Case ID: barb_64/html/0628-01.html
Source: Caselaw Access Project
Author: {"author": "\n      By the Court, E. Darwin Smith, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

John N. Dorris, receiver, &c., vs. James Sweeney.
    A corporation, organized under the act of 1848, authorizing the formation of corporations for manufacturing, mining, mechanical and chemical purposes, by filing in the offices of the Secretary of State, and county clerk, the certificate required by said act, signed by the requisite number of persons, and duly acknowledged; and which has used and exercised the franchises created, conferred or claimed by said act, made calls upon the stockholders for payments on their shares, erected a building, and done other acts in exercise of the corporate rights; is a valid corporation, de jure and de faeio, as between the stockholders and all third persons, until the State shall intervene, and question, in due form, its lawful existence.
    A stockholder in such a corporation cannot question its lawful existence, and is bound to pay the amount of his subscription to its stock, if any has been made.
    Where the defendant was sought to be made liable as a stockholder in a corporation, or a subscriber to its stock, although it was not pretended that he was one of the original corporators, or that after the incorporation of the company, he ever subscribed for any number of shares of its capital stock; but he was sought to be held solely upon a preliminary agreement, signed by him, before such corporation was organized, in and by which he agreed to unite with others in the formation of a joint stock or incorporate company, for certain specified purposes; it was held, that the signature of the defendant to this preliminary agreement did not make him a stockholder in said corporation, or bind him to take and pay for stock therein.
    Nothing in the act of 1848 authorizing the formation of such corporations gives any effect to a preliminary agreement to become a stockholder in a proposed corporation; and the agreement itself cannot have such legal effect.
    APPEAL by the plaintiff from a judgment, dismissing the complaint, entered on the decision of the court, at the circuit, on a- trial before the court without a jury.
    The action is to recover the sum of $5,000, "upon a written instrument, signed by the defendant, with other persons, of which the following is a copy, namely:
    “Buffalo Fruit House Association. We, the undersigned, hereby agree to unite in the formation of a joint-stock, or incorporate company, for the purpose of purchasing the exclusive right to make, use and vend, Hyce’s patent for preserving fruits or other products out of season, in Erie county, H". Y., and of erecting a building after the plan of said patent, with a capacity of about twenty thousand (20,000) bushels, and of stocking the same with fruits to be preserved, said building to be built so as to be ready for use by the first day of February, 1866, and for such purpose we mutally agree to pay to the treasurer, appointed by said company,, the amount set opposite our names in the following manner: fifty per cent on demand; twenty-five per cent on completion of the building; and twenty-five per cent whenever called in by said company.
    The capital stock of said company shall be $100,000, divided into 1000 shares of $500 each, with the privilege of increasing the same to $200; 000.
    As soon as $60,000 of the stock shall be subscribed, said company may organize under the laws of this State, and do such other acts as are necessary for an early prosecution of the business for which such company is formed.”
    This instrument was signed by the defendant and several others, about the 1st day of October, 1865. On the 31st day of October, 1865, some of the persons who had signed the written instrument above set forth, to the number of ten, executed and acknowledged the papers necessary to the formation of a corporation, under the act of the legislature of the State of New York, entitled: “An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes,” passed February 17, 1848, and the acts amendatory thereof, and supplementary thereto. The certificate of incorporation was filed on the 1st day of November, 1865. The defendant did not sign this certificate. He was not consulted about or advised of its execution. It was stated in the certificate thus executed and filed, among other things, that the name of the corporation thereby formed, was “The Buffalo Fruit Preserving Company.” That the objects for which such corporation was to be formed, were “the manufacture of preserved fruits, and the canning of fruits and other products, and the preserving and keeping of fruits and other articles from decay, and for the transaction of such other business as is connected with and incidental to the same.”
    On the 8th day of September, 1871, by a judgment of a competent court, the corporation thus formed, was dissolved, and the plaintiff was appointed receiver of its effects.
    The court found, as a fact, that the patent mentioned in the written instrument signed by the defendant, was for the preserving of fruits and other products, in a building to be erected upon a plan specified, wherein fruits and other articles were to be deposited in them natural state, and kept from decay, or change, by maintaining a certain uniform condition of the air within the building. The plaintiff excepted to this finding of fact. The persons who signed the subscription with the defendant, did not assume to form, any other corporation than the one above mentioned, and the defendant did not take any part in organizing the corporation that was formed. ■
    The court decided, as matter of law, that" the corpotion formed, as is above stated, and which the plaintiff in this action represents as receiver, was “simply a manufacturing corporation,” and not such a corporation as is described in, and contemplated by the instrument subscribed to by the defendant. That a corporation could not thus be formed, under the laws of this State, for the purposes expressed in such instrument, namely, of keeping and preserving fruits from decay.
    The ' court, therefore, directed judgment dismissing the complaint, with costs. Judgment was entered in accordance with the direction of the court, and the plaintiff appealed from such judgment.
    
