North Carolina Railroad v. Moore , 70 N.C. 6 ( 1874 )

The plaintiff, a corporation created by the law of the State on the 23d day of August, 1870, loaned the defendants the sum of $1,500, taking from them a bond or covenant in the words following, to wit:

"$1,500. Sixty days after date, we, or either of us, promise to pay to the Treasurer of the North Carolina Railroad Company the just and full sum of fifteen hundred dollars, for money borrowed at eight per cent interest. Witness our hands and seals, this August 23d 1870.

J. G. MOORE, [SEAL.] J. A. MOORE, [SEAL.] R. D. WADE. [SEAL.]"

In their answer the defendants admit the execution of the bond, and, for a principal defence, deny the capacity and power of the company to lend money and recover it by an action on a bond.

It being submitted to the Court, His Honor, upon consideration, gave judgment in favor of the plaintiff for the balance due on the bond, $947.70, (the defendants having paid $600 thereof on the 16th of March, 1871,) and interest and costs.

From this judgment defendants appealed to this Court. 1. That a corporation has no other capacities or powers than such as are necessary to effect the purposes of its creation. Angel (7) Ames on Corp., Sec. 7.

2. The exercise of its corporate franchise being restrictive of individual rights, cannot be extended beyond the letter and spirit of the act of incorporation. Beaty v. Knowler, 4 Pet., 162.

3. In deciding whether a corporation can make a contract, we are to consider whether it is permitted or forbidden by the charter, or some act binding upon it, and if they are silent, we have to consider whether the power is not implied, as being directly or indirectly necessary, to enable the corporation to fulfil the purposes of its creation. Angel Ames on Corp., Sec. 256.

4. This security for the loan of money is absolutely void. Mica Ins. Co.v. Scott, 19 Johnson, (N. Y.,); White Water Valley Co. v. Vallette and others, 21 How. 414. 1. Plaintiff partakes of the nature of both a public and private corporation, in this: It is created for the benefit of the public, as furnishing convenient and speedy transportation to the citizens, its public nature pertaining more to its duties than right; in its private nature it is intended to promote individual interest, by furnishing the means of profitable investment, and whatever may be done to attain this latter end is within the scope of its powers.

2. As to the powers of corporations generally, see Angel Ames, Secs. 256, 257, 258, 259.

3. The principal authority cited in Angel Ames, that a corporation is confined to the sphere of action limited by the terms and intention of the charter, or that a corporation other than a bank, was not allowed to loan money, is that of the Utica Insurance Company v. Scott, reported in 19 Johnson, (N. Y.); but in the State of New York there was a general banking act, which restrained every other corporation, in express terms, from lending money. We have no such act with us, and even in the case cited, it was held that the money could be (8) recovered, though the security was void.

4. "In this country," says Parsons on Bills and Notes, 164, after speaking of the English law on the subject, "it may be regarded as settled, that the power of corporations to become parties to bills of exchange or promissory notes, is co-extensive with the power to contract debts. Whenever a corporation is authorized to contract a debt, it way draw a bill or give a note in payment of it."

5. Two corporations may join in an action of assumpsit to recover money deposited jointly. Sharon Canal Co. v. Fulton Bank, 7 Wend. 412.

6. Plaintiff has the right to deposit its funds in bank or with an individual; a right to purchase and sell property, so far as is necessary to attain the ends of its creation. This being so, its right to recover follows, as a matter of course.

7. The Courts will do substantial justice, without regard to mere matters of form; and though we sue upon the security, if that be void, we are entitled to recover for money had and received. Oats, Williams Co. v.Kendall, 67 N.C. 241. The defendants borrowed money of the plaintiff and gave their bond therefor, but now seek to avoid the payment of the same by alleging the incapacity of the plaintiff to make such a contract or to enforce it in the Courts.

A corporation can do no act which is prohibited by its charter, or which is against the general law of the land; and as Mr. Dillon says, "it is the part of true wisdom to keep the corporate wings clipped down to the lawful standard." But the charter of the North Carolina Railroad Company, acts 1848-49, Ch. 82, is a very liberal one. It enacts that the Company shall have the power of "purchasing, holding, selling, leasing and conveying estates, real, personal and mixed, and acquiring the same by gift or devise as far as shall be necessary for the purposes embraced in the scope, object and interest of their charter, and no further, . . . and shall have and enjoy all other (9) rights and immunities which other corporate bodies may, or of right do exercise; . . . and may borrow money, make mortgages," etc.

We think it clear from these large and liberal grants of power, as well as upon general principles, that the plaintiff may deposit or loan its surplus funds without subjecting itself to the losses which would follow upon the establishment of the principle contended for by the defendants.McFarland v. Insurance Co., 4 Denio, 392; Potter v. Bank, 5 Hill, 490, and 7 Hill, 330; Benevolent Association v. Pribben, 48 Missouri, 37.

It is not alleged or pretended that the plaintiff is engaged in the business of banking; but so far as appears to us, this was only a single transaction, by way of investing surplus funds. The case pressed upon the argument to defeat this recovery, was the Insurance Company v. Scott, 19 Johnson, 1, in which it is held that the security there given was void, being in contravention of the general banking act of the State of New York. But, upon review of this case in the Court of Errors, it is held that the Ithica Insurance Company may loan their surplus funds on bonds, note or mortgage. Insurance Co. v. Scott, 8 Cowen, 709. In Frye v. Tucker,24 Ill. 180, the Court say, "that a railroad company can take a promissory note and negotiate it in the ordinary course of their business, cannot be questioned. It is a power inherent in all such corporations."

The judgment of the Superior Court is affirmed.

PER CURIAM. Judgment affirmed.

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