well known, says Chancellor Walworth, that there are and have been many joint stock, and even banking companies, which are mere partnerships, as to every person except their own stockholders, they never having been legally incorporated.' A provisional agreement may be defined as containing the heads of certain stipulations which it is intended should thereafter be comprised within a deed of settlement, where such an instrument is in the contemplation of the parties. It is sometimes nothing more than a prospectus, and frequently so publicly advertised. In like manner, as a deed of settlement, it contains the conditions which regulate the proceedings of the shareholders among themselves. An association may be formed under a deed of settlement with the view of becoming incorporated at a future period; but all the liabilities of the members, as partners existing before incorporation, must remain. The incorporation of a joint stock company in Pennsylvania, which had united under articles, one of which provided for an application to the legislature for a charter, it was held, does not substitute the responsibility of the corporation for contracts previously made with the associates, and exempt the members from liability beyond the joint funds. And the action of the legislature declaring the corporation solely responsible on such contracts, without the assent of all parties, is in direct contravention of the provision in the federal constitution which interdicts the impairing of the obligation of contracts.❜

An attempt was once made in Pennsylvania, to evade the rule as to the unlimited personal liability of partners, and beyond the amount of the shares for which they subscribed. The association, under the name of "Farmers and Mechanics Bank of Fayette County, Pennsylvania," engaged to pay, by the terms of their notes, "out of their joint funds according to their articles of association;" and it was made a part of

' Williams v. Bank of Michigan 7 Wend. (N. Y.) R. 542.

2 Wordsworth on Joint Stock Companies.

the care of the partners who were sued, that they had no joint funds. The question thus being, whether they were liable in their separate estates, the court gave their opinion, that every partner was liable, on the general principle that partners are as much liable for partnership debts, as they are for debts contracted personally; and that it was not merely their stock which was hazarded, but their individual fortunes. In another case in the same State, the "Farmers Bank of Lancaster" claimed to be virtually incorporated by a general "Act relating to the Association of individuals for the purpose of banking." The act provided, that no association should thereafter be formed for the purpose of banking, unless every member thereof should be individually, and personally liable for the company debts. The court held, that this provision could not be viewed as impliedly incorporating that bank, or any other company. It was merely an acknowledgment that such associations were lawful. The intent of it was to prevent associations, that were about to be formed, the members whereof were to shield themselves from personal responsibility, by a publication to the world that they were exempt from such responsibility. It was never the intention to incorporate an unlimited number of associations, free from all restraint and liability, without special restriction, as to the amount of capital, the nature of the business, and the length of duration of the association.

Whatever, then, may be the stipulations voluntarily entered into between the parties to a copartnership, they cannot arrogate to themselves the functions of a corporation; and without an express sanction of the legislature, amounting, at least, to the creation of a quasi body corporate, they cannot form an association capable of acting independently of the rules and principles which govern a simple partnership. Stipulations,

Werts v. Hess, &c. 4 S. & Rawle (Penn.) R. 356.

• Myers v. Irwin, 2 S. & Rawle (Penn.) R. 368.

' And see Collyer on Partnership, B. 3, Ch. 3; Story on Partnership,

says Lord Brougham, for the purpose of restricting the liability of partners, would plainly be of no avail; and "whoever,” he adds, "becomes a subscriber upon the faith of the restricting clause, or of the limited responsibility which that holds out, would have himself to blame, and be the victim of his ignorance of the known law of the land." A very serious practical result of the inflexibility of the rule of the personal liability of the members of a commercial firm, according to Bell, the author of the Commentaries on the Law of Scotland, occurred in that country, in the case of the Douglas Bank. That bank, says he, was formed for the generous but shortsighted purpose of relieving the distresses of the country, occasioned by the excessive use of bills of exchange, and the stop in the usual discounts to which the regular banks were forced to have recourse. After the bank had been established a little more than two years, it failed, with a loss of £430,000. Many of the stockholders were eminent lawyers, and they raised every possible point, in order to shield themselves and their families from the personal responsibility of the members of a company so circumstanced. But it was never for a moment imagined that the partners were not responsible for the last fraction of the debts. But an eminent jurist' has suggested that it may well deserve inquiry, how far stipulations in articles of copartnership, which limit the responsibility of the members to the mere joint funds, or to a qualified extent, will be binding upon their creditors, who have due notice of such a stipulation. This, however, it is not our province to consider.

