President of the Lechmere Bank v. Boynton

65 Mass. 369

• Court: Massachusetts Supreme Judicial Court
• Decided: October 15, 1853
• Status: Published

Opinion

Shaw, C. J.

These are not cases, as the titles would seem to import, of the same corporation against two parties, but exactly the reverse; each i’s instituted by a party of individuals, claiming to be the true corporation, adversely to the other, The real question is, whether the company, of which Hall has been chosen president, is the duly organized corporation under the act, St. 1853, c. 241, being an act to incorporate the Lech-mere Bank, in Cambridge, and entitled to enjoy the franchise, and exercise all the powers of a banldng company, according to the laws of this commonwealth; or whether the company, of which Boynton has been chosen president, is such true and legitimate corporation. Taking the facts, as reported by the master, according to the agreement of the parties, it seems to us quite clear, that the proof of either party would be quite sufficient to establish a due and legal organization under the charter, but for the facts tending to establish a superior claim on the part of the other party. But as two different corporations cannot be legally organized and constituted under one act of incorporation, it is manifest that any proof, whether strong and decisive, or barely preponderating, which establishes the legality of the one, must necessarily negative the legality of the other.

The first question to be decided is, who are the persons incorporated ? and this must depend, in the first instance, on a careful consideration of the charter, which is a grant by the government, by whose authority alone such franchise can be claimed, of the extent and limits of which, the act of the legislature is the sole authentic evidence. By the act of incorporation, Amory Houghton, Edmund Boynton, Frederic Kidder, their associates and successors, are made a corporation, &c. In acts of incorporation the term “ associates ” is ambiguous, and may have more than one meaning, and it becomes necessary to distinguish between the different classes, who, under the term “ associates,” may be members of a corporation. They may be either persons now acting with those named, and whom those named represent; or they may be persons, who may hereafter come in to be associates, and as such, members of the corporation. And in many of the old acts of incorporation, when the legislature were less sparing of words, the phrase was, after naming certain individuals, “those who have already associated, or may hereafter associate with them.” But although both classes might, in pursuance of the charter, become members of the corporation intended to be constituted, yet it would be by different modes and with different rights and powers.

It must be borne in mind, that the purpose of an incorporation, is to create an artificial person and body politic, to consist of a number of natural persons, associated and bound together by a name, which shall have identity and continuance, either in perpetuity or for a certain time, although every individual may change, and that frequently. But the act gives efficacy to the corporation thus constituted, not only at its outset but also during its whole continuance; it therefore confers these corporate powers, not only upon all those to whom the franchise is first granted, but upon those who, under the name of “ associates,” “ successors,” or “ assigns,” coming into these relations afterwards in the orderly way, provided by the charter and by-laws, constitute the corporation.

It is manifest, therefore, that the term “ associates ” may mean those who are already associated with the persons named, or those who may come in afterwards. The term “associates” may, therefore, in such an act of incorporation, have an appropriate place, although, used in this latter sense, it cannot mean persons intended as original grantees of the charter. The question now is, who were those original grantees, or, in other words, who were the persons to whom, by this description, it was intended to grant the franchise of being a banking corporation? We are not prepared to say that a grant may not be made to certain persons, by a certain and definite description, as well as by name, and when such words of description are used, it is always competent to go into paroi or other evidence aliwnde, to ascertain the person or thing embraced in the description. Even when a grant is made to one by name, and it turns out that there are two or more persons of the same name, it is in the nature of a latent ambiguity, and evidence aliwnde is admissible.

In the first charter of a bank in this commonwealth by which the Massachusetts Bank was established, St. 1783, c. 25, is an instance, where the grantees are designated partly by name and partly by description. It contains a preamble setting forth the advantages expected from a bank, and that many persons had subscribed thereto, and further, that William Phillips, and five other persons named, in behalf of such subscribers have applied for an act; it then proceeds to enact, that William Phillips and the five others named, together with all those who are, or those who shall become proprietors, &c., shall be a corporation. There, one subscription being definitely referred to, would be competent evidence, and would identify and distinguish the persons intended, as those on whom the franchise was conferred, as if they had been named.

