Bradley v. Luther W. Ballard.

• Citation: 8 Am.Rep. 656,1870 WL 6442,55 Ill. 413
• Parties: CHARLES BRADLEYv.LUTHER W. BALLARD.
• Decision Date: 30 September 1870
• Court: Supreme Court of Illinois

55 Ill. 413

1870 WL 6442 (Ill.)

8 Am.Rep. 656

CHARLES BRADLEY

v.LUTHER W. BALLARD.

Supreme Court of Illinois.

September Term, 1870.

OPINION TEXT STARTS HERE

APPEAL from the Circuit Court of Cook county; the Hon. ERASTUS S. WILLIAMS, Judge, presiding.

The opinion states the case.

Messrs. KNOWLTON, JAMIESON & SCALES, for the appellant.

No corporation is estopped to say in defense that it had not the power to make the contract attempted to be enforced against it, for the reason, that if thus estopped, its powers might be indefinitely enlarged, and greatly beyond what the legislature would grant, if solicited. Prince on Railways, 395, 398; Hood v. N. Y. & N. H. R. R. Co. 22 Conn. 508, 509; Welland Canal Co. v. Hathaway, 8 Wend. 484; Penn. & Steam Nav. Co. v. Dantridge, 8 Gill & J. 319; Abbott v. Steam Packet Co. 1 Md. Ch. 542; McCullough v. Moss, 5 Denio, 567; Hodges v. Buffalo, 2 ib. 110; Boon v. Utica, 2 Barb. 104; Solomons v. Laing, 12 Beavan, 352; Steele v. Harman, Park, B. 14 M. & W. 840; Broughton v. Water Works, 3 Barn. & Ald. (5 E. C. L.) 15; Stork v. Highgate, 5 Taunton, 406; Auburn Academy v. Strong, 1 Hopkin, 284; Smith v. Strong, 2 Hill, N. Y. 241; Safford v. Wyekoff, 1 ib. 442; 2 Kent's Com. 5 Ed. 291; Salem Bank v. Gloucester Bank, 17 Mass. 28, 30; Hodges v. City of Buffalo, 2 Denio, 110; N. Y. F. Ins. Co. v. Ely, 5 Cowan R. 568; N. Y. F. Ins. Co. v. Ely, 2 ib. 699; People v. Utica Ins. Co. 15 Johns. 383; Berlin v. New Brittain, 9 Conn. 180.

Mr. GEORGE HERBERT and Mr. GEORGE G. BELLOWS, for the appellees, on the same question, cited Moran v. Miami County, 2 Black, 724, 732; Coms. of Knox County v. Aspenwall, 21 How. 539; Bissell v. Jeffersonville, 24 ib. 287, 300; Society of Savings v. New London, 29 Conn. 193; State of Indiana v. Woram, 6 Hill, 33, 37; Collett v. Morrison, 9 Hare, 162, 175; Steam Nav. Co. v. Weed, 17 Barb. 378, 380, 384; Keithsburg v. Frick, 34 Ill. 405, 421; Maher v. City of Chicago, 28 Ill. 268, 270; DeWolf v. City of Chicago, 26 ib. 446, 447; Hope Mut. Ins. Co. v. Taylor, 2 Robt. 278; Rogers v. Danby, 19 Vt. 187; Port of London Ass. Co. Case, 35 Eng. L. & Eq. 178, 187; DeGroff v. Am. Linen Co. 24 Barb. 379, 21 N. Y. 174; Bissell v. M. S. & N. I. R. R. Co. 22 N. Y. 258; Railway Co. v. Howard, 7 Wallace, 412, 413; Gas Co. v. San Francisco, 9 Cal. 469, 470; Perkins v. Portland, etc. R. 47 Maine, 592; Parish v. Wheeler, 22 N. Y. 494; Pondville County v. Clark, 25 Conn. 97; Angell & Ames on Corp. secs. 240, 304, and notes; Mayor etc. Pittsburg v. Scott,1 Penn. St. 309, 317; Watrous' Exrs. v. McLaren, 21 Wend. 563; Kingsley v. Vernon, 4 Sandf. 365, 361; Palmer v. Lawrence, 3 ib. 161, 165, 166, 168, 176, S. C. 5 N. Y. 389; L'Armoreaux v. Vischer, 2 Comst. 281; Zabriskie v. C. C. & C. R. R. Co. 400, 401; Genesee Bank v. Patchen, 3 Kern. 309; Central Bank v. Empire Stone D. Co. 26 Barb. 36; Hawkins v. Bowne, 8 M. & W. 703, 709; Underwood v. Newport, 5 B. Mon. 129; West Winsted S. Bank v. Fox, 27 Conn. 290, 291; Bank of Middletown v. Jerome, 18 Conn. 449; Lucas v. Hart, 5 Clarke, 420; Foster v. LaRue, 15 Barb. 324, 325.

