1 Extent of corporate powers. A corporation, unless expressly restrained by law, has an unlimited power over its property and may dispose of it as fully as a na ural person.

2 Assignment by corporation. An insolvent corporation may make an assignment for the benefit of creditors; the power may be exercised by its directors.

November 3, 1870. Before THOMPSON, C. J., READ, Agnew, SHARSWOOD and WILLIAMS, JJ.

Error to the District Court of Allegheny County, No. 63, to October and November term, 1869.

On the 30th of May, 1868, The North American Oil and Mining Company, for the use of Francis H. Macy, trustee of Josiah Macy's sons, brought an action of covenant against the Ardesco Oil Company. The defendants pleaded non est factum, covenants performed absque hoc, set-off, payment with leave, and an additional plea denying the validity of the transfer by the legal to the equitable plaintiff of the lease sued

on.

The facts of the case are as follows:

On the 13th of January, 1858, E. F. Denny leased to J. F. Johnston, for fifteen years, a coal-right under a tract of land in Armstrong county, he to pay every six months one third of a cent per bushel for the coal mined, and if the rent should be unpaid for thirty days after demand, the lessor might enter and the lease be forfeited. On the 1st of July, 1859, the North American company accepted the lease from Johnston "subject to all conditions." On the 11th of April, 1866, the North American company mortgaged the premises to Francis II. Macy, in trust for Josiah Macy's sons, to secure a bond in the penalty of $150,000, conditioned for the payment of $25,000, with interest payable semi-annually, and for all such further advancements as Macy's sons should make to the company, with interest, in the aggregate amounting to $75,000, with proviso that in default of payment of any installment of interest for thirty days, the mortgage might be sued out.

On the 1st of July, 1867, the North American company leased the premises to the defendants for two years:

"In consideration whereof the said Ardesco Oil Company

1 Wood Hydraulic Co. v. King, 3 M. R. 618.

2 Savage v. Ball, 2 M. R. 579.

agrees to pay and discharge all arrears of interest due and owing on a certain mortgage for $25,000, held by Josiah Macy's sons against the party of the first part, together with all interest that shall accrue during the term of their lease. Also to pay and discharge all cash advanced by said Macys for insurance on the premises. Also to pay all arrearages of taxes due on the demised premises as well as all taxes that shall be assessed during the term of this lease. Also to pay

all rents due on the demised premises to Mrs. Elizabeth F. Denny, and such as shall become due and payable on the same during the term of this lease. Also to pay whatever sums, if any, shall be due persons for labor on the premises. Also to keep the premises insured to a reasonable amount in some responsible insurance company during the lease."

* *

On the 9th of March, 188, the North American company assigned all their interest in this lease to Francis H. Macy, trustee for J. Macy's sons.

The case was tried before KIRKPATRICK, J.

The plaintiffs gave evidence that "the consideration of the transfer of the lease to Macy was: the North American Oil and Mining Company were indebted to the Macys for money paid and the mortgage spoken of, for interest due and unpaid, for insurance money advanced by them and unpaid to them by the North American Oil and Mining Company. These formed the consideration of the transfer of the lease to the Macys. They were to credit the money received under the lease on the mortgage and other advances."

They gave evidence that the coal rent due to Mrs. Denny for coal on the 1st of January, 1838, was $1,026.74; that the defendants had paid no coal rent; also that the president of the defendants knew of the mortgage, of the interest in arrear, of unpaid taxes, insurance advances and Mrs. Denny's rent; the North American company had been frequently called on

for taxes.

They gave in evidence the amounts in detail of interest due on the mortgage, of taxes, of insurance and Mrs. Denny's

rent.

The defendants offered in evidence, as set-off, a number of notes due by the North American company to third persons amounting to about $10,000, indorsed to the defendants,

with proof that they owned them before the commencement of the suit; some of them before the assignment of the lease The offer was rejected and a bill of exceptions

to Macy sealed.

They renewed the offer, with the additional offer that the North American company was insolvent at the trial, and when the suit was brought. This was rejected and a bill of exceptions sealed.

The plaintiffs submitted these points which were affirmed: 3. Under the covenant of the defendants to pay and discharge all arrears of interest due and owing on the mortgage and all interest that shall accrue during the terms of the lease, they assumed the same liability which rested upon the North American Oil and Mining Company to Macy; that is to say, to pay within a reasonable time, or on demand, the arrears of interest and the accruing interest, according to the terms of the mortgage; and the defendants, having failed and neglected to pay, have violated their covenant, and plaintiffs are entitled to recover all interest due and unpaid at the commencement of this action.

