« AnteriorContinuar »
policy and justice, between shares of stock issued and became insolvent, and the losses of the creditors upon subscription at its organization, and those that
were sought to be, in part, recovered by enforcing a may afterwards be issued. The public is as much claim for unpaid stock subscription against the perabused by it.
son to whom the new stock had been issued. How The court, in the cases referred to, urged the con far does the decision of the court aid the continuing venience of the corporation and its needs in the corporation to commit the fraud which I have detransaction of its business, in behalf of its right to scribed, upon future creditors? throw its stock in as a gratuity, on the sale of its Again, suppose the corporation had been finally bonds, or to settle liability incurred by the sale of successful, would it not have been very unequal and stock newly issued, at a small percentage of its nom unjust that a new stockholder should receive a inal value. But do not the considerations apply as dividend upon $350,000 of stock for which he had strongly to corporations about to be organized, as it paid twenty cents on the dollar; whilst the remaindoes to those already in operation ? I know of in- ing stockholders would receive no greater dividend stances in which promoters of a corporation procured upon stock for which they bad paid dollar for the issuing of its bonds for the construction of its dollar? It destroys the equality of stockholders, works at a discount, and a gist of the whole of its and gives to the favored stockholder five times the stock as a bonus. They could not construct the dividend upon the actual capital invested that it works without the aid of such issue of stock, and does to the other. Whilst the case thus violates the are not the needs of the citizens about to engage in most important rules governing the issue of stock business as much to be respected its those already and accumulation of capital on one hand, it also engaged in it? Is not the evil of fictitious stock, destroys the just equality among stockholders, on issued after the corporation begins, as great as that
the other. On the other hand, if the corporation of the fictitious stock issued at its beginning ? Un-was, at the time, insolvent, or in such troubles, as der our law it may begin upon a mere subscription in that case, to produce insolvency finally, then of ten per cent without even payment of that amount,
without securing any advantage to the creditor, but, and then upon the contract of large obligations,
on the other hand, changing his position from a embarrassment begins at Its subsequent is creditor to a debtor, and making him liable as a sues of stock then come within the rule of conven
stockholder under the statute, the decision introience and necessity which is urged by the Supreme
duced a serious element of confusion as to the Court in support of the validity of the issues in the principal upon which the adjustment of accounts
between him and the other stockholders and other cases referred to. It is true the court does not fail to give its con
creditors may be made. demnation of
The real duty of relief is with the State. It is to watered "stock, but what is watered stock ? It is stock for which the corporation has
be borne in mind that these corporations are creatures not received an equivalent value, and which is,
of its law. Without capital they are absolutely 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, bor
low, and contract, break their contracts, repudiate rassed, issued certificates for new stock for the amount of $350,000 in satisfaction of a claim against their debts, refuse to pay their loans, without init for $70,000, and received therefor in payment property, to the creditors who must bear the losses,
curring any personal liability either in person or about twenty per cent of the stock sold. The court, This condition of things is both a reproach and on the ground of convenience to the corporation, in danger to the people of the State. settlement of its obligation under the particular cir
The incorporators should be required to provide, cumstances of that case, is compelled to set aside
at the outset an adequate capital by stock subscripthe fundamental rule, as stated by Justice Brown tions for the full amount of the capital fixed in the in the quotation given, that a certificate of stock certificate, and a sufficient percentage thereof renot truly representing actual capital paid, was a quired to be paid before the corporation shall be fraud and a deceit. If the corporation had there- permitted to organize, and, in the absence of such after proceeded in the conduct of its business incur- subscription and payment, if any organization is atring new obligations, claiming and securing adili- tempted, those engaging in it should be held liable tional and new credit, would not the additional as partners. The right to receive property in paystock have operated in such transaction to aid in ment of subscriptions should be strictly limited to securing such credit, under the assumption that such as is needed for the actual uses of the corporathere had been acquired an addition to the capital tion, to be valued in the mode prescribed by law. of $350,000 ? The corporation subsequently failed / Where corporations are organized by the owners of
running concerns, the property conveyed should be risk of such business, or any liability for any of the valued by disinterested appraisers, and should be losses which may result, be thrown upon the public, transferred without incumbrance of partnership in- any more than in business by the owners in their debtedness, and should exclude partnership claims, own proper name? so that the creditors of the new corporation should There is a clear distinction, as it appears to me, have bona fide and real capital as the security for the between the policy to be pursued with respect to credit given to it, to the amount of the capital certi- corporations created for the public use and those fied in the certificate of incorporation. Padded in- created for private enterprise. In what way, and voices, worthless bills, and bad debts, as a false pre how far, the public may be called upon to bear portense for the real responsibility in the corporation, tions of the risk incurred by undertakings for should be carefully prevented.
