Basshor v. Dressel

• Decision Date: 20 June 1871
• Parties: THOMAS C. BASSHOR and WALLACE STEBBINS v. WERNER DRESSEL.
• Court: Maryland Court of Appeals

34 Md. 503

THOMAS C. BASSHOR and WALLACE STEBBINS v. WERNER DRESSEL.

Court of Appeals of Maryland

June 20, 1871

APPEAL from the Superior Court of Baltimore City.

This was an action brought by the appellants, creditors of a corporation known as "The Baltimore Chrome Mining and Manufacturing Company," against the appellee, a stockholder therein, to charge him for the debt due by the company under the provisions of section 52 of Article 26 of the Code of Public General Laws. Judgment was rendered for the defendant and the plaintiffs appealed.

The cause was argued before STEWART, MAULSBY, GRASON, MILLER and ALVEY, J.

Thomas Rowland and John Thomson Mason, for the appellants.

The Court below erred in instructing the jury that there was no legal evidence of the incorporation of The Baltimore Chrome Mining and Manufacturing Company, and the plaintiffs were therefore, not entitled to recover in this action.

The certificate of incorporation is not defective. It contains all the requisites prescribed by section 40 of Article 26 of the Code, as necessary to constitute a manufacturing corporation. It was in this character that the company dealt with the plaintiffs. Whatever more the certificate contained may be rejected as surplusage. Code of Pub. Gen'l Laws, Art. 26, sec. 40; Eastern Plank Road Co. vs. Vaughn, 14 New York, 546.

There is no reason why the business of mining and manufacturing should not be carried on by the same company. The Code does not prohibit it, but rather, by implication, permits it. In fact, every mining company does do a manufacturing business in preparing its ores for the market. It was only to this extent that the company in question proposed to engage in manufacturing. The difference between the "mining of chrome ores" and the "manufacturing of bichromates and other salts," is not nearly so great as that between different kinds of manufacturing.

If these two operations should require the formation of two different companies, it would be difficult to define exactly where the operations of the mining company should terminate and those of the manufacturing company should begin. Code, Art. 26, secs. 40, 68; Neale vs The Vestry of St. Paul's Church, 8 Gill, 116; Bird vs. Daggett, 97 Mass., 494.

A substantial compliance with the requirements of section 40 is sufficient; even if those provisions are not to be considered as directory rather than fundamental. Angell & Ames on Corporations, sec. 92; Abbott's Digest of the Law of Corporations, 24; Eakright vs. Logansport & N. I. R. R. Co., 13 Ind., 404; Rogers vs. Danby Un. Soc., 19 Vt., 187; Mead vs. Keeler, 24 Barbour, 24; Spring Valley Water Works vs. San Francisco, 22 Cal., 440; Hawes vs. A. S. Petroleum Co., 101 Mass., 394; Merrick vs. R. E. & G. Co., 101 Mass., 381; Gen. Stats. of Mass., (1860,) ch. 61, secs. 1, 8; State vs. Brown, 31 N. J., (Law,) 357.

If there has been a user of a corporate franchise by an association of persons, their existence as a corporation can only be inquired into by the State; it cannot be questioned in a collateral proceeding. Angell & Ames on Corporations, secs. 94, 635; M. E. U. Church vs. Pickett, 19 N. Y., 482; Buffalo & A. R. R. Co. vs. Cary, 26 N. Y., 75; Eaton vs. Aspinwall, 19 N. Y., 119; Abbott vs. Aspinwall, 26 Barb., 202; Cochran vs. Arnold, 58 Penn., 399; Tarbell vs. Page, 24 Ill., 46; Baker vs. Adm'r of Backus, 32 Ill., 81; State vs. Brown, 31 N. J., (Law,) 357.

One who has participated in the acts of user of a corporation de facto, subscribed to its capital stock and acted as an officer of the corporation, is estopped from denying that it has ever existed.

A creditor dealing with a corporation formed under the provisions of Article 26, looks to the individual as well as the corporate liability. To permit a stockholder and officer of a company, holding itself out to the world as a corporation formed under the provisions of Article 26, to contract debts in its behalf, and then repudiate them because of some formal defect in his own certificate, would seem to be utterly inconsistent with any reasonable idea of justice. It is certainly a violation of those principles of truth and equity which have given rise to the doctrine of estoppel in pais. Angell & Ames on Corporations, secs. 94, 611, 630 a, 635; Abbott vs. Aspinwall, 26 Barb., 202; Eaton vs. Aspinwall, 19 N. Y., 119; Mead vs. Keeler, 24 Barb., 20; Callender vs. P. & H. R. R. Co., 11 Ohio, 516; West Winsted Association vs. Ford, 27 Conn., 289; Tarbell vs. Page, 24 Illinois, 46; McHose vs. Wheeler, 45 Penn., 32; Smith vs. Heidecker, 39 Mo., 162; Dooley vs. Cheshire Glass Co., 15 Gray, 494; McDougall vs. Lane, 18 Ga., 444; Neal vs. Vestry of St. Paul's Church, 8 Gill, 116, 119.

