« ForrigeFortsett »
Carolina,11 that the officers of a corporation could not dissolve it without the assent of the great body of the society.1"
The subject of the forfeiture of corporate franchises by nonuser or misuser, was fully discussed in the case of The King v. Amery ;c and it was held, that though a corporation may be dissolved, and its franchises lost, by nonuser or neglect, yet it was assumed as an undeniable proposition, that the default was to be judicially determined in a suit instituted for the purpose. The ancient doubt was, whether a corporation could be dissolved at all for a breach of trust. It is now well settled that it may, but then it must be first called upon to answer.>>
ton, in the summer of 1841, by Judge Butler, after an elaborate argument and upon full consideration, that a suspension of specie payment by the bank was not prr ae such a nonuser or misuser of the franchises, as to work a forfeiture of its charter. But in Planter's Bank of Mississippi in the state, 7 Smedes dj- Marshall Miss. R. 163, it was adjudged that the failure of a bank to redeem its notes in specie, is a cause of forfeiture of its charter. It ceases to answer the ends of its institution and the state many resume its grant.
* Smith v. Smith, 3 Eq. Rep. 557.
b In the case of Ward v. Sea Insurance Company, 7 Paige, 294, it was declared that the directors of a corporation, even with the consent of the stockholders, were not authorized to discontinue the corporate business, and distribute the stock, unless specially authorized by statute, or a decree in chancery. By the N. Y. Revised Statutes, vol. ii. 466, the majority of the directors or trustees of a corporation may, at any time, voluntarily apply by petition to the court of chancery, for a decree dissolving the corporation ; and the court, upon investigation, may decree a dissolution of it, if it appear that the corporation is insolvent, or that, under the circumstances, a dissolution would be beneficial to the stockholders, and not injurious to the public. Ibid. sec. 58—66. One or more receivers of the estate and effects of the .corporation aro to be appointed, with large and specific powers and duties, in respect to the settlement and distribution of the estate and effects. Ibid. 468—473.
« 2 Term. Rep. 515. Canal Company v. Rail Road Company, 4 Gill d> Johnson, 1. S. P.
d Slee v. Bloom, 5 Johns. Ch. Rep. 380. Story, J., in 9 Cranch, 51. All franchises, said Lord Holt, in the case of tho city of London v. Vanacre, 12 Mod. Rep. 271, are granted on condition that they shall be duly No advantage can be taken of any nonuser or misuser on the part of a corporation, by any defendant, in any collateral action.1 1 In the great case of The quo warranto against the city of London, in the 34 Charles *313 II..b it was *a point incidentally mooted, whether a corporation could surrender and dissolve itself by deed; and it was conceded, that it might be dissolved by refusal to act, so as not to have any members requisite to preserve its being. There are Uvo modes of proceeding judicially to ascertain and enforce the forfeiture of a charter for default or abuse of power. The one is by scire facias ; and that process is proper where there is a legal existing body, capable of acting, but who have abused their power. The other mode is by information in the nature of a quo warranto which is in form a criminal and in its nature a civil remedy; and that proceeding applies where there is a body corporate de facto only. but who take upon themselves to act, though, from some defect in their constitution, they cannot legally exercise their powers." Both these modes of proceeding against corporations are at the instance, and on behalf of the government. The state must be a party to the prosecution, for the judgment is, that the parties be ousted, and the franchises seized into the hands of the government.d
executed according to the grant, and if they neglect to perform the terras, they may be repealed by scire facias.
* Trustees of Vernon Society v. Hills, 6 Cowerie Rep. 23. All Saints' Church v. Lovett, 1 Hall's N. Y. Rep. 191. Canal Company v. Rail Road Company, 4 Gill <J- Johnson, 1.
b Howell's State Trials, vol. 8.
« Lord Kenyon, and Ashhurst, J., in Rex v. Pasmore, 3 Term. Rep. 199. The case against the city of London was by information in the nature of a quo warranto, charging the city with usurpation of its franchises, and requiring it to show by what warrant it claimed to exercise and enjoy its liberties, &c. So also in the greatly contested and elaborately discussed case of Thompson v. The People, 23 Wendell, 537. 591—594.
* Rex v. Stevenson, Yelv. Rep. 190. King v. Ogden, 10 Barnw. <JCress. 240. Bayley, J., Commonwealth v. Union Insurance Company, 5 Mass. Rep. 230. Centre and K. T. Road v. M'Conaby, 16 Serg. # Rawle,
This remedy must be pursued at law, and there only; and by the statutes of New-York, the mode of prosecution by information is directed, where there has been a misuser of the charter, or the franchises of the company are forfeited.* A court of chancery never deals with the »question of forfeiture. It may hold trustees of *314 a corporation accountable for abuse of trust, but the court cannot without special statute authority, divest corporations of their corporate character and capacity. It has no ordinary jurisdiction in regard to the legality 01 regularity of the election or amotion of corporators.
140 The judgment in such cases according to the New-York Revised Statutes, vol. ii. p. 585. sec. 49, is that the corporation bo ousted, and altogether excluded from its corporate rights and franchises, and be dissolved. In Indiana it is held, that a judgment against a corporation, in the case of a forfeiture of its charter, is, that the franchises be seized into the hands of the state, and that when its franchises are seized by execution, on the judgment, then, und not till then, the corporation is dissolved. State Bank v. The State, 1 Backford's Ind. Rep. 2G7.
