author: By the Court.—Speir,

text:
    OTTO KROMER, Plaintiff and Respondent, v. ANTON HEIM, Defendant and Appellant.
    I. Estoppel.

    1. Excess of invoice price of goods over contract price.
    (a) Where an agreement calls for the delivery Tpy a debtor to his creditor of goods at certain prices in payment of the debt, and the goods are delivered with bills having the prices annexed, and the creditor does not return the goods, an objection that the prices contained in the bills were in excess of those stipulated for, comes too late, and the delivery of the goods must be taken as payment, to the extent of the prices contained in the bills.
    H. Accord and satisfaction.

    1. Stipulation to settle judgment.

      (a) When it and the acts done under it will not sustain a plea of accord, and satisfaction.

    1. A plaintifE’s attorney made a stipulation, signed by him alone, whereby he agreed to accept in settlement of a judgment held by his client, goods to a certain amount, to be delivered by the judgment debtor to the judgment creditor or on his order, and upon delivery of goods to the specified amount, then to take for the balance of the judgment an assignment by the judgment debtor of his interest in a certain patent and the assets of such patent business; the judgment debtor, after having delivered goods to the specified amount, tendered an assignment of the patent and of the assets of the business, which fhe judgment creditor refused to accept. ,
    HELD,
    not an accord and satisfaction of the judgment.
    (5) What would sustain the plea.

    If in above put case the judgment creditor had accepted the assignment, there would have been an accord and satisfaction.
    HI. Substituted agreement. '

    1. Requisite to constitute.
    (a) That creditor has a right of action on it.
    1. Application.

      (a) In above put case the stipulation was held not to be a substituted agreement, because the defendant being under no obligation to do anything whatever under it, there was no consideration for it and the plaintiff had no right of action on it.
    Before Speir and Sakford, JJ.

      Decided November 4, 1878.
    This is an appeal from an order of the special term denying an application of the defendant to set aside an execution and to compel satisfaction of a judgment.
    The motion rose under the following stipulation.
    “New York Superior Court.”
    Otto Kromer against Autou Heim.
    Judgment
    $4,334.08, entered June 24, 1876.
    “Plaintiff will accept in settlement of the above judgment $3,000, and an assignment of defendant’s interest in Kromer & Ohlemacher belt clasp improvement patent, and assets of said patent business, if paid within one year in cash; or if defendant pays $250 in cash at the date hereof, and $250 cash within thirty days from date hereof, and $250 in belting within thirty days.-
    “$500 in merchandise in four months.
    “$240 in cash in six months.
    “$250 in merchandise in eight months.
    “$500 in merchandise in twelve months, and $500 in merchandise every four months, until the said judgment is paid. Interest to be charged to the amount of the judgment unpaid, and when said judgment shall all be paid, except the amount of one thousand dollars remaining unpaid, plaintiff will accept a transfer of defendant’s interest in said belt clasp patent and assets, and allow said $1,000 therefor.
    „ “The belting and merchandise must be furnished by the defendant on as favorable terms as would be allowed by J. B. Hoyt & Co., or Hew York rate for cash sales, and of a good merchantable quality, and such belting shall be shipped by defendant to such parties as the plaintiff may direct, and the freight paid in advance and charged to the account, and the amount paid for freight shall be deducted out of the next installment or payment by defendant to plaintiff.
    “Ho goods to be shipped by defendant without orders from plaintiff.
    “In case of defendant’s insolvency or failure to comply with the foregoing, plaintiff will not be bound to allow $1,000 for said belt clasp patent, and this stipulation is terminated. If defendant complies with the foregoing stipulation, I will not docket the judgment or issue execution thereon, and until defendant makes or shall be in default in one of said payments for ten days, all proceedings on said judgment shall be and the same are hereby stayed, and upon the performance hereof by the defendant, said judgment shall be satisfied and discharged by the plaintiff.
    “New York, July 26, 1876.
    “ J. W. FESTER, Att’y for Otto Kromer, PPff.’
    Defendant alleges that he delivered such merchandise, pursuant to the terms of the stipulation, as to leave remaining unpaid on the judgment only $1,000, and that he thereupon tendered to the plaintiff a transfer of his interest in the belt clasp patent and assets ; which plaintiff refused to accept.
    Plaintiff claimed that he was not bound to accept the assignment: 1. Because defendant shipped the goods to him at prices in excess of those fixed by the stipulation, the overcharge thereby created being $577.08. 2. Because there is nothing in the stipulation which renders it obligatory on him to accept the assignment.
    The motion was referred, and the referee denied it.
    The report of the referee was confirmed at the special term, and thereupon the order was made from which this appeal is taken.

      D. M. Porter, attorney, and of counsel, for appellant :
    I. An accord and satisfaction was established. 1. The stipulation was good as an accord. The plaintiff relies upon the cases of Noe v. Christie (51 N. Y. 270), and Tilton v. Alcott (16 Barb. 598), but they are distinguishable from this case. There is an element in this case which was not in those. Itere the property was to be manufactured, and was to be delivered in quantities to suit, and in such quantities as the plaintiff might direct, except the belt clasps, which the plaintiff already had, and the patent, of which he was joint owner. The agreement to manufacture and deliver is a consideration more beneficial to the plaintiff than an agreement to pay the judgment in full in cash. The case at bar therefore falls with the cases of Coit v. Houston, 3 Johns. Cas. 243 ; Payne v. Barnet, 2 Marsh. 312; Watkinson v. Inglesby, 5 Johns. 386; Billings v. Vanderbeck, 23 Barb. 546 ; Steinman v. Magnus, 2 Camp. 124; 1 East, 390; Bradley v. Gregory, 2 Camp. 383; Wood v. Roberts, 2 Stark. 417; Boothby v. Sowden, 3 Camp. 175 ; Howard v. Norton, 65 Barb. 161 ; Philips v. Bergen, 2 Id. 608; Good v. Sherman, 2 B. & Ad. 328; Pinnell’s Case, 5 Rep. 117; Andrew v. Boughey, Dyer, 756; Corwin v. Clark, 3 Exch. 375 ; Lynn v. Bruce, 2 H. Bl. 317; Lyth v. Ault, 7 Exch. 664; Jones v. Bullett, 2 Litt. 49 ; Blinn v. Chester, 5 Day, 359 ; 2 Parsons on Contracts, 5th Ed. 619, note z, and authorities there cited; Andrew v. Boughey, Dyer, 75 a ; Pinnell’s Case, 5 Rep. 117; Sibree v. Tripp, 5 M. & W. 23, 35 ; Brooks v. White, 2 Met. 285, 286 ; Jones v. Bullett, 2 Litt. 49 ; Douglas v. White, 3 Barb. Ch. 621 ; Blinn v. Chester, 5 Day, 359 ; Eaton v. Lincoln, 13 Mass. 424 ; Smith v. Brown, 3 Hawks, 580; Musgrave v. Gibbs, 1 Dal. 216; Comyn's Dig. Accord, B; Brooks v. White, 2 Met. 283 ; Henderson v. Moore, 5 Cranch, 11; Northington v. Higby, 3 Bing. & C. 454 ; Sibree v. Tripp, 15 M. & W. 23; Jones v. Perkins, 29 Miss. (7 Cush.) 139; Christie v. Craige, 20 Penn. 430 ; Grocers’ Bank of New York v. Fitch, 1 Thomp. & C. 651, 654, affirmed in 58 N. Y. 623. The referee and the court below fell into an error, because they did not make the distinction that the agreement to manufacture the goods,— that is, to manufacture goods at a fixed' price, and the services of the defendant Heim, in manufacturing and delivering them,—constituted a new consideration. The agreement is enforceable as an equitable satisfaction (Scott v. Frink, 53 Barb. 533, 543; Kelly v. Dee, 2 Thomp. & C. 286).
    II. There were other features of the accord. Plaintiff received the goods, and take his conduct, and his receipt of the invoices with each delivery, and the court must be convinced that the allegation of overcharge is entirely insincere, and was an afterthought to furnish him a pretense or plausible but unfounded excuse for refusing to satisfy the judgment. Even if there had been an overcharge, it would have no legal effect, because plaintiff has received the goods and has his pay for them. Kromer waived a tender by refusal to receive the belt clasps and an assignment of the patent (Holmes v. Holmes, 5 Seld. 525; Reay v. White, 3 Tyrwh. 596 ; S. C., 1 C. & M. 748). The plaintiff and his agent admit that the patent and assets are worthless; therefore the judgment is satisfied independently of the patent, and the agreement has been fully performed (See authorities and note to Cumber v. Wane, 1 Smith's Leading Cases, 7th Ed. p. 598, citing Sibree v. Tripp, 15 M. & W. 23). The maxim, “Weminimis curat lex," applies.
    III. It is insisted that the proposal signed by the plaintiff through his attorney, containing a written statement of the terms of a proposed purchase of personal property, which property has been delivered to, and possession of it has been taken by the plaintiff, is an acceptance of, and acquiescence in the terms of the proposal of the plaintiff to receive it, and that would be especially the case where both parties have written letters ordering compliance therewith and the acceptance of goods in performance of the contract pursuant to such orders under the contract, make it a valid contract (Dent v. North American Steamship Co., 49 N. Y. 390; Osborn v. Gantz, 60 Id. 540 ; Gaylor Manufacturing Co. v. Allen, 53 Id. 515; Fellows v. Strong, 24 Wend. 278)
    IY. Kromer’s agreement is a release (Willis v. De Castro, 4 C. B. N. S. 211; Hodges v. Smith, 1 Term Rep. 446; Greenbaugh v. McClelland, 30 L. J. Q. B. 15 ; Smith v. Mapleback, 8 Term Rep.).

      Y. If Kromer’s position is correct, that the belt clasps and patents are worthless, i. e., worth nothing, then the judgment is fully paid, as he made a contract for and upon a good consideration. Heim accepted it, and it is valid as a contract (Story v. Salomon, Ct. App. MSS.), and he performed it, and the judgment is paid. Otherwise, Heim has paid all that he is to pay before Kromer agreed to buy the belt clasps and patent for §1,000, in full satisfaction of the balance of the judgment. Until all except the §1,000 was paid the agreement was a dependent one, and as soon as all except §1,000 was paid, it became and was a substituted agreement, and either party could sue to enforce it, and it operated as a good executed accord and satisfaction,—i. e., Kromer had an absolute right to the belt clasps and patent, and Heim to a satisfaction (Good v. Cheeseman, 2 Barn. & A. 335 ; Bailey v. Homan, 3 Bing. N. C. 915; Evans v. Powis, 1 Exch. 601; Curlewis v. Clark, 3 Id. 375 ; Glockton v. Hall, 16 Q. B. 1039, cited in Smith L. Cas. 7th Ed. 601 n).

