stockholders were equally bona fide holders with himself, and equally victims of the fraud.' It is said that one who becomes a member after the irregular incorporation, having taken no part therein, is not to be held liable as a partner.2 § 163. (c) From fraud.- When the conduct of parties operates as a fraud or deceit upon third parties, whatever their private intention, the relation of partnership may be said to exist between them with respect to such third persons. Thus where promoters of a corporation had signed as parties of the second part a secret agreement with the owners of certain patents purchased in behalf of the projected corporation, and acted in concert for their own common benefit, it was held that whatever may have been their intention to the contrary they thereby became liable as partners. And they may incur liability as partners by holding themselves out as such, or negligently or fraudulently allowing themselves to be so represented by their co-promoters." So again, the individuals composing an incorporated company or society, may render themselves personally liable to its creditors by their acts, defaults and representations, such for example as representing the company to be solvent, when they have knowledge of the contrary; permitting their assets to be wasted, as in uselessly contesting a well founded claim; or using their corporate existence as a cloak for the prosecution of an illegal business; and in Illinois, by advertising the company as having a certain capital stock. Where, of course, a corporate 8 1 Perry v. Hale, (1887) 143 Mass. 540. Stafford Bank v. Palmer, (1880) 47 Conn. 443. Cf. Richardson v. Pitts, (1879) 71 Mo. 128. 3 Chandler v. Bacon, 30 Fed. Rep. 538; Emery v. Parrott, 107 Mass. 95; Story on Partnership, $ 49. 6 Searight v. Payne, (1874) 2 Tenn. Ch. 175. Bigelow v. Congregational Society, (1839) 11 Vt. 282. 9 McGrew v. City Produce Exchange, (1887) 85 Tenn. 572. 9 Ill. Stat. ch. 32, § 18. Not so, 4 Chandler v. Bacon, (1887) 30 Fed. however, at common law. WakeRep. 538. 5 Collingwood v. Berkeley, 15 C. B. N. S. 145; Maddick v. Marshall, 17 C. B. N. S. 829; Wood v. Argyll, 6 Man. & G. 928; Lake v. Argyll, 6 QB. 477; Beach on Railways, § 9; Taylor on Corporations, § 77. man v. Dalley, 51 N. Y. 27, 30; First National Bank v. Almy, (1875) 117 Mass. 476; Evans v. Coventry, (1856) 25 L. J. Ch. 489; Crease v. Babcock, (1846) 51 Mass. 525, 557. Contra, Haslett v. Wotherspoon, (1847) Strob. Eq. (S. C.) 209, 229. charter has been obtained merely as a cloak for a concern which in its inception and prosecution is a fraud and a swindle, the participants therein will not be thereby protected from personal responsibility for their illegal acts. But false representations by the shareholders and officers as to the solvency of a company, made by them in good faith, and fraudulent or ultra vires acts, on the part of the corporation itself, do not render the members individually liable as partners to corporate creditors. Such a misleading statement wilfully made constitutes a ground of action for damages only against the person making them; and it is a question between the State and the corporation alone whether it shall be called to account for exceeding the powers conferred upon it by its charter." 4 164. (d) From migration of corporation.- Since a corporation can have no legal existence beyond the jurisdiction of the State creating it, the privilege of transacting business in another State existing by comity alone, a migration from the State of its origin may subject its members to liability as partners. While its residence in one State creates no insuperable objection to its powers of contracting through its 1 McGrew v. City Produce Exchange, (1887) 85 Tenn. 572. Cf. Searight v. Payne, (1874) 2 Tenn. Ch. 175, 180. 2 Searight v. Payne, (1874) 2 Tenn. Ch. 175, 179; Jackson v. Tarquand, L. R. 4 H. L. 305. Cf. Collins v. Evans, 5 Q. B. 820. 3 Second National Bank v. Hall, (1878) 35 Ohio St. 158; Langan v. Iowa & M. C. Co., (1878) 49 Iowa, 317; Searight v. Payne, (1874) 2 Tenn. Ch. 175. In Lafond v. Deems, (1880) 81 N. Y. 507, it was claimed that a "tent" of the order of Rechabites departed from the objects of its organization by accumulation of a fund from rents of rooms, and that as to that fund the members were partners. It appeared that the association originally was obliged to hire more room than was actually required, to obtain the room which they wanted for their meetings, and 4 Searight v. Payne, (1874) 2 Tenn. 5 Searight v. Payne, (1874) 2 Tenn. Ch. 175, 180. 