Insolvency is frequently a ground for the forfeiture of the charter of a corporation. An assignment for the benefit of creditors, together with subsequent failure to meet its obligations, and a suspension of business, have been held to constitute such a ground of forfeiture as admitted no explanation or defense.3

1 State v. Central Ohio etc. Assoc. 29 Ohio St. 399.

2 In re Brooklyn etc. R. R. Co. 75 N. Y. 335; In re Brooklyn etc. R. R. Co. 72 N. Y. 245; Chinleclamouche etc. Co. v. Commonwealth, 100 Pa. St. 438.

3 People v. Utica Ins. Co. 15 Johns. (N. Y.) 353; 8 Am. Dec. 243.

4 Commonwealth v. Franklin Canal Co. 21 Pa. St. 117.

5 State v. Milwaukee etc. R. R. Co. 45 Wis. 579.

6 People v. Kingston etc. Co. 23 Wend. 193; 35 Am. Dec. 551; State v. Milwaukee etc. R. R. Co. 45 Wis. 579; Wood's Railway Law, 1713.

7 People v. Bank of Hudson, 6 Cow. 217; People v. Washington Bank, 6 Cow. 210, 216; Nimmons v Tappan, 2 Sweeney, 652; State v Bank of South Carolina, 1 Spear (S. C.) 433, 451, 466; Commercial Bank v. State, 14 Miss. 599, 617; Planters' Bank etc. v. State, 15 Miss. 163; State v. Real Es tate Bank, 5 Árk. 595; 41 Am. Dec. 103; State v. Seneca County Bank, 5 Ohio St. 171. Contra, State v. Bailey, 16 Ind. 46, 51; 79 Am. Dec. 405. Cf. Ferris v. Strong, 3 Edw. Ch. 127.

8 People v. Northern R. R. Co. 42 N. Y. 217; S. C. 53 Barb. 98. Cf. People v. Excelsior Gaslight Co. 8 N. Y. Civ. Proc. Rep. 390.

3

586. The same subject, continued.- -A forfeiture of the franchises of a corporation will be enforced only when the variation from the requirements of its charter are material,' where not only the letter but also the spirit of the law has been violated. No mere intention or purpose in a corporation to violate its duty can constitute a ground of forfeiture. Mere accidental negligence, or misuser arising from mistake, is not a ground of forfeiture. Thus, it has been held that the failure of a railroad company to file a survey and map of its route in the secretary of State's office within the period named in the charter, was not a sufficient ground of forfeiture. Obtaining a charter from another State and bringing a suit in a federal court

against the corporation first created for the purpose of having an act of legislature of the State by which it was originally incorporated declared void, has been held to constitute a ground of forfeiture

1 People v. Williamsburgh etc Co. 47 N Y. 5 3, and cases there cited; People v. Kingston etc. Co. 23 Wend. 193; 35 Am. Dec. 551; People v. Cheeseman, 7 Colo. 376.

2 Thompson v. People, 23 Wend. 585.

3 Commonwealth v. Pittsburg etc. R R. Co. 58 Pa. St. 23, 45.

4 Harris v. Mississippi Valley etc. R. R. Co. 51 Miss. 602. But see People v. Kingston etc. Co. 23 Wend. 193; 35 Am. Dec. 551.

5 Wool's Railway Law, citing Harris v. Mississippi Valley R. R. Co. 51 Miss. 602.

6 Commonwealth v. Pittsburg etc. R. R. Co. 58 Pa. St. 26, 45.

§ 587. The same subject, continued-Non-user. Both misuser and non-user of the corporate powers may be a cause of forfeiture, when the State by its proper officers may proceed to recall the charter, or grant of franchises. While the mere neglect to exercise their franchises by ordinary private corporations is not of itself a sufficient ground of forfeiture, a similar neglect by corporations of a quasipublic character wl constitute a ground of forfeiture. Raway companies having accepted extraordinary franchises from the State, thereby assume certain duties to the public which they are bound

