National Shutter Bar Co. v. C.F.S. Zimmerman & Co.

• Decision Date: 23 March 1909
• Citation: 73 A. 19,110 Md. 313
• Parties: NATIONAL SHUTTER BAR CO. v. C. F. S. ZIMMERMAN & CO.
• Court: Maryland Court of Appeals

73 A. 19

110 Md. 313

NATIONAL SHUTTER BAR CO. v. C. F. S. ZIMMERMAN & CO.

Court of Appeals of Maryland

March 23, 1909

Appeal from Circuit Court, Carroll County.

Action by the National Shutter Bar Company against C. F. S Zimmerman & Co. Judgment of non pros., and plaintiff appeals. Affirmed.

Argued before BOYD, C.J., and BRISCOE, PEARCE, SCHMUCKER, BURKE, and HENRY, JJ.

Leo Weinberg and Guy W. Steele, for appellant.

Francis Neal Parke and Hammond Urner, for appellee.

SCHMUCKER J.

The vital question presented by this appeal is whether a corporation, which did not pay its bonus tax until after the publication of an alleged libelous circular letter, can recover damages in an action, on the case against the publisher of the letter, for libel. The further question whether the defendants were estopped, by certain conduct on their part, from relying on the nonpayment of the bonus tax as a defense to the action, is also presented by the record. We will consider both questions.

The suit was instituted on August 29, 1906, in the circuit court for Frederick county, by the National Shutter Bar Company, as a body corporate, against the appellees, as copartners trading as C. F. S. Zimmerman & Co., and after two removals it reached the circuit court for Carroll county, where the judgment of non pros., from which the appeal was taken, was entered on the 8th of December, 1908. The alleged cause of action was the issue by the defendants on the 2d day of July 1906, of a circular letter to various persons and firms doing business with them and also with the plaintiff company stating that certain shutter bars, which were then being manufactured and sold by that company, were direct infringements of patent rights owned by the defendants, and giving notice that all sellers and users of the bars would be prosecuted for the infringement. We will assume, for the purposes of this opinion, without, however, so deciding, that this circular letter was libelous in character. The pleadings in the case were protracted and voluminous, and the record bristles with demurrers and exceptions. There were four successive declarations, one original and three amended ones, whose claims for damages grew from $20,000, in the first one, to $50,000, in the last. They were separately demurred to. Then, in response to demands from the defendants, the plaintiff filed in succession four bills of particulars, to each of which exceptions were filed. To discuss in detail the technical questions of pleading thus raised would be academic and useless, as the defense of the nonexistence of the plaintiff corporation at the date of the publication of the alleged libelous letter, which was presented in the manner hereinafter mentioned, constituted a fatal obstacle to a recovery by the plaintiff.

The defendants' demurrer to the third amended declaration having been overruled, they filed seven pleas, the last one of which interposed the defense to which we have referred, by averring that the corporation bonus tax had not been paid by the plaintiff when the alleged libelous letter was issued. The plaintiff demurred to that plea, but the court overruled the demurrer. Thereupon the plaintiff filed a replication to the plea, admitting that the bonus tax had not been paid at the time therein alleged, but averring that it had been paid on the 6th of August, 1906, before the institution of the suit, and further averring that the defendants were estopped from denying the corporate existence of the plaintiff at the time of the publication of the letter complained of, because they had recognized its existence by directing letters to it as a corporation and by referring other persons to it as such for information, and by procuring one of their number to sue it, as such, in the Circuit Court of the United States for the District of Maryland. The defendants demurred to this replication, and the court sustained their demurrer. The plaintiff then tendered, for filing, a second replication, asserting its incorporation under the general laws of the state on the 11th of December, 1905, by the filing of its duly approved certificate of incorporation in the office of the clerk of the circuit court for Frederick county, and that thereupon the persons named in the certificate to serve as directors for the first year proceeded to and did duly organize and carry on the business of making and selling of shutters bars, and that on the 6th of August, 1906, it paid its bonus tax. It then alleged the issue by the defendants of the circular letter, and averred that in consequence thereof it had suffered great loss and damage on and after the 6th of August, 1906. To this replication the defendants interposed a motion of ne recipiatur, which the court sustained. A rule to plead further was then laid upon the plaintiff, and upon its refusal to comply with the rule the court entered the judgment of non pros. against it, from which the appeal was taken.

Without pausing to inquire whether the first of these two replications was open to objection for duplicity, we will consider whether either of them constituted a sufficient reply to the seventh plea. In this connection it may be premised that the nonpayment of the bonus tax was properly pleaded by way of traverse, and not in abatement, for the plea did not interpose an objection to the further progress of the suit, but it denied the existence of the cause of action itself. The theory of the plea is that the plaintiff corporation had not been created at the time of the commission of the wrong in the declaration alleged, and therefore could not have been injured by it. The effect upon corporate existence of the nonpayment of the bonus tax, required by section 98, art. 81, Code Pub. Gen. Laws 1904, to be made as an essential step in the formation of corporations of the class to which the present plaintiff belongs, has received repeated consideration at the hands of this court, and is no longer an open question. Maryland Tube Works v. West End Improvement Co., 87 Md. 207, 39 A. 620, 39 L. R. A. 810; Cleaveland v. Mullin, 96 Md. 598, 54 A. 665; Murphy v. Wheatley, 102 Md. 501, 63 A. 62; State v. Consol. Gas Co., 104 Md. 364, 65 A. 40. The tenor and effect of these decisions was well expressed by the late Chief Justice McSherry, speaking for the court in Cleaveland v. Mullin, supra, where he said: "Section 88f (now section 98, art. 81, Code Pub. Gen. Laws) prescribes the payment of the bonus tax as a condition precedent to the possession or exercise by any corporation, other than the excepted classes, of any corporate powers. No company 'shall have,' that is, possess, 'or exercise,' that is, use, 'any corporate powers until said bonus tax has been paid.' It would be difficult to frame a more emphatic or sweeping condition precedent. *** That section 88f imposes a condition precedent is no longer an open question in this state. Md. Tube Works v. West End. Imp. Co., 87 Md. 215, 39 A. 620, 39 L. R. A. 810. 'There is certainly no doubt that, where a corporation is created by statute, or under a general statute, *** which requires certain acts to be done before it can be considered in esse, there those acts must appear to have been done in order to establish the corporate existence.' Lord v. Essex Bldg. Ass'n, 37 Md. 325. No less emphatic is the case of Franklin Fire Ins. Co. v. Hart, 31 Md. 59."

The cases to which we have referred were cases in contract, but on principle the same rule should be applied to cases in tort. In Maryland Tube Works v. West End Imp. Co., supra this court cited with approval and relied on, in support of the proposition that statutory conditions precedent must have been complied with to give existence to corporations formed under general laws, the case of Jones v. Aspen Hardware Co., 21 Colo. 263, 40 P. 457, 29 L. R....