* The New-York Revised Statutes, vol. iii. p. 581. 583, provide, that an information in the nature of a quo warranto, be filed by the attorney general, upon his own relation, or upon the relation of others, when any person or association usurps, or unlawfully holds any public office or franchise; or against any corporate body for misuser or nonuser of its franchises; or which does or omits acts which amount to a surrender thereof or whenever they shall exercise any privilege not conferred by law. So, the chancellor, on a bill filed by the attorney general, may restrain, by injunction any corporation from assuming powers not allowed by its charter, as well as restrain any individuals from exercising corporate rights or privileges not conferred by law. Ibid. 402. The neglect or refusal of a corporation to perform the duties enjoined by the statute creating it, is a cause of forfeiture, though the neglect or refusal should not proceed from a bad or corrupt motive. The People v. Kingston and Middletown T. It. Co., 2.'t Wendell Rep. 193. And the information lies for any cause of forfeiture, and the remedy is not limited to scire facias. The People v. Bristol St. R. T. Co. Ibid. 222. Thompson v. The People, 23 Wendell, 537. If only a single act of nonfeasance bo relied on as a cause of forfeiture, it must be averred and proved to be a wilful neglect, but not so if there be a general state of neglect or default. The People v. Hillsdale Si. C. T. Co. Ibid. 254.
These are subjects exclusively of common law jurisdiction. a
The mode of redress in New York, when incorporated companies abuse their powers. or become insolvent, has been the subjects of several statute regulations, which have committed the cognizance of such cases to the court of chancery.b The acts of 1817 and 1821,0 provided for the dissolution of incorporated insurance companies, by order of the chancellor, upon application of the directors, and for good cause shown; and the court of chancery, when it decreed a dissolution of the corporation, was to direct a due distribution of the funds, and to appoint trustees for that purpose. The act of April 21st, 1825d was much broader in its provisions. It contained many directions calculated to check abuses in the management of all monied incorporations, and to facilitate the recovery of debts against them. All transfers, by incorporated companies, in contemplation of bankruptcy. were declared
void; and if any incorporated bank should become "315 insolvent, or violate its charter, the *chancellor
was authorized. by process of injunction, to restrain the exercise of its powers, and to appoint a receiver, and cause the effects of the company to be distributed among the creditors. This was a statute of bankruptcy, in relation to incorporated banks, and it was an unusual pro
« Van Ness, J., 3 Johns. Rep. 134. Slec v. Bloom, 5 Johns. Ch. Rep. 380. Attorney General v. Earl of Clarendon, 17 Yesey, 491. Attorney General v. Reynolds, 1 Eq. Can. Abr. 131. pi. 10. Attorney General v. Uttca Insurance Company, 2 Johns. Ch. Rep. 31G. 378. 3S8. The King v. WhitwelL 5 Term Rep. 85.
b The provisions in the N. Y. Revised Statutes relative to proceedings in equity against corporations, received a minute analysis and judicial construction by the Vice Chancellor of New-York in the case of Mann, receiver, &c., v. Pentz, 2 Sandford's Ch. Rep. 257, and again at p. 301, but such local regulations can only be referred to in a work of so general a nature as the present one.
"L. N. Y. sess. 40. ch. 146, and sess. 44. ch. 148.
* Sess. 48. ch. 325. See also to S. P. 1 N. Y R. S. 603.
vision, for the English bankrupt laws, or the general insolvent laws of the several states, never extended to corporations.* The New York Revised Statutesb have continued and enlarged the provision. When any incorporated company shall have remained insolvent for a year, or for that period of time neglected or refused to pay its debts, or suspended its ordinary business, it shall be deemed to have surrendered its franchises, and to be dissolved.0 And whenever any corporation, having banking powers, or power to make loans on pledges, or to make insurances, shall become insolvent, or violate any of the provisions of its charter, the court of chancery may restrain the exercise of its powers by injunction, and appoint a receiver.d If the corporation proves, on investigation, to be insolvent, its effects are to be distributed among the creditors rateably. subject to the legal priority of the United States, and to judgments.1' And whenever any incorporated company shall become insolvent, or it shall appear to the trustees or directors thereof, that a dissolution of the corporation would be beneficial, application may be made voluntarily to the chancellor, by petition, for a dissolution ; and all sales, assignments, transfers, mortgages and conveyances of any part of their corporate estate, real or personal, made after filing such petition, or any judgments confess
• There is a statute of bankruptcy in New-Jersey, passed as early as 1810, in relation to insolvent banks and other corporations, with similar powers conferred upon the chancellor in respect to them. Elmer's Digest, p. 31. So also in Michigan, by act of 1837, and by R. S. of New-Jersey, 1847. p. 129.
b Vol. i. p. 603. sec. 4. Vol. ii. p. 462. sec. 31—p. 463. sec. 3&
• N. Y. Revised Statutes, vol. ii. p. 463. sec. 38. So, by a general law in N. Carolina, (see their Revised Statutes, tit. Corporations,) when any corporation shall, for two years together, cease to act as a body corporate, such disuso of their corporate powers and privileges shall be considered and taken as a forfeiture of the charter. The Statutes of Louisiana of 1842 and 1843 have provided for the facilities of the liquidation of banks solvent or insolvent, and whether their liquidation be forced or voluntary.
d New-York Revised Statutes, vol. ii. p. 4G3. 464. sec. 39.41. « Ibid. vol. ii. p. 465. sec. 48.
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