Burt v. Farrar

By the Court, Johnson, J. The object of signing the articles by all the associates, doubtless, was to effect the formation of a rail road corporation. But the corporation was not formed, and did not become a legal body until all the requirements of [520] the statute had been complied with, and the articles filed in the office of the secretary of state. [Cayuga General Term, June 1, 1857. Until all this was done, the subscription of any subscriber to the articles was, I think, a mere proposition to take the number of shares indicated by the subscription, of the capital stock of the corporation thereafter to be formed, and not a binding promise to’ take and pay. As an obligation, it was inchoate, and could never become of any force or effect unless the articles were filed and the corporation created. While the articles remained in the hands of the subscribers, or either of them, I see no reason why the defendant might not erase it altogether, or modify it as he saw fit. He may have acted in bad faith with his associates, but that is not the question here. A party may always withdraw or modify a proposition to enter into any obligation or relation, before it has been accepted-by the other party. When the corporation was created the defendant’s subscription took effect and became binding, and not before. And the defendant then became the owner of the shares he had agreed to take. This was determined by the articles as they stood at the time of filing. It is clear, I think, that the defendant, when the corporation came into being, could only have claimed two shares of the capital stock, and I do not see how the board of directors could have awarded him any greater number, without a new subscription. This being so, it must follow that the action cannot be maintained to. recover the amount of the eighteen shares. The obligations between the corporation and the subscribers to the stock are mutual, and the corporation cannot collect for shares which the defendant had no right to claim, and which it had no power to award and deliver to him. The nonsuit was therefore right, and a new trial must be denied. Johnson, T. R. Strong and Smith, Justices.]