      J. W. Eeeter, attorney, and of counsel for respondent, urged:—I.
    The stipulation signed by plaintiff’s attorney alone, on July 26, 1876, is no contract—is no agreement, (a) It is void for want of consideration (1 Pars. on Con. 427). (5) It is void for want of mutuality. Ho action for a breach of that document could be sustained by either party. The promise of each must be concurrent and obligatory at the same time to render either binding, and should be so stated in the declaration. It is nudum pactum (Utica & Syracuse R. R. Co. v. Brinckerhoff, 21 Wend. 139, by Nelson, J. ; De Zeny v. Bailey, 9 Id. 336, by Nelson, J.). That document is merely a privilege given to defendant wholly without consideration, giving defendant time to pay the judgment, and to pay the principal portion thereof in merchandise ; and when reduced to $1,000 to throw that off, and take said assignment, which privilege was terminable at will by plaintiff. Defendant never executed or signed the document; was never bound to perform it; never agreed to do anything under it. As defendant was not bound, plaintiff was not (21 Wend. 139, above cited), further than—plaintiff not having returned the goods which he allowed defendant to deliver, plaintiff is bound to credit defendant with the amount at prices defendant charged, although said prices were in excess of J. B. Hoyt’s, or New York rates at cash sales, on the judgment. When satisfied that defendant is not acting in good faith, and has charged from fifteen to twenty per cent, more more than New York rates for cash sales, plaintiff is under no obligation to submit to the fraud of allowing defendant $577.78 more than the $1,000 he promised to throw off.
    II. The defendant is bound only to pay the judgment entered by plaintiff in full, in money, $4,334.08. The court adjudicated that, June 24, 1876. (a) Plaintiff had waited six years, since 1870, to get that judgment, and wanted no new, or other obligation from defendant,—and took none, and made none. (5) Release not under seal, and without consideration, is void (2 Johns. 438; 2 Cow. 122; Seymour v. Minturn, 17 Johns. 169; Mitchel v. Hawley, 4 Den. 414). (c) The document is merely a privilege in which plaintiff promised, on certain conditions and without consideration, to take a less sum than the amount due to him. Plaintiff has not accepted the performance. Plaintiff has distinctly refused to accept defendant’s pretended performance.
    III. Said document being no contract, the transaction or case does not constitute an accord and satisfaction. (a) Payment of a less sum than that due does not operate as an accord and satisfaction (2 Johns. 448 ; Seymour v. Minturn, 17 Id. 169). (&) Performanee has not been accepted by plaintiff as accord and satisfaction. Tender of performance is not sufficient; there is no accord unless performance is accepted (Tilton v. Alcott, 16 Barb. 598, and many cases cited), (c) Plea of accord and satisfaction is not supported by proof of a tender made to plaintiff’s attorney, who declined to accept it as satisfaction, for one of the essentials, acceptance, is wanting (Noe v. Christie, 51 N. Y. 270; Hammond v. Christie, 5 Robt. 160; Burge v. Koop, Id. 1; Geary v. Page, 9 Bosw. 300; Mitchel v. Hawley, 4 Den. 414).
   By the Court.—Speir,

By the terms of the stipulation the' price of the merchandise to be delivered was provided for. It was delivered at certain intervals of time, with the prices named and fixed at the several times of delivery. The plaintiff raises the objection that some of the merchandise had been invoiced to him at 'too high prices ; that it was provided in the stipulation that the merchandise ordered by plaintiff must be furnished by the defendant, on as favorable terms as would be allowed by New York firms at New York rates for cash sales, and of good quality; that the overcharges in defendant’s bill amount to $577.08. The objection comes too late. All the merchandise had been delivered with the bills and - prices annexed, and the goods delivered were not returned.

When the amount due under the stipulation had been reduced to $967.58, the defendant made and tendered to the plaintiff an assignment of the patent, and of the assets of the business, which the plaintiff declined to accept. Had he accepted the assignment, such acceptance, with the previous cash payments and payments in merchandise under the stipulation, would have been a full and complete accord, payment and satisfaction of said judgment.

The difficulty in sustaining defendant’s motion to set aside the execution, and to compel a satisfaction of the judgment, is that no consideration appears in the stipulation. It is a mere privilege, for which the defendant paid nothing, and came under no obligation to do anything whatever. It was entirely optional with him whether he would avail himself of making any of the payments,- or executing the assignment. The judgment was good in the hands of the plaintiff, and could be presently executed. He gave time, to the defendant by paying down $250 in- cash, and at intervals in cash and merchandise, until the whole sum should be reduced to $1,000-. It was,, in fact, reduced by the payments'to the sum of $967.08, and an. assignment of the patent, &c., was tendered, but not accepted.

It is well settled that an accord, executory, with tender of performance, is no bar to an action. There are no facts to show that there was an accord and satisfaction of the plaintiff’s judgment, and as the whole defense rested upon that, it was incumbent on. the defendant to establish it (Brooklyn Bank v. De Grauw, 23 Wend. 342; Noe v. Christie, 51 N. Y. 270), In this last case it was held that a tender was not equivalent to.execution. The plaintiff agreed to accept and did accept some cash and some merchandise in lieu of cash, and so. far the accord was executed, but the tender of the assignment of the patent and assets is not equivalent to execution, it not. having been accepted. •

The defendant’s counsel relies upon a class of cases ’ where the courts have regarded the new agreement not as an accord but as a substituted agreement, and have held it to be a good defense though not performed at the time of the suit.

Among other cases he relies upon the case of Good v. Cheeseman (2 B. & Adol. 335). Even this case has been subsequently held as not affecting the rule that an accord executory must be executed, to constitute a defense (See decision of Tindal, Ch. J., in Bailey v. Homan, 3 Bing. N. C. 915). It would seem that even in such cases the new agreement will not be held to have been substituted unless the creditor has an immediate right of action upon it. The plaintiff here had no such right arising out of any direct or implied promise of the defendant; nor was there any concurrent promise which would be binding upon either.

The order appealed from should be affirmed with costs.

Sanford, J., concurred.


source: Caselaw Access Project

author: By the Coubt.—Speib, J.

license: Public Domain

text:
    SHEPHERD F. KNAPP, Receiver, &c., of the Bowling Green Savings Bank, Plaintiff and Respondent, v. WALTER ROCHE, Defendant and Appellant.
    I. Corporation, savings tank.

    1. Prohibition in charter against investing money deposited, except upon certain specified securities, and against the president, vice-president, any trustees, officers or servants directly or indirectly borrowing the funds of the corporation, its deposits, or in any manner using the same or any part thereof, except to pay necessary current expenses under the direction of board of trustees.
    (a) ACTIONS BASED ON THE STATUTE FOR THE RECOVERY OF MONEY INVESTED OR USED IN VIOLATION OF THE PROHIBITION.
    1. Constitutive pacts op.

      (a) What are: that there was a violation; that defendant is one of the parties falling within the purview of the prohibition; and that he authorized, or”was a party to, the violation.
    (6) What are not: that the money invested or used has not been repaid; that a demand has been made on the borrower; that the money has been lost, either through the inadequacy of the security or the insolvency of the borrower or otherwise.
    (5) VIOLATION OP PROHIBITION, WHAT CONSTITUTES.
    1. Loaning money on promissory notes, cashing checks, or permitting a depositor to overdraw his account.
    (c) RATIFICATION OF.
    1. What not sufficient to raise a liability as to one not originally a party to the violation.

      (a) In reply to a statement made by the bookkeeper to defendant 11 that the bank had to make up its bank account and those checks ” (referring to checks given for an unauthorized loan to C.), “must be got out of the way,” “ and he would make it a call loan to the defendant (the vice-president and a trustee), the defendant said “Do whatever you please. Charge it to C.”
    HELD,
    not a ratification whereby the defendant could be made liable on account of the loan.
    Before Speir, Sanford and Freedman, JJ.

      Decided November 4, 1878.
    This is an appeal from a judgment against the defendant entered upon the verdict of a jury, and from an order denying a motion for a .new trial made upon the judge’s minutes.
    The action was brought to. recover the amount of certain moneys of the insolvent Bowling Green Savings Bank, which the defendant, acting as one of its officers and trustees, had invested, loaned and used in violation of the express provisions of its act of incorporation, and which had never been repaid or collected.
    There was no allegation in the complaint, and no proof on the trial, that any demand was ever made either upon the railroad company or Colburn (in the opinion referred to), or that they refused or were unable to pay, or that the alleged loans or overdrafts had not been repaid and were uncollected.
    The facts pertaining to the questions discussed sufficiently appear in the opinion.

      John T. McGowan, attorney, and of counsel for appellant, among other things urged:
    I. While there can be no doubt that an action may be sustained against an officer of a bank for making loans of its funds in a manner not authorized by law, yet such an action can be maintained only by strict proof that the corporate funds or property have been lost and wasted, and the corporation has suffered actual loss. Though the prohibition in the act of incorporation may be held to confer a remedy by action in favor of the party injured, yet it is no greater in extent than that which would exist in the absence of the prohibitory clause (Potter on Stat. 160 ; Almy v. Harris, 5 Johns. 175). At common law, no action would be maintainable in the absence of proof of loss arising from the wrongful act (Angell & Ames on Corp. §§ 312, 314).
    II. In the present case, there was no evidence whatever of the taking or loaning of any money, or indeed of any tangible thing, and therefore no support for any part of the plaintiff’s claim. 1. There was no evidence whatever that the defendant ever had in his possession, actual or constructive, any money belonging to the Bowling Green Savings Bank. 2. The evidence proved, and only proved, that the secretary of the bank, who had supervision of the business of the bank, and charge and control of the receiving and paying teller thereof, had permitted the Avenue 0 Railroad Company and Daniel K. Colburn, two of its depositors and dealers, to overdraw their accounts with the bank, and thereafter, at various times, credits were given to both on the books of the bank against which they drew their checks, respectively. ' The transaction consisted in the making of entries in the books of the bank giving a credit to each of the dealers above named, and they were thereby authorized to draw against the amounts to their credit respectively in the bank. 3. True, the effect of these transactions was to cause the Bowling Green Savings Bank to pay the checks of the railroad company and Colburn, drawn against their respective accounts in said bank, but the testimony nowhere shows that the overdrafts, if any, were not paid to the bank before the appointment of the plaintiff as receiver, or to the plaintiff subsequent to his appointment. 4. There is no allegation or proof that any demand was ever made either upon the railroad company or Colburn ; that they refused or were unable to pay, or that the alleged loans or overdrafts have not been repaid, and were uncollected. 5. Conceding that the alleged loans or overdrafts were made in violation of the restrictive clause in section 4 of the act, in neither that nor section 6 is any pecuniary liability imposed on the offending trustee or trustees.

