William M. Lacy James Kent.

Commentaries on American law, Volume 2 online

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was final, and without appeal, because the doctrine is, that the
founder reposes in him entire confidence that he will act justly.
In most cases of eleemosynary establishments, the founders do not
retain this visitatorial power in themselves, but assign or vest it
in favour of some certain specified trustees or governors of the

(a) Aubnrn Academy v. Strong, 1 Hopkins* Ch. Rep. 278.

(b) Rcxu. Bishop of Chester, Str. Rep. 797.

{€) Skinner'8 Rep. 447. 1 Lord Raym. 5 S. C. 2 Tenn Rep. 346.

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* 302 OF THB RIGHTS OP PERSONS. [Part IV.

institntioiL It may even be inferred, from the nature of the
duties to be performed by the corporation or trustees for the pa-
eons interested in the bounty, that the founders or donors of the
charity meant to vest the power of visitation in such trustees.
This was the case with Dartmouth College, according to the

opinion of the Supreme Court of the United SStates, in
[♦302]* the case of Dartmouth College v. Wooduxird (a).

Where governors or trustees are appointed by a charter,
according to the will of the founder, to manage a charity, (as is
usually the case in colleges and hospitals, ) the visitatorial power
is deemed to belong to the trustees in their corporate char-
acter (6).«

The visitors of an incorporated institution are a domestic tri-
bunal, possessing a jurisdiction from which there is no appeal.
It is an ancient and immemorial right given by the common law
to the private founders of charitable corporations, or to those
whom they have nominated and appointed to visit the charities
they called into existence. The jurisdiction is to be exercised
within the bosom of the corporation, and at the place of its cor-
porate existence. Assuming, then, (as is almost universally the
fact in this country,) that the power of visitation of all our pub-
lic charitable corporations is vested by the founders and donors
of the charity, and by the acts of incorporation in the governors
or trustees, who are the assignees- of the rights of the founders,
and stand in their places; it follows, that the trustees of a college
may exercise their visitatorial power in sound discretion, and with-
out being liable to any supervision or control, so far as respects
the government and discipline of the institution, and so far as
they exercise their powers in good faith, and within the limits
of the charter. They may amend and repeal the by-laws and or-
dinances of the corporation, remove its officers, correct abuses
and generally superintend the management of the trust (c).*^

(a) 4 niieaton, 518.

(6) Story, J., iu 4 WTioi/on, 674, 675. 1 Blacht, Cbm. 482. Case of Sut-
ton's Hospital, 10 Co. 33, a. b. Philips r. Bury, supra. Green r. Rutherforth,
1 Ves. 462. Attorney General r. Middleton, 2 Ves. 327.

[c) The visitxitorial power is applied to control and correct abuses, and t »

^ As to the language in the grant or devise being sufficient to give the
power of visitation. Siinderson r. White, 18 Pick. 'S^iH; King v. Bishop of Elv,
1 W. Black. 83; Atty. Genl. v. Talbot, 3 Atk. 662; Nelson v. Gushing, 2 Gush.
519 (Mass.).

** A person appointed visitor has power to examine into and regulate the
conduct ot members who partake of the charity, and iu case of a college cs.-

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Lee. XXXIIL] OP THE RIGHTS OP PERSONS. * 803

This power of yisitation, Lord Hardwicke admits to be a power
salutary to literary institntions; and it arose from the right which
every donor has to dispose, direct, and regolate hid own pro-
perty as he pleases; cujua est dare ejus est disponere,
* Thongh the king, or the state, be the incipient foander, [ * 303 ]
{fundator incipienSj) by means of the charter or act of
incorporation, yet the donor or endower of the institution with
funds, is justly termed the perficient founder, (fundator per-
fieiens;) and it was deemed equitable and just at common law,
that he should exercise a private jurisdiction as founder in his
forum domesticum, over the future management of the trust (a).
But as this visitatorial power was, in its nature, summary and final,
and therefore liable to abuse. Lord Hardwicke was not disposed
to extend it in equity. It is now settled, that the trustees or
governors of a literary or charitable institution, to whom the
visitatorial' power is deemed to vest by the incorporation, are not
placed beyond the reach of the law. As managers of the rev-
enues of the corporation, they are subject to the general super-
intending power of the court of chancery, not as itself po^es-

