Central Railroad & Banking Co. v. Smith

76 Ala. 572

• Court: Supreme Court of Alabama
• Decided: December 15, 1884
• Status: Published

Opinion

CLOPTON, J.

— The Central Railroad and Banking Companyjwas chartered by the State of Georgia, for the purpose and witli power to construct and operate a railroad from Savannah to Macon, and to organize and do a banking business. The complaint alleges that the defendant and one Whitesides were the owners and proprietors of a steamboat called the George W. Wylly, and were engaged in operating the same on the Chattahoochee river, for the carriage of passengers and freight from Columbus, Georgia, to Apalachicola, Florida, and intermediate landings. The action is brought by appellee, to recover damages for injuries sustained, while a passenger on the boat in April, 1883. For the purpose of proving ownership of the steamer, and partnership or agency in operating it, the court, against the objection of defendant, admitted the following evidence: 1st, general reputation ; 2d, the record of a former suit between A. O. Gordon and the defendant; and, 3d, bond and certificate of enrollment, affidavit of ownership, and license to employ the boat in carrying on the coasting-trade.

1. Ownership, partnership, and agency are facts, to which witnesses, who know their existence, may testify. But, while the notoriety of a fact in a particular community may be admissible, to lay a foundation for an inference that one residing in the community had knowledge thereof, the existence of the fact having been otherwise established, it is well settled, that it is not competent to prove by general reputation ownership, partnership, or agency. These do not fall within any of the exceptions to the inadmissibility of hearsay evidence. — Humes v. O'Bryan, 74 Ala. 64; McCoy v. Odum, 20 Ala. 502; Blevins v. Pope, 7 Ala. 371.

2. It may be true that, where two persons are sued as partners, a judgment by default on personal service may, in a subsequent action against them by a stranger, be competent as an admission of the partnership. In such case, it is competent only as an admission, and is received on the same grounds as other admissions. The effect of an admission can not be accorded to a judgment, when the liability is denied and controverted in the suit. A denial of any and all liability can not be regarded as an admission of liability as partners. The suit of Gordon not being on an instrument in writing purporting to be signed in the partnership name, it was not necessary for the defendant to have contested the partnership charged by special plea. The verdict and judgment thereon, the general issue having been pleaded, do not convert the denial into an admission by the defendant. It is admitted that the record of a former suit and judgment, though between different parties, is admissible to prove the existence of the former suit, and the rendition of the judgment, when these become material matters of inquiry; but, for the judgment to operate as a bar, or as evidence of the facts on which it professes to be founded, it must be between the same parties, or their privies. Generally, a judgment can not be used as evidence by one party in a subsequent suit, when an opposite decision would not be evidence for the adversary party. The benefit must be mutual and reciprocal. — Phillips v. Thompson,3 Stew. & Port. 369 ; Tridby v. Seybest, 12 Penn. St. 101. The former suit and judgment are res inter alios.

3-4. The acts and declarations of a party in possession of property are admissible, so far as explanatory of his possession ; but not to prove joint ownership or partnership with a third person, unless notice of them is brought to the knowledge of such other person ; though they may be received to corroborate or rebut other evidence to prove the existence of a partnership. The manner in which the books and accounts are kept, and the merchandise is marked, is not available proof of a partnership, unless it is shown that the party against whom the evidence is offered had some agency in the acts, or sanctioned or approved them; and, ordinarily, the statements and admissions of one partner are not competent evidence to establish a partnership. Humes v. O’Bryan, supra; McNeill v. Reynolds, 9 Ala. 318; Thornton v. Kerr, 6 Ala. 823. The certificate and bond of enrollment, the affidavit of ownership, and the license were the acts and declarations of Whitesides and the officers; and the record shows there was no testimony that the defendant had any knowledge of, or participation in them.

5-6. The merits of the case involve the consideration of the questions, whether the corporation has power, under its charter, to own steamboats, and to engage, in association with a natural person, in the business of carrying persons and freights on the Chattahoochee river; and, if without power, whether under any, and what circumstances, it is liable to a passenger for injuries resulting from the negligence or unskillfulness of those in charge of the boat.