So, if articles of association were drawn up and signed, by which they had agreed to unite in applying for an act of incorporation, and an act should be passed conferring corporate powers on two or three of the first named, and their associates, referring to such articles, this would make the articles evidence, and make the act apply to all the parties there named, conformably to the maxim, Cerium est, quad cerium reddi potest. The question in all such cases is, what the legislature intended; it is a question of the construction of their words. Even if the parties to the enterprise had an understanding between themselves, which was not communicated to the legislature, or not acted upon by them, either in the words of their act, or referred to in it by necessary or reasonable implication, such understanding cannot aid in construing the act.

Supposing, then, that others besides the persons named may be original grantees of the franchise and benefits of the charter, and evidence out of the act itself is competent to show who were included in this charter under the term “ associates,” the question recurs, whether signers of the books, who were not signers of the petition, are included.

Association ex vi termini implies agreement, compact, union of mind, and purpose and action. When, as above stated, it includes those who are to come in afterwards, either together with, or as successors to the original grantees, it is by a compact between the party who desires to come in, on the one hand, and the corporation who consents to receive him, on the other. One of the powers granted is, to receive associates and provide for a succession of members. But the right to receive associates is a corporate right, to be exercised like other corporate powers, by a majority, if not otherwise regulated. But the exercise of a corporate right presupposes a previous corporate organization, and therefore, until such organization, there can be no such associates, and therefore no such one can act in the organization, although invited to do so by some, or even a majority of individual grantees. If, therefore, there are persons included in the act as grantees of the charter, under the name of “ associates,” they must be those who were actually associates, and could properly be designated, identified, and ascertained to be such, at the time of the passing of the act of incorporation.

We think it is clear, that the right to establish this bank was not conferred on the three persons named only; and it is not seriously contended that it was so. In this act, as well as in most others for establishing banks, passed at the same session, three persons only are named, even where the capital was $1,500,000. And in various other acts of incorporation, three persons only are named. And yet it is the manifest policy of the commonwealth, in granting banks, so important to the interests of the community, furnishing, as they practically do, the currency of the commonwealth, that the banking company shall consist of a large number of known and responsible persons, known to the legislature, in order that the best security shall be had that the currency thus to be furnished shall be a sound one. We think, therefore, that we may judicially take notice of a custom, adopted now for a number of years in the legislature, in granting acts of incorporation, to name the first three persons named in the petition, and to enact that they, their associates and successors, shall be the corporation. This expedient has probably been adopted with a view to shortening these acts as much as possible. Here the petition is before us, and it appears that though there are between twenty and thirty signers, the first three only are named in the act, followed by the words " then associates and successors ”

From the evidence, the court are of opinion, that by the term “ associates,” after naming the first three, primd facie the legislature intended those who were associated with them as petitioners. We have already suggested, that by the natural import of the word “ associates,” is understood persons united, acting together by mutual consent, by compact, to the promotion of some common object. The joining together, by signing and presenting one petition, for the promotion of one object, is the joint and united act of each and all the petitioners. They describe themselves as* inhabitants of East Cambridge, and pray that they may be incorporated for the purpose of establishing a bank at that place. The prayer is not, that they and their associates may be incorporated,—not in behalf of themselves and others—these would imply persons other than the petitioners. But the term “ associates ” is the language of the legislature, not of the petitioners ; and describes Houghton, Boynton, and Kidder, and their associates, the associates of the three. The term is fully satisfied by making it apply to the petitioners, who in fact are associated with Houghton, Boynton, and Kidder, in petitioning for precisely such an act. There is no intimation from any report or document, or from any evidence whatever, that the legislature intended to pass any other act than that prayed for; it is manifest, we think, that this charter was granted in answer to that petition. In quoting a similar act of incorporation, Parker, J. says that it was a grant or charter to the individuals who prayed for it, and those who should associate with them.

Is there any thing in the evidence before us to control and rebut this primd facie presumption of fact? The party acting with Houghton insist, that the books, which were prepared at the same meeting of four individuals, at which the enterprise was first projected, and which were put into circulation at the same time, in different places, made those, who subscribed for stock on those books, associates in the enterprise, with those who signed the petition, and that those were the associates contemplated in the charter. But we think this proposition 3annot be maintained, for several reasons.

