66 Conn. 9 | Conn. | 1895
The demurrer to the second reply was properly overruled. The plaintiff sues as trustee in insolvency of a joint stock corporation, upon an assessment which it has called in upon the defendant’s stock, and the only answer is nul tiel corporation. The second reply is that, however this may be, the defendant is estopped from making-such a defense, because the debts, whose existence have made the company insolvent, are due to creditors who trusted it, as a corporation, because they were led to believe that it was such, by the acts of the defendant, in promoting its organization, publishing its articles of association, acting as a director and as its president, and contracting in its name and behalf these very liabilities.
It is claimed that these averments were not sufficient, because no bad faith, willful wrong, or gross carelessness is charged. No such charges were necessary. The plaintiff represents the rights of the creditors of an insolvent company, who contracted with it as being a corporation. Whatever rights they formerly had against those who were its members, he now has. They were led to believe in the existence of such a corporation by the acts of the defendant, as a promoter, stockholder, director, and president of the company, which are set out in the reply. It was natural that such acts should induce that belief. He had means of knowledge as to the manner in which the company was organized, which were not possessed by the public in general. Had he in fact known that its organization was so defective that the corporation, in whose name he was contracting, had no existence, or was incapable of transacting business, his acts would have been no more prejudicial to
The modern estoppel in pais is of equitable origin, though of equal application in courts of law. It is much more than a rule of evidence. It establishes rights: it determines remedies. An equitable estoppel does not so much shut out the truth as let in the truth, and the whole truth. Its office is not to support some strict rule of law, but to show what equity and good conscience require, under the particular circumstances of the case, irrespective of what might otherwise be the legal rights of the parties. The key to its application is not infrequently to be found in the rule that in matters of trust and confidence, when one of two innocent persons must suffer, in consequence of the acts of one of them, the loss must generally be borne by him who thus occasioned it. Horn v. Cole, 51 N. H., 287, 12 Am. Rep. 111; Stevens v. Dennett, ibid., 324, 330; 2 Pomeroy’s Eq. Juris., § 802.
This rule clearly governs the case at bar. It is true that it does not extend to acts or representations not naturally calculated to mislead, and on which others had no right to rely. Danforth v. Adams, 29 Conn., 107. But those of the defendant were addressed to the public and to the parties injured. They came from one who was in a position to know what he affirmed. They gained credit to an organization in which he was interested. The company was a de facto corporation. Its creditors, who contracted with it as a corporation, could not hold the individuals who had associated to form it personally liable as co-partners, for with them no contract had been made. 2 Morawetz on Pri. Corp. § 748. The defendant was thus shielded from partnership liability by his representations as to its corporate character, and on these representations those with whom he dealt'as one of its officers had a right to rely. Northrop v. Bushnell, 38 Conn., 498, 511; West Winsted Savings Bank v. Ford, 27 id., 282, 289.
The publication in a newspaper, which the statute requires, of the articles of association under which a joint stock cor
Upon the trial to the jury on the issues of fact closed after the demurrer was overruled, the plaintiff offered evidence tending to prove the principal averments of the reply, and also that the defendant, as one of a majority of the directors, made a certificate under oath, as required by General Statutes, § 1948, and had it duly filed in the proper offices, for record, which stated, among other things, that the amount of capital stock actually paid for in cash was $12,000, being twenty per cent thereof; and that he was one of the stockholders who voted to make the assignment in insolvency, under which the plaintiff received his appointment. The defendant offered evidence to show that while he had voted as a director to have certain stock, on which the twenty per cent had never been in fact paid,except by a worthless check, transferred to the company, on account of the failure or inability of the subscriber to make such payment, and while no payment was ever made on this stock, yet he acted in that, and in all other matters affecting the business of the company, in entire good faith, aud in the honest belief that
At the defendant’s request, the court instructed the jury that they must return a verdict in his favor, unless he was estopped from denying that the corporation had been legally organized. The following instructions were asked by the defendant, and refused:—
“ Third. That to constitute such an estoppel, the plaintiff must clearly prove by a preponderance of evidence, and the jury must find that the defendant, by his words or conduct, willfully caused other persons to believe that the said corporation had been in fact legally organized, and that said other persons, by reason of such conduct of the defendant and by reason of such belief, subscribed for stock of said company, or gave credit to said company by reason of which said company became and still is indebted to them, and further that said persons will suffer pecuniary loss, in case the present action is decided in favor of the defendant.
“Fourth. There is no estoppel in this case, and the jury must find for the defendant on that point, unless all the said facts so requisite to constitute an estoppel, are clearly established. It is necessary that the jury should find not only that the defendant in fact represented that said corporation had been legally established, but that he did so knowingly and willfully. If he was himself deceived and mistaken in that respect, and made such representations in the mistaken belief that the corporation had been legally organized in good faith, and with no intent to deceive or defraud, then there is no estoppel, nor is there any estoppel, unless the defendant’s representations, if they were made at all, are shown to have been made to the very persons whom, it is claimed would now be losers by a verdict for the defendant in this case. The claim is that these representations were made to the other stockholders and to the creditors of the company. To sustain this claim, it must appear that the defendant represented that the company had been legally organized, to such other stockholders and creditors; that this representation actually came to the knowledge of such*20 stockholders and creditors; nor would that be sufficient unless it further appeared that such stockholders and creditors, in their dealings with the company, relied upon and were influenced by such representations of the defendant and not upon other grounds, and that they would not in fact have taken stock in the company, or allowed the company to become indebted to them, had it not been for such representations made by the defendant; and if all the said points should be clearly established, still there would be no estoppel, unless it further appears that such other persons would be losers by a verdict for the defendant in this case.”
