This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
The power of a corporation to dispose of its property may be considered under three general heads. First, its power to dispose of such property as does not interfere with the continuance of its corporate functions is an implied one.1 Thus a corporation formed to establish a soldiers' home and to hold land, may sell land not needed by it.2 A corporation may sell surplus steam for heating purposes;3 or may lease property not then used;4 or may temporarily lease all its plant in order to get money to conduct its business,5 even if the minority stockholders object.6 A corporation authorized to hold land may lease it to be used for purposes for which the corporation could not itself have used it.7 Thus a steamship company may lease its land for hotel purposes, reserving a certain cash rent and a per cent of the income from the hotel in excess of a fixed sum.8 So a lease may be valid where the business of the lessee is incidental to the business of the lessor. A railroad company may lease property not needed in its own business to a public warehouse company.9 Second, as to property essential to carrying on its business, a corporation may dispose of such property on going out of business,10 and a solvent water power company going out of business may, by consent of all interested, convey its land in satisfaction of its own stock.11 Franchises for use of streets may be alienated.12 A corporation formed to deal in plate glass, etc., may sell its stock of glass, and agree not to compete for twenty years.13 Third, a corporation cannot retain its corporate existence and transfer its property to another corporation, not as a means of winding up, but as a permanent investment.14 Such transactions are contrary to public policy as by such means the corporation maintains a corporate existence and yet makes it impossible for the corporation to exercise those functions for which it was created by the state.15 This principle applies with especial force to contracts whereby corporations of a public character attempt to transfer their powers and functions.16 Thus neither a turn-pike company17 nor a gas company18 can transfer their property so that they disable themselves from serving the public. Under a statute, however, which authorizes a corporation to lease its property or franchises a lease may be made for so long a time as to amount practically to a conveyance in fee.19
4 San Diego, etc., Co. v. Flume Co., 108 Cal. 549; 29 L. R. A. 839; 41 Pac. 495. But in Mallory v. Oil Works, 86 Tenn. 598; 8 S. W. 396, a similar arrangement in which the trustees had more extensive powers of management was held a copartnership.
5 Murray, etc., Co. v. Bank (Tex. Civ. App.), 61 S. W. 508.
6 Johnson v. Mfg. Co., 103 Wis. 291; 79 N. W. 236.
7 Wilson v. Oil Co., 46 W. Va. 469; 33 S. E. 249.
8 Willey v. Bank, 141 Cal. 508; 75 Pac. 106; reversing in banc, 72 Pac. 832.
1 State v. Canal Co., 40 Kan. 96 ; 10 Am. St. Rep. 166; 19 Pac. 349; State v. Warehouse Co., 109 La. 64; 33 So. 81; Joy v. Road Co.. 11 Mich. 155; Stockton Attorney-General v.
Tobacco Co., 55 N. J. Eq. 352; 36 Atl. 971; Holmes, etc., Mfg. Co. v. Metal Co., 127 N. Y. 252; 24 Am. St. Rep. 448; 27 N. E. 831; Ben-bow v. Cook, 115 N. C. 324; 44 Am. St. Rep. 454; 20 S. E. 453; Reynolds v. County, 5 Ohio 204; Davis v. Lee Camp (Va.), 18 S. E. 839.
2 Davis v. Lee Camp (Va.), 18 S. E. 839.
3 People v. Car Co., 175 111. 125; 51 N. E. 664.
4 Simpson v. Hotel Co., 8 H. L. Cas. 711; People v. Car Co., 175 111. 125; 51 N. E. 664; Brown v. Winnisimmet Co., 11 All. (Mass.) 326; Temple Grove Seminary v. Cramer, 98 N. Y. 121.
5 Plant v. Macon, etc., Ice Co., 103 Ga. 666; 30 S. E. 567; citing Simpson v. Hotel Co., 8 H. L. Cas. 711; Hancock v. Holbrook, 9 Fed.
353; Treadwell v. Mfg. Co., 7 Gray (Mass.) 393; 66 Am. Dec. 490; distinguishing, Thomas v. R. R. Co., 101 U. S. 71; Pennsylvania, etc., Co. v. Ry. Co., 118 U. S. 290; Cass v. Steel Co., 9 Fed. 640.
6 Bartholomew v. Rubber Co., 69 Conn. 521; 61 Am. St. Rep. 57; 38 Atl. 45.
7 Nye v. Storer, 168 Mass. 53; 46 N. E. 402; Benton v. Elizabeth, 61 N. J. L. 693; 40 Atl. 1132; affirming, 61 N. J. L. 411; 39 Atl. 683.
8 Nantasket Beach Steamboat Co. v. Shea, 182 Mass. 147; 65 N. E. 57.
9 State v. Warehouse Co., 109 La. 64; 33 So. 81.
10 Miners' Ditch Co. v. Zellerbach, 37 Cal. 543; 99 Am. Dec. 300; War-field v. Canning Co., 72 Ia. 666; 2 Am. St. Rep. 263; 34 N. W. 467; State v. Canal Co., 40 Kan. 96; 10
Am. St. Rep. 166; 19 Pac. 349; Mor-isette v. Howard, 62 Kan. 463; 63 Pac. 756; Detroit v. Gaslight Co., 43 Mich. 594; 5 N. W. 1039; Reynolds v. Stark Co., 5 Ohio 204.
11 Dupee v. Power Co., 114 Mass. 37.
12 Michigan Telephone Co. v. St. Joseph, 121 Mich. 502; 47 L. R. A. 87; 80 N. W. 383; Detroit v. Gaslight Co., 43 Mich. 594; 5 N. W. 1039.
13 McCausland v. Hill. 23 Ont. App. 738.
14 McCutcheon v. Merz & Co., 71 Fed. 787; 31 L. R. A. 415; affirming, 67 Fed. 414; Byrne v. Mfg. Co., 65 Conn. 336; 28 L. R. A. 304; 31 Atl. 833; People v. Ballard, 134 N. Y. 2G9; 17 L. R. A. 737; 32 N. E. 54.