§ 741. Subsequent ratification. That a subsequent ratification of an unauthorized act is equivalent to prior authorization is a familiar principle. And when the principal ratifies with knowledge of the facts, he cannot escape liability on account of his ignorance of the legal effect of his ratification.1

This principle is as applicable to corporations as to other principals, and ratification may be presumed from the absence of dissent as in other cases. As a general rule, there is no power of ratification by a corporation, when the act done was absolutely and under all circumstances ultra vires, for it possesses no original authority to do an act of that character.3

etc.

1 Kelley v. Newburyport, etc., R. R. Co., 141 Mass. 496, 6 N. E. 745. The president borrowed, of his bank, money which he loaned to a failing debtor of the bank and of himself. The debtor gave a mortgage, and delivered the mortgaged property to the president, with authority to sell, and apply the proceeds, The president promised that the debtor's debt to the bank should thus be paid. Held, that directors having relied on the president's promise that the debt would be paid by means of such dealings, and having made no other attempt to collect it, but having permitted the president to acquire the mortgage lien on property which otherwise might have been subjected to the debt to the bank, it was necessary that they should formally authorize or ratify his proceedings. Apperson's Ex's v. Exchange Bank (Ky.), 10 S. W. 801. Where the terms of a contract are known to the president of the corporation, who alone signed it, and to none other of the stockholders and directors of the corporation, though there are several others, there can be no subsequent ratification of the contract. Bi-Spool S. M. Co. v. Acme Manuf'g Co. (Mass.), 26 N. E. 991. 2 Gordon v. Preston, 1 Watts, 386, per GODSON, C. J.; S. P. Kelsey v. Nat. B'k, 69 Pa. St. 426; Shaver v. Hardin (Ia.), 48 N. W. 68; Woman's Christian, etc., Union v. Taylor, 8 Col. 75; 5 P. 826; Fifth Ward Sav. B'k v. First Nat. B'k, 48 N. J. L. 513; 7 Atl. Rep. 318.

3 Marsh v. Fulton Co., 10 Wall. 676; Crum's App., 66 Pa. St. 474; First Nat. B'k v. Fricke, 75 Mo. 178; Scott v. Middleton, etc., R. R. Co., 86 N. Y. 200. See Planters' B'k v. Sharp, 4 Smed. & Marsh, 75; Medomak Bank v. Curtis, 24 Me. 36; U. S. Rolling Stock Co. v. Atlantic, etc., R. R. Co., 34 Ohio St. 450; Board of Commrs. of Tippecanoe Co. v. Lafayette, etc., R. R. Co., 50 Ind. 85; Martin v. Zellerbach, 38 Cal. 310; Hazard v. Durant, 11 R. I. 196; First Nat. B'k v. Drake, 29 Kan. 311; Sherman v. Fitch, 98 Mass. 59; Boston & Prov. R. R. Co. v. N. Y. & New Eng. R. R. Co., 13 R. I. 260; Murray v. Nelson Lumber Co., 9 Northeastern Rep. 634; 143 Mass. 250; Kichland v. Menasha Woodenware Co., 68 Wis. 34; 31 N. W. Rep. 471.

To that class belong all acts prohibited by law. A contract prohibited by law is a nullity ab initio and is incapable of ratification. But acts contrary to the provisions of the charter as respects the authority of the person performing them may fall within the potential powers of the corporation. Under these circumstances, they cannot be avoided by the corporation after the shareholders have acquiesced and third parties have acted upon them without knowledge of the existence of facts rendering the act ultra vires.2

3

§ 742. Liability of corporation on simple contracts of agents." The rules and principles of law applicable to the relation of master and servant apply equally to corporations and their agents." The intention of the parties is generally important in determining whether an agent contracting with a third party binds himself or his principal. Although he contracts without disclosing his principal, but for the benefit of his principal, if credit is given exclusively to his principal he will not be held personally bound. If the relation of principal and agent is known to exist, the former and not the latter will be bound, unless the credit is given to the agent expressly and exclusively, and it was clearly his intention to become personally bound.*

