ficient reason for so designating it, but abundant reason for holding the person who questioned the existence of the corporation estopped from doing so. On the other hand, many cases are decided on grounds of estoppel, when, in fact, there are sufficient reasons for holding the corporation to be a de facto one, and hence, there is no necessity of invoking the doctrine of estoppel. Much of the confusion undoubtedly arises also from the variety of opinion as to the necessity of pleading and proving corporate existence in suits by or against corporations. See infra, pp. 1122-1130. For example, in Williams v. Bank, 7 Wend. (N. Y.) 539 (1831), it is said "A contract made with a corporation by name is not an admission or any evidence that the corporation is entitled to sue by that name." And again, in Welland Canal Co. v. Hathaway, 8 Wend. (N. Y.) 480, 24 Am. Dec. 51 (1832), it is said: "When a corporation sues, if they have not the powers and privileges assumed * it is their own fault, not his. Whether they had or not must be known to themselves, not to the defendant, and no act of his could legally add to or detract from them. Why, then, should he be estopped from denying their corporate capacity, or they be excused from establishing it by legal evidence, when they are endeavoring to enforce their rights in a manner and before a tribunal which can entertain their suit only on proof or assumption that they are a corporate body, duly constituted by competent authority?" So, too, in Maryland Tube and Iron Works v. West End Improvement Co., 87 Md. 207, 39 L. R. A. 810 (1898), where the question was as to whether there was cause for estoppel before the franchise tax was paid, it was said that the doctrine of estoppel can not be invoked unless the corporation has at least a de facto existence. A similar holding was made in Jones v. Hardware Co., 21 Colo. 263, infra, p. 637, and Duke v. Taylor, 37 Fla. 64, but it is submitted that the foregoing views are not according to the weight of authority. On the contrary: “A corporation de facto may legally do and perform every act and thing which the same entity could do or perform were it a de jure corporation. As to all the world, except the paranfount authority under which it acts and from which it receives its charter, it occupies the same position as though in all respects valid, and even as against the state, except in direct proceedings to arrest its usurpation of power, its acts are binding." People v. La Rue, 67 Cal. 526 (1885). Even the state in a quo warranto to test the right to a corporate office can not question the corporate existence. Commonwealth v. Yetter, 190 Pa. St. 488 (1899). See, also, Beach, §§ 13, 14, 16; Clark, §§ 41, 42; Cook, §§ 183186, 231-235, 637; Elliott, §§ 69-80; Morawetz, §§ 735-778; Taylor, §§ 145-157; I Thompson, §§ 495-513; VII Thompson, § 8212.

ARTICLE VI. CONDITIONS OF CORPORATE EXISTENCE BY ESTOPPEL.

Sec. 164. (A) Theories:

"An examination of the cases in which the doctrine of estoppel to deny corporate existence has been applied will show that most of them rest on some basis of conduct, or of benefit obtained, or other cause rendering it inequitable to allow such denial. The doctrine is an equitable one, and should be applied only where there are equitable grounds for applying it. It should never be applied where it would be inequitable to do so. Nor should it be applied unless it would be inequitable not to do so." Clark on Corps., § 43, p. 103.

(1) The doctrine is one of equity.

(a) Will be applied where it would be inequitable not to apply it.

ESTEY MANUFACTURING COMPANY v. RUNNELS.1

1884. IN THE SUPREME COURT OF MICHIGAN. 55 Mich. Rep. 130-133.

CHAMPLIN, J. This action was commenced before a circuit court commissioner to recover the possession of certain land described in the complaint, and averring that the defendant holds the same unlawfully and against the rights of the Estey Manufacturing Company. December 3, 1883, was the return day, when the defendant appeared and pleaded not guilty. The cause was then tried and judgment rendered in favor of the plaintiff; and on the 8th day of December, 1883, the defendant appealed the suit to the circuit court for the county of Shiawassee. The cause was tried in the circuit, April 3, 1884, when the plaintiff again had a verdict, whereupon the defendant brings the suit to this court by writ of error.