The general rule, that corporations created by an act of the legislature, or organized under general laws, can exercise only the powers expressly granted, the implied powers necessary and proper to carry into effect the express powers, and such incidental powers as pertain to the purposes of their creation, is not controverted. It may be conceded, that a railroad company, in the absence of express power, is authorized to make traffic arrangements for transportation by water, or may purchase, own, and operate steamboats, or other water-craft, when such an arrangement or business legitimately pertains to the corporate purposes, or may reasonably be inferred to have been contemplated and intended by the creating power. Such power is incidental to the purposes of the corporation, and such inf erence is reasonable, when a railroad company is incorporated with power to construct a railroad between fixed and designated termini, and to effectuate the construction it is necessary to cross navigable rivers, bays, or arms of sea, which, on account of their width and depth, or from other causes, can not be bridged ; or when a body of water, lying at the termination of the railroad proper, separates it from the metropolis, to and from which it was contemplated, intended, and is necessary to transport freight and passengers conveyed over the road,-A“ from the ostensible and substantial termini of their route ;” ol* when the act under which the company is organized authorizes it “ to contract for the transportation and delivery of, and to deliver persons and property, conveyed over their road, beyond its termini”— Wheeler v. S. F. & A. R. R. Co., 31 Cal. 46 ; Shawmut Bank v. P. & M. R. R. Co., 31 Vt. 491 ; So. Wales R. R. Co. v. Redmond, 10 Com. B., N. S., 674. In such cases, the power is implied, as necessary and proper to accomplish the objects of the incorporation ; or is incidental, pertaining to its purposes as expressed in the charter or general law, and -without which the express powers are ineffectual.

In Wheeler v. S. F. & A. R. R. Co., supra, it is said : “It is one thing to build and own a line of steamers to some foreign country, or some distant port, carrying on a wholly distinct and independent business entirely foreign to the objects of a railroad corporation, which might just as well, and a great deal better, be transacted by some other company organized for the purpose ; and quite another, to own and control steamboats for crossing rivers and bays in the line of the road, and the use of which is convenient, proper, and necessary to a successful accomplishment of the objects for which the road is built and operated.” It may be stated, generally, that a corporation has no power to engage in any business, not authorized by the law of its creation ; and a railroad company is unauthorized to use or apply its funds in aiding and carrying on business foreign to, and unconnected with its proper and legitimate purposes and objects, although the design and effect may be to augment the business of the road, and increase the profits of the corporators. Under the operation and application of the general rule, it has been held, that a company incorporated for the construction of a plank-road between designated points, with the right to take tolls, is not authorized to establish a stage-line 'on their road ( Wiswall v. G. & R. P. R. Co., 3 Jones Eq. 183); that a corporation chartered to lay out, make, and keep in repair a road from a point in the vicinity of Mt. Washington to the top of the mountain, and to take tolls,1 and to build and own toll-houses, had no authority to establish stage and transportation lines (Downing v. Mt. Wash. R. R. Co., 40 N. H. 420); and that corporations organized to construct and operate railroads have no power to buy steamboats to run in connection with their roads (Pearce v. M. & Ind. R. R. Co., 21 How. 441). Lord Langdale, as quoted by Mr. Justice Campbell, in the case last cited, says: “ Ample powers are given for the purpose of constructing and maintaining the railway, and for doing all business required for its proper use when made. But I apprehend that it has no where been stated, that a.railway company, as such, has power to enter into all sorts of other transactions. Indeed, it has been properly admitted, that railway companies have no right to enter into new trades or businesses, not pointed out by the acts. But it has been contended, that they have a right to pledge, without limit, the funds of the company for the encouragement of other transactions, however various and extensive, provided that the object of that liability is to increase the traffic upon the railway, and thereby to increase the profits of the shareholders. There is, however, no authority for any thing of that kind.” The statute of creation, construed as including, not only the expressly granted powers, but also implied and incidental powers — powers necessary, and directly appropriate to the execution of the express powers — is the measure of the powers of the corporation, and operates to the exclusion of all others.

A late decision of the Supreme Court of Georgia has rendered a further discussion of the question unnecessary. In Gunn v. v. Cen. R. R. & Banking Co., that court has construed the powers conferred by the charter of the defendant, and held that the corporation has no power to enter into a partnership with a natural person to purchase and run a steamboat on one of the rivers of that State. This decision was made in a suit brought hy a passenger on the same steamboat, to recover damages for injuries sustained at the same time, and under the same circumstances, as the plaintiff in the present action. If we entertained doubt of the power of the defendant to engage in such business, — when it is 'said, “ to be in doubt is to be resolved,”— comity would suggest an acceptance of, and acquiescence in the construction of the statutes of that State, under which the corporation was organized, by the court of last resort. We observe, however, an allusion to another statute, which authorizes railroad companies “to build, construct, and run as part of their corporate property, such number of steamboats or vessels as they may deem necessary to facilitate the business of such companies.” This statute does not appear in the present record, and can not be, and is not considered by us.

7. With the postulate assumed, that the defendant has no authority to own and operate, in association with a natural person, a steamboat on the Chattahoochee river, for carrying persons and freights, there remains to be considered the liability of the defendant to a person for injuries suffered on a boat thus owned and operated, while a passenger thereon.

