Case ID: ohio-st_48/html/0513-01.html
Source: Caselaw Access Project
Author: {"author": "Dickman, J.'", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

McFadden et al. v. Leeka et al.
    
      Contribution among partners for indebtedness created by one partner without consent of the other partners.
    
    1. An unincorporated association was formed under a specific name, for the purpose of erecting a building and carrying on the business of slaughtering hogs. The capital stock was fixed at $10,000 (afterwards increased), consisting of one thousand shares, of ten dollars each. All the original, but none of the increased stock, was subscribed or guaranteed, and the company was then organized with the adoption of a constitution and by-laws. The officers of the company consisted of five directors, a president, secretary and treasurer. The constitution made it the duty of the directors to have charge of the business of the company, to carry out the objects for which it was organized, and to see that the interests of the stockholders and company were protected; but, by one of the by-laws, the directors were forbidden to adopt plans of buildings, or make contracts, or create indebtedness, beyond the available capital of the company. By the constitution, each stockholder was to have one vote for each share of stock, and the shares were made transferable on the books of the company. The by-laws provided for the holding of regular meetings, and the calling of extra meetings of the stockholders.
    
      Held: That the association was a copartnership.
    2. Where the directors, in violation of the above mentioned article of the by-laws, incurred an indebtedness beyond the available capital of the company, they were not entitled to indemnity or contribution from other stockholders who did not assent, expressly or by necessary implication, to the creation or payment of any of such indebtedness.
    3: Stockholders, who were notified to attend meetings called by the directors to consider the matter of paying off such unauthorized indebtedness, cannot be held to have assented to the creation or payment of any of the indebtedness, because they failed to attend such meetings.
    (Decided October 20, 1891.)
    Error to the Circuit Court of Highland county.
    On the 5th day of September, 1874, there was a meeting of delegates from various subordinate granges of the Order of Patrons of Industry, held at the village of New Vienna, Clinton county, Ohio, for the purpose of making an effort to organize a company to build a slaughter and pork-packing house. At that meeting the following article of agreement was adopted:
    “We, the undersigned, do hereby agree to form ourselves into an association to be known as The Union Slaughter and Pork-packing Company of New Vienna, Clinton county, Ohio, and to pay the sum annexed to our names respectively, for the purpose of building a brick slaughter and pork-packing house in or near said village, provided the whole amount of capital stock, viz.: ten thousand dollars, which shall consist of one thousand shares of ten dollars each, shall be subscribed.' All subscriptions to be by shares and transferable on the books of the company. Each stockholder shall have one vote for each share of stock by him or her held, provided all levies or dues thereon have been paid.
    “ When the whole amount of capital stock shall have been subscribed, the stockholders shall meet and elect five directors, who shall be members of the Order of Patrons of Husbandry in good standing. °
    “ Said directors shall hold their office for one year, or until their successors are elected, and shall organize by electing a president, secretary and treasurer.
    “ And said pork-house, when built, shall be controlled and managed exclusively by the Patrons of Husbandry.
    “ Provided further, the money herein subscribed shall be paid in upon the call of the directors, after the 1st of March, 1875, in such sums as in their judgment may seem necessary.”
    The whole amount of the capital stock, to wit: 110,000, was thereafter subscribed or guaranteed, and on the 4th day of March, 1875, at a meeting of the stockholders of the company held at New Vienna, a constitution and by-laws for the government of the company were adopted by the stockholders ; and five directors were elected in pursuance of the provisions of the original article of agreement and the constitution, to manage the business of the company.
    A copy of the constitution and by-laws, as amended in respect to the name and capital stock of the company, is as follows:
    “ CONSTITUTION.
    PREAMBLE.
    Whereas it has become necessary for the farming community to unite in one common effort to protect themselves from the powerful combinations of men and money, and the urgent and unnatural channels of commerce, to which we, as producers, are now subject, do adopt the following constitution and by-laws:
    ARTICLE i.
    This association shall be known as The Union Pork-house Company of New Vienna, Clinton County, Ohio.
    
