transportation company as well as a mining and manufacturing company.

(3) The power to consolidate with any railroad company, chartered or to be chartered, is expressly conferred.

(4) In case of such consolidation the companies were to exercise the powers of both, and act in the name of either, or in an agreed name. The power did not stop here. There might be a temporary consolidation" with a railroad company.

*

66

There is nothing in this charter to indicate that only a technical consolidation was authorized. On the contrary, the power to make a "temporary consolidation," looking to all the four corners of this charter, clearly implies the power to make such an alliance or bring about such a union and co-operation of interests between the land company and the railway company as shall be to the mutual interest. of each, and place both under the same control and management. This could be done by the plan suggested by Mr. Morawetz in section 942, whereby the shares of one company should be held by the other, or by the same persons. This meaning seems reasonable and proper, looking to the objects and purposes of this corporation, and any steps which brought about unity of interest and co-operation in purpose as being legitimate and authorized. Under the power we are of opinion that the Kentucky Union Land Company had the power to acquire the shares in the railway company, and the right to exercise control over the railway company through the ownership and control of those shares.

* * *

Having authority to acquire this stock the land company became the sole stockholder in the railway company. Each had express authority to borrow money and issue bonds to carry out the purposes of the organization. The completion of this railway was an object within the scope of the charter powers. It could do so by its own name, or by aiding the railway company to negotiate its securities by guarantying their payment. The guaranty was not for the accommodation of the railway company. The grantor being the sole shareholder of the railway company, it was a contract for its own benefit, and therefore rested upon a sufficient security. In addition, the land company was a creditor of the railway company, and was to, and did receive the proceeds arising from sale of one-half million of these bonds. The remainder of the money thus raised was to be applied to the building of the railway line. The consideration was sufficient to fully support the contract.

One railway company, under authority of law, leased the line of another for a term of years. The consideration of the lease was an annual rental, and that the lessee company should guaranty the principal and interest of bonds to be issued by the lessor company. The contract of guaranty was challenged as ultra vires. The lessee company had no express authority to make such contract of guaranty, but did have power to make all such contracts as were usual and proper in the building and operation of the railway, and it likewise had power to lease the line of the lessor company. It was held that the consideration was sufficient and the guaranty valid. The court was of opinion that it was as competent for the company to promise to pay conditionally as to promise to pay absolutely; that the validity of the agreement depended upon the sufficiency of the consideration. The right to take the lease being express, it was a good consideration for the conditional promise involved by a contract guaranty. Low v. Railroad Co., 52 Cal. 53. See, also, Smead v. Railroad Co., 11 Ind. 104, and Zabriskie v. Railroad Co., 23 How. 381, where a general authority to aid a connecting railroad company was held sufficient to authorize the guarantying of the bonds of such road. Also, Mor. Priv. Corp., § 423. * * *

Guaranties held valid.

In accord, Green Bay Co. v. Union Co., 107 U. S. 98; Low v. California Co., 52 Cal. 53.

Ordinarily, a corporation may not enter into a contract as surety or guarantor. To do so risks the funds in a different enterprise and business under the control of another or different person or corporation. Colman v. Eastern Co., 10 Beav. 1; Lucas v. White Line Co., 70 Iowa 541; Davis v. Old Colony Co., 131 Mass. 258; Best Brewing Co. v. Klassen, 185 Ill. 37; Winterfield v. Cream City Co., 96 Wis. 239; Humboldt Co. v. American Co., 62 Fed. Rep. 356.

Such power exists, of course, in the cases of companies created for the express purpose of entering into such a business.

It also exists in cases where it is necessary to accomplish the objects for which they are created (see principal case).— ED.

VI. The Power to Act as Trustee, etc.

The old rule that corporations could not act as trustees, and in representative capacity generally, because having no soul, they had no conscience and were not amenable to the mandates of a court of equity has long been exploded, and it is now settled beyond dispute that public, quasi-public and even business corporations have the power to hold real and personal property in trust for any purpose

not foreign to the purposes of the creation, and that courts of equity will enforce these trusts. Jones v. Habersham, 101 U. S. 184; Farmers L. & T. Co. v. Harmony etc. Co., 41′ N. Y. 619; Vidal v. Girard's Executors, 2 Howard (43 U. S.) 126.

Exceptions arise, however, where corporations are expressly prohibited from taking by devise or otherwise. Trust Co. v. Lee, 73 Ill. 142.

Administrator or executor, Ledwith v. Ledwith, 1 Denio (N. Y.) 154; Fidelity Ins. Co. v. Niven, 5 Houston (Del.) 416.

As committee for non-competent, Camden Safe Co. v. Ingham, 40 N. J. Eq. 3.

As attorney or agent, Killingsworth v. Portland Tr. Co., 18 Ore

gon 351.

VII. Power to Enter Into a Partnership.

MALLORY V. HANAUR OIL WORKS.

86 Tennessee Reports 598 (1888)

Appeal in error from Circuit Court of Shelby county. The facts are stated in the opinion.

