[PART II. tionable for directors to take stock in another company in payment of property sold and as the means of selling it, if taken with a view to selling it again.1 Savings banks are often authorized by statute to invest in the stock of other banks, as a species of prudent investment. The great danger to be avoided is that of permitting a corporation to push wild schemes for the absorption of power, a permission which is constantly craved on the part of an enterprising directory, and secured whenever one company may purchase a controlling influence in the affairs of another. § 233. Power to hold Real Estate; Statutes of Mortmain. As to the right of a corporation to hold real estate, we may observe that, in order to restrain it, a variety of statutes, from the days of Magna Charta and King Henry III. down to the reign of George II., have been passed, known as the statutes of mortmain, and originally designed to loosen the "dead clutch" of the ecclesiastical corporations upon lands and tenements, though afterwards extended in principle to lay corporations. It is noticeable that these statutes make no mention of personal property.2 And, although originating in the feudal system, the policy of this mortmain legislation was known to the civil law. A corporation cannot take an estate in joint tenancy, either jointly with another corporation or with a natural person.4 And while the common-law principle may be considered as applicable alike to real and personal property, so far as concerns the right of a corporation to purchase and hold it, the statutes of mortmain long since established, where such statutes prevailed, an essential practical difference on behalf of things personal.5 Devises of 1 Hodges v. N. E. Screw Co., 3 R. I. 9. And see Howe v. Boston Carpet Co., 16 Gray, 493. 21 Bl. Com. 479; Ang. & Ames, § 148; Baird v. Bank of Washington, 11 S. & R. 411; Vanseat v. Roberts, 3 Md. Ch. 119; 2 Kent Com. 283; 2 Redf. Wills, 1st ed. 783; Morawetz, §§ 156-161; Taylor, § 128. 8 Browne's Civil Law, 145; Ang. & Ames, § 150. 4 Telfair v. Howe, 3 Rich. Eq. 235. 5 The statutes of mortmain, though in force in Great Britain, appear in many of the United States to have no force, or else to apply merely to ecclesiastical corporations. However, legislative provisions are to be found in various States, expressed either in special charters or general laws, inspired by the English policy. See lands to corporations are not favored by our law.1 And yet, there are many of our modern corporations whose business essentially requires the holding of real estate, and public policy moulds the legislative grant accordingly.2 So are some modern corporations created expressly for the purpose of dealing in lands.3 It is one thing, however, to purchase directly, and another to hold property by reason of the foreclosure of some mortgage or the forfeiture of some pledge given to secure a boná fide debt. Corporations, like individuals, necessarily become creditors in the course of business; and common prudence dictates that a debt due be sometimes secured by mortgage or otherwise. The power to take mortgages is often given to a corporation by its charter; and, even if not, it is usually an implied power, provided the debt were bona fide created in the regular course of business. In some States a bank may receive real estate as security for a loan or in payment of debts.5 Even a prohibition on purchasing or dealing in land does not necessarily forbid taking a mortgage as security. Corporations often lease buildings, too, and are held liable on their covenants. And, whether it be in regard to real estate or some species of personal property, that a corporation is forbidden to purchase and hold such property, under ordinary circumstances, the rule appears to be quite Morawetz, § 157; Page v. Heineberg, 40 Vt. 81; Odell v. Odell, 10 Allen, 1; Downing v. Marshall, 23 N. Y. 392; 24 How. 465; Miller v. Porter, 53 Penn. St. 292. The right to hold land may be found granted, restricted, or forbidden, under any particular charter in question. Where a corporation is incompetent under its charter to take real estate, a conveyance to it is voidable and not void, and only direct proceedings at the instance of the State can invalidate it. Fritts v. Palmer, 132 U. S. 282. 1 See Morawetz, §§ 160, 161; 2 Bl. Com. 372. As to the American doctrine in this respect, see Downing v. Marshall, 23 N. Y. 366; Taylor, § 391. The English statutes of wills, enacted under Henry VIII., have an important bearing on this question. 2 As, e.g., railways, and their right to acquire land for their routes by eminent domain, see § 240. 8 See 151 U. S. 294. 42 Kent Com. 283; Ang. & Ames, § 156; Susquehannah Bridge Co. v. General Ins. Co., 2 Md. Ch. 418; Silver Lake Bank v. North, 4 Johns. Ch. 370. 5 Thomaston Bank v. Stimpson, 21 Me. 195; 2 Kent Com. 283; Abb. Dig. Corp. 41. 6 Blunt v. Walker, 11 Wis. 334. 7 Abby v. Billups, 35 Miss. 618. favorable in permitting corporations to secure debts due them, as best they may, even though the collateral security taken should be of the prohibited class. § 234. Power to take by Bequest. - Corporations have the common-law right of taking personal property by bequest, equally with natural persons; and even a bequest to a corporation of its own stock is valid. But the law in this respect is affected by Statute 43 Eliz. c. 4, relating to charitable uses.2 Religious corporations, and even unincorporated religious societies, frequently receive gifts and bequests under a will for objects within the scope of their usual duties; and in this country the statute of charitable uses receives a favorable construction from the courts. Even a misnomer of the corporation does not vitiate the bequest, provided its identity be otherwise apparent.3 § 235. Power to hold Property upon Trusts. - As to the capacity of corporations to hold property upon trusts, there are English authorities which treat them as incapable, though for reasons somewhat artificial; but in this country their capacity to perform the duties of trustees is generally admitted, and the present American rule is that any corporation may hold property in trust for purposes not foreign to its own institution. Some of our courts seemed disposed to regard this capacity of a corporation even more favorably; yet in matters entirely outside of the proper purposes of the corporation, and more especially if the trust be repugnant to or inconsistent with the duties imposed by its creation, it should be conceded that a corporation has no right to take trust property nor to act as trustee. The right of a cor 1 Ang. v. Ames, § 177; Rivanna Nav. Co. v. Dawson, 3 Gratt. 