Sanford v. Gregg

Decision Date06 June 1893
Docket Number4.
Citation58 F. 620
PartiesSANFORD et al. v. GREGG, Auditor General.
CourtU.S. District Court — Eastern District of Pennsylvania

The language of the various acts of assembly of Pennsylvania under which this tax is claimed upon the capital stock of the Adams Express Company is as follows: Section 4, Act May 1 1868: 'That the capital stock of all companies whatever incorporated by or under any law of this commonwealth, or incorporated by any other state, and legally doing business in this commonwealth, shall be subject to pay a tax into the treasury at the rate of * * * upon the valuation of the capital stock of the same.' Fifth section of Act April 24, 1874: 'That every company whatever now or hereafter incorporated under any law of this commonwealth, or now or hereafter incorporated under the laws of any other state and doing business in this commonwealth * * * shall be subject to pay a tax * * * annually at the rate of * * * upon its common or preferred stock. * * *' Third section of Act March 20 1877: 'Every company or association whatever, now or hereafter incorporated by or under any law of this commonwealth, or now or hereafter incorporated by or under the laws of any other state or country and doing business in this commonwealth,' shall pay a tax on capital stock. The language of the fourth section of the act of June 7, 1879 (P. L. 114,) is identical, as far as pertinent, with that of 1877.

The Adams Express Company is a joint-stock association, formed in New York in 1854, under articles of association which contain the following provisions in substance:

(a) The subscribers declare 'that we, for ourselves and our associates and successors, have associated together as a joint-stock association for carrying on the business of express forwarding.'
(b) 'Every person or corporation or company who shall contribute to the joint stock, or who shall be admitted and acquire interests in the business of this company, shall participate in its profits and share in its losses.'
(c) The property of the company was divided into 12,000 shares of stock, with the right to increase or diminish their number. The shares are to be represented by proper certificates which shall be from time to time issued by the association. The association was authorized 'to receive from any persons, corporations, or associations subscriptions for shares, the contribution or payment for which shall be called in' by assessments to be levied or suits to be brought under the tenth provision of the certificate.
(d) The persons signing that certificate declare they were owners of shares, 10,769 shares. The balance was to be disposed of as the managers direct.
(e) The name of the association was the Adams Express Company. The business of the association could be carried on at the option and direction of the board of managers in that name or in the names of such associations or local express firms as are now or may be established and known to the public, and which may be purchased up by this association; and such persons, corporations, and associations as shall be admitted to and contribute or be members of the association by acquiring the interests of others should also be members of this association.

(f) Any person, corporation, or association entitled to any shares could transfer his or their interest, in whole or in part, under certain conditions, on the books of the association.

(g) The death of any shareholder, or the assignment by an insolvent debtor of his interest in the property of the association, should not dissolve the same; but the representatives or the assignee of such shareholder may transfer their shares in the manner and under the conditions aforesaid.

(h) 'The property and effects of the association, or committed to their charge and custody, * * * shall be in the exclusive possession and custody of the trustees, consisting of the president and two of the managers, in whom the same shall legally vest, subject always to the accountability therefor justly growing out of these presents, in the name of which trustees or the president all legal proceedings of the association shall be conducted as permitted by law.'

(i) Upon the change of any of those trustees, their substitutes, or, upon the death of any of them, their survivor or survivors, shall succeed to and exercise the above powers.

(j) The board of managers, consisting of nine persons, was appointed with power to select from their own number a treasurer and secretary, and to elect a president and vice president. The managers could direct the hiring, purchase, or sale for the association of any personal property which they may think necessary or proper for the conduct or in aid of the business of the association, even to the extent of being common carriers on the portions of their routes, and could insure or reinsure anything committed to the charge of the association.

(k) Annual meetings are fixed for the second Wednesday of February, and provisions made for calling special meetings.

(l) Assessments may be made upon any shareholder upon his shares for paying up his subscription, or ratably meeting the losses or claims of the association beyond its available resources at the time.