According to the true construction of Article 26, this company would not have attained a full corporate character, in any event, until the requirements of section 52 were complied with. Until the capital stock is fully paid up, the liability of the stockholders is that of partners at common law, except so far as is it modified and limited by the statute; and is not dependent upon the validity of the incorporation. Angell & Ames on Corporations, sec. 611; Matthews vs. Albert, 24 Md., 535, 537; Corning vs. McCullough, 1 N. Y., 47 53, 60; Moss vs. Oakley, 2 Hill, 265, 269; Abbott vs. Aspinwall, 26 Barb., 207; Conant vs. Van Schaick, 24 Barb., 87, 96; Hawthorne vs. Calef, 2 Wall., 22; Paine vs. Stewart, 33 Conn., 529.

Charles Marshall, for the appellee.

It is competent for a party when sued as a stockholder of an alleged corporation, to deny its legal existence. The liability is one created by statute, and exists only as to stockholders of a corporation created according to law.

Upon principle, there should be no estoppel, because the denial of the validity of the Act of incorporation works no wrong to the creditor, inasmuch as the liability of the defendant, in case the corporation had no existence, is unlimited, whereas if he be a stockholder of a legal corporation, his liability is limited to the amount of his stock. The defendant may contest the existence of the corporation, for the neglect or violation of any condition precedent to a valid corporate existence, or because there is no warrant in the law for the creation of such a corporation. Utley vs. Union Tool Company, 11 Gray, 140; Franklin Fire Ins. Co. vs. Hart, 31 Md., 59; Frostburg C. & I. Co. vs. Frost, 24 How., 283; Harrison vs. McGregor, 29 Cal., 126; Spencer, Field & Co. vs. Paul Cook, 16 La. An., 153; Crocker vs. Crane, 21 Wend., 220; Mokalumne Hill M. Co. vs. Woodberry, 14 Cal., 424; Dauchy vs. Brown, 24 Vermont, 197; 1 Redfield on Railways, 64, ch. 4, section 18.

The proof in this case shows that there never was a legal corporation known as "The Baltimore Chrome Mining and Manufacturing Company."

The Code, Article 26, section 40 to section 67, inclusive, provides for the incorporation of manufacturing companies, and section 68 to 87 inclusive, of the same Article, provide for the incorporation of mining companies. The certificate offered in evidence, purports to combine in one corporation both a manufacturing and a mining company. There is no provision in the Code which permits such an amalgamation of the two kinds of corporations, on the contrary, it will be seen upon examination of the powers and duties of each, that they are repugnant and inconsistent in many essential particulars. The Act of 1868, ch. 481, sections 35 and 36 provide for the incorporation of companies for two or more of the purposes named in the Act, and for the amalgamation of two or more of these companies after incorporation. The absence of such a provision in the law under which the corporation in question was attempted to be formed, becomes for this reason very significant. Without authority of law, it was as much beyond the power of the parties to unite two statutory corporations in one, as it would have been to incorporate a company for a single purpose not permitted by the law. Angell & Ames on Corporations, sec. 111; 1 Redfield on Railways, ch. 4, sec. 18, p. 64.

Two existing legal corporations cannot amalgamate so as to form a single corporation combining the purposes of both, even with the consent of every stockholder, without express legal sanction. State vs. Bailey, 16 Ind., 46. If this be true, an amalgamation of corporations, formed under special laws, must have express legislative sanction.

The differences between the two kinds of corporations, which a brief examination of the powers conferred upon each, and denied to each, would disclose, show conclusively that the attempt to amalgamate, not only was without legal authority, but that it was contrary to law.

The proof of the fact of a legal incorporation in this case was radically defective, and did not show the existence of any corporation recognized by law. If this be correct, there can be no statutory liability.

MILLER J., delivered the opinion of the Court.

This is another case where creditors of a corporation are seeking to enforce as against a stockholder, the personal liability imposed by section 52 of Article 26 of the Code. None of the questions determined in Norris vs. Johnson, and Norris vs. Wrenschall, arise here. The case was concluded in the Court below by an instruction to the jury that there was no legal evidence of the incorporation of the company of which the defendant is sought to be charged as a stockholder, and the plaintiffs are not, therefore, entitled to recover in this action, and whether this instruction be correct is the main question in this case.

The certificate of incorporation, dated the 11th of October 1866, professes on its face to form a company for the purpose of mining chrome ores and manufacturing bi-chromates...