 429; O'Connor 
 v. Hotel Co., 93 Tenu. 708, in which 
 demurrer to complaint was over- 
 ruled. It has been held that an in- 
 solvent corporation may be dissolved 
 
 611
 
 § 611.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. 
 
 doing on the part of the directors, an absolute right to have a 
 receiver of the corporate property appointed, although the 
 corporation be utterly insolvent ; this last being discretionary 
 with the court. 1 Thus, it is no ground for dissolving a manu- 
 facturing corporation on the petition of shareholders — a ma- 
 jority in number though a minority in interest — that a person 
 owning a majority of stock has for many years controlled the 
 election of officers and elected himself agent ; and that he 
 has for a long time " managed the affairs of said corporation 
 according to his own will and choice, regardless of the wishes 
 and interests of the other stockholders ; " that, according to 
 his statement, the corporation had been doing a losing business, 
 that he refuses to purchase the shares of complainants, and 
 that if the affairs of the corporation were properly managed 
 the business might be a source of profit to all. 2 
 
 § 611. Independent of statute, moreover, a court of equity 
 Jurisdic- h as no power to dissolve a corporation and divide its 
 equity. property at the suit of a shareholder, 3 or remove 
 corporate officers. 4 Under statutes in some of the states, how- 
 ever, an information in the nature of a quo warranto may be 
 filed at the relation of a shareholder against an illegally exist- 
 
 at. the suit of a shareholder. Masters 
 v. Eclectic Life Ins. Co., 6 Daly. 455. 
 But see Deuike v. New York, etc., 
 Lime Co., 80 N. Y. 599; Hardon v. 
 Newton, 14 Blatchf. 376. 
 
 1 Denike v. New York, etc., Lime 
 Co., 80 N. Y. 599. See Hardon v. 
 Newton, 14 Blatchf. 376. 
 
 a Pratt v. Jewett, 9 Gray, 34. See, 
 also, Burnham v. S. F. Fuse Mfg. Co., 
 76 Cal. 24. 
 
 3 Strong v. McCagg, 55 Wis. 624; 
 Bayless v. Orne, 1 Freem. Ch. (Miss.) 
 161; Howe v. Deuel, 43 Barb. 504; 
 Belmont i\ Erie Ry. Co., 52 Barb. 
 637; Waterbury v. Merchants' Un. 
 Exp. Co., 50 Barb. 157; Fountain 
 F'ry Tr'npk Co. v. Jewell, 8 B. Mon. 
 (Ky.) 140; Morrows v. Edwards, 
 20 Dist. Col. 475; Coquard v. Nat. 
 L. O. Co., 171 111. 480. See Gibson 
 v. Thornton, 107 Ga. 545; Oldham v. 
 612 
 
 Mt. Sterling Imp. Co., 103 Ky. 529. 
 Compare Baker v. Backus, 32 111. 79; 
 Terhune v. Midland R. R. Co., 38 N. 
 J. Eq. 423; Baker v. Louisiana Port- 
 able R. R. Co., 34 La. Ann. 754. 
 Compare Hitch i\ Hawley, 132 N. Y. 
 212. It has recently been held that 
 a court of equity, when a shareholder 
 is aggrieved by oppressive and fraud- 
 ulent action of the officers and 
 holders of a majority of shares, may, 
 in entertaining his suit for relief, if 
 carrying on the business is impracti- 
 cable, proceed and appoint a receiver 
 and wind up the corporation. Miner 
 v. Ice Co., 93 Mich. 97. Compare 
 Benedict v. Columbus Cons. Co., 
 49 N. J. L. 23; Ulmer v. Maine R. E. 
 Co., 93 Me. 324. 
 
 * Neall v. Hill, 16 Cal. 146. See 
 §581.
 
 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 611. 
 
 ing corporation to compel a dissolution. And, 1 finally, a court 
 has power, on the application of a shareholder, to open or 
 vacate a judgment dissolving a corporation, although the share- 
 holder was not a party to the action instituted by the attorney- 
 general, when it is shown the court that there is reasonable 
 ground to believe that there was fraud or collusion in obtaining 
 the judgment operating to the injury of the shareholder. 2 
 
 i See Albeit v. State, 65 Ind. 413. i 2 People v. Hectograph Co., 10 
 
 I Abb. N. C. (N. Y.)358. 
 
 613
 
 § 612.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 CHAPTER X. 
 
 LEGAL RELATIONS BETWEEN THE CORPORATION AND 
 ITS OFFICERS. 
 
 Fiduciary position of corporate offi- 
 cers, §§ 612, 613. 
 
 Liability to pay for qualification 
 shares, § 614. 
 
 Directors' duties enforceable by the 
 corporation or its receiver. Join- 
 der, § 615. 
 
 Liability of directors for fraud, 
 neglect of duty, and acts in viola- 
 tion of by-laws, § 616. 
 
 Ordinary care required, §§ 617- 
 619. 
 
 Directors not liable for errors of 
 judgment, §§ 620, 621. 
 
 Liability for ultra vires acts. §§ 622, 
 623. 
 
 Liability of directors for the acts of 
 other corporate agents, §§ 624-626. 
 
 Corporate officers should not place 
 their interests in opposition to 
 those of the corporation, § 627. 
 
 They cannot contract with them- 
 selves, § 628. 
 
 Secret profits, § 629. 
 
 Transactions fraudulent as a matter 
 of law, § 630. 
 
 Remedies of the corporation, § 631. 
 
 Loans by directors to the corpora- 
 tion, §§ 632-634. 
 
 Invalidity of transactions in which 
 officers are interested, §§ 635-637. 
 
 Railroad construction companies, §§ 
 638, 639. 
 
 Transactions in which officers act 
 for two adversely interested cor- 
 porations, §§ 640-643. 
 
 Common boards of directors, § 644. 
 
 Directors' authority; their right to 
 indemnification, § 645. 
 
 Compensation of directors and other 
 agents, §§ 646-648. 
 
 Removal of officers, §§ 649, 650. 
 
 § 612. Directors and other corporate officers and agents 
 Fiduciary occupy towards the corporation which they repre- 
 corporate* sent Potions of trust and confidence, and owe to it 
 officers. the duties which persons occupying such positions 
 ordinarily owe to their cestuis que trustent. 1 And the duties 
 
 1 See Wardell v. Railroad Co., 103 
 U. S. 651 ; Wickersham v. Crittenden, 
 93 Cal. 17; Lagarde v. Anniston L. 
 & S. Co., 126 Ala. 496; Morgan v. 
 King, 27 Colo. 539. This can hardly 
 apply when the directors are the 
 only shareholders. See e. g. Higgins 
 v. Lansingh, 154 111. 332; Manufac- 
 turing Co. v. Peabody, 21 N. Y. App. 
 247. Thus directors issued the en- 
 tire stock of a corporation to them- 
 
 614 
 
 selves in payment for property trans- 
 ferred to the corporation, and then 
 sold the stock to innocent outsiders. 
 The issue of the stock was such as 
 was authorized by statute, and the 
 directors at the time of the issue 
 were the only shareholders. It was 
 held that the proceeding could give 
 no cause of action to the corporation. 
 Foster v. Seymour, 23 Blatchf. 107. 
 See, also, Schilling v. Schneider, 110
 
 CHAP. X.J CORPORATION AND OFFICERS. [§ 613. 
 
 of corporate officers — at least directors — are more compli- 
 cated than those of ordinary agents of individuals. Pri- 
 marily they are accountable for the proper performance of their 
 duties to the corporation or body corporate as such. But it 
 must be remembered that the body corporate not only repre- 
 sents the interests of all the shareholders, but is also bound to 
 regard the interests of the creditors of the corporation, whom 
 in a certain sense it also represents ; and the directors, of 
 course, are affected with knowledge of the fact that the powers 
 of the body corporate must be exercised with due regard to 
 the interests of all persons in any way interested in the corpo- 
 rate enterprise. 
 
 § 613, The powers of directors are either given them directly 
 by the constitution of the corporation, or delegated to them 
 by the majority of shareholders. 1 It would seem, accordingly, 
 that those powers which directors receive directly from the 
 constitution must be exercised with due regard for the interests 
 of all persons entitled to rely on its provisions, and that the 
 powers which directors receive by vote of a majority of share- 
 holders must also be exercised with due regard for the interests 
 of all, because that majority was bound to exercise its powers 
 for the interests of all, and, therefore, only in the interests of 
 all could it delegate power to others. Accordingly, the direct- 
 ors cannot act with blind devotion for the interests of the 
 majority of shareholders, 2 or even of all the shareholders, 3 
 but must regard at the same time the interests of creditors. 4 
 And the truth of this is not affected by the fact that ordinarily 
 in the first instance directors are accountable for the abuse of 
 their powers only to the body corporate ; because, as before 
 
 Mo. 83; Barr v. N. Y., L. E. & W. 
 R. R. Co., 125 N. Y. 263. Compare 
 Metropolitan Elevated R. R. Co. v. 
 Manhattan Elevated R. R. Co., 11 
 Daly (N. Y. ), 373, 516. Since direct- 
 ors are trustees for the corporation, 
 as under an express trust, the statute 
 of limitations does not run against 
 the demands of its receiver for mis- 
 appropriation of moneys. Ellis v. 
 Ward, 137 111. 509; Masonic, etc., 
 Life Ass'n Co. v. Sharpe [1892], 1 Ch. 
 154. See § 626, note. 
 
 1 See §§ 219 et seq. 
 
 2 See Goodin v. Cincinnati, etc., 
 Canal Co., 18 Ohio St. 169, § 559. 
 
 3 Certain corporate funds, i. e., 
 those properly applicable to the 
 payment of dividends, may be man- 
 aged exclusively in the interests 
 of shareholders or paid over to 
 them, and the creditors have no 
 ground to complain. See § 750. 
 
 4 See §§ 756 et seq. 
 
 615
 
 § til4.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 pointed out, it is to this body as representing all the interests 
 in the corporate enterprise that they are accountable, and if 
 this body Tails to enforce the rights of all persons against the 
 directors, the persons injured may themselves take action to 
 bring the directors to account. 1 
 
 To such an extent may the duties of directors become com- 
 plicated by the divergency in interest of the different persons 
 to whom the} r owe duties, that it may often be difficult for 
 them to discriminate properly, and, by giving due and propor- 
 tionate consideration to the rights of all persons, keep them- 
 selves free from liability. It is only by acting always in 
 accordance with the corporate constitution, where that appears 
 silent using a sound and honest discretion, and in all cases of 
 difficulty taking the advice of counsel, that directors may keep 
 themselves free from liability and carry out the trusts imposed 
 upon them. 
 
 § 014-. By accepting the office of director a person impliedly 
 undertakes to discharge its duties, and assumes the 
 pay for ° liabilities attached to it. Accordingly, where by the 
 tionltoares constitution of the corporation, the ownership of a 
 certain number of shares is a condition precedent to 
 eligibility as a director, anyone accepting the office and acting 
 therein is liable to pay for the requisite number of shares. 2 A 
 person, however, who has merely accepted the office of director, 
 but has not acted as one, and without laches has retracted his 
 acceptance on the ground of misrepresentations made to him by 
 the promoters, will not be held liable as contributory on the 
 qualification shares, if as a matter of fact he has never taken 
 them ; for the acceptance of the office of director merely im- 
 
 1 See §§ 686, 687, 757, 758. 
 
 2 Fowler's Case, L. R. 14 Eq. 316; 
 Leeke's Case, L. 1!. 6 Ch. 469; Har- 
 vard's Case, L. R. 13 Eq. 30; Sidney's 
 Case, L. R. 13 Eq. 228; Miller's Case, 
 3 Ch. D. 661. Compare Do Ruvigne's 
 Case, 5 Ch. D.306; Printing, etc., Co., 
 in re, L. R. Ch. Div. 1894, vol. ii. 
 392. 
 
 There is no general rule of law 
 making the holding of shares an in- 
 dispensable qualification to the office 
 
 616 
 
 of director. State v. McDaniel, 22 
 Ohio St. 354; Wight v. Springfield & 
 New Lond. R. R. Co., 117 Mass. 226; 
 In re Election of St. Lawrence Steam- 
 boat Co., 44 N. J. L. 529; Florida's 
 Savings Bk. v. Rivers, 36 Fla. 575; 
 Bristol, etc., Trust Co. v. Jonesboro, 
 etc., Trust Co., 101 Tenn. 545. The 
 Civil Code requires it in California. 
 Rosecrans Gold Mining Co. v. Morey, 
 111 Cal. 114. And in Oregon, Silsby 
 v. Strang, 38 Or. 36.
 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 616. 
 
 Directors' 
 duties en- 
 forceable 
 by the cor- 
 poration or 
 its receiver. 
 Joinder. 
 
 plies an agreement to take the requisite number of shares 
 within a reasonable time after assuming the office. 1 A director, 
 moreover, is not bound to take the shares directly from the 
 company, but may acquire them by purchase or gift from some 
 prior holder. 2 
 
 § 615. Directors' duties are ordinarily enforceable in the 
 name of the corporation ; 3 as it is only after failure 
 or neglect on the part of the corporation to enforce 
 the rights which it represents that the creditors or 
 shareholders may themselves proceed to enforce such 
 rights as pertain to them respectively. A receiver, 
 however, or an assignee of the corporation has all the rights 
 and capacities of action possessed by the corporation against its 
 officers. 4 And in suits against them for damages arising from 
 their negligent or wrongful acts or omissions all the guilty 
 officers may be joined, or any one of them may be sued sepa- 
 rately. 5 
 
 § 616. In brief, then, the duties of directors and other officers 
 towards the corporation are to act for the furtherance 
 
 ... , » . , . , . Liability of 
 
 or the complex mass or interests which it possesses directors 
 
 or represents, and to do no act infringing the rights of n ^i e ct of 
 
 the possessors of any of those interests ; these duties aetsmvio- 
 
 include all the duties considered in their correlations , lati , on of 
 
 by-laws. 
 
 and due proportions owed by the directors to any of 
 the classes of persons interested in the corporate enterprise. 
 For the consequences of a breach of this trust on their part, 
 the officers are liable in damages ; and first of all, for any fraud 
 or unfair dealing towards the corporation ; fi then for gross 
 
 i Karuth's Case, L. R. 20 Eq. 506. 
 See Hewitts Case, 25 Ch. Div. 283. 
 
 2 State ». Leete, 16 Nev. 242; 
 Dent's & Forbe's Case, L. R. 8 Ch. 
 768; Brown's Case, L. R. 9 Ch. 102. 
 See Chapman's Case, L. R. 2 Eq. 
 567; Austin's Case, L. R. 2 Eq. 435; 
 Jenner's Case, 7 Ch. D. 132. See, 
 also, § 578. But see In re Carriage 
 Co-operative Supply Ass'n, 27 Ch. 
 Div. 323. 
 
 3 Hersey v. Veazie, 24 Me. 9; Smith 
 v. Hurd, 12 Mete. 371. 
 
 4 Hun v. Carey, 82 New York, 65; 
 
 Mason v. Henry, 152 New York, 529; 
 Shultz o. Christman, 6 Mo. App. 338; 
 Austin v. Daniels, 4 Den. (New York) 
 299. 
 
 s Hun v. Cary, 82 N. Y. 65. 
 
 6 First Nat. Bk. v. Reed, 36 Mich. 
 263. See Shultz v. Christman, ti Mo. 
 App. 338; Metropolitan El. Ry. Co. 
 v. Kneeland, 120 X. Y. 134; Cores v. 
 Day, 99 Wis. 276. If a treasurer 
 misappropriates funds of his corpo- 
 ration and lends them to a third 
 person, an action of contract brought 
 by the corporation against tlie bor- 
 
 617
 
 § 617.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 Ordinary- 
 care re- 
 quired. 
 
 negligence in attending to the corporate affairs, or gross mis- 
 management whereby the corporate assets are wasted ; x for 
 any acts in violation of the by-laws that occasion loss to the 
 corporation ; 2 and for acts forbidden by statute which occasion 
 loss, though the statute impose no penalty. 3 
 
 §<il7. "The first question to be considered is the measure 
 of fidelity, care, and diligence which such trustees 
 [trustees of a savings bank] owe to such a bank and 
 its depositors. The relation existing between the 
 corporation and its trustees is mainly that of principal and 
 agent, and the relation between the trustees and the depos- 
 itors is similar to that of trustee and cestui que trust. The 
 trustees are bound to observe the limits placed upon their 
 powers in the charter, and if they transcend such limits and 
 cause damage, they incur liability. If they act fraudulently, 
 or do a wilful wrong, it is not doubted that they may be held 
 for all the damage they cause to the bank or its depositors. 
 But if they act in good faith, within the limits of powers con- 
 ferred, using proper prudence and diligence, they are not 
 responsible for mere mistakes or errors of judgment. That the 
 trustees of such corporations are bound to use some diligence 
 in the discharge of their duties cannot be disputed. All the 
 authorities hold so. What decree of care and diligence are 
 
 rower is not a ratification of the 
 treasurer's unauthorized act, and 
 does not discharge him from his lia- 
 bility to the corporation. Goodyear 
 Dental Vulcanite Co. v. Caduc, 144 
 Mass. 85. 
 
 1 Austin v. Daniels, 4 Den. (N. Y. ) 
 299; Citizens' Loan Ass'n v. Lyon, 
 29 N. J. Eq. 110. See Merchants 1 
 Bank v. Jeffries, 21 W. Va. 504; Nix 
 v. Miller, 26 Colo. 203; Bank v. Hill, 
 148 Mo. 380; Warren v. Robinson, 19 
 Utah, 289. 
 
 2 Citizens 1 Building Ass'n v. 
 Coriell, 34 N. J. Eq. 383; Williams 
 v. Riley, 34 N. J. Eq. 398; Oakland 
 Bank v. Wilcox, 60 Cal. 126. An 
 officer, e. g., a cashier, is not liable 
 
 618 
 
 to the corporation for acts done in 
 good faith, but in violation of a by- 
 law, when the board of directors, 
 who have power to make by-laws 
 and prescribe his duties, practically 
 disregard the by-law which he has 
 violated, and render his observance 
 of it impossible. Thus, where a by- 
 law provided that the cashier should 
 consult a committee of directors in 
 making discounts, he is not liable 
 for neglecting to consult such com- 
 mittee when, with the acquiescence 
 of the board of directors, it holds no 
 meetings. Second National Bank v. 
 Burt, 93 N. Y. 233. 
 
 3 Thompson v. Greeley, 107 Mo. 
 577; Thompson u. Swain, ib. 594.
 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 618. 
 
 they bound to exercise ? l Not the highest degree, not such 
 as an extremely vigilant and very careful person would exer- 
 cise. ... It would not be proper to answer the question by 
 saying the lowest degree. . . . When one deposits money in 
 a savings bank, or takes stock in a corporation, thus divest- 
 ing himself of the immediate control of his property, he has 
 the right to expect that the trustees or directors, who are 
 chosen to take his place in the management and control of his 
 property, will exercise ordinary care and prudence in the trusts 
 committed to them — the same degree of care and prudence 
 that men prompted by self-interest generally exercise in their 
 own affairs. When one voluntarily takes the position of 
 trustee or director of a corporation, good faith, exact justice, 
 and public policy unite in requiring of him such a degree of 
 care and prudence, and it is a gross breach of duty — crassa 
 negligentia—not to bestow them." 2 
 
 § 618. Like directors, other corporate officers and agents are 
 bound to observe the utmost good faith towards the corpora- 
 tion ; and, perhaps, may be held to even a stricter performance 
 of their duties ; for agents and officers, other than directors, 
 usually receive salaries, and are supposed to devote a greater 
 portion of their time to the service of the corporation ; 3 and, 
 generally, all agents and servants of a corporation are bound 
 to act with care and diligence, and, while engaged in the per- 
 
 1 Not keeping property of the cor- 
 poration insured is not per se negli- 
 gence on the part of directors: the 
 complaint in such a case should 
 allege facts showing that the direct- 
 ors violated their duty in not keep- 
 ing it insured. Charleston Boot, 
 etc., Co. v. Dansmore, 60 N. H. 85. 
 
 2 Hun v. C'ary, 82 N. Y. 65, 70. 
 Opinion of the court per Earl, J. 
 See Citizens 1 Building Ass'n v. Cori- 
 ell, 34 N. J. Eq. 383. Directors are 
 liable only for gross negligence, 
 Jones v. Johnson, 86 Ky. 530, 
 which is absence of that diligence 
 which ordinarily prudent business 
 
 men would have exercised in their 
 business. Savings Bk. v. Caperton, 
 87 Ky. 306. 
 
 3 Commercial Bank v. Ten Eyck, 
 48 N. Y. 305; Austin v. Daniels, 4 
 Den. (N. Y.) 299; East N. Y., etc., 
 R. R. Co. o. Elmore, 5 Hun, 214; 
 Pangborn v. Citizens' Building Ass'n, 
 35 N. J. Eq. 341; First Nat. B'k v. 
 Reed, 36 Mich. 263. For disobeying 
 an order of court regarding invest- 
 ment of funds of a savings bank, its 
 president may be punished for con- 
 tempt, though the bank suffer no 
 loss. Una v. Dodd, 39 N. J. Eq. 
 173. 
 
 619
 
 § 619.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 formanoe of their functions, to act wholly and entirely in its 
 interests. 1 
 
 § 619. An admirable exposition of the liability of directors 
 to the corporation for neglect of their duties is contained in a 
 case decided by the greatest of England's chancellors as long 
 ago as the year 1742. The facts of Charitable Corporation v. 
 Sutton 2 were briefly as follows: The committee-men (direct- 
 ors), into whose hands the general charge of the corporate 
 affairs had been confided, had been guilty either of positive 
 frauds and breaches of trust, or of gross negligence. The 
 corporation had been formed for the purpose of lending on 
 pledges, and, in contravention of its rules or by-laws, its affairs 
 and the whole power and discretion of lending were left in 
 charge of one or two persons in such a way as to afford them 
 abundant opportunity to defraud the corporation, of which 
 opportunity they took every advantage. 
 
 In his opinion, Lord Hardwicke said : 3 " The grounds upon 
 which the plaintiffs found their relief against the committee- 
 men are these : 1. That they have been guilty of manifest 
 breaches of trust, or, at least, of such supine and gross negli- 
 gence of their duty, and so often repeated, that it will amount 
 to a breach of trust. These are great and important questions. 
 It will be proper to state what are the actual breaches of trust: 
 1st. Passing of notes, etc. 2dly. Signing notes for loans 
 upon pledges, called renewal pledges, though they knew at 
 the same time that the money originally lent was not paid. 
 3dly. Signing notes of John Thompson, warehouse-keeper. 
 4thly. Taking off all checks upon him, etc. 5thly. Making 
 
 1 A railroad company had a rule 
 that persons not buying tickets be- 
 fore entering sliould pay ten cents 
 extra. A conductor did not collect 
 this extra fare, but received the or- 
 dinary fare, bought tickets himself, 
 and punched and gave them in, con- 
 cealing the facts. It was held that 
 this did not constitute a payment, 
 and that the railroad company could, 
 notwithstanding, recover the fares 
 collected by him in assumpsit as 
 money had and received. Concord 
 
 620 
 
 R. R. Co. v. Clough, 49 N. H. 257. 
 Compare Taylor v. Taylor, 74 Me. 
 582. The cashier of a bank, though 
 authorized to loan its funds with or 
 without security, is liable for money 
 loaned without security to au indi- 
 vidual, and not entered up for sev- 
 eral years; such loan being evidently 
 concealed from the trustees. San 
 Joaquin Valley Bank v. Bours, 65 
 Cal. 247. 
 
 2 2 Atkyns, 400. 
 
 8 2 Atkyns, 403 et seq.
 
 CHAP. X.] CORPORATION AND OFFICERS. [§ 619. 
 
 several orders to put it in the power of Thompson, Wooley, 
 and Warren to commit those frauds. 
 
 " As to the three first, they are actual breaches of trust, and 
 the committee-men are clearly guilty who have been concerned 
 in them. The by-law prescribes that when notes were to be 
 issued by the cashier, they should be signed by one of the com- 
 mittee-men, and intended as a check upon the warehouse-keeper 
 and cashier. Now several notes have been issued without ob- 
 serving this rule, which is an express contravention of the by- 
 law. . . . As to the third breach of trust, the committee-men's 
 behavior with regard to Thompson, their warehouse-keeper. It 
 is such a notorious fraud, or at least gross inattention to suffer 
 him, who was to set a value upon all the pledges, to borrow 
 money upon them himself, that I shall direct those who shall 
 appear to be guilty of it, to make good the loss. 
 
 "As to the fourth and fifth breach of trust, the taking off 
 all checks upon Thompson, and making several orders to put 
 it in the power of Thompson, Wooley, and Warren to commit 
 those frauds. These are not so clearly breaches of trust, though 
 at the same time they appear to me to have tended greatly to 
 the loss and prejudice of the corporation. But whether they 
 are criminal will be the question. Now I think the persons 
 present are only liable who issued out the orders, which invested 
 Thompson, Wooley, and Warren with such powers. 
 
 " But then another head of charge has been made under the 
 crassa ncgl'ujentia, which has been divided into these several 
 branches : 1st. The committee-men's non-attendance upon 
 their employment ; 2dly. Their not observing the by-law of 
 laying the balance of cash regularly before them ; 3dly. Not 
 taking any notice of forfeited pledges ; 4thly. Never once in- 
 specting the warehouse to see what number of real pledges 
 were there ; 5thly. Putting the whole power into the hands 
 of Thompson, Wooley, and Warren. Now from all these an 
 accumulated charge is made against the whole body of direct- 
 ors or committee-men. Consider first the foundation of this 
 general charge. . . . Committee-men are most properly 
 agents of those who employ them in this trust, and who em- 
 power them to direct and superintend the affairs of the corpo- 
 ration. In this respect they may be guilty of acts of com- 
 mission or omission, of malfeasance or non-feasance. Vide 
 
 G:il
 
 § *519.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 Domat's Civil Law upon this head (2 B. Tit. 3, §§ 1 and 2). 
 Now where acts are executed within their authority, as repeal- 
 ing by-laws and making orders, in such cases, though attended 
 with bad consequences, it will be very difficult to determine 
 that these are breaches of trust. For it is by no means just 
 in a judge, after bad consequences have arisen from such exe- 
 cutions of their power, to say that they foresaw at the time 
 what must necessarily happen ; and, therefore, were guilty 
 of a breach of trust. 
 
 "Next as to malfeasance and non-feasance. For instance, 
 in non-attendance, if some persons are guilty of gross non- 
 attendance, and leave the management entirely to others, they 
 may be guilty by this means of the breaches of trust that are 
 committed by others. By accepting of a trust of this sort a 
 person is obliged to execute it with fidelity and reasonable 
 diligence ; and it is no excuse to say that they had no benefit 
 from it, but that it was merely honorary; and, therefore, they 
 are within the case of a common trust. 1 
 
 " Another objection has been made, that the court can make 
 no decree upon these persons which will be just ; for it is said 
 every man's non-attendance or omission of his duty is his own 
 default, and that each particular person must bear such a pro- 
 portion as is suitable to the loss arising from his particular 
 neglect, which makes it a case out of the power of this court. 
 Now, if this doctrine should prevail, it is, indeed, laying the 
 axe at the foot of the tree. But, if upon inquiry before the 
 master, there should appear to be a supine negligence in all of 
 them, by which a gross complicated loss happens, I will never 
 determine that they are not all guilty. Nor will I ever deter- 
 mine that a court of equity cannot lay hold of every breach 
 of trust, let the person be guilty of it either in a private or 
 public capacity. The tribunals of this kingdom are wisely 
 formed, both of courts of law and equity, and so are the tribu- 
 nals of most other nations ; and for this reason there can be 
 no inquiry but there must be a remedy in all or some of them ; 
 and therefore I will never determine that frauds of this kind 
 are out of the reach of courts of law or equity, for an intoler- 
 able grievance would follow from such a determination. In 
 
 1 Citing Coggs v. Bernard, 1 Salk. 26. 
 
 622
 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 621. 
 
 the present case one thing is clear [those who were engaged 
 in the confederacy to divert the funds of the corporation], are 
 certainly liable to make good the losses which the corporation 
 have sustained in the first place, and the committee-men who 
 were not partners in this affair are liable in the second place 
 only. Therefore, in the present case, I am of opinion, if there 
 is no evidence, to charge the committee-men of being privy to 
 the original design, yet they will be guilty in the second 
 degree, by conniving at the affair, and not making use of 
 the proper power invested in them by the charter, in order 
 to prevent the ill consequences arising from such a confed- 
 eracy." i 
 
 § 620. Directors acting in good faith are not liable, in the 
 absence of gross negligence, for doing what they Directors 
 have been authorized to do, even though it was ? ot liable 
 
 ' ° for errors 
 
 imprudent; 2 nor for errors in judgment in matters ofjudg- 
 within the scope of their discretion, even when the 
 errors seem palpable, and such as men of ordinary prudence 
 would not have committed. 3 They ordinarily receive no 
 salary, 4 are required to exercise only reasonable care and pru- 
 dence, and cannot be presumed to devote all their time to the 
 service of the company; 5 and under any circumstances, in the 
 absence of negligence, to hold them liable for the consequences 
 of mere errors of judgment would add an undue hardship to 
 the already onerous responsibilities of their position. 
 
 § 621. The circumstances of a Tennessee case are of interest. 
 
 1 See, also, Briggsr. Spaulding, 141 
 U. S. 132; North Hudson B'ld'g 
 Ass'n v. Childs, 82 Wis. 460; Henry 
 v. Jackson, 37 Vt. 431; Wilkinson 
 v. Dodd, 40 N. J. Eq. 123; aff'd 41 
 N. J. Eq. 566; Williams v. McKay, 
 40 N. J. Eq. 189; Deaderick v. Bank, 
 100 Tenn. 457; Utley v. Hill, 155 Mo. 
 232; Warren v. Robinson, 19 Utah, 
 289. 
 
 2 Overend v. Gurney, L. R. 4 Ch. 
 701; S. C, sub nom. Overend and 
 Gurney Co. ». Gibb, L. R. 5 H. L. 
 480. See International, etc., R. R. 
 Co. v. Bremond, 53 Tex. 96. Direct- 
 ors of a savings bank are not lia- 
 
 ble for not requiring the president 
 to furnish a bond, when the charter 
 leaves this to their discretion. Wil- 
 liams v. Halliard, 38 N. J. Eq. 373. 
 
 3 Spering 1 s Appeal, 71 Pa. St. 11; 
 Godbold v. Branch Bank of Mobile, 
 11 Ala. 191; Citizens' Building Ass'n 
 ». Coriell, 35 N. J. Eq. 383; Hun v. 
 Cary, 82 N. Y. 65, §617; Charita- 
 ble Corporation v. Sutton, supra ; 
 Excelsior Petroleum Co. v. Lacey, 63 
 N. Y. 422; Vance v. Phoenix Ins. 
 Co., 4 Lea (Tenn.), 385. 
 
 4 See § 646. 
 
 5 Percy v. Millardon, 8 Mart. N. S. 
 (La.) 68. 
 
 623
 
 § 622.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 The by-laws of a corporation provided that the directors should 
 elect a secretary, whose terra of office should be twelve months, 
 or until his successor was elected ; and provided further that 
 the secretary should give a bond with sureties for the faithful 
 performance of his duties. The board elected a secretaiw, took 
 the prescribed bond, and afterwards re-elected the same person 
 for the two following years, but took no new bond, deciding 
 without legal advice and erroneously, though after a discussion 
 of the matter, that the bond already taken was a continuing 
 security. In the third year the secretary became a defaulter, 
 and it was held that the directors having acted in good faith 
 were not liable to make good the loss. 1 
 
 § 622. If, however, directors do an act even honestly, which 
 is clearly beyond their powers, or ultra vires the cor- 
 poration, they will be liable to the corporation for 
 any damages resulting. 2 As Baron Lindley says : 
 " Directors are responsible for the loss of the company's assets 
 if that loss is attributable to the employment of the assets in a 
 manner and for purposes not warranted by the constitution." 1 
 Thus, a director of a savings bank, who acts with its president 
 in making a loan on security palpably worth less than double 
 
 Liability 
 for ultra 
 
 vires acts. 
 
 1 Vance v. Phoenix Ins. Co., 4 Lea 
 (Tenn.), 385. 
 
 - As where directors without au- 
 thority return deposits to subscrib- 
 ers; Williams v. P;ige, 25 Beav. 654; 
 or cancel subscriptions irregularly 
 and purchase shares (in England) in 
 the stock of the corporation with 
 corporate funds. Hodgkinson v. 
 National Live Stock Ins. Co., 26 
 Beav. 473; Joint Stock Discount Co. 
 v. Brown, L. R. 3 Eq. 139; S. C, L. 
 R. 8 Eq. 381; or, against the pro- 
 visions of the statute allot shares to 
 infants. In re Crenver, etc., M'g 
 Co., Ex parte Wilson, L. R. 8 Ch. 45. 
 See Lester v. Howard Bank, 33 Md. 
 558. Trustees of a savings bank are 
 liable to the receiver for dividends 
 paid by them which were not earned. 
 
 624 
 
 Van Dyck o. McQuade, 45 N. Y. 
 Super. Ct. 620; 2 Lindley on Part., 
 794; Evans v. Coventry, 8DeC, M. 
 & G. 835; see the decree, clause 4. 
 But see Excelsior Petroleum Co. v. 
 Lacy, 63 N. Y. 422. Compare Tur- 
 quand v. Marshall, L. R. 4 Ch. 376; 
 Stringer's Case, L. R. 4 Ch. 475; 
 Ranee's Case, L. R. 6 Ch. 104. It is 
 competent for a corporation to re- 
 lease a director from its claims 
 against him on account of an ultra 
 vires act of his done on its behalf. 
 Pneumatic Gas Co. v. Berry, 113 U. 
 S. 322. See Holmes v. Willard, 125 
 N. Y. 75. 
 
 3 2 Lindley on Part., 592. Com- 
 pare Pickering v. Stephenson, L. R. 
 14 Eq. 322, 342.
 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 623 « 
 
 the amount of the loan, and so violates a provision in the 
 charter of the bank, will be liable for any loss. 1 
 
 § 623. But it has been held that when the powers of direct- 
 ors are uncertain or difficult to ascertain, and they act honestly 
 under the advice of counsel, they will not be personally liable, 
 even though their acts be afterwards declared beyond their au- 
 thority and ultra vires? " In regard to whether the defendants 
 [directors] should be held responsible for any of their acts and 
 investments as ultra vires, it might be sufficient to notice the 
 fact that the charter of this corporation was a very compli- 
 cated one, made up by comparing together no less than sixteen 
 acts of incorporation or supplements. ... To have mistaken 
 the extent of their powers under such circumstances would not 
 have been matter of surprise even in the most timid and 
 cautious. We may adopt on this point the language of Green, 
 C. J., in Hodges v. New England Screw Co., 1 R. I. 312 : ' In 
 considering the question of the personal responsibility of the 
 directors we shall assume that they violated the charter of the 
 Screw Company. The question then will be, Was such viola- 
 tion the result of mistake as to their powers, and if so, did 
 they fall into the mistake from want of proper care, such care 
 as a man of ordinary prudence practices in his own affairs? 
 For if the mistake be such as with proper care might have 
 been avoided, they ought to be liable. If, on the other hand, 
 the mistake be such as the directors might well make, notwith- 
 standing the exercise of proper care, and if they acted in good 
 faith and for the benefit of the Screw Company, they ought not 
 to be liable.' We may say in this case, conceding that the 
 directors did violate the charter, it Avas a question upon which 
 with all due care they might have made an honest mistake ; 
 and moreover, it appears by the evidence and is so reported, 
 that they acted throughout by the advice of their counsel. It 
 is well settled that trustees will be protected from responsibil- 
 ity under such circumstances." 3 
 
 Still, it may be suggested that as to transactions within the 
 
 i Williams v. McDonald, 42 N. J. 
 Eq. 392. 
 
 2 Spering's Appeal, 71 Pa. St. 
 11; Hodges v. New England Screw 
 Co., 1 R. I. 312; S. C, 3 It. I. 9. 
 
 40 
 
 Compare Williams v. McDonald, 37 
 N. J. Eq. 409. 
 
 3 Spering's Appeal, 71 Pa. St. 11; 
 opinion of the court per Sharswood, 
 C. J. 
 
 625
 
 § 624.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 directors 
 for the acts 
 of other 
 corporate 
 agents. 
 
 powers of the corporation, but possibly beyond the powers of 
 the directors, directors may act in safety by procuring before- 
 hand the consent of a majority of shareholders in a corporate 
 meeting; and that as to acts which are ultra vires, it may be 
 unwise to permit directors in a great corporation to shield 
 themselves from responsibility behind even the most "un- 
 purchasable opinions" of counsel. The maxim Ignorantia 
 leyis neminem excusat is one of the pillars of corporation 
 law. 1 
 
 § 624. As appears from Charitable Corporation v. Sutton, 2 
 Liability of if the directors improperly surrender duties, Avhich 
 they ought themselves to perform, into the hands of 
 one or more of their number, or into the hands of 
 other agents of the corporation, they may render 
 themselves liable for damages arising to the corporation from 
 such frauds and wrongful acts as the persons, into whose hands 
 they have improperly surrendered their duties, commit in the 
 performance of them. It is even conceivable that directors, 
 by improperly intrusting to any person discretionary powers 
 confided to them to be exercised only by themselves, might 
 make themselves liable for errors of discretion committed in 
 good faith by that person ; even for such errors as the directors 
 would not have been liable for had they themselves committed 
 them in the discharge of their duties. Moreover, if it is the 
 duty of directors to watch over the conduct of each other, and 
 of other agents and clerks of the corporation, and they grossly 
 neglect this duty, they will be liable for the damages arising 
 from wrongful acts which, had it not been for their neglect, 
 
 1 The English courts have re- 
 cently expressed themselves as to 
 these points as follows: Directors 
 are not to be held liable on the 
 strict rules applied to trustees in 
 the English Court of Chancery; for 
 they are not in the position of 
 trustees iu whose name property 
 stands, and who deal with it as 
 principal and owner, subject only to 
 account to some cestui que trust. If 
 directors apply funds of the cor- 
 
 626 
 
 poration to clearly ultra vires pur- 
 poses, they are liable; otherwise a 
 strong and clear case of misfeasance 
 must be made out. Faure Electric 
 Accumulator Co., In re, 40 Ch. D. 
 141; see Liverpool Household Stores 
 Ass'n, In re, 59 L. J. Ch. 616; Cul- 
 lerne v. London, etc., B'Id'g Soc, 25 
 Q. B. D. 485; Masonic, etc., Life 
 Ass'n Co. v. Sharpe [1892], 1 Ch. 154. 
 2 § 619.
 
 CHAP. X.] CORPORATION AND OFFICERS. [§ 626. 
 
 the other directors and agents would have been unable to 
 commit. 1 
 
 § 625. On the other hand, if directors have been guilty of 
 no neglect of duty, the} 7 are not responsible for the wrongful 
 acts or omissions of other directors or officers of the corpora- 
 tion ; nor for the acts of inferior agents appointed by them- 
 selves ; provided, in the selection of the last, the} 7 have used 
 due care. Directors and other officers are responsible for the 
 performance of their own duties, and cannot be held liable for 
 wrongs which others have committed, unless the commission 
 of such wrongs is in some way due to an omission of duty on 
 their own part. 2 
 
 § 626. The following admirable statement of the liability of 
 directors for the acts of persons other than themselves is taken 
 from Baron Lindley's work on Partnership. 3 " The most diffi- 
 cult question which arises with reference to the liability of 
 directors is the extent to which each is liable for the acts of 
 the other. The following appear to be the principles applicable 
 to this subject : — 
 
 " 1. All those directors who are actually implicated in a breach 
 of trust by misapplying the company's money (even although 
 they only sign checks prepared by others) are jointly and sev- 
 erally liable for the losses arising therefrom. 4 
 
 " 2. Directors who know of and sanction such a breach of 
 trust are implicated in it within the meaning of this rule, al- 
 though they do not actively take part in it. 3 
 
 " 3. So are directors who know of the breach of trust, but 
 take no steps to prevent it, beyond writing a letter of disap- 
 proval. 6 
 
 ingly aids the cashier in abstracting 
 money from the bank, is liable there- 
 for to the bank, though he gets none 
 of the money himself. Hobart v. 
 Dovell, 38 N. J. Eq. 553. 
 
 :! 2 Lindley on Part., 595, 596. 
 
 4 Citing, Joint Stock Discount Co. 
 v. Brown, L. R. 8 Eq. 381; Laud 
 Credit Co. v. Fermoy, L. R. 5 Ch. 
 703. 
 
 5 Citing, "Land Credit Co. v. Fer- 
 moy. supra. 
 
 1 Horn Silver M'g Co. o. Ryan, 42 
 Minn. 196. 
 
 2 Batchelor o. Planters' Nat. Bk., 
 78 Ky. 435, 446; Williams v. Hal- 
 liard, 38 N. J. Eq. 373. In re Den- 
 ham & Co., 25 Ch. D. 752. See 
 Lewis v. Montgomery, 145 111. 30; 
 Savings Bank v. Caperton, 87 Ky. 
 306; Wallace o. Lincoln S'v'gs Bk., 
 89 Tcnu. 630. Unless their liability 
 is extended by statute; see, e. g., 
 Cons'n of California, 1879, art. xii. 
 § :'.. A receiving teller, who know- 1 G Citing, Joint Stock Discount Co. 
 
 627
 
 § 626.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 "4. Where the liability is to account for profits improperly 
 received by them, they are only severally liable for their own 
 receipts, and are not jointly and severally liable for each 
 other's receipts. 1 But it is submitted that their liability is 
 joint and several if there has been a joint receipt by them all, 
 and then a division amongst themselves of what they have all 
 received ; or if they have all been implicated in some joint 
 breach of trust resulting in profit to them all. 
 
 " 5. It has been decided that a director who is not cognizant 
 of a breach of trust committed by his co-directors and who 
 takes no part in it is not liable for it. 2 This point, however, 
 involves the question whether a director is not bound to make 
 himself acquainted with what his co-directors are doing, and 
 to take such steps as may be in his power to prevent them from 
 doing wrong. On this question opinions differ, and it can 
 scarcely be considered as settled. If, indeed (as often hap- 
 pens), the constitution of the company is such as to justify a 
 director in leaving certain matters to his co-directors, or some 
 of them, he is justified in trusting them with such matters, 
 and is not responsible for breaches of trust committed by them 
 and concealed from him. But in other cases his irresponsibility 
 is by no means so clear. 
 
 " 6. Nor, it seems, is a director liable for breaches of trust 
 committed by his co-directors before he became a director, but 
 afterwards discovered by him. In this case the new director's 
 liability, if any, can only be for the loss sustained by the com- 
 pany by reason of his omission to make kuown what he has 
 
 
 v. Brown, supra. The statute of 
 limitations runs against any liability 
 of directors for the wrongful acts of 
 other directors and officers, from 
 the time of the commission of the 
 wrongful acts. Spering's Appeal, 
 71 Pa. St. 11, 25; Williams v. Hal- 
 liard, 38 N. J. Eq. 373. See Link v. 
 McLeod, 194 Pa. St. 566, holding that 
 where directors are charged with 
 having made an unlawful payment 
 pursuant to an unlawful resolution 
 the statute runs from the date of the 
 resolution. See § 012, note. 
 
 1 Citing, Parker v. McKenna, L. R. 
 
 628 
 
 10Ch. 96; General Exchange Bank 
 v. Horner, L. R. 9 Eq. 480. If one 
 or more directors improperly dis- 
 pose of corporate funds, they are re- 
 sponsible individually; but to affect 
 them with joint responsibility, it 
 must appear that the act complained 
 of was done by the board or a 
 majority thereof. Franklin Ins. Co. 
 v. Jenkins, 3 Wend. 130. 
 
 2 Citing, Ashhurst v. Mason, L. R. 
 20 Eq. 225. Accord, Re Montrotier 
 Asphalte Co., Perry's Case, 34 L. T. 
 N. S. 716. 

 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 627. 
 
 discovered, and to compel the real delinquents to make good 
 their breach of trust ; and it is very questionable whether an 
 incoming director is liable in point of law for such omis- 
 sions." 
 
 § 627. It may be stated as a general rule that directors and 
 other corporate officers should do no acts that are „ 
 
 L Corporate 
 
 likely to render their personal interests antagonistic officers 
 
 to those of the corporation. 1 And when a corporate place their 
 
 officer finds his personal interests substantially op- ^'position 1 
 
 posed to those of the corporation, then, not only on *? those of 
 
 1 . the corpo- 
 
 account of the rights of the corporation and his ration, 
 duties to it, but also for the sake of his own security, the 
 plainest course for him is to resign. 2 For, under such circum- 
 stances, every step he takes may be subjected to the most 
 searching and harassing investigation at the instance of any 
 person interested in the corporate enterprise, and he will find 
 himself seriously hampered in the assertion of even his honest 
 rights, if such he happen to possess. Thus, for instance, it 
 has been held that directors of a railroad company cannot ac- 
 quire an interest in the profits of a contract for the construc- 
 tion of the road, that will give them a standing in a court of 
 equity to interpose an objection to the consummation of a com- 
 promise between the railroad company and its contractors. 3 In 
 
 iHill v. Frazier, 22 Pa. St. 320; 
 Goodin v. Cincinnati, etc., Canal Co., 
 18 Ohio St. 169; Attaway v. Nat. 
 Bk., 93 Mo. 485; Hemingway v. Hem- 
 ingway, 58 Conn. 443; §559, ante, 
 ch. 9; Brewster v. Stratman, 4 Mo. 
 App. 41; First Nat. Bk. v. Reed, 36 
 Mich. 263. See In re Imperial Land 
 Co., Ex parte Larking, 4 Ch. D. 566. 
 
 " Indeed it is not going too far to 
 say that every director of a company 
 is bound, when his personal interests 
 conflict with his duty to the share- 
 holders, to perform his duty toward 
 them at a sacrifice of his own inter- 
 ests; and a transaction in which a 
 director on behalf of his company has 
 in fact been dealing with himself 
 as an individual cannot stand." 2 
 Lindley on Part., 590; Aberdeen Ry. 
 
 Co. v. Blakie, 1 Macq. 461. The 
 president of a corporation, to whom 
 a bund has been delivered by the 
 board for sale, cannot convert such 
 bond to his own use in payment of a 
 claim due him from the corporation. 
 Gas Co. v. Reis, 54 Ohio St. 549. Cf. 
 Hall v. Goodnight, 138 Mo. 576. 
 
 2 See Goodin v. Cincinnati, etc., 
 Canal Co., supra. 
 
 3 Paine v. Lake Erie, etc., R. R. Co., 
 31 Ind. 283, 353. Compare Savings 
 Bank v. Wulfekuhler, 19 Kan. 60. 
 The president of a railroad company 
 who is authorized with two other di- 
 rectors to make a contract for the 
 construction of the road, cannot se- 
 cretly (at the time of contracting) 
 acquire rights in the contract which 
 he can enforce against the company; 
 
 629
 
 § ti'28.] THE LAW OF PRIVATE CORPORATIONS. [('HAP. \. 
 
 another instance, where on an execution sale against a corpora- 
 tion, a person who was both its treasurer and a shareholder 
 bought in land held by its trustees, it was held that his title 
 enured to the benelit of the corporation. 1 
 
 " The affairs of a corporation are generally intrusted to the 
 exclusive management and control of the board of directors ; 
 and there is an inherent obligation, implied in the acceptance 
 of such trust, not only that they will use their best efforts to 
 promote the interest of the shareholders, but that they will in 
 no manner use their positions to advance their own individual 
 interest, as distinguished from that of the corporation, or ac- 
 quire interests that may conflict with the fair and proper dis- 
 charge of their duty." - 
 
 § 628. A director or other corporate officer can on behalf of 
 his corporation make with himself no contract that will bind 
 the corporation ; ! nor any contract in which he is personally in- 
 
 and this, whether there beany fraud 
 in fact or not. Flint and P. M. R y 
 Co. v. Dewey, 14 Mich. 477. 
 
 1 McAllen v. Woodcock, 60 Mo. 
 174; see Brewster o. Stratman, t Mo. 
 App. 41. 
 
 But claims against a corporation 
 do not necessarily become extin- 
 guished on being purchased by its 
 agent. The corporation may there- 
 upon become indebted to him for 
 money expended in their purchase, 
 provided the purchase was not made 
 in violation of his duties or instruc- 
 tions. Sullivan r. Triunfo Mining 
 Co., 39 Cal. 459; Seeley v. San Jose" 
 Mill Co., 59 Cal. 22; Merrick r. Peru 
 Coal Co., 61 111. 472; Kitchen v. St. 
 Louis, etc., R'y Co., 69 Mo. 224. See 
 Pacific Railroad o. Ketchum, 101 
 U. S. 289; also § 033. Compare 
 Sandy River R. R. Co. o. Stubbs, 77 
 Me. 594. 
 
 2 Cumberland C'l, etc., Co. v. Par- 
 ish, 42 Md. 598, 605; see Sellers v. 
 Phoenix Iron Co., 13 Fed. Rep. 20; 
 Wickersham v. Crittenden, 93 Cal. 
 
 630 
 
 17; Shepaug Voting Trust Cases, 60 
 Conn. 553; Higgins t\ Lansingh, 154 
 111. 301; Cusick d. Bartlett, 91 Me. 
 153; Fort Payne Rolling Mill v. Hill. 
 174 Mass. 224; Center Crefk I. Co. r. 
 Lindsay, 21 Utah, 192. 
 
 a Guild v. Parker, 43 N. J. L. 430; 
 Port v. Russell, 36 Ind. 60; Coleman 
 o. Second Avenue R. R. Co., 3^ N. Y. 
 jni; First National Bank v. Gifford, 
 47 Iowa, 575; First National Bank 
 v. Drake, 29 Kansas, 311; Ex parte 
 Hill, 32 L. J. Eq. 154; see Butts v. 
 Wood, 37 N. Y. 317; Abbot v. Ameri- 
 can Hard Rubber Co., 33 Barb. 578; 
 Murray v. Vanderbilt, 39 Barb. 140; 
 Munson v. Syracuse, etc., Ry. Co., 29 
 Hun, 76; Winchester v. Baltimore, 
 etc., R. R. Co., 4 Md. 231. Compare 
 Palmer v. Nassau Bank, 78 Illinois, 
 380. But a single director can deal 
 with the rest of the board, when 
 they, and not he, represent the cor- 
 poration. Gamble v. Water Co., 122 
 N. Y. 91; Crymble v. Mulvaney, 21 
 Col. 203 ; cf . Warren v. Rubber Co., 
 166 Mass. 97. 

 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 629. 
 
 terested. 1 Accordingly, a resolution of the board of trustees 
 of a corporation carried by the casting vote of the ^ 
 
 1 J ° They can- 
 
 president ratifying an unauthorized act of his, in notcon- 
 which he was personally interested, is invalid. 2 And them- 
 a board of directors who have bartered away the se ves- 
 assets of the corporation for personal gain, cannot, by an act 
 purporting to be an acceptance for the company of an equiva- 
 lent for such assets, conclude the shareholders or a receiver 
 from showing that no equivalent was actually received. 3 
 
 § 629. Corporate officers may not buy from or sell to their 
 corporation and retain any profits from such trans- 
 actions, unless the profits are known and the trans- Sec ™t 
 
 1 _ profits. 
 
 actions acquiesced in by all who could claim any 
 interest in the profits. 4 For all secret profits derived by them 
 from any dealings in regard to the corporate enterprise they 
 must account to the corporation, 5 even though the transaction 
 may have benefited it. 6 
 
 1 European, etc., Railroad Co. v. 
 Poor, 59 Maine, 277; Blair Town Lot 
 Co. v. Walker, 50 Iowa, 376; Wicker- 
 sham v. Crittenden, 93 Cal. 17; Cur- 
 tin v. Salmon River, etc., Co., 130 
 Cal. 345; Smith v. Los Angeles Im. 
 Association, 78 Cal. 289. 
 
 2 Chamberlain v. Pac. Wool-Grow- 
 ing Co., 54 Cal. 103. See Davis v. 
 Rock Cr. L. F. & M. Co., 55 Cal. 359; 
 Bennett v. St. Louis Car Roofing Co., 
 19 Mo. App. 349; Ward v. Davidson, 
 89 Mo. 445. 
 
 3 Guild v. Parker, 43 N. J. L. 430. 
 See Rhodes v. Webb, 24 Minn. 292. 
 Resolutions passed by directors mak- 
 ing allowances in their favor and 
 auditing their own claims are void- 
 able by the corporation. Graves v. 
 Mono Lake Mfg. Co., 81 Cal. 303. 
 See Munson v. Magee, 161 N. Y. 182. 
 
 The presumption that directors 
 are acquainted with the affairs of 
 their bank, and that they have notice 
 of all the entries on its books, can- 
 not be relied on by a cashier seeking 
 to show a ratification of his wrong- 
 
 ful appropriation of the moneys of 
 the bank. First Nat. Bk. v. Drake, 
 29 Kan. 311. 
 
 4 See Imperial Mercantile Cred. 
 Ass'n v. Coleman, L. R. 6 H. L. 189. 
 Compare Barr v. Glass Co., 17 U. S. 
 App. 124. 
 
 5 European, etc., Ry. Co. v. Poor, 
 59 Me. 277; Parker v. Nickerson, 
 112 Mass. 195; McClure v. Law, 161 
 N. Y. 78; Bent v. Priest, 86 Mo. 475; 
 Ward v. Davidson, 89 Mo. 445; Perry 
 r. Tuscaloosa Co., 93 Ala. 364; San 
 Francisco Water Co. v. Pattee, 86 
 Cal. 623; Keokuk Packet Co. v. 
 Davidson, 95 Mo. 467; Hutchinson v. 
 Bidwell, 24 Oreg. 219; Electric Co. 
 v. Bates, 68 Vt. 579; Spaulding v. 
 North Milwaukee T. S. Co., 106 Wis. 
 481. Compare Hazard v. Durant, 14 
 R. I. 25. * 
 
 6 Bird Coal Co. v. Humes, 157 Pa. 
 St. 278; Bent v. Priest, 10 Mo. App. 
 543. An officer of a corporation may 
 act as trustee for bondholders under 
 a mortgage made by it. Ellis v. 
 Boston, etc., R. R. Co., 107 Mass. 1. 
 
 631
 
 § 629.] 
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 Thus, where the directors of a ferry company bought a steam- 
 boat in their individual capacity, and so owning it bought it of 
 themselves for the company at a large advance, it was held 
 that the transaction was fraudulent, and that their profits en- 
 ured to the benefit of the company, who might recover them 
 with interest. 1 In another case the treasurer of a bank had 
 received authority from it to sell certain of its property, which 
 he thereupon sold to himself and some of his brother officers 
 at the minimum price he was authorized to sell at; which was 
 far below the market value of the property. The bank was 
 allowed to recover of him the difference between the market 
 value and the price at which he had sold to himself. 2 And 
 when suit is brought against directors to compel them to ac- 
 count for the profits of transactions wherein they have acted 
 on behalf of the corporation, they cannot plead that the trans- 
 actions were ultra vires the corporation. 3 
 
 But in Ashuelot R. R. v. Elliot, 57 
 N. H. 397, the treasurer of a corpo- 
 ration, who was also trustee for 
 bondholders, was held to account to 
 the railroad company for profits 
 made by him while in possession as 
 trustee under the mortgage. 
 
 Directors caunot speculate with 
 corporate funds or credit and appro- 
 priate the profit. Redmond v. Dick- 
 erson, 9 N. J. Eq. 507. Directors of 
 a bank must give up to it all secret 
 profits received by them as a bonus 
 to obtain a loan from it. Farmers', 
 etc., Bank v. Downey, 53 Cal. 460. 
 See, also, York, etc., R. R. Co. v. 
 Hudson, 10 Beav. 485; Parker v. 
 McKenna, L. R. 10 Ch. 90; Dunston 
 v. Imperial Gas Co., 3 Barn. & Adol. 
 125; General Exchange Bank v. Hor- 
 ner, L. R. 9 Eq. 580; Gaskeil v. 
 Chambers, 26 Beav. 360; Madrid 
 Bank v. Pelly, L. R. 7 Eq. 442; Eden 
 c. Ridsdales Lamp Co., 23 Q. B. D. 
 368; Bland's Case [1893], 1 Ch. 012. 
 When in pursuance of a secret agree- 
 ment made with a promoter by a 
 person about to become a director 
 632 
 
 that the said promoter would buy 
 back said director's qualification 
 shares at par— the promoter does 
 buy them back at par when the 
 shares are valueless in the market, 
 the director will have to accouut to 
 the corporation for the money re- 
 ceived as secret profits. North Aus- 
 tralian Territory Co., In re [1892], 
 1 Ch. 322; 2 Lindley on Part., 588- 
 589. 
 
 1 Parker v. Nickerson, 112 Massa- 
 chusetts, 195. 
 
 2 Greenfield Savings Bank v. Si- 
 mons, 133 Mass. 415. 
 
 3 See Hill v. Nisbet, 100 Ind. 341. 
 Compare §§ 280-282, where it is 
 shown that even when affected with 
 no estoppel an outsider can take no 
 advantage of the fact that a given 
 transaction was ultra vires a corpo- 
 ration. Similarly it is only the cor- 
 poration, and its shareholders and 
 creditors, that can avail of the fact 
 that its officers were secretly inter- 
 ested in matters wherein they acted 
 for the corporation, or, as its agents, 
 dealt with themselves. In a recent
 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 630. 
 
 § 630. Transactions like the foregoing are fraudulent as a 
 matter of law, and no fraud or unfair dealing need „, 
 
 ' ... Transac- 
 
 be proved as matter of fact by the corporation in tions 
 order to set them aside, or compel the officers impli- a s a matter 
 cated to account for the profits they have made. 1 It of Iaw- 
 has been held that an express contract between directors and 
 the corporation is voidable at the option of the latter, acting 
 within a reasonable time ; and that no consideration of the 
 fairness of the contract will induce a court of law or equity 
 to enforce it against the resisting cestui que trust, though as to 
 others it may be valid. 2 But such contracts may be ratified 
 by the corporation either expressly, or by acquiescence for a 
 long period and the acceptance of the benefits of the trans- 
 actions : 3 provided the ratification or acquiescence on the part 
 of a corporation is free and voluntary, and not that of a man 
 whose hands are tied. 
 
 case in Iowa, trustees holding lands 
 in trust for a railroad company con- 
 veyed some of the lands, under au- 
 thority of the board of directors, to 
 be reconveyed to themselves in pay- 
 ment for their services. It was held 
 that a person claiming such lands 
 under a title adverse to that of the 
 railroad company could not dispute 
 the validity of this conveyance. 
 Miller v. Iowa Land Co., 50 Iowa, 
 374. 
 
 1 Stanley v. Luse, 36 Or. 25; Green- 
 field Savings Bank v. Simons, 133 
 Mass. 415; Bent v. Priest, 10 Mo. 
 A.pp. 543; Stewart v. Lehigh Valley 
 R. R. Co., 38 N. J. L. 505; Cook v. 
 Berlin Woollen Mill Co., 43 Wis. 
 433; Duncomb ». New York, H. & 
 N. R. R. Co., 84 N. Y. 190; Pearson 
 v. Concord R. R. Co., 62 N. H. 537; 
 Brewing Co. v. Planner, 44 La. Ann. 
 22; compare Davoue v. Fanning, 2 
 Johns. Ch. 252. Although there be 
 no actual fraud or unfairness, a cor- 
 poration may repudiate a contract 
 entered into by its board of directors, 
 when one of them is interested on 
 
 the other side, and the corporation 
 need not show that the influence of 
 such director determined the action 
 of the board. Munson v. Syracuse, 
 etc., R. R. Co., 103 N. Y. 58. See 
 Aberdeen Ry. Co. v. Blakie, 2 (H. L.) 
 Eq. 1281. 
 
 2 Stewart v. Lehigh Valley R. R. 
 Co., 38 N. J. L. 505. See, also, Little 
 Rock and Fort Smith R'y Co. v. 
 Page, 35 Ark. 304; Morgan v. King, 
 27 Colo. 539. A station agent bar- 
 gained with his company for an ex- 
 cursion train, not letting it be 
 known that he wanted it for himself. 
 Held, the company on discovering 
 this could disaffirm the contract. 
 Pegram v. Charlotte, etc., R. R. Co., 
 84 N. C. 696. 
 
 3 Kelley v. Newbury' pt Horse R. R., 
 141 Mass. 496; Twin-Lick Oil Co. v. 
 Marbury, 91 U. S. 587; Louisville, 
 etc., Railway Co. v. Carson, 151 111. 
 444, § 632; Town of Searcy v. Yar- 
 nell, 47 Ark. 269; Welch v. Import- 
 ers' Bank, 122 N. Y. 177; Battelle v. 
 Pavement Co., 37 Minn. 89. 
 
 633
 
 § 630.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 la Pacific Railroad of Missouri v. Missouri Paciiic Railway 
 Company, 1 a foreclosure was brought against a railroad com- 
 pany, and a decree of sale entered, practically by its consent, 
 its answer having admitted the allegations of the bill. It 
 then appealed from the decree, and tried to bring before the 
 Federal Supreme Court on appeal facts showing that its 
 directors and its solicitor had acted fraudulently and in hos- 
 tility to its interests in allowing the decree to be taken. The 
 corporate management seems to have been changed shortly after 
 the entry of the decree. The appeal duly prosecuted was not 
 decided for about three years. The appellate court found no 
 error which it could correct on appeal, but intimated that a 
 remedy could be had in the court below.- As soon as possible 
 after the appeal was decided, suit was brought to set aside the 
 decree. The defendants demurred on the ground of laches; 
 but it was held, and sustained on appeal, that the time during 
 which the appeal was pending should not be counted against 
 the plaintiff. Giving the opinion of the court, Justice Blatch- 
 ford said : " As to the frauds alleged in the bill respecting the 
 matters in the conduct of the suit, resulting in the decree, the 
 right to relief is based on the view, that the corporation itself, 
 the present plaintiff, speaking and acting now for its stock- 
 holders as a body, was powerless then, because it was mis- 
 represented by unfaithful directors, who did what was done 
 and refused to do otherwise, and through whom alone it could 
 then speak and act. . . . Under such circumstances mere 
 knowledge by or notice to the plaintiff, or its directors or 
 officers, or more or less of its stockholders, is unimportant; 
 and the plaintiff cannot be concluded by the failure of any 
 number of its stockholders to do, what unfaithful directors 
 ought to haye done, unless a case is shown of such acquies- 
 cence, assent or ratification as would make it inequitable to 
 permit what has been done to be set aside, or unless the rights 
 of innocent purchasers have subsequently intervened, to an 
 extent creating an equitable bar to the granting of relief. 
 The bill in this case does not show such a state of things. 
 While stockholders, more or less in number, may be allowed 
 
 i 111 U. S. 505. 2 Reported as Pacific R. R. Co. v. 
 
 I Ketchara, 101 U. S. 289. 
 
 634
 
 CHAP. X.j CORPORATION AND OFFICERS. [§ 631. 
 
 to interpose, if they have the means or the inclination to take 
 upon themselves the burden of such gigantic controversies as 
 are involved in the railroad transactions of the present day, it 
 would so far to legalize condonation of such transactions as 
 are set forth in the bill, if mere knowledge by helpless stock- 
 holders of the fraudulent acts of their directors were to prevent 
 the corporation itself from seeking redress, if it act promptly 
 when freed from the control of such directors. Frequently 
 requesting unfaithful directors to resign or employ other 
 counsel, so far from throwing on the stockholders the peril of 
 losing their rights, represented by the company, if they do not 
 personally assert them in place of the directors, operates of 
 itself, without more, only to aggravate the wrong. At the 
 same time it by no means follows that parties who have become 
 interested in the plaintiff's corporation with knowledge of 
 matters set forth in the bill, are entitled to the same standing 
 as to relief with those who were interested in the corporation 
 when the transactions complained of occurred." : 
 
 § 631. Accordingly, when corporate officers have been 
 guilty of a breach of trust towards the corporation, Reinedies 
 the latter may disaffirm the transaction, provided ofthecor- 
 
 . « . -ii • poration. 
 
 the rights or innocent outsiders do not intervene, 
 and may hold the officers liable for damages;- or without 
 disaffirming the transaction, may compel the officers to account, 
 with interest, for any profits they have made. 3 The corpora- 
 tion cannot, however, adopt in part and in part repudiate an 
 improper transaction of its officers. 4 And the right of a 
 corporation to avoid a transaction on account of the fiduciary 
 
 1 Pacific R. R. of Missouri v. i hers, 26 Beav. 360; York, etc., R'y 
 Pacific R'y Co., Ill U. S. 505, 520. Co. v. Hudson, 16 Beav. 485; Madrid 
 Compare Graham v. Boston, etc., R. i Bank v. Pelly, L. R. 7 Eq. 442; Parker 
 
 R. Co., 118 U. S. 162. 
 
 2 Ryan v. Leavenworth, etc., R'y 
 Co., 21 Kan. 365. See also cases in 
 last note but two. The receiver may 
 sue. Curtis u. Leavitt, 15 N. Y. 10, 
 
 v. McKenna, L. R. 10 Ch. 96; Buffalo, 
 X. Y. and Erie R. R. Co. v. Lamp- 
 son. 47 Barb. 533. 
 
 * Great Luxembourg R'y Co. v. 
 Magnay, 25 Beav. 586; Second Xa- 
 
 44. See High on Receivers, § 316 tioual Bank v. Burt, 93 N. Y. 233. 
 and §615. I It cannot retain the advantages and 
 
 8 Parker v. Xickerson, 112 Mass. ! repudiate the obligations of these 
 195; S. C, 137 Mass. 487; Greenfield \ transactions. Barr 0. N. Y., L. E. 
 Savings Bank v. Simons, 133 Mass. & W. R. R. Co., 125 N. Y. 263. 
 415 {supra, § 629); Gaskell v. Cham- 
 
 635
 
 § 633.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 relations sustained towards it by the other party, must be 
 exercised within a reasonable time after the facts connected 
 therewith are known or could by due diligence have been 
 ascertained. 1 
 
 § 632. Of course, directors are not excluded from deriving 
 profit from the corporate enterprise which is shared 
 directors' by the (other) shareholders ; as, for instance, they 
 corporation. ma Y rece i ve their proportion of dividends. Direct- 
 ors may also loan money to the corporation if the 
 terms are as favorable to the corporation as the most favorable 
 terms on which the directors could borrow money for it from 
 outsiders. 2 
 
 Thus, in Twin-Lick Oil Co. v. Marbury, 3 the Federal Su- 
 preme Court held that there was no rule forbidding one di- 
 rector among several from loaning money to the corporation, if 
 the money is needed and the transaction is open and other- 
 wise free from blame ; and that he might purchase its property 
 at a fair public sale, made by a trustee under a deed of trust 
 executed to secure the payment of his debt. The property in 
 controversy was oil land of a fluctuating value ; the director 
 committed no actual fraud ; and at the time of the sale the 
 shareholders knew all the facts, and refused to join him either 
 in the purchase or in paying assessments on their shares. It 
 was held, that four years afterwards, when by his skill and 
 energy he had made the property profitable, the corporation 
 could not have the sale set aside or an accounting for profits. 4 
 
 § 633. The facts of another important case were as follows : 
 
 1 Twin-Lick Oil Co. v. Marbury, 
 91 U. S. 587. See Stewart v. Lehigh 
 Valley R. R. Co., 38 N. J. L. 525. 
 
 2 Campbell's Case, 4 Ch. D. 470; 
 Santa Cruz R. R. Co. v. Spreckles, 
 65Cal. 193; Sutter St. R. R. Co. v. 
 Baum, 66 Cal. 44; Richardson v. 
 Green, 133 U. S. 30; Holtu. Bennett, 
 146 Mass. 437; Neal's Appeal, 129 Pa. 
 St. 64; Beach v. Miller, 130 111. 162; 
 Roseboom v. Whittaker, 132 111. 81 ; 
 Mullanphy Svgs. Bk. v. Schott, 135 
 111.655; Jones v. Hale, 32 Or. 465; 
 Patterson v. Portland Smelting 
 Works, 34 Or. 96. An owner of 
 
 636 
 
 property may sell it to a corporation 
 of which he is an officer, provided 
 he does not act on behalf of the cor- 
 poration in the matter. Gamble v. 
 Water Co., 122 N. Y. 91. See Crym- 
 ble v. Mulvaney, 21 Col. 203. 
 
 3 91 U. S. 587. 
 
 4 Accord, Addison v. Lewis, 75 
 Va. 701, 720; Harts v. Brown, 77 
 111. 226; Saltmarsh v. Spaulding, 
 147 Mass. 224; New Memphis Gas 
 Light Co. Cases, 105 Tenu. 268; 
 Singer v. Salt Lake Copper M'f'g 
 Co., 17 Utah, 143. See Seely v. San 
 Jose Mill Co., 59 Cal. 22; Humphrey
 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 633. 
 
 A., who at the time was the president of a railroad company, 
 but not a shareholder, made advances to it in perfect good 
 faith of eighty-one thousand dollars to aid it in constructing 
 its road. At a meeting of the executive committee of the 
 board, consisting of himself and two other directors, who were 
 guarantors on a note to him for a portion of his claim, a resolu- 
 tion was passed directing the treasurer to deliver to him eight 
 hundred and ten thousand dollars of its bonds as collateral 
 security. This action the board subsequently sanctioned. The 
 company afterwards became insolvent ; the trustee for the 
 bondholders brought suit to foreclose the mortgage given to 
 secure the bonds ; and on appeal taken from an order entered 
 in the suit, determining the relative rights and priorities of 
 certain of the bondholders, A. was allowed to prove his bonds 
 to the full amount, and share in the distribution of the assets 
 of the compan}^ to the extent of its real indebtedness to him. 1 
 On a former appeal of the same case, Judge Finch said : 
 "Where the trustee's act consists, not in possessing himself of 
 the property of the beneficiary as owner, but in taking col- 
 lateral security for a debt honestly due him or a liability justly 
 incurred, the rule [that the beneficiary may as of course avoid 
 the contract] can have no application, since the payment of 
 the debt or the discharge of the liability is an essential prere- 
 quisite of the avoidance. And this is true whether the pledge 
 is taken for a present or precedent debt." 2 
 
 Nevertheless, in the appeal, from which the preceding citation 
 is taken, it is said that as a general rule a director buys cor- 
 porate bonds below par only at the peril of their avoidance by 
 
 v. Patrons' Mercantile Assn., 50 Iowa, 
 607; Hill v. Nisbet, 100 Ind. 341; 
 Lusk's Appeal, 108 Pa. St. 152. 
 
 1 Duncomb v. New York, H. and 
 N. R. R. Co., 88 N. Y. 1. 
 
 2 Duncomb ». New York, H. and 
 N. R. R. Co., 84 N. Y. 190, 199. 
 See, also, Budd v. Walla Walla Print- 
 ing Co., 2 Wash. Ter. 347; Harpend- 
 ing v. Munson, 91 N. Y. 650; Weihl 
 v. Atlanta Furniture Co., 89 Ga. 297. 
 The language here of the learned 
 judge, perhaps, is somewhat broad. 
 The money loaned may indeed have 
 
 been advanced in good faith for 
 the benefit of the corporation; but 
 under some circumstances, to force 
 the corporation to pay its debt be- 
 fore demanding back its security, 
 might be very oppressive. In the 
 case in the text, the court laid stress 
 on the fact that the security taken 
 was not under the circumstances 
 excessive; and that the corporation 
 was not insolvent at the time it was 
 taken. Compare Hope v. Val. City 
 Salt Co., 25 W. Va. 789; Richardson 
 v. Green, 133 U. S. 30. 
 
 637
 
 § 633.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 the courts at the suit of the corporation. 1 Yet it has been held 
 that the treasurer of a corporation may with his own money 
 purchase its notes at a discount and collect their face value 
 from the corporation, provided that at the time of the pur- 
 chase he was under no duty to the corporation to purchase or 
 pay the notes in its behalf. 2 But it has also been held that 
 directors cannot, when the corporation is insolvent, buy up 
 claims against it at a discount, and then prove them at their 
 face on the winding up of the corporation. 3 The following is 
 a recent utterance of the New York Court of Appeals : " The 
 rule [forbidding a trustee to purchase obligations of his cestui 
 at less than par and enforcing them at par] is founded upon 
 the unwillingness of the law to uphold contracts which bring 
 into collision the trust duty and the personal interests, and it 
 is because of that collision, and the temptations which surround 
 it, that it declares the contract voidable at the election of the 
 beneficiary without investigating the good or the bad faith of 
 the trustee. The entire basis of the rule consists in this col- 
 lision between trust duty and personal interest, and the equi- 
 table prohibition has no application where there is no such pos- 
 sible inconsistency. There is no such conflict in the ordinary 
 case of the purchase by a director in a going corporation of its 
 outstanding obligations." 4 
 
 i Duncomb v. N. Y., H. & N. R. R. 
 Co., 84 N. Y. 190. See Fitzgerald v. 
 Fitzgerald, etc., Co., 41 Neb. 374. 
 If a director, by agreement with his 
 co-directors, take, directly from bis 
 company, its bonds below par on bis 
 private account and sell tbem at an 
 advance, he may be compelled to 
 account for the profits for tbe benefit 
 of the corporation, its shareholders, 
 or creditors; and this, although he 
 acted in good faith. Widrig v. New- 
 port St. Ry. Co., S2 Ky. 511. But 
 when suit is brought to foreclose a 
 mortgage made to secure bonds is- 
 sued to directors, they will not be 
 declared void at the instance of a 
 subsequent lienor, when the corpo- 
 ration does not defend. Bassett v. 
 Monte Christo M. Co., 15 Nev. 393. 
 638 
 
 2 St. Louis, etc., R. R. Co. v. Waller, 
 30 Kan. 51; Glenwood M'f'g Co. ». 
 Syme, 109 Wis. 355. 
 
 3 Linglu v. Nat. Ins. Co., 45 Mo. 
 109; In re Imperial Land Co., Ex 
 parte Larking, 4 Ch. D. 566; Patrick 
 v. Boonville Gas Light Co., 17 Mo. 
 App. 402. See § 759. Compare Iu- 
 glehart v. Thousand Islands Hotel 
 Co., 32 Hun (N. Y.), 377. The ques- 
 tion is, whether the director has 
 acted fairly for the interest of the 
 corporation in buying the securities 
 at a discount. Higgius v. Lansingh, 
 154 111. 301, 380. In this case he was 
 not allowed to enforce them at their 
 face. 
 
 4 Seymour v. Cemetery Ass'n, 144 
 N. Y. 333, 344. Opin. of court per 
 Finch, J.
 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 636. 
 
 § 634. The following rules regarding loans to a corporation 
 from its officers seem deducible from the preceding and other 
 cases. Directors or other officers may, when they honestly deem 
 it for the interest of the corporation to borrow, 1 advance it money 
 on terms as favorable as any on which they could have pro- 
 cured the money for it from other sources ; and they may take 
 from the corporation security for their loan. 2 But they cannot 
 — at least when the corporation is insolvent — take advantage 
 of their inside position to secure their existing debts to the in- 
 jury of other creditors of the corporation; 3 and no more in 
 recovering their debts or enforcing their security than in the 
 original transaction of loaning the money, can they disregard 
 the interests of the corporation. 4 Under such circumstances 
 not only may they not avail themselves of their control over 
 the affairs of the corporation to oppress it, but they cannot 
 make unconditional and unrestricted use of legal means open 
 to outside creditors. 5 
 
 § 635. Exceedingly difficult and complicated questions arise 
 in regard to transactions in which corporate officers, while 
 personally interested adversely to their corporation, contract 
 on its behalf with outsiders, whose interests in the transac- 
 tion may be the same as the personal interests of the contract- 
 ing officers ; and also in regard to transactions in which the 
 same officers act for two adversely interested corporations. 
 
 § 636. Every person, even though he act in good faith, is 
 
 i See Harts v. Brown, 77 111. 226; 
 Illinois Steel Co. v. O'Donnell, 156 
 111. 624. See Rylander v. Sheffield, 
 108 Ga. Ill, where the text is cited. 
 In this case an injunction to prevent 
 directors from foreclosing a mort- 
 gage held by them was refused. 
 
 2 McMurtry u. Temple Co., 86 Ky. 
 206; Foster p. Sugar Co., 118 Mo. 
 238; Jones v. Hale, 32 Or. 465. But 
 if the terms of the loan, the rate of 
 interest and security taken, are op- 
 pressive or exorbitant, they may be 
 disaffirmed by the corporation and 
 set aside on repayment of the amount 
 loaned with legal interest. Sutter 
 St. R. R. Co. v. Baum, 66 Cal. 44. 
 
 3 See § 759. 
 
 4 Hallam v. Indianola Hotel Co. 
 (Sup. Ct. Iowa), 21 Am. Law Reg. 
 N. S. 443. See Butler Paper Co. v. 
 Bobbins, 151 111. 588. 
 
 5 See Hallam v. Indianola Hotel 
 Co., supra. But see McMurtry v. 
 Temple Co., 86 Ky. 206. In matters 
 in no way relating to his official po- 
 sition, however, a director may sue 
 a corporation just as a shareholder 
 or any other person having a cause 
 of action against it. Burbank v. 
 West Walker Ditch Co., 13 Nev. 431. 
 And it has been held that a director 
 can plead to a recovery of interest 
 on a loan from his bank to himself, 
 that the interest was agreed on in 
 contravention of the National Bank- 
 
 639
 
 § 637.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 invalidity affected with notice of the ireneral rule of law that 
 
 of tnutsac- ° 
 
 tiona in an officer cannot bind his corporation by a contract 
 officers are in which he is personally interested. Thus, a gen- 
 interested. eral aat i lor i t y to a bank president to certify checks 
 drawn on it does not extend to checks drawn by himself. 
 Consequently, the face of the check showing the president's 
 attempt to use his official character for his private interest, 
 every one taking it is put on his inquiry ; and when the certi- 
 fication is false, no one can, as a bona fide holder of the check, 
 recover against the bank on the certification. 1 
 
 Accordingly, the first question will ordinarily be, did the 
 person contracting with the corporation through its officers, 
 know, or have reason to know, that in the same transaction 
 the officers were personally interested in a way that might lead 
 them to regard their own interests rather than those of the 
 corporation? If this be answered in the negative, and the 
 other contracting parties acted in good faith, they will be pro- 
 tected, having acted on the reasonable assumption that the cor- 
 porate officers were not violating their duty. 2 
 
 § 637. In many cases of this nature, however, that have come 
 before the courts, the outside parties have occupied no such 
 favorable and honest position ; but have acted with their eyes 
 only too open, and often have actively combined with the offi- 
 cers to defraud the corporation. Under such circumstances, 
 
 ing Act. Bank v. Slemmons, 34 Ohio 
 St. 142; compare Lester v. Howard 
 Bk., 33 Md. 558. 
 
 1 Claflin v. Farmers' and Citizens' 
 Bk., 25 N. Y. 293. See, also, West 
 St. Louis Bank v. Shawnee County 
 Bank, 95 U. S. 557; McKee v. Grand 
 Rapids, etc., Ry. Co., 41 Mich. 274; 
 Smith v. Los Angeles Im. Ass'n, 78 
 Cal. 289; cf. Rochester & C. T. R. 
 Co. v. Paviour, 104 N. Y. 281; Ran- 
 dall v. Rhode Isl. Lumber Co., 20 
 R. I. 625; Hebbard u. So. Land & 
 Cattle Co., 55 X. J. Eq. 18. 
 
 But it is held that if a person take 
 a note of a corporation executed and 
 indorsed by its president in such a 
 
 640 
 
 way as to put the purchaser on his 
 inquiry, the purchaser may recover 
 if he can show that, had he made in- 
 quiry, the facts which he would 
 have discovered would have pro- 
 tected him; as, for instance, if the 
 note indicates that the president 
 was about to use the proceeds for 
 his own benefit, plaintiff is protected 
 if there was in fact a resolution of 
 the board of directors authorizing 
 the president so to use the note. 
 Wilson v. Metropolitan El. R'y Co., 
 120 N. Y. 145. 
 
 2 Genesee Savings Bank v. Michi- 
 gan Barge Co., 52 Mich. 438. See 
 §204. 

 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 638. 
 
 they will be liable to account to the corporation equally with 
 its guilty officers. 1 
 
 Thus, in an English case, the plaintiff, a stock company, 
 made with the defendant, also a stock company, a contract 
 which gave the plaintiff the option of having a telegraph cable 
 manufactured and laid by the defendant ; the cable to be paid 
 for in instalments, payable, after the first, as the work was 
 certified to by the plaintiff's engineer. The option was exer- 
 cised, and the first instalment paid to the defendant, the 
 plaintiff also paying a commission to its own engineer. It 
 then discovered that its engineer had a secret sub-contract 
 with the defendant company to lay the cable himself. The 
 court held the plaintiff entitled to have the contract set aside, 
 and the instalment and commission returned to it. 2 
 
 § 638. In the United States it is not uncommon for the 
 directors of a railroad companv, whose road is in 
 
 Railroad 
 
 process of construction, to join with other persons constmc- 
 in forming a construction company ; and then, on panies 0m " 
 behalf of their railroad, make contracts with the 
 construction company most favorable to the latter and them- 
 selves. Such dishonest transactions the courts will set aside, 
 and by compelling accountings for profits, or awarding dam- 
 ages against the guilty directors, restore, as far as possible, 
 the railroad company to its property and rights. 3 Under such 
 circumstances, it is not necessary for the railroad corporation 
 
 1 Ryan v. Leavenworth, etc., R'y 
 Co., 21 Kan. 365; see, also, Kersey 
 Oil Co. v. Oil Creek, etc., R. R. Co., 
 12 Phila. (Pa.) 374. 
 
 When a board of mining directors 
 lease a mine to a party acting in the 
 interests of the minority of share- 
 holders, in order to withdraw it from 
 the control of a board about to be 
 elected, and thereby perpetuate the 
 control of the minority, the corpo- 
 ration may set the lease aside by a 
 bill in equity. Mahany Mining Co. 
 v. Bennett, 5 Sawyer, 141. A court 
 of equity, however, will not set aside 
 these improper contracts at the suit 
 
 41 
 
 of parties (shareholders and direct- 
 ors) to them. Weed v. Little Falls, 
 etc., R. R. Co., 31 Minn. 154. 
 
 2 Panama, etc., Telegraph Co. v. 
 India Rubber, etc., Telegraph Works 
 Co., 32 L. T. N. S. 517. 
 
 3 Ryan v. Leavenworth, etc., R'y 
 Co., 21 Kan. 305 ; Gilman, etc., R. 
 R. Co. v. Kelly, 77 111. 426 ; Wardell 
 v. Railroad Co., 103 U. S. 651 ; Thomas 
 v. Brownsville, etc., Ry Co., 1 Mc- 
 Crary, 392. See Abbot v. American 
 Hard Rubber Co., 33 Barb. 578. Cf. 
 Santa Fe E. Co. v. Hitchcock, 9 N. 
 Mex. 156; Barnes v. Lynch, 9 Okl. 
 156. 
 
 641
 
 § 639.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 to prove actual fraud, or that the transaction was against its 
 interest. 1 
 
 § G39. Wardell v. Railroad Co. 2 is a leading and instruc- 
 tive case in connection with this subject. There the president 
 of the Union Pacific Railroad, by order of the executive 
 committee of the board of directors, entered into a contract to 
 allow one Wardell and another to work coal lands belonging 
 to the company, agreeing that the railroad company would 
 purchase coal of them for fifteen years at prices which secured 
 them high profits. Thereupon a coal company was formed, in 
 which six of the railroad directors owned a majority of stock, 
 and, in pursuance of a previous secret arrangement, the con- 
 tract was assigned to it without consideration. The court held 
 the contract a fraud on the railroad company, and that 
 Wardell could sustain no claim against that company for its 
 repudiation of the contract. " All arrangements by directors 
 of a railroad company, to secure an undue advantage at its 
 expense, by the formation of a new company as auxiliary to 
 the original one, with an understanding that they, or some of 
 them, shall take stock in it, and then that valuable contracts 
 shall be given it, in the profits of which they, as stockholders 
 of the new company, are to share, are so many unlawful 
 devices to enrich themselves to the detriment of the stock- 
 holders and creditors of the original company, and will be con- 
 demned whenever properly brought before the courts for 
 consideration." 3 
 
 1 Oilman, etc., R. R. Co. v. Kelly, 
 77 111. 426. Compare Union Pac. 
 R. R. Co. v. Credit Mobilier, 135 
 Mass. 367. 
 
 2 103 U. S. 651. See, also, Union 
 Pacfic R. R. Co. v. Credit Mobilier, 
 135 Mass. 367, 376. 
 
 3 Wardell v. Railroad Co., 103 
 U. S. 651, 658. Opinion of the court 
 per Justice Field. In a later case in 
 the Federal Supreme Court, the di- 
 rectors of a railroad had made a 
 contract, in which two of them were 
 personally interested, for the con- 
 struction of the road, and had issued 
 the bonds of the company to the 
 
 642 
 
 contractors; suit was brought to 
 foreclose the mortgage made to se- 
 cure the bonds, and the corporation 
 allowed judgment to be taken against 
 it by default. Thereupon certain 
 shareholders intervened, and the 
 court held that the contract could 
 not be enforced, nor the bonds either 
 which had not come into the hands 
 of innocent holders for value. But 
 the court also held that the share- 
 holders seeking equity must do 
 equity, and that the bondholders 
 were entitled to be reimbursed the 
 sums which they had actually ex- 
 pended, and to be paid the fair value
 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 642. 
 
 § 640. The class of cases just discussed must carefully be 
 distinguished — and this in practice will often be Transac- 
 raost difficult — from cases which have arisen con- t 101 ? 8 ," 1 
 
 winch om- 
 
 cerning the contracts between two corporations, the ceis act for 
 validity of which is contested on the ground that verseiy in- 
 some of the officers of one corporation are officers CO rpo- e 
 of the other. rations - 
 
 These latter contracts may be set aside on the ground of 
 fraud like other contracts, 1 and they are especially open to the 
 suspicion that one corporation has been unfairly favored at the 
 expense of the other. Moreover, a contract of this character 
 is voidable if the common officers making it have personal 
 interests in the transaction which decidedly lead them to favor 
 one rather than the other of the contracting parties. 2 But in 
 such case the contract would be set aside, not on the ground 
 that a common agent represented two principals, but because 
 it is a contract in which he was personally interested. 
 
 § 641. Another preliminary consideration to be borne care- 
 fully in mind is that the acts and declarations of the agent 
 while acting as agent of one of the corporations, cannot create, 
 at least in favor of that corporation, an estoppel binding on 
 the other corporation, whom he may also represent. 3 Likewise, 
 that the two companies have some common directors or a com- 
 mon solicitor, does not affect one company with notice of acts 
 done or knowledge possessed by the common directors or solic- 
 itor as directors or solicitor of the other company. 4 
 
 § 642. It may be asserted with nearly as much safety as 
 
 of their services and materials fur- 
 nished; this value, however, not to 
 be estimated by the prices mentioned 
 in the contract. Thomas v. Brown- 
 ville, etc., R. R. Co., 109 U. S. 522. 
 See, also, McGourkey v. Toledo, 
 etc., R. R. Co., 146 U. S. 536, 565. 
 
 1 See, especially on this point, 
 Goodin v. Cincinnati, etc., Canal Co., 
 18 Ohio St. 169, cited at length in § 
 559. Also Fitzgerald v. Fitzgerald, 
 etc., Co., 41 Neb. 374; Rear River V. 
 O. Co. v. Hanley, 15 Utah, 506. 
 
 2 Galley v. National Exchange Bk., 
 41 Mich. 169. Compare San Oiego 
 
 v. San Diego, etc., Railroad Co., 44 
 Cal. 106. 
 
 3 Pennsylvania R. R. Co.'s Appeal, 
 80 Pa. St. 265. In such cases it may 
 be often difficult to determine for 
 whom the agent was acting when he 
 made the declaration, but it is safe 
 to assume that under such circum- 
 stances no court would favor an es- 
 toppel. 
 
 4 In re Marseilles Extension Rail- 
 way Co., 20 W. R. 254; DeKay v. 
 Hackensack Water Co., 38 N. J. Eq. 
 158; Benton v. Bank, 122 Mo. 332. 
 Compare Kersey Oil Co. v. Oil Creek, 
 
 643
 
 § 612.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 will attend the assertion of any exceedingly general negative 
 legal proposition, that there is no rule of law preventing an 
 agent or functionary from representing and binding two 
 adverse principals by ministerial acts involving no discretion. 
 For instance, the same person acting as broker may bind both 
 buyer and seller by a bought and sold note, 1 and at auctions 
 the auctioneer may be the agent of both parties. 2 It is also 
 said that there is no presumption that the common agent of 
 two adverse principals will act unfairly towards either. 3 
 
 Accordingly, it has been held that a common treasurer may 
 adjust the accounts of debtor and creditor corporations; 4 and 
 also that when resolutions have been properly passed authoriz- 
 ing a deed from one corporation to another, it is no objection 
 that the officer authorized to make the specific deed was an 
 officer of both corporations. 5 It has further been held, though 
 with questionable propriety, that a common agent may on be- 
 half of one company sell and on behalf of the other buy the 
 same property. 6 Moreover, it has been expressly decided in 
 more than one state after full consideration, that a contract 
 between two corporations, made by their respective boards of 
 directors, is not invalidated or rendered voidable at the election 
 of one of the parties thereto, from the mere circumstance that 
 a minority of its board of directors are also directors of the 
 other company. 7 
 
 etc., R. R. Co., 12 Phila. (Pa.) 374; 
 Martin v. South Salem Land Co., 94 
 Va. 28; see, also, § 210. 
 
 1 Butler v. Thomson, 92 U. S. 412. 
 
 2 Pugh v. Chesseldine, 11 Ohio, 
 109, 123. 
 
 3 Adams Mg. Co. v. Senter, 26 
 Mich. 73; Booth v. Robinson, 55 Md. 
 419. See Clark ». Trust Co., 100 U. 
 S. 149. 
 
 4 Bradley v. Richardson, 23 Vt. 
 720. Compare Chicago & N. W. R. 
 R. Co. v. Northern Line Packet Co., 
 70 111. 217. 
 
 5 Leathers u. Janney, 41 La. Ann. 
 1120. 
 
 6 Adams Mining Co. v. Senter, 26 
 Mich. 73. Approved Pauly v. Pauly, 
 
 644 
 
 107 Cal. 8. See Roberts v. Bank, 11 
 Wash. 550. But see San Diego d. San 
 Diego, etc., R. R. Co., 44 Cal. 106; 
 Memphis, K. & C. R. R. Co. v. Par- 
 sons Town Co., 26 Kan. 503, 509. 
 
 7 United States Rolling Stock Co. 
 v. Atlantic and Great Western Rail- 
 road Co., 34 Ohio St. 450; Mayor, 
 etc., of Griffin v. Inman, 57 Ga. 370; 
 Hagerstown M'fg Co. u. Keedy, 91 
 Md. 640; see, also, Booth r. Robinson, 
 55 Md. 419; Union Parific R. R. Co. 
 v. Credit Mobilier, 135 Mass. 367, 
 377; Wallace v. Long Island R. R. 
 Co., 12 Hun (N. Y.), 460. Accord, 
 Foster u. Oxford, etc., Ry. Co., 13 C. 
 B. 200, 203. Compare Manufactur- 
 ers' SVgs B'k v. Iron Co., 97 Mo. 38; 

 
 CHAP. X.] CORPORATION AND OFFICERS. [§ 644. 
 
 § 643. In United States Rolling Stock Co. v. Atlantic and 
 Gt. Western R. R. Co., it was said by Judge Boynton, giving 
 the opinion of the Supreme Court of Ohio : * " We have not, 
 upon the most diligent research, been able to find a case hold- 
 ing a contract made between two corporations by their respec- 
 tive boards of directors invalid, or voidable at the election of 
 one of the parties thereto, from the mere circumstance that a 
 minority of its board of directors are also directors of the other 
 company, nor do we think such a rule ought to be adopted. 
 There is no just reason, where a quorum of directors, sustain- 
 ing no relation of trust or duty to the other corporation, are 
 present participating in the action of the board, why such 
 action should not be binding upon the company, in the absence 
 of such fraud as would lead a court of equity to undo or set 
 aside the transaction. If the mere fact that a minority of one 
 board are members of the other gives the company an option to 
 avoid the contract without respect to its fairness, the same 
 result would follow where such minority consisted of but one 
 person, and notwithstanding the board might consist of twenty 
 or more. In our judgment, where a majority of the board are 
 not adversely interested, and have no adverse employment, the 
 right to avoid the contract or transaction does not exist with- 
 out proof of fraud or unfairness ; and hence the fact that five 
 of the defendant's board of directors were members of the 
 plaintiff's board, whatever may have been its effect on the 
 defendant's right to disaffirm or repudiate the contract, if 
 exercised within a reasonable time, did not disable the de- 
 fendant from subsequently affirming the contract if satisfied 
 with its terms, or rejecting it if not, nor did it relieve it from 
 the duty to exercise its election to avoid or rescind within a 
 reasonable time, if not willing to abide by its terms." 
 
 § 644. On the other hand, it may be said that common 
 
 Salina Nat. B'k v. Prescott, 60 Kas. 
 490. Contra, Metropolitan El. R. R. 
 Co. v. Manhattan El. R. R. Co., 11 
 Daly (N. Y.), 373, 503, and semble 
 contra, San Diego v. San Diego, etc., 
 R. R. Co., 44 Cal. 106, a case in 
 which, it seems to the writer, the 
 
 personal interests of the common 
 agent decidedly leaned towards one 
 of his adversely interested principals; 
 also Bill v. Western Un. Tel. Co., 16 
 Fed. Rep. 14; Ashnelot R. R. Co. v. 
 Elliot, 57 N. H. 397. 
 i 34 Ohio St. 450, 466. 
 
 645
 
 § 644.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 directors cannot take part in the making of impor- 
 boardsof tant contracts between two adversely interested 
 irectors. corporations when the action of the common direct- 
 ors is an essential factor in the transactions. 1 And it has 
 been finally held, and with such propriety of reasoning as to 
 lead one to believe that the rule will remain fixed, that when 
 common directors constitute a majority in each board, the two 
 boards of directors cannot in the same transactions validly 
 represent two adversely interested corporations. 2 In Pearson 
 v. Concord R. R. Co., the contracts made by the common 
 boards were set aside, and the court appointed a trustee for the 
 company, whose shareholders were suing to enjoin their direct- 
 ors from taking the contemplated action, to represent it in the 
 transactions. Giving the opinion of the court Judge Smith 
 said : " Their interests being conflicting, it was impossible for 
 common directors to procure the lowest rates for one party and 
 the highest rates for the other. ' No man can serve two mas- 
 ters.' They were not arbitrators called in to adjust con- 
 flicting claims, nor were they disinterested. The referee has 
 found that the purchase of Concord stock at prices largely in 
 excess of its market value w T as made with the intent and 
 purpose of obtaining control of the Concord, and thereby to 
 secure more favorable contracts for the business of the upper 
 companies over the lower. The plan was formed, the purchase 
 was made, the control of the Concord was obtained, and more 
 favorable contracts were secured. By taking the control of 
 the Concord, the upper companies disabled it as a contracting 
 party. In fixing the rates of that company for their business, 
 
 1 Metropolitan Telephone Co. v. 
 Domestic Telephone Co., 44 N. J. 
 Eq. 569; Metropolitan El. R. R. Co. 
 v. Manhattan El. R. R. Co., 11 Daly 
 (N. Y. ), 373, 503. A common direct- 
 or cannot execute an assignment by 
 debtor corporation to creditor corpo- 
 ration when the former is insolvent. 
 Sweeny v. Sugar Co., 30 W. Va. 443. 
 But see Pauly v. Pauly, 107 Cal. 8. 
 
 2 Memphis, etc. , R. R. Co. v. Woods, 
 88 Alabama, 641; O'Connor Mining 
 Co. v. Coosa Furnace Co., 95 Alabama, 
 
 646 
 
 614; Pearson v. Concord R. R. Co., 
 62 N. H. 537; Fitzgerald v. Fitz- 
 gerald, etc., Co., 44 Neb. 463, 490. 
 And see Bill v. Western Union Tel. 
 Co., 16 Fed. Rep. 14; and compare 
 Wallace ». Long Island R. R. Co., 
 12 Hun (N. Y.), 460. But such trans- 
 actions can be attacked by creditors 
 only on the ground of actual fraud 
 on creditors. O'Connor Mining Co. 
 v. Coosa Furnace Co.. 95 Alabama, 
 614.
 
 CHAP. X.] CORPORATION AND OFFICERS. [§ 645. 
 
 they were contracting with themselves. When a transaction 
 is a fraud in law, it is unnecessary to prove a fraud in fact, 
 nor is it permissible to show that the transaction was an 
 honest one. The justness of the contracts made with them- 
 selves, and of the votes they passed as directors of the Concord 
 Eailroad, for their own benefit, does not impart any validity 
 or legality to those contracts or votes. If such contracts were 
 to stand until shown to be fraudulent and corrupt, the result, 
 as a general rule, would be that they must be enforced in spite 
 of fraud and corruption. ... In the making of these con- 
 tracts and in the settlement of these claims, the stockhold- 
 ers of the Concord have the legal right to the services of di- 
 rectors whose interests are not hostile to their interests. A 
 director or stockholder in the Northern company is not such a 
 director. It may, for some purposes, be convenient and desira- 
 ble that the same person or persons should act as directors of 
 two or more roads forming part of a continuous line. For 
 many purposes their interests are not adverse. The harmoni- 
 ous working of the several parts, when a large portion of its 
 business is the transportation of goods and passengers over 
 the whole line, requires unity of purpose and management. 
 But, however this may be, the right of the stockholders of a 
 single road, that it shall be operated primarily in their own 
 interest, cannot be overridden or displaced by directors occu- 
 pying inconsistent relations." ' 
 
 It is, however, held that contracts made by boards of direct- 
 ors where a majority are common to the two corporations are 
 only voidable, and may be ratified by a majority vote at a 
 shareholders' meeting. 2 
 
 § 645. So far the discussion has been of the duties of directors. 
 Thev have, however, certain rights : and, in the first ~. 
 
 J ', ° Directors' 
 
 place, the right or authority, within the scope of their authority; 
 
 .... , „ . their right 
 
 discretionary powers, to manage the corporate affairs toindemni- 
 in accordance with their sound discretion, exempt from catlon - 
 any interference, except perhaps the controlling action of a ma- 
 jority of shareholders in a corporate meeting. 3 Further, they 
 
 1 Pearson v. Concord R. R. Co., 62 
 N. H. 537, 545, etc. But see xeiuble 
 contra, Evansville, etc., Co. v. Bauk, 
 144 Ind. 34. 
 
 2 San Diego, etc., R. R. Co. v. Pac. 
 Beach Co., 112 Cal. 53; Burden v. Bur- 
 den. 159 N. Y. 287. 
 
 3 See Railway Co. v. Ailing. 99 U. S. 
 
 647
 
 § 645.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 have a right to be indemnified by the corporation from any per- 
 sonal liability which may attach to them by reason of proper acts 
 on their part ; or which they may have with propriety assumed on 
 its behalf while acting within their authority. 1 The English courts 
 have gone further. In Exparte Chippendale 2 it was decided that 
 when directors who had no authority to borrow money on behalf 
 of the company did in fact borrow money and make advances 
 themselves in good faith, and apply it all to the benefit of the 
 company, they were entitled, having themselves repaid the 
 money borrowed, to be reimbursed by the shareholders the 
 whole amount borrowed and advanced. The equities of the 
 directors w r ere very strong in this case ; the money was urgently 
 needed to prevent great loss to the company, and the share- 
 holders were kept informed of the transactions. This decision, 
 however, was used as a precedent in cases going beyond it, 3 
 till the danger of extending its principles was recognized by 
 the courts, and their application restricted to cases where 
 money had been applied to the discharge of debts for which 
 the company was liable. 4 It is obvious that any extension of 
 the doctrine of Ex parte Chippendale is incompatible with the 
 security of persons interested in the corporate funds ; for the 
 liability of these funds to the directors for moneys expended 
 or liability assumed by them would thereby become measured 
 not by the authority which the directors had received, but 
 only by their discretion. It is certainly safer to adhere to the 
 " sensible rule that agents are not entitled to any indemnity 
 
 463; Elkins v. Camden, etc., R. R. 
 Co., 36 N. J. Eq. 241; § 684. When 
 the mauagement of the business is 
 by statute confided to the directors, 
 the corporation cannot by a vote join 
 another officer who is not a director 
 with them, or compel them to act 
 with liim in managing its business. 
 Charleston Boot, etc., Co. u. Duns- 
 more, 60 N. H. 85. 
 
 1 See In re Court Grange M'g Co., 
 Ex parte Sedgwick, 2 Jur. N. S. 494. 
 "As members they [directors] are 
 entitled to contribution in respect of 
 such debts and liabilities of the com- 
 pany as they may be compellable or 
 
 648 
 
 have been compelled to pay; and aa 
 agents and trustees they are entitled 
 to be indemnified by the company 
 from all losses and expenses bona 
 fide sustained and incurred by them 
 in the exercise of the trust imposed 
 on them." 2 Lindley on Part., 760. 
 
 2 4 De G., M. & G. 19. 
 
 8 See In re Norwich Yarn Co., Ex 
 parte Bignold, 22 Beav. 143; In re 
 Nat. Patent Fuel Co., Baker's Case, 
 1 Dr. & Sm. 54; Troup's Case, 29 
 Beav. 353; Hoare's Case, 30 Beav. 
 225. 
 
 4 See In re Natl. Bldg. Soc'y, Ex 
 parte Williamson, L. R. 5 Ch. 309.
 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 647. 
 
 from their principals in respect of unauthorized expendi- 
 tures." * 
 
 § 64:6. In the absence of some express provision in the 
 constitution or bv-laws of the corporation, a director compensa- 
 
 •1-1 • o 1 • rv. ti0Q ° f di " 
 
 is not entitled to any compensation for his official rectors and 
 services. 2 He cannot recover on a quantum meruit agents. 
 for his services as director; 3 and, moreover, to entitle him to 
 compensation, the by-law or resolution providing for his com- 
 pensation must have been passed before his services as di- 
 rector were rendered. 4 Because a subsequent vote to pay a di- 
 rector for his official services is without consideration, and he 
 cannot recover on it against the corporation. 5 
 
 § 647. Neither can a president recover for his services as 
 such except under the same circumstances and conditions as 
 
 1 2 Lindley on Part., 765; where 
 (pp. 760-768) will be found an in- 
 teresting discussion of these cases. 
 See, also, In re Worcester Corn Ex- 
 change Co., 3 De G., M. & G. 180 ; 
 Ex parte Cropper, 1 De G-., M. & G. 
 147. 
 
 2 Burns v. Commencement Bay, 
 etc., Co., 4 Wash. 558; Martin dale 
 v. Wilson Cass Co., 134 Pa. St. 348; 
 Illinois Linen Co. v. Hough, 91 111. 
 63; American Central Railway Co. v. 
 Miles, 52 111. 174; Maux Ferry Gravel 
 Road Co. v. Branegan, 40 Ind. 361 ; 
 Smith v. Putnam, 61 New Hamp. 632. 
 See Mather v. Mower Co., 118 N. Y. 
 629, 632. 
 
 3 Citizens' Nat. Bank v. Elliott, 55 
 Iowa, 104; Brown o. Republican M'n 
 Mines, 17 Col. 421. See cases in pre- 
 ceding note. 
 
 4 Lafayette, etc., Railway Co. v. 
 Cheeney, 87 111. 446; S. C, 68 111. 
 570; Ellis D.Ward, 137 111. 509. Com- 
 pare Barstow v. City R. R. Co., 42 
 Cal. 465. But see St. Louis, etc., 
 Railroad Co. v. Tiernan, 37 Kansas, 
 607; Wickersham v. Crittenden, 110 
 Cal. 332. 
 
 s Loan Association v. Stonemetz, 
 29 Pa. St. 534. See Carr u. Cbartiers 
 
 Coal Co., 25 Pa. St. 337. Directors 
 cannot make tbemselves allowances 
 for tbeir services. Maux Ferry 
 Gravel Road Co. v. Branegan, 40 Ind. 
 361; Gardner v. Butler, 30 N. J. Eq. 
 702, 721 ; Blatchford v. Rose, 54 Barb. 
 42; Jones v. Morrison, 31 Minn. 140. 
 See Butts v. Wood, 37 N. Y. 317. Di- 
 rectors cannot fix their own salaries 
 as president, secretary, etc. Kelsey 
 ». Sargent, 40 Hun (N. Y.), 150; 
 Bennett v. St. Louis Car Roofing Co., 
 19 Mo. App. 349; Wickersbam v. 
 Crittenden, 93 Cal. 17; 106 Cal. 327; 
 Mallory v. Mallory Wheeler Co., 61 
 Conn. 131. 
 
 " Trustees" of benefit associations 
 cannot vote themselves back pay. 
 State v. Benefit Association, 42 Ohio 
 St. 579. But it has been held that a 
 board of directors may vote a salary 
 to one of its number (he not voting) 
 for acting as attorney during two 
 yeai's past — for there rose on his ap- 
 pointment as attorney an implied 
 contract to pay the reasonable worth 
 of his special services. Ten Eyck v. 
 R. R. Co., 74 Mich. 226. See, also, 
 Clark v. American Coal Co., 86 Iowa, 
 436. 
 
 649
 
 § 647. J THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 an ordinary director. 1 But a director, or a president, who 
 renders services outside of the scope of his regular duties, 
 may, according to a number of decisions, recover the fair 
 worth of such services in the absence of any resolution provid- 
 ing for his compensation. 2 Agents and servants of the cor- 
 poration, other than the directors, president, and perhaps 
 treasurer, may recover the value of their regular or extraor- 
 dinary services on a quantum meruit? 
 
 1 Holland v. Lewiston Falls Bk., 52 
 Maine, 564; McAvity v. Pulp Co., 82 
 Maine, 504; Kilpatrick v. Penrose 
 Ferry Bridge Co., 49 Pa. St. 118; 
 Sawyer v. Pawner's Bk., 6 Allen, 207; 
 Merrick v. Peru Coal Co., 61 111. 472; 
 Gridley >:. Lafayette, etc., Ry. Co., 71 
 111. 200; Emporium R'l Estate Co. v. 
 Emrie, 54 111. 345; St. Louis, A. & S. 
 R. Co. v. O'Hara, 177 111. 525; Santa 
 Clara M'g Ass'n d. Meredith, 49 Md. 
 389; Citizens' Nat. Bk. v. Elliott, 55 
 Iowa, 104; see Banigan v. U. S. Rub- 
 ber Co., 22 R. I. 452; Wood's Sons 
 Co. v. Schaefer, 173 Mass. 445. Same 
 principles held to apply to a treasurer 
 in Kilpatrick v. Penrose Ferry Bridge 
 Co., supra ; Holder v. Lafayette, etc., 
 Ry. Co., 71 111. 106. Same rule ap- 
 plies to a vice-president. Blue v. 
 Bank, 145 Ind. 518. A vice-president 
 performing the duties of the presi- 
 dent is not entitled to the salary at- 
 tached to the office of president, 
 unless so provided in the by-laws. 
 Brown's Executor v. Galveston Whai'f 
 Co., 92 Tex. 520. 
 
 2 Santa Clara M'g Ass'n v. Mere- 
 dith, 49 Md. 389; Cheeney v. Lafay- 
 ette, etc., Ry. Co., 68 111. 570; S. C, 
 87 111. 446; Rockford, etc., R. R. Co. 
 v. Sage, 65 111. 328; Bagley v. Car- 
 thage R. R. Co., 165 N. Y. 179; Jack- 
 son v. New York Cent. R. R. Co., 
 2 T. & C. (N. Y.) 653; Gardner v. 
 Butler, 30 N. J. Eq. 702, 721; Shack- 
 elford v. New Orleans, etc., R. R. 
 Co., 37 Miss. 202; Citizens' Nat. Bk. 
 
 650 
 
 v. Elliott, 55 Iowa, 104; Rogers v. 
 Hastings, etc., Ry. Co., 22 Minn. 25; 
 Missouri River R. R. Co. v. Richards, 
 8 Kan. 101; Mitchell v. Holman, 3 
 Oregon, 280; Flynn v. Columbus 
 Club, 21 R. I. 534; Bassett v. Fair- 
 child, 132 Cal. 637; Lowe v. Ring, 106 
 Wis. 647. See Henry v. Rutland, 
 etc., R. R. Co., 27 Vt. 435; Hodges 
 i>. Same, 29 Vt. 220; Greensboro, etc., 
 T. Co. v. Stratton, 120 Ind. 294; Bart- 
 lett v. Mystic R'r Co., 151 Mass. 433; 
 Severson v. Bi-Metallic Co., 18 Mont. 
 13. Contra, Levisee v. Shreveport 
 City R. R. Co., 27 La. Ann. 641; Pew 
 v. Gloucester Nat. Bk., 130 Mass. 391; 
 Ruby Chief M. & M. Co. v. Prentice, 
 25 Colo. 4. Compare McCarthy v. 
 Mt. Lecarte, etc., Co., Ill Cal. 328; 
 Security Co. v. Bennington Mon. 
 Ass'n, 71 Vt. 201. 
 
 8 E. g., a superintendent can. Bee 
 v. San Francisco, etc., R. R. Co., 46 
 Cal. 248; or a secretary, who is not 
 a trustee, or stockholder. Smith 
 v. Long Island R. R. Co., 102 N. Y. 
 190. Compare Eagle, etc., M'f'g Co. 
 v. Brown, 58 Ga. 240. 
 
 A corporation may agree to pay 
 an agent for his labor in obtaining 
 stock subscriptions. Cincinnati, I. 
 and C. R. R. Co. v. Clarkson, 7 Ind. 
 595. Or for such services a person 
 may recover on an implied promise. 
 Hall v. Vermont and Mass. R. R. Co., 
 28 Vt. 401; Low v. Connecticut, etc., 
 R. R. Co., 45 N. H. 370. A treasurer, 
 secretary, or cashier is prima facie
 
 CHAP. X.] 
 
 CORPORATION AND OFFICERS. 
 
 [§ 650. 
 
 § 648. It has recently been held in Xew York that when a 
 life insurance company has contracted with a person to act as 
 its general agent for a stipulated number of years at a speci- 
 fied yearly salary, and the company is dissolved by the action 
 of the state, and its affairs placed in the hands of a receiver, 
 before the expiration of the term for which the agent was 
 hired, he cannot recover from the funds in the hands of the 
 receiver his stipulated salary for the unexpired term of ser- 
 vice, as damages for not continuing the employment. The 
 contract was ended with the corporate dissolution by the 
 action of the state, a contingency which the parties on con- 
 tracting were held to have contemplated ; and was not broken 
 by the company itself. 1 
 
 § 649. Whether, by whom, and on what grounds a cor- 
 porate officer mav be removed from office is not 
 
 t t i i ' i • • o rm i • • • i i Removal of 
 
 settled by the authorities/ lhat his original elec- officers. 
 tion was invalid is undoubtedly a good ground. 3 
 But this ground has nothing to do with the good or bad con- 
 duct of the officer himself, and invalidates his original title. 
 Undoubtedly, agents who hold office merely at the pleasure of 
 superior officers may be removed by the latter : and without 
 cause. 4 And the by-laws may, and, to avoid controversy, cer- 
 tainly should provide for removals from office. 5 
 
 § 650. Whatever implied power to remove officers for cause 
 there may be in a corporation, would seem to exist in that body 
 which appointed or elected the officer in question. Thus very 
 
 entitled to compensation: but if he 
 agrees to perform the services gratis. 
 this controls. First Xat. B*k r. 
 Drake, 29 Kans. 311. In the absence 
 of express agreement, a treasurer is 
 not entitled to compensation for in- 
 dorsing notes of his corporation, so 
 that they can be discounted. Parker 
 B. Xickerson, 137 Mass. 487. 
 
 1 People i\ Globe Mutual Ins. Co., 
 91 N. Y. 174; seinble contra, Rose- 
 baum v. Credit System Co., 61 X. J. 
 L. 543. 
 
 2 In Angell and Ames on Corp., 
 §§ 425 et spq., is given a summary 
 of the causes that have been held 
 
 grounds for removing officers of mu- 
 nicipal corporations. How far these 
 cases might be held applicable to 
 stock corporations is a question. 
 
 3 See §§ 577-581. 
 
 4 Hunter o. Sun Mutual Ins. Co., 
 26 La. Ann. 13. 
 
 5 See Hunter v. Sun Mutual Ins. 
 Co., supra; In re Griffin Iron Co., 
 63 X. J. L. 16S. A person entering 
 the service of a corporation as secre- 
 tary is affected with notice of its by- 
 laws relating to removals from office. 
 Douglass c. Merchants' Ins. Co., 118 
 X. Y. 484. 
 
 651
 
 § 050.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. X. 
 
 likely any officer appointed by the board of directors or trustees 
 could for cause be removed by them from the office to which 
 they had appointed him. But a board of directors has no im- 
 plied power, it would seem, to remove one of their own number, 
 even for cause ; or exclude him from taking part in their pro- 
 ceedings. 1 It would seem, however, that for good grounds the 
 majority of shareholders in a duly summoned meeting of the 
 corporation should be competent to remove a director. But 
 in the ordinary case of directors elected annually to serve for a 
 year, there is no power in the corporation to remove them ar- 
 bitrarily before the expiration of their term of office. 2 
 
 1 See § 808. 
 
 2 Imperial Hydropathic Hotel Co. 
 v. Harnpson, 23 Cli. Div. 1. Officers 
 of a corporation who, on the expira- 
 tion of their term of office, refuse to 
 deliver to their successors its books, 
 
 652 
 
 etc., may be compelled by mandamus. 
 Fasnacht v. German Literary Ass'n, 
 99 Ind. 133. In Ward v. Davidson, 
 89 Mo. 445, directors were removed 
 by the court for misconduct.
 
 CHAP. XI.] CORPORATION AND CREDITORS. 
 
 [§ 651. 
 
 CHAPTER XI. 
 
 LEGAL RELATIONS BETWEEN THE CORPORATION AND 
 ITS CREDITORS. 
 
 How they arise. General view, 
 §§ 651, 652. 
 
 Creditors have no voice in the cor- 
 porate management, §653. 
 
 Corporate assets a trust fund for 
 creditors? §§ 654, 655. 
 
 Creditors may follow them, § 656. 
 
 Transfer of assets to a new corpora- 
 tion, § 657. 
 
 Right of creditors to restrain their 
 misapplication, §§ 658, 659. 
 
 Rights of creditors regarding debts 
 due the corporation. Unpaid 
 stock subscriptions, §§660, 661. 
 
 Creditors may enjoin wrongs threat- 
 ening the corporation, § 662. 
 
 Creditors of an insolvent corpora- 
 tion not entitled to a receiver as 
 a matter of course, § 663. 
 
 Creditors cannot prevent dissolution, 
 §664. 
 
 No alteration of charter; nor con- 
 solidation. Survival of creditors' 
 lien, §665. 
 
 Liability of consolidated corpora- 
 tion, § 666. 
 
 Liability of corporation succeeding 
 the debtor corporation, § 667. 
 
 Insolvent assignments, § 668. 
 
 Relative rights of creditors, § 669. 
 
 Set-off, § 670. 
 
 Corporate property, when exempt 
 from execution, § 671. 
 
 Relations between a bank and de- 
 positors, § 672. 
 
 Lien of bank, § 673. 
 
 Bondholders, §674. 
 
 Equitable mortgages, § 675. 
 
 Railroad mortgages. Rolling stock, 
 §676. 
 
 Invalid provisions in corporate 
 securities, § 677. 
 
 May not invalidate the securities, 
 §678. 
 
 Corporate bonds negotiable, § 679. 
 
 Coupons, § 680. 
 
 Rights of bondholders, § 681. 
 
 Remedies of bondholders, § 682. 
 
 How they 
 arise. 
 General 
 view. 
 
 § 651. The legal relations between a creditor and the 
 corporation are occasioned either by a contract 
 binding on the latter, or by a tort for which it is 
 responsible. Before the claims of a creditor arise, 
 and during the transaction itself on which his 
 claims are based, the creditor is simply an outsider towards 
 whom the corporation, or the corporate agent l with whom the 
 creditor contracts, owes no duty not due to members of the 
 public at large. And creditors will rarely have any standing 
 in court to object to acts of the corporation done before their 
 
 1 See§§ 752-755. 
 
 653
 
 § 653.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. 
 
 claims arose. 1 From the moment, however, that a person 
 becomes a creditor, the corporation owes it to him to satisfy 
 his claim from the corporate funds, and is under a duty 
 towards him which he may enforce, not to waste the corporate 
 funds, or divert them from the purposes for which they were 
 set apart, so as to prevent the satisfaction of his claim. 2 From 
 that moment the corporation, having in charge funds in regard 
 to which the creditor has rights, occupies, because it has such 
 funds in charge, 3 a position of trust towards him. Moreover, 
 when subsequently the corporation or its representatives deal 
 with persons who are not yet creditors, they represent the 
 creditors, whose rights have already arisen, to this extent, 
 that the rights of the latter in the corporate funds are ordinarily 
 bound by the acts of the corporation or its representatives. 4 
 
 § 652. The classes and legal characteristics of the acts which 
 are binding on the corporation, as representative of the inter- 
 ests of all persons in the corporate enterprise, are discussed in 
 Chapter VII. , the chapter devoted to the treatment of the ef- 
 fect of acts done by or on behalf of a corporation in occasion- 
 ing legal relations between it and persons with whom it deals. 
 The present chapter is taken up with the discussion of the 
 rights of creditors who by some transaction have acquired a 
 valid claim on the corporate funds. 
 
 § 653. The corporate constitution specifies, among other 
 things, the objects of incorporation, to which the 
 corporate funds are to be applied. To the applica- 
 tion of the corporate funds to these objects in 
 accordance with the constitution a creditor cannot 
 object. As long as the affairs of the corporation 
 are being carried on in good faith and in accordance with the 
 
 Creditors 
 have no 
 voice in the 
 corporate 
 manage- 
 ment. 
 
 1 When a corporation, solvent at 
 the time, with no actual intent to 
 defraud its creditors, conveys its 
 lands for an inadequate considera- 
 tion, its subsequent creditors cannot 
 question the transaction. Graham 
 v. Railroad Co., 102 U. S. 148 ; cf. Nix 
 v. Miller, 26 Colo. 203. 
 
 2 As against its creditors, a corpo- 
 ration has no right to apply its prop- 
 
 654 
 
 erty to the payments of debts (e. g., 
 of its officers) which it is not bound 
 to pay. Nat. Tube Works Co. v. 
 Machine Co., 118 Mo. 305 ; ace. State 
 v. Shapleigh Hardware Co., 147 Mo. 
 366. 
 
 3 See §§ 41-47. 
 
 4 See §525; also Railway Co. v. 
 Ailing, 99 U. S. 463.
 
 CHAP. XI.] CORPORATION AND CREDITORS. 
 
 [§ 655. 
 
 constitution, a creditor cannot interfere in the corporate man- 
 agement. 
 
 § 654. It is not to be inferred, however, that the only rights 
 of a general creditor are to sue for his debt, and, on 
 recovery of a judgment, levy a fruitless execution Cor P° rate 
 on the departed funds of an insolvent corporation. " trust 
 He has many important rights, all more or less based creditors? 
 on or related to the fundamental doctrine that the 
 purposes for which corporate funds are set apart include the 
 payment of the corporate indebtedness ; and that for this, 
 among other purposes, these funds are held in trust. 
 
 § 655. This doctrine was first formulated by Justice Story 
 in "Wood v. Dummer, where the learned justice said: 1 "It 
 appears to me very clear, upon general principles, as well as 
 the legislative intention, that the capital stock of banks is to 
 be deemed a pledge or trust fund for the payment of debts 
 
 1 S Mason, 308, 311. It seems best 
 to leave the " trust fund" doctrine 
 as stated in the text; but recent 
 cases are tending to minimize if not 
 to impugn it. "While, it is true, 
 language has been frequently used to 
 the effect that the assets of a corpo- 
 ration are a trust fund held by a cor- 
 poration for the benefit of creditors, 
 this has not been to convey the idea 
 that there is a direct and express 
 trust attached to the property. . . . 
 When a court of equity does take into 
 its possession tbe assets of an insol- 
 vent corporation, it will administer 
 them on the theory that they in 
 equity belong to the creditors and 
 stockholders, rather than to tbe cor- 
 poration itself. In other words, and 
 that is the idea which underlies all 
 these expressions in reference to 
 'trust' in connection with the prop- 
 erty of a corporation, the corpora- 
 tion is an entity, distinct from its 
 stockholders as from its creditors. 
 Solvent, it holds its property as any 
 individual holds his, free from the 
 touch of a creditor who has acquired 
 no lien; free also from the touch of 
 
 a stockholder who, though equitably 
 interested in, has no legal right to, 
 the property. Becoming insolvent, 
 the equitable interest of the stock- 
 holders in the property, together 
 with their conditional liability to the 
 creditors, place the property iu a 
 condition of trust, first, for the credit- 
 ors, and then for the stockholders. 
 Whatever of trust there is arises from 
 the peculiar and diverse equitable 
 rights of the stockholders as against 
 the corporation in its property, and 
 their conditional liability to its cred- 
 itors. It is rather a trust in the ad- 
 ministration of the assets after pos- 
 session by a court of equity than a 
 trust attaching to the property, as 
 such, for the direct benefit of either 
 creditor or stockholder." Hollins v. 
 Brierfield Coal, etc., Co., 150 U. S. 
 371, 382-3S3. See Worthen v. Grif- 
 fith, 59 Ark. 562; Marvin v. Ander- 
 son, 111 Wis. 387; Plow Co. v. Rude, 
 GO Kas. 145; Kelly o. Clark, 21 Mont. 
 291; Schufeldtu. Smith, 131 Mo. 280; 
 Corey v. Wadsworth, 118 Ala. 488. 
 See, also, §§ 702a, 7026. 
 
 655
 
 § 655.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. 
 
 contracted by the bank. The public as well as the legislature 
 have always supposed this to be a fund appropriated for such 
 purpose. The individual stockholders are not liable for the 
 debts of the bank in their private capacities. The charter 
 relieves them from personal responsibility, and substitutes the 
 capital stock in its stead. Credit is usually given to this fund 
 by the public as the only means of repayment. During the 
 existence of the corporation it is the sole property of the cor- 
 poration, and can be applied only according to the charter ; 
 that is, as a fund for the payment of its debts, upon the se- 
 curity of which it may discount and circulate notes. Why 
 otherwise is any capital required by our charters? If the 
 stock may the next day after it is paid in be withdrawn by the 
 stockholders without payment of the debts of the corporation, 
 why is its amount so strenuously provided for, and its pay- 
 ment by the stockholders so diligently required ? To me this 
 point appears so plain upon principles of law as well as com- 
 mon sense, that I cannot be brought into any doubt that the 
 charters of our banks make the capital stock a trust fund for 
 the payment of all the debts of the corporation." 
 
 Again, in Sanger v. Upton, giving the opinion of the Federal 
 Supreme Court, Justice Swayne said: 1 "The capital stock of 
 an incorporated company is a fund set apart for the payment 
 of its debts. It is a substitute for the personal liability which 
 subsists in private co-partnerships. When debts are incurred, 
 a contract arises with the creditors that it shall not be with- 
 drawn or applied, otherwise than upon their demands, until 
 such demands are satisfied. The creditors have a lien upon it 
 in equity. 2 If diverted they can follow it as far as it can be 
 traced, and subject it to the payment of their claims, except 
 as against holders who have taken it bona fide for a valuable 
 consideration, and without notice. It is publicly pledged to 
 those who deal with the corporation for their security. Un- 
 paid stock is as much a part of this pledge, and as much a 
 part of the assets of the company, as the cash which has been 
 paid in upon it. Creditors have the same right to look to it 
 as to anything else, and the same right to insist upon its 
 
 i 91 U. S. 5G, 60. I First Nat. Bk. v. Dovetail Co., 143 
 
 2 But no " specific" lien. Electric I Ind. 550; Atlas National Bank v. 
 
 Co. v. Electric Co., 116 N. C. 112; I Moran Co., 138 Mo. 59. 
 656
 
 CHAP. XI.] CORPORATION AND CREDITORS. 
 
 [§ 656. 
 
 payment as upon the payment of any other debt due the 
 company." ' 
 
 § 656. If the corporate funds are trust funds for the dis- 
 charge of the corporate indebtedness, it follows on Creditors 
 well-grounded principles of equity jurisprudence, may follow 
 that the beneficiaries of the trust, shareholders or 
 creditors, can claim such funds in the hands of any one who 
 has not in good faith given value for them without notice of 
 a violation of the trust. 2 And, moreover, every one receiving 
 corporate funds knowing them to be such, is affected with 
 notice of the purposes for which they are held in trust. That 
 corporate funds may be tracked by creditors into the hands of 
 any person to whom they have been transferred without con- 
 
 1 Accord, Bartlett v. Drew, 57 N. 
 Y. 587; Hastings v. Drew, 76 N. Y. 
 9; County of Morgan v. Allen, 103 
 U. S. 498; Richardson v. Green, 133 
 U. S. 30; Coleman v. Howe, 154 111. 
 458; Singer v. Hutchinson, 183 111. 
 606; Corey v. Wads worth, 99 Ala. 68; 
 Bruner v. Brown, 139 Ind. 600; South 
 Bend, etc., Co. v. Ins. Co., 4 S. Dak. 
 173; Adamant Mfg. Co. v. Wallace, 
 16 Wash. 614; Thompson v. Reno 
 Sav's Bk., 19 Nev. 103; Bucku. Ross, 
 68 Conn. 29; Marshall Foundry Co. 
 v. Killian, 99 N. C. 501; Bell's App., 
 115 Pa. St. 88; Lee v. Imbrie, 13 Oreg. 
 510; Lane's App., 105 Pa. St. 491; 
 Thompson-Houston Elec. Co. v. 
 Murray, 60 N. J. L. 20; Van Pelt v. 
 Gardner, 54 Neb. 702; and cases in 
 succeeding notes. 
 
 The doctrine is sometimes embod- 
 ied in a statute. " No association 
 or any member thereof, shall during 
 the time it shall continue its banking 
 operations withdraw or permit to be 
 withdrawn, either in the form of 
 dividends or otherwise, any portion 
 of its capital. If losses have at any 
 time been sustained by any such as- 
 sociation, equal to or exceeding its 
 undivided profits then on hand, no 
 dividend shall be made; and no divi- 
 
 42 
 
 dend shall ever be made by any as- 
 sociation, while it continues its 
 banking operations, to an amount 
 greater than its net profits then on 
 hand, deducting therefrom its losses 
 and bad debts." U. S. Rev. Stat., 
 § 5204. The trust fund doctrine was 
 disapproved. O' Bear Jewelry Co. u. 
 Volfer, 106 Ala. 205; Corey v. Wads- 
 worth, 118 Ala. 488. The point held, 
 was that the mere insolvency of a 
 corporation does not engraft a trust 
 upon its property in favor of credit- 
 ors, ib. ; and Barret & Co. v. Pollak & 
 Co., 108 Ala. 390; Pollak & Co. v. 
 Muscogee Mfg. Co.. ib. 467. But 
 compare Age-Herald Co. o. Potter, 
 109 Ala. 675. 
 
 2 Cole v. Millerton Iron Co., 133 N. 
 Y. 164. The property of a corpora- 
 tion " is so far regarded as in the 
 nature of trust property that it can 
 be recovered by the company from 
 any person who has obtained it from 
 the directors with notice that they 
 are acting beyond their powers." 2 
 Liudley on Part., 593. See Bryson 
 o. AVurwich, etc., Canal Co., 4 De G. 
 M. & G. 711; Ernst v. Croysdill, 2 
 De G. F. & J. 175; Hardy v. Metro- 
 politan Land, etc., Co., L. R. 7 Ch. 
 427. 
 
 657
 
 § 057.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. 
 
 Transfer of 
 assets to a 
 new corpo- 
 ration. 
 
 sideration is a proposition supported unanimously by the 
 authorities. 1 
 
 § 657. Accordingly, a corporation cannot place its assets 
 beyond the reach of its creditors, merely by going 
 through a process of re-incorporation, taking a new 
 name, transferring without consideration the assets 
 of the old corporation to the new one, and issuing 
 shares in the capital stock of the new corporation to holders of 
 shares in the capital stock of the old/ 1 And if the share- 
 holders of one corporation organize another, and transfer to it 
 all the property of the former without paying the former's 
 debts, the obligations of the old company may be enforced 
 against the new one to the extent of the assets transferred to 
 it. 3 It is held, however, that before a creditor has a standing 
 
 1 Wood v. Dummer, 3 Mason, 308; 
 Wright v. Petrie, 1 Sm. & M. Ch. 
 (Miss.) 282; Marr v. Bk. of West 
 Tennessee, 4 Coldw. (Tenu.) 471; 
 Tinkham v. Borst, 31 Barb. 407; 
 Goodwin v. McGehee, 15 Ala. 232; 
 Jones v. Arkansas Mechanical Co., 
 38 Ark. 17; Union Nat. Bank v. 
 Douglass, 1 McCrary, 86. See Cur- 
 ran v. State, 15 How. 304, 307; Rail- 
 road Co. v. Howard, 7 Wall. 393, 409. 
 Montgomery, etc., R. R. Co. v. 
 Branch, 59 Ala. 139. These princi- 
 ples would apply to fraudulent 
 leases of its property by a heavily 
 indebted corporation. See Chicago, 
 etc., Ry. Co. v. Chicago Bank, 134 
 U. S. 276. 
 
 2 San Francisco, etc., R. R. Co. v. 
 Bee, 48 Cal. 398; Hancock v. Hol- 
 brook, 40 La. Ann. 53. See Cole v. 
 Millerton Iron Co., 133 N. Y. 164; 
 Hurd v. N. Y. & C, etc., Co., 1(57 
 N. Y. 89; Montgomery Web Co. v. 
 Dieuelt, 133 Pa. St. 585; Vance v. 
 McNabb Coal Co., 20 S. W. Rep. 
 (Tenn.) 424; Ewing v. Composite 
 Brake Shoe Co., 169 Mass. 72; cf. 
 White v. New Bedford Cotton Waste 
 Corp., 178 Mass. 20. 
 
 3 Hibernia Ins. Co. v. St. Louis, 
 
 658 
 
 etc., Transportation Co., 13 Fed. Rep. 
 516; Booth v. Bunce, 33 N. Y. 139; 
 Barclay v. Quicksilver MTg Co., 9 
 Abb. Pr. N. S. (N. Y.) 283; Same 
 v. Same, 6 Lans. (N. Y.) 25; Kelly 
 v. Mariposa Land, etc., Co., 4 Hun 
 (X. Y.), 632; Brum v. Merchants' 
 Mut. Ins. Co., 16 Fed. Rep. 140. 
 National B'k v. Texas Investm't Co., 
 74 Tex. 421; Grennell v. Detroit Gas 
 Co., 112 Mich. 70; Santa Fe E. Co. v. 
 Hitchcock, 9 N. Mex. 156. Com- 
 pare Fort Worth Pub. Co. v. Hitsou, 
 80 Tex. 216; Chase v. Michigan Tel. 
 Co., 121 Mich. 631. Unsecured cred- 
 itors of a corporation have a lien on 
 its property transferred to a suc- 
 ceeding corporation superior to the 
 lien of bondholders under a mort- 
 gage executed by the succeeding cor- 
 poration; the succeeding corporation 
 having given only its own stock in 
 payment for such property. Mont- 
 gomery, etc., R. R. Co. v. Branch, 59 
 Ala. 139. When, however, a railroad 
 corporation under authority of its 
 charter sells all its property and 
 franchises to another corporation for 
 value, the general creditors of the 
 vendor have no lien on such prop. 
 erty, and the vendee takes free from
 
 CHAP. XI.] CORPORATION AND CREDITORS. 
 
 [§ 659. 
 
 in court to inquire into a transfer of assets made by his debtor 
 corporation he must have obtained judgment against it. 1 
 
 § 658. On the principle that the funds of a corporation are 
 held in trust for its creditors, is also based the only Ri s ht of 
 
 ' J creditors to 
 
 right of the latter to interfere with the management restrain 
 of the corporate affairs. If the corporate funds are application, 
 being dissipated or applied to purposes beyond the 
 scope of the corporate objects in such a way as to imperil the 
 solvency of the corporation and the lien of the creditors on its 
 funds, a creditor can restrain the misapplication.* 2 This would 
 seem to follow a fortiori from the rule that a creditor can 
 follow corporate funds into the hands of any one receiving 
 them with notice of their misapplication ; and the remedy of 
 the creditor is to a»pply for an injunction and the appointment 
 of a receiver. 3 
 
 § 659. In Kearns v. Leaf, and Aldebert v. Kearns, 4 two 
 English cases decided together, a policy-holder in a joint- 
 stock insurance company, the shareholders of which were not 
 subject to personal liability, and whose funds, by provisions 
 in the company's deed and in the plaintiff's policy, were 
 liable for the sum insured, was granted an injunction restrain- 
 ing the company from transferring its assets to another com- 
 
 their claims. Chesapeake, O. & S. 
 R. R. Co. v. Griest, 85 Ky. 619. It 
 would seem to be simply a question 
 of the honesty of the transaction. 
 
 A judgment against the prior cor- 
 poration, recovered on a claim for 
 personal injuries occurring after the 
 transferial of its property to a suc- 
 ceeding corporation, cannot be en- 
 forced against that property in 
 possession of the succeeding corpo- 
 ration. Gray v. National Steamship 
 Co., 115 U. S. 116. 
 
 1 Tawas, etc., R. R. Co. v. Circuit 
 Judge, 44 Mich. 479. See, also, 
 Smith v. Railroad Co., 99 U. S. 398. 
 
 2 The English cases do not recog- 
 nize as fully as the American the 
 doctrine that corporate funds are 
 held in trust for creditors. In Eng- 
 land there has never been the same 
 
 necessity for the doctrine, as Eng- 
 lish companies are more apt to 
 be of unlimited personal liability. 
 Accordingly, the last proposition in 
 the text may not be law in England. 
 See Mills v. Northern R'y Co., L. R. 
 5 Ch. 621. 
 
 8 Conro v. Gray, 4 How. Pr. 
 (N. Y.) 166. There the court said 
 that it could appoint a receiver or 
 require security for the due preser- 
 vation and appropriation of the 
 property. See Fisk v. Union Pacific 
 R. R. Co., 10 Blatchf. 518 ; Innes v. 
 Lansing, 7 Paige (N. Y.), 583; Whit- 
 comb v. Fowle, 7 Abb. N. C. (N. Y.) 
 295; Irons v. Manufacturers' Nat. 
 B'k, 6 Biss. 301; Lothrop v. Stedman, 
 13 Blatchf. 134. Compare Bank of 
 St. Mary's v. St. John, 25 Ala. 506. 
 
 * 1 Hem. & Mil. 681. 
 
 659
 
 § 660.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. 
 
 pany, without first providing for the payment of the plaintiff's 
 policy. Vice-Chancellor Page-Wood said : " I apprehend that 
 under these stipulations the policy-holders have no right to 
 meddle with anything, wise or unwise, which the company 
 may do in accordance with the deed. For example, if the 
 company invest in a hazardous or even ruinous security, the 
 policy-holders are not entitled to interfere. It would be 
 extremely mischievous to allow such interference. Still, the 
 conduct of the company might reach a point of absolute waste 
 of the assets in contravention of the provisions of the deed, at 
 which the right of the policy-holders to intervene might be 
 considered to arise. . . . The principle on which the plaintiff's 
 case is founded here, is, that the fund which was held out 
 to him as his security, and to which he has himself con- 
 tributed, shall not be misapplied contrary to the provisions 
 of the deed. He says that he comes here to prevent a waste 
 of the assets. His position is somewhat analogous to that of 
 a person having a contingent debt against a testator's estate, 
 who may come into this court to prevent the estate being paid 
 away to legatees, or wasted, or thrown away by the executors. 
 The argument of the company, as I understand it, goes this 
 length, that the policy-holder is simply a contingent future 
 creditor minus the personal remedy. If that were the whole 
 of the contract, it would be very different from what persons 
 who insured in the company must have supposed. They could 
 not have imagined that it was to be in the power of the 
 directors of the company to destroy all their interests under 
 their policies, leaving them without redress until their policies 
 should have matured by death. ... In my opinion the plain- 
 tiff did acquire under that contract such a species of interest in 
 the fund as would entitle him to interfere to save the property 
 from being wasted contrary to the provisions of the deed." 1 
 
 § 660. Not only has a creditor the right to restrain an 
 Rights of improper dissipation of funds of the corporation 
 regarding actually in its possession, but he has the further 
 thecorpol r ' l ght, ^ these do not suffice for the payment of the 
 
 i 1 Hem. & Mil. 707-708. See, 
 also, Evans i\ Coventry, 5 De G., M. 
 & G. 911; In re State Fire Ins. Co., 
 1 Hem. & Mil. 457. 
 660 
 
 An insurance company has no 
 right to turn its policy-holders over 
 to another company against their 
 consent, and policy-holders are un-
 
 CHAP. XI.] CORPORATION AND CREDITORS. 
 
 [§ 661. 
 
 debt due him, to compel the debtors of the corpora- 
 tion to pay their debts. 1 This right of the creditors Unpaid 
 also is usually rendered effective through the ap- scriptions. 
 pointment of a receiver, who will be competent to collect all 
 debts owing the corporation, for the benefit of persons inter- 
 ested, shareholders or creditors. Especially is it competent 
 for the receiver or assignee in insolvency to collect — and in- 
 cumbent on him to do so — all unpaid stock subscriptions. 2 
 
 § 661. As stated in Sanger v. Upton, 3 unpaid stock subscrip- 
 tions, just as much as subscriptions actually paid in, constitute 
 part of the capital of the corporation, of the trust fund devoted 
 to the discharge of its indebtedness. Ordinarily, as long as the 
 corporation is a going concern under the management of its 
 regular officers, a call duly made by the board of directors is a 
 condition precedent to the liability of a shareholder to pay any 
 part of his unpaid subscription. 4 If the directors fail to make 
 a call when the unpaid subscriptions are needed to pay the debts 
 of the corporation, a court of equity, on the suit of a creditor, 
 will compel them to do so. 5 Ordinarily, however, to apply for 
 the appointment of a receiver is the course pursued. 
 
 der no obligation to protest, in order 
 to preserve their rights. An insur- 
 ance company contracts to keep on 
 hand the funds required by law for 
 the security of its patrons; and also 
 to continue its business so as to keep 
 in a condition to perform its engage- 
 ments. People v. Empire Mut. Life 
 Ins. Co., 92 N. Y. 105. 
 
 1 Before an alleged creditor of a 
 railroad company can file a creditor's 
 bill to obtain from one of its debtors 
 the satisfaction of his claim, he must 
 establish his debt by a judgment in 
 an action at law. Smith v. Railroad 
 Co., 99 U. S. 398. A judgment cred- 
 itor can garnishee a shareholder (on 
 a judgment against the corporation) 
 for unpaid calls due the corporation. 
 Meints v. East St. Louis, etc., Mill 
 Co., 89 111. 48; Hall & Farley, Trus- 
 tees, v. Henderson, 114 Ala. 601; Ro- 
 man v. Dimmick, 115 Ala. 233; Pick- 
 ering v. Townsend et al., 118 Ala., 351 ; 
 
 Lea v. Iron Bell Mercantile Co., 119 
 Ala. 271; Cooper v. Adel Security 
 Co., 122 N. C. 463: Martin v. South 
 Salem Land Co., 94 Va. 28. See Da- 
 vis Bros. 13. Montgomery, etc., Co., 
 101 Ala. 127. But cannot garnishee 
 a shareholder for unpaid subscrip- 
 tions for which no calls have been 
 made. Teague, Barnett & Co. v. Le 
 Grand, 85 Alabama, 493. 
 
 2 See §542. A creditor cannot 
 maintain an action to reach a debt 
 due to the corporation, when the 
 corporation is in the hands of a re- 
 ceiver. First Nat. Bk. v. Dovetail, 
 etc., Co., 143 Ind. 534. 
 
 8 § 655. 
 
 'See §§703, 517, 543. 
 
 8 Germantown Passenger Ry. Co. v. 
 Fitler, 60 Pa. St. 124; Ward e. Gris- 
 woldville Mfg. Co., 16 Conn. 593, 601; 
 Glenn v. Williams, 60 Md. 93; Sco- 
 ville v. Thayer, 105 U. S. 143, 155; 
 Salmon v. Hamborough Co., 1 (Eng.) 
 
 661
 
 § 663.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. 
 
 § 662. In cases of urgent necessity where the corporation 
 
 fails to protect itself from threatened wrongs, it is 
 
 may enjoin competent for a creditor, when the wrong if accom- 
 
 threatening plished would injure his vested rights, to enjoin 
 
 tnecorpo- ^ e wron cr.i And, under such circumstances, it would 
 
 ration. ° ' ' 
 
 seem that the principle that a shareholder cannot 
 maintain a bill in equity against a wrong-doer to prevent an 
 injury to the corporation unless he shows that the corporation 
 has refused to take measures to protect itself, does not apply 
 to a bill filed in good faith by a creditor. 2 
 
 § 663. The insolvency of a corporation so long as it con- 
 tinues to carry on its business in an honest manner, 
 Creditors of c | oes no t under all circumstances give the creditors 
 
 an insolvent 
 
 corporation an absolute right to the appointment of a receiver 
 toareceiver of the corporate assets. 3 Any such absolute right 
 of cours" er m ight often prove very oppressive, and, like other 
 peculiarly equitable remedies, the appointment of a 
 receiver is usually a matter within the discretion of the court. 4 
 Thus, according to a Massachusetts decision, the allegations 
 that a corporation is insolvent, that all its property is mort- 
 gaged to trustees for the benefit of one class of creditors ; that 
 it owes large amounts to other creditors, one of which has 
 attached its property ; that it is about to execute a lease for 
 nine hundred and ninety-nine years to said attaching creditor, 
 will not sustain a bill in equity brought by creditors of the 
 
 Chan. Cas. 204; see Ogilvie v. Knox 
 Ins. Co., 2 Black, 539; S. C, 22 How. 
 380; Allen v. Montgomery R. R. Co., 
 11 Ala. 437; Adler v. Milwaukee Pat- 
 ent Brick Mfg. Co., 13 AVis. 57; Dal- 
 ton, etc., R. R. Co. v. McDaniel, 56 Ga. 
 191; 2 Lindley on Part., 628; com- 
 pare Reg. v. Victoria Park Co., 1 
 Q. B. 288. Or the court will make 
 the call. Marson v. Deither, 49 Minn. 
 423. 
 
 1 Newby v. Oregon Central R. R. 
 Co., Deady, 609. 
 
 2 Lothrop v. Stedman, 42 Conn. 
 583; S. C, 13 Blatchf. 141. 
 
 8 See Catlin v. Eagle Bk., 6 Conn. 
 233; Pondville Co. v. Clarke, 25 Conn. 
 
 662 
 
 97; Bishop v. Brainerd, 28 Conn. 289, 
 301; Hoyt v. Shelden, 3 Bosw. (N. 
 Y.) 267; Curtis v. Leavitt, 15 N. Y. 
 10, 198; Hollins v. Brierfield Coal, 
 etc., Co., 150 U. S. 371; Falmouth 
 Nat. Bk. v. Canal Co., 160 Mass. 550. 
 4 But not always; see Railroad Co. 
 v. Soutter, 2 Wall. 510. A receiver 
 canuot be appointed ex parte in a 
 proceeding (a hill in ecmity) brought 
 by a creditor to wiud up an insolvent 
 corporation, pending the decision 
 on a demurrer putting in issue the 
 creditor's right to file the bill. Cook 
 v. Detroit, etc., R. R. Co., 45 Mich. 
 453.
 
 CHAP. XI.] CORPORATION AND CREDITORS. 
 
 [§ 664. 
 
 corporation to enjoin it from doing business and for the ap- 
 pointment of receivers. 1 But a judgment creditor is entitled 
 to a receiver on showing that there is danger that a corpora- 
 tion, admittedly insolvent, will misappropriate its assets to 
 his injury. 2 
 
 It follows, moreover, since it is only to protect their claims 
 that creditors are ever entitled to interfere in the corporate 
 affairs, that they can object to no action, authorized or unau- 
 thorized, on the part of the corporate management, which does 
 not injure their interests. Thus, a court of equity will not, 
 on the petition of a general creditor, restrain a corporation 
 from converting its assets into money by a sale to a share- 
 holder, when no shareholder objects, and the sale is honestly 
 made for an adequate price, with intent to apply the proceeds 
 pro rata to the payment of the corporate indebtedness. 3 
 
 § 664. Accordingly, a creditor cannot prevent the dis- 
 solution of a corporation. 4 For the obligation of 
 contracts entered into by the corporation survives 
 the dissolution ; and creditors may still enforce their 
 claims against any corporate property which has not 
 
 Creditors 
 cannot pre- 
 vent disso- 
 lution ; 
 
 1 Pond v. Framingham, etc., R. R. 
 Co., 130 Mass. 194. Compare Mer- 
 chants', etc., Bank v. Trustees, 63 Ga. 
 549. Still at the suit of a judgment 
 creditor a court of equity has power 
 to take possession of the property 
 (a bridge) of a corporation, and ap- 
 point a receiver to collect the tolls 
 and pay them into court, for the 
 purpose of paying the judgment. 
 Covington Drawbridge Co. u. Shep- 
 herd, 21 How. 112. A creditor may 
 enforce his claims, though he be 
 also a shareholder. Brinham v. Wel- 
 lersburg Coal Co., 47 Pa. St. 43. 
 
 2 Turnbull v. Prentiss Lumber Co., 
 55 Mich. 387. It has been held that 
 in the case of a corporation which is 
 insolvent and which has been aban- 
 doned by its officers and directors, a 
 simple contract creditor can main- 
 tain an action for the appointment 
 of a receiver and the administration 
 of its assets. Nunnally v. Strauss, 
 
 94 Va. 255, following Finney v. Ben- 
 nett, 27 Gratt. 305. 
 
 3 Barr v. Bartram M'f'g Co., 41 
 Conn. 506. Compare Swepson v. 
 Bank, 9 Lea (Tenn. ), 713. A general 
 creditor cannot secure the appoint- 
 ment of a receiver in an action to 
 prevent a corporation from fraudu- 
 lently disposing of its property. Int. 
 Trust Co. v. United Coal Co., 27 
 Colo. 246. 
 
 4 Mum ma v. Potomac Co., 8 Pet. 
 2S1 ; Smith v. Chesapeake, etc., 
 Canal Co., 14 Pet. 45; Currant. State, 
 15 How. 310; Mobile R. R. Co. v. State, 
 29 Ala. 586. Neither will a court 
 forfeit the corporate franchises at 
 the suit of creditors, although acts 
 constituting a ground of forfeiture 
 have been done. Gaylord v. Ft. 
 Wayne, etc., R. R. Co., 6 Biss. 286. 
 See Cole v. Knickerbocker Life Ins. 
 Co., 23 Hun, 255. 
 
 663
 
 § 665.] THE LAW OP I'UIVATE CORPORATK )NS. [CHAP. XI. 
 
 passed into the hands of bon a fide purchasers. 1 "A corpora- 
 tion, by the very terms and nature of its political existence, is 
 subject to dissolution, by a surrender of its corporate fran- 
 chises and by a forfeiture of them for wilful misuser and 
 non-user. Every creditor must be presumed to understand the 
 nature and incidents of such a body politic, and to contract 
 with reference to them. And it would be a doctrine new in 
 the law that the existence of a private contract of the corpora- 
 tion should force upon it perpetuity of existence contrary to 
 public policy and the nature and objects of its charter." 2 
 § 665. Neither can creditors prevent the alteration or 
 repeal of the charter of a corporation, 3 as under such 
 circumstances the capital of the corporation remains 
 charged with their equitable liens. 4 And finally, 
 creditors cannot prevent a consolidation of their 
 debtor corporation with another. But a corporation 
 cannot compel its creditors to give up their lien on 
 its funds, and accept in lieu thereof the personal liability of 
 the consolidated cor] (oration. 5 The equitable lien of the 
 creditors of a consolidating corporation survives, and they 
 
 Nor altera^ 
 tiou of 
 charter; 
 liDi- consoli- 
 dation. 
 Survival of 
 creditors' 
 lien. 
 
 1 Mumnia 0. Potomac Co., 8 Pet. 
 281, 286; Howe v. Robinson, 20 Fla. 
 352. See Panhandle Nat. B'k v. 
 Emery, 78 Tex. 498. But it has been 
 held that the plaintiff in a suit in 
 equity may enjoin a corporation, de- 
 fendant in the suit, which might be 
 held liable to respond pecuniarily to 
 the plaintiff, and which had made 
 one attempt to procure its dissolu- 
 tion, from dissolving, or having a 
 receiver appointed, or distributing 
 its assets among its shareholders or 
 from making any disposition of its 
 property. Fisk v. Union Pacific R. 
 R. Co., 10 Blatchf. 518. 
 
 2 Mumma v. Potomac Co., 8 Pet. 
 281, 287, opinion of the court per 
 Story, J. 
 
 A corporation, composed of two 
 other corporations, had been dis- 
 solved after the recovery of a judg- 
 ment against it. By the dissolution, 
 the two original companies resumed 
 
 664 
 
 their corporate existence. It was 
 held that such dissolution did not 
 affect the rights of the judgment 
 creditor, nor the validity of his judg- 
 ment; and tbat upon notice to the 
 two companies he was entitled to an 
 execution against them. Ketcham v. 
 Madison, etc., R. R. Co., 20 Ind. 2G0. 
 8 Road ij. Frankfort Bank, 23 Me. 
 318. See Pennsylvania College Cases, 
 13 Wall. 190, 218-220; Lothrop v. 
 Stedman, 13 Blatchf. 184, 143. As 
 to the repeal of provisions inserted 
 in a charter specially for the benefit 
 of creditors, see Hawthorne v. Calef, 
 2 Wall. 10, and §§ 500, 501. 
 
 4 See cases in preceding note. 
 
 5 In re Manchester, etc., Life Ass. 
 Ass'n, L. R. 9 Eq. 643; In re Family 
 Endowment Society, L. R. 5 Cb. 118; 
 Griffith's Case, L. R. 6 Ch. 374; In re 
 India, etc., Life Ass. Co., L. R. 7 Ch. 
 G51. Compare Terhune u. Potts, 47 
 N. J. L. 218. See §§ 425-427.
 
 CHAP. XI.] CORPORATION AND CREDITORS. 
 
 [§ ™6. 
 
 may obtain satisfaction from its property after the same has 
 passed to the consolidated corporation. 1 And where a suit is 
 pending against a corporation at the time of its consolidation, 
 the plaintiff may still treat it as having a separate existence 
 for the purpose of maintaining his action against it. 2 
 
 § 666. The consolidated company is in most cases held to 
 assume a personal liability for the obligations of the 
 prior corporations whose property it has acquired, coraoli- ° 
 and of which it may be regarded as the result. 3 juration! 1 " 
 Accordingly, an action at law may be brought 
 against the consolidated company on the obligation of one of 
 the prior companies. 4 "When, however, at the time of the 
 consolidation, a suit against one of the former companies is 
 
 Still it has been held that after a 
 railroad company has consolidated 
 with another as authorized by their 
 charters, and confirmed by legisla- 
 tion conferring all rights, powers, 
 and privileges belonging to either 
 on the new corporation, liabilities 
 of either of the old companies can 
 be enforced only against the new 
 corporation. Indianola R. R. Co. v. 
 Fryer, 56 Tex. 609. Compare Hous- 
 ton, etc., R. R. Co. v. Shirley, 54 
 Tex. 125; People v. Empire Mut. 
 Life Ins. Co., 92 N. Y. 105; § 659. 
 
