Court Opinion

ID: 4928246
Source: CourtListenerOpinion
Date Created: 2021-09-24 00:59:49.040821+00
Date Added: 2024-06-11T08:13:41.076033
License: Public Domain

The opinion of the Court was drawn up by
Sheplev J.
This is a writ of entry brought to recover a tract of land in the town of Bluehill, upon which a granite store has been erected. The demandants derive their title from the Bluehill Granite Company, and introduce a conveyance by deed of mortgage, of a tract of land, including the premises demanded, purporting to be executed by that company on April 6, 1837, by its president, John S. Labaugh, and its secretary, David E. Wheeler, to Matthew C. St. John, in trust for the benefit of certain persons therein named. And conveyances from the trustee and the cestues que trust, assigning that mortgage to William I. Tenney. Also copies of a judgment recovered by William I. Tenney, against that company, and of an execution issued thereon, and of the return of an officer upon it, showing a seizure and sale of the company’s right to redeem that mortgage to William I. Tenney; and a deed of the same from the officer to him on June 2, 1840. And a deed from William I. Tenney to the demandants, made on June 29, 1843.
To prove that the president and secretary of that company were authorized to make and execute the mortgage to Matthew C. St. John, the records of the company were introduced ; and the charter granted by an act of this State, approved February 29, 1836. The records of the board of directors were also introduced. It appears from those records, that a meeting of the corporators was called for the organization of the corporation, under its charter in the city of New York, *518and that the charter was there accepted, and the officers of the corporation, president, secretary, and directors were chosen. And at a meeting of those directors, held in that city on April 6, 1837, the president and secretary thus chosen, were authorized by vote to make and execute the conveyance in mortgage, to Matthew C. St. John, There is no proof, that any meeting for the organization of the company, or for the choice of its officers, has ever been holder) in this State. There is proof that the company, by a person acting as its agent, transacted business in this State, during the years 1836, 7 and 8.
It is contended, that the existence of the corporation is sufficiently proved by the introduction of its charter, and by the testimony, showing the transaction of business under it.
If this be admitted, the demandants must proceed further, and show that the persons who executed the conveyance in mortgage, were legally authorized to do it. If directors of the corporation, legally chosen, might transact business as such by vote of the board, at a meeting held in another State, and might authorize persons to execute a conveyance of real estate, yet it would be necessary, to show that such persons were legally chosen directors, before any conveyance made by their direction, could be considered as legally made.
The demandants must recover upon the strength of their own title, not because the tenant does not exhibit a legal title ; and their right to recover will depend upon a decision of the question, whether the corporation has authorized any board of directors or other persons to make that conveyance of its estate.
There are a variety of corporations. It will only be necessary on this occasion, to speak of one class of them, corporations aggregate, composed of natural persons. It is often stated in the books, that such a corporation is created by its charter. This is not precisely correct. The charter only confers the power of life, or the right to come into existence, and provides the instruments by which it may become an artificial being, or acting entity. Such a corporation has been well defined to be an artificial being, invisible, intangible, and existing *519only in contemplation of law. The instruments provided to bring the artificial being into life and active operation, are the persons named in the charter, and those who by virtue of its provisions, may become associated with them. Those persons or corporators, as natural persons, have no such power. The charter confers upon them a new faculty for this purpose. A faculty which they can have only by virtue of the law, which confers it. That law is inoperative beyond the bounds of the legislative power, by which it is enacted. As the corporate faculty cannot accompany the natural persons beyond the bounds of the sovereignty, which confers it; and they cannot possess or exercise it there. Can have no more power there to make the artificial being act, than other persons not named or associated as corporators. Any attempt to exercise such a faculty there, is merely an usurpation of authority by persons destitute of it, and acting without any legal capacity to act in that manner. It follows that all votes and proceedings of persons professing to act in the capacity of corporators, when assembled without the bounds of the sovereignty granting the charter, are wholly void.
This is a familiar principle, when applied in analogous cases to persons, upon whom the law has conferred some power or faculty, which, as natural persons, they do not possess.
The power conferred by law upon executors and administrators, cannot accompany their persons beyond the bounds of the sovereignty, which has conferred it. Story has collected numerous cases, in note under section 512, in his treatise upon the Conflict of Laws, proving the doctrine to be established both in England and in this country.
The same doctrine prevails respecting the powers of guardians. Williams v. Storrs, 6 Johns. Chan. 357.
The same doctrine generally prevails in this country, while it does not in England, respecting the powers of assignees under bankrupt and insolvent laws. The doctrine is stated and discussed and the cases are collected by Story in his treatise on the Conflict of Laws, c. 9, <§> 405 to 417.
