course of business. And, though a clause in the charter of a bank forbids it "to deal or trade, directly or indirectly, in anything except bills of exchange, promissory notes, gold or silver bullion, or on sale of goods the produce of its lands," it may nevertheless receive and hold bonds and mortgages, as securities for its debts; and, in the absence of proof to the contrary, such bonds and mortgages will be presumed to have come into the hands of the bank lawfully and within the scope of its corporate powers: the clause being designed merely to restrain the bank to its proper business of banking.' The capital stock of an insurance company may be invested in bonds and mortgages, executed directly to the corporation, or obtained by assignment, where the charter does not expressly prescribe the mode of investment, even though it impliedly gives the power to invest in stocks. Nor are securities taken by such a company affected by the fact, that they are taken at a different place from that at which, by necessary intendment, its proper business should be transacted; provided there be no proof that the business, in which the securities were taken, was unauthorized, though it be shown that the company has an office for the transaction of business at the place where the securities were taken. And where, by its charter, a bank was authorized to take mortgages in security for debts previously contracted, it was adjudged by Chancellor Kent, that, if the loan and mortgage were concurrent acts, and intended so to be, it was not a case within Silver Lake Bank v. North, 4 Johns. (N. Y.) Ch. R. 370; Baird v. Bank of Washington, 11 Serg. & Rawle (Penn.) R. 411; The People v. Utica Ins. Co. 15 Johns. (N. Y.) R. 358; Utica Ins. Co. v. Scott, 8 Cow. (N. Y.) R. 709; Leazure v. Hillegas, 7 Serg. & Rawle (Penn.) R. 319; The Banks v. Poitiaux, 3 Rand (Virg.) R. 136; Mann v. Eckford's Executors, 15 Wend. (N. Y.) R. 502; Thomaston Bank v. Stimpson, 21 Maine R. 195; Lagou et al. v. Badollet et al. 1 Blackf. (Ind.) R. 418, 419; 2 Kent Com. 282, 3d edit. Trenton Banking Company v. Woodruff, 1 Green (N. J.) Ch. R. 117. • Ibid. 1 2 the reason and spirit of the restraining clause of the statute, which only meant to prohibit the banking company from investing their capital in real property, and engaging in land speculations. "A mortgage taken to secure a loan, advanced bona fide as a loan, in the course, and according to the usage, of banking operations, was not, surely," says he, "within the prohibition." This decision in New York was upon the construction of a clause in the charter of a Pennsylvanian bank; and, in the subsequent case of Baird v. The Bank of Washington, the Supreme Court of Pennsylvania viewed, with the same liberality of construction, a similar clause in the charter of another bank in that State. The clause seems to have been introduced to prevent the bank from indirectly getting real estate into its hands, ostensibly in payment of a debt, but, in truth and fact, by a transaction which, in its origin, was a purchase. "The intention was," says Gibson, J., "to restrict the right to cases where the loan should be real, and not merely colorable; but I cannot think it was intended to narrow it further, or it would have been so expressed." An act incorporating an insurance and loan company provided, "that, in all cases where the said corporation have become the purchasers of any real estate, on which they have made loans, the mortgagors shall have the right of redemption of any such property in payment of the principal, interest, and costs, so long as it remains in the hands of the corporation unsold;" and, by virtue of it, a mortgagor's right of redemption was adjudged to continue, notwithstanding a contract for the sale of the mortgaged premises had been entered into and duly executed by the company, one-third of the purchase-money paid, and possession taken by making surveys, &c.; the right of redemption, under such a clause, being extinguished only by the execution and delivery of a deed of conveyance to the purchaser, who must be deemed 1 Silver Lake Bank v. North, 4 Johns. (N. Y.) Ch. R. 370. 2 11 Serg. & Rawle (Penn.) R. 411. * Ibid. 417. to have contracted with notice of the rights of mortgagor.' In such a case a purchase by an agent of the company does not bar the right of redemption, it being a purchase by the company within the meaning of the act." A corporation, authorized to invest its capital only on bond and mortgage, cannot recover money lent by the corporation, except a bond and mortgage be taken as security for its repayment; every other security, as well as the contract itself, being void." We have seen that an insurance company, impliedly authorized to invest in stocks, may nevertheless without express authority invest its capital stock in bonds and mortgages.