Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1885-10-10

Thousand dollars with the COMPANY. and the
contract, Exhibit A, was executed and dated
original contract which had contained the
power 10 the other parties to rescind This
transaction made Cotton the owner of one-ninth
of the stock of the W. d. Co. while each of tbe
other parties had two-ninths
II IS perhaps of no great consequence in this
case, but one can hardly resist the impression
have an equal share with the others but that he
was not able TO contribute his proportion. aud
that the notice to rescind was given in conse-
quence OF this failure, and the final arrange
ment was the compromise made
AT all events the corporation continued To he
as 1t had been, the almost universal agent OF
the associates in the accomplishment of the
schemes which ! think were CONTEMPLATED
when the parties first contracted for the COOP
Grafton OF each other in the contract Ex A.
They have built many railroads, steam YES
sells, fences ana bridges, repaired whnryes
docks and steamboais-in fact have done e,erv-
thing in the way OF construction renairirc or
furnishing that thei. extensive business has re-
quired.
II has had surveys made where If was ron.
structing no roads 1t has, in fact, furnished
the designs of the association before they had
or any contract with the company.
The new companies We're frequently or at
least sometimes, bound by the employees of the
w. d. Co., posing as corporators and then as
The new company then contracting with its
virtual creator to build and furnish its road tor
all Its stock and certain amount of bonds per
mile, the working capital was furnished nv de-
posts made by the corporators as before men
toned. These constituted the working capital
but always appeared on the books of the com
pany as Indebtedness due the depoSitors
ITS INDEBTEDNESS AND WORKING CAPITAL.
Thus, when Elk. was made out il showed an
Indebtedness as follows
To estate of Mark Hopkins 81 OS7. 600 10
To Charles 22l95H 70
10 leland 76S 734 s.
To g. p Huntington 3519 701 AZ
To estate of Colton..-..,............. 3l9S60 So
To s., H., II. K C..................... 29S Dos So
But while the Western Development Company
| seems to have been gotten up TO carry out and
realize the project for which the parties asso-
ciated themselves by Exhibit A. and while il
was managed almost like partnership, to ac-
complish their common purpose and to serve
their personal ends, il nevertheless was corpo-
ration and transacted its business as a corpora
tion going through with all the corporate
forms. The officers were the mere employees of
| the assC ciates "a term which l use for convent
ence meaning only the parties to contract-Ex-
hibit Al, and implicitly obeyed the directions of
either one Of them. But such directions were
generally, where necessary, reduced to the form
| of corporate resolutions.
The contracts under which they have per
formed such an amount of labor and secured
so many millions of assets were with their own
creatures, or, at least, with corporations pTaC-
tically belonging to the associates. The CON
tracts were of course all voidable, at the option
of either party to them, only neither party had
voice or Volitfon against the associates II may
be said that in effect these associates organized
corporations and built railways, taking, as they
had right to do, all the stock and such amount
of bonds as they saw fit to incumber their prop
erty with. Perhaps, in proper case-that is,
| where il was necessary to do iuStice-the Court
would disregard these corporate forms and,
| reaching beyond them, grasp the substance.
lit were necessary to enforce some contract
in relation to these matters made between them
selves, perhaps the Court would do so. But
| often, perhaps generally, forms are made to Sc
cure rights Are these corporations here mere
| forms, or do they and were they intended to
| constitute and show the relations of these par
ties to each other The law of the State author
| ICES corporations for any purpose for which men
may lawfully associate themselves. There is,
| then, no business which 1t is possible for CO.
| partnership to conduct which may not be car
| ried on by corporation. see no reason why,
| when persons have determined TO embark in
| any kind of business together, they may not de-
| termine for themselves whether they will do so
| as partners or as stockholders in a corporation.
| And il they have so chosen / do not compre-
| bend how the Court can disregard the relation
| they have contracted, and force upon them those
they have declined to enter into. The case cited
falls far short of the eXigencies of the PLAINTIFF
| case in this respect. In both of the cases cited
| from this State there was an antecedent agree
ment, to carry out which in part the corporation
was formed. The parties to the agreemeutlwere
| the only stockholders. Some one of the con
tracing parties attempted to avoid liability OF
defeat the contract, on the ground that this cor
poration they have created as an instrument tC
carry into effect this very agreement is now
| third party, and not bound by the agreement a.
| not a party to it.
