Court Opinion

ID: 8634536
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:43:02.256078+00
Date Added: 2024-06-11T16:55:53.181435
License: Public Domain

NELSON, District Judge.
Upon the application of John Kausal to be substituted in the place of the petitioning creditor, who failed to appear on the return day of the order to show cause, the debtor filed an answer denying the allegations made that he is a creditor, and has also in form denied the acts of bankruptcy charged in the original petition on file. The right of substitution must be established before the debtor can be required to try the questions presented by a denial of the acts of bankruptcy, and the court has proceeded summarily to hear the allegations of the creditor and the debtor in order to determine that issue.
Without elaborating the questions raised by the evidence, I have arrived, after an examination, at the following conclusions: What is the status of the association of which the debtor is a member? I feel less delicacy in deciding this question, from the fact that no act of the legislature of the state of Minnesota, in my opinion, exists, which can be invoked to sustain the claim made in the debt- or’s, answer, that the articles of association created a corporation. I am, therefore, led to the conclusion that the articles executed by Mendenhall, Baldwin and Murphy, December 18th, 1865, on file in the office of the secretary of state of Minnesota, entitled: “Articles of the State Savings Association,” did not authorize the exercise by said association of any corporate rights, by virtue of sections 56 and 57, c. 17, p. 286, Comp. St. Minn., and it is a misnomer to call it a corporation.
This is not a case where there have been defects in the proceedings taken to perfect the organization of a corporation, or an abuse of corporate rights, and an attempt made to take advantage of them by objection in a collateral proceeding. The point is raised upon the face of the articles of association, and the doctrine of estoppel urged does not apply; the utmost that can be claimed for these articles is, that the onus probandi is thrown.upon the creditor to show that they do not create a corporation.
True, the facts show that Kausal had dealings with the association by the name designated and claimed in the articles to be its corporate name, still he is not thereby estop-ped from showing that it had no. legal corporate existence. Even upon the strict rule contended for by the respondent’s counsel, in regard to which the authorities are by no means agreed, it was necessary for this association assuming to act in a corporate capacity to show itself to be a corporation de facto as against persons who have had dealings with it Simply showing that it had acted as such for any period of time, however long, is not sufficient. Some law, under which a corporation with the powers assumed might be lawfully created, must be shown in addition to mere user, before it can be said to exist as a corporation de facto.
The authorities cited to sustain the doctrine of estoppel in this case, relate to bodies exercising corporate powers and existing as corporations de facto within the rule above laid down. It cannot be maintained successfully that the act of the legislature authorized any such corporate capacity as is claimed here. This court, therefore, is not required to regard this association, so far as third persons are concerned, as a corporation until it shall have been otherwise decided by judicial proceedings properly instituted.
From the views above expressed, this is apparent, for there is no existing corporation de jure or de facto. Having at the outset decided that this association did not become a corporation under the laws of the state, it does not follow that the creditor has no remedy for a recovery of his deposit, because he dealt with it in its assumed corporate capacity. Not being clothed with any corporate franchises, its individual members cannot escape pecuniary responsibility by taking refuge behind any supposed privilege or sane-*12tity conferred by its efforts to become a corporation, and any creditor can treat it as a partnership, bolding the members thereof personally liable for all acts done within the scope of the partnership.
It is fairly established by the testimony, I think, that previous to the deposit in the association by this creditor, Murphy and Baldwin had withdrawn, and the debt was due him from Mendenhall. He therefore has a right to be substituted in the place of the original petitioner, and the court must proceed to adjudicate on such petition.