19; McCartee v. Orphan Asylum Society, 9 Cow. 437. 22 Kent Com. 285; Ang. & Ames, §§ 179-185. And see, as to Legacies, Schoul. Ex'rs, §§ 458-475. 8 Ib. An executory bequest limited to the use of a corporation to be created within the period allowed for the vesting of future estates and inter ests is valid. Burrill v. Boardman, 43 N. Y. 254. 41 Kyd, 27; Ang. & Ames, §§ 166– 168; 2 Kent Com. 285; Phillips Academy v. King, 12 Mass. 546; Morawetz, § 163; Vidal v. Girard, 2 How. 187. 5 See Jackson v. Hartwell, 8 Johns. 422; Vidal v. Mayor, &c. of Philadelphia, 2 How. 128; Trustees v. Peaslee, 15 N. H. 317. poration to take a trust which is valid in point of law must be contested by the State, and not by heirs and parties; and while the corporation may not be permitted to execute a trust upon the grounds already indicated, yet this is no reason why a trust unexceptionable in itself should not be permitted to stand with a new trustee substituted for the corporation.1 § 236. Right to transfer and dispose of Corporate Property. - Incidental to the right of holding property is the right to dispose of it at pleasure. Independently, therefore, of positive law to the contrary, all corporations have the absolute jus disponendi of all property, whether real or personal, which they may have lawfully acquired. Nor does the circumstance that the State holds some of the stock of the corporation affect this common-law right of alienating the corporation property. And if a corporation has power to dispose of its property in general, it certainly can, like an individual, dispose of any portion it may see fit. It may lease, grant, or mortgage what are rightly its lands, or assign such a mortgage, and may be held liable upon its covenants correspondingly like an individual. It may sell its property in order to raise money for the legitimate objects of its creation; and if it can borrow, it can borrow upon security 1 Bliss v. American Bible Society, 2 Allen, 334. See American Academy v. Harvard College, 12 Gray, 582. This whole subject will be found to have been modified considerably by local statutes; as, for instance, in New York, where colleges and other incorporated literary institutions are authorized to take real and personal estate in trust for a variety of purposes. N. Y. Stat. May 14, 1840, ch. 318; Ang. & Ames, § 168, Lathrop's n. The charter of a corporation sometimes provides in effect that the whole property of the company shall be held as real estate and so descend, or, on the other hand, that it shall be held as personal estate and be transferred and distributed accordingly. Although such clauses are usually designed to operate as between the stockholders, and not as to strangers, the legislature may give a provision of this kind a more sweeping effect, by using suitable language for that purpose. Cape Sable Company's Case, 3 Bland Ch. 670. 2 Abb. Dig. Corp. 587-588; 1 Kyd, 108; Ang. & Ames, §§ 187-191; 2 Bland Ch. 142; Reynolds v. Commissioners, 5 Ohio, 204; White Water Canal Co. v. Vallette, 21 How, 424; Dupee v. Boston Water Power Co., 114 Mass. 37; 57 Penn. St. 213; L. R. 6 Ch. 83; 80 III. 263. Ib. ; 305 of what it owns. If a suitable building for its business be lawfully purchased, its mortgage given to secure part of the purchase-money is equally lawful.1 And where a corporation has the right to purchase materials to be worked up in its factories, it may by inference borrow money for that purpose, and may pledge the corporate property as security.2 But all this might be a matter of special regulation in the charter; and we frequently find, in England and some portions of the United States, restraints placed by statute upon the alienation of corporate property, especially in the case of religious corporations.3 A restraint upon the power of alienation may be derived from the form of the instrument prescribed by its charter or by-law. Sometimes the charter provides as to the place where it shall dispose of certain kinds of property; as in the case of the charter of a fire insurance and loan company, which especially empowered the company to take mortgages, but provided that all mortgage sales should be made in the county where the property was situated. Sometimes the instrument must be executed in a particular manner; as where an act of incorporation required the assent of three fourths of the stockholders to make a mortgage. All such requirements, if expressed, must be strictly complied with, or the transaction is likely to fail altogether; although we find the courts disposed to protect third parties in their rights, when construing restraining clauses of this character, and to prevent the transaction from being collaterally impeached. The circumstances under which equity would interfere to restrain a corporation from improperly alienating its property must depend on general principles; but the court would doubtless interpose wherever the alienation was for other than corporate pur 1 Shaver v. Bear River M. Co., 10 Cal. 396. 2 Fay v. Noble, 12 Cush. 18; Uncas Nat. Bank v. Rich, 23 Wis. 339. See Phillips v. Winslow, 18 B. Mon. 431; Willink v. Morris Canal Co., 3 Green Ch. 377. 4 Myatt v. St. Helen's R. R. Co., 2 Q. B. 364. 5 Fuller v. Van Geesen, 4 Hill, 171. 6 Cape Sable Company's Case, 3 Bland Ch. 166. 7 See Fuller v. Van Geesen, supra ; 3 Ang. & Ames, §§ 187, 188; 2 Kent Ang. & Ames, § 189; 84 N. Y. 190. Com. 281; 1 Kyd, 116–162. |