Madison, Watertown & Milwaukee Plank Road Co. v. Watertown & Portland Plank Road Co.

By the Court, Smith, J.

This was a bill filed by the complainants, appellees, against the defendants, appellants, for the foreclosure of a certain mortgage executed by the defendants to the complainants, to secure the payment and interest of three several evidences of debt, called by the complainants “ certain *178 instruments in writing, or simple bills,” by wbicb tbe defendants acknowledged themselves to owe, for borrowed money, tbe complainants, or bearer, tbe respective sums of $1,000, $2,000 and $1,000, wbicb said sums tbe defendants promised to pay to tbe complainants in four years from tbe date thereof, respectively, with interest thereon, payable annually, at tbe rate of twelve per cent, per annum, at tbe office of tbe complainants, in tbe city of Milwaukee ; and to secure the payment of tbe said several sums and interest mentioned in tbe said bills, tbe defendants executed and delivered to tbe complainants, for tbe consideration of $4,000, a mortgage upon so much of their plank road as lies between tbe village of Portland and Watertown, together with all their franchises, and ■ all their personal property of any kind and description, and all their privileges ; to have and to bold, &c. Tbe bill also states that tbe whole sum of $4,000, together with interest since June 8th, 1852, remains due and unpaid, and that no proceedings at law have been bad, &c.; closing with tbe usual prayer.

To this bill tbe defendants interposed tbe following plea:

“ To the Circuit Court for the county of Jefferson: In Equity. Tbe plea of tbe Watertown and Portland Plank Road Company, defendants to tbe bill of complaint of tbe Madison, Water-town and Milwaukee Plank Road Company, complainants:

“ This defendant, by protestation, not confessing or acknowledging all, or any of tbe matters and things in tbe said complainant’s bill of complaint mentioned and contained, to be true in such form and manner as tbe same are therein set forth and alleged, for plea to tbe whole of tbe said bill, says, that tbe instruments in writing, or simple bills and mortgage mentioned in tbe said bill of complaint, were made, executed and delivered by tbe said defendants to tbe said complainants, for money loaned by tbe said complainants .to tbe said defendants, as in tbe said instruments in writing, or simple bills, is stated; and that tbe said complainant is a body corporate by virtue of an act of tbe legislature'of tbe territory of Wisconsin, entitled, ‘An act to incorporate tbe Lisbon and Milwaukee Plank Road Com *179 pany,’ which said act was amended by an act of the legislature of the territory of Wisconsin, entitled, 1 An act to provide for the continuation of the Lisbon and Milwaukee plank road from Watertown to Madison;’ and that by the said acts of incorporation and amendment, the said complainant is invested •with no power to loan money, or take any securities for the loan of money, and that the said loan of money was .not made in the usual or necessary course of the business of the said complainant ; and that the said complainant cannot, and ought not to recover any portion of the money mentioned in the said bill of complaint, for the causes herein above set forth.

“ Therefore, this defendant pleads the said acts of incorporation and amendment, and the lack of power in said complainant to loan any money, or to take securities therefor, in bar to the whole of the said complainant’s bill; and prays the judgment of this honorable court whether they shall be compelled to make any further answer to the said bill, and pray to be dismissed with their reasonable costs and charges in that behalf most wrongfully sustained.”

The plea was set down for hearing, and at the March term, 1856, of the Circuit Court, the case came on to be heard, whereupon the plea was overruled by the court, and the defendants were ordered to answer on or before the 20th day of April, then next ensuing.

There is but a single question here presented for the consideration of this court. Are" the facts, in the manner and form as they are stated in the plea, sufficient to defeat the relief prayed for in the complainant’s bill ?

