11 Mich. 155 | Mich. | 1863
Lead Opinion
We are all agreed that the obligors in the collateral bond were improperly made parties defendant, and that the bill, as to them, must be dismissed with costs against the complainants.
It is admitted that, but for the statute — Comp. L. §3567 — they could not be joined in a foreclosure bill upon this mortgage. We do not think the statute can be fairly construed as extending to an undertaking like the present, which is not for the payment of the debt or any part of it, but entirely collateral — that the company should (among other collateral matters) provide a sinking fund equal to eight per cent, per year of the sum loaned, to be invested
It is objected that the bill cannot be maintained against the company, for the following reasons:
I. That the company had not the right, under the general powers contained in its charter, and without a special provision of statute to that effect, to mortgage its road and franchises; its powers being conferred for a public purpose, which might be defeated by sale under a mortgage; and that the mortgage cannot, therefore, be maintained without the aid of the special act of 1851.
II. That it cannot be sustained under the act of 1851: because, 1st. The act conflicts with section 23 of article IV. of the Constitution, which prohibits the Legislature from authorising “by private or special law, the sale or conveyance of any real estate belonging to any person.” 2nd. Because the act was never duly accepted by the corn» pany. 3rd. If the act be constitutional, and its acceptance sufficient, it will not sustain the mortgage in this case; because the act only authorized a mortgage “ of the road or other property of said company;” which, it is insisted, must mean the entire road authorized by the charter to be 'Constructed, while that covered by the mortgage is only a part of the road so authorized; and if the act authorizes a mortgage of the franchise of the company at all, then it must be for the whole franchise, because it is in its nature indivisible. We will consider these objections in their order.
I. Can this mortgage be sustained and enforced to any, and if so, to what, extent, without the aid of the special act of 1851 ?
As a general rule, corporations may, I think, be said to have an incidental power to dispose of their property, real and personal, either by sale absolute, or by mortgage or other mode of security, for any debt which they may rightfully contract, to the same extent as natural persons, except so far as that power may be restrained by their charter, by considerations connected with the purposes of their creation, or limited by express provision or just implication of some statute, or by the general policy of the State to be deduced from its legislation. — A. & A. on Corp. §§187, 191; Pierce on Railr. 513, 514, and cases cited; 2 Kent, 281; Barry v. Merch. Exch. Co., 1 Sandf. Ch. 280.
Certain franchises — such (among others) as that of keeping a fair, a market, or a ferry, and taking tolls — have generally been recognized as property, and when vested in individuals, at least, proper subjects of transfer and mortgage. — Com. Dig. Title “ Grant, C.; ” Powell on Mort. 17 (b); Coote on Mort. 101; Hilliard on Mort. Ch. 1, §4; Pierce on Railr. 518, note 2, and cases cited. The franchise of maintaining a plank road and taking tolls is not necessarily a corporate franchise, more than that of a ferry. And it is difficult to discover any substantial reason why one should be held a proper subject of sale and mortgage and not the other. If public confidence is reposed in a plank road corporation, and there is an implied obligation on its part to afford the proposed • public accommodation, these considerations .would seem to apply with equal force to the legislative grantee of a ferry franchise: and if a transfer by mortgage of the franchise of taking tolls is to be prohibited in the one case, lest it might disable the original grantees from performing their duties to the public, it is difficult to see why the same consi
In Enders v. Board of Public Works, 1 Graft. 364, a dock company, whose charter declared the dock to be a public highway, was held to have the power to mortgage its dock, though the power was contested as conflicting with its duties to the public: and see Central Bridge Corp. v. Bailey, 8 Cush. 319. In Allen v. Montgomery Railr. Co. 11 Ala. 437, it was held that, upon general principles, a railroad company had the power to mortgage its property in such a manner as to transfer the beneficial use of its franchise for the benefit of creditors, and that a special power for that purpose in the charter did not abridge the general power; and see Mobile & Cedar Point Railway v. Talman, 15 Ala. 472.
