68 Me. 43 | Me. | 1877
The claim which we are required to pass upon originated in this way :
In April, 1875, the trustees of the Lewiston Institution for Savings subscribed for $50,000 worth of' the capital stock of the Continental Mills, one of the manufacturing corporations doing business at Lewiston. The savings bank had no money with, which to pay for the stock, and in July following the Franklin Company, another corporation doing business at Lewiston, agreed to pay the $50,000 to the Continental Mills, take the notes of the savings bank for the amount, and hold the stock as security. Five
I. The first question is whether it is competent for the trustees of a savings bank, at a time when there are no funds in the bank for investment, to agree to take shares in a manufacturing corporation, and thereby create a debt binding upon the bank.
We think not. It is familiar law that a corporation possesses such powers, and such only, as the law of its creation confers upon it. The rule is stated with great uniformity.
“ A corporation has only such powers as are specifically granted, or such as are necessary for carrying the former into effect; and these powers can only be exercised for the purposes contemplated by its charter.” Brightley’s Federal Digest, citing
“ A corporation can do no acts, and make no contracts, either within or without the state which created it, except such as are authorized by its charter.” Br. Fed. Dig., citing Bank of Augusta v. Earle, 13 Pet. 519. Tombigbee R. R. Co. v. Kneeland, 4 How. 16. Runyan v. Coster’s Lessee, 14 Pet. 122.
“ A corporation, being the mere creature of law, possesses only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence.” Marshall, C. J., in Dartmouth College v. Woodward, 4 Wheat. 518, 636.
“ An incidental power is one that is directly and immediately appropriate to the execution of the specific power granted, and not one that has a slight or remote relation to it.” Hood v. N. Y. & N. H. Railroad, 22 Conn. 1, and 502.
As corporations are created by public acts of the legislature, and all their powers, duties and obligations are declared #nd clearly defined by public law, parties dealing with them must take notice of those powers and the limitations upon them, at their peril; .and will not be allowed to plead ignorance of those powers and limitations in avoidance of the defense of ultra vires. Pearce v. Mad. & Ind. Railroad, 21 How. 441. Andrews v. Ins. Co., 37 Maine, 256.
“ In the United States, corporations cannot purchase, or hold, or deal in the stocks of other corporations, unless expressly authorized to do so by law.” Green’s Brice’s Ultra Vires, 95, note, citing a large number of authorities.
“ It certainly needs no argument or authority to show that a corporation created for the purpose of insurance has no power to advance its moneys or obligations to sustain another corporation in a similar or dissimilar business.” Opinion of the court in Berry, receiver, v. Yates, 24 Barb. 199.
“ When the directors of the company subscribed for stock in a building corporation, whatever may have been their motive, they transcended the powers conferred upon them, and departed from
If a corporation can purchase any portion of the capital stock of another corporation it can purchase the whole, and invest all its funds in that way, and thus be enabled to engage exclusively in a business entirely foreign to the purposes for which it was created. A banking corporation could become a manufacturing corporation, and a manufacturing corporation could become a banking corporation. This the law will not allow; and it has been held that notes given by a manufacturing corporation for the purchase of shares in a bank are not collectable. Sumner v. Marey, 3 W. & M. 105. That the notes given by a railroad corporation, for the purchase of a steamboat to be run in connection with its road, are not collectable. Pearce v. Railroad, 21 How. 441.
It would seem, therefore, upon principle as well as authority, that it is not within the authority of the trustees of a savings bank to invest its funds in the stock of manufacturing corporations, unless expressly authorized so to do by its charter, or the public laws of the state.
But we do not rest our decision upon this ground. We rest it upon the broader ground that it is not competent for the trustees of a savings bank to purchasemn credit^,property of any kind, not needed for immediate use, or the investment of existing funds. No such power is expressly conferred upon them; nor do we think it can be sustained as an incidental power.
It is suggested that it may be convenient in this way to provide, in advance, for the investment of funds that may afterwards come into the possession of the bank. We think the creation of debts, by corporations or individuals, for no other purpose than to provide a ready way to dispose of future acquisitions, a proceeding of very questionable convenience; that in the great
II. The second ground on which the claim of the Franklin Company is sought to be maintained is this: It is said that where a corporation is authorized to hire money for any purpose, mere knowledge on the part of the lender that it is to be used for an illegal purpose will not preclude a recovery. This may be true. But the claim in this case is not for money lent. It is for money ■paid. And the latter is the only claim which the evidence tends to support.-. Ordinarily such a distinction is unimportant. But iii this case it is vital. It is the hinge on which the case turns. It may be true that when money is lent, and the borrower is left free to use it as he pleases, mere knowledge on the' part of the lender that the borrower intends to use it for an illegal purpose will not bar a recovery. But it is well settled that if it be a part of the agreement that the money shall be used for an illegal purpose, or anything is done by the lender in furtherance of such a use of the money, a recovery therefor cannot be had. Thus, the mere kno wledge of the lender that the borrower of money intends to gamble with it, if, by the terms of the agreement, the latter is left free to use it as he pleases, may not constitute a bar to a recovery of it. But it is well settled that if the money is lent for the express purpose of enabling the borrower to gamble with it, a recovery cannot be had. Cannan v. Bryce, 8 Barn. & Ald. 179. McKinnell v. Robinson, 3 M. & W. 434. Tracy v. Talmage, 14 N. Y. 162. As already stated, there is no claim in this case for money lent. And the evidence would not support such a claim if there was one. The money was never for a moment in the possession of the bank. Never, for a moment, did the
“ The contracts of corporations which are not authorized by their charters are illegal, because they are made in contravention of public policy. . . . Although the unauthorized contract may be neither malum in se, nor mahcm prohibitum, but, on the contrary, may be for some benevolent or worthy object, — as to build an almshouse or a college, or to purchase and distribute tracts or books of instruction — yet, if it is a violation of public policy for corporations to exercise powers which have never been granted to them, such contracts, notwithstanding their praiseworthy nature, are illegal and void.” Selden, J., in Bissell v. Railroad, Companies, 22 N. Y. 258, 285.
“ Any application of, or dealing with, the 'capital, or any funds or money of the company, which may come under the control or management of the directors, or governing body of the company, in any manner not distinctly authorized by the act of parliament, is, in my opinion, an illegal application or dealing.” Lord Lang-dale, in Solomons v. Laing, 12 Beavan, 339.
These, extracts are to show the sense in which the word “ illegal ” is used when employed to describe the unauthorized acts and contracts of corporations. And, with respect to such acts and contracts, it has been very aptly said that the powers and franchises of corporations are grants from the government; that it would be just as reasonable and just as legal to allow one who has a patent for one hundred acres of land, to take possession of two hundred acres, as to allow a corporation to usurp and exercise a power not conveyed to it in its charter.
III. Another ground on which the Franklin Company claims
Decision of the commissioners affirmed.
Claim of the Franklin Company disallowed.