John V. Farwell Co. vs. Wolf and others. conspiracy, in August and September, 1893, goods, wares, and merchandise to the amount of $434.83 were purchased of plaintiff in the name of said Josephson, were delivered to him, and disposed of for the benefit of the defendants pursuant to the aforesaid fraudulent scheme; that no part of such goods has been paid for, and that by reason of the facts plaintiff has been damaged in the said sum of $434.83 and interest; that, further, in pursuance of said fraudulent conspiracy, goods, wares, and merchandise were at various times during the year 1893, particularly stated, purchased of some twenty-four different persons, copartnerships, and corporations, the name of each being given, with the amount purchased; that all of such goods were delivered to said Josephson, and disposed of for the benefit of the defendants pursuant to the aforesaid fraudulent scheme, no part of which has been paid for, to the damage of the sellers to the amount of their respective sales and interest; that before the commencement of this action such sellers, for a valuable consideration to them respectively paid, sold, assigned, and conveyed to plaintiff their respective claims for goods so sold and delivered, together with their respective causes of action for damages against defendants on account of the aforesaid. conspiracy. The aggregate of plaintiff's claim for damages for goods procured of it pursuant to the aforesaid fraudulent scheme, and of the several other claims mentioned, amounted to $5,102.32, for which sum judgment was demanded, with interest. The defendants, except Josephson, joined in an answer to the complaint. The result of the trial was that the jury found for the plaintiff on all the issues, and assessed the damages at the full amount claimed, which, with interest, made $5,432.25. Proceedings were duly had on the trial, and subsequent thereto, requisite to preserve for review the questions discussed in the opinion. Judgment was rendered on the verdict, and defendants appealed. For the appellants there were briefs by Blum & Blum, John V. Farwell Co. vs. Wolf and others. attorneys, and J. M. Morrow, of counsel, and oral argument by Mr. Morrow. For the respondent there was a brief by Lewis & Briggs and J. J. Hughes, and oral argument by H. M. Lewis. The following opinion was filed February 23, 1897: MARSHALL, J. The record shows that plaintiff is a corporation organized for the purpose of carrying on a general dry goods business. The point was raised on the trial, and preserved for review, that it did not possess power to acquire by assignment claims for damages in no way connected with its own affairs, growing out of the alleged conspiracy to defraud. It does not appear that such claims were in any way necessary to the preservation or enforcement of plaintiff's original claim, or that such purchase was to effect in any way the purposes of its organization, so as to bring its action in that regard within the rules that a corporation may, to preserve its own property and protect its legitimate interests, acquire and enforce liens which would otherwise be outside of the purposes of its organization. A corporation has only such powers as its organic act, charter, or articles of organization confer. This is elementary, but it includes such powers as are reasonably necessary to effect all the general purposes of the corporate creation, though not particularly specified in its charter, unless prohibited thereby or by some law of the state. From the foregoing, without further discussion, we must hold that plaintiff had no authority to acquire by purchase the various claims for damages on which a recovery was had. But it by no means follows that its want of power can be taken advantage of by the defendants in this action. Formerly want of corporate power was an effective weapon, both for defense and attack, in the hands of private parties; but, without any change whatever respecting the general doctrine of ultra vires as applied to the acts of corporations acting outside the purposes of their creation, there has been John V. Farwell Co. vs. Wolf and others. a gradual development in the direction of holding that none but a person directly interested in the corporation, or the state, can question such authority. Such development from the rigorous rule which anciently obtained was manifested earliest in the adoption of the rule that, where a corporation has violated its charter in the purchase and acquirement of real estate, its title thereto and right to enjoy the same cannot be inquired into collaterally in actions between private parties or between the corporation and private parties;that it can be questioned only by the state. Natoma W. & M. Co. v. Clarkin, 14 Cal. 544; Alexander v. Tolleston Club, 110 Ill. 65; Fritts v. Palmer, 132 U. S. 282; Runyan v. Coster's Lessee, 14 Pet. 122; National Bank v. Whiting, 103 U. S. 99; Shewalter v. Pirner, 55 Mo. 218; Ragan v. McElroy, 98 Mo. 349; National Bank v. Matthews, 98 U. S. 621. In the latter case the supreme court of the United States, reversing the supreme court of the state of Missouri, laid down the rule that," where a corporation is incompetent