
    Ehrman v. The Union Central Life Insurance Co.
    1. Where property which a corporation, under certain circumstances, is authorized hy its charter to acquire, is purchased in a mode or for a purpose not authorized, the title of the corporation to the property can not be defeated by a party who is a stranger to the agreement by which the property was acquired, and who is not injured by the transfer.
    2. A life insurance company doing business under the act of April 16, 1867 (S. & S. 218), purchased the assets of another company doing business under the same act, and, in consideration thereof, agreed to assume its risks and to pay its debts. Among the assets was the promissory note of the defendant (plaintiff in error), which was indorsed by the selling to the purchasing company: Held, 1. That, in an action on the note by the purchasing company, it will be presumed, in the absence of any averment to the contrary, that the agreement between the companies has been performed, or at least that it has not been abandoned. 2. That, where the validity of the note is admitted, the fact that the agreement between the companies is unauthorized by their charters is not a defense to the maker of the note. 3. Where there appears to be no connection between the taking of stock by the defendant in the selling company and the giving of the note, the fact of his being such stockholder will not affect a recovery on the note, in the absence of any showing that the transfer of the note was to his injury or prejudice as a stockholder.
    , Error to the Superior Court of Cincinnati.
    The original action ivas brought by the defendant in error against the plaintiff in error, on a promissory note. The following, omitting the formal parts, is a copy of the petition:
    “ The plaintiff states that it is incorporated as a life insurance company, under the laws of Ohio; that it is the owner and holder of a certain promissory note, made by the defendant, of which the following is a copy, to wit:
    “ $800. Cincinnati, November 16, 1867.
    “ On demand, I promise to pay to the order of the Home Mutual Life Insurance Company, of Cincinnati, eight hundred dollars, at their office, with interest at six per cent, per annum, until paid (said interest to be paid annually).
    “ Value received. B. Ehrman.”
    
      The indorsements upon said note are as follows :
    “ Interest on this note paid to October 14, 1871.”
    “Interest on this note paid to January 1, 1871.”
    “ J. W. Iredell, Sec’y.” “ Home Mutual Life Insurance Company, John Cochnower, Pres’t.”
    “No part of the said principal sum has been paid, and no interest has been paid since October 14,1871, and the said sum of eight hundred dollars, with interest thereon from October 14, 1871, is now due to the plaintiff from thd defendant, payment having been demanded. "Wherefore, plaintiff prays judgment,” etc.
    The defendant answered:
    “ 1. The defendant, -for answer to plaintiff’s petition, says that he admits that plaintiff is incorporated as set out in its petition herein, and admits the execution of the note sued on in plaintiff’s petition, and admits the indorsements thereon to be as set out by plaintiff; but defendant denies that the plaintiff is the owner and holder of said note, and that defendant is indebted to the plaintiff in any sum. Defendant says that plaintiff came into possession of said note by virtue of a contract between the plaintiff herein and the Home Mutual Life Insurance Company, a copy of which contract, marked Exhibit ‘A,’ is hereto attached, .and made part of, and incorporated in, this answer. Defendant further says that, by this contract, plaintiff took all assets, of every description, of the Home Mutual Life Insurance Company, including securities, cash on hand, •and real estate not requisite for plaintiff’s immediate accommodation in the transaction of its business, nor mortr gaged to plaintiff in good faith, by way of security for loans previously contracted, or for moneys due, nor conveyed to plaintiff in satisfaction of debts previously contracted in the course of its dealings, nor purchased by plaintiff at sales upon judgment, decree, or mortgage, obtained or made for such debts, and obtained a majority of the stock of the Home Mutual Life Insurance Company. Defendant says this whole contract was illegal and void, and incapable in law of passing any title to the note sued-on herein.
    “ 2. Defendant denies that, at the time of the indorsement of said note by John Cochnower, as president of the Home-Mutual Life Insurance Company, he was legally president of said company, for the reason that, at the time of his pretended election, he was not a stockholder in said company. Defendant says that, at the time of making the-note sued on herein, and ever since, he himself has been,, and now is, a stockholder in said company.”
    
      Exhibit “A.”
    