      ARTICLE II.
    The object of this company shall be to erect a slaughter and pork-packing house, and to carry on the business of slaughtering hogs, under such rules and regulations as are provided in this constitution.
    ARTICLE III.
    . Section 1. The capital stock of this company shall be fifteen thousand dollars, to consist of fifteen hundred shares of ten dollars each, which shall be transferable on the books of the company.
    Section 2. Each stockholder shall have one vote for each share of stock by him or her held, provided all assessments thereon have been paid.
    ARTICLE IV.
    All stockholders and officers of this company shall be members of the Order of Patrons of Husbandry.
    ARTICLE V.
    . Section 1. The officers of this company shall consist of five directors, who shall hold their office for one year or until their successors are elected and qualified.
    Section 2. Said directors shall organize from their own number by electing a president, secretary and treasurer. In the absence of either of the officers, the board may choose one of their own number to fill the vacancy.
    ARTICLE VI.
    It shall be the duty of the directors to have charge of the business of this company, and to carry out the objects for which it was organized, as provided in this constitution and by-laws, and to see that the interests of the stockholders and company are protected.
    ARTICLE VII.
    It shall be the duty of the president to preside at all the meetings of the company and directors, to see that the provisions of this constitution and by-laws are duly observed and enforced, inspect and announce the result of all ballotings, and perform such other duties as usually pertain to said office.
    
      . ARTICLE VIH.
    It shall be the duty of the secretary to keep a correct record of all the business transacted at all meetings of the company and directors, issue all notices required, keep a record of the number and amount of all orders issued on the treasurer, and perform such other duties pertaining to his office as may be required.
    ARTICLE IX.
    It shall be the duty of the treasurer to receive and take care of all money belonging to the company, to pay out the same on the written order of the directors, which order shall be signed by the president and secretary, to keep an account of all money received and expended, and to make a report at each regular meeting and oftener if required.
    ARTICLE X.
    All the vacancies in the office of director shall be filled by special election, twenty days notice being given.
    ARTICLE XI.
    This constitution may be altered or amended at any regular meeting by a two-thirds vote of all stock represented at said meeting. .
    BY-LAWS.
    ARTICLE I.
    This company shall hold regular meetings semi-annually, on the first Thursday of March and September.
    ARTICLE II.
    Section 1. The election of directors shall be held annually, on the first Thursday of March.
    Section 2. All elections shall be by ballot, and the majority of all votes polled shall be necessary to a choice.
    Section 8. The stockholders of this company shall have the privilege of voting by proxy, provided said authority be conferred in writing.
    ARTICLE III.
    The board of directors shall have power:
    1st. To call extra meetings of the stockholders, when necessary.
    2d. To build, or cause to be built, in or near the town of New Vienna, Clinton county, Ohio, one slaughter and one packing house, said packing house to be built of brick and stone, and covered with a fire-proof roof, and made as near fire-proof in other respects as practicable, and to be completed and furnished' with necessary fixtures on or before , the first day of November, 1875.
    3d. To purchase the necessary material for said buildings, and to employ competent workmen to build the same.
    4th. To select one of their own number, or employ a suitable stockholder of this company, to superintend the work on said buildings.
    5th. To employ a competent person to superintend the slaughter house when in operation.
    6th. To employ a guard for said buildings and contents, when in their judgment it shall be necessary.
    7th. To select a bank of deposit for the funds of the com-pany.
    8th. To have control of the packing house when completed, with'power to rent or lease the same to any responsible member or members of the Order of Patrons of Husbandry, or other parties.
    ARTICLE XV.
    
