the liability of a corporation, resting upon the acceptance by it of the benefits of a contract made by its promoters, can be enforced at law, or whether the corporation can be held liable only in equity. There appears to be no sound reason for the uncertainty of the courts in this regard. The theory of the corporate liability is that if, after it is fully organized and capable of entering upon contractual relations, it, with full knowledge of an agreement made for it by its promoters, accepts the benefits, it impliedly agrees to assume the burdens thereof. The obligation of the corporation rests upon an implied contract, and there is no reason why such contract should not be enforced at law. The rule is sometimes stated that the courts will not permit a corporation, which knowingly accepts the benefits of an agreement entered into by its promoters, to deny that it agreed to assume the corresponding burdens.59 This, however, is but another way of stating that an agreement to assume the burdens will be implied. While the cases are not wholly free from confusion, the rule seems, in this country, to be that the obligations of a corporation resting upon its acceptance of the benefits of the promoters' contract can be enforced in an action at law.60 The English cases, while not al

59. See cases cited, § 56, note 54. 60. Little Rock & Ft. Smith R. R. Co. v. Perry, 37 Ark. 164, 191, 9 Am. & Eng. R. R. Cas. 610; Perry v. Little Rock & Ft. Smith Ry. Co., 44 Ark. 383, 394-395; Tuttle v. Geo. H. Tuttle Co., 101 Me. 287, 292, 64 Atl. 496, 499, 8 Am. & Eng. Ann. Cas. 260; Grape Sugar & Vinegar Mfg. Co. v. Small, 40 Md. 395, 400; Low v. Conn, & Pass. Rivers R. R., 45 N. H. 370, 378; same case on a later appeal, 46 N. H. 284. Cf. Van Schaick v. Third Ave. R. R. Co., 49 Barb. 409, 415, affirmed, 38 N. Y. 346; also Titus v. Catawissa R. R., 5 Phila. 172.

The following cases were apparently brought on the law side of the court, and the principle under discussion recognized without reference to any theory that it was one to be applied only in equity.

Maine.-Robbins v. Bangor Ry. & Electric Co., 100 Me. 496, 62 Atl. 136, 1 L. R. A. N. S. 963.

Maryland.-Maryland Apartment House Co. v. Glenn, 108 Md. 377, 70 Atl. 216.

Missouri.-Pitts v. Steele Mercantile Co., 75 Mo. App. 221.

New York.-Grier V. Hazard, Hazard & Co., 13 Supp. 583, 38 St. Rep. 462, affirmed, 14 Supp. 784, 39 St. Rep. 74.

together clear, seem to indicate that the liability of a corporation based upon its acceptance of the benefits of the promoters' contracts can be enforced only in equity.61

58. Lord Cottenham's rule.

Care must be taken to differentiate between the liability of a corporation because of its acceptance, after complete organization, of the benefit of the promoters' contracts, and the supposed liability of the corporation imposed by Lord Cottenham's long since abandoned rule.

It seems in the early days of railroad building in England to have been not unusual for the owners of lands along the route of a projected road to oppose, or threaten to oppose, the granting of a corporate charter, and then to withdraw that opposition upon the promise of the promoters that the corporation would locate a station at some point deemed beneficial to the land owner, or take a certain portion of his land at an agreed price, or pay him a stipulated sum for consequential damages, or grant him some other real or supposed benefit in consideration of the withdrawal of his opposition. After the opposition had been withdrawn and the act of parliament passed, the corporation sometimes refused to carry out the promises made by its promoters. Lord Cottenham ruled, and his ruling was at one time

Ohio.-City B'ld'g Ass'n v. Zahner, 6 Ohio Dec. Reprint 1068, 10 Am. L. Rec. 181.

Pennsylvania.-Bell's Gap R. R. Co. v. Christy, 79 Pa. 54, 21 Am. Rep. 39; Swisshelm v. Swissvale Laundry Co., 95 Pa. 367.

Tennessee.-Pittsburg & Tennessee Copper Co. v. Quintrell, 91 Tenn. 693, 20 S. W. 248.

