Brown v. Atlanta Railway & Power Co.

39 S.E. 71, 113 Ga. 462, 1901 Ga. LEXIS 288
Supreme Court of Georgia·Decided May 20, 1901·Published·Cited by 37 cases

Opinion

Cobb, J.

1. Corporations, using that term to designate organizations merely claiming or alleged to be corporations as well as those which are in all respects legally constituted, have been divided into three classes, corporations de jure, corporations de facto, and corporations by estoppel. Corporations de jure have been de[468] fined to be those whose legal right to exist can not be questioned even by the State itself. The expression “ de facto corporations ” is generally used to denote associations exercising corporate powers under color of a more or less legal organization. One who has contracted with a corporation as such is estopped to deny its existence as a corporation at the date of the contract, in any suit arising thereunder, and such a corporation has been, it seems to us with great propriety, designated a corporation by estoppel. See Notes of John Lewis, Esq., to Vanneman v. Young, 3 Am. R. & Cor. Cas. 662 (52 N. J. L. 403), and authorities there cited. Where there can not be a corporation de jure there can not be one de facto. In order to constitute a corporation de facto, it is necessary that there should be either a charter or a law under which such a corporation could exist with the powers it assumes to exercise, and a colorable compliance with the requirements of the charter or the law and a user of the rights claimed under the same. See Georgia Southern & Florida R. Co. v. Trust Co., 94 Ga. 306, 316, and cases cited. Whether or not the rule, that there must be a charter or a law authorizing the creation of a corporation and a colorable compliance with the terms of such charter or law, applies to corporations by estoppel, is a question upon which there is some conflict of authority. The better doctrine seems to be that estoppel prevails notwithstanding the law under which the corporation claims to exist may be unconstitutional or otherwise invalid. See the notes to Yanneman v. Young, supra, and cases therein cited; G. S. & F. R. Co. v. Trust Co., 94 Ga. 315, and cases cited.

The power to create corporations resides in the State. If there is nothing in the constitution limiting or restricting the authority of the lawmaking body in this respect, this power is to be exercised by it. When this power is possessed by the State legislature, the question whether a given company of individuals has a legal corporate existence is to be determined by ascertaining whether the legislature has given its consent to the existence of such a corporation, either by the passage of a general law providing the manner in which corporations of that character may be formed, or by a special charter, if the legislature has authority to create corporations in this manner, and by ascertaining further whether there has been a compliance with the terms of the charter, whether the same be granted by special enactment or under the provisions of a general [469] law. If the corporation has a charter issued to it in the manner prescribed by law, and has in its organization complied fully with every requirement of the charter, then,, even as against the State, the corporation has a right to exist, and is technically a de jur,e corporation. In order, therefore, to constitute a de jure corporation, when the power to create corporations is vested in the legislature, it is necessary that the legislature should consent to the existence of the corporation in the manner and form in which it is asserting its right to exercise corporate functions. If the lawmaking body gives its consent that a company of individuals may exercise corporate power in a given way, the right of such company of individuals to exercise such authority can not be attacked collaterally by any one against whom the corporation may be proceeding within the limits of its organic powers, and not even the State itself will be. permitted to question the right of the corporation to exist and exercise the powers which the legislature has consented it should exercise, so long as the corporation is not guilty of any act which would be a sufficient reason for the State to institute a proceeding to forfeit the charter of the corporation. If a corporation has been formed, and is exercising corporate authority under color of a charter irregularly granted, or under a law authorizing the grant of corporate powers to such a corporation, it is well settled that defects in the organization of such a corporation can be cured by an act of the legislature which either expressly or impliedly declares that such corporation has a right to exist without regard to such defects. 1 Thomp. Cor. §512; 1 Mor. Cor. §20; Taylor, Priv. Cor. §157; Central Co. v. Alabama Co., 70 Ala. 120, s. c. 9 Am. Cor. Cas. 8. This has been held to be true even in cases where the lawmaking power of the State was prohibited by the constitution from creating the corporation in the first instance. See Central Co. v. Alabama Co., supra.

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Brown v. Atlanta Railway & Power Co., 39 S.E. 71, 113 Ga. 462, 1901 Ga. LEXIS 288 (Ga. 1901).

39 S.E. 71 (Brown v. Atlanta Railway & Power Co.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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