subscriptions. It would of course follow, from the necessities of the case, that before a corporation can contract as such, it must have a full and complete organization. While ordinarily such organization is not necessary to the commencement of corporate existence, it is sometimes made so by statute.3

1 Stowe v. Flagg et al., 72 Ill. 397; Cur- O. St. 328; U. R. Co. v. Holden, 63 N. C. ran v. Bradner, 27 Ill. Ap. 582. 410; Teitig v. Boesman, 12 Mont. 404; 31 Pac. 371.

2 Gent v. Company, 107 Ill. 652.
3 A. & N. T. Ry. Co. v. Smith, 15

CHAPTER III.

ORGANIZATION OF CORPORATIONS AFTER INCORPORATION.

§ 85. The Incorporators' Organization Meeting. That a corporation shall have a full and complete organization and existence as an entity before it can enter into any kind of contract or transact any business, would seem to be self-evident. A corporation until organization has no franchises or faculties. Its existence before is but a qualified existence. Its powers are limited for the time being to the right to organize itself into an active corporate organization, and, as we have seen, those engaged in bringing it into being have no power to bind it by contract unless so authorized by the charter. Until organization as authorized by the charter, it does not possess the right to exercise its corporate functions, nor has it a valid existence for all purposes.1

In this connection it was observed in a leading case, that "it is often stated in the books that a corporation is created by its charter. This is not precisely correct. The charter only confers the life and provides the instruments by which it may become an acting entity. Such a corporation has been well defined to be an artificial being, existing only in contemplation of law. The instruments provided to bring the artificial being into active operation are the persons named in the charter, and those who by virtue of its provisions may become associated with them. These persons the incorporators as natural persons have no such power. The charter confers upon them a new faculty for this purpose, a faculty which they can have only by virtue of the law which confers it." 2

The better, if not the prevailing, rule appears to be, that not only are the incorporators named in the articles of incorporation entitled to participate in the organization meeting thereof, but also all subscribers to the preliminary stock subscription to the capital stock of the proposed corporation may do so.3

1 Gent v. Company, 107 Ill. 652.

2 Miller v. Ewer, 27 Me. 509.

8 Baltimore City Pass. Ry. Co. v. Hambleton. 77 Md. 341; Spear v. Crawford,

§ 86. Organization Meeting, how called. - The - The more recent incorporation acts, such as are in force in Connecticut, Maine, Massachusetts, New Jersey, North Carolina, and West Virginia, point out specifically how the organization meeting of a corporation is to be called. Where no such statutes exist the better and safer practice is for all the incorporators, as well as the subscribers to the preliminary subscription agreement to the capital stock of the proposed corporation, to sign a waiver and agreement fixing the time and place for the organization meeting of the corporation.1

It has been held that all are not required to be present at the organization meeting who sign the articles of incorporation unless the statute requires it. A majority, it is said, is sufficient. The safer practice, however, is to comply with the rule stated above.3

Virginia is one of the few States possessing a statute giving the incorporators the right to assign their interests as such in a prospective corporation. Failure to call a mecting as provided by statute is to be regarded as a breach of a condition subsequent and is not fatal to the creation of a valid corporation.1

§ 87. Organization Meeting, where held. It was laid down at an early date by the Supreme Court of Maine in Miller v. Ewer,5 that all acts and proceedings of persons pretending to act in the capacity of incorporators when assumed without the bounds of the sovereignty granting the charter are absolutely void. The principle established in Miller v. Ewer has been quite generally adopted in other parts of the country.6

The reasoning of these cases is to the following effect: the charter bestows upon the incorporators certain privileges which

14 Wend. 24; Nickum v. Burkhardt, 30 Ore. 464; 47 Pac. 788; Waukon, etc. Ry. Co. v. Dwyer, 49 Ia. 121; Instone v. Company, 2 Bibb. (Ky.) 578; Chester Glass Co. v. Dewey, 16 Mass. 94; Haskell v. Read (Neb.), 93 N. W. 997.

1 B. B. R. Co. v. Buck, 68 Me. 81. 2 Packard v. Co., 168 Mass. 92; 46 N. E. 433.

3 See Babbitt v. E. J. I. Co., 1 Stew. Dig. 208, § 13, not otherwise officially reported (1876); Walworth v. Bracket, 98 Mass. 98.

4 McClinch v. Sturges, 72 Me. 288; Braintree Water Supply Co. v. Braintree, 146 Mass. 482; 16 N. E. 420; In re British Sugar Refining Co., 3 Kay & J. 408; Porter v. Robinson, 40 Hun (N. Y.), 209.

5 27 Me. 509.

