Camp v. Byrne

Corporations — Powers—Members—Estoppel.—A corporation cannot foe organized nor act without the limits of the jurisdiction of the State creating it. All votes and proceedings of persons professing to act in the capacity of corporators, when assembled beyond the bounds of the State granting the charter, are wholly void; but a subscriber to the stock of a corporation ' thus illegally organized, who has given his note for the amount subscribed, may by his acts be estopped from denying the legal existence of the corporation, when sued by a bona fide endorsee for value before maturity.

Appeal from St. Louis Circuit Court. Defendant asked the following instructions, which were refused: 1. The defendant asks the court to instruct the jury, if they believe from the evidence in this case that the defendant Byrne’s signature to the notes sued on was obtained by false and fraudulent representations of any persons acting or assuming to act as the agents of the St. Louis, Cairo and Johnsonville Packet Company, and that the plaintiff Camp had notice of the same, direct or indirect, sufficient to put a man of ordinary business prudence on his guard, they will find for the defendant, notwithstanding plaintiff may have obtained said notes for value before maturity. 2. Although the jury may believe that a charter was granted by the Legislature of the State of Tennessee by which a corporation was to be (to have been) created to be called the St. Louis, Cairo and Johnsonville Packet Company, such act did not authorize the corporation or stockholders to assemble beyond the limits of the State of Tennessee for the pui'pose of organizing, electing directors and accepting the said charter; and if the jury believe from the evidence that the first meeting of the stockholders of such corporation was held at St. Louis, in the State of Missouri, then the proceedings of that meeting, and all other meetings outside of the limits of the State of Tennessee, were wholly void and without authority of law, and the jury will find for the defendant Byrne. 3. That unless the jury believe from the evidence that the plaintiff Camp obtained the notes sued upon for value before maturity, and, without notice of the facts set up as a defence by the defendant Byrne, that he took the same subject to the same defence that the defendant Byrne would have had against the St. Louis, Cairo and Johnsonville Packet Company ; and if the jury further believe from the evidence that the notes sued upon were obtained in the first place by fraud of any agent or officer of the said company, or that the consideration thereof had failed, or that the same were obtained by false representations of C. J. Caffrey, then the plaintiff cannot recover, and the jury will find for the defendant. 4. Unless the jury believe from the evidence that the St. Louis, Cairo and Johnsonville Packet Company is a corporation chartered by the State of Tennessee, and that the corporators and stockholders thereof had accepted said charter, and proceeded, under its provisions, to organize such corporation by the election of directors at a meeting of the stockholders held within the limits of the State of Tennessee, and that, before proceeding to transact business as a corporation, the capital stock to the amount of three hundred and fifty thousand dollars had been subscribed and paid in, then the said St. Louis, Cairo and Jolmsonville Packet Company never had any legal existence, eould not make a contract with the defendant as a corporation, and could not make a lawful transfer of the notes sued upon to plaintiff so as to enable plaintiff to maintain this action. 5. If the jury believe upon the evidence that the said notes were obtained from the defendant by the said C. J. Caffrey, without giving the said defendant value or a consideration for the same, and that the plaintiff had' notice of such fact before he negotiated the notes, they should find for the defendant. 6. If the jury believe upon the evidence that the two notes, the subject-matter of the present action, were among others given to plaintiff with instructions from the company to collect the amount and apply the same in payment of the notes-of the said company, they should find for the defendant. The court gave, at the motion of plaintiff’s counsel, the following instructions, which were excepted to by the defondfendant, to wit: 2. The jury are instructed that the notes sued on are negotiable promissory notes, and that the plaintiff is entitled to recover, if they shall believe that the notes were negotiated with plaintiff before maturity for value, without notice, all of which must be presumed to be the case until the contrary is made to appear by evidence. 