Hughes v. Antietam Manufacturing Co.

Robinson, J., delivered the opinion of the Court. This is an action of assumpsit by the appellee, claiming to have been incorporated in pursuance of the 40th section of Article 26, of the Code of Public General Laws, to recover certain unpaid instalments, alleged to be due on the subscription of the appellant to its capital stock. The following is a copy of the recorded certificate, to which the subscription is affixed: “ The undersigned, free white citizens of the State of Maryland, desiring to form a company for the purpose of manufacturing, under the name and style of the Antietam Manufacturing Company of Washington County, have fixed the capital stock of said company at §150,000; said capital stock shall consist of five hundred ³²² shares, at $100 per share, the term of existence of said company or corporation not to exceed the term of forty years. The company shall be managed by a president and ten directors for the first year.

In testimony whereof we have each subscribed for the number of shares set opposite our names.” To which is affixed the subscription of the appellant, for fifty shares, five thousand dollars. This recorded certificate was offered in evidence to prove the incorporation of the appellee, and its admissibility for that purpose is objected to on the ground that it does not comply with the requirements and conditions precedent, prescribed by section 40, Article 26 of the Code. It becomes necessary, therefore, to determine what are the requirements and conditions prescribed by the statute. Section 40 provides that: “Any five or more free white persons, who may desire to form a company for the purpose of carrying on any manufacturing business, may make, sign and acknowledge, before some officer competent to take the acknowledgment of deeds, and record the same in the office of the clerk of the Circuit Court for the county * * * a, certificate in writing, in which shall be stated the corporate name of the company, the corporate name always to include the name of the county or city in which the business is carried on, the amount of the capital stock of said company; the term of its existence not to exceed forty years, the number of shares of which said stock shall consist, the number of trustees, directors or managers, &c., who are to manage the affairs of the company for the first year,” &c.

The certificate in this case is claimed to be defective' in many essential particulars; and first, because it does not appear upon its face to have been acknowledged before the justice of the peace by all of the subscribers. This, however, is not required by the statute; on the contrary, it expressly provides, that “ any five or more persons ” * * * “ who may make and acknowledge a certificate in writing,” &c., * * * “shall be a “ body politic and corporate.” The acknowledgment, therefore, by all of the subscribers, is not a ³²³ condition precedent, nor can the refusal of one or more deprive those who do join in the acknowledgment, from claiming the right of incorporation, provided they be five or more in number. Such a construction is neither sustained by the spirit nor letter of the Act. The certificate in this case does appear upon its face to have been acknowledged by five persons, and if the proof on this point be confined to the record copy solely, a question which we are not to be understood as deciding, we are of opinion the objection to it on this ground cannot be sustained.

Then again, it is said the amount of the capital stock and the number of shares are not stated with sufficient precision and accuracy. This objection, however, cannot apply to the capital stock, because it is fixed at $150,000, nor to the value of the shares, for it is fixed also at $100 per share; but the fatal error insisted on is in stating the number of shares to be five hundred. This is a mistake, however, apparent on the face of the certificate itself, because, if the coital stock is fixed at one hundred and fifty thousand dollars, and the value of the shares at one hundred dollars each, it follows, as a matter of course, that the whole number of shares must be fifteen hundred, and not five hundred as stated. Such an error could not certainly deceive or injure any one — the subscription of the whole capital stock, at a fixed value per share, would necessarily determine the aggregate number of shares.

But it was further insisted, that 'the particular trade to be carried on by the company ought to have been stated in the certificate. But no such requirement is prescribed by the 40th section under which the appellee was organized. It does provide that the corporate name of the company shall be stated, which name shall always include the county where the business is carried on — -not that the particular trade shall be stated or affixed to the name. We cannot understand why such a requirement should be considered as an indispensable condition precedent, for although a name is necessary in order to identify and distinguish the corporation, by which it may ³²⁴ sue and be sued, be known as grantor and grantee, and perform other acts incident to its corporate existence, it must be admitted that “the Antietam Manufacturing Companyjof Washington County,” the name by which the appellee is designated in the certificate, is sufficient to answer all of these purposes.

But again, it is said the recorded certificate does not show affirmatively on its face, that the president and directors therein named, to manage the affairs of the company for the first year, were parties to the acknowledgment of the same before the justice of the peace, prior to its being recorded. This qualification, however, is not required by law. .The 43d section provides that they shall be stockholders — not that they must have signed or acknowledged the certificate, and inasmuch as it appears from the original certificate offered in evidence to prove the appellant’s subscription, for which purpose it was clearly admissible, that they were stockholders, this objection cannot be sustained. "We think, also, the term of years, not to exceed forty years, is sufficiently definite. As used in this certificate, it means, and is to be understood as creating a term for at least forty years, the limit prescribed by the statute.

