William M. Lacy James Kent.

Commentaries on American law, Volume 2 online

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a dissolntion. Rollins v. Clay, 33 Me. 132. Resignation of officers and ^u^uiu
does not destroy a corporation. Moacatine Tamverein v. Funck. IH Iowa,
409. Neither does the Ion of members, piorided aolBcient letumn to furry
on and fill vacancies. State «. Univenitj ot Vincennca, 5 Ind. 77.



26 VOL. II. KKNT. 40X



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*311 OF THE RIGHTS OF PERSONS, [PartlV.

eyen withoat the consent of the archbishop. So, also, in the
case of The Corporation of Colchester v. SeaJber (o), the corpora-
tion consisted of a mayor, eleven aldermen, eighteen assistants,
and eighteen common council; and thoagh the mayor and alder-
men were judicially ousted in 1740, and those offices continued
vacant until 1768, when a new charter was granted and accepted,
it was held by the K. B., that the corporation was not dissohed
by all these proceedings, including the natural death of the
mayor and aldermen, subsequent to their ouster. This case
shows, that a corporation possesses a strong and tenacious priD-
c'lple of vitality, and that a jndgment of ouster against the mayor
and aldermen, nothwithstanding they were integral parts of the
corporation; was not an ouster, though a judgment against the
corporation itself might be. It was held in argument in that
case, that a corporation could not be dissolved but in three ways:
1. l^y abuse or misuser, and a consequent judicial forfeiture; 2.
Bj surrender accepted on record; 3. By the death of all the
members. It was admitted on the other side, that the corpora-
tion in that case was not dissolved, though it had become incap-
able of enjoying and exercising its franchises; and the court
held, that the loss of the magistracy did not dissolve the corpora-
tion. The better opinion would seem to be that a oor-
[*311 ] poration aggregate may ^surrender, and in that way
dissolve itself ; but then the surrender must be accepted
by government, and be made by some solemn act, to render it
complete. This is the general doctrine (6), but in respect to
the private corporations, which contain a provision rendering
the individual members liable for corporate debts due at the
time of dissolution, a more lax rule has been indulged. It was
held, in the court of errors of New York, in SJee v. Bloom (c),"

(a) 3 Burr, Rep. 1866.

(6) In the case of the charter of Connecticut, where there had been for
some time an involuntary nonnser of its privileges, by submission to the au-
thority of Sir Edmund Andross, the ablest counsel in England, consisting ot
Mr. Ward, John (afterwards Lord Chancellor) Somers. and George (after-
wards Ix)rd Ch. J.) Treby, were of opinion, that the charter remained good
and valid in law, inasmuch us there was no surrender duly made and en-
rolled, nor any judgment of record against it. See the opinion at large, in
1 TrtimbulVs Hist, qf Connecticuiy 407. Hutchinson's Hist, of JUassachHsetts,
vol. i. p. 406.

(c) 19 Joh7i8. Rep. 456. It was decided, in that case, that a by-law of a
corporation, allowing the stockholders, on paying 30 percent on theur shares,

*^See, also, McMahon v. Morrison, 16 Ind. 172; Washington, &c., Roadr.
State, 19 Md. 239.



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liCC. XXXIII-l OF THB RIGHTS OP PBR80NB. * 312

