Coston-Riles Lumber Co. v. Alabama MacHinery & Supply Co.

THOMAS, J.

(dissenting). Provisions of the charter offered in evidence are:

“(K) To borrow money and execute the corporation’s note or notes therefor and secure the same, if desired, by mortgage or pledge of its real or personal property, one or both, or any part thereof; (L) to further liave and exercise all of the powers and rights and discharge all of the duties, regardless of whether they are- expressly given or imposed herein or not, that are given and'imposed on such corporations by article five -of chapter 69, of the Code of Alabama of 1907, and the amendments to the respective pertinent sections thereof; * * * (N) to have, enjoy, and exercise all of the powers, privileges and' immunities and to be subject to all of the liabilities conferred or imposed by the Constitution and laws of this state on such corporations.”

Among the general express powers of business corporations contained in section 3481 of the Code of 1907 are:

“ * * * To borrow money, issue notes, bonds, or other negotiable paper or mortgage, pledge, or otherwise transfer or convey its real and personal property to secure the payment of money borrowed or any debt contracted, unless otherwise provided. * * * That the board of directors may mortgage or otherwise pledge, transfer, or convey the personal property of the corporation to secure money borrowed by it, and any debt contracted by it without first obtaining the consent of the stockholders.”

If the board of directors of the corporation had authorized its secretary-treasurer to give a certain form of note — as a negotiable or nonnegotiable note — and there was excess of authority in the act of giving a different note, the act would not be binding on the corporation “in the absence of some matter of estoppel,” or in the absence of evidence authorizing the creditor or payee in the note to act with the corporation’s designated agent in the matter of or to the extent he had the apparent authority committed to him, acting for the corporation in and about the corporation’s business and with a stranger, who was not held to notice of by-laws placing restrictions on the apparent authority of corporate agents. Buck Creek Lbr. Co. v. Nelson, 188 Ala. 243, 247 , 66 South. 476 ; So. States Fire Ins. Co. v. Kronenberg, 199 Ala. 164 , 74 South. 63 . In the instant. matter the board of directors, having confidence in its secretary-treasurer, gave him full authority to negotiate with plaintiff to close the matter of its present open account and extend the date of payment thereof by giving the company’s notes. It appears to have been th.e intent of the board of directors, in the authority given, not to limit that agent’s act to the giving of a “negotiable promissory note” (Code 1907, § 5131); and

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that he was authorized to execute such other form of note, or evidence of debt, as may be required by the creditor. If

a,

negotiable promissory note had been given, could it be said that such authority was not given? So, also, if provisions were contained in the notes making the same nonnegotiable.

An examination of the charter, exhibited in the evidence, discloses no prohibition against the corporation contracting 'with reference to venue of suits against it on said notes. It must therefore follow that if such contract does not violate either the expressed or implied powers of the corporation, it was not an excess of authority on the part of the directors in granting this authority, or of its secretary-treasurer in the execution of the notes in form declared upon in the complaint.

• The law of venue, and that part having application to civil suits against corporations, is as follows:

“A foreign .or domestic corporation may be sued in any county in which it does business by agent,” etc. Code 1907, § 6112.

It is apparent that this statute is for the protection of the corporation, and as to personal or transitory actions such right is held to be a personal right that may be waived; there being no consideration of public policy or morals involved. Thompson v. Union Springs Guano Co., 202 Ala. 327 , 80 South. 409 ; Hines v. Hines, 203 Ala. 633 , 84 South. 712 ; Cleveland v. Little Cahaba Coal Co., 205 Ala. 369 , 87 South. 567 ; Woolf v. McGaugh, 175 Ala. 299 . 57 South. 754 . The waiver was a “valuable element of the consideration supporting the contract” declared upon. Thompson v. Union Springs Guano Co., supra. The domicile of a corporation is the. state under the laws of which it is formed; and, in a general sense, it is considered as a “person” within, or a “citizen” of, that state; and like reference may be made to the domicile of the corporation with reference to the county of its situs. -If it conducts its business in different parts of the state, it must do so by agent, and the statute authorizes suits against it in any of such counties in which it “does business by agent.”

The law of venue of actions against individuals, contained in section 6110 of the Code of 1907, provides, among other things, that—

“A11 actions on contracts, except as may be otherwise provided, must be brought in the county in which the defendant, or one of the defendants, resides, if such defendant has within the state a permanent residence.”

