128 Neb. 631 | Neb. | 1935
This is an appeal from the district court for Brown county by Ainsworth Lodge No. 130, Independent Order of Odd Fellows of Ainsworth, Nebraska, defendant and appellant, and the Grand Lodge of Nebraska, Independent Order of Odd Fellows, intervener and appellant, from a decree foreclosing a mortgage on behalf of appellee Jesse N Bejot against certain real estate belonging to the defendant below. As a matter of convenience, Ainsworth Lodge No. 130, Independent Order of Odd Fellows, will hereafter he referred to as the Ainsworth Lodge, and the
The record discloses that prior to April 1, 1912, the Ainsworth Lodge was the owner of two lots in the city of Ainsworth upon which it desired to build a new lodge hall. Application was made to the Grand Lodge for permission to incur a mortgage indebtedness of $10,000 for this purpose and the same was granted. The trustees of. the lodge were authorized to construct the building. After using the funds the lodge had in its treasury, amounting to $1,900, the trustees incurred additional indebtedness amounting to $16,934.58. The trustees without authority from Ainsworth Lodge executed a first mortgage on the premises for $8,000. On July 3, 1920, the trustees without further authority executed a first mortgage upon the property to S. A. Rickenback for $8,000 and a second mortgage to the Citizens State Bank of Ainsworth for $8,800. On September 6, 1924, without additional authority, the trustees executed a first mortgage upon the lodge property to Charles Meyers for $8,767 and two second mortgages of equal priority, one to Charles Meyers for $5,838, and the other to J. D. Cook for $3,502.80. On September 6, 1929, the board of trustees without further authority from the lodge made and executed an extension agreement of these mortgages for a period of five years. The appellee became the owner and holder of the second mortgage originally given to Charles Meyers, in March, 1931. The owner of the first mortgage was brought into the case by order of court and a decree of foreclosure was entered in his behalf from which no appeal was taken. The executor of the estate of J. D. Cook failed to plead and a default was entered against the estate. The trial court found appellee’s mortgage to be a valid second lien and decreed a foreclosure thereof in the amount of $6,984.15. From the decree of the trial court, holding appellee’s mortgage to be valid and ordering the foreclosure thereof as a second lien, the appellants have appealed.
It is undisputed that the Odd Fellows fraternity is com
The execution and extension of the mortgage in question by the trustees of the Ainsworth Lodge were not ultra vires in the sense of being outside the corporate powers of the lodge. The charter of the Grand Lodge did require the subordinate lodge to obtain permission from it to incur the mortgage indebtedness complained of, which it did not do. Also, the by-laws of the subordinate lodge required the granting of authority by Ainsworth Lodge to its trustees before they could execute the mortgage or the extension agreement and this they did not do. These, however, were only regulations of the mode and the agencies by which the corporation should exercise the power granted to it. The distinction between the doing by a corporation of an act beyond the scope of the powers granted to it by statute or by its charter, and an act that amounts to an irregularity in the exercise of the granted powers has constantly been recognized by the courts. The
“A contract of a corporation, which is ultra vires, in the proper sense, that is to say, outside the object of its creation as defined in the law of its organization, and therefore beyond the powers conferred upon it by the legislature, is not voidable only, but wholly void, and of no. legal effect. The objection to the contract is, not merely that the corporation ought not to have made it, but that it could not make it. The contract cannot be ratified by either party, because it could not have been authorized by either. No performance on either side can give the unlawful contract any validity, or be the foundation of any right of action upon it.
“When a corporation is acting within the general scope of the powers conferred upon it by the legislature, the corporation, as well as persons contracting with it, may be estopped to deny that it has complied with the legal formalities which are prerequisites to its existence or to its action, because such requisites might in fact have been complied with. But when the contract is beyond the powers conferred upon it by existing laws, neither the corporation, nor the other party to the contract, can be estopped, by assenting to it, or by acting upon it, to show that it was prohibited by those laws.”
Also, in the case of National Home Bldg. Ass’n v. Home Savings Bank, 181 Ill. 35, it was held: “It is also argued that the building and loan association is estopped to raise the question whether the contract was ultra vires because it has received the benefit of the contract by the conveyance of property to it. That depends, as we think, upon the sense in which the term ultra vires is used. It has been applied indiscriminately to different states of fact in such a way as to cause considerable confusion. When used as applicable to some conditions, it has been frequently said that a corporation is estopped to make such a defense where it has received the benefit of the contract.
In the case at bar, the Ainsworth Lodge had the power to purchase and own real estate for a lodge home and to mortgage the same. Comp. St. 1929, sec. 24-607. The regularly appointed trustees, in mortgaging the property without the consent of the Grand Lodge or the authority of the Ainsworth Lodge, certainly acted within the powers granted by statute and charter, however irregular they may have been. The record discloses that the act of the trustees on September 6, 1924, in renewing the mortgage indebtedness of the lodge for five years was, on October 20, 1924, ratified and approved by resolution of the Ainsworth Lodge. The Ainsworth Lodge at all times retained the benefits of the transaction alleged to have been ultra vires. The lodge paid its interest regularly and continued to do so after the extension agreement of September 6, 1929, was entered into. That these acts amount to a ratification of the doings of the trustees cannot be successfully refuted. “Very slight circumstances are sufficient to establish a ratification by a corporation of the acts of its officers where
The doctrine of estoppel is also applicable to the case at bar. In Doerr v. Fandango Lumber Co., 31 Cal. App. 318, the court held: “Besides the foregoing considerations, it is very clear that the defendant Fandango company having received, retained, and used for the purposes of its business the money, to secure the repayment of which the mortgage was given, is, and upon a familiar equitable principle should- be, estopped from denying the validity of the obligation. As shown, it is not disputed that the corporation received the money and used it in the payment of a part of its debts.”