    
      “ This agreement, made and entered into this 13th day of' October, 1871, by and between the Home Mutual Life Insurance Company, of Cincinnati, Ohio, party of the first, part, and the Union Central Life Insurance Company, of the same place, party of the second part, witnesseth—
    “ That the party of the first part hereby assigns, transfers,, and conveys to the party of the second part all the assets- and property, of every kind, nature, and description whatever, of said party of the first part, and agrees, upon demand, to make from time to time all such deeds, indorsements, and assurances as may be necessary completely and effectually to transfer the title to said assets and property to said party of the second part, but without warranty or-recourse in case of failure of title.
    “ That the party of the second part hereby assumes and agrees to provide for and discharge all the debts and liabilities of the party of the first part (except such as may be-hereinafter specially excepted), of every name, nature, and description whatsoever, due or to become due, and to rein-sure all the risks, and to indemnify and save harmless all the stockholders, of the party of the first .part, against all their individual liability upon or concerning said debts, liabilities, and risks.
    “ The party of the second part agrees, with all reasonable-diligence, to procure, so far as possible, the substitution of policies of its own for the outstanding policies of the party of the first part, and, to that end, to make all reasonable endeavors to procure the consent of the holders of the said policies thereto — said policies to be substantially in the-same form as those now outstanding, without any deviation as may deter policy holders from making such a change.
    
      “ The party of the second part shall allow all parties having bonds of the United States included in the deposit of one hundred thousand dollars of the party of the first part,, now in the hands of the auditor of the State of Ohio, to substitute legal tender notes of the amount of the face or principal of said bonds therefor.
    “ The party of the second part agrees to allow all the stockholders of the party of the first part who may have-given notes secured by mortgage, which are included in said deposit with the auditor of state, an extension of three-years from this date on the punctual payment of interest, as it may mature annually, by said stockholders on their said notes, at the rate of six per cent, per annum. Interest to this date to be credited as paid on said notes.
    “ The party of the first part guarantees that its debts and liabilities, exclusive of certain advances hereinafter specified, and of risks upon policies, where the party insured was living until October 1, 1871, do not exceed the sum of forty thousand dollars, and the party of the second part agrees forthwith to furnish satisfactory personal security that it will pay said debts and liabilities, not exceeding the said amount of forty thousand dollars.
    “ The party of the second part agrees forthwith to deposit in the Safe Deposit Company of Cincinnati, bonds of the United States of the market value of fifteen thousand eight hundred and eighty-nine dollars, which bonds shall be deposited in the name of a committee, consisting of Henry A. Towne, George M. Dixon, John M. Phillips, and John Cochnower; said committee shall be charged with the doty of retaining said bonds and the interest that may accumulate thereon on deposit in said company for six months from this date, for the purpose of security to the party of the second part, that the amount of debts and liabilities of said party of the first part, exclusive of said advances and of said risks upon, policies outstanding September 30,1871, does not exceed forty thousand dollars. At the end of six months from this date, after providing for and discharging all such debts and liabilities in excess of forty thousand dollars, the residue of said bonds and interest shall be converted into money, and paid to Henry A. Towne, George M. Dixon, C. A. Croninger, Andrew King, and George Spencer, or any three of them, to be by them distributed among those stockholders of the party of the first part, who, in the month of July, 1871, subsequently advanced moneys to the said party of the first part, under and by virtue of a resolution of the board of directors of said party, passed June 13, 1871, it being the intent and purpose of this contract not to provide for the assumption of said advances by the party of the second part, as liabilities of the party of the first part, but to provide for their payment out of said bonds, if any sum is left for that purpose after maintaining and securing the party of the second part in the guarantee that the said debts and liabilities, exclusive of outstanding risks on September 30, 1871, and of said advances, do not exceed forty thousand dollars.
    “ The party of the second part is to pay no claims against the party of the first part unless audited and approved by C. A. Croninger and Andrew King, and is to defend all suits now pending, or that may be brought upon debts, liabilities, or risks of the party of the first part.
    “ If, after payment of all present debts and liabilities of said party of the first part, exclusive of said advances and of said risks outstanding on September 30, 1871, but including all expenses of settling and adjusting the said ■debts and liabilities and of litigation, it shall appear that the cash value of the assets hereby transferred exceeds the amount of said debts and liabilities, exclusive of said advances, but including said expenses, and also including a .sum to be ascertained as the value of the risks hereby assumed upon said outstanding policies, by a computation according to the New York standard rate of four and one-half per cent., then the difference, less the said sum of fifteen thousand eight hundred and eighty-nine dollars, shall be paid to said Towne, Ring, Spencer, Croninger, and Dixon, or any three of them, in cash, for distribution pro rata, first among said stockholders making said advances as aforesaid, in proportion to the amount of their said advances; and after their advances shall have been fully paid and discharged, then the residue, pro rata, among all the present stockholders of said party of the first part, in proportion to the amount of stock by them severally owned.
    “ The party of the first part agrees forthwith to procure the transfer by regular legal transfers of the majority in amount of the stock of the party of the first part, so as to vest the title in said stock in John M. Phillips, John P. P. Peck, Norman W. Harris, John Coehnower, and John Davis, in trust for said party of the second part, and so as to constitute said trustees the owners of said majority of stock in trust as aforesaid.
    “It is understood that among the liabilities of the party of the first part, which are hereinbefore provided, to be secured by the deposit of bonds of the United States, in the Safe Deposit Company of Cincinnati, are not to be included any commissions' of -agents hereafter accruing on renewal premiums.
    “ This contract is made and entered into upon the confidence that the schedule of assets and liabilities of the party of the first part, hereto annexed, and thus made part hereof, is in substance correct.
    “ Witness the signatures of the presidents and secretaries, and the corporate seals of said companies, the day and date aforesaid.
    [seal.] Henry H. Towne, Pres’t,
    
