Southern Steam Packet Co. v. Magrath

Caria, per Dunkin, Chancellor.
A majority of the Court are of opinion that the decree should be affirmed. They are content to rest the decision on the fact that the original agreement, to which alone the defendants were parties, contained no provision, either express or implied, for procuring a charter of incorporation; and that, by the terms of the Act of December, 1837, the condition of the parties was materially changed.

In the view taken by the Court, it is not very important, whether the charter of incorporation restricted or enlarged the liability of the parties to the agreement. The Chancellor supposed the liability was enlarged. But if the position taken by the appellants be well founded, all the subscribers were originally liable, as partners, to an unlimited extent, the restriction in the agreement being confined to their liability to Capt. Pennoyer, for the cost of constructing the boat. Certainly if a portion of these partners obtain a charter, limiting the general liability of each partner, it is a material variance. Any co-partner might well say, that he became a member of the firm, in consequence of the strength and importance which is derived from the unlimited responsibily of the persons who composed the association. When the fundamental article is changed, it becomes a new agreement, a new contract, which has not been presented to him, and to which his assent is not to be implied.

The original agreement provides that “ the present capital of the company shall consist of two hundred and fifty shares, at five hundred dollars each,” or one hundred and twenty-five thousand dollars. By the Act of incorporation,, the capital is fixed at one hundred thousand dollars, with liberty to increase the same to five hundred thousand dollars ; and the corporation is also authorized to hold property, real and personal, not exceeding five hundred thousand dollars in value.

*101By the terms of the original agreement, when two hundred shares, or one hundred thousand dollars, had been subscribed, the stockholders were to be called together, and directors elected. More than this amount had already been subscribed, and directors had been chosen.

The Act of incorporation itself, appoints directors of the company thereby established, and provides for the taking up by subscription of the whole, or any part of the capital. The last clause declares that the company shall not be considered a body corporate, until the whole amount of capital authorized shall have been actually subscribed. From this provision, it is manifest that all the subscribers to the original agreement, were not intended by the Act to-be included as existing members of the corporation, or that it contemplated a subscription to the whole amount; and, in the opinion of the Court, there is nothing in the original agreement which obliged the parties to it to subscribe to the stock, or accept the charter. The appeal is therefore dismissed.

B. F. DUNKIN.

We concur.

J. Johnston, David Johnson.

Harper, Ch.
Dissenting. I have no question of the truth of the rule, as laid down by the Chancellor below, that the majority of the members of a partnership are to govern, provided they do not violate the fundamental articles of their agreement. The question is, whether the acceptance of a charter of incorporation by a majority of the stockholders, is such a violation of their agreement. The articles stipulate that the subscribers shall form a joint stock company, to be called the Southern Steam Packet Association. Has this agreement been violated % Why, the terms of it relate quite as aptly to an incorporated as to an unincorporated company.

I suppose that four-fifths of the joint stock companies in the United States are incorporated. The corporation is in the very words of the agreement, a joint stock company called the Southern Steam Packet Association. If incorporation were not contemplated at the same time of signing, which may fairly enough be inferred, certainly there *102was nothing to restrain it. It is true, the majority have no right to vary the liabilities of their fellows. But it is plain that the stipulation that the subscribers should not be liable beyond the amount annexed to their names, had relation only to Capt. Pennoyer. He was to contract for the building of the boat, on his own credit; and if he incurred expenses beyond the amount subscribed, it would have been his own loss, as against him the stipulation was equally valid in favor of the partners or corporators.

But certainly they could not limit their liabilities as to creditors at large, but must have been liable to the full extent of their property.

The charter, therefore, limiting their liabilities to double the amount of their stock, was not to increase, but to lessen their liabilities — not a prejudice, but a benefit.

It has been suggested that the terms of the agreement were violated, by the charter’s incorporating not only the present members, but those who might hereafter become members. It is said that the defendants might become associated with partners, or fellow corporators, whom they never contemplated. But when the defendants signed the articles, there were other shares to be taken, and they were utterly ignorant whether they would be taken by few or many persons, and who these would be. Those who signed first, were ignorant of the whole of their associates, but took the risk, as to who and how many they should be; and we cannot suppose that some members have privileges in this respect more than others. I cannot but think the objection frivolous.

The defendants cannot be compelled to become corpora-tors, against their will, but they may be compelled to perform an agreement for the payment of money, into which they fairly and deliberately entered, and against the performance of which I do not perceive that they have a shadow of excuse. The right which the defendants’s partners as individuals, had to enforce the agreement, was devolved on the incorporated company by the act of incorporating them. This would not be questioned as to one who had concurred in applying for incorporation; and there is no greater reason to question it with respect to any person who made a valid contract with those individuals.