However agreeable or instructive it would be, to enter into a full discussion of the powers, duties, rights and liabilities of cor-jmrations, it is scarcely necessary or proper to do so in the present stage of this cause. We have no desire to anticipate the facts of the case, however they may be disclosed by answer or proof. In doing so, remarks might possibly be made prejudicial to one or another of the parties. All that we have now to consider are, the facts stated in the plea, in the manner and form as *180 therein set forth. Farther than that we cannot go, and hence our discussion is reduced to a very narrow compass. The pleadings, and the statutes appertaining to the case, inform us that the parties are two. plank road companies, the termini of whose roads are at the city of Watertown, the one approaching that city from the east, and the other from the west. The plea of the defendants avers:

1st. That the instruments in writing, or simple hills and mortgage mentioned in the complainant’s hill of complaint, were made, executed and delivered by the defendants to the complainants, for money loaned to the former hy the latter.

2. That the complainants are a body corporate hy virtue of an act of the legislature, and by neither of said acts, nor the several amendments thereto, are the complainants invested with power to loan money, or take any securities for the loan of money; and

3. That said loan of money was not made in the usual or necessary course of the business of the said complainants.

The object of a plea to a bill in chancery is, to reduce the cause to a single point, and from thence create a bar to the suit, or to the part to which it applies. 1 Mitf. 219; 1 Atk. 54; 2 Bligh P. C. 614; 15 Ves. 82. But this plea, whether • sufficient or insufficient, whether a defence or not, goes to the whole bill of complaint. A plea collects the rule of law on which the defence rests, from new matter stated by the defendant in that form. Lube, 341. It is therefore apparent, that where a plea goes to the whole matter of complaint and relief, it must be full and perfect in itself, so that if true it will be adequate to the determination of the whole case. Canal vs. Warring, 4 Johns. Ch. Rep. 693 .

The first point of the plea is, that the complainants are a corporate body, and that the bills were given for a loan of money. This general statement of itself is no objection to. the relief prayed for by the bill. The second is, that the complainants are not authorized by their charter to loan money, or to take securities therefor. This is a mere legal conclusion, to be determined by inspection of their charter. The third is, that the loan *181 was not made “ in tbe usual and necessary course of tbe business of tbe complainants.”

This last appears to us to be tbe only material allegation to be considered, and was really tbe only point urged in tbe argument. Tbe plea was set down for bearing by tbe complainants, and by so doing they undoubtedly admitted tbe truth of all tbe facts stated therein, for all the purposes of tbe suit; but a mere legal proposition stated in tbe plea, is not thereby made the stronger or better.

Tbe facts then stated in tbe plea which become tbe subject of consideration, are, that the complainants were a body corporate, being invested with no power to 'loan money; that these bills were given for a loan of money, and that tbe said loan of money was not made in the “ usual or necessary ” course of their business.

It will probably be admitted that a plank road corporation cannot engage in the business of loaning money, unless especially authorized so to do. But it will hardly be denied that if it becomes convenient or necessary for the corporation to loan to one of its contractors a sum of money to enable him to build a section of tbe road, such a transaction would be within tbe legitimate scope of its powers. The rule is, that if tbe means employed are reasonably adapted to tbe ends for which tbe corporation was created, they come within its implied or incidental powers, though they may not be specifically designated by tbe act of incorporation. Tbe last allegation in tbe plea, therefore, viz: that “ tbe loan was not made in tbe ‘ usual or necessary ’ course of tbe business of said complainants,” was eminently proper and necessary; and hence this averment becomes, as we have before said, tbe only one important particularly to consider, in reference to its effect upon tbe whole suit.

In a case of this kind it is difficult to avoid remarks upon tbe equitable character of tbe plea, as well as upon tbe just rights of the parties as disclosed by all the pleadings in the case. But we shall refrain from doing so, with tbe observation, that tbe parties must abide tbe consequences of their own transactions, and with tbe expression of regret that tbe whole transaction *182 between tbe parties bad not been fully disclosed; because in entering into a full discussion of tbe rights and powers of corporations, we may possibly anticipate facts hereafter to be disclosed, and must therefore confine ourselves to a more narrow compass than we otherwise would desire.

