be taken without loss, by holding the act invalid, the stockholders will be held estopped from invalidating the act or setting up its invalidity as a defence to an action upon it.1

§ 750. Distinction between executory and executed contracts.-There is a well settled distinction with regard to a corporation's attitude to a contract, the benefits of which it has enjoyed, and one to be performed on the part of one or both contracting parties in the future. The latter are usually called executory contracts. the former case, the assent of the corporation thereto will be presumed; for when a person has received and

2

In

matter of excess or misuse of authority in adding seals to notes when the authority was express to the extent of giving notes, slight evidence of the ratification of which excess in respect to the seals was sufficient, and that there was sufficient evidence of a ratification by the directors of the use of seals. Parish of St. James v. Newburyport & A. H. R. Co., 141 Mass. 500; 6 N. E. 749. Bringing suit on contract held not to constitute ratification. Goodyear, etc., Co. v. Caduc, 144 Mass. 85; 10 N. E. 483.

But where four persons who were common directors in two different railroad corporations became the assignees in a construction contract made by one of the companies by which they became entitled to receive its stocks and bonds, and by which they made a large profit, and afterwards acting for the two companies executed a lease of the road and franchises, it was held that the fact that lessee company had retained possession of and continued to operate the road under the lease did not amount to a ratification nor prevent it from making the defence of invalidity in a suit by a stockholder of the lessor company to compel payment of the rent. Barr v. N. Y. L. E. & W. R. Co., 52 Hun, 555. And where a president of a bank had, without authority, indorsed notes in numerous instances, it was held that the bank was, not bound by his indorsement in the name of the bank in the absence of evidence of knowledge of his previous indorsements by the board of directors. Fifth Nat. B'k v. Navassa Phosphate Co., 25 N. Y. S. Rep. 805; 6 N. Y. Supp. 1.

1 Weinman v. Wilkinsburg & E. L. Pass. Ry. Co., 118 Pa. 192; 12 A. 288; Leavitt v. Yates, 4 Edw. Ch. 134; Sheldon Hat Blocking Co. v. Eickmeyer Nat. Blocking Machine Co., 90 N. Y. 607.

2 Merchants' B'k of Macon v. Cent. B'k of Ga., 1 Kelly (Ga.), 418; Owen v. Purdy, 12 Ohio St. 73; Bangor, etc., R. R. Co. v. Smith, 47 Me. 34; Medonark B'k v. Curtis, 24 Id. 36; Talladega Ins. Co. v. Landers, 43 Ala. 115; Taylor v. Agr., etc., Assoc., 68 Id. 229; Scott v. Middleton, etc., R. R. Co., 36 N. Y. 200; Grape Sugar, etc., Mfg. Co. v. Small, 40 Md. 395; Pneumatic Gas Co. v. Berry, 113 U. S. 322; see Gilman, etc., R. R. Co. v. Kelly, 77 Ill. 426.

appropriated the fruits of a transaction done in his name and under apparent authority from him, he thereby furnishes the highest possible evidence of his approval. In such a case, no even plausible reason can be suggested why a corporation as well as a private principal should not be bound by the dealings of its agent, the benefits of which it has received and appropriated.'

This rule must be received with certain qualifications. It is not applicable to a case where the transaction was clearly beyond the scope of the franchises granted or illegal.2

But in all cases where it is practicable the corporation may restore benefits derived and disaffirm the transaction. It must, in order to avoid the contract, be able to place the parties in the condition they were before the act was done or the contract made.3

§ 751. Ground of principal's liability on partly executed contracts.-The underlying principle of the principal's liability founded on a receipt of the benefits from an unauthorized contract, is that a contract is an entire thing which cannot be adopted in part and rejected in part. An acceptance of its benefits imposes a corresponding obligation to assume its burthens.

1 Curtis v. Leavitt, 15 N. Y. 9. In Kansas L. Co. v. Cent. Bank, 34 Kan. 635; 9 P. 751, it appeared that the general manager of a corporation having authority, among other things, to collect money on checks for his corporation, presented to a bank for payment a check for $300, drawn in favor of the corporation and on the bank, and the officers of the bank, through a mistake paid to such general manager $800 instead of $300. The general manager and the corporation afterwards refused to return to the bank the $500 paid in excess over the amount of the check, and the bank sued the corporation therefor. It was held that the bank may recover; that the general manager in receiving the $800 was acting in the course of his employment, that the money paid to him was paid to the corporation; and that the corporation is liable for the $500 in excess of the amount of the check, whether the general manager ever accounted to the corporation therefor or not.

