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the property it was by a purchase; if it could purchase, the bondholders could sell, and the mortgage was the consideration of the purchase and sale.
Here the mortgage was executed to enable the corpo| ration to resume the exercise of its charter powers and fulfill the purposes for which it was originally created. No precedent has been found denying to a corporation the power to execute a mortgage of every thing it acquires by a purchase, when the mortgage is a condition of making a purchase; and there seems to be no reason in a case like the present for denying the power when the purchase of the mortgagor includes the franchise and the whole property of the corporation.
Section 9 of the charter is not a restriction upon the implied power of the corporation to incur such obligations as are necessary to enable it to carry on its business. It is a provision which would seem to be intended to enlarge rather than to restrict the power of the corporation in this regard. Its purpose is to authorize an increase of capital to an extent commensurate with the necessities of the corporation in any of the modes usually adopted by corporations for raising money-a provision which was necessary in view of section 4 of the charter, which limited the amount of increase. As a corporation has no implied authority to alter the amount of its capital stock when the charter has definitely prescribed the limit, this permission was necessary. The purchase of property by the corporation for cash or on credit is not an increase of its capital.
There is another ground however upon which the decision of the case may rest more satisfactorily. Assuming that the complainant transcended its charter powers in creating the mortgage bonds in question, it cannot be permitted to retain the benefits of its purchase and at the same time repudiate its liability for the purchase price. The rule is thus stated by a recent commentator:
The primary questions then are: First, whether upon the purchase of property, the corporation could mortgage what it acquired, to secure the purchasemoney; and second, whether section 9 of the charter has any application to such a transaction. It is to be observed that the complainant does not question its own power to acquire the money conveyed to it. It cannot do this while it holds on to the property and seeks to remove the lien of the mortgage. If it could legitimately purchase, why could it not, like an indiIvidual purchaser, mortgage to secure the price? A corporation, in order to attain its legitimate objects, may deal precisely as can an individual who seeks to accomplish the same ends, unless it is prohibited by law to incur obligations as a borrower of money. Corporations having the power to borrow money may mortgage their property as security. Although it was at one time a question whether express legislative consent was not required in order to authorize a mortgage of any corporate property, as for example in Steiner's Appeal, 27 Penn. St. 313, yet the rule now is that a general right to borrow money implies the power to mortgage all corporate property except franchises, unless restrained by express prohibition in the act of incorporation or by some general statute." Green's Brice's Ultra Vires (2d ed.), 223, 224.
In the late case of Philadelphia & R. R. Co. v. Stickler, 21 Am. Law Reg. 713, the Supreme Court of Pennsylvania considered the question, and Paxson, J., delivering the opinion of the court, said:
* * *
"So far as the mere borrowing of money is concerned it is not necessary to look into the charter of the company for a grant of express powers. It exists by necessary implication. The reason is plain. Such corporations are organized for the purposes of trade and business, and the borrowing of money and issuing obligations therefor are not only germane to the objects of their organization, but necessary to carry such objects into effect."
In Platt v. Union Pacific R. Co., 99 U. S. 48-56, Mr. Justice Strong, speaking for the court, says:
"The law founded on public policy requires that a contract made by a corporation in excess of its chartered powers be voidable by either party while a rescission can be effected without injustice. But after a contract of this character has been formed by either of the parties the requirements of public policy can best be satisfied by compelling the other party to make compensation for a failure to perform on his side." Morawitz Corp., § 100.
"Railroad corporations are not usually empowered to hold lands other than those needed for roadways and stations or water privileges. But when they are authorized to acquire and hold lands separate from their roads the authority must include the ordinary incidents of ownership-the right to sell or to mortgage."
