§ 507. Validates Irregularities in Organization.- An application of this principle, and one with which we have most concern in this place, is that it operates to validate irregularities in the organization of corporations. Applying this principle, it has been ruled that the regularity of the organization of a corporation can be questioned only in a direct proceeding taken by the State, as by quo warranto, and that no private person will be allowed to impeach collaterally the validity of its organization. This principle has the freest application where certain adventurers have assumed to organize a corporation under a law under which they might have organized it, and where they have been for a greater or less length of time in the user and enjoyment of the corporate privileges which they have assumed, but where there has nevertheless been some defect or irregularity in the mode of their corporate organization,2 — such, for instance, as the failure to record a duplicate of the certificate of incorporation in the county where the operations of the company are carried on. In short, it seems clear from an examination of the authorities, that a bona fide attempt to organize and a substantial compliance with the provisions of the law, are all that is necessary to establish, as between the corporation and persons other than the State under which it claims to be incorporated, its capacity to sue and to be sued, and to perform other acts as a corporation.' 1 East Norway &c. Lutheran Church v. Froislie, 37 Minn. 447; 35 N. W. Rep. 260; Baker v. Backus, 32 Ill. 79; Tarbell v. Page, 24 Ill. 46; Ossipee Man. Co. v. Canney, 54 N. H. 295; Lord v. Essex Bldg. Asso., 37 Md. 320. See also Childs v. Smith, 46 N. Y. 34. 2 Thompson v. Candor, 60 Ill. 244; Cincinnati &c. R. Co. v. Danville &c. R. Co., 75 Ill. 113; De Witt v. Hastings, 40 N. Y. Super. 463 (irregularity of filing certificate of incorporation); Tarbell v. Page, 24 Ill. 46; Swartwout v. Michigan &c. R. Co., 24 Mich. 389; Baker v. Backus, 32 Ill. 79; Rondell v. Fay, 32 Cal. 354; Buffalo &c. R. Co. v. Carey, 26 N. Y. 75. 3 Humphreys v. Mooney, 5 Col. 282. Although articles of incorporation were not adopted until after the stock was subscribed and business begun, they are binding upon the parties and fix their rights as among themselves, at least from the time of their adoption; and although the articles were not recorded as required by statute, yet where all the other steps necessary to create a corporation were taken, the parties are stockholders of a corporation, as among themselves. Heald v. Owen, 79 Iowa, 23. Methodist Episcopal Church v. Pickett, 19 N. Y. 482; Mokelumne &c. Co. v. Woodbury, 14 Cal. 424; Marsh v. Astoria Lodge, 27 Ill. 421; Spring Valley Water Works v. San Francisco, § 508. Except where the Thing to be Done is a Condition Precedent. An exception to the operation of the rule in this particular is, that where the thing to be done is made by the statute a condition precedent to the organization of the corporation, then there is no corporation unless this condition is substantially performed. There is also considerable authority, some of it discredited by time, to the effect that, where the body does not become entitled to corporate powers, until certain acts have been performed, such acts must be shown to have been done to establish the existence of the corporation, even in a collateral proceeding. The effect of this doctrine is that, if the charter requires the performance of certain acts as conditions precedent to the existence of a corporation, mere general evidence of user cannot be regarded as conclusive that such conditions have been performed. In pursuing this inquiry, courts usually hold that it is unnecessary to prove that the body have complied with certain statutory requisitions, which are not in terms, or by necessary or reasonable implication, conditions precedent to their existence or capacity to do particular acts. The decided cases afford no satisfactory test of what may be considered as conditions precedent to the corporate existence, the performance of which must be shown. Certain it is that many irregularities and omissions which might affect the right of the corporation to exist when called in question by the State, in a direct proceeding, do not impair its capacity to sue and be sued in general. "So long as the State does not interfere," said Bronson, C. J., in one 22 Cal. 434; Baker v. Neff, 73 Ind. 68; ante, § 224. 