Lewis v. Meier

• Decision Date: 01 January 1882
• Citation: 14 F. 311
• Court: U.S. District Court — District of Kansas
• Parties: LEWIS, JR., v. MEIER and others. [1]

14 F. 311

LEWIS, JR., v. MEIER and others. ^[1]

United States Circuit Court, D. Kansas.

November Term, 1882

J. P Usher, for complainant in cross-bill.

Mr Glover and Mr. Shepley, for defendants.

McCRARY C.J.

This suit was originally brought to foreclose a mortgage executed by the Kansas Pacific Railroad Company to certain trustees to secure bonds to the amount of $6,500,000. The original bill has been dismissed, and the case stands upon a cross-bill filed by the defendant company, in which it is alleged that the mortgage above referred to is fraudulent and void, and ought, therefore, to be canceled as a cloud upon its title. It is alleged that said mortgage was executed as part of a scheme whereby the directors of the company united with certain others to enter into certain contracts with the company to build a portion of the company's railroad, and to receive certain considerations therefor. In other words it is alleged that the directors of the company were members of a construction company, to which the bonds secured by said mortgage were issued, and that they contracted fraudulently with themselves. Conceding, for our present purposes, the truth of these allegations, the question arises, can the defendant company be granted the affirmative relief prayed for? The general rule is that a court of equity will not, in such cases, interfere in favor of either party, either to enforce or set aside the contract, or to award damages for its breach. The parties being in pari delicto, the court will leave them where it finds them. If this were a contract between natural persons, there could be no doubt about the application of this doctrine; but it is said that the rule does not apply to the defendant corporation, because, while the contract was made in the corporate name, the corporation is not, within the meaning of the rule, a party to it, since in making it the directors exceeded their authority. To sustain this view would be, in effect, to hold that a corporation can in no case be guilty of fraud; for, being an artificial being, it can act only through agents, and it would be impossible in any case to show that the charter of a corporation expressly authorized the perpetration of a fraud. It is, however, well settled that a corporation may be guilty of a fraud. The courts have gone further, and held such artificial persons liable in tort in certain cases. The true rule is that such acts as are done by the directors in the course and within the scope of their powers and duties, are to be regarded as the acts of the corporation. Such is the rule, even if the acts are unlawful and tortious. 2 Hil.Torts, 322; Copley v. G. & B. Sewing-Machine Co. 2 Woods, 494; Railroad Co. v. Quigley, 21 How. 202; Sandford v. Hundy, 23 Wend. 260; Brokaw v. N.Y., etc., Transp. Co. 32 N.Y.Law, 331; Fogg v. Griffin, 2 Allen, 1; Rives v. Plank-road Co. 30 Ala. 92; Litchfield Band v. Peck, 29 Conn. 384; Lee v. Village of Lundy Hill, 40 N.Y. 442; Perkins v. Railroad Co. 24 N.Y. 213.

These authorities abundantly show that if the directors or agents employed by a corporation conduct themselves fraudulently, so that if they had been acting for private employers such employers would have been affected by their frauds, the corporation is, in like manner and to the same extent, affected by them.

In other words, the settled doctrine is that a corporation can no more repudiate the fraudulent acts of its agents than an individual can. The rule is the same as to both. The doctrine as applicable to private individuals is familiar. The principal is liable for the acts of the agent, not alone in cases where they are expressly authorized, but also in all cases where such acts come within the range of the agent's duties.

In the case of the Railroad Co. v. Quigley, supra, Mr. Justice CAMPBELL ...