Chicago & Milwaukee Telegraph Co. v. Type Telegraph Co.

Mr. Justice Smith delivered the opinion of the court. It is contended on behalf of appellant that the guaranty of the lease from the Type Telegraph Company to Crawford, Stewart and Martin was void, because the Type Company was a foreign corporation, not authorized to do business in Illinois; second, the guaranty being by a corporation of the individual debt of another person was wholly foreign to the purposes of appellant’s charter and was ultra vires; third, the execution of the guaranty was wholly unauthorized; and fourth, the contract guaranteed was designed to prevent competition in the furnishing of market quotations. The Type Telegraph Company is a West Virginia corporation having its principal place of business at Cleveland, Ohio. Its charter shows that it is organized, among other things, to gather and distribute news' and construct, operate, own and lease wires, poles and ducts for the distribution of electric currents for all purposes, and generally to do all such- other business as may be necessary or incidental to the full development and prosecution of the business therein described and the purpos.es specified. The record shows that it had established in Chicago and Milwaukee plants consisting of wires, cables, printing telegraph tickers and other electrical appliances for the operation of tickers. The tickers were placed in the various offices of persons with whom contracts were made for the service. By means of electricity conveyed upon its wires and other electrical appliances there was caused to be written instantly upon a tape of paper the news of messages sent out from a main office to the customer. It had a large system of wires and cables connecting, or immediately available to connect, the important office buildings of the city of Chicago with each other. It had a like system in Milwaukee. The Type Company had the appliances for and was doing a telegraph business. True, it differed somewhat in kind from the usual business conducted by ordinary telegraph companies, but it was essentially a telegraph business, transmitting intelligence between distant points by means of electricity. The charter of the Type Telegraph Company is broad enough to bring it within the meaning of the wprd telegraph, as defined by the standard authorities. The business which it conducted and turned over under the lease in question was essentially a telegraph business conducted by and over telegraphic appliances. As said in Northwestern T. E. Co. v. Chicago, M. & St. P. Ry. Co., 76 Minn. 334, at page 344: “In these days there ought to be no one to question the statement that telephone is simply an improved telegraph. The former was originally called the speaking telegraph. The instruments used at the terminals are different, but the poles, the wires, the insulators and the generation of the electric current are all the same. ’ ’ See also Wis. Telephone Co. v. City of Oshkosh, 62 Wis. 32; National Tel. News Co. v. Western U. T. Co., 119 Fed. 294. We see no reason, either in the definition of a telegraph or in the nature of the business conducted by the Type Telegraph Company, which would prevent appellant company authorized to do a telegraph business from furnishing -such information to its customers over its wires as the evidence shows was furnished by the Type Telegraph Company, if the development of commerce has rendered that kind of information valuable to business men. In our opinion, therefore, the Type Telegraph Company is a telegraph company. It follows, we think, that to acquire the right to use the property and wire facilities of the Type Telegraph Company and thus promote and extend its business was within the expressed charter powers of appellant. If the lease had run to appellant as lessee, and appellant had thus become liable to pay the rent for the use of the property of the Type Telegraph Company, it would not have been an invalid contract, because ultra vires. The liability, however, took the form of a guaranty of a lease from the Type Telegraph Company to Martin, Stewart and Crawford, and it is contended in behalf of appellant that it did not have the power to make a pure contract of guaranty such as is relied upon in-the cross-bill of the Type Telegraph Company. It is argued that the execution of such a guaranty is plainly outside, either of any express power given by appellant’s charter, or of any power necessarily implied. In the argument of this question we think counsel for appellant have placed too much emphasis upon the mere form of the contract, and have lost sight of the substance of the transaction. “What is or what is not too remote must be determined according to the facts of each case. The rule has been stated to be: In exercising powers conferred by its charter that a corporation ‘may adopt any proper or convenient means tending directly to their accomplishment, and not amounting to the transaction of a separate unauthorized business.’ ” Best Brewing Co. v. Klassen, 185 Ill. 37. We must then reour to the facts shown by the record which relate to the making of the lease and guaranty and the object to be obtained. The evidence in the record shows that the contract or lease, although in form made with the individuals Martin, Stewart and Crawford and guaranteed by appellant, was in fact the contract and obligation of appellant. The negotiations for the lease began in July, 19C0. The first written evidence of the negotiations in the record is a letter1 dated July 28, 1990, written by Crawford as superintendent of appellant company to Solders, president of the Type Telegraph Company. This letter was written in response to a letter from Solders, of July 27th, and refers to a proposition for a lease of the property of the Type Telegraph Company outlined at a previous Cleveland conference. It states that the Chicago business of the Telegraph News Company had