Court Opinion

ID: 6629827
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:36:38.027009+00
Date Added: 2024-06-11T15:58:54.796741
License: Public Domain

Felch, J.
delivered the opinion of the Court.
1. It is urged as a ground for reversing the judgment below, that the court erred in refusing to nonsuit the plaintiffs below, because there was no sufficient evidence to prove their corporate existence, and in charging the jury that no proof of organization under their charter was necessary.
Whether the evidence adduced to prove corporate existence (which consisted merely in the production of the charter of the corporation, and acts amendatory thereto, and proof of acts of use?-,) was sufficient or not, we are clearly of opinion that there was no error in refusing the nonsuit. This court has already decided, in several cases, that the circuit court cannot compel a plaintiff to become nonsuit. He has always a right, if he chooses, to go to the jury with his case.
But we think the evidence was sufficient. This is a case where corporate powers are given directly and in presentí by the act, and not where the right to exercise such powers is made to depend upon something to be done in futuro. No condition or pre-requisite to the exercise of corporate powers are annexed to the charter. The most that could be required, would be a showing that the individuals to whom the powers were granted, accepted the charter. This was abundantly shown by the testimony in the case. Besides, the contract declared on was made with the corporation, in their corporate name, and by it the defendants admitted the existence of the corporation under the charter which was given in evidence. One of the defendants below was, moreover, by the very act of effecting an insurance with the company, giving the note declared on, and receiving as a consideration therefor a policy of insurance, issued by the corporation, a member of the corporate body. Such is the express provision of the act of incorporation. The defendants are, under the *134circumstances estopped from denying the existence of the corporation.*
*1352. It is also alleged as error that, in proof of user by the plaintiffs below, under their charter, the court allowed in evidence applications for policies, and policies issued by them, from 1838 to the time of trial, and also the official bonds of their officers. The objection was, that these should be matters of record, and should be proved by the introduction of the record.
The proof of user must necessarily consist of evidence of the acts of the corporation, showing that they are doing business under their charter. Any acts tending to show this, are admissible for that purpose ; as keeping open an office; having officers acting in the name, and as the agents of the company, &c. The receiving of applications and issuing policies of insurance, — in other words, doing the very business, and in the very manner pointed out by the statute, and in the name of the corporation, would be direct evidence of user.
We have no evidence that the policies, or applications, or official bonds were matters of record. They need not necessarily have been recorded. We are clearly of opinion, therefore, that the evidence was admissible.
3. It is also insisted that the court below erred in admitting parol evidence that, at the date of the execution of the policy of insurance referred to in the premium note of the defendants below, as the consideration for which it was given, Abraham Edwards, by whom the policy purported to have been signed as president, was the acting president, and that A. T. Prouty, by whom it purported to have been signed as secretary, was the acting secretary of the company, (the plaintiffs below.) It is insisted *136that the records of the company were the only competent evidence to prove who were its officers.
The express reference to the policy, in the note declared on, made it a part of the contract as set out in the declaration, and so the policy was admissible in evidence. It was there referred to as the consideration of the obligation of the defendants, and as such, it was competent for the plaintiffs below to give it in evidence for the purpose of showing it valid and binding upon the corporation, and as such a good consideration. But to make it valid as against the corporation, it was not necessary to show that the persons signing it as president and secretary, were chosen to those offices by a regular vote of the corporation, or that their appointments were matters of record. Whether they were or not, does not appear in the case. If they were acLing in the capacity in which they had signed the policy of insurance, and were officers de facto, the corporation would be as much bound by their contract as if every'formality had been taken in their election, and all the proceedings had been spread upon record. In an action against the company on the policy, this would have been all that was necessary to be shown to fix the liability of the company. ' Ang. & Ames on Corp. 73. And I cannot see why this evidence is not likewise admissible for the purpose of showing that the policy was binding on the company, and therefore a good consideration for the note. The rule of law excluding parol proof, when there is- written evidence, does not apply. This was not k case where fraud could be presumed, from the withholding of written evidence, and a resort to that of a secondary character. The very object of the testimony was to show the liability of the party offering it. The policy had been accepted by the defendants below, as the valid obligation of the corporation ; it was so admitted by them to be in the note declared on; and the proof *137offered and received was the very proof which would have fixed the liability of the corporation in a suit on the policy. There was no error, therefore, in admitting the evidence.
4. It appeared from the records of the corporation offered in evidence for the purpose of proving certain bylaws set out in the declaration, that the meeting of the directors at which they were adopted, was attended only by the president and a quorum of the directors — five of them being absent. — It is now contended, and was urged on the trial, that a mere majority of the board of directors had no power to adopt by-laws. The charter of the corporation authorized the president and directors to adopt bylaws. For the purpose of adopting them, we think that a majority of the directors was sufficient; and, consequently, that those offered in evidence were well adopted and in full force.
The admissibility of these by-lawrs in evidence was also objected to on the ground of variance, — they being alleged, in the declaration, to have been adopted by the whole board of directors, naming them. But we think this objection was not well taken. The majority, when assembled at a legal meeting, constituted the board of directors, and their act was the act of the whole. The allegation in the declaration that they were adopted by the whole board, naming them, is in legal effect true, although, at the particular meeting when they were adopted, some of the individual members of the board were not present: —the declaration does not allege that they were all present. By the act of the majority in legal meeting assembled, the by-laws became binding on the company in the same manner as though all the directors had been present: it was the act of all, and may well be so alleged in the declaration.
