Finnegan v. Noerenberg

• Citation: 53 N.W. 1150,52 Minn. 239
• Parties: Andrew J. Finnegan v. Frederick D. Noerenberg et al
• Decision Date: 13 January 1893
• Court: Supreme Court of Minnesota (US)

53 N.W. 1150

52 Minn. 239

Andrew J. Finnegan v. Frederick D. Noerenberg et al

Supreme Court of Minnesota

January 13, 1893

Argued January 3, 1893

Appeal by plaintiff, Andrew J. Finnegan, from a judgment of the District Court of Hennepin County, Smith, J., entered May 24 1892, that he take nothing by his action.

Plaintiff commenced this action against defendants, Frederick D Noerenberg, Charles S. Axtell, George Huhn, Joseph P. Allaire and many others, alleging in his complaint, that they were copartners doing business under the name of "The K. of L. Building Association." That in December, 1888, at Minneapolis, he at their request furnished materials and did plumbing to the value of $ 599.50 for them upon a building they were erecting. That he had not been paid, and he demanded judgment for the amount with interest. Noerenberg answered denying these allegations, and alleging that the materials were furnished and the work done for a corporation de facto known as The Knights of Labor Building Association and not for the defendants as partners. Plaintiff replied denying the existence of such corporation.

The issues were brought to trial January 27, 1892, before the court without a jury. It was shown in evidence that on June 15, 1886, a number of men adopted and signed articles of incorporation pursuant to Laws 1870, ch. 29. The name adopted was "The K. of L. Building Association." The general nature of its business was buying, owning, improving selling and leasing of lands, real and personal estates and property, and the construction of a building in Minneapolis as a hall for the Knights of Labor. Its capital stock was fixed at $ 100,000, divided into shares of $ 5 each to be paid in as the board of directors should direct. Its officers were to be seven directors, a president, a secretary and treasurer. They obtained subscriptions to the stock and adopted by-laws which were filed and recorded in the city clerk's office. They purchased lots four (4) and five (5) in block seventy (70) of the original town of Minneapolis and erected thereon a brick building, known as "The Labor Temple," three stories high, with a large hall on the third floor. Plaintiff furnished materials and did plumbing thereon to the value of $ 599.50 at the request of the board of managers. The defendant Noerenberg subscribed and paid for ten shares of the stock. The other defendants were also stockholders. The association became insolvent and owed over $ 40,000 which it was unable to pay. The attempt to incorporate was made in good faith, and the defendants believed they were duly incorporated, and that they were only liable as stockholders, not as partners, for the debts contracted. When the plaintiff furnished materials and did the plumbing, he believed he was dealing with the corporation and not with a copartnership.

The plaintiff claimed that the attempt to incorporate was ineffectual because Laws 1870, ch. 29, under which the attempt was made, is entitled "An act in relation to the formation of co-operative associations," and does not express its subject as required by the Constitution, Art IV., § 27; and because the association is not within the scope of the statute, and does not conform to its requirements. He claimed that the stockholders were partners and individually liable for his demand. The trial court thought otherwise and gave judgment for the defendants.

Judgment affirmed.

Savage & Purdy, for appellant.

The law under which incorporation was attempted, is void under that provision of the Constitution which relates to the titles of bills. Art. IV., § 27. Johnson v. Harrison, 47 Minn. 575; Mewherter v. Price, 11 Ind. 199; People v. Allen, 42 N.Y. 404; State v. Kinsella, 14 Minn. 524, (Gil. 395;) People v. Mahaney, 13 Mich. 481.

The association as organized is not within the scope of the statute, which only authorizes incorporation for the purposes of trade, or for carrying on any lawful mechanical, manufacturing or agricultural business.

The articles do not conform to the requirements of the statute. The place within which its business is to be carried on, is not distinctly set forth in its articles.

The association was not a de facto corporation. Two things are essential to a de facto corporation: (1) organization under color of law, and (2) user. De Witt v. Hastings, 40 N.Y.S. 463; Eaton v. Walker, 76 Mich. 579; Williamson v. Kokomo, etc., Fund Ass'n, 89 Ind. 389; Abbott v. Omaha Smelting, etc., Co., 4 Neb. 416; Heaston v. Cincinnati, etc., R. Co., 16 Ind. 275; Vredenburg v. Behan, 33 La. An. 627; Raccoon River Nav. Co. v. Eagle, 29 Ohio St. 238; West v. Bullshin, etc., Ditching Co., 32 Ind. 138; O'Reiley v. Kankakee, etc., Draining Co., 32 Ind. 169; Booth v. Wonderly, 7 Vroom, 250; Harris v. McGregor, 29 Cal. 125; Clegg, Wood & Co. v. Hamilton, etc., Grange Co., 61 Iowa 121; State v. Critchett, 37 Minn. 13.

It is requisite to the establishment of the de facto existence of a corporation, to show actual user. In this case there are no facts showing user. The business transacted by this association has been confined to a single enterprise, viz. that of erecting and leasing a particular hall or "Labor Temple" as it is called. The statute does not authorize any such business, for it is neither trade nor mechanical, manufacturing, nor agricultural business. De Witt v. Hastings, 40 N.Y.S. 463; affirmed 69 N.Y. 518; People v. Troy House Co., 44 Barb. 625; Swartwout v. Michigan Air Line R. Co., 24 Mich. 389.

Ankeny & Irwin, for respondents.

This is a de facto corporation, for there is both a colorable compliance with law, and a user. 4th Amer. & Eng. Encyc. of Law, 198; Gartside Coal Co. v. Maxwell, 22 F. 197; Whitney v. Wyman, 101 U.S. 392.

OPINION

Gilfillan, C. J.

Eight persons signed, acknowledged, and caused to be filed and recorded in the office of the city clerk in Minneapolis, articles assuming and purporting to form, under Laws 1870, ch. 29, a corporation, for the purpose, as specified in them, of "buying, owning, improving, selling, and leasing of lands, tenements, and here-ditaments, real, personal, and mixed estates and property, including the construction and leasing of a building in the city of Minneapolis, Minn., as a hall to aid and carry out the general purposes of the organization known as the 'Knights of Labor.'" The association received subscriptions to its capital stock, elected directors and a board of managers, adopted by-laws, bought a lot, erected a building on it, and, when completed, rented different parts of it to different parties. The plaintiff furnished plumbing for the building during its construction, amounting to $ 599.50, for which he brings this action against several subscribers to the stock, as copartners doing business under the firm name of the "K. of L. Building Association." The theory upon which the action is brought is that, the association having failed to become a corporation, it is in law a partnership, and the members liable as partners for the debts incurred by it.

It is claimed that the association was not an incorporation because -- First, the act under which it attempted to become incorporated, to wit, Laws 1870, ch. 29, is void, because its subject is not properly expressed in the title; second, the act does not authorize the formation of corporations for the purpose or to transact the business stated in the articles; third, the place where the business was to be carried on was not distinctly stated in the articles, and they had, perhaps, some other minor defects.

It is unnecessary to consider whether this was a de jure corporation, so that it could defend against a quo warranto, or an action in the nature of quo warranto, in behalf of the state;...