If the artificial being, called the Bluehill Granite Company, *520may be considered as having existence and active life in this State, by proof of its acts within her limits, it will be still true that it cannot have existence without her limits, and of course cannot make choice of any officers or agents there. It may maintain a suit without those limits, but that does not imply its existence or presence there. It may also contract without those limits. Being within them, it may, acting per se, by vote transmitted elsewhere, propose a contract or accept one previously offered. And it may, by an agent or agents duly constituted, act and contract beyond those limits. But it can neither exist, nor act per se without them, except by the assistance of its officers or agents duly elected or appointed within them.
The constitution and powers of such corporations were perhaps more thoroughly discussed and fully considered, than ever before by any judicial tribunal, in the case of the Bank of Augusta v. Earle, 13 Peters, 519. C. J. Taney, delivering the opinion of the Court, says, “ It is very true, that a corporation can have no legal existence out of the boundaries of the sovereignty by which it is created. It exists only in contemplation of law; and where that law ceases to operate and is no longer obligatory, the corporation can have no existence. It must dwell in the place of its creation and cannot migrate to another sovereignty.
The cases of McCall v. the Byram Manufacturing Co. 6 Conn. R. 428, and of Copp v. Lamb, 3 Fairf. 314, are relied upon as deciding, that corporations whose charters were granted by one State, could hold meetings, pass votes, and exercise powers in another State.
The question presented in the former case, was whether the secretary of a corporation was legally appointed by the directors at a meeting held by them in the city of New York. The charter had been granted by the State of Connecticut. The decision was in the affirmative.
The directors of a corporation are not a corporate body, are, when acting as a board, but a board of officers or agents, and they may exercise their powers as agents beyond the *521bounds, where the corporation exists. It did indeed appear in that case, that all the meetings of the stockholders, and of the directors, were holdcn in the city of New York, but the capacity of the stockholders to act there, does not appear to have been examined and discussed.
In the case of Copp v. Lamb, the Court did not enter upon an examination of the question, whether the proprietors of common and undivided lands had, by virtue of an act passed by the Commonwealth of Massachusetts, power to organize and act as a corporation in another State. It appeared that the land demanded in that suit, had been granted by a proprietary, which had acted as such more than forty years before that time. And although the place of its first organization and action was within the State of New Hampshire, yet all its acts had been confirmed in a meeting held several years afterward, which does not. appear to have been holden out of the Commonwealth of Massachusetts. It was under these circumstances, that the Court said, that it did not feel authorized to declare, that the proceedings were illegal and void, because the first meeting for organization was held in New Hampshire. The ground upon which the decision was made, appears to have been, that it was not competent for a person claiming title under one of the proprietors, who had acted as an officer of the proprietary at that meeting, to deny, after so long a time and under such circumstances, the legality of the exercise of corporate powers.
“ Corporations created by statute, must depend for their powers and the mode of exercising them, upon the true construction of the statute.” Runyan v. The Lessee of Coster, 14 Peters, 129. It is admitted in all the decided cases, that the sphere of action of a corporation is determined by the terms and intention of the legislation, by virtue of which it exists. That legislation, if it be possible to avoid it, is not to be so construed as to exceed the sovereignty of the legislative power. Farnum v. Blackstone Canal Company, 1 Sum. 47. That clause in the charter of the Bluebill Granite Company, which author *522iizes two persons named to call the first meeting of the company, at such time and place as they may think proper, cannot receive such a construction, as would authorize them to ■.call the meeting at a place without the limits of this State. Legislative bodies do not usually in their acts of legislation use language to limit their operation, but use general language, ■and the limitation is implied and inferred from the extent of the legislative power. The language used in that charter ■does not require any other construction or authorize the conclusion, that it was the intention to authorize that meeting to be held without the limits of the sovereignty. The consideration, that it could not have been its intention to attempt to encroach upon another sovereignty, by putting into action a ■corporation there, might be sufficient to call for a construction, which would not authorize it. There were, however, other ■enactments in this State, referred to in the charter as explanatory of the powers granted, which clearly exhibit the intention of the legislature, that the corporate powers should be exercised only within the State.
There is a clause in that charter, which gives the corporation .all the powers and privileges, and subjects it to all the duties and requirements incident by law to similar corporations. The law thus referred to, is the statute law, regulating manufacturing corporations.
