Fourthly, an act may be ultra vires by reason of its being done at a place where the corporation has no authority to act. Where the want of power is apparent upon comparing the act done with the terms of the charter, the party dealing with the corporation is presumed to have knowledge of the defect and the defense of ultra vires is available against him. But if a contract would under ordinary circumstances be within the corporate powers, and the other party, exercising reasonable care, does not discover that by reason of the particular circumstances of the case the corporation is in that instance exceeding its charter privileges, it cannot plead its want of authority as a ground upon which to avoid liability. Thus, where directors have power to bind the company on certain conditions, a person dealing with them may assume that the conditions have been fulfilled." And an innocent holder of negotiable securities which it is in the power of directors to issue, is not bound to see that certain preliminaries incumbent upon the company have been gone through with. It has even been said to be immaterial that the other party knew that the act was done with an unauthorized object in view, provided he has done nothing in furtherance of the unlawful design; but the better rule is, that if the contract is ultra vires within the knowledge of the party with whom it is made, he cannot afterward enforce it.10

9

1 Vide infra, § 515.

8

2 Poole v. West Point etc. Assoc. 30 Fed. Rep. 513; Warfield v. Mar shall County etc. Co. 72 Iowa, 666; Ossipee Manuf. Co. v. Canny, 52 N. H. 295; Auerbach v. Le Sueur Mill Co. 28 Minn. 291. Vide infra, § 516.

3 Vide infra, § 514.

4 Vide supra, §§ 435, 436, 465.

5 Bissell v. Michigan etc. R. R. Co. 22 N. Y. 264.

6 Express Co. v. Railroad Co. 99 U. S. 191, 199; Zabriskie v. Cleveland etc. R. R. Co. 23 How. 381, 398; Bissell v. Michigan etc. R. R. Co. 22 N. Y. 264; Davis v. Old Colony R. R. Co. 131 Mass. 258, 260; 41 Am. Rep. 221; Charleston etc. Turnpike Co. v. Willey, 16 Ind. 34; Eastern Counties R'y Co. v. Hawkes, 5 H. L. Cas. 331, 338. Cf. Fontaine v. Cærmarthen R'y Co. 5 Eq. 322.

7 Totterdell v. Fareham Brick Co. Law R. 1 Com. P. 674; Royal British Bank v. Turquand, 5 El. & D. 248; 6 El. & B. 327.

8 In re Land Credit Co. Ex parte Overend & Gurney, 4 Ch. 460. 9 Tracy v. Talmage, 14 N. Y. 162; 67 N. Y. 122; 67 Am. Rep. 132. 10 Eastern Counties R'y Co. v. Hawkes, 5 H. L. Cas. 331, 338.

Ø 514. (a). Infra vires acts rendered ultra vires by the manner of performance.—This class of ultra vires acts finds many illustrations in agreements entered into by directors acting severally with respect to business which they have no authority to transact except as a board. When the general laws of the State or the corporate charter requires such joint action, contracts entered into by them separately are not binding upon the corporation, for the other contracting party is affected with knowledge thereof. But the other contracting party is not presumed to have knowledge of the by-laws and rules of the corporation. Accordingly, it is no defense to an action for breach of a contract by a corporation, that, in entering into the contract, it had violated its own rules, when that fact was within its knowledge at the time the contract was entered into. Thus, in a recent case it was held that parties contracting with a corporation without actual notice of rules adopted by it, by which it exempts itself from liability on contracts unless they are in writing and signed by its president, will not be bound by such rules. Where it is provided by statute, as in Wisconsin,' that the deed of a corporation must be signed by its president or other authorized officer, and sealed and counter

signed by the secretary or clerk, these requirements must be strictly complied with; a deed signed by the president but not countersigned by the secretary being invalid, even though the company has authorized the president to make it."

1 Stoystown etc. Co. v. Craver, 45 Pa. St. 386; Baldwin v. Canfield, 26 Minn. 43; Lockwood v. Thunder Bay River Boom Co. 42 Mich. 536, 539; Gashwiler v. Willis, 33 Cal. 12; 91 Am. Dec. 607; Hillyer v. Overman etc. Manuf. Co. 6 Nev. 51; D'Arcy v. Lamar etc. R'y Co. Law R. 2 Ex. 158; S. C. 4 Hurl. & C. 463; Edgerly v. Emerson, 23 N. H. 555, 567; 55 Am. Dec. 207; Despatch Line v. Bellamy Manuf. Co. 12 N. H. 205, 224; 37 Am. Dec. 203; First National Bank v. Christopher, 11 Vroom, 435; 29 Am. Rep. 262; 40 N. J. 435, 437; Junction R. R. Co. v. Reeve, 15 Ind. 236; Williams v. Chester etc. R'y Co. 15 Jur. 828; Yellow Jacket etc. Manuf. Co. v. Stevenson, 5 Nev. 224; D'Arcy v. Tamar Kit Hill etc. R'y Co. Law R. 2 Ex. 159. Cf. Stephenson v. Polk, 71 Iowa, 278; East London Water Works Co. v. Bailey, 4 Bing. 283; Browne & Theobald's Railway Law, 108. Contra, In re Bonelli's Electric Telegraph Co. 40 Law J. Eq. 567.

