sufficiency and legal validity of the certificate of incorporation and public record of its organization. Railroad Co. v. Sullivant, 5 Ohio St. 276; Atkinson v. R. Co., 15 Ohio St. 21.

The case of Raccoon River Nav. Co. v. Eagle, 29 Ohio St. 238, is relied upon by the defendant in error. It was an action to recover upon a stock subscription. A plea of nul tiel corporation was interposed. The plaintiff claimed to be organized under an act to authorize the incorporation of companies "for the purpose of improving any stream of water declared navigable by any law of the state of Ohio." On the trial the plaintiff offered in evidence a certificate by which it appeared that the company was formed for the purpose of improving, etc., Big Raccoon river. Unfortunately there was no navigable stream in Ohio by that name. No other testimony was offered. There was no proof of user. There was no defect in the form of the proceedings to incorporate, but an attempt to organize and incorporate for a purpose impossible of accomplishment. There was neither a de jure nor de facto corporation. Judgment was properly rendered for defendant.

In excluding proof of what was actually done looking to the incorporation of Society Perun, and of the subsequent acts of user, which was offered in evidence, there was error, for which the judgment in the first entitled case (as well as that in the same plaintiff against Hay et al., which was tried with it and involved the same general questions) is reversed. Numerous other questions are presented by the voluminous records in these cases, but as they all depend upon the one central and controlling question discussed above, and as the disposition here made of the cases must lead to a retrial in the light of the principles indicated in this opinion, they are not separately considered.

Judgment reversed.

Note. See note at end of Cochran v. Arnold, infra, p. 629.

Sec. 163. (2) Reasons for not allowing a private party to attack successfully the validity of de facto corporate organization.

COCHRAN ET AL. v. ARNOLD ET AL.1

1868. IN THE SUPREME COURT OF PENNSYLVANIA. 58 Pa. St. Rep. 399-408.

STRONG, J.

*

The action was assumpsit brought against a large number of persons, charging them as partners in the purchase of cotton alleged to have been sold and delivered. The defendants were

1Argument omitted. Only part of opinion given.

40-WIL. CASES.

stockholders of a company called Conestoga Steam Mills, which claimed to have become a corporation in 1849, under the general manufacturing law of that year. In 1849 a certificate of association for corporate purposes was made out and recorded. It set forth all that the law required. It was entirely regular on its face. A certified copy of it was filed in the office of the secretary of the commonwealth. Ostensibly, the requirements of the law were fully met. From that time until after the cotton was sold, the corporation had, if not a legal, at least a de facto existence, and it carried on business as such. In November, 1856, the plaintiff sold a quantity of cotton to it and took the promissory notes of the corporation for the price, with a full knowledge of the mode of its constitution, and of what is now alleged to have been a failure to comply with the requisitions of the manufacturing law for the procurement of a charter. They now sue those who were stockholders of the company at the time the cotton was purchased, and claimed to recover against them individually, upon the ground that the original certificate for incorporation, though appar ently regular, was illegal and void, because it did not set forth that the capital paid in was at the time invested in mills, machinery and other property adapted to the purposes for which the corporation was proposed to be organized. This they contend renders the charter a nullity, and justifies them in treating the sale as having been made to the defendants as partners. The case rests therefore upon the assumption that, because the corporation was so irregularly constituted that the commonwealth might have called in question its legal existence, the plaintiffs may attack it and disprove its lawful being.

But the assumption is unwarranted. The plaintiffs are not at liberty to assert in this action that the corporation was not lawfully formed. Though formed under a general law, it is as against all the world, but the commonwealth, as completely and effectively a corporate body as if it had been created by a special act of assembly and by letters-patent. The act of April 7, 1849, prescribes what shall be the legal proof of the existence of such a corporation. That proof is a certificate of certain things made out as required, recorded in the proper county, with a certified copy of the certificate filed in the office of the secretary of the commonwealth, indorsed by him and then retained by the company. The law declares that when the certificate has been thus recorded and filed, the persons who have signed and acknowledged it, and their successors, shall be a body politic and corporate, in fact and in law. No distinction is made between the effect of such a mode of incorporation and the effect of any other mode. If the certificate recorded and filed is false, or if the law has in any particular been violated, the commonwealth has a remedy by writ of quo warranto, as it would have in any other case where corporate privileges have heen obtained by fraudulent means or in an illegal manner. But until the franchise claimed and used has been directly adjudged not to exist, there is a corporation de facto at least. If there is any thing settled it is that the corporate existence of a corporation de facto can not be inquired into collaterally. Upon this subject the authorities

are too numerous to admit of citation. The plaintiffs do not deny the principle as a general rule, but they contend that it is not applicable to corporations of this character, to those organized by the corporators themselves under a general law, and for support in this position they rely upon Patterson v. Arnold, 9 Wright 410. Such is the doctrine advanced in that case. But the decision then made was that of a bare majority of the court. It does not profess to rest on a single authority. It is sustained by none, for it is in conflict with the steady course of decisions elsewhere, wherever statutes exist similar to ours of 1849. Very little attempt was made to sustain it by reason, and if it is the law it must work great confusion and lead to intolerable mischiefs. Happily, if it was mistakenly made, we may now correct the mistake without harm to any one.