It is to be observed that in the present case there is no express statutory or charter prohibition upon the corporation to purchase the property or mortgage it for the purchase money. At most its acts were ultra vires, because outside the restricted permission of the charter. It is not necessary therefore to consider the distinction made by some of the adjudications between the two classes of cases. Hitchcock v. Galveston, 96 U. S. 341. The decided weight of modern au
The right of mortgaging follows as a necessary inci
dent to the right of managing the business of a corpo-thority favors the conclusion that neither party to a
transaction ultra vires will be permitted to allege its
The court, speaking through Mr. Justice Swayne, cite with approval Sedg. St. & Coust. Law, 73, in which the author states that the party who has had the bene
fit of the agreement will not be permitted to question its validity when the question is one of power conferred by a charter.
Another class of cases is where the corporation itself attempts to set up its own want of power, in order to defeat an agreement or transaction which is an executed one as to the other party, and from which the corporation has derived all that it was entitled to. Such cases were Parish v. Wheeler, 22 N. Y. 494; Bissell v. M. S. & N. I R. Co., id. 258; Hays v. Galion Gas Co., 29 Ohio St. 330-340; Attleborough Bank v. Rogers, 125 Mass. 339; McCluer v. Manchester R. Co., 13 Gray, 124; Bradley v. Ballard, 55 Ill. 418; Rutland & B. R. Co. v. Proctor, 29 Vt. 93. In the first of these cases the court say:
"It is now very well settled that a corporation cannot avail itself of the defense of ultra vires when the contract has been in good faith fully performed by the other party, and the corporation has had the full benefit of the performance and of the contract. If an action cannot be brought directly upon the agreement, either equity will grant relief, or an action in some other form will prevail."
The present case is phenomenal in the audacity of the attempt to induce a court of equity to assist a corporation in repudiating its obligations to its creditors without offering to return the property it acquired by its unauthorized contract with them. The fundamental maxim is that he who seeks equity must do equity. Every stockholder of the corporation when he acquired his stock took it with notice explicitly embodied in his certificate that his interest as a stockholder was subordinate to the rights of the holders of the mortgage bonds. It is now contended that if there is any obligation on the part of the corporation to pay for the property it purchased, it is not to pay what it agreed to, but to pay a less consideration, because the property was not worth the price agreed to be paid. The court will not compel the bondholders to enter upon any such inquiry. They are entitled to set their own value on their own property. When the complainant offers to reconvey the property in consideration of which it created its mortgage bonds it will have taken the first step toward reaching a position which may entitle it to be heard.
William Bernshouse bought of one Joseph E. P. Abbott two car-loads of cedar siding. The lumber was delivered to Bernhouse according to contract, accompanied by bills for the price of the same, in the uame of said Joseph E. P. Abbott. Bernshouse was the holder for value of three promissory notes of said Joseph E. P. Abbott, amounting to about the price of the lumber, and tendered them in payment of Abbott's bill. Joseph E. P. Abbott then wrote to Bernshouse, stating that in disposing of the lumber he had acted as the agent of another person. This suit was brought against Bernshouse for the price of the lumber. The plaintiff is John C. Abbott, the father of Joseph E. P. Abbott. The declaration consists of the common counts, with bill of particulars. The defendant, Bernshouse, pleaded the general issue, and a special plea of set-off of the debt of the agent to the demand of the plaintiff, to which the plaintiff replied by traversing the matters of fact, and on the issues so joined the parties went to trial. At the trial the court overruled a motion to nonsuit, and at the conclusion of the case ordered a verdict for the plaintiff without permitting the case to go to the jury.
The matters assigned for error arose both upon the motion for nonsuit and the charge of the court.
DEPUE, J. The transaction was a sale of personal property by an agent who had authority to sell, and who sold in his own name without disclosing his agency to a purchaser who bought in good faith, believing that the agent was the owner; and the inquiry is, under what circumstances such a purchaser, in an action by the principal for the contract price, is entitled to set-off a debt due him from the agent.
The son, when he negotiated the sale, had neither the possession of the property nor any muniment of title to it in himself. He sold it in his own name, without any authority from his father to sell it in that way.
