East New York & Jamaica Railroad v. Lighthall — 36 How. Pr. 481

Majority

p. 481

N.Y. SUPERIOR COURT.

The East New York and Jamaica Railroad Company agt. William A. Lighthall.

Headnote

A corporation (railroad) can act only by and through its officers and agents. Hence the acts of such officers and agents, performed within the scope of their general official duties, are binding upon the corporation.

Receiving payment of subscriptions to its capital stock, is no more out of the line of the president’s duty, than receiving payment for any other debt.

Therefore, where the president of the corporation receives payment of the subscriptions, to its capital stock in anything other than money, his act is binding upon the corporation, unless the corporation itself is incapable of receiving payment in that way; and this is so, notwithstanding the authority given to the president may have been limited in terms, to collections in money only.

Every corporation has, besides the powers expressly conferred by its charter, certain common law powers, which may be exercised in furtherance of the purposes of the corporation.

The plaintiff in this case having no limitation in its charter to the ordinary implied powers of all corporations, nor any provision which, either in express terms or by necessary implication, defines the thing which the plaintiff shall receive in payment for debts due to the corporation, the receipt by their president of coal stock of another corporation, in payment for the defendant's subscription to the capital stock of the plaintiff, was the receipt thereof by the plaintiff, and cannot now be rejected for want of authority.

General Term, December, 1868.

The action was brought to recover the amount of a subscription made by the defendant to the capital stock of the plaintiffs. The defence was payment.

It was proved that the subscription was made in July, 1866. The defendant testified that, about the 1st of November, one Degrauw, the president of the plaintiff's company, came on board the cars at Jamaica and asked the defendant if he would sell him coal stock. Defendant replied he would upon one condition. That he owed the plaintiff one thousand dollars, and wanted to pay it for some time, and would sell the coal stock on that condition at the same price he paid for it—thirty dollars a share. Degrauw told

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defendant to come to his office. The next day defendant called at Degrauw’s office, and transferred to Degrauw one hundred shares of the stock of the Mahony Coal Company, and received two acceptances of Degrauw of one thousand dollars each, and the following written agreement:

New York, November 1, 1866.

“ I hereby agree to deliver to William A. Lighthall, on the completion of the extension to Jamaica of the East New York and Jamaica Railroad Company, a certificate of stock of (20) twenty shares of the capital stock of said company.

“ Aaron A. Degrauw.”

A witness for the defendant testified that at the time the coal stock was transferred, the defendant said to Degrauw, “ this pays my subscription for one thousand dollars;” and Degrauw said, “ Yes, that is all right; when the stock is issued, I will give it to you.”

Degrauw contradicted all this evidence; and there was much other conflicting evidence, as to whether Degrauw agreed to take the coal stock as payment for the subscription. Degrauw also testified that he, Mr. Black, and the secretary, were authorized by the plaintiff to collect the stock subscriptions, but were never authorized to accept, in payment of the defendant’s subscriptions, Mahony Coal Comdany Stock; and the plaintiff’s secretary and treasurer testified that the plaintiff never authorized anything but cash to be taken for subscriptions to their capital stock.

The plaintiff's counsel asked the court to direct the jury to find a verdict in its favor, on the grounds, among others, that the written agreement did not show any permission to accept the coal stock for the subscriptions; and that Degrauw had no power to accept the coal stock in payment of the subscritptions.

The court refused the request and the plaintiff excepted.

The court submitted the case to the jury, under instructions that if it was an agreement of Degrauw’s to receive the coal stock as payment of the defendant’s subscription to

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the capital stock of the plaintiff’s company, that he had a right as president of such company to accept other things besides money m payment of the subscriptions to their stock. That if the jury found that Degrauw agreed to receive the coal stock as payment of the defendant’s subscription, they must discharge the defendant. To these instructions the plaintiff excepted.

The jury found for the defendant.

A motion for a new trial was made upon the judge’s minutes, and denied. Judgment upon the verdict was thereupon entered.

The "plaintiff appealed from both judgment and order.

J. E. Parsons for plaintiff, appellant.

W. W. Goodrich, for defendant, respondent.

The question which was submitted to the jury in this case was, whether Degrauw agreed with the defendant to receive the coal stock in payment for his subscription ; and they were instructed that if they so found, the agreement was binding upon the plaintiff.

If it was proper to submit such question to the jury—their verdict cannot be disturbed. . The evidence was conflicting, and therefore not open for review upon these appeals.

