104 S.W. 573 | Ct. App. Ind. Terr. | 1907
(after stating the facts as above). The plaintiff in error has filed 17 assignments of error, and states as follows: "There are three questions in this case that in our judgment will settle the case, and upon the determination of these questions this case will be reversed or affirmed. There arc a number of errors assigned, but they all go to those three questions. Hence, in our argument and brief, we shall not take the errors up seriatim, but shall group them in such manner as in our judgment will best present the point at issue.” Then says: “First is the qiiestion of whether the Coweta Cotton <fe Milling Company is a corporation in this case. Second, was the Coweta Cotton & Milling Company a corporation at the time the account sued upon was contracted? Third, conceding that it was a de facto corporation after it filed its “articles with the clerk of the Court of Appeals, were the defendants not liable as partners for that part of the debt contracted prior to the filing of its articles with the clerk of the Court of Appeals?” In support of its first proposition, the plaintiff in error claims that the case of Owen et al. vs Shepard et al., 59 Fed. 746, 8 C. C. A. 244, is exactly in point and decisive of this case. It is a case from the Circuit Court of Appeals for the Eighth Circuit, decided by Judge Caldwell. It appears from the statement of facts that two persons endeavored to secure an incorporation under the laws of the state of Illinois. Judge Caldwell says: “The evidence required by the statute of Illinois to prove the existence of a corporation is the certificate of the Secretary of State of the complete organization of the corporation, making a part thereof a copy of all papers filed in his office in and about the organization of the corporation, and duly authenticated under his hand and seal of state, and, in addition to this, proof that such copy had been recorded in the office of the recorder of deeds of the county where the principal office of the company is located. * * * The company was not shown to be either a defacto or a dc
In support of his second proposition, plaintiff in error cites the case of Garnett et al vs Richardson et al., 33 Ark. 144, which says: “An association of persons cannot do business as a corporation until their articles of .association are filed in the office of the Secretary of State as provided by law. For purchases made by them before then they are personally liable as partners.” Plaintiff in error also cites the case of Hurt vs Salisbury, 55 Mo. 310, which holds that: “Where an action was brought against the directors upon the ground that the association was not incorporated at the time the note
Upon the third proposition, it is suggested by plaintiff in error that “conceding, for the sake of argument, that the Coweta Cotton & Milling Company was a de facto corporation after it had filed its articles with the clerk of the Court of Appeals, were the defendants not liable as partners for that part of the debt contracted prior to the filing of its articles
Defendants in error, to establish their contention as above stated, introduced as a witness Mr. F. M. Davis, and asked him these questions: “Q. What position, if any, did you ever occupy with reference to plaintiff, the Western Investment Company? A. General manager. Q. How long were you manager of that corporation? A. From July, 1901, to the 25th or 27th of March, 1903.. Q.. Who were the officers of the Western Investment Company during the time you were general manager? ■ A. Mr. Naylor was president, Mr.. Wallace, I think, was treasurer, and Mr. Gibbons was secretary, and I was vice president and general manager. Q. You were vice president and general manager? A. Yes, sir. Q. Now, what did you do out there in connection with your office of vice president and general manager for the company? A. I bought the merchandise, I bought the iots on which the buildings were located, I built the buildings; that is, I caused it to be done, I mean. Q. I understand. A. Well, my first move was to buy Mr. Simmons out. Q. He was
Defendant in error also introduced James G. Knight as a witness: “Q. Your name is James G. Knight? A. James G. Knight. Q. What office did you hold in the Coweta Cotton & Milling Company? A. Secretary and manager. * * * Q. What conversations, if any, did you have with any of the representatives of the Western Investment Company, plaintiff, about the gin proposition and the incorporation, if any? A. Had a conversation with Mr. Naylor, in which he wanted to know why I didn’t let him in on it. .1 told him I understood Mr. Davis had already taken one-fifth, and that was letting the Western Investment Company in, as Davis was taking it for them, and he seemed satisfied -with that, and that was the whole extent of it. * * * Q. No; at any time? A. Yes, sir; I had such a conversation with Mr. Edwards. Q. What, if anything, was said,, anything about this stock, in any of the conversations with Mr. Edwards? A. He seemed to think that we ought to give him the seed on account of the Western Investment Company having stock in the gin. * * * Q. I will ask you to state who got the use and benefit of the goods that were sold, the material for the building, and all other items that make up this account sued on in this action-? A. The Coweta Cotton & Milling Company. * * * Q. . State, Mr. Knight, how you were treated by .the Western Investment Company in their business relations with you in the sale of these goods to you, as well as other business transactions had with them? A. We were treated as a corporation. * * Q. Mr. Knight, I will ask you whether or not you, as the general manager of the Coweta Cotton & Milling Company, acted in good faith in the belief that you were a corporation? A. Yes, sir. Q. Did you or your co-incorporators delay your incorporation with the purpose of deceiving or defrauding any one? A. No, sir.- * * * Q. Mr. Knight,
. Introduced in evidence and read by Mr. Murphey as follows: Defendant’s Exhibit D: “Wagoner, I. T., Dec. 5, 1902. $1500.00. The First National Bank of Wagoner, Indian Territory, pay to Western Investment Co. or bearer, fifteen hundred and no dollars. No. 101. Coweta Cotton & Milling Co., J. G. Knight, Secy.” Defendant’s Exhibit E: “Wagoner, I. T., Dec. 1st, 1902. $1500.00. The First National Bank of Wagoner, Indian Territory. Pay to Western Investment Co. or bearer, fifteen hundred & no-100 dollars. No. ---. Coweta Cotton & Milling Co., J. G. Knight, Secy.” Defendant’s Exhibit F: “Wagoner, Ind. Ter., Jan. 15th, 1903. First National Bank of Wagoner, pay to Western Inv. Co. Bearer, $1500.00. Fifteen hundred & no dollars. Coweta Cotton & Milling Co., J. G. Knight, Secy.”
