distinguished as follows: referring to the first as to the true, the second as the substantial compliance, and the third as the strict compliance rule. Space will permit of discussion here of only the first of the rules just referred to.

The legislatures alone, as has been shown, can create a corporation. Under the modern practice these bodies have passed general incorporation acts entrusting the execution of the law to the executive department of the government. Under the rule now generally established, either by statute or judicial construction, in most of the States a corporation becomes a corporation de facto from the moment the charter or certificate of incorporation is issued by the proper State authorities. The basis of holding such certificates as conclusive of corporate existence as against all the world except the State is that where by reason of such certificate a corporation is held out to the world as ready to undertake business, most disastrous consequences would follow to commercial undertakings if any private person was allowed to go back and enter into an examination of the circumstances attending the original incorporation.2

The power which creates the corporation it is needless to say should alone have the power to take it away. It should not be permitted to parties other than the State for this reason to collaterally impeach corporate existence, for to permit such impeachment would be in legal effect to permit third parties, for the purpose at least of that particular action, to destroy the effect of the previous action of the State in the premises. On grounds of public policy as to all parties but the State, it should under such circumstances be conclusively presumed that the statutory requirements relative to incorporation have been duly complied with.3 A corporation must of necessity be presumed to be rightfully in possession of the franchise and rightfully exercising the power which the legislative grant confers. Individual right is not invaded if the presumption is true in fact and there is no usurpation. It is the State the sovereign-whose rights are invaded and whose authority is usurped. The individual could not create the corporation, could not grant, define, or limit its powers; any grant of these by the sovereign cannot

1 See ante, § 6.

3 Tar River Nav. Co. v. Neal, 3 Hawks

2 Lake Superior Co. v. Morrison, 22 (N. C.), 520; Welch v Bank, 122 N. Y. Canada C. P. 224. 177; 25 N. E. 269.

lessen his right. There can consequently be no cause of complaint by the citizen, and no right to inquire whether the corporate existence is rightful, de jure, or merely colorable.1

Corporations may exist either de jure or de facto. If of the latter class, they are under the same protection of the law and governed by the same legal principles as those of the former so long as the State acquiesces in their existence and exercise of corporate functions. A private citizen whose rights are not invaded and who has no cause of complaint has no right to inquire collaterally into the legality of its existence. This can only be done in a direct proceeding on the part of the State from whom is derived the right to exist as a corporation and whose authority is usurped.2

A corporation de facto may legally do and perform every act and thing which the same entity could do and perform were it a de jure corporation. As to all the world except the paramount authority under which it acts and from which it receives its charter, it occupies the same position as though in all respects valid, and even as against the State, except in direct proceedings to arrest its usurpation of powers, its acts are to be treated as efficacious.3

Finally, it may be observed that the principle here contended for has been held by at least one court to be applicable to a case where a corporation had incorporated under an unconstitutional law, yet nevertheless the validity of the corporation's existence could not be collaterally attacked, as it had been chartered by the implied consent of the State.1

§ 83. Right of State to attack Corporate Existence in Direct Proceedings. This section has reference only to actions brought by the State for the purpose of testing the legality of corporate existence where it is alleged that there has been a failure on the part of the incorporators to perform all the conditions prescribed by statute as a precedent to corporate existence. The action here referred to is that of quo warranto, which, even in the absence of statutory provision, may be maintained at common law in behalf of the State against incorporators who assume to exercise corpo

1 Lehman v. Warner, 61 Ala. 455.

2 Snider's Sons' Co. v. Troy, 91 Ala. 224; 8 So. 658; Tar River Nav. Co. v. Neal, 3 Hawks (N. C.), 520.

84.

3 People v. LaRue, 67 Cal. 526; 8 Pac.

4 Richards v. Bank, 75 Minn. 196; 77 N. W. 822.

rate powers without being legally incorporated, for the purpose of ousting them from the exercise of such powers.1

In all such proceedings as against the State not merely a de facto corporate existence must be shown, but a de jure existence as well. The general prevailing view at the present time seems to be that, as against the State in such proceedings, it is necessary to show a specific statute authorizing the creation of corporations of the character of the one against which the quo warranto proceedings are brought, and also substantial compliance in the preliminary organization of the corporation with all conditions. precedent prescribed by statute.2

In quo warranto proceedings the burden of proof is upon the corporation to show that it has been legally incorporated. In the proceedings of the character referred to it has been well said. that "public policy demands that the power to oust de facto corporations from the exercise of corporate powers because of failure to comply substantially with conditions precedent be sparingly exercised." 4

Were the rule otherwise, disastrous consequences would follow in the commercial world, and in all such cases the courts should take extraordinary care to see that the rights of third parties are fully protected. In proceedings brought by the State, the most important matter to be looked at is whether there has been a failure on the part of the incorporators to comply with the provisions of the statute, which are merely directory as opposed to those that are mandatory. A "directory" provision is one which the legislature did not intend as essential to corporate existence, and the failure to comply with which is a mere irregularity and is not fatal to corporate existence. A "mandatory" provision, on the other hand, is one which must be substantially complied with in order to create a corporation de jure. Whether the particular provision of the statute is directory or mandatory is to be determined by "the intention and true meaning of the legislature deduced from the act and sometimes aided by other acts in pari

1 Greene v. People, 150 Ill. 513; 37 N. E. 842.

2 State v. Webb, 97 Ala. 111; 12 So. 377; People v. Selfridge, 52 Cal. 331; State v. Critchett, 37 Minn. 13; 32 N. W. 787; Holman v. State, 105 Ind. 569; 5 N. E. 702.

