McDermott v. Donegan

• Decision Date: 31 March 1869
• Citation: 44 Mo. 85
• Parties: THOMAS M. MCDERMOTT, Appellant, v. JOHN J. DONEGAN, Respondent.
• Court: Missouri Supreme Court

44 Mo. 85

THOMAS M. MCDERMOTT, Appellant,

v.JOHN J. DONEGAN, Respondent.

Supreme Court of Missouri.

March Term, 1869.

Appeal from St. Louis Circuit Court.

On the trial the court gave the following, with other instructions:

“1. The amount of capital stock of a corporation fixed by the charter to be subscribed and paid in before the company is authorized to organize and proceed to business under such charter, is an essential condition to the enforcement of subscriptions to such stock; and unless the jury believe from the evidence that the amount of three hundred and fifty thousand dollars had been subscribed and paid in before the St. Louis, Cairo and Johnsonville Packet Company proceeded to act under their charter, the plaintiff can not recover, and the jury will find for garnishee

2. In order to acquire such existence as will enable a corporation to enforce its subscriptions, the charter of such corporation must be accepted, and conditions precedent must be complied with according to the terms of such charter; and unless the jury believe from the evidence that the St. Louis, Cairo and Johnsonville Packet Company had acquired such existence, the plaintiff can not recover, and the jury will find for the garnishee.”

The other facts sufficiently appear in the opinion of the court.

Bakewell & Farish, for appellant.

I. The instructions were clearly erroneous. The second instruction was calculated to mislead the jury, and submitted to them purely a matter of law. The first instruction was erroneous, because the act of incorporation read in evidence was sufficient to impart a legal existence to the St. Louis, Cairo and Johnsonville Packet Company, for the purpose of enforcing subscriptions to its stock, and because the garnishee was, by his subscription, estopped to deny that the said St. Louis, Cairo and Johnsonville Packet Company was a body corporate. (Ang. & A. Corp. §§ 636, 518; Dutchess Manufacturing Co. v. Davis, 14 Johns. 238; Sagory v. Dubois, 3 Sandf. Ch. 491; Vermont Central R.R. v. Clayes, 21 Verm. 34.)

II. The act of incorporation may not be sufficient to give vitality to acts purporting to be done by the corporation, when it appears that the company has organized contrary to the requirements of its charter, and proceeded to business before a requisite amount of its stock was paid in; but this refers to matters of business outside and independent of subscriptions and the enforcement or collection thereof. The act of incorporation was read in evidence, from which it appeared that the parties therein named, and such others as might be associated with them, were created a body corporate, with power to sue, liability to be sued, and clothed with the right to sue and the power to enforce collection of subscriptions to its stock, independent of any organization. Such would seem to be the aim and scope of the charter, as otherwise the collection of subscriptions to the amount of three hundred and fifty thousand dollars could never be enforced, and the organization would fail. These subscriptions are mutual; there is a mutual obligation existing between all the subscribers. Their promise is to pay the amount of their subscription, and it is absolute and anterior to, and independent of, the organization or proceeding to business. The matter of proceeding to business has reference solely to the outside world, and can never be interpreted to mean payment of, or obligation to pay, subscriptions. The reservation in the charter was a matter between the State and the corporators. If it was infringed, the State, by proper proceeding, might have revoked the grant or enjoined its operation. It was intended as a protection to the outside world or community at large, and can never, in its letter or spirit, be construed to apply as a shield to delinquent subscribers to stock, to enable them to break their engagements, and screen them from the force and obligation of their promises. Their engagement is absolute. They subscribe and promise to pay their subscription, and they are estopped to say the corporation was a fraud, or that their engagement was to pay only when the company was organized and proceeded to business.

Slayback & Spencer, for respondent.

I. There was no error in the court below. The instructions given by the court fully covered the law applicable to the case, and were as fair for one party as the other. “As the attaching creditor can hold the garnishee only to the extent of the defendant's claim against the garnishee, and can acquire no rights against the latter except such as the defendant had, and as he is not permitted to place the garnishee in any worse condition than he would occupy if sued by the defendant, it follows, necessarily, that whatever defense the garnishee could urge against an action by the defendant for the debt in respect of which he is garnished, he may set up in bar of a judgment against him as garnishee.” (Drake on Attach. § 672; Shelton v. Simonds, Wright's Rep. 724.)

II. So far as the company was concerned, Donegan, the respondent, had a good defense, which he had a perfect right to set up against the appellant, to-wit: that the company had not complied with the conditions precedent...