that the trosiees of a private corporation maj do what woald be
eqaivalent to a anrrender of their trast, by an intentional aban-
doDment of their franchises, so as to warrant a oonrt of justice to
consider the corporation as in fact dissolved. But that case is
not to be carried beyond the precise ibcts on which it rested. It
ought only to be applied to a case where the debts dne at the
time of the dissolution are chargeable on the individual members,
and then it becomes a safe precedent It amounts only to this,
that if a private corporation saifer all their pn^wrty to be sacri-
floed, and the trustees actually r^inqnish their trust, and omit
the aonnal election, and do no one act manifesting an intention
to resume their corporate functions, the courts of justice may,/or
ihe sake of the remedy, and in faxxmr of erediiorsy who, in such
case^ have their remedy against the individual members, presume
a virtual surrender of the corporate rights, and a diaaolntion of
the corporation. This is the utmost extent to whidi the
doctrine was ^carried, and in sndi a case it is a safe and [ ^312 ]
reasonable doctrina So, in Briggg v. Penmvman (a),
where a manufacturing corporation establidied under the general
act of 22d Mardi, 1811 (6), for twenty yean, became insc^veni
within the time, and ii>competent to act by the Iobb of all its
funds, and under the provision that ^ €or all debts which shall
be dne and owing by the company at the time of its disec^ution,
the persons then composing^ the company sboold be individually
responsible to the extent of their respective shares of stock in
the company, and no further,^ it was decided that the evpof^.
tion was to be deemed diascMved for the purpose of the weJi
by the creditors against the stodkhol^ss individually, aad tt^
the statute contemplated a disBc^ution as mn ev^ot w'tMiA mig&t
happen in this way al any tame wUkin ike twumtf yoan. xA aay
mode of dissolution, in faeU was sufteiect xo aEr/rd tkm spMal
remedy to the creditor. But the o3d and weil «scai>£<iMi t^r^i-
ciple of law remains good as a gtmum ral#^ that a ^je^ttws^j\ »
not to be deemed di a solved by rtwmuu cf acr au^aa^sr or 'r-muix
of its franchises, unti] thedefaah hat bnec: jy^tktLj m^sfmti^ui



to forfeit them, wm void m t» cniitan. Sw^ i% ti^ imk mbis. t'.m
Wynyaw, Omimm Lmm JmnmL Sm. t. y tt:. ^^ ^^

(a) 1 HopkmM. 30O. & C 8 fjtmm. >C.

(b) LawB9f Stm Fwt, ml % «^ C7.







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* 3la OF THB RIGHTS OP PERSONS. • [Part IV.

and declared (a).^ It was adjudged, in South Carolina (6), that
the offioers of a corporation con Id not dissolve it without the as-
sent of the great body of the society (c).

The subject of the forfeiture of corporate franchises by nonnser
or misuser, was fnlly discnased in the case of The King v.
Amery (d) ; and it was held, that though a corporation may be
dissolved, and its franchises lost, by nonuser or neglect, yet it
was assumed as an undeniable proposition, that the default was
to be judicially determined in a suit instituted for the porpose.
The ancient doubt was, whether a corporation could be dissolyed
at all for a iNneach of trust It is now well settled that it may,
but then it must be first called upon to answer (e). No advantage

(a) Peter r. Kendall, 6 Amur. A Crest. 703. Slee v. Bloom, 5 Jokns. Ck.
Rep. :n9. 6 Cowm, 26. S. P. Story, J., A CroMch, 51. 4 Whealon 698. The
Atchafalava Bank r. Dawson, 13 Lorn. Rep, 4(77, 506. It was declared in ibis
last case, that a cause of forfeiture of a corporation charter oonld not be taken
advantage of, or enforced, except by a direct proceeding for that purpose by
the government, notwithstanding the charter was to be ipm fado forfeited
in the case alleged. In Wilde v. Jenkins, 4 Paige\^ Ch. Rep, 481, it was
held, that an incorporated mannflMStaring society was not dissolved, thoagh
all its property and effects, together with the charier, were sold by the trustees
and stockholders, and purchased by three partners with partnership ftiDds,
and who elected themselves trustees of the corporation. The stock of the
corporation became partnership property, and the legal title in the corporate
proi)erty was still in the corporation for the benefit of the copartners. And
in Russell v, McLellan, 14 Pick, 63, it was held, that though a corporation
had been without officers for more than two years, and had done no corporate
act in that times it was not thereby dissolved.

