Loverin v. McLaughlin

• Court: Illinois Supreme Court
• Writing for the Court: MAGRUDER
• Citation: Loverin v. McLaughlin, 161 Ill. 417, 44 N.E. 99 (Ill. 1896)
• Decision Date: 12 May 1896
• Parties: LOVERIN et al. v. McLAUGHLIN.

161 Ill. 417

44 N.E. 99

LOVERIN et al.

v.McLAUGHLIN.

Supreme Court of Illinois.

May 12, 1896.

Error to appellate court, First district.

Action by W. F. McLaughlin against Q. W. Loverin and others. From a judgment of the appellate court (46 Ill. App. 373) affirming a judgment for plaintiff, defendants bring error. Affirmed.Doolittle, Palmer & Tolman, for plaintiffs in error.

J. M. Harlan, for defendant in error.

This is an action brought by defendant in error against plaintiffs in error as directors of a corporation called the Q. W. Loverin Company, for the purpose of establishingagainst them a liability under section 18 of the corporation act for failing to file in the recorder's office a certificate, issued by the secretary of state, of the complete organization of the corporation, as required by section 4 of that act. Said section 18 (1 Starr & C. Ann. St. p. 617, c. 32) is as follows: ‘If any person or persons being, or pretending to be, an officer of agent or board of directors, of any stock corporation, or pretended stock corporation, shall assume to exercise corporate powers, or use the name of any such corporation, or pretended corporation, without complying with the provisions of this act, before all stock named in the articles of incorporation shall be subscribed in good faith, then they shall be jointly and severally liable for all debts and liabilities made by them, and contracted in the name of such corporation, or pretended corporation.’ Said section 4 (Id. pp. 610, 611, c. 32) is as follows: ‘The commissioners shall make a full report of their proceedings, including therein a copy of the notice provided for in the foregoing section, a copy of the subscription list, and the names of the directors and managers elected, and their respective terms of office, which report shall be sworn to by at least a majority of the commissioners, and shall be filed in the office of the secretary of state. The secretary of state shall thereupon issue a certificate of the complete organization of the corporation, making a part thereof a copy of all papers filed in his office in and about the organization of the corporation, and duly authenticated under his hand and seal of state, and the same shall be recorded in a book for that purpose, in the office of the recorder of deeds of the county where the principal office of such company is located. Upon the recording of the said copy, the corporation shall be deemed fully organized, and may proceed to business. Unless such company shall be organized and shall proceed to business as provided in this act, within two years after the date of such license, then such license shall be deemed revoked, and all proceedings thereunder void.’