    I. W. Iredell, Jr., Sec’y,
    
    
      Home Mut. Life Ins. Go.
    
    [duly stamped.] Home Mut. Life Ins. Co.
    [seal.] John P. P. Peck, V.. Pres’t,
    
    
      Onion Central.Life Ins. Co.
    
    N. W. Harris, Sec’y,
    
    
      Union Central Life Ins. Co.”
    
    
      The plaintiff filed a general demurrer to the answer. The cause being reserved to the superior court, in general term, that court sustained the demurrer, and gave judgment for the plaintiff. This judgment the defendant now seeks to reverse.
    
      Wilby & Wald, for plaintiff in error :
    
      We claim that the contract between the Union Central and the Home Mutual Company, in pursuance of which the plaintiff holds the note sued on, was incapable of passing such title to the note as would enable the plaintiff to 'sue on it. We base this claim on two distinct grounds. Eirst, that part of the consideration of the contract was the acquisition by the Union Central, and the conveyance by the Home Mutual, of certain real estate in the face of an express prohibition in the charters of both of them, forbidding them “ to purchase, hold, or convey ” such real estate ; and that this partial illegality makes the whole consideration, and therefore the whole contract ultra vires, illegal, and void. Second, that it was a contract for the amalgamation of the two companies, and therefore ultra vires, illegal, and void.
    As to the first ground, see Swan & Sayler, 220, § 338 Bank v. Swayne, 8 Ohio, 257 ; Widoe v. Webb, 20 Ohio St. 431; Raguet v. Roll, 7 Ohio, 77 ; 13 Ohio, 1; White v. Bass, 3 Cush. 494, 495 ; Leavitt v. Palmer, 3 Comst. 27; Aubert v. Maze, 2 B. & P. 374, 375 ; Benzley v. Bignold, 5 B. & A. 341; Collins v. Blantern, 2 Wils. 351; State v. Finlay, 10 Ohio, 51; McGregor v. Dover, etc., R’y, 18 Q. B. 618.
    As to the second ground, the amalgamation of the two companies, see Beaman v. Bufford, 1 Simon’s U. S. 550; Railway Co. v. Railway Co., 4 De G. McN. & G. 115; s. c., 6 H. L. Cases, 136, 137; Balfour v. Ernest, 5 C. B. N. S. 601; Mead v. St. Louis Mut. Ins. Co., 51 How. Prac. 5 ; N. Y. & Sharon Canal Co. v. Fulton Bank, 7 Wend. 412 ; Pearce v. Madison, etc., R’y, 21 How. (S. C. U. S.) 441; Winch v. Ray, 13 Eng. L. & Eq. 506 ; W. & M. L. R’y Co. v. Winans, 17 How. (S. C. U. S.). 39; Coe v. Col. & Piqua R. R., 10 Ohio-St. 372; State v. McDaniel, 22 Ohio St. 368; Pierce v. Emery, 32 N. H. 504, 508 ; State v. Consolid. Coal Co., 46 Md. 1; Meade v. Ins. Co., 51 How. Pr. 5, 6 ; Commonwealth v. Smith, 10 Allen, 455, 456 ; Smith v. Ins. Co., 2 Cooper, 736; Ward v. Sea Ins. Co., 7 Paige, 294; Abbott v. American Hard Rubber Co., 33 Barb. 578; Greene’s Brice’s Ultra Vires, § 308; Hays v. Railway Co., 61 Ill. 422; Richardson v. Sibley, 11 Allen, 65; 5 Am. L. R. N. S. 733.
    Having shown that the contract by which the plaintiff acquired possession of the note in suit was illegal, as prohibited by the charters of both companies, can we set this up to show that plaintiff could acquire no title through it ? Our opponents answer this question by saying that the state, alone, can raise this point. But we say that the question, whether or not the state is the only one to interfere depends, first, on the question of estoppel, where the-act complained of is merely in excess of