5. It is also contended that the court below erred in *138charging the jury that one of the by-laws offered in evidence, viz : Art. II, sec. 2, was valid ; that the corporation had power under their charter to adopt it; and that it was a contract to which the defendants below were parties, and was, therefore, binding upon them.
The charter of the corporation empowered the president and directors to “ adopt such by-laws and regulations for the transaction of the business o'f said company, as they might deem expedient,” &c. § 13. A copy of the by-law in question, will be found in the preceding statement of the case. It is contended that even under this general language of the charter, the corporation had no power to adopt this by-law, because it created a forfeiture. The power of a corporation to enforce its by-laws properly made, by pecuniary penalties competent and proportionable to the offence, will not be doubted. Ang. & Ames on Corp. 200. But it has been decided that they cannot be enforced by a forfeiture of the property or stock of the defaulting corporator. Kirk v. Nowell, 1 T. R. 125; Hart v. Mayor of Albany, 9 Wend. R. 571; In the matter of the Long Island Railroad Company, 19 Wend. R. 37. A forfeiture implies the loss of an interest in property, or the being deprived of some legal rights belonging to him who violates the by-law, in consequence of such violation. Of what property or rights are the defendants below deprived, by the operation of the by-law in question ? What is the thing forfeited ? The party is merely compelled to pay his note sooner than he otherwise would be liable to pay it, or a larger amount than might otherwise be required. The by-law does not purport to compel him to pay more than the amount; but to enforce the collection of the whole, to be held in the treasury, for the payment of assessments due and to be thereafter made ; — the balance, if any remained after the payment of such assessments, to be returned to him after the policy shall have *139expired. But when was the note payable ? By its very terms it was payable in such portions and at such times as the directors of ihe company, agreeably to their act of incorporation, might require. Under the charter the whole premium might have been required in advance. If the directors require the whole amount to be paid at once, in case of delinquency in the payment of any instalment, it seems to me to be precisely in accordance with the terms of the contract; and surely that cannot be deemed a forfeiture which provides for the collection of a sum agreed to be paid, precisely according to the terms of that agreement.
But this suit is not brought to enforce a penalty: it is upon the defendants’ written contract to pay money, with the necessary averments to show their liability under it. They stand in the relation of contractors simply in the matter here to be tried, and the law of contracts in other cases must apply.
It was competent for them to contract to pay in instalments, or on a contingency, or absolutely at a specified time. The by-law in question was in force when their note was given, and a copy was printed on the back of the policy executed to them by the company as a consideration for the note. The whole tenor of the transaction shows a full and perfect understanding on their part, that their liability was to be precisely that which is sought to be enforced in this suit.
We are, therefore, of opinion that the by-law was valid; and that the court below properly charged the jury that it was a contract to which the defendants below were parties, and for this reason binding upon them.
6. It is also contended that the court below erred in rejecting the evidence offered in defence of the action. The facts which the defendants below offered to prove, were, that the annual meeting of the stockholders of the corporation, regularly called for purpose of electing officers, *140and held January 6, 1841, was adjourned without day, and that no officers were elected, or any other legal business done at said meeting; — that from that time to the commencement of this suit, no legal meeting of the company had been held ;• — and that, during the whole of this period, the company had been insolvent, and had neglected and refused to pay their debts. The evidence, it is claimed, would have prevented a recovery by showing a dissolution of the corporation.
The charter expressly provides that the first directors of the corporation should remain in office for the period of one year, or until others were chosen. § 3. And also, that if it should at any time happen that an election of directors should not be made on any day when, pursuant to the act, it ought to have been made, the corporation should not, for that cause, be deemed to be dissolved; but it should be lawful, on any other day, to hold and make an election of directors, in such manner as shall be directed by the by-laws of the company. § 5.
In Slee v. Bloom, 6 John. Ch. R. 366, it was held that a corporation, whose charter contained a provision precisely like the above, was not dissolved by an omission to elect trustees, for more than two years, while the members constituting an integral part of the corporation remained in esse; but the old trustees continued in office until others were elected in their stead. And it seems to be the better opinion, that such would be the case, without any such express provision in the charter. Ang. & Ames on Corp. 77 ; 2 Kent’s Com. 295, and cases there cited. This seems to have been the opinion of the court in the People v. Runkle, 8 John. R. 464. At all events, if, after a failure to elect new directors, the old directors should continue to act, no objection could be taken collaterally, that they were not regularly elected at the proper time, or that the corporation was dissolved by reason thereof. The mem*141bers of the corporation, who are an integral part thereof, may still elect new officers, and continue their business ; and, in an action on a contract made with the corporation, such an objection cannot be available to defeat a recovery. The corporate powers must first be declared forfeited by a proper adjudication, in proceedings had for that express purpose. Ang. & Ames on Corp. 77, 510; Silver Lake Bank v. North, 4 John. Ch. R. 373; Trustees of Vernon Society v. Hills, 6 Cow. 23.
Applying the principles established by the authorities last cited, it is clear that the evidence offered to prove the insolvency of the corporation, was likewise inadmissible. For, although such insolvency might be a ground for adjudging the corporate rights forfeited, in proceedings against the corporation for that express purpose, yet it cannot be inquired into collaterally, in an action brought by the corporation.

