text:
    Bank v. McLeod.
    In a suit in chancery pending in a Kentucky court, wherein the trustees of an insolvent railroad corporation sought to enforce their rights under certain mortgages of the road and its equipment, the conditions of which had been broken, an application was made for the appointment of a receiver to take charge of and operate the road. Pending this application, certain roiling stock covered by the mortgages was temporarily in Ohio, and while here was seized in attachment by an unsecured Kentucky creditor. The entire property was insufficient to pay the debts secured by the mortgages, or to earn income to pay the interest. The order of the court appointing the receiver, made subsequent to the seizure in attachment, ordered him to take possession of all the property, including that seized, and authorized him to sue in his own name as such receiver, whenever necessary to perform his duties. Held, that the' mortgages covered the rolling stock, though temporarily in this state, and the receiver might, under the comity between states, by an action brought in this state in his own name, assert his right to the possession thereof, where such right is not in conflict with the rights of our own citizens, nor against the policy of our laws.
    Error to tbe District Court of Hamilton County.
    The original action was brought by Samuel Gill, Receiver of the Louisville, Cincinnati and Lexington Railroad Company, against the Merchants’ National Bank of Louisville, plaintiff in error, and George W. Zeigler, Sheriff of Hamilton county. Gill having died, the action was revived in the name of John McLeod, the successor of Gill, as such receiver.
    The object of the action was to enjoin the defendants from detaining or holding two passenger cars and one baggage car, and to compel a restoration of them to plaintiff, and for other relief.
    On April 1,1870, the Louisville, Cincinnati and Lexington Railroad Company, which was the owner of a line of railroad from Louisville to Lexington, and from' Lexington Junction on said main line to the Cincinnati and Newport bridge in Newport, and from Anchorage Station on said main line to Shelby ville, all in the state of Kentucky, mortgaged the same, with all its rolling stock, equipments and franchises, by a deed of trust to George L. Douglas, trustee, duly executed, acknowledged and recorded, to secure $1,000,000 in bonds of the company, with interest coupons attached at 8 per cent., payable semi-annually. By virtue of a contract the company had the right to cross the Newport bridge and make connection with like roads in Ohio.
    One of the conditions of this mortgage was, that, if défault was made and continued for more than ninety days in the payment of any semi-annual- installment, of interest, then the principal evidenced by the bonds should become due.
    On July 25, 1874, said Douglas, as trustee, commenced a suit in the Louisville chancery court, making the proper parties, alleging the foregoing facts, the insolvency of- the company and the insufficiency of the assets to pay fhe mortgage debts, and praying for the appointment of a receiver, on the ground that the entire property, including that in controversy, was insufficient to earn a net income sufficient to pay the interest on the bonded debt of the company, which was insolvent.
    By a cross-petition in that suit, filed by one Norvin Green, trustee, it appears he was a trustee under a prior deed of trust, in the nature of a mortgage, on the same property, to secure $3,000,000 in bonds.
    The condition of this mortgage was, that if default be made for more than sixty days in the payment of interest, then it should be lawful for said trustee to enter and take possession of' all the property embraced in the deed of trust.
    In his cross-petition Green also seeks the appointment of a receiver, and for the protection of his rights.

      Pending these applications for the appointment of such receiver, the plaintiff in error, a corporation of the state of Kentucky, doing business in Louisville, and within the jurisdiction of the court where said suit was pending, commenced its action in the court of common pleas of Hamilton county, Ohio, against said railroad company, as a foreign corporation, and caused an attachment to be issued and levied on certain cars, part of the equipment of said road, included in said mortgages, which was temporarily in Cincinnati, having crossed the Newport bridge to deliver passengers and freight and return. This action and attachment was commenced September 15, 1874.
    On September 21, 1874, upon the motions of Douglas, trustee, under the second mortgage, and Green, trustee, under the first, the breaches of the conditions of said mortgages being admitted, the court appointed said Gill receiver of all the property of the company, including the cars seized by attachment, and directed him to take charge of the same. This receiver Was duly qualified, and the railroad company was ordered to surrender to him its road and all its equipment and property, and he was ordered to take possession of the same and use and operate the road until the further order of the court. The order invested him with the “ same powers as are conferred on the president and directors of the company under its charter.”
    He was authorized to bring and defend all actions in his own name, as receiver, as he may be advised by counsel to be necessary or proper in the discharge of the duties of his office, lie was further authorized to take possession of all rights of the company across the Newport and Cincinnati bridge, to and from the depot in Cincinnati, under a contract for that purpose.
    On appeal to the district court the injunction prayed for was made perpetual, to reverse which judgment these proceedings in error are prosecuted.

