The Dutchess Cotton Manufactory against Davis

New York Supreme Court of Judicature1817-08

14 Johns. 238

Summary · law.co

Holding. The judgment of the trial court is affirmed for the plaintiffs; a corporation need not allege its incorporation in its declaration, and a defendant who enters into a contract with a corporation in its corporate name is estopped from denying the corporation's existence.

The Dutchess Cotton Manufactory brought an action against Davis to recover payment on an installment obligation for shares of stock in the corporation. Davis demurred to the declaration, apparently challenging whether the plaintiffs had adequately alleged their corporate status and whether an action could be maintained on a stockholder's promise to pay share instalments. The court held that stockholders may be sued on such promises, having previously settled this question in an earlier case involving the Goshen Turnpike Company.

The court further determined that the plaintiffs need not explicitly prove their incorporation in their declaration when the defendant has already acknowledged the corporation's existence by entering into a contract with them in their corporate name. Because the defendant dealt with the plaintiffs as a corporation, he was estopped from denying their corporate status. The note itself constituted valid evidence of the defendant's promise to pay for thirty shares, each valued at one hundred dollars, and the consideration for the promise appeared on the face of the document.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether a stockholder may be sued on a promise to pay share instalments
Whether a corporation must plead its incorporation in its declaration
Whether a defendant is estopped from denying a corporation's existence when he has contracted with it in its corporate name
Whether a promissory note for share payments constitutes a valid obligation

Procedural posture

The defendant demurred to the plaintiffs' declaration in an action for recovery of unpaid share instalments.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Thompson, Ch. J.,

delivered the opinion of the court. Since the decision of this court in the case of The Goshen Turnpike Co. v. Hurtin, (9 Johns. Rep. 217.) the question whether an action will lie at all upon a promise by a stockholder, in a corporation like the present, to pay his instalments, ought to be-considered at rest, at least in this court. We then took occasion to notice the decision of the court of errors in the case of The Union Turnpike Co. v. Jenkins, (1 Caines’ Cases in Error, 86.,) and concluded that, although one of the members of the court, in deliver!^ his opinion, thought that the only remedy was a forfeiture of the shares, and all previous payments, yet, that was not the point on which the decision turned, but on the ground taken, "by the chancellor, that the condition upon which Jenkins was to become a member of the company, viz. paying 10 dollars, had not been performed, and that the corporation was not considered in esse at the time of making the promise by J enlmis,

In the case again=t Hurtin, we considered the note, which was like the one set forth in the declaration in this cause, as a promissory note within the statute, though it had not the words bearer or order ¡ and, therefore, it was not requisite that a consideration should be averred, or appear upon the face of the note. Bui in that case, as in this, there is a consideration appearing on the face of the note. It is a promise to pay 100 dollars, for each share of stock set opposite the defendant’s name, to wit, thirty shares; and it is to be intended that the defendant bad become a stockholder to that amount.

The only question of doubt that can arise in this case is, whether it was not necessary for the plaintiffs to set forth in their declaration, by fit and proper averments, that they had been duly incorporated. But I am inclined to think it was not. The general act relative to incorporations for manufacturing purposes, (1 R. L.. 249.,) directs the certificate, which is to contain the requisite evidence of the company’s having become a body politic or corporate, to be filed in the office of the secretary of state, and declares, that as soon as such certificate shall be so filed, the persons who shall have signed and acknowledged the same, and their successors, shall become a body politic and corporate. This is a public law, and the certificate becomes matter of record. The incorporation ought not. therefore, to be considered a mere private act, since it was under a general law of the state, and the evidence thereof is made matter of record. But the defendant having undertaken to enter into a contract with the plaintiffs in their corporate name, he thereby admits them to be duly constituted a body politic and corporate, under such name. The case of Henriques v. The Dutch West India Company, (2 Ld. Raym. 1535.,) is very much in point on this question, if is there laid down by the counsel, and appears to be adopted by the court, that the plaintiffs in error were estopped, by the recognisance they had entered into with the defendants in error, from saying there was no such company ; and that where an action is brought by a corporation they need not show in the declaration how they were incorporated; but upon the general issue pleaded by the defend- the plaintiffs must prove they are a corporation. Th~ same principle was substanl~ally adopted by this court in the case of The Bank of the United States v. Haskins, (1 Johns. Cas. 132.) and in Jackson v. Plumbs, (8 Johns. Rep. 378.) The opinion of the court, therefore; is, that the plaintiffs are entitled to judgment upon the demurrer.

Judgment for the plaintiffs.