 1 Powell v. North Missouri R. R. 
 Co., 42 Mo. 63. See Hamilton v. 
 Railroad Co., 144 Pa. St. 34. Thus, 
 of course, a mortgage lien may be 
 enforced against property covered 
 by it, after the consolidation. Eaton, 
 etc., R. R. Co. v. Hunt, 20 Ind. 457. 
 See Racine, etc., R. R. Co. v. Farmers 1 
 Loan and Trust Co., 49 111. 331. 
 Likewise, a maritime lien on a ves- 
 sel remains after the consolidation 
 of the corporation owning the vessel. 
 The Key City, 14 Wall. 653. 
 
 2 Shackleford v. Mississippi Cen- 
 tral R. R. Co., 52 Miss. 159; Balti- 
 more and Susquehanna R. R. Co. v. 
 Musselman, 2 Grant's Cas. (Pa.) 
 348; East Tennessee, etc., R. R. Co. 
 
 v. Evans, 6 Heisk. (Tenn.) 607. See 
 Bruffet v. Gt. Western R. R. Co., 25 
 111. 353, 357. 
 
 It would seem, nevertheless, that 
 if — as is usually the case — the con- 
 solidation effects a dissolution of 
 the former corporations (see §421), 
 some change or substitution of 
 parties would be necessary: for on 
 dissolution suits against a corpora- 
 tion eo nomine abate. See § 435, and 
 see Indianola R. R. Co. v. Fryer, 
 supra. 
 
 3 Indianapolis, etc., R. R. Co. v. 
 Jones, 29 Ind. 465; Columbus, etc., 
 R'yCo. u.Powell, 40 Ind. 37; Thomp- 
 son v. Abbott, 61 Mo. 176; Miller v. 
 Lancaster, 5 Coldw. (Tenn.) 451, 
 520. See Houston, etc., R. R. Co. v. 
 Shirley, 54 Tex. 125; Warren v. 
 Mobile, etc., R. R. Co., 49 Ala. 582; 
 § 425. But see Shaw v. Norfolk 
 County R. R. Co., 16 Gay, 407; com- 
 pare Chase v. Vanderbilt, 5 J. & S. 
 (N. Y.)334. 
 
 This is frequently provided for 
 by the statute authorizing the con- 
 solidation. See Western Union R. 
 R. Co. v. Smith, 75 111. 496. 
 
 4 Columbus, etc., R'y Co. v. Skid- 
 more, 69 111. 566; Langborne v. Ry. 
 Co., 91 Va. 369. 
 
 665
 
 § 668.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. 
 
 pending, the consolidated company must be substituted in the 
 action or in some way properly brought into court, before a 
 judgment against it can be taken. 1 
 
 § 667. When there has been no consolidation of a debtor 
 corporation with another, the creditors of the former 
 ^rporation w ^ ^ ave n0 right to enforce their claims personalty 
 succeeding against the latter merely because it has acquired the 
 corporation, assets of the former, 2 unless the succeeding corpora- 
 tion is merely a continuance of the old one or a 
 revival of it under a new charter. 3 Moreover, that the name, 
 and the major part of the shareholders and officers, of the old 
 corporation were the same as those of the new, does not estab- 
 lish conclusively that the latter is a mere continuance of the 
 former. 4 " To ascertain whether a charter creates a new 
 corporation, or merely continues the existence of an old one, 
 we must look to its terms, and give them a construction con- 
 sistent with the legislative intent and the intent of the corpo- 
 rators." 5 
 
 § 668. To allow an insolvent corporation to make an 
 assignment of its property, giving preferences to a 
 portion of its creditors over the others, is unjust, as 
 well as utterly repugnant to the doctrine that cor- 
 porate property is a trust fund, on the credit of which persons 
 contract with the corporation. If such property constitutes 
 
 Insolvent 
 assign- 
 ments. 
 
 1 Selma, etc., R. R. Co. v. Harbin, 
 40 Ga. 706. Compare Ketcham v. 
 Madison, etc., R. R. Co., 20Ind. 260. 
 
 2 Bellows v. Hallowell, etc., B'k, 2 
 Mason, 31; Wyman v. Same, 14 Mass. 
 58; Bruffett v. Gt. Western R. R. Co., 
 25 111. 353. See § 415. But creditors 
 may under some circumstances fol- 
 low the property of their debtor cor- 
 poration. See § 657. 
 
 3 Mayor, etc., of Colchester v. Sea- 
 ber, 3 Burr. 1S66; see Broughton v. 
 Pensacola, 93 U. S. 266; Montgom- 
 ery Web Co. v. Dienelt, 133 Pa. St. 
 585 ; and § 657. 
 
 Thus, when a state bank is reor- 
 ganized iuto a national bank, under 
 provisions of the National Banking 
 Act, the national bank is liable for 
 
 666 
 
 I the obligations of the state bank. 
 Coffey v. National Bank, 46 Mo. 140. 
 Compare State v. National Bank, 33 
 Md. 75. A corporation is not liable 
 for the debts of a firm, though the 
 members of the firm constitute the 
 shareholders, and the firm assets 
 have been transferred to the corpo- 
 ration. McLellan v. Detroit File 
 Works, 56 Mich. 579. See Georgia 
 Co. v. Castleberry, 43 Ga. 187. 
 
 4 See cases in last note but one. 
 
 5 Story, J., in Bellows v. Hallowell 
 B'k, 2 Mason, 31, 44. See, also, Mil- 
 ler v. English, 21 N. J. Law, 317; 
 People v. Marshall, 1 Gilman (111.), 
 672; Goulding v. Clark, 34 N. H. 
 148.
 
 CHAP. XI.] CORPORATION AND CREDITORS. 
 
 [§ 668. 
 
 such a fund, it is clearly held in trust for the benefit of one 
 creditor just as much as another, 1 and to prefer one creditor to 
 another is evidently beyond the authority of the trustee. This 
 view is well supported by authority. 2 Thus a deed of general 
 assignment to trustees to procure a loan, and then to pay certain 
 debts of the corporation (a bank), and then others pro rata, the 
 trustees receiving large salaries for their services, has been held 
 void as against a non-consenting creditor. 3 Still there is no 
 doubt that an insolvent corporation, unless forbidden by stat- 
 ute, may make a valid assignment for the benefit of its cred- 
 itors; 4 and a number of cases have held that an insolvent 
 corporation may make such an assignment with preferences. 5 
 
 1 Dabney v. Bk. of S. Caro., 3 S. C. 
 124; Cook v. Moody, 18 Wash. 114. 
 This doctrine repudiated in Mis- 
 souri. Schufeldt v. Smith, 131 Mo. 
 280. 
 
 2 Rouse v. Merchants' Nat. Bk., 46 
 Ohio St. 493; Lang v. Dougherty, 74 
 Tex. 226; Robins v. Embry, 1 Sm. & 
 M. Ch. (Miss.) 207, 258 et seq.; Bod- 
 ley v. Goodrich, 7 How. 276; Swep- 
 son v. Bk., 9 Lea (Teun.),713; Ford 
 v. Bank, 87 Wis. 363; Biddle Pur. Co. 
 v. Steel Co., 16 Wash. 681; Conno- 
 ver v. Hull, 10 Wash. 673; Compton v. 
 Schwabacher, 15 Wash. 306; Trades- 
 man Pub. Co. v. Wheel Co., 95 Tenn. 
 634; Hardware Co. v. Mfg. Co., 86 
 Tex. 143; Cook v. Moody, 18 Wash. 
 114; Van Brocklin v. Queen City 
 Printing Co., 19 Wash. 552; Stough 
 v. Ponca Mills Co., 54 Neb. 500. 
 (Court in part relied on certain stat- 
 utes limiting the powers of corpora- 
 tions and those given them in ena- 
 bling acts. ) A creditor cannot secure 
 any advantage by attaching the funds 
 of an insolvent corporation which has 
 ceased to do business. Shoe Co. v. 
 Thompson, 89 Tex. 501 ; Carriage Co. 
 v. Grain Co., ib. 511. Semble contra, 
 Ballin v. Bank, 89 Wis. 278. See Ford 
 v. Hill, 92 Wis. 188; Hightower v. 
 
 Mustian, 8 Ga. 506; Marr v. Bk. of 
 West. Tenn., 4 Cold w. (Tenn.) 471; 
 Richards v. New Hamp. Ins. Co., 43 
 N. H. 263. Certain corporations, as, 
 e. g., national banks, are expressly 
 forbidden by their constitutions to 
 make preferences after or in contem- 
 plation of insolvency. U. S. Rev. 
 Stat., § 5242. 
 
 When an insolvent national bank 
 is making illegal preferential pay- 
 ments, a court will appoint a receiver 
 at the suit of a depositor. Irons v. 
 Manuf'rs Nat. Bk., 6 Biss. 301. A 
 statute forbidding corporations to 
 make assignments in contemplation 
 of insolvency does not impose on the 
 directors the duty of taking active 
 measures to see that no creditor, by 
 superior diligence in suing, obtains a 
 preference over others. The statute 
 calls for no affirmative action on the 
 part of the corporation, nor need the 
 insolvent corporation defend a suit 
 against itself in order to defeat a 
 preference. Varnum v. Hart, 119 
 N. Y. 101. See French v. Andrews, 
 145 N. Y. 441; Lopez v. Campbell, 
 163 N. Y. 340. 
 
 3 Bodley v. Goodrich, 7 How. 276. 
 Compare Age-Herald Co. v. Potter, 
 109 Ala. 675. 
 
 * For note 4 see page 668. 
 
 5 For note 5 see page 668. 
 
 667
 
 § C69.] 
 § 669. 
 
 Kelative 
 rights of 
 creditors. 
 
 THE LAW OF PRIVATE CORPORATIONS. [CHAP. XL 
 
 A court of equity, however, will regard the relative 
 rights of different creditors, and will restrain one 
 creditor from absorbing, after the corporation has 
 become insolvent, its available assets to the unjust 
 
 4 Ardesco Oil Co. v. North Am., 
 etc., Co., 66 Pa. St. 375; State v. 
 Bank of Md., 6 Gill & J. (Md.) 205; 
 Union Bk. v. Ellicott, ib. 363; Shock- 
 ley v. Fisher, 75 Mo. 498; Lionberger 
 v. Broadway Sav'gs Bk., 10 Mo. App. 
 499; Lamb v. Cecil, 25 W. Va. 288; 
 Chamberlain v. Bromberg, 83 Ala. 
 576; Kendall v. Bishop, 76 Mich. 
 634; Boynton v. Roe, 114 Mich. 401. 
 The board of directors of an insol- 
 vent corporation may make the as- 
 signment. See § 225. 
 
 5 Ringo v. Biscoe, 13 Ark. 563; 
 Savings Bk. v. Bates, 8 Conn. 505; 
 Whitwell v. Warner, 20 Vt. 425; Ar- 
 thur v. Commercial, etc., Bk., 17 
 Miss. 394; Wilkinson v. Bauerle, 41 
 N. J. Eq. 635; Vail v. Jameson, 41 
 N. J. Eq. 648; Warfield v. Marshall 
 County Canning Co., 72 Iowa, 666; 
 Rolling v. Shaver Wagon Co., 80 
 Iowa, 380; Pyles t>. Furniture Co., 
 30 W. Va. 123; Foster v. Mullanphy 
 Planing Mill Co., 92 Mo. 79; Butler 
 Paper Co. ». Robbins, 151 111. 588; 
 Worthen v. Griffith, 59 Ark. 562 
 (preferences are now forbidden by 
 statute in Arkansas); Sells v. Gro- 
 cery Co., 72 Miss. 590; Albergher v. 
 Bank, 123 Mo. 313. See Cat! in v. 
 Eagle Bk., 6 Conn. 233; Plow Co. 
 v. Rude, 60Kas. 145; Ames & Frost 
 v. Heslet, 19 Mont. 188; Wyeth, H. 
 & M. Co. v. James Spencer B. Co., 
 15 Utah, 110. Compare Hopkins v. 
 Gallatin Turnpike Company, 4 Hump. 
 (Tenn.), 403; Pope v. Brandon, 2 
 Stew. (Ala.) 401; Coats v. Donnell, 
 94 N. Y. 168; Bergen v. Fishing Co., 
 42 N. J. Eq. 397; Bank v. Cot. Mills, 
 115 N. C. 507; Henderson v. Indiana 
 T. Co., 143 Ind. 561; Shaw v. Robin- 
 
 668 
 
 son, 50 Neb. 403; Wallachs v. Same, 
 ib. 469; Campbell, etc., Co. v. Mar- 
 der, ib. 283; German Nat. Bank v. 
 First Nat. Bank, 55 Neb. 86; Seeds 
 Dry Plate Co. v. Heyn Photo-Supply 
 Co., 57 Neb. 214; Conway v. Smith 
 Mercantile Co., 6 Wyo. 468. 
 
 In the absence of lien created by 
 contract, or rights created by legal 
 proceedings, the officers of a corpo- 
 ration may exercise a reasonable and 
 proper discretion as to the order in 
 which debts of the corporation shall 
 be paid. Newport, etc., Bridge Co. 
 v. Douglass, 12 Bush (Ky.), 73. An 
 insolvent corporation has a right to 
 secure one creditor in preference to 
 another. Glover v. Lee, 140 III. 102; 
 Bank v. Salt Co., 90 Mich. 345 ; Prouty 
 v. Prouty, etc., Shoe Co., 155 Pa. St. 
 112. But after a judgment creditor's 
 bill has been filed the officers cannot 
 go on converting corporate assets 
 into money and paying creditors, giv- 
 ing preferences. Turnbull v. Pren- 
 tiss Lumber Co., 55 Mich. 387. Com- 
 pare Prentiss v. Nicholas, 100 U. S. 
 227. 
 
 Proof that at the time of the de- 
 livery of a mortgage by a corpora- 
 tion, the corporation was insolvent, 
 as a matter of fact, is not conclusive 
 evidence that the transfer (mort- 
 gage) was made "in contemplation 
 of the insolvency of such company " 
 within the meaning of a statute (1 
 N. Y. R. S., 603, § 4) declaring such 
 transfers unlawful; to come within 
 the prohibition of the statute, the 
 act must have been induced by the 
 existing or contemplated insolvency 
 of the company. (The creditor in 
 this case was not an officer.) Pauld- 

 
 CHAP. XI.] CORPORATION AND CREDITORS. 
 
 [§ 670. 
 
 exclusion of other creditors. 1 Thus, the property of a national 
 bank attached at the suit of a creditor, after the bank has be- 
 come insolvent, cannot be subjected to sale for the payment of 
 a demand, as against the claim for the property by a receiver 
 of the corporation subsequently appointed. 2 And a suit 
 against a national bank to collect a debt is abated by a decree 
 of a Federal District Court dissolving the corporation and for- 
 feiting its franchises, rendered upon an information against the 
 bank tiled by the comptroller of the currency. 3 
 
 § 670. A person who is a debtor to the corporation on one 
 account and its creditor on another, may ordinarily 
 set off against what he owes the corporation the debt 
 which the corporation owes him. Thus, a banker who was a 
 director in an insurance company, can set off against its de- 
 mand for money deposited with him, bearing interest and pay- 
 able on call, the amount due on its policies issued to and held 
 by him. And, the company having been adjudged bankrupt, 
 his right to such a set-off is equally available against its as- 
 signee. 4 But a shareholder cannot set off a debt owing him 
 from the corporation, if the latter is insolvent, against his 
 
 ing v. Chrome Steel Co., 94 N. Y. 
 334. See, also, Dutcher v. Importers 
 and Traders' Bk., 59 N. Y. 5. Com- 
 pare Robinson v. Bk. of Attica, 21 
 N. Y. 406; and Haxtum v. Bishop, 3 
 Wend. 13. An offer to allow judg- 
 ment to be entered against it by a 
 corporation is a transfer of its prop- 
 erty within the meaning of this stat- 
 ute. Kingsley v. First National Bk., 
 31 Hun (N. Y.), 329. As to the rule 
 when the preferred creditors are also 
 officers of the corporation, see §§ 759, 
 760. 
 
 iSee Pfohl v. Simpson, 74 N. Y. 
 137; Whittlesey v. Delaney, 73 N. Y. 
 571; Turnbull v. Prentiss Lumber 
 Co., supra. § 813. 
 
 In a foreclosure suit a court of 
 equity will prevent, if possible, the 
 sale of the central portion of a rail- 
 road which would leave the two ends 
 
 valueless. Chicago, Danville, etc., 
 R'y Co. v. Loewenthal, 93 111. 533. 
 
 2 National Bank v. Colby, 21 Wall. 
 609. 
 
 3 National Bank v. Colby, supra. 
 Compare Bank of Bethel v. Pahquio- 
 que Bank, 14 Wall. 383. Under the 
 National Banking Act, a creditor of 
 a national bank who establishes his 
 debt by suit and judgment after 
 refusal of the comptroller of the 
 currency to allow it, is entitled to 
 share in dividends on his debt (and 
 on the interest then due) so estab- 
 lished as of the day of the failure of 
 the bank; and not upon the basis of 
 the judgment, if the judgment in- 
 cludes interest subsequent to that 
 date. White v. Knox, 111 U. S. 
 784. 
 
 4 Scammon v. Kimball, 92 U. S. 
 362. See Scott v. Armstrong, 146 
 U. S. 499. 
 
 669
 
 § 072.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. 
 
 Corporate 
 property, 
 when ex- 
 empt from 
 execution. 
 
 liability for unpaid subscriptions. 1 And in all cases, in order 
 to entitle a debtor of the corporation to set off a claim against 
 it, the claim must have been acquired before the assets of the 
 corporation have come under the control of a court of equity. 2 
 § 671. When a corporation is created in order to subserve 
 some public purpose, its creditors may not be per- 
 mitted, for reasons of public policy, to enforce their 
 rights in a manner that would render the corpora- 
 tion incapable of fulfilling its public duty. Thus, 
 a corporate franchise to take tolls on a canal cannot be seized 
 and sold under an execution, unless express authority to that 
 effect exists in some statute of the state granting the charter. 3 
 Neither can lands or works essential to the enjoyment of a 
 franchise be separated from it, and sold under such process. 4 
 But lands belonging to a railroad company, which are not used 
 for corporate purposes, nor necessary to the full enjoyment and 
 exercise of the corporate franchises, may be sold on execution 
 against the corporation. 5 
 
 The relations between a corporation and certain special 
 
 classes of its creditors may now be more particularly referred to. 
 
 § 672. When an ordinary deposit is received by a bank and 
 
 placed to the credit of the depositor, the relation 
 
 between a neither of principal and agent, nor of bailor and 
 
 i See § 729. 
 
 2 Smith v. Mosby, 9 Heisk. (Tenn.) 
 501; Lanier v. Gayoso Savings Inst., 
 ib. 506. See §§810, 811. When a 
 corporation places its funds in the 
 hands of its general manager as 
 trustee for safe-keeping and to use 
 in the affairs of the corporation, 
 such trustee cannot, in the event 
 of the corporation's insolvency, set 
 off a debt owing him from the cor- 
 poration against the claim of its as- 
 signee for creditors for such moneys. 
 First National Bank v. Barnum Wire 
 Works, 58 Mich. 124. 
 
 8 Gue v. Tide Water Canal Co., 24 
 How. 257. See, also, State v. Rives, 
 5 Ired. L. (N. C.) 297; State v. 
 
 670 
 
 Middletown Turnpike Co., 65 N. J. 
 L. 73. 
 
 4 Gue v. Tide Water Canal Co., 
 supra ; East Alabama R'y Co. v. 
 Doe, 114 U. S. 340; Youngman v. 
 Elmira, etc., R. R. Co., 65 Pa. St. 
 278; Louisville, N. A., etc., R'y Co. 
 v. Boney, 117 Ind. 501; Overton 
 Bridge Co. v. Means, 33 Neb. 857. 
 See Bank v. Tanning Co., 170 Pa. St. 
 1. See, also, in regard to personal 
 property belonging to a railroad, 
 Philips v. Winslow, 18 B. Mon. (Ky.) 
 431, where the same principle was 
 applied. Compare § 334. 
 
 6 Plymouth R. R. Co. v. Colwell, 39 
 Pa. St. 337. See Shamokiu Valley 
 R. R. Co. v. Livermore, 47 Pa. St. 
 465.
 
 CHAP. XT.] CORPORATION AND CREDITORS. 
 
 [§ 672. 
 
 bailee is created, but that of debtor and creditor. 1 bank and 
 
 , depositors. 
 
 Consequently the bank has the right to apply the 
 money to the payment of any legal demand it may have at the 
 time against the depositor ; and, on the other hand, will be 
 liable to the depositor for any loss of the money, although 
 occurring without any fault on the part of the bank or its 
 servants. 2 When, however, a person deposits drafts in a bank 
 known at the time to its managers to be insolvent, receiving 
 the deposit is a fraud on the depositor, and he may reclaim 
 the drafts or their proceeds, so long as they have not come 
 into the hands of bona fide holders for value ; thus rescinding 
 what would otherwise have been the ordinary contract between 
 a depositor and the bank, i e., that the bank should become 
 the owner of the drafts and debtor for their equivalent. 3 
 There is no special trust relation between a bank and its de- 
 positors. But the bank is bound to know their signatures, and 
 is liable to them for all moneys paid out on forged checks ; 4 
 
 i Phoenix Bank v. Risley, 111 U. 
 S. 125; Davis v. Smith, 29 Minn. 201; 
 Hardy v. Chesapeake Bank, 51 Md. 
 562; Ward v. Johnson, 5 111. App. 
 30; Perth Amboy G. L. Co. v. Middle- 
 sex Co. Bank, 60 N. J. Eq. 84; 
 Ilarter v. Mechanics Nat. B'k, 63 N. 
 J. L. 578; Colton v. Drovers Bldg. 
 Assn., 90 Md. 85; Taft v. Quinsi- 
 gamond Nat. Bk., 172 Mass. 363; 
 Pacific Coast Sav. Soc. v. San Fran- 
 cisco, 133 Cal. 14; and cases in fol- 
 lowing notes. Depositors in savings 
 banks stand in the same relation to 
 the assets of the bank as share- 
 holders in banks of discount. Cogs- 
 well v. Rockingham Ten Cents SVgs 
 B'k, 59 N. H. 43; Hallu. Paris, ib. 71. 
 
 2 Commercial Bank v. Hughes, 17 
 Wend. 94; Marsh v. Oneida Central 
 Bank, 34 Barb. 298; ^Etna Nat. B'k 
 v. Fourth Nat. B'k, 46 N. Y. 82; 
 Boy den v. B'k of Cape Fear, 65 N. C. 
 13; In re B'k of Madison, 5 Biss. 
 515; Knecht v. United States S'v'gs 
 Ins'n, 2 Mo. App. 563. 
 
 But a bank when sued by a depos- 
 
 itor for his deposit cannot show that 
 the deposit really belonged to third 
 persons indebted to the bank, and 
 set off its claim against them. First 
 Nat. B'k v. Mason, 95 Pa. St. 113. 
 Compare Swartwout v. Mechanics' 
 Bank, 5 Denio, 555. Nor can a bank 
 hold the balance of a customer's 
 deposit, to apply it on his indebted- 
 ness to the bank not yet matured. 
 Jordan v. Nat. Shoe and Leather 
 B'k, 74 N. Y. 467. 
 
 3Cragie v. Hadley, 99 N. Y. 131; 
 Perth Amboy G. L. Co. v. Middlesex 
 Co. Bank, 60 N. J. Eq. 84; Higgins 
 v. Hayden, 53 Neb. 61. 
 
 4 Leavitt v. Stanton, Lalor (N. Y. ), 
 413; Morgan v. Bank of the State of 
 New York, 11 N. Y. 404; Weisser i>. 
 Denison, 10 N. Y. 68; Commercial 
 and Farmers' Nat. B'k v. First Nat. 
 B'k, 30 Md. 11; Harter v. Mechanics' 
 B'k, 63 N. J. L. 578; First Nat. B'k 
 of Belmont v. First Nat. B'k of 
 Barnesville, 58 Oh. St. 207. Com- 
 pare Neal v. Coburn, 92 Me. 139. 
 That the forger is the confidential 
 
 671
 
 § 673.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. 
 
 while the depositor is under no duty to the bank to examine 
 his pass book and vouchers for the purpose of detecting for- 
 geries. 1 
 
 In defending the interests of a depositor against a third 
 person claiming the deposit, the bank will not be liable for 
 neglect of its duty, if it takes reasonable legal measures in 
 defence, and notifies the depositor of the suit. Under such 
 circumstances it is not incumbent on the bank to make a stren- 
 uous defence or try to put the case off. 2 
 
 § 673. The facts of a carefully considered case decided not 
 Lien of long ago in the Federal Supreme Court were as 
 bank. follows: 3 A bank account was opened in the name 
 
 of a depositor known to the bank to be the general agent 
 of an insurance company, and whose chief business, as the 
 bank also knew, was to conduct the insurance agency. 
 The words " gen'l ag't " were attached to the depositor's name 
 in the account. The bank further knew that the account was 
 opened to facilitate the business of the agency, and was used 
 by the depositor as a means of accumulating premiums col- 
 lected by him for the company, and making payments to it by 
 checks. It was held that the bank was chargeable with notice 
 of the equitable rights of the insurance company, although the 
 depositor had deposited other moneys in the same account, and 
 had drawn checks against it for his private use ; and that the 
 company might enforce in equity its beneficial ownership 
 against the bank, which on its side set up a lieu on the fund 
 for a debt due from the depositor individually to it. Justice 
 
 clerk of the depositor is no defence, 
 if the latter has himself done noth- 
 ing to lead the bank to suppose the 
 check authentic. Frank v. Chemical 
 Nat. B'k, 84 N. Y. 209; Hardy v. 
 Chesapeake Bank, 51 Md. 562. Com- 
 pare U. S. Bank v. Bank of Georgia, 
 10 Wheat. 333; Dedham Nat. B'k r. 
 Everett Nat. B'k, 177 Mass. 392. A 
 bank is liable for money paid on 
 altered checks. Crawford ». West 
 Side B'k, 100 N. Y. 50. 
 
 1 Welsh v. German American 
 Bank, 73 N. Y. 424; see Frank v. 
 Chemical Nat. Bank, 84 N. Y. 209; 
 672 
 
 contra, Myers v. Bank, 193 Pa. St. 1. 
 As to the liability of savings banks 
 for moneys paid out on forged 
 checks or orders, see §§ 199, 245. 
 The statute of limitations does not 
 run against the claim of a depositor 
 until demand and refusal. Branch 
 v. Dawson, 33 Minn. 399. See Viets 
 v. Union National Bank, 101 N. Y. 
 563. 
 
 2 Detroit Savings Bank v. Burrows, 
 34 Mich. 153. 
 
 3 National Bauk v. Insurance Co., 
 104 U. S. 54.
 
 CHAP. XI.] CORPORATION AND CREDITORS. [§ 674. 
 
 Matthews said, giving the opinion of the court : " The contract 
 between a bank and a depositor is that the former will pay- 
 according to the checks of the latter, and when drawn in 
 proper form, the bank is bound to presume that the trustee (if 
 such it knows its depositor to be) is in the course of lawfully 
 performing his duty, and to honor them accordingly. But 
 when against a bank account, designated as one kept by the 
 depositor in a fiduciary character, the bank seeks to assert its 
 lien as a banker for a personal obligation of the depositor, 
 known to have been contracted for his private benefit, it must 
 be held as having notice that the fund represented by the 
 account is not the individual property of the depositor, if it is 
 shown to consist, in whole or in part, of funds held by him in 
 a trust relation." 1 .... 
 
 " Although the relation between a bank and its depositor is 
 that merely of debtor and creditor, and the balance due on 
 the account is only a debt, yet the question is always open, to 
 whom in equity does it beneficially belong ? If the money 
 deposited belongs to a third person, and was held by the 
 depositor in a fiduciary capacity, its character is not changed 
 by being placed to his credit in his bank account." 2 
 
 . . . . " Ordinarily the banker's lien attaches in favor of the 
 bank upon the securities and moneys of the customer deposited 
 in the usual course of business, for advances which are sup- 
 posed to be made upon their credit. It attaches to such 
 securities and funds not only against the depositor, but against 
 the unknown equities of all others in interest, unless modified 
 or waived by some agreement, express or implied, or by con- 
 duct inconsistent with its assertion. But it cannot be permitted 
 to prevail against the equity of the beneficial owner, of which 
 the bank has notice, either actual or constructive." 3 
 
 § 674. Of special classes of corporate creditors, bondholders 
 constitute the most important. Their rights for the 
 most part depend on the terms of the trust deed or ^s. n(ho 
 mortgage usually made by the corporation to secure 
 the payment of the bonds. 4 With notice of the terms of this 
 
 1 National Bank v. Insurance Co., I 104 U. S. 71. See, also, Bank of Me- 
 104 U. S. 64. tropolis v. New England Bank, 1 
 
 3 lb. 66. How. 234. 
 
 8 National Bank v. Insurance Co., I 4 A law depriving mortgage cred- 
 
 43 673
 
 § 076.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. 
 
 instrument bondholders are of course affected ; and by express 
 stipulation often it is made a part of the bonds themselves. 
 Should, however, provisions in the mortgage or trust deed be 
 inconsistent with those contained in the bonds, the terms of 
 the latter control, since the bonds constitute the principal debt 
 or the best evidence of the corporate obligation, for the pay- 
 ment of which debt or obligation the trust deed or mortgage is 
 but a security. 1 
 § 675. In order that bonds should constitute a lien on the 
 property of a corporation, it is not necessar}^ that a 
 mortgages, formal mortgage should be given (though, of course, 
 under the various recording acts, a mortgage or 
 trust deed duly executed and recorded is essential to the 
 security of bondholders) ; for it has been held that bonds 
 issued by a corporation pledging its real and personal property 
 for the pa} T ment of the debt and interest, and containing other 
 corresponding stipulations, will be treated by a court of equity 
 as a mortgage, and enforced according to the intention of the 
 contracting parties. 2 
 
 § 676. As against a railroad company and its privies, a 
 railroad mortgage, although given before the road 
 is completed, attaches to the road as fast as built, 
 and to all property covered by the terms of the 
 mortgage as such property comes into the owner- 
 ship of the railroad company. 3 And thus a mortgage by a 
 
 tion. White Mountains R. R. Co. 
 v. White Mountains R. R. Co., 50 
 N. H. 50. 
 
 1 Railway Co. v. Sprague, 103 U. 
 S. 756. 
 
 2 White Water Valley Canal Co. 
 v. Vallette, 21 How. 414. See, also, 
 Miller v. Rutland, etc., R. R. Co., 
 36 Vt. 452; In re Strand Music 
 Hall Co., 3 I)e G., J. & S. 147, 158; 
 Ketchum v. Pacific R. R. Co., 4 Dill. 
 78, 86. Compare Dillon v. Barnard, 
 1 Holmes, 386; Brunswick and Q. 
 R. R. Co. v. Hughes, 52 Ga. 557; 
 Thomas v. N. Y. & G. L. R. Co., 139 
 N". Y. 163; Hamilton Trust Co. v. 
 Clemes, 163 N. Y. 423. 
 
 3 Galveston Railroad v. Cowdrey, 
 
 Railroad 
 mortgages 
 Rolling 
 stock. 
 
 itors of their rights against the cor- 
 poration would impair the obligation 
 of a contract. Montgomery, etc., R. 
 R. Co. v. Branch, 59 Ala. 139. But 
 the legislature may constitutionally 
 pass a law providing that unless a 
 creditor of an embarrassed corpora- 
 tion expresses his dissent from meas- 
 ures deemed essential to the common 
 welfare of the corporation and its 
 creditors, he shall be held to have 
 assented to them. Union Canal Co. 
 v. Gilfillin, 93 Pa. St. 95; S. C, 
 aff'd, 109 U. S. 401. Compare, also, 
 Baltimore v. Baltimore Railroad, 10 
 Wall. 543. But a legislature cannot 
 confirm a fraudulent sale of the 
 mortgaged property of a corpora- 
 
 674
 
 CHAP. XI.] CORPORATION AND CREDITORS. 
 
 [§ 676. 
 
 railroad company, which in terras covers " all the following, 
 present, and future to be acquired property," mentioning 
 engines, cars, and machinery, carries not only engines and 
 cars that existed when the mortgage was made, but also such 
 as subsequently take their place or are added by the time of 
 the foreclosure. 1 Moreover, a railroad company owning the 
 whole of a long railroad and all the rolling stock upon it, may 
 assign particular portions of the rolling stock to particular 
 divisions of the road, and mortgage such portions with such 
 divisions respectively. Whether the company has mortgaged 
 its rolling stock in this manner, is a question of intention. 2 
 
 11 Wall. 459; Thompson v. Valley 
 R. R. Co., 132 U. S. 68; Phila., Wil. 
 and Balto. R. R. Co. v. Woelpper, 
 64 Pa. St. 366. See Pierce v. Emery, 
 32 N. H. 484; compare Dinsmore v. 
 Racine, etc., R. R. Co., 12 Wis. 649. 
 See § 817. But see Henshaw v. 
 Bank of Bellows Falls, 10 Gray 
 (Mass.), 568; Howe v. Freeman, 14 
 Gray (Mass.), 566; Mississippi Val- 
 ley Co. v. Chicago, etc., R. R. Co., 
 58 Miss. 896; Reed v. Ginsburg, 64 
 Oh. St. 11. Seems special author- 
 ity is not necessary to enable a rail- 
 road company to include in a mort- 
 gage after-acquired property. City 
 of Quincy v. Chicago, B. and Q. R. R. 
 Co., 94 111. 537. 
 
 iShawr. Bill, 95 U. S. 10; Ham- 
 lin v. Jerrard, 72 Me. 62. 
 
 It is held that mortgages of future 
 acquired property are to be liberally 
 construed. Little Rock, etc., R'y 
 Co. v. Page, 35 Ark. 304. See State 
 v. Northern Central Ry. Co., 18 Md. 
 193. " After-acquired clause " covers 
 equitable rights and interests subse- 
 quently acquired by or for the rail- 
 road company. Wade v. Chicago, 
 S., etc., R. R., 149 U. S. 327; Cen- 
 tral Trust Co. v. Kneeland, 138 U. S. 
 414. Brady v. Johnson, 75 Md. 
 445. But the enumeration of cer- 
 tain classes of " property " may 
 exclude other "property" not men- 
 
 tioned. Thus a railroad company 
 mortgaged its then and after to be 
 acquired " property, that is to say," 
 and then described various species 
 of property mortgaged. It was 
 held that certain municipal bonds 
 issued to aid in building the road, 
 and not embraced in the enumeration 
 of articles mortgaged, did not pass 
 by the use of the general word 
 "property." Smith v. McCullongh, 
 104 U. S. 25. See, also, Brainerd v. 
 Peck, 34 Vt. 496; Alabama v. Monta- 
 gue, 117 U. S. 602. Compare Wilson 
 v. Boyce, 92 U. S. 320; Eldridge v. 
 Smith, 34 Vt. 384. 
 
 It has also been held that a rail- 
 road corporation cannot include in 
 a mortgage of future to be acquired 
 property, land which, at the time of 
 the mortgage, it had no authority 
 to acquire. Meyer ». Johnston, 53 
 Ala. 237, 331. 
 
 2 Minnesota Co. v. St. Paul Co., 2 
 Wall. 609; S. C, 6 Wall. 742. A 
 mortgage by a railroad company of 
 " all present and future to be ac- 
 quired property of the company, in- 
 cluding the right of way and land 
 occupied, and all rails and other 
 materials used thereon or procured 
 therefor," includes rolling stock. 
 Pullan v. Cincinnati, etc., Air-Line 
 R. R. Co., 4 Biss. 35. 
 
 In Illinois, rolling stock is held to 
 
 675
 
 § 679.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. 
 
 Invalid 
 provisions 
 in corpo- 
 rate secu- 
 rities. 
 
 § 677. Terms in securities issued by a railroad or other 
 corporation repugnant to the legislative provisions 
 authorizing the security are void. Thus, a railroad 
 corporation issued its bonds, and mortgaged its prop- 
 erty to secure the payment of them, and of the 
 semi-annual instalments of interest thereon, as the same should 
 successively fall due. The statute authorizing the mortgage 
 declared that the bonds should not mature at an earlier period 
 than thirty years. In consequence, a provision in the bonds 
 that, upon a failure to pay any coupon, when presented at the 
 place of payment, and a continued default for six months, the 
 whole sum mentioned in the bond should become due and pay- 
 able, was held void. 1 
 
 § 678. But, although the securities may contain forbidden 
 or unauthorized provisions, courts will refrain from 
 vacate the holding void the securities themselves. 2 Thus, a 
 securities, corporation cannot refuse to pay its bonds on the 
 ground that they contain an unauthorized provision to the 
 effect that they may be converted into stock at the option of 
 the holder. 3 
 
 § 679. Bonds of a corporation issued payable to order or to 
 bearer are negotiable. 4 And the negotiable quality 
 
 Corporate ° ■ ; ° ^ . . J 
 
 bonds ne- of such a bond is not impaired by a provision 
 go ia e. contained in the bond, that it may be " registered 
 
 be a part of the realty, so as to pass 
 by a conveyance or mortgage of the 
 road. Michigan Cent. R. R. Co. v. 
 Chicago and M. Lake Shore R. R. 
 Co., 1 111. App. 399; Palmer v. Forbes, 
 23 111. 301; Hunt v. Bullock, ib. 320; 
 Titus v. Mabee, 25 111. 257; Titus v. 
 Ginheimer, 27 111. 462. This is not 
 the doctrine of other states. William- 
 son v. N. J. Southern R. R. Co., 
 29 N. J. Eq. 311, reversing S. C, 
 28 N. J. Eq. 277; Hoyle v. Pitts- 
 burgh, etc., R. R. Co., 54 N. Y. 314; 
 Coe v. Columbus, etc., R. R. Co., 10 
 Ohio St. 237; see Boston, Concord, 
 etc., R. R. Co. v. Gilmore, 37 N. H. 
 410. 
 
 1 Howell v. Western R. R. Co., 94 
 U. S. 463. 
 676 
 
 2 See Howell v. Western R. R. 
 Co., supra ; Carpenter «. Black Hawk 
 Gold Mg. Co., 65 N. Y. 43. That 
 some invalid bouds have been issued, 
 does not affect the validity of the 
 mortgage as a security for the other 
 bonds. Graham v. Boston, etc., R. 
 R. Co., 118 U. S. 162; cf. International 
 Trust Co. v. Davis & Farnum Co., 
 70 N. H. 118. A Wisconsin statute 
 expressly makes void bonds of cor- 
 porations issued for less than seventy- 
 five per cent, of the face value. See 
 Pfister v. Milwaukee Electric R. Co., 
 83 Wis. 86; Hinckley v. Pfister, ib. 64. 
 
 8 Wood v. Wheelen, 93 111. 153. 
 Compare Sturges v. Stetson, 1 Biss. 
 246. 
 
 4 Kneelaud v. Lawrence, 140 U. S.
 
 CHAP. XI.] CORPORATION AND CREDITORS. 
 
 [§ 680. 
 
 and made payable by transfer only on the books of the com- 
 pany." l Accordingly, the rights of a purchaser in good faith 
 are not impaired by equities affecting the title of his vendor. 2 
 § 680. Overdue and unpaid interest coupons do not of them- 
 selves make the bond to which they are attached dis- 
 honored paper. 3 When severed from the bond, 
 coupons are negotiable and pass by delivery. 4 They then cease 
 to be incidents of the bonds and become independent claims. 
 Consequently, if the bonds are cancelled or paid before ma- 
 turity, the severed coupons do not thereby lose their negotiable 
 character, nor their ability to support separate actions, and the 
 amount of their face draws interest from the time when it is 
 
 209; White v. Vermont, etc., R. R. 
 Co., 21 How. 575; Carr v. Lefevre, 
 27 Pa. St. 413; Mason v. Prick, 105 
 Pa. St. 162 ; Haven i\ Grand Junc- 
 tion R. R. Co., 109 Mass. 88; Morris 
 Canal, etc., Co. v. Fisher, 9 N. J. Eq. 
 667; Brainard v. New York and Har- 
 lem R. R. Co., 25 N. Y. 496; American 
 Nat. B'k v. American Wood Paper 
 Co., 19 R. I. 149; Hebbard r. So. 
 West. Land & Cattle Co., 55 N. J. 
 Eq. 18; see§ 326. Compare Railroad 
 Co. v. Howard, 7 Wall. 392. 
 
 1 Savannah, etc.. R. R. Co. c. Lan- 
 caster, 62 Ala. 555. But bonds con- 
 taining a provision whereby the com- 
 pany reserves the right to pay them 
 off at any time by adding twenty per 
 cent, to the amount of the principal 
 are not negotiable. Chouteau v. 
 Allen, 70 Mo. 290, 339; see, also, Mc- 
 Clelland v. Norfolk Southern R. R. 
 Co., 110 N. T. 469. 
 
 2 Kneeland v. Lawrence, 140 U. S. 
 209; Murray v. Lardner, 2 Wall. 110. 
 The doctrine of applied notice of a 
 lis pendens does not apply to nego- 
 tiable bonds. See § 327, also Ex parte 
 Williams, 18 S. C. 299. As to effect 
 of notice to a trustee for bondholders, 
 see § 814. 
 
 A corporation is not liable on its 
 bonds, which are stolen before the 
 
 I certificate of the trustee or the com- 
 pany's seal is affixed, to an innocent 
 holder; the certificate and seal hav- 
 ing been forged after the theft. Maas 
 v. Missouri, K. and T. R'y Co., 83 N. 
 Y. 223. 
 
 3 Railway Co. v. Sprague, 103 U. 
 S. 756; Cromwell v. County of Sac, 
 96 U. S. 51; Buffalo L.. T. & S. D. 
 Co. v. Medina Gas Co., 162 N. Y. 67. 
 See National Bank v. Kirby, 108 
 Mass. 497. But see First Nat. Bank 
 v. County Commissioners, 14 Minn. 
 77; Morton v. New Orleans, etc., 
 Ry. Co., 79 Ala. 590; see, also, § 326. 
 
 4 The title to interest coupons 
 passes by delivery. A transfer of 
 possession is presumptively a trans- 
 fer of title. Especially is this so 
 when the transfer is made to one 
 who is not the debtor and is under 
 no obligation to receive or pay them. 
 But cutting oft coupons when due 
 and transferring them to other hold- 
 ers gives to such holders no priority 
 of right over the holders of the bonds 
 from which the coupons have been 
 cut, nor over the subsequently ma- 
 turing coupons. Ketchum v. Dun- 
 can, 96 U. S. 657; cf. Holland Trust 
 Co. v. Thompson-Houston Elec. Co., 
 170 N. Y. 233. 
 
 677
 
 § 682.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XI. 
 
 payable. Statutes of limitation run against coupons, when 
 severed, from their maturity. 1 
 
 § 681. The holders of coupons guaranteed by a corporation 
 Ri htsof nay i n g general powers to make the guaranty, are 
 bond- not bound to see to the regularity of the exercise of 
 
 that power. 2 And the fact that coupons are made 
 payable at a particular place does not make a presentation 
 there for payment necessary, before commencing suit on them. 3 
 A corporation issuing a coupon bond is in the position of the 
 maker of a promissory note, rather than in that of the drawer 
 of a bill of exchange ; and the holder is under no obligation to 
 present the bond or the coupons for payment within a reason- 
 able time. 4 
 
 § 682. In a case recently before the Supreme Court of the 
 Remedies United States, a railroad mortgage provided that if 
 of bond- "default should be made in the payment of any 
 
 holders. l J J 
 
 half-year's interest on any of said bonds, and the 
 warrant or coupon for such interest shall have been presented 
 and its payment demanded, and such default shall have con- 
 tinued six months after such demand, without the consent of 
 the holder of such coupon or bond, then and thereupon the 
 principal of all of the said bonds hereby secured shall be and 
 become immediately due and payable, anything in such bonds 
 to the contrary notwithstanding ; and the said [trustee] may 
 so declare the same and notify [the railroad company], and 
 upon the written request of the holders of a majority of the 
 said bonds then outstanding, shall proceed to collect both prin- 
 cipal and interest of all such bonds outstanding by foreclosure. 
 . . . . " It was held that the written request of a majority of 
 
 1 Clark v. Iowa City, 20 Wall. 583; I itations only when suit on the bond 
 
 Walnut v. Wade, 103 U. S. 683; Ohio 
 v. Frank, ib. 697; Philadelphia, etc., 
 R. Co. v. Knight, 124 Pa. St. 58. See 
 Gilbert v. Washington City, etc., R. 
 R. Co., 33 Gratt. (Va.) 586; Whitaker 
 v. Hartford, etc., R. R. Co., 8 R. I. 
 47; Philadelphia and R. R. R. Co. v. 
 Smith, 105 Pa. St. 195. Compare 
 The City v. Lamson, 9 Wall. 478, in 
 which case it was held a suit on a 
 coupon is barred by a statute of lim- 
 
 678 
 
 is barred. See, also, § 326. 
 
 2 Connecticut Mur. Life Ins. Co. 
 v. Cleveland, etc., R. R. Co., 41 Barb. 
 9. See §§ 205, 328. 
 
 3 Walnut v. Wade, 103 U. S. 683; 
 Shaw v. Bill, 95 U. S. 10. See Alex- 
 ander v. Atlantic, etc., R. R. Co., 67 
 N. C. 198. 
 
 4 Williamsport Gas Co. v. Pinker- 
 ton, 95 Pa. St. 62.
 
 CHAP. XI.] CORPORATION AND CREDITORS. 
 
 [§ 682. 
 
 bondholders was a prerequisite to a foreclosure by the trustee. 
 But the court said that any bondholder could have sued in his 
 own name, and could have proceeded to foreclose. 1 
 
 1 Chicago and Vincennes R. R. Co. 
 V. Fosdick, 106 U. S. 47. Compare 
 Howell v. Western R. R. Co., 94 U. 
 S. 463; First National Ins. Co. v. 
 Salisbury, 130 Mass. 303. 
 
 A bondholder under a trust mort- 
 gage may sue the railroad on bonds 
 held by him, although the mortgage 
 provides that on the request of the 
 holders of a certain proportion of 
 bonds (more than the plaintiff held) 
 the trustees should sell the property 
 covered by the mortgage. Phila. 
 and Balto. Cent. R. R. Co. v. John- 
 son, 54 Pa. St. 127. See also Mont- 
 gomery County Agricultural Society 
 v. Francis, 103 Pa. St. 378. A bidder 
 at a judicial sale at public auction 
 on foreclosure of a railroad mort- 
 gage, whose bid has not been ac- 
 cepted, the sale being adjourned for 
 sufficient cause and finally discon- 
 tinued, cannot insist on leave to pay 
 his bid and have the sale to him 
 confirmed; although he was the 
 highest bidder and bid enough to 
 cover the mortgage debt. Blossom 
 v. Railroad Co., 3 Wall. 196. A 
 holder of railroad bonds secured by 
 a mortgage under foreclosure has a 
 standing in court to contest the 
 
 amount of compensation allowed the 
 trustee under the mortgage. Wil- 
 liams v. Morgan, 111 U. S. 684. A 
 board of directors passed a resolu- 
 tion permitting the holders of cer- 
 tain notes of the corporation, secured 
 by a mortgage held by a trustee for 
 the note holders, to convert their 
 notes into stock of the corporation 
 at par, provided all the holders of 
 the notes converted them within ten 
 days: some of the note holders filed 
 their notes for conversion and re- 
 ceived certificates of stock. It was 
 held, on subsequent foreclosure of 
 the mortgage, that such of the note 
 holders as had surrendered their 
 notes were entitled to have the fore- 
 closure carried on for them (as well 
 as the rest), not all the note holders 
 having surrendered their notes, and 
 consequently no conversion into 
 stock of any notes having taken 
 place. Pugh v. Faiimount Mining 
 Co., 112 U. S. 238. Taking a pledge 
 of corporate property does not pre- 
 vent a creditor from suing the cor- 
 poration or its shareholders, without 
 selling the pledge. Sonoma Valley 
 Bank v. Hill, 59 Cal. 107. 
 
 679
 
 § 683.] THE LAW OF PRIVATE CORPORATIONS. [t'HAP. XII. 
 
 CHAPTER XII. 
 
 LEGAL RELATIONS BETWEEN SHAREHOLDERS AND 
 OFFICERS OF A CORPORATION. 
 
 Effect of investing the officers with 
 authority to manage the corporate 
 enterprise, §§ 683, 684. 
 
 Right of shareholders that officers 
 shall do no unauthorized acts, 
 §685. 
 
 Remedy, § 686. 
 
 Fraudulent or ultra vires acts, § 687. 
 
 Shareholders incompetent to bring 
 action a gainst officers until there 
 has been a failure of the corpora- 
 tion to act, § 688. 
 
 Competency of shareholders to sue 
 when the corporate management 
 is in the hands of the guilty offi- 
 cers, § 689. 
 
 Corporation a necessary party ; ac- 
 
 § 683. 
 
 tion should be brought on behalf 
 of all the shareholders, §§ 690, 691. 
 
 Directors trustees for all the share- 
 holders, § 692. 
 
 Corporation cannot condone breach 
 of trust, § 693. 
 
 Responsibility of officers for error; 
 for acts of other officers, § 094. 
 
 Acts authorized by shareholders' 
 meetings, § 695. 
 
 Unconditional right of shareholders 
 to sue for direct injuries, §§ 696, 
 697. 
 
 Limits to the trust relation between 
 shareholders and directors, § 698. 
 
 Directors' right to indemnification, 
 
 Effect of in- 
 vesting the 
 officers 
 with au- 
 thority to 
 manage the 
 corporate 
 enterprise. 
 
 When a number of persons have combined their 
 property in a joint undertaking, agreeing that the 
 enterprise shall be managed in a certain way, no one 
 of them can at will withdraw from the agreement, 
 or interfere, except as in the agreement provided 
 for, with the management agreed on. Persons who 
 become incorporated agree, that within the fair scope 
 of the purposes of incorporation, the controlling discretion as 
 to the corporate enterprise shall rest with the body corporate 
 acting regularly, and through the will of a majority ; and that 
 the ordinary corporate business shall be managed by directors 
 and other officers elected directly or indirectly by the body 
 corporate. 1 
 
 "Where, however, as is usual, by the constitution of a cor- 
 poration the management of the corporate affairs is vested in a 
 board of directors, it would seem to be the right of every 
 
 1 Dudley v. Kentucky High School, 9 Bush, 576. 
 
 680 
 
 See § 553.
 
 CHAP. XII.] SHAREHOLDERS AND OFFICERS. [§ 685. 
 
 shareholder — a right secured to him by the fundamental 
 contract embodied in the corporate constitution — that the 
 ordinary business of the corporation shall be managed and 
 controlled by the board of directors, so long as they act within 
 the scope of their authority and honest discretion, free from 
 the interference of even a majority of shareholders. Under 
 such circumstances the fundamental plan, which every share- 
 holder agreed to, was not that a majority of shareholders, but 
 that the board of directors should, for ordinary purposes, man- 
 age and control the affairs of the corporation. 
 
 § 684. Thus, for instance, it has been held that a contract 
 between two connecting railroads for the division of earnings 
 according to the distance which each company should carry 
 the passengers or freight for which the money is paid, is 
 within the discretionary powers of the directors, and its 
 execution cannot be enjoined by a shareholder in one of the 
 companies who holds a majority of its stock, unless he shows 
 a fraudulent purpose on the part of the directors by which he 
 will be injured. 1 Similarly, the Supreme Court of the United 
 States has decided that where the trustees or directors of a 
 railroad company have appealed from a decree, and have 
 directed their counsel to prosecute the appeal, the Supreme 
 Court will not dismiss it on the motion of strangers to the 
 decree, who, since the decree was rendered, have become the 
 owners of the majority of the stock of the corporation. To 
 the directors is, by law, committed the management of the 
 concerns of the corporation ; they are its representatives in 
 court, and represent shareholders and creditors. If, in prose- 
 cuting an appeal to final judgment, they violate a corporate 
 obligation or their own duty, shareholders must seek a remedy 
 in some court of original jurisdiction. 2 
 
 § 685. It is, however, no part of the contract of any share- 
 holder that directors shall do acts unauthorized bv „. . , 
 
 Right of 
 
 the corporate constitution ; and it is the right of share- 
 
 every shareholder that they shall do no such acts, that officers 
 
 nor indeed any act beyond their own authority, ^author" 
 
 although within the corporate powers, unless the Redacts. 
 
 1 Elkins v. Camden and Atlantic R. I 2 Railway Co. v. Ailing, 99 U. S. 463. 
 R. Co., 36 N. J. Eq. 241. | 
 
 681
 
 § 687.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XII. 
 
 Remedy. 
 
 same is authorized or acquiesced in by the body corporate. 
 Directors about to do an unauthorized act may be restrained 
 no doubt. But how % 
 
 % 686. Unquestionably action to restrain them should be 
 taken b}^ and in the name of the corporation. For 
 the corporation is the direct superior or principal 
 of the board of directors. Moreover, if the unauthorized act 
 of the directors is not improper and fraudulent in itself, and 
 within the scope of the corporate powers, it does not follow 
 that a minority of shareholders have an absolute right that the 
 act should not be done ; for it may be that the majority, who 
 have power to do the act in question, approve of it. Under 
 such circumstances, for a minority of shareholders to allege a 
 refusal on the part of the corporation to restrain the act — an 
 essential allegation in a shareholder's bill to enjoin directors 
 — would imply the corporate approval thereof, and demolish 
 the plaintiff's case. Accordingly a minority of shareholders 
 cannot ordinarily prevent directors from doing any act which, 
 as done by the directors, the majority could competently 
 ratify. 1 The proposed act should be manifestly improper, and 
 the complaint should also show the impracticability of procur- 
 ing action from the body corporate in time to prevent injury. 2 
 § 687. In many cases, however, the acts of directors which 
 
 1 Where to the validity of certain 
 acts, original action on the part of 
 the body corporate is required by 
 statute to be taken in a certain man- 
 ner, as, e. </., in regard to an increase 
 of the capital stock, it is possible 
 that to validate an unauthorized in- 
 crease made by the directors, the 
 majority of shareholders would have 
 to go through the prescribed formal- 
 ities, and that a simple ratification 
 of the increase as made by the 
 directors would not be sufficient. 
 
 2 In this connection, Foss v. Har- 
 bottle, 2 Hare, 461, is the leading 
 authority. See §§ 553 et seq., where 
 the matter is discussed as coming 
 under the right of the corporation 
 
 682 
 
 or corporate management, to man- 
 age the corporate affairs. Here the 
 matter is spoken of rather with ref- 
 erence to the rights of shareholders 
 against directors personally. See 
 McNaughton v. Osgood, 41 Hun 
 (N. Y.), 108. 
 
 A bill was filed by shareholders 
 against directors to compel the latter 
 to assign to the corporation a lease 
 which they had taken in their own 
 name, the corporation being made a 
 party defendant. It was held that 
 all the shareholders should also have 
 been made parties, as the corpora- 
 tion had the right to take an as- 
 signment or decline it. Bengley u. 
 Wheeler, 45 Mich. 493. 

 
 CHAP. XII.] SHAREHOLDERS AND OFFICERS. 
 
 [§ 688. 
 
 are sought to be restrained are improper, fraudu- 
 
 T A ° ,, . , , . . r . .' Fraudulent 
 
 lent, or ultra vires acts, which the majority cannot or ultra 
 ratify, and which every shareholder has the right to 
 restrain. That such acts should not be done is as much the 
 right of a single shareholder as of a majority of shareholders. 
 Nevertheless, the proper plaintiff in a suit to restrain directors 
 from doing unauthorized acts, or in a suit against them for 
 damages suffered by the corporation, or to compel them to 
 account for illegal profits which they have made, is still the 
 corporation ; 1 and a complaint in any such suit, where the 
 corporation is not the complainant, is demurrable unless it 
 set forth sufficient reasons why the action is not brought by 
 the corporation. 2 
 
 § 688. Accordingly, in a suit brought by shareholders to 
 restrain directors or other officers from committing 
 unauthorized acts, the complaint should show — and ersYnconi-" 
 circumstantially — either that the corporation had j^"* t0 
 been requested to and had refused or failed to take action 
 
 ... against 
 
 action, or that the corporation is impotent to act for officers 
 the reason that the guilty officers constitute or con- hasten 1 "! 
 
 1 Brown v. Vandyke, 8 N. J. Eq. 
 795; Booth v. Robinson, 55 Md. 419; 
 Hedges v. Paquett, 3 Oreg. 77; State 
 v. Bank of Louisiana, 6 La. 745; 
 Fishery. Parr, 91 Md. 245; Decatur 
 Mineral Land Co. v. Palm, 113 Ala. 
 531; Macdougall v. Gardiner, 45 L. 
 J. Chan. 27. 
 
 2 Doud v. Wisconsin, etc., R. Co., 
 65 Wis. 108. See Black v. Huggins, 
 2 Tenn. Ch. 780. 
 
 Shareholders cannot maintain a 
 bill for the removal of the treasurer 
 of a corporation unless they have 
 previously applied to the board of 
 directors for relief. Tuscaloosa 
 M'f'g Co. v. Cox, 68 Ala. 71 ; Decatur 
 Mineral Land Co. et al. v. Palm, 113 
 Ala. 531 ; Jefferson County Sav. 
 Bank v. Francis, 115 Ala. 317; John- 
 son v. National B. & L. Ass'n,125 Ala. 
 465; Stahn v. Catawba Mills, 53 S. C. 
 
 519. Cf. Matthews v. Bank, 60 S. C. 
 
 183. In Woodrooff v. Howes, 88 Cal. 
 
 184, the court sustained the suit of a 
 shareholder for the specific perform- 
 ance of a contract made hy the de- 
 fendants — who were also a majority 
 of the corporation's directors — with 
 the corporation. In Jasper Land 
 Co. u. Wallis et al., 123 Ala. 652, a 
 suit by minority stockholders was 
 sustained without application to the 
 directors, when two sets of men 
 claimed to be directors and a receiver 
 was appointed. In Reynolds v. Bri- 
 denthal, 57 Neb. 280, an injunction 
 was sustained to prevent directors 
 improperly elected from acting. 
 Where the complaint alleges that de- 
 fendants are not directors, a demand 
 is not necessary. Whitehead v. 
 Sweet, 126 Cal. 67. See, also, Shivley 
 v. Eureka Mining Co., 129 Cal. 293. 
 
 683
 
 § 688.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XII. 
 
 failure of trol the corporate management and affairs. 1 If these 
 
 the corpo- r . ° 
 
 ration to facts appear in the complaint, and the complaint 
 further show that the corporation, and the plaintiff's 
 interests therein, would be injured by the commission of the 
 act sought to be prevented, it will be sustained by a court of 
 equity. 2 
 
 The same principles apply to actions brought by share- 
 holders against directors, after the commission of the unlawful 
 acts, for damages or to compel the directors to account for 
 profits which they have unlawfully made. The complaint 
 will be sustained if the plaintiff show an injury to him- 
 self through injuries to the corporation, and either that the 
 corporation has been requested to sue and has refused or 
 failed ; 3 or that it is not iu a situation to sue, or is under the 
 control of the guilty officers. 4 And a shareholder in his com- 
 plaint in such an action should state particularly the efforts 
 
 1 See §§ 139-142, 553-560. Absence | mandamus to compel the officers to 
 of such allegations, however, cannot hold the annual election for trustees. 
 
 be taken advantage of iu the first 
 instance in the appellate court. 
 Bulkley v. Big Muddy Iron Co., 77 
 Mo. 105. 
 
 9 Wright v. Oroville M'g Co., 40 
 Cal. 20; Sears v. Hotchkiss, 25 Conn. 
 171 ; Pearson v. Tower, 55 N. H. 
 215; Bliss v. Anderson, 31 Ala. 612. 
 See Elkins v. Camden and Atlantic 
 R. R. Co., 36 N. J. Eq. 467; Can- 
 non v. Trask, L. R. 20 Eq. 669 ; 
 Watts' s Appeal, 78 Pa. St. 370; Sel- 
 lers v. Phoenix Iron Co., 13 Fed. 
 Rep. 20. Compare Leslie v. Loril- 
 lard, 110 N. Y. 519; Perry v. Tnsca- 
 
 People v. Cummings, 72 N. Y. 433. 
 
 8 Greaves v. Gouge, 69 N. Y. 154; 
 Smith v. Poor, 40 Me. 415 ; Booth 
 v. Robinson, 55 Md. 419 ; Brewer 
 v. Boston Theatre, 104 Mass. 378 ; 
 Evans v. Brandon, 53 Tex. 56; Cogs- 
 well v. Bull, 39 Cal. 320; Hazard v. 
 Durant, 11 R. I. 195 ; Montgomery 
 Light Co. v. Lahey, 121 Ala. 131. 
 Compare Heath v. Erie R'y Co., 8 
 Blatchf. 347. 
 
 4 Brewer v. Boston Theatre, 104 
 Mass. 378; Rogers v. Lafayette Agri- 
 cultural Works, 52 Ind. 296; Carter 
 v. Ford Glass Co., 85 Ind. 180; Pond 
 
 loosa Co., 93 Ala. 304; Byers v. Rol- j v. Vermont Valley R. R. Co., 12 
 lins, 13 Col. 22; Marcusse v. Gullet' Blatchf. 280; Heath v. Erie R'y Co. 
 
 Gin Co., 52 La. Ann. 1383. 
 
 Where, by a statute on failure to 
 publish annual reports the share- 
 holders are made jointly and sev- 
 erally liable for the debts of the 
 corporation, one or more share- 
 holders may have a mandamus to 
 compel the officers to publish the 
 reports. Smith v. Steele, 8 Neb. 
 115. So a shareholder may have a 
 
 684 
 
 8 Blatchf. 347 ; Ryan v. Leaven- 
 worth, etc., R'y Co., 21 Kan. 365 ; 
 Peabody v. Flint, 6 Allen, 52; Mus- 
 sina v. Gnldthwaite, 34 Tex. 125 ; 
 Jones v. Johnson, 10 Bush (Ky. ), 
 649; Hilles b. Parrish, 14 N. J. Eq. 
 380; Booth v. Robinson, 55 Md. 419; 
 Neall v. Hill, 16 Cal. 145; Deaderick 
 v. Wilson, 8 Bax. (Tenn.) 108; 
 Davis v. Gemmell, 70 Md. 356;
 
 CHAP. XII.] SHAREHOLDERS AND OFFICERS. 
 
 [§ 689. 
 
 Compe- 
 tency of 
 sharehold- 
 ers to sue 
 when the 
 corporate 
 manage- 
 ment is in 
 the hands 
 of the 
 guilty 
 officers. 
 
 which he has made to prevail on the corporation to sue, so that 
 the court may judge intelligently whether his efforts have 
 been real or simulated. 1 In fine, it must be made to appear 
 to the court that it is necessary for the protection of the plain- 
 tiff's interests in the corporation that he should be allowed to 
 bring the action. 
 
 § 689. The following are a few instances of cases which 
 either hold, or proceed on the assumption, that 
 when it is apparent that the guilty officers consti- 
 tute the corporate management so as to render a 
 request to the corporation to proceed against them 
 futile, such request need not be made by share- 
 holders before commencing suit against them. 2 
 
 An action will lie in favor of a shareholder against 
 the president of a corporation, without previous de- 
 mand on the directors for relief, when the following facts ap- 
 pear from the complaint : that the corporation has made profits ; 
 that the president does not allow them to appear on the books 
 of the corporation ; that he is largely indebted to the corpora- 
 tion, and has received, but not accounted for, its emoluments ; 
 that the majority of the directors are his tools, and have sur- 
 rendered to him the control of the corporate affairs. 3 
 
 Where a member of the board of directors, who is also secre- 
 tary of the board and treasurer of the corporation, presents a 
 bill for extra compensation as secretary and treasurer, he is 
 disqualified from acting as a director on the auditing of the 
 bill ; and if the interested director is needed to make a quorum, 
 and by the aid of his own vote the bill is approved of, any 
 shareholder may sue for himself and other shareholders to pre- 
 vent its payment and to set aside the proceedings. 4 
 
 Harmerty v. Standard Theatre Co., 
 109 Mo. 297; Sage v. Culver, 147 N.Y. 
 241. See Watts' s Appeal, 78 Pa. St. 
 370; Brown v. Vandyke, 8 N. J. Eq. 
 795; Eaton v. Robinson, 18 R. I. 39(1; 
 Gerry v. Bismarck Bank, 19 Mont. 
 191; Forrester v. B. & M. Min. Co., 
 21 Mont. 544. 
 
 1 Dannmeyer v. Coleman, 11 Fed. 
 Rep. 97. See § 140. 
 
 2 See, e. g., Rotkwell v. Robinson, 
 
 39 Minn. 1; Smith v. Dorn, 96 Cal. 
 73. Other cases are cited in the 
 last note but one, many of which 
 are stated more at length elsewhere. 
 See, especially, Brewer v. Boston 
 Theatre, § 560. 
 
 3 Rogers v. Lafayette Agricultural 
 Works, 52 Ind. 296; cf. Montgomery 
 Light Co. ». Lahey, 121 Ala. 131. 
 
 * Butts v. Wood, 37 N. Y. 317. 
 
 685
 
 § 690.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XII. 
 
 Directors of a national bank are liable to shareholders for 
 losses sustained by it through their gross negligence and 
 inattention to duty. If the receiver of the bank when insol- 
 vent, himself one of the guilty directors, refuses to sue, a 
 shareholder may, on behalf of himself and all other share- 
 holders, sue the directors for damages, making the receiver 
 and the bank parties. The complaint need not allege a direc- 
 tion to sue from the comptroller of the currency, or a refusal 
 on his part to direct the receiver to sue ; and the action may 
 be brought in a state court. 1 In such an action the statute of 
 limitations affecting equitable actions generally applies. 2 
 
 § 690. In all cases where shareholders bring suit against 
 directors and other officers, either to restrain them 
 from improper and unauthorized acts, or to compel 
 them to account for illegal profits which they have 
 made, or when the suit is simply to recover damages 
 for injuries accruing to the corporate property 
 through their wrongful or negligent acts, it is essen- 
 tial that the corporation be made a party defendant. 3 
 Unless all the shareholders join as plaintiffs, the action should 
 be brought on behalf of all ; or, at least, of all who are willing 
 
 Corporation 
 a necessary 
 party; ac- 
 tion should 
 be brought 
 on behalf of 
 all the 
 share- 
 holders. 
 
 1 Brinckerhoff v. Bostwick, 88 N. 
 Y. 52; reversing S. 0., 23 Hun, 237. 
 See, also, Merchants and Planters' 
 Line v. Waganer, 71 Ala, 581; Kelsey 
 v. Sargent, 40 Hun (N. Y.), 150. 
 
 2 Brinckerhoff ». Bostwick, 99 N. 
 Y. 185. 
 
 s Greaves v. Gouge, 69 N. Y. 154; 
 Cunningham v. Pell, 5 Paige (N. Y. ), 
 607; Charleston Ins., etc., Co. v. 
 Sebring, 5 Rich. Eq. (S. C.) 342; 
 Sears v. Hotchkiss, 25 Conn. 171; 
 Black v. Huggins, 2 Tenn. Ch. 780; 
 Robinson v. Smith, 3 Paige (N. Y. ), 
 222; Davenport v. Dows, 18 Wall. 
 626; Bruschke v. Schuetzer Verein, 
 145 111. 433. 
 
 Where shareholders pass a resolu- 
 tion to cease to do business, and 
 place all the assets of the corpora- 
 tion in the hands of one of its offi- 
 cers, to be converted into money for 
 
 686 
 
 distribution among the shareholders 
 after paying the corporate debts, the 
 corporation is still a necessary party 
 to a bill filed by a shareholder against 
 the officer for an account and set- 
 tlement of the shareholder's interest. 
 Young v. Moses, 53 Ga. 328. So 
 when the corporation is in the hands 
 of a receiver, he as well as it is a 
 necessary party defendant. Brinck- 
 erhoff v. Bostwick, 88 N. Y. 52. 
 And a Federal court will not enter- 
 tain a suit by shareholders against 
 officers for fraudulent misappropria- 
 tion of corporate property, when the 
 receiver appointed by a state court 
 is not made a party to the suit, al- 
 though the state court has denied a 
 petition of the receiver to bring the 
 suit, and an application of present 
 plaintiffs for leave to make him a 
 party; for when a court has ap-
 
 CHAP. XII.] SHAREHOLDERS AND OFFICERS. 
 
 [§ 692. 
 
 to join in defraying its expenses. 1 And a court of equity is the 
 appropriate tribunal. 2 
 
 As in such cases the injury wrought by the misfeasance of 
 the officers is common to all shareholders, so in the interests of 
 all should the suit be brought. And thus it has been held that 
 a single shareholder cannot maintain a separate action at law 
 against directors for damages sustained by reason of their negli- 
 gence, which had rendered his shares worthless. His action 
 should be brought in a form to protect the interests of the cor- 
 poration as trustee for all its shareholders and creditors. 3 
 
 § 691. A distinction has been taken 4 which has not met 
 with continuing approval ; namely, that while a shareholder 
 may sue directors for damages arising to him through a breach 
 of trust on their part, he may not bring a suit in which a judg- 
 ment would in any way control the corporate action. The 
 distinction seems badly taken, for if the corporation refuses or 
 fails to act, it will often be that only through controlling the 
 corporate action by the aid of a court of equity can a share- 
 holder adequately protect his interests. 
 
 § 692. Although it is to the body corporate that directors 
 are immediately accountable, and actions can be 
 sustained against them by a shareholder for abuse 
 of their trust only under the conditions mentioned, 
 none the less do directors and other corporate officers 
 
 pointed a receiver, the court assumes 
 administration of the property, the 
 receiver is an officer of the court, 
 and his possession is the possession 
 of the court; and it is for the court 
 appointing him to decide claims of 
 or against the receiver, or permit 
 them to be litigated elsewhere. Por- 
 ter v. Sabin, 149 U. S. 473. Compare 
 Schuyler's Steam Tow Boat Co., In 
 re, 136 U. S. 169; Gilman v. Ketcham, 
 84 Wis. 60. 
 
 1 Greaves v. Gouge, 69 N. Y. 154; 
 Bosworth v. Allen, 168 N. Y. 157; 
 Brewer v. Boston Theatre, 104 Mass. 
 378; Robinson v. Smith, 3 Paige (1ST. 
 Y. ), 222 ; Davenport v. Dows, 18 Wall. 
 626. See Rogers v. Lafayette Agri- 
 cultural Works, 52 Ind. 296. 
 
 Directors 
 trustees for 
 all share- 
 holders. 
 
 2 Hodges v. New England Screw 
 Co., 1 R. I. 312; S. C, 3 R. I. 9; see 
 Smith v. Hurd, 12 Mete. 371; Allen 
 v. Curtis, 26 Conn. 456. For the right 
 of shareholders to sue on behalf of 
 the corporation, see §§ 138-142; and 
 for the right of a minority by suit to 
 control corporate action, see §§ 553- 
 560. 
 
 3 Craig v. Gregg, 83 Pa. St. 19; 
 Gardiner v. Pollard, 10 Bos. (N. Y.) 
 674. See, also, Evans v. Brandon, 53 
 Tex. 56. Compare Gaffney v. Colvill, 
 6 Hill, 567; Oliphant v. Woodburn, 
 etc., Co., 63 Iowa, 332; Eaton v. 
 Robinson, 19 R. I. 146. 
 
 4 Hodges v. New England Screw 
 Co., 1 R. I. 312. 
 
 687
 
 § 693.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XII. 
 
 hold their powers iti trust for all the shareholders, minority as 
 well as majority ; * and the primary reason why a single share- 
 holder cannot always bring suit against the guilty officers im- 
 mediately is not the inconvenience which a multiplicity of suits 
 might cause the latter, but rather the right of the corporation 
 to control the actions of its appointees and bring them to ac- 
 count. Accordingly, from the restrictions on the right of share- 
 holders to bring suits against corporate officers for a breach of 
 duty, it is not to be implied that directors and other officers do 
 not owe to every shareholder the substantial duties which 
 they owe immediately to the corporation. These restrictions 
 are only in respect to the manner of enforcing their duties ; 
 and the shareholders are the real beneficiaries. 
 
 § 693. Thus, it may be said that the officers of a corpora- 
 tion owe to the shareholders all the duties which 
 they owe to the body corporate ; and the rules gov- 
 erning the liability of officers to the body corporate 
 also govern their substantial liability to the share- 
 Moreover, it is beyond the powers of the corporation 
 to condone gratuitously, so as to conclude non-consenting 
 shareholders, a breach of trust on the part of directors, 
 whereby the assets of the corporation have been wasted or the 
 corporate interests injured. 2 Accordingly, for every breach of 
 trust on the part of the officers of a corporation, whether the 
 same consist in fraudulent or unauthorized acts or in gross 
 negligence, 3 the guilty officers are liable to the individual 
 shareholders in damages, or to account for unlawful profits 
 made by them. 4 And to enforce this liability, actions may 
 
 Corpora- 
 tion cannot 
 condone 
 breach of 
 trust. 
 
 holders. 
 
 1 Harris v. North Devon R'y Co., 
 20 Beav. 384; Richards v. New 
 Hampshire Ins. Co., 43 N. H. 263. 
 
 Directors can make no disposition 
 of the corporate funds which will 
 not enure to the equal [proportion- 
 ate] benefit of shareholders. Hale 
 v. Republican River Bridge Co., 8 
 Kan. 460. In Richardson v. Larpent, 
 2 Y. & C. N. R. 507, the bill was dis- 
 missed because shareholders, hold- 
 ing views opposed to the plaintiff, 
 were not made parties to the suit, 
 
 688 
 
 although the defendant directors 
 held the views of such shareholders. 
 Bruce, V. C, saying (p. 514), "Di- 
 rectors are officially obliged to have 
 an equal mind towards the share- 
 holders, and cannot properly be con- 
 sidered as representing an opposi- 
 tion." 
 
 2 Hazard v. Durant, 11 R. I. 195. 
 
 8 Brinckerhoff v. Bostwick, 88 N. 
 T. 52. 
 
 4 Ryan v. Leavenworth, etc., R'y 
 Co., 21 Kans. 365; Farmers', etc., 
 Bank v. Downey, 53 Cal. 466; Koehler 

 
 CHAP. XII.] SHAREHOLDERS AND OFFICERS. 
 
 [§ 695. 
 
 be brought by the latter under the conditions heretofore dis- 
 cussed. 1 
 
 § 694:. As corporate officers acting in good faith within their 
 authority are not liable to the corporation for a mere 
 mistake in judgment, 2 so, for such mistakes, they will binty of 
 
 otiicBrs for 
 
 not be liable to individual shareholders. 3 Neither errors; 
 will they be liable to shareholders for the frauds of J°uot te ° f 
 other officers under circumstances which do not ren- officers - 
 cler them liable to the corporation. 4 But, whenever directors 
 incur liability to the corporation for the frauds of other officers 
 which the negligence of the directors renders possible, the di- 
 rectors will be liable to the shareholders if the corporation fails 
 to bring suit against them. 5 
 
 § 695. Directors have been held not to be liable to share- 
 holders for improper or illegal acts which are author- 
 ized by a shareholders' meeting. 6 And a bill in 
 equity filed by shareholders against directors alleg- 
 ing illegal acts on the part of the latter, is demurra- 
 
 Acts au- 
 thorized by 
 sharehold- 
 ers' meet- 
 ings. 
 
 v. Black River Falls Iron Co., 2 Black, 
 715. 
 
 Directors will be liable to share- 
 holders if they fraudulently misman- 
 age the corporate affairs in the in- 
 terests of a rival corporation. Booth 
 v. Robinson, 55 Md. 419. The salary 
 of a director was increased improp- 
 erly. Some of the shareholders 
 acquiesced; others did not. Held 
 that the non-consenting shareholders 
 were entitled to recover their propor- 
 tion of the improper excess of salary 
 from the officer receiving it; but 
 said officer can retain the balance, as 
 against the shareholders who have 
 acquiesced with knowledge. Brown 
 v. De Young, 167 111. 549; cf. Eaton 
 v. Robinson, 19 R. I. 146; Blair v. 
 Telegram News Co., 172 Mass. 201. 
 
 1 Shareholders may, however, lose 
 their right to object by acquiescence 
 or a long delay; and they are charge- 
 able with knowledge of the records 
 of the corporation. Kitchen v. St. 
 Louis, etc., R'y Co., 69 Mo. 224; see 
 
 44 
 
 Watts's Appeal, 78 Pa. St. 370; Fos- 
 ter v. Mansfield, etc., R. R. Co., 146 
 U. S. 88; Ware v. Galveston City Co., 
 146 U. S. 102; Skinner i>. Smith, 134 
 N. Y. 240. 
 
 2 See § 620. 
 
 3 Smith v. Prattville M'f'g Co., 29 
 Ala. 503; Watts's Appeal, 78 Pa. St. 
 370; Booth v. Robinson, 55 Md. 419. 
 
 4 Dunn v. Kyle, 14 Bush (Ky.), 134; 
 Bloom v. Nat. Saving Co., 152 N. Y. 
 114. See §§ 624-626. A director is 
 not liable to a shareholder for mis- 
 representations in the articles of as- 
 sociation made before the election of 
 the board, of which he was a mem- 
 ber; and a person cannot maintain 
 an action against directors for the 
 violation of a statute and the conse- 
 quent depreciation of the stock, when 
 the acts complained of were commit- 
 ted before he became a shareholder. 
 Mabey v. Adams, 3 Bos. (N. Y.) 346. 
 
 6 Ackerman v. Halsey, 37 N. J. Eq. 
 356; aff'd 38 N. J. Eq. 501. 
 6 International, etc., R. R. Co. 
 
 689
 
 § 697.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XII. 
 
 Uncondi- 
 tional right 
 of share- 
 holders to 
 sue for 
 direct in- 
 juries. 
 
 ble when one of the complainants is a director who participated 
 in the alleged acts. 1 
 
 § 690. When an injury to a shareholder is not the result 
 of a misapplication of the corporate funds by reason of which 
 all shareholders suffer alike ; but is an injury 
 done by corporate officers to the shareholder di- 
 rectly, the shareholder may sue at once on his 
 own behalf; for he is the only person injured, and 
 in respect of such injuries he is not held to have 
 confided the protection of his interests to the body corporate. 2 
 Accordingly, when a person is induced through the fraudulent 
 misrepresentations of directors to purchase shares, he may 
 sue them immediately for the damages arising from the wrong 
 done him. 3 Likewise, Avhen directors make a fraudulent 
 overissue of stock, any one purchasing such shares on the 
 faith of their having been lawfully issued may recover from 
 the directors the damages sustained by him. 4 
 
 § 697. If confidential agents of a company conspire to 
 
 Bremond, 53 Tex. 96. See, also, 
 Overend v. Gurney, L. R. 4 Ch. 701; 
 S. C, sub nom. Overend & Gurney 
 Co. v. Gibb, L. R. 5 H. L. 480. Com- 
 pare Deaderick v. Wilson, 8 Bax. 
 (Tenn.) 108. 
 
 1 Baird v. Midvale Steel Works, 12 
 Phila. (Pa.) 255. 
 
 2 The treasurer of a corporation 
 who holds money to pay a dividend 
 •which has been declared, and refuses 
 to pay the dividend on certain shares, 
 claiming to be the owner of them 
 himself, is liable personally for the 
 amount of the dividend, to the real 
 owner in an action of assumpsit for 
 money had and received. Williams 
 v. Fullerton, 20 Vt. 3-16. When 
 there are two classes of sharehold- 
 ers, one whose dividends are to be 
 deferred for a number of years, and 
 directors pay to the other class div- 
 idends out of the capital of the com- 
 pany, the directors may be person- 
 ally liable to make up the sum, in 
 the interests of the deferred share- 
 
 690 
 
 holders. Salisbury v. Metropolitan 
 R'y Co., 22 L. T. N. S. 839. 
 
 Some directors attempted to pur- 
 chase on behalf of their bank its 
 own stock. This they had no power 
 to do, and the bank repudiated the 
 transaction. It was held that the 
 vendor could not sue the directors, 
 who had made no misrepresenta- 
 tions and whose want of power was 
 a matter of law, as open to the 
 knowledge of the plaintiff as to 
 themselves. Abelas v. Cochran, 22 
 Kan. 405. 
 
 8 Cole v. Cassidy, 138 Mass. 437; 
 Davidson v. Tulloch, 3 Macq. 783; 
 Paddock v. Fletcher, 42 Vt. 389; 
 Cazeaux v. Mali, 25 Barb. 578; Mor- 
 gan v. Skiddy, 62 N. Y. 319; Bale v. 
 Cleland, 4 Foss. & Finn. 117. Com- 
 pare Mabey v. Adams, 3 Bos. (N. Y. ) 
 346 ; Hubbard v. Weare, 79 Iowa, 
 678; Gerner v. Mosher, 58 Neb. 135. 
 See Gerner v. Yates, 61 Neb. 100. 
 
 4 Bruff v. Mali, 36 N. Y. 200; Shot- 
 well v. Mali, 38 Barb. 445.
 
 CHAP. XII.] SHAREHOLDERS AND OFFICERS. [§ 698. 
 
 depress the selling price of the shares by a system of false 
 accounts and concealments, in order that they may purchase 
 shares at less than the real value, and they do purchase the 
 shares of a holder at less than the shares are worth, the holder 
 may have the sale set aside with an accounting for dividends 
 received by them, or may hold the agents for the difference 
 between the value of the shares and what they paid. 1 Where, 
 however, the defendant with other directors of a corporation, 
 made an assessment on its stock, upon which but a small pro- 
 portion was paid, and threatened to make further assessments 
 for the purposes of the corporation, a course of action which 
 induced the plaintiff to sell his shares to the defendant, it was 
 held that there was no such fraud in the matter as would war- 
 rant setting the sale aside. 2 
 
 § 698. The trust relation between shareholders and directors 
 extends only to matters relating to the manage- , . . 
 
 . . J , ° A ,. ° Limits to 
 
 ment of the corporate business. Accordingly, rules the trust 
 applicable to transactions between a trustee and his tween 
 cestui que trust do not extend to a purchase of holders and 
 shares made by a director from a shareholder, and directors. 
 in the absence of actual fraudulent misrepresentations, such 
 a sale will be upheld, provided the director does not inten- 
 tionally and fraudulently divert or prevent the vendor from 
 making inquiries into the condition of the corporate affairs. 3 
 This rule, regarding the purchase of shares by an officer, 
 was applied under the following circumstances : The defend- 
 ant, who was the president and a director of a railroad 
 company, knowing by reason of his official position that the 
 true value of its stock was largely in excess of the selling 
 price, purchased the shares of a non-official shareholder for less 
 than their real value. The court held that the defendant was 
 under no duty to disclose to the shareholder matters affecting 
 the value of the shares, which were not matters of general 
 
 But an assignee of shares cannot 
 sue the transfer agent for improp- 
 erly refusing to register him; but 
 must sue the corporation. Denny 
 v. Manhattan Co., 2 Denio (N. Y. ), 
 115. 
 
 1 Walsham v. Stainton, 1 De G. 
 J. & S. 678. 
 
 2 Grant v. Attrill, 11 Fed. Rep. 
 469. 
 
 3 Carpenter v. Danforth, 52 Barb. 
 581; Deaderick v. Wilson, 8 Bax. 
 (Tenn.) 108; Commissioners of Tip- 
 pecanoe County v. Reynolds, 44 Ind. 
 509; Krumbhaar v. Griffiths, 151 Pa. 
 St. 223. 
 
 691
 
 § 699.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XII. 
 
 opinion and could not have been found out by the shareholder. 
 The fact known to the defendant and not to the plaintiff, was 
 that the former was about to consummate a sale of the road 
 which was likely to enhance, and when effected did greatly en- 
 hance, the value of the stock. 1 
 
 § 699. If directors expend money, and incur personal liability 
 for purposes not within their authority, yet the share- 
 holders, knowing the circumstances, acquiesce, and 
 receive the benefit of their acts, the directors will, as 
 against the shareholders, be entitled to indemnity 
 from the corporate funds. 2 And if shareholders neglect to at- 
 tend corporate meetings where they know such matters are to 
 be discussed, they will not be permitted to take advantage of 
 their ignorance. 3 But where by reason of certain defaults the 
 officers of a corporation have been compelled to pay its debts, 
 they cannot obtain contributions from the shareholders, whom 
 the same statute rendered liable after the property of the offi- 
 cers had been exhausted. 4 
 
 Directors' 
 right to in- 
 demnifica- 
 tion. 
 
 1 Commissioners of Tippecanoe 
 Co. v. Reynolds, 44 Ind. 509, Downey, 
 C. J., dissenting. The transaction 
 which in this case was allowed to 
 stand seems to the writer to have 
 been eminently unfair, and indeed a 
 rule — for which this decision is cer- 
 tainly authority — that directors in 
 their dealings with shareholders are 
 entitled to take advantage of their 
 knowledge of facts not known to the 
 latter, but which the directors are 
 acquainted with by reason of their 
 
 692 
 
 official position, seems of question- 
 able propriety. Compare Perry v. 
 Pearson, 135 111. 218, 236; Sargent 
 v. Kansas Mid. R. R. Co., 48 Kan. 
 672. 
 
 2 Ex parte Chippendale, 4 De G. M. 
 & G. 19; § 645. 
 
 3 See Turquand v. Marshall, L. R. 
 4 Ch. 376; Lire British, etc., Assur. 
 Soc, Lane's Case, 1 De G. J. & S. 
 504. 
 
 4 Stone v. Fenno, 6 Allen, 579.
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 CHAPTER XIII. 
 
 LEGAL RELATIONS BETWEEN SHAREHOLDERS AND 
 CREDITORS OF A CORPORATION. 
 
 Rights of creditors in absence of 
 statutory liability, § 700. 
 
 Liability incurred by subscribing. 
 Conditions, § 701. 
 
 Liability in respect of shares issued 
 for property, § 702. 
 
 Corporate assets a " trust fund " ? 
 Recent cases, § 702a. 
 
 "Bonus" stock, § 7026. 
 
 Creditors' remedies, § 703. . 
 
 Joinder of parties in creditors' bills, 
 §§ 704-706. 
 
 Appointment of receiver. Assignee 
 in bankruptcy, § 707. 
 
 Rights of creditors against share- 
 holders improperly withdrawing 
 corporate funds, § 708. 
 
 Shareholders, in what respects trus- 
 tees for creditors, §§ 709-711. 
 
 Classes of statutes imposing personal 
 liability, § 712. 
 
 Return of unsatisfied execution 
 against the corporation, § 713. 
 
 Nature of statutory liability, §§ 714- 
 716. 
 
 Shareholders not left, but made lia- 
 ble, § 717. 
 
 To what shareholders statutory lia- 
 bility attaches, §§ 718-720. 
 
 Creditors the proper parties to sue, 
 §721. 
 
 Necessary averments in pleading, 
 §§ 722, 723. 
 
 Performance by creditor of condi- 
 tions precedent, § 724. 
 
 Joinder of parties, § 725. 
 
 Distinction, § 726. 
 
 Liability of shareholders in national 
 banks, § 727. 
 
 Extinguishment of liability, § 728. 
 
 Set-off. Unpaid subscriptions, § 729. 
 
 Set-off. Dividends improperly re- 
 ceived, § 730. 
 
 Set-off. Statutory liability, §§ 731, 
 732. 
 
 When shareholder, who is also a 
 creditor, cannot sue another share- 
 holder at law, § 733. 
 
 Liability for debts of a particular 
 class. "Debts," §734. 
 
 Waiver or repeal of statutory lia- 
 bility. Substantial compliance 
 with statute, § 735. 
 
 Statute of limitations, § 736. 
 
 Effect of judgment against corpora- 
 tion, § 737. 
 
 Shareholders cannot deny corporate 
 existence, § 738. 
 
 Nor can the creditor ordinarily, 
 §739. 
 
 Who are shareholders as to creditors, 
 §740. 
 
 Transferee of shares as collateral 
 security, § 741. 
 
 Real owner of shares liable, § 742. 
 
 Rationale, § 743. 
 
 Fraud, when no defence, § 744. 
 
 Releases, no defence, § 745. 
 
 Compromises : forfeitures, § 746. 
 
 Effect of transfers of shares. Trans- 
 fers to the corporation, § 747. 
 
 Irregular transfers, § 748. 
 
 Transfers in fraud of creditors, 
 §749. 
 
 Relations between shareholders and 
 creditors on winding up. Divi- 
 dends, § 750. 
 
 On dissolution, § 751. 
 
 693
 
 § 701.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 § 700. When, according to the constitution of a corpora- 
 Rights of ^ on > liability for corporate indebtedness is not 
 creditors in extended bevond the corporate funds properly so 
 
 absence of J 
 
 statutory 
 liability. 
 
 called, that is, not beyond the capital named in the 
 charter or articles of association, paid up or agreed 
 to be paid up, and to be used in the corporate business, it is 
 almost an identical proposition to say that the shareholders, 
 provided they honestly pay what they have subscribed, are not 
 personally liable to creditors of the corporation. 1 AVhen such 
 is the constitution of a corporation, creditors have but two 
 general and comprehensive rights as against shareholders : the 
 one right, that each shareholder, unless cash in amount or 
 property in value equal to the par value of his shares has been 
 paid to the corporation on account of them, shall contribute to 
 the corporate funds the amount unpaid on his' shares when 
 necessary to meet the corporate indebtedness ; 2 the other right, 
 that shareholders shall not, to the injury of creditors, divert 
 the funds of the corporation from their proper function of 
 discharging the corporate indebtedness. Whatever rights 
 against shareholders in a corporation with a constitution of 
 this nature creditors may have, are incidental to these two 
 main rights. 
 
 § 701. By subscribing for shares in the capital stock of a 
 „ corporation, subscribers, even without an express 
 
 Liability r ' . ' 
 
 incurred by promise to pay, are held impliedly to agree to pay 
 Condmo^I' to the corporation the par value of the shares sub- 
 
 1 See Seymour v. Sturges, 26 N. Y. 
 134. A statute prescribing that 
 no shareholder shall be liable to 
 creditors of the corporation for 
 more than the amount subscribed 
 by him is declaratory of the com- 
 mon law. Walker v. Lewis, 49 Tex. 
 123. 
 
 2 This right of creditors, or liabil- 
 ity of shareholders, is sometimes ex- 
 pressed by statute. (See N. Y. Rev. 
 Stat. chap. 18, tit. iii. §1, par. 5); 
 Morgan v. New York and Albany 
 R. R. Co., 10 Paige (N. Y.), 290. 
 But no implied promise to pay for 
 shares can be held to arise when 
 
 694 
 
 the defendant never agreed to be- 
 come a shareholder nor accepted 
 that relationship, but repudiated it 
 as soon as he knew it was put upon 
 him by another person, as, for in- 
 stance, where one stockbroker or- 
 ders another to purchase stock, and 
 the second broker has it transferred 
 to the name of the broker who sent 
 the order. No implied authority 
 can exist in such case to transfer 
 stock to the name of the broker 
 ordering it, for the other broker 
 knows him to be acting merely as 
 a broker. Glenn v. Garth, 133 N. 
 Y. 18.
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 701. 
 
 scribed for by them respectively. 1 However, as it is the law 
 that when a certain amount of stock is mentioned in the 
 charter or articles of incorporation, a contract to subscribe 
 cannot be enforced by the corporation before the total amount 
 is subscribed, so creditors canuot compel a subscriber to pay 
 up his subscription when the same implied condition is un- 
 fulfilled and the subscriber has done nothing to estop him- 
 self from setting up such defence. 2 But a subscriber does 
 
 1 See § 513. 
 
 The original holder of stock in a 
 corporation is liable for unpaid in- 
 stalments of stock without an ex- 
 press promise to pay them, and a 
 contract made by him with the cor- 
 poration or its agents, limiting bis 
 liability therefor, is void as to cred- 
 itors of the company and its assignee 
 in bankruptcy who represents them. 
 Upton v. Tribilcock, 91 U. S. 45; 
 Tuckerman v. Brown, 33 X. Y. 297; 
 Jewell v. Rock River Paper Co., 101 
 111. 57; Union Mut. Life Ins. Co. v. 
 Frearstone M'f'g Co., 97 111. 537; 
 Keystone Bridge Co. v. Barstow, 8 
 Mo. App. 494; Wight Co. v. Steinke- 
 meyer, 6 Mo. App. 574; Farnsworth 
 v. Bobbins, 36 Minn. 369; Goodwin 
 v. McGehee, 15 Ala. "232. Compare 
 Ross v. Kelly, 36 Minu. 38. Tbe 
 charter of a trust company provided: 
 "If at any time tbe capital stock 
 paid into said corporation shall be 
 impaired by losses or otberwise, tbe 
 directors sball forthwith repair the 
 same by assessment." The company 
 being insolvent and in the hands of 
 a receiver, it was beld that a per- 
 sonal liability was not imposed on 
 the shareholders, and that they could 
 not be assessed to pay creditors, 
 and that the purpose of said pro- 
 vision was to prevent the continuance 
 of business with impaired capital. 
 Dewey v. St. Albans Trust Co., 57 
 Vt. 332. 
 
 The shareholders of a corporation 
 who were under no personal liability 
 to its creditors, at a time when the 
 corporation was insolvent made an 
 agreement to pay the treasurer "the 
 sums set opposite our names, respec- 
 tively, for the purpose of liquidating 
 the debt against said association." 
 All but one paid the amount, and 
 the business was continued three 
 years. It was held that an action 
 of assumpsit, in the name of the 
 treasurer, could be maintained on 
 behalf of those who were creditors 
 at the time of the above agreement, 
 the corporation having ceased to do 
 business, and transferred its assets 
 to its creditors. Haskell v. Oak, 75 
 Me. 519. A corporation was organ- 
 ized, the members agreeing that its 
 liabilities should not exceed an 
 amount much less than its nom- 
 inal capital stock; they then dis- 
 tributed its capital stock among 
 themselves, paying for it only a 
 small fraction of its face. Held, a 
 shareholder who was a party to the 
 original agreement could not recover 
 against other shareholders for debts 
 owing him by the corporation be- 
 yond the limited amount; but seems 
 an outside creditor could. Haider- 
 man v. Ainslie, 82 Ky. 395. 
 
 2 Temple v. Lemon, 112 111. 51; 
 Hawkins v. Citizens' Inv. Co., 38 Or. 
 544. See § 518. But the subscriber 
 may estop himself by delay from in- 
 
 695
 
 § 70±] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 estop himself by paying a call and acting as a shareholder. 1 
 The capital stock, whether actually paid up or subject to call, 
 constitutes the primary fund to be applied in furthering the 
 objects of incorporation. It is the fund which subscribers are 
 bound to contribute, and which creditors may rely on for the 
 payment of their claims. 13 It need not be altogether cash, but 
 may consist partly in buildings, plant, and properties. Accord- 
 ingly, a shareholder may pay for his shares in property or 
 even in services, provided such property or services be fairly 
 worth the par value of the capital stock received as fully paid 
 up in return. 3 
 
 § 702. To issue shares as fully paid up for property known 
 to the corporation and the shareholder receiving 
 them to be grossly below their par value, is a fraud 
 on creditors, for whose benefit the shareholder to 
 whom the shares are issued may be compelled to 
 make up the difference. 4 This rule has been held not to be 
 
 Liability iu 
 respect of 
 shares is- 
 sued for 
 property. 
 
 sisting (as against creditors) on the 
 condition. Lee v. Imbrie, 13 Oreg. 
 510. 
 
 1 Cornell and Michler's Appeal, 
 114 Pa. St. 153. 
 
 2 See Thompson v. Reno SVgs 
 Bank, 19 Nev. 103 and §§ 654, 655. 
 
 When sued by a creditor a sub- 
 scriber cannot plead an agreement 
 not contained on the face of the 
 subscription, that the subscription 
 was to be paid only under certain 
 conditions. Hickman v. Wilson, 104 
 111. 54; Hawkins v. Citizens 1 Inv. 
 Co., 38 Or. 544. See §521. 
 
 8 Coit v. Gold Amalgamating Co., 
 119 U. S. 343. See §522c. 
 
 But a subscriber cannot as against 
 creditors set up a collateral agree- 
 ment that his subscription was to 
 be paid in land which the corpora- 
 tion had no authority to acquire. 
 Noble v. Callender, 20 Ohio St. 199- 
 Compare In re Glen Iron Works, 
 Wilbur v. Stockholders, 13 Pliila. 
 (Pa.) 479; S. C, 18 Baukr. Reg. 178. 
 "The public has a right to assume, 
 
 GOG 
 
 where the stock of a company has 
 all been issued as full- paid stock, that 
 it has been paid for in full in money, 
 or in property at a fair value." Goff 
 v. Hawkeye Pump, etc., Co., 62 
 Iowa, 691, 694, opinion of court per 
 Adams. J. Where a corporation is- 
 sued all its stock fur a patent which 
 turned out worthless, the stock- 
 holders were held liable to credit- 
 ors. Chisholm Bros. v. Forney, 65 
 Iowa, 333. Where the articles of in- 
 corporation provided that 15 per 
 cent, only of the par value of shares 
 be paid in, it was held that payment 
 of the balance of 85 per cent, could 
 not be enforced by a receiver ap- 
 pointed after the corporation became 
 insolvent. Bent v. Underdown, 156 
 Ind. 516. 
 
 * Stout o. Hubbell, 104 la. 499; 
 Jackson r. Traer, 64 Iowa, 469; Free- 
 man v. Stine, 15 Phila. (Penn. ) 37; 
 Crawford v. Rohrer, 59 Md. 599; Os- 
 good «. King, 42 Iowa, 478; Wishard 
 v. Hansen, 99 Iowa, 307; Wether- 
 bee v. Baker, 35 N. J. Eq. 501 ; Elyton
 
 CHAP. XIII.J SHAREHOLDERS AND CREDITORS. 
 
 [§ 702. 
 
 affected by the facts that the corporation was insolvent when 
 the shares were issued, and that they were issued in payment 
 of a debt owed by it. 1 If, however, shares are issued as fully 
 paid up, when in fact the corporation has never received the 
 par value of them, creditors cannot compel a person who buys 
 them in good faith as full paid, to pay the difference between 
 their par value and the value of whatever property was given 
 for them originally. 2 Though possibly the creditors could hold 
 the original subscriber who took the shares as fully paid up, 
 
 Land Co. v. Birmingham Warehouse 
 Co., 92 Ala. 407; Romau ». Dimmick, 
 115 Ala. 233; Pickering v. Town- 
 send, 118 Ala. 351; Lea v. Iron Belt 
 Mercantile Co., 119 Ala. 271, 276; 
 Roman v. Dimmick, 123 Ala. 366; 
 Shickle v. Watts, 94 Mo. 410; Van 
 Cleve v. Berkey, 143 Mo. 109; Kelly 
 v. Clark, 21 Mont. 291; Coleman v. 
 Howe, 154 111. 458; Hastings Malt- 
 ing Co. v. Iron Range Co., 65 Minn. 
 28; Marshal Foundry Co. v. Killian, 
 99 N. C. 501; Clayton v. Ore Knob 
 Co., 109 N. C. 385. Compare White- 
 hill i>. Jacobs, 75 Wis. 474; Gogebic 
 Inv. Co. v. Iron, etc., Co., 78 Wis. 
 427; In re South Mountain Con- 
 solidated M'g Co., 14 Fed. Rep. 347; 
 Sprague v Nat. Bank, 172 111. 149. 
 Actual fraud on the part of the cor- 
 poration and stockholders need not 
 be shown. Gillin v. Sawyer, 93 Me. 
 151. When a person receives shares 
 as a gift, in consideration of his in- 
 fluence and service in recommend- 
 ing the goods of the corporation, 
 creditors may compel him to pay in 
 the amount of his subscription. 
 Savings Bk. v. Stove Co., 105 Mich. 
 535. See, also, Eddystone Ins Co., 
 7a re, L. R. Ch. Div. 1893, III. 9. 
 
 Where stock is issued in good faith 
 for property supposed to equal in 
 value the amount of stock issued for 
 it, the subscriber will not be liable to 
 creditors because subsequent events 
 show that the property was worth 
 
 less. Coit v. Gold Amalgamating 
 Co., 14 Fed. Rep. 12; S. C, aff'd 119 
 U. S. 343; Fort Madison Bank v. Al- 
 den, 129 U. S. 372; Brant v. Ehlen, 
 59 Md. 1; Penfield v. Dawson Town 
 & Gas Co., 57 Neb. 231; Kroenert v. 
 Johnston, 19 Wash. 96. See Cofhn 
 v. Ransdell, 110 Ind. 417, and § 723. 
 The stockholder who receives bonds 
 as a bonus upon paying for his stock 
 in property cannot be charged there- 
 for. The bonds may not be enforce- 
 able, but no obligation to pay for 
 them exists in favor of the creditor 
 of the corporation. Romau v. Dim- 
 mick, 123 Ala. 366. 
 
 1 Jackson v. Traer, 64 Iowa, 469. In 
 this case $350,000 of stock were issued 
 in payment of a debt of $70,000. 
 Contra, Clark v. Bever, 139 U. S. 
 96. 
 
 2 Brant v. Ehlen, 59 Md. 1; Phelan 
 o. Hazard, 5 Dill. 45; Steacy v. Little 
 Rock, etc., R. R. Co., ib. 348; Fore- 
 man v. Bigelow, 4 Cliff. 508; Erskine 
 o. Loewenstein, 82 Mo. 301; Johnson 
 w. Lullman, 15 Mo. App. 55; S. C, 88 
 Mo. 567; Keystone Bridge Co. v. Mc- 
 Cluney, 8 Mo. App. 496; West Nash- 
 ville Mill Co. v. Bank, 86 Tenn. 252; 
 Morgan n. Howland, 89 Me. 484; see 
 Waterhouse v. Jamieson, L. R. 2 
 H. L. Sc. 29. Compare Peck v. Coal- 
 field Coal Co., 11 111. App. 88; Rail- 
 road Co. v. Howard, 7 Wall. 392; 
 Troup v. Horbach, 53 Neb. 795. § 
 522c. 
 
 697
 
 § 7025.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. Xm. 
 
 assets a 
 " trust 
 fund?" 
 Recent 
 cases. 
 
 knowing them not to be so, liable for such difference, 1 or for 
 the difference between what he gave and what he received for 
 them. 2 
 
 § 702a. The doctrine that corporate assets constitute a 
 "trust fund" has recently been impugned; 3 and as certain 
 decisions of the Supreme Court of the United States might give 
 Corporate the impression that this doctrine and principles 
 flowing from it had been given up, that court has 
 felt itself called on to use the following language : 
 " It is the settled doctrine of this court that the 
 trust arising in favor of creditors by subscriptions to the stock 
 of a corporation cannot be defeated by any simulated payment 
 of such subscription, nor by any device short of an actual 
 payment in good faith. And while any settlement or satis- 
 faction of such subscription may be good as between the 
 corporation and the stockholders, it is unavailing as against 
 the claims of creditors. Nothing that was said in the recent 
 cases of Clark v. Bever, 139 U. S. 96 ; Fogg v. Blair, 139 U. S. 
 118; or Handley v. Stutz, 139 U. S. 417, was intended to 
 overrule or qualify in any way the wholesome principle 
 adopted by this court in the earlier cases, especially as applied 
 to the original subscribers to stock. The later cases were 
 only intended to draw a line beyond which the court was 
 unwilling to go in affixing a liability upon those who had 
 purchased stock of the corporation, or had taken it in good 
 faith in satisfaction of their demands." i 
 
 § 702b. One of the points decided in the case of Handley 
 
 v. Stutz was that only subsequent creditors could 
 
 s'tod< nuS " be presumed to have given credit to the company 
 
 on the faith of an issue of stock, and that conse- 
 
 » See Boyton v. Hatch, 47 N. T. 225; 
 Tallmadjre v. Fishkill Iron Co., 4 
 Barb. 382; Poll's Case, L. R. 5 Ch. 
 11 ; cf. Tulare Sav. B'k v. Talbot, 131 
 Cal. 45. 
 
 2 Eyerman v. Krieckhaus, 7 Mo. 
 App. 455. Christensen v. Eno, 106 
 N, Y. 97, appears to hold that a cor- 
 poration may present shares of its 
 stock to shareholders, and that on its 
 subsequent insolvency creditors can- 
 
 698 
 
 not compel shareholders who have 
 received shares as a gratuity to pay 
 up the par value thereof. Compare 
 Clark v. Bever, 31 Fed. Rep. 670. 
 
 3 Hospes v. Northwestern Mfg. Co., 
 48 Minn. 174; see § 7026. The present 
 discussion is to be read in connection 
 with §§ 522a-522c, and note to § 655. 
 
 4 Camden v. Stuart, 143 U. S. 104, 
 113. See Kelly v. Clark, 21 Mont. 
 291. Compare Lloyd v. Preston, 146
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 7026. 
 
 quently they alone would have a valid claim against those 
 shareholders who had received " bonus " stock, or stock issued 
 for less than its par value. 1 In connection with that case 
 the decision and reasoning in Hospes v. Northwestern Manu- 
 facturing Co. 2 are of interest. There the court held that 
 where it is explicitly agreed between the corporation and 
 the person to whom stock is issued that it shall be " bonus " 
 stock, no implied promise to pay for it can arise in favor 
 of the corporation, and hence not in favor of any creditor of 
 the corporation ; the creditor's right can rest only on a fraud 
 done him ; no equity exists in favor of a creditor whose debt 
 was contracted before the issue, nor in favor of a subsequent 
 creditor who knew of the agreement under which the " bonus" 
 stock was issued. The court then refers to the recent cases 
 in the Federal Supreme Court and continues : " It is difficult 
 if not impossible to explain or reconcile these cases upon 
 the ' trust fund ' doctrine, or, in the light of them, to predi- 
 cate the liability of the stockholder upon that doctrine. 
 But by putting it upon the ground of fraud, and applying the 
 old and familiar rules of law on that subject to the peculiar 
 nature of a corporation and the relation which its stockholders 
 bear to it and the public, we have at once a rational and logical 
 ground on which to stand. The capital of a corporation is the 
 basis of its credit. It is a substitute for the individual lia- 
 bility of those who own its stock. People deal with it and 
 give it credit on the faith of it. They have a right to assume 
 that it has paid-in capital to the amount which it represents 
 itself as having ; and if they give it credit on the faith of that 
 representation, and if the representation is false, it is a fraud 
 upon them ; and, in case the corporation becomes insolvent, 
 the law, upon the plainest principles of common justice, says 
 to the delinquent stockholder : ' Make that representation good 
 by paying for your stock.' It certainly cannot require the 
 
 U. S. 630, opinion of court per 
 Brown, J. See Fouche v. Merchants 1 
 Nat. Bank, 110 Ga. 827; Van Cleve 
 v. Berkey, 143 Mo. 109. 
 
 i Handley v. Stutz, 139 U. S. 417; 
 ace. First Nat. B'k v. Mining Co., 42 
 Minn. 327; Gil man v. Gross, 97 Wis. 
 224. Cf. Palmer v. Bank, 72 Minu. 
 
 266. Those are " subsequent cred- 
 itors" whose claims arise after the 
 resolution to issue the stock has 
 been passed, although it may not 
 have been distributed till after their 
 debts accrued. Handley v. Stutz, 
 supra. 
 
 2 48 Minn. 174. 
 
 699
 
 § 703.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 invention of any new doctrine to enforce so familiar a rule of 
 equity. It is the misrepresentation of fact in stating the 
 amount of capital to be greater than it really is that is the 
 true basis of the liability of the stockholder in such cases ; and 
 it follows that it is only such creditors who have relied, or 
 who can fairly be presumed to have relied, upon the professed 
 amount of capital, in whose favor the law will recognize and 
 enforce an equity against the holders of ' bonus stock.' " ' 
 
 The above reasoning is certainly forcible, and the decision, 
 as well as that in Ilandley v. Stutz, is in harmony with usual 
 modes of conducting the affairs of corporations. It is to be 
 borne in mind, however, that the " trust fund " doctrine rests 
 primarily on the view that the amount of stock named in the 
 charter constitutes a statement to all the world that that is the 
 amount of capital on which the corporation is to do business. 
 Now, as it would seem to be false on principle to say that the 
 amount of stock named in the charter does constitute such a 
 statement, and means money or money's worth, but that no 
 such idea is connected with any subsequent issue or increase of 
 stock, recent cases tend to uphold the indiscriminate issue of 
 fictitious stock. 
 
 § 703. Creditors in order to enforce their main right to 
 Creditors' have the nominal value of the capital stock actually 
 remedies. p a j^ j n? h ave the subsidiary right to compel the 
 directors to make calls ; 2 or creditors may themselves bring 
 
 1 Hospesw. Northwestern Mfg. Co., 
 48 Minn. 174, 197, Opinion of court 
 per Mitchell, J. See, also, Bickley v. 
 Schlag, 4(5 N. J. Eq. 532; Hehberd v. 
 South West. L. & C. Co., 55 N. J. Eq. 
 18; Wallace v. Carpenter Co., 70 
 Minn. 321 ; and Hastings Malting Co. 
 v. Iron Range Co., 65 Minn. 28. 
 
 2 See §661. 
 
 In the ordinary case of a solvent 
 corporation there is no liability on 
 shareholders to pay in the capital 
 until an assessment is levied by the 
 proper corporate authorities; but 
 when the corporation becomes in- 
 solvent, especially if it ceases to be a 
 going concern, this condition piece- 
 
 700 
 
 dent ceases to exist, and payment is 
 compellable at the suit of creditors, 
 although no assessment has been 
 made. Hatch v. Dana, 101 U. S. 
 205; Wilbur, Assignee, v. Stock- 
 holders, In re Glen Iron Works, 18 
 Bankr. Reg. 178; S. C, 13 Phila. 
 479; Holmes v. Sherwood, 3 McCrary, 
 405; Crawford v. Rohrer, 59 Md. 599. 
 See Kohler v. Agassiz, 99 Cal. 9. 
 Compare Seymour v. Sturges, 26 N. 
 Y. 134. 
 
 Unpaid stock " in cases of insol- 
 vency is due as an entirety; it is 
 due to the aggregate of the credit- 
 ors; only so much is due as is requi- 
 site to discharge the indebtedness of
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 703. 
 
 a bill in equity against the delinquent shareholders. 1 But 
 a creditor cannot sustain a bill against shareholders for satis- 
 faction of his claim from their unpaid subscriptions until he 
 has exhausted his legal remedies against the corporation and its 
 
 the corporation after all other assets 
 have been thereto applied; as a 
 necessary consequent there must be 
 an account of debts, assets, and un- 
 paid capital taken; when such ac- 
 count has been taken, and the 
 amount required from each stock- 
 holder has been ascertained, an as- 
 sessment ordering the payment of 
 such proportionate amount by each 
 may be made by a court of compe- 
 tent jurisdiction in a proceeding in 
 which the corporation and the stock- 
 holders should be made defendants. 
 " I consider it as the clear result 
 of the authorities that, except in 
 cases where the corporate author- 
 ities have themselves made calls 
 which are authorized by the sub- 
 scription contracts, there is abso- 
 lutely no liability of any kind what- 
 ever, on the part of the stockholder 
 to pay any part of his unpaid capital, 
 except under and by force of an as- 
 sessment made as above stated." 
 Bunn's Appeal (or Lane's Appeal), 
 105 Pa. St. 49, 67, per Green, J., giv- 
 ing opinion of the Supreme Court of 
 Pennsylvania. This case disapproves 
 In re Glen Iron Works, 13 Weekly 
 Notes, 387; S. C, 13 Phila. 479. See, 
 also, Bell's Appeal, 115 Pa. St. 88, 
 and compare Citizen's, etc., S'v'gs 
 B'k v. Gillespie, 115 Pa. St. 564; 
 Cumberland Lumber Co. v. Clinton 
 Hill Lumber Co., 57 N. J. Eq. 627. 
 Consequently, on the insolvency of a 
 corporation, unpaid and uncalled 
 amounts due upon the capital stock 
 cannot be attached by a judgment 
 creditor of the corporation by means 
 of an attachment execution. Bunn's 
 Appeal, supra. 
 
 1 Gaff v. Flesher, 33 Ohio St. 107; 
 Harmon ». Page, 62 Cal. 448; Baines 
 v. Babcock, 95 Cal. 581; Universal 
 Fire Ins. Co. v. Tabor, 16 Col. 531; 
 Washington S'v'gs Bk. v. Butchers' 
 & D. B'k, 107 Mo. 133; Bailey v. 
 Pittsburg Coal R. Co., 139 Pa. St. 
 213; Lane's Appeal, 105 Pa. St. 49; 
 Allen v. Montgomery R. R. Co., 11 
 Ala. 437, 449; Hightower v. Thorn- 
 ton, 8 Ga. 486, 504 ; Harmon v. Hunt, 
 116 N. C. 678; see Jones v. Jarman, 
 34 Ark. 323; Haslettu. Wotherspoon, 
 1 Strobh. Eq. (S. C.) 209; Martin v. 
 South Salem Land Co., 94 Va. 28; 
 Harris v. Gateway Land Co., 128 
 Ala. 652. A shareholder cannot 
 plead against creditors, that interest 
 on instalments already paid in, has 
 not been paid him by the corpora- 
 tion as promised. Wood v. Pearce, 2 
 Disney (Ohio), 411. See, also, cases 
 in succeeding notes. But an action 
 at law does not lie by a creditor 
 against a shareholder for unpaid 
 subscriptions. Patterson v. Lynde, 
 106 U. S. 519; Van Pelt v. Gardner, 
 54 Neb. 702; Burch v. Taylor, 1 
 Wash. 245. See Bunn's Appeal, 
 supra. But compare Potts v. Wal- 
 lace, 146 U. S. 689. A statute giving 
 creditors a right, on return of execu- 
 tion against corporations unsatisfied, 
 to an execution against shareholders 
 to the extent of their unpaid sub- 
 scriptions, does not increase share- 
 holders' liability, and is constitu- 
 tional. Hill v. Merchants' Ins. Co., 
 134 U. S. 515. A stockholder cannot 
 be garnisheed on his unpaid subscrip- 
 tion by a creditor of the corporation, 
 when no call has been made. KcKel- 
 vey v. Crockett, 18 Nev. 238. As to 
 701
 
 § 704.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 property. 1 Though it would seem that this last rule is inap- 
 plicable to creditors of a dissolved corporation who can obtain 
 no judgment at law against it. 2 
 
 § 704. A creditor suing for satisfaction of his debt may 
 properly, and, according to the majority of decisions, 
 must sue on behalf of himself and all other creditors 
 who are willing to join. For the unpaid subscrip- 
 tions constitute a fund for the benefit of all the 
 creditors. 3 In such an action it is proper to join all the share- 
 holders as defendants ; and if the latter are too numerous to be 
 joined, or if some of them are unknown to the plaintiff, or in- 
 solvent, or beyond the jurisdiction of the court, the creditors' 
 bill should contain allegations to this effect. 4 The corporation 
 should also be made a party defendant. 5 
 
 Joinder of 
 parties in 
 creditors' 
 bills. 
 
 the assignment by the corporation of 
 unpaid subscriptions, see §§ 543, 707. 
 As to right of receiver of an insol- 
 vent foreign corporation to sue for 
 unpaid subscriptions, see § 393, note. 
 
 1 Terry v. Anderson, 95 U. S. 628, 
 636; Sturges ». Vanderbilt, 73 N. Y. 
 384; Blake v. Hinkle, 10 Yerger 
 (Tenn.), 218. See Hatch v. Dana, 
 101 U. S. 205; Marsh v. Burroughs, 
 1 Woods, 463; Remington v. Samana 
 Bay Co., 140 Mass. 494; Thomson- 
 Houston Elec. Co. v. Murray, 60 N. 
 J. L. 20; Wehn v. Fall, 55 Neb. 548. 
 The Federal Supreme Court holds 
 that the plaintiff must have obtained 
 judgment against the corporation in 
 the courts of the state where he seeks 
 to sue the shareholder, or show that 
 it was impossible to do so, before he 
 can maintain an action for unpaid 
 subscription against the shareholder. 
 National Tube Works Co. v. Ballou, 
 146 U. S. 517. See, also, Swan Land 
 Co. v. Frank, 148 U. S. 603; Hard- 
 ware Co. v. Milling Co., 13 Utah, 423. 
 As to the effect in such a suit of a 
 judgment against a corporation, 
 see § 737. 
 
 2 Terry v. Anderson, supra ; com- 
 pare Sturges v. Vanderbilt, supra ; 
 
 702 
 
 Remington v. Samana Bay Co., 140 
 Mass. 494. 
 
 3 See Dabney v. Bank of South 
 Carolina, 3 S. C. 124; Sawyer »• 
 Hoag, 17 Wall. 610; Hickling v. 
 Wilson, 104 111. 54; Lane's Appeal, 
 105 Pa. St. 49; Brundage v. Monu- 
 mental Gold, etc., M'g Co., 12 Oreg. 
 322; Patterson v. Lyude, 112111. 196; 
 Pickering v. Hastings, 56 Neb. 201; 
 Welch v. Sargent, 127 Cal. 72. This 
 rule holds good though the corpo- 
 ration be a foreign corporation. lb. 
 
 4 Adler v. Milwaukee Patent Brick 
 M'f'g Co., 13 Wis. 57; Vick v. Lane, 
 56 Miss. 681; Wetherbee v. Baker, 35 
 N. J. Eq. 501; Holmes v. Sherwood, 
 3 McCrary, 405; Bronsou v. Insurance 
 Co., 85 N. C. 411. See Hadley v. 
 Russell, 40 N. H. 109; Erickson v. 
 Nesmith, 46 N. H. 371; Trust Co. v. 
 Loan Co., 92 Me. 444. 
 
 5 Wetherbee v. Baker, 35 N. J. Eq. 
 501 ; Perkins v. Sanders, 56 Miss. 733; 
 Holmes v. Sherwood, 3 McCrary, 
 405; Patterson v. Lynde, 112 111. 196; 
 Potter v. Dear, 95 Cal. 578; contra, 
 that corporation is not a necessary 
 party, see German Nat. Bank v. 
 Farmers & Merchants Bank, 54 Neb. 
 593.
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 705. 
 
 § 705. The corporation being insolvent, no doubt any cred- 
 itor not made a party to the bill has a right to come in and in- 
 sist on a ratable distribution of the corporate assets, which 
 include unpaid subscriptions. 1 And a creditor's bill that is 
 properly framed will be in a form to enable any creditor to 
 join. 3 It would, however, work hardship if a creditor who sues 
 in a court of equity to reach assets of the corporation which he 
 cannot subject to his claim in an action at law, were in all cases 
 obliged to make all the shareholders parties, or even to bring 
 his suit on behalf of all the creditors. To insist on this would 
 practically force a creditor seeking such equitable relief to bring 
 a bill for the winding up of the corporation ; which is certainly 
 not incumbent on him. 3 
 
 Thus, in Marsh v. Burroughs, 4 a bill was brought by certain 
 judgment creditors of a bank against a portion of the share- 
 holders, to compel them to satisfy the plaintiffs' judgments 
 from the unpaid subscriptions due on the defendants' shares. 
 The bill alleged that the stock of the bank was divided into 
 twentv thousand shares, held by a great number of share- 
 holders in different states, some of whom were insolvent. 
 Although the objection was made that the proper parties were 
 not before the court, Justice Bradley sustained the bill, saying 
 in the course of his opinion : " A judgment creditor who has 
 exhausted his legal remedy, may pursue in a court of equity 
 any equitable interest, trust, or demand of his debtor, in 
 whosesoever hands it may be. And if the party thus reached 
 has a remedy over against other parties for contribution or 
 indemnity, it will be no defence to the primary suit against 
 him that they are not parties. If a creditor were to be stayed 
 until all such parties could be made to contribute their pro- 
 portionate share of the liability, he might never get his 
 money. " 5 
 
 1 See Pfohl v. Simpson, 74 N. T. 
 137; Marru. Bank of West Tennes- 
 see, 4 Coldw. (Tenn.) 471; Adler v. 
 Milwaukee Patent Brick MTg Co., 
 13 Wis. 57; Osgood v. Lay tin, 3 
 Keyes (N. Y.), 521. 
 
 2 Suck was the form in Hatch v. 
 Dana, 101 U. S. 205, and Ogilvie v. 
 Knox Ins. Co., 22 How. 380. 
 
 3 See Crawford v. Rohrer, 59 Md. 
 599; Martin v. South Salem Land Co., 
 94 Va. 28. 
 
 4 1 Woods, 463. 
 
 5 Marsh v. Burroughs, 1 Woods, 
 463, 468. See, also, Bartlettv. Drew, 
 57 N. T. 587. 
 
 703
 
 § 707.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 § 706. So in Hatch v. Dana, 1 a creditor's bill brought 
 against a portion of the shareholders, not to wind up the 
 company, but simply to obtain the payment of the plaintiff's 
 debt out of unpaid subscriptions, was sustained by the Su- 
 preme Court of the United States. " The liability of a sub- 
 scriber for the capital stock of a company is several, and not 
 joint. By his subscription each becomes a several debtor 
 to the company, as much so as if he had given his promissory 
 note for the amount of his subscription. At law, certainly, 
 his subscription may be enforced against him without joinder 
 of other subscribers ; and in equity his liability does not cease 
 to be several. A creditor's bill merely subrogates the creditor 
 to the place of the debtor, and garnishees the debt due to the 
 indebted corporation. . . . We hold that the complainant 
 was under no obligation to make all the shareholders of the 
 bank defendants in his bill. It was not his duty to marshal 
 the assets of the bank, or to adjust the equities between the 
 corporators. In all that he had no interest. The appellants 
 may have had such an interest, and, if so, it was quite in their 
 power to secure its protection. They might have moved for 
 a receiver, or they might have filed a cross-bill, obtained a 
 discovery of the other stockholders, brought them in, and 
 enforced contribution from all who had not paid their stock 
 subscriptions. Their equitable right of contribution is not 
 yet lost." 2 
 
 § 707. Instead of himself suing, a creditor may apply for 
 the appointment of a receiver, whose function it 
 will be to collect unpaid subscriptions. 3 And after 
 the appointment of a receiver, a creditor cannot 
 bring suit in his own name for unpaid subscrip- 
 tions ; nor prosecute a suit further if he has already 
 
 Appoint- 
 ment of 
 receiver. 
 Assignee in 
 bank- 
 ruptcy. 
 
 1 101 U. S. 205. 
 
 2 Hatch p. Dana, 101 U. S. 205, 211, 
 214; opinion of the court per Strong, 
 J.; accord, Ogilvie w. Knox Ins. Co., 
 22 How. 380 ; Cornell & Michler's 
 Appeal, 114 Pa. St. 153; Baines v. 
 Babcock, 95 Cal. 581; Pierce v. Mil- 
 waukee Const'n Co., 38 Wis. 253; 
 Palmer v. Woods, 149111. 146; Fouche 
 v. Merchants' Nat. Bank, 110 Ga. 
 
 704 
 
 827; Harrell v. Blount, 112 Ga. 711; 
 Cooper 17. Security Co., 127 N. C. 
 219. See Smith, Rec'r, v. Johnson, 
 57 Oh. St. 48G; Walter v. Merced 
 Academy Ass'n, 126 Cal. 582. Com- 
 pare Griffith v. Mangam, 73 N. Y. 
 611 ; Thompson v. Reno Savings 
 Bank, 19 Nev. 103. 
 
 3 See § 542. 
 
 A receiver should not call on share-
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 708. 
 
 begun one. 1 Unpaid subscriptions, moreover, being part of 
 the assets of the corporation, pass by a decree in bankruptcy to 
 its assignee ; after which he and not the creditors should sue 
 for them. And the mere fact that the assignee has delayed 
 for two years in bringing suit does not enable creditors 
 to sue. 2 
 
 § 708. Creditors may also restrain shareholders from with- 
 drawing the corporate funds to the injury of the former, 
 and can recover such funds from shareholders who have im- 
 properly received them. 3 For instance, the share- Ri „ htsof 
 holders of an insolvent bank are not entitled to re- creditors 
 ceive or divide among themselves any of its assets snare- 
 until its debts and liabilities are fully discharged. 4 pr0 periy 
 And an action may be maintained by the receiver ^g^p^." 
 of an insolvent corporation against its shareholders rate funds. 
 to recover sums received by them as dividends when the cor- 
 poration was insolvent. 5 But where dividends have been 
 
 holders for the balance of their un- 
 paid subscriptions in order to pay 
 creditors, until the whole amount of 
 the corporate indebtedness is deter- 
 mined and the liability of each share- 
 holder fixed. Chandler v. Keith, 42 
 Iowa, 99; Mann u. Pentz, 3 New York, 
 415. But see Dayton v. Borst, 31 
 N. Y. 435. 
 
 iRankine v. Elliot, 16 N. Y. 377; 
 Brown v. Brink, Rec'r, 57 Neb. 600. 
 See § 690, note. 
 
 In a creditor's action against an 
 insolvent corporation for the ap- 
 pointment of a receiver, a court has 
 no jurisdiction to grant an inter- 
 locutory order makiug an assess- 
 ment on the unpaid stock, as against 
 shareholders not parties to the bill, 
 the bill containing no allegation 
 that they are too numerous to be 
 made parties. Lamar Ins. Co. v. 
 Hildreth, 55 Iowa, 248. 
 
 2 Lane v. Nickerson, 99 111. 284. 
 But a bill brought by creditors, 
 alleging collusion between the cor- 
 poration, its assignee, and its debt- 
 
 45 
 
 ors, may be sustained. Stocks v. 
 Van Leonard, 8 Ga. 511. 
 
 s Bartlett v. Drew, 57 N. Y. 587; 
 Singer v. Hutchinson, 183 111. 606. 
 See § 656. 
 
 4 Wood v. Dummer, 3 Mason, 308; 
 Hollister v. Hollister Bank, 2 Keyes 
 (N. Y.), 245. 
 
 6 Osgood v. Lay tin, 3 Keyes (N. 
 Y.), 521; Lexington Life, etc., Ins. 
 Co. v. Page, 17 B. Mon. (Ky.)412; 
 Grant, Assignee, v. Ross, 100 Ky. 44; 
 Grant v. Southern Contract Co., 104 
 Ky. 781; Davenport, Rec'r v. Lines, 
 72 Conn. 118. Especially if the divi- 
 dends were paid out of capital. 
 William v. Boice, 38 N. J. Eq. 364. 
 Although a statute makes the direct- 
 ors personally liable for all divi- 
 dends paid out of capital. lb.; 
 §§ 566, 567. It has been held that a 
 receiver of a national bank, upon the 
 corporation's becoming insolvent, 
 cannot recover dividends paid out 
 of capital if the corporation was 
 solvent at the time, and the stock- 
 holder received them in good faith. 
 
 705
 
 Sharehold- 
 ers in what 
 respect 
 trustees for 
 creditors. 
 Statute of 
 limitations. 
 
 § 710.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 properly paid from profits, the company being solvent at the 
 time, its subsequently accruing insolvency will not enable 
 creditors to recover such dividends from the shareholders who 
 have received them. 1 
 § 709. Since the unpaid subscriptions just as much as those 
 which are actually paid in, are held to constitute 
 the capital of the corporation, 2 shareholders to the 
 extent of their unpaid subscriptions have in their 
 possession funds to which creditors of the corpo- 
 ration may be entitled; and shareholders may 
 therefore, to the extent of their unpaid subscrip- 
 tions, be regarded as trustees for creditors. 3 Accordingly, 
 the statute of limitations does not run against the right of 
 creditors to enforce the payment of unpaid subscriptions until 
 the corporation has ceased to be a going concern, 4 or until a 
 valid call has been made by the directors or by a court of com- 
 petent jurisdiction, or at least some authorized demand has been 
 made on the subscriber. 5 
 
 § 710. Further, the body corporate derives its powers to 
 act as such from the constitution of the corporation ; a propo- 
 sition which involves the further proposition that it must ex- 
 ercise its powers in accordance with the terms of such con- 
 stitution. These powers, accordingly, cannot be exercised in 
 
 
 McDonald, Rec'r, v. Williams, 174 U. 
 S. 397. Similarly a preferred share- 
 holder is postponed to creditors. St. 
 John v. Erie Railway Co., 22 Wall. 
 136. In such an action the receiver 
 may make the creditors parties to 
 restrain them from bringing separate 
 suits against the shareholders. Os- 
 good v. Laytin, supra. 
 
 1 Reid v. Eatonton M'fg Co., 40 
 Ga. 98. See McLean v. Eastman, 21 
 Hun, 312. 
 
 2 See § 661. 
 
 8 See §§ 41-47. 
 
 4 Allibone v. Hager, 46 Pa. St. 48, 
 54; Payne v. Bullard, 23 Miss. 88; 
 Curry v. Woodward, 53 Ala. 371,376. 
 See Harmon v. Page, 62 Cal. 448; 
 First Nat. B'k v. Green, 64 Iowa, 445; 
 Wilkins v. Worthen, 62 Ark. 401; 
 706 
 
 Swearingen v. Dairy Co. ,198 Pa. St. 68. 
 It was held in Glenn v. Marbury, 145 
 U. S. 499, that, though a corpora- 
 tion is insolvent and in the hands of 
 a receiver, the statute of limitations 
 does not begin to run until an assess- 
 ment has been made; and see Semple 
 v. Glenn, 91 Ala. 245; Van Pelt v. 
 Gardner, 54 Neb. 702. 
 
 5 Scovill v. Thayer, 105 United 
 States, 143, 155; Hawkins v. Glenn, 
 131 U. S. 319; Glenn v. Liggett, 135 
 U. S. 533; Great Western Tel. Co. v. 
 Gray, 122 111.630; Washington SVgs 
 B'k v. B. & D. B'k, 107 Mo. 133; 
 Western R. R. Co. v. Avery, 64 N. C. 
 491; Harris v. Gateway Land Co., 
 128 Ala. 652. See Glenn v. Saxton, 
 68 Cal. 353.
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 711. 
 
 disregard of interests which just as much as the interests of 
 shareholders are protected by rights which are the manifesta- 
 tions of legal rules contained in the constitution. And, there- 
 fore, in so far as shareholders, constituting the body corporate, 
 have power to control the funds in which creditors have 
 legally protected interests, shareholders must be regarded as 
 occupying towards them a position of trust ; for the latter have 
 ordinarily no voice in the corporate management. As Jus- 
 tice Miller said, giving the opinion of the Federal Supreme 
 Court, in Sawyer v. Hoag : l " But, after all, this artificial 
 body is but the representative of its stockholders, and exists 
 mainly for their benefit, and is governed and controlled by 
 them through the officers whom they elect ; and the interest 
 and power of legal control of each shareholder is in exact 
 proportion to the amount of his stock. It is, therefore, but 
 just that when the interest of the public, or of strangers deal- 
 ing with the corporation, is to be affected by any transaction 
 between the stockholders who own the corporation, and the 
 corporation itself, such transaction should be subjected to a 
 rigid scrutiny, and if found to be affected with anything un- 
 fair toward such third person, calculated to injure him, or 
 designed intentionally and inequitably to screen the stock- 
 holder from loss at the expense of the general creditor, it 
 should be disregarded or annulled so far as it may inequitably 
 affect him." a 
 
 § 711. Thus, the Federal Supreme Court has held that a 
 foreclosure sale, made after a railroad company, the mortgagor, 
 had become insolvent, and expedited by an arrangement be- 
 tween the mortgagees and the shareholders, by which the former 
 received a part of the debt due them and the latter the 
 
 1 17 Wall. 610, 623. 
 
 8 Compare Arkansas River, etc., 
 Co. v. Farmers' L. & T. Co., 13 Col. 
 587. Thus, an insolvent bank can- 
 not convey its property to pay a 
 debt due its sole shareholder. Swep- 
 son o. Bank, 9 Lea ( Tenn.), 713. 
 But it has been held that a share- 
 holder may avail himself of his supe- 
 rior advantages to obtain security 
 for debts due him, to the exclusion 
 
 of other creditors of the corporation. 
 The court said that shareholders and 
 strangers who are creditors stood on 
 very unequal terms; but it seemed to 
 bean inequality allowed by the law 
 and understood by persons contract- 
 ing with the corporation. Whitwell 
 B. Warner, 20 Vt. 425, 444. See 
 Keichwald v. Commercial Hotel Co., 
 106 111. 439, 452. 
 
 707
 
 § 713.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 § 712. 
 
 Classes of 
 
 statutes 
 
 imposing 
 
 personal 
 
 liability. 
 
 remainder of the proceeds, is fraudulent as against the general 
 creditors of the company ; and this, although the road was 
 mortgaged far above its value, and did not on the sale in open 
 market bring nearly enough to satisfy even the mortgage 
 debts. 1 
 
 Statutes imposing individual liability 2 fall under 
 two heads : those which make the shareholders 
 jointly and severally liable for all the debts of the 
 corporation, and those which add a further limited 
 liability to the liability arising, according to the 
 general rules of corporation law, from subscribing for stock. 
 The extent of this limited liability may be made dependent 
 on the number of shares held, or on the proportion which that 
 number bears to the whole number of shares in the capital 
 stock. Statutes imposing a limited liability may be sub- 
 divided into those in accordance with the tenor and import of 
 which a single creditor ina\ T sue a single shareholder at law ; 
 and those which are construed to render the shareholders liable 
 to contribute a proportionate amount to a common fund for the 
 ratable benefit of all creditors. To enforce the liability of 
 shareholders under the latter, all the creditors must join in a 
 suit in equity, or one creditor must sue in equity on behalf 
 of all other creditors ; and in so far as is practicable, all the 
 shareholders must be joined as defendants. 
 
 § 713. It is ordinarily provided by all these statutes — 
 
 1 Railroad Co. v. Howard, 7 Wall. 
 392. But compare Pennsylvania 
 Transportation Co.'s Appeal, 101 Pa. 
 St. 576, where it was held that the 
 bondholders aud shareholders of a 
 railroad company may unite for the 
 purchase of the property of the com- 
 pany at a contemplated foreclosure 
 sale, to prevent a sacrifice of the 
 property; and if the agreement and 
 sale are fair, they do not operate as a 
 fraud on a creditor, who had notice 
 of the sale and an opportunity of 
 bidding. But a creditor who is also 
 a shareholder and votes for and par- 
 ticipates in the distribution of the 
 
 708 
 
 property of the corporation cannot 
 invoke the doctrine that it is a trust 
 fund, which he can follow into the 
 hands of the individual sharehold- 
 ers. Fort Madison Bank v. Alden, 
 129 U. S. 372; Thompson v. Bemis 
 Paper Co., 127 Mass. 595. 
 
 2 Statutes imposing a further 
 liability on shareholders towards 
 creditors, do not impliedly deprive 
 creditors of their right to enforce 
 payment of subscriptions for stock. 
 See Bunn's Appeal, 105 Pa. St. 49; 
 Warner v. Callender, 20 O. St. 190; 
 Washington S'v'gs B'k v. B. & D. 
 B'k, 107 Mo. 133.
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 714. 
 
 those which impose a limited, as well as those which 
 impose an unlimited liability — that a creditor shall ^5^^ 
 obtain judgment against the corporation, and that ® x ^ t t i( i? 
 execution shall be levied thereunder, and returned eorpora- 
 wholly or partially unsatisfied before he can proceed 
 against a shareholder individually. 1 
 
 § 714. The general nature of the personal statutory liability 
 of shareholders for corporate indebtedness has been ^ T 
 
 • it Nature of 
 
 much discussed; 2 some courts having held such ha- statutory 
 bility to be that of partners ; while in Michigan it is ia * * y " 
 said to be that of guarantors. The truth is, the liability of 
 
 1 But these conditions precedent 
 are not always imposed. Thus, when 
 it was provided by a certain charter 
 that the " members of the company 
 shall be jointly and severally liable 
 for all debts and contracts made by 
 the company until the whole amount 
 of the capital stock fixed and limited 
 by the corporation" is paid in, it 
 was held that the liability of share- 
 holders was unconditional, original, 
 and immediate, not dependent on 
 the insufficiency of the corporate 
 assets, and not collateral to that of 
 the corporation, upon the event of 
 its insolvency; and that upon a bill 
 filed against a corporation for a debt 
 under seal, the shareholders were 
 properly made parties, in order to 
 avoid a multiplicity of suits. Man- 
 ufacturing Co. v. Bradley, 105 U. S. 
 175. See, also, Culver ». Third Nat. 
 B'k, 64 111. 528; Bird v. Calvert, 22 
 S. C. 292. 
 
 On the other hand, such conditions 
 may be implied from the tenor of the 
 statute. Thus, where shareholders 
 in a bank were made liable jointly 
 and severally to creditors for the de- 
 posits, it was held that their liability 
 was secondary, and could not be en- 
 forced until the assets of the bank 
 had been exhausted. Mean's Ap- 
 peal, 85 Pa. St. 75. See, also, Har- 
 per v. Union M'fg Co., 100 111. 225. 
 
 Compare Hatch v. Burroughs, 1 
 Woods, 439; Grindle v. Stone, 78 
 Me. 176; Trust Co. ». Loan Co., 92 
 Me. 444. See, also, § 724. After an 
 insolvent corporation has made an 
 assignment, the rule requiring a re- 
 turn of execution against it unsatis- 
 fied before proceeding against share- 
 holders on their statutory liability 
 no longer applies. Barrick v. Gif- 
 ford, 47 O. St. 180. 
 
 2 The statutory liability of share- 
 holders, whether limited or unlim- 
 ited, which last is unusual, ordinarily 
 arises ex contractu, and is not a pen- 
 alty. See Norris v. Wrenschall, 34 
 Md. 492; Flash ». Conn, 109 U. S. 
 371. Such liability cannot be re- 
 pealed so as to affect the vested 
 rights of creditors. Hawthorne v. 
 Calef, 2 Wall. 10; Provident SVgs 
 Ins. v. Jackson Place Skating Rink, 
 52 Mo. 552. Not even by a state con- 
 stitutional amendment. St. Louis 
 R'y Supplies Co. v. Harbine, 2 Mo. 
 App. 134. See §§ 500, 501 ; also § 735. 
 It survives the death of a share- 
 holder, and attaches to his personal 
 representatives. Richmond v. Irons, 
 121 U. S. 27; Grew v. Breed, 10 Met. 
 (Mass.) 569; Cochran v. Wiechers, 
 119 N. Y. 399; Hansen v. Davison, 73 
 Minn. 454. 
 
 Where this liability sounds in con- 
 tract it will be enforced outside the 
 
 709
 
 § 715.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 shareholders under statutes imposing individual liability for 
 corporate indebtedness is the liability of shareholders under 
 such statutes, and to speak of it as the liability of guarantors, 
 or the liability of partners, is to call it what it is not. 1 
 
 § 715. That it is not the liability of guarantors seems too 
 evident to require argument. Suretyship is a legal institution 
 composed of peculiar rules based on the general notion that a 
 surety is a man conferring a benefit and receiving none in re- 
 turn, whose contract, therefore, is to be construed strictly in 
 his own favor. 2 It is evident that the situation of a share- 
 holder is very different, 3 and the decision in the Michigan 
 case, 4 that the shareholder was a guarantor who was discharged 
 because time was given the corporation, is against the weight 
 of authority, and apparently a mistaken decision. 5 
 
 limits of the state chartering the 
 corporation; at least, if the necessary 
 parties can be brought within the 
 jurisdiction of the foreign court. 
 Hodgson v. Cheever, 8 Mo. App. 318. 
 Compare Lowry v. In man, 46 N. Y. 
 119. See § 394. 
 
 Thus liability attaching to share- 
 holders until the total capital stock 
 is paid in, and a certificate to that 
 effect filed will be enforced outside 
 the state. Cuykendall v. Miles, 10 
 Fed. Rep. 342. 
 
 On the other hand, any liability of 
 shareholders or officers contingent 
 on the failure of the latter to pub- 
 lish or file reports is held penal and 
 not enforceable outside the state. 
 Wood v. Wicks, 7 Lea (Teun.), 40. 
 But see §§ 764, 765. Sucli penal lia- 
 bility will be strictly construed in 
 favor of the shareholders. Cady v. 
 Smith, 12 Neb. 628, 630. Compare 
 Smith o. Steele, 8 Neb. 115. And it 
 has been held not to survive the death 
 of the person affected with it. Di- 
 versey v. Smith, 103 111. 378. 
 
 1 The nature of this liability in any 
 particular case depends, of course, 
 on the intent of the statute creat- 
 ing it. Under some statutes it will 
 
 710 
 
 resemble the liability of guarantors, 
 and under others that of partners. 
 But neither the rules of suretyship 
 nor the rules of partnership law will 
 ever be wholly and exclusively appli- 
 cable. 
 
 2 Mobile, etc., R. R. Co. v. Nicholas, 
 98 Ala. 92, 125. See Ward v. Stahl, 
 
 81 N. Y. 406. 
 
 3 See Emerson v. Slater, 22 How. 28. 
 
 4 Hanson v. Donkerly, 37 Mich. 184. 
 See Ball El. L't Co. v. Child, 68 Conn. 
 522. Cf. Nat. Loan Ass'nw. Lichten- 
 waluer, 100 Pa. St. 100; Milroy v. 
 Spur Mountain Iron M'g Co., 43 
 Mich. 231. 
 
 5 Directly contra to Hanson v. Don- 
 kerly are Harger v. McCullough, 2 
 Denio (N. Y. ), 119; Moss v. Averell, 
 10 N. Y. 449; Aultman's Appeal, 98 
 Pa. St. 505; Young v. Rosenbaum, 39 
 Cal. 646; Sonoma Valley Bank v. 
 Hill, 59 Cal. 107; Hatch v. Burroughs, 
 1 Woods, 439; Hyman v. Coleman, 
 
 82 Cal. 650; Boice v. Hodge, 51 Ohio 
 St. 236. The view taken in Hanson 
 v. Donkerly seems overruled in 
 Grand Rapids Sav'gs Bank v. Warren, 
 52 Mich. 557. 
 
 To be sure, where, under the stat- 
 ute, suit must be commenced against
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 716. 
 
 § 716. The temptation to speak of the statutory liability 
 of a shareholder as the liability of a partner is more insidious, 
 because of the resemblance between the two kinds of liability. 
 But it is evident that the status of a shareholder in a corpora- 
 tion, to members of which personal liability attaches, differs 
 much from that of a partner. 1 Shareholders are not, like 
 partners, each other's agents ; unlike partners, they may trans- 
 fer their shares at will ; then ordinarily, even in respect of his 
 statutory liability, a shareholder cannot be sued until the 
 creditor has exhausted his legal remedies against the corpora- 
 tion ; and finally, under some statutes, a shareholder may be 
 sued alone, though in the end he is entitled to contribution 
 from his fellow shareholders. Undoubtedly there remains the 
 main resemblance between the liability of partners and the 
 statutory liability of shareholders, that a shareholder as well 
 as a partner is liable individually for the debts of the corpora- 
 tion or firm, a resemblance which is especially prominent in 
 the unlimited liability 2 of a shareholder who like a partner 
 may be obliged to pay all the debts of the concern. And the 
 danger lies here, lest with eyes fixed on this main resemblance 
 courts overlook minute differences, and in consequence fail to 
 do accurate justice. The perception of a resemblance is often 
 nothing but a failure to see differences. Corporations are 
 largely regulated by statute, and differ in so many respects 
 from partnerships that errors must be introduced by an indis- 
 criminate reasoning from the analogy of the latter institutions. 3 
 
 a shareholder within one year after 
 the debt of the corporation became 
 due, the liability of the shareholder 
 cannot be extended by any exten- 
 sion or renewal of the indebtedness 
 of the corporation, as by taking its 
 note. Parrot v. Colby, 6 Hun, 55; 
 S. 0., affd 71 N. Y. 597; Jagger 
 Iron Co. v. Walker, 76 N. Y. 521. 
 Compare Dryden v. Kellogg, 2 Mo. 
 App. 87. But this is very different 
 from an extension to the corporation 
 discharging the shareholder before 
 the expiration of the period limited 
 by the statute for the commence- 
 ment of suit against him. But it 
 
 was held in Mohr v. Elevator Co., 40 
 Minn. 343, that the release of a cor- 
 poration through proceedings in in- 
 solvency releases the statutory liabil- 
 ity of shareholders. 
 
 1 Corporators are not partners, 
 even though rendered liable by stat- 
 ute for certain debts of the corpora- 
 tion. Baker v. Backus, 32 111. 79. 
 Compare United States v. Knox, 102 
 IT. S. 422. To see how unlike the 
 liability of partners is the statutory 
 liability of shareholders, see § 727. 
 
 2 Unusual in this country. 
 
 3 See §§67-69. See Barrick v. Gif- 
 ford, 47 O. St. 180, 189. Shareholders 
 
 711
 
 § 717.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 " Iii order to contrast the nature of the liability of share- 
 holders with that of partners, companies must be divided into 
 those which are incorporated and those which are not, and each 
 class must be again subdivided, for, owing to the diversity of 
 the statutes relating to companies, little is common to them all. 
 The general principles which require to be borne in mind, are, 
 first, that unincorporated companies are not at common law 
 distinguishable from partnerships; and, secondly, that incor- 
 porated companies are distinguishable from them, and that the 
 shareholders in such companies are not liable for the corporate 
 debts and engagements save so far as they are rendered so by 
 act of Parliament. If shares in an incorporated company are 
 registered in the names of two persons and one of them dies, 
 the survivor is the only person liable to be made a contributory 
 in respect of them." ' 
 
 § 717. This doctrine that shareholders in corporations are 
 
 not liable for the corporate debts, save so far as they 
 
 holders not are ren ^ ere ^ s0 D y tne statute imposing the indi- 
 
 le/t, but vidual liability, does not accord with the view 
 
 made liable. ~ 
 
 taken in Corning v. McCullougn/ where it was said 
 that by these statutes shareholders are not made but left liable 
 for the corporate indebtedness. The difference is important. 
 If the shareholder is left liable, in every case of doubt there 
 is a presumption in favor of his liability ; while if he is made 
 liable, his liability is to be deduced from a fair construction of 
 the statute. The view of Baron Lindley seems the correct 
 one, and accords with the prevailing doctrine in America. 
 "Individual liability is repugnant to the law of corpora- 
 tions, and qualifies in this case an exemption which would 
 otherwise exist. Stockholders in such cases are liable accord- 
 ing to the plain meaning of the terms employed by the legis- 
 lature, and not otherwise." 3 
 
 Moreover, it would seem that if shareholders are left liable, 
 
 made " individually responsible for 
 an amount equal to the amount of 
 stock held by them respectively " 
 were said to be partners in Thomp- 
 son v. Meisser, 108 111. 359 ; and 
 Schalucky v. Field, 124 111. 617. 
 
 1 1 Lindley on Partnership, 375, 
 citing Hill's Case, L. R. 20 Eq. 595. 
 
 712 
 
 1 N. Y. 47. 
 8 Carroll v. Green, 92 U. S. 509, 
 512, opinion of the court per Swayne, 
 J. See, also, Terry v. Little, 101 
 U. S. 21G: Chase v. Lord, 77 N. Y. 1; 
 Libby v. Tobey, 82 Me. 397.
 
 CHAP. XHI.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 718. 
 
 and the statute " leaving " them so prescribe at the same time 
 a way of enforcing their liability, the course prescribed by 
 the statute may be disregarded, and the shareholder may be 
 proceeded against in some other manner. And this is not law. 1 
 § 718. A question sometimes very difficult to answer in 
 regard to this statutory liability is : What share- 
 holders are subject to it? Those who were such ^j° a ^ at 
 when the corporation incurred the indebtedness, nolder s 
 
 1 _ ' statutory 
 
 or those who are such when suit is brought against liability 
 
 attaches. 
 
 them, or the corporation is dissolved or wound up. 
 
 Many cases have held that the shareholder who was such at 
 
 the time when the corporation contracted the debt is the one 
 
 liable. 2 
 
 In the absence of any indication in the statute, the ques- 
 tion seems to be whether the analogy of partnership or corpo- 
 ration law is to be followed. The transferability of shares is 
 a universal element of corporation law ; just as much is it the 
 universal doctrine of partnership law that the interest of a 
 partner is not transferable. According to partnership law, it 
 is the partner who was such at the time when the debt was 
 contracted who is liable ; in accordance with the doctrine of 
 the transferability of shares by which a transfer constitutes a 
 complete novation — a doctrine of which every creditor of the 
 corporation has notice — it would seem equally clear that the 
 transferee or shareholder who holds the shares when suit is 
 brought to enforce the individual liability, or who holds them 
 
 1 Statutory liability can be en- 
 forced only in the mode pi-escribed 
 by the statute. Hoard v. Wilcox, 
 47 Pa St. 51; Youghiogheny Shaft 
 Co. d. Evans, 72 Pa. St. 331 ; Dauchy 
 v. Brown, 24 Vt. 197; Peck v. Coal- 
 field Coal Co., 3 111. App. 619; Minne- 
 apolis B. B. Co. v. City Bank, 66 
 Minn. 441. Provided, of course, the 
 statute express the remedy. See 
 same cases. 
 
 2 Moss v. Oakley, 2 Hill (N. Y.), 
 265; Judson v. Rossie Galena Co., 9 
 Paige, 598; Young v. New York, etc., 
 Steamship Co., 15 Abb. Pr. (N. Y.) 
 
 69; Tracy v. Yeates, 18 Barb. 152; 
 Williams v. Hanna, 40 Indiana, 535; 
 Wehrman v. Reakirt, 1 Cincinnati 
 Supr. Ct. 230; Larrabee v. Baldwin, 
 35 Cal. 155; Windham Provident Ins. 
 Co. v. Sprague, 43 Vt. 502; Chesley 
 ». Pierce, 32 N. H. 388; Brown v. 
 Hitchcock, 36 Ohio St. 667; Hanick v. 
 Ward well, 58 Oh. St. 294; Voight v. 
 Dregge,97 Mich. 322; see Mokelumne 
 Hill Canal Co. v. Woodbury, 14 Cal. 
 265; Davidson v. Rankin, 34 Cal. 
 503; Shueyu. Holmes, 21 Wash. 223. 
 Compare McCullough v. Moss, 5 
 Denio (N. Y.), 567. 
 
 713
 
 § 719.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 at the winding up of the corporation, is the person liable. 1 And, 
 moreover, the chief argument in favor of holding liable the 
 shareholders who are such when the debt is contracted, i. e., 
 that persons contracting with the corporation rely on the credit 
 of the then shareholders, loses its force in view of the prevail- 
 ing American rule, according to which a transfer made to an 
 irresponsible person when the corporation is in failing circum- 
 stances is void as to creditors ; a rule which applies as fully in 
 regard to the statutory liability of shareholders as in regard to 
 their liability for unpaid subscriptions. 2 
 
 § 719. Let us test the analogy of partnership law in this 
 respect. " As the firm is not liable for what is done by its 
 members before the partnership between them commences, so 
 upon the very same principle a person who is admitted as a 
 partner into an existing firm does not by his entry become 
 liable to the creditors of the firm for anything done before he 
 became a partner. Each partner is, it is true, the agent of 
 the firm, but .... the firm is not distinguishable from the 
 persons from time to time composing it; and when a new 
 member is admitted he becomes one of the firm for the future, 
 but not as from the past, and his present connection with the 
 firm is no evidence that he ever expressly or impliedly author- 
 ized what may have been done prior to his admission. It 
 may, perhaps, be said that his entry amounts to a ratification 
 by him of what his now partners may have done before he 
 joined them. But it must be borne in mind that no person 
 can be rendered liable for the act of another on the ground 
 that he has ratified, confirmed, or adopted it, unless at the 
 time the act was done, it was done on his behalf." 3 
 
 These concise remarks of Baron Lindley are certainly true 
 as to partnerships ; but their inapplicability to corporations 
 shows the lameness of the analogy between corporations and 
 partnerships. As the learned Baron says : "A person who is 
 admitted as a partner into an existing firm, does not by his 
 entry become liable to the creditors of the firm for anything 
 
 i See § 720. 
 
