90 Me. 405 | Me. | 1897
Ira P. Farrington, the testator, whose will is called in question by this bill in equity, died at his home in Portland, December 17, 1894, leaving a will dated July 9, 1891, and a codicil dated January 4, 1893. The will was probated in January, 1895, in the probate court below and approved by this court in the next April afterwards. The will, after a most generous provision for his widow, and numerous bequests to his relatives, besides several large bequests to certain local charities other than those to be herein named, contains the following residuary clause: — “Fifth. All the rest and residue of Estate, Real and Personal or Mixed,
“ The one-third given said Eye and Ear Infirmary shall be maintained as a separate fund, designated as ‘The Farrington Fund,’ held, invested and re-invested, and the net income thereof applied forever annually, or oftener, to the Charitable purposes of the Corporation.
“ Likewise the one-third given the Maine General Hospital shall be in the same manner maintained as a separate fund, designated as ‘The Farrington Fund,’ held, invested and re-invested, and the net income thereof applied forever annually, or oftener, one-lialf for the support of free beds, in its hospital, to be known as ‘ the Farrington Free Beds,’ and the other half to the general Charitable purposes and the maintenance of the Corporation.
“And likewise the one-third given the Portland Public Library shall be in the same manner maintained forever as a separate fund, designated as ‘The Farrington Fund,’ held, invested and reinvested, and the not income thereof applied forever annually, or oftener, to the support of the Library of said Corporation.
“Provided, nevertheless, that whatever principal sum or sums may come hereunder to the Portland Public Library shall be paid to the city of Portland on the following trusts, namely,—
“ To pay thereon perpetually interest semi-annually at the rate of four (4) per cent per annum, to the Portland Public Library, said interest to be applied as aforesaid by said Portland Public Library to the support of its Library.
“ Said fund shall be entered on the books of the city as ‘ The Farrington Fund for the benefit of the Portland Public Library,’ and the interest so paid by the city shall be entered on the books of the Portland Public Library as interest from such ‘Farrington Fund.’
*410 “ If the city shall decline to accept the same on the trust aforesaid, or if for two years after request in writing by my executors to accept the same as aforesaid, the city shall neglect so to accept, I direct that said principal sum or sums be paid to said Portland Public Library to be held, invested and re-invested and the net income thereof applied as hereinbefore set out.”
The testator names Hon. William L. Putnam and Hon. Thomas H. Haskell as executors, and confers certain authority over his estate on them as such executors as follows: “I give the executors full possession, management and control of all my real estate wherever situate, subject to the devise of my beloved wife; and I authorize them from time to time to lease, sell or exchange the samé, or any part thereof, and to receive the proceeds of such leases and sales and all other incomes or other proceeds thereof, for the purpose of fully executing this will, reminding them, however, that their authority over my estate whether real or personal is given solely for the purpose of closing and distributing the same as heretofore mentioned directed, with a prudent regard for obtaining fair prices within a reasonable time to be taken therefor.”
The codicil is as follows:
“I hereby re-publish and re-affirm said will except as herein modified.
“ The gift of the one-third part of the rest and residue of my estate to' the Maine General Hospital by the fifth clause of said will and all gifts and devises in any part of said will to said Maine General Hospital, I hereby revoke; and I hereby give, devise and bequeath all the same one-third and all other said gifts and devises, to the Maine Eye and Ear Infirmary, to hold to the use of it and its successors and assigns forever; the same to be in addition to, and not to affect or change, the gifts and devises to said Maine Eye and Ear Infirmary in said will contained. I double the gift of $20,000, to the Home for Aged Men of Portland.”
The Eye and Ear Infirmary is a charitable association organized under the general statute which authorizes the formation of such corporations. R. S., Ch. 55, § 1. Numerous kinds and classes of persons and associations are permitted by this section to be organ
The bill alleges that the Infirmary had at the death of' the testator property to the full amount of one hundred thousand dollars in value, and that any additional amounts to be received through this will would be in excess of the limit allowed by its charter and in disregard of the statutes of the state; and so it further alleges “ that the said Maine Eye and Ear Infirmary is incompetent to receive and incapable of holding any property beyond the amount which it now possesses, and that the bequests and devises made to it under Item 5th of the said will and under the codicil to said will of said Ira P. Farrington are invalid and void, and revert to the heirs of Ira P. Farrington.” The bill includes the Infirmary and the executors as respondents, the prayer of the same being that the parties be enjoined, the one against paying over, and the other against receiving the devises and bequests in execution of the intention of the testator.
