Court Opinion

ID: 6999717
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:39:50.717225+00
Date Added: 2024-06-11T16:09:53.331585
License: Public Domain

Mr. Justice Adams delivered the opinion of the court. The question is whether the facts alleged in the bill entitle appellant to relief. Section 16 of chapter 32 of the statutes is as follows: “ If the indebtedness of any stock corporation shall exceed the amount of its capital stock, the directors and officers of such corporation assenting thereto shall be personally and individually liable for such excess, to the creditors of such corporation.” It is apparent from the bill that at the time the indebtedness to appellant was contracted, the Chicago Press Club Auxiliary Association was not a legally organized corporation for the purpose of engaging in its contemplated business, because its certificate of complete organization was not issued until about three months after that time, and the contention of counsel for appellee is, that the bill showing, as it does, that the association was not a corporation de jure, the decree sustaining the demurrer and dismissing the bill was proper. On the other hand; counsel for appellant contend that the bill shows that appellees held out to the world and to him, that the association was a legally organized corporation; that they acted as its officers and directors, and in its name, and in all respects as if it were a corporation, and that, by reason of the appellees so acting, appellant was led to deal with the association as a corporation,- knowing nothing to the contrary, and that, under these circumstances, the appellees are estopped to say that the association was not a legally organized corporation. Appellees’ counsel lay a great stress on the fact that it is shown by the bill itself that the association was not a de jure corporation, but this is a mere matter of pleading, and we do not regard it as important, if the bill also avers facts which, if true, would estop the appellees from denying legal organization. In McCarthy v. Lavasche, 89 Ill. 270, the appellant was sued as a stockholder of a corporation chartered by special act of the legislature, and the plaintiff, in his declaration, set up the clause of the charter imposing liability on stockholders. The act was, therefore, before the court by virtue of the plaintiff’s pleading, and if unconstitutional, this was apparent from- plaintiff’s pleading, of which the act, by reference, was a part; yet the court held that the defendant, having subscribed for stock in the corporation, was estopped to question the constitutionality of the act, even though it was unconstitutional, and he was held liable. In United Growers Co. v. Eisner, 47 N. Y. Supp. 906, which was also a suit against'a stockholder, it was objected that it affirmatively appeared that the company was not properly incorporated, notwithstanding which, the court held that the defendant was estopped by his acts from defending on that ground. In Merrick v. Reynolds E. & G. Co., 101 Mass. 381, the company was" sued as a corporation. It affirmatively appeared in a stipulation of facts on which the suit was tried, that the company, at the time of making the contract sued on, had not complied with a statutory requirement, compliance with which was made by the statute a condition precedent to commencing business; yet the court held the company liable on the principle of estoppel. Suppose that the bill in the present case, by way of anticipation of appellees’ defense, had charged or averred that the defendants would claim that, at the time of contracting with complainant, as stated in the bill, its certificate or complete organization had not been issued, and therefore it was not a legally organized corporation, but that, conceding the same to be true, defendants should not be heard to make such defense, because, etc. (averring facts which would estop them); this would be proper pleading, and in accordance with the precedents (1 Dan. Ch. Pr. & Pl. 373; Puterbaugh’s Ch. Pl. & Pr. 55-56), and would not preclude the complainant from relying on the estoppel. Instead of so pleading, the appellant has merely averred the facts, which, although, perhaps, less formal, does not change the substance of the matter, and a court of equity looks to substance rather than form. Beach’s Mod. Eq. Juris., Sec. 7; 1 Pomeroy’s Eq. Juris. 263. The association was fully organized as a corporation when it had complied with the statutory requirements prerequisite to the issuance of its certificate of complete organization. Had it not been, the certificate could not have been issued. It bad a regularly elected board of directors and regularly elected officers, and proceeded in the usual way to accomplish one of the objects of its incorporation, viz., “ to construct a suitable building,” and, as reasonably if not necessarily incidental thereto, to employ an architect to prepare plans for and supervise the erection of the building. Appellees held out to the public and to appellant that it was a legally organized corporation, by proceeding with the business for which it was incorporated, and by contracting in the corporate name. Had the association sued appellant in the corporate name for a breach of his contract, he, having dealt with it as a corporation, would have.been estopped to deny its corporate existence, and appellees are equally estopped to so deny. McCarthy v. Lavasche, 89 Ill. 270; Bushnell v. Consolidated I. M. Co., 138 Ib. 67; Curtis v. Tracy, 169 Ib. 233; U. S. Express Co. v. Bedbury, 34 Ib. 459, 467; Tarbell v. Page, 24 Ib. 46; Swartwout v. Railroad Co., 24 Mich. 389. In Loverin v. McLaughlin, 161 Ill. 417, the court quotes with approval this language from Beach on Priv. Corp.: “ If a corporation be illegally formed, its members or stockholders are liable as partners for its acts or contracts; and directors, officers and agents, acting and contracting in its name, are personally liable.” The decree will be reversed and the cause remanded.