*

*
*

are practically unanimous that the city cannot grant exclusive privileges. Thus, when a city having a general power to permit a streetrailway company to lay its track in the streets, granted an exclusive right for a certain number of years, the exclusive part of the grant was held void. Brewer, J., delivering the opinion of the court, in speaking of the effect of such a power in a municipality, says "that it furnishes no authority for surrendering its constant supervision and management to any other corporation or individual. It implies that the city to-day, to-morrow, and so long as the grant remains, shall exercise its constant judgment as to the needs of the public in the streets, and not that it may to-day surrender the right of determining a score of years hence what the public may then need. The city may to-day determine that one street railroad will answer all the wants of the public, and so give the privilege of occupying the streets to but a single company. Ten years hence its judgment may be that two railroads are needed. Where is the language in the charter which restricts it from carrying such judgment into effect by giving a like privilege to a second company. When the legislature deems that public interests require that cities should be invested with power to grant exclusive privileges, it will say so in unmistakable terms, as it already has in some instances. Till then the courts must deny the possession of such powers." So, also, in Davis v. Mayor, 14 N. Y. 506, under a like power, the city undertook by resolution to confer upon an association of persons the exclusive right to construct and maintain for a term of years a railway in Broadway, for the transportation of passengers for profit. The court of appeals held the resolution void, and that the city had no power to make such a grant. Mr. Dillon, in commenting on this case, says that it "rests upon the sound principle that the pow ers of a corporation in respect to the control of its streets are held in trust for the public benefit, and cannot, unless clearly authorized by a valid legislative enactment, be surrendered to private parties, either corporate or natural. In this case there was no such authority, and hence the resolution of the council authorizing private persons to construct and operate a railroad upon certain terms, without power of revocation, and without limit as to time, was not a license or act of legislation, but a contract; void, however, because, if valid, it would deprive the cor

poration of the control and regulation of its streets." 2 Dill. Mun. Corp. § 716. See, also, to the same effect, Milhau v. Sharp, 27 N. Y. 611; Birmingham & P. M. S. Ry. Co. v. Birmingham S. Ry. Co., 79 Ala. 465; New Orleans City R. Co. v. Crescent City R. Co., 12 Fed. Rep. 308; People's R. Co. v. Memphis R. Co., 10 Wall. 52; Railroad Co. v. Smith, 29 Ohio St. 291; Cooley, Const. Lim. 207, 208; 2 Dill. Mun. Corp. (4th ed.) 727, and cases cited; and the recent case of New Orleans City & L. R. Co. v. City of New Orleans (La.), 11 South. Rep. 78.

In harmony with these authorities, and resting upon the same general principles which they announce, are the cases denying to a municipality, under the grant of power to establish and regulate ferries within their limits, the power to confer exclusive privileges or franchises for that purpose. East Hartford v. Bridge Co., 10 How. 511; Minturn v. Larue, 23 How. 435; Wright v. Nagle, 101 U. S. 796; 1 Dill. Mun. Corp. (4th Ed.) § 114, and cases cited. So, although supplying water and light for city purposes is recognized to be one of the most important functions of municipal government, in which private persons or corporations would not be likely to engage without some assurance of a return upon their outlay; and hence the apparent reason for permitting a city to grant exclusive privileges for such purposes. Yet by the decided weight of authority a municipality cannot, under a general power on the subject, such as the city of Salem possesses over street railways, grant to a corporation or individual the exclusive right to use its streets for such purposes. State v. Cincinnati Gaslight & Coke Co., 18 Ohio St. 262; Grand Rapids E. L. & P. Co. v. Grand Rapids E. E. L. & F. G. Co., 33 Fed. Rep. 659; Saginaw Gaslight Co. v. Saginaw, 28 Fed. Rep. 536; Syracuse Water Co. v. Syracuse, 116 N. Y. 167, 22 N. E. Rep. 381; Hamilton Gaslight, etc., Co. v. City of Hamilton, 37 Fed. Rep. 832; East St. Louis v. Gaslight Co., 10 Reporter, 109; City of Brenham v. Brenham Water Co., 67 Tex. 542, 4 S. W. Rep. 143; Norwich Gaslight Co. v. Norwich City Gas Co., 25 Conn. 19; Lehigh Water Co.'s Appeal, 102 Pa. St. 525; Davenport v. Kleinschmidt, 6 Mont. 502, 13 Pac. Rep. 249; Long v. City of Duluth, (Minn.) 51 N. W. Rep. 913; 2 Dill Mun. Corp. (4th Ed.) 692 et seq., and cases cited. We take it, therefore, to be settled by the decided weight of authority that a municipal corporation

