Board of Trustees v. Attorney-General

129 S.W. 27, 228 Mo. 514, 1910 Mo. LEXIS 147

• Court: Supreme Court of Missouri
• Decided: May 31, 1910
• Status: Published

Opinion

YALLIANT, J.

This is a suit in equity, the purpose of which is to obtain a judicial interpretation of certain clauses of the plaintiff’s charter. The plaintiff corporation is an educational institution chartered under the general laws of this State, first in 1879, and again by amended charter in 1894. The college had existed as an unincorporated educational institution some years before 1879, under the care, and to a great extent at the expense, of its founder, George S. Park. From a small beginning it has grown to be an institution of large means, affording at present educational facilities to several hundred students and giving advantages to ambitious boys and girls, who have not otherwise means, to obtain education of a high degree by aid of their own industry and co-operation in the college work. It is an institution that reflects great credit on its founder and on that body of faithful men who have devoted their lives to the work. The charter gives to the board of trustees the power to fill vacancies, thus making the board self-perpetuating; it also gives them power to create vacancies by removal from office, but although now a difference has arisen between them touching the meaning of a certain clause in the charter, yet neither in the past nor in the present has there been or is there any reproach or charge of misconduct cast by one on another. We approach the consideration therefore of the point of difference between these parties with the highest respect for the opinion of each and with perfect confidence that on both sides the desire is to arrive at the true meaning of the charter.

In the first article of the charter it is declared that “the principles of the college shall be non-sectarian, but evangelical, imbued with the spirit of Christian liberty and charity.” And it is further declared that “the object of this corporation shall ever be to diffuse moral and religious principles, in the most practical and effectual manner; to afford the advantages of training and education to the youth of both sexes of the country, especially the west and southwest, to give especially facilities to youth found worthy and not having sufficient means, who may be inured to hardships, acquainted and in sympathy with the people among whom they are to live and labor, to obtain an education by labor or otherwise; thus offering a safe and unlimited opportunity to the patriotic and benevolent to assist in this great work, by their donations and endowment.”

In article 2 of the charter it is provided that there shall be daily Bible readings, lectures, model Sabbath school, etc., besides a full course of instruction in science, literature and art. “In the male department shall be taught agriculture, business management, skilled labor and practical wisdom.” In the female department, household and domestic duties. By such means it was declared that the students would contribute largely to their own support while gaining knowledge. “It is designed to educate by practice, training and doing as well as by teaching, and these departments of skilled labor, and science, literature and art shall be under the supervision and direction of the most competent instructors that the funds of the college will permit the trustees to employ.”

Section 2 of article 3 of the charter is the section about which there is a difference in opinions, which difference has led to this suit. That section is as follows : ‘ ‘ The board of trustees are hereby forbidden to contract any debts against the corporation, or to mortgage the property of the college proper, or to do any act to erect a lien upon or incumber any property given, or purchased, or vested in it, in trust or otherwise, but shall hold inviolate all furniture, stock, assets, lands, buildings, moneys or endowment funds, professorships (scholarships), or other funds, preserving them in perpetuity, using only furniture, stock,, lands and buildings, and the interest of the funds;handing them down to their successors forever; and all claims against the above named property or corporation shall be void in law; and any trustee voting or acting against this provision of the charter, or any other officer or agent, shall not in any way legally bind-the board of trustees of the institution, they have superseded their authority and can only assume individual and personal responsibility and the record of this charter in Platte county, Missouri, shall be legal notice thereof to all.”

From the beginning of the college it has subsisted on donations from various sources helped out by the labor of the students in its various industrial departments. Many of the donations have come with specific directions from the respective donors as to the particular purpose to which they are to be devoted, and about them there is no difference of opinion as to how they are to be used or applied. But there are, also many donations which have come without any designation by the donors of the purpose for which they are to be used, and it is in reference to these that the difference in opinions has arisen. On the part of the minority of the board of trustees it is contended that the charter means that donations of the last-named class must be invested in the endowment fund and only the interest arising therefrom can be used in defraying the expenses of the institution, while the majority are of the opinion that the principal of such donations may be used when necessary to defray general expenses of the college. The trial court adopted the view of the minority and held as follows: “And the court further finds from the pleadings and the evidence that the board of trustees of Park College now holds funds •aggregating about two hundred and fifty thousand dollars, which have been donated to it without any restrictions or directions by the respective donors as to the use to be made thereof, and that other funds may be similarly donated without restrictions or directions as to the use to be made thereof. It is the decree of the •court that it was and is the true intent and meaning of said charter that all such funds, so donated, shall become part of the permanent funds of the college; that no part of the principal thereof shall be used or •expended, but the same shall be loaned or invested so as to produce interest or income, which interest or income only shall be used or expended by said board of trustees as they may deem for the best interest of the college.” Prom that decree this appeal has been taken.

