instructing him to contract for that corporation, induced the wrong. They would therefore be liable for the wrong, just as a person who procures the commission of a trespass is liable for the trespass. See Pollock, Torts, 7 ed., 74; Trowbridge v. Scudder, 11 Cush. (Mass.) 83, 86; Medill v. Collier, 16 Oh. St. 599, 611.

In Utley v. Tool Co., 11 Gray (Mass.) 139, Bigelow, J., said: “We are not called on now to say whether the plaintiffs have any remedy for the collection of their debt against those who participated in the transactions connected with the attempted organization of the supposed corporation."

In First Bank v. Almy, 117 Mass. 476, there is a dictum by Gray, C. J.: “Even if the organization of the corporation had been defective, there would have been great difficulty in holding the associates to be subject to the liability of co-partners which they never intended to assume."

...

Morawetz says (Priv. Corp., 2 ed., § 748): “If an association assumes to enter into a contract in a corporate capacity, and the party dealing with the association contracts with it as if it were a corporation, the individual members of such association cannot be charged as parties to the contract, either severally or jointly, or as partners. It is clear that the members of the association do not agree to be parties to the contract severally or jointly. They do not agree to be bound as partners." This reasoning was applied in Planters Bank v. Padgett, 69 Ga. 159, and was approved by dicta in Canfield v. Gregory, 66 Conn. 9, 17, and in Miller v. Coal Co., 31 W. Va. 836, 840. Viewing the authorities as a whole, however, they establish the proposition that the associates may be held to full liability on a contract, notwithstanding that they intended to contract only as a corporation and therefore to subject themselves only to limited liability. There are decisions to that effect in Christian Co. v. Fruitdale Co., 121 Ala. 340; Garnett v. Richardson, 35 Ark. 144, 146; Forbes v. Whittemore, 62 Ark. 229, 234; Taylor v. Branham, 35 Fla. 297, 302; Duke v. Taylor, 37 Fla. 64, 75; Pettis v. Atkins, 60 Ill. 454; Bigelow v. Gregory, 73 Ill. 197; Kaiser v. Lawrence Bank, 56 Ia. 104; McLennan v. Hopkins, 2 Kan. App. 260; Cincinnati Co. v. Bate, 96 Ky. 356; Field v. Cooks, 16 La. Ann. 153; Chaffe v. Ludeling, 27 La. Ann. 607; Williams v. Hewitt, 47 La. Ann. 1076; Eaton v. Walker, 76 Mich. 579, 590; Johnson v. Corser, 34 Minn. 355, 357; Martin v. Fewell, 79 Mo. 401; Furniture Co. v. Crawford, 127 Mo. 356, 364; Cleaton v. Emery, 49 Mo. App. 345; Davidson v. Hobson, 59 Mo. App. 130; Abbott v. Omaha Co., 4 Neb. 416; Bank of Watertown v. Landon, 45 N. Y. 410; Medill v. Collier, 16 Oh. St. 599, 612; Guckert v. Hacke, 159 Pa. St. 303; N. Y. Bank v. Crowell, 177 Pa. St. 313; Haslett v. Wotherspoon, 2 Rich. Eq. (S. C.) 395; Empire Mills v. Alston Co., 15 S. W. 505 (Tex.); Mitchell v. Jensen, 29 Utah 346; Bergeron v. Hobbs, 96 Wis. 641; Slocum v. Head, 105 Wis. 431; Owen v. Shepard, 59 Fed. 746; Wechselberg v. Flour City Bank, 64 Fed. 90; Davis v. Stevens, 104 Fed. 235. There are clear dicta to the same effect in Stafford Bank v. Palmer, 47 Conn. 443; Lawler v. Murphy, 58 Conn. 294, 313; Loverin v. McLaughlin, 161 Ill. 417, 435; Sentell v. Rives, 48 La. Ann. 1214; State v. Debenture Co., 107 La. 562, 570; Michigan v. How, I Mich. 512; Hill v. Beach, 1 Beasl. (N. J) 31, 36; Fuller v. Rowe, 57 N. Y. 23, 26. See also Coleman v. Coleman, 78 Ind. 344; Flagg v. Stowe, 85 Ill. 164; Matter of Browne Co., Ltd., 106 La. 486; Montgomery v. Forbes, 148 Mass. 249; Booth v. Wonderly, 36 N. J. L. 250; Worthington v. Griesser, 77 N. Y. App. Div. 203; Bank v. Hall, 35 Oh. St. 158; Ridenour v. Mayo, 40 Oh. St. 9; Brundred v. Rice, 49 Oh. St. 640; Vanhorn v. Corcoran, 127 Pa. St. 255; McGrew v. City Produce Exchange, 85 Tenn. 572; Smith v. Ins. Co., 14 Fed. 399.