1. It is true that these books were prepared by the four per sons, at a meeting, which was the germ of the enterprise, but they were to be circulated in different places ; those who subscribed one had no means of knowing who had subscribed others, and there was nothing, therefore, to make the signers of these different books associates with each other. And it is found as a fact, that most of the petitioners, when they signed the petition, did not know of these subscriptions. Had they all signed on the same book or paper, declaring the intended enterprise, it might have been regarded more plausibly as an article of association, and referred to by the legislature.

2. But the heading to their books, which was alike in all, did not amount necessarily, perhaps by its import not probably, to an agreement, to join in obtaining or procuring a charter for a bank; but it was an agreement to take shares for the purpose of forming a banking association, to be established in East Cambridge, and to pay, &c. This, might be fairly contended to be a provisional undertaking, to take shares in such a bank, when granted and organized, and in a condition to receive associates and fill up its stock. This undertaking, even if it is valid and binding as a contract, which is doubtful for want of consideration and reciprocity, would give them no power to act in the organization, or otherwise as associates and members of such corporation, until received as associates by the corporation when organized, after being qualified to act as a corporation. Until this is done, those only who are made members by the act of incorporation can be deemed capable of acting; and as the act makes no distinction amongst its grantees, as to the number of shares they shall respectively hold, they shall have an equal voice and vote, as if each held an aliquot part of the whole stock, according to the number of grantees of the charter. But when organized, they may, and commonly do pass a vote, declaring how many shares each shall take, and this being entered on their books, which constitute the authoritative record of the doings of the corporation, shall be deemed a corporate act, and be conclusive

So, as they have the whole authority and property in. themselves, they may share it with others, by admitting them to take shares, and thereby diminish their aggregate amount of stock, pro tcmto; and if those others consent to it by becoming stockholders, this is also entered on their books, and they become members to all intents and purposes, with the original grantees. They become associates de facto then, and within the terms of the charter, members. Gray v. Portland Bank, 3 Mass. 364.

3. The petitioners who ask for the grant, by their petition, ask it for themselves ; they recite the advantage to East Cambridge as a moving cause, addressed to the legislature, and describe themselves as inhabitants of East Cambridge; whereas if it had been intended that all the signers of the books, who were engaged to take stock, were intended and expected to be original grantees of the charter and franchise, and not to come in as takers of stock afterwards, there seems no reason why they should not have joined in the petition, and described themselves as inhabitants of East Cambridge and various other places.

4. If we examine what took place before the legislative committee, it rather tends to strengthen the conclusion, that the legislature, by their act, intended the other petitioners, and not the signers of the books, as the “ associates.”

We had supposed it not usual to address memorials to a committee of the legislature, but that the proper course was, to address them to the two houses, and that through them they were sent to the committee. But this informality, if it be one, is of no importance. The first was signed by Houghton and others who had signed the petition, reciting their pending petition praying for a bank with a capital of $200,000, and now intimating that a capital of $100,000 would, for the present, accommodate the business of that village, and that it is desirable to have the proposed bank owned and managed by citizens of the place, they now ask for the smaller capital.

The signers of the counter-memorial, desiring the capital to be $200,000, according to the original petition, describe themselves as residents of East Cambridge. Several of them were not signers of the petition, nor inhabitants of East Cambridge ; this, perhaps, is of no other importance, than that i implies a consciousness on their part, that the contemplated bank was intended for the special accommodation and benefit of that place and its inhabitants, and that it should be so understood by the legislature.

The legislature, by granting the bank of the smaller capital, as far as this proceeding could have any effect, sanctioned the views of the petitioners.

We attribute very little force and effect to this evidence. In general it would be unsafe to go into the interlocutory proceedings before the legislature, to ascertain what they intended, by any act of legislation; in general, the construction must be obtained from the words of the act, in reference to the subject-matter and the surrounding circumstances, and with due regard to other acts in similar cases. But, we think it quite clear, that these proceedings have no tendency to contradict or vary the construction which, on other grounds, we put on the act, nor to favor a different construction.

Some consideration, perhaps, may be supposed to be due to the fact, that the notice for calling the first meeting, signed by Amory Houghton, was addressed to the petitioners for said act, and all other persons interested therein, which includes persons other than the petitioners. But we think this circumstance of no weight.

