Case ID: ohio-st_53/html/0001-01.html
Source: Caselaw Access Project
Author: {"author": "Shacjcb:, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Snyder et al. v. The Chamber of Commerce et al.
    
      Private corporation — Articles of incorporation not for profit — Effect of provisions as to capital stock — Personal liability of trustees or directors.
    
    The declaration in the articles of incorporation of a Chamber of Commerce, that it “is formed not for profit,! ’ is not inconsistent with a provision for capital stock, nor with a declaration that it is intended to promote the prosperity of the city in which it is located; and the trustees or directors o'f such corporation are personally liable for all its debts by them contracted.
    (Decided May 14, 1895.)
    
      ERROR to the Circuit Court of Hancock county.
    The plaintiffs in error, who are partners, brought suit in the common pleas court of Hancock county, against the Chamber of Commerce of Find-lay, O., a corporation under the laws of the state of Ohio, and twenty-five ojbher defendants, who were joined as trustees of the Chamber of Commerce which was alleged to be a corporation not for profit, to recover the. amount due on a bill for fireworks sold to the board of trade.
    Two of the defendants, the Chamber of Commerce and C. C. Howell, did not answer. The other defendants filed separate answers in substance, denying the averments of the petition generally, and specifically denying that they had contracted the obligation, and in one of the answers it is alleged that the Chamber of Commerce is a corporation organized for profit, having a capital stock of $50,000, divided into shares of $100 each, of which $10,000 had been subscribed.
    On the trial, evidence was offered by the plaintiff tending, as to some of the defendants at least, to show that they had participated in the meeting-to promote the “Celebration of the Application of Natural Gas to the Mechanical Arts,” at which the fireworks were used, and had otherwise promoted the celebration under the auspices of the Chamber of Commerce. The plaintiffs also introduced the articles of incorporation of the Chamber of Commerce, containing the following statement of its purposes:
    ' ‘£ First — The name of the said corporation shall be The Chamber of Commerce of the City of Find-lay.
    “ Second — The location of said Chamber of Commerce shall be the said city of Findlay, where its principal business is to be transacted.
    “ Third — The said The Chamber of Commerce of the city of Findlay, of the county of Hancock, and state of Ohio, is formed not for profit, but for the purpose of effecting- an organization to be composed of the merchants, business men and others interested in the welfare of said city of Findlay, in its ■ progressive growth, in the advancement of its business, in providing a place of common resort during business hours of those interested in the mutual prosperity of the said city and of the people residing and doing business therein, and for the interchange of opinions, the conduct of commercial affairs, the transaction of daily business in such a hall as may be erected and provided for the use of said Chamber of Commerce, and for the doing of all other things that will enhance the interests of said city and promote the convenience and welfare of all business men trading therein, and for the doing of and carrying out the purposes for which such organizations are usually organized within and under, and so far as the same may not conflict with, but which may be in accordance with the laws of the state of Ohio.
    “ Fourth — The amount of the capital stock of the said The Chamber of Commerce of the city of Findlay shall be fifty thousand ($50,000) dollars, divided into shares of one hundred ($100) dollars each, which same shall be issued to all members who may choose to become such, and adopting its constitution, rules and by-laws may avail themselves of the privileges afforded them by the said The Chamber of Commerce.”
    The constitution of the corporation provides:
    
