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share a unit indivisible. It is true, like all indivisible chattels, it may admit of joint ownership; but such joint owners, however numerous, have but the powers, rights and liabilities of one person. Thus there may be multiples of the unit in the partnership, but there can be no fractions. On treating of the assets for the purpose of division, the calculation must be based on this unit and its multiples; the share or number of shares.

now.

Now, taking A. and B. to represent the discontented stockholders in this case. What right have they to complain against the course pursued by the directors in settling this account? They have elected to stand debtors to stock, or in other words, to borrow that much of the capital at common interest. If they had chosen, they might have paid in all and received probably a little more than six per cent., but they preferred six sure to the chance of getting more. But this is not all. When the bank began to wind up, some years ago, these stockholders retained their unpaid capital, thus having six per cent. on it, till this time; while the other stockholders receive their $30 without interest now, to make them equal with those who have retained. If principal and interest were brought into hotch-pot up to this time, and a dividend declared, as might well be done in justice and equity, under a correct construction of this charter, the unsatisfied stockholders would perhaps complain louder than they do If there had been a large amount of profits for this final division, and those who by consent were allowed to retain the $20 on each share, and also to retain their interest in lieu of temporary dividends on that amount, should tender a payment of their $20, with interest, up to this time, they would undoubtedly have a right to an equal share of the whole. The agreement among themselves to permit this detention or loan of part of the capital could not affect their right guarantied by their charter or articles of partnerships, to wit: that each share should be equal, and the only unit on which to base a proper dividend of gains or losses. So, on the contrary, if the whole capital had been sunk, equity would have compelled the delinquent stockholders to pay up their balance, or, if there be a partial loss, still the final distribution of the lessened capital would and ought to be on the same principle of equality by calculating such debt to stock as part of the capital to be divided, and, if not brought in, as actually retained and received by such stockholders.

§ 1456. A charter cannot be changed by default or election of stockholders. A part of the stockholders cannot change the fundamental principles of their charter or articles of partnership, either by their default in paying, or election to retain a portion of the capital. Nor can a chancellor annul the charter or change the stipulations of the parties in search of a visionary equity.

Then as to another objection, that if the full paying stockholders had not paid in the money not required of them, the purchase of the United States Bank shares, by which the loss was caused, would not have occurred. It is to be remembered that the purchase was the act of the board, which is the bank. The stockholders, and all the stockholders, are represented by the board, and they neither are nor can be heard to speak, or seen to act otherwise. How, then, is A. liable to loss rather than B. or C.? unless it be on the principle that if I lend a man money, which he loses by unwise speculation, he may set up as a plea against its payment that if I had not lent it to him he would not have lost it, and that, as my own act was the primary cause of loss, therefore I should bear it myself. The plea would be demurrable in law, and is without precedent in a court of chancery. The case in Louisiana is in point, and we

are happy to have our own views supported by so well considered a judgment of a court necessarily familiar with the equitable principles of partnership law. This case, it is true, seems to have been overruled at a subsequent date; but as the learned judge who took chief part on the last decision was the counsel who argued the first so ably, though unsuccessfully, it may be doubted whether the first case will not be considered, abroad, as the better authority.

Let the decree be that the directors distribute the sum now for distribution among the stockholders, paying to each respectively who may have paid in on the stock subscribed, or held by him more than other stockholders, the amount of such excess. And distribute the assets from time to time and as collected, among the stockholders, paying to each any sum he may have paid on each share of his stock more than any other stockholder on each share of his stock, and so toties quoties until the said stockholders are thus made equal in the amount paid in on their respective shares of stock, and pay from any balance or residue which may remain for distribution an equal dividend or proportion thereof on each share held by each stockholder respectively, so that each stockholder shall receive an equal share or dividend of such residue on each share of stock held by him.

SECOND NATIONAL BANK v. NEW YORK SILK MANUFACTURING COMPANY. (Circuit Court for New Jersey: 11 Federal Reporter, 532–536. 1882.)

Opinion by NIXON, J.

STATEMENT OF FACTS.-This is a motion of Alfred Wagstaff, receiver of the New York Silk Manufacturing Company, appointed by the supreme court of New York, and Augustus Zabriskie, receiver, appointed by the court of chancery of New Jersey, to strike out the appearance entered by the defendant company to two writs of foreign attachment issued by the circuit court of the county of Hudson, New Jersey, against the property of the said company. The admitted facts of the case are these: The New York Silk Manufacturing Company is an insolvent corporation, organized under the laws of the state of New York, doing business and having property in the state of New Jersey. On the 13th of September, 1881, one James Michin, a creditor, filed a bill in the court of chancery of New Jersey against the said company, alleging its insolvency, and praying for an injunction and for the appointment of a receiver. Pending this proceeding, to wit, on the 3d of October, 1881, the Second National Bank of Paterson caused a writ of foreign attachment to be issued against the property of the company, by virtue of which the sheriff of the county of Hudson levied upon all its goods and chattels within the jurisdiction, and duly returned the writ with an inventory and appraisement of the property seized. On the 29th of October a second writ was issued out of the same court against the same defendant, by the same plaintiff, which was also levied upon the same property that was inventoried and appraised under the first writ. Subsequently to the issue of the first attachment, to wit, on the 21st of October, the chancellor of New Jersey signed an order restraining the defendant company, and its officers and agents, from selling, transferring, incumbering, or otherwise disposing of any of the goods, chattels, rights, credits, moneys or effects of the said company until the further order of the court. On the 7th of November the chancellor signed another order, appointing Augustus Zabriskie receiver, and directing him, before entering upon the office, to take the oath prescribed by law, and to give bond to the chancellor, with approved security, in the sum