2 Miller v. Rutland, etc., R. R. Co., 36 Vt. 452.

3 Rider v. Union India Rubber Co., 5 Bosw. 85.

But in order to render a ratification binding upon a principal, he must be aware at the time of all the material facts and circumstances affecting the value of the contract and the obligations imposed by its terms.1 Ratification can only be presumed when the party sought to be bound by it is shown to have been in a position where he must have known or was negligent if he did not learn the true nature of the acts of his agent.2

A corporation will be deemed to have ratified the acts of an agent when, though without actual authority, through inattention or otherwise, it permits him to pursue a particular line of conduct for a considerable period without objection.3

What kind or period of acquiescence amounts to ratification and what acts constitute constructive authorization or subsequent adoption are in most cases conclusions of fact proper for a jury, and are to be determined by the circumstances of each particular case.

An important rule which may be mentioned in this connection is that requiring authority for or ratification of contracts required by law to be in writing to be proven by evidence of a similar character.*

§ 752. Protection from wrongs of promoters.-But the interest of subsequent shareholders in à corporation will be protected from wrongs and unauthorized acts done and liabilities incurred by the agents before its organization in its name, by those who afterwards

1 Gilman, etc., R. R. Co. v. KeHy, 77 Ill. 426.

2 Hatchin v. Kent, 8 Mich. 526; Eastern Counties v. Broom, 15 Jun. 297; 2 Eng. L. & Eq. 406; see Ree v. Birkenhead, 21 L. J. N. S. Exch. 9; 7 Eng. L. & Eq. 546.

* Exchange B'k v. Monteith, 17 Barb. 171; Beers v. Phoenix Glass Co., 14 Barb. 358; Caldwell v. Nat. Mohawk Val. B'k, 64 Id. 333; City Bank v. Perkins, 4 Bosw. 420.

↑ Despatch Line of Packets v. Bellamy Mfg. Co., 12 N. H. 205.

became its promoters and shareholders.

But the cor

poration after being formed may bind itself by ratification of such contracts in the same manner and with like effect as in the case of others.2

§ 753. Notice to agent. The rule that notice to an agent whose duty it is, as such, to act upon it or to convey it to his principal, is legal notice to the principal, applies to corporations.3

When, however, an officer of the corporation has assumed an attitude in which his interest is adverse to

1 In Morrison v. Gold Mountain, etc., Co., 52 Cal. 306, it was held that an agreement among parties owning a mine and who expected to incorporate, but had not done so, that one of them was entitled to two thousand, five hundred shares of the stock of the company, was not the agreement of the corporation. See also, Hawkins v. Mansfield Gold Min, Co., 52 Cal. 513; Munson v. Syracuse, etc., R. Co., 29 Hun, 76.

2 Battelle v. N. W. C., etc., P. Co., 37 Minn. 89; 33 N. W. 327; Paxton Cattle Co. v. First Nat. B'k, 21 Neb. 621; 33 N. W. 271.

3 Nat. Security B'k v. Cushman, 131 Mass. 490; Fulton B'k v. N. Y. & Sharon Canal Co., 4 Paige Ch. 127; Waynesville Nat. B’k v. Iroses, 8 Fed. Rep. 1. When the vendee's agent in the purchase of real estate in the purchase of a tract of land has actual notice of a mortgage upon the premises at the time of the purchase, the vendee will be presumed to have taken the property subject to the mortgage. May v. Borel, 12 Cal. 91; Hunter v. Watson, Id. 363; Mahoney v. Middleton, 41 Id. 42; Connolly v. Peck, 6 Id. 348. But where the president of a corporation acquired notice of an unrecorded mortgage in an action between the corporation and the mortgagee, concerning the title to the property, an instruction that the knowledge of the president was imputable to the corporation was held erroneous. The question should have been submitted to the jury whether there was identity of interest between the president and corporation. International, etc., Co. v. McMorran, 73 Mich. 467; 41 N. W. Rep. 50. Notice to attorney of transfer of debt before garnishment held notice to his client. Bierce v. Bed Bluff Hotel Co., 31 Cal. 160. Notice to one who is in the possession of goods as the agent of a carrier in the regular course of his agency is notice to the carrier. Jones v. Earl, 37 Id. 630. Notice to attorney acting as agent by tenant that a third party has an unrecorded interest in the land held binding upon his principal. Bauer v. Pierson, 46 Id. 293.

