was merely noIYlinal-oD.El' that the 'assignor paid the expenses'oithe suit: But these arauot Incqusisten,t transfer, and they signify nothing when taken IDiconnection with the testimony of the assignor and assignee, who both'state that the' transfer was, absolute, and that there is no understalldingor agreeinent by" which the assignor is to have any of ,the contents of the note 0): the fruits,of the litigation. It follows that the, court had jurisdiction of the action on the note, and that the judgment ,therein is 'valid and binding on all thedefend.ants herein for the purposes of this 'the plaintiff is therefore entitled to have the conveyances of Decenibe1'29, 1877, to the defendants Beauchamp and Mary Jackson, so far as they hinder and delay him front obtaining satisfaction of his judgnlerit, set aside and held for naught. But' it is a mistake to 'suppose that the property, or aby portion of it remaining after the satisfaction ()£the judgment, will revert to the husbii.nd. As between him and bis wife, the conveyances are good and vest the title in her., They are not void, but only voidable at the'suit of a creditor who is thereby prevented from the collection ofbisdebt, and then only so far, as to' enable him to collect it. In re Estes, 7Sawy. 460. If, there' is any surplus Of the property, oithe proceeds thereof, after satisfying the judgment of the plaintiff and the costs of this'suit, as it is proba.ble there will be, it belongs to the wife. ,;.Adecree will be entered setting aside the conveyancesll.sto 'the' plailitiff,and directing the master to sell the property, or so much thereof as may be necessary to satisfy the' plaintiff's judgment arid' the costs oHhis suit and the execution of the decree herein, aondpay the remainder of the proceeds', if any t to the defendant' Mary Jackson. ·
(Circuit Uourt, D., KaTl,8a8.Npvember TerIl1. 1882.).
' . ,
CONTRACT-No RELIEF . ,The general rule is' that a court of eqliity will not Interfere itr behalf of 'either pa-rty to a contr.act fraudulent as to bpth parties, either.to ,t1}e &mn,C, ,or a breach thereof. . ' !' '" '.
,SAME RULE:. '" ",: . ' , · 'A' corporation may oeguiity 6f fraud,and if through its b08l'd Of direct6rS'it . enters'intb a fraudulent contraCt. it is subject to ,the TtUe state<V:"
2. SAllE-CORPORATIONS BOUND BY
3. OORPORATIONS ARE BOUND 'By ACTS OF AGENTS OR DIRECTORS.
A contract made by the directors of a corporation in the course and within the general scope of their powers and duties, is to be regarded as made by the corporation, although in making it the directors may have acted fraudulently,' The rule is the same as that which prevails between natural persons.
4. RULE APPLIED-CoNTRACT BY CORPORATION WITH ITS DIIlECTORS.
Where a railway corporation, through its board of directors, entered into a of a part of its road with certain pers')us, some contract for the of whom were directors of the company, and, in pursuance of that contract, executed its bonds in a large sum, secured by mortgage upon its property, held, that although the contract be held void, yet the corporation, being itself a party to the fraud, could not maintain a bill to set aside and cancel the. mortgage as a cloud upon its title,
J. P.Usher, for complainant in cross-bill. Mr. Glove?' and ]fr. Shepley, for defendants. MCCRARY, C. J. This suit was originally brought to foreclose a mortgage executed by the Kansas Pacific Railroad Company to certain trustees, to secure bonds to the amount of $6,500,000. The original bill has been dismissed, and the case stands upon a crossbill filed by the defendant company, in which it is alleged that the mortgage above referred to is fraudulent and void, and ought, therefore, .to be canceled as a cloud upon its title. It is alleged that said mortgage was executed as part of a scheme whereby the directors of the company united with certain others to enter into certain contracts with the company to build a portion of the company's railroad, and to receive certain considerations therefor. In other words, it is alleged that the directors of the company were members of a con. struction company, to which the honds secured by said mortgage were issued, and that they contracted fraudulently with themselves. Conceding, for our present purposes, the truth of these allegations, the question arises, can the defendant company be granted the affirmative relief prayed for? The general rule is that a court of equity will not, in such cases, interfere in favor of either party, either to enforce or set aside the contract, or to award damages for its breach. The parties being in pari delicto, the court will leave them where it finds them. If this were a contract between natural persons, there could be no doubt about the application of this doctrine i but it is said that the rule does not apply to the defendant corporation, because, while the contract was made in the corporate name, the corporation is not, within the meaning of the rule, a party to it, since in making it the directors exceeded their authority. To sustain this view would be, in effect, to hold that a corporation can in no oase be guilty of fraud; for, being an artificial being, it can a.ct only through agents, a.nd it
LEWIS V. MEIER.
