| Ind. | Dec 11, 1860
This case was before us in 1858, and decided upon rulings below, touching the evidence. The then judgment in the cause was reversed, and a new trial ordered. The facts are so fully stated in the opinion delivered on the former examination, and reported in 10 Ind. p. 234, that we shall not recapitulate them here.
The question which the record now presents for our determination is this: Had existing stockholders in the Ohio Insurance Qorrvpany the legal right, on an increase of the capital stock of said company, under the charter, to take such increased stock, to the exclusion of all other persons ? Nunnemacher holds the affirmative of this question, and relies on Gray v. The Portland Bank, 3 Mass. 364" court="Mass." date_filed="1807-11-15" href="https://app.midpage.ai/document/gray-v-president-of-the-portland-bank-6403115?utm_source=webapp" opinion_id="6403115">3 Mass. R. 364, as authority for doing so. Whether that case was rightly decided on its own facts, we shall not inquire; but the decision in it, we have no hesitation in saying, can not be applied as a general rule of law to all stock corporations. That decision seems to have been based upon the legal proposition that a corporation is a contract between the corporators, as a partnership is a contract between the partners, and that the original contract by which the corporation is formed, embraces, or includes in it, the right, in existing corporators, of taking all increase of stock, in proportion to the amount then severally held by them in the existing stock. This proposition we can not assent to as law. A corporation is a creature existing, not by contract; but, in this country, is created or authorized by statute; and its rights, and even modes of action, may be, and generally are, defined and marked out by statute; and where they are, they can not be changed, even by the contracts of the corporators. There may be a contract among individuals to enter into a corporation; but when they have become a corporation, the charter, not contract, determines their rights. The
(1.) By counsel for appellant: It is well settled, that where there has been a fraudulent breach of trust by the directors, the primary party to sue is the corporation, for she is the injured party, and the remedy is against tho directors, .who are individually and personally responsible. Robinson et al.
Now, this provision of the charter is utterly inconsistent with the proposition that the existing stockholders had the exclusive right to take the increased stock, in amounts proportionate to the quantities they then held of the original stock. How could the directors of the company, on the one hand, possess the power to increase the stock in such manner as to them seemed best, and at the same time, the stockholders, on the other hand, possess the power to compel an increase of it in but one single manner, viz: by giving it to them? As to the right of a Court to control the discretion of directors of a corporation, see Grant on Corp., pp. 226, 231, 252, and Hodges v. The N. E. Screw Co., 1 R. I. Rep. 312.
The judgment is reversed, with costs. Cause remanded, &c.