144 Ga. 665 | Ga. | 1916
Lead Opinion
1. The term “ultra vires,” whether with perfect accuracy or not, as to the acts of a corporation, or acts purporting to be done by it, has been used in more than one sense. An act is ultra vires in the strictest sense when it is beyond the scope of the powers granted by law to the corporation, so that it is not in the power of the corporation to perform it under any circumstances. Sometimes an act is said "to be ultra vires with reference to the rights of certain persons, when the corporation can not legally perform such act without their consent. Sometimes an act is said to be ultra vires with reference to some specific purpose, when the corporation can not perform it for that purpose.
2. If an act be done which is ultra vires in the sense first mentioned, it is wholly void, and the corporation may avail itself of that fact as a defense. If an act is ultra vires in either of the last two senses, the right of the corporation to avail itself of the defense will depend upon the circumstances of the case. Miners’ Ditch Co. v. Zellebach, 37 Cal. 543 (99 Am. D. 300).
(as) There is a distinction between the doing by a corporation of an act beyond the scope of the powers granted to it by law, and an irregularity in the exercise of the granted powers. Zabriskie v. Cleveland etc. Railroad Co., 23 How. (64 U. S.) 381, 398 (46 L. ed. 488); Central Transportation Co. v. Pullman Palace Car Co., 139 U. S. 24, 59-60 (11 Sup. Ct. 478, 35 L. ed. 55); Louisville etc. Railway Co. v. Louisville Trust Co., 174 U. S. 552, 570 (19 Sup. Ct. 817, 43 L. ed. 1082).
3. The general law which provides the method of incorporating railroad companies, and declares powers possessed by companies incorporated thereunder, contains a provision authorizing such a company to borrow “such sums of money, at such rates of interest and upon such terms, as such company or its board of directors shall deem necessary or expedient, and to execute one or more trust deeds or mort
(«.) There was evidence sufficient to authorize the finding of the auditor that there had been ratification by the company of the acts of its officers in issuing the bonds, by acquiescence in such acts with knowledge thereof; or perhaps more strictly, as to it, there was an estoppel.
(6) The only persons defending against the foreclosure of the mortgage of the railroad company are the company itself and the trustee of bondholders of the granite company, who claims as such trustee to own a majority of the stock of the railroad company, as part of the security for the bonds. As to the voting of this latter stock at the meeting of the stockholders of the railroad company, a ruling is hereinafter made.
Dissenting Opinion
dissents as to the preceding notes 3 and (a) and (6). He is of opinion that if any stockholder of the railroad company was not notified, as prescribed in the Civil Code, § 2583, the bonds are void.
4. The provisions contained in the Civil Code (1910), § 2583, are primarily for the benefit of the stockholders, and, so far at least as their interests are involved, may be waived by them. Whether or not a creditor with a lien on the property of the railroad company, arising before or after the giving of the mortgage or deed of trust to secure the bonds, or any other person, could contest the validity or priority of such a mortgage or deed of trust, and whether there is a difference between contingencies dependent on things extrinsic the corporation, such as registration in a public office, and those peculiarly within the knowledge of the corporation or its agents, is not now involved or necessary for decision. See, on the general subject, 3 Thomp. Corp. (2d ed.) §§ 2563, 2564, 2565; Campbell v. Argenta Gold & Silver Mining Co., 51 Fed. 1; Hervey v. Illinois Midland Ry. Co., 28 Fed. 169; Paulding v. Chrome Steel Co., 94 N. Y. 334; Rochester Savings Bank v. Averell, 96 N. Y. 467; Atlantic Trust Co. v. Crystal Water Co., 72 App. Div. 539 (76 N. Y. Supp. 647); Nelson v. Hubbard, 96 Ala. 238 (11 So. 428, 17 L. R. A. 375); Thomas v. Citizens Horse Ry. Co., 104 Ill. 462; Beecher v. Marquette & Pacific Rolling Mill Co., 45 Mich. 103 (7 N. W. 695).
5. A corporation organized for quarrying and selling granite issued bonds, and executed a mortgage or deed of trust to a trustee to secure them. Being the owner of two hundred and forty-three shares of stock in a railroad company, it caused a certificate for that number of shares to be issued to the trustee of its bonds. The mortgage or deed of trust described various physical properties which were covered by it, and also mentioned as a part of the property included in it the 243 shares of railroad stock. It contained the following clause: “The party of the first part [the granite company] shall be suffered and permitted to possess, manage, operate, and enjoy the premises and property herein-before described or mentioned, with the appurtenances, and to collect, receive, use, and enjoy the rents, income, issues, and profits thereof, and to dispose of the same in any manner not inconsistent with these presents; and especially may its board of directors distribute and pay over to its stockholders the net annual income and profits after paying the interest due on any and all of the said bonds from time to time outstanding.” Held, that, under such contract, as between the trustee and the granite company, the right to vote the stock in the railroad company was in the granite company.