Judgment affirmed.

 The following case having some bearing upon this point, was decided by this court at the January Term, 1841. Present — William A. Fletcher, C. J. and Morell, Ransom, and Whipple, Justices.
D. W. Owen and I. Owen v. The President, Directors and Company op the Farmers’ Bank of Sandstone.
On plea of the general issue to an action by a corporation upon a note made papable to the corporation, the plaintiffs must prove their corporate existence.
Error to Lenawee Circuit Court. Assumpsit by defendants in error, against the plaintiffs in error, upon the following note:
“$700. Sandstone, January 27, 1838.
“ Two months after date, we, or either of us, promise to pay the President, Directors and Company of the Farmers' Bank of Sandstone, seven hundred dollars, for value received.
(Signed)

Derrick W. Owen,

Isaac Owen."

The defendants below plead the general issue, and gave notice of set off.
On the trial, the plaintiffs below submitted the cause to the jury without offering any evidence to prove their corporate existence. The counsel for the defendants in sisted that such evidence was necessaiy to entitle the plaintiffs to recover, and re quested the court so to instruct the jury. The court refused so to do, but charged “ that the defendants, by making their note payable to the plaintiffs, by the corporate name assumed in the declaration, had admitted their existence as a corporation, by that name, and were estopped from denying their right to recover as such corporation; and that, therefore, it was not necessary for them to prove their corporate existence.” To which charge the defendants excepted, and a verdict having been found, and judgment thereon rendered against them, removed the record into this court, by writ of error and bill of exceptions.
Ransom, J. delivered the opinion of the Court. We are satisfied that the court below erred in charging the jury that the plaintiffs below need not prove their corporate existence. In the case of the Bank of Utica v. Smalley, 2 Cow. 778, where the subject received a pretty full consideration upon argument and authorities, it was held by Judge Sutherland, delivering the opinion, “ that where a corporation sues, they need not set forth by averment in the declaration how they were incorporated, but that, upon the general issue pleaded, they must prove that they are a corporation,” and many adjudged cases are cited in support of the position. In the case of Williams v. The Bank of Michigan, 7 Wend. 540, the doctrine upon this subject was again considered, and thoroughly sifted. There appears to have been some diversity of opinion upon this question, but the preponderance of authorities seems to be greatly in favor of the position, that plaintiffs, suing as a corporation, should prove affirmatively, that they were a corporation having power to make the contract on which their suit is brought. In delivering his opinion in the case last cited, the Chancellor remarks, that, “ there is no doubt that, by the common law in England, and the settled law of the state of New York, if a suit is brought by a corporation, they must, on the general issue pleaded, show that they are a corporationand a number of cases, both English and American, are referred to in support of that position. When the plaintiffs sue as partners, or as an unincorporated association, and declare upon *135a contract made by the defendants directly to them, in the name of their firm or association, upon the general issue pleaded, it is clear that they would be bound to prove the existence of their partnership, or association. From analogy it would seem, surely, that the same rule should apply to corporations 5 more especially to the banking institutions created under our general banking law.

Judgment reversed.