The two leading cases on the subject of the right of a purchaser of personal property to set-off a debt due to him from the agent through whom the sale was made, where an action has been brought by the principal to recover the contract price are Rathbone v. Williams, reported in a note to George v. Claggitt, 7 T. R. 359, and Baring v. Corrie, 2 B. & Ald. 137. In Rathbone v. Williams the action was for the value of goods sold. The sale was made through Rathbone, Sr., & Co., who were the plaintiff's factors, and had sold the goods in their own names as principals, without disclosing their agency. The purchaser, in an action by the principal for the contract price, was allowed to set off a debt due to to him from the factors. In Baring v. Corrie the sale was made by a broker, who did not disclose his principal; and the purchaser, in an action for goods sold, brought by the principal, was not allowed to set off a debt he had against the broker.
The distinction between these two cases is explained by Abbott, C. J., in his opinion in Buring v. Corrie. He says: "The distinction between a broker and a factor is not merely nominal, for they differ in many important particulars. A factor is a person to whom goods are consigned for sale, * * * and he usually sells in his own name, without disclosing that of his principal. The latter therefore with a full knowledge of these circumstances, trusts him with the actual possession of the goods andgives him authority to sell in his own name. But the broker is in a different situation. He is not trusted with the possession of the goods, and he ought not to sell in his own name. The principal therefore who trusts a broker has a right to expect that he will not sell in his own name." And referring to the cases cited in which the set-off had been allowed, including Rathbone v. Williams, the chief justice said that "in all the cases cited the factor was in actual possession of the goods, and the pur
chaser could not know whether they belonged to him or not, and at all events they knew that he had a right to sell the goods." In Baring v. Corrie, where the claim of set-off was disallowed, the property sold was not in the possession of the broker who negotiated the sale. It was lying in the West India docks, from which it could not be obtained without a delivery order countersigned by the plaintiff's custom house I clerk; and, as was said by Bailey, J., "the plaintiffs did not trust the broker with either the muniments of their title or the possession of the goods, as was done both in the case of Rathbone v. Williams and that of George v. Claggitt."
The language of Abbott, C. J., and Bailey, J., quoted I from Baring v. Corrie, is quoted with approval by 1 Cresswell, J., in Fish v. Kempton, 7 C. B. 687, 693. And the distinction between a factor having the possession of the goods with power to sell, under the usages of trade, and a broker or other agent who has not such possession, has been adopted as settled law in cases where the right to set off has arisen-the right to ta set-off being recognized only where the sale was made by a factor. Carr v. Hinchliff, 4 B. & C. 547; Purchell v. Salter, 1 Q. B. 197; Semenza v. Brinsley, 18 C. B. (N. S.) 467, 477, per Willes, J.; Ex parte Dixon, 4 Ch. Div. 133; 19 Eng. R. 734; Borries v. Imperial | Bank, L. R., 9 C. P. 38; 7 Eng. R. 138; Hogan v. Shorb, 24 Wend. 458, 462; 2 Kent, 633.
Ramozetti v. Bowring, 7 C. B. (N. S.) 851, is also an important case in this line of decision. The action was brought for a bill of wine sold and delivered to the defendants. The plaintiff carried on the business of a I wine merchant, under the name of the Continental Wine Company. The business was conducted by one Nixon, the plaintiff's son-in-law. Nixon, representing himself to be the proprietor of the Continental Wine Company, induced the defendants to take the goods in question in part satisfaction of his debt to them. The I defendants contended that the goods having been sold by Nixon, the agent, without disclosing his principal, the contract could not be enforced by the latter, discharged of the defendants' right of set-off. The common serjeant left it to the jury to say whether the plaintiff or Nixon was the real owner of the business, Itelling them to find for the defendants if they were of jopinion that Nixon was the owner; but if they thought the plaintiff was owner they must find for him. The court in banc held this to be a misdirection, and that the proper question was whether the plaintiffing had so conducted himself as to enable Nixon to hold himself out as the proprietor, and whether the defendants dealt with him on that footing.