In interpreting a clause in any written instrument it is well to read the whole instrument and derive light from its general controlling purpose, if we can.

Section 3 of this article declares that “The board of trustees shall have oversight, approval and direction of all endowment funds, of all real estate and personal property, and of all loans made of them.” Then it proceeds to mention the character of the securities in which the funds may be invested.

Quotations are made in one of the briefs from section 4 as throwing light on the subject; that section is as follows: “It is the earnest desire of the friends of this institution that it be established and built up hy wisdom, and stand forever and go on improving like the older institutions of Europe and America. To accomplish this purpose it is suggested that the board of trustees look most critically into the way things are going and make wise provisions for future contingencies; if any trustee neglects such care and caution, request him to resign and appoint another. It is a positive wrong to be indulgent to incapacity or inefficiency, to idleness, wastefulness or any other unfitness. Let the eyes of these guardians pierce every nook and corner and thereby insure wise and skillful management of the institution. Let them provide the best instructors and make the best provisions for the institution their funds will permit, going no further. Let them stop all leaks, stir up the indolent, get honest work done, and make purchases as far as practicable when prices are lowest, for ‘there is a time to get.’ In summer prepare and lay up for winter. Let them secure every trust, promptly discharge every trustee, officer, agent, or employee, and have the business, work and instruction done by as few men and at as small cost as possible consistent with the true interests of the institutions, without favor or partiality, remembering that the Lord’s work must be done better than our 'own.”

' At or about the time of the incorporation, Mr. Park, the founder, executed a deed of gift to the corporation conveying certain land described by metes and bounds “in or near Parkville” in Platte county, on which was situated a college building, one that had been in use as such before the incorporation. In the deed it was specified as the consideration that the grant was made for thé educátional purposes as set forth in the charter, that the principles of the college were to be non-sectarian but evangelical, and that a majority of the board of trustees were at all times to be members of the Presbyterian church, holding the Westminster Confession as containing the true system of faith and doctrine; that should the trustees fail to carry out the purposes for which the conveyance was made and observe its conditions, then the deed assumed to confer on a court of equity the jurisdiction to compel them to do so, or to remove them and appoint others having the prescribed qualifications. The property conveyed by that deed with the personal property consisting of the then college equipment was all the means that were at the disposal of the trustees with which to carry on the work for which the college was chartered. There was then no endowment fund or fund designated for any purpose, no income and no ready money. “There was the necessary furniture for a students’ dormitory and a meager equipment for college purposes.” The college was started on the hope that benevolent people could be found who. would contribute the means to carry on the good work, and this hope was realized during the first year after the incorporation when about $8000 was collected from such persons, and ninety-four or ninety-six students were maintained, and from that time on and up to the trial of this suit that hope has been realized and the college has grown. In 1879 the corporation’s college buildings were worth about $15,000, now it owns buildings worth over $225,000 ; then it had no endowment or other permanent fund, now it has such funds amounting to several ¡hundred thousand dollars, yielding interest income of over $15,000, but never from its beginning to the day of the trial had the income or interest been sufficient to defray the necessary expenses of the institution, but that income was helped out by appropriating to defraying those expenses money from donations that had come without any designation from the donors as to how it should be used. Except so much of them as were used to defray necessary expenses, those donations have been added to the endowment fund.

The foregoing facts do not afford a solution of the question, but they do show how the majority of the board of trustees have interpreted the clause of the charter in question from the beginning, and the condition of the affairs of the corporation at the start shows how the framers of the charter must have understood the language used in this now disputed clause, else they would probably have indicated how the institution should start and go until an endowment fund could be raised.

In one of the briefs, referring to the charter, the learned counsel says: “It is unique in this: That drafted, as it was, by the founder, a man not familiar with such work, it possesses every essential element of a perfect constitution: Clear and unmistakable in its terms, yet it allows elasticity that has made it entirely practical.” We agree with so much of this comment as indicates that the charter was drawn by “a man not familiar with such work, ’ ’ but that the powers conferred on the board of trustees or that the limitations on those powers are stated in clear and unmistakable terms we do not agree. It was not the work of a lawyer or of one accustomed to writing documents with the expectation of having the words employed undergo judicial interpretation. Take the language ol section 4 for example; it is full of beautiful and eorhmendable sentiment and it is useful in the form of advice to the trustees, but as to powers given, or limitations on such powers, it throws but little light; the advice given is as applicable to the trustees in the performance of their duties prescribed by the charter, as interpreted by the majority, as it is to their duties as interpreted by the minority. It is good admonition under all circumstances and, so far as shown by this record to the contrary, it has been faithfully followed.