already been leased by appellant, but that it had not been done until they believed that the Type Telegraph Company was perfectly willing to make the contract with appellant at $2,000 per year. The letter shows clearly that it was the intention of appellant to lease the property. That it was so understood by the directors of the Type Telegraph Company appears from their action on July 31, 1900, upon the receipt of the letter, in passing a resolution authorizing the leasing of the property to appellant. That the lease was finally made to Martin, Stewart and Crawford and guaranteed by appellant, was due to the request of Crawford and Stewart, according to the testimony of Solders and Tilden. The Type Company knew nothing of the responsibility of the individuals, but was willing to make the lease in that form, provided appellant would guarantee its fulfillment and performance. In this connection it should be observed that the lease dated July 24, 1900, between appellant and the Printing Telegraph Company referred to in the letter of July 28, 1900, from Crawford, as superintendent of appellant, to Solders, president of the Type Company contained a provision that it might he assigned to a company owned and controlled by Martin, Stewart and Crawford. It is evident from this and other facts in the record and the manner in which the business was conducted that the National Telegraph News Company was organized for the benefit of appellant and to act in conjunction with appellant company which was owned and controlled by Martin, Stewart and Crawford. Eeasons which appeared entirely satisfactory to the managers of appellant dictated the policy of forming another company, the National Telegraph News Company, as a means or method of securing control of all these properties and operating them for the benefit of appellant and in the interest of appellant. The properties acquired under both leases were connected up with the lines of appellant directly and were used by appellant in its telegraph business from the date of the leases to a period long after the receiver was appointed; and all the properties and the facilities afforded by them were managed and conducted as one business entity and enterprise. The evidence is uncontradicted practically that the acquisition of the right to use the wire facilities of the Type Telegraph Company was indispensable to appellant in the condition of its property'in 1900. It also shows that the control of the ticker business of the Type Telegraph Company was important to appellant. It is clear, we think, from the evidence that by acquiring the lease from the Type Telegraph Company, for this is the substance of the transaction and the intent of the parties to it, appellant merely adopted proper and convenient means to accomplish the objects and exercise the powers conferred on it by its charter, and it did not amount to the transaction of a separate unauthorized business. Central Lumber Co. v. Kelter, 201 Ill. 503, 507; Richelieu Hotel Co. v. International M. E. Co., 140 id. 248; Carmichael v. Lake St. E. Co., 184 id. 348; Winterfield v. Cream City Brewing Co., 96 Wis. 239; Mercantile T. Co. v. Kiser & Co., 91 Ga. 636. It is insisted, however, that the execution of the guaranty by Stewart and Crawford was wholly unauthorized; that the transaction was so far outside of the ordinary course of business that it did not fall within the implied powers of Stewart as vice-president and Crawford as secretary to bind appellant by the execution of such a guaranty, and no action was ever taken by the board of directors authorizing it. If the questions before us in this record are to be viewed merely from the standpoint of the forms which the transactions took out of which they arise, and the nominal parties to the transactions, and are to be decided by the application of the technical rules of law to them as if they were presented separately in proceeding at law, certain results would necessarily follow. But this is a proceeding in equity and a court of equity will look to the substance of the transactions and the intention of the parties as evidenced by what was said and done by them, rather than to the mere form of the separate transactions, and thus obtain a true, equitable perspective of the transactions involved and apply to them equitable principles in administering or refusing relief. ' The record shows that in the spring of 1900 the Midland Telegraph Company, the original complainant, was organized under the laws of Wisconsin, ostensibly to do a telegraph business. What it did, however, in connection with the matters in controversy now before us was to take over substantially all of the capital stock of appellant and issue bonds upon the stock as collateral security. In this way a certain amount of money was raised. Crawford, Stewart and Martin owned and controlled the Midland Telegraph Company, and through it the appellant company. The whole business and policy of appellant company was controlled by Martin, Stewart and Crawford during the period covered by the transactions in question. These same parties organized the National Telegraph •News Company and took from appellant an assignment of the lease from the Printing Telegraph News Company and assigned the lease and also the lease from the Type Telegraph Company to the National Telegraph News Company in payment of the capital stock of that company. They were therefore the persons about whom the transactions involved in this case center, for they were the owners and controllers of all the corporations involved in the transactions, except the Type Telegraph Company and the Printing Telegraph News Company. After the leases were made, the offices and business of the Type Telegraph Company and the Printing Telegraph News Company were moved into the same suite of offices with that of appellant, and from that time forward the properties and business of these three companies