Basshor v. Dressel

34 Md. 503 | Md. | 1871

Miller, J.,

delivered the opinion of the Court.

This is another case where creditors of a corporation are seeking to enforce as against a stockholder, the personal liability imposed by section 52 of Article 26 of the Code. None of the questions determined in Norris vs. Johnson, and Norris vs. Wrenschall, arise here. The case was concluded in the Court below by an instruction to the jury that there w'as no legal evidence of the incorporation of the company of which the defendant is sought to be charged as a stockholder, and the plaintiffs are not, therefore, entitled to recover in this action, and whether this instruction be correct is the main question in this case.

The certificate of incorporation, dated the 11th of October, 1866, professes on its face to form a company for the purpose of mining chrome ores and manufacturing bi-chromates and other salts, under the name of “ The Baltimore Chrome Mining and Manufacturing Company,” and provides that the mining operations of the company shall be conducted in Harford comity and other counties of the State, and its manufacturing operations and generally all the business of the company shall be conducted in the city of Baltimore, in which its office for the transaction of business will be situated. On the part of the appellee, it is contended that this is an attempt to create a company, both for mining and manufacturing purposes, for which no provision is made by the Code: that these several kinds of corporations are provided for by different sections, are in many essential features totally dissimilar, and parties have no power without legislative sanction to amalgamate the two in one certificate: that this is a radical defect in the organization of this company, just as fatal to its corporate existence as if the attempt had been to incorporate it for a purpose not permitted by law: that the right of recovery against a stockholder depends upon the fact that the plaintiff was a creditor of the corporation of which the defendant was at the time a stockholder, and hence the plaintiff must show the existence of the corporation of which he became a creditor : and that on this issue it is competent for the defendant to contest the legal existence of the corporation by reason of neglect or violation of any condition precedent to a valid corporate existence, or because there is no warrant in the law for the creation of such a corporation. On the other hand, the appellants insist, first, that there is no defect in the certificate, that it contains all the prescribed requisites necessary to constitute a manufacturing corporation, and whatever more there is in it may be rejected as surplusage, especially in view of the facts that the certificate was recorded in Baltimore city only, and no attempt made to organize a mining company by having it recorded in Harford county, or elsewhere, that the corporation did carry on a manufacturing business in the city of Baltimore, for at least a year and a-half, and its debt to the appellants for machinery to be used in that business was there contracted: secondly, that where there has been such user of corporate franchises by an association of individuals, their existence as a corporation can only be inquired into by the State, and cannot be questioned in a collateral proceeding like the present between a creditor and a stockholder: and thirdly, that the appellee, who was one of the originators of the company, a subscriber to its stock, a signer of the' certificate of incorporation, and who acted as one of its directors from its organization until it stopped business, and was present at the meeting of the board at which the settlement of the appellants’ claim was unanimously authorized, is estopped by these acts of active participation in the user of a corporation defacto, from denying ..it had ever existed, and to permit him now to repudiate the existence of the corporation which he was thus instrumental in creating, conducting and holding out to the world as a corporation and capable of contracting debts as such, and escape the liability of a stockholder therein, would be inconsistent with any reasonable idea of justice, and in violation of those principles of truth and equity on which the doctrine of estoppels in pais is founded.

These conflicting views have been strongly urged in argument, and a large number of authorities cited and pressed upon our attention, but we are relieved from the duty of expressing any opinion upon them, because, in our judgment, this case does not rest upon the positions stated by the appellants’ counsel. We are convinced that any defects, whether vital or formal, that may have existed in the original certificate of incorporation, because'of its attempted combination of a mining with a manufacturing company, have been cured by competent authority. The record shows that the defendant offered in evidence the minutes of proceedings of this company contained in a book which it was agreed should be used in this Court, and as we understand the offer, it embraces all the proceedings in that book that are relevant to the matters in controversy between the parties to this suit. An examination of that book has disclosed the facts that the company applied to the Legislature for an amendment of its charter, and a special law, (Act of 1867, ch. 382,) for that purpose was passed, which, on motion of the appellee, was accepted, and is set out in full on the minutes of proceeding. That law, entitled “ An Act to amend the charter of the Baltimore Chrome Mining and Manufacturing Company, by empowering the said company to increase its capital stock, or to make calls or assessments upon the present capital stock,” amongst other tilings, empowers that corporation to increase its capital stock to the sum of $750,000, and if that shall not be done, then to make calls or assessments upon its present capital stock to the amount of $1 on each share. We regard this Act as a legislative recognition of the validity of the existing corporation, and as having the effect to cure the defect, if any such existed, in the original certificate, of combining the two kinds of corporations in one charter. By accepting this Act, the corporation, as to any such defect, became valid ab initio, as much so as if incorporated under the law of 1868, ch. 471, section 35. With the proof of this law and its acceptance in the ease, there was error in the instruction granted by the Court, and for this reason the judgment must be reversed.

The only other question material to be considered is, whether there is any sufficient evidence to authorize the jury to find that the capital stock had all been paid up. The certificate fixes the capital stock at $500,000, divided into one hundred thousand shares of $5 each. In reference to manufacturing corporations, the law provides that nothing but money shall be considered as payment of any part of the capital stock. There is no proof and no pretence that this provision has been complied with. In the case of mining corporations, the law allows lands, as well as money, to be considered as payment, but that does not authorize leasehold interests, of which the greater part of this property consisted, to be considered as payment in full of the capital stock, so as to exempt the stockholders from personal liability under section 52. And even if all the property had consisted of fee-simple estates in lands, we should be very unwilling to decide that such property, -whose actual value, ascertained beforehand by public sale, was certainly less than $50,000, could, by any arrangement or agreement between the stockholders, be taken to be worth $500,000, so as to constitute payment in full, under this section, of stock to that amount. We are fully satisfied there is no proof in this record of compliance with the statutory provision, by observance of which, exemption from personal liability is secured to the stockholders.

(Decided 20th June, 1871.)

These views dispose of all the material questions that will probably arise in the further progress of this case, and we are therefore relieved from the necessity of deciding in detail, upon the large number, of prayers offered by the appellants and rejected by the Court.

Judgment reversed and new trial awarded.