      John W. Herron, for plaintiff in error, claimed:
    That the defendant in error acquired no title to the property in controversy; that he had no power to bring suit for its recovery in the state of Ohio, and that the order of the Louisville circuit court had no effect outside of Kentucky; and cited Finnell v. Burt, 2 Handy, 208; Booth v. Clark, 17 Howard, 322, 334, 338; High on Receivers, §§ 239, 244; Ins. Co. v. Needles, 52 Mo. 17; Ins. Co. v. Taylor, 2 Robert. (N. Y.) 279, Warren v. Union National Bank, 7 Phila. 156.
    A receiver is but an appointee of the court from which he derives his authority, and as receiver, he has no extra-territorial rights of action. The states of the Union, for all except national purposes, are to be regarded as foreign and independent of each other. As it is the decree of the court of chancery in Kentucky that is attempted to be enforced in this state, let us see how' the Kentucky courts give effect to the proceedings of another state. In Johnson v. Parker, 4 Bush, 152, it is held by the court of appeals of Kentucky : A citizen of Ohio made to another citizen of that state a voluntary deed, assigning all his estate, debts, &c., everywhere, for the payment of all of his own debts, without discrimination or preference, according to the laws of Ohio, regulating assignments by “ insolvent debtors.” After the date of the assignment, Kentucky creditors in the courts of Kentucky attached a debt due by a citizen of Kentucky to the non-resident insolvent. The attaching creditors never acceded to the assignment. Held, that in the courts of Kentucky the attachment liens have preference over the title and claims of the assignee. “ The principle of comity does not require the courts of one state to recognize and enforce, to the prejudice of its own citizens, assignments made by insolvent debtors under the laws of another state ; but they will secure justice to domestic creditors, without regard to the foreign law on assignments.”
    It is true that this decision professes to regard only the rights and interests of citizens of Kentucky ; but in our courts, citizens of Ohio are entitled to only the same rights as those of other states. If a solemn instrument transferring the legal title to property is to be disregarded, because made in another state, it will be disregarded at the instance of non-residents as well as of our own citizens. In this state a different rule has been held — voluntary assignments made in another state, and valid there, have been held valid .here. Sortwell v. Jewitt, 9 Ohio, 180; Fuller v. Steiglitz, 27 Ohio St. 355; Kanaga v. Taylor, 7 Ohio St. 134.
    And the counsel on the other side have relied on these cases. But every one is a case of voluntary assignment, sustained on the ground that the instrument transferred the legal title to the property. It has never, in this state, and, so far as I can find, in any other state, been held that a decree of court in one state has of itself transferred the title to property at the time beyond the jurisdiction of the court maldng the order.

      Taft <& Floyd, for defendant in error:
    I. Although a receiver, appointed by a court in Kentucky, of an insolvent corporation of that state, has, by virtue of the laws of Kentucky, no power beyond the limits of that state, yet, by the comity between the states, such a receiver is permitted to bring a suit in his capacity of receiver, to enforce the rights of the parties he represents, in personal property, in Ohio. Finnell v. Burt, 2 Handy, 202; Cuykendall v. Miles, 10 Fed. Rep. 343; Hurd v. Elizabeth, 41 N. J. (12 Vroom) 1; Ex parte Norwood, 3 Biss. 504; Hunt v. Jackson, 5 Blatchf. 349; Goodwin v. Jones, 3 Mass. 517; May v. Breed, 7 Cush. 15, 42; Dunlap v. Rogers, 47 N. H. 281, 287; Hoyt v. Thompson, 19 N. Y. 207, 226; Messick's Est., 2 Ashm. 435; Musselman’s Est., 5 Watts & S. 9; Mann v. Cooke, 20 Conn. 178; May v. Breed, 7 Cush. 15; Story’s Conf. of L. § 420; Hunt v. Ins. Co., 55 Me. 290; Hoyt v. Thompson, 5 N. Y. 520; Runck v. St. John, 29 Barb. 585; Lombard Bank v. Thorp, 6 Cow. 46; Hoyt v. Thompson, 11 N. Y. 341; Cogill v. Wooldridge, 8 Baxter (Tenn.) 580; Bank of Augusta v. Earle, 13 Pet. 590; Fuller v. Steiglitz, 27 Ohio St. 355; Bidlach v. Mason, 26 N. J. 230; Dayton v. Borst, 7 Bosw. 115; Pugh v. Hurth, 52 How. Pr. 22; Osgood v. Marquis, 61 N. Y. 524; 14 Allen, 353; High on Receivers, 35, 44, 52, §§ 47, 648.

      II. The mortgagees and the receiver who represents them, have a right to hold the cars as against the attachment of the plaintiff in error. Kanaga v. Taylor, 7 Ohio St. 134; Sortwell v. Jewitt, 9 Ohio, 180; Fuller v. Steiglitz, 27 Ohio St. 355; Applegate v. Ernst, 3 Bush. 648; 12 Bush, 673; 14 Allen, 353; 129 Mass. 314; 46 Conn. 474; 25 N. Y. 586.
   Johnson, J.

There is no bill of exceptions ; hence, if the facts stated in the petition, which are put in issue, entitled the receiver to the relief prayed for and granted, we must presume those facts were proved sufficient to warrant the judgment.

These facts are, in brief, that there were two mortgages on the railroad and its equipment, including the cars in controversy, the conditions of which had been broken; the company was insolvent; the property was insufficient to pay the mortgage debts, or to earn enough to pay the interest thereon.

In this condition of things, the trustees applied to a court of chancery in Kentucky, having jurisdiction of the subject-matter, for the appointment of a receiver. Pending this application, the plaintiff in error, a citizen of Kentucky, and within the jurisdiction of the court before whom the application was made, came to Ohio, and by attachment, founded on an unsecured claim against the railroad company, seized cars, covered by the deeds of trust, and now claims priority over the right of the receiver.

After this, the court in Kentucky made the appointment of a receiver, and clothed him with the powers stated. He was to take possession of the road, its equipment, franchises, &c., and to operate the same. He was vested with power to sue in his own name as receiver in all actions advised by counsel, necessary or proper in the discharge of his duties. This power to possess himself of the property of the road, and to operate the same, extended across the Ohio river, over the Newport bridge, to a connection with the Ohio roads at that point, and for that purpose invested him with the same powers as the president and directors of the company had under its charter, to make connections with roads in this state.

The conditions of both mortgages having been broken, the right to the possession of the mortgaged property by the laws of Kentucky vested in the trustees, under the terms of the deeds of trust.

The right which the company had, to run its cars across the Newport bridge into this state, also vested in the trustees, and on their motion was conferred on the receiver. Instead of asserting, in person, this right, the trastees secured the appointment of a receiver, and had him clothed with all the powers they, as well as the corporation, possessed in the premises.

The temporary removal of these cars into Ohio by the company, pending the application for a receiver, did not divest the mortgagees of any rights to possession of the property, nor impair the power of the court over it.

