Case Name: Picard and Conard v. Hughey et al.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1898-06-21
Citations: 58 Ohio St. 577
Docket Number: 
Parties: Picard and Conard v. Hughey et al.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 58
Pages: 577–599

Head Matter:
Picard and Conard v. Hughey et al.
Corporation organized to supply gas to municipality — Addition to charter so as to also supply electricity — Issue of additional bonds and mortgage — Validity of the change under section 8288a, Revised Statutes — Interpretation of Law.
Where a corporation organized under the laws of this state to manufacture and furnish gas to light the streets and public and private buildings of a municipal corporation, amends its charter so as to authorize it to employ for that purpose both gas and electricity in connection with gas, such additional powers should not be deemed to change substantially the original purposes of its organization, and is therefore authorized by section 3238a, Revised Statutes.
(Decided June 21, 1898.)
Error to the Circuit Court of Highland county.
This action was begun by J. M. Hughey, as receiver of the Hillsboro Gas & Electric Light Company, a corporation organized under the laws of this state, to manufacture and furnish electric lights, to sell certain real estate that belonged to the corporation, and for adjustment of liens thereon. The cause was tried in the court of common pleas and appealed to the circuit court where the facts were found separately from the conclusions of law, and a judgment rendered holding that certain bonds which had been issued by the Hillsboro Gas & Electric Light Company, valid liens on such real estate. Whereupon the cause was brought to this court for reversal on such special finding of facts. The facts necessary to the understanding of the decision of the court will be found in the opinion.
Huggins & Horst, for plaintiffs in error.
Brief of Henry M. Huggins.
The plaintiffs in error claim:
That the alleged indebtedness of The Hillsboro Gas Light Company to The Citizens’National Bank of Hillsboro is invalid.
That no part of the proceeds of the sale of the property of The Hillsboro Gas Light Company can be taken to pay said Citizens’ National Bank claim.
The attempted amendment of the certificate of incorporation of “The Hillsboro Gas Light Company” was of no effect. The only authority for the amendment of a certificate of incorporation in Ohio is found in Revised Statutes, section 3238a. It will hardly be claimed that the manufacture and sale of electric arc and incandescent light were a part of the original purposes of The Hillsboro Gas Light Company. Practical electric lighting was unknown when that company was incorporated. Any improvement or invention in the line of the original purpose could, no doubt, be brought in by amendment. But not something entirely distinct and different. The Findlay Gas Light Company v. The Incorporated Village of Findlay, (2 C. C. Rep., 237, s. c. 1 Circ. Dec., 463) is in point.
This court has held that where special provision has been made by statute for corporations, the general provision by statute for corporations does not apply. The State v. The Pioneer Live Stock Company, 38 Ohio St., 347;. The State ex rel. v. Taylor, Secretary of State, 55 Ohio St., 61.
1. The claim of the receiver of the Citizens’ National Bank of Hillsboro is wholly made up of indebtedness to the bank incurred by the gas company in the manufacture and sale of electric light. This is a matter of fact about which there is no dispute.
2. The Hillsboro Gas Light Company not only had no power to engage in the electric light business, but such action on its part was positively prohibited by the Statutes of Ohio. Ewing v. Toledo Saving Bank, 43 Ohio St., 31; Bank of Augusta v. Earl, 13 Peters, 519; Bouse, Trustee, v. Merchants' National Bank, 46 Ohio St., 493; Perry on Trusts, section^ 242; Taylor on Private Corporations, section 34; Morawitz on Private Corporations, section 803; Wait on Insolvent Corporations, sections 162, 654; Section 3266, Revised Statutes.
3. The Citizens’ National Bank had full notice that The Hillsboro Gas Light Company had no power to enter upon the business of the manufacture and sale of electric light, and in doing so that it was violating an express provision of the law of Ohio.
C. M. Overman was president and a director of The Hillsboro Gas Light Company. He was also president and a director of The Citizens’ National Bank. O. S. Price was a director of The Hillsboro Gas Light Company. He was also cashier and a director of The Citizens’ National Bank. They must have known all about the Gas Company embarking in fche business of electric light. Notice to a director is notice to the bank. Morse on Banks and Banking, section 112, 113. Notice to the cashier is notice to the bank. Morse on Banks and Banking, section 166.
