of a power in the corporation to enter into a contract of partnership, by which another principal would be created, having equal power to contract debts and to bind the partnership and the corporation in solido.

Indeed, the effect of all our statutes, the settled policy of our legislature, for the regulation of manufacturing corporations is that the corporation is to manage its affairs separately and exclusively; certain powers to be exercised by the stockholders, and others by officers who are the servants of the corporation and act in its name and behalf. And the formation of a contract, or the entering into a relation, by which the corporation or the officers of its appointment should be divested of that power, or by which its franchises should be vested in a partner with equal power to direct and control its business, is entirely inconsistent with that policy.

The power to form a partnership is not only not among the powers granted expressly or by reasonable implication, but is wholly inconsistent with the scope and tenor of the powers expressly conferred and the duties expressly imposed, upon a manufacturing corporation under the legislation of the commonwealth.

The difficulties would be obviously greater in holding such a partnership to be valid, when formed and carried on for the prosecution of a business other than that, if not foreign from that, for which the corporation was created. It is difficult to see how the corporation should engage in such business, even when under its own control, still less to enter into copartnership with third persons for that purpose.

By the St. of 1852, c. 195, not adverted to in the argument, corporations created for the manufacture of woolen and cotton goods are authorized to carry on certain other manufactures, but this only when four-fifths of the stockholders shall, by a vote at a special meeting called for the purpose, consent to the same. This statute furnishes a pretty strong implication that the power to carry on a different business from that for which the corporation was chartered, did not exist before the statute was passed.

We are, therefore, all of opinion that in the formation of the alleged partnership the corporation exceeded the powers given by its charter expressly or by implication, and that the contract of copartnership was illegal and void.

It is said, however, that if this be so, such violation of the charter can only be alleged by the commonwealth upon proceedings for a forfeiture of the charter, and that the validity of the partnership cannot be called in question by the corporation or by its creditors or debtors.

As the basis of proceeding against the Whittenton Mills in insolvency upon the petition of Mason under the St. of 1838, c. 163, § 21, even supposing that the provisions of that statute are not limited to natural persons, it was necessary to show the existence of an actual copartnership between Mason and the corporation. It was not sufficient to show that they had so conducted as to be liable to third persons as partners; they must be partners inter sese. Hanson v. Paige, 3 Gray, 239. There must be a contract of copartnership between them. Into such a contract the petitioners were incapable of entering.

But the case rests upon broader grounds. The charter of the corporation is part of the public law. Rev. Sts. c. 2, § 3. Those who deal with the corporation must take notice of the extent of its powers, and that the corporation is legally incapable of entering into the contract of partnership; that that contract was beyond the scope of its authority, and that this incapacity resulted from considerations not personal or peculiar to this corporation or its members, but from general grounds of public policy, which the corporation and those dealing with it cannot be permitted to contravene and defeat. That policy is to confine these corporations within the limits prescribed by law, to protect the stockholders from liabilities which the charter and laws do not create; and, while it imposes upon the stockholders of the corporation heavy responsibilities, to retain to them the legal control of its business and conduct of its affairs.

The precise point at issue before us is the validity of these proceedings in insolvency. That depends, as before remarked, upon the existence of the partnership between the Whittenton Mills and Mason. Upon that only could the petition of Mason be sustained.

It is not necessary for this purpose to decide how far these considerations will affect those claiming to be the creditors or debtors of the alleged partnership. It is in this point of view only, that the cases of Chester Glass Co. v. Dewey, 16 Mass. 94; Quincy Canal v. Newcomb, 7 Met. 276, and White v. South Shore Railroad, 6 Cush. 412, can be deemed material. They have the tendency to show the existence of a contract between the Whittenton Mills and Mason, which the former is estopped to question.

In the case of Chester Glass Co. v. Dewey, one ground of defence to the recovery of goods sold and delivered by the plaintiff corporation was that the corporation was prohibited from trading. The court held that the legislature did not intend to prohibit the supply of goods to those employed in the manufactory. That certainly was the end of the matter. The court, however, added that the

defendant could not refuse payment on this ground, but that the legislature may enforce the prohibition by causing the charter to be revoked. This suggestion will be entitled to consideration if a question should arise as to the right of the alleged company to recover for goods sold, but it certainly is not conclusive upon the relation of the partners inter sese.

In Quincy Canal v. Newcomb, it was held that, where a canal was opened and toll claimed and the defendant used the canal, he was liable to the payment of such toll and could not avoid such payment by showing that the canal had not been made so deep as the statute required.

In White v. South Shore Railroad, it was held that the defendants were liable for damages in constructing their road through and across a mill pond authorized by the general court to be raised in a navigable river, though in erecting the dam for raising the pond the condition of the act permitting it had not been complied with. The court said that the railroad company could not take the petitioners' pond from them because the dam was not constructed in compliance with the act; that whether it had been so constructed was a matter between the government and the petitioner.

