Camp v. Byrne

Fagg, Judge, delivered the opinion of the court. This cause is brought here upon an appeal from the St. Louis Circuit Court at general term. The suit was instituted upon two negotiable promissory notes, each for the sum of $250, executed by the appellant Byrne and made payable to the order of the St. Louis, Cairo and Johnsonville Packet Company. They were both dated on the 8th day of December, 1865, one payable ninety days and the other one hundred and twenty days after date. The petition alleges that said company before maturity transferred the same by* endorsement to the respondent Camp for value, and that he was then the owner and holder thereof. There was no appearance for the company, and judgment by default was taken against it. The answer of Byrne, denies generally the several allegations of the petition, and then proceeds to set up several special grounds of defence : First — that the said notes were given in consideration of his subscription for five shares of stock in the said company at one hundred dollars per share; that he was induced to make the subscription and execute the notes upon the false and fraudulent representations of one C. J. Caffrey. Second — that this company was never a body corporate, but a sham and a fraud concocted by Caffrey with the intent of defrauding and taking advantage of him and many others; that all elections pretended to have been held under a charter for said company passed by the Legislature of the State of Tennessee, as well as all other acts and things done in pursuance thereof, were utterly void and of no effect. Third — that all of the pretended acts of Caffrey as president of the company were [533] without authority and therefore not binding upon Byrne, and that Camp had notice of these facts at the time he obtained the notes. A motion was made by the respondent’s counsel to strike out so much of the answer as denied the corporate existence of the company, and alleged fraud in its organization, as well as a failure of consideration for the notes. Under the law regulating practice and proceedings in the St. Louis Circuit Court, it is provided that all motions to strike out or reform pleadings shall be heard and determined at general term. The motion in this instance was so heard and by the court overruled. At the trial of the cause at special term, the judge then presiding, on his own motion, directed a large portion of the answer embraced in the motion to be stricken out; which was done, and exceptions duly taken. The verdict and judgment being for the plaintiff, an appeal was taken to the general term, where the same was affirmed. The action of the judge at special term is assigned for error, and it is insisted upon as sufficient to authorize a reversal of the judgment. We do not think so. It is an irregularity certainly, but not such as to affect the merits of the case. The statute seems to contemplate the settlement of all questions at general term which relate to the form and sufficiency of the pleadings, so that when the causes are distributed for trial at special term the issues are to be considered as made up. The court at general term by affirming the judgment did not seem to regard this departure from the rule of practice fixed by the statute as sufficient to affect the merits of the case, nor do we. The proof presents substantially the following state of facts. A charter was granted by the General Assembly of the State of Tennessee on the 16th of November, 1865, authorizing the formation of a company to be called the “ St. Louis, Cairo and Jolmsonville Packet Company.” The capital stock was limited to one million of dollars, and the company authorized to organize and proceed to business when the sum of three hundred and fifty thousand dollars should be actu [534] ally subscribed and paid in. No organization was effected in the State of Tennessee. The commissioners named in the charter called a meeting for the election of the first board of directors in the city of St. Louis. . A board was elected and proceeded to do business under the charter. It is shown by the testimony offered on the part.of the defendant Byrne, that, for the purpose of carrying on the business of the company, the chief part of which, as stated by the charter, being the running'of a line of boats from the city of St. Louis to Jolmsonville, it was necessary to borrow money. The witness Caffrey, after stating that he had negotiated a loan with Camp, the respondent, and that in that transaction he had transferred to him the notes sued upon, says: “I did it as president of the company. I acted under the direction of the board of directors in doing it. They had not been consulted as to this particular transaction further than they had authorized me to negotiate for a loan of money to meet demands upon the company, and gave me authority to use the credit and resources of the company to do it. I met Mr. Camp, and he told me he had some surplus money, and he called at the office of the company and examined the notes for stock which I proposed to give him as collateral security.” Other testimony in the cause shows that this transaction occurred in the month of February, 1866, and before the maturity of either one of the notes in controversy. That portion of the answer which was stricken out at the trial set up the defence that the company had no legal existence as a corporation, and stated specifically the reasons in support of that position. The law seems to be well settled in this country that “ all votes and proceedings of persons professing to act in the capacity of corporations, when assembled beyond the bounds of the State granting the charter of the corporation, are wholly void”—Ang. on Corp. § 498, and Miller v. Ewer, 27 Me. 509. If the respondent’s right to recover in this case depended solely upon the power of this company to contract and do business as a corporation, it would seem to be clear that his [535] action must fail. Whether it was assumed by the judge trying the cause that the act of incorporation was conclusive evidence of the fact that the company had a living corporate being, or that the defendant Byrne by his acts was estopped from denying its existence, cannot be accurately determined from the record. It is certainly true that the mere legislative act is not.sufficient of itself to give vitality to a corporate body — a creature said to be “intangible” and “which exists merely in contemplation of law.” The acts of the persons designated by the charter, performed in the manner pointed out, could alone clothe the individual subscribers of stock in this company with corporate powers and privileges. The organization of the company, therefore, in the State of Missouri was not a compliance with the provisions of the charter and did not constitute a corporation. But does not the admission of the defendant in his answer, that he executed the notes in question, estop him from denying the existence of the corporation as against an innocent holder ? There is no evidence tending to show that Camp had knowledge of any of the facts relied upon in the answer as a defence to the notes. They were transferred before maturity, and the right of the company to make such transfer cannot be disputed by the maker. The notes were executed in the month of December, 1865, and the company continued to do business until the month of June following. There is nothing tending to show that during that time there was any doubt as to the regularity of its organization and its rightful existence as a corporate body. The defendant himself had so recognized it by making the negotiable paper which he did. If he did it with knowledge of the fact that this company, of which he thus become a member, was in point of fact a mere cheat and a fraud upon the public, he should not be permitted to take advantage of his own wrong. Even though he acted in ignorance of the facts in the case, still he had placed it in the power of the company to give currency to his paper, and he alone must suffer the consequences. [536] The transferring through its officers of the notes in question, as well as the execution of the company’s notes to Camp, were concurrent acts. The money was loaned to the company upon the faith of the notes given for stock. Their solvency was passed upon and a selection made by Camp before the money was actually paid to the company. They were not given as collaterals to secure a pre-existing debt, but constituted the security upon which the loan was really made, and Camp is therefore a bona fide holder for value. With this general view of the case, and applying the law to the facts in the record, it is apparent that the instructions asked by the defendant were properly refused. The court committed no error in excluding all testimony in relation to the amount of stock actually subscribed and paid in previous to the first meeting, and also as to what became of the money loaned by Camp to the company. These, with the kin. dred subjects of investigation sought to be introduced in the course of the trial, were not legitimate matters of inquiry, and the ruling of the court in relation to them must be sustained. The instructions given on the part of the plaintiff, taken together, declared the law properly in relation to negotiable promissory notes in the hands of a bona fide holder for value. The judgment of the Circuit Court must therefore be affirmed. The other judges concur.