    It shall be the duty of the directors to patronize the members of the Order of Patrons of Husbandry, when purchasing material for, or employing labor on, said buildings, provided said material and labor can be procured from said persons on as reasonable terms as from other parties.
    ARTICLE v.
    The capital stock shall be paid into the hands of the treasurer on the call of the directors, but in no case shall a call be made for more than twenty per cent, at one time, nor oftener than once in thirty days, and twenty days’ notice shall be given.
    ARTICLE VI.
    The treasurer shall give bond and security for the sum of ten thousand dollars.
    •article vn.
    The officers of this company shall be paid two dollars per day for time actually spent in its services, and all necessary traveling expenses when on business of the company.
    ARTICLE VIII.
    The directors of this company shall not adopt plans of buildings or make contracts or create indebtedness beyond the available capital of this company.
    ARTICLE IX.
    These by-laws may be altered or amended at any regular meeting by a two-thirds vote of all the stock represented at said meeting.”
    In May, 1875, the directors bought of one Trueman Peale, for a consideration of $600, certain lands, and received a deed therefor, for the purpose of erecting thereon the proposed slaughter and pork-packing house.
    On the 6th day of December, 1875, the directors — having before that time been thereto authorized by a resolution passed by the stockholders — conveyed, by their deed of that date duly made and delivered, the said lands to Christopher Lewis in trust for the company, and thereafter caused the slaughter and pork-packing house to be thereon erected.
    In erecting the building, the directors exhausted all the moneys that had been collected from subscribers to the capital stock, and borrowed large sums upon their own responsibility, beyond the available capital of the company.
    They obtained a mortgage on the slaughter and pork-packing house premises from Lewis, the trustee, to indemnify them against loss on account of the indebtedness which they had thus incurred, foreclosed the mortgage, and bought in the property at foreclosure sale.
    After the directors, to wit: the defendants in error, Jonathan Leeka, Thomas Jeffs, Joshua W. Johnson, Josiah Polk and Charles B. Edwards, had bought in the property and applied the purchase-money upon the indebtedness which they had created, there still remained a large balance, for which they brought suit in the Court of Common Pleas of Highland county, against the plaintiffs in error, H- W. McFadden and others, all stockholders of The Union Pork-House Company. In the court of common pleas judgment was rendered in favor of the plaintiffs in error. The defendants in error thereupon appealed to the district court, and judgment was there rendered -against the plaintiffs in error. The supreme court reversed the judgment of the district court, and the ease was sent to the circuit court for a re-trial. In November, 1888, the case was tried in the circuit court, and judgment was there rendered against the plaintiffs in error, and this proceeding is brought to reverse the judgment of the circuit court.
    The circuit court made the following findings of fact and conclusions of law therefrom, to wit:
    “ 1. That the plaintiffs and defendants named in the petition formed a copartnership in the name and for the purposes therein set forth.
    “ 2. That the capital stock was fixed at the sum of $10,000, and this sum was to be raised by subscriptions ■ of so-called shares of stock. Each share was $10 and each member subscribed the number of shares he was willing to take, and that no work was to be done or money expended until the $10,000 of stock had been raised by subscription or guaranty.
    “ 3. That all of the stock was subscribed or guaranteed before the organization of the company.
    “ 4. That only the sum of $8,500 of this stock was ever collected.
    “ 5. That by the constitution and by-laws of the partnership, which were agreed to and adopted by the members, for the government of the partnership the right and authority to prepare plans for, purchase the necessary material, employ workmen and construct a slaughter and packing house was' conferred upon a board of directors, consisting of stockholders of the partnership or company, and the business of the concern was carried on by them.
    “6. That these directors were also authorized to and. did appoint one of their members superintendent of the work and building. The plaintiff, C. B. Edwards, was such superintendent.
    “ 7. That it was provided in said by-laws that the board of directors shall not adopt plans of building or make contracts or create indebtedness beyond the available capital of the company.
    “ 8. That the constitution and by-laws, so far as they related to the powers and duties of the directors, and the limitation forbidding them to adopt plans of building or make contracts or create indebtedness beyond the available capital of the company, were never changed, amended or altered.
    “ 9. That the subscribers organized on the 4th day of March, 1875, by adopting said constitution and by-laws and electing a board of directors to manage the business of the company.
    “10. That the directors of the company secured a site, adopted plans of building, and caused to be built thereon the pork-packing house mentioned in the petition.
    “11. That the directors, between the time they began work and the first day of December, 1875, incurred liabilities to the amount of twelve thousand four hundred and sevenJiine dollars and forty-two cents ($12,479.42), and they had collected up to that time the sum of $7,255. That the amount of liabilities was $5,224.42' in excess of the amount at the time collected, and was $3,979.42 more than was ever collected.
    “ 12. That the debt or liability created prior to the first day of December, 1875, was beyond the available capital of the company.
    “18. That this additional indebtedness was created by the directors without consultation with other stockholders and was first brought to the attention of the other stockholders, at a called meeting of stockholders held on the first day of December, 1875.
    “ 14. That by the provisions of the by-laws two regular meetings of the stockholders were to be held each year, to wit, on the first Thursdays of March and September, and the directors were empowered to call extra meetings when1 necessary.
    “ 15. That at the called meeting of stockholders on December 1, 1875, a resolution was adopted authorizing the directors to finish the building exclusive of fixtures and to borrow money to pay off the indebtedness. A postal card notice of which meeting, correctly addressed, was mailed to each shareholder.
    “ 16. That at a regular meeting begun on March 2, and adjourned to March 16, 1876, the capital stock of said company was increased to $15,000, but no additional stock was ever obtained, or any sum subscribed beyond the original $10,000.
    “ 17. At said meeting in March, 1876, the total number of shares voting was 270|.
    “18. That the total cost of said pork-house site and building alone was $14,800, and the total expenditure by the directors was $15,875, being for building, insurance and taxes. The indebtedness created by the directors was in excess of the capital stock paid in or subscribed.
    “ 19. That the plaintiffs were all stockholders of the company, and they borrowed the money sued for in this action upon their individual credit, and the board of directors used the same in payment of the indebtedness which had been created in the construction of the building, paying taxes and insurance.
    “ 20. That at a meeting of the stockholders on the 23d day of December, 1876, the trustee, to whom had been made the title to the property, was authorized to execute and deliver to the plaintiffs the mortgage in the petition described to secure them from loss on account of their individual liability on said indebtedness.
    “ 21. That the plaintiffs paid the notes mentioned in said mortgage, and that afterward suit was commenced by them in Court of Common Pleas of Clinton county against C. Lewis, the trustee, as mortgagor, to foreclose said mortgage, and that the bringing of said suit and the service of summons upon him was made known at a meeting of the stockholders.
    “ 22. That none of the stockholders, save said C. Lewis, were made parties to said action in Clinton county, and no summons was issued to any one save said Lewis.
    