These objections seem to us to be more technical than sound. The policy of the law, as plainly indicated by the several provisions of the general corporation act, is to encourage the formation of these and other like companies, in order that not only the subscribers, but the public, may share the advantages, supposed to flow from combined capital and labor; and whilst the requirements of the law are to be fairly 'and substantially complied with, the rights and franchises of corporations and the interests of stockholders are not to be frittered away by technicalities, nor sacrificed to a strained construction of the statute. Assuming then, in a suit brought to recover a subscription made prior to and in contemplation of being incorporated, it is necessary for' the appellee to prove its corporate existence, and ³²⁵ such undoubtedly is the law in this State, we are of opinion that the recorded certificate substantially complies with the requirements of section 40 of Article 26, and was therefore admissible in evidence for that purpose. The question then as to whether the original certificate could be offered to show that the acknowledgment of other subscribers had been omitted in recording the same, becomes immaterial.

The right, however, of the appellee to maintain this suit, is further denied on the ground that the law under which it was incorporated, does not require or contemplate any subscriptions prior to the factum of incorporation; and a subscription thus made was supposed to stand on a different footing from one under ail Act of incorporation by the Legislature, which provides for the taking of subscriptions by commissioners or persons named in the Act. In the one case it was said, there was a party in esse competent to make and receive a promise; in the other, certain conditions precedent were to be performed before the corporate existence is completed. If, however, this objection be sound, it applies with equal force to a subscription made in contemplation of a charter by the Legislature, for in such a case the organic life is derived through the statute, and until it is passed, the proposed company may be said not to have any existence. And yet it is well settled, that subscriptions thus made are binding and may be enforced after the charter is granted by the Legislature.

If so, where is the distinction in principle between the binding force of such a subscription, and one made in contemplation of being incorporated under a general corporation law. In each easel the contract is made by the subscribers with each other, the; consideration of which is the right to a given number of^ shares upon the incorporation of the company, whether it bei under a special or a general Act of the Legislature. And hence in the several States where this question has arisen upon subscriptions to a certificate or articles of association, formed for the purpose of being incorporated under a general corporation law, it has been held that such subscriptions arc ³²⁶ binding and may be enforced after the organization of the company. In Staunton, President of the Exchange Bank, vs. Wilson, 2 Hill, 153, where the defendant signed articles of association, and subscribed prior to the incorporation, it was held that this fact constituted no objection to the recovery. “It is true,” say the Court, “ the company did not come into existence till several months after the defendant’s subscription purports to have been made, and the power of the president to sue did not arise until that time.

The contract, though dated before, must be considered as taking effect only from the 1st of January.” And in the Hamilton and Dearsville Plank Road Co. vs. Rice, 7 Bar., (N. Y.,) 157, where the subscription was made also to articles of association, the Court said: “ We think too that the fact that the corporation was not in esse when the agreement was signed, is not of itself a sound objection to the right of maintaining an action upon it.” See also Tonica and Petersburg R. R. Co. vs. McNeely, 21 Illinois, 71; Johnston vs. Ewing Female University, 35 Illinois, 518, and Heaston vs. Cincinnatti and C. R. R. Co., 16 Ind., 275 . The objection that the subscription was made prior to the incorporation of the appellee cannot therefore be sustained. But conceding the validity of the subscription, it is contended that an action of assumpsit will not lie, because it does not contain an express promise to pay, and that the only remedy against the delinquent subscriber is by a forfeiture and sale of the stock under the 45th section. It may be true, that an express promise in so many words, may not be found in the subscription, but it was made for a given number of shares and at a fixed money value, and when construed in connection with the law under which the company was to be organized, we are very far from admitting it does not amount to an express promise to pay for the shares in the manner and upon the conditions therein prescribed.

The purpose of the appellant and his co-subscribers in signing the articles of ³²⁷ association and subscribing for a given number of shares, was to organize a company and furnish capital sufficient to carry on the manufacturing business, from the successful prosecution of which they expected to realize a profit on the money thus invested. To this end property was to be purchased, materials bought, labor performed, and debts incurred, and these could only be done and accomplished by the payment of the stock subscribed. Forfeiture and sale of the shares might fail to realize the means necessary to