William M. Lacy James Kent.

Commentaries on American law, Volume 2 online

. (page 45 of 108)
Online LibraryWilliam M. Lacy James KentCommentaries on American law, Volume 2 → online text (page 45 of 108)
Font size
QR-code for this ebook

ton r. Ackley, 8 Cush. 93, the only remedy against stockholders of a manu-
facturing company who are jointly and severally liable is either by way of
attachment against their persons or property or execution against the cor-
poration or by bill in equity, they cannot bo made liable at law on a con-
tract made with the corporation. See, also, Harris «. Dorchester, 23 Pick.
112. In Harger v, M'Culloch, 2 Den. 119, it has been held that where
stockholdersare jointly and severally liable they are principal debtors and
not sureties, and the creditors' extension of time to one does not release the
other. The person whose name stands on the books of the corporation as
stockholder is liable though he has transferred it, and he cannot set up his
defence showing that he holds it as trustee for the purchaser. Mann r. Car-


by Google


incorportioDB, by a (danse, now' usnallj inserted in the acts of
incorporation, that *^it shall be lawfnl for the legislature, at any
time thereafter, to alter, modify, or repeal the act" (a). With
this general view of the rise and progress of corporations, I shall
proceed to a more particular detail of the general principles of
law applicable to the subject (6).


(a) In MaasacfaiisettB there ia a standing statute provision, that every act
of incorporation, which shonid be thereafter passed, shall at all times be
sobject to amendment, alteration, or repeal, at the pleasure of t^e legisla-
ture, nnleas there should be in the same act an express provision to the
ooiitniiy. Act of 1830. Revised Statutes of 1835.

Xb) "Diere has been a disposition in some of the states, to change, in an
essential degree, the character of incorporated companies, by making the
members personally responsible in certain events, and to a qualified extent,
for the debts of the company. This is intended as a check to improvident
oondact and abase, and to add to the general secnrity of creditors; and the
policy has been porsned to a moderate and reasonable degree only, in Rhode
Island, New York, Maryland, and South Carolina. But in Massachusetts,
by a series of statutes, passed in 1809. 1818, 1822, and 1827, an unlimited
personal responsibility was imposed upon the members of manufacturing
corporations, equally as in the case of commercial partnerships. The wisdom
of the policy haisbeen strongly questioned; (Amer, Jurist^ vol. il. p. 92, art.
6. IbitL vol. iv. p. 307;) and, on the other hand, it has been supported by
high authority; (Parker, Ch. J., 17 Mass. Rep. 334;^ and whether it be well
or ill founded, it is admirably well calculated to cure all undue avidity for
charters of incorporation. This unlimited personal responsibility was re-
strained by statute, in 1828, and the responsibility applied only in the case
of banks to the stockholders at the time the charter expires. They are made
liable in their individual capacities, for the payment and redemption of all

rie. 2 Barb. 294, see, also, Bank of Holyoke v. Bumham. 11 Cnsh. 183.
Where there is a provision that the directors shall be liable, for excess debts,
in their private and individual capacity, they are liable jointly and nor sev-
erally. Banks r. J)arden, 18 Ga. 318. For their position under 1 N. Y.
Rev. Stat. 602, which provides that they shall be liable in case the debts ex-
ceed three times its paid stock, see Tallmadge r. Fishkill Iron Co., 4 Barb.

382. As to the nature of an action to enforce the personal liability of a cor-
poration imposed by its charter upon its officers for failing to perform a duty,
see Merchants' Bank of New Haven v. Bliss, 1 Rob. 391, and see wntra
Neal t;. Moultrie, 12 Oa. 104. And as to jurisdiction of the courts of one
state over those of another to enforce such liability. Bird v. Hayden. 1 Rob.

