Opinion
2 Div. 120.
October 6, 1938.
Appeal from Circuit Court, Dallas County; John Miller, Judge.
Smith Johnston, of Mobile, and Rushton, Crenshaw Rushton, of Montgomery, for appellants.
All acts of a corporation are presumed to be within its powers until the contrary be shown. The burden is on the defendant to prove its pleas of ultra vires. Boulware v. Davis, 90 Ala. 207, 8 So. 84, 9 L.R.A. 601; Ala. City, G. A. R. Co. v. Kyle, 202 Ala. 552, 81 So. 54; Ala. Gold Life Ins. Co. v. Central A. M. Assn., 54 Ala. 73; Thompson on Corp., § 5644; 7 R.C.L. 589. At common law every corporation had power to sue and be sued, to grant or receive by its corporate name and to do all other acts as natural persons may do. 1 Blacks. Com. p. 475; 2 Kent's Com. 277; Bank of Michigan v. Niles, 1 Doug., Mich., 401, 41 Am.Dec. 575; Thompson on Corp. § 5645. Code 1852, § 1481, made little, if any, change in the common law, but to some extent amplified the powers. The charter of a corporation, read in the light of any general laws which are applicable, is the measure of its power, but whatever under the charter and other general laws, reasonably construed, may be fairly regarded as incidental to the objects for which the corporation is created is not to be taken as prohibited. Ala. City, G. A. R. Co. v. Kyle, supra; Central Trans. Co. v. Pullman Co., 139 U.S. 24, 11 S.Ct. 478, 35 L.Ed. 55; Cunningham Hdwe. Co. v. Gama Trans. Co., 4 Ala. App. 561, 58 So. 740; Code 1907, § 3615; Gen.Acts 1911, p. 49; Code 1923, § 7169. An eleemosynary corporation may borrow money. Thompson on Corp. § 5698; Moss v. Harpeth Academy, 7 Heisk., Tenn., 283. A hospital is a charity, and within the powers of appellee. 11 C.J. 315, 316, 304; Powers v. Mass. Homeopathic Hospital, 109 F. 294, 47 C.C.A. 122, 65 L.R.A. 372; Bishop Chapter of Cathedral of St. John the Devine v. Denver, 37 Colo. 378, 86 P. 1021; Thornton v. Franklin Square House, 200 Mass. 465, 86 N.E. 909, 22 L.R.A., N.S., 486; Mich. Sanitorium v. Battle Creek, 138 Mich. 676, 101 N.W. 855. The law that a corporation cannot become an accommodation endorser or guarantor has no application to a transaction which, while it may be in form a signing for the accommodation of another, is really a transaction based upon a valid consideration and within the powers of the corporation. Cunningham Hdwe. Co. v. Gama Trans. Co., supra; Holmes v. Willard, 125 N.Y. 75, 25 N.E. 1083, 11 L.R.A. 170; Re New York Car Wheel Co., D.C.N.Y., 141 F. 430; Bacon v. Montauk Brewing Co., 130 App. Div. 737, 115 N.Y.S. 617; 14-A C.J. 733, 741. The Board of Trustees was merely the agent or subsidiary of the appellee. Courts will look beyond mere form and where necessary to prevent injustice will disregard the fiction of corporate entity. United States v. Lehigh V. R. Co., 220 U.S. 257, 31 S.Ct. 387, 55 L.Ed. 458; United States v. Delaware, L. W. R. Co., 238 U.S. 516, 35 S.Ct. 873, 59 L.Ed. 1438; Chicago, M. St. P. R. Co. v. Minneapolis C. C. Assn., 247 U.S. 490, 38 S.Ct. 553, 62 L.Ed. 1229; Moore-Handley Hdw. Co. v. Towers Hdw. Co., 87 Ala. 206, 6 So. 41, 13 Am.St.Rep. 23; Birmingham R. Co. v. Crossett, 210 Ala. 650, 98 So. 895; Jefferson County Burial Soc. v. Cotton, 222 Ala. 578, 133 So. 256; 39 A.L.R. 1073, note; 34 A.L.R. 600, note. The plea of ultra vires should not prevail where it will not advance justice but on the contrary will accomplish a legal wrong. Eastern B. L. Asso. v. Williamson, 189 U.S. 122, 23 S.Ct. 527, 47 L.Ed. 735; Colorado Union Gold Mine Co. v. Rocky Mountain Nat. Bank, 96 U.S. 640, 24 L.Ed. 648; San Antonio v. Mehaffey, 96 U.S. 312, 24 L.Ed. 816; Ohio, c. R. Co. v. McCarthy, 96 U.S. 258, 24 L.Ed. 693; Re New York Car Wheel Co., supra; 14-A C.J. 315.
