Taking Part in Organization Before Subscription Complete, But if the stockholder, knowing that the stock is only partly subscribed, takes part in organizing and operating the company, he will be estopped to set up the incompleteness of the subscription to defeat his own liability." c. BY DEED. A party to a deed to or from a de facto corporation is estopped to deny the existence of the corporation in order to avoid the effect of the deed.2 Maine. Kennebec, etc., R. Co. v. Jarvis, 34 Me. 360; Oldtown, etc., R. Co. v. Veazie, 39 Me. 571; Penobscot R. Co. v. Dummer, 40 Me. 172, 63 Am. Dec. 654; Somerset, etc., R. Co. 7. Cushing, 45 Me. 524; Somerset R. Co. v. Clarke, 61 Me. 379. Massachusetts. Salem Mill Dam Corp. v. Ropes, 6 Pick. (Mass.) 23, 9 Pick. (Mass.) 187; Newburyport Bridge v. Story, 6 Pick. (Mass.) 45: Central Turnpike Corp. v. Valentine, 10 Pick. (Mass.) 142; Cabot, etc., Bridge v. Chapin, 6 Cush. (Mass.) 50; Worcester, etc., R. Co. v. Hinds, 8 Cush. (Mass.) 110; Stoneham Branch R. Co. v. Gould, 2 Gray (Mass.) 277. Michigan. Shurtz v. Schoolcraft, etc., R. Co., 9 Mich. 269; Swartwout v. Michigan Air Line R. Co., 24 Mich. 389; Monroe v. Fort Wayne, etc., R. Co., 28 Mich. 272. Nebraska. — Livesey v. Omaha Hotel Co., 5 Neb. 50; Macfarland V. West Side Imp. Assoc., (Neb. 1898) 73 N. W. Rep. 736. Washington. - Birge v. Browning, 11 Wash. 249. * * * In Illinois, Allman v. Havana, etc., R. Co., 88 Ill. 521, which accords with these authorities, has been questioned in Peoria, etc., Union R. Co. v. Peoria, etc., R. Co., 105 Ill. Io, as follows: "That decision was under the general railroad law, and this is under a special charter. If this does not distinguish that case from this, it must be limited to cases arising under the general railroad law, or must be overruled, as on more mature reflection we are convinced it is repugnant to the general doctrine applicable to cases like the present. But Hudson v. Green Hill Seminary Corp., 113 Ill. 627, and Henry v. Centralia, etc., R. Co., 121 Ill. 264, reaffirm the Allman case, without referring to the Peoria case. How Number of Shares Fixed Charter and By-laws. Though a charter provision as to the number of shares would constitute a defense, such a provision in the by-laws would not. Kennebec, etc., R. Co. v. Jarvis, 34 Me. 360. But where the charter leaves the amount to be fixed by the corporation, and it has been so fixed, the full amount must be subscribed. Somerset, etc., R. Co. v. Cushing, 45 Me. 524. If the charter of a corporation does not fix the number of shares, this must be done by the directors or stockholders, and the number filed, before there can be any valid assessment. Somerset R. Co. v. Clarke, 61 Me. 379. And the passing and acceptance of a charter amendment reducing the amount required will not avail to make the subscription binding. Nor will a corporator be estopped to set up the lack of legal organization by having acted in the organization. "If a vote had been passed by them with entire unanimity that they would waive all objection on account of a deficiency of capital, and that they would proceed to * * * make assessments, it would have been but a violation of the charter, and illegal and void." Oldtown, etc., R. Co. v. Veazie, 39 Me. 571. Stock Subscribed by Agent Without AuthoritySubsequent Insolvency. If thirty of five thousand shares are subscribed by one in behalf of another, without authority, the stock is incomplete, and no binding assessment can be made, though the person subscribing may be liable for the amount as damages. But the unexpected insolvency of some subscriber is not a defense. Salem Mill Dam Corp. v. Ropes, 9 Pick. (Mass.) 187. Corporation Must Prove Stock Subscribed and Conditions Fulfilled. The company must show that all the stock has been subscribed, and, if any subscriptions were conditional, that the conditions have been fulfilled or waived. Central Turnpike Corp. v. Valentine, 10 Pick. (Mass.) 142. A Subscription to be Paid For in Stock of Another Company is not to be included. Cabot, etc., Bridge v. Chapin, 6 Cush. (Mass.) 50. 