Exline-Reimers Co. v. Lone Star Life Ins. Co.
Exline-Reimers Co. v. Lone Star Life Ins. Co.
Opinion of the Court
This suit was instituted by M. P. Exline Company against appellee, but, pending its determination, appellant, Ex-line-Reimers Company, acquired the former company’s assets and prosecuted the case in its name. The suit was to recover a balance on an account for certain items of stationery, office furniture, supplies, etc., for which ap-pellee was alleged to be liable. Appellee denied by proper pleading all liability for the items of account. No further statement of the pleadings are necessary, since no question of their sufficiency arises.
The rights of the parties on this appeal depend upon the law arising upon practically undisputed facts; the following, supported by the record, being those essential to a disposition of the case: The articles specified in the account sued on were articles necessary to the conduct of the business of life insurance companies and were purchased on requisitions signed Lone Star Life Insurance Company, by J. M. Dawson, who represented L. H. Morgan, to whom the supplies, etc., were delivered. Morgan, claiming to represent the Lone Star Life Insurance Company, promised the account would be paid by the company, and upon such representations appellant relied without other inquiry or investigation. At the time the requisitions were made upon appellant for the supplies, etc., and at the time the same were delivered' to Morgan, he was attempting to organize said Lone Star Life Insurance Company, and in pursuance of that object had, on February 2, 1909, interested Messrs. Worsham, Keating, Slaughter, Gannon, Reardon, Baker, Green, Hamilton, and Edwards, all of Dallas, Tex., except the first named, to the extent that they signed articles incorporating the proposed company under certain statutory provisions then existing and delivered same to L. H. Morgan.' Morgan retained possession of the articles of incorporation until May 28, 1909, at which time same were filed in the office of the commissioner of insurance, etc., and approved by tha.t official. All the articles covered by the account sued on, except certain items hereafter referred to, were purchased by Morgan, claiming to represent the company, prior to the time of filing the articles of incorporation in the office of the commissioner of insurance. Those who signed the articles of incorporation, learning that Morgan had filed same with the commissioner, called a meeting June 7, 1909, of the incorporators for the purpose of dis *1062 cussing the status of the company. Morgan attended the meeting. The' result of the meeting was that the project was abandoned, and it was agreed that each incorporator should be released from prior tentative subscriptions to the stock of the company; the cause of the abandonment being the inability or refusal of any one of the incorporators to assume direction of the affairs of the proposed company. At this time Morgan requested that the incorporators assign the charter to him if they intended to abandon the matter,- since he had spent much time and money inj attempting its promotion, and since he believed he could organize same without reference to the participation therein of those present. This the incorporators agreed to do, and by direction of counsel for Morgan, in writing, assigned to him all their respective rights, title, and interest in the charter, on condition that the assignors should be released absolutely from all liability to the proposed company on their proposed subscriptions to stock, and giving to Morgan by the assignment the further right to assign to other persons the interests so assigned to him, as well as the right to constitute a board of directors for the company. Thereafter, on June 11, 1909, in pursuance of the authority contained in said assignment, a meeting of certain gentlemen claiming to be stockholders of the company was held; those present being Messrs. Morgan, Swain, Dawson, and Clark. These purported stockholders by their recorded minutes of the meeting, recited that L. H. Morgan had contributed $6,000 in money to the company, and directed that in lieu thereof stock in the company be issued to him in the sum of $4,000; the remainder so contributed to be subject to future adjustment. By direction of Morgan those acting as stockholders further directed that one share of stock directed to be issued to him be issued in turn each to Swain, Clark, Anderson, and Hannah, and 36 shares to J. M. Dawson. The assignment of the charter to Morgan by the incorporators of the company was acknowledged and ratified at said meeting, and all liability on the part of the incorporators to the company on account of their subscriptions declared canceled.
The individuals above named, acting as stockholders, also elected themselves a board of directors, and adjourned, and immediately convened as directors and elected Swain president, Hannah vice president, Dawson secretary and treasurer. This action was in turn approved, and the president authorized to make such contracts for stock subscriptions and to transact such other business as1 the interests of the company should require. Neither Morgan nor those to whom stock was directed to be issued at the time of the related stockholders’ and directors’ meetings were actual subscribers to the stock of the Lone Star Life Insurance Company. A few days after the meetings just mentioned, and on June 15, 1909, the gentlemen who had signed the articles of incorporation and executed the assignment of the charter to Morgan individually and collectively signed letters addressed to L. H. Morgan & Co., indorsing the proposed company, referring to themselves as charter members, and in some instances as subscribers to the stock or as intending to subscribe thereto. Subsequent to all the transactions detailed, and in December, 1909,. or January, 1910, the incorpora-tors, due to complaints of those who had subscribed to stock at the solicitation of Morgan, concluded that liability attached to them as incorporators, notwithstanding the assignment of the charter and the attempted cancellation of any liability on their part by those nominated by Morgan at the claimed stockholders’ meeting of June 11,1909, whereupon they assumed control of the corporation without objection, so far as the testimony discloses, on the part of Morgan and the officers selected by him, subscribed enough stock or secured subscriptions for enough stock to comply with the laws in that respect, as well as other things necessary to place the company in a position to commence operations, which was accomplished about March, 1910, at which time all connection of the directors and oifieers selected by Morgan with the company ceased. The directors and officers selected as last detailed promptly denied all liability for appellant’s debt when presented for payment, and repudiated the acts of Dawson in accepting the articles and promising payment.
