Court Opinion

ID: 6987596
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:19:08.39786+00
Date Added: 2024-06-11T16:09:30.852810
License: Public Domain

Bailet, J. The principal controversy in this case, arises upon the first ground specified in the motion to vacate the judgment, viz: that the defendant had no power to execute the note sued on. The other grounds may be disposed of in a few words. The second, viz: that the defendant was not served with process as required by law, is an attempt to apply to this case the provisions of the fourth section of the defendant’s charter prescribing special rules for the service of process on the corporation. Whether those provisions are to be regarded as still in force or not, we fail to perceive how any question as to the service of process can arise in this case, since the defendant, by its warrant of attorney waived such service. The right of the corporation to be served in a particular- manner in no way interfered with its power to appear without pmoeess. But it may well be questioned whether the various amendments to the general law prescribing the manner of "serving process on corporations, passed since the date of the defendant’s charter, have not operated as a repeal, by implication, of the provisions of the charter on that subject. But even if there was no proper service, such fact could result only in a vacation of the judgment, and would be no ground for dismissing the suit out of court against the plaintiff’s objection. The fifth ground, viz, that the note was not executed by the defendant corporation, does not seem to be true in fact. It purports, on its face, to be the note of the corporation, and it was executed by officers who, as between the corporation and third persons, will be presumed to have been vested with sufficient authority to bind their principal, provided the execution of the note was not, as to the corporation itself, ultra vires. In the body of the note, the1 corporation appears in its corporate name as the promisor, and the signature is in the following words: “ The St. Francis Xavier Female Academy, of Chicago, Illinois: by Sophia Granger, President; Anna Drum, Secretary.” This was an execution by the corporation, it not being pretended that the persons who signed as president and secretary were not such officers, or that their signatures were not genuine. The affidavits read in evidence on the hearing of the motion, tended strongly to support the third and fourth grounds for vacating the judgment, viz.: that the judgment was largely in excess of the amount due, and that the holder of the note, after the sale under the deed of trust, agreed to forgive, or in other words, to donate to the defendant whatever balance remained unsatisfied. It may be doubted whether the latter of these grounds presented any defense to the note, it appearing that the transaction was at most a mere unexecuted gift, and therefore incapable of enforcement. But the showing made by the affidavits, that the judgment was largely in excess of the amount due, furnished a sufficient ground for vacating the judgment, and letting the defendant in to mate its defense. It furnished no ground, however, for dismissing the suit. That should have been allowed to remain pending for the purpose of enabling the parties to litigate the matters thus in controversy. But if it be true that the defendant had no power to execute the note, it follows, necessarily, that the plaintiff could in on event be entitled to judgment, and that the suit was properly dismissed out of court. The decision of the court below, then, can be sustained only upon the theory that the execution of the note by the corporation was ultra vires. A corporation is said to be a mere creature of the law, and to possess only such powers and capacities as are given it by its charter. It is precisely what the incorporating act has made it, and can exercise only such powers as are specifically granted, or are necessary to its existence or incidental to the exercise of the powers expressly given. Hence, any specific power which may be claimed for a corporation must find its warrant in the charter, and if it cannot do that it has no existence. “ It is clear that the power to execute a promissory note is not among the powers specifically conferred upon the defendant by its charter, and we have only to determine whether it is implied as incedental to the exercise of the powers expressly given. Had it the power to contract debts, and if so, is the power to evidence such debts by the execution of a promissory note to be implied? The defendant was by its charter expressly empowered to establish and maintain an educational institution, and to acquire ■and hold property for that purpose. By the third section of ■ the charter, the corporators and their successors were declared to be competent, in law and equity, “to take to themselves, in their said corporate name, real, personal or mixed estate, by gift, grant, bargain and sale, conveyance, will, devise or bequest