EFFORT To AVOID PARTNERSHIP
The Court in effect, said justice shall not be
defeated by this merely formal thing. 1t really
only represents yourselves We viii look behind
the form to the substance. The contract shall
not be defeated by this mere technicaity. The
case of Short VS.. Bandry hardly amounted tC
| this There the corporation was and was ere
ated only TO act as q naked trustee of the lega
hon nea -YRt.
the partnership, and it would seem that whole
matter might have been settled without the
comments made Here there is no question OF
| an altecedent contract, with the enforcement o
which the corporate entity stands in the way i
is not an obstruction which can embarrass the
| Court in granting relief, which, but for such
| They are to be made to vanish from sight to show
| what the rights of the parties are, or rather Il
fix upon the defendants obligations which they
deliberately decline to assume, and not because
they stand in the way or obstruct the Court il
ascertaining and securing the rights of the par
ties. All the parties were evidently unwilling
to assume towards each other the relation o
| partners. The law offered them the choice L
| become stockholders in corporation and they
deliberately contracted that relation. Tho
same business could have been carried on il
| either form, and ii the corporation were a close
| corporation. in pretty much the same manner
except as to the authority of the managers: bu
this makes all the difference in the world as tC
the relations of the parties
But one position Of the plaintiff is, admitting
| that these are all corporations and are to be
| treated as such, still they are but the instru
| mentalities of a copartnership, which was ere
ated by the association of Cotton with the de
| PENDANTS and Mark Hopkins. The individual.
| were partners and, in consequence of the cor
porate agencies used by them, they had no firm
name or partnership capital designated as such
and the individual interests of the partners were
measured by the stock held by each in their re
Spective corporations and the profits of the
partnership were paid by way of dividends OF
| the shares of stock in the VariOuS pnrpOratiOpS
| held by each respectively. see no mention o.
business i'll the complaint carried on by these
parties except corporate business. Regarding
these companies as corporate entities, it is diff
cult to see how there can be any other relation
| between the parties, so far as the business Of
| each corporation is concerned, than that of co
stockholders.
am not now saying that, taking the entire
group of companies together there may not have
been here some sort of fiduciary relation; but
| speaking now of definite relation of copartner
| ship TO carry on business. The complaint an
| swers that of common carriers; but this we find
entirely in the hands of these corporate instru
| mentalities which entirely manage them, and
are fully adequate TO the occasion, without the
partnership. What is the business beyond the
scope of the business of the corporations il
which they become mere instrumentalities
| Bring us the books of this larger business and
show us its profits. What is there earned which
| Is not corporate property? By averment, all the
profits are corporate profits aud are divided
among the stockholders as the profits of Other
corporations are divided.
FIDUCIARY RELATIONS DO NOT IMPLY PARTNER
SHIP.
l can understand how corporation may be-
made an instrumentalty of a partnership
These railroad companies are used rs instru
mentalities by many partnerships. But cannot
comprehend a partnership which has no firm
name. no capital stock, no business. and earn.
no profits and incurs no loss Take the case o.
loss. How can there be II partnership loss
Ihese profits are as stockholders, and theii
losses would be of the same character. Wha
liabilities do they incur except as stockholders
Inc TACT that they have sometimes borrowed
money on their individual notes for the corpo
ration would not affect the question ANY
stockhOider may do that. And will ii be con
tended that If the majority holders of stock con
suit as to the policy of the corporation. ant
agree together to enforce such policy that they
thereDy became partners? | can see no reason
why the averments OF the complaint as to tn,
mode OF conducting this alleged eopartnership
ana the divisions of profits, would not fit any
case where there is such consultation as well as
thls IL seems to me this is a misuse of the
Term nstrumentality. The proper object of srlel
corporation Is to make money for its stockhold
ers. through corporate business as other cOrpo
ratlons 90. To say that the associates use these
corporations only for that purpose is to saw that
they are acting only as stockholders A corpo
ration must be made to serve some other bust
ness 10 constitute it an nstrumentalitv in the
sense IN which the word is used in The com
plant. have not the faculty to grasp the ided
OF partnership whose business consists in con.
trolling a number Of corporations for the pur