Court Opinion

ID: 6598109
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:05:10.259053+00
Date Added: 2024-06-11T15:57:55.226048
License: Public Domain

By the Court,
Dixon, C. J.
The decision of this court, recently announced in the case of Clark vs. Farrington, must be considered as decisive of the power of á railroad company, authorized by its charter to receive subscriptions to its capital stock in the manner in which such corporations usually are, to dispose of its stock to a subscriber upon credit, and as a security for the payment therefor, at a future day,- to receive from the subscriber his note and mortgage. That case arose under the charter of the La Crosse & Milwaukee Railroad Company. In this, the note and mortgage were given to Jhe *344Milwaukee and Mississippi. We deem it unnecessary to comment upon the general principles there so fully discussed, and shall confine ourselves as much as possible to inquiring whether, as .is claimed, there is, in this respect, any.substantial difference in the powers of the two companies.
The general authority of such corporations, unless there be some provision to the contrary, to receive securities for debts created in the usual course of their business, in the same manner as natural persons, is not denied. It is admitted that they have this power as an accident to that of entering into the contracts out of which the indebtedness arose. But it is contended that, in this respect the charter of the Milwaukee and Mississippi Company is peculiar; that by its terms the company is prohibited from taking securities upon real estate. It is also said, that it differs from others as to the mode in which its stock is to be subscribed and paid for 3 and that this difference is such as forbade its receiving notes or other securities therefor, but required a present payment, and in money only. We will examine these propositions in the order we have stated them.
The efficient words of the charter in relation to the power of the company to contract generally, are precisely the same as those of the charter of the LaCrosse and Milwaukee Com - pany, and authorize the Board of Directors “ to make such covenants, contracts, and agreements, with any person, co-partnership, or body politic whatsoever, as the execution and management of the works, and convenience and interest of the company may require 3 and in general to superintend and direct all the operations, receipts, disbursements, and other proceedings of the company.” It was held in the case above referred to, that language like this included the power to make a contract like the present, unless it was elsewhere restricted by the charter, and we determined that it was not. The La Crosse Company is declared to “ be capable in law of *345purchasing, holding, selling, leasing, and conveying estates, either real, personal, or mixed.” The Mississppi Company is declared to be capable of doing the same thing, “ so far as the same may be necessary for the purposes hereafter mentioned and no further.” By a subsequent section it is authorized to enter upon, take possession of, and use lands along the line of its route, not exceeding a certain width, “Provided, that the said corporation shall not, in their corporate capacity, hold, purchase, OR deal in, any lands within this territory other than the land on which said road shall run, or which may be actually necessary for the construction or maintenance thereof, and of the warehouses, machine shops, and other fixtures connected therewith.”
. Herein it is said a distinction is to be made between the powers of the two corporations. It is manifest that it rests upon the language of this proviso, and principally upon the construction to be put upon the words, “ hold, purchase, or deal in.” It is not to be disputed that as to the direct powers of the corporations in this respect, the distinction is broadly and plainly marked; but the question is whether it really exists as to their incidental powers in reference to which the language of the legislature is in both cases exactly the same. If the argument be correct it must go to the extent, and be consistent with an intention on the part of the legislature of denying to this company, under all circumstances, those means .and facilities for collecting and securing its debts, contracted in the usual course of its corporate business, which are generally, and, we might say, universally accorded to corporations of the same or a kindred character. It must be held to destroy the implication arising from the previously granted powers, by which all other corporations are deemed to be authorized to enter into the same or like contracts, and the question is, did the legislature so intend ? It is the sole object of statutory interpretation or con *346struction, to discover the intention of the framers; and when that is ascertained, it is to govern. Did the legislature intend to deprive this company of one of the safest and most beneficial methods of securing and enforcing the payment of debts due to it, -which is commonly resorted to by other corporations and natural persons, for that purpose, and without which, according to the course of trade and business known to prevail in the country, the successful accomplishment of its enterprise would be seriously checked and embarrassed ? Did they mean to say, that in no emergency, can this company secure to itself, by mortgage or lien upon real estate, a precedent debt, contracted in good faith, and in the legitimate transaction of its business as a corporation ? Did they intend to declare that no judgment in its favor should be a lien upon the real estate of the debtor; that no execution upon such judgment, should be levied upon such property ? Or if it might, that the company could not protect its rights by bidding at the judicial sale ? These and various other similar questions must be answered in the affirmative before the construction contended for can be sustained.
