And this I believe to be the proper construction to be placed upon the instrument. There is no doubt considerable conflict in the decisions upon similar questions, and, this being the case, the court feels somewhat free to decide the question upon what it conceives to be the correct legal principles applicable to such cases; and in so doing I shall entertain a hope that the ruling may be found to be grounded upon true principles of commercial law, and also to be in accordance with the best authority. The motion to direct a verdict for the defendant will be overruled. The defendant thereupon offered evidence to prove a want of con· sideration in the making of the note, which evidence being objected to was ruled out, until the plaintiff's position as a bona fide purchaser and owner of the notes should be impeached. Thereupon the defendant rested its case, and the court ordered a verdict for the plaintiff for the amount of the notes in suit, with interest.
and another v.
«(}ircuit (lourt, D. Kansas.
December 16, 1885.)
CoRPORATIONS-ACTS ULTRA VIRES-ExECUTED CONTRACTS.
Where a corporation goes outside of the scope of its legitimate business and makes a contract, and that contract has been executed and the corporation has received the benefits thereof, it will be enforced.
2. S.um-CONTRACTS WITHIN SCOPE OF BUSINESS. Where the contract is within the general scope of the business of corporations of the character, though beyond the powers actually vested in the particular corporation contracting, parties who make the contract in ignorance of the peculiar limitations in the special corporate powers of this individual corporation are not prejudiced thereby. 3. SAME-INJURY TO INNOCENT PARTIES. Wherever a contract has been entered into which is beyond the powers of the corporation, and other parties have acted upon the faith of that contract and parted with money or value, and the relations of the parties have become so changed that the ante the contract cannot be restored, the contract will be enforced. 4. BANKING CORPORATION-SUBSCRIPTION TO A CREAMERy-WITIIDRAWAL. Where a banking corporation, through its president, subscribed to a creamery, but before any act was done or expenditures made on the faith of such subscription the SUbscription was withdrawn, held, that it was simply an execu' tory contract, and that the subscription could at the time be withdrawn, and that the bank was not liable. . 5. PRINCIPAL AND AGENT-CONTRACT FOR PRINCIPAL BY AGENT-LIABILITY OF
Where an agent, without fraud or misrepresentation, at the request of the principal makes a contract for such principal and in his name, whiC(h is not binding on the principal because ultra vires, the facts being fully known to all parties, the agent is not liable on such contract.
HOLT 11. WINl!'IELD BANK.
At Law. G. W. Beebe and Rossington It Smith, for plaintiff. J. J. Buck and G. F. McMillen, for defendant. BREWER, J. These two cases are tried together. The first case presents this question: 'rhe Winfield by its presideJ?t, scribed a thousand dollars towards the bUlldmg of a creamery III Wmfield. I think it immaterial to state the form in which the plan was to be carried out. The sum and substance of it was that the bank, by its president, subscribed a thousand dollars towards the building of a creamery; and the question is whether the bank is bound by that subscription. Counsel for plaintiff have with great diligence found and submitted to me some 25 or 30 cases involving the question of the responsibility of a corporation for contracts which are not within the line of its cor:porate business. It may be considered as settled law to-day that where a corporation goes outside the scope of its legitimate business and makes a contract, and that contract is executed and the corporation has received the benefits of the contr'1ct, the courts will never listen to a plea of ultra vires. It also, I think, may be laid,down as within the limits of many decisions and good law that where the contract is within the general scope of the business of corporations Of that character, though beyond the powers actually vested in the particular contracting corporation, parties who make the contract,.in ignorance of the peculiar limitations in the special corporate powers of this individual corporation, are not prejudiced by them. It may also be laid down as a third proposition that wherever a contract has been entered'into which is beyond the powers of the corporation, and other parties have acted upon the faith of that contract and parted with money or value, and the relations of parties have become so changed that the status ante the contract cannot be restored, the courts will not listen to a plea of ultra vires; but with these limitations, and possibly some others, which, however, are not germane to this case or which do not now occur to me, the doctrine is still true that cor,poraoLthose tion created with certain defined powers cannot go powers and make a contract to bind. A corporation created for banking purposes cannot go into the insurance business ; and while the contract remains executory no contract of insurance can he enforce.d against it. And this is no technical, artificial, arbitrary rule. It is founded in the protection necessary to stockholders who invest their means in the corporation. They may be willing to trust their means in a certain class of business, and if the corporation is created for that class of business they have a right to nily upon the fact that it will not enga.ge in any other business. No question of estoppel rises in this case upon the stockholders by reason of their personal action. This subscription was signed by the president with the assent of a majority of the directors. The answer, not put in issue, alleges that the party who obtained this subscription, who was. the active. agent
of the plaintiffs in this suit, had authority from them to consent to any modifications, limitations, or conditions in the subscription; and it further alleges that this subscription was made by the Winfield bank upon certain unfulfilled conditions, and that when it was apparent, and that, too, immediately after the signing of the contract, that these conditions were not to be complied with, the president of the bank notified this agent that the bank's subscription was canceled, null, and void. Counsel sav that this is an executed contract. I do not understand that a contra·ct for the doing of work can be called an executed contract before the consideration is paid or the work done. It is true that this was a subscription by a number of parties, and upon the faith of that subscription the plaintiffs acted; but as to each one of the subscribers it. was an executory contract until the consideration was paid; or until the work was done by the plaintiffs. And, according to the testimony, immediately after the subscription, prior to any active proceedings, the bank, subscribing by its president, notified the authorized agent of the plaintiffs that the subscription was canceled. I cannot look upon it as otherwise than a mere executory contract, and as such it is clearly without the scope of the powers of the bank. Starting a creamery is not bank business. I have before me in Omaha, Nebraska, a case which illustrates the wisdom and necessity of keeping corporations within the proper limits of their power. There the parties started with a creamery; a creamery association was incorporated. That was too humble a business for the promoters. The corporation bought a bank and went into the banking business; rented a manufacturing company's property and went into manUfacturing; started a broker's office and went into the loan business. As a consequence, and as might be expected, there was a terrible crash, and a host of hungry creditors are claiming relief. As much as I object to saying to any party that he can get out of his promise, I think that the promise of the bank in this case was beyond its powers and not binding upon it. Judgment will have to go for defendant. The other case is one against the president of the bank, and as to which I have no question. After the suit was commenced against the bank, and it had set up this plea of ultra vires, the plaintiffs sued the president, claiming that if the bank was not liable he was; that he was the agent who signed that subscription, and if the principal was not liable the aget;lt was. I had occasion when I was on the supreme bench, in the case of Abelea v. Oochran, 22 Kan. 405, to examine with great care the circumstances under which an agent is responsible when the principal is not bound. There were in this case no misrepresentations of fact or of law made by the president. He simply told the parties he would subscribe for the bank if a majority of the directors assented. He saw
UNITED STATES V. TOD.