      Devlin, Miller & Trull, attorneys, and John E. Devlin, of counsel, for respondent.
   By the Coubt.—Speib, J.

Section 6 of the act specifically defines the business and object of this savings bank, which are to receive deposits of moneys, and to invest them or loan the same on certain specified State, United States, city or county securities of this State, or in such other manner as is authorized by the act of incorporation, for the use, interest and advantage of the depositors. It also provides that no president, vice-president, trustee, officer or servant of the corporation, shall directly or indirectly borrow its funds or its deposits, or in any manner use the same, “ except to pay necessary expenses.” It further provides ‘ ‘ that no money deposited in the said savings institution shall be invested except in the securities and stocks mentioned in the section, or on bonds and mortgages of unincumbered real estate, worth at least double the amount of the loans to be secured thereby.”

It clearly appears that the defendant loaned, by way of temporary investments, the funds of the bank to the Avenue C Railroad Company, and to one Col-burn, partly upon promissory notes, and partly without any evidence of debt whatever, but in no instance upon any of the securities, stocks, bonds or mortgages permitted by the act of incorporation. The testimony is uncontradicted that Smith, the president, the defendant, the vice-president, and the bookkeeper, Selmes, had a full and clear understanding during the whole time that these overdrafts and loans to the Avenue C Railroad Company were to be protected and taken care of at all events. I am unable to see that, so far as the verdict includes the balance of these overdrafts and loans to this railroad company, that any exception can be taken to it. The evidence in the case fully sustains the findings of the jury in this particular.

The case discloses that there was an account kept by Mr. Selmes, the bookkeeper, of the loans made to Colburn, and that the whole sum amounted to $99,860.74, and that there was paid on account thereof, which had been credited to Colburn, an amount leaving a balance, as due from him, the sum of $15,570.28. I am of opinion that the whole of this sum cannot be charged to the defendant. In other words, the sum of $5,500, included in this balance, was borrowed by Col-burn from Selmes, the bookkeeper, on three several distinct checks drawn by friends of Colburn, payable to his order, and indorsed by him about June 21, 1870, without the knowledge of the defendant, and when he was on his way to Europe. The checks were cashed by Selmes, after advising with Smith, the president, with the money of the savings bank, and were put into the drawer and counted as cash. These checks remained in the drawer for about six months, continued to be counted as cash, and when it became necessary for an account to be made up at the end of the year to show to the superintendent, it was deemed important to get these checks out of the way, as it would not answer to call them money, especially as the president and the bookkeeper had tried their best to collect them from Colburn and had failed; It was then determined to make this a call loan, and put it into defendant’s account, which was done on December 31, 1870. The only proof that the defendant had anything to do with the loan to Colburn relied upon by the plaintiff’s counsel, and which is all that appears in the case, relates to a conversation between Selmes and defendant, as testified to by the former. He says he told defendant—as I understand his testimony—that the bank had to make up its bank account, and those checks must be got out of the way, and he had, or would make it a call loan by defendant. The reply was, “Do whatever you please. Charge it to Col-burn.” This was not a ratification of the original loan, which was made by the witness Selmes, and for which the defendant could be made liable. Selmes does not appear to have had any authority from Boche to loan the money and count the security which he took as cash in his money drawer. Batification is the subsequent adoption of certain acts, which is equivalent to a prior authority. The witness Selmes had been before particularly examined by plaintiff’s counsel as to what he knew about' the loans to Colburn, and his answer was, “He, defendant, spoke to me about all these, except this $5,500. That has to be explained, you know.” It is also to be remembered that this witness stated “that, after the overdrafts had been accumulating, Mr. Smith, Mr. Roche and myself, had a perfect understanding all the time as to these overdrafts and loans to the Avenue C Railroad Company, that they were to be taken care of and protected—that was the first thing to be done, and we were to make the explanations afterwards.” This arrangement was not extended to the Colburn loans.

The judgment and order must be reversed and a new trial had, with costs to appellant to abide the event, unless the plaintiff deduct from the verdict the sum of §5,500, with interest from December 31, 1870, in which case the judgment and order must be affirmed without costs on this appeal.

Freedman, J., concurred,


author: By the Court.—Speir, J.

text:
    DAVID McMASTER, Plaintiff and Respondent, v. MARCUS KOHNER, Defendant and Appellant.
    I. Agreement.

    1. Modification, when consideration fob necessary.

      (a) Bent, reduction of.

    1. An agreement to reduce the rent reserved by a lease for the balance of the demised term thereafter to ensue requires a new consideration.
    Before Speir and Freedman, JJ.

      Decided November 4, 1878.
    The facts sufficiently appear in the opinion.

      J. H. Southworth, attorney, and H. 0. Southworth, of counsel, for appellant.
    The decision at the trial was erroneous. 1. A contract in writing may be varied by parol, the original contract furnishing sufficient consideration for the modification (38 N. Y. 225, 227, Hunt, Ch. J.; 20 Barb. 42). Original contract in writing, modified by parol afterward. “Held also it was competent for the parties by a subsequent parol contract, to extend the time for the performance of the original agreement, and this without any new consideration.” The time for performance in this last case was enlarged by parol, and held well (20 Barb. 64. See 5 Cow. 506; 8 Johns. 528; 1 Barb. 327 ; 15 Johns. 200 ; 7 Cow. 48, 50 ; 12 Barb. 366). The case in 38 N. Y. would seem to be decisive of the one at bar in defendant’s favor.

      W. McDermott, attorney, and of counsel for respondent.
    A promise by parol made subsequently to the execution of the lease, needs a new and sufficient consideration to uphold it (Walker v. Gilbert, 2 Robt. 214. See also Van Allen v. Jones, 10 Bosw. 369; Coe v. Harly, Daily Register, March 4, 1878, Ct. of App.).
   By the Court.—Speir, J.

The action was brought to recover a balance of $764.88 due to the plaintiff for rent on a lease dated October 19, 1874. By the terms of the lease the defendant was to pay the sum of $1,550 per annum, payable monthly in advance, for two years and six months from November 1, 1874.

The defendant gave evidence tending to show that when the lease was running, and after the January term of 1876 had commenced, the plaintiff agreed to accept $100 per month thereafter, and that defendant paid such sum until June, 1876, when plaintiff agreed to accept for the balance of said term $80 per month rent until the end of the term, and that defendant directed a man who boarded with him to pay plaintiff that amount, which he did pay until the termination of the lease. The court ordered a verdict for the plaintiff—for the reason that the agreement claimed by the defendant was without consideration and void. This is too plain for discussion.

The judgment must be affirmed with costs.

Freedman, J., concurred.


text:
    JACOB W. FEETER, Plaintiff and Respondent, v. MARGARET WEBER, Executor, &c., Defendant and Appellant.
    I. Contracts.
    1. Promissory note.

      (a) Consideration, what sufficient.
    The settlement of a litigation is a sufficient consideration for notes given in pursuance of, and to effect, the settlement.
    H Settlement.

    1. Estoppel by.
    When parties to a litigation come to a settlement thereof, and one, pursuant to the settlement, and to carry it into effect, gives to the other bis promissory notes (such other complying with the terms of settlement on his part), he cannot, in an action on the notes, set up that Ms adversary in the litigation so settled had no legal cause of action against Mm, without showing fraudulent concealment of material facts which were not within his knowledge when he gave the notes.

      (a) Especially is this the case where the defendant in an action on the notes himself proves the settlement and compromise.
    Before Speir and Freedman, JJ.

      Decided November 4, 1878.

      The defendant appeals from a judgment in favor of the plaintiff on a verdict rendered by the jury, under the direction of the court, for $3,416.94, entered December 13, 1877, being the amount of four promissory notes, with interest, dated September 3, 1874, for $500 each.
    It appeared that Mrs. Mary A. L. Weber, the widow and executrix of Albert Weber, had in the lifetime of Charles F. Weber commenced an action against him for the recovery of certain goods, chattels, and credits, claimed to belong to the estate of Albert Weber, and had also taken certain proceedings before the surrogate. The suit and proceeding were settled between the parties. The terms were that Charles F. Weber should give to Mary A. L. Weber 'the promissory notes in question, and Mary A. L. Weber should assign all claim to the estate of Albert Weber, deceased, her husband, to Margaret Weber, wife of Charles F. Weber, and discontinue the above mentioned suits, and stipulate that she would bring no other for the same cause of action or any part thereof, or for any goods, chattels, money, or credit claimed to have been taken by the defendant therein, and that she should surrender to Charles F. Weber, all the books, papers, receipts, vouchers, or memoranda in her possession belonging, or at any time in the possession of Albert Weber, deceased, or that came into her possession as executrix, or that have been in her possession at any time since the decease of Albert Weber.
    Each party fulfilled the terms to be performed by them respectively.
    Thereafter Charles F. Weber died, and letters testamentary were issued to defendant as executrix of his will.
    The notes were assigned to the plaintiff.
    Defendant’s counsel admitted all the material aliegations in the complaint, but insisted that there was no consideration for the notes, because the estate of Charles F. Weber had no cause of action whereon to found the action and proceedings compromised, and that Mary A. L. Weber was chargeable with knowledge of it.
    There was no re-assignment or offer to re-assign that which had been assigned to Margaret, nor any offer to annul the stipulation for the discontinuance of the aforesaid action, nor any return, or offer to return the articles, &c., which had been surrendered to Charles F. Weber.
    The defendant held the affirmative of the issues on the trial.

      Sigismund Kaufmann, attorney, and Lewis Sanders, of counsel, for appellant, among other points urged :
    I. To justify the direction of verdict in favor of either party the evidence must hot only be undisputed, but there must be no evidence in the case which would warrant a jury in drawing contrary inferences. If there are any inferences to be drawn, the case must be left to the jury. “The evidence tended to maintain the issue which the jury were to try; whether weak or strong, it was their right to pass upon it” (Hickman v. Jones, 9 Wall. 201; Barney v. Schmeider, Id.). “Nor is it always enough that the evidence be undisputed, if it be of a circumstantial character, for then there is often a conclusion to be drawn by the jury” (Rich v. Rich, 17 Wen.676). When a question of fraud arises on the trial, the court cannot withhold such question from the jury (Upton v. Bedlow, 42 How. 121). It was for them (the jury) to draw inferences from the conduct of the parties, and upon an examination of all the facts to declare what that conduct was designed to express (Lockwood v. Thorn, 18 N. Y. 291).

