18 S.W. 691 | Tex. | 1891
This suit was brought November 9, 1889, by appellee against J.R. Bond and others, in the District Court of Kaufman County, to recover a balance due of $875 on a promissory note executed January 23, 1888, by appellants (J.R. Bond as principal and the others as sureties) in favor of appellee, and due twelve months from date.
Defendants answered, that the note was executed in consideration of money loaned by plaintiff to the principal Bond; that plaintiff at the time it made the loan was a private corporation under the laws of Texas, and was by its charter authorized and empowered to manufacture and vend cotton and woolen goods, and do other acts incident and necessary thereto; that under its charter plaintiff had no authority to loan money; that for more than seven years before the institution of the suit plaintiff had not engaged in the manufacture and sale of cotton and woolen goods, but had confined its operations to loaning money; that the note was void. *311
Plaintiff, by supplemental petition, denied defendants' averments, and alleged that the note sued on was executed for a loan made by it for the sole purpose of better enabling plaintiff to conduct its business in the manufacture and sale of cotton and woolen goods; that defendants received and appropriated the money to their own use and benefit, and are estopped to question the validity of the note.
January 4, 1890, judgment was rendered by the court (trying the case without a jury) in favor of appellee against appellants for the full amount sued for.
The court as matters of fact found among other things as follows:
1. That the note was executed in consideration of money loaned.
2. That plaintiff is a private corporation chartered under the General Laws of Texas of 1881, and its charter authorized it to manufacture and vend cotton and woolen goods, and do any and all things necessary thereto.
3. That plaintiff operated a cotton and woolen factory for about six months in 1882, and ceased active operations in the fall of 1882, because its funds and machinery were insufficient to successfully operate, and it has not since resumed.
4. That when plaintiff ceased operations it realized about $4000 in cash from goods on hand, which money was loaned out in three loans, the object of the loans being to pay expenses while the machinery was idle.
5. That plaintiff has never loaned money as a business, and at all times intended to use the proceeds of the note sued on in the prosecution of its business in manufacturing and vending cotton and woolen goods, provided sufficient capital could be raised to operate successfully.
From these facts the court concluded, as matter of law, as follows:
1. The plaintiff under its charter had no power or right to loan defendants its funds or capital.
2. Defendants having received the money for which the note was executed by them, are estopped from denying the power of plaintiff to loan the money.
The last finding of the court is assigned as error, and presents the only question to be considered by us, viz.: Are the appellants, who have received the money in consideration of which they executed the note sued on, in a position to question the appellee's right of recovery?
In considering the question, it will be conceded that the court was correct in finding that the act of the plaintiff corporation in loaning the money was ultra vires.
It seems now to be settled by the great weight of authority, that where there is a question of a contract between a corporation and another party, and the contract has been performed by the other party, and the corporation has received the benefit of the contract, it will not *312
be permitted to plead that on entering into the contract it exceeded its chartered powers. Railway v. Gentry,
We have found but one series of modern decisions militating against the views here expressed. We refer to the decisions of the Supreme Court of Alabama. In that State it is held that a person who has made a contract with a corporation which is ultra vires is not estopped from pleading the invalidity of the contract, though he has received the benefit of it. City Council v. Montgomery, etc., Co.,
Appellants, however, contend that the doctrine of estoppel should not apply in this case, because the corporation is forbidden to use its funds for the purpose of loans by the statute under which it is organized; that in this case the act of the corporation was not merely without authority, but that it was in violation of law. The statute referred to is article 589, Revised Statutes, which reads as follows: "No corporation created under the provisions of this title shall employ its stock, means, assets, or other property, directly or indirectly, for any other purpose whatever than to accomplish the legitimate objects of its creation." It is true that a distinction is made between the act of a corporation which is merely without authority and one which is illegal. In the one case, it is a question of authority; in the other, of legality. A corporate act becomes illegal when committed in violation of an express statute on a specific subject, or when it is malum in se or malum prohibitum, or when it is against public policy. Beach on Priv. Corp., sec. 438; Taylor on Priv. Corp., secs. 293-295. If, therefore, the transaction here engaged in by appellee was not merely beyond its powers but was also illegal, in the sense stated, the contention of appellants should prevail.
It will be noted that article 589, relied upon by appellants, is a general statute. It is merely declaratory of the common law, by which corporations are strictly confined in their powers to the limits and fixed purposes for which they were created. The language of the statute at most emphasizes the doctrine of the common law. To such "general prohibitions, against the doing by corporations of acts beyond the scope of the corporate powers, courts appear to give little effect." Taylor on Corp., sec. 295; Curtis v. Leavitt,
We therefore agree with the court below, that the appellants, having received the benefit of the loan, are in no position to question its validity, and we conclude that the judgment should be affirmed.
Affirmed.
Adopted November 24, 1891.