Before a court establishes a construction which is to operate thus harshly upon the interests of a great number of persons, who have invested their means upon the faith of the chartered rights of a corporation, it should be clearly satisfied that the legislature so intended; it should learn, if possible, what motive there was for such a peculiar and isolated restriction ; what good was to be attained by it. If no sufficient motive can be found, and no good discovered; if on the other hand its tendency is to thwart and partially defeat the object which the legislature had in view by creating the corporation, it should ascertain if the language is not susceptible of an interpretation, not destructive of, but consistent with the end sought, and at the same time creditable to the good sense and sound judgment of the legislature. We can discover *347no motive for such a restriction; no good to be accomplished by it. On the contrary, it seems to us to conflict with the general object of the act, and to be purely evil in its consequences. It is difficult to perceive any reasons why this company was to be so singularly and unjustly restrained. We cannot bring our minds to the conclusion that such was the intention of either the legislature or the promoters.
We are of opinion that there is ample room to give full operation and effect to the language in question, without producing the result contended for. We think it was intended, to prohibit the corporation from purchasing, holding or dealing in real estate directly, and in a manner unconnected with the lawful and proper management and control of its affairs and business; and that it was not the design to prevent its acquiring an interest therein incidentally, whenever, in the proper exercise of its powers, it became necessary for it to do so, in order to protect its legal rights.
Such, to us, is the obvious spirit and reason of the prohibitory clause. The legislature meant only to confine the company to. the true objects o'f its charter, and to forbid its diverting its capital and investing it in real property, and engaging in land speculations.' Nor will the language used, when interpreted according to the well settled and most authentic rule of giving to each word its commonly accepted and plain grammatical signification, bear the construction sought to be put upon it. A mortgagee is not, in ordinary conversation, understood to be either the purchaser, holder or dealer in lands, nor is the act of mortgaging, a purchasing, holding or dealing in real estate. It is true, that it may possibly result in the mortgagee becoming a purchaser. He may be obliged, to do so, and to hold and sell in order to replace his debt, interest and expenses. But all this is regarded in the law as a mere remedy, a means given to collect the debt. He would not thereby fall within this restraining clause, according to its *348true spirit and meaning. By a dealer in real property, we understand a person who buys and sells for the purpose of gain and profit. By it, no one would understand to be meant a person whose business it is to loan money upon notes or bonds, and mortgages of real estate. In such transactions, the debt is considered the principal thing, the mortgage the incident. It is the money due, to which the mortgagee has the right, and not the land; and unless the mortgagor, by his failure to pay, renders a compulsory proceeding necessary in order to obtain satisfaction, he never acquires an absolute or controlling interest. A mortgage differs widely from an absolute conveyance of land. For all the purposes of negotiation and trade, it is regarded as mere personalty. It attaches itself to the debt and follows its destinies and ownership. It is beneficially assigned, transferred, released, surrendered, reissued and revived with the instrument evidencing the debt, and with no other forms or ceremonies than are requisite to do so with the latter.
It is urged, because the charter in question contains prohibitory words, that the case stands on different grounds than it would if it were merely silent. We do not so regard it. By all the rules of construing such instruments, mere silence as to a given subject, unless it be necessary to the exercise of some authority conferred, is as absolute a negative of power in relation to it as positive words of restriction. Such words can only be regarded as expressive of a desire on the part of the legislature to remove any doubts which otherwise might possibly arise. The case stands, then, as if the charter was silent upon the subject, and falls within those numerous authorities which hold that corporations, which are not directly empowered to hold or deal in real estate, may nevertheless acquire and transmit the title to it, as an incident to their powers to make general contracts touching a particular branch of business. And as this company is authorized to *349receive and hold it for some purpose, its unauthorized acquisitions would seem to come within the doctrine of this court in the cases of Burns vs. Dodge , 9 Wis., 458; and Sherwood vs. the Rock River Bank, 10; id., 230
The question of the power of this company to issue its stock, taking therefor the note and mortgage, or other security of the subscriber, payable at a future day, must be regarded as substantially settled by the case of Clark vs. Farrington, above referred to. The charters of the two companies in this respect differ very slightly, By that of the La Crosse the managing officers are empowered “to decide upon the amount to be paid on such subscription,” and “ the time and manner and proportions in which the stockholders shall pay subsequent instalments on their respective shares.” In this, the board of directors are declared to “ have full power to decide the time and manner and proportion in which the said stockholders shall pay the money due, on their respective shares.” It is insisted that the words “ money due,” obviously distinguish this case from the former, that they confine this company to receiving money only for its stock. If this be admitted, we do not see how it follows as a conclusion, that a note and mortgage may not be received.
It is well established, both upon natural reason and legal authority, that a stock subscription is a contract between the corporation on one side and the subscriber on the other; and that as such, courts of justice will enforce it for or against either. It is a contract which this company was fully authorized to enter into. Whatever diversity of opinion may have formerly been entertained upon the subject, it is well settled by modern decisions, and the rational and sound rule, no doubt is, that whenever a corporation has the power to make a contract and is not restricted in the manner of so doing, as to such contract, it stands on the same footing as a natural person; and that in relation thereto it may adopt any of the *350modes immediately calculated to accomplish it which the individual could.
