Calumet & Chicago Canal & Dock Co. v. Conkling

• Decision Date: 09 June 1916
• Docket Number: No. 10407.,10407.
• Citation: 112 N.E. 982,273 Ill. 318
• Court: Illinois Supreme Court
• Parties: CALUMET & CHICAGO CANAL & DOCK CO. et al. v. CONKLING et al.

273 Ill. 318

112 N.E. 982

CALUMET & CHICAGO CANAL & DOCK CO. et al.

v.CONKLING et al.

No. 10407.

Supreme Court of Illinois.

Feb. 16, 1916.

Rehearing Denied June 9, 1916.

Error to Branch B. Appellate Court, First District, on Error to Circuit Court, Cook County; Jesse A. Baldwin, Judge.

Suit by the Calumet & Chicago Canal & Dock Company and another against Allen Conkling and others. A decree in favor of complainants was affirmed by the Appellate Court, First District (192 Ill. App. 613), and Abel Davis, trustee in bankruptcy of Allen Conkling, brings certiorari. Reversed and remanded.

Carter, Craig, and Duncan, JJ., dissenting.Jesse Lowehaupt and Oscar M. Wolff, both of Chicago, for plaintiff in error.

Bentley, Burling & Swan, of Chicago, for defendants in error.

FARMER, C. J.

This case comes to this court by writ of certiorari to review a judgment of the Appellate Court for the First District, affirming a decree of the circuit court foreclosing trust deeds at the suit of the Calumet & Chicago Canal & Dock Company and Murry Nelson, Jr., trustee, given by Allen Conkling upon property which will for convenience be referred to as blocks 138 and 139 in the Calumet & Chicago Canal & Dock Company's subdivision in South Chicago. The first of the trust deeds was given by Conkling January 22, 1909, upon both blocks, to secure the payment of his notes for $50,000, made payable to himself and by him indorsed and delivered to the dock company. At the time the first trust deed was given there was a street or avenue between the two blocks, which had been dedicated to the public by the dock company. It was afterwards vacated, and the dock company conveyed it to Conkling. The second trust deed was given June 19, 1911, upon this strip of land, to secure the same indebtedness, and subject to all the terms, conditions, and covenants contained in the trust deed of January 22, 1909. Before the bill for foreclosure was filed Allen Conkling was adjudged a bankrupt, and Abel Davis, plaintiff in error, was appointed trustee in bankruptcy of his estate. He was made a defendant to the bill to foreclose. Plaintiff in error answered the bill, setting out in full the act of 1869 incorporating the dock company, and alleged that for many years prior to the giving of the notes and trust deeds Conkling was the owner of block 138, and that if he was indebted to the dock company at the time he gave the first trust deed it was on account of a loan made him by said company, that said corporation had no power or authority to loan money and accept trust deeds as security, and that making the loan and accepting the trust deeds was ultra vires and beyond its corporate powers and authority, and that the trust deeds created no lien upon the property superior to the title of the plaintiff in error.

The facts with reference to the transaction between the dock company and Conkling are that prior to January 22, 1909, Conkling was the owner of block 138, which was mortgaged to secure a loan of $30,000. He applied to Murry Nelson, president of the dock company, for a loan on the property. Nelson testified he first told Conkling's agent, who was trying to secure the loan, that his company was not in the business of making loans, and advised him to go to other parties. Nelson testified Conkling's agent came back later and said Conkling would like to buy some property, and inquired if Nelson's company would make a loan if he bought additional property. These negotiations finally resulted in the dock company selling Conkling block 139 for $15,000, loaning him $35,000 cash, and taking his notes for $50,000, secured by trust deed on blocks 139 and [273 Ill. 321]138, which latter block Conkling already owned. None of the purchase price of block 139 was paid by Conkling, but it was included in the $50,000 for which the notes and trust deed were given.

After issues was joined in the circuit court, the cause was referred to a master in chancery to take the testimony and report his conclusions. The master reported that the notes and trust deed were given as part of a transaction by which the dock company sold Conkling block 139 for $15,000, and as an inducement for such purchase the dock company gave him credit for the whole purchase price ($15,000) and in addition loaned him $35,000 out of the surplus funds of the dock company, that the dock company had the power, under its charter, to sell block 139 and to loan Conkling $35,000 as incidental to such sale, and that the notes and trust deeds were valid legal obligations of Conkling. The chancellor overruled exceptions of Abel Davis, trustee in bankruptcy, and entered a decree in accordance with the finding and report of the master. Davis sued out a writ of error from the Appellate Court for the First District to review the decree. That court affirmed the decree of the circuit court, and the case is brought to this court for review upon a writ of certiorari.

