policy and justice, between shares of stock issued upon subscription at its organization, and those that may afterwards be issued. The public is as much abused by it. The court, in the cases referred to, urged the convenience of the corporation and its needs in the transaction of its business, in behalf of its right to throw its stock in as a gratuity, on the sale of its bonds, or to settle liability incurred by the sale of stock newly issued, at a small percentage of its nominal value. But do not the considerations apply as strongly to corporations about to be organized, as it does to those already in operation? I know of instances in which promoters of a corporation procured the issuing of its bonds for the construction of its works at a discount, and a gift of the whole of its stock as a bonus. They could not construct the works without the aid of such issue of stock, and are not the needs of the citizens about to engage in business as much to be respected as those already engaged in it? Is not the evil of fictitious stock, issued after the corporation begins, as great as that of the fictitious stock issued at its beginning? Under our law it may begin upon a mere subscription of ten per cent without even payment of that amount, and then upon the contract of large obligations, embarrassment begins at once. Its subsequent is sues of stock then come within the rule of conven ience and necessity which is urged by the Supreme Court in support of the validity of the issues in the cases referred to. and became insolvent, and the losses of the creditors were sought to be, in part, recovered by enforcing a claim for unpaid stock subscription against the person to whom the new stock had been issued. How far does the decision of the court aid the continuing corporation to commit the fraud which I have described, upon future creditors? Again, suppose the corporation had been finally successful, would it not have been very unequal and unjust that a new stockholder should receive a dividend upon $350,000 of stock for which he had paid twenty cents on the dollar; whilst the remaining stockholders would receive no greater dividend upon stock for which they had paid dollar for dollar? It destroys the equality of stockholders, and gives to the favored stockholder five times the dividend upon the actual capital invested that it does to the other. Whilst the case thus violates the most important rules governing the issue of stock and accumulation of capital on one hand, it also destroys the just equality among stockholders, on the other. On the other hand, if the corporation was, at the time, insolvent, or in such troubles, as in that case, to produce insolvency finally, then without securing any advantage to the creditor, but, on the other hand, changing his position from a creditor to a debtor, and making him liable as a stockholder under the statute, the decision intro duced a serious element of confusion as to the principal upon which the adjustment of accounts between him and the other stockholders and other creditors may be made. row, and contract, break their contracts, repudiate their debts, refuse to pay their loans, without incurring any personal liability either in person or property, to the creditors who must bear the losses. This condition of things is both a reproach and danger to the people of the State. It is true the court does not fail to give its conThe real duty of relief is with the State. It is to demnation of "watered" stock, but what is watered be borne in mind that these corporations are creatures stock? It is stock for which the corporation has of its law. Without capital they are absolutely not received an equivalent value, and which is, therefore, fictitious, in whole or in part, and certi-myths without substance, with neither body nor fies an interest in capital which does not exist. In soul. The stockholders may, in the name of the one case, a corporation that was at the time embar-corporation, manage their own business, buy, borrassed, issued certificates for new stock for the amount of $350,000 in satisfaction of a claim against it for $70,000, and received therefor in payment about twenty per cent of the stock sold. The court, on the ground of convenience to the corporation, in settlement of its obligation under the particular circumstances of that case, is compelled to set aside the fundamental rule, as stated by Justice Brown in the quotation given, that a certificate of stock not truly representing actual capital paid, was a fraud and a deceit. If the corporation had thereafter proceeded in the conduct of its business incurring new obligations, claiming and securing additional and new credit, would not the additional stock have operated in such transaction to aid in securing such credit, under the assumption that there had been acquired an addition to the capital of $350,000? The corporation subsequently failed The incorporators should be required to provide, at the outset an adequate capital by stock subscriptions for