LURTON, J.: This is an action of unlawful detainer, brought by the Hanaur Oil Works, a corporation created under the General Incorporation Act of 1875, and engaged in the manufacture of cotton seed oil at Memphis, Tenn.

The facts which raise the question to be determined are these: In July, 1884, a contract was entered into by and between four corporations engaged in manufacturing cotton seed oil at Memphis for the formation of what is designated in the agreement as a "combination syndicate" and "partnership." The contracting mills agreed to select a committee, composed of representatives from each corporation and to turn over to this committee the properties and machinery of each mill, to be managed and operated by this committee, through officers, agents, and employes selected by them, for the common benefit, the profits and losses of such operations to be shared in proportions agreed upon. This arrangement was to last one year, but with consent of all, might be renewed for two additional years, and, as appears, was at end of first year renewed for two other years, terminating August 1, 1887.

The facts clearly establish that the possession of the several mills was turned over to this executive committee, and they were operated by these managers thenceforward under the name of the

"Independent Cotton Seed Association." There was a provision in the contract by which other mills were to be admitted by consent, and a fifth corporation was in fact subsequently admitted. The Hanaur Oil Works was one of these contracting corporations, the contract being authorized by both shareholders and directors. In July, 1886, the business of the second year having been about concluded, the board of directors of the Hanaur Oil Works passed a resolution declaring this contract void, as being an agreement ultra vires, and their president was instructed to take possession of their mill.

It is, however, argued by the learned counsel for appellants, that if it be a partnership, that it does not therefore follow that it is ultra vires; that such a contract, not being prohibited by law or the charter of the defendant in error, or against public policy, is not void even if in excess of power expressly conferred; that the business proposed by the contract, being within the purposes of the charter, is therefore within the implied powers of the corporation, and not ultra vires. In other words, "that the question is not whether the corporation had, by virtue of the act of incorporation, authority to make the contract, but whether they are by those statutes forbidden to do it." In this doctrine we do not concur. There is, however, respectable authority for the position. A corporation being an artificial creation, is the very thing it is made by the statute which brings it into being, and nothing more. The extent of its powers are those enumerated in its charter, or implied by fair and natural construction of powers expressly conferred.

The charter is the measure of its powers, and the enumeration thereof implies the exclusion of all others. We are not to look to the charter to see whether the thing done be prohibited, but whether there is authority to do it. These principles we understand to have the support of the great weight of authority in this country, and to have the sanction of the Supreme Court of the United States. Thomas v. Railroad Company, 101 U. S. 71.

This view of the law has been the one entertained by this court, and clearly and distinctly enforced in an opinion by the present chief justice in the case of Elevator Company v. Memphis & Charleston Railroad Company, 1 Pick. 703. The power to enter into a partnership is not expressly or impliedly conferred by our Act of 1875, under which the Hanaur Oil Works is incorporated. Neither is such authority within the implied powers of corporations. A partnership and a corporation are incongruous. Such a contract is wholly inconsistent with the scope and tenor of the powers

expresssly conferred and the duties expressly enjoined upon a corporation, whether it be a strictly business and private corporation or one owing duties to the public, such as a common carrier. In a partnership each member binds the firm when acting within the scope of the business. A corporation must act through its directors or authorized agents, and no individual member can, as such member, bind the corporation.

Now, if a corporation be a member of a partnership, it may be bound by any other member of the association, and in so doing he would act not as an officer or agent of the corporation, and by virtue of authority received from it, but as a principal in an association in which all are equal, and each capable of binding the society by his acts. The whole policy of the law creating and regulating corporations, looks to the exclusive management of the affairs of each corporation by the officers provided for or authorized by its charter. This management must be separate and exclusive, and any arrangement by which the control of the affairs of the corporation should be taken from its stockholders and the authorized officers and agents of the corporation would be hostile to the policy of our general incorporation acts. The decided weight of authority is that a corporation has not the power to enter a partnership, either with other corporations or with individuals. Says Mr. Morawetz: "It seems clear that corporations are not impliedly authorized to enter into partnership with other corporations or individuals. The existence of a partnership not only would interfere with the management of the corporation by its regularly appointed officers, but would impair the authority of the share holders themselves, and involve the company in new responsibilities through agents over whom it had no control." I Morawetz on Corporations, sec. 421; Whittenton Mills v. Upton, 10 Gray 582 (S. C., 71 Am. Dec. 681); Angell & Ames on Corporations, sec. 272.

It is unnecessary to consider this contract as constituting a mere traffic arrangement; for the conclusion already announced that it was an effort to form a partnership, determines that in its scope and effect it sought to accomplish much more than would be understood by the phrase " traffic arrangement."

The next assignment is that this contract, if ultra vires at all, was so only as to the power of the officers, and not as to the power of the corporation; that the thing to be done, being within the purposes and scope of the franchises of the corporation, and the contract being ratified by the shareholders, became valid and binding. There may be acts ultra vires as to the officers, and yet not so as to shareholders. But the contract here entered into we have