1 Leavitt v. Yates, 4 Edw. Ch. 134; Sheldon Hat Blocking Co. v. Eckmeyer Hat Blocking Co., 90 N. Y. 607.

Phosphate of Lime Co. v. Green, L. R. C. P. 43; International R. R. Co. v. Bremond, 53 Tex. 96; Bedford R. R. Co. v. Bowser, 48 Pa. St. 29; Memphis Branch R. R. Co. v. Sullivan, 57 Ga. 240; Martin v. Pensacola, etc., R. R. Co., Fla. 370; Empire Transf. Co. v. Blanchard, 31 Ohio St. 650; Hotel Co. v. Wade, 97 U. S. 13; Pneumatic Gas Co. v. Berry, 113 Id. 322; Evans v. Smallcomb, L. R. 3 H. L. 249; see Twin Lick Oil Co. v.

infra.

Marbury, 91 U. S. 587,

In determining whether a contract made by an agent embraces the obligation of the principal, we may look to what preceded as well as what occurred at the time, the situation of the parties and the subject matter and all the surrounding circumstances with a view of ascertaining the intention of the parties and that being established will generally determine the main question.1

§ 743. Where principal will not be bound.—In discussing

1 Lazarus v. Shearer, 2 Ala. 718. The action in this case was against the defendant personally on a draft which he had drawn and accepted in the form of "Gilbert Shearer, President of the Selma and Tennessee Railroad Company." After the plaintiff and payee had offered the draft and acceptance in evidence the defendant was allowed to prove that it was drawn by him for an indebtedness of the corporation to himself, and that he, at the time of the transaction, had apprized plaintiff that the draft was drawn and accepted by him in his capacity as president of the company, and not in his private capacity. A yerdict having been rendered for the defendant it was held that the action of the court below in admitting the evidence was proper and its judgment on the verdict was affirmed. In Kean v. Davis, 1 Zab. 683, a bill of exchange had been signed "John Kean, President Elizabethtown & Somerville R. R. Co." There being nothing on the face of the instrument by which it could be determined whether the liability assumed was corporate or individual it was held that parol evidence was admissible to explain the latent ambiguity. See also, Boisgerard v. New York Bkg. Co., 2 Sandf. Ch. 23; City of Memphis v. Memphis Gas Co., 7 Heisk. 531; Mott v. Hicks, 1 Cow. 513; Passmore v. Mott, 2 Binney, 201; Hovey v. McGill, 2 Conn. 280; Palmer v. Stevens, 1 Davis, 471; McWhorter v. Lewis, 4 Ala. 198; Bank of Utica v. Meagher, 18 Johns. 342; Means v. Swornistedt, 32 Ind. 87; Nicholas v. Oliver, 36 N. H. 218; Mann v. Chandler, 9 Mass. 335; McIntyre v. Preston, 5 Gill. 48; Atlantic Mut. Fire Ins. Co. v. Young, 38 N. H. 451; Jenkins v. Morris, 16 M. & W. 877; Tripp v. Swasey, etc., Co., 13 Pick. 291; Elwell v. Dodge, 33 Barb. 336; see Scott v. Johnson, 5 Bosw. 213; Merchants' B'k v. McColl, 6 Ib. 473; Brockway v. Allen, 17 Wend. 40; Olcott v. Tioga R. R. Co., 27 N. Y. 546; Thompson v. Tioga R. R. Co., 36 Barb. 79; B'k of Columbia v. Patterson, 7 Cranch. 299.

An

Where the body of an agreement to submit matters to arbitration contained the name of the corporation and the title of its controlling officers, but was simply signed with the name of its principal officer, without descripto personæ the corporation was held liable. Detroit v. Jackson, 1 Doug. Mich. 106. agreement to pay for work was signed "J. M. R. T. F. R. Bldg. Comm. in behalf of the trustees of the New Washington Seminary," the agreement itself not containing any mention of the corporation or its trustees. It was held that no action lay against the members of the committee for the reason that it did not contain an acknowledgment of individual liability. McHenry v. Duffield, 7 Blackf. 41.

the topic treated in the next preceding section, we have assumed authority in the agent from the corporation to make the contracts, in cases where there exists such apparent authority as to estop the corporation from denying his actual authority.