383. As to the liability of members being limited to those who were such
at the time of action brought and not including the estates of prior deceased
members. Child v. Coffin, 17 Mass. 64; Middletown Bank v. Magill, 5 Conn.
57; Marcy r. Scott, 17 Mass. 330. In Moss v. Oakley, 2 Hill, 265; Judson
r. Rossle Galena Co., 9 Paige, 598; Chesley v. Pierce, 32 N. H. 388, it was
held that only those who were stockholders at the time the contract was
made, »nd not those who were stockholders at the time the action was
broo^t, are liable upon the contract. But see, under the New York Banking
Laws, Case of Empire City Bank, 8 Abb. Pr. 192; and under the New York
Manufacturing Companies Acts, 1811, Cushmau r. Sheppard, 4 Barb. 113,
were the contrary is held. See further Curtis v, Harlow, 12 Mete. 3. The
liabilitj does not extend to unauthorized acts of those who exceed the limits
of the powers. Kearney v. Buttles, 1 Ohio St. 362.

By the common law corporations have power to take property by devise.
Be MeOraw's Estate, 19 N. Y. S. R. 392.



by Google


[ * 273] * IL Of the various kinds of corporations^ and how
Corporations are divided into aggregcUe and sole (a). A cor-
poration sole consists of a single person, who is made a body cor-
porate and politic, in order to give him some legal oapaeitiee and
advantages, and especially that of perpetuity, which, as a natural
person, he could not have. A bishop, dean, parson, and vicar, are
given in the English books as instances of sole corporations; and
tbey and their successors in perpetuity take the corporate pro*
)>erty and privil^es; and the word successors is generally as neoes-
Hary for the succession of property in a corporation sole, as the
word heirs is to create an estate of inheritance in a private indi-
vidual (6). A fee will pass to a corporation agg^gate, without
the word successors in the grant, because it is a body, which, in
its nature, is perpetual; but, as a general rule, a fee will not pass
to a corporation sole, without the word aoccessors, and it will coi^
tinue for the life only of. the individual clothed with the oorpor-

outstanding bills. This provision was oon tinned by the Masaachnsetts Re>
vised Statntes of 1835, and it has been essentially adopted by statutf* in
New Hampshire in 1837, in respect to maniifactnring corporations. Persona
holding stock in corporations as tnuAees for others, are specially exempted from
personal responsibility. Act of Mam. 1838. In Percy v. Mil lander, 20 MaiiiM*9
Rep. 68. Directors of a bank are held personally i^sponsible to the stock-
holders for gross negligence, or wanton disregard of duty. See note 2, aidt.

In England, tbe statute of 4 and 5 William IV., ch. 94, reciting 6 Geo. IV..
ch. 91, by which the king was enabled to render the members of any cor-
poration thereafter created, individually liable for its oontracta, enacted that
the king, after three months' notice in the gazette of his intention, might,
by letters patent, grant to any company, or association, for any trading, cfaai^
i table, literary, or other purpose, corporate powers, subject to such conditions
for the prevention of abuses in the management of their affiftira, the security
of creditors, and the protection of the public, as the king may see fit to im-
pose; but no execution upon any judgment or decree to issue without special
leave of the court, after notice of the persons to be charged, nor alter the ex-
piration of three years after such person shall have ceased to have been a
member of the company. In New York, not only mannfaioturing incorpora-
tions, under the general act of March 22d. 1811, ch. 67, but in several of the
charters of fire insurance companies, there is a provision, that in respect to
debts of the company contracted before the corporation expiree, the peraooa
c^imprsing the corporation at the time of its dissolution, shall be individually
responsible to the extent of their respective shares in the funds of the com-
)Miny. By this means a stockholder, according to some recent decisions, in-
curs the risk, not only of losing the amount of stock subscribed, but to be
liable for an equal sum, provided the debts due at the time of the dissolntion
require it. See Briggs v. Penniman, 1 Bopkin^s Bep. 3U0, S. C. 8 Cbmeii**^.
:%7; and see tn/ra, p. 312. The tendency of legislation and of judicial de-
cisions in the several states, is to increase the personal responsibility of stock-
holders in the various private corporate institutions, and to give them mora
and more the character of partnerships, with some of the powers and privi-
leges of corporations.

