selves for the purpose of forming a corporation, to be called the Forbes Woolen Mills, the amount of the capital stock to be twenty thousand dollars, divided into four hundred shares of fifty dollars each; and that the object of the corporation was to manufacture and sell woolen and other goods, and the places of business were Nashua, in New Hampshire, and East Brookfield, in Massachusetts.

The defendant further testified that, subsequently to the execution of the agreement of association, one or more meetings were held by the signers, at which he was elected president and treasurer of the corporation, and such other officers and directors were elected as were necessary under the laws of New Hampshire; that the attorney had been recommended to him as a reputable and reliable man and attorney, and he left everything in his hands, and supposed he did everything necessary and proper to establish the corporation in a legal manner; that records of the meetings were kept by the attorney, and that there was a stock-book, and certificates of stock were issued; that all the stock was issued to the defendant, and that no other person was interested in it; that fifty per cent. of the capital stock of the corporation was actually paid in by him in cash and supplies; that after the organization of the corporation he hired, as treasurer of the corporation, a mill in East Brookfield belonging to his mother, Roxanna Forbes, and himself, and began the manufacture of woolen goods; that he purchased the necessary supplies, including those named in the plaintiff's account, and placed them under the direction of a superintendent, employed to supervise the manufacture of the goods; that there was no manufacturing done in Nashua, nor any other business except the holding of corporate meetings, and possibly the sale now and then of a bill of goods in the ordinary course of business; and that the principal place of business of the corporation was in East Brookfield; that he, as president and treasurer of the corporation, continued to manufacture,woolen goods for about four months, and sent the goods to commission houses in New York to be sold; and that at the end of said four months he was unable to continue the business and gave it up, and no further business was done by him or by the corporation.

The following sections of chapter 152 of the General Laws of New Hampshire of 1878 were introduced in evidence:

"Section 1. Any five or more persons of lawful age may, by written articles of agreement, associate themselves together for agricultural, educational or charitable purposes, or for carrying on any lawful business, except banking and the construction and maintenance of a railroad; and when such articles have been executed and recorded in the office of the clerk of the town in which the principal business is to be carried on, and in that of the secretary of state, they shall be a corporation, and such corporation, its officers and stockholders, shall have all the rights and powers and be subject to all the duties and liabilities of similar corporations, their officers and stockholders, except so far as the same are limited or enlarged by this chapter.

"Sec. 2. The object for which the corporation is established, the

place in which its business is to be carried on, and the amount of capital stock to be paid in, shall be distinctly set forth in its articles of agreement.

Upon this evidence the defendant asked the judge to rule that the plaintiffs were not entitled to recover, that the account in question had been paid by the notes of the Forbes Woolen Mills as a corporation, and that there was no evidence to authorize the jury to find for the plaintiffs.

The judge declined so to rule, and submitted the following questions to the jury: "1. Did the Forbes Woolen Mills and the members of the said alleged corporation, including said Forbes, at the time of its attempted organization, intend to carry on its business as a manufacturing corporation (other than holding meetings of its members and officers) in whole or in part, in the city of Nashua, N. H.? 2. Was there any attempt in good faith on the part of the defendant, Forbes, to organize the corporation of the Forbes Woolen Mills? 3d. Did said Forbes at and prior to the time the goods in controversy, were ordered, namely, at all times after May 12, 1885, during his dealings with the plaintiff, believe that the organization of said Forbes Woolen Mills was a valid corporation?"

The jury answered the first two questions in the negative and the third in the affirmative.

The judge, being of the opinion that, upon the findings of the jury and the uncontradicted evidence in the case, the plaintiffs were entitled to recover, directed the jury to return a verdict for the plaintiffs, and reported the case for the determination of this court.

C. ALLEN, J. The apparent corporation was not a corporation. The statute of New Hampshire requires five associates, and the articles of agreement must be recorded in the town in which the principal business is to be carried on, and the place in which the business is to be carried on must be distinctly stated in the articles; otherwise there is no corporation. The defendant's pretended associates were associates only in name; he alone was interested in the enterprise. The articles of agreement were recorded in Nashua, and stated that the business was to be carried on there; but it was not in fact carried on there, and was not intended to be. The defendant took all the shares of the capital stock, and paid into himself as treasurer only 50 per cent. of the amount thereof. This is not a case where there has been a defective organization of a corporation which has a legal existence under a valid charter. Here there was no corporation. It was just the same as if the defendant had done nothing at all in the way of establishing a corporation, but had conducted his business under the name of the Forbes Woolen Mills, calling it a corporation. The business was his personal business, which he transacted under that name. Fuller v. Hooper, 3 Gray 334, 341. Bryant v. Eastman, 7 Cush. III.

The jury found that he did not, in good faith, attempt to organize the corporation, but that he believed it to be a valid corporation. His belief, in view of the facts of the case, is immaterial. Under this

state of things, the defendant bought goods of the plaintiffs for his own sole benefit, adopting the name of the apparent corporation, which had no real existence, and which represented nobody but himself. He can not escape responsibility for his purchases by the device of putting such a mere name between himself and the plaintiffs. The purchase was in substance by and for himself alone. The plaintiffs might have repudiated the transaction, and maintained replevin, if they had learned the facts in time. They may also treat the transaction as a sale to the defendant personally. Fay v. Noble, 7 Cush. 188, 194; Kelner v. Baxter, L. R. 2 C. P. 174, 183, 185; 2 Kent Com. (13th ed.) 630.

Since the notes represented nothing, the plaintiffs were at liberty to treat them as void and recover on the original contract for goods sold. Melledge v. Boston Iron Co., 5 Cush. 158, 171.