corporate power expressly given, but not expressly or impliedly prohibited; and, second, where the act complained of is expressly or impliedly prohibited (that is, illegal, and therefore no question of estoppel can ever arise. See Meddil v. Collier, 16 Ohio St. 599) on the rule of par delictum. The state can always punish a corporation for an unauthorized act. Hence,, the state’s right to interfere can not in any way depend on the question, whether or not any one else has a right to interfere for the same act. Where the corporation’s contract is do a thing “ merely in excess of power ” (and by this we-mean one of those intermediate class of acts before described, acts not expressly or impliedly prohibited, though not expressly authorized), so long as it is executory on both sides,, either party can refuse to go on and set up the fact of excess of power. There is no estoppel, and hence the state is here not the only one to interfere. If such a contract is executed on either side, an estoppel arises against the-other side, preventing its setting up the excess of power, and hence here the state is the only one to interfere.
    This principle can be illustrated by taking a few of the cases cited by our opponents, as well as any others. Eor instance, Walsh v. Barton, 24 Ohio St. 24; 101 Mass. 400 ; 17 Wis. 372; 3 Nevada, 385 ; 22 Cal. 398; 6 S. & M. 179 ; 12 Wall. 358; 55 Mo. 218; 14 N. J. Eq. 13.
    For the proposition that the maker of a note, on being sued by the holder, can show, as a bar to a recovery, that the holder holds it simply by virtue of a contract void for statutory illegality, we cite: Sproule v. Merril, 29 Me. 260 ; Strong v. Tompkins, 8 Johns. 97; Benson v. Drake, 55 Me. 555; Story on Promissory Notes, § 193 ; Adams v. Rowan, 8 S. & M. 624; Holman v. Ringo, 36 Miss. 690; Green v. Seymour, 3 Sand. Ch. 291, 292; Johnson v. Bush, 3 Barb. Ch. 240; Dewitt v. Brisbane, 16 N. Y. 508; Sprobb v. U. S., 20 Wall. 459.
    Assuming that this court adopts that theory of ultra vires, which rests the doctrine on the mere want of capacity of a corporation to do an act unauthorized by its charter, saying that all attempts to do such act are a nullity, the case of Strauss v. Eagle Ins. Co., 5 Ohio St. 60, is in point; and see 7 Eng. & Ir. Appeals, 672; 23 Minn. 198; 8 Reporter, 499 ; 6 Central L. Jour. 56 ; 12 Ohio St. 601.
    
      R. A. Harrison, for Mr. Black, in a case decided with and by this one, in addition to the authorities cited by counsel for plaintiff in error on the subject of ultra vires,
    
    cited: Hood v. The N. Y. & N. H. R. R. Co., 22 Conn. 502; Smith v. The St. Louis Mutual Life Ins. Co., 2 Tenn. Ch. 742; Ashbury Railway and Carriage Co. v. Riche, 7 Eng. and Irish Appeal Cases (L. R.) 653 ; E. A. Railway Co. v. E. C. Railway Co., 73 Eng. Com. Law, 775, 813; Toomey v. L. B. & S. C. Railway Co., 91 Eng. Com. Law, 146, 149; The Madison Plank Road Co. v. Watertown Plank Road Co., 7 Wis. 59 ; The Board, etc., Tippecanoe Co. v. The Lafayette, etc., R. R. Co., 50 Ind. 85, 112; Learns v. Leaf, Henning & Miller, 681, 708, 709 ; Workman v. Wright, 33 Ohio St. 405. And, among other things, said :
    The Union had not only no power to purchase the capital stock of the Home, but it was prohibited, by necessary implication, from doing so.
    