4. The legal effect of the action of The Hillsboro Gas Light Company in embarking in the manufacture and sale of electric light without power so to do and in defiance of the express provisions of the law of Ohio, with full notice on the part of The Citizens’ National Bank of Hillsboro of such lack of power and violation of law is to make the debts of the company incurred in the business of electric light and in the hands of the bank void. Bank of Ghillicothe v. Swayne et al., 8 Ohio 257.
The holding of the latter case has been followed by our Supreme Court in numerous cases. Among these are the following: Bonham v. Taylor, 10 Ohio, 108; Creed v. Commercial Bank, 11 Ohio, 492; Miami Exporting Go. v. Clark, 13 Ohio, 1; Bank of Wooster v. Stevens, 1 Ohio St., 233; Spaulding v. Bank of Muskingum, 12 Ohio, 544; Bartholomew v. Bentley, 1 Ohio St., 41; Straus & Bro. v. Eagle Ins. Go., 5 Ohio St., 60; Vannatta v. State Bank, 9 Ohio St., 27; White's Bank of Buffalo v. Toledo Fire d> Marine Ins. Go., 12 Ohio St., 601; Franklin Bank v. Gommercial Bank, 36 Ohio St., 350; Kilbreath v. Bates, 38 Ohio St., 187; Ewing v. Bank, 43 Ohio St., 37; B. B. Company v. Hinsdale, 45 Ohio St., 556; B. B. Go. v. Iron Go., 46 Ohio St., 49; Ehrman v. Ins. Go., 35 Ohio St., 324.
Unless expressly restrained by its charter, a corporation has the incidental power to make any contract and evidence it by any instrument that may be necessary and proper to accomplish such purposes and objects. Story on Bills, section 79.
These doctrines are supported by a multitude of adjudged cases: Broughtons. Manchester Water Works, 3 Bam & Old, 1; Munn s. Commission Go., 15 Johns, 44; N. G. Firemans' Ins. Go. s. Ely, 2 Con., 664; Lane s. Bennett, 5 Con., 574; Phila delphia Loan Go. v. Toxoner, 13 Con., 249; Korn v. Mer. As. So., 6 Crouch, 198; Bank of Ohillieothe v. Moss, 5 Denio, 567; Kilbreth v. Bates, 38 Ohio St., 189. The decision in Bank of Chillicothe v. Swayne has, however, in some instances been, criticized, and to a certain extent perhaps modified.
The first of these cases, so far as we have found, is that of Larwell v. Hanover Savings Fund Society, 40 Ohio St., 274.
The next case, and perhaps the only one, in which the Chillicothe case is criticized — perhaps modified- — is that of The National Bank of Washington v. The Continental Life Lnsurance Co., 41 Ohio St., 1.
The later case of Railway Co. v. Iron Co., 46 Ohio St., 44, disposes of any question with regard to Bank of Chillicothe v. Sxoayne, and the cases in Ohio we have cited which approve it being overruled.
“These cases all proceed upon the principle that the powers of corporations organized under legislative statutes are such, and such only, as those statutes confer, or that may fairly be implied therefrom.:! This doctrine was clearly announced and applied in Straus v. Eagle Ins. Co., 5 Ohio St., 59, and has been firmly adhered to in this court. Railroad Co. v. Hinsdale, 45 Ohio St., 556.'
It will be insisted here, no doubt, that it is in the highest degree unjust to allow The Hillsboro Gas Light Company to obtain the benefit of its contract and repudiate its obligations. The legal answer to this is that there never was any contract. A contract, of necessity, has to have two parties capable of contracting. Here there was but one as to the subject-matter involved. But then it will be urged that the Gas Light Company is estopped to say it had no power to contract, because it has the money upon the contract.
We have thus reviewed the eases in Ohio since the case of Bank of Ohillioothe v. Swayne was decided. We reach the conclusion that a contract of an Ohio corporation forbidden by its charter when such charter was special, or forbidden by general statute, is void and cannot be enforced in law or equity. And this whether the other contracting party had notice of the prohibition or not.