      “ 23. That the Clinton county court found the amount due plaintiffs under said mortgage, and ordered the sale of the real estate to satisfy the same, and after having been appraised and twice offered for sale, and not sold for want of bidders, it was again appraised and bid in by plaintiffs at the sum of $3,333J, being two thirds the appraised value. Said sale was afterwards confirmed and deed made to plaintiffs.
    “ 24. That after applying said sum of $3,333-^-, the proceeds of the sale, there remains unpaid of said indebtedness the sum of $4,867.96, with interest at 6 per cent, from October 15, 1878.
    “ 25. That all of the capital stock which was paid in was expended in the purchase of ground and the erection of said pork-house, and the only assets of said company are the shares of stock remaining unpaid in whole or in part.
    “ 26. That there' was an impression prevailing among the stockholders that only the sum of $10,000 would be used in the business of the concern, but that there was no contract or agreement to that effect.
    “ 27. That the indebtedness to-the plaintiffs was incurred by the board of directors without the knowledge or authority of a large number of the answering defendants.
    “ 28. That after the completion of the pork-house it was accepted at a meeting of the stockholders.
    “ 29. No action was taken by any of the defendants at any meeting of stockholders by which any formal protest was made; but some of the stockholders did express their dissatisfaction on account of the creation of the debt.
    “ 30. As to the notices of regular and called meetings the court finds that printed notices were put in the post-office directed to each stockholder. The contents of these notices are not fully known, except as to the meetings held March 2 and September 26,1876. The first of these notices informed the stockholders that an election of directors would be held, and that each stockholder would be entitled to one vote for each share of stock. The second was of a called meeting, and informed the stockholders that the matter of meeting the indebtedness and completing the house would be considered; also an opportunity would be given stockholders to dispose of stock. ■
    “ 31. The court finds that H. W. McFadden had notice of all tíre' meetings, was never present at any meeting when the indebtedness was made known or talked of; that he learned about the indebtedness at Antioch and never attended any meetings after he heard of it, and he at times expressed his dissatisfaction at the creation of the debt.
    “32. That Pleasant Betterton never voted nor had the right to vote at any meeting. He received notices of the meetings.
    “33. That James West never attended any meetings of stockholders, and never expressly assented to the creation or payment of any of the indebtedness, but had notices of all meetings.
    “ 34. That Alfred Johnson never attended any of the meetings, and never expressly assented to any indebtedness and never heard of the debt until the commencement of this suit. Had notices of meetings.
    “35. That W. Harvey West attended but one meeting and got his certificate of stock. There was no quorum and no business transacted. Never knew of debt until about time suit was begun. Received notice of meetings.
    “ 36. That Samuel West never attended but one meeting. Never expressly assented to any indebtedness. Never present when subject of indebtedness discussed. Had notices of all meetings.
    “37. Samuel Polk attended meeting when indebtedness was made known; at another meeting where vote was taken by stock, he voted against paying indebtedness, and he never expressly assented to it.
    “ 38. That the defendants named in the supplemental petition as insolvent, or as having died, leaving no estate, are persons from whom, or their legal representatives, nothing can be made by legal process.
    “39. That George Moon, as executor of Simeon Moon, joined in the original answer and in the amended and sub-, stituted answer filed in this action.
    