The rights of the mortgagees under this mortgage will be determined by the lex loci oontraeius, when such contract is. not contrary to the policy of our laws, nor in conflict with the rights of our own citizens. In such a case our courts will by the law of comity enforce, the contract, and give it an extra-territorial operation. Thus, the mortgagee of chattel property under the laws of New York, may assert his rights against the mortgaged property found in Ohio. Kanaga v. Taylor, 7 Ohio St. 134.

This property, at the time it was seized in attachment, was in possession of the mortgagor, and was temporarily in Ohio, under a contract with the Cincinnati and Newport Bridge Company, but the right to the possession was in the trustees under their mortgages. If, instead of procuring the appointment of a receiver, they had, in person, asserted their right to the possession under the conditions of the mortgage, no one doubts that their right was paramount to the seizure under the attachment.

The right of the trustees under these mortgages, which are valid by the laws of both-states, can be asserted in Ohio, as fully as in Kentucky. The only limitation being, that the courts of Ohio, while allowing the comity of suit on a contract not in contravention of our laws or public policy, will protect the rights of our own citizens, and will not allow the principles of comity, to defeat or impair those rights. Fuller v. Steiglitz, 27 Ohio St. 355; Bank of Augusta v. Earle, 13 Pet. 591; Shortwell v. Jewitt, 9 Ohio, 180; Oliver v. Townes, 14 Martin (La.) 93; Gaulaudet v. Hall, 35 N. Y. 657; Whart. on Conflict of Laws, §§ 364-369 ; Story on Conflict of Laws, §§ 244, 259.

The validity of these mortgages and of the appointment of the receiver of this corporation is clearly stated in Newport & Cin. Bridge Co. v. Douglas, 12 Bush, 673. The extent of the powers of the receiver to operate and control the road and its earnings under this appointment are there fully settled.

■ Counsel for plaintiff in error concede the extra-territorial rights of the owner of property, or of the mortgagee thereof, to maintain an action in the courts of a sister state, when the case comes within the exception stated, but deny that a receiver has any such power. The claim is, that the receiver acquired no title to the property in controversy, and had no power to bring an action in the state of Ohio, the order of the Louisville chancery court having no effect outside of the state of Kentucky.

Let it be assumed as settled by all the authorities that the order of the Kentucky court sitting in chancery, did not operate to confer or divest any title to property outside of that state. That is probably also true as to the title of property within that state. The receiver, when appointed by the court of chancery, did not acquire the title to the property, but only the right under orders of the court to possess and operate the same, as the trustees under the mortgage might have done, or as the court might direct.

Stripped of all collateral matters, the question is, has the receiver, in such a case, the legal capacity to possess himself of the property embraced in these mortgages. The general principle is: “ that the possession of the receiver is that of all parties to the suit, according to their titles. As between the owner and incumbrancers it is for some purposes the possession of the incumbrancers, who have obtained or extended the receiver; as between the owner whose possession has been displaced and a third party it is the possession of the former.” High on Receivers, § 131, note 1. Thus in Horlock v. Smith, 2 Law Jour. N. S. 157, where a receiver was appointed of property mortgaged to A., and continued tb hold over after his discharge, it was held, that the possession of the receiver after* such discharge, was the possession of A.

The general proposition is well established that the receiver is the officer or agent of the court appointing him, for the benefit of whoever may be ultimately determined to be entitled to the property. In the case at bar, the fact was established, that the right of property was in the receiver, for the benefit of the incumbrancers, on whose motion he was appointed, and therefore, as between them and the owner, or the unsecured creditors, the possession is that of the incumbrancers. Thus it was held in Angel v. Smith, 9 Vesey, 337, that when the rights of the parties are ultimately determined, the possession of the receiver for the whole period, by relation, dates back to the time of the appointment, though, pending such determination, it be deemed the possession of the court for all parties interested.

Again, the possession of the receiver and his rights to possession, are exclusive. No one, not even the trustees under these mortgages, could interfere with this right. Having procured his appointment, and placed the property in the custody of the court, they would be estopped from asserting in person the right to enter upon and use the property, reserved to them in the conditions of their mortgages. Without authority of the court, no one has- the right, by execution, or otherwise, to interfere with the receiver’s possession. High on Receivers, §§ 135 to 156, and cases cited.

Again, the authority to bring actions is derived from the court appointing him, which may be conferred either by a general order or by special orders in particular cases. 2 Daniels Oh. Prae. 1751, note 7; Davis v. Gray, 16 Wall. 216-219. This is according to the weight of authority, though there are many well considered cases holding that a receiver has the right to sue, by virtue of his appointment, and the general powers thereby conferred, without express authority for that purpose. 2 Daniels Oh. 1751, note 7, in brackets; Wray v. Jamison, 10 Humph. 186; Baker v. Cooper, 57 Maine, 388; High on Receivers, § 210.

In the case before us, the order of appointment authorizes the receiver to bring all necessary and proper actions in his own name as such, under the advice of counsel. So far as the court had power to do so, it has, by a general order, clothed the receiver with the right to bring this action. If the allegations of the petition are true, and in this proceeding, we must assume that they are, the action was a necessary and proper one, and was advised by counsel who represents the receiver. This right to sue in his own name is not controverted when applied to an action in Kentucky, but the claim is, that the authority to do so is confined to actions brought in Kentucky. In other words, that this right cannot, by the comity between states, be exercised in a sister state.

As the mortgage was valid in Ohio, and the property was insufficient to pay the debt, the equity of redemption, on which the attachment was levied, was valueless. The attaching creditor acquired no right or interest by the seizure, paramount to the mortgages. Had it appeared that an interest in the property was acquired by the seizure, a different and somewhat difficult question would have been presented, namely, would the Ohio court retain the property, until this interest was ascertained and protected ? If the attaching creditor was a citizen of Ohio, the principle, that our courts would protect its own citizens, would seem to apply, but treating the mortgages as valid, no such interest existed, or could be acquired by the levy of the attachment, as the property was insufficient to pay the debts secured by the mortgages.

