Farmers' Bk. of Ky. v. Ohio River Line Steamboat Co. v. Barret et als. Same boat company. Exceptions were taken to this judgment both by plaintiffs and defendants, and both have appeal ed to this court. The facts out of which this controversy arose, as shown by the bill of exceptions, are as follows: Perkins testifies that he built the steamboat Royal in 1892, and was the sole owner thereof; that subsequently, in 1893, he and J. B. Thompson built the steamboat Jewell in partnership, he being the owner of two-thirds, and Thompson of onethird; that the whole sum of the note for $23,100 was for money borrowed and used by him in the construction of the two boats, except $6,250, which was borrowed by him for another purpose upon his individual credit; that the whole of the $4,900 note was borrowed for the use of the steamboat company after its organization; that at the time the money was borrowed from the bank for the construction of the boats the bank knew for what purpose it was being obtained, and looked to the boats, through him, for the repayment thereof; that the steamboat company was organized on the 2d day of December, 1893, with a capital stock of $50,000, but that no money was paid therefor by the stockholders; that the two steamboats, by agreement between himself and Thompson, were turned over to the company in payment of the entire stock, and constituted its sole assets; that certificates were issued to himself and wife for 799 shares, to Thompson for 200 shares, and Vance for one share; that it was understood and agreed by the stockholders at the time of the organization of the company that the indebtedness which had been incurred by him to the bank should be assumed as an indebtedness of the steamboat company, and be paid by it, as this indebtedness was, in the Farmers' Bk. of Ky. v. Ohio River Line Steamboat Co. Same v. Barret et als. main, created to raise money with which to construct the boats. Mr. Starling, the cashier of the bank, testifies that the several notes which were consolidated into the note for $23,100 were given by Perkins for the construction and running expenses of his two boats, Jewell and Royal, and that it was his understanding that these two notes were bound for the payment of the money so furnished; that the old notes were given up on the 4th day of February, 1895, and the note for $23,100 executed in lieu thereof, in accordance with this agreement; that previous to this date Perkins had been trying to sell the Royal in order to take up this note; that the note for $23,100 included one for $1,200 borrowed on the 29th day of December, 1893, and also an item of $2,700, which was loaned direct to the steamboat company on the same date; and that on the day this note was executed the steamboat company borrowed an additional sum of $4,900, and executed mortgages to secure both notes, the mortgage being signed by Perkins, as president, and Thompson, as secretary, of the company, and the notes in the name of the company, with Perkins and Thompson as securities; that on the 12th day of July, 1895, insurance was taken out on both boats, and the policies made payable to the bank, it having furnished the money with which to pay the premium. The interest of R. D. Vance in the company was only a nominal one, as he only held one share of stock, which was given to him for his services in writing out the articles of incorporation, and he himself testifies that he abandoned all claim to this share soon after the organi zation of the company. It seems to us, from the testimony, the attendant facts which surrounded the organization of the steamboat com Farmers' Bk. of Ky. v. Ohio River Line Steamboat Co. Same v. Barret et als. pany, and the transfer to it of the boats without any money being paid therefor, it is impossible to escape the conclusion that it was a part of the scheme that the new organization should assume the payment of the outstanding liabilities of Perkins to the bank, which had, in the main, been created to construct these very boats. Perkins at that time had very little estate, outside of his interest in the boats and the business in which they were engaged. Both were clearly liable to the bank for the amount of its claims against him, and they were practically the only security it had for the large sums of money which had been advanced to Perkins; and it had the right to demand that this security should be preserved in the transfer to the new company, which had no money, and paid nothing for the boats. The execution of the notes and mortgage by Thompson furnishes very satisfactory evidence that his understanding of the conditions on which the company acquired this property from Perkins was identical with that testified to by Perkins and Starling; and the first question to be determined, therefore, is, did the steamboat company have the right to acquire the interest of Perkins in the boats, subject to the condition that it should assume payment of certain definite and specific indebtedness due and owing by him at the time to the bank, and could it execute the mortgage on the boats to secure the payment of such indebtedness? The common-law powers of private trading corporations of this character are ordinarily the same as those possessed by individuals, and may be employed in the same manner, and, unless restricted by their charters or some positive or clearly implied prohibition of law, Farmers' Bk. of Ky. v. Ohio River Line Steamboat Co. Same v. Barret et als. have the power to mortgage their property to secure the payment of borrowed money or debts necessarily contracted in the course of their business to enable them to carry on the purposes of the corporation. . The assumption by the steamboat company of the indebtedness of Perkins, who owned three-fourths of its capital stock, to the bank, was in effect a borrowing of that much money from the bank to enable it to consummate the purpose of its creation, which was to acquire and operate the boats in question. And the fact that the bank continued to furnish the new organization the necessary funds to enable it to discharge its outstanding obligations to others and to pay its operating expenses is certainly very strong evidence of the existence of the alleged agreement. We think the assumption of this indebtedness was within the powers of the new corporation, especially when it was done with the knowledge and approval of all of its stockholders It is a well-recognized rule in courts of equity that the doctrine of ultra vires should not be allowed to prevail where it would defeat the ends of justice or work a legal wrong, and certainly it should not be invoked in a case of this sort to defeat the effect of an agreement which is clearly within the scope of the powers of a corporation of this character. It therefore follows that the notes executed to the bank by the steamboat company and the mortgage made to secure them, are valid and enforceable obligations in the hands of the bank, and should have been so adjudged. The judgment is also erroneous on another ground. Appellees are not creditors of the corporation. They only stand, with respect to it, in the attitude of stockholders; Neff v. Covington Stone and Sand Co. (two cases). Holmes, et als., v. Same. Morton, et als., v. Same. Wallace, et als., v. Same. and as such they were privies to the litigation in which the bank obtained a judgment for the balance due on their debt against the steamboat company, which is binding upon them until reversed, modified, or set aside in a direct action instituted for that purpose. See Freem. Judgm. sec. 177; Black. Judgm., sec. 583; Van Fleet, Former Adj., p. 995; Thomp. Corp., secs. 3392, 3393; Beach, Priv. Corp., sec. 726; Mor. Priv. Corp., 865; Herm. Estop., p. 164. A number of other errors are suggested, but, in view of the conclusions which we have reached on the points discussed, it will be unnecessary to consider them. For the reasons indicated, the judgment is reversed, with instructions to the lower court to enter a judgment dismissing the petition. CASE 61-ACTION TO ENFORCE LIEN FOR STREET IMPROVEMENT MARCH 10, MAY 10 AND MAY 11. Neff v. Covington Stone & Sand Co. (two cases). Holmes & Others v. Same. Morton & Others v. Same. Wallace & Others v. Same. 108 457 Case 1 d130 674 130 675 APPEAL FROM KENTON CIRCUIT COURT. ACTION BY COVINGTON STONE & SAND CO. AGAINST MARY NEFF, ET JUDGMENT FOR PLAINTIFF AND DEFENDANTS APPEAL. AFFIRMED. CORPORATIONS-CONTRACTS STREET ASSESSMENTS--DISCRETION OF TRUSTEES OF TOWN RECORDS-JUDGMENT-SUFFICIENCY IN DE- Held: 1. A corporation may contract by a name other than its corporate name, provided it is apparent that it is the contracting party. |