Andrews Bros. Co. v. Youngstown Coke Co.

• Decision Date: 11 April 1898
• Docket Number: 554.
• Citation: 86 F. 585
• Parties: ANDREWS BROS. CO. v. YOUNGSTOWN COKE CO., Limited.
• Court: U.S. Court of Appeals — Sixth Circuit

86 F. 585

ANDREWS BROS. CO. v. YOUNGSTOWN COKE CO., Limited.

No. 554.

United States Court of Appeals, Sixth Circuit.

April 11, 1898

This is an action by the Youngstown Coke Company, Limited, claiming to be a corporation organized under the law of Pennsylvania against the Andrews Brothers Company, a corporation of the state of Ohio, to recover $7,967.95, with interest from January 31, 1889, for coke sold and delivered to the defendant by an unauthorized agent of the plaintiff, and used by the defendant corporation. The suit is to recover the market value as for a conversion. A jury was waived, and the issues of law and fact submitted to the court, which found for the plaintiff, and entered judgment for $9,519.16. This writ of error was sued out by the defendant for the purpose of reversing this judgment.

Thomas W. Sanderson, for plaintiff in error.

John G White, for defendant in error.

Before TAFT and LURTON, Circuit Judges, and CLARK, District Judge.

LURTON Circuit Judge, after making the foregoing statement of facts .

The first and principal question is whether the circuit court had jurisdiction. The plaintiff is described in its original petition as 'a limited partnership association, duly organized and existing under and by virtue of the laws of the state of Pennsylvania, of which state it is a citizen. ' This was perhaps an insufficient statement of its corporate character, under Chapman v. Barney, 129 U.S. 677, 9 Sup.Ct. 426, and Carnegie, Phipps & Co. v. Hulbert, 3 C.C.A. 391, 53 F. 10. To meet this difficulty, an amended petition was filed, in which it was averred that the plaintiff was a corporation under the laws of Pennsylvania and a citizen of that state. The defendant in an amended answer, and by way of abatement, admits that the plaintiff company was created and organized under the Pennsylvania act of June 2, 1874, but denies that it thereby became either a corporation or a citizen of said state, within the meaning and effect of the statutes of the United States, requiring diversity of citizenship to give jurisdiction to a United States court. A Pennsylvania act of March 21, 1836, provided for the creation of limited or special partnerships, having one or more general partners with unlimited liability and special partners with limited liability. But such associations had none of the attributes or faculties of a corporation. The history of that act and its amendments is fully stated in the opinion of the court in Laflin & Rand Co. v. Steytler, 146 Pa.St. 434, 23 A. 215. The act of 1874, under which the Youngstown Coke Company was organized, was neither an amendment nor a supplement to the act of 1836. In the case cited above, the court, in speaking of this act of 1874, say:

'The act of 1874, it will be seen, was not a mere amendment or supplement to anything that went before, but, like the act of 1836, a new scheme, carefully and elaborately drawn, creating a new kind of artificial person, standing between a limited partnership as previously known and a corporation, and partaking of the attributes of each. It was, however, a step forward in the same line of legislative recognition of business demands uniformly pursued since the start, in 1836.'

The act of June 2, 1874, under which the defendant in error was organized, is in 17 sections. The first provides that three or more persons desiring to organize under the act may do so by preparing, signing, and acknowledging a statement in writing which shall set forth the amount of capital subscribed for by each; the total amount of capital, and when and how to be paid; the character of the business and location of same; the name of the association, with the word 'Limited' added thereto as a part of same; the duration of the association, which shall not exceed 20 years; and the names of the officers selected in conformity with the act. The second section provides that the members of the association shall not be liable for the debts or engagements of the company beyond their unpaid subscriptions to the capital. The fourth section provides that interests in such associations shall be personal estates, and may be transferred, given, bequeathed, distributed, sold, or assigned under such rules and regulations as shall be adopted from time to time--