In England the same ruling as in Ohio seems to have been pretty strictly adhered to. Green’s Brices Ultra Vires, pages 608 and 611.
Mr. Green, the learned American editor of Mr. Brice’s treatise, states the American rule, page 160, note. 1 Dillon on Municipal Cor., No. 415-426; Police Jury v. Britton, 15Wal., 566; Mayer v. Bay, 19 Wal., 468; Morse on Banks and Banking, section 731.
We are fully aware that the later writers upon the law of corporations have, to some extent, leaned against the invalidity of the partly executed contracts of corporations.
But in no case, so far as we are aware, has it been held by any reputable' court, or laid down by any text writer of repute, that a contract forbidden by statute, or a contract of a corporation beyond its powers, the other party having notice thereof, is valid.
Perhaps no recent, or comparatively r.ecent text writer upon the law of corporations has gone further in this direction than Mr. Morawetz. Section 660.
Mr. Beach on Private Corporations follows Mr. Morawetz. Section 438, Illegal Corporate Acts, Ultra Vires; Thomas v. The Railroad, 101 U. S., 70, and cases there cited; Salem Mill-Dam Co. v. Ropes, 6 Pick., 23; Briche v. Ashbury Railway Carriage Co., L. R., 7; H. L., 653. Authorities on last proposition: In re Comstock, 3 Sawey, 218; Kent v. Quicksilver Mining Co., 78 N. Y., 159; Ogdensburg, R. Co. v. Vermont, Co., 4 Hen., 268.-
Our case here is one of prohibition by statute.
Collins <& Collins, for Erie City Iron Works and Ball Engine Co., defendants in error.
The argument for the plaintiffs in error must stand or fall up on the proposition, “that the acts in controversy were not within the scope of the powers of the corporation to perform under any circumstances or for any purpose.”
Now we say, that so far as the rights of plaintiffs in error in this case are concerned, that even if it were true that the corporation could not change its name and enlarge its powers without their consent, yet with their consent it might be done, since none of the acts complained of are illegal per se or prohibited by positive law. Boone on Corporations, section 98 and notes cited, and section 103.
Here is an executed contract. Bonds issued and sold, and on each side the contract executed, and unless fraud was clearly shown or it was expressly prohibited by statute, the courts never permit a repudiation by either party and the defense of ultra wires will not be sustained. Hays v. Qalion Gas Co., 29 Ohio St., 330; Bradley v. Ballard, 55, 111., 417; Miners Ditch Go. v. Zellerbach, 37 Id., 543; Foulks v. San Diego R. R. Co., 51 Id., 365; Bisselv. Mich., etc., R. R.■ Co., 22 New York,.258; Attleborough Bankv. Rogers, 125 Mass., 339; Hitchcock v. Galveston, 96 U. S., 341.
This defense if allowed in the ease at bar would not advance justice, but on the contrary, work a legal wrong, as the bonds by the sale of which the plant was erected and put in operation, would not be paid while the plaintiffs in error who caused the issue of the bonds would retain the proceeds of the sale of the plant. Whitney Arms Co. v. Ba/rlow, 63 N. Y., 62; Buffett v. Troy B. B. Co., 40 N. Y., 168; Madison Avenue Baptist Churchy. Olive Street Church, 73 N. Y., 82; Darst v. Gales, 83 111., 136; Whitney v. Fwst National Bank, 50 Vt., 338; Bailway Company v. McCarthy, 96 U. S., 258.
If a corporation has entered into a contract which has been fully executed on the other part and nothing remains but the payment of the consideration, it will not be allowed to set up the defense of ulto'a vires.
It cannot be said it was not within its chartered privileges. Grant v. Henry Clay Coal Co., 80 Pa. St., 208; Oil Creek, etc., B. B. Co. v. Penn. Transportation Co., 83 Id., 160; Be Groff v. Am. Linen Co., 24 Barb., 375, 21 N. Y., 124; State Boa/rd v. Citizens’ B. B. Co., 47 Indiana, 407.