      1. The statute from which it derives its powers provides and specifies the modes in which its whole capital, and its funds or accumulations, shall be invested. (S. & C. 219, 220, §§ 7, 8, 9, and 11.) The purchase of the capital stock of another corporation is not one of the authorized modes. The specification in the statute of the modes of investing the capital, as well as the corporate funds, precludes all other modes of investment. Smith v. Alabama Ins. Co., 4 Ala. 558; Scott v. DePeyster, 1 Edw. Ch. 513.
    (These authorities sustain our position — that neither of these corporations possess the power to either invest or dispose of their property and funds in the modes provided for in the contract.)
    2. In the United States, corporations can not purchase or hold, or deal in the stocks of other corporations, unless expressly authorized to do so by law.
    So held, upon the authorities cited, in the very recent case of Franklin Company v. Lewiston Institution for Savings, 68 Me. 43. Many American cases, to the same effect, are also cited in Green’s Brice’s Ultra Vires, 95, note.
    The words “illegally” and “ultra vires” represent totally different ideas. It is true that a contract may have both these defects, but it may also have one without the other. Green’s Brice’s Ultra Vires, 38.
    The defendant in error can not claim the privileges of a bona fide holder of commercial paper. Franklin Company v. Lewiston Institution for Savings, 68 Me. 43, and eases there cited.
    As to 'whether the rule is changed where the contract is a beneficent one, see Bissell v. Railroad Co., 22 N. Y. 258, 285.
    
      G. H. Collins, and Moore, Newman § Hutchins, and G. D. Robertson, also for plaintiffs in error,
    in cases decided with and by this one, filed briefs discussing the same question as those here reported.
    
      Mattheios, Ramsey &¡ Matthews, for defendant in error.
    
      1. The contract between the companies is executed, and is not involved in this action.
    The note appears to be properly indorsed, and has been •duly delivered. It will be observed that the contract provides for a transfer “ without recourse.” Thus the contract between the companies is fully executed, and this •contract of indorsement is fully executed. The indorsement of a promissory note is a distinct and independent •contract, and is not connected with the contract between maker and payee. The indorser maybe sued without joining the maker, and may be held in many instances in which the maker could not be held. So the maker may be ■sued without reference to the indorser. When, therefore, the Home Mutual Company indorsed and delivered this note to the Union Central, the contract between them was •executed, because that was all that the Home Mutual .agreed to do. It agreed to transfer the title. The contract of indorsement was also, at the same time, fully exe•cuted, and the Union Central Company was invested with the right to sue the maker upon Ms contract.
    
