16 Mass. 94

September, 1819

Hampshire, Franklin, and Hampden County


Certain individuals having associated in writing for the purpose of carrying on a particular manufacture, and being afterwards incorporated for the same purpose, one, who subscribed the writing after the incorporation, became thereby a member of the corporation, and was held to pay the sum he had subscribed.

It being part of such original agreement, that, if a further sum than was subscribed should be needed, the subscribers should be assessed in proportion to their subscriptions, it was holden that the only remedy for such assessments was by a sale of the shares.

If such a company refuse to give a certificate to a stockholder entitled thereto, he does not thereby lose his rights.

It is not competent to a member of such corporation to object an irregularity in the warning of their first meeting, in an action against him for his subscription money, after they have been in fact organized, and have transacted business for several years.

If such corporation set up a store for the sale of merchandise generally, and sell such merchandise on credit, it does not lie in the mouth of a purchaser, in an action for the price of goods sold to him, to object that they were prohibited by law to carry on such trade.

ASSUMPSIT to recover the original amount or price of a share in the stock of the said company, and also the assessments laid on the said share; and it is alleged in the declaration, that the defendant agreed to take the said share, and promised to pay the said original amount, and all the assessments. The plaintiffs also claim another sum for goods sold and delivered by them to the defendant.

On the general issue pleaded and joined, trial was had before Jackson, J., at the last April term in Hampden; when the plaintiffs produced certain articles of association or agreement, dated May 7th, 1814, and subscribed by the defendant and others, by which the subscribers thereto

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agreed to associate together for the purpose of manufacturing glass in the town of Chester, and for carrying on such trade as might be judged useful. They formed themselves into a company, by the name of The Chester Glass Company; engaged to pay to their agent the sums annexed to their names, at such times as the majority might direct; and in case a further sum should be needed, and other subscriptions could not be obtained, they agreed to be assessed in proportion to their subscriptions; and the profits or losses in the business were to be divided in the same proportion. The stock was to be divided into shares of 500 dollars, each share to have one vote in all transactions. The subscription was made accordingly in shares. It appeared in evidence that it was not originally subscribed by all of those whose names then appeared on it. On the 7th of June, 1814, those who had then subscribed, or some of them, were incorporated by an act of the General Court, by the name of "The Chester Glass Company," with all the usual powers and privileges of manufacturing companies. After the said incorporation, sundry other persons subscribed the said association, and received certificates of their respective shares. The defendant subscribed it in April, 1815, in the manner following. He was a carpenter living very near the plaintiffs' manufactory, and it was proposed between him and the agent of the company, that he should take a share, and should pay for it by discharging the company of 100 dollars, which they owed him, and by making boxes for their glass, and by other services, provided he would do it at as cheap a rate as the plaintiffs could procure it to be done by any other person. The agent having stated this proposition to the directors of the company, and obtained their consent, agreed with the defendant accordingly, and he thereupon subscribed the association. It appeared that the defendant made the boxes for the plaintiffs, pursuant to the said agreement, until July or August following; when he refused to make any more, unless for a higher

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price than was demanded by another person. In June, 1815, he contracted with the said directors to erect the frame of a house for the plaintiffs, for a sum agreed on, which should go towards the payment for his said share. Sundry facts were proved, tending to show that he considered himself a member of the company, and that the plaintiffs admitted and considered him as such.

There was also some evidence tending to show that the company had adopted the said articles of agreement as containing the evidence of membership; as by voting that some of the subscribers might be released, on procuring other persons to take their shares.

It was objected for the defendant, that the paper writing signed by him could not be controlled by parol evidence; that it did not contain any contract with the plaintiffs; and that it could not have been adopted by them; nor could the supposed contract, made by the defendant, be ratified and confirmed by them, without some vote to that effect by the company.

The judge directed the jury, upon this evidence, to find for the plaintiffs upon this point, if they were satisfied that the defendant intended and agreed to take one share in the company's stock after their incorporation, and to pay the sum expressed in the said articles as the price thereof; and that the plaintiffs agreed that he should have the share and become a member of the company accordingly.

