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In this case the Aspen Hardware Company claims title to the property in dispute in its corporate capacity and not as a co-partnership. It is admitted that the fee for filing the certificate of incorporation with the secretary of state was not paid prior to the levy of the writ of attachment, and that the certificate was not filed in the office of the secretary of state until about the time of the bringing of the present action, the evidence leaving the exact time uncertain.

It is to be remembered that in this case the corporation is the party plaintiff, and it may be stated, as a general rule, that when a company relies on its corporate capacity it assumes the burden of establishing such capacity.

The language of the act is plain and unambiguous. It reads: "No such corporation shall have or exercise any corporate

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The taking of title to property was certainly the exercise of a corporate power, and as such prohibited by the express terms of the statute. This is not controverted by counsel for appellee, but it is contended that Eads, having assisted in the organization of the corporation, and having sold to it the hardware stock, is estopped from denying the corporate existence of the company, and that the attaching creditor took the property subject to the same estoppel.

The doctrine of estoppel can not be successfully invoked, we think, unless the corporation has at least a de facto existence. The rule is stated as follows by Morawetz on Private Corporations, § 750, it having been first announced in the case of Brouwer v. Appleby, 1 Sandf. 158: "A defendant who has contracted with a corporation de facto is never permitted to allege any defect in its organization as affecting its capacity to contract or sue, but that all such objections, if valid, are only available on behalf of the sovereign power of the state."

It is also well settled that to constitute a de facto corporation there must be either a charter or a law authorizing the creation of such a corporation, with an attempt in good faith to comply with its terms, and also a user or attempt to exercise corporate powers under it. Duggan v. The Colorado Mortgage and Investment Co.. 11 Colo. 113; Bates et al. v. Wilson et al., 14 Colo. 140.

A de facto corporation can never be recognized in violation of a positive law. This principle, which seems to be supported by all the authorities, is thus stated in Morawetz on Private Corporations, § 758: "If the formation of a corporate association is not only prohibited by this general rule of the common law, but is also in violation of some principle of morality or public policy, or a positive statutory prohibition, the parties forming such association will not be legally bound by their agreement of membership, and the courts will not recognize the association, either as among its members or against third parties.” To recognize the defendant as a de facto corporation would, as we have seen, be in direct conflict with the express language of the act, which declares that without the payment of the fee the corporation shall have no corporate power.

One object of this statute is to restrict the organization of "wild

cat" corporations, it being supposed that the increased fee required by the act would, in a measure, at least, prevent the overcapitalization of companies. The legislature being of the opinion that this purpose would be advanced by requiring the fee to be paid as a condition precedent to the exercise of any corporate power, it is the duty of the courts to give effect to this intent as the same is manifest from the plain language of the act.

The taking of title to the property in controversy being the exercise of a corporate power, and, as such, forbidden until the fee for filing has been paid, it follows that the title of The Aspen Hardware Company as a corporation can not be upheld. Having failed to comply with the statute, The Aspen Hardware Company at the time of the transfer was neither a de jure nor a de facto corporation, but simply a voluntary association of individuals in the nature of a co-partnership.

There is a broad distinction between those acts made necessary by the statute as a prerequisite to the exercise of corporate powers and those acts required of individuals seeking incorporation, but not made prerequisites to the exercise of such powers.

"In respect to the former, any material omission will be fatal to the existence of the corporation, and may be taken advantage of collaterally, in any form in which the fact of incorporation can properly be called in question. In respect to the latter, the incorporation is responsible only to the government in a direct proceeding to forfeit the charter." Abbott v. Omaha Smelting and Refining Company, 4 Neb. 416. The omission in this case is of acts of the former class, and consequently there was no corporation in esse at the time of the levy of the writ, while the evidence leaves it in doubt if this omission had been supplied prior to the institution of the present action.

But although it could not at the time exercise any corporate power, this did not prevent The Aspen Hardware Company from taking title to the property as a co-partnership. In other words, under the conceded facts, the company was not at the time a corporation, but this will not preclude it from maintaining the action as a co-partnership. The plaintiff sues as The Aspen Hardware Company, and the facts alleged show that such company was a co-partnership and not a corporation. There is nothing in the name of the association to conflict with this, as at common law partners may carry on business under any name they choose. They are bound rather by their acts than by the style which they give to themselves. Cook on Stock and Stockholders, § 233; Chaffee v. Ludeling, 27 La, Ann. 607.

This principle has been applied in many cases where parties have set up the defense of individual non-liability by reason of having directed an incorporation to be had, but where none in fact was consummated. Cook on Stock and Stockholders, §§ 233, 234; Abbott v. Omaha Smelting and Refining Co., supra; Empire Mills v. Alston Grocery Co., 15 S. W. Rep. 505 (Texas).

The law having cast this liability upon the members of the associa41-WIL. CASES.

tion, we think they must be given the advantages accorded a co-partnership. So, in this case, while we feel compelled, under the statute, to deny plaintiff's right of recovery as a corporation, we think they may maintain the action as a co-partnership. The cause will accordingly be reversed and remanded, with directions to the district court to allow parties to amend their pleadings as they may be advised. Reversed.

Note. To same effect: 1898, Maryland Tube & Iron Works v. West End Imp. Co., 87 Md. 207, 39 L. R. A. 810.

See, also, cases following and those cited in note to Cochran v. Arnold, supra, p. 629,

Sec. 168.

(4) Public policy forbids the creation or recognition of corporations by estoppel.