enforce a due observance of the statutes of the charity, and it is not a power
to revoke the gift, or change its uses, or to divest the rights of the parties to
the bounty. Where the power is vested in trustees, it is an hereditament
founded in property, and there can be no amotion of them from their corpor-
ate capacity, or interference with the jnst exercise of their power, unless it
be reserved by the statutes of the foundation or charter, except in chancery
for abuse of trust. Allen r. McKean, 1 Sumner^ 276.

(a) The case of Sutton's Hospital, 10 Co. 33, a. 2 Ves, 472. The InisUiU'
Hon of Sutton^a Hospital, Lord Coke extolled as a work of charity, surpassing
any foundation *'that ever was in the christian world, or that was ever seen
by the eye of time." (f*ref. to 10 Co.) The founder was Thomas Sutton,
and his object was to establish a hospital for the relief of such poor, aged,
maimed, needy, and impotent military men, and captives in war, and other
persons, as should be deemed fit objects: and to establish dk free school for the
maintenance and education of poor chilidren in good literature; and provi-
sion was likewise to be made for the maintenance of religious instruction
in the hospital, under the superintendence of a grave and learned divine.
His real estate appropriated consisted of the charter house in the county of
Middlesex, and twenty acres of land, yielding, when Ix)rd Coke reiH>rted the
case, an annual income of 3,500/. sterling, and which he said would shortly
be 5,000/. This charitable purpose was aided and carried into eflfect by a
liberal charter from King James; and the most illustrious names in England
were nominated by the founder, and inserted in the charter, as governors:
and the charter received, on discussion, the sanction of all the judges in the
exchequer chamber. Such a case reflected lustre on that age; and, consider-
ing it under all its circumstances, it was pre-eminent for the benevolence of
its object, as well as for the munificence of the donation.

pel or admit a fellow. Coveny's Case, Dyer, 209; Sanderson v. White, IH
Pick. 328; Bracken t>. William and Mary College, 3 Call. 573; Dartmouth
CoUege V. Woodward, 4 W^heat 518, 675.

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* 805 OF THE RIQHTS OF PERSONS. [Part IV.

sing a visitatorial power, or a right to control the
[ * 304] charity, * but as possessing a general jurisdiction in \

all cases of an abuse of trust, to redress grievances, and
suppress frauds. Where a corporation is a mere trustee of a
charity, a court of equity will yet go further; and, though it can-
not appoint or remove a corporator, it will, in a case of gross fraud,
or abuse of trust, take away the trust from the corporation, and
vest it in other hands (a).

There is a marked and very essential difference between civil
and eleemosynary corporations, on this point of visitation. The
power of visitors, strictly speaking, extends only to the latter; for
though, in England, it is said that ecclesiastical corporations are
under the jurisdiction of the bishop as visitor, yet this is not that
visitatorial power of which we haVe been speaking, and which is
discretionary, final, and conclusive. It is a part of the ecclesi-
astical polity of England, and does not apply to our religions
corporations. The visitatorial power, therefore, with us, applies
only to eleemosynary corporations. Civil corporations, whether
public, as the corporations of towns and cities, or private, as
banks, insurance, manufacturing, and other companies of the
like nature, are not subject to this species of visitation. They
are subject to the general law of the land, and amenable to the
judicial tribunals for the exercise and the abuse of their powers (&).
The way in which the courts exercise common law jurisdiction
over all civil corporations, whether public or private, is by writ of
mandamuSy and by information in the nature of quo warranto (c).
It is also well understood, that the court of chancery has a juris-
diction over charitable corporations for breaches of trust. It has
been much questioned, whether it had any such jurisdiction over
any other corporations, than such as were held to charitable uses. •
The better opinion seems, however, to be, that any cor-
[ * 305 ] poration ^chargeable with trusts, may be inspected, con-
trolled, and held accountable, in chancery, for an abuse