(a) Co, LUt. 8, b, 250, a. (6) Ibid. 8, b. 9, a.



by Google


ate charaeier (a). There are very few points of corporation law
applicable to a corporation sole. Tbej cannot, according to the
English law, take personal property in snccession, and their cor-
porate capacity, in that respect, is confined to real pro-
perty (&). The corporations generally in * use with ns, [ * 274 ]
are aggpregate, or the union of the two or more indiTidn-
als in one body politic, with a capacity of succession and perpe-
tuity. Besides the proper aggregate corporations, the inhabi-
tants of any district, as counties, towns, and school districts, in-
corporated by statute, with only particular powers, are sometimes
called quiui corporations.' No private action for neglect of cor-
porate duty, unless given by statute, lies against them, as such a
corporation. Having no corporate fund, each inhabitant is said
to be liable to satisfy the judgment, if the statute gives a suit
against such a community (c).

Another division of corporations, by the English law, is into ec-
elest'astical and lay. The former are those of which the members
are spiritual persons, and the object of the institution is also
spiritual. With us, they are called religious corporations. This
is the description given to them in the statutes of New York,
Ohio, and other states, providing generally for the incorporation
of religious societies (d), in an easy and popular manner, and for

(rt) Co. Lift. 94, b., and notes 46 and 47, to Go. Litt. lib. 1. Viner. tit. JSW-
tale, L.

(6) 1 Kyd on Corp. 76, 77. do. LiU. 46, b. But, by statute, a corporation
snle may be enabled to take personal as well as real property by snccession;
and a treasurer or collector, for instance, is sometimes created a corporation
sole, or qua»i corporation, for the purpose of taking bonds and other personal
property to him in his official character, and of transmitting the same to his

(c) Rnsaell v. The Men of Devon, 2 Term Rep. 667. Riddle v. Proprietors
of Locks, &c., on Merrimack River, 7 Mass. Rep. 187, Parsons, Ch. J. Mer-
chant^ Bank v. Cook, 4 Pick. Rep. 414. Adams v. Wiscasset Bank, 1 Oreen-
leaf '« Repi 361 . In the case of the Attorney General .v. Corporation of Exeter,
(2 Rua9eU*8 Rep. 63,) Lord Eldon held, that if a fee-farm rent >vas charge-
able on the whole of a city, it might be demanded of any one who holds pro-
perty in it, and he would be left to obtain contribution from the other in-

(d) Act of New York, April 5<A, 1813, ch. 60; of Ohio, February 5M, 1819.

* A term applied to those bodies or municipal societies which, though not
vested with the general powers of corporations, are yet recognized, by statute
or immemorial usage, as persons or aggregate corporations, with precise
daties which may be enforced, and privileges which may be maintained, by
fruits at law. They may be considered quntri corporations, with limited
powers, co-extensive with the duties imposed upon them by statute or usage.
bnt restrained from a general use of the authority which belongs to those
metaphysical persons by the common law. Bee Bouvier's Law Dictionary,
▼ol. 2, Quasi Corporations, p. 401.



by Google


the purpose of managing, with more facility and advantage, the
temporalities belonging to the charch or congregation.* Lftj cor-
porations are again divided into eleenujsynary and eivil. An
eleemosynary corporation is a private charity, constitated for the
perpetual distribution of the alms and boanty of the founder. In
this class €ire ranked, hospitals for the relief of poor, sick, and im-
potent persuns, and colleges and academies establiphed for the
promotion of learning and piety, and endowed with property,
by public and private donations (a).^ Civil corporations are

(a) 1 Blacks. Com, 471. 1 JTyd. on Corp, 25—27. 1 Lord Jiaym. 6, 8. 1
Vea. 537. 9 Vea, Jr. 405. 1 Burr. Rep. 200. Lord Holt, in Phillips c. Bory,
cited in 2 Term Rep. 353.

