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Story Professor of Law in Harvard University







The first edition of Cases on Corporations was published seven
years ago. In this second edition there are large changes.

The following subjects are considered at much greater length:
Unincorporated Associations; Issues of Stock at a Discount or for
Overvalued Property; Offenses Against the Sherman Anti-Trust
Act; Reorganizations of Corporations.

The more important cases decided since 1909 are set forth, or
cited in the notes.

There are numerous notes by the editor.

E. H. W.

Langdell Hall, Cambridge,
April, 1916.




The Formation of a Corporation:

A. Necessity of Authority from the State 1

B. Grant of Authority from the State 9


Distinguishing a Corporation from an Unincorporated
Association :

A. Where there is no Legislative Enactment 31

B. Where there is some Legislative Enactment 51


Under what, if any, Circumstances the Corporate Fic-




Subscriptions to Stock of a Corporation to be formed 173


Conveyances to Promoters, and Contracts with Pro-


Issues of Stock at a Discount or for Overvalued Prop-
erty 200


Transactions between Promoters and the Corporation

Promoted 334




Extent of the Powers:

Section 1. In General 380

Section 2. To enter into a Partnership 405

Section 3. To hold Stock in other Corporations 409

Section 4. To hold their own Stock 439

The Exercise of the Powers:

Section 1. In whom the Powers are vested 464

Section 2. Mode of exercising the Powers 487


In General 500

Offenses under the Sherman Anti-Trust Act . . . .514



Collateral Attack upon the Formation of a Corporation.

Herein of the Expression "De Facto Corporation":

Section 1. WTiere there have been Dealings between the Parties on

a Corporate Basis 598

Section 2. Where there have been no DeaUngs between the Parties

on a Corporate Basis 638


Collateral Attack upon the Powers of a Corporation.
Herein of the Expression "Ultra Vires":
Section 1. The English Authorities 655


Section 2. United States Authorities:

A. Torts 677

B. Transfers of Property Rights 686

C. Contracts 712

D. Quasi Contracts 740

E. Liability of Human Beings 743

F. Setting aside an Ultra Vires Transaction .... 753


Directors and other Officers:

A. Unauthorized Action by de jure Officers 761

B. De Facto Officers • 764

C. Liability of Directors for Action or Inaction 769

D. Contracts with the Corporation 782

E. Purchases of Corporate Property or Obhgations 793

F. Relation to Stockholders 798

G. Dealings with Third Persons 818

H. Executive Officers 821

Section 1. Rights of a Stockholder even when he is in the Minority:

A. To inspect the Corporate Books and Records . . . 827

B. To Dividends 832

C. To subscribe to New Issues of Stock 843

D. To enjoin any Act which the Corporation is unautho-

rized to do, or which it was unauthorized to do
when Plaintiff became a Stockholder 850

E. To prevent and redress an Appropriation of Corpo-

rate Assets by the Majority 857

F. To compel the Corporation to assert Valid Claims,

and to resist InvaUd Claims 859

G. Procedure in a Suit by Stockholder to assert a Cor-

porate Right 873

H. Rights of Persons who became Stockholders at a time

subsequent to the Commission of the Alleged Wrong 881

Section 2. Transfer of Shares 888

Section 3. Voting Trusts 912


Creditors 925


Issues of Stock by a Corporation with Impaired Capital . 937


Right of Stockholders to prevent a Sale, or Lease, of

Corporate Assets 947

Rights of Creditors as affected by Reorganizations . 982


Certificate of Incorporation of United States Steel

Corporation 1007

By-Laws 1013

Minutes of First Meeting of Incorporators .... 1019

Minutes of First Meeting of Directors 1022

Listing of Securities 1026

Syndicate Agreement 1030

Voting Trust Agreement 1037

Certificate of Common Stock 1042

Certificate of Preferred Stock 1044

Bond 1046

Coupon 1048

Voting Trust Certificate 1050


Andrews Bros. Co. v. Youngstown

Coke Co 74

Ashbury Railway Carriage and Iron

Co. V. Riche 657

Athol Music Hall Company v.

Carey 173

Attorney-General for Canada v.

