entire property of a corporation for the purpose of paying its debts and winding up its affairs may be legitimate. Id., p. 348.

A court of equity will not, upon the petition of a general creditor, restrain a corporation from converting its assets into money by a sale thereof to a stockholder, when such sale is not in fact in fraud of the stockholders or of the creditors, nor in prejudice of the rights of either, when no stockholder objects, and when the sale is made for an adequate price with the intent to apply the proceeds to the payment of the full amount of the debts of the company or an equal proportion of every debt. Barr vs. Bartram & Fanton Mfg. Co. et al., 41 Conn. 506. See also Bartholomew et al. vs. The Derby Rubber Co., 69 Conn. 521.

A sale by officers, however, in excess of their powers, and not authorized by vote of the corporation or the directors, passes no title to the property so sold. Winsted Hosiery Co. vs. New Britain Knitting Co., 69 Conn. 565.

As a practical matter a corporation which wished to sell all its property, pay its debts and distribute the surplus, if any, would in the present day proceed under § 29 and wind up the corporation.

A corporation chartered for manufacturing purposes cannot legally take a lease of land of no value to it for such purposes, but with the sole object of commencing a suit against another corporation for flowing the land and harassing it under the forms of law. Occum Co. vs. Sprague Mfg. Co., 34 Conn. 529.

The articles of incorporation of a corporation formed under general law stand on the same footing as defining the powers of such corporation, as does the charter of a corporation specially chartered. Thus a railroad organized under general laws of a state has no power to accept a lease of another railroad, such lease not being authorized by the general laws of the state, and in an action for rent accrued it may set up the illegality of the lease. Oregon Ry. & Navigation Co. vs. Oregonian Ry. Co., 130 U. S. 1.

A corporation cannot exercise, under claim of authority by general laws, a power which is expressly excepted out of the powers granted by its charter. Farrell vs. Winchester Ave. Railroad Co. et als., 61 Conn. 127. Similarly a provision in the charter of a fire insurance company that its consent to double insurance must be endorsed upon the policy, cannot be waived by it so as to allow such consent to be proved by any other evidence than such indorsement. Couch vs. City Fire Insurance Co. of Hartford, 38 Conn. 181.

Repeated doing of an act not authorized by charter or statute cannot make the doing of such act lawful, as power cannot be acquired by its repeated unlawful exercise. So an ordinary private manufacturing corporation has no power to accept drafts having no connection with its business, though it has done so repeatedly, and may set up in defense to a suit on such acceptance, at least against one who has not given value, that it was accepted for accommodation merely. Webster & Co. vs. Howe Machine Co., 54 Conn. 394.

Though in general, therefore, a corporation is not bound by a contract which it was not legally empowered to make, there are certain cases where such ultra vires contracts, if not expressly prohibited or tainted by fraud, will be given effect after partial or full performance. See Hitchcock vs. Galveston, 96

U. S. 341.

Power as to manufacture of electricity. The powers of corporations in this respect are definitely limited. by Public Acts of 1909, Chap. 254, as follows:

"Section 3916 of the general statutes is hereby amended to read as follows: No person or corporation, unless acting under authority from the general assembly, shall, in any city or town of this state whose population exceeds fifteen thousand, manufacture for sale any electricity for the purposes of lighting or power; but this section shall not prevent the manu

facture or distribution of electricity for the purpose of the business of the manufacturer thereof, or the sale thereof for use in or on buildings or land owned or used by such manufacturer; nor shall this section prevent the manufacture of electricity for sale for the use of others in so far as it can be so used without being transmitted or conducted upon, under, along, or across any highway or public grounds."

Sec. 4. Power to transact business outside the state. Every corporation organized under the provisions of this act, and every corporation heretofore or hereafter organized under any general or special law of this state, shall have power, subject to the limitations of its charter, certificate of incorporation, articles of association, or any statute affecting it, to carry on business in any state or territory of the United States, or in any foreign country, if not prohibited by the laws of such state or territory or foreign country.

NOTE.

For powers of a state to limit operations of a foreign corporation seeking to do business within its borders, see note to § 81, infra, page 122.

Sec. 5. Dividends restricted. No corporation shall pay any dividend or make any other distribution of its assets except from its net profits or actual surplus, unless in accordance with the law allowing the reduction of stock, or upon the dissolution of the corporation. The secretary

shall enter the name of every director voting for any dividend, or any other distribution of the assets, upon the records of the corporation. Every director voting for a dividend or other distribution of assets in violation of this section shall be fined not more than five hundred dollars. If such payment or distribution renders a corporation insolvent, the directors so voting shall be jointly and severally liable, to the amount so paid or distributed, to any creditors existing at the date of such vote who shall obtain judgment against such corporation on which execution shall be returned unsatisfied. No such dividend shall be paid or distribution made unless duly voted by the directors of the corporation.

NOTES.

Dividends on stock held in trust. This is covered by Gen. St., Rev. of 1902:

$ 377. Who entitled to stock dividend on stock held in trust. When any executor, administrator, or trustee holds or shall hold shares of stock in a private corporation, whose use or income belongs to one or more persons, and in which there is a remainder interest in another person or persons, all stock dividends made by such corporation, and all rights to subscribe for new stock in such corporation, shall belong to the trust fund, and shall not be deemed a part of such use or income, unless otherwise expressly declared in the instrument creating said trust, or unless, in case of a stock dividend, the corporation making such divi

dend shall expressly declare the same to be made from the earnings of the corporation since the formation of the trust.

Where a large portion of surplus has been set aside and invested, and the stockholders have sold their stock, reserving their interest in said specified assets, which are later divided among such former stockholders, such dividends are treated, as between remaindermen and holders of life interests, as capital and not as income. Second Universalist Church of Stamford et als. vs. Colegrove, 74 Conn. 79.

Undistributed profits, or surplus in any form, may, however, be invested or employed in the business without thereby becoming capital, and until so dedicated to corporate uses through the process of a stock dividend do not cease to be available for distribution as dividends, and when so distributed as dividends belong to the life tenant, such transaction being in no sense a liquidation or surrender of a portion of its capital. Smith, Trustee, vs. Dana et als., 77 Conn. 543. See also Boardman et als., Trustees, vs. Boardman et al., 78 Conn. 451; Bulkeley vs. Worthington Ecclesiastical Society, 78 Conn. 526; Stamford Trust Co., Trustee, vs. The Yale & Towne Mfg. Co. et al., 83 Conn. 43 at 52; Bishop vs. Bishop, 81 Conn. 509; Green, Trustee, vs. Bissell et als., 79 Conn. 547; Boardman et als. vs. Mansfield et als., Exec., 79 Conn. 634.

Section 377 is perhaps merely declaratory of the common law, for as a general rule stock dividends, even when they represent net earnings, become at once part of the capital of the corporation, Gibbons vs. Mahon, 136 U. S. 549; and belong to the capital of a trust fund and not to the life tenant. Spooner vs. Phillips et al., 62 Conn. 62.

For distinction between cash and stock dividends see Terry vs. Eagle Lock Co. et als., 47 Conn. 141.

Where a corporation received shares of its own stock in payment of a debt and voted to distribute