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franchises may be revoked.3 Thus, a railway company which has completed its road between the termini named in its charter, or articles of association, forfeits its franchises by abandoning or ceasing to operate a part of its road. But a failure to run regular passenger trains over a branch road on account of travel over the line having been so reduced by the establishment of a competing tramway that operating expenses were greater than gross receipts,

has been held not to be a sufficient ground of forfeiture. If a company, organized under the New York General Railroad Act of 1850, fails, within five years after the filing of its articles of association, to begin the construction of its road, and to expend thereon ten per cent. of the amount of its capital, or fails within ten years to complete and put its road in operation, it is enacted that its corporate existence and powers shall cease. By subsequent acts, however, the periods designated above are extended by two years in favor of any existing corporation which may be unable to construct its road within the time specified. In a recent case in Iowa it was held that the provisions of the code of that State forfeiting the charter of corporations upon non-user of their franchises during two consecutive years, did not apply to a railway company failing to begin the construction of its road until three years after its incorporation, where in the meanwhile it had made continuous efforts to procure the requisite funds. Under the provision of the constitution of Illinois,1o abrogating corporate charters not in operation, it was held that the charter was in operation where all the stock of the corporation had been subscribed for, and a meeting of the corporators had been held, accepting the charter, electing officers, and authorizing contracts. Companies daly incorporated by the legislature of Georgia, under the constitution of 1868, did not forfeit their privileges by failing to organize until after the adoption of the constitution of 1877, there being no provision of law to that effect.is A substantial relinquishment of the ordinary business of a corporation brings it within the meaning of a

statute declaring a forfeiture for suspension of business. A mere election of directors, and an occasional exercise of corporate functions, will not suffice.13

1 Barclay v. Talman, 4 Edw. Ch. 123, 129. Vide supra, § "34.

2 Attorney-General v. Bank of Niagara, Hopk. 354; University of Marylan 1 v. Williams, 9 Gill. & J. 35; 31 Am. D. 72. But see Ward v. Sea Ins. Co. 7 Page, 294; In re Jackson etc. Ins. Co. 4 Sand. Ch. 559.

3 People v Albany etc. R R. Co. 24 N. Y. 261; 82 Am. Dec 295; Silliman v. Fredricksburg etc. R. R. Co. 27 Gratt. 119, 125; State v. Railway Co. 40 Ohio St. 504, 56.

4 Wood's Railway Law, 1714, citing People v. Albany etc. R. R. Co. 24 N. Y. 261; 83 Am. Dec. 295.

5 Commonwealth v. Fitchburg R. R. Co. 12 Gray, 180.

6 N. Y. Laws of 1850, ch. 140.

7 N. Y. Laws of 1867, ch. 775, § 1.

8 N. Y. Laws of 1875, ch. 598, § 1, as amended by N. Y. Laws of 1879, ch. 350; N. Y. Laws of 1882, ch. 405, § 1.

9 Young v. Webster City etc. R. R. Co. 75 Iowa, 140.

10 Ill. Const. 1870, art. xi.

11 McCartney v. Chicago etc. R. R. Co. 112 Ill. 611.

12 Atlanta v. Gate City etc. Co. 71 Ga. 106.

13 In re Jackson etc. Ins. Co. 4 Sandf. Ch. 559, 562; Briggs v. Penniman, 8 Cow. 387; 18 Am. Dec. 454.

1

§ 588. The same subject, continued-Ultra vires acts-"Trust" associations.-Such ultra vires and illegal acts as have been discussed in the chapter on that subject may be made the basis of proceedings on the part of the State to forfeit the charter of a corporation. In view of the various plans proposed by the holders of railway securities to save themselves from the consequences of ruinous competition, by combination for the maintenance of rates, and the creation in one form or another of a railway "trust," an opinion just handed down by Justice BARRETT of the Supreme Court of New York City may be considered at some length in this connection. The case was an action of the State against a business corporation to forfeit its fran

chises upon the ground that it had exceeded its corporate powers in entering into a combination, or "trust," with various other companies. The foundation of this combination, as of others of like character, rests upon a written agreement, called a "trust deed," providing that all the shares of the capital stock of each company shall be transferred to a board of trustees, to be held by them as joint tenants, subject to the purposes set forth in the deed. These purposes are, in substance, declared to be, to promote economy of administration; to reduce the cost of manufacture, "thus enabling the price of sugar to be kept as low as is consistent with reasonable profit;" to furnish protection against unlawful combinations of labor; to protest against lowering the standard of manufacture; and "generally to promote the interests of the parties hereto in all lawful and suitable ways." The cestuis que trust are the entire body of stockholders. In acknowledgment of the shares delivered by them to the trustees, the latter issue what are termed "trust certificates," divided among the several companies in proportion to the value of their respective plants (free from debt), and subdivided by each company among its shareholders in proportion to the stock of the corporation which each cestui que trust held prior to the transfer to the trust board. Upon the acceptance of the trust certificates, the original corporate shareholder ceases to hold any further relations with his particular corporation, and thenceforward he is treated as a shareholder in the trust board. He can no longer receive a dividend from his particular corporation; nor, indeed, can the latter ever again declare a dividend. Each