(b) Smith V. Smith, 3 Eq. Rep. 557. ^

(c) In the case of Waid v. Sea Insurance Company, 7 Hiige, 294, it was
declared that the directors of a corporation, even with the consent of the
stockholders, were not authorized to discontinue the corporate business,
and distribute the stock, unless specially authorized by statute, or a decree
in chancery. By the AT. V. Revised StatuieSy vol. ii. p. 466, the majority of
the directors or trustees of a corporation may, at any time, voluntarily ap-
ply by petition to the court of chancery, for a decree dissolving the corpora-
tion; and the court, upon investigation, may decree a dissolution of it, if it
appear that the corporation is insolvent, or that, under the circumstances, a
dissolution would be beneficial to the stockholders, and not injurious to the
public. Ibid. sec. 58—66. One or more receivers of the estate and effects
of the corporation are to be appointed, with large and specific powers and
duties, in respect to the settlement and distribution of the estate and effects.
Jbid. 468—473.

(d) 2 TVrm. Rep. 515. Canal Company v. Rail Roatl Company, 4 Oill dt John-
son, 1 S. P.

(e) Slee v. Bloom, 5 Johwt. Ch. Rep. 380. Story, J., in 9 Craneh, 51. All
franchises, said I>ord Holt, in the case of the city of I^ndon v. Vanacre, 12
Mod. Rep. 271. are granted on condition that they shall be duly executed
according to the grant, and if they neglect to perform the terms, they may
be repealed by scire facias.

** In Vermont it has been held that it did not lose its corporate existence
by not doing business for eleveii years, and disposing of its property, and
■eglecting to choose corporate officers. Brandon Iron Co. r. Gleason. 24 Vt. 2t«.
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Tier. XXXril.] OF THE RIGHTS OF PERSONS. * 313

can be taken of any nonnser or misaser, on the part of a corpora-
tion, by any defendant, in any collateral action (a\^^ In the great
case of The quo tvarranto against tht city of London^ in
the 84 Charles II., it was *a point incidentally mooted, [ *313 J
whether a corporation conld surrender and dissolve it-
self by d&ed; and it was conceded, that it might be dissolved by
reftiaal to act, so as not to have any members requisite to preserve
its being. There are two modes of proceeding judicially to as-
certain and enforce the forfeiture of a charter for default or abuse
of power. The one is by scire facias; and that process is proper
where there is a legal existing body, capable of acting, but who
have abused their power. The other mode is by information in
tlie nature of a quo ivarranto ; and that proceeding applies where
there is a body corporate de facto only, but who take upon them-
seWes to act, though, from some defect in their constitution, they
cannot legally exercise their powers (6). Both these modes of
proceeding against corporations are at the instuice, and on be-
half of the government The state must be a party to the pros-
ecution, for the judgment is, that the parties be ousted, and the
franobises seized into the hands of the government (c).^* This
remedy most be pursued at law, and there only; and by the sta-
tutes of New York, the mode of prosecution by information is
directed^ where there has been a misuser of the charter, or the

{a) Trustees of Vernon Society p. Hills, 6 Cknoen's Rep, 23. All Saints
ChoTcta t. Lovett, 1 HoIVh N. Y. Bep. 191. Canal Company v. Kail Road
Company, 4 GUI <A Jtthnson, 1 .

{b) Lord Eenyon, and Ashhnrst, J., in Rex v. Pasmore, 3 Term Bep. 199.

{e) Rex V. Stevenson, Ydv. Bep. 190. King w. Ogden, 10 Bamw. A Cress.,
240, Bayley, J. Commonwealth v. Union Insurance Company, 5 Ma98. Rep.
230. Centre and K. T. Road v M'Conaby, 16 Serg. A Bawle, 140. The judg-
ment in SQch cases, according to the Neto York Revised Stxiiutes. vol. ii. p. 585,
sec. 49. is, that the corporation be ousted, and altogether excluded from its
corporate riichts and franchises, and be dissolved. In Indiana, it is held,
that ajudgment afcninst a corporation, in the case of a forfeiture of its charter,
is, that the franchises be seized into the hands of the state, and that when
its franchises are seized by execution, on the judgment, then, and not till
then, the corporation is dissolved. State Bank v. The State, 1 Blackford's
Jmd. Bep. 267.