By the act then in force defining the powers and duties of manufacturing corporations, c. 137, they were authorized to make by-laws, not repugnant to the constitution and laws of this State. Were required to divide their property into shares. The evidence of title to these shares was to be certificates .signed by the treasurer. Transfers of these shares were to be recorded by the clerk in a book to be kept by him for that purpose. The corporations were authorized to make assessments upon the shares, and the treasurer, when the holders failed to pay, was authorized to sel]1! them in a manner prescribed by the act, and to make conveyances of them to be recorded by the clerk. The act of March 15, 1821, c. 60, <§> 31, then in force, provided, when an execution had been issued upon a *523judgment recovered against a manufacturing corporation, and a demand had been made by an officer upon the president, treasurer, or clerk of the corporation, that the same might be collected by a levy upon the property or body of a corporator. By the act of Feb. 12, 1828, c. 385, then in force, the treasurer of such a corporation is required to give public notice in a newspaper printed in the county, where the corporation is established, and if none is printed in that county, then in one printed in an adjoining county, of the amount of the capital stock actually paid in.
The directors are prohibited from making any dividends of the capital until all the debts due from the corporation have been paid. The agent or officer having charge of its property was required to deliver to an officer having a writ or execution against it, the names of the directors and clerk, and a schedule of all its property including debts. It was made the duty of the clerk or person having charge of the books of the corporation to produce the same in court, when certain suits were pending. By the act of Feb. 18, 1836, other provisions were made respecting the mode of calling meetings, the liability of the stockholders, the mode of collecting debts from the property of the corporation, and requiring the clerk of the corporation to furnish an officer having an execution against the corporation, with a list of the names and places of residence of the stockholders.
It is obvious, that those provisions contemplated the establishment and action of manufacturing corporations to be within the State. That their meetings were to be called, and their officers to be chosen by virtue of the laws of the State, and of course where those laws were operative. That the officers and especially the clerk was to be found within the-State ; and that he was to have the custody of the books and records within the State, to perform the duties required of him.. All these enactments were obligatory upon the Bluehill Granite Company and its stockholders.
Whether the statute provisions of this State, and the inten*524tion of the legislative power, or the general rules of law respecting corporations, be examined, the conclusion must be the same ; that this corporation could hold no meeting for the election of its officers or for the regulation of its affairs, without the limits of this State. That all such meetings and proceedings were without right or authority and wholly void.
If there were no directors de jure, were there any de facto having authority to convey the estate of the corporation ?
Public officers, when appointed by the duly constituted authorities without any power to make the appointment, are regarded as authorized to perform their official duties, and their acts are to be regarded, as it respects other persons, as valid. Commonwealth v. Fowler, 10 Mass. R. 290. This is upon the principle, that they have been held out to the public by the duly constituted power as public officers, capable of performing certain public duties, and their acts are therefore to be regarded as valid. So when corporations have held certain persons out to the public as its directors or officers, those dealing with them as such and ignorant of their want of legal power, will be entitled to consider their acts as binding upon the corporation. And when there has been an informal or irregular exorcise of an existing power of election, the officers so elected, until removed, are regarded as officers de facto, and their acts are obligatory upon the corporation.
But when the corporators have no power at all to proceed to an election, and when the officers must be considered as assuming to be such without any election, their acts cannot be binding upon the corporation, unless the corporation has held them out in the manner before stated to be its officers. If the law were otherwise, persons having no legal authority to act as corporators might assume it and proceed and elect officers, who by being considered to be officers de facto might convey the whole property of the corporation and divest it of all its rights. No decided case, it is believed, will be found to maintain such a doctrine.
In this case the grantee of the corporation, Mathew C„ *525St. John, or the cestues que trust, or William I. Tenney, their grantee or assignee, cannot claim to take the position of a purchaser from persons, who had been held out by the corporation to the public as its officers without any knowledge of their real character and authority. For it appears, that these conveyances were made to persons, who claimed to be stockholders actively participating in all the proceedings of the corporation, and they must be regarded as having a knowledge of all its acts, and of its legal right to act. The tenant is in no way connected with those proceedings, and is entitled to require, that the demandants should establish their title. They appear only to represent the legal title of William I. Tenney, as his assignees under an act of insolvency.
If there were no legally existing mortgage, there could be no legal sale at auction of the right of the corporation to redeem it. In such case the execution could only be satisfied from the real estate of the corporation by a levy and appraisal. Tenney obtained no legal title by that seizure and sale, and he could convey none to the demandants.
Under such circumstances it will not be necessary to consider, whether the tenant obtained any title whatever by the proceedings stated in the testimony.
Demandants nonsuit.