      “40. That William Pond was not a subscriber to the capital stock of said company or a member thereof.
    “ 41. That Isaac R. Allison was a subscriber to the capital stock of said company to the amount of five (5) shares.
    “42. That Eh Powell is the administrator of Alpheus Powell, Samuel H. Moon is. the executor of Asa Moon, Collins Thompson is the administrator of John J. Achor, and C. N. Carey is the representative and liable for the share of D. M. Carey, deceased, defendants, and that this action should be revived and proceed against them as such representatives respectively, and from its foregoing findings of fact the court, as its conclusions of law, finds and holds:
    Conclusions of Law. .
    “ 1. That the purposes for which said company was formed have wholly failed, and that said copartnership is insolvent, and that there are no available assets except the amounts unpaid upon the subscriptions of solvent stockholders.
    “ 2. That there is due and owing the plaintiffs upon their claim against said company, including interest to this date, the sum of seventy-eight hundred and twenty-one dollars and seventeen cents ($7,821.17).
    “ 3. That plaintiffs are entitled to a judgment against each of said solvent stockholders who has not paid his subscription to said capital stock for the amount remaining unpaid, with interest thereon from April 2, 1879, amounting in all to $1,309.16.
    . “ 4. That after the amounts due upon said unpaid subscriptions have been applied to the payment of said sum of $7,821.17, the remainder, together with the costs of this action, should be paid by all the solvent members of said co-partnership in the proportion of the number of shares held by each to the whole amount of said indebtedness unpaid with costs taxed at $575.07, amounting in all to $7,087.08; that is to say, by the plaintiffs and all of the defendants who are solvent, and the representatives of those who have died leaving estates out of which said amounts may be collected, including Eli Powell, as administrator of Alpheus Powell, Samuel H. Moon, as executor of Asa Moon, Collins Thompson, as administrator of John J. Achor, and C. N. Carey, as representative of D. M. Carey, against each of .whom this action is hereby ordered to stand revived and proceed in their names as such representatives respectively. It is therefore ordered and adjudged that each of the following named defendants pay the sum found due upon unpaid subscription to said capital stock within thirty days from this date, or that, in default thereof, execution issue as upon judgments at law for money only, which defendants and amounts due from each are as follows, to wit.”
    Here follows first, a list of all persons who have never paid their original subscriptions, and second, a list of all the solvent stockholders, including plaintiffs in error, together with' the amount of the judgments rendered against them respectively.
    