If the conditions stated in the opening paragraph of the article are satisfied, the associates have usually been shielded from full liability to the other contracting party, but not on the reasoning that no liability might be imposed upon them except such as they had intended to assume. Snider's Co. v. Troy, 91 Ala. 224; Cory v. Lee, 93 Ala. 468 Owensboro Co. v. Bliss, 132 Ala. 253; Humphreys v. Mooney, 5 Colo. 282; Doty

v. Patterson, 155 Ind. 60; Finnegan v. Noerenberg, 52 Minn. 239; Johnson v. Okerstrom, 70 Minn. 303; Kleckner v. Turk, 45 Neb. 176; Hogue v. Capital Bank, 47 Neb. 929; Larned v. Beal, 65 N. H. 184; Stout v. Zulick, 48 N. J. L. 599; Vanneman v. Young, 52 N. J. L. 403; Rowland v. Meader Co., 38 Oh. St. 269; Mason v. Stevens, 16 S. D. 320; Shields v. Clifton Co., 94 Tenn. 123; Tennessee Co. v. Massey, 56 S. W. 35 (Tenn.); American Co. v. Heidenheimer, 80 Tex. 344; Clausen v. Head, 110 Wis. 405; Gartside Co. v. Maxwell, 22 Fed. 197. See also Canfield v. Gregory, 66 Conn. 9, 17; Clark v. Richardson, 31 S. W. 878 (Ky.); Sentell v. Hewitt, 50 La. Ann. 3; Merchants' Bank v. Stone, 38 Mich. 779; American Co. v. Bulkley, 107 Mich. 447; Love v. Ramsey, 139 Mich. 47; Richards v. Minnesota Bank, 75 Minn. 196; Whitford v. Laidler, 94 N. Y. 145, 151; Wentz v. Lowe, 3 Atl. 878 (Pa.).

For the effect of special statutory provisions, see Loverin v. McLaughlin, 161 Ill. 417, 434 (cf. 83 Ill. App. 643); Eisfeld v. Kenworth, 50 Ia. 389; Marshall v. Harris, 55 Ia. 182; Clegg v. Hamilton Co., 61 Ia. 121; Heuer v. Carmichael, 82 Ia. 288 (cf. Bank of Davenport v. Davies, 43 Ia. 424, followed in Jessup v. Carnegie, 80 N. Y. 441); Sweney v. Talcott, 85 Ia. 103; Thornton v. Balcom, 85 Ia. 198; Stokes v. Findlay, 4 McCrary (U. S. C. C.) 205.

If the state has taken affirmative action and by its constitution or laws has indicated an intensified intent not to permit corporate action, except on compliance with stated requirements, then, although the conditions stated in the opening paragraph of the article are satisfied, the courts may hold the associates to full liability. Medill v. Collier, 16 Oh. St. 599, 612 (associates engaged in the banking business without making a required deposit of securities; it is not entirely clear whether the court considered that the associates had not been incorporated, or that they were engaged in an ultra vires transaction; apparently the court would have reached the same result on either supposition).

There are some decisions holding the associates to full liability to the other contracting party, although the conditions stated in the opening paragraph of the article are satisfied and there has been no such affirmative action by the state. Garnett v. Richardson, 35 Ark. 144; Bigelow v. Gregory, 73 Ill. 197; Kaiser v. Lawrence Bank, 56 Ia. 104; Williams v. Hewitt, 47 La. Ann. 1076 (full consideration of the question of estoppel); Bergeron v. Hobbs, 96 Wis. 641; Wechselburg v. Flour City Bank, 64 Fed. 90. See also Johnson v. Corser, 34 Minn. 355, 357; Abbott v. Omaha Co., 4 Neb. 416. Cf. Granby Co. v. Richards, 95 Mo. 106, with the reasoning of the court in Hurt v. Salisbury, 55 Mo. 310.

