wealth alone. Accordingly, a deed of land to a
corporation is valid, even though it is prohibited
by its charter from holding real estate, until the
State vacates such deed by a direct proceeding in-
stituted for that end. For example, a conveyance
of land to a foreign corporation forbidden by
statute to acquire and hold real estate, is not void,
but passes the title to the corporation, and it may
hold the property subject to the commonwealth's
right of escheat. Of the parties in interest who
may question the ultra vires acts of a corporation,
dissenting shareholders, who have not been estopped
from so doing, by accepting the benefits of the
transaction, or by sleeping upon their rights until
superior equities have arisen, stand first. It is
not necessary that a majority of the shareholders
should join in seeking to set aside a contract upon
the plea of ultra vires. One shareholder alone may
maintain his action therefor, so long as he has n t
himself ratified or acquiesced in the act, for there
is no authority in a majority of the stockholders,
although in meeting duly assembled, to make any
disposition of the corporate funds or property un-
authorized by the constitution of the corporation.*
While it is within the power of the shareholders,
by a vote of a majority of those in interest, to
ratify any unauthorized act of the corporate di-
rectors, officers and agents, which that majority
might in the first instance have authorized, it is
not within the power of the majority to ratify any
ultra vires act against the will of a single dissent-
ing shareholder, for the shareholders cannot, by
ratification, confirm that which they originally
lacked the power to authorize. Where share-

holders entitled to representation are deprived thereof, equity will restrain ultra vires acts, pending litigation to enforce the right of representation."

1 Hickory Farm Oil Co. v. Buffalo etc. R. R. Co. 32 Fed. Rep. 22. 2 Mallett v. Simpson, 94 N. C. 37; 55 Am. Rep. 594.

3 Hickory Farm Oil Co. v. Buffalo etc. R. R. Co. 32 Fed. Rep. 22. Cf. Commonwealth v. New York etc. R. R. Co. 114 Pa. St. 340.

4 Abbott v. American etc. Co. 4 Blatchf. 489; S. C. 33 Barb. 578; Adriance v Roome, 52 Barb. 399; Taylor v. Earle, 8 Hun, 1: Smith v. New York etc. Co. 18 Abb. Pr. 419; Brady v. Mayor, 16 How. Pr. 432; Barclay v. Quicksilver Mining Co. 9 Abb. Pr. N. S. 284; Kean v. Johnson, 9 N. J. Eq. 401; Middlesex etc. R. R. Co. v. Boston etc. R. R. Co. 115 Mass. 347; Robbins v. Clay, 33 Me. 132; Tippecanoe County v. Lafayette etc. R. R. Co. 50 Ind. 85; Ashbury Railway Carriage Co. v. Rishe, Law R. 7 H. L. 653; Lyde v Eastern Bengal R'y Co. 36 Beav. 10; Taylor on Corporations, 263. 5 Vide supra, §§ 504 and 505.

6 See cases cited supra, note 1, and Bird v. Bird's Patent etc. Co. 9 Ch. 358.

7 Mackintosh v. Flint etc. R. R. Co. 34 Fed. Rep. 582.

66

§ 519. (b). Corporate creditors of a failing concern. So long as a company is a going concern," and the interest which corporate creditors have in its capital stock for the payment of their debts is in no way endangered by a diversion of that fund from the purposes for which the enterprise was incorporated, it does not appear that creditors may interfere with its affairs upon the ground that it is exceeding its charter privileges. The question then is solely between the shareholders and the State, and if ratified by the former and not objected to by the latter, no one else may attack any of its transactions upon the ground that they are ultra vires. When, however, ultra vires transactions are of such a nature as to endanger the security of the trust fund to which the creditors have a right to look for the payment of their claims, and e pecially where the solvency of the company is doubtful, and the amounts in

volved in the ultra vires transactions are large when compared with the capital stock of the corporation, the right of corporate creditors to interfere, either to restrain or to set aside such contracts, is undoubted; and no ratification of ultra vires agreements by the shareholders will, in that case, be a bar to the creditor's action.

2

1 Talmage v. Pell, 7 N. Y. 323; Bank Commissioners v. St. Lawrence Bank, 7 N. Y. 513; National Trast Co. v. Miller, 33 N. J. Eq. 155; Abbott v. Baltimore etc. Co. 1 Md. Ch. 512; Bank of Chattanooga v. Bank of Memphis, 9 Heisk. 403. But see Mills v. Northern R'y Co 5 Ch. 621. 2 Galloway v. Hamilton, 63 Wis. 651, and cases cited supra.

