The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1897-03-24
STOCKHOLDERS IN A MANUFACTURE
ING CONCERN ENGAGED IN
OTHER BUSINESS
NOT HELD AS INDIVIDUALS.
ARTICLES OF INCORPoBATION
SHOULD DETERMINE THE SCOPE
OF ANY BUSINESS.
IMPORTANT RULING BY BRILL.
StockhOIders' Liability Determine ed
by What a Company Is Author
lied to Do.

Judge Brill rendered an opinion yes
terday in dismissing certain case in
Volving the liability of stockholders
in corporations that will be of consid-
cradle interest to the public. The case
was that of Howard Wheeler as re-
ceiver Of Haynie & Co., an insolvent
corporation, against William L. Ames,
Adolph I. Rosen, Bernard Norlitsck,
Philip Nelkie, K. M. Ellingsen and
William w. Tracy. The question in
volved was, whether the stockholders
of a manufacturing corporation that
also carried ON a mercantile business,
in addition to it's manufacturing bust
ness, were individually liable as sucn
stockholders or not. Ambrose T1gne
represented the plaintiff, and j. {.
Mangan, Eller, How & Butler, Pal
mer & Dickinson and Otto Kueffner
appeared for the defendants. After
an extensive argument of the defend
ants motion to dismiss, Judge Brill, in
granting the motion, said:
This question is difficult and somewhat
doubtful one. 1t has been presented with
very great ability by council for the plaintiff
well by counsel for the defendants. 1t
is conceded that so for as indicated by the ar
ticles of incorporation themselves, this a
manufacturing corporation. l. IS claimed
upon the part of the plaintiff, that while this
is true yet it was not In fact organized for
the purpose Of a manufacturing business ex-
clusivey And it is claimed also that in fact
It did other business than a manufacturing
business and such as was incident to manu-
featuring business.
1t has been claimed that there was fraud in
the organization. l think that the purposes
Of the corporators if it be inquired into
at ali aside from the indication gwen by the
articles themselves must have been fraudu-
lent, in order to make the claim efectual.
Without going over the question in detail
It hardly seems tc me that there is evidence
In the case sufficient to warrant a finding
that there was a fraudulent purpose IN the
organization of this corporation. II appears
that 1t, In fact, did a manufacturing business
and also that it did mercantile business to
some extent. The evidence is indefinite and
rather unsatisfactory as to the volume and
extent of the outside business done by the cor
poration And Q { I think there is evidence
sufficient in the case to warrant a finding
that the corporation did business not inciden-
tai to the business of manufacturing.
Whether that should be the finding or not
will be another question if the finding is made.
The motion is made to dismiss, and that
question must be considered upon the basis
Of whether or not there is evidence in the
case at this time sufficient to warrant the
finding to that effect And my impression is
at this time that there is evidence in the
case that would warrant such a finding. SO
the question in this case TO my mind comes
10 the question where a corporation is formed
for manufacturing purposes, and 1t engages in
other business, not warranted by its articles,
whether stockholders in the corporation are
individually liable. This must depend, of
course upon the construction given TO the Ian
guage of the constitution. Now, by its Ian
guage the constitution excerpts from its pro-
visions imposing individual liability upon
stockholders in corporation. stockholders of
any corporation organized for the purpose of
carrying on any kind of manufacturing or
mechanical business" That language seems
plain and clear. Taken in its ordinary mean
Ing there can be little doubt about what eff
fect should be given it. 1t seems to me that
the construction placed upon this language by
the supreme court is equally clear: that is
While it has not passed upon a state of facts
here presented. yet it has been held in cases
Involving the liability of stockholders in cor
porations that the purpose for which a cor
pOration is organized is to be determined by
Its articles and not by what K in fact did
and that the liability of its stockholders is to
be determined by what it was authorized to
DO in its articles and not by the business
which, in fact, the corporation carried ON.
mat decision, or declaration of principle
by the supreme court, it seems to me- logi-
rally, governs this question. If the liability
f the stockholders is to be determined not
by what the corporation in fact did but by
what II was authorized to do by its articles
applies to this case, well as the case
hat was before the supreme court.
Now Of course, something may be said as
10 the injustice or unfairness of allowing the
corporation to carry on a business other than
manufacturing business, and holding the
tIOChLOIueIS eAelHPJ from llaDlllty. But
IONS dealing with a corporation must take
notice of its powers fixed by its articles of
Incorporation. And is seems to be fair that
when a stakeholder takes stock in manu-
acturing corporation. he should not be re-
Iu1red TO act as a manager of the corporation.
Any other construction would make it neces-
AIRY that a stockholder stand over a corpora
ion and direct its affairs, whether he desired
% or not This provision of the constitution
ras adopted, as the supreme court has said
md as is generally understood in order to
fcfn an1f oa+V7r D,,4 -. ~
S to be liable because the corporation may in
ldVertently, or otherwise, overstep the bounds
hen the purpose of the enactment would be
! good deal impaired.
As / have said the question is not free from
foubt, and l think the bar have not entirely
lgreed as to what the proper construction
Mould be, but 1t seems to me that it should
le held, following in analogy, at least what
fhe supreme court has already held and fol-
lowing the plain and clear language Of the
constitution, that the stockholders are not Ia
bic. l am not prepared to say that there
hight not be circumstances under which the
stockholders might be held liable by reason
II the fact that the corporation had exceeded
rs powers. But it seems to me that would
Re upon some other principle than that pre-
ented in this l do not think that the
principle of estOppel arises here as it does
lot appear that persons who are seeking to
mforce this liability were in any way misled
motion to dismiss, / think will have to be
franted.