      “ARTICLE I.
    “Section 1. This association shall be known as The Chamber of Commerce of the citjr of Findlay.
    “ARTICLE II.
    “Section 1. Theobjects of The Findlay Chamber of Commerce are to collect, preserve and circulate valuable and useful information relating- to the business of Findlay, and especially the facts relating- to its manufacturing interests; to encourage wise and needful legislation, and to oppose the enactment of laws likely to be prejudicial to the manufacturing and commercial interests ; to study the working’s of our system of transportation, upon which our commercial prosperitjr so larg-ely depends, and endeavor to remedy, by all proper means, the defects and abuses existing- therein; to secure fair and equitable rates of freight to and from the city, the discontinuance of vexatious and unjust overcharg-es, and prompt settlement of damages on goods shipped; to facilitate the adjustment of differences, controversies and misunderstandings between its members and others; and tp strive in all ways to promote the manufacturing, commercial and other industrial interests of Findlay.
    “ARTICLE III.
    “Section 1. Any person, if recommended by a member of the association, and elected by the board of directors, may become an active member of the association upon the payment of the fees and dues prescribed by the by-laws.”
    Evidence was also introduced to show that ten per cent of the capital stock was subscribed and an organization effected by the election of the defendants as directors.
    The purchase of the articles mentioned in the petition, and the liability of the corporation to pay therefor were admitted.
    The plaintiffs requested the following instructions :
    4 ‘ First — 4 In this case we request the court to charge as a matter of law that the defendant corporation is a corporation created for purposes other than profit. ’
    4 4 Which request the court refused to give to the jury, and to which refusal to so charge the plaintiffs at the time excepted.
    ■ 4 4 Second — 4 If you find from the evidence that the defendant corporation was formed not for profit, but for the purpose of effecting an organization to be composed of the merchants, business men and others interested in the welfare of the city of Find-lay in its growth, in the advancement of its business, in providing a place for resort during business hours of those interested in the mutual prosperity of the city of Findlay, and of the people residing and doing business therein, and for the interchange of opinions, the conduct of commercial affairs, the transaction of daily business in such hall as may be erected and provided for the use of said Chamber of Commerce, and for the doing of all other things that will enhance the interests of said city, and promote the convenience and welfare of all business men trading therein, and for the doing of and carrying out of the — ¡^irposes for which such organizations are usual!® organized within and under and so far as the same may not conflict with, but which may be in accordance with the laws of the state of Ohio, then you must find the defendant corporation to be a corporation created for purposes other than profit. ’
    “Which request, also, the court refused to give to the jury, to which refusal to- so charge the plaintiffs at the time excepted.
    “ Third — ‘A corporation created for purposes other than profit may have a capital stock, and if you find from the evidence that the defendant corporation had a capital stock, that fact of itself will not be sufficient to relieve the defendants from personal liability from a debt of the corporation by them contracted. ’
    “Which request, also, the court refused to give to the juiy, to which refusal to so charge, plaintiffs at the time excepted.
    The court gave, with others of like tenor, the following propositions:
    “ First — ‘The records of the Chamber of Commerce, produced and read in evidence, conclusively show that said corporation was organized with a capital stock with a long list of subscribers thereto, and a board of directors and other officers, and that it was, in fact, so organized for business purposes and for profits, either directly or indirectly, notwithstanding the defect in its name and the statement in its charter that it is a corporation not for profit. ’
    “To which charge the plaintiffs' at the time excepted.
    
      “Second — ‘It is therefore, upon the face of the records and papers produced, to be deemed and held as a matter of law to be a business corporation, controlled by its board of directors under section 3248, Revised Statutes, and hot by trustees. ’
    
      ‘ ‘ To which charge also, plaintiffs at the time excepted.”
    The jury returned a verdict in favor of all the defendants except the corporation and Howell. A motion for a new trial was overruled and judgment entered upon the verdict. This was affirmed by the judgment of the Circuit Court, and the reversal of both judgments is sought here.
    
      Frank A. Dams, John F. Alforcl and J. M. Platt, for plaintiffs in error.
    Corporations organized under the laws of Ohio are of two classes:
    
      First — Corporations organized for profit which must have a capital stock- owned by stockholders.
    
      Second — Corporations organized for purposes other than profit consisting of members associated together for a lawful purpose.
    Corporations created for purposes other than profit may again be divided into two classes, to-wit: Those which have a capital stock and those that do not. It is apparent from the statutes themselves that corporations not. for profit may have a capital stock. A corporation not for profit, and having’ a capital stock, was before this court in the case of The Ohio College of Dental Surgery v. Rosenthal, 45 Ohio St., 183.
    The fact then that this corporation had a capital stock, in no way determines or assists in the determination of the question, whether the organization was or was not for profit. The proposition, that a private corporation can exercise no power but such as are expressly given to it by its charter, or such as are necessary to carry into execution the powers conferred by express provision, is so well settled in this state that it does not seem necessary to cite authorities in its support. Straus et al. v. Eagle Insurance Co., 5 Ohio St., 59; White's Bank of Buffalo v. Toledo Insurance Co., 12 Ohio St., 601; Franklin Bank v. Commercial Bank, 36 Ohio St., 350; Lessee of Overmyer v. Williams, 15 Ohio, 26; Bonham v. Taylor et al., 10 Ohio, 108; Bank of Chillicothe v. Swayne et al., 8 Ohio, 257 ; Ehrman v. Insurance Co., 35 Ohio St., 324; State v. Vanderbilt, 37 Ohio St., 590; Railroad Co. v. Hinsdale, 45 Ohio St., 556; Railway Co. v. Iron Co., 46 Ohio St., 44; Niagara County Bank v. Baker, 15 Ohio St., 68; Kilbreth v. Bates, 38 Ohio St., 187; Morawetz on Private Corporation, section 316; Waterman on Corporations, vol. 1, p. 113; Thomas v. Railroad Co., 101 U. S., 82; Dartmouth College Case, 4 Wheat., 518.
    The individual defendants, therefore, of this corporation would be personally liable for all debts by them contracted either directly or indirectly, by the intervention of an agent. It may be contended that because this corporation claims to have had a capital stock that the liability is upon the stock and not upon the trustees individually. This will not do. The statute does not so read. If that construction was true, then the statute, would read, the trustees of a corporation created for purposes other than profit and not having a. capital stock shall be personally liable, etc. The section in its terms includes the trustees of all corporations not for profit, whether they have a. capital stock or not.
    
