97 Ala. 111 | Ala. | 1892
— The attempt to incorporate tbe company, tbe validity of whose charter is questioned in tbis case, in that tbe defendants are charged with having usurped tbe franchise of being a corporation, proceeded under §§ 1803-
In these statutes, it is provided, that two or more persons, desiring to form themselves into a private corporation, for carrying on any manufacturing, mining, immigration or industrial business in this State, may file in the probate court of the county, in which it is proposed that the company shall have its principal place of business, a written declaration, signed by them, setting forth, the names and residences of the petitioners, the name of the proposed corporation, the amount of the capital stock, and the number of shares into which it is to be divided, and other matters as prescribed in § 1803.
Thereupon, the probate judge must issue a commission to the petitioners, or to any two or more of them, to open books of subscription and proceed with the business of procuring- the subscription of the capital stock, as provided in § 1804.
All subscriptions are required to be made payable in money, or in labor or property, at its money value.- — § 1805. Section 1806 provides, that when not less than fifty per cent, of the proposed capital stock has been subscribed, by hona fide subscribers, the board of corporators shall call the subscribers together, and they shall proceed to organize the corporation, by electing from themselves, a board of directors of not less than three nor more than nine members, who, in turn, shall elect from this number, a president, and secretary.
It is then provided, in section 1807, as amended, that upon the completion of the organization, and the payment to the treasurer of the company, or to some officer designated for that purpose, in cash, at least twenty per cent, of the capital subscribed, payable in money, and the payment of the remainder of the capital so subscribed for, payable in money, being secured to be paid,......... .....and also the delivery to such officers of at least twenty per cent, of the property subscribed, .... the board of corporators shall, in writing, over their own signatures, certify the same to the judge of probate, who shall issue to them a certificate, that they have been fully organized according to law, under the name and for the purposes indicated in their written declaration, and are fully authorized to commence business under their charter.
The Code of 1886, provides, that, “an action may be brought in the name of the State, on the information of any person, for the purpose of vacating the charter or annulling
And, again, that “an action may he brought in the name of the State against the party offending, in the following cases,” — naming three causes of offense, the third and last of which is, “when any association, or number of persons, act within this State as a corporation, without being duly incorporated,” § 3170.
Under either of these sections, — to annul a charter, or to exclude persons from exercising corporate franchises, when they have not been duly incorporated, — the judge of the Circuit Court may order the action brought, — under § 3167, whenever he has reason to believe that any one of the acts or omissions, specified in that section, can he proved, and it is necessary for the public good; or, under § 3170, when he believes that any one of the acts specified in that section can be proved, and it is necessary for the public good; or, under either one of them, for the causes specified in them, “an action may be brought on the information of any person fiving security for the costs of the action, to be approved y the clerk,” the provision being the same in both sections, for the action by private persons, §§ 3168 and 3171.
The information in this case was filed without the direction of the judge of the Circuit Court, and was instituted by Hercules Sanche, in the name of the State, on his relation, having given security for costs, approved by the clerk of the Circuit Court. It charged, in substance, that the defendants, and their associates were acting, and claimed to act, as a corporation, under the name of The Electro Libration Company, by virtue of certain proceedings in the probate office of Jefferson county, described in the information, which were had and taken under the provisions of the Code of 1876, first above referred to, for the purpose of incorporating said company, but which are alleged to have been merely colorable, and abortive because : — 1st, Notwithstanding the report of the commissioners, that 10,000 shares, of $100 each, of the capital stock of the'company had been duly, and regularly and in good faith subscribed for, and that the subscribers had paid the entire subscription of $1,000,000, to the capital stock of said corporation, paid by causing to be conveyed to it, the property which they had subscribed for said stock, yet, as a matter of fact, not 50 per cent, of the proposed capital stock of $1,000,000, nor any appreciable part thereof, had been subscribed by bona fide subscribers, nor had the subscribers agreed to pay money, or money’s worth on account of their said subscriptions, nor was it
The prayer of the petition followed § 3178 of the Code, that the defendants, who were the so-called directors of ' said pretended corporation, residing in Alabama, and their associates.be excluded and ousted from the said franchise of acting as a corporation, and pay the costs of the proceeding.
The defendants demurred to the information, assigning numerous grounds. One of these grounds was, that the said Electro Libration Co., had not been made a party to the suit. The court sustained the demurrer on this ground, — as it would seem from the opinion on file, — giving the plaintiff the privilege of amending, which he declined to do, and judgment was rendered on the demurrer, in favor of defendants. Let us consider these several grounds of demurrer.