Standard Trust Co 337

Automatic Self-Cleansing Filter

Co. V. Cuninghame .... 477
Ayers v. The South Australian

Banking Co 664

Bahia & San Francisco Ry. Co.,

in r-e 901

Baldwin v. Canfield 488

Bank v. Trebein 125

Bank of Topeka v. Eaton ... 45
Bank of United States v. Deveaux . 108
Baroness Wenlock v. River Dee

Co 668

Bartholomew v. Derby Rubber

Co 961

Bates V. Coronado Beach Co. . . 407
Bath Gas Light Co. v. Claffy . . 731
Boston & Albany R.R. Co. v. Rich-
ardson ... 902

Boyce v. Towsontown Station . . 600
Brewer v. Boston Theatre . . . 857

Brewer v. The State 645

Brightman v. Bates ..... 921
British South Africa Co. v. De
Beers Consolidated Mines, Ltd. . 655

Broderip v. Salomon 148

Brown v. Winnisimmet Co. . . 393
Bryant's Pond Steam Mill .Co. v.

Felt 176

Burroughs v. North Carolina R.R.

Co .841

Bushnell v. Consolidated Ice Ma-
chine Co 603

Butler Paper Co. v. Cleveland . . 25

California Bank v. Kennedy . .415
California Bank v. Kennedy . . 694
Callender v. Painesville R.R. Co. . 598

Carmichael's Case 179

Central Railroad Company v. Col-
lins 410

Central R.R. Co. v. Smith . . .682
Central Transportation Co. v.

Pullman's Car Co 728

Chambers v. McKee & Bros. . . 859

Charlestown Boot Co. v. Duns-
more 483

Chestnut Hill Turnpike Co. v.

Rutter 500

Chicago City Railway Co. v. Aller-

ton . . ' 466

Citizens National Bank v. Apple-
ton . . 740

Clapp V. Peterson 446

Clews V. Friedman . . . . . . 897

Coffin V. Ransdell 230

Coit V. Gold Amalgamating Co. . 242

Cole V. Millerton Iron Co. . . . 989
Commercial National Bank v.

Weinhard 468

Continental Securities Co. v. Bel-
mont 875

Continental Tyre & Rubber Co.,

Ltd., V. Daimler Co., Ltd. . . 157

Cook V. Burlington 90

Coppin V. Greenlees & Ransom

Co 442

Cottentin v. Meyer . . . . . 636

Cotton V. Imperial Corporation . 970

CroweUf. Jackson 798

Davenport v. Dows 873

Davenport v. Peoria Insurance

Co 487

David Payne & Co., Ltd., in re . . 666

Davis V. Las Ovas Co 346

Davis V. Stevens 628

Denny Hotel Co. v. Schram . . 409
Denver Fire Insurance Co. v. Mc-
Clelland 720

Dodge V. Woolsey 868

Douglass V. Ireland 265

Downing v. Mount Washington

Road Company 380

Dunphy v. Traveller Newspaper

Association 874

Dupee V. Boston Water Power Co. 449

East Birmingham Land Co. v.

Dennis 890

East Norway Lake Church v.