This confers upon a defendant a personal privilege, and it is not essential to jurisdiction of the cause (where the court attempting to exercise it has jurisdiction of such action) that the suit be brought in the county of defendant’s residence. That is to say, from the holding that venue is a personal privilege which may be waived by a defendant’s failure to complain against a suit filed against him in the county in which neither he, nor one of the defendants, resides, the court has extended the rule to the effect that the debtor might in advance stipulate in the contract the county in which he would be suable on or under that contract, and as a part of the valuable “consideration supporting the contract.”

In Thompson v. Union Springs Guano Co., supra, the plaintiff being a corporation, it is declared, on authority of Woolf v. McGaugh, 175 Ala. 299, 307 , 57 South. 754 , that venue statutes, in civil actions, confer a mere personal privilege that may be waived by the party entitled to assert it; that it was competent for the parties to such a contract to stipulate therein that either may sue the other in an action founded on the contract, in any court within the state having jurisdiction of the subject-matter; and that although defendant’s attention was not called to such stipulation in the note she signed (no misrepresentation having been made to her, and no concealment or deception practiced upon-her to procure her signature),- she was bound by her signature in that behalf. Thereafter, in Brown v. Alabama Chemical Co., 207 Ala. 215 , 92 South. 260 , the Thompson and Woolf Cases, supra, were reviewed, the Massachusetts case (Nute v. Hamilton Ins. Co., 6 Gray; 174) was discussed, the rule of the common law adverted to, and it was again declared, of the place of suits in transitory actions, that—

“The conclusion, * * * drawn by this court in Thompson v. Union Springs M-uano Co., supra, and foHowed by the trial court in the case at bar, that such a stipulation is not contrary to public policy 'and should, at least in a case circumstanced as this, be enforced as a valuable element of the consideration supporting the contract, is sound.”

The special circumstances of the Brown Case were that defendant had agreed in the note that suit might be brought in Montgomery county; whereas, the place of residence of the maker 'of the note was Lowndes county.

In the later case of Stewart v. Capital Fert. Co., 207 Ala. 596 , 93 South. 641 , the foregoing authorities were considered; the Chief Justice saying:

“The defendant interposed a plea to the venue, to which the plaintiff filed a replication setting up a clause in the note authorizing suit to be brought in Montgomery county, which this court has heretofore held was binding on the defendant. * * * But, if it contained the clause as set up in the replication, it was .not, as matter of law, an ordinary waive note,” etc.

The conclusion in the Stewart, Brown, and Thompson Cases, supra, was that, the provi

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sion as to venue contained in the several notes declared upon was not void as against public policy, and was not ultra vires the corporation.

Since the venue statute (Code 1907, § 6110) merely confers a personal privilege, it would appear that the corresponding statute (Code 1907, § 6112), providing that the corporation “may be sued "in any county in which it does business by agent,” likewise confers upon the corporation a “personal privilege” as to venue. If this be true, in thé absence of anything to the contrary in its charter, the corporation would have the saíne rights as the individual in that behalf. If the latter may stipulate in advance (as of a valuable right or a part of the consideration) as to the venue of suits on contracts between the individual and the corporation, it would - seem that a like right obtained \vhen the corporation contracted with its individual or corporate creditors. In Thompson v. Union Springs Guano Co., supra, the stipulation in question as to venue was declared to be “a valuable element of the consideration supporting the contract”; and this valuable right of contract is available to the parties alike, whether they be. individuals or corporations. That is to say, this valuable right of contract being dealt with may not be given to the individual and withheld from the corporation, and not raise a fundamental question. Article 14, Const, of United States.

• The necessarily implied powers are powers fairly regarded as incidental to and pertaining to the purpose of the creation of the corporation, and necessary and proper to carry into effect its express powers; and are discussed, or were the subjects of decision, in Ala. Red Cedar Co. v. Tenn. Valley Bank, 200 Ala. 622 , 76 South. 980 ; Ala. G. S. R. Co. v. Loveman Compress Co., 196 Ala. 683 , 72 South. 311 ; Ala. City G. & A. R. Co. v. Kyle, 202 Ala. 552, 554 , 81 South. 54 ; Fairhope Single Tax Corp. v. Melville, 193 Ala. 289, 304 , 69 South. 466 ; State ex rel. Perkins v. Montgomery Light Co., 102 Ala. 594 , 15 South. 347 ; Steiner & Lobman v. Steiner Land & Lumber Co., 120 Ala. 128, 139 , 26 South. 494 ; Chewacla Lime Works v. Dismukes, 87 Ala. 344 , 6 South. 122 , 5 L. R. A. 100; Central R. R. & B. Co. v. Smith, 76 Ala. 572 , 52 Am. Rep. 353 ; Talladega Ins. Co. v. Peacock, 67 Ala. 253 ; Cunningham Hdw. Co. v. Gama Transportation Co., 4 Ala. App. 561, 568 , 58 South. 740 ; Trustees of Dartmouth College v. Woodward, 4 Wheat. 518, 636 , 4 L. Ed. 029 , 659. See, also, 2 Fletcher, Cyc. Corp. pp. 1756, 1758, 1764-1767, § 792; section 233, Const, of 1901.

