People ex rel. Marshall v. Ravenswood

Mitchell, J.

The complaint shows that the defendants have violated their charter, and also that they omitted to do certain things which might be essential to give them a legal corporate existence, and prays that they may be excluded from the franchises which they claim, and that the corporation be dissolved. The defendants object that several causes of action are improperly joined ; insisting that one cause treats the corporation as never having existed, and the other as having once existed and then lost its right to a continued existence; and that these are inconsistent allegations, and the judgments to be rendered on them, incompatible. This mode of pleading is deliberately sanctioned in The People v. The Saratoga and Rensselaer Rail Road Company, (15 Wend. 126.) If the former system did not allow it, the present does, as it allows causes of action arising out of the same transaction or the same subject matter. There is but one subject matter in this case— the right of the defendants to continue to exercise certain franchises. That right may be decided against them, by showing that they did not comply with conditions precedent to the origin of that right, or with conditions subsequent; and in either case the judgment is that they be excluded from such franchises. (Code, §§ 440, 443, &c.) In like manner if a lease were executed to one, with a condition that the lessee should not enter until he should pay a certain bonus, and to be void on non-payment of rent, the lessor—if the lessee entered—might show that neither the bonus nor the rent was paid, and claim the possession of the land. There would be but one subject matter-—the right to the possession of the land.

The code recognizes that the action may be against the corporation for either kind of usurpation of franchises, when it provides (§ 441) that the judgment, whether against a natural person or association, if they are found guilty of usurping a franchise, shall be that they be excluded from such franchise.

The judgment of the special term, against the defendants, should be affirmed with costs.

Cowles, J.

Scire facias, quo warranto, and information in the nature of quo warranto, are abolished, and the .remedies provided in part 2, title 13, chap. 2 of the code, substituted in their place. This suit, and the pleadings under it, must be construed by those provisions. It is brought against the defendants as a corporation. The defendant is sued by and in its corporate name. The object is to vacate its charter, as provided for in § 430 of the code. It is brought against the corporation, not against natural persons usurping, or assuming without proper authority to exercise corporate powers or rights. By the act of bringing the suit the plaintiffs assume that the defendants have acquired legal corporate existence ; for if it did not exist as a corporation, they could not be brought into court as such.

The distinction between actions brought to vacate a charter or to annul the existence of a corporation, and those brought against individuals acting as a corporation without being duly incorporated, is clear and broad. (Code, §§ 430, 432.) The one lies against the corporate body itself, the other against the persons unlawfully assuming to act as a corporation. The one can only be brought on leave first obtained from the supreme court or a judge thereof. (§§ 430, 431.) The other may be brought without such leave. (§ 432.) The judgment in the one case is that the “ corporation be excluded from such corporate rights, privileges and franchises, and that the corporation be dissolved.” (§ 442.) In the other case the judgment is that the person usurping such franchise be excluded therefrom ; and he may also be fined, in the discretion of the court. (§ 441.) In case of judgment against the corporation, a copy of the judgment is to be filed in the office of the secretary of state. (§ 445.)

This distinction under the code had been previously recognized. Formerly judgment of ouster was rendered when a liberty or franchise was wrongfully usurped, and that supposed there had been no grant; but if the liberty or franchise had been granted, or had once existed and was forfeited for abuse or misuser, judgment of seizure was given. Judgment of ouster would operate upon individuals ; judgment of seizure upon a corporation. (The King v. The City of London, cited in 2 Term Rep. 523, and commented upon in The People v. The Saratoga and Rensselaer Rail Road Co., 15 Wend. 113.) In the last case the court-say, “ When therefore an information is filed under the revised statutes against a corporation by its corporate name, the existence of the corporation is admitted-—or rather that it once had a legal existence.” And under the provisions of the code the same principle is evidently applicable.

This suit being against the corporation by its corporate name, must be held to admit that the defendant has once acquired legal and actual corporate existence, and that admission arising from the fact of the suit being brought against the defendant as a corporate body treating it and assuming it to be a legal entity, cannot, as it seems to me, be overcome by any averments in the complaint that it had not acquired existence. Otherwise, we are presented with the absurdity of assuming to bring into court a fictitious party, which neither has nor ever had existence ; and that too in face of the fact, as shown by the record, that the defendant sued is actually present in court, which is the case here; for the defendant is not only sued by this corporate name as an artificial person actually in existence, but appears in court by that name, and interposes this demurrer. There is, therefore, such a legal entity as this defendant. It is admitted by the plaintiff by the very act of suing, and is conceded by the defendant by the act of appearing and demurring; and this broad fact cannot be overcome by the plaintiff’s charging in his complaint facts which, if true, would go to show that the defendant had failed to comply with' such terms as by the charter were conditions precedent to its organization as a corporate body.

