E. Corey & Co. v. Morrill

[603] The opinion of the court was delivered by Royoe, Ch. J. This was an action of debt for goods sold and! delivered, and upon certain notes given therefor, and also upon R. L. sec. 3279, which provides that in case debts aré contracted by a corporation by voluntary association before compliance with the provisions of the preceding section, 3278, the president and* directors shall be personally liable for such debts. The defendants named in the writ are four in number, but of these only two, Morrill and Lamson, are before the court; and* in disposing of the first aspect in which the case is brought, it i» sufficient to say that the record fails to show that either of these-defendants bought, ordered or contracted for the goods in question, or signed the notes given therefor, or that the goods were-sold or notes accepted by the plaintiffs upon their credit. The judgment being in favor of the defendants, we are bound to presume, since none of these facts appear from the exceptions to-have been found for the plaintiffs, that they were found for the ■ defendants. There is clearly no ground, therefore, upon which the defendants can be held directly liable upon the first three-counts in the declaration. The last three counts are upon sec. 3279, R. L., and seek to-hold .the defendants as directors of a corporation by voluntary association under the laws of this State. Without passing upon the question of whether this section is to be regarddd as penal or remedial, it is sufficient to say that the liability imposed by it. being a purely statutory one, it is not within the province of the-courts to enlarge or alter its -provisions, which are clear and unambiguously construction. It is clear that the conditions precedent to the creation of a liability under that Section are, first, the existence of a corporation, recognized as such by the laws of this State; second, the contracting of debt by such corporation p and third, a failure to comply with the provisions of section 3278 before the contraction of such debt. Our statutes provide, R. L. ss. 3276, 3277, that three or-more persons, who by articles of association in writing, the substantial form of which is prescribed by sec. 3277, associate604 themselves together for the purpose of carrying on some business -or doing some thing specified in the section, “ and who comply with the provisions of this chapter, shall, with their successors •and assigns, constitute a body politic and corporate.” This -statute also, conferring rights and powers without the scope of -the common law, is not to be enlarged by construction. Without ...going further, it is obvious that no corporation can have legal -existence or recognition, unless the first step prescribed by the ¡statute, at all events,’ has been taken in substantial compliance with its provisions. Three or more persons must by articles of .association in writing, substantially conforming to the requirements of section 3277, associate themselves together under the ¿provisions of the chapter before the corporation can be said to .have received the animating spark. And it is obvious that the three or more persons must sign or execute these articles in such -a manner as to come within the well established rules of law prescribing the elements necessary to constitute a signing or execution which will make the paper executed the legal and binding instrument of' the person who executes it. Their signatures •must not be procured, without fault on their part, by fraud; nor .must they be affixed with the understanding and upon condition -that the paper signed is not to take legal effect and be valid and binding, either presently, or at some fixed and definite time, or •upon the happening of some contingency or fulfilment of some -condition within the bounds of possibility. N or is it obvious .how such an instrument as this, more than any other, can have .life and binding force if executed only to take effect upon the happening of some event, unless it is shown that the event has happened. The articles of association which were drawn up in this case were signed by all the defendants, but, as the exceptions show, were signed upon the understanding and agreement that “ they were not to take effect until certain things were done, which were never done and the articles never did take effect.” This finding of fact by the court below is conclusive that no corporation ever entered into existence; and there being no corporation, there could be no directors, and no liability under section 3279. [605] The case shows no act or omission on the part of the defendant’ Lamson which can be held to estop him from making his. defense in the suit upon the ground above established. He supposed, as the court found, that after the meeting of Feb. 18th, 1878, the business was conducted by th.e partnership, of which he was not a member, and as it had been conducted before that-meeting ; and nothing is shown which could be held to charge-him witl/notics, either actual or constructive, to the contrary. It is found, however, that the defendant Morrill, with Buchanon, visited the plaintiffs and represented to them that the-corporation which had been projected -had in fact been legally organized, and that he was a director in it. Upon the strength, of this representation, and upon the faith and credit of it, alone, the plaintiffs sold and delivered the goods and accepted the note's sued for. Upon familiar principles this finding of fact estopsMorrill from now denying the truth of his representation; and. failing to show that a corporation was organized, and that it had complied with the provisions of section 3278, this estoppel debars him from any defense against the liability imposed by section 3279, as against the plaintiffs in this case. The judgment of the County Court as to the defendant Morrill is reversed, and judgment rendered against him for the amount shown by the plaintiffs’ specifications, and interest,, and as to the defendant Lamson, the judgment of the County-Court is affirmed.