Dade Coal Co. v. Penitentiary Co. No. 2

Lamar, J. The lease act of 1876 (Acts 1876, p. 46) is exceedingly indefinite as to the rights and status of those composing the Penitentiary Companies. It is manifest, however, that the General Assembly did not intend to create ordinary corporations with the right to transfer shares so as thereby to turn over the management of the convicts to any one who would buy stock. Only “ bona fide citizens of Georgia ” were authorized to become members. The names of such citizens applying for the lease were to be. entered upon the minutes of the executive department. If their bid was accepted, the lease was then made to them, and thereupon ipso facto they became a corporation, with no right to sublet, and no indication of any right to sell shares, stock, or other evidence of membership. The charter named no capital stock, and consequently was silent as to the shares or the number or par value thereof. If by virtue of its power to make rules and by-laws any such provision could have been made by the action of the members, there is no allegation that any capital was ever named, that any was ever paid in, or that any scrip was ever [828] issued. The company did no business of any sorb, had no camps or prisons; and it is expressly alleged that, except the lease, it had no asset. While, therefore, it is charged that the Dade Coal Company owned 12 1/2 per cént. in the stock of Company No. 2, and 31 1/4 per cent, in Number 3, it is evident, from the petition as a whole, that this can not refer to stock in the ordinary sense. It can only mean that, not on account of an amount contributed, but by an agreement among the members, the Dade Company was to receive a certain proportion of those assigned under the lease. The company had no assets. It did no business of any sort. It did not even receive the convicts from the State or pay the hire to the State. But after the agreement as to the proportion that each member was bo receive, they organized separate camps or prisons to which the convicts were sent. The hire was paid, not by Company No. 1 or No. '2, but by the one in control of such camp, who was recognized by the State authorities as a lessee, and to whom all the laws applicable to the original companies were applied. The State enforced against such camps all the regulations for securing humane treatment, and other requirements of the act. And whatever may be the rights of the public, certainly the members of the company who made this arrangement, and who for years took advantage of the provisions thereunder, can not in litigation between themselves be heard to dispute its validity. Whatever may have been the right of the members under the original lease — whether that of stockholders, tenants in common, partners, or what not, the consent division was equivalent' to a partition, under which thereafter the interest was held in severalty. If this division was the equivalent of the issuance of a stock certificate, then when there was a forfeiture of that interest, it was equivalent to a forfeiture of the stock. There is no suggestion that this division was temporary, and had to be renewed from year to year. Under one division each member received not only those on hand that year, but by virtue thereof an equal proportion during the continuance of the lease. That this partition represented the present and future right thereunder is illustrated by the case in which such interest is said to have been sold by W. D. Grant, one of the original members of Company No. 3. It was not and can not be claimed that, having sold his stock, he retained any interest in the labor of the convicts, or, having sold his in [829] terest in the convicts’ labor, he had any interest in the stock. Interest in the lease and in shares of stock were convertible terms. Loss of stock was loss of lease. Forfeiture of lease was the same as forfeiture of the stock. When the State, under the provisions of the act of 1876, forfeited the several interest, the Dade Company lost its interest in the lease as completely as a cotenant, whose lot assigned on partition, if sold under a tax fi. fa., would lose the land and the future increase of the land. When the interest was forfeited, it did not thereupon revest in Companies Nos. 2 and 3, so that what the Dade Company lost as a sublessee it regained in whole or in part as a corporator. But the result was to put the State in as complete control of this forfeited part as it would have had of the whole had either of the original leases been forfeited as an entirety. After the forfeiture the State had the right to make a new lease or a new assignment to any one selected by the Governor. The petition shows that this was done; for it alleges that plaintiff was deprived of the use and control of said convicts as hereinbefore set out, under and by virtue of the orders of the Governor of the State of Georgia, and by virtue of said orders said convicts were taken away from plaintiff and delivered to the stockholders of said Penitentiary Company. In the light of this allegation it is evident that the Dade Company had no cause of action against Companies Nos. 2 and 3, or those called stockholders thereof. The act of which it complains was not that of the company but of the State. The title of the stockholders was acquired not through Companies Nos. 2 and 3, but from the State directly. The mere fact that a corporation has no capital stock does not necessarily deprive the members of their proportionate rights in the corporate property. But when there is no capital stock, when the character of the corporate enterprise has in it elements of personal trust making the personnel of the members important, with no Tight to sell or sublet, as here, the case is to be governed by rules altogether different from those applicable to an.ordinary stockholder and his company. It is more nearly subject to the analogous principle governing that form of corporation in which the interest of a member before dissolution consists only in the right to use the corporate property, or to engage in corporate purposes. If he fails to attend the meetings, or to avail himself of [830] the corporate privileges, he has no cause of action against the company, or those who participated more actively than he. If during the continuance of the organization his membership is severed by death, resignation, expulsion, or other form of forfeiture, he loses all of his corporate rights. Mason v. Atlanta Fire Co., 70 Ga. 604; Cumming v. Hollis, 108 Ga. 402; Schwartz v. Duss, 187 U. S. 8. This disposes of the controlling question in both cases, and makes it unnecessary to consider whether the Dade Coal Company was a “ bona fide citizen of Georgia,” which under the act of 1876 could be a corporator in Company No. 2, or whether it by purchase had the right to become a. member of No. 3. The allegation that the executors of Joseph E. Brown had paid $4,035 on account of rent due by Company No. 3 set out no cause of action. It failed to show that the estate was requested to make such payment, or to indicate how or why the payment was made, so as to' make Company No. 3 responsible therefor. There is no allegation that the estate owned stock in No. 3, or even in Dade Coal Company. It is inferable, however, that these payments may have been made on account of the agreement to hold W. D. Grant harmless on the obligation assumed by him in the bond. If so, there are no sufficient allegations to show that the latter had a cause of action against No. 3, or a right to subrogate the estate thereto if there was any. Judgment affirmed. All the Justices concur.