      Alphonso Hart, for plaintiffs in error.
    
      Steel vf Hough, and Ulrio Sloahe, for defendants in error.
   Dickman, J.'

The unincorporated association known as The Union Pork-house Company, is to be regarded as merely a copartnership, and subject to the rules governing that branch of the law. It did not lose its real nature as a partnership because certain of its members were constituted directors, and its members were called stockholders, and a constitution and by-laws were adopted, and the number of its members was large. It might be deemed expedient to appoint directors to act as the special agents for managing the affairs of the company, instead of leaving each member, as in an ordinary partnership, to act as a general agent for the transaction of business in the ordinary way. The company, too, might be a partnership, although its capital stock be divided into shares, which, by the articles of association, are made transferable on the books of the company. The constitution and by-laws adopted by the shareholders are analogous to articles of copartnership, and are of equal binding force in fixing the relations of the shareholders to each other, and in shaping and governing the business of the company. The company or partnership involved in the present inquiry, was organized with a capital stock of $10,000 (afterwards increased to $15,000), consisting of one thousand shares of ten dollars each, transferable on the books of the company. All the original stock was subscribed or guaranteed before the organization of the companj'-, but no additional stock was ever subscribed beyond the original. $10,000, and of the amount subscribed, only' the sum of $8,500 was ever collected.

The constitution of the company made it the duty of the directors to have charge of the company’s business, to carry out the objects for which the company was organized, and to see that the interests of the stockholders and company were protected. And by article 8th of the by-laws it is provided that “ the directors of the company shall not adopt plans of buildings, or make contracts, or create indebtedness beyond the available capital of the company.” This provision, so obviously designed for the protection of the stockholders against an unauthorized and extravagant expenditure of money by the directors, has never been repealed, amended, changed or modified, and still remains in full force.

The directors purchased land, and caused a slaughter and pork-packing house to be erected thereon. Between the time they began work and the first day of December, 1875, as appears from the findings of fact, they had incurred liabilities to the amount of twelve thousand four hundred and seventy-nine dollars and forty-two cents. They had collected up to that date only the sum of seven thousand two hundred and fifty-five dollars, and had thus created a debt or liability beyond the available capital of the company. And this additional indebtedness had been created, contrary to one of the by-laws, without consultation with other stockholders, and was first brought to the attention of the other stockholders at a called meeting held on the first day of December, 1875.

Subsequently to the last named day, the total cost of the land and building alone reached the sum of fourteen thousand eight hundred dollars; and the total expenditure by the directors, including insurance and taxes, amounted to fifteen thousand eight hundred and seventy-five dollars.

By reason of such expenditure in excess of the capital stock paid in or subscribed, it was found by the circuit court, that after applying the proceeds of sale on the foreclosure of the mortgage made to the directors on the company’s real estate, there was due and owing to them the sum of seven thousand eight hundred and twenty-one dollars and seventeen cents, and that after the amounts due upon the unpaid subscriptions of solvent stockholders have been applied to the payment of that sum, the remainder should be paid by all the solvent members of the copartnership, including the directors, each contributing in the proportion of the number of shares held by each to the whole amount of such indebtedness.

The solvent shareholders should doubtless be held to pay the amount of their unpaid subscriptions. Their obligation to pay the amount of their shares as capital, may be treated as assets like other legal claims belonging to the company. But such unpaid subscriptions were not, as it proved, available capital of the company, upon which the directors might rely in making contracts and incurring liabilities. Available capital, like “ available means,” is a term well understood to be any assets that can be readily converted into money. Brigham v. Tillinghast, 13 N. Y. 215.

