590

tion would, from necessity, be suspended or dormant, or perhaps $332 entirely cease; but the mere neglect or mere failure to elect officers will not dissolve the corporation, certainly not while the right or capacity to elect remains. In this respect municipal corporations resemble ordinary private corporations, which exist per se, and consist of the stockholders who compose the company. The officers are their agents or servants, but do not constitute an integral part of their corporation, the failure to elect whom may suspend the functions, but will not dissolve the corporation."

Since all of our charters

§ 332 (167). Surrender of Charter. of incorporation come from the legislature,3 a municipal corporation

the contrary. But no authorities are cited and no reasons given, and the conclusion that an actual dissolution of the corporation resulted from a failure to elect, is believed to be unsound, This case was referred to as not having been followed in Texas in Buford v. State, 72 Tex. 182, quoting and approving the text.

1 Willc. chap. vii. and observations to dissolve the corporation, there being at pp. 325, 326, 327, pl. 852; Colchester no express provision of the charter to v. Seaber, 3 Burr. 1866; Colchester v. Brooke, 7 Queen's B. 383; Rex v. Pasmore, 3 Term R. 241; Grant on Corp. 308; Bacon v. Robertson, 18 How. 480; Lowber v. Mayor, &c. of New York, 5 Abb. Pr. 325; Clarke v. Rochester, 5 Abb. Pr. 107; Welch v. Ste. Genevieve, 1 Dillon C. C. R. 130; Ex parte Moore, 62 Ala. 471; Butler v. Walker, 98 Ala. 358; Swamp Land Dist. v. Silver, 98 Cal. 51; Elliott v. Pardee, ration is not considered to be interrupted The existence of a municipal corpo149 Cal. 516; Hill v. Anderson, 122 Ky. in consequence of a change in the coun87; 90 S. W. Rep. 1071, quoting cil. Elmendorf v. Ewen, 2 N. Y. Leg. text; Cain v. Brown, 111 Mich. 657; Obs. 85; Elmendorf v. Mayor, &c. of State v. Dunson, 71 Tex. 65, citing New York, 25 Wend. 693. Further, text; Buford v. State, 72 Tex. 182. see chapters relating to Corporate That the failure to elect officers does not Officers and Corporate Meetings, post. dissolve, while the capacity to elect re- In Kentucky, it was held in an action mains, see also Philips v. Wickam, 1 to recover penalties for obstructing a Paige Ch. 590; Commonwealth Cullen, 13 Pa. St. 133; Mendota had no jurisdiction of the offence bev. highway, that a plea that the justice v. Thompson, 20 Ill. 197; Rose v. Roseburg & M. Turnpike Co., 3 Watts rate limits of a city was not sufficient to cause the locus was within the corpo(Pa.), 46; People v. Wren, 5 Ill. 269, oust him of jurisdiction when the city 275; Brown v. Union Insurance Co., had, for more than seventeen years, 3 La. An. 177; Welch v. Ste. Gene- failed to exercise any of the governvieve, supra; Green Township, 9 Watts mental functions granted to it by its & S. (Pa.) 22; Vincennes University charter. Cincinnati, N. O. & T. P. R. v. Indiana, 14 How. 268; Muscatine Co. v. Baughman, 116 Ky. 479 Turnverein v. Funck, 18 Iowa, 469; ity of, and procedure under California Schriber v. Langdale, 66 Wis. 616. In statute for voluntary disincorporation ValidLea v. Hernandez, 10 Tex. 137, it ap- of cities of sixth class, see Mintzer v. peared that a place was incorporated Schilling, 117 Cal. 361. as a town prior to 1848, that in the pealing an existing charter of a village year just named the legislature passed does not revive a prior charter. The A charter rean act to incorporate the town, and village ceases to exist on the day the that no election for officers nor any repealing charter takes effect. State organization was had thereunder for v. Reads, 76 Minn. 69. three years and down to the commencement of the action, nor were there any officers de facto acting. The court held that the failure to elect officers operated

cases there cited; People v. Fairbury
Trustees, 51 Ill. 149.
Angell & Ames on Corp. § 771 and

