Court Opinion

ID: 6957434
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:39:52.67877+00
Date Added: 2024-06-11T16:08:19.664595
License: Public Domain

Mr. Justice Sheldon delivered the opinion of the Court: The question here presented is, whether there was a corporation, and the property involved had become corporate property. There clearly was no corporation on the 10th of August, 1870, or until the 12th of November, 1870, the time the license was issued. A corporation can not be constituted by the agreement of parties. It can only be created by or under legislative enactment. The third section of the act relating to the formation of manufacturing, etc., corporations (Laws 1857, p. 161), provides that, “'when the certificate (described in the first section) shall have been filed as aforesaid with the clerk of said court, and a duplicate thereof filed in the office of the Secretary of State, the said clerk shall issue a license to the persons who shall have signed and acknowledged the same, on the reception of which they and their successors shall be a body corporate and politic, in fact and in name, by the name stated in such certificate,” etc. The certificate here was signed and acknowledged August 10, 1870, but it was not filed in the office of the Secretary of State until October 5, and in the office of the circuit clerk November 11, and the license was not issued until November 12, 1870. The signers of the' certificate did not become a body politic and corporate, under the statute, by the malting of the certificate, but it was only upon the reception of the license that there could have been a corporate existence. Stock is essential to the existence of a manufacturing corporation, under the statute. The integral parts of such a corporation are at least three stockholders. Section four of the act referred to provides that “the affairs of such company shall be managed by a board of not less than three nor more than seven directors, who shall be stockholders therein, and who shall, after the first year, be annually elected by the stockholders,” etc. There was here no stock hook opened, no stock issued, and, as we regard it, no stock subscribed for or taken in the corporation. There is no pretense of any subscription for stock, more than the written agreement of August 10, 1870, and appellees’ counsel insist upon that as a stock subscription. That agreement, so far as it relates to stock, is evidently all executory, to take and put in stock at a future time. It does -not purport that the parties thereby take or put in any stock. An undertaking to subscribe a certain amount of stock when books shall be opened, does not make the subscriber a stockholder, liable to calls. Thrasher v. Pike County Railroad Co. 25 Ill. 393. The agreement is a mutual one, between three persons, containing various provisions and stipulations, each one’s agreement being in view of all the several provisions being carried into effect as therein designated. This agreement could not be binding upon the subsequent corporation to be formed under the statute. Stowe and Mathewson did not agree to take, respectively, $25,000 and $10,000 of stock absolutely, but the former was to put in his machinery, tools, etc., as stock, for $25,000 stock in the company, and Mathewson was to transfer his patents, etc., at the sum of $10,000 stock in the conypany. The twelfth section of the act provides that nothing but money shall be considered as payment of any part of the capital stock of any such company, except real estate and personal property necessary to carry on the business of the company, which shall be received as payment only at a cash valuation, to be. fixed by the appraisement of two disinterested persons, etc. Flow, supposing the corporation, when it has occasion to act with reference to stock, should follow the statute, and only take the property at its-appraised value, which should be less than the arbitrary values fixed upon it in the agreement. Clearly the parties would not be bound, by the agreement, to put in their property at the appraised value. The same may be remarked as to the building and land to be put in as stock by Flagg. This agreement, too, assumes to appoint the parties to it officers in the company for one year, such as president and treasurer, superintendent and manager, and agent, and to fix the amount of their salaries. Suppose the corporation should see fit to choose its officers, and other ones, for itself, or to diminish these salaries, would, then, the agreements as to stock be obligatory? Ho action whatever with regard to the subject of stock has been had since the making of the agreement. Under section nine of the act, stockholders are liable to the extent of their stock. How much stock have the parties, and especially Flagg? He has evidently the chief interest in the concern. The agreement does not fix the amount of the stock he was to take, nor has it been ascertained as yet, according to the agreement or otherwise, what his stock would be. We can not regard this agreement of August 10 as a subscription for stock. Ho one, by the agreement, was to put in any cash stock, except Flagg $10,000; but he seems to have actually put into the company as stock no money or anything else. Hathewson testifies, that whatever money Flagg ever paid in was all credited to Flagg’s account, as money loaned to the company. He did not understand that Flagg ever paid in any money as on his stock. On filing his answer, Flagg tendered with it, for the company, his warranty deed for the land and buildings, but never before. The testimony shows that Flagg did not carry out the contract fully in respect to completing the buildings within the time agreed upon, and this was a cause of difference between him and Stowe. It was claimed by Flagg, that the sum at which Stowe -was to put in his machinery, tools, etc., was too high; that the latter made false and fraudulent representations as to their value, they not being open to inspection at the time, and that their true value was not to exceed $15,000. These subjects of dispute, existing in regard to the performance of the agreement, further go to show the impropriety of regarding such an agreement as an actual subscription for stock, and that there was a necessity of a future adjustment, in order to ascertain the amount of the stock which was to be subscribed for. All seems to have been done under the articles of association of August 10, and before there could have been corporate existence by virtue of the issue of the license Bovember 32. The by-laws were adopted and the officers elected previously; the transfer of property which Stowe made was August 35, and though business was subsequently carried on under the name of Empire Machine Works, that name had been adopted and used prior to August 10. A certificate was made and filed and a license procured, and no further action would appear to have been taken in a corporate capacity. In our view, the property here involved has never been changed into corporate property, but belongs to these parties as an association of individuals under their written agreement of August 10, 1870, and we are of opinion the appellant is entitled to maintain his bill for relief. The decree will be reversed, and the cause remanded for further proceedings. Decree reversed.