6. Although the proxy to vote such shares of stock in a meeting of stockholders of the railroad company was not shown to have been authorized by a vote of the directors of the granite company in regular meeting, yet, in view of the evidence as to the manner in which the business of the granite company had been conducted, and the investing, by ac
(a) The decisions in Garmany v. Lawton, 124 Ga. 876 (53 S. E. 669, 110 Am. St. R. 207), and Potts-Thompson Liquor Co. v. Potts, 135 Ga. 451 (69 S. E. 734), are not controlling, so far as to hold that the president and secretary of the railroad company had authority to issue bonds for it. Both of those cases dealt with private corporations. The former involved the making of a mortgage to secure a promissory note. The latter involved the renting of a storehouse or building where it was contended that the corporation conducted a branch of its business. Neither of the corporations was a railroad company, and there was no statute in regard to them similar to Civil Code § 2583 in regard to the issuance of bonds by railroad companies. So far as applicable to .the facts, however, those decisions may have force in relation to the granite company.
7. Under the evidence, the auditor was authorized to find tliat the bonds of the railroad company had found their way into the hands of innocent purchasers for value and without notice of any defense to them, if any existed.
(a) If the bringing of a suit to foreclose the mortgage or deed of trust against the railroad property because of an alleged default in the payment of interest, and the subsequent dismissing of such suit by the corporation which was at that time the trustee under the mortgage or deed of trust to secure such bonds, should be held to put such corporation on inquiry when it subsequently became a taker of the bonds as security for an indebtedness to it, nevertheless the evidence warranted the auditor in finding that the holders of the bonds for whose benefit the present foreclosure suit was brought, and who became parties thereto, and their immediate predecessor as the holder of such bonds, were purchasers of the same for value, before due, and without notice; and the presiding judge was authorized to overrule the exception to such finding.
(b) That overdue and unpaid interest coupons are attached to a bond negotiable by delivery does not of itself, as matter of law, make the bond to which they are attached dishonored paper, or charge the taker for value with notice of a defense to such bond, if any exists. At most, the existence of such attached coupons would only be a' circumstance, which might be considered with other facts, in determining whether the taker was affected with notice. Civil Code (1910), § 4287; Fidelity Co. v. Mays, 142 Ga. 821 (83 S. E. 961); Railway Co. v. Sprague, 103 U. S. 756 (26 L. ed. 554).
8. The contract under which the holders of the bonds for whose benefit the
(o) In so far as attacks were made upon the contract on the grounds just above indicated, not by reference to its face alone, but by taking it in connection 'with extraneous testimony, the auditor was authorized to find that such contract was not in restraint of trade, either intrastate or interstate, and that it was not illegal under the Sherman anti-trust law, or under the constitution or law of this State.
(6) If the criticisms in the brief of counsel for plaintiffs in error upon the sufficiency of the findings of the auditor on this subject be considered as arguments supporting the exception to the overruling of one ground of the motion to recommit the auditor’s report, they can not prevail. While the report of the auditor did not in terms l'efer to the intent with which the contract was made, his findings on this subject were sufficient to uphold the contract as not illegal. They were authorized by the evidence, and the presiding judge did not err in overruling the exceptions based on the findings in this regard.
9. A company organized to quarry and sell granite issued bonds and gave a mortgage or deed of trust to a trustee to secure them. After describing certain land, the description of the property proceeded: “And generally all and singular its real and personal property (except quarried granite in process of preparation for market), apparatus, fixtures, machinery, engines, boilers, steam-drills, rock-crushers, tools, and equipments of every kind and description whatsoever, and wherever situated, which are now held or may be hereafter acquired by said party of first part, together with all and singular the privileges and appurtenances, and the rents, issues, profits, income, and rights belonging to or growing out of and appertaining to said property, including two hundred and forty-three shares of the capital stock of Georgia Granite Railroad Company.” Two or three years thereafter the granite company obtained certain negotiable bonds of the railroad company, transferable by delivery (as found by the auditor), which it later pledged as security for an indebtedness, and which ultimately found their way into the hands of innocent purchasers for value and without notice of any defect in them, if there was any. The trustee for the bondholders of the granite company never had possession of them. Seld, that the use of the words, “which are now held or may be hereafter acquired,” in the above-quoted description, did not transfer to the trustee for the bondholders of the granite company the title to such bonds of the railroad company, so as to affect the title acquired by the subsequent bona fide purchasers for value. See, in this connection, 4 Cook on Corporations (7th ed.), § 852; 23 Am. & Eng. Enc. Law (2d ed.), 808, 809; Smith v. McCullough, 104 U. S. 25 (26 L. ed. 637).
Judgment affirmed.