      A. Blackford, E. T. Dunn and II. F. Burket, for defendants in error.
    With powers in the charter the most ample for profit, with a capital stock ample in amount to make profit, divided into shares well calculated for profit, opening books for subscription to-capital stock, indicating- profit, subscribing for capital stock in amounts from one hundred to two thousand dollars, indicating an expectation of division of profits in proportion to amount of capital stock held 'by each, and electing- directors instead of trustees, can it be said that all these indications-of a corporation for profit are to be overcome by the single recital of the charter that the corporation desire to become incorporated under the laws of Ohio for purposes other than profit? If such was their desire they failed to carry that desire into effect.
    If we are right in our confident claim that this is a corporation for profit, then there is no error in the record, and the judgments should be affirmed. If it was a corporation not for profit, then there is an utter failure of proof that the defendants were the trustees of the corporation. All. the record evidence clearly shows that these defendants in error were elected as directors and not as trustees. The difference between a director and a trustee, is wide and marked. Proof that a. man has been elected director does not prove that-he was elected a trustee; and proof that he accepted the office of director does not prove that he-accepted the office of trustee.
    Although the debt may have been contracted b}7-trustees of a corporation not for' profit, it would be the debt of the corporation, and the trustees-would only be collaterally liable for it. Wright v. McCormick, 17 Ohio St., 87; Walbrecht v. Puckelat,, 9 Law Bull., 335; Brown v. Hitchcock, 36 Ohio St., 667.
    The difference in the imposing liability upon the-trustees is because of the difference between the
    
      two classes of corporations, those of this class having no capital stock, but the liability is in our opinion of the same nature, to be resorted to by creditors, only when the debt cannot be made ag'ainst the corporation itself. But it is not sufficient merely to show an act of insolvency or failure because notwithstanding a failure to meet an obligation, the property may remain.
   Shacjcb:, J.

The claim of the plaintiffs is that the defendants are liable in this action under the provisions of section 3261 of the Revised Statutes : “The trustees of a corporation created for a purpose other' than profit, shall be personalty liable for all debts of the corporation by them contracted. ”

The view of the trial court, as indicated by the instructions given and by its refusals to instruct as requested, was that although the articles of incorporation of the chamber of commerce declared that it was “formed not for profit,” that declaration is not entitled to controlling effect, because of the provision for capital stock and because •of the declaration in the articles that the corporation was formed for the purposes of doing such things as would ‘ ‘ enhance the interests of the city and promote the convenience and welfare of all business men trading therein.”

Bjr the provisions of section 3S32, corporations of this character are authorized to acquire such real estate as may be for their interest, which would require, capital, and certificates' of stock would be convenient evidence of the interests of the several members therein. That the existence of capital stock does not conclusively indicate that the corporation is for profit is made clear by the provisions of section 3262: “A corporation for profit, after its original capital stock is fully paid up, or a corporation not for profit, having- a capital stock, may increase its capital stock or the number of shares into which its capital stock is divided.” This provision of the statute makes it clear that the proposition of law contained in the third request is sound.

Nor was the view of the trial court justified by the fact that the corporation was intended to promote the growth and prosperity of the city, and-thus to confer incidental benefit upon its members and officers in common with others owning property in the city or doing business therein. The corporation, though authorized to own or lease real estate for its general purposes, was not authorized to deal therein, nor could it transact any business out of which profits payable as dividends could be realized. The ownership of stock was not necessary to membership in the corporation, nor to officjal participation in its management. Since those who, as directors or trustees, incur the debts that may be incident to the management of a corporation of this character do not necessarily bear the liability which the statute imposes upon stockholders, they are within the provisions of section 3261 of the statutes. Corporations for profit within the meaning of the statute are those which are formed for the prosecution of business enterprises with a view to realizing gains to be distributed as dividends among the shareholders in proportion to their contributions to the capital stock.

For error in the instructions given and in refusing to instruct as requested, the judgments of the circuit court and court of common pleas are reversed.

Bürket, J., having- been of counsel, did not sit.