Both of these respondents, the executors and the corporation, filed general demurrers to the bill, which were sustained by the justice before whom the case was heard below, and the case comes to us on exceptions and a final decree in favor of the respondents. Mr. Justice Strout of this court, by whom the issues were decided, filed a written judgment in the case from which we reproduce that portion of the same which bears upon the questions we propose now to discuss, reading as follows: “ This is a bill in equity, and
“ At common law, corporations were entitled to take and hold real or personal property to any amount, if it was reasonably useful and convenient in attaining its. legitimate ends. In England, so large an amount had been acquired and held by its corporations, particularly the ecclesiastical, that as a measure of purely public policy the statute of mortmain was enacted to prevent the accumulation of real estate in ecclesiastical corporations. That statute has not been generally adopted in this country; but it has been deemed wise in many instances to limit in the charter, or by general law, the amount of property to be held by corporations. In this state, by statute, corporations are entitled to hold and convey lands and other property. R. S., c. 66, § 2. This authority is unlimited, unless the charter, or general law under which the corporation is created, or some statute, imposes a limit. A limit of $100,000 is imposed by the statute- under which this corporation was created. Taken in connection with the common law, and the general statute upon the subject, it is apparent that the limitation upon this class of corporations, not applicable to many others, was a matter of public policy. As such, it is for the state alone to take advantage of its breach, if it chooses, or it may waive it; and consequently private parties cannot be permitted to assert against the corporation a violation of the limitation. The decided weight of authority is to this effect, and the principle is deemed sound..
“ A devise of lands operates a conveyance upon probate of the will. The devisee takes by purchase. The title may be defeated,
“The will, in this case, gave to the Infirmary one-third of the residue of the estate, after payment of legacies, in trust, to be invested and kept invested, the income only to be applied to the charitable purposes for which the institution was organized. The codicil added another third of the residue to the gift, but said nothing about trust; but the fair construction of the codicil, taken in connection with the, trust created by the will, is that the trust attaches to the entire two-tliirds. The effect of the codicil was to increase the one-third in the original will to two-thirds. No other change was intended by the testator. The whole scheme in his mind was charity. The gift was to a public charity, administered by the corporation created for that purpose.
“ The Infirmary can take the gift, upon the trusts specified, and hold it against all, except the state, although the amount is in excess of the limitation in the statute.
“If, however, the Infirmary should be regarded as incompetent to take the property in trust, it being devoted by the testator to a public charitable use, the court would appoint a trustee to carry into effect the testator’s bounty. A public charity, definite in its objects as this i.s, is never allowed to fail for want of a trustee, and if the trustee originally appointed is incapable, from any-cause, to take the property and execute the trust, a competent trustee will be appointed.”
The question on the first branch of the case, therefore, is whether these devises and bequests are absolutely void as the complainants contend, or whether they are merely voidable according to the view of the question taken by the respondents. After very much examination of the authorities pro and con, and careful consideration of the principles which affect the respective positions of the parties, wo feel forced to the conclusion that the position advocated by the complainants ought not to be sustained. We feel
The general statute under which this infirmary was organized is not expressly prohibitory, but rather regulative and directory. No penalties are attached and none intended more than a possible -forfeiture of the excessive property received, or of the charter, or of one or both. This interpretation of the statute cannot by any possibility be harmful to the community, as the state can make it as stringent as it pleases at any time. But thus far the state has had no motive either to amend the statute or to enforce forfeitures for violation of its provisions. And in one section of the chapter relating to general organizations the legislature allows devises, bequests and gifts to towns for the establishment, or increase of public librai-ies, without imposing any limitation whatever. It. S., Ch. 55, § 10. There cannot be an objection that such absorption of property excludes capital from taxation, because that is a matter wholly within the control of the legislature.