The Calumet & Chicago Canal & Dock Company was created a corporation by special act of the Legislature in 1869. The object of its creation, as stated in section 5 of the act, was to construct a canal from some point on the Calumet river to the South branch of the Chicago river or the Illinois and Michigan Canal, as the corporation might determine, and to construct, use, operate, employ, and maintain docks, slips, basins, shipyards, dockyards, dry docks, warehouses, and piers which the corporation might deem necessary and proper. The corporation was given the right to condemn land for its corporate purposes and to intersect any road, highway, or railroad with its canal. It was given perpetual succession and the usual corporate powers to contractand be contracted with, sue and be sued, etc., and to ‘purchase, possess and occupy real and personal estate, and may sell, lease and employ the same in such manner as it shall determine, * * * and have and exercise all the powers necessary as a corporation to carry out the objects of this act.’ The capital stock was $500,000, to be divided into shares of $100 each. The corporation has never constructed a canal, but appears to have acquired considerable land, or land of considerable value, as the president testified its assets were worth about $3,000,000. He further testified it had no other source of income than the sale of real estate.

[5] While part of the dock company's brief and argument is devoted to the proposition that the power given it to acquire and possess real and personal estate, and sell, lease, and employ the same, etc., is an express authority to loan its money, its principal reliance to sustain the transaction of making the loan is that it was authorized by the implied powers of the corporation. The dock company insists that, in view of the powers expressly granted to it, its charter should be construed to imply the power to loan money, when the loaning is incidental to the exercise of some express power, or where the corporation has surplus funds not required for use in its business. We think it entirely clear that there is no basis for any claim that the power to loan money was expressly given by the act creating the corporation. The power to ‘employ’ its real and personal estate in such manner as it might determine was given for the purpose of enabling the corporation to carry out the object of its creation. While it was expressly authorized to purchase, possess, and occupy real and personal estate in the exercise of its legitimate corporate purposes and powers, and ‘employ’ the same in such manner as it might determine, this power only conferred authority to acquire property for the purpose, and employ it in carrying out the objects, for which the corporation was created. Having no express authorityto loan money, if it possessed any such authority it must be found in its implied powers. The rule is that corporations can only exercise such powers as are conferred in express terms or by necessary implication. The implied powers are presumed to exist in order that such bodies may be able to carry out the express powers granted and to accomplish the purpose of the corporation's creation. An implied or incidental power must be directly or immediately appropriate to the execution of the powers expressly granted, and not one that has a slight or remote relation to it. People v. Chicago Gas Trust Co., 130 Ill. 268, 22 N. E. 798,8 L. R. A. 497, 17 Am. St. Rep. 319, and cases there cited. The enumeration of powers expressly granted implies the exclusion of all others not fairly incidental. A power which the law will imply must be one in a sense necessary or needful and suitable to accomplish the object for which the express powers were granted. Central Transportaion Co. v. Pullman's Palace Car Co., 139 U. S. 24, 11 Sup. Ct. 478, 35 L. Ed. 55. Whatever incidental powers are reasonably necessary to enable the corporation to perform its corporate functions are implied from the powers expressly granted. People v. Campbell, 144 N. Y. 166, 38 N. E. 990. These general rules are so well settled that further discussion of them or citation of authorities is not required.

The principal question for determination is whether the loan was made as an incident to the exercise of an express power granted. There is no dispute about the facts as hereinbefore briefly stated. It is contended the loan of $35,000 was made for the purpose of effecting the sale of block 139, that the corporation had express power to sell real estate, and that the loan was incidental to the sale, and therefore was an incident to the exercise of an express power and authorized under the implied powers. The express power given by section 1 of the statute creating the corporation to purchase and sell real estate did not confer authority to deal in real estate by buying and selling it. The only real estate the corporation was authorized to acquire was such as was reasonably necessary to enable it to carry out the objects of its creation,...