Froislie 646

Easton National Bank v. Ameri-
can Brick Co 300

Eliot V. Freeman 48

Ellis V. Marshall 17

Elyton Land Co. v. Birmingham
Co 255


Elyton Land Co. v. Dowdell . . 947
Erianger v. New Sombrero Phos-
phate Co 334

Ewing V. Composite Brake Shoe
Co 982

Finley Shoe & Leather Co. v. Kurtz 491
First National Bank v. National

Exchange Bank 423

Ford V. Easthampton Rubber

Thread Co 837

Fort Payne Rolling Mill v. Hill . 785

Foss V. Harbottle 862

Franklin Bridge Co. v. Wood . . 9
Franklin National Bank v. White-
head 402

Furnivall v. Coombes .... 670

Gallagher v. Germania Brewing Co. 98
General Rubber Co. v. Benedict . 809

Gilbert v. Finch 779

Gillett V. Chicago Title & Trust

Co 276

Goodnow V. American Writing

Paper Co 832

Great Southern Fire Proof Hotel

Co. V. Jones 78

Groel V. United Electric Company 866
Guarantee Trust Co. v. Dilworth

Coal Co 222

Guckert f . Hacke 653

Hall's Safe Co. v. Herring-Hall-
Marvin Safe Co 145

Handley v. Stutz 937

Harris v. Gas Co 756

Heckman's Estate 191

Henry v. Babcock & Wilson Co. . 829

Herron Co. v. Shaw 270

Hibbs V. Brown 63

Hill V. Nisbet 429

Hodges V. New England Screw Co. 777
Hoisting Machinery Co. v. Goeller

Iron Works 492

Hong Kong & China Gas Co., Ltd.,

V. Glen 216

Hospes V. Northwestern Mfg. &

Car Co 292

Hubbard v. Worcester Art Mu-
seum 704

Hun V. Cary 772

Hutchinson v. Green 473

Imperial Building Co. v. Chicago
Open Board of Trade . . .618

Indianapolis Fiu-nace Co. v. Herk-
imer 649

Irvine v. New York Edison Co. . 984

Jackson v. Hooper 100

Jacobus V. Jamestown Mantel Co. 821
Janney v. Minneapolis Industrial
Exposition 793

John Foster & Sons, Ltd., v. Com-
missioners of Inland Revenue . 94
Joint Stock Discount Co. v. Brown 416
Jourdan v. Long Island R.R. Co. 494

Kelner v. Baxter 187

Kerfoot v. Farmers' Bank . . . 689

Kraft V. Griffon Co 943

Kuser v. Wright 764

Lake Superior Iron Co. v. Drexel . 250

Lantz V. Moeller 290

Linn Timber Co. v. United States . 137
Liverpool Insurance Co. v. Massa-
chusetts 51

Luthy V. Ream 912

Malone v. Lancaster Gas-Light Co. 388

Marvin v. Anderson 451

Mason v. Pewabic Mining Co. . . 955
MacGregor v. Dover & Deal Ry.

Co 672

McArthur v. Times Printing Co. . 184

McClure v. Law 818

McDonald v. Dewey 908

McDonald, Receiver, v. Williams . 932

McGraw, Matter of 699

McNab V. McNab & Harlin Mfg.

Co 835

McNeil V. Tenth National Bank . 894
Meyer v. Mining & Milling Co. . 303
Middlesex Husbandmen v. Davis . 20
Minnesota Gas-Light Co. v. Dens-
low 605

Mobile & Ohio R.R. Co. v. Nicho-
las 917

Mobile Improvement Co. v. Gass . 782
Mokelumne Co. v. Woodbury . . 28

Monk V. Barnett 237

Monument National Bank v. Globe

Works 712

Moore & Handley Co. v. Towers

Hardware Co 140

Morgan v. Lewis 456

Munson v. Syracuse R.R. Co. . . 784

National Bank v. Matthews . . 686
National Home Building Ass'n v.

Home Savings Bank . . . .714

Natusch V. Irving 850

New Bedford Railroad v. Old Col-
ony Railroad 983

New England Trust Co. v. Abbott 905
New York Cable Co. v. Mayor, etc.,

of New York 651

Nims V. Mount Hermon Boys'

School 677

North Milwaukee Town Site No. 2

V. Bishop 464

Northern Pacific Railway Co. v.

Boyd 995

Northern Securities Co. i). United

States 532



Northwestern Transportation Co.
V. Beatty 787

Oakes v. Turquand 930

O'Conner Mining Co. v. Coosa Fur-
nace Co 791

Old Dominion Copper Co. v. Bige-
low 349

Old Dominion Copper Co. v. Lewi-
sohn . . . . 341

Ooregum Gold Mining Co., Ltd.,
V. Roper 201

Parker v. Bethel Hotel Co. . . . 84

Parsons v. Joseph 885

Pell's Case 200

Penfield v. Dawson Town & Gas

Co 244

Pennell v. Lothrop 183

Pennsylvania Transportation Com-
pany's Appeal 992

Penobscot Boom Corporation v.