 2 See dissenting opinion iu Brown 
 v. Hitchcock, 36 Ohio St. 667. See 
 § 749. As to Brown v. Hitchcock, 
 supra, the same court followed it in 
 
 714 
 
 Mason v. Alexander, 44 Ohio St. 318, 
 saying that they were not prepared 
 to assume the responsibility of over- 
 ruling it. 
 a Lindley on Part., 389.
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 719. 
 
 done before he became a partner." But by purchasing par- 
 tially paid-up shares, the buyer, to the extent of the unpaid 
 subscriptions due on them, renders himself liable for the debts 
 of the corporation, whether contracted before or after he be- 
 came a shareholder. 1 Further on in the same extract, Baron 
 Lindley says in substance, that the entry of a new partner 
 into a firm cannot by any implied ratification make him liable 
 for the previously contracted indebtedness of the firm, be- 
 cause, in contracting such indebtedness, the firm did not act 
 in his behalf. But, on the other hand, acts of a corporation 
 are always done on behalf of persons occupying in respect of 
 that corporate enterprise the status of shareholder, either at 
 the time the acts were done, or subsequently. This is im- 
 plied by the principle of " perpetual succession," fundamental 
 m corporation law. 2 Accordingly, the general rule that trans- 
 ferees of shares succeed to the rights and liabilities of their 
 transferrers, is established beyond controversy. 3 
 
 1 Webster v. Upton, 91 TJ. S. 65; 
 Moses v. Ocoll Bank, 1 Lea (Tenn. ), 
 398. 
 
 2 See §§ 15, 17. 
 
 8 Hartford and N. H. R. R. Co. v. 
 Boorman, 12 Conn. 530; Mann v. 
 Currie, 2 Barb. 294; Webster v. Up- 
 ton, 91 U. S. 65; Moses v. Ocoll Bank, 
 1 Lea (Tenn. ), 398; Barton Nat. Bank 
 v. Atkins, 72 Vt. 33. See § 587. 
 
 "When a person takes shares in 
 a company, he, as between himself 
 and other shareholders, takes these 
 shares with all the rights and liabil- 
 ities attaching to them, so that his 
 co-shareholders have a perfect right 
 to insist upon his contributing with 
 them towards the liquidation of 
 debts contracted before he joined 
 the company. And even as to cred- 
 itors, the liability of shareholders to 
 them does not depend altogether 
 upon the principles of partnership, 
 but upon statutory enactments. 1 ' 
 1 Lindley on Part., 394, citing Taylor 
 v. Iflll, 1 N. R. 566, V. C. W.; Cape's 
 Executors' Case, 2 De G. M. & G. 
 
 562; Mahew's Case, 5 De G. M. & G. 
 837. It may be stated generally 
 that in all companies regulated by 
 the Companies Act of 1862, an in- 
 coming shareholder is, so long as he 
 remains a shareholder, liable to 
 creditors in respect of debts in- 
 curred by the company before he 
 became a shareholder." 1 Lindley 
 on Part., 395. See Olson v. Cook, 57 
 Minn. 552; First Nat. Bk. v. Plow 
 Co., 58 ib. 167. Compare Blundell 
 v. Winsor, 8 Sim. 601, 613. 
 
 Under certain statutes, however, 
 e. g. (New York Mfg. Co.'s Act of 
 1848), shareholders are held not 
 liable to creditors for the debts of the 
 company contracted before they be- 
 came shareholders. Tracy v. Yeates, 
 18 Barb. 152; Phillips v. Therasson, 
 
 11 Hun, 141; Weber v. Fickey, 47 
 Md. 196; contra, Curtis v. Harlow, 
 
 12 Mete. 3. Compare Longley v. 
 Little, 26 Me. 162. Nevertheless, a 
 transferee may be liable to indem- 
 nity his transferrer in respect of a 
 debt for which, to creditors, the 
 
 715
 
 § 720.] THK LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 § 720. Thus, as there is reason to hold that the purchaser 
 of shares assumes all the liability connected "with them, the 
 reasons for holding that the seller continues liable seem to 
 fail ; as presumably the legislative intention was not to make 
 two sets of shareholders liable for the same indebtedness on 
 the same shares. The creditors in contracting may have re- 
 lied on the individual responsibility of the then shareholders, 
 but none the less were they affected with notice of the trans- 
 ferability of shares. 
 
 In view of the preceding discussion, and the impropriety of 
 introducing anomalies into corporation law, it would seem 
 correct, in the absence of provision or indication in the statute 
 to the contrary, 1 to hold that all liability in respect of shares 
 ceases upon the absolute a and regular transfer of them to a 
 person capable of succeeding to the liabilities of the former 
 holder ; provided the transfer be not made to an irresponsible 
 person in defraud of creditors. 3 
 
 transferee is not, under the statute, 
 held liable; and on that account, if 
 the transferee is solvent aud within 
 the jurisdiction of the court, a 
 creditor suing the transferrer 6hould 
 make the transferee a party. Wheeler 
 v. Faurot, 37 Ohio St. 26. See Brown 
 v. Hitchcock, 36 Ohio St. 667. 
 
 In Massachusetts, under a stat- 
 ute, whereby shareholders are made 
 jointly and severally liable for all 
 debts and contracts made by the 
 corporation until the whole amount 
 of the capital stock is paid in, a 
 shareholder is liable for debts con- 
 tracted while he remains such, al- 
 though his membership cease before 
 the debts become payable. But he 
 is not liable for debts contracted 
 before he became a shareholder if 
 his membership expires before the 
 debts are payable or suit is brought 
 against him. Holyoke Bank v. Burn- 
 ham, 11 Cush. 183. See Johnson v. 
 Somerville Dyeing, etc., Co., 15 Gray, 
 216. Compare Curtis v. Harlow, 12 
 Mete. 3. The liabilities to which a 
 
 716 
 
 transferee of shares succeeds are 
 those incidental to the relationship 
 of shareholder; they do not include 
 the liability to return dividends im- 
 properly received by the transferrer. 
 Hurlbut v. Taylor, 62 Wis. 607. 
 
 1 See Hebdy's, etc., Case, L. R. 2 
 Eq. 167. 
 
 2 See Veiller v. Brown, 18 Hun, 571; 
 §747. 
 
 3 See §§ 747-749. The following de- 
 cisions support the result reached in 
 the text: McLaren v. Franciscus, 43 
 Mo. 452 ; Shrainka v. Allen, 76 Mo. 
 384; Bond v. Appleton, 8 Mass. 472; 
 Curtis v. Harlow, 12 Mete. 3; Child v. 
 Coffin, 17 Mass. 64; Middleton Bk. v. 
 Magill, 5 Conn. 28 (a case of unlim- 
 ited liability); Ball Elec. Light Co. v. 
 Child, 68 Conn. 522; People's Live 
 Stk. Ins. Co., In re, 56 Minn. 180; Olson 
 v. Cook, 57 Minn. 552; Cleveland v. 
 Burnham, 55 Wis. 598; Nixon v. 
 Green, 11 Exch. 550. See Marcy v. 
 (lark, 17 Mass. 330, 335; Cape's 
 Executors' Case, 2 De G. M. & G. 
 562; Grisewood & Smith's Case, 4
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 722. 
 
 § 721. In respect to enforcing the statutory liability of 
 shareholders to creditors, it may be said generally 
 that the suit must be brought by the creditors and the proper 
 not by the corporation or its receiver. 1 This liabil- ^ ties t0 
 ity, whether limited or not, is a security provided 
 by law for the benefit of the creditors, over which the corpora- 
 tion has no control ; and, consequently, an attempted assign- 
 ment by the corporation of the statutory liability of share- 
 holders is inoperative, although made for the equal benefit of 
 all the creditors. 2 
 
 § 722. As to the necessary allegations in the complaint, it 
 is impossible to state any more definite rule than 
 simply that the complaint must contain the allega- averments 
 tions essential to make out a case under the partic- |" f, lead " 
 ular statute relied on. Thus, where the charter 
 declares that " in all cases of losses exceeding the means of the 
 corporation, each stockholder shall be held liable to the amount 
 of unpaid stock held by him," the complaint must aver that the 
 losses or liabilities of the company exceed its assets. 3 But it 
 
 De G. & J. 544; Griswold v. Seligman, 
 72 Mo. 110, 119. See Root v. Sinnock, 
 120 111. 350. 
 
 The authorities are so conflicting, 
 and the statutes so diverse, that the 
 only safe rule for a practitioner is to 
 seek for decisions under the statute 
 affecting his client, or statutes pre- 
 cisely similar in terms. It would be 
 well for the legislature always to 
 designate the class of shareholders 
 intended to be made liable. 
 
 The Ohio rule is, that the share- 
 holder who is such at the time the 
 corporation contracts the debt, is the 
 one liable; and the liability is not 
 discharged by transfer, but transferee 
 must indemnify transferrer. Harp- 
 old v. Stobart, 46 O. St. 397. See, 
 also, Sayles v. Bates, 15 R. I. 342; 
 Jackson v. Meek, 87 Tenn. 69. 
 
 1 Farnswortli v. Dewey, 91 N. Y. 
 308; Hirshfeld v. Fitzgerald, 157 N. 
 Y. 166; Runner v. Dwiggins, 147 Ind. 
 238; Lane v. Morris, 8 Ga. 468, 476; 
 
 Bristol v. Sandford, 12 Blatchf. 341; 
 Jacobson v. Allen, 20 Blatchf. 525; 
 S. C, 12 Fed. Rep. 454; Wincock v. 
 Turpin, 96 111. 135; Liberty Female 
 College A.ss'n v. Watkins, 70 Mo. 13; 
 Steinke v. Loofbowrow, 17 Ut. 252. 
 Cf. Parker o. Bank, 53 S. C. 583; 
 State v. Union Stockyards Bank, 103 
 Iowa, 549; Zang v. Wyant, 25 Col. 
 551; Colton v. Moyer, 90 Md. 711. 
 Compare the two cases of Harris v. 
 First Parish, 23 Pick. 112, and Baker 
 v. Atlas Bank, 9 Mete. 182. 
 
 A judgment creditor of the cor- 
 poration may, in the same action, 
 join a claim to compel the payment 
 of stock subscriptions and a claim 
 to enforce the individual statutory 
 liability. Warner v. Callender, 20 
 Ohio St. 190. 
 
 2 Wright v. McCormack, 17 Ohio 
 St. 86; Umsted v. Buskirk, ib. 113; 
 Dutcher v. Maine Nat. B'k, 12 
 Blatchf. 435. 
 
 3 Blair v. Gray, 104 U. S. 769. 
 
 717
 
 § 723.] THK LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 may not always be necessary for the creditor to aver that the 
 corporation is insolvent, or that the creditor has obtained a 
 judgment against it, unless the statute makes the liability of 
 the shareholder contingent on such insolvency, or requires the 
 creditor to exhaust his remedies against the corporation before 
 suing a shareholder. 1 
 
 § 723. In New York, under the Manufacturing Companies 
 Act of 1848, 2 the stockholders were made "severally individ- 
 ually liable to the creditors of the company, . . . . to an 
 amount equal to the amount of stock held by them respec- 
 tively, for all debts and contracts made by such company 
 until the whole amount of capital stock fixed and limited by 
 such company shall have been paid in, and a certificate 
 thereof filed and recorded as prescribed. . . ." 3 Under this 
 act, as amended by chapter 333 of the Laws of 1853, by which 
 shares could be paid for in property, in order to charge the 
 
 1 Manufacturing Co. v. Bradley, 
 105 U. S. 175; Perkins v. Church, 31 
 Barb. 84; Hodges v. Silver Hill M'g 
 Co., 9 Oregon, 200; Morrow v. Supe- 
 rior Court, 64 Cal. 383. See Culver 
 v. Third Nat. Bank, 64 111. 528; 
 Spence v. Shepard, 57 Ala. 598. 
 
 Taking a pledge of corporate prop- 
 erty has been held not to prevent the 
 creditor from suing the shareholders 
 without selling the pledge. Sonoma 
 Valley Bank v. Hill, 59 Cal. 107. 
 
 2 This statute is now repealed ; 
 but the writer has left in this edition 
 such decisions under it as seem pos- 
 sibly applicable to statutes now in 
 force in New York and elsewhere. 
 The present clause in the New York 
 statute (see ch. 688, § 54, laws of 
 1892, as amended by laws of 1901, 
 ch. 354,) reads: "Every holder of 
 capital stock not fully paid, in any 
 stock corporation, shall be person- 
 ally liable to its creditors, to an 
 amount equal to the amount unpaid 
 on the stock held by him for debts 
 of the corporation contracted while 
 such stock was held by him." For 
 
 718 
 
 construction of New York statutes, 
 see Close v. Potter, 155 N. Y. 145. 
 
 8 Stockholders are not liable under 
 this clause to a creditor who is also 
 a director. McDowall v. Shehan, 
 129 N. Y. 200. But see contra, 
 Janney ». Minneapolis Industrial Ex- 
 position, 79 Minn. 488. 
 
 A stockholder is not relieved from 
 this liability by having paid in full 
 for his own shares. Wheeler v. 
 Millar, 90 N. Y. 353; ace. Tibbals 
 v. Libby, 87 111. 142. Compare 
 Schricker v. Ridings, 65 Mo. 208, 
 and Lewis v. St. Charles County, 5 
 Mo. App. 225. 
 
 Although where the corporation 
 has no power to increase its capital 
 stock, stock issued in excess of the 
 limit is void, and the holders of it 
 are not liable to creditors thereon, 
 yet where the power to increase the 
 stock exists, and there is a way in 
 which the increase may lawfully be 
 made, the creditors are entitled to 
 rely on the assumption that the in- 
 crease has been lawfully effected, 
 and the holders of the stock will be
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 724. 
 
 bolder of stock issued for property individually with the debts 
 of the corporation, it was not enough to prove that the property 
 was purchased at an over-valuation through a mere mistake 
 or error of judgment on the part of the company's trustees. 
 The purchase had to be shown to have been made in bad faith, 
 with intent to evade the statute. But in such case in order to 
 establish legal fraud it was only necessary to prove, (1) that the 
 stock exceeded in amount the value of the property in exchange 
 for which it was issued, and (2) that the trustees issued it de- 
 liberately, and, with knowledge of the real value of the prop- 
 erty, overvalued the same. 1 It might properly be left with the 
 jury to say whether " the property was placed and taken at a 
 higher valuation with a fraudulent purpose, with the intent to 
 evade the statute." 2 
 
 § 724. Where the statute prescribes conditions precedent 
 which are to be performed by a creditor to entitle him p er form- 
 to sue a shareholder, the plaintiff must allege and ^editS-sof 
 
 estopped from setting up its illegal 
 or irregular issue (see §541), when 
 they have voted for the increase, 
 accepted the stock, and received divi- 
 dends thereon. 
 
 The new shares of the stock so in- 
 creased become subject to the lia- 
 bility of this section until fully paid 
 up and a certificate filed; but the 
 fact of their remaining vinpaid does 
 not revive the liability of the hold- 
 ers of the original shares, which are 
 paid up, and a certificate filed as 
 required. 
 
 The provision that the certificate 
 shall be matte tvithin thirty days is 
 but directory. Veeder v. Mudgett, 
 95 N. Y. 295. 
 
 Interest will be allowed on the 
 creditor's claim from the time when 
 he begins his action against the stock- 
 holder, even though such allowance 
 of interest increase the claim to a 
 sum exceeding the amount of stock 
 held by the defendant. Burr v. 
 Wilcox, 22 N. Y. 551; Handy v. 
 
 Draper, 89 N. Y. 334; Shellington 
 v. Howland, 53 N. Y. 371. Contra, 
 Cole v. Butler, 43 Me. 401, 405; 
 Sackett's Harbor Bank v. Blake, 3 
 Rich. Eq. (S. C. ) 225, 233. And 
 where the entire principal and in- 
 terest of the debt do not exceed the 
 amount of the stockholder's liability 
 as limited by the statute, interest 
 will be allowed as against the stock- 
 holder from the maturity of the 
 debt. Wheeler i>. Millar, 90 N. Y. 
 353. 
 
 1 Douglass v. Ireland, 73 1ST. Y. 100. 
 See, also, Schenck v. Andrews, 57 N. 
 Y. 133; Boynton v. Andrews, 63 N. Y. 
 93; Boynton v. Hatch, 47 N. Y. 225; 
 National Tube Works Co. v. Gilfillan, 
 124 N. Y. 302. 
 
 2 Lake Superior Iron Co. v. Drexel, 
 90 N. Y. 87. For the present New 
 York statute, see sec. 42, chap. 688, 
 laws of 1892, as amended by 
 chap. 354, laws of 1901. (Ante, § 522c, 
 n. 3.) 
 
 719
 
 § 725.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 conditions prove his fulfillment of them: 1 and the shareholder 
 
 precedent. l 
 
 may plead improper or non-performance of them. 2 
 Thus, under the New York Manufacturing Companies Act of 
 1848, before referred to, it was a condition precedent to the 
 maintaining of an action by creditors against stockholders that 
 the former should have obtained a judgment against the corpo- 
 ration, and that an execution should have been issued there- 
 under and returned wholly or partially unsatisfied. 3 A pro- 
 ceeding in rem, affecting only the corporate property attached, 
 was not a compliance with this condition. 4 If, however, the 
 conditions precedent to a liability of a stockholder under this 
 statute were rendered impossible by the paramount law of the 
 United States, set in operation by the stockholder himself, per- 
 formance of them by creditors was excused. 5 
 
 § 725. It is a difficult matter to state rules of general ap- 
 plicability regarding the joinder of parties in 
 parties 10 actions to enforce the statutory liability of share- 
 holders. For there is great diversity in the lan- 
 guage of the different statutes ; and the decisions are hard to 
 reconcile. 
 
 When shareholders are made severally individually liable 
 to the creditors of the corporation to an amount equal to the 
 
 i Hirslifield v. Bopp, 145 N. Y. 84; 
 Cuykendall v. Corning, 88 N. Y. 130, 
 137. 
 
 2 See Fourth Nat. Bank v. Franklin, 
 120 U. S. 747. Due diligence seems 
 to be required of the creditor to dis- 
 cover property of the corporation 
 before a scire facias will be issued 
 against a shareholder. Hitchens v. 
 Kilkenny, etc., R. R. Co., 15 C. B. 
 459. Still, where the statute pro- 
 vides that execution against the 
 corporation must first have been 
 returned unsatisfied, no greater dili- 
 gence is required than is implied in 
 obtaining judgment, suing out an 
 execution, and getting a return of 
 nulla bona thereunder. Thornton v. 
 Lane, 11 Ga. 459, 514; Bank of U. S. 
 v. Dallam, 4 Dana (Ky.), 574. But 
 notice should be given the share- 
 
 720 
 
 holder, that he may point out cor' 
 porate property. Lane v. Harris, 16 
 Ga. 217, 224. See, also, Lane o. Mor- 
 ris, 8 Ga. 468; Paine ». Stewart, 33 
 Conn. 516, 531; Toucey v. Bowen, 1 
 Biss. 81 ; Grew v. Breed, 10 Mete. 569, 
 579. See § 713. 
 
 3 Handy v. Draper, 89 N. Y. 334, 
 reversing S. C, 23 Hun, 256. See 
 Kincaid ». Dwindle, 59 N. Y. 548; 
 Dean t\ Mace, 19 Hun, 391. See § 55, 
 ch. 688, N. Y. Laws of 1892. 
 
 4 Rocky Mountains National Bank 
 v. Bliss, 89 N. Y. 338. 
 
 6 Shellington v. Howland, 53 N. Y. 
 371; followed in Flash v. Conn, 109 
 U. S. 371. The Nat. Bankruptcy 
 Act is referred to. Compare Ansonia 
 B. & C. Co. v. New Lamp Chimney 
 Co., 53 N. Y. 123; Glass Co. v. Vary, 
 152 N. Y. 121.
 
 CHAP. XHI.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 725. 
 
 amount of stock held by the shareholders respectively, a 
 single creditor may sue one or more shareholders as he deems 
 proper in an action at law. 1 Where, however, the share- 
 holders are simply made individually liable for the corporate 
 indebtedness, to an amount equal either to the par value of 
 the shares held by them respectively or in the proportion 
 which their shares bear to the total amount of the capital stock, 
 the rule applied in many cases is that all the shareholders, so 
 far as practicable, should be joined in an action in equity ; 
 which should be brought by all the creditors, or in such a form 
 that all the creditors may come in. 2 " The creditors should all 
 join because they have a common interest in the funds to be 
 realized ; or, if the action is commenced by one or more of 
 
 i Flash v. Conn, 109 U. S. 371; 
 Garrison v. Howe, 17 New York, 
 458; Mathezv. Neidig, 72 New York, 
 100; Weeks v. Love, 50 New York, 
 568; Mann v. Pentz, 3 N. Y. 415; 
 Bank of Poughkeepsie v. Ibbotson, 
 24 Wend. 473; Wincock v. Turpin, 
 96 111. 135; Hull v. Burtis, 90 111. 
 213; Smith v. Londoner, 5 Colorado, 
 365; Culver v. Third National Bank, 
 64 111. 528; Norris v. Johnson, 34 Md. 
 485; Perry v. Turner, 55 Mo. 418; 
 Gruud v. Tucker, 5 Kan. 70; Gibbs v. 
 Davis, 27 Fla. 531; Scbalucky v. 
 Field, 124 111. 617. See Merchants' 
 Nat. Bank v. Bailey Mfg. Co., 34 
 Minn. 323. Compare Abbey v. Dry 
 Goods Co., 44 Kan. 415; Wood worth 
 v. Bolles, 61 Kas. 569. When the 
 charter provides that " each stock- 
 holder shall be jointly and severally 
 liable to the creditors in an amount," 
 etc., a single creditor can sue a single 
 shareholder at law. Hall & Co. v. 
 Kliuck, 25 S. C. 348; Sadler v. Nichol- 
 son, 49 S. C. 7. But see Harper v. 
 Union Manufacturing Co., 100 111. 
 225. These cases hold that an action 
 at law is open to the creditor 
 although he might have sued in 
 equity. But under a Pennsylvania 
 statute an action at law has been 
 
 46 
 
 held the exclusive remedy. Brinham 
 v. Wellersburg Coal Co., 47 Pa. S. 43. 
 See Deming v. Bull, 10 Conn. 409; 
 Simonson v. Spencer, 15 Wend. 548. 
 
 2 Coleman v. White, 14 Wis. 700 
 Overmyer v. Cannon, 82 Ind. 457 
 Von Glahn v. Harris, 73 N. C. 323 
 Johnson v. Fisher, 30 Minn. 173 
 Terry u. Martin, 10 S. C. 263; Eames 
 v. Doris, 102 111. 350; Tunesma v. 
 Schuttler, 114 111. 156; Gianella v. 
 Bigelow, 96 Wis. 185. See Smith 
 v. Huckabee, 53 Ala. 191; Jones v. 
 Jarmau, 34 Ark. 323; and cases in 
 following notes. Compare Hull v. 
 Burtis, 90 111. 213. Semble contra, 
 Morrow v. Supreme Court, 64 Cal. 
 383. 
 
 Where stockholders are made lia- 
 ble to pay up their shares and also 
 to an amount equal to the amount 
 of their stock, a creditor may, on 
 behalf of himself and other cred- 
 itors, bring a suit in equity against 
 the stockholders, the assignee in 
 bankruptcy of the corporation and 
 such creditors as have brought suits 
 at law, to collect the sums due from 
 the stockholders, distribute the 
 same, and restrain the prosecution 
 of the other suits. Pfhol v. Simp- 
 son, 74 N. Y. 137. 
 
 721
 
 § 726.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 them, the complaint should be so framed that the others may 
 come in and prove their claims before the court or a referee, 
 and share in the distribution of the moneys received. All the 
 stockholders should be made defendants, because they too 
 have a common interest, and without their presence it is im- 
 possible to adjust their rights and liabilities, and protect them 
 from unequal and oppressive burdens. The same reasons 
 exist for making all the stockholders parties to such actions 
 as in proceedings against delinquent stock subscribers to com- 
 pel them to contribute towards the payment of the debts of an 
 insolvent bankrupt corporation. The corporation should be 
 joined, unless it has been dissolved or its assets wholly ex- 
 hausted, for the reason that both creditors and stockholders 
 are interested in closing its affairs, and in having its available 
 property appropriated to the payment of debts, without which 
 there can be no final settlement and adjudication of the rights 
 and liabilities of the parties." * 
 
 § 726. The underlying distinction seems to be as follows: 
 If the shareholders are made severally and individ- 
 ually liable to the creditors directly, one creditor 
 alone may sue a single shareholder, and at law. If, however, 
 from the general tenor of the statute it may be inferred that 
 the legislative intention was to create a fund which, on the in- 
 ability of the corporation to pay its debts, should be collected 
 and ratably distributed among its creditors, then the liability 
 of each shareholder is rather to contribute to a common fund 
 in a certain proportion than to pay the debt of any one cred- 
 itor. In such case one creditor cannot sue alone ; all the share- 
 holders, so far as practicable, should be made defendants ; and 
 equity is the proper tribunal. 2 
 
 Giving the opinion of the Federal Supreme Court in Terry 
 v. Little, 3 Chief Justice Waite said : " The individual lia- 
 
 i Coleman v. White, 14 Wis. 700, 
 702, per Dixon, C. J. Compare 
 Taylor v. Goss, etc., M'f'g Co., 11 
 Col. 419. 
 
 2 Pollard v. Bailey, 20 Wall. 520; 
 
 Terry v. Little, 101 U. S. 216; Eames 
 
 v. Doris, 102 111. 050; Queenan v. 
 
 Palmer, 117 111. 619; Crease v. Bab- 
 
 722 
 
 cock, 10 Mete. (Mass.) 525; Grew v. 
 Breed, ib. 569; Hansen v. Davison, 
 73 .Minn. 454; McLaughlin v. O'Neil, 
 7 Wyo. 187. Compare Mills c. Scott, 
 99 U. S. 25; Bates v. Day, 198 Pa. St. 
 513. 
 
 3 101 U. S. 216, 217.
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. [§ 727. 
 
 bility of stockholders in a corporation is always a creature of 
 statute. It does not exist at common law. The first thing 
 to be determined in all such cases is, therefore, what liability 
 has been created. There will always be difficulty in attempt- 
 ing to reconcile cases of this class in which the general ques- 
 tion of remedy has arisen, unless special attention is given 
 to the precise language of the statute under consideration. 
 The remedy must always be such as is appropriate to the lia- 
 bility to be enforced. The statute which creates the liability 
 may declare the purpose of its creation and provide directly or 
 indirectly a remedy for its enforcement. If the object is to 
 provide a fund out of which all creditors are to be paid, share 
 and share alike, it needs no argument to show that one cred- 
 itor should not be permitted to appropriate to himself, without 
 regard to the rights of others, that which is to make up the 
 fund. 
 
 " The language of the charter is peculiar. The stockhold- 
 ers are not made directly liable to the creditors. They are 
 not in terms obliged to pay the debts, but are ' liable and held 
 bound .... for any sum not exceeding twice the amount of 
 .... their .... shares.' This we think means that on the 
 failure of the bank, each stockholder should pay such sum, 
 not exceeding twice the amount of his shares, as shall be his 
 just proportion of any fund that may be required to discharge 
 the outstanding obligations. The provision is, in legal effect, 
 for a proportionate liability by all stockholders. Undoubtedly 
 the object was to furnish additional security to creditors, and 
 to have the payments when made applied to the liquidation of 
 debts. So, too, it is clear that the obligation is one that may 
 be enforced by the creditors ; but as it is to or for all creditors, 
 it must be enforced by or for all. The form of the action, there- 
 fore, should be one adapted to the protection of all. A suit at 
 law by one creditor to recover for himself alone is entirely in- 
 consistent with any idea of distribution. As the liability of a 
 stockholder is not to any individual creditor, but for contribu- 
 tion to a fund, out of which all creditors are to be paid alike, 
 the appropriate remedy is by suit to enforce the contribution, 
 and not by one creditor alone to appropriate to his own use 
 that which belongs to others equally with himself." 
 
 § 727. The Federal Supreme Court has also rendered an 
 
 723
 
 § 727.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 Liability of ^sfructive decision regarding the liability of 
 share- ' shareholders in national banks. The shareholders 
 
 holders in . ....... 
 
 national in a national bank are " individually responsible 
 equally and ratably, and not one for another, for 
 all contracts, debts, and engagements of such association, to 
 the extent of the amount of their stock therein, at the par 
 value thereof, in addition to the amount invested in the 
 shares." 1 An assessment of seventy per cent. of the value of 
 their shares was made on the shareholders of an insolvent 
 national bank, in order to discharge its liabilities. This 
 assessment was not sufficient, but would have been if all the 
 shareholders had been solvent and within the jurisdiction of 
 the court. A creditor requested the comptroller of the cur- 
 rency to order a further assessment of thirty per cent, and to 
 direct the receiver to proceed as before to collect it. The 
 comptroller refused, and was sustained in his refusal by the 
 Supreme Court, who held that this liability of shareholders 
 was several and not joint, and that the insolvency of one 
 shareholder, or his being beyond the jurisdiction of the court, 
 did not affect the liability of another ; and if the bank itself 
 held any of its stock, the several liability of the other share- 
 holders would not thereby be increased, but would be computed 
 as if the stock held by the bank was in the hands of a natural 
 person. 2 Giving the opinion of the court, Justice Swayne 
 said : " In the process to be pursued to fix the amount of the 
 separate liability of each of the shareholders, it is necessary to 
 ascertain (1) the whole amount of the par value of all the 
 
 1 Shareholders in national banks, 
 liable for its debts, are liable for in- 
 terest thereon (to the same extent 
 with the bank), but not in excess of 
 their maximum liability fixed by the 
 statute. Richmond v. Irons, 121 U. S. 
 27. 
 
 2 United States v. Knox, 102 U. S. 
 422. The comptroller may, however, 
 make a second assessment. Stude- 
 baker u. Perry, 184 U. S. 258. See, 
 also, Crease v. Babcock, 10 Mete. 525; 
 Matter of the Hollister Bank, 27 
 N. Y. 393. The Ohio Revised Stat- 
 utes, § 3260, provide for joint action 
 
 724 
 
 and ascertaining the proportion each 
 shareholder shall pay, up to the 
 amount of stock held by him. In an 
 action by a creditor to enforce the 
 individual liability of shareholders 
 under this statute, where not all the 
 shareholders are before the court, 
 and it does not appear that those not 
 served could not have been served, 
 it is error to assess on the share- 
 holders served the whole amount of 
 the corporate indebtedness. Bone- 
 witz v. Van Wert County Bank, 41 
 O. St. 78.
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 729 - 
 
 stock held by all the shareholders ; (2) the amount of the de- 
 ficit to be paid after exhausting all the assets of the bank ; 
 (3) then to apply the rule that each shareholder shall contribute 
 such sum as will bear the same proportion to the whole 
 amount of the deficit as his stock bears to the whole amount 
 of the capital stock of the bank at its par value." i 
 
 § 728. Under statutes by which shareholders are made lia- 
 ble to a certain limited amount, determined either 
 by the number of shares held by them respectively, guish-" 
 or by the proportion borne by that number to the ^binty. 
 total capital stock, a shareholder may extinguish 
 his liability by paying a debt of the corporation equal in 
 amount to the sum for which he is liable. 2 
 
 § 729. A shareholder, however, indebted to an insol- 
 vent corporation for unpaid subscriptions, cannot, 
 against his liability therefor, set off a debt owing him 
 
 Set-off. 
 Unpaid 
 subscrip- 
 tions. 
 
 1 United States v. Knox, 102 U. S. 
 425. After such an assessment on 
 the shareholders of a national bank 
 has been made, a suit at law may 
 properly be brought by the receiver 
 to collect it. Bailey «. Sawyer, 4 
 Dill. 463. 
 
 Sec. 50 of the National Banking Act 
 of 1864, which provides that suits to 
 which officers or agents of the United 
 States are parties shall be conducted 
 by the district attorney, is so far but 
 directory that it cannot be set up by 
 shareholders to defeat a suit brought 
 against them by a receiver, who, 
 with the approval of the Treasury 
 Department, had employed private 
 counsel. In such a suit it is neces- 
 sary that action on the part of the 
 comptroller of the currency touching 
 the personal liability of the share- 
 holders, should precede the institu- 
 tion of any suit by the receiver, and 
 the fact must be averred in the bill. 
 It is no objection to such a bill that 
 shareholders without the jurisdic- 
 tion of the court are not made par- 
 ties; and creditors are not proper 
 parties to it. Kennedy v. Gibson, 8 
 
 Wall. 498, followed in Casey v. Galli, 
 94 U. S. 673. The liability of share- 
 holders in national banks survives 
 the death of a shareholder, and at- 
 taches to his representatives. Rich- 
 mond v. Irons, 121 U. S. 27. But it 
 does not arise in respect to debts 
 contracted after the bank has gone 
 into liquidation. lb. 
 
 3 Garrison v. Howe, 17 N. Y. 458; 
 Woodruff, etc., Iron Works v. Chit- 
 tenden, 4 Bos. (N. Y. ) 406; Jones 
 v. Wiltberger, 42 Ga. 575; Boyd v. 
 Hall, 56 Ga. 563; San Jose Savings 
 Bank v. Pharis, 58 Cal. 380; Thomp- 
 son v. Meisser, 108 111. 359. 
 
 When shareholders are liable to 
 the amount of their stock, and a 
 shareholder pays a corporate debt 
 equal to the amount of his shares, 
 he cannot be held liable again as to 
 those shares, nor can the assignee 
 of them be held liable. Trebus v. 
 Smiley, 110 111. 316. 
 
 After a creditor, however, has be- 
 gun a suit against a shareholder, 
 then the latter cannot defeat him by 
 paying another debt of the corpora- 
 tion. Jones v. Wiltberger, supra. 
 
 725
 
 § 730.] THE r,AW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 from the corporation. 1 He is first bound as a shareholder to pay 
 whatever may be due on his shares, whereupon he will be 
 entitled to participate in the assets of the corporation ratably 
 with the other creditors. 2 "The debts must be mutual; must 
 be in the same right. . . . The debt which appellant owed 
 for his stock was a trust fund devoted to the payment of all 
 the creditors of the company. As soon as the company be- 
 came insolvent, and this fact became known to the appellant, 
 the right of set-off for an ordinary debt to its full amount 
 ceased. It became a fund belonging equally in equity to all 
 the creditors, and could not be appropriated by the debtor to 
 the exclusive payment of his own claim." 3 
 § 730. Likewise, a shareholder, who has been paid divi- 
 dends by an insurance company when insolvent, 
 cannot, in a suit by its receiver to recover them, 
 set off his claims as a creditor of the corporation. 4 
 " The defendant must restore the trust funds re- 
 ceived in violation of law and improperly withheld, and then 
 he will be in a position to claim, as a creditor of the company, 
 a participation in common with other creditors, in a fund real- 
 
 SetK)ff. 
 Dividends 
 improperly 
 received. 
 
 A shareholder cannot, under a 
 double liability clause, get a friend 
 to buy up claims at a discount, con- 
 fess judgment in his favor, and then 
 plead this judgment as a bar to 
 other creditors of the corporation. 
 Manville v. Karst, 16 Fed. Rep. 173. 
 See Buchanan v. Meister, 105 111. 
 638. And when a shareholder is 
 liable to creditors to an amount 
 equal to the stock held by him, he 
 cannot buy up claims at a discount 
 and set them off at their face in a 
 suit by a creditor. Gauch v. Har- 
 rison, 12 111. App. 459; Thompson 
 v. Meisser, 108 111. 359; Thebus v. 
 Smiley, 110 111. 316. When a share- 
 holder pays a debt of the corpora- 
 tion, and takes an assignment, the 
 debt is extinguished, and the share- 
 holders cannot revive it by assign- 
 
 726 
 
 ing it. Hardy v. Norfolk M'f'g Co., 
 80 Va. 404. 
 
 1 A statute may permit such set-off. 
 Appletou v. Turnbull, 84 Me. 72. 
 
 2 Sawyer v. Hoag, 17 Wall. 610. See, 
 also, Lawrence v. Nelson, 21 N. Y. 
 158; Singer v. Given, 61 Iowa, 93; 
 Boulton Carbon Co. v. Mills, 78 Iowa, 
 460; Shickle v. Watts, 94 Mo. 410; 
 Thompson v. Reno Sav'gs Bk., 19 
 Nev. 103; Wilkinson v. Bertock, 111 
 Ga. 187. Cf. First Nat. B'kt. Rig- 
 gins, 124 N. C. 534; Efrid v. Pied- 
 mont Land, etc., Co., 55 S. C. 78. 
 
 s Sawyer v. Hoag, 17 Wall. G10. 622; 
 opinion of court per Miller, J. Sem- 
 ble contra, Sav'gs Bank v. Butchers, 
 etc., Bank, 130 Mo. 155. 
 
 * Osgood v. Ogden, 4 Keyes (N. Y.), 
 70.
 
 CHAP. XIH.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 732. 
 
 ized and secured for their common benefit ; but, I apprehend, 
 not till then." x 
 
 § 731. On similar principles, if the statutory liability of 
 shareholders is in effect to contribute to a common _ 
 
 Set-off. 
 
 fund to be ratably distributed among creditors, or statutory 
 if their statutory liability assumes this character by 
 virtue of the nature of the proceeding brought to enforce it, a 
 shareholder cannot, against this liability, set off an indebted- 
 ness of the corporation to him. 2 " Under a proceeding for 
 winding up a corporation, where an account of all the debts 
 and of the effects, including the aggregate liabilities of the 
 stockholders, is required to be taken, there is no reason why 
 a creditor should be in any better situation on account of being 
 at the same time a stockholder. In the latter character the 
 constitution and the statute make him liable to the creditors to 
 an amount equal to his stock, or to his just proportion of that 
 amount if the whole is not required ; but as a creditor he is en- 
 titled only to a dividend in proportion to the other creditors. 
 In a case of deficiency in means to pay all the debts, he must 
 take his dividend pro rata. But if he could set off his claim as 
 a creditor against his liability as a stockholder, he might be 
 paid in full, while the other creditors would receive only a part 
 of the amount due them." 3 
 
 § 732. When, however, a single creditor can and does sue 
 
 Iron Co., 4 Barb. 382, 391. This rea- 
 
 1 Osgood v. Ogden, 4 Keyes (N. Y. ), 
 70, 89; opinion of court per Bacon, J. 
 
 2 Matter of the Empire City Bank, 
 
 18 N. Y. 199; Matthews v. Albert, 24 
 Md. 527; Hillier v. Allegheny Mut. 
 Ins. Co., 3 Pa. St. 470; Thompson v. 
 Meisser, 108 111. 359; Thebus v. 
 Smiley, 110 111. 316; Grissell's Case, 
 L. R. 1 Ch. 528; Black & Co.'s Case, 
 L. R. 8 Ch. 254; Callisher's Case, L. 
 R. 5 Eq. 214; Barnett's Case, L. R. 
 
 19 Eq. 449. See, also, Lawrence v. 
 Nelson, 21 N. Y. 158; Emmert v. 
 Smith, 40 Md. 123; Weber v. Fickey, 
 47 Md. 196; Bulkley v. Whitcomb, 
 121 N. Y. 107; Lauraglenn Mills v. 
 Ruff, 57 S. C. 53. But see, perhaps, 
 contra, Briggs v. Penuiman, 8 Cow. 
 (N. Y.) 387; Tallmadge v. Fishkill 
 
 soning is not applicable when the 
 shareholders' liability is unlimited; 
 because each shareholder "is liable 
 to contribute to any amount until all 
 the liabilities of the company are 
 satisfied, and therefore it signifies 
 nothing to the creditors whether the 
 set-off is allowed or not." Grissell's 
 Case, L. R. 1 Ch. 528, 536, per Lord 
 Chelmsford. 
 
 3 Matter of the Empire City Bk., 18 
 N. Y. 199, 227; opinion of court per 
 Denio, J. In a recent Connecticut 
 case of questionable reasoning, set- 
 off was not allowed on the ground 
 that the shareholder was a guarantor, 
 and a guarantor when sued on his 
 guaranty cannot set off a debt due 
 
 727
 
 § 732.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 a shareholder at law, to enforce the statutory liability of the 
 latter, it is then competent for the shareholder to set off a 
 debt owing him from the corporation. 1 "The statutory lia- 
 bility constitutes a fund which belongs to the creditors to 
 secure the payment of their debts ; but it belongs to all the 
 creditors, as well those who are stockholders as those who are 
 not. The defendant as a creditor, has an interest in the fund 
 as well us the plaintiff, and his debt was one that would be 
 chargeable against the fund, because it was a debt against the 
 company, for the payment of which stockholders were indi- 
 vidually liable, and this would be so irrespective of the ques- 
 tion whether the money advanced by the defendant was used 
 to pay obligations for which he was individually liable or not. 
 An action at law cannot be maintained against a stockholder, 
 who is also a creditor to an amount equal to his stock, for the 
 reason that he has an interest in the fund sued for, and it can- 
 not be known but that the whole fund is sufficient to pay all 
 the debts. No accounting can be had, because the proper 
 parties are not before the court." 2 
 
 A case recently arose in New York, where the defendant, 
 who was indebted to the corporation for his unpaid subscrip- 
 tion, was sued by a creditor to recover, under the Manufactur- 
 ing Companies Act of 1848, an amount equal to the stock held 
 by the defendant. The corporation was also indebted to the 
 defendant, and this indebtedness he sought to set off in the 
 action brought against him by the creditor. The Court of 
 Appeals held that the defendant could set off only the excess 
 of the indebtedness of the corporation to him over his indebted- 
 ness on his unpaid subscription to it; and since, as a matter 
 of fact, the balance was in favor of the corporation, the set- 
 off was entirely disallowed. 3 
 
 him from the principal debtor (i. e., 
 the corporation). Ball Electric Light 
 Co. v. Child, 68 Conn. 522. 
 
 iMathez v. Neidig, 72 N. Y. 100; 
 Jerman v. Benton, 79 Mo. 148; con- 
 tra, Lauraglenn Mills v. Ruff, 57 S. C. 
 53. Accord, Pierce ». Security Co., 
 60 Kas. 164. But see Buchanan v. 
 Meisser, 105 111. 638. A stockholder 
 who buys up claims against an in- 
 
 728 
 
 solvent corporation can set them off 
 only at the amount he paid for them. 
 Abbey v. Long, 44 Kan. 688. 
 
 2 Mathez v. Neidig, 72 N. Y. 100, 
 104; opinion of the court per Church, 
 C. J. See Matter of Empire City 
 Bank, 18 X. Y. 199, 227; Agate v. 
 Sands, 73 N. Y. 620. 
 
 3 Wheeler v. Millar, 90 N. Y. 353. 
 Compare Ernmert v. Smith, 40 Md.
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 733. 
 
 When 
 shareholder 
 who is also 
 a creditor 
 cannot sue 
 another 
 
 §733. A creditor of a corporation who is also a share- 
 holder cannot ordinarily sue another shareholder at 
 law to recover nis debt from the individual statu- 
 tory liability of the latter. For the same liability 
 affects the plaintiff himself, who accordingly is not 
 entitled to recover his full claim from another shareholder 
 
 at law. 
 
 shareholder. Contribution from the other share- 
 holders is all that he is entitled to ; and only a court of equity 
 is competent to adjust the rights of the plaintiff and defend- 
 ant. 1 It has even been held that a creditor, who is also a 
 shareholder, is estopped from enforcing the individual liability 
 of another shareholder, when such liability arises on a default 
 in the responsibility for which both plaintiff and defendant 
 share. 2 
 
 If, however, one shareholder is, as against a certain other 
 shareholder, entitled to the full amount of a debt due the 
 
 123; Weber v. Fickey, 47 Md. 196. 
 As against the liability as share- 
 holder, under this New York statute, 
 shareholders who are also trustees 
 cannot set off the amount which they 
 have paid to extinguish their liabil- 
 ity as trustees to creditors, under 
 another section of the same statute, 
 for failure to file an annual report. 
 Veeder v. Mudgett, 95 N. Y. 295. 
 Not the full amount of his debt from 
 the bank, but the proportion due the 
 shareholder (in a national bank in 
 the hands of a receiver) out of the 
 funds to pay its debts (i. e., the statu- 
 tory liability of shareholders, etc. ), 
 may be set off against his indebted- 
 ness to that fund. King v. Arm- 
 strong, 50 Ohio St. 222. 
 
 1 Thayer v. Union Tool Co., 4 
 Gray, 75; Bailey v. Bancker, 3 Hill 
 (N. Y.), 188; Richardson v. Aben- 
 droth, 43 Barb. 162; Beers v. Water- 
 bury, 8 Bosw. (N. Y.)396; Thomp- 
 son v. Meisser, 108 111. 359. See 
 Bisset v. Kentucky River Nav. Co., 
 15 Fed. Rep. 353. Compare Clark v. 
 Myers, 11 Hun, 60S; Oswald v. Times 
 
 Co., 65 Minn. 249. But it has been 
 held that an assignee of a judgment 
 obtained in a suit against the corpo- 
 ration, of which the plaintiff in the 
 suit was a shareholder, may sue a 
 shareholder at law. Woodruff, etc., 
 Iron Works v. Chittenden, 4 Bosw. 
 (N. Y.) 406. But, see, Potter v. 
 Stevens Machine Co., 127 Mass. 592. 
 
 The New York courts rest their 
 decisions on the not altogether satis- 
 factory grounds that plaintiff and 
 defendant are partners. A moment's 
 consideration will show that even 
 when a shareholder sues his corpo- 
 ration and obtains from it the pay- 
 ment of his demand, he does not in 
 reality obtain the face of his debt; 
 for the corporate assets in which he 
 is interested as a shareholder are so 
 much diminished by the satisfaction 
 of his claim as a creditor. Only 
 when one shareholder sues another, 
 then it is apparent that he is not en- 
 titled to the full amount of the debt. 
 
 2 Potter v. Stevens Machine Co., 
 137 Mass. 592. See § 701, note. 
 
 729
 
 § 734.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIH. 
 
 for debts of 
 a particular 
 class. 
 "Debts." 
 
 former from the corporation, there is no reason why he should 
 not sue the other shareholder at law. Thus, where a statute 
 provides that all shareholders shall be severally individually 
 liable to creditors to the amount of unpaid stock held by them 
 respectively, a creditor may maintain an action at law against 
 a shareholder ; even though the former is also a shareholder, 
 provided his stock is paid in full. 1 
 
 § 734. When the shareholders are made liable only for 
 Liability debts of a particular class, as for money due em- 
 ployes, they may plead that the debt sued on does 
 not come within that class. 2 For instance, by a 
 New York statute stockholders are made liable for 
 all debts due " labourers, servants, and apprentices, for services 
 performed for such corporation." The Court of Appeals hold 
 that the services referred to are menial or manual ; and that 
 he who performs them must be of a class whose members 
 usually look to the reward of a day's labor or service for 
 immediate or present support, from whom the company does 
 not expect credit, and to whom its future ability to pay is of 
 no consequence ; one who is responsible for no independent 
 employment, but does a day's work or a stated job under the 
 direction of a superior. Accordingly, a bookkeeper who 
 " worked by the year," and often acted as manager, is not in 
 this category, 3 nor an assistant chief engineer. 4 So where 
 
 1 Smith v. Londoner, 5 Colorado, 
 365; Brown v. Merrill, 107 Cal. 446; 
 Knowles v. Sandercock, 107 Cal. 629. 
 A shareholder in a corporation, to 
 the members of which personal lia- 
 bility attached, became bankrupt. 
 He pledged with one of his creditors 
 some bonds of the company which 
 itself had become insolvent. The 
 assignee in bankruptcy disputed the 
 creditor's title, but settled and gave 
 up all claim to the bonds, the creditor 
 agreeing to indemnify the assignee 
 from any liability as shareholder in 
 the company. The creditor then 
 sued on the bond to enforce the in- 
 dividual liability of the shareholders. 
 
 His agreement to indemnify the 
 assignee was set up in defence. But 
 the defence was held bad, as the 
 agreement was only an agreement 
 to indemnify the assignee, who was 
 not liable as a shareholder; it was 
 no agreement to indemnify the bank- 
 rupt. American File Co. v. Garrett, 
 110 U. S. 288. 
 
 2 Wakefield v. Fargo, 90 N. Y.213; 
 Conant v. Van Schaick, 24 Barb. 87; 
 Larrabee v. Baldwin, 35 Cal. 155. 
 Compare Wilson v. Shareholders, 43 
 Pa. St. 424. 
 
 ! Wakefield v. Fargo, 90 X. Y. 213. 
 Compare Short v. Medberry, 29 Hun, 
 39. The riffht of action under this 
 
 4 For note 4 see page 731. 
 
 730
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 735. 
 
 shareholders are made liable for the " debts " of the corporation 
 a shareholder may plead that the claim of the creditor is not a 
 "debt" in the sense in which the term is used in the statute. 
 Thus, a judgment against a corporation for personal injuries 
 is not a "debt contracted" by it. 1 
 
 § 735. Shareholders may also plead that their individual 
 liability has been waived in respect of the claim on 
 which suit is brought against them, 2 or that the 
 statutory provision on which rests their liability 
 had been repealed either before they became share- 
 holders, 3 or before the debt on which suit is brought withstat- 
 was contracted ; 4 or that the statutory liability was 
 created after the debt was contracted by the corporation, and 
 
 Waiver or 
 
 repeal of 
 
 statutory 
 
 liability. 
 
 Substantial 
 
 compliance 
 
 statute is assignable. Oneida Bank 
 v. Ontario Bank, 21 N. Y. 490. A suit 
 in equity against all the other share- 
 holders is the proper means of en- 
 forcing contribution when a share- 
 holder has paid wages of an employe. 
 Clark v. Myers, 11 Hun, 608. So a 
 travelling salesman was held not to 
 be a laborer. Jones v. Avery, 50 
 Mich. 326. See Clark, Appeal of, 
 100 Mich. 448. See Sleeper v. Gor- 
 dium, 67 Wis. 577, for a construction 
 of a statute of this nature. 
 
 The liability of shareholders to 
 creditors, to the extent of their un- 
 paid subscriptions, is not excluded 
 by the existence of a statute render- 
 ing shareholders individually liable 
 to the amount of stock held by each 
 of them, for all work or labor done, 
 or materials furnished to carry on 
 the operations of the corporation ; 
 even though the claims of the judg- 
 ment creditors suing to enforce the 
 payment of the unpaid subscriptions 
 arose from labor done and materials 
 furnished. Bunn's Appeal, 105 Pa. 
 St. 49. 
 
 4 Brockway v. Innes, 39 Mich. 47; 
 nor a railroad contractor. Peck v. 
 Miller, 39 Mich. 594. A corporation 
 
 cannot be an " employe " of another 
 corporation within the purview of a 
 statute making shareholders liable 
 for debts due employes. Dukes v. 
 Love, 97 Ind. 341. As to who are 
 "employes," see Palmer v. Van 
 Sautvoord, 153 N. Y. 612. 
 
 1 Bohn v. Brown, 33 Mich. 257 ; 
 Hacock v. Sherman, 14 Wend. 58 ; 
 Doolittle v. Marsh, 11 Neb. 243. 
 Compare Dryden v. Kellogg, 2 Mo. 
 App. 87. Liability for " dues " covers 
 damages arising from a tort of the 
 corporation. Rider v. Fritchey, 49 
 O. St. 285. See § 773. 
 
 2 French v. Teschemaker, 24 Cal. 
 518; Basshor v. Forbes, 36 Md. 154. 
 See Brown v. Eastern Slate Co., 134 
 Mass. 590. 
 
 3 Ochiltree v. Railroad Company, 
 21 Wall. 249. 
 
 4 But where bonds were issued by 
 a corporation while personal liabil- 
 ity attached to its shareholders, the 
 holder of them, though he became 
 such after the repeal of this per- 
 sonal liability, has all the rights of 
 his assignor, including the latter's 
 right of action against the share- 
 holders. Blakeman v. Benton, 9 
 Mo. App. 107. 
 
 731
 
 § 736.] THF LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 repealed before suit was brought against the shareholder. 1 
 And when, a statute, on failure to comply with which share- 
 holders are made liable, has been substantially complied with, 
 this, where the creditor is not injured, may absolve a share- 
 holder from liability. 2 
 
 § 736. When, according to the construction put on the 
 statute, the individual liability of shareholders is 
 fimitatlons primary or co-ordinate with that of the corporation, 
 and not contingent on the inability of the creditor 
 to satisfy his claim from the corporate assets, the statute of 
 limitations begins to run from the time when the debt matures 
 against the corporation. 3 And under a statute providing that 
 " if any loss or deficiency of the capital stock in any bank shall 
 arise from the official mismanagement of the directors, the 
 stockholders at the time of such mismanagement shall in their 
 individual capacities be liable to pay the same," the Massa- 
 chusetts Supreme Court holds that the statute begins to run 
 from the happening of the loss or deficiency in respect of 
 which the liability exists. 4 If, however, the liability of share- 
 holders is contingent on the inability of the corporation to 
 discharge the debt and the exhaustion of the legal remedies of 
 the creditor against it, then the statute of limitations does not 
 run against the liability of the shareholders until the creditor 
 has had a reasonable time to exhaust his remedies against the 
 corporation. 5 
 
 1 Jerman v. Benton, 79 Mo. 148. 
 
 a Booth v. Campbell, 37 Md. 522. 
 
 3 Davidson v. Rankin, 34 Cal. 503; 
 Hyman v. Coleman, 82 Cal. 650 ; 
 Lindsay v. Hyatt, 4 Edw. Ch. (N. Y.) 
 97; compare Allibone v. Hager, 46 
 Pa. St. 48. See, also, Terry v. Mc- 
 Lure, 103 U. S. 442; Carroll v. Green, 
 92 U. S. 509. But see Mitchell v. 
 Beckman, 64 Cal. 117 ; Hawkins v. 
 Furnace Co., 40 O. St. 507; Young- 
 love v. Lime Co., 49 O. St. 663. 
 
 * Baker v. Atlas Bank, 9 Mete. 
 182. 
 
 5 Longley v. Little, 26 Me. 162. 
 See Handy o. Draper, 89 N. Y. 334: 
 Kilton Warren Co. v. Prov. Tool Co., 
 
 732 
 
 22 R. I. 605. Where a statute enacts 
 that when "a corporation has un- 
 lawfully made a division of its prop- 
 erty, or has property which cannot 
 be attached or is not by law attach- 
 able, any judgment creditor may file 
 a bill in equity" to obtain the satis- 
 faction of his debt from such prop- 
 erty, the right of action conferred 
 does not accrue until the return of 
 execution unsatisfied; and not till 
 then does the statute of limitations 
 begin to run. Taylor v. Bowker, 111 
 U. S. 110. 
 
 Wben a bank charter contains 
 provision making shareholders lia- 
 ble for the " ultimate redemption of
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 737. 
 
 § 737. Where the suit against the shareholder is brought 
 to enforce his statutory liability, and a judgment Effectof 
 on the claim of the creditor has been obtained judgment 
 against the corporation, it is held in some cases that corpora- 
 the shareholder may contest the suit as being based tlon ' 
 on a debt not due from the corporation, thus virtually having 
 the whole matter retried, and compelling the creditor to prove 
 again his original right to recover against the corporation. 1 
 But the weight of authority is, perhaps, in favor of the view 
 that judgment against the corporation can, in a suit by cred- 
 itors to enforce the statutory liability of shareholders, be im- 
 peached by a shareholder only on grounds of collusion or lack 
 of jurisdiction in the court rendering it. 2 This view seems at 
 least well established when the liability sought to be enforced 
 is not statutory, but merely that attaching to shareholders on 
 
 the bills, 1 ' the liability of the share- 
 holders arises when the bank refuses 
 to redeem or becomes notoriously 
 insolvent, and from that time the 
 statute of limitations runs in favor 
 of the shareholders. Terry v. Tub- 
 man, 92 U. S. 156. See Godfrey v. 
 Terry, 97 U. S. 171; Long v. Bank 
 of Yanceyville, 90 N. C. 405. 
 
 When, however, the statute re- 
 quires suit within a certain time to 
 be begun against the shareholder, 
 that time is not extended by the 
 recovery of judgment against the 
 corporation. Stilphen ». Ware, 45 
 Cal. 110. This liability is upon an 
 implied not au express contract 
 within the meaning of a statute of 
 limitations. McDonald v. Thomp- 
 son, 184 U. S. 71. 
 
 1 Union Bank v. Wando Mfg., etc., 
 Co., 17 S. C. 339; Strong v. Wheaton, 
 38 Barb. 616; MacMahon v. Macy, 51 
 N. Y. 155; Miller c. White, 50 N. Y. 
 137; Whitman v. Cox, 26 Me. 335; 
 Heard v. Sibley, 52 Ga. 310. See Mer- 
 rill ». Shaw, 38 Me. 267; Trippe v. 
 Huncheon, 82 Ind. 307; Neilson v. 
 Crawford, 52 Cal. 248. Directly op 
 posed to this view are Holyoke Bank 
 
 v. Goodman Paper Mfg. Co., 9 Cush. 
 576; Farnum v. Ballard Vale Ma- 
 chine Shop, 12 Cush. 507; Robbins v. 
 Justices, 12 Gray, 225, which hold 
 that when a shareholder, whom cred- 
 itors intend to hold individually, is 
 required to be summoned in the suit 
 against the corporation, he cannot 
 dispute the merits of the claim 
 against it. 
 
 2 Milliken u. Whitehouse, 49 Me. 
 527 ; Barron v. Paine, 83 Me. 312; 
 Wilson v. Pittsburg, etc., Coal Co., 
 43 Pa. St. 424; Donworth v. Cool- 
 baugh, 5 Iowa, 300; Slee v. Bloom, 
 20 Johns. (N. Y.)669; Lowry v. Par- 
 sons, 52 Ga. 357; Oswald v. Times Co., 
 65 Minn. 249; Holland v. Iron Co., ib. 
 324; Nichols v. Stevens, 123 Mo. 96; 
 Ball v. Reese, 58 Kas. 614. See Black 
 v. Womar, 100 111. 328; Manufactur- 
 ing Co. v. Bradley, 105 U. S. 175; 
 Singer ». Given, 61 Iowa, 93. In such 
 case judgment against the corpora- 
 tion is prima facie evidence against 
 the shareholder according to Grund 
 v. Tucker, 5 Kans. 70; Schaeffer v. 
 Missouri Home Ins. Co., 46 Mo. 248; 
 Hoagland v. Bell, 36 Barb. 57. 
 
 733
 
 § 738.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 account of unpaid subscriptions or corporate property improp- 
 erly received by them. 1 
 
 § 738. In a suit brought by a creditor against a shareholder 
 share- either for unpaid subscriptions, or on account of 
 
 bolder can- his statutory liability, the shareholder cannot deny 
 corporate the legal existence of the corporation. 2 If the cor- 
 existence. p 0r ation is illegally or irregularly formed, very 
 likely there will be all the more reason and justice in holding 
 persons who purport to be shareholders therein to their full 
 liability. 3 And, although where the capital stock is fixed at 
 
 1 Wetherbee v. Baker, 35 N. J. Eq. 
 501; Bisset v. Kentucky River Nav. 
 Co., 15 Fed. Rep. 353; Clapp v. Peter- 
 son, 104 111. 26; Glenn v. Williams, 
 60 Md. 93, 116; Tatum v. Rosenthal, 
 95 Cal. 129. Held prima facie evi- 
 dence in Hastings?;. Drew, 76 N. Y. 9; 
 Stevens v. Fox, 83 N. Y. 313. In a 
 suit to enforce the statutory liability 
 of shareholders, where the statute 
 provides that, on return of execution 
 against the corporation unsatisfied, 
 plaintiff may proceed against share- 
 holders, the action may be founded 
 on the judgment against the corpo- 
 ration. Guerney v. Moore, 131 Mo. 
 650. 
 
 2 Casey v. Galli, 94 U. S. 673; Eaton 
 v. Aspinwall, 19 N. Y. 119; Hickling 
 v. Wilson, 104 111. 54; Hause v. Mann- 
 heimer, 67 Minn. 194 ; Gardner v. 
 Minneapolis & St. L. Ry., 73 Minn. 
 517; Danbury & N. R. R. Co. v. Wil- 
 son, 22 Conn. 435 ; McFarlan v. Teuton 
 Ins. Co., 4Denio (N. Y.), 392; Eppes 
 v. Railroad Co., 35 Ala. 33; Beck v. 
 Henderson, 76 Ga. 361; Aultman v. 
 Waddle, 40 Kan. 195 ; Hughes v. Bank 
 of Somersett, 5 Litt. (Ky. ) 47; Tar 
 River Nav. Co. v. Neal, 3 Hawks 
 (N. C), 520; McHose v. Wheeler, 45 
 Pa. St. 32; Hammond v. Straus, 53 
 Md. 1 ; Slocum v. Providence Steam, 
 etc., Co., 10 R. I. 112; Wheelock v. 
 Kosl,77Ill. 29r.; Central Agricultural 
 Ass'n o. Alabama Gold Life Ins. Co., 
 
 734 
 
 70 Ala. 120; McDonnell v. Alabama 
 Gold Life Ins. Co., 85 Ala. 401; Na- 
 tional Com. B'k v. McDonnell, 92 
 Ala. 388 (the last five cases were ac- 
 tions brought by creditors to enforce 
 statutory liability); Ossipee Hosiery, 
 etc., Co. v. Canney, 54 N. H. 295; 
 Keyser v. Hitz, 2 Mackey (Dist. of 
 Col.), 473; Estate of Davis v. Wat- 
 kins, Rec'r, 56 Neb. 288. See §§ 145 
 et eeo., and § 537. 
 
 Shareholders, who form under a 
 special charter, whereby they render 
 themselves liable to creditors in an 
 amount equal to double the amount 
 of their stock, cannot escape by 
 pleading that the charter contra- 
 venes the state constitution. Mc- 
 Carthy v. Lavasche, 89 111. 270. As 
 against creditors suing for unpaid 
 subscriptions a shareholder cannot 
 deny the corporate existence, even 
 when a judgment of ouster has been 
 rendered. Rowland v. Meader Fur- 
 niture Co., 38 Ohio St. 269. 
 
 8 Thus a shareholder cannot de- 
 feat an action by the receiver of his 
 bank to recover the amount of a 
 note given for his stock, by showing 
 that he and other shareholders ille- 
 gally gave notes for stock instead of 
 paying cash, in fraud of the banking 
 laws. Farmers', etc., Bank v. Jenks, 
 7 Mete. 592. See, also, Abbott v. 
 Aspinwall, 26 Barb. 202. 
 
 Nor can a shareholder plead that
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 739. 
 
 a certain amount no action ordinarily lies against a shareholder 
 to enforce his subscription until the entire amount is sub- 
 scribed for, yet if the directors undertake to organize the com- 
 pany upon a partial subscription of the capital stock, and a 
 subscriber takes part in such organization, knowing that the 
 whole amount has not been taken, and attends corporate meet- 
 ings at which money is voted and contracts are made for pur- 
 chases, he will be estopped in a suit by a creditor from 
 pleading that the capital stock had never been fully subscribed 
 for. 1 
 
 § 739. On the other hand, persons who have contracted 
 with a de facto corporation as a corporation, cannot „ 
 
 J L . Nor can the 
 
 deny its corporate existence in order to charge its creditor 
 shareholders individually as partners. 2 But it is 
 held that when the enabling act under which a corporation is 
 formed provides that a substantial failure to comply with its 
 requirements shall render the shareholders individually liable, 
 ami the statute is not complied with, they are primarily liable, 
 and may be sued by a creditor before the corporate assets are 
 exhausted; and this, although the creditor has dealt with the 
 corporation as a corporation. 3 
 
 the corporate enterprise has been 
 abandoned, in an action brought 
 against him by a creditor. Bish v. 
 Bradford, 17 Ind. 490. 
 
 i Garling v. Baechtel, 41 Md. 305. 
 When sued upon his statutory lia- 
 bility a shareholder who has accepted 
 his certificate and received dividends, 
 cannot plead that the certificate was 
 issued before an increase of capital 
 stock was all paid in, although the 
 statute provided that no such in- 
 crease should be valid until it was 
 all paid in. Scott v. Demeese, 181 
 U. S. 202; cf. Lantry v. Wallace, 182 
 U. S. 536. 
 
 2 Stout v. Zulick, 48 N. J. L. 599; 
 Merchants', etc., Bank v. Stone, 38 
 Mich. 779; Am. Mirror Co. v. Bulk- 
 ley, 107 Mich. 447; Richards v. Min- 
 nesota Savings Bank, 75 Minn. 196; 
 Humphrey u. Mooney, 5 Colorado, 
 
 282; Second National Bank c. Hall, 
 35 Ohio St. 158; Stafford Nat. Bk. v. 
 Palmer, 47 Conn. 443; First Nat. Bk. 
 i\ Almy, 117 Mass. 476; Laflin, etc., 
 Powder Co. v. Sinsheimer, 46 Md. 315. 
 Sniders' Sons Co. v. Troy, 91 Ala. 224; 
 Cory v. Lee, 93 Ala. 468; Larned v. 
 Beal, 65 N. H. 184; Rutherford v. 
 Hill, 22 Oreg. 218; Boyington ». Van 
 Etten, 62 Ark. 63; Kleckner v. Turk, 
 45 Neb. 176. See Trowbridge v. 
 Scudder, 11 Cush. 83; New York 
 Iron Mine v. First Nat. Bk., 39 Mich. 
 644; Heald v. Owen, 79 Iowa, 23. 
 But see Johnson v. Corser, 34 Minn. 
 355, and compare Foster v. Moulton, 
 35 Minn. 458. See § 148. 
 
 3 Clegg v. Hamilton, etc., Grange 
 Co., 61 Iowa, 121; Marshall v. Har- 
 ris, 55 Iowa, 182; Kaiser v. Lawrence 
 Sav'gs Bk., 56 Iowa, 104; Eisfield v. 
 Kenworth, 50 Iowa, 389; Heuer v. 
 
 735
 
 § 740.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 Who are 
 
 sharehold 
 ers as to 
 
 creditors. 
 
 § 740. As evidently the most obvious plea which a defend- 
 ant can interpose, when sued either for unpaid sub- 
 scriptions or on account of statutory liability, is 
 that he is not a shareholder, it is important to de- 
 termine the circumstances or conditions which con- 
 stitute a person a shareholder as to creditors. 1 Where the 
 name of an individual appears on the stock book of a corpora- 
 tion as a shareholder, the prima facie presumption is that he 
 is the owner of stock, and in an action against him by or on 
 behalf of creditors, the burden of proving that he is not such 
 rests on him. 2 If, however, the defendant has never consented 
 
 Carmichael, 82 Iowa, 288; see Smith 
 v. Colorado Fire Ins. Co., 14 Fed. 
 Rep. 399; Lehman v. Knapp, 48 La. 
 Ann. 1148; Cincinnati C. Co. v. Bate, 
 9ii Ky. 356. In Bigelow v. Gregory, 
 73 111. 197, it is said that there is 
 a difference between corporations 
 formed under a general enabling act, 
 in this respect; that if the provisions 
 of an enabling act are not substan- 
 tially complied with, the would-be 
 corporators will be liable as partners. 
 Thus, shareholders have been held 
 liable as partners for contracts made 
 before the articles of incorporation 
 were filed. Garnett v. Richardson, 
 35 Ark. 145; Ferris v. Thaw, 72 Mo. 
 446. See Loverin v. McLaughlin, 161 
 111. 417; Creswell v. Oberly, 17 111. 
 App. 281; see §451, note. Compare 
 Curtis v. Tracy, 169 111. 233. Under 
 such circumstances shareholders 
 would certainly be liable as partners 
 to people dealing with them without 
 knowledge of their attempted incor- 
 poration. Guckert v. Hacke, 159 Pa. 
 St. 203; New York, etc., Bank v. 
 Crowell, 177 Pa. St. 313. Of course 
 persons who engage in business to- 
 gether without taking any steps to 
 incorporate themselves, will be lia- 
 ble as partners, though they have 
 regarded themselves as " stockhold- 
 ers." Faruum o. Patch, 60 N. II. 294. 
 736 
 
 And when persons deal as partners 
 through a common agent, and after- 
 wards become incorporated, but do 
 not change their style or manner of 
 doing business, they will be liable as 
 partners for debts contracted in the 
 business to persons who have had no 
 notice of their incorporation. Mar- 
 tin v. Fewell, 79 Mo. 401. 
 
 1 See Wilson v. Seligman, 143 U. S. 
 41. In general these conditions will 
 be the same as those which render a 
 person liable on his subscription to 
 the corporation. See §§ 510 et seq. 
 
 2 Turnbull v. Payson, 95 U. S. 418; 
 Iloagland v. Bell, 36 Barb. 57; Rock- 
 ville, etc., Turnpike Road v. Van Ness. 
 2 Cr. C. Ct. 449; Pittsburgh, W. and 
 R. R. R. Co. v. Applegate, 21 W. Va. 
 172; South Branch R'y Co. v. Long's 
 Adm., 43 W. Va. 131. See Stratton 
 v. Lyons, 53 Vt. 130. 
 
 A stockholder named in a cer- 
 tificate is liable as such unless he 
 promptly disavow the relation. Mc- 
 Ilose v. Wheeler, 45 Pa. St. 32. If 
 the certificate show the stock sub- 
 scribed for, but unpaid, it is conclu- 
 sive as to the liability of the holder 
 to this extent, that he cannot show 
 that the stock was subscribed for 
 by him as an agent of the company, 
 and that such as was owned by him 
 individually was fully paid up. Alii-
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 741 ' 
 
 to become a shareholder, or held himself out as such, or ac- 
 cepted a certificate, he may plead that his name was placed on 
 the books of the corporation without his authority 1 unless the 
 circumstances are such as affect him with notice of its having 
 been placed there. 2 If a person subscribes for shares, signs the 
 articles of association, acts as an officer, and appears as a share- 
 holder on the books, he will not, as against creditors, be per- 
 mitted to deny that he is such, although no certificate has ever 
 been issued to him. 3 And when sued by a creditor, mere ir- 
 regularities in becoming a shareholder will not avail the de- 
 fendant. 4 
 
 It has also been held that if a person makes a subscription 
 conditioned on an amendment to the charter being obtained 
 from the legislature, and subsequently the corporation is organ- 
 ized without obtaining the amendment, the defendant taking 
 no active part in its organization, he may be held as a share- 
 holder if he pays up a portion of his subscription, and, through 
 his clerk, takes a receipt wherein the corporation receipts for 
 " ten per cent of his stock in this bank." 5 
 
 § 741. One to whom shares have been transferred in pledge 
 or as collateral security for money loaned, but who 
 appears on the books of the corporation as the of shines 
 owner of the shares, is liable to creditors, or for security 6 ™ 1 
 their benefit as a shareholder. 6 For this the Fed- 
 
 bone v. Hager, 46 Pa. St. 48; com- 
 pare Chapman and Barber's case, 
 Law Rep. 3 Eq. 361. 
 
 »Mudgett v. Horrell, 33 Cal. 25; 
 see Matter of Reciprocity Bauk, 22 
 N. Y. 10, 17; Simmons v. Hill, 96 
 Mo. 679. 
 
 2 As, for instance, if defendant be- 
 comes cashier of a bank and acts as 
 such. Finn v. Brown, 142 U. S. 56. 
 
 3 Wheeler v. Millar, 90 N. Y. 353- 
 In general a certificate is not essential 
 to constitute a person a shareholder, 
 §511. 
 
 4 Holyoke Bank v. Goodman Paper 
 Mfg. Co., 9 Cush. 576; Burr v. Wil- 
 cox, 22 N. Y. 551. Compare Ex parte 
 Hennessy, 2 McNaghten & Gordon, 
 201; Blien v. Rand, 77 Minn. 110. 
 
 47 
 
 6 Lehman v. Warner, 61 Ala. 455; 
 See §§517-521, as to conditional sub- 
 scriptions. 
 
 e Nat. Bk. v. Case, 99 U. S. 628; 
 Pullman v. Upton, 96 U. S. 328; 
 Fouche v. Merchants' Nat. Bank, 110 
 Ga. 827; Adderly v. Storm, 6 Hill 
 (N. Y.), 624; Roosevelt v. Brown, 11 
 N. Y. 148; Holyoke Bnnk v. Burn- 
 ham, 11 Cush. 183; Magruder v. 
 Colston, 44 Md. 349; Crease v. Bab- 
 cock, 10 Mete. 525; Wheelock v. 
 Kost, 77 111. 296; Hale v. Walker, 31 
 Iowa, 344; Bowden v. Farmers', etc., 
 Bk., 1 Hughes, 307; Erskine v. Loe- 
 wenstein, 82 Mo. 301. Nat. Comm'l 
 Bk. v. McDonnell, 92 Ala. 388; Tut- 
 hill Spr'g Co. v. Smith, 90 Iowa f 
 331. Semble contra, McMahon v. 
 
 737
 
 § 742.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 eral Supreme Court say there are several reasons. " One is 
 that he is estopped from denying his liability by voluntarily 
 holding himself out to the public as the owner of the stock, 
 and his denial of ownership is inconsistent with the representa- 
 tions he has made ; another is, that by taking the legal title he 
 has released the former owner ; and a third is, that after hav- 
 ing taken the apparent ownership, and thus become entitled to 
 receive dividends, vote at elections, and enjoy all the privileges 
 of ownership, it would be inequitable to allow him to refuse 
 the responsibilities of a shareholder." ' 
 
 A mere pledgee of shares, however, who is not registered as 
 owner, and never receives dividends or exercises any of the 
 rights of a shareholder, is not liable as a shareholder to cred- 
 itors of the corporations. 2 Thus it is held by the Federal 
 Supreme Court that a pledgee of shares in the stock of a 
 national bank, who in good faith while the bank is not in 
 failing circumstances, takes the transfer in the name of an 
 irresponsible person, for the avowed purpose of avoiding lia- 
 bility as a shareholder, and who never exercises any rights of 
 a shareholder or receives any dividends, incurs no liability as 
 a shareholder to the creditors of the bank. The dividends were 
 paid to the pledgor, the real owner. 3 
 
 § 742. On the other hand, if a person is the real owner of 
 
 Macy, 51 N. Y. 155. So an executor 
 holding shares may be chargeable 
 with the individual liability of his 
 testator. Diven v. Duncan, 41 Barb. 
 520. Compare Rev. St., §5152. 
 
 i Nat. Bk. v. Case, 99 U. S. 628, 
 631. Compare Union Savings Ass'n 
 v. Seligman, 92 Mo. 635 (overruling 
 Griswold v. Seligman, 72 Mo. 110); 
 Fisber v. Seligman, 75 Mo. 13; Bray 
 v. Seligman, ib. 31; Burgess v. Selig- 
 man, 107 U. S. 20. In respect of 
 Federal courts following state deci- 
 sions, in construing a state statute, 
 see Flash v. Conn, 109 U. S. 371. 
 Brokers wbo purchase shares and 
 cause themselves to be registered on 
 the books of the company as sbare- 
 holders, are liable as shareholders, 
 although the sbares be purchased for 
 
 738 
 
 a customer. McKim v. Glenn, 66 
 Md. 479; see Kerr v. Urie, 86 Md. 72. 
 
 2 Anderson v. Phila. Warehouse 
 Co., Ill U. S. 479; Henkle v. Salem 
 Mfg. Co., 39 O. St. 547. A person 
 who receives a transfer of shares in a 
 national bank as security for debt, 
 and surrenders the certificates and 
 takes out new ones in his name de- 
 scribed as " pledgee " on the books 
 of the bank, and holds them still in 
 good faith as security, is not a share- 
 bolder as to creditors. Pauley v. 
 Loan, etc., Co., 165 TJ. S. 606. Cf. 
 Matteson v. Dent, 176 U. S. 521. 
 This case summarizes the law as to 
 liability of pledgees of stock, under 
 various circumstances, to creditors 
 of the corporation. 
 
 3 Anderson v. Philadelphia Ware- 
 
 i
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 745. 
 
 shares, and, as between himself and the apparent „ , 
 
 ' i » • • Real owner 
 
 holder, entitled to the profits thereof, it will not of shares 
 
 liable 
 
 avail him as a defence against creditors that the 
 shares did not stand in his name. 1 And thus a person cannot 
 escape liability as a shareholder by taking his shares in the 
 name of an infant. 2 
 
 § 743. Summing up, the rationale of the preceding deci- 
 sions may be said to be this. Any person who ap- Rationale 
 pears to be a shareholder, or any person who is ac- 
 tually entitled to the emoluments of shares in a corporation, 
 is liable as a shareholder to creditors. 3 
 
 § 744. When, after the insolvency of the corporation, suit 
 is brought bv or on behalf of creditors against „ , 
 
 ° J ... Fraud, 
 
 shareholders, either on their statutory liability or when no 
 
 (Icf G11C6 
 
 for unpaid subscriptions, the latter cannot success- 
 fully plead that they were induced to subscribe by fraudulent 
 misrepresentations on the part of the corporation or its officers 
 or agents. 4 Nor can he set up a counterclaim for money paid 
 for his stock. 5 
 
 § 745. It is in view of the right of shareholders to contri- 
 bution among themselves, that the English courts Releases 
 hold that directors cannot release shareholders from no defence - 
 liability, except in accordance with the provisions of the 
 deed of settlement. 6 But in America, it is recognized to be 
 the right of creditors that no shareholder shall be released 
 from his liability except in accordance with the constitution 
 
 house Co., Ill IT. S. 479. The court 
 said that the creditors of the bank 
 were put in no worse position by the 
 transfer thau they would have been 
 in had the shares remained in the 
 name of the pledgor. 
 
 1 See Burr v. Wilcox, 22 N. Y. 551; 
 Stover v. Flack, 30 N. Y. 64. 
 
 2 Roman v. Fry, 5 J. J. Marsh. 
 (Ky. ) 634. See, also, Cox's Case, 4 
 De G. J. & S. 53 ; Pugh & Sharman's 
 Case, L. R. 13 Eq. 566; Richardson's 
 Case, L. R. 19 Eq. 588. Compare 
 Maxwell's Case, 24 Beav. 321. 
 
 3 See § 749, as to colorable trans- 
 fers. 
 
 4 Ogilvie o. Knox Ins. Co., 22 How. 
 380; Upton v. Tribilcock, 91 U. S. 45; 
 Lantry v. Wallace, 182 U. S. 536; 
 Schaeffer v. Missouri Home Ins. Co., 
 46 Mo. 248; Upton v. Englehart, 3 
 Dill. 496; Turner v. Grangers' Life 
 Ins. Co., 65 Ga. 549; Bissell v. Heath, 
 98 Mich. 472. See Fouche v. Mer- 
 chants' Nat. Bank, 110 Ga. 827. See 
 § 525; compare Weber v. Fickey, 52 
 Md. 500. 
 
 5 Lantry v. Wallace, 182 U. S. 536. 
 
 6 See Directors, etc., v. Kisch, L. 
 R. 2 H. L. 99; Smith's Case, L. R. 2 
 Ch. 604. 
 
 739
 
 § 745.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XHI. 
 
 of the corporation. 1 " It must also be conceded that if the 
 company has, in fraud of its creditors, released subscribers to 
 its stock from the payment of their subscriptions, the release 
 is inoperative to protect those subscribers against claims of 
 the creditors. ... It has been settled by very numerous 
 decisions that the directors of a company are incompetent to 
 release an original subscriber to its capital stock, or to make 
 any arrangement with him by which the company, its cred- 
 itors or the state, shall lose any of the benefit of his subscrip- 
 tion. Every such arrangement is regarded in equity not 
 merely as ultra vires, but as a fraud upon the other share- 
 holders, upon the public, and upon the creditors of the com- 
 pany." 2 When a subscription payable in property is made 
 for shares, it is no defence to a suit by creditors against the 
 subscriber, that the corporation has returned the property and 
 the subscriber has released all claim to the shares. 3 
 
 1 Slee v. Bloom, 19 Johns. (N. Y.) 
 456; Eisenlord v. Oriental Ins. Co., 
 29 N. J. Eq. 437; Allen v. Mont- 
 gomery R. R. Co., 11 Ala. 437, 450; 
 Mann v. Cooke, 20 Conn. 178; Pey- 
 chaud v. Hood, 23 La. Ann. 732; 
 Putnam v. New Albany, 4 Biss. 365; 
 Bouton v. Dement, 123 111. 142; com- 
 pare Cooper v. Frederick, 9 Ala. 737 
 Thus, an unauthorized cancellation 
 of a subscription when the corpora- 
 tion is insolvent, does not as to 
 creditors release the subscriber 
 Rider v. Morrison, 54 Md. 429. See, 
 also, Ailing v. Wenzel, 133 111. 264 
 So the withdrawal of shareholders, 
 in pursuance of a resolution of the 
 directors in a probably insolvent 
 corporation to allow shareholders to 
 withdraw on payment of five per 
 cent, of their shares on which ninety 
 per cent, was unpaid, is void as to 
 creditors. Gill v. Balis, 72 Mo. 424. 
 A shareholder, however, who surren- 
 ders unpaid stock to a corporation is 
 not liable thereon to a creditor 
 whose claim accrues after the sur- 
 render. Johnson v. Lullman, 15 Mo. 
 
 740 
 
 App. 55; S. C, 88 Mo. 567; Erskine 
 v. Peck, 13 Mo. App. 280; compare 
 Carter v. Union Printing Co., 54 
 Ark. 576. 
 
 On the other hand, a majority of 
 shareholders cannot by a by-law im- 
 pose individual liability on share- 
 holders. Reid v. Eatonton M'f'g 
 Co., 40 Ga. 98. 
 
 2 Burke v. Smith, 16 Wall. 390, 
 394, per Strong, J. Where share- 
 holders were by statute individually 
 liable to the amount of the unpaid 
 balance on their subscriptions, for 
 corporate debts contracted during 
 their ownership of stock, and it was 
 provided that such liability should 
 continue for one year after a trans- 
 fer, it was held that a solvent corpo- 
 ration could not release a sharehold- 
 er so as to affect creditors, even in 
 consideratian of a payment by him 
 of an amount in excess of the calls 
 made or due at the time of his re- 
 lease. Vick v. La Rochelle, 57 Miss. 
 602. 
 
 8 Singer v. Given, 61 Iowa, 93. 
 
 But it is held that a shareholder
 
 CHAP. XIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 747. 
 
 § 746. A hona fide compromise between a shareholder and 
 the corporation has, however, been sustained. 1 And 
 if the company actually forfeits the shares for non- 
 payment of calls, creditors cannot hold the person 
 whose shares have been forfeited liable for the re- 
 maining instalments, unless the forfeiture was collusive. 3 
 
 § 747. Upon a transfer of shares made in accordance with 
 the constitution and by-laws of the corporation, the 
 liability of a shareholder to creditors ordinarily 
 ceases; 3 and the transferee succeeds to all the rights 
 and liabilities of the transferrer. 4 The transfer, 
 however, in order to free the transferrer from further 
 liability on account either of unpaid subscriptions or stat- 
 utory liability, must be absolute so that the transferee does 
 not become a trustee for the transferrer ; 5 and, moreover, must 
 be to a person capable of succeeding to all the liabilities of 
 the transferrer. Accordingly, a transfer to an infant leaves 
 the transferrer liable/' as does a transfer to the corporation or 
 its nominee; 7 for it is held that the person succeeding to the 
 
 Compro- 
 mises. 
 Forfeit- 
 ures. 
 
 Effect of 
 transfers 
 of shares. 
 Transfer 
 to corpo- 
 ration. 
 
 who surrenders unpaid shares to the 
 corporation is not liable thereon to 
 creditors whose claims accrue after 
 such surrender. Johnson v. Lull- 
 man, 88 Mo. 567. 
 
 1 New Albany v. Burke, 11 Wall. 
 90; New Haven Trust Co. v. Nelson, 
 73 Conn. 477. See Gelpke v. Blake. 
 19 Iowa, 263, 267; but compare Put- 
 nam v. New Albany, 4 Biss. 365. 
 
 2 Mills v. Stewart, 41 N. Y. 384; 
 Allen v. Montgomery, etc., R. R. Co., 
 11 Ala. 437. 
 
 8 Huddersfield Canal Co. v. Buck- 
 ley, 7 T. R. 36; Cole v. Ryan, 52 
 Barb. 168; Tucker v. Gilman, 121 
 N. Y. 189. Except according to the 
 cases holding otherwise in regard to 
 statutory liability. See § 718. 
 
 4 Hartford and N. H. R. R. Co. ». 
 Boorman, 12 Conn. 530. Transferee 
 is liable to creditors for unpaid sub- 
 scriptions. Webster ». Upton, 91 
 U. S. 65. See §§ 719, 720. 
 
 5 National Bank i\ Case, 99 U. S. 
 
 1628; Davis v. Stevens, 17 Blatchf. 
 j 259. Cf. Matteson v. Dent, 176 U. S. 
 I 521. To relieve a stockholder in a 
 ! manufacturing corporation from per- 
 j sonal statutory liability, his stock 
 i must have been transferred on the 
 books of the company, and such 
 transfer must have been made in 
 pursuance of an actual bona fide 
 sale, without any secret understand- 
 ing or trust in favor of the trans- 
 ferrer. Veiller v. Brown, 18 Hun, 
 571. 
 
 6 Symon's Case, L. R. 5 Ch. 298; 
 Weston's Case, ib. 614; Costello's 
 Case, L. R. 8 Eq. 504. See Reave- 
 ley's Case, 1 De G. & Sm. 520; S. C, 
 aff'd 1 Ha. & Tw. 168; Richardson's 
 Case, L. R. 19 Eq. 588. 
 
 7 Morgan's Case, 1 De G. & Sm. 
 750; Bennett's Case, 5 De G. M. & G. 
 284; Zulueta's Claim, L. R. 5 Ch. 
 444; Richmond's Exrs Case, 2 De G. 
 & Sm. 244; Ex parte Henderson, 19 
 Beav. 107; Daniell's Case, 22 Beav. 
 
 741
 
 § 748.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 Irregular 
 transfers. 
 
 liability of the transferrer must be one who succeeds to a per- 
 sonal liability distinct from and in addition to that of the 
 corporation ; some one who can assume the full liability of a 
 shareholder. 1 
 
 § 748. If a transfer is irregular, as, for instance, not re- 
 corded on the books of the company, when that 
 formality is required, the transferrer is not freed 
 from his liability; 2 though it does not follow that 
 no liability attaches to his transferee. 3 Creditors are entitled 
 to treat as shareholders all persons whose names appear on the 
 books of the corporation ; and until the name of a shareholder 
 is removed from those books, a creditor is justified in acting on 
 the assumption that that person is a shareholder. It has been 
 held, however, that when a person has done " all in his power " 
 to have his name removed from the company's books, he is 
 freed from liability, although, in fact, his name continues 
 there. 4 This decision seems of doubtful correctness. It is 
 
 43; Hunt's Case, ib. 55; Eyre's Case, 
 31 Beav. 177. But these are English 
 cases; and in England a corporation 
 cannot purchase its own shares. See 
 also cases in following note, and § 
 552. 
 
 1 Matter of Reciprocity Bank, 22 
 N. Y. 9. See Currier v. Lebanon 
 Slate Co., 56 N. H. 262. See § 134. 
 
 A person who is a creditor at the 
 time of the transfer to the corpora- 
 tion, may follow the property re- 
 ceived by the shareholder in ex- 
 change for his shares, and subject 
 it to the satisfaction of the full 
 amount of his claim. The defend- 
 ant may have equities over against 
 other shareholders; but this fact the 
 creditor need not heed. Clapp v. 
 Peterson, 104 111. 26. 
 
 2 Richmond v. Irons, 121 U. S. 27; 
 Matteson v. Dent, 176 U. S. 521; 
 Worrall v. Judson, 5 Barb. 210;Shel- 
 lington v. Rowland, 53 N". Y. 371 ; 
 Dane v. Young, 61 Me. 160; Fowler 
 ». Ludwig. 34 Me. 455; Cutting v. 
 Damerel, 23 Hun, 339; In re Bach- 
 
 742 
 
 man, 12 Nat. Bankr. Reg. 223; Plumb 
 v. Bank, 48 Kan. 484; Herri ck v. 
 Wardwell, 58 Oh. St. 294. Compare 
 Jones v. Dunn, 70 Ala. 164; O'Brien 
 o. Cummings, 13 Mo. App. 197. 
 
 3 "So far from its being necessary 
 to make a man a contributory, that 
 he should be modo et forma a mem- 
 ber according to the strict provisions 
 of the deed of settlement, that on 
 the contrary, if a man, by repre- 
 sentations that he is entitled to be 
 registered, becomes registered and 
 admitted de facto as a shareholder, 
 he is not at liberty as against those 
 who do not dispute his liability, to 
 refer to or insist on any invalidity 
 as a ground for not being treated as 
 a shareholder. So, if the directors 
 themselves do an irregular act, and 
 admit a man and treat him as a 
 shareholder, they are also bound." 
 Straffon's Exr's Case, 1 DeG. M. & 
 G. 576, 594, per Lord Chan. St. 
 Leonards. 
 
 4 Shortbridge v. Bosanquet, 16 
 Beav. 84. See Whitney v. Butler,
 
 CHAP. XIIII.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 749. 
 
 Transfers 
 in fraud 
 of credit- 
 ors. 
 
 submitted the shareholder did not do all he could to have his 
 name removed, for he could have appealed to the courts ; and 
 if in the mean time any one acted on the faith of his being a 
 shareholder, the loss should fall on the shareholder whom the 
 corporation represents, rather than on an innocent outsider. 1 
 
 § 749. When shares are not fully paid up and the corpora- 
 tion is in failing circumstances, it is the general 
 rule throughout the United States, that the holder 
 cannot validly transfer them to an irresponsible per- 
 son for the purpose of avoiding further liability 
 in regard to them. The right of transfer cannot be exercised 
 in defraud of creditors of the corporation. 2 A similar rule 
 applies to transfers of shares in the stock of a corporation 
 whose shareholders are by statute rendered personally liable to 
 creditors. 3 
 
 The English cases, on the other hand, hold that a share- 
 holder may transfer his shares to an irresponsible person for 
 the sole purpose of freeing himself from further liability on 
 them ; and, provided the transfer be absolute, so that, as be- 
 tween transferrer and transferee, the latter does not hold the 
 
 118 U. S. 655; Matteson v. Dent, 176 
 U. S. 521; Cox v. Elmendorf, 97 
 Tenn. 518; Nation's Case, L. R. 3 
 Eq. 77; Fyfe's Case, L. R. 4 Ch. 768; 
 Ward & Garfit's Case, L. R. 4 Eq. 
 188. 
 
 1 See § 525. 
 
 2 Dauchy v. Brown, 24 Vt. 197; 
 Nathan v. Whitlock, 9 Paige (N. Y.), 
 152; Marcy v. Clark, 17 Mass. 330; 
 Rider v. Morrison, 54 Md. 429; Gaff 
 v. Flesher, 33 Ohio St. 107; Nat. Car- 
 riage Mfg. Co. v. Story, etc., Co., Ill 
 Cal. 531; Burt v. Real Est. Exch., 
 175 Pa. St. 619. See Angell and 
 Ames on Corp., § 535; 2 N. Y. Rev. 
 Stat., 7th ed. 1482. 
 
 3 Bowden v. Johnson, 107 U. S. 
 251; Richmond v. Irons, 121 U. S. 
 27; Stuart v. Hayden, 169 U. S. 1; 
 Aultmann's Appeal, 98 Pa. St. 505; 
 McLaren v. Franciscus, 43 Mo. 452; 
 Provideut Saviugs Ins. v. Jackson 
 
 Place Skating, etc., Rink, 52 Mo. 
 557; Bowden v. Santos, 1 Hughes, 
 158; Magruder v. Colston, 44 Md. 
 349; Central Agricultural, etc., Ass'n 
 v. Alabama Gold Life Ins. Co., 70 
 Ala. 120. See Miller v. Great Repub- 
 lic Insurance Company, 50 Mo. 55. 
 
 Where a general banking law im- 
 posed on shareholders individual 
 liability while they continued such, 
 and for one year thereafter; and a 
 creditor of a bank made demand on 
 a shareholder for payment, and the 
 latter requested delay, promising not 
 to transfer his shares, but did secretly 
 and fraudulently transfer them, it 
 was held that the transfer was void 
 as against such creditor, although 
 his suit was brought more than one 
 year after it had taken place. Paine 
 v. Stewart, 33 Conn. 516. Compare 
 also Marr ». Bank of West Tennessee, 
 4 Lea (Tenn.), 578. 
 
 743
 
 § 750.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIII. 
 
 shares in trust for the former, the transferrer will be free 
 from further liability in respect of the shares. 1 The English 
 law does not recognize the doctrine that corporate funds are 
 held in trust for creditors as well as shareholders, and the 
 English decisions respecting the transfer of shares seem con- 
 sistent with the general English view of corporation law. 
 Provisions in English deeds of settlement are regarded as 
 existing for the security of shareholders; and creditors are 
 held to derive few rights directly from them. And so, in 
 regard to the " Winding-up Act," Lord Romilly says : " The 
 object of the Winding-up Act was only to settle the equities 
 between the partners in order that when the partnership was 
 wound up, they might obtain contribution from each other." 2 
 § 750. From what has been said of the relations between 
 Relation creditors and shareholders, it is plain that upon the 
 between insolvency or winding-up of a corporation, a cred- 
 hoiders and itor has a right to be paid the debt due him prior 
 whiiiing^up! to any of the rights of shareholders in respect of 
 Dividends. j-he corporate funds. 3 When a dividend, however, 
 has been duly declared from surplus profits, the capital of 
 the company being left entire, a shareholder is entitled to his 
 portion of the dividend in preference to the claims of creditors; 
 even though he may not call for it until the company has be- 
 
 1 Jessopp's Case. 2 De G. & J. 638; 
 De Pass's Case, 4 De G. & J. 544; 
 Harrison's Case, L. R. 6 Ch. 286; 
 King's Case, ib. 196; Master's Case, 
 L. R. 7 Ch. 292; Williams's Case, 1 
 Ch. Div. 576. In the following cases 
 the transfer was held merely color- 
 able, and the transferrer remained 
 liable: Chinnock'sCase, Johns. (Eng. 
 Ch.)714; Hyam's Case, 1 De G. F. 
 & J. 75; Costello's Case, 2 De G. F. 
 & J. 302; Budd's Case, 3 De G. F. 
 & J. 297; Ex parte Kintrea, L. R. 5 
 Ch. 95. 
 
 2 In re Philips, 18 Beav. 629; com- 
 pare, regarding the English view, 
 § 524. 
 
 3 Brewer v. Michigan Salt Ass'n, 
 58 Mich. 351; compare Banigan v. 
 Hard, 134 U. S. 291. Rights of 
 
 1U 
 
 creditors of the corporation are su- 
 perior as to corporate assets to the 
 rights of creditors of a stockholder, 
 though he own the concern. State 
 v. Commercial State Bank, 28 Neb. 
 677. Where a national bank is de- 
 clared in default by the comptroller, 
 and a sufficient f und is realized from 
 its assets to pay all claims against it, 
 and leave a surplus, interest should 
 be allowed on claims during the 
 period of administration, before ap- 
 propriating the surplus to the share- 
 holders. Chemical Nat. B'k r. Bailey, 
 12 Blatchf. 480. See, also, Hart's 
 Appeal, 96 Pa. St. 355; Lura ». Rob- 
 ertson, 6 Wall. 277; and compare 
 Cochran v. Ocean Dry Dock Co., 30 
 La. Ann. Pt. II. 1365.
 
 CHAP. XIH.] SHAREHOLDERS AND CREDITORS. 
 
 [§ 751 - 
 
 come insolvent. 1 For the moment a dividend is thus declared, 
 it becomes the property of the individual shareholders. 2 In a 
 controversy coming before the New York courts, the Erie Kail- 
 way had declared a dividend and deposited money to pay it 
 with D. S. & Co. Thereafter the company withdrew what re- 
 mained of such money ; and this subsequently passed with the 
 corporate property into the possession of a receiver of the road. 
 Application was made by a shareholder to compel the receiver 
 to pay him the amount of his dividend. It was held that the 
 fund deposited with D. S. & Co. should be regarded as specific- 
 ally appropriated for the payment of the dividend, and that the 
 shareholders acquired an equitable lien upon such fund to the 
 extent of the amounts to which they were respectively entitled ; 
 and that the lien followed the fund into the hands of the re- 
 ceiver. 3 
 
 §751. The dissolution of a corporation does not increase 
 the personal liability of shareholders as towards „ ,. 
 
 On clisscv 
 
 creditors, 4 nor make the former liable as partners, lution. 
 
 even as to debts contracted by the corporate agents 
 
 after the dissolution, provided there is nothing to show fraud 
 
 on their part, or an actual intention to transact business as 
 
 partners. 5 
 
 1 Le Roy v. Globe Insurance Co., 
 2 Edw. Ch. (N. Y.) 657. See Albany 
 Fertilizer Co. v. Arnold, 103 Ga. 145. 
 See § 708. 
 
 2 Van Dyck v. McQuade, 86 N. Y. 
 38; cf. Hunt, Rec'r, v. O'Shea, 69 N. 
 H. 600. 
 
 s In re Petition of Julius LeBlanc, 
 
 14 Hun, 8; S. C, aff'd 75 N. Y. 598. 
 
 ^Tarbell v. Page, 24 111. 46; Stearn 
 
 Stone Cutter Co. v. Scott, 157 Mo. 
 520. 
 
 5 Central City Savings B'k v. 
 Walker, 66 N. Y. 424. But they 
 will become chargeable as partners 
 if, knowing of the expiration of the 
 charter, they agree to continue busi- 
 ness and appoint one of their num- 
 ber as manager. National Bank v. 
 Landon, 45 N. Y. 410. 
 
 745
 
 § 752.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. 
 
 CHAPTER XIV. 
 
 LEGAL RELATIONS BETWEEN OFFICERS AND CREDIT- 
 ORS OF A CORPORATION. 
 
 Liability of officers acting on behalf 
 of their corporation, §§ 752, 753. 
 
 When the contract is ultra vires, 
 §754. 
 
 Officers' liability to outsiders for the 
 acts of other agents, § 755. 
 
 Responsibility of directors to cred- 
 itors, § 756. 
 
 For misapplication of the corporate 
 funds, § 757. 
 
 For neglect of duty, § 758. 
 
 Director's duties to creditors on the 
 insolvency of the corporation, 
 §§ 759, 760. 
 
 Statutory liability of officers to cred- 
 itors. Four classes, § 761. 
 
 First class, § 762. 
 
 Second class, § 763. 
 
 Third and fourth classes, §§ 764- 
 766. 
 
 Liability for failure to file annual 
 reports, §§ 767-771. 
 
 What debts are included in this lia- 
 bility, §§ 772, 773. 
 
 Liability for signing false reports, 
 §774. 
 
 Forms of action. Joinder of parties, 
 §775. 
 
 Liability of 
 officers 
 acting on 
 behalf of 
 their corpo- 
 ration. 
 
 § 752. Before entering on the discussion of the legal rela- 
 tions between the officers of a corporation and cred- 
 itors whose rights in respect of the corporate assets 
 have already accrued, it will be well to notice the 
 relations between officers acting on behalf of the cor- 
 poration and persons with whom they deal, whose 
 legal relations in respect of the corporate enterprise are first 
 occasioned by their transaction with the officers. 
 
 In contracting on behalf of a corporation, its officers owe to 
 the person with whom they contract usually no duties which 
 ordinary agents do not owe to persons with whom they con- 
 tract on behalf of their principals. The same degree of fair- 
 ness and good faith is to be observed by officers as is ordi- 
 narily required in the dealings between man and man. 1 And 
 
 1 See Edgington v. Fitzmaurice, 29 
 Ch. Div. 459. An officer who states 
 to a person about to sell goods 
 to the corporation that in his opin- 
 ion the corporation is solvent, will 
 not be liable for his misrepresen- 
 tation if honestly made, although 
 
 746 
 
 the corporation was insolvent at 
 the time. Searightu. Payne, 2 Tenn. 
 Ch. 175; but will be liable for fraud- 
 ulent misrepresentations. Phillips 
 v. AVortendyke, 31 Hun (N. Y.), 192. 
 The president of a corporation is 
 liable in damages for putting his
 
 CHAP. XIV.] 
 
 OFFICERS AND CREDITORS. 
 
 [§ 753. 
 
 in general the responsibility of corporate officers to outsiders 
 for whatever torts the former may commit would be regulated 
 by the rules applicable to the responsibility of ordinary agents 
 under similar circumstances. 1 Thus if, acting on behalf of 
 their corporation, officers commit a fraud or other palpable 
 wrong or tort, there would seem to be no reason why they 
 and their corporation might not be joined as defendants in the 
 same action by the injured person. 2 
 
 § 753. It may be stated as a general proposition, drawn 
 from the principles of the law of agency as applicable to 
 officers of corporations, that corporate officers contracting as 
 such in good faith will not be personally liable to the other 
 contracting party, if (1) the other party when contracting 
 knows or ought to know that the officers are acting on behalf 
 of their corporation, and (2) the officers have authority to 
 make the contract, and (3) the contract is made in such form 
 
 name to statements known to him to 
 be false, or to statements which he 
 had no reasonable ground to suppose 
 to be true. Trimble v. Reid, 97 Ky. 
 713. Cf. Prewitt v. Trimble, 92 Ky. 
 176. If directors knowingly issue 
 spurious stock and borrow money on 
 it as collateral, representing it to be 
 genuine, they are liable to the lender 
 in an action for deceit. Nat. Ex- 
 change Bank v. Sibley, 71 Ga. 726. 
 So directors issuing bonds falsely 
 purporting to be "first mortgage 
 bonds," are liable for the fraud to 
 an innocent purchaser who buys 
 from the agent in whose hands the 
 directors placed them for sale. 
 Clark v. Edgar, 84 Mo. 106. Direct- 
 ors of a bank are liable on insolvency 
 of the bank for false representations 
 made by the directors to the public 
 as to the bank's solvency, whereby 
 the depositor is induced to deposit. 
 Seale v. Baker, 70 Texas. 283; Kink- 
 ier v. Junica, 84 Tex. 116. It makes 
 no difference that the plaintiff was a 
 stockholder (last case). Compare 
 Hunnewell v. Duxbury, 154 Mass. 
 
 286; Miller v. Howard, 95 Tenn. 
 407; Townsend v. Williams, 117 N. 
 C. 330. 
 
 1 If the agent of a bank without 
 authority — either because the au- 
 thority has not been conferred by 
 the bank as a matter of fact, or be- 
 cause the bank has no power under 
 its charter to confer such authority 
 — pays away its money to the officer 
 of another bank, and the latter officer 
 knows that the agent has no author- 
 ity to pay the money, and that his 
 bank has no right to take it, he is 
 liable personally to the first bank for 
 the money, whether he has paid it 
 over to its own bank or not. Ameri- 
 can Nat. Bk. v. Wheelock, 45 N. Y. 
 Super. Ct. 205. 
 
 2 See Hewett v. Swift, 3 Allen, 420; 
 Campbell v. Portland Sugar Co., 62 
 Me. 552; In re Imperial Land Co., 
 L. R. 10 Eq. 298; Wright v. Wilcox, 
 19 Wend. 343; Suydam v. Moore, 8 
 Barb. 358; Phelps v. Wait, 30 N. Y. 
 78. But see Parsons v. Winchell, 5 
 Cush. 592. 
 
 747
 
 § 753.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. 
 
 as to bind the corporation, and (4) there are no circumstances 
 leading to the conclusion that the officers intended to make 
 themselves personally responsible. 1 In some states, however, 
 the liability of officers to persons with whom they contract on 
 behalf of their corporation, has been extended by statute. 2 
 
 1 Thus, a treasurer of a corpora- 
 tion, to whose order as such a uote 
 is made payable, and who indorses 
 the note " R. Beraan, Treasurer," 
 and negotiates it on behalf of the 
 corporation, is not personally liable 
 as indorser. Babeock u. Beman, 11 
 N. Y. 200. See, also, Hicks v. Hin.le, 
 9 Barb. 528; Farmers' at,d Mec. B'k 
 v. Colby, 64 Cal. 352; McCormick v. 
 Stockton R. R. Co., 130 Cal. 100. 
 But see contra the questionable case 
 of Heffner v. Brownell, 70 Iowa, 
 591. 
 
 If the covenants in the body of a 
 sealed instrument are expressed as if 
 made by a corporation directly with 
 the plaintiff, and in the instrument 
 the defendant is not named, but 
 signs, and, with his own seal, seals 
 it as president of the corporation, 
 and on their behalf, an action does 
 not lie on it against him individu- 
 ally. Hopkins v. Mehaffy, 11 S. & 
 R. (Pa.) 126. See, also, Randall v. 
 Van Vechten, 19 Johns. (N. Y.) 60; 
 Aggs v. Nicholson, 1 H. & N. 165. 
 The officers of a corporation de- 
 scribed themselves in a contract as 
 the president, vice-president, secre- 
 tary, treasurer, and directors of the 
 corporation, and covenanted on be- 
 half of " themselves and their suc- 
 cessors in office. 11 They signed and 
 sealed the contract without adding 
 their official titles, and the corpo- 
 rate seal was not attached. Held, 
 they were not liable personally. 
 Whitford v. Laidler, 94 N. Y. 145. 
 Compare City of Kansas v. Hannibal 
 and St. Jo. R. R. Co., 77 Mo. ISO. 
 
 But the directors of a joint stock 
 
 748 
 
 company will be liable if they exe- 
 cute a note in the following form: 
 " On demand, we jointly and sev- 
 erally promise to pay to H. or order, 
 the sum of £250, value received, for 
 and on behalf of the Wesleyan 
 Newspaper Association," " P. S., 
 J. W., Directors." For the word 
 "severally 11 is equivalent to "per- 
 sonally." Healey v. Story, 3 Exch. 
 3. Accord, Bradlee v. Boston Glass 
 Manufactory, 16 Pick. 347. See, also, 
 Brockway v. Allen, 17 Wend. 40. 
 A promissory note in the form ' I 
 promise to pay, 11 and signed by 
 "E., Pies, and Treas. C. Co., 11 is 
 the note of E., who is liable thereon, 
 and it is not competent to introduce 
 parol evidence to show that the par- 
 ties at the time understood the note 
 to be the note of the company. 
 Davis v. England, 141 Mass. 587. 
 See McClure v. Livermore, 78 Me. 
 390. So a draft accepted by " E. T. 
 L., Agent," may bind the acceptor 
 personally, where nothing further in 
 the draft appears to show that E. T. 
 L. did not intend to bind himself 
 personally. Slawson v. Loring, 5 
 Allen, 340. And persons who per- 
 sonally covenant in a deed, and exe- 
 cute it with their own signatures 
 and seals, will likely be held per- 
 sonally on the covenants; although, 
 from the general tenor of the deed, 
 it might appear reasonably probable 
 that they executed it as representa- 
 tives of a corporation. See Stinch- 
 field v. Little, 1 Me. 231; Trippets 
 v. Walker, 4 Mass. 595. 
 
 2 E. g., " Any officer of a corpora- 
 tion making, or professing to make
 
 CHAP. XIV.] 
 
 OFFICERS AND CREDITORS. 
 
 [§754 
 
 If corporate officers, on behalf of their corporation, entei 
 into a contract which they have no authority to make, yet if, 
 under the circumstances, by the operation of any rule of law, 1 
 the contract binds the corporation to the other contracting 
 party, the officers will not be personally liable to him, for he 
 has suffered no damage from the fact that in reality the con- 
 tract was unauthorized. If, however, officers make an unau- 
 thorized contract on behalf of their corporation, allowing the 
 other contracting party acting as a reasonable man to infer that 
 they have the requisite authority, and in consequence of their 
 lack of authority, the other party is unable to hold the corpo- 
 ration on the contract, what is their liability to him ? Here 
 distinctions must be drawn. The officers may have no author- 
 ity to contract either (1) because their superior officers or the 
 corporation has not authorized them to make the contract, or 
 (2) because the corporation itself has no power to make such a 
 contract, or (3) both of these reasons may unite. 
 
 § 754. In the first supposed case, the officers would be 
 liable, either on the ground of fraud, or implied 
 warrant}'' of the requisite authority. 2 In the third extract f s 
 supposed case there would usually be present suffi- ultra vires. 
 cient fraud or misrepresentation of fact on their part to ren- 
 der them liable. In the second case, where the corporate offi- 
 cers may have conceived themselves authorized to make the 
 contract, but the contract is ultra vires the corporation, as a 
 rule the officers acting in good faith would not be personally 
 liable ; because the powers of a corporation are matters of 
 
 any contract not in writing, in the 
 name of or in behalf of any corpo- 
 ration, of the value of one hundred 
 dollars or less, shall be liable as 
 surety for such corporation upon 
 such contract ; and may be sued 
 either with the corporation or sepa- 
 rately for a breach thereof." Bat- 
 tle's Rev. Stat, of N. C, p. 266, § 24. 
 
 » See §§ 193, 75. 
 
 2 Where two directors wrote to a 
 bank saying that they had author- 
 ized the manager of the company 
 to overdraw on the company's ac- 
 count, the directors themselves hav- 
 
 ing no authority to overdraw, it was 
 held that they impliedly warranted 
 that the manager had authority, and 
 were personally liable. Cherry v. 
 Colonial Bank, 38 L. J. P. C. 49; S. 
 C, L. R. 3 P. C. 24. See Jefts t». 
 York, 4 Cush. 371; S. C, 10 Cush. 
 392; Weare v. Oove, 44 N. H. 196. 
 Directors are personally liable when 
 they make a contract on behalf of the 
 corporation before sufficient stock 
 has been subscribed to authorize the 
 corporation (under a statute) to 
 begin business. Trust Co. v. Floyd, 
 47 O. St. 526. 
 
 749
 
 § 754. J THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. 
 
 law with knowledge of which persons dealing with it are 
 affected. 1 Accordingly, the correct rule seems as follows : if 
 officers contract as such with a person who acts in good faith, 
 believing them to be authorized to make the contract in ques- 
 tion, such contracting party cannot hold the officers personally 
 liable if, in order to make out his case, it is necessary for him 
 to base his claim against them on such honest though mis- 
 taken misrepresentation of the powers of the corporation as 
 arises by implication from their having executed the contract 
 in its behalf. 2 And even if the representations by the officers 
 of the powers of the corporation were express, nevertheless 
 such representations would be only as to matters of law pre- 
 sumably as much within the knowledge of the other contract- 
 ing party as of the officers of the company, and so if they were 
 honestly made and did not amount to a warranty, there would 
 still seem to be no sufficient reason for holding the officers 
 personally liable. Still, it is to be borne in mind that prob- 
 ably the contracting parties do not stand on equal footing in 
 regard to actual knowledge of the corporate powers; for the 
 person contracting with the officers as a matter of fact is very 
 likely ignorant of the scope of the corporate powers; with 
 which the officers are just as likely conversant. So it would 
 require but slight evidence in such cases to show fraud on the 
 part of the latter; and, indeed, the rule ignorcmtia legis nemi- 
 nem excusat has been relaxed as between persons who actually 
 
 1 Ellis v. Colmau, 25 Beav. 662; 
 Rashdall v. Ford, L. R. 2 Eq. 750; 
 Beattie v. Ebury, L. R. 7 Ch. 777. 
 Contra, Wilson v. Goodman, 4 Hare, 
 54; Richardson v. Williamson, L. H. 
 6 Q. B. 276; Weeks v. Propert, L. R. 
 8 C. P. 427. In the three last cases 
 the person contracting with the 
 officers had executed his side of the 
 contract, and would have been reme- 
 diless had the decision been the 
 other way. Still they seem to the 
 writer to be wrong in principle, and 
 to afford illustrations of hard cases 
 making bad law. See cases in next 
 note. 
 
 2 Abeles v. Cochrane, 22 Kans. 
 
 750 
 
 405; Humphrey v. Jones, 71 Mo. 
 62. 
 
 " If the defect of authority arises 
 from a want of legal capacity, and 
 if the parties act under a mutual 
 mistake of the law, and are both 
 equally well informed in regard to 
 the facts, so that the lender is not 
 misled by any word or act of the 
 agent, he would have no legal rem- 
 edy against the agent; not in as- 
 sumpsit, for it was not his contract; 
 not in tort, for he is chargeable with 
 no deceit." Jefts v. York, 10 Cush. 
 392, 395, per Shaw, C. J. Compare, 
 however, AVeare v. Gove, 44 N. H. 
 196.
 
 CHAP. XIV.] 
 
 OFFICERS AND CREDITORS. 
 
 [§ 755. 
 
 are very unequal in tbeir knowledge of the law. 1 Very likely, 
 moreover, if the contract were in such a form that an intention 
 on the part of the officers to bind themselves personally could 
 in any way be inferred, the fact that the contract was not with- 
 in the powers of the corporation might strengthen the presump- 
 tion that they intended to make themselves personally liable ; 
 since otherwise the contract would be invalid, a result which 
 cannot be presumed to have been intended by the parties. 2 
 
 § 755. An agent is not liable to third persons for the frauds 
 or other tortious acts or omissions of inferior agents, -.,_ 
 
 ° ' Officers' 
 
 although they may have been appointed by him. If liability to 
 the superior agent fails to use due care in selecting for the 
 sub-agents or servants, he will be liable to his prin- other° 
 cipal for damages resulting from their dishonesty or a s ents - 
 inefficienc} 7 ; but, should parties dealing with such sub-agents 
 or servants suffer injury, the maxim respondeat superior would 
 fix the liability therefor on the common principal and not on 
 the superior agent. 3 
 
 A similar rule applies to directors and other corporate 
 officers. Ordinarily, they would not be liable to outsiders for 
 the wrongful acts of agents of the corporation other than 
 themselves, unless they authorized the wrong, or in some way 
 participated in it, or knowingly derived benefit from it. 4 
 Accordingly, the New York Court of Appeals has held that 
 the facts that the name of a person was published as a trustee 
 of a corporation and a certificate of stock issued to him, were 
 not sufficient to warrant a verdict against him for a fraud 
 perpetrated by other trustees and agents of the corporation. 5 
 But should a director lend his name or influence in any man- 
 
 !See Wheeler v. Smith, 9 How. 
 55; Carrugi W.Atlantic Fire Ins. Co., 
 40 Ga. 135. 
 
 2 See Weare v. Gove, 44 N. H. 196. 
 
 3 Stone v. Cartwright, 6 Term Rep. 
 411; Bath v. Caton, 37 Mich. 199. 
 
 4 Scott v. Depeyster, 1 Edw. Ch. 
 (N. Y.) 513; Weir v. Barnett, 3 
 Excli. Div. 32; Lewis v. Montgom- 
 ery, 145 111. 30; Davenport v. New- 
 ton, 71 Vt. 11. 
 
 But where a person acts as the 
 president of a spurious bank, which 
 
 never had any legal organization, he 
 may be personally liable for deposits 
 lost through the mismanagement 
 and fraud of his associates. Hauser 
 v. Tate, 85 N. C. 81. A superior 
 officer directing a servant of the cor- 
 poration to commit a tort is liable to 
 the injured person. Peck v. Cooper, 
 112 111. 192. 
 
 5 Arthur v. Griswold, 55 N. Y. 
 400; Wakeman v. Dalley, 51 N. Y. 
 27; See Hume v. Commercial Bank, 
 9 Lea (Tenn.), 728. 
 
 751
 
 § 756.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. 
 
 § 756. 
 
 Responsi- 
 bility of 
 directors 
 to credit- 
 tors. 
 
 ner to promote the fraud of another agent of the company, he 
 would be liable to the persons injured, as by so doing he 
 would make the fraud his own ; * and for issuing false certifi- 
 cates of stock, officers of a corporation have been held liable 
 to assignees of the certificates who purchased them in good 
 faith.* 
 
 Coming now to the relations between directors and 
 creditors of the corporation — relations, that is, be- 
 tween directors and persons whose claims against 
 the corporation have already arisen — we shall find 
 the rules heretofore stated not always applicable. 
 To the extent of creditors' interests, corporate funds are held 
 in trust for creditors as well as shareholders. Consequently, 
 directors having in their charge funds on which creditors have 
 valid claims and equitable liens, but in the management of 
 which creditors have ordinarily no voice, hold a position of 
 trust towards creditors as well as shareholders ; and owe it 
 accordingly to creditors to protect their interests, as they owe 
 it to shareholders to protect the interests of the latter. 3 
 
 The only claim of creditors is to be paid what is due them, 
 and their main right is that the corporate funds shall not be 
 wasted, embezzled, or managed with reckless improvidence, 
 and that those funds shall not, to the injury of the creditors, 
 be applied to purposes manifestly beyond the objects of incor- 
 poration. It is, moreover, a duty owed by directors to cred- 
 itors to use reasonable care to keep the corporation solvent, a 
 duty qualified by the duty of directors towards shareholders 
 to use the corporate funds for the purposes of the corporate 
 
 1 Salmon r. Richardson, 30 Conn. 
 300; Morgan v. Skiddy, 62 N. Y. 
 319; Clarke v. Dickson, 5 Jur. X. S. 
 1029. Subordinate officers concerned 
 may be liable as well as their superi- 
 ors. Cullen r. Thomson, 6 L. T. N. 
 S. 870. 
 
 2 Bruff v. Mali, 36 X. Y. 200; see, 
 also, Shotwell v. Mali, 38 Barb. 445; 
 Cazeaux v. Mali, 25 Barb. 578; § 696; 
 but compare Peck v. Gurney, L. R. 
 6 H. L. 377. 
 
 3 Thomas v. Sweet, 37 Kan. 183; 
 Seale v. Baker, 70 Tex. 283; com- 
 
 752 
 
 pare Heywood v. Lincoln Lumber 
 Co., (54 Wis. 639; Sturges v. Knapp, 
 31 Vt. 1, 53; Baxter v. Moses, 77 
 Me. 465; Hurlbut v. Marshall, 62 
 Wis. 590. The managers and treas- 
 urer of a savings bank, when charged 
 with malfeasance by its receiver, are 
 to be regarded as trustees for depos- 
 itors, and the statute of limitations 
 applying to legal actions does not 
 apply. Williams v McKay, 40 N. J. 
 Eq. 189; Williams v. Reilly, 41 N. J. 
 Eq. 137.
 
 CHAP. XIV.] 
 
 OFFICERS AND CREDITORS. 
 
 [§ 757. 
 
 enterprise, and by the right of directors in so doing to incur 
 whatever risks may be reasonably necessary. 1 
 
 And, accordingly, directors will be liable to the persons for 
 whom they hold the funds of the corporation in trust, in the 
 number of whom creditors are to be included, if they commit 
 either a positive breach of trust by misapplying the corporate 
 funds, or a negative breach by grossly neglecting their duties. 2 
 
 § 757. In the first place, as to the liability of directors to 
 creditors for positive misapplication or mismanage- „ 
 
 , pi , For mi sap- 
 
 ment of the corporate funds : " All creditors have plication of 
 the right to look to it [the capital of the corpora- rate^unds. 
 tion] and to its faithful administration for the 
 payment of their debts .... and they have an interest in and 
 claim upon the fund set apart by law for their payment, and 
 may hold the directors responsible for its unfaithful distribu- 
 tion, or may follow it into the hands of the distributees who 
 hold it as volunteer recipients, having no rightful claim upon 
 it." 8 There is no doubt that creditors may follow corporate 
 
 1 See Bank of Mutual Redemption 
 v. Hill, 56 Me. 385. 
 
 2 Peun Bk. v. Hopkins, 17 Weekly 
 Notes (Pa. ), 49; Brockway Mfg Co., In 
 re, 89 Me. 121; see cases cited in fol- 
 lowing notes and text. But in such 
 suits judgment must first be had 
 .against the corporation, and unless 
 this is alleged the bill is demurrable. 
 Van Weel v. Winston, 115 U. S. 228; 
 Baxter v. Moses, 77 Me. 465. 
 
 According to some decisions, to 
 render directors liable to creditors, 
 they must have beeu guilty of some 
 fraudulent or malicious act. Fusz 
 v. Spaunhorst, 67 Mo. 256; Zinn v. 
 Mendel, 9 W. Va. 580; Minton v. 
 Stahlman, 96 Tenn. 98. Two special 
 term cases in "New York, both de- 
 cided by the same judge, go even 
 further, and hold that directors are 
 not liable to creditors even for wilful 
 and fraudulent mismanagement of 
 the corporate assets. Winter v. 
 Baker, 34 How. Pr. 183; Branch v. 
 Roberts, 50 Barb. 435. But the rea- 
 
 48 
 
 soning in these two cases is palpably 
 erroneous. Moreover, it is submit- 
 ted that every breach of trust on the 
 part of a trustee, whether it consist 
 in a positive misapplication of the 
 trust funds, or merely in wilful neg- 
 lect of the duties of the trust, will 
 be regarded as fraudulent by a court 
 of equity. And it is thought that 
 the weight of authority sustains the 
 proposition in the text. Compare 
 Lyman v. Bonney, 101 Mass. 562; S. 
 C, 118 Mass. 222. The position of 
 a treasurer is held to be different; 
 and that he, being a mere ministerial 
 officer having no control over corpo- 
 rate funds, or discretion in paying 
 them out, owes no duties to credit- 
 ors. Taylor v. Taylor, 74 Me. 582. 
 Still, semble, he would be liable to 
 creditors if he embezzled the funds, 
 and thereby rendered the corpora- 
 tion insolvent. See Brockway Mfg. 
 Co., In re, 89 Me. 121. 
 
 "Grata v. Redd, 4 B. Mon. (Ky.) 
 178, 196 per Ewing, C. J. This case 
 
 753
 
 § 757.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. 
 
 property into the hands of those who have wrongfully acquired 
 it ; ' and of this rule, it is not only a necessary consequent, 
 but, as it were, a necessary antecedent, that the directors 
 being the trustees, will, for their wrongful disposal of this 
 property, be personally liable to creditors. Whether a person 
 acquiring trust funds will be liable to account to the bene- 
 ficiary of the trust, will depend on the circumstances of their 
 acquisition. But the trustee will always be liable to his 
 beneficiary for their wrongful disposal. 2 
 
 Accordingly, the directors of a bank who, in order to sub- 
 serve their personal interests, accept in payment for stock, 
 securities not authorized to be taken, instead of cash, will be 
 personally liable to note-holders and other creditors for the 
 whole amount of the so-called paid-up capital. 3 Similarly, 
 if the charter of a bank require a certain portion of the capital 
 stock to be paid up in specie before the bank has authority to 
 issue bank notes, and the stock is subscribed, but the specie is 
 not paid, yet the directors nevertheless circulate bank notes, 
 " if the bank fail or become insolvent, the bill-holders and 
 creditors may proceed at once against the directors for a 
 breach of trust in so acting contrary to their duty under the 
 charter." 4 
 
 If a director of a bank withdraws a large amount of its 
 funds, giving no security, and uses them in his own business, 
 and in consequence thereof the bank becomes insolvent, he will 
 be liable to account to the creditors of the bank for the funds 
 so withdrawn. 5 But it would seem that directors are not liable 
 
 held directors liable to refund to the 
 creditors, dividends improperly re- 
 ceived by themselves. 
 
 1 See §§ 656, 657. And see in par- 
 ticular Union Nat. Bank v. Douglass, 
 1 McCrary, 86; Jones v. Arkansas 
 Mechanical Co., 38 Ark. IT. 
 
 2 Theassignees of an insolventbank 
 may recover damages from the di- 
 rectors for a fraudulent sale by them 
 to the bank of its own stock. Shultz 
 v. Christ man, 6 Mo. App. 338. In 
 Railway Co. v. Ailing, 99 U. S. 463, 
 it is said that directors represent cred- 
 itors. 
 
 754 
 
 3 Moses v. Ocoee Bank, 1 Lea 
 (Tenn. ), 398. 
 
 4 Schley v. Dixon, 24 Ga. 273, 277. 
 A receiver may in the interest of 
 creditors sue directors for such in- 
 juries as have accrued to the cred- 
 itors nt universi, through the unlaw- 
 ful management by the directors of 
 the corporate affairs. Raymond v. 
 Palmer, 35 La. Ann. 276. 
 
 5 Bank of St. Mary's v. St. John, 
 25 Ala. 566. See Brockway Mfg. Co., 
 In re, 89 Me. 121.
 
 CHAP. XIV.] 
 
 OFFICERS AND CREDITORS. 
 
 [§ 758. 
 
 to account to creditors for the profits they have made from the 
 use of the corporate funds for their personal advantage, although 
 they might be accountable to shareholders for such profits. 1 
 
 § 758. Through gross neglect of their duties, directors may 
 render themselves liable to creditors for the frauds 
 or other wrongful acts of officers and agents of the of°dut|. leCt 
 corporation other than themselves, by which cred- 
 itors have suffered injury. If it is the duty of directors to 
 supervise the actions of each other and of the other officers of 
 the corporation, and through gross neglect of duty on the part 
 of directors, the funds of the corporation are embezzled or 
 wasted by others, as they could not have been had the directors 
 attended to their duties, the delinquent directors will be lia- 
 ble to the persons to whom they owe the duty of supervising 
 the corporate affairs for the loss. This duty directors owe to 
 the corporation as the representative of the interests of all 
 persons in the corporate funds. If the corporation fails to 
 enforce it, or to sue for the damages which a breach of it has 
 occasioned, the shareholders may proceed against the directors. 2 
 Directors also owe this duty to creditors, since for them as 
 well as for shareholders the corporate funds are held in trust. 
 Consequently, if it can be shown that had it not been for the 
 gross negligence of directors, the wrongful acts of the other 
 officers could not have been committed, all the directors who 
 have been either dishonest or delinquent will be liable for the 
 consequences of such acts to creditors of the corporation who 
 are injured. 3 If, indeed, it should be held that the creditor 
 
 1 Lexington R. R. Co. v. Bridges, 7 
 B. Mon. (Ky.) 556. But see Thomas 
 v. Sweet, 37 Kan. 183. 
 
 2 See § 694. 
 
 3 Directors who misappropriate 
 corporate funds or through culpable 
 negligence allow other corporate 
 agents to do so, will be individually 
 liable to judgment creditors, whose 
 executions against the corporation 
 have been returned unsatisfied. Shea 
 v. Mabry, 1 Lea (Tenn. ), 319. See, 
 also, Maisch v. Saving Fund, 5 Phila. 
 30; Penn Bank v. Hopkins, 17 Weekly 
 Notes (Pa.), 49. When the guilty 
 
 directors control the corporation no 
 previous demand on the corporation 
 to sue need be alleged. lb. And 
 compare Robinson v. Smith, 3 Paige 
 (N. Y.), 222. 
 
 In an action against the directors 
 of an insolvent bank, the complaint 
 charged that bonds, specially de- 
 posited with the bank, were wrong- 
 fully taken by its officers, and by 
 them converted to the use of the 
 bank without authority from the 
 plaintiffs, and that the defendants 
 had, or by the most ordinary dili- 
 gence and investigation, could have 
 
 755
 
 § 759.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. 
 
 himself could not sue in the absence of some enabling statutory 
 provision, he could in case of the insolvency of the corporation 
 — the only case in which his interests ordinarily would have 
 been injured 1 — apply for the appointment of a receiver, whose 
 duty it would then be to sue the delinquent directors, and ap- 
 ply the moneys recovered to the discharge of the corporate in- 
 debtedness. 2 
 
 § 759. When a corporation becomes insolvent, the duty of its 
 directors towards its creditors becomes even stricter 
 and more imperative ; for, under such circumstances, 
 the rights of creditors are paramount, and it has be- 
 come probable that they will be somewhat damaged ; 
 and the plain duty of directors, who control the funds 
 from which corporate debts are paid, is to see that 
 the loss is as small as possible. Moreover, since, upon the in- 
 solvency of the corporation, the rights of unsecured creditors 
 are equal, it would seem to be improper, even in the absence 
 of a statute expressly forbidding it, for directors to make pref- 
 
 Di rectors' 
 duties to 
 creditors 
 on the in- 
 solvency 
 of the cor- 
 poration. 
 
 had ample notice of this. The com- 
 plaint was held good; the following 
 being in substance the views taken 
 by the court. The defendants could 
 not rely on any lack of privity be- 
 tween them and the plaintiffs. In 
 a certain sense, directors are the 
 bank, and the public has a right to 
 expect reasonable care from them. 
 They owe this duty to creditors of 
 the bank. It is the duty of directors 
 to use ordinary diligence to acquaint 
 themselves with the business of the 
 bank, and whatever information 
 might be acquired by ordinary atten- 
 tion to their duties, they may, in 
 controversies with persons doing 
 business with the bank, be presumed 
 to have. They canuot then be heard 
 to say that they were not apprised 
 of facts showu to exist by the books 
 of the bank, and which would have 
 come to their knowledge except for 
 their gross neglect. It is not neces- 
 sary in many cases to show that the 
 
 756 
 
 directors actually had their attention 
 called to the mismanagement of the 
 bank's affairs or to the misconduct 
 of the subordinate officers. It is 
 sufficient to show that the evidence 
 of such mismanagement or miscon- 
 duct was sufficient to apprise them 
 of it, had they not been grossly neg- 
 ligent or wilfully careless in the dis- 
 charge of their duties. United 
 Society of Shakers v. Underwood, 9 
 Bush (Ky.), C09. Cf. Miller v. How- 
 ard, 95 Tenn. 407. 
 
 1 Compare Frost Mfg. Co. v. Foster, 
 76 Iowa, 535; Houston v. Thornton, 
 122 N. C. 365. 
 
 For the question of the liability of 
 directors for the death of a person 
 killed by an explosion of powder 
 kept by the corporation in violation 
 of law, see Cameron v. Kenyon-Con- 
 nell Com. Co., 22 Mont. 312. 
 
 2 Compare Attorney-General v. 
 Guardian Mut. Insurance Co., 77 N. 
 Y. 272.
 
 CHAP. XIV.] 
 
 OFFICERS AND CREDITORS. 
 
 [§ 759. 
 
 erences among them. 1 And certainly, when directors are 
 themselves among the number of corporate creditors, they can- 
 not make use of their official position in order to secure to 
 themselves advantages over other creditors in the settlement of 
 the corporate indebtedness. Any such unfair transaction will 
 be set aside at the suit of creditors ; and directors will be com- 
 pelled to account for the ratable benefit of all the creditors, for 
 whatever corporate assets they have taken possession of or as- 
 signed to themselves, after the insolvency of the corporation, for 
 the securing 1 of their own claims. 2 Nor will directors in defence 
 
 1 Richards v. New Hampshire Ins. 
 Co., 43 N. H. 263; Haywood v. Lin- 
 coln Lumber Co., 64 Wis. 639. See 
 Casserly v. Manners, 9 Hun, 695; 
 Atlas Tack Co. v. Exchange Bank, 
 111 Ga. 713. Also § 668. 
 
 2 Olney y. Conancut Land Co., 16 R. 
 I. 597; Sweeny v. Sugar Co., 30 W. 
 Va. 443; Kersteter's Appeal, 149 Pa. 
 St. 148; Hopkins & Johnson's Ap- 
 peal, 90 Pa. St. 69; Smiths. Putnam, 
 61 N. H. 632; Wilkinsons. Bauerle, 
 41 N. J. Eq. 635; Haywood v. Lum- 
 ber Co., 64 Wis. 639; Bradley v. Far- 
 well, 1 Holmes, 433; Corbett v. 
 Woodward, 5 Sawyer, 403; Stout v. 
 Yaeger Milling Co., 13 Fed. Rep. 802; 
 Gaslight Imp't Co. v. Terrell, L. R. 
 10 Eq. 168. See Throop v. Hatch 
 Li th. Co., 125 N. Y. 530; Kingsley v. 
 First Nat. Bk., 31 Hun (X. Y.), 329; 
 Gottlieb v. Miller, 154 111. 44; Love 
 Mfg. Co. v. Mfg. Co., 74 Miss. 290; 
 King v. Woolridge, 78 Miss. 179; 
 Gibson v. Trowbridge Furniture Co., 
 96 Ala. 357; Goodyear Rubber Co. 
 v. George D. Scott Co., ib. 439; 
 Corey v. Wadsworth, 99 Ala. 68. 
 (These three cases limited in O'Bear 
 Jewelry Co. v. Volfer, 106 Ala. 205. ) 
 Sutton Mfg. Co. v. Hutchinson, 24 
 U. S. App. 145; Bos worth v. Bk., 
 ib. 413; Mercantile Co. v. Co-opera- 
 tive Ins., 12 Utah, 213; Hays v. citi- 
 zens' Bk., 51 Kan. 535; Bridge Co. 
 v. Fowler, 55 Kan. 17; Plow Co. v. 
 
 Rude, 60 Kas. 145; Ingwersen w. 
 Edgecombe, 42 Neb. 740; Wyman ». 
 Williams, 52 Neb. 833; S. C, 53 Neb. 
 670; Stough v. Ponca Mill Co., 54 
 Neb. 500; Seeds Dry Plate Co. v. 
 Heyer Photo-Supply Co., 57 Neb. 214; 
 cf. Nebraska Nat. B'k v. Clark, 58 
 Neb. 183; Reynolds v. Smith, 60 Neb. 
 197; Hill v. Lumber Co., 113 N. C. 
 173; Smith v. Bradt Printing Co., 97 
 Tenn. 351; Taylor u. Mitchell, 80 
 Minn. 493. See Mary Lee Coal, etc., 
 Co. v. Knox, 110 Ala. 632; Mont- 
 gomery v. Phillips, 53 N. J. Eq. 203. 
 Cf. Duncomb v. N. Y., Housatonic, 
 etc., R. R. Co., 88 N. Y. 1; S. C, 84 
 N. Y. 190; Larrabee v. Franklin Bk., 
 114 Mo. 592; Bassett o. Monte Christo 
 Mining Company, 15 Nev. 293; Sav- 
 age v. Miller, 56 N. J. Eq. 432; Taylor 
 v. Gray, 59 N. J. Eq. 621; Clark v. 
 Colton, 91 M'd, 195; Hill v. Standard 
 Tel. Co., 198 Pa. St. 446; Symonds v. 
 Lewis, 94 Me. 501 ; § 632. 
 
 Contra, Planters' Bank v. Whittle, 
 78 Va. 737; Foster v. Mullanphy 
 Planing Mill Co., 16 Mo. App. 150; 
 Garrett v. Burlington Plow Co., 70 
 Iowa, 697; Rollins v. Shaver Wagon 
 Co., 80 Iowa, 380; Warfield r. Mar- 
 shall County Canning Co.. 72 Iowa, 
 666; Foster ». Mullanphy Planing 
 Mill Co., 92 Mo. 79; Rockford Gro- 
 cery Co. v. Standard Grocery Co., 175 
 111. 89; South Bend Steel Plow Co. 
 y. George C. Cribb Co., 97 Wis. 230; 
 757
 
 § 7(30.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. 
 
 be allowed to plead their own ignorance of the corporate in- 
 solvency. 1 Moreover, when a corporation has been adjudged 
 bankrupt or has become insolvent, if its officers buy up claims 
 against it at a discount, in a settlement of their own statutory 
 liability (as shareholders), they will not be allowed more than 
 they actually paid for such claims. 3 
 
 § 760. In Drury v. Cross, 3 a sale was made of the entire 
 property of a railroad company, at a price far below its value, 
 under a scheme between the directors and the purchasers, by 
 which the former escaped liability on certain endorsements 
 made by them for the corporation. At the suit of other cred- 
 itors the sale was set aside, and the purchasers were held as 
 trustees for the complaining creditors for the full value of the 
 property purchased, less a sum which the purchasers had actu- 
 ally paid for a lien claim, which they had bought at a large 
 discount. Interest on the balance from the time of the pur- 
 chase to the date of the final decree was also added. So, in 
 
 Corey v. Wadswortli, 118 Ala. 488; 
 Anderson v. Bullock County Bank, 
 122 Ala. 275. It is held that the mere 
 fact that a debt of the corporation 
 is guaranteed by certain directors, 
 does not invalidate a pi'eference given 
 as to that debt. Blair v. Illinois 
 Steel Co., 159 111. 350; Henderson 
 v. Indiana T. Co., 143 Ind. 561; 
 Levering v. Bimel, 146 Ind. 545; 
 Symonds v. Lewis, 94 Me. 401; com- 
 pare Allen v. Hotel Co., 95 Tenn. 
 480, contra, Tillson v. Downing, 45 
 Neb. 549. Directors may include 
 themselves among preferred credit- 
 ors, but the burden is on them to 
 show that the transaction is fair. 
 Schufeldt v. Smith, 131 Mo. 280; 
 Butler v. Land Co., 139 Mo. 467; 
 State ex rel. Grimm v. Rubber Mfg. 
 Co., 149 Mo. 181; Mueller v. Fire Clay 
 Co., 183 Pa. St. 450; Cowan v. Plate 
 Glass Co., 184 Pa. St. 1; Creighton & 
 Birch v. Stanton M'f'g Co., 191 Pa. 
 St. 231. A majority of the directors 
 cannot prefer a creditor corporation 
 in which they are stockholders by 
 
 conveying all the assets of the insol- 
 vent corporation to it. German Nat. 
 Bank v. First Nat. Bank, 55 Neb. 86. 
 
 1 Corbett v. Woodward, 5 Sawyer, 
 403; Clay v. Towle, 78 Me. 86; Bou- 
 ney v. Tilley, 109 Cal. 346; Lowry 
 Banking Co. v. Empire, etc., Co., 91 
 Ga. 624; Clark v. Colton, 91 Md. 195. 
 But see Hayes v. Beardsley, 136 N. 
 Y. 299; Finch M'f'g Co. v. Sterling, 
 187 Pa. St. 596. 
 
 In Tool Co. v. Howe, 157 U. S. 
 313, a mortgage was held valid, 
 which was sanctioned by the share- 
 holders, and was given to directors 
 to induce a continuance of credit, 
 the corporation being a going con- 
 cern, though not possessed of assets 
 equal to its indebtedness; there be- 
 ing no intention to defraud other 
 creditors. 
 
 2 Bulkley v. Whitcomb, 121 N. Y. 
 107; Holland v. Heyman, 00 Ga. 174; 
 Lingle v. National Ins. Co., 45 Mo. 
 109. But see Craig's Appeal, 92 Pa. 
 St. 396. 
 
 8 7 Wall. 299.
 
 CHAP. XIV.] 
 
 OFFICERS AND CREDITORS. 
 
 [§ 762. 
 
 Jackson v. Ludeling, 1 where the directors and local managers 
 of an embarrassed railroad company holding a small portion of 
 its bonds obtained a hasty order of sale, and sold out the road, 
 grossly disregarding the interests of the other bondholders, the 
 sale was set aside. 2 
 
 Directors and other officers, however, who are also cred- 
 itors, are of course not excluded, because officers, from sharing 
 ratably with the other creditors of their corporation. 3 
 
 §761. Throughout the states of the Union many statutes 
 have been passed regulating the relations between 
 directors and creditors of corporations. The major- liability 
 ity of them seem to proceed on the theory that cor- tocredftora. 
 porate funds are trust funds to be managed with due F , onv 
 
 i ° classes. 
 
 regard for the security of creditors as well as the 
 profit of shareholders ; and that in the management of these 
 funds directors are charged with duties to creditors. These 
 statutes may be divided into four classes : the first providing 
 for certain liability of the directors in contract ; the second for 
 certain liability of the directors in tort, beyond their common 
 law or equitable liability ; the third for certain acts to be per- 
 formed by the directors ; and the fourth forbidding certain acts 
 absolutely or under certain circumstances. By violating stat- 
 utes of the third and fourth classes, directors either (1) incur 
 specific pecuniary penalties, (2) render themselves individually 
 responsible for certain corporate liabilities, or (3) commit a mis- 
 demeanor or felony. 
 
 § 762. The first class of statutes 4 seem to apply rather to 
 those relations between directors and persons deal- 
 ing with them which arise directly from the trans- 
 
 1 21 Wall. 616. 
 
 2 See, also, James v. Railroad Co., 
 6 Wall. 752. 
 
 8 Bristol Milling, etc., Co. v. Pro- 
 basco, 64 Ind. 406. See Christian's 
 Appeal, 102 Pa. St. 184; Hoover 
 Mercantile Co. v. Evans Mining Co., 
 193 Pa. St. 28. 
 
 4 Illustrations: " The officers and 
 stockholders of every corporation or 
 association for banking purposes, 
 issuing bank notes or paper credits 
 
 to circulate as money, shall be indi- 
 vidually liable for all debts con- 
 tracted during the term of their 
 being officers or shareholders of such 
 corporation or association, equally 
 and ratably to the extent of their 
 respective shares of stock in such 
 corporation or association." Cons, 
 of Mich., art. xv. § 3. 
 
 "The trustees of a corporation 
 created for a purpose other than 
 profit, shall be personally liable for 
 
 759
 
 § 764.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. 
 
 action occasioning the claims of such person against the corpo- 
 ration, than to the relations with such persons after the latter 
 have become creditors of the corporation. Statutes of this 
 class create a liability arising through no fault of the directors, 
 but sounding in contract ; and to repeal one of them so as to 
 affect the relations between creditors whose debts have already 
 arisen, and directors holding office at the time of the repeal 
 would conflict with the Federal constitution. 1 Many of them 
 create a liability of directors as shareholders, and indeed seem 
 hardly applicable to directors as such. 
 
 § 763. A single instance of statutes of the second class will 
 Second suffice : " The directors or trustees of corporations 
 c]ass - .... shall be jointly and severally liable to the 
 
 creditors and shareholders for all moneys embezzled or mis- 
 appropriated by the officers of such corporations .... during 
 the term of office of such directors or trustees." 2 This provi- 
 sion, which creates a liability on the part of directors for wrong- 
 ful acts of other corporate agents far in excess of any common 
 law or equitable liability, apparently proceeds on the idea that 
 it is a duty, for the non-fulfillment of which a director would 
 be liable to all persons interested, to see that the corporate 
 funds are not misapplied. In fact, it makes him an insurer 
 against their misapplication. And a director held to the 
 liability imposed by a statute of this nature, himself innocent 
 of all misfeasance, would seem entitled to contribution from 
 his co-directors. 3 
 
 § 764. The statutes of the third and fourth classes, wmether 
 
 all debts of the corporation by them 
 contracted.' 1 Rev. Stat, of Ohio, 
 § 3261. 
 
 1 See Hawthorne v. Calef, 2 Wall. 
 10; Corning v. McCullough, 1 N. Y. 
 47. 
 
 2 Cons, of California, 1870, art. 
 xii. § 3. See Winchester v. Mabury, 
 122 Cal. 522, which holds that under 
 this provision the only proper rem- 
 edy is a bill in equity on behalf of 
 all the creditors, and not an action 
 at law on behalf of an individual 
 creditor. 
 
 760 
 
 3 See Ash hurst v. Mason, L. R. 20 
 Eq. 225. Where by statute direct- 
 ors are liable "to the creditors and 
 stockholders of said corporations for 
 any loss which may he sustained in 
 consequence of any incompetency, 
 unfaithfulness, or remissness in the 
 discharge of their official duties . . . 
 and any number of such directors 
 may be sued in the same action by 
 any claimant under these provi- 
 sions;" the action must be brought 
 in a court of equity. Crown v. 
 Brainerd, 57 Vt. 625.
 
 CHAP. XIV.J OFFICERS AND CREDITORS. 
 
 [§ 764. 
 
 positive (commanding) or negative (forbidding), have Thild and 
 been usually adjudged penal ; and this, too, whether fourth 
 the penalty consists in (1) a specific sum of money, 
 (2) creation of general liability on the part of directors for 
 corporate debts, or (3) in making certain acts or omissions 
 felonies or misdemeanors. 1 From the view that statutes of 
 these two classes are penal, important consequences follow. 
 First, a number of courts have refused to enforce them outside 
 of the state enacting them. 2 Secondly, when the liability of a 
 director under one of these acts is enforced against him, it 
 seems that he will have no action for contribution against his 
 co-directors; 3 and thus the "joint and several" liability of 
 directors under these statutes may mean little more than they 
 may be joined as defendants. Thirdly, these statutes are to be 
 construed strictly. 4 Fourthly, a repeal of them even so as to 
 effect existing debts is constitutional; 5 for there can be no 
 vested right to recover a penalty. 6 And, finally, the liability 
 
 1 Wiles v. Suydam, 64 N. Y. 173; 
 First Nat. Bank v. Price, 33 Md. 487: 
 Sturges v. Burton, 8 Ohio St. 215; 
 Breitung v. Lindauer, 37 Mich. 217; 
 Kritzer v. Woodson, 19 Mo. 327; 
 Gregory v. German Bank, 3 Col. 332; 
 Union Iron Co. v. Pierce, 4 Biss. 327; 
 Irvine v. McKeon, 23 Cal. 472; 
 Nassau Bank v. Brown, 30 N. J. Eq. 
 478, 484; Stebbins v. Edmands, 12 
 Gray, 203; Billings v. Trask, 30 Hun 
 (N. Y.), 314; Gadsden v. Woodward, 
 103 N. Y. 242. See §771. 
 
 2 First Nat. Bank v. Price, 33 Md. 
 487; Derrickson v. Smith, 27 N. J. 
 L. 166; Halsey v. McLean, 12 Allen, 
 438; Bird v. Hayden, 2 Abb. Pr. N. 
 S. (N. Y.)61; S. C, 1 Robt. (N. Y.) 
 383; Veeder v. Baker, 83 N. Y. 156. 
 Contra, Huntington v. Attrill, 146 
 U. S. 657. See Story, Confl. of Laws, 
 §§ 620, 621 ; Whart. Conn, of Laws, 
 §§ 853 et seq.: and compare §§ 393 
 and 714, note, ante. 
 
 8 Andrews v. Murray, 33 Barb. 354. 
 
 Contra. Nickerson v. Wheeler, 118 
 Mass. 295. See §§ 767, 805. 
 
 * Bonnellu. Griswold, 80 N. Y. 128; 
 Manhattan R'y Co. v. Kaldenbersr 
 165 N. Y. 1; Steam Engine Co. v. 
 Hubbard, 101 U. S. 188; Gray v. 
 Coffin. 9 Cush. 192; Chase v. Curtis, 
 113 U. S. 452. See Pier v. Hanmore, 
 86 N. Y. 95. Compare Western 
 Union Tel. Co. v. Hamilton, 50 Ind. 
 181; Wing & Evans v. Slater, 19 R. 
 I. 597. Judgment against the cor- 
 poration is not even prima facie 
 evidence in an action against the di- 
 rectors to charge them with the 
 debts of the corporation for their 
 failure to file a report. Miller v. 
 White, 50 N. Y. 137. 
 
 5 Breitung v. Lindauer, 37 Mich. 
 217; Union Iron Co. v. Pierce, 4 Biss. 
 327; Gregory v. German Bank, 3 
 Col. 332. 
 
 6 Yeaton v. United States, 5 
 Cranch, 281; Norris v. Crocker, 13 
 How. 429. 
 
 761
 
 § 766.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. 
 
 which they impose will not survive the death of the delinquent 
 director, unless reduced to judgment before that event. 1 
 
 § 765. On the other hand there seems to be an increasing cur- 
 rent of judicial opinion opposed to the view that statutes under 
 which directors may become liable for the debts of the corpora- 
 tion are penal in an " international sense," so that courts should 
 decline to enforce them beyond the state enacting them. The 
 leading case is Huntington v. Attrill, 2 in which the Federal 
 Supreme Court held that a New York statute, by which direct- 
 ors who sign a false certificate or report are made liable for the 
 debts of the corporation, was not penal in the sense that it could 
 not be enforced without the state. " As the statute imposes a 
 burdensome liability on the officers for their wrongful act, it 
 may well be considered penal, in the sense that it should be 
 strictly construed. But as it gives a civil remedy, at the pri- 
 vate suit of the creditor only, and measured b} r the amount of 
 his debt, it is as to him clearly remedial." 3 
 
 Likewise in Neal v. Moultrie, 4 it was held that the liability, 
 being created in favor of individuals, could not constitute a pen- 
 alty. In Hargroves v. Chambers, 5 it was said that the liability 
 of the directors would not be affected by the extinguishment 
 of the debt as to the corporation ; which last is opposed to the 
 Xew York case of Jones v. Barlow. 6 Some of these statutes 
 certainly come near creating a liability sounding in contract. 
 For instance, it would be hard to construe the following as 
 creating a mere penalty : " If a bank shall become indebted be- 
 yond the amount allowed .... the directors .... shall be 
 liable for the excess in their private capacities, and an action in 
 contract may, in such cases, be brought against them, or any of 
 them ; their or any of their heirs, executors, or administrators, 
 by any creditor of the bank ; or such creditor may have a rem- 
 edy by a suit in equity." 7 
 
 § 766. There are finally a few statutes, falling properly under 
 
 1 Mitchell v. Hotchkiss, 48 Conn. 
 See §771. 
 
 2 146 U. S. 657. 
 
 3 146 U. S. 676. 
 * 12 Ga. 104. 
 
 6 30 Ga. 580. 
 6 62 N. Y. 202. 
 
 762 
 
 7 General Stat, of Mass. 203, § 27. 
 
 Statutes making directors liable 
 for indebtedness in excess of the 
 amount of capital stock are ceasing 
 to be held penal. See Woolverton v. 
 Taylor, 132 111. 197; Farr v. Briggs' 
 Estate, 72 Vt. 225. Compare Lewis
 
 CHAP. XIV.] OFFICERS AND CREDITORS. 
 
 [§ 767. 
 
 none of the preceding classes, whose object it is, by creating 
 presumptions, to put on the directors the disproof of certain 
 matters which it might be hard for other persons to prove. For 
 instance: "Every insolvency of a chartered bank . . . . shall be 
 deemed fraudulent." * " It is presumed that directors present 
 at a meeting assent to the measures there passed; and that 
 within a certain time, or after such measures are entered on the 
 books of the corporation, absent directors have knowledge of 
 them." 2 
 
 Although it would be beyond the limits of this treatise to 
 discuss in detail the effect of the various statutes which impose 
 liability on directors either for failure to do certain acts which 
 are prescribed, or for doing certain other acts which are for- 
 bidden, 3 still a few illustrations of the more frequent of these 
 statutes and their effect may not be out of place. 
 
 § 767. Enabling acts very commonly require corporations to 
 file annual reports of their condition, and make direct- 
 ors liable for the debts of the corporation on a failure Liability 
 
 1 . , for failure 
 
 to do so. 4 Such a requirement was contained in the to file 
 New York Manufacturing Companies Act of 1848. 3 reports. 
 Although that act is repealed, some of the New York 
 
 v. Montgomery, 145 111. 30. A stat- 
 ute provided that no corporation 
 should create any debt in excess of 
 its paid up capital stock, and that 
 the directors voting for or consent- 
 ing to tthe creation of such debt 
 should be personally liable therefor 
 to the creditors of the corporation. 
 Held that the statute imposes a lia- 
 bility upon the consenting directors 
 "to the extent of such excess, not 
 for the benefit of any particular 
 creditor, but for the benefit of all, 
 and their liability is in equity a 
 fund to which all the creditors may 
 resort for the satisfaction of such 
 debts as the corporation itself fails 
 to pay, to be shared in by all in pro- 
 portion to the debt remaining un- 
 paid. . . . The liability is second- 
 
 ary, to be resorted to only after the 
 usual remedies against the corpora- 
 tion have been exhausted," although 
 the statute contains no such express 
 provision. Nat. Bk. v. Dillingham, 
 147 N. Y. 603, 610. Under such a stat- 
 ute a part of the creditors cannot sue 
 on their own behalf, but suit should 
 be brought in behalf of all. Moulton 
 v. Connell Co., 93 Tenn. 377; Trades- 
 man Pub. Co. v. Wheel Co., 95 Tenn. 
 634. 
 
