so, and it is deemed to be prohibited; but if it cannot be judicially perceived to be so unconnected, illegality is not to be presumed.1 According to a statement of the rule which finds favor in later English authorities, a corporation created for particular purposes and with special powers cannot lawfully make, and is not bound by contracts if it appears by the express provisions of the statute creating it, or by necessary or reasonable inference, that the legislature meant that they should not be made; but unless it so appears, the corporation is bound.2 The prima facie right to make a contract does not exist where, from the nature and objects of the incorporation appearing on the face of the act, the corporation is expressly or impliedly forbidden to make it.3 1 Norwich v. Norfolk R. Co., 4 El. & Bl. 397, 414, 415, 419, 420. A test varying little from this may be found in Bissell v. Mich. S. & N. I. R. Co., 22 N. Y. 258, 290, Selden, J.; Miners' Ditch Co. v. Zellerbach, 37 Cal. 543, 586, 587; Ohio & M. R. Co. v. McCarthy, 96 U. S. 258. 2 South Yorkshire R. & River Dun Co. v. Great Northern R. Co., 9 Exch. 55, 84, Parke, B. (1853); Bateman v. Ashtonunder-Lyne, 3 Hurl. & N. 323 (1858); Shrewsbury & B. R. Co. v. North Western R. Co., 6 H. L. Cas. 113, 136; Chambers v. Manchester & M. R. Co., 5 Best & S. 588 (1864); Taylor v. Chichester & M. R. Co., L. R. 2 Exch. 356, 370, 374, 383, 384; Brown v. Winnisimmet Co., 11 Allen, 326, 331. In South Wales R. Co. v. Redmond, 10 C. B. N. s. 675, 682 (1861), Erle, J., said: Corporations have at law capacity to make all contracts not expressly or impliedly prohibited; and, therefore, contracts frustrating or necessarily inconsist ent with the object for which a company is incorporated by an act are impliedly prohibited by it." In Shrewsbury & B. R. Co. v. North Western R. Co., 6 H. L. Cas. 113, Lord Cranworth said: Prima facie, a corporation may contract under seal. You must show that the particular contract is one which the corporation has no power to enter into. It must be shown on the face of it to be a breach of duty, some. thing foreign to the object for which the company was established." p. 124. Again: "Prima facie corporate bodies are bound by all contracts under their common seal. When the legislature constitutes a corporation it gives to that body, prima facie, an absolute right of contracting. But this prima facie right does not exist in any case where the contract is one which, from the nature and object of incorporation, the corporate body is expressly or impliedly prohibited from making; such a contract is said to be ultra vires. And the question here, as in similar cases, is, whether there is anything on the face of the act of incorporation which expressly or impliedly forbids the making of the contract sought to be enforced." p. 135. See Riche v. Ashbury R. Carriage & Iron Co., L. R. 9 Exch. 224, 264, 292; Hare v. London & N.W. R. Co., 2 Johns. & H. 80, 105, 106. In Chambers v. Manchester & M. R. Co., 5 Best & S. 588, Crompton, J., held that a corporation is bound by the seal being affixed to the deed, where the direc tors have power given them so to affix it; but that it is not bound where the legislature has said that the thing shall not be done. In Attorney-General v. Great Eastern R. Co., L. R. 5 App. Cas. 473, 478, Selborne, Lord Chancellor, said, that the doctrine of ultra vires "ought to be reasonably, and not unreasonably, understood and applied; and that whatever may be fairly regarded as incidental to or consequential upon those things which the legislature has authorized, ought not (unless expressly prohib ited) to be held by judicial construction to be ultra vires." -- Power to sell or mortgage Property.