Texas.-Lancaster G. & C. Co. v. Murray G. S. Co., 19 Tex. Civ. App. 110, 47 S. W. 387; writ of error refused, 93 Tex. 732.

generally followed, that it would be inequitable to permit the corporation which had obtained its charter partly as a result of the withdrawal of the plaintiff's opposition, and thus received the full benefit of the promoters' agreement, to refuse to perform the obligations thereof, and that equity would compel performance.62 Lord Cottenham's rule was questioned by the House of Lords in Preston v. The Proprietors of the Liverpool, Manchester, etc., R. R. Co.63 and disapproved in Caledonian and Dumbartonshire Junction R. R. Co. v. Magistrates of Helensburgh.64

In the last mentioned case an agreement had been entered into by the Magistrates of Helensburgh on the one part, and the Committee of Management of a projected railroad on the other, under which the Magistrates agreed to afford to the railroad company, if it should obtain its act of incorporation, certain facilities enabling it to carry a branch line through the streets of Helensburgh, to the harbor and quay which the town proposed to build, and for the right to build which the Magistrates were about to apply to Parliament. The Magistrates further agreed, by petitioning Parliament or otherwise, to promote the objects of the projected railroad company. The committee of management, on the other hand, agreed to advance to the magistrates the expenses of preparing the plans for the harbor and quay, of obtaining the act of Parliament therefor, and the cost of constructing the harbor and quay, of which advances the railroad was to be repaid the sum of £3,000 and no more. Both acts of Parliament were obtained. The railroad company, however, refused to carry out the agreement. The Magistrates brought suit and the Court of Sessions gave judgment in their favor. On appeal to the House of Lords, Lord Chancellor Cranworth reviewed the decisions of Lord Cottenham in Edwards v. Grand Junction Railway Co., Stanley v. Chester & Birkenhead Ry. Co. and Lord Petre v. Eastern Counties Ry. Co.65 and said that Lord Cottenham's decisions went much further than to decide that if the company took the benefit of the contracts entered into by third persons with its promoters, the company must at the same time perform the obligations thereof and that "Lord Cottenham acted on the principle that a company incorporated by Act of Parliament is, or may be, bound by the previous contracts of those by whom the

Ry. Co. v. Hawkes, 5 H. L. Cas. 331, 356, (1855).

64. 2 Macq. 391, 411, 415, 2 Jur. N. S. 695, (1856). See also Earl of

Shrewsbury v. North Staffordshire Ry. Co., L. R. 1 Eq. 593, 14 W. R. 220.

65. See note 62, supra.

66

act of incorporation has been obtained. I have stated my reason for thinking that such a doctrine rests on no sound principle, and may lead, as in Lord Petre's case I think it did lead, to great injustice. And if, therefore, the case now to be decided was in all respects similar to the three cases I have referred to, what I should have to decide would be whether I should advise your Lordships to adhere to the precedents established by Lord Cottenham, on the ground that it is unsafe to act against a series of decisions, even though they may appear not to rest on any solid foundation, or to depart from them and to adopt what I consider a just and more correct principle." The judgment of the Court of Sessions was reversed on the ground that the contract of the promoters attempted to commit the company to an application of its funds to an object foreign to the provisions of the act of incorporation.

Lord Cottenham's rule does not seem to have been further passed upon. Parliament in 1864 enacted the Railways Construction Facilities Act which provided that "Contracts relative to the purchase or taking of lands for the railway, entered into by the promoters before the incorporation of the company by the certificate, shall be as binding upon the company as if they had been entered into by the company." 67

The case of Caledonian and Dumbartonshire Junction R. R. Co. v. Magistrates of Helensburgh, in which the court disapproved of Lord Cottenham's rule, was decided by the House of Lords in 1856, before the theory had been developed that a corporation, by accepting after its organization the benefits of a contract made by its promoters, impliedly agrees to assume its burdens. The difference between the principle just mentioned and Lord Cottenham's rule lies in the fact that in the cases decided under Lord

66. Lord Cottenham's decisions were similarly interpreted in Earl of Shrewsbury v. North Stafford

shire Ry. Co., L. R. 1 Eq. 593, 14 W. R. 220.

67. Stat. 27 & 28 Vict., Chap. 121, § 30.