Verdict to stand.

Sec. 154. Same.

(b) Written articles of agreement.

UTLEY v. UNION TOOL COMPANY.

1858. IN THE SUPREME JUDICIAL COURT OF MASSACHUSETTS. II Gray's (Mass.) Rep. 139-142.

Actions of contract against the Union Tool Company, described in the writs as "a corporation established according to law, in Goshen, in the county of Hampshire. The principal defendants were defaulted, and several persons were summoned in as stockholders, pursuant to the statute of 1851, ch. 315, and filed answers, upon which trials were had in the court of common pleas in Hampshire.

The plaintiffs proposed to prove by the records of the Union Tool Company that the respondents were stockholders therein. The respondents objected to the admission of this evidence before the exist ence of the corporation had been shown, and unless it was shown that it was a manufacturing corporation whose stockholders might become liable as such for its debts. Morris, J., ruled that it was not necessary for the plaintiffs to prove the existence of the corporation, that being admitted by the default, but that it was necessary to show that it was such a corporation that its stockholders might become individually liable, and admitted evidence that the company had made by-laws and done other acts as a corporation, and the respondents had attended meetings as stockholders, without proof that the company had ever been incorporated by the legislature, or by articles of association in writing, setting forth the amount of the capital stock, and the purpose of their establishment, as required by the statute of 1851, ch. 133, §§ 1-3. Verdicts were taken for the plaintiffs, and the respondents alleged exceptions. The other facts sufficiently appear in the opinion.

These cases were argued at Northampton in September, 1858, and decided at Boston in April, 1860.

BIGELOW, J. There can be no doubt that the burden of proof was on the plaintiffs, to show the legal existence of a corporation, of which the persons summoned in the action were members, and for the debts of which they were personally liable. This is the precise issue which, by statute 1851, ch. 315, § 2, it was intended should be open to a stockholder on his being admitted to defend the action as therein provided. It is to be made to appear that he is liable in the action; otherwise, he is entitled to judgment in his favor "upon the issues joined." It has already been determined that under this provision an alleged stockholder can not be allowed to make a general defense to an action against a corporation, by calling in question the validity of the debt which is sought to be recovered, or disputing the amount averred to be due, but that he has a right to a hearing and adjudication on the question whether he is a member of a corporation and liable as such for its debts. Holyoke Bank v. Goodman Paper Mfg. Co., 9 Cush. 582. It is obvious that the trial of the issue which is thus opened to an alleged stockholder necessarily involves the question of the legal existence of the corporation, for the debt of which he is sought to be charged, because his liability depends on the nature of the corporate body and of the powers and duties with which it was clothed by law. Until these are shown, it can not be known whether the stockholder is legally chargeable or not. Doubtless there may be cases where the existence of a corporation, and the character and description of its functions and privileges, may be shown by prescription or long user. In such case a charter or legislative grant of corporate powers may be presumed. But no such inference or presumption can exist in the present cases, nor do the plaintiffs attempt to maintain their claims to charge the persons summoned on any such ground. On the contrary, the whole case rests on the allegation that the respondents are liable as stockholders in a corporation created and established under the recent statute, entitled "an act relating to joint stock companies." Statue 1851, ch. 133.

But it seems to us that the evidence offered at the trial fails to show that the alleged corporation ever had any legal existence. By reference to the first section of the statute, it will be found that, in order to establish a corporation under it, it is necessary that not less than three persons should enter into "articles of agreement in writing," for the purpose of carrying on business of the nature specified in the statute. By these articles it is provided, in sections 2 and 3, the amount of capital stock shall be fixed and limited, and the purpose for which and the place in which the corporation is to be established shall be distinctly and definitely set forth. By section 4, it is further provided that, before commencing business, a certificate shall be made of the name, purpose, capital stock and other particulars concerning the constitution and objects of the corporation, to be published and recorded as therein required. And by section 5 it is provided that, "when such persons are organized as aforesaid"—that is, by

articles of agreement as above set forth-"they shall become a corporation, with all the powers and privileges and subject to all duties, restrictions and liabilities set forth in the thirty-eighth and forty-fourth chapters of the Revised Statutes." There can be no doubt of the construction which ought to be given to these provisions. The implication is clear and unavoidable that, until the organization is completed according to the requirements of the statute, the association does not become a corporation, and does not possess corporate rights or privileges, nor is it subject to the duties and liabilities of a manufacturing corporation, among which is the liability of the stockholders for the corporate debts, if certain provisions of law are not complied with. There is an obvious reason for making such organization by written articles of agreement a condition precedent to the exercise of corporate rights. It is the basis on which all subsequent proceedings are to rest, and is designed to take the place of a charter or act of incorporation, by which corporate privileges are usually granted. If there were no such requirement. there would be an absence of any provisions by which the right to exercise corporate power could be definitely fixed and established, and there would be no means of ascertaining the rights of stockholders or of persons dealing with such associations.

Upon an examination of the evidence adduced at the trial, there is nothing to show that any articles of agreement were ever entered into for the formation of a corporation under the statute. That some organization took place with a view to establish a corporation is abundantly shown. But the essential fact is wanting to show that the persons engaged in the enterprise ever complied with the condition. precedent to their right to assume the name and functions of a corporation. It is not a case of a defective organization under a charter or act of incorporation, nor of erroneous proceedings after the necessary steps were taken to the assumption of corporate powers, but there is an absolute want of proof that any corporation was ever called into being which had the power of contracting debts or of rendering persons liable therefor as stockholders.

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. It is sufficient for the decision of this case. that the respondents can not be held liable in the action for the debts of a corporation which has never had any legal existence. Exceptions sustained.