The charter of a corporation is to be read in connection with the general laws under which it was incorporated. This, in a sense, is a measure of its corporate powers. The corporation may, however, exercise such incidental powers as, under a reasonable construction of the charter and the general laws under which the corporation was created or consummated, may be fairly regarded as incidental to the purposes of its creation, and necessary and proper to carry them into effect. Under such general rule of construction, of charter powers of a corporation, in Steiner & Lobman v. Steiner Land & Lumber Co., 120 Ala. 128, 140 , 26 South. 494 , 497, is; the declaration that—

“A corporation has implied power to make- and indorse negotiable notes and bills in carrying on its lawful business, yet it is well established

* * *

that it has no power to-make, indorse or accept, for the mere accommodation of others, notes and bills in which it has no interest,

unless

such power is expressly conferred, or is incidental to some other power expressly conferred.” In re Tallassee Mfg. Co., 64 Ala. 567, 593 .

I take it that the “general laws of the-state of its creation” would not make of a-corporation an exception as to the equal’ right of contract (a valuable consideration, and right, Thompson v. Union Springs Guano Co., supra; Brown v. Alabama Chemical Co., supra) pertaining to venue. In my judgment the corporation and the individual have the same right of contract on this subject.

Of powers implied from powers expressly granted, the general rule is that the charter of a corporation impliedly confers upon it the power to make all contracts and to do all-acts which are reasonably necessary to enable it to accomplish the objects of its creation, “to use the means necessary to effect that purpose” (2 Fletcher, Oyq. Corp. § 791, p-. 1766), and to that end may enter into contracts and engage in transactions which- are-incidental or auxiliary to its main business, - or which may become necessary, expedient, or profitable in the care, management, and' disposition of the property which it is authorized to hold, manufacture, or dispose of undes the act or statutes by which it was created, or in the collection of its debts. Paterson & Edey Lumber Co. v. Bank of Mobile, 203 Ala. 536 , 84 South. 721 .

In Mr. Fletcher’s general classification of implied powers of a corporation are: (1) Acts; in the usual course of business, as borrowing-money ; making 'ordinary contracts; executing promissory notes, checks, or bills of exchange; taking notes or other securities; acquiring personal property for use in connection with the business; acquiring and holding land and buildings to be used as places; of business or in connection therewith; and' selling, leasing, mortgaging, or other transfer of property of the corporation in connection with the running of the business. (2) Acts-to protect and collect debts owing to the corporation, etc. Paterson & Edey Lumber Co. v. Bank of Mobile, supra.

It is settled in another jurisdiction that a

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corporation, not prohibited by law from doing so, and without any express power in its charter for that purpose, “may make a negotiable promissory note payable either at a future day or upon demand when such note is given for any of the legitimate purposes for which the company was incorporated” (Moss v. Averell, 10 N. Y. 449, 457 , and authorities; Leih-Und-Sparkassa Aadorf v. Pfizer, 158 App. Div. 505 , 143 N. Y. Supp. 744 ); and that the power on the part of the corporation to become a party to a negotiable instrument is implied when the nature and objects of the corporation are such that the transaction is necessary or proper in the conduct of its business (Police Jury v. Britton, 15 Wall. 566 , 21 L. Ed. 251 ; Scott v. Bankers’ Union, 73 Kan. 575 , 85 Pac. 604 ; Pearce v. Madison, etc., Co., 21 How. [U. S.] 441, 16 L. Ed. 134 ). In Merchants’ Natl. Bank v. Citizens’ Gas Light Co., 159 Mass . 505, 34 N. E. 1083 , 38 Am. St. Rep. 453 , it ivas held that the authority of the officer to sign notes on behalf of the corporation need not appear in the by-laws, nor be expressly granted by a vote of the directors of stockholders ; that if the corporation permits its treasurer to act as its fiscal agent, and holds him out to the public as having the general authority implied from his official name and character, and by its silence and acquiescence suffers him to draw and accept drafts, and to indorse notes payable to the corporation, it is bound by his acts within the scope of such imolied authority. Alabama City G. & A. R. Co. v. Kyle, 202 Ala. 552, 556 (7), 81 South. 54 .