Where a corporation has accepted the benefit of a loan it cannot avoid liability by repudiating the authority of those who contracted the loan. And the doctrine of ultra vires cannot be carried to the extent of requiring one who honestly lends money to a corporation for proper purposes to see that the money is not applied to other purposes.
We affirm as a matter of law that such acts were binding on the corporation and on all the stockholders — that there was and is no positive prohibition by any statute — that there was nothing against public policy — nothing fraudulently, and that whether expressly authorized or not, is a matter of no consequence as applied to this particular ease. Allegheny City v. McOlurkan, 14 Pa. St., 81; Beers v. Phoenix Glass Co., 14 Barb., 358; Bank of Middlelmry v. Rutland, etc., R. R. Co., 30 Vt., 159; Zabrishie v. Cleveland,- etc., R. R. Co., 23 How., 381.
As to estoppel of stockholders, without adding to the length • of brief, we cite: Hermann on Estoppel, sections 570 to 579 inclusive, and the numerous cases there cited. Gaff v. Flesher, 33 Ohio St., 107.
If the directors did wrong they cannot shoulder their mistakes on creditors. They are absolutely without defense. Thompson on Liability of Stockholders, sections 402, 404, 405, 407 and 415.
It is not for us to show that we are within the law. The court will presume that, and sustain corporate acts unless clearly shown to be ultra vires. State ex rel. v. Taylor, 55 Ohio St., 61.
The change made was not a change, but simply an enlargement of the scope or purpose to better carry out the object of lighting the streets of Hillsboro, Ohio, and its buildings. The object remained the same and better and more modern modes of carrying out the object were added.
A corporation created for mining and transporting coal, was allowed to purchase and use a steamboat in its business. Callcmay, etc., v. Gla/rk, 32 Miss., 305; Wheeler v. San Francisco, etc. R. R. Co., 31 Cal., 46; Doioning v. Mt. Washington etc. Co., 40 N. H., 230; Lyndenborough Glass Co. v. Mass. Glass Co., 3 Mass., 315.
There are numerous cases in which the question in various forms has arisen cited in section 103, of Boone on Corporations, and in notes to Brice’s Ultra Vires:
The right to issue the bonds followed, if the other steps were valid. Hayes v. Galion Gas Light Co., 29 Ohio St., '330.
As to Picard and Conard, the doctrine of estoppel applies with all its vigor. The rest of the case hangs on the mere thread of a chance that John H. Brown, holding a mere trifle of stock, may in some manner overturn the proceedings, and that this, although of little benefit to him, would give the whole fund from the sale of the property to the stockholders who created the debt, instead of to the creditors, thus establishing a new rule, by which a party who borrows money and gives a mortgage, when the mortgage is foreclosed gets the money instead of the mortgagee.
The stocks in this case were personal property, and the remedy as to its conversion (if wrongfully coaverted) is solely against the executor who converted it, and who, if a wrong was committed upon John H. Brown, is liable either as executor or guardian. But no wrong- was committed. The executor had the right to do just what he did, and the authorities are manifold. The personal assets of James Brown passed into the hands of the executor, and the control over the stocks was the same as over other chattels. Nor was there any requirement upon him to take any step to protect it more than required for other chattel interests, and, having full power over it, his acts bind all other parties. Perry on Trusts, sections 809, 812; Pike v. Rowland, 94 Pa. St., 238.
Van Leman da Chaffin, for John H. Brown, cross-petitioner, defendant in error.
Under the charter of the Gas Light Company, we think it is clear that there was no power to engage in the business of electric lighting.
The charter of a corporation is the measure of its powers, and it is confined to the exercise of those expressly granted, and such incidental powers only as are necessary for the purpose of carrying into effect the powers specifically conferred. The enumeration of powers in the charter, implies the exclusion of all others. Mias Straus <& Bro. v. The Eagle Ins. Co., 5 Ohio St., 60; Morawetz or Pri. Corp., page 149 and note 2, page 150; Franklin Bank v. Com. Bank, 36 Ohio St., 355; Bailway Co. v. Iron Co., 46 Ohio St., 49.