3 Ante, §§ 55, 65, 92.

cannot dissolve itself by a surrender of its franchise. The State creates such corporations for public ends, and they will and must continue until the legislature annuls or destroys them, or authorizes it to be done. If there could be such a thing as a surrender, it would, from necessity, have to be made to the legislature, and its acceptance would have to be manifested by appropriate legislative action.1

§ 333 (168). Forfeiture of Corporate Existence. -The doctrine of a forfeiture of the right to be a corporation has also, it is believed by the author, no just or proper application to our municipal corporations. If they neglect to use powers in which the public or individuals have an interest, and the exercise of such powers be not discretionary, the courts will interfere and compel them to do their duty.3 On the other hand, acts done beyond the powers granted are void. If private rights are threatened or invaded, the courts will, as hereafter shown, restrain or redress the injury. With what surprise would we hear of a proceeding to forfeit the charter of the city of New York or Chicago because of the misconduct of its officers, or because the common council, as in the famous case against the city of London; were assuming to exercise unauthorized powers by ordaining an oppressive by-law. In short, unless otherwise specially provided by the legislature, the nature and constitution of

"The creation of a corporate franchise is an attribute of sovereignty to be exercised solely by the supreme power of the State. Such franchise being amenable only to the power of its creation, it follows that this power alone can question the legality of its existence, by such proceedings as in its wisdom it may adopt." Bonner, J. Brennan v. Bradshaw, 53 Tex. 330. Municipal corporations incorporated under a general act, containing provisions for their dissolution, can be disincorporated in the method prescribed in the act. Hambleton v. Town of Dexter, 89 Mo. 188. It is also held, in accordance with the text, that franchises granted to municipal corporations cannot be surrendered by them. A city owning the franchise of collecting toll on freight passing through the channel of a river, contracted with a firm that, in consideration of city bonds delivered, the firm should construct and maintain the channel, collect tolls, and, with the proceeds, pay off the bonds. In answer to an information in

the nature of quo warranto requiring the city and the firm to show cause why they assumed authority to collect tolls, the city disclaimed all right to collect them, and asked that the proceeding be dismissed as to it. Held, that the city could not be divested of so valuable a right without a hearing in court, and was a necessary party to the proceeding. Willie, C. J., said: "It is extremely doubtful whether a municipal corporation can, by a mere disclaimer, surrender a franchise in which not only the corporation, but a large portion of the State's population residing within the city's limits, as well as of the commercial world, are interested." Morris v. State, 65 Tex. 53.

2 See Welch v. Ste. Genevieve, 1 Dillon C. C. R. 130, arguendo.

3 Ante, chap. vii. § 246; post, chapter on Mandamus.

Ante, § 237 and notes.

5 See chapter on Remedies to prevent, correct, and redress Illegal Corporate Acts, post, §§ 1570-1600.

our municipal corporations, as well as the purposes they are created to subserve, are such that they can, in the author's judgment, only be dissolved by the legislature, or pursuant to legislative enactment.' They may become inert or dormant, or their functions may be suspended, for want of officers or of inhabitants; but dissolved, when created by an act of the legislature, and once in existence, they cannot be, by reason of any default or abuse of the powers conferred, either on the part of the officers or inhabitants of the incorporated place. As they can exist only by legislative sanction, so they cannot be dissolved or cease to exist except by legislative consent or pursuant to legislative provision.2

At com

§ 334 (169). Effect of Dissolution at Common Law. mon law, a corporation, of whatever kind, which was wholly dissolved was considered to be civilly dead; and the effect was that their lands reverted to the grantor or his heirs, and the debts of the corporation, whether owing to or by it, were extinguished. Leases made by the corporation would cease because of the reversion of the lands to the original owners; and, for the same reason, lands given to or held by the corporation for charitable purposes would be lost. These inconveniences and results are so disastrous that the English courts, as the more recent cases before cited will show, have doubted and limited, although they may not have overthrown, the doctrine that municipal corporations may be totally dissolved. These consequences of a dissolution of a corporation attached to all corporations,

1 Meriwether v. Garrett, 102 U. S. 472; Mobile v. Watson, 116 U. S. 289. More fully see, ante, chap. iv. §§ 96-113, and post, §§ 335, 336.

