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rights by the pledge received from Foote, to such interest in the bank as said certificate of stock represented is quite true. But what that interest is, if any, we cannot in the present case determine.

Judgment affirmed.

RAILROAD COMPANY V. MARSEILLES.*

SUPREME COURT OF ILLINOIS, 1876.

(84 III. 145, 643.)

Power of a Corporation to purchase and hold its own Stock.

Per Curriam:- The rule is familiar, and is not contested, that such bodies can only exercise such powers as may be conferred by the legislative body creating them, either in express terms or by necessary implication; and the implied powers are presumed to exist to enable such bodies to carry out the express powers granted and to accomplish the purpose of their creation. Such being the rule, the question arises whether this corporate body might make such a purchase, or is it outside of, and beyond the limit of its power?

Appellant has referred us to a number of cases in our own court, in which it has been held that such organizations have no power to release subscribers for their stock from paying therefore and from their subscriptions; that, when such subscriptions are intended to be fictitious, or the subscribers are released from payment, it operates as a wrong, if not a fraud, on the other subscribers for stock in the same company. But here, the stock had been subscribed, paid for, and certificates therof issued to, and they were owned and held by, the village at the time this contract was entered into and executed. So, the question is not, whether appellant may release the village from paying for and receiving shares subscribed for, but whether appellant has power to purchase shares of its own stock, paid for, issued to, and held by the village.

In the case of Taylor v. Miami Exportation Co., 6 Ohio, (Hammond) 83, it was held that a banking corporation might lawfully receive shares of its own stock from a solvent debtor in

*See Clapp v. Peterson, 104 Ill. 26. (1882.) Trevor v. Whitworth, L. R. 12 App.Cases 409. (1887.)

discharge of his indebtedness. The court went further, and held that, where a large number of shares had been issued to enable the holder to vote for certain persons for directors at an approaching election, and, after the holder had thus voted, the money paid for the shares was returned to him, and he restored the shares to the bank, as there was no loss sustained by the transaction, and the result of the election was not changed, and whilst the court condemned the transaction, it held that equity could afford no relief, as no one had been injured. It was also held in that case that, where the shares of the company were transferred to it in payment of such indebtedness, the corporation might hold and sell it as it did its other property.

In the case of the City Bank of Columbus v. Bruce, 17 N. Y. 507, it appeared that the board of directors passed a resolution that all stockholders indebted to the bank on stock notes, by a specified day, might pay such debts to the bank in its shares of stock, at a named per cent, and that not far from half of the stock of the bank was thus surrendered; aud the court held, there was no ground for questioning the validity of the transaction; that no rule of common law or any provision of the charter forbade it; and the Ohio case is referred to and approved by the court.

In the case of Williams v. The Savage Manufacturing Co., 3 Md. Ch. R. 452, it was held that banking corporations had the right to take shares of their own stock in pledge or payment of indebtedness to the corporation, and to reissue the same. On the latter proposition Ex parte Holmes, 5 Cow., 426 is referred to by the court in its support.

In the case of The State v. Smith, 48 Vt. R. 266, it was held, that where a railroad company had purchased 2,350 shares of the stock of the company, the stock did not merge, and the legality of the purchase seems to be recognized by the court. And in further support of the rule see Angell & Ames on Corp. § 280, where it is said it is one of the corporate powers that may be legally exercised.

If, then, as in the cases above referred to, a bank may purchase and hold its own shares, no reason is perceived why a railroad corporation may not do the same thing, and the case of the State v. Smith (supra) was the purchase of stock by a railroad company, and of shares of its own stock. These authorities, we think, fully recognize the power of the directors of a company, when not prohibited by their charter, to purchase shares of stock of their company. It falls within the scope of the power of the directors to manage and control the affairs and property of the company for the best interests of the stockholders, and when they have thus acted, we will presume, until the contrary

is shown, that the purchase was for legitimate and authorized purposes.

If it were shown that the purchase was made to promote the interests of the officers of the company alone, and not the stockholders generally, or if for the benefit of a portion of the stockholders and not all, or for the injury of all or only a portion of them, or if it operated to the injury of creditors, or would defeat the end for which the body was created, or if it was done for any other fraudulent purpose, then chancery could interfere. In such case, Melvin v. The Lamar Ins., Co., 80 Ill. 446, and other cases in chancery referred to in appellant's brief, would apply, but the defence cannot be made a law. The case of Belford Railroad Co. v. Bower, 48 Pa. St. R. 29 was in a court were there is no distinction between actions at law and suits in equity, and we presume the defence was allowed by the application of equitable principles, and the cases in the British courts which seem to bear on the question were in equity. Whatever may be the rights of stockholders or creditors, if there are any, relief can only be had in equity, aud by a stockholder or other cestui que trust. The judgment of the court below will, therefore be affirmed. Judgment affirmed.

COPPIN V. GREENLESS COMPANY.

SUPREME COURT OF OHIO, 1882.

