We contend that the corporation, plaintiff in this case, is not in a condition to raise the question attempted to be raised. It is estopped to deny the validity of the deed of 1860, or to go behind its execution and deny the authority of the Trustees executing it, upon some supposed failure to comply with preliminary formalities. (Curtiss v. Leavitt, 15 N.Y. 47.) If the power could have been exercised under any given state of facts, and it has been exercised, third persons dealing with the corporation have a right to suppose that the given state of facts existed, and then the whole doctrine of acquiescence and ratification is directly applicable. This is the doctrine of all the authorities. If the act is within the corporate powers, then, however irregularly performed, it may be cured by acquiescence of the corporation. (Bank of the United States v. Dandridge, 12 Wheat. 64; Bank of Columbia v. Patterson's Administrator, 7 Cranch, 299; Bank of Northern Liberty v. Cresson, 12 Sergt. & R. 313; Proprietors of Canal Bridge v. Gordon, 1 Pick. 296; Danforth v. Schoharie Turnpike Co., 12 Johns 227; Randall v. Van Vechten, 19 Jones, 59; Mott v. Hicks, 1 Cow. 513; Dunn v. St. Andrew's Church, 14 Johns. 117; Zabriskie v. The Cleaveland, Columbus and Cincinnati R. R. Co., 23 How. U.S. 281; Knox County v. Aspinwall, 21 How. U.S. 545; Bissell et al. v. City of Jeffersonville, 24 How. 287; Gelpecke v. City of Dubuque, 1 Wallace, 203, 223; Van Hostrup v. Madison City, 1 Wallace, 297; Meyer v. City of Muscatine, 1 Wallace, 393.) The case of Hoyt v. Thompson, 19 N.Y. 207, is a very elaborate decision, and fully sustains the views we take. (See, also, Bulkeley v. The Derby Fishing Co., 2 Conn. 252; Hoyt v. Shelden, 3 Bosw. 294; Miller et al. v. Rutland and Washington R. R. Co., 36 Vt. 452; Degroff v. American Linen Thread Co., 21 N.Y. 127; Parish v. Wheeler, 22 N.Y. 502--Comstock's opinion; Bargate v. Shortridge, 31 Eng. Law & Eq. 51--opinion of Lord St. Leonard; Gordon v. Preston, 1 Watts, 387; and Chapman & Harkness v. Mad River, etc., R. R. Co., 6 Ohio St. 119.)
But the main argument of the counsel for the plaintiff is based upon the proposition that the sale and conveyance of the Miners' Ditch Company was absolutely void on its face--beyond the corporatepower--" ultra vires in the extreme sense." That is to say, the proposition is that a corporation in this State cannot sell its entire property under any circumstances. The particular consideration of the sale is of no consequence, as the objection strikes at the power itself. It does not exist. The whole power of the corporation is incapable of effecting the object. No stockholder complains. The case shows that they have received the consideration of the sale, and are satisfied. Indeed, it is not perceived why the objection now under consideration would not be equally valid, equally fatal, notwithstanding every stockholder, without exception, had approved of the sale, united in it, and done everything necessary to lend it sanction. It is a question of power in the corporate body. How can the unanimous consent of every branch of the body, of every person connected with or interested in the corporation, import into the body a power which its incorporating Act denies it? And yet those who contend for this doctrine of inability to sell always admit that it can be done by the unanimous consent of the stockholders. In truth, it is because the power exists, and, if suffered to be exercised, would convey the property, that Courts of equity are so often appealed to to prevent its exercise; and the cases cited are generally of that character. Relief is sought against the improper and fraudulent exercise of an existing and essential power by the preventive action of Courts of chancery.
Every corporation, as such, has the capacity to take and grant property, and to contract obligations, in the same manner as an individual. But the general powers incident to a body corporate, at common law, are restricted by the nature and object of the institution of each. So that, at common law, the restriction of the powers of the corporation to the objects and purposes of the institution existed, which the counsel supposes was introduced only by statutory provision. (Berry v. Merchants' Exchange Co., 1 Sandf. Ch. 288, 295; Bank of Northern Liberty v. Cresson, 12 Sergt. & R. 313.)