public use, is a matter of fair debate. Having asAs it is but decent justice to the public that this sumed the exercise of a franchise for the public use, fictitious person should be provided with sufficient there are duties imposed upon such corporations means to secure the debts to be contracted in its that do not apply to private; they are under obliganame, so it should be incumbent on the officers and tions to carry on and operate them, from which they stockholders of such corporation to keep and main cannot discharge themselves. But that cannot tain that fund, holding it in trust and keeping it justify a departure from honest and safe business substantially intact, for the purposes for which it methods, or dispensing with honest and safe securiwas provided. And whenever that capital becomes ties to creditors. Watered stock, excessive issue of so impaired as to no longer furnish security for the bonds, beginning of corporations on inadequate payment of corporate debts, every debt thereafter capital are no more justified with them, than it is contracted should be personally chargeable against with private corporations. the officers and stockholders of the corporation, There is no doubt but that corporate franchise is having notice of such condition. In some legisla- very useful and convenient for very much business. tion it is provided that all indebtedness incurred or In large enterprises it saves to the incorporators contracted in excess of the assets of the corporation the inconvenience and embarrassment arising from should be enforced as a liability against the stock-succession of interests by death, transfers, bankholders.
ruptcies of particular partners, and so on. But this In its very nature this capital is a trust and should is a convenience to the owners. It should not be be held as such by the corporation. Our Supreme made the means of escape from fair and just reCourt, in Taylor v. The Miami Exporting Company, sponsibility for the indebtedness incurred in the states the principal as follows:
name of the corporation for their use. “It is very clear, upon general principles, as well The Legislature has gone no further in imposing as the legislative intention, that the capital stock of a liability upon stockholders for the debts of the corporations is to be deemed a pledge or trust fund corporation than the Constitution itself imperatively for the payment the debts contracted by them. requires, and has provided scarcely any machinery The public, as well as the Legislature, have always for the enforcement of even that liability. But we supposed this to be a fund appropriated for such now have a further expedient for escaping even this purpose. The individual stockholders are not liable liability, by having a large portion of our domestic for the debts of the corporation in their private industries organized under the laws of other States, capacities. The charter relieves them from personal and as corporations of such States. It is true that responsibility, and substitutes the capital stock in these corporations can only carry on business in stead.” It is greatly to be regretted that the Ohio by the permission of the State, but, with the principal so declared by the courts of this and other exception of insurance companies, we have imposed States should have been so much qualified by some little or no restriction upon them and practically modern decisions.
they exercise and possess all the rights in Ohio that Indeed, it is difficult to understand why, in fair- domestic corporations have. While at the same ness as to corporations for the conduct of strictly time they secure to their stockholders, citizens of private business, the stockholders or owners thereof Ohio, all the exemption from liability allowed by should not be chargeable with the whole of the in- | the laws of the State under which such corporations debtedness of the corporation. Why should they are organized. This is a fraud upon our own laws enjoy exemptions that cannot be held by the in- and Constitution. It is permitting our own citizens dividual transacting business in his own name? to import into the State, for their own government The franchise is granted for their convenience alone; and their own exemption, the laws of other States to the business is to be conducted in their interest and govern them and fix their liability in the transaction for their profit alone; the public derives no benefit of their business. It not only defeats the protection or gain from it; and why should any portion of the I 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 The mere statement of the situation sufliciently that capital has been impaired so as to effect the shows the necessity, on part of the Legislature, with security for the payment of their claims. But, the respect to foreign corporations, of vindicating the limit prescribed for myself does not permit further State policy. The organization of State industries
consideration of these matters. into corporations, by its own citizens, under foreign laws, should be prohibited. It should be prohibited, also, for reasons beyond the considerations which I Abstracts of Receut Decisions. have urged, as affecting taxation of property legiti
ACCORD AND SATISFACTION mately within the jurisdiction of the State and subject rightfully to the operation of its tax laws. But
Where, in the course of performance of a these are matters beyond the scope of the discussion contract, disputes and mutual recriminations arose, in which I intended to indulge.
and afterwards a new and modified contract was The legislation that I should suggest, in view of
made by way of accord, but nothing was ever done the topics I have presented, is:
under it: Ielil, that there was no satisfaction, and First. That no corporation for profit should be
that the original contract remained in force, and an permitted to organize until not less than fifty per
action for damages could be maintained for breach cent of the capital had been subscribed and twenty
thereof. (Crow v. Kimball Lumber Co. (L. S. C. five per cent thereof paid, where the corporation C. of App. 1, 69 Fed. Rep. 61.) was to operate a public use; and that all of the CARRIERS OF GOODS.