It appears from the testimony of Mr. Davis that he was vice president and general manager of the plaintiff, and that lie had entire charge of the business of the plaintiff; that he was instrumental in the organization of the defendant Coweta Cotton & Milling Company as a corporation. Plaintiff in error objected to the testimony of Mr. Davis upon the ground that no authority was given by the board of directors of the plaintiff, authorizing Mr. Davis to do the things that he testified that he did do for the plaintiff, and that, therefore, the plaintiff was not bound by his action as general manager. Mr. Davis states that there was no formal action of the board, but by conversations with' the directors among themselves he did what was desired by the plaintiff, and that his authority in acting for the plaintiff in subscribing for stock in the defendant corporation for the plaintiff was given' him by consultation
There is undoubtedly some conflict of authority between the decisions of the different states on the subject of the individual liability of the directors in acting for a proposed corporation which has not been fully organized under the law. In Snider’s Sons’ Company vs Troy, 91 Ala. 224, 8 South. 658, 11 L. R. A. 515, 24 Am. St. Rep. 887, the court discusses this conflict of authority, and says: “Whether the shareholders in a corporation de facto are individually liable for the corporate debts, in the absence of fraud or a statute, is a question as to which the authorities are in direct antagonism. In Cook on Stocks & Stockholders, § 233, the doctrine asserted is: ‘A corporate creditor seeking to enforce the payment of his debt may ignore the existence of the corporation, and may proceed against the supposed stockholders as partners,’ by proving that the prescribed method of becoming incorporated was not complied with by the company in question.’ The leading cases supporting this doctrine are Bigelow vs Gregory, 73 Ill. 197; Abbott vs Omaha Smelt. Co., 4 Neb. 416; Garnett vs Richardson, 35 Ark. 144; Ferris vs Thaw, 72 Mo. 446; Ridenour vs Mayo, 40 Ohio St. 9; Coleman vs Coleman, 78 Ind. 344. * * * In 2 Morawetz on Private Corporations, § 748, the doctrine is stated as follows: ‘If an association assumes to enter into a contract in a corporate capacity, and the party dealing with the association contracts with it as
In Gartside Coal Co. vs Maxwell (C. C.) 22 Fed. 197, decided in the Circuit Court for the Eastern District of Missouri, Brewer, J., says: “It is very clear to my mind that this attempted incorporation was invalid, and that, if it had ever boon challenged by the officer of the state, in proper proceedings, its. exercise of corporate powers would have been enjoined; but, while 1 think that is unquestionably so, it does not seem to me to follow that those who were supposing themselves stockholders in this corporation can be held personally liable. I think the true rule is this: That where persons knowingly and fraudulently assume a corporate existence, or protend to have a corporate existence, they- can be held liable as individuals; but where they are acting in good faith, and suppose that they are legally incorporated — that they are stockholders in a -valid corporation — and where the corporation assumes to transact business for a series of years, and the assumed corporate existence is not challenged by the state, then they cannot be held liable, as individuals, as members of the corporation. Of course, the converse is perfectly true, that a person who deals with a corporation, or gives to an assumed
In Johnson et al vs Okerstrom et al., 73 N. W. 147, 70 Minn. 303, from the Supreme Court of Minnesota, the court says: “A de facto corporation exists where there is a law authorizing the creation of a corporation, an attempt to organize a corporation, pursuant to it, and user as a corporation under such attempted organization. Color of apparent organization does not mean that there shall have been a full compliance with what the law requires to be done, nor a substantial compliance. A substantial compliance will make a corporation de jure. But there must lie an apparent attempt to perfect an organization under the law. There being such apparent attempt to perfect an organization, the failure as to some substantial requirement will prevent the corporation from being a corporation de jure; but, if there be user pursuant to such attempted organization, it will not prevent it being a corporation de facto. * * * In this case the evidence shows that there was a bona fide attempt to incorporate, and a colorable compliance with the law, followed by a user as a corporation of the rights which the parties be
In Tennessee Automatic Lighting Co. vs Massey et al., 56 S. W. 35, in the Court of Chancery Appeals of Tennessee, the court says: “It follows from this that the Nashville Hotel Company by its conduct gave sufficient proof of user of the franchises claimed by it, and that it occupied at least the status of a corporation de facto, and the complainant, having dealt with such supposed corporation as a corporation, cannot now abandon this position, and sue the individual members, to hold them liable merely as partners. Merriman vs Magiveny, 12 Heisk. 494; Railroad Co. vs Johnson, 8 Baxt. 332, 335; Manufacturing Co. vs Vertrees, 4 Lea, 75; 1 Thomp. Corp. §§ 518-538 (and see section 521); Sherwood vs Alvis, 83 Ala. 115, 3 South. 307, 3 Am. St. Rep. 695.”