The power of a corporation to sell is co-extensive with its power to purchase; or rather, whatever it owns or can own it can dispose of, being itself the judge in each instance as to the circumstances and inducements under which it will exercise the power, and being responsible only to its stockholdersfor the bona fides of its action, and to the State when it violates its chartered privileges. As to all third persons acting in good faith, its power of disposition is of necessity unlimited. (2 Kent's Com., 11th Ed., 327, 328; 1 Kyd, 108; Barry v. Merchants' Exchange Co., 1 Sandf. Ch. 293; The Mayor, etc., of Colchester v. Lowton, 1 Ves. & Bea. 226, 237, 240, 244; Pierce v. Emery, 32 N.H. 503; Treadwell v. Salisbury Manufacturing Co., 7 Gray, 404; Binney's Case, 2 Bland, 142; 1 Vesey, Belt's Sup., 226.) The same principles are maintained in the cases of Sargent v. Webster, 13 Met., Mass., 497; Hodges v. New England Screw Co. et al., 1 R.I. 312; The Banks v. Poitiaux, 3 Randolph, 136; and Lauman v. The Lebanon Valley R. R. Co., 30 Penn. St. 42.
The whole question has been repeatedly decided in cases of deeds of trust. (Dana v. The Bank of the United States, 5 Watts & S. 243; The State of Maryland v. President and Directors of the Bank of Maryland et al., 6 Gill & Johns. 205; Union Bank of Tennessee v. Ellicott et al., 6 Gill & Johns. 363; Lord v. The Governor and Co. of Copper Miners, 22 Eng. Ch. 739; and Gordon v. Preston, 1 Watts, 386.)
In this case the corporation, plaintiff, seeks to avoid its own deliberate act upon the plea that it exceeded its corporate powers; that it was guilty of a misuser of its franchise by overworking its unquestionable power to sell. We respectfully submit that it is not competent for the corporation itself to raise this objection. It cannot be permitted to impeach its own acts in this way. The corporation cannot take advantage of its wrong. It is estopped by its own acts. If this sale be a misuser of its franchise, it is a cause of forfeiture; and it is settled that a cause of forfeiture can be taken advantage of by the Government alone, and in a proceeding instituted for the purpose. (Leazure v. Hillegast, 7 Sergt. & Rawle, 312; Baird v. Bank of Washington, 11 Sergt. & Rawle, 418; Goundie v. Northampton Water Co., 7 Barr, Penn. St. 239; Banks v. Poitiaux, 3 Randolph, 136; Silver Lake Bank v. North, 4 Johns. Ch. 370; Barrow v. Nashville and Charlotte Turnpike Co., 9 Humphreys, 304; Fleckner v. The Bank of the United States, 8 Wheat., 5 U.S. Cond., 463, 464.)
JUDGES: Sawyers, C. J.
OPINION
SAWYERS, Judge
By the Court, Sawyer, C. J., on petition for rehearing:
Defendant, Zellerbach, is the only one interested in the property in dispute. In rendering the decision in this case, we proceeded upon the idea that he did not appear in the record to have any knowledge of the purpose of the Miner's Ditch Company in its conveyance to the Eureka Lake Water Company, to distribute the stock of the latter company received as the consideration of the conveyance, to the stockholders of the former, which is the fact in the case, if any there is, that renders the transaction between those corporations illegal. Our attention is now called to a fact not before brought to our notice by counsel, and overlooked when the opinion was written, that in the answer of Zellerbach stating the loan of money, through which the title was ultimately acquired by him, it is averred that the Eureka Lake Water Company " borrowed of this defendant and the defendant Powers (then partners in business under the firm of Marks & Co.) the sum," etc. It also appears in the findings that one George C. Powers signed, as Trustee, the conveyance of the Miners' Ditch Company to the Eureka Lake Water Company, and it is claimed that, as this is the same name as that of defendant Powers, it must be presumed that the Powers who signed the deed and who advanced the money as the partner of Zellerbach is the same person; that notice to one of the partners is notice to all, and that it therefore appears in the record that Zellerbach did have notice. Conceding this to be so, for the purposes of the decision, it becomes necessary to determine the point whether, upon that hypothesis, the Miners' Ditch Company stands in a position to avail itself of the illegality of its contract to distribute its capital stock to the stockholders of the corporation, by conveying its property and distributing the stock of another corporation received in payment, in the mode and under the circumstances stated in our former opinion, to its stockholders. And we are of the opinion that it does not. The act of sale and conveyance was not wholly beyond the power of the corporation to perform. It had full power to sell and convey its property. It is provided that it shall not be lawful for the Trustees to divide or withdraw any portion of the capital stock. The corporation having power to sell and convey its property, but it being made unlawful for the Trustees to divide the capital stock, the corporation stood upon the same footing in respect to such conveyance as any natural person with reference to a contract, which he has the power to make, but which is made unlawful upon some principle of public policy adopted by the law making power. In this case the contract was wholly executed. There was nothing of an executory character left on either side. The conveyance was fully made by the Miner's Ditch Company to the Eureka Lake Water Company, and the grantee put completely in possession, and remained for years in such possession with the knowledge and acquiescence of both the corporation and its stockholders. While so in possession, it executed its mortgage to Zellerbach and Powers, for the large sums of money advanced by them, and put them in