Davis v. West Saratoga Building Union, No. 3

Stewart, J., delivered the opinion of the Court. The note, upon which the appellee in this case was sued, purports to be a negotiable instrument, signed by certain persons, professing to be the officers of the West Saratoga Building Union, No. 3, and payable to Heck, who endorsed the same, and it is alleged was passed to the appellant, the plaintiff below, for a valuable consideration before maturity. There was proof tending to show that the parties who signed the instrument, were the president, treasurer and secretary of the corporation, and that they had before issued notes of the same sort, one of which the appellant had received, and which was paid. The note in question, it appears, was drawn with a view of raising money to meet an antecedent obligation, which the company had incurred for one of its members, to whom it had loaned money and taken a mortgage to secure the re-payment. It is maintained by the appellee, that as a corporation it ■was not authorized by its charter to issue the promissory note in question, and that the officers of the company, who issued the note, transcended their powers in doing so; and secondly, that the note was entrusted to Brocker, with the date left blank, to prevent its negotiability, merely for the purpose of [293] ascertaining if the money could be obtained upon the note, and to make report to the officers to that effect, but that he was not authorized to transfer the note to the appellant or other party. If these officers of the company had the power to issue the note, and did do so, and placed it in the hands of Brocker, with special instructions as to the use to be made of it, and the note was transferred by Brocker to the appellant, before its maturity, for a valuable consideration, who received it bona fide, without knowledge upon his part of the restrictions imposed upon the party by the makers of the note, he is entitled to recover thereon, as an innocent holder who had purchased the note for value, although the officers of the company may have been deceived and defrauded by the party to whom they had confided the note. “ A bona fide holder for value, without notice, is entitled to recover on any negotiable instrument, which he has received before it became due, notwithstanding any defect or infirmity in the title of the person from whom he derived it, as for example, even though such person may have acquired it by fraud, or even by theft, or by robbery. Story on Prom. Notes, secs. 191, 192. The corporation in question, according to its certificate, bearing date 15th of May, 1868, required by the 37th sec. of ch. 471 of the Act of 1868, became incorporated, under the general law for that purpose, under the name of West Saratoga Building Union, No. 3, “ for the accumulation of a fund by the savings of the members thereof, sufficient to enable them to purchase for themselves, respectively, real or leasehold property, and generally for the purpose of a building association, and subject in all particulars to the limitations relating to corporations, which are contained in the general laws of the State.” Under sec. 18 of ch. 471, of this general Act for incorporations, we take it, this particular corporation, would be embraced with class 5, for the formation of homestead or [294] building associations. The 2d section of this law, restricts all incorporations thereunder, except for banking purposes, from issuing any note or other evidence of a debt, to be used as currency. The purport of this provision, was to prohibit all corporations, except the banks, from issuing paper for circulation as currency, and not to restrict them from giving promissory notes, as evidence of debt, where they were otherwise authorized. The sections from 44 to 50, inclusive, define the general powers of the corporations, created under this law, and prescribe the general regulations thereof, except in the eases, where there may be special provisions, applicable to particular corporations. Amongst the powers conferred, the 48th section, authorizes the corporations to acquire by purchase, or in any other manner, and to hold, use and dispose of, any property, real, personal or mixed, in or out of the State, which may be necessary and proper to enable them to fulfil the purposes of their incorporation, and generally to do every other act or thing, not inconsistent with law, which may be necessary or proper to promote the objects and purposes of the corporation. The 51st section, prohibits corporations, from exercising any corporate powers, except such as are conferred by law and such as are necessary to the exercise of the given powers. The 59th section, makes the stockholders of any corporation individually liable to the creditors of the corporation, to the amount of new stock, for all debts and contracts made by the corporation, until the whole amount of the capital stock, shall have been paid in and certificate thereof made and filed. Section 77, subjects all corporations, formed thereunder, to all such provisions of future legislation as may be made applicable to such corporations. Section 87, made applicable to corporations formed for the purpose of loaning money on real or personal property, may, at any time, in advance of the period of time, at which the corporation may cease to exist, advance to any member thereof, for such premium as may Be [295] agreed upon, the sum which he would bo entitled to receive upon the dissolution of the corporation or may purchase his share. The authority vested in this corporation, by the law of its charter, according to the nature of its business, is unquestionably sufficient, to enable it to borrow money, and to make loans to its members with a view to accomplish the purpose of its formation; and, endowed with this right, there is nothing in the character of the organization, or inconsistent with the public law or policy, to prevent it from employing the usual legal methods of effecting this purpose, subject to the sole restriction, that it shall not issue a paper currency. The powers of the corporation comprehend, not only the express grants, but extend to all the means necessary for the exercise of the powers conferred — sec. 51. This incidental power, without that section, the corporation would have possessed, by implication, for the purpose of effecting the objects designed by its charter, according to the nature of its business, and not in conflict with the public law. Wellersburg & W. N. P. R. Co. vs. Young, 12 Md., 476. If it had occasion, in the course of its dealings and transactions, to effect the loan proposed in this instance, the company had the right, according to their discretion, through its officers, to give this promissory note for that purpose, or, if the company owed any antecedent debt, if their creditor preferred such evidence, it might issue a promissory note for the payment of the same. “ All persons are competent to bind themselves as makers of a promissory note, who are not ineapitated by some special provision or disability created by law. So are corporations, acting within the scope of the particular business of the corporation.” Story on Prom. Notes, sec. 61. “Express authority is not indispensable to confer such a right — it may be implied as a usual and appropriate means to accomplish the objects and purposes of the charter.” Story on Prom. Notes, sec. 74. If the charter of this company prohibited the issue of such a note, in terms, or had prescribed any particular [296] mode in which to acknowledge its indebtedness, or if the nature of the corporation itself forbid the creation of any debt of this sort, parties dealing with it, or its officers, would do so at their peril, and subject to such limitations. Mayor and C. C. of Baltimore vs. Baltimore and Ohio R. R. Co., 21 Md., 51. (Decided 8th March, 1870.) It would be an unwarrantable construction, when this company is empowered to borrow money, without specification, that would restrict it to any special method; and there is no sound reason why it should not be allowed to use the most convenient measure for that purpose not inconsistent with the public law. Wellersburg Plank Road vs. Young, 12 Md., 484. The general law does not restrict this company from issuing the promissory note in question, and it has not been shown that by any of its by-laws, or other proceedings, that the officers of the company were prohibited from issuing the note, and we do not see, therefore, why the appellant may not be permitted to recover, if there has been no fraud on his part or knowledge of any fraud on the part of others connected with the transaction, before he became the holder of the note. If the evidence shows that the appellee, through its officers, issued the note, and the appellant, in good faith, received it for value, the appellee is bound to pay it, although their agent may have transcended his instructions and defrauded the company in giving currency to the note, yet, if the appellant was not aware of such facts, he is not to be precluded thereby from his right of recovery as a bona fide holder. Ye think the appellee’s prayers ought to have been refused, and the prayer of the appellant-granted. Judgment reversed, and new trial awarded.