If the law under which the associates organized is unconstitutional, the court, in Michigan v. How, 1 Mich. 512, said that the associates would be exposed to full liability. "When the law under which such exemption is claimed is unconstitutional, the exemption itself ceases to exist." There is a dictum to the same effect in Burton v. Schildbach, 45 Mich. 504, 511, and a decision in Eaton v. Walker, 76 Mich. 579, 590"Obligors are bound, not by the style which they give to themselves, but by the consequences which they incur by reason of their acts." The court would apparently have held the associates even if the plaintiff had admitted that he dealt with them as a corporation. See also Clark v. American Co., 165 Ind. 213, 216.

In Planters Bank v. Padgett, 69 Ga. 159, a court assumed, by a judgment, to incorporate associates. The judgment was held to be void, but the associates were shielded from full liability on the authority of Morawetz (§ 748, supra).

In Richards v. Minnesota Bank, 75 Minn. 196, the name of a corporation de jure was changed. Held, that, even if the act making the change was unconstitutional, persons contracting with the corporation in such new name could not hold the stockholders to full liability.

Where the law under which the associates organized did not authorize such a cor. poration as they attempted, they were held to full liability in Davis v. Stevens, 104 Fed. 235 (Mason v. Stevens, 16 S. D. 320, is not inconsistent with this principle). To the same effect are Booth v. Wonderly, 36 N. J. L. 250 (a charter authorizing a business to be carried on in Trenton was used in conducting a business at Jersey City; apparently no stock was subscribed; the persons who assumed to act as directors were held to full liability); Ridenour v. Mayo, 40 Oh. St. 9 (trustees of a savings bank used name of bank in carrying on a general banking business). See also Vredenburg v. Behan, 33 La. Ann. 627; Hill v. Beach, 1 Beasl. (N. J.) 31, 36 (one ground of the decision was that the laws of New York did not authorize a corporation to be formed by the residents of another state to do business only in that other state).

In Merchants' Bank v. Stone, 38 Mich. 779, Marston, J., dissenting, held, that a statute authorizing manufacturing corporations did not authorize lumbering companies, and that the associates were exposed to full liability. The grounds on which the majority proceeded, in protecting the associates, are not clear.

Where associates are incorporated by State M, they cannot act as a corporation in State N, unless the courts of State N see fit to give validity to the incorporation. Where the courts of State N have refused to give validity to a foreign incorporation, they have held the associates to full liability on their contracts. Taylor v. Branham, 35 Fla. 297; Cleaton v. Emery, 49 Mo. App. 345; Davidson v. Hobson, 59 Mo. App. 130; Empire Mills v. Alston Co., 15 S. W. 505 (Tex.). See also Duke v. Taylor, 37 Fla. 64; Montgomery v. Forbes, 148 Mass. 249; Hill v. Beach, 1 Beasl. (N. J.) 31, 36; Owen v. Shepard, 59 Fed. 746, 749. It may be noted in passing that the present tendency of the courts is to go far in giving validity to a foreign incorporation. See Demarest v. Flack, 128 N. Y. 205; Second Bank v. Hall, 35 Oh. St. 158.

Where the associates have not acted in good faith, a preliminary question arises. It seems always to have been the law in this country that a charter obtained by fraud was voidable, and not void (as to the English law, see Morgan v. Seaward, 2 M. & W. 544, 561; Macbride v. Lindsay, 9 Hare, 574, 583; Robinson v. London Hospital, 22 L. J. Ch. 754,757). Thus, if the legislature is induced by fraud to pass a special act of incorporation, the corporation comes into being, and the fraud is only a cause of forfeiture by the state. Charles River Bridge v. Warren Bridge, 7 Pick. (Mass.) 344, 370. Similarly, if the legislature has by a special or general law authorized a designated official or body to issue a charter or a certificate (which is made conclusive evidence of incorporation) upon the performance of conditions precedent, and the official or body is induced by fraud to issue such charter or certificate. Rice v. Bank of Commonwealth, 126 Mass. 300 (Mass. Laws of 1903, c. 437, § 12, provides that the certificate of the Secretary of State "shall have the force and effect of a special charter"); Nat'l Bank v. Rockefeller, 195 Mo. 15, 42 (the statute provides that the certificate of the Secretary of State" shall be taken by all courts of this State as evidence of the corporate existence of such corporation"; the court held that the certificate was equivalent to a special act of the legislature; whether this was a sound construction of the statute, quaere); Centre Co. v. M'Conaby, 16 Serg. & R. (Pa.) 140, 1 Pen. & W. (Pa.) 426, 431; Travaglini v. Societa Italiane, 5 Pa. Dist. 441; German Ins. Co. v. Strahl, 13 Phila. (Pa.) 512. See also Pattison v. Albany Ass'n, 63 Ga. 373; Laflin Co. v. Sinsheimer, 46 Md. 315; U. S. Vinegar Co. v. Schlegel, 143 N. Y. 537; Cochran v. Arnold, 58 Pa. St. 399; Wells Co. v. Gastonia Co., 198 U. S. 177, 185. Similarly, if the designated official or body is induced by fraud to do an act the performance of which is one of the conditions precedent to incorporation. Duke v. Cahawba Co., 16 Ala. 372; Litchfield Bank v. Church, 29 Conn. 137, 148; Jones v. Dana, 24 Barb. (N. Y.) 395; Tar River Co. v. Neal, 3 Hawks (N. C.) 520.

