Laflin & Rand Powder Co. v. Sinsheimer , 1877 Md. LEXIS 49 ( 1877 )

Brent, J.,

delivered the opinion of the Court.

This is an action of assumpsit to recover from the appellees for merchandise sold, and for which it is claimed'they are personally liable. The declaration contains three counts — the first, for goods sold and delivered — the second, for money found due on an account stated, and the third, is a special count.

It is very full and lengthy, but alleges in substance, that the defendants pretending there was a company duly incorporated under the laws of West Virginia, by the name of the Lancaster Furnace and Mining Company, induced the plaintiff to sell certain goods to said company ; that the plaintiff afterwards discovered that the company was not in fact incorporated, that for reasons, which are specially set out, the necessary acts and proceedings to constitute a valid incorporation under the laws of West Virginia had not been performed and taken, that the said pretended corporation was but a voluntary unincorporated association, the members of which are personally liable for the goods sold to them under the name of the pretended company, and which goods were in fact received by the defendants.»

The defendants pleaded, that they were not indebted as alleged,- and that they did not promise as alleged.

The incorporation of the defendants under the laws of West Virginia was placed in evidence, and proof offered, tending to show that certain requirements, which the appellant claims were conditions precedent to the incorporation of the defendants, had not been complied with. It was also proved that the goods had been sold and charged to the Lancaster Eurnace and Mining Company, and that no claim for them had been made against the defendants personally, until after the failure of that company.

The plaintiff presented two prayers, both of which involved the valid incorporation of this company. But the Court rejected them, and instructed the jury.

First, That there is no evidence upon which the jury can find for the plaintiff on the first or second count in the. narr.

Second, That the plaintiff having given in evidence the Statutes of West Virginia, under which the Lancaster Eurnace and Mining Company claims to have been incorporated, and the certificate of the Secretary of State of said State, declaring the existence of said corporation, it is incompetent for this Court to inquire collaterally into the validity of said corporation, and the plaintiff cannot recover upon the third and fourth counts in the narr.

To these instructions by the Court, and to the rejection of its prayers, the appellaut has excepted.

There has been no error alleged, in the argument, in the first instruction granted, and we do not understand the appellant as controverting its correctness. The real question in the case is presented upon the second instruction.

If the view of the law, as there expressed, is right, the rejection of the instructions- asked for on the part of the appellant follows as a matter of course.

As already seen, the incorporation of this company, by the name of the Lancaster Furnace and Mining Company, was obtained under the general corporation laws of West Virginia, in which State its operations as a Mining and Manufacturing Company were to be carried on. We have carefully compared the certificates of its incorporation, authenticated by the Secretary of State and the seal of West Virginia, with the requirements of the laws of that State, and we find that it is in all respects in matter of form in accordance with their provisions. Code, West Va., ch. 54, secs. 6, 7, 8, 9 and 10, and ch. 53, sec. 62. The certificate, which is the charter giving to this company a corporate existence, discloses therefore no error upon the face of it, and is before us authenticated in such manner as is declared in the 10th section of the law, above referred to, shall be sufficient evidence of the existence of the corporation. Thus formally incorporated, it went into active operation, under its corporate name, became the owner of land, constructed buildings and apparatus proper and necessary to accomplish the purposes of its organization, and while thus actively engaged, the goods mentioned in the narr. were sold and delivered to it by the appellant.

Can the validity of its incorporation be attacked in this suit, by proving aliunde the certificate of its incorporation, that certain pre-requisites of the law had not been in good faith complied with P We have found no case, which has allowed this to be done in a collateral proceeding such as the present. The rule seems, from all the authorities, to be well established, that the Courts are bound to regard a company incorporated according to all the required forms of law, as a corporation, so far as third parties are concerned, until it is dissolved by a judicial proceéding on behalf of the goverment that created it. In the case of The Proprietors of Charles River Bridge vs. Proprietors of Warren Bridge, and others, 7 Pick., it is said on page 371, where the question of fraud in the procurement of an extension of the charter of Charles River Bridge is considered, “ if fraud was practiced, the charter could be re voted only upon a process of quo warranto. * * * The defendants cannot take advantage of the supposed false representations. A man passing over the bridge might as well refuse on the same ground, to pay the toll.” So in Jones vs. Dana, 24 Barb., 299,-it is said, “if the company has in form a charter authorizing it to act as a body corporate, and was in fact in the exercise of its corporate powers at the time of its dealing with the plaintiffs, then it was to them and all third persons, a corporation de facto and the validity of its corporate existence can only be tested by proceedings in behalf of the people,” and 7 Wend., 553, 6 Cowen, 23, and 9 Cowen, 194, are cited as authorities. See also, The River Navigation Co. vs. Neal, 3 Hawks., 520 ; Pres. & Co. of the K. & C. Turnp. Road Co. vs. McConaby, 16 Serg. & R., 145; State vs. Carr, 5 N. H., 371 ; S. & T. Railroad Co. vs. Tipton, 5 Ala., 787 ; Duke vs. Cahawba Navigation Co., 16 Ala., 372.

The present appellant stands in this case in the attitude of a third person to the company in question, and cannot in the manner attempted, and by the proof offered, impeach its corporate existence. It has been clothed with all the forms of a corporation by the laws of a neighboring State, and was in the exercise and use of the franchises conferred upon it. It was a corporation de facto at the time the goods were sold and delivered to it, by the appellant, and its existence as a corporation cannot be collaterally drawn into question.

To permit a recovery against the defendants, and thereby to say that they are to he regarded in law as a voluntary unincorporated association, would be a departure from all the cases. The debt was not created with them individually, hut with a company acting under a formal incorporation, and in' the exercise of its corporate powers. This appellant dealt with it and gave it credit as a corporation. If its assets are not ample to pay, it is the misfortune of the creditor. The exhibition of its incorporation, duly and properly authenticated, has been a sufficient answer to the claim preferred against these defendants, and so far as third parties are concerned, it must be regarded as a corporation., until it is otherwise declared in a judicial proceeding on behalf of the government that created it.

(Decided 7th March, 1877.)

The Superior Court of Baltimore City was therefore, in our opinion, right in rejecting the prayers of the appellant and in granting the instruction that the plaintiff could not recover under the special count in the declaration.

As the instructions of the Court are without error, the judgment will be affirmed.

Judgment affirmed.