“ The proposition” (says Mr. Pierce, in his able work on Railroads, p. 516), “that a corporation cannot perform acts as to its property which will disable it from performing its public duty, if admitted at all,, must be confined to a very limited operation; so limited as to make the proposition itself doubtful;” and he gives some pertinent reasons for this view; yet there are, doubtless, . many species of corporations as to which such considerations should be allowed to limit, if not to prohibit, the power of such transfer. But there are many cases where the public object for which the charter was granted would be promoted rather han orejudiced by a mortgage. The corporators or
I am aware of no provision of the statute or of the charter, which either expressly or by just implication, can be fairly construed as prohibiting a plank road company from mortgaging their road and fixtures, with the franchise of taking tolls; nor was any such provision cited
If the State had adopted a policy calculated to prohibit, or had failed to provide for, a sale on execution, of the franchise of taking tolls against plank roads and similar corporations, this would be a strong argument against the power to dispose of the same by mortgage: but if'the State has waived, for the benefit of creditors, the injury •which might result to the public by a transfer under execution, then in the absence of any prohibition against mortgaging, I am at a loss to discover upon what ground it can .be held that a mortgage of the same property should not be held valid and to authorize a sale to the same extent. The power of the corporation to contract a debt cannot be doubted, and the power of this corporation to contract the debt for which the mortgage is given was not denied upon the argument, nor do I think it can be successfully controverted: see Gordon v. Preston, 1 Watts, 385; Union Bank v. Jacobs, 6 Humph. 515; Barry v. Merchants' Exch. Co. 1 Sandf. Ch. 280. If not paid, the law, at the instance of the creditors, would compel a sale on execution. Why may not the parties provide by contract, on the like failure to pay, for a sale to the same extent under a mortgage, as the law would have compelled, had no mortgage been given? The reasons are the same in both cases, and the effect upon the corporation and the public the same. But if the sale on
The fact that the whole road authorized by the charter was not covered by the mortgage is, I think, no objection to its validity, and if -the view I have taken of the ease thus far be correct, the mortgage of a part is even less objectionable as regards both the public and the company, than a mortgage of the whole.
But again, there is nothing in the case tending to show that any portion of the balance of the road, from Eaton Bapids towards Lansing, has ever been constructed. We cannot presume without proof that it has been: as no legal duty rested upon the company to construct it. People v. The Jackson and Mich. Plank Road Co., 9 Mich. 285. My conclusion, therefore, is that the mortgage in this
II. We do not think this act comes in conflict with the twenty-third section of the fourth article of the Constitution against authorizing “by -private or special law, the sale or conveyance of any real estate belonging to any person”; but that so far as the act has any effect, it'must be treated as ap amendment of the charter. The eighth section of the fifteenth article of the Constitution, authorizes the Legislature to amend any'act of incorporation theretofore granted (of which this was one), by a vote of two-thirds of all the members elected to each house. The act in question was declared to take immediate effect (§ S). By the twentieth section of the fourth article of the Constitution it could not be ordered to take immediate effect without a vote of two-thirds of the members elected to each house,1 which is the same majority as that required to amend an act of incorporation. W e must, therefore, presume that the act was passed by the requisite majority. Whether it would be competent to prove the contrary we need not decide, as no such proof is offered.
But it is objected that this act was never accepted-by the company. Its acceptance by the board of directors is admitted, and that a certificate of accejffance, signed by the president and secretary, and under the corporate seal, was filed in the office of the secretary of state, as provided in the third section of the act. Admitting that it is competent for the company to set up in defense to the mortgage, the want of assent by any stockholder to the
In the present case it appears by the evidence in the record, that, at a meeting of the stockholders specially called for the purpose of taking into consideration the question of making this loan and securing the same by mortgage, the holders of a majority of the stock voted for a resolution to make the loan and to secure the same by a mortgage 'of the road, and that there was not a vote
The act of 1851 must therefore be held to be valid and to authorize the mortgage, whether it was previously authorized under the incidental powers of the corporation or not, unless the mortgage is to be held void because it does not cover the whole road authorized by the charter. But what is the extent of the operation of this act? Does it authorize the company to mortgage any other of its franchises than those I have endeavored to show might have been mortgaged under the incidental or implied powers contained in the charter. I think it does not. It authorizes the company to “mortgage the road or other property’’ of the company “to secure their bonds.” It is silent on the subject of franchises; but as the road could be of no value without the power or franchise of receiving tolls, and its object was to enable the company to raise money on the security of the mortgage, the franchise of receiving tolls must be understood as included with the road and fixtures. And in thus expressly authorizing a mortgage for this specific purpose, it is fair to presume the Legislature intended a mortgage with the usual power of sale, and which on default should authorize an absolute sale of the property mortgaged, as the usual and most effectual means of rendering the security available.