- A local stacapital should be subscribed and paid, as to all other tion agent, as such, has no power, without further corporations.
authorization, express or implied, to bind his comSecond. That no shares of stock should be issued pany by a contract to transport freight beyond its upon said subscription, or otherwise sold, without line. It is, however, entirely competent for a carfull payment of the par value of such stock in money
rier contract to carry freight
its own or in property necessary to the use of the corpora- line, and if it does so indicate, such contract is tion, of full equivalent money value.
binding upon it. (Page v. Chicago, etc., Ry: Co. Third. That no running business shall be organ- | (S. Dak.], 64 N. Y. Rep. 1:37.) ized into a corporation, or purchased by a corpora
CORPORATIONS tion, at other than the value thereof, which shall be
To entitle one to a preference on a ascertained by appropriate public authority.
claim for services as manager of an insolvent corFourth. That the stockholders of all corporations poration for two months preceding its insolvency, for profit organized for the conduct of private busi
he must prove the services actually rendered by ness, in the sole interests of the stockholders, shall
him. (Duryee v. United States Credit System Co. be liable for the whole amount of its indebtedness, [N. J.), 32 Atl. Rep. 690.) over and above its capital and assets.
FRAUDS, STATUTE OF— CONTRACT. —The value of Fifth. That all assignments of stock made in the
work and labor supplied under a contract void by contemplation of the insolvency of a corporation for profit, or with intent to evade liability, as stock
the statute of frauds, is recoverable upon the theory
that a benefit has been recovered, from which holder, shall be void.
Sixth. That no bonds shall be issued in excess of springs an implied undertaking to pay the value of the amount of capital actually paid.
such work and labor. (Banker v. Henderson (N. J.), These provisions look only to the security of the 32 Atl. Rep. 700.) creditors and to the public dealing with the corpora
MECHANICS' LIENS-RAILROAD CONTRACTORS. tion.
The Florida statute of June 3, 1887, which gives a I have not attempted to consider or discuss the superior lien to any persons “ who shall perform question as to the rights of stockholders, as against any labor upon or for the benefit of any railroad,” the corporation or its officers, nor as to their rights etc., is to be construed as estending its benefits to among themselves. The creditors and those deal a railroad contractor who has furnished work and
labor for construction, as well as to those actually New Boolis and New Editions. performing labor. (Couper v. Gaboury [U. S. C. C. of App.), 69 Fed. Rep. 7.)
Schouler's Domestic Relations, 5th edition, by MUNICIPAL CORPORATIONS
James Schouler, LL. D., professor in the Boston TIeld, following the decision of the University of Law and author of treatises on the Supreme Court of Pennsylvania, that the language Carriers, Wills, etc.
Law of Personal Property, Bailments, including of article 9, § 8, of the Constitution of that State,
The desirability of a new edition of this able limiting the debt of cities to 7 per cent of the as work on this most important subject is easily seen sessed valuation of taxable property therein, means by the tremendous number of decisions which have the valuation fixed by the city authorities for city been made on this subject since the appearance of taxation, not made by county officers for county the last edition. It will be but necessary to menpurposes. ( Dupont v. City of Pittsburgh [U. S. C. tion that the law of Husband and Wife is changC., Penn.], 69 Fed. Rep. 13.)
ing yearly on account of the fresh enactments by
the different Legislatures and is, at present, in a PRINCIPAL AND AGENT - AUTHORITY. -An agent
most pitiable and chaotic condition. This embarwho is authorized to sell standing timber has no
rassment to the lawyer to discover the true interimplied authority to accept a note of the purchaser pretation of the law is to a great extent obviated as part payment, made payable in three months, by the appearance of this work which is most comto the order of the agent individually, and in no prehensive in its scope and complete in every part. manner disclosing his agency ; and in such case
We realize that too often the public are deceived by
an enthusiastic review of some work which is not the principal will be sustained in asking for a rescis
in accord with the merits which it deserves, but we sion of the contract. (McGrath v. Vanaman (N. J.], 32 Alt. Rep. 686.)
feel justified in highly recommending this work as
a substantial treatise and valuable text-book on RAILROAD COMPANY-MORTGAGE-FORECLOSURE this important subject of domestic relations. The — RECEIVERSILIP.-- A court of equity has no power, table of cases cited shows a tremendous amount of upon a bill for the foreclosure of a railroad mort research on the part of the author and that all the gage, to take into its custody or control, through a
recent decisions are embodied in the work. The reciver or otherwise, property not covered by the
work is divided into six parts, cach having one or
more chapters on the different parts of the subject mortgage, nor to make any order that will binder
discussed in each sub-division. The first part deals or delay creditors in subjecting property not covered with a general discussion of the law of Domestic by the mortgage to the payment of their debts.