Where there is neither real authority nor any apparent authority available to the party who has dealt with the agent and seeks to hold the corporation, the agent alone is liable, regardless of the intention of the parties, and no matter if in form the contract is that of a corporation.1 Subject to the exceptions considered in the preceding sections and hereafter to be treated of in the chapter devoted to the doctrine of ultra vires.2 Individual liability results from contracts made and liability assumed as such by officers and agents of corporations in excess of its chartered powers and outside the objects and purposes for which it was formed.

And when one has contracted a debt as the agent of a corporation, but in his own name, in order to escape individual liability, it is incumbent on him to show not only that he acted only as an agent, but that he had authority and acted within the powers of the corporation.3

§ 744. Board of directors-Contracts made directly with. A contract which has been negotiated with a corporation directly, through its board of directors or a meeting of the shareholders, and entries of its terms made in its books will not be held binding upon it if

1 Fifth Nat. B'k v. Navassa Phosphate Co., 6 N. Y. Supp. 1; 25 N. Y. St. Rep. 805; Haynes v. Hammervill, 42 Me. 276; Middlesex, etc., B'k v. Hirsh Bros., etc., Co., 4 N. Y. Supp. 385; 24 N. Y. St. R. 297; Sheridan Electric Light Co. v. Chatham Nat. B'k, 5 N. Y. Supp. 529; 38 Hun, 396; 52 Hun, 575.

2 Infra, § 758 et seq.

3 Harwood v. Haines, 9 Ala. 659; Brockway v. Allen, 17 Wend. 40 and cases cited. See also, Tenn. Riv. Tr. Co. v. Kavanaugh (Ala.), 9 So. 395 (Aug., 1891).

completed through an officer of the corporation without evidence showing an authorization to such agent to complete the contract, although the by-laws invest such officer with general authority to make such contracts and conveyances. Any papers executed by such officer to carry into effect such contract are prima facie unwarranted, at least in so far as they depart from the terms agreed upon and so registered.'

§ 745. Fraudulent disposal of cancelled and unissued corporate securities and obligations. As to evidences of indebtedness in the form of bonds, coupons, certificates of shares and the like, falsely and fraudulently put in circulation by agents of corporations or purloined and disposed of by them or others after erasing the cancellation marks or other evidence of their redemption and payment, it is well settled that the corporation cannot be held even in favor of an innocent purchaser for their face value. The same principle governs cases of spurious paper of municipal corporations disposed of without authority and fraudulently, as in that of private corporations, no liability resulting to either with respect to the same.2 For an agent to invest ordinary

1 East Rome Town Co. v. Brower, 80 Ga. 258; 7 S. E. 273. Where the president had been the agent of the company in making sales of land under an implied authority only, he was held to have no right to sell in consideration of a note collectible in horses since such transactions constitute a barter and not a sale; also that in such case it was immaterial whether grantees had actual notice of the president's limited power or not, since they are presumed to know the provisions of the company's charter and that it cannot delegate greater powers than there conferred. Fitzhugh v. Franco-Texan Land Co. (Tex.), 16 S. W. 1078 (Sept., 1891). See Ceeder v. Lumber Co. (Mich.), 49 N. W. 575 (Sept., 1891). There can be no presumption that a director has authority, even with the consent of his co-directors, to pledge the credit of the corporation for his individual undertakings. Lyndon Mill Co. v. Lyndon, etc., Inst. (Vt.), 22 A. 575 (Sept., 1891).

2 Where the treasurer of a corporation fraudulently filled out a blank certificate of stock which had been signed by the president and delivered it to a person who advanced money to him upon the representation that he had transferred to the lender certificates of stock to a corresponding amount, it was held that the