An over-strict construction of the law and of the rights of parties under the law in the case before us is neither expedient nor reasonable. Here is an institution, and the only one of the kind in the state, and virtually a state charitable institution of the most beneficent and humane kind, seeking money for supporting its very life and existence, and to enable it to render assistance free of charge to the poor of the state suffering from diseases of the eye and ear. This testator, who had been always a director in the institution and finally its president, knowing and fully appreciating
Tt will be noticed that most of the authorities, on which the complainants rely, concede that the rule which we would apply to devises is at all events applicable to gifts by deed, the argument being that in such a case as this a deed would be valid and a devise void. Tt seems inconsistent that such potential consequences should attach to the mere form of transmitting the property. We do not appreciate the justice of saying that a deed of property delivered by a donor on the day of his death to a corporation would be good, and a devise of the same property made on the same day would be bad. But the argument by the complainants is that, in the one case, the transaction is executed and, in the other case, that it cannot be considered as executed without a resort to the forms and assistance of the courts. We think the whole thing involves a distinction without a difference, a formal but not substantial distinction. Each mode of transfer needs the protection and aid
The foregoing reasoning only serves to illustrate the unsubstantial foundation upon which it is endeavored to raise a technical excuse for pronouncing a deed voidable and a devise absolutely void. The true and conclusive answer, however, to this indefensible position of the complainants is that it is utter assumption on their part in declaring a devise like this to be void, when it is voidable merely, and can be rendered void in no way other than by the act of the government itself. No wrongful act by a corporation renders its charter void or creates any forfeiture without proceeding by which such forfeiture shall be established. A cause for forfeiture is not itself forfeiture. The same section which prescribes the amount of property which this corporation may hold, also declares that it may use and dispose of the same for the purposes for which it was organized. Suppose the corporation wrong
Now what is there illegal, let us ask, in this court or in the probate court below acting in the furtherance of bequests that are simply voidable and consequently valid until they have been declared to be otherwise upon the intervention of the state? If the state has the exclusive privilege, as it has, of rendering the voidable bequest void, what is there wrongful in our regarding it as sound and sufficient while the question of its validity is not acted upon by the state, or the error is waived or permitted by the state ? What right has the judicial branch of the government to dictate what the state should do against its will or its policy, and decide a question for the state which the state can better decide for itself? What right has the court to deprive the state of all opportunity to determine whether it will thus severely punish this corporation for the mistake of the testator or will waive or overlook it? Certainly the state should not be prevented from making such election. If courts at the instigation of heirs can refuse to act upon voidable bequests as valid until avoided by the state, then, as a matter of course, the state can practically never have any opportunity to exercise its discretion in such a case any more than as if such right never existed, and the court would be assuming the prerogative of really acting in opposition to the state. The court could not exercise any broad discretion in the solution of the question, while the state could. It certainly is an excellent policy to refer such questions to the discretionary power of the state, which can determine them, according to the circumstances, upon the great principles of justice and generosity, and in conformity with the wishes and welfare of the whole community. Among so many societies and associations as are organized under the general statute there will always be exceptional cases where, from their amount of business or other causes they have come to exceed the limitation of capital allowed them, and it is reasonable that the state should have the privilege, if it pleases, of relaxing the statutory restraints in such exceptional cases. And the circumstances of the present case make the strongest appeal for the protection of this devisee
There is but little authority, either English or American, favoring the conclusion that bequests or devises not strictly authorized by law are to be considered void instead of voidable. This will be seen in the examination of cases in this country to be made in the progress of this discussion. But it may also be worth the while to notice what application has been made of the principle by the English courts in view of the statutes of mortmain as existing in that country. In Grant on Corporations, a reputable English work on the subject, at page *101, the author states the doctrine as follows: “ The meaning of the term unlicensed corporation is this. As was observed above, the conveyance of lands to a corporation was not made void to all intents and purposes by the statutes of mortmain, but only voidable at the option' of the lords and the crown; consequently if the mesne lords and the crown all consented to waive the escheat, each in their respective rights, the corporation to whom the land was granted enjoyed the property unmolested. In process of time the rights of the lords becoming difficult to trace, a license from the crown was generally considered sufficient to ascertain the right of property to the corporation; and this license it became usual for corporations to obtain from the crown, enabling them to take lands to such a value, notwithstanding the statutes of mortmain. In strictness, however, the license to hold in mortmain was only a waiver of the right of the crown to enter on the lands alienated; for as no royal charter can per se take away the property, or prejudice the interest of the subject, such license did not abrogate the right of the mesne lords to enter, and therefore, with respect to them, the corporation was not secure until the lapse of the periods respectively limited for the assertion
The cases in this country, most of them which favor the principle that an estate in the condition this is goes to the heirs of a testator rather than to the devisee, seem to inculcate the idea that the heirs may waive their right so as to allow the estate to pass to the devisee. And we have not the slightest doubt that, but for the interference of the heirs in the present case by this bill in equity, no obstacle would have stood in the way of a complete administration of the testator’s estate according to his clearly expressed intention. No court would have had the least hesitation in following the ordinary course of procedure, or would have entertained the thought, suo moto, of instituting inquiry to see whether the bequests in question were valid or not. But why should a bequest, invalid when not consented to by the heirs, become unobjectionable when such consent is obtained? If illegal as coming from the testator, why not just as illegal when coming from the testator and his heirs? Such considerations as these go to show how illogical and untenable a position it is to denominate the devises and bequests in the present will absolutely void.