DEED- CREDITORS FORECLOSING TRUST-DEVISE ON
The plaintiffs, as creditors, whose debts were secured
Mr. Chitty, with characteristic exactness, states the principle to be that "where a principal permits one who is not known to be an agent to sell as apparent principal, and afterward intervenes, the buyer is entitled to be placed in the same situation at the time of the disclosure of the actual principal as if the agent had been the real contracting party; and he is entitled to the same defense against the principal, whether it be by common law or by statute, as he was entitled to at that time against the agent, the apparent principal. Accordingly if in such a case the defendant has acquired a set-off against the agent before the principal has interposed, the latter will be bound by the set-off. But," he adds, "this doctrine does not apply where the agent is a mere broker, and has not the possession of or is not intrusted with the indicia of property in he goods.' Chitty on Cont. 306.
In the case now before the court the son had neither he possession nor the indicia of property. He vas an agent with a naked power to sell. The judge roperly denied the defendant's claim to set-off the on's debt, and the judgment should be
[See 30 Eng. R. 667; 29 id. 192.-ED.]
UNITED STATES SUPREME COURT AB-
(chap. 17, art. 4, § 1557), in regard to allowances for improvements on land to purchasers in good faith, until they were served with process on the supplemental bill. (7) The meaning of the words "good faith" in the statute, and as applicable to this case, defined. Cole v. Johnson, 53 Miss. 94; Green v. Biddle, 8 Wheat. 1,79. (8) The amount allowed by the Circuit Court, for improvements, upheld as proper, under the special circumstances. The present case has an analogy to that of a purchaser at a foreclosure sale, who makes valuable improvements in the belief that he has acquired an absolute title. He is entitled to be paid for them if the premises are redeemed. 2 Jones on Mortgages, § 428. Where a party lawfully in possession under a defective title makes permanent improvements, if relief is asked in equity by the true owner, he will be compelled to allow for such improvements. 2 Story Eq. Jur., § 1237, note 1; Bright v. Boyd, 1 Story, 478; 2 id. 605; Putnam v. Ritchie, 6 Paige, 390; Williams v. Gibbes, 20 How. 538. Canal Bank v. Hudson. Opinion by Blatchford, J. [Decided March 24, 1884.]
INSURANCE-LIFE-ELECTION AS TO POLICIES-SURRENDER-ASSIGNMENT BY COMPANY -FUND DEPOSITED WITH TREASURER POLICY-HOLDER NOT BOUND BY DAMAGES.- (1) The holder of a policy of life insurance, who is entitled, in case of default in payment of his premiums, to exchange his policy for a paid-up policy instead of forfeiting it, is at liberty to elect at any time to consider himself in default, and to demand a paid-up policy. (2) Where a policy-holder was entitled in case of default to have his policy commuted to a paid-up policy for the amount of premiums actually paid, but both he and the agent of the company supposed him entitled to a paid-up policy of such amount as the premiums paid would have purchased had they been paid all at once for that purpose, and the insured surrendered his policy to the agent upon that understanding, held, that the company was bound to return the policy unchanged, if so required, and had no right to alter it to a paid-up policy for the sum to which he was in fact entitled. (3) Where an insolvent insurance company transfers its assets, under order of court, to another company, the holder of a policy cannot be required to continue his insurance with the assignee, but may treat the assignment as a rescission of the contract with the assignor, and recover from it whatever is justly due. Of this we think there can be no doubt. Where one party to an executory contract prevents the performance of it, or puts it out of his own power to perform it, the other party may regard it as terminated and demand whatever damage he has sustained thereby. We had occasion to examine this subject in the recent case of United States v. Behan, 4 Sup. Ct. Rep. 81, to which we refer. (4) The measure of damages in such a case is not the amount of the premiums actually paid, but only the value of the policy at the time of its surrender. (5) An assignment by an insolvent insurance company to a company in another State does not carry a fund deposited with the treasurer of the State where the assignor was organized to secure citizens of that State from loss. Such a fund remains subject to attachment by citizens of the State in suits against the company. To this fund the complainant, being a citizen of Tennessee, had a right to resort. The object of the laws of Tennessee in requiring the fund to be placed on deposit with the treasurer was to protect and indemnify its own citizens in their dealings with the company. The assignment to the new company in Missouri did not deprive them of the right to this indemnity. Lovell v. Insurance Co. Opinion by Bradley, J. [Decided April 7, 1884.]
