ence, are in no sense identical with the corporation, nor do they represent it in any relation of agency, and they have no authority to enter into preliminary contracts binding upon the corporation. 7 R. C. L. § 59, p. 80; Franklin F. Ins. Co. v. Hart, 31 Md. 59; Safety Deposit L. Ins. Co. v. Smith, 65 Ill. 309; Gent v. Manufacturers' & M. Mut. Ins. Co. 107 Ill. 652; Battelle v. Northwestern Cement & Concrete Pav. Co. 37 Minn. 89, 33 N. W. 327; Munson v. Syracuse, G. & C. R. Co. 103 N. Y. 58, 8 N. E. 355. The correct rule is that enunciated by the supreme court of Texas, thus: "Upon the question as to the liability of the corporation growing out of contracts made on its behalf by its promoters, there is considerable diversity and some conflict of opinion. But there are some propositions affecting this question upon which the authorities seem to be in substantial accord. A promoter, though he purport to act on behalf of the projected corporation, and not for himself, cannot be treated as agent, because the nominal principal is not then in existence; and hence, when there is nothing more than a contract by a promoter, in which he undertakes to bind the future corporation, it is generally conceded that it cannot be enforced." Weatherford, M. W. & N. W. R. Co. v. Granger, 86 Tex. 350, 40 Am. St. Rep. 837, 24 S. W. 795. To the same effect, see also Morrison v. Mountain Gold Min. Co. 52 Cal. 306, 13 Mor. Min. Rep. 578; New York & N. H. R. Co. v. Ketchum, 27 Conn. 180; Gent v. Manufacturers & M. Mut. Ins. Co. 107 Ill. 652; Sellers v. Greer, 172 Ill. 549, 40 L.R.A. 589, 50 N. E. 246; Park v. Modern Woodmen, 181 Ill. 214, 54 N. E. 932; Smith v. Parker, 148 Ind. 127, 45 N. E. 770; Carey v. Des Moines Co-op. Coal & Min. Co. 81 Iowa, 674, 47 N. W. 882; Abbott v. Hapgood, 150 Mass. 248, 5 L.R.A. 586, 15 Am. St. Rep. 193, 22 N. E. 907; Battelle v. Northwestern Cement & Concrete Pav. Co. 37 Minn. 89, 33 N. W. 327; York Park Bldg. Asso. v. Barnes, 39 Neb. 834, 58 N. W. 440; Bash v. Culver Gold Min. Co. 7 Wash. 122, 34 Pac. 462. However, the corporation may legally adopt or assume its promoter's contracts, and thus -adoption of become liable there- promoter's on, both in law and contract. in equity, not merely for the benefits. received, but on the contract itself. Davis Bros. v. Montgomery Furnace & Chemical Co. 101 Ala. 127, 8 So. 496; Little Rock & Ft. S. R. Co. v. Perry, 37 Ark. 164; Perry v. Little Rock & Ft. S. R. Co. 44 Ark. 383; Chater v. San Francisco Sugar Ref. Co. 19 Cal. 219; Scadden Flat Gold Min. Co. v. Scadden, 121 Cal. 33, 53 Pac. 440; Colorado Land & W. Co. v. Adams, 5 Colo. App. 190, 37 Pac. 39; Arapahoe Invest. Co. v. Platt, 5 Colo. App. 515, 39 Pac. 584. The adoption of such a contract is on the theory that the contract made by the promoters is a continuing offer on the part of the other party to the contract, unless withdrawn by him, and that it may be accepted and adopted by the corporation after it is created. Deschamps v. Loiselle, 50 Mont. 565, 571, 148 Pac. 335. In the case of Fitzpatrick v. O'Neill, 43 Mont. 552, 118 Pac. 273, Ann. Cas. 1912C, 296, the only case heretofore decided by this court, brought to our attention, dealing with promoters' contracts, Mr. Justice Smith said: "It is not necessary to decide here whether there is any liability on the part of the corporation to its promoters in the absence of an express promise by it after organization. No ques tion as to the rights of subsequent stockholders having no knowledge of the issuance of the stock is before us. All of the then stockholders had knowledge that the stock was about to be issued and all agreed to the issuance. No stockholder was misled or deceived. All agreed that the amount issued was reasonable. Under these circumstances, we are of opinion that the corporation could legally issue stock in payment for services performed in its promotion and organization, and that the issu (59 Mont. 469, 197 Pac. 1005.) ance of such stock must be deemed that the stock could not be legally It is not the universal rule that the corporation must act exclusively through its board of directors. 'Formal action is often dispensed with, even in the most important matters, where all the members of the corporation, including the shareholders and directors, are present and concur, although there is no formal vote either of the shareholders or of the directors.' 