Defendant also introduced and read in evidence a duly certified copy of the articles of association of the plaintiff corporation, from which it appeared that there were but three corporators, two of whom resided in Michigan and one in Vermont. The acknowledgment of Jacob W. Estey was taken before a person styling himself a notary public, but his official character and authority to take acknowledgments was not authenticated in accordance with the requirements of our statutes. The defendant's counsel requested the court to charge the jury as follows:

"Fourth. That the articles of association filed in said cause and read therein are void under the law."

The third and fourth requests refer to the same point, and may be considered together. Where a body assumes to be a corporation and acts under a particular name, a third party dealing with it under such assumed name is estopped to deny its corporate existence. Such is the general rule, founded upon equitable principles, and if any exceptions exist, it is only where "there are no facts which make it legally unjust to forbid its denial." Doyle v. Mizner, 42 Mich. 337. In this case the defendant introduced in evidence the execution upon which the sale was made. From this it appears that it was issued upon a judgment rendered for damages for the non-performance of certain promises and undertakings made by this defendant to the Estey Manufacturing Company, which shows that the defendant had had dealings with the plaintiff as a corporation in the name assumed by it. He was therefore estopped, not only by having dealt with it as a corporation, but by the judgment in the case, to deny its corporate existence. The execution, sale and sheriff's deeds all result from the contract relation voluntarily entered into between the defendant and this corporate body, and it would be manifestly unjust and inequitable to 1 1 Arguments omitted. Only part of opinion relating to the one point given.

permit the defendant to question the legal corporate existence of the plaintiff in this collateral proceeding.

For these reasons the requests were properly refused, and the judgment is affirmed.

The other justices concurred.

Note. See note at the end of this article, on extent of doctrine.

Sec. 165. Same.

(b) Will be applied only where it is equitable to do so.

DOYLE v. MIZNER, GRAY AND KANE.1

1879. IN THE SUPREME COURT OF MICHIGAN. 42 Mich. Rep. 332-341.

Error to superior court of Detroit. Trover. Plaintiff brings error. CAMPBELL, C. J. Doyle brought suit to recover for the forcible removal and disposal of certain goods claimed to be his property, and taken from his possession by defendant Kane under color of a chattel mortgage purporting to be made by Mizner and Gray, as president and secretary of the Detroit Chemical Works.

January 27, 1875, an agreement was signed by Doyle, Mizner and Gray to organize a joint-stock company, to be known as the Detroit Chemical Works, with a capital of $50.000, in 2,000 shares of $25 each. The paid-in capital was fixed at $14,000; the estimated assets of the Detroit Manufacturing Company, of which $10,000 as paid-up stock was to go to Doyle, and $2,000 each to Gray and Mizner, who were therein stated to have purchased that interest. But there is nothing to indicate that they gave or were to give any consideration. The remaining $36,000 was to be sold for working capital, after allowing Doyle $4,000 to be sold for Doyle's benefit in payment for certain claims sold to the company, and for which he was to turn in $4,000 of his stock. The first $500 raised was to go towards paying the chattel mortgage. Without some further showing it would seem that under this arrangement Doyle furnished the entire original capital, and Gray and Mizner got their share out of him for nothing.

On the 11th of February, 1875, a transfer in writing was signed by the three parties of all the property of the Detroit Manufacturing Company to the chemical works for the expressed consideration of $14,000, "subject to a claim of about $500, held by Kane & Hibbard (or their client), of Detroit, Mich."

*

Doyle's ground of action is based on the claim that he never transferred his rights to any one, and that the paper in question was not to become operative until he received consideration by payment for his goods. His testimony, if believed, shows that the paper was never delivered in such a way as to belong to the Detroit Chemical Works or to pass any title until paid for.

1 Arguments omitted. Only part of opinion given.

It is claimed for the defense that Doyle, having dealt with it and acted with Gray and Mizner, is estopped from denying its corporate existence. There are certainly many cases in which a recognition of corporate existence by dealing with the corporation, will estop from questioning it. But this doctrine rests on the ground that such action creates relations and encourages conduct which there may be difficulty in undoing. In ordinary cases such recognitions have been considered as binding.