Each side relies on certain authorities in defense of its position, and between the two sides many have been referred to. The first one relied on by the complainants, and probably one of the earliest decisions on the question in this country, is Trustees of Davidson College v. Chamber’s Executors, reported, in 1857, in 3 Jones, N. C. Eq. 251. The same question arose there that exists here, and
The next case cited by the complainants is that of Cromie’s Heirs v. Louisville Orphans’ Home Soc. 3 Bush, (Ky.) 365, decided in 1867. And this case we consider more favorable to' the party against whom it is- cited than to the party citing it. It appears that a citizen of Kentucky made different bequests in his will and among them one to an incorporated society in the State of New York, which already possessed all the property that the laws of New York allowed it to have for its capital. The testator’s heirs contested the validity of the bequest on that account. The opinion of the court is peculiar and savors a little of judicial sectionalism. While it was admitted that the remedy for taking an excess of capital would be in a forfeiture of some kind, and that the forfeiture would belong to the State of New York, still it was thought inexpedient to send it there because that state might apply the proceeds of any forfeiture for purposes different from the objects to which the same would be applied in Kentucky; and so it was held that, as Kentucky could not avail itself of any forfeiture for the fault of a foreign corporation, and as New York should not have it under the circumstances, the heirs of the testator living in Kentucky better have the benefit of the same. But the court speaks significantly on the legal question as follows: “The question of title is between the corporation and the owner of the forfeited right.” .... “ The limitation in this case is a mere matter of state policy, and the state of New York can alone take advantage of its violation.” And then the court goes on to justify its withholding from New York what it admits belongs to that state, and its giving the same to the heirs, in the manner following : “ But notwithstanding this legal conclusion, should a court of equity enforce the devise against the heirs when, if the limitation has been transcended, the state of New York may take from the devisee the excess over the maximum of the prescribed value,
The case of Chamberlain v. Chamberlain, 43 N. Y. 424, is cited by the complainants as an authority favoring the position espoused by them. The opinion on this point is not fortified by any authorities, is quite brief as far as relates to the present question, and gives as a reason for its conclusion that “unlimited trusts of this character might become an unmitigated evil.” But, let us ask, is that a question for the courts to determine or is it for the state, a judicial, or is it a governmental power or policy! Cannot the state by its representative officers regulate the tendency of the so-called evil with their power of instituting proceedings for forfeitures and escheats, or cannot the state by its legislative power entirely prevent it by penalties or provisions to that end whenever it sees fit to do so?
But the opinion in the case cited admits as much when it goes on to say: “Doubtless the restriction on corporations is a governmental regulation and one of policy to be enforced by the government.” That is precisely what the respondents are contending for. Then the opinion adds: “ But an individual whose interests are affected may also insist on the legislation as a restriction.” There is precisely the difference between that case and this. The effect of the reasoning in that case is that such an excessive bequest is voidable only and not void, but that it may be avoided by the government or by the heirs of the testator. On the other hand the present respondents admit that such a bequest is voidable, and contend that it can be avoided only by the state — that the bequest is not of itself a forfeiture, but at most a cause for forfeiture. It seems to us inconsistent to declare that the heir has the same right as the state, for in such case, as we have said before, the heir would practically have the exclusive right of repudiation and the state have none. Should not the state control its own policy and
The complainants also rely very much on the Cornell University case, reported in 1888, under the title of Matter of McGraw, 111 N. Y. 66, a strongly stated case and in point here, excepting as the New York policy differs from the policy maintained elsewhere, and as the municipal law there differs from the statutes of other states and especially from the statutory system of our own state. It is there held that such devises and bequests as these are absolutely and irrevocably void, and in this respect the case is not wholly consistent with the views expressed by the same court in the Chamberlain case already commented on, and is in great advance of any doctrine expressed in any previous case in that state. The result is reached by an interpretation “ of the general statutes of the state relating to the organization and holding of property by corporations of the class of Cornell University as the same have been affected by the terms of the special charter granted to it.” While in our own state we have no statute affecting the question outside of the terms of the corporate charter itself, or of the general law authorizing the charter, the New York code contains clauses touching the ability of corporations to acquire property which her court construes to be expressly and utterly prohibitory. The provisions are of themselves severe and they are also strictly and severely construed by the New York Court. This same case came before the Supreme Court of the United States afterwards, and that court declined to review the decision of the New York Court of Appeals upon the ground that no federal question was presented, inasmuch as the decision sought to be reviewed was based upon the charter of the University and the municipal law of the state of New York. Cornell University, 136 U. S. 152. The statute of wills in New York is disabling and restraining in its character and prohibits a devise to a corporation unless specially permitted by its charter or by some statute to take property by devise. Her statutes on analogous subjects have been restrictive and her decisions have been accordingly. Its code
In opposition to the doctrine attempted to be maintained by the complainants, the respondents have cited quite an array of cases, both of a direct and indirect bearing on the question, some of which will receive our examination.