The court, as to the points thus presented, charged the jury that it was not necessary, to found an estoppel, that they should find that the defendant willfully held the company out as a corporation; but, on the contrary, that the course of conduct which the plaintiff claimed to have proved would be sufficient to support his action, although the defendant acted in entire good faith, supposing that the corporation was legally organized, whether with or without actual knowledge of the law as to the effect of a failure to pay in twenty per cent in cash upon the capital stock; and that this being a proceeding for the benefit of creditors, to collect unpaid installments of stock, if they should “find that the company in fact had held itself out to be a legal corporation and began and carried on the business for which it was organized, and contracted debts with third parties as a corporation, and also find that the defendant as a stockholder attended the meetings of the company during this time and accepted the office of director and president of the company, and a.cted as such officer, and attended all the directors’ meetings while he held these offices, and took part in the direction and management of the corporation while it was conducting that business, then by law he is estopped to deny that the corporation was a legal corporation, and your verdict should be for the plaintiff.”
The defendant complains that the charge, thus given, treated as immaterial the question whether his acts and
It is true that a trustee in insolvency represents no creditors but those who are such when the proceedings in insolvency are commenced. But all the creditors of the Bridgeport Vitrified Pipe Company who contracted with it as a corporation, presumably did so because it was publicly held out as such by its officers and stockholders. The defendant, as one of these, caused its articles of association, containing his subscription to its stock, to be published in a newspaper, and subsequently executed its organization certificate, and had it recorded in the offices of the secretary of the State and town clerk. A copy of such an organization certificate, by General Statutes, §1090, when certified by the secretary of the State under its seal, is prima facie evidence of the due formation, existence, and capacity of the corporation which it describes. This section was designed to relieve the corporation and all having dealings with it from the necessity of proving, in every ease to which it might be a party, by the testimony of witnesses in court, that the conditions of incorporation had been complied with. The certificate of the recording officer of the State, under its seal, excuses the production of the original document, and makes what would otherwise be hearsay, legal evidence as to all the world. The formalities of attestation serve onty to verify the correctness of the copy and the fact of record. They lend no new weight to the statements in the original certificate of the directors. These remain the only real evidence of the fulfillment of the statutory conditions to which they refer, and are simply given, as evidence, a wider effect.
When the defendant joined in filing the organization certificate for record, he furnished to the public evidence under oath that the Bridgeport Vitrified Pipe Company was a corporation, capable of transacting business and contracting debts. Wood v. Wiley Construction Co., 56 Conn., 87, 97. This certificate served the purpose of a special charter. Whoever afterwards dealt with the company as a corporation
One of these statements was that the required cash payment on the stock had been duly made, and the defendant cannot now be heard to deny it, as against any creditor, although he be one who became such without actual knowledge that such a statement had been made. The law gave notice that it must have been made by some one, if there was a corporation in existence to which credit could be given; and every creditor could safely rely, without inquiry, on the security afforded by any stock subscriptions mentioned in the certificate, which were made, or had been assumed, by one of the directors by whom it was executed.
In a case like this, where a trustee in insolvency is the sole plaintiff, he must recover, if at all, for the benefit of the estate, as a whole. He does not represent the special equities of any particular creditors, but the general equities of all. So far as this defendant is concerned, his responsibility to all rests upon the same ground. If any particular creditor were shown to have become such solely by reason of his knowledge of what the defendant had stated in the organization certificate, and of his reliance upon its truth, he would occupy no better position than others who had only constructive notice. In equity and good conscience, the signers of that certificate owe an equal obligation to every one who dealt with what they certified to be a legal corporation, with a capital so far paid in as to enable it to transact business, on the footing of its title to that name, and character.
Our statute provides (General Statutes, § 1944) that the signers of the articles of association for a joint stock corporation shall “become and remain” such a corporation, when the organization certificate is filed with the secretary of the State. The “first meeting” of the corporation, for effect
It was not in dispute between the parties to this cause that the articles of association and organization certificate were sufficient in form, and that they were duly published and filed for record. The only issue tendered by the answer was upon the allegation that there was not and never had been any such corporation as that of which the 'plaintiff claimed to be trustee; but the estoppel set up in the reply had a broacler reach, and was invoked to preclude the defendant from denying that the corporation ever existed, and that it was capable of contracting debts and making calls on stock subscriptions.
As the case was tried in the court below in this broader aspect, and as if turning on the right of the defendant to rely on the falsity of material statements in the organization certificate, we have treated it from the same point of view; although it may be that, in strictness, the answer was disproved by the admitted facts, which went to show that a corporation was organized, although it never became legally competent to commence business. If this be so, the plaintiff would no less have been entitled to a verdict on the issues closed. »
There is no error in the judgment appealed from.
In this opinion the other judges concurred.