At the conclusion of the trial and upon the evidence as adduced, the substance of the essential features of which we have related, the trial judge instructed verdict for the defendant, and in accordance with which judgment was entered.
“Those who undertake to organize a corporation are not in any sense its agents before it comes into existence. They cannot affect it by their declarations or representations, or bind it by their engagements made in its behalf; but, after coming into existence, the corporation may make their engagements its own by express agreement or by ratification; and this ratification or adoption may be by express corporate action or by any of the other modes by which corporations may ratify or adopt the unauthorized or officious acts of others made in their behalf, as where the corporation voluntarily accepts the benefits accruing to it from the engagement of its promoters, after full knowledge, and having full liberty to decline the same.” 10 Oye. 262.
Keeping in mind the fact that no one claiming to represent the corporation after incorporation had promised to pay the debt sued for, and that it was at no time originally liable therefor, did the assignment to Morgan and the election of stockholders, directors, and officers thereunder, and their acceptance of the articles sued for, create any liability against appellee by virtue of the authority conferred upon the corporators by article 3096h? We conclude not, since in our opinion the acts of the corporators, as well as those of the stockholders, directors, and officers elected as stated, were void. That portion of the act that confers upon the cor-porators authority to perfect the organization of the company and direct its affairs pending final authority from the state to transact a general business was not intended to be used as a means of conferring upon the corporators greater authority than may be found in the act itself. There is nothing in the act which would by reasonable deduction or inference authorize the corporators by simple assignment of the charter to confer upon others even the authority conferred upon them, much less authorize their as-signee to do that which the state denied the original corporators the right to do. Without in the least restricting the authority conferred upon the corporators, it is clear that their authority, after the charter was approved, was to do the things specified by the act; i. e., sell stock, invest same, call a meeting of the stockholders, and to do any and all other incidental or necessary things thereto or reasonably to be inferred. The reason why such authority was not intended to be conferred are not far to find.
“A defacto authority cannot arise when there has been absolutely no election or appointment, or, what is equivalent, one that is absolutely null and void, and not merely irregular or informal;” or ‘'where there has been no assertion of the right to exercise the office, except in the very instance where it is questioned;” or “where there has been no acquiescence in the official acts of the person claiming such authority, either on the part of the body for whom he professes to act or of any one else. Otherwise the simple bold assertion of a right to an office would bind such corporation or body by the acts of the usurper, and parties suffering from his unlawful acts could never question them.” Franeo-Texan Land Oo. v. Laigle, 59 Tex. 839.
“It is only where the act of the corporation sought to be denied is merely irregular or informal or defective in no vital respect that any one participating in it is estopped to deny its validity. It if be absolutely void, and liable to be treated as a nullity in any proceeding where called in question, no participation in such act could give it vitality, even as to one who took part in it.”
Thus it further appears that not only the officers legally constituted are not estopped to deny the unlawful acts, but even those who attempted to confer that right are not, so far as relates to the corporation as such. Nor do the facts proven on trial bring this suit within the modification of the general rule stated in the case last cited, being instances where those entitled to complete the organization, while having the right of organization, have neglected in the organization to observe some of the details provided by the act authorizing incorporation, such as a failure to secure subscriptions for the full amount of the capital stock. Such a case is not presented by the record before us. Gentlemen, neither corporators nor stockholders, acting upon authority not conferred by law, and which, as a consequence, could not be conferred by the corporators pretending to be stockholders, met and agreed to reimburse Morgan for certain money expended in promoting the corporation by issuing him stock in the corporation, a portion of which he in turn issued to them, and whereupon, based upon the stock so acquired, they held a stockholders’ meeting, electing directors, who in turn elected officers, and the officers-so elected in turn accepted the articles sued for and promised to pay for same. i It is not necessary to discuss the acts of the corpora-tors, since same is in no sense an issue in the suit.
Entertaining the views expressed, it becomes our duty to affirm the judgment of the lower court.
Affirmed.
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