The first on the list is Jones v. Habersham, 107 U. S. 174, a case of devise precisely in point, where Gray, J., delivering the opinion of the court, said: “ But there are two conclusive answers
A similar if not the same question arose in National Bank v. Whitney, 103 U. S. 99, affecting the present case in several respects. The case was first decided by the New York court of Appeals and its decision reversed by the Supreme Court of the United States. The National banking act allowed banks instituted by its authority to take mortgages on real estate for certain specified purposes “and no other.” This bank took a mortgage on real estate to secure past indebtedness and also for such future advances as the bank might furnish the mortgager. The latter branch of the transaction was directly forbidden by the banking act, the security not being for one of the purposes permitting it to be taken, and was declared by the New York court to be utterly void, but by the supreme court to be. voidable only until rendered void by some action on the part of the federal government. In the appellate court Field, J., in the opinion says: “Disregard for the prohibition only laid the association open to punishment by the government. The impending danger of a judgment for ouster and dissolution was, we think, the check and no other contemplated by Congress. The consequence insisted upon did not follow. The
Vidal v. Girard’s Executors, 2 How. 127, may also well be regarded as a significant authority on the question, where Story, J., says: “If the trusts were in themselves valid in point of law, it is plain that neither the heirs of the testator, nor any other private persons, could have any right to inquire into or contest the right of the corporation to take the property, or to execute the trusts; but this right would exclusively belong to the state in its sovereign capacity, and in its sole discretion, to inquire into and contest the same by a quo warranto, or other proper judicial proceeding.”
In harmony with these federal cases is the very recent decision of the same question by the Maryland Court of Appeals in the case of Hanson v. Little Sisters of the Poor in Baltimore, 79 Md.
In the case cited the court also says: “The contrary doctrixxe would make it very hazardous to take title from a corporation with such a linxitatioxx ■ on its charter, axxd, if the objectioxx coxxld be made by any one, title to property once held by such corporations would cease to be marketable, litigatioxx would be promoted, axxd courts would be coxxstantly called oxx to decide the very difficult
In Hamsher v. Hamsher, 132 Ill. 273, where the validity of a devise was involved, it is said in the head note of the case: “ Whether the corporation exceeds its power in receiving land by gift or devise is a question alone for the state.” And in the opinion the court says: “If the Young Men’s Christian Association of Decatur has exceeded in extent its power of holding real estate, appellant, ( heir ) we concede, cannot take advantage of the fact. ( Alexander v. Tolleston Club, 110 Ill. 65. ) Where a corporation may for some purposes acquire and hold the title to real estate, it cannot be made a question by any party, except the state, whether the real estate has been acquired for the authorized uses or not. ( Hayward v. Davidson, 41 Ind. 214.) There being capacity to purchase or to receive by devise whether the corporation, in so purchasing or receiving, exceeds its power is a question between it and the state and does not concern the appellant.”
In a peculiar case of devise in Massachusetts, Baker v. Clarke Institution, &c., 110 Mass. 88, the court says: “ The purposes and objects of the trust are distinctly set forth. If its full execution had been found to be impossible by reason of the continued incapacity of the cestui que trust to take the whole fund, it might have become necessary and proper for the court to declare a resulting trust, as to the excess, in favor of the next of kin, to be applied by law,” citing the New York case of Chamberlain v. Chamberlain, supra, for that proposition. Later in the opinion the court says: “ But even if it was intended to evade or disregard the limit of legal capacity, we are not prepared to hold that it would render the bequest invalid, either in whole, or for the excess.” And the court further adds: “ But we cannot doubt that a removal by the Legislature, of such a restriction upon the capacity of the corporation, before the complete execution of the trust, will enable it to receive the whole fund for its benefit, although for
Chambers v. St. Louis, 29 Mo. 543, is a case of a devise of property to a municipal corporation for certain purposes, and the question was as to what extent the corporation could take and hold the property. In this case the court, among other things, said: “ It is a matter between the state and the city. The law is only directory in relation to corporations taking land. It inflicts no penalty nor does it in terms avoid the conveyance. Nowhere is a corporation in express terms prohibited from taking and holding lands. . . . It is not for the courts in a collateral way to determine the question of misuser by declaring void conveyances made in good faith.” The city was authorized to acquire land necessary only for its municipal purposes. The case of Hayward v. Davidson, 41 Ind. 212, involved a similar question upon a devise to county commissioners for the benefit of a county, and was decided the same way as was the case in Missouri.
