CHAPTER IX

LIABILITY FOR TORTS AND CRIMES

§ 81. Common-Law Conception of Corporation. The common-law conception of a corporation was that of an artificial person, invisible and intangible, with neither soul nor body and with no moral sense. Legally capable of exercising only the powers conferred, its capacity to commit either torts or crimes was necessarily denied. It was repeatedly adjudged that they could not be subjected in actions of trover, trespass, or disseizin; that they could not commit crimes nor be liable for torts, with few exceptions. The old idea of a corporation without a soul is more quaint than substantial, and the theory of the doctrine that a corporation, by its charter, could exercise only those powers beneficial in themselves is contrary to the modern and the common-sense idea, that if it is possible for a corporation to act from good motives, it can also act upon bad ones. They can intend to do evil as well as to do good. This is substantially the modern doctrine through the application of which corporations are held liable for their torts and subject to punishment for the commission of many criminal offenses. The law of private corporations, within the last half century, has been in progress of development, and has grown up from a few rules and maxims into a substantial body of law. Corporations have so multiplied and extended that they are connected with and in a great degree influence all the business transactions of the country and give character to some extent to society itself. Corporations, instead of being the soulless and unconscious beings of Lord Coke's times are the great motive powers of society, governing, regulating, and transacting its chief business affairs. They act not only upon pecuniary concerns, but as having conscience and motives, and to an almost unlimited extent they are entrusted with the benevolent and religious agencies

of the day and are constituted trustees and managers of large funds promotive of such objects.

§ 82. Liability for Torts. The development of the law respecting private corporations, in respect to the subject of this chapter, has progressed with its development along other lines, and it is now the settled rule that a corporation is liable in civil action for torts committed by its agents and servants the same as a natural person. When a corporate officer or agent acts within the apparent scope of his power or authority, the corporation is bound by his acts, and is liable to third parties who may have sustained damages by reason of them. For the unauthorized and unlawful tortious acts of its officers and agents, it is only liable when the corporation has subsequently ratified or adopted them. To create a liability for an unauthorized and unlawful act of the corporate officers and agents, it must appear that they were expressly directed to do the act, or that it was done in pursuance of general authority relative to the subject of it. Where the act is within the scope of the general powers of the corporation, its liability is not defeated by the fact that the corporate agents have assumed to do and have done that which the corporation itself could not rightfully do. A corporation may do wrong through its agents and be subjected to a liability for the consequences of that wrongful act. The modern doctrine holds that the liability extends to torts, involving a specific intent or the element of malice, as libel, fraud, malicious prosecution, or conspiracy.

Damages Recoverable. The commission of a tort may lead to the recovery of punitive damages by the one injured. It is now held that a corporation may be liable in punitive damages under the same circumstances as a natural person acting through an agent would be held. The decisions, however, are conflicting on the question of punitive damages, and some still hold that only actual damages can be recovered; others, that punitive damages will be allowed when the wrongful act of the agent was willful and intentional; and still others hold that punitive damages can

be recovered only when the wrongful act was done under the express direction of the corporation or afterwards ratified by it.

Motive and Intent as Elements. For many years the decisions made a distinction in determining the liability of the corporation for its acts or conduct, between those for which the actor is liable, independently of motive and which are injurious, and those the nature or character of which depends upon the motive, and which, apart from this, cannot be made a ground of liability. Many authorities have maintained that because a corporation was incapable of possessing motives or evidencing an intent, where the act involved these as an essential ground of recovery, that the corporation could not be held. The tendency of modern decisions is to ignore the distinctions as to corporations and to apply the same principles which are applied to natural persons acting under similar conditions. An early case in Connecticut is illustrative of this modern tendency. This was an action based on the provisions of the Connecticut statutes entitled "An Act to Prevent Vexatious Suits", and the court held that it was subjected to the same general principles as actions in a case for malicious prosecution at common law. The plaintiff alleged that the defendant, a corporation, without probable cause, with malicious intent, unjustly to vex, harass, embarrass, and trouble the plaintiff, had commenced, by writ of attachment, and prosecuted against him, a certain vexatious suit and action for fraudulent representations, to the injury of the bank. There was a motion for non-suit which was granted by the lower court but which was set aside on appeal. The question involved in this case was whether a corporation could act from malice, and therefore commence and prosecute a malicious or vexatious suit. This was decided in the affirmative by the appellate court, where this language was used:

"But after all, the objection to the remedy of this plaintiff against the bank in its corporate capacity is not so much • Goodspeed v. Bank, 22 Conn. 530.

that as a corporation it cannot be made responsible for torts committed by its directors, as that it cannot be subjected to that species of tort which essentially consists in motive and intention. The claim is, that, as a corporation is ideal only, it cannot act from malice, and, therefore, cannot commence and prosecute a malicious or vexatious suit. This syllogism, or reasoning, might have been very satisfactory to the schoolmen of former days; more so, we think, than to the jurist who seeks to discover a reasonable and appropriate remedy for every wrong. To say that a corporation cannot have motives, and act from motives, is to deny the evidence of our senses, when we see them thus acting, and effecting thereby results of the greatest importance, every day. And if they can have any motive, they can have a bad one; they can intend to do evil as well as to do good. If the act done is a corporate one, so must the motive and intention be."

As illustrating the tendency and holdings of courts on the questions suggested above, a few quotations will be instructive:

"A corporation is liable to the same extent and under the same conditions as a natural person for the consequences of its wrongful acts and will be held to respond in a civil action at the suit of an injured party for every grade and description of forcible, malicious, or negligent tort or wrong which it commits, however foreign to its nature or beyond its granted powers the wrongful transaction or act may be."10

"Corporations are liable for every wrong they commit, and in such cases the doctrine of ultra vires has no application. They are liable for the acts of their servants while such servants are engaged in the business of their principal in the same manner and to the same extent that individuals are liable under like circumstances. An action may be maintained against a corporation for its malicious or negligent tort, however foreign they may be to the object of its creation or beyond its granted powers. It may be sued for assault and battery, for fraud and deceit, for false imprisonment, for malicious prosecution, for nuisance and for libel."'i

10 New York, etc., R. R. Co. v. Schuyler, 34 N. Y. 30. 11 National Bank v. Graham, 100 U. S. 699.

§ 83. Commission of Crime. In general, a corporation may be responsible for omissions to perform specific duties imposed by law. They are subject to punishment for some acts of misfeasance, but not ordinarily for crimes which involve a mental operation or the element of personal violence. There are also some crimes which a corporation, from its intangible nature, can not commit. A corporation may also be guilty of contempt of court and punished the same as a natural person. Bishop on Criminal Law, Sec. 417, states their liability as follows:

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'A corporation cannot, in its corporate capacity, commit a crime by an act in the fullest sense ultra vires and contrary to its nature but within the sphere of its corporate capacity and to an undefined extent beyond. Whenever it assumes to act as a corporation it has the same capabilities of criminal intent and of act, in other words, of crime, as an individual must sustain to the thing of like relation."

There exists at the present time no distinction between the acts of misfeasance and of nonfeasance, at least where no criminal intent is involved.

The crimes involving criminal intent, and which from their nature a corporation is incapable of doing, are, among others, murder, larceny, and assault and battery, although a corporation may be liable civilly for punitive damages caused by an assault and battery, or a malicious prosecution and other torts involving intent. In keeping with these rules of liability, a corporation has been held subject to indictment for criminal libel, for keeping a disorderly house, obstructing navigation, for committing a public nuisance, for Sabbath breaking, and for usury.

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