Court Opinion

ID: 8057953
Source: CourtListenerOpinion
Date Created: 2022-09-09 04:34:53.124758+00
Date Added: 2024-06-11T16:37:55.980774
License: Public Domain

The opinion of the court was delivered by
The Chief Justice.
This action was brought to recover the amount due upon a promissory note made by the defendant, payable to the order of the Camden and Atlantic *226Railroad Company, aiid by them endorsed. Upon the trial a verdict was taken for the plaintiff, subject to the opinion of this court upon the case made by the evidence. The drawing of the note by the defendant, and its endorsement by the payees, are not called in question. The only point submitted for the consideration of the court is, whether the Camden and Atlantic Railroad Company, to whom the note was made payable, and by whom it was. endorsed, have power to receive or to transfer commercial paper.
The note in question was’ given as a renewal of another note, originally given by the defendant, by way of accommodation to the company, to enable them to raise money to meet its liabilities. The original note was not negotiated, but was deposited with De Costa, the president of the company, as collateral, to secure the payment of certain debts due to him from the company. After several renewals, the. note in question, with the knowledge of the defendant, was transferred to De Costa, after he had ceased to be president or director of the company, in payment of a part of the indebtedness of the company to him.
The charter of the Camden and Atlantic Railroad Company confers upon them the ordinary powers of a railroad company. By the 15lh section, it is enacted, “that the said corporation shall have power to borrow such sum or sums of money, from time to time, as shall be necessary to build, construct or repair said road, and furnish the said corporation with all the necessary engines and machinery for the uses and objects of the said company, and to secure the payment thereof by bond or mortgage, or otherwise, on the said road, lands, privileges, franchises and appurtenances of or belonging to said corporation, at a rate of interest not exceeding seven per centum per annum; provided that it shall not be lawful for the said c'ompany to plead any statute or statutes of this state against usury in any suit ill law or equity instituted to *227enforce the payment of any bond or mortgage executed under this section.”
This section, it is insisted on the part of the defendant, is a limitation of the power of the company to borrow money for specified purposes and in the mode designated, and that it is tantamount to a prohibition of the company’s borrowing money for any other purpose or upon any other security than that specified.
It is clear, however, that the 15th section of the charter was designed not as a limitation or restriction of the powers of the corporation, but as a grant of additional power. It authorizes the company to borrow such sums of money as shall from time to time be necessary-’ for the construction, repair, and equipment of the road, and to secure the repayment thereof by bond, mortgage, or other security on the load and franchises of the corporation, at a rate of interest exceeding the rate established by law. The corporation are clothed with powers which, independent of that provision, they could not have exercised. But there is nothing in the provision which, by necessary implication or by fair intendment, can be construed to limit the general powers and capacities incident to every corporation. The question, therefore, of the power of the corporation to give or endorse the note in question must be decided in view of the inherent powers of the corporation, irrespective of the special provision contained in the section alluded to.
On the pari of the defendant, it is insisted that a corporation can make no contract which is not necessary to enable it to answer the object of its incorporation; that the loaning of money, or the borrowing of notes to be discounted in market, is not necessary to the operation of a railroad company • and that, consequently, the making or endorsement of commercial paper by such company, as a security for money loaned and the endorsement of notes borrowed lor the purpose of raising money, are void ucLs*
*228The simple inquiry is, whether a railroad company has, as a necessary incident, the inherent power of borrowing money for the payment of its debts or for its necessary purposes. It is conceded that the corporation has such powers only as are expressly conferred by charter or necessarily incident to those powers. If it may lawfully contract debts, it would seem clear that it may enter into obligations to pay those debts, or borrow money for that purpose.
The power of incurring debts in the course of its legitimate business, of giving notes, or borrowing money for the payment of such debts, would seem necessarily incident to ^every corporation whose business involved the expenditure of large sums of money, and often upon sudden and unforeseen contingencies. Such, it is believed, is the universal custom of all important corporations, whether private or municipal. The authorities in support of the practice are abundant.
Our statute recognizes bodies politic or corporate as persons by whom promissory ixotes and bills of exchange may be drawn, endoi'sed, and accepted. Nig. Dig. 667, § 4. The technical doctrine, that a corporation can contract only under its corporate seal, was long since exploded.
In Munn v. The Commission Co., 15 Johns. R. 44, it was held that a corporation of limited powers might engage to pay or advance money at a future day by the acceptance of a bill of exchange.
In Mott v. Hicks, 1 Cowen 513, it was held that a private corporation might give a negotiable promissory note for a debt incurred in its ordinax-y business.
In Kelley v. Mayor of Brooklyn, 4 Hill 263, it was held that a municipal eoi'poration may issue negotiable paper for a debt conti’acted in the course of its proper business ; and in delivering the opinion of the court, Cowen, J., said, independently of any statute provision, a corporation may issue negotiable paper for a debt couti'acted in the course of its proper business. This is a power incident *229to all corporations, and no provision in its charter, or elsewhere, merely directing a certain form in affirmative words should be so construed as to take away the power.
The same general principle will be found in Moss v. Oakley, 2 Hill 265; Barker v. The Mechanic Ins. Co., 3 Wend. 96; Furniss v. Gilchrist, 1 Sandf. Sup. Ct. R. 53; Angell and Ames on Corp., § 257; Pierce on Railroads 372. The result of the authorities, to adopt the language of a recent writer, seems to be, that corporations parrying on business under no restraining act may make promissory notes and draw bills of exchange, where these are the usual and proper means to accomplish the purposes of their organization ; that such notes and bills are to be presumed legal and valid where they are not prohibited by law and are received in good faith, and that they are invalid when given in violation of law, or when given for purposes wholly foreign to those for which the corporation was created. Edwards on Bills 77.
The note in question was given as a renewal of accommodation paper originally given by the defendant, being one of the directors of the company, to raise money to pay the debts of the corporation. It was subsequently transferred by the company to one of its creditors, in payment of a debt due, with the knowledge and assent, of the defendant. There is no pretence in the evidence, either that the indebtedness of the company, which the paper of the defendant was originally designed to satisfy, or for the payment, of which the note in question was eventually transferred by the company, was not incurred in the course of its regular and lawful business.
We are of opinion, therefore, that the railroad company were authorized to hold and transfer the note in question, and that consequently the plaintiff is entitled to judgment upon the verdict.
This conclusion renders it unnecessary to express any opinion upon the other point discussed by counsel upon *230the argument, viz., whether the objection, if valid, can be taken advantage of by this defendant.
The plaintiff is entitled to judgment.
Cited in Montague v. Church School Dist., 5 Vr. 219; Hackettstown v. Swackhammer, 8 Vr. 191.