«* See, also, Cahill v. Kalamazoo Mutual Ins. Co., 2 Dongl. (Mich.) 124.
139; Connecticut & Passumpsic Rivew R. R. Co. v. Bailey, 24 Vt. 466; Buf-
falo A Alleghany R. R. Co. v. Cary, 26 N. Y. 75.

** The information in the nature oi a quo warranto must be *Mn the name
and by the authority of the people of the state.** Wright v. People, 15 111.
417. It most be prosecuted by the authority .of the (>)minon wealth to be
exercised by the legislature; or by the attorney or solicitor general acting
under its direction or ex-ofUdo in its behalf. Commonwealth v. Lexington,
Aa, Turnpike Co., 6 B. Monr. (Ky) 397; State v. Paterson & Hamburg Turn-
pike Co., 1 Zabr. (N. J.) 9.

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* 314 OF TUB RIGHTS OF PERSONS. [Pnrt IV.

franchises of the company are forfeited (a). A conrt of
[ * 314] chancery neyer deals with the * qnestion of forfeitare.
It may hold tmstetss of a corporation acconutahle f<ir
abuse of trust, but the court cannot without special statute au-
thority, divest corporations of their corporate character anci ca-
pacity. It has no ordinary jurisdiction in regard to the legality
or regularity of the election or amotion of corporators. These
are subjects exclusively of common law jurisdiction (6).*'

The mode of redress in New York, when incorporated com-
panies abuse their powers, or become insolvent,*" has been the
Hubject of several statute regulations, which have committed the
cognizance of such cases to the court of chancery. The acts of
1817 and 1821 (c), provided for the dissolution of incorporated
insurance companies, by order of the chancellor, upon application
of the directors, and for good cause shown; and the conrt of
chancery, when it decreed a dissolution of the corporation, was
to direct a due distribution of the funds, and to appoint tras-
tees for that purpose. The act of 1825 (d) was much broader
in its provisions. It contained many directions calculated to
check abuses in the management of all monied incorporations,
and to facilitate the recovery of debts against them. All trans-
fers, by incorporated companies, in contemplation of bankruptcy,
were declared void; and if any incorporated bank should be*

(a) The New Ymrk Revised Statutes, vol. iii. p. 681, 683, provide, that at* in-
formatiou in the nature of a quo vrarranto, be filed by the attorney general,
upon his own relation, Or upon the relation of others, when any person or as-
sociation usurps, or unlawfully holds any public office or franchise; or against
any corporate body for misuser or uonuser of its franchises; or which does or
omits acts which amount to a surrender thei-eof; or whenever they shall ex-
ercise any privilege not conferred by law. So, the chancellor, on a bill filed
liy the attorney general may restain, by injunction, any corporation from
fissuming powers not allowed by its charter, as well as restrain any individ-
uals from exercising corporate rights or privileges not conferred by law.
Ibid. 462.

{h) Van Ness, J., 3 Johns. Rep, 134. Slee v. Bloom, 5 Johns. Ch, Rep, 380.
Attorney General v. Earl of Clarendon, 17 Kesey, 491. Attorney Qeneral r.
Beynolds, 1 Eq. Cos. Abr. 131, pi. 10. Attorney General v. Utica Insurance
Company, 2 Johns, Ch. Rep, 376, 378, 388. The King v, Whitwell, 5 Term
Rep. 85.

(c) L, N. Y. sees. 40. ch. 146, and sees. 44, ch. 14a

{d) Sees. 48, ch. 325.

^ In cases where they are misappropriating or wasting the corporate funds
equity will treat them at trustees, and will interfere by injunction to re-
strain and pievent such misappropriation, &c. Scbofield v. Eighth School
District, 27 Conn. 499; S^mith v. Bangs, 15 111. 399.

^ As to what constitutes insolvency see Brouwer r. Harbeck, 9 N. Y. (5
Seld.) 6S9j Ferry v. Bank of Central New York, 15 How. Pr. 445.