The simple question then presented by the plea is, were the complainants, in the prosecution of the objects of their incorporation, confined in law to the means and instrumentalities which, are “ usual and necessary'1' for the accomplishment of the objects contemplated by their charter? We think not.. The complainants cannot exercise any powers, or make any contract not authorized by their charter. • But are they restricted to the means usually adopted by like corporations for like purposes ? Must every means employed by them be absolutely necessary to the end proposed ? Several modes differing in kind, may be convenient and well adapted to the objects to be accomplished, and not one of them absolutely necessary. Are the company restricted to that mode only, which they may be prepared to show was absolutely necessary ? .. Must every means adopted»be a sine qua non to the end ? And have .the company no power of choice outside the limits of necessity ? Or, are they restricted on the other hand to such means and modes as are usually adopted by like corporations? Or in other words, must the means employed, in every instance, be- either “usual” or “necessary ?” If convenient and adapted to the end, may they not be employed, though unusual, and though not absolutely necessary ? The law of corporations is strict, and properly so, but- it is not confined to'such narrow limits. Yet this is the scope of the plea.. It does not inform us for what purpose this loan was made; what were the objects in view by the respective parties. It does not negative the idea that the loan was made in the due prosecution of the objects of the corporation. The defendants may have been contractors to perform the whole of a work required at their terminus, one-half of which belonged to the complainants, to perform which work -was in the due course of the business of both, and this loan made to enable the defendants more speedily and advantageously to complete it; .thus greatly *183 promoting the interests of both, parties, though not absolutely necessary to either. It is difficult to conceive in what manner such a transaction would transcend their charter. The allegation is, that this transaction was a loan of money, and not made in the “ usual or necessary course of the business of the complainants.” Suppose a contractor for the construction of a section of the road, the building of a bridge, or a toll-house and gate, should be unable to complete his job without a loan of money, and for that purpose the company should make him the loan; this might not be usual; it might not be necessary; the company might permit him to forfeit his contract, and then re-let it; but would a loan of money under such circumstances be considered unauthorized by their charter ? This plea does not state that the loan was not made in the course of the business of the company, nor in the prosecution of their work, nor in furtherance of the objects of their incorporation: nor does it allege that the loan was made for any purpose outside of the scope of their business, but only that it was not made in the “ usual and necessary course of their business.” It would be going very far to condemn this corporation upon the mere allegation that they had done an act which was not usual or absolutely necessary to be done in the course of their business. Pleas of this kind should be full and explicit, certain and definite, so that the court can ascertain whether or not the transaction was sanctioned by law. The rule of pleading in this respect is analogous to cases at law. The plea should clearly and distinctly aver all the facts necessary to render it a complete defence to the case made by the bill, so far as the plea extends. All intendments which could otherwise be made against the pleader, should be excluded by proper averments, and facts, not conclusions or inferences, should be stated. Story's Eq.Pl. §§ 663, 664, 665; Mitf. 339, 1 Bro. Ch. Ca. 224; 6 Ves. 595, 597, 239 et seq.; Cooper's Eq. 226; 3 Paige, 273 ; id. 566; 5 Ves. 245 and note; 2 Sch. & Lef. 727; 18 Ves. 182.

Tested by the principles derived from these authorities, as well as from the reason of the case, we are constrained to hold this plea insufficient, and order the case to stand for answer. *184 We do tbis witb less regret, from tbe fact tbat tbe answer will probably disclose tbe trae nature of tbe transaction ; and when all tbe facts shall appear before ns, we shall be better enabled to discover and apply tbe law applicable to corporations, and to do complete justice between tbe parties.

We have carefully abstained from any discussion of tbe law defining tbe powers and duties of corporations, which were so ably presented on tbe argument, lest we might be found adjudicating upon tbe rights of tbe parties before they bad been disclosed by tbe pleadings and proofs.

Tbe order of tbe Circuit Court is affirmed, witb costs, and the cause remanded for further proceedings, according to law.