Court Opinion

ID: 8185416
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:07:50.491874+00
Date Added: 2024-06-11T16:40:23.873807
License: Public Domain

Mabshall, J.
The first question to be determined is, To whom did plaintiff contract to sell the paper? In determining that question, the date when the Times Printing Company became á corporation competent to contract, as such, •is important. Sec. 1772, E. S., provides that the articles of organization, or a yerified copy thereof, “ shall be recorded by the register of deeds of the county in which such corporation is located; and no corporation shall, until such articles be so left for record, have legal existence.” Sec. ■1773, E. S., provides that, “ until the directors or trustees shall be elected, the signers of the articles of organization shall have direction of the affavrs of the corporation,” and that “ no such corporation shall transact business with any others than its members, until at least one half of its .capital shall have been duly subscribed, and at least twenty per centum thereof actually paid in; and if any obligation shall be contracted in violation hereof, the corporation offending shall have no right of action thereon; but the stockholders then existing of such corporation shall be personally liable upon the same.” It is hardly possible that one can mis*149understand the plain meaning of these provisions. Clearly, the Times Printing Company became a corporation on the 5th day of September, 1893, the day the articles of organization were filed for record in the office of the register of deeds for Milwaukee county. Erom that day till October 6, 1893, the signers of the articles, D. 8. Bose, Clarence L. Clark, and Peter Mulholland, had lawful authority to manage its affairs. During that time it was capable of contracting obligations in its corporate capacity, subject to the statutory disability respecting the enforcement of the same, but liable, nevertheless, thereon, and its stockholders existing at the time of the making thereof personally liable as well.
It follows that the Times Printing Company, as a corporation, had lawful authority on the 27th day of September, 1893, to contract with plaintiff for the paper. On that day its agent testifies that he sold the paper to such corporation, and with knowledge that, though incorporated, it had not yet been organized. The evidence clearly shows that, prior to that time, and thereafter till the 6th day of October, 1893, the signers of the articles of organization, represented by Clark as manager, were active in promoting the corporate enterprise, and preparing to publish the paper as soon as the organization of the corporation could be perfected, and that the material in question was contracted for in furtherance of the general plan in which the corporators were engaged:. The question of ratification was argued at considerable length by counsel to show that the obligation to pay for the paper became the contract of the corporation by ratification subsequent to its organization, though it is not claimed that there was any act of ratification other than by using the paper; but, in our view of the case, no ratification was necessary to make the contract with the plaintiff that of the corporation. But, conceding that there was a ratification as claimed, it was of a contract theretofore made, in the name of and for the benefit of an existing corporation, by one who *150assumed to act as its manager; hence such ratification would relate back to September 27, 1893. Ratification presumes power on the part of the ratifier to have made the contract in the- first instance. McArthur v. Times Printing Co. 48 Minn. 319. Counsel for plaintiff seeks to make the contract that of the corporation upon the theory of adoption, instead of ratification, strictly so called. There is abundance of authority to support such doctrine when applied to contracts for the benefit of projected corporations. McArthur v. Times Printing Co., supra; Pittsburg Mining Co. v. Quintrell, 91 Tenn. 693; Thompson, Corp. § 5322. But the better view is that the corporation does not become liable after its creation, by “ ratification,” as the term is ordinarily understood, because ratification, as stated, presumes ability to contract at the time the unauthorized contract was made. Where there is no corporation in fact there cannot be any agent; hence the liability which the corporation incurs by adopting a contract made for its benefit before it had legal existence does not relate back to the unauthorized act, and make a contract as of that date, but the contract dates from the adoption of such act (Pratt v. Oshkosh Match Co. 89 Wis. 406), though no such case is presented here. When the obligation in question was incurred, the corporation was in existence. Clark and his assistants had absolute control of its affairs. The contract was made with the corporation through Clark, acting as its manager. It was within the scope of the business which the corporation was organized to conduct; hence whether Clark originally had authority to act from his associates or not, or whether the corporation became liable by subsequent ratification, such liability dates from the 27th day of September, 1893.