But this rule is one originating in equitable principles, and can not be applied universally. There would be no sense in applying it where no new rights have intervened, and where such recognition has itself been brought about by fraudulent dealings carried on for the very purpose of entrapping a party into the action on which such recognition rested. If there was no corporation in fact, and if there are no facts which make it legally unjust to forbid its denial, it is difficult to understand what room there is for an estoppel. And inasmuch as facts were asserted by plaintiff tending to show good reasons why he should not be estopped, and that testimony was open to the jury, the rulings upon the proof of corporate existence are fairly open to review.

The incorporation was sought to be shown by asking Doyle on cross-examination concerning the signing of the paper purporting to be articles of incorporation, which had been filed in the Detroit city clerk's office, April 6, 1875. This paper was not acknowledged, and was not filed in the county clerk's office. A copy of the same paper was certified by the secretary of state; but his certificate did not give a copy of any acknowledgment, but merely said the paper was accompanied by an acknowledgment in the usual form. The original paper had an unsigned certificate of acknowledgment.

Under our present constitution no charters can be granted, and all private corporations must be organized under general laws, and can only be valid when strictly conforming to all the conditions imposed upon their completion. The statute concerning manufacturing corporations expressly requires that the articles shall be "acknowledged before some person authorized by the laws of this state to take acknowledgments of deeds." Comp. L., § 2839.

There was, therefore, no incorporation shown, and, therefore, for the purposes of this case, none exists as a matter of fact. The only

way in which, under these circumstances, any question of corporate action could arise would be by way of estoppel. And it is important to see how far relations existed which might create it, and whether any one shows a right to rely on it.

By the contract of January 27, 1875, Doyle agreed to transfer his assets to the company as soon as it should become incorporated. The whole consideration of that agreement rested on the creation of stock, which was to be in part apportioned and in part sold as agreed. Noth ing but the stock of such a nature as to be lawfully transferable as such could satisfy the agreement. And until provision was made which secured this no consideration existed for the transfer, and there

was no promise to make it. This becomes material in another point of view, which will be referred to presently.

To what extent, if any, the action of those parties on the assumption there was a corporation would estop them as against third parties dealing with them, can only be decided when such cases arise. As between themselves there can be no such estoppel where Mizner and Gray are not injured by any honest reliance on Doyle's action to their prejudice. Each of them knew what was done, and was bound in law to know there was no incorporation. If a mistake of law would exonerate them from this rule, it would also exonerate Doyle, and would still bind him by no estoppel extending beyond such results as came from an honest reliance on his acts. They could claim no interest in his property for which no consideration passed, and they could claim no rights against him except to the extent of their damage by a justifiable reliance on what had been done to their prejudice by his procurement or encouragement.

If it was understood the bill of sale was not to take immediate effect, then no title could pass to the concern either corporation or unincorporated. And, as already seen, there was no state of things which formed any legal consideration for the transfer under the agreement of January, 1875. We think the court erred in connecting the transfer with that agreement, if there was no actual incorporation. In the absence of an actual incorporation the transfer must be regarded as a new and distinct arrangement, resting on its own consideration. It could not be valid unless delivered, and where the same persons are grantors and representatives of the grantees, there must be distinct evidence that it was intended to be operative, which its signature alone would not give. And if there was no corporate existence, not only does the consideration of the transfer expressed on its face utterly fail, but the further difficulty arises that there is absolute identity between grantors and grantees, with nothing to distinguish it from any other grant of a party to himself. From such a document no new rights could arise as between the parties.

Reversed.,

Sec. 166.

(2) Estoppel arises on matter of fact only, and not of law.

SNYDER v. STUDEBAKER.

1862. IN THE SUPREME COURT OF INDIANA. 19 Ind. Rep. 462-466.

Appeal from the Wells Circuit Court.

WORDEN, J. This was an action by Snyder against Studebaker to recover possession of a certain tract of land. Judgment for the defendant.

The same question is presented by the pleadings and the evidence. It appears that, in March, 1853, the plaintiff, who was then the