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#



Lee XXXIII.] OF THE RIGHTS OF PERSONS. * 815

come insolvent, or violate its charter, the ^chancellor [*315 J
was aathorized, by process of injunction, to restrain the
exercise of its powers, and to appoint a receiver, and caase the
effects of the company to be distributed among the creditors.
This was a statute of bankruptcy, in relation to incorporated
banks, and it was an unusual provision, for the English bank-
rapt laws, or the general insolvent laws of the several statesj.
never extended to corporations (a). The New York Revtaed
StcUutes (b)j have continued and enlarged the provision. When
any incorporated company shall have remained insolvent for a
year, or for that period of time neglected or refused to pay its
debts, or suspended its ordinary business, it shall be deemed to .
have surrendered its franchises, and to be dissolved (o). And
whenever any corporation, having banking powers, or power to
make loans on pledges, or to make insurances, shall become in-
solvent, or violate any of the provisions of its charter, the court
of chancery may restrain the exercise of its powers by injunction,
and appoint a receiver (d)" If the corporation proves, on in-
vestigation, to be insolvent, its efTects are to be distributed among
the creditors rateably, subject to the legal priority of the United
States, and to judgments (e). And whenever any incorporated
company shall become insolvent, or it shall appear to the direc-
tors or trustees thereof, that a dissolution of the corporation
would be beneficial, application may be made voluntarily to the
chancellor, by petition, for a dissolution; and all sales, assign-
ments, transfers, mortgages and conveyances of any part of their
corporate estate, real or personal, made after filing such petition,
or any judgments confessed after that time, are declared to be
void, as against the receivers to be appointed, and as against the

(<f) There is a statnte of bankitipicy in New Jersey, passed as early as
1810, in relation to insolvent banks and other corporations, with similar
powers conferred upon the chancellor in respect to them. Elmer^s Digest^
p. 31.

(b) Vol. i. p. 603, sec 4. Vol. ii. p. 402, sec. 31,— p. 463, sec. 38.

{c) N, Y. Revised Statutes, vol. ii. p. 463, sec. 38. So, by a general law in
N. Carolina (see their Revised Statutes, tit. Corporations), when any corpo-
ration shall, for two years together, cease to act as a body-corporate, such dis-
use of their corporate powers and privileges shall be considered and taken as
a forfeitnre of the charter.

(d) New York Revised Statutes, vol. ii. p. 463, 464, sec 39, 41.

{e) Ibid, vol. 11. p. 465, sec 48.

*^ As to what facts warrant the appointment of a receiver, see Conro v.
Gray, 4 How. Pr. 166; Conro v. Port Henry Iron Co.", 12 Barb. 27. As to what
will not, see Bakerv. Bachns, 32 111. 79; Hagar r. Stevens, 2 Halst. Ch. (N. J.)
374.

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* 315 OF THE RIGHTS OF PERSONS. [P^ lY.

creditors (a). This last provision is to be taken as a qaalifica-
tioQ and limitation of the generality of a similar proyision, al-
ready mentioned, in the act of 1825 (6).

. (a) New York Revised Statute$^ vol. ii. p. 469, sec. 71. In Misstmri, by sta-
tute upon the dissolution of any corporation, the president and directors, or
managers thereof, at the time of its dissolution, are made ex-oficio trustees to
settle its concerns. E. S. of Mimtouri, 1835.

{b) Under the English bankrupt system, a voluntary payment to a creditor,
under circumstances which must reasonably lead the debtor to believe bank-
ruptcy />ro6a6/tf, is deemed a fraud upon the other creditors, within the mean-
ing of the bankrapt law, and the money can be recovered back by the as-
signees. Poland V. Glyn, 2 Dowting iS: Bytand, 310. The New York provi-
sion falls fi&r short of the English rule, in the check given to partial pay-
ments, but it has the merit of giving a clear and certain test of an act of
insolvency. In Indiana, it has been held, that a bank forfeited its charter:
1. When it contracted debts to a greater amount than double that of the de-
posits; 2. For the issuing of more paper, with a fraudulent intention, than
the bank ooald redeem; 3. When it made large dividends of profits, while
the bank refused to pay specie for its notes; 4. Embezzling laige sums of
money deposited in iMuik for safe keeping. State Bank v. The State, 1 Biaek-
ford's Ind, Bep. 267.