The established law of the land for many years had been that no change whatever could be made in the charter of a corporation without legislative authority. Morawetz, page 70, etc.
And this was the law of Ohio until the act of May 18, 1886. Revised Statutes, section 3238a. Then undoubtedly the provisions of this section should be strictly construed.
James Brown died May 8, 1881, seized of 202 shares of the capital stock of The Hillsboro Gas Co. His will was at once probated, and George W. Brown qualified as executor. By said will there was bequeathed to John H. Brown, the cross-petitioner, and who was an infant until June 1, 1893, the one-sixteenth part of said 202 shares of stock in the said gas company.
That it is not claimed, nor does it appear, that the said John H. Brown, nor his guardian, were ever notified of any of the proceedings in the attempt to enlarge and change the charter and powers of the said gas company. The record does show that thirty days’ notice by publication was not given, as required by the statute. Then such change, even within the provisions of the statute, would be void unless the notice of such proposed change was expressly waived by each and all of the stockholders.
This, it is clear, was not done so far as this cross-petitioner, at least, is concerned.
Upon the proving of the will the stock therein bequeathed to John H. Brown, vested in him, subject only to the right of the executor to use it if necessary to pay the debts of the testator.
The executor had no authority to waive the notice required by the statute; he was not the owner of the stock of the said testator. If any part of it was willed to him, then such waiver might bind him upon such part, but it could not affect the right of others who acquired the stock under the said will.
The powers of an executor are limited by the will and the law. They are personal in their nature and cannot be delegated to others. If he creates any new obligations, they are his and not the estate’s. Zucht, Admr., v. Behrens, 28 Ohio St., 231.
In addition to the authorities cited by Judge Huggins, we ask your attention to the following: A. & E. Enc. of Law, page 208, volume 4; Davis v. Railroad Co., 131 Mass., 259; A. and E. Enc., volume 27, pages 368 and 369; Mor awe tz Pri. Corp., 75.
But there is still another reason why The Citizens’ National Bank of Hillsboro, or its receiver, is not entitled to any part of the fund in the receiver’s hands.
The Citizens’ Bank is chargeable with full knowledge of all the facts, in connection with the attempted change of the charter of said company, and the illegal issue of said bonds. Zousiana State Barnk v. Sencal, 13 La., 525; National Security Bank v. Cushman, 121- Mass., 490; Ex Parte Stewart, 4 De. G. J. & S., 543; Ex Parte Burbridge, 1 Deac., 131; Union Bank v. Campbell, 4 Humph., 394; Bank of America v. McNeil, 10 Bush., 54; JDessler v. Norwood, 17 C. B. (N. S.), 466; The Distilled Spirits, 11 Wall., 356; Chouteau v. Allen, 10 Mo., 290.
The same presumption of knowledge ought to apply to a corporation. Atlantic Bank v. Merchants Bank, 10 Gray, 532.
Has a stockholder the right to resist distribution of proceeds of corporate property to the holders of illegally issued mortgage bonds?
A single shareholder may maintain suit to restrain the corporation from a contemplated transaction which is manifestly beyond its powers. (Volume 27), A. and E. Ene., page 386.
There is one exception to this rule, and that is where the stockholder actively participated in the wrongful act, or sat supinely by and allowed innocent persons to acquire rights, that would be thereby prejudiced.
And if the act done was clearly beyond the powers of the corporation under any circumstances, even this would not prevent a bona fide owner of a single share from resisting the unlawful demand. A. and E. Ene., volume 27, page 403.
We presume it will not be questioned but that a defendant in a proceeding in' error has a perfect right to file his cross-petition in error in the same proceeding-. 54 Ohio St., 622.
Steele <& Hogsett, for Robert M. Dittey, defendant in error.
Upon the question of the bank’s knowledge of any infirmity in the issue of bonds arising from the knowledge of Price and Overman, who were officers both of the bank and of the Gas and Electric Light Co., we suggest:
1. The Citizens’ National Bank cannot be chargeable with knowledge because of their position.
2. The knowledge of an officer is the' knowledge of the principal only when the officer is acting within the discharge of his duty.
