Edinboro Academy versus Robinson

Supreme Court of Pennsylvania1860-10-25

37 Pa. 210

Summary · law.co

Holding. The judgment of the lower court was reversed and a new trial awarded because the court below incorrectly determined that an action by a corporation to collect subscriptions was improperly brought in the corporate name, when the proper inquiry should have been whether the associates had in fact organized themselves into that corporation through lawful process.

When individuals subscribe money toward a common fund with a stated purpose, they form an association. Their subscriptions become contracts among themselves to contribute to that fund. If the subscribers subsequently organize themselves through legal incorporation with the consent of a majority at a properly noticed meeting, the resulting corporation becomes the true legal organization of the association and the proper party to enforce collection of the subscriptions.

The lower court erred by deciding that an action brought in the corporate name was improper. The relevant factual question—whether the associates actually organized into the corporation in question—was therefore excluded from consideration below, yet it is the central question in the case. The court should determine whether a meeting was held on reasonable notice and whether a majority consented to the corporate form of organization.

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

Key issues

Whether subscription to a common fund creates a binding contract among subscribers
Whether legal incorporation constitutes the true organization of an association of subscribers
Whether a corporation formed by subscriber consent is the proper legal party to collect subscriptions
What process and notice requirements are necessary for valid organization of a subscription association

Procedural posture

The case was heard on appeal from a decision by a lower court that had rejected an action brought by the corporation in its corporate name to collect subscriptions.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

The opinion of the court was delivered, by

Lowrie, C. J.

— So soon as this subscription-paper became complete by the subscription of the stipulated amount of money, the subscribers to it became an association of persons united for contributing to a common fund for a common purpose, to be carried out by themselves. Then the subscription of each (at least if not withdrawn before the actual organization of the associates) became a contract, by each associate with his fellows, in consideration of similar contracts by them, to contribute to the common fund the amount subscribed by him.

Such an act of association involves an agreement to organize the associates when the subscription shall be complete, and in the present ease this is expressly provided for. The duties created by the act of subscription, are duties to the association, and the first of them that is to be performed is the duty of organization; and when this is complete, the duty of paying the sum subscribed is a duty to the organized association. • In a legal aspect, the most perfect form of organization is .by legal incorporation, and, therefore, this, when regularly obtained by the common consent of the associates, must be regarded as the true organization of the association, and the corporation becomes the proper legal body to which the subscriptions are to be paid, and which is to sue for them. There can be but one true organization.

The court below was, therefore, in error in deciding that the action was improperly brought in the name of the association in its corporate form. The decision ought to have been that, if the associates did organize themselves by legal incorporation, then the corporation is the organized association, and is the proper legal party to demand and enforce the payment of the subscriptions.

The question of fact is therefore involved in the true decision: did the associates organize themselves into this corporation called “ The Edinboro’ Academy?”

The decision of the court below excluded this question, though it is the vital one of the cause. It may not be easily decided, because there is no complete prescribed form for the process of organization. And so it is in the original organization of states, and there we take the fact of the existing organism as proof of its legitimacy without inquiring into the regularity of the formative process. And in such a case as this, if we find the associates acting as members of the organism we assume the regularity of its formation as against them.

The only form agreed upon here for the process of organization is, that it shall be by a meeting of the associates held according to notice to be given. If such a meeting was held on reasonable notice, and if, by consent of a majority, the corporate form of organization was adopted or assented to, the corporation is the organized body contemplated by the contract of subscription, and has the right to demand and receive the sums subscribed.

The law rather pardons than approves the naming of the trustees of the corporation as plaintiffs, in such an action before a justice of the peace.

In court, the form ought to be amended so as to let the plaintiff appear in its simple corporate name.

Judgment reversed, and a new trial awarded.

Thompson, J., having been of counsel in the case, did not sit at the hearing.