of $25,000, conditioned for the faithful discharge of his duties. The oath was taken and the bond executed and filed on the following 15th day of November. In the meantime proceedings were going on in the supreme court of the city and county of New York, whereby several judgments were obtained against the defendant company, among which were two in favor of the Second National Bank of Paterson, upon the same claims on which the writs of attachment were issued in New Jersey. On the 16th of November, 1881, one Rufus O. Mason commenced an action there, pursuant to the provisions of section 1781 of the Code of Civil Procedure of the state of New York against the New York Silk Manufacturing Company, William A. M. Grier, William I. Harris, James T. Michin, Joseph Michin, Jr., and Frederick H. Harris, the president, secretary, treasurer, and trustees of the said corporation. Upon filing the complaint he obtained from his honor, Judge Donohue, an order upon the defendants to show cause, on the 18th of November, why the individual defendants should not be compelled to account for their official conduct in the management and disposition of the funds and property of the silk company; why they should not be enjoined from collecting and receiving any debt or demand, or from paying out or transferring or delivering to any person, or in any manner interfering with any money, property or effects of the said company during the pendency of the suit; and why a receiver should not be forthwith appointed, with the usual powers of receivers in like cases. On the return day the rule was made absolute. Alfred Wagstaff was appointed receiver, and the company, its officers, agents and servants, were enjoined "from collecting any debts or demands, and from paying out or disposing or transferring to any person any of its property or effects, except to deliver the same to the receiver." Contemporaneously with these proceedings the defendant company moved, in the circuit court of the county of Hudson, to quash the writs of attachment as improvidently issued-the corporation having officers residing in the state at the time of their issue. After hearing the parties the court refused to quash. The same application was subsequently made by the New Jersey receiver, but the judge declined to hear argument, treating the question as res adjudicata. Pending a motion in the state court for the appointment of an auditor in the attachment suits, and for the sale of the property as perishable, Mr. Zabriskie, the New Jersey receiver, applied to the chancellor for authority to take the possession and control of the attached property, which authority, after hearing, the vice-chancellor declined to grant, on the ground that the court of chancery had no right to interfere with the proceedings in the courts of law where liens had been acquired before the date of the receiver's appointment. Failing in these motions, the silk company took the usual steps prescribed in the third section of the act of March 3, 1875, to remove the case. Appearances were entered in behalf of the corporation in the attachment suits. Its president made and filed in the state court a petition for the removal of the suits into the circuit court of the United States, accompanied with a bond, with good and sufficient security, which petition and bond were accepted by the state court. By virtue of these steps all further jurisdiction over the cases ceased in the state court and vested here.

§ 1457. Right of a corporate receiver to act in foreign court.

The case thus stated presents for consideration questions of interest and importance. The counsel for the attaching creditors suggested at the outset that neither of the receivers had any standing here, and were not placed by the law of their appointment in a position which authorized them to intervene and

make any motion in the suit. Accepting the decision of the supreme court in Booth v. Clark, 17 How., 322, as the law in the federal courts in regard to the powers of receivers outside of the jurisdiction which appointed them, there would seem to be foundation for this view in respect to the New York receiver. It is there said (page 335): "We think that a receiver has never been recognized by a foreign tribunal as an actor in a suit. He is not within that comity which nations have permitted, after the manner of such nations as practice it in respect to the judgment and decrees of foreign tribunals, for all of them do not permit it in the same manner and to the same extent to make such comity international or a part of the law of nations."

Then, after distinguishing between the rules existing in the courts of the United States and of Great Britain in respect to foreign assignments in bankruptcy, the court proceeds to say: "He [the receiver] has no extraterritorial power of official action; none which the court appointing him can confer, with authority to enable him to go into a foreign jurisdiction to take possession of the debtor's property; none which can give him, upon the principle of comity, a privilege to sue in a foreign court, or another jurisdiction, as the judgment creditor might have done, where his debtor may be amenable to the tribunal which the creditor may seek." This was simply applying to foreign receivers the same rule which they had before announced in regard to foreign executors and administrators. Kerr v. Moon, 9 Wheat., 565.

§ 1458. Corporate receiver appointed after attachment takes subject to lien thereof.

But it is not necessary to decide the question, as the receiver appointed by the court of chancery of New Jersey is also here, and is not obnoxious to the objection of deriving his power to act from a foreign tribunal. We have more difficulty in regard to his standing. His appointment was made after the lien had been created against the property of the insolvent corporation by force of the attachment proceedings, and he took it subject to the lien.