3. When an agent assumes to act in antagonism to his principal, the rule of imputed knowledge does not apply.
4. If the agent has such a personal interest in a transaction as to lead him to conceal his knowledge from his principal, the knowledge of the agent cannot be imputed to the principal.
5. That an agent, acting avowedly for himself or on behalf of others with whom he is interested, cannot be treated as the agent of the corporation, is well sustained by authority. Innererity v. Merchants'1 National Bank, (139 Mass., 332) 52 Am. Rep., 710; Fairfield Savings Bank v. Chase, (72 Me., 226) 39 Am. Rep., 319; Koehler v. Bodge, 31 Nebr., 328; Barnes v. Trenton Gas Light Co., 27 N. J. Eq., 33; Boone’s Law of Banking, sections 132 and 346.
Certificates of stock in the new company were issued to and accepted by Picard and Conard, plaintiffs in error, in surrender of those held by them in the old company, and were held and voted by them at subsequent elections; and the action taken was ratified by them in various ways; and to allow them now to deny the validity of an indebtedness incurred upon the faith of their own actions and for their benefit, and to hold that the fund resulting largely from the sale of property bought with the money so borrowed should be paid to them as stockholders of the old company instead of to the creditors, would he in the highest degree inequitable. 2 Morrawitz on Corp., section 631 et seq.; 2 Herman on Estoppel, section 1186, page 1328; Chapman v. Railroad, 6 Ohio St., 119; Sanderson v. Iron and Nail Co., 34 Ohio St., 442.
Under the third conclusion of law complained of, plaintiffs in error claim that the addition of the electric light business to that of the Gas Co. was ultra vires. We contend:
That the contract sued upon having been executed by the creditor, the claim of ultra vires cannot be made. Boone on Corp., section 101; 2 Morrawitz, section 689 et seq.; 2 Herman, section 1182-1183; 34 Ohio St., 450; 2 Waterman on Corp., 371-372; Gaffv. Flesher, 33 Ohio St., 114; National Bank v. Ins. Go., 41 Ohio St., 11; Hayes v. G. I. <& G. Go., 29 Ohio St., 340; Larwell v. Harmon, 40 Ohio St., 284; 7 Ohio, 412; 21N. Y., 127; 22 N. Y., 509; 63 N. Y., 62.
It is claimed, however, that the addition of the electric light business to that of the Gas Co. was forbidden by positive law and therefore ultra vwes strictly, so that there could be no estoppel or innocent purchaser of securities. The amendment was made under authority of section 3238$ of the Revised Statutes of Ohio.
This amendment was made at a meeting of the directors, called for that purpose, of which the stockholders had notice, publication of notice of the meeting being waived in writing by all of the stockholders.
The real question is whether or not said amendment worked any material change in the purpose of the company as originally organized. State eos rel. v. Taylor, 55 Ohio St., 61.
In the ease at bar the purpose, as expressed in the articles of incorporation, manifestly was to furnish light for the streets and buildings of the incorporated village of Hillsboro. Gas is the source of light; so also is electricity, and it would seem to us, therefore, not unnatural or improper to amend the articles of incorporation so as to combine the business of manufacturing gas and electricity for the purpose of furnishing light, each being an agency for a common result.
The case of The Findlay Gaslight Go. v. The Incorporated Village of Findlay if C. C. Rep., 237 ; s. c. 1 Circ. Dec., 463), presented a very different question, both as to the position of the parties and as to the rights claimed.
Sections 3266, 3238 and 3856 should be construed together. Section 3266 is limited by the others, and the assets of the corporation may be used for such corporation as enlarged by amendment under the other sections. Hayes v. Galion Gas Go., 29 Ohio St., 330. The amendment of the articles of incorporation was authorized by law. Its right to act as a corporation could only be challenged by the state. The amendment was accepted and acted upon by all of the parties as lawfully made, and they should not now be heard to complain. Boone on Corp., section 104; Society Pervm v. Cleveland, 43 Ohio St., 490; Farmers' loan & Trust Go. v. A. A. <Jc H. M. By., 34 Law Bui., 177.