Independent of the rights of any citizen of Ohio, will comity allow the receiver to maintain an action in Ohio, which he could bring in Kentucky? We think, that upon both principle and authority such an action may be maintained. The-nature of the Union between the states, as members of a common government, the vital interests which bind them together,, should lead us to presume a greater degree of comity in conumercial, as well as in political affairs, than we should be authorized to presume betweenstates wholly foreign to each other.

In Hurd v. City of Elizabeth, 41 N. J. L. 1, it was held, that a receiver appointed by a court of New York, clothed with authority to take the designated property wherever situate, may sustain a suit for such property in the courts of New Jersey. That was an action in that state to recover moneys, due a New York bank, of which the plaintiff was appointed receiver by a New York court. There, as here, the right to sue outside of New York was denied.

It is said, there are dicta that go to the extent of this :claim, but the correct rule is stated to be; That a receiver cannot sue or otherwise exercise his functions, in a foreign jurisdiction, whenever such acts, if sanctioned, would interfere with the policy established by law in such foreign jurisdiction. .....It could not be exercised in such foreign jurisdiction to the disadvantage of creditors resident there, because it is the policy of every government, to retain in its own hands the property of a debtor, until all domestic claims against it have been satisfied.” The distinction is drawn between the case of a receiver acting under the inherent force of his appointment alone, and a case where, by the terms of his appointment, he is directed to gather the assets wherever found.

The power of the court to confer such authority on a receiver is not limited to property found within the state where he is appointed. It is not necessary that the property should be within the jurisdiction of the court. Thus the courts of England have appointed receivers to manage landed property in India, Canada, China, Ireland, the South American states, and other places. 2 Daniels Ch. *1731, and cases cited. So, on principles of comity, the aid of a New Jersey court was extended to a foreign receiver to obtain possession of property, as against the officers of a corporation of which he was receiver, who may be endeavoring by fraud or subterfuge to withhold it. Bidlach v. Mason, 26 N. J. Eq. 230.

The principle announced in Hurd v. Elizabeth, supra, which is a late and well considered case, is in our judgment supported by reason and authority. A few of the cases are: Pond v. Cooke, 6 Reporter (Conn.) 516; Hunt v. Columbia Ins. Co., 55 Maine, 297, 298; Ex parte Norwood, 3 Bissell, 501; Gray v. Ramis, 1 Wood, 420, affirmed in Davis v. Gray, 16 Wall. 203; Punk v. St. John, 29 Barb. 585; Barclay v. Quicksilver Min. Co., 6 Lans. 25; Willets v. Waite, 25 N. Y. 577; Peterson v. Chemical Bank, 32; Pugh v. Hurt, 52 How. (N. Y.) 22; Graydon v. Church, 7 Mich. 36.

Great reliance is placed on the remarks of Mr. Justice Wayne in deciding the case of Booth v. Clark, 17 How. 334, where it is said, “ that the receiver’s right to the possession of the property is limited to the jurisdiction of his appointment.” This, and other remarks, of the learned judge, are termed dieta, when applied to cases like the present. Hurd v. City of Elizabeth, 11 N. J. Law, 1; Ex parte Norwood, 3 Bissell, 512.

Booth v. Clark was correctly decided upon the facts before the court. One Camara recovered a judgment in court of New York against Clark, and upon a return of no goods on which to levy, had Booth appointed receiver in 1812, to reach equitable assets and choses in action of Clark, to satisfy his judgment. In 1851, Booth, as receiver, filed a bill in the circuit court of the district of Columbia, seeking to reach a claim upon Mexico in favor of Clark, which had been awarded to him in 1818. Clark was adjudged a bankrupt in 1813, and this claim against Mexico, which was then existing, passed to his assignee. It was held in Clark v. Clark, 17 How. 315, that this claim belonged to the assignee fn bankruptcy. The controversy in that case was therefore one between Clark’s assignee in bankruptcy, and Booth, receiver under the creditors’ bill of. Camara, filed in New York, as to which was entitled to collect from the United States the amount awarded to Clark by the commission under the treaty between the United States and Mexico. It was held that the assignee in bankruptcy, by virtue of his office, had the best right to the fund. . There were no liens or vested rights of the judgment creditor to his debtors claim or chose in action. The receiver only acquired an authority to sue for and reduce to possession this claim. This authority had no extra-territorial force, as against the assignee in bankruptcy, who represented all creditors alike, and who, by the adjudication in bankruptcy, became invested with the right to choses in action wherever found.

Unlike the present case there was no lien or mortgage, or other vested interest in the receiver. So far we have taken no notice of the fact that the litigating parties are both citizens of Kentucky. The plain tiff in error has no right to invoke that protection against the principles of comity, which this state would accord to her own citizens. "Whart. on Confl. of L. §§ 364-369.

In such a case it is held, where questions as to extraterritorial property arise between foreign assignees and foreign creditors, domiciled in the same state, the foreign law to which such parties are subject, will be upheld.” Ibid. § 369, and note.

In Rhode Island Bank v. Danforth, 14 Gray, 123, it was held that a mortgage on chattels in Massachusetts by a Rhode Island mortgagor to a mortgagee residing in the same state, would be sustained in the courts of Massachusetts, as against an attachment in Massachusetts, by a Rhode Island creditor.

The court say, all the parties are citizens of Rhode Island, and a valid mortgage there will transfer the property in Massachusetts.

If this were not the rule, it would enable a Kentucky creditor of an insolvent debtor by attachment, in Ohio, to defeat an assignment made in Kentucky for the equal benefit of his creditors, and thereby secure a priority over other, and even over a valid mortgage.