a majority of the directors and they assented; he then came back and subscribed in the bank's name. There were no false representations of facts. no representations of law. Every person who deals with corporations is chargeable with notice of the general scope of their powera. If he deals with an insurance company he knows that it is insurance business that that company is authorized to transact. So if he deals with a bank he knows that it is banking business that that bank is authorized to transact, and none other. He has the same general knowledge that the officers of the bank have. Of course, where there is a concealment of a fact within the special knowledge of the party making the representation or making the signature. he may be bound. If. for instance, the bank had power to make such a contract as this. provided the directors assented. and defendant had represented to the plaintiffs that the directors had assented when in fact they had not. then unquestionably a failure to hold the bank lia. ble would cast a liability upon him; but when a man deals with an officer of a corporation. and no representations are made by that officer, and that officer simply proposes to bind the corporation, and as a matter of fact the corporation is not bound, and is not bound simply because the contract is ultra vires of that corporation, the in. dividual making the subscription is also not bound. Judgment may be entered for the defendant in the second case.
1(M/Juit OOU'l't, 8 D. Ohio,
November, 1885 )
"mAMOUS" CRIMES-CRIMINAL INFORMATION.
Offenses punishable by imprisonment for more than one year may, upon conviction thereof, subject the defendant to an .. infamous" punishment, and cannot be prosecuted by criminal information.
The offenses created by sections 4746, 5418, and 5479 can be prosecuted only by indictment.
Demurrer to Criminal Information. J. O. Harper, for demurrer. Henry Hooper. Asst. U. S. Atty., contra. SAGE, J., (orally.) The defendant is charged in a criminal information with violating sections 4746, 5418, and 5479, Rev. St. He demurs on the ground that the offenses are "infamous," and can be prosecuted only by indictment or presentment of a grand jury. The counts under sections 5418. 5479, are clearly within Ex parte Wilson, 114 U. S. 417, S. 0.5 Sup. Ct. Rep. 93.6, as those sections in terms authorize imprisonment at hard labor. Section 4746 authorizes a sentence of "imprisonment for a term not exceeding three years."
Under section 5541, if the sentence be for a period longer than one year, it may be executed in a penitentiary, and, under section 5539, subject to the discipline and treatment applied to prisoners under sentence by the state courts. Prisoners in the Ohio penitentiary are, by law, kept at hard labor. A sentence by this court to imprisonment in the Ohio penitentiary is therefore in effect a sentence to imprisonment at hard labor. See Ex parte Karstendick, 93 U. S. 396, and Ex parte Geary, 2 Biss. 485. The criterion laid down in Ex parte Wilson is "whether the crime is one for which the statutes authorize the court to award an infamous puniShment, not whether the punishment ultimately awarded is infamous. When the accused is in danger of being subjected to an infamous punishment if convicted, he has the right to insist that he shall not be put upon trial except on the accusation of a grand jury." 114 U. S. 426, and 5 Sup. Ct. Rep. 939. As the crime charged in the counts under section 474-6 would, upon conviction, authorize a sentence to the penitentiary, and in fact subject the accused to a term at hard labor, it is infamous, and cannot be prosecuted by information. Demurrer sustained.
DORLAN v. GUIE.)
(Oircuit Oourt, E. D. Pennsylvania. November 10, 1885.)
PATENTS FOR INVENTIONS-INFRINGEMENT-LETTERS PATENT
No. 127,858. When, from thi evidence, it appears that the defendant is simply pursuing the same process of manufacturing which he followed before the patent in question was issued, the court will not restrain him from continuing to use the same means
for complainant. MacVeagh & Bispham, for respondent. BUTLER, J. The plaintiff's patent is, in substance, for the use of chloride of lime, ("in large or small quantities,") as a sizing ingredient, (in combination with other materials ordinarily employed for sizing,) in the manufacture of pulp-size paper. The several claims read as follows:
Farley & (1) As a sizing ingredient, chloride of lime, or its equivalent, substantially as and for the purpose set forth. (2) Chloride of lime, or its equivalent, in quantities large or small, as a new and essential sizing ingredient or material, and as a basis or principle in any composition of other sizing ingredients in and for sizing paper-stock materials, or paper pUlps to make pUlp-sized papers, and for sizing any other article that has required or may reqUire any
by C. B. Taylor, Esq., of the Philadelphia bar.