      II. The answer denies that there was any consideration whatsoever paid for the notes. The notes were given in compromise of a suit in the superior court and surrogate’s proceedings ; the court declined to try the question whether or not these claims were tona fide or not, and excluded nearly all the evidence offered to show the claims to be totally unfounded. Upon all the authorities this was clearly error. If the estate of Albert Weber had no claim against his father, Charles F. Weber, then a bringing of a suit did not make it any better; it made it worse, being in the nature of a blackmail claim, and its discontinuance would not be any consideration ; as plaintiff, by discontinuing a suit without any foundation, got rid of the certainty of paying costs. This point was directly raised and decided by Tiítdal, C. J., and Cress well, J., in Wade v. Simeon (3 D. & L. 596), where the declaration stated that the sums sued for had been promised by defendant during the pendency of a former suit, and in consideration of its being discontinued, which was done. The defense was that the plaintiff never had any cause of action, and that he knew it. To which defense plaintiff demurred. The demurrer was sustained (See also Cook v. Wright, 1 B. & S. 539, 570 ; Tooley v. Windham, Cro. Eliz. 206). Longridge v. Danville (5 Barn. & Ald. 122), suit on compromise of claim for damages against the owners of the ship Carolina. “Bayley, J. If it had appeared in this case that the owners of the Carolina' could not have been liable at all, I agree that the consideration for the promise would have failed.”

      J'. W. Feeler, attorney, and of counsel, for respondent, urged:
    I. The notes in this action, having been given in settlement of former actions, are founded on good consideration, and the court will not look behind the compromise,—it is not competent to show that the first suit could not have been maintained (Bronson, J., Stewart v. Ahrenfeldt, 4 Denio, 189; Farmers’ Bank of Amsterdam v. Blair, 44 Barb. 641; Russell v. Cook, 3 Hill, 504 ; Seaman v. Seaman, 12 Wend. 381).
    II. The notes in suit given by defendant’s testator to Mary A. L. Weber, and the consent given by Mary to discontinue the actions brought by her against said Charles F. Weber, and the assignment by Mary to defendant of her interest in the estate of Albert, and the general release to Charles F. Weber, each was the consideration for the other, and constitute a written agreement. The defendant is estopped from avoiding said agreement, or the payment of said notes, without having restored or having offered to restore to plaintiff’s assignor or plaintiff whatever the defendant or her testator received for said notes (Ely v. Kilburn, 5 Den. 514; 2 Abb. Dig. 270, § 1395 ; Mumford v. Am. Life Ins. Co., 4 N. Y. 482, 483; Hogan v. Weyer, 5 Hill, 389 ; 5 Barb. 319 ; 13 Id. 641; 2 Story Eq. §§ 693, 694 ; Willard's Equity (Potter’s ed.) 303).
   By the Court.—Speir, J.

The main defense interposed on the trial was that the notes were given and executed without any consideration. It appears that a suit was pending in this court, brought by Mary A. L. Weber, executrix of Albert Weber, deceased, against Charles F. Weber, the maker of the, notes, for the recovery of certain goods, chattels and money supposed to belong to the estate of Albert Weber, deceased. That at the same time, certain proceedings were pending in the surrogate’s court in the matter of the estate of Albert Weber, deceased, in which she as executrix and legatee claimed as owner all the estate and assets belonging to him in his lifetime. These proceedings in the surrogate’s court and the suit in the superior court were compromised and discontinued on September 2, and the notes in suit are of the same date and were given in consideration of the settlement of the suit and the proceedings in the two courts. The defendant’s counsel furnished the. evidence on the trial of the discontinuance and settlement in both cases; He then offered to show that Mary A. L, Weber, executrix, &c., had no legal cause of action against Charles F. Weber, the defendant in said suit or proceedings.. The learned judge, very properly, we think, declined to try that issue. The settlement and compromise rested upon a good consideration. The counsel did not offer proof of any fraudulent concealment of material facts,, which were not within the knowledge of his client, who made the notes ; he was not therefore in a position to defeat a recovery-upon his promise to pay them. The defendant having himself furnished the evidence of settlement and compromise was estopped from setting up that the proceedings in the courts had no foundation in law.

The claim that Charles F. Weber was under duress at the time he executed the notes and delivered them to Mary A. L. Weber, was clearly shown to be destitute of any foundation by defendant’s own- witness. Further notice of the point is unnecessary.

The judgment must be affirmed with costs.

Freedman, J., concurred.


author: By the Court.—Speie, J.

text:
    MORRIS K. JESSUP, and others, Plaintiffs, v. ANDREW CARNEGIE, and others, Defendants.
    I. Corporation.
    1. Pre-requisites to a legal corporate existence.

    (a) Non-compliance with, effect of.
    1. See Partnership, infra.

      3. Be facto by user.

      (a) Doctrines relating to, when not applicable.
    1. Not applicable where a corporation is sought to be formed under the provisions of a general law.
    3. Iowa, corporations in State of.

      (a) General statutes existing in 1871, relating to the formation of corporations other than railroad corporation.
    1. Pre-requisites to a legal corporate existence.
    1. Recording of articles of incorporation in the office of the recorder of deeds of the county where the principal place of business is to be, in a proper book kept therefor, and within three months after such recording, filing in the office of the secretary of state a copy of the articles, and publishing a certain prescribed notice for four weeks in succession in some newspaper as convenient as practicable to the principal place of business.
    II. Statutes.—Construction op.
    1. MANDATORY, WHAT ARE.
    1. Negative expressions will impress a mandatory character on a statute.
    8. Imposition of a duty and giving the means of performing it will have a like effect.
    HI. Partnership resulting by operation op law.
    1. Corporation.—Body assuming to be without legal corporate existence, associates in forming, and stockholders in, the proposed company are liable as copartners upon contracts made in the name adopted as its corporate name.
    1. This although the parties dealing with the proposed company believed it to be a corporation, and dealt with it as such.
    3. This although the associates and stockholders did not intend to become copartners and liable as such.
    IV. Comity op States.
    1. Statute law of one State to be applied in another.

      (a) Existing law at the time of contrract made to be applied.

    The rights, liabilities, and obligations of parties to a contract made and to be performed in this State, the parties on one side being all citizens of New York, and on the other not citizens of Iowa, so far as affected by the statute laws of Iowa, must be determined according to the interpretation and construction of the statute as expounded by the courts of Iowa at the time of the making of the contract.

      (a) This although the then exposition has been by subsequent decision reversed.

    V. Constitutional law.

      1. Impairing obligation of contracts.

      (а) By judicial decisions, cannot be.
    1. Can no more be impaired by subsequent judicial decisions on the construction of a statute, than by subsequent legislation.
    (б) Remedy, impairing of when impairs the obligation.
    1. A statute which so affects the remedy existing at the time the contract was entered into as to substantially impair and lessen the value of the contract impairs the obligation of the contract, and is forbidden by the constitution, and is therefore void.
    VI. Application of above principles.
    1. The, Davenport Bailway Construction Company.

    held,
    that as to the plaintiffs in this action it must be held:
    1. That it is not a railroad corporation.
    2. That it has not complied with the pre-requisites to a legal corporate existence.
    3. That the associates in its formation, and those who became interested therein, are liable as copartners upon obligations made in the name adopted for the proposed corporation.
    Before Speir and Freedman, JJ.

      Decided November 4, 1878.
    This action was brought against the defendants as copartners on a number of promissory notes made under the name and designation of “ The Davenport Railway Construction Company.”
    In addition to the statutory provisions referred to in the opinion, there were read in evidence various provisions of the statutes of Iowa, respecting remedies against corporations and stockholders referred to in the points.
    The cause was tried before the court and a jury, and a verdict for plaintiff was directed.
    The exceptions were ordered to be heard at the general term in the first instanced

      Lewis Sanders, attorney, and of counsel for defendants, Carnegie, Smith, McCandless and Preston.