10 Cyc. 761; Lemars Shoe Co. v. Lemars Shoe Mfg. Co. 89 Ill. App. 245." The authority of this case, cited and relied upon by the plaintiff, it will readily be seen, has no application to the case under consideration, as there is no contention made by allegations of the complaint, or otherwise, that the contract was assumed or adopted by all of the directors of the corporation, or all of its stockholders. Were such facts made to appear, a different conclusion would doubtless be reached, upon this phase of the case, even in the absence of formal action by the board of directors or stockholders. The "Not only is it impossible for the corporation to become liable before it comes into existence, but its mere incorporation will not, of itself, charge it with liability for contracts which, prior thereto, promoters purported to make in its behalf. corporation, however, may enter into contracts based on agreements previously made; thus, subscriptions to stock in a corporation thereafter to be formed amount to offers to the corporation which subsequently may be accepted by it, though, until acceptance, the subscriber may withdraw. The principle governing other contracts intended to be made on behalf of the future corporation is the same. Though it cannot, when formed, ratify the action of the promoter, since it is an essential of ratification that the principal should have been in existence and capable of contracting at the time the agent acted, the corporation, either by formal action or without such action, if the contract is of the sort which requires no formality, may become bound as a party to the contract by adoption or novation. The cases generally speak of the obligation of the corporation as created by adoption, but novation seems the more accurate term. If the assent of the corporation to the bargain is merely an adoption of it, the promoter apparently must still remain liable. But it seems more nearly to correspond with the intentions of the parties to suppose that, when the corporation assents to the contract, it assents to take the place of the promoter-a change of parties to which the other side of the contract assented in advance. There would then be a novation which would discharge the promoter at the same time the corporation assumed the obligation." 1 Williston, Contr. § 306, and cases cited in notes. Such preliminary contracts, when within the corporate powers and not otherwise objectionable, may by adoption, but not otherwise, become the contracts of the corporation and be enforceable as such. Battelle v. Northwestern Cement & Concrete Pav. Co. 37 Minn. 89, 33 N. W. 327; Munson v. Syracuse, G. & C. R. Co. supra; Penn. Match Co. v. Hapgood, 141 Mass. 145, 7 N. E. 22. There is some authority for the proposition that the corporation is so liable where a majority of the incorporators authorized the contract, but it is difficult to understand the principle on which this conclusion rests, since, after the corporation is in esse, it is not bound by contracts or engagements made by a majority of the stockholders, but is only bound by such as are made by its governing body, its board of directors or trustees acting within the scope of their powers, and by ministerial officers created and empowered to make such engagements. 14 C. J. 282. Section 3833 of the Revised Codes expressly declares: "The corporate powers, business and property of all corporations formed under this title must be exercised, conducted and controlled by a board of not less. than three nor more than thirteen directors," etc. Mr. Chief Justice Brantly, speaking for this court in Deschamps v. Loiselle, supra, in considering the application and effect of this section. of the statute, well said: "While it is entirely competent, indeed often necessary, for the directors to manage and conduct the business of the corporation through duly authorized agents, the directors themselves are the agents ultimately responsible. They, therefore, cannot abdicate their duties nor permit others to act in their stead for the corporation or the stockholders. This would be in direct violation of the injunction of the statute, which, being exclusive, is also mandatory. If the construction of the agreement contended for by counsel, and adopted by the trial court, should be upheld, the statute would be set aside." It is manifested that a corporation cannot be held liable on contracts in consequence of oral expressions of individual stockholders, directors, or officers, made on the streets, in corner grocery stores, saloons, or elsewhere, unless express authorization has been given to the individual to act as the agent or mouthpiece of the corporation, and such authority to an individual, even though an officer of the corporation, may be conferred only by formal action taken by the corporation itself. In principle, see Williams