Miller v. Tod, Secretary of State

This is an original petition for the writ of mandamus to compel the Secretary of State to accept and file a charter presented by the relators.

It is averred in the petition, in effect, that the relators had agreed to organize a corporation and had prepared a charter in accordance with the forms required by the statute and had presented it to the respondent with the request that it be filed in his office, and that he had refused to comply with the request. The purpose for which the corporation was attempted to be organized is stated in the proposed charter, a copy of which is made a part of the petition, in the following terms: "The purpose for which this corporation is formed is the construction, maintenance and operation of dams, reservoirs, lakes, wells, canals, flumes, laterals and other necessary appurtenances for the purpose of irrigating and milling; and for the purpose of growing, selling and purchasing of rice and other agricultural products, and to purchase and lease all lands necessary for that purpose." The respondent filed demurrers to the petition, — one general in form and another, as we think, general in effect, though it specifies the grounds upon which the insufficiency of the pleading is asserted. These grounds are: (1) That one of the purposes for which the proposed corporation is to be organized is not embraced in the statute; and (2) that the proposed charter is for two purposes separately provided for in distinct subdivisions of the statute which defines the occupations for which private corporations may be created.

Title 21 of the Revised Statutes provides for the creation of private corporations and embraces article 642, which declares that "The purposes for which private corporations may be formed are," and proceeds to define in separate subdivisions, numbered from 1 to 54, inclusive, the purposes for which such corporations may be formed. Among them are the following:

"23. The construction, maintenance and operation of dams, reservoirs, lakes, wells, canals, flumes, laterals and other necessary appurtenances for the purposes of irrigation, navigation, milling, mining, stockraising and city waterworks."

"27. The growing, selling and purchasing of seeds, plants, trees, etc., for agricultural and ornamental purposes, and to purchase and lease all lands necessary for that purpose."

One of the purposes in the proposed charter falls substantially within the definition contained in subdivision 23 quoted above, and about that no question is made. But "the purpose of growing, selling and purchasing rice and other agricultural products, and to purchase and lease all lands necessary for that purpose," as set out in the charter, is not couched in the same language as subdivision 27, and the question is, do they have in substance the same meaning? We are of the opinion that they do not. On part of the relators it is contended, in effect, that since rice is a seed, therefore the growing of rice comes within the defined purpose. The argument may be plausible but it is not sound. The language of the subdivision in question shows clearly that what was contemplated was the growing and dealing in seed merely as seed and not the growing of a product for sale generally. The Legislature intended to authorize corporations to engage in a seed and nursery business, and, as incidental thereto, to grow seeds, plants and trees for the purpose of that business. Because they intended to authorize the creation of corporations to grow seed on a limited scale for a limited purpose, it does not follow that they intended to empower the creation of corporations to grow rice and other agricultural products on an enlarged scale, not only for sale for seed but for sale for any other purpose to which such products may be applied. The proposed charter does not confine the business of the company to the growing and selling of rice merely as seed, and therefore we think the company could not be organized for carrying on such a business. We are also of opinion that since one of the purposes declared in the proposed charter is not authorized by law, the fact that another purpose mentioned in connection therewith is a lawful one does not save it. Article 643 of the Revised Statutes sets forth the articles which shall be contained in the charter. The second of these is "the purpose for which it (meaning the corporation) is formed." Article 644 declares that the charter shall be subscribed by three or more persons, and prescribes the manner in which it shall be signed and acknowledged. Article 645 provides that "such charter shall thereupon be filed in the office of the Secretary of State, who shall record the same at length," etc. It is clearly implied, as we think, that the purpose set forth in the charter must be an authorized purpose. But there is no language in any of these articles which throws any light upon the question as to the duty of the Secretary of State when the charter set forth two purposes, one of which was authorized and the other not. But when the meaning of a statute is doubtful, the policy of the measure is a matter to be considered by the courts and that construction ought to be given to the law which best accords with sound policy. To permit a charter to be filed which purports to create a corporation to carry on a business for which a corporation can not be legally created under the law would be to hold out the organization as a corporation when it possessed none of the rights and immunities of such artificial bodies, and to allow innocent third parties who may purchase its shares or deal with it to be misled to their injury. To permit an unauthorized purpose to be set forth with another that is authorized could accomplish no good and would serve only to give color of authority to that which is not authorized and thereby to open a door to deception and fraud. Our last remark is made merely with reference to effect of a charter which embraces an unauthorized purpose and not with reference to the relators, who are here contending in good faith that both the purposes declared in their charter are purposes for which a corporation may be lawfully created under the statute. As we understand, while they do not admit that the mention of an unlawful purpose would vitiate their charter, they have not contended that it would not. But since we hold that one of the purposes in relator's charter is unauthorized, the question is necessarily in the case and had to be determined.

The question whether a charter which declares that it is organized for two purposes, one of which is authorized and the other not, and which has been accepted and filed by the Secretary of State, is good for the authorized purpose, is not before us. Neither is the question, whether a company under such charter so accepted and filed should be declared a de facto corporation. See American Salt Co. v. Heidenheimer, 80 Tex. 344. We therefore express no opinion upon either of these points.

Since we sustain the first ground of objection to the proposed charter, it is not necessary to consider the second.

The writ of mandamus is refused.

Mandamus refused.