9. A promissory note payable to a person by name, adding treasurer, &c., naming a railway corporation, must be regarded as payable to the person named and not to the corporation.1 But such a note, given for a conditional subscription of stock, must be regarded as a waiver of the condition, and, if executed some time after the date of the subscription, cannot be construed as part of the contract of subscription.15 10. A corporation, after having claimed and exercised corporate powers for a considerable time, will be estopped from denying its corporate existence.16 It is said in some cases, that if the corporation contracts by a style which is usual in creating corporations, and which discloses the names of no natural persons, that the corporate existence will be implied and need not be averred.17 But in general such a proposition would not be regarded as maintainable in suits, either in favor or against a corporation: it should be described as such in the declaration, with its location at its central place of doing business. 11. It has been held, that where defendants, sued as a corporation, rely upon the fact that the corporate existence has ceased before the institution of the suit, it must be pleaded in abatement and not in bar of the action. But in general the want of corporate existence and power may be shown at any time before judgment, upon proper notice and special plea.18 A party who has sued a corporation and recovered judgment against them by a particular name, is afterwards estopped from denying the corporate existence.19 But this seems not altogether in accordance with the requirement that estoppels be mutual, unless the judgment were between the same parties. Such an estoppel would therefore only operate as between the plaintiff in the former suit and the corporation. 12. The cases are very numerous where it has been held that a 14 Chadsey v. McCreery, 27 Ill. 253. 15 O'Donald v. E. Ind. & Cl. Railw. Co., 14 Ind. 259. 16 Callender v. Painesville & H. R. R. Co., 11 Ohio N. S. 516; The Atlantic & Ohio R. R. v. Sullivant, 5 Ohio N. S. 276. See also Ashtabula & New L. R. R. Co. v. Smith, 15 Ohio N. S. 328. 17 Stein v. Ind. &c., Association, 18 Ind. 237. 18 Meikel v. The German Savings Fund Society, &c., 16 Ind. 181. 19 Pochelu v. Kemper, 14 Louis. Ann. 308. party who gives a written contract to a corporation by a particular name is estopped to deny the existence and name of such corporation.20 13. And in all cases of the plea of nul tiel corporation, proof of a corporation in fact will be sufficient.20 20 Hubbard v. Chappel, 14 Ind. 601. CHAPTER IV. PROCEEDINGS UNDER THE CHARTER. SECTION I. Organization of the Company. 1. Conditions precedent must be performed. 8. Defect of organization must be pleaded 2. Stock must all be subscribed, ordinarily. 3. Charter-location of road, condition prece dent. 4. Colorable subscriptions binding at law. specially. 9. Question cannot be raised collaterally. 10. Records of company, evidence. 11. Membership, how maintained. 12. By subscription and transfer of shares. 13. Offers to take shares not enforced in equity, and may be withdrawn. § 18. 1. To give the corporation organic life, the mode pointed out in the charter must ordinarily be strictly pursued. Conditions precedent must be fairly complied with. Thus, where a given amount of capital stock is required to be subscribed or paid in before the corporation goes into operation, this is to be regarded as an indispensable condition precedent.2 But if the charter is in the alternative, so that the stock shall not be less than one sum or greater than another, the company may go into operation with the less amount of stock, and subsequently increase it to the larger.2 1 Angell & Ames on Cor. ch. 3, §§ 95–112; 2 Kent, Comm. 293 et seq. 2 Post, § 51, and cases cited. Bend v. Susquehanna Bridge, 6 Har. & Johns. 128; Gray v. Portland Bank, 3 Mass. 364; Minor v. The Mechanics' Bank of Alexandria, 1 Peters, (U. S.) 46. Opinion of Story, J. And where a corporation is formed, or attempted to be formed, under general statutes, the inchoate proceedings do not ripen into a corporation, until all the requirements of the statute, even the filing of the articles in the office of the Secretary of State, are complied with. And until this is done, the subscription of any one to the articles is a mere proposition to take the number of shares specified, of the capital stock of the company thereafter to be formed, and not a binding promise to pay. The obligation is merely inchoate and can never become of any force, unless the corporation goes into effect in the mode pointed out in the statute. And until that time, the subscriber may revoke the offer, and if the articles are in his possession or control, erase his name. Burt v. Farrar, 24 Barb. 518. 2. And where business corporations are created with a definite capital, it is regarded as equivalent to an express condition that the whole stock shall be subscribed before the company can go into full operation; and in the case of banks, it must be paid in specie in the absence of all provision to the contrary, before they can properly go into operation.3 3. In some cases it is a condition of the charter, or of the subscriptions to the stock, that the track of a railway shall touch certain points, or that it shall not approach within certain distances of other lines of travel. This class of conditions, so far as they can practically be denominated conditions precedent, must be strictly complied with, before the company can properly go into operation so as to make calls. 