We have already referred to the case of Rainey v. Laing, 58 Barb. 453, as differing entirely from the McGraw or Cornell University case, for the reason that it was decided on a policy generally prevailing in the American courts rather than on the statute of wills in the state of New York which statute is, as construed by its Court of Appeals, intensely prohibitory in its character. In the case cited (Rainey v. Laing), the court said: “That the question whether the property with that which the Synod already held would exceed in amount the sum to which its charter restricted it, could not be tried in an action brought by the executors for the construction of the will.
“That the condition imposed in the act incapacitating the Synod, being not against its taking but against its taking and holding, the corporation could take, but whether it could hold was another question, not necessary or proper in this collateral way to be considered, a question purely of public policy with which individuals had no concern, but in which the state as the sovereign was alone interested and which it might either raise or waive according to its pleasure.”
Another case of devise, relied on by both parties, Heiskell v. Chickasaw Lodge, a late case reported, in 1889, in 3 Pickle, (Term.) 668, 686. The case holds that as to a devise, where the charity is definite, heirs and other devisees cannot question the legal capacity of the trustee to hold and administer the trust, but the state alone can do so. At the time the devise took effect, the corporation held more than the amount prescribed in its charter. The same case also held, in deference to the decision in the Cornell case, that there is a difference whether the funds bequeathed have been actually received or not by the donee, while we do not understand the latter case as admitting that a devise or bequest of the kind would be otherwise than void under any circumstances. But Mr. Pritchard, a Tennessee author, explains, in a note to his work on Wills, published as lately as 1894, that the Tennessee court was misled by not noticing the grounds upon which the Cornell University case was decided by the New York court. And we quote below a portion of this note, numbered 13 to section 153 of the work referred to, as being instructive because of its references to many cases, and nests of cases in books, and particularly because it contains a clear explanation of why and how the New York policy, as illustrated in the Cornell University case, differs from the policy of other states on the same question. The note discusses the English statutes of mortmain, and says that by the English statutes of mortmain, beginning with 9 Henry III, corporations were prohibited from taking or holding lands without the King’s license and that they were therefore excepted from the
The foregoing cases, with one exception, are where the question is discussed as to the ability of corporations to acquire by devise or bequest property exceeding the amount wjdch their charters expressly allow them to possess. In addition to those authori
In Heard v. Talbot, 7 Gray, 113, in discussing the relations in which a corporation stands towards the state as well as towards individuals interested in the same question, the following remarks made in the opinion of the court appear: “ Although the disuse of the canal and its abandonment by the corporation may be a gross disregard of the duty imposed on them by law and an essential violation of the terms and conditions implied from the contract entered into with the government by the acceptance of a charter, and upon due proceedings had may be a sufficient ground upon which to decree a forfeiture of all their corporate rights and privileges, they do not constitute any valid ground upon which the exercise by the corporation of any of the powers conferred by their charter can be defeated or denied by third persons in collateral proceedings. This results from the very nature of the act of incorporation. It is not a contract between the corporate body, on the one hand, and individuals whose rights and interests may be affected by the éxercise of its powers, on the other. It is a compact between the corporation and the government from which they derived their powers. Individuals, therefore, cannot take it upon themselves in the assertion of private rights, to insist upon breaches of the contract by the corporation, as a ground for resisting or denying the exercise of a corporate power. That can be done only by the government with which the contract was made, and in proceedings only instituted against the corporation. . . . Therefore, it has been often held that a cause of forfeiture, however great, cannot be taken advantage of or enforced against corpora
In Davis v. Old Col. R. R. Co. 131 Mass. 258, is a learned discussion by Gray, J., in the course of which he says : “ There is a clear distinction between the exercise by a corporation of a power not conferred upon it, varying from the objects of its creation as declared in the law of its organization, and the abuse of a general power, or the failure to comply with prescribed formalities or regulations in a particular instance;” to which proposition many and various cases are cited. In commenting on a former case between the same parties, it is in the opinion said as follows: “ The objection that a corporation had no right to trade in gravel or land was raised by the defendant by way of defense to a bill in equity by the corporation for specific performance of his agreement. .....There can be no doubt of the correctness of the decision overruling the objection. The corporation by its purchase had acquired a title to the land, which was good against all the world, except possibly by the commonwealth.”