the full amount of the capital fixed in the certificate, and a sufficient percentage thereof required to be paid before the corporation shall be permitted to organize, and, in the absence of such subscription and payment, if any organization is attempted, those engaging in it should be held liable as partners. The right to receive property in payment of subscriptions should be strictly limited to such as is needed for the actual uses of the corporation, to be valued in the mode prescribed by law. Where corporations are organized by the owners of running concerns, the property conveyed should be valued by disinterested appraisers, and should be transferred without incumbrance of partnership indebtedness, and should exclude partnership claims, so that the creditors of the new corporation should have bona fide and real capital as the security for the credit given to it, to the amount of the capital certified in the certificate of incorporation. Padded invoices, worthless bills, and bad debts, as a false pretense for the real responsibility in the corporation, should be carefully prevented. As it is but decent justice to the public that this fictitious person should be provided with sufficient means to secure the debts to be contracted in its name, so it should be incumbent on the officers and stockholders of such corporation to keep and maintain that fund, holding it in trust and keeping it substantially intact, for the purposes for which it was provided. And whenever that capital becomes so impaired as to no longer furnish security for the payment of corporate debts, every debt thereafter contracted should be personally chargeable against the officers and stockholders of the corporation, having notice of such condition. In some legislation it is provided that all indebtedness incurred or contracted in excess of the assets of the corporation should be enforced as a liability against the stockholders. In its very nature this capital is a trust and should be held as such by the corporation. Our Supreme Court, in Taylor v. The Miami Exporting Company, states the principal as follows: "It is very clear, upon general principles, as well as the legislative intention, that the capital stock of corporations is to be deemed a pledge or trust fund for the payment of the debts contracted by them. The public, as well as the Legislature, have always supposed this to be a fund appropriated for such purpose. The individual stockholders are not liable for the debts of the corporation in their private capacities. The charter relieves them from personal responsibility, and substitutes the capital stock instead." It is greatly to be regretted that the principal so declared by the courts of this and other States should have been so much qualified by some modern decisions. Indeed, it is difficult to understand why, in fairness as to corporations for the conduct of strictly private business, the stockholders or owners thereof should not be chargeable with the whole of the indebtedness of the corporation. Why should they enjoy exemptions that cannot be held by the individual transacting business in his own name? The franchise is granted for their convenience alone; the business is to be conducted in their interest and for their profit alone; the public derives no benefit or gain from it; and why should any portion of the risk of such business, or any liability for any of the losses which may result, be thrown upon the public, any more than in business by the owners in their own proper name? There is a clear distinction, as it appears to me, between the policy to be pursued with respect to corporations created for the public use and those created for private enterprise. In what way, and how far, the public may be called upon to bear portions of the risk incurred by undertakings for public use, is a matter of fair debate. Having assumed the exercise of a franchise for the public use, there are duties imposed upon such corporations that do not apply to private; they are under obligations to carry on and operate them, from which they cannot discharge themselves. But that cannot justify a departure from honest and safe business methods, or dispensing with honest and safe securities to creditors. Watered stock, excessive issue of bonds, beginning of corporations on inadequate capital are no more justified with them, than it is with private corporations. There is no doubt but that corporate franchise is very useful and convenient for very much business. In large enterprises it saves to the incorporators the inconvenience and embarrassment arising from succession of interests by death, transfers, bankruptcies of particular partners, and so on. But this is a convenience to the owners. It should not be made the means of escape from fair and just responsibility for the indebtedness incurred in the name of the corporation for their use. The Legislature has gone no further in imposing a liability upon stockholders for the debts of the corporation than the Constitution itself