Wherever the legislature has authorized the formation of a corporation upon the performance of certain conditions precedent, the courts must necessarily determine

whether the legislature intended to require a certain mental state in the corporators as one of these conditions. Considering the difficulty of proof on such a point, the courts may incline against such a construction of the law. See Importing Co. v. Locke, 50 Ala. 332, 334; Niemeyer v. Little Rock Ry., 43 Ark. 111, 120; Aurora Co. v. Lawrenceburgh, 56 Ind. 80, 87; Lincoln Ass'n v. Graham, 7 Neb. 173; Atty.-Gen. v. Stevens, Saxt. Ch. (N. J.) 369, 378; Nat'l Docks Co. v. Central R. R., 32 N. J. Eq. 755; Terhune v. Midland Co., 38 N. J. Eq. 423; Atty.-Gen. v. Am. Tobacco Co., 55 N. J. Eq. 352, 369, aff'd 56 N. J. Eq. 847; Buffalo Co. v. Hatch, 20 N. Y. 157, 159; Wellington Co. v. Cashie Co., 114 N. C. 690; Cochran v. Arnold, 58 Pa. St. 399, 405; Windsor Co. v. Carnegie Co., 204 Pa. St. 459, and cases cited. Cf. Christian Co. v. Fruitdale Co., 121 Ala. 340, 345; Montgomery v. Forbes, 148 Mass. 249; Augir v. Ryan, 63 Minn. 373; Hill v. Beach, I Beasl. (N. J.) 31, 36; Jersey City Co. v. Dwight, 29 N. J. Eq. 242 (the learned vice-chancellor who decided this case assumed, 46 N. J. Eq. 116, that it could not stand with 32 N. J. Eq. 755. But see 49 N. J. Eq. 329, 335); Elizabeth Co. v. Green, 49 N. J. Eq. 329 (by five dissenting judges. Whether the majority was opposed on this point does not appear. The decision is explained in 52 N. J. Eq. 111, 144, on a ground consistent with this opinion by the dissenting judges); Farnham v. Benedict, 107 N. Y. 159, 169; Brundred v. Rice, 49 Oh. St. 640; McGrew v. City Produce Exchange, 85 Tenn. 572; Le Warne v. Meyer, 38 Fed. 191. See also Carey v. Cincinnati Co., 5 Ia. 357; Chicora Co. v. Crews, 6 S. C. 243, 275. In New Orleans Co. v. Louisiana, 180 U. S. 320, 330, Peckham, J., said: "If not created for a lawful purpose, the company was not created at all." There is a dictum to the same effect by Lord Herschell in Salomon v. Broderip, [1897] A. C. 22, 43.

The legislature may, however, require a certain mental state as a condition precedent to incorporation. Thus it may require that certain subscriptions or payments be made in good faith. And, it is submitted, where the legislature requires that certain statements be made and filed or recorded in a public office, the courts should hold that the legislature intended to require that such statements be made in good faith.

Assume that such requirement is made. For example, the legislature requires the associates to state the amount of capital stock subscribed and paid in. The associates make statements which are false, and which are known to be false. If incorporation fails because such statements are not made in good faith, it would seem to be clear that the associates should be held to full liability on their contracts. To say that A, the other contracting party, is estopped to show that the associates are not incorporated when the incorporation has failed because the associates made a representation which they knew was not true, and A has acted on it to his hurt, would be contrary to the principles underlying the law of estoppel. There is no equity in estopping A under these circumstances; the equity is all the other way. Here then is a case where justice between the parties and public policy both require that the associates be held to full liability. One may be permitted to be astonished at a doctrine which protects the associates, —it is contrary to the manner in which the courts deal with fraud in every other branch of the law.

