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Law School Case Brief

Wiswall v. Greenville & Raleigh Plank Rd. Co. - 56 N.C. 183 (1857)

Rule:

A corporation has a right to restrain by injunction the corporators from doing any act which is not embraced within the scope and purpose for which the corporate body was created, and which would be a violation of the charter; not only on the ground that such act would operate injuriously upon the rights and interests of the corporators, but on the further ground that a forfeiture of the charter would be thereby incurred. 

Facts:

Plaintiff stockholders in a plank-road company prayed for an injunction against defendants, the president and the directors of the company. The company was incorporated for the purpose of effecting a communication by means of the plank road. Defendants, or a majority of them, with the sanction and approbation of a majority of the stockholders, adopted a resolution to purchase with the accumulated funds of the company a line of stages with the necessary appurtenances, to be run as their property upon the road, and further to procure a contract from the U.S. government for carrying the public mail by such stage line upon the road. The stockholders insisted that this would be a misapplication of the funds and that such enterprises were foreign to the purpose for which the company was instituted and not authorized by their charter.

Issue:

Were the corporators acting within the scope and purpose of its corporate charter?

Answer:

No

Conclusion:

The court found that the only question made by the demurrer was whether the company had the power to purchase stages and horses to be run upon the road and had it likewise power to enter into a contract to carry the U.S. mail on the road by means of such stages. The question has to be decided by a construction of the charter. The court examined it and declared that no such power was given to the company. A charter of incorporation creating a company for the purpose of effecting a communication by a plank road between designated points with the privilege of taking tolls does not authorize the company to establish a stage line upon their road, nor to contract for carrying the United-States mail.

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