public record of its organization. R. R. Co. v. Sullivant, 5 Ohio St. 276; Atkinson v. R. R. Co., 15 Ohio St. 21.

*

*

The case of Raccoon River Nav. Co. v. Eagle, 29 Ohio St. 238, is relied upon by the defendant in error. It was an action to recover upon a stock subscription. A plea of nul tiel corporation was interposed. The plaintiff claimed to be organized under an act to authorize the incorporation of companies "for the purpose of improving any stream of water declared navigable by any law of the State of Ohio." On the trial the plaintiff offered in evidence a certificate by which it appeared that the company was formed for the purpose of improving, etc., Big Raccoon River. Unfortunately there was no navigable stream in Ohio by that name. No other testimony was offered. There was no proof of user. There was no defect in the form of the proceedings to incorporate, but an attempt to organize and incorporate for a purpose impossible of accomplishment. There was neither a de jure nor de facto corporation. Judgment was properly rendered for defendant.

In excluding proof of what was actually done looking to the incorporation of Society Perun, and of the subsequent acts of user, which was offered in evidence, there was error, for which the judgment in the first entitled case (as well as that in the same plaintiff against Hay et al., which was tried with it and involves the same general questions) is reversed. Numerous other questions are presented by the voluminous records in these cases, but as they all depend upon the one central and controlling question discussed above, and as the disposition here made of the cases must lead to a re-trial in the light of the principles indicated in this opinion, they are not separately considered.

Judgment reversed.18

18 Finch v. Ullman (1891) 105 Mo. 255, 16 S. W. 863, 24 Am. St. 383, accord.

In Stevens v. Episcopal Church History Company (1910) 140 App. Div. (N. Y.) 570, 125 N. Y. S. 573, in which case a certificate of incorporation was executed without any action directing or authorizing the filing of it, the Court said at page 579: "Some of the statutory steps must be taken in an attempt to comply with the requirements of the law, and the mere execution of a paper which is not filed and does not become a public record is insufficient." But what steps must be taken can not be determined by any definite rule. It may be said: (1) That the courts favor the doctrine and are disposed to apply it in any case where steps have been taken which justify a reasonable expectation on the part of the incorporators that they have formed a corporation de jure. (2) That less is required to form a corporation de facto having the capacity to sue or to be sued, than to form a de facto corporation exempting its members from individual liability. Bigelow v. Gregory (1874) 73 Ill. 197. (3) That less is required to form a corporation de facto as between it and its members than between it and non-members. McClinch v. Sturgis (1881) 72 Maine 288; Foster v. Moulton (1886) 35 Minn. 458, 29 N. W. 155; Bushnell v. Consolidated Ice Mach. Co. (1891) 138 Ill. 67, 27 N. E. 596; Anderson v. Thompson (1899) 51 La. Ann. 727, 25 S. E. 399; and cases in Note 16, supra.

See also People v. Carter (1900) 122 Mich. 668, 81 N. W. 924, in which it was held that under a prosecution for an embezzlement from an incorporated

company it was sufficient to show that it was a de facto corporation and the corporation was held de facto, although no articles had been filed.

In McLennan v. Hopkins (1895) 2 Kans. App. 260, 41 Pac. 1061 (failure to prepare and file certificate); Utley v. Union Tool Company (1858) 11 Gray (Mass.) 139 (no articles entered into); Van Buren v. Reformed Church (1872), 62 Barb. (N. Y.) 495 (mere assumption and user); Perrine v. Levin (1910) 68 Misc. (N. Y.) 327, 123 N. Y. S. 1007, certificate not filed with secretary of state, it was held that there was no de facto corporation. In Gelders v. State (1909) 164 Ala. 592, 51 So. 232 (failure to have signatures of subscribers to capital stock in the certificate as required by law); Finnegan v. Noerenberg (1893) 52 Minn. 239, 53 N. W. 1150, 18 L. R. A. 778, 38 Am. St. 552 (failure to state distinctly the place where the business is to be carried on); Lyell Ave. Lumber Co. v. Lighthouse (1910) 137 App. Div. (N. Y.) 422, 121 N. Y. S. 802 (failure to have the certificate signed at the end); Christian & Craft Grocery Co. v. Fruitdale Lumber Co. (1898) 121 Ala. 340, 25 So. 566; Slocum v. Providence Steam &c. Pipe Co. (1870) 10 R. I. 112; Hughesdale Mfg. Co. v. Vanner (1879) 12 R. I. 491 (failure to pay the statutory incorporation fees), it was held that a de facto_corporation was formed. But see Jones v. Aspen Hardware Co. (1895), 21 Colo. 263, 40 Pac. 457, 29 L. R. A. 143, holding payment of fees “a condition precedent to the exercise of any corporate power." For other examples of de facto corporations, see Eaton v. Aspinwall (1859) 19 N. Y. 119; Buffalo & A. R. Co. v. Carey (1862) 26 N. Y. 75; Rondell v. Fay (1867) 32 Cal. 354; Swofford Bros. Dry Goods Co. v. Owen (1913) 37 Okla. 616, 133 Pac. 193; approved in 1 Virginia Law Rev. 236-8, 244; Lamming v. Galusha (1894) 81 Hun. (N. Y.) 247, affd. 151 N. Y. 648, 45 N. E. 1132; Card v. Moore (1902) 68 App. Div. (N. Y.) 327, 74 N. Y. S. 18, affd. 173 N. Y. 598, 30 N. Y. S. 767, 66 N. E. 1105; Gillman v. Druse (1901) 111 Wis. 400, 87 N. W. 357.

