22 F. Cas. 627 | D. Me. | 1858
The demurrer for the purposes of this hearing admits the truth of the facts alleged, but denies their sufficiency to maintain the action. This is an action by a stockholder against the directors for negligence and misconduct in the management of the affairs of the corporation. The general rule is that the acts done by the officers of a corporation are the acts of the corporation itself. A corporation aggregate is merely an artificial person without any natural organs of action and can act only through the instrumentality of natural persons. The old and primitive rule of the common law was that it could only speak and act by its common seal, but even this must be affixed to the paper or parchment by a natural person acting as its agent. 2 Kent, Comm. 222; 2 Bl. Comm. 472. The law or charter from which it derives its existence, points out who these agents shall be, usually as in this case, a board of directors. It is only through these that it can exercise the powers and faculties with which it is clothed by the law. One of these faculties is that of acquiring rights and coming under obligations by means of contracts. But these contracts are made through the instrumentality of the directors or other authorized agents, though when made they are the contracts of the corporation; all the rights and obligations which result from them accrue to the corporation and not to the instruments by which they are made. The agent is the mere conduit-pipe or the electric wire by which the corporate sanction passes into the contract. These contracts thus made are also performed or violated through the instrumentality of agents. The violation or breach of the contract is just as much an act of the corporation as the making of it or carrying it into execution. All the rights acquired by the contract inure to the benefit of the corporation, and all the liabilities resulting from its breach rest upon it. The agents by which these are effected are equally strangers to the rights and responsibilities. Such is the familiar and well-established doctrine of the law.
On principle, then, it is not easy to see how the directors can be liable to this action. They are the mere instruments of the corporation both in making and breaking the contracts. And the decisions of the courts are in conformity with this theory. Ang. & A. Corp. c. 9, §§ 311, 312. Nor, as I understand the plaintiff’s argument, does he controvert the general doctrine. He relies on a distinction to take his case out of it. While the directors act within the scope and limits of the powers granted to the corporation, it is not denied that as its general agents, their acts bind the corporate body, but do not bind themselves personally. But when they go beyond those powers and do acts not authorized by the charter, then their acts bind themselves and do not bind the corporation. And on this distinction the plaintiff seeks to hold the directors personally responsible In this action. Id. c. 9.
The question then arises, whether the case comes within the distinction. The act complained of is a breach on the part of the directors of a contract binding on the corporation, and damages are sought for the loss and injury resulting from it. But this was an act done under color of official authority; for the directors act officially as much in violating a contract as in making and carrying it into execution. They were not, therefore, acting beyond the scope of their power, but only exercising it wrongfully; it may be from an error of judgment, or it may be wantonly and maliciously. It was at most an abuse of their authority, and not a usurpation of ungranted power. Such an abuse of power may be a wrong done to their principal, and if wantonly done they will be answerable for every loss or damage resulting to the corporation. But it is not the less the act of the corporation and binding upon it in relation to third persons. The injury done to such parties is an injury done by the corporation, and the corporate body is alone responsible. See Ang. & A. Corp. c. 9, §§ 311, 312, and the authorities therein cited. This would be an answer to the action if it were by a stranger. But in this case the plaintiff sues as a stockholder for an injury not peculiar to himself but common to all the stockholders; that is, an injury or damage to the common corporate property. The case is unlike that put at the argument of the directors using a patented article, of which a stockholder is the patentee. The injury in such a case is not done to him as a stockholder but as a patentee. It is an illegal and fraudulent appropriation of his private property. It may be admitted that for such a wrong a stockholder would not be debarred of any remedy either against the company or directors; that would be open to a stranger, for it is as such that he sues, and nothing is more common in law than for a person to have a right of action in one character which he cannot maintain in another, as a trustee, executor, or administrator. The plaintiff’s right of action in such a case does not grow out of his relations to the company. But in the case at bar the wrong complained of is peculiarly a wrong to the corporation. It is the common corporate property that has been depreciated. The injury to the plaintiff is derivative and secondary, and affects him so far only as he is entitled to a share of that property. In such a case a suit for any neglect or misfeasance of the directors or other officers of the corporation must be against the company and not against the individual wrong doers. Smith v. Hurd, 12 Metc. [Mass.] 371; Smith v. Poor, 40 Me.
The case of Smith v. Poor, recently decided ! by the supreme court of this state, in one of its aspects bears a very dose analogy to ■ the case at bar. There the plaintiff sued the directors as a contractor for a breach of con-. tract; and also for loss and damage sustain-' ed by him as a stockholder, for alleged fraudulent acts done by them under color of official authority. The court ruled that in neither aspect could the action be maintained; that for official misconduct of the directors the . company was alone responsible to a stranger. : And that an individual corporator, who has . suffered damage, even in a private contract, by the misconduct or fraud of the director : acting colore officii can maintain no action personally against them, but his only remedy ' is against the corporation. The present ca'se is even stronger against the plaintiff than that. In that the injury set forth was substantially personal and private to himself. Here it is primarily and peculiarly an injury to the artificial or ideal person of the corporation. In strict and technical law the corporation is the only party injured, and the plaintiff and other stockholders suffer wrong and damage only as component parts and members of this ideal personality. Technically, also, the injury is simple and entire, a unity, and not several to the members and component parts, and as the injury is an entirety the remedy cannot be apportioned, but must be by a single suit; and in the excepted . cases where the stockholders may maintain. an action personally against the directors, all must unite, either actually or virtually, in the suit.
This demurrer is filed by one of the defendants, and it was contended at the argument that it may be sustained on grounds that are peculiar to himself. I have not thought it necessary to consider these, as my opinion is that it is good, on grounds equally applicable to all. The demurrer adjudged good.