BOYCE v. THE TRUSTEES OF TOWSONTOWN STATION OF THE M. E. CHURCH.1

1876. IN THE COURT OF APPEALS of MARYLAND. 46 Md. Rep. 359-374

[Action of assumpsit by appellant against appellee. Plea there never was a corporate body as alleged. Plaintiff offered evidence to show corporate existence, by way of user, by reading a mortgage executed by the church to certain persons, a deed to the church for its property, an application by the church for a loan, a mortgage given by it for its property to secure bonds issued by it; by way of authority to exist, a certificate of incorporation, setting forth name, officers, location, powers, purposes, acknowledged before one justice of the peace (the statute requiring the acknowledgment to be before two justices), all of which was objected to, and excluded by the court; this exclusion of evidence is assigned as error, and appeal taken.] Arthur W. Machen, for appellee, contended:

The proposition contended for by the appellant's counsel would be as inconvenient in practice as it is illogical and unsound. If, whenever certain individuals choose to call themselves a corporation, and conduct business in the name of the supposed corporation, a corpora tion de facto is thereby created, a high attribute of sovereignty becomes unnecessary, all statutory restrictions and guards become nugatory, and any partnership may practically become a corporation.

But what kind of a corporation is it, if it has no powers? No principle is better established than that all the corporate powers must be found expressed in the charter, or necessarily incident to those powers which are expressed. How would it advance the plaintiff to hold that a corporation may be considered as existing, if it is impossible that any cause of action can be established against it for want of charter conferring power to make the contract out of which it is to arise?

1 Statement of facts abridged. Arguments for appellants omitted; only part of argument for appellee given.

There is no room for presumption or estoppel, for, the plaintiff having produced the alleged instrument of incorporation, the truth appears, and it is manifest that the provisions of the law have not been complied with, and that no incorporation was effected.

STEWART, J., delivered the opinion of the court.

From a careful consideration of the case, we find no error in the rulings of the circuit court, in the four exceptions taken by the appellant.

The controlling question to be determined under the first plea of the appellee of nul tiel corporation is, whether any or all of the evidence offered on the part of the appellant in the said exception, and refused by the court, was sufficient to show that the appellant could be held to be a corporation de jure or de facto, or to estop the appellee from disputing its liability as a corporation.

The act of 1868, ch. 471, in its fourteenth section, provides, amongst other things, for the incorporation of religious societies, and by sections 151, 162, 163 and 164 for religious corporations.

These last provisions are more especially applicable to the organization of a church, religious society or congregation, of whatever denomination which the appellee professes to be, and it is to be presumed were intended for such purpose.

Amongst other requisites to constitute a religious corporation, church, religious society or corporation under these last sections, it was necessary that the agreement for that purpose should be acknowledged by the trustees or a majority of them, before two justices of the peace of the county or city in which the church, congregation or society, or the greatest number of the members shall reside, or before a judge of the circuit court, or of the supreme bench of Baltimore, and certified by the said justices or judge according to the directions of section 163.

No authority having been given to the judge by these provisions, to determine that the law had been complied with, his certificate is not sufficient evidence that the defendant is a corporation.

But the appellant has undertaken to offer evidence of certain acts and proceedings of the appellee, referred to in the exceptions, to show that it held itself out as a corporation, and treated with the appellant as such, and is estopped from denying its liability as a corporation.

We think it would be extending the doctrine of estoppel to an extent not justified by the principles of public policy, to allow it to operate through the conduct of parties concerned, to create substantially a de facto corporation, with just such powers as the parties may by their acts give to it.

This would be substituting the dealings of the parties for compliance with the requirements of the law, and giving to them the same effect through the aid of the courts. Thus, virtually, through the courts, recognizing the existence of the corporation, in manifest disregard of the written law.

It has been determined by this court that a corporation can not bind itself in excess of its powers. Pennsylvania Steam Navigation Co. v. Dandridge, 8 G. & J. 319.

Whilst denying its capacity upon any principle of estoppel to make contracts, ultra vires, to bind itself, it would not be consistent with that theory to recognize its existence ad libitum, according to the conduct of the parties concerned.

Such a principle would seem to affix no other limit to the existence of the corporation de facto or the extent of its power than the dealings of the parties, through the recognition of the courts, might upon the doctrine of estoppel prescribe.

It would be more reasonable to hold corporations to their contracts, though ultra vires, of which they have received the benefit, or to prevent parties who have contracted with them, and receive the benefit therefrom, from defeating their liability, on the ground of want of power in the corporation, as is held in quarters of high authority (see note and references in 2d Kent 351), than to hold that corporations should be deemed to have existence because they had so held themselves out.

The statute law of the state, expressly requiring certain prescribed acts to be done to constitute a corporation, to permit parties indirectly, or upon the principle of estoppel, virtually to create a corporation for any purpose, or to have acts so construed, would be in manifest opposition to the statute law and clearly against its policy, and justified upon no sound principle in the administration of justice. Judgment affirmed.

Sec. 169. (B) Parties estopped.

(1) The pretended corporation itself.

FITZPATRICK, RECEIVER, v. RUTTER.1

1896. IN THE Supreme Court of Illinois.

160 Ill. 282-7.

MR. JUSTICE WILKIN delivered the opinion of the court: On November 20, 1893, George Rutter filed in the circuit court of Cook county his declaration in assumpsit against the Switchmen's Mutual Aid Association of North America, of which he was a member, to collect an indemnity of $1,000, claimed to be due him, under the rules of the association, for injuries sustained in a railroad accident. Summons was issued and served upon the officers of the association, but the declaration was not filed ten days prior to the first day of the January term, 1894. By agreement of counsel, however, it was stipulated that the association would take no advantage of the failure to file the declaration in the proper time. The declaration was filed on the first day of the January term, 1894, and on March 13, following, no plea being on file, judgment by default was taken against the defendant association. Execution having been issued thereon and returned no property found, Rutter, on June 18, 1894, filed a creditor's Arguments omitted. Only part of opinion given.

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