Kohlsaat v. Gay

Mr. Presiding Justice Adams delivered the opinion of the court. This cause came to this court before on appeal from a decree sustaining a demurrer to the original bill and dismissing the bill. We reversed that decree and remanded the cause. In the original bill it was averred, as it is in the amended bill, that the Chicago Press Club Auxiliary Association assumed to be a corporation and held itself out in all respects as such, and that complainant “was led by the said defendants and each of them to deal with said Chicago Press Club Auxiliary Association in the matters hereinafter mentioned as a corporation in fact and in law, knowing nought to the contrary.” Assuming, as we are bound to do, in passing on the demurrer, that the defendants held themselves out as a corporation, as stated in the bill, and that the complainant, knowing nothing to the contrary, dealt with them as such, we held that the defendants were estopped to deny that the Chicago Press Club Auxiliary Association was a corporation in fact and in law. 80 Ill. Appellate, 178. Quite a different case is presented by the record now before us. If the complainant knew that the Auxiliary Association had not received a certificate of complete organization from the Secretary of State, and, therefore, was not authorized to make contracts for the purposes of its contemplated organization, as specified in the statement made to the secretary, under section 2 of the statute, the defendants are not estopped to claim that the Auxiliary Association was not a legally organized corporation August 18, 1892, when the contract with complainant is alleged to have been made. Davidson v. Young, 38 Ill. 145, 152; People v. Brown, 67 ib. 435; Powell v. Rogers, 105 ib. 318; Mut. L. Ins. Co. v. Amerman, 119 ib. 329, 336; R. R. Co. v. City of Belleville, 122 ib. 376, 383; Robbins v. Moore, 129 ib. 30, 54; Knapp v. Jones, 143 ib. 375, 382; Holcomb v. Boynton, 151 ib. 294, 300. In Davidson v. Young, supra, it is said: “The doctrine of estoppels in pais, or equitable estoppels, is based upon a fraudulent purpose and a fraudulent result. If, therefore, the element of fraud is wanting, there is no estoppel; as, if both parties were equally cognizant of the facts, and the declaration or silence of the one party produced no change in the conduct of the other, he acting solely upon his own judgment. There must be deception and change of conduct in consequence, in order to estop a party from showing the truth,” citing authorities. In People v. Brown, supra, the court states the elements necessary to an estoppel, among which is: The party to whom the representation was made must have been ignorant of the truth of the matter; and in Holcomb v. Boynton, supra, it is said of estoppel: “The essential elements are misrepresentation or concealment of material facts, ignorance of the truth of the matter by the party to whom the representations were made, and reliance upon his part, in acting on the representations.” To the same effect are the text-books. Bigelow’s Law of Estoppel, 5th ed., p. 361, parag. 5; 11 Am. & Eng. Ency., 2nd ed., p. 434, parag. 5. It would seem too plain for argument that a person of sound mind, knowing the very truth of a matter, cannot be misled or deceived in regard to it by the statements or conduct of others inconsistent with the truth. The court in overruling complainant’s exceptions 1, 2, and 8, found that the organization of the Chicago Press Club Auxiliary Association was the result of a suggestion made by the 'complainant; that the complainant advised said organization, for the purpose for which it was organized, and that complainant, on August 18, 1892, knew that the charter from the Secretary of State had not been received or recorded. Complainant, appellee here, has not assigned any cross-errors; therefore he cannot contend here that the above findings of the court are erroneous, nor can we consider or review those findings. By failing to assign cross-errors, complainant has acquiesced in the findings. Vose v. Strong, 144 Ill. 108, 113; Heineck v. Grosse, 99 Ill. App. 441, 443. But even though cross-errors were assigned on the findings, this would not avail complainant. Frank E. Johnson testified that August 18, 1892, after the resolution of that date was passed, he told complainant in a room adjoining that in which the meeting was being held, that the action, in passing the resolution, was too previous and hasty; that they had no incorporation, and no money, and could not legally act, in witness’ judgment. This witness also testified that he talked with complainant as often as twice a week in the first part of August, 1892; that he met him in the rooms of the club, and that complainant aslted him, the witness, if they had the charter, and witness said he did not know just then, but that, a day or two before, they had not received it, and complainant said that -was strange, as such things usually came back in two or three days. Complainant denied that Johnson told him that they were not incorporated and could not legally make a contract, that the action was too hasty, etc., but, manifestly, it cannot be held that a finding that Johnson did so tell him, and, therefore, that he knew the Auxiliary Association was not incorporated when the resolution of August 18, 1892, was passed, is not sustained by the evidence. Mr. Waldo testified that complainant was present at the meeting of August 18, 1892, and that some one said at that meeting that they were not organized and could not contract. He says he thought complainant was present when this was said, but could not say positively. The complainant was a member of the Press Club, as the master finds, of which the association was a mere auxiliary, as the name indicates, and had ample opportunity to know what was going on in respect to the incorporation of the Auxiliary Association, and the master finds that he evinced considerable interest in having the incorporation hastened and made some complaints, after the meeting of August 18, 1892, that the steps to complete the incorporation were too slow, which finding is fully sustained by the evidence, and the court overruled complainant’s exception 8 to the finding. Complainant put in evidence a circular of date August 18, 1892, signed by Kohlsaat, Waldo and Packard, which states, among other things, that the Auxiliary Association was duly incorporated; but Mr. Waldo testified that the circular was not mailed, but was held, owing to the delay in procuring the incorporation papers from Springfield. Complainant in his bill, after averring the passage of the resolution of August 18,1892, avers that he accepted it, cleariy indicating that the resolution was the first step toward his employment as an architect. The contrary is true. It is conclusively shown by the evidence, including complainant’s own testimony, that he