The defendant, John H. Brown, complains by cross-petition in error that neither he, then a minor, nor his guardian, were notified of any of the proceedings in attempting to enlarge and change the charter and powers of said Gas Co. He was a residuary legatee under the will of said James Brown. At the time the action was taken to amend the articles of incorporation of the Hillsboro Gas Co., the estate of said James Brown was being administered by George 'W. Brown, as executor of his last will and testament, and as such executor he held stock belonging to said estate. We maintain that at the death of James Brown, his property passed into the hands of the law for administration by his executor. The will fixed the law of its distribution after payment of his debts. Woerner Am. Law of Administration, section 172; Schoenberger v. Lancaster, 28 Pa. St., 459; Cook on Stockholders, section 612; 1 Morrawitz on Corp., section 483; In re North Shore Perry Co., 63 Barb., 556; Thompson on Corp., section 731; Matter Cape May, etc., Nav. Co., 51 N. J. L., 78.

Opinion:
Bradbury, J.
Only one question will be considered in this opinion, and that question relates to the legality of the proceedings by which The Hillsboro Gas Light Company enlarged its object and purposes so as to authorize it to manufacture and furnish electric lights.
The special finding of fact discloses that in the year 1875 The Hillsboro Gas Light Company was incorporated under the laws of this state for the purpose of erecting gas works for the manufacture and sale of gas. Its capital stock was $40,000, divided into 800 shares of $50 each, fifty per cent, of which had been paid in; when, in 1888, the company attempted to enlarge its powers so as to permit it to manufacture and furnish electric lights in addition to gas lights. It appears that all the formal steps prescribed by statute to accomplish this purpose, were correctly taken, that the charter was, in fact, amended so as to authorize the corporation to manufacture and furnish electric lights, that afterwards, the name of the corporation changed from The Hillsboro Gas Light Company to The Hillsboro Gas & Electric Light Company, and the capital stock reduced from $40,000 to $20,000.
Thereupon the directors of the new corporation, in order to secure funds for the purpose of purchasing the necessary plant, machinery and apparatus with which to produce and furnish electric light, passed the following resolution: "Resolved, that the president of the Hillsboro Gas and Electric Light Company be and he is hereby authorized to issue the bonds of said company to the extent of $14,000, in denominations of $500 each, and all payable on the first day of July, 1899. Said bonds to be dated July 1, 1889, and draw interest from date at the rate of six per cent, per annum, payable semi-annually, and shall be signed by the president and countersigned by the secretary of said company." And, to secure the payment of these bonds, the president of the company was authorized to execute, on behalf of the company a mortgage, or deed of trust, upon the real estate, fixtures, material, privileges and franchises of the company. And thereupon the bonds were executed, and a mortgage also executed for the purpose of securing their payment.
If, under the statutes of this state, the old company, so-called, had power to amend its charter so as to authorize it to manufacture and sell electric light instead of, or in addition to gas, the new corporation, so-called, should not be regarded as a distinct entity from its predecessor, but rather as the samé body, but clothed with enlarged powers and a new name. It is, however, probably immaterial to the question under consideration, which view of this question of identity is adopted, for in either case, whether the new company should he regarded as distinct from the old one or a continuation of it under a new name, the validity of the bonds and mortgage in question depends upon the authority of the corporation to construct and pay for machinery and apparatus adapted to generate electricity, and to generate-and sell the same for lighting purposes. If the new concern had no power to engage in the production and sale of electric light, the bonds in question having been issued to provide the machinery, etc., necessary to the production of electric lights, and the mortgage given to secure them, would be void, at least in the hands of those who had notice of the purpose for which the bonds were issued, unless the corporation and its stockholders should be estopped to set up this want of power. They would have been void for the reason that they were issued for a purpose which the corporation had no power to accomplish. The circuit court was of the opinion that the facts established by the evidence, did raise such an estoppel, and also that the bonds, or most of them, were held for value by bona fide owners who were not chargeable with notice of want of uower in the corporation to issue them.