§ 1459. Powers of a receiver of an insolvent corporation under the laws of New Jersey.

It is admitted that the appoinment of the receiver invested him with full power to sell, assign and convey all the assets of the corporation; but this did not include the right to the possession and control of the property that was in legal custody at the time, and held by legal process for the benefit of those creditors to whom the law gave a lien for the payment of their claims.

§ 1460. An insolvent corporation, after the appointment of a receiver, may remove a suit to a federal court.

The case, in our judgment, turns upon the question, What power to act remains in a corporation after a decree of insolvency, an injunction, and the appointment of a receiver? This officer, doubtless, becomes the custodian of the property, but the corporate entity still exists, and the fair implication from the provisions of section 83 of the title "Corporations," in the Revised Statutes of New Jersey, is that until the injunction continues four months the corporation may use and exercise its franchises and transact ordinary business in its own name, subject, of course, to the right of the receiver to the possession and control of the property. The question came before the supreme court of Massachusetts in the case of Coburn v. Boston Papier Mache Manuf'g Co., 10 Gray, 243. It will be seen, by reference to the insolvent corporation act of Massachusetts, that after insolvency the commissioner, by publication, forbids the payment of any debt and the delivery of any property belonging to the corpo

ration, to it or for its use, and also the transfer of any property or the making of any contract. The assignee, standing in the place of the receiver, under the New Jersey statute has quite as full power, and is clothed with as large control over the affairs and assets of the corporation, as the receiver appointed by a court. The counsel for the defendants contended on the arguiment that the proceedings in insolvency amounted to an extinguishment of the corporation, but the court was of the opinion that there was nothing in such proceedings to prevent the corporation continuing to accomplish the end and purpose of its existence; at least until its franchise, or right to act as a corporation, was sold, under the provisions of the statute, if, indeed, such sale would have the effect. The reason assigned was that the corporation, notwithstanding the proceedings, might have assets sufficient to pay all its debts, and then no impediment. would exist before a surrender pursuant to law, or a forfeiture ascertained and declared by a proper judicial proceeding, from resuming its business. There is no decision in New Jersey contradicting this view, although in two or three cases obiter dicta are found which seem to indicate a different conclusion.

§ 1461. An insolvent corporation may appear to attachments and may remove causes to the federal court.

It results that there was nothing in the pending proceedings in insolvency which hindered the corporation from appearing to the attachment against its property and removing the controversy to this court; and however much the court may be disposed to promote equality among all the creditors, it is hardly authorized by an order to divest a class of creditors of the lien which they acquired under the provisions of the attachment laws of New Jersey by the voluntary act of the corporation. The motion is therefore refused.

§ 1462. Abuse and misuse. In a proceeding to forfeit the charter of a railway corporation on the ground of "abuse or misuse" of the franchises conferred by it, held, that there can be no 66 abuse or misuse" without a positive act of malfeasance, which, to furnish ground of forfeiture, must be wilful, and something more than incidental negligence, excess of power, or mistake in the mode of exercising an acknowledged power. Baltimore v. Connellsville, etc., R. Co.,* 6 Phil., 191.

§ 1463. As to what constitutes "abuse or misuse" of franchises conferred by charter on a railway company, held, that abuse includes misuse, and that both mean any positive act in violation of the charter and in derogation of public right wilfully done or caused to be done by those appointed to manage the general concerns of the corporation. Ibid.

§ 1464. An act of the legislature directing a forfeiture of a railway charter on the ground of "abuse or misuse" of the franchises conferred by it, passed without first having the fact of such "abuse or misuse" ascertained by judicial proceeding, is unconstitutional, null and void. Ibid.

§ 1465. Non-user.- A provision of a statute, that if any corporation organized thereunder "shall, for any period of six months after the commencement of its business, neglect and cease to carry on the same, its corporate powers shall also cease," is not a limitation upon the existence of the corporation, but is a condition subsequent, and the forfeiture of the charter for non-user of the franchises does not arise until it is judicially declared. Wallamet Falls Co. v. Kittridge,* 5 Saw., 44.

§ 1466. A forfeiture of charter by non-user of franchises, or suspension of operations, can only be enforced by the government creating the corporation. Kanawha Coal Co. v. Kanawha & Q. Coal Co., 7 Blatch., 406.

§ 1467. Rights of creditors.-The relation between directors of a corporation and its stockholders is that of trustee and cestui que trust. Creditors in certain cases are preferred even to stockholders, for the reason that the latter, as constituent members of the corporate body, are regarded in some respects as sustaining the same relation to the former as that sustained by the corporation. (Barnard v. Farwell, Massachusetts, October term, 1874; Railroad v. Howard, 7 Wall., 411.) Bradley v. Converse,* 4 Cliff., 375.

§ 1468. No forfeiture collaterally.- A forfeiture cannot be taken collaterally by third parties. Kanawha Coal Co. v. Kanawha & Ohio Coal Co., 7 Blatch., 406.

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