Case Name: Merchants & Manufacturers' Bank v. Charles Stone, William Livingstone Jr. and Edward T. Hughes
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1878-06-05
Citations: 38 Mich. 779
Docket Number: 
Parties: Merchants & Manufacturers’ Bank v. Charles Stone, William Livingstone Jr. and Edward T. Hughes.
Judges: Campbell, C. J., concurred.
Reporter: Michigan Reports
Volume: 38
Pages: 779–795

Head Matter:
Merchants & Manufacturers’ Bank v. Charles Stone, William Livingstone Jr. and Edward T. Hughes.
Be facto corporations not to he treated as partnerships.
Where a body professing to be a corporation has been dealt with expressly as such, those who have so dealt with it cannot question its corporate existence for the purpose of charging its members individually as if they were partners.
Error to Superior Court of Detroit.
Submitted February 1.
Decided June 5.
Assumpsit. Plaintiff brings error.
Griffin & Dickinson and William Jennison for plaintiff in error.
Where there has been no corporate act in good faith, the corporate character is not acquired either de jure or de facto, Unity Ins. Co. v. Cram, 43 N. H., 636; Harris v. McGregor, 29 Cal., 124; DeWitt v. Hastings, 40 N. Y. Sup. Ct., 463; Abbott v. Omaha S. Co., 4 Neb., 416; Paterson v. Arnold, 45 Penn. St., 410: contra, Cochran v. Arnold, 58 Penn. St., 399.
G. V. N. Lothrop for diaries Stone, defendant in error.
They who have dealt and contracted with a body as a corporation are estopped from denying its legal existence, Armstrong v. Harvey, 11 Ohio St., 527; it is only where there is no color of corporate organization that all the parties acting jointly can be considered as joint contractors or partners, Childs v. Smith, 55 Barb., 45; Fuller v. Rowe, 57 N. Y., 23; Nat. Bank v. Landon, 45 N. Y., 410; where there was a promise by a de facto corporation, the corporators could not be held as partners, Cent. City Savings Inst. v. Walker, 5 Hun, 34: 66 N. Y., 424; Fay v. Noble, 7 Cush., 188.

Opinion:
Graves, J.
During the period between the summer of 1871 and the fall of 1875, the bank transacted a large amount of business in the way of discounting paper and otherwise with a concern appearing to the bank and the public and purporting to be a corporation bearing the name of " The Charles Stone Timber Company," and all this business was undertaken and prosecuted by the bank upon the specific understanding that the concern was contracting as a corporation and not otherwise. Indeed the bank dealt with it throughout as a corporation in fact and without any qualification or reserve, recognized it as one.
In the course of this business and in the fall of 1875 there remained a note in the hands of the bank for $4000, which the company had made to it in renewal of one previously discounted. It was signed "The Chas. Stone Timber Co., W. Livingston, Jr., Treasurer," being the usual style. The company failing to pay, the bank sued the defendants upon -the money counts aione, and set forth a copy of the note in the usual manner with notice that the original would be given in evidence against the defendants under said money counts. The defendants were only charged as individuals. They were not described in the declaration as members of a firm. Neither was there any averment that they were sued upon any special liability or undertaking, or any undertaking made by them in any peculiar character. Hughes was not served.
Livingston pleaded discharge in bankruptcy and Stone pleaded the general issue and made affidavit denying execution of the note. The bank contended that the company was' not a corporation but was a private cd-partnership composed of defendants and on that theory endeavored to recover upon the note, against defendants in this form of proceeding.
Stone controverted the position so taken by the bank.
In view of the issue and state of facts it was incumbent upon the bank to establish that the company represented by the signature to the note, was a co-partnership ; that the defendants were the partners, and that the note was made by the firm. The style of the company was of equivocal import. It might denote a corporation or it might denote a co-partnership. The mere name then was indeterminate in that regard. By itself it gave no clue to the nature of the company as being incorporated or unincorporated. The burden of proof was on the bank to show that it was a mere private firm composed of defendants. But it was unable to make any advance towards proof of the affirmative of that issue except by showing articles of association made and filed by defendants under the law of the State for forming corporations; that the company had not assumed to act as a co-partnership, but under the name of " The Charles Stone Timber Company," being1 the title adopted by the articles, had assumed in fact to proceed as a corporation and for a series of years had in such name and character carried on a business not only large in amount but extensive in view of the number and variety of the transactions, and moreover had' expressly acted in such character in giving the note in question to the bank. The bank took the ground that the proceedings to incorporate were not valid; that the business carried on was not in just construction within the articles or the statute; that the company was not a corporation in point of fact, and that the defendants, who were the only members, were in consequence responsible in character of partners for the undertaking of the company. Now the proof that as matter of fact the company carried on business as a corporation in the name of " The Charles Stone Timber Company" when the bank dealt with it, established prima facie that it was a corporation pursuant to law (Act 109 of 1871, vol. 1, p. 176) and certainly the evidence the bank adduced in regard to the operations of the company, the attitude it maintained and the character in which the two concerns dealt together showed that the company was a corporation de facto, and -so acknowledged by the bank. In short the company was prima facie a lawful corporation when the note was taken, and the bank admitted in the very transaction that it was one in fact, and that admission cannot be disputed in this collateral way in order that the bank may call in question the corporate existence of the company and charge against the individual members the precise obligation which was unequivocally accepted as a corporate one. Swartwout v. Michigan Air Line R. R. Co., 24 Mich., 389; Parker v. Northern Central Michigan R. R. Co., 33 Mich., 23; Casey v. Galli, 94 U. S., 673, 680; Dutchess Cotton Manufactory v. Davis, 14 Johns., 238; All Saints Church v. Lovett, 1 Hall, 191 [2d ed., 213]; Leonardsville Bank v. Willard, 25 N. Y., 574; Eaton v. Aspinwall, 19 N. Y., 119; Methodist Episcopal Union Church v. Pickett, id., 482; Worcester Medical Institution v. Harding, 11 Cush., 285; Dooley v. Wolcott, 4 Allen, 406; Steam Navigation Co. v. Weed, 17 Barb., 378; Palmer v. Lawrence, 3 Sandf. S. C., 161, 170; Congregational Society v. Perry, 6 N. H., 164; Newburg Petroleum Co. v. Weare, 27 Ohio St., 343; Smith v. Sheeley, 12 Wall., 358; Lessee of Frost v. Frostburg Coal Co., 24 How., 278; Bank of Salem v. Almy, 117 Mass., 476; Fay v. Noble, 7 Cush., 188; Trowbridge v. Scudder, 11 id., 83; Bennett v. Dean, 35 Mich., 306; Hawes v. Anglo-Saxon Petroleum Co., 101 Mass., 385.
Whether the defendants might or might not have been proceeded against in some other form, is a question I do not consider. According to the existing state of things, I am of opinion no case is made against them, and that the bank has no ground of complaint against the judge's direction to find for the defendants, and that the judgment ought to be affirmed with costs.
Campbell, C. J., concurred.
Cooley, J. I concur in the result.