Case Name: Cooke v. Marshall
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1900-05-30
Citations: 196 Pa. 200
Docket Number: Appeal, No. 68
Parties: Cooke v. Marshall.
Judges: Before Sterrett, C. J., Green, McCollum, Mitchell, Dean, Fell and Brown, JJ.
Reporter: Pennsylvania State Reports
Volume: 196
Pages: 200–204

Head Matter:
Cooke v. Marshall.
Corporations — Right to issue stock — Legislative authority.
A corporation has no right to issue stock nor to increase or reduce its stock without specific legislative authority to do so.
Directors elected by persons holding stock of a corporation, which the corporation had no legislative authority to issue, are not the legally constituted directors of the corporation.
Reargued Oct. 24,1899.
Appeal, No. 68, Oct. T., 1898, by defendant, from judgment of C. P. No. 1, Allegheny County, March T., 1897, No. 684, on case stated in the suit of O. R. Cooke v. James L. Marshall.
Before Sterrett, C. J., Green, McCollum, Mitchell, Dean, Fell and Brown, JJ.
Reversed.
Case stated on quo warranto.
The facts appear by the original report in 191 Pa. 315.
William, M. Watson and O. S. Fetter man, with them J. J. Miller, for appellant.
The Chartiers Cemetery Company had no express authority in its charter to increase its capital stock, and as there cannot be any implied right or power to increase . capital stock, all the supposed increases made by the company were null and void and the supposed elections held thereunder were likewise void: Peck v. Elliott, 79 Fed. Repr. 10; People y. Parker Vein Coal Co., 10 Howard’s Pr. 543.
The Chartiers Cemetery Company had not lawful authority to create a capital stock and any election held thereunder was void.
The omission of a fixed capital stock in the charter and a failure to confer on the company the power to fix one is abscn lutely fatal to appellee’s ease: Farrington v. Tennessee, 95 U. S. €86 ; Sturges v. Stetson, 1 Bissell (U. S.), 246.
It would be against the public to permit a corporation to ■create a capital stock unknown to tbe public as to amount and ■division into shares : State v. Kennon, 7 Ohio, 560.
The touchstone of all by-laws, the good of the corporation, shows this stock was unlawful, being not for the good of the company nor in any sense necessary, but simply an afterthought: Bonaparte v. Camden & Amboy R. R. Co., 1 Baldwin (C. C. of U. S.), 205; State v. Consolidation Coal Co., 46 Md. 1; Kirksey v. Florida & Georgia Plank-Road Co., 7 Florida, :23; Grangers’ Life and Health Ins. Co. v. Kamper, 73 Ala. 325; Green’s Brice’s Ultra Vires, p. 112; Lathrop v. Kneeland, 46 Barb. (N. Y.) 432; Trenton Mut. Life and Fire Ins. Co. v. McKelway, 12 N. J. Eq. 133; Chicago City Ry. Co. v. Allerton, 18 Wall. (U. S.) 233.
W. B. Rodgers, with him A. W. Buff and H. B. Oarmaolc, for appellee.
When the methods of voting at a corporate meeting are not fixed by general law, the corporators may make the law ior themselves, subject to the qualification that such laws and Regulations as they may make shall not conflict with the laws cf the state or of the United States: Com. v. Detwiller, 131 Pa. 634; Com. y. Gill, 3 Wharton, 247.
These incorporators adopted these by-laws or resolutions- for the purpose of maintaining a succession and providing for the management of the company, and the methods selected will not be set aside except for illegality: Knights of Honor v. Martin, 13 W. N. C. 160; Waterman on the Law of Corporations, p. 278; Millward-Cliff Cracker Co.’s Est., 161 Pa. 163; State v. Kennon, 7 Ohio, 560; State v. Morristown Fire Assn., :23 N. J. Law, 195; Burrall v. Bushwick R. R. Co., 75 N. Y. 211; Barry v. Merchant’s Exchange Co., 1 Sandford’s Chancery, 280; Christensen v. Eno, 106 N. Y. 101; Bent v. Hart, 10 Mo. App. 143; Wells v. Green Bay and Miss. Canal Co., 90 Wis. 442 ; Wilkes-Barre Deposit & Savings Bank v. Wilkes-Barre, 148 Pa. 601; Kirksey v. Florida & Georgia Plank-Road Co., 7 Florida, 23.
May 30, 1900:

Opinion:
Opinion by
Mr. Chief Justice Green,
We were very willing to grant a rehearing in this case as it is one of a quite exceptional character, and the leading question at issue is so barren of authority as to make it a case of first impression. We have heard with much interest the able argument of counsel upon the second hearing and have given a patient study of the case, but we are unable to see any sufficient reason for changing the conclusions' expressed in the first opinion filed. For the reasons there stated we still think that all the issues of capital stock were entirely illegal and void. As the claimants represented by the plaintiff, of the office of trustees, found their title to the office upon the votes of the holders of capital stock, and we hold that there never was any valid issue of stock, we cannot consider them as having any title to* the office claimed. But there can be no doubt, we think, that. the administration of the affairs of the company during the long-period succeeding the organization of the company must be-regarded as entirely legal in all respects. The trustees were-originally elected in strict conformity with the by-laws of the-company, and their title was never questioned until in the present litigation; they were trustees de facto and the acts done by them were within the line of their duty as such officials-The claim of title to the office by the defendant and those whom he represented we cannot consider as valid. . The function of the original coporators was exhausted when their successors-were designated by them, and we do not see how their original authority could be resuscitated by the action of two of their number after a delay of thirty-two years and a constant acquiescence in the action of the original corporators in establishing their successors in office. We do not consider the title of the defendant and those he represents to the office of trustee as of any validity.
In this situation it seems to us that immediate steps should be taken to remedy this anomalous condition of affairs. The corporation is certainly the owner of the property except such as has been sold to plot holders and is devoid of a legally constituted managing body. As the private interests of certain parties have always been recognized in the way of a proportionate holding of the corporation, it seems to us that there ought to be no difficulty in effecting a reorganization under the gen eral corporation law of the commonwealth. Of course we cannot undertake to give advice as to what should be done nor to be bound by any suggestions we now make, but it may be quite possible that in any such reorganization the proportionate interests of the several parties holding stock can be recognized as the basis upon which the ultimate division of interests may be founded. W e make no decision upon the subject but leave the whole matter open for future consideration. We make no-change in the judgment as formerly entered.
The judgment of the court below is reversed and judgment is now entered for the defendant with costs under the case stated.