Even when the conditions stated in the opening paragraph of the article are satisfied, if the other contracting party did not have knowledge, and cannot reasonably be charged with knowledge, that the associates intended to contract as a corporation, — in other words, where there is no basis for any estoppel against him, the associates are held to full liability. Christian Co. v. Fruitdale Co., 121 Ala. 340; Duke v. Taylor, 37 Fla. 64; Field v. Cooks, 16 La. Ann. 153; Martin v. Fewell, 79 Mo. 401; Guckert v. Hacke, 159 Pa. St. 303; N. Y. Bank v. Crowell, 177 Pa. St. 313; Slocum v. Head, 105 Wis. 431. See also Lawler v. Murphy, 58 Conn. 294, 313; Eaton v. Walker, 76 Mich. 579, 587; Mitchell v. Jensen, 29 Utah 346, 360; Clausen v. Head, 110 Wis. 405. As to the liability of the associates in tort, see the article in 20 HARV. L. REV. 456, and the authorities collected in note 30 to that article.

No associate can be held unless he has participated in, authorized, or ratified the act because of which the plaintiff asks relief. But no rules to determine what is authorization or ratification should be evolved which are contrary to the general principles of agency. The same rules should be applied as in the case of joint-stock companies whose members do not assume to be incorporated. If a body of men unite to engage in a business, and appoint a few of their number to manage it, and these few, or their sub-agents, make contracts within the scope of the business, the contracts so made are authorized by the associates, — it should not be necessary to show that the associates authorized the particular transaction. See Pettis v. Atkins, 60 Ill. 454; Frost v. Walker, 60 Me. 468; Tappan v. Bailey, 4 Met. (Mass.) 529; Ferris v. Thaw, 72 Mo. 446; Booth v. Wonderly, 36 N. J. L. 250; Medill v. Collier, 16 Oh. St. 599, 613; Ash v. Guie, 97 Pa. St. 493. Cf. Stafford Bank v. Palmer, 47 Conn. 443; Central Bank v. Walker, 66 N. Y. 424; Seacord v. Pendleton, 55 Hun (N. Y.) 579.

NOTE B.
English Authorities.

It was recognized from a very early date that certain bodies of men were authorized of common right to act as a unit for some purposes. Such bodies were called corporations at the common law. Y. B., 11 Hen. IV, 12; Y. B., 37 Hen. VI, 30; Y. B., 8 Edw. IV, 6; Y. B., 20 Edw. IV, 2; Y. B., 14 Hen. VIII, 2; Co. Lit. 3a; Finch's Law, c. XVII; Keilw, 32a; 2 P. Wms. 125; 4 Vin. Abr. 525. See also Madox, Firma Burgi, 85, 91. Cf. Y. B., 19 Hen. VI, 80.

The general rule, however, was that a body of persons were not authorized of common right to act as a unit. Madox, Firma Burgi, 26; Bracton, lib. I, c. 24, fol. 56; Y. B., 49 Edw. III, 3; Y. B., 10 Hen. IV, 3; Y. B., 20 Edw. IV, 2; Y. B., 22 Edw. IV, 34; Y. B., 12 Hen. VII, 27; Brooke, Abr. Corp., 81.

The sovereign could, by charter, authorize a body of men to act as a unit. The courts refused to give effect to such authorization when made by any person or body other than the sovereign. Madox, supra; Bracton, supra; Y. B., 49 Edw. III, 3; Dyer 81, fl. 64; Brooke, Abr. Corp. 33. Cf. Y. B., 14 Hen. VIII, 2.

Collateral attack upon legal incorporation was unhesitatingly permitted. Y. B., 49 Edw. III, 3; Y. B., 20 Edw. IV, 2; Y. B., 22 Edw. IV, 34; Y. B., 12 Hen. VII, 27. For the remarks of Coke as to the nature of a corporation, see supra, p. 306. Adams & Lamberts Case, 4 Coke 104 b, 107 b. By statute 1 Edw. VI, c. 14, " all manner of colleges" were given to the king. The court might well have construed this to include all colleges, incorporated or unincorporated, but "a difference was agreed that where the college, chauntry, &c had such beginnings which might have made a lawful foundation, but for error or imperfection in the penning or proceeding of it, was not in judgment of law lawfully founded. Such college or chauntry is given

:

to the King by the said act; but when there is a college or chauntry only in vulgar reputation, without any commencement or countenance of a lawful foundation, there such college or chauntry is not given to the King by this act."

