The application of the subscribers' deposits to the purchase of properties other than those to be acquired by the contemplated corporation is obviously improper, and the subscribers cannot be charged with the cost of such properties, unless such use of their deposits was expressly authorized or ratified by them.59 § 331. Disposition of property acquired pending promotion of abortive corporation. Questions may well arise as to the ownership and disposition to be made of property acquired for the abortive corporation. It may in general be said, that such property belongs to the parties who have paid, or will be made to pay, the expense of L. R. 4 Ch. Div. 315; cf. In re Kensington Station Act, L. R. 20 Eq. 197), and compensation for the services of the parliamentary agent, and claims for moneys advanced towards the expenses of carrying the bill through Parliament, (In re Brampton and Longtown Railway Co., L. R. 10 Eq. 613), were disallowed. These cases turned upon the words "incurred on account of the promotion of the company." This act of 1869, applied only to railways, sanctioned by acts passed before the Parliamentary session of 1867. Muir v. Forman's Trustees, Session Cases, 5 Fraser, 546, 567, affirming, Muirkirk, etc., Rys., 10 Scots Law Times, 247, 251. See also In re Lowestoft, etc., Tramways Co., L. R. 6 Ch. Div. 484, decided under the Board of Trade regulations, and In re Birmingham and Lichfield Junction Ry. Co., L. R. 28 Ch. Div. 652, decided under a special act. The Parliamentary Deposits and Bonds Act of 1892, (Stats. 55 and 56 Vict., Ch. 27), provided that the court might "order that the deposit fund or any part thereof be paid or transferred to the receiver or to the liquidator of the company, or be applied as part of the assets of the company for the benefit of the creditors thereof." It was held that this statute did away with the distinctions made under the act of 1869 between so-called "meritorious" and "non-meritorious " creditors and that the debts of all creditors, including solicitors and parliamentary agents, were proper charges against the fund. In re Manchester M. & D. Tramways Co., 1893, 2 Ch. Div. 638; Ex parte Bradford and District Tramways Co., 1893, 3 Ch. Div. 463. See also In re Hull, Barnsley & West Riding Junction Railway, 1893 W. N. 83; Muir v. Forman's Trustees, Session Cases, 5 Fraser 546, 568, affirming, Muirkirk, etc., Railways, 10 Scots Law Times 247. 59. Miller v. Denman, 49 Wash. 217, 95 Pac. 67, 16 L. R. A. N. S. 348. acquiring it. Subscribers disclaiming liability for the expenses of the attempted organization of the corporation will certainly not be heard to assert an interest in property that has been acquired. A mere subscriber for the shares of the company, under no agreement to share the expenses of the attempted formation of the company, who is merely bound to pay for his allotted shares when and if issued, would not ordinarily have an option to pay his share of the expenses and thereby acquire an interest in the property acquired by the promoters. Promoters who are not parties to the contract for the purchase of the property, and who disclaim liability for its cost, are clearly not entitled to an interest therein, and a promoter demanding an interest in the property acquired would undoubtedly have to pay his share, not only of the direct cost of the property, but of all of the incidental and collateral expenses of the promotion. The disposition to be made of the property that has been acquired by the promoters pending the organization of an abortive corporation depends necessarily upon the agreement of the parties, and upon their relation to each other and to the transactions in question, and each case must, as it arises, be decided in accordance with the equities of the particular situation.60 60. Illinois.-Flagg v. Stowe, 85 Ill. 164; Stowe v. Flagg, 72 Ill. 397. Kentucky.-Mt. Carmel Tel. Co. v. Mt. Carmel & Flemingburg Tel. Co., 119 Ky. 461, 27 Ky. L. Rep. 30, 84 S. W. 515. Minnesota.