Cuyler v. City Power Co.
| Decision Date | 20 October 1898 |
| Docket Number | 11,283 - (69) |
| Citation | 76 N.W. 948,74 Minn. 22 |
| Parties | CORNELIUS C. CUYLER and Another v. CITY POWER COMPANY and Others |
| Court | Minnesota Supreme Court |
Action in the district court for Otter Tail county by plaintiffs, in their own behalf and in behalf of all other creditors of the defendant City Power Company, to enforce the individual liability of the stockholders in that company. Defendants A T. Rand, C. D. Wright, Elmer E. Adams, Samuel Hill, Anna E Hill, and C. W. Ames demurred to the complaint on the ground that it failed to state a cause of action. From an order Baxter, J., sustaining the demurrer, plaintiffs appealed. Affirmed.
Corporation -- Construction of Articles.
The charter provisions of a domestic corporation construed.
Corporation -- Manufacturing Corporation.
Held, that from these provisions it clearly appears that such corporation was organized to carry on an exclusively manufacturing business.
C. C. Houpt and Clapp & Macartney, for appellants.
In order to exempt stockholders from liability to creditors, the corporation must be an exclusively manufacturing concern. Even though its business is largely or principally manufacturing, if in addition thereto it does or may do, under its articles, some other business not merely incidental thereto, the stockholders are liable. Oswald v. St. Paul G. Pub. Co., 60 Minn. 82; St. Paul Barrel Co. v. Minneapolis Dist. Co., 62 Minn. 448. In the absence of fraudulent attempts to evade the law, the articles of incorporation are the sole criterion to ascertain the purpose for which the corporation was formed. Nicollet Nat. Bank v. Frisk-Turner Co., 71 Minn. 413; Arthur v. Willius, 44 Minn. 409; Densmore v. Shepard, 46 Minn. 54.
A proper test to determine whether the articles authorized any business beyond what is incidental to manufacturing is whether it could, under its charter, successfully defend in an action by a stockholder or the state, on a charge of doing an unauthorized business. Arthur v. Willius, supra; St. Paul Barrel Co. v. Minneapolis Dist. Co., supra.
Applying these rules, we contend that under its charter the company can buy and sell, lease as lessee and as lessor, property, water power and rights, without even improving the same, much less operating them. The authority to deal in the several articles mentioned in the charter is not limited to such as may be necessary or convenient to the defendant's business of creating or transmitting power by the defendant corporation, for there is no such limitation, but for the business generally. In support of this construction see Mohr v. Minnesota El. Co., 40 Minn. 343; Densmore v. Shepard, supra; First Nat. Bank v. Winona P. Co., 58 Minn. 167; Anchor Inv. Co. v. Columbia El. Co., 61 Minn. 510; St. Paul Barrel Co. v. Minneapolis Dist. Co., supra; Anderson v. Anderson, 65 Minn. 281.
W. E. Dodge and Charles S. Albert, for respondents.
The purpose of the constitutional exemption of stockholders in manufacturing and mechanical corporations from double liability has been declared to be the fostering of manufacturing within the state and the promotion of the establishment of manufacturing corporations. Nicollet Nat. Bank v. Frisk-Turner Co., 71 Minn. 413; Cowling v. Zenith I. Co., 65 Minn. 263; State v. Minnesota T.M. Co., 40 Minn. 213; People v. Wemple, 129 N.Y. 543; Waterbury v. Atlas, 42 La. An. 723; City v. Arthurs, 36 La. An. 98; Attorney General v. Lorman, 59 Mich. 157. This exemption should be construed liberally. Martin v. Wakefield, 42 Minn. 176; White v. Steam Tug, 6 Cal. 462. The provision of the constitution imposing on stockholders a liability for the debts of the corporation is in derogation of common right, and to be extended no further than strict construction carries it; the exception must be liberally construed. If the language leaves a reasonable doubt whether such liability was intended to be imposed, the doubt must be resolved against the liability. Sutherland, St. Const., §§ 366, 371, 400; Gray v. Coffin, 9 Cush. 192; Dane v. Dane, 14 Gray, 488; Chase v. Lord, 77 N.Y. 1; Danvers v. City, 10 Pick. 513; Moyer v. Pennsylvania, 71 Pa. St. 293; City v. Chaffee, 70 Mich. 80; City v. Putnam, 45 Mich. 263; Wakefield v. Fargo, 90 N.Y. 213; Coffin v. Rich, 45 Me. 507; 1 Cook, Stockh. § 214. A corporation organized for a certain specified purpose is granted, either expressly or impliedly by the law, all the necessary and incidental powers needful for carrying out that purpose. So in the charter of defendant corporation it was provided that it should acquire and hold real estate, water power, canals, water courses, bridges, dams, pipes, buildings and other works necessary, proper or convenient for the purpose for which it was organized, and the disposal of its said property. These are merely incidental powers, and are expressly subject to the main purpose and the only purpose, that of creating and producing motive power. These incidental powers are directly and immediately appropriate to the execution of the specific power granted. Nicollet Nat. Bank v. Frisk-Turner Co., supra; Hastings Malt. Co. v. Iron Range B. Co., 65 Minn. 28; Cowling v. Zenith I. Co., supra; People v. Wemple, supra. The express provision of the charter is that the company can acquire property for the purpose of manufacturing power, and such property as is necessarily incidental to that purpose.
That part of the charter of defendant corporation (article 1) to be construed at this time reads as follows:
"The general nature of its business shall be the acquiring and holding, either by purchase or lease, of real estate and water power, and the purchasing, hiring, building, improving or construction of canals, locks, ponds or water courses within Otter Tail county, Minnesota, with the water power appurtenant thereto; the building, erecting, repairing, laying, purchasing, leasing, operating and maintaining of all necessary and convenient bridges, free or toll dams, flumes, water gates, pipe conduits, aqua ditches, wells, reservoirs, buildings, fixtures, cables, machinery and water wheels, or other works necessary, proper or convenient for the purpose of producing and creating water, steam and other motive power, and all transmission and application of the same for manufacturing and lawful business, and the acquiring, in any lawful manner, of any or all flowage and riparian rights that may be necessary or convenient in the prosecution of its business and the disposing of any or all of its said property, power and rights, either by sale or lease."
And the sole question is whether the corporation is within the excepting clause found in section 3, art. 10, of the state constitution, and its stockholders exempt from the individual liability which plaintiffs attempt to fasten upon them in this proceeding.
We have had occasion many times since 1872 (when the exception was made a part of section 3) to pass upon like provisions in the charters of other corporations with respect to the same question, and the general proposition laid down is that the excepting clause applies only to corporations organized to carry on an exclusively manufacturing or mechanical business including anything which is properly incidental to or necessarily connected with such business, and, in the absence of fraudulent attempts to evade the law, the articles of incorporation are the sole criterion to ascertain the purposes for...
To continue reading
Request your trial