When the directors, finding they were able to collect only eight thousand and five hundred dollars of the stock, proceeded to contract an indebtedness largely in excess of the available capital of the company, and in disregard of a plain provision of an unchanged by-law, their action, as between the partners, was binding only uuon those who either assented beforehand" to the creation of the indebtedness or ratified it after it was incurred. In general, the act of one or more partners in contravention of the partnership articles in a substantial point, cannot, as among the members of the firm, bind the non-assenting partners.

One of the most obvious duties and obligations of all partners is, strictly to conform themselves to all the stipulations contained in the partnership articles. In respect to the extent of the partnership as stated in the articles, courts of equity construe the articles strictly, and do not permit the business to be extended by any of the partners without the consent of all of them. Story, Part., §§ 178, 193. In the management of the interior concerns of the partners among themselves, the weight of authority is in favor of the power of a majority of the firm, acting in good faith, to bind the minority in the ordinary transactions of the partnership, and when all have been consulted. 3 Kent’s Com., 45. But unless special provision in the articles of association be made to the contrary, this right of the majority does not extend to the right to set aside, or materially change any of the articles of the partnership. In effecting such a change, or in substantially violating any of the articles, it is essential that all should unite; otherwise, it is not obligatory upon them. Colly. Part., 3d Am. ed., 182. In no case can the majority bind the minority inter sese to anything expressly stipulated against in the contract, or which is not fairly within the scope of the partnership business, and that cannot be considered within its scope which in any respect is subversive of the fundamental agreement. Abbott v. Johnson, 32 N. H. 9; 1 Wood’s Colly. Part., § 155, p. 285 n.

In Davies v. Hawkins, 3 Maule & Sel. 488, a company was formed for brewing ale, and by deed they confided the conduct of the business to two persons, who were to be trustees of the company. General quarterly meetings of the company were to be held. It was resolved by the King’s Bench, that one person only could not be appointed at a general quarterly meeting in place of the two originally appointed under the deed, unless such alteration was made with the consent of all the subscribers. Lord Ellenbokough said, that “ a change had been made in the constitution of this company, which could not be made without the consent of the whole body of the subscribers. It was such a substituted alteration in its constitution as required the consent of all.”

The right of contribution and indemnity between parties grows, in a large measure, ‘out of the agency of the partner seeking reimbursement. Each member, as an agent of the firm, is entitled to be indemnified by the firm, against liabilities bona fide incurred by him while pursuing the authority conferred upon him by the agreement entered into between himself and his copartners; but he has no right to claim contribution from .the other members of the firm, for liabilities incurred in disregard of the authority thus reposed in him. It devolves upon agents and trustees who seek indemnity from their principals and cestuis que trustent, to show that they have not acted contrary to their instructions, for on principle they will not he entitled to any indemnity or reimbursement for losses and expenses incurred while so acting. And this rule has been applied to directors of companies. In The Worcester Corn Exchange Company’s Case, 3 De Gex, Mac. & G. 180, a company was organized for the purpose of building a corn exchange. The deed of settlement of the company limited the amount of each shareholder’s subscription, and authorized the directors to create new shares, and to raise the money hy borrowing, under certain restrictions. The capital of the company being expended, and more money being required, the directors advanced money themselves, and expended it in payment of debts of the company. They also, hut in excess of their powers, borrowed money of a bank which had notice of the company’s deed. It was held that the directors were not entitled to charge the shareholders, either in respect of the advances, or in respect of the bank debt, beyond the amount of the capital which each shareholder had agreed to subscribe. And this decision is. pronounced to be, “ strictly in conformity with the sensible rule that agents are not entitled to any indemnity from their principals in respect of unauthorized expenditures.” 1 Wood’s Colly. Part., 495.

