John T. Stuart, Abraham Lincoln, and Benjamin S. Edwards to Robert Smith, 1 March 18641Springfield, (Ills.) March 1, 1854.Dear Sir:
We herewith send you our answer to the questions propounded in your letter of the 24th February, 1854.2Yours, Respectfully,John T. Stuart,A. Lincoln,B. S. Edwards.
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Stuart, John T.Springfield, IllinoisLincoln, AbrahamSpringfield, IllinoisEdwards, Benjamin S.Springfield, IllinoisSmith, RobertHon. Robert Smith, Alton, Illinois.
First. Is the corporation legally formed?
The articles of association filed in the office of the Secretary of State, establish the length of the road at one hundred and sixty miles or thereabouts. They also show subscriptions to an amount in the aggregate less than forty thousand dollars. With the articles and endorsed thereon or annexed thereto, is filed the affidavit of three persons, named in said articles as Directors, stating that the ‘amount of stock necessary for the incorporation of said company has been subscribed, viz; one hundred and sixty thousand dollars, and that ten per cent. on the amount, viz: sixteen thousand dollars, has been actually paid in as required by law.’ The date of this certificate is August 7, 1850.
It is, we think, undoubted law, that such associations are confined to the provisions of the act authorizing them, and cannot be organized until all its substantial enactments on the subject are complied with. See the case of ‘Valk vs. Crandall and others’— 1st Sanford’s Ch. Rep.[Chancery Report] p. 179.3 The substantial provisions of the act of Nov[November]. 5, 1849, preliminary to the incor-
<Page 2>poration of the company, are contained in the first and second sections of the act. The language is explicit, ‘That any number of persons not less than twenty-five, being subscribers to the stock of any contemplated railroad may be formed into a corporation for the purpose of constructing, owning and maintaining such railroad by complying with the following requirements.’ When stock to the amount of at least one thousand dollars for every mile of said road so intended to be built, shall be in good faith subscribed, and ten per cent. paid thereon as herein required, then the said subscribers may elect Directors for the said company, thereupon they shall severally subscribe articles of association, &c.[etc.] ‘Each subscriber to such articles of association shall subscribe thereto his name, place of residence, and the number of shares of stock taken by him in such company. The said articles of association may, on complying with the next section, be filed in the office of Secretary of State, and thereupon the persons who have subscribed, and all persons who shall from time to time become stockholders in such company, shall be a body corporate by the names specified in such articles.’4
‘Sec. 3. Such articles of association shall not be filed in the office of the Secretary of State, until ten per cent. on the amount of stock subscribed thereto, shall have been actually and in good faith paid in cash to the Directors named in such articles, nor until there is endorsed thereon, or annexed thereto, an affidavit made by at least three of the Directors named in such articles, that the amount of stock required by the first section has been subscribed, and that ten per cent. on the amount has actually been paid in.’
We cannot doubt that the obvious intention of the Legislature was to require that all the preliminary steps to the incorporation of the company must appear on the face of the papers filed in the Secretary’s office. The manifest propriety of such a requisition as security to the public against the formation of fictitious and irresponsible corporations, would of itself constitute a sufficient reason for this construction. The minuteness of detail contained in these sections is inconsistent with any other. Why such precision in these requirements, and the
<Page 3>further requisition that these articles should be filed in the office of the Secretary, if not for the very purpose of manifesting the compliance with the provisions of the act? We think that the subscription of the amount prescribed by the first section must be antecedent to the formation either of a company or the corporation. Until this amount has been subscribed and the ten per cent. paid, the articles of association cannot be legally entered into. The language is: When stock to the amount required shall be in good faith subscribed and the ten per cent. paid, ‘then the said subscribers may elect directors for said company; thereupon they shall severally subscribe articles of association.’5 Now, who are to subscribe these articles? Clearly, those who have subscribed the amount previously ascertained by the act, and have paid the per centage. These, and these only, are the said subscribers who may elect directors, the names of whom are to appear in the articles. Until the amount required is subscribed, no election of directors is authorized. Any persons elected directors by any number of subscribers prior to that event, would be illegally elected, and their certificate or affidavit would, so far as compliance with this act is concerned, be of no more legal validity than the statement of persons nowise connected with the company.
