[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 50
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 51 The judgment was rendered and sustained upon the ground that the defendant was not empowered to receive the moneys of the plaintiff and their recovery was authorized under the decisions of this court. (Tracy v. Talmage, 14 N.Y. 162; Curtis v.Leavitt, 15 N.Y. 9 Sacketts Harbor Bank v. Codd, 18 N.Y. 240;De Groff v. American Linen Thread Co., 21 N.Y. 124;Oneido Bank v. Ontario Bank, 21 N.Y. 490; Irwin v. Curie171 N.Y. 409.) The primary inquiry is, do the allegations of the complaint, admitted as true, establish conclusively *Page 53 that the defendant surpassed its powers in receiving the moneys.
Neither the time when, nor the purpose for which the defendant was organized, is alleged. It may have been formed "for any lawful business purpose or purposes other than a moneyed corporation, or a corporation provided for by the banking, the insurance, the railroad and the transportation corporations laws, or an educational institution or corporation which may be incorporated as provided in the education law." It is a stock corporation. (Business Corporations Law, Laws 1909, ch. 12 [Cons. L. ch. 4], section 2.) Its lawful business purpose may have been the buying, developing or improving and selling of real estate, or mining, or manufacturing or another. It might not "by any implication or construction be deemed to possess the power of carrying on the business of discounting bills, notes or other evidences of debt, of receiving deposits, or buying and selling bills of exchange, or of issuing bills, notes or other evidences of debt for circulation as money." (General Corporation Law, Laws 1909, ch. 28 [Cons. L. ch. 23], section 22, as amended by L. 1911, ch. 771.) Its statutory powers were those given by the Business Corporations Law, the General Corporation Law and the Stock Corporation Law; and it did not possess and could not exercise "any corporate powers not given by law, or not necessary to the exercise of the power so given." (Idem, Laws 1909, ch. 28 [Cons. L. ch. 23], section 10.) It was empowered to borrow money and issue and dispose of its obligations for any amount so borrowed, for it is enacted (Stock Corp. Law, Laws 1909, ch. 61 [Cons. L. ch. 59], section 6): "In addition to the powers conferred by the general corporation law, every stock corporation shall have the power to borrow money and contract debts, when necessary for the transaction of its business, or for the exercise of its corporate rights, privileges or franchises, or for any other lawful purpose of its incorporation; and it *Page 54 may issue and dispose of its obligations for any amount so borrowed, and may mortgage its property and franchises to secure the payment of such obligations, or of any debt contracted for said purposes." In case the defendant borrowed the moneys it received from the plaintiff for any lawful purpose of its incorporation, manifestly and beyond the need or reach of argument, it, in doing that, exercised its lawful powers only. The complaint does not specifically allege that the defendant did not or did borrow the moneys or state the use or purpose to which the moneys were applied. It contains no allegation in regard to the nature or denomination of the defendant's business. The facts in regard to those matters are alleged only through the contents of the certificate and the averment that the defendant is a domestic business corporation.