But we are reminded that the constitution and by-laws of The Union Pork-house Company provide, by article 11 of the one and article 9 of the other, that either the constitution or by-laws “ may be altered or amended at any regular meeting by a two-thirds vote of all stockholders represented at said meeting.” And it is urged in argument, that notwithstanding article 8 of the by-laws restraining the action of the directors has never been altered or amended, yet, the shareholders, at certain extra but not regular meetings, by a vote sufficient to alter or amend that section, virtually assented to and ratified the acts of the directors in creating an indebtedness beyond the available capital of the company, by authorizing them to borrow money and directing a mortgage on the company’s property to idemnify them against loss. But the object of a change in the by-laws is not to be attained by an indirect, irregular, and unauthorized method, calculated to mislead the shareholders. The shareholders had the right to rely upon the inviolability of the constitution and by-laws, unless changed in the manner prescribed. Until the by-laws to restrict the directors in the expenditure of money should be changed in the mode provided, to wit: by a two-thirds vote of all the stock represented at a regular meeting, of which due notice had been given, and held on the first Thursda}r of March or September, the directors would be confined within the bounds of the available capital of the company, and in transgressing those bounds, would, we think, be entitled to no contribution or reimbursement from non-assenting shareholders or partners who had paid their subscriptions. If it is proposed to make an alteration in the partnership articles by an agreement which shall be binding on all parties, notice of the proposed change and of the time and place at which it is to be taken into consideration ought to be given to all partners. Const v. Harris, 1 T. & R. 496. For, even if the change is one which it is competent for a majority to make against the assent of the minority, all are entitled to be heard upon the subject; and unless all have an opportunity of opposing the change, those who object to it will not be bound by the others. 2 Lind. Part., 2d Am. ed., 410.

Recurring, however, to the court’s findings of fact in reference to the extra meeting of December 1st, 1875, when a resolution was adopted authorizing the directors to finish the building and borrow money to pay off the indebtedness; and the extra meeting of September 26th, 1876, when the matter of paying off the indebtedness, and completing the building was considered; and the extra meeting of December 28d, 1876, when the trustee was authorized to execute and deliver a mortgage to secure the directors from loss on account of their individual liability on the indebtedness, it does not appear how many shares of stock were represented at any one of those meetings, or whether any resolution was adopted by a two-thirds vote, or whether any notice was ever given to any shareholder, informing him that an alteration or amendment of any of the by-laws would be taken into consideration.

Furthermore, where a member of a firm materially violates the articles of copartnership, and claims contribution and indemnity from his copartners for the losses and expenses to which he has thereby been subjected, it will be incumbent upon him to show assent or ratification of his acts by his copartners before he can recover of them. In the findings of fact it is not disclosed that the plaintiffs in error, or any of them, ever expressly assented to the creation or payment of any of the indebtedness contracted by the directors. Indeed, the court evidently did not regard such assent necessary to bind the other shareholders. For, the court found, that a stockholder who was never present at any meeting when the indebtedness was made known or talked of, who never attended any meeting after he heard of the indebtedness, and who expressed his dissatisfaction at the creation of the debt; that a stockholder who never attended any of the meetings, never heard of the indebtedness until the commencement of the original action, and never expressly assented to it; and that a stockholder who attended a meeting when the indebtedness was made known, but voted against paying it, and never expressly assented to it, should each, nevertheless, be holden to contribute toward the reimbursement of the directors. The fact that the shareholders received notice of the meetings and failed to attend, seems to have been deemed adequate to bind them. But, the directors having disregarded an important article of the bylaws, essential to the safety and protection of the company, and thereby created an indebtedness beyond the company’s available capital, a shareholder who did not see fit upon notice, to attend a meeting called by those directors to consider their own neglect of duty, should not therefore be concluded by the action of those stockholders present who ratified the unauthorized acts of the directors.

In our view the conclusions of law, and the decree of the circuit court are not altogether sustained by the facts as found by the court; and those of the plaintiffs in error who did not, in any other manner than by failure to attend the meetings of the stockholders when notified, assent expressly or by necessary implication, to the creation or payment of any of the indebtedness incurred by the directors, should not be required to contribute toward the payment of such indebtedness, after paying the amount due upon their respective subscriptions. We think, therefore, that a judgment should be rendered for the plaintiffs in error upon the facts found, in conformity with the foregoing opinion of the court.

Judgment accordingly.