This court has repeatedly decided, that the contracts of corporations, which they have no power to make, are void, and that the courts will not enforce them. “ Such contracts on the part \ of a corporation are ultra vires, and void, and no right of action can spring out of them.” — Marion Sav. Bank v. Dunkin, 54 Ala. 471; Chambers v. Falkner, 65 Ala. 448. No contract made by a corporation, not within the scope of its powers, can be made valid', or the foundation of a right of action, by the assent of the shareholders. If the corporation attempts to carry such contract into execution, dissentient stockholders, though a minority, may restrain its consummation. And if suit is brought against the corporation on such contract, they may avail themselves of the defense of ultra vires.- — Davis v. Old Col. R. R. Co., 131 Mass. 258. The settled doctrine of this court is, that a reception and retention of the fruits and benefits of the transaction do not estop the corporation from denying its power to make the contract; though an action may be maintained, in a 'proper case, against a corporation, for the money or property received, the legal effect of such suit being a disaffirmance of the prohibited contract.

Were the present action founded on a contract of transportation, it is unquestionable, that the defendant could successfully interpose the defense of ultra vires. The action is, however, ex delicto., founded on the common-law duty of a common carrier. The plaintiff does not require the aid of an illegal contract to establish his case; its enforcement is not necessary to entitle him to a recovery. The rules applicable are those which govern in cases of torts committed by a corporation. The question is, whát is the liability of a corporation for a tort, committed while transacting a business without and beyond the purview of the corporate powers and purposes? This is followed by another question; by what authority, and in what manner, can a corporation be subjected to such liability?

While, as the law confers no power or permission to commit a wrongful act, every species of tort may be technically ultra vires, it is well established, that corporations may commit almost (every kind of tort, and be liable to an action for the same. In such case, the doctrine of ultra vires has no application. — Mer. Bank v. State Bank, 10 Wall. 601. “A corporation is liable to the same extent, and under the same circumstances as a natural person, for the consequences of its wrongful acts, and will bo held to respond in a civil action, at the suit of an injured party, for every grade and description of forcible, malicious, or negligent toft or wrong which it commits, however foreign to its nature, or beyond its general powers, the wrongful transaction or act may be.” — N. Y. & N. H. R. R. Co. v. Schuyler, 31 N. Y. 30. Accordingly, actions have been maintained against corporations for libel, malicious prosecutions, assault, and other torts too numerous to be mentioned.— Green v Lon. Gen. Om. Co., 7 Com. B., N. S. 388: P. W. & R. R. R. Co. v. Quigby, 21 How. 202; Jordan v. Ala. Gt. So. R. R. Co., 74 Ala. 85. Generally, it may be said, that corporations are liable for the consequences of tortious acts done by its authority, though not within the scope of its powers, express, implied, óF incidental. The distinction between the liability of a corporation, on an unauthorized contract, and for a negliVol. LXXVI, gent or wrongful act in the performance of such contract, is clearly and properly drawn by Selden, J! in Bissell v. Mich. So. & No. Ind. R. R. Cos., 22 N. Y. 258; which was an action by a passenger on a train of cars, which by contract the two companies were unitedly running, for a breach of duty to convey him safely, the passenger having been injured by the negligence of their servants. The defense of the companies was, that, in making the contract, they transcended their powers, and, consermisfitly, in judgment of law, they were'not operating the roajl^and did not undertake to carry tiie plaintiff over it. After holding that the contract to operate the consolidated roads, aife to transport the plaintiff, was illegal and void, he says: “Itiis said, that if the contract was uli/ra vires, and the corporations protected from all responsibility for its violation on that ground, it must be equally free from responsibility for an injury inflicted while attempting to perform it. But this, I apprehend, by no means follows, though it is probably true, so far as the duty to observe due care grows out of the contract. The plaintiff’s claim, however, rests not upon his contract, but upon the right which every man has to be projected from injury through the carelessness of others. It has the same legal foundation as that of one who has been injured by the negligent driving of some person upon the public highway, or has been run over by a train of cars, when crossing the railroad track. The duty to observe care, in these cases, arises, not upon any contract, but from the obligation which rests upon all persons, whether natural or artificial, so to conduct as not through their negligence to inflict injury upon others.” An exemption from liability in such cases, because the act, is ‘id.ira vires, would be a license to corporations to do wrongs., to others! From these principles it follows, that if the defendant undertook the business of transporting persons by a mode of conveyance other than that authorized and provided by the charter, its duties and responsibilities to a passenger are the same as if the business was authorized and legal.