- A corporation has the power, except as restricted by legislation or some limitation arising from its purposes or nature, to sell, convey, or mortgage its property, real and personal. It may, unless so restricted, dispose of such property by a single sale, as well as in parcels.2 A railroad corporation has this power to the same extent as other corporations, except that in most jurisdictions it is not permitted, without legislative authority, to sell its franchises, including its right of way and other property essential to such franchises.3 Power to contract Debts, give Promissory Notes, and issue Bonds. — A railroad corporation, unless specially restrained by statute, may contract debts by obtaining credit in the course of its business or borrowing money, and may give as evidence of its debts the same forms of obligations as an individual. Thus, it may bind itself by promissory notes, bills of exchange, and negotiable bonds.* 1 Pierce v. Emery, 32 N. H. 484, 503; Boston, C., & M. R. Co. v. Gilmore, 37 N. H. 410, 420; Richards v. Merrimack & C. R. R. Co., 44 N. H. 127, 135; Coe v. Columbus, P., & I. R. Co., 10 Ohio St. 372, 377; Commonwealth v. Smith, 10 Allen, 448, 455; Hendee v. Pinkerton, 14 Allen, 381; Dupee v. Boston Water Power Co., 114 Mass. 37; Miller v. Rutland & W. R. Co., 36 Vt. 452, 473; White Water Valley Canal Co. v. Vallette, 21 How. 414, 424; Jones v. Guaranty & I. Co., 101 U. S. 622; Joy v. Jackson & M. Plank Road Co, 11 Mich. 155, 165; Black v. Del. & R. Canal Co., 7 C. E. Green, 130, 410, 9 C. E. Green, 455; Lauman v. Lebanon Valley R. Co., 30 Pa. St. 42; Wood r. Bedford & B. R. Co., 8 Phil. 94; West v. Madison County Ag. Board, 82 Ill. 205; Kelly v. Ala. & C. R. Co., 58 Ala. 489; Yates v. Van De Bogert, 56 N. Y. 526. It may, when its charter gives it the general power to make all contracts which its convenience or interest may require, sell and pledge a note and mortgage held by it: Uncas National Bank v. Rith, 23 Wis. 339; or any choses in action: Morris v. Cheney, 51 Ill. 451; Downie v. Hoover, 12 Wis. 174. 2 Treadwell v. Salisbury Man. Co., 7 Gray, 393; Miners' Ditch Co. v. Zellerbach, 37 Cal. 543; Buford v. Keokuk N. L. Packet Co., 3 Mo. App. 159; Ardesco Oil Co. v. North Am. Oil & M. Co., 66 Pa. St. 375; Wilson v. Miers, 10 C. B. N. s. 349; Featherstonhaugh v. Lee Moor If the statute prescribes the conditions on which the power to issue bonds shall be exercised, it must be complied with. The company may sell the bonds which it is authorized to issue, directly or indirectly, without the intervention of a third party, either within or without the State. A corporation is liable upon an accommodation note to a bona fide holder who, paying value, took it before maturity.3 Power to lend Surplus Funds, to compromise Disputes. A railroad corporation may lend its surplus funds. It may compromise disputes, even with a subscriber to its stock, where the settlement is made in good faith, and does not work a fraud on creditors or other subscribers. It may pay for injuries and losses for which it is not legally liable. A railroad Power to guarantee the Bonds of other Corporations. corporation has the power, in the course of its business and with a view to promote its lawful purposes, to guarantee the bonds of other corporations; and even when made for the accommodation. of another company, they are valid in the hands of a bona fide holder. When taking the lease of the railroad of another corporation, it can, as a part of the transaction, guarantee the latter's bonds. It may guarantee municipal bonds issued in payment of 1 Commonwealth v. Smith, 10 Allen, 448; Chambers v. Manchester & M. R. Co., 5 Best & S. 588. See Rockwell v. Elkhorn Bank, 13 Wis. 653. The bona fide holder of the stolen bond may recover against the company the whole amount thereof, and is not limited to the amount paid by him. Grand Rapids & I. R. Co. v. Sanders, 17 Hun, 552. As to facts affecting with notice the bona fide holder of a bond stolen before its issue, see Parsons v. Jackson, 99 U. S. 434. 