3 People v. Lowden (Cal.), 8 Pac. 66. 4 Duggan v. Company, 11 Colo. 113; 17 Pac. 105.

5 Newcomb v. Reed, 12 Allen, 362; B. W. S. Co. v. Inhabitants of Braintree, 146 Mass. 482; 16 N. E. 420.

materia and extraneous circumstances." "1 Even as against the State it is only necessary that a mandatory provision shall be substantially complied with.2

§ 84. When does Corporate Existence commence ? Where the statute provides, as it does in some of the Commonwealths, that the articles of incorporation shall be filed with State officials or in some local county office or both, the general rule is that the corporate existence dates from the time of filing of the articles with such officials and not from the time it begins to do business.3 The foregoing seems to be the rule in force in the majority of States. Some of the States, however, provide by statute as to when corporate existence shall commence, as, for example, Alabama, California, Colorado, Connecticut, Delaware, Idaho, Iowa, Kansas, Kentucky, Maine, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.* In a number of the States corporate existence depends not merely upon filing articles with the Secretary of State, but also upon filing the same in the local recording office of the county where the principal place of business of the corporation is to be located, as, for example, in Arizona, California, Colorado, Delaware, Idaho, Maryland, Montana, New Jersey, Utah, and Wisconsin. In some few of the States the statute by reason of its peculiar provision seems to contemplate the corporate existence shall commence before the filing of articles of incorporation with any official, either State or county; this for the reason that the certificate required to be filed with such officials must be signed by corporate officers. States to which reference is here made are. Arkansas, Illinois, Indian Territory, Maine, Massachusetts, Michigan, and Missouri.

1 Cross v. Company, 17 Ill. 54; Eakright v. Company, 13 Ind. 404; Newcomb v. Reed, 12 Allen, 362.

2 People v. Company, 97 Cal. 276; 32 Pac. 236; State v. White, 13 Mo. Appeals 139; People v. Cheeseman, 7 Colo. 376; 3 Pac. 716: Newcomb v. Reed, 12 Allen, 362; Eakright v. Company, 14 Ind. 404; Walworth v. Bracket, 19 Mass. 98; B. W. S. Co. v. Inhabitants of Braintree, 146 Mass. 482; 16 N. E. 420.

3 Hanna v. Company, 23 O St. 622; G. M. & S. Co. v. Richards, 95 Mo. 106; 8 S. W. 246; Humphreys v. Mooney, 5 Colo. 293; V. C. Railway Co. v. Clayes, 21 Vt. 30; Borough of Braddock v. Company, 189 Pa. 379; 42 Atl. 15; Badger Paper Co. v. Rose, 95 Wis. 45; 70 N. W. 302; Hunt v. Company, 11 Kan. 412.

4 See Part II., Synopsis-Digest of the Corporation Laws of the several States and Territories.

There seems to exist in some jurisdictions the theory that in the matter of determining when the corporate existence commences reference must be had, first, to the primary franchise of being a corporation vesting in the incorporato.s and next to the secondary franchise to do certain specific acts which vests in the corporation. Again, in some States, while filing articles of incorporation constitutes a condition precedent to the creation of corporate existence, it is also a condition precedent to the right of doing business.2

Ordinarily corporate existence does not commence until all conditions precedent are performed. There is a very obvious distinction between such acts as are declared to be necessary steps in the process of incorporation and such as are required of the individuals seeking to become incorporated, but which are not made prerequisites to the assumption of corporate powers. With respect to the former any material omission will be fatal to its existence as a corporation de jure, as against the State. In respect to the latter, failure to comply therewith is not ordinarily accompanied by forfeiture of its charter powers, but rather goes to the question of the personal liability of the individuals who attempt to do business as a corporation without having complied with all the conditions subsequent.*

Corporate existence in this immediate connection ordinarily means full authority to transact business as such in contradistinction to the qualified existence of such corporations which dates from the time of filing the articles of association with the Secretary of State. So too, in those States where organization precedes the filing of a certificate of incorporation, it has been held that a corporation has a qualified existence from the date of the incorporators' first meeting."

In Illinois corporate existence does not commence until the reception of a license from the Secretary of State to take stock

1 State v. Water Co., 61 Kan. 547; 60 Pac. 337.

2 Gade v. Company, 165 Ill. 367; 46 N. E. 286; Martin v. Deetz, 102 Cal. 55; 36 Pac. 368; In re S. M. Co., 37 Minn. 91; 33 N. W. 219; Johns v. People, 25 Mich. 499; G. M. & S. Co. v. Richards, 95 Mo. 106; 8 S. W. 246.

3 Afferton v. Company, 67 Ind. 334; Borough of Braddock v. Company, 189

Pa. St. 379; 42 Atl. 15; Badger Paper
Co. v. Rose, 95 Wis. 145; 70 N. W. 302.

4 Herrod v. Hamer, 32 Wis. 162; E.
G. L. Co. v. Green, 46 N. J. Eq. 118; 18
Atl. 844; M. H. M. Co. v. Woodbury, 14
Cal. 424.

5 Hurt v. Salisbury, 55 Mo. 310.

6 S. G. & P. Co. v. Scholfield, 70 Conn. 500; 40 Atl. 182.