-Jacobson v. McCullough, 113 Minn. 332, 129 N. W. 759, and cases cited. New York.-Schantz v. Oakman, 163 N. Y. 148, 57 N. E. 288, affirming, 10 App. Div. 151, 75 St. R. 1140, 41 Supp. 746; Dyckman v. Valiente, 42 N. Y. 549, affirming, 43 Barb. 131. United Kingdom and Colonies.Sylvester v. McCuaig, 28 U. C. C. P. 443; Hopper v. Hoctor, 35 Can. S. C. 645. If a promoter represents to an architect employed to draw plans for the proposed company, that land standing in the name of the promoter was to be acquired by the corporation, such land may, if the promoter has received shares in payment therefor, be treated as held in trust for the corporation and subjected to the payments of its debts. The want of legal organization of the company is immaterial. See Friedman v. Janssen, 23 Ky. L. R. 2151, 66 S. W. 752. § 332. Liability of promoters of defectively organized corpo ration. Promoters who carry on business in the name of a defectively organized corporation may sometimes be held liable as partners for the debts contracted in the name of the company. The doctrine supported by the weight of authority is that persons who associate themselves to engage in business for profit under any name are liable as partners for the debts incurred in that name; that the limited liability of stockholders of corporations is an exception to the general rule, and that the stockholders come within that exception only if the company in whose name they carry on business is in fact a corporation.61 The associates need Iowa.-Kaiser v. Lawrence Sav. Bank, 56 Iowa 104, 8 N. W. 772, 41 Am. Rep. 85. Kansas.-Central Nat. Bank. v. Sheldon, 86 Kan. 460, 121 Pac. 340. Louisiana.-In re Browne & Jenkins Co., Ltd., 106 La. 486, 31 So. 67; Field v. Cooks, 16 La. Ann. 153. Minnesota.-Roberts Mfg. Co. v. Schlick, 62 Minn. 332, 64 N. W. 826. Missouri.-Martin v. Fewell, 79 Mo. 401; Farmers' State Bk. v. Kuchs, 163 Mo. App. 606, 147 S. W. 862; Weir Furnace Co. v. Bodwell, 73 Mo. App. 389; Davidson v. Hobson, 59 Mo. App. 130. Nebraska.-Abbott v. Omaha Smelting Co., 4 Neb. 416. New Jersey.-Cottentin v. Meyer, 80 N. J. Law 52, 76 Atl. 341. New York.-Tuccillo v. Pittelli, 127 Supp. 314. Wisconsin.-Bergeron v. Hobbs, 96 Wis. 641, 71 N. W. 1056, 65 Am. St. Rep. 85. United Kingdom and Colonies.— Seiffert v. Irving, 15 Ont. Rep. 173; Gildersleeve v. Balfour, 15 Ont. Pr. Rep. 293. And see note to Empire Mills v. Alston Grocery Co., 12 L. R. A. 366. The intended incorporators of an abortive corporation not intended to be formed for profit, were held liable, not as co-partners, but on the theory of agency in Johnson v. Corser, 34 Minn. 355, 25 N. W. 799, and in Upton v. Corser, 34 Minn, 355, 25 N. W. 801. Some authorities seem to sustain a rule that one who has contracted with an abortive company as a corporation, will not, even though no de facto corporation ever existed, be allowed to deny the corporate ex not, to escape liability, prove the existence of a de jure corporaThe creditor cannot, if there is a corporation de facto, tion. istence and hold the stockholders liable as partners. (Gartside Coal Co. v. Maxwell, 22 Fed. Rep. 197; Magnolia Shingle Co. v. J. Zimmern's Co., 3 Ala. App. 578, 58 So. 90; Planters and Miners Bank v. Padgett, 69 Ga. 159). Such a rule is in conflict with that established by the weight of authority, (see cases, supra) and must not be confused with the rule that one who has entered into a contract with a supposed corporation as such, is estopped from avoiding his obligations by showing the want of corporate existence of the opposite party. (This estoppel is peculiarly potent as against one who himself promoted the corporation. See Geneva Mineral Spring Co. v. Coursey, 45 N. Y. App. Div. 268, 61 Supp. 98; cf. Doyle v. Mizner, 42 Mich. 332, 3 N. W. 968). There is a plain distinction between, on the one hand, forbidding persons who have made engagements and reaped the benefit thereof, to avoid their obligations by denying the legal existence of the opposite party, and on the other