George v. Nevada Central Railroad

By the Court, Belknap, J.: This is an action against a railroad corporation, organized under the laws of this state, upon a contract made by its superintendent with the plaintiff that he should report the condition of certain mines in the Reese River mining district. The case was tried by the court without a jury. None of the evidence has been brought here. Findings of fact and conclusions of law were made by the court, and upon these judgment was entered for the defendant. [237] Among other things, it was found that the principal business of the defendant was the transportation of ores from the Austin mining district, and that this business became unprofitable to the railroad company because of the limited output of the mines. It appeared to some, at least, of the defendant’s officers that with a more active management of the mines the traffic of the defendant would be increased. Accordingly the superintendent of the company, Mr. Hinchcliffe, by the authority of Mr. Hatch, the president, employed the plaintiff to examine the mines known as the “ Manhattan Mining Property,” and to report upon them, in the expectation that a change in their management and control could be brought about. The change took place, but whether through the instrumentality of the report or otherwise, is not clear; but it is found as a fact that the report was beneficially used by Hatch, Hinchcliffe and Elliman, officers of the defendant, and that under the new management of the mines the business of the railroad company materially increased. The fact was also found that the defendant was vested with the power conferred by the statute of the state relative to railroad corporations, and that neither the president nor secretary was authorized to employ the plaintiff in the service in which he was engaged, and, also, that no action was ever taken by the board of directors in the matter. Section 843, Gen. Stats., commits the management of railroad corporations to a board of directors. ’ The section is as follows: “The directors of any railroad company heretofore incorporated, or which may be incorporated hereafter, from and after its incorporation or organization, in pursuance of the provisions of this act, or of any law now in force in this state, shall, for and on behalf of such company, manage the affairs thereof, make and execute contracts, of whatever nature or kind, fully and completely to carry out the objects and purposes of such corporation, in such way and manner as they may think proper, and exercise generally the cor-, por ate powers of such company; and such directors shall also have full power to make such by-laws as they may think proper, and alter the same from time to time, for the transfer of the stock, and the management of the property and business of the company, of every description whatsoever, within the objects and purposes of such company, and for prescrib [238] ing the duties of officers, artificers and employes of said company, and for the appointment of all officers, and all else that by them may be deemed needful and proper, within the scope and power of said company; * * * provided, that such by-laws shall be approved by a majority of the stockholders, and shall not be inconsistent or in conflict with the laws of this state, or with the articles of association.” A corporation can exercise no power not granted to it by the legislature. In Thomas v. Railroad, Co., 101 U. S. 82, this principle was stated as follows: “We take the general doctrine to be in this country, though there may be exceptional cases and some authority to the contrary, that the powers of corporations organized under legislative statutes are such; and such only, as those statutes confer. Conceding the rule applicable tó all statutes, that what is fairly implied is as much granted as what is expressed, it remains that the charter of a corporation is the measure of its powers, and that the enumeration of these powers implies the exclusion of all others.” In Davis v. Railroad Co., 131 Mass. 259, it is said: “A corporation has power to do such business, only, as it is authorized by its act of incorporation to do, and no other. It is not held out by the government, nor by the stockholders, as authorized to make contracts which are beyond the purposes and scope of its charter. It is not vested with all the capacities of a natural person, or of an ordinary partnership, but with such, only, as its charter confers. If it exceeds its chartered powers, not only may the government take away its charter, but those who have subscribed to its stock may avoid any contract made by the corporation in clear excess of its powers. If it makes a contract manifestly beyond the powers conferred by its charter, and therefore unlawful, a court of chancery, on the application of a stockholder, will restrain the corporation from carrying out the contract; and a- court of common law will sustain no action on the contract against the corporation. livery person who enters into a contract with a corporation is bound, at his peril, to take notice of the legal limits of its capacity, especially where, as in this commonwealth, all acts of incorporation are deemed public acts, and every corporation organized under general laws is required to file in the office of the secretary of the [239] commonwealth a certificate showing the purpose for which the corporation is constituted.” In Morawetz on Private Corporations, the author states the law thus: “The powers possessed by the various agents of a corporation may be limited by the terms of their appointment, or by custom; but the ultimate source of their authority is always the agreement of the shareholders, expressed in their charter or articles of association. It follows, therefore, that, if an act is in excess of the ■ chartered purposes of a corporation, it will always be outside of the powers delegated to the company’s agents, as well as in excess of the corporate powers which the company is authorized by law to exercise. The general rule that a contract made by an agent of a corporation in excess of his powers does not bind the company applies with peculiar force to a contract which is in excess of the charter itself. For a person dealing with a corporatibn must, at his peril, take notice of the terms of its charter, and of the fact that acts in excess of the charter are necessarily in excess of the authority of the agent performing them.” (Section 580.) The defendant corporation is authorized by the statutes of the state to construct and maintain a railroad. To employ persons to make a report upon mines is outside the purposes and objects of a railroad corporation, and, consequently, outside of the powers delegated to it by any of its officers. Assuming that the road may have been benefited by an increased business, the same reason would be applicable to any other project that would lead to the same result. The question is not whether the business is profitable, but whether it is within the legitimate purposes of the corporation. (Mor. Priv. Corp., sec. 363.) It is claimed that the contract was an executed contract, and that the defendant, having received its benefits, cannot defend upon the ground of want of authority to make it. If the company had received the benefits of the contract, the question we should have to consider would be different from the one now before us. But the fact is that the report never came into the possession of the corporation, as such. Several of its officers used it, but their use was unauthorized, and never ratified by the corporation. The findings of fact on this point show “ that the stockholders of said defendant did not personally [240] know of the making of said contract, and, the same was never presented to them for their action, other than said Hatch and Hinchcliffe, and no action was ever taken thereon by the board of directors of said defendant.” .Judgment affirmed. Murphy, C. J.: I concur.