acts, amending or altering charters. The various act of incorporation of private companies for banking, manufacturing, literary, charitable, and insurance purposes; for turnpike, and railroads, and toll-bridges; and for many other objects upon which private industry, skill, and speculation can be freely and advantageously employed, constitute a mighty mass of charters, which occupy a large part of the volumes of the statute law in almost every state. (a) All these incorporations are contracts

the act were not bodies politic or corporate, within the meaning of the constitution. It seemed to be admitted, in the opinion given, that the restrictive clause had not answered the policy which dictated it. It was considered that the spirit and meaning of the restrictive clause was to guard against the increase of joint-stock corporations, for banking and other purposes of trade and profit to the corporators, with exclusive privileges, not enjoyed by the citizens at large; that although those banking associa tions had many of the distinguishing characteristics of corporations, they did not come within the true legal interpretations, and still less within the spirit and design of the restrictive clause. The statute conferred the power of free banking, and did not create any monopoly, nor secure to any association privileges which might not be enjoyed in the same manner by all others, nor place them beyond the entire control of the legislature. The decision of the Court of Errors was received and confirmed on the principle of stare decises, in a subsequent writ of error from the Supreme Court to that court, in December, 1845, in the case of Gifford v. Livingston, 2 Denio R. 380. But though these associations are not corporations within the spirit and meaning of the restrictive clause in the constitution, requiring the assent of two thirds of the members of each branch of the legislature to pass a corporation, yet it is held that they are, to all other intents and purposes, corporations, and as such, liable to taxation on their capital, if deriving any income or profit from it, like other corporations. The People v. Assessors of Watertown, 1 Hill's N. Y. Rep. 616. The People v. The Supervisors of Niagara, 4 Hill's N. Y. Rep. 20. See, also, infra, vol. iii. p. 26, for a British statute founded on similar principles in the creation of joint-stock companies. The above decision, in 4 Hill, was affirmed on error in the same case in 7 Hill, 504.2

(a) The laws of Massachusetts give the greatest facility to the creation of bodies politic and corporate. "When any lands, wharves, or other real estate, are held in

1 The constitutional provision requiring two thirds, &c., no longer exists, and the new constitution of 1846, art. 8, sec. 1, provides that all general laws and special acts (creating corporations) may be altered from time to time, ar repealed.

2 The powers of joint-stock banking companies, formed under the statute of New York, entitled "an act to authorize the business of banking," passed April 18, 1838, have been considered in numerous cases, some of which are not mentioned in the preceding note.

1. The constitutionality of the banking law must be considered as finally settled, by the decisions cited in the note. It must also be remembered, that the question of the constitutionality of this law arose under the constitution of 1821. The new constitution of 1846, has not retained the provision which requires the assent of two thirds of the members elected to each branch of the legislature, to every bill erecting a corporation; and, moreover, it expressly declares that "corporations may be formed under general laws.” Art. 8, sec. 1.

between the government and the company, which cannot ordinarily be affected by legislative interference; and it has accordingly been attempted to retain a control over these private corporations, by a clause, now usually inserted in the acts of incorporation, that "it shall be lawful for the legislature, at any time hereafter, to alter, modify, or repeal the act." (a) With

common by five or more proprietors, they may form themselves into a corporation." Revised Statutes of 1836, part 1, tit. 13, ch. 43, sec. 1. So, in New York, by statute in 1811, (and which is still in force,) manufacturing corporations may be created by the mere association of five or more persons filing a certificate designating their name, capital, object, and location. A similar law was passed in Michigan and Connecticut, in 1837. The increase of corporations, in aid of private industry and enterprise, has kept pace in every part of our country with the increase of wealth and improvement. The Massachusetts legislature, for instance, in the session of 1837, incorporated upwards of seventy manufacturing associations, and made perhaps forty other corporations relating to insurance, roads, bridges, academies, and religious objects. And in 1838, the legislature of Indiana authorized any twenty or more citizens of any county, on three weeks previous public notice, to organize themselves, and become an agricultural society, with corporate and politic powers; and the inhabitants of any and every town or village may incorporate themselves for the institution and management of a public library. In Pennsylvania, the courts of quarter sessions, with the concurrence of the grand jury of the county, may incorporate towns and villages; Purdon's Dig. 130; and literary, charitable, or religious associations and fire companies, may be incorporated under the sanction of the supreme court. Ib. 168, 172.

(a) In Massachusetts, there is a standing statute provision, that every act of incor

2. On the question whether these associations are subject to the provisions of the Revised Statutes as to moneyed corporations, (1 R. S. 589, art. 1,) and as to the dissolution of insolvent corporations, (2 R. S. 463, secs. 39, 42,) see Leavitt v. Tylee, 1 Sandf. Ch. Rep. 207. Gillett v. Moodie, (Court of Appeals, July, 1850.) Boisgerard v. The New York Bank. Co. 2 Sandf. Ch. R. 23. Sagory v. Dubois, 3 Sandf. Ch. R. 485.

