Case Name: PAULY v. CORONADO BEACH CO.
Court: United States Circuit Court for the Southern District of California
Jurisdiction: United States
Decision Date: 1893-06-12
Citations: 56 F. 428
Docket Number: 
Parties: PAULY v. CORONADO BEACH CO.
Judges: 
Reporter: Federal Reporter
Volume: 56
Pages: 428–430

Head Matter:
PAULY v. CORONADO BEACH CO.
(Circuit Court, S. D. California.
June 12, 1893.)
Coepobations — Ultra Vibes Acts.
A California corporation was organized, as stated in tlie articles of incorporation, for the purpose of acquiring a certain piece of land, laying it out as a town, and reselling’ in lots, blocks, etc., and also of acquiring- “street railroad or oilier rights and franchises, telegraph, telephone, or other similar franchises, and gas and electric light franchises, oyer the said property, or any part thereof.” Held, that the corporation had no authority to subscribe for shares of stock in a manufacturing' corporation, and suclt a subscription teas ultra yin's and void.
At Law. Suit by Frederick N. Pauly, receiver of tire California National Bank of San Diego, against the Coronado Beach Company. Judgment for defendant.
M. T. Allen, for plaintiff.
James E. Wadharn, for defendant.

Opinion:
EOKH, District Judge.
This suit was brought to recover of the defendant, as the bolder and owner of certain shares of stock in a corporation called the Coronado Fruit-Package Company, its alleged pro rata share of certain indebtedness dne from that company to the hank, of which the plaintiff is the receiver. The defendant and the Coronado Fruit-Package Company are both corporations duly organized under the la,ws of the state of California. The purposes of the defendant, as stated in its articles of incorporation, are:
"(a) To acquire, by purchase or otherwise, that piece or parcel of land situate on the hay ot San Diego, in the county of San Diego, state of California, and known as the "Peninsula of San Diego,' and as 'Coronado Beach Property;' to lay out and divide the same, or such parts thereof as they may deem advisable, Into town blocks and lots, with suitable streets and avenues; and, generally, to develop and beautify the same as a town and seaside resort, with a view to reselling or otherwise disposing of the same in blocks or lots, and either by public auction or private contract, or to cultivate, improve, subdivide, or sell, for any other purpose, any pieces or parts thereof.
"(b) To acquire, by purchase or otherwise, street-railroad or other rights and franchises, telegraph, telephone, or other similar franchises, and gas and electric light franchises, over the said property, or any part thereof, and to develop, resell, or otherwise dispose of the same, and to acquire, hold, and maintain all and every right, privilege, and interest in and over the said property, its appurtenances and privileges, that a private owner thereof might or could do, have, or hold, in and over the same; aleo, to construct and-maintain wharves upon the said water front"
The purposes of the Coronado Fruit-Package Company, as stated in its articles of incorporation, are:
"The manufacture of fruit package's, veneers, and general woodwork, and to receive and collect compensation for such products, and to purchase, hold, and operate all necessary real and personal property in the conduct of the business aforesaid."
E. S. Babcock, Jr., was one of the incorporators of the defendant Coronado Beach Company, and the evidence in this case shows that he was the practical manager and controller of the business of that company. Acting for the Coronado Beach Company, he became one of the incorporators of the Coronado Fruit-Package Company, signing the articles of incorporation of that company, "E. S. Babcock, Jr., Trustee for Coronado Beach Company," ami in the same capacity, and in the same tvay, he subscribed for 100 shares of the stock of the Coronado Fruit-Package Company, the certificate therefor being issued to "Coronado Beach Co., E. S. Babcock, Jr.,* Trustee." Eighty per cent, of the face value of the stock, to wit, the sum of $8,000, was paid by tbe Coronado Beacb Company to tbe Coronado Fruit-Package Company, and tbe certificate of stock kept among tbe assets of tbe defendant company. All of tbis was done by the direction of E. S. Babcock, Jr.
Assuming that tbe acts of Babcock in these particulars should be considered and treated as tbe acts of tbe Coronado Beach Company, they must be held ultra vires of that company. Tbe doctrine upon that subject is thus summed up by tbe supreme court in tbe case of Central Transportation Co. v. Pullman's Palace Car Co., 139 U. S. 48, 11 Sup. Ct. Rep. 484:
'•The charter of a corporal ion, read in the light of any -general laws which are applicable, is the measure of its powers, and the enumeration of those powers implies the exclusion of all others not fairly incidental. All contracts made by a corporation beyond the scope of those powers are unlawful and void, and no action can be maintained upon them in the courts; and this, upon three distinct grounds: The obligation of every one contracting with a corporation .to take notice of the legal limits of its powers; the interest of the stockholders, not to be subjected to risks which they have never undertaken; and, above all, the interest of the public, that the corporation shall not transcend the powers conferred upon it by law."
If it be assumed that tbe laws of California, conferring tbe right of forming corporations, is not limited to individual persons, it is nevertheless clear that tbe purposes of tbe defendant company, as expressed in its articles of incorporation, do not, expressly or by implication, include tbe subscription for shares in any other corporation, and tbe assumption of tbe resulting liabilities. See Mor. Priv. Corp. §• 433.
There must be judgment for tbe defendant, and it is so ordered.