North River Insurance v. Lawrence

By the Court, Savage, Ch. J. The manner in which this corporation are to manage their monied operations is clearly pointed out. They may loan money upon bond and mortgage, but on no other security. They shall not be concerned in the discounting notes, nor any other banking operations. They may purchase stock for the purpose of investment, but for no other purpose. It has often been decided that a corporation can do no act but such as is expressly authorized or necessarily implied in their act of incorporation. The plaintiffs might loan money upon bond and mortgage, but not on a note. They seem to be aware of this, and endeavor to make themselves secure by loaning the money upon an hypothecation of stock, and take a note as collateral security ; but that is equally unauthorized. They may purchase stocks for the purpose of investment, and sell where losses make it necessary; but in no other way can they deal in stocks. But even if it were lawful to loan money upon the hypothecation of stocks, that would not authorize the taking a note by way of security for the loan. It is an evasion of the statute, which intended the company should not at all interfere with the banks in lending money upon personal security. It is a sufficient answer to this action that the plaintiffs, in taking the note in question, have done an act which they had no authority to do. They have no capacity to become the payees or endorsees of a promissory note. They cannot, therefore sustain an action in that character. The defendant is entitled to judgment.