'By a vote of a majority of the members in number and value of their interests; and in the absence of such rules and regulations and transferee of any interest in any such association shall not be entitled to any participation in the subsequent business of such association, unless elected to membership therein, by a vote of a majority of the members in number and value of their interests. And any change of ownership, whether by sale, death, bankruptcy or otherwise, which occurs in the absence of any rules and regulations of such association regulating such transfer, and which is not followed by election to membership in such associations, shall entitle the owner or transferee only to the value of the interest so acquired at the date of acquiring such interest, at a price and upon terms to be mutually agreed upon, and in default of such agreement, at a price and upon terms to be fixed by an appraiser to be appointed by the court of common pleas of the proper county, on the petition of either party, which appraisement shall be subject to the approval of said court.'

The fifth section provides for a board of managers, who shall be not less than three nor more than five, one of whom shall be chairman, one the treasurer, and one the secretary. This section also provides that:

'No debt shall be contracted or liability incurred for such association, except by one or more of the managers, and no liability greater than five hundred dollars, except against the person incurring it, shall bind the association, unless reduced to writing and signed by at least two managers.'

The sixth and seventh sections provide for distribution of profits through dividends, such dividends not to impair capital, and that it shall be unlawful to lend its credit, name, or capital to any member, or to any other person, without consent of a majority in number and value of members in writing. The eighth, ninth, and tenth sections provide how such companies may be dissolved, and how the property shall be distributed. The remaining parts of the act provide-- First, that the association may sue and be sued in its associate name, service of process to be made upon one of its officers, or on any agent, clerk, or manager in counties where it may maintain an office; second, that such associations may acquire, hold, and convey real estate in its associated name.

This act does not declare these associations to be 'corporations,' nor are they styled 'corporations.' They are called 'partnership associations.' Neither does the act disclaim a purpose to create corporations, as was the case under the English and New York joint-stock acts mentioned and construed in Liverpool Ins. Co. v. Massachusetts, 10 Wall. 566, and People v. Coleman, 133 N.Y. 279, 31 N.E. 96. But the fact of corporation or no corporation must depend upon the existence or nonexistence of those faculties which are of the essence of corporate existence. We need not be too attentive to mere names. The inquiry must go deeper, and a solution be reached upon principle.

In the masterly opinion of Chief Justice Nelson in Thomas v. Dakin, 22 Wend. 9, 70, that learned jurist, when engaged in the determination of a like question arising under the New York law providing for banking associations, was confronted with the fact that the act did not declare the associations thereby organized to be corporations, or style them such, and said:

'A corporate body is known to the law by the powers and faculties bestowed upon it, expressly or impliedly, by the charter. The use of the term 'corporation' in its creation is of itself unimportant, except as it will imply them.' In the same case, Judge Cowen (22 Wend. 103) said:

'It has been impossible for me to see the force of the argument that the legislature have constantly avoided to call these associations, or any of their machinery, a corporation. Therefore we cannot adjudge them to be so. If they have the attributes of corporations, if they are so in the nature of things, we can no more refuse to regard them as such than we could refuse to acknowledge John or George to be natural persons, because the legislature may, in making provisions for their benefit, have been pleased to designate them as belonging to some other species. Should the legislature expressly declare each of them to be corporations, without giving them corporate succession or other artificial attributes, the declaration would not make them so. On the other hand, even an express legislative declaration that certain associations are not included in the definition of corporations would not change their character, provided they should in fact be clothed with all the essential powers of corporations.'

In Liverpool Ins. Co. v. Massachusetts, 10 Wall. 566-576, in considering the corporate character of the Liverpool Insurance Company, a joint-stock association organized under an English act of parliament, the court said:

'It is also urged that the several acts of parliament we have mentioned expressly declare that they shall not be held to constitute the body a corporation. but, whatever may be the effect of such a declaration in the courts of that country, it cannot alter the essential nature of a corporation or prevent the courts of another jurisdiction from inquiring into its true character, whenever that may come in issue. It appears to have been the policy of the English law to attach certain consequences to incorporated bodies, which rendered it desirable that such associations

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