But I think it very clear that no power is given by the act to mortgage any franchise essentially corporate in its character, and which could not be enjoyed by a natural person — such as the right of being a corporation. In other words, there is nothing in the language of the act,.
I am, therefore, satisfied no other franchises are authorized to be mortgaged than those I have endeavored to show would have been authorized under the incidental powers of the corporation; and the same considerations will •apply, so far as relates to the question of mortgaging the whole or a part of the road.
So much of the decree of the Court below as relates •to the obligors in the collateral bond must be reversed, and the bill as to them dismissed, with costs against complainants of both courts. And the decree of foreclosure and sale, entered in the Court below, must be so modified as to confine the sale to so much of the road between Jackson and Eaton Rapids as may have been already constructed, together with the toll-houses, gates, and other fixtures and erections appurtenant thereto,- with the franchises and rights of keeping up and maintaining the said road, fixtures, erections and appurtenances, and of taking ■tolls thereon, and the cause must be remitted to the Court
I think the mortgage good under the act, and on that ground concur in the opinion of my brother Christiancy. Whether it would be valid without the act I have some doubt, and do not wish to express an opinion on that, point, as it is not necessary to a decision of the cause.
Concurrence Opinion
I concur entirely with my brother Christiancy, that the signers of the collateral bonds in question are not proper defendants for the reasons he has given. I am also of' opinion, that the law which authorized a mortgage to be executed by the plank road company was properly accepted. Whether any amendment to a charter is not Valid which is accepted by a majority in interest of the corporators, is a question upon which I express no opinion. This amendment is for a beneficial purpose, and. creates no charge or liability, except against the common property for a common object.
I think the mortgage in controversy is within the authority expressly granted by the statute. A power to-mortgage the whole, includes a power to mortgage less than -the whole, provided the whole is divisible. The company in question had authority to build a road beyond the limits covered by this security; but a forfeiture for its non-completion -could not, under the terms of the law, extend to the part actually completed within those limits. The light to take toll was not dependent on the completion of the road from Jackson to Lansing, but was apportioned according to the distance completed. The tolls are not made collectable in gross, but may be taken at
It is true that no franchise which the law entrusts to the discretion of specific legal bodies can be exercised by any other person in violation of that trust. But it does not follow, because a certain authority is vested in a corporation, that its delegation must always amount to such a violation of trust. No corporation, for business purposes, was ever created which did not require a considerable portion of its affairs to be transacted by agents who are not corporate officers. In building a plank road, for example, the location of the road, and the steps necessary to secure the right of way against unwilling owners of land, must in general be acts of the corporation itself, and must derive their validity from the exercise of the discretionary authority which the charter has placed in particular hands. When the board of directors, or any other named body, are required to manage any particular business requiring the .exercise of a statutory discretion, they cannot give their authority to any one not authorized by statute to receive it. But those acts of a ministerial character, -which involve no further exercise of discretion than is called for in the business of private parties, transacted by ordinary business agencies, are usually allowed to be performed by corporation agents as freely as by private agents. The actual work of grading and planking a road is not a franchise which must be exercised by the directors or stockholders. The actual collection of tolls is not such a franchise. All of the peculiar corporate acts are done at corporate meetings by vote, if required to be done by the corporation itself; and I
In receiving a mortgage of corporate property, where there is a statutory power to mortgage, the mortgagees must necessarily take it subject to such duties or encumbrances as the law attaches to the enjoyment of the property mortgaged, but not to such as may exist against the corporation without reference to that property. It is not necessary, in the-case before us, to consider what liabilities are appended to the ownership of the portion of road mortgaged to the complainants, and I shall make no attempt to determine them.
Entertaining these views, I do not deem it necessary to express any opinion upon the power of the plank road company to make such a mortgage independent of the statute.
I am inclined to think that such a power exists in regard to such matters as require no strictly official or corporate interference to manage, and that it would, therefore, .cover the use and enjoyment of most of the corporate property. But in the absence of any express authority to alienate' or mortgage, a very serious question may arise, whether the alienee of such property may not take it subject to a somewhat larger liability, for corporate acts and omissions. As the law upon this subject cannot be regarded as very clearly defined upon all points, I prefer to reserve my opinion upon it, as the mortgage was made
I concur, therefore, in the result arrived at by my brother Ohristiancy.
Decree against the plank road company modified, and against the other parties reversed.