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would be impossible in any case to show that the charter of a corporation expressly authorized the perpetration of a fraud. It is, however, well settled that a corporation may be guilty of a fraud. The courts have gone further, and held such artificial persons liable in tort in certain cases. The true rule is that such acts as are done by the directors in the course and within the scope of their powers and duties, are to be regarded as the acts of the corporation. Such is the rule, even if the acts are unlawful and tortious. 2 Hil. Torts, 322; Copley v. G. & B. Sewing-Machine Co. 2 Woods, 494; Railroad Co. v. Quigley, 21 How. 202; Sandford v. Hundy, 23 Wend. 260; Brokaw v. N. J., etc., Transp. Co. 32 N. J. Law, 331; Fogg v. Griffin, 2 Allen, 1; Rives v. Plank-road Co. 30 Ala. 92; Litchfield Bank v. Peck, 29 Conn. 384; Lee v. Village of Lundy Hill, 40 N. Y. 442; Perkins v. Railroad Co. 24 N. Y. 213.
These authorities abundantly show that if the directors or agents employed by a corporation conduct themselves fraudulently, so that if they had been acting for private employers such employers would have been affected by their frauds, the corporation is, in like manner and to the same extent, affected by them.
In other words, the settled doctrine is that a corporation can no more repudiate the fraudulent acts of its agents than an individual can. The rule is the same as to both. The doctrine as applicable to private individuals is familiar. The principal is liable for the acts of the agent, not alone in cases where they are expressly authorized, but also in all cases where such acts come within the range of the agent's duties.
In the case of the Railroad Co. v. Quigley, supra, Mr. Justice CAMPBELL says:
“The result of the cases is that for acts done by the agent of a corporation, either in contractu or in delicto, in the course of its business or of their employment, the corporation is résponsible as an individual is responsible under like circumstances."
In that case the corporation was sued for libel, and held liable, the defense that the defendant was a corporate body, with defined and limited powers, being overruled. It was argued that the corporation, being a mere legal entity, it was incapable of malice, which is a necessary ingredient of a libel. The defense there, as here, was that the directors acted outside of their authority, and bound themselves as individuals only. But the court said, (folio 209 :) "To support this argument we would be required to concede that a corporation could only act within the limits and according to the faculties determined
by the act of incorporation, and that, therefore, no crime or offense can be imputed to it; that, although illegal acts might be committed for the benefit or within the service of the corporation, and to accomplish objects for which it was created, by the direction of their dominant body, that such acts, not being contemplated by the charter, must be referred to the rational and sensible agents who performed them, and the whole responsibility must be limited to those agents; and we should be forced, as a legitimate consequence, to conclude that no action ex delicto or indictment will lie against a corporation for any misfeasance."
It is true that the question there was whether the corporation was liable in damages for injuries caused by a malicious libel; but if the corporation is liable for one of the consequences of an unauthorized and illegal act of its agents, on the ground that the act was done “to accomplish objects for which it was created,” it is clearly liable for all such consequences. Here, one of the consequences of the illegal and fraudulent contract is that neither party shall be heard in a court of equity to demand any relief either enforcing or annulling the same. This is a rule of great general importance, and one which the courts are often called upon to enforce in the interest of sound morality and for the public good. To sustain the present cross-bill would be to determine that the rule has no application to corporations, and that these artificial persons, who act from necessity only through agents, may, through such agents, enter into fraudulent and immoral contracts, and, after receiving their benefits, may ask a court of equity to cancel them, on the ground that their agents made them without authority.
We cannot give our assent to such a doctrine. A very large proportion of the most important business of the country is transacted by these artificial persons, and they control vast aggregations of wealth and exercise vast powers. It is the sound policy of the law to apply to corporations, as far as possible, those rules of good conscience and equity which are enforced as between man and man.
The contract now in controversy was made by the board of directors for the purpose of constructing a railroad, which the corporation was clearly authorized to construct. It was therefore within the general scope of their powers. The corporation may be permitted to defend against the contract on the ground that it was fraudulent as alleged; but if so, it is not because the corporation has any special claims to the favor of a court of equity in that regard, but solely upon the ground that neither party to a fraudulent contract (both having participated in the fraud) can demand its enforcement. The company is not entitled to affirmative relief, and therefore the cross-bill is dismissed.
FOSTER, D, J., concurs.
MONGBOVE and others v. KOUNTZB and others.
(Circuit Court, D, Nebraska. November Term, 1882.)
1. EQUITY-PRACTICE-SUPPLEMENTAL BILL.
Leave will not be granted after decree to file a supplemental bill for the purpose of setting up matters which might, by the use of due diligence, have been
ascertained, and pleaded by way of amendment in the original suit. 2. SAME-CHANGING PARTIES.