ESTOPPEL- — LESSEE DENYING LESSOR'S TITLE - ACT OF MARCH 3, 1877- - COMMISSIONERS' CONSTRUCTION OF LAW REVIEWABLE - TRUSTEE.- Lessees and their assignees, having knowledge of a lease under a claimant or occupant, and holding the property for him, are bound by a stipulation to surrender it on the termination of the lease, and are estopped from claiming a right paramount and adverse to his, their possession being his possession. Blight's Lessees v. Rochester, 7 Wheat. 533. (2) Under the provision of the act of March 3, 1877, in relation to the tract of land known as the Hot Springs Mountain, the action of the commissioners therein provided for is final, on matters depending upon conflicting evidence as to the extent of occupation and the value of improvements; but upon the construction of law, and as to the equities of third persons arising from contracts or fiduciary relations between them and the person to whom the commissioners may adjudge the right to purchase, their action may be reviewed and corrected by the courts. This question was very fully and thoughtfully considered in Johnson v. Towsely, reported in 13 Wallace. In that case the direct question was as to the effect to be given to the tenth section of the act of June 12, 1858, which declared that appeals in cases of contest between different settlers for the right of pre-emption should thereafter be decided by the commissioner of the general land office, "whose decision shall be final unless appeal therefrom be taken to the secretary of the Interior." It was held that the finality there declared had reference only to the supervisory action of the land department; that after the title had passed from ths government, and the question had become one of private right, the jurisdictiou of courts of equity might be invoked to ascertain if the patentees did not hold in trust for other parties; and if it appeared that the party claiming the equity had established his right to the land upon a true construction of the acts of Congress, and by an erroneous construction the patent had been issued to another, the court would correct the mistake. This case is a leading one in this branch of the law and has been uniformly followed. The decision aptly expresses the settled doctrine of this court with reference to the action of officers of the land department, that when the legal title has passed from the United States to any party, when in equity, and in good conscience, and by the laws of Congress, it ought to go to another, a court of equity will convert the holder into a trustee of the true owner, and compel him to convey the legal title. This doctrine extends to the action of all officers having charge of proceedings for the alienation of any portion of the public domain. The parties actually entitled under the law cannot, because of its misconstruction by those officers, be deprived of their rights. Shepley v. Cowan, 91 U. S. 330; Moore v. Robbins, 96 id. 530; Quinby v. Conlan, 104 id. 420; Smelting Company v. Kemp, id. 636. Rector v. Gibbon et al. Opinion by Field, J. [Decided April 7, 1884.]
UNITED STATES CIRCUIT COURT ABSTRACT.*
REMOVAL OF CAUSE BY ASSIGNEE.-Though the assignee of a chose in action caunot sue originally in the Federal courts unless his assignor could have done so, he can accomplish the same result by bringing his action in the State court and removing it thence to the Federal court. Berger v. Com'rs, 2 McCrary, 483; 5 Fed. Rep. 23; Miller v. C. B. & Q. R. Co., 3 McCrary, 460; 17 Fed. Rep. 97; City of Lexington v. Butler, 14 *19 Fed. Rep.
