Perry v. Hale

• Decision Date: 23 February 1887
• Citation: 143 Mass. 540,10 N.E. 174
• Parties: PERRY v. HALE and others.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

143 Mass. 540

10 N.E. 174

PERRY v. HALE and others.

Supreme Judicial Court of Massachusetts, Essex.

February 23, 1887

COUNSEL

Sherman &amp Bell and W.H. Moody, for plaintiff.

The contract was proved by its production in writing. The evidence of fraud was ample. All the representations fall within the principle as stated in Hazard v. Irwin, 18 Pick. 95. In the case at bar the plaintiff had not equal means of knowing the facts. David v. Park, 103 Mass 501; Savage v. Stevens, 126 Mass. 207; Brown v Castles, 11 Cush. 348; Bradley v. Poole, 98 Mass. 169; Upton v. Englehart, 3 Dill. 496. If the contract was only voidable, a seasonable rescission was made. Has the plaintiff sued the right parties? The only question is whether the attempted incorporation in New Hampshire is to be treated in the courts of Massachusetts as void or valid. We contend that there was no actual incorporation; (1) because the law of New Hampshire was not complied with; (2) because the attempted incorporation was void as an infringement upon the sovereignty of this commonwealth. See Gen.Laws N.H. c. 152, §§ 1-4, and Harris v McGregor, 29 Cal. 125. The articles could not be legally recorded in Haverhill. Bigelow v. Gregory, 73 Ill. 197; Doyle v. Mizner, 42 Mich. 332, 3 N.W. 968. The state of New Hampshire has no power to incorporate citizens of Massachusetts for the purpose of doing business, not in New Hampshire, but in Massachusetts. See Lord Dacres' Case, 1 Dyer, 81; Hill v. Beach, 12 N.J.Eq. 31; Thompson v. Waters, 25 Mich. 214, 221. Any other doctrine would result in endless confusion and wrong. Erickson v. Nesmith, 15 Gray, 222, 4 Allen, 233; Halsey v. McLean, 12 Allen, 438. Where the supposed corporation has contracted as such, and, when sued on the contract, attempts to deny its own incorporation, it is always held to be estopped to do so. Dooley v. Cheshire Glass Co., 15 Gray, 494; Merrick v. Reynolds Engine Co., 101 Mass. 381. An individual, who has contracted with a body as a corporation, is estopped from denying its existence where his purpose is to escape from his contract. Worcester Med.Inst. v. Harding, 11 Cush. 285; Douglas Co. v. Bolles, 94 U.S. 104; Wallace v. Loomis, 97 U.S. 146; Doyle v. Mizner, supra; Farmers', etc., Bank v. Jenks, 7 Metc. 592; Barrett v. Mead, 10 Allen, 337; Williams v. Cheney, 3 Gray, 215; Williamsburg Ins. Co. v. Frothingham, 122 Mass. 391; Merchants' Nat. Bank v. Glendon Co., 120 Mass. 97; Washington Co. Nat. Bank v. Lee, 112 Mass. 521; Martin v. Fewell, 79 Mo. 401, 411; Stowe v. Flagg, 72 Ill. 397; Frost v. Frostburg Coal Co., 24 How. 278; Ang. & A. Corp. § 594; Chester Glass Co. v. Dewey, 16 Mass. 94; Utley v. Union Tool Co., 11 Gray, 139; Bigelow v. Gregory, 73 Ill. 197; Newcomb v. Reed, 12 Allen, 362. A corporation must submit itself to the jurisdiction of some state. The last question is, what is the liability of the members if the attempted incorporation is void? That may depend upon the objects for which they associate themselves; but it will, in all cases, be a joint liability, and, in the most cases, that of partners. Fuller v. Rowe, 57 N.Y. 23, 26. See Stafford Nat. Bank v. Palmer, 47 Conn. 443, 447, 448; Flagg v. Stow, 85 Ill. 164; Ferris v. Thaw, 72 Mo. 446; Martin v. Fewell, 79 Mo. 401; State v. How, 1 Mich. 512; Bigelow v. Gregory, 73 Ill. 197; Coleman v. Coleman, 78 Ind. 344; Kaiser v. Lawrence Sav. Bank, 56 Iowa, 104; Vredenburg v. Behan, 33 La.Ann. 627; Abbott v. Omaha Smelting, etc., Co., 4 Neb. 416; Garnett v. Richardson, 35 Ark. 144; Holbrook v. St. Paul's, etc., Ins. Co., 25 Minn. 229; Richardson v. Pitts, 71 Mo. 128. See Fay v. Noble, 7 Cush. 188; Trowbridge v. Scudder, 11 Cush. 86; Salem Bank v. Almy, 117 Mass. 476.