cannot create a monopoly by granting the exclusive privilege to any person or corporation to use its streets for laying street railway tracks, without express legislative authority so to do; and this power must be plainly conferred in express words, or arise from the language used by implication so direct as to amount to the same thing. The mere general power to permit or allow the use of the streets for such purposes is not sufficient to authorize the granting of exclusive privileges. The only cases to which we have been cited or have been able to find apparently holding a contrary doctrine are City of Newport v. Newport Light Co., 84 Ky. 167, and Des Moines Ry. Co. v. City of Des Moines, 73 Iowa, 513, 33 N. W. Rep. 610, and 35 N. W. Rep. 602, both of which have been criticised and declared to be contrary to the decided weight of authority by Brown, J., in Saginaw Gaslight Co. v. Saginaw, supra, and Jackson, J., in Grand Rapids E. L. & P. Co. v. Grand Rapids, etc., supra, and are considered by Mr. McKinley, author of the article on "Municipal Corporations" in the American & English Encyclopedia of Law to be out of line with the authorities on the subject. As the charter of the city of Salem does not in express words, or by necessary implication equivalent thereto, confer upon the city the power to grant the exclusive privilege to one person or corporation to occupy its streets with a street railway, but only contains a general grant of a continuing power "to permit, allow, and regulate the laying down of tracks thereon," it seems clear that it did not authorize the city to grant an exclusive franchise to plaintiff's assignor, and thereby disable itself from granting a similar privilege to defendant over the same streets. It is earnestly urged that the construction of street railways necessarily requires the expenditure of a large sum of money, usually without the prospect of an immediate return, and hence private persons would not be likely to engage in such enterprises without an assurance that they would be protected from competition for a sufficient length of time to remunerate them for the outlay. This argument, which is not without force, suggests considerations of policy which might influence the legislature to grant or authorize the granting of exclusive franchises, or induce a municipality to make a franchise practically exclusive by withholding a like privilege from a competing enterprise, but a reference to the cases cited will show that it has often

been urged, but without effect, when a court is called upon to construe particular legislation. It follows that the decree of the court below must be affirmed, and the complaint dismissed.*

Municipal corporations-power to grant exclusive rights to street railroads.—The power of municipal corporations to grant exclusive rights to furnish water or light is discussed in note to Columbus Water Co. v. Mayor, etc., of Columbus, 5 Am. R. R. & Corp. Rep. 724. Cases relating to railroads in streets are referred to on page 741. See also Mayor, etc., of City of Houston v. Houston City Street R. Co., 6 Am. R. R. & Corp. Rep. 106.

LOUISVILLE BANKING Co. v. EISENMAN.

(Court of Appeals of Kentucky, February 25, 1893.)

1. CORPORATIONS. WHETHER THEY MAY BE ORGANIZED BY ONE PERSON. GENERAL STATUTES OF KENTUCKY. Chapter 56, § 1, provides that “any number of persons may associate themselves together" and become incorporated for the transaction of any lawful business, except, etc. Held, that one person cannot create a corporation and conduct his business in its name so as to exempt him from personal liability for debts thereby created.

2. EFFECT UPON CORPORATE EXISTENCE OF ONE PERSON BECOMING OWNER OF ALL THE STOCK. Where a corporation is legally organized, and one stockholder in good faith purchases and has transferred to him all the shares of stock held by the other stockholders, the corporation is not ipso facto dissolved, but the operation of its charter is merely suspended until other persons become stockholders.

3. INDIVIDUAL LIABILITY OF SOLE OWNER OF STOCK FOR DEBTS CONTRACTED DURING SUCH OWNERSHIP. Where a corporation, while its stock is owned by one person, and while doing a prosperous business, becomes an accommodation indorser of the drafts of third persons with the belief by such sole stockholder and by the bank cashing the drafts that only the corporation is made liable thereon, and such bank has obtained judgment against the corporation on such drafts, such sole stockholder is not personally liable, and such bank is not entitled to share in the distribution of the assets of his estate in the hands of an assignee.

4. Where it appears that the stock paid in and the assets of the corporation were amply sufficient to pay all debts, except such drafts, the fact that all the stock subscribed was not paid up does not, in the absence of fraud, render such stockholder personally liable on such indorsements.

A

CTION by the Louisville Banking Company against Eisenman
Bros. & Co., a corporation, on certain drafts indorsed by it,

VOL. VII-72

* Reported in 32 Pac. Rep. 304.

in which there was a judgment for plaintiff. Execution having been returned unsatisfied, plaintiff seeks to have its judgment satisfied from the assets of the estate of J. C. Eisenman in the hands of the Germania Safety Vault & Trust Company, his as signee, on the ground that he was the sole stockholder of such corporation. From a judgment for defendant, plaintiff appeals.

Barnett, Miller & Barnett & Bright and Brandies, for appellant. Burwell K. Marshall, for appellee.

etc.

PRYOR, J. A corporation styled Eisenman Bros. & Co. was organized under chapter 56 of the General Statutes for the purpose of engaging in the milling business and the purchase of grain, The incorporators were Jacob Kriegher, Sr., David Frantz, Sr., and J. C. Eisenman. The capital stock of the corporation was $50,000, and by its terms the corporation could begin business when two-fifths of its stock had been paid in. There is some conflict in the testimony as to whether as much stock as $20,000 had been paid when the corporation began to deal with the public, and we shall assume, for the purposes of this case, that only $15,000 of paid-up stock was in the vaults of the corporation at that time. J. C. Eisenman, the appellee here, purchased up the stock of the corporation, and became the sole owner of all the stock and the corporate property. This purchase was made in January, 1889. The appellee, on account of his individual indorsements for the corporation, made an assignment to the Germania Safety Vault and Trust Company, and the assignee instituted this action for the purpose of settling up the estate assigned, and its distribution between creditors. On the day of October, 1889, the corporation also transferred its assets to the trust company for the payment of its debts. In the months of September, October and November of the year 1889, a firm known as J. C. Mattingly & Sons, engaged in the manufacture and sale of whisky, drew their drafts on the corporation of Eisenman Bros. & Co. for large sums of money, amounting in all to about $20,000. The drafts were accepted by the corporation, indorsed by Mattingly & Sons, and discounted by the Louisville Banking Company, the appellant in this case, and placed to the credit of J. C. Mattingly & Sons. The corporation of Eisenman Bros. & Co. had no interest in the loans,