incorporation,'-were left untouched by the law, which is moreover limited in such a way as to prevent its application to what may be called corporations by usurpation. The law came before the Court in Shutter Bar Company v. Zimmerman, 110 Md. 314,-where the question was: "Whether a corporation, which did not pay its bonus tax until after the publication of an alleged libellous circular letter, can recover damages in an action on the case against the publisher of the letter, for libel." Discussing the Act of 1908, it is said: "The obvious purpose and spirit is to save the incorporation of persons who have in good faith made an effort to comply with the requisites of the corporation laws of the State but whose compliance turns out to have been in some respects irregular or informal. It was not intended to cover cases where through indifference or neglect there has been no attempt at all to comply with important requirements of the law which by its express terms are made conditions precedent to the possession or use of any corporate franchises. It has been held by our predecessors that a corporation cannot be actually or virtually created by estoppel in Maryland. In Boyce v. Trustees M. E. Church, 46 Md. 373, it is said: "The statute law of the State expressly requiring certain prescribed acts to be done to constitute a corporation, to permit parties, indirectly or upon the principle of estoppel, virtually to create a corporation for any purpose, or to have acts so construed, would be in manifest opposition to the statute law, and clearly against its policy, 1 E. g. eminent domain; and see Bonaparte v. Railroad Co., 75 Md. 340. A subscriber to stock would naturally have the right to insist upon technical incorporation. and justified upon no sound principle in the administration of justice." "1 § 32. Estoppel by pleading. In common law pleading, the general issue puts upon a corporation plaintiff the burden of proving its legal existence; and this was the settled law in Maryland (Agnew v. Bank, 2 H. & G. 493). But by statute (Code 1911, Art. 75, sec. 24, sub-sec. 108) it is now provided that "whenever the partnership of any parties or 1 But while the result in this case was right, it is submitted that the construction of the new law is unnecessarily narrow; and that there is a broad difference between creating a corporation by estoppel and estopping a litigant in a particular case from setting up the claim of no such corporation. If such estoppel can arise from a failure to plead (see § 32), there should be no difficulty in applying an estoppel by conduct. Failure to pay the bonus tax, while evidence of someone's indifference and neglect, is not the same thing as lack of good faith. Moreover, to make the consequences of such failure fall upon innocent stockholders or ignorant creditors, seems disproportioned to the good accomplished by the rule, especially as ample means for the prompt collection of the bonus tax are given to the State officials. A charter, as in Franklin Insurance Co. v. Hart, 31 Md. 59, may make the subscription to a given amount of stock a condition precedent to corporate existence. Such corporation may incur liabilities before the condition has been complied with; the logical result of the strict doctrine is, that these will not be valid as corporate obligations; and in some jurisdictions the stockholders may be held as partners. Inasmuch as an unincorporated association, having the statutory right to sue and be sued in the group name, was recognized as a legal unit in Snowden v. Crown Cork & Seal Co., 114 Md. 650, there would seem to be nothing in the public policy of the State opposed to either the de facto or the estoppel doctrines. For the Federal decisions, see Andes v. Ely, 158 U. S. 312 and cases cited; also New Orleans Debenture Co. v. Louisiana, 180 U. S. 328. And for illustrations of difficulties arising from the application of the strict doctrine, see Isaac v. Emory, 64 Md. 333; Jones v. Linden Building Asso., 79 Md. 73. the incorporation of any alleged corporation, or the execution of any written instrument filed in the case is alleged in the pleadings in any action or matter at law, the same shall be taken as admitted for the purpose of said action or matter, unless the same shall be denied by the next succeeding pleading of the opposite party or parties."1 $33. Partnership liability. Where the doctrine of corporations de facto and the estoppel theory are not recognized, parties who undertake to carry on business in the name of a pretended corporation may be liable as individuals to those with whom they deal. There are two views of this liability: (1) That all the associates, particularly if the association is one for gain, are partners and bound as such; (2) that liability depends upon agency and only those who participate in the particular transaction are liable, they being held under the rule that one who acts as agent without authority or without a principal, is personally responsible to those with whom he deals. This appears to be the 1 Black v. First National Bank, 96 Md. 399; Railroad Co. v. Hoover, 79 Md. 267; Banks v. McCosker, 82 Md. 526. The wording of the Practice Act for Baltimore City (Baltimore City Code 1906, sec. 312) is different: "If the copartnership or incorporation of any of the parties to the suit shall be alleged in the declaration and the affidavit to be filed therewith *** the fact of such alleged copartnership or corporation shall be deemed to be admitted for the purposes of such cause unless the said affidavit shall further state that the affiant knows or has good reason to believe such allegations * * * to be untrue." This provision is limited to the parties to the suit. In Horner v. Plumley, 97 Md. 282, it was held (on a different point) that the local Act is "complete in itself and exclusive" of the State law; but in that case there was no conflict between the two. sounder view.1 As among themselves, the rights of shareholders in a pretended corporation are what they would be if it had been duly incorporated; 2 and transactions before, can be ratified after de jure incorporation.3 1 See Thompson Corporations, secs. 269 and 8520; Machen Corporations, sec. 293; Harvard Law Review, xxv, 633. See, also, Hart v. Insurance Co., 31 Md. 65 and Register v. Medcalf, 71 Md. 528. The discussion illustrates the merits of the estoppel doctrine. Where parties have contracted, in good faith, for and with a supposed corporation, the rule imposing personal liability always violates the intention of the parties and usually works injustice. 2 Cannon v. Brush Electric Co., 96 Md. 446. 3 Grape Sugar Co. v. Small, 40 Md. 395; Murphy v. Wheatley, 102 Md. 502; Munich Co. v. Surety Co., 113 Md. 225. |