Where the president of a corporation visited its estate while improvements were in progress under contract with a lessee and being informed of the same made no objection, it was held to be prima facie sufficient to charge the corpɔration with knowledge of the fact that the work was being done and the corporation giving no notice that it would not be responsible its estate in the premises was allowed to be sold for the lien as well as that of the lessee. Phelps v. M. C. G. M. Co., 49 Cal. 336; see also, Donald v. Beals, 57 Id. 399.

it, the corporation is not chargeable with notice to him during a transaction consummated between them.1

The general rule is, that notice to an agent while acting for his principal, of facts affecting the character of the transaction is constructive notice to the principal.2 Knowledge so acquired or coming within their

1 Barnes v. Trenton Gas-Light Co., 27 N. J. Eq. 33: Peckham v. Herdren, 76 Ind. 47; see Seneca County B'k v. Neass, 5 Denio, 329; Atlantic State B'k v. Savery, 82 N. Y. 291; Farmers', etc., B'k v. Payne, 25 Conn. 444; Wickersham v. Chicago Zinc Co., 18 Kans. 481; Mihills Mfg. Co. v. Camp, 49 Wis. 130. Where it appeared that a conspiracy had been formed to defraud the city of New York and a bank by obtaining from the bank moneys ostensibly to be used for the benefit of the city, but which was really appropriated by the conspirators fraudulently to their own use and that three of the directors of the bank had entered into the conspiracy, none of whom had participated at any meeting of the board of directors, when action was taken with reference to making the advances out of which the action arose or acted for the bank in the transactions, it was held that the bank was not chargeable with notice of the fraud or precluded from claiming the benefit of good faith on its part; that under the circumstances, knowledge which the directors possessed could not be attributed to it, and that the fact that part of the advances were so misappropriated did not deprive the bank of the right to recover the same. Mayor, etc., v. Tenth Nat. B'k, 111 N. Y. 446; see also, Bank of U. S. v. Davis, 2 Hill, 451; President, etc., v. Cornen, 72 N. Y. 291; Atlantic B'k v. Savery, 82 Id. 293; Cragie v. Hadley, 99 Id. 131; Custer v. Tompkins Co. B'k, 9 Pa. St. 27; Pres., etc., Wash. B'k v. Lewis, 22 Pick. 24; Farmers', etc., B'k v. Payne, 25 Conn. 444. The following additional authorities are in support of the exception to the general rule which exists when the agent is engaged in committing an independent fraudulent act on his own account and the facts, notice of which is to be imputed, relate to such fraudulent act; Kennedy v. Green, 3 Myl. & K. 699; Espin v. Pemburton, 3 Dels. & J. 547; Rolland v. Hart, L. R. 6 Ch. 678; Re European Bank, L. R. 5 Ch. 358; Oakland v. Carpenter, 13 Cal. 540; Cove v. Cove, L. R. 15 Ch. D. 639; Kettlewell v. Watson, L. R. 21 Ch. D. 685, 707; Innerarity v. Merchants' Nat. B'k, 139 Mass. 332; Dilloway v. Butler, 135 Mass. 479; Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268.

2 Allen v. South Boston R. Co., 150 Mass. 200; 5' L. R. An. 716, 719; Suit v. Woodhall, 113 Mass. 391; Sartwell v. North. 114 Mass. 188; The Distilled Spirits, 11 Wall. 356. Notice to an active managing officer of an incorporated bank, given during banking hours at the usual place of business, is notice to the bank. Second Nat. Bank v. Howe, 40 Minn. 390; 42 N. W. 2000.

Notice to cashier in course of business is notice to bank. Stebbins v. Lardner (S. D. May, 1891), 48 N. W. 847.

Notice given to any one acting for the secretary in his absence, and at his place of business, would be as effectual as if given to the secretary himself. McKenney v. Diamond State Loan Ass'n (Del.), 18 A. 905.