The Hawaiian star. [volume] (Honolulu [Oahu]) 1893-1912, 1905-10-30
POWERS OF
CORPORATIONS
SUPREME COURT TODAY SETTLED
IMPORTANT QUESTIONS AT
FECTING THEIR RIGHTS.

The case of F. E. Thompson VS.. Whit
ney & Marsh was decided 10y the Su-
preme Court this morning, in unani-
nous opinion written by Associate
Justice Hartwell. The opinion disposes
of important questions of law affecting
Hawaiian corporations. The action was
upon the defendants Endorsement of
two promissory notes of the Honolulu
& Hawaiian Paper Co., Ltd, payable
in sums of $500 and $1,000 respectively to
the order of Fitzgerald Trunk Co., the
notes being Endorsed by Whitney &
Marsh Ltd, by H. T. Marsh, secre-
tary." The complaint set forth that
the note was made to pay for some
goods to obtain which the buyer, hav
ing no credit of his own in considera-
ton of the Endorsement agreed to de-
liver the goods to Whitney & Marsh
and did deliver them and that the note,
after being dishonored, was Endorsed by
it's drawee to the plaintiff, Thompson.
The first question was whether the
complaint showed that the indorse-
ment was made for the accommodation
of the maker of the note The court
held that an Endorsement by a corpora
ton may or may not be regarded as
given for accommodation according as it
appears that the collateral transaction,
the agreement to deliver the goods to
the indorser, is within the scope of the
indorser's corporate powers, and con-
strued the complaint as showing an
Endorsement, and that the plaintiff did
not take the note for value or without
notice of the nature of the Endorsement.
Therefore, the plaintiff was in no better
position than the drawee and the same
defense which the defendant corpora
ton could make to an action by the
drawee can be made in this action by
the plaintiff
Upon the subject of the right of a
corporation to make accommodation
paper, the court says that while part
ner cannot bind his firm by an accom-
mediation note or endorsement, the firm
may be bound by actual or implied con-
sent or by ratification. The same rule
applies, says the court, to partnership
notes given by a partner for individual
debt. Hawaiian corporations are not
authorized by statute to issue accom-
mediation paper, and corporate notes
are to be issued only for the corporate
business. If issued for other purposes
they have no validity except with bona
fide holders without notice that they
were issued for an unauthorized pur-
pose. The consent of all stockholders
cannot add to the powers of a corpora
ton, but against an innocent holder of
corporation paper corporation cannot
escape liability. Concluding, the deci-
sion says:
ut may be for the interest of a cor
poration to aid by Its credit or it's mon
ey those whose business is allied to or
is of like nature with it's own, and
the failure of which might affect inju-
riously it's own business and yet to
make common cause with such other
persons or corporations on the claim
that the exigencies of it's own particu-
lar business require it to do So would
perhaps be beyond it's corporate power.
Whatever may be the favorable result
upon the corporation of giving volun-
tary aid under such circumstances, the
granting or Withholding of such aid
would involve the exercise of large dis
erection, so liable to abuse of favoritism
that it cannot be classed with any cor
porate power granted by statute. If
such power were expressly included in
articles of association of incorporated
joint stock companies few persons
would care to risk their money in pur-
chase of its stock unless sure of the ac-
ton of those who held the majority of
the stock. 1t is for the protection of
the minority stockholders, as we'll as
in pursuance of the general policy of
law concerning corporate powers, that
corporate transactions are restricted by
law to the purposes which are defined
in the corporate charter or articles
of association. Exceptions sustained,
order to vacate judgment with further
appropriate proceedings"
Thompson & Clemens for plaintiff
Thayer & Hemenway for defendant.