 1 Georgia Code, 1873, § 4428. 
 
 2 California Penal Code, §§ 569, 570. 
 
 3 J. e., statutes of the third and 
 fourth classes. 
 
 4 To an action by a creditor to 
 charge a director with the penalty 
 for a failure to file a report, the di- 
 rector cannot plead that he did not 
 
 8 For note 5 see page 764. 
 
 763
 
 § 709.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. 
 
 decisions construing it may still be of interest with reference to 
 similar statutory provisions. 
 
 § 768. According to the section of the act of 1848, as it 
 has been judicially expounded : " Upon default of a company 
 to report, all the trustees then in office are jointly and severally 
 liable for all the debts of the company then existing, whether 
 contracted by them or their predecessors, and for all that may 
 be subsequently contracted during their continuance in office, 
 till such report be made. Trustees who, upon such default, 
 retire from office, are liable for all debts of the company then 
 existing, but for no subsequent ones. Their successors, by 
 promptly obeying the requirements of the statute, may escape 
 all liability ; but if they continue the default until the next 
 January, they are liable for the debts contracted during their 
 administration up to that time, and for no other, unless they 
 then and there make default, in which latter case they become 
 liable for all debts then existing. Thus the members of suc- 
 cessive boards may become liable for the same debts, by reason 
 of successive defaults." ' 
 
 § 769. Under this statute, trustees are elected for one year, 
 and, unless they hold over and act for the corporation after the 
 expiration of their term of office, they are not liable for a sub- 
 sequent failure to file a report, although no new trustees are 
 elected. 2 The mere fact, moreover, that a stockholder is 
 elected a trustee, is not enough to charge him with the 
 penalties for a failure to file a report. There must be evi- 
 
 
 know of the law requiring it, and 
 that the failure was not intentional. 
 Van Etten v. Eaton, 19 Mich. 187. 
 See (Jennert v. Ives, 102 Mich. 547. 
 Compare Cooke v. Pearce, 23 S. C. 
 239. 
 
 6 Laws of 1848, chap. 40, §12; re- 
 placed by laws of 1892, chap. 688, 
 §30. 
 
 For decisions construing section 30, 
 chapter 688 of the laws of 1892, see 
 Chapman v. Lynch, 156 N. Y. 551; 
 Sinclair v. Fuller, 158 N. Y. 607; Mor- 
 gan v. Hedstrom, 165 N. Y. 224; Man- 
 hattan Co. v. Kaldenberg, 165 N. Y. 
 1. Section 30, laws of 1892, is in its 
 
 764 
 
 turn abolished by section 30, laws of 
 1901, which substitutes a conditional 
 and limited liability. 
 
 1 Vincent v. Sands, 1 J. & S. 
 (N. Y.) 511, 517. Opinion of the 
 court per Freedman, J.; S. C, aff'd 
 58 N. Y. 673. See Koike v. Thomas, 
 56 N. Y. 559; Chambers v. Lewis, 
 28 N. Y. 454; Boughton v. Otis, 21 
 N. Y. 261; Gaus v. Switzer, 9 Mon- 
 tana, 408. This liability is not con- 
 tingent on the failure of the creditor 
 to collect against the corporation. 
 Larson v. James, 1 Col. App. 313. 
 
 2 Van Amburgh i\ Baker, 81 N. Y. 
 46. In this case before the expira-
 
 CHAP. XIV.] 
 
 OFFICERS AND CREDITORS. 
 
 [§ 770. 
 
 dence of his acceptance of the office. 1 And this liability does 
 not arise if a report be filed, although the same is in some 
 respects untrue. 2 
 
 § 770. To relieve trustees from their duty to file annual re- 
 ports a technical dissolution of the corporation is not requisite. 
 This duty is at an end when the corporation is practically aban- 
 doned and has ceased to carry on business ; or when its affairs 
 have passed into the hands of a receiver or an assignee in bank- 
 ruptcy. 3 The action against the trustee must be brought on 
 the original claim of the creditor ; and not on a judgment ob- 
 tained against the corporation, as the latter is not even prima 
 facie evidence to charge the trustees with a debt. 4 The decla- 
 rations, however, of an officer, relating to matters in which he 
 was competently acting for the corporation, are admissible as 
 evidence against a trustee in an action brought to charge the 
 latter with a debt of the corporation, there having been a fail- 
 ure to file the annual report. 5 And in such an action the trus- 
 tees cannot avail themselves of a defence not personal to 
 themselves, but going to the foundation of the claim against 
 the corporation ; unless the corporation itself could have suc- 
 cessfully relied on the same defence. 6 The statute of limita- 
 tions begins to run in favor of the trustees from the time when 
 the cause of action accrued against them, L e., from the time 
 
 tion of their term the trustees passed 
 a resolution discontinuing business. 
 If, however, a trustee holds over, 
 and there is a debt contracted while 
 he is a trustee de facto, he is liable 
 for a default. Doming v. Puleston, 
 55 N. Y. 655. 
 
 1 Cameron v. Seaman, 69 N. Y. 
 396; Osborn & Cheese man Co. v. 
 Croome, 14 Hun, 164; S. C, aff'd 77 
 N. Y. 629. 
 
 2 Bonnell v. Griswold, 80 N. Y. 
 128. Liability for signing false re- 
 ports is provided for in New York 
 by § 31, ch. 688, laws of 1892. See 
 §774. 
 
 8 Kirklandr. Kille, 99 N. Y. 390; 
 Losee v. Bollard, 79 N. Y. 404; 
 Huguenot Nat. Bank v. Stud well, 
 
 74 N. Y. 621; Bonnell v. Griswold, 80 
 N. Y. 128; Bruce v. Piatt, ib. 379. 
 But compare Sanborn w. Lefferts, 58 
 N. Y. 179; Gans v. Switzer, 9 Mon. 
 408. 
 
 * Miller v. White, 50 N. Y. 137; 
 Esmond ». Bullard, 16 Hun, 65; 
 Chase v. Curtis, 113 U. S. 452. Com- 
 pare Bassett v. St. Alban's Hotel 
 Co., 47 Vt. 313. Contra, Thayer v. 
 New England Lithographic Co., 108 
 Mass. 523. 
 
 6 Hoag v. Lamont, 60 N. Y. 96. 
 
 6 Whitney Arms Co. v. Barlow, 63 
 N. Y. 62. For a case where the de- 
 fendant trustee was allowed to deny 
 that a corporation had ever been or- 
 ganized, see DeWitt v. Hastings, 69 
 N. Y. 518. 
 
 765
 
 § 773.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. 
 
 of their first failure to file a report, 1 and successive failures do 
 not prevent the statute from running. 2 
 
 § 771. A liability of this character being penal does not 
 survive the death of the delinquent trustee, as against his 
 representatives, nor 3 the death of the plaintiff occurring in the 
 course of the action. 4 However, the right to enforce this lia- 
 bility passes with an assignment of the debt. 5 
 
 § 772. Although the language of the New York statute is 
 broad enough to include a debt of the corporation 
 included in to one of the trustees who are in default, yet such a 
 biiity*" result is held not to be within its spirit ; and neither 
 a delinquent trustee nor a firm of which he is a 
 member can take advantage of a default for which he is in 
 part responsible, to recover against his co-trustees. 6 An as- 
 signee for value, however, who takes an absolute assignment 
 of a debt of the corporation can maintain an action against the 
 trustees, although his assignor remains a trustee up to the time 
 of the default. 7 
 
 § 773. Where on account of a failure to file a report, direct- 
 ors or trustees are made liable for the " debts " of the corpora- 
 tion, corporate liabilities " which may give causes of action 
 against it and result in judgments are not within the statute 
 unless they constitute present debts ; " for a debt is " something 
 which may be subject to a suit as a debt, and not something 
 to which the party may be entitled as damages in consequence 
 of a failure to perform a duty or keep an engagement." 8 
 
 1 Duckworth v. Roach, 81 N. Y. 49. 
 Compare Larsen v. James, 1 Col. 
 App. 313. 
 
 2 Losee ». Bullard, 79 N. Y. 404; 
 see Chapman v. Lynch, 156 N. Y. 
 551 ; Morgan v. Hedstrom, 165 N. Y. 
 224. 
 
 3 Stokes v. Stickney, 96 N. Y. 323; 
 Mitchell v. Hotchkiss, 48 Conn. 9. 
 
 4 Brackett v. Griswold, 103 N. Y. 
 425. The cause of action here was 
 not a failure to file the report, but 
 the filing a false report. 
 
 6 Pier v. George, 20 Hun, 210; 
 S. C, aff'd 86 N. Y. 613. 
 
 6 Knox v. Baldwin, 80 N. Y. 610; 
 766 
 
 Briggs v. Easterly, 62 Barb. 51. See 
 Adams v. Mills, GO N. Y. 533. Com- 
 pare Thacher v. King, 156 Mass. 
 490. But a creditor who is also a 
 stockholder, may recover on this lia- 
 bility of the trustees. Sanborn v. 
 Lefferts, 58 N. Y. 179. 
 
 i Cornell v. Roach, 101 N. Y. 373. 
 But compare Brackett v. Griswold, 
 103 X. Y. 425. 
 
 6 Lockhart v. Van Alstyne, 31 
 Mich. 76, 78, per Cooley, J.; ace. 
 Cady v. Sauford, 53 Vt. 632. See 
 Whitney Arms Co. v. Barlow, 68 
 N. Y. 34; Victory Webb Printing 
 Co. v. Bucher, 26 Hun, 48; Allen
 
 CHAP. XIV.] OFFICERS AND CREDITORS. 
 
 [§ 775. 
 
 § 774. A provision of the following character is not infre- 
 quent in enabling acts. " If any certificate or report 
 made, or public notice given by the officers of any fofsignmg 
 such company, in pursuance of the provisions of this ports.™" 
 act, shall be false in any material representation, 1 all 
 the officers who shall have signed the same, knowing it to be 
 false, shall be jointly and severally liable for all the debts of the 
 company contracted while they are stockholders or officers 
 thereof." 2 Under a provision of this kind, in order to charge 
 the officers signing the false report, some fact must be proved 
 showing bad faith, or wilful and fraudulent intent to deceive 
 on the part of the officers. 3 
 
 § 775. In regard to the form in which actions to enforce the 
 statutory liability of directors should be brought, 
 little of general value can be said ; since this is a actions. 
 matter so largely dependent on the terms of the partieT ' 
 statute itself, as well as on the rules of procedure in 
 force in the different states. It may be said, however, that if 
 the apparent intention of the statute creating the liability is to 
 provide a fund for the security of all the creditors, then, on 
 principles heretofore discussed in relation to the statutory lia- 
 
 v. Clark, 108 N. Y. 269; Felker v. 
 Standard Yarn Co., 148 Mass. 226. 
 A claim in tort is not a "debt" 
 within the meaning of such a stat- 
 ute. Chase v. Curtis, 113 U. S. 452; 
 Leighton v. Campbell, 17 R. I. 51; 
 nor is the liability for damages 
 which arises from the infringement 
 of a patent. Child u. Boston, etc., 
 Iron Works, 137 Mass. 516. Com- 
 pare Trinity Church v. Vanderbilt, 
 98 N. Y. 170. See § 734. 
 
 i See Butler v. Smalley, 101 N. Y. 
 71; which held that knowingly omit- 
 ting certain liabilities of the com- 
 pany did not make the report " false 
 in any material representation." 
 Compare Whitaker v. Masterton, 106 
 N. Y. 277. 
 
 2 Chap. 40, N. Y. Laws of 1848, 
 sec. 15; see § 31, chap. 688, laws of 
 1892. 
 
 8 Pier v. Hanmore, 86 N. Y. 95; 
 Bonnell v. Griswold, 89 N. Y. 122; 
 Stebbins v. Edmands, 12 Gray, 203. 
 See Arthur v. Griswold, 55 N. Y. 401; 
 Waters v. Quimby, 27 N. J. L. 296. 
 But see Huntington v. Attrill, 118 
 N. Y. 365; Hatch v. Attrill, ib. 383; 
 American Credit Indemnity Co. v. 
 Eld, 156 Ind. 212. 
 
 Where directors are made liable 
 for all debts of the company con- 
 tracted by them in excess of a cer- 
 tain amount, a director who protests 
 verbally against contracting the debt 
 is not liable. Schofield v. Hender- 
 son, 67 Ind. 258; Aimen v. Hardin, 
 60 Ind. 119; see Raber v. Jones, 40 
 Ind. 436. Compare in regard to pro- 
 visions of this kind, White v. How, 
 3 McLean, 111; Cornwall ». East- 
 ham, 2 Bush (Ky.), 561; Irvine v. 
 
 767
 
 § 775.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XIV. 
 
 bility of shareholders, 1 the action should be brought in a court 
 having equitable powers, and on behalf of all creditors who are 
 willing to share in the expense. 
 
 Thus, a statute provided that " if the indebtedness of the 
 company shall at any time exceed the amount of its capital 
 stock, the trustees assenting thereto shall be personally and 
 individually liable for such excess to the creditors of the 
 company." The Federal Supreme Court held that an action 
 at law could not be maintained by one creditor among many to 
 enforce for his own benefit the liability thus created ; but that 
 the remedy was in equity, since the excess, for which the 
 directors were liable, constituted a fund for the benefit of all 
 the creditors. 2 Justice Miller said, giving the opinion of the 
 court : " The remedy for this violation of duty as trustees is in 
 its nature appropriate to a court of chancery. The powers 
 and instrumentalities of that court enable it to ascertain the 
 excess of indebtedness over the capital stock, the amount of 
 this which each trustee assented to, and the extent to which 
 the funds of the corporation may be resorted to for the pay- 
 ment of the debts ; also, the number and names of the creditors, 
 the amount of their several debts ; to determine the sum to be 
 recovered of the trustees and apportioned among the creditors, 
 in the manner which trial by jury and the rigid rules of com- 
 mon law proceeding render impossible." 3 
 
 McKeon, 23 Cal. 472; National Bank 
 v. Paige's Executor, 53 Vt. 452. 
 
 1 See § 726. 
 
 2 Horner v. Heming, 93 U. S. 228. 
 
 3 Horner v. Heming, 93 U. S. 228, 
 232. Accord, Merchants' Bank v. 
 Stevenson, 10 Gray, 332; Low r. 
 Buchanan, 94 111. 76; Buchanan b. 
 Bartow Iron Co., 3 111. App. 191; 
 Anderson v. Speers, 21 Hun, 5(58. 
 See Peele v. Phillips, 8 Allen, 86; 
 Bond v. Morse, 9 Allen, 471. But 
 see Cornwall v. Eastham, 2 Bush 
 (Ky.), 561; Buell v. Warner, 33 Vt. 
 570; Bassett v. St. Alhan's Hotel 
 Co., 47 Vt. 313. As to the form of 
 an action at law, see Union Iron Co. 
 0. Pierce, 4 Bliss. 327. 
 
 768 
 
 It has been held that it is not nec- 
 essary for the creditor to recover a 
 judgment against the corporation 
 before proceeding against the direct- 
 ors to enforce a liability of this na- 
 ture. Merchants' Bank v. Stevenson, 
 5 Allen, 398. But see Kinsley v. Rice, 
 10 Cray, 325; Johnson v. Church- 
 well, 1 Head (Tenn.), 146. 
 
 When on account of paying a divi- 
 dend out of capital, directors are 
 rendered liable for the debts of the 
 corporation, it has been held that 
 the corporation need not be joined 
 as defendant. The guilty directors 
 have no right of subrogation, and 
 no recourse against the corporation. 
 Hill v. Frazier, 22 Pa. St. 320.
 
 CHAP. XV.] LEGAL RELATIONS AMONG SHAREHOLDERS. [§ 777. 
 
 CHAPTER XV. 
 
 LEGAL RELATIONS AMONG THE SHAREHOLDERS OF A 
 CORPORATION. 
 
 Relations discussed, § 776. 
 
 Two classes of legal relations be- 
 tween shareholders, §§ 777, 778. 
 
 Right of shareholders that each shall 
 bear his proportion of the corpo- 
 rate burdens, § 779. 
 
 Releases. Transfers, § 780. 
 
 Subscriptions induced by fraud, § 
 781. 
 
 Changes in the corporate constitu- 
 tion, § 782. 
 
 Contribution among shareholders, 
 § 783. 
 
 Where shareholders are also cred- 
 itors, § 784. 
 
 Classes of shareholders, § 785. 
 
 Rights of preferred shareholders, § 
 786. 
 
 Shares more fully paid up, § 787. 
 
 Equal rights of shareholders, § 788. 
 
 Relations between transferrer and 
 transferee, § 789. 
 
 Specific performance, § 790. 
 
 Indemnification of transferrer, § 791. 
 
 Fraud, § 792. 
 
 Warranty by transferrer, § 793. 
 
 Pledge of shares, § 794. 
 
 Validity of assignment of stock cer- 
 tificates, § 795. 
 
 As against assignor's creditors, § 796. 
 
 Stock certificates " in trust," § 797. 
 
 Right to dividends as between trans- 
 ferrer and transferee, § 798. 
 
 As between life-tenant and remain- 
 der-man, §§ 799-801. 
 
 § 776. The legal relations between individual shareholders 
 and the majority acting as the body corporate, were 
 discussed in Chapter IX. It remains in this chap- ^cu^sed 
 ter to consider the relations among individual share- 
 holders acting for themselves and representing only their own 
 rights and interests in the corporate enterprise. 
 
 § 777. The legal relations between shareholders are of two 
 classes, and may appropriately be treated under two 
 general divisions. First, those which subsist be- 
 tween shareholders, as it were indirectly, by reason 
 of the relationship sustained by them towards the 
 body corporate ; of which relationship the general 
 result that works itself out into relations between the share- 
 holders individually, is that each is entitled as against all 
 others to share in the profits of the corporate enterprise in the 
 proportion borne bv his shares to the total number, and has 
 49 769 
 
 Two classes 
 of legal 
 relations 
 between 
 share- 
 holders.
 
 § 779.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XV. 
 
 the further right, that each shall bear a proportionate share of 
 whatever liability may arise out of the corporate enterprise. 
 Secondly, those legal relations which subsist directly between 
 the successive holders of the same shares of stock, or between 
 persons possessing rights in the same shares, legal relations 
 which have no reference to the rest of the shareholders, and 
 do not depend primarily on a relationship sustained towards 
 the corporation. 
 
 § 778. The rights and liabilities constituting the legal re- 
 lations of the first class are as a usual thing enforceable by 
 individual shareholders against each other only after some de- 
 fault or failure to act on the part of the corporate manage- 
 ment, or else they come into play only on the insolvency of the 
 corporation. But with legal relations of the second class, the 
 corporate management has little or nothing to do. An instance 
 of the first class is the right which each shareholder has that 
 no other shareholder shall be released from his liabilities as 
 such in a manner unauthorized by the corporation constitution. 
 Instances of the second class appear in the right of the vendor 
 or vendee of shares to have the other take the necessan' steps 
 to complete the transfer; or in the rights which subsist be- 
 tween a person having the life interest in certain shares and 
 the remainder-man. 
 
 § 779. It is the right of shareholders that every one of 
 Rights of their number shall pay over to the corporate man- 
 holders agement a value in cash or property equal to the 
 ^lrbe^r P ar va ^ ue °f the shares subscribed for by him. 1 
 his propor- Consequently, eveiy agreement between a subscriber 
 corporate and the corporate agents by which the former is not 
 to pay the face of his subscription, is fraudulent and 
 void as to shareholders not consenting.^ Thus, a separate 
 agreement made on subscribing for shares, whereby the sub- 
 scriber on surrendering his certificate of stock is to receive 
 
 i See §§ 522a-522c. 
 
 2 White Mountains, etc., R. R. Co. 
 v. Eastman, 34 N. H. 124; Graff v. 
 Pittsburgh, etc., R. R. Co., 31 Pa. St. 
 489; Robinson v. Pittsburgh, etc., R. 
 R. Co., 32 Pa. St. 334; Miller v. 
 Hanover Junction, etc., R. C. Co., 
 87 Pa. St. 95; Connecticut, etc., 
 
 770 
 
 Rivers R. R. Co. v. Bailey, 24 Vt. 
 465, 476; Jewett v. Valley R'y Co., 
 34 Ohio St., 601, 609. See Bailey v. 
 Pittsburgh, etc., Gas-Coal Co., 69 Pa. 
 St. 3134; Wood v. Pearce, 2 Disney 
 (Ohio), 411. Compare Buford v. 
 Keokuk Northern Line Packet Co., 
 69 Mo. 611.
 
 CHAP. XV.] LEGAL RELATIONS AMONG SHAREHOLDERS. [§ 780. 
 
 back the part of his subscription already paid, and to be re- 
 leased from further payments, is a fraud on other shareholders : 
 and when on the insolvency of the corporation, the receiver is 
 enforcing subscriptions for the benefit of creditors, and is not 
 including as shareholders the fraudulent subscribers, any share- 
 holder may bring a bill for himself and others who may join, 
 to compel such subscribers to assume their liabilities as share- 
 holders. 1 
 
 § 780. Likewise is it as essentially a right of shareholders 
 as of creditors that no shareholder shall withdraw 
 or be released from any liability arising out of the Transfers 
 corporate enterprise, except in accordance with the 
 constitution of the corporation ; 2 and, except in accordance 
 with that constitution, it is beyond the powers of the body 
 corporate to release any of their number. 3 But it would seem 
 that a shareholder whom the body corporate had voted to 
 release, might, under some circumstances, have the right to be 
 
 1 Melvin v. Lamar Ins. Co., 80 111. 
 446. But an agreement among 
 subscribers that one of their num- 
 ber who subscribed as "trustee," 
 shall not be held liable on his sub- 
 scription, is valid as to such sub- 
 scribers. Winston v. Dorsett Pipe 
 Co., 129 111. 64. 
 
 2 Spackman ». Evans, L. R. 3 H. L. 
 171; Dixon's Case, L. R. 5 Ch. 79; 
 Gill v. Balia, 72 Mo. 424; Bedford R. 
 R. Co. v. Bowser, 48 Pa. St. 29. See 
 Houldsworth v. Evans, L. R. 3 H. L. 
 263; Miller v. Hanover Junction R. R. 
 Co., 87 Pa. St. 95. But see Shoe- 
 maker v. Washburn Lumber Co., 97 
 Wis. 585. 
 
 A decree is objectionable which 
 confers on the receiver discretionary 
 powers to compromise witli share- 
 holders; for each shareholder has a 
 vested right in the subscription con- 
 tract of every other shareholder; 
 and it is beyond the power of a court 
 of equity to invest any one with a 
 discretionary right to release it. At 
 least this cannot be done by a de- 
 
 cree to which all the shareholders 
 are not parties. Chandler v. Brown, 
 77 111. 333. 
 
 3 An arrangement allowing mem- 
 bers of a company to retire under 
 certain conditions agreed to by a 
 public meeting of the shareholders, 
 convened after due notice to all the 
 shareholders, is not in itself valid 
 unless made in accordance with the 
 provisions of the deed of settlement; 
 and if not assented to directly or in- 
 directly, after due notice, by all the 
 shareholders, it may be impeached 
 by any one of them. But if the 
 means of notice to all appear suffi- 
 cient, so as to raise a clear presump- 
 tion of knowledge and acquiescence, 
 and the arrangement is left unim- 
 peached for a great number of years, 
 the shareholder who has been al- 
 lowed to retire, and whose name has 
 been removed from the lists of the 
 company, will be held to be relieved 
 from his liability as a shareholder. 
 Evans ». Smallcomb, L. R. 3 H. L. 
 249. See §§ 549, 550. 
 
 771
 
 § 782. J THE LAW OF PRIVATE CORPORATIONS. [CHAP. XV. 
 
 Subscrip- 
 tions in- 
 duced by 
 fraud. 
 
 indemnified by those who voted to release him from any lia- 
 bility in respect of the corporate enterprise. 1 A transfer of 
 shares made to an irresponsible person when the corporation is 
 insolvent, for the purpose of escaping liability, is a fraud on 
 the other shareholders, who will have to contribute more if the 
 transfer is held valid, 2 just as much as such a transfer would 
 be a fraud on creditors. 3 
 § 781. If a person is induced by a fraud of the corporate 
 agents, for which the corporation is responsible, to 
 subscribe for shares, he may rescind his contract by 
 acting promptly. But it would be unjust to allow 
 him to withdraw to the injury of others who have 
 subsequently subscribed for shares or contracted with the cor- 
 poration on the faith of his subscription. " It would be ex- 
 tremely difficult to maintain, upon general principles of law, 
 that a private fraud between the original subscribers and com- 
 missioners, could be permitted to be set up, to the injury of 
 subsequent purchasers, who become honafide holders, without 
 any participation or notice of the fraud." 4 
 
 § 782. Just as it is beyond the powers of the body corporate 
 to release any shareholder from liability attaching 
 to him under the constitution of the corporation, so 
 it is also beyond the powers of the majority to 
 increase the liabilitv of shareholders to creditors. 5 
 
 Changes 
 in the 
 corporate 
 constitu- 
 tion. 
 
 1 In pursuance of a resolution 
 passed at an extraordinary meeting 
 of an unincorporated company, a 
 shareholder sold his shares to the 
 directors, upon the terms that ho 
 should withdraw from the company 
 and be no longer liable for any of its 
 debts. No power to enter into such 
 an arrangement was contained in the 
 deed of settlement. It was held that 
 the shareholder was still liable for 
 the debts of the company, and was 
 properly included in the list of con- 
 tributories. Lord Chancellor Cot- 
 tenham, however, intimated that 
 there might be equities between such 
 shareholder and any shareholder 
 who could be shown to have assented 
 to the release. Ex parte Morgan, 1 
 
 772 
 
 Ha. & Tw. 320. See Zulueta's Claim, 
 L. R. 5 Ch. 444. 
 
 2 See Nathan v. Whitlock, 9 Paige 
 (N. Y.), 152; Everhart v. West- 
 chester, etc., R. R. Co., 28 Pa. St. 
 339; Chouteau Spring Co. v. Harris, 
 20 Mo. 382, 390; Johnson v. Laflin, 
 6 Cent. L. J. 131; S. C, 5 Dill. 76; 
 Augell and Ames on Corp., § 535. 
 
 3 See § 749. 
 
 Minor v. Mechanics' Bank, 1 Pet. 
 46, 66, opinion of the court per 
 Story, J. See §§ 523-525. The 
 English cases, however, are not in 
 accord with this view. See Smith's 
 Case, L. R. 2 Ch. 604. 
 
 5 Trustees v. Flint, 13 Mete. (Mass.) 
 539. See § 583.
 
 CHAP. XV.] LEGAL RELATIONS AMONG SHAREHOLDERS. [§ 783. 
 
 And it would seem that a change in the corporate constitu- 
 tion, procured by a majority from the legislature, would release 
 a dissenting shareholder from his obligation to pay calls, at 
 least so far as regards the rights of the members comprising 
 the majority which procured the change. 1 
 
 § 783. When the condition of the corporate affairs is such 
 that liability to creditors for unpaid subscriptions Contribu . 
 arises, or where shareholders are affected with a tion 
 
 . . among 
 
 statutory liability, either several or joint and sev- share- 
 eral, and one shareholder is compelled to pay a debt 
 of the corporation, he is in all cases entitled to contribution 
 from the other shareholders, to an extent that will equalize 
 among them all in proportion to the amount of stock held by 
 them respectively, the corporate burdens. 2 " The right of 
 contribution grows out of the organic relation among the 
 stockholders. As between them and the creditors, each stock- 
 holder is severally liable [if the statute so declare him] to all 
 the creditors ; as between themselves, each stockholder is bound 
 to pay in proportion to his stock." 3 
 
 It has been held, however, that one shareholder who has paid 
 a debt of the corporation, is not entitled to contribution from 
 the other shareholders, until he has exhausted the property of 
 the corporation that is bound to reimburse him. 4 And if the 
 liability on which the shareholder has been held to a cred- 
 
 1 See Hartford and N. H. R. R. 
 Co. v. Croswell, 5 Hill, 383; §§530 
 et seq. 
 
 2 Aspinwall v. Torrance, 1 Lans. 
 (N. Y.) 381; Briuham v. Wellers- 
 burg Coal Co., 47 Pa. St. 43; Weber 
 v. Fickey, 47 Md. 196. See Mat- 
 thews v. Albert, 24 Md. 527; Masters 
 v. Rossie Lead M'g Co., 2 Sandf. 
 Ch. (N. Y.) 301; Hadley v. Russell, 
 40 N. H. 109; Erickson v. Nesmith, 
 46 N. H. 371; Wincock v. Turpin, 
 96 111. 135; Van Pelt v. Gardner, 54 
 Neb. 702; Bennison v. McConnell, 56 
 Neb. 46. 
 
 Where a corporation is not fully 
 organized, so that, under the Mis- 
 souri law (see Hart v. Salisbury, 55 
 
 Mo. 310; § 739), the shareholders re- 
 main personally liable for the cor- 
 porate debts, and certain sharehold- 
 ers pay those debts, they are entitled 
 to contribution, even from those who 
 have paid up their stock. Richard- 
 son v. Pitts, 71 Mo. 128. It is not 
 necessarily essential that the pay- 
 ment should have been made under 
 compulsion of suit. Redington v. 
 Cornwell, 90 Cal. 49. 
 
 3 Umstead v. Buskirk, 17 Ohio 
 St. 113, 118, per White, J. 
 
 4 Gray v. Coffin, 9 Cush. 192. But 
 in this case the plaintiff held for 
 his security a mortgage on the cor- 
 porate property, which he had not 
 enforced. 
 
 773
 
 § 786.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XV. 
 
 itor is statutory and the statute provides a remedy whereby 
 shareholders shall obtain contribution from each other, the 
 statutory remedy must be followed. 1 There is no implied 
 promise on the part of shareholders to idemnify others, who, 
 at the request of the former, became sureties for the corpora- 
 tion. 2 
 
 § 784. The relations among shareholders may be compli- 
 Where ^a.ted by a shareholder being also a creditor of the 
 share- corporation. In such case those rights and liabili- 
 
 holders are - 
 
 also cred- ties of the person holding such double status which 
 appertain to him as shareholder must be regarded as 
 distinct from the rights which belong to him as creditor. 
 Ordinarily such a person can bring no action to enforce his 
 rights as creditor in a form that will render it impracticable 
 to discriminate between the two positions held by him ; nor 
 can an action by such a person suing as creditor be maintained 
 in a court which has not the capacity to adjust his rights and 
 liabilities. 3 
 
 § 785. In an honestly conducted corporation the interests 
 of all shareholders will for the most part coincide, 
 
 Classes of , 
 
 share- unless there are different classes or shareholders. 
 
 A separation of shareholders into classes with some- 
 what divergent interests may be occasioned by the issue of 
 preferred shares, or might possibly arise from the fact that 
 part of the shareholders own fully paid-up shares, while the 
 shares of others are not fully paid up. 
 
 § 786. Preferred shares are usually issued to obtain further 
 capital for the prosecution of the corporate enterprise ; and 
 
 the rights of the holders as against the holders of 
 preferred common shares depend on the terms of the issue of 
 holders. tne preferred shares. 5 The usual provision included 
 
 in those terms, the one, in fact, which constitutes 
 shares preferred shares, is that the holders shall receive from 
 
 & Cres. 419. Compare Schaeffer v. 
 Phoenix Brewery Co., 4 Mo. App. 
 115. See § 733. 
 4 See §§ 559a, 5596. 
 
 i O'Reilly v. Bard, 105 Pa. St. 569; 
 Brinham v. Wellersburg Coal Co., 
 47 Pa. St. 43. 
 
 2 Larson v. Dayton, 52 Iowa, 597. 
 
 8 See Thayer v. Union Tool Co., 4 
 
 Gray, 75; Bailey v. Bancker, 3 Hill 
 
 (N. Y.), 188; Smith v. Huckabee, 53 
 
 Ala. 191; Milburn v. Codd, 7 Barn. 
 
 774 
 
 5 For the power of a corporation 
 to issue preferred shares, see §§ 571, 
 572.
 
 CHAP. XV.] LEGAL RELATIONS AMONG SHAREHOLDERS. [§ 787. 
 
 the profits of the corporate business a certain amount of divi- 
 dends before the holders of common stock shall receive any- 
 thing. 1 On the other hand, preferred shareholders are not 
 creditors of the corporation, and, in the absence of express 
 provision, are entitled on the winding up of the business to 
 receive the principal of their shares only in the same proportion 
 with the holders of common stock. 2 
 
 It is apparent how the interests of preferred shareholders 
 may differ from those of the holders of common shares. For 
 instance, one course of policy may insure for the corporation 
 sufficient profits to pay the dividends on the preferred stock ; 
 while another course, proper but more hazardous, will probably 
 result in profit sufficient to pay dividends on all the stock, 
 common as well as preferred. Evidently it will be for the 
 interests of the preferred shareholders to have the corporation 
 pursue the former course. 
 
 § 787. Again, a divergence of interest might arise from the 
 fact that some shares in the corporate stock are _. 
 
 itt, . Shares 
 
 fully paid up, while others are not. W hen there is more fully 
 no special provision regulating the matter, it would * p ' 
 seem in such case that any dividends earned should be dis- 
 tributed among the shareholders, not in proportion to the 
 nominal amount of stock held by them, but according to the 
 amounts of capital they have actually paid in. 3 But, however 
 this may be, undoubtedly on the winding up of the company 
 and the distribution of its assets, each shareholder is entitled 
 
 1 Unless there is some agree- 
 ment or enactment to the contrary, 
 preference shareholders are entitled 
 to be paid out of the profits of 
 the company their dividends to the 
 amount guaranteed, before the other 
 shareholders receive anything; so 
 that if the profits divisible at any 
 given time are not sufficient to pay 
 the guaranteed dividends in full, the 
 deficiency must be made good out 
 of the next divisible profits; the ordi- 
 nary shareholders taking no profits 
 until all arrears of guaranteed divi- 
 dends have been paid to the prefer- 
 ence shareholders." 2 Lindley on 
 
 Part., 796; ace. Boardman v. Lake 
 Shore, etc., Ry. Co., 84 N. Y. 157. 
 See § 564. 
 
 2 In re London Indian Rubber Co., 
 L. R. 5 Eq. 519; McGregor v. Home 
 Ins. Co., 33 N. J. Eq. 181. The stat- 
 ute may provide that preferred stock 
 shall be a lien on the corporate prop- 
 erty. Heller v. Marine Bank, 89 Md. 
 002. 
 
 3 Still this is by no means clear. 
 "Where there are several classes of 
 shares on which unequal sums have 
 been paid up, the profits of the com- 
 pany ought prima facie to be divided 
 amongst the shareholders in propor- 
 
 775
 
 § 788.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XV. 
 
 Equal 
 rights of 
 share- 
 holders. 
 
 to receive in proportion to the amount which he has actually 
 contributed for corporate purposes. 1 
 
 § 78S. Aside from considerations arising from the circum- 
 stance that part of the shares are preferred, or that 
 a part are more fully paid up than others, every 
 shareholder is entitled, both in the distribution of 
 profits and on the winding up of the corporation, to 
 participate in proportion to the number of shares held by him. 
 " Prima facie all stockholders at any particular period are 
 equally interested in the property and business of a corpora- 
 tion. They assume the same liabilities, are entitled to the 
 same rights, and are equal owners of the property. When, 
 therefore, the directors undertake to distribute among the 
 stockholders any portion of the funds or property of a corpora- 
 tion, whether it be called profits or not, all stockholders are 
 entitled to an equal share in the fund, proportionate to their 
 stock ; whether they have been stockholders for a longer or 
 shorter period. Unless the charter give to the directors power 
 to discriminate between stockholders at different periods in 
 the distribution of profits, they are all entitled to share 
 therein." 2 Accordingly, at the suit of a minority, a court 
 will restrain the majority from appropriating to themselves the 
 assets of the corporation, or from obtaining advantages not 
 shared in by the minority. 3 Agreements, however, entered 
 into by a group of shareholders who hold a majority of stock, 
 whereby they agree to act together in influencing the corporate 
 
 tion to the sums paid up on their 
 respective shares, and not in propor- 
 tion to the nominal values of such 
 shares." 2 Lindley on Part., 797. 
 See Somes v. Currie, 1 K. & J. 605; 
 Inre Hodges Distillery Co., Ex parte 
 Maude, L. R. 6 Ch. 51. 
 
 1 Hartman v. Insurance Co., 32 
 Gratt. (Va. ) 242. In proportion to 
 his "in-put," as it is expressed in 
 this case. 
 
 2 Jones v. Terre Haute, etc., R. R. 
 Co., 29 Barb. 353, 357, per Ingraham, 
 J.; S. C, affd 57 N. Y. 196. Ace. 
 Jackson's Admr's v. Newark Plank 
 Road Co., 31 N. J. L. 277. 
 
 776 
 
 3 Menier v. Hooper's Teleg'h 
 Works, L. R. 9 Ch. 350. See §§ 558, 
 559. Compare Bailey v. Citizens' 
 Gas Light Co., 27 N. J. Eq. 196. 
 
 Certain parties, fraudulently repre- 
 senting that the entire assets of a 
 corporation belonged to them, pro- 
 cured a decree of a court dissolving 
 the corporation, and acquired pos- 
 session of its assets. They were held 
 as trustees ex maleficio for bona fide 
 shareholders. Bailey's Appeals, 96 
 Pa. St. 253. When a corporation is be- 
 ing wound up on the expiration of its 
 charter, and its real estate is sold by 
 decree of the court, one party of
 
 CHAP XV.] LEGAL RELATIONS AMONG SHAREHOLDERS. [§ 789. 
 
 management, may be upheld so long as the interests of the 
 other shareholders are not fraudulently or unfairly sacrificed ; 
 and even then will not be set aside at the instance of the 
 parties to them, but only on complaint of some innocent 
 shareholder whose interests are injured. 1 
 
 § 789. Coming now to the second class of legal relations 
 between shareholders, it may be remarked that many Relations 
 of the rules regulating the sale of personal property between 
 
 transferrer 
 
 apply to the relations between the transferrer and and trans- 
 transferee of shares. 2 The transferee of a certificate 
 of stock occupies the position of the assignee of a chose in 
 action which for most purposes is negotiable. 3 A reciprocal 
 agreement to transfer and accept a transfer of shares is not a 
 nudum pactum / but the mutual promises constitute good con- 
 siderations for each other : and this, although nothing has been 
 paid on the shares. 4 
 
 shareholders may purchase the same 
 to benefit adjoining property held 
 by them. This is no fraud on the 
 other shareholders. Pewabic Min- 
 ing Co. v. Mason, 145 U. S. 349. 
 
 i Faulds v. Yates, 57 111. 416. See 
 Smith v. San Fran., etc., Ry. Co., 115 
 Cal. 584; Mobile & O. R. R. Co. v. 
 Nicholas, 98 Ala. 92. Compare Foil's 
 Appeal, 91 Pa. St. 434; Riggs v. 
 Railway Co., 191 Pa. St. 298; Bright- 
 man v. Bates, 175 Mass. 105; post, 
 § 790. Compare Moses v. Scott, 84 
 Ala. 608 ; Chapman v. Bates, 60 N. J. 
 Eq. 9; Clowes v. Miller, 60 N. J. Eq. 
 179. But see Woodruff v. Went- 
 worth, 133 Mass. 309; Guernsay v. 
 Cook, 120 Mass. 501 ; Harris v. Scott, 
 67 N. H. 437; § 577 note, and §§ 559a, 
 5596. The agreement was held in- 
 valid in Harvey v. Imp. Co., 118 N. C. 
 693. Equity will not specifically en- 
 force such agreements. Gage v. 
 Fisher, 5 North Dakota, 297. 
 
 2 A person may sue another for the 
 conversion of shares of stock. Kuhn 
 r. McAllister, 1 Utah, 273; Nabring 
 v. Bank of Mobile, 58 Ala. 204. Com- 
 pare Reid v. Commer'l Ins. Co., 32 
 
 La. Ann. 546. In England a contract 
 for the sale of shares is held not to 
 be a contract for the sale of soods, 
 wares, or merchandise, within the 
 statute of frauds. Duncuft v. Al- 
 brecht, 12 Simons, 189. But in Amer- 
 ica the reverse is the law. Tisdale 
 v. Harris, 20 Pick. (Mass.) 9; Baltzen 
 v. Nicolay, 53 N. Y. 467; North v. 
 Forest, 15 Conn. 400; Pray v. Mit- 
 chell, 60 Me. 430; Colvin v. Williams, 
 3H. & J. (Md.) 38. 
 
 3 Stock may, however, be held by 
 a valid title without a certificate, 
 which is but uidicia of title, and the 
 right to the stock is in the nature of 
 a non-negotiable chose in action. 
 Accordingly, stock certificates issued 
 by order of a Confederate court, 
 after confiscation of the shares of 
 " alien enemies," are void, and no 
 better in the hands of a transferee 
 than in those of the original holder, 
 as against the rightful owner of the 
 stock. Dewing v. Perdicaries, 96 
 U. S. 193. 
 
 * Cheale v. Kenward, 3 De G. & J. 
 27. A memorandum of a contract 
 to purchase shares signed by the 
 
 777
 
 § 790.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XV. 
 
 § 790. Further, a contract for the sale of shares will be 
 Specific specifically enforced in equity, if it is not uncon- 
 perform- scionable ' or against public policy, when from the 
 scarcity of the shares or other reasons the purchaser 
 cannot go into the market and purchase similar ones. 2 But if 
 shares similar to those which are the subject of the sale, are 
 readily purchasable in the market, equity will not, as a general 
 rule, specifically enforce the contract ; but will leave the parties 
 to their remedies at law. 3 And equity will pursue a similar 
 course when for any reason the contract for the sale of the 
 shares is against public policy. Thus it has been decided in 
 Pennsylvania that, for reasons of public policy, equity will not 
 decree the specific performance of a contract to sell shares in 
 the stock of a national bank, the object of the purchase being 
 to obtain the control of the bank. 4 " "While the legal right of 
 the complainant to buy up sufficient of the stock of this bank 
 to control it in the interest of himself and his friends may be 
 conceded, it is by no means clear that a court of equity will 
 lend its aid to help him. A national bank is a quasi public 
 institution. . . . Were we to affirm this decree, I see no rea- 
 son why we may not be called upon to use the extraordinary 
 powers of a court of equity to assist in miscellaneous stock 
 jobbing operations." 5 
 
 purchaser, is an admission of the 
 existence of the corporation. Mann 
 v. Williams, 143 Mass. 394. 
 
 1 See Mississippi and M. R. R. Co. 
 v. Cromwell, 91 U. S. 643. 
 
 2 Johnson v. Brooks, 93 N. Y. 337; 
 White v. Schuyler, 1 Abb. Pr. N. S. 
 (N. Y.) 300; S. C, 31 How. Pr. 
 (N. Y.) 38; Todd v. Taft, 7 Allen,- 
 371; Cheale v. Kenward, 3 De G. 
 & J. 27; Duncuft v. Albrecht, 12 
 Simons, 189; Moses v. Scott, 84 Ala. 
 608; compare C hater v. San Fran- 
 cisco Sugar Refining Co., 19 Cal. 219; 
 Cushman v. Thayer M'f'g Co., 76 
 N. Y. 308. Especially will equity 
 specifically enforce a transfer in the 
 course of enforcing a trust. Coles 
 v. Whitman, 10 Conn. 121; Draper v. 
 Stone, 71 Me. 175. Compare Wonson 
 
 778 
 
 v. Fenno, 129 Mass. 405; Colquhoun 
 v. Courtenay, 43 L. J. Eq. 338; John- 
 son v. Brooks, supra. 
 
 8 Ross v. Union Pac. Ry. Co., 1 
 Woolw. 26. But see Ashe o. John- 
 son, 2 Jones Eq. (N. C.) 149. Like- 
 wise the specific transfer or delivery 
 of particular shares, rather than 
 others, will not be enforced; all 
 being alike. Hardenbergh v. Bacon, 
 33 Cal. 356; Hubbell v. Urexel (U. S. 
 Cir. Ct. Eastern Dist. of Pa. ), 21 Am. 
 Law Reg. (N. S.) 452. See § 794. 
 
 4 Foil's Appeal, 91 Pa. St. 434. 
 Compare Faulds v. Yates, 57 111. 416; 
 §788. 
 
 5 Foil's Appeal, 91 Pa. St. 434, 
 437. Opinion of the court per Pax- 
 son, J. See Gage v. Fisher, 5 North 
 Dakota, 297.
 
 CHAP. XV.] LEGAL RELATIONS AMONG SHAREHOLDERS. [§ 792. 
 
 If the transfer of shares forms part of a contract that equity 
 will specifically enforce, as, for instance, a contract for the 
 sale of land, equity will specifically enforce the transfer in the 
 course of enforcing the main contract. 1 On the other hand, if 
 the contract to transfer shares is part of a contract which equity 
 cannot or will not specifically enforce, the transfer of shares 
 will not be enforced specifically. 2 
 
 § 791. The purchaser is not the only party to the contract 
 who is entitled to its specific performance. When 
 any liability is connected with the shares, either for cation of " 
 unpaid subscriptions or on account of some statute trausferrer - 
 creating individual liability on the part of shareholders, the 
 vendor has the right to have the vendee specifically perform 
 the contract, and register himself as owner of the shares, in 
 order that the vendor may be freed from liability. 3 And at all 
 events after a valid sale has been made, the vendee is bound to 
 indemnify the vendor from all liability as to future calls, 4 as 
 well as from liability created by statute. 5 
 
 § 792. If the transferrer is guilty of such misrepresenta- 
 tions or concealments as would entitle the purchaser „ 
 
 j- i i i " . Fraud. 
 
 of personal property to have the sale set aside, the 
 transferee will be discharged from his agreement to purchase, 6 
 or he may hold to his bargain and sue the transferrer for 
 damages. 7 
 
 1 Leach v. Fobes, 11 Gray, 506; 
 Bissell v. Farmers', etc., Bank, 5 
 McLean, 495. 
 
 2 Ross v. Union Pac. R'y Co., 1 
 Woolw. 26; Danforth v. Philadelphia 
 and C. M. R'y Co., 30 N. J. Eq. 12; 
 Fallon v. Railroad Co., 1 Dill. 121. 
 
 3 Paine v. Hutchinson, L. R. 3 Eq. 
 257; S. C, aff'd L. R. 3 Ch. 388; 
 Shepherd v. Gillespie, L. R. 5 Eq. 
 293; Walker v. Bartlett, 2 Jur. N. S. 
 643; S. C, 18 C. B. 845. 
 
 * Hutzler v. Lord, 64 Md. 534; 
 Shepherd v. Gillespie, supra; Walker 
 v. Bartlett, supra ; Wynne v. Price, 
 3DeG. & Sm. 310; Cruse v. Paine, 
 37 L. J. Eq. 711; Evans v. Wood, ib. 
 159; Hodgkinson v. Kelly, ib. 837; 
 Hawkins v. Maltby, L. R. 4 Ch. 200; 
 
 Castellan o. Hobson, L. R. 10 Eq. 47. 
 Contra and semble overruled by above 
 cases. Humble v. Langston, 7 M. & 
 W. 517. 
 
 5 Wheeler v. Faurot, 37 Ohio St. 
 26; Brown*. Hitchcock, 30 Ohio St. 
 667. These were instances of liabil- 
 ity created by statute which was 
 held to attach to shareholders who 
 were such at the time when the debt 
 was contracted by the corporation. 
 See §§ 718 et seq. 
 
 6 See Fosdick v. Sturges, 1 Biss. 
 255. If, however, the transferee's 
 name is registered as a shareholder, 
 the rights of creditors or other share- 
 holders might intervene. 
 
 7 Riggs v. Tayloe, 2 Cranch Cir. 
 Ct. 687; McClure v. Central Trust 
 
 779
 
 § 794.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XV. 
 
 § 793. A party selling as his own personal property of 
 which he is in possession, impliedly warrants his 
 by trans- title to the thing sold. 1 This doctrine applies to the 
 sale of such choses in action as shares of stock. The 
 certificate is the evidence of ownership, and if the certificate 
 is forged, or the holder is not a bona fide holder, and from the 
 circumstances transfers no valid claim as against the corpora- 
 tion, he will be liable to his vendee on this implied warranty 
 of title. For his possession of the certificate is as to the 
 vendee possession of the stock. But when the holder is such 
 in good faith, and the certificate is in the usual form, regular 
 on its face, sealed with the genuine corporate seal, and issued 
 by the duly constituted officers of the corporation, the vendor's 
 warranty does not cover the case, but the vendee, if there is 
 anything wrong with the stock, has a remedy for damages 
 against the corporation. 2 
 
 § 794. It has been held that, in cases of pledge, the pledgee 
 must be put into possession of the thing pledged, or 
 shares 6 of if that be a claim, the evidence of the obligation 
 must be delivered, and, accordingly, that shares can- 
 not be pledged unless they are evidenced by certificates, which 
 must be delivered to the pledgee. 3 In the absence of specific 
 agreement to the contrary, the pledgee of shares is entitled to 
 have them transferred to his own name on the books of the 
 company, and when such transfer is made, he is not bound to 
 
 Co., 165 N. Y. 108. A person who 
 agrees to purchase shares of a share- 
 holder at a future date certain can- 
 not plead, that before that date the 
 company mortgaged it? road or con- 
 solidated with another, in pursuance 
 of powers contained in its charter. 
 Noyes v. Spaulding, 27 Vt. 420. A 
 transfer of shares fraudulently pro- 
 cured from the owner when drunk 
 may be set aside. Thackrab v. 
 Haas, 119 U. S. 499. 
 
 1 A person selling shares does not 
 impliedly warrant that the corpora- 
 tion is a corporation de jure, but 
 only de facto. Harter v. Eltzroth, 
 111 Ind. 159. 
 780 
 
 2 People's Bank v. Kurtz, 99 Pa. 
 St. 344. See §§ 592 et seq. The 
 transferrer of shares does not im- 
 pliedly warrant the corporation's 
 title to its property, nor is there 
 any implied warranty to that effect 
 when the corporation is itself the 
 nominal transferrer, if it is only 
 the medium through which its then 
 shareholders transfer their shares to 
 the transferee. State of Louisiaua 
 v. North Louisiana & T. R. R. Co., 
 34 La. Ann. 947. 
 
 3 Lallande v. Ingram, 19 La. Ann. 
 364. Compare Cherry v. Frost, 7 Lea 
 (Tenn.), 1.
 
 CHAP. XV.] LEGAL RELATIONS AMONG SHAREHOLDERS. [§ 795. 
 
 retain the identical shares pledged, provided he keep on hand 
 a number of similar shares sufficient to answer the pledgor's 
 demand on repayment of the loan. 1 It is held, moreover, that 
 a pledgor of shares is not entitled to an injunction restraining 
 the pledgee, to whose name the shares have been transferred 
 on the books, from voting on them, at least not if the complaint 
 contain only allegations to the effect that the pledgee is voting 
 the shares so as to subserve the interests of another corporation, 
 and that it is greatly against the pledgor's interest to allow the 
 pledgee to vote them. 2 
 
 § 795. Certificates of stock, even those bearing on their face 
 such a phrase as " transferable only on the books of „ ,.,. 
 
 r J Validity 
 
 the company," are for most purposes negotiable, of assign- 
 By an assignment of the certificate the legal title stock cer- 
 to the stock passes ; 3 and the possession of the cer- tlJlcate - 
 tificate properly indorsed is prima facie evidence of ownership. 
 Consequently, the assignee for value without notice of prior 
 
 1 Hubbell v. Drexel, (Cir. Ct. East- 
 ern Dis. of Pa.) 21 Am. Law Reg. N. 
 S. 452; Nourse v. Prime, 4 Johns. Cli. 
 (N. Y.) 490; Allen v. Dykers, 3 Hill 
 (N. Y.), 593; Gilpin v. Howell, 5 Pa. 
 St. 41 ; Neiler v. Kelley, 69 Pa. St. 
 409; Boylan v. Huguet, 8 Nev. 345; 
 see Otis v. Gardner, 105 111. 436. See 
 Hay ward v. Rogers, 62 Cal. 348; 
 Barclay v. Culver, 30 Hun (X. Y.), 1. 
 Compare Laugton v. Waite, L. R. 6 
 Eq. 165; Cherry v. Frost, 7 Lea 
 (Tenn.), 1. On payment of the debt 
 a court may specifically enforce the 
 return of the shares when the stock is 
 of uncertain market value and the 
 pledgor cannot buy others. Krouse 
 v. Woodward, 110 Cal. 638. A 
 pledgee of shares that have been 
 transferred on the books of the cor- 
 poration cannot sell them without 
 notice to the pledgor and demand of 
 payment; nor at private sale, for less 
 than market value. Nabi ing v. Bank 
 of Mobile, 58 Ala. 204. And an 
 agreement that pledgee may sell 
 without notice does not permit him 
 
 to sell without demand of payment. 
 Wilson o. Little, 2 N. Y. 443. 
 
 An execution cannot be levied on 
 shares of stock pledged by the exe- 
 cution debtor and transferred on the 
 books of the corporation to the 
 pledgee. A purchaser at such exe- 
 cution sale gets no title. Nabring v. 
 Bk. of Mobile, 58 Ala. 204. 
 
 2 Mc Henry v. Jewett, 90 New York, 
 58. The court did not decide who 
 was entitled to vote the shares, but 
 merely that the complaint was bare 
 of facts justifying an injunction. 
 The pledgee in whose name as 
 " trustee " stock stood, was held en- 
 titled to vote in Commonwealth v. 
 Dalzell, 152 Pa. St. 217. See § 578. 
 
 3 Leitch u.Wells, 48 N. Y. 585; 
 Thurber v. Crump, 86 Ky. 408. But 
 see Noble v. Turner, 69 Md. 519; 
 Kerr v. Urie, 86 M'd 72. 
 
 The tender of a certificate prop- 
 erly indorsed is a good tender of 
 shares " transferable on the books 
 of the company. 1 ' Noyes v. Spauld- 
 ing, 27 Vt. 420. 
 
 781
 
 § 796.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XV. 
 
 796. 
 
 As against 
 
 assignor's 
 
 creditors. 
 
 equities, obtains a title superior to them ; and if the rightful 
 owner has invested another with the usual evidence of title or 
 with apparent authority to dispose of the shares, he will be 
 estopped from disputing the rights of an innocent purchaser. 1 
 And the doctrine of the implied notice of lis pendens has no 
 application to certificates of stock which pass from hand to 
 hand like negotiable instruments. 2 But a bona fide purchaser 
 of a stolen certificate acquires no title as against the true 
 owner. 3 
 
 Likewise, although it be provided that all transfers 
 of shares shall be recorded on the books of the cor- 
 poration, and the certificates state that shares are 
 transferable only in that manner, a bona fide sale of 
 the shares, or an assignment of them as collateral security, 
 accompanied by a delivery of the certificates with a power of 
 attorney, is valid as against the attaching creditors of the 
 vendor or assignor, 4 and also as against his assignee in insol- 
 
 v. Ives, 31 Conn. 25; Beckwith v. Bur- 
 rough, 13 R. I. 294; Merchants' Nat. 
 Bk. v'. Richards, 6 Mo. App. 454; S. C, 
 aff'd, 74 Mo. 77; Newberry v. Detroit, 
 etc., Iron Mfg. Co., 17 Mich. 141; 
 Sargent v. Essex Marine Ry. Co., 9 
 Pick. 202; Lund v. Mill. Co., 50 Minn. 
 36; Weber v. Bullock, 19 Col. 214; 
 Kern v. Day, 45 La. Ann. 71. See 
 Sargent v. Franklin Ins. Co., 8 Pick. 
 90; Clark v. German Security Bk., 61 
 Miss. 611; Seeligson v. Brown, 61 
 Tex. 114. But compare State Ins. 
 Co. o. Sax, 2 Tenn. Ch. 507; Cates r. 
 Baxter, 97 Tenn. 443. Contra, But- 
 trick v. Nashua, etc., R. R. Co., 62 
 N. H. 413. But such an assignment 
 of the certificates would not hold as 
 against a bona fide purchaser who is 
 not an execution creditor of the 
 assignor, at sheriff's sale under an 
 execution. Farmers' Nat. Bk. v. 
 Wilson, 58 Cal. 600. Compare New- 
 berry v. Detroit, etc., Iron Mfg. Co., 
 17 Mich. 141 ; Weston v. Bear Eiver 
 M'g Co., 6 Cal. 425. See §589. But 
 transfers of shares made with intent 
 to hinder and defraud creditors are 
 
 1 Walker v. Detroit R'y Co., 47 
 Mich. 338; McNeil v. Tenth Nat. 
 B'k, 46 N. Y. 325; Cherry v. Frost, 
 7 Lea (Tenn.), 1; Dovey's Appeal, 
 97 Pa. St. 153; Gass v. Hampton, 16 
 Nev. 185; Stinson v. Thornton, 56 
 Ga. 377; Otis v. Gardner, 105 111. 
 436. See Winter v. Belmont M'g 
 Co., 53 Cal. 428; Caulkius v. Gas- 
 light Co., 85 Tenn. 683; Gilbert v. 
 Erie B'ld'g Ass'n, 184 Pa. St. 554; 
 National Trust Co. v. Gray, 12 D. C. 
 App. Cas. 276. Unless circumstances 
 exist to put the purchaser on inquiry. 
 Ryman v. Gerlach, 153 Pa. St. 197. 
 
 2 Leitch v. Wells, 48 N. Y. 585; 
 Holbrook v. New Jersey Zinc Co., 
 57 N. Y. 616. 
 
 8 Barstow v. Savage M'g Co., 64 
 Cal. 388; East Birmingham Land 
 Co. v. Dennis, 85 Ala. 565; Swim v. 
 Wilson, 90 Cal. 126. 
 
 4 Scott v. Pequonnock Nat. Bank, 
 15 Fed. Rep. 494; Smith v. Crescent 
 City Live Stock, etc., Co., 30 La. 
 Ann. Part II. 1378; Cornick v. 
 Richards, 3 Lea (Tenn.), 1; Broadway 
 Bk. v. McElrath, 13 N. J. Eq. 24; Colt 
 
 782
 
 CHAP. XV.] LEGAL RELATIONS AMONG SHAREHOLDERS. [§ 797. 
 
 vency. 1 But it has been held, where a statute provides that no 
 assignment of stock shall be valid except as between the parties 
 until it is entered on the books of the corporation, that an 
 attachment by the assignor's creditors, levied before such en- 
 try, is valid as against the assignee of the certificate. 2 And, in 
 general, shares of stock are subject to attachment, and an at- 
 taching creditor acquires a lien superior to the claim of a sub- 
 sequent bona fide purchaser for value with no actual notice of 
 the attachment. 3 
 
 § 797. The preceding rules protecting the assignee of cer- 
 tificates of stock, are not applicable when the cer- 
 tificate bears on its face a notice that its holder is fi£ C c ^ e c s er " 
 not the absolute owner. Thus, a person lending "m trust." 
 money on a certificate containing the words "in trust," is 
 affected with notice of the trust, and the hypothecation will be 
 invalid as against the cestui} And a similar rule would apply 
 
 void. Beckwith v. Burrough, 14 R. I. 
 366. 
 
 1 Sibley v. Quinsigamond Nat. 
 Bank, 133 Mass. 515; Blouin v. Li- 
 quidators of Hart, 30 La. Ann. Part I. 
 714. The equitable interest of a 
 shareholder in his shares will pass 
 by a general assignment in a trust 
 deed for the benefit of creditors, as 
 against an attaching creditor with 
 notice of the assignment, although 
 the cbarter of the corporation pro- 
 vides tbat transfers to be valid must 
 be entered on the books. Black v. 
 Zacharie, 3 How. 483. 
 
 2 Application of Murphy, 51 Wis. 
 519; Fort Madison Lumber Co. v. 
 Batavian B'k, 71 Iowa, 270; Moore 
 v. Opera House Co., 81 Iowa, 45. 
 See, also, Newell v. Williston, 13S 
 Mass. 240; Central National Bank v. 
 Williston, 138 Mass. 244; Fisher v. 
 Essex Bank, 5 Gray, 373; Boyd v. 
 Rockport Steam Cotton Mills, 7 Gray, 
 406; Blancbard v. Dedham Gaslight 
 Co., 12 Gray, 213; Weston v. Bear 
 River, etc., Water and M'g Co., 5 
 Cal. 186; Naglee v. Pacific Wharf Co., 
 
 20 Cal. 529; Conway v. John, 14 Col. 
 30. But compare Weston v. Bear 
 River M'g Co., 6 Cal. 425; Thurber 
 V. Crump, 86 Ky. 408; Lippitt v. 
 Paper Co., 15 R. I. 141. 
 
 3 Chesapeake and Ohio R. R. Co. 
 v. Paine, 29 Gratt. ( Va. ) 502 ; Shen- 
 andoah Valley R. R. Co. v. Griffith, 
 76 Va. 913. But see Armour Bros. 
 v. Nat. B'k, 113 Mo. 12. So the in- 
 terest of a shareholder in the prop- 
 erty of a corporation, represented by 
 shares of stock, may be reached by 
 garnishee process served on the cor- 
 poration. The corporation may be 
 the attaching creditor and garnishee 
 itself. Norton v. Norton, 43 O. St. 
 509 (a case construing statutes). The 
 state in which a corporation is char- 
 tered is the situs of shares of stock 
 for the purpose of determining con- 
 flicting claims to ownership. Jelle- 
 nik v. Huron Copper Mining Co., 177 
 U. S. 1. 
 
 4 Shaw v. Spencer, 100 Mass. 382; 
 Loring v. Brodie, 134 Mass. 453; 
 Budd v. Monroe, 18 Hun, 316; Gas- 
 ton v. American Exchange Nat. B'k, 
 
 783
 
 § 798.] THE LAW OF PRIVATE CORrO RATIONS. [CHAP. XV. 
 
 if the assignee of the certificate has or is affected with notice 
 of the rights of persons other than the holder. Thus, it has 
 been held, that a person purchasing shares from an administra- 
 tor at an illegal private sale, will be liable to the distributees 
 of the estate for dividends received by him. 1 
 
 § 798. Individual shareholders have no right to profits made 
 by the corporation until a dividend is declared. Ac- 
 cordingly, a dividend belongs to the owner of the 
 shares at the time when it is declared, whether it 
 was earned before he acquired the shares or subse- 
 quently. 2 And a sale of shares after a dividend 
 has been declared, does not carry the dividend, although it is 
 not payable until after the sale. 3 Similarly it is held, where 
 the directors " vote to pa\ f a dividend of four per cent, this da}', 
 and another of like amount from earnings of last year," that 
 the person who owns the shares when the dividends are thus 
 voted is entitled to both dividends although he sell the shares 
 
 Right to 
 dividends, 
 as between 
 transferrer 
 and trans- 
 feree. 
 
 29 N. J. Eq. 98. But see semble con- 
 tra, Brewster v. Sirae, 42 Cal. 139; 
 Winter v. Belmont M'f Co., 53 Cal. 
 428. Compare Winter v. Montgom- 
 ery Gas L. Co., 89 Ala. 544. 
 
 1 Nutting v. Thomasson, 57 Ga. 
 418. 
 
 2 Jermain v. L. Shore, etc., Ry. 
 Co., 91 N. Y. 483; Board man v. L. 
 Shore, etc., Ry. Co., 84 N. Y. 157; 
 Brundage v. Brundage, 65 Barb. 397; 
 Timberlake v. Compress Co., 72 Miss. 
 323. See Hyatt v. Allen, 56 New 
 York, 553; March v. Eastern Rail- 
 road Co., 43 N. H. 515. A bequest 
 of shares does not carry a scrip 
 dividend received by the testator 
 during his life; but such a dividend 
 declared after testator's death, be- 
 longs to the legatee. Brundage v. 
 Brundage, supra. 
 
 When preferred or guaranteed 
 dividends .should have been paid at 
 a certain time, but were not declared, 
 and the shareholder entitled to them 
 did not enforce their declaration, 
 they remain payable to the holder of 
 
 784 
 
 the stock, and pass with a transfer 
 of it. Jermain v. Lake Shore, etc., 
 Ry. Co., 91 N. Y. 483; Manning v. 
 Quicksilver M'g Co., 24 Hun, 361. 
 
 Pledgee of shares in whose name 
 the stock stands is entitled to divi- 
 dends. Boyd v. Worsted Mills, 149 
 Pa. St. 363; Central Neb. Nat. Bank 
 b. Wilder, 32 Neb. 454; Guarantee 
 Co. v. East Rome Co., 96 Ga. 511. 
 
 3 Bright v. Lord, 51 Iud. 272; 
 Spear v. Hart, 3 Rob. (N. Y.) 420; 
 compare Phinizy v. Murray, 83 Ga. 
 747. Contra semble, Burroughs v. 
 North Carolina R. R. Co., 67 N. C. 
 376. 
 
 A shareholder is not liable for divi- 
 dends received by him, in the first 
 instance, to a person claiming to be 
 the owner of the stock, but whose 
 claim the company ignores. Such a 
 person must first establish his claim 
 against the company. Peckham v. 
 Van Wagenen, 83 N. Y. 40. This 
 proposition might be affected, how- 
 ever, by relations between the plain- 
 tiff and defendant.
 
 CHAP. XV.] LEGAL RELATIONS AMONG SHAREHOLDERS. [§ 799. 
 
 before the day for the payment of the second dividend has been 
 fixed. 1 
 
 § 799. Difficult and still unsettled questions respecting the 
 ownership of dividends, arise when the shares are As between 
 left in trust by will, the income of the trust to go life-tenant 
 
 •f ' o and re- 
 
 to a life-tenant, and the principal, at his death, to mainder- 
 a remainder-man. There is little doubt that a rea- 
 sonable amount of profit, earned before the testator's death, 
 but declared in the shape of an ordinary cash dividend after 
 that event, is income and belongs to the life-tenant. 2 But an 
 ordinary cash dividend earned before, but declared after the 
 testator's death, is to be distinguished from a distribution in 
 the shape of a cash dividend — consequent, perhaps, on a change 
 of policy in the body corporate — of long accumulated profits. 
 " Where the profits of a corporation have been accumulating 
 for many years, till the market value of the stock is double its 
 original price, and the owner dies, directing the ' income ' of his 
 estate to be applied to particular objects for limited periods, 
 these extraordinary accumulations are as much a part of his 
 capital as any other portion of his estate, and must therefore 
 be regarded as forming part of the principal from which the 
 future income is to arise."" 3 
 
 Likewise, when after the testator's death, the corporation 
 sells a portion of its property or franchises, and distributes the 
 
 1 Hill v. Newichawanick Co., 8 Hun, 
 459, aff'd 71 N. Y. 593. 
 
 2 Bates v. Mackinley, 31 Beav. 280; 
 Milieu v. Guerrard, 67 Ga. 284. 
 
 sEarp's Appeal, 28 Pa. St. 368, 
 375, opinion of the court per Lewis, 
 C. J. But all profit arising after 
 the death of the testator is " in- 
 come." Wiltbank's Appeal, 64 Pa. 
 St. 256; Biddle's Appeal, 99 Pa. St. 
 278, 282; Earp's Appeal, 28 Pa. St. 
 368; Van Doren v. Olden, 19 N. J. 
 Eq. 176. See Moss's Appeal, 83 Pa. 
 St. 264. " It is well settled in this 
 state that when the stock of a cor- 
 poration is by the will of a decedent 
 given in trust, the income thereof 
 for the use of a beneficiary for life, 
 
 50 
 
 with remainder over, the surplus 
 profits, which have accumulated in 
 the lifetime of the testator but 
 which are not divided until after 
 his death, belong to the corpus of 
 his estate; whilst the dividends of 
 earnings made after his death are 
 income, and are payable to the life- 
 tenant, no matter whether the divi- 
 dend be in cash, or scrip, or stock." 
 Smith's Estate, 140 Pa. St. 344, 352, 
 opinion of court per Clark, J. Con- 
 nolly's Estate, 198 Pa. St. 137. This 
 distinction is discarded in Richard- 
 son v. Richardson, 75 Me. 570, where 
 the rule is stated to be, that all cash 
 dividends, declared from profits, go 
 to the person holding the stock at 
 
 785
 
 § 800.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XV. 
 
 proceeds in the shape of a cash dividend, that too is a part of 
 the principal, and is not income to be paid over to the life- 
 tenant. 1 Of a similar status is money paid to a corporation 
 for property taken by a city, and distributed as a cash divi- 
 dend. 2 But moneys arising from the sale of corporate property 
 and distributed as a cash dividend, are income if they arise 
 from a sale of property made by the corporation in the ordinary 
 course of its business, when it sells only such property as its 
 regular business is to sell. 3 In Lang v. Lang's Executor 4 the 
 following proposition was held to be the rule as stated by Col- 
 lins, J., giving the opinion of the New Jersey Court of Errors 
 and Appeals : " The underlying principle applicable in this 
 case is that no corporate dividend declared after the right to 
 the income has become severed from the ultimate ownership 
 of the stock upon which such dividend is declared, belongs in 
 equit}' - to the person entitled to income except so far as it is 
 derived from the earnings of the stock after such severance. 
 The general trend of judicial opinion in this country is toward 
 the adoption of that principle, and we adopt it without qualifi- 
 cation." 
 
 § 800. In regard to the status of dividends not payable in 
 cash, the authorities are more conflicting. The rule has 
 indeed been stated in Massachusetts, that cash dividends are 
 income and stock dividends are principal. 5 But, even accord- 
 ing to the Massachusetts decisions, that which may be dis- 
 
 the time (i. e., the life- tenant), with- 
 out regard to the time when the 
 profits were earned or their source, 
 and regardless of the size of the 
 dividend; provided it is not a dis- 
 tribution of the company's assets, as 
 on winding-up. 
 
 i Vinton's Appeal, 99 Pa. St. 434; 
 Eisner's Appeal, 175 Pa. St. 143; 
 Wheeler v. Perry, 18 N. H. 307; Gif- 
 ford v. Thompson, 115 Mass. 478. 
 See Clarkson v. Clarkson, 18 Barb. 
 646. But see Balch v. Hallet, 10 
 Gray, 402. 
 
 2 Heard v. Eldredge, 109 Mass. 
 258. 
 
 8 Reed v. Head, 6 Allen, 174. 
 
 786 
 
 4 57 N. J. Eq. 325. 
 
 5 Minot v. Paine, 99 Mass. 101. 
 See Leland v. Hayden, 102 Mass. 
 542; Daland v. Williams, 101 Mass. 
 571; Davis v. Jackson, 152 Mass. 
 58; In re Hopkins's Trusts, L. R. 
 18 Eq. 696. And see Richardson v. 
 Richardson, 75 Me. 570, 574. In 
 D'Ooge v. Leeds, 176 Mass. 558, it 
 was held that certain bonds repre- 
 senting the surplus of the company, 
 distributed among the stockholders 
 by vote of the managers, amounted 
 to an issue of preferred stock, and 
 as between tenant for life and re- 
 mainder-men were capital and not 
 income.
 
 CHAP. XV.] LEGAL RELATIONS AMONG SHAREHOLDERS. [§ 801. 
 
 tributed in the form of a cash dividend is sometimes principal ; * 
 and in New York, stock dividends declared out of earnings are 
 held to be income. 2 It has also been held where a testator 
 directed the income of shares to be paid to one person for life, 
 remainder to other parties, that dividends declared in the form 
 of certificates of indebtedness go to the life-tenant, although 
 they may consist in part of profits accumulated before the 
 testator's death. 3 But where it is resolved to increase the 
 corporate stock, and the right of shareholders to subscribe is 
 valuable, and is sold, the proceeds are principal of which the 
 interest only goes to the life-tenant. 4 
 
 § 801. In regard to this somewhat confusing matter of the 
 rights of life tenant and remainder-man in stock dividends, 
 the following suggestions are hazarded. Usually to speak 
 of a "stock dividend" involves in reality a contradiction in 
 terms. A dividend is a distribution of profits. But when a 
 corporation has accumulated profits, and declares a "stock 
 dividend," just what the corporation does not do is to declare 
 a dividend. A "stock dividend" is no dividend, no real dis- 
 tribution, either of profits or capital ; but merely an increase 
 
 1 Heard v. Eldredge, supra. 
 
 2 McLouth v. Hunt, 154 N. Y. 179; 
 Lowry v. Farmers* L. & T. Co., 56 
 App. Div. 408; Chester v. Buffalo 
 M'f'g Co., 70 App. Div. 443. Ace. 
 Hite v. Hite, 93 Ky. 257; Thomas v. 
 Gregg, 78 Md. 545; Pritchitt v. Trust 
 Co., 96 Tenn. 472. 
 
 3 Milieu v. Guerrard, 67 Ga. 284. 
 The English rule is as follows : 
 "When a testator or settler directs 
 or permits the subject of his dispo- 
 sition to remain as shares or stocks 
 in a company which has the power 
 either of distributing its profits as 
 dividend, or of converting them into 
 capital, and the company validly ex- 
 ercises this power, such exercise of 
 its power is binding on all persons 
 interested under the testator or set- 
 tler in the shares, and consequently 
 what is paid by the company as div- 
 idend goes to the tenant for life, 
 
 and what is paid by the company to 
 the shareholder as capital, or appro- 
 priated as an increase of the capital 
 stock in the concern, enures to the 
 benefit of all who are interested in 
 the capital." Bouch v. Sproule, 12 
 App. Cas. 385, 397; language of Jus- 
 tice Fry quoted above and elsewhere. 
 See, also, Sugden v. Alsbury, 45 Ch. 
 D. 237; Ellis v. Barfield, 60 L. J. Ch. 
 488; Hooper v. Rossiter, 1 McClel. 
 527 ; Barclay v. Wainwright, 14 
 Vesey, 66 ; Price v. Anderson, 15 
 Simons, 473; Preston v. Melville, 16 
 Simons, 163; Johnson v. Johnson, 15 
 Jur. 714. 
 
 4 Atkins v. Albee, 12 Allen, 359 ; 
 BiddhVs Appeal, 99 Pa. St. 278; Brin- 
 ley v. Grou, 50 Conn. 66; Green v. 
 Smith, 17 R. I. 28; Hite v. Hite, 93 
 Ky. 257; Eisner's Appeal, 175 Pa. St. 
 143. 
 
 787
 
 § 801.] THE LAW OF PltlVATE CORPORATIONS. [CHAP. XV. 
 
 in the number of shares into which the capital is divided. 1 
 For instance, some years ago, when the stock of the Rock 
 Island Railroad was selling at more than double its par value, 
 the corporation issued to every shareholder an additional share 
 for each share of stock already held by him. The object ac- 
 complished was the halving of the market- value of the shares. 
 But by this action no part of the capital or accumulated profits 
 of the corporation was distributed among the shareholders. 
 Take, for another instance, the present condition of the 
 Chemical Bank of New York City. The par value of its shares, 
 in number three thousand, is one hundred dollars ; but their 
 market value, at the present time, is about four thousand dol- 
 lars. Should the Chemical Bank issue another share of stock 
 to each shareholder for every share already held by him, it 
 would not distribute one cent. Where, before such issue or 
 "stock dividend," if one so choose to call it, the holder of one 
 share owns one three-thousandth of the entire property, after 
 such issue he will own two six-thousandths. 2 
 
 1 "After a stock dividend a cor- 
 poration has just as much property 
 as it had before. It is just as sol- 
 vent and just as capable of meeting 
 all demands upon it. After such a 
 dividend the aggregate of the stock- 
 holders own no more interest in the 
 corporation than before. The whole 
 number of shares before the stock 
 dividend represented the whole prop- 
 erty of the corporation, and after 
 the dividend they represent that and 
 no more. A stock dividend does not 
 distribute property, but simply 
 dilutes the shares as they existed 
 before." Williams ». West. Un. Tel. 
 Co., 93 N. Y. 162, 189; Mills v. Brit- 
 ton, 64 Conn. 4. And compare Com- 
 monwealth v. Pittsburgh, etc., Ry. 
 Co., 74 Pa. St. 83; Gilkey v. Paine, 
 80 Maine, 319; Allegheny?;. Railway 
 Co., 179 Pa. St. 424. 
 
 2 See Terry v. Eagle Lock Co., 47 
 Conn. 141, Ki4; §568, and Williams 
 v. Western Union Telegraph Com- 
 pany. 93 X. Y. 162, 189, supra; also 
 
 788 
 
 Osborne v. Osborne, 24 Gratt. (Va. ) 
 392. New shares representing the 
 surplus property of a corporation 
 are principal and not income. Peti- 
 tion of Brown, Administrator, 14 R. 
 I. 371. 
 
 By noticing the rights of creditors, 
 it will become still more apparent 
 that a stock dividend is no dividend 
 at all. As against creditors a corpo- 
 ration, which has no surplus earn- 
 ings, has no right to declare a cash 
 dividend, and in that way distribute 
 its capital among the shareholders. 
 But it might declare " stock divi- 
 dends" ad infinitum, and no creditor 
 be any the worse, or any share- 
 holder have a cent more in his 
 pocket. To be sure, "stock divi- 
 dends" may become very material 
 in view of outside considerations; 
 as where a corporation is restricted 
 from paying more than a certain 
 percentage of dividends. By issu- 
 ing further stock it might (if the 
 issue were not declared void) keep
 
 CHAP. XV.] LEGAL RELATIONS AMONG SHAREHOLDERS. [§ 801. 
 
 Consequently, since a "stock dividend" is no real dividend 
 or distribution of profits, it would seem that even if such 
 " dividend " were " declared out of profits," the stock so issued 
 could not be regarded as income ; * for it must be conceded 
 that the life-tenant has no right to claim corporate earnings as 
 income of the trust created in his favor until the corporate 
 management has voted to distribute them as a dividend ; and 
 if the corporate management decides on declaring a stock 
 dividend, what it really decides on, is not to declare a dividend 
 at all. 2 
 
 down the percentage of dividends, 
 while it increased their amount. 
 But, none the less, the issue of the 
 stock would itself be no dividend. 
 
 1 The rule that "stock dividends " 
 are principal seems to be gaining 
 ground. So held in Gibbons v. 
 Mahon, 136 U. S. 549; Spooner v. 
 Phillips, 62 Conn. 62. Regarded as 
 settled in Mills v. Britton, 64 Conn. 
 
 4; and see the Massachusetts cases 
 in § 800, note. 
 
 2 This rule might seem to work 
 hardship on the life-tenant. But, 
 if so, the real cause of his hardship 
 is the action of the corporate man- 
 agement in not declaring a dividend; 
 and possibly, in an extreme case, the 
 life-tenant might compel the declara- 
 tion of a dividend. 
 
 789
 
 § 803. J THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVI. 
 
 CHAPTER XVI. 
 
 LEGAL RELATIONS AMONG THE OFFICERS OF A 
 CORPORATION. 
 
 Directors, § 802. 
 
 Contribution among directors; re- 
 specting liability to tbe corpora- 
 tion, §§ 803, 804. 
 
 Respecting liability to creditors, 
 §805. 
 
 Between directors bound on the 
 same instrument, § 800. 
 
 § 802. 
 
 Between directors and other officers, 
 
 §807. 
 Right of directors to inspect the 
 
 corporate books, § 808. 
 Be facto directors, § 809. 
 
 Directors. 
 
 Directors meet together, consult, and together trans- 
 act the business of the corporation. But their mutual 
 legal relations as directors are few, perhaps their 
 most important right as against each other being that no one 
 of their number shall commit any wrongful act through which 
 the corporate interests are injured in a way that Avill implicate 
 other directors in liabilitv to make good the damages. 
 
 § 803. The common rule of law that there is no contribu- 
 tion among tort-feasors 1 must be strictly construed 
 in relation to directors and other officers and agents 
 of corporations, for they may be held liable for the 
 wrongful acts of each other in cases which are not 
 within the contemplation of the rule. In two 
 classes of cases the rule seems inapplicable. First, when 
 directors are held liable for the acts of their appointees or 
 associates ; 2 and secondly, when by some statute directors are 
 rendered liable, although guilty of no default, for the wrong- 
 ful acts of each other or of other corporate agents. 3 Accord- 
 ingly, if directors are, for any reason, held liable for the 
 
 Contribu- 
 tion among 
 directors ; 
 respecting 
 liability to 
 the corpora- 
 tion. 
 
 1 There seem to have been excep- 
 tions to this rule at common law, 
 e. g., where one of two persons was 
 held liable for the tort of their com- 
 mon servant, contribution from the 
 other was allowed. Wooley v. Batte, 
 790 
 
 2 Car. & P. 417. But see Oakes t\ 
 Spalding, 40 Vt. 347; and Spalding 
 v. Oakes, 42 Vt. 343. 
 
 2 See § 624. 
 
 8 See, e. g., Const, of Cal., 1879, 
 art. xii. § 3.
 
 CHAP. XVI.] LEGAL RELATIONS AMONG OFFICERS. [§ 804. 
 
 damages resulting from the wrong-fill acts or omissions of their 
 
 DO O 
 
 appointees, or of other directors, when they themselves have 
 neither participated in the wrongful acts nor connived at 
 them, they would certainly seem to be entitled to indemnifica- 
 tion from their appointees in the one case, and from the other 
 directors in the other. 
 
 This notion of different degrees of liability for wrongful 
 acts or omissions is by no means a new doctrine, nor altogether 
 the result of statute. Lord Hardwicke said in Charitable 
 Corporation v. Sutton : l "In the present case one thing is 
 clear, that [those] who were the five engaged in that confed- 
 eracy are certainly liable to make good the losses which the 
 corporation have sustained in the first place, and the committee- 
 men [directors] who were not partners in the affair, in the 
 second place only." Lord Hardwicke had in his mind rather 
 their degrees of liability as enforced in a suit brought by the 
 corporation ; still, carried out logically, any such idea must 
 end in allowing contribution or indemnification among direct- 
 ors and other officers of a corporation. 
 
 § 804. And decisions sustain this conclusion. 2 Thus, in 
 an English case, it was held an irregularity for directors to 
 take the promissory notes of one of their number, instead of 
 cash, in payment for shares ; and an irregularity that would 
 render them liable to make good to the company any loss 
 occurring on a promissory note so taken. But the court also 
 held that the transaction was not so fraudulent or illegal as to 
 entitle the representatives of a debtor to repudiate his debt 
 as to the company ; and that the directors, who had voluntarily 
 made good the full price of the shares, were entitled to be 
 indemnified out of the assets of the debtor. 3 The court further 
 held in another case, arising apparently from the same facts, 
 that the directors who took part in the meetings at which the 
 
 1 2 Atkyns, 400, 404, § 619. 
 
 2 When a director, by agreement 
 with his co-directors, for whom lie 
 is to act as well as for himself in 
 the matter, has taken bonds of the 
 corporation below par, and sold them 
 at a profit, and has been obliged to 
 account to the corporation for the 
 
 whole amount of profit realized, he 
 is entitled to contribution from such 
 of his co-directors as were associated 
 with him in the transaction. Wid- 
 rig v. Newport Street R'y Co., 82 Ky. 
 511. 
 8 Power v. Hoey, 19 W. R. 916. 
 
 791
 
 §806.] THK LAW OF miYATK CORPORATIONS. [CHAP. XVI. 
 
 transactions were authorized, were entitled to contribution 
 from each other ; and that they need not wait until sued by 
 the company, or until a loss had certainly befallen it ; but 
 being themselves bound to make good the matter at once, they 
 were at once entitled to contribution. The court said, more- 
 over, that it would draw a line between those who participated, 
 and those who were merely negligent in allowing the improper 
 transactions. 1 
 
 A rule for such cases might perhaps be stated thus : If 
 directors A., B., C, and D. are held liable for the wrongful 
 act of director E., with which they were in no way concerned, 
 either actively or by connivance, they will have the right as 
 against E. to complete indemnification ; and if one of their 
 number, as for instance A., has been forced to pay all or more 
 than his proportion of the loss arising from the wrongful act, 
 he will be, as against B., C, and D., entitled to contribution. 2 
 
 § 805. Still, when the liability is the result of an act or an 
 omission which may be imputed to each one of the 
 
 Kespecting , . 1 u i • 
 
 nubility to directors, it has been held that no contribution 
 anions: them would obtain. As in the case of 
 Andrews v. Murray, 3 where it was held that no contribution 
 could be had in respect of liability arising from a failure to file 
 an annual report required by statute ; Judge Ingraham saying : 
 " Either of the trustees might have avoided this liability by 
 attending to the duty imposed upon him by the statute. He 
 cannot charge any other trustees with the consequence of his 
 own negligence. The statute imposes the duty on each, the 
 liability attaches to each, and the policy of the law is to leave 
 each one to the consequences of his own negligence, so as to 
 insure stricter attention to the provisions of the statute on the 
 part of each of the trustees, which might not be the case if 
 such negligence could be divided between the whole." 4 
 
 § 806. If the officers of a corporation bind themselves for its 
 
 1 Power v. O'Connor, 19 W. R. 
 923. 
 
 2 Compare Ashhurst v. Mason, L. 
 R. 20 Eq. 225; Wilson v. Goodman, 
 4 Hare, 54; Lewin on Trusts, 744, 
 ed. 6. 
 
 792 
 
 » 33 Barb. 354. 
 
 4 33 Barb. 354, 356. Nickerson v. 
 Wheeler, 118 Mass. 295, is directly 
 contrary to this decision. See §§764, 
 767.
 
 CHAP. XVI.] LEGAL RELATIONS AMONG OFFICERS. [§ 809. 
 
 benefit on the same obligation, thev will be entitled _ x 
 
 ° . ... Between 
 
 to contribution from each other in regard to liability directors 
 thereon ; as where, for instance, directors become the the same 
 makers and endorsers of a note to raise money for mstrument - 
 the corporation. 1 
 
 § 807. There would seem to be no reason to doubt that if 
 directors through neglect of their duties are held to 
 the corporation for damages resulting from a breach directors 
 of trust committed by a subordinate officer or agent, J^-J. °,J er 
 they would be entitled to indemnification from him. 
 On the other hand, supposing that an executive or ministerial 
 officer incurs liability from carrying out the orders of the board 
 of directors, has he any rights over against them ? It would 
 seem so, if he acted innocently in the matter ; but if he knew 
 of the breach of trust intended by the board, then unquestion- 
 ably he would have been an active cognizant party to it, and 
 would have no right to contribution or indemnification from 
 his fellow wrong-doers. 
 
 § 808. A director has a right at all times to inspect the 
 books of the corporation ; and if the board of direct- 
 ors, by resolution or by-law, attempt to exclude one 
 of their number from examining the books, he may 
 obtain a mandamus, directing the proper officer to 
 allow him to examine them ; and this holds true even when 
 the other directors believe the one so excluded to be hostile to 
 the corporation. 2 
 
 § 809. It has been held that trespass may be brought in the 
 name of the corporation, by a board of de facto 
 directors, who are in possession, against another j(^^ s- 
 board claiming to be the legal directors of the same 
 corporation. And in such a suit, the defendants cannot defend 
 by impeaching the title of the de facto directors ; as this can 
 only be done in some action in the nature of a quo warranto. 3 
 
 Right of 
 directors to 
 inspect cor- 
 porate 
 hooks. 
 
 1 Slaymaker v. Gundacker, 10 S. 
 & R. (Pa.) 75; Niddleton v. McCar- 
 tee, 2 Mackey (Dist. of Col.), 420. 
 
 2 People v. Throop, 12 Wend. 
 183; People v. Mott, 1 How. Pr. 
 
 (N. Y. ) 247; but compare Rosen- 
 feld v. Einstein, 46 N. J. L. 479. 
 
 3 Atlantic, Tennessee, etc., R. R. 
 Co. v. Johnston, 70 N. C. 348. 
 
 793
 
 § 811.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XX11. 
 
 CHAPTER XVII. 
 
 LEGAL RELATIONS AMONG THE 
 CORPORATION. 
 
 CREDITORS OF A 
 
 Creditors who are also shareholders 
 
 or officers, §§ 810, 811. 
 Other creditors, § 812. 
 When the corporation is insolvent, 
 
 §813. 
 Capacities of receiver. Mortgage 
 
 trustee, § 814. 
 Creditors having claims founded on 
 
 the same instrument, § 815. 
 Provisions in railroad mortgages, 
 
 §816. 
 Reorganizations, § 816a. 
 
 §810. 
 
 Mortgages covering property to be 
 acquired. Contractors' liens, §§ 
 817, 818. 
 
 Mortgages of separate portions of 
 the railroad. Rolling stock, §819. 
 
 Earnings, § 820. 
 
 Appointment of receiver in fore- 
 closure suit. Payment of current 
 expenses, §§ 821, 822. 
 
 Receivers' orders, §§ 823, 824, 824«. 
 
 Statutory liability of shareholders. 
 Priorities of creditors, §§ 825, 826. 
 
 Creditors 
 who are 
 also share- 
 holders or 
 officers. 
 
 The relationship of creditor may be occupied either 
 by a person holding no other relationship towards 
 the corporation, or by a shareholder, or by a director 
 or other officer. If a person occupies towards the 
 corporation a dual relationship, for the correct deter- 
 mination of his rights and liabilities in respect to the corporate 
 enterprise, his two relationships must be kept distinct. Indeed, 
 the two relationships between a corporation and a person who 
 is at once shareholder and creditor, or director and creditor, 
 are so distinguishable that a person holding such double rela- 
 tionship is, for many purposes, to be treated as two persons, 
 and will not always be entitled to take advantage of being one 
 person. 1 
 
 § 811. Thus, when a corporation is insolvent, a person oc- 
 cupying the two relationships of shareholder and creditor, 
 avIio is indebted as shareholder for calls, may not offset against 
 
 1 Nor can a person who is merely 
 an ordinary debtor to a corporation, 
 buy up claims against it at a discount 
 after it has passed into the hands of 
 a receiver, or become evidently in- 
 solvent, and set them off at their 
 
 794 
 
 face against his liability to the cor- 
 poration. Diven v. Phelps, 34 Barb. 
 •224; Balch o. Wilson, 25 Minn. 299; 
 Smith o. Mosby, 9 Heisk. (Tenn.)501; 
 Lanier v. Gayoso Savings Institution, 
 ib. 506.
 
 CHAP. XVII.] LEGAL RELATIONS AMONG CREDITORS. [§ 812. 
 
 his indebtedness to the corporation the indebtedness of the 
 latter to himself. He must pay in his calls, and then he will 
 rank as a creditor, receiving his due proportion of the corporate 
 assets. 1 Again, a person occupying the dual relationship of 
 director and creditor, may not, at least if the corporation is 
 insolvent, use the advantages of his position as director to 
 procure the payment of his claims as creditor in preference to 
 the claims of other creditors. As a director, he must, in good 
 faith, discharge his full duty towards all the persons interested 
 in the corporate enterprise ; and this forbids the favoring of 
 any interest, as, for instance, his own. 2 
 
 It is held, however, that a shareholder may make use of 
 whatever advantages his position as shareholder may give him, 
 to secure the payment of debts due him from the corporation, 
 even to the exclusion of other creditors who are not share- 
 holders. 3 And at all events, the fact that a person occupies 
 the status of shareholder or officer in a corporation, will not 
 ordinarily prejudice his rights as a creditor, if he happens to 
 be one. Thus, directors are not excluded from sharing as 
 creditors, when they are such, pro rata with other creditors of 
 the corporation. 4 
 
 § 812. The legal relations between creditors occupying no 
 other relationship towards the corporation are sim- 
 pler. One creditor may ordinarily sue the corpora- itors! r ° 
 tion at his will without regard to the etfect which 
 his suit may have on the payment of debts due other creditors. 5 
 And creditors of a railroad company may, in order to protect 
 themselves, combine into an association and buy in the road ; 
 provided there is no arrangement to prevent competition. 
 
 i See § 729. 
 
 2 See § 759. 
 
 3 Whitwell v. Warner, 20 Vt. 444. 
 See §§ 710, 711. But, according to 
 the better opinion, a corporation can- 
 not make a valid insolvent assign- 
 ment with preferences. See § GC8. 
 For the doctrine that corporate 
 funds are trust funds for the pay- 
 ment of debts of the corporation, 
 see §§ 654-659 and § 702, etc. 
 
 4 Bristol Milling and M'f'g Co. v. 
 Probasco, 64 Ind. 406. 
 
 5 In Robinson v. Bank of Darien, 
 18 Ga. 65, 108, it is said in substance, 
 that where a judicial preference has 
 been established by the superior 
 legal diligence of any creditor, that 
 preference will be observed as to 
 legal assets, and execution creditors 
 are entitled to preference; though 
 perhaps, as to equitable assets where 
 the judgment creditor must go into 
 equity, the rule may be different, 
 and creditors are equal and must 
 share proportionately. 
 
 795
 
 § 813.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. 
 
 Moreover, that the trustees making the sale, and two of the 
 directors of the corporation were members of this association, 
 was held not to render the sale void, but merely to give the 
 corporation a right to redeem within a reasonable time, and 
 before new equities had intervened. 1 
 
 § 813. When, however, a corporation becomes insolvent, 
 
 its assets constitute a fund for ratable distribution 
 corporation amongst its creditors ; and it has been held that no 
 is insolvent, creditor can by suit or execution gain priority of 
 
 payment over the rest. 2 This, at least, holds true 
 after the corporate assets have passed into the hands of an 
 assignee, or a receiver has been appointed. 3 Under such cir- 
 cumstances it is competent for a creditor to restrain the pay- 
 ment to another of a greater proportion of his claim than the 
 rest receive : 4 except, of course, when the claim of the other is 
 based on a lien acquired before the insolvency of the corpora- 
 tion. Subsequent lien-creditors, however, have a standing in 
 court to contest the enforcement of prior incumbrances on the 
 corporate property, 5 unless the security of the subsequent lien- 
 creditors is in terms made subject to the prior incumbrance.'' 
 
 1 Kitchen v. St. Louis, etc., R'y 
 Co., 69 Mo. 224. 
 
 2 Marr v. Bank of West Tennes- 
 see, 4 Coldw. (Tenn.) 471. Contra, 
 Breene v. Merchants, etc., B'k, 11 
 Col. 97. 
 
 3 Clinkscales v. Pendleton M'f'g 
 Co., 9 S. C. 318; Hadley v. Freed- 
 mau's Savings Co., 2 Tenn. Ch. 122; 
 Roseboom ». Whittakev, 132 111. 81. 
 
 ^ See Bank u. Lumber Co., 91 Tenn. 
 12; Dobson v. Simonton,. 86 N. C. 
 492; Balch v. Wilson, 25 Minn. 299; 
 Smith v. Mosby, 9 Heisk. (Tenn.) 
 
 v 501; Lanier v. Gayoso Savings In- 
 stitution, ib. 506; Cowan v. Plate 
 Glass Co., 184 Pa. St. 1. 
 
 The plaintiff took a fire policy in 
 an insurance company on an agree- 
 ment that the policy might be ter- 
 minated at any time on notice by 
 the insurers and return of the proper 
 proportion of the premium, for the 
 unexpired term. The company be- 
 
 796 
 
 came insolvent and was dissolved. 
 Its receiver notified all policy hold- 
 ers that their policies were termi- 
 nated. To this notice the plaintiff 
 paid no heed, and subsequently suf- 
 fered a loss. His claim was to par- 
 ticipate in the assets of the company 
 in respect of his loss; but the court 
 held he could participate only on 
 account of his unearned premium; 
 and based their decision on the 
 ground that after the dissolution of 
 a corporation and the appointment 
 of a receiver, a creditor could ac- 
 quire no new rights against the cor- 
 poration. Dean & Son's Appeal, 98 
 Pa. St. 101. 
 
 * Pfohl 0. Simpson, 74 N. Y. 137. 
 See People v. Security Life Ins. Co., 
 71 N. Y. 222. 
 
 5 Commonwealth v. Smith, 10 
 Allen, 448; see Fox v. Seal, 22 Wall. 
 424. Compare § 185. 
 
 6 Bronson v. La Crosse, etc., R. R.
 
 CHAP. XVII.] LEGAL RELATIONS AMONG CREDITORS. [§ 814. 
 
 Bat a judgment creditor will never be entitled to dispute the 
 validity of a prior mortgage merely on the ground that its ex- 
 ecution was irregular, when the corporation lias had the bene- 
 fit ot the mortgage and would itself be in no position to con- 
 test its validity. 1 
 
 § 814. When there is a receiver of the corporate assets, the 
 various rights of creditors are enforceable by him ; 
 and he may contest the payment of debts arising 
 from ultra vires or illegal transactions, and maintain 
 actions to recover moneys paid on illegal or fraudu- 
 lent claims to persons assuming to be creditors of the corpora- 
 tion. 2 If, however, the receiver is delinquent in the discharge 
 
 Capacities 
 of receiver. 
 Mortgage 
 trustee. 
 
 Co., 2 Wall. 283; Bundy v. Iron Co., 
 38 Ohio St. 300; Pittsburg Carbon 
 Co. v. McMillin, 119 N. Y. 4(5. See 
 Hasselman v. United States Mort- 
 gage Co., 97 Ind. 365. A decree of 
 sale of a railroad, had in the fore- 
 closure of a first mortgage thereon, 
 recited that the sale " shall be sub- 
 ject to the liens established, or which 
 may be established, by said court in 
 this cause on references heretofore 
 had and now pending, as prior and 
 superior to the lien of the holder of 
 bonds issued under the first mort- 
 gage, decreed to be foreclosed by 
 former decree in said cause." These 
 references were to a master to deter- 
 mine the priority of the lien of 
 receiver's certificates and the like, 
 and in the orders of reference, per- 
 mission was given to the bondhold- 
 ers to oppose any claims before the 
 master. The purchaser at the sale 
 was held to have no standing in 
 court, even on the ground that these 
 liens had been established by fraud 
 practised on the master and the 
 court, to re-litigate the liens ex- 
 pressly subject to which he bought 
 and took title, the same recitals 
 being in substance expressed in his 
 deed; said purchaser having made 
 
 no offer to surrender the property 
 to be re-sold for the benefit of those 
 concerned. Swann v. Wright's Ex'r, 
 110 U. S. 590. 
 
 1 Thomas v. Citizens' Horse R'y 
 Co., 104 111. 462; Taylor v. Agricul- 
 tural, etc., Ass'n, 68 Ala. 229; Bundy 
 v. Iron Co., 38 Ohio St. 300. 
 
 2 See Whittlesey v. Delaney, 73 
 N. Y. 571; also §§ 273, 542. The 
 receiver of a corporation may avoid 
 a chattel mortgage on its property, 
 on the ground that it was not filed 
 according to law. Farmers' L. and 
 T. Co. v. Minneapolis, etc., Works, 
 35 Minn. 543. Compare, as to re- 
 ceiver's powers, Vanderbilt v. Cen- 
 tral R. R., 43 N. J. Eq. 669; Harring- 
 ton v. Connor, 51 Neb. 214; Bosworth 
 v. Terminal Road Ass'n, 174 U. S. 182. 
 A receiver of a railroad property is 
 not bound to adopt the contracts 
 (accept the leases) of the railroad 
 company; he is entitled to a reason- 
 able time to elect whether to adopt 
 or repudiate. If he elect to adopt 
 a lease, he becomes vested with title 
 to the leasehold interest, and is lia- 
 ble upon the covenant to pay rent. 
 United States Trust Co. v. Wabash 
 R'y, 150 U. S. 287. 
 
 797
 
 § 815.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. 
 
 of his trust, an injured creditor will have a standing in court 
 to enforce the proper distribution of the corporate assets. 1 
 
 Mortgages or trust deeds covering the property of corpora- 
 tions are usually made to a trustee for bondholders, who there- 
 by becomes, in accordance with the terms of the mortgage or 
 trust deed, the representative of the bondholders for the pur- 
 poses of the trust. 2 " The trustee of a railroad mortgage," said 
 Chief Justice Waite, giving the opinion of the Federal Supreme 
 Court in Shaw v. Railroad Co., "represents the bondholders in 
 all legal proceedings carried on by him affecting his trust, to 
 which they are not actual parties, and whatever binds him, if 
 he acts in good faith, binds them." 3 Bondholders ordinarily 
 are not necessary parties to a foreclosure suit brought by their 
 trustee ; 4 and notice to the trustee in matters relating to his 
 trust is notice to the bondholders. 5 
 
 §815. When a number of creditors, as, for instance, bond- 
 holders, have claims against a corporation arising 
 from the same transaction or series of transactions, 
 and secured by the same security, their mutual rela- 
 tions, as well as their relations towards the corpora- 
 tion, will largely depend on the terms of their 
 security. In such case, however, even in the absence of any 
 special provision or agreement forbidding it, one creditor 
 
 Creditors 
 having 
 claims 
 founded on 
 the same 
 instrument. 
 
 1 See Pfohl v. Simpson, 74 N. Y. 
 137. 
 
 2 Bondholders are ailected with 
 notice of the terms of the mortgage 
 or trust deed securing their bonds. 
 See § 674. 
 
 ;i Shaw v. Railroad Co., 100 U. S. 
 605, 611; ace. Beals v. Illinois, etc., 
 R. R. Co., 133 U. S. 290; El well v. 
 Fosdick, 134 U. S. 500; Rumsey v. 
 People's R'y Co., 154 Mo. 215. 
 
 4 Shaw v. Norfolk County R. R. 
 Co., 5 Gray (Mass.), 162; Williamson 
 o. New Jersey Southern R. R. Co., 25 
 N. J. Eq. 13. 
 
 5 Actual notice to a mortgage 
 trustee of an agreement to which 
 property received by a railroad com- 
 pany is subject, is notice to bond- 
 holders. Pierce ». Emery, 32 N. H. 
 
 798 
 
 484. So is actual notice to trustee 
 of a prior equitable mortgage. Mil- 
 ler v. Rutland, etc., R. R. Co., 36 Vt. 
 452. But see Commissioners, etc., 
 v. Thayer, 94 U. S. 631. 
 
 A mortgage trustee in possession 
 cannot bind the bondholders per- 
 sonally for the payment of the ex- 
 penses of the road. See Chaffee v. 
 Rutland R. R. Co., 53 Vt. 345. Com- 
 pare Sturgis u. Knapp, 31 Vt. 1. 
 
 When a mortgage trustee is him- 
 self a judgment creditor, bondhold- 
 ers cannot object to his levying exe- 
 cution on property of the railroad 
 company not covered by the mort- 
 gage. Elbridge v. Smith, 34 Vt. 384. 
 
 As to officers of the corporation 
 acting as trustees for bondholders, 
 see § 629 note.
 
 CHAP. XVII.] LEGAL RELATIONS AMONG CREDITORS. [§ 815. 
 
 cannot proceed alone and enforce his rights against the cor- 
 poration to the detriment of other creditors similarly situated. 
 When persons have a common interest in a security, equity 
 will not allow one of them to appropriate it exclusively to 
 himself, or impair its worth to the others ; for community of 
 interest involves mutual obligation. Thus, although one 
 bondholder under a railroad mortgage may often use it to 
 enforce the payment of his claim, 1 he cannot use it to obtain 
 an advantage for himself over the other bondholders ; he can- 
 not use it to become the owner of the mortgaged premises at 
 the lowest possible price, leaving unpaid the bonds of the 
 other bondholders. His duty, if he uses the security, is to 
 make it productive of the most obtainable for all interested in 
 it; and if he seeks to make a profit at the expense of those 
 whose rights in the security are the same as his own, he is un- 
 faithful to the relation which he has assumed, and guilty of 
 fraud. 2 " If a single bondholder has any right at all to insti- 
 tute proceedings, he is bound to act for all standing in a simi- 
 
 1 When a trustee under a mort- 
 gage, on being applied to in pursu- 
 ance of its terms, refuses to sue, the 
 bondholders may themselves sue, 
 making the trustee, the corpora- 
 tion, and the rest of the bondhold- 
 ers parties. Hotel Co. v. Wade, 97 
 U. S. 13; Commonwealth v. Susque- 
 hanna, etc., R. R. Co., 122 Pa. St. 
 306. See Galveston R. R. v. Cow- 
 drey, 11 Wall. 459; Western Penn. 
 Hospital v. Mercantile Library Hall 
 Co., 189 Pa. St. 269; §682. But see 
 Hackensack Water Co. v. DeKay, 36 
 N. J. Eq. 548; and compare New 
 York Guaranty, etc., Co. v. Memphis 
 Water Co., 107 U. S. 205. Unsecured 
 creditors are not proper parties to a 
 suit to foreclose a mortgage on the 
 property of a corporation. Herring 
 v. N. Y., etc., R. R. Co., 105 N. Y. 
 340. 
 
 In a recent case in Maine, damage 
 was occasioned by sparks from a 
 locomotive, while the railroad was 
 being operated by trustees under a 
 
 mortgage, before foreclosure. An 
 action was brought under a statute 
 providing that, " when a building or 
 other property is injured by fire com- 
 municated by a locomotive engine, 
 the corporation using it is responsi- 
 ble for such injury." It was held 
 that a corporation subsequently 
 formed of the bondholders was 
 not liable; nor were the bond- 
 holders liable themselves, as the 
 trustees were operating the road 
 on their own responsibility and not 
 as agents for the bondholders; and 
 a statute protected the trustees. 
 Stratton v. European, etc., R'y, 74 
 Me. 422. But see S. C, 76 Me. 269. 
 2 Jackson v. Ludeling, 21 Wall. 
 616. In this case, the managers and 
 local officers of an embarrassed rail- 
 road company, holding a small por- 
 tion of its bonds, had obtained a 
 hasty order of sale and sold out the 
 road, grossly disregarding the rights 
 of the rest of the bondholders. At 
 the suit of the injured bondholders 
 
 799
 
 § 815.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. 
 
 lar position, and not only to permit other bondholders to 
 intervene, but to see that their rights are protected in the 
 final decree.'" ' 
 
 In another case, where a railroad mortgage of doubtful 
 adequacy had been executed directly to all the bondholders by 
 name, to secure specifically the sum due to each, it was held 
 that no single bondholder, even though professing to act on 
 behalf of all who might come in and contribute to the expenses 
 of the suit, could proceed alone against the company, and 
 obtain a sale of the property mortgaged. For, the sufficiency 
 of the security being doubtful, all other creditors similarly 
 situated should have had notice, in order to protect their 
 interests; and even in equity, a suit on a written instrument 
 should be brought in the name of all who are formal parties to 
 it, and retain an interest therein. 2 And again, where a col- 
 lusive and fraudulent sale of corporate property, procured by 
 one set of creditors, had been set aside at the suit of other 
 creditors, the creditors procuring the collusive sale were held 
 not entitled to recover back money which they had paid to the 
 holders of a prior mortgage at a time when the suit to set the 
 sale aside was pending ; nor were they entitled to be sub- 
 rogated to the security of such mortgage. 3 
 
 the sale was set aside. Compare 
 Wabash, etc., Canal Co. v. Beers, 2 
 Black, 448. 
 
 A bondholder under a mortgage 
 will not be entitled on the foreclosure 
 of the same to enforce a side agree- 
 ment made by him with the corpora- 
 tion, by which he would obtain an 
 inequitable advantage over the other 
 bondholders. Vose v. Bronson, (i 
 Wall. 452. 
 
 When bonds in excess of the 
 limit under a mortgage are sold to 
 bona fide purchasers, and nothing 
 appears in the bonds or in the mort- 
 gage by which the purchasers could 
 have ascertained that the bonds 
 which they purchased were unau- 
 thorized, such purchasers will be en- 
 titled to share pro rota with the 
 other bondholders. Stanton v. Ala- 
 
 800 
 
 bama, etc., R. R. Co., 2 Woods, 523. 
 The decision of the court, however, 
 seems, in this case, actually to have 
 rested on the inability of the court 
 to determine which were the bonds 
 that had been issued in excess, the 
 court saying that it did not follow 
 that the highest numbers were such, 
 as the bonds might all have been ne- 
 gotiated together, and the highest 
 numbers sold first. 
 
 1 New Orleans Pac. R\y v. Parker, 
 143 U. S. 42, 58, opinion of court per 
 Brown, J. 
 
 2 Railway Co. v. Orr, 18 Wall. 
 471. See Pennock v. Coe, 23 How. 
 117. 
 
 3 Railroad Co. v. Soutter, 13 Wall. 
 517. Compare Drury v. Cross, 7 
 Wall. 290; § 700. But trustees un- 
 der a railroad mortgage containing
 
 CHAP. XVII.] LEGAL RELATIONS AMONG CREDITORS. [§ 816. 
 
 § 816. The provisions contained in some trust deeds and 
 mortgages for the benefit of bondholders go far 
 
 Provisions 
 
 towards organizing the bondholders into a body in railroad 
 corporate to take the place and perform the func- mortga s es - 
 tions of the original corporation upon the insolvency of the 
 latter. Thus, in the mortgage of a railroad it was cove- 
 nanted and agreed by all the parties thereto, " that in case of an}' 
 judicial foreclosure sale, .... and the holders of a majority 
 of the then outstanding bonds secured by this mortgage shall 
 in writing request said trustees or their successors, they are 
 authorized to purchase premises embraced herein for the use 
 and benefit of the holders of the then outstanding bonds 
 secured by this mortgage, and having so purchased said 
 premises, the right and title thereto shall vest in said trustees, 
 and no bondholder shall have any claim to the premises or the 
 proceeds thereof, except for his pro rata share of the proceeds 
 of the said purchased premises, as represented in a new com- 
 pany or corporation to be formed for the use and benefit of the 
 holders of the bonds secured hereby, and the said trustees may 
 take such lawful measures as deemed for the interest of said 
 bondholders, to organize a new company or corporation for the 
 benefit of the holders of the bonds secured by this mortgage. 
 Said new company or corporation shall be organized upon such 
 terms, conditions, and limitations, and in such a manner, as 
 the holders of a majority of the said outstanding bonds secured 
 by this mortgage shall in writing request or direct, and said 
 trustees so purchasing shall thereupon re-convey the premises 
 so purchased by them to said new company or corporation." A 
 default having been made, and a foreclosure brought, the court 
 held that this agreement inured equally to the benefit of all 
 
 covenants of warranty may buy up 
 a prior incumbrance to protect tbe 
 property from a forced sale, and will 
 be entitled to subrogation to tbe 
 security as against tbe company, and 
 to be reimbursed tbe amount paid 
 by tbem witb legal interest. Mem- 
 phis and L. R. R. R. Co. v. Dow, 
 120 U. S. 287. 
 
 Where a majority of shareholders 
 and creditors foreclose a railroad 
 
 51 
 
 collusively, such shareholders are 
 necessary parties to a bill to set the 
 sale aside. Ribon v. Railroad Cos., 
 16 Wall. 446. But bondholders un- 
 der a mortgage are not ordinarily 
 necessary parties to a foreclosure 
 suit brought by tbe trustees under 
 the mortgage. Williamson v. New 
 Jersey Southern R. R. Co., 25 N. J. 
 Eq. 13, § 814. 
 
 801
 
 § 816a.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. 
 
 the bondholders, and that each held his interest subject to the 
 controlling power therein given to the majority. 1 
 
 It has recently been held by the United States Supreme 
 Court, that when the franchises of a corporation are mort- 
 gaged under statutes conferring upon purchasers at foreclosure 
 sale the authority on compliance with certain forms to become 
 a corporation, no contract arises between the bondholders and 
 the state that these statutory forms shall remain the same or 
 that the state shall impose no further conditions. The right of 
 the bondholders is to reorganize under whatever laws are in force 
 at the time of reorganization. 2 
 
 § 816a. Ordinarily, a majority of mortgage bondholders 
 
 cannot by an agreement that the railroad company 
 
 Reorganize mav issue a mortgage taking preference to theirs, 
 
 tions. J ° ° ° * 
 
 affect the rights of a minority. 3 And neither can 
 bondholders or shareholders claim the benefits of a reorganiza- 
 tion when they fail to comply with its terms. 4 In a case 
 
 1 Sage v. Central R. R. Co., 99 
 U. S. 334. See, also, Shaw v. Rail- 
 road Co., 100 U. S. 605. 
 
 2 Schurz v. Cook, 148 U. S. 397; 
 Memphis & L. R. R. R. Co. v. Com- 
 missioners, 112 U. S. 609, 621. 
 
 8 Poland v. Lamoille Valley R. R. 
 Co., 52 Vt. 144 ; Hollister v. Stew- 
 art, 111 N. Y. 644. Nor can trus- 
 tees of the mortgage do so, nor waive 
 defaults in payments of principal or 
 interest. lb. But provisions ena- 
 bling a majority of bondholders to 
 modify the mortgage rights of all 
 may be inserted in the mortgage. 
 Follit v. Edistone Granite Quarries, 
 (1892) 3 Ch. 75; Sneath v. Valley 
 Gold, (1893) 1 Ch. 477. As to pri- 
 orities of the holders of detached 
 coupons over bondholders, see Se- 
 wall v. Brainerd, 38 Vt. 364; Miller 
 v. Rutland, etc., R. R. Co., 40 Vt. 
 399. 
 
 A person who advances money to 
 the corporation to take up coupons, 
 under an undisclosed agreement that 
 they are to be delivered to him un- 
 
 802 
 
 cancelled, but the coupon-holders 
 having no reason to think they were 
 not paid, but rather having every 
 reason to suppose them simply paid 
 and cancelled, cannot claim a lien 
 under the mortgage; he is merely a 
 creditor of the corporation. Cam- 
 eron v. Tome, 64 Md. 507. 
 
 4 Fidelity Ins. Co.'s Appeal, 106 
 Pa. St. 144. See Weston v. New 
 Guston Co., 64 L. T. Rep. 815. 
 When a statute provides that any 
 shareholder may within six months 
 come in and assent to a plan of re- 
 organization (after a railroad fore- 
 closure) and comply with its terms 
 and thereby become entitled to share 
 in the benefits, he gains no rights by 
 an assent after the six months have 
 expired; and equity cannot relieve 
 him from the effect of his failure to 
 perform this condition precedent. 
 Vatable v. New York, etc., R. R. Co., 
 96 N. Y. 49. 
 
 In setting aside a foreclosure sale 
 and directing a further inquiry into 
 the circumstances of the case, the
 
 CHAP. XVII.] LEGAL RELATIONS AMONG CREDITORS. [§ 816«. 
 
 which not long ago came before the Supreme Court of the 
 United States, the parliament of the Dominion of Canada had 
 authorized a railroad corporation, existing under its authority, 
 
 Supreme Court has uttered the fol- 
 lowing dictum upon the subject of 
 reorganization agreements : " We 
 must, therefore, recognize the fact, 
 for it is a fact of common knowledge, 
 that, whatever the legal rights of 
 the parties may be, ordinarily fore- 
 closures of railroad mortgages mean 
 not the destruction of all inter- 
 est of the mortgagor and a trans- 
 fer to the mortgagee alone of the 
 full title, but that such proceed- 
 ings are carried on in the interests 
 of all parties who have any rights in 
 the mortgaged property, whether as 
 mortgagee, creditor or mortgagor. 
 We do not stop to inquire, because 
 the question is not presented by this 
 record, whether a court is justified 
 in permitting a foreclosure and sale 
 which leaves any interest in the 
 mortgagor, to wit, the railroad com- 
 pany and its stockholdeis, and ought 
 not always to require an extinction 
 of the mortgagor's interest and 
 a full transfer to the mortgagee, 
 representing the bondholders. As- 
 suming that foreclosure proceedings 
 may be carried on to some extent at 
 least in the interests and for the 
 benefit of both mortgagee and mort- 
 gagor (that is, bondholder and stock- 
 holder), we observe that no such 
 proceedings can be rightfully car- 
 ried to consummation which recog- 
 nize and preserve any interest in 
 the stockholders without also recog- 
 nizing and preserving the interests, 
 not merely of the mortgagee, but of 
 every creditor of the corporation. 
 In other words, if the bondholder 
 wishes to foreclose and exclude in- 
 ferior lienholders or general un- 
 secured creditors and stockholders he 
 
 may do so, but a foreclosure which 
 attempts to preserve any interest or 
 right of the mortgagor in the prop- 
 erty after the sale must necessarily 
 secure and preserve the prior rights 
 of general creditors thereof. This is 
 based upon the familiar rule that the 
 stockholder's interest in the prop- 
 erty is subordinate to the rights of 
 creditors; first of secured and then 
 of unsecured creditors. And any 
 arrangement of the parties by which 
 the subordinate rights and interests 
 of the stockholders are attempted to 
 be secured at the expense of the 
 prior rights of either class of cred- 
 itors comes within judicial denun- 
 ciation." Louisville Trust Co. v. 
 Louisville, N. A. &. C. R'y Co., 174 
 U. S. 674; but see comments upon 
 this case by the Circuit Judge upon 
 again confirming the sale, sub nom. 
 Farmers' L. & T. Co. o. Louisville, 
 N. A. & C. R'y Co.; In re Louisville 
 Tr. Co., 103 Fed. R. 110; and in 
 Wenger v. Chicago & E. R. Co., 114 
 Fed. R. 34. See, also, Paton v. Nor. 
 Pac. R. R. Co., 85 Fed. R. 838; and 
 Ferguson o. Ann Arbor R. R. Co., 17 
 N. Y. App. Div. 336. 
 
 A provision in the constitution of 
 Arkansas, that "no private corpora- 
 tion shall issue stock or bonds ex- 
 cept for money or property actually 
 received, or labor done; aud all ficti- 
 tious increase of stock or indebted- 
 ness shall be void," does not prevent 
 the carrying out of an agreement 
 between mortgage bondholders of an 
 embarrassed railroad, whereby trus- 
 tees are to buy the mortgaged prop- 
 erty on foreclosure, and convey it to 
 a new company to be organized by 
 the bondholders, which should issue 
 
 803
 
 § 816a.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. 
 
 to enforce a settlement upon the mortgage creditors of the 
 company, by which they were to receive other securities of the 
 company in place of their mortgage bonds ; and the settlement 
 preserved the right of citizens of the United States, being 
 bondholders, to participate in the reorganization on the same 
 terms as Canadians and other British subjects. The settle- 
 ment, assented to by more than three-fourths of the bond- 
 holders, having gone into effect, the court held that it was 
 binding on non-assenting bondholders, citizens of the United 
 States, who brought suit in a Federal court to recover on their 
 bonds. 1 Giving the opinion of the court, Chief Justice Waite 
 said: " Holders of bonds and other obligations issued by large 
 corporations for sale in the market, and secured by mortgages 
 to trustees or otherwise, have by fair implication certain con- 
 tract relations with each other. . . . They are not corpora- 
 tions, and thus necessarily, in the absence of fraud or undue 
 influence, bound by the will of the majority as to matters 
 within the scope of the corporate powers, but they are inter- 
 ested in the administration of a trust which has been created 
 for their common benefit. Ordinarily, their ultimate security 
 depends in a large degree on the success of the work in which 
 the corporation is engaged, and it is not uncommon for differ- 
 ences of opinion to exist as to what ought to be done for the 
 promotion of their mutual interests. In the absence of statu- 
 torv authority, or some provision in the instrument which 
 establishes the trust, nothing can be done by a majority, how- 
 ever large, which will bind a minority without their consent.* 
 Hence it seems to be eminently proper that where the legisla- 
 tive power exists some statutory provision should be made for 
 binding the minority in a reasonable way by the will of the 
 majority ; and unless, as in the case in the states of the United 
 States, the passage of laws impairing the obligation of contracts 
 is forbidden, we see no reason why such provisions may not be 
 made in respect to existing as well as prospective obligations. 
 The nature of securities of this class is such that the right of 
 
 new mortgage bonds in lieu of the 
 old bonds, and full paid up stock to 
 the bondholders without any pay- 
 ment of money. Memphis & L. R. 
 R. R. Co. v. Dow, 120 U. S. 287. 
 804. 
 
 1 Canada Southern R. Co. v. Geb- 
 hard, 109 U. S. 527. 
 
 2 Same language used in Gilfillan 
 v. Union Canal Co., 109 U. S. 401, 
 403.
 
 CHAP. XVII.] LEGAL RELATIONS AMONG CREDITORS. [§ 817. 
 
 legislative supervision for the good of all, unless restrained by 
 some constitutional prohibition, seems almost necessarily to 
 form one of their ingredients, and when insolvency is threat- 
 ened, and the interests of the public, as well as creditors, are 
 imperilled by the financial embarrassments of the corporation, 
 a reasonable 'scheme of arrangement' may in our opinion as 
 well be legalized as an ordinary ' composition in bankruptcy.' 
 In fact such i arrangement acts ' are a species of bankrupt acts. 
 Their object is to enable corporations created for the good of 
 the public to relieve themselves from financial embarrassments 
 by appropriating their property to the settlement and adjust- 
 ment of their affairs, so that they may accomplish the purposes 
 for which they were incorporated." 1 
 
 § 817. A mortgage by a corporation, as for instance a rail- 
 road company, when competently made, attaches to whatever 
 of the property of the corporation it purports to cover, 
 whether acquired or to be acquired ; and the bond- 
 holders under such mortgage have ordinarily a 
 lien on the property covered by the mortgage prior 
 in law as in time to any subsequently accruing 
 rights of other creditors. 2 But if at the time of ex- 
 ecuting a railroad mortgage there exists statutes which give 
 contractors a first lien on railroads for labor performed on them, 
 a contractor by duly filing his lien in accordance with the stat- 
 ute will acquire as against the mortgagees and bondholders a 
 lien prior in effect, although the mortgage may have been 
 recorded first. 3 
 
 Mortgages 
 covering 
 property to 
 be ac- 
 quired. 
 Contract- 
 ors' liens. 
 
 1 Canada Southern R. Co. v. Geb- 
 hard, 109 U. S. 527, 534, etc. 
 
 2 See, e. g., Loudenslager v. Ben- 
 ton, 4 Phila. 382; Covey v. Pitts- 
 burgh, Ft. W., etc., R. R. Co., 3 
 Phila. 173; Hamlin v. Jerrard, 72 
 Me. 62; Hamlin v. European, etc., 
 R. R. Co., 72 Me. 83. As to what 
 property a railroad mortgage covers, 
 see § 676. 
 
 So when a corporation accepts 
 bonds of a state or county issued by 
 virtue of a law which declares that 
 they shall be a first lien on its 
 property, such lien will arise on the 
 
 acceptance of them by the corpora- 
 tion, and a purchaser of the road or 
 of its bonds issued under a subse- 
 quent mortgage, is bound to take 
 notice of the act; and the lien of 
 the county under the act is enforce- 
 able against the funds in the hands 
 of a receiver, appointed in a fore- 
 closure suit of the subsequent mort- 
 gage, and against the purchaser of 
 the road. Ketchum i\ St. Louis, 
 101 U. S. 306; Wilson v. Boyce, 92 
 U. S. 320. 
 
 3 Brooks v. R. R. Co., 101 U. S. 
 443; Meyer v. Hornby, ib. 728. See 
 
 805
 
 § 818.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. 
 
 § 818. When a railroad company mortgages its road, "built 
 and to be built," although at the time when the mortgage is 
 executed but a portion of the road is built, the mortgage 
 attaches to the unbuilt portions of the road as they are built, 
 and takes precedence of the claims of the contractors 1 (unless 
 there are statutes giving contractors a prior lien), and judg- 
 ment creditors, as well as bondholders under a subsequent 
 mortgage covering the portions of the road which were unbuilt 
 when the first mortgage was given. 2 A mortgage, however, 
 intended to cover after-acquired property attaches to such 
 property in the condition in which it comes into the possession 
 of the company. 3 Consequently, if property, when acquired 
 by the company, is already subject to mortgages or other liens, 
 the general mortgage, though prior in time, does not displace 
 them ; and if a railroad company when acquiring property 
 gives back a purchase-money mortgage, the giving of the mort- 
 gage and the purchase of the property constituting one trans- 
 action, the purchase-money mortgage will take precedence, in 
 respect of the property purchased, over every lien, or mort- 
 gage, or judgment covering the entire property of the com- 
 pany. 4 Thus, a railroad company mortgaged its present and 
 future property, and then entered in a written agreement with 
 a car company, by which the former hired certain cars at a 
 rent payable monthly, reserving the right to purchase them at 
 their original cost, the car company retaining the right to 
 rescind the agreement if the railroad company failed to pay the 
 interest on its bonds. While this contract was in force, the 
 mortgagee filed a foreclosure bill, and a receiver was appointed 
 in the foreclosure suit, who took charge of the road, and used 
 
 Fox v. Seal, 22 Wall. 424. Compare 
 Woods v. Pittsburgh, Cinn. and St. 
 L. Ry. Co., 99 Pa. St. 101. 
 
 1 Duuhain v. Railway Co., 1 Wall. 
 254; Thompson o. Valley R. R. Co., 
 132 U. S. 68. 
 
 2 Pennock v. Coe, 23 How. 117; 
 Galveston It. R. Co. v. Cowdrey, 11 
 Wall. 459; First Nat. Bk. v. Ander- 
 son, 75 Va. 250. See Buck v. Sey- 
 mour, 46 Conn. 156; Branch v. At- 
 lantic, etc., R. R. Co., 3 Woods, 481. 
 
 8 Botsford v. New Haven, etc., R. 
 
 806 
 
 R. Co., 41 Conn. 454; Williamson v. 
 New Jersey Southern R. R. Co., 29 
 N. J. Eq. 311. 
 
 4 United States v. New Orleans 
 Railroad, 12 Wall. 362, where it was 
 held that a failure to register the 
 purchase-money mortgage made no 
 difference; but the court said that if 
 the purchased property had been 
 rails to be attached to the road, the 
 case might have been decided dif- 
 ferently. See, also, Botsford v. New 
 Haven, M. and W. R. R. Co., 41
 
 CHAP. XVII. ] LEGAL RELATIONS AMONG CREDITORS. [§ 820. 
 
 the cars above mentioned in operating it. The court held that 
 the contract between the railroad company and the car company 
 was binding, and that the latter was entitled to the possession 
 of the cars, and to compensation for their use by the receiver, 
 payable out of the fund to the credit of the foreclosure suit. 1 
 
 § 819. A railroad company may give distinct mortgages 
 covering separate portions of its road, and in such Mortgages 
 
 i • i , ,i ,. of separate 
 
 case one mortgagee has no rights over the portion portions of 
 of the road covered by the other mortgage, and is KoiiLog" 
 not even a necessary party to a suit to foreclose it. 2 stock - 
 In regard to rolling stock, however, it may be different, and 
 it has been held that in the absence of any specific apportion- 
 ment between the several divisions of the road covered by 
 separate mortgages, the terms of which are sufficiently broad 
 to include rolling stock, such mortgages attach to all the roll- 
 ing stock in the order of their priority. 3 
 
 § 820. Where, according to the terms of a railroad mort- 
 gage, the company is to hold possession, of the road 
 and received the earnings, until the mortgagees take 
 possession, or the proper judicial authority interposes, such 
 possession gives the company a right to the whole fund of the 
 earnings and subjects them to its control. The earnings, con- 
 sequently, remain as liable to the creditors of the company 
 as if the mortgage did not exist. 4 Thus, a corporation mort- 
 
 Conn. 454; Hand v. Savannah, etc., 
 R. R. Co., 12 S. C. 314, 364; Hall v. 
 Mobile, etc., Ry. Co., 58 Ala. 10. 
 
 1 Myer v. Car Company; 102 U. 
 S. 1. 
 
 2 Bronson v. Railroad Co., 2 Black, 
 524. Compare Chicago, Danville, 
 etc., Ry. Co. v. Lowenthall, 93 111. 
 433. 
 
 3 Minnesota Co. v. St. Paul Co., 6 
 Wall. 742. See § 676. 
 
 Where a receiver in Kentucky is 
 appointed under a mortgage includ- 
 ing rolling stock, an Ohio couivt will 
 enforce his claim on a part of such 
 rolling stock, temporarily in Ohio, 
 as against the attachment of an un- 
 secured Kentucky creditor. Bank 
 v. McLeod, 38 Ohio St. 174. 
 
 4 Gilman v. Illinois, etc., Tel. Co., 
 91 U. S. 603. Even though the 
 mortgage cover income. Dow v. 
 Memphis R. R. Co., 124 U. S. 652; 
 Sage v. Memphis, etc., R. R. Co., 
 125 U. S. 361. A decree, silent as 
 to the profits and possession of the 
 road from the date of the decree 
 until the sale thereby ordered, does 
 not affect rights to such profits and 
 possession during that period. lb. 
 DeGraff v. Thompson, 24 Minn. 452. 
 Compare One v. Peacock, 14 O. St. 
 187; Coe v. Columbus, etc., R. R. 
 Co., 10 O. St. 372; Coe v. Knox 
 County Bank, 10 O. St. 412; Contra, 
 Dunham v. Isett, 15 Iowa, 284; Jes- 
 sup v. Bridge, 11 Iowa, 572. 
 
 807
 
 § 822.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. 
 
 gaged its property, rents, issues, and profits, giving to the 
 trustee the right to enter and take possession and collect the 
 rents and issues. Default having been made, the trustee tiled 
 a bill to subject the moneys of the company on hand to the 
 claims of the mortgage. A judgment creditor whose execution 
 had been returned nulla bona, also tiled a bill to obtain satis- 
 faction of his judgment from the same moneys ; and it was 
 held that, since the trustee had not taken possession, his claim 
 to the moneys should be postponed to that of the judgment 
 creditor. 1 
 
 § 821. When pending the foreclosure of a railroad mortgage, 
 
 the trustees or the bondholders procure the appoint- 
 
 mentof re- ment of a receiver of the corporate property, it is 
 
 foreclosure competent for the court to add to the order appoint- 
 
 suit. Pay- ma . ^ e receiver such terms and conditions in regard 
 
 meat of cur- © ° 
 
 rent ex- to the payment of the current expenses of the road 
 incurred prior to his appointment, 2 as well as in re- 
 gard to expenses incurred during the time of the receivership, 
 as may seem to the court just or expedient in view of the cir- 
 cumstances of the case. 
 
 § 822. Here the leading authority is Fosdick v. Schall, 3 where 
 Chief Justice Waite said, giving the opinion of the Federal Su- 
 preme Court : " We have no doubt that when a court of chan- 
 cerv is asked by railroad mortgagees to appoint a receiver of 
 the railroad property, pending proceedings for foreclosure, the 
 court, in the exercise of a sound judicial discretion, may, as a 
 condition of issuing the necessary order, impose such terms 
 with reference to the payment from the income during the re- 
 ceivership of outstanding debts for labor, supplies, equipment, 
 or permanent improvement of the mortgaged property as may, 
 under the circumstances of the case, appear to be reasonable. 
 Railroad mortgages and the rights of railroad mortgagees are 
 comparatively new in the history of judicial proceedings. They 
 are peculiar in their character and affect peculiar interests. The 
 
 1 American Bridge Co. v. Ileidel- 
 bacli, 94 U. S. 798. Compare King 
 v. Housatonic R. R. Co., 45 Conn. 
 220; New York Security Co. v. 
 Saratoga G. & E. L. Co., 159 N. Y. 
 137. 
 
 808 
 
 2 Metropolitan Trust Co. v. Tona- 
 wanda, etc., R. R. Co., 103 N. Y. 
 245, is adverse to this; but the 
 weight of authority favors the full 
 proposition stated in the text. 
 
 3 99U. S. 235.
 
 CHAP. XVTI.j LEGAL RELATIONS AMONG CREDITORS. [§ 822. 
 
 amounts involved are generally large, and the rights of parties 
 oftentimes complicated and conflicting. It rarely happens that 
 a foreclosure is carried through to the end without some con- 
 cessions by some parties from their strict legal rights, in order 
 to receive advantages that could not otherwise be attained, and 
 which it is supposed will operate to the general good of all who 
 are interested. This results almost as a matter of necessity 
 from the peculiar circumstances which surround such litigation. 
 " The business of all railroad companies is done to a larger 
 or less extent on credit. The credit is longer or shorter as the 
 necessities of the case require ; and when companies become 
 pecuniarily embarrassed it frequently happens that debts for 
 labor, equipment, and improvements are permitted to accumu- 
 late, in order that bonded interest may be paid and a disastrous 
 foreclosure postponed, or altogether avoided. In this way the 
 daily and monthly earnings, which ordinarily should go to pay 
 the daily and monthly expenses, are kept from those to whom 
 in equity they belong, and used to pay the mortgage debt. 
 The income out of which the mortgagee is to be paid, is the 
 net income obtained by deducting from the gross earnings 
 what is required for necessary operating and managing ex- 
 penses, proper equipment and useful improvements. Every 
 railroad mortgagee impliedly agrees that the current debts 
 made in the ordinary course of business shall be paid from the 
 current receipts before he has any claim on the income. If, 
 for the convenience of the moment, something is taken from 
 what may not improperly be called the current debt fund, and 
 put into that which belongs to the mortgage creditors, it 
 certainly is not inequitable for the court, when asked by the 
 mortgagees to take possession of the future income, and hold 
 it for their benefit, to require as a condition of such an order, 
 that what is due from the earnings to the current debt shall 
 be paid by the court from the future current receipts before 
 anything derived from that source goes to the mortgagees. 1 
 
 1 " So far as current expense cred- 
 itors are concerned, the court should 
 use the income of the receivership 
 in the way the company would have 
 been bound in equity and good con- 
 science to use it if no change in the 
 
 possession had been made. ... If 
 current earnings are used for the 
 benefit of mortgage creditors before 
 current expenses are paid, the mort- 
 gage security is chargeable in equity 
 with the restoration of the fund 
 
 809
 
 § 822.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. 
 
 In this way the court will only do what, if a receiver should 
 not be appointed, the company ought itself to do. For even 
 though the mortgage may in terms give a lien upon the profits 
 and income, until possession of the mortgaged premises is 
 actually taken, or something equivalent done, the whole earn- 
 ings belong to the company and are subject to its control. 1 
 
 " The mortgagee has his strict rights, which he may enforce 
 in the ordinary way. If he asks no favors, he need grant 
 none. But if he calls upon a court of chancery to put forth 
 its extraordinary powers and grant him purely equitable relief, 
 he may with propriety be required to submit to the operation 
 of a rule which always applies in such cases, and do equity in 
 order to get equity. The appointment of a receiver is not a 
 matter of strict right. . . . 
 
 " We think, also, that if no such order is made when the 
 receiver is appointed, and it appears in the progress of the 
 cause that bonded interest has been paid, additional equipment 
 provided, or lasting and valuable improvements made out of 
 earnings which ought, in equity, to have been employed to 
 keep down debts for labor, supplies, and the like, it is within 
 the powers of the court to use the income of the receivership 
 to discharge obligations, which, but for the diversion of funds, 
 would have been paid in the ordinary course of business. 
 This, not because the creditors to whom such debts are due 
 have, in law, a lien upon the mortgaged property or the 
 income, but because, in a sense, the officers of the company 
 are trustees of the earnings for the benefit of the different 
 
 which has been thus improperly ap- 
 plied to their use." Burnham v. 
 Bower., Ill U. S. 776, 782, 783. 
 
 1 Compare King v. Housatonic 
 R. R. Co., 45 Conn. 226. The earn- 
 ings of a road in the hands of a re- 
 ceiver are chargeable with the value 
 of goods lost in transport, and with 
 damages done to property during 
 his management, in preference to 
 the claims of bondholders, under 
 an existing mortgage. Cowdrey v. 
 Galveston, etc., R. R. Co., 93 U. S. 
 352. Earnings of the road in the 
 hands of a receiver are chargeable 
 
 810 
 
 with injuries to a person sustained 
 while the road is in the receiver's 
 hands. Mobile and O. R. R. Co. v. 
 Davis, 62 Miss. 271. 
 
 The assignee of a claim which is 
 entitled, as against the claims of 
 bondholders, to be paid from earn- 
 ings in the receivers' hands, has all 
 the rights of his assignor. Union 
 Trust Co. v. Walker, 107 U. S. 596; 
 Burnham v. Bowen, 111 U. S. 776. 
 If the claim as against the funds 
 of the receivership, is evidenced by 
 commercial paper, it is no waiver of 
 the claim to renew the paper. lb.
 
 CHAF. XVII.] LEGAL RELATIONS AMONG CREDITORS. [§ 823. 
 
 classes of creditors and the stockholders ; and if they give to 
 one class of creditors that which properly belongs to another, 
 the court may, upon an adjustment of the accounts, so use the 
 income which comes into its hands, as, if practicable, to restore 
 the parties to their original equitable rights. While, ordi- 
 narily, this power is confined to the appropriation of the 
 income of the receivership and the proceeds of moneyed assets 
 that have been taken from the company, cases may arise where 
 equity will require the use of the proceeds of the sale of the 
 mortgaged property in the same way. . . . The power rests 
 upon the fact, that in the administration of the affairs of the 
 company the mortgage creditors have got possession of that 
 which, in equity, belonged to the whole, or a part of the general 
 creditors." l 
 
 § 823. In accordance with the principles indicated iu the 
 foregoing opinion, it is held that a court of equity, 
 which has appointed managing receivers of such ^raers Ver8 ' 
 property as a railroad, when taken under its charge 
 as a trust fund for the payment of incumbrances, has power to 
 authorize the receivers to raise money necessary for the preser- 
 vation and management of the property, and make such money 
 chargeable as a first lien thereon. 2 This power is regarded as 
 
 1 Fosdick v. Schall, 99 U. S. 235, 
 251, etc. Affirmed and followed in 
 Fosdick v. Car Co., ib. 256; Huide- 
 koper v. Locomotive Works, ib. 258; 
 Union Trust Co. v. Souther, 107 
 U. S. 591; Burnham v. Bowen, 111 
 U. S. 776; Southern Railway v. Car- 
 negie Steel Co., 176 U. S. 257; Wil- 
 liamson v. Washington City, etc., 
 R. R. Co., 33Gratt. (Va.)624; Addi- 
 son v. Lewis, 75 Va. 701; Atkins v. 
 Petersburg R. R. Co., 3 Hughes, 307; 
 Douglass v. Cline, 12 Bush (Ky. ), 
 608. 
 
 See, also, Hale v. Frost, 99 U. S. 
 389; Meyer v. Johnston, 53 Ala. 
 237; Union Trust Co. v- Walker, 107 
 U. S. 596; Farmers' Loan, etc., Co. 
 v. Missouri, etc., R'y Co., 21 Fed. 
 Rep. 264. 
 
 Compare Newport, etc., Bridge 
 
 Co. v. Douglass, 12 Bush (Ky.), 673. 
 The cases of Metropolitan Trust Co. 
 v. Tonawanda Valley, etc., R. R. Co., 
 103 N. Y. 245, and Duncan v. Mobile, 
 etc., R. R. Co., 2 Woods, 542, seem 
 not to accord with the above deci- 
 sions. 
 
 But the rule of Fosdick v. Schall 
 does not in general apply to the 
 fund realized by sale of the mort- 
 gaged railroad. St. Louis, etc., R. R. 
 Co. v. Cleveland, etc., Ry., 125 U. S. 
 658. Nor does the rule apply to give 
 priority to a debt arising for work 
 done in the original construction of 
 the road; and not in keeping up the 
 railroad as a going concern. Toledo, 
 etc., R. R. Co. v. Hamilton, 134 U. 
 S. 296. 
 
 - Miltenberger v. Logansport Rail- 
 way, 106 U. S. 286; Wallace v. 
 
 811
 
 § 824. j THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. 
 
 part of the jurisdiction which is exercised by a court of equity 
 in carrying out its duty to protect and preserve trust funds in 
 its hands. It should be exercised with caution, and if possible 
 with the consent or acquiescence of the parties interested in 
 the fund. 1 
 
 § 824. In the case of Miltenberger v. Logansport Railway 
 the Federal Supreme Court held that a court of equity could 
 create claims, through a receiver appointed by it on the fore- 
 closure of a railroad mortgage, prior to the lien of the mort- 
 gage ; and could decree that the receiver should pay the 
 operating expenses of the road for ninety days preceding his 
 appointment, and also certain sums of money, amounting to 
 ten thousand dollars, due other and connecting lines for 
 materials and repairs and for ticket and freight balances, a 
 part of which last indebtedness was incurred more than ninety 
 days prior to the appointment of the receiver. The above 
 claims were ordered to be paid out of the net proceeds of the 
 sale, before paying the mortgage bonds. 2 Giving the opinion 
 of the court, J udge LUatchford said : " It cannot be affirmed 
 that no items which accrued before the appointment of a 
 receiver can be allowed in any case. Many circumstances may 
 exist which make it necessary and indispensable to the busi- 
 ness of the road and the preservation of the property, for the 
 receiver to pay pre-existing debts of certain classes, out of the 
 
 Loomis, 97 U. S. 146; Langdon v. 
 Railroad Co., 53 Vt. 228; see Same v. 
 Same, 54 Vt. 593. 
 
 1 Wallace v. Loomis, supra. While 
 a railroad was in the hands of a re- 
 ceiver appointed in a foreclosure 
 suit, the court authorized him to 
 borrow money and issue certificates, 
 to be a lien prior to the mortgage 
 debt, and to part with them at not 
 less than ninety cents on a dollar. 
 The receiver borrowed money by 
 hypothecating some of the certifi- 
 cates. Held, that tin: hypothecated 
 certificates were not liens to the ex- 
 tent of their face; but that a decree 
 was proper allowing the repayment 
 of the moneys loaned on certificates 
 
 812 
 
 issued at ninety cents on the dollar 
 and making such certificates a lien. 
 Swann v. Clark, 110 U. S. 602. 
 
 For ordinary debts which were not 
 allowed prior payment (over bond- 
 holders) out of funds in hands of re- 
 ceiver, see Addison v. Lewis, 75 Va. 
 701; Farmers' L. & T. Co. v. Tel. Co. 
 148 N. Y. 315. Such are debts in- 
 curred in the construction (not main- 
 tenance) of the road. Boston, etc., 
 Co. v. Chesapeake & O. R. R. Co., 76 
 Va. 180. 
 
 - Miltenberger v. Logansport Rail- 
 way, 106 U. S. 286. See Va. & Ala. 
 Coal Co. v. C. R. R. & B. Co. of Ga., 
 170 U. S. 355.
 
 CHAP. XVII.] LEGAL RELATIONS AMONG CREDITORS. [§ 824. 
 
 earnings of the receivership, or even the corpus of the property, 
 under the order of the court, with a priority of lien. Yet the 
 discretion to do so should be exercised with very great care. 
 The payment of such debts stands prima facie on a different 
 basis from the payment of claims arising under the receiver- 
 ship, while it may be brought within the principle of the 
 latter by special circumstances. It is easy to see that the 
 payment of unpaid debts for operating expenses, accrued within 
 ninety days, due by a railroad company, suddenly deprived of 
 the control of its property, due to the operatives in its employ, 
 whose cessation from work simultaneously is to be deprecated, 
 in the interest both of the property and of the public, and the 
 payment of limited amounts due to other and connecting lines 
 of road for materials and repairs and for unpaid ticket and 
 freight balances, the outcome of indispensable business rela- 
 tions, where a stoppage of the continuance of such business 
 relations would be a probable result, in case of non-payment, 
 the general consequences involving largely, also, the interests 
 and accommodation of travel and traffic, may well place such 
 payments in the category of payments to preserve the mort- 
 gaged property in a large sense, by maintaining the good-will 
 and integrity of the enterprise, and entitle them to be made a 
 first lien. " * 
 
 1 Miltenberger v. Logansport Rail- 
 way, 106 U. S. 286, 311. A debt from 
 a railroad company for car rental 
 accruing prior to the receivership 
 was not given priority over mort- 
 gage debt; but a similar debt for 
 car rental subsequent to receivership 
 allowed in Thomas v. Western Car 
 Co., 149 U. S. 95. See, also, Union 
 Trust Co. v. Illinois Midland Ry. 
 Co., 117 U. S. 434; Kneeland v. 
 Foundry and Machine Works, 140 
 U. S. 592; Williamson v. Washing- 
 ton City, etc., R. R. Co., 33 Gratt. 
 (Va.) 624; Poland v. Lamoille Val- 
 ley R. R. Co., 52 Vt. 144. Compare 
 Hand v. Savannah, etc., R. R. Co., 
 17 S. C. 219, 266; Ex parte Benson 
 & Co., 18 S. C. 38; Ex parte Caro- 
 lina Nat. Bk., ib. 289; Denniston r. 
 
 Chicago, Alton, etc., R. R. Co., 4 
 Biss. 414; M'Cormack v. Salem R'y 
 Co., 34 Or. 543. When bondholders 
 suffer certain persons to act as re- 
 ceivers, and issue negotiable certifi- 
 cates, which come into the hands of 
 bona fide holders for value, the bond- 
 holders cannot set up that the re- 
 ceivers were improperly appointed. 
 Langdon v. Vermont, etc., R. R. Co., 
 53 Vt. 228; see Humphreys v. Allen, 
 101 111. 490. But it has been held 
 that receiver's certificates payable 
 to a given person "or bearer 1 ' are 
 not negotiable, and when issued 
 without benefit or consideration to 
 the receivership, so that the payee 
 could not have recovered on them 
 against fuuds in the hands of the 
 receiver, cannot be recovered on 
 
 813
 
 § 825.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. XVII. 
 
 § 824a. The Supreme Court has recently spoken some 
 words of warning as to these matters :. " The appointment of a 
 receiver vests in the court no absolute control over the prop- 
 erty, and no general authority to displace vested contract 
 liens. Because in a few specified and limited cases this court 
 has declared that unsecured claims were entitled to priority 
 over raortgao-e debts, an idea seems to have obtained that a 
 court appointing a receiver acquires power to give such prefer- 
 ence to any general and unsecured claims. . . . Can anything 
 be conceived which more thoroughly destroys the sacredness 
 of contract obligations ? One holding a mortgage debt upon 
 a railroad has the same right to demand and expect of the 
 court respect for his vested and contracted priority as the holder 
 of a mortgage on a farm or lot. So, when a court appoints a 
 receiver of railroad property, it has no right to make that re- 
 ceivership conditional on the payment of other than those few 
 unsecured claims which, by the rulings of this court, have been 
 declared to have an equitable priority. No one is bound to 
 sell to a railroad company or to work for it, and whoever has 
 dealings with a company whose property is mortgaged must 
 be assumed to have dealt with it on the faith of its personal 
 responsibility and not in expectation of subsequently displac- 
 ing the priority of the mortgage liens. It is the exception 
 and not the rule that such priority of liens can be displaced." 1 
 § 825. In respect of the statutory individual liability of 
 shareholders it is said that "a creditor who moves 
 first and proceeds so far as to establish his right to 
 seize the property of a stockholder, or to bring his 
 suit, obtains a priority of right in the fund which 
 the statute has in effect set apart for the payment of 
 his debt. By such proceedings, and the institution of a suit 
 
 Statutory- 
 liability of 
 share- 
 holders. 
 Priorities of 
 creditors. 
 
 against such funds by a bona fide 
 holder for value. Turner v. Peoria 
 and S. R. R. Co., 95 111. 134. 
 
 1 Kneeland v. American Loan Co., 
 136 U. S. 89, 97. Opinion of court, 
 per Brewer, J. See Morgan's Co. v. 
 Texas Central Ry. Co., 137 U. S. 172. 
 Compare Quincy R. R. Co. v. Hum- 
 phreys, 145 U. S. 82; Va. & Ala. Coal 
 Co. o. C. R. R. & B. Co. of Ga., 170 
 814 
 
 U. S. 355. The principle of Fosdick 
 v. Schall has never been applied ex- 
 cept in the case of a railroad com- 
 pany. Wood c. Guarantee Trust Co., 
 128 U. S. 416; Int. Trust Co. v. Uni- 
 ted Coal Co., 27 Colo. 246, collecting 
 authorities ; followed in Standley v. 
 Hendrie, etc., MTg Co., 27 Colo. 
 331.
 
 CHAP. XVII.] LEGAL RELATIONS AMONG CREDITORS. [§ 826. 
 
 within the period fixed by the statute, he acquires a right to 
 recover against the stockholder to the amount of his stock, 
 with which no creditor subsequently moving can rightfully 
 interfere, and any payment made to such subsequently moving 
 creditor by such stockholder must be regarded as a payment 
 in his own wrong." * The case, however, in which these re- 
 marks occur, arose under the construction of a particular 
 statute, and consequently is to be applied with caution. 2 
 
 § 826. When an action has been instituted by part of the 
 creditors of an insolvent corporation for the benefit of all the 
 creditors, against the shareholders to enforce the (limited) 
 statutory liability of the latter, no creditor can acquire priority, 
 or institute a separate suit for the enforcement of such liability 
 on his own behalf. 3 
 
 1 Cole v. Butler, 43 Me. 401, 404, 
 per May, J., approved in Iugalls v. 
 Cole, 47 Me. 530, 541. Accord, 
 Jones v. Wiltberger, 42 Ga. 575; The- 
 bus v. Smiley, 110 111. 316. 
 
 2 Semble contra, Pfohl v. Simpson, 
 74 N. Y. 137; Donnelly o. Mulhall, 
 12 Mo. App. 139. In Illinois a cred- 
 itor obtains a prior lien only through 
 a final judgment in his favor. Chi- 
 
 cago v. Hall, 103 111. 342; but see 
 Thebus v. Smiley, 110 111. 316. Com- 
 pare State SaviDgs Ass'n v. Kellogg, 
 63 Mo. 540. 
 
 3 Wright v. McCormack, 17 Ohio 
 St. 86; Pfohl v. Simpson, 74 N. Y. 
 137. See Pollard o. Bailey, 20 Wall. 
 520. Also, specially, §§ 725, 728, 
 704-706. 
 
 815
 
 APPENDIX. 
 
 PRESENT METHODS OF FORMING A CORPORATION. 
 
 Although in England corporations may have come into ex- 
 istence by the common law or by prescription, there has never 
 been any sanction for such a formation of a private corporation 
 in the United States. Here the rule is universal that no body 
 of persons can become a body corporate without following the 
 plan prescribed for that purpose by a law of Congress or a 
 statute of the legislature of that state wherein incorporation 
 takes place. While it is not essential that all the terms of a 
 statute should be strictly complied with in order to effect an 
 incorporation, it yet is clear that incorporation cannot be ef- 
 fected simply by contracts among individuals, and that it re- 
 sults only from substantially following the appropriate statute. 
 
 Such statutes differ broadly in the different states and also 
 differ in the same state, according to the various kinds of cor- 
 porations. Under the simplest of these statutory plans, incor- 
 poration is effected simply by filing a paper in the office of the 
 Secretary of State. Under the most complicated there are 
 such preliminaries as subscriptions to stock, consents of various 
 outside interests, and other formalities. 
 
 On account of the great number and variety of the statutory 
 requirements, the details of the formation of corporations are 
 not within the scope of such a treatise as the present. It is, 
 however, of importance to note the principles lying back of all 
 proceedings for the formation of corporations. The legal 
 questions to be considered by the promoters of a corporation 
 naturally differ with the different objects which they may wish 
 to attain by incorporation. One object always in mind is to 
 obtain the public sanction to be a corporation, and receive the 
 two chief rights appertinent thereto, viz : the right to a name 
 and the right to a succession of interests. This is popularly 
 termed the obtaining of the franchise to be a corporation. The 
 52 817
 
 APPENDIX. 
 
 next object — winch is occasionally very prominent, and at times 
 of no importance — is to obtain certain privileges from the public 
 authority. Some of these privileges are the right of eminent 
 domain, (in instances of corporations like railroads, which sub- 
 serve the public use,) the right to issue credits and receive de- 
 posits, (as that of banks or trust companies,) the right of do- 
 ing certain acts in certain places, whether exclusively or not, 
 (as to furnish water, or to run a ferry, or to occupy the streets 
 of a municipality). These are the " franchises " which pertain to 
 a corporation. A third object is the regulation of the respective 
 rights, duties and liabilities of the body corporate, stockhold- 
 ers, creditors and directors, either of one class as against an- 
 other, or one member of a class as against another member of 
 the same class or other classes. The fourth and last object 
 (not always mentioned) is the minimizing of taxation. 
 
