Court Opinion

ID: 4894072
Source: CourtListenerOpinion
Date Created: 2021-09-02 23:54:33.614213+00
Date Added: 2024-06-11T08:11:55.733646
License: Public Domain

Willie, Chief Justice. —
A private corporation, whose charter has been granted by one state, cannot hold meetings or pass votes, or have any legal existence in another state. It must dwell in the place of its creation, and cannot migrate to another sovereignty. Bank of Augusta v. Earle, 13 Pet., 519; Miller v. Ewer, 27 Maine, 509; Aspinwall v. O. & M. R. R. Co., 20 Ind., 497.
This prohibition as to the performance of acts,outside of the state where chartered, refers to acts of a strictly corporate character, such as must be discharged by the corporators themselves, such as the original organization, the election of directors, etc. The better opinion is, that the mere transaction of such business as is usually done by the directors or other agents of the body may be done as well without the state as within it. Bellows v. Todd, 39 Iowa, 209; Arms v. Conant, 36 Vt., 745; Gal. v. R. R. Co., 11 Wall., 476, 477.
The third section of the charter of the “ Franco-Texan Land Company” declares that “ its principal office for the transaction of business shall be at Weatherford, Parker county, Texas, and that its business might also be transacted at the city of New York, and at Paris, France,” etc.
It is, to say the least, doubtful whether or not a state could grant a corporation the right to change its residence to another sovereignty at its own will, and there exist and perform its corporate functions. It is not to be presumed that such a thing was intended by this charter, but that the words transact business were used in the ordinary sense in which they are employed in reference to corporations, i. e., perform such acts as are done through directors and other agents, and that they were not applied to strictly corporate acts, which can be done by the stockholder alone.
We do not think that this section gave the company the right to hold stockholders’ meetings outside of the state of Texas.
It is well settled that corporations being prohibited from holding meetings of stockholders outside of the sovereignty of- their crea*344tion, the proceedings of all such meetings are absolutely void and of no effect. See authorities cited above. Hence the directors elected at the meeting of the stockholders of the present corporation, held in Paris in 1880, were not de jure officers of that body, nor clothed with the power of making by-laws for its government.
But it is said that they were de facto directors, and as such the appellee ivas bound by their acts. '
Lord Ellenborough defined a de faeto officer to be “ one who has the reputation of being the officer he assumes to be, and yet is not a good, officer in point of law.” Rex v. Corporation of Bedford Level, 6 East, 268-9. In commenting upon this definition it is said in Greene’s Brice’s Ultra Vires, p. 523, that it “ requires the addition of something to fix the corporation with acquiescence in the acts of the so-called officer — the mere assumption or reputation is not per se sufficient.” A person claiming to be a de facto officer should have some colorable right to the office, though he has no legal right thereto by reason of some informality or irregularity in his election or appointment.
A de faeto authority cannot arise when there has been absolutely no election or appointment, or, what is equivalent, one that is absolutely null and void, and not merely irregular or informal; and where there has been no assertion of the right to exercise the office except in the very instance where it is questioned; and where there has been no acquiescence in the official acts of the person claiming such authority, either on the part of the body for whom he professes to act, or of any one else. Otherwise the simple bold assertion of a right to an office Avould bind such corporation or body by the acts of the usurper, and parties suffering from his unlawful acts could never question them.
The facts in the record bring this case precisely within this class of acts. The directors were elected at a meeting of stockholders held in France, Avhich election was absolutely null and void, and Avhich Avas subject to collateral attack, and gave the persons elected no more poAver than if there had been no election whatever. The proceedings of such a meeting no court of justice could respect, n.o matter in what manner it might be questioned. The only act performed by this board of directors, so far as we are informed, was to enact the by-laAv complained of, and Ave have no proof that this bylaw was ever attempted to be enforced, except in the case now under consideration. It was not attempted to be enforced then, except by the president of the company, and we are not informed that he had ' power by virtue of his office to bind the company to acquiescence in *345the conduct of fictitious directors. LTo one else, except the president, seems to have recognized the validity of the by-law and the authority of the board making it. Under the facts brought before us, we do not consider that this board were de facto directors, and hold that they had no right to pass the by-law, and it, too, was void.
It is sought to hold the appellee bound by the acts of the directors, because, as is alleged, he participated in the meeting of stockholders at Paris through one holding his power of attorn ejE It is not shown what character of power of attorney was given by Laigle to the party who voted his stock at that meeting. If the power was general, without authority to use it at a meeting held without the state, the presumption would be that it was to be legally exercised, and, if so, the agent transcended his authority when he used it at a prohibited assembly of the stockholders.
As the record is to be construed most strongly against the party bringing the cause here, we might presume that the power of attorney was general, and rest our decision there. But if it conferred a special authority to vote at the Paris meeting, the appellee is still not estopped.
The doctrine as stated in reference to de facto authority applies also to questions of estoppel. It is only where the act of the corporation sought to be denied is merely irregular or informal, or defective in no vital respect, that any one participating in it is estopped to deny its validity. If it be absolutely void, and liable to be treated as a nullity in any proceeding where called in question, no participation in such act could give it vitality, even as to one who took part in it. For instance, if the charter of a company required the subscription of a certain amount of stock before it could be organized, and an organization was had with a subscription of a less amount, one who had taken part in this irregular formation of the company would probably be estopped from setting up that it was no corporation. But if the so-called corporation had no charter, or a charter which could not be constitutionally granted, there would be no estoppel against denying its existence by any one, whether a partaker in its organization or not. Heaston v. Cin. & I. R. R. Co., 16 Ind., 279; Harriman v. Southern, id., 190.
So if a corporation were prohibited from passing a by-law except by a two-thirds vote of the directors, it might be out of the power of a director, who took part in passing one by a bare majority, to dispute its validity. But if the law gave the power to the directors only to make by-laws,- and a part of the stockholders should *346assume to do so, such bydaws would be of no more effect as to these particular stockholders than as to any one else.
We think that the Paris meeting being a nullity, the directors elected by it mere usurpers in assuming to make bydaws for the government of the company, such by-law was wholly void, even as to the appellant whose agent took part in the unauthorized meeting.
There is another consideration which would seem to be decisive of this.cause in favor of appellee, even though the by-law had been passed by a competent board of directors. Under the charter and by-laws of the company the appellee was entitled to exchange his eight shares of stock for a certain quantity of land. The object to be attained by the by-law in reference to the manner of making the exchange was to prevent any imposition upon the company by surrendering to it fraudulent or fictitious stock and receiving from it land in exchange. There could have been no intention to prevent a bona fide stockholder from obtaining land in exchange for his stock. The by-law merely established a method' of ascertaining whether or not the shares of stock were or were not genuine.
It would seem, then, that if the appellee could establish that fact by any other proof which was sufficient, that he could go into a court of justice and do so, and could not be bound to pursue the method pointed out by the by-laws. The mode of proof required by them might be so onerous as to amount to a privation of his rights. In this instance it involved a great deal of trouble and consumption of time, and his rights were in a great measure left at the mercy of the president and other agents of the company, who could delay or even destroy them, if they should choose so to do. Should .the stock be genuine and those agents refuse so to declare it, the appellee would certainly have a right to sue the company, establish his stock and secure the land. It would seem but reasonable that he should do so without waiting for the action of those agents, when he was possessed of full legal proof of his rights independent of the mode pointed out by the by-laws.
Be this as it may, we think the by-law void and not binding upon him, and the judgment is affirmed.
Affirmed.
[Opinion delivered April 27, 1883.]