Keith Wilkinson and Pettus Fuller, all of Selma, for appellee.
Appellee was without express charter power and, therefore, could not become accommodation surety or endorser for the Hospital Corporation. Steiner v. Steiner L. L. Co., 120 Ala. 128, 26 So. 494; First Nat. Bank v. Winchester, 119 Ala. 168, 24 So. 351, 72 Am.St.Rep. 904; Kennemer-Willis Gro. Co. v. Hacker, 225 Ala. 415, 143 So. 821; J. R. Raible Co. v. City Bank Trust Co., 22 Ala. App. 68, 112 So. 543. Appellee could not operate a business like a hospital, or go into trade, and certainly could not do so through another corporation. Harriman v. First Brian Bap. Church, 63 Ga. 186, 36 Am.Rep. 117; State ex rel. v. Southern Pub. Co., 169 Tenn. 257, 84 S.W.2d 580, 100 A.L.R. 576, 579, note. Code 1923, § 7015; Ala. G. S. R. Co. v. Loveman Comp. Co., 196 Ala. 683, 72 So. 311; Grand Lodge v. Waddill, 36 Ala. 313; Const. 1901, § 233; Gen.Acts 1852, p. 289; Gen.Acts 1871, p. 204; American Ice Ind. Co. v. Crane, 142 Ala. 620, 39 So. 233; McAlister v. Burgess, 161 Mass. 269, 37 N.E. 173, 24 L.R.A. 158; Baltzell v. Church Home Inf., 110 Md. 244, 73 A. 153. The Alabama laws governing "Annual Conferences of Itinerant Ministers", and not laws providing for "Corporations not of a Business Character", apply to appellee, and its charter has not been amended since 1871. Code 1923, Art. 15, § 7083, Art. 23, § 7167.
This case was tried by the circuit judge without a jury upon an agreed statement of facts. The sole issue presented and decided was whether or not the endorsement of the bonds by the appellee was ultra vires. The agreed statement of facts admits that the appellee corporation was operating under a charter power as fixed by the Act of 1852, Page 289, as last amended by the Act of 1871, Page 204, and that the charter has not been since amended.
It is well settled that corporations may exercise only such powers as are expressly granted or necessarily implied for the purpose of executing the powers incident to those expressly granted. Constitution 1901, Section 233; Alabama Great Southern Railroad Co. v. Loveman Compress Co., 196 Ala. 683, 72 So. 311, and cases there cited.
These acts did not give the appellee corporation the express authority to operate a hospital, business or charitable. At most, it was authorized to "receive and hold real and personal property to the value of Fifty Thousand Dollars, to be employed under the direction of the said Trustees for the advancement of the interest of religion and education, and for charitable purposes." Acts 1851-52, Page 289. The Act of 1871, Page 204, amends this quoted section only to the extent of increasing the amount of property to be held and used for the advancement of religion, education and charitable purposes to Two Hundred Thousand Dollars. There is no express general authority for it to engage in charitable purposes generally or to incur an unlimited liability for the organization or operation of hospitals by itself or through a subsidiary corporation or agency, — certainly no authority to endorse and become liable for the payment of Five Hundred Fifty Thousand Dollars of bonds issued by another corporation whether said last corporation was or was not its subsidiary.
We have accepted the agreed statement that the charter powers of the appellee are fixed and controlled by the above cited acts, but are not unmindful of Article 23 of Chapter 274 of Michie's Code, dealing with "Corporations not of a Business Character." It may be questioned if this applies to the corporation in hand, but, conceding that it does, Section 7169 reads as follows, to wit: "Corporations, not of a business character, created under this article, or created by special act of the legislature heretofore, may acquire and hold real property and personal property, may receive property by gift, will or devise, holding the same in conformity with all lawful conditions imposed by the donor, and may exercise such other powers as are incident to private corporations."
This provision merely authorizes these corporations to hold and acquire real property and to receive same by gift, with lawful conditions imposed by the donor, but does not increase the extent to which it may engage in charities. This section also provides that such corporations "may exercise such other powers as are incident to private corporations." This by no means increases the charter powers of this corporation, simply deals with its implied power incident to the execution of its express power.
There can be no question that the Phoenix City Conference, by the adoption of the resolutions considered, by an almost unanimous vote of 143 to 2, gave its approval and moral support to the endorsement of the bonds and greatly enhanced the selling price of same, but we are constrained to consider and decide this case from a legal and not a moral standpoint, and the judgment of the circuit court is therefore affirmed.
Affirmed.
GARDNER, BOULDIN, and FOSTER, JJ., concur.