    The contract sued upon is the contract of Mr. Ehrman to pa.y a sum of money to a lawful person upon a valid -consideration. TMs consideration is not impeached by the answer in any way. This is the only contract in question in the cause. It is the contract sued upon. The. contracts between the two companies are not sued upon, neither that •of October, 1871, or the subsequent contract of indorsement of the note.
    The plaintiff in error, therefore, must make good his proposition that the maker of a valid promissory note may •escape payment at the suit of an indorsee on the ground that the consideration of the contract between indorser and indorsee was illegal. No authority can be found to support such a proposition. The maker has no interest what, •ever in the question.
    As opposed to the above proposition, see Knights v. Putnam, 3 Pick. 184; Armstrong v. Gibson, 31 Wis. 61; Shum v. Lowry, 48 Ind. 206; Brown v. Donnell, 49 Me. 421; 
      Burnop v. Cook, 32 Ill. 168; 2 Hilliard Con. 415; Streit v. Waugh, 48 Vt. 298; 25 La. Ann. 477; 7 Wend. 562.
    2. There is nothing illegal in the contract, unless it be the provision as to transfer of real estate. This does not affect the note in question in any way. Its transfer could Lave been enforced. Morris v. Way, 16 Ohio, 469.
    Suppose that the real estate has been conveyed by deed to the Union Central, is there any ground for the claim that the title did not pass to the latter 1 That title did pass, subject only to the right of the state to question it, is well settled. Walsh v. Barton, 24 Ohio St. 24; Farmers’ Bank v. R. R. Co., 17 Wis. 372; Whitman Co. v. Baker, 3 Nev. 386; Cal. Co. v. Alta Co., 22 Cal. 398; Smith v. R. R. Co., 6 Sm. & M. 179 ; Smith v. Sheely, 12 Wall. 358 ; Shewalter v. Pirner, 55 Mo. 218; Amerman v. Wiles, 24 N. J. Eq. 13; Rutland Co. v. Proctor, 29 Vt. 93; Bradley v. Ballard, 55 Ill. 418 ; Parish v. Wheeler, 22 N. Y. 494; Bissell v. R. R., 22 N. Y. 259.
    If, therefore, the Union Central Company got a good title as against all but the state, even to the real estate, a fortiori, it had a good title to the notes, which were such as it-had the right to take and hold.
    It is to be borne in mind throughout that the only defect in the plaintiff’s title to the note is contained in the allegation that it acquired, at the same time, and upon the same consideration, other property, which it had no right to acquire.
    So far as this aspect of the case presents a question of corporate power, as distinguished from a question of illegality, we say:
    1. The defendant had no power to raise the question. He does not represent the state. He is not a creditor of either company. He is not a stockholder of plaintiff. It is the plaintiff alone who is alleged to have transcended the charter power. The defense under consideration does not show that he was a stockholder of the Home Mutual Company. At all events, no right of his as a stockholder is involved in this action. He is not a party to the alleged 
      ultra vires contract. If it affected his rights as a stockholder,he was bound to object to it, and institute proceedings in equity to enjoin it. Otherwise, he would be estopped in equity, and the transaction would stand, leaving him only a remedy in damages. Goodin v. Railroad Co., 18 Ohio St. 169.
    He appears to have acquiesced. If the allegation in another count, to the effect that he is a Home Mutual stockholder, shall be considered in this connection, he must be held to have acquiesced, as he does not allege that the transaction was without his knowledge or consent, or that ne even now seeks to have it avoided. The absence of such allegations creates an estoppel. Bat we are only concerned to show that his rights as a stockholder are not involved in this action, and that he stands in no relation to the contract of October 13, 1871, which will enable him to raise the question of corporate power. Only parties, or persons whose rights are adversely affected, can raise the question. Vermont Railroad v. Vermont Railroad, 34 Vt. 2; Eno v. Crooks, 10 N. Y. 60; Farmers’ Bank v. Railroad Co., 17 Wis. 372; Donnell v. Brown, 49 Me. 421.
    The courts of this country have generally adopted the doctrine of the case, of Bissell v. Michigan Railroad Co., 22 N. Y. 259, as embodied in the opinion of Judge Comstock, which is, in substance, that where either party has received the benefit of a contract, the plea of ultra vires can furnish no defense to the other. This court cites that case with approval, in Allen v. Bank, 23 Ohio St. 97; the Supreme Court of Illinois follows it in Bradley v. Ballard, 55 Ill.; the Supreme Court of Indiana follows it in Board of Agriculture v. Citizens’ Railway Co., 47 Ind. 407. And see the case of Weare v. Petroleum Co., 27 Ohio St. 343.
    In the case of Whitney Arms Co. v. Barlow, 63 N. Y. 62, the court fully examined the question, and decided that “ the plea of ultra vires, as a general rule, will not prevail, whether interposed for or against a corporation, when it will not advance-justice, but, on the .contrary, will accomplish a legal wrong.”
    
      
      Towner & Farnham were with Messrs. Matthews, Ramsey & Matthews in two of the cases determined by this case.
   White, J.

The ground of error relied on in this case is, that the agreement of October 13, 1871, entered into between the Home Mutual Life Insurance Company and the plaintiff, is unauthorized by the charters of the respective companies, and is therefore void; and that, as the plaintiff’s title to the note in controversy is derived through this agreement, the transfer of the note by the Home Mutual to the plaintiff is inoperative.

In applying the doctrine of ultra vires, in a particular case, regard must not only be had to the unauthorized agreement or transaction, but also to the relation which the litigating parties sustain to it.

Where there is an absolute or total want of power in a corporation to deal in respect to a given subject, it may be that acts done in the name of the corporation, in regard to such subject, would, as corporate acts, be void for all purposes and as against all persons.