The first count of the declaration avers that on the 16th of October, 1889, and at divers times prior thereto, beginning with the 3d of April, 1889, ‘said defendants, pretending to be directors and officers of a pretended stock corporation by the name of Q. W. Loverin Company, did assume to use corporate powers and to use the name of said pretended stock corporation, without having theretofore complied with an act of the state of Illinois entitled ‘An act concerning corporations' (being a part of chapter 32 of the Revised Statutes of the state of Illinois), which prescribes and regulates the manner in and by which corporations for pecuniary profit may be lawfully organized and authorized to do business; that is to say, said defendant did not file or cause to be filed, and there had not been filed, prior to or at said time, to wit, the 16th day of October, 1889, in the recorder's office of Cook county, in which county was the principal office of said pretended corporation, a certificate from the secretary of state of the state of Illinois of the complete organization of said corporation; and, so assuming and pretending, as aforesaid, said defendants did purchase from said plaintiff, on the alleged behalf of said pretended corporation, divers goods, wares, and merchandise of the value in all of the sum of eleven hundred and sixty-eight dollars and seventy-one cents ($1,168.71), which said goods, wares, and merchandise were by said plaintiff at the times, respectively, of said purchase, and at the request of said defendants, delivered to them as, and so pretending to be, directors, officers, and agents of said pretended corporation; whereby and by force of the statute in such case made and provided said defendants became and were jointly and severally liable to pay the plaintiff said purchase price or value of said goods, wares, and merchandise so as aforesaid purchased by them in the name of such pretended corporation; and, being so liable, said defendants,’ etc., ‘promised to pay,’ etc. A second count was filed with the amended declaration, but was subsequently withdrawn, and a substitute for the second count was filed, pleading the same facts in the same language as in the first count, but omitting any reference to the statute; alleging ‘that the defendants thereby became jointly and severally liable as parties doing business under the name of Q. W. Loverin Company, to pay,’ etc. A demurrer to the first count was overruled, whereupon three special pleas to said count were filed. The gist of the first plea is that the plaintiff has no cause of action, because prior to the making of the supposed promises ‘all the capital stock named in the articles of incorporation of said Q. W. Loverin Company had been fully subscribed in good faith, and that the said several supposed promises, and undertakings in said court mentioned were made by defendants, if at all, in their respective capacities as directors of said corporation, the Q. W. Loverin Company, and not otherwise,’ etc. The second plea (after showing in detail the taking of all previous steps requisite to the formation of a corporation for pecuniary profit) sets up that nearly two years prior to April 3, 1889, the secretary of state issued and delivered to the defendants, as directors, a duly-authenticated certificate of the complete organization of the corporation, Q. W. Loverin Company, and that thereupon the said corporation became and was a corporation de facto; that the said several promises and undertakings were made by the said defendants, if at all, as directors, etc., ‘and not otherwise, and are the promises of said corporation, and not of said defendants.’ But the plea does not deny the averment of the declaration that the certificate of complete organization was not filed for record in Cook county, where the principal office of the Q. W. Loverin Company was located. The third plea sets up that prior to April 3, 1889, ‘all the capital stock named in the articles of incorporation of the said Q. W. Loverin Company had been fully subscribed in good faith, and said subscriptions fully paid, and a certificate of the complete organization of the said Q. W. Loverin Company had been issued by the secretary of state, and every requirement of the corporation act had been fully complied with, except that the said certificate of complete organization of said corporation had not been recorded in the recorder's office of Cook county before said 16th day of October, 1889; that said Q. W. Loverin Company thereby became a corporation de facto, and that on said 3d day of April, and on other dates, the said plaintiff recognized its corporate existence, and contracted with these defendants as representatives of said corporation, and not otherwise, and is estopped to deny its corporate existence.’ Then the plea sets up that in July, 1889, the Q. W. Loverin Company, as a corporation, made a voluntary assignment for the benefit of creditors; that the plaintiff, to obtain a dividend from the assets of said corporation, made, and on the 15th of October, 1889, filed with the assignee, a verified claim of $1,168.71, being for the same account as was sued upon in this suit. A general demurrer to all three special pleas was sustained, and defendants elected to abide by their said pleas. Subsequently the order was vacated in so far as it sustained the demurrer as to the third of said pleas, without, however, impairing the force or effect of said order in so far as it sustained the demurrer as to the first and second of said pleas; and a replication to said third plea was filed. By his replication to the third plea the plaintiff showed that he had never received from the assignee or from any other source any portion of the sums due him, and that, after filing his verified claim with said assignee, a judgment was duly entered in accordance with the statute in the county court of Cook county, discontinuing all proceedings in the matter of said assignment, and thereby, and by force of the statute, all parties were remitted to the same rights as existed at the time of the assignment. Demurrers to this replication and to the so-called substituted or amended second count having been overruled, the defendants elected to abide by their demurrers. It being stipulated that if there was a right of recovery the amount which the plaintiff was entitled to was $1,168.71, judgment was entered in plaintiff's favor for that sum and costs. The appellate court has affirmed the judgment thus rendered by the circuit court.

MAGRUDER, J. (after stating the facts).

The main question in this case is whether the directors and officers of a corporation are liable, under section 18 of the general incorporation act of the state, for debts and liabilities contracted by them in the name of the corporation before a certificate from the secretary of state of the complete organization of the corporation has been recorded in the office of the recorder of deeds of the county where the principal office of such company is located, as required by section 4 of said act.

1. In order to answer this question it is desirable at the outset to ascertain, if possible, the true meaning of section 4. That section, which is set out in full in...