Without differing from the circuit court upon those questions, we rest the decision of this court upon the power of the corporation to make and issue the bonds in question, and to execute a mortgage on the corporate property to secure them. This, of course, depends upon the validity of the amendment made to its charter. By its original charter, authority is given to erect "gas works for the manufacture and sale of gas for the streets, and public and private buildings of the incorporated village of Hillsboro, Ohio." It is quite clear that under the powers thus given the corporation could not proceed to erect an electric light plant and manufacture and furnish electric light to the village of Hillsboro and its inhabitants. The obvious purpose of its creation was to manufacture and sell light to that village and its inhabitants, but it chose in the first instance to ask the state for authority to furnish a particular kind of light, and that authority and no other was given. Whether at that time any other means of lighting the streets of our towns and cities were known, is not material. For, whether there was or was not, the charter of this corporation then limited its right to the production and sale of gas and of course it had no power to do anything- else. In the year 1888, the corporation sought to enlarge its powers by amending its charter, and to that end applied to the state for and obtained authority to produce and sell to the same village and the same inhabitants and for the same purpose, i. e., to light the streets, etc., of the village of Hillsboro, a different agency, known under the name of electricity. The authority to apply for this amendment is found in section 3238a, Revised Statutes, which reads: 'Any corporation, incorporated under the general corporation laws of the state may---amend its articles of incorporation so as to change the corporate name---or so as to modify, enlarge or diminish the objects or purpose for which it is formed; or so as to add thereto anything omitted from, or which might lawfully have been provided for in such articles originally; provided, however, that nothing under this supplementary section shall authorize a corporation to by amendment to change substantially the original purposes of its organization."
The power of amendment granted by the foregoing section is broad. The corporation may change its name or its place of business. It may enlarge or diminish the objects or purposes for which it was formed, and it may add to its articles of incorporation anything which might have been included in said articles originally. These extensive powers of amendment have only a single limitation, which is that the amendment does not change substantially the original purposes of the corporation. The right to amend its charter by adding whatever might originally have been included in the articles of incorporation, is expressly given. The power of amendment in that respect, and to that extent, received direct legislative sanction. The legislative mind was immediately directed to that particular matter, and the power to accomplish that end expressly and unequivocally granted. It would seem to follow from' this explicit and unambiguous grant of the right to amend the charter, so as to add what might have been originally included,that the making of such an amendment by a corporation, would not in any case in the contemplation of the legislature, substantially change the original purposes of its organization. This, certainly, is a reasonable construction, for surely no good reason can be assigned that would forbid the granting, by amendment, of any power that might have been originally granted. If the public welfare or convenience did not demand the exclusion of the power originally, why, or upon what principle, should they deny its being given by amendment of the charter? No sound reason has been advanced against the policy of granting to the same corporation the power to make and sell gas for the purpose of lighting public streets and places and public and private buildings, and also conferring the power to generate electricity and apply it to the same purposes, and we can see none. Each power is but a different means to the same end. The ultimate object or purpose for which each agency is employed, is to provide light. Originally the Hillsboro Gas Light Company sought to accomplish this object by means of manufactured gas; afterwards it was discovered that this object could be in some respects more satisfactorily accomplished by electricity. We think an amendment of its charter so as to authorize it to employ for this purpose electricity is expressly authorized by that provision of section 3238a which permits anjr amendment that add powers which "might lawfully have been provided for in said articles originally. "
This court, in the case of live Steubenville Gas & Electric Light Company v. Taylor, Secretary of State, 55 Ohio St., 61, had occasion to consider the extent to which corporate charters may be amended under section 3238a, Revised Statutes. It may be observed, in passing, that the original charter of the relator in that case conferred upon it the power to employ both gas and electricity much more extensively than the amended charter of the Hillsboro Gas & Electric Light Company permitted, and yet no suggestion was made that the exercise of such powers was not authorized by our laws. In that case the corporation already had, as we have seen, power to employ both gas and electricity for producing light, etc., sought to enlarge its powers so as to obtain the authority to operate a street railway.
This court was of the opinion that the power thus sought, would, if obtained, change substan tially the original purpose of the corporation, and denied the right to that amendment. That conclusion, however, in no wise conflicts with the conclusions reached in this case.
Judgment affirmed.