Doyle v. Mizner

• Decision Date: 29 November 1879
• Citation: 3 N.W. 968,42 Mich. 332
• Court: Michigan Supreme Court
• Parties: EDWARD DOYLE and others v. THOMAS M. MIZNER and others.

3 N.W. 968

42 Mich. 332

EDWARD DOYLE and others v. THOMAS M. MIZNER and others.

Supreme Court of Michigan

November 29, 1879

The rule that one dealing with a corporation is estopped from denying its existence will not be applied where no new rights have intervened from such dealing, and such recognition is brought about through fraudulent transaction carried on for the very purpose of entrapping party into the action upon which such recognition is based. To create a corporation under the general laws the statutory requirements must be strictly complied with, and an attempt to create a manufacturing corporation, by the filing of an unacknowledged certificate, is a mere nullity. The acknowledgment is, under section 2839, Comp.L., an essential requisite. In certifying a copy of articles of incorporation, filed in his office, the secretary of state should give a copy of the whole instrument, including the certificate of acknowledgment. His certificate, to the conclusion that the instrument was acknowledged, amounts to nothing. Chattel mortgage in controversy in this case held void for want of authority in parties executing the same.

Error to superior court of Detroit.

Moore & Moore, for plaintiffs in error.

E.E Kane and Moore, Canfield & Warner, for defendants in error.

CAMPBELL, C.J.

Doyle brought suit to recover for the forcible removal and disposal of certain goods claimed to be his property, and taken from his possession by defendant Kane, under color of a chattel mortgage purporting to be made by Mizner and Gray, as president and secretary of the Detroit Chemical Works. This mortgage bore date April 10, 1875, and purported to cover the entire property and credits of the company, which were quite valuable if owned at all, and all future acquisitions, to secure $312.23, payable on demand, to Kane, as trustee, to pay certain debts therein named, and authorized him to take possession whenever he should deem himself insecure. He took possession at once, against Doyle's protest.

The case was before us at the January term, when we reversed a judgment, which had been rendered against Doyle, under instructions which took the case from the jury. We did not, therefore, consider all the points raised further than to hold that Kane was not on any better footing than his co-defendants, and that Doyle's case, if true made out a gross fraud. 40 Mich. 160. On a new trial the whole facts were again discussed, and a judgment rendered for defendants, of which Doyle again complains. The case as now presented--in addition to various questions and rulings brought up for review--presents a controversy growing out of these circumstances.

In 1874 Doyle, using the name of the Detroit Manufacturing Company was owner of a considerable business, consisting chiefly of manufacturing perfumery and extracts usually sold by grocers. On the seventeenth of September, 1874, he gave a chattel mortgage to William Frank & Sons for $293.86, payable in three months, which afterwards became the property of Henry Boulter, and was held by him in April, 1875. January 27, 1875, an agreement was signed by Doyle, Mizner and Gray to organize a joint stock company, to be known as the Detroit Chemical Works, with a capital of $50,000, in two thousand shares of $25 each. The paid-in capital was fixed at $14,000; the estimated assets of the Detroit Manufacturing Co., of which $10,000, as paid-up stock, was to go to Doyle, and $2,000 cash to Gray and Mizner, who were therein stated to have purchased that interest. But there is nothing to indicate that they gave or were to give any consideration. The remaining $36,000 was to be sold for working capital, after allowing Doyle $4,000 to be sold for Doyle's benefit, in payment for certain claims sold to the company, and for which he was to turn in $4,000 of his stock.

The first $500 raised was to go towards paying the chattel mortgage. Without some further showing it would seem that, under this arrangement, Doyle furnished the entire original capital, and Gray and Mizner got their share out of him for nothing.

There was a paper introduced, which, if genuine and properly dated, showed that on the first day of January, 1875, articles were signed by the three, in accordance with the agreement, containing further a provision that there should be three directors and no more, and giving the directors the exclusive right to make and change by-laws. One of these papers was filed with the secretary of state, February 3d, and one with the city clerk of Detroit, April 6, 1875. It does not appear that any copy was filed with the Wayne county clerk, and no by-laws were shown to have been adopted.

On the eleventh of February, 1875, a transfer in writing was signed by the three parties, of all the property of the Detroit manufacturing works to the Chemical works, for the expressed consideration of $14,000, "subject to a claim of about $500, held by Kane & Hibbard, (or their client,) of Detroit, Michigan." This claim was probably the Franks mortgage.

Whether this transfer ever became operative is one of the questions in the case.

Doyle's ground of action is based on the claim that he never transferred his rights to any one, and that the paper in question was not to become operative until he received consideration by payment for his goods. His testimony, if believed, shows that the paper was never delivered in such a way as to belong to the Detroit chemical works or to pass any title until paid for. Upon this a chief part of the controversy turns. But all of the issues are connected with some questions of evidence which require notice. And, inasmuch as it was insisted on the part of Doyle that the whole corporation arrangement was a fraud, and as no one was interested in it or in its existence except the parties to this suit, the regularity of its organization and the fact of its existence may become material.

It is claimed for the defence that Doyle, having dealt with it and acted with Gray and Mizner, is estopped from denying its corporate existence. There are certainly many cases in which a recognition of corporate existence, by dealing with the corporation, will estop from questioning it. But this doctrine rests on the ground that such action creates relations and encourages conduct which there may be difficulty in undoing. In ordinary cases such recognitions have been considered as binding.

But this rule is one originating in equitable principles and cannot be applied universally. There would be no sense in applying it where no new rights have intervened, and where such recognition has itself been brought about by fraudulent dealings carried on for the very purpose of entrapping a party into the action on which such recognition is rested. If there was no corporation in fact, and if there are no facts which make it legally...