Staver & Abbott Mfg. Co. v. Blake
| Decision Date | 24 December 1896 |
| Citation | 69 N.W. 508,111 Mich. 282 |
| Parties | STAVER & ABBOTT MANUF'G CO. v. BLAKE ET AL. |
| Court | Michigan Supreme Court |
Error to circuit court, Kent county; William E. Grove, Judge.
Action by Staver & Abbott Manufacturing Company against Catherine A Blake and others. From a judgment for defendants, plaintiff brings error. Affirmed.
Wylie & Clapperton (Bundy & Travis, of counsel), for appellant.
Charles B. Blair (Fletcher & Wanty, of counsel) for appellees.
The defendants are the members and owners of the stock of the Grand Rapids Storage & Transfer Company, Limited, an association organized May 13, 1890, under chapter 79, How. Ann. St. The plaintiff is a manufacturing corporation of Chicago, Ill. It sues for merchandise alleged to have been sold and delivered to the defendants. The declaration is upon the common counts. The bill of particulars is for merchandise sold, for which notes were given, "executed by the name of Grand Rapids Storage & Transfer Company, Limited," dated January, May, and October, 1895. No claim is made that these defendants made individual promises, upon the faith of which these goods were sold and delivered, or that they had ever expressly formed a partnership, or that they had ever held themselves out to plaintiff as co-partners. The sole basis for the right of recovery against them is the failure of the original organizers to comply with the statute in organizing, and noncompliance with the statute in carrying on the business after it was organized. These defects are stated by the learned counsel to be as follows: (1) The articles did not state when and how $7,000 were to be paid. (2) They falsely stated that $13,000 in cash had been paid in, when, as a matter of fact, property instead of money had been paid in, without any schedule containing the names of the parties contributing, with a description and valuation of the property contributed. (3) No yearly or other meetings of the members of the association were held for five years. (4) No managers of the association were elected for upward of five years. (5) No subscription book was kept, as required by the statute. (6) The statute was not observed in the matter of contracting debts. (7) The statute was not observed in using the word "Limited" in connection with the associate name. The defendants contend (1) that the company was properly organized; (2) that the plaintiff was estopped to deny that the association was legally organized, and to assert partnership relations, because it dealt exclusively with the association, and not with its members as a partnership; (3) that partnership associations limited are corporations; (4) that the express penalties imposed by the statute for its violation exclude all others; (5) that these defendants are subsequent stockholders, are innocent purchasers, and therefore not liable for irregularities in the organization or its management.
1. The Original Organization. There is no evidence of any dishonesty or bad faith in the formation of this association. It was organized under the advice of eminent counsel, who drew the articles. On March 29, 1890, eight citizens of Grand Rapids signed an agreement to form an association to be known as the Grand Rapids Storage & Transfer Company, Limited. This agreement specified the amount each was to contribute. $12,800 were thus contributed, and, when the articles were formed, this was so stated therein. This money was invested in the purchase of property and the erection of a building for the business of the association. The capital stock was fixed at $20,000. $7,200 remained unpaid, and the articles did not specify when or how it should be paid. Technically, and $12,800 of capital was not paid in cash at the time of the execution of the articles. It was, however, paid in shortly before, and for the purpose of, forming the association, and had been expended in the purchase of property for it, and to use in its business.
Subsequent Management. It is true that meetings were not held, and managers elected, and debts incurred, in strict compliance with the statute. The business was conducted in the name of the association, and without any fraudulent intent or acts.
2. The Provisions of the Law. This act was passed in 1887, and is entitled "An act authorizing the formation of partnership associations, in which the capital subscribed shall alone be responsible for the debts of the association, except under certain circumstances." Section 1 declares that It also requires a schedule containing the names of such contributors, and the description and valuation of the property so contributed. Section 2 provides that the members shall not be liable on any judgment, decree, or order which shall be obtained against such association, or for any debt or engagement of such company, otherwise than is provided by the act. This section further provides for proceedings in such cases, and makes the members liable for labor debts. It limits the liabilities of stockholders to the amount of their unpaid subscriptions, and requires a subscription list to be kept, which shall be open to inspection by creditors and members at all reasonable times. Section 6 prohibits division of profits to diminish or impair the capital of the association, and makes any one consenting to such a division liable to any persons interested or injured thereby, "to the amount of such division or impairment." Section 3 provides that "the omission of the word 'Limited' in the use of the name of the partnership association shall render each and every member of such partnership liable for any indebtedness, damage or liability arising therefrom."
3. Plaintiff's action is based upon contract not upon tort. It insists that the letter of the law, in the formation and conduct of the partnership association limited, has not been complied with, and therefore the law makes the defendants either partners or members of a joint-stock company at the common law, and therefore individually liable. Neither of these defendants was interested in this association at its organization. The husband of Mrs. Blake was one of the principal stockholders. She advanced to him the money which he originally paid in, and also the money with which he purchased, soon after the organization, most of the other stock. The stock was assigned to her as security. Subsequently, she discharged the liability of her husband, and took the stock, and now owns all but $200 worth, owned by the defendants Aldrich and Pantland. None of these were aware of any irregularity in the original organization or in its subsequent management. Plaintiff had for several years dealt with this association as such. Its correspondence was carried on with it. Its contracts were made with it. It had no belief that it was making any contract with these defendants, or that they were individually liable, for the correspondence and course of business refute any such conclusion. The very name of the association implied a warning to plaintiff that it was not...
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