*' In South Carolina, the boards of commiasionere of roads are deemed
quasi corporations. Commissioners, &c., v. McPherson, 1 Speers, 218. In
Mississippi, the trastees of a school, and of the poor are. quasi oorporationa.
Carmicha«^l r. Trustees of School Lands, 3 How. Miss. 84; Governor r.
Gridley, Walk. Miss. 328; and see Trastees of Schools v. Tatman, 13 III. 27.
The saccessors of the officers of snch corporations may sne for a debt dae
their predecessors, and they may also be sued for debts contracted by their
predecessors. Jackson v. Hartwell, 18 Johns. 422; and see also 1 Kyd. 29.

In The Mersey Docks and Harbour Board Trustees r. Gibbs, L. R. 1, H.
L. 93, and The Mersey Docks and H. B. T. v. Penhallow and others, the
principle on which a private person, or a oompany, is liable for damages oc-
casioned by the neglect of its servants was held to apply to corporations en-
trusted by statute to perform certain works, and to receive tolls for their use,
even though such tolls are not applicable to their individual use or that ot
the corporation. See Pamaby v. The Lancaster Canal Company, 11 Ad. &
£. 223. City authorities charged with the duty of keeping roads in repair
are liable for the non-repair of a sidewalk, even though they may have a right
to impose a duty upon the owner of the land adjoining to keep it in repair.
City of Bloomington v. Bay, 42 111. (Freeman) 5a3, 507; The City of Clii-
cago r. Robins, 2 Black. 418; Scammon v. The City of Chicago, 25 111. 424;
Browning v. City of Springfield, 17 111. 143. But if the power is merely con-
ferred, but not positi vely required by law, it is not bound to do so. Peck r,
Village of Bataviu. 32 Barb. 634.

The governor of a state, as the head of the executive department, is a
quasi corporation. Governor «. Allen, 8 Humph. 176. See, further, Van
Kirk V. Clark, 16 Serg. & R. 286; Commissioners v. Gherky, Wright, 493:
People V. Lathrop, 19 How. Pr. 368.

An action at common law does not lie against a town for damages for non-
repair of roads, yet qwisi corporations created by legislature for purposes of
public policy are liable to be indicted for negligence in repairing them. No
action, however, lies unless given by statute. Mower r. Inhabitants of
Leicester, 9 Mass. 247. There is a distinction in this respect between ag-
gregate and quoisi corporations who are by statute invested with particular
powers without their consent; yet, if they have a corporate fund, the dis-
tinction would seem not to apply. Riddle v. Merrimac River Locks, &c,

^ Religions societies are not to be regarded as ecclesiastical corporations in
the sense of the English law, but as civil corporations governed by common
law. Robertson v. Bullions, 11 N. Y. (1 Kern) 243. The same effect which
is given to the decisions oi ecclesiastical courts in England cannot be claimed
for those of a synod, or any ecclesiastical judicatory in this countryi Smii^* r.
Nelson, Id Vt 511. See, also, Watson v. Avery, 2 Bush. 332. They may



by Google


established * for a variety of purposes, and thpy are [ * 275 J
either public or private. Public corporations are such
as are created by the government for political purposes, as coun-
ties, cities, towns, and villages; they are invested with subordi-
nate legislative powers, to be exercised for local purposes con-
nected with the public good, and such powers are subject to the
coQtrol of the legislature of the state (a).' They may also be