      I. a. Stockholder not liable under Iowa statute. The precise question which is attempted to be raised here has been definitively decided twice by the. highest court of Iowa (First National Bank v. Davies, 43 Iowa, 435), where the court held that a failure to file a copy of the articles of incorporation in the secretary of state’s office was not a failure to comply substantially with requisitions of publicity and organization, required by the statute, b. The decision by the court of last resort of a State upon the statutes of its own State is conclusive on the courts of other States. It becomes a part of the statute law (Elmendorf v. Taylor, 10 Wheat. 159, 160; Shelby v. Guy, 11 Id. 367; Arguello v. U. S., 18 How. Pr. 539 ; Suydam v. Williamson, 24 How. U. S. 427; Hoyt v. Thompson, 3 Sandf. 421; Hoyt v. Sheldon, 3 Bosw. 302).
    II. 1. Failure to file articles in secretary of state’s office is a question for the State only. 2. The requirement of the statute is simply to duplicate proof (Tarbell v. Amos, 24 Ill. 48 ; Cross v. Pinckneyville Mill Co., 17 Id. 56; Mokelmume Hill Mining Co. v. Woodbury, 14 Cal. 427; Baker v. Backus, 32 Ill. 97).
    III. The Iowa statute forbids this suit. The foregoing authorities under point II. illustrate the policy of the law, and show the principle to be uniformly approved. In addition to the policy of the law, as expounded by the courts, we have, under the Iowa statute, a positive inhibition. “ Sec. 1180. Persons acting as a corporation, under the provisions of this chapter, will be presumed to be legally incorporated, until the contrary is shown; and no such franchise shall be declared actually null or forfeited, except in a regular proceeding brought for that purpose.”
    IV. The general policy of the law is the same (Buffalo and Albany Railroad Co. v. Cary, 26 N. Y. 77; Eaton v. Aspinwall, 19 Id. 121, 122). Defect in organization is a question of law, and it is for the State alone to take steps to dissolve such corporation (Doyle v. Peerless Petroleum Co., 44 Barb. 244; Trustees of Vernon v. Hills, 6 Cowen, 26, 27; The Eagle Works v. Churchill, 2 Bosw. 171; Charles River Bridge v. Warren Bridge, 7 Pick. 371; Wight v. Shelby R. R. Co., 16 B. Monroe (Ky.) 7; Searsbury Turnpike Co. v. Cutler, 6 Vt. 324). That condition precedent to a legal organization of corporation cannot be collaterally questioned (State v. Carr, 5 N. H. 370 ; President, &c., Kishacoquillas and Cent. T. R. Co. v. McConaby, 16 Serg. & Rawle, 145 ; Canal Co. v. Railroad Co., 4 Gill & J. 4, 107; 1 Edw. 84-110 ; Chamberlain v. Painesville and Hudson R. R. Co., 15 Ohio, 250).
    V. Proceedings must be had in Iowa. The pro-ceeding against the corporation must be had in the ■ State granting the charter (Persse & Brooks’ Paper Works Co. v. Willett, 19 Abb. Pr. 433).
    VI. Proof of corporation. “ Evidence of user sufficient” (Eaton v. Aspinwall, 10 N. Y. 121 ; Williams v. Bank of Michigan, 7 Wend. 553 ; McFarlan v. Triton Insurance Co., 4 Denio, 397 ; Rindell v. Fray, 32 Cal. 361; Dannebroge Mining Co. v. Allment, 26 Cal. 288 ; President & Trustees v. Thompson, 20 Ill. 200; Utica Ins. Co. v. Tilman, 1 Wend. 555; Gaines v. Bank of Miss., 7 English (Ark.) 769 ; Bank of Manchester v. Allen, 11 Vt. 302; 3 Wend. 296; Caryl v. McErath, 3 Sandf. 178-179 ; Spring Valley Water Works, San Francisco, 22 Cal. 440, reviewing all the cases). Every presumption indulged in favor of the legal existence of a corporation after it has gone into operation (Dunning v. New Albany and Salem R. R., 2 Ind. 457; 1 Greenl. Ev. 65). Exemplified copy of charter and evidence of user under it sufficient proof of incorporation (Utica Ins. Co. v. Tilman, 1 Wend. 555). Searsbury Turnpike Co. v. Cutler (6 Vt. 322), dispenses with proof of record of organization ; parol proof of incorporation under indictment for counterfeiting is admitted (S. C., Id. 323). Books of a corporation are competent evidence for the purpose of showing the acts and proceedings of the corporation, and that it has complied with statutory requisites (Ryder v. Alton & Sangamon R. R., 13 Ill. 523 ; Highland Turnpike v. McKean, 10 Johns. 154; Owings v. Speed, 5 Wheat. 420; Wood v. Jeff. Co. Bank, 9 Cowen, 194; Gray v. Turnpike Co., 4 Randolph, 578 ; Duke v. Catawba, Nov. Co., 10 Ala. 82; Hall v. Carey, 3 Georgia, 239).
    VII. Stockholders improperly joined. Cause of action several. Defendants not jointly liable as stockholders (Young v. New York and Liverpool U. S. Mail Steamship Co., 15 Abb. Pr. 75; Aspinwall v. Torrance, 1 Lansing, 384). Statutes of Iowa make the individual property of the stockholders liable; this liability is several» It does not make the stockholders liable.
    VIII. Estoppel. “But defendant having undertaken to enter into a contract with the plaintiffs in their corporate name, he thereby admits them to be duly constituted a body politic and corporate, under such name” (Dutchess Cotton Manufactory v. Davis, 14 Johns. 245 ; Henriques v. Dutch West India Co., 2 Ld. Raym. 1535; Judah v. American Live Stock Ins. Co., 4 Ind. 339, and cases there cited; Franz v. Teutonia Building Asso., 24 Md. 270 ; Wood v. Coosa & Chattanooga R. R., 32 Geo. 291, 292).
    VIII. There is no liability of stockholder at common law. “ It is clear by common law only corporation could be sued” (Erickson v. Nesmith, 4 Allen [Mass.] 235). Without a provision in law or charter for individual liability of stockholder, the general rule is, none exists (Shaw v. Boylan, 16 Ind. 386 ; Winter v. Baker, 50 Barb. 433). Dissolution of corporation does not render stockholders liable as partners (Tarbell v. Page, 24 Ill. 47; Central Savings Bank v. Walker, 66 N. Y. 430; Wilson v. Fesson, 12 Ind. 285). At common law there is no individual liability of a stockholder (Shaw v. Boylan, 16 Ind. 386 ; Trustees of Free Schools So. Parish Andover v. Flint, 13 Metc. [Mass.] 539 ; Woodruff & Beach Iron Works Company v. Chittenden, 4 Bosw. 417; Andrews v. Callendar, 13 Pick. 490; Winter v. Baker, 50 Barb. 434).
    IX. This court has not jurisdiction of the subject-matter of the action. This will be apparent from an examination and comparison of the case at bar with Lowry v. Inman, 46 N. Y. 120. ... “ Whether the obligation is imposed, and the remedy given solely by the statute, or rests upon the assent of the stockholders . . . the result is the same; the obligation, or liability, and the remedy are inseparable ; and the party interested is confined to the remedy prescribed by the act.” The remedies prescribed by the Iowa statute are:—1st. A judgment against the corporation. 2nd. Execution thereon. 3rd. Demand upon the proper officer for- corporate property. 4th. A return of insufficient corporate property. 5th. An action against the stockholder. 6th. Stockholders’ right to a stay of proceedings at any stage of the action against himself upon pointing out corporate property. Before this action could be maintained against any stockholder in Iowa, a judgment must have been recovered against the company, execution issued, demand made, and execution returned unsatisfied. Though the contracts sued upon were made in New York, they are to be governed by the Iowa statute (Hutchins v. New England Coal M. Co., 4 Allen, 583). When a statute creates a right and provides a remedy, that alone must be followed (Smith v. Lockwood, 13 Barb. 209; Moncrief v. Ely, 19 Wend. 407; Doe v. Bridges, 1 Barn. & Ad. 859; Hillsdale v. Larned, 16 Mass. 64-69 ; Stafford v. Ingersol, 3 Hill, 41; Almy v. Harris, 5 Johns. 175 ; Renwick v. Morris, 7 Hill, 576; Erickson v. Nesmith, 4 Allen, [Mass.] 236, and cases cited). Action in Massachusetts to charge stockholder in New York corporation for corporate debts for failure of company to file annual report, &c. Held, “ Liability of stockholder must be treated as part of the statute system of another State, incapable of execution alieno foro (Halsey v. McLean, 12 Allen, 443).
    X. Where the statute of a foreign State provides the remedy without becoming a portion of the contract made under it, it may be repealed by the legislature at pleasure. No State interferes with the internal police of another. Nor will it enforce an obligation entered -into with a view to that police, and intended to have no operation except in connection with it. No action can be maintained out of the State, where, by the law of the State authorizing the contract, it is to have effect only in a particular way, not known to the common law. It is the exclusive province of the tribunals of that State (Picheney v. Fisk, 6 Vt. 108-112). By chap. 32, Laws of Iowa of 1876, the proceedings of the Davenport Railway Construction Co. were validated. The liability of the stockholder for failure to file articles of incorporation in the secretary of state’s office is penal, and is analogous to the penalty imposed upon trustees for not filing the annual report under the laws of this State, which has been held to be a penalty (Merchants’ Bank v. Bliss, 35 N. Y. 412). The statute of limitations for penalties' was enforced in Whiting Arms Co. v. Barlow, 63 Id. 57 ; Jones v. Barlow, 62 Id. 205). It being a penalty, the power which prescribes formalities to be observed in its creation is able to dispense with them (Black River R. R. Co. v. Barnard, 31 Barb. 258).
    XI. By a repeal of the penalty the action falls with it (U. S. v. Findley, 1 Abb. U. S. 364 ; Kimbro v. Colgate, 5 Blatchf. 229; U. S. v. Six Fermenting Tubs, 1 Abb. U. S. 268; U. S. v. Tynen, 11 Wall. 88).
    XII. The company’s notes were excepted to as incompetent, irrelevant, and becáuse no foundation had been laid for them. If corporation had no corporate existence, it would not authorize holder of notes made by it to treat Stockholders as partners (Towbridge v. Scudder, 11 Cushing, 86 ; Fay v. Noble, 7 Id. 192; and authorities cited, supra, VIII. and IX.). Articles of incorporation, &o., to pfove agency of person making contracts as an authority from stockholder, held inadmissible (Noble v. Fay, 7 Cushing, 189). In Cochran v. Arnold, 58 Penn. 404, it was held, in an action to charge stockholders as partners doing business as a corporation under name of “ConestogaSteam Mills,” for irregularity in formation, Suit on notes given by G. S. M. for cotton sold by plaintiffs, Held— “ corporate existence of a corporation de facto, cannot be inquired into collaterally.” Not liable as partners (Baker v. Backus, 32 Ill. 107).

      Alexander & Green, attorneys, and Ashbel Green, of counsel for defendant Davison, Urged:
    I. The liability of stockholders is a part of the statute system of Iowa, incapable of execution alieno foró. The remedy is necessarily confined to the sovereignty of Iowa, and can have no recognition or effect beyond the boundary of that State (Halsey v. McLean, 12 Allen, 443 ; Lowrey v. Inman, 46 N. Y. 130; Pickering v. Fisk, 6 Vt. 102 ; Doun v. Lippman, 5 Cl. & Fin. 1 ; Ferguson v. Fyffe, 8 Id. 121).