6 Freeman v. Company, 38 Me. 343; Smith v. Company, 64 Md. 85; 20 Atl. 1032; Camp v. Byrne, 41 Mo, 525; Humphreys v. Mooney, 5 Col. 282; Duke v. Taylor, 37 Fla. 64; 19 So. 172; Miller v. Parrish, 14 N. J. Eq. 380; Ormsby v. Company, 56 N. Y. 623; Mitchell v. Company, 40 N. Y. Sup. Ct. 406; F. T. L. Co. v. Laigle, 59 Texas, 339; Hodgson v. Company, 46 Minn. 454; 49 N. W. 197; Ohio, etc. Ry. Co. v. McPherson, 35 Mo. 13; Arms v. Conant, 36 Vt. 744; Galveston, etc. Ry. Co. v. Cowdrey, 11 Wall. 459; Runyan v. Coster, 14 Peters, 122; Augusta Bank v. Earle, 13 Peters, 519; Wright v. Lee, 2 S. D. 596; 57 N. W. 706.

they can possess only by virtue of the law which confers it; that law is inoperative beyond the bounds of the legislative power by which it was enacted; that, as the foregoing faculty cannot accompany the incorporators beyond the bounds of the sovereignty which creates it, they cannot possess or exercise it there, and can have no more power there to make the artificial being act than other persons not named or associated as incorporators. Therefore any attempt to exercise such a faculty there is merely a usurpation of authority by persons destitute of it and acting without any legal capacity to act in that manner. If the foregoing reasoning be sound, it follows that all fundamental corporate acts and proceedings when assumed without the bounds of the sovereignty granting the charter are absolutely void. The principle here stated has been materially qualified in a large number of jurisdictions by an extended application of the doctrine of estoppel. As an example of this, attention is called to the case of Handley v. Stutz.1

This was a case where a Kentucky corporation at a meeting of the stockholders of the corporation, held outside of the State, increased the capital stock of the company from one hundred twenty thousand dollars to two hundred thousand dollars. It was contended that this increase was illegal, for the reason that the meeting of the stockholders authorizing it was held outside of the State of Kentucky. The court, in its opinion upon this point, spoke as follows:

"Nor were the proceedings of such meeting any less binding upon those participating in it by reason of the fact that it was held outside of the boundaries of the State under the laws of which the company was incorporated. By act of the Kentucky Legislature, it is provided, that all elections for directors and other officers by private. corporations shall be held within the territorial limits of the State of Kentucky, and that any such election held outside of Kentucky shall be void. Beyond the election of officers, however, there is no statutory restriction of corporate action to the limits of the State, and in the absence of such inhibition the proceedings of such meeting would, with regard to directors' meetings, be binding upon all those participating in it, as well as upon those acting upon the faith. of its validity or receiving the stock authorized to be issued at said meeting. It is true that there are cases holding that stockholders'

1 139 U. S. 417; 11 S. Ct. 530.

meetings cannot be legally held outside of the home State of the corporation, but the question has generally arisen where a majority present had attempted by their action to bind a dissenting minority, or had taken action prejudicial to the rights of third persons. Indeed, so far as we know, the authorities are uniform to the effect that the action taken at such meeting was binding upon those who participated in or partook of the benefits of them. In this case the meeting was attended by all the stockholders but two, who were present by proxy. The vote increasing the stock was unanimous, and it does not lie in the mouth of those who participated in this act, or received the stock voted at this meeting, to question its validity."1

Unquestionably the legislature has the legal right, in the absence of constitutional provision, to provide that all meetings of corporations, whether organization or otherwise, may be held outside the State.2

§ 88. Steps Necessary to complete Organization. The principal matters which demand attention at the organization meeting of a corporation may be enumerated as follows: (1) the adoption of by-laws; (2) election of directors; (3) providing for the issue and payment of the capital stock of the corporation. The subject of the adoption of by-laws and the payment of the capital stock of the corporation will be left for subsequent consideration.

With respect to the matter of the election of a board of directors the following may be said. Many of the incorporation acts require that the names of the first board of directors shall be set forth in the articles of incorporation, and this ordinarily obviates the necessity of electing a new board at the organization meeting of the corporation.3 Unless the statute so requires it, it is not necessary, in order to give the incorporators the right to participate in the organization meeting, that they be stockholders. But ordinarily it is contemplated by the incorporation acts that the incorporators shall be stockholders or subscribers for capital stock.

1 See to the same effect Heath v. S. L. Min. Co., 39 Wis. 146; O. & M. Ry. Co. v. McPherson, 35 Mo. 13; Ormsby v. Vermont Min. Co., 56 N. Y. 632; Humphrey v. Mooney, 5 Col. 282; Wright v. Lee, 2 S. D. 596; 57 N. W. 706; T. M. Co. v. Goodhue, 18 N. C. 981.

4 Hammond v. Straus, 53 Md. 1; Perkins v. Berders, 56 Miss. 733; Proprietors, etc. v. Dickinson, 6 Gray (Mass.), 586; Coyote v. Ruble, 8 Oregon, 284; Densmore Oil Co. v. Densmore, 64 Pa. St. 43; Singer Mfg. Co. v. Peck, 9 S. D. 29; 67 N. W. 947; Ramsey v. Tod, 95 Texas,

2 Graham v. Co., 118 U. S. 161; 6 Sup. 614; 69 S. W. 133; Byrnes v. Beck, 10 Ct. 1009.

3 Hamilton Trust Co. v. Clemens, 163 N. Y. 423; 57 N. E. 614.

Ga. 121; B. B. & T, Co. v. J. B. T. Co. 101 Tenn. 545; 48 S. W. 228; Wechselberg v. Bank, 64 Fed. 90.