Lord v. Essex Building Ass'n , 37 Md. 320 ( 1873 )

Alvey, J.,

delivered the opinion of the Court.

The mortgage to the Building Association, the appellees, was made on the 16th of April, 1868, and the decree there'on for sale of the mortgaged premises was passed on the 5th of June, 1871. The judgment in favor, of the appellants against the mortgagor was rendered on the 27th of June, 1868; and the question is, as between these mortgage and judgment creditors, which have priority in the distribution of the proceeds of sale ? and this depends upon the further question, whether the appellees have been legally incorporated, so as to enable them, in their corporate- capacity, to take and enforce the mortgage security as against the judgment creditors of the mortgagor, the judgment constituting a lien on the estate mortgaged?

The right of the appellees to take the benefit of the mortgage, as against the appellants, is resisted on the ground that they have not been legally incorporated ;— that there is, as supposed, a radical defect in the proceedings necessary, under the law, to confer upon them corporate capacity.

The appellees claim to have been regularly incorporated under and in pursuance of the 30th and 31st secs, of the 26th Art. of the Code. By the latter of these sections it is provided, that before any such association shall become a corporation, they shall lodge with the clerk of the county, or the city, as the case may be, in which such corporation is designed to act, a copy of the articles of association of such corporation, signed by at least seven members, and certified by the secretary thereof, to be recorded in the office of such clerk. The defect that is supposed to exist in this case, consists in the omission of the secretary, who certified the copy of the articles of association for record, to certify to the fact, that the seven members whose names appear to the articles did in truth sign the same. The secretary certified that the copy of the articles lodged in the clerk’s office for record was a true copy, ifand that the persons whose names are signed thereto are members ” of the association. But it is insisted, that as the parties named could have been members without signing the articles of association furnished for record, the secretary should have done more than he did; that he should have certified that the members named, did in fact, sign the articles ; and because of his omission to do so, the association altogether failed to obtain a corporate character or capacity, as they intended, and that, therefore, they cannot maintain their claim as against the appellants.

There is certainly no doubt of the general proposition as contended for on the part of the appellants, that where a corporation is created by statute, or under a general statute as in this case, which requires certain acts to be done before it can be considered in esse, there those acts must appear to have been done, in order to establish the corporate existence. Ang. & Am. on Corp., see. 83. For, as was said by the Court in the case of Agnew vs. The Bank of Gettysburg, 2 H. & G., 493, “ Upon authority it is clear that the plaintiff, to maintain his case, must shew that by law he has been effectually created a corporation.”

Such being the requirement, have the appellees shewn that it has been complied with ? We think they have. The certificate of the secretary would seem to embrace by fair construction, every fact essential to entitle the parties associating, to have their articles or constitution recorded, and to become endowed with the faculties and capacity of a corporation. The copy of the articles furnished for record by the secretary, who was the agent of the association, is certified by him to be a true copy, and that the parties whose names appear thereto, are members. We are not to assume, that those names were forged, or that they were signed without authority. We should rather presume the contrary. As we read the certificate, it imports that the names were properly signed to the articles, for the purpose of gratifying the requirement of the law. If indeed the parties, whose names appear to the articles, were members, and consented to,, or acquiesced in the action of the secretary, in furnishing the copy of the articles for record, as we must suppose they did, it is difficult to imagine under what circumstances they could ever be heard to controvert the fact of their names being properly signed to such articles. Such question could certainly never arise in any mere collateral proceeding.

It is supposed, however, that the omission of the secretary to certify to the signing of the articles by the seven members whose names appear thereto, is not the only defect which involves the validity of the incorporation of the appellees. By the 32d section of the Article of the Code before referred to, it is provided, that any corporation formed under the preceding section shall have power to declare in their articles of association the number of shares, not exceeding one thousand, of which its capital stock shall consist, the par value of the same, not exceeding four hundred dollars per share. In disregard of this provision of the statute, the appellees, in their articles of association, provided that the number of shares should be indefinite; and that each member could hold as many shares as he liked; but that he should have but one vote.

But, in our view, whatever may be' the true construction of this particular provision of the statute, as to the necessity of making the articles, of association conform to it, it does not prescribe a condition precedent to the existence of the corporation itself. The only conditions precedent are those prescribed by the sections 30 and 31, before referred to. Upon doing the acts there prescribed, it is expressly declared that the association shall £< be considered a body politic and corporate, and as such shall be capable to hold and dispose of property, both real and personal, and may choose presiding and other officers.” Whether all the provisions that may be incorporated into the articles of association exactly conform to law, is a question that is not, by any means, necessarily or properly involved in the inquiry, whether the association has acquired corporate existence or not? Many of the provisions in such articles may be found to be without the warrant of law, and still the corporation exist, and be capable of exercising the rights and franchises conferred upon it by law. Such question as that here attempted to be made, cannot arise in any mere collateral proceeding like the present. In any proceeding to enforce and give effect to a provision incorporated into the articles of association in conflict with or not justified by law, another and a different question would be presented. But, if the law has been violated in the particular supposed, it can only be made cause for effecting the corporate existence by direct proceeding, taken at the instance and in the name of the State, and of the State alone. The Regents vs. Williams, 9 Gill & Johns., 365, 426; Cochran, et al. vs. Arnold, et al., 58 Penn. St., 399.

(Decided 30th January, 1873.)

As we perceive no error in the order appealed from, it will be affirmed, with costs.

Order affirmed, with costs, and cause remanded.