 With these four objects in mind, the promoters first select a 
 state wherein to incorporate. In the early part of the nine- 
 teenth century, the ordinar}^ method of incorporation was by 
 special act of the Legislature of some state. The difficulties 
 of obtaining such special act, the attendant expenses, and the 
 abuse of giving to one what was denied to another, led to 
 amendments in the constitutions of almost all of the states, for- 
 bidding such special charters. There were substituted general 
 statutes, by following which incorporation could be attained. 
 The most celebrated of these general statutes were those en- 
 acted by the Legislature of the state of New York between 
 the years 184-7 to 1854. These comprised different statutes for 
 different kinds of corporations : one method for a railroad, 
 another for a bank, another for an insurance company, and yet 
 another for an ordinary business enterprise. The other states 
 for the most part followed the plan of the New York statutes. 
 Up to the present time, in regard to corporations demanding 
 special privileges, the statutory requirements are practically 
 alike throughout the states of the Union. The tendency is 
 general to impose additional safeguards against the indiscrimi- 
 nate grant of incorporation to such kind of enterprises. For 
 instance, in New York, incorporation for railway purposes is 
 not now permitted until the Board of Railway Commissioners 
 has approved of the enterprise after due hearing (section 59 of 
 the Railway Law). The like rule obtains in Massachusetts. 
 818
 
 APPENDIX. 
 
 These public authorities must also be consulted in regard to 
 any important change in the corporate affairs, such as the is- 
 suing of bonds. Inasmuch as the Legislatures of almost all of 
 the states have taken substantially a parallel course in regard 
 to such incorporations, the method usually adopted is to in- 
 corporate in the state where such an enterprise is to be located. 
 Where railways run through different states, incorporation is 
 often taken out in each of them. Banks are almost universally 
 incorporated in the state where the bank is located ; while 
 insurance companies are incorporated where their main office 
 and financial affairs are conducted. 
 
 In sharp contrast with this situation of general uniformity 
 as to corporations that desire special privileges, the Legislators 
 of the different states have taken very divergent courses re- 
 garding incorporation where the object is merely existence, 
 appropriate internal regulations, and avoidance of taxation. 
 On the one side, the states of New Jersey and West Virginia 
 have enacted a series of laws by which in return for a compar- 
 atively small tax, the right to be a corporation is universally 
 granted and under just such a charter as the promoters think 
 best for themselves. The New Jersey statutes have permitted 
 a body of promoters to set forth in their certificate of incor- 
 poration exactly such a plan as they desire for the measure- 
 ment of the rights, duties, and obligations of all who are or 
 may be interested in the corporation. That has been done 
 upon the theory that it was a matter of private concern, which 
 those interested or to be interested, should regulate to suit 
 themselves, substantially without interference on the part of 
 the state. This tendency was looked upon with a great dis- 
 favor by New York, Massachusetts and Pennsylvania. Not- 
 withstanding the adverse attitude of their Legislatures and 
 public authorities, enterprises to be conducted in the latter 
 states were being continually organized under the New Jersey 
 statutes. The Legislatures put numerous restrictions on the 
 right of foreign corporations to do business within their 
 states. Nevertheless, in spite of such restrictions, those in- 
 terested in corporations continued to prefer the plan of the 
 New Jersey statutes. Some two years ago, the Legislature of 
 New York modified its corporation laws by simplifying the 
 method, lessening the tax on incorporation, adopting tin 1 Xew 
 
 819
 
 APPENDIX. 
 
 Jersey plan by which the value of the property for which the 
 stock is issued is, in the absence of actual fraud, conclusively 
 presumed to be the same as the value of the stock, doing away 
 with onerous penalties for failure to file reports, and in other 
 ways assimilating the statutory plan of incorporation to mod- 
 ern business methods. 
 
 The formation of an ordinary business enterprise at the 
 present time has, therefore, resolved itself practically into 
 drafting a plan under which the affairs of all interested there- 
 in are to be regulated. This plan is embodied in the certificate 
 of incorporation. It sets forth, among other details, the name 
 of the corporation, the various objects of the corporation, and 
 its capital stock. Under the heading of its objects, there is 
 scope for restriction upon what it may do, if that is what the 
 incorporators desire for the protection of one as against the 
 other, or of amplification to such an extent that it may do any- 
 thing and everything, thereby eliminating almost entirely 
 questions of ultra vires. The certificate may also state what 
 powers one class of stockholders shall have as against another, 
 who shall elect the directors, wdiat shall be the powers of the 
 directors, what limitations shall be thereon, what shall be the 
 restrictions against mortgages upon the property, etc. In short 
 the certificate of incorporation becomes a comprehensive basic 
 contract, which is to be read into all other contracts thereafter 
 made in regard to any matters of that corporation. There are 
 provisions for the amendment of the original charter, by con- 
 sent of certain members, or a proportion of the people in- 
 terested. 
 
 It is manifest from this resume of the present method of the 
 formation of corporations, that where a corporation is care- 
 fully formed, there is now substantially no restraint put upon 
 it by the public authority, unless it desires or has obtained some 
 special public privileges. Corporations of the most enormous 
 magnitude now regulate themselves with almost the same 
 amount of secrecy as a private individual gives to his own af- 
 fairs. The almost unvarying attitude of the courts to an in- 
 quisitive stockholder or creditor, is that no rights will be ac- 
 corded to them, so long as the corporate body apparently 
 moves along the contract lines laid down in its certificate of 
 incorporation. The stockholder or creditor became such with 
 820
 
 APPENDIX. 
 
 that in mind, and must not look for the old " visitorial" rights 
 of the state to assist him. 
 
 This matter of the formation of corporations is the subject 
 of continual change. The question is not altogether a legal 
 one, but becomes also an economic and political one. Changes 
 in the method of incorporation will doubtless follow as solu- 
 tions may be reached of the problems relating to the great 
 trusts and monopolies which have recently arisen. The sub- 
 ject can only be dealt with at present as one which is in the 
 transition stage. 
 
 821
 
 TABLE OF CASES 
 
 EEFEKENCES ARE TO THE SECTIONS. 
 
 A. 
 
 SECTION 
 
 Abbey v. Dry Goods Co. 725 
 
 v. Long 732 
 
 Abbott v. American Hard Rub- 
 ber Co. 229, 628, 638 
 Abbott v. Aspinwall 738 
 v. Chase 189 
 v. Baltimore, etc., Steam 
 
 Packet Co. 273 
 
 v. Johnston, etc., R. R. Co. 170, 305 
 
 Abeles v. Cochran 696, 754 
 
 Abell v. Penn. Mut. Life Ins. Co. 392 
 
 Abendroth v. Manhattan Ry. Co. 176 
 
 Aberdeen Bank v. Chehalis Co. 484 
 
 Aberdeen Ry. Co. v. Blakie 627, 630 
 
 Ableman v. Booth 456, 461 
 
 Academy v. Exeter 489 
 
 Ackerman v. Halsey 694 
 
 Adamant Mg. Co. v. Wallace 655 
 
 Adams v. Mills 772 
 
 v. R. R. Co. 421, 490 
 
 Adams Express Co. v. Deyette 135 
 
 v. Fenwick 353 
 
 v. Haynes 353 
 
 v. Ohio 477a, 482 
 
 v. Schlesinger 193 
 
 v. Stettaners 353 
 
 0. Wilson 363 
 
 Adams Mfg. Co. v. Sentor 642 
 
 v. R. R. Co. 305 
 
 Adden v. White Mountains, etc., 
 
 R. R. Co. 179 
 
 Adderly v. Storm 741 
 
 Addison v. Lewis 632, 822 
 
 Addyston Pipe & Steel Co. v. 
 
 U. S. 309a 
 
 Adelbert v. Kearns 659 
 
 Adler o. Milwaukee, etc., Brick 
 
 Co. 661, 704, 705 
 
 v. Reeves 583 
 
 Adriance v. Roome 195, 196 
 
 A'D. St. Nav. and Coal Co., In re 572 
 ^tna Ins. Co. v. Black 396 
 
 t». Wheeler 364 
 
 Mtna, Nat. Bank v. Fourth Nat. 
 
 Bank 672 
 
 v. Ins. Co. 236 
 
 Africa v. Duluth Tribune Co. 237 
 
 Agate v. Sands 732 
 
 SECTION 
 
 Age-Herald Co. v. Potter 655, 668 
 Aggs v. Nicholson 753 
 
 Agricultural Bank v. Burr 587 
 
 v. Wilson 587 
 
 Agricultural Branch R. R. Co. v. 
 
 Winchester 530 
 
 Aiken v. Western Union Tel. Co. 357 
 Aimen v. Hardin 774 
 
 Alabama v. Montague 676 
 
 Alabama Nat. B 1 k v. O'Neill 258 
 Albany Fertilizer Co. v. Ar- 
 nold 568, 750 
 Albany Northern R. R. Co. v. 
 
 Bromwell 163a 
 
 Alabama Foundry Machine Wks. 
 
 v. Dallas 523 
 
 Alabama and F. R. R. Co. v. 
 
 Kenny 163a 
 
 Alabama and Tenn. Rivers R. R. 
 
 Co. v. Kidd 360 
 
 v. Burkett 179 
 
 Alabama Gt. Southern Ry. Co. 
 
 v. Fulghum 392 
 
 v. Gilbert 163 
 
 v. Little 359 
 
 v. Moorer 372 
 
 v. Thomas 353 
 
 Alberger v. Bank 668 
 
 Albeit v. Northern Cent. Ry. Co. 368 
 
 v. Savings Bank 338 
 
 v. State 611 
 
 Albion Steel, etc., Co. v. Martin 83 
 
 Aldham v. Brown 99 
 
 Aldrich v. Chemical Nat. 
 
 Bank 161, 240, 310 
 
 «. Coal Co. 393 
 
 v. Drury 162a 
 
 Aldridge v. Tuscumbia R. R. Co. 163 
 
 Alexander v. Atlantic, etc., R. R. 
 
 Co. 681, 557 
 
 v. Cauldwell 267 
 
 v. Commissioners of McDowell 
 
 Co. 325 
 
 v. Culbertson, etc., Co. 212 
 
 v. Relfe 338 
 
 v. Rollins 284 
 
 v. Searcy 556 
 
 v. Winters 87 
 
 823
 
 TABLE OF CASKS. 
 
 SECTION 
 
 Alexandria and F. Ry. Co. v. 
 Alexandria and W. K. K. 
 Co. 163 
 
 Alexandria and F. Ry. Co. v. 
 
 Faunce 174 
 
 Alexandria Canal Co. v. Swann 137 
 Aliboue v. Hager 709, 730, 710 
 
 Allbritton v. J. and G. N. R. R. 
 
 Co. 377 
 
 Allegheny v. Railway Co. 801 
 
 Allegheny R. R. Co. v. McLain 347 
 Allemoug v. Simmons 258 
 
 Allen v. Baltimore and O. R. R. 
 
 Co. 4926 
 
 v. Citizens' Steam Nav. Co. 193 
 v. City of Portland 248 
 
 v. Clark 773 
 
 v. Commonwealth 477a 
 
 v. Curtis G90 
 
 v. Dykers 794 
 
 v. First National Bank 301 
 
 v. Freed man's Savings Co. 276 
 v. Hotel Co. 759 
 
 y. Jones 163, 473 
 
 v. London and S. W. Ry. Co. 
 
 339, 344 
 v. Louisiana 620 
 
 v. Montgomery R. R. Co. 
 
 661, 703, 745, 746 
 v. South Boston R. R. Co. 591 
 
 v. Woousocket Co. 130 
 
 Ailing v. Boston and Albany R. R. 
 
 Co. 355 
 
 v. Wenzel 745 
 
 Allison v. Southern R'y Co. 400 
 
 Allinan v. Havana, etc., R. R. 
 
 Co. 518 
 
 Allyn v. Boston and Albany R. R. 
 
 Co. 376 
 
 Alma Spinning Co., In re 547 
 
 Alta Silver Mining Co. v. Mining 
 
 Co. 236 
 
 Alton Horse Ry. Co. v. Deitz 173 
 
 American Bible Soc. r. Marshall 391 
 American Bridge Co. v. Heidel- 
 
 bach 320 
 
 American Casualty Co. v. Lea 392 
 American Central Ry. Co. v. 
 
 Miles 646 
 
 American Clay M'f'g Co. v. Idem 137 
 American Coal Co. v. Consolida- 
 tion Coal Co. 497, 502 
 American Credit Indemnity Co. 
 
 v. Eld 774 
 
 v. County Commissioners 479 
 
 American Express Co. v. Conant 
 
 395, 472 
 
 v. Second National Bank 353 
 
 tJ. Smith 361 
 
 v. Spellman 359 
 
 American File Co. v. Garrett 733 
 
 824 
 
 SECTION 
 
 American Ins. Co. v. Oakley 236 
 
 v. Wellman 401 
 
 American L. and T. Co. v. Minn., 
 
 etc., R. R. Co. 419 
 
 American Merchants' Un. Exp. 
 
 Co. v. Milk 360 
 
 American Mirror Co. v. Bulkley 739 
 American Mort'g Co. v. Tennille 388 
 American Mut. Life Ins. Co. v. 
 
 Owen 384 
 
 American Nat. Bank v. Amer. 
 
 Wood Paper Co. 679 
 
 American Nat. Bank v. Wheelock 752 
 v. Hammond 336 
 
 American Rapid Tel. Co. v. Con- 
 necticut Telephone Co. 454, 455 
 American Ref. Transit Co. v. Hall 479 
 American Ry. Frog Co. v. Haven 136 
 American Refrigerating Co. v. 
 
 Linn 5596 
 
 American Saving, etc., Ass'n v. 
 
 Smith 248 
 
 American Surety Co. v. Pauly 249 
 American Tube Works v. Boston 
 
 Machine Co. 541 
 
 American Union Exp. Co. v. 
 
 Robinson 360 
 
 American Union Tel. Co. v. 
 
 Union Pac. Ry. Co. 305,314 
 
 v. Western Un. Tel. Co. 383, 486 
 American Wire Nail Co. v. Bay- 
 less 598 
 Ameriscoggin Bridge Co. v. Bragg 449 
 Amerman v. Wiles 277 
 Ames v. Kansas 460 
 v. Lake Superior, etc., R. R. 
 Co. 464 
 Amesburyr. Bowditch Mut. Ins. 
 
 Co. 583 
 
 Amesbury Woolen, etc., Co. v. 
 
 Amcsbury 477a 
 
 Amherst Academy v. Cowles 92 
 
 Amy v. Dubuque 326 
 
 Anderson v. Buckley 432 
 
 v. Bullock Co. Bk. 300,759 
 
 v. U. S. 309a 
 
 v. Kinley 210 
 
 v. Longden 235 
 
 v. Phila. Warehouse Co. 741 
 
 v. Santa Anna 318 
 
 v. Scott 523 
 
 v. Speers 775 
 
 v. Thompson 537 
 
 Anderson Brick Co. v. Sobkowish 365 
 
 Anderson County v. Houston, 
 
 etc., R. R. Co. 330 
 
 Anderson County Com'rs v. Beal 329 
 
 Anderson Transfer Co. v. Fuller 204 
 
 Andrews v. Murray 764, 805 
 
 v. Union Mut. Fire Ins. Co. 
 
 21, 269, 583
 
 TABLE Of OA8E8. 
 
 SECTION 
 
 Androscoggin, etc., R. R. Co. v. 
 
 Androscoggin R. R. Co. 308 
 
 Angier v. East Tenn., etc., R. R. 
 
 Co. 409 
 
 Angle c. Mississippi, etc., R. R. 
 
 Co. 363 
 
 Anglo-Amer. Provision Co. v. 
 
 West India Improvement Co. 
 
 392, 480 
 Anglo-Calif ornian Bank y. Gran- 
 gers' Bank 196, 601 
 Ansonia B. and C. Co. v. New 
 
 Lamp Chimney Co. 724 
 
 Anspach v. Mahanoy, etc., R. R. 
 
 Co. 162 
 
 Anthony y. County of Jasper 320 
 Antoni v. Greenehow 494 
 
 Appleby v. Erie County Savings 199 
 Appleby y. Terre Haute and I. 
 
 R. R. Co. 305 
 
 Appleton v. Turnbull 729 
 
 Application of Cooper 400 
 
 Aransas P. H. Co. v. Manning 183 
 Arapahoe Cattle Co. v. Stevens 522r 
 Archambeau v. N. Y. R'y Co. 415 
 v. Piatt 417 
 
 Archer v. Terre Haute, etc., R. 
 
 R. Co. 305 
 
 Anlesco Oil Co. v. North Am. 
 
 Oil Co. 130, 668 
 
 Argus Co.'s Petition 577, 580 
 
 Argus Printing Co., In re 578 
 
 Arkadelphia Cotton Mills u. 
 
 Trimble 518 
 
 Arkansas River, etc., Co. v. Far- 
 mers' L. & T. Co. 710 
 Arkansas Valley Ag. Soc. v. 
 
 Eichholtz 568 
 
 Armaut v. Railroad Co. 568 
 
 Armington v. Palmer 137 
 
 Armour v. National Bank 392, 796 
 
 Arms v. Conant 225, 381 
 
 Armstrong v. Karshner 517, 523, 530 
 
 Arnold v. Covington Bridge Co. 163 
 
 v. Hudson River R. R. Co. 174 
 
 v. Illinois Central R. R. Co. 353 
 
 v. Suffolk Bank 599 
 
 Arnot v. Erie R'y Co. 280, 308 
 
 Arthur u. Commercial, etc., Bank 668 
 
 v. Griswold 755. 774 
 
 Ashbury Railway Carriage, etc., 
 
 Co. v. Riche 291, 296 
 
 Ashe v. Johnson 790 
 
 Asher v. Sutton 236 
 
 Ashley r. Ryan 479 
 
 Ashmore o. Penn. Steam Tow Co. 353 
 Ashpitel v. Sercombe 104 
 
 Ashtabula, etc., R. R. Co. v. 
 
 Smith 517 
 
 Ashton v. Burbank 531 
 
 v. Dashaway Assoc. 556 
 
 SECTION 
 
 Ashton v. Zeila Mining Co. 587 
 
 Ashuelot M'f'g Co. v. Marsh 236 
 
 Ashuelot R. R. Co. u. Elliott 
 
 496, 499, 629. 642 
 Ashurst v. Mason 526, 763, 804 
 
 Ashville Division v. Aston 
 
 159, 430, 437 
 Asiatic Banking Co., In re, Bank 
 
 of India's Case 196 
 
 Aspinwall v. County of Daviess 320 
 v. Ohio, etc., R. R. Co. 382 
 
 v. Torrance 783 
 
 Association v. Fenner 153 
 
 Asylum v. New Orleans 848 
 
 Atchison Board u. De Kay 320 
 
 Atchison and Neb. R. R. Co. v. 
 
 Washburn 353 
 
 Atchison and D. R'y Co. v. Lyon 178 
 Atchison and N. R. R. Co. v. 
 
 Garsirle 175a 
 
 Atchison, etc., R. R. Co. v. Holt 365 
 Atchison, etc., R. R. Co. v. Moore 365 
 Atchison, T. & S. F. R. R. Co. v. 
 
 Denver & N. O. R. R. Co. 162, 309 
 v. Matthews 475 
 
 v. Fletcher 381, 534 
 
 Athenaeum Society, In re, Ex 
 
 parte Eagle Co. 251 
 
 Athol Music Hall Co. v. Carey 109 
 
 Atkins v. Albree 800 
 
 v. Petersburg R. R. Co. 822 
 
 v. Marietta, etc., R. R. Co. 125, 155 
 
 Atkinson v. Marietta, etc., R. R. 
 
 Co. 451 
 
 v. St. Croix M'f'g Co. 193 
 
 Atlanta, etc., R. R. Co. v. Kim- 
 
 berly 170 
 
 Atlantic and Gulf R. R. Co. v. 
 
 Allen 488 
 
 Atlantic and G. R. R. Co. v. 
 
 Jacksonville, etc., R. R. Co. 395 
 Atlantic and Pac. R. R. Co. v. 
 
 St. Louis 166, 168, 204 
 
 v. Reisner 193 
 
 Atlantic and Pac. Tel. Co. u. 
 
 Union Pac. R. R. Co. 309, 314 
 Atlantic Cotton Mills v. Abbott 518 
 Atlantic, etc., R'y Co. v. Dunn 377 
 Atlantic Delaine Co. v. Mason 
 
 522c, 574 
 Atlantic Mills v. Indian Orchard 
 
 Mills 342 
 
 Atlantic State Bank v. Savery 161 
 Atlantic, Tenn., etc., R. R. v. 
 
 Johnson 809 
 
 Atlas Nat. Bank v. Moran Co. 655 
 v. Savery 293, 302 
 
 Atlas Tack Co. v. Exchange Bank 759 
 Attaway v. National Bank 627 
 
 Attleborough Nat. Bank v. 
 
 Rogers ^3, 302 
 
 825
 
 TABLE OF CASES. 
 
 SECTION 
 
 Att'y-Gen'l v. Am. Tob. Co. 
 
 309a, 460 
 v. Bank of Niagara 459 
 
 v. Chicago, etc., R. R. Co. 460 
 
 v. Great Eastern R'y Co. 308 
 
 v. Guardian Mut. Ins. Co. 
 
 143, 395, 542, 758 
 v. Jamaica Pond Aqueduct 457 
 u. Metropolitan R. R. Co. 175 
 
 v. North American Life Ins. Co. 451 
 v. Petersburg, etc., R. R. Co. 460 
 o. Eailroad Co. 433 
 
 v. Railroad Companies 4766 
 
 v. Utica Ins. Co. 156, 457, 458 
 
 Auburn Bolt Works v. Schultz 91 
 Auerbach v. Le Seuer Mill Co. 
 
 125, 127, 286 
 Augsburg L. & I. Co. v. Pepper 136 
 Augur Steel Axle, etc., Co. v. 
 
 Whittier 157 
 
 Augusta Bank v. Hamblet 234 
 
 Augusta M'f'gCo. v. Vertrees 449 
 Aultman v. Waddle 738 
 
 Aultman's Appeal 393, 715, 749 
 
 Aurora Agricul.Soc. v. Paddock 125 
 Aurora City v. West 326 
 
 Aurora, etc., R. R. Co. v. Law- 
 
 renceburg 147 
 
 Aurora, etc., Turnpike Co. v. 
 
 Holthouse 453 
 
 Austin v. Daniels 615, 616, 618 
 
 v. Tecumseh Bank 415 
 
 Austin's Case 614 
 
 Australian, etc., Co. v. Mounsey 125 
 Ayrault v. Pacific Bank 161 
 
 Ayres, In re 462 
 
 B. 
 
 Babcock u. Beman 752 
 
 Bach v. Pac. Mail S. S. Co. 554 
 
 Bachman, In re 601, 748 
 
 Backus v. Lebanon 470 
 
 Bacon v. Cohea 437 
 
 v. Irwin 140 
 
 v. Michigan Central R. R. Co. 342 
 
 r. Mississippi Ins. Co. 125, 20li 
 
 v. Robertson 264, 460 
 
 Badger v. American Popular Ins. 
 
 Co. 253 
 
 Badger P. Co. v. Rose 108 
 
 Ba^lev v. Carthage R. R. Co. 647 
 Bagnall v. Carlton 82 
 
 Bagshaw, Ex parte 608 
 
 Bahia, etc., R'y Co., In re 593 
 
 Baile i\ Educational Society 
 
 521, 522c 
 
 Bailey v. Bancker 733, 784 
 
 v. Birkenhead, etc., R'y Co. 554 
 
 v. Buchanan County 326 
 
 82G 
 
 SECTION 
 
 Bailey v. Citizens' Gas Light Co. 
 
 536, 788 
 v. Macaulay 77 
 
 v. Maguire 489 
 
 v. Malheur Irr. Co. 137 
 
 v. Pittsburgh Coal R. Co. 703 
 
 v. Pittsburgh, etc., Gas Coal 
 
 Co. 521, 522a, 522c, 779 
 
 v. Railroad Co. 564 
 
 v. Rome, etc., R. R. Co. 365 
 
 v. Sawyer 727 
 
 v. The 'Master Plumbers, 309a, 582 
 
 Bailey's Appeal 788 
 
 Bailey's Case 110 
 
 Baine's v. Babcock 703, 706 
 
 Baird v. Bank of Washington 189 
 
 v. Calvert 713 
 
 v. Midvale Steel Works 695 
 
 v. Morford 376 
 
 v. Petitt 365 
 
 v. Ross 98 
 
 Baker v. Atlas Bank 721, 736 
 
 v. Backus 611, 716 
 
 v. Loan Co. 281 
 
 v. Louisiana Portable R. R. 
 
 Co. 611 
 
 v. Marshall 595, 599 
 
 v. Neff 146 
 
 v. Wassen 594 
 
 v. Woolston 210 
 
 Baker's Appeal 227, 449, 577 
 
 Balch u. Hallet 799 
 
 «. Wilson 810, 813 
 
 Baldwin v. Canfield 187, 258 
 
 13. U. S. Tel. Co. 357 
 
 Bale v. Cleland 696 
 
 Balfour v. Gas Co. 108 
 
 Ball i). Anderson 393 
 
 v. Reese 393, 737 
 
 Ball El. Light Co. 13. Child 
 
 715, 720, 731 
 Ball & O. S. W. R'y Co. v. 
 
 Voight 352 
 
 Ballin v. Bank 668 
 
 Balliott v. Brown 229 
 
 Baltimore 13. Baltimore Railroad 674 
 B. C. & A. Ry. Co. v. Ocean City 491 
 13. Wicomico Co. 491 
 
 Baltimore and Ohio R. R. Co. 
 
 13. Baugh 365 
 
 13. Brady 359 
 
 13. Creeger 475 
 
 13. Noell's Adm'r 412 
 
 13. Pittsburgh, W. & K. R. 
 
 R. Co. 163, 163a 
 
 13. Pumphrey 360, 361 
 
 13. Sherman 137 
 
 13. Schwindling 371 
 
 v. State 374 
 
 v. Wheeling 554, 558 
 
 13. Whittington 376
 
 TABLE OF CASES. 
 
 SECTION 
 
 Baltimore and Ohio R. R. Co. v. 
 
 Wilkins 201 
 
 v. Wightman's Adm'r 412 
 
 Baltimore and P. R. Co. v. Fifth 
 
 Baptist Church 145, 169 
 
 Baltimore aud Potomac R. R. 
 
 Co. v. Reaney 173, 177 
 
 v. State 327 
 
 Baltimore & S. P. R. R. Co. v. 
 
 Hackett, 173 
 
 Baltimore, etc., R. R. Co. v. Mus- 
 
 selmaD 665 
 
 v. Nesbit 495 
 
 Baltimore, etc., Railway Co. v. 
 
 Sewell 599 
 
 Baltimore, etc., Steamboat Co. v. 
 
 Brown 362, 363 
 
 Baltimore, etc., Turnpike Co. v. 
 
 Boone 377 
 
 v. Cassell 169 
 
 v. Union Ry. Co. 163a 
 
 Baltimore, P., and C. R. R. Co. 
 
 v. Lansing 178 
 
 Baltzen v. Nicolay 789 
 
 Banet v. Alton, etc., R. R. Co. 227 
 Bandcroft v. Wilmington Conf. 
 
 Acad. 248 
 
 B. & P. R. R. Co. v. Cumberland 374 
 Bangor and P. R. R. Co. v. Mc- 
 
 Comb 178 
 
 Bangor, etc., R. R. Co. v. Smith 449 
 
 Banigan v. Bard 750 
 
 v. U. S. Rubber Co. 647 
 
 Banister v. Pennsylvania Co. 344 
 
 Bank v. City of Charlotte 531 
 
 v. Cotton Mills 668 
 
 v. Durfee 601 
 
 v. Flour Co. 114, 127, 193 
 
 v. Hill 616 
 
 v. Lanier 594, 602 
 
 v. Lumber Co. 813 
 
 u. McLeod 819 
 
 v. Penland 240 
 
 v. Railroad Co. 125 
 
 v. Salt Co. 668 
 
 v. Statesville 328 
 
 v. Tanning Co. 671 
 
 v. Tennessee 489 
 
 v. Wickersham 135 
 
 v. Zent 161 
 
 Bank Commissioners v. Bank of 
 
 Brest 225, 230 
 
 v. Bank of Buffalo 224, 233, 457 
 
 v. Granite State Prov. Assn. 394 
 
 v. James Bank 457 
 
 v. St. Lawrence Bank 273 
 
 Bank of America v. McNeil 606 
 
 Bank of Attica v. Manufacturers' 
 
 Bank 599, 601 
 
 Bank of Augusta v. Earle 
 
 380, 381, 382, 384 
 
 SECTION 
 
 Bank of Australasia w. Breillat 125 
 Bank of Batavia v. N. Y., etc., 
 
 R. R. Co. 204 
 
 Bank of Bethel v. Pahquioque 
 
 Bank 432, 669 
 
 Bank of British Columbian. Page 401 
 Bank of Buffalo v. Thompson 51, 62 
 Bank of Chattanooga v. Bank of 
 
 Memphis 272 
 
 Bank of Chillicothe v. Dodge 195 
 
 v. Swayne 298 
 
 Bank of Columbia v. Patterson 248 
 
 Bank of Commerce v. McGowan 488 
 
 v. New York City 482 
 
 v. Tennessee 489 
 
 Bank of Genesee v. Patchin Bank 244 
 
 Bank of Georgia v. Savannah 477a 
 
 Bank of Greenboro' v. Clapp 342 
 
 Bank of Hamilton v. Dudley's 
 
 Lessee 468 
 
 Bank of Hindostan, In re 586 
 
 Bank of Holly Springs v. Pinson 601 
 Bank of Kentucky v. Adams 
 
 Exp. Co. 352, 354 
 
 v. Bonnie Bros. 604 
 
 v. Schuylkill Bank 224, 263 
 
 v. Wister 462 
 
 Bank of Little Rock u. McCarthy 260 
 
 Bank of Louisiana u. Wilson 435 
 
 Bank of Madison, In re 672 
 
 Bank of Metropolis v. Guttsch- 
 
 lick 248 
 
 v. Jones 236, 241 
 
 v. New England Bank 673 
 
 Bank of Middlebury v. Rutland, 
 
 etc., R. R. Co. 259 
 
 Bank of Mississippi v. Wren 435 
 
 Bank of Mutual Redemption v. 
 
 Hill 756 
 
 Bank of New Hanover v. Kenan 
 
 161, 346 
 Bank of New London v. Ketchum 259 
 Bank of North American. Rindge 393 
 Bank of Ohio v. Knoop 453 
 
 Bank of Omaha v. Douglass 
 
 County 410 
 
 Bank of Oregon, In re 239 
 
 Bank of Pennsylvania v. Reed 239 
 Bank of Poughkeepsie v. Ibbotson 725 
 Bank of Redemption v. Boston 484 
 Bank of Republic v. County of 
 
 Hamilton 495 
 
 Bank of Saline v. Alvord 298 
 
 Bank of South Australia v. 
 
 Abrahams 225 
 
 Bank of South Carolina v. Ham- 
 mond 257 
 Bank of St. Mary's «. St. John 
 
 658, 757 
 Bank of Tennessee v. Cummings 293 
 Bank of U. S. v. Dallam ' 724 
 
 827
 
 TABLE OF CA8ES. 
 
 SECTION 
 
 Bank of U. S. v. Dandridge 
 
 188, 204, 217, 219, 248, 449, 250, 
 257, 263 
 v. Davis 210 
 
 v. Devereaux 21, 410 
 
 v. Dunn 224, 230, 241 
 
 i>. Owens 298 
 
 v. Waggener 298 
 
 Bank of Utica v. Smalley 589 
 
 Bank of Vergennes v. Warren 241 
 Bank of Washtenaw v. Montgom- 
 ery 384 
 Bank Tax Case 482 
 Banks v. Ga. R. R., etc., Co. 170 
 Banks, The, v. Poitaux 303 
 Bansemer v. Toledo, etc., R. R. 
 
 Co. 360 
 
 Barclay v. Culver 794 
 
 v. Quicksilver Mining Co. 657 
 
 v. Wainwright 800 
 
 Bard v. Poole 384, 386, 389 
 
 Bardstown and L. R. R. Co. v. 
 
 Metcalfe 305 
 
 Bargate v. Shortridge, 224, 232, 589 
 Barings v. Dabney 507 
 
 Barker, Ex parte 578 
 
 Barker v. Cairo, etc., R. R. Co. 561 
 Barksdale v. Finney 342 
 
 Bailey v. Gittings, 392 
 
 Barnard v. Vermont, etc., R. R. 
 
 Co. 563 
 
 Barndollar v. Dubois 57 
 
 Barnes v. Brown 580 
 
 v. District of Columbia 315 
 
 v. Lynch 638 
 
 v. Ontario Bank 240, 253 
 
 v. Suddard 303 
 
 v. Trenton Gas Light Co. 210 
 
 Barnes Bros. v. Coal Co. 196 
 
 Barnett v. Chicago, etc., R. R. 
 
 Co. 399 
 
 v. Denison 329 
 
 Barnett's Case 731 
 
 Barney v. Oyster Bay Steamboat 
 
 Co. 350 
 
 Barnum v. Okolona 319 
 
 Barr v. Bartram, etc., Mfg. Co. 663 
 
 v. Glass Co. 629 
 
 v. King 402 
 
 v. New York, L. E. and W. 
 
 R. R. Co. 140, 141, 612, 631 
 
 Barrell v. Lake View Land Co. 
 
 189, 261 
 
 Barrett v. County Court 325 
 
 v. Maiden, etc., R. R. Co. 347 
 
 Barrett & Co. v. Pollak & Co. 655 
 
 Barrick v. Austin 241 
 
 v. Gifford 713, 716 
 
 Barron v. Burnside 400 
 
 v. Burrill 511 
 
 v. Eldredge 360 
 
 828 
 
 SECTION 
 
 Barron v. Paine 737 
 
 Barrow v. Nashville, etc., T. C. 303 
 Barrow Stm. Ship Co. v. Kane, 
 
 392, 395, 400, 412 
 Barrows v. National Rubber Co. 606 
 v. Natchoug Silk Co. 541 
 
 Barry v. Merchants' Exchange 
 
 Co. 127, 129, 561 
 
 v. N. Y. Cent, and H. R. R. R. 
 
 Co. 371 
 
 v. Screwmen's Association 249 
 
 Barstow v. City R. R. Co. 646 
 
 v. Savage Mg. Co. 795 
 
 Barter v. Wheeler 364 
 
 Bartemeyer v. Iowa 476 
 
 Bartholomew v. Derby Rubber 
 
 Co. 608 
 
 Bartlett v. Drew 655, 705, 708 
 
 v. Kinsley 187 
 
 v. Mystic River Co. 647 
 
 v. Western Union Telegraph 
 Co. 357 
 
 Bartlette v. Norwich and Wor- 
 cester R. R. Co. 308 
 Barto v. Nix 135, 521 
 Barton v. Port Jackson, etc., 
 
 Plank Road Co. 135, 298 
 
 Barton Nat'l Bank v. Atkins 501, 719 
 
 Bass v. City of Columbus 325 
 
 v. Roanoke Nav. Co. 163 
 
 Bassett v. St. Alban's Hotel Co. 
 
 770, 775 
 v. Fairchild 647 
 
 v. Monte Christo M. Co. 
 
 381, 633, 759 
 Basshardt Co. v. Oil Co. 276 
 
 Basshor v. Dressell 157, 460 
 
 v. Forbes 735 
 
 Batard v. Hawes 81 
 
 Batchelor v. Planters' Nat. Bank 
 
 249, 625 
 Bates v. Androscoggin R. R. Co. 
 
 563, 564, 572 
 
 v. Bank of Alabama 257 
 
 v. Day 726 
 
 v. Great Western Tel. Co. 522a 
 
 v. Mackniley 799 
 
 v. Wilson, etc., Co. 146 
 
 Bates County v. Winters 320, 324 
 
 Batho. Caton 755 
 
 Bath Gas Co. v. Claffy, 276 
 
 Bathe v. Decatur Agric. Soc. 222 
 
 Battelle v. Pavement Co. 87, 630 
 
 Batty o. Eureka Bk. 302, 604 
 
 Bavington v. Pittsburgh, etc., 
 
 R. R. Co. 519 
 
 Bawknightv. Liverpool, etc., Ins. 
 
 Co. 396 
 
 Baxter v. Moses 756 
 
 v. Roberts 365 
 
 Bayless v. Oine 611
 
 TABLE OF CASES. 
 
 SECTION 
 
 Beach v. Fulton Bank 276, 342 
 
 v. Miller 632 
 
 Beach & Weld v. Wakefield 286 
 
 Beale v. Mouls 77 
 
 v. Railway Co. 377 
 
 Beals v. Illinois, etc., R. R. Co. 814 
 Bear River O. Co. v. Hanley 640 
 Beard v. The Union, etc., Pub. 
 
 Co. 400 
 
 Beardslev ». Johnson 573 
 
 Beardsley v. N. Y. L. I. & W. 
 
 R. R. Co. 4766 
 
 Beattie v. Ebury 754 
 
 Beatty v. Marine Ins. Co. 
 
 195, 253, 262 
 v. Bartholomew County Agric. 
 Soc. 146 
 
 Beaty c. Knowler's Lessee 224 
 
 Beauregard v. New Orleans 468 
 
 Beck v. Henderson 738 
 
 v. Kantorowics 82 
 
 Becker v. Western Un. Tel. Co. 357 
 Becket v. Houston 511 
 
 Beckwith v. Burrough 796 
 
 Bedford v. Eastern B. & L. Ass'n 400 
 v. Hannibal and St. Jo. R. R. 
 Co. 368 
 
 Bedford and Cambridge R'y Co. 
 
 v. Stanley 90 
 
 Bedford R. R. Co. v. Bowser 
 
 229, 517, 549, 780 
 Bee o. San Francisco, etc., R'y Co. 647 
 Beebe v. Beebe Co. 236 
 
 Beecher v. Marquette, etc., Ins. 
 
 Co. 282 
 
 v. Marquette and Pac. Rolling 
 Mill Co. 300 
 
 Beekman v. Saratoga, etc., R. R. 
 
 Co. 163, 476 
 
 Beene v. Cahawba, etc., R. R. Co. 
 
 513, 546 
 Beer Co. v. Massachusetts 476 
 
 Beers v. Arkansas 462 
 
 v. Bridgeport Spring Co. 563, 568 
 v. Phoenix Glass Co. 193 
 
 v. Waterbury 783 
 
 Beeson v. Lang 417, 418 
 
 Behre v. Nat. Cash Register Co. 342 
 Beitman v. Steiner 580 
 
 Belcher Sugar Ref. Co. v. Eleva- 
 tor Co. 281 
 Belfast, etc., R. R. Co. v. Belfast 
 
 563, 564, 565 
 
 v. Coffrell 518 
 
 v. Moore 513 
 
 Belger v. Dinsmore 359 
 
 Belknap v. Boston and M. R. R. 
 
 Co. 377 
 
 Rec'r, p. Adams & Rice 542 
 
 v. Schild 462 
 
 Bell v. Americus, etc., R. R. Co. 521 
 
 SECTION 
 
 Bell v. Farwell 393 
 
 v. Indianapolis, etc., R. R. Co. 
 
 417, 432 
 v. Railroad Co. 319 
 
 Bell's Appeal 655, 703 
 
 Bellows v. Hallowell and Au- 
 gusta Bank 667 
 v. Todd 381 
 Bell's Gap R. R. Co. v. Christy 86 
 Belmont v. Erie R'y Co. 611 
 Belton, In re 429 
 Benbow v. Cook 260 
 Bend v. Susquehanna Bridge Co. 587 
 Benedict v. Columbia Cons. Co. 611 
 v. Lansing 201 
 Bengley v. Wheeler 686 
 Benignia v. P. R. R. Co. 365 
 Bennett v. Keene 229 
 v. Maryland Fire Ins. Co. 216 
 v. Railroad Co. 371 
 v. S. A. R. E. B. and L. Ass'n 249 
 v. St. Louis Car Roofing Co. 
 
 628, 647 
 Bennett's Case 747 
 
 Benninghoff u. Agricultural Ins. 
 
 Co. 212, 214 
 
 Bennison v. McConnell 783 
 
 Benscic v. Thomas 270 
 
 Bensinger v. Wren 51 
 
 Benson, Ex parte 309, 822 
 
 Bent v. Priest 629, 630 
 
 v. Underdown 124, 702 
 
 Benton v. Bank 641 
 
 v. C. R. I. and P. R. R. Co. 372 
 v. Springfield Y. M. C. A. 258 
 
 Benwood Iron Works v. Hutchin- 
 son 396 
 Berg v. Atchison, etc., Railroad 
 Co. 363 
 v. Marietta, etc., R'y Co. 523 
 Bergen v. Fishing Co. 668 
 Bergman v. St. Paul Mut. B'ld'g 
 
 Ass'n 546, 583 
 
 Bergner, etc., Br'w'g Co. v. Drey- 
 fus 395 
 Berkeley v. C. & O. Ry. Co. 374 
 Berks Turnpike Road v. Myers 
 
 159, 251, 254 
 Bernard's Township v. Stebbins 
 
 254, 318, 328 
 Bernhardt v. Brown 407 
 
 Berrison v. Chicago R. R. Co. 173 
 Berry v. Broach 610 
 
 v. Kansas City, etc., R. R. Co. 425 
 v. W. Ya. & P. R. R. Co. 359 
 
 Berrvman v. Cincinnati Southern 
 
 R. R. Co. 162 
 
 Besel v. N. Y. C. and H. R. R. R. 
 
 Co. 365 
 
 Best Brewing Co. v. Classon 283 
 
 Bestor v. Wathen 162 
 
 829
 
 TABLE OF OASES. 
 
 SECTION 
 
 Beveridge v. New York El. R. K. 
 
 Co. 229, 502, 563 
 
 Bezaa v. Pike 214 
 
 Bibb v. Hall 145 
 
 Bickley v. Schlag 702/> 
 
 Biddle Pur. Co. v. Steel Co. 668 
 
 Biddle's Appeal 799, 800 
 
 Bidwell v. Pittsburgh, etc., R'y 
 
 Co. 187 
 
 Bigbee, etc., Co. v. Moore 303 
 
 Bigelow v. Gregory 451, 739 
 
 Bill v. Western Union Telegraph 
 
 Co. 642, 644 
 
 Billings v. Robinson 542, 586 
 
 v. Trask 764 
 
 Bingharnton Bridge, The 
 
 450, 453, 461, 468 
 Binghampton Trust Co. v. Autou 342 
 Bird v. Bird Patent, etc., Co. 268 
 
 v. Chicago, etc., R. R. Co. 592 
 
 v. Hayden 764 
 
 Bird Coal Co. v. Humes 629 
 
 Birmingham Nat. Bank v. Roden 110 
 Birmingham T. and S. Co. v. 
 
 Louisiana Nat. Bank 606 
 
 Birney v. N. Y., etc., Telegraph 
 
 Co. 357 
 
 Bish v. Bradford 738 
 
 v. Johnson 535, 536 
 
 Bishop v. American P. Co. 309c, 388 
 
 v. Brainerd 408, 420, 536, 663 
 
 v. Globe Co. 210, 392, 603 
 
 v. Kent & Stanley Co. 185 
 
 Bissell v. Farmers,' etc., Bank 790 
 
 v. Heath 744 
 
 v. Jeffersonville 331 
 
 v. Michigan Southern, etc., R. 
 
 R. Co. 264, 275, 280, 287, 290, 338 
 v. N. Y. O. R. R. Co. 353 
 
 v. Spring Valley Township 332 
 Bisset v. Kentucky River Nav. 
 
 Co. 733, 737 
 
 Bjorngaard v. County Bank 5596 
 
 Black v. Burlington, etc., R. R. 
 
 Co. 374 
 
 v. Delaware and Raritan Canal 
 
 Co. 229, 305, 384, 420, 557 
 
 Black v. Goodrich Trans. Co. 353 
 
 v. Huggins 687, 690 
 
 v. Wabash, etc., Ry. Co. 356 
 
 v. Wo mar 737 
 
 v. Zacharie 796 
 
 Black & Co. 's Case 731 
 
 Blackburn v. Selma M. and M. 
 
 R. R. Co. 146 
 
 Blackman v. Central R. R. Co. 138 
 v. Levman 326 
 
 Black River, etc., R. R. Co. v. 
 
 Barnard 178 
 
 v. Clarke 537 
 
 830 
 
 SECTION 
 
 Black River Improvement Co. v. 
 
 La Crosse Booming, etc., Co. 174 
 Black Run Improvement Co. v. 
 
 La Crosse Booming, etc., Co. 174 
 Blackstock v. N. Y. and Erie R. 
 
 R. Co. 361 
 
 Blaekwell, The 137 
 
 Blair u. (umming County 319 
 
 v. Erie R'y Co. 353 
 
 v. Gray 722 
 
 v. Illinois Steel Co. 759 
 
 v. Perpetual Ins. Co. 381 
 
 v. Telegram News Co. 693 
 
 Blair Town Lot Co. v. Walker 628 
 
 Blaisdell v. Bohr 593 
 
 Blake v. Griswold 263 
 
 v. Hinkle 432, 703 
 
 v. Holly 204 
 
 v. Maine Central R. R. Co. 366 
 
 v. McClung 383, 394 
 
 v. Portsmouth, etc., R. R. Co. 436 
 
 v. Rich 162n 
 
 v. Winona, etc., R. R. Co. 476a 
 
 Blakeman v. Benton 735 
 
 Blalock v. Manufacturing Co. 135 
 
 Blanc v. Paymaster M'g Co. 395, 396 
 
 Blanchard v. Dedham Gas Light 
 
 Co. 796 
 
 v. Hillard 195 
 
 Bland's Case 629 
 
 Blatchford v. Ross 227, 646 
 
 Blen v. Bear River, etc., Co. 214, 236 
 Blien v. Rand 740 
 
 Bliss v. Anderson 688 
 
 v. Kaweah Co. 204, 236 
 
 Block v. Commissioners 330 
 
 Bloede Co. v. Bloede 583 
 
 Blood v. La Serena, L. & W. Co. 
 
 187, 281 
 v. Marcuse 201 
 
 Bloodgood v. Mohawk, etc., R. 
 
 R. Co. 163, 476 
 
 Bloom v. National Sav. Co. 694 
 
 Bloomfield v. Charter Oak B'k 334 
 Blossom v. Dodd 358 
 
 v. Railroad Co. 682 
 
 Blouin v. Liquidators of Hart 796 
 Blount v. Windley 493 
 
 Bloxham v. Metropolitan R'y Co. 565 
 Blue v. Bank 647 
 
 Blumenthal v. Brainerd 360, 417 
 
 Blundell v. Windsor 719 
 
 Blunt v. Walker 249 
 
 Bly v. Water Co. 120 
 
 Board, etc., Tippecanoe County 
 v. Lafavette, etc., R. R. Co. 
 
 229, 268, 305, 556 
 Board of Administrators v. Gas 
 
 Light Co. 421, 425 
 
 Board of Liquidation v. McComb 462
 
 TABLE OF OASES. 
 
 SECTION 
 
 Board of Public Works u. Gaunt 462 
 Board of Trade Tel. Co. v. Bur- 
 nett 175 
 Boardman v. Lake Shore, etc., 
 
 R'y Co. 474c, 563, 564, 786, 798 
 Bockhover ». Life Ass'n 390, 495 
 
 Bocock v. Coal Co. 196 
 
 Bodlev ». Goodrich 668 
 
 Bohan v. Port Jervis G. L. Co. 169 
 Bohmer v. City Bank 264, 606 
 
 Bolin v. Brown 734 
 
 Boice v. Hodge 715 
 
 Boise City Canal Co. v. Pinkham 146 
 Boisgerard y. New York Banking 
 
 Co. 159 
 
 Bommer v. American Spiral 
 
 Hinge M'f'g Co. 90 
 
 Bonaparte v. Appeal Tax Court 479 
 
 v. Baltimore, etc., R. R. Co. 449 
 
 Bond v. Appleton 720 
 
 v. Central Bank 257 
 
 v. Morse 775 
 
 v. Terrell M'f'g Co. 276, 295 
 
 Bonelli's Electric Tel. Co., In re 258 
 
 Bouewitz v. Van Wert County 
 
 Bank 727 
 
 Bonham v. Needles 330 
 
 Bouham's Case 456 
 
 Bonnell v. Griswold 764, 769, 770, 774 
 Bonner v. City of New Orleans 127 
 Bouuey v. Tilley 759 
 
 Booe v. Junction R. R. Co. 531 
 
 Boogher v. Life Association 342 
 
 Booker v. Young 260 
 
 Boom Co. v. Patterson 178, 473 
 
 Booske v. Gulf Ice Co. 146 
 
 Boot and Shoe Co. v. Hoit 109 
 
 Booth v. Boston and Albany R. 
 
 R. Co. 365, 366 
 
 v. Bunce 657 
 
 v. Campbell 735 
 
 v. Farmers' and Mechanics' 
 
 Bank 236 
 
 v. Robinson 125, 130, 642, 687, 
 
 688, 693, 694 
 
 v. Rome, etc., R. R. Co. 167 
 
 Borchardt v. Wauseau Boom Co. 167 
 
 Borough of Easton v. Lehigh 
 
 Water Co. 455 
 
 Borry v. Cooper 353 
 
 Boscowitz v. Adams Exp. Co. 
 
 353, 359 
 Bosher v. Land Co. 523 
 
 Bostock v. North Staffordshire 
 
 Ry. 128 
 
 Boston and Albany R. R. Co., 
 
 Matter of 163a 
 
 v. Greenbush 163a 
 
 v. Pearson 56 
 
 v. Richardson 597 
 
 v. Shanley 369 
 
 SECTION 
 
 Boston, etc., Co. v. Chesapeake, 
 
 etc., R. R. Co. 823 
 
 Boston and L. R. R. Co. v. Com- 
 monwealth 477a 
 v. Nashua, etc., R. R. Co. 137 
 v. Salem, etc., R. R. Co. 152, 470 
 Boston and M. R. R. Co. v. Lowell, 
 
 etc., R. R. Co. 163a 
 
 Boston and Providence R. R. Co. 
 v. New York and N. E. R. R. 
 Co. 608 
 
 Boston and W. R. R. Co. v. Old 
 
 Colony R. R. Co. 174 
 
 Boston, Barre, etc., R. R. Co. v. 
 
 Wellington 96 
 
 Boston, Concord, etc., R. R. Co. 
 
 v. Gil more 676 
 
 Boston Glass Manufactory v. 
 
 Langdon 429, 432, 433 
 
 Boston Water Power Co. v. Bos- 
 ton and W. R. R. Co. 163, 163a 
 Bostwicku. Baltimore, etc., R. R. 
 
 Co. 359 
 
 v. Van Voorhis 249, 257 
 
 Boswell v. Hudson R. R. Co. 353, 359 
 
 Bosworth v. Bank 759 
 
 v. Allen 690 
 
 v. Terminal Road Ass'n 814 
 
 Botsford v. New Haven, etc., R. 
 
 R. Co. 818 
 
 Botts v. Turnpike Co. 536 
 
 Bouch v. Sproule 800 
 
 Bouden v. Farmers', etc., Bank 741 
 v. Johnson 749 
 
 v. Santos 749 
 
 Boughton y. Otis 768 
 
 Bolton Carbon Co. v. Mills 522c, 729 
 Bourdette v. Sreinard, 585 
 
 Bourdier v. Morgan, etc., R. R. 
 
 Co. 173 
 
 Bouton v. Dement 745 
 
 Bowditch v. New England Life 
 
 Ins. Co. 301 
 
 Bower v. B. and S. W. Ry. Co. 170 
 Bowman v. Chicago, etc., Ry. Co. 
 
 474a" 
 Boyce u. Montauk Gas Co. 185 
 
 v. St. Louis 387 
 
 Boyd v. Chesapeake and Ohio 
 
 Canal Co. 210 
 
 v. Hall 728 
 
 v. Peach Bottom Ry. Co. 516 
 
 v. Redd 604 
 
 v. Rockport Steam Cotton 
 
 Mills ' 796 
 
 v. Sims 140 
 
 v. Worsted Mills 798 
 
 Boyden v. Bank of Cape Fear 672 
 
 Boyd en v. Fitchburg R. R Co. 372 
 
 Boyer r. Boyer 483 
 
 Boyington v. Van Etten 739 
 
 831
 
 TABLE OF CASE8. 
 
 SECTION 
 
 Boyleu v. Huguet 794 
 
 Buy n ton v. Andrews 723 
 
 v. Hatch 522c, 702, 723 
 
 v. Rowe 130, 225, 068 
 
 Brabbits v. Chicago and N. W. 
 
 Ky. Co. 365 
 
 Braceville Coal Co. v. People 475 
 
 Brackett v. Griswold 771 
 
 Brad dock r. Philadelphia, etc., 
 
 K. R. Co. 97, 517 
 
 Bradford B. Frankfort, etc., R. K. 
 
 Co. 536 
 
 Bradford Banking Company u. 
 
 Briggs 603 
 
 Brad lee ». Boston Glass Mfy. 753 
 
 Bradley v. Ballard 125, 280 
 
 o. Farwell 759 
 
 v. New York and N. H. R. R. 
 
 Co. 175a 
 
 v. People 484 
 
 v. Reppell 430 
 
 o. Richardson 138, 642 
 
 Bradstreet v. Bank of Royalton 259 
 
 Brady v. Insurance Co. 146 
 
 Brague b. No. Cent. Ry. Co. 372 
 
 Brady v. Johnson 676 
 
 Brainard v. Clapp 162a 
 
 v. Missiquoi R. R. Co. 175a 
 
 Brainard v. New York, etc., R. R. 
 Co. 
 v. Peck 
 
 Brampton, etc., Ry. Co., In re 
 
 Branch v. Atlantic, etc., R. R. Co, 
 
 Branch v, Dawson 
 
 v. Jesop 131, 270, 305, 565 
 
 v. Roberts 756 
 
 Branson v. City of Phila. 
 i\ Trump Machine Co. 
 
 Brant b. Ehlen 
 
 Braslin v. Railroad Co. 
 
 Brass v. Stoeser 
 
 Brassell v. N. Y. C. and IT. R. 
 R. R. Co. 
 
 Brause v. New England Fire Ins. 
 Co. 
 
 Bray v. Seligman 
 
 Bray ton v. Fall River 
 
 Breed v. Mitchell 
 
 Breen p. Merchants', etc., Bank 
 
 Breese o. U. S. Tel. Co. 
 
 Breitung v. Lindauer 
 
 Brenham v. German Am. Bank 
 v. Water Co. 
 
 Brent v. Bank of Washington 
 
 505, 601 
 
 Brewer v. Boston Theatre Co. 
 
 560, 688, 689, 690 
 r. Michigan Salt Association 750 
 
 Brewer Brewing Co. v. Boddie 286 
 
 Brewing Co. r. Flanner 630 
 
 v. Templeman 309c 
 
 679 
 
 676 
 
 86 
 
 818 
 672 
 
 163a 
 398 
 702 
 170 
 
 476a 
 
 374 
 
 392 
 741 
 473 
 361 
 813 
 357 
 764 
 320 
 309c 
 
 
 
 SECTION 
 
 re 
 
 wster v. Hartley 
 
 136, 577, 578 
 
 v. 
 
 Hatch 
 
 103 
 
 v. 
 
 Hough 
 
 488 
 
 V. 
 
 Sime 
 
 797 
 
 V. 
 
 St rat man 
 
 627 
 
 Bridenbecker v. Lowell 240 
 
 Bridge Co. v. Fowler 759 
 
 v. Hoboken Land, etc., Co. 461 
 
 v. Traction Co. 187 
 
 v. United States 497 
 
 Bridge Proprietors v. Hoboken 
 
 Co. 461, 468 
 
 Bridgeport Old Brewery Co., In re 574 
 Bridgeport Sav'gs Bk. v. Eldrige 236 
 Briggs v. Cape Cod Ship Canal 
 
 Co. 460 
 
 v. Easterly 772 
 
 v. Penniman 731 
 
 v. Spaulding 619 
 
 Brigg's Case 110 
 
 Brigham o. Agricultural Branch 
 
 i;. R. Co. 162a, 164 
 
 Bright o. Lord 798 
 
 v. Metaire Cemetery Ass'n 236 
 
 Brightman v. Bates 788 
 
 v. Davis 580 
 
 Brimmer v. Rebman 474d 
 
 Biinham v. Wellersburg Coal Co. 
 
 561, 663, 725, 783 
 Brinkershoff v. Bostwick 689, 690, 693 
 Briuley v. Grow 800 
 
 Briutnall v. Saratoga, etc., R. R. 
 
 Co. 363 
 
 Brisbane v. Delaware, etc., R. R. 
 
 Co. 593 
 
 v. St. Paul and S. C. R. R. Co. 174 
 Bristol o. Sanford 721 
 
 Bristol Milling, etc., Co. v. Pro- 
 
 basco 760, 811 
 
 Bristol, etc., Tr. Co. v. Jones- 
 
 boro Tr. Co. 522c, 614 
 
 Bristol Nor. Co. v. Selliez 529 
 
 British American Land Co. v. 
 
 Ames 384 
 
 British, etc., Assurance Society, 
 
 In re 699 
 
 British Provident, etc., Ass. Soc, 
 
 In re, Lane's Case 211 
 
 Britton r. Atlantic, etc., R'y Co. 
 
 347, 348 
 
 v. D. N. O. and S. R. Co. 179 
 
 Broadway Bank v. McElrath 796 
 
 Broadway Nat. B'k u. Baker 393 
 
 Brockett v. Ohio, etc., R. R. Co. 408 
 
 Brockway v. Allen 159, 753 
 
 v. Gadsden, etc., Co. 518 
 
 B. Iuness 734 
 
 Brockway M'f'g Co., In re 756, 757 
 
 Brodie b. McCabe 333 
 
 Brokaw v. New Jersey R. R. Co. 
 
 335, 338
 
 TABLE OF CASES. 
 
 SECTION 
 
 Bronson, Lire 479 
 
 v. Insurance Co. 704 
 
 v. Kinzie 450 
 
 v. La Crosse, etc., R. R. Co. 138, 813 
 v. Railroad Co. 819 
 
 Brooklyn, In re 453 
 
 v. Insurance Co. 330 
 
 Brooklyn Central R. R. Co. v. 
 
 Brooklyn City R. R. Co. 164 
 
 Brooklyn Steam Transit Co. v. 
 
 Brooklyn 150, 432, 458, 460 
 
 Brooklyn W., etc., R. R. Co., 
 
 Matter of 155, 432, 458, 460 
 
 Brookman v. Metcalf 125 
 
 Brooks v. Ball 93 
 
 v. Davenport and S. P. R. Co. 
 
 178, 179 
 v. Martin 313 
 
 v. Railway Co. 817 
 
 Broughton v. Pensacola 316, 667 
 
 v. Jones 258 
 
 Brown v. Adams Exp. Co. 353 
 
 v. Atlantic R'y Co. 145, 157 
 
 v. Beatty 179 
 
 v. Brink, Rec'r 707 
 
 v. Colorado 468 
 
 0. De Young 693 
 
 v. Eastern R. R. Co. 359 
 
 v. Fairmount Gold M'gCo. 227, 530 
 v. Hannibal, etc., R. R. Co. 369 
 v. Hitchcock 718, 719, 791 
 
 v. Houston 474c 
 
 v. Insurance Co. 198 
 
 o. Maryland 474a, 480 
 
 v. Merrill 733 
 
 v. Monmouthshire Ry. Co. 
 
 563, 565 
 v. Mortgage Co. 146, 27(5 
 
 v. Pacific Mail S. S. Co. 
 
 577, 579, 581 
 
 v. Republican Mountain Mines 640 
 
 v. Vandyke 687, 688 
 
 v. Weunissiinet Co. 121 
 
 Brown's Exec. v. Galveston 
 
 Wharf Co. 647 
 
 Brown, Administrator, Petition 
 
 of 801 
 
 Brown's Case 614 
 
 Brownell v. Troy, etc., R. R. Co. 412 
 Bruce v. Piatt * 770 
 
 Bruff ». Mali 696, 755 
 
 Bruffet v. Great Western R. R. 
 
 Co. 458, 665, 667 
 
 Brum v. Merchants' Mut. Ins. 
 
 Co. 657 
 
 Brundage v. Brundage 798 
 
 v. Monumental Gold, etc., Co. 704 
 Brundred c. Rice 309 
 
 Brunei - v. Brown 655 
 
 Brunswick G. L. Co. v. United 
 
 Gas, etc., Co. 310, 305, 309c 
 
 53 
 
 SECTION 
 
 Brunswick G. L. Co. v. Gale 350 
 
 v. Hughes 675 
 
 Bruschke v. Schuetzen Verein 690 
 Brush Elec. L. & T. Co. v. Mont- 
 gomery 210, 237 
 Bryan v. Carter 601, 603 
 Bryant u. Goodnow 92 
 v. Rich 347 
 Bryson v. Warwick, etc., Canal 
 
 Co. 314, 656 
 
 Buchanan v. Bartow Iron Co. 775 
 
 v. Litchfield 321 
 
 v. Meisser 728, 732 
 
 Bucher i\ Dillsburg, etc., R. R. 
 
 Co. 521 
 
 Buchner v. Chicago, etc., R. R. 
 
 Co. 175a 
 
 Buck v. Ross 655 
 
 v. Seymour 818 
 
 Buckeye Marble, etc., Co. v. Har- 
 vey 309, 309c 
 Buckingham v. McLean 298 
 Buckley v. Great Western Ry. 
 
 Co. 360 
 
 Bucksport, etc., R. R. Co. v. 
 
 Buck 517, 530 
 
 Budd v. Munroe 797 
 
 v. New York 476ffl 
 
 v. Street Ry. Co. 546, 599 
 
 7?. Walla Walla Printing Co. 
 
 261, 633 
 
 Budd' s Case 749 
 
 Buell o. Buckingham 260 
 
 v. Warner 775 
 
 Buffalo German Ins. Co. v. 
 
 Third Nat'l Bank 602 
 
 Buffalo and Jamestown R. R. Co. 
 
 v. Clark 109 
 
 v. Gifford 108 
 
 Buffalo L, T., & Safe D. Co. i\ 
 
 Medina Gas (Jo. 680 
 
 Buffalo and N. Y. C. R. R. Co. v. 
 
 Braiuard 163 
 
 Buffalo, etc., R. R. Co. v. Gary 537 
 v. Dudley 533, 546 
 
 0. Hatch 530 
 
 v. Lampson 631 
 
 v. Pottle 630 
 
 Buffet 15. Troy and Boston R. R. 
 
 Co. 275, 308 
 
 Buff ord v. Keokuk, etc.. Packet 
 
 Co. 608, 609, 779 
 
 Building Ass'n o. Lamson 276 
 
 Bulkley ». Big Muddy Iron Co. 688 
 v. Derby Fishing Co. 253 
 
 v. Whitcomb 731, 759 
 
 Bullard v. Bank 602 
 
 Bullock v. Turnpike Co. 511 
 
 Buncombe Turnpike Co. v. Mc- 
 
 Carson 155 
 
 Bundy v. Iron Co. 813 
 
 833
 
 TABLE OF CASES. 
 
 SECTION 
 
 Bunn's Appeal 703, 712, 734 
 
 Bunnell v. Slemmons 634 
 
 v. St. Paul, etc., By. Co. 365 
 
 Burbank v. Dennis 82 
 
 v. Jefferson City Gas Light 
 
 Co. 3056 
 
 v. West Walker River Ditch 
 
 Co. 561 
 
 Burbridge v. Morris 77 
 
 Burcli v. Taylor 703 
 
 v. West 237 
 
 Burden v. Burden 644, 270, 303, 554 
 
 Burges and Stock's Case 311 
 
 Burgess v. Pue 263 
 
 v. Seligman 468, 741 
 
 o. St. Louis Ry. Co. 556 
 
 Burgess's Case 523 
 
 Burke v. Ellis 417 
 
 Burke v. Louisville and N. R. R. 
 
 Co. 368 
 
 v. Smith 229, 745 
 
 Burlington v. P. R. R. Co. 175a 
 
 Burlington and M. R. R. Co. v. 
 
 Boestler 518 
 
 v. Reimpackle 175a 
 
 Burnham v. Bowen 822 
 
 v. San Francisco Fuse Mfg. Co. 610 
 
 v. Webster 239 
 
 Burns v. Commencement Bay, 
 
 etc., Co. 646 
 
 Burnside v. Dayrell 104 
 
 Buinsville Turnpike Co. v. State 599 
 Burr v. McDonald 125 
 
 v. Wilcox 511, 723, 740, 742 
 
 Burrall v. Bushwick, etc., R. R. 
 
 Co. 437, 567 
 
 Burrill v. Nahant Bank 
 
 219, 225, 233, 234 
 Burroughs v. Housatonic R. R. 
 
 Co. 368 
 
 v. North Carolina R. R. Co. 798 
 
 v. Norwich, etc., R. R. Co. 193, 363 
 
 Burrows u. Smith 90, 97 
 
 Burt v. Batavia Paper M'f'g Co. 210 
 
 v. Farrar 92, 96 
 
 v. Rattle 565 
 
 v. Real Estate Exchange 749 
 
 Burton v. Schildbach 148 
 
 Bnsey v. Hooper 511 
 
 Bush v. Peru Bridge Co. 453 
 
 Bushel o. Commonwealth Ins. Co. 
 
 392, 399 
 Bushnell v. Chautauqua County 
 
 Nat. Bank 161 
 
 v. Consolidated Ice Co. 538 
 
 Buswell v. Order of the Iron Hall 394 
 Butchers' and Drovers' Bank v. 
 
 McDonald 146 
 
 Butchers' Union Slaughter 
 House, etc., Co. v. Crescent 
 City Co. 474 
 
 SECTION 
 
 Butler v. Land Co. 759 
 
 v. Railroad Co. 360 
 
 v. Smalley 774 
 
 v. Thomson 642 
 
 v. United States, etc., Ass'n 401 
 
 v. Watkins 338, 342 
 
 Butler Paper Co. v. Bobbins 635, 668 
 
 Butler University v. Scoonover 511 
 
 Butternuts, etc., Turnpike Co. v. 
 
 North 97 
 
 Button v. Hoffman 187 
 
 v. Hudson River R. R. Co. 376 
 
 Buttrick v. Nashua, etc., R. R. Co. 796 
 Butts v. W T ood 628, 646, 689 
 
 Byers v. Rollins 688 
 
 Byrne v. Schuyler & Co. 130, 608 
 
 C. 
 
 C. B. and Q. R. Co. v. Lewis 204 
 
 C. B. U. P. R. Co. v. Smith 319 
 
 Cabot, etc., Bridge Co. v. Chapin 96 
 Cadle v. Muscatine W. R. R. Co. 175a 
 Cady v. Sandford 773 
 
 v. Smith 714 
 
 Cahill v. Citizens' Mut. B'ld'g 
 
 Ass'n 146 
 
 v. Kalamazoo Ins. Co. 200, 432 
 
 Cahn v. Mich. Cent. R. R. Co. 360 
 
 Cain v. C. R. I. and P. R. Co. 175a 
 
 Cairo v. Zane 320, 332 
 
 Cairo and St. L. R. R. Co. v. City 
 
 of Sparta 325 
 
 v. Nav. Co. 371 
 
 Caldwell v. National Mohawk 
 
 Valley Bank 239 
 
 v. New Jersey Steamboat Co. 378 
 v. Southern Express Co. 350 
 
 Caledonia, etc., R'y Co. v. Hel- 
 ensburgh 87, 88 
 Caldeion v. Atlas Steamship Co. 352 
 Caley v. Philadelphia, etc., R. R. 
 
 Co. 517, 531 
 
 California v. Armstrong 179 
 
 v. Pacific R. R. Co. 481 
 
 California Bank v. Kenuedy 
 
 162, 283, 305a 
 California Southern Hotel Co. v. 
 
 Callendar 519 
 
 v. Russell 96 
 
 California Sugar M'f'g Co. v. 
 
 Schafer 109 
 
 Callahan v. Louisville, etc., R. Co. 412 
 Callisber's Case 731 
 
 Calumet Paper Co. v. Show Co. 
 
 230, 258 
 Calteaux v. Mueller 236 
 
 Calvin's Case 756 
 
 Camanche, The 137 
 
 Camden v. Stuart 702a
 
 TABLE OF CASES. 
 
 SECTION 
 
 Camden and Amboy R. R. Co. v. 
 
 Baldauf 353, 359 
 
 ». Elkins 576 
 
 0. Forsyth 364 
 
 v. May's Landing R. E. Co. 
 
 277, 3056 
 Camden Horse R. R. Co. v. Citi- 
 zens' Coach Co. 165 
 Camden Rolling Mill Co. v. 
 
 Swede Iron Co. 396 
 
 Came v. Brigham 582 
 
 Caraeron«. Kenyon Commett Con. 
 
 Co. 758 
 
 Cameron v. Seaman 769 
 
 v. Tome 816a 
 
 Cammeyer v. United German 
 
 Churches 258 
 
 Camp v. Byne 382 
 
 v. Hartford, etc., Steamboat 
 
 Co. 351, 353 
 
 v. Western Un. Tel. Co. 357 
 
 Campbell v. Brunk 138 
 
 v. Campbell 472 
 
 v. City of Kenosha 325 
 
 v. Farmers', etc., Bank 415 
 
 v. Marietta, etc., R. R. Co. 416 
 
 v. Morgan 567 
 
 v. Pope 212 
 
 v. Portland Sugar Co. 752 
 
 Campbell, etc., Co. v. Marder 668 
 
 Campbell's Case 632 
 
 Canada Southern R. Co. v. Geb- 
 
 hard 390, 816a 
 
 Canal Bridge v. Gordon 187 
 
 Canal Co. v. Sansom 587 
 
 v. Vallette 450 
 
 Canastota Knife Co. v. Newing- 
 
 ton Tramway Co. 175 
 
 Candee ». West. Un. Tel. Co. 357 
 Canfield v. Baltimore and O. Co. 353 
 Cannon v. New Orleans 480 
 
 v. Trask 560, 688 
 
 Cape Breton Co., In re 83 
 
 Cape's Ex'rs' Case 719, 720 
 
 Capebart v. Seaboard, etc., R. R. 
 
 Co. 356 
 
 Cape May, etc., Nav. Co. 577 
 
 Capital State Bank v. Lane 346 
 
 Capital Traction Co. v. Orcutt 421 
 Caps v. Prospecting Co. 538 
 
 Carbon Iron Co. v. Carbon 
 
 County 477a 
 
 Card v. Carr 262 
 
 Carden v. General Cemetery Co. 86 
 Cardot v. Barney 417 
 
 Cardwell v. Bridge Co. 474a 
 
 v. Kelley 526 
 
 Cargill Co. v. Minnesota 476a 
 
 Carlen v. Drury 554 
 
 Carley v. Hodges 771 
 
 Carli v. Stillwater Street R'y Co. 175 
 
 SECTION 
 
 Carlisle v. Cahawba, etc., R. R. 
 
 Co. 518 
 
 v. Saginaw Valley R. R. Co. 516 
 v. South Eastern R'y Co. 565 
 
 v. Terre Haute, etc., R. R. Co. 531 
 Carlow v. Aultman 384 
 
 Carlton v. Southern Mut. Ins. Co. 570 
 Carnahanv. Western Un. Tel. Co. 393 
 Carney v. Duniway 244 
 
 Carolina Nat. Bank, Ex parte 824 
 Carpenter v. Black Hawk Min- 
 ing Co. 125, 131, 678 
 ». Danforth 698 
 v. N. Y. and N. H. R. R. Co. 565 
 Carr v. Cbartiers Coal Co. 646 
 v. La Fevre 679 
 v. Ga. L. & T. Co. 204 
 Carriage Co. v. Graiu Co. 668 
 Carriage Co-operati ve Supply 
 
 Ass'n, In re 615 
 
 Carriger u. EastTenn., etc., R. R. 
 
 Co. 173 
 
 Carroll v. East St. Louis 388 
 
 v. Green 717, 736 
 
 v. Mullanphy Savings B'k 582 
 
 Carroll County v. Smith 
 
 316, 327, 328, 332 
 Carrothers v. Newton Spring Co. 146 
 Carrugi v. Atlantic Fire Ins. Co. 
 
 255, 754 
 Carrutbers v. Kansas City, etc., 
 
 R. R. Co. 170, 425 
 
 Carson v. Central R. R. Co. 175 
 
 v. Gas Ligbt Co. 556 
 
 Carson-Rand Co. v. Stern 401 
 
 Carstens v. Leidigb, etc., Lum- 
 ber Co. 392 
 Cartan v. Father Matthew Soc. 583 
 Carter v. Howe Machine Co. 342 
 v. Central Vt. R. R. Co. 374 
 v. Ford Plate Glass Co. 142, 688 
 v. Union Printing Co. 745 
 Carton & Co. v. Illinois Central 
 
 R. R. Co. 474c 
 
 Cartwright v. Dickinson 546, 549 
 Casco Nat. Bank v. Clark 210 
 
 Case v. Bank 240, 599 
 
 v. Kelly 128 
 
 Casey v. Galii 727, 738 
 
 Cass v. Manchester Iron and 
 
 Steel Co. 229 
 
 Cassaday v. American Ins. Co. 400 
 Casserly v. Manners 759 
 
 Castellan v. Hobson 791 
 
 Castle o. Belfast Foundry Co. 238 
 Castleberry v. State 187 
 
 Castlemen v. Templeton 393 
 
 Castner v. Twitcbell Champlin 
 
 Co. 185 
 
 Cates ». Baxter 796 
 
 v. Sparkman 554 
 
 835
 
 TABLE OF OASES. 
 
 SECTION 
 
 Catlin ». Eagle Bank 225, 6ti3, 668 
 Cattle Co. r. Haines 599 
 
 Cauley v. Pittsburgh, etc., R. R. 
 
 Co. 165, 371 
 
 Caulkins v. Gas Light Co. 592, 795 
 Cayuga Lake R. R. Co. v. Kyle 537 
 Cazeaux v. Mali 696, 755 
 
 Cecil, Matter of 579 
 
 Cedar Grove Co. 578 
 
 Cedar Rapids, etc., R'y Co. v. 
 
 Spofford 162 
 
 Ceeder v. Lumber Co. 238 
 
 Center Creek L. Co. v. Lindsay 627 
 Central Agricultural Ass'n v. 
 Alabama Gold Life Ins. Co. 
 
 157, 738, 749 
 Central Branch U. P. R. R. Co. 
 
 v. Andrews 175a 
 
 v. Atchison, T. and S. F. R. R. 
 
 Co. 164, 470 
 
 v. Twine 175a 
 
 v. Western Union Tel. Co. 314 
 
 Central Bridge Co. v. Lowell, 137, 470 
 
 Central City Savings Bank v. 
 
 Walker ' 751 
 
 Central, etc., Road Co. v. People 460 
 Central Gold Mining Co. v. Piatt 125 
 Central Nat. Bank t>. Levin 210 
 
 v. Williston 796 
 
 Central Nebraska Nat. Bank v. 
 
 Wilder 798 
 
 Central Pac. R. R. Co. v. Cal- 
 ifornia 482 
 o. State Board 480 
 Central R'y Co. v. Brown 335 
 Central R. R. Co. v. Collins 309, 556 
 0. (ieorgia Co. 392 
 r. Smalley 374 
 v. Smith 308, 336 
 v. Ward 597, 599 
 r. Wright 489 
 Central R. R., etc., Co. v. Cheat- 
 ham 202 
 v. Georgia 421, 491 
 v. Letcher 368 
 Central Transportation Co. v. 
 Pullman's Palace Car Co. 
 
 123, 264, 283, 286, 305a, 310 
 Central Trust Co. r. Kneeland 676 
 
 r. McGeorge, 395 
 Central Union Telephone Co. v. 
 
 Bradbury 357, 475 
 
 Cliaffee v. Boston and L. R. R. 374 
 
 v. Bromberg 668 
 
 v. Ludeling 418 
 
 v. Middlesex R. R. 302 
 
 v. Rutland R. R. Co. 565, 814 
 
 Chaffee County r. Potter 321 
 
 ChafHn v. Cummins 511 
 
 Challis v. Atchison, etc., R. R. 
 
 Co. 165 
 
 836 
 
 8ECTION 
 
 Chamberlain v. Bromberg 225 
 
 v. Pacific Wool-growing Co. 628 
 Chamberlain v. Painesville, etc., 
 
 R. R. Co. 190, 517 
 
 v. St. Paul, etc., R. R. Co. 507 
 
 Chamberlin v. Mammoth Mining 
 
 Co. 238 
 
 Chambers v. Falkner 276 
 
 v. Lewis 768 
 
 v. Lancaster 237 
 
 v. Manchester, etc., Ry. Co. 305 
 
 v. St. Louis 303 
 
 Chambers County v. Clews 328 
 
 Chandler v. Bacon 82 
 
 v. Brown 542, 780 
 
 v. Keith 707 
 
 Chapin v. Sullivan R. R. Co. 162a 
 
 Chapman v. Rates 580, 788 
 
 Chapman v. Colby 121, 389 
 
 v. Ironclad Co. 135, 283 
 
 v. Lynch 767, 770 
 
 v. Oshkosh, etc., R. R. Co. 174, 179 
 
 v. Mad River, etc., R.R.Co. 532, 557 
 
 v. McCrea 346 
 
 Chapman's Case 614 
 
 Chapman & Barber's Case 740 
 
 Charitable Corporation ». Sutton 
 
 619, 620, 624, 803 
 Charles River Bridge Co. v. War- 
 ren Bridge Co. 122, 147, 453, 464 
 Charleston Boot, etc., Co. v. 
 
 Dansmore 617, 645 
 
 Charleston, etc., Turnpike Co. v. 
 
 Willey 284, 390 
 
 Charleston Ins. Co. v. Sebring 690 
 Charlotte, etc., R. R. Co. v. 
 
 Gibbes 474tZ 
 
 Charlton v. New Castle and Car- 
 lisle Ry. Co. 309, 556 
 Charter Oak Ins. Co. v. Sawyer 401 
 Chartiers Ry. Co. v. Hodgens 531 
 Chase v. Curtis 764, 770, 773 
 r. Lord 717 
 v. Mich. Tel. Co. 657 
 r. Railroad Co. 513, 546 
 D. Kedfield Creamery Co. 87 
 B. Sutton Mfg. Co. 175 
 o. Sycamore, etc., R. R. Co. 518 
 v. Tuttle 260 
 v. Vauderbilt 666 
 Chautauqua County Rank v. Ris- 
 
 ley 204 
 
 Chater v. San Francisco Sugar 
 
 Refg. Co. 108, 790 
 
 Chattahoochee National Bank v. 
 
 Schley 337, 346 
 
 Chattanooga, etc., R. R. Co. v. 
 
 Liddell 170 
 
 Chatteroi Ry. Co. v. Kinner 495 
 
 Cheale v. Kenward 789, 790
 
 TABLE OF CASES. 
 
 SECTION 
 
 Cheeney v. Lafayette, etc., Ry. 
 
 Co. 647 
 
 Cheever v. Railroad Co. 206 
 
 Cheltenham, etc., Ry. Co. v. 
 
 Daniel 520, 589 
 
 Chemical Nat. Bank v. Bailey 750 
 
 v. Havermale 283 
 
 v. Kohner 202 
 
 Chenango County Mat. Ins. Co., 
 
 Ex parte 577 
 
 Cheraw, etc., R. R. Co. v. Com- 
 missioners 421 
 Cherokee Iron Co. ». Jones 556 
 Cherokee Nation v. Kansas Ry. 
 
 Co. 470 
 
 Cherry v. Colonial Bank 754 
 
 v. Frost 794, 795 
 
 Chewacla Lime Works v. Dis- 
 
 mukes 283a 
 
 Chesapeake and Ohio Canal Co. 
 
 v. Dulany 512 
 
 v. Howard 336 
 
 v. Knapp 248 
 
 Chesapeake and O. R. R. Co. v. 
 
 Miller 490 
 
 v. Paine 796 
 
 Chesapeake O. & S. R. R. Co. v. 
 
 Griest 657 
 
 Chesapeake, etc., R. R. Co. v. 
 
 Virginia 491 
 
 Cheshire County Telephone Co. 
 
 v. State 477a 
 
 Chesley v. Pierce 511, 718 
 
 Chester v. Buffalo Mfg. Co. 800 
 
 Chester Glass Co. v. Dewey 
 
 276, 411, 546 
 Chetlain v. Republic Life Ins. 
 
 Co. 515, 529 
 
 Chew v. Ellingwood 249 
 
 Chicago and Alton R. R. Co. v. 
 
 Becker 375 
 
 v. Chicago, etc., Coal Co. 415 
 
 v. People 475, 476a 
 
 v. Shea 356 
 
 v. Suffern 309 
 
 v. Sullivan 365 
 
 Chicago, etc., R. R. Co. v. State 485 
 Chicago Bldg. & Mfg. Co. v. Sum- 
 
 merous 549 
 
 Chicago Bldg. & Mfg. Co. v. 
 
 Lyon 551 
 
 Chicago and A. Ry. Co. v. Derkes 276 
 v. Erickson 350 
 
 Chicago and C. A. L. R. R. Co. 
 
 v. McCo-.l 360 
 
 Chicago and Eastern R. R. Co. 
 
 v. Flexman 347 
 
 Chicago and M. R. R. Co. r. Ross 365 
 Chicago and N. W. Ry. Co. v. 
 
 Auditor-General 406 
 
 v. Bentley 360 
 
 SECTION 
 
 Chicago and N. W. Ry. Co. v. 
 
 Crane 170 
 
 v. Morand 365 
 
 v. Northern Line Packet Co. 642 
 v. Ward 365 
 
 v. Williams 248 
 
 Chicago and R. I. R. R. Co. v. 
 
 Whipple 170 
 
 Chicago and Vincennes R. R. Co. 
 
 B. Fosdick 682 
 
 Chicago and W. I. R. R. Co. v. 
 
 Ayres 175a 
 
 Chicago and Western Ind. R. R. 
 
 Co. v. Dunbar 163 
 
 Chicago B. and Q. R. R. Co. v. 
 
 Bryan 348 
 
 v. Chamberlain 163 
 
 v. George 350 
 
 v. Gregory 365 
 
 ». Griffin 348 
 
 v. Haggerty 474 
 
 v. Lewis 303 
 
 v. Siders 477 
 
 v. Stumps 368 
 
 v. Wilson 3, 164 
 
 Chicago Building Soc. v. Crowell 212 
 
 Chicago City Ry. Co. v. People 460 
 
 Chicago, Danville, etc., R. R. Co. 
 
 v. Loewenthal 669, 819 
 
 v. Smith 319 
 
 Chicago Edison Co. v. Fay 593 
 
 Chicago, etc., R. R. Co. v. Ackley 476a 
 o. Ashling 421 
 
 v. Chicago 470 
 
 v. Chicago Bank 656 
 
 v. Iowa 474c, 476a 
 
 v. James 215, 236 
 
 v. Miller 374 
 
 v. Minnesota 476a 
 
 v. Moffit 425 
 
 v. Nebraska 465 
 
 v. People 454 
 
 v. Solan 352 
 
 v. United States 450, 467 
 
 v. Wellman 476a 
 
 Chicago Gas Light Co. v. Peo- 
 ple's G. L. Co. 304, 309c 
 Chicago Hansom Cab Co. v. 
 
 Yerkes 5596 
 
 Chicago Life Ins. Co. v. Auditor 495 
 v. Needles 457, 474 
 
 Chicago, M. & St. P. R. R. Co. v. 
 
 Milwaukee 475 
 
 Chicago, M. &. St. P. v. Tomp- 
 kins 4706 
 Chicago Mut. Life Ins. Co. v. 
 
 Hunt 458 
 
 Chicago, P. & St. L. Ry. Co. v. 
 
 Ayres 308 
 
 Chicago, Pekin, etc., R. R. Co. v. 
 
 Marseilles 135 
 
 837
 
 TABLE OF CASES. 
 
 SECTION 
 
 Chicago, K. I. and P. K. R. Co. 
 
 o. Town of Lake 163, 103a 
 
 ». Zeruecke 400a, 499 
 
 Chicago R. K. Co. v. Jarrett 377 
 
 o. Jones 374 
 
 v. Scurr 377 
 
 Chicago, St. L. and N. O. R. R. 
 
 Co. v. Abels 356 
 
 Chicago v. Hall 825 
 
 Chicago, T. & T. Co. v. Bank 202 
 
 Chickaming y. Carpenter 324 
 
 Chicora Co. v. Crews 149 
 
 Child v. Boston, etc., Iron Works 773 
 
 v. Cotliu 720 
 
 v. Hudson Bay Co. 601 
 
 Cliilds v. Bank of Missouri 342 
 
 v. Cleaves 393 
 
 v. New Haven & N. Co. 179 
 
 Cliincleclaraouche Lumber Co. 
 
 v. Commonwealth 454, 457, 498 
 Chinnock's Case 586, 749 
 
 Chippendale, Ex parte 645, 698 
 
 Chisholra Bios. v. Forney 701 
 
 Chouquette v. Barada 204 
 
 Chouteau v. Allen 256, 679 
 
 v. Deane 522c 
 
 Chouteau Ins. Co. y. Floyd 
 
 517, 521, 549 
 v. Holmes 184, 261, 540 
 
 Chouteau Spring v. Harris 601 
 
 Christ Church v. County of Phil- 
 adelphia 489 
 Christian v. American Mortgage 
 
 Co. 401 
 
 Christian, etc., Grocery Co. v. 
 
 Fruitdale Lumber Co. 146 
 
 Christensen v. Eno 702 
 
 Christenson y. American Exp. 
 
 Co. 353 
 
 Christian's Appeal 360 
 
 Christian Union v. Yount 384, 388 
 Chv Lung v. Freeman 4746 
 
 Chubb v. Upton 147, 537 
 
 Cincinnati C. Co. v. Bate 158 
 
 Cincinnati and S. Gr. Ave. Ry. 
 
 Co. ». Cumminsville 175, 176 
 
 Cincinnati and S. Ry. Co. v. 
 
 Longworth 178, 179 
 
 Cincinnati, B. and Q. R. R. Co. 
 
 y. Chicago 476 
 
 Cincinnati C. Co. v. Bate 739 
 
 Cincinnati, etc., Air Line R. R. 
 
 Co. v. McCool 360 
 
 Cincinnati, etc., R. R. Co. v. 
 
 Clarkson 647 
 
 v. Cole 449 
 
 v. Interstate Commerce Com- 
 
 m'n 474d 
 
 v. Pontius 353, 354, 359, 363 
 
 Cincinnati H. and D. R. R. Co. 
 
 i-. Spratt 364 
 
 838 
 
 SECTION 
 
 Cincinnati H. and D. R. R. Co. 
 
 v. Sullivan 475 
 
 Cincinnati, Lafayette, etc., R. R. 
 
 Co. o. Danville, etc., R'y Co. 151 
 
 Cincinnati Mat. Ass. Co. v. Ro- 
 senthal 401 
 
 Cinn Volksblatt Co. v. Hoff- 
 
 meister 585 
 
 Citizens' Building Ass. v. Coriell 
 
 616, 617, 620 
 
 Citizens' Ins. Co. v. Sortwell 
 
 184, 573, 575 
 
 Citizens' Loan Assoc, v. Lyon 616 
 
 Citizens' Nat. Bank v. Elliott 646, 647 
 v. Columbia County 484 
 
 Citizens' Sv'gs B'k r. Blakesley 342 
 v. Owensboro 461, 497 
 
 Citizens' Street R. R. Co. v. Rob- 
 bins 599 
 
 Citizens' etc., Ass'n v. Perry Co. 332 
 
 Citizens' etc., Sav. Bank v. Gil- 
 lespie 703 
 
 City v. Lamson 680 
 
 City Bank v. Bruce 135, 136 
 
 p. Bartlett 523 
 
 v. Cutter 195 
 
 y. Perkins 239 
 
 City El. Ry. Co. v. National Bank 236 
 
 City El. St. Ry. Co. v. First Nat. 
 
 B'k 267 
 
 City Fire Ins. Co. v. Carrugi 
 
 JiC), ^86, 292, 396 
 
 City Ins. C<>. v. Commercial 
 
 Hank 432, 435 
 
 City National Bank v. Paducah 484 
 v. Phelps 416 
 
 City of Bridgeport v. N. Y. and 
 * N. II. R. R. Co. 490 
 
 City of Buffalo, In re 613a 
 
 City of Carthage v. First Nat. 
 
 Bank 483 
 
 City of Chicago v. Cameron 142 
 
 City of Covington v. Covington, 
 
 etc., Bridge Co. 571 
 
 City of Danville v. Danville 
 
 Water Co. 475 
 
 City of Georgetown y. Alexandria 
 
 Canal Co. 167, 171 
 
 Cit} r of Indianapolis r. Nevin 476a 
 
 Citv of Jacksonville v. Jackson- 
 ville R'y Co. 171 
 
 City of Kansas y. Hannibal and 
 
 St. Jo. R. R. Co. 753 
 
 City of Lexington v. Butler 
 
 326, 328, 329 
 
 City of London v. Wood 456, 503 
 
 City of Lvnchburg y. Slaughter 319 
 
 City of Madison v. Smith 319 
 
 City of Menasha v. Milwaukee, 
 "etc., R. R. Co. 415 
 
 City of Mt. Vernon v. Hovey 326
 
 TABLE OF CASES. 
 
 SECTION 
 
 City of Natchez v. Mallery 303 
 
 City of New York v. Miln 4746 
 
 City of Ottawa v. Carey 319, 320, 322 
 City of Quiucy v. Chicago B. and 
 
 Q. R. R. Co. 676 
 
 City of Savannah v. Kelly 322 
 
 City of St. Louis v. Shields 146 
 
 Claflin v. Farmers 1 , etc., Bank 636 
 Claibourne County v. Brooks 318, 319 
 Clapp v. Peterson 135, 136, 747 
 
 Claremont Bridge Co. v. Royce 384 
 Clark, Appeal of 734 
 
 v. American Coal Co. 646 
 
 v. Barnard 407, 462 
 
 v. Bever 5226, 702, 702 a 
 
 v. City of Rochester 319 
 
 v. Colton 759 
 
 v. Edgar 752 
 
 v. Farrington 121, 123 
 
 v. Faxton 351 
 
 v. German Security Bank 796 
 
 v. Iowa City 326, 680 
 
 v. Monongahela Nav. Co. 530 
 
 v. Myers 733, 734 
 
 v. Port of Mobile 480 
 
 v. Read 125 
 
 v. St. Louis, etc., R'y Co. 353 
 
 v. Titcomb 125, 236 
 
 v. Trust Co. 642 
 
 v. Turner 541 
 
 Clarke Nat. Bank v. Bank of Al- 
 bion 244 
 Clarke i\ Brooklyn Bank 515 
 v. Dickson 755 
 v. Lincoln Lumber Co. 541 
 v. Needles 360 
 v. Thomas 541 
 Clarkson v. Claikson 799 
 Clayton v. Ore Knob Co. 702 
 Clearwater v. Meredith 419, 421, 510 
 Cleghorn v. New York Central 
 
 R. R. Co. 378 
 
 Clegg o, Crawford 374 
 
 v. Hamilton, etc., Grange Co. 739 
 Clements v. Todd 104 
 
 Cleveland v. Burnham 720 
 
 Cleveland C. and C. R. R. Co. v. 
 
 Keavy 365 
 
 Cleveland, O, C. and I. R. R. Co. 
 
 v. Coburn 162 
 
 Cleveland, etc., R. R. Co. v. Illi- 
 nois 474d" 
 Cleveland, etc., R. R. Co. v. 
 
 Robbins 594 
 
 v. Rowan 376 
 
 v. Spear 408 
 
 Cleveland, Painesville, etc., R. 
 
 R. Co. v. Cm-ran 353 
 
 Cleveland Paper Co. v. Courier Co. 130 
 Cleveland Trust Co. v. Lander 484 
 Clews v. Bank of New York 245, 246 
 
 SECTION 
 
 Clinch v. Financial Co. 608 
 
 Clinkscales v. Pendleton M'f'g Co. 813 
 Clinton Bridge, The 171 
 
 Close v. Gleuwood Cemetery Co. 
 
 146, 498, 499 
 
 v. Potter 723 
 
 Clowes o. Miller 580, 788 
 
 Clyde ». Hubbard 363 
 
 Coal Creek Co. v. Tennessee 
 
 Coal Co. 130 
 
 Coates v. Missouri, K. and T. Ry. 
 
 Co. 368 
 
 v. Nottingham, etc., R. R. Co. 565 
 
 v. United States Exp. Co. 364 
 
 Coats v. Donnell 240, 668 
 
 Cobb v. 111. Cent. R. R. Co. 361 
 
 Cocheco Nat. Bank v. Haskell 241 
 
 Cochran v. Arnold 157 
 
 v. Ocean Dry Dock Co. 750 
 
 v. Wiechers 714 
 
 Cockburn v. Union Bank 585 
 
 Coe v. Columbus, etc., R. R. Co. 
 
 125, 131, 676, 820 
 
 v. Errol 485 
 
 v. Knox County Bank 820 
 
 v. Peacock 820 
 
 Coffey v. National Bank 416, 667 
 
 Coffin v. Ransdell 522c, 702 
 
 v. Rich 501 
 
 Coggin v. Central R. R. Co. 425 
 
 Coggs v. Bernard 619 
 
 Cogswell v. Bull 555, 688 
 
 v. New York, etc., R. R. Co. 167 
 
 v. Rockingham Ten Cents 
 
 SVgs B'k 672 
 
 Cogwin v. Town of Hancock 330 
 
 Cohen v. Southern Exp. Co. 363 
 
 Cohen v. Berlin-Jones Co. 309c 
 
 Coit v. Gold Amalgamating Co. 
 
 701, 702 
 Cole v. Butler 723, 825 
 
 v. Dyer 577 
 
 v. Goodwin 351, 359 
 
 v. Knickerbocker Life Ins. Co. 664 
 v. Lagrange 319 
 
 v. Millerton Iron Co. 419, 656, 657 
 v. N. Y., N. H. & H. R. R. 
 
 Co. 374 
 
 v. Ryan 747 
 
 Coleman v. Cassidy 696 
 
 v. Columbia OilCo. 135 
 
 v. Howe 522a, 522c, 655, 702 
 
 v. Oil Co. 236 
 
 v. San Rafael Turnpike Co. 128,303 
 
 v. Second Ave. R. R. Co. 628 
 
 v. White 725 
 
 Coles v. Whiteman 790 
 
 Colfax Hotel Co. v. Lyon 263, 511 
 
 Collier o. Davis 401 
 
 Collingswood v. Berkley 77 
 
 Collins v. Collins 567 
 
 839
 
 TABLE OF CASES. 
 
 SECTION 
 
 Collins v. Hammock 137 
 
 v. New Hampshire 474a" 
 
 v. Sherman 453 
 
 Colman v. Eastern Counties R'y 
 
 Co. 556 
 
 Colorado Iron Works v. Mining 
 
 Co. 400 
 
 Colorado Merchants' Dispatch 
 
 Trans. Co. v. Comforth 353 
 
 Colquhouu v. Courtney 790 
 
 Colt v. Ives 796 
 
 v. Woolaston 104 
 
 Coltou v. Mississippi, etc., Boom 
 
 Co. 451 
 
 v. Drovers' Bldg. Ass'n 672 
 
 v. Mover 721 
 
 Columbia County v. King 318, 333 
 
 Columbia Nat. Bank's Appeal 
 
 133, 541 
 
 Columhian Bank's Estate 135, 552 
 
 Columbus, etc., R'y Co. v. Powell 6b6 
 
 v. Skidmore 425, 666 
 
 Columbus P. and I. K. K. Co. v. 
 
 Indianapolis and B. R. R. Co. 308 
 
 Colvin v. Williams 789 
 
 Comanche County v. Lewis 157 
 
 Commercial Bank v. Burgwyn 210 
 
 V. Chambers 484 
 
 v. Hughes 672 
 
 v. Lockwood 437 
 
 v. Nolan 298 
 
 v. Pfeiifer 146 
 
 v. Sherman 400 
 
 v. St. Croix M'f'gCo. 205 
 
 v. State of Mississippi 459 
 
 v. Ten Eyck 618 
 
 Commercial Bank of Natchez v. 
 
 State 459 
 
 Commercial Elec. Light & R. R. 
 
 Co. v. Judson 479 
 
 Commercial F. I. C. v. Board of 
 
 Revenue 130 
 
 Commercial Nat. Bank v. Burch 135 
 Commercial, etc., B'kr. Slocomb 410 
 Commercial, etc., Nat. Bank v. 
 
 First Nat. Bank 672 
 
 Commercial Mut. Assurance Co. 
 
 v. Scammon 388 
 
 Commissioners, etc., v. Bolles 330 
 v. Holyoke Water Power Co. 502 
 r. Thayer 814 
 
 v. Tobacco Co. 477 
 
 Commissioners of Craven v. At- 
 lantic, etc., R. R. Co. 125 
 Commissioners of Johnson 
 
 County v. January 325, 331 
 
 Commissioners of Marion County 
 
 v. Clark 326 
 
 Commissioners of Tippecanoe 
 
 County ?). Beynolds 698 
 
 Commonwealth v. Arrison 459 
 
 840 
 
 SECTION 
 
 Commonwealth v. Boston & A. 
 
 R. R. Co. 136 
 
 v. Boston & N. R. R. Co. 171 
 
 v. Bringhurst 579 
 
 v. Building Co. 477a 
 
 v. Chesapeake, etc., R. R. Co. 479 
 v. Coal Co. 400 
 
 v. Cochituate Bank 500, 501 
 
 v. Commercial Bank 459 
 
 v. Cullen 227, 432, 449, 453, 530, 573 
 v. Dalzell 794 
 
 v. Eastern R. R. Co. 475 
 
 v. Erie and N. E. R. R. Co. 120 
 
 v. Erie Trans. Co. 489 
 
 v. Essex Co. 163a, 502 
 
 v. Evans 476 
 
 v. Fayette County R. R. 489 
 
 v. Fitchburg R. R. Co. 454 
 
 v. Gas Co. 477 
 
 v. Gloucester Ferry Co. 479. 480, 485 
 v. Hamilton Mfg. Co. 474, 477a 
 
 v. Lancaster Savings Bank 388 
 
 v. Lowell Gas Light Co. 477a 
 
 v. Milton 383 
 
 v. New Bedford Bridge 450, 503 
 v. Old Dominion Steamship 
 
 Line 479 
 
 v. Owensboro, etc., R. R. Co. 462 
 v. R. R. Co. 477 
 
 v. Philadelphia Co. 481 
 
 v. Pittsburg 530 
 
 v. Pittsburg and Connellsville 
 
 R. R. Co. 459, 503, 801 
 
 v. Phoenix Iron Co. 585 
 
 v. Pottsville Water Co. 489 
 
 v. Power 371 
 
 v. Railroad 477a, 565 
 
 v. Reading Savings Bank 
 
 210, 233, 263, 342 
 v. Smith 125, 305, 813 
 
 v. Standard Oil Co. 400, 477, 479 
 v. Susquehannah, etc., R. R. 
 
 Co. 815 
 
 v. Texas, etc., R. R. Co. 403, 480 
 v. Union Fire, etc., Ins. Co. 459 
 v. Vermont, etc., R. R. Co. 
 
 350, 353 
 v. Woelper 576 
 
 v. Woodward 578 
 
 Com p. v. Carlisle Deposit Bank 161 
 Compton v. Schwabacher 6H8 
 
 v. The Chelsea 187 
 
 Comstock, In re 401 
 
 Conant v. Van Schaick 734 
 
 Conard v. Atlantic Ins. Co. 137 
 
 Concord v. Robinson 320 
 
 Concord First Nat. Bk. v. Haw- 
 kins 283 
 Concord R. R. Co. v. Clough 618 
 v. Greely 163, 4fi4 
 Concordia Savings Asso'nu. Reed 137
 
 TABLE OF CASES. 
 
 SECTION 
 
 Condon v. Mut. Reserve, etc., 
 
 Assn. 392 
 
 Congregational Soc'y v. Sperry 575 
 Conkey v. Hark 493 
 
 Conklin v. Second Nat. Bank, 
 
 594, 602 
 Connecticut and P. Rivers R. R. 
 
 Co. v. Bailey 97, 521, 529, 779 
 v. Cooper 382 
 
 Connecticut Mut. Ins. Co. v. 
 
 Cushman 450, 498 
 
 Connecticut Mut. L. Ins. Co. v. 
 Cleveland, etc., R. R. Co. 251, 681 
 v. Spratley 395 
 
 Connecticut River Savings Bank 
 
 v. Fiske 286 
 
 Connecticut Ry. Co. v. Union Ry. 
 
 Co. 454 
 
 Connolly's Est. 799 
 
 Connolly v. Union Sewer Pipe 
 
 Co. 309« 
 
 Connover v. Hull 668 
 
 Conover v. Mut. Ins. Co. 262 
 
 Conrad v. Trustees of Ithaca 169 
 
 Conro o. Gray 432, 658 
 
 v. Port Henry Iron Co. 181 
 
 Consolidated Channel Co. v. 
 
 Central Pac. R. R. Co. 163 
 
 Consolidated Gregory Co. v. 
 
 Raber 202 
 
 Const v. Harris 112, 556 
 
 Continental Improvement Co. v. 
 
 Phelps 369 
 
 v. Stead 368, 374 
 
 Contoocook Valley R. R. Co. v. 
 
 Barker 518 
 
 Contra Costa Coal Mines R. R. 
 
 Co. ». Moss 163, 163a 
 
 Converse v. Norwich, etc., Trans. 
 
 Co. 363 
 
 Conway v. John 796 
 
 v. Taylor's Executor 4746 
 
 v. Smith Mercantile Co. 668 
 
 Cook v. Berlin Woolen Mill Co. 630 
 
 v. City of Burlington 483 
 
 v. Detroit, etc., Ry. Co. 415, 663 
 
 v. Kuhn 248 
 
 v. Moody 667 
 
 v. Pearce 767 
 
 v. Pennsylvania 485 
 
 Cooke v. Marshall 133 
 
 v. State Nat. Bank 244 
 
 Cooley v. Board of Wardens 4746 
 
 Coon o. Syracuse, etc., R. R. Co. 366 
 
 Cooney v. Packing Co. 303 
 
 v. Pullman Palace Car Co. 347 
 
 Cooper v. Ardel Security Co. 660 
 
 v. Corbin 424 
 
 v. Curtis 189 
 
 v. Frederick 135, 745 
 
 v. Mullins 365 
 
 SECTION 
 
 Cooper v. Oriental Savings Ass'n 
 
 435, 436 
 v. Security Co. 706 
 
 Cooper Mfg. Co. v. Ferguson 400 
 
 Coosa River Steamboat Co. v. 
 
 Barclay 325 
 
 Copes v. Charleston 325 
 
 Copley v. Grover & Baker Sew- 
 ing Machine Co. 342 
 Copp v. Lamb 382 
 Coppage v. Hutton 516 
 Coppin v. Greenless & Co. 134 
 Coquard v. Nat. So. Co. 611 
 Corbett v. Woodward 574, 759 
 Corcoran v. Snow Cattle Co. 210 
 Cordell v. N. Y. C. and H. R. 
 
 R. R. Co. 374 
 
 Cordova Coal Co. v. Long 427 
 
 Corey v. Wadsworth 655, 759 
 
 Cork, etc., R'y Co., In re 311 
 
 v. Cazenove 515 
 
 Corn Exchange Bank v. Nassau 
 
 Bank 246 
 
 Cornell v. Roach 772 
 
 Cornell and Michler's Appeal 701, 706 
 Cornick v. Richards 796 
 
 Corning v. McCullough 501, 717, 762 
 Cornwall v. Eastham 774, 775 
 
 Cortello v. Brewing Co. 601 
 
 Cory v. Lee 739 
 
 Costello's Case 586, 747, 749 
 
 Cotting v. Kansas City Stock 
 
 Yards 4766 
 
 Cotton Mills Co. v. Burns 537 
 
 Cotton Mills v. Dunstan 546 
 
 Cotton Press Co. v. McKellar 90 
 
 County Court v. Griswold 163 
 
 County Life Ass. Co., In re 189, 195 
 County of Allegheny v. Cleve- 
 land, etc., R. R. Co. 406, 412 
 County of Bates v. Winters 322 
 County of Blue Earth v. St. Paul, 
 
 etc., R. R. Co. 171 
 
 County of Cass v. Gillett 324, 327 
 
 v. Johnson 328 
 
 v. Morrison 467 
 
 County of Clay v. Society for 
 
 Savings 330 
 
 County of Daviess v. Huidekeper 322 
 County of Green v. Daniell 333 
 
 County of Henry v. Nioolay 324 
 
 County of Jasper v. Ballon 325 
 
 County of Macon v. Shores 327 
 
 County of Mobile v. Kimball 
 
 469«, 4746 
 County of Morgan v. Allen 655 
 
 County of Moultrie v. Savings 
 
 Bank 322 
 
 County of Ouachita v. Wolcott S26 
 County of Ralls v. Douglass 330 
 
 County of Randolph v. Post 322 
 
 841
 
 TABLE OF CASES. 
 
 SECTION 
 
 County of Schuyler v. Thomas 324 
 Couuty of Scotland t. Thomas 324 
 County of Travers v. St. P. M. & 
 
 M. B. B. Co. 491 
 
 County of Tipton v. Locomotive 
 
 Works 324 
 
 County of Warren r. Marcy 327, 330 
 County Palatine Loan, etc., Co., 
 
 In re, Cartwell's Case 234 
 
 Court Grange M'g Co., In re 045 
 
 Courtwright v. Deeds 511, 520 
 
 Covert ». Kogers 260 
 
 Covey v. Pittsburgh, etc., R. R. Co. 817 
 Covington v. Covington, etc., 
 
 Bridge Co. 571 
 
 v. Kentucky, 497 
 
 Covington Bridge Co. v. Mayor 
 
 406, 409 
 v. Kentucky 474d 
 
 v. Sargent 572 
 
 Covington Drawbridge Co. v. 
 
 Shepherd 413, 663 
 
 Covington, etc., T. Co. v. Sand- 
 ford 4766 
 Covington Stock Yards Co. v. 
 
 Keith 360 
 
 Cowdrey v. Galveston, etc., R. R. 
 
 Co. 822 
 
 Cowell v. Springs Co. 
 
 286, 384, 388, 460 
 Cowan v. Plate Glass Co. 759, 813 
 Cowles u. Cromwell 586, 587 
 
 Cox v. Central Vt. R. R. Co. 356 
 
 v. Elmendorf 748 
 
 ». Louisville, etc., R. R. Co. 175a 
 Cox's Case 742 
 
 Cozart v. Georgia R. R., etc., 
 
 Co. 550 
 
 Cracker Co.'s Estate 210 
 
 Craddock v. American Mortgage 
 
 Co. 401 
 
 Craft y. South Boston R. R. Co. 193 
 Cragie v. Hadley 210, 342, 672 
 
 Craig v. Cumberland Valley 
 
 State Normal School 519 
 
 ». First Presbyt'n Church 579 
 
 v. Gregg 690 
 
 v. Town of Andes, 332 
 
 Craig's Appeal 759 
 
 Craker v. Chicago and N. W. R'y 
 
 Co. 335, 347, 377 
 
 Cram v. Bangor House Proprie- 
 tary 260, 263 
 Crandall v. Lincoln 135, 552 
 v. State of Nevada 485 
 Craven v. Atlantic and N. C. R. 
 
 R. Co. 298 
 
 Cravens v. Eagle Mills Co. 517 
 
 Crawford v. Branch Bank of Mo- 
 bile 494 
 v. Cincinnati, etc., R. R. Co. 348 
 842 
 
 SECTION 
 
 Crawford v. Longstreet 128, 248 
 
 v. Rohrer 702, 703, 705 
 
 v. Southern R. R. Ass. 363 
 
 v. West Side Bank 072 
 
 Crawford sville, etc., T. P. Co. v. 
 
 State 459 
 
 Crease v. Babcock 726, 727, 741 
 
 Credit Co. i\ Howe Machine Co. 205 
 Creed v. Pennsylvania R. H. Co. 350 
 Creighton & Birch v. Mfg. Co. 759 
 Crenshaw v. Ullman 151 
 
 Crenver, etc., M'g Co., In re 622 
 
 Crescent City Slaughter House 
 
 Co. v. New Orleans 474 
 
 Cresswell v. Oberly 739 
 
 Creswell v. Lanagan 193 
 
 Crippen r. Leighton 393 
 
 Crisswell's Appeal 561 
 
 Crocker v. Crane 91, 234 
 
 v. Old Colony R. R. Co. 592 
 
 v. Whitney 302 
 
 Crolley v. Minneapolis and St. 
 
 L. R'y Co. 166 
 
 Cromwell v. County of Sac 326, 680 
 Crook o. Girard Iron Co. 390 
 
 Cropper, Ex parte 312, 645 
 
 Cross v. B and S. W. R. Co. 567 
 
 Cross v. W. Va. R. R. Co. 577 
 
 v. Pinckneyville Mill Co. 108 
 
 v. St Louis, etc., R. R. Co. 175a 
 Crossley v. East Orange 479 
 
 Crow «. Oxford 332 
 
 Crowley o. Christensen 474d 
 
 Crown v. Brainerd 763 
 
 Crum's Appeal 211, 237 
 
 Crumlish v. Railroad Co. 140 
 
 Crump o. U. S. Mining Co. 236 
 
 Cruse v. Paine 791 
 
 Crutcher v. Kentucky 486 
 
 Crvmble v. Mulvaney 632 
 
 Culbreth v. Phila., W. and B. 
 
 R. R. Co. 360 
 
 Cullen v. Thomson 755 
 
 Cullerne v. London, etc., Build- 
 ing Soc. 623 
 Culver v. Reno Real Estate Co. 209 
 v. Third Nat. Bk. 713, 722, 725 
 Cumberland Coal Co. v. Parish 027 
 Cumberland Lumber Co. v. Clin- 
 ton. Hill Lumber Co. 703 
 Cumberland Valley R. R. Co.'s 
 
 Appeal 309, 556 
 
 Cumberland & P. A. R. R. Co. d. 
 
 State 485 
 
 Cummings v. National Bank 484 
 
 v. Webster 196 
 
 Cummings v. Union Blue Stone 
 
 Co. 309c 
 
 Cunningham v. Alabama L. Ins. 
 
 Co. 601
 
 TABLE OF CASES. 
 
 SECTION 
 
 Cunningham v. Edgefield, etc., 
 
 K. R. Co. 521, 523, 529 
 
 v. Macon and B. R. R. Co. 462 
 
 v. Pacific R. R. Co. 166 
 
 v. Pell 690 
 
 Cunningham's Appeal 569 
 
 Cupit v. Park City B'k 260 
 
 Curran v. State of Arkansas 
 
 437, 501, 507, 656, 664 
 Currier v. Lebanon Slate Co. 135, 747 
 Curry v. Supervisors of De- 
 catur County 238 
 v. Woodward 709 
 Curtinv. Salmon R., etc., Co. 260, 628 
 Curtis v. Delaware, etc., R. R. 
 
 Co. 364 
 
 v. Harlow 719, 720 
 
 v. Leavitt 123, 125, 295, 299 
 
 572, 631, 663 
 
 v. Rochester, etc., R. R. Co. 349 
 
 v. St. Paul, etc., Ry. Co. 178 
 
 v. Tracey 739 
 
 v. Whitney 450 
 
 Cusick v. Bartlett 511, 627 
 
 Cushing v. Perot 393 
 
 Cushman v. Thayer M'f'g Co. 
 
 594, 599, 790 
 
 Custar v. Titusville Gas Co. 105 
 
 Cutting v. Damerel 542, 588, 748 
 
 v. Grand Trunk Ry. Co. 361 
 
 v. Marlor 342 
 
 v. Corning 724 
 
 Cuykendall v. Miles 714 
 
 I). 
 
 D. R. Martin, The 350 
 
 Dabney v. Bank of South Caro- 
 lina 704 
 v. Stevens 195, 196 
 Deland v. William 800 
 Daley v. Norwich, etc., R. R. 
 
 Co. 372 
 
 Dallas v. Atlantic & O. R. R. Co. 395 
 Dallas County v. McKenzie 321, 330 
 Dalton, etc., R. R. Co. v. Mc- 
 
 Daniel 661 
 
 Dana v. Bank of St. Paul 253, 254 
 
 v. Bank of U. S. 181, 219, 224. 
 
 225, 253 
 
 Danburv and Norwalk R. R. 
 
 Co.V Wilson 91, 738 
 
 Dane v. Young 748 
 
 Danforth v. Philadelphia, etc., 
 
 R. R. Co. 790 
 
 Daniell, Ex parte 522a, 545 
 
 Daniell's Case 586, 747 
 
 Daniels v. Clegg 375, 376 
 
 v. Hart 125, 305 
 
 v. St. Lonis, etc., R. R. Co. 416 
 Dannmeyer v. Coleman 140, 688 
 
 SECTION 
 
 448 
 
 437 
 460 
 
 171 
 
 178 
 258 
 
 Danolds v. State of New York 
 Danville Seminary v. Mott 
 Danville, etc., Plankroad Co. 
 
 v. State 
 Danville, etc., R. R. Co. u. 
 Commonwealth 
 v. Gearhart 
 D'Arcy v. Tamar, etc., R'y Co. 
 Darling v. Boston and Worces- 
 ter R. R. Co. 363, 364 
 v. Mayor, etc., of Baltimore 334 
 Darlington v. United States 470 
 Darrington v. Bank of Ala- 
 bama 507 
 Darst v. Gale 212, 280, 282 
 Dartmouth College v. Wood- 
 ward 21,450,453,472 
 Dauchy v. Brown 717, 749 
 Davenport v. County of Dodge 333 
 v. Dows 505, 690 
 Rec'r, v. Lines 566, 708 
 Davenport Bank v. Davenport 484 
 Davenport v. Newton 755 
 Davey v. Jones 161 
 Davidson v. Bridgeport 263 
 v. County Commissioners 319 
 v. Lanier 293 
 v. New Orleans 492 
 v. Rankin 718, 736 
 u. Tulloch 696 
 v. West Chester Gas Light 
 Co. 125 
 Davies, In re 309a 
 Daviess County v. Dickinson 321 
 Davis v. Bank of River Raisin 298 
 o. C. and N. W. R. Co. 175a 
 v. Dumont 523 
 v. England 753 
 
 Flagstaff Silver M'g Co. 195, 225 
 u.Gemmell 688 
 
 v. Uray 450, 460, 462, 542 
 
 v. Jackson 800 
 
 v. Memphis, etc., R. R. Co. 432 
 o. Old Colony R. R. Co. 
 
 195, 264, 267, 286 
 v. Proprietors 572 
 
 v. Railroad Co. 140 
 
 v. Rock Creek L. F. and M. 
 
 Co. 628 
 
 v. Rockingham Investment Co. 193 
 v. Smith 672 
 
 v. State 4(i4 
 
 o. Stewart 747 
 
 v. Tuscumbia R. R. Co. 163 
 
 v. United States Electric, etc., 
 
 Co. 130, 559 
 
 v. Watkins, Rec'r 738 
 
 Davis's Case 123 
 
 Davis Improved Wrought Iron 
 
 Wagon Wheel Co. v. Davis, 
 
 etc., Co. 210 
 
 843
 
 TABLE OF CASES. 
 
 SECTION 
 
 Davis Bros. v. Montgomery, etc., 
 
 Co. 87, 660 
 
 Davoue v. Fanning 6:J0 
 
 Dawes v. North River Ins. Co. 
 
 236, 262 
 Dawley v. Wagner Palace Car 
 
 Co. 347 
 
 Dawson v. Morrison 77 
 
 Day v. Essex County Bank 137 
 
 v. Insurance Co. 150 
 
 v. Ogdensburg, etc., R. R. Co. 
 
 381, 458 
 
 v. Postal Tel. Co. 384 
 
 v. Savage 456 
 
 v. Spiral Spring Buggy Co. 276 
 
 0. Worcester, etc., R. R. Co. 426 
 
 Dayton v. Borst 513, 707 
 
 Dayton C. & I. Co. v. Barton 400a 
 
 Dayton, etc., R. R. Co. v. Hatch 
 
 181, 227 
 Daytou Nat. Bank v. Merchants' 
 
 Nat. Bank 599 
 
 Deaderick v. Wilson 154, 227, 449. 
 585, 688, 695, 698 
 v. Bank 619 
 
 Dean & Son's Appeal 813 
 
 Dean v. Mace 724 
 
 Dearborn v. Washington Sav. 
 
 Bank 600 
 
 Dearborn Foundry Co. v. Augus- 
 tine 401 
 De Bemer v. Drew 394 
 Debnam r. Telephone Co. 400 
 De Bost v. Albert Palmer Co. 196 
 De Camp v. Alward 432 
 Decatur Mineral Land v. Palm 687 
 De Comeau v. Guild Farm Oil 
 
 Co. 599 
 
 Dedham Bank v. Chickering 235 
 
 Dedbam Nat. Bank v. Everett 
 
 Nat. Bank 672 
 
 Dedricb v. Ormsby, etc., Co. 211 
 
 De Graff v. Thompson 820 
 
 De Grof v. American Linen 
 
 Thread Co. 204 
 
 Deitrichs v. Lincoln, etc., R. Co. 164 
 De Kay r. Hackensack Water Co. 641 
 De La Cuesta v. Insurance Co. 568 
 De La Grange v. Southwestern 
 
 Tel. Co. 357 
 
 De La Vergne Co. v. Ger. Sav. 
 
 Inst. 130, 283, 309 
 
 De Lancey v. Insurance Co. 122 
 
 Delano v. Butler 541 
 
 Delaplane v. Chicago, etc., R. R. 
 
 Co. 174 
 
 Delaware, etc., Canal Co. v. 
 
 Mahlenbrock 400 
 
 Delaware, etc., Canal Co. v. Penn- 
 sylvania Coal Co. 189 
 
 844 
 
 SECTION 
 
 Delaware, etc., Nav. Co. v. San- 
 
 som 546 
 
 Delaware, etc., R. R. Co. v. Irick 109 
 
 v. Oxford Iron Co. 602 
 
 v. Tborp 464 
 
 Delaware, etc., Tow Boat Co. v. 
 
 Starrs 353 
 
 Delaware Railroad Tax 
 
 470a, 485, 489, 491, 505 
 Delta Lumber Co. v. Williams 242 
 Del Valle v. Steamboat Rich- 
 mond 355 
 Demarest v. Fleck 384 
 Deming v. Bull 725 
 v. Grand Trunk R. R. Co. 361 
 v. Puleston 769 
 Den v. Fillings 574 
 Denham & Co., In re 625 
 Denike v. New York, etc., Lime 
 
 Co. 610 
 
 Dennis v. Joslin Mfg. Co. 263 
 
 Denniston v. Chicago, etc., R. R. 
 
 Co. 824 
 
 Denny v. Manhattan Co. 696 
 
 Densmore Oil Co. v. Densmore 83 
 Dent's Case 522a, 545, 614 
 
 Denver and R. G. R'y v. Harris 335 
 Denver and Swansea R'y Co. v. 
 
 Denver City R'y Co. 153, 156 
 Denver Fire Ins. Co. v. McClel- 
 land 277 
 Denver, S. P. and P. R. R. Co. v. 
 
 Couwav 366 
 
 De Pass's Case 101, 586, 749 
 
 De Peyster v. Am. Fire Ins. Co. 566 
 Di j rby Council v. State Council 382 
 Derosia v. Winona, etc., R. R. Co. 360 
 Derrick v. Lamar Ins. Co. 342 
 
 Derrickson v. Smith 764 
 
 Derringer v. Derringer 389 
 
 Derringer's Ad. v. Derringer's 
 
 Ad. 384 
 
 Derry v. Lowry 348 
 
 De Ruvi^ne's Case 614 
 
 Descombes v. Wood 225, 230 
 
 Desdoity, Ex parte 578 
 
 Des Moines Bank v. Hotel Co. 511 
 Des Moines L. & F. Co. v. Til- 
 ford 237 
 Despatch Line v. Bellamy M'f'g 
 
 Co. 89, 188, 248, 258, 260 
 
 Desper v. Continental Water 
 
 Meter Co. 392 
 
 Detroit v. Dean 140, 141, 142 
 
 v. Detroit, etc., v. Plank Road 
 
 Co. 502 
 
 v. Detroit St. Ry. Co. 4766 
 
 v. Mutual Gas Co. 418 
 
 Detroit Fire, etc., Ins. Co. v. 
 
 Judge of Saginaw Co. 121
 
 TABLE OF CASES. 
 
 SECTION 
 
 Detroit Savings Bank v. Bur- 
 rows 672 
 
 Detroit Scheutzen Bund ». De- 
 troit Agitations Verein 149 
 
 Detroit Cit. St. Ry. Co. ». Detroit 
 Ry. 316 
 
 Devereaux v. Buckley 361 
 
 Dewey v. St. Albans Trust Co. 
 
 513, 701 
 
 Dewing v. Perdicaries 789 
 
 De Witt 0. Hastings 145, 770 
 
 Dexter, etc., Plank Road Co. v. 
 
 Millard 513 
 
 Dey b. Jersey City 258 
 
 De Yturbide v. Metropolitan 
 
 Club 14 
 
 Diamond Match Co. v. Powers 389 
 
 Diamond Match Trust 309c 
 
 Dickerman v. Northern Trust Co. 
 
 82, 139, 522a 
 
 Dickinson v. Central Nat. Bank 595 
 
 Diefenbach v. Vaughan 401 
 
 Dietrich v. Baltimore, etc., R'y 
 
 Co. 210 
 
 Diligent Fire Ins. Co. v. Com- 
 monwealth 120 
 
 Dill v. Wabash Valley R. R. Co. 
 
 108, 542 
 
 Dillard r. L. and N. R. R. Co. 
 
 353, 359 
 
 Dillon v. Barnard 675 
 
 Dimpfell v. Ohio and Miss. R. 
 
 Co. 140, 555, 556 
 
 Dinsmore i\ Louisville, C. and 
 L. R'y Co. 309 
 
 v. Racine, etc., R. R. Co. 676 
 
 Directors v. Kisch 524. 745 
 
 Distilling Co. v. People 309c 
 
 District of Col. v. Camden Iron 
 
 Works 248 
 
 Ditchett v. Spuyten Duyvil, etc., 
 R. R. Co. 
 
 Diven v. Duncan 
 r. Phelps 
 
 Diversey v. Smith 
 
 Dixon's Case 
 
 Dixon County v. Field 
 
 Dobbin v. Richmond, etc 
 Co. 
 
 Dobbins ». Walton 
 
 Dobson v. More 
 v. Simonton 
 
 Dock v. Cordage Co. 
 
 Dockery v. Miller 
 
 Dodge v. City of Council Bluffs 
 
 381, 384 
 v. County of Platte 330 
 
 Dodge v. Pyrolusite Manganese 
 
 Co. 394 
 
 v. Woolsey, 139, 140, 141, 488, 556 
 
 587, 
 
 170 
 T41 
 810 
 714 
 550, 780 
 332 
 R. R. 
 
 365 
 603 
 236 
 435, 813 
 135, 568 
 204 
 
 SECTION 
 
 Doernbecker v. Lumber Co. 260 
 
 Dolan v. Del. and Hud. Canal Co. 368 
 v. Wilkerson 263 
 
 Donnell v. Lewis County S'v'gs 
 
 Bank 161, 240 
 
 Donnelly b. Mulhall 825 
 
 Donohoe v. Mariposa Land, etc., 
 
 Co. 224 
 
 Donovan v. Halsey Fire Engine 
 
 Co. 197 
 
 Donworth v. Coolbaugh 504, 737 
 
 D'Ooge v. Leeds 799 
 
 Dooley b. Cheshire Glass Co. 146 
 Doolittle v. Marsh 734 
 
 Doon Township v. Cummings 321 
 Dorr v. Life Ins. C. L. Co. 603 
 
 v. New Jersey Steam Nav. Co. 
 
 351, 359 
 Dorris b. French 83 
 
 Dorsey Harvester Rake Co. v. 
 
 Marsh 114, 120 
 
 Dorsey M. Co. v. McCaffrey 342 
 
 Doty b. Patterson 148 
 
 Doud i'. Wisconsin, etc., Rail- 
 road Co. 687 
 Dougberty v. Hunter 237 
 Doughty v. Somerville, etc., R. R. 
 
 Co. 163 
 
 Douglas b. Ireland 723 
 
 v. Kentucky 474 
 
 Douglass b. Cline 822 
 
 v. County of Pike 318, 468 
 
 r. Merchants' Ins. Co. 649 
 
 8. Phenix Ins. Co. 392 
 
 Dousman b. Wisconsin, etc., M'g 
 
 Co. 569 
 
 Dovey's Appeal 795 
 
 Dow v. Beidelman 476a 
 
 v. Memphis R. R. Co. 820 
 
 v. Northern R. R. Co. 305 
 
 v. R. R. Co. 502 
 
 Dowd n. Chicopee 375 
 
 Downie b. White 521 
 
 Downing b. Indiana State Board 58 
 
 B. Mt. Washington Road Co. 267 
 
 B. Potts 578 
 
 Dovle i: Continental Ins. Co. 
 
 383, 400 
 v. Misner 150, 260 
 
 Drake b. Hudson River R. R. Co. 175a 
 Draper b. Springport 328 
 
 v. Stone 790 
 
 Dreher v. I. S. W. R. Co. 178 
 
 Dresser v. Traders' Nat. Bank 283a 
 Driscoll v. Norwich, etc., R. Co. 
 
 170, 305 
 v. West Bradley, etc., M'f'g 
 Co. 599, 600, 601 
 
 Droitwich Patent Salt Co. v. 
 
 Curron 133 
 
 845
 
 TABLE OF CASES. 
 
 SECTION 
 
 Drummond's Case 522c 
 
 Drummond Tobacco Co. v. 
 
 Handle 158 
 
 Drury 0. Cross 700, 815 
 
 v. Midland It. R. Co. 174, 179 
 Dryden v. Kellogg 715, I'M 
 
 Dry mala v. Thompson 305 
 
 Dublin, etc., R'y Co. v. Black 515 
 Ducat o. Chicago 383, 480 
 
 Duckworth r. Koach 770 
 
 Dudley v. Kentucky High School 
 
 553, 083 
 Dueber Watch Case M'f'g Co. v. 
 
 Howard Co. 309a 
 
 Dugas v. Town of Donaldson- 
 
 ville 326 
 
 Duke v. Andrews 99 
 
 v. Cahawba Nav. Co. 263, 460, 589 
 
 u. Dire 99 
 
 v. Markham 187 
 
 Dukes v. Love 734 
 
 Duluth & F. K. R. Co. v. St. Louis 
 
 County 488 
 
 Du Laurens v. First Div. St. P. 
 
 and P. R. R. 248, 348 
 
 Duncan v. Mobile, etc., R. R. 
 
 Co. 822 
 
 Duncomb v. New York H. and 
 
 N. R. R. Co. 225, 301, 630, 633, 759 
 Duncuft o. Albrecht 789, 790 
 
 Dundee Mortgage Co. v. Nixon 400 
 Dunham b. Isett 820 
 
 v. Railway Co. 818 
 
 Dunkerson, In re 583 
 
 Dunlap v. International Steam- 
 boat Co. 355 
 u. Toledo, A. A., etc., R'y Co. 172 
 Dunn v. Commercial Bank 598 
 v. Grand Trunk R'y Co. 350 
 v. Kyle 694 
 Dunphy v. Newspaper Assoc. 560 
 Dunston v. Imperial Gas Light 
 
 Co. 629 
 
 Dupee v. Boston Water Power 
 
 Co. 135 
 
 Durant p. Palmer 376 
 
 Durfee i\ Old Colony, etc., R. 
 
 R. Co. 534, 553, 556, 562 
 
 Durham r. Monumental Silver 
 
 M'g Co. 509 
 
 Durkee v. People 577 
 
 Durlacher v. Frazer 187 
 
 Dutch West India Co. v. Van 
 
 Moses 158 
 
 Duteher 0. Importers, etc., Bank 668 
 v. Maine Nat. Bank 721 
 
 Dutchess Cotton M'f'g Co. v. 
 
 Davis 276, 546 
 
 Dutchess, etc., R. R. Co. v. Mab- 
 
 bett 516 
 
 846 
 
 SECTION 
 
 Dwinelle v. New York Central, 
 
 etc., R. R. Co. 335 
 
 Dyer v. Erie R'y Co. 368 
 
 E. 
 
 Eagle, etc., M'f'g Co. v. Brown 647 
 Eagle Ins. Co. v. Ohio 474 
 
 Eakins v. White Bronze Co. 222 
 
 Eakright e. Logansport, etc., 
 
 R. R. Co. 529 
 
 Eames b. Doris 725, 726 
 
 Earp's Appeal 799 
 
 East Alabama R'y Co. v. Doe 671 
 East and West R. R. Co. v. 
 
 East Tennessee, etc., R. R. 
 
 Co. 155, 163 
 
 East Anglian R'y Co. v. Eastern 
 
 Counties R'y Co. 291, 305 
 
 East Birmingham Land Co. v. 
 
 Dennis 795 
 
 East Boston R. R. Co. v. East- 
 ern R. R. Co. 125 
 East Hartford v. Hartford Bridge 
 
 Co. 316 
 
 East Line, etc., R. R. Co. v. 
 
 Garrett 258 
 
 East N. Y., etc., R. R. Co. v. 
 
 Elmore 618 
 
 East Penn. R. R. Co. v. Hotten- 
 
 stein 178 
 
 East River Bank v. Hoyt 210 
 
 East River National Bank v. 
 
 Grove 193 
 
 East St. Louis v. Zebley 333 
 
 East Tenn., etc., R. R. Co. v. 
 
 Evans 665 
 
 v. Interstate Com. Commission 
 
 474d 
 v. Gammon •")1"> 
 
 v. Rogers 363 
 
 Eastern Counties R'y Co. v. 
 
 Hawkes 204, 232, 286 
 
 Eastern Plank Road Co. v. 
 
 Vaughan 91, 92, 93, 108, 
 
 109, 451. 547 
 Eastern R. R. Co. v. Boston and 
 
 Maine R. R. Co. 103a. 227 
 
 Eastman v. Meredith 335 
 
 Eaton v. Aspinwall 537, 738 
 
 v. Boston, etc., R. R. Co. 173 
 
 Eaton o. N. Y. C. & H. R. R. Co. 365 
 
 v. Robinson 688, 690, 693 
 
 p. St. Louis, etc., M'g Co. 412 
 
 r. Walker 146 
 
 Eaton, etc., R. R. Co. v. Hunt 
 
 409. 005 
 Eby v. North' n Pacific R. R. Co. 404 
 Ecker v. First Nat. Bank 241
 
 TABLE OF CASES. 
 
 SECTION 
 
 Eckert v. Long Island R. R. Co. 375 
 Eckman v. C. B. and Q. R. Co. 276 
 Eddys tone Ins. C, In re 702 
 
 Edelhoff v. Horner it Miller Co. 238 
 Edelmau v. St. Louis Transfer Co. 378 
 Eden ». Ridsdales Lamp Co. 629 
 
 Edgar Collegiate Inst. v. People 459 
 Edgerly v. Emerson 258, 260 
 
 Edgerton v. New York, etc., R. 
 
 R. Co. 350 
 
 Edgewood R. R. Co.'s Appeal 476 
 Edgeworth v. Wood 56 
 
 Edgiugton v. Fitzmaurice 752 
 
 Edinboro Academy v. Robinson 92 
 Edison, etc., Co. v. Navigation 
 
 Co. 401 
 
 v. Spokane Co. 479 
 
 Edwards v. Fairbanks 276, 303 
 
 v. Grand Junction R'y Co. 88 
 
 v. Kearsey 493 
 
 v. London and N. W. R'y Co. 
 
 339, 344 
 v. People 324, 536 
 
 Edwards Co. v. Jennings 309c 
 
 Eel River R. R. Co. v. State 305 
 
 Eels v. Telegraph Co. 175 
 
 Elird y. Piedmont, etc., Laud Co. 
 
 587, 729 
 Ehret p. Camden & Trenton Ry. 
 
 Co. 175 
 
 Ehrgott v. Bridge Manufactory 209 
 Ehrmau v. Union Central Life 
 
 Ins. Co. 264, 282 
 
 Eidman v. Bowman 228, 569 
 
 Einstein ». R. G. & E. Co. 133 
 
 Eisenlord v. Oriental Ins. Co. 745 
 Eisfeld v. Kenworth 148, 739 
 
 Eisner's Appeal 799, 800 
 
 Elder v. New Zealand Land Im- 
 provement Co. 96. 518 
 Eldridge ». Smith 131, 132, 676, 814 
 Election of Cape May, etc., 
 
 Nav. Co., In re 577« 
 
 Electric Co. v. Bates 629 
 
 v. Electric Co. 655 
 
 v. Tandy 511 
 
 Electric Co. of America ». The 
 
 Edison Electric Co. 569 
 
 Electric Lighting Co. v. Leiter 
 
 137. 432 
 ». Rust 401 
 
 Electric Street Co. of M. v. Ruft 125 
 Elevator Co. v. Memphis, etc., 
 
 R. R. Co. 267, 562, 565 
 
 Eloy r. Positive Assurance Co. 87 
 Elizabeth town, etc., R. R. Co. 
 
 v. Combs 175c 
 
 v. Helm 179 
 
 Elkins o. Camden and Atlantic 
 
 R. R. Co. 224, 308. 309. 577, 
 
 644, 684, 688 
 
 SECTION 
 
 Ellerman v. Chicago June. Rys. 127 
 Elliott Nat. Bank v. Western, 
 
 etc., R. R. Co. 193 
 
 Ellis v. American Tel. Co. 357 
 
 v. Barheld 800 
 
 v. Branstrator 204 
 
 v. Boston, etc., R. R. Co. 029 
 
 v. Colman 754 
 
 v. First Nat. B'k 241 
 
 v. Little 542 
 
 v. Marshall 449 
 
 v. Pacific R. R. Co. 166 
 
 v. Ward 612, 646 
 
 Ellison v. Schneider 589 
 
 Ellsworth v. St. Louis, etc., R. 
 
 R. Co. 285, 390 
 
 Ellsworth v. Tartt 304 
 
 Elmendorf v. Taylor 468 
 
 Elmore v. Naugatuck R. R. Co. 363 
 
 Elston v. Piggott 384, 400 
 
 Elwell v. Fosdick 814 
 
 Ely v. Sprague 561 
 
 Elyea v. Lehigh S. M. Co. 434 
 Elyton Land Co. v. Birmingham 
 
 Warehouse Co. m 
 v. Dowdell 
 Embury v. Connor 
 Emerson v. Slater 
 
 702 
 556 
 400 
 715 
 
 Emerson, Talcott & Co. v. Mc- 
 Cormick Harvesting Ma- 
 chine Co. 392 
 Emery v. Boston Marine Ins. 
 
 Co. 197 
 
 Emmert v. Smith 731, 732 
 
 Empire Ass. Co., In re 608 
 
 Empire City Bank, Matter of 
 
 589, 731, 732 
 Empire M'f'g Co. v. Stuart 146 
 
 Empire Trans. Co. i\ Wamsutta 
 
 Oil Co. 353 
 
 Emporium Real Estate Co. v. 
 
 Emrie 647 
 
 Enfield v. Jordan 327 
 
 Enfield Toll Bridge Co. v. Hart- 
 ford, etc., R. B. Co. 470 
 England v. Dearborn 187, 236 
 English v. New Haven and North- 
 ampton Co. 502 
 English Am. L. & T. Co. v. Hiers 210 
 Enterprise Ditch Co. v. Moffett 
 
 498, 522c 
 Epps v. Miss., Gainesville, etc., 
 
 R. R. Co. 147, 530, 738 
 
 Eppright v. Nickerson 225, 543 
 
 Equitable B. & L. Assn. v. Bid- 
 well 146 
 Equi table Life Ass. Soc. v. 
 
 Vogel's Executrix 392 
 
 Era Assurance Soc, In re, Ex 
 
 parte Williams 227 
 
 Erickson v. Nesmith 393, 704, 783 
 
 847
 
 TABLE OF CASES. 
 
 SECTION 
 
 Erie and N. E. R. R. Co. v. Casey 503 
 Erie and N. Y. City R. R. Co. v. 
 
 Owen 91, 96 
 
 Erie and Western Trans. Co. v. 
 
 Dater 350 
 
 Erie City Iron Works v. Barber 342 
 Erie, etc., Plank Road Co. v. 
 
 Brown 519 
 
 Erie R. Co. v. State 383, 485 
 
 v. Steward 162a, 1(34 
 
 r. Wilcox 363 
 
 Erie R'y Co. v. Del., Lack, and 
 
 W. R. R. Co. 152 
 
 ». Pennsylvania 479, 489 
 
 Ernest v. Croysdill 314, 656 
 
 v. Nicholls 195, 311 
 
 v. Peck 745 
 
 Erskine v. Louvenstein 741 
 
 Ervin v. Oregon, etc., R'y Co. 
 
 392, 558, 608, 610 
 Escanaba Co. v. Chicago 474c, 475 
 Eschweiler v. Stowell 560 
 
 Eslava v. Ames Plow Co. 384 
 
 Esmond ». Ballard 770 
 
 Espy v. Hank of Cincinnati 245, 246 
 Essex Turnpike Co. v. Collins 
 
 92, 515 
 Estabrook, Ex parte 205 
 
 Etna Ins. Co., In re, Ex parte 
 
 Shields 523 
 
 Eureka Basin, etc., Co., hire 163 
 Eureka Co. v. Bailey Co. 248 
 
 Eureka Iron Works ». Bresnahan 
 
 236, 259 
 European, etc.. R. R. Co. v. 
 
 Poor 628, 629 
 
 Evans v. Bailey 26:'» 
 
 o. Brandon 688, 690 
 
 v. Coventry 134, 622, 659 
 
 v. Interstate R'y Co. 435 
 
 v. Lee 204 
 
 o. Memphis, etc., R. R. Co. 348 
 v. Osgood 575 
 
 d. Smallcombe 217, 780 
 
 v. Wood 791 
 
 Evansich v. G. C. and S. F. R'y 
 
 Co. 371 
 
 Evansville o. Dennett 330, 332 
 
 Evansville Bank v. Britton 484 
 
 Evansville, etc., Co. ». Bank 644 
 
 Evansville, etc., R. R. Co. v. 
 
 Dick 173 
 
 o. Duncan 350 
 
 v. Hyatt 376 
 
 r. I'osey 521 
 
 o. Shearer 517 
 
 v. Young 353 
 
 Evansville R. R. Co. v. Evans- 
 ville 572 
 Everhart v. Phila., etc., R. R. Co. 577 
 
 848 
 
 SECTION 
 
 Evarts v. Killingsworth M'f'g 
 
 Co. 432 
 
 Everett v. Union Pacific R. R. 
 
 Co. 178 
 
 Everhart v. Phila., etc., R. R. Co. 
 
 530, 572, 577 
 Ewell v. Daygs 450 
 
 Ewing v. Toledo S'v'gs Bk. 
 
 298, 380, 388 
 v. Composite Brake Shoe Co. 657 
 Ex-Mission Land Co. v. Flash 82 
 
 Excelsior Fire Ins. Co., Matter 
 
 of 227 
 
 Excelsior Grain Binder Co. v. 
 
 Stayuer 516 
 
 Excelsior Petroleum Co. v. Lacey 
 
 620, 622 
 Excelsior Water Co. v. Price 565 
 Exchange B'k v. Macon Cons. 
 
 Co. 187 
 
 v. Sibley 752 
 
 Exchange Nat. B'k v. Third 
 
 Nat. B'k 161 
 
 Express Cases 350 
 
 Exposition R. R. Co. v. Rail- 
 road Co. 518 
 Express Co. v. Caldwell 356 
 r. Kountze Bros. 352, 413 
 o. Railroad Co. 284, 384 
 v. Reagan :'.");; 
 o. Walker 210 
 Express Companies v. Railway 
 
 Companies 309 
 
 Exter v. Sawyer 82 
 
 Eyerman v. Kriekhaus 702 
 
 Eyre's Case 586, 747 
 
 F. 
 
 Factors, etc., Ins. Co. v. New 
 
 Harbor Protection Co. 145 
 
 Fagan v. Boyle Ice Machine Co. 137 
 Fair Assoc, v. Walker 96, 109 
 
 Fairchild r. Masonic Hall Asso- 
 ciation 430 
 Fairfax's Devisee v. Hunter's 
 
 Lessee 303 
 
 Fairfield Savings Rank v. Chase 210 
 Fallon v. Railroad Co. 790 
 
 Fall River Iron Works Co. v. 
 Old Colony, etc., R. R. Co. 
 
 162, 162a 
 Fall River Union Bank v. Sturte- 
 
 vant 240 
 
 Falmouth Nat. Bank v. Canal Co. 663 
 Family Endowment Soc, In re 665 
 Faneuil Hall Bank v. Bank of 
 
 Brighton 298 
 
 Fanning v. Gregoire 453
 
 TABLE OF CASES. 
 
 SECTION 
 
 Fanning v. Insurance Co. 511 
 
 v. Osborn 304 
 
 Fargo v. Michigan 485 
 
 Fariow v. Kelly 374 
 
 Farmers' Bank v. McKee 237 
 
 Farmers', etc., Bank v. Butch- 
 ers', etc., Bank 203, 208, 244 
 Farmers', etc., Bank v. Cham- 
 plain Trans. Co. 353 
 v. Colby 753 
 v. Detroit, etc., R. R. Co. 281 
 v. Downey 629, 693 
 v. Harrison 298 
 v. Jenks 738 
 v. Little 435 
 v. Wasson 600, 601 
 Farmers', etc., Nat. Bank v. Dear- 
 
 ing 483 
 
 Farmers' L. and T. Co. v. Clowes 204 
 v. Curtis 204 
 
 v. Louisville, N. A. & C. Ry. 
 
 Co. 816a 
 
 v. McKinney 384 
 
 v. Minneapolis, etc., Works 814 
 v. Missouri Ry. Co. 822 
 
 v. New York, etc., R. R. Co. 559a 
 v. Perry 204 
 
 v. Telegraph Co. 823 
 
 Farmers' Mutual Ins. Co. v. 
 
 Chase 233, 234 
 
 Farmers' Nat. Bank v. Wilson 796 
 Farmington Savings Bank v. Fall 301 
 Farnham v. Camden and Am- 
 
 boy R. R. Co. 359 
 
 v. Delaware & Hudson Canal 
 
 Co. 155 
 
 Farnsworth y. Dewey 721 
 
 v. Lime Rock R. R. Co. 449, 460 
 
 v. Minn, and Pac. R. R. Co. 458 
 
 v. Robbins 701 
 
 Farnum v. Ballard Vale Machine 
 
 Shop 737 
 
 v. Blackstone Canal Co. 406 
 
 v. Patch 739 
 
 Farr v. Brings' Estate 393, 767 
 
 Farrar v. Walker 523 
 
 Farrell v. Oregon Gold Co. 395 
 
 v. Union Trust Co. 417 
 
 Farrell Foundry v. Dart 210 
 
 Farrier v. New England Mort- 
 gage Co. 401 
 Farrington v. Rut. R. R. Co. 368 
 v. South Boston R. R. Co. 598 
 v. Tennessee 477a. 488, 489 
 Farwell v. Boston and W. R. R. 
 
 Co. 366 
 
 v. Houghton Copper Works 
 
 260, 261 
 Fasnacht v. German Literary 
 
 Ass'n 650 
 
 Faulds v. Yates, 580, 788, 790 
 
 54 
 
 SECTION 
 
 Faure Electric Accumulator 
 
 Co., In re 623 
 
 Faust v. Passenger R'y Co. 175 
 
 Fawcett v. Laurie 565 
 
 v. New Haven Organ Co. 200 
 
 v. Whitehouse 82 
 
 Fay v. Noble 100, 148, 196, 198, 201 
 
 v. Minneapolis, etc., R'y Co. 365 
 
 Fear v. Bartlett 523, 526 
 
 Featherstouhaugh v. Lee Moor 
 
 Porcelain Clay Co. 130 
 
 Fee v. New Orleans Gas Light 
 
 Co. 421 
 
 Feital v. Middlesex R. R. Co. 170 
 Felker v. Standard Yarn Co. 773 
 
 Fenner v. Buffalo., etc., R. R. 
 
 Co. 360 
 
 Fennessy v. Ross 559a 
 
 Fenton v. Wilson Sewing Ma- 
 chine Co. 342 
 Ferguson v. Sherman 393 
 Fairchild v. Brewing Co. 415 
 Ferguson v. Ann Arbor R. R. 
 
 Co. 816a 
 
 Ferro v. Buffalo, etc., R. R. Co. 368 
 Ferris v. Thaw 148, 739 
 
 Fertilizer Co. v. Clute 449 
 
 Fertilizing Co. v. Hyde Park 
 
 122, 476 
 Flaherty v. Atlantic Lumber 
 
 Co. 248 
 
 Fibel v. Livingston 359 
 
 Fidelity Ins. Co.'s Appeal 816a 
 
 Field o. Chicago and R. I. R. 
 
 R. Co. 359, 363 
 
 v. Investment Co. 216, 229 
 
 v. N. Y. C. R. R. Co. 368 
 
 Fietsam v. Hay 132 
 
 Fifth Ave. Bank v. Forty-Sec- 
 ond St. R. R. Co. 591 
 Fifth Nat. Bank v. Phosphate 
 
 Co. 237 
 
 v. Pierce 302 
 
 Fifth Ward Savings Bank v. 
 
 First Nat. Bk. 125, 202, 236 
 
 Fillebrown v. Grand Trunk R. 
 
 Co. 350 
 
 Financial Corporation, Holmes 1 
 
 Case, In re 133 
 
 Finch v. Riverside Ry. Co. 175 
 
 Finch Mfg. Co. v. Sterling 759 
 
 Finletter v. Appleton 587 
 
 Finley Shoe and Leather Co. v. 
 
 Kurtz 228 
 
 Finn v. Brown 740 
 
 Finnev ». Bennett 663 
 
 Fire Department v. Noble 383 
 
 Fire Ins. Co. v. Keeseville 335 
 
 Fireman's Ins. Co., Ex p arte 599 
 r. Thompson 395, 397 
 
 First Ave. Land Co. v. Parker 591 
 
 849
 
 TABLE OF CASES. 
 
 SECTION 
 
 First Nat. Bank i>. Almy 148, 739 
 v. Anderson 818 
 
 v. Barnum Iron Works ' 670 
 
 v. Briggs 210 
 
 v. Christopher 258 
 
 v. County Commissioners 680 
 
 v. Dovetail, etc., Co. 655, 660 
 
 v. Drake 628, 647 
 
 v. First Nat. B'k 239, 672 
 
 v. Fricke 211 
 
 v. Gifford 587, 628 
 
 v. Graham 161 
 
 v. Green 709 
 
 v. Grosshaus 303 
 
 v. Hendrie 162 
 
 15. Hoch 161, 236 
 
 v. Hoean 201 
 
 v. Kiefer Co. 264, 272, 273, 286 
 
 15. Kimberlands 236 
 
 v. Lam son, etc., Co. 563 
 
 v. Loyhed 210 
 
 v. Mason 672 
 
 v. Michigan City B'k 239 
 
 u. Mining Co. 5226, 7026 
 
 v. Nat. Exchange Bank 
 
 135, 137, 161, 223 
 v. Ocean Nat. Bank 161, 200, 241 
 v. Pierson 302 
 
 v. Plow Co. 719 
 
 v. Price 764 
 
 v. Riggins 729 
 
 v. Reed • 616, 618, 627 
 
 v. Rex 161 
 
 v. St. Josephs 483 
 
 v. San Francisco 483 
 
 v. Tisdale 236 
 
 v. Waters 484 
 
 v. Williams 342 
 
 i). Winchester 187, 276 
 
 First Nat. Bank of Wellington v. 
 
 Chapman 484 
 
 First Nat. Ins. Co. v. Salisbury 682 
 First Parish v. Cole 137 
 
 First Presbyterian Church, In re 158 
 Fiser v. Mississippi, etc., R. R. 
 
 Co. 516 
 
 Fish v. Smith 263, 537, 541 
 
 Fisher v. Boston 335 
 
 v. Bush 580 
 
 v. Chicago and Springfield R. 
 
 R. Co. 164 
 
 v. Essex Bank 796 
 
 v. New York Cent., etc., R. 
 
 It. Co. 424 
 
 v. Parr 687 
 
 v. Seligman 741 
 
 Fishkill Savings Inst. v. Nat. 
 
 Bank 335 
 
 Fish o. Chicago, etc., R. R. Co. 409 
 v. Union Pacific R. R. Co. 
 
 435, 658, 664 
 850 
 
 SECTIOK 
 
 Fister v. La Rue 89 
 
 Fitch v. Constantine Hydraulic 
 
 Co. 238 
 
 v. New Haven, etc., R. R. Co. 
 
 308, 453 
 v. Pac. R. R. Co. 368 
 
 v. Steam Mill Co. 125, 248 
 
 Fitchburg, etc., R. R. Co. v. 
 Grand Junction R. R. Co. 
 
 475, 502 
 Fitchburg R. R. Co. v. Boston 
 
 and M. R. R. Co. 174 
 
 v. Gage 309 
 
 Fitts v. Cream City R. R. Co. 371 
 Fitzgerald v. Fitzgerald, etc., Co. 
 
 633, 640, 644 
 u. St. Paul, etc., R'y Co. 375 
 
 Fitzgerald Construction Co. v. 
 
 Fitzgerald 237, 595 
 
 Fitzhugh v. Land Co. 195, 237 
 
 Fitzwater v. Bank 138 
 
 Flagg v. Manhattan R'y Co. 224, 563 
 Flagstaff Silver M'g Co. v. 
 
 Patrick 195, 225 
 
 Flash v. Conn 384, 393, 714, 
 
 724, 725, 741 
 Flackner v. Bank of U. S. 
 
 211, 233, 248 
 Fleming v. Chicago, D. and M. 
 
 R. Co. 178 
 
 Fletcher v. N. Y. Life Ins. Co. 193 
 
 v. Peck 453, 456 
 
 Flike v. Boston and A. R. R. Co. 365 
 
 Flinn v. Phila. W. & B. R. R. Co. 353 
 
 15. Columbus Club 647 
 
 Flint v. Board of Aldermen 483 
 
 15. Clinton Co. 204 
 
 v. Norwich and N. Y. Trans. 
 
 Co. 347 
 
 Flint and P. M. Ry. Co. 15. Dewey 627 
 
 Flint, etc., Plank Road Co. v. 
 
 Woodhull 438, 458, 503 
 
 Florida Central, etc., R. R. Co. 
 
 v. State 162 
 
 Florida Midland R. R. Co. v. 
 
 Varnedoe 210 
 
 Florida Sav. Bank v. Rivers 614 
 
 Florsheim v. Lester 400 
 
 Floyd v. Nat. Loan Co. 384 
 
 Fluker v. Railway Co. 553 
 
 Flynn v. San Francisco, etc., R. 
 
 R. Co. 373 
 
 Fobes 0. Rome, etc., R. R. Co. 
 
 175, 175rt 
 Fogg 15. Blair 5226, 702a 
 
 Folger t5. Chase 436 
 
 Foil's Appeal 788, 790 
 
 Follit v. Edistone Granite Quar- 
 ries 816a 
 Forbes 15. Boston and L. R. R. 
 