anxiously sought the employment and that he sent to the Auxiliary Association a formal written proposition that he would perform the services in question for five per cent, of the total cost of construction and completion of the building. Complainant testified: “ It was probably in August that I requested a contract. I was informed that they were going to meet, and I went over there and asked for that resolution to be passed. I said I wanted something tangible to work on as a contract; I wanted them to officially pass on me as architect.” It is not improbable that he drafted the resolution. He was questioned and answered as follows: Q. “ Didn’t you write the resolution ?” A. “ I have no recollection of writing any such resolution.” , Q. “Do you deny it?” A. “I deny nothing of the sort. I have no remembrance of it at all.” He was a member of the Press Club, and the evidence tends to prove that he was a leading spirit in procuring the organization of the Auxiliary Association, attended a number of the meetings of that association, frequently inquired how the matter of organization was progressing, and complained of the delay in its completion. Waldo, the secretary, testified that he sent complainant notices of when meetings would occur, and that he attended nearly all of them. The utmost that complainant can claim in respect to the status of the Auxiliary Association August 18, 1892, if so much, is that it xvas a corpora,tion defacto, and he bases his claim against the defendants on section 16 of the act concerning corporations. Thus, assuming that the Auxiliary Association was a corporation defacto, the question is presented whether section 16 includes corporations defacto. Sections 16 and 18 of the statutes are as follows: “ Sec. 16. 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.” “Sec. 18. 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, withqut 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.” There can be no question, in view of the statement made to the Secretary of State, which is in accordance with section 2 of the statute, that the attempt was to create a stock corporation. Section 16 must be strictly construed, and the liability of directors imposed by the section is, like that of a surety, stricti juris. Woolverton v. Taylor, 132 Ill. 197; Lewis v. Montgomery, 145 ib. 30. What, then, is meant by the words in the section, “ stock corporation ” and “such corporation”? What kind of corporation is meant? Whether a defacto corporation, which, under the statute, cannot legally “ proceed to business”, or a corporation which, having fully complied with all the provisions of the act entitling it to a certificate of complete organization, has received such certificate and can legally “ proceed to business” and exercise its granted corporate powers % We think the latter; that where the word “corporation” is mentioned in the section, without a qualification, a legally organized corporation, which has received and filed for record a certificate of complete organization, is meant, and not such as the Auxiliary Association was when the alleged contract is claimed to have been made. The section is, on its face, for the protection of creditors, and in Low v. Buchanan, 94 Ill. 76, the court held that it is for the benefit of all creditors. How, legally there can be no creditors until a corporation is legally organized, because until then it cannot legally contract. Gent v. Manufacturers & M. Mut. Ins. Co., 107 Ill. 652; Loverin v. McLaughlin, 161 ib. 417; McCormick v. Market Nat. Bank, 162 ib. 100. It is an elementary rule that “one part of a statute must be so construed by another, that the whole may, if possible, stand.” 1 Blackstone, Sec. 89. And this is especially the rule when sections relate to the same subject. Lewis’ Sutherland on Statutory Construction, vol. 2, sec. 344; Home Ins. Co. v. Swigert, 104 Ill. 653, 664. Section 18 of the act, quoted supra, includes, as we think, such associations as the Auxiliary Association was at the time of the alleged contract. Complainant, while stating facts in his bill showing that the Auxiliary Association was not a completely organized corporation, avers, in substance, that it claimed to be, in all respects, a corporation in fact and in law; in other words, that it pretended to be a corporation. Therefore, the Auxiliary Association was a “pretended stock corporation” and within the very words of section 18. But if section 16 includes pretended stock corporations and persons being or pretending to be officers, agents, or a board of directors of any stock corporation, or pretended corporation, then section 18 is superfluous. But so to hold would be contrary to the rule of construction above mentioned. The remedy under section 18 is at law, so that complainant cannot rely on that section in the present case. Loverin v. McLaughlin, 161 Ill. 417, 435. The Press Club was unincorporated and the Auxiliary Association was intended as a mere instrument or agency in carrying out its views. A lot on which to erect the proposed building was selected by the Press Club. The owners of the lot were not willing, for financial reasons, to lease it to the Press Club, but expressed a willingness to lease it to Mr. Kohlsaat individually, and so did, with the understanding that when the building should have progressed so far as to be sufficient security for the rent, the lease would be turned over to the Press Club and Mr. Kohlsaat released from his obligation as lessee. Mr. Kohlsaat carried the lease for a number of years, at an expense to him of $20,000, no part of which has been repaid to him by the club. The plan of the Press Club, which was well known to all the club members, including the complainant, was to issue bonds on the security of the lease and the proposed building, and erect the building with the proceeds of the sale of the bonds, which scheme fell through, the club not finding the bonds marketable. The master, in his report, says: “None of the members of the Auxiliary Association really owned any stock. It could not be sold, or transferred, to any one 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 statements are fully sustained by the evidence. The master further says: “I can hardly believe that Mr. Gay, when said resolution was passed, really expected to get his pay from said Association (whose capital stock he knew to be only $1,000) unless the bonds of the Association could be floated.” We fully concur with the master. Complainant was a member of the Press Club, an active participant, with the other members, in a scheme on the success of which he relied for compensation for his services as architect, and the scheme having failed, he now seeks to hold liable his partners in it. The decree will be reversed and the cause remanded, with directions to dismiss the bill for want of equity. Reversed and remanded with directions.