Mr. CHIEF JUSTICE LAWRENCE delivered the opinion of the Court:

This was a bill in chancery, brought by Bradley against Ballard and others, for the purpose of enjoining the prosecution of a suit pending in the circuit court of Cook county, against a corporation called “The North Star Gold and Silver Mining Company,” in which complainant was a stockholder, upon certain promissory notes given by said company, and also to cancel certain other notes not yet in suit. The court sustained a demurrer to the bill, and, the complainant not asking to amend, a decree of dismissal was entered. It appears by the averments in the bill that various persons associated themselves together in the city of Chicago, in the year 1866, and filed their articles of organization in the circuit court of Cook county, under the general incorporation law, whereby they became incorporated under the title above stated. The statute requires the certificate to state the town and county in which the operations of a company thus incorporated are to be carried on, and the certificate of this company stated that their operations were to be carried on in the city of Chicago, in the county of Cook and State of Illinois. It further appears from the bill that the company thus organized engaged in mining in the Territory of Colorado, and in the prosecution of that work borrowed large sums of money, for which the notes described in the bill were given, except some that are alleged to have been given for official salaries. It is not claimed that they were not given for a full and fair consideration, but their cancellation is sought upon the ground that they were given for money borrowed to enable the company to prosecute a business which it had no power to prosecute, and that this purpose was known to the lenders of the money. It is insisted that, although the business of the corporation was mining, yet, by the terms of its certificate, it had no power to prosecute that business beyond the limits of the city of Chicago, or certainly not beyond the limits of this State.

Whether this is the proper construction of the statute, is a question we do not find it necessary to decide. Conceding that it is, and that this corporation had no power to engage in mining in Colorado, we are still of opinion the complainant has not, by his bill, entitled himself to relief. He became a stockholder to the extent of $25,000, and from the name and character of the company he must have known it was organized for the purpose of mining beyond the limits of this State. He subsequently became one of the directors of said company, and it is a legitimate inference from the bill that at least a part of these debts were created while he was thus participating in the control of the company. There is no pretence in the bill that he ever, in any mode, objected to the mining operations of the company, in Colorado, or to the borrowing of money therefor, and the fair, and, indeed, unavoidable inference, from the nature of the company, the connection of complainant with it, and the silence of the bill in this regard, is, that he did not object. On what ground, then, can he ask a court of equity to enjoin the collection of these notes?

It is said by counsel for complainant, that a corporation is not estopped to say, in its defense, that it had not the power to make a contract sought to be enforced against it, for the reason, that if thus estopped, its powers might be indefinitely enlarged. While the contract remains unexecuted on both sides, this is undoubtedly true, but when, under cover of this principle, a corporation seeks to evade the payment of borrowed money, on the ground that, although it had power to borrow money, it expended the money borrowed in prosecuting a business which it was not authorized to prosecute, it is pressing the doctrine of ultra vires to an extent that can never be tolerated, even though the lender of the money knew that the corporation was transacting a business beyond its chartered powers, and that his money would be used in such business, provided the business itself was free from any intrinsic immorality or illegality.

Neither is it correct to say that the application to corporations of the doctrine of equitable estoppel, where justice requires it to be applied, as when, under a claim of corporate power, they have received benefits for which they refuse to pay, from a sudden discovery that they had not the powers they had claimed, can be made the means of enabling them indefinitely to extend their powers. If that were true, it would be an insuperable objection to the application of the doctrine, even for the purpose of preventing injustice in individual cases. But it is not true. This doctrine is applied only for the purpose of compelling corporations to be honest, in the simplest and commonest sense of honesty, and after whatever mischief may belong to the performance of an act, ultra vires, has been accomplished. But while a contract remains executory, it is perfectly true that the powers of corporations can not be extended beyond their proper limits, for the purpose of enforcing a contract. Not only so, but on the application of a stockholder, or of any other person authorized to make the application, a court of chancery would interfere and forbid the execution of a contract ultra vires. So, too, if a contract, ultra vires, is made between a corporation and another person, and, while it is yet wholly unexecuted, the corporation recedes, the other contracting party would probably have no claim for damages. But if such other party proceeds in the performance of the contract, expending his money and his labor in the production of values which the corporation appropriates, we can never hold the corporation excused from payment, on the plea that the contract was beyond its power.

Take, for example, the case of a corporation chartered to build a railway from Chicago to Rock Island. Under such a charter, the...