4. But it has been held, that colorable subscriptions to stock, in order to comply with the requisites of the charter, are not to be regarded as absolutely void. They are binding upon the subscribers themselves. And they are binding upon the other subscribers unless, upon their first discovery, they take steps to stay the further proceedings of the corporation, which may be done in a court of equity. If there has been unreasonable delay in opposing the action of the corporators, upon the faith of such subscriptions, or if matters have progressed so far before the discovery of the true character of the subscriptions, by the parties liable to be injurious * 3 King v. Elliott, 5 Sm. & Mar. 428; post, § 51. But a requirement in the charter of a railway company, that $1,000 per mile shall be subscribed, and ten per cent paid thereon in good faith, does not require ten per cent to be paid by each subscriber, in order to the performance of the condition. It is a sufficient compliance with such requirement, if that proportion on the whole subscription. be paid. Ogdensb., Rome, & Clay. R. v. Frost, 21 Barb. 541. But under the late English Statutes corporations are allowed to organize, and make calls to some extent, before all the capital is subscribed. Or. P. W. Co. v. Brown, 9 Jur. N. S. 578; s. c. 2 H. & C. 63. But in America the rule that all the stock must be subscribed before the company can go into operation is strenuously adhered to. Shurtz v. The S. & T. Railw. Co., 9 Mich. 269. And upon general principles it seems not to be held indispensable in England that all the stock be subscribed, either to enable the corporation to go into operation, or even to borrow money on mortgage. McDougall v. The Jersey Imperial Hotel Co., 2 H. & M. 528; s. c. 10 Jur. N. S. 1043. But, in America, the entire capital stock must be subscribed and paid in money, and it will not be sufficient to pay it in the equivalent for money, to the acceptance of the shareholders or directors, unless the charter or general laws of the State so provide. The People v. The Troy House Co., 44 Barb. 625. ly affected by them, as to render it difficult to restore the parties to their former rights, the corporation will still be allowed to proceed, notwithstanding the fraud upon the charter.1 5. Conditions subsequent in railway charters, by which is to be understood such acts as they are required to perform after their organization, will ordinarily form the foundation of an action at law, in favor of the party injured; or they may be specifically enforced in courts of equity, in cases proper for their interference in that mode; or if the charter expressly so provide, proceedings by way of scire facias, to avoid the charter may be taken.5 6. Where a statute declares certain persons by name, and such other persons as shall hereafter become stockholders, a corporation, the distribution of the stock, in the mode pointed out in the statute, is a condition precedent to the existence of the corporation.6 *7. Where the charter of a railway company appoints a certain number of commissioners, to receive subscriptions and distribute the stock, in such manner as they shall deem most conducive to the interests of the company, making no provision in regard to a quorum, all must be present to consult when they distribute the stock, although a majority may decide, this being a judicial act. Walker v. Devereaux, 4 Paige, 229. The entire ground of chancery jurisdiction in regard to the conduct of commissioners or corporations in making colorable subscriptions of stock is here very fully discussed by the learned Chancellor. And the conclusion arrived at seems the only practicable one, that colorable subscriptions or fraudulent distribution of stock will not defeat the legality of the organization of the corporation, unless the thing is arrested in limine. Johnston v. S. W. R. R. Bank, 3 Strob. Eq. 263; Selma & Tenn. R. v. Tipton, 5 Alabama, 787; Hayne v. Beauchamp, 5 Sm. & M. 515. The decision of the commissioners is conclusive upon the company and shareholders, at law certainly. Crocker v. Crane, 21 Wendell, 211. And where the charter, or act of association, names commissioners to take up subscriptions, they alone have jurisdiction of the matter, and subscriptions taken up by volunteers are not binding upon the subscribers unless adopted by the commissioners. Shurtz v. The S. & T. R. R. Co., 9 Mich. 269. 5 2 Kent, Comm. 305 and notes. Crocker v. Crane, 21 Wendell, 211; s. c. 2 Am. Railw. C. 484. Where the statute names a large number of persons, and enacts that they, or any three of them, may act as commissioners, either the whole number or any three may act at the election of the individuals. No particular form of words is required to create the grant of a corporation. The grant of power to perform corporate acts implies the grant of corporate powers. Comm. v. West Chester Railw. Co., 3 Grant Cas. 200. |