of any person or persons whomsoever; and the same estate, whether real or personal, to grant, bargain, sell, convey^ demise, let, place out at interest or otherwise dispose of the same for the use of said institution, in such manner as to them shall seem most beneficial to said institution.” The power to acquire property, conferred by the first section, is, if anything, broader still. Authority is there given to the corporation, in its corporate name, “to acquire, hold and convey property, real personal or mixed, in all lawful ways.” Among the lawful ways in which property may be acquired, is, by purchase, either for cash or on credit. It cannot be doubted, then, that power is here given to acquire all such real and personal property as might be necessary for the establishment and maintenance of the institution, by purchase, and on credit. Is the power to give a promissory note for the indebtedness thereby incurred to be implied? The charter does not prohibit the execution of negotiable paper, and where there is no such prohibition, a corporation may execute such paper for a debt contracted in the course of its proper business. In the case of Curtis v. Leavitt, 15 N. Y. 66, it is said: “That the right of corporation in general to give a note, bond or other engagement to pay a debt, is so nearly identical or so inseparably connected with the right to contract the debt, that no doubt upon the question ought to be admitted. When a corporation can lawfully purchase property or procure money on loan in the course of its business, the seller or the lender may exact, and the purchaser or borrower must have the power to give, any known assurance which does not fall within the prohibition, express or implied, of some statute. The particular restriction must be sought for in the charter of the corporation, or in some other statute binding upon it; but if not found in that examination, we may safely affirm that it has no existence.” So in Moss v. Averill, 10 N. Y. 457, the court say: “Ho question is better settled upon authority than that a corporation, not prohibited by law from doing so, and without any express power in its its charter for that purpose, may make a negotiable promissory note payable either at a future day, or upon demand, when such note is given for any of the legitimate purposes for which the company was incorporated.” The authorities holding this doctrine are very numerous, but reference may be made to the following: Barker v. Mechanic Ins. Co. 3 Wend. 94; Moss v. Oakley, 2 Hill, 265; Kelly v. Mayor of Brooklyn, 4 Id. 263; Barry v. Merchants’ Exchange Co. 1 Sandf. Ch. 280; Mott v. Hicks, 1 Cow. 513; Hamilton v. New Castle and Danville R. R. Co. 9 Ind. 359; Carne v. Brigham, 39 Me. 35; Patridge v. Badger, 25 Barb, 146; Commercial Bank v. Newport Manufacturing Co. 1 B. Mon. 13; Smith v. Eureka Flour Mills, 6 Cal. 1. The affidavit of the defendant’s president shows, it is true, that the note in question was given, not for the purchase money of property, but to secure a loan of money to pay a previously existing indebtedness. But we think that from the power to contract a debt, the power to borrow money for its payment is clearly implied. Thus in Barry v. Merchants’ Exchange Co., supra, it is said: “Upon this principle, and to the extent stated, a corporation, in order to attain its legitimate objects, may deal precisely as an individual may who seeks to accomplish the some ends. If chartered for the purpose of building a bridge, it may contract a debt for the labor, the materials, or the land upon which the bridge is abutted. If more advantageous, it may borrow money to purchase such land or materials, or to pay for such labor. And as evidence of the indebtedness and as security for its repayment, it may execute to the creditor a promissory note, a bond or a mortgage, whether the debt be for the money borrowed, or for the work, materi.als or land.” In Moss v. Haspeth Academy, 7 Heisk. 283, it is held that a corporation, unless prohibited has authority to borrow money to accomplish the purpose for which it was organized, wherever such power may be fairly implied as a usual and appropriate means to accomplish the objects of its charter. See, also, Beers v. Phoenix Glass Co. 14 Barb. 358; Partridge v. Badger, 25 Id. 46. But even if the borrowing of the money in question was in excess of the corporate powers of the defendant, we think the defense of ultra vires should not prevail. The defendant ought not to retain the money borrowed, and escape its repayment on the plea that it had no power to hoi-row it. See Degroff v. American Linen Thread Company, 24 Barb. 275; Bissell v. M. S. & N. I. R. R. Co. 22 N. Y. 258. We think the court below erred in dismissing the suit, and the judgment will be reversed and the cause remanded, with instructions to reinstate the suit, so that the parties may have an opportunity of litigating therein the matters in controversy between them in relation to said note and the indebtedness thereby secured. Judgment reversed.