Section 2, which is the one concerning which there is this controversy, is very emphatic in its declaration that the trustees shall make no debt against the corporation, and it declares as a matter of law that any claim against the corporation or its property shall be void. One familiar with the law of corporations would hardly have expressed it in that way. Section 981, Revised Statutes 1879, now section 3442, Revised Statutes 1909, authorizes the organization of a corporation for a certain purpose and with certain conditions which corporation when organized would not be liable for any debt or pecuniary obligation whatever, and doubtless the writer of this charter had before him that section, for some of the language used seems to have been taken therefrom; but this is not the kind of corporation authorized by that section and does not profess to be. There is no question raised in this record as to the meaning’ of that clause in the section 2 which declares that all claims against the corporation shall be void, and therefore what is above said is not intended as expressing any opinion thereon, but the court is asked in the petition to define the personal liability of the trustees when acting in good faith in the management of the corporation or the expenditure of its funds. In that connection the petition states that difficulty has sometimes been experienced in securing otherwise desirable persons to act as trustees for fear of incurring personal liability. The trial court in answering that question construed the charter to mean that no personal liability was incurred when the trustees acted in good faith, but that “in contracting debts and creating encumbrances on college property their act in so doing shall be ultra vires and void, so far as binding the permanent funds of the college is concerned.” If that is the correct view of the law it would appear that if a debt is incurred the corporation is not bound and the individuals are not bound unless they act in bad faith. We refer to this now only to show how far the language of this section is from that clearness and precision which is claimed for it.

We come now to the main question in the case. Section 2 starts out with forbidding the trustees to contract any debt against the corporation or to mortgage or otherwise encumber any of its property, but shall hold inviolate all furniture, stock, assets, lands, buildings, moneys or endowment funds, professorships, scholarships or other funds, preserving them in perpetuity, using only furniture, stock, lands and buildings and the interest of the funds; handing them down to their successors forever; and all claims against the above named property shall be void in law, ’ ’ etc. The clause forbidding the incurring of, debt and the words just quoted are embraced in one sentence and convey but one complete thought. The sentence begins and ends with the thought of forbidding the incurring of debts, all else in the sentence is in furtherance of that thought. The words expressing the initial thought are followed by and connected with the words last quoted by the conjunction “but.” The meaning of the word “but” varies somewhat according to the context. According to Webster it is used to mean “except,” and also sometimes to mean “on the contrary, on the other hand, ’ ’ and it was probably used in the latter sense in this context, that is, it was intended to say that the trustees should incur no debt and create no mortgage or lien, on the contrary they should hold inviolate the property, etc., “using only furniture, stock, lands and buildings, and the interest of the funds.” There is no grammatical connection between the first part of the sentence forbidding the incurring of debt and the part following the conjunction “but,” unless it be that the latter has reference to the topic stated in the former. Whichever meaning we give to the conjunction “but,” whether “except” or “on the contrary,” we must go back to the first part of the sentence to learn what the words following “but” mean. The word “but” in that connection was not intended to begin a new sentence or introduce a new topic. The sentence, taking all its parts together, means that the trustees shall not jeopardize the property by incurring debts or creating mortgages “but” shall preserve the same unbroken, and in place of incurring debt for any purpose they may use, for that purpose, only the income from the property and the interest from the funds, and beyond that what cannot be done without going in debt must be left undone. It was debt that was feared and its consequences. Under that clause the trustees were forbidden to incur debt even for the necessary current expenses of maintaining the college. But the using for necessary current expenses, money given to them by donors without any direction as to the purposes for which it was to be used, would not be going in debt, and if we should interpret that sentence to mean that the trustees should not only not go. in debt for such purpose, but should also not use for such purpose money so given, we would introduce a new topic into that sentence, and put a limitation on the powers of the board not indicated by the' language. The language used shows that although in 1879 when the first charter was obtained the corporation had no funds, yet the organizers expected to accumulate funds, for they use the words “endowment funds, professorships, scholarships and other funds.” And it is for the protection of those funds that the language in question is used. Those funds are to be held intact and only the interest from them used. Anyone familiar with the affairs of institutions of this kind knows the meaning of the terms, endowment fund, professorships and scholarships; they are terms indicating permanent investments for particular purposes or money designated to be so invested or held for a particular purpose. The limitation is on the use of the property and funds; the language is: “hold inviolate all furniture, stock, assets, lands, buildings, moneys or endowment funds, professorships, scholarships or other funds, preserving them in perpetuity, using only furniture, stock, lands, and buildings and the interest of the funds.” The funds specified are such as are well known to be permanent in character, endowments, professorships, scholarships, and the general words “or other funds” following in that connection mean other funds ejusdem generis. Even if the word fund could ever be construed to mean money in an unlimited sense its use in this sentence forbids that construction, for here it is used in the specific sense of a permanent fund, “endowment fund, professorship, scholarship,” et omnia ejusdem generis. But ■our attention is called to the word “moneys” used in that connection; the context is, “all furniture, stock, assets, lands, buildings, moneys or endowment funds, professorships,” etc. The word moneys is connected with the words endowment funds by the conjunction “or.” The word “or” has two significations. According to Webster it may be used to convey the idea of an alternative, that is, “you may read or you may write. ... It corresponds to either. ... It often connects a series of words or propositions presenting a choice of either; as, he may study law or medicine or divinity or he may enter into a trade.” The word was evidently not used in that sense in this connection; the author of the instrument did not mean to say that the board of trustees should preserve intact ■either the moneys or the endowment funds, one or the -other, as they might choose. But the same great author above quoted goes on to say that the conjunction “or” may be used to join different terms expressing the same thing or idea; as, “this is a sphere or globe.” That is the sense in which the word “or” is here used; the word moneys was used by the author of the instrument as synonymous with the word endowment funds, professorships and scholarships. Money ■does not become an endowment until it is either set apart or at least designated for that purpose. Moneys that are given to this institution designated for a particular purpose, as for an endowment fund, a professorship1, a scholarship or other purpose of like character, cannot be used for any other purpose without violating the terms of the charter, but money given without any designation of purpose may be used for such purposes as the board of trustees deem best for the good of the college. And judging the future by the past the benevolent patrons of this institution need have no fears of. the misappropriation of their gifts, but even if unlawful use of them should be made, or attempted, the courts of the State are strong enough to right or prevent the wrong.