In Gow v. Collin, 109 Mich. 45, the plaintiff alleged that the statements of the associates in their certificate of incorporation respecting their capital were false, and that he contracted with them relying on these statements; he sought to hold them to full liability. A demurrer to the bill was sustained. 'The company, in form, was duly incorporated, was recognized by the public authorities, and filed its annual reports, and did business as a corporation. The complainants dealt with it as a corporation." substance, this was all the consideration which the court gave to the point. The decision is the more remarkable when compared with Doyle v. Mizner, 42 Mich. 332.

In

In Cochran v. Arnold, 58 Pa. St. 399, the reasoning of the court goes as far as the decision in Gow v. Collin. But the statements, although technically untrue, do not seem

to have been made in bad faith, and, in any event, the other contracting party knew all the facts.

Laflin Co. v. Sinsheimer, 46 Md. 315. From portions of the opinion it would appear that the court dealt with the case as one of incorporation secured by fraud. But elsewhere (p. 320) it says that the validity of the incorporation cannot be collaterally attacked "by proving aliunde the certificate of its incorporation that certain prerequisites of the law had not been in good faith complied with.”

In Webb v. Rockefeller, 195 Mo. 57, the court held that A, who had contracted with the associates, could not recover in tort because he was not of the class intended to be influenced by the representations as to their capital.

On the other hand, in Montgomery v. Forbes, 148 Mass. 249, the defendant falsely stated that the business of the corporation was to be carried on in a certain state; he thereafter purchased goods in the name of the corporation, and was held to full liability. There is a dictum to the same effect in Gartside Co. v. Maxwell, 22 Fed. 197. See also Cleaton v. Emery, 49 Mo. App. 345; Davidson v. Hobson, 59 Mo. App. 130; Hill v. Beach, I Beasl. (N. J.) 31, 36; Booth v. Wonderly, 36 N. J. L. 250. In Christian Co. v. Fruitdale Co., 121 Ala. 340, 345, the question was whether or not the associates were to be held to full liability to one who had contracted with them not knowing that they assumed to act as a corporation. The evidence went to show that affidavits as to the capital were false. "We are, therefore, clear to the conclusion . . . that all the evidence. . . tending to show that the incorporation . . . was a fraud and a pretense intended to cover a partnership business, to shield the partners from individual liability and to set up a straw corporation without capital and without assets should have been allowed to go to the jury."

In Brundred v. Rice, 49 Oh. St. 640, 650, where a corporation was not organized in good faith, but for the purpose of consummating an illegal agreement, the associates were held accountable for moneys nominally paid to the corporation. "The act of incorporating can be of no avail to them as a defense." To the same effect is McGrew v. City Produce Exchange, 85 Tenn. 572.

If the attempt at incorporation is not made in good faith, but persons purchase the stock in good faith, they should not be exposed to full liability to those who have contracted with the corporation. American Co. v. Heidenheimer, 80 Tex. 344 See also Minor v. Mechanics Bank, 1 Pet. (U. S.) 46, 66.

In Bank of Watertown v. Landon, 45 N. Y. 410, the associates, after the expiration of their charter, agreed to continue the business, and the business was continued ostensibly by a corporation. The plaintiff became the owner of a note signed in the name of the corporation, and which he believed was made by a corporation de jure. The associates were held to full liability. Cf. the dictum in Miller v. Coal Co., 31 W. Va. 836, 840.

Where the assumption of the corporate privilege was naked, the associates have uniformly been held to full liability to the other contracting party. Forbes v. Whittemore, 62 Ark. 229; Pettis v. Atkins, 60 Ill. 454; McLennan v. Hopkins, 2 Kan. App. 260; Chaffe v. Ludeling, 27 La. Ann. 607, 611; Johnson v. Corser, 34 Minn. 355 (see the explanation of this case in 52 Minn. 239, 244); Furniture Co. v. Crawford, 127 Mo. 356, 364; Haslett v. Wotherspoon, 2 Rich. Eq. (S. C.) 395; Owen v. Shepard, 59 Fed. 746. See also Johnson v. Okerstrom, 70 Minn. 303, 311; Martin v. Fewell, 79 Mo. 401; Bergeron v. Hobbs, 96 Wis. 641. The assumption of the corporate privilege may be called naked wherever the associates have not filed or recorded their certificate of incorporation (or similar paper) in any public office designated by law for the filing of such papers.