National Ass'n of Certified Public Accountants v. United States

• Decision Date: 04 June 1923
• Docket Number: 3870.
• Citation: 292 F. 668
• Parties: NATIONAL ASS'N OF CERTIFIED PUBLIC ACCOUNTANTS v. UNITED STATES.
• Court: U.S. Court of Appeals — District of Columbia Circuit

292 F. 668

NATIONAL ASS'N OF CERTIFIED PUBLIC ACCOUNTANTS v. UNITED STATES.

No. 3870.

United States Court of Appeals, District of Columbia.

June 4, 1923

Submitted February 14, 1923.

Appeal from Supreme Court of the District of Columbia.

Tracy L. Jeffords and Edwin C. Dutton, both of Washington, D.C for appellant.

Peyton Gordon and Vernon E. West, both of Washington, D.C., for the United States.

Before SMYTH, Chief Justice, ROBB, Associate Justice, and BARBER Judge of the United States Court of Customs Appeals.

SMYTH Chief Justice.

The United States, acting through the district attorney, filed its bill asking for an injunction prohibiting the National Association of Certified Public Accountants, a corporation organized under the laws of the District of Columbia, from exercising the power to confer the degree of certified public accountant, or any other degree, upon any person, on the ground that it had no lawful right to do so. In due time the corporation answered. A motion to strike out the answer and for a decree pro confesso was filed by the United States. Pending the disposition of this motion, other steps not necessary to mention were taken. Then the court sustained the motion to strike, and, the corporation refusing to amend its answer, but electing to stand on it, entered a decree granting the relief prayed for.

In its brief the corporation admits it was formed under section 599 of the Code of the District. This section authorizes citizens of the United States, a majority of whom being also citizens of the District, who desire to associate themselves for benevolent, charitable, educational, literary, musical scientific, religious, or missionary purposes, and societies formed for mutual improvement or for the promotion of the arts, to form a corporation by filing in the office of the recorder of deeds a certificate in writing, which shall state the name adopted, the term for which the corporation is organized, its particular business and objects, and the number of its managers for the first year of its existence. There is nothing in the section which says that the corporation thus formed shall have the power to confer degrees, or admit its members to degrees, or to issue to its members a certificate pertaining to degrees. No mention whatever of degrees is made in it. The certificate, however, which was filed by the organizers of the corporation, provides that when the members of the corporation shall present 'satisfactory evidence of knowledge in the theory and practice of accounting, and shall have satisfactorily passed the prescribed qualifying examination of the association,' the corporation shall have power 'to admit sad members to the degree of certified public accountant, and to issue to such members the association's formal certificate to that degree pertaining. ' The corporation claims the right to do these things, and admits that it has done them in many instances.

According to the bill the corporation admitted one of its members to the degree of certified public accountant (usually indicated by the letters 'C.P.A. ') on his own unsupported statement as to his qualifications, without any instruction or examination by the corporation or any of its representatives. Persons residing in California, desiring to test the methods employed by the corporation, presented to it an application for a certificate as a certified public accountant in the name of one Duarfy. The certificate was issued on the recommendation alone of persons wholly unknown to the corporation. Later it developed that Duarfy existed only in the minds of those who had arranged the test. In other words, he was a fictitious person. Other instances are given in which the corporation granted degrees without any examination or test of the applicant. All these allegations are admitted by the answer. In no place does the answer assert that any other or different test of an applicant's fitness for a degree was employed by the corporation. It says, however, that the corporation in this respect had followed the example of other institutions in conferring like degrees. It is also charged in the bill, and not denied by the answer, that during the nine months of the corporation's existence it issued more than 2,500 certificates at $10 apiece.

We but state an elementary principle when we say that a corporation is a juristic person created by the sovereignty. Elliott on Private Corporations, Sec. 8. According to the doctrine of general capacity, which prevails in England, a corporation has all the powers of a natural person except where a statute provides otherwise. Pollock on Contracts, 119; Baldwin's Modern Pol. Inst. 206. But that doctrine does not apply in the United States. Here we have the rule of special capacity, under which a corporation has no powers but those expressly conferred on it, and such incidental powers as may be reasonably necessary to carry those expressly granted into effect. Thomas v. Railroad Co., 101 U.S. 71, 82, 25 L.Ed. 950; Oregon Railway & Navigation Co. v. Oregonian Railway Co., Ltd., 130 U.S. 1, 9 Sup.Ct. 409, 32 L.Ed. 837; Waters-Pierce Oil Co. v. Texas, 177 U.S. 28, 43, 20 Sup.Ct. 518, 44 L.Ed. 657; State v. Lincoln Trust Co., 144 Mo. 562, 46 S.W. 593.

Section 599, as we know, does not expressly grant the power to confer or admit to degrees; nor is such authority reasonably necessary to enable the corporation to execute the powers expressly granted. It can do all the section contemplates without admitting to degrees. This is manifest from an inspection of the section. Therefore the corporation does not possess the power which it claims.

Chapter 18 of the code deals with corporations. It is divided into fourteen subchapters. Subchapter 1 relates to institutions of learning, and subchapter 3, which contains section 599 relates to societies benevolent, educational, etc. In order...