Lamson 14

People V. Coleman 59

People ex rel. Manice v. Powell . . 484
People V. North River Sugar Refin-
ing Co 128

People V. Pullman Car Co. . . .390
People V. Pullman Car Co. . . . 417
People V. Rochester Railway &

Light Co 510

People V. Stockton R.R. Co. . . 24
People ex rel. Tiffany & Co. v.

Campbell 382

Phillips V. Blatchford .... 33
Phillips V. Providence Steam En-
gine Co 951

Pollitz V. Gould 881

Provident Bank & Trust Co. v.
Saxon 631

Reed v. The Richmond Street R.R.

Co 21

Richards v. Wiener Co 454

Richardson v. Williamson . . . 673
Richardson Fueling Co. v. Sey-
mour 611

Riker & Son Co. r. L'nited Drug

Co .963

Royal British Bank v. Turquand . 761
Russell V. Temple 82

St. Louis Railroad v. Terre Haute

Railroad 753

Salomon v. Salomon & Co., Ltd. . 148

Sanford v. McArthur 743

Sawyer v. Hoag 925

Schwab V. Potter Co 974

Scovill V. Thayer 220

Seaton v. Grimm 614

See V. Heppenheimer 278

Seeberger v. McCormick . . . 747
Seymour v. Spring Forest Ceme-
tery Association 796

Sherman v. Fitch 498

Small V. Minneapolis Electro-
Matrix Co 958

Smith V. Hurd 805

Snider's Sons' Co. v. Troy . . .606
Society Rerun v. Cleveland . . . 638
Southworth v. Morgan .... 225

Spering's Appeal 769

Standard Oil Co. v. United States . 552
State V. Atlantic Citv and Shore

R.R. Co. . . . ' 431

State V. Bank of Hemingford . . 726

State V. Dawson 15

State V. Eastern Coal Co. . . . 506
State V. Missouri Pacific Ry. Co. . 418
Stevens v. Rutland & Burlington

R.R. Co 852

Stokes V. Continental Trust Co. . 843

Stoutimore v. Clark 616

Strong V. Repide 800

Swift & Co. V. United States . . 547

Tappan v. Bailey 31

Thomas v. Dakin 55

Timmis, Matter of 966

Tisdale v. Harris 888

Trevor v. Whitworth 439

United States v. American Tobacco

Co 574

United States v. E. C. Knight Co. . 516
United States v. Freight Associa-
tion 520

United States v. John Kelso Co. . 503
United States v. Milwaukee Re-
frigerator Transit Co 116

United States v. Winslow . . . 595

U.S. Brewing Co.r. Dolese . . . 384

U.S. Express Co. v. Bedbury . . 613

U.S. Steel Corporation v. Hodge . 786

Varney v. Baker 827

Vent V. Duluth Coffee Co. . . . 462

Wathen v. Jackson Oil Co. . . . 878
Weatherford Ry. Co. v. Granger . 192
Whittenton Mills v. Upton . . . 405
Wilder Mfg. Co. v. Corn Products

Co 622

Williams v. Johnson 397

Williams v. Milton 36

Winget V. Quincy Building Ass'n . 615

Wood V. Whelen 476

Wragg, Ltd., in re 213




A . Necessity of Authority from the State.

Book I, pp. 468, 469, 470, 472, 473.

The honor of originally inventing these political constitutions en-
tirely belongs to the Romans. They were introduced, as Plutarch
says, by Numa; who finding, upon his accession, the city torn to
pieces by the two rival factions of Sabines and Romans, thought it
a prudent and politic measure to subdivide these two into many
smaller ones, by instituting separate societies of every manual trade
and profession. They were afterwards much considered by the civil
law, in which they were called universitates as forming one whole out
of many individuals; or collegia, from being gathered together: they
were adopted also by the canon law, for the maintenance of ec-
clesiastical discipline; and from them our spiritual corporations ar6
derived. But our laws have considerably refined and improved upon
the invention, according to the usual genius of the English nation:
particularly with regard to sole corporations, consisting of one per-
son only, of which the Roman lawyers had no notion; their maxim
being that "tres faciunt collegium.'^ Though they held, that if a
corporation, originally consisting of three persons, be reduced to one,
"si universitas ad unum redit," it may still subsist as a corporation,
"et stet nomen universitatis."