(a) Attorney General v. Governors of the Foundling Hospital 2 rc*fy,
jr., 42. Ex parte Greenhouse, 1 Madd. Ch. Rep. 92. Story, J., 4 Wheaton,
676. The strict principles and watchftil care of chancery in respect to cor-
porations acting as trustees of charities and charitable funds, and in re-
spect to free schools and all other charitable foundations, are annonnced
with much force in the late English cases, as see Attorney General r.
Atherstone Free School, 3 Mylne <& Keen, 544. Attorney General v. Mayor of
Newbury, Jbid, 647.

■ 1 Blacks. Com. 480, 481.
2 Kyd on Cf^rporaUoHSy 174.

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Lee XXXIII.] OP THE RIGHTS OF PERSONS. * 305

of snch trusts. With that exception, the rule is nnderstoqd to
be, that all corporations are amenable to the coarts of law, and
there only, according to the course of the common law, for non-
user or misuser of their franchise (a),^

V. Of the dt68oliUion of corporations.

A corporation may be dissolved, it is said, by statute; by the
LBtnral death of all the members; by surrender of its franchises;
and by forfeiture of its charter, through negligence, or abuse of
its franchises (b).^

This branch of the subject affords matter for various and very
interesting inquiries.

In respect to public corporations, which exist only for public
purposes, as counties, cities, and towns, the legislature, under
proper limitations, have a right to change, modify, enlarge, or
restrain them; securing, however, the property, for the uses of
those for whom it was purchased (c). A poblic corporation, in-
stituted for purposes connected with the administration of the
government, may be controlled by the legislature, because such a
corporation is not a contract within the purview of the Con-
stitution of the United States. In those public corporations,

(a) Attorney General v. Utica Insurance Company, 2 Johns. Ch, Rep. 384 —
390. 1 Ves, 4d8. 2 Aik, Rep. 406, 407. 3 Merivale*8 Rep. 375. 4 Wheaton,
App. 20, 21. Attorney General v. Mayor of Dublin, 1 Blights Rep. 312. The
Neio York Reviaed SiaiuteSf vol. ii. p. 462, have given to the chancellor juris-
diction over the directors and other trustees of corporations, to compel
them to account, and to suspend their powers when abused, and to remove
any trustee or officer for gross misconduct, and to restrain and set aside
alienations of property made by them contrary to law, or the purposes of
their trust The power may be exercised as in ordinary cases, on bill or
petition, at the Instance of the attorney general, or a creditor, director, or,
trustee of the oorporatiou : and these equity powers exist in the court of
chancery, notwithstanding the like visitatorial powers may reside elsewhere.
Ibid. sec. 34.

[h) 1 Blacks. Com. 485.

(c) Story, J., 7 CraneVa Rep. 52.

"* When and how the procf^dings of the visitor may be reversed or re-
viewed, see In re Dean of York, 2 Q. B. 1; Eden v. Foster, 2 P. Wm. 325;
and see under Massachusetts Stat. 1823, ch. 50, Murdock*s Appeal, 7 Pick.
303,321.

* A mere resolution will not dissolve a corporation, there must be a
judicial sentence or a surrender of the charter accepted by the state. New
York Marbled Iron Works v. Smith, 4 Duer. 362. See, also. Polar Star
Lodge V. Id., 16 La Ann. 53; Reeve v. Boston Copper Co., 15 Pick. 351;
Campbell 17. Mississippi Union Bank. 6 How. (Miss.) 681. But as to pri-
vate corporations for trading or manufacturing purposes, where expedient
for the puiposes of winding up, it would seem they may by resolution wind
ttp their afl&irs, see Tread well v. Salisbury Manuf. Co., 7 Gray (Mass.), 393.