(38 Ohio St. 275.)

Power of a Corporation to Purchase and Hold its Own Shares.

McIlvaine J.:-Whether the defendant corporation was bound by its executory agreement with the plaintiff to purchase shares of its own stock, under the circumstances detailed in the petition, was, undoubtedly, the question upon which the case turned in the district court.

The power of a trading corporation to traffic in its own stock, where no authority to do so is conferred upon it by the terms of its charter, has been a subject of much discussion in the courts; and the conclusions reached by different courts have been conflicting. Of course, cases wherein the power is found to exist by express or implied grant in the charter, furnish no aid in the solution of the question before us; unless the claim of the plaintiff

can be sustained, that such power was conferred on the defendant by section 63 of the corporation act of 1852 (S. & C. 301), as amended, which confers on manufacturing corporations the powers enumerated in section 3 of the act, and among others, the power "to acquire and convey at pleasure, all such real and personal estate as may be necessary or convenient to carry into effect the objects of the corporation." We think, however, that this claim cannot be maintained. The sole object of the defendant organization was "for manufacturing purposes;" and it cannot be said in any just sense, that the power to acquire or convey its own stock was either necessary or convenient "for manufacturing purposes."

The doctrine that corporations, when not prohibited by their charters may buy and sell their own stocks, is supported by a line of authorities; and prominent among them may be mentioned the cases of Dupee v. Boston Water Power Co., 114 Mass. 37 and C. P. and S. R. R. v. Co. Marseilles, 84 Ill. 145. But nevertheless, we think the decided weight of authority both in England and in the United States, is against the existence of the power unless conferred by express grant or clear implication. The foundation principle upon which these later cases rest is that a corporation possesses no powers except such as are conferred upon it by its charter, either by express grant or necessary implication; and this principle has been frequently declared by the Supreme Court of this State; and by no court more emphatically than by this court. It is true, however, that in most jurisdictions, where the right of a corporation to traffic in its own stock has been denied, an exception to the rule has been admitted to exist, whereby a corporation has been allowed to take its own stock in satisfaction of a debt due to it. This exception is supposed to rest on a necessity, which arises in order to avoid loss; and was recognized in this State as early as Taylor v. Miami Exporting Co., 6 Ohio, 176, and has been incidentally referred to as an existing right since the adoption of our present constitution. State v. Building Association, 35 Ohio St. 258.

But, however, that may be, the right of a corporation to traffic in its own stock, at pleasure, appears to us to be inconsistent with the principle of the provisions of the present constitution, article 13, section 3, which reads as follows: "Dues from corporations shall be secured by such individual liability of stockholders, and other means, as may be prescribed by law; but in all cases, each stockholder shall be liable, over and above the stock by him or her owned, and any amount unpaid thereon, to a further sum, at least equal in amount to such stock." Now, it is just as plain, that a business or trading corporation cannot exist

without stock and stockholders, as it is that the creditors of such corporations are entitled to the security named in the constitution. State ex-rel. Att'y-Gen. v. Sherman 22 Ohio St. 411. The corporation its elf cannot be a stockholder of its own stock within the meaning of this provision of the constitution. Nobody will deny this proposition. And if a corporation can buy one share of its stock at pleasure, why may it not buy every share? If the right of a corporation to purchase its own stock at pleasure exists and is unlimited, where is the provision intended for the benefit of creditors? This is not the security to which the constitution invites the creditors of corporations. I am aware, that the amount of stock required to be issued is not fixed by the constitution or by statute, and also that provision is made by statute for the reduction of the capital stock of corporations; but of these matters, creditors are bound to take notice. They have a right, however to assume that stock once issued, and not called back in the manner provided by law, remains outstanding in the hands of stockholders liable to respond to creditors to the extend of the individual liability prescribed. In this view it matters not whether the stock purchased by the coporation that issued it, becomes extinct, or is held subjeet to be reissued. It is enough to know that the corporation, as purchaser of its own stock does not afford to creditors the security intended. And surely, if the law forbids the organization of a corporation without stock, because the required security is not furnished, it cannot be, that having brought the corporation into existence, it invests it with power to assume, at pleasure, the identical character or relation to the public, that was an insurmountable objection to the giving of corporate existence in the first place.

Plaintiff in error lays much stress on the averments in the petition, that it had been the custom of the corporation that its officers and others actively engaged in its service, should be holders of shares of its stock, and upon ceasing to be connected with the company such persons had been accustomed to sell, and the company to buy such stock; and that the plaintiff had purchased the stock for the price of which suit was brought while in the employment of defendant.

We cannot see why these averments should take the case out of the general rule.

If it were averred that the plaintiff had purchased this stock from the defendant, or from others, under an agreement with the company that it would buy the same from him when he quit its employment or if the contract of purchase by the defendant had been executed, very different questions would arise.

It is not even averred, that the plaintiff relied upon such custom either in making the purchase or the sale of the stock; so that, in

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