The plaintiff has inserted in his complaint averments of that description, and which are only proper to be made when the suit is against individuals, for usurping or assuming to act as a body corporate when in fact they are unincorporated.

These averments are, as I regard them, manifestly irrelevant and impertinent; for the plaintiff cannot be. permitted to treat the defendant as a corporation in fact for the purpose of proving it, and then assume to charge that it never performed those acts, without performing which it never could have acquired existence.

But the complaint also charges other acts of neglect or omissions of duty which, if true, -would forfeit the charter, and also avers the doing of acts which could only be performed by the defendant as an actual existing corporation; thus in effect averring its actual existence.

As I regard the case, the plaintiffs admit the corporate existence of the defendant by the mere fact of suing it by its corporate name, and consequently must be held to have admitted the performance by it of all such acts as by the charter were conditions precedent to its entering upon a state of legal- existence. All averments to the contrary must, as I think, be regarded as irrelevant, and on motion be struck from the complaint or disregarded on the trial. Such facts only can be proved at nisi prius in this case as go to show that by misuser, neglect or abuse, the defendants have forfeited their charter.

Had all of the allegations which go to show that the defendants had never commenced a legal corporate existence been embraced in one count or statement of a cause of action, unaccompanied by any other averments, and the demurrer had been interposed to that one count or statement of the cause of action, I should have no hesitation whatever in holding the demurrer well taken, since such averments alone would show no cause of action against the defendant. But the complaint, while it states facts which are entirely irrelevant as I view the case, also avers -other facts which are pertinent and proper, and which if true show that the defendant has forfeited its charter. The demurrer is to the whole complaint,■ and the complaint, as a whole, is good, while it contains much which is irrelevant and ought to be stricken from the record. But that remedy is by motion, not by demurrer.

. For these reasons I concur with my brother Mitchell, that the judgment of the special term should be affirmed. But with leave to the defendants, should they appeal to the court of appeals, to withdraw their demurrer, and answer after the cause is remitted to this court, on payment of costs.

Clerke, J.

The complaint alleges first, in substance, that the defendants have acted as a corporation, without being legally incorporated ; and, secondly, sets forth several acts and omissions, in consequence of which they have forfeited their corporate rights, privileges and franchises. The complaint demands judgment, first, that the defendants be excluded from those franchises and privileges and all corporate rights; and secondly, that the corporation be dissolved and their charter vacated.

These are inconsistent causes of action ; because they require different modes of proceeding, and the nature of the judgment appropriate to each is different. The language employed in The King v. Amery, (2 T. R. 515,) and in The People v. Saratoga and Rensselaer Rail Road Co., (15 Wend. 113,) is precisely applicable to this case. If the object of this action was to dispute the fact of the incorporation, it should have been commenced against individuals ; if to effect the dissolution of a corporation having an actual existence, then it is correctly instituted against the corporation. But the plaintiffs seek both objects, which are not only inconsistent with each other, and which require totally distinct and inconsistent judgments, but in order to accomplish the first object, the individuals unlawfully exercising corporate powers, which, it is alleged, were never conferred on them, should be sued by their respective names. In the one case, judgment of ouster would be rendered; equivalent to the demand in this complaint that “ the defendants be excluded,” &c.; and in the second case, the proper judgment would he that of seizure, equivalent to the other part of the demand in this complaint, “ that the corporation be dissolved,” &c. The one is rendered against individuals, for unlawfully assuming to be a corporation; the other is rendered against a corporation for a forfeiture of its corporate privileges.

The two cases referred to by the counsel for the plaintiffs have no applicability to these questions. That of The People v. The Bank of Hudson, (6 Cowen, 217,) was an information against an incorporated company, seeking a dissolution on the ground of forfeiture ; it was not pretended that it had not been duly incorporated ; but, being a corporation, it had forfeited its charter, and therefore the language quoted by the counsel had no relevancy in the connection in which it was employed; and so the court expressly state, that the judgment must be against the corporate name, being a judgment of seizure. The other case referred to, (The People v. The Kingston and Middletown Turnpike Road Co., 23 Wend. 193,) is of the same description ; it was commenced for the purpose of effecting the dissolution of a corporation, which it was admitted had had an actual existence ; but which, it was alleged, was forfeited by a non-compliance with the requirements of the act of incorporation, in neglecting or refusing to perform the duties enjoined. It was not "pretended, as in this case, that the defendants never had a legal existence, that “ without legal authority they claimed to be a body politic and corporate in law, fact and name.”

I am, however, of opinion that the other facts stated in the complaint constitute sufficient ground for the forfeiture of the corporate privileges to entitle the plaintiffs to a judgment of disselution ; but the first cause of demurrer is well taken.

New York General Term, September 3, 1855.

The judgment of the special term should be reversed, with costs.

Judgment affirmed.

Mitchell, Clerke and Cowles, Justices.]