3. It has been held that the supreme court had not summary jurisdiction in relation to the election of directors of those associations. In matter of Bank of Dansville, 6 Hill, 370. With regard to the extent and effect of the restriction of the R. S. vol. i. 591, 558, as to the assignment of assets over $1,000, without a resolution of the directors, see Gillett v. Campbell, 1 Den. 520. Gillett v. Moody, 3 Comst. 479. Gillett v. Phillips,

3 Kern. 114.

4. As to the effect on these associations of the law of May 14, 1840, prohibiting the issuing of bills or notes, not payable on demand, and without interest, see Smith v. Strong, 2 Hill R. 241. Swift v. Beers, 3 Denio R. 70. Hayden v. Davis, 3 McLean R. 276. Tylee v. Yates, 3 Barb. S. C. Rep. 222. Leavitt v. Blatchford, 5 Barb. S. C. Rep. 10. S. C. 8 Comst. R. 19. Ontario Bank v. Schermerhorn, 10 Paige R. 110.

5. Suits may be brought by or against these associations, in the name of their presidents, or in the name of the association. Delafield v. Kinney, 24 Wend. R. 345. Case v. The Mec. Bk'g Association, 1 Sandf. Sup. Ct. Rep. 693.

See, on the general subject of these banking companies, Palmer v, Lawrence, 3 Sandf. S. C. R. 161. Palmer v. Yates, 3 Sandf. S. C. R. 138. See Laws of 1854, ch. 242, further regulating them.

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. (a)

poration which should be thereafter passed, shall at all times be subject to amendment, alteration, or repeal, at the pleasure of the legislature, unless there should be in the same act an express provision to the contrary. Act of 1830. Revised Statutes of 1836.1 In North Carolina all bodies corporate are limited to thirty years, unless otherwise specially declared. Revised Statutes of North Carolina, 1837.2 In New York it is held, and very correctly, that though a charter of incorporation cannot pass without the assent of two thirds of the members of each house, it cannot be altered without the like assent, notwithstanding the charter contains the reservation of a power in the legislature to alter, modify, or repeal the charter at pleasure; for that reservation conferred no new power, but was only to retain the power which the legislature then had over the subject. Com. Bank of Buffalo v. Sparrow, 2 Denio R. 97.

(a) There has been a disposition in some of the states to change, in an essential degree, the character of private 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 conduct and abuse, and to add to the general security of creditors; and the policy has been pursued 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 1808, 1818, 1821, 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 has been strongly questioned; (Amer. Jurist, vol. ii. p. 92, art. 6. Ibid. 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 incorporations. This unlimited personal responsibility was restrained by statute in 1828 and 1830, and the responsibility applied only in the case of banks, to the stockholders at the time of

There is a similar provision in the Rev. Stat. of Conn. tit. 3, ch. 12, sec. 164, (1849,) and in the Laws of Vt. 1851, ch. 45.

2 In Louisiana, the duration of corporations is limited to twenty-five years. There was a general law for the formation of corporations, passed in this state in 1848, and it is conspicuous for clear and comprehensive provisions. Laws, 1848, Act 100. R. S. p. 115, sec. 8, (1856.)

3 By the laws of R. Island of 1847, members of manufacturing corporations are liable for the corporate debts until the capital stock be paid; and the note or obligation of the stockholder is not payment. There is a similar law in Georgia. Acts of 1847. See also Louisiana R. S. (1856,) p. 116, sec. 14. Laws of Vt. (1851,) No. 60. Mass. R. S. p. 330, secs. 16, 17. Laws of N. H. (1856,) ch. 1852. R. R. stockholders are liable in N. Y., to the extent of their unpaid subscriptions, to all creditors; and for thirty days personal service of laborers if an execution against the corporation shall be returned unsatisfied. Laws of 1854, ch. 282. In some recent statutes the stock of the corporation is made liable for its debts in the absence of corporate property and the individuals whose stock is taken have a claim against the corporation. R. S. of Me. (1857,) p. 328, ch. 46, sec. 24 and seq. Laws of Vt. (1852,) No. 22.

*

II. Of the various kinds of corporations, and how *273 created.

loss, by mismanagement of the directors, or for outstanding bills at the time the charter expires. They are made liable in their individual capacities only to the extent of the stock they may hold in the bank at the time of the abuse, or at the time of the expiration of the charter. This provision was continued by the Massachusetts Revised Statutes of 1836, p. 312, sec. 30, 31, and has been essentially adopted by statute in New Hampshire, in 1837, in respect to manufacturing corporations. Persons holding stock in corporations as trustees for others, are especially exempted from personal responsibility. Act of Mass. 1838. The personal liability of the stockholders does not enable the creditors to sue them. It is the business and duty of the corporation, enforced by bill in equity in its name, to compel payments from individual stockholders.1 Baker v. Atlas Bank, 9 Metcalf, 182. In Percy v. Millaudon, 20 Martin's Rep. 68, directors of a bank were held personally responsible to the stockholders for gross negligence or wanton disregard of duty. The statutes of Michigan, in 1837, 1838, go further, and make the directors liable for the amount of indebtedness of an insolvent bank, and stockholders are made liable secondarily in proportion to the amount of their stocks. See Angell & Ames on Corporations, pp. 546-564, 3d edit., relative to the personal responsibility of corporators under

state statutes.

