Calumet & Chicago Canal & Dock Co. v. Davis

Mr. Justice Gridley delivered the opinion of the court. Counsel for the defendant, Abel Davis, trustee, etc., state at the commencement of their written argument here filed: “The only question before this court is the validity of the trust deed covering Blocks 138 and 139. It is our contention that the act of the Dock Company in making the loan to Conkling was absolutely ultra vires, and that therefore no action can be brought upon the trust deed. * * * We contend that nothing in the Dock Company’s charter can be twisted into an express power to loan money, and that the making of this loan was not the exercise of a power reasonably and necessarily incidental to any express power of the corporation.” Counsel then argue that, assuming that the Dock Company did have express power to buy and sell land, the making of said loan was not the exercise of a power reasonably incidental to or implied from the power to sell land. And counsel further contend that the master’s finding that this loan was made out of the surplus funds of the Dock Company is not warranted by the evidence. At the conclusion of their written argument counsel state: “It is the common misfortune of the complainant and the unsecured creditors who are represented by plaintiff in error that Allen Conkling became bankrupt. If Mr. Conkling were today solvent, * . * * the unsecured creditors could enforce payment of their claims, and the Dock Company, although it could not foreclose its trust deed, could bring an action for money had and received, and * * * recover its money. * * * The Dock Company cannot profit by its own wrong and now enforce an ultra vires security, and thus recover its claim in full while other creditors take nothing.” Counsel for the complainants contend (1) that by the language of the Dock Company’s special charter express power is given that company to loan money; (2) that the loan in question was proper as an incident to the sale of said lots in Block 139 to Conkling; (3) that said loan was valid as an investment of surplus funds of the Dock Company; and (4) that as Conkling received the benefits of the loan both he and the trustee of his bankrupt estate are estopped, under the facts of this case, to deny the power of the Dock Company to make the loan. In the discussion of the first point counsel for complainants contend that while the Dock Company was not authorized under its special charter to engage in the business of loaning money, it was expressly given power to lend money whenever such action might be reasonably incidental to the accomplishment of any legitimate corporate object, or whenever it had moneys on hand upon which it might desire to earn interest. Section 1 of the charter states that the Dock Company “may purchase, possess and occupy real and personal estate, and may sell, lease and employ the same in such manner as it shall determine.”. And counsel argue that money is personal property, that the right given to the company to employ personal estate includes the right to employ money “in such manner as it shall determine,” and that to so employ money includes the right to lend money whenever reasonably incidental to any legitimate corporate purpose, and such lending is not expressly prohibited or is not against public policy.- There is force in counsel’s argument. We do not find in the Dock Company’s special charter, granted March 10, 1869, any express prohibition against its making such a loan as the one in question and taking security therefor. And we do not think that it was then, or is now, contrary to public policy for a corporation to make such a loan. Section 1 of the present general act concerning corporations (J. & A. Tf 2418), which was passed in 1872; provides that ‘ ‘ corporations may be formed in the manner provided by this act for any lawful purpose except banking, insurance, real estate brokerage, the operation of railroads and the business of loaning money.” This does not mean that the occasional or incidental lending of money by corporations, or the formation of corporations, for the purpose of engaging in the business of loaning money, is prohibited by the policy of the law, but does mean that corporations may not be formed under said act of 1872 for the purpose of engaging in that business. Stevens v. Pratt, 101 Ill. 206; Brown v. Scottish-American Mortg. Co., 110 Ill. 235. The Dock Company’s special charter was granted before said Act of 1872 was passed, and the evidence shows that it was not engaged in the business of loaning money. By section 1 of its special charter the Dock Company was expressly given power to purchase and sell real estate. The evidence shows that at the time the loan in question was made it was possessed of considerable real estate which it was desirous of selling. Even assuming that the Dock Company did not have express power under its charter to make the loan in question, we think it had implied power so to do, as reasonably incidental to the sale to Conkling of said lots in Block 139. 3 Thompson on Corp., sec. 2181; Kraft v. West Side Brewery Co., 219 Ill. 205; Union Water Co. v. Murphy’s Flat Fluming Co., 22 Cal. 621, 629; Holmes, Booth & Haydens v. Willard, 125 N. Y. 75, 81; Central Lumber Co. v. Kelter, 201 Ill. 503, 507. And we think that the loan was valid as an investment of the surplus funds of the Dock Company. 1 Clark & Marshall on Priv. Corp., see. 186; Bank of Berwick v. George Vinson Shingle & Mfg. Co., 132 La. 861, 863; Garrison Canning Co. v. Stanley, 133 Iowa 57, 60; Western Boatmen’s Benev. Ass’n v. Kribben, 48 Mo. 37, 43; Laughlin v. Chicago Ry. Equipment Co., 182 Ill. App. 280, 291. We cannot agree with the contention of counsel for defendant, viz., that the finding of the master that the loan was made out of the surplus funds of the Dock Company is not warranted by the evidence. Murry Nelson, Jr., president of the Dock Company, testified to the effect that at the time of the making of the loan the company had surplus funds in its possession from which the loan was made, and his testimony was not contradicted. And, assuming that the Dock Company did not have express power to make the loan, we are of the opinion that as Conkling received the full benefits of the loan the defense of ultra vires cannot prevail under the facts disclosed. Bradley v. Ballard, 55 Ill. 413, 417; Darst v. Gale, 83 Ill. 136, 140; Kadish v. Garden City E. L. & Bldg. Ass’n, 151 Ill. 531, 537; Rector v. Hartford Deposit Co., 190 Ill. 380, 389. The making of the loan was not an act which was prohibited by the Dock Company’s charter, or one which it could not under any circumstances perform. Neither can we say that it was an act which was wholly outside of the general scope of the powers conferred upon it by the legislature. The present case is to be distinguished, we think, from the cases of National Home Bldg. & L. Ass’n v. Home Sav. Bank, 181 Ill. 35; Fritse v. Equitable Bldg, & L. Society, 186 Ill. 183; Steele v. Fraternal Tribunes, 215 Ill. 190; Converse v. Emerson, Talcott & Co., 242 Ill. 619; and Mercantile Trust Co. of Illinois v. Kastor, 191 Ill. App. 219. For the reasons indicated the decree of the Circuit Court is affirmed. Affirmed.