If the assent of all the stockholders were shown to the formation of the partnership - which was not the fact it could not enlarge the powers of the corporation, or make that legal which was inconsistent with the law limiting their powers and prescribing their duties. Whether, if such assent were available, it could be manifested in any other mode but a vote of the stockholders, it is not necessary to inquire.

The decision of the question as to the existence of the partnership between the Whittenton Mills and William Mason in the negative renders unnecessary the inquiry whether, if a partnership had existed, the petitioners could be subjected to the provision of the insolvent law of 1838, c. 163, and the acts in addition thereto.

The proceedings in insolvency founded upon the petition of Mason as the partner of said Whittenton Mills under the firm of William Mason & Co., were illegal and must be vacated and set aside, so far as they affect the estate of the Whittenton Mills. A mandamus must be issued to the judge in insolvency for the county of Bristol to proceed upon the petition of the Whittenton Mills, to hear the parties, and, good cause being shown, to issue his warrant thereon. Decree accordingly.

PHILIP ALLEN & SON v. WOONSOCKET COMPANY.

11 Rhode Island Reports 288 (1876)

BILL IN EQUITY brought by the surviving copartners of the firm of Philip Allen & Sons against the respondent corporation, charging that there had existed between the respondent and the complainants a copartnership to carry on the business of calico printing. The prayer of the bill was for an account and settlement. The facts as found by the court are sufficiently stated in its opinions.

POTTER, J. The old firm of P. Allen & Sons having failed, and all the parties having made assignments in 1857, a new firm, under the same name, was formed by the same parties, by an agreement in writing, November 26, 1858.

In June, 1858, the print works formerly owned by P. Allen & Sons were sold by their assignees, and purchased by the Woonsocket Company (a corporation chartered by the legislature in 1832), who had occupied them on lease from the assignees of P. Allen & Sons after their failure.

The bill alleges that said defendant corporation, by Crawford Allen, its agent, on November 26, 1858, formed a partnership with P. Allen & Sons, to carry on said printing business; the corporation to furnish the works and capital, the said P. Allen & Sons to manage the business and devote their skill, attention, and influence to it, and to receive for such services a salary of $200 per month, and twenty per cent. of the profits of the business, and that said business was so carried on until Philip Allen's death, on December 16, 1865, when the agent notified said P. Allen & Sons that their interest in the business ceased; that large profits were made; and that complainants received the salary, and a portion but not all of the share of profits they were entitled to, and praying for an account and payment of the balance that may be found due.

The answer denies the partnership, contends that such a partnership could not legally exist, as being ultra vires on the part of said Woonsocket Company; that if it existed, it was terminated when the mill stopped in December, 1864, or when the accounts were closed and a new arrangement begun in May, 1865, instead of December 16, 1865, the date of Philip Allen's death; and that therefore the suit is barred by the statute of limitations, the bill not being filed until December 15, 1871; denies that any moneys were paid to P. Allen & Sons as a part of profits, but that what was paid over and above the salary was a gratuity, and for the use of a trademark, and not of right under contract; that stated and true accounts were rendered and allowed and settled by the parties, the last in

December, 1870. The respondent claims the benefit of these allegations as if pleaded.

The answer also sets out other matters which, though bearing on these questions by way of inference and evidence, need not be noticed now.

The answer further alleges that on December 12, 1871, P. Allen, Jr., one of the complainants, released all claims against the respondent for services as partner or individually.

The first point of defence is that the respondent, being a corporation chartered by the legislature of Rhode Island, had no power to enter into a partnership; that the whole proceeding would be ultra vires.

The grounds on which the proceedings of corporations have been held to be void, as being beyond the powers given them by their charter, have been chiefly these:

First. Because public policy requires that corporations should be confined to the business, and to the mode of managing that business prescribed by the charter, which is their law, and which they are bound to obey.

The act incorporating this company was passed at the January session A. D. 1832. It incorporates the Woonsocket Company. It seems strange, but is true, that no portion of the act specifies what business is to be done by the company, nor can its business be inferred from anything in its name.

Second. Because the individual stockholders of the company have a right to require that the corporation shall be confined to its legitimate business. They have invested their money on the faith that it will be so confined. A majority have no power to change it. The stockholders have invested their money also on the faith that its business will be managed by the officers provided for in the charter, and in whose election they have a voice; and while a majority, through their officers and agents, may make many binding contracts, they cannot transfer the whole control of their affairs to a body foreign to themselves.

Now, in this case, the charter does not specify by what officers the business of the corporation shall be managed; and during the whole period involved in this suit the Woonsocket Company had but one single stockholder. Crawford Allen owned the whole stock. There was no other stockholder with any right to complain that the business had been changed, or that the corporation had put the management of any portion of its business beyond its own control. And this, we think, makes a material difference between the present case and the cases to which we have been referred on the part of