Story Case

The Alice of Old Vincennes Hotel Corporation owned a large hotel near a mineral spring in Southern Indiana. In 1910, when the corporation was formed, it purchased five acres of land for the hotel site. In 1914, a majority of the stockholders voted to purchase two hundred acres of land, on which to build a golf course for the use of the hotel guests. Two minority stockholders objected to this expansion and brought proceedings in Court to have the purchase declared void, on the ground that the corporation had no power to purchase any land except for hotel purposes, since the charter expressed that it should have the power for this purpose only. Should the minority stockholders win?

Ruling Court Case. Nicoll Vs. N.Y &E. R. R. Co., Volume 12 New York Reports, Page 121

Nicoll gave a deed to the New York and Erie Railroad Company of a strip of land across his farm for the right-of-way of the railroad. Later, he wished to regain it from the railway company and brought this action to have the corporation ejected from the possession, on the ground that it did not have power to purchase land, nor to take a deed to the fee. The company was chartered for fifty years, and this, it was claimed, made it impossible for it to take more of a title than a fifty-year interest, while the deed purported to con-vey the whole ownership, for all time, to the corporation and its successors.

It was held that the company was entitled to retain the land. The Court said, in an opinion by Mr. Justice Parker: "The power to purchase lands, where it is necessary for the other purposes of the corporation, is a power incident at common law to all corporations, unless they were specially restrained by their charters or by statute. It is true, that corporations are in most states, expressly prohibited from holding land that is not used for the corporate business, and corporations, for the purpose of buying and holding real estate, are not often permitted. But one of the general powers of any corporation is the holding, purchasing, and conveying of such real estate as the purposes of the corporation require."

As to the objections that the corporation could not take the whole title, the Court said: "The unsoundness of that position is easily shown. It has never yet been held that the grant of a title, in fee, could be denied, because the grantee had but a limited existence. If it were so, a grant could never be made to an individual in fee, because, in his earthly existence, he is not immortal. It is not to the parties to the grant, but to its terms, that we look to ascertain the character and extent of the estate conveyed. By our statutes, a deed without words of express limitation and restriction, conveys the whole title that the grantor had. Upon the whole, my conclusion is, that the New York and Erie Railroad Company took from Nicoll a fee. This fee may be fully enjoyed by the company, in spite of its limited duration. It is an enjoyment of the fee to possess the land and to have full control of it, including the power of alienation, by which the full value of the fee may at once be realized."

There was, therefore, no defect in the title of the defendant, the railroad company, and Nicoll could not have it dispossessed of the land. Judgment was given for the defendant.

Ruling Law. Story Case Answer

At common law, every corporation has the power to acquire, hold, and convey real estate. This rule has, however, been narrowly construed and, in many cases, modified in the United States. Corporations have the right to purchase that amount of real estate which is necessary for the purpose for which the corporation is formed. A corporation, however, is not limited by the express words of its charter; it is said to have the implied favor to do these things which are necessary to fulfill the express purposes for which it is organized. In determining these incidental or implied powers, simple common sense is used. "Necessary," in this connection, does not mean indispensable, but, merely, that which is reasonably convenient and usual, in order to carry out the corporate purposes.

It might be most unreasonable and unusual to say that the Astor Hotel, in New York, or the Hotel La Salle, in Chicago, has the implied power to own and conduct a golf links many miles away from the hostelry, and yet, it may be most reasonable to say that a summer hotel, or resort hotel, in the country, should have this implied power. We think the minority stockholders, in the Story Case, should lose.