It was upon the distinction above stated that it was held, in Brunswick Gas Light Co. v. United Gas Co., 85 Maine, 532, that one gas company could not sell its charter, inclusive of rights obtained through the exercise of the principle of eminent domain, to another gas company without the consent of the legislature. The same distinction is aptly stated, in a South Dakota mining case, Gilbert v. Hole, 49 N. W. Rep. 1, in this way: “ There is a difference between exercising power entirely foreign to the nature of a corporation and exercising legitimate powers to an improper extent. In the former case, the acts done might be absolutely void; in the latter, they would only be voidable by a proper proceeding on the part of the state.” The general rule illustrated by some of the preceding cases is also well put in case of Alexander v. Tolleston Club, 110 Ill. 65, where the head note reads thus : “ When a corporation, by the law of its creation is authorized in some cases or for some purposes or to a certain extent to take and hold a title to real estate, it cannot be made a question by any party except the state whether its real estate has been secured for
But the present suit is not either instituted or controlled by the state. It is a collateral proceeding by private parties. The state is not thereby exercising her policy, and if thé suit can be sustained the state will have no opportunity whatever to express' by any act its assent or dissent in relation to the conduct of the corporation in accepting the bequests. The state is neither directly or indirectly represented in the litigation. What'can be plainer'! But the corporation is using the state’s machinery for their purposes, it is said. Is not that- the business of the state whether such use of her procedure shall be had or not' ? Cannot the court wait until the state through her officials comes into court asking for any judicial assistance ?
In Briggs v. Cape Cod Ship Canal, 137 Mass. 71, the point of' many cases is expressed in these words: " “ The act of incorporation is a contract between the commonwealth and the corporation ; whether the' corporation has complied with the conditions 'is a question of fact to be judicially determined. The commonwealth may' waive a strict compliance with- the terms of the act, and may elect whether it will insist upon a forfeiture, if there 'has been a breach of condition.” Even the North Carolina court feels some amelioration -of its rigid doctrine maintained in Chambers' Executors v. Davidson College, the first case cited on complainants’ brief, when, in Mallett v. Simpson, 94 N. C. 37, thirty years after its first decision, it says : “ Conceding that the railroad company had not purchased the land in question or used it for the purposes contemplated by the charter, the deed to it vested the legal title in it and its right to purchase and hold land could not be collaterally assailed. No one but the state could take advantage of the defect that the purchase was ultra vires.”
The law authors are nearly or quite unanimous in their concurrence on the exact question presented for our determination. In Devlin on Deeds, volume 1, § 120, it is laid down that “if a charter of a corporation forbids it to purchase or take lands, a deed made to it is void.” And the author in the next following section (121) ascribes to the state the discretion of applying any remedy, saying that “the general rule is that the state alone can take advantage of the clause of the charter prohibiting a corporation from holding land.” In Beach on Private Corporations, § 378, it is said that “no party except the state can object that the corporation is holding real estate in excess of its rights.” And it seems to us that it is a consistent deduction from that proposition to say that no party but the state can object to any effort by a corporation to acquire real estate. Ilow can a thing be wrong in the beginning and right in the end? How can it be logically said that a contemplated act is wrong and as soon as consummated is right ? It would seem as if the first step towards a wrong act would constitute less offense than the last step would.
Says Mr. Perry, in his reliable work on Trusts, “if a corporation takes land by grant or bequest in trust or otherwise which by its charter it cannot hold, its title is good as against third persons and strangers; the state only can interfere.” Perry, Trusts, § 45.
The quotation below from Schouler on Wills (§ 24) directly implies that the bequests he is speaking of are merely voidable, for if void a legislature at its will could not cure the difficulty. The author says: “ But limitations and restrictions under the act of incorporation should here be regarded, to the extent, at least, of procuring an enabling act from the legislature to hold the property where the original charter privileges would otherwise be transcended. In Massachusetts and many other states no disability to take by either devise or bequest is imposed by the statute of wills
The text of the section, in Pritchard on Wills, section 153, air extended note to- which we have already incorporated in this opinion, on a review of the authorities, says that when a corporation is already holding as much land as it is authorized to hold, its right to land devised to it can be questioned by the state only unless, as in New York, there is some statute declaring the devise to be void. It is said in Morawetz on Pri. Cor. § 671, as follows: “The statute of New York prohibiting devises of real estate to corporations, unless expressly authorized by their charters or by statute to take by devise, renders prohibited devises absolutely void; and it has been held that the legislature cannot by subsequent enactment validate a devise which is void under the statute, for this would impair the vested rights of the heir.
