Chambers v. Falkner , 65 Ala. 448 ( 1880 )

BB.IOKBLL, C. J.

— 1. If it is not manifest from the note and mortgage, that each was executed to Chambers in an official capacity, and not individually, the parol evidence is full and clear that such is the fact. The consideration moved wholly from the corporation known as the Alabama State Grange, or by its corporate name, State Grange of the Patrons of Husbandry of Alabama; and that it was the intention the note and mortgage should be executed to Chambers as its president, and for' its benefit, is fully proved. There was no objection to parol evidence of the facts, and, if there had been, it could not have been sustained. — Douglass v. Br. Bank of Mobile, 19 Ala. 659; Caldwell v. Br. Bank of Mobile, 11 Ala. 549; Smith v. Br. Bank of Mobile, 5 Ala. 26; McWalker v. Br. Bank of Mobile, 3 Ala. 153.

2-3. It has been too often decided in this court, to be matter of doubt or controversy, that the contracts of corporations, which they have no power to make, are void, and the courts can not enforce them. Promissory notes, or mortgages, given as security to the corporation, are wanting in legal validity, and will not furnish a cause of action, in law or in equity. — Smith v. Ala. Life Ins. & Trust Co., 4 Ala. 558; Grand Lodge v. Waddell, 36 Ala. 313. The consideration of the note the mortgage was intended to secure, was money of the corporation, loaned to the mortgagor, by its officers and agents, acting by its authority, as it must be presumed, and as the proof very clearly indicates. The express power to loan money is not conferred on the corporation; and any such implied or incidental power is foreign to, and excluded by the purposes and objects of its creation, as expressed in the article of incorporation, and by the express declaration in the article, that it was not formed for pecuniary profit. A corporation, not created for banking purposes, or to conduct some business usual in banking, whatever may be its character, though it may have the power, express or implied, of borrowing money, has not an implied power of loaning its funds. — 1 Dan. Neg. Inst. § 384. It was so held by this court, in reference to a railroad corporation, in Waddill v. Ala. & Tenn. Railroad Co., 35 Ala. 323; and in reference to the Grand Lodge of Masons, in Grand Lodge of Ala. v. Waddill, 36 Ala. 313. This case, it is admitted, is decisive of the case now before us, unless we are prepared to overrule it. If we had serious doubts of its correctness, we could not depart from it, at this day. But we are of opinion that it is well founded in principle, and is supported by the weight of authority.

4. We do not regard it as within our province, to inquire whether the parties now in interest, who are creditors seeking the enforcement of liens for the security of meritorious debts, ought to interpose the want of capacity in the corporation to make the loan, to defeat the priority claimed for the mortgage given to secure it. The court can not indulge in favor or disfavor to either party, and is simply without power to enforce contracts wanting in legal obligation and validity; and without power to impart capacity to corporations to enter into contracts foreign to the purposes of their creation. The powers which they may have, are derived from statutes, and it is not for the courts, by tolerating their usurpations, to defeat the will of the legislature. The corporation may, and did doubtless, part with the money in good faith ; and there is no evidence of any want of good faith on the part of the mortgagors. Each, doubtless, when the transaction was had, was under the belief of its legality and validity; and it is their misfortune, rather than fault, that the mortgagor is without the ability to meet the demands of all his creditors, and thereby have avoided a race of diligence between them.

There are authorities which support the proposition, so vigorously pressed by appellant’s counsel, that as the mortgagor has reaped all the benefits of the transaction — has obtained and used the money of the corporation — all who claim under him should be estopped from denying the corporate power to make the contract. The proposition is not new in this court. It was pressed upon the consideration of the court, in the leading case of City Council of Montgomery v. Montgomery & Wetumpka Plank-Road Co., 31 Ala. 76-88. In answer, Stone, J. speaking for the court, said: “ If this doctrine be established, these corporations, no matter how limited their powers, may make themselves omnipotent. They have only to induce persons to contract with them, beyond the scope of their powers, and their very usurpations have the effect of conferring powers on them which the legislature have withheld. A proposition so erroneous can scarcely need argument to overturn it.” More recently, the proposition was again pressed, and the answer of Justice Stone was again : “ A party dealing with a corporation, in a matter not within the purview of its delegated power, does not estop himself from setting up, in defense, the want of authority in the corporation to make the contract .... In such case, the doctrine of estoppel can not be held to apply, without clothing corporations with the ability to increase their powers indefinitely, by sheer usurpation. Such contracts on the part of a corporation are ultra vires, and void, and no right of action can spring out of them.” — Marion Savings Bank v. Dunkin, 54 Ala. 471. These were not hasty, ill-considered opinions. They were the result of careful research and deliberation, and all but the latter case have stood unquestioned by the profession, for many years. Touching contracts, their validity and obligation, obedience to the maxim stare decisis compels a strict adherence to them.

5. The appellant can have no higher standing than would his assignor, or the corporation, if either were seeking a foreclosure of the mortgage, in a controversy with other mortgagees. What rights a bona fide holder could have acquired, it is not necessary to inquire. It is not shown that the appellant stands in that relation; on the contrary, the weight of the evidence, so far as it touches the point, is against him. When valid defenses are shown to exist against negotiable paper, if the holder would protect himself against. them, he is required to show that, in good faith, for a valuable consideration, without notice of its infirmities, he acquired the paper before matnrity. — Ross v. Drinkard, 35 Ala. 434; Mayor v. Wetumpka, 63 Ala. 632. When, the appellant acquired the paper — whether before or after maturity — is not shown distinctly. The strong tendency of the testimony of Ealkner is, that it must have been at some time after its maturity. It is not enough that the appellant gave a valuable consideration for the paper. He must have derived his. title before its maturity ; for, whenever negotiable paper is found outstanding after its maturity, whoever deals in it is put on inquiry; and if he makes none, he must be content to take it subject to all defenses which could be made against his transferror. The time of the acquisition of the paper, was a fact lying peculiarly within the knowledge, of the appellant — he had the means of showing it clearly. The burden of proof was upon him; and the maxirq must be applied, that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.

Whether the note and mortgage could not be enforced by the assignor of the appellant, or by the appellant as assignee, if it was shown that the assignor had without authority made the loan, and was bound to account for the money to the corporation, is not a question now presented. — Tomkies v. Reynolds, 17 Ala. 109; Bryan v. Wilson, 27 Ala. 208. The pleadings do not aver these facts, nor is there any evidence showing them. On the contrary, the evidence tends to show that the money was loaned by authority of those charged with the control a'nd custody of the corporate funds; and that the president was the mere conduit through which it was transmitted to the mortgagor, and charged only with the duty of taking securities for its payment.

The decree of the chancellor must be affirmed.