* Where such a company was by charter restricted from dealing "in the purchase or sale of any stock or funded debt whatever, created or to be created, by or under any act of the United States, or of any particular State," the restriction was construed not to apply to investments in the stock of the Bank of the United States, or in the stock of the banks, or money corporations of any particular State. The discounting by a bank of bills of exchange, secured by a deposit of cotton to be shipped by the bank and the proceeds credited to the borrower, was held not to be "a dealing in goods, wares and merchandise," within the prohibition of a fundamental law of the Bank prohibiting such dealing. An insurance company, restricted by charter from discounting notes, though authorized to take and hold securities bona fide pledged to them to secure debts due to them, cannot lend money on the hypothecation of stock and the taking of a note as collateral security for the payment of the loan.' A banking 1 Edwards v. Farmers Fire Ins. Co. 21 Wend. (N. Y.) R. 467. 2 Ibid. 3 Life and Fire Ins. Co. v. Mechanics Fire Ins. Co. 7 Wend. (N. Y.) R. 31. See also North River Ins. Co. v. Lawrence, 3 Wend. (N. Y.) R. 482; New York Fire Ins. Co. v. Ely, 2 Cow. (N. Y.) R. 678. Mann v. Eckford's Executors, 15 Wend. (N. Y.) R. 502. Verplanck v. The Mercantile Ins. Co. 1 Edw. (N. Y.) Ch. R. 84. Bates & Hewes v. The Bank of the State of Alabama, 2 Alabama R. 465 to 475. 7 North River Ins. Co. v. Lawrence, 3 Wend. (N. Y.) R. 482. association adopted certain articles as the basis of their union, by which it was agreed, that the subscribers to the bank should be permitted to pay one tenth of their subscriptions in the stocks of certain incorporated companies, and the remainder in money. The articles of association authorized the immediate commencement of business, and provided for and contemplated an application to Congress for a charter, which was, some time after they had carried on business as an association, obtained, and provided that the whole capital stock of the bank should be paid in money. Upon a bill by one of the subscribers to have an account of the profits of the stock by him subscribed and payment for the same, it was decided, that the stock subscribed and paid in had become consolidated with the other part of the capital of the association, having been received as so much money, that neither the subscribers nor their assignees were entitled to have a specific return or an account of the same, and that the charter of incorporation produced no change in this respect. A bank may, it seems, buy its own stock, if its capital cannot be usefully employed in loans, and the directors may dispose of stock so purchased; nor upon the resale, have the stockholders any right of preemption. A corporation owning its own stock cannot, however, authorize its directors, or even the trustees of the stock held by them for its own use, to vote upon it; it not being permitted to a company to procure stock, which its officers may wield to the purposes of an election.3 2. A corporation can have no legal existence out of the sovereignty by which it is created, as it exists only in contemplation of law and by force of law; and when that law ceases to operate, and is no longer obligatory, the corporation can have no existence. It must dwell in the place of its creation, and cannot migrate to another sovereignty. But although 1 Holbrook Union Bank of Alexandria, 7 Wheat. R. 553. "Hartridge et al. v. Rockwell, R. M. Carlton, (Ga.) Sup. Ct. R. 260. 'Ex parte Holmes, 5 Cowen (N. Y.) R. 426; Ex parte Desdoity, 1 Wend. (N. Y.) R. 98. it may live and have its being in that state only, yet it does not follow that its existence there will not be recognized in other places; and its residence in one state creates no insuperable objection to its power of contracting in another. The corporation must show, that the law of its creation gave it authority to make such contracts as those it seeks to enforce. Yet, as in case of a natural person, it is not necessary that it should actually exist in the sovereignty in which the contract is made. It is sufficient that its existence, as an artificial person, in the state of its creation is acknowledged and recognized by the state or nation where the dealing takes place, and that it is permitted by the laws of that place, to exercise the powers with which it is endowed. Every power, which a corporation exercises in another state, depends for its validity upon the laws of the sovereignty in which it is exercised; and a corporation can make no valid contract, without the sanction, express or implied, of such sovereignty; unless a case should be presented, in which a right claimed by the corporation should appear to be secured by the Constitution of the United States. Accordingly, where a coal company incorporated by the State of New York, for the purpose of supplying the city of New York and its vicinity with coal, purchased coal lands in Pennsylvania, the recitals in the act of incorporation, which gave the power to purchase and hold lands, showing that this power was granted with special reference to the purchase of lands in the State of Pennsylvania, it was held by the Supreme Court of the United States, that the right to hold the lands so purchased depended upon the assent, express or implied, of the State of Pennsylvania; and the Supreme Court of Pennsylvania having decided, that a corporation of that State, or of any other State, has, with special license, a right to purchase, hold, and convey land, until some act is done by the govern 2 'The Commercial and Railroad Bank of Vicksburgh v. Slocomb et al. 14 Peters R. 60; S. P. Irvine, for the use of the Lumberman's Bank of Warren v. Lowry, 14 Peters R. 393. And see Bank of Augusta v. Earle, 13 Peters R. 584. As to place of a corporation, see ante, Ch. III. § 5. 2 Ibid. |