In this jurisdiction it is held that an express grant of power to borrow money and issue bonds therefor, or to borrow money and secure the payment thereof by bond and mortgage, does not impliedly prohibit a corporation from borrowing money necessary in its business, and issuing negotiable notes and bills therefor. Talladega Ins. Co. v. Peacock, 67 Ala. 253, 260 ; McCullough v. Talladega Ins. Co., 46 Ala. 376 ; Talladega Ins. Co. v. Landers, 43 Ala. 115, 137 . In the case of Talladega Ins. Co. v. Peacock, supra, Mr. Chief Justice Brickell says:

“It cannot be matter of doubt, that every corporation clothed with the powers conferred on this company [to borrow money and issue its bonds therefor], has an incidental and implied power to borrow money, and in the exercise of the power, may make paper negotiable, or not negotiable,

and give saeh securities as may ho deemed most advantageous.

[Italics supplied]. The power, though it may not be expressly conferred, is implied and incidental, unless of it there is express prohibition.” Alabama Gold Life Ins. Co. v. Central, etc., Ass’n, 54 Ala. 73 ; M. & C. R. R. Co. v. Talman, 15 Ala. 491 ; Allen v. Montgomery, etc., Co., 11 Ala. 454 .

The prima facie presumption is that contracts by corporations are justified by their powers and are valid, and the burden of showing invalidity rests on the impeaching part;'. Touart v. Jett Bros. Cont. Co., 169 Ala. 638, 642 , 53 South. 751 ; Marengo Abstract Co. v. Hooper & Co., 174 Ala. 497, 503 , 56 South. 580 ; Perryman & Co. v. Farmers’ Union, etc., Co., 167 Ala. 414, 418 , 52 South. 644 .

The provision of the Constitution (section 233) that “no corporation shall

engage in any business other than

that expressly authorized in its charter or articles of incorporation” has not been violated by giving the company’s note (with the special provision as to the venue of suit on the note) securing the corporation’s debt to appellee. (Italics supplied.) It was the exercise of its express powers or an act necessary and proper to carry into effect those powers in extending its credit. See Paterson & Edey Lumber Co. v. Bank of Mobile, supra; Ala. G. S. R. Co. v. Loveman Compress Co., supra, explaining Sales-Davis Co. v. Henderson-Boyd Lumber Co., 193 Ala. 166 , 69 South. 527 , and U. S. Cast Iron P. & F. Co. v. Bailey, 194 Ala. 261 , 69 South. 825 .

The contract, or notes with “provision as to venue of suits” thereon, was within the authority given and exercised ‘by the secretary-treasurer and pursuant to resolutions of the board of directors; and that authority was not violative of the public policy of the state, the question of public policy being decided adversely to appellants in Thompson v. Union Springs Guano Co., supra; nor was the act ultra vires the corporation.

Mr. Fletcher says that so far as the contents and requisites of a bill or note are concerned, the same rule applies to paper executed by a corporation that governs such paper executed by an individual, except certain rules with regard to signatures; that if an authorized agent of the corporation draws a draft on it in favor of a third person for a debt due such third person from the corporation, it is in effect the note of the corporation, payable on demand. 2 ■ Fletcher, Cyc. Corp. § 956, p. 1910. The express authority given the secretary-treasurer was to purchase machinery, or

to

close the debit account therefor with plaintiff, by giving the company’s note; and this he did for the corporation by executing its notes, upon which the suit was prosecuted to judgment. This act by the corporation was not beyond the actual or apparent authority of the executive agent of the corporation acting for it in the matter of the formal acknowledgment and evidencing the debt in the contract form and terms in which the postponement of the due date of that indebtedness of the corporation was contracted. It is the opinion of the writer that .neither the conclusion announced by the majority, nor that on which the special concurrence of result by the CHIEF JUSTICE and Mr. Justice McCLELLAN is rested, is tenable.