Gay v. Kohlsaat

Mr. Justice Farmer delivered the opinion of the court: The evidence shows, and the master found, that the complainant, and all those connected with the organization of the Chicago Press Club Auxiliary Association, were members of the Chicago Press Club, which was a corporation not authorized to acquire and hold real estate, and that the auxiliary association was proposed to be organized and incorporated for the sole purpose of erecting a building for the use and benefit of the Chicago Press Club; that the attempted organization of the auxiliary association was the result of a suggestion made by complainant for that purpose; that while complainant did not actively participate in the organization of the auxiliary association as a member thereof, he aided in its organzation by his advice and counsel. The bylaws adopted by the auxiliary association provided that its capital stock should consist of ten shares of the par value of $100 each; that its membership should consist of ten members of the Press Club, who should hold the stock in equal shares, and that said ten members of the auxiliary association should be elected from a list designated by the Press Club. The by-laws further provided that by a vote of not less than six, any member of the auxiliary association might be deprived of his membership and stockholding; that vacancies in the membership should be filled from members of the Press Club, and that outgoing members should transfer their stock to their successors. The master further found and reported: “None of the members of the auxiliary association really owned any stock. It could not be sold or transferred to .anyone who was not so selected from the membership of the Press Club, and if a holder had died, his estate would have received nothing. It does not appear that, any of the subscribers for stock, or holders thereof, ever paid anything for the stock. In fact, it was all held by these men as agents or trustees for the Press Club, and the association was really only the creature of the Press Club, being an instrument to be used in obtaining a building for the Press Club, and the said complainant was aware of these facts.” These findings of the master were sustained by the evidence and justified his conclusion that the auxiliary association was really but an agent of the Press Club, to do for said Press Club what it could not lawfully do for itself. It is clearly shown by the evidence that in addition to the complainant being the author of the scheme to provide a building for the Press Club, he was informed of the status and acts of the auxiliary association all the time, and that he was notified of most, if not all, its meetings, and attended many of them, and knew August 18, 1892, when the resolution was adopted that the auxiliary association enter into a contract with him, as architect, to perfect plans and have general supervision of the erection of a building, that said auxiliary association had not received its charter from the Secretary of State, and was therefore not a corporation. He was present at this meeting, but left the room as the vote was about to be taken on the resolution. After the vote was taken he returned to the meeting and asked for a copy of the resolution. The evidence shows that complainant manifested considerable interest in hastening the incorporation, and the master finds that after the meeting of August 18, 1892, he complained of the slow progress in completing the incorporation. This finding was not excepted to by complainant. He did except, among others, to the findings of the master that the organization of the auxiliary association was the result of his suggestion; that he advised its organization for the purpose for which it was organized, and that he knew, on August 18, 1892, that the charter from the Secretary of State had not been received or recorded. These exceptions were overruled by the trial court, and no cross-errors have been assigned by complainant upon such ruling. He is therefore deemed to have acquiesced in the findings of the court upon these propositions. (Vose v. Strong, 144 Ill. 108.) Complainant knew that the capital stock of the auxiliary association was only $1000, and that its only means of obtaining money to erect the proposed building was by the sale of bonds. Frank F. Johnson, originally a defendant to the bill in this case but as to whom the decree of the circuit court dismissed the bill, testified he told complainant, at the time of the meeting August 18, 1892, that the action in adopting the resolution was hasty and would do complainant no good, because the association was not a corporation yet, and that complainant replied, the prestige and standing of the club would bring the money end around all right. According to Johnson’s testimony, complainant more than once inquired concerning the completion of the corporation, and manifested irritation at what he thought the slow methods of the members of the auxiliary association in completing the incorporation. It is true, complainant denies much of the testimony of Johnson, but the weight of the evidence shows that though not a member of the auxiliary association, he, as a member of the Chicago Press Club, in addition to advising the incorporation of the auxiliary association, was much concerned in the project for the erection of the proposed building. If the building was erected he expected to get the contract as the architect to design and superintend its construction, and in his communication to the auxiliary association, at its meeting August 18, 1892, proposing to render the architectural services for five per cent of the cost of the building, he stated, but not as a part of his proposition to do the work, that as he desired to do all he could to promote the success of the enterprise, he would take as part pay for his services $1500 in bonds issued by the association. Without further adverting to the testimony, it seems clear the allegation in complainant’s bill that he was “led by said defendants, and each of them, to deal with said Chicago Press Club