In Finnegan vs Knights of Labor Bldg. Ass’n et al., 53 N. W. 1150, 52 Minn. 239, 18 L. R. A. 778, 38 Am. St. Rep. 552, in the Supreme Court of Minnesota, the court say: “The plaintiff furnished plumbing for the building during its construction amounting to S599.50, for which he brings this action against several subscribers to the stock, as copartners doing business under the firm name of the ‘K. of L. Building Association.’ The theory upon which the action is brought is that, the association having failed to become a corporation, it is in law a partnership, and the members liable as partners for the debts incurred by it.” And on page 1151 of 53 N. W., page 243 of 52 Minn., the court says: “ ‘When a body of men are acting as a corporation, under color of apparent organization, in pursuance of some charter or enabling act, their authority to act as a corporation cannot be questioned collaterally.’ ”
In Merchants’ & Manufacturers’ Bank vs Stone et al., 38 Mich. 779, it is said: “In short, the company was prima facie a lawful corporation which the note ivas taken, and the bank admitted in the very transaction that it was one in fact, and that admission cannot be disputed in this collateral way in order that the bank may call in question the corporate existence of the company and charge against the individual members the precise obligation which was unequivocally accepted as a. corporate one.” In Gow vs Collins & Parker Lumber Co., 109 Mich. 45, 66 N. W. 676, the court says: “The complainants seek to have the corporation known as the Collin & Parker Lumber Company declared invalid and void, and
In Eaton vs Aspinwall, 19 N. Y. 119, the court says: “Thus it will be seen that this corporation, though not a valid corporation in point of law, ^may carry on its enterprises, have its day in court, and divide its revenue among the holders of the shares of its capital, until the state shall interpose and ask that it be dissolved.”
In Little Rock & Ft. Smith R. R. Co. vs Perry, 37 Ark. 164, the court says: “That where the formation of a corporation was in contemplation and the promoters of the corporation were taking initiatory steps to perfect its organization, and obtain a charter, and provide in advance the means necessary for its successful operation, all contracts made by such promoters, for the benefit of the future corporation, and which were reasonable and proper to put it in operation, and the benefits of which were afterwards accepted by the corporation, became binding on the corporation without any formal contract to,pay.”
In Whitney vs Wyman, 101 U. S. 392, 25 L. Ed. 1050, the syllabus of the case is as follows: “Where a party who discloses his principal and is known to be acting as an agent enters as such into a contract, he is not liable thereon in the absence of his express agreement to be thereby bound. Where a corporation, organized pursuant to the provisions of a statute, but before its articles of association were filed with the county clerk, entered into a contract for certain machinery to enable
In W. L. Wells. Company vs Gastonia Cotton Manufacturing Company, 198 U. S. 177, 25 Sup. Ct. 640, 49 L. Ed. 1003, the court says: “The contention of the defendants in the court below was — and their contention here is — that the subscription of $10,000 to the capital stock of the W. L. Wells Company and the payment thereof, was a condition precedent to the company’s becoming a corporation. * * * We are of opinion that the Circuit Court of Appeals erred in
Under the decision in Garnett vs Richardson, supra, we are of the opinion that the corporation was not fully or
The laws of Arkansas put in force in this jurisdiction in reference to the organization of corporations provides that, before any corporation formed or established by virtue of the provisions of this act shall commence business, the president and directors thereof shall file a true copy of their articles of association with the clerk of the Court of Appeals, and a duplicate thereof with the clerk of the county in which said corporation is to transact said business. The statutory requirement in the two cases is similar, and the Supreme Court, in passing upon this very question, says, if the commencing of the business for which it was incorporated before a certain amount of capital stock was subscribed and paid for was in violation of the company’s charter, that was a matter for which it could be called to account by the state, and did not affect the existence in law of the company as a corporation.
In our judgment, the decisions of the Supreme Court of the United States in the above cited cases are conclusive upon the question involved in this case, and are binding upon this court. Therefore the action of the court below in directing a verdict for the defendant was right, and should be, and is hereby, affirmed.