 Co. 360
 
 TABLE OF CASES. 
 
 Ford v. Bank 668 
 
 v. Chicago Milk Shippers' 
 
 Ass'n 309c 
 
 v. Easthampton Thread Co. 568 
 v. Fitchburg R. R. Co. 365 
 
 v. Hill 668 
 
 v. Land Co. 489 
 
 v. Santa Cruz R. R. Co. 344 
 
 Foreman v. Bigelow 522c, 702 
 
 Forrester v. B. & M. Mining Co. 
 
 229, 268, 608, 688 
 Forstall v. Consolidated Ass'n 495, 507 
 Fort Edward, etc., Plauk Road 
 
 Co. v. Payne 97 
 
 Fortier v. New Orleans Nat. B'k 302 
 Fort Madison Bank v. Alden 702, 711 
 Fort Madison Lumber Co. v. Ba- 
 
 tavian Bank 796 
 
 Fort Payne Rolling Mill v. Hill 627 
 
 Forth Worth C. Co. v. Bridge Co. 121 
 
 Fort Worth Pub. Co. v. Hitson 657 
 
 Fosdick v. Car Co. 822 
 
 v. Schall 507, 821, 824a 
 
 v. Sturges 541, 792 
 
 Foss v. Harbottle 142, 554, 555, 686 
 
 Foster v. Essex Bank 161, 240, 337 
 
 v. Lumber Co. 402 
 
 v. Mansfield, etc., R. R. Co. 693 
 
 v. Master of New Orleans 4746 
 
 v. Moulton 739 
 
 v. Mullanphy Planing Mill Co. 
 
 668, 759 
 v. Oxford, Worcester, etc., R. 
 
 R. Co. 642 
 
 v. Seymour 612 
 
 v. Sugar 634 
 
 v. White 585 
 
 Fouche o. Brown 130 
 
 v. Merchants' Nat. Bk. 210, 211, 
 
 587, 702a, 706, 741, 744 
 
 Foulke v. San Diego, etc., R. Co. 
 
 249, 313 
 Fountain v. Carmarthen Rail- 
 way Co. 195 
 Fountain Ferry T. R. Co. v. 
 
 Jewell 517, 611 
 
 Four Mile Valley R. R. Co. t>. 
 
 Bailey 527 
 
 Fourth National Bank v. Frank- 
 
 lyn 724 
 
 Fowle v. Common Council of 
 
 Alexandria 315 
 
 Fowler v. Baltimore and Ohio 
 
 R. R. Co. 376 
 
 v. Bell 388 
 
 v. Great So. T. & T. Co. 195 
 
 v. Lamson 393 
 
 v. Ludwig 748 
 
 Fowler's Case 614 
 
 Fox i\ Allensville, etc., T. P. Co. 263 
 
 v. Clifton 96 
 
 SECTION 
 
 Fox v. Horah 437 
 
 v. Seal 813, 817 
 
 Fox's Appeal 477 
 
 Francis v. Dubuque, etc., R. R. 
 
 Co. 360 
 
 Franco-Texan Land Co. v. Laigle 
 
 381, 382 
 
 v. McCormick 267, 312 
 
 Frank v. Chemical Nat. Bank 672 
 
 v. Lanier 246 
 
 v. Morrison 582 
 
 Frank's Oil Co. v. McCleary 587 
 
 Frankford, etc., Turnpike Co. v. 
 
 Churchill 97 
 
 v. Philadelphia and Reading 
 R. R. Co. 368 
 
 Frankford and P. Pass'r R'y Co. 
 
 v. Philadelphia 489 
 
 Frankfort Bank v. Johnson 338 
 
 Franklin Ave. German Savings 
 
 Ins. v. Board of Education 276 
 Franklin Bank v. Commercial 
 
 Bank 298 
 
 Franklin Branch Bank v. Ohio 488 
 Franklin Bridge Co. v. Wood 12 
 
 Franklin Co. v. Lewiston Insti- 
 tution for Savings 267 
 Franklin Glass Co. v. Alexander 546 
 Franklin Ins. Co. v. Jenkins 626 
 Franklin Nat. Bk. y. Whitehead 283 
 Franz v. Teutonia Building Ass'n 146 
 Fraser v. Ritchie 135 
 Fiazier v. Railway Co. 125 
 Freeh v. Phila., W. and B. R. R. Co. 376 
 Freedle i\ North Car. R. R. Co. 179 
 Freehold, etc., Association v. 
 
 Brown 504 
 
 Freeland v. Pennsylvania Cen- 
 tral Ins. Co. 147, 153, 537 
 Freeman v. Alderson 394 
 ». Machias Water Power Co. 382 
 v. Minneapolis and St. Louis 
 
 R'y Co. 170 
 
 v. Stine 702 
 
 v. Winchester 546 
 
 Fremont and R'y Co. v. Whalen 179 
 
 French v. Andrews 668 
 
 v. Donohue 130, 146 
 
 v. Teschemacher 735 
 
 Freon v. Carriage Co. 599 
 
 Freeport Water Co. v. Freeport 4766 
 
 Frick Coke Co. v. Painter 178 
 
 Fridley v. Bowen 302 
 
 Friedlander v. Slaughter House 
 
 Co. 595 
 
 v. Texas, etc., Ry. Co. 201 
 
 Frink v. Potter 375 
 
 Fritts v. Palmer 302 
 
 Fritee r. Equitable, etc., Society 283 
 Frost v. Domestic Sewing Ma- 
 chine Co. 202 
 
 851
 
 TABLE OF CASES. 
 
 SECTION 
 
 Frost v. Frosburg Coal Co. 146 
 
 v. Heslet 668 
 
 Frost Manufacturing Co. v. Fos- 
 ter 758 
 Frothingham v. Barney 608 
 Fry's Ex'rs v. Lexington, etc., 
 
 R. R. Co. 513, 530, 531, 532 
 
 Frye v. Tucker 125 
 
 Fnl gam v. Macon, etc., R. R. Co. 520 
 Fuller o. Dame 162 
 
 v. Jewctt 365 
 
 Fulton Bank v. N. Y. and Sha- 
 ron Canal Co. 236 
 Fulton B. & L. Ass'n v. Greenlea 192 
 Fuqua v. Brewing Co. 309c 
 Fur man v. Nichol 507 
 Fusz v. Spaunhorst 756 
 Fyfe's Case 589, 748 
 
 G. 
 
 G. C. and S. F. R'y Co. v. Don- 
 
 ahoo 173 
 
 v. Eddins 175a 
 
 Gadsden v. Woodward 764 
 
 Gaff v. Flesher 703, 749 
 
 Gaffney o. Colville 690 
 
 Gage v. Fisher 788, 790 
 
 Gahogan v. B. & M. R. R. Co. 374 
 Gaines v. Union Trans. Co. 359 
 
 Gainey v. Wilson 542 
 
 Gains v. Coates 122 
 
 Galbraith v. Building Ass'n 599 
 
 Galena, etc., R. R. Co. v. En- 
 
 nor 97, 121 
 
 v. Fay 376 
 
 v. Loomis 475 
 
 v. Rae 361 
 
 Galigher v. Jones 599 
 
 Gallagher v. Brewing Co. 187 
 
 Gallery v. National Exchange 
 
 Bank 640 
 
 Galpin v. Chicago and N. W. 
 
 R'y Co. 369 
 
 Galvanized Iron Co. v. Westoby 110 
 Galveston City Co. v. Sibley 595 
 
 Galveston, etc., R'y Co. v. Al- 
 lison 354 
 v. Gonzales 412 
 Galveston R. R. Co. v. Cowdrey 285, 
 380, 381, 676, 815, 818 
 v. Texas 502 
 Gamble v. Water Co. 125, 522a, 558, 
 5596, 628, 632 
 Gandy v. Chicago and N. W. 
 
 R'y Co. 368 
 
 Gano o. Chicago, etc., R'y Co. 204 
 Gans r. Switzer 768,770 
 
 Garden Gully Mining Co. v. 
 
 Mc Taster" 190,547 
 
 bo2 
 
 SECTION 
 
 Gardiner v. Butler 646, 647 
 
 v. Hamilton Mut. Ins. Co. 536 
 
 v. London, Chatham, etc., R'y 
 
 Co. 308 
 
 v. Minn. & St. L. Ry. Co. 738 
 
 v. Pollard 690 
 
 Garling v. Baechtel 738 
 
 Garnett v. Richardson 100, 148, 739 
 Garrat Ford Co. v. W. M'f'g Co. 401 
 Garrett v. Burlington Plow Co. 
 
 205, 759 
 v. Chicago and N. W. Railway 
 
 Co. 368 
 
 v. Dillsburg, etc., R. R. Co. 516, 517 
 
 v. Kansas City C. M. Co. 522a 
 
 Garrison v. City of New York 473 
 
 v. Howe 725, 728 
 
 Garvey v. Long Island R. R. Co. 
 
 165, 172 
 Garwood v. Ede 104 
 
 Gas Co. v. Reis 627 
 
 v. Dairy Co. 303 
 
 v. Downington 460 
 
 Gashwiler v. Willis 181, 258 
 
 Gaskell v. Chambers 629, 631 
 
 Gaslight Improvement Co. v. 
 
 Terrell 750 
 
 Gass v. Citizens' Building Ass'n 249 
 
 v. Hampton 795 
 
 v. New York, etc., R. R. Co. 364 
 
 Gaston v. American Exch. Nat. 
 
 Bank 797 
 
 Gasway v. Atlantic, etc., R'y 
 
 Co. 377 
 
 Gates v. Boston, etc., R. R. Co. 454 
 v. Hooper 309c 
 
 Gates, Adm'r, v. Tippecanoe Stone 
 
 Co. 522c 
 
 Gauch v. Harrison 728 
 
 Gaylord v. Fort Wayne, etc., 
 
 R. R. Co. 664 
 
 Gear v. C. C. and D. R. Co. 178 
 
 v. Dubuque and S. C. R. R. 
 Co. 162a 
 
 Gearns v. Bowery Sav. Bank 199 
 
 Gelpe v. Blake ' 746 
 
 v. City or Dubuque 318, 325, 
 
 326, 328, 468 
 Gem m ell v. Davis 600, 602 
 
 General Exchange Bank v. Ear- 
 ner 626, 629 
 Genessee S'v'gs B'k v. Michi- 
 gan Barge Co. 285, 636 
 Gennarr. v. Ives 767 
 Gent v. Insurance Co. 86, 87 
 George v. (iinning Co. 395 
 v. St. Louis, etc., R'y Co. 349 
 v. Somerville 303 
 Georgia Banking Co. v. Smith 4766 
 Georgia, etc., R. R. Co. v. Stol- 
 
 lenwerck 409
 
 TABLE OF CASES. 
 
 SECTION 
 
 Georgia Co. ». Castleberry 667 
 
 Georgia Ice Co. v. Porter 146 
 
 Georgia K. R. Co v. Gann 353 
 
 v. Smith 4766 
 
 Georgia Northern R'y Co. v. 
 
 Tifton, etc., Ry. Co. 460 
 
 Georgia Southern R. R. Co. v. 
 
 Bigelow 395 
 
 Gerhard v. Bates 103 
 
 Germain Fruit Co. ». Cal. So. R. 
 
 R. Co. 362 
 
 German, etc., Building Ass'n v. 
 
 Lindmeyer 598, 599 
 
 German Evangelical Congrega- 
 tion v. Pressler 258 
 German Ins. Co. v. First Na- 
 tional Bank 395 
 German Ins. Co. v. Strahl 146 
 German Nat. Bank v. Butchers', 
 
 etc., Co. 311 
 
 v. First Nat. Bank 211, 668, 759 
 v. Farmers' & Merchants' Bank 704 
 German Reformed Church v. 
 
 Van Puechelstein 137 
 
 German Security Bank v. Jef- 
 ferson 605 
 Germania Fire Ins. Co. u. M. 
 
 and C. R. R. Co. 359 
 
 Germantown, etc., R. R. Co. v. 
 
 Fitler 547, 661 
 
 Germantown Farmers' Mut. Ins. 
 
 Co. v. Dheim 276, 286 
 
 Germantown Pass'r R'y Co. v. 
 
 Brophy 374 
 
 Gerry v. Bismarck Bank 688 
 
 Getty u. Devlin 82, 105 
 
 Geyser v. Ins. Co. 601 
 
 Giavella v. Bigelow 725 
 
 Gibbons v. Mahon 801 
 
 v. Ogden 4696 474a 
 
 Gibbs v. Baltimore Gas Co. 298, 476 
 
 v. Davis 725 
 
 v. Queens Ins. Co. 392, 397, 398 
 
 Gibb's Estate 61 
 
 Gibson v. American Merchants' 
 
 Un. Exp. Co. 354 
 
 v. Erie R'y Co. 366 
 
 v. Goldthwaite 225 
 
 v. Thornton 611 
 
 v. Trowbridge Furn. Co. 759 
 
 Giesey v. Cincinnati W. and C. 
 
 R. R. Co. 163, 179 
 
 Gifford v. New Jersey R. R. Co. 
 
 547, 553, 555 
 
 v. Thompson 799 
 
 Gilbert's Case 586 
 
 Gilbert v. Erie Bldg. Ass'n 795 
 
 Gilbert v. Savannah, etc., R. R. 
 
 Co. 167 
 
 v. Washington City, etc., R. 
 R. Co. 680 
 
 SECTION 
 
 Giles v. Hutt 546 
 
 Gilnllan v. Union Canal Co. 816a 
 Gilkey v. Paine 801 
 
 Gilkie, etc., Co. ». Gas Co. 522c 
 
 Gill v. Balis 228, 745, 780 
 
 Gillen v. Sawyer 522c, 702 
 
 Gilleuwater ». Madison, etc., R. 
 
 R. Co. 350 
 
 Gillett v. Bank of Missouri 342 
 
 v. Missouri Valley R. R. Co. 342 
 
 Gillis v. Bailey 233 
 
 Gill's Adm'x v. Kentucky, etc., 
 
 Gold M'g Co. 383, 513 
 
 Gilman, etc., R. R. Co. v. Kel- 
 
 ley 214, 638 
 
 v. Spencer 309 
 
 Gilman k. City of Sheboygan 477 
 
 o. Gross 7026 
 
 o. Illinois, etc., Tel. Co. 820 
 
 v. Ketcham 690 
 
 v. Philadelphia 474c 
 
 v. Sheboygan, etc., R. R. Co, 415 
 
 Gil more v. Mittineague Co. 210 
 
 Gilpin v. Howell 794 
 
 Gilson v. Jackson County Horse 
 
 R'y Co. 350 
 
 Ginn u. New England Mortgage 
 
 Co. 400 
 
 Ginrich v. Patrons' Mill Co. 540 
 
 Girvin v. N. Y. C. & H. R. R. Co. 338 
 Gladson v. Minnesota 474cZ 
 
 Glass Co. v. Vary 724 
 
 Gleason v. Goodrich Trans. Co. 355 
 Gleaves v. Brick Church Turn- 
 pike Co. 108 
 Glen o. Saxton 709 
 v. Williams 661, 737 
 Glen Iron Works, In re 701, 703 
 Glenn v. Garth 700 
 Glenn v. Liggett 709 
 v. Marbury 709 
 Glenwood Mfg. Co. v. Syme 634 
 Gloucester Ferry Co. v. Penn- 
 sylvania 4746 
 Glover v. Lee 238, 668 
 Godbold v. Branch Bank of Mo- 
 bile 620 
 Goddard v. Crefeld Mills 401 
 v. Grand Trunk Railway 347, 378 
 v. Merchants' Exchange 683 
 Godfrey v. Terry 7:56 
 Goff v. Great Northern R'y Co. 344 
 v. Hawkeye Pump Co. 701 
 Gogebic Inv. Co. v. Iron, etc., Co. 702 
 Gold Mining Co. v. National 
 
 Bank 216, 301 
 
 Golden Gate M'g Co. ». Supe- 
 rior Court 143 
 Golden Rule v. People 547 
 Goldey v. Morning News 398 
 v. Pennsylvania R. R. Co. 353 
 
 853
 
 TABLE OF CASES. 
 
 SECTION 
 
 Gooch v. McGee 105 
 
 Goodin v. Cincinnati, etc., Canal 
 
 Co. 276, 559, 613, 027, 640 
 
 v. Evans 270 
 
 Goodlett v. Louisville, etc., K. 
 
 R. 409 
 
 Goodnow v. Oakley 204, 238 
 
 Goodrich v. Reynolds 146, 163 
 
 v. Thompson 363 
 
 Goodspeed v. East Had den 
 
 Bank 338, 342 
 
 Goodwin v. Colorado Mortgage 
 
 Co. 401 
 
 v. Hardy 561 
 
 v. McGehee 656, 701 
 
 v. Union Screw Co. 249 
 
 Goodyear Dental Vulcanite Co. 
 
 v. Caduc 616 
 
 Goodyear Rubber Co. v. George 
 
 D. Scott Co. 759 
 
 Goold «. Chapiu 360 
 
 Gordon v. Lea Fire Ins. Co. 205 
 
 v. Manchester, etc., R. R. 361 
 
 v. Muchler 196, 583 
 
 v. Preston 260 
 
 v. Richmond, etc., R. R. Co. 
 
 562, 565, 571 
 
 v. Swan 187 
 
 v. Tax Court 488 
 
 v. Winchester Building Ass'n 461 
 
 Gores v. Day 616 
 
 Gorman v. Guardian S'v'gs 
 
 Bank 546 
 
 v. Pacific Railroad 475 
 
 Goshen Nat. Bnnk v. Bingham 244 
 Goshen, etc., Turnpike Co. v. 
 
 Hurtin 516, 546 
 
 Gottfried v. Miller 567 
 
 Gottschalk v. C. B. and Q. R. 
 
 R. Co. 175a 
 
 Gottlieb v. Miller 759 
 
 Gould v. Town of Oneonta 519 
 
 Gouldie v. Northampton Water 
 
 Co. 276, 303 
 
 Goulding v. Clark 575, 667 
 
 Gover's Case 83 
 
 Govick v. Atl. Coast Line R. R. 
 
 Co. 342 
 
 Gowen Marble Co. v. Tarrant 249 
 Gowen v. Penobscot R. R. Co. 495 
 Gower's Case 548 
 
 Grace v. Adams 351, 359 
 
 Gradin v. St. Paul, etc., R'y Co. 372 
 Graff v. Pittsburg and Steuben- 
 
 ville R. R. Co. 101, 521, 587, 779 
 Graylin Co. v. Woodside 601 
 
 Grafton and G. R. Co. v. Fore- 
 men 179 
 Graham v. Birkenhead R'y Co. 556 
 v. Boston, etc., R. Co. 405, 409 
 630, 678 
 854 
 
 SECTION 
 
 144 
 
 302 
 
 34, 651 
 
 328 
 
 Graham v. Mutual Aid Soc. 
 r. National Bank 
 v. Railroad Co. 
 (.raud Chute p. Wiuegar 
 Grand Gulf Hank v. Archer 
 Grand Gulf R. R. Co. v. State 
 
 of Mississippi 
 Grand Rapids Booming Co. v. 
 
 Jarvis 
 Grand Rapids Bridge v. Prange 
 Grand Rapids, etc., R. R. Co. v. 
 Cameron 
 v. Heisel 171, 171a 
 
 Grand Rapids Savings B'k v. 
 
 Warren 501, 715 
 
 Grand Tower M'fg, etc., Co. v. 
 
 Ullruan 170, 360 
 
 Grand Trunk R'y Co. v. Cum- 
 in ings 366 
 Granger v. Grubb 184, 578 
 v. Original Empire Mill Co. 261 
 Grangers' Ins. Co. v. Turner 523 
 Grangers' Life, etc., Co. v. Kam- 
 
 298 
 
 503 
 
 173 
 156 
 
 374 
 
 fer 
 
 Granite Co. v. Mulliken 
 Grant v. Attrill 
 
 v. Henry Clay Coal Co. 
 
 v. So. Contract Co. 
 Grant, Assignee v. Ross 
 Grape Sugar M'fg Co. i 
 
 133, 541 
 
 210 
 
 697 
 
 280, 303 
 
 708 
 
 108 
 
 Small 
 
 90, 214 
 
 Gratz v. Redd 757 
 
 Gravensteine's Appeal 553 
 
 Graves v. Adams Exp. Co. 356 
 
 Graves v. Hartford, etc., Steam- 
 boat Co. 360 
 v. Lake Shore, etc., R. R. Co. 356 
 v. Mono Lake Mining Co. 628 
 v. Saline Co. 325 
 Gray v. Chaplin 556 
 501, 764, 783 
 363 
 142, 436 
 
 v. Coffin 
 v. Jackson 
 v. Lewis 
 
 v. National Benefit Assoc. 197 
 
 v. National Steamship Co. 657 
 
 v. Portland Bank 569 
 
 Grayville and Mattoon R. R. Co. 
 
 v. Burns 258 
 
 Great Luxembourg R'y Co. v. 
 
 Magnay 631 
 
 Great Northern R'y Co. v. Ken- 
 nedy 546 
 Great Western Min. Co. v. 
 
 Woodmas, etc., Co. 143 
 
 Great Western R'y Co. v. Miller 193 
 
 Great Western Tel. Co., Re, 193 
 
 v. Gray 522, 522a, 542, 709 
 
 v. Loewenthal 521 
 
 Greaves v. Gough 688, 690 
 
 Greeley v. Nashua S'v'gs Bk. 161 
 
 Greely v. Smith 435
 
 TABLE OF CASES. 
 
 SEOTIOV 
 
 Green v. Biddle 500 
 
 v. Kemp 300 
 
 v. Life Assn. 397 
 
 v. London Omnibus Co. 338 
 
 v. Neal's Lessee 468 
 
 v. St. Alban's Trust Co. 460 
 
 v. Smith 800 
 
 v. Sprague M'f'g Co. 189 
 
 v. Walkill Nat. Bank 432 
 
 v. Williams 394 
 
 v. Woodland Ave. St. R. R. Co. 425 
 Green Bay and Min. R. Co. v. 
 
 Union Steamboat Co. 120, 308 
 Greenbriar Industrial Exp. v. 
 
 Oelieltree 518 
 
 Green County t>. Conness 318, 424 
 Greenfield Savings Bank v. Si- 
 mons 629, 630, 631 
 Greenleaf v. B'd of Review 477a 
 v. Norfolk Southern R. R. Co. 211 
 Green Mountain, etc., Turnpike 
 
 Co. v. Bulla 599 
 
 Greenpoint Sugar Co. v. Wbitin 
 
 185, 300 
 Greensboro, etc.,T. Co. v. Strat- 
 
 ton 647 
 
 Greensburg, etc., Co. v. Mc- 
 
 Cormick 238 
 
 Greenville Co. v. Planters' Press 227 
 Greenwood v. Freight Co. 504, 505 
 Greer v. Chartier's R'y Co. 551 
 
 Gregg v. Granby Mining & 
 
 Smelting Co. 577 
 
 Gregory v. German Bank 764 
 
 v. Lamb 201 
 
 Grenada County Supervisors ». 
 
 Brogden 325, 329 
 
 Grennell v. Detroit Gas Co. 657 
 
 Gresbam Life Assur. Soc, In re 589 
 Grew v. Breed 714, 724, 726 
 
 Gridley v. Lafayette, etc., R'y 
 
 Co. 647 
 
 Griffin v. Kentucky Ins. Co. 464 
 
 Griffith v. Chicago, etc., R'y Co. 236 
 v. Man gam 706 
 
 v. Griffin Iron Co. 649 
 
 Grindle v. Stone 713 
 
 Grinnell v. Western Un. Tel. Co. 357 
 Grisewood & Smith's Case 720 
 
 Grissell's Case 731 
 
 Griswold v. Haven 208 
 
 v. Peoria University 108 
 
 v. Seligman 720, 741 
 
 Groff's Appeal 163a 
 
 Gross v. United States Mort- 
 gage Co. 325, 450 
 Grosse Isle Hotel Co. v. I'Anson 517 
 Grosvenoru. N. Y. C. R. R.Co. 360 
 Grubb v. Mahoning Nav. Co. 511 
 Gruber v. R. R. Co. 338 
 Grund v. Tucker 725, 737 
 
 SECTION 
 
 Guaga Iron Co. v. Dawson 384 
 
 Guarantee Co. v. East Rome Co. 798 
 
 Guckert v. Hache 
 Gue v. Tide Water Canal Co 
 Guerney v. Moore 
 Guernsey v. Coal Co. 
 
 v. Cook 
 Gulf, etc., R'y Co. v. Ellis 
 
 v. Morris 
 Guild v. Parker 
 Guilford v. Western Union Tel. 
 
 Co. 391, 392 
 
 Guinavlt v. Louisville, etc., R. 
 
 R. Co. 
 Guinn v. Iowa Cent. R'y Co. 
 Gulf, etc., R'y Co. v. State 
 Gulf & Ship I. R. R. Co. v. Hewes 
 
 739 
 671 
 
 393, 737 
 236 
 
 580, 788 
 475 
 304 
 628 
 
 409 
 412 
 309 
 
 489 
 493 
 130 
 
 87 
 
 Gunn v. Barry 
 
 v. Central Railroad 
 
 v. London, etc., Fire Ins. Co. 
 Gunnison Co. Com. v. Rollins 
 
 321, 330 
 Gunster v. Scranton Co. 210 
 
 Gurner v. Mosher 696 
 
 v. Yates 696 
 
 Guy ». Baltimore 474a, 474b, 480, 485 
 
 H. 
 
 Hacheny v. Leary 400 
 
 Hackensack Water Co. v. De Kay 
 
 153, 189, 251, 253, 815 
 Hackett v. Ottawa 330 
 
 Hackney v. Allegheny County 
 
 Mut. Ins. Co. 201 
 
 Hacock v. Sherman 734 
 
 Hadd v. U. S. and Canada Exp. 
 
 Co. 363 
 
 Haddock v. Citizens' Nat. Bank 195 
 Hadden v. Farmers', etc., Fire 
 
 Ass'n 264 
 
 Iladen v. Linville 236, 392 
 
 Iladly v. Freeman's Savings Co. 813 
 
 v. Russell 704, 783 
 
 Hagar v. Reclamation Dist. 
 
 469a, 492a 
 v. Union Nat. Bank 602 
 
 Hagerman v. Empire Slate Co. 402 
 Ilagerstown M'f'g Co. v. Keedy 642 
 Hahn v. Brewing Co. 127 
 
 Hahnemannian Life Ins. Co. 
 
 v. Beebe 137 
 
 Haigb v. Brooks 93 
 
 Haldeman v. Ainslie 701 
 
 Hale v. Frost 822 
 
 v. Lewis 400a 
 
 v. Republican River Bridge Co. 692 
 
 v. Sanborn 518 
 
 v. Walker 714 
 
 855
 
 TABLE OF CASKS. 
 
 SECTION 
 
 Hall v. Auburn Turnpike Co. 20'.), 231 
 v. Bank 204, 303 
 
 v. Cheney 353 
 
 v. DeCuir 474c 
 
 v. Goodnight 627 
 
 v. Henderson 552 
 
 v. Mayor, etc., of Swansea 311 
 
 v. Mobile, etc., R'y Co. 263, 818 
 v. Paris 672 
 
 v. Rose Hill, etc., Co. 589 
 
 v. Selma, etc., R. R. Co. 522, 529 
 v. U. S. Ins. Co. 587 
 
 v. Vermont, etc., R. R. Co. 86, 647 
 v. Wisconsin 450 
 
 Hall's Case 105, 134, 549 
 
 Hall & Co. v. Klinck 725 
 
 Hall & Farley, Trustees, v. Hen- 
 derson 660 
 Hall M'f'g Co. v. American, etc., 
 
 Supply Co. 276 
 
 Hallam v. Indianola Hotel Co. 634 
 Halliday v. St. Louis, etc., R'y 
 
 Co. 364 
 
 Halsey v. McLean 764 
 
 Halstead v. Mayor, etc., of New 
 
 York 295 
 
 Ham v. Wisconsin, I. and N. 
 
 R'y Co. 178 
 
 Hamilton v. Annapolis, etc., R. 
 
 R. Co. 163, 164 
 
 v. Grangers' Life, etc., Ius. 
 
 Co. 523 
 
 v. Keith 453 
 
 ». New Castle, etc., R. R. Co. 125 
 
 v. Railroad Co. 665 
 
 v. Vicksburg S. and P. R. R. 
 
 Co. 162a, 167, 174 
 
 Hamilton Co. v. Massachusetts 482 
 
 Hamilton, etc,, Plank Road Co. 
 
 v. Rice 91 
 
 Hamilton Gas Light Co. v. Ham- 
 ilton City 497 
 Hamilton Mut. Ins. Co. v. Ho- 
 
 bait 536 
 
 Hamilton Tr. Co. v. Clemes 676 
 
 Hamlin v. European, etc., R. R. 
 
 Co. 817 
 
 Hamlin o. Jerrard 427, 676, 817 
 
 v. Brass Co. 258 
 
 Hammett v. Little Rock, etc., 
 
 R. R. Co. 529 
 
 Hammond v. Hastings 603 
 
 v. Port Royal, etc., R. R. Co. 415 
 v. Straus 738 
 
 Hammond Beef Co. v. Best 395, 480 
 Hampson v. Price's Patent Can- 
 dle Co. 229 
 Hancock v. Chicot County 319 
 Hancock Compt v. Singer Mfg. 
 
 Co. 461, 477 
 
 v. Holbrook 130, 182, 009, 657 
 
 856 
 
 SECTION 
 
 Hancock Mut. L. I. Co. v. War- 
 ren 400a 
 Hancock Nat. B'k v. Ellis 393 
 v. Fainum 393 
 Hand v. Savannah, etc., R. R. 
 
 Co. 818, 825 
 
 Hand Gold M'g Co. v. Parker 163 
 Handley v. Stutz 184, 382, 5226, 
 
 702a, 7026 
 Handy v. Diaper 723, 724, 736 
 
 Hanick v. Wardwell 718 
 
 Hanlin v. Chicago, etc., R'y Co. 173 
 Hanna v. Cincinnati, etc., R. 
 
 R. Co. 536 
 
 v. International Pet. Co. 384 
 
 Hanney v. Standard Theatre Co. 688 
 
 Hannibal and St. Jo. R. R. Co. 
 
 v. Marion Co. 325 
 
 v. Martin 210 
 
 v. Muder 163 
 
 Hannibal, etc., Plank Road Co. 
 
 v. Menefee 529 
 
 Hannibal R. R. Co. v. Swift 350 
 
 Hanover Bank v. Dock Co. 216 
 
 Hanover Junction, etc., R. R. 
 
 Co. v. Haldeman 529 
 
 Hanson v. Davidson 726 
 
 v. Donkersley 715 
 
 v. European, etc., K. Co. 347 
 
 v. Hurd 240 
 
 v. Vernon 319 
 
 Hardenburgh v. Farmers', etc., 
 
 Bank 574 
 
 Harding v. Chicago, etc., R. R. 
 
 Co. 395 
 
 v. Am. Glucose Co. 140, 309c 
 
 Ilardon v. Newton 610 
 
 Hards v. Plate Valley Imp. Co. 96 
 
 Hardware Co. v- Manufacturing 
 
 Co. 668 
 
 v. Milling Co. 703 
 
 Hardy v. Boom Co. 237 
 
 v. Chesapeake Bank 672 
 
 v. Merriweather 125 
 
 v. Metropolitan Land Co. 314, 656 
 
 v. Norfolk M'f'g Co. 729 
 
 Hardy v. Sweigant 105 
 
 Hare v. London and N. W. R. 
 
 R. Co. 308, 597 
 
 Barger v. McCullough 715 
 
 1 1 ai proves v. Chambers 765 
 
 Harkreader v. Turnpike Co. 489 
 
 Harman v. Page 703, 709 
 
 Harmon v. Hunt 703 
 
 Ilarpending v. Munson 633 
 
 Harper v. Indianapolis, etc., R. 
 
 R. Co. 365 
 
 Harper v. Newport News, etc., 
 
 Co. 170 
 
 v. Union M'f'g Co. 713, 725 
 
 Harpold v. tttrobart 720
 
 TABLE OF CASES. 
 
 SECTION 
 
 Harrington v. Connor 187, 814 
 
 v. St. Paul, etc., R. R. Co. 175a 
 Harris v. Am. B & L. Ass. 210, 240 
 v. First Parish 721 
 
 v. Gateway Land Co. 145, 703, 709 
 v. McGregor 451 
 
 v. Mississippi Valley, etc., R. 
 
 R. Co. 432, 459 
 
 v. Muskingum M'f'g Co. 187 
 
 v. North Devon R'y Co. 692 
 
 v. Roberts 162 
 
 ». Runnels 297 
 
 v. Scott 788 
 
 Harris 1 Case 234 
 
 Harrison v. Mexican R'y Co. 572 
 
 v. Missouri Pac. R. R. Co. 193 
 
 v. Timmins 58 
 
 Harrison's Case 101, 586, 749 
 
 Harrell v. Blount 706 
 
 Harrow Co. v. Bement 309c 
 
 Harshman v. Bates County 323, 324 
 
 Hart v. Boston, etc., R. R. Co. 409 
 
 v. Direct U. S. Cable Co. 373 
 
 v. Frontino, etc., Mining Co. 597 
 
 v. Missouri State Ins. Co. 204 
 
 v. Pennsylvania R. R. Co. 356 
 
 v. Rensselear, etc., R. R. Co. 364 
 
 v. St. Charles St. R. R. Co. 569 
 
 v. Western Un. Tel. Co. 357 
 
 Hart's Appeal 750 
 
 Harter v. Eltzroth 793 
 
 v. Kernochan 324 
 
 v. Mechanics Nat. Bank 672 
 
 Hartford and N. H. R. R. Co. 
 
 v. Boorman 586, 587, 719, 747 
 
 v. Croswell 531, 782 
 
 v. New York and N. II. R. 
 
 R. Co. 308, 309 
 
 Hartford Bank ». Barry 239 
 
 v. Hart 187 
 
 Hartford Bridge Co. v. Union 
 
 Ferry Co. 453 
 
 Hartford Fire Ins. Co. v. Ray- 
 in ons 401 
 Hartford Ins. Co. v. Chicago Ry. 
 
 Co. 352 
 
 Hartford Ry. Co. v. Wagner 162a 
 Hartman v. Insurance Co. 787 
 
 Hartridge v. Rockwell 135 
 
 Harts v. Brown 632, 634 
 
 Hartshorne v. B. C. R. and N. R. 
 
 Co. 178 
 
 Harvey v. Improvement Co. 788 
 
 v. Terre Haute, etc., R. R. 
 
 Co. 356 
 
 v. Thomas 163 
 
 v. Lackawanna R. R. Co. 178 
 
 Har ward's Case 614 
 
 Hascnritter v. Kirchoffer 146 
 
 Haskell v. Oak 701 
 
 v. Sells • 94, 97 
 
 SECTION 
 
 Haskell v. Worthington 518, 523 
 
 Haslet v. Wortherspoon 703 
 
 Hasselman v. United States M'f'g 
 Co. 813 
 
 Hastings v. Brooklyn L. I. Co. 201 
 v. Drew 737 
 
 Hastings and G. I. R. R. Co. v. 
 Ingalls 175a 
 
 Hastings Malting Co. v. Iron 
 
 Range Co. 522c, 702, 7026 
 
 Hatch v. Attrill 774 
 
 v. Burroughs 713, 715 
 
 v. Coddington 192 
 
 v. Dana 703, 705, 706 
 
 «. Vermont Central R'y Co. 178 
 v. Western Union Tel. Co. 568 
 
 Hatcher v. Toledo, etc., R. R. Co. 415 
 
 Hathaway v. Toledo, etc., R. R. 
 
 Co. 376 
 
 Hauley v. Upton 511, 587 
 
 Hause v. Manuheimer 738 
 
 Hauser v. Davison 714 
 
 v. Tate 755 
 
 Havemeyer v. Havemeyer 580 
 
 v. Iowa County 318, 325, 468 
 
 v. Superior Court 504 
 
 Haven v. Grand Junction R. R. 
 
 Co. 679 
 
 Hawes v. Anglo-Saxon Pet. Co. 146 
 v. Oakland 139, 140, 141, 554 
 
 Hawken v. Bourne 311 
 
 Hawkins v. Furnace Co. 736 
 
 v. Citizens Ins. Co. 518, 521, 701 
 v. Glenn 138, 709 
 
 v. Hoffman 355 
 
 v. Maltby 791 
 
 Ilawley v. Hurd 480 
 
 v. Fairbanks 333 
 
 Hawtayne v. Bourne 312 
 
 Hawthorne v. Calef 450, 501, 665, 
 
 714, 762 
 
 Ilaxtun v. Bishop 668 
 
 Hayden v. Davis 298 
 
 v. Middlesex Turnpike Co. 187, 249 
 
 Hayes v. Beardsley 759 
 
 Hayner ». American Popular 
 
 Life Ins. Co. 236 
 
 Haynes v. Brown 511 
 
 v. Covington 286 
 
 Hays ». Citizens' Bank 759 
 
 v. Commonwealth 577 
 
 v. Holly Springs 320 
 
 v. Houston, etc., R. R. Co. 378 
 
 v. Michigan Cent. R. R. Co. 475 
 v. Miller 374 
 
 v. Ottawa, etc., R. R. Co. 179, 529 
 
 Hayward v. Davidson 128 
 
 v. Leeson 84a 
 
 v. Rogers 794 
 
 Haywood v. Lincoln Lumber 
 ' Co. 756, 759 
 
 857
 
 TABLE OF CASES. 
 
 SECTION 
 
 Ilaywood, etc., Plank Road Co. 
 o. Bryan 516 
 
 Hazard i: Durant 629, 688, 693 
 
 Hazeltine d. Railroad Co. 5ti4 
 
 Eazen v. Boston and Maine R. R. 
 
 Co. 162a, 344 
 
 Hazelhurst v. Savannah, etc., 
 
 II. l;. Co. 214, 309, 571, 572 
 
 Hazelton Boiler Co. v. llazelton 
 
 T. B. Co. 137 
 
 Head u. Providence Ins. Co. 114, 253 
 
 Head Money Cases 4746 
 
 Heald V. Owen 739 
 
 Healey v. Story 753 
 
 Heard i: Eldridge 799, 800 
 
 v. N. Y. C, etc., Co. 657 
 
 v. Sibley 737 
 
 Health v. Barmore 436, 437 
 
 v. Erie R'y Co. 560, 688 
 
 v. Missouri, etc., R. R. Co. 170, 432 
 
 v. Silverthorn Lead M'g Co. 189 
 
 Hebbard c. So. West Land & 
 
 Cattle Co. 636, 679, 7026 
 
 Hebdy's Case 720 
 
 Hedges v. Hudson River R. R. 
 
 Co. 360 
 
 v. Paquett 687 
 
 o. Superior Court 143 
 
 Heffner v. Brownell 752 
 
 Heggie v. Building Assoc. 137 
 
 Heims Brewing Co. v. Flannery 277 
 Heine v. Pollak 193 
 
 Heinigw. Adams, etc., M'f'g Co. 146 
 Heinze v. South Green Bay L. 
 
 Co. 189 
 
 Helfrich v. Williams 336 
 
 Heller v. Marine Bank 786 
 
 Helm d. Swigprett 589, 599 
 
 Helwege v. Hibernia Nat. Bank 245 
 Heman ». Britton 437 
 
 Hemingway v. Hemingway 627 
 
 Hemstad v. Hall 542 
 
 Hendee v. Pinkerton 225 
 
 Henderson, Ex parte 586, 747 
 
 v. Indiana T. Co. 668, 759 
 
 v. Louisville, etc., R. R. Co. 355 
 p. Mayor of New York 474a, 4746 
 D. Railroad Co. 342, 523 
 
 Henderson Bridge Co. v. Hen- 
 derson City 485 
 Henderson, etc., R. R. Co. v. 
 
 Dickerson 178, 179 
 
 Hendricks v. Sixth Ave. R. R. 
 
 Co. 347 
 
 Hendrix v. Academy of Music 
 
 518, 521 
 Henkle v. Salem M'f'g Co. 741 
 
 Hennessy, Ex parte 740 
 
 Henning r. United States Ins. 
 
 Co. 253 
 
 Hennington v. Georgia 475 
 
 858 
 
 SECTION 
 
 Henry v. Dubuque and P. R. R. 
 
 Co. 178 
 
 v. Elder 138 
 
 v. Great Northern R'y Co. 564 
 
 v. Jackson 619 
 
 v. Lake Shore, etc., R'y Co. 366 
 v. Northern Bank 210, 236 
 
 v. Rutland, etc., R. R. Co. 647 
 
 Henshaw v. Bank of Bellows 
 
 Falls 676 
 
 Hepburn v. Griswold 476 
 
 v. School Directors 484 
 
 Hercules Iron Works v. Elgin, 
 
 etc., R'y Co. 166 
 
 Hereford Wagon Co., In re 88 
 
 Herrick v. Wardwell 748 
 
 Herring v. N. Y., etc., R. R. 
 
 Co. 430, 815 
 
 Herron v. Vance 436 
 
 Hersey v. Veazie 615, 655 
 
 Hestonville, etc., R. R. Co. v. 
 
 Philadelphia 162a 
 
 Heuen v. Baltimore, etc., R. R. 
 
 Co. 407 
 
 Heuer v. Carmichael 739 
 
 Hewett v. Swift 344, 752 
 
 Hewett's Case 614 
 
 Hibbard v. N. Y. and Erie R. R. 
 
 Co. 348 
 
 v. West. Un. Tel. Co. 357 
 
 Hibernia Fire Engine i\ Harri- 
 son 583 
 Hibernia Ins. Co. v. St. Louis, 
 
 etc., Trans. Co. 657 
 
 Hickens v. Congreve 82 
 
 Hickling ». Wilson 701, 704, 738 
 
 Hicks v. Hinde 753 
 
 b. International, etc., R. R. 
 Co. 170 
 
 Heironimus v. Sweeney 270 
 
 Higgins v. Hannibal and St. 
 
 Jo. R. R. Co. 349 
 
 v. Hayden 672 
 
 v. Hopkins 76 
 
 v. Jeffersonville, etc., R. R. 
 
 Co. 376 
 
 v. Lansingh 612, 627, 633 
 
 v. New Orleans, etc., R. R. 
 
 Co. 353 
 
 v. Three Hundred Casks of 
 Lime 480, 485 
 
 Higgins Co. v. Higgins Soap Co. 137 
 Highland Ave., etc., R. R. Co. v. 
 
 Robbins 371 
 
 Hightower v. Mustian 668 
 
 v. Thornton 437, 703 
 
 Hill, Ex parte 628 
 
 v. Beach 148 
 
 v. Boston 335 
 
 v. Frazier 627, 775 
 
 v. Jewett Pub. Co. 591
 
 TABLE OF CASES. 
 
 SECTION 
 
 Hill c. Lumber Co. 759 
 
 v. Memphis 320 
 
 v. Merchants' Ins. Co. 703 
 
 v. Mining Co. 260 
 
 v. Newichawanick Co. 798 
 
 v. Nisbet 130, 629, 632 
 
 v. Pine River Bank 606 
 
 v. Rockingham Bank 599 
 
 v. Standard Tel. Co. 759 
 
 v. Syracuse, etc., R. R. Co. 359 
 HilFs Case 310, 716 
 
 Hiller v. Burlington, etc., R. R. 
 
 Co. 398 
 
 Hilles o. Parish 381, 581 
 
 Hilliard v. Goold 204, 216 
 
 Hillier v. Allegheny Mut. Ins. Co. 731 
 Hill M'f'g Co. v. Boston and 
 
 L. R. R. Co. 363 
 
 Hills v. Exchange Bank 484 
 
 v. Parish 688 
 
 Hillyer v. Overman Silver M'g 
 
 Co. 258 
 
 Hinchman v. Paterson Horse 
 
 R'y Co. 175 
 
 Hinchley v. Cape Cod R. R. Co. 376 
 v. Chicago, etc., R'y Co. 377, 378 
 Hincks v. Converse 145 
 
 Hinds v. Barton 368 
 
 Hines v. Wilmington, etc., R. R. 
 
 Co. 387 
 
 Hirschfeld v. Fitzgerald 720 
 
 Hirschfield v. Central Pac. R. R. 
 
 Co. 360 
 
 Hirshfield v. Bopp 724 
 
 Hitch v. Hawley 431, 611 
 
 Hitchcock's Heirs v. IT. S. 
 
 Bank 298, 387, 388 
 
 Hitchens v. Kilkenny R'y Co. 86, 724 
 Hite v. Hite 800 
 
 Hitte v. Republican Valley R. 
 
 R. Co. 170 
 
 Hoadley v. Northern Trans. Co. 351 
 
 Hoag v. Lamont 210, 248, 770 
 
 Hoagland v. Bell 737, 740 
 
 v. Cincinnati, etc., R. R. Co. 512 
 
 v. Hannibal and St. Jo. R. R. 
 
 Co. 308 
 
 Hoard v. Chesapeake, etc., R'y 
 
 Co. 415 
 
 v. Wilcox 717 
 
 Hoare's Case 645 
 
 Hobart ». Do veil 625 
 
 v. Milwaukee City R. R. Co. 175 
 
 Hoboken Building Ass'n v. 
 
 Martin 159 
 
 Hockett v. State 357, 475 
 
 Hodge v. First Nat. Bank 236, 241 
 Hodges v. Baltimore Passenger 
 
 R'y Co. 175 
 
 v. New England Screw Co. 623, 
 
 690, 691 
 
 SECTION 
 
 Hodges v. Rutland, etc., R. R. 
 
 Co. 236, 647 
 
 v. Silver Hill M'g Co. 722 
 
 Hodges Distillery Co., In re 787 
 
 Hodgkinson r. Kelley 791 
 
 v. Nat. Live Stock Ins. Co. 622 
 
 Hodgson v. Cheever 714 
 
 v. Duluth, etc., R. Co. 382 
 
 v. So. Bldg. Ass'n 392 
 
 Hoey v. Henderson 531 
 
 Hoff v. Jasper Co. 321, 332 
 
 v. West Jersey R. R. Co. 366 
 
 Hoffman u. Hancock Mut. Life 
 
 Ins. Co. 201 
 
 Hoffman Steam Coal Co. v. 
 
 Cumberland Coal Co. 210 
 
 Hoge v. Railroad Co. 489 
 
 Holbert v. St. L. K. C. and N. 
 
 R. Co. 386 
 
 Holbrook v. Fauquier, etc., 
 
 Turnpike Co. 253, 589 
 
 v. Ford 394 
 
 v. New Jersey Zinc Co. 598, 795 
 
 Holcomb's Ex'r v. Managers 
 
 N. H. D. B. Co. 260 
 
 Holden o. Fitchburg R. R. Co. 366 
 v. Hoyt 263 
 
 Holder v. Lafayette, etc., R'y 
 
 Co. 647 
 
 Holladay u. Kennard 350, 351 
 
 ». Patterson 162, 309 
 
 Holland v. Heyman 759 
 
 v. Iron Co. 737 
 
 v. Lewiston Falls Bank 647 
 
 Holland Tr. Co. v. Houston Elec. 
 
 Co. 680 
 
 Hollingshead v. Woodward 432 
 
 Hollins 15. Biierfield Coal Co. 34, 62, 
 
 651, 663 
 
 Hollister v. Hollister Bank 708 
 
 v. Nowlen 351, 359 
 
 v. Stewart 816a 
 
 Hollister Bank, Matter of 727 
 
 Holly v. Atlanta Street R. R. 
 
 Co. 347 
 
 Holman v. State 459, 518 
 
 Holmes, Ex parte 135, 136, 578 
 
 Holmes v. Board of Trade 202 
 
 v. Carolina Cent. R. R. Co. 377 
 
 v. Higgins 81 
 
 v. Holmes M'f'g Co. 137, 158 
 
 v. Sherwood 703, 704 
 
 v. Wakefield 344 
 
 v. Willard 622 
 
 Holmes, etc., M'f'g Co. v. 
 
 Holmes, etc., Metal Co. 130, 434 
 
 nolsnpple v. Rome, etc., R. R. Co. 353 
 
 Holt ». Bacon 241 
 
 v. Bennett 632 
 
 Hoi yoke Bank v. Burnham 589, 
 
 719, 741 
 
 859
 
 TABLE OF CASES. 
 
 SECTION I 
 
 ITolyoke v. Goodman Paper Co. 
 
 737, 740 
 Holyoke Building Assoc, v. 
 
 Lewis 583 ' 
 
 Holyoke Co. v. Lyman 502 j 
 
 Home Ins. Co. v. City Council 489 I 
 v. Davis 383, 400 ; 
 
 Home Mining Co. v. McKibbin 140 
 Home of tbe Friendless v. 
 
 Rouse 488 
 
 Home Stock Ins. Co. v. Sher- 
 wood 516, 537 
 Homes ». Dana 92 
 Hood v. New York and N. H. 
 
 R. R. Co. 338, 362 
 
 Hooper v. Rossiter 800 
 
 v. Savannah, etc., R. R. Co. 178 
 
 Hoosier Co. i\ McCain 365 
 
 Hooven Mercantile Co. v. Evans 
 
 Mining Co. 759 
 
 Hopcroft y. Parker 76 
 
 Hope v. International Financ- 
 ial Societv 134, 608 
 v. Valley City Salt Co. 633 
 Hope Mut. Fire Ins. Co. v. 
 
 Beckman 227, 557 
 
 Hope Mut. Life Ins. Co. v. Per- 
 kins 125 
 Hopkin v. Buffum 578 
 Hopkins v. Atlantic, etc., R. R. 
 
 Co. 377 
 
 v. Gallatin Turnpike Co. 668 
 
 v. Mehaffy 753 
 
 v. Taylor 417 
 
 v. U. S. 309a 
 
 v. Western Pac. R. R. Co. 344 
 
 Hopkins and Johnson's Appeal 759 
 
 Hopkins Trusts, In re 800 
 
 Hopper v. Covington 329 
 
 Hoppin v. Buffum 578 
 
 Hopson v. .<Etna Axle, etc., 
 
 Co. 225 
 
 Horn r. Agricultural Soc. 336 
 
 v. Chicago, etc., R. R. Co. 475 
 
 Horn Silver Mining Co. v. New 
 
 York 479 
 
 v. Ryau 624 
 
 Hornblower v. Crandall 103 
 
 Home Nat. Bank v. Waterman 1S7 
 Hornor v. Henning 775 
 
 Hornstein v. Atlantic, etc., R. R. 
 
 Co. 178, 179 
 
 Horton v. Wilder 577 
 
 Hosher v. Kansas City, St. Jo., 
 
 etc., R. R. Co. 179 
 
 Hospes v. Northwestern M'f'g 
 
 Co. 5226, 702a, 7026 
 
 Hotchkiss v. Artisans' Bank 103 
 
 Hotel Co. v. Schram 130, 518 
 
 v. Wade 815 
 
 Hotham v. East India Co. 97 
 
 860 
 
 SECTION 
 
 Hot Springs R. R. v. Tripp 364 
 
 v. Williamson 175a 
 
 Hough v. Railway Co. 365, 366 
 
 Houldsworth v. City of Glasgow 
 
 Bank 523, 524 
 
 v. Evans 780 
 
 Housatonic R. R. Co. v. Lee 163a 
 House of Mercy v. Davidson 391 
 
 Houston v. Thornton 758 
 
 Houston and T. C. R. R. Co. v. 
 
 Odurn 175 a 
 
 Houston, etc., R'y Co. v. Bre- 
 
 mond 606 
 
 v. Burte 356 
 
 v. Rust 309 
 
 v. Shirley 413, 425, 427, 665, 666 
 
 v. Smith 373 
 
 v. Texas 502 
 
 v. Van Alstyne 597 
 
 Hovey's Estate 400 
 
 Howard v. Glenn 137, 523, 530 
 
 v. Lombard 393 
 
 v. Turner 526 
 
 Ilowbreach Coal Co. v. Teague 
 
 190, 540, 574 
 
 Howe v. Boston Carpet Co. 130 
 
 v. Deuel 611 
 
 v. Freeman 676 
 
 v. Robinson 664 
 
 Howell v. Chicago, etc., R. R. 
 
 Co. 133, 394, 561, 568 
 
 v. Western R. R. Co. 677, 67S, 682 
 Howe Machine Co. v. Souder 342 
 Howland v. Milwaukee, etc., R'y 
 
 Co. 366 
 
 Iloyle v. Plattsburgh and Mon- 
 treal R. R. Co. 676 
 Hoyt v. Sheldon 389, 663 
 v. Thompson 236, 389 
 Hoyt v. Thompson's Ex'r 195, 219 
 223, 233, 234, 389 
 Hubbard v. United States M't'ge 
 
 Co. 402 
 
 v. Wen re 696 
 
 Hubbell v. Drexel 790, 794 
 
 Huddersfield Canal Co. v. Buck- 
 ley 587, 747 
 lluddleston v. Gouldsbury 567 
 Hudson v. Green Hill Seminary 
 
 145. 146 
 Hudson v. Inhabitants of Win- 
 slow 251 
 Hudson and Del. Canal Co. v. 
 New York and Erie R. R. 
 Co. 164 
 Hudson Real Estate Co. v. Tower 108 
 Hudson River Tel. Co. v. Wa- 
 tervleit Turnpike, etc., Co. 
 
 162a, 167 
 Hu<ih v. McRae 432 
 
 Hughes o. County of Monroe 335
 
 TABLE OF CASES. 
 
 SECTION 
 
 Hughes o. Bank of Somerset 738 
 
 v. Drover's Bank 592 
 
 v. Macfie 372 
 
 v. M'f g Co. 96, 109, 513, 
 
 518, 547, 549 
 v. Vermont Copper M'g Co. 599 
 Huguenot Nat. Bank v. Stud- 
 well 770 
 Huidekoper v. Locomotive 
 
 Works 822 
 
 Hull i?. Burtis 725 
 
 v. Glover 187 
 
 Humble v. Langston 791 
 
 Humboldt Driving Park Assoc. 
 
 v. Stevens 569 
 
 Humboldt Township v. Long 
 
 321, 326, 330 
 
 Hume v. Commercial Bank 755 
 
 Humes v. Missouri Pac. R'y Co. 475 
 
 Humpbrey v. Jones 754 
 
 v. Patrons' Mercantile Ass. 146, 
 
 286, 311, 632 
 
 v. Pegues 488, 490 
 
 Humphreys v. Allen 824 
 
 v. McKissock 187 
 
 v. Mooney 148, 739 
 
 v. Perry 355 
 
 Hun v. Cary 615, 617, 620 
 
 Hunnewell v. Duxbury 752 
 
 Hunt v. Bullock 676 
 
 v. Kansas, etc., Bridge Co. 537 
 
 v. Legrand Skating Co. 431 
 
 Hunt, Recr., v. O'Shea, Assignee 
 
 568, 750 
 Hunter v. Hudson R. Iron Co. 342 
 v. Roberts 562 
 
 Hunter v. Sun Mutual Ins. Co. 649 
 Huntington v. Attrill 393, 765, 774 
 v. Densmore 359 
 
 Huntington, etc., R. R. Co. v. 
 
 Decker 210, 365 
 
 Huntsville, etc., R'y Co. v. Cor- 
 
 peuing 210 
 
 Hurd v. Hotcbkiss 263 
 
 Hurlburt v. Marshall 756 
 
 v. Taylor 719 
 
 Hurst v. Salisbury 76 
 
 Hurtado v. California 492a 
 
 Huse v. Ames 225 
 
 Huss v. Central R. R., etc., Co. 402 
 Hussey v. Norfolk R. R. Co. 337 
 
 Hussner v. Brooklyn City R. R. 
 
 Co. 175 ft 
 
 v. Bank 239 
 
 Hutchins v. New England Coal 
 
 M'g Co. 380, 381 
 
 Hutcbison v. Crutcher 432 
 
 Hutchinson v. Bidwell 629 
 
 v. Green 225, 230 
 
 v. Surrey Consumers' Gas Light 
 
 Ass'n 87 
 
 SECTION 
 
 Hutchinson v. Western and At- 
 lantic R. R. Co. 338 
 Hutt v. Giles 96 
 Huttig Co. v. Hotel Co. 401 
 Hutton v. Scarborough Cliff 
 
 Hotel Co. 572 
 
 Hutzler v. Lord 791 
 
 Huyett v. Phila. and Reading 
 
 R. R. Co. 368 
 
 Hyam's Case 586, 749 
 
 Hyatt v. Allen 798 
 
 Hygeia Ice Co. v. N. Y. Hygeia 
 
 Ice Co. 137 
 
 Hyman v. Coleman 715, 736 
 
 Hyslop v. Finch 166 
 
 Ibbotson's Case 459 
 
 I. 
 
 Illinois and M. Canal v. Chi- 
 cago and R. I. R. R. Co. 454 
 Illinois Cent. R. R. Co. v. 
 
 Adams 353 
 
 v. Ashmead 361 
 
 v. Chicago 502 
 
 v. Cobb 350, 361 
 
 v. Decatur 489 
 
 v. Dick 371 
 
 v. Downey 344 
 
 v. Friend 360 
 
 v. Frankenberg 363 
 
 v. Godfrey 371 
 
 v. Illinois 474d" 
 
 v. Johnson 363 
 
 u. Kanouse 362 
 
 v. McClellan 350, 366 
 
 v. Morrison 353 
 
 v. People 476a, 476b 
 
 v. Phelps 369 
 
 v. Reed 353 
 
 Illinois G. T. R. R. Co. v. Cook 536 
 Illinois Linen Co. v. Hough 646 
 
 Illinois River R. R. Co. v. Zim- 
 
 mer 227, 449, 516, 536 
 
 Illinois Steel Co. v. O'Donnell 634 
 Illinois W. C. Co. v. Pearson 158 
 
 Imboden v. Etowah, etc., M'g 
 
 Co. 146, 189 
 
 Imlay v. Union Branch R. R. 
 
 Co. 175a 
 
 Imperial Hydropathic Hotel Co. 
 
 v. Hampson 650 
 
 Imperial Land Co., In re 627, 633, 752 
 Imperial Merc. Credit Ass'n v. 
 
 Coleman 628 
 
 Importing and Exporting Co. v. 
 
 Locke 149 
 
 Independent Insurance Co., Re 436 
 India and London L. Ass. Co., 
 
 In re 665 
 
 861
 
 TABLE OF CASES. 
 
 SECTION 
 
 Indian River S. Co. v. East 
 
 Coast Tr. Co. 309 
 
 Indianapolis, B. and W. R. Co. 
 
 v. Beaver 350 
 
 Indianapolis, B. and W. R. R. 
 
 Co. v. Smith 173, 175a 
 
 Indianapolis, B. W. and R. R. 
 
 Co. v. Hartley 175a 
 
 Indianapolis, etc., R. R. Co. v. 
 
 Allen 353 
 
 v. Carr 375 
 
 v. Horst 350, 376 
 
 v. Jones 666 
 
 v. Passmore 368 
 
 v. Pugli 178 
 
 v. Ray 417, 432 
 
 v. Renard 348 
 
 v. Stout 374 
 
 Indianapolis Cable R. R. Co. 
 
 v. Citizens' R. R. Co. 122 
 
 Indianapolis Furnace, etc., Co. 
 
 v. Herkimer 99, 538 
 
 Indianapolis P. and C. R. R. 
 
 Co. v. Anthony 347 
 
 Indianapolis Rolling Mills v. 
 
 St. Louis, etc., R. R. Co. 212, 
 214, 238 
 Indianola v. Gulf, W. T. and P. 
 
 R'y 120 
 
 Indianola R. R. Co. v. Fryer 425, 
 
 427, 665 
 Ingalls v. Cole 825 
 
 Ingledew v. Northern R. R. 361 
 
 Inglehart v. Thousand Islands 
 
 Hotel Co. 633 
 
 Ingraham v. Terry 435 
 
 Ingram v. C. D. and M. R. R. Co. 171 
 Ingwerson v. Edgecomb 759 
 
 Inhabitants of Springfield v. 
 Connecticut River R. R. 
 Co. 163a 
 
 Inman Steamship Co. v. Tinker 480 
 Innes v. Lansing 62, 658 
 
 Insane Hospital v. Higgins 138 
 
 Instone v. Frankfort Bridge Co. 546 
 Insurance Commissioner v. U. S. 
 
 F. I. Co. 435 
 
 Insurance Co. v. Bruce 330 
 
 v. Colt 193, 254 
 
 i\ Craig 400a 
 
 v. Francis 412, 413 
 
 v. Kennedy 401 
 
 D. McCain 189, 193, 198 
 
 v. Morse 400 
 
 v. Kailroad Co. 363, 364 
 
 v. State 309c 
 
 Insurance Co. v. Tennessee 490 
 
 r, Wall 511 
 
 Insurance Oil Tank Co. v. Scott 120 
 
 Inter Ocean Co. v. Associated 
 
 Press 476a 
 
 862 
 
 SECTION 
 
 International & G. N. R'y Co. v. 
 
 State 504 
 
 International, etc., R. R. Co. v. 
 
 Bremoud 536, 620, 695 
 
 v. Graves 374 
 
 v. Kindred 365 
 
 International, etc., R'y Co. v. 
 
 Townsend 368 
 
 International C. S. O. Co. v. 
 
 Wheelock 400 
 
 International L. Ass. Soc, Inre 125 
 Int. Tr. Co. v. United Coal Co. 
 
 277, 310, 663, 824 
 v. Davis & Farnum Co. 678 
 
 Interstate Commerce Commis. v. 
 
 Baltimore, etc., R. R. Co. 474d 
 v. Railway 474d 
 
 Iowa and Union R. R. Co. v. 
 
 Perkins 518 
 
 Iowa Lumber Co. v. Foster 135 
 
 Ireland v. Globe Milling Co. 
 
 87, 392, 582 
 v. Palestine Co. 501 
 
 Irish v. Milwaukee, etc., R'y Co. 
 
 360, 363 
 
 Iron Co. v. Construction Co. 397 
 
 V. Hays 522c 
 
 Iron City Bank v. Pittsburg 477a 
 
 Iron R. R. Co. v. Fink 599 
 
 v. Irouton 163a 
 
 v. Mowery 349 
 
 Irons v. Manufacturers' Nat. 
 
 Bank 658, 668 
 
 Irrigation Dist. v. Bradley 163 
 
 Irvine v. Lowry 411 
 
 u. McKeon 764, 774 
 
 Isaacs v. Third Ave. R. R. Co. 347 
 Isaacson v. N. Y. C. and H. R. 
 
 R. R. Co. 193, 363 
 
 Isabel v. Hannibal and St. Jo. 
 
 R. R. Co. 165 
 
 Isham v. Bennington Iron Co. 187 
 v. Buckingbam 586, 589 
 
 Island City S'v'gs B'k v. Sach tie- 
 ben 415 
 Isom v. Miss. Central R. R. Co. 179 
 
 J. 
 
 Jackson v. Brown 125 
 
 v. Campbell 197 
 
 c. Crown Point Mining Co. 538 
 v. Hampden 260 
 
 v. Indianapolis, etc., R. R. Co. 376 
 v. Ludeling 760, 815 
 
 v. Meek 720 
 
 v. N. & W. R. R. Co. 365 
 
 r. Xew York Central R. R. Co. 647 
 v. St. Stockbridge 523 
 
 v. Traer 522c, 702
 
 TABLE OF CASES. 
 
 SECTION 
 
 Jackson's Admr's v. Newark 
 
 Plank Road Co. 788 
 
 Jackson Ins. Co. v. Cross 195, 346 
 Jackson Marine Ins. Co., Matter 
 
 of 432 
 
 Jackson M'g Co. v. Auditor Gen- 
 eral 485 
 Jacksonville and S. E. R. R. Co. 
 
 v. Walsh 178 
 
 Jacksonville, etc., R. R. Co. v. 
 
 Hooper 305a 
 
 v. Town of Virden 328,330 
 
 Jacobs Pharmacy Co. v. Trust Co. 285 
 
 Jacobus v. Allen 721 
 
 v. St. Paul and Chic. R'y Co. 
 
 352, 353 
 Jagger Iron Co. v. Walker 715 
 
 James v. Milwaukee 322 
 
 ». Railroad Co. 760 
 
 v. Rogers 125 
 
 Jamieson v. Indiana Nat. Gas Co. 476 
 Janney v. Minn. Industrial Expo. 723 
 Jarrolt v. Moberly 321 
 
 Jarvis v. Manhattan Beach Co. 591 
 Jasper Land Co. v. Wallas 687 
 
 Javcox, In re 298 
 
 Jeiferis v. Phila., etc., R. R. Co. 368 
 Jefferson v. Hewitt 523 
 
 Jefferson Branch Bank v. Skel- 
 
 ley 468, 488 
 
 Jefferson County Sav. Bank v. 
 
 Eborn 377 
 
 Jefferson Co. Savs. Bank y. Fran- 
 cis 687 
 Jefferson County Savings Bank 
 
 v. Hewitt 477a 
 
 Jeffersonville M. and I. R. R. Co. 
 
 v. Esterle 175a 
 
 Jeffersonville R. R. Co. v. Cleve- 
 land 360 
 v. Rogers 347, 348 
 Jefferys v. York 75, 754 
 Jellett v. St. Paul, etc., R'y Co. 360 
 Jellenik p. Huron Copper Mining 
 
 Co. 796 
 
 Jemison v. Citizens' Sav. Bank 
 
 123, 276 
 v. Planters', etc., Bank 453 
 
 Jenkins v. Neff 484 
 
 Jenkins v. Union Turnp'kCo. 91, 516 
 Jenner's Case 614 
 
 Jenneson v. Railroad Co. 363 
 
 Jermain v. Lake Shore, etc., R'y 
 
 Co. 798, 799 
 
 Jerman i\ Benton 732, 735 
 
 Jersey City and Bergen R. R. Co. 
 
 v. Jersev City and Hoboken 
 
 R. R. Co. 165 
 
 Jessopp's Case 101, 586, 749 
 
 Jessup b. Bridge 820 
 
 v. Loucks 162a 
 
 SECTION 
 
 Jewell v. Rock River Paper Co. 701 
 Jewett v. Valley R. R. Co. 779 
 
 John Hancock Ins. Co. v. Rail- 
 road Co. 426 
 Johnson v. Boston, etc., R. R. Co. 371 
 v. Brooks 790 
 v. Bush 263 
 v. Church well 775 
 v. Corser 739 
 v. Fisher 725 
 v. Goodyear Mining Co. 499 
 v. Hudson River R. R. Co. 376 
 v. Johnson 800 
 v. Laflin 780 
 v. Lullman 702, 745 
 15. National V. & L. Ass'n 687 
 v. Lyttle's Iron Agency 547 
 v. Okerstrom 145 
 v. Pensacola, etc., R. R. Co. 309 
 v. Philadelphia 489 
 v. Shrewsbury, etc., R'y Co. 308 
 o. Somerville Dyeing Co. 719 
 v. St. Louis Despatch Co. 342 
 b. Underbill 300, 589 
 Johnson City v. R. R. Co. 320 
 Johnston v. Charlottesville Nat. 
 
 Bank 267 
 
 v. Elizabeth B'ld'g Ass'n 210 
 
 v. Ewing Female University 109 
 v. Jones 573, 578 
 
 v. Shortridge 210 
 
 b. Trade Ins. Co. 392 
 
 Johnston, Trustee, v. Allis 108 
 
 Joint Stock Discount Co. v. 
 
 Brown 622, 626 
 
 Jones v. Arkansas Mechanical 
 
 Co. 656 
 
 v. Avery 734 
 
 v. Bank of Leadville 432, 433 
 
 v. Bank of Tennessee 146 
 
 v. Barlow 765 
 
 v. Bolles ' 138 
 
 v. Cincinnati Type Foundry 
 
 Co. 146 
 
 v. Dunn 748 
 
 v. Fales 195 
 
 v. Guaranty and Indemnity 
 
 Co. 125 
 
 v. Hale 146, 632, 634 
 
 v. Harrison 104 
 
 v. Jarman 703, 725 
 
 v. Johnson 6t-8 
 
 v. Kokomo Building Asso- 
 ciation 146 
 v. Milton, etc., Turnpike Co. 574 
 v. Morrison 133, 135, 229, 558, 
 569, 646 
 v. Pearl M. Co. 382 
 v. Planters' Bank 293 
 v. Terre Haute, etc., R. R. 
 Co. 788 
 
 863
 
 TABLE OF CA8ES. 
 
 320 
 
 342 
 
 672 
 211 
 577 
 504 
 553 
 
 SECTION 
 
 Jones v. Trustees Florence Uni- 
 versity 263 
 D. White worth 522 c 
 v. White Valley R. R. Co. 179 
 r. Wilterberger 728, 825 
 Jonesboro City v. Cairo, etc., 
 
 It. R. Co. 
 Jordan b. Alabama G. N. R'y 
 Co. 
 v. Nat. Shoe and Leather 
 Bank 
 Jordan & Co. r. Collins 
 Jordy v. Hebraid 
 Joslyn v. Distilling Co. 
 
 v. Pacific Mail S. S. Co. 
 Joy v. Jackson, etc., Plank 
 
 Road Co. 227 
 
 Judd b. Harrington 309c 
 
 Judson ii. Rossie Galena Co. 718 
 
 v. Western R. R. Co. 359, 360 
 
 Juke v. Commonwealth 576 
 
 Junction R. R. Co. v. Reeve 258 
 
 K. 
 
 Kadish v. Loan Ass'n 280 
 
 Kacppler v. Redfield Creamery 
 
 Co. S6 
 
 Kalil b. Memphis, etc., R. R. 
 
 Co. 405, 408 
 
 Kahu v. Bank of St. Joseph 604 
 
 Kaiser v. Lawrence Savings 
 
 Bank 148, 739 
 
 Kalamazoo Novelty M'f'g Co. 
 
 v. McAlister 210 
 
 Kampman v. Tarver 541 
 
 Kanawha Coal Co. v. Ballard 
 
 Coal Co. 138 
 
 v. Kanawha and Ohio Coal Co. 
 
 157, 460 
 Kane b. New York El. Co. 176 
 
 Kansas and E. R. R. Cons. Co. 
 
 v. Topeka, etc., R. R. Co. 392 
 Kansas & Texas Coal R'y v. 
 
 North-Western C. & M. Co. 163 
 
 Kansas City Hotel Co. b. Harris 541 
 
 v. Hunt 541 
 
 v. Sauer 432, 435 
 
 Kansas City L. and S. R. R. 
 
 Co. v. Phillibert 376 
 
 Kansas City, St. Jo., etc., R. R. 
 
 Co. v. Alderman 520 
 
 v. Campbell 166 
 
 v. Simpson 359 
 
 Kansas Lumber Co. v. Central 
 
 Bank 342 
 
 Kansas, O., etc., R'y Co. v. 
 
 Smith 421 
 
 Kansas Pac. R. R. Co. r. Atchi- 
 son T. and S. F. R. R. Co. 23, 413 
 864 
 
 SECTION 
 
 Kansas Pac. R. R. Co. v. Butts 368 
 v. Miller 350 
 
 v. Mower 475 
 
 v. Peavey 365, 366, 373 
 
 v. Reynolds 351, 353 
 
 Kansas Pac. R'y Co. v. Pointer 376 
 Karnes v. Rochester, etc., R. R. 
 
 Co. 561 
 
 Kaiuth's Case 614 
 
 Katama Land Co. v. Jernegan 518 
 Katzenberger b. Aberdeen 325 
 
 Kayser v. Trustees of Bremen 147 
 Kean v. Johnson 268, 608 
 
 v. Union Water Co. 581 
 
 Kearney v. Buttles 269 
 
 Kearns v. Leaf 659 
 
 Keetjan v. Western R. R. Co. 365, 366 
 Keen v. Van Reuth 146, 153 
 
 Keffe v. Milwaukee, etc., R. R. 
 
 Co. 371, 372 
 
 Keith b. Globe Ins. Co. 210 
 
 Keithsburg v. Frick 325 
 
 Kelley v. Newburyport Horse R. 
 
 R. Co. 146, 270, 630 
 
 v. Milan 320 
 
 v. Norcross 366 
 
 v. People's Trans. Co. 276, 303 
 
 Kellinger v. Forty-second Street, 
 
 etc., R. R. Co. 175 
 
 Kellogg Bridge Co. v. Hamilton 249 
 Kelly v. Alabama and Cincinnati 
 
 R. R. Co. 125, 264 
 
 v. Board of Public Works 248 
 
 r. (lark 651, 702,702a 
 
 B. Fletcher 522c 
 
 v. Mariposa Land, etc., Co. 667 
 
 v. Pittsburg 492 
 
 Kellner». Baxter 76,87 
 
 Kelsey v. National Bank 211 
 
 v. Northern Light Oil Co. 520 
 
 v. Sargent 647, 689 
 
 Kempson v. Saunders 102 
 
 Kendall v. Bishop 668 
 
 Kenicottu. Supervisors 319, 328, 330 
 
 Kennebec Co. v. Augusta Ins. 
 
 Co. 384 
 
 Kennebec, etc., R. R. Co. v. 
 
 Jarvis 515 
 
 o. Kendall 513 
 
 b. Palmer 92, 108 
 
 v. Portland, etc., R. R. Co. 125 
 
 Kennedy v. Gibson 140, 727 
 
 0. Panama, etc., Mail Co. 103 
 
 v. Savings Bank 284 
 
 Kenosha, etc., R. R. Co. v. Marsh 530 
 
 Kent v. Freehold Land Co. 103 
 
 v. Jackson 98 
 
 v. Quicksilver Mining Co. 125, 126, 
 
 269, 288, 572, 583, 584 
 
 Kent Benefit Building Soc, 
 
 In re 312
 
 TABLE OF CASES. 
 
 SECTION 
 
 Kenton County Court v. Bank 
 
 Lick Turnpike Co. 164, 454 
 
 Kenton Ins. Co. v. Bowman 603 
 
 Kentucky Bank Tax Cases 497 
 
 Kentucky Central R. K. Co. v. 
 
 Thomas 350 
 
 Kentucky R. R. Tax Cases 492 
 
 Keokuk Bridge Co. v. People 406, 479 
 Keokuk, etc., R. R. Co. v. Mis- 
 souri 421, 491 
 Keokuk & Hamilton Bridge Co. 
 
 v. 111. 482 
 
 Keokuk Packet Co. v. Davidson 629 
 Kerclmer v. Gettys 381 
 
 Kern v. Day 796 
 
 Kernochan v. Manhattan R'y Co. 176 
 Kerr v. Eurie 741, 795 
 
 Kersey Oil Co. v. Oil Creek, etc., 
 
 R. R. Co. 229, 260, 261, 637, 641 
 Kersteter's Appeal 759 
 
 Ketcham v. Madison, etc., R. R. 
 
 Co. 664, 666 
 
 Ketchum o. Amer. Merchants' 
 
 Union Exp. Co. 353 
 
 v. Duncan 680 
 
 v. Pacific R. R. Co. 675 
 
 v. St. Louis 817 
 
 Key City, The 665 
 
 Keyser v. Hitz 223, 567, 738 
 
 Keystone Bridge v. Barstow 701 
 
 v. McCluney 702 
 
 Kidd v. Pearson 476 
 
 Kidwelly Canal Co. v. Raby 91, 98 
 
 Kiffrer v. Elder 327 
 
 Kilbretli v. Bates 298 
 
 Kiley v. Western Union Tel. Co. 359 
 
 Kilgore v. Bulkeley 253 
 
 Kilpatrick v. Penrose Ferry 
 
 Bridge Co. 647 
 
 Kilton Warren Co. v. Prov. Tool 
 
 Co. 736 
 
 Kimball v. Goodburn 432 
 
 v. Grate Co. 124 
 
 v. N. Y. C. & H. R. R. Co. 363 
 
 v. Norton 199 
 
 Kimmish v. Ball 474tZ 
 
 Kincaid v Dwinelle 144, 432, 724 
 
 Kindred v. New Eng., etc., Co. 401 
 
 Kinealy i\ St. Louis, K. C. and 
 
 C. R. R. Co. 162, 174 
 
 King ». Armstrong 732 
 
 v. Bank of England 599 
 
 v. Barnes 219, 559a 
 
 v. Bedford Level 188 
 
 v. Housatonic R. R. Co. 820, 822 
 
 v. Howell 459 
 
 v. National M. and E. Co. 402 
 
 c. Paterson, etc., R. R. Co. 568 
 
 v. Theodorick 573 
 
 v. Woohidge 759 
 
 King's Case 586, 749 
 
 55 
 
 SECTION 
 
 Kingsley u. First National B'k 
 
 668, 759 
 v. New England Ins. Co. 196 
 
 Kinkier v. Juuica 752 
 
 Kinney v. Central R. R. Co. 353 
 
 Kinsley v. Rice 775 
 
 Kinsman St. R'y Co. v. Broad- 
 way R. R. Co. 163a 
 Kintrea, Ex parte 586, 749 
 Kirk v. Bell 234, 262 
 Kirkbride v. Lafayette County 319 
 Kirkland v. Dinsmore 358 
 v. Kille 770 
 Kirkpatrick v. N. Y. C. and H. 
 
 R. R. Co. 365 
 
 Kirtland b. Hotchkiss 469 
 
 Kishacoquillas, etc., Turnpike 
 
 Co. v. McConaby 147 
 
 Kissam v. Anderson 216 
 
 Kisterbock's Appeal 598 
 
 Kitchen v. Cape Girardeau, 
 
 etc., R. R. Co. 114, 233 
 
 v. St. Louis, K. C, etc., R'y 
 
 Co. 627, 693, 812 
 
 Klaus, In re 583 
 
 Kleckner v. Turk 739 
 
 Klein v. Alton, etc., R. R. Co. 548 
 
 v. Jewett 417 
 
 Kline o. Central Pac. R. R. Co. 373 
 
 Knapp ». Grant 325 
 
 o. Publishers', etc., Co. 569 
 
 Knoblauch v. German Sav. Bk. 210 
 
 Knecht v. United States S'v'gs 
 
 Inst. 672 
 
 Kneeland v. American Loan 
 
 Co. 824a 
 
 v. Foundry and Machine 
 
 Works 824 
 
 v. Lawrence 679 
 
 Knell v. U. S. and Brazil S. S. 
 
 Co. 353, 359 
 
 Knickerbocker Life Ins. Co. c. 
 
 Ecclesine 137 
 
 Knight v. Corporation de Wells 
 
 158, 188 
 v. Flatrock, etc., Turnpike 
 
 Co. 538 
 
 v. Long 197 
 
 v. New Orleans, etc., R. R. 
 
 Co. 369 
 
 Knight's Case 547 
 
 Knights of Pythias v. Weller 430 
 
 Kuowles v. Sandercock 733 
 
 Knowlton v. Ackley 432 
 
 v. Congress Spring Co. 133 
 
 Knox v. Baldwin 772 
 
 v. Childersburg Land Co. 110 
 
 v. Eden Musee 591 
 
 B. Havman 523 
 
 Knox Co. r. Aspinwall 330, 331 
 
 v. Ninth Nat. Bank 318, 328 
 
 865
 
 TABLE OF CASES. 
 
 SKOTION 
 
 Knox County Court v. United 
 
 States 333 
 
 Knoxville t\ Knoxville, etc., R. 
 
 R. Co. 265 
 
 Knoxville Iron Co. v. Harbison 
 
 400a, 475 
 Koehler v. Black River Falls 
 
 Iron Co. 236, 693 
 
 v. Dodge 210 
 
 Koemel v. New Orleans, etc., 
 
 R. R. Co. 175a 
 
 Kohl v. United States 470 
 
 Kohler v. Agassiz 703 
 
 Kolff v. St. Paul Fuel Ex- 
 change 583 
 Koons ii. St. Louis, etc., R. R. 
 
 Co. 37-2 
 
 v. West Un. Tel. Co. 357 
 
 Kortright v. Buffalo Commer- 
 cial Bank 598, 599 
 Koshkonong v. Burton 326 
 Kraft d. Freeman Printing As- 
 sociation 203 
 Kraft County Bank v. Bank 593 
 Kraniger v. Building Soc. 264 
 Kreissl v. Distilling Co. 580 
 Krizer v. Woodson 764 
 Kroenert v. Johnston 702 
 Krouse v. Woodward 794 
 Krumbhaar v. Griffiths 698 
 Krutz v. Paola Town Co. 150 
 Kucheman v. C. C. and D. R'y 
 
 Co. 175a 
 
 Kuhn v. McAllister 789 
 
 Kuser v. Wright 189 
 
 Kyle v. Laurens R. R. Co. 362, 363 
 
 v. Wagner 225 
 
 L. L. & G. R. R. Co. v. Maris 360 
 L. & N. R. R. Co. v. Kentucky 4766 
 Labette County Com'rs v. 
 
 Moulton 333 
 
 Lackawanna Iron, etc., Co. v. 
 
 County of Lucerne 477a 
 
 LaCrosse City R'y Co. v. Ilighie 175 
 Laclede Gas Light Co. v. Murphy 465 
 La Fayette Bank v. St. Louis 
 
 Stoneware Co. 205 
 
 Lafayette, etc., R'y Co. v. 
 
 Cheeney 646 
 
 Lafayette Insurance Co. v. 
 
 French 383, 397, 398, 400, 413 
 Lafayette Plankroad Co. v. 
 
 New Albany, etc., R. R. 
 
 Co. 163a, 453 
 
 Laflin, etc., Powder Co. v. Sin- 
 
 sheimer 739 
 
 Lagarde v. Anniston L. & S. Co. 612 
 
 866 
 
 SECTION 
 
 La Grange, etc., Plankroad Co. 
 
 B. Mays 521 
 
 La Grange, etc., R. R. Co. v. 
 
 Rainey 153, 432, 433 
 
 Lahr v. Metropolitan Elevated 
 
 R. R. Co. 176 
 
 Lake County v. Graham 332 
 
 Lake Erie and W. R'y Co. v. 
 
 Griffin 415 
 
 Lake Ontario, etc., R. R. Co. 
 
 v. Mason 511, 513, 516 
 
 Lake Ontario Shore R. R. Co. 
 
 v. Curtiss 109, 515 
 
 Lake Roland R. R. Co. v. Frick 179 
 Lake Shore and M. S. R'y Co. v. 
 
 Chicago and W. I. R. R. Co. 163a 
 v. Cincinnati S. and C. R'y 
 
 Co. 163a 
 
 v. Ohio 474a" 
 
 Lake Shore, etc., R. R. Co. v. 
 
 Miller 374, 376 
 
 v. Prentice 378 
 
 v. U. S. 467 
 
 Lake Superior Iron Co. v. Drexel 723 
 Lake v. Argyl 77 
 
 v. Virginia, etc., R. R. Co. 453 
 
 Lake View v. Rose Hill Ceme- 
 tery Co. 474, 476 
 Lakin v. Railroad Co. 170 
 Lallande i\ Ingram 794 
 Lamar ». Lanier House Co. 554 
 Lamar Ins. Co. v. Hildreth 707 
 Lamb v. Camden and Amboy 
 
 R. R. Co. 351 
 
 v. Cecil 241, 668 
 
 v. Lamb 401 
 
 Lamb Knit Goods Co. v. Lamb 
 
 Glove & Mitten Co. 137 
 
 Lambert v. Staten Island R. R. 
 
 Co. 374 
 
 Lamm v. Port Deposit Home- 
 stead Ass'n 342 
 Lampkin v. Railroad Co. 347 
 Lancaster v. Amsterdam Imp. 
 
 Co. 384 
 
 Lancaster County Nat. Bank v. 
 
 Smith 337, 353 
 
 Land Co. v. Haupt 103, 111 
 
 ». Obenchain 82 
 
 v. Railroad Co. 303 
 
 Land Credit Co. v. Fermoy 626 
 
 Land Grant R'y Co. v. Commis- 
 sioners 384 
 Landman ». Entwistle 76 
 Lane r. Brainard 261 
 v. Boston and A. R. R. Co. 210 
 v. Harris 724 
 r. Morris 721, 724 
 v. Nickerson 707 
 ii. Railroad Co. 348 
 Lane's Appeal 655, 703, 704
 
 TABLE OF CASES. 
 
 SECTION 
 
 Lane's Case 699 
 
 Lang v. Dougherty 668 
 
 v. Lang's Executor 799 
 
 Langan v. Iowa, etc., Construc- 
 tion Co. 338, 342 
 Langdon v. Patterson 573 
 v. Railroad Co. 823 
 r. Vermont, etc., E. R. Co. 824 
 Langhorne v. Railway Co. 666 
 Langley v. Boston and Maine 
 
 R. R. Co. 170 
 
 Langton v. Waite 794 
 
 Lantry v. Wallace 738, 744 
 
 Lanier o. Gayoso Sav. Inst. 670, 810 
 
 Lanier Lumber Co. v. Rees 130 
 
 Laning v. N. Y. Cent. R. R. 365 
 
 Laredor Bridge Co. 309c 
 
 Larned v. Beal 739 
 
 Larrabee v. Baldwin 718, 733, 734 
 
 v. Franklin Bank 759 
 
 v. Sewall 375 
 
 Larson v. Dayton 783 
 
 v. James 768, 770 
 
 Larwell i\ Hanover Savings 
 
 Fund Society 298 
 
 Lassiter v. West. Un. Tel. Co. 357 
 
 Lathrop o. Commercial Bank 384 
 
 v. Union Pacific R'y Co. 395 
 
 Latimer v. Union Pacific R'y 
 
 396, 399 
 Lauman r. Lebanon Vallev R. R. 
 
 Co. 536, 608, 610 
 
 Lauraglenn Mills v. Ruff 731, 732 
 
 Law o. Rich 430, 432 
 
 Lawler v. Androscoggin R. R. Co. 365 
 
 Lawless d. Anglo-Egyptian Co. 342 
 
 Lawrence v. Gebbard 225 
 
 c. Nelson 729, 731 
 
 v. New York, etc., R. R. Co. 363 
 
 v. Winona, etc., R. R. Co. 363 
 
 Lawrence's Case 110 
 
 Layden b. Knights of Pythias 400 
 
 Lazure v. Graniteville M'f'g Co. 365 
 
 Lea o. American, etc., Canal Co. 432 
 
 v. Iron Belt Mercantile Co. 660, 702 
 
 Leach v. Forbes 790 
 
 Leasure v. Union Mut. Life 
 
 Ass'n 384 
 
 Leathers i\ Janney 642 
 
 Leavenworth County v. Miller 319 
 Leavenworth, etc., R. R. Co. v. 
 
 Douglass Co. 319 
 
 Leavitt v. Fisher 598 
 
 v. Oxford and M. Co. 219, 234 
 
 260, 261 
 
 v. Palmer 298 
 
 v. Pell 276 
 
 v. Stanton 672 
 
 Leazure v. Hillegas 276, 303 
 
 Lebanon Savings Bank r. Hol- 
 
 lenbeck 384 
 
 SECTION 
 
 Leber v. Minneapolis, etc., R'y 
 
 Co. 178 
 
 Le Blanc, Matter of 568, 750 
 
 Le Blanch v. London, etc., R'y 
 
 Co. 361 
 
 Lee County v. Rodgers 325 
 
 Lee v. Imbrie 519, 655, 701 
 
 v. Marsh 353, 359 
 
 v. Neufchatel Asphalt Co. 565 
 
 v. Pittsburg Coal Co. 193, 238 
 
 v. Smith 241 
 
 Leed's Blacking Co., In re, How- 
 ard's Case 234 
 Leeke's Case 614 
 Leekins v. The Nordyke, etc., 
 
 Co. 248 
 
 Legal Tender Cases 476 
 
 Legendie v. Brewing Ass'n 585 
 
 Leggett v. Bank of Sing Sing 604 
 Lehigh Bridge Co. v. Lehigh Coal 
 
 Co. 137, 432 
 
 Lehigh Vallev Coal Co. v. Agri- 
 cultural Works 125, 284 
 Lehigh Valley R. R. Co. v. Penn- 
 sylvania 485 
 Lehman v. Glenn 263 
 v. Knapp 739 
 o. Warner 740 
 Leighton v. Campbell 773 
 Leisy v. Hardin 414(1 
 Leitch ». Wells 327, 587, 795 
 Leland y. Hayden 800 
 Leloup o. Port of Mobile 486 
 Lennox b. Roberts 437 
 Leo v. Union Pac. R'y Co. 555 
 Leominster Canal Co. v. Shrews- 
 bury, etc., R. Co. 88 
 Leonard b. Ameri. Ins. Co. 253, 264 
 v. Burlington Mut. Loan Ass'n 263 
 v. N. Y., etc., Tel. Co. 357 
 Le Roy v. Globe Ins. Co. 750 
 Leslie b. Lorillard 688 
 Lester v. Howard Bank 299. 301, 
 338, 622. 634 
 B. Webb 193, 212 
 Levering v. Bernel 759 
 Levisee v. Shreveport City R'y 
 
 Co. 647 
 
 Lewevs Island, etc., Co. v. Bol- 
 ton 518, 547 
 Lewis ». Albemarle, etc., R. R. 
 
 Co. 212 
 
 B. Brainerd 585 
 
 ». City of Shreveport 320. 321 
 
 v. Commissioners 330, 332 
 
 /■. Jeffries 185 
 
 r. Land Co. 523 
 
 »-. Meier 342 
 
 B. Montgomerv 625. 755, 765 
 
 r. X. Y. S. C. Co. 347 
 
 v. St. Charles County 723 
 
 867
 
 TABLE OF CASES. 
 
 SECTION 
 
 Lewis v. St. Louis, etc., R. Co. 365 
 v. Tilton 148 
 
 Lexington, etc., R. R. Co. v. 
 
 Chandler 54G 
 
 v. Staples 547 
 
 Lexington Life, etc., Ins. Co. v. 
 
 Page 566, 708 
 
 Lexington R. R. Co. v. Bridges 757 
 L. Herbette v. National Bank 240 
 Libby o. Hodgson 392, 396 
 
 r. Land Co. 211, 212 
 
 r. Tobey 717 
 
 Liberty Female College Ass'n v. 
 
 Watkins 721 
 
 Library Hall Co. v. Pittsburg 
 
 Ass'n 229 
 
 License Tax Cases 289, 456, 461 
 
 Lichtenstein v. Mayor 335 
 
 Liebke v. Knapp 522c 
 
 Life and Fire Ins. Co. v. Mechanic 
 
 Fire Ins. Co. 236, 299, 338 
 
 Life Association v. Goode 435 
 
 ». Levy 384, 561 
 
 Life Ass'n of America v. Fas- 
 sett 436, 437 
 Life Ins. Co. ». Overholt 384 
 Light & Heat Co. v. Elk County 477a 
 Lightner r. Boston, etc., R. R. Co. 424 
 Limburger v. Broadway SVgs 
 
 Bank 542, 668 
 
 r. House 484 
 
 r. Westcott 359 
 
 Limer v. Traders' Co. 258 
 
 Lincoln v. Express Co. 541 
 
 Lincoln, etc., Bank v. Page 195 
 
 Lincoln M'f'g Co. v. Sheldon 518 
 
 Lincoln Street R. R. Co. v. Lin- 
 coln 425, 488, 499 
 Lindell v. Benton 435 
 Lindsav ». Hyatt 736 
 v. Winona, etc., R. R. Co. 368, 374 
 Link ». McLeod 626 
 Linkauf v. Lombard 275, 276 
 Linton o. Childs 483 
 Linville ». Hadden 392 
 Lippett v. American Wood Paper 
 
 Co. 599 
 
 Lippitt o. Paper Co. 796 
 
 Lissard v. B. & M. R. R. Co. 363 
 
 Litchfield v. Preston 303 
 
 Litchfield Bank v. Church 105 
 
 Litchfield Iron Co. v. Bennett 188 
 Little o. Boston & Me. R. R. Co. 356 
 v. Dusenbury 417 
 
 Little Miami R. R. Co. v. Nay- 
 
 lor 162a 
 
 v. Stevens 365 
 
 o. United States 565 
 
 Little Rock v. National Bank 326 
 
 Little Rock & Fort Smith R. R. 
 
 Co. v. Daniels 170 
 
 868 
 
 SECTION 
 
 Little Rock and Fort Smith K. R. 
 
 Co. v. Perry 90 
 
 Little Rock and N. R. R. Co. v. 
 
 Little Rock, etc., R. Co. 210 
 
 Little Rock, etc., R'y Co. v. Chap- 
 man 173 
 v. Glide well 360 
 v. Page 630, 676 
 v. Talbot 351, 353 
 Littleton M'f'g Co. v. Parker 518 
 Liverpool Household Stores 
 
 Assoc, In re 261, 623 
 
 Liverpool Ins. Co. v. Massachu- 
 setts 58, 383 
 Livezey v. Pacific R. R. Co. 592 
 Livingston County v. Ports- 
 mouth Bank 324 
 Lloyd v. Preston 702a 
 v. West Branch Bank 161, 239 
 Loan Ass'n v. Stonemetz 646 
 v. Topeka 319, 456, 477 
 Loan and Trust Co. v. Bank 606 
 Lock?;. Columbia, etc., Trustees 318 
 v. Turnpike Co. 417 
 Lockhardt v. Van Alstyne 572, 773 
 Lockwood v. Mechanics' Nat. 
 
 Bank 260, 601 
 
 Lockwood v. Thunder Bay 
 
 River Boom Co. 258 
 
 Lodge v. Phila., Wilm. and 
 
 Balto. R. R. Co. 163 
 
 Loewenthal v. Rubber Co. 577 
 
 Logan v. Vernon, etc., R. R. 
 
 Co. 153, 168 
 
 v. Western Un. Tel. Co. 361 
 
 Logan County Nat. Bank v. 
 
 Townsend 311 
 
 Logan County v. U. S. 477a 
 
 Lohman v. New York and Erie 
 
 R. R. Co. 569 
 
 London, Brighton, etc., R. R. 
 Co. v. London and S. W. R'y 
 Co. 305 
 
 London, etc., Ass. Co., In re 586 
 London, etc., Ass. Soc. v. Red- 
 grave 110 
 London India Rubber Co., In re 786 
 Long v. Bank of Yanceyville 736 
 v. Citizens' Bank 87 
 V. Georgia Pac. R'y Co. 303 
 Long Island R. R. Co., Matter 
 of 546, 547, 574, 576, 577a 
 v. Garvev 165, 172 
 Longley v. Little 501, 719, 736 
 Longmont v. Ditch Co. 259 
 Looker v. Maynard 502, 577 
 Lopez v. Campbell 668 
 Lord v. Yonkers Fuel Gas Co. 125 
 Lorenz v. Jacob 163 
 Loring i\ Brodie 210, 240, 797 
 v. Salisbury Mills 593 

 
 TABLE OF CASES. 
 
 SECTION 
 
 Los Angeles Holiness Band v. 
 
 Spires 148 
 
 Los Angeles v. Los Angeles City- 
 Water Co. 4766 
 
 Losee v. Bullard 770 
 
 Lothrop v. S ted man 
 
 140, 436, 658, 662, 665 
 
 Loudenslager v. Benton 817 
 
 v. Woodbury Heights Land Co. 83 
 
 Lou., Cin. and Lex. R. R. Co. v. 
 
 Commonwealth 167 
 
 Louis v. Brown Township 327, 333 
 
 Louisiana Nat. Bank v. Citizens' 
 
 Nat. Bank 245 
 
 Louisiana Savings Bank, In re 151 
 
 Louisiana v. Jumel 
 
 462 
 
 467 
 
 v. New Orleans 
 
 333, 493 
 
 498 
 
 v. Pillsbury 
 
 
 469a 
 
 v. Wood 
 
 
 321 
 
 Louisville and N. R. 
 
 R. Co. v. 
 
 
 Brownlee 
 
 
 359 
 
 v. Palmes 
 
 
 490 
 
 v. State 
 
 
 163a 
 
 Louisville and P. R. 
 
 R. Co. v. 
 
 
 City R. R. Co. 
 
 
 152 
 
 Louisville Banking Co 
 
 v. Eisen- 
 
 
 mann 
 
 
 429 
 
 Louisville City R'y 
 
 Co. v. 
 
 
 Weams 
 
 
 350 
 
 Louisville, etc., R. R. Co. v. 
 
 
 Behlma 
 
 
 474t7 
 
 v. Brownlee 
 
 353 
 
 359 
 
 v. Campbell 
 
 
 360 
 
 v. Carson 
 
 
 629 
 
 v. Kelly 
 
 
 377 
 
 ». Kentucky 
 
 419 
 
 502 
 
 v. Letson 
 
 21, 
 
 411 
 
 v. Mahan 
 
 
 360 
 
 v. McVay 
 
 
 193 
 
 v. Neal, Adm. 
 
 
 140 
 
 V. OlT 
 
 
 365 
 
 v. Shanks 
 
 
 377 
 
 v. Weaver 
 
 
 363 
 
 Louisville, etc., Turnpike Co. v. 
 
 
 Ballard 
 
 
 495 
 
 Louisville, N. A., etc. 
 
 , R'y Co. 
 
 
 v. Boney 
 
 425, 
 
 671 
 
 v. Eubank 
 
 
 174d 
 
 v. Louisville 
 
 
 204 
 
 v. Louisville Tr. Co. 
 
 284, 
 
 409 
 
 Louisville Gas Co. v. 
 
 Citizens' 
 
 
 Gas Co. 
 
 
 474 
 
 Louisville Trust Co. v. 
 
 Railway 
 
 
 Co. 
 
 
 316a 
 
 Louisville Water Co. v. 
 
 Clark 
 
 497 
 
 v. Kentucky 
 
 
 497 
 
 Love MTg Co. v. Manufacturing 
 
 
 Co. 
 
 
 759 
 
 Lovell v. St. Louis Mutual Ins. 
 
 
 Co. 
 
 
 210 
 
 Loverin v. McLaughlin 
 
 
 739 
 
 SECTION 
 
 Lovett c. Steam Saw Mill Ass'n 204 
 
 Low v. Buchanan 775 
 
 v. California Pac. R. R. Co. 127 
 
 v. Connecticut and P. R. R. Co. 86 
 
 Lowe v. E. and K. R. R. Co. 
 
 309, 467, 515, 551 
 
 v. Ring 647 
 
 Lower r. C. B. and Q. R. R. Co. 163 
 
 Lowry v. Commercial Bank 592, 598 
 
 v. Farmers' L. & T. Co. 800 
 
 v. Inman 393, 714 
 
 v. Parsons 737 
 
 Lowry Banking Co. v. Empire, 
 
 etc., Co. 216, 759 
 
 Lucas v. Pitney 125 
 
 v. White Line Transfer Co. 
 
 265, 267 
 Lum i\ Robertson 437, 750 
 
 Lumbard v. Aldrich 384 
 
 Lumber Co. v. Thomas 401 
 
 Lumsden's Case 95 
 
 Lund ». Mill Co. 796 
 
 Longrell v. Pennell 83 
 
 Lupe v. Atlantic, etc., R. R. Co. 353 
 Lure v. Isthmus Transit Co. 238 
 
 Lurk's Appeal 632 
 
 Luttrell (■. Martin 284 
 
 Lycoming Fire Ins. Co. v. 
 
 Langley 384 
 
 Lycoming Gas and Water Co. 
 
 v. Mayer 174, 178 
 
 Lyde b. Eastern Bengal R'y 
 
 Co. 268, 556 
 
 Lyman v. Bonney 756 
 
 Lynch d. Metropolitan Ele- 
 vated R. R. Co. 342, 348 
 o. Nurd in 372 
 Lyde v. The County 319, 331 
 Lydenborough Glass Co. v. 
 
 Mass. Glass Co. 211, 212 
 
 Lyndon Mill Co. ». Lyndon 
 
 Ins'n 236 
 
 Lynn ». Polk 464 
 
 Lyon o. American Screw Co. 585 
 
 Lyons v. Orange, etc., R. R. Co. 449 
 Lytle o. Lansing 327 
 
 M. 
 
 Maas o. Missouri, K. and T. 
 
 R'y Co. 204, 679 
 
 Mabey ». Adams 094, 696 
 
 Macdougall t\ Jersey Imperial 
 
 Hotel Co. 565 
 
 Machine Co. v. Gage 485 
 
 Machinists' National Bank v. 
 
 Field 593 
 
 Macfarland v. West Side Imp't 
 
 Co. 96, 519 
 
 Mack v. Coal Co. 140, 558 
 
 869
 
 TABLE OF CASES. 
 
 SECTION 
 
 Mackall v. Chesapeake, etc., 
 
 Canal Co. 153 
 
 Mackay v. Commercial Hank 342 
 r. Western Union Tel. Co. 361 
 
 Macnaughton r. Osgood 080 
 
 Macon, etc., R. R. Co. v. Gib- 
 son 503 
 v. Maves 363 
 v. Va'son 263, 517, 529 
 Mad an r. Sherard 358, 359 
 Madden v. Electric Light Co. 392 
 Maddick v. Marshall 77 
 Madison and Indianapolis R. 
 R. Co. v. Norwich Sav'gs 
 Soc. 203, 205 
 Madison Avenue Baptist 
 Church v. Oliver St. 
 Baptist Church 303, 314 
 Madison, etc., Plank Road 
 Co. v. Watertown, etc., 
 Plank Road Co. 123 
 Madrid Bank, In re, Wilkin- 
 son's Case 523 
 Madrid Bank v. Pelly 629, 031 
 Magee v. Pacific Imp. Co. 275 
 Maghee v. Camden, etc., R. 
 
 R. Co. 364 
 
 Magnin e. Dinsmore 353, 356, 359 
 Magowan v. Gronewcg 193 
 
 Magruder v. Colson 741, 749 
 
 Maguire o. Board of Revenue 483 
 Magwood u. Railroad Bank 592 
 
 Mahady v. Bushwick R. R. Co. 175 
 Mahaska County R. R. Co. v. 
 Des Moines Vallev R. 
 R. Co. 102a 
 
 Mahew's Case 719 
 
 Mahony v. East Holyford Min- 
 ing Co. 251 
 v. Spring Valley Water Co. 106 
 Mahony Mining Co. r. Ben- 
 nett 637 
 Main v. Casserly 280, 284 
 Maine v. Grand Trunk R'y Co. 
 
 479, 485 
 Maisch r. Saving Fund 758 
 
 Malecek o. Tower Grove R. R. 
 
 Co. 210, 377 
 
 Mallett o. Simpson 128, 303 
 
 Mallory v. Mallory Wheeler Co. 640 
 
 v. Oil Works 130 
 
 r. Tioga R. R. Co. 302, 402 
 
 Malone v. Boston, etc., Railroad 
 
 Co. 359 
 
 v. Haw ley 365 
 
 Maltz c. American Express Co. 412 
 Manchester and Lawrence R. R. 
 
 Co. v. Fisk 233 
 
 Manchester and London L. 
 
 Ass. Co., In re 665 
 
 Mandel ». Swan Land Co. 546 
 
 SECTION 
 
 Mangan v. Atterton 372 
 
 Manhattan Co. v. Kaldenberg 767 
 v. Lydig 199 
 
 Manhattan Hardware Co. v. 
 
 Phalen 187, 212 
 
 v. Roland 287 
 
 Manhattan Life Ins. Co. c. 
 
 Forty-Second St. R. R. Co. 591 
 Manhattan Oil Co. v. Camden 
 
 and Amboy R. R. Co. 364 
 
 Manheim, etc, Turnpike Co. v. 
 
 Arndt 531 
 
 Mann v. Birchard 353 
 
 ». Cooke 546, 549, 745 
 
 v. Currie 586, 719 
 
 v. Pentz 707, 725 
 
 v. Williams 789 
 
 Manney v. High Shoals M'f'g 
 
 Co. 138 
 
 Manning p. Quicksilver M'g Co. 799 
 Mansfield, etc., R. R. Co. «. 
 
 Brown 513, 517, 536, 539 
 
 v. Drinker 150, 154, 539 
 
 v. Stout 536, 539 
 
 v. Swan 413 
 
 Manufacturers' Sav. Bank ». 
 
 Iron Co. 642 
 
 Manufacturing Co. v. Bradley 
 
 713, 722, 737 
 v. Founce 577 
 
 r. Peabody 012 
 
 Manville v. Belden M'g Co. 310 
 v. Karst 728 
 
 0. Western Un. Tel. Co. 357 
 
 Manx Ferry Gravel Road Co. 
 
 v. Branegan 610 
 
 Mapes v. Second Nat. Bk. 240, 241 
 
 v. Scott 101, 303 
 
 Marande i\ Texas & Pac. Ky. Co. 360 
 
 March v. Eastern R. R. Co. 
 
 229, 556, 798 
 Marchand v. Loan, etc., Co. 85, 86 
 Marcusse v. Gullet Gin Co. 088 
 
 Marcy v. Clark 101, 586, 720, 749 
 
 v. Township of Oswego 321, 
 
 330, 332 
 Marietta, etc., R. R. Co. v. 
 
 Elliott 531 
 
 Marine Bank v. Clements 236 
 
 V. Ogden 130 
 
 Marine Nat. B'k v. Nat. City 
 
 Bank 245 
 
 Marine Ins. Co. v. Young 248 
 
 Mariners' Bank v. Sewall 436 
 
 Marion o. C. R. I. and P. R. 
 
 R. Co. 344 
 
 Market Co. v. Railroad Co. 163a 
 
 Market St. R'y Co. r. Central 
 
 R'y Co. 152 
 
 Marlborough M'f'g Co. v. Smith 
 
 227, 530
 
 TABLE OF CASES. 
 
 SECTION 
 
 Marquette H. and O. R. R. 
 
 Co. ». Langton 426 
 
 Man- v. Bank of West Tennes- 
 see 500, (356, 668, 705, 749, 813 
 Marseilles Extension R'y etc., 
 
 Co., In re 134, 232, 641 
 
 Marsh c. Burrows 703, 705 
 
 v. Fairbury, etc., R. R. Co. 162 
 
 v. Fulton Co. 323 
 
 v. Mathias 146 
 
 v. Oneida Central Bank 672 
 
 v. Railroad 556 
 
 Marshall v. Baltimore & Ohio 
 
 R. R. Co. 293, 412, 413 
 
 v. Harris 148, 793 
 
 v. Sherman 393 
 
 v. Western N. C. R. R. Co. 507 
 
 Marshall Foundry Co. v. Kil- 
 
 lian 655, 702 
 
 Marston v. Deither 661 
 
 Martin v. Continental Pass. 
 
 R'y Co. 229 
 
 v. Fewell 739 
 
 v. Mobile, etc., R. R. Co. 384 
 
 v. Nashville. Building Ass. 582, 583 
 v. Niagara Paper Co. 185, 197, 213 
 v. Pensacola, etc., R. R. Co. 97, 521 
 v. Railroad 412 
 
 Martin v. South Salem Land Co. 
 
 210, 522, 641, 660, 703, 705 
 B. Webb 215, 216, 241 
 
 Marti ndale v. Kansas City, St. 
 
 Jo. and C. B. R. R. Co. 162 
 
 o. Wilson Cass Co. 646 
 
 Marvin v. Anderson 651 
 
 v. Universal Life Ins. Co. 198 
 
 Marvine v. Hyiners 225 
 
 Maryland v. Baltimore and 
 
 Ohio R. R. Co. 507 
 
 Maryland Tube Works v. West 
 
 End Imp. Co. 154, 401 
 
 Mary Lee Coal, etc., Co. o. Knox 759 
 Marysville Investment Co. v. 
 
 Munson 430 
 
 Marysville, etc., Co. v. Johnson 
 
 92, 109, 110 
 Maslin v. Bait, and Ohio R. R. Co. 353 
 Mason v. Alexander 718 
 
 v. Brooklyn City, etc., R. R. 
 
 Co. 164 
 
 v. Frick 679 
 
 v. Haile 493 
 
 v. Henry 615 
 
 v. Missouri Pac. R'y Co. 371 
 
 «. Pewabic M'g Co. 608 
 
 Masonic Templar Assoc, v. 
 
 Channell 521 
 
 Masonic, etc., Life Assoc, v. 
 
 Sharpe 612, 623 
 
 Massachusetts v. Western Un. 
 
 Tel. Co. 479 
 
 SECTION 
 
 Master's Case 586, 749 
 
 v. Interstate Ass'n 583 
 
 Masters v. Electric L. Ins. Co 610 
 
 v. Rossie Lead Mining C 783 
 
 Matter of La Societe, etc., 158 
 
 Mather v. Mower Co. 646 
 
 Mathez v. Neidig 725, 732 
 
 Mathias v. White Sulphur Springs 238 
 
 Mathis v. Morgan 429 
 
 v. Bank 687 
 
 v. Southern Ry. Co. 400 
 
 Matteseu v. Dent 741, 747, 748 
 
 Matthews v. Albert 731, 783 
 
 v. Associated Press 583 
 
 v. Mass. Nat. Bank 240 
 
 v. Trustees 383 
 
 Maupin v. Virginia Lead M'g 
 
 Co. 202 
 
 Maxmilian v. Mayor 335 
 
 Maxwell's Case 742 
 
 May v. Memphis Branch R. R. 
 
 Co. 519 
 
 v. State Bank 435 
 
 Maynard v. Fireman's Fund 
 
 Ins. Co. 219, 342 
 
 Mayor, etc., of Atlanta v. Cen- 
 tral R'y Co. 179 
 Mayor, etc., of Baltimore v. 
 
 B. and O. R. R. Co. 554 
 Mayor, etc., of Colchester v. 
 
 Seaber 667 
 
 Mayor, etc., of Worcester v. 
 
 Norwich, etc., R. R. Co. 166, 502 
 c. Railroad Com'rs 162 
 
 Mayor of Baltimore v. Pitts- 
 burgh, etc., R. R. Co. 503 
 Mayor of Griffin i\ Inman 642 
 Mayor of Lynn r. Turner 169 
 McAlester M'f'g Co. v. Florence 
 
 C. & I. Co. 130 
 McAllen «. Woodcock 627 
 McAllister v. Plant 125 
 McAlpin v. Powell 372 
 McAndrew v. Electric Tel. Co. 357 
 McArthur v. Times Printing Co. 87 
 McAuley v. Columbus, Chi- 
 cago, etc., R'y Co. 155, 420 
 
 McAvity v. Pulp Co. 647 
 
 McCabe v. Goodfellow 57 
 
 McCalet v. Goodwin 187 
 
 McCall v. Byram M'f'g Co. 381 
 
 McCartee p. Orphan Asylum 127 
 
 McCarthy v. Lavashe 537, 538, 738 
 
 ». Mt. Tecarte, etc., Co. 647 
 McCellan v. Detroit File Works 206 
 McClanahan o. Ivanhoe Land Co. 523 
 McClellan v. Scott 342 
 McClelland v. Norfolk South- 
 ern R. R. Co. 679 
 
 15. Whitley 515 
 
 McCleod v. Ginther 210 
 
 871
 
 TABLE OF CASES. 
 
 SECTION 
 
 McCluer v. Manchester, etc., R. 
 
 K. Co. 170 
 
 McClure v. Central Trust Co. 792 
 
 v. Law 029 
 
 v. Livermore 753 
 
 o. Phila., etc., K. R. Co. 201 
 
 v. Township of Oxford 320 
 
 McCormack v. Salem R'y Co. 824 
 
 McCormick v. Kansas City, etc., 
 
 R. R. Co. 173 
 
 v. National Bank 298 
 
 v. Stockton R. R. Co. 753 
 
 McCoy v. Briant 319 
 
 v. Farmer 437 
 
 McCracken v. Hayward 450, 493 
 
 v. Mclntyre 522c 
 
 McCray v. Junction R. R. Co. 
 
 531, 536 
 
 McC ready v. Railroad Co. 368 
 
 v. Rumsey 603 
 
 McCulloch i\ Maryland 481, 483 
 
 v. Norwood 435 
 
 McCullough v. Moss 181, 205, 718 
 
 v. Talladega Ins. Co. 146, 263 
 
 McCully v. Pittsburg, etc., R. 
 
 R. Co. 517 
 
 McCummons v. Chicago and 
 
 N. W. R'y Co. 368 
 
 McCurdy v. Myers 608 
 
 McCurdy's Appeal 225 
 
 McOurrie v. So. Pac. R. R. Co. 350 
 McDaniel v. Chicago and W. 
 
 R'y Co. 364 
 
 McDaniels v. Flower Brook M. 
 
 Co. 574 
 
 McDermott v. Evening Journal 342 
 
 McDonald v. Chisholm 193, 204. 
 
 McDonald v, Mass. Gen. Hospital 335 
 
 v. Railroad 170 
 
 v. N. & W. R. Co. 365, 366 
 
 v. Williams 708 
 
 v. Thompson 736 
 
 McDonnell v. Alabama Gold 
 
 L. I. Co. 738 
 
 McDonough v. Bank of Houston 86 
 
 MacDougal v. Central R. R. Co. 376 
 
 ». Gardner 687 
 
 v. Jersey Imperial Hotel Co. 
 
 96, 518 
 McDowall v. Shehan 722 
 
 Mcllhenny's Appeal 84 
 
 McElroy v. Minims P. H. Co. 237 
 McElroy v. Nashua and Lowell 
 
 R. R. Co. 350 
 
 McFadden v. County of Los 
 
 Angeles 582 
 
 McFarlan v. Triton Ins. Co. 738 
 
 McGinty o. Athol Reservoir Co. 429 
 McGomkey v. Toledo, etc., R. 
 
 R. Co. 639 
 
 McGowan v. McDonald 501 
 
 872 
 
 SECTION 
 
 McGowan v. Wilmington, etc., 
 
 R. R. Co. 475 
 
 McGregor, qui tarn v. Erie R'y 
 
 Co. 407 
 
 McGregor v. Dover and Deal 
 
 R'y Co. 305, 387 
 
 v. Home Ins. Co. 786 
 
 v. Kilgore 361 
 
 McHenry v. Jewett 578, 794 
 
 McHose v. Wheeler 537, 738, 740 
 Mclntire v. Preston 137, 204 
 
 McKeag v. Collins 236 
 
 McKee v. Grand Rapids, etc., 
 
 R'y Co. 636 
 
 McKeen v. Northampton County 479 
 McKelvey v. Brockett 703 
 
 McKiernan v. Lenzen 202 
 
 McKim v. Glenn 512, 741 
 
 McKinley v. Wheeler 120 
 
 McKinney v. Jewett 360 
 
 McLaren v. Franciscus 720, 749 
 
 McLaughlin v. Detroit, etc., R. 
 
 R. Co. 510, 572 
 
 v. O'Neil 726 
 
 McLean v. Eastman 708 
 
 v. Plate Glass Co. 563 
 
 McLellon v. Detroit File Works 
 
 415, 665 
 McLendon v. Commissioners 326 
 McLouth D. Hunt 800 
 
 McMahon v. Macy 737, 741 
 
 v. Morrison 421 
 
 McMannus o. Phila., etc., R. 
 
 R. Co. 578 
 
 McMillen v. Boyles 325 
 
 McMillen v. Judge of Lee Co'y 325 
 v. Michigan So. R. R. Co. 170, 359 
 McMurtrv o. Temple Co. 634 
 
 McNeely «. Woodruff 575, 577, 578 
 McNeil v. Chamber of Com- 
 
 niGrcc 261 
 
 v. Tenth Nat. Bank 578, 795 
 
 McNichol v. United States, etc., 
 
 Agency 395, 472 
 
 McNulta r. Corn Belt Bank 228, 583 
 McQueen v. Middletown M'f'g 
 
 Co. 396 
 
 McQuilken v. Cent. Pac. R. R. 
 
 Co. 376 
 
 McRae v. Wilmington, etc., R. 
 
 R. Co. 348 
 
 McReynolds v. Burlington and 
 
 O. R'y Co. 178 
 
 Meacham v. Fitchburg R. R. Co. 179 
 
 Mead v. Keeler 537 
 
 v. N. Y. Housatonic, etc., 
 
 R. R. Co. 409, 424 
 
 Meads v. Merchants' Bank 244 
 
 r. Walker 515 
 
 Means v. Imp't Co. 130 
 
 Meaus's Appeal 713 

 
 TABLE OF CASES. 
 
 SECTION 
 
 Mearshon v. Pottsville Lumber 
 
 Co. 400 
 
 Mechanics' Banking Ass. v. 
 
 White Lead Co. 205, 244 
 
 Mechanics' Bank v. Bank of 
 
 Columbia 254 
 
 v. Heard 433 
 
 v. N. Y. and N. H. R. R. Co. 
 
 572, 599 
 v. Seton 210 
 
 Mechanics' Building Ass'n v. 
 
 Stevens 529 
 
 Mechanics', etc., Bank v. De- 
 bolt 453, 483 
 v. Smith 196, 197 
 Mechanics' Foundry, etc., Co. 
 
 v. Hall 513 
 
 Mechanics' Nat. Bank v. Bur- 
 net M'f'g Co. 188, 189, 581 
 v. Baker, Rec'r 484 
 Medbury v. New York and Erie 
 
 R. R. Co. 252 
 
 Medomak Bank o. Curtis 214 
 
 Med way Cotton M'f'g Co. v. 
 
 Adams 159 
 
 Meeker v. Winthrop Iron Co. 608 
 Meier v. Pennsylvania R. R. Co. 
 
 349, 350 
 Meints v. East St. Louis, etc., 
 
 Mill Co. 660 
 
 Melhado v. Hamilton 572 
 
 v. Porto Allegre R. Co. 87 
 
 Melledge v. Boston Iron Co. 159 
 
 Melvin v. Lamar Ins. Co. 779 
 
 v. Lisenby 253 
 
 Memphis and L. R. R. Co. 
 
 v. Commissioners 816 
 
 v. Dow 815, 816a 
 
 v. Railroad Commissioners 
 
 131, 132, 489, 490 
 Memphis Branch R. R. Co. v. 
 
 Sullivan 518 
 
 Memphis City v. Dean 139, 140 
 
 Memphis City Bank v. Tennes- 
 see 490 
 Memphis, etc., R. R. Co. v. Ala- 
 bama 412 
 v. Grayson 305 
 v. Parson's Town Co. 642 
 v. United States 477 
 v. Woods 558, 559, 644 
 Memphis Gas Co. v. Shelby 
 
 County 488, 489 
 
 v. Williamson 140 
 
 Memphis Packet Co. v. Nagel 377 
 
 Memphis Water Co. v. Magens 415 
 
 Menier v. Hooper's Telegraph 
 
 Co. 558, 788 
 
 Mercantile Bank v. New York 484 
 
 v. Tennessee 490 
 
 SECTION 
 
 Mercantile Co. v. Co-operative 
 
 Ins. Co. 759 
 
 Mercantile Ins. Co. v. Jaynes 144 
 Mercantile Nat. Bank b. Parsons 187 
 Mercantile Trust Co. v. Mellon 477a 
 Mercer Co. v. Hackett 326, 330, 331 
 Mercer Co. Ins. Co. v. Strana- 
 
 han 233 
 
 Merchants' and Planters' Line 
 
 v. Waganer 146, 560, 610, 689 
 Merchants' Bank r. Bergen 
 
 County 329 
 
 v. Gas Light Co. 210 
 
 v. Shouse 600 
 
 v. State Bank 193, 204, 243 
 
 335, 337 
 v. Stevenson 775 
 
 Merchants', etc., Bank v. Stone 
 
 148, 739 
 v. Trustees 663 
 
 Merchants' Despatch Trans. Co. 
 
 v. Bolles 364 
 
 v. Joesting 359 
 
 v. Leysor 210, 359 
 
 v. Moore 363 
 
 v. Theilbar 357, 359 
 
 Merchants' Nat. Bank v. Bailey 
 
 M'f'g Co. 725 
 
 v. Hansom 302 
 
 v. Lovitt 210 
 
 v. Richards 796 
 
 Merchants' Union Barb Wire 
 
 Co. v. Rice 216 
 
 Mercier v. Canonge 210 
 
 Meredith b. N. J. Zinc Co. 502 
 
 Meredith b. Zinc & Iron Co. 569 
 
 Merrick b. Bank of the Me- 
 tropolis 225, 233 
 v. Peru Coal Co. 647 
 v. Reynolds Engine, etc., Co. 146 
 o. Santvoord 380, 381, 384 
 Merrill v. Consumers' Coal Co. 212 
 v. Grinnell 355 
 v. Monticello 320 
 v. Reaver 529, 541 
 v. Shaw 737 
 v. Suffolk Bank 435 
 Merrimack M'g Co. v. Bagley 587 
 Merritt v. Earle 350 
 v. Lambert 195 
 v. Porchester 163 
 Merriweather v. Garrett 334 
 Mersey Docks v. Gibbs 169 
 Messenger v. Penna. R. R. Co. 309 
 Messersmith v. Sharon Savings 
 
 Bank 587 
 
 Methodist Episcopal Church 
 
 v. Kendall 92, 93 
 
 Methodist E. Church r. Pickett 
 
 145, 148 
 
 873
 
 TABLE OF CASES. 
 
 Metropolitan City R'y Co. v. 
 
 Chicago, etc., R'y Co. 470 
 
 Metropolitan Coal Consumers 1 
 
 Assoc, In re 104 
 
 Metropolitan El. R'y Co v. Knee- 
 land 616 
 v. Manhattan Elevated R. R. 
 Co. 559, 612, 642, 644 
 Metropolitan Nat. Bank v. 
 
 Claggett 416 
 
 Metropolitan Omnibus Co. v. 
 
 Hawkins 137 
 
 Metropolitan R. R. Co. v. High- 
 land St. R. R. Co. 163a 
 Metropolitan Savings Bank v. 
 
 Baltimore 597 
 
 Metropolitan Telephone Co. v. 
 
 Domestic Tel. Co. 233, 644 
 
 Metropolitan Trust Co. v. Tona- 
 
 wanda R. R. Co. 822 
 
 Metz v. Buffalo, etc., R. R. Co. 170 
 Mexican, etc., Co., In re 586 
 
 Mexican Central R'y Co. v. 
 
 Pinkuey 397 
 
 Meyer v. Bristol Hotel Co. 138 
 
 Meyer v. City of Muscatine 328, 330 
 
 v. Hornbv 817 
 
 v. Johnson 131, 421, 676, 822 
 
 Meyers u. C. R. I. and P. R. Co. 475 
 
 Miami Exporting Co. v. Clark 298 
 
 v. Gano 435 
 
 Michaels v. N. Y. Central R. R. 
 
 Co. 350 
 
 Michener o. Payson 523 
 
 Michigan Central R. R. Co. v. 
 
 Boyd 864 
 
 v. Burrows 361 
 
 v. Cairo w 210, 355 
 
 v. Chicago, etc., R. R. Co. 676 
 
 v. Coleman 210 
 
 v. Hale 351 
 
 Michigan Ins. Bank v. Eldred 416 
 Michigan Southern and N. J. 
 
 R. R. Co. v. Caster 361 
 
 v. Day 193 
 
 Michigan Southern, etc., R. R. 
 
 Co. v. Heaton 353 
 
 Mickey v. Stratton 204 
 
 Mickles v. Rochester City Bank 432 
 Micon »'. Tallassee Bridge Co. 453 
 Middle Bridge Co. v. Marks 380, 385 
 Middlebrook b. Merchants' Bank 578 
 Middlesex Husbandmen Co. v. 
 
 Davis 263 
 
 Middlesex R. R. Co. v. Boston, 
 
 etc., R. R. Co. 305 
 
 Middlesex Turnpike Co. v. 
 
 Locke 530, 531 
 
 v. Swan 530 
 
 Middleton v. McCartie 806 
 
 MiddMon Bank v. Magill 720 
 
 874 
 
 SECTION 
 
 Middletown Ferry Co. v. Mid- 
 
 dletown 479 
 
 Midland, etc., R'y Co. v. Gor- 
 don 110 
 Midland R'y Co. v. Great West- 
 ern R'y Co. 308 
 v. Taylor 593 
 Mihill's M'f'g Co. v. Camp 210 
 Milan Milling Co. v. Gorten 400 
 Mill mi n v. City of Cedar Rapids 175a 
 v. Codd 784 
 Milford, etc., Turnpike Co. v. 
 
 Brush 159 
 
 Military I. Ass'n v. S. P. & I. 
 
 R'y Co. 130 
 
 Mill Co. v. Felt 108 
 
 Miller v. American, etc., Ins. 
 
 Co. 310 
 
 v. Burlington, etc., R. R. Co. 336 
 v. English 574, 667 
 
 v. Ewer 380, 382 
 
 v. Great Republic, etc., Ins. Co. 749 
 v. Guerrard 799, 800 
 
 v. Hanover Junction, etc., 
 
 R. R. Co. 521, 779, 780 
 
 v. Howard 752, 758 
 
 v. Iowa Land Co. 629 
 
 v. Lancaster 424, 666 
 
 v. Murray 554 
 
 v. Porter 128 
 
 v. Prairie du Chien R'y Co. 162a 
 
 v. Ratterman 565 
 
 v. Rutland, etc., R. R. Co. 185, 213, 
 
 675, 814, 816a 
 
 v. State 498 
 
 v. United States 479 
 
 v. White 737, 764, 770 
 
 v. Wild Cat Gravel Road Co. 513 
 
 v. Williams 401 
 
 Miller's Case 614 
 
 Milliken v. Steiner 189 
 
 v. Whitehouse 737 
 
 Mills v. Boyle Mining Co. 204 
 
 Mills v. Britton 801 
 
 v. Central R. R. Co. 229, 556 
 
 v. Michigan Central R. R. Co. 360 
 
 v. Northern R'y Co. 565, 658 
 
 v. Scott 726 
 
 v. St. Clair County 453 
 
 v. Stewart 548 
 
 v. Western Bank 298 
 
 Milnor v. N. Y. and N. H. 
 
 R. R. Co. 364, 385 
 
 Milroy v. Spur Mountain Iron 
 
 M'g Co. 715 
 
 Miltenberger v. Logansport R'y 
 
 823, 824 
 Milwaukee v. N. Y. and N. H. 
 
 R. R. Co. 383 
 
 Milhvaukee, etc., R. R. Co. v. 
 
 Armes 377
 
 TABLE OF CASES. 
 
 SECTION 
 
 Mims v. Macon, etc., R. R. Co. 163 
 Miner v. Ice Co. 611 
 
 Mineral Springs Co. v. De Bautte 213 
 Miners' Bank v. Iowa 410 
 
 v. United States 503 
 
 Miners' Ditch Co. ». Zellerbach 264 
 Mining v. N. Y. C. & St. L. R. 
 
 R. Co. 175a 
 
 Mining Co. v. Anglo-California 
 
 Bank 193 
 
 v. Iron Co. 127 
 
 Minneapolis B. B. Co. v. City 
 
 Bank 717 
 
 Minneapolis Harvester, etc., Co. 
 
 v. Libby 544 
 
 Minneapolis R'y Co. v. Beck- 
 
 with 378, 480 
 
 Minneapolis Threshing M. Co. 
 
 v. Davis 105, 109 
 
 Minneapolis & St. L. R'y Co. 
 
 v. Emmons 475 
 
 v. Gardiner 424 
 
 Minnesota Co. v. St. Paul Co. 
 
 676, 819 
 Minnesota Gas Light Co. v. 
 
 Denslow 538 
 
 Minor v. Mechanic's Bank 193, 
 
 231, 781 
 Minot v. Curtis 158 
 
 v. Paine 561, 800 
 
 Minton v. Stahlman 756 
 
 Missano y. Mayor 335 
 
 Mississippi and M. R. R. Co. v. 
 
 Cromwell 790 
 
 Mississippi and Tenn. R. R. 
 
 Co. v. Devancy 164 
 
 Mississippi, etc., Boom Co. v. 
 
 Prince 449 
 
 Mississippi Bridge Co. v. Ring 178 
 Mississippi Central R. R. Co. 
 
 c Caruth 173 
 
 Mississippi, etc., R. R. Co. v. 
 
 Cross 97, 137, 521, 528, 529, 532 
 v. Gaster 225, 532 
 
 Mississippi R'y Co. v. McDonald 
 
 179, 495 
 Mississippi Valley Co. v. Chi- 
 cago, etc., R. R. Co. 427, 676 
 Missouri C. & M. Co. v. Ladd 400 
 Missouri K. & Tex. v. Haber 474d 
 Missouri Lead Mining Co. v. 
 
 Reinhard 381, 382 
 
 Missouri Pac. R. R. Co. v. 
 
 Lyde 365 
 
 Missouri Pac. R'y Co. v. Hays 178 
 c. Humes 475 
 
 u. Meek 406 
 
 v. Nebraska 163, 163a 
 
 v. Stults 193 
 
 v. Tygard 518 
 
 v. Watts 170 
 
 SECTION 
 
 Missouri River, etc., R. R. Co. 
 
 v. Shirley 145 
 
 Missouri River R. R. Co. v. 
 
 Richards 647 
 
 Mitchell v. Beekman 511, 736 
 
 Mitchell v. B. & M. R. R. Co. 372 
 v. Deeds 234, 238 
 
 v. Holman 647 
 
 v. Hotchkiss 764, 771 
 
 v. Illinois and St. L. R. R. Co. 166 
 v. Rome R. R. Co. 204, 516 
 
 v. Vermont Miniug Co. 547 
 
 Mittler v. Fidelity Mut. L. I. Co. 400a 
 
 Mobile and Girard R. R. Co. 
 
 v. Copeland 363 
 
 Mobile and Montgomery R. R. 
 
 Co. v. Steiner 
 
 
 
 352, 476a 
 
 Mobile and Ohio 
 
 R. 
 
 R. 
 
 Co. v. 
 
 Davis 
 
 
 
 
 822 
 
 v. Hopkins 
 
 
 
 
 353 
 
 v. Moseley 
 
 
 
 
 488 
 
 v. Nicholas 
 
 
 
 
 715, 788 
 
 v. People 
 
 
 
 
 162 
 
 o. Postal Tel 
 
 C. 
 
 Co. 
 
 
 163a 
 
 v. State 
 
 
 
 
 458, 475 
 
 v. Thomas 
 
 
 
 
 365 
 
 v. Weiner 
 
 
 
 
 353 
 
 v. Yandall 
 
 
 
 
 515 
 
 Mobile and S. 
 
 H. 
 
 R. 
 
 R. 
 
 Co. v. 
 
 Kennedy 
 
 
 
 
 488 
 
 Mobile Mutual Ins. Co. v. Cul- 
 
 lom 600, 601. 604 
 
 Mobile R. R. Co. v. State 664 
 
 Mobile, etc., R. R. Co. v. McLel- 
 
 land 344 
 
 v. Prewitt 360 
 
 v. Tennessee 565 
 
 Mobley v. Breed 166 
 
 Mohr b. C. N. W. R. R. Co. 360 
 
 v. Elevator Co. 715 
 
 Mokelumne Hill Mining Co. v. 
 
 Woodbury 451, 718 
 
 Monadnock R. R. ». Felt 518 
 
 Monell r. Northern Central R. R. 
 
 Co. 364 
 
 Monroe v. Ft. Wayne, etc., R. R. 
 
 Co. 263, 537 
 
 Monroe Merc. Ass'n v. Arnold 258 
 Monroe Savings Bank v. Roch- 
 ester 477a 
 Mousseaux v. Urquhart 136, 578 
 Moutclair v. Ramsdell 326 
 Montgomery j>. Merrill 153 
 v. Phillips 759 
 Montgomery County Agricul- 
 tural Soc. v. Francis 682 
 Montgomery Light Co. v. Lahev 
 
 688, 689 
 Montgomery, etc., R. R. Co. r. 
 
 Boring 416 
 
 v. Branch 656. 657, 674 
 
 875
 
 TABLE OF CASES. 
 
 SECTION 
 
 Montgomery, etc., R. R. Co. v. 
 
 Moore 363 
 
 Montgomery Southern R'y Co. 
 
 v. Matthews 523 
 
 Montgomery AVeb Co. v. Dienelt 
 
 657, 667 
 Montpelier, etc., R. R. Co. v. 
 
 Langdon 537 
 
 Montrotier Asphalt. Co., lie 626 
 
 Monument, Nat. Bank v. Globe 
 
 Works 205 
 
 Moore o. Bank of Commerce 
 
 583, 601 
 v. Fitchburg R. R. Co. 347 
 
 u. Garwood 104 
 
 v. Hanover June. R. R. Co. 530 
 v. N. Y., N. H. & H. R. R. Co. 365 
 v. Opera House Co. 796 
 
 15. Schoppect 432 
 
 v. Silver Valley Mining Co. 141 
 v. Wayne Circuit Judge 395 
 
 Moore, etc., Hardware Co. v. 
 
 Towers Hardware Co. 90 
 
 Moores v. Citizens 1 Nat. Bank 598 
 Moorhead v. Little Miami R. R. 
 
 Co. 163, 164 
 
 Moian v. Com miss' is of Miami 
 
 County 330 
 
 v. New Orleans 485 
 
 Moreland v. State Bank 257 
 
 Morford v. Farmers 1 Bank 244 
 
 Morgan, Ex parte 780 
 
 Morgan v. Bank of North Amer- 
 ica 600 
 Morgan o. Bank of the State of 
 New York 672 
 v. Donovan 282 
 v. Hech strom 767, 770 
 v. Howland 702 
 15. King 140, 612, 630 
 15. Lewis 135 
 15. Louisiana 489, 490 
 15. New York & A. R. R. Co. 700 
 15. Nat. Bl'd'g Ass'n 435 
 15. Railroad Co. 140 
 u. Skidd 696, 755 
 15. Strutliers 105 
 Morgan's Case 747 
 Morgan County v. Thomas 236, 415 
 Morgan's Co. d. Texas Cent. 
 
 R'y Co. 824a 
 
 Morgan's Steamship Co. v. Lou- 
 isiana Board of Health 474a 
 Morisette v. Howard 211 
 Morrill v. Boston & Maine R. R. 
 
 Co. 556 
 
 i). Little Falls M'fg Co. 138 
 
 15. Manufacturing Co. 574, 577, 578 
 15. Smith Co. 420 
 
 Morris 15. Cheney 123, 543 
 
 15. Ely ton Land Co. 130, 608 
 
 87G 
 
 309 
 372 
 
 173 
 
 45 
 
 SECTION 
 
 Morris v. Ga. L. S. <fc B. Co. 210 
 
 15. Hall 389 
 
 Morris and Essex R. R. Co. 15. 
 
 Central R. R. Co. 163a, 164, 166 
 15. Land Co. 547, 556 
 
 v. Newark 175a 
 
 15. State 368 
 
 15. Sussex 204, 295 
 
 Morris Canal, etc., Co. i>. Fisher 679 
 v. Nathans 518 
 
 15. Van Vorst 199, 240 
 
 Morris Run Coal Co. 15. Barclay 
 Coal Co. 
 
 Morrisey v. Easton R. R. Co. 
 
 Morrison 15. Buckport, etc., R. R. 
 Co. 
 15. Savage 
 15. Wilder Gas Co. 204, 258 
 
 Morrison Jewell Co. 15. Lingami 137 
 
 Morrow v. Edwards 611 
 
 15. Iron Co. 522a 
 
 15. Superior Court 722, 725 
 
 Morse 15. Beale 204, 238 
 
 15. Minneapolis, etc., R'y Co. 366 
 
 Morse Arms M'fg Co. v. U. S. 137 
 
 Morton 15. New Orleans, etc., 
 R'y Co. 
 15. Hamilton College 
 
 Morton County Bank v. Day 
 
 Morton Gravel Road Co. 
 Wysong 
 
 Moseby 15. Burrow 
 
 Moses 0. Ocoee Bank 719, 757 
 
 15. Pittsburgh, F. W. and C. R. 
 
 R. Co. 175a 
 
 15. Scott 788, 790 
 
 15. Tompkins 547 
 
 Moshannon Land Co. ». Sloan 201 
 
 Mosher v. Southern Exp. Co. 363 
 
 Moss v. Averill 715 
 
 Moss v. Oakley 718 
 
 v. Rossie Lead Mining Co. 204, 826 
 
 Moss's Appeal 799 
 
 Mott 15. Consumers' Ice Co. 339, 344 
 15. Danville Seminary 437 
 
 r. Hicks 159 
 
 i). Pennsylvania R. R. Co. 488 
 
 Moulin v. Insurance Co. 396 
 
 Moulton v. Connell Co. 765 
 
 Mount Holly Paper Co.'s Ap- 
 peal 
 
 Mount Holly Turnpike Co. v 
 Ferree 
 
 Mount Pleasant 15 
 
 Mount Sterling 
 Little 
 
 Mt. Washington 
 Marsh 
 
 Mower i). Staples 
 
 Mowrey 15. Indianapolis, etc., 
 
 R. R. Co. 536, 557 
 
 680 
 
 86 
 
 137 
 
 582 
 432 
 
 Beckwith 
 Coal Co. 
 
 Hotel Co. 15. 
 
 603 
 
 596 
 316 
 
 513 
 
 211 
 
 557
 
 TABLE OF CASES. 
 
 SECTION 
 
 Moyerr. N. Y. C. and H. R. 
 
 R. R. Co. 173 
 
 Moyle v. Lander's Admrs. 560 
 
 Mozly v. Alston 142, 554 
 
 Mudgett v. Howell 740 
 
 Mueller v. Fire Clay Co. 759 
 
 Mugler v. Kansas 476 
 
 Mullan v. Phila., etc., S. S. Co. 365 
 Mullanphy Sav. Bank v. Schott 632 
 Mullarkey v. P. W. and B. R. 
 
 R. Co. 363 
 
 Muller v. Dowes 408, 412, 413, 420 
 
 Mulligan v. 111. Cent. R. R. Co. 363 
 
 v. New York, etc., R. R. Co. 347 
 
 Mullins v. South and North 
 
 R. R. Co. 449a 
 
 Mulloy v. Nashville and De- 
 catur R. R. Co. 449 
 Mumford v. American L. Ins., 
 
 etc., Co. 381 
 
 Mum ma v. Harrisburg, etc., R. 
 
 R. Co. 175a 
 
 v. Potomac Co. 435, 664 
 
 Muncy Co. v. Green 91 
 
 Munger v. Tonawauda R. R. Co. 369 
 
 Munhall v. Pennsylvania R. 
 
 R. Co. 308, 309 
 
 Munn v. Illinois 450, 475, 476a, 497 
 Munson v. Magee 628 
 
 v. Syracuse, etc., R. R. Co. 
 
 76, 87, 630 
 M unt's Case 747 
 
 Murphy, Application of, Exparte 
 
 796 
 Murphy v. Boston and A. R. 
 
 365, 371 
 v. City of Louisville 312 
 
 v. C. R. I. and P. R. R. Co. 371 
 v. Deane 373, 376 
 
 v. Union R'y Co. 348 
 
 Murray v. Lardner 679 
 
 u. Nelson Lumber Co. 214 
 
 v. Vanderbilt 628 
 
 Murray's Lessee v. Hoboken 
 
 Land Co. 471 
 
 Muscatine Turn Verein v. Funck 
 
 435, 436 
 Muschamp v, Lancaster R'y Co. 363 
 Musgrave v. Morrison 518 
 
 Mussey v. Eagle Bank 244 
 
 Mussina v. Goldthwaite 688 
 
 Mutual Benefit Life Ins. Co. 
 
 v. Davis 276, 384 
 
 v. Wiune 401 
 
 Mutual Fire Ins. Co. v. Stokes 449 
 
 v. Farquar 573 
 
 Mutual Loan, etc., Ass'n v. 
 
 Price 249 
 
 Mutual Savings Bank v. Meri- 
 den Agency Co. 267 
 
 Myer v. Car Company 
 
 v. Liverpool, etc., Ins. Co. 
 
 Myers v. Bank 
 v. Campbell 
 
 Mynard v. Syracuse, etc., R, 
 Co. 
 
 SECTION 
 818 
 
 392 
 672 
 302 
 R. 
 353 
 
 Myrick u. Mich. Cent. R. R. Co. 363 
 
 y. Petway 
 R. R. Co. v. 
 362, 
 Biowu 
 
 130, 131, 161, 
 
 101, 586, 749, 
 Exchange 
 
 N. 
 
 Nabring v. Bank of Mobile 789, 
 Nagel v. Missouri Pac. R'y Co. 
 Naglee v. Pacific Wharf Co. 588, 
 Nash p. Minn. Title, etc., Co. 
 Nashua Lock Co. v. Worcester, 
 
 etc., R. R. Co. 
 Nashua R. R. Co. v. Lowell 
 
 R. R. Co. 
 Nashville and C. R. R. Co. v. 
 Cowardin 
 
 v. Jones 
 
 v. Starnes 
 Nashville Bank 
 Nashville, etc., 
 
 Carroll 
 Nassau Bank r. 
 
 v. Jones 
 Nathan v. Lee 
 
 v. Whitlock 
 National Albany 
 Bank u. Wells 
 National Bank v. Anderson 
 
 v. Baker, Rec'r 
 
 v. Berry 
 
 v. Case 
 
 v. Colby 
 
 «. Commonwealth 
 
 v. Deposit Co. 
 
 v. Dillingham 
 
 v. Graham 
 
 v. Insurance Co. 
 
 v. Kimball 
 
 v. Kirby 
 
 v. Knitting Works 
 
 v. Lake Shore, etc., R. R. Co. 
 
 v. London 
 
 v. Mallan 
 
 v. Matthews 161, 302, 
 
 v. Paige's Executor 
 
 v. Phoenix Warehousing Co. 
 
 v. Texas Investment Co. 
 
 v. United States 
 
 0. Watsontown Bank 
 
 v. Whitney 
 
 v. Young 
 National Bank of Commerce v 
 Nat. Mechanics' B'k'g Asso- 
 ciation 
 National Building Soc'y, In re 
 
 587, 741, 
 435, 
 482, 
 
 161, 337, 
 301, 432, 
 
 240, 
 276, 
 205, 
 
 794 
 371 
 
 796 
 237 
 
 364 
 
 408 
 
 163 
 518 
 344 
 432 
 
 365 
 764 
 276 
 
 388 
 780 
 
 484 
 187 
 484 
 236 
 747 
 669 
 484 
 432 
 765 
 346 
 673 
 492 
 680 
 236 
 595 
 751 
 210 
 303 
 774 
 149 
 657 
 478 
 607 
 302 
 285 
 
 245 
 645 
 
 I i
 
 TABLE OF CASES. 
 
 SECTION 
 
 National Carriage MTg Co. v. 
 
 Story, etc., Co. 749 
 
 National Commercial Bank v. 
 
 McDonnell 501, 738, 741 
 
 National Condensed Milk Co. 
 
 v. Brandenburg 396 
 
 National Docks K. R. Co. v. Cen- 
 tral K. K. Co. 155, 103 
 National Exchange Co. v. Drew 
 
 232, 523 
 National Home B'l'd'g Ass'n v. 
 
 Bank 2(54, 281, 284 
 
 National Loan Ass'n v. Lichten- 
 
 walner 715 
 
 National Park Bank v. Warehous- 
 ing Co. 244 
 National Patent Fuel Co., In re 645 
 National Pemberton Bank v. 
 
 Porter 264, 293, 302 
 
 National Permanent B'ld'g Soc, 
 In re, Ex parte Williamson 
 
 265, 305, 311 
 National Security Bank v. Cush- 
 
 man 210, 240 
 
 National Shoe and Leather Bank 
 
 v. Mechanics' National Bank 495 
 National State Bank v. Vigo 
 
 Bank 236 
 
 National Tel., etc., Co. v. Du 
 
 Bois 392 
 
 National Trust Co. v. Gray 795 
 
 ». Miller 273 
 
 v. Murphy 384 
 
 National Tube Works Co. v. Bal- 
 
 lou 703 
 
 v. Gilfillan 723 
 
 v. Machine Co. 651 
 
 Nation's Case 589, 748 
 
 Natoma Water M'g Co. v. Clarkin 286 
 Natusch v. Irving 112, 268, 556 
 
 Naugatuck R. R. Co. v. Water- 
 bury Button Co. 308 
 Naugatuck Water Co. v. Nichols 529 
 Nauvoov. Better 330 
 Neal v. Coburn 672 
 v. Moultrie 765 
 Neal's Appeal 632 
 Neall r. Hill 611, 688 
 Nebraska Nat. B'k v. Clark 759 
 Neff o. Wolf River Boom Co. 415 
 Neiler v. Kelley 794 
 Neilson v. Chicago M. and N. 
 
 R'y Co. 179 
 
 v. Crawford 737 
 
 v. Nelson Blakey 518 
 
 v. Eaton 125 
 
 v. Hubbard 125, 133, 184, 436 
 
 v. St. Martin's Parish 333 
 
 v. Woodruff 351 
 
 Nesbit r. Riverside Ind. Dist. 321 
 Nesmit.hu. Washington Bank 601 
 
 878 
 
 SECTION 
 
 Neuchatel Asphalte Co. v. Mayor 401 
 Neustadt v. III. Cent. R. R. Co. 488 
 New Albany v. Burke 746 
 
 New Albany, etc., R. R. Co. v. 
 
 Fields 521 
 
 v. Tilton 475 
 
 New Bedford R. R. Co. v. Old 
 
 Colony R. R. Co. 415 
 
 New Boston Fire Insurance Co. 
 
 v. I'pton 258 
 
 New Buffalo v. Iron Co. 324 
 
 Newburg Petroleum Co. o. 
 
 Weare 384 
 
 Newburger v. Howard & Co.'s 
 
 Express 359 
 
 Newbury v. Detroit, etc., M'f'g 
 
 Co. 588, 796 
 
 Newby v. Colt's Patent Fire 
 
 Arms Co. 392 
 
 v. Oregon Central R. Co. 
 
 137, 158, 662 
 
 Newcastle Marine Ins. Co., In re 586 
 
 Newell v. Great Western R'y Co. 396 
 
 v. Minneapolis, etc., R'y Co. 168 
 
 v. Smith 363, 417 
 
 v. Willston 796 
 
 New Boston Ins. Co. v. Saunders 203 
 
 New England Ex. Co. v. Maine 
 
 Central R. R. Co. 309 
 
 New England F. Ins. Co. v. 
 
 De Wolf 254 
 
 New England Fire Ins. Co. v. 
 
 Robinson 249 
 
 New England Iron Co. v. Gilbert 
 
 El. R. R. Co. 204 
 
 New England Mutual Ins. Co. v. 
 
 Phillips 581 
 
 New England Mut. Life Ins. Co. 
 
 v. Woodworth 395 
 
 New England R. R. Co. v. Cen- 
 tral R'y Co. 281 
 N. E. R. R. Co. v. Conroy 365, 366 
 New England T. Co. v. Abbott 583 
 Newhall v. Galena, etc., R. R. Co. 553 
 New Hampshire, etc., R. R. 
 
 Co. v. Johnson 513, 514, 546 
 
 New Haven and Northampton 
 
 Co. v. Hayden 162a, 225, 3056 
 New Haven, etc., R. R. Co. v. 
 
 Chapman 530 
 
 New Haven Horse Nail Co. v. 
 
 Linden Spring Co. 393 
 
 New Haven Trust Co. v. Gaffney 522a 
 u. Nelson 746 
 
 New Hope and Del. B'dge Co. 
 
 v. Poughkeepsie Silk Co. 299 
 
 New Hope, etc.. Bridge Co. v. 
 
 Phoenix Bank 215, 240 
 
 New Jersey v. Yard 461 
 
 New Jersey Steam Nav'n Co. 
 
 D. Merchants' Bank 351, 357
 
 TABLE OF CASES. 
 
 SECTION 
 
 New Jersey Southern R. R. Co. 
 v. Long Branch Commis- 
 sioners 153 
 New Lihdell Hotel Co. v. Smith 92 
 New Memphis Gas Lt. Co. Cases 632 
 New Orleans v. Citizens' Bank 489 
 v. Houston 477a 
 New Orleans, etc., R. R. Co. 
 
 v. Delaware 305 
 
 v. Jones 179 
 
 v. Jopes 347 
 
 v. McDonald 319 
 
 v. Southern, etc., Tel. Co. 163, 163a 
 New Orleans City, etc., R. R. 
 
 Co. v. New Orleans 489 
 
 New Orleans Debenture Re- 
 demption Co. v. Louisiana 460 
 New Orleans Gas Light Co. v. 
 Louisiana Light, etc., Co. 
 
 154, 474 
 New Orleans J. and G. N. R. 
 
 R. Co. v. Allbritton 349 
 
 v. Jones 179 
 
 o. Mitchell 374 
 
 v. Moyl 179 
 
 New Orleans Nat. Bank v. Ray- 
 mond 167 
 New Orleans Pacific R'y Co. 
 
 ». Parker 815 
 
 New Orleans, St. Louis, etc., 
 
 R. R. Co. v. Burke 347, 378 
 
 v. Harris 553, 557 
 
 New Orleans M. and T. R'y 
 
 Co. v. Mississippi 454 
 
 New Orleans Water Works Co. 
 
 v. Rivers 474 
 
 Newport v. Mudgett 484 
 
 Newport and Cincinnati Bridge 
 
 Co. v. Wooley 407 
 
 Newport, etc., Bridge Co. v. 
 
 Douglass 668, 822 
 
 Newport Cotton Mill Co. v. Mims 
 
 97, 518 
 Newry, etc., R'y Co. v. Coombe 515 
 v. Edmunds 511 
 
 New Sombrero Phosphate Co. 
 
 v. Erlanger 82 
 
 Newton v. Commissioners 316 
 
 Newton M'f'g Co. v. White 150, 
 
 189, 429 
 New York v. Squire 474d 
 
 New York and Canada R. R. 
 
 Co. v. Gunnison 163 
 
 New York and Erie R. R. Co. 
 
 v. Ketchum 86 
 
 v. Shepard 412, 413 
 
 New York and Harlem R. R. 
 
 Co. v. Kip 163 
 
 New York and L. I. R. R. Co., 
 
 In re 458 
 
 New Fork and N. E. R. R. Co. 
 
 SECTION 
 
 v. New York, etc., R. R. Co. 193, 
 210, 305. 420 
 New York and N. H. R. R. Co. 
 
 v. Schuyler 133, 208, 329, 338, 
 342, 541, 590, 591 
 New York Cable Co. v. Mayor, 
 
 etc., of N. Y. 168 
 
 New York Central, etc., R. 
 
 R. Co., Matter of 163 
 
 New York Central and H. R. 
 
 R. R. Co. v. Metropoli- 
 tan Gas Light Co. 163 
 New York Dry Dock v. Hicks 384 
 New York Elevated R. R. Co., 
 
 Matter of 460 
 
 New York, etc., Bank r. Ciowell 739 
 New York Firemen's Ins. Co. 
 
 v. Sturges 120, 204 
 
 New York Floating Derrick 
 
 Co. v. New Jersey Oil Co. 381 
 New York Guaranty, etc., Co. 
 
 v. Memphis Water Co. 815 
 
 New York, H. and N. R. R. 
 
 Co. v. Boston H. and E. 
 
 R. R. Co. 162 
 
 New York, Housatonic,etc, R. R. 
 
 Co. v. Boston, Hartford and 
 
 Erie R. R. Co. 163a, 164, 166 
 
 New York Iron Mine v. First 
 
 Nat. Bank 148, 201, 739 
 
 New York L. and W. R'y Co., 
 
 In re 162a, 166 
 
 New York, L. E. and W. R'y 
 
 Co. v. Haring 338 
 
 v. Nickals 564 
 
 New York L. Ins. Co. u. Cravens 400a 
 New York Security Co. v. Sara- 
 toga G. & E. Lt. Co. 820 
 New York Marbled Iron Works 
 
 v. Smith 432 
 
 New York, N. H. & H. R. R. Co. 
 
 v. Long 153 
 
 New York, etc., R. R. Co. v. 
 