2

3

limit the duration of the corporation it creates. In either of the latter cases the provision is no more than a precedent legislative determination and declaration of forfeiture or surrender of corporate existence at a certain time, or upon the happening of a certain event, and as effectually destroys the corporate entity as the contemporaneous legislative abrogation of the charter. Butler v. Walker, 98 Ala. 358.

Swamp Land District v. Silver, 98 Cal. 51; Butler v. Walker, 98 Ala. 358; Ex parte Moore, 62 Ala. 471; Cain v. Brown, 111 Mich. 657, quoting and approving text. The legislature, having plenary power in the premises, may create municipal corporations conditionally, i. e., make provision for corporate existence upon a vote of the 3 Co. Litt. 13; 1 Lev. 237; Knight people within the territorial limits of v. Wells, 1 Lut. 519; Rex v. Sanders, the proposed corporation accepting 3 East, 119; Attorney-General v. the franchises, privileges, and immu- Gower, 9 Mod. 226; 1 Rol. Abr. 816; nities granted in the act; and may also, Colchester v. Seaber, 3 Burr. 1866; as a corollary to this power to pre- Willc. 330, pl. 858; 2 Kyd, 516; Rex scribe a condition precedent, the v. Pasmore, 3 Term R. 247; Grant, charter act may provide a condition Corp. 305; Colchester v. Brooke, 7 subsequent to continued corporate Queen's B. 383; Commonwealth v. existence, or may even absolutely Roxbury, 9 Gray, 451, note.

eleemosynary, municipal, and private; and since this doctrine has, in this country, been generally rejected as to private corporations organized for pecuniary profit, and rests upon no foundation in reason or justice, it may perhaps safely be affirmed that it would not, on full consideration, be applied to the dissolution of a municipal corporation by an absolute and unconditional repeal of its charter, or to the case where the charter of such a corporation is forfeited, if that may be done, by judicial sentence. Therefore the leases of a corporation would not be disturbed by its dissolution, nor would its lands held in fee revert, nor would those held in trust for charitable purposes be lost, since equity would supply trustees.1

as to the surplus after paying the debts, stands upon grounds as high and has claims as irresistible as the creditor before had. The usual consequences of a dissolution, as stated by the textwriters, if correct, which was doubted, were deemed inapplicable to moneyed or trading corporations.

Ante, §§ 107, 131; chapters on corporation in fee and for a full price Corporate Boundaries and Property, do not revert, and that the stockholder, post; Bacon v. Robertson, 18 How. (U. S.) 480; Girard v. Philadelphia, 7 Wall. (U. S.) 1; Mumma v. Potomac Co., 8 Pet. 281; Curran v. Arkansas, 15 How. (U. S.) 312; 2 Kent, 307, note; Angell & Ames, Corp. 779 a; Coulter v. Robertson, 24 Miss. 278; County Com'rs v. Cox, 6 Ind. 403; State v. Trustees, &c., 5 Ind. 77; Vincennes University v. Indiana, 14 How. (U. S.) 268; Owen v. Smith, 31 Barb. 641; Commonwealth v. Roxbury, 9 Gray (Mass.), 451, note. See also Broadway Railway Case, decided by the Court of Appeals of New York, 1888; People v. O'Brien, 111 N. Y. 1; ante, § 112.

The general subject of the effect of a dissolution of a private corporation is extensively discussed by Mr. Justice Campbell, in Bacon 2. Robertson, supra. The case was a bill in chancery by the stockholders of a bank, whose charter had been judicially forfeited, for a distribution of the surplus after the payment of the debts and the relief was granted. The Supreme Court of the United States seemed to be of opinion that, upon the general principles of equity jurisprudence, and without statutory aid, the surplus of the assets of a corporation for pecuniary profit, after the payment of debts and expenses, belonged to the shareholders; that the creditor of such a corporation, dissolved or declared forfeited by judgment upon quo warranto or judicial sentence, has, without a statute to that effect, a claim in equity upon the corporate property for the satisfaction of his debt; that lands conveyed to the