Judgment affirmed.


source: Caselaw Access Project

author: White, J.

license: Public Domain

text:
    Kilbreth v. Bates.
    1. Under the charter oí the Ohio Life Insurance and Trust Company, the discounting of a bill of exchange at a higher rate of interest than was allowed by the charter, rendered such bill void in the hands oí the company. Bank of Chillicothe v. Swayne, 8 Ohio, 257, followed.
    2. The effect of the clause in the charter declaring its forfeiture, was not to validate, in whole or in part, an instrument that would, in the absence of such clause, have been invalid ; but to enforce upon the company additional motives for observing in the management of its business the requirements of its charter.
    Error to the Superior Court of Cincinnati.
    The original action was brought by James P. Kilbreth, assignee of the Ohio Life Insurance and Trust Company, in the Superior Court of Cincinnati, against Isaac Bates ás acceptor, and Eden B. Keeder as indorser, of two bills of exchange. One of the bills was dated June 11, 1857, for $3,500, and payable three months after date at the office of the Ohio Life Insurance and Trust Company, New York, and the other was dated July 14, 1857, for $2,500, payable two months after date, also payable at the office of the company in New York.
    One of the defenses interposed by Bates was as follows:
    “And the said defendant, for a second answer to said petition, states that he is only an accommodation acceptor upon said bills of exchange in the petition described, for said Eden B. Keeder, who is the principal thereon, and this defendant is only his surety. That this fact was well known to the said Ohio Life Insurance and Trust Company, the original holder of said bills of exchange, when she took the said paper, and he asks that he have the benefit thereof. And further this defendant states, that the said bills of exchange, in the petition named, were so made in pursuance of an arrangement made between the said Keeder and the said Ohio Life Insurance and Trust Company, in order that the latter might discount the same at the rate of six per cent, per annum, and discount therefrom the rate of exchange between Cincinnati and New York, which was, at that time, one and one-half per cent., and which discounts were so made, whereby the said company did reserve to itself for the loan and forbearance of the principal money, covered by said two bills of exchange, a per cent, equal to Seven and one-half per cent, upon the aggregate amount of bpth bills, which was in contravention of the charter of said company, and in violation of the law of the land.
    “ That said Ohio Life Insurance and Trust Company, at the time of said arrangement and discounting said bills, well knew that said Reeder and this defendant had no money at New York to meet said bills, and were not expected to have any when said' bills matured, but the same were to be paid and taken up at the city of Cincinnati. That such was the understanding and agreement of said Reeder and company when they discounted said bills, and that said arrangement was a mere shift and device to evade the provisions of the charter of said company against the reservation of more than six per cent, per annum for the loan and forbearance of money by said company. And the defendant further states, that by the charter of said company, and which was in force at the said time of said discounts of said bills, it was and is provided that the said company should not loan money at a rate of interest exceeding six per cent, per annum, whereas the said loans and discounts upon said bills of exchange, were at the rate of seven and one-half per cent, per annum, and which loan and discounting, as aforesaid, of said bills of exchange were usurious and rnrll and void.”
    To this defense a demurrer was filed, which was overruled, and judgment rendered for the defendant.
    On error this judgment was affirmed in general term; and the present petition in error is prosecuted to reverse these judgments.