hand allowing individuals who have not even attempted to comply with the forms prescribed by statute and necessitated by public policy, to escape personal liability and thus obtain the most substantial advantages of a legal corporate organization. See Kaiser v. Lawrence Savings Bank, 56 Iowa 104, 108-109, 8 N. W. 772, 774-775, 41 Am. Rep. 85; Cleaton v. Emery, 49 Mo. App. 345, 355-356; see also note to Empire Mills v. Alston Grocery Co., 12 L. R. A. 366. A partnership liability somewhat similar to that referred to in the text, but based upon a very different theory is sometimes cast upon the promoters, if they, being members of a partnership, organize a corporation to take over the partnership business under the same or even a different name, and then proceed to conduct the business for the corporation without bringing home to those with whom they do business, notice of the fact of their incorporation. Perkins v. Rouss, 78 Miss. 343, 29 So. 92; Martin v. Fewell, 79 Mo. 401, 412; Holmes Refining Co. v. United Ref. Exp. Oil Co., 33 N. Y. App. Div. 62, 53 Supp. 81; Tobias v. Wierck, 21 N. Y. Misc. 763, 48 Supp. 146, and see Rust-Owen Lumber Co. v. Wellman, 10 S. D. 122, 72 N. W. 89; Johns v. Brown, 1 Tex. Ct. of App. Civ. Cas., § 1016; Thompson on Corporations, (2nd ed.), § 4753; Cook on Corporations, (7th ed.), § 243; cf. Whitwell v. Warner, 20 Vt. 425. It has also been said that if a corporation is organized by the promoters simply for the purpose of consummating an illegal agreement, while shielding themselves from the consequences of receiving the illegal exactions made thereunder, the act of incorporation does not avail them as a defense. Brundred v. Rice, 49 Ohio St. 640, 32 N. E. 169, 34 Am. St. Rep. 589. call its legal existence into question.62 If there be a law under which the corporation might be organized de jure, an attempt in good faith to organize thereunder, and a user of the assumed corporate powers, there is, according to the weight of authority, a corporation de facto.63 It is sometimes held that to relieve the associates from personal liability there must be a substantial compliance with the terms of the statute under which the organization V. Davis, 62. Federal.-Harrill 168 Fed. Rep. 187, 94 C. C. A. 47, 22 L. R. A. N. S. 1153. Alabama.-Snider's Sons Co. v. Troy, 91 Ala. 224, 8 So. 658, 24 Am. State Rep. 887, 11 L. R. A. 515; Cory v. Lee, 93 Ala. 468, 8 So. 694; Owensboro Wagon Co. v. Bliss, 132 Ala. 253, 31 So. 81, 90 Am. St. Rep. 907. Indian Territory.-Western Investment Co. v. Davis, 7 Ind. Terr. 152, 104 S. W. 573, 15 Am. & Eng. Ann. Cas. 1134, and cases cited, (reversed, sub nom. Harrill v. Davis, 168 Fed. Rep. 187, 94 C. C. A. 47, 22 L. R. A. N. S. 1153. Kansas.-Murdock v. Lamb, 92 Kan. 857, 142 Pac. 961. Michigan.-Eaton v. Walker, 76 Mich. 579, 43 N. W. 638, 6 L. R. A. 102, and cases cited. Minnesota.-Johnson V. Okerstrom, 70 Minn. 303, 73 N. W. 147. New York.-Fox v. McComb, 44 State Rep. 178, 17 Supp. 783, 63 Hun 630. New Jersey.-Stout v. Zulick, 48 N. J. L. 599, 7 Atl. 362. Tennessee.-Merriman v. Magivney, 12 Heisk. 494; Tennessee Automatic Lighting Co. v. Massey, 56 S. W. 35. Washington.-American Radiator Co. v. Kinnear, 56 Wash. 210, 105 Pac. 630, 35 L. R. A. N. S. 453. It has been held that the creditor may hold the individuals, if he had no knowledge of any attempted incorporation and supposed that he dealt with a co-partnership. Slocum v. Head, 105 Wis. 431, 81 N. W. 673, 50 L. R. A. 324. The organizers of a de facto corporation are not liable for its torts. Howard v. Long, 142 Ga. 789, 83 S. E. 852. 63. Federal.-Harrill V. Davis, 168 Fed. Rep. 187, 94 C. C. A. 47, 22 L. R. A. N. S. 1153. Alabama.-Snider's Sons Co. v. Troy, 91 Ala. 224, 8 So. 658, 24 Am. State Rep. 887, 11 L. R. A. 515. Colorado.-Jones v. Aspen Hdw. Co., 21 Colo. 263, 40 Pac. 457, 29 L. R. A. 143, 52 Am. St. Rep. 220; Humphreys v. Mooney, 5 Colo. 282, 288. Florida.-Duke v. Taylor, 37 Fla. 64, 19 So. 172, 53 Am. State Rep. 232, 31 L. R. A. 484. |