2 Bank of Ashland v. Jones, 16 Ohio St. 145. See Commissioners v. Atlantic & N. C. R. Co., 77 N. C. 289. & Monument Nat. Bank v. Globe Works, 101 Mass. 57; Mechanics' Banking Assoc. v. New York & S. White Lead Co., 35 N. Y. 505. Eastern R. Co., L. R. 11 Ch. Div. 449, 480. 7 Madison & I. R. Co. v. Norwich Savings Bank, 24 Ind. 457; Cozart v. Georgia R. & B. Co., 54 Ga. 379; Arnot v. Erie R. Co., 67 N. Y. 315, 5 Hun, 608. See Smead v. Indianapolis, P., & C. R. Co., 11 Ind. 104; Madison, W., & M. Plank Road Co. v. Watertown & P. Road Co., 7 Wis. 59, 5 Wis. 173; West of England Bank, In re, L. R. 14 Ch. Div. 317. A railway company cannot, in England, guarantee the parliamentary expenses or the profits and stock of another company. Maunsell v. Midland G. W. R. Co., 1 Hem. & M. 130; Colman v. Eastern Counties R. Co., 10 Beav. 1. For the construction of a statute authorizing one corporation to aid another, see Baltimore v. Balt. & O. R. 4 North Carolina R. Co. v. Moore, 70 Co., 21 Md. 50. N. C. 6. 5 Ante, Chap. III. pp. 76, 77. Taunton v. Royal Ins. Co., 2 Hem. & M. 135; Attorney-General v. Great 8 Low v. Central Pacific R. Co., 52 Cal. 53; Opdyke v. Pacific R. Co., 3 Dill. 55. 66 subscriptions to its capital stock. It may, when authorized by statute to aid in the construction of a connecting railroad, by a subscription to the capital stock of the corporation owning it or otherwise," guarantee the bonds of the latter, and where, as a condition of such right to aid, the vote of its stockholders in favor thereof is required, a subsequent vote ratifying a guaranty made. by the directors on its behalf was held equivalent to a previous vote authorizing the guaranty.2 Power of the Company to purchase and hold its own Stock. — A corporation, not being prohibited by statute and acting bona fide, may purchase its own stock and reissue it. Generally the corporation becomes the owner of its stock by receiving it in payment of debts or as the consideration of property sold. Such a transaction in the ordinary course of business is not open to objection, but the power of the corporation to hold its own stock should be treated as subject to limitation and restraint; and some authorities confine it to stock received in payment of debts. The right to vote on shares held by the company, or by others in trust for it, is, as has already been seen, suspended while they are so held.5 Power to purchase and hold the Stock of other Corporations. The purchase by the company of the capital stock of other corporations, when not prohibited by statute, may be allowed to a limited extent and for an incidental purpose; but when involving a misappropriation of the corporate funds, or being a mere speculation or induced by a vicious purpose, will be enjoined at the Miss. & M. R. Co. v. Howard, 7 Dupee v. Boston Water Power Co., 114 Wall. 392. Mass. 37. 2 Zabriskie v. Cleveland, C., & C. R. Co., 23 How. 381; Conn. Mut. Life Ins. Co. v. Cleveland, C., & C. R. Co., 41 Barb. 9. See East Boston Freight R. Co. v. Eastern R. Co., 13 Allen, 422. 3 Chicago, P., & S. W. R. Co. v. Marseilles, 84 Ill. 145, 643: Chetlain v. Republic Life Ins. Co., 86 Ill. 220; State v. Smith, 48 Vt. 266; City Bank v. Bruce, 17 N. Y. 507; State Bank v. Fox, 3 Blatch. 