This view is corroborated by the 3d section of the act, which makes a certified copy of ‘any articles of association filed in pursuance of this act with a copy of the affidavit aforesaid endorsed thereon presumptive evidence of the incorporation of said company.’ Being only presumptive evidence, even if every thing required appeared on the face of the papers, the truthfulness of the statements contained in them might be controverted. Surely it was not intended that a copy of articles showing only a subscription of a part of the amount required, should be presumptive evidence of the subscription of the whole. And here we can see no reason for requiring an affidavit. The law requires the subscription to be made in good faith. The names of subscribers, if genuine, with the amount of their subscription, would show the liability of each, and afford the means of ascertaining the aggregate amount. The affidavit would make the prima facie evidence of the genuineness of the signatures,
<Page 4>the good faith of the subscriptions, and the payment of the ten per cent.. Two essential guaranties are thus afforded for the construction or honestly attempted construction of the contemplated road, viz; The personal responsibility of the subscribers, as provided in the 14th section of the act, and the affidavit of three directors to the good faith of the subscription and the payment of the instalment; and these, the articles subscribed as required, and the affidavit, constitute the presumptive evidence of incorporation. The one was not intended as a substitute for the other. The company could no more be organized without the subscriptions appearing on the articles than without the affidavit, and vice versa.
We think that the only subscriptions which would in any event be obligatory, are those which appear on the articles, or are subscribed on the books opened by the Commissioners. Now by reference to the 5th section it will be seen, that the commissioners are only authorized to open books, ‘from time to time after the company shall be incorporated.’ Such subscriptions cannot supply the place of those which by the terms of the law are required to be made anterior, and as a condition precedent to the incorporation of the company. Without further extending the argument, we are clearly of opinion that the association called ‘The Atlantic and Mississippi Railroad Company’ is not a corporation legally formed, ‘under the act to provide for a general system of railroad incorporations,’ approved November 5, 1849.
Second. Have they such an organization as entitles them to come before the present session of the Legislature? We think not. By the tenth section of the fourth article of the constitution the Governor ‘may on extraordinary occasions convene the general assembly by proclamation, and shall state in said proclamation the purpose for which they are to convene, and the general assembly shall enter on no legislative business except that for which they are specially called together.’
The proclamation which is thus made the exclusive grant of legislative power at this session— which cannot constitutionally be transcended— is, so far as relates to this subject, in these words: ‘To pass laws recognizing the existence of, and con-
<Page 5>ferring additional powers upon corporations formed, or which may be formed prior to the action of the legislature thereon, under the act to provide for a general system of railroad incorporation’— approved Nov. 5, 1849— ‘declare the public utility of their works, sanction the routes and termini thereof, and authorize the construction of the same.’ This language is plain and the meaning apparent. It is, not to recognize the existence of, and confer additional powers on associations, but corporations formed under the act— not companies whose organization had not been completed, but those who, by complying with the requirements of the general law have perfected their organization thereunder, so far as that could be done anterior to the legislation which is required by that law. It is apparent that the Governor had in contemplation the twenty-second section of the act containing provisions for those acts of the Legislature necessary to clothe the corporation with all the powers conferred by the act; and particularly to the last clause of that section, ‘And the Legislature reserve (the right) to itself to indicate the routes and termini of said roads, and the same shall not be constructed and commenced without the express sanction of the Legislature of this state by a law to be passed thereafter.’ It was intended that the assembly might sit under the law of ‘49, but not that they might legislate in direct conflict with its provisions.6
The answers to the remaining questions, are we think, necessarily involved in what we have already stated.7 If we are correct in these opinions, then it follows, that the Atlantic and Mississippi Railroad Company has no legal existence as a corporation— that the law of this session being beyond the power of the Legislature at a called session to pass, is a nullity; that no bonds could be issued, nor collections of subscriptions be enforced by a so called corporation which had no legal existence. As all subscriptions must be supposed to have been made with reference to an organization under the general law, they would only be payable to a corporation legally formed under that law— while all who subscribed to the articles of association, may be presumed to have known that action of the Legislature according to the general law of Nov. 5, 1849, would be applied,John T. Stuart,A. Lincoln,B. S. Edwards.