Before we proceed to treat of the several incidents of corporations,
as regarded by the laws of England, let us first take a view of the
several sorts of them; and then we shall be better enabled to appre-
hend their respective qualities.

The first division of corporations is into aggregate and sole. Cor-
porations aggregate consist of many persons united together into one
society, and are kept up by a perpetual succession of members, so


as to continue forever: of which kind are the mayor and commonalty
of a city, the head and fellows of a college, the dean and chapter of
a cathedral church. Corporations sole consist of one person only and
his successors, in some particular station, who are incorporated by
law, in order to give them some legal capacities and advantages,
particularly that of perpetuity which in their natural persons they
could not have had. In this sense the king is a sole corporation; so is
a bishop; so are some deans, and prebendaries, distinct from their
several chapters; and so is every parson and vicar. And the neces-
sity, or at least use, of this institution will be very apparent, if we
consider the case of a parson of a church. At the original endow-
ment of parish churches, the freehold of the church, the churchyard,
the parsonage house, the glebe, and the tithes of the parish, were
vested in the then parson by the bounty of the donor, as a temporal
recompense to him for his spiritual care of the inhabitants, and with
intent that the same emoluments should ever afterwards continue
as a recompense for the same care. But how was this to be effected?
The freehold was vested in the parson; and, if we suppose it vested
in his natural capacity, on his death it might descend to his heir, and
would be liable to his debts and encumbrances: or at best, the heir
might be compellable, at some trouble and expense, to convey these
rights to the succeeding incumbent. The law therefore has wisely
ordained, that the parson, quatenus parson, shall never die, any more
than the king; by making him and his successors a corporation. By
which means all the original rights of the parsonage are preserved
entire to the successor; for the present incumbent, and his predeces-
sor who lived seven centuries ago, are in law one and the same per-
son; and what was given to the one was given to the other also. . . .

Corporations, by the civil law, seem to have been created by the
mere act, and voluntary association of their members: provided such
convention was not contrary to law, for then it was ilUcitum col-
legium. It does not appear that the prince's consent was necessary
to be actually given to the foundation of them; but merely that the
original founders of these voluntary and friendly societies, for they
were little more than such, should not establish any meetings in
opposition to the laws of the state.

But, with us in England, the king's consent is absolutely necessary
to the erection of any corporation, either impliedly or expressly
given. The king's implied consent is to be found in corporations
which exist by force of the common law, to which our former kings
are supposed to have given their concurrence; common law being
nothing else but custom, arising from the universal agreement of the
whole community. Of this sort are the king himself, all bishops,
parsons, vicars, churchwardens, and some others; who by common
law have ever been held, as far as books can shew us, to have been
corporations, virtute officii: and this incorporation is so inseparably


annexed to their offices, that we cannot frame a complete legal idea
of any of these persons, but we must also have an idea of a corpora-
tion, capable to transmit liis rights to his successors at the same time.
Another method of implication, whereby the Icing's consent is pre-
sumed, is as to all corporations by prescription, such as the city of
London, and many others, which have existed as corporations, time
whereof the memory of man runneth not to the contrary ; and there-
fore are looked upon in law to be well created. For though the mem-
bers thereof can shew no legal charter of incorporation, yet in cases of
such high antiquity the law presumes there once was one ; and that
by the variety of accidents which a length of time may produce, the
charter is lost or destroyed. The methods by which the king's con-
sent is expressly given are either by act of parliament or charter.
By act of parliament, of which the royal assent is a necessary in-
gredient, corporations may undoubtedly be created : but it is observ-
able, that, till of late years, most of these statutes which are usually
cited as having created corporations do either confirm such as have
been before created by the king, as in the case of the College of Physi-
cians, erected by charter 10 Hen. VIII, which charter was after-
wards confirmed in parliament; or they permit the king to erect a
corporation in futuro with such and such powers, as is the case of
the Bank of England, and the society of the British Fishery. So that
the immediate creative act was usually performed by the king alone,
in virtue of his royal prerogative.