There is no reason that can be given for such a distinction as is claimed between a charter obtained under the act of 1849 and one obtained under a special act of assembly. In each case corporate power is obtained by act of the corporators, under restrictions imposed by law. When an act authorizes letters-patent to issue after a certificate by commissioners appointed to receive subscriptions to the capital stock that a certain amount has been subscribed, and a certain proportion paid in, the certificate may be false, but nobody ever supposed that the charter obtained by the false certificate is void, or that it may be attacked collaterally. Why, then, should it not be so in case of a charter under the act of 1849?

How much more is a charter secured under that act the work of the corporators than this one obtained in the other mode? How much less is the organization under the conduct of the state? Yet that it is less is the only reason attempted to be given in Patterson v. Arnold why the charter in the one case should be open to collateral attack, and in the other assailable only directly by the commonwealth.

If we look at the consequences of permitting one who deals with a corporation formed under the general manufacturing law to deny that it ever had any legal existence, or to call in question its rights to exercise corporate powers or enjoy corporate privileges, we shall find them to be no less mischievous than such as would follow the doctrine that any corporation may be collaterally attacked by one who has given credit to it, that it is not immunity to its shareholders. Indeed, the mischiefs of such a doctrine are the same, whatever may be the mode of obtaining corporate existence. By one jury a charter may be set aside. By another it may be sustained. One creditor may sue the corporation as such, obtain a judgment and sell its land, himself becoming the purchaser. Another creditor may sue the corporators, alleging that their charter is null, furnishing no immunity to them. He may obtain a judgment and sell the same land to, another purchaser, as the property, not of the corporation, but of the stockholdIn such a case which purchaser would hold the title?

ers.

Again, new stockholders may come in, totally ignorant of any fraud or mistake in making out the certificate. Are they to be charged individually because there was a secret vice in obtaining corporate be

ing? That would be monstrous. It would render the manufacturing law a thing to be avoided, though it expresses a cherished policy of the legislature. Yet, if a charter can be shown invalid by a collateral attack at the suit of a creditor, why are not new stockholders who have come in after the birth of the corporation equally liable as partners, or joint contractors, with all the original stockholders? Can the charter be effective and yet not effective? In Patterson v. Arnold it seems to have been thought a charter may be good as to some stockholders and a nullity as to others. What confusion must this produce? Some may be sued as partners, and others through the corporation, and under judgments obtained execution be levied upon the same property. Or all the original stockholders may go out and give place to successors. Then that which was incurably vicious, because an usurpation upon the commonwealth, has become good. It is impossible, however, that a charter can be good as to some stockholders and bad as to others. Every one has an interest in the property of his associates invested in the common stock. Such is his corporate right. If that property can be withdrawn by action against his associates individually, the charter ceases to be to him all that it purports to be.

It is said that those who certify falsely for the purpose of obtaining a charter are guilty of fraud. Doubtless this is so. There is a fraud upon the state. If it be also a fraud upon creditors, the law furnishes a remedy. An action will lie for the fraud. But to deny the corporate existence of a de facto corporation, and to hold as partners those who were guilty of fraud in obtaining the charter, is to confound an action ex contractu with one essentially for a tort.

It has already been said that Patterson v. Arnold is unsustained by authority. General laws, much like our act of 1849, exist in many of the states, and whenever the question has come up it has been ruled that corporations formed under them, like all others, are to be regarded as such until their right is questioned by the state. The question can not be raised collaterally whether they are lawfully such. In Jones v. Dana, 24 Barb. Sup. C. Rep. 402, the court said: "The statute is explicit and leaves no room for construction. It makes the copies of the charter and certificates filed in the office of the county clerk the authority of the corporation to commence business and issue policies, and makes them evidence for and against the company; that is, evidence of the authority to act as a corporation. The legislature having said what acts shall give the company corporate powers, and what shall be the evidence of those acts, as well for as against the company, courts can not, at the instance of third persons, go behind those acts, and the prescribed evidence of them, for the purpose of determining the validity of the corporation, and make the decision, perhaps, depend upon some mistake or accident from which no one has received or can receive any injury." And again: "The only remaining question is, whether the plaintiffs have shown the Utica Insurance Company, acting under a charter, or an authority apparently valid, and really so, unless impeached by something outside of the record evidence of the corporate existence, and depending upon

proof aliunde. If they have, and have thus furnished prima facie evidence of the incorporation, they can not go behind that evidence to show that it was got up in fraud or mistake, or irregularly brought into existence.' All this was said in reference to a corporation that came into being under an act very similar to ours. To the same effect is Sedman v. Eveleth, 6 Metcalf 114, and Baker v. Backus, 32 Ill. 111. I know of no case, except Patterson v. Arnold, in which a different doctrine has been advanced. It was not then competent for the plaintiffs in this action, after having contracted with the Conestoga Steam Mills as a corporation, to deny its corporate existence. the stockholders its charter furnished an immunity against its creditors. The plaintiffs, therefore, would have had no cause of action against any of the defendants had their amendment been allowed.