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OP THE RIGHTS OP PERSONS. [Part IV,

[ * 306 ] there is Id reality but one * paHij, and the trnstees or
governors of the corporation are merely trustees for
the pnblic. A private corporation, whether civil or eleemosynary,
is a contract between the government and the corporators; and
the legislature cannot repeal, impair or alter the rights and
privileges conferred by the charter, against the conseut, and
without the default of the corporation, judicially ascertained and
declared. This great principle of constitutional law was settled
in the case of Dartmouth College v. Woodward (a); and it had
be^n asserted and declared by the Supreme Court of the United
States, in several other cases, antecedent to that decision (6).*^
But it has become quite the practice, in all the recent acts of in-
corporations for private purposes, for the legislature to reserve
to themselves a power to alter, modify or repeal the charter at
pleasure: and though the validity of the alteration or repeal of
a charter, in consequence of such a reservation, may not be
legally questionable (c), yet it may become a matter of serious
consideration in many cases, how far the exercise of such a power
could be consistent with justice or policy. If the charter be con-
sidered as a compact between the government and the individual
corporators, such a reservation is of no force, unless it be made
part and parcel of the contract. If a charter be granted, and
accepted, with that reservation, there seems to be no ground to
question the validity andef&ciency of the reservation; and yet it

(a) 4 Wheaion, 318.

\b) Fletcher v. Peck, 6 CranvK's Rep. 88. The State of New Jersey r. Wil-
son, 7 Ibid, 1G4. Terret v. Taylor, 9 Ibid. 43. The Town of Pawlet ». Clark,
Ibid, 292. Grants of property and ol franchises conpled with an interest, to
pnblic or political corporations, are beyond legislative control, equally as
in the case of the property of private corporations. Storv, J., in Dartmonth
College V. Woodward, 4 ^Wheaton, 697—700. Town of Pawlet r. Clark, 9
Cranch'8 Rep. 292. See, also, supra, p. 275. If a charter, or act of incorpora-
tion, be procured from the legislature upon some fraudulent suggestion, or
concealment of a material fact, made by or with the consent or knowledge
of the persons incorporated, it may be vacated or annulled upon scire facias^
upon the relation of the attorney general. N. V. Revised Statutes, vol. ii.
p. 579, sec. 13.

(c) Parsons, Ch. J., 2 Mass. Rep. 146 Story, J., 4 Wheaton, 708—712.
M'Laren v, Pennington, 1 Paige^s Rep. 102.

•^ Private charters are protected by the clause prohibiting the impairing
the obligation of contracts. Gorman v. Pacific R. R., 26 Mo. 441. A legis-
lative enactment authorizing a material change is not binding upon a stock-
holder without his assent, although the corporation act thereunder, the
relation between the corporation and the stockholder being a contract
McCray v. Junction R. R. Co., 9 Ind. 359. See, further, Hospital v. Phila-
delphia Co., 24 Pa. St. 229.

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Lee XXXIII.] OP THE RIGHTS OP PERSONS. *307

is easy to perceive, that if stich a datise, inserted as a
"^^ formula in every charter and grant of the govern- [ * 307 ]
ment (a), be snffiGient to give the state an unlimited
control, as its mere pleasure, of all its grants, however valuable
the consideration upon which they may be founded, the great
and salutary provision in the Constitution of the United States,
so far as concerned all grants from state governments, will be-
come of no moment. These legislative reservations of a right of
appeal, ought to be under the guidance of extreme moderation
and discretion. An absolute and unqualified repeal, at once, of
a charter of incorporation of a money or trading institution,
would be attended with most injurious and distressing conse-
qnences. According to the settled law of the land, where there
is no special statute provision to the contrary, upon the civil
death of a corporation, all its real estate, remaining unsold, re>
verts back to the original grantor and his heirs {b\^ The debts
due to and from the corporation are all extinguished.^^ Neither
the stockholders nor the directors or trustees of the corporation,
can recover those debts, or be charged with them, in their natural
capacity. All the personal estate of the corporation vests in the
people, as succeeding to this right and prerogative of the crown,
at common law (c). A very guarded and modern example of