6 Bank of Augusta v. Earle, 13 Pet. 519; Paul v. Virginia, 8 Wall. 168, holding that a corporation is not a citizen within the meaning of the federal constitutional guaranty of equal privileges in each State to citizens of others. 7 agents in another,' New Jersey has taken the stand that individuals desiring to carry on a manufacturing business within her borders must organize as corporations under her laws, in order to secure exemption from personal liability. New York, on the other hand, has extended every encouragement to the immigration of foreign corporations. The recognition in that State of the rights conceded in her courts to foreign corporations is considered neither injurious to her interests, repugnant to her policy, nor opposed to the spirit of her legislation; and the court of appeals has declared it to be neither provident nor just to inaugurate a rule which would unsettle the security of corporate property and rights, by excluding others from the enjoyment there of privileges which have always been extended to citizens of the State abroad. This has been the policy of other States as well. But certainly no rule of comity will allow one State to spawn corporations, and send them forth into other States to be nurtured, and do business there, when the State creating them will not allow them to do business within its own boundaries. Accordingly, a 1 Bank of Augusta v. Earle, 13 Pet. 519, 521. "It is very true that a corporation can have no legal existence out of the boundaries of the sovereignty by which it was created. But although it must live and have its being in that State only, yet it does not by any means follow that its existence there will not be recognized in other places; and its residence in one State creates no insuperable objection to its power of contracting in another." Marshall, C. J. in Bank of Augusta v. Earle, 13 Pet. 521. 2"It cannot be recognized by any court in New Jersey as a legally constituted corporation, nor be dealt with as such. If it can be, what need is there of any general or special law in our State. Individuals desirous of carrying on any manufacturing business, may go into the city of New York, organize under the general laws of that State, erect all their manufacturing establishments here, and under their assumed name, transact their business, not only free from all personal responsibility, but under cover of a corporation not amenable to our laws." Hill v. Beach, (1858) 12 N. J. Eq. 31. 3 Merrick v. Santvoord, (1866) 34 N. Y. 207. But see Kruse v. Dusenbury, (N. Y. Com. P. 1884) 19 Week. Dig. 201, where a New Jersey corporation having no office in that State, was pronounced to be a fraud upon the laws of New Jersey, and ineffectual to screen its organizers from personal responsibility as partners for contracts made in New York. Danforth v. Penny, 3 Metc. 564; Second National Bank v. Hall, (1878) 35 Ohio St. 158. 5 Land Grant Ry. & Trust Co. v. Coffey County, 6 Kan. 245. company organized in Pennsylvania to do business anywhere except in that State has been denied the privilege of corporate existence in the State of Kansas.' 3 § 165. (e) From continuance of business after dissolution. The fact that a corporation has been dissolved or ousted by a judgment in quo warranto proceedings does not affect the existing rights of creditors nor liabilities of stockholders.' Suits by and against them are not governed by the practice in proceedings by and against partners. "A corporation never can dissolve itself so as to defeat any of the just rights of its creditors;" and proceedings may be instituted in equity to enforce payment when judgment could not be obtained at law. While in the absence of statute, a corporation can not contract or incur any obligation in its corporate capacity after dissolution,' its members do not incur personal liability as partners upon the subsequent transactions of its agents,' unless they have expressly authorized the continuance of the enterprise.3 § 166. (f) From purchase of corporate property and franchises. A transfer of the property and franchises of a corporation does not invest the purchasers with corporate exist ence; and if they continue the business, they become liable as partners in respect of liabilities therein incurred,10 9 § 167. Joint-stock companies.