 Cromwell 350 
 
 New York P., etc., R. R. Co. 
 
 v. Dixon 193 
 
 New York State v. Roberts 400, 480 
 New York State Loan and Trust 
 
 Co. V. Helmer 298 
 
 New Zealand Banking Co., In 
 
 re, Se well's Case 211 
 
 Niagara Falls, etc., R. R. Co., 
 
 In re 163 
 
 Niantic Savings Rank v. Town 
 
 of Douglas 324 
 
 Nicholas v. N. Y. Cent, and 
 
 H. R. R. R. Co. 353 
 
 Nichols v. Bridgeport 166 
 
 )•. Mase 257 
 
 v. New Haven and N. Co. 490 
 
 v. Stevens 737 
 
 879
 
 TABLE OF CASES. 
 
 SECTION 
 
 Nichols's Case 110 
 
 Nicli olson v. New York and 
 
 N. II. R. R. Co. 179 
 
 v, Randle 202 
 
 Nickels u. Building Ass'n 400 
 
 Nickerson v. Wheeler 764, 805 
 
 Nicoll v. N. Y. and E. R. R. Co. 128 
 Nicrosi v. Calera Land Co. 187 
 
 Niemeyer v. Little Rock, etc., 
 
 R. R. Co. 155 
 
 Nieto v. Clark 347 
 
 Nirnick v. Mingo Iron Works 393 
 Nimmons v. Toppau 432 
 
 Niraes v. Mt. Hermon School 
 
 335, 33(3 
 Nippenoze M'f'g Co. i\ Stadon 521 
 Nitro-glycerine Case 3(39 
 
 Nix v. Miller 616, 051 
 
 Nixon v. Brownlow 110 
 
 v. Green 720 
 
 Noble ». Callender 701 
 
 v. Turner 794 
 
 Noblesville Gas Co. v. Loehr 258 
 Nockles v. Crosby 104 
 
 Noesen v. Town of Port Wash- 
 ington 319, 531 
 Nolman v. Mitchell 110 
 Nolton v. Western R. R. Co. 352 
 Norfolk, etc., R, R. Co. v. Hou- 
 
 chins 366 
 
 Norfolk, etc., R. R. Co. v. 
 
 Pennsylvania 486 
 
 N. O. J. and G. N. R. Co. ». 
 
 Wallace 392 
 
 Norris v. Crocker 764 
 
 v. Johnson 725 
 
 l>. Mayor, etc., of Smithville 433 
 v. Trustees of Abington Acad- 
 emy 453 
 v. Wrenshall 714 
 North v. Forrest 789 
 v. State 151 
 North American Building Ass'n 
 
 ». Sutton 599 
 
 Northampton Bank v. Pepoon 
 
 233, 235 
 North Australian Territory Co., 
 
 In re 629 
 
 North Branch Pass'r R'y Co. 
 
 v. City Pass'r R'y Co. 163a 
 
 North Carolina, etc., R. R. Co. 
 v. Carolina Central R'y 
 Co. 163,* 163a 
 
 North Carolina R. R. Co. v. 
 
 Commissioners 479 
 
 v. Leach 521 
 
 Nortli East and S. W. Ala. R. 
 
 R. Co., Ex parte 495 
 
 North Hudson Building Assoc. 
 
 v. Bank 232 
 
 v. Childs 619 
 
 880 
 
 SECTION 
 
 North Missouri R. R. Co. v. 
 
 Akers 392, 306 
 
 v. Maguire 488 
 
 North Penn. R. R. Co. 0. Reh- 
 
 man 369 
 
 North River Ins. Co. v. Law- 
 rence 276 
 
 North Shore, etc., Ferry Co., Be 578 
 
 North Stafford Steel, etc., Co. 
 
 v. Ward 96 
 
 North State Copper, etc., Co. 
 
 v. Field 392, 394 
 
 North Street R. R. Co. v. Spul- 
 
 lock 517 
 
 Northern Bank v. Porter Town- 
 ship 332 
 
 Northern Central R. R. Co. v. 
 
 Bastian 238 
 
 v. Eslow 515 
 
 v. Mayor, etc., of Baltimore 163a 
 v. State 372 
 
 Northern Pacific R. R. Co. v. 
 
 Doherty 162a 
 
 Northern Pacific R. R. Co. v. 
 
 Dustin 454 
 
 Northern Pac. R. R. Co. v. Free- 
 man 374 
 p. Peterson 365 
 
 Northern R. R. ». Concord and 
 
 C. R. R. 163a 
 
 Northern Transportation Co. 
 
 v. Chicago 384 
 
 o. Derby Nat. Bank 241 
 
 v. McClary 361 
 
 North rup v. Mississippi Valley 
 
 Ins. Co. 210 
 
 Northside R'y Co. v. Worthing- 
 
 ton 127 
 
 Northwest Trans. Co. v. Beatty 5596 
 
 Northwestern T. E. Co. v. Chi- 
 cago, M. & St. P. R'y Co. 163a 
 
 Northwestern Distilling Co. v. 
 
 Brant 159 
 
 Northwood Union Shoe Co. v. 
 
 Pray 598 
 
 Norton v. Alabama Nat. Bank 
 
 211, 236 
 v. Bridge Co. 396 
 
 v. Dyersburg 320 
 
 v. Norton 796 
 
 v. Shelby Co. 321 
 
 Norway Plains Co. v. Boston 
 
 and M. R. R. Co. 360 
 
 Norwich, etc., Nav. Co. v. Theo- 
 bald 96 
 
 Norwich Lock Mfg. Co. v. Hock- 
 
 aday 96 
 
 Norwich Yarn Co.. Re 045 
 
 Nottingham v. Baltimore and 
 
 P. R. R. Co. 175a 
 
 Nourse v. Prime 794
 
 TABLE OF CASES. 
 
 SECTION 
 
 Noyes t>. Smith 365 
 
 v. Spaulding 792, 795 
 
 Nugent v. Railroad Co. 170 
 
 v. Supervisors 320, 324, 420, 530 
 
 Nulton v. 
 
 Clayton 
 
 
 
 
 513 
 
 Nunnally 
 
 v. Strauss 
 
 
 
 
 663 
 
 Nutter v. 
 
 Lexiugton, 
 
 etc., 
 
 R. 
 
 R. 
 
 
 Co. 
 
 
 
 
 
 518 
 
 Nutting 
 
 v. Connecticut 
 
 River 
 
 
 R. R. 
 
 Co. 
 
 
 
 
 363 
 
 v. Thomasin 
 
 
 
 
 797 
 
 Nye v. Storer 
 
 
 
 
 5596 
 
 o. 
 
 Oakdale Mfg. Co. v. Garst 309c, 385 
 Oakes v. Turquand 523 
 
 u. Water Co. 237 
 
 Oakland Bank v. Wilcox 616 
 
 Oakland R. R. Co. 13. Oakland, 
 
 Brooklyn, etc., R. R. Co. 458 
 Oates v. National Bank 318 
 
 O'Bear Jewelry Co. 13. Volfer 655, 759 
 O' Brian v. Knivan 188 
 
 O'Brien v. Cummings 748 
 
 Occidental Ins. Co. 13. Ganzhorn 
 
 523, 537 
 Oclielree v. Railroad Co. 735 
 
 O'Connell v. B. and O. R. R. Co. 365 
 O'Conuor v. Chicago, etc., R'y 
 
 Co. 210 
 
 13. Fou du Lac, etc., R'y Co. 173 
 
 0. Hotel Co. 610 
 
 13. North Truckee Ditch Co. 561 
 
 O'Connor Mining Co. 13. Coosa 
 
 Furnace Co. 644 
 
 Odd Fellows' Hall Co. v. Glazier 513 
 Odell u. Odell 128 
 
 Ogden v. City of St. Joseph 477a 
 13. County of Daviess 320 
 
 Ogilvie 13. Knox Ins. Co. 661, 705, 
 
 706, 744 
 Ogle v. Knipe 567 
 
 Oglesby 13. Attrill 554 
 
 O'Hara v. Lexington and O. R. 
 
 R. Co. 163 
 
 Ohio 13. Frank 326, 680 
 
 Ohio and M. R. R. Co. 13. Dick- 
 
 erson 350 
 
 13. Dunbar 170 
 
 v. Indianapolis, etc., R. R. Co. 308 
 
 13. McClelland 475 
 
 Ohio and Mississippi R. R. Co. 
 
 13. McPherson 381 
 
 i). Russell 170 
 
 13. Selby 353 
 
 13. Weber 479, 485 
 
 13. Wheeler 408, 412 
 
 Ohio and Mississippi R'y Co. 13. 
 
 People 409 
 
 Ohio, etc., R. R. Co. 0. Yohe 350 
 56 
 
 SECTION 
 
 Ohio Insurance Co. 13. Munne- 
 
 m acker 21 
 
 Ohio Life Ins. Co. v. Merchants' 
 
 Ins. Co. 391 
 
 Ohio Nat. Bank 13. Construction 
 
 Co. 458 
 
 Oil Creek, etc., R. R. Co. v. 
 
 Perm. Transp. Co. 276, 280 
 
 Olcott 13. Supervisors 319, 468 
 
 13. Tioga R. R. Co. 204, 308 
 
 Old Colony, etc., R. R. Co. v. 
 
 Plymouth 163a 
 
 Oldham 13. First National Bank 
 
 161, 302 
 
 13. Mt. Sterling Imp't Co. 87, 
 
 529, 611 
 
 Oldtown R. R. Co. 0. Veazie 133, 499 
 
 Oler 13. Baltimore, etc., R. R. 529, 541 
 
 Oli phant 13. Wood burn Coal and 
 
 M'g Co. 124, 690 
 
 Olyphant Sewage Co. v. Oly- 
 
 phant Borough 460 
 
 Oluey v. Conanicut Land Co. 759 
 
 Olson 13. Cook 719, 720 
 
 Omaha, etc., R. R. Co. 13. Mar- 
 tin 371 
 Oneida Bank v. Ontario Bank 313, 734 
 O'Neill 13. New York, C. and H. 
 
 R. R. Co. 360 
 
 Opinion of the Justices (66 N. 
 
 H. 629) 470 
 
 Opsahl 13. Judd 372 
 
 Orange County Bank v. Brown 355 
 Orchard 13. Hughes 293 
 
 Oregon v. Jennings 330 
 
 13. Smith 577 
 
 Oregon Central R. R. Co. 13. 
 
 Scroggin 537 
 
 Oregon R'y Co. v. Oregonian 
 
 R'y Co. 120, 128, 283, 305 
 
 13. Portland 163a 
 
 Oregonian R'y Co. v. Hill 166 
 
 Orient Ins. Co. 13. Daggs 383, 400a 
 
 O'Reilly 13. Bard 783 
 
 Ormsby 13. Vermont, etc., Co. 381 
 
 Orndoff 13. Adams Express Co. 353 
 
 Orr 13. Bracken County 502 
 
 13. Lacey 298 
 
 13. Quimby 470 
 
 Osborn v. Crosby 92 
 
 13. People 153 
 
 Osborne 13. County of Adams 319 
 
 v. Knox, etc., R. R. Co. 366 
 
 v. Mobile 485 
 
 ». Osborne 801 
 
 13. Tunis 204, 248 
 
 Osborne & Cheeseman Co. 13. 
 
 Crooney 769 
 
 Osgood v. King 702 
 
 13. Laytin 705, 708 
 
 13. Ogden 730 
 
 881
 
 TABLE OF CASES. 
 
 SECTION 
 
 Ossippee H. and W. Co. v. Can- 
 
 ney 127, 205, 286, 537, 738 
 
 Oswald v. Times Co. 733, 737 
 
 Oswego Starch Factory v. Dol- 
 
 lovvay 477a, 479 
 
 Otis v. Gardner 794, 795 
 
 Otoe Couuty v. Baldwin 319, 325 
 Ottawa v. Carey 321 
 
 v. National Bank 326 
 
 Ottawa, etc., R. R. Co. v. Black 529 
 v. Hill 521 
 
 Otten v. Richmond, etc., R. R. 
 
 Co. 376 
 
 v. Smith 436, 437 
 
 v. Whi taker 581 
 
 Otter v. Brevoort Petroleum Co. 
 
 522c, 599 
 Ouachita Packet Co. v. Aiken 474c 
 Oubre v. Donaldsonville 326 
 
 Overend v. Gurney 620, 695 
 
 Overend & Gurney Co. v. Gibbs 
 
 620, 695 
 Overmeyer v. Cannon 725 
 
 Overton Bridge Co. v. Means 671 
 Owensboro Nat. Bank v. Owens- 
 
 boro 483 
 
 Owesley v. Montgomery R. R. 
 
 Co. 342 
 
 Oxford Iron Co. v. Spradley 125, 
 
 204, 286 
 
 Pace v. Burgess 480 
 
 Pacific Bank v. Stone 236 
 
 Pacific Nat. Bank v. Eaton 511 
 
 Pacific Coast Sav. Soc. v. San 
 
 Francisco 672 
 
 v. Pierce Co. 484 
 
 Pacific Railroad v. Chrystal 179 
 
 v. Ketcham 627, 630 
 
 Pacific R. R. Co. v. Hughes 530 
 
 v. Maguire 488 
 
 v. Missouri Pac. R. R. Co. 140 
 
 v. Seeley 162 
 
 v. Thomas 193, 212 
 
 Pacific It. R. Removal Cases 413 
 
 Pacific R. R. of Mo. v. Missouri 
 
 Pac. Ry. Co. 630 
 
 Packard v. Taylor 350 
 
 Packer v. Sunbury and Erie R. 
 
 R. Co. 122 
 
 Packet Co. v. Catlettsburg 474?> 
 
 v. Keokuk 414b 
 
 v. St. Louis 4746 
 
 Paddock v. Fletcher 103, 696 
 
 Paducah, etc., R. R. Co. v. Com- 
 monwealth 167 
 v. Hoehl 376 
 Page v. Chicago M., etc., R'y 
 Co. 178 
 
 882 
 
 SECTION 
 
 Page v. Heinburg 128 
 
 Paige v. Smith 395 
 
 Pain v. Societe St. Jean Baptiste 
 
 583 
 Paine v. Hutchinson 791 
 
 v. Lake Erie, etc., R. R. Co. 
 
 424, 627 
 v. Stewart 724, 749 
 
 Pairpoint, etc., M'f'g Co. v. 
 
 Watch Co. 388, 389, 391 
 
 Palairet's Appeal 163 
 
 Palestine Co. v. Wooden 501 
 
 Palfrey v. Paulding 449 
 
 Palmer v. Bank 702a 
 
 v. Forbes 125, 676 
 
 v. Maine Cent. R. R. Co. 344 
 
 v. Missouri Pac. R'y Co. 368 
 
 v. Nassau Bank 628 
 
 v. Ridge Mining Co. 587 
 
 v. Van Santvoord 734 
 
 v. Woods 706 
 
 v. Yates 234 
 
 Palmeri v. Manhattan R'y Co. 347 
 Paua o. Bowler 318, 330, 331 
 
 Panama, etc., Telegraph Co. v. 
 India Rubber, etc., Tele- 
 graph Works Co. 637 
 Pangborn v. Citizens' Building 
 
 Ass'n 618 
 
 Panhandle Nat. Bank v. Emery 
 
 310, 664 
 Pardee v. Drew 355 
 
 Parish v. N. Y. Produce Ex- 
 change 583, 584 
 v. Wheeler 276, 277, 303, 308 
 Park v. Grant Locomotive Works 
 
 563 
 
 v. Petroleum Co. 138 
 
 Park Co. v. Roberts 82 
 
 Parke v. Commonwealth Ins. Co. 396 
 
 Parke's Appeal 162 
 
 Parker v. Bank 225, 721 
 
 Parker v. Boston and M. R. R. 178 
 
 v. Hotel Co. 187, 429, 432 
 
 v. Kett 188 
 
 v. McKenna 629, 631 
 
 v. Metropolitan R. R. Co. 502 
 
 v. Nickerson 263, 629, 631, 647 
 
 v. Northern Central, etc., R. 
 
 R. Co. 515, 516 
 
 v. Washoe Manuf. Co. 204 
 
 Parkersburg v. Brown 319, 456, 477 
 Parkin v. Fry 81 
 
 Parks v. Tel. Co. 357 
 
 Parr v. Railroad Co. 305 
 
 Parrott v. Byers 589 
 
 v. Colby 715 
 
 Parsons v. New York Central, 
 
 etc., R. R. Co. 368 
 
 Parsons v. Spooner 85 
 
 v. Winchell 752
 
 TABLE OF CASES. 
 
 SECTION 
 
 Passenger Cases 4746, 485 
 
 Passenger R. R. Co. v. Young 347 
 Passenger R'y Co. i>. Boudron 378 
 Passmore v. Western Union 
 
 Tel. Co. 357 
 
 Patoo v. Nor. Pac. R. R. Co. 816a 
 Patrick v. Boonville Gas Light 
 
 Co. 633 
 
 v. Reynolds 77 
 
 Patterson v. Clyde 359 
 
 u. B. and M. R. R. Co. 376 
 
 i>. Kentucky 4696 
 
 v. Lynde 703, 704 
 
 v. Portland Smelting Works 632 
 v. Robinson 238 
 
 Pattison v. Albany Building 
 
 Ass'n 147 
 
 v. Svracuse Nat. Bank 161 
 
 Pattou v. T. & P. R. Co. 365 
 
 Paul v. Virginia 383 
 
 Paulding v. Chrome Steel Co. 
 
 185, 300, 668 
 Paulman v. Erie R. R. Co. 365 
 
 Pauly i>. Loan, etc., Co., 741 
 
 i>. Pauly 260, 642, 643 
 
 Paup v. Drew 507 
 
 Paxton Cattle Co. i>. First Nat. 
 
 Bank 90 
 
 Payne v. Bullard 709 
 
 v. Commercial Bank 241 
 
 v. New South Wales Coal Co. 87 
 
 Payne's Case 586 
 
 Payson ». Stoever 211, 213 
 
 v. Withers 527 
 
 Peabody v. Flint 559, 688 
 
 Pearce v. Madison, etc., R. R. 
 
 Co. 195, 264, 305, 418 
 
 Pearsall v. Railway 453, 502 
 
 Pearson v. Concord R. R. Co. 
 
 309, 630, 644 
 
 v. Duane 348 
 
 v. Tower 688 
 
 v. Wheeler 417 
 
 Peavy v. Calais R. R. Co. 166 
 
 Peck u. Coalfield Coal Co. 
 
 522c, 702, 717 
 13. Cooper 755 
 
 u. Gurney 755 
 
 13. Miller 734 
 
 v. N. Y. C. and H. R. R. R. 
 
 Co. 348 
 
 13. Providence Gas Co. 592 
 
 13. Schenectady Ry. Co. 175 
 
 Peckham 13. Hendren 210 
 
 13. North Parish 396 
 
 v. Van Wagenen 798 
 
 Peebles 13. Patapsco, etc., Co. 342 
 
 Peek 13. Detroit Novelty Works 210 
 
 Peel 13. Phillips 775 
 
 Peet v. Chicago and N. W. R'y 
 
 Co. 362, 363 
 
 SECTION 
 
 Peete 13. Morgan 480 
 
 Pegram 13. Charlotte, etc., R. R. 
 
 Co. 630 
 
 Peik 13. Chicago, etc., R'y Co. 
 
 474c, 476a 
 Pierce 13. Jersey Water Works 518 
 Pell's Case 522c, 702 
 
 Pelton 13. National Bank 484 
 
 i). Rensselaer, etc., R. R. Co. 360 
 Pemberton 13. N. Y. C. R. R. Co. 359 
 Pembina Mining Co. 13. Penn- 
 sylvania 383, 480 
 Pendergast 13. Bank of Stockton 601 
 Pendleton v. Kinsley 347 
 Pendleton Hardware Co., In re 283 
 Penfield v. Dawson T. & G. Co. 702 
 Peninsular R'y Co. 13. Duncan 109 
 Penn Bank 13. Hopkins 756, 758 
 Penn Match Co. 13. Hapgood 86, 87 
 Penniman's Case 493, 494 
 Pennison 13. Railroad Co. 131, 415 
 Pennock v. Coe 815 
 Pennoyer v. Neff 395, 472 
 Pennsylvania v. Quicksilver Co. 413 
 Penna. Canal Co. 13. Bentley 376 
 Pennsylvania Co. 13. Roy 350 
 13. Wentz 475 
 Pennsylvania, etc., Nav. Co. 13. 
 
 Dandridge 283 
 
 Pennsylvania Co. 13. Insurance 
 
 Co. 593 
 
 13. Toomey 344 
 
 i). Woodsworth 350 
 
 Pennsylvania R. R. Co. 13. Bal- 
 timore and C. R. R. Co. 163a 
 13. Berry 363 
 
 13. Bowers 489 
 
 13. Butler 353 
 
 i). Henderson 353 
 
 13. Jones 362 
 
 13. Milk Exchange 309c 
 
 v. Miller 496 
 
 13. New York and L. B. R. 
 
 R. Co. 171 
 
 v. Richter 373, 374 
 
 i). Schwarzenberger 363 
 
 13. Sheldon 309c 
 
 v. Sly 416 
 
 i). St. Louis, etc., R. R. Co. 284, 
 305, 409 
 i). Vandiver 348 
 
 13. Weber 376 
 
 Pennsylvania R. R. Co.'s Ap- 
 peal 122, 163a, 470, 592, 641 
 Pennsylvania Transportation 
 
 Co.'s Appeal 415, 711 
 
 Penobscot, etc., R. R. Co. v. 
 
 Bartlett 96 
 
 v. Dummer 96, 108, 263 
 
 v. Dunn 229, 513 
 
 Penrose v. Chaffraix 489 
 
 883
 
 TABLE OF CASES. 
 
 SECTION 
 
 Pensacola Tel. Co. v. Western 
 
 Union Tel. Co. 383, 474a 
 
 Pentz v. Citizens' Fire Ins. Co. 583 
 People o. Albany, etc., R. R. Co. 
 
 454, 460, 574, 577 
 v. American Bell Telephone 
 
 Co. 400 
 
 v. Assessors 481 
 
 v. Atlantic Ave. R. R. Co. 459 
 
 u. Ballard 608 
 
 v. Barker 477 
 
 o. Batchelor 573,574 
 
 v. Board of Governors 575 
 
 v. Bogart 459 
 
 v. Boston and Albany R. R. 
 
 Co. 457, 475 
 
 v. Broadway R. R. Co. 122 
 
 v. Buffalo Stone Co. 459 
 
 v. Chicago Gas Trust Co. 130, 309c 
 v. Chicago, etc., R. R. Co. 162 
 
 v. Coleman 57, 477a 
 
 v. Commissioners 484, 489 
 
 v. Compagnie Generale Trans- 
 
 atlantique 4746, 480 
 
 v. Crockett 601 
 
 v. Crossley 576, 579 
 
 v. Cummiugs 688 
 
 v. Dashaway Assoc. 459 
 
 v. Draper 464 
 
 v. Empire Mut. Life Ins. Co. 
 
 659, 665 
 v. Equitable Trust Co. 477a, 479 
 v. Fidelity, etc., Co. 388 
 
 v. Fire Association 383, 400, 480 
 v. Fishkill Plank Road Co. 459 
 
 v. Flint 437 
 
 v. Formose 401 
 
 v. Glann 320 
 
 v. Globe Mut, Ins. Co. 649 
 
 v. Granite State Prov. Ass'n 394 
 v. Hektograph Co. 140, 611 
 
 v. Holden 320 
 
 v. Home Ins. Co. 484 
 
 v. Horn Silver M'g Co. 479 
 
 v. Howard 386 
 
 v. Humphrey 470 
 
 v. Improvement Co. 460 
 
 v. Kenney 577 
 
 v. Kerr 171, 175, 175a 
 
 v. Kingston and Middletown 
 
 Turnpike Co. 459 
 
 v. Lake Shore, etc., R. R. Co. 585 
 v. La Rue 128 
 
 v. Los Angeles R'y Co. 458 
 
 v. Manhattan Co. 453, 460 
 
 v. Manhattan Gas Light Co. 454 
 v. Marshall 667 
 
 v. Metropolitan R'y Co. 224, 563 
 v. Milk Exchange 459 
 
 v. Montecito Water Co. 468 
 
 v. Mott 808 
 
 884. 
 
 SECTION 
 
 People v. National Bank 483 
 
 v. National Trust Co. 437 
 
 v. N. Y. C. and II . R. R. R. 
 
 Co. 455, 502 
 
 v. North Chicago Railway Co. 459 
 v. North River S. R. Co. 
 
 51, 130, 3096 
 v. N. Y., L. E. and W. R. R. 
 
 Co. 454, 455 
 
 v. Oakland County Bk. 121 
 
 v. (>' Brien 128, 504 
 
 v. Ottawa Hydraulic Co. 460 
 
 v. Pacific Mail S. S. Co. 585 
 
 v. Perrin 157 
 
 v. Pittsburg R. R. Co. 457 
 
 v. Pullman Car Co. 128, 460 
 
 v. Roberts 400, 480 
 
 v. Robinson 578 
 
 v. Salem 319, 476 
 
 v. Saratoga, etc., R. R. Co. 474c 
 v. Schlitz Brew. Co. 309a 
 
 v. Security Life Ins. Co. 813 
 
 v. Selfridge 451 
 
 v. State Treasurer 139 
 
 v. Sterling M'f'g Co. 591 
 
 v. Supervisors 472, 480 
 
 v. Throop 808 
 
 v. Twaddell 228, 432, 579 
 
 v. Ulster, etc., R. R. Co. 459 
 
 v. Utica Insurance Co. 
 
 120, 161, 293, 457, 459 
 v. Wabash, etc., R'y Co. 474c 
 
 v. Walker 432 
 
 r. Weaver 484 
 
 v. Wemple 57, 485 
 
 People's Bank v. Kurtz 793 
 
 u. National Bank 239, 241 
 
 People's Ferry Co. v. Balch 518 
 
 People's Gas Light Co. v. Chi- 
 cago Gas Light Co. 454 
 People's L. S. Ins. Co., In re 720 
 People's Mut. Ins. Co. t3. West- 
 
 cott 190, 540, 573, 574 
 
 People's Savings Bank v. Cupps 199 
 Peoria and P. V. Ry. Co. v. Chi- 
 cago, etc., R'y Co. 362 
 v. Peoria and F. R'y Co. 155, 163a 
 Peoria and P. W. R. R. Co. v. 
 
 United States R. R. Co. 362 
 
 Peoria and R. I. R. R. Co. v. Coal 
 
 Valley M'g Co. 305 
 
 13. Lane 170 
 
 v. Preston 518, 530 
 
 Peoria and Springfield R. R. Co. 
 
 v. Thompson 270, 280 
 
 Peoria P. and I. R. R. Co. v. 
 
 Black 179 
 
 Percy v. Millaudon 228, 620 
 
 Perin v. Carey 128 
 
 Perkins v. Church 722 
 
 v. Eastern R. R. Co. 369
 
 TABLE OF CASES. 
 
 SECTION 
 
 Perkins v. Missouri, K. and T. 
 
 R. R. Co. 347, 378 
 
 v. New York Central R. R. Co. 353 
 v. Sanders 704 
 
 v. Union Button-hole, etc., 
 
 Machine Co. 519 
 
 v. Watson 298 
 
 Perley v. N. T. C. and H. R. 
 
 R. R. Co. 355 
 
 Perriue v. Chesapeake and Dela- 
 ware Canal Co. 122 
 Perry v. Hale 104 
 v. Little Rock, etc., Railway 
 
 Co. 86 
 
 v. Pearson 698 
 
 v. R. R. Co. 170 
 
 v. Simpson Waterproof M'f'g 
 
 Co. 212 
 
 v. Thompson 359 
 
 v. Turner 725 
 
 v. Tuscaloosa Co. 140, 258, 629, 688 
 Pertli Amboy G-. L. Co. v. Mid- 
 dlesex Co. Bank 672 
 Peru Iron Co., Ex p arte 204 
 Peter v. Un. M. Co. 5226 
 Peterborough R. R. Co. v. 
 
 Nashua and L. R. R. Co. 212 
 
 Peters v. Lincoln and N. W. 
 
 R. Co. 185 
 
 Petersburg Savings, etc., Co. v. 
 
 Lumsden 605 
 
 Petre v. Eastern Counties R'y Co. 88 
 Petition of P. &M. R'y Co. 4G0 
 
 Pettibone v. Lake View Town 
 
 Co. 237 
 
 Petty v. Brunswick R'y Co. 146 
 
 Petty v. Myers 319 
 
 Pew v. Gloucester Nat. Bank 647 
 Pewabic Mining Co. v. Mason 788 
 Peychard v. Hood 745 
 
 Pfeifer v. Sheybogan, etc., R. 
 
 R. Co. 415 
 
 Pfister v. Milwaukee Electric 
 
 R. Co. 678 
 
 Pfleger v. Hastings 178 
 
 Pfohl v. Simpson 669, 705, 725, 813, 
 
 814, 825, 826 
 
 Pfyfe v. Eimer 400 
 
 Phelan v. Hazard 522c, 702 
 
 Phelps v. Farmers', etc., B'k 562 
 
 v. Illinois Central R. R. Co. 350 
 
 v. Wait 752 
 
 Phenix Bank v. Curtis 137 
 
 Philadelphia & Balto. R. R. Co. 
 
 v. Holden 374 
 
 Philadelphia and Bait. Cent. R. 
 
 R. Co. u. Johnson 6S2 
 
 Philadelphia and E. R. R. Co. 
 
 V. Cake 179 
 
 Philadelphia and Reading R. R. 
 
 Co. v. Derby 335, 350, 352 
 
 Philadelphia & Reading 
 Co. v. Ramsey 
 v. Smith 
 
 SECTION 
 
 R. R. 
 
 363 
 680 
 
 v. Speaien 
 v. Stitchter 
 
 
 372 
 
 125, 126 
 
 v. Yerger 
 Philadelphia and 
 
 368 
 Wilmington 
 
 R. R. Co. v. Maryland 
 Philadelphia Contributionship 
 
 v. Commonwealth 
 Philadelphia, etc., R. R. Co. v. 
 Couway 
 v. Hickman 
 v. Knight 
 v. Lewis 
 v. Maryland 
 v. Philada., etc., 
 v. Quigley 
 Philadelphia, etc., 
 
 Pennsylvania 
 Phila. Fire Ass'n v 
 Phila. Loan Co. 
 
 S. 
 
 490 
 484 
 
 521 
 
 518 
 
 680 
 
 204 
 
 421 
 
 Towboat Co. 170 
 
 335, 338, 342 
 
 S. Co. v. 
 
 485 
 New York 400 
 v. Towner 
 
 298, 313 
 Philadelphia Pass'r R'y Co.'s 
 
 Appeal 465, 470 
 
 Philadelphia v. Western Union 
 
 Tel. Co. 305 
 
 Philadelphia W. and B. R. R. 
 
 Co. v. Bowers 4766 
 
 v. Kent County R. R. Co. 409 
 
 v. Larkin 377 
 
 v. Lehman 361 
 
 v. Woelpper 676 
 
 Phillips, In re 749 
 
 Phillips v. Campbell 193, 197 
 
 v. Covington, etc., Bridge Co. 518 
 Dunkirk, etc., R. R. 163. 175a, 473 
 
 v. Earle 
 
 v. Library Co. 
 
 r. Mercantile Nat. Bank 
 
 v. P. & R. R. R. Co. 
 
 v. Providence S. E. Co. 
 
 r. Sanger Lumber Co. 
 
 v. Therasson 
 
 v. Wickham 
 
 v. Wiuslow 
 
 o. Wortendyck 
 Phillips Limerick Academy v. 
 
 Davis 
 Phinizy v. Murray 
 Phoenix Bank v. Donnell 
 
 v. Rislcy 
 Phoenix Carpet Co. v. State 
 Phoenix Ins. Co. v. Common- 
 wealth 383, 480 
 
 v. Tennessee 490 
 
 v. Welch 400, 480 
 
 Phoenix Iron Co. v. Common- 
 wealth 385 
 Phoenix Warehousing Co. v. 
 
 iiadger 521 
 
 885 
 
 356 
 
 396, 398 
 
 240 
 
 178 
 
 608 
 
 211 
 
 719 
 
 432, 579 
 
 125, 671 
 
 752 
 
 92 
 
 798 
 
 137 
 
 672 
 
 476a
 
 TABLE OF CASES. 
 
 SECTION 
 
 Phosphate of Lime Co. v. 
 
 Green 213 
 
 Phosphate Sewage Co. v. Har- 
 
 • mont 82 
 
 Picard v. Tennessee, etc., R. 
 
 R. Co. 490 
 
 Pickard v. Pullman Southern 
 
 Car Co. 485 
 
 Pickering v. Hastings 704 
 
 Pickering v. Steveuson 231, 275, 622 
 v. Townsend 522c, 660, 702 
 
 Pickett v. Abney 263 
 
 Piedmont M'f'g Co. v. Colum- 
 bia, etc., R. R. Co. 363 
 Pier v. George 771 
 v. Hanmore 764, 774 
 Pierce v. Commonwealth 577 
 v. Crompton 384, 389, 394 
 v. Drew 175, 357 
 v. Emery 305, 376, 814 
 v. Jersey Waterworks Co. 96 
 v. Milwaukee Construction Co. 706 
 v. Morse-Oliver Co. 258 
 v. R. R. Co. 170, 353, 356 
 v. Security Co. 732 
 Pike v. Bangor, etc., R. R. Co. 517 
 Pinckney v. West Un. Tel. Co. 357 
 Pingree v. Mich. C. R. R. Co. 421, 4766 
 Pingry v. Washburn 309, 4766 
 Pinkerton v. Perm. Traction Co. 170 
 Pinney v. First Div. St. P., 
 
 etc., R. R. Co. 360 
 
 Pinney v. Nelson 391 
 
 Pindleton M. Co., In re, 277 
 
 Pioneer Paper Co., Matter of 577a 
 Piscatauqua Ferry Co. v. Jones 
 
 516, 521 
 Pitchford v. Davis 96 
 
 Pittsburg Cai-bon Co. v. Mc- 
 
 Millin 813 
 
 Pittsburg Min. Co. v. Spooner 52 
 Pittsburg, etc., Min. Co. v. 
 
 Quintrell 87 
 
 Pittsburg and C. R. R. Co. v. 
 
 Bedford, etc., R. R. Co. 305 
 
 v. Pillow 347 
 
 Pittsburg and L. E. R. R. Co. 
 
 v. Bruce 175a 
 
 v. Robinson 178, 179 
 
 Pittsburg, etc., Coal Co. v. 
 
 Otterson 587 
 
 Pittsburg R. R. Co. v. Altoona 
 
 Co. 281 
 
 Pittsburgh, etc., R. R. Co. v. 
 Applegate 516, 740 
 
 v. Bentley 178 
 
 v. Biggar 517, 518 
 
 v. Clarke 511, 587, 589 
 
 v. Gnzzam 511 
 
 v. Hollowell 350, 361 
 
 v. Robinson 178 
 
 886 
 
 SECTION 
 
 Pittsburgh, etc., R. R. Co. v. Ruby 210 
 v. Southwest. Penn. R. R. Co. 
 
 163a, 475 
 v. Stewart 517 
 
 Pittsburgh, C. and St. L. R. 
 
 Co. v. Barrett 360 
 
 v. Nash 360 
 
 v. Nelson 366 
 
 v. Theobald 210 
 
 v. Thompson 349 
 
 v. Vandiue 348 
 
 v. Williams 349 
 
 Pittsburgh, Cincinnati, etc., 
 
 R. Co. v. Moore 418 
 
 v. Morton 350 
 
 Pittsburgh, Ft. W. and C. R'y 
 
 Co. v. Bingham 371 
 
 v. Divinney 366 
 
 v. Hazen 361 
 
 v. Hinds 347 
 
 v. Lewis 363 
 
 v. Slusser 377 
 
 Pittsburgh Ry. Co. v. Board of 
 
 Public Works 485 
 
 Pittsburgh V. and C. R'y Co. 
 
 v. Bentley 178 
 
 Pixley v. Roanoke Nav. Co. 
 
 153, 156, 457 
 
 v. Western Pac. R. R. Co. 249 
 
 Place v. Union Exp. Co. 361 
 
 Plant v. Macon O. & I. Co. 130, 608 
 
 Planters' Bank v. Padgett 148 
 
 v. Sharp 211, 298, 453 
 
 v. Whittle 759 
 
 Planters', etc., Mut. Ins. Co. v. 
 
 Selma Sav. Bank 604 
 
 Piatt v. Archer 435 
 
 v. Birmingham Axle Co. 210, 603 
 Players. Burlington, etc., R'y Co. 350 
 Plimpton v. Bigelow 382, 392 
 
 Plow Co. v. Rude 651, 668, 759 
 
 Plumb v. Bank 748 
 
 Plummer v. Penobscot Lum- 
 bering Ass'n 120 
 Plymouth R. R. Co. v. Colwell 671 
 Pneumatic Gas Co. v. Berry 622 
 Poland v. Lamoille Valley R. 
 
 R. Co. 816a, 824 
 
 Pollak & Co. v. Muscogee M'f'g 
 
 Co. 655 
 
 Pollard v. Bailey 726, 826 
 
 v. State 483 
 
 Pollock v. Carolina Inv. B. & L. 
 
 Assn. 192 
 
 Pollock v. Shultze 224 
 
 v. National Bank 593 
 
 Tonieroy's Lessee v. State Bank 436 
 Pompton v. Cooper Union 330 
 
 Ponca Mills Co. v. Mikesell 555 
 
 Pond v. Framingham, etc., R. 
 
 R. Co. 663
 
 TABLE OF CASES. 
 
 SECTION 
 
 Pond v. Vermont Valley R. R. Co. 
 
 560, 688 
 Pondville Co. v. Clark 663 
 
 Pontchartrain v. New Orleans, 
 
 etc., R. R. Co. 152 
 
 Pontchartrain R. R. Co. v. 
 
 Heirne 210 
 
 Pool v. Falls Road R'y Co. 175 
 
 Pope v. Bank of Albion 244 
 
 v. Brandon 668 
 
 v. Terre Haute Car Manu- 
 factory 398, 472 
 Port v. Russell 628 
 Port of London Ass. Co.'s Case 311 
 Port Royal R. R. Co. v. Ham- 
 mond 406, 409 
 Port Royal, etc., R. R. Co. v. 
 
 Branch 558 
 
 Porter v. C. R. I. and P. R. R. 
 
 Co. 344 
 
 v. Chicago and R. I. R. R. Co. 360 
 v. Northern Missouri, etc., 
 
 R. R. Co. 175a 
 
 v. Rockford, etc., R. R. Co. 477, 
 477a, 492a 
 v. Sabin 690 
 
 Portland Bank v. Apthorpe 488 
 
 Portland, etc., R. R. Co. v. Gra- 
 ham 547 
 Portsmouth Brewing Co. v. Ports- 
 
 mouth B. & B. Co. 
 Post v. Supervisors 
 
 v. Toledo, etc., R. R. Co. 
 Postal Tel. Co. v. Charleston 
 
 v. Eaton 
 Potter v. Dear 
 v. Greenwich 
 u. Merchants' Bank 
 v. Stevens Machine Co. 
 v. Thornton 
 Potts v. Wallace 
 Poucher v. New York C. R. R. 
 
 Co. 
 Poughkeepsie, etc., Plank R. 
 
 Co. v. Griffin 
 Poulton v. London and South- 
 western R'y Co. 
 Powder River Cattle Co. v 
 
 Custer 
 Powell v. No. Missouri R. R. Co 
 
 v. Pennsylvania R. R. Co. 
 Power v. Holly 
 
 v. O'Connor 
 Powers v. Hazleton, etc., R'y 
 
 Co. 155, 178 
 
 Prather v. Jeffersonville, etc., 
 
 R. R. Co. 163, 164 
 
 v. Western Un. Tel. Co. 162a 
 
 Pratt v. Boston and Albany R. 
 
 R. Co. 593 
 
 v. Jewett 610 
 
 137 
 320 
 393 
 486 
 175 
 704 
 321 
 239 
 733 
 128 
 703 
 
 353 
 
 92 
 
 339 
 
 401 
 665 
 353 
 
 804 
 804 
 
 SECTION 
 
 Pratt v. Pratt 556, 562 
 
 v. Railway Co. 360 
 
 v. Short 298, 299 
 
 v. Taunton Copper M'f'g Co. 593 
 
 Pray v. Mitchell 789 
 
 Prendergast v. N. Y. C. and H. 
 
 R. R. R. Co. 372 
 
 Prentice v. Decker 353, 359 
 
 Prentis v. Nichols 668 
 
 Presbrey v. Old Colony and N. 
 
 R. R. Co. 178 
 
 Presbyterian Church v. City of 
 
 New York 572 
 
 Presbyterian Society v. Auburn, 
 
 etc., R. R. Co. 175a 
 
 Preston v. Liverpool, etc., R'y 
 
 Co. 87, 88 
 
 v. Melville 800 
 
 v. Missouri, etc., Lead Co. 233 
 
 v. Prather 161 
 
 Pre witt v. Trimble 752 
 
 Price v. Anderson 800 
 
 Price v. C. & O. Ry. Co. 348 
 
 v. Grand Rapids, etc., R. R. 
 
 Co. 260 
 
 v. Holcomb 610 
 
 v. Milwaukee, etc., R. R. Co. 178 
 v. New Jersey R. R. Co. 369 
 
 v. Oswego, etc., R. R. Co. 360 
 
 Price's Appeal 513 
 
 Priestley v, Northern Ind., etc., 
 
 R. R. Co. 361 
 
 Prime's Estate 489 
 
 Primrose v. Western Union Tel. 
 
 Co. 357 
 
 Prince v. Commercial Bank 137 
 
 Pringle v. Eltingham Cons. Co. 610 
 v. Woolworth 144 
 
 Printing, etc., Co., In re 614 
 
 Pritchard v. Norton 493 
 
 Pritchitt v. Trust Co. 800 
 
 Proctor Coal Co. v. Finley 577 
 
 Proctor Sons Co. v. Cooke 522c 
 
 Pronik v. Spirits Dist. Co. 563 
 
 Produce Exch. Co. v. Beaverbach 197 
 Pronger v. Old Nat. Bank 337 
 
 Propeller Niagara ». Cordes 350, 351 
 Proprietors of Locks and 
 Canals v. Nashua and 
 Lowell R. R. Co. 162a, 163, 178 
 Prospect Park, etc., R. R. Co., 
 
 Re 163a, 420 
 
 v. Williamson 163a 
 
 Protection Life Ins. Co. v. Os- 
 good 599 
 Proutv v. Lake Shore, etc., R'y 
 
 Co. 426 
 
 v. Michigan Southern, etc., 
 
 R. R. Co. 394, 564, 572 
 
 o. Prouty, etc., Shoe Co. 137, 668 
 
 Providence Bank v. Billings 488 
 
 887
 
 TABLE OF CASES. 
 
 SECTION 
 
 Provident Institution v. Massa- 
 chusetts 482 
 Prov. Savings Inst. v. Jackson 
 
 Place Skating Rink 501, 714, 749 
 Provident Trust Co. v. Mercer 
 
 County 319, 330 
 
 Pruitt v. Hannibal and St. Jo. 
 
 R. R. Co. 193 
 
 Pueblo, etc., R. R. Co. v. Rubb 
 
 163, 100 
 Pugh v. Chesseldine 042 
 
 Pugh v. Fairmount M'g Co. 682 
 
 Pugh and Sherman's Case 742 
 
 Pullen v. Cincinnati, etc., R. R. 
 
 Co. 125, 305, 676 
 
 Pullis v. Pullis 248 
 
 Pullman's Palace Car Co. v. 
 
 Adam 347 
 
 v. Central Trans. Co. 310 
 
 v. Hall 357 
 
 v. Pennsylvania 479 
 
 v. Reed 348 
 
 v. Smith 347 
 
 Pullman v. Upton 541, 587, 741 
 
 Pumpelly v. Green Bay Co. 173, 473 
 
 Purcell v. Southern Exp. Co. 353 
 
 Purdy o. Erie K. R. Co. 4706 
 
 Putnam v. Broad vvav, etc., R. R. 
 
 Co. 347 
 
 p. New Albany 745, 746 
 
 Pylas v. Furniture Co. 668 
 
 Pyrolusite Manganese Co., Mat- 
 ter of 430, 610 
 ». Ward 480 
 
 Q. 
 
 Queenan v. Palmer 726 
 
 Quested v. Newburyport Horse 
 
 R. R. 170 
 
 Quick v. Lemon 513 
 
 Qui m by v. Vanderbilt 364 
 
 Quincy v. Jackson 333 
 
 v. Steel 141 
 
 Quincy Bridge Co. v. Adams 
 
 County 406 
 
 Quincy Coal Co. v. Hood 210 
 
 Quincy R. R. Co. v. Humph- 
 reys 824a 
 Quiner v. Marblehead Ins. Co. 589 
 
 R. 
 
 Rabe v. Dunlap 556 
 
 Raber v. Jones 774 
 
 Racine and Miss. R. R. Co. v. 
 
 Farmers' L. and T. Co. 248, 
 
 406, 420, 605 
 
 Racine County Bank v. Ayres 517 
 
 Rafferty v. Donald 586 
 
 Ragan v. Aiken 131, 309 
 
 v. McElroy 282, 330 
 
 888 
 
 SECTION 
 
 Ragland o. McFall 237 
 Kahm v. Bridge Manufactory 209 
 
 Rahrer, In re 474o* 
 
 Rahway v. Munday 333 
 
 Railroad ». Knoxville 97 
 
 v. New Oi leans 494 
 
 v. Pendleton 490 
 
 v. Railroad 277, 309, 310, 314 
 
 Railroad Co. v. Alabama 462 
 v. Androscoggin Mills 362, 363, 364 
 
 v. Babcock 365 
 
 v. Baldwin 383 
 
 v. Barnhill 408 
 
 v. Barron 170 
 
 v. Bristol 475 
 
 v. Brown 305 
 
 v. Brumley 364 
 
 v. Commissioners 489 
 
 v. County of Hamblen 490 
 
 v. County of Otoe 819 
 
 v. Falconer 322 
 
 v. Fraloff 353, 355 
 
 v. Fuller 474c 
 
 v. Furnace Co. 224 
 
 v. Georgia 421, 468, 491 
 
 v. Gladmon 375, 376 
 
 v. Hambleton 175a 
 
 v. Hambley 36(5 
 
 v. Hamersley 475 
 
 v. Hanning 170 
 
 r. Harris 408, 412, 489 
 
 v. Hecht 493, 495 
 
 v. Houston 308, 374 
 
 v. Howard 127, 183, 656, 679, 
 702, 711 
 
 v. Husen 474c 
 
 v. Jackson 479 
 
 v. Koontz 412 
 
 v. Lockwood 350, 352 
 
 r. Lumber Co. 156 
 
 v. Maine 491 
 
 v. Manufacturing Co. 359, 360 
 
 v. Maryland 474c, 485 
 
 v. McClure 468 
 
 v. National Bank 318, 408 
 
 v. Peniston 482 
 
 v. Pollard 169, 351 
 
 u. Pratt 362, 363 
 
 v. Reeves 351 
 
 v. Richmond 474c, 475, 476 
 
 v. Rodrigues 548 
 
 v. Schurmeir 176 
 
 v. Schutte 210 
 
 ». Skinner 369 
 
 v. Sneed 541 
 
 v. Seutter 663, 815 
 
 v. Stevens 352 
 
 v. Stout 372, 375 
 
 v. Telegraph Co. 276 
 
 ». Tennessee 462 
 
 v. Vance 477a
 
 TABLE OF CASES. 
 
 SECTION 
 
 Railroad Co. v. Walrath 349 
 
 v. Yeiser 368 
 
 Railroad Commission Cases 4766 
 
 Railroad Companies v. Gaines 489, 
 
 490 
 v. Keokuk Bridge Co. 214, 264, 
 283a, 308 
 Railroad Com'i-s v. Portland, 
 
 etc., R. R. Co. 454 
 
 Railroad Tax Cases 480, 492a 
 
 Railway Co. v. Allerton 133, 227, 
 
 228, 555 
 v. Ailing 645, 651, 684, 757 
 
 v. Backus 477a, 492a 
 
 v. Fire Association 400 
 
 v. Gill 4766, 490 
 
 v. Granger 86, 89 
 
 v. Harris 477a 
 
 v. Keokuk Bridge Co. 310 
 
 v. Herley 4696 
 
 v. Hooper 121 
 
 u. Iron Co. 130 
 
 v. Lawrence 175, 175a 
 
 v. Loftin 489 
 
 v. McCarthy 121, 362 
 
 v. Orr 815 
 
 v. Philadelphia 489 
 
 v. Renwick 174 
 
 v. Sprague 674, 680 
 
 v. State 580 
 
 v. Stephens 350 
 
 v. Valleley 348 
 
 v. Whitton 400, 408, 411, 412 
 
 Raleigh and Augusta Air Line 
 
 v. Wicker 178, 179 
 
 Raleigh and Gaston R. R. Co. 
 
 v. Reid 488 
 
 Raleigh and G. R. R. Co. v. 
 
 Davis 163 
 
 Ralls County Court v. United 
 
 States 333 
 
 Ralston v. Bank 599 
 
 Ramsden v. Boston and A. R. R. 
 
 Co. 335 
 
 Ramsey v. Peoria, etc., Ins. Co. 146 
 v. Thompson M'f'g Co. 523 
 
 Ramstage, etc., Hotel Co. v. 
 
 Montefiore 517 
 
 Ranee's Case 622 
 
 Randall v. Baltimore and O. R. 
 
 R. Co. 366 
 
 v. Rhode Island Lumber Co. 636 
 
 v. Van Vechten 248, 753 
 
 Ranger v. Great Western R'y Co. 335 
 
 Rankine v. Elliott 707 
 
 Raritau and D. B. R. R. Co. v. 
 
 Delaware, etc., Canal Co. 152 
 Rashdall v. Ford 754 
 
 Rasmussen v. Idaho 474d" 
 
 Rathbone v. Gas Co. 140 
 
 section 
 Rathbun v. Citizens' Steamboat 
 Co. 360 
 
 v. Snow 192 
 
 Ratterman v. Western Un. Tel. 
 
 Co. 486 
 
 Raw v. Minnesota Valley R. R. 
 
 Co. 173 
 
 Rawson v. Pennsylvania R. R. 
 
 Co. 359 
 
 Raymond v. Palmer 757 
 
 Raynav v. Alexander 97 
 
 Read v. Buff urn 201 
 
 v. Frankfort Bank 665 
 
 v. City of Plattsmouth 325 
 
 v. Memphis Gayoso Gas Co. 
 
 234, 518 
 v. Spaulding 350 
 
 v. St. Louis, etc., R. R. Co. 361 
 Reading Tr. Co. v. Reading 
 
 Iron Works 568 
 
 Reagan v. Loan & T. Co. 476a 
 
 Real Estate Trust Co. v. Bird 569 
 Reapers' Bank v. Willard 495 
 
 Reavey's Case 95, 747 
 
 Reciprocity Bank, In re 740, 747 
 
 Red River V. L. & J. Co. v. 
 
 Smith 210 
 
 Redinffton v. Cornwell 783 
 
 v. Telegraph Co. 357 
 
 Redmond v. Dickerson 629 
 
 v. Enfield M'f'g Co. 394 
 
 Red Polled Cattle Club v. Red 
 
 Polled Cattle Club 137 
 
 Red Wing Hotel Co. v. Fried- 
 rick 109 
 Reed v. Boston Machine Co. 541 
 y. Ginsburg 676 
 v. Head 799 
 v. Home Savings Bank 342 
 v. Jones 581 
 v. Richmond Street R. R. Co. 
 
 99, 451 
 v. St. Louis, etc., R'y Co. 353 
 
 Reed Bros. v. National Bank 415 
 
 Regents of University v. Wil- 
 liams 453 
 Regina v. Mayor of Tewkesbury 577 
 v. Registrar, etc. 158 
 v. Victoria Park Co. 661 
 v. Wilts, etc., Canal Naviga- 
 tion 585 
 Richwald v. Commercial Hotel 
 
 Co. 229, 381, 710 
 
 Reid r. Commercial Ins. Co. 595, 789 
 
 v. Eatonton M'f'g Co. 583, 708, 745 
 
 Reilly y. Oglebay 573, 575 
 
 Reisner v. Atchison, etc., R. 
 
 R. Co. 178 
 
 v. Strong 155 
 
 Relfe v. Rundle 27, 28, 120, 264, 390 
 
 889
 
 TABLE OF CASES. 
 
 SECTION 
 
 Relief Fire Ins. Co. v. Shaw 248, 254 
 Remington v. Samana Bay Co. 703 
 Rendall v. Crystal Palace Co. 555 
 Rentier u. Bank of Columbia 195 
 
 Rennie v. Clarke 76 
 
 Reno Water Co. v. Lete 236 
 
 Rensselaer, etc., Plank Road 
 
 Co. v. Barton 92, 513, 516 
 
 v. Wetsel 96 
 
 Rensselaer R. R. Co. v. Davis 163 
 
 Republic Life Ins. Co. v. Swigert 135 
 
 Republican, etc., Mines v. Brown 390 
 
 Revere v. Boston Copper Co. 433 
 
 Rex v. Uicken 460 
 
 v. Langhorn 573 
 
 v. Pasmore 14, 449 
 
 v. Peacock 460 
 
 v. Wardroper 460 
 
 Reyer v. Odd Fellows' Assoc. 397 
 
 Reyman Br'g Co. v. Blister 400 
 
 Reynell v. Lewis 77 
 
 Reynolds v. Bridentlial 687 
 
 v. Smith 759 
 
 v. Collins 248 
 
 v. Crawfordsville First Nat. 
 
 Bank 276, 302 
 
 v. Hind man 376 
 
 v. Kenyon 240 
 
 v. Simpson 120 
 
 Rhode Island, etc., R. R. Co., 
 
 In re 153 
 
 Rhodes o. Iowa 474d 
 
 Rhodes v. Mo. Sav. Co. 388 
 
 Rhodes v. Webb 628 
 
 Ribon v. Railroad Co. 815 
 
 Rice v. Boston, etc., R. R. Co. 360 
 
 v. Hart 360 
 
 v. Hosiery Co. 393 
 
 v. Rockefeller 599 
 
 Rich v. State National Bank 515 
 
 v. Town of Seneca Falls 320 
 
 Richards v. Merrimack, etc., 
 
 Co. 305 
 
 v. Minnesota Sav. B'k 432, 739 
 
 v. New Hampshire Ins. Co. 668, 
 
 692, 759 
 
 Richardson v. Abendroth 733 
 
 v. Buhl 309c 
 
 v. Graham 83, 522c 
 
 v. Green 632, 633, 655 
 
 v. Larpent 692 
 
 v. Pitts 783 
 
 v. Railroad Co. 563 
 
 v. Richardson 799, 800 
 
 v. Sibley 125, 305 
 
 v. Vermont, etc., R. R. Co. 510, 572 
 
 v. Watson 210 
 
 v. Williamson 754 
 
 Richardson's Case 742, 747 
 
 Richboro Dairymen's Ass'n v. 
 
 Ryan 546 
 
 890 
 
 SECTION 
 
 Riche v. Bar Harbor Water Co. 163 
 Richelier Hotel Co. v. Mili- 
 tary E. Co. 109 
 Richmond v. Irons 714, 727, 748, 749 
 v. Union Steamboat Co. 360 
 Richmond Bank v. Robinson 301 
 Richmond Enquirer Co. v. 
 
 Robinson 201 
 
 Richmond R'y Co. v. Brown 455 
 
 Richmond, etc., R. R. Co. v. 
 
 City of Richmond 474 
 
 v. Louisa R. R. Co. 122 
 
 v. Reed 531 
 
 Richmond's Case 548, 586 
 
 Richmond's Ex'rs Case 747 
 
 Richter v. Henningsan 187 
 
 Richwald v. Commercial Hotel 
 
 Co. 89 
 
 Ricketts v. Bait, and Ohio R. 
 
 R. Co. 364 
 
 Ricketts v. Birmingham St. K'v 
 
 Co. 305 
 
 Ricord v. Central Pac. R. R. Co. 342 
 Riddle v. Bedford County 189 
 
 v. Proprietors of Locks and 
 
 Canals 169, 449 
 
 Rider v. Fiitchey 734 
 
 v. Morrison 551, 586, 745, 749 
 
 Rider Life Raft Co. v. Roach 283 
 
 Ridge v. P. R. R. Co. 169 
 
 Ridgway v. Farmers' Bank 205, 
 
 225, 233 
 Ridgway Township v. Griswold 424 
 Ridley v. Plymouth Baking Co. 262 
 Riesterer v. Land & Lumber Co. 301 
 Riggs v. Commercial Mutual 
 
 Ins. Co. 187 
 
 v. Railway Co. 788 
 
 v. Taylor 792 
 
 Rikhoff v. Browne's Sewing 
 
 Machine Co. 99, 538 
 
 Riley v. Rochester 128 
 
 Rinesmith v. People's Freight 
 
 R'y Co. 521 
 
 Ringling v. Kohn 240 
 
 Ringo v. Biscoe 668 
 
 Ringold v. Haven 361 
 
 Risley v. Indianapolis, etc., 
 
 R. R. Co. 236 
 
 Rittenhouse v. Independent 
 
 Line of Telegraph 357 
 
 Rivanna Nav. Co. v. Dawsons 136 
 Rives v. Dudley 128 
 
 v. Montgomery Plank Road 
 
 Co. 523 
 
 Road Co. v. Kreeger 537 
 
 Kohl) o. Ross County Bank 239 
 
 Bobbins v. Embry 668 
 
 v. Justices 737 
 
 v. Milwaukee and H. R. 
 
 R. Co. 178, 179
 
 TABLE OF CASES. 
 
 Roberts v. Bank 
 
 v. Easton 
 
 v. N. Y. El. R. R. Co. 
 Robert's Case 
 
 SECTION 
 
 642 
 
 175 
 
 175 
 
 97 
 
 Roberts M'f'g Co. v. Scblick 77 
 
 Robertson v. Bullions 22b 
 
 Robinson v. Bank of Darien 812 
 
 v. Bank of Attica 668 
 
 v. Bland 299 
 
 v. Chartered Bank 601 
 
 v. Gardner 502 
 
 v. Merchants' Despatch 
 
 Trans. Co. 359, 361 
 
 v. National Bank 587, 589 
 
 v. Navigation Co. 392 
 
 v. Pittsburg, etc., R. R. Co. 
 
 521, 779 
 v. Smith 690, 758 
 
 v. Southern National Bank 283 
 Rochester Land Co. v. Roe 522c 
 
 Rochester S'v'g's B'k v. Averell 185 
 Rochester, etc., Ry. Co. v. Ray- 
 mond ' 586 
 Rochester & C. T. R. Co. v. Pa- 
 
 viour 636 
 
 Rockbold ». Canton Society 123 
 
 Rockford Grocery Co. v. Stan- 
 dard Grocery Co. 759 
 Rockford, etc., R. R. Co. v. Hill- 
 
 mer 475 
 
 v. Sage 86, 647 
 
 v. Wells 170 
 
 Rockland, etc., Steamboat Co. 
 
 v. Sewall 137, 518 
 
 Rockville, etc., Turnpike v. 
 
 Van Ness 740 
 
 Rockwell v. Elkhorn Bank 125, 254 
 Rocky Mountains Nat. Bank v. 
 
 Bliss 724 
 
 Rodgers v. Insurance Co. 436 
 
 v. Wells 539 
 
 Rogers v. Burlington 319 
 
 v. Hastings, etc., R'y Co. 647 
 
 v. Kennebec, etc., R. R. Co. 174 
 v. La Fayette Agricultural 
 
 Works ' 560, 688, 689, 690 
 
 v. New York, etc., Land Co. 87 
 v. Pell 225 
 
 v. Simmons 401 
 
 v. Wheeler 417 
 
 Rogers Locomotive Works v. 
 
 Erie R'y Co. 309 
 
 Rolling Stock Co. v. People 385 
 
 Rollins v. Clay 206, 229 
 
 v. Shaver Wagon Co. 668, 759 
 
 Roman v. Dimmick 522c, 660, 702 
 
 v. Fry 742 
 
 v. Woolfolk 140 
 
 Rome, etc., R. R. Co. v. Ontario, 
 
 etc., R. R. Co. 415 
 
 Rome R. R. Co. v. Sullivan 361, 363 
 
 SECTIOX 
 
 Root v. Goddard 298 
 
 v. Great Western R. R. Co. . 363 
 v. Long Island R. R. Co. 309 
 
 v. Sinnock 720 
 
 v. Wallace 195, 298 
 
 Rorke v. Thomas 768 
 
 Rose v. Barclay 565 
 
 v. Des Moines Valley R. R. Co. 353 
 v. Turnpike Co. 429, 432 
 
 Rosebaum v. Credit System Co. 648 
 Roseboom v. Whittaker 632, 813 
 
 Rosecrans G. M. Co. v, Morey 614 
 Rose Hill, etc., Road Co. v. Peo- 
 ple 145 
 Rosenblatt v. Johnson 484 
 Rosenfeld v. Einstein 808 
 v. Peoria, etc., R. R. Co. 353 
 Rosenthal v. Weir 356 
 Rosevelt v. Brown 741 
 Ross v. C. B. and Q. R. R. Co. 533 
 v. Kelly 701 
 v. Union Pacific R'y Co. 790 
 Roth v. Buffalo, etc., R. R. Co. 360 
 Rotherham Alum, etc., Co., hire 88 
 Rothschild v. Michigan Cent. 
 
 R. R. Co. 360 
 
 Rothwell v. Robinson 556, 689 
 
 Rough v. Breitung 187 
 
 Rounds v. Carter 366 
 
 Rouse v. Merchants' Nat. Bank 668 
 Rowland v. Meader Furniture 
 
 Co. 738 
 
 Roxbury v. Boston and P. R. R. 
 
 R. Co. 496 
 
 Royal British Bank, hi re Wal- 
 ton's Case 253 
 Royal British Bank i\ Turquand 
 
 195, 204, 251 
 Ruby v. Abyssian Society 187 
 
 Ruby Chief M. & M. Co. v. Pren- 
 tice 647 
 Rudd v. Robinson 263 
 Rue v. Missouri Pac. R'y Co. 391 
 Ruffner v. Cincinnati, etc., R. R. 
 
 Co. 368 
 
 Ruggles v. Brock 523 
 
 v. State of Illinois 453, 476a, 4766 
 Rule v. Owega, etc., Co. 393 
 
 Piumsey v. People's R'y Co. 814 
 
 Rundle v. Delaware, etc., Canal 
 
 174, 177 
 
 Runner v. Dwiggins 721 
 
 Rnnyan v. Coster 303 
 
 v. Coster's Lessee 383. 384 
 
 Russel v. Mc.Lellan 263, 429, 432 
 
 v. Wakefield Water Works 142 
 
 Russell v. Bristol 513 
 
 v. Easterbrook 587 
 
 v. Jones 401 
 
 v. Pacific R'y Co. 393 
 
 Russian Iron Works, In re 523 
 
 891
 
 TABLE OF CASES. 
 
 SECTION 
 
 Rutherford i\ Hill 148, 739 
 
 Rutland and B. R. R. Co. v. Proc- 
 tor 308 
 v. Thrall 517, 532, 54G, 571, 572 
 Rutland R. R. Co. v. Chaffee 
 
 162a, 165 
 Rutland R. R. Co. v. Ranehau 355 
 Rutland Canadian R. R. Co. v. 
 
 Central Vt. R. R. Co. 163a 
 
 Rutz v. Esler, etc., M'f'g Co. 523, 529 
 Ryan v. Chicago and N. W. R'y 
 Co. 365 
 
 v. Cumberland Valley R. R. 
 
 Co. 366 
 
 v. Dunlap 241 
 
 v. Fowler 365 
 
 v. Hayes 417 
 
 v. Leavenworth, etc., R'y Co. 
 
 631, 637, 638, 688 
 v. Martin 159 
 
 v. Valaudingham 146 
 
 Ryder v. Alton, etc., R. R. Co. 
 
 516, 576 
 Rylander v. Sheffield 634 
 
 Rye's Case 110 
 
 Ryman v. Gerlach 795 
 
 S. 
 
 Sacalaris v. Eureka, etc., R. R. 
 
 Co. 202 
 
 Sackett's Harbor Bank v. Blake 723 
 
 Sadler v. Langhani 163 
 
 v. Nicholson 725 
 
 Safety Deposit Life Ins. Co. v. 
 
 Smith 86 
 
 Safford v. Wyckoff 253, 285 
 
 Sage, Matter of 585 
 
 v. Central R. R. Co. 816 
 
 v. Culver 688 
 
 v. Memphis, etc., R. R. Co. 820 
 
 Sager v. Portsmouth, etc., R. R. 
 
 Co. 353 
 
 Sagory v. Debois 513, 546 
 
 Saint Mary's Gas Co. v. Elk 153 
 
 Salem Bank v. Gloucester Bank 195, 
 
 231, 253 
 Salem Iron Factory v. Danvers 477a 
 Salem Mill Dam Co. v. Ropes 90, 
 
 133, 527 
 Salem Nat, Bk. v. Prescott 432 
 
 Salina Nat. Bk. v. Prescott 642 
 
 Salisbury v. Metropolitan R'y 
 
 Co. 696 
 
 Salisbury Mills v. Townsend 596, 698 
 
 Salmon v. Hamborough Co. 661 
 
 v. Richardson 755 
 
 Salmon River Mining Co. v. 
 
 Dunn 281 
 
 Salt Co. c. East Saginaw 489 
 
 Salter v. Utica, etc., R. R. Co. 374 
 892 
 
 SECTION 
 
 Salt Lake City v. Hollister 264, 335 
 Saltmarsh v. Planters', etc., M. 
 
 Bank 435 
 
 v. Spaulding 225, 381, 632 
 
 Samuels v. Central Overland 
 
 Express Co. 142 
 
 v. Halliday 142 
 
 San Antonio v. Jones 520 
 
 v. Mehaffy 330 
 
 Sanborn v. Firemen's Ins. Co. 254 
 
 v. Lefferts 770, 772 
 
 San Buenaventura M'f'g Co. v. 
 
 Vassault 574, 577a 
 
 Sandal v. Atl. L. & I. Co. 383 
 
 Sanford v. Railroad Co. 309, 556 
 
 San Diego v. San Diego and 
 
 Los Angeles R. R. Co. 640, 642 
 San Diego, etc., R. R. Co. v. 
 
 Pacific Beach Co. 644 
 
 San Diego Water Co. v. Flume 
 
 Co. 309c 
 
 Sands v. Manistee River Imp. 
 
 Co. 474c 
 
 Sandy River v. Merchants', etc., 
 
 Bank 240 
 
 Sandy River R. R. Co. v. Stubbs 627 
 San Francisco, etc., R. R. Co. v. 
 
 Bee 657 
 
 v. Caldwell 163, 179 
 
 v. Gould 166 
 
 v. State Board 480 
 
 San Francisco Water Co. ». 
 
 Pattee 629 
 
 Sanger v. Upton 537 
 
 San Joaquin Land, etc., Co. v. 
 
 Beecher 109 
 
 v. West 109 
 
 San Joaquin Valley B'k v. Bours 618 
 San Jose Bank v. Sierra Lumber 
 
 Co. 189 
 
 San Jose Savings Bank v. Pharis 728 
 Santa Clara County v. Southern 
 
 Pac. R. R. Co. 480 
 
 Santa Clara Female Academy 
 
 v. Sullivan 384 
 
 Santa Clara M'g Ass'n v. Mere- 
 dith 647 
 Santa Cruz R. R. Co. v. Schwartz 518 
 v. Spreckles 632 
 Santa Fe E. Co. v. Hitchcock 638, 657 
 Sapp v. Northern Cent. R'y Co. 304 
 Sappington v. L. R. M. R. and 
 
 T. R. R. Co. 415 
 
 Sargont v. Essex Marine R'y Co. 796 
 
 v. Franklin Ins. Co. 796 
 
 v. Kansas Mid. R. R. Co. 698 
 
 v. Webster 184, 225, 260, 261, 573 
 
 Sater o. Burlington, etc., Plank 
 
 Road Co. 178 
 
 Savage r. Ball 578 
 
 v. Bartlett 523, 526
 
 TABLE OF CASES. 
 
 SECTION 
 
 Savage ». Miller 759 
 
 v. Peoples' B & L. Ass'n 584 
 
 v. Russell 384 
 
 Savannah and Memphis K. R. 
 
 Co. v. Lancaster 125, 679 
 
 Savannah Bank v. Hartridge 210 
 
 Savings Bank v. Baltimore 593 
 
 v. Bates 668 
 
 v. Butchers, etc., Bank 729 
 
 v. Caperton 617, 625 
 
 v. Davis 248 
 
 v. Elevator Co. 280 
 
 v. Stove Co. 702 
 
 v. Wulfekuhler 135, 627 
 
 Sawyer v. City of Acton 464 
 
 v. Dubuque Printing Co. 608 
 
 v. Dulaney 350 
 
 v. Hoag 542, 704, 710, 729 
 
 v. Pawner's Bank 647 
 
 v. Upton 655 
 
 v. Winnegance Mill Co. 137 
 
 Sayers v. First Nat. B'k 137 
 
 Sayles v. Bates 720 
 
 S. A. & A. P. R'y Co. v. S. W. T. 
 
 & T. Co. 386 
 
 S. C. and St. Paul R. Co. v. 
 
 Osceola County 326 
 
 Scadden ». Flat G. M. Co. 87 
 
 Scammon ». Kimball 670 
 
 Scanlan ». Crawshaw 430 
 
 Scarlett v. Academy of Music 521 
 Scbaeffer v. Missouri Home Ins. 
 
 Co. 511, 737, 744 
 
 Schallard ». Eel River Nav. Co. 
 
 204, 263 
 Schalucky v. Field 716, 725 
 
 Schenck v. Andrews 723 
 
 Schenectady, etc., Plank Road 
 
 Co. v. Thatcher 533 
 
 Schew v. Erie R'y Co. 360 
 
 Schilling v. Schneider 612 
 
 Scbleider v. Dielman 435 
 
 Schley v. Dixon 757 
 
 Schloss v. Montgomery Trade Co. 538 
 Schmidlapp v. La Confiance Ins. 
 
 Co. 392 
 
 Scbmidt v. Hennepin, etc., Co. 604 
 Schmitt & Bros. Co. v. Maboney 435 
 Schoenwald v. Metropolitan 
 
 S'v'gs B'k 199 
 
 Schofield v. Henderson 774 
 
 Scbollenberger, Ex parte 412 
 
 Scbollenberger v. Penna. 414d 
 
 School District v. Boston, Hart- 
 ford and Erie Co. 353 
 v. Insurance Co. 451 
 v. Stone 321, 332 
 Schooner v. Hinckley 542 
 Scbrieker v. Ridings 723 
 Scbroeder v. Detroit, etc., R'y 
 
 Co. * loo 
 
 8ECTION 
 
 Schufeldt v. Smith 668, 759 
 
 Scbulenberg v. Harriman 153 
 
 Scbultz v. Sutter 543 
 
 Schumm v. Seymour 258 
 
 Schurneier v. St. Paul, etc., R. 
 
 R. Co. 175a 
 
 Schurz v. Cook 816 
 
 Schuyler's Steam Tow Boat Co., 
 
 In re 690 
 
 Schuylkill Nav. Co. v. Thoburn 178 
 Schwartz v. Atlantic, etc., Tel. 
 
 Co. 357 
 
 Schwarzwelder v. Germ. Mut. 
 
 Ins. Co. 556 
 
 Scofield v. Railway Co. 309 
 
 v. State Nat. Bank 302 
 
 Scofield Rolling Mill Co. v. 
 
 Georgia 342 
 
 Scolfield G. & P. Co. v. Scolrield 137 
 Scotland County Court v. Hill 
 
 326, 333, 337 
 Scott v. Armstrong 670 
 
 v. Central R. R., etc., Co. 563 
 
 u. Depuyster 755 
 
 v. Deweese 738 
 
 v. Eagle Fire Ins. Co. 563, 566 
 
 v. Hansbeer 824 
 
 v. Johnson 236 
 
 v. Lord Eburv 76, 87 
 
 v. Middleton,"etc, R. R. Co. 211, 214 
 v. Nat. Bank of Chester Val- 
 ley 337 
 v. Pequonnock Nat. Bank 796 
 v. Snyder, etc., Co. 523 
 Scottish N. E. R'y Co. v. Stewart 141 
 Scottish Union Ins. Co. v. Heriott 
 
 400, 480 
 Scoville v. Thayer 541, 661, 709 
 
 Scranton Electric Co.'s Appeal 309c 
 Scranton G. & W. Co. v. Northern 
 
 C. & I. Co. 163a 
 
 Screven Hose Co. v. Philpot 276, 286 
 Scripture v. Francestown Soap- 
 stone Co. 589 
 Scruggs v. Scottish Mortgage Co. 400 
 Scudder v. Trenton Delaware 
 
 Falls Co. 163 
 
 Seale v. Baker 752, 756 
 
 Seamans v. Zimmerman 401 
 
 Searight v. Pavne 114, 522c, 752 
 
 Sears v. Hotchkiss 688, 690 
 
 Seaverns ». Presbyterian Hos- 
 pital 210 
 Secombe v. Railroad Co. 468, 473 
 Second Nat. Bank v. Burt 616, 631 
 v. Hall 148, 739 
 v. Western Nat. Bank 245 
 Security Bank v. National Bank 245 
 Security Co. v. Bennington Mon. 
 
 Ass'n 647 
 
 Security Saw Ass'n v. Elbert 401 
 
 893
 
 TABLE OF CASES. 
 
 SECTION 
 
 Sedalia W. and S. R'y Co. v. 
 
 Abell 516, 518 
 
 v. Wilkerson 91 
 
 Seeds Dry Plate Co. v. Heyn 
 
 Photo. Supply Co. 668, 759 
 
 Seeley v. New York, etc., Nat. 
 
 Exch. Bank 570 
 
 v. San Jose Mill Co. 202, 627, 632 
 Seeligson v. Brown 796 
 
 Seibert v. Lewis 333 
 
 Seixas v. New Orleans 436 
 
 Seligman v. Charlottesville Nat. 
 
 Bank 267 
 
 Sellers v. Greer 187 
 
 v. Phoenix Iron Co. 558, 627, 688 
 Sells v. Grocery Co. 668 
 
 Selma, etc., R. R. Co. v. Ander- 
 son 518, 523 
 v. Harbin 666 
 v. Tipton 91, 546 
 v. Tyson 392 
 Selma" R. and D. R. R. Co. v. 
 
 Camp 178 
 
 v. Keith 178 
 
 Semple v. Bank of British Co- 
 lumbia 401 
 v. Glenn 263, 709 
 Seneca County Bank v. Lamb 583 
 Senour Mfg. Co. v. Church 264 
 Sentell v. Hewitt 148 
 Sercomb v. Catlin 143 
 Severson v. Bi-Metallic Co. 647 
 Sewall v. Boston Water Power 
 
 Co. 592, 593 
 
 v. Brainerd 816a 
 
 Seward v. City of Rising Sun 479 
 
 Seymour v. Cemetery Ass'n 634 
 
 v. Chicago Guaranty, etc., Soc. 277 
 
 v. Detroit Rolling Mills 219 
 
 v. Sturges 700, 703 
 
 Shackleford v. Mississippi C. R. 
 
 R. Co. 427, 665 
 
 v. New Orleans, etc., R. R. Co. 647 
 Shamokin Valley R. R. Co. v. 
 
 Livermore 671 
 
 Shanc.k v. North. Cent. R'y Co. 365 
 Shane v. Kansas City, etc., R. 
 
 R. Co. 173 
 
 Sharp v. Mayor, etc., of New 
 
 York 342 
 
 Shaw v. Bill 681 
 
 v. Boston and W. R. R. Co. 374 
 v. Clark 210 
 
 v. Davis 5")4 
 
 v. Norfolk, etc., R. R. Co. 426, 
 
 666, 814 
 v. Port Philip, etc., M'g Co. 
 
 342, 598 
 v. Quincy Mining Co. 413 
 
 v. Railroad Co. 814, 816 
 
 v. Robinson 668 
 
 894 
 
 SECTION 
 
 Shaw v. Spencer 598, 797 
 
 Shawhan v. Zinn 140 
 
 Shawmut Bank v. Plattsburg, 
 
 etc., R. R. Co. 308 
 
 Shaw's Claim 87 
 
 Shay v. Tuolumne County Water 
 
 Co. 187 
 
 Shayne v. Evening Post Pub. 
 
 Co. 435 
 
 Sheffield Nickel Co. v. Unwin 
 
 224, 563 
 Sheffield R'y Co. v. Woodcock 511 
 Shelby Co. v. Union, etc., Bank 489 
 Shelbyville, etc., Turnpike Co. 
 
 v. Barnes 536 
 
 Sheldon v. B. A. R. R. Co. 173 
 
 Sheldon Hat Blocking Co. v. 
 
 Eickmeyer Hat, etc., Co. 187, 
 
 213, 225, 229, 609 
 
 Shellenberger v. Patterson 190 
 
 Shelliugton v. Howland 589, 723, 
 
 724, 748 
 Shenandoah Valley R. R. Co. 
 
 v. Griffiths 432, 796 
 
 Shenango and A. R. R. Co. v. 
 
 Braham 178 
 
 Shepaug Voting Trust Cases 627 
 Shepard v. Man. R'y Co. 176 
 
 Shepherd v. Gillespie 791 
 
 Shepherd's Case 589 
 
 Shepley v. Atlantic, etc., R. R. 
 
 Co. 125, 3056 
 
 Sheridan v. Sheridan Electric 
 
 Light Co. 141 
 
 Sheridan El. Light Co. v. Na- 
 tional Bank 233 
 Sherley v. Billings 347 
 Sherlock v. Ailing 350, 4746 
 Sherman v. Fitch 211, 212, 237 
 v. Hudson River R. R. Co. 361 
 v. McKeown 400 
 v. Milwaukee, etc., R. R. Co. 175a 
 v. Smith 500 
 Sherman Centre, Town Co. v. 
 
 Morris 277 
 
 Sherman Centre, Town Co. v. 
 
 Swigart 237 
 
 Sherman County v. Simmons 321 
 Sherry v. Wakefield lust. 210 
 
 Sherwood v. Alvis 401 
 
 v. A. & D. R. Co. 415, 416, 454 
 
 v. St. Paul and C. R'y Co. 178 
 
 Shewalteru. Pirner 276, 303 
 
 Sliihley v. Angle 100 
 
 Shickle v. Watts 702, 729 
 
 Shields v. Ohio 424, 4766 
 
 Shiff v. N. Y. C. and H. R. R. 
 
 R. Co. 364 
 
 Ship's Case 110 
 
 Shipley v. Baltimore, etc., R. R. 
 
 Co. 179
 
 TABLE OF CASES. 
 
 SECTION 
 
 Shively v. Eureka M. Co. 687 
 
 Shockley v. Fisher 542, 668 
 
 Shoe Co. v. Thompson 668 
 
 Shoe and Leather Bank v. 
 
 Thompson 137 
 
 Shoemaker v. Nat. Mechanics' 
 
 Bank 161 
 
 v. Washburn Lumber Co. 780 
 
 Shore Liue R. R. Co. v. Maine 
 
 Cen. R. R. Co. 435 
 
 Short v. Medbury 734 
 
 v. Stevenson 82 
 
 Shorter v. Smith 453 
 
 Shortridge v. Bosanquet 748 
 
 Shortz v. Unangst 258, 573 
 
 Shotwell v. Mali 696, 755 
 
 Shrewsbury v. North Stafford- 
 shire R'y Co. 88, 291 
 Shriver v. Sioux City 353 
 Shreyer v. Montgomery, etc., 
 
 Co. 87 
 
 Shropshire, etc., R'ys Co. v. 
 
 Queen 511, 598 
 
 Shuey v. Holmes 542, 718 
 
 Shultz v. Christmau 615, 616, 757 
 Shurtleff v. Wiscassett 330 
 
 Shurtz v. Schoolcraft, etc., R. R. 
 
 Co. 516 
 
 Sias i\ Consol. Lighting Co. 258 
 
 Sibell v. Remsen 298 
 
 Sibley v. Quinsigamond Nat. 
 
 Bank 599, 796 
 
 Siebe v. Machine Works 238 
 
 Silk M'f'g Co. v. Campbell 138 
 
 Silkstone Fall Colliery Co., Re 574 
 Silliman v. Fredericksburg, etc., 
 
 R. R. Co. 195 
 
 Silsliy v. Strong 614 
 
 Silver Hook Road v. Green 233, 234, 
 
 543 
 Silver Lake Bank v. North 302, 384 
 Si mm o. Anglo-American Tele- 
 graph Co. 593 
 Simmons v. Hill 740 
 v. Steamboat Co. 459 
 Simon v. Sevier Assoc. 260 
 Simons v. First Nat. B'k 302 
 v. Vulcan Oil Co. 82 
 Simonson v. Spencer 725 
 Simpson v. Building Ass'n 276 
 v. Denison 308 
 v. Garland 189 
 v. Railroad Co. 368 
 v. Westminster Palace Hotel 
 Co. 556 
 Sims v. Street R. R. Co. 219, 224 
 Sinclair o. Fuller 767 
 v. Hutchinson 655, 708 
 Singer v. Given 148, 729, 737. 745 
 v. Salt Lake C. M. Co. 
 
 260, 261, 381, 632 
 
 453 
 
 Branch 
 
 453, 488 
 
 363 
 
 610, 693 
 
 Co. 
 
 R 
 
 etc., 
 
 518 
 589 
 282 
 
 141 
 236 
 383 
 474 
 753 
 806 
 
 SECTION 
 
 Singer M'f'g Co. v. Holdsfodt 377 
 Single v. Supervisors 325 
 
 Singleton v. Southwestern R. 
 
 R. Co. 170, 305 
 
 Sinking Fund Cases 499 
 
 Sinnickson v. Johnson 171 
 
 Sioux City R. R. Co. v. N. A. Tr. 
 
 Co. 283 
 
 Sioux City and P. R'y Co. v. 
 
 United States 565 
 
 Sixth Ave. R. R. Co. v. Kerr 
 
 163a, 165, 470 
 Skaneateles Water Co. v. Skane- 
 
 ateles 
 Skelly v. Jefferson 
 
 Bank 
 Skinner v. Hall 
 
 v. Smith 
 Skowhegan and A. R 
 
 v. Kinsman 
 Skowhegan Bank v. Cutler 
 Slater Woolen Co. v. Lamb 
 Slatterly v. St. Louis, 
 
 Trans. Co. 
 
 Slattery v. North End Sav. B'k 
 
 Slaughter v. Commonwealth 
 
 Slaughter House Cases 
 
 Slawson v. Loring 
 
 Slaymaker v. Gundacker 
 
 Slee v. Bloom 432, 549, 745 
 
 v. International Bank 589 
 
 Sleeper v. Goodwin 734 
 
 v. Norris 432 
 
 Slipher v. Earhart 511, 519 
 
 Sloan v. Central Iowa R'y Co. 417 
 
 v. Pacific R. R. Co. 4766 
 
 Slocum v. Providence Steam and 
 
 Gaspipe Co. 147, 537, 738 
 
 v. Warren 537 
 
 Small v. Herkimer, etc., Co. 513, 546 
 
 v. C. R. I., and R. R. R. Co. 282 
 
 Smead v. Indianapolis, P. and 
 
 C. R. R. Co. 
 Smelser v. Wayne Turnpike Co. 
 Smith v. Alvord 
 
 v. Bradt Printing Co. 
 
 v. Chesapeake and Ohio 
 
 Canal Co. 
 v. Chicago and N. W. R'y Co. 
 v. Colorado Fire Ins. Co. 
 v. Corporation of Washington 
 
 167, 177 
 v. Crescent City Live Stock, 
 
 etc., Co. 796 
 
 v. Dorn 260, 689 
 
 v. Eastwood Wire Co. 498 
 
 v. Exchange Bank 161 
 
 v. First Nat. Bank 239, 337 
 
 v. Goldsworthy 133 
 
 v. Gower 542 
 
 v. Hannibal, etc., R. R. Co. 368 
 
 895 
 
 453 
 146 
 381 
 759 
 
 664 
 415 
 148
 
 TABLE OF CASES. 
 
 
 SECTION 
 
 Smith v. Heideker 
 
 537 
 
 v. Huckabee 
 
 725, 783 
 
 v. Hurd 
 
 615, 690 
 
 v. Johnson 
 
 70(1 
 
 v. Londoner 
 
 725, 755 
 
 v. Long Island R. R. Co. 647 
 
 v. Los Angeles Im. Ass'n 628, 636 
 
 v. McCullough 676 
 
 v. Mosby 670, 810, 813 
 
 v. Mutual Life Ins. Co. 393 
 
 v. Nelson 584 
 
 v. New Hartford Water Co. 86 
 
 v. North Am. M'f'g Co. 569 
 
 v. North Carolina R. R. Co. 353 
 
 v. Parker 87 
 
 v. Plank Road Co. 158, 521 
 
 v. Prattv'le Mfg. Co. 553, 562, 694 
 
 v. Putnam 646, 759 
 
 v. Railroad Co. 592, 595, 657, 660 
 
 v. San Francisco, etc., R'y Co. 788 
 
 v. Silver Valley M'f'g Co. 381, 
 
 382, 449 
 
 u. Smith 196, 230, 238, 432 
 
 ». Soutb Royalton Bank 210 
 
 v. State 460 
 
 13. Steel 688, 714 
 
 13. St, Louis Mut. Life Ins. Co. 394 
 
 v. St. Louis & S. W. R'y Co. 474d 
 
 v. Weed Sewing Machine Co. 384 
 
 13. Wells Mfg. Co. 238 
 
 B. Whiting 193 
 
 Smith's Case 745, 782 
 
 Smith's Estate 799 
 
 Smoot v. Wetumpka 376 
 
 Smyth y. Ames 476a, 476b 
 
 Sneath v. Valley Gold 816a 
 
 Snell 13. Buresh* 169 
 
 u. Chicago 131 
 
 Sniders' Sons Co. v. Troy 148, 739 
 
 Snook 13. Georgia Imp. Co. 531 
 
 Snow 13. Boston Blank Book Co. 556 
 
 i\ Church 559a 
 
 Snyder v. Penn. R. R. Co. 175a 
 
 Snyder Bros. v. Bailey 137 
 
 Societe Fonciere v. Milliken 395 
 
 Society for Savings 13. Coite 482 
 
 Society Perun 13. Cleveland 145 
 
 Solis 13. Blank 144 
 
 Solomon's Lodge v. Montmollin 204 
 
 Solomon It. R. Co. 13. Jones 237 
 
 Somerset R. R. Co. 13. Clarke 517 
 
 13. dishing 517, 519 
 
 Somes 13. Currie 787 
 
 Sonoma Valley Bank o. Hill 715, 722 
 
 Sonder 13. Columbia Nat. Bank 598 
 
 South and North Alabama R. 
 
 R. Co. 13. Cliappell 335, 342 
 
 13. Highland Ave., etc., R. R. 
 
 Co. 128, 303 
 
 13. Henlein 353 
 
 v. McLendon 377 
 
 S96 
 
 SECTION 
 
 South and North Alabama R. R. 
 
 Co. 13. Wood 350, 360 
 
 South Bend, etc., Co. 13. Insur- 
 ance Co. 655 
 South Bend Steel Plow Co. v. 
 
 Cribb Co. 759 
 
 South Branch Ry. Co. ». Long 740 
 South Carolina v. Gaillard 494 
 
 South Carolina R. R. Co. v. 
 
 Blake 424 
 
 So. Car. & Ga. R. R. Co. d. Aug. 
 
 So. R. R. Co. 130 
 
 Ex parte 164 
 
 South Georgia, etc., R. R. Co. 
 
 13. Ayres 529 
 
 South Joplin Land Co. v. Case 83,84 
 South Mountain Cons. M'g Co., 
 
 In re 702 
 
 South School District 13. Blakes- 
 
 lee 158, 574 
 
 South Wales R'y Co. v. Red- 
 mond 308 
 South Yorkshire R'y Co. 13. 
 
 Great Northern R'y Co. 291 
 
 Southern Building Ass'n 13. Nor- 
 man 383 
 Southern B. & L. Ass'n v. 
 Casa Grande Stable Co. 
 
 130, 295,311 
 
 Southern Exp. Co. 13. Armstead 359 
 
 13. Caperton 356 
 
 13. Cook 353 
 
 13. Uickson 360 
 
 13. Fitzner 342 
 
 13. Kaufman 360 
 
 D.Memphis, etc., R. R. Co. 309 
 
 13. Moon 353 
 
 v. Shea 363 
 
 13. Van Meter 360 
 
 Southern Hotel Co. i>. Newman 263 
 
 Southern Life Ins. Co. 13. Lanier 529 
 
 Southern Minn. R. R. Co. 13. 
 
 Stoddard 162 
 
 Southern Pac. R. R. Co. 13. Cali- 
 fornia 468 
 13. Denton 400 
 13. Orton 451 
 13. Raymond 163 
 13. Reed 175a 
 v. Wilson 166 
 Southern Penn. R. R. Co. 13. 
 
 Stevens 531 
 
 Southern Ry. Co. 13. Carnegie 
 
 Steel Co. 822 
 
 13. Franklin R. R. Co. 416 
 
 Southgate v. Atlantic and Pac. 
 
 R. R. Co. 202 
 
 Southwestern R. R. Co. 13. Fel- 
 
 der 360 
 
 13. Southern, etc., Tel. Co. 163a 
 13. Wright 4926
 
 TABLE OF CASES. 
 
 SECTION 
 
 Sovereign Camp v. Fraley 382 
 
 Spaeknian v. Evans 550, 780 
 
 Spafford v. First Nat. Bank 161 
 
 Spahn v. Farmers 1 Bank 14(3 
 
 Spalding v. Oakes 803 
 
 Spangler v. Butterfield 114, 202 
 
 Sparks v. Accident Ass' n 402 
 
 v. Dispatch Co. 237 
 
 v. Dunbar 187 
 
 v. Farmers' Bank 249 
 
 Sparrow v. Evansville, etc., R. R. 
 
 Co. 536 
 
 Spaulding v. Chicago and N. W. 
 
 R'y Co. 368 
 
 v. No. Milwaukee T. S. Co. 629 
 
 Spear v. Crawford 92 
 
 v. Hart 798 
 
 v. Ladd 233 
 
 Speirs v. Union Drop Forge Co. 248 
 
 Spence v. Mobile, etc., R. R. Co. 264 
 
 v. Shepard 722 
 
 Spering's Appeal 620, 623, 626 
 
 Spiller v. Paris Skating Rink Co. 87 
 
 Spofford v. Bucksport, etc., R. 
 
 R. Co. 163 
 
 Spohn v. Missouri Pac. R'y Co. 347 
 
 Spooner v. Phillips 562, 801 
 
 Sprague v. Cutler, etc., Co. 400 
 
 v. N. Y. C. R. R. Co. 360 
 
 v. Illinois River R. R. Co. 536 
 
 v. National Bank 702 
 
 v. Smith 417 
 
 Sprigg v. Western Tel. Co. 502 
 
 Spring Co. v. Knowlton 133, 313 
 
 Spring Valley Water Works, 
 
 In re 451 
 
 v. San Francisco 498 
 
 v. Schofler 464, 477«, 497, 499 
 
 Springer v. United States 478 
 
 Spurlock v. Pacific Railroad 583, 603 
 Squire v. N. Y. Central R. R. Co. 351 
 St. Albans v. National Car Co. 479 
 St. Anthony Falls Co. v. East- 
 man 376 
 St. Charles M'f'g Co. v. Britton 537 
 St. Clair v. Cox 395, 399, 472 
 St. James's Parish v. Newbury- 
 
 port Horse R. R. Co. 259 
 
 St. John v. Erie R'y Co. 
 
 563, 565, 708 
 St. Johns M'f'g Co. v. Munger 104 
 St. Joseph, etc., R. R. Co. v. 
 
 Ryan 162 
 
 St. Joseph, etc., R'y Co. v. 
 
 Shambaugh 155, 449 
 
 St. Joseph Township v. Rogers 330 
 St. Lawrence Steamboat Co., 
 
 Re Election of 479, 577, 578, 614 
 St. Louis v. Western Un. Tel. Co. 486 
 St. Louis A. and C. R. Co. v. 
 
 Dalby 348 
 
 57 
 
 SECTION 
 
 St. Louis and St. Jo. R. R. Co. 
 
 v. Richardson 179 
 
 St. Louis and S. F. R'y Co. v. 
 
 Wilson 599 
 
 St. Louis Drug Co. v. Robinson 281 
 St. Louis, etc., Coal Co. v. 
 
 Sandoval Coal Co. 436, 
 
 437, 608 
 St. Louis, etc., R. R. Co. v. 
 
 Anderson 178, 179 
 
 v. Cleveland, etc., R. R. Co. 822 
 v. Eakins 517 
 
 v. Gilliam 366 
 
 v. Kerby 178, 179 
 
 v. Lamed 362, 363 
 
 v. Marker 425 
 
 v. Mathers 162 
 
 v. Mathews 475 
 
 v. Miller 415 
 
 v. Montgomery 360 
 
 v. Morris 179 
 
 v. N. W. St. Louis R'y Co. 174 
 
 v. O'Hara 647 
 
 v. Payne 372 
 
 v. Terre Haute, etc., R. R. Co. 279 
 v. Tiernan 84, 522c, 646 
 
 o. Waller 633 
 
 v. Willis 170 
 
 St. Louis, etc., R'y Co. v. Belle- 
 ville R'y Co. 145 
 v. James 412 
 St. Louis, K. C. and N. R'y 
 
 Co. v. Piper 353 
 
 St. Louis w. Manufacturers' 
 
 Savings Bank 488 
 
 St. Louis Colonization Ass'n 
 
 v. Hennessy 149, 538 
 
 St. Louis Domicile, etc., Ass'n 
 
 v. Augustin 189 
 
 St. Louis Gas Light Co. v. St. 
 
 Louis 150 
 
 St. Louis, I. & M. R. R. Co. v. 
 
 Berry 490 
 
 St. Louis, I. & M., etc., Ry. Co. 
 
 v. Paul 499 
 
 St. Louis Perpetual Ins. Co. v. 
 
 Cohen 392 
 
 v. Goodfellow 603 
 
 St. Louis R. R. Co. v. North- 
 western St. Louis R'y Co. 
 
 152, 174 
 St. Louis R'y Co. v. Weakly 364 
 
 St. Louis R'y Supplies Co. v. 
 
 Harbine 501, 714 
 
 St. Louis Stoneware Co. v. 
 
 Partridge 282 
 
 St. Mary's Church, Case of 227 
 
 St. Paul, etc., R. R. Co. v. Rob- 
 bins 520 
 St. Paul & N. R. R. Co., In re 408 
 St. Paul Fire Ins. Co. v. Allis 145, 451 
 
 897
 
 TABLE OF CASES. 
 
 SECTION 
 
 Stafford v. American Mills Co. 394 
 Stafford National B'k v. Palmer 
 
 148, 739 
 Stalin v. Catawba Mills 687 
 
 Stamper v. Swan 201 
 
 Standley v. Hendin M'f'g Co. 824a 
 Stauge v. Hill, etc., St. K'y Co. 175a 
 Stanhope's Case 548 
 
 Stanley v. Luse 630 
 
 v. Schwalby 462 
 
 v. Stanley 501, 589 
 
 Stanton v. Alabama, etc., R. 
 
 R. Co. 815 
 
 v. New York, etc., R. R. Co. 87 
 
 v. Wilson 108 
 
 Star Line v. Van Vliet 182 
 
 Stark Bank v. U. S. Pottery Co. 193 
 
 Starkweather v. American Bible 
 
 Soc'y 387 
 
 Starr v. Camden, etc., R. R. Co. 175a 
 
 Starrett v. Rockland Fire Ins. Co. 515 
 
 State v. Accommodation Bank 449 
 
 v. American Cotton Oil Trust 309c 
 
 v. Anniston Rolling Mills 479 
 
 v. Ass'd Press 309a, 476a 
 
 v. Atchison & N. R. R. Co. 305 
 
 v. Atherton 199, 240 
 
 o. Bailey 421, 459 
 
 v. Baltimore and Potomac 
 
 R. R. Co. 376 
 
 v. Baltimore and O. R. R. Co. 568 
 v. Bank 477a 
 
 v. Bank of Louisiana 33, 687 
 
 v. Bank of Maryland 130, 432, 668 
 v. Bank of Washington 436 
 
 v. Barron 432, 459 
 
 v Benefit Ass'n 647 
 
 v. Berry 488 
 
 v. Bienville Oil Works Co. 585 
 
 v. Bonnel 574 
 
 v. Boston, Concord, etc., R. R. 
 
 Co. 384, 386 
 
 v. Brown 559 
 
 v. Building Association 459 
 
 v. Butler 432 
 
 v. Capital City Dam Co. 459 
 
 v. Carpenter 599 
 
 v. Central Ohio Relief Ass'n 
 
 451, 459 
 v. Cherraw, etc., R. R. Co. 599 
 
 v. Chute 577 
 
 V. Cincinnati 460 
 
 v. Cincinnati, N. O., etc., 
 
 R. R. Co. 309 
 
 v. Citizens' Savings Bank 201 
 
 v. Commercial Bank 239 
 
 v. Commercial State Bank 750 
 
 v. Com'r of Railroad Taxa- 
 tion 464 
 v. Constantine 577 
 v. Commissioners 491 
 
 898 
 
 SECTION 
 
 State v. Conklin 583 
 
 v. Consolidation Coal Co. 305 
 
 v. Consolidation Co. 457 
 
 v. Coonan 576 
 
 v. Council Bluffs Ferry Co. 460 
 v. Crawfordsville T. P. Co. 459 
 v. Curtis 190, 583 
 
 v. Dawson 449 
 
 v. Dayton, etc., R. R. Co. 454 
 
 v. District Court 396 
 
 v. East Orange 475 
 
 v. Eastern and A. R. R. Co. 163a 
 v. Equitable L. & I. Co. 459 
 
 v. Essex Bank 459 
 
 v. Ferris 578, 589 
 
 v. Firemen's Fund Ins. Co. 210, 
 335, 309a 
 v. Fourth N. H. Turnpike 460 
 
 v. Goodwinsville, etc., Road 
 
 Co. 460 
 
 v. Greer 577 
 
 v. Hartford and N. H. R. R. 
 
 Co. 308, 454 
 
 v. Hazleton, etc., R'y Co. 459 
 
 v. Hogan 459 
 
 v. Holmes 556 
 
 v. Irrigating Co. 132 
 
 v. Kidd 479 
 
 v. Krebs 120 
 
 v. Land & Timber Co. 392 
 
 o. Leete 614 
 
 v. Lesauer 421, 430 
 
 v. Lincoln Trust Co. 120, 157 
 
 v. Macon County 333 
 
 v. Maine Central R. R. Co. 491 
 
 u. Mansfield 128 
 
 v. Mayor of Manitowoc 333 
 
 v. McDaniel 577, 614 
 
 v. McGrath 133 
 
 v. Merchant 228, 577a 
 
 v. Merchants' Exchange 583 
 
 v. Middletown Turnpike Co. 671 
 v. Milwaukee, etc., R. K. Co. 459 
 o. Minnesota Cent. R'y Co. 459 
 v. Minnesota Thresher M'f'g 
 
 Co. 459 
 
 v. Mississippi, etc., R. R. Co. 460 
 v. Mitchell 140, 230, 430 
 
 v. Montclair R. R. Co. 163a 
 
 v. Morgan 125, 490 
 
 v. Morris 474 
 
 v. Morristown Fire Ass'n 567 
 
 v. Murphy 474 
 
 v. Nashville, etc., R. R. Co. 464 
 v. National Bank 416, 667 
 
 v. Nebraska Distilling Co. 309c 
 v. Newark 128 
 
 v. New Haven, etc., Co. 162a, 475 
 v. Newman 130 
 
 v. New Orleans, etc., R. R. Co. 577a 
 v. New Orleans Gas Light Co. 589
 
 TABLE OF CASES. 
 
 SECTION 
 
 State v. Northern Central K'y Co. 
 
 406, 409, 488, 676 
 v. Noyes 453, 475 
 
 o. Old Town Bridge Co. 460 
 
 v. Pacific Brewing Co. 586 
 
 v. Patterson, etc., R. R. Co. 454 
 v. Pawtuxet Turnpike Co. 459, 460 
 v. Payne 430 
 
 v. Person 464 
 
 v. Pettineli 575 
 
 v. Portland Natural Gas Co. 309c 
 v. R'y Co. 131 
 
 v. R. R. Comm'rs 170, 432 
 
 v. Railway Co. 141 
 
 v. Railway and B. Co. 459 
 
 v. Real Estate Bank 459 
 
 v. Rio Grande R'y Co. 459 
 
 v. Rives 432, 671 
 
 v. Rombaur 599 
 
 v. Rubber M'f g Co. 759 
 
 v. Saline County Court 328 
 
 v. Shapleigh Hardware Co. 651 
 v. Sherman 131, 305 
 
 v. Smith 136, 569 
 
 v. So. Pac. R. R. Co. 380 
 
 v. South. Pac. R. R. Co. 460 
 
 v. Spartenburg Ry. Co. 460 
 
 v. Stephens 479 
 
 t>. Standard Oil Co. 51, 3096, 400a 
 v. Taylor 460 
 
 v. Telephone Co. 454 
 
 v. Tudor 579, 582 
 
 y. Union Stockyards Bank 721 
 
 v. Vanderbilt 457, 459 
 
 v. Water Co. 131, 384 
 
 r. W. U. M. Life Ins. Co. 401 
 
 o. Wabash R'y Co. 417 
 
 v. Western, etc., R. R. Co. 167, 434 
 v. Western Un. Tel. Co. 480 
 
 v. Wood 459 
 
 D. Wright 575 
 
 v. Young 450 
 
 State Bank v. Chetwood 257 
 
 v. City of Richmond 477a 
 
 v. Fox 135, 569 
 
 v. Knopp 453, 488 
 
 State Board of Agriculture v. 
 
 Citizens' St. Ry. Co. 280 
 
 State Board of Assessors v. 
 
 Morris & E. R. R. Co. 490 
 
 State Fire Ins. Co., In re 659 
 
 State Freight Tax, Case of 485 
 
 State Ins. Co. v. Sax 796 
 
 State Nat. B'k v. Union Nat. B'k 381 
 State of Florida v. Florida Cen- 
 tral R. R. Co. 138, 256 
 State of Louisiana v. Bank of 
 
 Louisiana 562 
 
 v. North Louisiana and T. 
 R. R. Co. 793 
 
 SECTION 
 
 State of Minnesota v. Winona, 
 
 etc., R. R. Co. 476a 
 
 State of New Hampshire ». 
 
 State of Louisiana 462 
 
 State of Ohio v. Pennsylvania, 
 
 etc., Canal Co. 460 
 
 v. Sherman 131, 305 
 
 State of Oregon v. Smith 577 
 
 State of Pennsylvania v. Wheel- 
 ing, etc., Bridge Co. 171, 459 
 State of Tenn. v. Davis 241 
 
 State Railroad Tax Cases 477a, 492 
 State Savings Ass'n v. Kel- 
 logg 825 
 State Tax on Foreign Held 
 
 Bonds, Case of 479, 492a 
 
 State Tax on Railway Gross 
 
 Receipts 485 
 
 State Tonnage Taxes 480 
 
 State Treasurer v. Auditor Gen- 
 eral 419, 479 
 Steacy v. Little Rock, etc., R. 
 
 R. Co. 522c, 702 
 
 Steamboat Co. v. McCutcheon 
 
 204, 384 
 Steamboat New World v. King 352 
 Steam Engine Co. v. Hubbard 764 
 Steam Navigation Co. v. Weed 276 
 Steamship Co. v. Portwardens 4746 
 v. Tugman 412 
 
 Steamship Dock Co. v. Heron's 
 
 Administratrix 600, 601 
 
 Stearns Stone Cutter Co. v. 
 
 Scott 751 
 
 Stearns v. Minn. 488 
 
 Stebbins v. Edmunds 764, 774 
 
 v. Merritt 575 
 
 Steckle o. First Nat. Bank 342 
 
 Steele ». Russell 346 
 
 v. Townsend 353 
 
 Steenerson v. Great Northern R. 
 
 R. Co. 4766 
 
 Steers o. Liverpool, etc., Steam- 
 ship Co. 359 
 Steiner v. Steiner L. & L. Co. 120, 
 267, 285, 295 
 Steins v. Franklin County 325 
 Steinke v. Loofboriow 721 
 Steinway, Matter of 585 
 Steinweg v. Erie Railway 351 
 Stephens v. Fox 737 
 Sterling's Appeal 175 
 Stetler i\ Chicago, etc., R'y Co. 366 
 Stetson v. Chicago and E. R. R. 
 
 Co. 175a 
 
 Stettaner v. N. Y., etc., Cons. 
 
 Co. 585 
 
 Stevens v. Boston and M. R. R. 
 
 Co. 360 
 
 v. Carp River Iron Co. 210 
 
 899
 
 TABLE OF OASES. 
 
 SECTION 
 
 Stevens v. Corbitt 515 
 
 v. Davison 229 
 
 v. Eden Meeting House Soc'y 573 
 v. Patterson and N. R. R. Co. 174 
 v. Pratt 388 
 
 v. Rutland, etc., R. R. Co. 556 
 
 Stewart, Ex parte 210 
 
 Stewart v. Brooklyn and Cross- 
 town R. R. Co. 335, 347 
 v. Erie and Western Transp. 
 
 Co. 308, 309, 556 
 
 v. Firemen's Ins. Co. 592 
 
 v. Hoyt 137 
 
 v. Lehigh Valley R. R. Co. 309, 
 
 630, 631 
 
 v. Printing Co. 586 
 
 Stewart's Appeal 305 
 
 Stewart's Case 110 
 
 Stiles v. Laurel Fork Co. 436 
 
 Stillman v. Dougherty 519 
 
 Stilphen v. Ware 736 
 
 Stimson v. Connecticut River 
 
 R. R. Co. 355 
 
 Stinchfield v. Little 753 
 
 Stinson v. Chicago, St. P., etc., 
 
 R. R. Co. 178 
 
 v. Thornton 795 
 
 Stocker v. Wedderburn 112 
 
 Stockholders, etc., v. Louisville, 
 
 etc., R. R. Co. 573 
 
 Stockley v. Thomas 392 
 
 Stocks v. Van Leonard 707 
 
 Stockton Sav. Bank v. Staples 128 
 Stockton, etc., R. R. Co. v. City 
 
 of Stockton 319 
 
 Stoddard v. Lum 393 
 
 Stokes v. Detrick 212, 213 
 
 v. Lebanon, etc., Turnpike Co. 
 
 515, 546 
 v. New Jersey Pottery Co. 202. 236 
 v. Saltonstall 169, 349, 351, 375 
 
 v. Stickney 771 
 
 Stone v. Cartwright 755 
 
 v. C. and N. W. R. Co. 348 
 
 v. Elliott 327 
 
 v. Fenno 699 
 
 v. Illinois Central R'y Co. 170 
 
 v. Kellogg 585 
 
 v. Mississippi 474 
 
 Stoneham Branch R. R. Co. v. 
 
 Gould 5 17 
 
 Stoney v. American Ins. Co. 205, 285 
 Storage Co. v. Assessors 511 
 
 Storey v. New York Elevated 
 
 R. R. Co. 173, 174, 176 
 
 Story v. Concord, etc., R. R. Co. 365 
 
 Stough v. Ponca Mills Co. 668, 759 
 
 Stout v. Hubbell 702 
 
 v. Sioux City, etc., R. R. 382, 412 
 
 v. Y eager Milling Co. 759 
 
 v. Zulick 145, 148, 739 
 
 900 
 
 SECTION 
 
 Stoutmore v. Clark 146 
 
 Stover v. Flack 742 
 
 Stowe v. Flagg 451 
 
 v. Wyse 184, 201, 573, 574 
 
 Stoystown Turnpike Road Co. 
 
 v. Craver 258 
 
 Stratt'ou's Exrs. Case 748 
 
 Strafford National Bank v. 
 
 Dover 484 
 
 Strand Music Hall Co., In re 675 
 
 Strange v. H. & T. C. R. R. Co. 594 
 Strasburg R. R. Co. v. Echter- 
 
 nacht 109 
 
 Stratton v. European, etc., R'y 
 
 417, 815 
 v. Lyons 189, 740 
 
 Street v. Ballis 102 
 
 Street R. R. Co v. Morrow 477a 
 
 v. Nolthenins 376 
 
 Stringer's Case 622 
 
 Stringham u. Oshkosh and M. 
 
 R. R. Co. 260 
 
 Strong v. Brooklyn Crosstown 
 
 R. R. Co. 570 
 
 v. McCagg 611 
 
 v. Sacramento, etc., R. R. Co. 373 
 
 v. Smith 578 
 
 v. Wheaton 737 
 
 Stuart v. Hayden 749 
 
 Studebaker v. Montgomery 146 
 
 ». Perry 727 
 
 Sturges v. Burton 764 
 
 o. Crowinshield 493 
 
 ». Knapp 756, 814 
 
 v. Stetson 541, 678 
 
 v. Vanderbilt 432, 703 
 
 Suburban R. T. Co. v. Mayor, 
 
 etc., of New York 163a 
 
 Sugden r. Alsbury 800 
 
 Sullivan v. Lewiston Institu- 
 tion of Savings 199 
 v. Triunfo Mining Co. 627 
 Summitt v. State 348, 371 
 Sumner v. Richardson Lake 
 
 Dam Co. 167 
 
 Sum rail v. Sun Mutual Ins. Co. 449 
 Sun Pr. & Pub. Ass'n v. Moore 202 
 Sunderland v. Westcott 359 
 
 Sunny South L. Co. v. Nei- 
 
 meyer L. Co. 400 
 
 Supervisors v. Durant 333 
 
 v. Gabraith 320, 330 
 
 v. Miss., etc., R. R. Co. 531 
 
 v. Schenck 325, 330 
 
 v. Stanley 484, 492 
 
 v. Wisconsin Central R. R. 
 
 Co. 162a, 3056 
 
 Supply Ditch Co. v. Elliot 594 
 
 Supreme Commandery v. Ains- 
 
 worth 498, 583 
 
 Supreme Lodge v. Simering 581
 
 TABLE OF CASES. 
 
 SECTION 
 
 Supreme Order of Iron Hall v. 
 
 Griggsby 401 
 
 Supreme Sitting, etc., v. Baker 431 
 Susquehanna Boom Co. v. West 
 
 Branch Boom Co. 468 
 
 Susquehanna Bridge Co. v. Gen- 
 eral Ins. Co. 125 
 Sussex R. R. Co. v. Morris and 
 
 Essex R. R. Co. 308 
 
 Sutherland v. Olcott 133 
 
 Sutliff v. Lake County 332 
 
 Sutter St. R. R. Co. v. Baum 632, 634 
 Sutton v. N. Y. C. and H. R. 
 
 R. R. Co. 371 
 
 Sutton M'f'g Co. v. Hutchinson 759 
 Sutton's Hospital, Case of 
 
 10, 12, 13. 14 
 Suydam v. Moore 752 
 
 Swan v. Manchester, etc., R. R. 
 
 Co. 348 
 
 v. North British, etc., Co. 593 
 
 v. Williams 163 
 
 Swan Land Co. v. Frank 703 
 
 Swann o. Clark 822 
 
 v. Wright's Ex'r 813 
 
 Swartwout v. Mechanics' Bank 672 
 
 v. Michigan Air Line R. R. 
 
 Co. 146, 518 
 
 Swearingen v. Dairy Co. 709 
 
 Sweatland v. 111. and Miss. Tel. 
 
 Co. 357 
 
 Sweeney v. Old Colony R. R. 
 
 Co. 371 
 
 Sweeny v. Sugar Co. 644, 759 
 
 Swepson v. Bank 663, 668, 710 
 
 Swift o. Smith 187 
 
 v. Tyson 468 
 
 Swim v. Wilson 795 
 
 Swindler v. Hilliard 353 
 
 Swing v. Bentley Co. 393 
 
 Swinney v. Ft. Wayne, etc., R. 
 
 R. Co. 163 
 
 Sykes v. People 158 
 
 Symon's Case 586, 747 
 
 Symonds v. Lewis 759 
 
 Syracuse, etc., R. R. Co., In re 
 
 Application of 577a 
 
 Taber v. Interstate B. & L. Ass'n 400 
 Tafft v. Praesidis, etc., R. R. 
 
 Co. 594 
 
 Taft v. Hartford, etc., R. R. Co. 565 
 v. Quinsigamond Nat. B'k 672 
 
 Taggart v. Western Md. R. R. Co. 91 
 Tait's Case 110 
 
 Talbot «>. Hudson 163, 4696 
 
 Talbott v. Silver Bow County 483 
 Talcott o. Wabash R. R. Co. 363 
 
 Talladega Ins. Co. v. Peacock 193 
 
 SECTION 
 
 Tallmadge v. Fishkill Iron Co. 
 
 522c, 702, 731 
 
 Talmage v. Pell 
 
 273 
 
 Talman v. Rochester City Bank 
 
 161 
 
 Tammany Water Works v. 
 
 
 New Orleans 
 
 474 
 
 Tappan v. Merchants' Nat. 
 
 
 Bank 
 
 479 
 
 Tarbell v. Page 
 
 751 
 
 Tarbell Admr. v. Rutland R. R. 
 
 
 Co. 
 
 365 
 
 Tarble's Case 456, 
 
 461 
 
 Tai box v. Gorham 
 
 210 
 
 Tar River Co. v. Neal 
 
 738 
 
 Tatem v. Wright 383, 
 
 480 
 
 Tatum v. Rosenthal 
 
 737 
 
 Tavistack Ironworks Co., In re 
 
 
 Lyster's Case 
 
 262 
 
 Tawas, etc., R. R. Co. v. Cir- 
 
 
 cuit Judge 415, 657 
 
 Taxpayers v. Tennessee Central 
 
 R.K. Co. 321 
 
 Taylor v. Agricultural, etc., 
 
 Ass'n 125, 214, 225, 234, 254, 813 
 
 v. Branham 
 
 382 
 
 v. Chicester and Midhurst 
 
 
 R'y Co. 264, 269, 
 
 291 
 
 u. Bowker 
 
 736 
 
 v. Collier 
 
 361 
 
 v. Earle 268, 
 
 608 
 
 v. Gas and Coke Co. 
 
 382 
 
 v. Gross, etc., M'f'g Co. 
 
 725 
 
 v. Grand Trunk R'y Co. 350, 
 
 377 
 
 v. Granite Assoc. 
 
 397 
 
 v. (xray 435, 
 
 759 
 
 o. Griswold 577, 
 
 579 
 
 v. Holmes 
 
 140 
 
 o. Inll 
 
 719 
 
 v. Little Rock, etc., R. R. Co. 
 
 364 
 
 v. Miami Exp. Co. 
 
 135 
 
 o. Mitchell 
 
 759 
 
 r. North Star M'f'g Co. 
 
 280 
 
 v. Pliila. and Reading R. R. Co. 
 
 126 
 
 v. South and North Alabama 
 
 
 R. Co. 
 
 270 
 
 v. Street Ry. Co. 145 
 
 175 
 
 &. Taylor 618 
 
 756 
 
 v. Trust Co. 
 
 384 
 
 Taylor & Co. v. Little Rock, etc., 
 
 
 R. R. Co. 
 
 353 
 
 Teague v. Le Grand 
 
 660 
 
 Teasdale's Case 134, 
 
 550 
 
 Telegram Newspaper Co. v. Com- 
 
 
 monwealth 
 
 343 
 
 Telegraph Co. v. Davenport 
 
 592 
 
 v. Electric R'y Co. 
 
 173 
 
 v. Griswold 
 
 357 
 
 r. Texas 
 
 486 
 
 Temperance Ass'n v. Friendly 
 
 
 Soc. 
 
 229 
 
 Temple v. Lemon 
 
 701 
 
 901 

 
 TAI3LE OF CASKS. 
 
 SECTION I 
 
 Templin v. Chicago, etc., R'y Co. 236 
 r. Dodge 233 
 
 Ten Broeck v. Boiler Compound 
 
 Co. 196 
 
 Ten Eyck v. Delaware and Rari- 
 
 tan Canal Co. 173, 476 
 
 v. Railroad Co. 646 
 
 Tennessee v. Davis 4696 
 
 v. Sneed 494 
 
 v. Whitworth 477, 488, 490, 491 
 
 Tennessee River Tr. Co. v. Kava- 
 
 naugh 193 
 
 Tenny v. East Warren Lumber 
 
 Co. 259 
 
 Terhune v. Midland R. R. Co. 611 
 p. Potts 665 
 
 Terre Haute and I. R. R. Co. v. 
 
 Clark 374 
 
 v. Earp 530 
 
 v. Fitzgerald 347 
 
 v. Jackson 347 
 
 v. McMurray 201 
 
 Terre Haute and S. E. R. R. Co. 
 
 v. Rodel 175a 
 
 Terre Haute, etc., R. R. Co. v. 
 
 Graham 344 
 
 Terre Haute Gas Co. v. Teel 173 
 
 Terrell V. Branch Bank 210 
 
 Territory v. Virginia Road Co. 460 
 Terry v. Andersen 493, 703 
 
 v. Eagle Lock Co. 279, 568, 801 
 v. Little 717, 726 
 
 v. McLure 736 
 
 v. Merchants', etc., Bank 432, 435 
 v. Martin 725 
 
 v. Tubman 736 
 
 Texas and Pac. Coal Co. v. Law- 
 son 309c 
 Texas and Pac. R. R. Co. v. Archi- 
 bald 365 
 Texas & Pacific Ry. Co. v. Cal- 
 lander 360 
 Texas & Pacific R'y Co. v. Clay- 
 ton 360 
 Texas & Pacific R. R. Co. v. Mur- 
 phy 376, 425 
 Texas & Pac. R'y Co. r. Hoffman 417 
 Texas & Pac. R'y Co. v. Inter- 
 state Commerce Commis- 
 sion 474(2 
 i\ O'Donnell 372 
 v. Reise 360 
 Texas and St. L. R. R. Co. v. 
 
 Robards 162, 212 
 
 v. Matthews 178 
 
 B. Orr 371 
 
 Thacher v. Dartmouth Bridge Co. 163 
 
 v. King 772 
 
 Tliacherde v. Hass 792 
 
 Thames v. Central City Ins. Co. 579 
 
 Thames Haven Dock Co. v. Rose 262 
 
 902 
 
 SCCTIOK 
 
 Thatcher v. Bank of the State of 
 
 N. Y. 246 
 
 Thayer v. Burchard 361 
 
 v. Nehalen Mill Co. 201,248 
 
 v. New Bedford R. R. Co. 174 
 
 v. New England Lithographic 
 
 Co. 770 
 
 v. Union Tool Co. 733, 784 
 
 Thebus v. Smiley 728, 731, 825 
 
 Thigpen v. Mississippi Central 
 R. R. Co. 515, 521 
 
 Third Ave. S'v'gs Bank v. Dim- 
 ock 276 
 
 Third National Bank v. Boyd 161 
 v. Stone 483 
 
 Thomas v. Boston and P. R. R. 
 
 Co. 360 
 
 v. Brownsville, etc., R'y Co. 
 
 638. 639 
 v. Citizens' Horse R'y Co. 185, 813 
 v. Dakin 17, 58 
 
 v. Gregg 800 
 
 v. N. Y. & G. L. R. R. Co. 675 
 
 v. Railroad Co. 114, 120, 305 
 
 v. Sweet 756, 757 
 
 v. Western Car Co. 824 
 
 Thomas's Case 549 
 
 Thompson v. Abbott 666 
 
 v. Bemis Paper Co. 711 
 
 v. Duncan 376 
 
 v. Erie R'y Co. 554, 563, 572 
 
 v. Greely 616 
 
 v. Gnion 531, 532 
 
 v. Lambert 125, 203, 279, 286 
 
 v. Natchez Water Co. 381 
 
 v. North Missouri R'y Co. 376 
 
 v. Page 92, 108 
 
 v. Reno Sav. Bank 655, 701, 706, 729 
 v. St. Nicholas Nat. Bank 302 
 
 v. Swain 612 
 
 v. Valley R. R. Co. 676, 818 
 
 v. Waters 384, 389, 391 
 
 v. Western Un. Tel. Co. 357 
 
 v. Williams 260, 574 
 
 Thompson-Houston Elec. Co. v. 
 
 Murray 655, 703 
 
 Thomson b. Allen Co. 333 
 
 v. Lee County 319 
 
 v. Meisser 716, 728, 731, 733 
 
 v. Oliver 518 
 
 v. Pacific R. R. 482 
 
 Thorington v. Gould 189 
 
 Thornton v. Lane 724 
 
 v. Marginal Freight Rail- 
 way (Jo. 435, 496 
 v. National Exchange Bank 302 
 
 Thorp v. Woodhull 91, 511, 516 
 
 Thorpe v. New York C. & H. 
 
 R. R. R. Co. 348 
 
 v. Rutland, etc., R. R. Co. 
 
 152, 163a, 464, 475
 
 TABLE OF CASES. 
 
 SECTION 
 
 Thrasher v. Pike County R. R. 
 
 Co. 100 
 
 Throop v. Hatch Lith. Co. 759 
 
 Thurber v. Crumb 794, 796 
 
 v. Harlem, etc., R. R. Co. 374 
 
 Thurston v. Union Pac. R. R. 
 
 Co. 348, 350 
 
 Thweatt v. Bank of Hopkins- 
 
 ville 303 
 
 Tibbals v. Libby 723 
 
 Tidewater Co. v. Coster 163 
 
 Tiernan v. Rinker 480, 485 
 
 Tierney v. N. Y. C. and H. R. 
 
 R. R. Co. 361 
 
 v. Parker 523 
 
 Tifft v. City of Buffalo 325 
 
 Tileston v. Newell 187 
 
 Tillinghast v. Boston Co. 395 
 
 Tillson v. Downing 759 
 
 Tilson v. Warwick Gas Light Co. 87 
 Timberlake v. Compress Co. 797 
 
 Tindal v. Wesley 462 
 
 Tinkham v. Borst 656 
 
 Tinsman v. Belvidere Dela- 
 ware R. R. Co. 174, 177 
 Tipling v. Pexall 12 
 Tippets v. Walker 233, 753 
 Tisdale v. Harris 789 
 Titcomb v. Insurance Co. 437 
 Titus v. Cairo and Fulton R. R. 
 
 Co. 225, 236 
 
 v. Ginheimer 676 
 
 v. Great Western Turnpike 
 Road 591 
 
 v. Mabee 676 
 
 Tobin v. Portland, etc., R. R. 
 
 Co. 371 
 
 Toddv. Kankakee, etc., R. R. Co. 179 
 
 «. Old Colony, etc., R. R. Co. 374 
 
 v. Taft 790 
 
 Toledo and Ann Arbor R. R. Co. 
 
 v. Johnson 147, 153 
 
 Toledo and Wabash R. Co. v. 
 
 Daniels 102a, 104 
 
 Toledo Bank v. Bond 453, 488 
 
 Toledo Com. Co. v. Glen Co. 400 
 
 Toledo Tie Co. v. Thomas 401 
 
 Toledo P. & W. R'y Co. v. 
 
 Deacon 475 
 
 Toledo, Wabash and W. R. R. 
 
 Co. v. Beggs 
 
 v. Hammond 
 
 ». Jacksonville 
 
 v. Moore 
 
 v. Morrison 
 
 v. Rodrigues 
 
 v. Williams 
 
 v. Wright 
 Toledo, etc., R. R. Co. v. Ham 
 
 litem 
 Toll Bridge Co. v. Betsworth 
 
 144, 349, 353 
 355 
 475, 476 
 365 
 173 
 121 
 348 
 348 
 
 82-2 
 210 
 
 SKCTIOK 
 
 Tolman v. Syracuse, etc., R. R. 
 
 Co. 376 
 
 Tombigbee R. R. Co. v. Knee- 
 land 381, 384 
 Tome v. Parkersburgh, etc., R. 
 
 R. Co. 598 
 
 Tompkins v. Augusta So. R. R. 
 
 Co. 421 
 
 Tomkins v. Blakely 393 
 
 Tomlinson v. Branch 424, 491 
 
 v. Jessup 497 
 
 Tonica, etc., R. R. Co. v. Mc- 
 
 Neeley 109 
 
 Tooker v. Gormer 360 
 
 Tool Co. v. Howe 759 
 
 v. Morris 293 
 
 Tootle v. Bank 277 
 
 Topeka Manuf. Co. v. Hale 521 
 
 Topeka Paper Co. v. Oklahoma 
 
 Pat. Co. 303 
 
 Totten v. Tison 565, 572 
 
 Toucey v. Brown 724 
 
 Touche v. Metropolitan Ware- 
 housing Co. 87 
 Tourtelet v. Whithed 283 
 Towers, etc., Co. v. Inman 277 
 Town v. Bank of River Raisin 432, 433 
 Town of Coloma v. Eaves 330 
 Town of Concord v. Ports- 
 mouth Savings Bank 320, 322 
 Town of Duanesburg v. Jen- 
 kins 325 
 Town of East Lincoln v. Dav- 
 enport 324 
 Town of Queensbury v. Culver 319 
 Town of Reading v. Wedder 323 
 Town of Searey v. Yarnell 146, 630 
 Town of South Ottawa v. Per- 
 kins 320 
 Town of Springport v. Teu- 
 
 tonia S'v'gs B'k 332 
 
 Town of Venice v. Murdock 318, 330 
 Town of Weyanvvega v. Ayl- 
 
 ing 330 
 
 Townes v. City Council 395 
 
 v. Nicbols 599 
 
 Townsend v. Mclver 589, 590, 599 
 
 v. N. Y. C. and H. R. R. R. Co. 378 
 
 v. Williams 752 
 
 Township of Burlington v. 
 
 Beaseley 319 
 
 Township of East Oakland v. 
 
 Skinner 320 
 
 Township of Elmwood v. Marcy 318 
 Township of Pine Grove v. Tal- 
 
 cott 318,319 
 
 Township of Rock Creek v. 
 
 Strong 330 
 
 Tiacey v. Guthrie County Agri- 
 cultural Soc. 211 
 0. Tal Image 286, 293, 299 
 
 903
 
 TABLE OF CASES. 
 
 SECTION 
 
 Tracy v. Elizabethtown, etc., 
 
 R. R. Co. 163 
 
 v. Yates 718, 719 
 
 Tradesman Pub. Co. v. Wheel 
 
 Co. 668, 765 
 
 Transit Co. v. Lynch 485 
 
 Transportation Co. v. Chicago 177 
 
 V. Downer 351 
 
 v. Wheeling 4696, 485 
 
 Treadwell v. Salisbury M'f'g Co. 
 
 431, 610 
 Tregeur v. Water Co. 567 
 
 Trenton Mut. Life Ins. Co. v. 
 
 Perrine 137 
 
 Trenton Potteries Co. v. Oliphaut 
 
 309c 
 
 Trester v. Missouri Pac. R'y Co. 424 
 
 Trevitt v. Converse 187 
 
 Triesler v. Wilson 581 
 
 Trigg v. St. Louis, etc., R'y Co. 377 
 
 Trimble v. Reid 752 
 
 Trinity Church v. Vanderbilt 773 
 
 Tripp v. National Bank 225 
 
 v. New Metallic Packing Co. 210 
 
 v. Swanzey Paper Co. 219, 225 
 
 Trippe v. Huncheon 737 
 
 Trisconi w. Winship 610 
 
 Trott v. Sarchett 518 
 
 v. Warren 263 
 
 Troup v. Hornback 522c, 702 
 
 Trow v. Verm't Cent. R. R. Co. 373 
 
 Trowbridge v. Hamilton 583 
 
 v. Scudder 148, 739 
 
 Troy Mining Co. v. White 574 
 
 Troy and Boston R. R. Co. v. 
 
 Boston Hoosac Tunnel, etc., 
 
 R. R. Co. 305 
 
 Troy, etc., R. R. Co. v. Kerr 432 
 
 v. Newton 546 
 
 v. Tibbets 91 
 
 v. Warren 91 
 
 Troy, etc., Turnpike Co. v. Mc- 
 
 Cliesney 546 
 
 Truckee, etc., Turnpike Co. v. 
 
 Campbell 153, 156, 490 
 
 Trust Co. v. Floyd 754 
 
 v. Germania Ins. Co. 400 
 
 v. Georgia 456 
 
 v. Loan Co. 704, 713 
 
 Trust, etc., Co. v. Lumber Co. 583 
 Trustees v. Flint 583, 782 
 
 Trustees of Canandaigua Acad- 
 emy v. McKechnie 204 
 Trustees of Christian Church v. 
 
 Johnson 248 
 
 Trustees of Farmington Acad- 
 emy ii. Allen 92 
 Trustees of First Baptist Church 
 
 v. Brooklyn Fire Ins. Co. 254 
 Trustees of N. W. College v. 
 
 Schwagler 158 
 
 904 
 
 SECTION 
 
 Trust, of School Dist. v. Gibbs 449 
 Trustees of the W. and E. Canal 
 
 Co. v. Beers 507 
 
 Tuchband v. Chicago, etc., R. R. 
 
 Co. 396 
 
 Tuckahoe Canal Co. v. Tuckahoe 
 
 R. R. Co. 453 
 
 Tucker v. Ferguson 489 
 
 v. Gil man 747 
 
 v. Mass. Central R. R. 178 
 
 v. St. Louis, K. C. and N. R'y 
 
 Co. 201 
 
 Tuckerman v. Brown 550, 701 
 
 Tullis v. L. E. & W. R. R. Co. 475 
 
 Tunesma v. Schuttler 725 
 
 Tunney v. Midland R'y Co. 365 
 
 Turcott v. R. R. Co. ' 402 
 
 Turnbull v. Payson 740 
 
 v. Prentiss Lumber Co. 
 
 663, 668, 669 
 Turner v. First Nat. Bank 337 
 
 v. Grangers' Life Ins. Co. 744 
 
 v. Hannibal and St. Jo. R. R. 
 
 Co. 170 
 
 v. Hawkeye Tel. Co. 357 
 
 v. Maryland 480, 485 
 
 v. Peoria and S. R. R. Co. 824 
 
 Turnpike Co. v. Illinois 122, 167 
 
 v. Montgomery County 121 
 
 v. Pass. R'y Co. 204 
 
 v. State 453 
 
 Turnpike Road v. Green 342 
 
 Turquand v. Marshall 622, 699 
 
 Tuscaloosa, etc., Ass. v. Green 436 
 
 Tuscaloosa Cotton Seed Oil Co. 
 
 v. Perry 237 
 
 Tuscaloosa M'f'g Co. v. Cox 687 
 
 v. Williams 309a 
 
 Tuthill, Re 470 
 
 Tuthill Spring Co. v. Smith 741 
 
 Tuttle v. Iron Nat. Bank 585 
 
 v. Michigan Air Line 539, 574 
 
 v. Walton 601, 603 
 
 Tutwilert). Tuscaloosa Coal Co. 140 
 
 Twelfth Street Market Co. v. 
 
 Jackson 238 
 
 Twenty-second Street, hi re 465 
 
 Twin Creek, etc., Turnpike Co. 
 
 v. Lancaster 92, 109 
 
 Twin Lick Oil Co. v. Marbury 
 
 630, 631, 632 
 Twyncross v. Grant 103, 104 
 
 Tyfer v. Trustees 249 
 
 v. Western Un. Tel. Co. 357 
 
 Tyrell v. Cairo, etc., R. R. Co. 270 
 Tyrrell v. Bank of London 82 
 
 U. 
 
 Ulmer v. Real Estate Co. 140, 611 
 Ulmsted v. Buskirk 72-1, 783
 
 TABLE OF CASES. 
 
 SECTION 
 
 Una v. Dodd 618 
 
 Uncas Nat. Bank v. Rith 125 
 
 Uncles v. Colgate 314 
 
 Underbill v. Santa Barbara 
 
 Land Co. 197, 213, 299, 584 
 
 Union Agricultural Ass'n v. 
 
 Nell 530 
 
 Union Bank v. City of Richmond 483 
 V. Ellicott 130, 225, 668 
 
 v. Gince 557 
 
 v. Jacobs 125 
 
 v. Laird 603 
 
 v. Ridgeley 235 
 
 v. Wando M'g, etc., Co. 737 
 
 Union Branch R. R. Co. v. 
 
 East Tenn., etc., R. R. Co. 151 
 Union Bridge Co. v. Troy, etc., 
 
 R. R. Co. 313 
 
 Union Canal Co. r. Gilfillin 507, 674 
 Union Depot, etc., Co. v. Bruns- 
 wick 174 
 Union Express Co. v. Graham 353 
 Union Gold Mining Co. v. 
 
 Rocky Mt. Nat. Bank 181, 
 
 202, 236 
 Union Hardware Co. v. Plume, 
 
 etc., Co. 311 
 
 Union Hotel Co. v. Hersee 97 
 
 Union Improvement Co. v. Com- 
 monwealth 497 
 Union Insurance Co. v. Hart 401 
 v. Hoge 510 
 Union Iron Co. v. Pierce 764, 775 
 Union Locks and Canals v. 
 
 Towne 531 
 
 Union Mut. Ins. Co. v. Keyser 181 
 v. White 238 
 
 Union Mut. Life Ins. Co. v. 
 
 Frear Stone, etc., Co. 701 
 
 Union Nat. Bank a. Douglass 656, 757 
 
 v. Hunt 276, 521 
 
 v. State Nat. Bank 387 
 
 Union Pacific R. R. Co. v. 
 
 Credit Mobilier 638, 639, 642 
 v. Goodridge 474d 
 
 v. Hall 454 
 
 v. Lincoln 319 
 
 v. United States 565 
 
 Union Pac. R'y Co. v. Beatty 193 
 v. Cheyenne 492b 
 
 v. Railway Co. 305 
 
 Union Refrigerator Transit Co. 
 
 v. Lynch 479 
 
 Union Savings Assoc. ». Selig- 
 
 man 741 
 
 Union Trust Co. v. Illinois 
 
 Midland R. R. Co. 824 
 
 v. Library Hall Co. 281 
 
 v. Souther 822 
 
 v. Walker 822 
 
 Union Turnpike Co. «. Jenkins 91 
 
 SECTION 
 
 United Hebrew Ass'n v. Ben- 
 
 shinol 504 
 
 United Society of Quakers v. 
 
 Underwood 758 
 
 United States v. Central Pacific 
 
 R. R. Co. 565 
 
 v. City Bank 236, 241 
 
 v. Coombs 474a 
 
 o. County of Clark 333 
 
 v. County of Macon 320, 333 
 
 v. Cruikshank 456, 461 
 
 v. De Witt 4696 
 
 v. Erie R'y Co. 479 
 
 v. Forty-three Gallons of 
 
 Whiskey 474a 
 
 v. Fox 387 
 
 v. Freight Ass'n 309a 
 
 v. Insurance Companies 137, 149 
 v. Joint Traffic Ass'n 309a 
 
 v. Jones 473 
 
 v. Kansas Pacific R. R. Co. 565 
 v. Knight Co. 309a 
 
 v. Knox 716, 727 
 
 v. Lee 462, 467 
 
 v. New Orleans Railroad 333, 318 
 v. Pipe Co. 309a 
 
 v. Reynes 172 
 
 v. Trinidad Coal Co. 120 
 
 v. Un. Pac. R. R. Co. 452, 493, 502 
 United States Bank v. Bank 
 
 of Georgia 672 
 
 v. Planters' Bank 462 
 
 v. Stearns 145 
 
 United States Express Co. v. 
 
 Bockman 359 
 
 v. Harris 356 
 
 United States Ins. Co. v. Schriver 210 
 United States Mercantile, etc., 
 
 Assoc, In re 158 
 
 United States Mortgage Co. v. 
 
 Gross 388 
 
 United States Rolling Stock 
 Co. v. Atlantic and Great 
 Western R. R. Co. 642 
 
 United States S., etc., Co. v. 
 
 Scott 387 
 
 United States Tel. Co. v. 
 
 Gildersleeve 357 
 
 United States V. Co. v. Foeh- 
 
 renbach 309c, 529 
 
 v. Schlegel 309c, 529 
 
 United Trust Co. v. Lee 388 
 
 v. Wabash R'y 814 
 
 Universal Fire Ins. Co. v. 
 
 Tabor 703 
 
 University v. North Car. R. R. 
 
 Co. 505 
 
 v. People 461, 488, 489 
 
 University of Des Moines v. 
 
 Livingston 515 
 
 Upham v. Worcester 179 
 
 905
 
 TABLE OF CASES. 
 
 
 SECTION 
 
 Upton v. Burnham 
 
 
 589 
 
 v. Englehart 
 
 523, 
 
 744 
 
 0. Ilausbrough 
 
 97, 
 
 51!) 
 
 v. South Branch R. R. 
 
 Co. 
 
 179 
 
 v. Triblecock 511. 
 
 513, 522, 
 
 523 
 
 542, 
 
 549, 701, 
 
 744 
 
 Urner v. Stollenberger 
 
 
 523 
 
 Utica Ins. Co. v. Scott 
 
 
 298 
 
 v. Kip 
 
 
 299 
 
 Utica Nat. Brewing Co 
 
 , Matter 
 
 
 of 
 
 
 427 
 
 Utley o. Clark Gardiner 
 
 M'g Co. 
 
 401 
 
 v. Hill 
 
 
 619 
 
 Utter v. Franklin 
 
 
 325 
 
 V. 
 
 Vail v. Hamilton 135, 136, 185 
 
 v. Jameson 668 
 
 Valdetero v. Citizens' Bank 211 
 
 Vale Mills ». Spalding 588 
 
 Valle o. Zeigler 479 
 
 Valley Bank v. Sewing Society 432 
 V;iu Aernam v. Bliestein 56, 57 
 
 Van Allen v. Assessors 477a, 484 
 
 Van Am burgh v. Baker 769 
 
 Van Brocklin v. Queen City 
 
 Printing Co. 668 
 
 Vance v. Erie R'y Co. 342 
 
 v. McNabb Coal Co. 657 
 
 v. Phoenix Ins. Co. 620, 621 
 
 Van Cleve v. Berkey 702, 702a 
 
 Van Cott o. Van Brunt 522c 
 
 Vanderbilt v. Central R. R. Co. 814 
 Vanderpoel v. Gorman 388 
 
 Vanderwater v. New York, etc., 
 
 R. R. Co. 368 
 
 Van Diemen's Land Co. v. 
 
 Cockerell 547, 599 
 
 Van Doren v. Olden 799 
 
 Van Dyck v. McQuade 622, 750 
 
 Vane v. Cobbold 104 
 
 Van Etten v. Eaton 767 
 
 Van Hostrop v. Madison City 331 
 Van Leuren ». First Nat. Bank 161 
 Van Lindley v. Richmond, etc., 
 
 R. R. Co. 360 
 
 Vanneman o. Young 451 
 
 Van Norman v. Jackson Circuit 
 
 Judge 567 
 
 Van Pelt v. Gardner 655, 703, 709, 783 
 v. Home Bldg. Assoc. 432 
 
 Van Rensselaer v. Snyder 493 
 
 Vansands v. Middlesex Co. B'k 600 
 Van Santvoord v. St. John 363 
 
 Van Steuben v. Central R. R. Co. 305 
 Van Weel v. Winston 756 
 
 Van Wyck v. Knevals 153, 383 
 
 Varnum v. Hart 668 
 
 Vatable v. New York, etc., R. 
 
 R. Co. 816a 
 
 906 
 
 SECTION 
 
 Vaughan v. Taff Vale R'y Co. 368 
 
 Veazie Bank v. Feno 478 
 
 Veeder v. Baker 764 
 
 v. Mudgett 732 
 Veiller v. Brown 720, 747 
 Velt Hospital v. City of New 
 
 York 489 
 
 Venner v. Atchison, etc., R. Co. 227 
 Vermont and C. R. R. Co. v. 
 
 Vermont Central R. R. 
 
 Co. 288, 3056, 449, 458 
 
 Verner v. General, etc., Trust 265 
 
 v. Sweitzer 359 
 
 Verplanck v. Mercantile Ins. Co. 135 
 
 Vick o. Lane 704 
 
 v. La Rochelle 745 
 Vicksburg v. Tobin 4746 
 Vicksburg and M. R. R. Co. v. 
 
 O'Brien 210 
 Vicksburg, etc., R'y Co. v. 
 
 Dennis 489 
 Vicksburg, etc., R. R. Co. v. 
 
 McKean 97, 516, 521 
 
 Victory Webb Printing Co. v. 
 
 Bucher 773 
 
 Vidal v. Girard's Ex'rs 315 
 
 Viets v. Union Nat. B'k 672 
 Vilas u. Milwaukee, etc., R. R. 
 
 Co. 415 
 
 Vilas Nat. B'k v. Strait 237 
 Vinas v. Merchants' Mut. Ins. 
 
 Co. 342 
 Vincent v. Sands 768 
 Viner v. N. Y. and C. Steam- 
 ship Co. 360 
 Vinton's Appeal 799 
 Virginia & Ala. R. R. Co. v. C. 
 
 R. R. & B. Co. of Ga. 824, 824a 
 Virginia and T. R. R. Co. v. 
 
 Henry 178 
 Virginia and Tenn. R. R. Co. v. 
 
 Sayers 353 
 Virginia and Truckee R. R. 
 
 Co. v. Lovejoy 164 
 
 Virginia Coupon Cases 494 
 
 Visalia Gas Co. v. Sims 304 
 
 Voight v. Dregge 718 
 
 Voltz v. National Bank 303 
 Von Glahn v. De Rossett 436, 437 
 
 v. Harris 725 
 
 Von Hoffman v. City of Quincy 333 
 Vos Burgh v. Lake Shore, etc., 
 
 R. Co. 365 
 
 Vose 15. Bronson 815 
 
 v. Cockcroft 400 
 
 Vreeland v. N. J. Stone Co. 511 
 
 W. 
 
 Wabash, etc., Canal Co. v. Beers 815 
 Wabash, etc., R'y Co. u. Illinois 474c
 
 TABLE OF CASES. 
 
 SECTION 
 
 Wabash, etc., Ry. Co. v. Jagger- 
 
 man 363 
 
 v. People 476a 
 
 Wabash R'y Co. v. McDaniels 365 
 Wade v. Chicago, S., etc., R. R. 
 
 Co. 676 
 
 v. Travis County 318, 468 
 
 Wadsworth v. Supervisors 320 
 
 Wager v. Troy Union R'y Co. 175a 
 Wagner v. Meety 32o 
 
 v. Stall 507 
 
 Waite v. Mining Co. 259 
 
 v. Santa Cruz 321, 330 
 
 Wakefield v. Fargo 734 
 
 Wakefield Bank v. Truesdale 240 
 Wake man v. Dalley 755 
 
 Walburn v. Chenaulb 522c 
 
 Waldo v. Chicago, etc., R. R. 
 
 Co. 523 
 
 Waldoborough v. Railroad Co. 608 
 Walker, Ex parte 158 
 
 Walker v. Bartlett 791 
 
 v. Detroit R'y Co. 795 
 
 v. Devereux 91 
 
 v. FlemiHg 190 
 
 v. Johnson 
 v. Lewis 
 
 579, 581 
 700 
 162 
 
 v. Mad River, etc., R. R. Co. 
 v. Mobile, etc., Railroad Co. 
 
 515, 523 
 
 v. St. Louis Nat. Bank 246 
 
 v. Whitehead 498 
 
 Walker's Case 601 
 
 Walkley v. City of Muscatine 333 
 
 Wall v. County of Monroe 320 
 
 v. Livezey 349 
 
 v. Mining and Smelting Co. 87 
 
 v. Piatt 417 
 
 Walla Walla v. Walla Walla 
 
 Water Co. 474a 
 
 Wallace v. Carpenter Co. 7026 
 
 v. Clayton 350 
 
 v. Lincoln Sav. Bank 625 
 
 v. Long Island R. R. Co. 642, 644 
 
 v. Loomis 451, 507, 823 
 
 v. Townsend 515 
 
 Wallachs v. Robinson 668 
 
 Walling v. Michigan 485 
 
 Walnut v. Wade 326, 330, 680, 681 
 
 Walsh v. Barton 282 
 
 Walsh am v. Staunton 697 
 
 Walstab v. Spottiswood 104 
 
 Walter v. Merced Acad. Ass'n 
 
 513, 706 
 Walther v. War ner 163 
 
 Waltonjc Oliver 148 
 
 v. Riley 146 
 
 Walworth County Bank v. Far- 
 mers' L. and T. Co. 212, 236 
 Wann v. Western Union Tele- 
 graph Co. 357 
 
 SECTIOK 
 
 Waoters v. International and 
 
 G. N. R. R. Co. 162 
 
 Ward v. Atlantic and Pacific 
 
 Tel. Co 167 
 
 v. Davidson 628, 629, 650 
 
 v. Farwell 495 
 
 v. Griswoldville Mfg Co. 661 
 
 v. Loudesborough 104 
 
 v. Johnson 125, 280, 672 
 
 v. Maryland 485 
 
 v. N. Y. Cent. R. R. Co. 361 
 
 v. Saint Vincents' Hospital 335 
 
 v. Sea Ins. Co. 457 
 
 v. South Eastern R'y Co. 597 
 
 v. Stahl 715 
 
 Ward and Garfit's Case 589, 748 
 
 Waidell v. Railroad Co. 612, 638, 639 
 
 Wardner, etc., Co. v. Jack 284 
 
 Ware v. Bazemore 140 
 
 v. Galveston City Co. 693 
 
 v. Hamilton Brown Shoe Co. 401 
 
 Warfield v. Marshall County 
 
 Canning Co. 668, 759 
 
 Warner v. B. and C. R. R. Co. 350 
 ». Calendar 712, 721 
 
 v. De Witt County National 
 
 Bank 303 
 
 v. Mower 574 
 
 v. New York Cent. R. R. Co. 376 
 Warren v. Beers 58 
 
 v. First Nat. Bank 391 
 
 v. King 565 
 
 v. Mobile, etc., R. R. Co. 426, 666 
 v. Robinson 616, 619 
 
 v. Rubber Co. 628 
 
 Warren Mfg Co. v. J3tna Ins. Co. 383, 
 
 397, 399 
 Warren Ehret Co. v. Ice Co. 83 
 
 Warwick R. R. Co. v. Cady 518 
 
 Waseca County Bank v. Mc- 
 
 Kenna 4926 
 
 Washburn, etc., M'f'g Co. v. 
 
 Providence, etc., R. R. Co. 363 
 Washer v. Allensville, etc., T. 
 
 P. Co. 263 
 
 Washington Gas Co. v. Lamden 342 
 Washington Inv. Ass'n v. Stanley 146 
 Washington Mill Co. v. Lumber 
 
 Co. 273 
 
 Washington, etc., R. R. Co. v. 
 
 McDade 365 
 
 Washington, etc., T. Road v. 
 Baltimore and Ohio R. R. 
 Co. 152 
 
 Washington Savings Bank v. 
 
 Butchers' and D. Bank " 703, 
 
 709, 711 
 
 Washington Times Co. v. Wilson 211 
 
 Washington University v. Rouse 488 
 
 Water Co. v. Ware 170 
 
 v. Water Co. 453 
 
 907
 
 TABLE OF CARES. 
 
 SECTION 
 
 Water Supply, etc., Co. v. Temiey 303 
 Water Valley Mfg. Co. v. Seaman 523 
 Waterbury v. Merchants' Un. 
 
 Express Co. 611 
 
 Waterford, etc., Ry. Co. v. 
 
 Dalbaic 96 
 
 Waterhouse v. Jamieson 522, 702 
 v. London and S. W. R. Co. 593 
 Waterman v. Conn, and P. R. 
 
 R. R. Co. 173 
 
 Waters v. Quimby 774 
 
 Waters Pierce Oil Co. v. Texas 400a 
 
 Watkins v. Eames 92 
 
 Watkins Land Co. v. Elliott 396 
 
 Watson v. Eales 547 
 
 v. Earl Charlemont 104 
 
 v. Fairmont R. R. Co. 171 
 
 v. Memphis, etc., R. R. Co. 193 
 
 v. Pittsburgh, etc., R. R. 
 
 Co. 178 
 
 Watts v. Gantt 303 
 
 v. Salter 104 
 
 Watt's Appeal 125, 688, 693, 694 
 
 Waukon, etc., R. R. Co. v. Dwyer 513 
 
 Way v. American Gease Co. 451, 569 
 
 Waycross K. R. Co. v. Offerman 187 
 
 Wayne Pike Co. «. Hammons 560 
 
 Wayne Title Co. v. R. R. Co. 195 
 
 Weare v. Gove 754 
 
 Weatherley v. Capital City 
 
 Water Co. 435 
 
 Weaver v. Miss., etc., Boom Co. 173 
 Webb v. Baltimore, etc., R. R. 
 
 Co. 511, 516. 517, 567 
 
 v. Com' is 251 
 
 v. Graniteville M'f'g Co. 592 
 
 v. Ridgeley 581 
 
 v. Smith 210 
 
 Webber v. Great Western R'y 
 
 Co. 
 
 
 363 
 
 v. Virginia 
 
 
 485 
 
 Weber v. Bullock 
 
 
 796 
 
 v. Fickey 719, 731, 732, 
 
 744, 
 
 783 
 
 Webster v. Turner 
 
 
 610 
 
 v. Upton 513, 587, 
 
 719 
 
 747 
 
 Webster's Case 
 
 
 110 
 
 Webster Telephone Case 
 
 
 454 
 
 Weckler v. First Nat. Bank 
 
 
 161, 
 
 
 336, 
 
 338 
 
 Weed v. Little Falls, etc. 
 
 , R. 
 
 
 R. Co. 
 
 
 637 
 
 v. Panama R. R. Co. 
 
 
 361 
 
 Weeden v. Lake Erie, etc 
 
 , R. 
 
 
 R. Co. 
 
 
 518 
 
 Weeks v. Love 
 
 
 725 
 
 v. N. Y., N. H. and H 
 
 R. 
 
 
 R. Co. 
 
 347 
 
 355 
 
 v. Propert 
 
 
 754 
 
 Wehn v. Fall 
 
 
 703 
 
 Wehrmnn v. Reakert 
 
 
 718 
 
 Weigand v. All. Sup. Co. 
 
 
 432 
 
 908 
 
 
 
 SECTION 
 
 Weight v. Liverpool, etc., Ins. 
 
 Co. 395 
 
 Weihenmeyer v. Bittner 585 
 
 Weihl v. Atlantic Furniture Co. 633 
 Weinman v. Passenger Ry. Co. 537 
 Weir i\ Barnett 755 
 
 v. Express Co. 356 
 
 v. St. Paul, etc., R. R. Co. 163 
 
 Weisger v. Ice Co. 523 
 
 Weiss v. Pennsylvania R. R. Co. 376 
 Weisser v. Denison 672 
 
 Welch r. Boston and A. R. R. 
 
 Co. 353 
 
 v. First Div. St. Paul and 
 
 Pac. R. R. Co. 115, 415 
 
 v. Importers', etc., Bank 185, 630 
 ». Mill Co. 309c 
 
 v. Post 320 
 
 v. Pullman Palace Car Co. 347 
 
 v. Sargent 586 
 
 Weld v. Gorham 195 
 
 Wells ». American Exp. Co. 210 
 
 v. Maine Steamship Co. 350 
 
 v. New York Central Railroad 
 
 Co. 353 
 
 v. Rahway Rubber Co. 260 
 
 v. Rodgers 261, 543, 544 
 
 v. Supervisors 320 
 
 Welsh v. Concord R. R. Co. 359 
 
 v. German American Bank 672 
 
 v. Pittsburg, Ft. W. and C. 
 
