and received by the defendant were sufficient | sale of bonds, as long as there was no intent to establish the misappropriation, and the to evade the usury law. good faith and honesty of the defendant in receiving the money were questions for the

jury.

Affirmed.

CLEARWATER COUNTY STATE BANK v.
BAGLEY-OGEMA TELEPHONE CO.

et al.

[Ed. Note. For other cases, see Usury, Dec. Dig. § 83.*]

Appeal from District Court, Clearwater County; C. W. Stanton, Judge.

Action by the Clearwater County State Bank against the Bagley-Ogema Telephone Company and others. From a judgment for plaintiff, defendants appeal. Affirmed.

W. A. Marin, Morphy, Ewing & Bradford,

(Supreme Court of Minnesota. Nov. 3, 1911.) and Deutsch, Allen & Breding, for appellants. Wm. A. McGlennon and M. J. Daly, for respondent.

(Syllabus by the Court.)

1. CORPORATIONS ( 425*) - CONTRACTS-ESTOPPEL TO DENY VALIDITY.

Where a corporation obtains a loan of money on its notes or bonds, secured by a mortBUNN, J. This action was brought by the gage which appears to have been executed on plaintiff bank to foreclose a mortgage made behalf of the corporation by its president and to it by defendant Bagley-Ogema Telephone secretary, with authority of its board of direc

tors, it being within the powers of the corpora- Company, January 15, 1909, to secure 12 tion to execute such a mortgage, and the pro- promissory notes or bonds, each for the sum ceeds of the loan being used for corporate pur- of $500, made payable to plaintiff. The poses, such corporation is estopped from asserting the defense that such mortgage was not in fact authorized by its board of directors, or that the person signing as secretary was not the secretary; the mortgagee not having notice of such defects.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. § 1697-1701; Dec. Dig. § 425.*] 2. USURY ( 83*)-CONTRACTS INVALID-SALE OF BONDS BELOW PAR.

Where a telephone company borrows money for its corporate purposes, secured by mortgage on the whole or part of its property and franchises, and its bonds or notes are issued for the loan so secured, bearing interest at the rate of not exceeding 6 per cent., section 2902, R. L. 1905, applies. It is not usury, in the absence of an intent to evade the usury law, if the bonds or notes are sold at less than their par value, or if the lender discounts the same, although the result be an agreement to pay more than the lawful rate of interest.

[Ed. Note.-For other cases, see Usury, Dec. Dig. § 83.*]

mortgage covered the franchises, telephone lines, equipment, and all the other property of the mortgagor. The defendants Northwestern Electric Equipment Company and Western Electric Company are judgment creditors of the telephone company, having liens subsequent to the mortgage. Defendants answered separately, each pleading that the mortgage was executed without authority of the board of directors of the mortgagor. The telephone company also pleaded usury. The issues were tried, and the court rendered a decision for plaintiff, ordering judgment of foreclosure. Defendants appealed from the judgment entered pursuant to such decision.

[1] 1. The board of directors of the telephone company did not authorize the mortgage. It purported to be executed on behalf of the corporation by E. J. Warren, its 3. SUFFICIENCY OF EVIDENCE-INTENT TO EXx-president, and L. O. Warren, its secretary, ACT USURY.

The evidence sustains the finding that there was no intent to exact usury. 4. TELEGRAPHS AND TELEPHONES (§ 17*) – MORTGAGES-FORECLOSURE-RIGHT OF RE

DEMPTION.

Where a public service corporation, such as a telephone company, mortgages its' franchises, easements, and its entire property, both real and personal, and it appears, by reason of the character and condition of the mortgaged property, that the plant is an integer, and that the real estate cannot be sold separately from the personal property, without greatly impairing the value of the whole, to the detriment of all concerned, the mortgaged property should, on foreclosure, be sold as an entirety, without right of redemption as to the real estate, notwithstanding the statute, giving a right of redemption from foreclosure sales of real estate.