But there is an obvious distinction between such a case and one where the corporation deals with a subject within the scope of its granted powers, but for a purpose, or in a mode not authorized by its charter. Thus, where property which the corporation, under certain circumstances, is authorized by its charter to acquire, is purchased, in a mode or for a purpose not authorized, it seems clear to us that the title of the corporation to the property can not be defeated by a party who is a stranger to the agreement by which the property was acquired, and who is not injured by the transfer.

A stranger to the agreement or transaction has no right to question its validity, whether it was entered into between corporations or natural persons. To obtain a standing in a court of justice to make such inquiry, a party must show that he is interested in the question, and that the execution of the agreement operates to his injury or prejudice.

The plaintiff' and the Home Mutual Company, at the date of the agreement of October 13,1871, were carrying on the business of life insurance under the act of April 16,1867, entitled “ an act for the incorporation and regulation of life insurance companies.” S. & S. 218.

The substance of the agreement between the companies was that the plaintiff purchased all the assets of the Home Mutual, an.d in consideration thereof agreed to assume its risks and to pay its debts. Among the assets was the promissory note of the plaintiff' in error, in controversy in this case, which was indorsed and delivered by the Home Mutual to the defendant in error, in pursuance of the agreement.

The agreement is set forth in full as part of the answer; but there is no averment that it has not been performed by the respective parties. In the absence of such averment, it will be presumed, in a case like the present, that the agreement has been performed, or at least that it has not been abandoned.

The validity of the note sued on is admitted. The only defense relied on is that the plaintiff, the purchasing company, has not.such a title to the note as will enable it to maintain the action.

According to the principles already stated, the fact that the agreement between the companies is unauthorized by their charters does not constitute a defense by the maker of the note. As a debtor, he is interested in paying the note only to a parky who is authorized to receive payment and to discharge him from liability. But while the validity of the transfer is insisted upon or adhered to by the parties to it, he has no interest in questioning the title of the purchaser, as payment to the latter will discharge his liability on the note.

The answer likewise states that the defendant, at the time of the making of the note, was, and that he still continues to be, a stockholder in the selling company. There appears, however, to be-no connection between the taking of the stock and the giving of the note ; and where such is the case, the fact'of Ms being such stockholder can not affect a recovery on the note, in the absence of any showing that the transfer of the note was to his injury or prejudice as a stockholder.

Having stated the principles upon which we rest our decision in this case, we deem it unnecessary to analyze and review the numerous authorities cited by counsel in this case, and in several others argued in connection with it. In regard, however, to the case of Straus v. Eagle Ins. Co., 5 Ohio St. 59, relied upon by the plaintiff in error, it is proper to say that, while we do not question the correctness of the decision in that case, there are expressions in the opinion apparently in conflict with the view we have taken. These expressions were subsequently qualified in the opinion in the case of White’s Bank of Buffalo v. Ins. Co., 12 Ohio St. 610 ; and of this qualification we approve.

In regard to the averment in the answer, that Cochnower was not the legal president of the company, for the reason that at the time of his election he was not a stockholder in the compauy, it is only necessary to say, without inquiry whether the objection, in a proper proceeding, would be valid or not, that being a de facto officer, his title can not be questioned in a collateral proceeding.

Judgment affirmed.

Okey, J.,

dissenting. In Massachusetts, “ it is the estabtablished law that the holder of a negotiable note may bring suit upon it, whether in law or in fact he be orbe not the real owner of it.” National Bank v. Porter, 125 Mass. 333, 339. In Minnesota, the suit must be brought by the real party in interest. There are exceptions to the rule, but a case like this would not be within them. Farmers’ and M. Bank v. Baldwin, 23 Minn. 198; First National Bank v. Pierson (Minn.), 16 Albany L. Jour. 319; s. c., Thompson’s Nat. Bank Cas. 637. This difference in the practice in those states was supposed, as will be seen in the eases cited, to be a sufficient explanation of a difference in holding upon the question whether a national bank purchasing a promissory note may maintain an action thereon, assuming the purchase to be one which it was not authorized by law to make. The statute of this state is like that of Minnesota. It is a sufficient defense in Ohio that the plaintiff is not the real party in interest. The answer in this case embraces that defense, and therefore it was error to sustain a demurrer to it.

