Regents of the University of Minnesota v. Hart

7 Minn. 61 | Minn. | 1862

By the Gourt

FlaNdrau, J.

The Regents of the University of Minnesota are made a corporation by chap. 23 of the Comp. Stats., p. 350. Section one establishes the University. Section two provides a fund for the support of the same from the proceeds of the lands .that may bo granted by the United States to the Territory for that purpose. Section three declares the object of the University to be purely educational. Section four vests the government of the same in a Board of Regents, and together with section five, provides the manner of their election. Section seven makes them a body corporate, with the right, as such, of suing and being sued, contracting and being contracted with, and of making, using and altering a common seal. Section eight authorizes the Regents to appoint a secretary, treasurer and librarian, and defines the duties of the first two officers. Section nine confers upon the Regents certain powers, among which are to elect a Chancellor, who shall be ex officio President of the Board of Regents, and in his absence, authorizes them to appoint one of their own number President pro tern. ' Section thirteen locates the University at St. Anthony and authorizes the selection of a site for the same, and the erection of. the buildings as soon as funds may be provided for that purpos^. Section fifteen authorizes the Regents to expend such portions of the fund which, by the provisions of said chapter 23 may come under their control, as they may deem expedient, for the erection of buildings, &c. These are the -only portions of the chapter that it is necessary to refer to in this case. The Regents were confined in all their expenditures, to the particular fund referred to, and provided by that chapter, and persons dealing with them would be held chargeable with knowledge of their rights and powers. In 1856, they were, by act of the Legislature, [Gomp. Stat. 352), empowered to issue the Bonds of the University to the amount of $15,000, secured by mortgage on the lands referred to in chapter 23 above mentioned, for the purpose of liquidating a debt incurred in the purchase of the site authorized by section 13 of said chapter, to the amount of $5,000, and the balance, of $10,000, to be expended in the erection of the buildings also provided for in section 13. By a subsequent act, passed March 8, 1858, {pomp: Stat. 353), the Regents were empowered to raise by the same means the sum of $40,000, about the disbursement of which nothing is said.

We think these three acts must be construed together, and the two latter be understood as providing the fund spoken of in the first. They, however, depart to a certain extent, from the original design of applying the fund. The first act declares that the proceeds of all lands that may hereafter be granted by the United States to the Territory, for the support of a University, shall be and remain a perpetual fund to be called the “ University Fund,” the interest of which shall be appropriated to the support of a University. It was the design of this act to retain all the proceeds that might arise from the- sale or mortgage of the University lands, as a principal fund, which was not to be encroached upon, but was to be invested to produce a revenue for the support of the University. The interest alone was to be expended. The act of 1856, however, authorizes $15,000 to be raised upon bonds, and mortgage of these lands, and makes a specific appropriation of the whole sum to two objects — $5,000 to pay a debt, for the site, and .$10,000 to be exjoended in the erection of the buildings. - The act of 1858 raises $40,000 by bond and mortgage of the same lands, but makes no appropriation of it for auy purpose. It might be said that this $40,000 was the first proceeds of the lands contemplated by section 2 of the charter of the University, or chapter 23 above spoken of, and ..t once became a “perpetual fund,” the interest of which alone was subject to the disposal of the Board of Regents; but we are of opinion that the two latter acts must receive the sanie interpretation, and that of 1858 be understood to have been passed to supply a deficiency growing out of the inadequacy of the sum raised by the act of 1856, and to carry out the purpose of that act, which was to erect a University building. Cotemporaneous history and a fair comparison of the two acts, justify this conclusion. Had the act of 1858 intended to devote the money raised under its provisions to the “ perpetual fund ” spoken of in the charter, some provision would have been made for its investment by the Regents, in order that a revenue in the way of interest might be raised.

The conclusions we arrive at from this analysis of the several acts that control the subject, are as follows :

1st. The Board of Regents are a public corporation, for the purpose, among other things, of erecting a University building, and for that purpose, with the restrictions hereafter mentioned, possess all the powers necessary to the attainment of that end. They could make all necessary contracts, and give written evidences to creditors, of debts incurred in and about the work, payable at a future day, but could not execute a negotiable promissory note in the commercial sense of that term, because they were restricted in their expenditures to the particular fund provided for them by the Legislature, and had no power to contract debts upon the credit of any other, and negotiable paper must be payable absolutely.

2d. That their powers were known to all persons dealing with them.

3d. That an action may be maintained against them upon any contract which they had power to enter into, concerning the erection of the University buildings, but that a judgment recovered upon such contracts, would bind only the fund upon the faith of which the credit was originally given.

4th. That the title to the lands reserved by Congress for the “ use and support of a State University,” is in the State, and not in the corporation, and all property acquired by the Regents, real or personal, with the fund placed at their disposal, is the property of the State, the corporation being merely a trustee or agent, with specified and limited powers, to use it in a particular manner for a given end.

In regard to the manner in which the notes are executed, we think that the power granted by section 9 of the charter, to the Board of Regents, to elect one of their own number President pro tem., in tbe absence of tbe Chancellor, confers npon the President pro tem., when so elected, tbe same powers that are vested in tbe permanent President, and any business that could be transacted by one, might be done by tbe other. Tbe Board by a resolution, passed at a meeting over which Mr. Steele presided as President, authorized the President and Secretary to sign the notes, in pursuance of which they were issued by Mr. Steele and' the Secretary. The counsel insists that the resolution referred to the regular President, and not to Mr. Steele; but from the whole evidence we take a different view. The Chancellor seldom attended the business meetings, and Mr. Steele generally did, and always acted as temporary chairman ; we think the resolution referred to him.

Nose. — Justice Atwater having acted as Secretary of the University in making the notes in question in this-suit, took no part in tbo decision.

We have examined the authorities cited by the Attorney General, and we think they establish the rule, that a corporation which is confined in its expenditures to a particular fund, may not create a debt or borrow money beyond such fund, without express authority. To this rule we assent, but we do not think the 'Regents did either by the issuance of these notes. They merely postponed the payment of a demand against the Board, which might have been immediately paid out of the fund in their hands for that purpose. It was drawing on the fund at a future day.

The Plaintiffs are entitled, under the pleadings and evidence, to judgment on the notes, but such judgment can only be executed on the fund provided by the Legislature for the erection of the building.

The order denying the new trial is affirmed.