imperatively requires, and has provided scarcely any machinery for the enforcement of even that liability. But we now have a further expedient for escaping even this liability, by having a large portion of our domestic industries organized under the laws of other States, and as corporations of such States. It is true that these corporations can only carry on business in Ohio by the permission of the State, but, with the exception of insurance companies, we have imposed little or no restriction upon them and practically they exercise and possess all the rights in Ohio that domestic corporations have. While at the same time they secure to their stockholders, citizens of Ohio, all the exemption from liability allowed by the laws of the State under which such corporations are organized. This is a fraud upon our own laws and Constitution. It is permitting our own citizens to import into the State, for their own government and their own exemption, the laws of other States to govern them and fix their liability in the transaction of their business. It not only defeats the protection which the Constitution intended to give to the com munity as against the improper use of a corporate | ing with the corporation are interested in the quesfranchise, but it subjects those citizens to all the in- tion as to who are stockholders and as to the changes conveniences of remedy, to that limitation of relief of stockholdings made from time to time, inasmuch which arises from the fact that it is a foreign cor- as that is a part of the security which the State poration governed by foreign laws, and can only be gurantees to them in dealing with it. If they have reached and called to an account as to the use of its a legal or equitable interest in the capital of the corcharter, the remedies of dissolution and other pro- poration so as to entitle them to inquiry as to its ceedings against it, in the State under whose laws it condition, they may also be entitled to know, from is organized. time to time, in periodical statements, as to how far that capital has been impaired so as to effect the security for the payment of their claims. But, the limit prescribed for myself does not permit further consideration of these matters. The mere statement of the situation sufficiently shows the necessity, on part of the Legislature, with respect to foreign corporations, of vindicating the State policy. The organization of State industries into corporations, by its own citizens, under foreign laws, should be prohibited. It should be prohibited, also, for reasons beyond the considerations which I have urged, as affecting taxation of property legitimately within the jurisdiction of the State and subject rightfully to the operation of its tax laws. these are matters beyond the scope of the discussion in which I intended to indulge. But The legislation that I should suggest, in view of the topics I have presented, is: First. That no corporation for profit should be permitted to organize until not less than fifty per cent of the capital had been subscribed and twentyfive per cent thereof paid, where the corporation was to operate a public use; and that all of the capital should be subscribed and paid, as to all other corporations. Second. That no shares of stock should be issued upon said subscription, or otherwise sold, without full payment of the par value of such stock in money or in property necessary to the use of the corporation, of full equivalent money value. Third. That no running business shall be organ-| ized into a corporation, or purchased by a corporation, at other than the value thereof, which shall be ascertained by appropriate public authority. Fourth. That the stockholders of all corporations for profit organized for the conduct of private business, in the sole interests of the stockholders, shall be liable for the whole amount of its indebtedness, over and above its capital and assets. Fifth. That all assignments of stock made in the contemplation of the insolvency of a corporation for profit, or with intent to evade liability, as stockholder, shall be void. Sixth. That no bonds shall be issued in excess of the amount of capital actually paid. These provisions look only to the security of the creditors and to the public dealing with the corporation. I have not attempted to consider or discuss the question as to the rights of stockholders, as against the corporation or its officers, nor as to their rights among themselves. The creditors and those deal CARRIERS OF GOODS -CONTRACT. A local station agent, as such, has no power, without further authorization, express or implied, to bind his company by a contract to transport freight beyond its line. It is, however, entirely competent for a carrier to contract to carry freight beyond its own line, and if it does so indicate, such contract is binding upon it. (Page v. Chicago, etc., Ry: Co. [S. Dak.], 64 N. Y, Rep. 137.) CORPORATIONS PREFERENCE. To entitle one to a preference on a claim for services as manager of an insolvent