1. Taking Part in Organization Before Subscription Complete. — Litchfield Bank v. Church, 29 Conn. 137: Hager v. Cleveland, 36 Md. 476; International Fair, etc., Assoc. v. Walker, 83 Mich. 386; Macfarland v West Side Imp. Assoc., (Neb. 1898) 73 N. W. Rep. 736. Contra, Oldtown, etc., R. Co. v. Veazie, 39 Me. 571, quoted in last note supra. 2. Estoppel by Deed to or from Corporation — United States. Cowell v. Colorado Springs Co., 100 U. S. 55; Doyle v. San Diego Land, etc., Co., 46 Fed. Rep. 709. Missouri. - German Bank v. Stumpf, 6 Mo. App. 17; Broadweli v. Merritt, 87 Mo. 95; Ragan v. McElroy, 98 Mo. 349: Baker . Atchison, etc., R. Co., 122 Mo. 396; Bradley v. Reppell, 133 Mo. 545. Wisconsin. Whitney v. Robinson, 53 Wis. 309; Ricketson v. Galligan, 89 Wis. 394. One whose title to real estate comes from a deed from a corporation cannot deny the exist ence of the corporation in order to attack the validity of a mortgage executed by it prior to his own title. Hasselman v. U. S. Mortgage Co., 97 Ind. 365: Dooley v. Wolcott, 4 Allen (Mass.) 406; Wallace . Loomis, 97 U. S. 146. One who claims under a deed which recited a mortgage in favor of a party bearing a corporate name is estopped to deny the corporate character of the mortgagee. Hasenritter. Kirchoffer, 79 Mo. 239. One who sells real estate to a corporation de 2 d. BY OTHER FACTS. So one who has sued a corporation as such,1 or suffered a judgment in favor of such a corporation, or filed a counterclaim against it, or gone to trial on the merits, or given a recognizance in the action, or given a bond to a third party, in which a corporation is named as such as the principal, or a town which has levied a tax on a corporation as such, in a suit to recover back the tax, is estopped to deny the corporate existence which has thus been recognized and affirmed. 6 e. ESTOPPEL of the CoRPORATION ITSELF. And an association which has assumed to be and acted as a corporation, and incurred obligations in that capacity, is estopped to deny its own corporate existence in order to relieve itself or its members from such liabilities.8 facto cannot question its right to take title after it has paid the consideration. Smith v. Sheeley, 12 Wall. (U. S.) 358. One who has made a mortgage to a corporation cannot defeat foreclosure by denying the corporate existence of the mortgagee. Grangers' Business Assoc. v. Clark, 67 Cal. 634; Shasta Bank v. Boyd, 99 Cal. 604; Payette v. Free Home Bldg. Loan, etc., Assoc., 27 Ill. App. 307; Franklin v. Twogood, 18 Iowa 515; Den v. Van Houten, 10 N. J. L. 270; Franz v. Teutonia Bldg. Assoc. No. 2, 24 Md. 259. One who has bought land mortgaged to a corporation, assuming payment of the mortgage, is estopped to deny the existence of the corporation as a bar to a foreclosure action. People's Sav. Bank, etc., Assoc. v. Collins, 27 Conn. 142. One who has borrowed money, and given a mortgage to the plaintiff in its corporate name, cannot deny the legal incorporation of the plaintiff in an action for correction of the deed. West Winsted Sav. Bank, etc., Assoc. v. Ford, 27 Conn. 282, 71 Am. Dec. 66. 1. Suing Corporation as Such. Lester v. Georgia, etc., R. Co., 90 Ga. 802; Cresswell v. Oberly, 17 Ill. App. 281; Pochelu v. Kemper, 14 La. Ann. 307, 74 Am. Dec. 433; McClinch 7. Sturgis, 72 Me. 288. See Heuer v. Carmichael, 82 Jowa 288; Stivers v. Carmichael, 83 Iowa 759. 2. Suffering Judgment in Corporation's Favor. Trogdon . Cleveland Stone Co., 53 Ill. App. 206; Estey Mfg. Co. v. Runnels, 55 Mich. 130. 