      JSoadly, Johnson & Colston, for plaintiff in error:
    ' 1. As the charter of the Ohio Life Insurance and Trust Company contains no limitation or prohibition in regard to the rate of interest that might .be contracted for by it, save a penalty if it demanded or received more than seven per cent., it might contract for and receive any rate, subject, however, to the same restrictions as natural persons, and, in addition, the imposition of the penalty provided by its charter. Corwin v. Ins. Co., 14 Ohio, 6.
    In all the Ohio cases in which the supreme court has held contracts of corporations void by reasons of stipulations for usurious interest, the charters of the corporations' have contained prohibitions against such contracts being entered into; and it was by reason of such prohibition that the contracts were held to be ultra vires and void. In the case of the Chillicothe Bank v. Swayne, 8 Ohio, 257, the bank by its charter was prohibited from taking over six per cent.; and on page 289 the court hold that by reason of the prohibition the loan was void. This court, in the ease of Commercial Bank, 11 Ohio, 492, referring to the Chillicothe Bank case, says: “ In the case of the Bank of Chillicothe v. Swayne, the bill was discounted by the plaintiff, and more than six per cent, per annum reserve, in advance, as interest, against an express prohibition in the charter.” In the case of Creed v. Commercial Bank, 11 Ohio, 489, the court held that the bank, by its charter, was-limited to taking interest on “ banking principles and usages,” and the court finds that that is a limitation to taking interest at six per cent., and on the reasoning of the Chillicothe Bank case, held the contract void. Ib. 493. In the case of Spaulding v. Bank of Muskingum, 12 Ohio, 544, the court held that the corporation “is prohibited by its charter, which gave it birth, and not only so, but by general law, from receiving more than six per cent.” interest (Ib. 546), and, therefore, held that the contract could not be enforced. In the case of Miami Exporting Company v. Clark, 13 Ohio, 1, the company was prohibited by its charter from taking over six per cent, per annum, and the court held, “ when a bank, so prohibited, discounts a bill,” at usurious rates, that the loan is void. In the case of Bank of Wooster v. Steven, 1 Ohio St. 233, the bank was limited by its charter to six per cent, interest on its loans, and the -court held that “ a note or other obligation taken by a bank limited by its charter to six per cent, per annum interest upon its loans is void, if more than that is reserved or paid, for want of corporate power to enter into such contract. In the case of Vanatta v. State Bank, 9 Ohio St. 27, the bank discounted a note drawn in a form prohibited by its charter to be discounted, and the court, therefore, held the note void.
    Now, it will be noticed that all of these cases, in which the contracts are held void, turn on the prohibition or limitation contained in the charters. Had there been no prohibition, the reason of the decisions would have failed, and as there is no limitation or prohibition in the charter of the Ohio Life Insurance and Ti’ust Company, we submit that these cases are not in point.
    That these decisions are against the prevailing authorities in the other states and of the United States courts, we shall hereinafter see ; and the court, in Rock River Bank v. Sherwood, 10 Wis. 238, referring to the cases of The Bank of U. S. v. Owens, 2 Peters, 527; Bank of Chillicothe v. Swayne, 8 Ohio, 252; Creed v. The Commercial Bank, 11 Ohio, 489; Spaulding v. Bank of Muskingum, 12 Ohio, 544, and Orr v. Lacy, 2 Douglass, as cases holding that a usurious contract made, by a corporation is void, says : “I am not prepared to follow these decisions. In my judgment, the reasoning in these cases is clearly and successfully and completely answered by the opinions given in the Commercial Bank of Manchester v. Nolon, 7 How. (Miss.) 508, and McLean, Assignee, &c. v. The Lafayette Bank, 3 McLean, 587.” And, therefore, while these cases in our own state have as yet not been reversed by the supreme court, they should be kept strictly within their limits, and should not be applied to the charter of corporations having no limitations or prohibitions. That this court recognizes this distinction between charters containing prohibitions and charters containing no prohibitions, is, we think, fully demonstrated by the case of Corwin v. Urbana and Champaign Ins. Co., 18 Ohio, 6; Ehrman v. Insurance Co., 35 Ohio St. 337; and see Pollock on Prin. Con. 91; Bank v. Harrison, 57 Mo., 511; McLean v. Bank, 3 McLean, 611; Am. & F. C. W. v. Yount, 9 Reporter, 697, and cases cited; Hoys v. Gas Co., 29 Ohio St., 338; Buckingham v. McLean, 13 How. 151; Bank v. Dearing, 91 U. S. 35; Bank v. Burchard,
      33 Vt. 346; Bank v. Mandeville, 1 Cranch C. C. 552; Bank v. Nolan, 7 How. (Miss.) 508; Bank v. Sharpe, 4 S. & M. 75; Bank v. Archer, 8 S. & M. 151; Littleworth v. Archer, 50 Miss. 403; 13 Conn. 249, 257; 26 Conn. 145; 10 Wis. 231; Bank v. Hastings, 12 Wis. 47; Durkee v. Bank, 13 Wis. 216; Brower v. Haight, 18 Wis. 102; Insurance Co. v. Dhein, 43 Wis. 420; Bandel v. Isaacs, 13 Md. 202; Bank v. North, 4 John. Ch. 370; Palmer v. Lawrence, 3 Sandf. 162; Steam Nav. Co. v. Weed, 17 Barbour, 378; Whitney Arms Co. v. Barlow, 63 N. Y. 63; Bank v. Matthews, 98 U. S. 627; Bank v. Hobbs, 11 Gray, 251; Bank v. Butts, 9 Mass. 449; Little v. O’Brien, 9 Mass. 423; Lyon v. Bank, 1 Stewart, 468; Railroad Co. v. Lewis, 33 Pa. St. 33; Railroad Co. v. Transit Co., 83 Pa. St. 160; Steamboat Co. v. McCutchen, 13 Pa. St. 13; Bank v. Pauk, 40 Me. 109; Township of Pine Grove v. Talcott, 19 Wallace, 666; Glass Co. v. Dewey, 16 Mass. 94; Potter v. Bank, 5 Hill, 490; Bank v. Bank, 11 Barb. 213; Mott v. U. S. Trust Co., 19 Barb. 568; Fleckner v. Bank, 8 Wheat. 336.
    In view of the cases above cited we think that the current of authority is overwhelmingly against the statement of the law as made by the court in Bank of Chillicothe v. Swayne. Nowhere, except in Ohio and Michigan, has the doctrine in that case been followed and approved. And it is certainly inconsistent with, if not overruled by the case of Hays v. Galion, 29 Ohio St. 330; see also Whitney Arms Co. v. Barlow, 63 N. Y. 62.
    II. The charter of the Ohio Life Insurance and Trust Company definitely fixing a penalty, to wit, forfeiture of charter, if interest in excess of seven per cent, should be contracted for, no other or further penalty could be enforced against it. Farmers’ National Bank v. Dearing, 91 U. S. 35. See also Stafford v. Ingersoll, 3 Hill, 38; Whitehall v. Lamb, 57 Barb. 429. Pollock on Contracts (Wald’s edition), note, p. 97.- Citing, in support: Farmers’ National Bank v. Dearing, supra; Bank v. Hobbs, 11 Gray, 250; Bank v. Garlinghouse, 22 Ohio St. 492; Bank v. Moore, 2 Bond, 170; Bank v. Pratt, 115 Mass. 539; Whiley v. Starbuck, 44 Ind. 298; Brown v. Bank, 72 Penn. St. 209.