2 Samuel v. Fidelity etc. Co. 49 Hun, 122.

3 Walker v. Wilmington etc. R. R. Co. 26 S. C. 80,

4 Rev. Stat. Wis. § 2216.

5 Galloway v. Hamilton, 68 Wis. 657.

§ 515. (b). Infra vires acts rendered ultra vires by the purpose of performance.-Where a corporation authorized to perform an act for one purpose exercises its privilege for an unauthorized purpose, it cannot take advantage of its want of authority and avail itself of the plea of ultra vires.' Thus, a corporation empowered to make a note for any purpose will not be permitted to allege, as against a holder in good faith, that as to the particular note in question, it exceeded its power.2

1 Cowell v. Springs Co. 100 U. S. 55; Galveston R. R. Co. v. Cowdrey, 11 Wall. 450; Tracy v. Talmage, 14 N. Y. 162; 67 Am. Dec. 132; Moss v. Rossie etc. Co. 5 Hill, 137; Oxford Iron Co. v. Spradley, 51 Ala. 171; Natoma Water etc. Co. v. Clarkin, 14 Cal. 544, 552; Thompson v. Lambert, 44 Iowa, 239; Eastern Counties R'y Co. v. Hawkes, 5 H. L. Cas. 331.

2 Lehigh Valley Coal Co. v. West Depere Agricultural Works, 63 Wis. 45.

§ 516. (c). Infra vires acts rendered ultra vires by the extent of performance. The best illustra

tion of this principle is the case of a corporation borrowing a sum of money less than the amount authorized by its charter, but which, together with amounts previous'y borrowed, exceeds the total amount of indebtedness that it is authorized to contract. Although a corporation has incurred an indebtedness in excess of the charter or statutory limit, the contract under which it was incurred is binding upon it whenever it has actually received the money borrowed, or the services or property for which the indebtedness was assumed.' Thus, a corporation, even though forbidden to do so by its charter, may execute a mortgage for more than half the stock actually paid up, without the mortgage being invalid on the ground of ultra vires. So a bona-fide holder of negotiable paper issued by a corporation which has power to issue such paper under any circumstances, has a right to presume that such circumstances attended the issuing of it as carry the requisite authority, and it is no more liable to impeachment in his hands for any infirmity than is any other business paper.* And the shareholders, after having admitted the company's liability for a particular debt, will be estopped from repudiating it on the ground that it was in excess of the indebtedness which the law permitted the corporation to incur.5

1 Ossipee Manuf. Co. v. Canney, 52 N. H. 295; Auerbach v. Le Sueur Mill Co. 23 Minn. 291.

2 Poole v. West Point etc. Assoc. 30 Fed. Rep. 513; Warfield v. Marshall County etc. Co. 72 Iowa, 666.

3 Warfield v. Marshall County etc. Co. 72 Iowa, 656.

4 National Bank of Republic v. Young, 41 N. J. Eq. 531.

5 Poole v. West Point etc. Assoc. 30 Fed. Rep. 513.

§ 517. The personal liability of directors herein.-Directors who enter into contracts which

they have power to make after certain preliminary steps have been taken, impliedly represent that those steps have been taken, and may be made pesonally liable if they have not perfected their powers. Thus, directors borrowing money after the company's powers are exhausted, impliedly represent that they have power to borrow, and may be made personally liable.2 In the same way, where directors, who had no power to bind the company, stated to a bank that the manager had authority to draw checks on account of the company, they were held personally liable to repay the bank, but instructions given by directors to the bankers of the company to honor its checks drawn in a certain manner, at a time when there was a balance at the bank in its favor, have been held not to impose any liability upon the directors to repay checks subsequently drawn upon the bank when the account of the company was overdrawn.*

1 Browne & Theobald's Railway Law, 110. See Cherry v. Colonial Bank, Law R. 3 P. C. 24; Richardson v. Williamson, Law R 6 Q. B. 276; Collen v. Wright, 8 El. & B. 647. See, too, Lakeman v. Mountstephen, Law R. 7 H. L. 17; Beattie v. Lord Ebury, 7 Ch. 777; Law R. 7 H. L. 102. 2 Browne & Theobald's Railway Law, 110; Firbank's Executors v. Humphreys, 13 Q. B. Div. 51; Chaples v. Brunswick Soc. 5 Com. P. Div. 331; Q. B. Div 696; Weeks v. Propert, Law R. 8 Com. P. 427.

3 Browne & The bald's Railway Law, 110; Cherry v. Colonial Bank, Law R. 3 P. C. 24, where the account of the company was overdrawn, to the knowledge of the directors.

4 Beattie v. Lord Ebury, Law R. 7 H. L. 102.

(a). A

518. Who may plead ultra vires single dissenting shareholder.-Ultra vires acts cannot be questioned collaterally by parties whose right; are in no way infringed thereby. Thus, the right to object to the legal capacity of a corporation to hold real estate is vested ir. the common