5.

Under the covenant to pay the taxes, it was defendants duty to pay within a reasonable time, and if the jury believe the evidence of Joseph Myers and others, defendants have violated their covenant in this respect, and plaintiff's are entitled to recover all taxes unpaid at the date of the lease of July 1, 1837, and all assessed since that date and prior to the bringing of this action.

6. The plaintiffs are entitled to recover the amount of the rent unpaid to Mrs. Denny at the bringing of this action, together with interest thereon.

The defendants submitted these points which were refused: 2. The payments to be made by defendants are in the nat ure of rent, and no time having been fixed for the payment thereof, there was nothing due from the lessee to the lessor before the expiration of at least one year of the term. Accordingly, this suit having been brought prior to that time, plaintiff's can not recover.

3. If the last point be declined, then the covenants by defendants, the breaches of which are declared on, were in the nature of agreements to indemnify the plaintiffs pro tanto.

And the plaintiffs having given no evidence that they had been called on since the date of the lease to make payment, and there being no evidence or claim that they have paid the respective amounts against which they were thus indemnified, have failed to show special damages, and can not in this suit recover more than nominal damages for the breach of said covenants.

4. The equitable plaintiffs held the lease subject to all equi ties between the legal plaintiff's and defendants at the time of bringing this suit.

5. No sufficient authority has been shown for the execution of the lease in evidence, and the said lease as a deed was null and void. The only rights arising to the plaintiff's would be for the use and occupation of the premises by the defend

ants.

6. The board of directors of the North American Oil Company had no power or authority to make the lease upon which this suit is brought.

7. The plaintiffs can not in this suit recover more than nominal damages for breach of the covenants to pay the rent due Mrs. Denny or the interest due Macy.

The verdict was for the plaintiff's for $9,202.61.

The defendants removed the case to the Supreme Court, and assigned for error:

1 and 2. The rejection of their offers of evidence.

3-8. The refusal of the defendants' points.

9-11. The affirmance of the plaintiffs' points.

H. BURGWIN, for plaintiffs in error.

E. S. GOLDEN and J. K. KERR, for the defendants in error.

The opinion of the court was delivered January 3, 1871, by SHARSWOOD, J.

The first and second errors assigned are to the rulings of the learned judge below in excluding the offer of the defendants to prove a set-off, consisting of promissory notes of the plaintiff's past due and originally drawn in favor of third persons, and by them indorsed to the defendants. Waiving the consideration of other objections made to the admission VOL. VIII-38.

of this evidence, we think that it was rightly rejected because clearly precluded by the terms of the lease sued upon. That a party may be debarred from availing himself of the act of assembly about defalcation, by an agreement not to plead it, either express or implied, has been adjudged by this court in Henniss v. Page, 3 Whart. 275; Bank of U. S. v. Macalester, 9 Barr, 475; Reed v. Penrose, 12 Casey, 214. So far as this question is concerned, the court in the case last cited may be stated to have been unanimous, for, although Mr. Justice Strong thought that the contract in that case did not, by implication, prevent the defendant garnishee from setting up his claims against the company as an answer to the attachment of another of their creditors laid upon the money in his hands, yet he admitted, in clear and distinct terms, the general principle as stated. "This right of defalcation," said he, "is a legal right, secured to a defendant in all cases where he holds demands against a plaintiff, due in the same right and due at the time when the suit was commenced against him. I agree that he may, by express contract, preclude himself from pleading a set-off. Such a contract, founded on consideration, would bind him. This I understand to be the principle of Пenniss v. Page, 3 Whart. 275, and, I think, a defendant may also debar himself from using a set-off by a contract not express. Thus, if he receives money delivered to him for his application to a particular use, his receipt may amount to an agreement not to apply it to any other use, and, of course, not to his own, by pleading a set-off." The example thus stated of an agreement necessarily implied is in effect the very case now before us. The defendants bound themselves to apply the consideration they were to pay or the grant of the lease to a particular use, and they can not apply it to any other use, and of course, not to their own in payment of the promissory notes which they have bought up and hold. The covenant contained in the lease was that the consideration should be paid to certain creditors of the lessors who held incumbrances upon the leased premises. It was for the purpose of relieving it from these liens. Had a clause been added that it should not be applied to any other debts, it would not have been stronger by such express agreement than that which was thus necessarily implied. The covenant being under seal, the action could only be brought in the name of the covenantees, as was