Auxiliary Association, in matters hereinafter mentioned, as a corporation in fact and in law, knowing naught to the contrary,” is not sustained by the evidence. The sole purpose of the proposed incorporation of the Chicago Press Club Auxiliary Association was to enable the Chicago Press Club to evade the law by doing through its creature, which the master aptly characterizes as a “dummy,” what the law forbade it doing directly, and act in palpable violation of the spirit of the law while pretending to comply with its letter. No one was more familiar with these facts than complainant. It is not necessary, however, in the view we take of this case, for us here to determine whether a party equally responsible with others for such attempted evasion of the law, may under any circumstances resort to the remedies provided in either section 16 or section 18 of the statute hereafter quoted. This proceeding is a bill in chancery to establish liability under section 16 of the act on corporations. It reads: “If the indebtedness of any stock corporation shall exceed the amount of its capital' stock, the directors and officers of such corporation, assenting thereto, shall be personally and- individually liable for such excess, to the creditors of such corporation.” Section 18 of the same chapter reads: “If any person or persons being, or pretending to be, an officer or agent, or board of directors, of any stock corporation, or pretended stock corporation, shall assume to exercise corporate powers, or use the name of any such corporation, or pretended corporation, without complying with the provisions of this act, before all stock named in the articles of incorporation shall be subscribed in good faith, then they shall be jointly and severally liable for all debts and liabilities made by them, and contracted^in the name of such corporation, or pretended corporation.” (Hurd’s Stat. 1905, p. 500.) We agree with the Appellate Court that section 16 does not embrace associations exercising corporate powers without legal authority so to do, but refers only to de jure corporations. It will be observed the language is not, that if the indebtedness of any “pretended” stock corporation shall exceed the capital stock the directors and officers of such “pretended” stock corporation assenting thereto shall be liable, but the word “corporation,” without qualification, is used throughout the section. Section 18 provides a remedy against persons presuming to represent and act for a pretended stock corporation without having complied with the provisions of the act concerning corporations. The two sections were obviously meant to apply to different conditions. There can be no indebtedness of a corporation until there is a corporation. (Gent v. Manufacturers’ and Merchants’ Ins. Co. 107 Ill. 652; Loverin v. McLaughlin, 161 id. 417.) An indebtedness incurred before the incorporation of an association is not the indebtedness of a corporation, but may be of the members of the association unlawfully pretending to exercise corporate powers. The question here is entirely different from the question considered by this court in Streator Tel. Co. v. Construction Co. 217 Ill. 577. There the corporation after its organization received a telephone exchange and lines constructed under a contract with the promoters of the corporation before its organization was complete, and it was held the corporation was liable for the balance due on the contract for construction. The object and purpose of section 16 was to protect creditors of corporations, and we find in it no intimation of any application to a person, or an association of persons, wrongfully assuming to exercise corporate authority and thereby incurring indebtedness. By this section creditors are protected against de jure corporations where they incur indebtedness beyond their capital stock. By section 18 creditors are protected against persons contracting an indebtedness by unlawfully pretending to exercise the functions of a corporation. If the case sought to be made by plaintiff here is embraced in the provisions of section 16, then it would seem that section 18 is superfluous. There is no conflict between the two sections, each providing a remedy under the particular circumstances embraced within its provisions, and the rule of construction that all the parts of an act relating to the same subject, where not in conflict, shall be sustained, forbids holding that either section is meaningless. “Statutes should be so construed that effect may be given to all of their provisions, so that no part will be inoperative or superfluous, void or insignificant, and so that one section will not destroy another.” (2 Lewis’ Sutherland on Stat. Const.—2d ed.— sec. 380.) Lewis v. Montgomery, 145 Ill. 30, was a suit to enforce a liability under section 16, and it was there said: “In Woolverton v. Taylor, 132 Ill. 197, the statute sought to be invoked here was under consideration, and we there "held, that while the liability imposed is not penal, but contractual, it is like that of a surety, and therefore stricti juris. This being the case, the statute should receive a construction in consonance with the nature of the obligation imposed. The words employed should be interpreted according to their plain and obvious meaning, and should not be extended by construction so as to embrace cases not clearly within the terms of the statute.” It is not claimed by complainant that he is entitled to relief under the provisions of section 18, as under said section the action must be at law, (Loverin v. McLaughlin, supra,) while under section 16 the action is by a bill in equity. Lowe v. Buchanan, 94 Ill. 76; Woolvert on v. Taylor, 132 id. 197. The authorities which hold that parties holding out an association as a legally organized corporation and incurring indebtedness to innocent parties on the faith of such representations cannot, as against such creditors, be heard to deny the legality of the corporation, are not applicable to this case. The judgment of the Appellate Court is affirmed. Judgment affirmed.