The body of each of the certificates under discussion, in substance or in form, does not tend to show that the defendant did not borrow the moneys for a lawful purpose of its incorporation. It in borrowing had the power to issue and dispose of its obligation for any amount so borrowed, and the certificate is the obligation of the defendant. The word "obligation" has many meanings and when used in a statute its significance must be gathered from and governed by the purpose and context of the enactment. In this statute (Stock Corp. Law, section 6) it embraces all instruments in writing, however informal, and with or without seal, whereby the borrowing corporation contracts with a lender for the repayment of the sum borrowed. To borrow is the reciprocal action with to lend, and the idea of a borrowing is not filled out unless there is in the transaction a promise or understanding that what is borrowed will be repaid on returned, with or without compensation for the use of it in the meantime. (Kent v. Quicksilver Mining Co., 78 N.Y. 159; Sinton v.County of Carter, 23 Fed. Rep. 535; affd., 120 U.S. 517;Munzinger v. United Press, *Page 55 52 App. Div. 338; Ghiglione v. Marsh, 23 App. Div. 61; Thorn v. Hall, 10 App. Div. 412; affd., 160 N.Y. 661.) The right to borrow money given by the statute is a power to create an indebtedness and procure for its payment funds from others to be paid at a future date, with the power to issue obligations for the payment of the funds procured or borrowed. In substance, the money is borrowed from the purchasers of the obligations. The body of the certificates is, in form, an obligation of that precise nature. The certificates were issued by the defendant. By the body of each the defendant promised to pay to the plaintiff, at the stated time, the sum paid to it by him and which is the consideration for the promise, with interest and, additionally, such portion of the profits as it may consider just. Thus much, at least, evidences a borrowing and lending for the corporate lawful uses and purposes, and the issuance and disposal of the obligation of the defendant to pay the sum borrowed with a compensation for its use. No provision or privilege indorsed upon the certificate is destructive of or inconsistent with the body of it. Within a lawful range, the defendant was at liberty to make the obligation attractive to the lender. In the privilege to its owner of having payment in real estate, there is not, obviously, ultra vires or inconsonance with the body of the certificate, and this conclusion is, with equal certainty, true of each of the provisions that the owner may have the certificate transferred upon the records of the defendant; that he may have a paid-up certificate, or an accelerated payment in cash according to a stated schedule on sixty days' notice in writing; that in case of his death his representatives might have "the total amount of the premiums paid with" interest or the continuance of the certificate or that the interest is to be compounded and credited annually. We cannot discern in those privileges, considered severally or connectedly, any stipulation or effect which bars or contradicts the conclusion *Page 56 that the defendant borrowed these moneys of the plaintiff for the lawful purpose of its incorporation and issued to the plaintiff the certificates as evidence of its indebtedness to him and its obligation for its payment, and, therefore, received them intravires and rightfully. It is wholly immaterial that a moneyed, railroad or transportation corporation is empowered to issue an identical or similar instrument. The issuance of a promissory note by the defendant does not evidence to any extent that it is engaged in a business ultra vires of it and lawful only to a corporation of the classes above mentioned authorized to issue its promissory note. No more do these certificates, by any reasonable and fair intendment, furnish any proof that the defendant did not receive these moneys as a borrower for an authorized use. The words of Judge GRAY may well be invoked here: "I know of no principle of law which, as to commercial transactions within their [corporations] chartered powers and involving the receipt or borrowing of, and the obligation to repay, moneys, denies the entire freedom to regulate them by such a contract as the parties are willing to enter into." (People v. Binghamton Trust Co., 139 N.Y. 185, 189.) A fact essential to a cause of action is not alleged when it is only to be inferred from other facts specifically averred which are not inconsistent with the opposite fact. (Clark v. Dillon,97 N.Y. 370.)
In the absence of averment we are to presume that the certificates are within the powers of the defendant. When a corporate contract is not on its face necessarily beyond the scope of the power of the corporation, it will, in the absence of averment and proof to the contrary, be presumed to be valid. (Railway Co. v. McCarthy, 96 U.S. 258; Gaul v. Kiel Arthe Co., 199 N.Y. 472.)
The facts alleged as constituting the third cause of action are unavailing for reasons already written. They differ from those we have considered in that the payments of plaintiff were under a certificate stipulating *Page 57 that (a) the interest is payable semi-annually, (b) a share in the profits to be conclusively determined by the directors shall be given the owner, (c) the defendant reserved the right on or after five years from its date to terminate the certificate upon stated terms, (d) the owner may surrender the certificate after two years upon terms stated, and (e) the certificate may be applied in the purchase of real estate for sale by the defendant, or (f) transferred upon its records.
The order appealed should be reversed and the complaint dismissed, with costs in all the courts.
WILLARD BARTLETT, Ch. J., WERNER, HISCOCK and HOGAN, JJ., concur; CHASE and CUDDEBACK, JJ., dissent.
Order reversed, etc.