With the economic development of England, there came to be need of some device by which the capital of many persons could be united. Charters of incorporation were difficult to obtain; large partnerships, therefore, were formed, the articles of partnership being moulded so as to give, as far as possible, the same results as though the members were incorporated. Such a large partnership was usually called a joint-stock company. These companies were not infrequently promoted in a manner calculated to mislead and injure the public. The public might be led to believe that they could free themselves of all liability at any time by transferring their shares, and that their liability, while they continued members of the company, would be limited to the par value of their share. Moreover, many companies were formed to carry out projects not economically justifiable.

These companies aroused such hostility that Parliament passed a statute, commonly known as the Bubble Act, to repress them. Geo. I, c. 18 (1719). This provided, among other things, that "the acting or presuming to act as a corporate body or bodies. . without legal authority. . . shall . . . forever be deemed to be illegal and void"; and that violations of the act should be deemed to be public nuisances and punishable in the criminal courts as such (§§ 18, 19).

This statute was in force for over a century. The objection that a company was illegal under this statute could, without doubt, be raised collaterally. See Buck v. Buck, 1 Campb. 547; Rex v. Stratton, 1 Campb. 549, n.; Pratt v. Hutchinson, 15 East 510; Josephs v. Pebrer, 3 B. & C. 639; Kinder v. Taylor (per Eldon, C.), 3 L. J. Rep. (o. s.) 68.

When these provisions were repealed (6 Geo. IV, c. 91, 1825), Lord Eldon secured the introduction of a recital that it was expedient that such matters "should be adjudged and dealt with in like manner as the same might have been adjudged and dealt with according to the Common Law."

In Duvergier v. Fellows, 5 Bing. 248, 266 (1828), Best, C. J., said: "Persons who, without the sanction of the legislature, presume to act as a corporation are guilty of a contempt of the King, by usurping on his prerogative." A defendant convicted in a quo warranto proceeding may be fined, and "this shows that the usurpation is considered as a criminal act . . The acting as such a corporation, without charter from the Crown, is contrary to law, and no man can maintain an action on a bond given to secure payment of a compensation to the obligee for the formation of any such pretended corporations." This reasoning necessarily leads to the conclusion that there may always be collateral attack on unauthorized corporate action. See also Blundell v. Winsor, 8 Sim. 601.

On the other hand, Tindal, C. J., said: “I am not aware that presuming to act as a corporate body was an offense at common law." Harrison v. Heathorn, 6 M. & G. 81, 107 (1843). See also Queen v. Tankard, [1894] 1 Q. B. 548, 551.

As to what action is an assumption of the corporate privilege, see Duvergier v. Fellows, 5 Bing. 248; Walburn v. Ingilby, 1 M. & K. 61, 76; Garrard v. Hardey, 5 M. & G. 471; Harrison v. Heathorn, 6 M. & G. 81, 137; Sheppard v. Oxenford, 1 K. & J. 491, 495.

The Companies Act of 1862 (25 & 26 Vict., c. 89, § 4) provided that " no company, association, or partnership consisting of more than twenty persons shall be formed

...

. . unless it is registered as a company under this Act." This provision is still in force. The courts have uniformly refused to enforce any contract made with a body which should have been registered under this provision. The authorities are collected in Lindley, Companies, 6 ed., 185, note c.

This review of the authorities establishes that there is no authority in England from

the earliest times to the present day denying collateral attack upon incorporation where the assumption of the corporate privilege is naked.

Suppose, however, (1) that a charter of the king has been actually, but improvidently, issued; or (2) that Parliament has passed a special act of incorporation to become effective upon the performance of conditions precedent, and that the conditions have not been performed; or (3) that there has been partial, but not complete, compliance with the provisions of a general incorporation law.