E.T. Burley, for all defendants except Saltmarsh.

The question here presented is whether this action of contract can be maintained against either of the 10 joint defendants upon the evidence reported. If the defendants, other than Saltmarsh, are liable to the plaintiff in any form of action, it must be upon the ground that they were members of an association engaged in a common enterprise, and not upon the ground that some of the defendants were officers of such association. If that association was in law a copartnership, then we have a case in which one copartner, after remaining for a year in the copartnership, seeks to maintain an action at law against his copartners to recover his contribution to the capital of the association. Fay v. Noble, 7 Cush. 188. If the plaintiff's position is tenable, it would seem to follow that he is liable over to such of the defendants, and others, as were induced to purchase stock upon similar representations, while the plaintiff was a member of the association. It is submitted that this action of contract cannot be maintained against either of the defendants: First. Because the plaintiff paid his money to the use of a corporation de jure. It was a sufficient compliance with the statute to record where the principal business within the state was carried on. It is not claimed that Dover was not such a place. It is well settled that a corporation created in one state may, upon the principle of comity, exercise within another state the general powers conferred under the laws of the state where the corporation was organized, provided the doing so be not inconsistent with the laws of such other state. Gen.Laws N.H. c. 152; Christian Union v. Yount, 101 U.S. 352. Second. Because the plaintiff cannot in this action impeach the legality of the corporation. Worcester Med.Inst. v. Harding, 11 Cush. 288; Butchers' & Drovers' Bank v. McDonald, 130 Mass. 264; Appleton Fire Ins. Co. v. Jesser, 5 Allen, 448. Third. Because, if not a corporation de jure, it was, at the times of the several payments by plaintiff, a corporation de facto. 2 Mor.Corp.§ 748, and cases cited. If the plaintiff has any remedy, it is in tort, and not in contract. Fay v. Noble, ubi supra; Trowbridge v. Scudder, 11 Cush. 85; Ward v. Brigham, 127 Mass. 24. Fourth. Because there was no sufficient evidence of material misrepresentations, even as against Saltmarsh, to be submitted to the jury. Fifth. Because there was no valid rescission of the contract as between plaintiff and defendants, and no notice before suit of any rescission given to defendants, or either of them, and no demand made upon defendants, or either of them, or their agent. 1 Mor.Corp. § 108.

OPINION

C. ALLEN, J.

The plaintiff contends that he was induced to take shares in the company by the fraud of Saltmarsh; that the company was not incorporated; that it is open to him to deny the validity of the attempted incorporation; that he was entitled to rescind his contract of purchase of shares, and to withdraw from the company, and to treat his membership as void from the beginning; that he has done all that he could do to make such rescission and withdrawal effectual; and that the result is that the other members of the company are liable to him in an action at law for money had and received, as parties or otherwise, for the repayment of the money which he paid for his shares. Assuming, without deciding, that all the earlier propositions are well maintained, the result contended for does not follow. The plaintiff does not charge fraud upon any of the defendants except Saltmarsh. There is nothing to show that any other defendant was associated with Saltmarsh in the alleged fraud. It appears that as many as 75 persons became members of the company, and acted as stockholders. The plaintiff himself acted as a stockholder for more than a year. There were formal articles of association, officers were chosen to manage the company's affairs, and the plaintiff's payments were made to two different persons, who successively acted as the company's treasurer. It is clearly to be inferred that his payments, and the payments made by the other stockholders, went into a common fund. So far as appears Saltmarsh was the chief, if not the only, promoter of the company; and other persons, even the other defendants themselves, who constituted but a portion of the members of the company, may have taken their shares under circumstances and representations similar to those which led the plaintiff to purchase his. Works were erected at a cost of $25,000, and business was begun. Some of the defendants were seen taking part in the work or business; and, as to the other defendants, there was no evidence, except what appeared by the papers, showing the attempted organization of the company as a corporation, and the action taken at various meetings, and a return of the company's condition to the secretary of state of New Hampshire. There was...