3. Filing Counterclaim Against Corporation. Ward v. Minnesota, etc., R. Co., 119 Ill. 287; McKnight v. Mineral Point, 1 Pin. (Wis.) 99: Black River Imp. Co. v. Holway, 85 Wis. 344. 4. Going to Trial on Merits. - Ward v. Minnesota, etc., R. Co., 119 Ill. 287. As to admitting proof without objection that the property for the recovery of which the action was brought belonged to the plaintiff corporation, see Remington Paper Co. v. O'Dougherty, 65 N. Y. 570. 5. Giving Recognizance in Action. Henriques v. Dutch West India Co., 2 Ld. Raym. 1535. Action on Bond Given to Prevent Replevin. In an action on a bond given by the defendant to the plaintiff in a former action between the same parties, conditioned for the delivery of certain personal property in case of judgment in favor of the plaintiff, the defendant is estopped to deny the legality of the corporation. Loaners' Bank v. Jacoby, 10 Hun (N. Y.) 143. In an Action by a Corporation upon a Bond the production of the bond to the plaintiff by its corporate name and its successors and assigns "is sufficient prima facie proof of the plaintiff's incorporation. Williamsburg City F. Ins. Co. v. Frothingham, 122 Mass. 391, citing Williams v. Cheney, 3 Gray (Mass.) 215; Topping v. Bickford, 4 Allen (Mass.) 120; Conard v. Atlantic Ins. Co., 1 Pet. (U. S.) 386. 6. Giving Bond Wherein Corporation Is Principal. Jefferson v. McCarthy, 44 Minn. 26. Giving Bond for Attachment of Corporation Property. When persons are joined in giving a bond for the attachment of the property of a corporation, they are not in a position to deny its corporate existence. Seattle Crockery Co. v. Haley, 6 Wash. 302, 36 Am. St. Rep. 156. 7. Action to Recover Taxes Against Corporation. - Monroe Water Co. v. Frenchtown Tp., 98 Mich. 431. 8. When Corporation Estopped - United States. - Handley v. Stutz, 139 U. S. 417 (relying on the Kentucky statute), Shapleigh v. San Angelo, 167 U. S. 646; Aller v. Cameron, 3 Dill. (U. S.) 198; Phinizy v. Augusta, etc., R. Co., 62 Fed. Rep. 678; Farmers' L. & T. Co. v. Toledo, etc., R. Co., 67 Fed. Rep. 49: Blackburn v. Selma, etc., R. Co., 2 Flipp. (U. S.) 525. Alabama. McCullough . Talladega Ins. Co., 46 Ala. 376. Georgia. Southern Bank v. Williams, 25 Ga. 534: Imboden v. Etowah, etc., Min. Co., 70 Ga. 86; Georgia Ice Co. v. Porter, 70 Ga. 637; Stewart Paper Mfg. Co. v. Rau, 92 Ga. 511; Georgia Southern, etc., R. Co. v. Mercantile Trust, etc., Co., 94 Ga. 306, 47 Am. St. Rep. 153. Illinois. - U. S. Express Co. v. Bedbury, 34 Ill. 459; Racine, etc., R Co. v. Farmers' L. & T. Co., 49 Ill. 346, 95 Am Dec. 595; Independent Order, etc., v. Paine, 122 Ill. 625; Fitzpatrick v. Rutter, 160 Ill. 282; Clarkson v. Erie, etc., Dispatch, 6 Ill. App. 284; Fields v. United Brotherhood, etc., 60 Ill. App. 258; Forest Glen Brick, etc., Co. v. Gade, 55 Ill. App. 181. Indiana. - Tipton F. Co. v. Barnheisel, 92 Ind. 88; Ewing v. Robeson, 15 Ind. 26; Adams Express Co. v. Hill, 43 Ind. 157. Iowa. - Quinn v. Shields, 62 Iowa 138, 49 Am. Rep. 141 (relying on a statute). Kentucky. Walton v. Riley, 85 Ky. 413 (relying on a statute). Maryland. - Hammond v. Straus, 53 Md. 1. Massachusetts. - Dooley v. Cheshire Glass Co., 15 Gray (Mass.) 494. IV. INDIVIDUAL LIABILITY OF MEMBERS OF DEFECTIVELY Organized CORPORATION. - The authorities with reference to the individual liability of the members or stockholders in corporations defectively organized are confused and not easily reconcilable. The whole question is fully discussed under another title in this work.1 DE FACTO COURT.-See the title DE FACTO OFFICERS, post. DE FACTO GOVERNMENT. (See the titles DE FACTO OFFICERS, post; DE FACTO CORPORATIONS, ante.)