34 Md. 316 | Md. | 1871
delivered the opinion of the Court.
This is an action of assumpsit by the appellee, claiming to have been incorporated in pursuance of the 40th section of Article 26, of the Code of Public General Laws, to recover certain unpaid instalments, alleged to be due on the subscription of the appellant to its capital stock.
The following is a copy of the recorded certificate, to which the subscription is affixed: “ The undersigned, free white citizens of the State of Maryland, desiring to form a company for the purpose of manufacturing, under the name and style of the Antietam Manufacturing Company of Washington County, have fixed the capital stock of said company at §150,000; said capital stock shall consist of five hundred
This recorded certificate was offered in evidence to prove the incorporation of the appellee, and its admissibility for that purpose is objected to on the ground that it does not comply with the requirements and conditions precedent, prescribed by section 40, Article 26 of the Code. It becomes necessary, therefore, to determine what are the requirements and conditions prescribed by the statute. Section 40 provides that: “Any five or more free white persons, who may desire to form a company for the purpose of carrying on any manufacturing business, may make, sign and acknowledge, before some officer competent to take the acknowledgment of deeds, and record the same in the office of the clerk of the Circuit Court for the county * * * a, certificate in writing, in which shall be stated the corporate name of the company, the corporate name always to include the name of the county or city in which the business is carried on, the amount of the capital stock of said company; the term of its existence not to exceed forty years, the number of shares of which said stock shall consist, the number of trustees, directors or managers, &c., who are to manage the affairs of the company for the first year,” &c. The certificate in this case is claimed to be defective' in many essential particulars; and first, because it does not appear upon its face to have been acknowledged before the justice of the peace by all of the subscribers. This, however, is not required by the statute; on the contrary, it expressly provides, that “ any five or more persons ” * * * “ who may make and acknowledge a certificate in writing,” &c., * * * “shall be a “ body politic and corporate.” The acknowledgment, therefore, by all of the subscribers, is not a
Then again, it is said the amount of the capital stock and the number of shares are not stated with sufficient precision and accuracy. This objection, however, cannot apply to the capital stock, because it is fixed at $150,000, nor to the value of the shares, for it is fixed also at $100 per share; but the fatal error insisted on is in stating the number of shares to be five hundred. This is a mistake, however, apparent on the face of the certificate itself, because, if the coital stock is fixed at one hundred and fifty thousand dollars, and the value of the shares at one hundred dollars each, it follows, as a matter of course, that the whole number of shares must be fifteen hundred, and not five hundred as stated. Such an error could not certainly deceive or injure any one — the subscription of the whole capital stock, at a fixed value per share, would necessarily determine the aggregate number of shares.
But it was further insisted, that 'the particular trade to be carried on by the company ought to have been stated in the certificate. But no such requirement is prescribed by the 40th section under which the appellee was organized. It does provide that the corporate name of the company shall be stated, which name shall always include the county where the business is carried on — -not that the particular trade shall be stated or affixed to the name. We cannot understand why such a requirement should be considered as an indispensable condition precedent, for although a name is necessary in order to identify and distinguish the corporation, by which it may
But again, it is said the recorded certificate does not show affirmatively on its face, that the president and directors therein named, to manage the affairs of the company for the first year, were parties to the acknowledgment of the same before the justice of the peace, prior to its being recorded. This qualification, however, is not required by law. .The 43d section provides that they shall be stockholders — not that they must have signed or acknowledged the certificate, and inasmuch as it appears from the original certificate offered in evidence to prove the appellant’s subscription, for which purpose it was clearly admissible, that they were stockholders, this objection cannot be sustained. "We think, also, the term of years, not to exceed forty years, is sufficiently definite. As used in this certificate, it means, and is to be understood as creating a term for at least forty years, the limit prescribed by the statute.
These objections seem to us to be more technical than sound. The policy of the law, as plainly indicated by the several provisions of the general corporation act, is to encourage the formation of these and other like companies, in order that not only the subscribers, but the public, may share the advantages, supposed to flow from combined capital and labor; and whilst the requirements of the law are to be fairly 'and substantially complied with, the rights and franchises of corporations and the interests of stockholders are not to be frittered away by technicalities, nor sacrificed to a strained construction of the statute.
Assuming then, in a suit brought to recover a subscription made prior to and in contemplation of being incorporated, it is necessary for' the appellee to prove its corporate existence, and
The right, however, of the appellee to maintain this suit, is further denied on the ground that the law under which it was incorporated, does not require or contemplate any subscriptions prior to the factum of incorporation; and a subscription thus made was supposed to stand on a different footing from one under ail Act of incorporation by the Legislature, which provides for the taking of subscriptions by commissioners or persons named in the Act. In the one case it was said, there was a party in esse competent to make and receive a promise; in the other, certain conditions precedent were to be performed before the corporate existence is completed. If, however, this objection be sound, it applies with equal force to a subscription made in contemplation of a charter by the Legislature, for in such a case the organic life is derived through the statute, and until it is passed, the proposed company may be said not to have any existence. And yet it is well settled, that subscriptions thus made are binding and may be enforced after the charter is granted by the Legislature. If so, where is the distinction in principle between the binding force of such a subscription, and one made in contemplation of being incorporated under a general corporation law. In each easel the contract is made by the subscribers with each other, the; consideration of which is the right to a given number of^ shares upon the incorporation of the company, whether it bei under a special or a general Act of the Legislature. And hence in the several States where this question has arisen upon subscriptions to a certificate or articles of association, formed for the purpose of being incorporated under a general corporation law, it has been held that such subscriptions arc
In Staunton, President of the Exchange Bank, vs. Wilson, 2 Hill, 153, where the defendant signed articles of association, and subscribed prior to the incorporation, it was held that this fact constituted no objection to the recovery. “It is true,” say the Court, “ the company did not come into existence till several months after the defendant’s subscription purports to have been made, and the power of the president to sue did not arise until that time. The contract, though dated before, must be considered as taking effect only from the 1st of January.” And in the Hamilton and Dearsville Plank Road Co. vs. Rice, 7 Bar., (N. Y.,) 157, where the subscription was made also to articles of association, the Court said: “ We think too that the fact that the corporation was not in esse when the agreement was signed, is not of itself a sound objection to the right of maintaining an action upon it.” See also Tonica and Petersburg R. R. Co. vs. McNeely, 21 Illinois, 71; Johnston vs. Ewing Female University, 35 Illinois, 518, and Heaston vs. Cincinnatti and C. R. R. Co., 16 Ind., 275. The objection that the subscription was made prior to the incorporation of the appellee cannot therefore be sustained.