v. Broadwater County, 28 Mont. 365, 72 Pac. 755. The corporation may thus generally confer authority through its by-laws, regularly approved and adopted, or by resolution duly passed by its board of directors, or by formal adoption or assumption. Conceding that the corporation might with propriety, after coming into existence, adopt the contract of its promoters as its own, yet necessarily such authority is limited to 1 such contracts as the corporation itself is authorized to make. Thomp. Corp. § 98. The purpose of the capital stock of a corporation is obvious and quite generally understood. The fact that by a certificate of incorporation the capital stock of a company is fixed at a certain amount does not of itself create anything of value. Its effect is simply to confer authority to issue capital stock to the amount stated, unimpaired, in accordance with the provisions of the laws under which it comes into being, with the purpose in view of raising the capital fixed. The power to issue its capital stock constitutes a corporate franchise. It may be exercised only with persons desiring to become stockholders, and a contract to purchase stock must be mutual. One claiming a right to the issuance and delivery of capital stock in a corporation by subscription contract or other agreement, or claiming the right of a stockholder by virtue of contract, must be in position to enforce his rights. The corporation must be in position to enforce the subscription agreement. By our organic law it is declared: "No corporation shall issue stocks or bonds, except for labor done, services performed, or money and property actually received." Constitution, § 10, art. 15. This provision, substantially, has also been incorporated in our statutory law. Section 3894, Rev. Codes, as amended by Laws of 1917, chap. 89. The meaning of the language used in the Constitution is plain, unambiguous, and needs no interpretation. If stocks or bonds. be issued except "for labor done, services performed, or money and property actually received," their issuance is in direct violation of the Constitution and of the services in statute, and ipso facto invalid. Arkansas River Land, Town & Canal Co. v. Farmers' Loan & T. Co. 13 Colo. 587, 22 Pac. 954. -issuance of stock for selling it. Plaintiff can maintain this action only by allegation and proof of con (59 Mont. 469, 197 Pac. 1005.) tractual rights binding upon and enforceable against the corporation. This he has failed to do. On the contrary it is affirmatively made to appear from the allegations of the complaint that plaintiff's demand is based upon an alleged right to the issuance and delivery of 415 shares of the capital stock of the corporation, or $4,150, in violation of the constitutional mandate and of the statutes under which the corporation came into existence. It is obvious that, at the time the contract was made, no labor had been done, services performed, or money or property actually received by the corporation, as the corporation had no existence. The parties to the agreement had no legal right whatsoever, as the promoters of the corporation or otherwise, to make a binding contract for disposition of its capital stock after its becoming a legal entity, and the corporation itself could only legally issue its stock after the labor had been done or services performed, to the reasonable value thereof in payment therefor, or for money or property in fact received by the corporation, reasonably worth the par value of such stock. "The stockholders of every corporation shall be severally and individually liable to the creditors of the corporation in which they are stockholders, to the amount of unpaid stock held by them respectively, for all acts and contracts made by such corporation, until the whole amount of capital stock subscribed for shall have been paid in." Rev. Codes, § 3853. "All corporations for profit must issue certificates for stock when fully paid up, signed by the president and secretary, and may provide, in their by-laws, for issuing certificates prior to the full payment, under such restrictions and for such purposes as their by-laws may provide." Rev. Codes, § 3854. appears that the plaintiff therein was instrumental in organizing the defendant corporation. He had had many years of experience in building refineries, and entered into an agreement with others who proposed to form the corporation, pursuant to which they were to pay him a salary as general manager during the construction of the plant and $5,000 par value of the capital stock of the corporation for the use of his name, processes, and knowledge in erecting a refinery. The minutes of the corporation disclosed a recognition of the contract on the part of the corporation, and the court, in considering the enforceability of such contract as against the corporation, said: "The case involves a construction of § 39 of art. 9 of the Constitution [William's Constitution and Enabling Act, § 2566], which provides as follows: 'No corporation shall issue stock except for money, labor done, or property actually received to the amount of the par value thereof, and all fictitious. increase of stock or indebtedness shall be void. . In the case at bar the plaintiff does not contend In the case of Webster v. Webster 17 A.L.R.