In England, the 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 corporation, thereafter created, individually liable for its contracts, 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, charitable, literary, or other purpose, corporate powers, subject to such conditions for the prevention of abuses in the management of their affairs, the security of creditors and the protection of the public, as the king may see fit to impose; 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 after the expiration of three years after such person shall have ceased to have been a member of the company. See, also, infra, vol. iii. p. 27, note. By the stat

1 This applies only to that section of the act by which stockholders are liable for the deficiencies in the capital stock caused by the misconduct of directors. They are liable to the suit of the bill-holders on the dissolution of the bank for the whole of the bills. See on the adjustment of their liabilities, Crease v. Babcock, 10 Met. 525. All the bill-holders should be plaintiffs and all the stockholders defendants. See also Bogardus v. Manufacturing Co. 3 Seld. 147. No action at law lies against stockholders. Knowlton v. Ackley, 8 Cush. 93.

An act, under which the property of a manufacturing company, including its right to call assessments and the liability of stockholders for its debts, is vested in trustees for distribution among the creditors, is a bar to a suit by a creditor against a stockholder under an act-making members of manufacturing companies liable for their debts. Walker v. Crain, 17 Barb. 119.

When the statute provides that an execution against the corporation may be levied on any member, a suit must be regularly brought and carried to execution against the corporation before the members are liable. Dauchy v. Brown, 24 Vt. 197. See also Grose v. Hilt, 36 Me. 22. Mackenzie v. Railway Co. 28 Eng. L. & Eq. 216.

Corporations are divided into aggregate and sole. (a) A corporation sole consists of a single person, who is made a body

utes of 8 and 9 Vict., for consolidating in one act the provisions respecting the constitution of incorporated companies, ch. 16, 17, 18, shareholders are liable individually to the amount of their shares, and no further. In New York, not only in manufacturing incorporations 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 the debts of the company contracted before the corporation expires, the persons composing the corporation at the time of its dissolution shall be individually responsible to the extent of their respective shares in the funds of the company. By this means a stockholder, according to some recent decisions, incurs the risk not only of losing the amount of stock subscribed, but of being liable for an equal sum, provided the debts due at the time of the dissolution require it. See Briggs v. Penniman, 1 Hopkins's Rep. 300. S. C. 8 Cowen's Rep. 387; and see infra, p. 312. The tendency of legislation and of judicial decisions in the several states is to increase the personal responsibility of stockholders in the various private corporate institutions, and to give them more and more the character of partnerships, with some of the powers and privileges of corporations. In Angell & Ames on Corporations, ch. 17, 3d edit., the extent of the personal liability of the members of a private corporation for the debts of the company is fully examined.1

(a) Co. Litt. 8 b. 250 a.

1 Stockholders, it has been held, who are "jointly and severally liable" for the corporations' debts, are principal debtors, and not sureties; and therefore not discharged, by time having been given to the corporation by the creditor. Harger v. McCullough, 2 Denio's R 119.

A creditor of a corporation, of which the charter renders the stockholders personally liable for its debts, is not affected in his rights against the stockholders, by an arrangement between the corporation and the stockholder, reducing and relinquishing the number of shares subscribed. Mann v. Pentz, 2 Sand. Ch. Rep. 257. Mann v. Currie, 2 Barb. S. C. Rep. 294.

Where a corporation incurred debts exceeding three times the amount of its capital, contrary to Rev. Stat. (vol. i. 604, sec. 3,) it was decided that the directors, under whose administration this amount of debt was incurred, were personally liable, not only to creditors whose debts were contracted during the existence of their excess of corporate debts, but to any creditor after any lapse of time. Tallmadge v. Fishkill Iron Co. 4 Barb. S. C. Rep. 382.

There seems to be some conflict as to when the liability of a stockholder begins and ends. In Bank v. Burnham, 11 Cush. 183, it is held that a member is liable for debts contracted during his membership even after selling his shares. For debts contracted before his membership, he ceases to be liable on ceasing to be a member. See also Hill v. London Assurance Co. 38 E. L. & E. 407.

In Connecticut only those are liable for corporation debts who hold stock when the action is brought. Middletown Bank v. McGill, 5 Conn. 28.

In New York it seems to be unsettled who are to be considered members and liable for the company's debts. See McCullough v. Moss, 5 Den. 567.

As to personal liability of stockholders for debts of the corporation contracted out of its legitimate business, see Kearney v. Buttles, 1 Oh. St. 362.

A fraudulent assignment of stock to evade liability is void as against creditors. Dauchy v. Brown, 24 Vt. 197.