- A government de facto in the legal sense is a government that unlawfully gets the possession and control of the rightful government, and maintains itself there by force of arms against the will of the rightful government, and claims to exercise the powers thereof.2 DE FACTO JUDGE. See the title DE FACTO OFFICERS, post. Michigan. Mich. 482. Minnesota. Jewell v. Grand Lodge, etc., 41 Minn. 405; Scheufler v. Grand Lodge, etc., 45 Minn. 256; Perine v. Grand Lodge, etc., 48 Minn. 82; Cornfield v. Order Brith Abraham, 64 Minn. 261. See also Foster v. Moulton, 35 Minn. 458. - Empire Mfg. Co. v. Stuart, 46 Wisconsin. Williams υ. Stevens Point Lumber Co., 72 Wis. 487. An association which exercises corporate functions, and has a name implying corporate existence, cannot, when sued as a corporation, deny its corporate existence. U. S. Express Co. v. Bedbury, 34 Ill. 459: Fitzpatrick v. Rutter, 160 Ill. 282; Clarkson v. Erie, etc., Dispatch, 6 Ill. App. 284; Fields V. United Brotherhood, etc., 60 Ill. App. 258. See also Grand River Bridge Co. v. Rollins, 13 Colo. 4. A corporation cannot repudiate acts which it performed as a corporation, on the ground that it was not at that time organized so as to have corporate capacity, though it has since perfected its organization. Georgia Ice Co. v. Porter, 70 Ga. 637; Independent Order, etc., 7. Paine, 122 Ill. 625; Empire Mfg. Co. v. Stuart, 46 Mich. 482. Estoppel of Creditors Intervening to Prevent Enforcement of Corporation Obligations. Creditors intervening in a suit brought by the mortgage bondholders of a railroad to foreclose the mortgage are estopped, just as the corporation itself would be, from asserting the illegality of the corporation as a defense to the enforcement of the bonds. Continental Trust 770 Co. v. Toledo, etc., R. Co., 82 Fed. Rep. 642. Distinctions and Qualifications. An association which has done business as a corporation, under an attempted organization, has the burden of proof to show any irregularity in the publication of the certificate. Wood v. Wiley Constr. Co., 56 Conn. 87. A de facto corporation is estopped to deny its existence at the time of making the contract, but not the subsequent cessation of its corporate functions, both de facto and de jure. Dobson v. Simonton, 86 N. Car. 492. Where goods were sold to a person under the designation of “ manager of the South Publishing Company," when there was at the time no such company, and no association of individuals doing business as such, and no attempt at an organization or incorporation, it was held that, in an action against a corporation subsequently organized under that name by the individual to whom the goods were sold, the corporation was not estopped from denying its corporate liability, none of the goods ever having come into its possession. Bradley Fertilizer Co. v. South Pub. Co., 6 Misc. Rep. (N. Y. C. Pl.) 128. Doctrine Denied. Boyce v. Towsontown Station, etc., 46 Md. 359, denies the whole doctrine of estoppel of an acting corporation to deny its own existence, the court saying: "We think it would be extending the doctrine of estoppel to an extent not justified by the principles of public policy, to allow it to operate through the conduct of the parties concerned to create substantially a de facto corporation, with just such powers as the parties may by their acts give to it. This would be substituting the dealings of the parties for compliance with the requirements of the law. *To permit parties indirectly, or upon the principle of estoppel, virtually to create a corporation for any purpose, would be in manifest opposition to the statute law, and clearly against its policy, and justified upon no sound principle in the administration of justice." See also the dictum in Welland Canal Co. v. Hathaway, 8 Wend. (N. Y.) 484, 24 Am. Dec. 51. 