<Page 6>for they will not we think, be presumed to have understood that such application would be made until all the prerequisites of that law had been complied with. All subscriptions, prior to the filing of the articles must, in our opinion, have been made with the implied or express understanding that the full amount required by the law would be bona fide subscribed, and the per centage paid, and until that event, they would not be bound. We do not think that by the mere act of subscription they assented to the filing of the articles before the one hundred and sixty thousand dollars had been legally subscribed. Those who subscribed after the alleged formation of the Company by the filing of the articles, will be presumed to have so subscribed with the understanding, that all the requisitions of the act had been complied with, and the articles of association had been legally filed in the office of the Secretary, and if this has not been done they would not be bound to pay their subscriptions.8
1This letter appeared in Paul M. Angle’s New Letters and Papers of Lincoln. The original has not been located.
Paul M. Angle, comp., New Letters and Papers of Lincoln (Boston: Houghton Mifflin, 1930), 123-28.
2Robert Smith wrote John T. Stuart, Abraham Lincoln, and Benjamin S. Edwards one day after the Illinois General Assembly, in special session, passed an act authorizing the construction of the Mississippi and Atlantic Railroad. Incorporated in August 1850, the Mississippi and Atlantic Railroad Company was established to build a railroad from Terre Haute, Indiana to St. Louis, Missouri. The company had encountered significant opposition in Illinois in the previous few years and had halted progress on the road. Lincoln and other prominent Illinoisans lobbied against the Mississippi and Atlantic Railroad Company, arguing that it was not a legal corporation. The law enacted by the General Assembly seemingly resolved the issue over the legality of the corporation, paving the way for construction of the railroad.
“An Act Recognizing and Authorizing the Construction of the Mississippi and Atlantic Railroad,” 23 February 1854, Laws of Illinois (1854), 79-80; Albert J. Churella, The Pennsylvania Railroad, Volume 1: Building an Empire, 1846-1917 (Philadelphia: University of Pennsylvania Press, 2013), 279.
3Valk v. Crandall and others, a New York chancery case, centered around a new banking business. After creating articles of association, the incorporators elected a president and directors. The directors proceeded to sign and record an act of organization and commence business. However, because the stockholders did not sign the certificate as required by law, the business had no legal existence or capacity.
Valk v. Crandall and others, 1 Ny. (Sandford) (1846) 179.
6On January 9, 1854, Governor Joel A. Matteson issued a proclamation calling an extra session of the Legislature to convene on February 9. In regard to railroads, the proclamation stated that the session would “pass laws recognizing the existence of and conferring additional powers upon corporations formed, or which may be formed, prior to the action of the Legislature thereon, under the act to provide for a general system of railroad incorporations, approved Nov. 5. 1849; declare the public utility of these works; sanction the route and termini thereof; and authorize the construction of the same.”
Weekly Rock Island Republican (IL), 18 January 1854, 1:3.
7The remaining questions, found in Robert Smith’s letter, are as follows: 3rd. What effect will the passage of the bill, at this session of the Legislature, have upon the association, if not heretofore legally organized? 4th. Under the existing organization, is any subscription, heretofore made, binding upon any subscriber, and can the collection of such subscription be enforced? 5th. Can the company issue bonds and make a security that would be valid?
8The opinion of Stuart, Lincoln, and Edwards notwithstanding, the Illinois Supreme Court upheld a lower court ruling that the company was legally organized under Illinois law, with Chief Justice Samuel H. Treat opining that the company had been perfected to prosecute the work to completion.
Illinois Daily Journal (Springfield), 19 April 1854, 3:4; People of the State of Illinois, on the Relation of Eldredge S. Janney, Appellants, v. The Mississippi and Atlantic Railroad Company, Appellees, 14 Ill. (Peck), 440-46.
Printed Transcription, 6 page(s), Paul M. Angle, comp.,
New Letters and Papers of Lincoln (Boston: Houghton Mifflin, 1930), 123-28