§ 520. (c). The other contracting party, until the corporation has performed. The party contrating with the corporation may set up its want of authority to enter into the agreement with him until it has performed its part of the contract; for until then he has no assurance but that the corporation itself may plead ultra vires at any time, and it is 1.0t reasonable to compel him to perform, when he cannot compel the company to do the same. But when the other contracting party has received from a corporation the full consideration of his engagement, he cannot avoid performance on his part by the plea that the contract was beyond the charter privileges and powers. For knowing, or being presumed to know, the limitations of the authority of the corporation with which he was dealing, he is estopped to plead its want of authority; and moreover, the doctrine of ultra vires derives its origin from the principle that certain acts are a violation of a compact between the State, the shareholders, and the creditors of the corporation, a compact to which he is in no way privy; and accordingly the plea is allowed and can be made only

1

Where the

by one of the parties to that compact. claim is merely for the recovery of a sum of money, acts of part performance will not cure the insufficiency of the contract, and the other contracting party may plead ultra vires until the whole amount be paid. If, however, there is something more to be done under the contract than mere payment of money, if there have been acts of part performance, the company must be taken to have acquiesced in and adopted the contract, and specific performance will be decreed. Officers of a corporation sued by it for the conversion to their own use of stock which they had purchased for the company, cannot plead by way of defense that the purchase was ultra vires. A corporation in suing upon a contract need not allege power on its part to enter into the contract.

1 National Bank v. Whitney, 103 U. S. 99; Diamond Match Co. v. Roeber. 106 N. Y. 473: 60 Am. Rep. 464; Whitney Arms Co. v. Barlow, 63 N. Y. 62. 70; 20 Am. Rep. 504; Steam Navigation Co. v. Weed, 17 Barb. 378; Leavitt v. Pel', 27 Barb. 322; Standard Oil Co. v. Shofield, 16 Abb. N. C. 372; Oil Creek etc. R. R. Co. v. Pennsylvania Transportation Co. 83 Pa. St. 160; Chicago etc. R'y Co. v. Derkes, 103 Ind. 520; Ehrman v. Union Central etc. Ins. Co. 35 Ohio St. 324. Contra, Chambers v. Falkner, 65 Ala. 4.

2 Pearce v. Madison etc. R. R. Co. 21 How. 441, 443; Alexander v. Cauldwell, 33 N. Y. 480; Davis v. Old Colony R. R. Co. 131 Mass. 258; 41 Am. Rep. 221; Downing v. Mt. Washington Road Co. 40 N. H. 230.

3 Crampton v. Varna R'y Co. 7 Ch. 562; Jackson v. North Wales R'y. Co. 6 Rob. C. 113.

4 Wilson v. West Hartlepool R'y Co. 2 De Gex, J. & S. 475; Laird v. Birkenhead R'y Co. JOHNSON (Eng. Vice-Ch.), 500; London etc. R'y Co. v. inter, Craig & P. 57. And see Crook v. Corporation of Seaford, 6 Ch. 551.

5 St. Louis Stoneware Co. v. Partridge, 8 Mo. App. 217.

6 St. Paul etc. Co. v. Dayton, 37 Min. 364.

521. The consideration to be surrendered when the contract is set aside. When a corporation has repudiated a contract as ultra vires, it must restore to the other party whatever it may

2

have obtained from him,' unless the thing acquired has become so blended with the corporate property that it cannot be rendered up without infringing the rights of persons who have never assented to the contract nor in any way acquiesced in it. In accor lance with the doctrine of equity, holding a corporation to account for the benefits that have accrued to it under an ultra vires transaction, the court, while annulling a contract as ultra vires, will enforce an accounting on the basis of a reasonable compensation for the profits realized under the contract, together with interest thereon.3

1 Brice's Ultra Vires (2nd Eng. ed.), 769; Newcastle Northern R. R. Co. v. Simpson, 23 Fed. Rep. 214; Humphrey v. Patrons' Mercantile Assoc. 50 Iowa, 607; White v. Franklin Bank, 22 Pick. 1:1; In re Cork etc. Ry Co. Law R. 4 Ch. 748; Ernest v. Nicholls, 6 H. L. Cas. 401; Burge's and Stock's Case, Law R. 5 Ch. 309; Hawken v. Bourne, 8 Mees. & W. 703; Hall v. Swansea, 5 Q. B. 526; Hawtayne v. Bourne, 7 Mees. & W. 595. Ex parte Cropper, 1 De Gex, M. & G. 147.

2 Taylor on Corporations, § 310, citing Hill's Case, Law R. 9 Eq. 605. 3 Newcastle Northern R. R. Co. v. Simpson, 23 Fed. Rep. 214.

§ 522. Of ratification and acquiescence in ultra vires acts.—If all the shareholders of a solvent corporation ratify or acquiesce in an ultra vires act which does not endanger its ability to meet the claims of corporate creditors, and which is not illegal as contrary to statute, malum per se, or against public policy, the contract may be enforced. It is not essential that there be an express ratification. The intelligent acquiescence of all parties who have a right to object is equivalent to an express ratification.1 Thus, a settlement, effected by the directors of a railway company by giving notes, should be regarded as ratified by the company

ver where for a number of years it has not disputed its