52 N.Y.S. 672 | N.Y. Sup. Ct. | 1898
The plaintiff, as receiver of the insolvent corporation above named, .and which was created'by a special charter from the legislature of the state of New Hampshire to- do¡ an insurance and building loan business on the mutual plan, brings this action in equity to compel the surrender to the receiver of certain mortgages held by the Continental Trust Company and so held as security and for the benefit of the defendants Roscoe B. Ashley and Perry R. Smith.
There is no disputed fact in the case. It is conceded that the Granite State Provident Association was empowered bytits charter in language following, viz.: “ And shall be capable ,of acquiring. by purchase, lease, mortgage, or otherwise, and of holding absolutely and' conditionally, lands, real estafe ¡and personal property, and of selling, alienating, transferring, mortgaging, leasing, conveying or in any way disposing of the same, and otherwise acting as a building association, enabling members to purchase or build their own houses.” The charter further provides that the corporation “ shall carry on business solely on the mutual plan,” and' that the holders of “ certificates of shares who shall have paid all due premiums or
The: conclusion, it seems to me, is unavoidable, that the charter powers of the Granite State Provident Association were restricted to the issuance of stock and to the doing of business upon the mutual plan, and that it was not authorized to'issue stock, to which was attached an unconditional guarantee of 6 per cent, annually to the holder.
' Then come provisions for redemption of the certificate by the association by payment "in full, etc., and the holder is given the right to demand payment in full after ten-years.. This discloses a special contract, quite outside the ordinary contract between the association and the other members, and" has more the appearance óf a loan of money upon security than otherwise. It certainly is - not capital taking the risks and chances of the business." The deu fendants, Ashley and Smith, parted with their money in good faith
I am convinced that the plaintiff is not now in a position to maintain this action and will not" be until he shall have restored, or offered to restore, the money obtained from defendants, Ashley and
It was declared in Bissell v. Michigan R. Co., 22 N. Y. 258, that corporations like natural persons.have power and capacity to do wrong,- and may in their contracts and dealings break over the restraints imposed upon them by their charters, but when they do so their exemption from liability cannot be claimed on the sole ground that they have no attributes or faculties which render it possible for them to -thus act; that they are bound by their acts ■ where a repudiation of such acts would result in manifest wrong to innocent parties. Of course this refers to contracts which are not in themselves void if made by an individual, and the court says (page 309.): “ I have already adverted to the rule that where the illegality of the contract consists in the violation of some law, the pro- ' hibitions 'of which are aimed-‘at one. of the parties only, the other party is to be treated, as comparatively innocent and may have relief against the more guilty party even in an action eos contractu.”
In Parish v. Wheeler, 22 N. Y. 507, Comstock, J., uses this language: “ If the purchase of the steamboat involved any breach of the public law, the corporation alone was guilty, because all the restraints of the statute or the common law, affecting the transaction, are imposed upon it alone. There is certainly no moral turpitude if a railroad corporation buys a steamboat or builds a church; nor is there any legal turpitude. It may be mi excess of power, or a private breach of trust in respect to its stockholders. The latter may complain, or the state may interpose; but corporations themselves, like individuals, in dealing with other parties, ■ must live up to the rules of common honesty.” This Was said in reference to a railroad corporation in the exercise of whose powers the public have ah interest, and the rule may be applied to private corporations with even more propriety.
There was a contract made in violation of its charter by the Rider Life Raft Company (97 N. Y. 381), and here Miller, J., uses this language: “ The rule is well settled that the plea of ultra vires should not, as a general rule, prevail, whether interposed for or - against a corporation, when it Would not advance justice, but on the .contrary would accomplish a legal wrong.
And why should not this association be required to pay hack to these defendants their money? These defendants purchased an interest in these mortgages and now hold them through their trastee, the Continental Trust Company. That was the legal effect of their contract. Per these they paid their money. The plaintiff says the association had no power to sell them. Then make restitution; place these defendants where they stood before this insolvent company seduced them through this unlawful device — if it is unlawful. This is only common honesty, and I see no reason why-this plaintiff should be held exempt from its exercise.
.The complaint should he dismissed, with costs, and judgment is so directed.
Judgment accordingly.