4. The jury are instructed that, after the defendant has made his notes (sued on) payable to the order of the St. Louis, Cairo and Jolmsonville Packet Company, and delivered them to the company, he is precluded from afterwards denying that the company has power to negotiate the same. 5. The jury are instructed that, if they believe that the notes sued on were transferred before maturity to plaintiff for value, then he has a right to recover, unless he had notice prior to receiving the same that the consideration had failed, or some notice that the defendant objected to their negotiation. And, of its own motion, the court gave the following instruction, excepted to by defendant, to wit: “ The jury are instructed that, if they find for plaintiff, and against defendant Byrne, they will assess the damages against both defendants at the amount of said notes, with interest from maturity at the rate of six per cent.; that, if they find for defendant Byrne, they will so state in their verdict, and. assess the damages in favor of plaintiff against the St. Louis, Cairo and Johnsonville Packet Company at the amount of said notes, with interest from maturity at the rate of six per cent, per annum." And, at the motion of defendant’s counsel, the court gave the following, modified by the court by the addition of the words “at or prior to the time said notes were transfei'red to him," to wit: “ If the jury believe from the evidence that the consideration of the notes sued upon has failed, or that the same were obtained by false representations, or that the transfer of the said notes was made by a person having no authority to transfer the same, they will find for defendant; provided, they further believe that plaintiff had notice thereof 1 at or prior to the time said notes were trcmsferred to him.’ " I. Under the act organizing the St. Louis Circuit Court, a motion to strike out or reform a pleading should be determined by the court in general term. It is improper for this court in special term to strike out, on its own motion, the same parts of a pleading previously passed on at general term, after the jury bad been sworn and the issue joined, without notice to parties. — G-. S. 1865, §§ 10 & 11, p. 889, §§ 8,15, 23, ch. 168, pp. 670-2. II. A negotiable note or bill of exchange will be void in the hands of an innocent holder when it is founded in fraud, or duress, or imposition, or circumvention, or taking undue advantage of a party. — Sto. on Bills, § 185 ; Chit, on Bills, pp. 21,83,84; Bail, on Bills, p. 143, par. 2, 5 ed.; id. pp. 56, 57, par. 6 ; Duncan v. Scott, 1 Camp. 100 ; Rees v. Marquis of Headford, 2 Camp. 574; Grew v. Bevan, 3 Stark. 134; City Bank of Columbus v. Phillips, 22 Mo. 85; 1 Pars. Bills, 276, 277. III. A contract obtained for a corporation by the fraud of its agent is void; not merely voidable, but void ab initio. —Ang. & A. on Corp. § 309, p. 357 ; Crump v. U. S. Mining Co., 7 Grat. (Va.) 352; Denny v. Kyle, 16 Mo. 450 ; Scott v. DePyster, 1 Edwds. Chan. 513; Hibernia Turnpike Co. v. Henderson, 8 S. & R. 219. IV. Any person who deals with a corporation is not excused for ignorance of public acts limiting its corporate powers, and a person who purchases notes given to a corporation as subscriptions to its stock, knowing them to be so given at the time he takes them, is presumed to have notice as to whether such corporation has ever so perfected its corporate existence as to be able,to enforce its subscriptions. — Ang. & A. on Corp. § 291-299; Att. Gen. v. Life & Eire Ins. Co., 9 Paige Chan. 470; Valkv. Crandall, 1 Sand. Chan. 179; Williams v. Chester & Holyhead R.R. Co., 5 Eng. L. & E. 503 ; Wyman v. Hallowell &ioigustaBk.,14 Mass. 58; Salem Bk. v. Gloucester Bk., 17 Mass. 29; Hartford Bk. v. Barry, 17 Mass. 97. V. In order to acquire such existence as will enable the corporation to enforce its subscriptions, the charter of such corporation must be accepted, and conditions precedent must be complied