It appeared that the directors had ordered that no certificate should be issued to any member, of the shares held by him, until he had paid or secured the said 500 dollars due on each share. On the first of April, 1815, certain of the proprietors, having complied with the said order, received their certificates; and others received them at different times afterwards. The defendant never paid the said 500 dollars, except in part by his work as above mentioned. But a few days before the commencement of this action, the clerk of the company tendered him a certificate

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in the common form, dated the 10th of August, 1816, which he refused to accept. This certificate had been recorded in the usual manner in books of the company; but without the order or request of the defendant.

It was also objected on the part of the defendant, that the stock had never been divided into any certain number of shares. As to this, it did not appear that there was any vote of the company, or of the directors, expressly limiting the number of shares; but the directors once proposed to limit the number to thirty, and they afterwards talked of admitting more. The whole number of certificates issued was twenty-nine, of which that issued to the defendant was the last. The judge was of opinion that this point was involved in the preceding; and that if the company did admit the defendant as a proprietor, after twenty-eight shares had been taken up, that was a sufficient division of the stock into twenty nine shares; and this objection was overruled.

It was further objected for the defendant, that the first meeting of the company under the act of incorporation was not legally notified; and that, therefore, they were not regularly organized, nor ever authorized to act as an incorporated company. It is required by law [Note p97-1] that the first meeting of such a corporation shall be called by the major part of the persons named in the act of incorporation. In the act incorporating the plaintiffs, eight persons are named, two of whom were David King and Leister King, who were partners in trade under the firm of David & Leister King, and had subscribed by that name as partners, for their shares, on the original articles of association. The notification for the first meeting was subscribed in like manner, "D. & L. King," and by three others named in the act. It appeared that all the members met at the time and place appointed for the said first meeting. As no exception had ever before been taken by any one on this account, and as they had proceeded to act as an incorporated company, and the defendant

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had dealt with them as such, the judge was of opinion that this objection furnished no ground of defence to this action, and so instructed the jury.

Respecting the claim for goods sold and delivered, it was proved that the defendant had received the goods from the store of the plaintiffs, which was kept near their manufactory, for the accommodation of their workmen. It contained a general assortment of such goods as are usually kept in country stores, which the plaintiffs were always ready to sell, and did from time to time sell, to others than those employed in the manufactory. It was objected, on the part of the defendant, that the plaintiffs were not authorized by law to keep such a store, and to sell goods in this manner; and therefore that they could not recover against him on this count. This objection was overruled.

It was likewise objected, for the defendant, that the plaintiffs had not proved any demand made on him, for the sum supposed to be due on his share, before the commencement of their action.

This objection was not mentioned, until after the jury had retired to deliberate on their verdict; and the judge was of opinion that, if they should find a verdict for the plaintiffs upon the questions submitted to them, the action would be well maintained, without any evidence of a special request or demand of the money supposed to be due from the defendants.

Being also of opinion that the plaintiffs were not entitled to recover in this action the amount of the assessments, made from time to time on the shares of the proprietors after the incorporation, he directed the jury, if they should find a verdict for the plaintiffs, to assess the damages at the said sum of 500 dollars, with interest from the time the proprietors were, by a vote of the company, to pay interest; deducting the sum due the defendant for his labor and services, as before stated, and adding the sum

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due for the goods sold and delivered him by the plaintiffs, with interest from the date of the writ.

The jury found their verdict according to the said opinions and directions of the judge; and the defendant moved for a new trial on account thereof; agreeing that if the Court should be of opinion that the plaintiffs were entitled to recover the amount of the said assessments, the same with interest thereon might be added to the amount of the damages found by the verdict.

Mills, for the defendant. The contract, to which the defendant became a party, was unambiguous, and needed no explanation. It was merely an association of individuals, to employ a certain joint capital for the purpose of manufacturing glass. They did not contemplate an incorporation. The subscribers became copartners for a particular object, and each contracted with the others, and not with a corporation. There is not even any act of the corporation, adopting the act of association or admitting the defendant a member of the company, and they cannot legally act but by a vote of the body, or by an agent legally authorized by such a vote. [Note p99-1]

The act defining the general powers and duties of manufacturing corporations, [Note p99-2] requires that the property of such corporations shall be divided into shares, meaning, without doubt, a number fixed and determinate, and to be agreed upon in the commencement of their proceedings; and every member is to have a certificate of his property under the seal of the corporation. The defendant never had such a certificate, nor was one ever prepared for him, until the plaintiffs were about bringing this action. Until he received such certificate he was not a member, nor liable to assessments; for he had no evidence of his ownership. The plaintiffs never did determine the number of shares, into which their stock should be divided; and thus a certificate of a share might be made to represent any portion of the stock, to-day a tenth part, to-morrow a

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twentieth, as the discretion or caprice of the company should dictate.

