Smith v. Eureka Flour Mills Co.

The opinion of the Court was delivered by Mr. Justice Heydenfeldt. Mr. Chief Justice Murray concurred.

1. The policy of this State has altered the rigidness of the Common Law which disabled a corporation from making a contract except under its corporate seal. The act of incorporation, instead of being as form[7]erly a favor granted by the sovereign to the subject, has under our system become a matter of right available under general laws. Under those laws the power of corporations to create debts is treated as an incident to the express powers, and not as in itself one of the express powers. This is evident from the 3d section of the Act of 1850, and the 15th section of the Act of 1853. In both these sections corporations are prohibited from issuing bills or notes for circulation as money; to this expression we gave a construction in the case of Magee & Beals v. The Mokelumne Hill Canal and Mining Co., 5 Cal. 258. To this we will add that we must apply the rule cxpressio unius est exclusio alterius. One cause of issuing bills or notes is expressly excluded; the right to issue them in all other proper cases must be inferred as an incident to the expressed powers or objects of the corporation.

2. It is objected that the plaintiff failed to show that the President and Secretary who signed the note were empowered by the corporation to do so. The answer of the defendant rendered this unnecessary; it proceeds, in the defence, simply to rely upon the want of power in the corporation to issue notes, which we have above shown was unsustained by the law. To force upon the plaintiff the necessity of proving the execution of the note to have been authorized by the corporation, the answer should have denied the “ genuineness and due execution” of it under oath, as is required by the 53d section of the Practice Act, otherwise the Act provides “ it is deemed to be admitted.”

3. The next objection is that the Act of 1853 requires the corporate powers to be exercised by a board of three trustees, who should have executed the note. But this is already answered; the power to make a note is not one of the express corporate powers but only an incident to those powers. The latter are those which must of necessity be included in the main objects of the corporation. Aside from them, all corporations by the general Act have power to make by-laws for the “organization of the company,” the “management of its property,” the “ regulation of its affairs, and for carrying on all kinds of business within the objects and purposes of the company,” in which there is no reason to exclude the right of making promissory notes.