Emery v. De Peyster (1902) 77 App. Div. 65, 78 N. Y. S. 1056: A certificate of incorporation which recited that the object of the corporation was "to do a general publishing and printing business," was filed in the office of the Secretary of State of New York on December 21, 1899, but no certificate was filed in the office of the Clerk of New York County, which was the place at which the corporate business was to be conducted. On December 22, 1899, the Board of Directors held a meeting, at which the sole business transacted was the election of officers and the passage of a resolution authorizing the purchase from one Donnell of his publication, the "Railway News." No action was taken pursuant to this resolution prior to January 1, 1900, nor did the corporation transact any other business prior to that time. Held, that on that date there was no de facto corporate existence, the court saying in part, per Patterson, J.: "None of the cases to which our attention has been called holds that the mere organization of the corporation by the election of officers and the passage of resolutions by directors relating to contracts purely executory in their nature, constitute acts of user of the franchise." -Eds.

CHAPTER III.

SUBSCRIPTIONS TO STOCK.

Section 1.-When Subscriber Becomes a Stockholder.

MT. STERLING COALROAD CO. v. LITTLE.

1879. 14 Bush (Ky.) 429.

JUDGE ELLIOTT delivered the opinion of the court.

This action was brought by appellant on the following writing: "The undersigned propose to subscribe for the number of shares of $50 each to the capital stock of the Mt. Sterling Coalroad Company, when the charter shall have been obtained and the company organized, provided that the company receives our subscription, payable as follows viz., ten per cent. on or before February 1, 1874, and by calls not exceeding ten per cent. per month thereafter until paid. Wm. Little, ten shares."

By the plaintiff's petition this instrument signed by appellee is treated as a subscription of ten shares of stock in the coalroad company, and on allegation of non-payment judgment is sought for the amount of the ten shares, which, it is alleged, appellee subscribed.

There is no allegation that the appellant ever delivered or tendered to the appellee the ten shares of stock, but instead thereof it is alleged. that it received the appellee's subscription.

The writing sued on does not amount to a subscription of stock to appellant's company. It is only, as its language imports, a proposition to subscribe ten shares of $50 each after the company shall have obtained its charter and perfected its organization, provided appellee should be permitted to pay ten per cent. of his subscribed stock on the 1st of February, 1874, and the balance in calls of not exceeding ten per cent. per month.

We regard the reasoning of the court in the case of Thrasher v. Pike County Railroad Company, 25 Illinois Reports, page 393, as conclusive of this case. In that case the agents of the company, before its organization, agreed and promised to receive Thrasher's subscription of $3,000 to the capital stock of the company, and it is then averred that Thrasher, “in consideration of this promise, undertook and promised the plaintiff that he would subscribe to the stock of this company the sum of $3,000 when the books should be open for subscriptions, and that this promise was, by writing, signed by the defendant, and by him delivered to the plaintiff."

The plaintiff then averred that the subscription-books were opened and subscriptions solicited, of which the defendant had notice; and

it further averred that the defendant's subscription was due when the company's books were opened, which was before the commencement of the suit, and that the defendant, after request, had refused to pay any part of his subscription of $3,000.

In that case, as in this, the action treated the writing sued on as a subscription, but the court, in that case, said that "this we do not think is a fair view of the defendant's liability upon his promise, if one was made to the plaintiff. His undertaking is to subscribe a certain amount of stock when the subscription books should be opened. This promise does not make him a stockholder, and as such liable to calls.

"The company has parted with no stock to him, and can only claim as damages the actual loss sustained by it by his failure or refusal to subscribe when he was notified the books were opened for such purpose.