[Ed. Note.-For other cases, see Telegraphs and Telephones, Dec. Dig. § 17.*]

5. USURY (§ 83*)-CONTRACTS INVALID-SALE OF BONDS BELOW PAR.

It is not material that the bonds or notes were made payable to the lender, or that the transaction was in form a loan, rather than a

and the acknowledgment recites that it was signed and sealed on behalf of the corporation by authority of its board of directors. It is undoubtedly true that the president and secretary of defendant had no authority to execute the mortgage, without the action of the board of directors acting as a board assembled at a board meeting. But if it was within the powers of the corporation to execute such a mortgage, and if the corporation received and used the proceeds of the loan for corporate purposes, it is estopped, as against a mortgagee who had no notice of the want of authority of the officers, from asserting the invalidity of the mortgage. Defendants do not dispute this proposition. They concede that the corporation had power to borrow money, or sell its bonds, and give a mortgage on its property to secure the debt, and that the money received was used for corporate purposes, but insist that plaintiff had notice that the board had not au

thorized the mortgage. This contention is based upon the claim that M. J. Kolb, president of the plaintiff bank, had been a stockholder and director of the telephone company, and therefore that he knew that the board of directors had not authorized the mortgage. But the evidence showed that Kolb had ceased to be a stockholder in the company some two weeks before the mortgage was executed. Therefore, granting that notice to him would be notice to plaintiff, we are satisfied that the evidence does not show that Kolb had any knowledge, either that the board had not authorized the execution of the mortgage, or that L. O. Warren was not entitled to act as secretary. There is no suggestion of fraud or bad faith, and the evidence shows that plaintiff parted with the money in the full belief that the mortgage was valid. It is a clear case of estop pel.

payable to plaintiff, or even that the transaction took the form of a loan, rather than a sale of bonds. The material things are that the borrower was a telephone company, that the mortgage covered its property and franchises, and that the money was borrowed for corporate purposes. The evidence is clear that plaintiff paid all that the notes were worth, and the transaction was in effect, if not in form, a sale of its bonds at their real, but below their par, value. The statute says that the bonds are valid and binding on the company, and that no plea of usury shall be allowed. We think this disposes of the defense of usury, in the absence of an intent to evade the usury law. The decision for plaintiff necessarily involves a finding by the trial court that there was no such intent, and this finding is amply sustained by the evidence.

[4] 3. Defendants urge that it was error [2] 2. The defense of usury is based upon to order a sale of the property of the telethe fact that, while the notes call for the phone company as an entirety, without repayment of $6,000, due in three years, with demption. The argument is that the fran6 per cent. interest, the bank paid and the chises and easements of the company are incompany received but $5,245. It is apparent corporeal hereditaments, and therefore real that, adopting the usual rule of computation, estate, and that a foreclosure sale of real plaintiff would receive more than 10 per estate, without the right of redemption, is cent. on the money loaned. It is argued that contrary to R. L. 1905, § 4480, and thereevery essential element of usury exists; that fore illegal. It is clear that the right of is, that there was a loan of money, that the redemption is an inseparable incident of money was to be returned at all events, and every mortgage of real estate, and equally that more than the lawful rate of interest clear that there is no right of redemption was stipulated to be paid for it. All this is from a judicial sale of personal property. true, and it might be difficult to escape the Conceding that the franchises and easements conclusion that there was usury in the trans- of the telephone company are real estate, yet action, were it not for the provisions of R. L. a large part of the property mortgaged was 1905, § 2902, the material part of which personalty-poles, wires, instruments, and reads as follows: "Telegraph and telephone switchboards. The company was a public companies may mortgage or execute deeds service corporation, quasi public in characof trust of the whole or any part of their ter. The trial court found that the franproperty and franchises to secure money bor- chises and other property covered by the rowed by them for the construction and mortgage are so connected and related to equipment of their lines and properties and each other that the value of the one would for other corporate purposes, and issue their be greatly impaired by the severance therecorporate bonds in sums of not less than from of the other; that they are and do five hundred dollars, secured by such mort-form a unit, and are of little value when gages or deeds, and if payable to bearer negotiable by delivery, bearing interest at the rate of not exceeding six per cent. per annum, and convertible into stock or not as may be deemed expedient, may sell them at such prices as they may deem proper; and if said bonds shall be sold below their normal or par value they shall be valid and binding on the company, and no plea of usury shall be put in by, or allowed to said company in any suit thereon."

not used and operated as a whole, and would be of small value to a purchaser, if sold separately. The decisions are uniform that where a mortgage covering the franchises and other property, real and personal, of a quasi public corporation, such as a railroad, canal, water, gas, telegraph, or telephone company, is foreclosed, the sale should be of the property as an entirety, and without right of redemption, notwithstanding statutes giving a right of redemption from foreclosure sales of mortgaged real estate. The cases base this rule on the public character of the corporation and on the character of the property mortgaged.