possession, and this mortgage was subsequently foreclosed, and under the judgment of the Court the property was sold and purchased in by them, and the defendant, having now acquired the entire title, is in possession. Large portions of the money advanced went in satisfaction of debts due from the Miner's Ditch Company. At all events, the defendant was in possession under his conveyance, and the contracts were all fully executed on both sides, each having received and enjoyed the consideration. There was nothing of an executory character left. It is not sought by either party in this action to recover on any branch of an executory contract--the usual form in which questions in such cases are presented. The question is which party, in fact, has the title as the case now stands, and, as between those parties, it is clearly in the defendant. We know of no instance in which the grantor has been able to recover at law when the contract has been fully executed, as in this case. A fortiori, he would not be entitled to relief in equity. But in the worst view that can be taken for the defendant the maxim applied in suits on illegal executory contracts, in parit delicto potior est conditio possidentis, or defendentis, would apply, and justify an affirmance of the judgment. But the defendant is in a better position than if sued, on an executory contract. (See Schermerhorn v. Salmon, 14 N.Y. 141.) The contract is fully executed on both sides, and the transaction closed between them. The case of Inhabitants of Worcester v. Eaton, 11 Mass. 368, is precisely in point. The only difference is, in that case the grantor in the illegal deed is a natural person, and here it is a corporation. But with reference to the inherent power of the two persons to make a conveyance of the property conveyed, the parties stand on the same footing. The vice in both conveyances, if any there be, is that the contract is illegal for similar reasons. The principle is, therefore, the same. The consideration of the conveyance in the case cited was a composition of a felony. Yet the contract being fully executed, it was held to pass the title, and could not be avoided, so as to authorize a recovery by the grantor, or, which is the same thing, by the subsequent grantee of the grantor, and this, when an entry had been made for the very purpose of avoiding the deed. The case is in point, and we know of none to the contrary; besides, we believe it to be sound.
The plaintiff, however, claims the benefit of the maxim, because the defendant sets up the facts and prays affirmative relief. But we think the defendant, and not the plaintiff, is the party entitled to the benefit in this case. The defendant is in possession, and has been in possession for many years, with the acquiescence both of plaintiff and the stockholders, who have received and long enjoyed the consideration for the conveyance. The plaintiff brings the action to recover possession of the property conveyed. The defendants, to defeat a recovery, although it is unnecessary, set up the facts in their answer, as a defense, and the Court finds the facts in favor of the defendants, and holds upon the facts, as stated and found, that defendant has a title both in law and equity, and so adjudges. And this is undoubtedly so. The facts constitute a legal, as well as an equitable defense, and there is no necessity whatever for any equitable or affirmative relief. It was only necessary, upon the facts alleged and found, to enter a judgment that plaintiff take nothing by his action. This is not the exact form of the judgment, but it is substantially that, and is no more extensive in its operation, as to the matters adjudged, than it would be in that form. Technically, it might just as well be in that form, and as a plea of res adjudicata in another suit, it would cover the same issues. In effect, the relief is no more as it is than the ordinary judgment against plaintiff in an action for possession. In form, however, it adjudges the title to be in Zellerbach, and that, as between the parties, the plaintiff has no title. That is to say, the judgment simply adjudges what the present state of the title under the executed agreement, as between the parties, really is. It goes no further. It grants no active relief. It gives nothing on any executory promise. It does not change the position of the parties. It only determines what that position is, and leaves them in it. What before existed in fact and in law is simply adjudged to exist. It is now res adjudicata, and not open to further dispute. And this the Court would have determined as the basis of the judgment, although it would not have so expressed it in terms in the judgment, had the judgment been that the plaintiff take nothing by his action. But under the issues upon which such a judgment would have been entered, and the judgment in pursuance thereof, the same matters would have been res adjudicata, as under the present form of the judgment. In substance, then, the parties are left in the same condition in which the suit found them, as to their rights. We will look to the substance of the thing done, and not to the form, especially in a case like this, where it is clearly manifest that an outrageous injustice would be perpetrated upon the defendant, as between the parties to this action, if, under ordinary circumstances, they could be compelled to surrender this property to the plaintiff without a return of the vast sums of money they have advanced to obtain it, and in a case, also, where it is quite apparent that none of the parties to the original transaction in fact meditated any wrong. We have no idea that any of the parties at the time of the original conveyance supposed for a moment that they were performing any illegal act.