26 N.Y. 75 | NY | 1862
Lead Opinion
Their reasons were not put *77 in writing. Those of the court below were delivered by MASTEN, J., as follows:
The defendant contends that the plaintiff's organization is defective, because the affidavit annexed to the articles of association does not contain the allegation required by the statute, "that it is intended in good faith to construct or to maintain and operate the road mentioned in the articles of association," and that it is not therefore a corporation. The articles of association are in due form, and the affidavit annexed to them, while it does not come up to the requirement of the statute in the particular specified, is colorable. The articles and affidavit were filed and recorded in the office of the secretary of state; the capital stock was subscribed and partly paid in; the route of the road was surveyed and located; the right of way obtained; a contract for the construction of the whole road entered into and liabilities incurred which have not been satisfied. This was sufficient to constitute the plaintiff a corporation de facto, so that neither it nor its stockholders can object that it is not strictly a corporation de jure.
I am of the opinion that, under this and similar general acts for the formation of corporations, if the papers filed, by which the corporation is sought to be created, are colorable, but so defective that, in a proceeding on the part of the State against it, it would for that reason be dissolved, yet by acts of user under such an organization it becomes a corporation de facto, and no advantage can be taken of such defect in its constitution, collaterally, by any person.
Any other rule, it seems to me, must be fraught with serious consequences and great public mischief. Most of the persons who subscribe in good faith for the stock, do not examine to see whether all the requirements of the statute in the organization of the corporation have been complied with; and if they did examine would not probably discover a defect like the one now pointed out. The stock is sold in market from hand to hand without any such examination. The corporation may carry on its business for years, and its stock have entirely changed hands, when its property may be destroyed *78 by a trespasser, and in an action against him in the name of the corporation his only defence, "you are not legally a corporation by reason of a defect in your constitution," would (upon the doctrine contended for by the defendant) be successful. The doctrine of estoppel could not be applied in that case, as it has been in some cases, to counteract an erroneous decision upon the question now before me.
I am aware that there are decisions in the Supreme Court, beginning with The First Baptist Society v. Rapalee (16 Wend., 605), upon the point now presented to us, in conflict with the opinion I have here expressed. Their error is, in not recognizing the distinction between what is sufficient to constitute a corporation de facto and what is necessary to constitute one de jure, and how and by whom a corporation defacto may be shown not to be a corporation de jure. The State alone can take advantage of a defect in the constitution of a corporation like the one in this case. In its action it will be governed by public policy and considerations. And it has declared that it will not take advantage of the defect in the plaintiff's constitution. I think the Court of Appeals has settled the principle as I have stated it. (Eaton v. Aspinwall,
Dissenting Opinion
The plaintiff's right to recover must, I think, depend upon the validity and sufficiency of the proceedings for their incorporation under the general act of 1850. The question is upon the validity of the contract alleged to have been made by the intestate by his subscription on the 8th of June, 1853; and the tests of its validity must be applied as of that date. There is no evidence that he did anything, after that time, recognizing the existence of the corporation. and up to that time there had been no user of the franchise which would estop any one from disputing the corporate existence of the plaintiff. All that had been done under the articles of association was, that the persons named as directors had come together and chosen from their number a president, secretary, treasurer and other officers. This was in no sense a user of any corporate franchise extended to the body *79
as a corporation by the laws of the State. By thus getting together, calling themselves a corporation and electing officers, they did not become a corporation quoad third persons and the people, so that their corporate existence could only be questioned by the Attorney-General upon a quo warranto. Had they, on the 2d day of June, 1853, brought an action as a corporation, no one would claim that this formal election of officers was such a user of a corporate franchise as to constitute them a corporation de facto. And yet that was all there was when the plaintiff subscribed; and if they were not then a corporation, either de jure or de facto, the contract was invalid, and the subsequent acquisition by the plaintiff of certain corporate rights, as against third persons and the public, by usurpation, could not inure by relation to establish a contract against an individual having no subsequent concern or dealing with the Company. A single act in the exercise of the franchise claimed would not be a user, within the rule that makes a user evidence of corporate existence; still less is the preparation to enter upon the user sufficient to establish the existence of a corporation. The user of a corporate franchise has never, so far as cases have come to my notice, been relied upon or regarded as evidence of corporate existence in actions upon subscriptions to the capital stock. Indeed it could not be, for the reason that contracts of that character are incident to the creation of the corporation. In some cases a person dealing with a corporation is estopped from denying its existence. (Angell
Ames on Corp., § 94.) But in this court, as well as in other courts, in actions upon subscriptions to the capital stock, the question of the creation and existence of the corporation has been regarded as an open question, and the subscriber has not been concluded by his subscription. The questions made in the cases that have been before this court would have been very easily disposed of, had the doctrine of estoppel been deemed applicable; and the fact that the proceedings for the incorporation have been examined and cases disposed of upon the merits, is very high evidence that the subscriber is at liberty *80
to controvert the existence of the corporation. (EasternPlankroad Co. v. Vaughan,
The judgment should be reversed and a new trial granted, costs to abide event.
SUTHERLAND, J., also dissented; SELDEN, J., expressed no opinion.
Judgment affirmed.