by its charter to take a title to real estate, a conveyance to it is not void, but only voidable, and the sovereign alone can object;" that "it is valid until assailed by a direct proceeding instituted for that purpose" by the government; and, further, in effect, that the danger of a judgment of ouster and dissolution is the only check to prevent and punish violations of corporate charters. If the question were respecting the right of a private person to challenge corporate action concerning the acquirement or enjoyment of lands without authority in the charter so to do, it would be deemed so well settled that no such right exists as not to be open to serious discussion; but whether the same rule governs generally is not so clear. An extended discussion of the subject, showing the process of development in the application of such rule, would be interesting and instructive, but not necessary for the purposes of this opinion. Therefore we content ourselves with referring to a few well-considered cases, showing the present John V. Farwell Co. vs. Wolf and others. state of the law respecting the subject, which Thompson, in his work on Corporations, very properly refers to as a "new and growing doctrine." In Prescott Nat. Bank v. Butler, 157 Mass. 548, an action between the bank and a private person, the question was raised of whether the action of the former in purchasing notes in the open market as a commodity was ultra vires; and in respect thereto the court said, in effect, that if such a purchase be ultra vires, it is not made penal or expressly prohibited; therefore the violation of law could be remedied only in proceedings against the bank, in the name of the state, to deprive it of its charter. In Grant v. Henry Clay C. Co. 80 Pa. St. 208, where the question was whether the corporation could purchase or hold leases of mining lands, the court, in deciding such question, said, in effect, that if the commonwealth is interested in such an inquiry, it must be made by the proper officer; that the question was of a public nature, concerning solely the sovereignty of the state, and not one that in any way concerned private parties. In Martindale v. K. C., St. J. & C. B. R. Co. 60 Mo. 508, the question was whether the defendant had violated statutory requirements, and the court laid down the broad doctrine that collateral inquiry by a private citizen into the supposed illegal acts of a corporation is not permitted in any case, unless expressly so provided by statute. To the same effect are Kinealy v. St. L., K. C. & N. R. Co. 69 Mo. 658, and Hovelman v. Kansas City H. R. Co. 79 Mo. 632. In Baker v. N. W. G. L. Co. 36 Minn. 185, the question was whether the purchase and enforcement of certain mortgage liens was in excess of the corporate authority. Held, that none but the state or a stockholder could raise the question. If the position that the principle under discussion is now, in most jurisdictions, recognized as one of general application, except in respect to contracts wholly executory, required further support, resort might be had to many other John V. Farwell Co. vs. Wolf and others. adjudications of the highest respectability, though authorities there are which still adhere to the old rule that a corporate act in excess of its power, either because outside of the purposes of the corporation or because prohibited by statute, is ultra vires, and cannot be enforced in any action in any court of justice, without regard to whether such act be challenged by the public or by a private person. Such authorities are exceptional. Judge Thompson, in his'valuable treatise on the Law of Corporations (volume 5), commenting on the subject (secs. 6033-6038), appears to deprecate the prevalence of the "new doctrine," and to argue against its further extension, upon the ground that it practically destroys the effect of the doctrine of ultra vires, as applied to the unauthorized exercise of corporate power; but the learned author is manifestly in error in that respect. Such doctrine, notwithstanding the limitation which modern development has placed on the means by which it may be called into use, still exists, and may and will continue to exist, adapted as fully as ever to restrain the abuse of corporate franchises and authority, and to punish such abuse whenever the state, in its sovereign capacity, sees fit to exercise it. That such doctrine cannot be resorted to as a weapon for attack and defense in the hands of mere private persons, and used as a ready means of embarrassing business operations by and with corporate bodies, which directly or indirectly touch and administer to human desires at every turn of the individual in modern life, while its effectiveness for all essential purposes of restraint and punishment is fully preserved, furnishes no cause for regret, but rather cause for gratification at the evidence of how certainly principles, by natural growth and development, adapt the law and its administration to the ever-changing needs of advancing civilization, so as best to promote justice and the common welfare. When a corporation offends against the law of its creation, such offense is against the sovereignty of the state; |