      H. C. Whitman and Clark B. Montgomery, for defendants in error:
    I. The law of Ohio as to the powers of corporations, and the proper construction of their charters, is as well settled as any doctrine can be, and the decisions of our highest court are uniform on the question, for a period of more than forty years, without a single exception.
    The ^principle is well stated by Hitchcock, J., in the leading case of the Bank of Chillicothe v. Swayne, 8 Ohio, 287. And the principles of that case have been affirmed in Strauss v. Insurance Co., 5 Ohio St. 61; 11 Ohio 12; Creed v. Bank, 11 Ohio 492; 13 Ohio, 17; Spalding v. Bank of Muskingum, 12 Ohio, 544; Morris v. Way, 16 Ohio, 477, 478; Bank of Wooster v. Stevens, 1 Ohio St. 233; Russell v. Failor, 1 Ohio St. 329; Bartholomew v. Bently, 1 Ohio St. 42; Debolt v. Ohio Life Ins. and Trust Co., 1 Ohio St., 575, 576; Union Bank at Massillon v. Bell, 14 Ohio St. 209; Selser v. Brock, 3 Ohio St. 307; and First National Bank of Columbus v. Garlinghouse, 22 Ohio St. 502. The cases cited by opposite counsel as holding a doctrine opposed to what we claim do not sustain their claim.
    Nor is it true, as asserted by counsel, that the doctrines of the decision in 8 Ohio have nowhere in the Union, except in Michigan, been approved. On the contrary, the great underlying principle of that decision, that a corporation has only such powers as are expressly granted by its charter, or necessary to carry out such powers, is the settled law of construction in the several states of the Union. McMullen v. City Council of Charleston, 1 Bay, 46; People v. Utica Ins. Co., 15 Johns. 358; New York Firemen's Ins. Co. v. Ely, 2 Cow. 678; Boyce v. City of St. Louis, 29 Barb. 650; 18 How. Pr. 125; 12 Illinois, 138; 14 Illinois, 193; 21 Illinois, 205; 13 Cal. 540; 5 Wendell, 590; 15 N. H. 317; 20 N. Y. 312; 27 Pa. St. 339; 31 Alabama N. S. 76; 33 Ill. 416; 2 Cal. 524; 22 Conn. 522.
    To the above might be added numerous decisions of other state courts, if needed.
    To same effect, in addition to cases cited, of United States decisions, see Beaty v. Knowles, 4 Peters, 152, affirming 1 McLean, 41; 9 How. 172; 5 McLean, 194; 6 Wheaton, 593; 1 Blachf. C. Ct. 258; 3 Wall. 320; 12 Wall. 349; 23 How. 435, 436; and this principle, says Judge Nelson, in 23 Howard, is a well-settled rule of construction, whether the corporation be public or private.
    The logical and inevitable legal conclusion, from the application of this settled rule of construction of the powers of corporations, is that if they are, by the law of their creation, forbidden to make a certain contract to take more than six per cent, interest, and they attempt to do what is so forbidden, the act is null and void. There can be no escape from this conclusion, and it is just, as well as legal. The Ohio cases, from the 8th to the last decision, all stand on this sound, legal and just foundation.
    But opposing counsel say, that 8 Ohio is certainly inconsistent- with, if not overraled by the case of Hayes v. Galion, 29 Ohio St. 330, 340. Counsel, however, are clearly mistaken in such idea. The question decided in 8 Ohio, and following cases, is, so far as any analogy may be traced, recognized in 29 Ohio St. The question was, has the Gas Company the power, under the general incorporation act of May 1, 1852, to borrow money to enable it to accomplish the legitimate objects of its creation, and secure the payment of the same by note, and a mortgage of the corporate property ? and the court held it had such power. The court, neither in its syllabus of decision, nor in the opinion, modifies, or limits, or overrules 8 Ohio, or any of the cases sustaining it. Nor is there a word in either inconsistent with the well-settled law of those cases.
    In order to properly construe this charter, we must not forget -that it is a peculiar one — that it creates different departments of action with entirely different objects. One is the investment loan department of the whole capital, provided for in section 7. Another is the life insurance department. Another is the annuity department. Another is the general trust department (clause 5 of section 2). Another is the special trust department, embraced in sections, as to infants and, others, 3,4, 5. Another is the banking department. Another is the general loaning and discounting, not embraced in the others.
    And so when we are asked to construe the whole, we must look to each department to see what powers therein are granted, and what limitations are imposed, whether as to rates of interest or otherwise. And if we find that the operations under one class of powers, and for one object, are specially limited by a special rate of interest, and that other departments are silent as to rates, or contain a different rate, we of course say that each case and transaction must be controlled by the powers given and limitations imposed by each department.
    Now the case at bar is one of the discount of bills of exchange and loaning money upon them. This clearly does not fall under the provisions of the seventh section or the investment loan department; but it falls under the department for loaning money not for specified investment, but as in the ordinary way of banking and loaning or discounted bills. It comes under the banking and loan department. The power to issue notes for circulation is not necessarily a part of banking; and to such a transaction as the one at bar, the limitation of six and not seven per cent, applies. And such was the opinion of the court‘below. But if limitation of seven per cent, applies, it is equally fatal. The sections of the charter cited (7 and 23) as to rates of interest are also prohibitory. They not only limit the rate, but they prohibit a greater. And if a greater rate than is allowed is taken, the loan is usurious and void for want of corporate capacity to make it, and also for its being against an express prohibition.
    The reply to the claim .of plaintiffs in error is obvious:
    1. It cannot be questioned that there is a clear, positive limitation in the charter, beyond which interest cannot be charged in one class of cases over six per cent., and in another over seven.
    2. That this limitation is an absolute prohibition to the company to charge more.
    3. That if' the company shall in any case so charge and receive usurious interest, the transaction is necessarily void ; first, for want of corporate power, because the power is only given and is limited to a less rate; and, second, because the act is a prohibited act, and so without authority.
    As to the claim that forfeiture of the charter is the only liability imposed on the corporation for such acts thus done ultra vires, and in defiance of express prohibition, such claim is utterly untenable for a moment.
   White, J.

The first ground relied on in this case for the reversal of the judgment is, that the charter of the plaintiff not being pleaded, it cannot be known by the court whether the loans in question were in violation of the charter or not.

In answer to this it is sufficient to say, that the only authority of the plaintiff to maintain the action is derived from its charter, which is required, by section 28 thereof, to “ be taken and received in all courts, and by all judges, magistrates, and all other public officers, as a public act.” 32 Ohio L. 68.

Section 7 of the charter requires the wdiole of the capital stock to be invested in bonds or notes drawing interest not exceeding seven per centum per annum, secured by unincumbered real estate within this state, of at least double the value in each case of the sum so secured. Section 19 Authorizes the trustees to invest “ the premium and profits received by the company and the moneys received by them in trust in government, or other public stocks of the United States or of any state, or in the stock of any incorporated city or in such real or personal securities as they may deem proper, or loan the same to any county, city, incorporated town or company.” The investments referred to in this section are investments otherwise than by way of loan; and the loans which the section authorizes to be made are limited to counties, cities, incorporated towns, or companies.