To all

There is another reason why there could have been no recovery. If the certificate for the incorporation was erroneous or fraudulent, the plaintiffs knew it when they sold the cotton. It was not for them afterward to say it was a wrong done to them. It is needless, however, to enlarge upon this. It is enough that they were not at liberty to call in question the validity of the charter.

The judgment is affirmed.

Note. De facto corporations: See also, Clopton, J., in Snider's Sons' Co. v. Troy, 91 Ala. 224, infra, p. 656, and particularly as to de facto corporations, 1847, Brouwer v. Appleby, 1 Sandf. (N. Y. Superior Ct.) 158; 1859, Eaton v. Aspinwall, 19 N. Y. 119; 1862, Buffalo & A. R. Co. v. Cary, 26 N. Y. 75; 1872, Swartwout v. R. Co., 24 Mich: 390; 1881, Butchers' & D. Bank v. McDonald, 130 Mass. 264; 1885, People v. La Rue, 67 Cal. 526, 8 Pac. Rep. 84; 1886, Stout v. Zulick, 48 N. J. L. 599, 7 Atl. Rep. 362; 1889, Eaton v. Walker, 76 Mich. 579, 43 N. W. Rep. 638, 27 A. & E. C. C. 310; 1890, Snider's Sons' Co. v. Troy, 91 Ala. 224, 24 Am. St. Rep. 887, infra, p. 656; 1891, American Salt Co. v. Heidenheimer, 80 Texas 344, 26 Am. St. Rep. 743; 1891, Allen v. Long, 80 Texas 261, 26 Am. St. Rep. 735; 1893, Gibbs' Estate, 157 Pa. St. 59, supra, p. 244; 1894, Martin v. Deetz. 102 Cal. 55, 41 Am. St. Rep. 151, 36 Pac. Rep. 368; 1894, MeTighe v. Macon Const. Co., 94 Ga. 306, 47 Am. St. Rep. 153; 1894, State Bank Building Co. v. Pierce, 92 Iowa 668; 1895, Coxe v. State, 144 N. Y. 396, 39 N. E. Rep. 400; 1895, American Loan and Trust Co. v. Minn. & N. W. R. Co., 157 III. 641; 1895, Greenbrier Indus. Ex. v. Squires, 40 W. Va. 307, 52 Am. St. Rep. 884; 1895, Jones v. Hardware Co., 21 Colo. 263, 52 Am. St. Rep. 220, 29 L. R. A. 143, infra, p. 637; 1896, Bradley v. Reppell, 133 Mo. 545, 54 Am. St. Rep. 685, infra, p. 868; 1895, American Mirror Co. v. Bulkley, 107 Mich. 447; 1896, Tuckasegee Mining Co. v. Goodhue, 118 N. C. 981; 1896, Duke v. Taylor, 37 Fla. 64, 53 Am. St Rep. 232; 1897, Martin v. South Salem Land Co., 94 Va. 28, 26 S. E. Rep. 591; 1897, Continental Trust Co. v. T.,St. L. & K. R. Co. (C. C. N. D. Ohio), 82 Fed. Rep. 642; 1897, Johnson v. Okerstrom, 70 Minn. 303, 73 N. W. Rep. 147; 1898, Maryland Tube and Iron Works v. West End Imp. Co., 87 Md. 207, 39 L R. A. 810; 1898, Jones v. Hale, 32 Ore. 465, 8 Am. & E. C. C. (N. S.) 150; 1899, Calkins v. Bump, 120 Mich. 335, 79 N. W. Rep. 491; 1899, Marsh v. Mathias, 19 Utah 350, 56 Pac. Rep. 1074; 1899, City of Wilmington v. Addicks, Del. --- 43 Atl. Rep. 297; 1899, Christian & Craft Grocery Co. v. Fruitdale Lumber Co., 121 Ala. 340, 25 So. Rep. 566; 1899, Commonwealth v. Yetter, 190 Pa. St. 488. See, also, infra, pp. 1122-1130, on necessity of pleading and proving corporate existence, in suits by and against a corporation.

There is great confusion among the cases as to the doctrines concerning de facto corporate existence, and estoppel to deny corporate existence; many cases call an apparent corporation a de facto corporation, when there is no suf