1. See the title STOCKHOLDERS. * * * * * 2. Chisholm v. Coleman, 43 Ala. 204. See also Scheible v. Bacho, 41 Ala. 434; Thorington v. Smith, 8 Wall. (U. S.) 8. Volume VIII. DE FACTO OFFICERS. BY JOSEPH WALKER MAGRATH. I. DE FACTO OFFICERS OF PRIVATE CORPORATIONS, 773. 1. Who Are, 773 a. Definition, 773 b. What May or May Not Give Color of Title, 774- (2) Acceptance of Office and Acting as an Officer, 774. (3) Possession of the Corporation's Property, 774. (4) Holding Over, 775. (5) Forcible Intrusion, 775. (6) Unconstitutional Law or Void Resolution of Corporation, 775 c. Ineligible Persons, 775. (1) Residence Qualification, 775 (2) Stock Qualification, 775. d. Persons Irregularly Chosen, 775. (1) Election to Office Not Vacant, 775. (2) Election at Improper Time, 776. (3) Election at Improper Place, 776. (4) Election at Meeting Without Quorum, 776. (5) Election by Less than Quorum of Directors, 776. (6) Failure to File Certificate of Election, 776. e. Effect of Decision Against Title, 777 2. Rights and Powers, 777. a. May Conduct Business, 777. b. May Sue in Corporate Name, 777. c. Acts for Own Benefit Void, 777. d. Cannot Acquire Rights as Creditor by Neglect of Duty as Officer, 777. e. No Right to Hold Over in Default of Appointment of Successors, 778. 3. Liabilities, 778. a. Personal Liability, 778. b. Liability of Sureties, 778. 4. Validity of Acts, 778. a. General Rule, 778. b. Limitation, 781. c. Effect of Illegal Acts, 781. II. DE FACTO PUBLIC OFFICERS, 781. 1. Who Are, 781. a. Definitions, 781. (1) Lord Ellenborough's Definition, 781. (3) Other Definitions, 783. b. Persons Acting Without Appointment or Election, 783. (1) There Must Be Appearance of Rightful Authority, 783. (3) Acquiescence, 785. (4) Possession of Office Necessary, 786. c. Persons Not Properly Qualified, 786. (1) Irregularities in Form of Qualification, 786. (4) Failure to File Appointment, Commission, or Acceptance of Office, 787. (5) Omission to Qualify, 788. d. Persons Not Eligible, 788. e. Lack of Power in Electing or Appointing Body, 789. (1) In General, 789. (2) Appointment to Elective Office, or Vice Versa, 791. f. Persons Irregularly Elected or Appointed, 791. (1) In General, 791. (2) Office Not Vacant, 792. (3) Appointment for Too Long a Term, 792. g. Persons Elected or Appointed under Unconstitutional Law, 793. (2) Office Purporting to Be Created by Unconstitutional Law, 794h. What May Give Color of Title, 794 (1) Significance of Term 794 (2) Presumption of Right to Office, 795. (3) Entering Office Before Term Begins, 795. (4) Holding Over, 796. (5) Extension of Officer's Furisdiction, 798. (6) Decision in Favor of Right, 798. Commission Intended for Another Person, 798. i. Where There Can Be No Color of Title, 799. (2) Person in Hiding, 799. (3) Fudicial Decision Against Right, 799. j. As to Existence of Office, 799. (1) There Must Be an Office in Existence, 799. (2) Office Irregularly Created, 800. (3) Conflicting Doctrines as to Whether a De Facto Office Can 2. Rights, 802. Exist, 801. a. Right to Act, 802. b. Right to Perfect Title, 703. c. Right to Protection, 803. (1) Protection from Interference, 803. (2) Not Protected from Liability for Acts, 804. (3) Protection of Person Acting under De Facto Officer, 805. d. Office Confers No Privileges, 805. 3. Duties, 806. 4. Liabilities, 806. a. Personal Liability, 806. (1) Liability for Money Received, 806. (2) Cannot Escape Liability by Denying Title, 806. (3) Criminal Liability, 806. (4) Penalties for Usurpation, 807. b. Liability of Superior Officer, 807. c. Liability of Sureties, 807. (1) In General, 807. (2) May Not Deny Principal's Title, 807. (3) Not Liable to De Fure Officer for Fees, 808. 5. Right to Compensation as Between De Jure and De Facto Officers, 808. a. Rights of De Fure Officer, 808. (1) Entitled to Emoluments of Office, 808. (2) When Right Matures, 809. (3) Right to Recover from De Facto Officer, 810. |