Relations and is divided into eleven paragraphs, (Scott v. Farmers' Loan & Trust Co. [U. S. C. C. while the second part denls with Husband and Wife of App.], 69 Fed. Rep. 17.)
and is divided into seventeen chapters. The third SALES— WIEN 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
Parents, Legitimate Children and Illegitimate Chilties intended to make the payment of the purchase fourth part deals with Guardian and Ward and is
dren, and is comprised within six chapters. The price and the delivery of possession concurrent con
subdivided 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, WILL--DEVISE OF SURVIVORS. —Testator devised
General Disabilities of Infants, Acts Void and Voidhis residuary estate to his executors, to be equally able, Acts Binding upon Infant, Injuries and divided among his five children, the shares of the Frauds of Infants, Ratification and Avoidance of sons to be paid them when they attained twenty- Infants' Acts and Contracts, and Actions by and one years of age, the daughters to receive the inter- against Infants. The sixth part deals with Master est on their shares yearly during their lives; but if and Servant, Nature of the Relation, Mutual Oblieither of them die without issue her share is to go ties of the Servant as to Third Persons, and Gene
gations of Master and Servant, Rights and Liabilito her surviving brothers and sister equally to be
ral Rights and Liabilities of the Master. The index divided among them.” Held, that on the death of might, perhaps, be more elaborate, but is in the main a brother who left children, such children were not satisfactory, while the foot-notes on each page make entitled to any part of the daughter's share. (Ash- the work really practical and convenient in form. hurst v. Potter [N. J.], 32 Alt. Rep. 698.)
Published by Little, Brown & Co., Boston, Mass.
Dennett, 6 Greenl. 421; Hayden v. Shed, ni The Albany Law Journal.
Mass. 500; Marbourg v. Smith, u Kan. 554,
Schippel v. Norton, 38 Kan. 567, 16 Pac. Rep. ALBANY, OCTOBER 19, 1895.
Where an officer acting under process is
guilty of such an improper and illegal exercise Current Topics.
of authority under it, as will warrant the con
clusion that he intended from the first to use his [All communications intended for the Editor should be addressed 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
he becomes a trespasser ab initio, and is liable business matters, should be addressed to THE ALBANY LAW JOURNAL COMPANY.]
for the same as if he had acted without process. 'HE abuse of process by an officer and the Barrett v. White, 3 N. H. 210; Breck v. Blan
liability 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 ecution of legal process affords, and becomes a justification. Ilsley v. Nichols, 12 Pick. 270; trespasser ab initio, when he is guilty of such an Welsh v. Wilson, 34 Minn. 92, 24 N. W. Rep. improper and illegal exercise of authority under 327; People v. Hubbard, 24 Wend. 369; Freem. it as warrants the conclusion that he intended Ex'ns, $ 256 ; State v. Becker (Ind. Sup.), 31 from the first to use his legal authority as a cover
N. E. Rep. 950. The rigor of the common for his illegal conduct; that a plaintiff in re
law is changed, in respect to breaking into a plevin, who does not direct or participate in a
dwelling house, by the statute which authorizes malicious abuse of the writ of replevin by the
an officer to break open any building for the purofficer in whose hands it is placed for service, is pose of seizing the property called for by a writ not liable for the damages sustained by reason
of replevin, after he has demanded entrance into of the unlawful acts of the officer; and that in the building, and delivery of the property, and
the same has been refused. Gen. St. 1889, an action of trespass, in which the alleged trespass consists of an abuse of legal process, sub- | Š 4918. What constitutes a legal demand for sequent irregularities in the action in which the
entrance will depend upon the circumstances of
each case. process is issued, for which the party proceeded against is not responsible, cannot be considered It is not every irreuglarity in the execution for the purpose of characterizing the previous of process that will deprive the officer of its act. On this important point the court in the protection. To have that effect, it must be an action writes as follows:
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
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 u 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 ac the 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.
Vol. 52 — No. 16.