- A joint-stock company may be defined to be "a partnership whereof the capital is divided 1 Land Grant Ry. & Trust Co. v. Coffey County, 6 Kan. 245. 2 Rowland v. Meader Furniture Co., (1882) 38 Ohio St. 269; Portland &c. Co. v. Portland, 12 B. Mon. 77. Cf. Polar Star Lodge v. Polar Star Lodge, 16 La. Ann. 53. 3 Rowland v. Meader Furniture Co., (1882) 38 Ohio St. 269. Brown v. Union Ins. Co., 3 La. Ann. 177, 182. 5 Bacon v. Robertson, 18 How. 480; Folger v. Columbian Ins. Co., 99 Mass. 267, 276; Howe v. Robinson, 20 Fla. 352, where action at law was barred by the statute of limitations. "Taylor on Corporations, § 435; Beach on Railways, § 601; Wood's 7 Central City Savings Bank v. Walker, (1876) 66 N. Y. 424. 8 National Union Bank v. Landon, (1871) 45 N. Y. 410. 9 New Orleans &c. R. Co. v. Delaware, 114 U. S. 296; Memphis &c. R. Co. v. Berry, 112 U. S. 609; Fietsam v. Hay, (1887) 122 Ill. 293; s. c. 3 Am. St. Rep. 492; Archer v. Terre Haute &c. R. Co., 102 Ill. 492; Black v. Delaware &c. Canal Co., 24 N. J. Eq. 455; Chaffee v. Ludeling, (1875) 27 La. Ann. 607. 10 Chaffee v. Ludeling, (1875) 27 La. Ann. 607 1 into shares which are transferable without the express consent of all the co-partners." Its articles of association bear the same relation to it that the charter bears to an incorporated company, regulating the duties of the officers, and the duties and obligations of the members among themselves. At common law they have none of the rights and immunities of regularly incorporated companies, being nothing more than partnerships; and every member of the company is liable for the debts of the concern, no matter what the private arrangements among themselves may be. But both in England and in this country, the law of joint-stock companies is largely regulated by statute. The powers conferred upon them by these enactments are such that for many purposes they are held to be corporations, even though they have nowhere been 4 5 1 Hedge & Horne's Appeal, (1869) some additional privileges, for the 68 Pa. St. 273. regulation of industrial and prov2 Bray v. Farwell, (1880) 81 N. Y. ident societies by the 28 & 29 Vict. 600. 3 Robbins v. Butler, (1866) 24 Ill. 387, 426, 432; Moore v. Brink, 4 Hun, 402; Wells v. Gates, 18 Barb. 554; Skinner v. Dayton, (1822) 19 Johns. 513; Keasley v. Codd, (1826) 2 Carr. & P. 408. 4 N. Y. Laws of 1881, ch. 599; of 1868, ch. 290; of 1867, ch. 289; of 1858, ch. 172; of 1854, ch. 245. "In 1856, the 19 & 20 Vict. c. 47, was passed under the auspicies of Mr. Lowe as vice-president of the Board of Trade, consolidating the various provisions of the numerous preceding Joint-Stock Companies Act. This act, however, was itself soon amended and varied by the 20 & 21 Vict. cc. 90 & 91. A new act, sweeping away the former enactments and creating a complete body of law in their place, was accordingly passed in 1862, and this, the 25 & 26 Vict. c. 89, now contains the great body of law on the subject. It is supplemented by the Industrial Societies Act, 1862, 25 & 26 Vict. c. 87, containing very similar provisions, with c. 86, extending the principle of limited liability to persons advancing money to private and unregistered partnerships, and by the Companies Act, 1867, 30 & 31 Vict. c. 131, introducing additional provisions for the security of creditors and shareholders, intended to remedy the evils in the constitution and management of joint-stock companies brought to light in the panic of 1866, and to incorporate the suggestions of a committee of the House of Commons appointed in consequence of that panic." Shelford on Joint-Stock Companies, 7, 8. 5 Thomas v. Dakin, 22 Wend. 9; Warner v. Beers, 23 Wend. 103; Leavitt v. Blatchford, 17 N. Y. 521; s. c. 5 Barb. 9; Gillett v. Phillips, 13 N. Y. 114; Talmage v. Pell, 7 N. Y. 328; Gillett v. Moody, 3 N. Y. 478; Gifford v. Livingston, 2 Denio, 380; Case v. Mechanics' Banking Assoc., 1 Sandf. 693; Culver v. Sanford, 8 Barb. 225; Tracy v. Talmage, 18 Barb. 456; Falconer v. Campbell, 2 McLean, 195; Parmly v. Tenth Ward |