(1) Grant was of opinion that if a charter had been issued by the king as an exercise of the royal prerogative and it was in excess of such prerogative, the associates and their successors were, after acceptance, estopped to dispute the validity of the charter. But the authorities which he cites cannot be said clearly to establish his point. Grant, Corp., 20 (note p), 21 (notes q and r), 22 (notes t and x), 23 (note b). In Queen v. Boucher, 2 G. & D.737 (1842), a statute authorized the crown, on a given state of facts, to grant a charter of incorporation to a municipality. The crown granted a charter. The court refused, where the validity of the incorporation was questioned collaterally, to inquire whether the charter had been properly granted. This is apparently the first case in which the English courts denied collateral attack. The remarks of Denman, C. J. (p. 749), are inconsistent with his own remarks in Rutter v. Chapman, 8 M. & W. 1, 110.

In Atty.-Gen. v. Avon, 33 Beav. 67, 74 (modified, on appeal, 9 L. T. (N. s.) 187), a court of equity declined to inquire collaterally whether a municipal charter, actually issued by the crown, was, under the terms of the statute, properly issued.

(2) Denton v. East Anglian Co., 3 C. & K. 16. Parliament passed an act consolidating three corporations into one, the act to take effect when a certain certificate was given. The plaintiff sued the consolidated company to recover the price of goods sold. Counsel for the defendant objected that the plaintiff had not shown that the certificate had been given. A witness testified that business had been done in the name of the consolidated company. Campbell, C. J., directed a verdict for the plaintiff.

(3) The first general incorporation law in England was passed in 1844 (7 & 8 Vict., c. 110). In Pilbrow v. Pilbrow's Co., 5 C. B. 440, 472 (1848), three of the judges apparently were of the opinion that a certificate of registration under the statute was conclusive evidence of the incorporation of the associates. It put the associates " upon the same footing as if they held the patent confirmed by an act of Parliament." In Banwen Iron Co. v. Barnett, 8 C. B. 406 (1849), the question was considered with more care. A shareholder resisted a call on the ground that the certificate of registration had been granted upon the production of a deed not containing all the matter required by law. Maule and Williams, JJ., concurred in disallowing this defense. Both judges inclined to hold “that, although the registrar may have erred in granting a certificate of complete incorporation, the company [was] to be considered as an incorporated company, until dissolved by a competent authority." Maule, J., who gave the principal opinion, rested his judgment, however, on a narrower ground. The defendant was to be taken as one of the shareholders who concurred in having the deed registered, and therefore he could not raise any objection to the incorporation. But a stranger's position would differ materially the certificate might not be conclusive upon everybody. Williams, J., had remarked that "the Statute appears to be defectively drawn." By 19 & 20 Vict., c. 47, § 13 (1856), it was provided that "the certificate of incorporation given by the registrar shall be conclusive evidence that all the requisitions of this act in respect of registration have been complied with." This provision was repeated in the Companies Act of 1862 (25 & 26 Vict, c. 89).

Nevertheless collateral attack has been allowed where the objection was that the company was not such a company as was authorized to be registered. In re Northumberland Dist. Banking Co., 2 De G. & J. 357 ; In re Nat. Debenture Corporation,

[1891] 2 Ch. 505 (Kekewich, J., said that the certificate was conclusive only "as to matter of machinery "). See also Liverpool Bank v. Mellor, 3 H. & N. 551; In re Bridport Old Brewery Co., L. R. 2 Ch. 191, 195; Wenlock v. River Dee Co., 36 Ch. D. 674, 693. Cf. Peel's Case, L. R. 2 Ch. 674, 681; Oakes v. Turquand, L. R. 2 H. L. 325, 351; Reuss v. Bos., L. R. 5 H. L. 176, 200; Nassau Phosphate Co., 2 Ch. D. 610; In re Ennis Co., L. R. Ir. 3 Ch. D. 94; Glover v. Giles, 18 Ch. D. 173; Hill v. Hill, 55 L. T. (N. s.) 769; In re Laxon & Co., [1892] 3 Ch. 555; Ladies Dress Ass'n v. Pulbrook, [1900] 2 Q. B. 376.