^fl) The People v. Morri.% 13 Wendell , 325. They are common in every
Ktate. One of the first acts of the general aRsembly of Connecticnt, in 1639,
was the incorporation of all the towns in the colony, with town privileges
for local parposes, snch as choosing officers and magistrates for holding local
courts, and to provide for durable keeping a registry of deeds and mortgages,
Rod for the maintenance of schools and public worship. The establishment
of towns with corporate powers, as local republics, was the original policy
throughout New England, and it had a durable and benign effect upon the
institutions, and moral and social character of the people. M. De Tocque-
ville, in his De fa Demoeratie en Ameriqne^ tome, 1, 64, 96, appears to have
been very much struck with the institution of New England towns. He
uonstdeied them as small independent republics, in all matters of local con-
make by-laws and rules for preserving order and use ueces.sary force to re-
mave those wilfully offending them. McLain t\ Matlock, 7 Ind. 625; Lee v.
Louisville Pilot Benevolent Association, 2 Bush. 254. A general statute au-
thorizing their formation must be substantially .followed, and its require-
ments complied with, and the facts stated in the certificate. Ferraria v,
Vascsinoelles. 23 111. 456. As to the formal requisites being presumed, see All
Saints' Church v. Lovett, 1 Hall, 191. As to who constitute the corpora-
tion, see Robertson r. Bullions, uln supra. People v. Fulton, 11 N. Y. 94.

For the distinction between ecclesiastical and eleemosynary corporations,
see the Dartmouth College Case, 4 Wheat. 681 ; 1 SharSwood Blackstone, 471.
A ooiporation for religious and charitable purposes, endowed solely by pri-
vate beneficiaries, is a private eleemosynary corporation, although created
by government charter. The Society for the Propagation, &c., v. Town of
New Haven, 8 Wheat. 464. See, further, Vinceunes University v. Indiana,
14 How. 268; Asylum v. Phoenix Bank, 4 Conn. 172. As to how they are
regulated, see Trustees of Phillips Acad<3my v. King, 12 Mass. 546; Dart-
mouth College r. Woodward, 4 Wheat. 660. As to chancery assuming juris-
diction over them. Att. Gen. v. Governors of Foundling Hospital, 2 Ves. jr.
43. As to the power to control them by state legislature. Dart v. Houston,

* Corporations are not public because their object is of a public character.
TtDsman v. Belvidere Delaware R. R. Co., 2 Dutch. 148. See, further, as to
what is a public corporation, Sayre v. Northwestern Turnpike Co., 10 I^igh,
454; University of North Carolina v. Maultsby. 8 Jred. Eq. 257. Trastees of
public schools are. Bush v. Shipman, 4 Scam. 186; Trustees, &c., v. Tatman,
13 HI. 27. Compare State v. Springfield, Ac., 6 Ind. 83. As to a county, see
Mills V. Williams. 11 Ired. I^aw, 558. ^or facts held not sufficient to render
a corporation apublic one. Bank of Alabama ?;. Gibson, 6 Ala. N. S. 814;
State Bank r. Gibbs, 3 McCord, 377; Mahoney v. Bank of Arkansas. 4 Ark.
62U^ State Bank r. Clark, 1 Hawks, 36. A public corporation must have
its rights chartered from the commonwealth in order to carry out the pur-
poses of its organization. Allegheny Co. v. McKeesport Diamond Market,
23 W. N. C. (Pa.) 89. While a private corporation needs no franchise from
the state in order to carry out its business. Pittsburgh's App., 23 W. N. C.



by Google


empowered to take or hold private property for municipal Qees,
and such property is inyested with the security of other private
rights (a). So, corporate franchises attached to public corporatioDs
are legal estates coupled with an interest, and are protected as pri-
vate property. If the foundation be private, the corporation is pri-
vate, however extensive the uses may be to which it is devoted by
the founder, or by the nature of the institution. A bank, created by
the government, for its own uses, and where the stock is exclusively
owned by the government, is a public corporation. So^ a hospital
created and endowed by the government, for general purposes, is
a public^ and not a private charity. But a bank, whose stock is
owned by private persons, is a private corporation, though its ob-
jects and operations partake of a public nature, and though the
government may have become a partner in the association by
sharing with the corporators in the stock (6). The same thii^
niay be said of insurance, canal, bridge, turnpike, and railroad
companies. The uses may, in a certain sense, be called public,
but the corporations are private, equally as if the franchises were
vested in a single person. A hospital founded by a private bene-
factor, is, in point of law, a' private corporation, though dedi-
cated by its charter to general charity. A college, founded and
endowed in the same manner, is a private oharity, though, from
its general and beneficent objects, it may acquire the character
of a public institution (c).^ If the uses of an eleemosynary oor-

cern, and as forming the principle of the life of American liberty, existing at
this day.