and the National Telegraph News Company were operated and conducted by the same persons. The officers of the latter named company were the same as those of appellant. In view of these facts and of this situation, the case is not one where the officers have caused the corporation to guarantee a contract made with some of its directors for their individual benefit. Here the act of appellant in guaranteeing the lease was for the benefit of appellant, and appellant for a number of years acquiesced in the lease and guaranty, and received the benefits and advantages of the lease, and it cannot now be allowed in equity to raise the defense that its officers and owners exceeded their powers in making the guaranty of the lease. No showing is made that the contract was unfair or unreasonable, or a fraud upon the rights of appellant. On the contrary the guaranty and the lease are shown to be of great value to appellant. Cook on Corporations (5th ed.), sec. 684; Morawitz on Corporations (2nd ed.), sec. 632; Pneumatic Gas Co. v. Berry, 113 U. S. 322, 327. But aside from the question of estoppel, we think that Martin, Stewart and Crawford were the agents of appellant in obtaining the lease, and that the contract or lease, although in form made with the individuals named and guaranteed by appellant, was actually the contract of appellant. The record shows that no license to do business in-this State was ever obtained by the Type Telegraph Company until February 6, 1905, which was several years after the lease in question was made, and one-month after the original bill was filed. The cross-bill, was filed several months subsequent to the compliance with the statute prohibiting foreign corporations from doing business in this State, until certain conditions-are complied with. On this state of facts it is contended that the guaranty of the lease was null and. void by force of the statute. Section 67b of'chapter 32, Hurd’s Revised Statutes-of 1903, provides that no foreign corporation organized for pecuniary profit shall be authorized or permitted to transact business in this State or to continue business therein, if already established, until it shall designate some person as its agent or representative in this State on whom service of process may be had if desired. Section 67d of the same chapter provides for a fine* for neglect or failure to comply with the provisions, of the act; and in addition provides that such corporation cannot maintain any legal or equitable proceedings in the courts of this state upon any demand.. Section- 67c of the same chapter provides in its concluding paragraph as follows: “And provided, further, that the provisions of this act shall not apply to railroad or telegraph companies which have heretofore built their line of railway into or through this State, nor to insurance, banking or loaning companies.” ' Under the rules of construction applicable to statutes of this character, this statute should be construed liberally, and unless corporations of this character come within the plain provisions of the act, it should not be so construed as to nullify their contracts and deprive them of their legal remedies. By the express provision of section 67c above quoted the act does not apply to telegraph, insurance, hanking or loaning companies. As we have seen the Type Telegraph Company is a telegraph company. It therefore comes within the proviso above quoted and the provisions of the statute do not apply to it. What we have said upon the objections made to the lease of the Type Telegraph News Company apply, to those made to the lease of the Printing Telegraph News Company and need not be repeated. The latter company is, in our opinion, a telegraph company and it was within the powers of appellant to acquire its cables, wires, appliances and business in the legitimate promotion of the purposes aud business for which it was incorporated. If appellant leased of the Printing Telegraph News Company property suitable for telegraphic purposes and then used it for other purposes, or if appellant leased more of such property than was necessary for its purpose, the state alone can complain. Appellant, or those assigning cross-errors on this appeal, cannot complain. Brewer & Hoffman B. Co. v. Boddie, 181 Ill. 622; Alexander v. Tolleston Club, 110 id. 63; Rector v. Hartford Deposit Co., 190 id. 380. The lease of the Printing Telegraph News Co. to appellant provided that appellant should have the right “of assigning this contract, on or before the first day of September, 1900, to a company now’ organized or to he organized, provided that the company to which said assignment is made shall he owned or controlled by Messrs. L. M. Martin, W. R. Stewart, Jr., and F. E. Crawford, and shall have the right to operate in Illinois.” This provision gave appellant the right to assign the lease, but it did not provide that the assignment ■when made should operate as a release of appellant. An assignment of a lease with the assent of the lessor does not release the lessee, but both the lessee and the assignee are liable. Grommes v. St. Paul T. Co., 147 Ill. 635; Barnes v. Northern T. Co., 169 id. 112. And this is true, even though the lessor accepts rent from the assignee where there was no intention of the lessor to release the lessee and accept the assignee in his place. Grommes v. St. Paul T. Co., supra. It appears, hOwever, that all receipts which were given for rent paid under the lease ran to appellant. No evidence in the record tending to show that the Printing Telegraph News Company agreed to release appellant is called to our attention, and we find no such evidence. On the contrary, the intention is manifested on the part of the Printing Telegraph News Company not to release appellant. We cannot concur in the contention that the assignment of the lease discharged appellant from liability. The decree of the Circuit Court is affirmed. Affirmed.