Wall. 282; Bushnell v. Kennedy, 9 id. 387. Cir. Ct.,
INJUNCTION REFUSED TO RESTRAIN EXERCISE OF MUNICIPAL POWERS ADEQUATE REMEDY AT LAW.Courts of equity often interdict the unlawful exercise by municipal corporations of their powers; and possibly, cases of such peculiar hardship from the enforcement of a void ordinance in restraint of trade might arise, that a court of equity would feel moved to interpose by injunction, even before its illegality had been established at law. But such cases would be exceptional. Dill. Mun. Corp., § 727; Ewing v. City of St. Louis, 5 Wall. 413; High, Inj., §§ 1242, 1244. The ordinary remedy for an injury from the operation of an unlawful municipal ordinance is by an action at law, for complete redress in damages is generally thus attainable. (2) A borough ordinance forbids any person to convey or have, etc., within the borough limits, any nitro-glycerine, (except enough to "shoot" any oil well within the borough, and this upon payment of a license fee), under a penalty of not less than $50, nor more than $100, for each offense, upon conviction before the burgess or a justice of the peace. Plaintiff's works for the manufacture of nitro-glycerine are nine miles from the borough, and a magazine for its storage is one mile from the borough, on the opposite side. Plaintiff's employees conveying nitro-glycerine from its works to the magazine along public highways, through the borough limits, were arrested and fined, but these judicial proceedings were removed into the proper county court, and are there pending. The plaintiff, alleging that the ordinance is unreasonable, unauthorized and void, and injurious to its business, filed a bill in equity against the borough to restrain the enforcement thereof, etc. Held, that the case was not one for equitable relief, and on this ground, a preliminary injunction refused. The case of Butler's Appeal, 73 Penn. St.448, is not an authority, it seems to me, for the proposition that an injunction is a proper remedy for the injury of which the plaintiff complains. That was a case of a clearly illegal exercise by city councils of the taxing power. I have been referred to no precedent, nor have I been able to find any, where a court of equity in such a case as the present has granted the relief the plaintiff seeks. But in several analogous cases such redress has been denied, and the aggrieved party turned over to his legal remedies. Burnett v. Craig, 30 Ala. 135; Gaertner v. City of Fon du Lac, 34 Wis. 497; Cohen v. Goldsboro, 77 N. C. 2; Brown v. Catlettsburg, 11 Bush, 435. Here the plaintiff's legal remedies are, I think, ample. One of these has already been invoked; for by certiorari or appeal the proceedings against the plaintiff's employees for violation of the ordinance have been removed into the proper State court, and are there pending. It does not appear to me that the plaintiff is likely to sustain any injury which may not be fully and adequately compensated by an action for damages, should it be adjudged that the ordinance is invalid. Cir. Ct. W. D. Penn., Jan'y 21, 1884. Torpedo Co. v. Borough of Clarendon. Opinion by Acheson, J.
PATENT UTILITY -LICENSE NOT ASSIGNABLE.(1) A patent will not be declared void for inutility if it possesses any utility whatever, even the slightest. Lowell v. Lewis, 1 Mason, 183, 186: Earle v. Sawyer, 4 id. 1, 6; Seymour v. Osborne, 11 Wall. 516, 549; Wilbur v. Beecher, 2 Blatchf. 132, 137; Lehnbeuter v. Holthaus, 105 U. S. 94; Bell v. Daniels, 1 Fisher, 375; Shaw v. Lead Co., 11 Fed. Rep. 711; Wheeler v. Reaper Co., 10 Blatchf. 189; Vance v. Campbell, 1 Fisher, 485; Sim. Pat. 92, 93; Walk. Pat. 52, 53. (2) A license to use a patented process at the licensee's place
of business, and to associate others with him in such
NEW JERSEY SUPREME COURT ABSTRACT.*
DAMAGES — LIQUIDATED OR PENALTY —(1) It is a
CONSTITUTIONAL LAW- POWER OF LEGISLATURE-
*To appear in 45 N. J. L. (16 Vroom).