“ A distinction should be observed between the effect of laws restricting the power of testators to devise their property to corporations, and laws restricting the power of corporations to take property. Such laws differ both in their application and in their legal effect.” Again the author says in another section (§ 332) as follows: “A distinction should be observed between those laws whose object it is to regulate corporations in respect of their power of acquiring and holding property, and laws whose object is to restrict the power of testators to dispose of their property. Laws of the former description are enacted in pursuance of a general policy of preventing corporations from acquiring the ownership of real estate in the absence of express authority from the state. But laws prohibiting devises to corporations are intended to- restrict the testamentary capacity of testators, and their object in many instances is to prevent testators from being driven by the improper use of religious influence to devise their property to religious institutions and thus disinherit their heirs.”
Mr. Thompson, the learned and able commentator on Corporations, in his work which is the latest of any in this country on the
The author, in section 6033, characterized the question as follows : “ These considerations bring us to the somewhat new and
The complainants quote a part of a section from the same author, as follows : “ This principle [ that the state alone can interfere ] has no application where the corporation is seeking the aid of a court of justice to enable it to acquire lands which it has no power to acquire and hold. Here the principle is that a court of justice will not aid a corporation to do that which is impliedly forbidden by its charter or by the law.” This might be misleading if read without the omitted portion of the section, which is as follows: “It has, for instance, no application to a case where a suit in equity is brought to compel the specific performance of a contract to convey land to a railroad company, which the latter has attempted to acquire, not for any purpose connected with the building and operating of its road, but merely for speculative purposes. In such a case the specific performance was refused on the ground, among others, that the company had no power under its charter to take and hold land for such purposes.” It is evident enough from the omitted extract, as well as from the citation in the note to the section that the meaning of the author is not inconsistent with his avowals in other sections of the work. The section applies to cases when a corporation has no power to be exercised and not merely where it exercises an excess of power of the same kind as that authorized by its charter. See, on this point, Case v. Kelly, 133 U. S. 21.
The complainants quote in their brief an article in the Harvard Law Review (January, 1896,) in which the writer, who was said at the argument by counsel for complainants to be a recent graduate of Harvard Law School, favors upon the admittedly doubtful
But that learned author, in his brief note on the subject, takes no notice of the distinction between a want of testamentary capacity to give and a mere lack of authority in the corporation to take.
Taking now a retrospective glance at the cases and authorities on both sides which we have noticed in the foregoing pages, wo feel impressed with the correctness of the statement of Stjrout, J. at the hearing of this case below, that the decided weight of authority is in favor of these respondents on this “ new and growing question” as the author Thompson expresses it. Upon closing his discussion of the direct cases cited on his opening brief, the learned counsel for the complainants says: “But if the decisions of New York are claimed to rest upon the provisions of special New York statutes, what has the counsel to say as to all the other cases cited by the plaintiffs from North Carolina, from Kentucky, from New Jersey, and from Rhode Island?” We have substantially, according to our view answered the question ourselves by saying that the force of the opinion of the two judges in the North Carolina case is much lessened by the able minority opinion of the chief justice in the case and by the fact that the majority opinion yields the
The counsel for the complainants have very critically reviewed the cases cited against them, and in some respects, as seems to us, upon purely theoretical rather than practical grounds. Their argument would sweep away much of the more direct authority, and all of the auxiliary cases as about worthless. This is too extreme. Of course, the cases of each class are not entirely alike, and may be of various degrees of force as authorities. But they all go to illustrate as well as to bring out the underlying principle on which a settlement of the case before us depends, and most or many of them are enough alike in support of the principle involved as to be regarded as leaves from the same tree.
The counsel rebel. against regarding the National Bank cases as fitting precedents in support of the question here, but they ai’e so regarded in some cases and by some authors, which shows how other minds than ours are influenced by them. So the counsel protest just as strongly against the alien cases as being of any importance as authority. But that class of cases is. constantly cited in the books as supporting by analogy such a position as the respondents stand upon here. Deeds to aliens may not be of principal importance, but it seems to us that devises to. aliens, which are good at common law, are clearly cases in point and of more consequence as precedents than any other analogous authority. Does
A few of the more important propositions pertinent to the case may, in conclusion, be briefly re-stated as these: That there is no restraining clause in our statute of wills preventing the testator from making these devises and bequests ; that they are regular and valid on their face, nothing in the will indicating that the corpora
This conclusion renders it unnecessary and inexpedient to discuss the further contention of the respondents that the bequests are valid in equity if not at law, upon the maxim that no legal trust of a charitable nature shall fail for want of a competent trustee, and that if this corporation cannot act some other party may be appointed by the court that can.
.Exceptions overruled.
Appeal dismissed, and decree below affirmed.