I have, in this lecture, gone as far into the law of corporations as was oon-
sistent with the plan and nature of the present work; and, for a more fall
view of the subject, I would refer to the Treatise on Corporations^ by Messrs.
Angel 1 & Ames, as containing an able and thorough examination of every
part of the learning appertaining to this head; and as being a performance
which deserves and will receive the respect and patronage ol the profession.



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PART V.

OP THE LAW CONCERNING PERSONAL PROP-

ERTY.



LECTUBJe XXXIV.

OF THE HISTORY, PROGRESS, AND ABSOLUTE RIGHTO OP
PROPERTY.

Having concluded a series of lectures on the various rights of
persons, I proceed next to the examination of the law of property,
which has always occupied a pre-eminent place in the municipal
codes of every, civilized people. I propose to begin with the law
of personal property, as it appears to be the most natural and
easy transition, from the subjects which we have already discussed.
This is the species of property which first arises, and is cultivated
in the rudest ages; and when commerce and the arts have as-
cended to distinguished heights, it maintains its level, if it does
not rise even superior to property in land itself,. in the influence
which it exercises over the talents, the passions, and the destiny
of mankind.

To suppose a state of man prior to the existence of any notions
of separate property, when all things were common, and when
men, throughout the world, lived without law or government, in
innocence and simplicity, is a mere dream of the imagination. It
is the golden age .of the poets, which forms such a delightful pic-
ture in the fictions, adorned by the muse of Hesiod, Lucretius,
Ovid, and VirgiL It has been truly observed, that the first
*man who was bom into the world killed the second; and [*318J
when did the times of simplicity begin f And yet we find the
Roman historians and philosophers (a), rivalling the language of

(a) SullwA Cat. sec. 5. Jugur, sec. 18. Tacit. Ann, lib. 3, sec. 26. Oie,
Orat, pro. P. Sextio, sec. 42. Justin, lib. 43, ch. 1.

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• 319 OF PERSONAL PROPERTY. [Part Y.

poetry in their descriptioiiB of some ima^narj state of natare, which
it was impossible to know, and idle to conjectore. No such state was
intended for man in the benevolent dispensations of Providence;
and in following the migrations of nations, apart from the book of
Genesis, human curiosity is unable to penetrate beyond the pages
of genuine history; and Homer, Herodotus, and Livy, carry us
back to the confines of the fabulous ages. The sense of property
is inherent in the human breast, and the gradual enlargement and
cultivation of that sense, from its feeble force in the savage state,
to its full vigor and maturity among polished nations, forms a
very instructive portion of the history of civil society. Man was
fitted and intended by the Author of his being, for society and
government, and for the acquisition and enjoyment of property.
It is, to speak correctly, the law of his nature; and by obedience
to this law, he brings all his faculties into exercise, and is enabled
to display the various and exalted powers of the human mind (a).
Occupancy, doubtless, gave the first title to property in lands

and moveables. It is the natural and original method of ac-
[*3 19] quiring it; and apon the principles of universal law, *that

title continues so long as occupancy continues (&). There is
no person, even in his rudest state, who does not feel and aoknowl
edge, in a greater or less degree, the justice of this title. The right
of property, founded on occupancy, is .suggested to the human
mind, by feeling and reason, prior to the influence of positive institu-
tions (c). There have been modern theorists, who have considered
separate and exclusive property, and inequalities of property, as
the cause of injustice, and the unhappy result of government aad
artificial institutions. But the human society would be in a most
unnatural and miserable condition, if it were possible to be insti-
tuted or reorganized upon the basis of such specnlationa The
sense of property is graciously bestowed on mankind, for the pnr-

{a) ReldeOf in his Uxor Ebraica, lib. 1, ch. 1, gives the following definition



Online LibraryWilliam M. Lacy James KentCommentaries on American law, Volume 2 → online text (page 51 of 108)