By 63 & 64 Vict., c. 48, § 1 (1900), it is provided that the registrar's certificate "shall be conclusive evidence that all the requisitions of the Companies Acts in respect of registration and of matters precedent and incidental thereto have been complied with, and that the association is a company authorized to be registered and duly registered under the Companies Act."

Questions as to collateral attack upon incorporation usually have arisen in the United States where there has been partial, but not complete, compliance with the provisions of a general incorporation law. Owing to the form of their statutes, the English courts have, in the main, not been troubled by these questions.

Apparently no English judge has ever attempted to define the phrase "de facto corporation."

NOTE C.

A subscribes to the stock of a corporation organized under an unconstitutional law. The corporation may maintain an action for payment of the subscription. Evansville Co. v. Evansville, 15 Ind. 395, 416; East Pascagoula Co. v. West, 13 La. Ann. 545; Weinman v. Wilkinsburg Co., 118 Pa. St. 192. See also St. Louis Ass'n v. Hennessy, II Mo. App. 555.

A takes insurance from such a corporation and gives his note in payment. The corporation may maintain an action for payment of the note. Freeland v. Penn. Co., 94 Pa. St. 504. Contra, Skinner v. Wilhelm, 63 Mich. 568.

A borrows money from such a corporation. It may maintain an action for repayment, and may enforce the securities given. Winget v. Quincy Ass'n, 128 Ill. 67; Platte Bank v. Harding, 1 Neb. 461; Building Ass'n v. Chamberlain, 4 S. D. 271. See also St. Louis v. Shields, 62 Mo. 247, 252. Contra, Green v. Graves, 1 Doug. (Mich.) 351; Owen v. Bank of Sandstone, 2 ibid, 134. But in Burton v. Schildbach, 45 Mich. 504, a receiver of the corporation was allowed to proceed in equity to require A to account, although the receiver was not allowed to enforce the securities given.

Such a corporation carries goods for A. It may recover the toll. Black River Co. v. Holway, 85 Wis. 344.

The receiver of such a corporation may maintain an action against the state itself to recover the consideration paid for a grant which had failed. Coxe v. State, 144 N. Y. 396.

Where the corporation is organized under a law which permits the formation of some corporations, but not of such a corporation as was organized, it may maintain an action for payment of a subscription to its stock. Per Rapallo, J., in Phoenix Co. v. Badger, 67 N. Y. 294. Contra, Raccoon River Co. v. Eagle, 29 Oh. St. 238.

A borrows money from such a corporation. It may maintain an action for repayment, and may enforce the securities given. Homestead Co. v. Linigan, 46 La. Ann. 1118. See also New Orleans Co. v. Louisiana, 180 U. S. 320, 328. Cf. Workingmen's Bank v. Converse, 29 La. Ann. 369.

NOTE D.

Where legal incorporation failed because of a lack of good faith on the part of the associates, but this lack in no wise injured A, the corporation may maintain an action

for breach of A's contract. See Southern Bank v. Williams, 25 Ga. 534; Smith v. Mississippi Co., 14 Miss. 179; United States Co. v. Schlegel, 143 N. Y. 537; Palmer v. Lawrence, 3 Sandf. (N. Y.) 161, 168; Wallace v. Loomis, 97 U. S. 146, 154. Note also Pattison v. Albany Ass'n, 63 Ga. 373.

Where legal incorporation has ceased because of lapse of time, and A thereafter contracts with the associates as a corporation, the corporation may maintain an action for breach of A's contract. West Missouri Co. v. Kansas City Co., 161 Mo. 595; Miller v. Coal Co., 31 W. Va. 836, 841; Citizens Bank v. Jones, 117 Wis. 446. Contra, White v. Campbell, 5 Humph. (Tenn.) 38 (1844). But if A dealt with the associates as a corporation while their charter was in force, he may show that, at time of suit brought, the charter had expired through lapse of time. Clark v. American Coal Co., 165 Ind. 213.

