Skolnik, S. G.

English

Marquette University Law School

Marquette Law ReviewVolume 11Issue 3 April 1927 Article 9Corporations: Officers and directors, guaranteeingcorporation's notes, cannot recover from otherstockholders on the ground that corporation wasincompletely organizedS. G. SkolnikFollow this and additional works at: http://scholarship.law.marquette.edu/mulrPart of the Law CommonsThis Article is brought to you for free and open access by the Journals at Marquette Law Scholarly Commons. It has been accepted for inclusion inMarquette Law Review by an authorized administrator of Marquette Law Scholarly Commons. For more information, please contactmegan.obrien@marquette.edu.Repository CitationS. G. Skolnik, Corporations: Officers and directors, guaranteeing corporation's notes, cannot recover from other stockholders on the ground thatcorporation was incompletely organized, 11 Marq. L. Rev. 159 (1927).Available at: http://scholarship.law.marquette.edu/mulr/vol11/iss3/9NOTES AND C01MMENT 159the validity -f any government regulation of private schools is under considera-tion; but the limitations of the constitution must not be transcended.. The Supreme Court cited Meyer v. Nebraska,' Bartels v. Iowa,4and Pierce v. Society of Sisters,5 to the general point of the rightsguaranteed by the Fourteenth Amendment to owners, parents and chil-dren in respect of attendance upon schools against adverse action bythe States.The advance made in the present decision, is the establishment ofthe proposition that the inhibition of the Fifth Amendment that "noperson shall . . . . be deprived of life, liberty or property withoutdue process of'law" protects the fundamental rights of the individualagainst action by the Federal Government, and by the agencies setup congress for the government of the territories, as the territoriallegislature or officers, as is secured by the Fourteenth Amendmentwhich declares that no "state" shall "deprive any person of life,liberty or property without due process of law," against action con-sidered in the cases cited above on the part of the States.H.W.I.Corporations: Officers and directors, guaranteeing corporation'snotes, cannot recover from other stockholders on the ground thatcorporation was incompletely organized.In the instant case' a number of farmers attempted to organize acorporation called the Blair Farmers' Exchange. Subscriptions weresigned, a meeting of the subscribers was held, and the corporationcommenced business in 1go. Its present officers and directors fromtime to time gave corporate notes to the home bank of Blair, of whichthey became joint endorsers and guarantors. In 1921 the corporationsuspended business, and in 1923 the bank sued upon the unpaid notes,joining as defendants those officers and directors, who now appear asplaintiffs, and who had endorsed and guaranteed the notes. The bankhad judgment, the officers and directors paid the judgment and nowseek contribution from the other stockholders. They base their groundfor recovery upon a violation of section i8o.o6, pleading that less than50 per cent of the authorized capital had been subscribed at the timethey assumed the obligation of guarantors, and assuming therefore,that the stockholders were personally liable as a violation of section18o.o6.The basis of the asserted liability under this action was the impliedpromise of the corporation that it would reimburse the guarantors inthe amount paid by them in the discharge of its obligations. The court,however, held that this implied obligation of the corporation, is onearising between the corporation and members of the corporation andnot one contracted in violation of the statute. Upon this principle thecourt decided that no liability exists on the part of the defendantsto the plaintiffs.'262 U.S. 4o4.268 U.S. 510, 39 A.L.R. 468.Hanson & Martin, 2IH N.W. 79o.MARQUETTE LAW REVIEWAt first blush it would seem that the court went a trifle too far; thatthe directors had acted for the corporation as its general agent toproceed to conduct the business contemplated, and as such agent thedirectors endorsed the notes, all for the benefit of the corporation,thus creating a liability for any act done within the scope of his power.There is no question but that had the corporation been successful, thestockholders would not object to dividends or profits. But (followingthe court's reasoning) the directors, (the plaintiffs) knew or at leastshould have known that the corporation was not legally organized.They knew or should have known that by doing business in its corporatename and holding it out as legally organized, they in effect repre-sented that it was such a corporation. They cannot, therefore, now asagainst their fellow stockholders, retrace their steps and claim thatthe corporation with and for whom they have dealt for so many yearsnever had a legal existence and so compel their fellow stockholdersto share a liability which they voluntarily assumed.This precise question has no case exactly parallel in Wisconsin, buthas arisen generally over the country. In Georgia2 and Texas,' theshareholders are held not liable; likewise in Illinois, 4 Louisiana- andPlanters & M. Bank v. Padgett, 69 Ga. 159.Maine.6 There are many decisions to the contrary, Missouri beingone of the leading ones, holding that the members of the corporationare liable to contribute their share to the managing members who havemade themselves personally liable.' The great weight of authority,as well as the better reason, however, is the other way. The doctrineof partnership liability in such cases is not found in law or reason andis repugnant to the statute authorizing a corporation, one object ofwhich is to limit liability of stockholders.8S. G. SKOLNIKDedication: Nature and requisites; common law or implied dedi-cation.Dugan v. Zurinuchlen' is an action to enjoin the maintenance of afence by defendant on the center line of an alleged sixteen-foot alleyarising either by implied dedication or by prescription. Defendant isthe owner of a subdivision which bounds the west side of the alley.The original owners on the east side made a dedication of sixteen-foot alley therein conveying eight feet of their land making up theeast half of the alleged alley. The original owner of defendant's landnever joined in the dedication of the west half of eight feet butnevertheless built a fence which allowed eight feet to the alley. Thesubsequent owner of the defendant's land subdivided it, and on theplot made no reference to the alley. Now defendant removed the'American Sale Co. v. Heidenheinzer, 8o Tex. 344., Cresswell & Oberly, 17 Ill. App. 281.Pochel v. Kemper, 14 Louisana 308.'McClinch v. Sturgis, 72 Me. 288.'Richardson & Pitts, 7, Mo. 128.'Gartside Coal Co, v. Maxwell, 22 Fed. Rep. 197.1 2H N.W. 986, Ia.

Corporations: Officers and directors, guaranteeing corporation\u27s notes, cannot recover from other stockholders on the ground that corporation was incompletely organized

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Corporations: Officers and directors, guaranteeing corporation\u27s notes, cannot recover from other stockholders on the ground that corporation was incompletely organized

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