(a) In Massachnsetts, in 1830 — ^31, the legislatnre made a general pro-
vision that all charters of corporations, thereafter established, might he
amended, altered, or repealed at the pleasure of the legislature, unless
there should be inserted in the act of incorporation an express limitation as
to the duration of the same.

(h) So, where title to land is rested in an incorporated turnpike company
for the purpose of a road, and the road is abandoned, the land reverts to the
original owner. Hooker v. Utica Turnpike Company, 12 Wendell, 371. The
statute law of Massachusetts, is to the same effect. Act 1804, and Revised
Statutes of 1836. But in New York, by statute of April 18th, 1838, ch. 262,
whenever a turnpike corporation becomes dissolved, or the road discon-
tinued by the company, the road becomes a public highway.

(c) Edmunds v. Brown & Sillard, 1 Lev. Rep, 237. Co. Litt. 13, b. ZBurr.
B^. 1868, arg. 1 Blacks. Com. 484. 2 Kyd on Corp. 516. State Bank v. The
State, 1 Blackfird'8 Ind. Rep. 267.

* Upon dissolution the real property granted to it in fee vests in the re-
ceiver for the benefit of the creditors and stockholders, and does not revert
back to the grantor. See Owen v. Smith, 31 Barb. (N. Y.) 641. Property
only which remains in its hands at the expiration of the corporation or
its dissolution revcrta to the original proprietors; property divested by its
own act or by law does not revert. State v. Rivers. 5 I red. 297.

"SeeMallory «. Mallett, 6 Jones' Eq. (N. C.) 345; Hopkins r. White, 1,
Head. 31 ; but it is within the legislative power to rescue the assets from
this principle in any special case, llobinson v. Lane, 19 Ga. 337. Yet the
legiBlatuie has no power, by renewing a charter, to review the liabilities.
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* 809 OP THE RIGHTS OF PERSONS. [Part IV.

these legislative reservations annexed to a charter, is that con-
tained in the act of the legislature of New York, of February
28th, 1822, c. 50, where it is declared, by way of express proviso,
that the legislature may, after the expiration of five years, alter
and modify And expunge the act, upon condition, nevertheless,
that no alteration or modification shall annul or invalidate the

contracts made by or with the corporation, and that the
[ * 308 ] corporation may still continue a * corporation, so far

as to collect, and recover, and dispose of their estate,

real and personal, and pay their debts, and divide the surplus (a).

A corporation may also be dissolved when an integral part

of the .corporation is gone, without whose existence
[ * 309 ] *the functions of the corporation cannot be exercised,

and when the corporation has no means of supplying
that integral part, and has become incapable of acting. The cor-
poration becomes then virtually dead or extinguished (6). Bat
in the case of The King v. Paasmare (c), in which this subject was
most extensively and learnedly discussed, the K. B. seemed to
consider such a dissolution not entirely absolute, but only a dis-
solution to certain purposes (d).*® The king could interfere and

(a) By the New York Revised StatuteSy vol. i. p. 600, sec. 9, upon the dis-
solution of a corporation, the directors or managers existing at the time,
(when no other persons are specially appointed for the purpose,) are de-
clared to be trustees lor the creditore and stockholders, with power to
settle the concerns of the corporation, pay the debts, and divide the surplus
property among the stockholders. This is a just and wise provision, and
gets rid altogether of the inequitable consequences of the rule of the common
law. And in Indiana, also, whenever a corporation is dissolved, all its
property vests in the state in trust to pay its debts and dischai^e its con-
tracts, and the residue, if any, to be paid over to the stockholders. Eevised
Statutes of Indiana, 1838, p. 149.