The foregoing renders it unnecessary to spend time considering whether there was a ratification by the corporation or not, in respect .to which counsel for both sides argued at considerable length in the briefs.
*151The only remaining question is, Were the defendants stockholders of the corporation at the time the contract was made ? It is alleged, in effect, that they were such stockholders, and ■on that the case turns. On the subject of when a person may be said to be a stockholder in a corporation there is some conflict of opinion, but it is nowhere held that one can become such without being the owner or holder of stock or .a subscriber therefor. If the defendants were stockholders, they were such by virtue of having merely signed a paper which bound them to take stock in a corporation to be formed. To be sure, the paper signed is in the form of a present subscription for stock, but all, or nearly all, the signers subscribed before the articles of organization were filed. All signed long before there was any corporate organization, and the paper expressly states that the subscribers ■subscribed for stock in a corporation to be formed. At most, it can only be said to have constituted an agreement to take stock. The mere signing of the paper did not make the signers stockholders. Much learning has been displayed respecting this subject by the text writers, and many adjudications exist in the courts of this country respecting just what the status is of a mere signer to such a subscription paper ■under such circumstances. The subject is treated in article 21 of Thompson’s Commentary on the Law of Corporations, under the title “ The Contract of Subscription,” commencing with sec. 1136. But all the authorities substantially agree that, until the subscription paper has been presented to the corporation and assented to by it, the signers are not stockholders. In Minneapolis Threshing Machine Co. v. Davis, 40 Minn. 110, the character of such a subscription paper was considered, and the conclusion reached that it was a binding contract between the subscribers to take stock and to pay therefor according to their respective subscriptions, and hence that they became stockholders at the instant such subscriptions were accepted by the corporation. Says Mr. Justice *152Stowe on the same subject, in Knox v. Childersburg Land Co. 86 Ala. 180: “ Such an agreement is in no sense a subscription to stock. Something more must be done before it can be affirmed that the subscription is a complete contract.” To the same effect are Athol Music Hall Co. v. Carey, 116 Mass. 473; Ashuelot B. & S. Co. v. Hoit, 56 N. H. 548; Buffalo & J. R. Co. v. Gifford, 87 N. Y. 294. In Waterman, Corp. (sec. 177), it is stated, in effect, that if a number of persons mutually agree to become stockholders in a corporation to be formed, their agreement is in the nature of a continuing offer, which offer, by acceptance, consummates the contract of membership and makes the subscribers stockholders. In McClure v. P. F. R. Co. 90 Pa. St. 269, the form of the subscription paper was that of a present subscription for the stock of an existing corporation. The court held, in effect, that,the subscribers became stockholders from the instant of the acceptance of a subscription by the corporation, not before. In Buffalo & J.R. Co. v. Gifford, supra, the form of the subscription was as follows: “We, the undersigned, in consideration of, and for the purpose of, becoming stockholders in the Buffalo & Jamestown Bailroad Company, do hereby subscribe and take the number of shares, of $100 each share, of the capital stock of said company set opposite our respective names, and agree to pay therefor,” etc. The subscriptions were obtained by one who afterwards became a director of the corporation so organized. The subscription paper was delivered to and accepted by the corporation, and the subscribers participated as such in the business of the corporation. The court held that the subscription was not valid to make the subscribers stockholders in the first instance, but that they became such by the acceptance of the subscription by the corporation. Decisions along this line could be multiplied at great length, but suffice it to say that no well-considered case can be found which holds that a mere agreement to subscribe for, or a subscription to, the stock of *153a corporation to be formed, will constitute the subscribers stockholders, and as all of the defendants were so circumstanced September 27, 1893, they were not stockholders existing at the date the contract was made, upon which this action depends, hence not liable thereon under the provisions of sec. 1773, R. S.
By the Cov/rt.— The judgment of the superior court is affirmed.