with, according to the terms of such charter. — ■ Red. on Rail., §§ 15, 51; Ang. & A. on Corp. §§ 83, 95, 112 ; 232, 229, 239, 253, 291; 2 Kent O. 293 et seq.; Hibernia Turnpike Oo. v. Henderson, 8 Sarg. & R. 219, 224. YI. The capital stock is a trust fund for creditors, and must be paid in before the corporation can enforce subscriptions, or acquire such vitality as can enable them to make and enforce contracts where the amount of such capital stock is limited by charter. — Fire Dept. v. Kip, 10 Wend. 266 ; Ang. & A. on Corp., 600 ; Wood v. Dummer, 3 Mason C. O., 308 ; Cooper v. Frederick, 9 Ala. 742; Bk. of Natchez v. Chambers, 8 Miss. 49; State v. LaGrange & M. R.R. Co., 9 Humph. (Tenn.) 448; 1 Amer. Law Mag., 103; Red. Rail., §§ 18, 51; King v. Elliott, 5 Sm. & Mar. 428. VII. Unless a corporation be organized within the State granting its charter, all acts, votes and proceedings of stockholders and directors chosen at meetings assembled outside of the limits of such State, and not in conformity to the charter of such corporation, are wholly void, and persons elected at such meeting’s so held, without regard to their charter, to act as officers of such corporation, derive no authority to act as such corporation. — Ang. Corp., §§ 104,161, 274,265, 291, 403,466 (a), 521, 543, 498, 633; 7 Grat. (Va.) 352 ; Green v. Seymour, 3 Sand. Cli. 285; Root v. Goddard, 3 McLean’s C. C. 102. VIII. A corporation organized in Missouri, in order to acquire actual and valid legal existence as a body corporate, must be either chartered by a special act of the Missouri Legislature or formed under the general statutes of the State. — G. S. 1865, ch. 62. IX. Although corporations created and chartered by the laws of another State may be represented by agents within this State, yet the corporation itself has no power to migrate to this State. — Miller v. Ewer, 14 Shep. (Me.) 509 ; Bk. of Augusta v. Earle, 13 Pet. (U. S.) 586 ; id. 122 ; Tatum v. Wright, 3 Zabr. 429. X. A person contracting with a corporation is not thereby precluded from denying the legality and binding effect of its subsequent proceedings, unless he participated in such acts. —Smith v. Heidecker, 39 Mo. 163, and cases above cited. XI. The doctrine of estoppel to deny the legal existence of a corporation, by having contracted with it by its name, does not apply, unless such corporation has been actually' created by law. In the latter case, a person contracting with such corporation may be estopped from disputing the corporate existence, but may question the authority of its agents to act outside of the powers conferred by such charter, and disputing the authority of an agent is not a denial of the existence of such corporation. — Oldtown & Lincoln R.R. Co. v. Veazie, 39 Me. 571. XII. The general principle that a‘person who has executed a promissory note payable to a coi’poration, is not allowed to call in question the corporate capacity of such corporation, does not apply to the maker of a note who has been induced to give his signature to such note by fraud. — Ang. Corp. § 309; Root v. Goddard, 3 McLean’s C. 0.102; Crump v. IT. S. Mining Co., 7 Grat. (Ya.) 352; Fairfield Co. Turnpike Co. v. Thorpe, 13 Conn. 173; Denny v. Kyle, 16 Mo. 450. XIII. The maker of a note payable to a corporation may resist its payment in the hands of an endorsee, to whom such note may have been transferred by persons not legally authorized under its charter to make such transfer. — Ang. Corp. § 393 ; 2 Hare Oh. 461; Plalito v. Mer. & Man. Ins. Co. of St. Louis, 38 Mo. 255, and Head v. Prov. Ins. Co., 2 Cranch, 168 ;v Simon v. Randall, 3 M. & Craig Ch. 444 ; Hodgson v. Copeland, 4 Shep. (Me.) 314 ; Smith v. Hurd, Mete. (Mass.) 371. XIV. To make the transfer of a note from a corporation valid, such transfer must be made by a person having authority under the charter and by-laws of the corporation to make such transfer, and persons dealing with a corporation must take notice of the extent of the authority of its agents. —Ernest v. Nichols, 30 Law Times, 45; 6 House of Lords Oases, 418, decided in Aug., 1857 ; Ridgley v. Kingsbridge Flour Mill Baking Co., 2 Excli. 711; Salem Mill Dam Co. v. Ropes, 6 Pick. 23, affirmed in 9 Pick. 187; Worcester & Nashua R.R. Co. v. Hinds, 8 Cush. (Mass.) 110; Red. Rail., p. 697, note a.; Mechanics’ Bk. v. Schaumburg et al., 38 Mo. 243.