(6). 1 Bol. Ahr. 514, 1. 1.

(c) 3 Term Rep. 199.

[d) So, in the case of the Lehigh Bridge CJompany v. The Lehigh Coal Com-
pany, 4 Bawle^s Rep, 1, the loss of an integral part of a corporation was held

. to work a dissolution for certain purposes only, and that an entire dissolu-
tion was the result of a permanent incapacity to restore its deficient part, and
did not happen when the legitimate existence of the part was not indisjiensa-
ble to a valid election.

^ The mere omission to elect officers does not work a dissolution while the
right remains vested in the members. Commonwealth v. Cullen, 1 Pa. St. 133;
Evarts v. Killingworth Manuf. Co., 29 Conn. 447. See, further, Yincennes
University v. Indiana, 14 How. 268; Hoboken Building Association v. -Mar-
tin, 2 Beasl. (N. J.) 427; Knowlton t>. Ackley, 8 Cush. (Mass.) 93. Under 2
New York Rev. Stat. 463, { 38, the corporation is taken to have surrendeied
its charter if it is insolvent or suspends ordinary business for one year.
Bradt v. Benedict, 17 N. Y. 93. See Nickles v. Rochester City Bank, 11
Paige, 118. The non-performance of a condition upon the non-periormance
of which the corporation was to be dissolved, does not ipso facto vork a

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Lee XXXIII.3 OF THE RIGHTS OF PEBSOSS. * 310

grant a new charter, and he conld renovate the oorpooraticHi, either
with the old or with new corporators. If renovated in the sense
of that case, all the former rights would revive and attach on the
new corporation, and, among others, a right to sae on a bond
given to the old corporation. Bnt if not renovated, then the dis-
solotion becomes absolute, because the corporation has become
incapable of acting. In the case of a new incorporation, upon
the dissolution of an old one, the title to the lands belonging to
the old corporation does not revive in the new corporation, ex-
cept as against the state. In England, it woold require an act
of parliament to revive the title as against the original grantoir,
or his heirs (a); but it would be at least questionable whether any
statute with us could work such an entire renovation, becatise
vested rights cannot be divested by statute. When a corporation
has completely ceased to exist, there is no ground for the theory
of a continuance of the former corporation under a new name or
capacity. It becomes altogether a new institution, with newly
created rights and privileges.

It is said, that a corporation may be dissolved by a voluntary
surrender of its franchises into the hands of government, as
well as by an involuntary forfeiture of them, through a total
neglect of using them, or using them illegally and
•unjustly (5). But in the case of The King v. The City [ ♦ 810 ]
of IxmdoTL, Sir Gborge Treby (afterwards Lord Ch. J.)
very forcibly contended, that a corporation could not be dissolved
by a voluntary surrender of its property, because a corporation
might exist without property; and upon that argument be shook,
if not destroyed, the authenticity of the note at the end of the
case in Dyer, of tfie Archbishop of Dublin v. Bruerton (c), in
which it was stated, that a religions corporation might be legally
dissolved and determined by a surrender of the dean and chapter,

(a) 1 PnsUm an AhstraeU of TUles, 273.
(5) 1 Waodd, Lee. 500. 8(dk, Bqf. 191.
(c) 3 Djfer^s Rep, 282, b.



dissolntioD. Matter of Reformed Chuich of N. Y., 7 How. Pr. 476, Ht^,
under section 27, General Banking Act of Pennsylvaoia, Comm^mwi^aHh r.
Bank of Commerce, 9 Am. L. Rejs. 379. Mere non-exen;fM of prm«T in not



Online LibraryWilliam M. Lacy James KentCommentaries on American law, Volume 2 → online text (page 50 of 108)