The fact that the complainant desires to drop out of the case some of the parties defendant to the original bill, does not of itself give him the right to proceed by supplemental bill, especially when it appears that such change of
parties is not essential. 8. REMOVAL OF CAUSE-JURISDICTION OF CIRCUIT COURT.
A circuit court of the United States has no jurisdiction of a case commenced in a state court on a contract by an assignee, and removed thence to said court, unless the action might have been brought originally in the circuit court by the assignor, and it is probable that a plea to the jurisdiction would be entertained in a supplemental proceeding.
Application for Leave to File a Supplemental Bill.
It appears from the record that about the year 1877 John I. Redick recovered a judgment in the district court for Douglas county, Nebraska, for about $2,500 against the Omaha & Northwestern Railroad Company, which judgment was afterwards assigned to one James E. Brown, who commenced a suit in equity in the district court of Burt county, Nebraska, against John A. Horback, Henry W. Yates Herman Kountze, Francis Smith, Frank Murphy, and Sally A. Horback, for the purpose of subjecting to the payment of said judgment certain real estate in the bill described.
The ground of the action was that the said respondents, some of them being directors of said railroad company, had entered into a contract with the company to construct a portion of the line of railway, which contract was contrary to public policy and void; and that they had received the land sought to be subjected as a part of the proceeds of said contract, and therefore held it in trust for the creditors of said company. It was in the original bill averred that the respondents had received
under said contract, besides the real estate then sought to be sub-
Pending said suit, said James E. Brown departed this life, and the
A decree was rendered in favor of the complainants which reserved their right, in case the real estate should not sell for sufficient to pay the judgment, interest, and costs, to apply to the court for further relief in the premises. Complainants ask leave now to file & supplemental bill for the purpose of subjecting the personal property still remaining in the hands of said respondents as the proceeds of said illegal contract to the payment of the balance which is alleged to be due upon said judgment. This personal property is said to consist of the bonds and stock received by respondents as the fruits of said contract, or proceeds thereof, amounting to between $75,000 and $80,000.
The grounds upon which this leave is asked, as they appear in the supplemental bill, are, in substance, as follows:
(1) That it has been ascertained since the filing of the original bill that all the respondents in said original bill are not directors and trustees of said railroad company, and that the prayer of said original bill was not broad enough and suflicient to grant complainants such relief as has since been shown they were entitled to. (2) That it has since appeared by proof, and on trial of said cause, that the respondents hold in their possession the bonds above mentioned as the fruits of the contract above referred to. (3) That the complainants had no means of knowing, and did not know, at the time of the filing of the original bill, that the respondents held in their possession the proceeds of said bonds, which they had converted to their own use.
It is insisted by respondents that it appears from the record that
Redick « Redick, for complainants.
MCCRARY, C. J. It is well settled that leave will not be granted,
. This is conceded by the learned counsel for complainants, but they deny that there is anything in the record which was sufficient to bring
home to complainants notice of the facts now averred in time to have presented the same by way of amendment to the original bill. By reference to the foregoing statement it will be seen that the original bill itself alleged, among other things, that the respondents therein had received $45,000 in Burt county bonds, and $16,000 per mile in bonds on the line constructed, being about $112,000, which they have converted to their own use. It thus appears that at the time of filing the original bill the complainants had information which would have enabled them to pursue and subject the personal property, as well as the real estate, which defendants had received under said contract. It is said in answer to this suggestion, and it is in fact elsewhere alleged in the supplemental bill, that the complainant did not know, at the time of the filing of the original bill, that the respondents held the proceeds of said bonds, which they had converted to their own use, but the allegation of the original bill was precisely to this effect. It is there distinctly averred that the defendant held all the property received upon said contract in trust for the railroad company, the contract under which they obtained it being null and void.
It follows, therefore, that, even if we do not look beyond the allegations of the original bill, we have ample proof that the fact sought to be set up by way of supplemental bill was, or might have been, known to the complainants at the time the original suit was commenced. But, as already stated, it is sufficient if it appears that the facts sought to be set up by way of supplemental bill were known in time to have been presented by way of amendment to the original bill. It is not enough that they were not known when the original bill was filed.
By reference to the answer filed in the original cause it will be seen that the facts concerning the contract, and the receipt thereunder by defendants of the land, and of the county and railroad bonds above mentioned, were fully disclosed, and there is no allegation that the defendants had paid the same over to the railroad company, or had any purpose to do so.
On the contrary, it appeared from the face of the answer, beyond question, that the defendants held said property, including both real estate and personal property, claiming the right to it, and denying any liability on their part to pay it over to the railroad company. In other words, the theory of their defense was that they did not hold it as trustees for the railroad company. The answer disclosed the fact (which appears to have been known to the complainants when the original bill was filed) that the defendant held