"The company has the stock which the defendant promised to take but did not take. His promise is like any other agreement to purchase any specific article of property. If the property contracted for be retained by the vendor, and there is no delivery to the purchaser, or offer to deliver, the damages must not be measured by the value of the property, for it would not be just in such cases that the vendor should retain the property and recover also the value of it from the promisor. Some damage might result from the loss of a bargain, and to such a vendor would be entitled if the extent could be established."

In that case the court held that, in a suit to recover for the defendant's failure to subscribe, the measure of damages would likely have been the difference between the market and par value of the stock. The same doctrine is held in Pennsylvania. (See 21 Pa.

220.)

This doctrine accords with our views of this contract. The appellant has parted with nothing and the appellee has received nothing, and the appellant's petition is insufficient for the recovery of damages for the breach of appellee's contract to subscribe ten shares of stock in its company.

As this was not a suit for damages for a breach of appellee's contract to subscribe stock in appellant's company in pursuance of his written proposition, the judgment of the court sustaining a demurrer to the appellant's petition must be sustained, and as the appellant refused to plead further, the court properly dismissed the suit. Wherefore the judgment is affirmed.1

1 Thrasher v. Pike County R. Co. (1861) 25 Ill. 393: Quick v. Lemon (1883) 105 11. 578, esp. 585; Association v. Walker (1891) 88 Mich. 62, 86-8; Strasburg R. Co. v. Echternacht (1853) 21 Pa. St. 220, 60 Am. Dec. 49, accord. Cf. In re Hooley (1899) 2 Q. B. 579.

But see Bullock v. Falmuth etc. Turnpike Co. (1887) 85 Ky. 184, 3 S. W. 129 (per Bennett, J.): “Where a company is authorized to issue its capital stock, and put it upon the market for sale; and a person wishing to purchase the stock, as stock, merely as a judicious investment, agrees with the company to purchase so much of the stock at an agreed price; and the company,

BALTIMORE &C. R. CO. v. HAMBLETON.

1893. 77 Md. 341, 26 Atl. 279.

MCSHERRY, J., delivered the opinion of the Court.

By chapter 71 of the Acts of 1862 the Baltimore City Passenger Railway Company was incorporated. Its capital stock was limited to forty thousand shares, which in the course of a few years were fully paid up. The Act of 1890, ch. 271, made provision for the substitution of some other motive power in the place of horses, which were then used to draw the company's cars, and authority was given to the company by the Legislature to raise the money needed to effect this change, and to defray the expense of providing rapid transit. The company was accordingly authorized to increase its capital stock, but not beyond two hundred and forty thousand shares, and also to borrow upon bonds secured by mortgage an amount of money not exceeding its authorized capital stock. The Act declares that "all new or additional stock * * * shall be paid for in money as and when the board of directors" shall call for the same, and that "all the shareholders of the said company shall have the privilege of subscribing for said new or additional stock, ratably and in proportion to their respective holdings," paying therefor the par value thereof. Under the Act of 1890 the shareholders, at a meeting held in July of that year, authorized the issue of forty thousand shares of new or additional stock, of the par value of twenty-five dollars per share, to be paid for in money as and when the board of directors should call for the same; and, following the directions of the Act, made provision for the shareholders to subscribe within a designated time for their respective ratable proportions thereof. Public notice was given of this action, and a circular containing the same information was sent to each shareholder.

Miss Cordelia D. Hollins was then the owner of eighty-five shares of the original stock, and electing to avail of the privilege accorded without having delivered the stock or tendered it to the purchaser, sues for the recovery of the agreed price, then the rule is that the company cannot maintain such an action, because the company still holds the property, and the law will not permit it to withhold the property from the purchaser, and recover the agreed price of it. In such a case, the company's remedy would be confined to an action for the recovery of such damages as it might have sustained, such as the loss of a bargain by reason of the purchaser's failure to comply with his contract. This rule was correctly stated in the case of Mt. Sterling &c. Road Company v. Little, 14 Bush (Ky.) 429; but the rule, by inadvertence, was incorrectly applied to the state of facts before the court. *To the extent that the opinion in that case was made to apply to the facts of it, it is overruled."

*

As to the distinction between agreements to subscribe and subscriptions, see also Knox v. Childersburg Land Co. (1888) 86 Ala. 180, 5 So. 578; Twin Creek etc. Road Co. v. Lancaster (1881) 79 Ky. 552; Van Schaick v. Mackin (1908) 129 App. Div. (N. Y.) 335, at p. 339, 113 N. Y. S. 408; and as to distinction between subscription and agreement to purchase shares see Wemple v. St. Louis &c. R. Co. (1887) 120 Ill. 196, 11 N. E. 906; Marson v. Deither (1892) 49 Minn. 423, 52 N. W. 38.-Eds.