1 Ante, § 226; Lord v. Essex Building Asso., 37 Md. 320; Boyce v. Trustees, 46 Md. 359. 2 Fire Department v. Kip, 10 Wend. (N. Y.) 266; Utica Ins. Co. v. Cadwell, 3 Wend. (N. Y.), 296; Utica Ins. Co. v. Tillman, 1 Wend. (N. Y.) 555; United States Bank v. Stearns, 15 Wend. (N. Y.), 314; Lucas v. Bank, 2 Stew. (Ala.) 147; Wood v. Jefferson Co. Bank, 9 Cow. (N. Y.) 194; Southbold v. Horton, 6 Hill (N. Y.), 501; Bank of Auburn v. Aikin, 18 Johns. (N. Y.) 137; Mokelumne &c. Co. v. Woodbury, 14 Cal. 424. 3 Long continued user, however, has great weight in support of the presumption that the conditions upon which the charter was granted have been duly performed. All Saints Church v Lovett, 1 Hall (N. Y.), 191; Dunning v. New Albany &c. R. Co., 2 Ind. 437. Narragansett Bank v. Atlantic Silk Co., 3 Metc. (Mass.) 282; Bank of United States v. Dandridge, 12 Wheat. (U. S.) 64, 81; Bank v. Allen, 11 Vt. 302; Eaton v. Aspinwall, 19 N. Y. 119. case, "the company may sue, or do any other lawful act, whatever sins may have been committed in bringing the body into existence." 1 § 509. Further Observations and Illustrations. Where a company, having taken all other steps to become incorporated under the general law, omits to file the certificate of incorporation in the office of the Secretary of State, such a non-compliance with the statute might sustain a quo warranto or scire facias on behalf of the people, and oust the corporators from the exercise of their franchise; but it does not necessarily follow that it is not, as to third persons, a corporation. So, it has been reasoned that a defect in the organization of a corporation, which would not avail a defendant in an action by the corporation, upon the plea of nul tiel corporation, cannot be shown either by the corporation itself when a defendant, or by a stockholder when sued for debts of the corporation.3 Similarly, in one case, where the affidavit annexed to the articles of association filed under a general corporation law, did not contain the allegation "that it is intended in good faith to construct or maintain and operate the road mentioned in the articles of association," the judge delivering the opinion of the court said: "I am of the opinion that, under this and similar general acts for the formation of corporations, if the papers filed, by which the corporation is sought to be created, are colorable, but so defective that in a proceeding on the part of the State against it, it would for that reason be dissolved, yet by acts of user under such an organization it becomes a corporation de facto, and no advantage can be taken of such defect in its constitution, collaterally by any person." 4 Where a company was incorporated for the purpose of removing from a 1 McFarlan v. Trenton Ins. Co., 4 Den. (N. Y.) 392, 397; Swartwout v. Michigan &c. R. Co., 24 Mich. 389. That there are irreconcilable variations in the views of the courts as to what are conditions precedent and what are conditions directory, has been already shown. Ante, § 226. Thus, the provisions of the Illinois act of 1859, relating to corporations, that "any company formed under this act shall file a copy of their by-laws, signed by the president and secretary of such company, and a list of the stockholders therein, and the amount of the stock signed, as aforesaid, in the county clerk's office," etc., is but directory, and is not a requisite to incorporation. Upon compliance with section 1 of the act, the incorporation became complete. Rose Hill &c. Co. v. People, 115 Ill. 133. While, as elsewhere seen (ante, § 227), the decisions of other courts would make this a condition precedent. 2 Baker v. Backus, 32 Ill. 79; ante, § 240. 3 Eaton v. Aspinwall, 19 N. Y. 119, 122. 4 Buffalo &c. R. Co. v. Cary, 26 N. Y. 75. But see the dissenting opinion of Allen, J., in this case. river all obstructions to the free passage of logs, etc., and were authorized to demand toll from the owners of logs, etc., freely passing down the river, it was held, in an action to recover tolls for logs that passed the river freely, that the defendant could not show that the corporation had not removed the obstructions, though the act of incorporation was by its terms to be void if they would not be removed in one year, and though more than a year had elapsed before the action was brought.1 In an action upon a bond issued by a school board, if it appear that such a school board had a de facto existence, acted in that official capacity, was recognized as such by the county court, it cannot be set up as a defense to avoid liability on the bond, that it had no legal existence. "Such a board must be regarded as one de facto whose right to act no one but the State is competent to question.' 