The

In the course of his admirable opinion, the learned justice observed: "The common law of Great Britain was deficient in supplying the instrumentalities for a speedy and just settlement of the affairs of an insolvent corporation whose charter had been forfeited by judicial sentence. opinion usually expressed as to the effect of such a sentence was unsatisfactory and questioned. There had been instances in Great Britain of the dissolution of public or ecclesiastical corporations by the exertion of public authority, or as a consequence of the death of their members; and parliament and the courts had affirmed, in these instances, that the endowments they had received from the prince or pious founders would revert in such a case." Stat. de Terris Templariorum, 17 Edw. II.; Dean and Canons of Windsor, Godb. 211; Johnson v. Norway, Winch. 37; Owen, 73; 6 Vin. Abr. 280. What was to become of their personal estate, and of their debts and credits, had not been settled in any adjudicated case, and, as was said by Pollexfen in the argument of the quo warranto against the city of London, was, perhaps, 'non definitur in jure.” (See ante, Introductory Chapter, § 10.) Solicitor Finch, who argued for the

§ 335 (169 a). Effect of Dissolution in this Country. The correctness of the prediction which the author ventured in the last section to make, that the common-law consequences of the dissolution of a corporation would not be applied in this country to the dissolution of a municipal corporation, has since been adjudged by the Supreme Court of the United States and by other tribunals. The legislature absolutely repealed the charter of an indebted city, abolished all of the municipal offices therein, and established in the place of the late city government a new local organization with the means of self-government. The acts which abolished the old and established the new organization made no provision for the payment of debts of the annihilated city corporation, and, in fact, provided that the successor organization should not be liable therefor, and that any taxes raised within the new organization should not be applied for the payment of the debts of the late corporation.

crown in that cause, admitted: "I do not find any judgment in a quo warranto of a corporation being forfeited." Treby, on behalf of the city, said: "The dissolving a corporation by a judgment in law, as is here sought, I believe is a thing that never came within the compass of any man's imagination till now; no, not so much as the putting of a case. For in all my search (and upon this occasion I have bestowed a great deal of time in searching), I cannot find that it even so much as entered into the conception of any man before; and I am the more confirmed in it because so learned a gentleman as Mr. Solicitor has not cited any one such case wherein it has been (I do not say adjudged, but) even so much as questioned or attempted; and, therefore, I may very boldly call this a case prima impressionis.' The argument of Pollexfen was equally positive.

The power of courts to adjudge a forfeiture so as to dissolve a corporation was affirmed in that case, but the effect of that judgment was not illustrated by any execution, and the courts were relieved from their embarrassment by an act of parliament annulling it. Smith's Case, 4 Mod. 53; Skin. 310; 8 St. Trials, 1342. See ib. 1042. Nor have the discussions since the Revolution extended our knowledge upon this intricate subject. The case of Rex v. Amery, 2 Term R. 515, has exerted much influence upon text-writers.

The questions were, whether a judg ment of seizure quosque upon a default was final, and if so, whether the king's grant of pardon and restitution would overreach and defeat a charter granting to a new body of men the same liberties, intermediate the seizure and the pardon. The King's Bench, relying upon the Year-Book, discovered that it did not support the conclusion drawn from it, and Chief Baron Eyre says that "Lord Coke had adopted the doctrine too hastily.' The discussions upon this case show how much the knowledge of the writ of quo warranto, as it had been used and applied under the Plantagenets and Tudors, had gone from the memories of courts and lawyers. 4 Term R. 122: Tan. on Quo War. 24. In Colchester v. Seaber, 3 Burr. 1866, where the suit was upon a bond, and the defence was that certain facts had occurred to dissolve the corporation, and that the creditor's claim was extinguished on the bond, Lord Mansfield said: "Without an express authority, so strong as not to be gotten over, we ought not to determine so much against reason as that parliament should be obliged to interfere. The question occurs here, Could parliament interfere? And the answer would be by their authorizing a suit to be brought, notwithstanding the dissolution. These are all cases of municipal corporations where the corporators had no rights in the property of the corporation in severalty."