This section is from the book "Popular Law Library Vol8 Partnership, Private Corporations, Public Corporations", by Albert H. Putney. Also available from Amazon: Popular Law-Dictionary.
This doctrine has now been abandoned, and it is well settled that a private corporation is liable for its torts substantially to the same extent as an individual. The principal distinction arises from the fact that all a corporation's torts must arise out of its responsibility for the acts of its agents.
A corporation is liable for all torts committed by its agents or servants in the regular cause of their agency or employment.
This doctrine is fully set forth by the Supreme Court of the United States in the case of The Philadelphia, Wilmington & Baltimore Railroad Co. vs. Quagley,12 as follows:
11 Ohio and Mississippi Railway Co. vs. McCarthy, 96 U. S.f 257; Union W. Co. vs. Murphy's Flat Fluming Co., 22 Cal., 620; Morris and E. R. R. Co. vs. R. R. Co., 29 N. J. Eq., 592.
"The defendants contend that they are not liable to be sued in this action; that theirs is a railroad corporation, with defined and limited faculties and powers, and having only such incidental authority as is necessary to the full exercise of the faculties and powers granted by this charter; that, being a mere legal entity, they are incapable of malice, and that malice is a necessary ingredient in a libel; that this action should have been instituted against the natural persons who were concerned in the publication of the libel. To support this argument, we should be required to concede that a corporate body could only act within the limits and according to the faculties determined by the Act of Incorporation, and therefore that no crime or offense can be imputed to it. That although illegal acts might be committed for the benefit or within the service of the corporation, and to accomplish objects for which it was created by the direction of their dominant body, that such acts, not being contemplated by the charter, must be referred to the rational and sensible agents who performed them, and the whole responsibility must be limited to those agents, and we should be forced, as a legitimate consequence, to conclude that no action ex delicto or indictment will lie against a corporation for any misfeasance. But this conclusion would be entirely inconsistent with the legislation and jurisprudence of the states of the Union relative to these artificial persons. Legislation has encouraged their organization, as they concentrate and employ the intelligence, energy and capital of society, for the development of enterprises of public utility. There is scarcely an object of general interest for which some association has not been formed, and there are institutions whose members are found in every part of the Union, who contribute their efforts to the common object. To enable impersonal beings - mere legal entities - which exist only in contemplation of the law, to perform corporal acts, or deal with personal agents, the principle of representation has been adopted as a part of their constitution. The powers of the corporation are placed in the hands of a governing body selected by the members who manage its affairs, and who appoint the agents that exercise its faculties for the accomplishment of the object of its being. But these agents may infringe the rights of persons who are unconnected with the corporation, or who are brought into relations of business or intercourse with it. As a necessary correlative to the principle of the exercise of corporate powers and faculties by legal representatives, is the recognition of a corporate responsibility for the acts of those representatives.
12 21 Howard, 202.
"With much wariness, and after close and exact scrutiny into the nature of their constitution, have the judicial tribunals determined the legal relations which are established for the corporation by their governing body, and their agents, with the natural persons with whom they are brought into contact or collision. The result of the cases is, that for acts done by the agents of a corporation either in contractu or in delicto, in the course of its business, and of their employment, the corporation is responsible, as an individual is responsible under similar circumstances. At a very early period, it was decided in Great Britain, as well as in the United States, that actions might be maintained against corporations for torts; and instances may be found, in the judicial annals of both countries, of suits for torts arising from the acts of their agents, of nearly every variety. Trespass quare clasum fregit was supported in 9 Serg. & R., 94; Mound vs. Monmouthshire Canal Co., 4 Mann. & G., 452. Assault and Battery; Moore vs. Fitchbury R. R. Co., 4 Gray, Mass., 465; Eastn. Co's Ry. Co. vs. Vroom, 6 Exch., 314. For damages by a collision of rail cars and steamboats. Phil. & Read. R. R. Co. vs. Derby, 14 How., 465; N. Y. & Va. S. S. Co., 19 How., 241. For a false representation; Finnie vs. Glasgow & S. W. R. Co., 34 L. & Eq. R., 14; Etting vs. Bk. U. S., 11 Wheat., 59.
'The case of The National Exchange Co. of Glasgow vs. Drew, 2 Mac. H. of L., Cas. 103, was that of a company in failing circumstances, whose managers sought to appreciate its stock by a fraudulent representation to the company, and a publication of the report as adopted by it, that its affairs were prosperous. Two of its stockholders were induced to borrow money from the company to invest in its stock. The question in the cause was, whether the company was responsible for the fraud. In the House of Lords, upon appeal, Lord St. Leonards said: 'I have come to the conclusion, that if representations are made by a company fraudulently, for the purpose of enhancing the value of stock; and they induce a third person to purchase stock; and those representations so made by them, bind the company. I consider representations by the directors of a company as representations by the company, although they may be representations made to the company.' . . . The report 'becomes the act of the company by its adoption and sending it forth as a true representation of their affairs; and if that representation is made use of in dealing with third persons, for the benefit of the company, it subjects them to the loss which may accrue to the party who deals, trusting to those representations.'