Opinion
Argued December 4, 1895
Decided December 19, 1895
Benno Loewy for appellants.
S.R. Ten Eyck for respondent.
The defendants insist that there is additional proof in the present case, which takes it out of the operation of our decision in the case between this same plaintiff and Schlegel. ( 143 N.Y. 537. ) A careful consideration of the case fails to show that it is so materially changed by this further proof, as to compel us to reach a different conclusion from that reached in the prior case. Judge O'BRIEN observed in the Schlegel case, with respect to certain statements and acts of the promoters of the plaintiff company, which were relied upon as evidence of an illegal purpose or object in the formation of the company, that it was unnecessary to inquire whether such statements and acts furnished evidence of an illegal purpose; because it did not appear that they were ever adopted or acted upon by the corporation itself. The defendants now argue that the additional proof in the present case establishes such an adoption and ratification. But the difficulty is that not only the evidence is lacking of any formal adoption by the plaintiff of any illegal undertakings; but, speaking in a strict or legal sense, there was nothing for the company to adopt or ratify. The doctrine of ratification belongs to the law of agency and seems misapplied here. The promoters had made no engagements or contracts; but had merely gotten up a prospectus and had made various declarations, prior to the formation of the plaintiff corporation. When the corporation was formed, its object was declared in the certificate to be "to buy, sell, deal in and handle vinegar." Those purposes, on their face, do not imply an illegal object, or one necessarily inconsistent with public policy, as declared by the public law. The strongest way in which the case might be put for the defendants is, that, subsequently to the incorporation of the plaintiff, there were corporate acts which showed, or tended to show, a purpose of controlling the production and sale of vinegar and of regulating its cost, through combinations or agreements between those who were members of the company and which would control their dealings with the public. In a certain sense, it might be said that that was in line with the projects of the promoters of the company; but that there was such an adoption or ratification of any illegal purpose or scheme, upon the formation of the plaintiff corporation, as to necessarily affect it with a vice which would taint contracts of subscription to the capital stock, cannot be said. The design of the directors may have been immoral and against public policy because of the means proposed. But not all combinations are condemned, and self-preservation may justify prevention of undue and ruinous competition, when the prevention is sought by fair and legal methods. On its face the organization of the company was for objects, which were not necessarily of an illegal nature and the presumption must be, in such a case, that they were within that legitimate class of objects for which corporations may be formed. The defendants voluntarily subscribed to the capital stock of the company and their subscription must be assumed to have been to enable it to carry out the legitimate objects for which it was incorporated. If "afterwards the corporation," as was said in the opinion in the Schlegel case, "departed from the purpose of its creation and entered upon projects which were illegal, this misconduct must be corrected in some other way than in a suit against the defendant to recover his subscription." That way, as was pointed out, might be through a suit by the People to vacate the charter. Furthermore, if it were possible to assume the existence of an illegal transaction here, to which plaintiff and defendants were parties, it would not be a case where the court would decline to lend its aid to the enforcement of the contract of subscription, for the rights of the creditors of this insolvent or embarrassed company have intervened. It would be highly inequitable that the defendants should escape and that the creditors of the company should suffer. We did not intend to hold in the Schlegel case that any subsequent corporate act, manifesting, or tending to manifest, an illegal purpose on the part of the directors, might so retroact as of the time when parties were engaged in promoting the formation of the company as, in connection with their acts and declarations of like tenor, to affect the corporation itself with the vice of illegality and to render contracts of subscription to the stock void. Had the certificate of incorporation expressed any illegal purpose of its promoters, another and a very different question might be presented; but that is not this case. On its face, the transaction between the plaintiff and the defendants was valid and it is only by seeking to inject into it the alleged vice of subsequent corporate dealings that it can be said to be tainted and, therefore, unenforceable. This is a distinction which has no support in the cases, or in principle. We see no reason, therefore, for changing our views with respect to the right of the plaintiff to recover upon the contract of subscription.
Upon the other point which has been pressed upon us, that the incorporation of the plaintiff was not proved, our views can be briefly stated. One of the defendants did not deny the legal incorporation. The other defendant did put it in issue. It may possibly be that when the plaintiff rested his case, the incorporation had not been strictly and fully proved as required by legal rules. But the defendant elected to proceed with the case and, before the close of all the evidence, the laws of the state of Illinois were in the case and showed that the certificate of incorporation was in substantial compliance with them. The point that it did not appear that the certificate was recorded in the office of the recorder of deeds of the county, as required by the Illinois law, was not distinctly taken, nor did the motion to dismiss suggest it. The objection was general. Had the defendants pointed out as a defect that which they now insist upon, it is quite possible that the plaintiff might have supplied the omission. The opportunity should have been afforded to it at any rate. We think, too, that there was enough in the evidence, perhaps, to show that the plaintiff had been recognized and treated as a corporation, not only by the defendants, but by the courts of the state of Illinois.
The argument that it appears that the capital stock was subscribed for, in part, by corporations and that such subscriptions were invalid under the law, is of no avail. That is a question for the People to raise through their proper officers and in appropriate proceedings. The defendants cannot raise it. At the furthest, it might be available in proceedings to vacate the charter — a point, however, we do not consider.
We do not think it necessary to review at greater length the questions, which the appellants have argued with so much fullness. We think the case was, in the main, covered by the decision in the Schlegel case and that there was, in the present case, no material question for the jury to pass upon.
The judgment should be affirmed, with costs.
All concur.
Judgment affirmed.