Where the assumption of the corporate privilege is naked, the propriety of allowing this to be a foundation of rights in the associates may well be doubted. If A contracts with the associates as a corporation, does this without more give them a -right to sue A as a corporation? Some courts have been careful not to commit themselves to any larger doctrine than that the contract is sufficient to make a primâ facie case of incorporation. See Montgomery R. R. v. Hurst, 9 Ala. 513; Gaines v. Bank of Mississippi, 12 Ark. 769; Brown v. Mortgage Co., 110 Ill. 235, 241; Williams v. Cheney, 3 Gray (Mass.) 215, 220; Topping v. Bickford, 4 Allen (Mass.) 120, 121; Williamsburg Co. v. Frothingham, 122 Mass. 391; French v. Donohue, 29 Minn. 111, 113; Johnston Co. v. Clark, 30 Minn. 308; Den v. Van Houten, 5 Halst. (N. J.) 270; Ryan v. Martin, 91 N. C. 464. Some courts have gone further, and have said that where the assumption is naked the associates may not sue as a corporation. See Schuetzen Bund v. Agitations Verein, 44 Mich. 313; Methodist Church v. Pickett, 19 N. Y. 482. On the other hand, there is a cloud of dicta to the effect that if A contracts with the associates as a corporation, he is estopped to show that they were not authorized to act as a corporation. Such a dictum seems first to have been made in Dutchess Manufactory v. Davis, 14 Johns. (N. Y.) 239 (1817), in which the court relied on Henriques v. Dutch West India Co., 2 Ld. Raym. 1532. See the explanation of this latter case by Nelson, J., in Welland Canal Co. v. Hathaway, 8 Wend. (N. Y.) 480, 481. While the language of these dicta is unrestrained, and, taken at its face value, covers the case of naked assumption, it is clear that in nearly all of the cases no question as to naked assumption was present to the minds of the judges. Such dicta will be found in McCullough v. Talladega Co., 46 Ala. 376; Lehman v. Warner, 61 Ala. 455, 466; Greenville v. Greenville Co., 125 Ala. 625, 642; Searcy v. Yarnell, 47 Ark. 269, 281; Plummer v. StrubyEstabrooke Co., 23 Colo. 190, 193; School District v. Alderson, 6 Dak. 145, 149; Booske v. Gulf Ice Co., 24 Fla. 550, 559; Petty v. Brunswick Ry. Co., 109 Ga. 666, 674 ; Lombard v. Chicago Congregation, 64 Ill. 477, 487; John v. Farmers' Bank, 2 Blackf. (Ind.) 367, 369; Ensey v. Cleveland Co., 10 Ind. 178; Beaver v. Hartsville University, 34 Ind. 245; Jones v. Kokomo Ass'n, 77 Ind. 340; Cravens v. Eagle Co., 120 Ind. 6; Depew v. Bank of Limestone, 1 J. J. Marsh (Ky.) 378, 380; Blanc v. Germania Bank, 114 La. 739; Meadow Dam Co. v. Gray, 30 Me. 547, 549; Worcester Institution v. Harding, 11 Cush. (Mass.) 285; Stoutimore v. Clark, 70 Mo. 471, 477; Mason v. Crowder, 98 Mo. 352; Congregational Soc. v. Perry, 6 N. H. 164; Nashua Co. v. Moore, 55 N. H. 48, 53; Dutchess Mfy. v. Davis, 14 Johns. (N. Y.) 239; Williams v. Bank of Michigan, 7 Wend. (N. Y.) 539, 542; Commercial Bank v. Pfeiffer, 108 N. Y. 242, 254; All Saints Church v. Lovett, 1 Hall (N. Y.) 191, 198; Newburg Co. v. Weare, 27 Oh. St. 343, 354; Grant v. Clay Co., 80 Pa. St. 208, 218; Myers v. Croft, 13 Wall. (U. S.) 291, 295; Casey v. Galli, 94 U. S. 673, 680; Close v. Glenwood Cemetery, 107 U. S. 466, 477; Andes v. Ely, 158 U. S. 312, 322; Wallace v. Hood, 89 Fed. 11, 20; Wells Co. v. Avon Mills, 118 Fed. 190, 194. Of these dicta, those entitled to most weight are in Williams v Bank of Michigan, 7 Wend. (N. Y.) 539, 542, and Com