But conceding the validity of the subscription, it is contended that an action of assumpsit will not lie, because it does not contain an express promise to pay, and that the only remedy against the delinquent subscriber is by a forfeiture and sale of the stock under the 45th section. It may be true, that an express promise in so many words, may not be found in the subscription, but it was made for a given number of shares and at a fixed money value, and when construed in connection with the law under which the company was to be organized, we are very far from admitting it does not amount to an express promise to pay for the shares in the manner and upon the conditions therein prescribed. The purpose of the appellant and his co-subscribers in signing the articles of
But it is further insisted, that the appellant had the right to withcLayv his subscription after the acknowledgment of the certificate before the justice of the peace, and at any time prior to its being recorded. We think, however, it is clear, both upon principle and authority, he cannot. As we have before said the subscription is in itself a contract on the part of the appellant to pay for the shares thus taken in the manner and according to the terms prescribed by law, in consideration of which he acquired the right to demand the same upon the organization of the company, and of which he could not be deprived, either before or subsequent to the incorporation. The obligation to pay on the one hand, and the right to demand on the other, created a mutuality of contract, binding as between the co-subscribers, the parties thereto, and could not be discharged by the act of one, without the assent of the other. And this too seems to be well settled. In Angell & Ames on Corporations, sec. 523, the rule is thus stated: “ A person subscribing before the organization of a proposed incorporated joint stock company, raises a mutuality in his contract which will render him liable to the company after incorporation. A subscriber or partner in an intended undertaking, subscribing an agreement to take measures to carry out the same, cannot discharge himself of liability or repudiate the concern to which he may have thus pledged
In Kidwelly Canal Co. vs. Raby, 2 Price, 93, 1 Ex., where this question came directly before the Court, Richards, B., said: “I i Raby had not endeavored to withdraw, there could have been no doubt of his liability ; then the question becomes, whether he has in fact withdrawn; and I think he has not, inasmuch as he could not do so without the consent of all those with whom he had become engaged in the undertaking.” The subscription in this case was made in contemplation of a charter by the Legislature, but in Lake Ontario, &c. R. R. Co. vs. Mason, 16 N. Y., 463, the rule thus laid down was recognized and extended to a subscription to articles of association, signed with a view of being incorporated under a general law, and Selden, J., said: “ If the contract to pay for and take the stock was a valid contract, made upon a sufficient consideration, then subscription was not open to revocation until the incorporation of the company was perfected, the other subscribers had an interest in its execution and performance, of which they could not be deprived by the act of the defendant.”
We find no error in the rejection of the appellant’s third prayer. In order to avoid the contract of subscription, it must appear to have been made upon the faith of false representations of the agent, in regard to a matter of fact, material to the value and success of the enterprise. The mere statement that the rents of the Emmert property would pay six per cent, on the capital stock for the first year, and then the company could determine whether to build or not, &c., must he regarded as the mere expression of opinion in regard to the success of the undertaking, upon which the appellant had no
The appellant’s eighth prayer was also properly rejected. This was a joint undertaking, and the consideration of the contract of subscription was the right to share the ¡Drofits arising therefrom. Under such circumstances, a subscriber could neither withdraw nor be released from his subscription without the consent of all the co-subscribers, and the fact that the directors or managers undertook to release certain parties, cannot operate in any manner to discharge the appellant from his obligation.
The statute under which the appellee wras organized, confers no such power on the directory, and the exercise of it cannot affect, one way or the other, the liability of the subscribers who may have been thus released.
We think, however, the Court erred in the modification of the appellant’s second prayer. The change of the capital stock from fifty to one hundred and fifty thousand dollars, after his subscription, and without his assent or subsequent acquiescence, discharged him from all liability on account of the same, and the mere acknowledgment by him of the certificate before the justice of the peace, if, at the time, he was ignorant of the change or alteration thus made, cannot be construed as a new contract on his part, nor estop him from relying on this defence in a suit by the appellee — the party by whom the change was made.
We think, also, the Court erred in regard to the notice prescribed by section 49.-of Article 26. It has been decided, we are aware, in one or two States, under statutes similar in many respects to the one under which the appellee was organized, that notice of the calls or assessments is only necessary to the forfeiture and sale of the stock; but in referring to
There is another objection, which, so far as the record discloses, is fatal to the right of the appellee to recover in this suit. The capital stock of the company, and the number'of shares, and their par value per share, are fixed in the recorded certificate, and there is no provision either in the articles of association, or the subscription itself, or the general law under
Being of opinion that the Court erred in the modification of the appellant’s second prayer, and also in granting the appellee’s first prayer, so far as regards the notice of the assessments or calls, the judgment will be reversed, and a new trial awarded.
Judgment reversed, and new trial awarded.