corporation for two months preceding its insolvency, he must prove the services actually rendered by him. (Duryee v. United States Credit System Co. [N. J.], 32 Atl. Rep. 690.) INSOLVENT CORPORATION FRAUDS, STATUTE OF CONTRACT. -The value of work and labor supplied under a contract void by the statute of frauds, is recoverable upon the theory that a benefit has been recovered, from which springs an implied undertaking to pay the value of such work and labor. (Banker v. Henderson [N. J.], 32 Atl. Rep. 700.) MECHANICS' LIENS-RAILROAD CONTRACTORS. The Florida statute of June 3, 1887, which gives a superior lien to any persons "who shall perform any labor upon or for the benefit of any railroad," etc., is to be construed as extending its benefits to a railroad contractor who has furnished work and New Books and New Editions. Schouler's Domestic Relations, 5th edition, by James Schouler, LL. D., professor in the Boston University of Law and author of treatises on the Law of Personal Property, Bailments, including Carriers, Wills, etc. The desirability of a new edition of this able work on this most important subject is easily seen by the tremendous number of decisions which have been made on this subject since the appearance of the last edition. It will be but necessary to mention that the law of Husband and Wife is changing yearly on account of the fresh enactments by the different Legislatures and is, at present, in a most pitiable and chaotic condition. This embarrassment to the lawyer to discover the true inter PRINCIPAL AND AGENT AUTHORITY. -An agent who is authorized to sell standing timber has no implied authority to accept a note of the purchaserpretation of the law is to a great extent obviated as part payment, made payable in three months, to the order of the agent individually, and in no manner disclosing his agency; and in such case the principal will be sustained in asking for a rescis by the appearance of this work which is most comprehensive in its scope and complete in every part. We realize that too often the public are deceived by an enthusiastic review. of some work which is not in accord with the merits which it deserves, but we sion of the contract. (McGrath v. Vanaman [N. J.], feel justified in highly recommending this work as 32 Alt. Rep. 686.) RAILROAD COMPANY-MORTGAGE-FORECLOSURE -RECEIVERSHIP.-A court of equity has no power, upon a bill for the foreclosure of a railroad mortgage, to take into its custody or control, through a reciver or otherwise, property not covered by the mortgage, nor to make any order that will hinder or delay creditors in subjecting property not covered by the mortgage to the payment of their debts. (Scott v. Farmers' Loan & Trust Co. [U. S. C. C. of App.], 69 Fed. Rep. 17.) a substantial treatise and valuable text-book on this important subject of domestic relations. The table of cases cited shows a tremendous amount of research on the part of the author and that all the recent decisions are embodied in the work. The work is divided into six parts, cach having one or more chapters on the different parts of the subject discussed in each sub-division. The first part deals with a general discussion of the law of Domestic Relations and is divided into eleven paragraphs, while the second part deals with Husband and Wife and is divided into seventeen chapters. The third SALES-WHEN TITLE PASSES. In a contract for part is on Parent and Child, The Right of Parents the sale of personal property, where no agreement and Duties and Right of Children with reference to is made as to credit, the law presumes that the par-dren, and is comprised within six chapters. The Parents, Legitimate Children and Illegitimate Chilties intended to make the payment of the purchase fourth part deals with Guardian and Ward and is price and the delivery of possession concurrent consubdivided into nine chapters on Guardians in Genditions. The vendor has the right to perform his eral, Appointment of Guardians, Termination of part of the contract, or, if the goods have been Guardian's Authority, Nature of the Guardian's delivered with the expectation of immediate pay- Office, Rights and Duties of the Guardian concernment, and this condition is not performed, the ven- ing the Ward's Person, Rights and Duties of the dor may retake possession of the same. (George Guardian as to the Ward's Estate, Sales of the W. Merrill Furniture Co. v. Hill [Me.], 32 Alt. Rep. Ward's Real Estate, The Guardian's Bond, Inven712.) tory and Accounts, and the Rights and Liabilities of the Ward. The fifth part deals with Infancy, General Disabilities of Infants, Acts Void and Voidable, Acts Binding upon Infant, Injuries and Frauds of Infants, Ratification and Avoidance of Infants' Acts and Contracts, and Actions by and against Infants. The sixth part deals with Master and Servant, Nature of the Relation, Mutual Obligations of Master and Servant, Rights and Liabiliral Rights and Liabilities of the Master. The index might, perhaps, be more elaborate, but is in the main satisfactory, while the foot-notes on each page make the work really practical and convenient in form. Published by Little, Brown & Co., Boston, Mass. WILL--DEVISE OF SURVIVORS.