 R. R. Co. 353 
 
 v. P. R. R. Co. 365 
 
 v. Sargent 704 
 
 Wei ton v. State of Missouri 485 
 
 Wemple v. St. LouiB, etc., R. R. 
 
 Co. 511 
 
 Wendell v. N. Y. Cent, and H. 
 
 R. R. R. Co. 375 
 
 Wenger v. Chicago, etc., R. R. 
 
 Co. 816a 
 
 Wertheimer v. Pennsylvania R. 
 
 R. Co. 359 
 
 West v. Camden 559a 
 
 v. Carolina Life Ins. Co. 153 
 
 v. Crawford 92 
 
 v. Madison County Agricul- 
 tural Board 125 
 West Branch, etc., Canal Co.'s 
 
 Appeal 599 
 
 West Chester, etc., R. R. Co. 
 
 v. Jackson 563, 564, 565, 572 
 
 v. Miles 348 
 
 Wostcott v. Fargo 353 
 
 West End Co. v. Claiborne 516 
 
 West End, etc.,"" R. R. Co. v. 
 
 Atlantic, etc., R. R. Co. 502 
 
 West End R. R. Co. v. Dameron 544 
 
 West Jersey K. R. Co. v. Abbott 368 
 
 West Jersey R. R. Co. v. Cape 
 
 May, etc., R. R. Co. 152
 
 TABLE OF CASES. 
 
 SECTION 
 
 West Jersey Traction Co., In re 
 
 204, 211 
 West Missouri Land Co. v. 
 
 Kansas City, etc., Co. 150 
 
 West Nashville Planing Mill v. 
 
 Bank 522c 702 
 
 West of England Bank, In re, 
 
 Ex parte Booker 224 
 
 West River Bridge Co. v. Dix 470 
 West Salem Land Co. v. Mont- 
 gomery Land Co. 212 
 West St Louis SVgs Bank v. 
 
 Shawnee County Bank 206, 
 
 241, 636 
 West Wisconsin R. R. Co. v. 
 
 Supervisors 488, 489 
 
 Wester field v. Rodde 236 
 
 Western and Atlantic R. R. Co. 
 
 v. McElwee 363 
 
 Western Bank v. Gilstrap 202 
 
 Western Bank of Scotland v. 
 
 Addie 342, 523 
 
 v. Mills 298 
 
 Western Boatman's Benevolent 
 
 Ass'n v. Kribben 210 
 
 Western H. & I. Co. v. Bank 212 
 
 Western Maryland R. R. Co. 
 
 v. Franklin B'k 342, 598 
 
 Western Nat. Bank v. Arm- 
 strong 161, 200, 240 
 v. Lawrence 393 
 Western Pennsylvania R. R. 
 
 Co.'s Appeal 163a, 164 
 
 Western Pennsylvania Hospital 
 
 v. Mercantile L. Assn. 815 
 
 Western Pennsylvania R. R. Co. 
 
 v. Hill 178 
 
 Western Plank' d Co. v. Stockton 529 
 
 Western R. R. Co. v. Avery 546, 709 
 
 v. Bayne 237 
 
 v. Davis 415 
 
 Western Screw, etc., Co. v. Cous- 
 
 ley 86 
 
 Western Trans'n Co. i>. New- 
 hall 351, 353 
 Western Un. R. R. Co. v. 
 
 Smith 426, 666 
 
 West. Un. Tel. Co. v. Adams 357 
 
 v. Alabama 486 
 
 v. American Un. Tel. Co. 309 
 
 v. Atlantic and Pacific Tel. 
 
 Co. 309 
 
 v. Beals 357 
 
 v. Blanchard 357 
 
 v. Burlington, etc., R'y Co. 309, 314 
 V. Carew 357 
 
 v. Chicago, etc., R. R. Co. 309 
 
 v. Enbanks 357 
 
 v. Eyser 377 
 
 v. Fontaine 357 
 
 v. Furguson 350 
 
 
 SFfTION 
 
 West. Un. Tel. Co. v. Graham 357 
 v. Hamilton 393 
 
 v. Jones 357 
 
 v. Linn 357 
 
 v. Massachusetts 383 
 
 v. Meek 357 
 
 v. Meredith 357 
 
 v. Meyer 357, 383, 480 
 
 v. Neill 357 
 
 v. Pendleton 357, 474(Z 
 
 v. Pleasants 395 
 
 v. Reynolds 357 
 
 v. Sbepard 176 
 
 v. Short 357 
 
 v. Taggart 479 
 
 v. Young 357 
 
 Westinghouse Machine Co. v. 
 
 Wilkinson 280 
 
 Weston v. Bear River, etc., 
 
 Co. 588, 766 
 
 v. Bear River, etc., Water and 
 
 M'f'g Co. 796 
 
 Weston v. New Gaston Co. 816a 
 
 Weston's Case 586, 601, 747 
 
 Wetherbee v. Baker 702, 704, 737 
 
 v. Fitch 236 
 
 Wetumpka and Coosa R. R. 
 
 Co. v. Bingham 449 
 
 Weymouth v. Washington, etc., 
 
 R. R. Co. 395 
 
 Wharf, etc., Co. v. Simpson 204 
 
 Whelan v. McCready 210 
 
 Wheeler, Matter of 228 
 
 Wheeler v. Faurat 719, 791 
 
 v. Frontier Bank 501 
 
 v. Land Co. 259 
 
 v. Millar 723, 732, 740 
 
 v. Perry 799 
 
 v. Pullman Iron Co. 431, 437 
 
 v. San Francisco and A. R. 
 
 R. Co. 308, 362 
 
 v. Smith 255, 754 
 
 Wheeler & Wilson M'f'g Co. 
 
 v. Boyce 342 
 
 Wheeless tj. Second National 
 
 Bank 342 
 
 Wheelock v. Boston and Al- 
 bany R. R. Co. 376 
 v. Kost 738, 741 
 v. Moulton 187 
 Wherrv v. Hale 281, 302 
 Wbicher v. B. & A. R. R. Co. 347 
 Whipple v. Union Pac. R'y Co. 
 
 426, 427 
 
 Whirley v. Whiteman 372 
 
 Whitaker v. Grummond 549 
 
 v. Hartford, etc., R. R. Co. 680 
 
 v. Masterton 774 
 
 Whitbeck v. Mercantile Nat. 
 
 Bank 484 
 
 Whitcomb v. Fowle 658 
 
 909
 
 TABLE OF CASES. 
 
 White v. Coventry 
 v. Franklin Bank 
 v. How 
 v. Howard 
 v. Knox 
 
 SECTION 
 
 157 
 311, 313 
 
 506, 774 
 387,391 
 669 
 
 v. New Bedford C. W. Corp. 657 
 v. Schuyler 790 
 
 v. Vermont, etc., R. R. Co. 679 
 White Hall, etc., R. R. Co. v. 
 
 Myers 97, 521 
 
 Whitehead v. Sweet 581, 687 
 
 Whitehall v. Jacohs 702 
 
 Whitehouse's Case 110 
 
 Whiteman's Ex'r v. Wilming- 
 ton, etc., R. R. Co. 344 
 White Mountains R. R. Co. v. 
 
 Eastman 105, 779 
 
 v. White Mountains R. R. 
 
 325, 674 
 White River Lumber Co. v. 
 
 Improvement Association 400 
 White River T. Co. v. Vermont 
 
 Central R. R. Co. 152, 163a 
 
 Whitewater, etc., Canal Co. v. 
 
 Vallette 675 
 
 Whitewater Valley R. R. Co. v. 
 
 McClure 178 
 
 Whitford v. Laidler 248, 753 
 
 Whiting, In re 479 
 
 v. Sheboygan 319 
 
 v. Wellington 207 
 
 Whitman v. Boston and M. R. R. 179 
 
 o. Cox 737 
 
 V. Oxford Bank 393 
 
 Whitman, etc., Mining Co. v. 
 
 Baker 384 
 
 Whitney v. Atlantic, etc., R. R. 
 
 Co. 305 
 
 v. Butler 748 
 
 v. First National Bank 161, 337 
 v. Leominster Savings Bank 277 
 v. Peay 313 
 
 v. Wyman 87 
 
 Whitney Arms Co. v. Barlow 
 
 264, 276, 773 
 Whitsitt v. Trustees Presbyte- 
 rian Church 92, 109 
 Whittenton Mills v. Upton 130 
 Whittlesey v. Delancy 669 
 v. Delaney 814 
 Whitwell v. Johnson 195 
 v. Warner 668, 710, 811 
 Whit worth v. Erie R'y Co. 364 
 Wibert v. N. Y. and Erie R. R. 
 
 Co. 361 
 
 Wickersham v. Chicago Zinc Co. 210 
 
 v. Crittenden 236, 612, 627, 628, 646 
 
 Wickham », Grant 342 
 
 Widrig v. Newport St. R'y Co. 
 
 633, 804 
 Wiestlingi.-. Warthen 401 
 
 910 
 
 SECTION 
 
 Wiggin v. Free Will, etc., Church 574 
 Wiggins Ferry Co. v. Chicago and 
 
 Alton R. R. Co. 308 
 
 v. East St. Louis 453, 485 
 
 Wight v. Shelby R. R. Co. 516 
 
 Wight Co. v. Steinkemeyer 701 
 
 Wilbur c. Stockholders 267, 701, 703 
 
 v. Stoopel 219, 559a 
 
 Wilcox v. Bickel 140 
 
 v. Continental Life Ins. Co. 435 
 
 Wild v. Bank of Passamaquoddy 239 
 
 Wilde v. Merchants' Despatch 
 
 Trans. Co. 359 
 
 Wilev. Wilson 281 
 
 Wiles p. Suydarn 764 
 
 Wiley v. First Nat. Bank 161, 337 
 
 v. West Jersey R. R. Co. 368 
 
 Wilkens v. Thorne 392, 394 
 
 Wilkes County v. Coler 318 
 
 Wilkins v. W r orthen 709 
 
 Wilkinson v. Bauerle 668, 759 
 
 v. Bertock 729 
 
 v. Uodd 619 
 
 Wilks v. Georgia Pac. R'y Co. 276 
 
 Willamette M'f'g Co. v. Bank of 
 
 British Columbia 125, 131 
 
 Willard v. Holmes 342 
 
 Willcocks, Ex parte 260, 578 
 
 Willey v. Parratt 104 
 
 Williams, Ex parte 679 
 
 Williams v. Bank 311 
 
 v. Bank of Michigan 137 
 
 v. Boice 708 
 
 v. Clough 365 
 
 v. Creswell 384 
 
 v. Fullerton 696 
 
 v. Great Western R'y Co. 372 
 
 v. Halliard 620, 625, 626 
 
 v. Hanna 718 
 
 tj. Louisiana 321 
 
 v. Lowe 600 
 
 v. McDonald 622, 623 
 
 v. McKay 619, 756 
 
 v. Mechanics' Bank 595 
 
 v. Montgomery 309r 
 
 v. Morgan 682 
 
 v. New York Central R. R. 
 
 Co. 175 a 
 
 v. Page 103, 622 
 
 v. Parker 565 
 
 v. Pigott 77 
 
 v. Planters' Ins. Co. 342 
 
 v. Reilley 756 
 
 v. Riley 616 
 
 v. Savage M'f'g Co. 136, 569 
 
 v. St. George's Harbor Co. 88 
 
 v. Western Union Tel. Co. 
 
 565, 567, 801 
 Williams's Case 101, 586, 749 
 
 Williams Co. v. IT. S. Baking Co. 248 
 Williamson, Ex parte 123
 
 TABLE OF CASES. 
 
 SECTION 
 
 Williamson v. Kokoruo BTd'g 
 
 Ass'n 151 
 
 v. Mason 342 
 
 v. New Jersey, etc., R. R. Co. 676 
 v. New Jersey Southern R. R. 
 
 Co. 814, 815, 818 
 
 o. Washington City, etc., R. R. 
 Co. 822, 824 
 
 Williamsport Gas Co. v. Pinker- 
 ton 6S1 
 Willis v. Chapman 57 
 v. Fry 208, 591 
 v. Grand Trunk C. Co. 353 
 v. Porter 556 
 Williston v. Michigan S., etc., 
 
 R. R. Co. 563, 564, 565, 572 
 
 Wilmer v. Atlantic, etc., R'y Co. 409 
 Wilmington C. and A. R. R. 
 
 Co. v. Board of Com'rs 477a 
 Wilmington, etc., R. R. Co. v. 
 
 Alsbrook 489 
 
 v. Ling 249 
 
 Wilmington R. R. Co. v. Reid 488 
 
 Wilson, Ex parte 622 
 
 Wilson v. Boyce 676, 817 
 
 v. Curzon 77 
 
 v. Fire Alarm Co. 392 
 
 v. Handley 105, 523 
 
 v. Harry 362 
 
 v. Gaines 490 
 
 v. Goodman 754, 804 
 
 V. Little 794 
 
 v. Lumman 87 
 
 v. McNamee 474b 
 
 »• Metropolitan El. Ry. Co. 636 
 
 v. Miers 130 
 
 ». Northern Pacific R. R. Co. 349 
 
 v. Ohio and Miss. Railway Co. 476a 
 
 v. Pittsburgh, etc., Coal Co. 737 
 
 v. Proprietors 578 
 
 v. Rockford, etc., R. R. Co. 179 
 
 v. S;ilamanca 324 
 
 v. Seligman 740 
 
 v. Shareholder, The 734 
 
 v. Tesson 504 
 
 v. Wills Valley R. R. Co. 511, 530 
 
 Wilson's Case 123 
 
 Wiltbank's Appeal 799 
 
 Winch v. Birkenhead, etc., R. 
 
 R. Co. 305 
 
 v. Conservators of the Thames 169 
 
 v. Tobin 464 
 
 Winchelsea's Causes 460 
 
 Winchester v. Baltimore and S. 
 
 R. R. Co. 210, 628 
 
 v. Mabury 763 
 
 Winchester, etc., T. R. Co. v. 
 
 Croxton 476/, 
 
 Winoock v. Turpin 721, 725, 783 
 
 Windham Prov. Sav. Inst. v. 
 
 Sprague 718 
 
 SECTION 
 
 Wing v. Bank 240 
 
 v. Slater 764 
 
 Winget v Building Assoc. 146, 523 
 Winnie v. 111. Cent. R. R. Co. 301 
 Winona, etc., R. R. Co. v. 
 
 Blake 350, 476a 
 
 Winona and S. P. Ry. Co. v. 
 
 Waldron 179 
 
 Winslow v. Vermont, etc., R. 
 
 R. Co. 360 
 
 Winston v. Dorsett Pipe Co. 779 
 
 v. Tennessee and P. R. R. 
 
 Co. 319 
 
 v. Westfelt 327 
 
 Winter v. Baker 756 
 
 v. Belmont M. Co. 795, 797 
 
 v. Montgomery G. L. Co. 797 
 
 Winton v. Little 161, 302 
 
 Wirth v. Philadelphia City 
 
 Pass'r Ry. Co. 162a 
 
 Wisconsin, etc., R. R. Co. v. 
 
 Jacobson 474d 
 
 Wisconsin Cent. R. R. Co. v. 
 
 Ross 170 
 
 Wishard v. Hasen 702 
 
 Withers v. Buckley 470 
 
 Witter v. Grand Rapids, etc., 
 
 Co. 269 
 
 v. Mississippi, etc., R. R. Co. 530 
 Wolf v. R. R. Co. 140 
 
 Wolff w. New Orleans 333 
 
 Wolff Dryer Co. v. Bigler Co. 400 
 Women's Christian Temper- 
 ance Union v. Taylor 193 
 AVonder v. Bait, and Ohio R. 
 
 R. Co. 365 
 
 Wonson v. Fenno 790 
 
 Wood v. Argyll 77 
 
 v. Bedford, etc., R. R. Co. 305 
 
 v. Burroughs 705 
 
 v. C. M. and St. P. R. R. Co. 193 
 v. Church B'ld'g Ass'n 581 
 
 v. Coosa, etc., R. R. Co. 516 
 
 v. Diwnmer 6-"j5, 656, 708 
 
 v. Guarantee Trust Co. 824a 
 
 v. Macon, etc., R. R. Co. 163a 
 
 v. New Bedford Coal Co. 369 
 
 v. Pearce 703, 778 
 
 v. Whelen 90, 204, 219, 224, 225, 676 
 v. Wicks 714 
 
 v. Wiley Construction Co. 233 
 
 Wood Hydraulic Hose Mining 
 
 Co. u.* King 214, 381 
 
 Woodcock v. Bank 281 
 
 Woodfolk v. Nashville, etc., R. 
 
 R. Co. 179 
 
 Woodfork ». Union Bank 449 
 
 Woodhouse v. Commonwealth 
 
 Ins. Co. 501 
 
 v. Crescent Mut. Ins. Co. 592 
 
 Woodlawn Cemetery u. Everett 474 
 
 911
 
 TABLE OF CASES. 
 
 SECTION 
 
 Woodruff v. Howes 687 
 
 Woodruff v. Erie Ry. Co. 287, 3056 
 v. Parham 480 
 
 v. Sherrard 359 
 
 v. Town of Okolona 321 
 
 v. Trapnell 507 
 
 v. We ut worth 580, 788 
 
 Woodruff, etc., Ironworks v. 
 
 Chittenden 728, 733 
 
 Woodruff Sleeping, etc., Co. v. 
 
 Die hi 347 
 
 Wood's Case 97 
 
 Wood's Sons Co. v. Schaefer 647 
 
 Woods v. Pittsburg, Cin. and 
 St. L. R'y Co. 817 
 
 Woodson c. Milwaukee, etc., R. 
 
 R. Co. 368 
 
 Woodstock Iron Co. v. Exten- 
 sion Co. 162 
 
 Woodward v. St. Louis, etc., R. 
 R. Co. 
 
 Woodridge v. Holmes 
 
 Woodworth v. Bolles 
 
 Wooley r. Batte 
 
 Woolfolk v. January 
 
 Woolverton v. Taylor 
 
 Worcester Corn Ex. 
 
 Co. 
 
 342 
 543 
 501, 725 
 803 
 522c 
 765 
 In re 
 312, 645 
 Worcester v. Forty-second St. 
 
 R. R. Co. 169 
 
 Worcester R. R. Co. c. Hinds 517 
 Workiugmen's Bank v. Converse 149 
 Workman v. Campbell 162, 515, 
 
 589, 748 
 World's Fair Ex. Co. 0. Gasch 549 
 Worth v. Commissioners 479 
 
 ». Petersburg R. R. Co. 488 
 
 v. Wilmington, etc., R. R. Co. 488 
 Worthin v. Griffith 651, 668 
 
 Worthington v. R. R. Co. 195 
 
 Wright v. Bank of Metropolis 599 
 v. Bundy 381 
 
 v. Cent. Cal. Co. 577 
 
 v. Chicago, etc., R. R. Co. 392 
 
 v. Commonwealth 577 
 
 v. Hughes 123, 125 
 
 v. McCormack 721, 826 
 
 v. Milwaukee, etc., Ry. Co. 415 
 v. Nagle 468 
 
 v. Nostrand 436 
 
 v. Oroville M'f'g Co. 219, 224, 
 
 558, 688 
 v. Petrie 656 
 
 v. Pipe Line Co. 280 
 
 v. Ryder 309 
 
 v. Southwestern R. R. Co. 4926 
 v. Springfield and New Lon- 
 don R. R. Co. 614 
 v. Wilcox 752 
 Wright's Appeal 591, 597 
 
 912 
 
 SECTION 
 
 Wyandott, K. C. and N. W. 
 
 Ry. Co. o. Waldo 178 
 
 Wyeth H. & M. Co. v. James 
 
 Spencer Co. 668 
 
 Wylie D. Northampton B'k 161 
 
 Wyman v. Chicago and Alton 
 
 I!. R. Co. 364 
 
 i\ Eaton 393 
 
 v. Hallowell and Augusta B'k 667 
 v. Penobscot, etc., R. R. Co. 305 
 
 Williams 
 Wynne v. Price 
 
 Xenia Bank v. Stewart 
 
 542, 759 
 791 
 
 210, 240 
 
 Y. 
 
 Yale G. S. Co. v. Wilcox 82, 83 
 
 Yates v. Milwaukee 174, 176 
 
 v. Vann De Begert 204 
 
 Yazoo R. R. Co. v. Thomas 489 
 
 Yazoo &M. V. Ry. Co. v. Adams 491 
 Yeaton v. Bank of the Old Do- 
 minion 502 
 v. United States 764 
 Yellow Jacket Silver Mining 
 
 Co. v. Stevenson 214, 258 
 
 Yeomans v. Contra Costa Steam 
 
 Nav. Co. 350 
 
 Yerkes ». Nat. Bank 161 
 
 Yonge v. Kinney 349 
 
 York and Cumberland R. R. (Jo. 
 
 v. Ritchie 234, 547 
 
 York and Maryland Line R. R. 
 
 Co. v. Winans 305 
 
 York Co. v. Central Railroad 351 
 
 York, etc., R. R. Co. v. Hudson 
 
 629, 631 
 Yorkshire Ry. Wagon Co. v. 
 
 McClure 291 
 
 Yorton v. Milwaukee, etc., R'y 
 
 Co. 348 
 
 Youohiogheny Shaft Co. v. 
 
 Evans 717 
 
 Young v. Clarendon Township 320 
 
 v. Farwell 394 
 
 v. Iron Co. 392 
 
 v. Moses 690 
 
 v. N. Y., etc., Steamship Co. 718 
 
 v. Rosenbaum 715 
 
 v. Vough 602 
 
 Younglove v. Lime Co. 736 
 
 Youngman v. Elmira, etc., R. R. 
 
 Co. 670 
 
 Z. 
 
 Zabriskie v. Cleveland, etc., R. 
 
 R. Co. 195, 270, 280, 286, 574
 
 TABLE OF CASES. 
 
 
 
 SECTION 
 
 Zabriskie v. Hackensack, 
 
 etc., 
 
 
 R. R. Co. 
 
 
 502 
 
 535 
 
 Z&ng v. Adams 
 
 
 
 90 
 
 v. Wyant 
 
 
 
 721 
 
 Zearfoss v. Farmers 1 
 
 Institute 
 
 189 
 
 Zent v. Duluth, etc., 
 
 Co. 
 
 
 135 
 
 58 
 
 
 
 
 SECTION 
 
 Ziegler v. First Nat. Bank 342 
 
 Zimmer v. State 424 
 
 Zinn v. N. J. Steamboat Co. 360 
 
 Ziikel v. Joliet Opera Co. 549 
 
 Zottman v. San Francisco 312 
 
 Zulueta's Claim 134, 314, 780 
 
 913 

 
 INDEX. 
 
 [REFERENCES are to the sections.] 
 
 ABANDONMENT OF CHARTER, 433, 434. 
 
 ABUSE OF CORPORATE POWERS, corporation liable for damage 
 
 caused by, 169. 
 ABUTTING OWNERS ON STREETS, 175-177. 
 ACCEPTANCE OF AMENDMENT TO CHARTER, 227, 530, note. 
 
 estoppel to deny, 146, note. 
 
 when shareholder may enjoin, 557. 
 ACCEPTANCE OF BENEFIT. See Ratification. 
 ACCEPTANCE OF CHARTER, 449. 
 
 ACCEPTANCE OF SURRENDER OF FRANCHISES, 433, 434. 
 ACCOMMODATION CERTIFICATIONS BY BANKS. 244. 
 ACCOMMODATION ENDORSEMENTS BY BANKS, 244, note, 236, 
 
 note. 
 ACCOUNTING : 
 
 by corporations for benefits received under ultra vires contracts, 310. 
 
 specific chattels, 311-313. 
 
 money, 311. 
 
 illegal ultra vires contracts, 313. 
 
 by other party for benefits received under ultra vires contracts, 314. 
 See Secret Profits. 
 ACQUIESCENCE. See Ratification. 
 ACTIONS. See Suits by and against Corporations. 
 ACTS DONE ON BEHALF OF CORPORATIONS: 
 
 when franchises a protection from liability for, 167-170. 
 
 when franchises not a protection from liability for, 171-177. 
 
 of body corporate, when binding, 180-183. 
 formalities required, 184-187. 
 
 See Agents, Directors, President, Cashier, Illegal Acts, 
 Torts, Ultra Vires. 
 ACTS DONE WITHOUT THE STATE INCORPORATING THE COR- 
 PORATION: 
 
 the two questions, 379. 
 
 legal effect of the act within the limits of the home state, 380-382. 
 
 legal effect of the act in the foreign state, 383. 
 
 comity among states, 384. 
 
 limits to this comity, 385. 
 
 foreign corporations cannot exercise special franchises, 386. 
 
 nor act contrary to the laws or public policy of the state, 387, 388. 
 
 nor do acts beyond their powers, 389-391. 
 
 915
 
 916 INDEX. 
 
 References are to the Sections. 
 
 ACTS DONE WITHOUT THE STATE, Etc.— (continued). 
 actions against foreign corporations, 392. 
 by one foreign corporation against another, 392. 
 
 penal provisions not enforced outside the state enacting them. Stat- 
 utory liability, 393. 
 jurisdiction over assets of foreign corporations, 394. 
 service on foreign corporations, 395, 396. 
 statutes regulating service, 397. 
 New York doctrine, 398. 
 proceedings in rem, 399. 
 
 statutes imposing terms on foreign corporations, 400. 
 effect of non-compliance with these statutes, 401. 
 statutes of limitations, 402. 
 
 status of a body of men incorporated by the legislation of two or more 
 states, 403-408. 
 ADJOURNED MEETINGS, 574. 
 ADMINISTRATOR, foreign corporation as, 384. 
 ADMISSIONS OF CORPORATE AGENTS, 210. 
 
 of president, 235 note. 
 AGENTS OF CORPORATIONS: 
 
 promoters in what respects agents, 82-84. 
 need not be appointed by deed under the corporate seal, 248. 
 validity of their acts, general principles, 191-193. 
 effective limitations on authority of, 194. 
 
 Class L. where other party is charged with notice, 195. 
 effect of by-laws, 196, 197. 
 
 Class II., where other party bas actual knowledge, 198, 199. 
 Class III., where course of agent's employment indicates the 
 limitations, 200, 202. 
 authority of, dependent on actual functions, 202. 
 effect of extrinsic facts on validity of contract of, 203-206, 284, 285. 
 certification of their authority by, 207-209. 
 fraud of, when corporation cannot plead, 207. 
 fraud of, subscriptions obtained by, 523-526. 
 admissions of, 210. 
 notice to, 210. 
 
 ratifying unauthorized acts of, 211-217, 256. 
 delegation of authority by, 233, 234. 
 authority of, when expires, 235. 
 mariner of action, non-observance of formalities by, 247-262. See 
 
 Formalities. 
 approval of acts by other agents, 252. 
 cannot bind corporation by ultra vires acts, 265, 267. 
 cannot represent corporation when dealing with themselves, 628-631. 
 compensation of, 646-G48. See Directors, President, Cashier, 
 Treasurer, Secretary, Station Agent, Insurance Agent, 
 Teller, Torts. 
 AGREEMENT BETWEEN THE CORPORATORS, 31.
 
 INDEX. 917 
 
 References are to the Sections. 
 
 ALIENATE PROPERTY, power of corporations to, 130. 
 
 ALLOT SHARES, power to, directors cannot delegate, 234. See Shakes 
 
 of Stock. 
 ALTERATION OF CHARTERS OR ENABLING ACTS: 
 
 state cannot alter unless it has reserved the power to, 450, 453, 557. 
 
 power to, may be reserved to the state, 464. 
 
 by statute or constitutional provision, 464, 496. 
 
 power reserved to prevents existence of contracts between corporation 
 and state, 496, 497. 
 
 contract between corporators subject to it, 498. 
 
 limitations in the power to, 499-502. 
 
 effect of on subscriptions to shares, 530-535. 
 
 release of subscribers thereby, 531-535. 
 AMALGAMATION. See Consolidation. 
 
 AMENDMENT OF CHARTER, acceptance of, 227, 449, note, 530, note, 
 557. 
 
 See Alteration of Charters. 
 AMOTION, 14, note, 649, 650. 
 
 court of equity cannot pronounce judgment of, 581. 
 ANALOGY, danger of reasoning from, 67-69, 717. 
 ANALYSIS OF THE NOTION OF A CORPORATION, 23-51. 
 
 the two meanings of the term " corporation," 23. 
 
 meaning of the terms "legal institution," and "legal relation," 24-27. 
 
 the constitution of a corporation, 28-30. 
 
 incorporation, 28-30. 
 
 fundamental agreement between the corporators, 31. 
 
 the corporate funds, 32, 33. 
 
 legal relations in respect to the corporate funds, 34, 35. 
 
 result of the analysis, 36. 
 
 persons between whom exist the legal relations in respect of the cor- 
 porate enterprise, 37. 
 
 corporate management, 38. 
 
 order of treatment, 39. 
 
 general nature of the legal relations existing in respect of the corporate 
 enterprise, 40. 
 
 trust relations, 41-47. 
 
 the corporation also a body of men, 48-50. 
 
 the legal person, 51. 
 ANNUAL REPORTS. See Reports. 
 APPEAR AS DEFENDANT, a corporation can, 143. 
 
 a foreign corporation can, 396, note. 
 APPOINTMENT OF AGENTS, 248. 
 
 ARBITRATION, corporations may refer matters to, 137. 
 ASSAULT, liability of corporations for, 344. 
 ASSENT, of shareholders to mortgage. 185, 186. 
 
 corporation cannot, as shareholder in itself, assent to mortgage, 136, 
 note. 
 ASSESSMENTS. See Calls.
 
 918 INDEX. 
 
 References are to the Sections. 
 
 ASSETS OF CORPORATIONS: 
 
 status of, 32, 33. 
 
 legal relations in respect to, 34, 35, 41-47. 
 
 trust fund for creditors, 654, 655. 
 
 creditors may follow, 656, 657. 
 
 restrain misapplication of, 657-659. 
 
 assignments of for creditors, 130, 668. 
 ASSIGNEE OF INSOLVENT CORPORATION, may sue for subscrip- 
 tions, 542. 
 ASSIGNMENTS FOR CREDITORS, 130, 668. 
 
 made by directors, 225, 230, note, 668, note. 
 ASSIGNMENT OF SUBSCRIPTIONS TO SHARES IN A FUTURE 
 
 CORPORATION, 101, 102. 
 ASSOCIATIONS. See Joint Stock Associations. 
 ATTACHMEMT OF SHARES, 796. 
 
 does not incumber property of tbe corporation, 567, note. 
 
 in foreign corporation, 392, note. 
 ATTORNEY, corporation may appear by, 143. 
 
 managing officers may employ, 202. 
 AUSTIN'S ANALYSIS OF A LAW, 439. 
 AUTHORITY, delegation of by directors, 233. 
 AUTHORITY TO FORM A CORPORATION: 
 
 in the Roman law, 4. 
 
 in the common law, 12. 
 
 BAGGAGE, liability of carriers for, 355. 
 BANKRUPTCY. See Insolvency, Winding-up. 
 BANKS : 
 
 when cannot establish branches, 121, note. 
 
 may loan money, 161. 
 
 may deal in exchange, 161. 
 
 may purchase, discount, and collect notes and bills, 161. 
 
 may receive special deposits as gratuitous bailee, 161, 337. 
 
 liability for special deposits, 161, 337, 346. 
 
 may convey property, 161. 
 
 power of to guarantee, 267. 
 
 may make covenants of warranty, 161. 
 
 may not subscribe to stock in a railroad company, 161, 267. 
 
 liability on checks certified by cashier or teller, 242-245. 
 
 liability on raised checks certified by, 245, 246. 
 
 liability for money paid on forgeries, 199, 672. 
 
 relations to depositors, 672. 
 
 lien on deposits, 673. 
 
 prohibited loans by, 301. 
 
 excessive interest taken by, 298. 
 
 prohibited circulating notes issued by, 298, 299. See National 
 Banks, Savings Banks, Cashier. 
 BENEFIT OF TRANSACTION, acceptance of, 211, 214. See Rati- 
 fication.
 
 INDEX. 919 
 
 References are to the Sections. 
 
 BENEFIT, set-off against amount of compensation for property taken, 179. 
 BEQUEST OF SHARES, right to dividends, 799, 801. 
 BILLS AND NOTES, issued by corporations, 205, 285, 299. 
 BILLS OF LADING : 
 
 effect of provisions in to limit liability of carrier, 358, 359. 
 
 liability of railroad company to those who make advances on, 201. 
 BLACKSTONE'S view of a corporation, 14, 15. 
 BOARD OF DIRECTORS. See Directors. 
 BODY CORPORATE : 
 
 consists of whom, 48-50. 
 
 acts of, when binding, 180-183. 
 
 manner of acting, 184-187. See Legal Effect of Acts done by ob 
 
 ON BEHALF OF CORPORATIONS, ULTRA VlRES. 
 
 cannot act outside the state, 382. 
 BONDS : 
 
 corporation may issue, 125. 
 
 issued before incorporation, 90, note. 
 
 situs of for taxation, 479. 
 
 when negotiable, 679. 
 
 effect of invalid provisions in, 677, 678. 
 
 purchase of by directors, 633. 
 
 that some are invalid may not affect mortgage security for the rest of 
 the issue, 678, note. See Municipal Bonds. 
 BONDS CONVERTIBLE INTO STOCK, 541, note, 679. 
 BONDHOLDERS, 674-682. 
 
 officers of corporations may act as trustee for, 629, note. 
 
 affected with notice of terms of the mortgage, 674. 
 
 and bound by them, 816. 
 
 under railroad mortgages, 676. 
 
 under mortgages of rolling stock, 676. 
 
 rights of, how affected by invalid provisions in mortgages, 677, 678. 
 
 remedies of, 682, 815, note. 
 
 when not necessary parties to suit by trustee to foreclose, 815, notes. 
 
 legal relations among, 815-820. 
 
 on reorganization of debtor corporations, 816a. 
 between and contractors, 817. 
 between and other creditors, 820-824. 
 
 under mortgages of separate portions of railroad, 819. 
 
 appointment of receiver at suit of, 821, 822. 
 
 priority of receiver's orders over claims of, 823. 
 
 bonds held by, negotiable, 679. 
 
 coupons, 680. See Creditors, Trustees under Railroad Mort- 
 gages. 
 "BONUS" STOCK, issue of, 522a, 7026. 
 BOOKS OF CORPORATION: 
 
 interpolations in, 263. 
 
 evidence to prove subscriptions, 263. 
 to prove organization meeting, 263.
 
 920 INDEX. 
 
 References are to the Sections. 
 
 BOOKS OF CORPORATION— (continued). 
 
 when not against outsiders, 2(5.3. 
 right of shareholders to inspect, 585. 
 
 of directors to inspect, 808. 
 
 mandamus to inspect, 585, 808. 
 a mandamus lies to compel outgoing officers to surrender, 650, note. 
 BORROW MONEY : 
 
 power of corporation to, 125-127. 
 
 mining superintendent cannot, 202. 
 
 nor treasurer of savings bank, 202. 
 
 liability of corporations for, 214-216, 232, 286, 311. 
 
 cashier may, 240. 
 
 power of directors to, 209, 225. 
 statutory limitations on amount, 205, 286. 
 BRANCHES, power of corporations to establish, 121, note. 
 BURDEN OF PROOF OF CONTRIBUTORS NEGLIGENCE, 376. 
 
 See Presumptions. 
 BUSINESS, place of. 
 
 power of corporation to change, 121, note, 382. 
 when foreign corporations must state, 400. 
 BY-LAWS : 
 
 power of corporations to make, 6, 12, 14, 19, 582. 
 
 where resident, 582. 
 
 evidence against shareholders, 582, note, 
 must be reasonable and not contrary to law, 583. 
 cannot create statutory liability, 583. 
 regulating transfers and alienations of shares, 583. 
 repeal of, 584. 
 
 creating lien on shares, 601, 602. 
 
 outsiders, when not affected with notice of, 196, 197. 
 when ordinarily disregarded do not affect rights of outsiders, 197. 
 liability of savings bank for moneys paid in violation of, 199 and note. 
 transfers of shares in violation of, 589, 594. 
 liability of directors for acts in violation of, 616-619. 
 may provide for removal of officers, 649. 
 
 CALLS: 
 
 illegally chosen officers cannot make, 540. 
 
 when a condition precedent to enforcing a subscription, 517, 543, 7)3. 
 
 authority to make cannot be delegated, 233, 234, 543. 
 
 may be assigned when made, 543. 
 
 action for cannot be sustained after forfeiture of shares, 546. 
 
 creditors can compel directors to make, 703. 
 
 when necessary before creditors can sue shareholders, 703. 
 
 until made, statute of limitations does not run against unpaid sub- 
 scriptions, 709. 
 CAPACITIES OF CORPORATIONS AT COMMON LAW, 12, 15. 
 CAPITAL AND INCOME, status of dividends, 799-801.
 
 INDEX. 921 
 
 References are to the Sections. 
 
 CAPITAL STOCK. See Stock. 
 
 valuation of for taxation, 477a, note. 
 CARRIER. See Common Carrier. 
 CASHIER: 
 
 powers of, 202, 239-243. 
 
 appointment of, 248. 
 
 has power to borrow, 240. 
 
 powers restricted to ordinary business of tbe bank, 241. 
 
 cannot bind bank as accommodation endorser, 241. 
 
 cannot certify his own cbeck, 241, note. 
 
 cannot bind bank on his own note, 202, 241. 
 
 fraud of, 240, 598, note. 
 
 declarations of, 240, note. 
 
 effect of notice to, 215, 240. 
 
 cannot pledge assets for antecedent debt, 241, note. 
 
 certifications of checks by, 243, 244. 
 
 when not liable for acts in violation of by-laws, 616, note. 
 
 prima facie entitled to compensation, 647, note. 
 CATTLE ON RAILROAD TRACKS, 369. 
 CERTIFICATE OF INCORPORATION MUST BE FILED, 451, note. 
 
 liability of shareholders, 148. See De Facto Corporation. 
 CERTIFICATE OF STOCK. See Stock Certificate. 
 CERTIFICATION OF CHECKS, 242-240, 636. 
 CHANGE IN CORPORATE ENTERPRISE: 
 
 effect of on subscriptions, 530-535. 
 
 directors cannot make, 226, 227. 
 CHARGES BY RAILROAD COMPANIES, power of state to regulate, 475, 
 
 476a, 4766. 
 CHARTER: 
 
 when fraud in obtaining cannot be pleaded, 147. 
 
 embodies a contract, 438, 448. 
 
 consideration for grant of, 454. 
 
 acceptance of necessary, 449. 
 
 surrender of, 433, 434. 
 
 judicial notice of, 264, note. 
 
 acceptance of amendment to, 227. 
 
 may contain exemptions from taxation, 488, 491. 
 
 effect of alteration on subscription contracts, 500, 501, 530-535. 
 
 creditors cannot prevent alteration, 665. 
 
 when shareholders can prevent alteration, 557. 
 
 persons affected with notice of, 118, 195, 264, note. 
 
 expiration of, 150, note. See Dissolution. 
 
 repeal of, 464, 496-504. 
 
 limitations on the reserved right of the state to alter and repeal, 496- 
 502. 
 
 judicial decree, when necessary to repeal, 503. 
 
 effect of repeal, 504. See Franchises. 
 CITIZENS, in what respect corporations are not, 383, 480.
 
 922 INDEX. 
 
 References are to the Sections. 
 
 CITIZENSHIP OF CORPORATIONS WITH RESPECT TO THE JURIS- 
 DICTION OF THE FEDERAL COURTS, 410-413. 
 classification of corporations, 22a, b, c, d, e, /. 
 
 COKE'S VIEW OF A CORPORATION, 11-14. 
 
 COLLATERAL ATTACKS ON FRANCHISES. See De Facto CORPO- 
 RATION. 
 
 COLLATERAL SECURITY, liability of person holding shares as, 741, 
 
 743. See Pledge of Shares. 
 COMBINATION. See Monopolies, Consolidation. 
 COMITY AMONG STATES, in regard to foreign corporations, 384-390. 
 COMMERCE, power of Congress to regulate, 474ct-474d\ 485. 
 COMMISSIONERS, subscriptions to shares received by, 91 and notje. 
 COMMITTEES OF DIRECTORS, 261, note. 
 
 powers and modes of acting, 234. 
 COMMON CARRIER: 
 
 of passengers, 347, 348. 
 
 may make reasonable regulations, 348. 
 
 as to tickets, 348. 
 liability for baggage, 355. 
 
 liability for negligence, 349-351. 
 
 cannot stipulate against liability for negligence, 352-354. 
 
 may stipulate against liability for fire, 351. 
 
 limitations on liability for goods, 356. 
 
 assent of shipper to limitations of liability, 358, 359. 
 
 implied from accepting bill of lading, 358, 359. 
 
 effect of notices to passengers and shippers, 359. 
 
 when liability begins and ceases, 360. 
 
 misdelivery a conversion, 360. 
 
 should give notice to consignee of arrival of goods, 360. 
 
 liability for delay in transportation, 361. 
 for wrong delivery, 360. 
 measure of damages, 361. 
 for losses on connecting lines, 354, 362-364. 
 
 not charged with notice of contents of packages, 369. See Railroad 
 Companies, Torts. 
 
 state may compel to perform their functions, 454, 455. 
 COMMON LAW NOTION OF A CORPORATION, 10-22. 
 
 relation of the common to the Roman law, 10. 
 
 Coke's idea of a corporation, 11-13. 
 
 Blackstone's idea of a corporation, 14, 15. 
 
 perpetual succession, 16. 
 
 capacity to sue and use a corporate seal, 17. 
 
 capacity to hold lands, 18. 
 
 capacity to make by-laws, 19. 
 
 dissolution, 20. 
 
 doctrine that a corporation is a person, 21, 22. 
 COMPENSATION: 
 
 for crossing railroad tracks, 163u.
 
 INDEX. 923 
 
 References are to the Section*. 
 
 COMPENSATION— ( continued). 
 for property taken, 171-177. 
 for tracks laid in streets, 175-177. 
 measure of, 178. 
 
 when portion of track is taken, 178. 
 what benefits may be set off, 179. 
 of promoters, 86. 
 
 of directors and other officers and agents, 646-648. 
 COMPETITION, arrangements between railroad companies regarding, 
 
 307-309. 
 COMPROMISES OF ACTIONS: 
 corporations may make, 137. 
 when cashier and president may make, 202. 
 directors may make, 223 and note, 224. 
 CONDEMNING LAND. See Eminent Domain. 
 CONDITIONS IN SUBSCRIPTION CONTRACTS, 96, 97, 517-521. 
 
 See Calls. 
 CONDITIONS PRECEDENT TO ENFORCING STATUTORY LIA- 
 BILITY OF SHAREHOLDERS, 724. 
 CONFESS JUDGMENT, corporation may, 137. 
 CONGRESS : 
 
 corporations created by, 467. See National Banks. 
 power to regulate commerce, 474a-474d, 485. 
 power to tax, 478. 
 CONSENTS OF SHAREHOLDERS TO MORTGAGE, 185. 
 CONSIDERATION MOVING TO STATE FROM CORPORATORS, 454. 
 CONSIDERATION OF SUBSCRIPTION CONTRACTS, 91-94, 509-512. 
 CONSIGNEE OF GOODS, right of to notice from the railroad company, 
 
 360. 
 CONSOLIDATION : 
 
 of corporations created by different states, 403-409. 
 differs from succession, 415. 
 
 special authority requisite, 305, 419, 420, 227, note, 
 effect of, 421-423. 
 
 on subscription contracts, 536. 
 unauthorized when not ground of forfeiture, 459, note, 
 when subscriber may question validity of, 539. 
 shareholder may enjoin, 536. 
 creditors cannot prevent, 665. 
 of railroad companies, effect on power of county to issue bonds, 323, 
 
 324. 
 liability of consolidated corporation to creditors, 425-427, 666. 
 capacities of consolidated corporation, 424. 
 franchises vest in consolidated company, 424. 
 power to mortgage passes to it, 424. 
 
 eminent domain passes to it, 424. 
 exemptions from taxation, how affected by, 491. 
 CONSPIRACY, shareholders may sue corporation and officers for, 560.
 
 924 INDEX. 
 
 References are to the Sections. 
 
 CONSTITUTION OF A CORPORATION : 
 
 consists of what, 28, 64-66, 448, 453. 
 
 operative in regard to what acts, 30. 
 
 dual nature of, 438. 
 
 contains rules for corporate management, 38. 
 
 embodies a contract, 448. 
 
 shareholders may enjoin changes in, 557. 
 
 creditors cannot enjoin changes in, 6(35. 
 
 effect of changes in on subscription contracts, 530-535, 782. See 
 Charters. 
 CONSTRUCTION COMPANIES, 638, 639. 
 CONSTRUCTION OF CORPORATE POWERS : 
 
 general principles, 120. 
 
 to be construed reasonably, 121. 
 
 when to be construed strictly, 122. See Corporate Powers. 
 CONTEMPT, corporation may be punished for, 143. 
 CONTRACT: 
 
 of promoters, 76-79. 
 
 liabilities of corporation thereon, 87-90. 
 
 cannot be enforced by corporation incorporated for an illegal purpose, 
 149. 
 
 effect of performance of ultra vires contracts, 275-281. 
 
 seal, when necessary, 248. 
 
 notion of, 447. 
 
 embodied in the constitution of a corporation, 448, 453. 
 
 between the corporation and the state, 450, 453. 
 
 between the corporators, 31, 448, 498. 
 parties to it, 31. 
 
 to take shares in a corporation to be formed, 91-112. See Subscrip- 
 tions to Shares. 
 
 implied contracts of corporations, 249. 
 CONTRACT OF MEMBERSHIP. See Subscriptions to Shares. 
 CONTRACTOR'S LIEN ON RAILROADS, 817, 818. 
 CONTRIBUTION: 
 
 among promoters and provisional committeemen, 81. 
 
 among shareholders, 705, 706, 734, note, 783, 784. 
 
 among officers, 803-807. 
 CONTRIBUTORY NEGLIGENCE, 373, 376. 
 
 burden of proof, 376. 
 
 child not guilty of, 375. 
 CONTROL OF THE CORPORATE ENTERPRISE: 
 
 vested in the corporation acting through a majority, 553. 
 
 vested in the board of directors, 180-182, 683-685. 
 
 when courts will not interfere at suit of a minority, 554. 
 
 minority may restrain ultra vires acts, 555-557. 
 
 minority may restrain improper appropriation of corporate assets by 
 majority, 558, 559.
 
 INDEX. 925 
 
 References are to the Sections. 
 
 CONVERSION: 
 
 of preliminary deposits by promoters, 104, 106. 
 
 corporation may be liable for, 342. 
 
 misdelivery of common carriers, 360. 
 
 of shares, 599, note, 789, note. 
 CONVEYANCES, 248. See Lands. 
 CORPORATE BODY: 
 
 consists of whom, 48-50. 
 
 acts of, when binding, 180. 
 when invalid, 181-183. 
 
 must be done in corporate meeting, 184. 
 
 special formalities, 185. 
 CORPORATE CAPACITIES. See Corporate Powers. 
 CORPORATE FUNDS: 
 
 status of, 32, 33. 
 
 legal relations in respect of, 34, 35, 41-47. See Assets. 
 CORPORATE MANAGEMENT, 8, 38, 118. See Control op the Cor- 
 porate Enterprise. 
 CORPORATE POWERS: 
 
 meaning of term, 114. 
 
 at common law, 12, 14. 
 
 at Roman law, 7. 
 
 considerations in determining, 115-119. 
 
 rules of construction, 120, 121. 
 
 when to be construed strictly, 122. 
 
 to raise money, 123-127. 
 by issue of stock, 124. 
 by borrowing, 125. 
 
 to issue notes or bonds, 125. 
 
 to mortgage, 125. 
 
 to establish branches, 121, note. 
 
 to change place of business, 121, note. 
 
 to issue deferred income bonds, 126. 
 
 to guaranty, 127, 267. 
 
 to hold lands, 18, 128. 
 
 to acquire personal property, 129. 
 
 to alienate, 130, 
 
 to lease, 130. 
 
 to transfer franchises, 131, 132. 
 
 to increase capital stock, 133, 228. 
 
 to purchase stock in another corporation, 130, note, 161, 267, 309. 
 
 to purchase its own stock, 134, 135, 552. 
 
 to issue preferred shares, 571, 572. 
 
 to re-issue shares, 136. 
 
 to compromise actions, 137. 
 
 to submit to arbitration, 137. 
 
 to sue and be sued, 137-144. 
 
 acts within scope of body corporate, 180.
 
 926 INDEX. 
 
 References are to the SeotionB. 
 
 CORPORATE POWERS— (continued). 
 
 to act outside of the state, 379-402. 
 
 to make by-laws. See By-laws. 
 
 not specially vested remain in body of shareholders, 228, note. 
 
 of corporations created by two states, 403-409. 
 
 persons dealing with corporation charged with notice of, 195, 264, 389- 
 391. 
 
 See Ultra Vires. 
 CORPORATION: 
 
 a body politic, 12, 14. 
 
 meanings of the term, 23. 
 
 analysis of meanings, 24-51. 
 
 regarded as a legal institution, 24-47. 
 
 regarded as a body of men, 48-51. 
 
 classification of, 22a, 6, c, a", e, /. 
 
 constitution of, consists of what, 28, 64-66, 448, 453. 
 
 definitions of, 21, note, 27. 
 
 common law capacities, 12, 15. 
 
 incidents of, arising by implication, 12, 15. 
 
 notion of, in the Roman law, 1-9. 
 in the common law, 10-22. 
 according to Coke, 11-14. 
 according to Blackstone, 15, 16. 
 
 not a " person " in the Roman law, 2. 
 
 " artificial persons " in the common law, 15, 21, 22. 
 
 resemblances of, to other legal institutions, 52-71. 
 
 law relating to, 53. 
 
 liability of, for contracts of promoters, 87-90. 
 
 may enforce subscriptions made before its organization, 108-110. 
 
 right of, to control corporate enterprise, 553. 
 
 de facto, when legal existence not to be questioned, 145-157. 
 
 incorporated for illegal purpose cannot enforce contract, 149. 
 
 when not liable for its acts which cause damage, 167-169. 
 
 cannot change its name, 158. 
 
 when liable after delegation of its powers, 170. 
 
 liable for property taken by it, 171-177. 
 
 acts of, when binding, 180-185. See Body Corporate. 
 
 power of, to act outside of state, 379-402. 
 
 cannot migrate, 382. 
 
 created by two states, 403-409. 
 
 citizenship of, with respect to the jurisdiction of the Federal courts, 
 410-413. 
 
 how formed under enabling acts, 114, note, 451, note. 
 
 present methods of forming, Appendix. 
 
 in what respect not a citizen, 383, 480. 
 
 rights of, against the state, 461-463. 
 
 may be bound by implied contracts, 249. 
 
 ratification by, 211, 213, 214.
 
 INDEX. 927 
 
 References are to the Sections. 
 
 CORPORATION— ( continued). 
 
 may be guilty of fraud, 342, note. 
 
 created by Congress, may remove cases to Federal courts, 413, note, 
 not a foreign corporation in a state, 404, note. 
 
 consolidation of. See Consolidation. 
 
 dissolution of. See Dissolution. 
 
 rights of, against the state, 461-463. 
 
 law applicable to, 53, 64-71. See Corporate Powers. 
 CORPORATIONS, public and private, distinctions regarding liability of, 
 177, 315, 316. 
 
 created by two or more states, 403-409. 
 
 defectively organized. See De Facto Corporation. 
 CORPORATORS, fundamental agreement between, 31, 114. 
 
 meaning of the term, 114, note. 
 COUNSEL, managing officers may employ, 202. 
 
 president cannot, 236. 
 COUPONS, 327, 680, 681. 
 
 bear interest when overdue, 326, note. 
 COUPON BONDS, corporation may issue, 125. 
 CREDITOR'S BILLS AGAINST SHAREHOLDERS, joinder of parties, 
 
 704-706. 
 CREDITORS OF CORPORATIONS: 
 
 rights of, regarding ultra vires acts, 272, 273. 
 
 relations of, to shareholders, effect thereon of the reservation of the 
 right to alter and repeal the charter, 500, 501. 
 
 relations of, to the state, 507. 
 
 how relations of, to the corporation arise, 651, 652. 
 
 cannot question transactions occurring before they become such, 651. 
 
 have no voice in the corporate management, 653. 
 
 corporate assets a trust fund for, 654-656. 
 
 unpaid stock part of trust fund for, 655. 
 
 may follow assets, 657, 708. 
 
 transferred to a new corporation, 657, 667. 
 
 may restrain misapplication of assets, 272, 273, 658, 659. 
 
 may compel payment of debts due the corporation, 660. 
 
 may compel payment of stock subscriptions, 660-661, 701, 703. 
 
 may enjoin wrongs threatening corporation, 662. 
 
 when entitled to a receiver, 663, 707. 
 
 cannot prevent dissolution, 664. 
 
 cannot prevent alteration of charter, 665. 
 
 cannot prevent consolidation, 665. 
 
 liability to, of consolidated corporation, 425-427, 666. 
 of succeeding corporation, 667. 
 
 rights of, regarding insolvent assignments by debtor corporation, 668. 
 
 discretion of officers as to order of payment of claims of, 668, note. 
 
 relative rights of, 669. 
 
 right to set off, 670. 
 
 rights of, against shareholders in absence of statutory liability, 700- 
 708.
 
 INDEX. 
 
 References are to the Sections. 
 
 CREDITORS OF CORPORATIONS— [continued). 
 
 that shareholders shall pay their subscriptions, 701, 703. 
 exists though statute impose a further liability, 712, note, 
 that property received for shares shall be worth their par value, 
 702, 702a, 7026. 
 joinder of parties in actions by, against shareholders, 704-706. 
 calls, when necessary before bringing action, 703. 
 may restrain shareholders from withdrawing corporate funds, 708. 
 shareholders trustees for, in what respect, 45, 709-711. 
 statutory liability of shareholders to. See Statutory Liability. 
 who are also shareholders cannot sue other shareholders at law, 733, 
 
 784. 
 cannot deny corporate existence to charge shareholders as partners, 
 
 148, 739. 
 what persons are shareholders as to creditors, 740-743. 
 when can hold pledgee of shares as shareholder, 741. 
 shareholders cannot plead that their subscriptions were obtained by 
 
 fraud as against, 744. 
 nor that they had been released, 745. 
 but compromises may hold good as against, 746. 
 liability of shareholders to, effect on of transfer of shares, 747-749. 
 and bona fide forfeitures hold good, 746. 
 rights of, against shareholders on winding up, 750, 751. 
 rights of, against officers, 756. 
 
 who misapply corporate funds, 757. 
 who neglect their duty, 758. 
 on insolvency of the corporation, 759, 760. 
 statutory liability of officers to creditors. See Statutory Liability. 
 rights of, who are also shareholders or officers, 810, 811. 
 legal relations among, 812. 
 
 when corporation is insolvent, 272, 273, 813. 
 
 creditors whose claims are founded on the same instrument, 815. 
 contractors 1 liens on railroads, 817. 
 
 legal relations between general creditors aud bondholders on foreclo- 
 sure, 820-824. 
 receivers 1 orders, 823. 
 
 enforcing rights of against shareholders in foreign corporations, 393. 
 priorities of, regarding statutory liability of shareholders, 825, 826. 
 See Depositors, Bondholders. 
 CUMULATIVE VOTING, 577. 
 CUSTOMS OF BANKS, 195. 
 
 DAMAGE : 
 
 when corporation not liable for, 167, 168. 
 
 when corporation liable for, 169-177. 
 DAMAGES : 
 
 exemplary, 377, 378. 
 
 recoverable against corporations for torts, 377, 378.
 
 INDEX. 929 
 
 References are to the Sections. 
 
 DAM AGES— ( continued ). 
 
 for delay in carrying goods, 361. 
 
 for loss of goods by carrier, 361. See Eminent Domain. 
 DEATH of parties, penal actions do not survive, 764, 771. 
 DEBTS, what are, 734, 772, 773. 
 DECEIT, corporation liable in action for, 342. 
 DECLARATIONS of officers or agents, 210. 
 
 effect of when false on subscriptions, 97, note, 521. 
 DECREASE OF CAPITAL STOCK: 
 
 power of corporations to, 133. 
 
 rights of shareholders on, 570. 
 DEEDS OF CORPORATIONS, 248. 
 
 proof of, 248, note. 
 DE FACTO CORPORATION: 
 
 how existence of, may be questioned, 145. 
 
 what is, 145, note, 148. 
 
 corporation organized under void law is not, 148. 
 
 subscriber before organization may deny existence, 99. 
 
 subscriber after organization may not, 147, 537-539, 738, 739. 
 
 when subscriber may question validity of consolidation, 539. 
 
 when parties contracting with estopped to deny existence of, 146-148. 
 
 when such parties not estopped, 149, 150. 
 
 when creditors estopped to deny existence, 148, 739. 
 
 when existence cannot be denied by parties affected with no estoppel, 
 151-153. 
 
 when existence can be denied, 154. 
 
 validity of special franchises may be questioned, 154-156. 
 
 cannot exercise right of eminent domain, 155. 
 
 defective organization remediable, 157. 
 DE FACTO OFFICERS : 
 
 who are, 188. 
 
 general reputation does not make, 188. 
 
 acts of, when valid, 188-190. 
 
 cannot make calls, 540. 
 
 rights of, against other officers, 809. 
 DE FACTO ORGANIZATION OF CORPORATION, when sufficient, 
 153. See De P'acto Corporation. 
 
 when insufficient, 154-156. 
 DEFAMATION, 137, 342. 
 DEFECTIVE ORGANIZATION OF CORPORATION, how cured, 157. 
 
 liability of shareholders to creditors on, 728. 
 DEFENDANT, corporation may appear as, 143. 
 DEFERRED INCOME BONDS, 126. 
 DEFINITIONS : 
 
 of corporation, 21, 23, notes, 27. 
 
 of legal effect, 30, note, 113. 
 
 of corporators, 114, note. 
 
 of corporate powers, 114. 
 
 59
 
 930 INDEX. 
 
 References are to the Sections. 
 
 DEFINITIONS— (continued). 
 of a valid act, 118, note. 
 of a binding act, 118, note, 
 of partnerships, 23, note, 59. 
 of a tort, 335, note. 
 of dissolution, 428. 
 of law, 440, 446. 
 of a legal right, 442. 
 of shares of stock, 567. 
 DELAY IN TRANSPORTATION: 
 liability of carrier, 301. 
 measure of damages, 361. 
 
 LEGATION OF AUTHORITY BY DIRECTORS, 233, 234. 
 DELEGATION OF FRANCHISES, does not relieve corporation from 
 
 liability, 170. 
 DEPOSITORS: 
 
 in savings banks, 199. 
 relations of, to bank, 672. 
 forgeries, 672. 
 
 lien of bank on deposits of, 673. 
 DEPOSITS ON SUBSCRIBING FOR SHARES. See Preliminary De- 
 posits. 
 DEPOTS: 
 
 railroad company may condemn land for, 163. 
 power of railroad companies to locate, 162. 
 contracts to locate by railroad companies, 309. 
 DEVISES TO FOREIGN CORPORATIONS, 391. 
 DIRECTORS: 
 
 on wrongful refusal of to sue, when shareholders may, 140. 
 effect of vesting corporate management in, 180-183, 683-685. 
 acts of, when valid, 191-193. 
 notice to, 210, note. 
 
 presumption of knowledge by, 216, note, 
 cannot agree as to who shall be directors, 219, note, 
 powers of when corporate powers are vested in, 219, 220, 224. 
 limitations on, 221. 
 to transact ordinary business, 223. 
 to make compromises, 223, 224. 
 to borrow, 225. 
 
 to guarantee debts of other corporations, 224. 
 to mortgage, 225. 
 
 to make assignments, 225, 230, note, 668, note, 
 cannot change corporate enterprise, 226, 227. 
 
 accept amendment to charter, 227, 449, note, 530, note. 
 
 increase capital stock, 228. 
 
 transfer or lease certain property, 229. 
 
 change termini of railroad, 229, note. 
 
 close the business, 230.
 
 INDEX. 931 
 
 References are to the Sections. 
 
 DIRECTORS— (continued). 
 
 bind corporation in matters not relating to corporate business, 
 222, 231, 232. 
 ratification by, 211, and note. 
 
 of bonds issued before incorporation, 90, note, 
 acquiescence of, in unauthorized act, 212. 
 delegation of authority by, 233, 234. 
 must act as a board, 258, 259. 
 meetings of, quorum, 260. 
 may meet outside the state, 381. 
 cannot be elected outside of state, 382, note, 
 presumptions in favor of regularity, 261. 
 action of, special provisions regarding, 262. 
 record of their acts, 263. 
 
 cannot bind corporation by ultra vires acts, 267. 
 liability of, for money borrowed from their corporation in violation of 
 
 terms of a statute, 301. 
 when illegally elected cannot make calls, 540. 
 elections of, 577-581. 
 fiduciary position of, 612, 613. 
 when there are no other shareholders, 612, note, 
 liability of, to pay for qualification shares, 614. 
 when need not be holders of shares, 614, note, 
 duties of, enforceable by corporation, 615. 
 
 or by its receiver or assignee, 615. 
 liability of, for neglect of duty, 616-619. 
 
 for fraud, 616-619. 
 
 for acts in violation of by-laws, 616-619. 
 
 for errors of judgment, 620, 621, 694. 
 
 for not requiring officers to furnish official bonds, 619, note, 621. 
 
 for ultra vires acts, 622, 623, 754. 
 
 may be released from this liability, 622, note. 
 
 for acts of other corporate agents, 624-626. 
 
 for mistaking corporate powers, 622, 623. 
 should have no interests opposed to the corporation, 627. 
 cannot contract with themselves, 628-631. 
 whether they may be trustees for bondholders, 629, note, 
 must account for secret profits, 629-631. 
 
 cannot set up that contract was ultra vires, 629. 
 loans by, to the corporation, 632-634, 810, 811. 
 transactions of fraudulent as a matter of law, 630. 
 
 may be ratified by the corporation, 630. 
 
 remedies of corporation regarding, 631. 
 purchase by bonds of their corporation, 633. 
 
 cannot bind corporation when personally interested with other con- 
 tracting party, 635-639. 
 when may act for two corporations, 640-644. 
 when may sue corporation like an outsider, 634, note.
 
 932 INDEX. 
 
 References are to the Sectiong. 
 
 DIRECTORS— (continued). 
 
 right of, to indemnification, 645, 699. 
 
 to compensation, 646-648. 
 removal of, 649, 650. 
 
 right of, to manage corporate affairs, 645, 683. 
 actions against by shareholders, 683-691. 
 trustees for shareholders, 692. 
 
 only in regard to management of corporation, 698. 
 liability of, to shareholders, 692-695. 
 liability of, for error, 694. 
 
 for frauds of other officers, 694. 
 
 for immediate injuries, 696, 697. 
 
 for fraud, 696, 697. 
 liability of, in contracting for their corporation, 752, 753. 
 liability of, in contracting for their corporation, when contract is ultra 
 
 vires, 754. 
 liability of, to outsiders for acts of other corporate agents, 755. 
 liability of, to creditors, 756. 
 
 for misapplication of corporate funds, 757. 
 
 for neglect of duty, 758. 
 
 for frauds of other officers, 758. 
 discretion of, as to order of payment of debts of corporation, 668, note. 
 duties of, to creditors on insolvency of the corporation, 759, 760. 
 cannot prefer themselves over other creditors when corporation is in- 
 solvent. 759. 760. 
 statutory liability of, to creditors. See Statutory Liability. 
 legal relations between, 802. 
 contribution among, 763, 764, 767, 803-806. 
 contribution between, and other officers, 807. 
 right of, to inspect corporate books, 808. 
 rights of de facto directors, 809. 
 rights of, when creditors, 810-811. See Officer. 
 DISCRIMINATIONS IN PAYMENT OF DEBTS, 668, 669. 
 DISSOLUTION OF CORPORATIONS: 
 what is, 428. 
 causes of, 429, 430. 
 
 at Roman law, 6. 
 
 at common law, 12, 20. 
 consolidation causes, 421. 
 decree when necessary, 431, 432. 
 failure to elect corporate officers does not cause, 432. 
 discontinuance of business does not cause, 432. 
 insolvency does not cause, 432. 
 
 assignment of property for creditors does not cause, 432. 
 appointment of receiver does not cause, 432. 
 power of majority to dissolve, 431, 610. 
 power of minority to dissolve, 610. 
 power of directors, 230.
 
 INDEX. 933 
 
 References are to the Sections. 
 
 DISSOLUTION OP CORPORATIONS— (continued). 
 
 by surrender of franchises, 20, 433, 434. 
 
 creditors cannot prevent, 664. 
 
 jurisdiction of equity to dissolve a corporation, 611. 
 
 court cannot dissolve a foreign corporation, 394. 
 
 consequences of, 435-437. 
 at common law, 20, 21. 
 
 consequences of, at Roman law, 6, note. 
 
 suits by and against corporations abated by, 150, note, 435. 
 
 no rights can be acquired against corporation after, 813, note. 
 
 corporate capacities when preserved after, 436. 
 
 lease to corporation not determined by, 437, note. 
 
 relations between shareholders and creditors on, 750, 751. 
 
 relations among shareholders on, 786. 
 
 not always requisite to relieve officers from duty to file annual reports, 
 770. 
 DITCHES, railroad company liable for obstructing, 173. 
 DIVERGENCY OF INTEREST IN A CORPORATE ENTERPRISE, 
 
 116, 117. 
 DIVIDENDS: 
 
 directors cannot delegate authority to declare, 234. 
 
 evidence of, 263, note. 
 
 court will not enjoin directors of foreign corporation from paying, 394. 
 
 shareholders have no absolute right to, before declaration, 562, 563. 
 
 when shareholders may compel declaration, 563. 
 
 on preferred shares cumulative, 564. 
 
 payable only out of profits, 565. 
 
 recovery of, when illegally paid, 566, 567. 
 
 application of statutes of limitation, 566, note, 
 transferee not liable to return dividends paid to his transferrer, 
 719, note. 
 
 shareholders improperly receiving, cannot set off debt against liability 
 to return, 568. 
 
 after declaration belonging to shareholders, 568, 750. 
 
 even as against creditors, 750. 
 
 stock dividends, 568, 800, 801. 
 
 right to, as between transferrer and transferee, 798. 
 
 right to, as between life-tenant and remainder-man, 799-801. 
 
 scrip dividend, when bequest of shares does not carry, 798, note. 
 DOMICILE OF CORPORATION CREATED BY TWO STATES, 
 
 407, note, 409. See Federal Courts, Foreign Corporations. 
 DOUBLE TAXATION, 477a. 
 
 DRAINS, railroad company liable for obstructing, 173. 
 DRUNKEN PERSON MAY BE EXCLUDED FROM CARS, 348. 
 DUE PROCESS OF LAW, 470-472, 480, 492, 492a. 
 
 EARNINGS: 
 
 right to, as between general creditors and mortgagees, 820.
 
 934 INDEX. 
 
 References are to the Sections. 
 
 EARNINGS— {continued). 
 
 right of insolvent corporation to control, 820. 
 
 agreements for division of, between corporations, 224. See Dividends. 
 ELECTION OF OFFICERS, 577-581. 
 
 held outside the state void, 382, note, 
 court of law tribunal to determine validity, 581. 
 EMINENT DOMAIN: 
 
 how differs from police and taxing powers, 469a. 
 
 legislature cannot surrender, 465, 466. 
 
 restrictions on, 4696-472. 
 
 state may take corporate property by, 470-473. 
 
 francbises may be taken by, 470. 
 
 due process of law, 471, 472. 
 
 just compensation, 178, 473. 
 
 what constitutes a taking of property, 171-177. 
 
 of railroad companies, 163-166. 
 
 does not arise by implication, 163. 
 extends only to necessary property, 163. 
 property devoted to a public use may be taken by, 163a. 
 not exhausted by single exercise, 164. 
 may acquire the fee, 165. 
 not transferable, 166. 
 not liable to sale on execution, 166. 
 statute granting must be strictly followed, 166. 
 mode of exercising, 166, 473. 
 cannot be exercised by de facto corporation, 155. 
 injunction against exercising, 155, note, 
 nor by foreign corporation, 386. 
 passes to consolidated corporation, 424. 
 measure of compensation, 178, 473. 
 set-off of benefits, 179. 
 EMPLOYES: 
 
 liability of corporation for torts of, 343, 344. 
 
 for injuries to, 365, 366. 
 shareholders' liability to, 734. 
 ENABLING ACTS, formation of corporations under, 451, note. 
 ENDORSEMENTS, by corporations, 125, note, 244, note. 
 EQUITABLE MORTGAGES, 675. 
 ERROR: 
 
 subscriptions induced by, 527. 
 
 liability of corporations for transfers registered by, 597. 
 directors when not liable for, 620, 621. 
 ERRORS OF JUDGMENT, when directors not liable for, 620, 621. 
 ESTOPPEL: 
 
 principles of, apply to corporations, 193, note. 
 of corporation by acts of agent, 210, note, 
 of shareholders, 187. 
 to plead nul tiel corporation, 146-151.
 
 INDEX. 935 
 
 References are to the Sections. 
 
 ESTOPPEL— (continued). 
 
 of corporation to deny what is certified by proper officer, 186, 207, 208. 
 
 affecting promoters, 74, 75. 
 
 of promoter to deny he acted as agent of the corporation, 82. 
 
 or corporation by acts of promoters, 88-90. 
 
 of persons dealing with corporation to deny corporate existence, 146-151. 
 
 of persons dealing with corporation, or validity of amendment to char- 
 ter, 146, note. 
 or question validity of acts of de facto officers, 189, 190. 
 
 by performance of ultra vires contract, 276-280. 
 
 of municipality by recitals in bonds, 329-332. 
 
 when corporation not escopped by interpolations in its books, 263. 
 
 of subscribers to allege tbeir subscriptions were fictitious, 105. 
 
 of subscribers by their laches, 111. 
 
 of subscribers to insist on performance of conditions by corporation, 
 519. 
 
 of subscribers to plead nul tiel corporation, 537-539. 
 in suit by creditors, 738. 
 
 of creditors to deny corporate existence to charge shareholders as part- 
 ners, 739. 
 
 of subscribers to allege irregularity of shares issued to them, 541. 
 
 of corporation to deny validity of transfer of shares, 589. 
 
 of corporation by issuing a certificate of shares, 591, 598. 
 
 of transferee of shares as collateral to deny that he is a shareholder, 741. 
 EVIDENCE, rules of, applicable to corporations, 263. 
 
 by-laws, 582, note. 
 
 books of corporation when, 263. 
 
 reports of officers, 263, note. 
 
 general reputation as to who are officers not, 188. See Judgment 
 against Corporation. 
 EXAMINATION OF BOOKS OF CORPORATION: 
 
 by shareholders, 585. 
 
 by directors, 808. 
 EXCLUSIVE PRIVILEGES, to be strictly construed, 122. 
 
 to shippers, 309. 
 EXECUTION : 
 
 what corporate property exempt, 165, 671. 
 
 property of municipal corporations exempt, 334. 
 
 returned unsatisfied, when a condition precedent of statutory liability 
 of shareholders to creditors, 713. 
 EXECUTORS, transfers of shares by, 592. 
 
 EXEMPLARY DAMAGES, when recoverable for personal injuries, 377, 378. 
 EXEMPTION FROM TAXATION, 487-491. 
 
 may not pass to succeeding corporations, 417, 487-491. 
 EXPIRATION OF CHARTER, 150, note. See Dissolution. 
 EXTRA-TERRITORIAL ACTS OF CORPORATIONS. See Foreign 
 
 Corporations. 
 EXTRINSIC FACTS, do not affect validity of agents' acts, 203, 284, 285.
 
 936 INDEX. 
 
 References are to the Sections. 
 
 FALSE IMPRISONMENT, corporation liable for, 342. 
 FALSE REPORT, liability of directors for signing, 774. 
 
 enforced outside the state, 393. 
 FALSE REPRESENTATIONS. See Fraud. 
 FEDERAL AGENCIES, exemption of, from state taxation, 482. 
 FEDERAL COURTS: 
 
 jurisdiction, 410^13, 468. 
 
 when corporation cannot deny its incorporation in order to oust, 
 146, note, 
 state cannot prohibit foreign corporation to remove suits to, 400. 
 how far will follow decisions of state courts, 318, 468. 
 FEDERAL DECISIONS REGARDING RAILWAY AID BONDS OF MU- 
 NICIPAL CORPORATIONS, 318. 
 FEE OF LAND, corporation may condemn, 128. 
 FENCE, duty of railroad company to, 369. 
 
 legislature may compel railroad company to, 475, note. 
 FICTITIOUS SUBSCRIPTIONS, 105. 
 FIDUCIARY RELATIONS, 41-47. 
 FIRE, carrier may stipulate against liability for, 351. 
 FIRES, caused by sparks from locomotives, 368. 
 FLAGMEN AT RAILWAY CROSSINGS, 368. 
 FORBIDDEN ACTS. See Statutory Prohibitions. 
 FORECLOSURE OF MORTGAGES: 
 
 given by railroads, appointment of receiver, 821-824. 
 
 by foreign corporation, 384, note, 401. 
 
 of property of consolidated corporation created by two states, 409, 
 
 note, 
 sale under, 619, note, 682, note, 711, 813. 
 parties to, 814, 815, note. 
 
 puichasers at, not liable on judgment against corporation, 415. 
 but assume position of former corporation for the future, 417. 
 FOREIGN CORPORATIONS, 379-402. 
 legal effect of their acts, 383. 
 may purchase land, 384, note, 388, note, 
 permitted by comity to contract and sue, 384-390. 
 foreclosure by, 384, note, 
 devises to, 390. 
 
 cannot exercise special franchises, 386. 
 
 cannot act contrary to the law or public policy of the state, 387, 388. 
 cannot act beyond their chartered powers, 389. 
 implied notice of powers of, 195, note, 389-391. 
 court will not take judicial notice of powers of, 389. 
 
 nor entertain controversies relating to internal management of, 392. 
 nor dissolve, 394. 
 
 nor compel distribution of assets of, 394. 
 nor enjoin dividend, 394. 
 nor appoint receiver, 394. 
 enforcement of individual liability of shareholders in, 393.
 
 INDEX. 937 
 
 References are to the Sections. 
 
 FOREIGN" CORPORATIONS— ( continued). 
 
 enforcement of directors' liability for signing false report, 393. 
 attachment of shares in, 392, note, 
 garnishment of, 392, note, 
 suits by and against, 392-394, 399. 
 jurisdiction over assets of, 394. 
 service of process on, 395-399. 
 may appear as defendant, 396, note, 
 residence of, 395, note. 
 
 proceedings in rem against property of, 399. 
 statutes imposing terms on, 400, 401. 
 
 state cannot prevent from removing cases to Federal courts, 400. 
 when statute of limitations bars claims against, 402. 
 corporations incorporated by two or more states, 403. 
 taxation of, by states, 480. 
 
 corporations created by act of Congress are not, 404. 
 FORFEITURE: 
 
 of franchises, 457-459. 
 
 suit for, must be brought in the name of the state, 151. 
 
 liability to, does not relieve from liability for damages, 169. 
 
 may be waived, 460. 
 
 grounds of, not to be taken advantage of collaterally, 460. 
 
 when judicial decree not necessary, 458, 503. 
 of shares, special authority requisite, 546. 
 
 subscription cannot be enforced after, 546. 
 
 must be regular, 547. 
 
 due notice necessary, 547. 
 
 by illegally chosen directors void, 547. 
 
 for illegal assessments void, 547. 
 
 option to declare, rests with corporation, 548. 
 
 when collusive may be set aside, 548. 
 
 directors cannot delegate authority to forfeit shares, 234. 
 FORGERY: 
 
 liability of savings bank for moneys paid on forged order, 199. 
 transfers of shares on forged order, 593. 
 forged stock certificates, 591. 
 FORMALITIES: 
 
 required by statute, 185, 186. 
 
 in leases, 185. 
 
 in mortgages, 185. 
 
 certification of fulfillment of, 186. 
 
 validity of acts as dependent on, 247. 
 
 corporate seal, 248. 
 
 implied contracts, 249. 
 
 non-observance of, 250. 
 
 imperative of directory, 251. 
 
 approval of contract of other officers, 252. 
 
 when other contracting party has notice of, 253.
 
 938 INDEX. 
 
 References are to the Sections. 
 
 FORMALITIES— ( continued). 
 
 when not applicable, 254. 
 
 when corporate agent and other contracting party are not on equal 
 terras regarding, 255. 
 
 ratification of informal acts, 256. 
 
 other party can set up non-observance of, 257. 
 
 observable by directors. See Directors. 
 FORMATION OF CORPORATIONS: 
 
 in the Roman law, 4. 
 
 under enabling acts, 451, note. See De Facto Corporation. 
 
 present methods, Appendix. 
 FRANCHISES: 
 
 transfer of, 131, 132, 304. 
 
 delegation of, 170. 
 
 when delegation of does not relieve corporation from liability, 170. 
 
 mortgage of, 304. 
 
 when not to be questioned collaterally, 145-157, 168, 460. 
 by a subscriber for shares, 537-539. 
 by creditors, 739. 
 
 vest in consolidated company, 424. 
 
 authority to mortgage passes to consolidated company, 424 
 
 extending duration of, 451, note. 
 
 surrender of, 433, 434. 
 
 forfeiture of, 457-459. 
 
 forfeiture of, state may waive, 460. 
 
 when not to be taken advantage of collaterally, 460. 
 
 taxation of, 479, note, 488, 489. 
 
 valuation of for taxation, 477a. 
 
 when a protection to the corporation from liability, 167-170. 
 
 when not a protection to the corporation from liability, 171-177. 
 
 may be exercised outside of the state, 381. 
 
 exempt from execution, 671. 
 
 state may take by eminent domain, 470-473. 
 FRAUD: 
 
 in obtaining charter, when cannot be pleaded, 147. 
 
 liability of corporation for, 342. 
 
 subscriptions obtained by, 97, note, 103, 523-526. 
 
 liability of directors for, 616-619. 
 
 in obtaining subscriptions, cannot be pleaded against creditors, 744. 
 against other shareholders, 781. 
 
 of vendor of shares, 792. 
 FRAUDS, statute of 
 
 promise of shareholder to pay debt of corporation within, 187, note. 
 
 contract to take shares, not within, 511, note. 
 FRAUDULENT ISSUES OF SHARES, liability of corporation, 591. 
 FRAUDULENT SUBSCRIPTIONS TO SHARES IN THE STOCK OF 
 
 A CORPORATION TO BE FORMED, 105. See Subscriptions. 
 FRAUDULENT TRANSFER OF SHARES : 
 
 effect as to corporation, 586.
 
 INDEX. 939 
 
 References are to the Sections 
 
 FRAUDULENT TRANSFER OF SHARES— (continued). 
 
 effect as to creditors, 749. 
 
 effect as to other shareholders, 780. 
 FREIGHT : 
 
 liabilities of carrier regarding, 350, 356. 
 FUNDS, CORPORATE. See Corporate Fund. 
 
 GAIUS, his division of persons, 2. 
 GAMBLERS, may be excluded from trains, 348. 
 GARNISHMENT, of shares, 796, note. 
 
 of unpaid subscriptions, 660, note. 
 GARNISHMENT OF FOREIGN CORPORATION, 392, note. 
 GAS PIPES, under streets, damages for laying, 175, note. 
 GENERAL AGENTS, powers of, 201, 202. 
 
 GENERAL ISSUE, plea of, admits corporate capacity to sue, 137. 
 GENERAL PRINCIPLES, application of, in the formation of new rules 
 
 of law, 70, 71. 
 GILDA MERCATORIA, 13. 
 GRANT. See Charter. 
 GRATUITOUS SUBSCRIPTIONS, 94, note. 
 GRATUITY TO EMPLOYES, 229, note. 
 GUARANTY, power of corporations to, 127, 203, note, 224, 267. 
 
 by a city, 322, note. 
 
 of ultra vires lease is void, 305. 
 
 of dividends on stock of another corporation, 563, note. 
 
 HEREDITAS JACENS, 9. 
 HIGHWAYS: 
 
 railroads on, 175-177. 
 
 telegraph poles on, 175, note. 
 HORSE RAILROADS in streets, 175. 
 HOSPITALS, liability in tort, 335, note. 
 HYPOTHECATION. See Pledge of Shares. 
 
 ILLEGAL: 
 
 corporations are, when organized for prohibited purposes, 149, note. 
 
 what acts are, 287. 
 
 acts against public policy, 289-291. 
 
 acts contra bonos mores, 293. 
 
 ultra vires acts, 292. 
 
 acts forbidden by statute, 294-303. 
 
 acts against public policy, 304-309. 
 
 accounting for benefits received from illegal acts, 313. 
 ILLEGAL CORPORATIONS, 6, 149, note. 
 
 ILLEGAL LEGISLATURE, corporations incorporated by, may sue, 149. 
 ILLEGAL PURPOSE, corporation incorporated for, cannot enforce con- 
 tract, 149. 
 
 nor subscriptions to its shares, 95.
 
 940 INDEX. 
 
 References are to the Sections. 
 
 ILLEGAL STOCK, 541. 
 
 IMPLICATION, incorporation by, 13. 
 
 IMPLIED CONTRACTS OF CORPORATE AGENTS, 249. 
 
 IMPLIED NOTICE: 
 
 of contents of packages carried by railroad companies, 369. 
 
 of limitations on authority of corporate agent, 195, 264, note. 
 
 of usages of corporations, 195. 
 
 of by-laws, 196, 197. 
 
 of formalities required, 251-253. 
 
 of corporate powers contained in charter, 195, 264, 389-391. 
 
 of powers of foreign corporations, 195, note, 3S9-391. 
 IMPLIED WARRANTIES BY A CORPORATION, 249, note. 
 INCIDENTS TACITLY ANNEXED TO A CORPORATION, 12. 
 INCOME, when dividends are to be treated as, 799-801. 
 INCOME BONDS, 126. 
 INCORPORATION: 
 
 effect of, at common law, 12, 14. 
 
 what is, 28. 
 
 consequences, 29, 30. 
 
 by implication, 13. 
 
 lawful authority for, in common law, 12. 
 in Roman law, 4. 
 
 by two or more states, 403-409. 
 INCREASE OF STOCK: 
 
 power of corporations, 133. 
 
 by issue of stock dividend, 133, note, 568. 
 
 rights of shareholders on, 569. 
 
 directors cannot authorize, 228. 
 
 when subscriptions to illegally increased stock cannot be enforced, 
 541. 
 
 right to, as between life-tenant and remainder-man, 800, 801. 
 INDEMNIFICATION : 
 
 right of promoters to, 80, 85. 
 
 right of directors to, 645, 699. 
 
 of transferrer by transferee, 791. See Contribution. 
 INDICTMENT, corporation subject to, for nuisance, 167, note. 
 INDIVIDUAL LIABILITY. See Statutory Liability. 
 INFANTS: 
 
 subscription contracts of, 95, 515, note. 
 
 transfers of shares to, 586. 
 INFORMALITIES. See Formalities. 
 INJUNCTION, from voting on shares, 581. 
 
 by subscriber to prevent violation of subscription contract, 112. 
 
 by shareholders to prevent ultra vires acts, 555, 556, 687. 
 
 to restrain collection of tax, 484, note, 492 b. 
 INSOLVENCY OF CORPORATION: 
 
 no defence to suit on subscriptions, 542. 
 
 by state to restrain ultra vires acts, 457. 

 
 INDEX. 941 
 
 References are to the Sections. 
 
 INSOLVENCY OF CORPORATION— (continued). 
 
 does not cause dissolution, 432. 
 
 relations of directors to creditors on, 759, 760. 
 
 directors, when creditors, cannot prefer themselves to other creditors 
 on, 759, 760. 
 
 relations among creditors on, 813. See Set-off. 
 INSOLVENT ASSIGNMENTS BY CORPORATIONS, 130, 668. 
 
 by foreign corporations, 394, note. 
 INSPECTION OF BOOKS : 
 
 by shareholders, 585. 
 
 by directors, 808. 
 INSPECTORS OF ELECTIONS, 577, 578. 
 INSTITUTION. See Legal Institution. 
 INSURABLE INTEREST IN CORPORATE PROPERTY, shareholder has, 
 
 187, note. 
 INTERPOLATIONS IN CORPORATE BOOKS, 263. 
 INSURANCE AGENT : 
 
 powers of, 193, note, 201. 
 
 informal consents to further insurance, 255. 
 
 compensation, 648. 
 INTEREST : 
 
 excessive, taken by banks, 298. 
 
 on overdue coupons, 326, note. 
 
 statutory liability of shareholders in national banks, 727, note, 750, 
 note. 
 INTERPLEADER, when corporation entitled to, as against opposing 
 
 claimants of shares, 596. 
 INVALID STOCK, 541. 
 IRREGULAR ORGANIZATION OF CORPORATIONS. See De Facto 
 
 Corporation. 
 ISSUE OF STOCK : 
 
 rights of subscribers to shares in a company to be formed, 91. 
 
 corporation may raise money by, 124. 
 
 below par, 124, 522o-522c. 
 
 re-issue of shares purchased by the corporation, 136. 
 
 for property, 522c. 
 
 rights of shareholders on issue of new shares, 569. See Increase of 
 Stock, Preferred Shares. 
 
 JOINDER OF PARTIES. See Creditors' Bills, Statutory Liability, 
 
 Foreclosure of Mortgages. 
 JOINT STOCK ASSOCIATIONS, 55-57, 61, note. 
 
 suits against, 55. 
 JUDGMENT AGAINST A CORPORATION: 
 
 corporation may confess, 137. 
 
 when evidence in an action by a creditor against shareholders, 737. 
 
 not evidence in an action by creditors against directors, 763, note, 770.
 
 942 INDEX. 
 
 References are to the Sections. 
 
 JUDICIAL NOTICE: 
 
 courts will not take, of special charter, 264, note. 
 
 nor of powers of foreign corporations, 389. 
 JURISDICTION. See Foreign Corporation, Federal Courts. 
 JUKY DUTY, exemption of corporate officers from, 424, note. 
 JUST COMPENSATION. See Eminent Domain. 
 
 KINO, power of, to create corporations, 12. 
 KNOWLEDGE: 
 
 by corporation, presumption of, 216. 
 
 of agents affects corporation, 210. 
 
 implied of corporate powers, 195, 264, 389-391. 
 
 LABORERS, liability of shareholders for debts due, 734. 
 
 LACHES, of subscriber to shares in a corporation to be formed, 111. 
 
 of shareholders, 213, 556, note, 560, note. 
 
 of a corporation, what is not as against its directors, 630, 632. 
 LANDS: 
 
 power of corporations to purchase, 12, 14, 18, 128. 
 
 conveyances of, to corporation presumed valid, 128. 
 
 though purchased without authority, corporation can convey, 282. 
 
 invalid conveyances and leases by shareholders, 181, 187, note. 
 
 conveyances by corporate agents, 201. 
 
 president has no power to convey, 236. 
 
 unauthorized conveyances of, to corporations, 303. 
 
 acquired hy eminent domain, 103-166. 
 
 foreign corporation may purchase and convey, 384, note, 388, note. 
 
 devises of, to foreign corporations, 391. 
 LAPSE OF TIME, when no ratification, 110, 217. See Ratification, 
 
 Laches. 
 LAW: 
 
 Austin's analysis of, 439, 441. 
 
 definitions of, 440, 446. 
 
 relating to corporations, 53, 64-71. See Rules of Law. 
 LEASES BY CORPORATIONS: 
 
 power of corporations, 130. 
 
 by railroad company does not affect lessor's right to exercise eminent 
 domain, 166, note. 
 
 may not relieve lessor corporation from liability for injuries, 170. 
 
 when invalid, if executed by shareholders, 181. 
 
 consent of shareholders to, 185. 
 
 what property directors cannot lease, 229. 
 of railroads, 305, 416. 
 when ultra vires, 305. 
 
 when shareholders may enjoin ultra vires lease, 305. 
 
 rights of parties on rescission of illegal ultra vires lease, 213. 
 LEGAL EFFECTS, definition of, 30, note, 113, 445. 
 
 of acts, how affected by incorporation, 29, 30. 

 
 INDEX. 943 
 
 References are to the Sections. 
 
 LEGAL INSTITUTIONS: 
 meaning of term, 24. 
 resemblances between, 52-64. 
 analogies between, 67-69. 
 LEGAL PERSON, 2, 14, 21, 22, 51. 
 
 a corporation not, in tbe Roman law, 2, 3. 
 corporations called such in the common law, 14. 
 inferences from the fiction, 21, 22. 
 LEGAL RELATIONS: 
 
 definition of, 24, note, 25. 
 
 general nature of, existing in respect to a corporate enterprise, 40. 
 ai-ising from incorporation, between whom existing, 37. 
 how they arise, 25, 26, 442-144. 
 LEGAL RELATIONS ARISING THROUGH THE PROMOTION 
 
 OF A CORPORATION: 
 the law applicable, 72. 
 two classes of persons interested, 73. 
 liability of promoters, general principles, 74, 75. 
 legal relations between promoters and parties contracting with them, 
 
 76. 
 responsibility of promoters for the acts of otber promoters, 77. 
 liability of contracting promoter whose contract binds, or is adopted 
 
 by other promoters or the corporation, 78, 79. 
 legal relations between promoters, 80, 81. 
 legal relations between promoters and the corporation subsequently 
 
 formed; promoters' secret profits, 82-84. 
 right of promoters to indemuity from the corporation subsequently 
 
 formed, 85. 
 liability of corporation to compensate promoters, 86. 
 legal relations between the corporation when organized and persons 
 
 with whom the promoters have contracted on its behalf, 87-90. 
 LEGAL RELATIONS CONSEQUENT UPON AN AGREEMENT 
 
 TO TAKE SHARES IN THE STOCK OF A CORPORATION 
 
 TO BE ORGANIZED: 
 is the agreement binding, 91. 
 consideration, 92-95. 
 
 conditional agreement to take shares, 96, 97. 
 when deposits may be withdrawn, 98. 
 certain defences, 99. 
 
 legal relations arising from a valid agreement to take shares, 100. 
 assignment of subscriber's interest, 101, 102. 
 legal relations between subscribers and promoters, 103. 
 when promoters are liable to subscribers for deposits, 104. 
 fraudulent subscriptions, 105. 
 misapplication of deposits, 106. 
 
 subscriptions in general enforceable by the corporation when organ- 
 ized, 107-109. 
 rights of subscribers against the corporation, 110. 
 effect of subscriber's laches, 111, 112.
 
 944 INDEX. 
 
 References are to the Sections. 
 
 LEGAL RIGHT, definitions, 442. 
 
 LEGISLATIVE RECOGNITION, of defectively organized corporations, 
 
 157. 
 LEGISLATURES, restrictions on powers of, 464-466. 
 LIABILITY OF SHAREHOLDERS. See Statutory Liability, 
 
 Shareholders. 
 LIABILITY TO ACCOUNT FOR BENEFITS RECEIVED UNDER 
 
 ULTRA VIRES CONTRACTS. See Ultra Vires. 
 LIBEL: 
 
 action for, lies against corporation, 342. 
 lies in favor of corporation, 137. 
 LIEN OF BANKS ON DEPOSITS, 673. 
 LIEN OF CONTRACTORS ON RAILROADS, 817. 
 LIEN OF CORPORATION ON ITS SHARES: 
 does not exist by implication, 600. 
 power of corporation to create by by-law, 601. 
 national banks cannot create, 602. 
 effect, 603, 605. 
 scope, 604. 
 waiver, 606, 607. 
 LIEN OF CORPORATION FOR WORK DONE, 137, note. 
 LIEN OF CREDITORS ON CORPORATE FUNDS, 657, 665. 
 LIFE-TENANT AND REMAINDER-MAN, right to dividends as 
 
 between, 799, 801. 
 LIMITATIONS ON AUTHORITY OF CORPORATE AGENTS. See 
 
 Agents, Directors. 
 LIMITATIONS ON THE POWER OF GOVERNMENT OVER 
 
 CORPORATIONS, 469a, 469?; et seq. 
 LIMITATIONS, STATUTE OF: 
 
 barring liability of directors for misfeasance, 612, note. 
 
 for acts of other agents, 626, note, 
 barring liability for unpaid subscriptions, 709. 
 barring liability, for dividends wrongfully received, 566, note. 
 statutory liability of shareholders, 736. 
 
 liability of directors to creditors, 756, note, 770. 
 liability of foreign corporation, 402. 
 liability of banks to depositors, 672, note, 
 actions by shareholders against officers, 689. 
 actions on coupons, 326, 680. 
 LIMITED PARTNERSHIPS, resemblances of, to corporations, 58. 
 LIQUIDATION. See Winding-up. 
 LIS PENDENS, implied notice of, 327, 795. 
 LOANS, excessive, by national banks, 301. 
 
 LOANS BY OFFICERS TO THEIR CORPORATION, 632-634. 
 LOCATION OF RAILROAD ROUTE, 162, 162a. 
 LOCATION OF RAILROAD STATIONS, 162. 
 LOTTERY, state may forbid, 474. 

 
 INDEX. 945 
 
 References are to the Sections. 
 
 MALICIOUS PROSECUTION, action for, lies against corporation, 
 
 342. 
 MALUM PROHIBITUM, 294-303. 
 MANAGEMENT, corporate, 38, 118. 
 
 creditors have no voice in, G53. See Control of the Corporate 
 Enterprise. 
 MANAGING OFFICERS, powers of, 202. 
 
 may employ counsel, 202. 
 MANDAMUS: 
 
 against officers of municipal corporations, 333. 
 
 against corporation to compel performance of duties owing the public, 
 
 454, 455. 
 against state officers, 462, note. 
 
 to compel out-going officers to surrender books, 650, note, 
 to obtain inspection of corporate books, 585, 808. 
 to compel transfer of shares, 599. 
 
 to compel officers to publish annual reports, 688, note, 
 to compel officers to call meetings, 575, note, 
 to compel officers to hold elections, 688, note. 
 MASTER AND SERVANT. See Employes Torts. 
 MEASURE OF COMPENSATION FOR PROPERTY TAKEN, 178. 
 MEASURE OF DAMAGES. See Damages. 
 MEETINGS: 
 
 of body corporate, 184, 573-576. 
 
 validity of acts done at, 184, 185. 
 must be notified to all the shareholders, 573. 
 what notice should contain, 574. 
 adjourned meetings, 574. 
 must be called by proper authorities, 575. 
 of body corporate, mandamus to compel officers to call, 675, note, 
 business at, must be regularly done, 576. 
 held outside of state, 382. 
 voting at, 576, 577. 
 of directors, 260, 261. 
 
 held outside the state, 381. 
 of corporations created by two states, 409. 
 MEMBERS. See Shareholders. 
 
 MERITS, going to trial on, admits corporate existence, 137. 
 METHODS OF FORMING A CORPORATION, Appendix. 
 MINING SUPERINTENDENT: 
 
 has no implied power to borrow money, 202. 
 notice to, 210, note. 
 MISAPPLICATION by promoters of preliminary deposits, 106. 
 MISAPPROPRIATION. ) 
 
 MISFEASANCE. \ See Directors, Agents, Officers. 
 
 MISMANAGEMENT. ) 
 
 MISMANAGEMENT OF CORPORATE AFFAIRS DOES NOT RELEASE 
 SUBSCRIBER, 529. 
 
 60
 
 946 INDEX. 
 
 References are to the Sections. 
 
 MISNOMER, 159. 
 
 MISTAKE. See Error. 
 
 MISTAKE AS TO CORPORATE POWERS, liability of directors for, 622, 
 
 623, 694. 
 MONEY: 
 
 power of corporations to raise, 123-127. 
 
 by issue of stock, 124. 
 
 by sale of property, 124. 
 
 by borrowing, 125. 
 
 and issuing security, 125. 
 
 by issue of "deferred income bonds," 126. 
 
 by guaranty, 127. 
 
 liability of corporations for money loaned officers, 214-216, 225. 
 
 power of directors to borrow, 225. 
 
 amount that may be borrowed, 127. 
 
 statutory limitations on amount, 205. 
 MONOPOLIES, not to be presumed, 121, note. 
 
 corporations may not form, 309a, etc. 
 MORTGAGES BY CORPORATIONS: 
 
 power to mortgage, 125. 
 
 of franchises, 125. 
 
 consent of shareholders, 185, 186. 
 
 corporation cannot assent to, as shareholder in its own stock, 136, note. 
 
 shareholders cannot make, 187, and note. 
 
 defective execution of, 254, note. 
 
 power of directors to make, 225. 
 
 of committee of directors to make, 234. 
 
 president has no power to make, 236. 
 
 irregularities cannot be set up by subsequent grantee of premises, 282. 
 
 when irregularities cannot be set up by creditor of corporation, 813. 
 or by junior mortgagee, 151, note. 
 
 equitable, 675. 
 
 of railroads, 674-682, 815-820. 
 
 provisions in, 816. 
 
 of rolling stock, 678, 819. 
 
 of future to be acquired property, 676, 817. 
 
 reorganization of debtor corporation, 816a. 
 
 invalid provisions in, 677, 678. 
 
 foreclosure of, appointment of a receiver, 821. See BONDHOLDERS, 
 Municipal Bonds. 
 MORTGAGE-TRUSTEE. See Trustees under Railroad Mort- 
 gages. 
 MORTMAIN, statutes of, 12, 18, 128. 
 MUNICIPAL BONDS IN AID OF RAILROADS, 317-333. 
 
 Federal decisions regarding, 318. 
 
 municipality has no inherent power to issue, 319. 
 legislature may authorize municipality to issue, 319. 
 
 special authority requisite, 320.
 
 INDEX. 947 
 
 References are to the Sections. 
 
 MUNICIPAL BONDS IN AID OF RAILROADS— (continued). 
 
 holders charged with notice, 320. 
 
 municipal subscription, what constitutes, 320. 
 
 constitutional restrictions, 321, 332. 
 
 for railroad not yet in existence, 322. 
 
 consolidation of railroad company, 323, 324. 
 
 may be validated, 325. 
 
 negotiable, 326. 
 
 coupons, 326, 327. 
 
 no implied notice of Us pendens affecting, 327. 
 
 presumptions in favor of validity of, 328. 
 
 absence of seals, 328, note. 
 
 recitals in, 329-332. 
 
 registration of, 332. 
 
 remedy of holder, mandamus, 333. 
 
 effect on, of failure to complete road, 521. 
 MUNICIPAL CORPORATIONS, 177, 315, 316. 
 
 distinction between liability of and that of private corporation, 177, 
 335, note. 
 
 power of, to tax, 333. 
 
 property of, exempt from execution, 334. 
 
 NAME OF CORPORATION: 
 
 necessary, 12, 14. 
 
 corporation may enjoin use of its name, 137. 
 
 right to, 158. 
 
 corporation cannot change, 158. 
 
 misnomer, 159. 
 NATIONAL BANKS : 
 
 may receive special deposits, 161, 337. 
 
 may exchange and deal in government securities, 161. 
 
 may not deal in stocks, 161. 
 
 nor sell railroad bonds on commission, 161, 336, note. 
 
 excessive loans by, 301. 
 
 real estate security taken by, 161, 302. 
 
 liability of, for loss of special deposits, 337. 
 
 succession of to state bank, 416, note. 
 
 state taxation of, 483, 484. 
 
 cannot create by by-law a lien on their shares, 602. 
 
 relative rights of creditors of, 669, note. 
 
 liability of shareholders in, 727. 
 
 in voluntary liquidation not thereby dissolved, 432, niote. 
 
 when agreements to transfer shares in, are against public policy, 790. 
 NAVIGABLE WATERS, right of railroad companies to cross, 162a. 
 NEGLIGENCE : 
 
 liability of carrier for, 349-351. 
 
 carrier cannot stipulate against liability for, 352-354. 
 
 liability for negligent injuries to trespassers. 370-372.
 
 948 INDEX. 
 
 References are to the Sections. 
 
 NEGLIGENCE— (continued). 
 
 contributory, 373-376. 
 
 damages recoverable for personal injuries caused by, 377, 378. 
 
 injuries to employes caused by, 305, 366. 
 
 to persous on railroad track caused by, 368, 370-372. 
 fires caused by, 368. 
 injuries to cattle caused by, 369. 
 NEGOTIABLE INSTRUMENTS OF CORPORATIONS, 205, 285, 299. 
 
 wbeu validity of not affected by intrinsio facts, 285. See Municipal 
 Bonds. 
 NET EARNINGS, what are, 565. 
 NEW STOCK, right of shareholders to take, 569. 
 "NON-ASSESSABLE" SHARES, 522. 
 
 NON-OBSERVANCE OF FORMALITIES. See Fobmalities. 
 NON-RESIDENT CORPORATIONS. See Foreign Corporations. 
 NON-RESIDENT SHAREHOLDER, service on, 740. 
 NOTICE : 
 
 of defects when not necessary to charge the corporation with negli- 
 gence, 169, note, 
 to shareholders, when not notice to corporation, 187, note, 
 to corporate agents, effect, 210, 215, 216. 
 to cashier, 215, 240. 
 to president, 216. 
 
 judicial notice of charter, 264, note, 
 implied of corporate powers, 195, 264. 
 of usages of corporations, 195. 
 
 of powers of foreign corporations, 195, note, 389-391. 
 of formalities, 253. 
 general notices by railroad companies to passengers and shippers, 359- 
 railroad company should give notice to consignee of arrival of goods, 
 
 360. 
 when essential to due process of law, 472, note, 480, 492, 492a. 
 to delinquent shareholders before forfeiting shares, 547. 
 of corporate meetings, 574, 575. 
 of directors' meetings, 260, 261. 
 necessary to forfeiture of shares, 547. 
 to common directors of two corporations, 641. 
 doctrine of implied notice of pendency of action does not apply to 
 
 negotiable bonds, 327, 679, note, 
 bondholders affected with notice of mortgage, 674. 
 effect of notice to trustee under a mortgage, 679, note, 
 service of, on non-resident stockholder, 740. 
 NUISANCE: 
 
 corporation may sue to restrain, 137. 
 may be indicted for, 167, note, 
 liable for, 169 note, 344. 
 when acts of corporation not a nuisance, 171. 
 NUL T1EL CORPORATION, plea of, 99, 146-151.
 
 INDEX. 949 
 
 References are to the Sections. 
 NUMBER OF SHARES, power of corporation to increase, 133. 
 
 OBJECTS OF INCORPORATION, important in determining corporate 
 
 powers, 114, 120. 
 OBLIGATION OF CONTRACTS, 333, 448-450, 453, 4(31-468, 487-491, 
 
 493-502, 507. 
 OBSERVANCE OF FORMALITIES. See Formalities. 
 OFFICERS: 
 
 de facto, validity of their acts, 188-190. 
 
 rights of, 809. 
 illegally elected cannot make calls, 540. 
 election of, 577-581. 
 indemnification of, 645. 
 compensation of, 646-648. 
 removal of, 581, 649, 650. 
 
 a court of equity has no power to remove, 611. 
 approval by, of agents 1 acts, 252. 
 relations of, to state, 506. 
 
 may act as trustees for bondholders, 629, note, 
 liability of, in acting on behalf of their corporation, 752, 753. 
 liability of, to other contracting party when contract is ultra vires, 754. 
 liability of, to outsiders for acts of other agents, 755. 
 liability of, to creditors, 756. 
 
 for misapplication of corporate funds, 757. 
 for neglect of duty, 758. 
 for frauds of other officers, 758. 
 relations of, to creditors on the insolvency of the corporation, 759. 
 relations among, 802. 
 contributions among, 803-807. 
 
 right of, to inspect corporate books, 808. See Directors, President, 
 Cashier, Agents, Statutory Liability. 
 OFFICIAL BONDS, 249, note, 257. 
 
 liability of directors for not requiring other officers to furnish, 619, 
 note, 621. 
 ORDINARY BUSINESS: 
 
 meaning of the term with reference to the powers of the board of 
 directors, 223. 
 
 with reference to powers of cashier, 241. 
 ORDINARY CARE, required of directors, 617. 
 
 ORGANIZATION OF CORPORATIONS, cannot be affected outside of 
 the state, 382, note, 
 when defective, is remediable, 157. 
 
 must be a substantial compliance with enabling act, 451, note, 
 certificate must be filed, 451, note. See De Facto Corporations. 
 OWNERSHIP OF CORPORATE PROPERTY, :5;>. 
 
 PAR, issue of stock below, when illegal, 124, 541. 522o-522c. 
 PAROL DECLARATIONS, effect of on subscriptions, 97. note, 103, note, 
 521.
 
 950 INDEX. 
 
 References are to the Sections. 
 
 PARTIES TO CREDITORS' HILLS. See Creditors' Bills, Statu- 
 tory Liability. 
 PARTIES TO FORECLOSURE SUITS, 814, 815, note. 
 PARTNERS: 
 
 analogy between shareholders and, 68. 
 
 promoters are not, 77. 
 
 subscribers to shares before formation of corporation, not, 100. 
 
 shareholders not held as on defective organization, 148. 
 exceptions, 148. 
 
 creditors cannot deny corporate existence to charge shareholders as, 
 148, 739. 
 
 shareholders not, 68, 716, 719. 
 PARTNERSHIP: 
 
 definitions, 23, note. 
 
 how differing from a corporation, 59-61, 719. 
 
 limited, 58. 
 
 whether corporations can form, 130, note, 364. 
 PASS-BOOK OF SAVINGS BANK DEPOSITORS, regulations in, 199. 
 PASSENGERS: 
 
 liability of railroad companies for injuries to, caused by another rail- 
 road company, 170. 
 
 liability of common carriers to, for tort of employes, 335, 347. 
 
 railroad regulations affecting, 348. 
 
 cannot be detained for non-payment of fare, 348. 
 
 tickets, 348. 
 
 liability of common carriers for negligence, 350. 
 
 carrier cannot stipulate against liability for negligence, 352. 
 
 persons travelling on pass may be, 352. 
 PENALTY, not enforced outside of state creating it, 393. See Statutory 
 
 Liability. 
 PENDENCY OF ACTION: 
 
 doctrine of implied notice inapplicable to negotiable instruments, 327. 
 
 to stock certificates, 795. 
 PERFORMANCE OF ULTRA VIRES CONTRACT, effect of, 275-281. 
 PERPETUAL SUCCESSION, 12, 14, 16, 21, note, 430, note. 
 PERSONAL LIABILITY. See Statutory Liability. 
 PERSONAL PROPERTY, power of corporation to acquire, 129. 
 PERSONS: 
 
 legal or artificial, 2, 15, 21, 22, 51. 
 
 between whom legal relations respecting a corporate enterprise exist, 37. 
 
 interested in forming a corporation, 73. 
 PLACE OF BUSINESS: 
 
 power of corporation to change, 121, note. 
 
 foreign corporations required to state, 400. 
 PLEADING. See Suits, Creditors' Bills, Statutory Liability. 
 PLEDGE OF SHARES, 794, 797. 
 
 when valid as against pledgor's creditors, 796. 
 
 when the pledgor is a trustee, 797.
 
 INDEX. 951 
 
 References are to the Sections. 
 
 PLEDGEE OF SHARES, when held as shareholder to creditors, 741. 
 POLICE POWER: 
 
 how differs from eminent domain and taxing power, 469a. 
 
 state cannot revoke franchise through exercise of, 474. 
 
 restrictions on, through power of Congress to regulate commerce, 474a. 
 
 its limits, 475, 476. 
 
 legislature cannot surrender, 465, 466. 
 
 regulation of railroad charges by, 475, 476a, 4766. 
 
 state may change remedy by exercise of, 493-495. 
 POOLING ARRANGEMENTS OF RAILROAD COMPANIES, 309. 
 POWERS OF AGENTS. See Agents. 
 
 POWERS OF CORPORATIONS. See Corporate Powers. 
 POWERS OF DIRECTORS. See Directors. 
 PREFERENCES, directors cannot make to themselves when creditors, 
 
 759, 760. 
 PREFERENTIAL ASSIGNMENTS BY CORPORATIONS, 668. 
 PREFERRED SHARES: 
 
 power to issue, 124, 571, 572. 
 
 right of holders to dividends, 563. 
 
 dividends on, cumulative, 564. 
 
 payable only out of profits, 565. 
 
 rights of holders as to other shareholders on winding-up, 786. 
 PRELIMINARY DEPOSITS: 
 
 when may be withdrawn, 98. 
 
 liability of promoters for, 104, 106. 
 
 effect of failure to make, on validity of subscription, 516. 
 PRESIDENT: 
 
 powers of, 190, note, 192, note, 202, 236-238. 
 enlarged by custom, 237. 
 
 cannot mortgage corporate property, 187, note, 236. 
 nor sell lauds of corporation, 236. 
 
 nor assign property in payment of antecedent debts, 236, note, 
 nor bind it as an accommodation indorser, 236, note. 
 
 may sell its goods, 237, note. 
 
 when corporation liable for moneys borrowed by, 203. 
 
 notice to, 216. 
 
 admissions of, 236, note. 
 
 compensation of, 646-648. 
 
 of bank cannot certify his own check, 636. 
 PRESUMPTIONS IN FAVOR OF VALIDITY OF CORPORATE ACTS, 
 128, 203-206, 251, 261, 263, 328. 
 
 that land was acquired for authorized purposes, 128, note, 232, note. 
 
 when outsider may assume that agent is acting rightfully, 204. 
 
 outsider may not assume existence of unusual facts, 206. 
 
 regarding negotiable paper, 205, 285. 
 
 assertion by agent of his own authority, 207-209. 
 
 in favor of validity of directors' acts, 232. 
 
 that corporate Beal is rightfully affixed, 202, note.
 
 952 INDEX. 
 
 References are to the Sections. 
 
 PRESUMPTIONS IN FAVOR OF VALIDITY, Etc.— (continued). 
 
 that formalities have been observed, 251. 
 
 in favor of regularity of directors' meetings, 261. 
 
 in evidence, ordinary presumptions apply, 203. 
 
 that restrictions on corporate powers have not been violated, 284. 
 
 that money is not borrowed by a corporation in excess of authorized 
 limit, 286. 
 
 nor for an unauthorized purpose, 286. 
 
 on part of seller of property that it is proper for corporation to pur- 
 chase, 286. 
 
 in favor of validity of municipal bonds, 328-332. 
 
 in favor of foreign corporation, 390, note. 
 PRESUMPTION OF KNOWLEDGE BY CORPORATION, 216. 
 PRESUMPTION THAT PERSONS DEALING WITH A CORPORATION 
 
 KNOW ITS POWERS, 195, 264, 389-391. 
 PRINCIPAL, when dividends are to be treated as, 799-801. 
 PRIVATE PROPERTY: 
 
 what is, 171. 
 
 cannot be taken without compensation, 163. 
 PRIVILEGED COMMUNICATIONS OF OFFICERS TO MEMBERS OF 
 
 CORPORATIONS, 342, note. 
 PRIVILEGES, when exclusive to be strictly construed, 122. 
 PROCESS, service on corporations, 143, 395-399. 
 PROHIBITIONS, statutory. See Statutory Pkoiiibitions. 
 PROMISSORY NOTES: 
 
 corporations may issue, 125. 
 
 of corporations are negotiable, 125, note. 
 
 when president may issue, 202. 
 
 issued by agents, 205. 
 
 title in corporation cannot be questioned by promisor, 282. 
 
 when issued in contravention of statute void, 298. 
 PROMOTERS: 
 
 not partners presumptively, 77. 
 
 liability of, 74-84, 103. 
 
 to parties with whom they contract, 76-79. 
 
 for acts of other promoters, 77. 
 
 for statements in prospectus, 77. 
 
 to each other, 80, 81. 
 
 contribution among, 81. 
 
 to the corporation subsequently formed, 82-84. 
 
 false statements of, 97, note. 
 
 to account for secret profits, 82-84. 
 
 to subscribers, 103. 
 
 for preliminary deposits, 104, 106. 
 
 right of, to indemnity from the corporation, 85. 
 
 from each other, 80. 
 
 to compensation, 81, 86. 
 
 liability of corporation for acts of, 87-90.
 
 INDEX. 953 
 
 References are to the Sections. 
 
 PROMOTION OF A CORPORATION. See Legal Relations Arising 
 
 THROUGH THE PROMOTION OF A CORPORATION. 
 
 PROOF OF ACTS OF CORPORATIONS, 263. 
 PROOF OF DEED OF CORPORATION, 248, note. 
 PROPERTY: 
 
 what is, 172. 
 
 power of corporations to acquire, 128, 129. 
 
 of a corporation, ownership respecting, 33. 
 
 not to be taken without compensation, 171. 
 except when public, 171. 
 
 what constitutes a taking of, 173. 
 
 powers of corporation over, 124, 130. See Corporate Powers. 
 
 in which the public has an interest, 474-476. 
 
 a corporation may receive in payment for its shares, 522c, 701. 
 PROSPECTUS : 
 
 liability of promoters for statements in, 77. 
 
 terms of become conditions in subscriptions, 96. 
 PROVISIONAL COMMITTEE-MEN, not partners prima facie, 77. 
 
 not liable for contracts of managing committee, 77, note. 
 
 remuneration of, 81. 
 
 contribution among, 81, note. 
 PROXY, right to vote by, 579. 
 PUBLIC CORPORATIONS. See Municipal Corporations, Municipal 
 
 Bonds. 
 PUBLIC POLICY : 
 
 acts illegal as against, 289, 304-309. 
 
 foreign corporations cannot act contrary to, 387, 388. 
 
 agreement to sell shares, when against, 790. 
 PUBLIC PROPERTY, when corporation may take without compensation, 
 
 171. 
 PUBLIC USE : 
 
 what is, 163. 
 
 property devoted to, may be taken by eminent domain, 163a. 
 PUNITIVE DAMAGES, when recoverable for personal injuries, 377, 378. 
 PURCHASE BY CORPORATION OF ITS SHARES, 134, 135, 552, 586, 
 
 747. 
 PURCHASE OF SHARES. See Transfer of Shares; Shares of Stock 
 
 IN ANOTHER CORPORATION. 
 
 QUALIFICATION SHARES OF DIRECTORS, 614. 
 QUANTUM MERUIT, corporation may be held on, 249. 
 QUASI CORPORATION, 58, note. 
 QUO WARRANTO, must be brought in the name of the state, 151. 
 
 nature of action, 460, note. See Forfeiture of Franchises. 
 QUORUM necessary for transaction of business at directors 1 meetings, 260. 
 
 at shareholders' meetings, 577, note. 
 QUORUM AT ROMAN LAW, 8.
 
 954 INDEX. 
 
 References are to the Sections. 
 
 RAILROAD AID BONDS. See Municipal Bonds in Aid of Rail- 
 roads. 
 RAILROAD COMPANIES: 
 
 power of, to locate road, 162, 162a. 
 
 to locate stations, 162. 
 
 to change location of route, 162a, 229, note. 
 
 to cross tracks of another railroad, 163a. 
 directors of, cannot change termini, 229, note. 
 right of eminent domain of, 162, 163. 
 
 may take easement or fee, 162a, 165. 
 
 for what purposes may take land, 163. 
 right of, to cross navigahle waters, 162a. 
 when may take property devoted to a public use, 163a. 
 railroad a public use, 163. 
 right of, to exclusive use of its track, 162a. 
 
 can exercise eminent domain though road has been leased, 166, note, 
 in condemning land must comply strictly with statute, 166. 
 liable for throwing back surface water, 173. 
 
 for obstructing drains and ditches, 173. 
 
 for obstruction of river navigation, 174. 
 liability to riparian owners, 174. 
 liability for tracks in streets, 175-177. 
 conditional subscriptions to shares in, 109, 517. 
 collateral attacks on franchises of, 152. 
 liability of, for advances made on bills of lading, 201. 
 lease of road may not relieve from liability, 170. 
 cannot relieve themselves from liability by delegating their franchises, 
 
 170. 
 without special authority, cannot mortgage or transfer their franchises, 
 
 125, 305. 
 nor lease their franchises, 305. 
 
 such leases void, 305. 
 effect of leases on right to tolls on leased road, 416. 
 nor without special authority can they consolidate, 305. 
 consolidation of. See Consolidation. 
 ultra vires acts, 305. 
 traffic arrangements, 307, 308. 
 pooling arrangements, 309. 
 contracts of, as to stations, 309. 
 contracts giving exclusive privileges, 309. 
 charges by, 309. 
 
 municipal bonds issued in aid of. See Municipal Bonds. 
 liable for assaults and batteries, 344. 
 
 for trespass, 344. 
 
 for public nuisance, 344. 
 may stipulate against liability for fire, 351. 
 
 cannot stipulate against liability for losses arising from negligence, 
 352-354.
 
 INDEX. 955 
 
 References are to the Sections. 
 
 RAILROAD COMPANIES— ( continued). 
 
 liability of connecting lines as common carriers, 354, 362-364. 
 liability of, for injuries to employes, 365, 366. 
 to trespassers, 370-372. 
 to persons on track, 368. 
 for negligence of flagman, 368. 
 for fires caused by sparks, 368. 
 to fence railroad, 369. 
 not charageable with knowledge of contents of packages carried by 
 
 them, 369. 
 may make reasonable regulations regarding passengers, 348. 
 rigbt of, to tolls on leased roads, 416. 
 state may compel them to perform tbeir functions, 454, 455. 
 
 to erect suitable stations, 454. 
 state may control them by virtue of its police power, 475. 
 state may regulate fares, 475, 476, 476a. 
 taxation of, 479, 485. 
 railroad tracks in streets, 175-177. 
 when liable in exemplary damages, 377, 378. 
 liability for contracts of station agents, 193, note, 201. 
 when shareholder may enjoin from extending road, 556. 
 contractors 1 liens, 817, 818. 
 provisions in mortgages, 816. 
 
 mortgages of, covering property to be acquired, 676, 817. 
 covering rolling stock, 819. 
 covering separate portions of road, 819. 
 foreclosure sales, 669, note, 682, note, 711, 813. 
 not dissolved by sale of road, 432, note. 
 right to earnings of, as between bondholders and judgment creditors, 
 
 820. 
 appointment of receiver in foreclosure of, 821, 822. 
 priority of receiver's orders, 823, 824. 
 payment of current expenses on foreclosure, 821, 822. 
 incorporated by two states, 403-409. See Common Carriers, Emi- 
 nent Domain, Mortgages, Bondholders, Trustees under 
 Railroad Mortgages. 
 RAILROAD CONSTRUCTION COMPANIES, 638, 639. 
 RAISE MONEY. See Money. 
 RATES OF RAILROAD COMPANIES, regulation of, by the state, 475, 
 
 476a, 4766. 
 RATIFICATION: 
 
 of acts of promoters, 86-90. 
 
 of bonds issued before incorporation, 90, note. 
 
 of subscription contracts of infants, 95. 
 
 by acquiescence, 110, 193, 212. 
 
 formal ratification not requisite, 212. 
 
 by shareholders, 187, 213. / 
 
 by accepting benefit of act, 214.
 
 956 INDEX. 
 
 References are to the Sections. 
 
 RATIFICATION— ( continued). 
 
 knowledge or implied notice of facts necessary, 212, 214, 215. 
 
 what notice is sufficient, 212, 210. 
 
 through lapse of time, 110, 217. 
 
 of informal acts, 256. 
 
 of ultra vires acts, 269-273. 
 by shareholders, 270, 271. 
 
 by corporation, of contracts in which directors are personally interested, 
 630. 
 REAL ESTATE. See Lands. 
 RECEIVER : 
 
 effect of appointment on suits pending, 144, 813. 
 
 court will not appoint for foreign corporation, 394. 
 
 may recover subscriptions, 542. 
 
 capacities of, 542, 615, 814. 
 
 may enforce directors' duties, 615. 
 
 may enforce rights of creditors against officers, 756, note, 758, note. 
 
 may contest payment of ultra vires claims, 272, 273, 814. 
 
 pleading irregularity of appointment, 542. 
 
 liability of, when operating railroad, 417. 
 
 when necessary party in suits by shareholders against officers, 690, note. 
 
 when creditors are entitled to, 663, 707. 
 
 when appointed at suit of creditors must determine amount of corpo- 
 rate indebtedness before enforcing a subscription, 707, note. 
 
 in foreclosure suits, 821. 
 
 when court will recognize foreign receiver, 819, note. 
 
 appointment does not cause dissolution of corporation, 432. 
 RECEIVER'S ORDERS. 821-824. 
 RECITALS IN MUNICIPAL BONDS, 329-332. 
 REDUCTION OF CAPITAL STOCK, 133, 570. 
 REGISTRY OF MUNICIPAL BONDS, 332. 
 REGISTRY OF TRANSFERS OF SHARES, liability of corporation, 
 
 592, 593, 597. 
 REGULATIONS BY CARRIERS, 348. 
 
 RE-ISSUE OF SHARES PURCHASED BY CORPORATION, 136. 
 RELEASE OF SUBSCRIPTIONS : 
 
 invalid, 549-551. 
 
 no defence as to creditors, 745, 746. 
 
 no defence as to other shareholders, 780. 
 REMAINDER-MAN AND LIFE-TENANT, right to dividends as be- 
 tween, 799-801. 
 REMEDY : 
 
 distinction between, and right, 493. 
 
 state may control, 493-495. See Suits. 
 REMOVAL OF OFFICERS, 581, 649, 650, 611. 
 
 REMOVE FROM PLACE TO PLACE, corporations cannot, 121, note. 
 REMUNERATION OF OFFICERS, 86, 646-648. 
 REORGANIZATION AGREEMENTS, 816a.
 
 INDEX. 957 
 
 References are to the Sections. 
 
 REPEAL OF CHARTERS OR ENABLING ACTS, 464, 496-504. 
 
 limitations on the reserved right to alter and repeal, 496-502. 
 
 judicial decree, when necessary, 503. 
 
 effect of, 504. 
 REPLEVIN FOR CORPORATE PROPERTY, cannot be sustained by 
 
 sole shareholder, 187. 
 REPORTS: 
 
 failure to file, liability of officers, 767-773. 
 does not survive death, 771. 
 
 false, liability of officers signing, 774. 
 does not survive death, 771, note. 
 RESEMBLANCES BETWEEN CORPORATIONS AND CERTAIN 
 OTHER LEGAL INSTITUTIONS: 
 
 what law applicable to corporations, 53. 
 
 New York statute of 1875, 54, 55. 
 
 New York joint stock association, 56. 
 
 comparison, 57. 
 
 limited partnerships, 58. 
 
 partnerships: dissimilar from corporations at common law, 59. 
 
 points of difference remaining, 60, 61. 
 
 the element common to these various legal institutions, 62. 
 
 material questions, 63. 
 
 law applicable to corporations, how determinable, 64, 65. 
 
 changes in corporation law, 66. 
 
 the use of analogy, 67-69. 
 
 the application of general principles, 70, 71. 
 RESIDENCE OF FOREIGN CORPORATION, 395, note. 
 
 of corporation created by two states. 407, note, 409. 
 RESTRICTIONS ON AUTHORITY OF CORPORATED AGENTS. 
 
 See Agents, Directors. 
 RESTRICTIONS ON STATE LEGISLATURES, 464. 
 RIGHTS, regarded as "property," 172. 
 
 RIPARIAN OWNERS, rights of, against railroad companies, 174. 
 ROLLING STOCK, 676, 819. 
 ROMAN LAW RELATING TO CORPORATIONS, 1-9. 
 
 early Roman view, 1. 
 
 a corporation not a person in the Roman law, 2. 
 
 later Roman view, 3. 
 
 special authority to form a corporation necessary only in later times, 4. 
 
 varieties of Roman corporations, 5. 
 
 illegal corporations at Rome, 6. 
 
 dissolution in Roman law, 7. 
 
 corporate management, 8. 
 
 hereditas jacens, 9. 
 RULES OF LAW: 
 
 how they become operative, 25. 
 
 between whom they operate, 26. 
 
 what rules brouglit into operation by incorporation, 27. 
 
 applicable to corporations, 52-71.
 
 958 INDEX. 
 
 References are to the Sections. 
 
 SALARIES, 646-648. 
 
 SALVOR, corporation may be, 137. 
 
 SAVINGS BANKS, when not liable for money paid on forged order, 199. 
 
 cannot purchase stock in another corporation, 267. 
 SCRIP DIVIDEND, when bequest of shares does not carry, 798, note. 
 SEAL: 
 
 right of corporation to use, 12, 14, 17. 
 
 when necessary, 248. 
 
 presumed to be rightfully affixed, 204, note. 
 
 absence of in municipal bonds, 328, note. 
 SECRET AGREEMENTS with subscribers void, 521. 
 SECRETARY: 
 
 power of, 201. 
 
 prima facie entitled to compensation, 647, note. 
 SECRET PROFITS: 
 
 promoters must account to corporation for, 82-84. 
 
 directors must account to corporation for, 629-631. 
 SECURITY, corporation has implied power to give, 125. 
 SECURITIES COMPANY 3090". 
 SELL PROPERTY, power of corporations to, 130. 
 SERVANTS, liability of shareholders for debts due, 734. See Agents, 
 
 Employes, Torts. 
 SERVICE OF PROCESS: 
 
 on corporations, 143. 
 
 mode may be changed, 495. 
 
 on foreign corporations, 395-399. 
 
 on non-resident stockholders, 740. 
 SERVICES, corporation may receive in payment for its shares, 522c. 
 
 compensation for, 86, 646, 648. 
 SET-OFF: 
 
 when debtor of corporation entitled to, 670, 810, note. 
 
 by shareholders, against unpaid subscriptions, 729, 811. 
 
 by shareholders, against claim for corporate funds improperly received, 
 730. 
 
 by shareholders, in actions against the corporation, 187, note. 
 
 by shareholders, against statutory liability to creditors, 731. 732. 
 
 of benefits against amount of compensation for property taken oy emi- 
 nent domain, 179. 
 SHARES OF STOCK: 
 
 right of subscribers to allotment of, 91, 110. 
 
 on increase of stock, 569. 
 
 definitions of, 567. 
 
 increase in number of, 133. 
 
 are subject to attachment, 392, note, 796. 
 
 attachment of does not incumber property of the corporation, 567, note. 
 
 taxation of, 477a, 483, 484. 
 
 situs of for taxation, 477a, note, 479, note. 
 
 forfeiture of, 234, 546-548.
 
 INDEX. 959 
 
 References are to tho Sections. 
 
 SHARES OF STOCK— (continued). 
 may be paid for in property, 522c. 
 See Shareholders, Transfers, Subscriptions. 
 SHARES OF STOCK IN ANOTHER COMPANY, power of one corpora- 
 tion to purchase, 130, note, 161, 267, 309. 
 a savings bank cannot purchase, 267. 
 when a shareholder may restrain purchase, 556. 
 SHAREHOLDERS: 
 
 constitute body corporate, 48-50. 
 
 not partners, 68, 100, 148, 716, 719. 
 
 right of, to sue on behalf of corporation, 139-142. 
 
 must be such at time of injury, unless shares devolve on them by 
 operation of law, 140, note, 141, note, 
 how incapacitated from acting when management vested in directors, 
 
 180-183. 
 consent of, to mortgages, 185, 186. 
 must act in corporate meetings, 184. 
 agreements among, to control corporation management, when legal, 
 
 5596. 
 cannot act individually for the corporation, 187. 
 not legal owners of the corporate property, 187. 
 have insurable interest, 187. 
 notice to, not notice to corporation, 187, note, 
 ratification by, 187, 203. 
 
 of ultra vires acts, 270. 
 relations to creditors, effect thereon of reservation by the state of the 
 
 right to alter and repeal, 500, 501. 
 relations of, to the state, 505. 
 
 to the corporation, how occasioned, 509-512. 
 "non-assessable" shares held by, 522. 
 may enjoin consolidation, 536. 
 may restrain improper and ultra vires acts on part of corporation or 
 
 officers, 140, note, 553-556, 683, 684. 
 may enjoin acceptance of amendment, 557. 
 corporation must be managed in interests of as such, 558. 
 may sue corporation for conspiracy, 560. 
 
 for injuries to themselves individually, 561. 
 cannot plead nul tiel corporation, 537-539, 738. 
 liability of, to receiver, 542. 
 may pay for shares in property, 522c, 701. 
 cannot be released, 549-551, 780. 
 right of, to dividends, 562-568. 
 
 to subscribe for additional shares on increase of stock, 569. 
 rights of, regarding meetings, 573-576. 
 
 elections, 577-581. 
 right of, to vote, 578-581. 
 
 to vote in their own interest, 5596. 
 
 to inspect corporate books, 585.
 
 960 INDEX. 
 
 References are to the Sections. 
 
 SHAREHOLDERS— [continued). 
 
 corporate affairs to be managed in interests of, 558, 559. 
 rights of, on winding-up, 608, 609. 
 
 to dissolve, 610. 
 
 that officers do no unauthorized acts, 685. 
 remedies of, against officers, 560, 686-688. 
 
 statute of limitations, 689. 
 actions by, against officers, for corporate mismanagement, 689-691. 
 actions by, against officers, for individual injuries, 696, 697. 
 directors trustees for, 692, 698. 
 liability of, to indemnify directors, 699. 
 
 to creditors in absence of statutory liability, 700-708. 
 
 in national banks, 727. 
 
 to creditors to pay up subscriptions, 701, 703. 
 
 to creditors on shares issued for property, 702. 
 
 to creditors for withdrawing corporate funds, 708, 719, note. 
 creditors 1 bills against, joinder of parties, 704-706. 
 trustees for creditors in what respects, 45, 709-711. 
 liability to creditors when enforceable outside of state, 393. 
 statutory liability of, to creditors. See Statutory Liability. 
 when entitled to set-off against creditors, 729-732, 811. 
 when also creditors, cannot sue other shareholders at law, 733, 784. 
 liability of, for " debts " of the corporation, 734. 
 estopped to deny corporate existence in suit by creditors, 738. 
 who are such, as to creditors, 740-743. 
 
 release by corporation of, no defence against creditors, 745. 
 forfeiture of shares valid as to creditors, 746. 
 compromise may be valid as to creditors, 746. 
 liability of, to creditors, as ended by a transfer of shares, 747. 
 
 not ended by a transfer of shares to the corporation, 747. 
 
 not ended by an irregular transfer, 748. 
 
 not ended by a fraudulent transfer, 749. 
 relations of, to creditors on winding-up, 750, 751. 
 legal relations among, two classes, 777, 778. 
 
 right of, that each shall bear his proportion of corporate burdens, 779. 
 rights of, against each other, on a change in the corporate constitu- 
 tion, 782. 
 contribution among, 734, note, 783, 784. 
 classes of, 785. 
 
 rigbts of, who hold shares more fully paid up, 787. 
 equal rights of, 788. 
 
 relations between transferrer and transferee of shares, 789-793, 798. 
 pledge of sbares by, 794. See Subscriptions, Preferred Shares. 
 SHIPPERS, when not affected with notice of limitations on authority of 
 
 station agents, 193, note. 
 SLEEPING-CAR COMPANIES, liability of, 347, note. 
 SOC1I VECTIGALIUM PUBLICORUM, 1. 
 SOVEREIGNTY, never absolute, 456.
 
 INDEX. 961 
 
 References are to the Sections, 
 
 SPECIAL DEPOSITS, liability of banks, 161, 337, 346. 
 SPECIFIC PERFORMANCE: 
 
 of transfer of shares, right of purchaser as against corporation, 599. 
 as between transferrer and transferee, 790. 
 STATES OF THE UNION: 
 suits against, 462. 
 
 relations of, to corporations created by them, 438-449, 452, 469. 
 contract between corporation and, 450, 453. 
 
 rights acquired by state, 454, 456. 
 may forfeit franchises, 457-460. 
 rights of corporation against, 461, 462. 
 
 limitations thereon, 463-466. 
 limitations on power of states over corporations, 469a, 469b et seq. 
 eminent domain of, 470-473. 
 police power of, 474-476, 493. 
 taxing power of, 477-486. 
 exemptions from taxation by, 487-491. 
 have control over remedies, 493-495. 
 
 reserved right of, to alter and repeal charters or enabling acts, 496-604. 
 relations of, to shareholders, 505. 
 to corporate officers, 506. 
 
 to creditors of corporations, 507. See Taxation. 
 STATIONS: 
 
 power of railroad companies to locate, 162. 
 contracts of railroad companies to locate, 309. 
 STATION AGENTS, powers of, 193, note, 201. 
 STATUTES: 
 
 of mortmain, 128. 
 
 regulating service on foreign corporations, 397. 
 imposing terras on foreign corporations, 400, 401. 
 New York "business corporations " act of 1875,54,55. 
 New York "manufacturing companies " act, 125, note, 
 regulating joint stock associations in New York, 56. 
 English companies act, 296. 
 
 of limitations. See Limitations, Statutory Liability, National 
 Banks. 
 STATUTORY LIABILITY: 
 
 when enforced outside of state creating it, 393. 
 
 how far subject to alteration by subsequent legislation, 500, 501. 
 
 of shareholders, 712. 
 
 does not deprive creditor of right to enforce unpaid subscriptions, 
 
 712, note, 
 return of execution unsatisfied, 713, 724. 
 when shareholders may be joined in action against corporation, 718, 
 
 note, 
 nature of, 714-717. 
 ordinarily not a penalty, 714, note, 
 not released by time given corporation, 715 and note. 
 
 61
 
 962 INDEX. 
 
 References are to the Section*. 
 
 STATUTORY LIABILITY— (continued). 
 not the liability of guarantors, 715. 
 cannot be extended, 715, note. 
 not the liability of partners, 716, 719. 
 must be enforced as prescribed by the statute, 717, 783. 
 attaches to what shareholders, 718-720. 
 cannot be created by by-law, 583. 
 creditors proper parties to enforce, 721. 
 corporation cannot assign, 721. 
 averments in pleading, 722. 
 under national banking act, 727. 
 
 under New York " manufacturing companies" act, 723. 
 set-off under New York " manufacturing companies " act, 732. 
 conditions precedent, 724. 
 joinder of parties, 725, 726. 
 survives death of shareholder, 727j note, 
 extinguishment of, 728. 
 right to set-off, 731, 732. 
 for debts of a particular class, 734. 
 for "debts," 734. 
 repeal of, 735. 
 waiver of, 735. 
 
 when barred by statute of limitations, 736. 
 evidence of judgment against corporation, 737. 
 existence of corporation cannot be denied, 738, 739. 
 priorities of creditors regarding, 825, 826. 
 
 not extinguished by transfer of shares to corporation, 135, 747. 
 of directors, 761-775. 
 
 different classes, 761-766. 
 
 in its nature penal, 764, 765, 771. 
 
 for failure to file reports, 767-773. 
 
 does not survive death of delinquent, 771. 
 
 what debts included, 772, 773. 
 
 for signing false reports, 774. 
 
 enforced outside the state, 393. 
 forms of action, joinder of parties, 775. 
 contribution, 763, 764, 767, 806. 
 STATUTORY PROHIBITIONS, 294-303. 
 
 corporations organized for prohibited purposes, 149, note. 
 
 general prohibitions, 295. 
 
 English " Companies' Act," 296. 
 
 effect, general rule, 297. 
 
 excessive rate of interest, 298. 
 
 forbidden bills and notes, 298. 
 
 first qualification to general rule, 299. 
 
 second qualification to general rule, 300. 
 
 third qualification to general rule, 301. 
 
 excessive loans by national banks, 301.
 
 INDEX. 963 
 
 References are to the Sections. 
 
 STATUTORY PROHIBITIONS— ( continued ). 
 
 forbidden loans by savings banks, 301. 
 
 prohibitions by implication, 302. 
 
 effect on conveyances to corporation, 303. 
 STOCK: 
 
 corporation cannot issue below par, 124. 541, 545. 
 
 power of corporation to raise money by issue of, 124. 
 to increase or decrease, 133. 
 to purchase its own, 134, 135, 552. 
 
 to purchase stock in another corporation, 130, note, 161, 267, 309. 
 to re-issue shares, 136. 
 
 directors cannot increase, 228. 
 
 rights of shareholders on increase or decrease, 569, 570. 
 
 issue of invalid stock, 541, 545. 
 STOCK-BROKER, when not liable on shares put in his name, 700, note. 
 STOCK CERTIFICATE: 
 
 issue of, not essential to constitute a shareholder, 511. 
 
 corporation estopped by, 591, 598. 
 
 liability of corporation on forged, 591-593. 
 
 assignment of, effect, 795, 796. 
 
 passes legal title to shares, 587, 590. 
 
 held "in trust," 797. 
 
 need have no seal, 248. 
 
 is but evidence, 587. 
 
 purchaser of stolen, gets no title, 795. 
 STOCK DIVIDENDS: 
 
 right of shareholders in, after declaration, 568. 
 
 power of corporation to make, 568, and note. 
 
 whether principal or income, 800, 801. 
 STOCKHOLDERS. See Shareholders. 
 STREET RAILROAD, franchises of, 304, note. 
 STREETS, use of, by railroads, 175-177. 
 SUBSCRIBERS TO STOCK OF A CORPORATION TO BE FORMED: 
 
 rights of, to shares after company is formed, 91. 
 
 effect on, of false statements of promoters, 97, note. 
 
 may deny that corporation has been formed, 99. 
 
 not partners, 100. 
 
 legal relations of, to promoters, 103. 
 
 rights of, against corporation, 110-112. 
 
 affected by laches, 111. See Subscriptions. 
 SUBSCRIPTIONS TO SHARES IN A CORPORATION TO BE 
 FORMED, 91-112. 
 
 made to commissioners, 91, and note. 
 
 of infants, 95. 
 
 consideration of, 91-94. 
 
 defence that objects of incorporation are illegal, 95. 
 
 defence that corporation has not been formed, 99. 
 
 conditions in, 96, 97.
 
 964 INDEX. 
 
 References are to the Sections. 
 
 SUBSCRIPTIONS TO SHARES, Ere— (continued). 
 
 when not enforceable until all the stock subscribed, 96. 
 preliminary deposits, 98, 99, 104, 106. 
 legal relations arising from, 100-106. 
 assignment of, 101, 102. 
 defence of promoter's fraud, 103. 
 fraudulent, 105. 
 
 enforceable by corporation when formed, 107-109. 
 rescission of, by subscribers, 110-112. 
 SUBSCRIPTIONS TO SHARES: 
 
 forms of, and consideration for, 509-512, 515, 516. 
 promise implied by, to pay for shares, 513-515. 
 
 even though corporation has also power to forfeit them, 513. 
 offer to subscribe revocable, 515, note, 
 secret oral conditions void, 521. 
 infancy may be pleaded, 95, 515, note, 
 conditions in, 517, 518-521. 
 levy of assessment, 517. 
 calls for, when not prerequisite, 543. 
 obtained by fraud, 103, 523-526. 
 fraudulent may be enforced, 105. 
 effect on, of error, 527. 
 
 of subsequent illegal corporate action, 528, 529. 
 
 of change in corporate enterprise, 530-535, 782. 
 
 of alteration of charter, 530-535. 
 
 of consolidation, 536. 
 
 of failure to make preliminary deposit, 516. 
 
 of purchase by the corporation of the sbares subscribed for, 134, 
 135, 552. 
 may be paid in property, 522c. 
 
 when illegal corporation cannot enforce, 95, 145, note, 
 cannot be released, 549-551, 745, 746, 780. 
 assignment of, 543. 
 
 purchase of, by another corporation, 544. 
 liability on, to creditors, 701, 703, 745, 746. 
 creditors may enforce, 660, 661. 
 
 althougb shareholders subject to statutory liability, 712, note, 
 receiver may enforce, 542. 
 
 debts owing subscribers not to be set off against, 729, 811. 
 when nul tiel corporation may not be pleaded to suit on, 99, 537, 539, 738. 
 when it may, 99, 154. 
 when illegal election of directors making calls may be pleaded to suit 
 
 on, 540. 
 when illegality of shares issued may be pleaded, 541. 
 when barred by statute of limitations, 709. 
 
 insolvency of the corporation may not be pleaded to suit on, 542. 
 SUCCESSION: 
 
 perpetual, 12, 14, 16, 430, note.
 
 INDEX. 965 
 
 References are to the Sections. 
 
 SUCCESSION— ( continued). 
 
 by one corporation to the property of another, 414. 
 
 different from consolidation, 415. 
 
 property passes by, subject to restrictions, 416. 
 
 succeeding corporation takes the place of former, 417. 
 
 special exemptions may not pass by, 418, 487-491. 
 
 liability of succeeding corporation to creditors, 667. 
 SUITS AGAINST DIRECTORS BY CREDITORS TO ENFORCE 
 
 STATUTORY LIABILITY (JOINDER), 775. 
 SUITS AGAINST JOINT STOCK ASSOCIATIONS, 56, note. 
 SUITS AGAINST OFFICERS BY SHAREHOLDERS (JOINDER), 
 
 685-691. 
 SUITS AGAINST SHAREHOLDERS BY CREDITORS: 
 
 joinder of parties, 703-706. 
 
 statutory liability (joinder), 756-760. 
 SUITS AGAINST STATES OR THE UNITED STATES, 462. 
 SUITS BY AND AGAINST CORPORATIONS, 137-144, 382-402. 
 
 right to sue and be sued implied at common law, 12, 14. 
 
 at Roman law, 7. 
 
 that corporation may sustain, 137. 
 
 should be brought in the name of the corporation, 138. 
 
 against state, 462. 
 
 directors may compromise, 137, 224. 
 
 when may be brougbt by shareholders, 138, 139, 142, 536, 553-561, 
 683, 684, 689-691. 
 
 allegations in, when brought by shareholders, 140-142. 
 
 abated by dissolution, 435. 
 
 effect on, of appointment of receiver, 144. 
 
 service of process on corporation, 143. 
 on foreign corporations, 395-399. 
 
 by and against foreign corporations, 392-402. 
 
 state cannot prevent foreign corporations from removing to Federal 
 courts, 400. 
 SUPERINTENDENT : 
 
 powers of, 202. 
 
 can recover for services on quantum meruit, 647, note. 
 SURETIES ON BONDS OF CORPORATE OFFICERS, 249, note, 257. 
 SURFACE WATER, railroad companies liable for turning back, 173. 
 SURRENDER OF CHARTER OR FRANCHISES, 20, 433, 434. 
 
 TAXATION by municipalities to pay railroad aid bonds, 333. 
 
 mandamus the remedy of bondholders, 333. 
 TAXATION OF CORPORATIONS, 477-4926. 
 
 taxing power, how differs from eminent domain, 469a. 
 
 double taxation, 477a. 
 
 taxation of shares, 477a. 
 
 situs of shares for taxation, 477a, note, 479. 
 
 due process of law, 492, 492a.
 
 i+66 INDEX. 
 
 References are to the Sections. 
 
 TAXATION OF CORPORATIONS— (continued). 
 by Congress, 478. 
 
 situs of corporate bonds for taxation, 479. 
 by state legislatures, 479. 
 
 of foreign corporations, 400, note, 479, 480. 
 
 restrictions on, in the Federal constitution, 480, 481. 
 
 of Federal agencies, 482. 
 
 of corporations " doing business" in the state, 479, note. 
 
 of national banks, 483, 484. 
 
 of railroad companies, 479, 485. 
 
 of telegraph companies, 486. 
 
 exemptions from, 487-491. 
 
 restrictions on, 4696. 
 
 restriction through power of Congress to regulate commerce, 485. 
 jurisdiction of equity to restrain, 484, note, 4926. 
 what are " profits," " net earnings, " etc., 565. 
 TELEGRAPH COMPANIES : 
 
 liable for damages for erecting lines along highway, 175, note. 
 liability of, 357. 
 
 penalties imposed on, 393, note, 
 taxation of, 486. 
 TELLER : 
 
 powers of, 193, note, 246, note, 
 certification of checks by, 244. 
 TERMINAL FACILITIES, railroad company may take land for, 163. 
 TICKET-AGENTS, powers of, 201. 
 TICKETS : 
 
 railroad regulations regarding, 348. 
 effect of provisions contained in, 358, 359. 
 TIME, lapse of, when no ratification, 217. See Ratification. 
 TORTS OF CORPORATE AGENTS AND SERVANTS : 
 liability of corporation, 335. 
 doctrines of ultra vires, how applicable, 336-338. 
 when tort causes breach of no special corporate obligation, 339, 
 
 367-372. 
 summary of rules respecting liability for, 341. 
 within scope of agent's authority, 342. 
 fraud, 342. 
 
 within scope of tort feasor's employment, 343, 344. 
 deceit, 342. 
 corporation liable for assaults and batteries, 343. 
 
 for trespasses, 343. 
 action for trover lies against corporation, 342. 
 action for libel lies against corporation, 342. 
 
 and action for false imprisonment, 342. 
 that act of servant was wilful does not relieve corporation, 344. 
 when tort causes breach of duty owed by corporation, 345. 
 injuries to employes, 365, 366.
 
 INDEX. • 967 
 
 References are to the Sections. 
 
 TORTS OF COROPRATE AGENTS AND SERVANTS— (continued). 
 damages recoverable for personal injuries, 377, 378. See Negligence, 
 
 Common Carriers. 
 liability of municipal corporations, 177, 355, note. 
 TRACKS, laid in street or highway, 169, 175-177. 
 
 power of railroad companies to locate and change, 162, 162a. 
 TRADE-MARK, corporation may have, 120, note. 
 TRAFFIC ARRANGEMENTS OF RAILROAD COMPANIES, 307. 
 TRANSFER OF FRANCHISES, 131, 132, 305. 
 TRANSFER OF SUBSCRIPTIONS TO SHARES IN A CORPORATION 
 
 TO BE FORMED, 10), 102. 
 TRANSFERRER AND TRANSFEREE OF SHARES, 789-798. 
 relations between, 789, 792. 
 agreement to transfer not a nudum pactum, 789. 
 rights of, to specific performance, 790. 
 
 transferrer's right to indemnification from liability, 719, note, 791. 
 fraud of transferrer, 792. 
 implied warranty by transferrer, 793. 
 right to dividends as between, 798. 
 transferrer of shares as collateral security when held as shareholder to 
 
 creditors, 741. 
 transferee not liable to creditors for dividends wrongfully received by 
 his transferrer, 719, note. 
 TRANSFERS OF SHARES: 
 
 in stock of a corporation not yet formed, 101, 102. 
 to corporation, 134, 135, 552, 586, 747. 
 
 does not end transferrer's liabilities, 747. 
 to infant, 747. 
 
 general effect of transfer, 586. 
 when corporation is insolvent, 586. 
 fraudulent, 586, 749, 780. 
 liability of transferee, 587. 
 
 taking shares as collateral security, 741. 
 irregular, 588, 589, 748, 795, 796. 
 cannot be established by parol, 511, note, 
 liability of corporation in registering, 592, 595. 
 transfers by executors and trustees, 592. 
 transfers on forged orders, 593. 
 in violation of by-laws, 594. 
 in disregard of uuknown rights, 595. 
 when corporation may compel rival claimants to interplead, 596. 
 liability of corporation in registering transfers by mistake, 597. 
 estoppel of corporation by issue of certificate, 598. 
 right of purchaser to, 599, 790. 
 specific performance of, 790. 
 
 corporation cannot refuse to register transfer because transferrer in- 
 debted to it, 600. 
 except when corporation has a lien, 603.
 
 068 • INDEX. 
 
 References are to the Sections. 
 
 TRANSFERS OF SHARES— (continued). 
 
 effect of, to relieve shareholder from liability to creditors, 717-720, 
 747-749. 
 to relieve shareholder from liability to other shareholders, 780. 
 
 unrecorded, 795, 796. 
 
 validity as against transferrer's creditors, 796. 
 TREASURER, powers of, 187, note, 193, note, 210, note, 342, note. 
 
 prima facie, entitled to compensation, 647, note. 
 TRESPASS, corporation liable for, 344. 
 TRESPASSERS, liability of railroad companies to, 370-372. 
 TROVER, corporation liable in action for, 342. 
 TRUST FUNDS, 32, 33, 62. 
 
 corporate assets a trust fund for creditors, 654-659, 702a. 
 " TRUSTS " AND MONOPOLIES, illegal, 309a, etc. 
 TRUST RELATIONS, 41-47. 
 TRUSTEES UNDER RAILROAD MORTGAGES : 
 
 liability of, when operating railroad, 417. 
 
 officer of corporation may act as, 629, note. 
 
 bondholder may contest compensation of, 682, note. 
 
 capacities of, 814. 
 
 represent the bondholders, 816, note. 
 
 ULTRA VIRES ACTS : 
 
 questions relating to, how determinable, 264. 
 
 meaning of the term, 264, note. 
 
 legal effect of, general rule, 265. 
 
 when done by board of directors, 267. 
 
 when done by body corporate, 268. 
 
 ratification of, 269-272. 
 
 rights of creditors regarding, 272-274, 814. 
 
 receiver may contest payment of ultra vires claims, 272-274, 814. 
 
 contracts, effects of performance, 275-281. 
 
 when other contracting party estopped to plead, 276. 
 
 who cannot plead, 281-283. 
 
 when directors cannot plead to actions for an accounting, 629. 
 
 legal effect, qualification to general rule, 284-286. 
 
 apparently within scope of corporate powers, 284-286. 
 
 negotiable instruments, 285. 
 
 purchase of property, 286. 
 
 money borrowed in excess of statutory limit, 286. 
 
 when illegal, 287-292. 
 
 contra bonos mores, 293. ■ 
 
 prohibited by statute, 294-303. See Statutory Prohibitions. 
 
 excessive loans by national banks, 301. 
 
 conveyances of real or personal property to corporations, 303. . 
 
 against public policy, 304. 
 
 transfer of franchises, 305. 
 
 traffic arrangements, 307.
 
 INDEX. 969 
 
 References are to the Section!. 
 
 ULTRA VIRES ACTS— (continued). 
 
 pooling arrangements, 309. 
 
 liability of corporations to account for benefits received under ultra 
 vires contracts, 310-313. 
 
 specific chattels to be returned, 311. 
 
 money borrowed, 311. 
 
 liability of other party to account for benefits received, 314. 
 
 doctrines of, how applicable to the torts of corporations, 336-338. 
 
 liability of officers to the corporation for, 622, 623. 
 
 shareholders may restrain directors from committing, 555, 556, 687. 
 
 release of shareholders when, 745. 
 
 liability of officers making an ultra vires contract to the other party, 
 754. 
 UNITED STATES, suits against, 462. 
 UNIVEKSITAS, meaning in Roman law, 1. 
 UNPAID STOCK, part of trust fund for creditors, 655-661. 
 UNSUBSCRIBED STOCK, power of directors to place, 224. 
 USAGES OF BANKS, 195. 
 USURY, 298. 
 
 VALID ACT, definition of, 118, note. 
 
 VERBAL DECLARATIONS, effects of on subscriptions, 97, note, 521. 
 
 VOID STOCK, 541. 
 
 VOTING FOR CORPORATE OFFICERS, 577-581. 
 
 transfer books evidence of right, 578. 
 
 by proxy, 579. 
 
 cumulative voting, 577. 
 
 corporation cannot vote on shares held by it, 136. 
 
 right to, as between pledgor and pledgee of shares, 794. 
 
 agreements between shareholders as to, 580, 788, 790. 
 VOTING TRUSTS, 580, 788, 790. 
 
 WARRANTY: 
 
 implied warranties by corporations, 249, note. 
 
 covenants by banks, 162. 
 
 implied warranty by vendor of shares, 793. 
 
 implied, of authority to act, 75, 76, 752-754. 
 WATER, surface, railroad company liable for turning back, 173. 
 WINDING-UP: 
 
 rights of shareholders on, 608, 609. 
 
 relations of shareholders to creditors on, 750. 
 
 rights of shareholders holding shares more fully paid up, 787. 
 
 rights of preferred shareholders, 786. See Dissolution. 
 WITHDRAWAL OF PRELIMINARY DEPOSITS, 98.


 
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