We, therefore, hold that the acts of the trustees of Ainsworth Lodge were within the scope of the powers of the corporation granted by their charter and the statutes, that the irregularities complained of go to the mode of exercising the power and not to a lack of power, that under such circumstances the appellee could plead and prove a ratification or an estoppel against the defense that the action of its representatives was unauthorized. A ratification was clearly proved and we hold that appellee’s mortgage was a valid second lien on the lodge property secured thereby. Under the undisputed evidence, and the authorities cited, the Ainsworth Lodge is also estopped to deny its alleged invalidity.
The Grand Lodge is in a somewhat different position. It claims an interest in the subject-matter of the suit by virtue of a reversionary interest in the property of the Ainsworth Lodge that would accrue to it' as trustee if the Ainsworth Lodge should surrender its charter for any reason. It is the contention of the Grand Lodge that the action of the Ainsworth Lodge in executing a mortgage in excess of $10,000 is ultra vires because written permission by the Grand Lodge was given to incur mortgage indebtedness to that extent only, as required by the constitution of the Grand Lodge of Nebraska. Counsel for the Grand Lodge claim that the Ainsworth Lodge was possessed of
The argument is made that the Ainsworth Lodge was not a corporation because it failed to file its charter or constitution under which it was working with the county clerk of the county in which it was located. A careful reading of section 24-607, Comp. St. 1929, discloses that Ainsworth Lodge is incorporated by virtue of that section and the requirement that the charter or constitution be filed with the county clerk is merely a condition precedent to its holding title to real estate in its own name. The Ainsworth Lodge, by holding itself out as having the right to own, hold and convey interests in real estate used for corporate purposes, is estopped to deny that it complied with the conditions precedent thereto. It cannot secure funds by mortgaging its property as a corporation and subsequently refuse payment on the theory that it had failed to follow the proper method of obtaining title in the first instance, and at the same time retain its ill-gotten gains. The Grand Lodge has also treated the Ainsworth Lodge as a corporation entitled to hold title to real estate for lodge purposes in its own name by granting permission to it to incur the $10,000 mortgage indebtedness and it also is estopped to deny that the necessary formalities were taken in order to benefit its reversionary interest. The Grand Lodge has received semiannual reports for many years showing the indebtedness of the Ainsworth Lodge to be in an amount ranging from $15,881 to $18,851. Having
The evidence is undisputed that Bejot was a trustee of the Ainsworth Lodge at the time he purchased the mortgage and was for many purposes acting in a fiduciary capacity for the members of the Ainsworth Lodge. The record fails to disclose that the Ainsworth Lodge had any special or general fund from which money could have been obtained to purchase or pay the mortgage in question at the time Bejot bought it. Neither was Bejot under any duty on behalf of the lodge with reference to the mortgage at the time he dealt for it. The only difference that the transaction made was that the debt and security belonged to Bejot instead of Meyers. Counsel for appellants cite many cases in support of their contention. Upon examination, we find that they hold in substance that directors, trustees or other officers of a corporation who are entrusted with its interests, and occupy a fiduciary relation towards it, will not be allowed to contract with the corporation, directly or indirectly, or to sell property to it or purchase property from it, where they act both for the corporation and themselves. We concur with counsel for appellants that this is a proper statement of the law but the appellee in the case at bar does not come within the rule. Appellee dealt with a third person for a mortgage given by the lodge at a time when he was under no obligation to the Ainsworth Lodge regarding the mortgage.
In Inglehart v. Thousand Island Hotel Co., 32 Hun (N. Y.) 377, it was held: “So also' a trustee or director may, with his own money, purchase for himself of a third person a valid and subsisting outstanding debt owing by the company, and secure a perfect title thereto. Such a transaction is not even the ground for entertaining the suspicion that it is in violation of any duty which he owes the corporation, and there is no presumption of law against its fairness. If the obligation is valid the owner may sell and transfer it to any one who is willing to become a purchaser, and he thereby secures an unquestioned title. * * * The other question to be considered in this connection is, will the trustee or director be permitted to enforce a collection of the debt thus acquired for its entire amount, or shall he be limited to the sum which he actually paid for the debt or obligation. I am unable to discover any good reason why he should not be permitted to enforce payment for the full amount, nor can I find any decision limiting the trustee to the sum actually paid.” See, also, Seymour v. Spring Forest Cemetery Ass’n, 144 N. Y. 333; McIntyre
The judgment of the district court is in all respects correct and it is hereby
Affirmed.