2 Where a corporation instituted a suit to establish a certain paper writing as the last will and testament of a deceased person, which paper contained a bequest to a legatee having the name of the plaintiff, to wit, "the Catholic Church at the city of Lexington," the principle was applied that, whether a corporation exists de jure or not, its existence cannot be questioned in a collateral proceeding, if it appear to be acting under color of law, and recognized by the State as such. "The question of its being must be raised by the State itself, on a quo warranto or other direct proceeding; and this, although the act incorporating it, or authorizing its incorporation, is violative of the constitution of the State." 3 In replevin by one claiming the property under a chattel mortgage executed by a de facto corporation, defendant offered evidence to show the non-existence of the corporation de jure by reason of the articles of incorporation being acknowledged. The articles were otherwise regular, and showed an attempt in good faith to comply with the statute, and there had been open and public exercise of corporate powers by the company for several months prior to the date of the mortgage. It was held that this was sufficient to authorize plaintiff to deal with the company as a corporation de facto, and to warrant the refusal of the court to allow defendant to attack its existence collaterally by introducing the evidence offered.4 § 510. State Precluded by Lapse of Time from Questioning Regularity of Corporate Organization.— Although, as a general 1 Bear Camp River Co. v. Woodman, 2 Me. 404. 2 Franklin Avenue &c. Inst. v. Board of Education, 75 Mo. 408. 3 Cath. Church v. Tobbein, 82 Mo. 418, 424. 4 Duggan v. Colorado Mortgage &c. Co., 11 Col. 113; 20 Am. & Eng. Corp. Cas. 519; 17 Pac. Rep. 105. rule, the statute of limitations does not run against the State, nor can laches be imputed to it, yet this rule will not be allowed to apply so as to destroy the existence of a corporation, where many private rights have been acquired on the faith of it, and where the vacation of its franchises would lead to confusion and injustice. It was so held where it was sought by an information in the nature of quo warranto, to vacate the franchises of a railroad company, on the ground that its articles of association were defective in not specifying its terminus with sufficient certainty. As between eight and nine years had elapsed since the filing of the articles in the office of the Secretary of State, and as such filing was notice to the State, at the time, of the manner in which the organization of the corporation had taken place, a judgment of ouster was refused.1 § 511. Corporation Suing for Rights which can only Inhere in it as a Corporation.-It is believed, however, that the exception to the general rule obtains where the corporation is the actor in the litigation and is therein seeking to enforce a right which inheres in it as a corporation. Thus, if a corporation has been created to erect a bridge, with power to take tolls thereon for the period of twenty years, and after the lapse of twenty years it sues to recover such tolls, the defendant may show that the twenty years have expired and thereby defeat the action.* It is also assumed that where a corporation proceeds to condemn the lands of a private owner for public uses, it must show a prima facie right to exercise this extraordinary power, by proving that it has corporate existence, at least de facto. An administrator cannot maintain an action in his representative character without pleading and proving that he is an administrator, because it is only in that character that he has a title to sue. He ordinarily proves this by putting in evidence his letters of administration. It should seem, upon the same principle, that where a plaintiff, claiming to be a corporation, brings an action which, from its very nature, it cannot have unless it is a body corporate, it must prove 1 State v. Bailey, 19 Ind. 452. As to the period of limitation for an information in the nature of quo warranto, see Ang. & A. Corp., § 743. 2 Grand Rapids Bridge Co. C. Prange, 35 Mich. 400; s. c. 24 Am. Rep. 585. |