{a) These local corporations, as cities and towns, can sne and be sued, and
the judicial reports in this country, and especially in the New Knf^land
states, abound with cases of suits against towns, in their corporate capacity,
for debts and bi*eaches of duty for which they were responsible.

(b) Marshall, Ch; J., U. 8. Bank v. Planters' Hank, 9 Wheaion, 907. It has
even be^n held, that a stale bank, may be considered a private corporation,
though owned entirely by the state.' Bank of South Carolina tr.'Gibbs, 3
M' Cord's Rep. 377.

(c) Dartmouth College v. Woodward, 4 Wheaton, 518. Story, J., Ibid, 668,
669, 697—700. The case of St Mary's Churc*, 7 Serg. <it RawU, 559.

^ A corporation founded by private beneficence, though for objects of gen-
eral welfare, such as the education of young men, is a private and not a public
corporation. If the foundation, even though under the charter of the gov-
ernment, be private, the corporation is private, no matter how extensive the
uses may be to which it is devoted. Dartmouth College r. Woodward, 4 Wheat.
518; Bundle v, Delaware A Raritan Canal, 1 Wall. C. Ct. 275; Bonaparte t.
Camden & Amboy R. R. Co., Bald. 205; Allen v, McKeen, 1 Snmn. 276.

For the distinction between public and private, see People r. Morris, 13
Wend. 325; City of Ix)uisviller. Commonwealth,! Durv.295; Rex p. Bishop
of Ely, 2 Durnf. & E. 290; Bentlev t>. Bishop ot Ely, Fort, 299; and see
Pittsburgh's Appeal, 23 W. N. C. (Pa.) 91 atUe, note 6. The liability of the



by Google


poratioa be for general charity, yet Bach piirpo8es will not of
themselves oonstitnte it a pablic corporation. Every charity which
is eztensixe in its object may, in a certain sense,. be called a
poblio charity. Nor will a mere act of incorporation change a
charity from a private to be a pnblic one. The charter of the
crown, said Lord Hardwicke (a), cannot make a charity
*more or less public, but only more permanent It is [* 276 ]
the eztensiveness of the object that constitutes it a pnb«
lie charity. A charity may be public, though administered by a
private corporation. A devise to the poor of a parish is a public
charity. The charity of almost every hospital and college is
pablie, while the corporations are private. To hold a corpora-
tion to be pablic, because the charity was public, would be to
ooQfoand the popular witn the strictly legal sense of terms, and
to jar with the whole current of decisions since the time of Lord
Coke (6).

In England, corporations are created, and exist, by prescrip-
tion, by royal charter, and by act of parliament. With us, they
are created by authority of the legislature, and not otherwisa
There are, however, several of the corporations now existing in
this country, civil, religious, and eleemosynary, which owed their
origin to the crown, under the colony administration. Those
charters granted prior to the revolution, were upheld either by ex-
press provision in the constitutions of the states, or by general
principles of publif and common law of universal reception; and

(fl) 2 Atk. Rep. 88,

[b) Sntton's Hospital, 19 Co. 23. Lord Hardwicke, 2 Afk. Rep. 87. lA>rd
Holt, in Philips €. Bury, reported at lar^re in 2 Term Rep. 3.'>2. The opinions
ofthe judgefl in Dartmoath College v. Woodward, 4 Wheaton^ 518. All the

Online LibraryWilliam M. Lacy James KentCommentaries on American law, Volume 2 → online text (page 45 of 108)