      II. The alleged failure to comply with the require1 *- ments of the statute of Iowa, did not, ipso facto, create the relation of partnership between the stockholders. The stockholders cannot, without other evidence than the proof of their interest, be held to have authorized each other, as partners, to pledge the credit, of the whole, and to have empowered any one of the number to bind all in any matter within the ordinary course of business of the corporation (Central Bank v. Walker, 66 N. Y. 424; National Bank v. Landon, 45 Id. 410 ; Fuller v. Rowe, 57 Id. 23 ; Noble v. Fay, 7 Cushing, 189; Trowbridge v. Scudder, 11 Id. 86 ; Baker v. Backus, 32 Ill. 82).
    III. There was no substantial failure to comply with the laws of Iowa (Washington College v. Duke, 14 Iowa, 14; National Bank v. Davies, Id. ; S. C. on reargument, 43 Iowa, 435).
    IY. The exposition of the Iowa courts upon the com struction of statutes of that State is to be- taken by-this court as conclusive, and to be received with the-same force as. if the interpretation contained in such decisions was incorporated in the statute in terms (Hoyt v. Sheldon, 3 Bosw. 302 ; Hoyt v. Thompson,. 3 Sandf. 421; Shelby v. Gray, 11 Wheat. 361; Tioga R. R. v. Blossburg R. R., 20 Wall. 137; Elmwood v. Macy, 2 Otto, 289).
    Y. The-passage of the act of 1876, and the-filing of the articles in the office of the secretary of State in 1874, cured any invalidity in the organization if any existed prior thereto. 1. The question is one solely for the. State of Iowa to deal with (Eaton v. Aspinwall, 19 N. Y. 119; Buffalo & Allegany R. R. Co. v. Cary, 26 Id. 75; Doyle v. Petroleum Co., 44 Barb. 239; Cochran v. Arnold, 58 Penn. St. 399). The law of 1876 practically cured the alleged defect (Black R. R. Co. v. Bernard, 31 Barb. 258 ; Green v. Seymour, 3 Sandf. Ch. 285; Whitewater Canal Co. v. Vallette, 21 How. U. S.
      414). 2. The liability of stockholder is in nature of penalty (Garrison v. Howe, 17 N. Y. 458 ; Merchants’ Bk. v. Bliss, 35 Id. 412). The act of 1876 took away the penalty, and any cause of action founded thereon fails (Kimbro v. Colgate, 5 Batchf. 229 ; Butler v. Palmer, 1 Hill, 324).
    Emott, Burnett & Hammond, attorneys, and James Emott, of counsel for defendants, Duff, Dexter, and Ames:
    I. The consequences resulting from a violation of, or a failure to comply with, the provisions of the statutes of Iowa in regard to the formation of corporations are two-fold in their character : first, as affecting the corporation; and second, as affecting the individual corporators. First. The consequence upon the corporation is the forfeiture of its franchises and rights, if the failure to comply with the statute or the violation of its provisions is not condoned by the sovereign power. This result can only be reached in a proper action by the State, and such action must be brought and conducted to judgment before any such condonation, or the forfeiture cannot be enforced. It appears in this case that no such action has ever been brought in the State of Iowa, and that the State, by the- act passed March 3, 1876, legalized the formation of this corporation, saving its liability for contracts made prior to the taking effect', of the act, and the liability of the individual members ^thereof to pay up their stock so far as the same is unpaid. Second. The consequences of a failure to comply with-, the provisions of the statute for the formation of corporations, or a violation of that statute, upon those becoming stockholders, is, in the language of the act, “ to render the individual property of the stockholders liable foi’ the corporate debts.” It will be observed that this isi a liability created by the statute, of a penal character, \ imposed upon the stockholders as such, and a liability to the payment of the debts of the corporation.
    II. This is not a case like that presented in Lowry v. Inman, 49 N. Y. 119, where the liability was imposed by the charter of the corporation, and did not arise from its violation or a failure to observe it. The present case is an action founded upon a liability which the defendant did not incur by becoming a member of the corporation, but solely from the fact that he, or some one for whose acts he is responsible, has done or not done something required by law. It is therefore an action, on the statute, and not on any contract, express or implied (Lawlor v. Burt, 7 Ohio St. 340).
    III. If this were an action against a stockholder in a New York corporation, under a New York statute, in terms like that of Iowa, it would be barred by the New York statute of limitations (Lawlor v. Burt, supra). But it is an action on a foreign statute, and no such action will lie in the State of New York. Our courts will not entertain a suit of a penal character upon or to enforce a foreign statute (Lowry v. Inman, 46 N. Y. 119, and cases cited ; Halsey v. McLean, 12 Allen, 438; Merchants’ Bank v. Bliss, 35 N. Y. 412). The attempt to enforce the statute of Iowa in another State, deprives stockholders in this corporation of important rights- conferred by the statute itself, and therefore the remedy given by the statute is necessarily confined to the State of Iowa, and can have no recognition in any other State (Lowry v. Inman, 46 N. Y. 130; Halsey v. McLean, 12 Allen, 438 ; Pickering v. Fisk, 6 Vt. 162; Ferguson v. Fyff, 8 Clark & Finelly, 121; Down v. Lippman, 5 Id. 1).
    IV. There is no foundation for the doctrine asserted in the complaint, and upon which this action seems to have been brought, that the failure by the persons organizing this corporation to comply with certain requirements of the statutes of Iowa ipso facto created them partners, and made the corporation a common law partnership, and. its members, liable as general partners to all persons dealing with it (Fay v. Noble, 7 Cush. 188-192).
    V. The notes upon which this action was brought are the notes of a corporation. The parties who took them, took them as such. The statute creating the liability which is supposed to rest upon these defendants makes them liable for these notes, if at all, as corporate debts; not because they were partners, nor because they directly incurred or authorized these liabilities as their individual debts. The Davenport Railway Construction Company was a corporation defacto, until dissolved by the forfeiture of its franchises, adjudged in a proper action. It filed its articles in the proper county office; it published the proper notice in a county newspaper ; it. commenced business ; it dealt with the plaintiffs and gave its notes. Subsequent to its organization, it is alleged that it failed to comply with the requirements of the statute, that it should file a copy of its articles in the office of the secretary of State. But this subsequent default did not turn it from a corporation de facto into a partnership. If it had, no such statute as that passed in 1876 would have been passed by the Iowa legislature, or could have had any operation or effect. A violation of a charter,- or of laws providing for the organization of corporations, or a failure to observe the requirements of such statutes, does not create the relation of partnership between the stockholders (Central Bank v. Walker, 66 N. Y. 424; Fuller v. Rowe, 57 Id. 23; National Bank v. Landon, 45 Id. 410 ; Noble v. Fay, 7 Cush. 189 ; Trowbridge v. Scudder, 11 Id. 86; Cochran v. Arnold, 48 Penn. St. 404; Baker v. Backus, 37 Allen, 107).
    YI. This- case has been decided against the plaintiffs in the courts of Iowa, and the construction given to the statutes here relied upon, by the courts of Iowa, will be taken by the courts of this State as conclusive. It must be received as if the interpretation given by such decisions were incorporated in the statute in terms (Hoyt v. Sheldon, 3 Bosw. 302 ; Howe v. Thompson, 3 Sandf. 421; Ward v. Gray, 11 Wheat. 361 ; Tioga R. R. Co. v. Bloomsburgh R. R. Co., 20 Wall. 137; Elmwood v. Macy, 2 Otto, 289), In the case of the First National Bank of Davenport v. Davies, which was a suit brought against a person who was a stockholder in the Davenport Railway Construction Company, the supreme court of Iowa held that the stockholders in the company were not individually liable for its debts. It "will be observed that the statute provides, as amended in 1858, that it shall not be applicable to railroad corporations or corporators. The supreme court held, by a majority of the judges, that the Davenport Railway Construction Company was a railway corporation, and that it and its stockholders were entitled to the benefit of this exemption. Since the trial of this case a re-hearing of that case has taken place, and the court adhere to their decision. It is thus the law of the State of Iowa, that these defendants are not liable for the debts incurred by or in the name of the Davenport Railway Construction Company, or' for the notes upon which this action is brought (National Bank v. Davis, 43 Iowa, 435. See also Washington College v. Duke, 14 Id. 14).
    VII. The passage of the act of 1876, page 291, together with the previous filing of the articles of this company in the office of the secretary of state in 1874, waived any invalidity in the organization of this company, if any existed prior thereto. The liability of these defendants as stockholders, if any ever existed, was in the nature of a penalty for a failure to observe the statutes of the State. The act of 1876 condoned this failure, and dispensed with this penalty, and the question was one solely for the State of Iowa to deal with (Merchants’ Bank v. Bliss, 35 N. Y. 412; Black River R. R. Co. v. Barnard, 31 Barb. 258; Eaton v. Aspinwall, 19 N. Y. 121; Doyle v. Petroleum Co., 41 Id. 244 ; Cochran v. Arnold, 48 Penn. St. 404).