8. But, before the duties and responsibilities attach, the corporation must undertake and engage in the business, and thereby assume its burdens. Of this there can be no implication, from the isolated fact, that some officer or agent has engaged, in the name of the company, in running and operating the boats; in other words, there can be no implication that a corporation has made a contract, or engaged in business transcending its powers. — Oreen’s Brice’s Ul. Vires. 36Í. It may he interred from proved circumstances, as other facts, but is not the subject of implication. Corporations are responsible for the wrongs committed by their officers, agents, or servants, while in the course of their employment; but, if the officer, agent, or servant, “ go beyond the range of his employment or duties, and of his own will do an unlawful act injurious to another, the agent is liable, but the master or employer is not.” Gilliam v. S. & N. R. R. Co., 70 Ala. 268. The limitation is, the scope of the employment, or delegated’authority. If an officer or agent can not directly subject the corporation to liability for his tortious act beyond the range and conrse of his employment, though done while engaged in its performance, for what reason, or on what principle is it, that an officer or agent can, by making an unlawful transaction, and engaging in an unauthorized and unlawful business, in the name of the company, without the authority of the corporation, indirectly subject it to liability for the negligent or intentional wrongs of the agents or servants employed by him in the performance of such contract, or in carrying on such business ? While corporations should be held to a strict responsibility for the wrongful acts of their employees, when done in the course of their employment, and connected with the execution of the business for which incorporated, they should be protected against the consequences of unauthorized acts of their officers or agents, committed in excess of its powers, and unconnected with the business or purposes of their incorporation and organization, especially when dealing with persons charged with notice of their powers, and the nature and extent of the employment and authority of the officer or agent.

In Brakan v. N. J. R. & T. Co., 32 N. J. Law, 328, it is said : “In considering the question whether the agent has the authority of the- corporation, so as to make it answerable for his act, the purposes for which the company was incorporated must not be overlooked. An authority given even by the board of directors, in expi'ess terms, will not, in all cases, be the authority of the corporation. The directors are only agents themselves, and their powers are necessarily limited within the scope of the purposes for which the corporation was created, beyond which they are not authorized to bind the corporation. To fix the liability of a corporation for the tortious acts of one of its employees, done in obedience to the commands of its officers, the act must be connected with the transaction of the business for which the company was incorporated. If the directors should order an agent to take a person out of his house and beat hita; or if the directors of a banking company should purchase a steamboat, and engage in transporting passengers, 'the corporation would not be liable for the misfeasance or nonfeasance of agents employed in that business.” It is true that the board of directors may be invested by the charter, or general law, with such management and authority as practically to constitute it the corporation; but, by the provisions of the charter of the defendants, the directors are agents and representatives, with authority limited by the scope of the powers, business, and purposes of the corporation. It will be observed that the business was not carried on in the name of the corporation.'As there is no implied authority of any officer or agent to make an ‘ultra-vires contract, or transaction, and on that ground merely bind the corporation, it follows, that if the boats were purchased and engaged, in connection with Whitesides, in the'/ business of transporting persons and freight on the Ohattahoo- / dice river, by the president, superintendent, or even the direct- jy ors, the corporation is not bound thereby, and is not liable for |i the negligent or wrongful acts of the persons employed in such t business, unless the transaction was previously authorized, or subsequently ratified by the corporation. Without such authority or ratification, the persons thus employed are not the agents or employees of the corporation. As the immediate or direct act of the officer or agent, in such ease, can not bind the corporation, his mere knowledge of, and acquiescence in the prosecution of such business, are not tantamount to a ratification by the corporation. Considering the difference between the principles which govern the liability of the company for the tortious acts of its agents committed in the course of their authorized employment, and its liability for the tortious acts of persons employed in the conduct and prosecution of a business undertaken on behalf of the corporation by its agents, beyond the range of their employment, and prohibited by the laws of its creation, the previous authority or subsequent ratification, in order to bind the corporation, must be in corporate capacity.

A corporation is an artificial body, a distinct person, in legal contemplation, from the stockholders, in which the corporate property is vested. Its will is usually or ordinarily expressed at a meeting of the corporators. Its officers are its agents, and not the agents of the stockholders. In this sense, previous authority, to bind the corporation by the act of an officer or agent transcending its powers and unconnected with its authorized business and purposes, must be the result of corporate action, as contradistinguished from the individual action of the stockholders or officers. Subsequent ratification results, when a knowledge of the business being thus conducted, and of the reception and retention of its fruits and benefits, is brought home to the corporators, at a time, and under circumstances which require them to elect to repudiate or be bound, and they fail to disavow the act; in other words, any facts, wdiich would' be a ratification of the unauthorized acts of an agent by a prin-' cipal who is a natural person.

An application of these principles will probably be a sufficient guide on another trial.

Reversed and remanded.