[3] We think that this statute applies to this case. Its intent is clear-to enable telegraph and telephone companies to borrow money for the construction and equipment of their lines and other corporate purposes, In National Foundry & Pipe Works v. without the chance to repudiate their obliga- Oconto Water Company (C. C.) 52 Fed. 43, tions on the plea of usury, and without in- a waterworks case, Judge Jenkins says: vestors being deterred by such chance. It is "The plant must be treated as an entirety

process. The defendant is a quasi public corporation. The plant is an integer. Separation of the parts would destroy the efficiency of the whole, working destruction to (Supreme Court of Minnesota. Nov. 10, 1911.) all interests concerned. The structure here

NORTHLAND PRODUCE CO. v.

STEPHENS.

(Syllabus by the Court.)

is of the class of which canals, street rail-1. MORTGAGES (§ 319*)-RIGHTS OF PARTIES ways, railroads, telegraph, telephone, and electric light and gas plants' are examples, and will only be dealt with as an entirety." The Supreme Court of North Dakota, in a waterworks case, McKenzie v. Bismarck Water Co., 6 N. D. 361, 71 N. W. 608, applied the rule, saying that the cases were unanimous that, notwithstanding statutes clearly giving a right of redemption from sales of real estate on judicial process, property such as was embraced in the mortgage under consideration in that case should be sold as an entirety without redemption. We quote from the opinion: "The Bismarck Water Company is not merely a private enterprise. It is also a corporation of quasi public character, and has peculiar relations and duties with respect to the public. The property and franchises described in the mortgage, while primarily consisting of both real estate and personal property, is so blended together and reciprocal in its uses that to divide it, and sell each part separately-one part with and one part without the right of redemptionwould destroy or greatly impair the value of the same, to the serious detriment of both public and private interests." To the same effect are Hammock v. Loan & Trust

ACTIONS TO RECOVER PROPERTY.

Findings of the trial court that a debt, to secure the payment of which plaintiff executed and delivered to defendant a deed of certain property, had not been paid in full, held sustained by the evidence.

[Ed. Note. For other cases, see Mortgages, Dec. Dig. § 319.*]

2. CORPORATIONS (§ 388*) - POWERS - CONTRACTS-ESTOPPEL TO DENY VALIDITY.

Plaintiff, a corporation, in consideration of a loan of money to carry on its business, in addition to the repayment of the money borrowed, agreed to pay an indebtedness to the lender of will, and business plaintiff had succeeded. another corporation, to whose property, good It is held that, since plaintiff received and retained the benefits of the transaction, it will not be heard to allege its want of authority or power to enter into the contract.

Co., 105 U. S. 77, 26 L. Ed. 1111; Peoria, etc., Ry. Co. v. Thompson, 103 Ill. 187; Farmers' Loan & Trust Co. v. Iowa Water Co. (C. C.) 78 Fed. 881; Sioux City Terminal Ry. Co. v. Trust Co. of N. A., 82 Fed. 124, 27 C. C. A. 73; Pacific Northwest Packing Co. v. Allen, 116 Fed. 312, 54 C. C. A. 648; McFadden v. Railway Co., 49 N. J. Eq. 176, 22 Atl. 932.

We hold that by reason of the necessity arising from the character and condition of the property mortgaged, as well as because of the quasi public character of the defendant telephone company, it was correct to order a sale of the mortgaged property as an entirety, without right of redemption, notwithstanding the statute giving a right of redemption from foreclosure sales of real estate.

[5] 4. It is claimed that the trial court erred in finding that the notes were sold and discounted by the telephone company to the bank. As we have said, it was immaterial what the form of the transaction was, whether a loan or a sale of bonds, and we therefore consider it unnecessary to decide whether this finding is supported by the evidence. We are satisfied that the trial court disposed of the case correctly, and that the judgment should be affirmed. Judgment affirmed.

[Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 1556-1567; Dec. Dig. § 388.*] 3. EVIDENCE (§ 389*)-CORPORATE MINUTES—

EFFECT.

The minutes of a private corporation are at most only prima facie evidence against third persons, and are open to contradiction or explanation in an action involving transactions of which the minutes purport to be a record.

[Ed. Note.-For other cases, see Evidence, Cent. Dig. §§ 1717, 1718; Dec. Dig. § 389.*] Lewis, J., dissenting.

Appeal from District Court, Beltrami County; C. W. Stanton, Judge.

Action by the Northland Produce Company against A. D. Stephens, as trustee. From an order denying a new trial after tiff appeals. Affirmed. an order for judgment for defendant, plain

Reynolds & McClearn, for appellant. Martin O'Brien, for respondent.