would be impossible in any case to show that the charter of a corporation expressly authorized the perpetration of a fraud. It is, however, well settled that a corporation may be guilty of a fraud. The courts have gone further, and held such artificial persons liable in tort in certain cases. The true rule is that such acts as are done by the directors in the course and within the scope of their powers and duties, are to be regarded as the acts of the corporation. Such is the rule, even if· the acts are unlawful and tortious. 2 Hi!. Torts, 322; Copley v. G.lt B. Sewing-Machine Co. 2 Woods, 494; Railroad Co. v. Quigley, 21 How. 202; Sandford v. Bundy, 23 Wend. 260; Brokaw v. N. J., etc., Transp. Co. 32 N. J. Law, 331; Fogg v. Griffin, 2 Allen, 1; Rivesv. Plank-road Co. 30 Ala. 92; Litchfield Bankv. Peck, 29 Conn. '384; Lee v. Village of Lundy Hill, 40 N. Y. 442; Perkins v. Railroad Co. 24 N. Y. 213. These authorities abundantly show that if the directors or agents employed by a corporation conduct themselves fraudulently, so that if they had been acting for private employers such employers would have been affected by their frauds, the corporation is, in like, manner and to the same extent, affected by them. In other words, the settled doctrine is that a corporation can no more repudiate the fraudulent acts of ·its agents than an individual can. The rule is the same as to both. The doctrine as applicable to private individuals is familiar. The principal is liable for the acts of the agent, not alone in cases where they are expressly authorized, but also in all cases where such acts come within the range of the agent's duties. In the case of the RaiZ,'oad Co. v. Quigley, supra, Mr. Justice CAMPBELL- says: "The result of the cases is that for acts done by the agent of a corporation, either in contractu or in delicto, in the course of its business or of their employment, the corporation is responsible as an individual is responsible nnder like circumstances." " In tl1at case the corporation was sued for libel, and held liable, the defense that the defendant was a corporate body, with defined and limited powers, being overruled. It was argned that the corporation, being a mere legal entity, it was incapable of malice, which is a necessaa-y ingredient of a libel. The defense there, as here, was that the directors acted outside of their authority, and bound themselves as individuals only. But the court said, (folio 209:) "To support this argument we would be required to concede that 8. corporation could only act within the limits and aooording to the faoulties determined
314 by the tht, therefore, no .offense can be imputed to it; that, althougl;dllegal acts might })e,committed for the ben,efit or withint4e servioe pUbe corporation"and to accomplish objects for which it was (lreated, by the direc;tion of their dominant body,that llotbeinggontemplatedl;>y the charter, must be referred to the rational and se,nsibla agents who performed them, and the whole responsibility must 1:>e liIp.ited to those agent,s; andwe should be forced, asa legitimate consequence, to conclude that no action ex or indictment will lie against a corporation fOl' any misfeasance. " It.is tmethat the question there was whether the corporation was liable.in damages for injuries caused by a malicious libel; but if the corporation is liable for one of the consequellces of an unauthorized and illegal act of its agents, on the ground that th(jaet was done "to accomplish objects for which.it was created," it is clearly liable for aU such. coos¢quencef:\. Here, one of the consequences of th,e illegal ltnd fraudulent contract is that neither party shall be heard in a court of equity to demand any reljef eitherenfqrcing orannulling same. This is a rule of great general importance, and one which the courts are ,often called upon to eJ;lforce in the i,nterest of sound morality and public good. To ,sustain the present cross-bill would he da· termine that the rule has no application to corporations, and that these artificial perSon!!, who act from Ilecessity only through agents, may, through such agents, enter into fraudulent and immoral, con· tracts, and, after receiving their 1;>e;nEl.fits, may ask a court of, equity to cancel them, on the ground that their agents made them without We cannot give our assent to such a doctrine. A very large proportion of the Plost. iJIlPQrtant business of the country is transacted by artificial persons, and they control vast aggregations of wealth and exercise vast powers. It is the sound policy of the law to apply tocQrporations, as far as possible, those rules of good cOJ;lsciencaand equity which are enforced al> between man man. The tract now in controversy was by the board of directors for the purpose of constl'uctinga railroad, which the corporation was clearly ,authorized ,to ' ,It therefore within the geneJ;alscope of .their powers., The corporation may be permitted to defend against ,the ,contract Qn the ground that it was fraudulent as alleged; but if sOji,tisnot .because the corporatio:p. has any special clajms to the fai vot,Q£·a, court ,of t)(Juity intllat regfJ,r,d, )Jut solely upon ,thegrouud
that neither! pa.rty to a' fra.udulent contract (both .having participated in thE'i fraud) call demand its enforcement. The-company is not en.. titled to affirmative relief, and therefore the cross· bill is dismissed.
MOSGBdVE and others
November Term, 1882.)
(OWCliit Oourt, D. Nebraska.
. pose of setting up matters which might, by the use of due diligence, have been ascertained, and pleaded 11Y way of amendment ill. the origipal suit·
The fact that the complablant d08ires to drop ont of the case 80me of the parties detendant to the original bill, doe8 not of ,itself give:him the right to especially when it appears that such change of proceed bY parties is not essential.
REMOVAL 011' CAU,BE-JU,RI8DICTION 011' CmOUIT CO:t1Ror·
.A circuit court of the United 'States has no jurisdiction of a case commenced in a state court on a contract by an assignee, and removed thence to said court, unlessthe.action might have been brought originally in the circuit court by the assignor, and It is probable that a plea to the jurisdiction would be entertained in a suppleinental proceeding.
Application for Leave to File a Supplemental Bill. It appears from the record that about the year 1877 John I. recovered a judgment in the district coui-t for Douglas county, Nebraska, for about $2,500 against the Omaha & Northwestern Railroad Company, which judgment was afterwards assigned to one James E. Brown, who commenced a suit in equity in the district courl of Burt county, Nebraska, against John A. Horback, Henry W. Yates Herman Kountze, Francis Smith, Frank Murphy, and Sally A.. Eorback, for the pUl:pose of subjecting to the payment of said judgmenc certain real estate in the bill described. The ground of the action was that the said respondents, s0111eof them being directors of said railroad company, had entered into a contract with the company tooonstruct a portion of the line of railwa.y,which contract was contrary to 'pub1ic policy and void; a.nd that they hadreceived the land sought to be subjected as a part of the proce.e(1s of said contract, and- therefore held itintrust for the creditors of said company. U was in the briginal billa.verred that the respondents J'eceived