But this ground is not well taken, since when the parties are very numerous, or there are many in the same interest who can not be easily ascertained; or where the question is one of common interest, and one or more may sue or defend for the whole; or where the parties form a voluntary association, and those made defendants may be fairly presumed to represent the interests of all, the action may proceed against any number, in such cases, less than the whole. This information alleges, that the defendant’s associates are too numerous to be brought upon the record, some are unknown and the remainder are non-residents. It would seem that the defendants, the chosen officers and directors of the alleged corporation, its governing body, would fairly represent the other stockholders. — Story’s Eq. Pl. §§ 97, 99; Ewing v. The State, 33 A. & E. C. Law Cases, 684; The People v. Carpenter, 24 N. Y. 86; Chesshire v. Harper, 116 Ill. supra.
The case of The Jersey City Gas Co. v. Dwight, 29 N. J. Eq. R. 212, is in many respects like the one we consider. The defendants, thirteen in number, claimed to have acquired corporate existence, under a general statute authorizing the formation of gas companies, which provided that thirteen persons may become a corporation on complying with certain prerequisites prescribed by it, similar in many respects to the statute under which these defendants sought incorporation, one of which requirements, was the subscription of at least one-half of the entire capital stock, and the payment of twenty per cent.- thereon in cash. The court say: “The complainants deny the corporate existence of the defendants. They allege the defendants are not a corporation, and never have been. It is admitted, they filed articles of association and an affidavit, showing an ostensible compliance with the statute, but their compliance is charged to have been vicious and fraudulent. The complainants say, that one-half of the capital stock of the projected corporation was not actually subscribed, and that twenty per centum was not paid in cash by each subscriber, on his subscription, before the articles were filed, but that some of the subscriptions were entirely fictitious. • • • • • Upon the facts admitted, I do not think that this subscription can be regarded as coming up to the standard prescribed by the statute. • • • It is designed to pre
In Peterson v. Arnold, 45 Penn. 410, the supreme court of Pennsylvania held, that when a company is incorporated by act of assembly, the charter is conclusive evidence of its validity, but when the act or organization is under the general manufacturing law, the charter though binding on its members, covers no fraud that may have been used in forming it; that the omission of stockholders to pay their stock as required by law, is a violation of the law by which the charter was procured, and it is no shield against creditors.
The Indiana court, on appeal, in an action of quo warranto, brought, under a statute similar to ours, against individuals, challenging their right to act as a railroad corporation, attempted to be organized under the general law, say: “Merely simulated subscriptions, made by persons who are neither actually nor apparently able to pay the amount subscribed, can not answer the purpose of the statute • • • They are an attempt to acquire corporate functions, not by compliance with law, but by a disingenuous evasion of it.” Holeman v. The State, 5 N. E. Rep. (Ind.) 702.
■ Our own court, in line with these decisions, in an adjudication on a similar incorporation statute, held, that the conditions to organization, as laid down in the statute, are prerequisite to rightful, lawful organization, and that it is only when these things are done, that the subscribers become a body corporate, with the powers conferred by the laws on private corporations. Cen. Ag. & Mech. Ass. v. Ala. Gold, Life Ins. Co., 70 Ala. 131; Sparks v. Woodstock Iron Co., 87 Ala. 294.
Section 6 of Art. XIY of the constitution of the State provides, “That no corporation shall issue stock or bonds, except for money, labor done, or money or property actually
In construing this clause of the Constitution we held, that one purpose was, to protect the public, as well as stockholders, against spurious and worthless stock, by the process of watering, — in other words, from fraudulent issuing and putting on the market, fictitious corporate stock, which is based on nothing valuable, as a consideration for its issue. —Williams v. Evans, 87 Ala. 725.
The learned counsel for the defendants, admits in argument, that in such a proceeding as this, the corporation itself and the individuals, can not be joined as defendants; that when the action is under § 3170 of the Code, as this one is, it must be against the parties offending, and not against them and the corporation jointly, and when the individuals simply act as agents of the corporation de facto, — formally, if not legally organized, — the action must be against the corporation alone, or, in other words, if there has been an attempt at organization, under the statute, however imperfect and fruitless the result, the forms of the law having been complied with, the action must be against the pseudo corporation ; but if there has been a naked usurpation of a franchise to be a corporation, without any pretext at organization, then, and only then, must the action be against the individual usurpers.