The evidence shows that a large part of the money and properties belonging to the corporation are carried in the name of the secretary of the board of trustees; the explanation given for that is that owing to the restriction in the charter concerning the incurring of debt and creating of liens, etc., it became necessary to do as was done. We express no opinion on that subject, because there is no question of that kind raised in the pleadings; we mention it only to show that we have not overlooked it. But whilst the-fact is adversely criticised in one of the briefs for the respondent, no dishonest purpose or of concealment of the fact or loss to the corporation is suggested.

There is a prayer in the petition that the court construe that clause in section 1, article 3, referring to-the power of the board of trustees to discharge any trustee, officer, agent or employee of the corporation, but there is no suggestion of any disagreement as to-the meaning of that clause, and there is nothing obscure about it, therefore we see no use in discussing it..

One other point remains to be mentioned. The-petition states that a doubt has arisen among the members of the board of trustees as to their being personally liable for their acts in the management of the-affairs of the corporation and particularly in the expenditure of its funds. In answering this question the court does not undertake to say what personal liability, if any, a member of the board of trustees would incur in favor of a third person under the circumstances mentioned, because to do so would in effect forestall or prejudge a case not yet arisen and affect the rights of persons not parties to this suit. But as between the individual trustee and the corporation it is not improper to define their respective rights and liabilities. By accepting the office of member of this board of trustees the individual enters into an implied contract with the corporation that in the exercise of tbe power that office confers on Mm be will faithfully observe and obey the mandates of the charter, and he becomes personally liable to the corporation for any breach of that implied contract, if the corporation should be damaged thereby. The fact that he may have acted in good faith would be no’ defense if he committed a breach of the contract. But it would be no breach of the contract if the transaction was one calling for the exercise of his judgment and he exercised that judgment in good faith, although it should turn out to have been bad or mistaken judgment. For example, this charter expressly forbids the trustees creating a debt on the credit of the corporation; they are given no discretion on that point, therefore, if the board should take such action as created such a debt it would be a breach of the implied contract and such of the trustees as created the debt would be liable to the corporation for the injury, if injury should result. But, again, for example, if a proposition should come before the board to purchase for the use of the college certain property or procure certain conveniences, as water, light, etc., and the trustees in good faith should exercise their best judgment and make the purchase, or obtain the object proposed, paying for it out of money belonging to the corporation not devoted to any other special purpose, they would not be liable, even though it should turn out that the purchase was a bad one and loss entailed on the corporation, and what is here said of a purchase would apply to any other investment made in good faith.

The judgment is reversed and the cause remanded to the circuit court with directions to enter a decree construing the charter in question according to the law as in this opinion expressed, and entering judgment that the corporation pay the costs of this suit, both in this- and the circuit court.

All concur, except Wood-son, J., not sitting.