The general law, before referred to, requires a major part of the corporators named in the act to notify the first meeting of the corporation. This requisition was not conformed to in the case of this company. D. & L. King made but one person in this case. If it be said that the party subscribing represented his copartner, and so there was the subscription virtually of both; then if he had had five partners in the firm, his signature would have represented six. This could never be held a compliance with the statute. The corporation thus assembled were not authorized to exercise any corporate acts; and all the future meetings deriving their powers under that meeting, no legal act has ever been done by them.

The plaintiffs had no right or power to enter into any business or trade, except that for which they had a charter. Many mischiefs will arise to the community, if such a course is permitted and sanctioned. The plaintiffs' trading generally being illegal, no legal and binding contract can grow out of it. Nor can they object to the defendant's availing himself of this point. If the contract was illegal, it cannot be enforced in a Court of law.

The original contract of the defendant, if any is proved, was to pay for the share in his labor. Before the plaintiffs could institute an action for a breach of this contract, they ought to have demanded a fulfilment on the part of the defendant, and he must have refused or neglected to perform what he had undertaken.

Bliss, for the plaintiffs.

PARKER, C. J. The objections taken to the verdict are, first, that there is no contract with the corporation, which renders the defendant liable as a member, or entitles him to a share in the stock; that the written paper, signed by the defendant, was made before the company was incorporated, and was, therefore, a contract only with the individuals. But the answer given to this

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objection is sufficient, viz. that the act incorporates all who might afterwards associate, as well as those who had then associated. The defendant, in fact, signed the paper after the act had passed; but he must be taken to have signed it on the day it bears date. He cannot dispute this, in order to avoid the burden it imposed on him. And, in addition to this, the transactions between him and the agent of the corporation are enough to constitute him a member; the corporation having also, by various acts, consented to consider him as such.

It is insisted, secondly, that he cannot be a member, without a certificate of his share; it being provided by the general act upon this subject, that the stock shall be divided into shares, and that certificates shall issue to the stockholders. But it was not essential to the existence of the corporation, that certificates should have issued. The corporation might be compelled, if there were a Court of chancery, to give certificates; but still, for want of them, the stock holders would not lose their rights. The defendant never demanded a certificate. If he had, and it had been refused, perhaps he might have declined being a member. But a certificate was, in fact, offered to him before this action was brought.

In the third place it is objected, that the corporation has never been duly authorized under the statute, and that therefore no contract has been made with them, and they have no right to maintain this action. The statute requires that the first meeting shall be called by a major part of the persons incorporated. David King and Leister King, who were partners in trade, were named in the act of incorporation; and to the advertisement for calling the meeting, the name of the firm is signed. Considering this as one signature, there was not a majority; taking the names separately, there was. We think that this objection cannot be made by one of the company, after they have in fact been organized, and for several years transacted business as a corporation. But if it were otherwise, we

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think it would be right to consider the advertisement as signed by each of the partners, the one who actually signed acting for the other.

As to the fourth objection, which was to the recovery on the count for goods sold and delivered, on the ground that the plaintiffs were prohibited from trading, it cannot avail. The legislature did not intend to prohibit the supply of goods to those employed in the manufactory. Besides, the defendant cannot refuse payment on this ground; but the legislature may enforce the prohibition, by causing the charter to be revoked, when they shall determine that it has been abused.

To the fifth objection it is a sufficient answer, that a demand, if necessary, shall be presumed after verdict. The objection should have been taken before the jury retired; because the fact of a demand might have been proved.

The plaintiffs can recover nothing beyond the amount of the defendant's subscription and interest thereon. There is no promise to pay assessments, but only an agreement that, if 500 dollars per share should be insufficient, assessments might be made; evidently meaning to place them upon the common ground of assessments, which are to be enforced by a sale of the shares.

Judgment on the verdict.


[Note p97-1] Stat. 1808, c. 65, § 2.

[Note p99-1] 7 Mass. Rep. 106.--8 Mass. Rep. 232.

[Note p99-2] Stat. 1808, c. 65, § 3.