In this case, therefore, in the absence of the special words granting to the directors a discretion, the company would have had the power to give to the subscriber a credit. Not departing from the object in view, the terms of the agreement might be varied and modified to suit the taste, convenience and necessities of the respective parties. But in this case the discretionary power conferred upon the directors to decide the time, manner and proportions in which the stockholders shall pay for their respective shares, puts the matter beyond any reasonable doubt. There seems to be no room for argument upon the question. The counsel seems to understand the word “ due ” to mean owing presently. We cannot do so. Its obvious sense to us is “ payable ” not presently ■but generally; that a party is bound by his contract at some time to pay. To hold it, to signify “ owing presently,” is repugnant to the manifest meaning of the entire sentence, and destructive of the discretion expressly granted. The taking of the note was a mere regulation of the payment. It is one of the most frequent methods of arranging the time, manner and proportions of payments in pecuniary transactions known to the law and to the entire business world. It is a mistaken idea of counsel that the giving of a promissory note by the debtor operates as an absolute payment or extinguishment of the original debt, or changes its nature. This is not so. Unless the note be expressly given and accepted in satisfaction and discharge of the debt, it only suspends the remedy upon it during its currency, and upon its dishonor or non-payment if in the hands of the payee, it may be disregarded, and suit brought for the original indebtedness. Chitty on Contracts, p. 660.
In this case, the mortgagor at the time of the giving of the note and mortgage, subscribed the stock book of the company, *351and it is not perceived why the rale applicable to the giving and receiving of notes generally, might not operate here also. Unless we are to give to the language here used some construction different from that which it would receive in ordinary transactions among men, we cannot perceive the smallest room for doubt or hesitation. Suppose an agent or factor, having in his possession the goods of his principal, should be instructed by him to sell them for money only, and should furthermore be told that he had full power to decide the time, manner and proportion in which the purchasers should pay the money due, would any one doubt that, acting in good faith, he could give such a period of credit as in his opinion the interests of his employer required ? And in so doing could he not receive from the vendee his note or other written instrument payable in money ? If he should take a note payable in specific articles, it might be beyond his authority, but a cash note certainly would not. Suppose, in addition to this, he should take the precaution to secure the payment of the note by the mortgage of the purchaser, would any court be seriously invited to hold him personally responsible to his principal for a violation of his instructions or duty? We cannot say what might be done, but until we have witnessed it, we must be permitted to entertain doubts upon the subject
The view we have taken of this case renders the principles laid down in Russell vs. Topping, 5 McLean, 194, inapplicable to it. That case only goes so far as to hold that a corporation, not expressly authorized, cannot, in a transaction independent of and wholly unconnected with the exercise of its legitimate powers, become the purchaser of real estate, and of course falls far short of the question here presented. It is not only consistent with, but recognizes the correctness of the views we have taken. The case of Root vs. Goddard, 3 McLean, 102, seems equally foreign. The *352distinction between the giving of a note by a corporation which is forbidden to do so, and the receiving of one from a natural person,by a corporation empowered to do so for some purposes, cannot fail of observation. In the one case, there is an absolute want of power, and the instrument never in fact has an existence. Butin the other, it is not so. The individual has the power to make the note and the corporation to receive it under certain circumstances, and unless it be declared void by statute, if received for ah unauthorized purpose, it will be good in the hands of an innocent holder.
This is an action for foreclosure and sale commenced by the plaintiff as the holder of a second mortgage upon the lands mortgaged to the railroad company, against the defendants, Knowlton and wife, as mortgagors, the company as the holder of the prior mortgage, and Hurd as a subsequent in-cumbrancer. The complaint charged that the mortgage given to the company was illegal and void, asked that it might be so declared and set aside, and that the lien of the plaintiff might be adjudged to be prior thereto. In ah other respects it is in the ordinary form. Hurd made no answer. The company disclaimed, and the defendant, Walker, as the holder of the note and mortgage given to it, asked leave to come in and defend, which was granted. The complaint was accordingly amended, and he answered insisting' on the validity of his security. He alleged that no part of his principal or interest had been paid, and prayed judgment of foreclosure and sale against his co-defendants, Knowlton and wife, in the usual form, and that out of the proceeds of sale his mortgage might be first paid and satisfied. The defendant Knowlton answered, denying the legality of the note and mortgage, and asking that the defendant, Walker, might be decreed to cancel and surrender them to him. He also alleged that they were obtained from him by fraud; but, although he himself was examined as a witness, no proof tending to establish it was offered.
*353The plaintiff and the defendant Knowlton prevailed in the court below. Its judgment, therefore, must be reversed and the canse remanded with directions, that judgment be entered in accordance with the prayer of the answer of the defendant Walker.