431; Williams v. Savage Man. Co., 3 Md. Ch. 418, 452; Hartridge v. Rockwell, R. M. Charlton, 260; Taylor v. Miami Exporting Co., 6 Ohio, 176; Iowa Lumber Co. v. Foster, 49 Iowa, 25; 4 Barton v. Port Jackson & U. F. Plank Road Co., 17 Barb. 397; German Savings Bank v. Wulfekuhler, 19 Kan. 60; Currier v. Lebanon Slate Co., 56 N. H. 262; Peterson v. Ill. L. & L. Co., 6 Brad. (Ill.) 257; State v. Building Assoc., 35 Ohio St. 258. In England, the power exists only when expressly conferred. London, H., & C. E. Bank, In re, L. R. 5 Ch. App. 444; Marseilles Extension R. Co., In re, L. R. 7 Ch. App. 161; Hope v. International Fin. Society, L. R. 4 Ch. Div. 327; Bonnington Sugar Refining Co. v. Thompson, 6 Cas. Ct. Sessions, 4th Ser. 80. 5 Ante, Chap. II. p. 25. instance of stockholders.1 By some authorities such investments have been held altogether unauthorized.2 Power to hold Real Estate. The power to hold real estate is limited to the proper and necessary uses of the company, such as for the location, materials for construction, station grounds, and other like purposes, and does not extend to the purchase of land as an investment or speculation. The company's power to hold real estate acquired by purchase may be more extensive than its power to condemn private property under the right of eminent domain, and may include the right to hold land to be used for the construction of dwelling-houses for its officers and employees, for shops in which its cars and engines may be made, and for slips for the accommodation of vessels from which it receives, or to which it delivers freight. The company may, with the view of increasing its business, buy land for the purpose of selling the gravel therefrom to persons who are to pay for its transportation over the railroad, and afterwards sell the land and enforce in equity the contract of sale.5 Even when created for a limited period, it may purchase, hold, and convey a title in fee-simple. Where a corporation is authorized to purchase land for certain purposes, and uses the power, the presumption is, that the power 1 Hodges v. New England Screw Co., 1 R. I. 312, 3 R. I. 9; Ryan v. Leavenworth, A., & N. W. R. Co., 21 Kan. 365, 400; Barned's Banking Co., In re, L. R. 3 Ch. App. 105; Royal Bank of India's Case, L. R. 4 Ch. App. 252, L. R. 7 Eq. Cas. 91. See Joint Stock Discount Co. v. Brown, L. R. 8 Eq. Cas. 381. 2 Sumner v. Marcy, 3 Wood. & M. 105; New Orleans, F., & H. Steamship Co. v. Ocean Dry Dock Co., 28 La. An. 173; Central R. Co. v. Collins, 40 Ga. 582; Hazlehurst v. Savannah, G., & N. A. R. Co., 43 Ga. 13; Mutual Savings Bank & B. Assoc. v. Meriden Agency Co., 24 Conn. 159; Franklin Co. v. Lewiston Savings Bank, 68 Me. 43. Corporations have been authorized by statutes to make such investments. Zabriskie v. Cleveland, C., & C. R. Co., 23 How. 381; Baltimore v. Balt. & O. R. Co., 21 Md. 50; White v. Syracuse & U. R. Co., 14 Barb. 559. 3 Overmyer v. Williams, 15 Ohio 26; State v. Newark, 1 Dutcher, 315; Taber v. Cincinnati, L., & C. R. Co., 15 Ind. 459; Waldo v. Chicago, St. P., & F. R. Co., 14 Wis. 575; Blunt v. Walker, 11 Wis. 334; Pacific R. Co. v. Seely, 45 Mo. 212; Norwich v. Norfolk R. Co., 4 El. & B. 397; Eastern Counties R. Co. v. Hawkes, 5 H. L. Cas. 331. 4 Eldridge v. Smith, 34 Vt. 484; Rensselaer & S. R. Co. v. Davis, 43 N. Y. 137; Black v. Del. & R. Canal Co., 7 C. E. Green, 130, 410, 9 C. E. Green, 455; Plymouth R. Co. v. Colwell, 39 Pa. St. 337. See Spear v. Crawford, 14 Wend. 20. It has been suggested that the company may supply a chapel and theatre for the benefit of its workmen. East Anglian R. Co. v. Eastern Counties R. Co., 11 C. B. 775, 793; Norwich v. Norfolk R. Co., 4 El. & Bl. 397, 415. 25. 5 Old Colony R. Co. v. Evans, 6 Gray, 6 Nicoll v. New York & E. R. Co., 12 N. Y. 121, 12 Barb. 460; Boston & A. R. Co. v. Greenbush, 5 Lans. 461, 52 N. Y. 510; Yates v. Van De Bogert, 56 N. Y. 526; ante, Chap. VI. p. 130. |