The proposition that the Court erred in refusing to nonsuit the plaintiff, is based on the ground that the defendants were not liable to pay the note sued because it was not made under the seal of the corporation.
It can hardly be necessary to contend against such a propositionin this Court. It is true it was formerly held in England that a corporation could only be bound by act under seal, but this was before the modern era of trade and commerce which has given birth to a great variety of companies to carry on manufactures, trade, commerce, insurance, etc.; and in regard to such corporations it is not now the law in England or America that a corporation can only be bound by the corporate seal.
" Corporations have of late been established for the purpose of carrying on trading speculations, and where the nature of their constitutions is such as to render the drawing of bills or the constant making of any particular sort of contracts necessary for the purposes of the corporation, there the Courts have held that they would imply in those who are, according to the provisions of the charter, carrying on the corporation concerns, an authority to do those acts without which the corporation could not subsist." (Beverly v. Gas Light and Coke Co. , 6 A. & E. 829.)
And in the case of Church v. Imperial Gas Light Co., (Id, 861,) Lord Denman, in reviewing the old doctrine, says that the power to accept bills of exchange and to issue promissorynotes by companies incorporated for purposes of trade and commerce, stands on the same ground of the power to employ inferior servants, and is among the exceptions to the old Common Law rule requiring the corporation seal to bind the company.
In the United States, contracts of a corporation rest upon the same footing as those of natural persons, and are valid without seal, whether expressly made by the corporation or by its officers or agents. (Bank of Columbia v. Patterson's Heirs, 7 Cranch, 299; Fleckner v. Bank of U. S., 8 Wheat. 338.)
A corporation may bind itself by contract without its corporate seal. It may give a promissory negotiable note by its President. (Mott v. Hicks, 1 Cow. 513; Chestnut Hill Turnpike Co. v. Rutter , 4 S. & R. 16; Union Bank v. Ridgely, 1 H. & G. 324.)
Or arising by implication of law, either from the acceptance of an executed consideration or from the ratification of acts done by parties assuming to be agents, although without sufficient authority. (Kennedy v. Balt. Ins. Co., 3 Har. & G. p. 367; Dunn v. St. Andrew's Church, 14 Johns. 118; Episcopal Charitable Soc. v. Episcopal Ch., 1 Pick. 372; Randall v. Van Vetcher, 19 Johns. 60.)
There is nothing in the objection that the appellant was inhibited from making a note by the fifteenth section of the Act concerning corporations. (Magee v. Mok. Hill Co. , 5 Cal. 258.)
The second error assigned by the appellant cannot be maintained--because the answer contains no statement of facts warranting the introduction of the proposed proof.
The stockholders have taken good care by the terms of the note to exempt themselves from personal liability. (See copy of note in complaint.) It would therefore be very convenient to avoid paying the note by the company altogether, by showing a want of authority to make it, or that the consideration was illegal, or that it circulated as money, if such a plea could prevail. Be that as it may, the defendants plead in answer just nothing at all, and appeal no doubt for delay, and respondent's counsel submit that this case is one in which the respondent is entitled to the utmost damages.
There is nothing in the fact that three trustees did not sign the note. The " Act concerning Corporations" (5 sub. of Sec 1,) provides that the company shall havepower " to appoint such subordinate officers and agents as the business of the corporation shall require." (Comp. Laws, 280.)
The complaint alleges the note was made by the corporation--the answer does not deny it-- non constat, it was made under a resolution of the trustees or otherwise, or the President and Secretary may have made it by virtue of their office as agents or officers, being thereunto empowered by the very act of their appointment. The Courts have uniformly held that prima facie the apparent agents or officers of a corporation when acting in its name may bind the corporation. (See cases cited in note to Mayor of Ludlow v. Charlton, 6 M. & W. 823.)
JUDGES: The opinion of the Court was delivered by Mr. Justice Heydenfeldt. Mr. Chief Justice Murray concurred.
OPINION
HEYDENFELDT, Judge
1. The policy of this State has altered the rigidness of the Common Law, which disabled a corporation from making a contract except under its corporate seal. The act of incorporation, instead of being as formerly a favor granted by the sovereign to the subject, has under our system become a matter of right available under general laws. Under those laws the power of corporations to create debts is treated as an incident to the express powers, and not as in itself one of the express powers. This is evident from the third section of the Act of 1850, and the fifteenth section of the Act of 1853. In both these sections corporations are prohibited from issuing bills or notes for circulation as money; to this expression we gave a construction in the case of Magee v. The Mokelumne Hill Co. , 5 Cal. 258. To this we will add that we must apply the rule expressio unius est exclusio alte rius. One cause of issuing bills or notes is expressly excluded; the right to issue them in all other proper cases must be inferred as an incident to the expressed powers or objects of the corporation.
2. It is objected that the plaintiff failed to show that the President and Secretary, who signed the note, were empowered by the corporation to do so. The answer of the defendant rendered this unnecessary; it proceeds, in the defense, simply to rely upon the want of power in the corporation to issue notes, which we have above shown, was unsustained by the law. To force upon the plaintiff the necessity of proving the execution of the note to have been authorized by the corporation, the answer should have denied the " genuineness and due execution" of it under oath, as is required by the fifty-third section of the Practice Act; otherwise the Act provides, " it is deemed to be admitted."
3. The next objection is that the Act of 1853 requires the corporate powers to be exercised by a board of three trustees, who should have executed the note. But this is already answered; the power to make a note is not one of the express corporate powers, but only an incident to those powers. The latter are those which must of necessity be included in the main objects of the corporation. Aside from them, all corporations by the general Act, have power to make by-laws for the " organization of the company," the " management of its property," the " regulation of its affairs, and for carrying on all kinds of business within the objects and purposes of the company," in which there is no reason to exclude the right of making promissory notes.
The remaining point is, that the note provides that the property of the company only was pledged for its payment, without recourse in any event to the private assets of its stockholders. To this, the answer is simple; the defendant has no right to make the objection; the corporation is liable, and it cannot affect that liability, whether the stockholders are exempt or not. If they are not exempt, the only result is that the plaintiff has more security for his claim.
Judgment affirmed, with ten per cent. damages.