      Hvarts, Southmayd & Qhoate, attorneys, and Joseph II. Qhoate, of counsel, for plaintiffs:
    I. By the true construction of the statutes of Iowa in question, and according to the settled principles of the common law, the defendants, having assumed to act as in a corporate capacity, without a legal organization as a corporate body, are liable as partners to those with whom they contract and to the full extent of the notes given in the name of the company for goods purchased of the plaintiffs (Fuller v. Rowe, 57 N. Y. 23 ; Wells v. Gates, 18 Barb. 554; Townsend v. Goewaey, 19 Wend. 424; Cross v. Jackson, 5 Hill, 478 ; Dennis v. Kennedy, 19 Barb. 517. See also opinion of Day, J., in First Nat. Bank of Davenport v. Davies, printed in the case ; Dubuque v. Dubuque, 7 Iowa, 262 ; Dishon v. Smith, 10 Id. 212 ; McKellar v. Stout, 14 Id. 359). The recording of the articles of incorporation in the office of the secretary of State, and the due publication in the time prescribed by law are essential to the existence of the corporation, and there being no corporation, there is no shield against the common law liability of the defendants. The situation of the defendants is analogous to that of stockholders carrying on business by agreement after the dissolution of the corporation (Nat. Union Bank of Watertown v. Landon, 66 Barb. 189 ; Cunnaston v. McNair, 1 Wend. 457). This case is distinctly reaffirmed by the court of appeals in Bank v. Walker, 66 N. Y. 429. Defendants seek to present the case as an attempt on the part of the plaintiffs to inflict upon the private property of the defendants as stockholders a liability as if created by statute and by that only imposed on their property as stockholders. That is not our position. We claim that there was no corporation existing at the time these purchases were made and these notes given, and that, as a consequence, the defendants were left uncovered and unable to hide their personalty from liability under the corporate shield, and that the statutes of Iowa afford them no protection. This renders inapplicable and ineffective the chief portion of the propositions arrayed in the elaborate brief presented by the defendants. The case is in no wise an attempt to annul or forfeit the charter or franchise of a corporation, which prerogative pertains only to the sovereignty. The cases, from the reports of Illinois and California, set forth under Mr. Sanders’ second point, will be found to have been, in part, suits between companies and stockholders upon subscriptions for stock, where the perfected organization of the corporation was not material to the liability ; in part suits to enforce penal liability of stockholders for failure to comply with statutory requirements imposed upon the corporation; and all arising under different statutes, the language and meaning of which are wholly different from the statute of Iowa. So that the general observations cited from those cases are wholly inapplicable here. What is essential to the perfection of the corporate existence is, of course, dependent upon the particular language and provisions of the statute in each case. But the Illinois cases cited in the brief of defendants’ counsel have been expressly overruled by a recent case in that State (Bigelow v. Gregory, 73 Ill. 197), which is a conclusive authority in plaintiffs’ favor. Again: the nature of the action, and the relation of the parties, between whom the controversy arises, is in the highest degree material, if we would avoid confusion. We are suing individuals, as individually liable, not because they are stockholders of a corporation, but because there was no corporation, and they were not stockholders not merely upon a statutory liability, but upon a liability against, which they are seeking to interpose a statutory protection as a defense. This distinction, clearly observed, disposes of the long array of cases from our own reports cited in Mr. Sanders’ fourth point. ■ So, too, the propositions that proceedings for a forfeiture of franchises of a corporation must be had in the State of its creation, and that proof of user is sufficient evidence of corporate existence in certain suits between the corporation itself and parties dealing with it, and that liability of stockholders, as such, under 'the provisions of statutes, is always statutory ; and that, as between corporations and parties contracting with them, as such, in suits arising between them, the parties so- contracting are,, for the necessary purposes of justice, and to prevent fraud, estopped to deny the corporate- existence of the. company at the date of the contract; and that, a corporation being created, there is at common law no individual liability of stockholders for its debts—are all propositions well enough in themselves to be applied in proper cases and between proper parties, but are wholly out of place and irrelevant in this contest, where the question is, whether the defendants can find in the statutes of Iowa, and in the proceedings had thereunder, statutory shelter from the individual liability otherwise incurred by them by the purchase and receipt of the plaintiffs’ property and by their notes, given in payment therefor.
    II. By the Code of Iowa as amended in 1870, the-filing of a copy of the articles of incorporation in the office of the secretary of State was necessary to the valid creation of the corporation. The language of the statute is mandatory and not simply directory. This certificate not being filed, it followed that there was no corporation (Supreme Court of Iowa, First National Bank of Davenport v. Ludwig S. Davies, administrator, in MSS., see opinion of Day, J.). Even without any further provision of statute it necessarily followed by the established principles of common law, as illustrated by the cases in our own courts, cited under our first point, that parties purchasing property in the company name, and giving for it a note in the corporate name, were individually liable upon the note as copartners. But the Code of Iowa (§ 1166), which the defendants invoke for their protection, expressly so declares : “ A failure to comply substantially with the foregoing requisitions, in relation to organization and publicity, renders the individual property of all the stockholders liable for the corporate debts.” The failure to file the certificate in the secretary of state’s office was a “substantial failure to comply with the requirements.” The amendment of 1870 made the filing there fundamental, if it was not before (Yid. on this point also, Day, J.’s opinion). But, secondly, at any rate it was the settled law of Iowa, at the time of the giving of the notes here sued on, that by the true construction of this and similar statutes of that State, as expounded by the supreme court of that State, the failure to file such a certificate was fatal to the attempted creation of the corporation, and left the so-called stockholders exposed, as at common law, to liability for the debts of the company (Township of Dubuque v. City of Dubuque, 7 Iowa, 262 ; Dishon v. Smith, 10 Id. 212 ; McKellar v. Stout, 14 Id. 359; opinion of Day, J., ut supra). And, thirdly, by the very principle of comity, contended for by the defendants, and so ably expounded in their briefs, that the construction put upon the statutes of a State by the fixed and settled decisions of the courts of that State in matters of local law, is to be adopted and followed by the tribunals of other States in interpreting the same statutes, this court is bound to say that at the time of the giving of the notes here sued on, it was part of the law of Iowa that the failure to file the certificate of incorporation in the secretary of state’s office was fatal to the attempted defense of the defendants against their individual liability upon the notes, either at common law or under the statutes in question (Hoyt v. Thompson, 3 Sandf. 421 ; Hoyt v. Sheldon, 3 Bosw. 302; Elmendorf v. Taylor, 10 Wheat. 159; Shelly v. Grey, 11 Id. 367; Greene v. Lessee of Neal, 6 Peters, 298).
    III. The Davenport Railway Construction Company was not and is not a “railroad corporation,” and its so-called “stockholders” are not therefore exempted from the liability otherwise incurred by section 1338 of the Code of Iowa,—which enacts that section 1166, already cited, “shall not be deemed and construed to be applicable to railroad corporations and corporators; and stockholders in railroad companies shall be liable only for the amount of stock held by them in said companies.” To say that such a construction company, organized for the sole purpose of building railroads for railroad companies to own and operate, but to own and operate no railroads itself, is a railroad corporation, is abhorrent to common sense and common honesty, and no court administering justice would so hold. Consistently with those old fashioned elements of justice, viz., common sense and common honesty, there can be no possible answer to the reasons stated by Beck, J., on the reargument in the Dane’s case, 43 Iowa, 435, 436. It cannot be denied that at the time of the giving of the notes sued on, wherever railroad corporations were known, not only in Iowa but in all civilized States and. countries, the settled definition of the term did not include, but excluded a construction company, having no power to act as a common carrier, or to own and operate a railroad, or to exercise railroad franchises thereon. This distinction between a railroad corporation and other corporations was clear throughout the statutes of Iowa (Vide Revision of 1.860, passim). It was clearly stated by the supreme court of Iowa, long before the notes here sued on were issued ‘(Vide State of Iowa v. County of Wapello, 13 Iowa). Ho suggestion to the contrary had ever been made in the courts of that State. Hothing so monstrous had even yet been whispered or imagined, for the sake of screening some local debtor from his legal liabilities, as that a construction company, which had no one of the elements or features of the corporation known to the people and courts of all English-speaking States, as railroad corporations, was included within that definition. Upon the principle of comity, therefore, to which the defendants have themselves appealed, this court, construing the statute in question at the time of the giving of the notes sued on, according to the' settled principles of law, alike as expounded by the courts of Iowa, as of every other State, must have held that the construction company was not a railroad company, and that, therefore, the defendants were personally liable, as adjudged in the court below.
    IV. And this brings us to the final and most interesting question in the case, viz: Whether the courts of this State, in a case arising' here upon a contract made and to be performed here, between defendants, not citizens of Iowa, and plaintiffs, all citizens of Hew York, are bound to follow the supreme court of Iowa in a reversal and change of the law, as it is shown to have there existed at the time of the giving of the note sued on, such reversal and change being first promulgated in a decision made in December, 1875, more than three years after the contract in suit was made, and the rights of the parties thereunder had become vested. We confidently submit that bur courts are not so bound, but that, on the contrary, they must protect the suitors before them in their vested rights, and hold them to their legal liabilities as fixed by the law as it existed when those rights became vested and those liabilities fixed, a. It is desirable, in the first place, to ascertain just what the courts of Iowa have done in the premises since that time. In the case of First National Bank of Iowa v. Davies, commenced July 29, 1874, two years after the notes in suit w.ere given, and first decided at the December term, 1875, the supreme court of that State, by a closely contested and divided vote, gave to a lo.cal statute a retrospective and retroactive construction, differing from that which was understood and in force at the time of the making of the contract sought to be enforced, and to the prejudice of the rights and obligations of the parties then and thereby vested and fixed. This certainly cannot be called, even at this time, a fixed and settled construction of the local statute by an unbroken series of decisions such as the supreme court of the United States requires, to establish the rule of comity, even as bearing on subsequent contracts and •subsequent cases. 5. The rule of comity contended 1 for, as applied and expounded by the courts best entitled to administer it, does not admit of any such ■interpretation and result. That rule holds the parties to what, according to the law as expounded at and prior to the time of the making of the contract, they must have understood their respective rights and liabilities to be. This is entirely consistent with the usual method of application of the rule of comity, which, as stated by this court in Hoyt Sheldon, 3 JBosw. 302, accepts the construction of the statute by the courts of the State which enacted it, “ with the same force as if that interpretation was incorporated in the statute in terms.” ¡Neither the legislature nor the •courts of the State enacting the statute, however, will in another forum be permitted, by a subsequent change of the construction of the statute, to impair the obligation of contracts already fixed. This was so ruled in Butz v. City of Muscatine, 8 Wall. 575; Von Hoffman v. City of Quincy, 4 Wall. 557. c. We submit, also, that the facts peculiar to this case, that the contract was made here, and by its terms was to be here performed, between parties, none of whom, so far as it appears, resided in Iowa, and that the subsequent decision in Iowa, adverse to our claim, was rendered after great dispute by a closely divided court, and evidently under local prejudice, and for the relief of a resident intestate, are considerations calculated greatly to weaken its influence upon the, judgment of this court. Authority it is conceded by the rule of comity to have none. d. As to the question of what is a railroad corporation, that is not at all a matter of local law, any more than what is a partner, or what is a surety, or what is a bill of exchange. It is a question of general, of common law, of common sense, dependent upon the general principles of law, and the common understanding of the English language.
    Y. There is nothing in the point that this court has no jurisdiction of the case. It is based upon the same erroneous notion that we have here nothing but a statutory liability to enforce, and utterly ignores the common law liability of the defendants as partners. All that the much-vaunted case of Lowry v. Inman (46 N. Y. 120), holds is, that, where there is nothing but a statutory remedy, that remedy must be strictly pursued. There is no intimation that the courts of this State have no jurisdiction over the defendants to enforce the personal liability under which they rest. Sections 1172, 1173, 1174, have no reference whatever to such a common law liability or to suits thereon, but only to any statutory liabilities of the private property of the stockholders as such, created by the act itself. Besides, there is nothing in the facts proved here to create any defense to the action under any or either of these sections. Section 1173 relates wholly to proceedings after judgment, and even as to that the proof required by this section was given of a judgment and execution returned unsatisfied, and a demand made and not complied with. Section 1174 is alike inapplicable. It does not create a defense. It only provides in a certain contingency for a continuance of the cause or a stay of execution. The act does not require, even for the purposes of a suit to enforce the statutory liability against the property of stockholders, the commencement of suit and issue of judgment and execution on the same claim against the company, but only that, before a levy on the private property of the stockholders, the requisite proof must be given that corporate property cannot be found to satisfy the same. In the nature of things, these sections can have no application to a suit like this, in another jurisdiction against the defendants as copartners.
    VI. There was no error in admitting the defendants’ own notes in evidence against themselves, it appearing that they were jointly engaged in business under the name in which the notes were issued, and that the same were given by their representative for goods sold and delivered to them, and used in their common business. The cases cited by defendants from the courts of Massachusetts and Pennsylvania, as bearing upon this point, so far as they are contrary to the well-established law of this State, as illustrated by the cases cited under our first point, are of no moment.
   By the Court.—Speie, J.

In 1871 the defendants, together with one Edgar Thompson, now deceased, entered into an agreement among themselves, and with others whom they should associate with them as a body corporate in law to transact the business for furnishing materials for, and the building, making, and equipment of railroads in the State of Iowa, and all proper extensions of the same in adjoining States, having the principal office or place of business at Davenport in that State. Subsequently the said defendants, with the other defendants who became associated with them in the business, and who also became stockholders of the proposed company, entered upon the transaction of the business so proposed, and continued to conduct it under the name of the Davenport Railway Construction Company, and under that name made and delivered the promissory notes in suit.

The first question presented is: had the defendants a legal, corporate existence, when in the name of the company they made, indorsed and delivered the several notes set out in the complaint ?

What is necessary and essential to create a corporate existence must depend upon the particular construction of the language and provisions of the statute in each case.

It appears that the defendants proposing to become incorporated failed to comply with the requirements of the statute as to the recording of articles of incorporation in the office of the secretary of state, and the due publication in the time prescribed by law. The plaintiffs claim that by this omission, by the true construction of the statutes of Iowa, and according to the settled principles of the common law, the defendants assuming to act in a corporate capacity without legal organization as a corporate body are liable as partners to those with whom they contracted. The suit is therefore brought against the defendants as individuals, liable, not for the reason that they are liable as stockholders of a corporation, but because there was no corporation, and they were not stockholders—not merely upon a statutory liability, but upon a liability against which they seek to shelter themselves by interposing a statutory protection as a defense.