This notice was not issued in pursuance of any provision in the act itself, for there was none, but under a provision in Rev. Sts. c. 44, § 3, which provides, that the first meeting of all corporations shall, unless otherwise provided for, be called by a notice signed by any one or more of the persons named in the act of incorporation. This was purely a ministerial act. His power and authority was, to call a meeting of the persons incorporated, and did not extend beyond. Any attempt to carry it further was wholly void. The persons thus incorporated were fixed by the act either by name or by description more or less definite, and the number could not be enlarged or diminished by the act of the person calling the meeting. If persons other than petitioners were not included in the act, the call for the meeting, whatever were its terms, could give them no power. For the same reason also, as before stated, an invitation by any other of the persons named in the act, or embraced as associates, could not confer an authority to meet and vote, on others not embraced. If subscribers to books, not included in the petition, were included in the act, they needed no such invitation ; if they were not included in the grant, such invitation gave them no authority to vote.

Perhaps it may be said, that there are many instances in which, upon a similar call for a meeting to accept an act and organize a corporation, for establishing a bank, or other similar purposes, a meeting has been held, of all friends and promoters of the enterprise, without regard to the question whether petitioners or not, and that the validity of such organization has not been called in question. If it be so, which we think highly probable, it maybe accounted for upon a very simple principle, that of the consent of those concerned. Volentibus non fit injuria. No objection being taken to the right of such persons, the vote is duly recorded as the vote of those entitled, and when stock is assigned to persons not petitioners, indiscriminately, with those who were, and entered on the books, it is the act of the corporation, under their acknowledged power, to receive associates. In the present case, the objection was taken in the outset, by those embraced in the petition, claiming alone to be existing associates, and the great majority of them refused to act with those not petitioners, thereby raising the question, Who were the associates and persons incorporated ? Their assent, therefore, is expressly disproved.

It is said that, upon this subject, the power of the legislature is unlimited, and that they may grant franchises, rights, and powers, to persons by a general description, though in some degree doubtful and uncertain; and that in this case they might, by a change of phraseology, have granted this charter to all those who in any form had subscribed for stock. Courts of justice, we think, should be slow to believe that the legislature would grant powers and privileges so highly interesting both to public and private rights, to sets of persons designated by a description so doubtful and uncertain as to render it difficult to prove who are the persons intended as grantees ; nor should they put such a construction upon a particular grant, unless the intent of the legislature is clear and explicit. But assuming that they have such power, and that in any particular case the persons intended must be ascertained and identified by the best evidence which the nature of the case affords; yet, we are of opinion, that they have not done so in the present case, and that, according to the preponderating weight of the evidence, the grant of a charter for this bank, was made to the three persons named, and those associated with them, in a prayer to the legislature, for a grant of such a franchise to them.

Perhaps this act is drawn with as much care and precaution as acts of incorporation generally are ; but it is matter of regret, that, in many acts of incorporation, there is room for great doubt and uncertainty on many grounds ; and it is rather matter of surprise, that there have not been more difficulties, rather than fewer, in organizing and conducting the business of corporations. One clause in the general laws, above cited, (Rev. Sts. c. 44, § 3,) authorizing any one of several persons named, to fix the time and place for the first meeting, on the regularity of which all its future meetings depend, seems to open a wide door for difficulties, especially when different parties in a corporation are struggling to gain an undue advantage. One might fix one time and place, and another a different one, several meetings and several organizations might be had, and it would be difficult to decide which would be regular, although it Is certain that one of them only could be upheld. Perhaps, upon further consideration, the legislature may perceive the importance of providing, by more accuracy and precision in their enactments, against any such difficulty in future.

In all matters of grant, whether it be of property, or of franchises, rights, powers, and immunities, whether it be by priva te or public act, especially when great public and private interests are concerned, it is impossible to overrate the importance of certainty in designating the subject-matter of the grant, the objects and purposes for which, and the persons to whom it is made. Certainty is the father of right, and the author of peace. Uncertainty engenders doubt, and doubt leads to controversy, litigation and strife, which it is the best purpose of all wise legislation and able and cautious jurisprudence, not only to adjust, but to prevent altogether.

A decree must be entered at the proper time and in due form, for a perpetual injunction against those who claim to act as the president, directors, and company of the Lechmere Bank, under the organization by which Edmund Boynton was elected president, and declaring the right of the company of which Lewis Hall has been chosen president, to all the rights and immunities granted by said act.

Decree accordingly.