Westinghouse Machine Co. v. Wilkinson

SOMERYILLE, J. In May, 1885, Wilkinson & Cole exe-cuted a note for two thousand dollars, payable to the order of the Montgomei-y Iron-Works Company, which was indorsed by the payee to the plaintiff — the Westinghouse Machine Company — a body corporate, which here brings suit on this note respectively against the makers and the indorser. The two causes are submitted together, and, as they depend upon essentially the same principles of law, we consider them together. The qnestion presented is one of ultra vires, or of corporate power. The consideration of the note sued on was a balance due on certain machinery delivered by the plaintiff to the Montgomery Iron-Works Company, to be sold by the latter corporation, as the agent of the plaintiff, under an arrangement by which, as agent, it in substance agreed to account for, or guarantee, the payment of a certain fixed price for all machinery received and sold by it, and was to take for its own benefit all profits received from purchasers over and above this fixed price. The charter of the Montgomery Iron Works Company shows that this company -was organized for the purpose of “ manufacturing and repairing machinery,” and for no other object; and it was expressly prohibited from contracting any debt, without the written consent of its board of directors. Under this state of facts, we hold that it was wholly outside of the scope and purposes for which this corporation was created to act as the agent of the plaintiff in making sales of machinery. The power to manufacture and repair machinery, coupled with a prohibition against the creation of debts, except in a mode particularly specified, does not confer by implication the power to act as agent in making sales of machinery manufactured by others, and of taking and indorsing notes executed for the purchase-money. The act was clearly ultra vires, and being such, under the uniform rulings of this court, the contract was void, and' the doctrine of estoppel can not be invoked by the plaintiff to debar the interposition of this defense. To permit this would practically be giving the sanction of the court to the doctrine, that a corporation can become omnipotent by arrogating to itself power forbidden by its charter, which is the vital source and origin of all corporate power.—Chambers v. Falkner, 65 Ala. 449; Marion Savings Bank v. Dunklin, 54 Ala. 471; Grand Lodge of Ala. v. Waddill, 36 Ala. 313; Waddill v. Ala. & Tenn. R. R. Co., 35 Ala. 323; City [315] Council v. Montgomery Plank-Road Co., 31 Ala. 76; Wood’s Field on Corp. (2d Ed.), § 243. The note being void as against the maker — as much a nullity as if made by a married woman or a lunatic — the payee could not give it any validity, by indorsing it to one fully cognizant of' all the facts attending its creation. Nor could it incur a liability as indorser of a void note, especially of negotiable paper, relating to a transaction which was beyond the scope of its corporate powers.—Green’s Brices’ Ultra Vires, (2d Ed.) 252, 255-256; 1 Daniel Neg. Instr. (3d Ed.), §§ 377 et seq. These views result in the affirmance of the judgment in each of the two causes under consideration, which is accordingly adjudged.