-Testator devised his residuary estate to his executors, to be equally divided among his five children, the shares of the sons to be paid them when they attained twentyone years of age, the daughters to receive the interest on their shares yearly during their lives; but if either of them die without issue her share is to go to her surviving brothers and sister equally to be divided among them." Held, that on the death of a brother who left children, such children were not entitled to any part of the daughter's share. (Ashhurst v. Potter [N. J.], 32 Alt. Rep. 698.) ties of the Servant as to Third Persons, and Gene The Albany Law Journal. ALBANY, OCTOBER 19, 1895. Current Topics. [All communications intended for the Editor should be ad dressed simply to the Editor of THE ALBANY LAW JOURNAL. legal authority as a cover for his illegal conduct, All letters relating to advertisements, subscriptions, or other business matters, should be addressed to THE ALBANY LAW JOURNAL COMPANY.] he becomes a trespasser ab initio, and is liable for the same as if he had acted without process. THE 'HE abuse of process by an officer and the Barrett v. White, 3 N. H. 210; Breck v. Blanliability of the plaintiff in process is chard, 20 N. H. 323; Grafton v. Carmichael, 48 thoroughly discussed in the case of Wurmser v Wis. 660, 4 N. W. Rep. 1079; Ross v. PhilStone, 40 Pac. Rep. 993, in which it was held brick, 39 Me. 29; Stoughton v. Mott, 25 Vt. by the Court of Appeals of Kansas that an offi- 668. If goods are taken by an unlawful breakcer forfeits the protection which the proper ex-ing into a dwelling house, legal process is no justification. Ilsley v. Nichols, 12 Pick. 270; Welsh v. Wilson, 34 Minn. 92, 24 N. W. Rep. 327; People v. Hubbard, 24 Wend. 369; Freem. Ex'ns, § 256; State v. Becker (Ind. Sup.), 31 N. E. Rep. 950. The rigor of the common law is changed, in respect to breaking into a dwelling house, by the statute which authorizes an officer to break open any building for the purpose of seizing the property called for by a writ of replevin, after he has demanded entrance into the building, and delivery of the property, and the same has been refused. Gen. St. 1889, 4918. What constitutes a legal demand for entrance will depend upon the circumstances of each case. ecution of legal process affords, and becomes a trespasser ab initio, when he is guilty of such an improper and illegal exercise of authority under it as warrants the conclusion that he intended from the first to use his legal authority as a cover for his illegal conduct; that a plaintiff in replevin, who does not direct or participate in a malicious abuse of the writ of replevin by the officer in whose hands it is placed for service, is not liable for the damages sustained by reason of the unlawful acts of the officer; and that in an action of trespass, in which the alleged trespass consists of an abuse of legal process, subsequent irregularities in the action in which the process is issued, for which the party proceeded against is not responsible, cannot be considered for the purpose of characterizing the previous On this important point the court in the action writes as follows: act. It is not every irreuglarity in the execution of process that will deprive the officer of its protection. To have that effect, it must be an act of such gross delinquency as to clearly It is well to observe the difference between a point to the wrong intent. Taylor v. Jones, malicious use and a malicious abuse of process. 42 N. H. 25. If there was no abuse of the The former exists when legal process, civil or process at the taking, subsequent irregularities criminal, is used out of malice and without just in the proceedings in the replevin action could cause, but only its regular execution is contemp- not affect the previous taking so as to make it lated. There is a malicious abuse of process a trespass. Gardner v. Campbell, 15 Johns. where a party, under process legally and prop- 402; Grafton v. Carmichael, 48 Wis. 660; 4 N. erly issued, employs it wrongfully and unlaw-W. Rep. 1079. Conceding that the conduct fully, and not for the purpose it is intended by of the constable was such as to make him a law to effect. Wood v. Graves, 144 Mass. 366, trespasser ab initio, and therefore liable in a 11 N. E. Rep. 567. The malicious use of pro- proper action for damages, yet before the cess, either civil or criminal, is reached by an plaintiff in that action can be made liable for action for malicious prosecution; but such acthe same acts, it must appear that he contion cannot be commenced until after the mal- trolled, directed, or counseled the unlawful use iciously prosecuted action has terminated in of the process. There is no legal presumption favor of the defendant therein. Plummer v. that one concurs in the unlawful act of another. |