Chase's Patent Elevator Co. v. Boston Tow-boat Co.
| Decision Date | 25 October 1890 |
| Citation | 152 Mass. 428,28 N.E. 300 |
| Parties | CHASE'S PATENT ELEVATOR CO. v. BOSTON TOW-BOAT CO. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
J.F. Jackson, for plaintiff.
W.S Rogers, for defendant.
This is an action for the price of an elevator furnished to the defendant by the plaintiff, under a written agreement. The answer alleges that at the time of its making and performing the agreement the plaintiff's capital stock had not been paid in, and a certificate of the payment, etc., had not been filed, as required by Pub.St. c. 106, § 46, which forbids a corporation to "commence the transaction of the business for which it was organized" until those things are done. The replication alleges that before the contract and sale a certificate of organization had been issued, and a large part of the stock paid in; that shortly afterwards the stock was paid in in full; and that a certificate was filed before the date of the writ. There is a demurrer to the replication, on which the superior court ordered judgment for the defendant.
A majority of the court are of the opinion that the demurrer must be overruled on the ground that the facts alleged in the answer are no defense. In other words, we are of opinion that section 46 of chapter 106 of the Public Statutes, just referred to, when construed with the rest of the chapter, and in the light of former decisions, cannot be taken to make the contract void.
By section 61 of the same chapter the "stockholders in any corporation which is subject to this chapter shall be jointly and severally liable for its debts or contracts in the following cases: *** First, for such as may be contracted before the original capital is fully paid in," etc. By section 62 their liability is made conditional upon the recovery of a judgment against the corporation. It is expressly contemplated, therefore, that a corporation may make contracts before complying with section 46, upon which a judgment may be recovered. It cannot be maintained that the contracts for which the corporation, and, secondarily, the stockholders, are thus liable are confined to contracts outside of its business, and so not within the scope of section 46. Such a limitation would be in the face of the obvious purpose to protect the public which is shown by the first clause of section 61. Some of the contracts mentioned--for instance, those in the fourth clause (debts to operatives)--are plainly contracts made in the course of business, yet they fall under the words "debts or contracts," at the beginning of the section, so that those words would have to be read as meaning two different things at once, as applied to the different clauses, in order to make the supposed limitation possible. The words are substantially the same that were used when corporations could begin business before the whole amount of their stock had been paid in. Gen.St. c. 60, § 17. At that time, of course, they extended to contracts in pursuance of the business for which the corporation was organized as was assumed by the cases. Merrick v. Governor Co., 101 Mass. 381; Hawes v. Petroleum Co., 101 Mass. 385 and 111 Mass. 200; Gearing Co. v. Whittier, 117 Mass. 451. There is no reason for construing them differently now, and it has not been suggested that they have not the same extent as before in the cases which have arisen since St.1870, c. 224, now embodied in Pub.St. c. 106. Barre Nat. Bank v. Hingham Manuf'g Co., 127 Mass. 563. See Kelley v. Railroad, 141 Mass. 496, 6 N.E. 745. It follows that if the parties to this action were reversed, and the defendant was the one who relied on the contract, section 46 would not prevent a recovery.
If, then, the contract sued upon bound the plaintiff, it would be entirely anomalous to hold that the defendant was free. The general rule is that, when a contract is made void by a prohibition, it is void against both sides. Cranson v. Goss, 107 Mass. 439, 440. The defense of ultra vires, in the sense that the contract was illegal or prohibited, has been set up by corporations so much oftener than against them that it is hard to find cases of the latter sort; whereas, if either party were to be precluded from it, it would be the corporation. It may be worth noticing, however, that the decisions assume that, if it is a defense to the corporation, it is a defense to the other party. Railway Co. v. Redmond, 10 C.B. (N.S.) 675; Manufacturing Co. v. Clark, 32 Mo. 305, 308; Railroad v. Proctor, 29 Vt. 93, 96; Bank v. Sherwood, 10 Wis. 230. The same principle was recognized in the cases concerning prohibited insurance, relied on by the defendant. Williams v. Cheney, 3 Gray, 215, 222; Jones v. Smith, Id. 500, 501; Insurance Co. v. Lapsley, 15 Gray, 262, 263; Insurance Co. v. Hastings, 2 Allen, 398, 400; Insurance Co. v. Pursell, 10 Allen, 231, 232.
If a corporation makes such a contract as this before its capital stock is fully paid in, the result of sections 46 and 61 is not that it is void as against both contractors, nor that it binds the corporation, and is void as against the other party, but simply that the personal liability of the members of the corporation takes the place of what has not been paid in upon the stock as security to the other party.
By Gen.St. c. 61, § 8, the officers of the corporations there mentioned were required to publish certificates similar to that now required, but of less scope, "before such corporation commences business." This plainly means that such corporation shall not commence business until the certificate is published. But it was decided that that section did not prevent the corporation from recovering upon a contract made before the certificate was published. The discussion was directed mainly to showing that the corporation existed before the filing of the certificate; but one ruling asked was a general one that the plaintiff could not recover, and it is said that "in the opinion of the court this omission of the officers cannot be set up to defeat the plaintiff's right to recover." Merrick v. Governor Co., 101 Mass....
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