All the other methods, therefore, whereby corporations exist, by
common law, by prescription, and by act of parliament, are for the
most part reducible to this of the king's letters patent, or charter of

Note. — From very early times the courts recognized some cor-
porations as existing bj^ force of the common law alone. See Y.B.
11 Hen. IV, 2; Y.B. 37 Hen. VI, 30; Y.B. 8 Edw. IV, 6; Y.B. 20 Edw.
IV, 12; Y.B. 14 Hen. VIII, 2; Co. Lit. 3a; Finch's Law, c. xvii;
Keilw. 32a; 2 P. Wms. 125; 4 Vin. Abr. 525. There is also evidence
tending to show that, in early times, the Court of Exchequer, in
revenue matters, allowed unchartered bodies of men to be sued, and
even to sue, as a unit. Madox, Firma Burgi, 85, 91.

"Anciently a Gild either Religious or Secular could not legally
be set-up without the Kings Licence. If any Persons erected a Gild
without Warrant, that is, without the Kings leave, it was a Trespass,
and they were lyable to be punished for it. For example. In the
Twenty-sixth year of K. Henry II (1179), several Gilds in London
were amerced to the Crown as Adulterine, that is, as set-up without
Warrant from the King." Madox, Firma Burgi, 26.

In De Li})crtates, Lib. ii, c. 24, fol. 56, Bracton puts the case that
the king should grant some liberty "ut si alicui universitati, sicut


civibus vel burgensibus vel aliquibus alis q. mercatum habeant." It
appears, from the chapter as a whole, that he considered this Uberty,
or franchise, together with various other Uberties, to be under the
control of the King {"in manu sua") ; and that private persons
might enjoy it, " sed de gratia ipsuis Regis spedali."

Y.B. 49 Edw. Ill, 3 (1375). A devised lands to B for life, re-
mainder "a deux des meliour homes de la Guild de la Fraternity de
Whitawyers en Londres" forever. A died without heirs, and on the
death of B the king claimed the land by escheat. The court held
that the devise (after B's life estate) was void. Belknap expressed
his opinion that, even if the devise had been to "the Fraternity," it
would not have been good, because the commonalty of London can-
not by their own act create a community within the community
without the charter of the king. A " Fraternity " is not a term known
to the law, nor can a community exist without a charter. ("Le
commen de Londres ne poet my d'eux mesme faire comen deins cest
comen sans chartr le Roy. . . . Fraternity n'est my terine de ley, ne
comen ne putt my estre sans chre") Knyvet, Chancellor, with greater
precision of thought, said that this commonalty of the gild, which is
not confirmed by the king, could not be adjudged a body capable of
taking an estate by purchase. {"II ne poet pas estre p. la ley q. c.
cominalty de la Guilde, q. n'est affirme p. chre le Roy, purroit etre adjudgee
un corps de purchace estate.")

Y.B. 20 Edw. IV, 2 (1480). B, alderman of the X gild, brought
debt against C, and counted upon an obligation made to A, some-
time alderman of the gild, and his successors. Objection that the
plaintiff had not shown how the corporation was formed. Littleton
took a distinction between a "corporation of common right" and
a gild. The judges were all of opinion that, if suit could be main-
tained, it would be by the executor of A. See also Y.B. 22 Edw.
IV, 34,

In Y.B. 14 Hen. VIII, 2 (1522), Fineux remarked: "There is a
corporation by the Pope alone, as those mendicant brothers who
cannot purchase." But Brooke, writing after the Reformation, laid
it down that if the Pope purports to create a corporation, "ideo ceo
est usurpation et voyd a cest jour etfuit imperpetuum." 1 Brooke, Abr.
Corp. 33. See also Dyer, 81, pi. 64.

In Terrett v. Taylor, 9 Cranch, 43, Story, J., said (p. 46): "At a
very early period the religious establishment of England seems to
have been adopted in the colony of Virginia; and, of course, the

Online Librarytiesonlaw00Select cases and other authorities on the law of private corporations → online text (page 1 of 123)