The loans now in question come within neither section 7, nor section 19, but under section 23 of the act. The section last named provides that the company may lend money “ on notes or obligations, or such other securities as the said trustees may require, at a rate of interest not exceeding six per cent. per annum. If said company shall suspend payment on its bills or notes, in silver or gold coin, lawful money of the United States, for more than thirty days, or shall demand and receive a greater rate of interest in any case than seven per cent, per annum, its charter shall be thereby forfeited.”

The language used in this section prescribing the rate of interest at which loans may be made is substantially the same as that used in the charter of the Chillicothe Bank in the case of Bank of Chillicothe v. Swayne, 8 Ohio, 257. The language of the charter in that case was, “ The said corporation shall not take more than at the rate of six per centum per annum, on its loans or discounts; ” and the court held that the bank had no capacity to loan money at a higher rate, and that, if a loan at a higher rate be effected by discounting a bill of exchange, no recovery could be had thereon. That case was decided in 1838, and contains an elaborate discussion of the question involved, and has ever since been recognized as authority in this State. Creed v. Commercial Bank, 11 Ohio, 489; Miami Exporting Co. v. Clark, 13 Id. 1, 17, 21; Bank of Wooster v. Stevens, 1 Ohio St. 233; Preble County Bank v. Russell, Id. 313, 320; Russell v. Failor, Id. 329; Straus v. Eagle Ins. Co., 5 Id. 59; Union Bank of Massillon v. Bell, 14 Id. 209; First National Bank v. Garlinghouse, 22 Id. 502.

The same principle had previously been decided by the supreme court of the United States, in the case of the Bank of the United States v. Owens, 2 Peters, 257. The authority of the case last named is fully recognized by the same court in Tiffany v. Boatman’s Institution, 38. Wall. 375. In the opinion in that case the court say: “The defendant is by its charter authorized to lend money on interest, but is forbidden to exact more than eight per cent, for the loan. No penalty is prescribed for transgressing the law, nor does the charter declare what effect shall be given to the usurious contract. This effect must, therefore, be determined by the general rules of law. The modern decisions in this country are not uniform on the question whether, if the bank takes more than the rate prescribed, the contract shall be avoided or not on these general rules ; nor is this a matter of surprise if we consider the growing inclination to construe statutes against usury so as not to destroy the contract. It is, however, unnecessary to review these cases, or the earlier ones in England and in this country which uniformly hold that the contract is avoided, because this court has in the case of Bank of the United States v. Owens, decided the question.

“ The bank in that case brought suit upon a promissory note that was discounted at a higher rate of interest than six per cent., which was the limit allowed by its' charter upon its loans or discounts. The charter, like that of the Boatman’s Institution did not declare void any contract transcending the permitted limits, nor affix any penalty for the violation of the law.

“ It was contended in that case, as it has been in this, that a mere prohibition to take more than a given per cent, does not avoid a contract reserving a greater rate, and that, when a contract is avoided, it is always in consequence of an express provision of law to that effect. But the court held otherwise, and decided that such contracts are void in law upon general principles; that there can be no civil right where there is no legal remedy, and that there can be no legal remedy for that which is illegal. Chief Justice Taney, in the Maryland circuit, as late as 1854, in a similar case held similar views, and supported them by the decision in this case. Dill v. Ellicott, Taney Circuit Court Dec. 233.” See also Pearce v. Railroad Co., 21 How. (U. S.) 441; Ashbury Railway Carriage and Iron Co. v. Riche, L. R, 7 Eng. & Ir. App. Cases, 653; Attorney-General v. Great Eastern Railway Co., L. R. 5 App. Cases. 473; Thomas v. Railroad Co., 101 U. S. 71.

But the principle decided in Bank of Chillicothe v. Swayne is recognized by this court as applying to the charter now in question in the case of Bank of Ashland v. Jones, 16 Ohio St. 145. The question in that case w'as, whether the present plaintiff in error acquired the bonds in question by way of purchase, or for a loan of money at an illegal rate of interest. The court below held that the bonds were taken by the company in the mode last mentioned and held them void for that reason. This court reversed the judgment on the sole ground, that the transaction was not a loan, but a purchase of the bonds. Two members of the court dissented on the ground that the' transaction was a loan of money, and not a sale of bonds at a rate of interest above that allowed by the charter. The only difference between the majority of the court and the minority was as to the character of the transaction, but all agreed, that if the bonds were taken by the company for a loan of money they were void in the hands of the company.

The decisions as to the effect of agreeing for unlawful interest under the National Banking Act have no bearing on the question now under consideration. For, as was said by this court in the case of the First National Bank of Columbus v. Garlinghouse, 22 Ohio St. 502, the forfeiture provided for in that act “ is expressly limited to the interest which the note, bill, or other evidence of debt carries with it, or which has been agreed to be paid thereon. In thus limiting the forfeiture to the interest, the right of the bank to the principal is necessarily implied. And so far as the argument as to the entire invalidity of the note is founded on the supposed want of power or capacity in the bank, it is enough to say that authority implied is as effective and available as authority expressly conferred.

“The statute operates on the instrument given for the loan, and, in effect, declares it to be invalid as to the entire interest, but valid and binding as an obligation for the payment of the principal.”

Upon the same principle it is claimed by the plaintiff in error, that the only effect of stipulating for an unlawful rate of interest under the charter now in question is the forfeiture of the charter. We think the provision in the charter in relation to forfeiture will bear no such construction. Its effect is not to validate an instrument, in whole or in part, that wrould, in the absence of the forfeiture clause, have been invalid, but to enforce upon the company additional motives for observing in the management of its business the requirements of its charter.

No question arises in this case as to the right of the company to sue for the recovery of the money from the principal who received it. The action in this case, as in the case of the Chiliieothe Bank, is brought on the intruments given for the loan, which being void constitute no cause of action. See Pearce v. Railway Company, 21 How. supra, 441, 444; Miami Exporting Co. v. Clark, 13 Ohio, 1, 19.

Judgment affirmed.