The articles of incorporation in question were filed in the office of the recorder of deeds on May 17,1871. The law in force at that time—Revision, § 1152, as amended by chapter 172, Laws of 1870,—provides: “Previous to commencing any business, except that of their own organization, they must adopt articles of incorporation, which must be recorded in the office of the recorder of deeds of the county where the principal place of business is to be, in a book kept therefor, and in the office of the secretary of state in a book kept for that purpose.” Section 1154 provides that a notice must ¡be published for four months in succession in some newspaper, as convenient as practicable to the principal place of business. Section 1155 prescribes the contents of such notices. Section 1156, as amended by •the same chapter, is as follows : “The corporation may commence business as soon as the articles are filed in' thenffice of the recorder of deeds, and their doings shall be valid if the publication in a newspaper is made, and •the copy filed in the office of the secretary of state within three months of such filing in the recorder’s office.”

It is to be observed, first, that the language of section 1152 is mandatory and not merely directory. It affirms the want of any right to enter upon any business except that of organization until the articles of incorporation are adopted and recorded in the office of both the recorder of deeds and the secretary of state. The use of the negative expression determines the mandatory character of the statute. When the statute imposes a duty and gives the means of performing it, it is held to be mandatory (Cooley Constitutional Limitations, 89, 4th ed.; People v. Schermerhorn, 19 Barb. 558). The language of section 1156, as amended by the same chapter, permits the corporation to commence business as soon as the articles are filed in the office of the recorder of deeds, but significantly adds, “Their doings 'shall be valid if the publication in the newspaper is made and the copy filed in the office of the secretary of state within three months after such filing in the recorder’ s office.” Section 1166 provides: “A failure to comply substantially with the foregoing requisitions in relation to organization and publicity, renders the individual property of all the stockholders liable for the corporate debts.” McKelly v. Stout, 14 Iowa, 359, decides that the prime object of this requirement is to make individual corporators liable for the failure to do those things which are necessary to the transaction of business (City of Dubuque v. City of Dubuque, 7 Iowa, 262 ; Dishon v. Smith, 10 Id. 212-218). These statutes have received the same construction in the neighboring State of Illinois as in Iowa (Bigelow v. Gregory, 73 Ill. 197).

It must, I think, be considered by the construction of these and the like statutes in Iowa, as expounded by the supreme court of that State at the time the notes herein sued on were given, as settled law, that the failure to file the articles of incorporation in the office of the secretary of state, was fatal to the attempted creation of the corporation, and the stockholders, consequently, were left exposed, as at common law, to individual liability for the debts of the company.

The company, then, existing in name only, independent of any sanction of general or special law, can be nothing more than an ordinary partnership, and subject to the same laws. It cannot be said that proceeding to transact business with third parties they incur no liability. They were not liable as stockholders, for there was no corporation. There being no corporation, each must be liable as' a partner at common law. Assuming to act under a corporate name without a legal organization as a corporate body, they must be held liable as partners to those with whom they contracted. At that time they had a community of interest in the property, and they were entitled to share in the profits, and bound to bear the losses resulting from the business (Fuller v. Rowe, 57 N. Y. 23; National Union Bank of Watertown v. Landon, 45 Id. 410; affi’g 66 Barb. 189; Wells v. Gates, 18 Id. 554).

The defendants’ liability is not affected by the fact that the plaintiffs, when they took the notes, supposed they were the notes of the corporation, and were ignorant of their corporate existence. They believed the paper to be that of the incorporation, from the fact that the business was done in the same name, and they had a right to proceed against the real makers of the notes, upon discovering who were transacting business under that name (National Bank of Watertown v. Landon, supra). Nor does the fact that because the defendants did not intend to become copartners at common law, and become liable as general partners, furnish any answer to the claim of the plaintiffs. It is enough that the parties assumed to act in a corporate capacity, without a legal organization as a corporate body. The court say, in Fuller v. Rowe, cited above, it cannot be denied that they are liable as partners in such a case to those with whom they contract. Intention of the parties has nothing to do with their liabil- ■ ity. The legal effect of the nature of the agreement into which the defendants entered, was such that it made them partners until they should comply with the essential proceedings declared by the statutes of Iowa, to become a corporation. The only question involved in such a case, relates solely to the liability created by the defendants, to all persons with whom they deal. It is unnecessary to refer to the numerous instances where parties are guiltless of any intention of creating a partnership relation, which the law nevertheless pronounces does exist, and enforces the liability arising out of that relation.

It is claimed that a corporation in fact and user under it were sufficient to show a corporation defacto, and that these omissions to comply with the statutes cannot be urged collaterally against their existence, but only in a direct proceeding. The defendants sought to join themselves into a corporation under the provisions of a general law. In such a case it is only in pursuance of the provisions of the statute for such purpose that corporate existence can be acquired. Where a corporation is created by a special charter and there have been acts of user under it the rule may have some application. •

Section 1338 of the revised code, passed March 20, 1858,—which is as follows: “Be it enacted by the general assembly of the State of Iowa, that section 689 of the code” (this section is identical with section 1166 of the revised code) “shall not be deemed and construed to be applicable to railroad corporations and corporators; and stockholders.in railroad companies shall be liable only for the amount of stock held by them in said companies,”—has no application to the present case.

The Davenport Railway Construction Company was organized for the purpose of furnishing materials for constructing railroads generally, and not for the purpose of building and operating railroads. The defendants did not suppose that they were authorized to build and operate railroads, nor did they organize for that purpose. In August and September, 1871, before they made the notes in question, they published in the Daily and Weekly 'Davenport Gazette, a notice of their incorporation—giving the title of their company, place of business and its general nature,—which was “ to make and perform a contract with the Davenport and St. Paul Railroad Company to furnish iron and equipments for the said company’s roads, including the construction of depots, machine-shops, water-stations, and all such other buildings and accessories as shall be necessary to the successful operation of said road.” Can there be any doubt what the real intention of the defendants was % They published to the world what the general nature .of-*1-Mr business was ; not to operate a railroad, but to ma*. md perform a contract with a railroad company then in existence, which was owned by and being or to be operated by another and separate company.

An examination of the revision of the statute of 1860 makes it apparent that there is a clear distinction between a railroad corporation and all other corporations, and the supreme court of the State of Iowa has settled that such distinction existed before and at the time the notes in question were issued. State of Iowa v. County of Wapello (13 Iowa, 388), overruling Dubuque County v. Dubuque & Pacific Railroad Co. (4 G. Green, 1), and approving Stokes v. County of Scott (10 Iowa, 166) decides that the legislature has no power to authorize counties to become, as corporations, stockholders in railroad companies. A construction company, which contains no element heretofore known to our courts or to the public as railroad corporations, would be a more startling proposition than that counties could become stockholders in railroad corporations.

The case comes up before this court on a contract made and to be performed in New York, between plaintiffs, all citizens of New York, and defendants, not citizens of Iowa. The contract in the suit was-made; and the rights of the parties thereunder became vested at the time the law existed as settled in the State of Iowa. Three years thereafter, the supreme couftof the State reversed the law, which till then had been deemed settled by a decision first made known in December, 1875. Although the case was first heard by two judges, the diversity of their' opinions was so great it may be justly said, that nothing was decided by the court. Day, J., held, that the filing of the articles of incorporation in the office of the secretary of state, was essential to the valid creation of the corporation, but that it was a railroad corporation, and its stockholders were exempt from liability, while the other justice, Beck, held the reverse on both propositions. Afterwards, at the June terra, 1876, since the trial of the case at bar, a rehearing was had, and all the five judges of the court took part, and here again they divided, three to two. Beck, Severs, and Bothrick holding the filing to be non-essential, and the other two dissenting from that, and Day, Servers, and Bothrick holding that it was a railroad corporation, and the other two judges dissenting from that.

When we consider what a railroad corporation is— that it has nothing to do with local law, that the term is so well defined, and conveys the idea of oneness so absolutely as to be incapable of two different meanings —that it is simply a definition of a substantive thing— as well and as universally known and understood by all English-speaking people as the definition of law itself, or as'any other term well known and defined in the common and accepted use of our language, the courts of this State and of other States upon principles of comity according to the settled principles of law must, we think, hold that at the time of the giving of the notes the construction company was not a railroad company, and that the defendants were personally liable as adjudged in this court below. Comity holds the parties to what according to the law as expounded at and prior to the time of the making of the contract they must have understood their respective rights and liabilities to be. It accepts the construction of the statute by the courts of the State which enacted it with the same force as if that interpretation was incorporated in the statute in terms. The fundamental law will not permit either the legislature, or the courts of the State enacting the statute, by a subsequent change of the construction of the statute in another forum to impair the obligation of contracts already fixed.

The rule is stated with precision in the case of Butz v. City of Muscatine (8 Wall. 575). The supreme court of Iowa had, by a uniform course of decisions, promulgated after the issue of the city bonds, denied the right of the holders to the remedy sought under the acts in force ■ at the time of their issue. It holds that under the. statute of • Iowa, in force when the contract was made, the relator was entitled to the remedy he asked, and that this right can no more be taken away by subsequent judicial decis-. ions, than by subsequent legislation (Von Hoffman v. City of Quincy, 4 Wall. 535). In Edwards v. Kearzy (15 U. S. Sup. Ct., reported in full in Albany Law Journal, May 4', 18.78, p. 346), it was held that a law of North Carolina, exempting personal property and a homestead of. a debtor from sale and execution, was invalid as to debts contracted before its enactment. The court says: “The remedy subsisting in a State ' when and where a contract is made, and is to be performed, is a part of the obligation, and any subsequent law of the State, which so affects that remedy as substantially to impair and lessen the value of the contract, is forbidden by the constitution, and is therefore void.” In Brown v. Kenzie (1 How. U. S. 311), Taney, Ch. J., speaking of the protection of the rem-edy, says, it is this protection which the clause of the constitution now in question mainly intended to secure. In Green v. Ridder (8 Wheat. 11), Story, J., “If the remedy afforded be qualified and restrained by conditions of any kind, the right of the owner may indeed subsist, and be acknowledged, but it is impaired and rendered insecure, according to the nature and extent of such restrictions ;” and at page 75, “ The prohibition of the constitution embraces all contracts executed or executory between private individuals, or a State and individuals, or corporations, or between the States themselves.”

It appears that the defendants were jointly engaged in business under the name in which the notes were issued, and that they were given by their representatives for goods sold and delivered to them and used in their common business. I see no good reason why they should not have been given in evidence against themselves.

We think the exceptions should be overruled, and judgment upon the verdict ordered with costs.

Freedman, J., concurred.