In our research, aided by the industry of counsel, we have found but one case which seems to support this suggestion of defendant’s counsel, — that of The People v. Flint, 64 Cal. 49 ; which is weakened, if not destroyed by the later case in the same court, of The People v. Stanford, 77 Cal. 360, where the proceeding was against the railroad corporation, as one of the defendants, with others, alleging that the individuals named as defendants, and the railroad company, were falsely claiming that there was such a corporation, and that they have unlawfully held and exercised and claimed the right to exercise divers powers, &c. The court say, that the proceeding is an anomaly, that a corporation can not be sued as such, and brought into court, and the action maintained against it, on the ground that it is not a corporation. If it is intended to draw in question the franchises of the corporation, the proceedings must be against the individuals who usurp the franchise. If it is claimed that the corporation is
In Indiana, they have a statute similar to ours, authorizing an action against any association or number of persons acting within the State as a corporation, without being legally incorporated. The only difference between their statute and ours is, that ours uses the word “duly,” instead of “legally” incorporated, and theirs also provides, like ours, for an action against the corporation, for forfeiture of its charter, for acts which amount to a forfeiture or surrender.
In construing this statute, the Supreme Court of that State, held, that an information against a corporation in its corporate name, charging that it has not been legally organized, and pointing out certain defects in its organization, and praying a dissolution of its franchises, was bad, rot being against the individuals claiming to be a corporation, and holding that it could not be brought into court, as a corporation, to answer an allegation, that it is not and never was a corporation, and that, when a corporation is brought into court in its corporate name, its existence as such is admitted. — The Mud Creek Draining Co. v. The State, 43 Ind. 236.
In the State of New York, an action is authorized as here, “When any association or number of persons shall act within this State as a corporation without being legally incorporated.” Ours is a transcript of their law, substituting the word “duly” for “legally.” In a quo warranto proceeding, calling on a railroad company, organized under general statute, to show by what warrant it used certain franchises alleged to have been usurped, the court say, “If the information in this case had for its object to oust the defendants from acting as a corporation, and to test the fact of their incorporation, it should have been filed against the individuals; if the object was to effect a dissolution of the corporation, which had had an actual existence, or to oust such corporation of some franchises, which it unlawfully exercised, then the information is correctly filed against the corporation. • ' ■ • When, therefore, an information is filed against a corporation, the existence of the corporation is admitted.” —The People v. Saratoga & R. R. R. Co., 15 Wend. 114.
In Ohio, they have statutes similar to ours, authorizing actions against corporations, for violations of charters, misuser or forfeiture of franchise, and against any association of persons who act as a corporation without being legally incorporated; and in a proceeding against a company by its corporate name, charging a usurpation of certain corporate franchises, the Supreme Court of that State held, that when
In the Indiana case already referred to, Holman v. State, 5 N. E. Rep. supra., the court held, that the information was rightly exhibited against the individuals named as defendants, requiring them to show by what authority they assumed to act as a corporation, and that, in such a proceeding, it might be shown the subscriptions were fraudulent and never made in good faith, and if the action was against the corporation, no such enquiry would be allowed.
In Chesshire v. The People, 116 Ill. 493, which was an information against individuals assuming to act as directors of a corporation, whose legal existence was denied in the information, the court held, that it would be impossible to make the corporation a party. The only persons, if that hypothesis be true, to be brought before the court, to test the validity of the organization of -the district, are those assuming to act in the capacity of directors.
In line with the foregoing are the following decisions:— The People v. Weber, 129 Ill. 169; The State v. Barron, 57 N. H. 498 ; The People v. Carpenter, 24 N. Y. 86; The State v. Coffee, 59 Mo. 59; The State v. Com. Bank, 33 Miss. 474.
The text books maintain the same doctrine. — High on Extraordinary Remedies, § 661, is as follows: “Some conflict of authority has existed in this country, as to the effect of instituting proceedings against a corporation eo nomine. But the weight of authority may be now regarded as sustaining the proposition, that the effect oí filing an information against a corporation by its corporate name, to procure a forfeiture of its charter, or to compel it to disclose by what authority it exercises its corporate franchise, is to admit the existence of the corporation. Its corporate existence can not be afterwards controverted.” — 1 Dillon on Corp. § 892; Angel & A. on Corp. § 756; Boon on Corp. § 165.
And so, if tbe action is under § 3167, against tbe company only, for the purpose of vacating its charter or annulling its corporate existence, and tbe judgment is against tbe corporation, as in tbe case of a judgment against individual usurpers of a franchise, tbe Circuit Court would not be competent to wind up its affairs, and tbe creditors and stockholders would seek remedies in other actions. — State v. Atchison & N. R. R. Co., 24 Neb. 143; Society Perum u. Cleveland, 43 Ohio St. 481; s. c. 12 A. & E. Corp. Cas. 40.
It can not be doubted, after what bas been said, that tbe allegations of tbe complaint in this case, if true, are sufficient to entitle tbe plaintiff to bis judgment as authorized by tbe statute, and that tbe demurrer to tbe information ought to have been overruled.
Beversed and remanded.