But I do not place this dissent alone or principally upon such narrow ground. It appears from the answer that the contract between the insurance companies was entered into, not merely without authority of law, but in direct violation of statutes prohibiting it. The Home Company undertook to transfer all its property and business to the Central Company by a single and entire contract. The contract embraced real estate. The statute specifies the circumstances under, and purposes for which, such corporations may hold real estate, and it appears from the answer that the real estate attempted to be purchased was not within that provision. The same statute provides that “ it shall not be lawful for any company to purchase, hold, or convey real estate in any other ease or for any other purpose.” 69 Ohio L. 153, § 12.

In a larger sense, however, the statutes prohibited the contract. They provide that such company may “ make insurance on the lives of individuals,” show what business may be done in connection therewith, how policy holders shall be secured, how the funds of the company shall be invested, how the company may reinsure, and how it may be wound up. The whole act negatives the claim that the self-destruction attempted in this case was authorized. Indeed, the opinion has not been expressed by any member of this court that the contract was lawful, in the sense that either company could have enforced its execution as against the other. At the same time, it is asserted, in the opinion of the majority, that it does not appear that the contract has been rescinded. That, however, is not material, for it does not appear that the contract has been executed. There can be no presumption that an illegal contract has been performed. If the company wished to rely upon the fact that the contract had been executed, a reply instead of a demurrer to the answer would have been proper.

There is a well-known distinction between a mere abuse of the power delegated to directors and the absence of power in the corporation itself. The directors of a corporation may be authorized to receive the indorsement of a promissory note in a particular way, or on a particular consideration, and this authority may be abused. Or a corporation, authorized to receive the indorsement of a promissory note, may enter into a single and entire agreement, expressly prohibited by its charter, by which agreement a promissory note, among other things, is received. The distinction between these eases is important, but it is disregarded in the decision of this case. According to many authorities, the corporation receiving the note, in the instance first mentioned, may recover upon it. But I humbly submit that no case other than this can be found, in England or America, where a recovery has been permitted in the latter case. The title acquired by such an agreement is no better than if the company had been, in terms, prohibited from receiving the note. The transfer was “ void for all purposes and as against all persons.”

The principles I have stated are so distinctly asserted and ably vindicated in Straus v. Eagle Ins. Co., 5 Ohio St. 59, that the citation of other authorities seems almost a work of supererogation. As being in entire harmony with that decision, I will refer, however, to the following cases, most of which have been decided since it was announced : Farmers’ and M. Bank v. Baldwin, supra; First National Bank v. Pierson, supra; Smith v. St. Louis M. L. Ins. Co., 2 Tenn. Ch. 742; Hood v. N. Y. & N. H. R. Co., 22 Conn. 502; Hays v. Ottawa, etc., R. Co., 61 Ill. 422; Madison Plank R. Co. v. Watertown Plank Road Co., 7 Wis. 59; Board, etc. v. Lafayette, etc., R. Co., 50 Ind. 85 ; Pearce v. Madison, etc., R. Co., 21 How. 442; E. A. Railways v. E. C. Railway, 73 Eng. Com. L. 775; Toomey v. L. B. &. S. C. Railway, 91 Eng. Com. L. 146; Ashbury Railway, etc. v. Riche, L. R., 7 Eng. & Ir. Appeal, 653. And see Richardson v. Sibley, 11 Allen, 72; Widoe v. Webb, 20 Ohio St. 431.

There is a remark of the judge delivering the opinion in White's Bank v. Ins. Co., 12 Ohio St. 601, 610, wholly unnecessary to the decision of that case, which is claimed to qualify something said by Ranney, J., in Straus v. Ins. Co.. Precisely what the supposed qualification is, or why it was suggested, is not very apparent. But I am satisfied that Straus v. Ins. Co., being founded on correct principles, will withstand all the assaults made upon it.

The rule that the charter of a corporation must be strictly construed, has been enforced in this state for many years. The statute now provides that “ corporations may be formed . . . for any purpose for which individuals may lawfully associate themselves, except for dealing in real estate, or carrying on professional business ” (Rev. Stats., § 3235), or banking (Const., art. 13, § 7). It is probable that the number of corporations organized in any year hereafter will greatly exceed that of any preceding year. In my opinion this is not a time when we should relax the strict rule upon this subject, which has operated so well in this state in the past. As this decision is in direct conflict with that rule, I dissent from it.

This case was considered in connection with others involving supposed rights under the same or a similar contract. Without entering a formal dissent in any of them, this dissent applies to every case where the same infirmity was set up and the judgment or modification is in favor of the company. In some of them additional reasons for the view I have taken will be found to exist.  