4

$2. This personal liability of the members of unincorporated joint stock companies has already been shown to be inconsistent with one endowed with a perfectly corporate charácter, as in the case of the latter, the law recognizes only the

' Walburn v. Ingilby, 1 Mylne & Keen Chan. R. 51.

2 Bell's Com. 263.

* Story on Partnership, Ch. 8, p. 255-257.

Ante, pp. 36, 37.

creature of the charter, and knows not the individuals. Thus it is, that the proceedings of a vestry of a church, pledging its corporate funds to persons who might perform work, or furnish materials for it, can impose no personal liability upon the members of the vestry; and an impression, moreover, subsequently manifested by them, that they had assumed a personal responsibility, cannot vary the legal interpretation of the act upon which the question of responsibility depends.'

Indeed, the members of a private corporation are exempted in their persons and estates from the liability of an action at law, instituted by a company creditor, even if a portion of the company property has been assigned to them, in exclusion of the creditor.

In the case of Vose v. Grant,' it appeared that the stockholders of the Hallowell and Augusta Bank, after the expiration of their charter, made dividends of their capital stock among themselves, so that there were not corporate funds left sufficient to redeem their outstanding bills. It was admitted that the stockholders, in making those dividends, had been guilty of no fraud, for at the time they were made, the debts due to the bank, with twenty-five per cent. of the capital stock undivided, would be sufficient to pay all the debts due from the bank. But it happened that the president and one of the directors, both apparently in good circumstances and in good credit, and largely indebted to the bank when the dividends were voted, afterwards failed. The plaintiff was a holder of the bills of the bank, and brought an action on the case for the neglect, carelessness, and default of the defendant, who was a stockholder, in order to recover the amount. The opinion of the Court, which had been prepared with great deliberation by Judge Jackson, was, first, if any right of

1 Vincent v. Chapman, 10 G. & Johns. (Md.) R. 279. The treasurer of a corporation is not liable, in his individual capacity, to a stockholder, for refusing the payment of a dividend, although there are funds in the hands of the treasurer sufficient for the payment at the time of such refusal. French v. Fuller, 23 Pick. (Mass.) R. 108.

15 Mass. R. 505.

action accrued, it was to those who held the bills at the time of the misconduct complained of; and that such a right could not be assigned to the plaintiff. That alone, it was considered, would have been decisive of the action; but as the general question presented in the case was a very important one, it was deemed proper to investigate and decide it. In investigating the question, his Honor alluded to the fact, that there was no evidence of fraudulent or dishonest intentions on the part of the defendant and the other stockholders; and said, if the present action could be maintained, as for a tort, several consequences would follow which, all would admit, were highly unreasonable and unjust.

His Honor then proceeded to state what the consequences would be: "In the first place, any of the stockholders might be sued alone, because in an action founded on tort, it is not necessary to join all the wrongdoers; and the defendant cannot, in such a case, plead the omission of the others in abatement. Secondly, the individual who was sued would be liable to the whole extent of the injury complained of, without regard to the amount which he had received on the division of the stock. If a man has done me an injury, for which I bring an action of this kind, it is no defence for him to say that he has not been enriched by it. The same stockholder would, therefore, be liable to successive actions of the same kind, by all the different holders of the bank notes; and the defendant in the case at bar, although he received less than 1200 dollars on the division of the capital stock, might be compelled, if he has estate sufficient, to pay the whole of the notes for 90,000 dollars, and upwards, which are said to be still unpaid. Thirdly, if anything could make this more strikingly unjust, it is the circumstance, that the defendant, after paying all that money, could have no remedy for contribution against the other stockholders. No such action will lie by one trespasser or wrongdoer against his companions; but either one may, at the election of the injured party, be made liable for the whole." The decision accordingly was, that the plaintiff could not

recover.