4 S.D. 271 | S.D. | 1893
This was an action brought by the respondent in the court below upon a contract for the payment of money, executed by the defendant, Albert E. Chamberlain, and to foreclose a mortgage upon real estate, which was given by him to secure the payment of said money.
The Building and Loan Association of Dakota is a corporation organized under the provisions of ‘ ‘An act to provide for the incorporation and regulation of building and loan associations,” passed by the territorial legislature of Dakota, and approved March 18, 1885, and an act amendatory thereof, approved March 11, 1887. Said act, after prescribing the mode in which corporations may be organized as therein specified, provided, among other things, not material here: “Sec. 4. Thé money in the treasury, if equal to the amount of one share of stock in. the association, shall be offered for loan in open meeting, and the stockholder who shall bid the highest premium for the preference or priority of loan shall be entitled
On the 1st day of March, 1889, the defendant, Albert E. Chamberlain was a member of said association, and the owner and holder of 16 shares of stock of said association; said stock being issued in separate series; 10 shares being dated March 1, 1889. On that day the plaintiff made a loan of SI,600 to said defendant Albert E, Chamberlain, the whole amount of premium bid therefor being deducted in advance, and for which defendant Albert E. Chamberlain, on March 1, 1889, made, executed and delivered to the said plaintiff his promissory note, in writing, and said note so executed and delivered is in words and figures following, towit: “SI, 600.00. Aberdeen, Dakota, March 1st, 1889. For value received, after three years from date, and before nine years from date, I promise to pay to the order of the Building and Loan Association of Dakota, at its home office, in Aberdeen, Dakota, the sum of sixteen hundred
To secure the payment of said note, interest thereon, and loan, and also to secure the payment of the monthly dues upon said, stock, the fines for failure to pay said monthly dues, and the fines for failure to pay the interest payments when due, the said defendant Albert E. Chamberlain did, on the 1st day of March, 1889, execute and deliver to the plaintiff a mortgage deed, and thereby convey to the plaintiff certain real property, which was described therein, which mortgage deed ‘‘provided further, in case of default m the payment of the principal, when due, or of interest, or of any part thereof, or if the taxes or premiums on insurance on the property hereby mortgaged be due and unpaid for the space of six months, or should said
The by-laws of said association in force at the time of the contract provide that “any member who shall neglect or refuse to pay his or her monthly dues of sixty cents per share on the day the same shall become due, shall pay afine of ten cents per share upon each share of stock, payable monthly, for every month a monthly payment shall be allowed to run past due. ” “For each day an interest payment shall be allowed to run unpaid after it becomes due, there shall be the sum of five cents per day paid the association upon each one hundred dollars of loan for which such interest payment is contracted.”
The defendant Albert E. Chamberlain did not pay the installments due on the 16 shares of stock for several. months in 1890 and 1891, nor did he pay the-interest due on the note secured by the mortgage, and by reason of said default the entire principal sum and interest became due; also a fine’of ten cents per share for each month in which a default was had, and a penalty of five cents per day on each $100 for the time of the continuation of the default, became due and payable as provided by the by-laws of said association. For these various
To the complaint of the respondent, the defendant Albert B. Chamberlain demurred upon the following grounds: (1) That the complaint does not state facts sufficient to constitute a cause of action; (2) that the plaintiff has not capacity to sue; —which demurrer was overruled, and from this order an appeal was duly taken and perfected.
The only ground, in this appeal, upon which the defendant Albert E. Chamberlain seeks to be released from the obligations created by the contract and mortgage executed by himself and wife, is that the plaintiff has no valid existence, and is therefore incapable of maintaining an action to enforce this or any other contract. In support of this contention, he insists that the acts of the territorial legislature of 1885 and 1887, un-. der which said association was organized, were enacted without authority, and are Unconstitutional and void. On this point it is sufficient to say .that whatever may be the fact in relation to the valid legal existence of said association, as a corporation, the defendant Chamberlain is not in a position to challenge its validity. The complaint shows that he was a stockholder in it, and, as such, he contracted with in, borrowing and receiving money of it, and endeavored to, and did receive benefits from it, under the rules and regulations, it is presumed, he helped to make. The rule is well established that a party who has contracted with a corporation de facto, as such, cannot be permitted, after receiving the benefits of his contract, to allege any defects in the organization of such corporation, effecting its capacity to enforce such contract; but all such objections, if valid, are available only on behalf of the sovereign power of the state. On this proposition see 2 Mor. Corp. § 750, and authorities cited in note. This rule applies, also, where the corporation is organized under a law alleged to be unconstitutional. 2 Mor. Corp. § 759; Freeland v. Insurance Co., 94 Pa. St. 504;
The case of McCarthy v. Lavasche, 89 Ill. 270, was a suit brought by a creditor of a corporation to enforce the individual liability of a shareholder for double the amount of his shares. The defense was interposed that the act of the legislature under which the corporation was formed was unconstitutional. The supreme -court, however, held that the defendant was liable. Justice Walker, in delivering the opinion of the court, said: “It is urged that the corporation was never legally organized, as the act under which the stockholders incorporated was unconstitutional and void; that if not, then the clause in the charter rendering stockholders liable is too vague to render them liable to the individual creditors of the company; or, if it shall be held that they are so liable, then the remedy is in equity, against all the stockholders. On the other hand it is contended that the law does not contravene the constitution; but if it should be so held, the stockholders having organized the corporation, and held themselves out to the world as such, and thereby obtained credit and incurred indebtedness, they are es-topped to deny the validity of the act, or their organization under it; and that a reasonable and fair construction of the clause of the act quoted renders the shareholders individually liable to each and every creditor, and that the remedy for a recovery on the liability is complete at law. These are the questions raised and discussed on this record. Even if the law is unconstitutional, can the promotors and those engaged in its operation, be heard to say that they may relieve themselves from liability, and from all their engagements, because the law under which they have acted is prohibited by the organic law? May shrewd, intelligent persons go to the general assembly and procure an act that they should know is prohibited by the fundamental law, avail themselves of its benefits, obtain the money of the uninformed and the confiding, and then be heard to say, we are not incorporated; our charter and organization are void, and
If stockholders might show the law unconstitutional, and their organization void, and all their acts unauthorized, then all persons engaged in the organization of the. corporation should be held liable for the consequences of their illegal and unauthorized acts, independent of the clause in their charter. So they should, in no event, escape liability for obtaining 'money without authority. ’ ’
The rule in Michigan appears to be different, and, when a
So far as this question arises in our jurisdiction, it is well settled by Section 2892 of the Compiled Laws, which is as follows: £‘The due incorporation of any company, claiming in
This seems, therefore, to be the well-established doctrine throughout American jurisprudence. Any other doctrine would be contrary to the plainest principles of reason and good faith, and involves a.mockery of justice. Parties must take the consequences of the position they assume. They are estopped to deny the reality of the state of things which they have helped to make appear to exist, and upon which others have relied. Therefore, we are of the opinion that the court below committed no errer in overruling the demurrer upon this ground, and the order of the court below is affirmed.