BROWN, J. The evidence in the case shows and tends to show the following facts: The Northland Trade Company was a corporation organized under the laws of this state, originally located and doing business in Wadena county. It transferred its business to Bemidji, and for a year or more prior to the time of the transaction involved in this action conducted its affairs at that place. For some reason, not clearly disclosed by the record, the officers and directors of the corporation conceived the idea of a reincorporation under a new name, the new concern to take over all the property and business of the old at Bemidji. This was apparently for the purpose of infusing new life into the enterprise and continuing and extending the business. The Northland Produce Company was then incorporated by the officers and stockholders of the Trade Company and others, and sub

sequently took over the entire property, | shall give in writing to this company an good will, and business of the old concern agreement to deliver by warranty deed said at Bemidji, which, though not dissolved, real property back to said company, upon ceased to do business at that place. The full payment of the company's obligation Trade Company was at this time indebted to him, A. D. Stephens, or the Merchants' to the Merchants' National Bank of Crook- National Bank by said company." ston, of which defendant herein was president, in the sum of about $2,000.

But the resolutions, which were recorded Prior to in the minutes of the meeting, were never and during the proceedings for the reorgani- called to the attention of Stephens or the zation, negotiations were had between the bank, and there is no evidence that Stephofficers of the corporation and defendant ens knew anything about them. But the Stephens, representing his bank, for a loan evidence does show at least, tends to show of money to enable the new concern to com--that the transaction was completed, the plete the construction of a cold storage plant property deeded to Stephens, and the money which the Trade Company had commenced, advanced by the bank, upon the basis of but had not completed. After the organiza- the proposition which was accepted at the tion of the Produce Company, the secretary March 9th meeting of the board of directors. thereof, after so negotiating with Stephens, The secretary of the Produce Company, who reported to the board of directors, at a meet- was also its general manager, and who, ing held on March 9, 1907, that Stephens, acting for the corporation, closed the transfor the bank, would advance to the new con- action, Stephens, and MacGregor, who as cern money to complete its plant, on con- cashier of the bank accepted the deed, all dition and consideration that the Produce so testified. The bank thereafter advanced Company convey to him certain real prop- from time to time $5,000 to the Produce erty received by it from the Trade Company, Company, and the same has been repaid in upon which was situated the cold storage plant referred to, as security for the repayment of advances to be made and also the payment of the $2,000 indebtedness of the Trade Company. That the proposition was then submitted to the board of directors there is no substantial controversy. That it was at that meeting accepted by the board two members of the board affirmatively declared. The third member, who was called as a witness, said that the matter was discussed, but he had no recollection of an acceptance being made at that time. The court was justified in finding that soon after this meeting Stephens was informed of this acceptance; and, while the evidence is not as clear as might be desired, it sufficiently appears that he was so informed prior to March 23, 1907.

On that date there was another meeting of the directors of the Produce Company, at which the following resolutions were adopted:

full.

The plaintiff thereafter brought this action to compel a reconveyance of the property so transferred to Stephens; a reconveyance having been refused by him until the Trade Company debt was paid. This the plaintiff refused to pay, claiming that the deed was not given as security therefor, but solely for the advances to be made to the Produce Company. The trial court in substance and effect found that the Produce Company assumed that debt, and that the deed was executed and delivered as security for its payment, as well as for the payment of advances to be made the new company, and ordered judgment for defendant. Plaintiff appealed from an order denying a new trial.

It is contended by plaintiff on this appeal (1) that the findings of the trial court, in respect to the assumption of the debt of the Trade Company and that its payment was secured by the deed, are not sustained by the "Resolved, that A. D. Stephens of Crook- evidence; (2) if the findings be held supportston, Minnesota, be and is hereby appointed ed by the evidence, that the contract was betrustee of the real property of the North-yond the authority and power of the plaintiff land Produce Company, to hold same in corporation, and ultra vires and void; and trust and as security for loans made to said company by said A. D. Stephens, trustee, or by the Merchants' National Bank of Crookston, Minnesota, and that said property be deeded to said A. D. Stephens as such trustee.

(3) that a new trial should be granted for errors committed on the trial in rulings on the admission and exclusion of evidence, and also for misconduct on the part of the trial court.

[1] 1. The contention that the evidence "Be it resolved, that John D. Lunn, secre- fails to support the findings must be resolved tary and treasurer, is hereby authorized against the plaintiff. Within the rule guidto borrow from said A. D. Stephens, trustee, ing this court in such cases, we have only of said bank, a sum of money not to exceed to inquire whether the evidence is clearly seven thousand ($7,000) dollars, and shall and palpably against the findings. If there give for the same a note or notes of this be evidence in the record fairly tending to company, executed in corporate form, and, support the findings, they must be sustained.

MacGregor all testified to the facts essential the trial court to reconcile the conflicts in the evidence and to ascertain the facts.