(m) Dividends of the profits may be declared by the managers to such extent as they from time to time may provide.

(n) The authentication by the secretary and the president or vice president and treasurer or secretary of all acts, obligations, powers, and documents of the association.

John Hampton Barnes, Geo. Tucker Bispham, and Wayne Mac-Veagh, for complainants.

(1) It is submitted that the provisions of the articles of association fall short of the characteristics of a corporation.

'A corporation is a body consisting of one or more persons established by law for certain specific purposes, with the capacity of succession, either perpetual or for a limited period, and other special privileges not possessed by individuals.' (Definition from American & English Encyclopaedia of Law.)

Such an organization can only be created by the action of the law and authority of the government, and not by the agreement of the parties. Stowe v. Flagg, 72 Ill. 397; Atkinson v. Railroad Co., 15 Ohio St. 21; People v. Assessors of Watertown, 1 Hill, (N. Y.) 616; State v. Bradford, 32 Vt. 50. It follows that a corporation can have no legal existence out of the state creating it. The exercise of any power in another state depends upon the will of that state. Bank v. Earle, 13 Pet. 519; Railroad Co. v. Wheeler, 1 Black, 286. The statutes of Pennsylvania under which the right is claimed to settle these taxes refer to companies incorporated under the law of another state and doing business in this commonwealth. Their purpose was to recognize corporations created by law of another state and doing business in this state, and the authority to do such business must be expressly granted, as shown in the decisions above cited.

The Adams Express Company was not established by law or under the authority of any government. It is a voluntary association of individuals. All of the powers granted by the said articles of association may be lawfully created by agreement between the parties. There is no assumption of any power expressly reserved to corporations. The provision making the shares assignable without causing dissolution is not contrary to the policy of the law, and is expressly authorized by the joint-stock company act of the state of Pennsylvania. See Act Pa. June 2, 1874. The members of such organization have the right, under that act, to elect purchasers of stock members of the association. A similar power has been recognized and held to be within the power of individuals in the case of Gleason v. McKay, 134 Mass. 419, and it is competent for partners to agree that death shall not dissolve the copartnership. 1 Pars. Cont. § 200; Tyrrell v. Washburn, 6 Allen, 475, 476; Pearce v. Chamberlain, 2 Ves. Sr. 33; Kingman v. Spurr, 7 Pick. 235. The designation of the trustees as the parties to whom property was to be conveyed for the benefit of the copartnership was lawful without statutory authorization, and was not the exercise of a corporate power. Corporations take and convey real estate by their corporate name, and under their corporate seal. A copartner may, in his own name, take title to firm real estate purchased with the partnership fund, and it then becomes partnership property, and is subject to its liabilities, and is divisible on liquidation, and can be sold by the authority of the firm; and until the firm's affairs are settled it is personal property. Lindl. Partn. 642; Id., Wentworth's Notes, 342; Pars. Partn. 372; Moderwell v. Mullison, 21 Pa. St. 257, 259; Van Brunt v. Applegate, 44 N.Y. 544.

The title to the property being in the three trustees, it was proper to give them the power to sue in relation thereto and, indeed, only those named in the transfers, to wit, the three trustees, could sue, (Metcalfe v. Rycroft, 6 Maule & S. 75; Scott v. Godwin, 1 Bos. & P. 67,) and dormant partners need not join, (Mitchell v. Dall, 2 Har. & G. 171.) The delegation of power to the president to sue has been reaffirmed by the State Code of New York, which authorizes (section 1919) suits in the name of the president or treasurer, where the association consists of seven or more persons, but only when the association is 'unincorporated.' Like power exists both at law and in equity. Chamberlain of London's Case, 5 Coke, 62b; Smith v. Swormstedt, 16 How. 302. Moreover, the right of suing or being sued in the name of a president is not a corporate power or privilege. The corporate power or privilege is to sue and be sued in the corporate name. There is no attempt in the articles to determine against whom suit must be...

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