Gartside Coal Co. v. Maxwell

• Decision Date: 03 November 1884
• Citation: 22 F. 197
• Parties: GARTSIDE COAL CO. v. MAXWELL and others. [1]
• Court: U.S. District Court — Eastern District of Missouri

22 F. 197

GARTSIDE COAL CO. v. MAXWELL and others. ^[1]

United States Circuit Court, E.D. Missouri.

November 3, 1884

Hiram J. Grover, for plaintiff.

Henry Hitchcock, Lucien Eaton, and Walker & Walker, for defendants.

BREWER J., (orally.)

In this case the facts are these: There was a corporation, or what pretended to be a corporation, which purchased coal from the plaintiff, and the transactions extended through a series of years. The defendants, or the defendants' so-called corporation, failed to pay,-- became insolvent; and this action is to charge those who were the stockholders in this supposed corporation as though they were partners; and the basis of the claim is that there was no corporation; that whatever it assumed or pretended to be, although it called itself a corporation, and attempted to transact business as a corporation, yet in fact it was no corporation, and had no legal existence; and that these parties who were acting as though they were stockholders in this corporation were really not stockholders, and must therefore individually be held as partners to have made the purchases.

It is very clear to my mind that this attempted incorporation was invalid, and that if it had ever been challenged by the officer of the state, in proper proceedings, its exercise of corporate powers would have been enjoined; but, while I think that is unquestionably so, it does not seem to me to follow that those who were supposing themselves stockholders in this corporation can be held personally liable. I think the true rule is this: that where persons knowingly and fraudulently assume a corporate existence, or pretend to have a corporate existence, they can be held liable as individuals; but where they are acting in good faith, and suppose that they are legally incorporated,-- that they are stockholders in a valid corporation,-- and where the corporation assumes to transact business for a series fo years, and the assumed corporate existence is not challenged by the state, then they cannot be held liable, as individuals, as members of the corporation.

Of course, the converse if perfectly true, that a person who deals with a corporation, or gives to an assumed corporation a note, cannot question the corporate existence of that party with whom he has dealt or to whom he gave his note. So, on the other hand, where a person deals with what he supposes is a corporation, with what all parties think is a...