      
      G. A. Scroggs, for the appellant.
    
      John Ganson, for the respondent.
   By the Court, E. Darwin Smith, J.

The plaintiff is the receiver of an insolvent corporation by the name of “The Buffalo Fruit Preserving Company,” organized under the act of 1848, authorizing the formation of corporations for manufacturing, mining, mechanical and chemical purposes. Such corporation was organized by filing in the Secretary of State’s office and in the clerk’s office of the county of Erie, the certificate required by said act, signed by the requisite number of persons to comply with the terms of said act. The second section of said act declares that “when said certificate shall have been filed, the persons who shall have signed and acknowledged the same, and their successors, shall be a body politic and corporate in fact and in name.”

It appears that the corporation so formed, used and exercised the franchises created, conferred or claimed by said act, for some time afterwards; made calls upon the stockholders for payments on their stock, erected a building, and did other acts in exercise of the corporate rights so claimed. I do not see why the corporation so created was not a valid corporation, therefore, de jure and defacto, as between the stockholders and all third persons, until the State should intervene and question, in due form, its lawful existence. If the defendant was a stockholder of such corporation, I think he could not question its lawful existence, and would be bound to pay for his subscription to its stock, if any had been made, within the case of The Buffalo and Allegany Railroad Company v. Cary, (26 N. Y. 75.)

The question in the case is therefore narrowed to the simple inquiry, was the defendant a stockholder in said corporation, or a subscriber to its stock?

It is not pretended that he was one of the original corporators, or that after the incorporation of said, company he ever subscribed for any number. <3f shares of its capital stock. He is sought to be held solely upon a preliminary agreement, signed by him before such corporation was organized, in and by which subscription paper signed by him, he agreed to unite in the formation of a joint stock or incorporate company for the purpose of purchasing the exclusive right to make, use and vend, Nyces patent for preserving fruits, and other purposes specified. It is quite clear, I think, that the signature of the defendant to this preliminary agreement did not make him a stockholder in said corporation, or bind him to take and pay for stock therein. Nothing in the act of 1848, authorizing the formation of such corporations, gives any effect to a preliminary agreement to become a stockholder in a proposed corporation, and the agreement itself cannot have such legal effect.

[Fourth Department, General Term, at Rochester,

April 1, 1873.

Mullin, Talcott and E. D. Smith, Justices.]

This is held distinctly in respect to a preliminary subscription under the plank-road act of 1847, to the stock of a proposed company, or an agreement to take stock in such company, in the case of The Poughkeepsie & Salt Point Plank-Road Company v. Griffin, (24 N. Y. 150.) And the point was so held, also, in Burt v. Farrar, (24 Barb. 518;) and in The Troy & Boston Railroad Company v. Tibbsts, (18 id. 297;) and the same v. Warren, (Id. 310.)

These cases, seem to me, conclusive on the point that the defendant never was a stockholder in such corporation, and was not liable on his subscription as such, to take such stock or pay for the same.

The judgment should, therefore, be affirmed.