But it is claimed that, notwithstanding Degrauw’s agreement, the receipt of the coal stock by him was not payment to the plaintiff, for two reasons; first, because the plaintiff had no power to receive anything other than money in payment of subscriptions to its capital stock; and, second, because Degrauw had no authority to receive it, or to bind the plaintiff by any agreement that it should be received in payment of the, defendant’s subscription.

Independently of the evidence furnished by the plaintiff, that Mr. Degrauw was expressly authorized by them to collect stock subscriptions, I think he had power to do so, by virtue of his office as president of the company.

p. 484

Corporations can act only by and through their agents ; for, although in law a person, and capable of exercising all the functions conferred upon it by law, is yet, as a corporate aggregation, incapable of exercising such functions otherwise than through its officers and" agents. Hence the acts of such officers and agents, performed within the scope of their general official duties, are binding upon the corporation. Ordinarily corporations do not differ,from persons in the effect which is to be given to the acts of their agents. If the corporation has power, it may delegate such power; and it is only when prohibited by law, or the act is not incidental to the purposes of its incorporation, that it is ultra vires, and void (Sharp agt. Mayor of New York, 40 Barb., 256 ).

Receiving payment of subscriptions to its capital stock was no more out of the line of the president’s duty, than receiving payment of any other debt, and it cannot be pretended that such receipt, had it been in money, would not have bound the plaintiff, even althongh it never came to its possession. And the fact testified to by the secretary, that no one was authorized to receive anything other than money, cannot impair the effect which must be given to the payment made by the defendant.

In this case, however, there was express authority given to the president of the company, and it therefore follows that his act is binding on the plaintiff, unless the plaintiff itself was incapable of receiving anything but money; and that is so, notwithstanding the authority given to the president may have been limited in terms, to collections in money only (Clark agt. Metropolitan Bank, 3 Duer., 241 ).

It is a familiar principle, that the act of the agent, although in abuse or excess of authority, if within the’’ general scope of the business he was employed to transact, is binding upon his principal, as respects third persons, who, believing in the power of the agent, would sustain a loss if the act was not considered that of the principal (Hope Mutual Life Insurance Co. agt, Taylor, 2 Robt., 268).

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It remains then to be seen whether the plaintiff had power- to receive paymént otherwise than in money for subscriptions to its capital stock.

Every corporation has, besides the powers expressly conferred by its charter, certain common law powers, which may be exercised in furtherance of the purposes of the corporation. Such common law powers are the same as those possessed by individuals, and may be employed in the same manner, unless restricted by some positive or clearly implied prohibition of law (Barry agt. Merch. Exch. Co., 1 Sandf. Ch. 280 ; DeGroff agt. Am. Linen Thread Co., 21 N. Y. R., 124). And the objection that an act of a corporation is ultra vires rests upon the absence of either express or implied power, and not upon the wrong use of it, especially where such wrong use may work injury to innocent persons.

These common law or implied powers in a corporation were fully recognized in Curtiss agt. Leavitt (15 N. Y. R., 9), where it was held that a corporation had power to. contract a debt, and give its time obligation for its payment. And in a later case (City Bank of Columbus agt. Bruce, 17 N. Y. R., 507), the receipt by a corporation of its own stock in payment of a debt due to it, was sustained, as being within the incidental powers of the corporation. The court there say (Selden, J.), “ I am not aware of any common law principle which forbids it, nor is it known to have been in contravention of any provision of the charter of the company.” And in (Magee agt. Badger, 30 Barb., 246 ), a railroad corporation took the promissory notes of a subscriber in payment of his subscription for stock, and it was upheld.

I have looked into the charter of the plaintiff’s company and also at the provisions of the Revised Statutes to which the charter is subject, and do not find any limitation to the ordinary implied powers of all corporations, nor any provision which, either in express terms or by necessary implica

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tion, defines the thing which the plaintiff shall receive in payment for debts due to the corporation.

I do not think any question, whether receiving coal stock of another company was within the purposes of the plaintiff’s corporation, is involved in the present case. If this was an action upon an executory contract, to compel the plaintiff to receive the stock in payment for the defendant’s subscription, it might be said, that dealing in such stock was foreign to the' purposes of the company, and the contract therefore not within its implied powers. But in this case the contract was executed. The stock had been received by Degrauw in payment of defendant’s subscription, and, as has been seen, such receipt was the receipt of the plaintiff, and cannot now be rejected upon any plea of want of authority.

And although the plaintiff has not reaped the fruits of the transaction, it must, nevertheless, be concluded by the act of its agent, and not seek to inflict a wrong upon an innocent person, who, believing in the competency of the agent to act on behalf of his principal, had dealt with him accordingly.

I am of opinion that the judgment and order appealed from should be affirmed.

Garvin, J., concurred.