-29. 4 The Constitution provides that the corporation shall not issue its stock, except for a consideration equal to the par value thereof. This represents the public policy of the state. It is intended to bind the corporation. It is intended to protect the public. It is intended to put corporations upon a real substantial basis, to prevent the watering of their stock. The Constitution is one instrument. of the people. The courts are another. If the courts require a corporation to do that which the Constitution says shall not be done, the judicial arm is antagonistic to the Constitution itself; and it would seem to be a simple proposition that the courts will not compel that to be done which the Constitution prohibits doing. If this be true, then to permit damages for the refusal by the corporation to do it would be to punish it for refusing to do that which the law says shall not be done, and indirectly compel it to do that which is prohibited. We believe, therefore, that under our Constitution, such an agreement is prohibited, and that the court should not enforce it directly by compelling the issuance of the stock, or indirectly by giving damages for breach of the contract." In the case of Rogers v. Gladiator Gold Min. & Mill. Co. 21 S. D. 412, 113 N. W. 86, the court there had under consideration pleadings as follows: "Plaintiff alleges that the defendant corporation was organized and is existing under and by virtue of the laws of this state; that during 1900 and 1901 he performed certain services as an assayer and broker for and on behalf of the defendants, at their special instance and request, for which they promised and agreed to give him certain shares of capital stock in the defendant corporation; that, notwithstanding due demands therefor, defendants have failed and refused to deliver such stock; and that the highest market value of the stock during the period between such refusal and the date of the action was 40 cents in one case and 15 cents in the others. Without denying any of these allegations, except as to the value of the stock, and 'while admitting that a promise was given the plaintiff for shares of stock as alleged,' defendants averred 'that the promise was coupled with a condition precedent, which the plaintiff has never performed or attempted to perform;' denying 'that plaintiff ever in good faith performed or acted as a broker for defendants,' and alleged 'that plaintiff's every act as a broker to defendants' stock has been hostile and inimical to the interest of these defendants.' In considering and applying a similar constitutional inhibition of the state of South Dakota (art. 17, § 8), the court said: "It is quite clear from the evidence that the contract made by the plaintiff with the mining corporations was clearly in violation of the section of the Constitution above referred to. He paid no money or property therefor, and the only services that he was to perform apparently were those to be performed for Crabtree individually in aiding him to dispose of the stock of the corporation and in making assays for him. Clearly such a contract was not permissible under the provisions of our Constitution, and not within the powers of the trustees of the corporations to make. In the case of Upton v. Tribilcock, 91 U. S. 45, 23 L. ed. 203, the Supreme Court of the United States, in discussing this subject, says: capital stock of a moneyed corporation is a fund for the payment of its debts. It is a trust fund, of which the directors are the trustees. It is a trust to be managed for the benefit of its shareholders during its life, and for the benefit of its creditors in the event of its dissolution. This duty is a sacred one, and cannot be disregarded.' Furber v. WilliamsFlower Co. 21 S. D. 228, 8 L.R.A. (N.S.) 1259, 111 N. W. 548, 15 Ann. Cas. 1216. The contract in this case seems to have been made with Crabtree as trustee and promoter, and not with the corporations them "The |