dissenting:
I do not concur in the conclusion of this opinion nor in the reasoning upon which it is based. In my judgment the entire loan may fairly be held an incident to the sale of the real estate in question. The opinion holds the trust deed valid to the extent of $15,000. I fail to see how, then, it can be held that the balance of the loan is entirely void. Does it not necessarily follow from holding a part of the loan valid that the loaning of the balance can only be held to have been an act in excess of power and valid on collateral attack, and not an act wholly beyond and outside the scope of the corporate power of the company ? (Rector v. Hartford Deposit Co. 190 Ill. 380; People v. Shedd, 241 id. 155; Golconda Northern Railway v. Gulf Lines Railroad, 265 id. 194.) If it be assumed that the power of the corporation to sell land is not the main, essential power of the corporation but only a subsidiary one, under the reasoning of this court in former decisions this loan may be held to come within the powers incidental to the main or essential purpose of the corporation.
It does not seem to me that the loan was ultra vires but' rather that it was a legitimate investment of surplus funds of the corporation in an interest-bearing security and within the implied powers of the corporation. The opinion concedes that circumstances may arise when any corporation may lawfully make temporary loans of its surplus funds. This, of course, means whether the corporation be a going concern or in the process of liquidation. Situations may often arise where a corporation will require months, and sometimes even years, to liquidate and when it cannot wisely or safely distribute its funds to the proper parties as rapidly as they are paid in. What is meant in the opinion by a temporary loan? Does it mean one for thirty, sixty or ninety days, or may it be for six months or .longer ? Then, too, what kind of security shall be taken ? Must each case be determined by its own special facts? Before any corporation is safe in making such a loan, must it be submitted to a court for decision? If a temporary loan can be made under any circumstances, is that not an admission that the corporation is acting within its implied powers in making such loan ? How can the doctrine laid down in the opinion be reconciled with the conclusion in this case that the loan of $15,000 is valid ? Of course, no one can. contend that a corporation such as this, under its charter, is authorized to engage exclusively, or even largely, in the business of loaning money. Can a temporary loan be made by taking as security municipal or other negotiable bonds ? Most of such securities are usually for a long term of years but are readily negotiable. If such a loan can be made, why may not a loan be made by investing in a mortgage on real estate ? It may well be urged that a mortgage on real estate is a safer investment than many negotiable bonds, and ordinarily, as to large investments, just as negotiable. “This power to loan may reasonably be implied in the case of corporations which, from the nature of their business, must necessarily keep on hand a large fund available for future contingencies. Such corporations ought to have the implied power to loan such surplus funds on security that may be readily converted into cash.” (3 Thompson on Corporations,—2d ed.—sec. 2181.) It cannot be that a corporation has the implied power to make a loan only to assist in carrying on an active business. A corporation, while liquidating, must necessarily exercise its implied powers the same as when it is a going concern. The fair test as to the power of a corporation to make a loan should be, not whether the act under discussion will directly promote the original corporate enterprise, but whether such act is reasonably connected with and adapted to promote some lawful corporate action which the corporation is proposing to take. • The activities of a corporation in liquidating its property after the corporate enterprise has been abandoned ( certainly are not different, in principle, from its activities in endeavoring to carry out the original corporate purpose, and the implied powers must be the same in either case.
But even if it be held that the loan was ultra vires, the decision of the court in this case is contrary to the general rule that the defense of ultra vires will not be allowed to accomplish an injustice. This court said in Kadish v. Equitable Building Ass’n, 151 Ill. 531: “The plea of ultra vires should not, as a general rule, prevail, whether interposed for or against a corporation, when it would not advance justice, but, on the contrary, would accomplish a legal wrong.” In Central Transportation Co. v. Pullman Palace Car Co. 139 U. S. 24, it was said (p. 60) : “A contract ultra vires being unlawful and void, not because it is in itself immoral but because the corporation by the law of its creation is incapable of making it, the courts, while refusing to maintain any action upon the unlawful contract, have always striven to do justice between the parties, so far as could be done consistently with adherence to law, by permitting property or money, parted with on the faith of the unlawful contract, to be recovered back or compensation to be made for it.” In Logan County Bank v. Townsend, 139 U. S. 67, in referring to an illegal contract, the court said (p. 76) : “The illegality of the contract does not arise from any moral turpitude. The property was transferred under a contract which was merely malum prohibitum and where the city was the principal offender. In such case the party receiving may be made to refund to the person from whom it has received the property for the unauthorized purpose, the value of that which it has actually received.” In this same opinion, commenting on another decision, it is stated on the same page: “The court, while assuming that the statute, by clear implication, forbade the bank from making a loan on real estate, refused to restrain the bank from enforcing the deed of trust.” The recent authorities, in most jurisdictions if not all, hold that the theoretical notion that the corporation has exceeded its powers or violated some shadowy principle of public policy has largely been abandoned. In such cases the decisions are placed on the more solid ground of damage, either suffered or threatened. “The more modern as well as the correct rule is, that in all such cases the corporation may recover unless the statute says that it shall not. It has been expressly held that where the contract was neither immoral nor against public policy, and no penalty was attached, the corporation could recover on the security though the loan was in violation of the charter.” (3 Thompson on Corporations,—2d ed.—secs. 2182, 2119.)
Land-holding contrary to law has always been recognized in this State as against public policy, yet this court in Walker v. Taylor, 252 Ill. 424, held that where the parties had organized an Iowa corporation to deal in Illinois land, the court would not forfeit their rights to the land but created an equitable claim in their, favor against such land.
From a reading of the decisions on the question of ultra vires it is quite apparent that the question as to whether a corporation has by its acts exceeded its powers is often a close one and difficult to decide. This court has not heretofore decided any case that would absolutely control on the facts here. Conkling, in this case, had a past-due mortgage on his plant. He had to extend it or his business would be closed. The dock company in good faith lent- him the money with which to take up the mortgage and he received the full benefit of the loan. Under such circumstances he ccertainly could not repudiate this obligation. Under all well settled principles of law, why should Conkling’s assignee or creditors have any greater rights, in equity, than he would have had ? ■ It is a rule of universal application that courts of equity will never affirmatively enforce either a penalty or a forfeiture. (2 Story’s Eq. Jur.—13th ed.— sec. 1319; 16 Cyc. 80; Tarr v. Stearman, 264 Ill. 110.) By this decision the dock company, in a court of equity, is being deprived of its property and of any remedy to recover the same. In effect a forfeiture is being enforced. By reason and the great weight of authority, it seems to me, the canal and dock company should be permitted to realize on the security it holds for the amount of its loan. To do so is not to uphold an unlawful contract but rather to enforce the implied contract of Conkling to make compensation for the money, which neither he nor his creditors, in justice, have the right to retain.
Craig and Duncan, JJ., also dissenting.