sanction of the corporation, the effect of the common law prohibition against acts done in excess of corporate anthority, and of statutes declaring the illegality of such acts, if there be such statutes, as well as the condition and relation of the parties to the subject matter at the time the question is raised, remain to be taken into account.

Beside these considerations, it must be borne in mind, that the effect of an ultra vires act often depends as much upon who are the objectors as upon the nature of the act itself. Under various circumstances, the state, a stockholder, or an immediate party-one or all-may object. Consequently, on determining the value of a decision upon a given state of facts, it is important to consider not only the facts, but who are the parties to the suit.

§ 759. Not favored as a defence.—Courts give such liberal consideration to the equities and circumstances of each case, and allow public policy and convenience to modify technical rules of law to such an extent, that the term of ultra vires has become almost meaningless. Great uncertainty and confusion is found both among text writers and judges on this branch of our subject.

It is difficult to reduce the law on this branch of our subject to an orderly arrangement, or to subdivide it into sections having an obvious, natural or consecutive connection. Therefore, the sections will contain little more than convenient representations of rules and views which appear upon examination of the authorities to be accepted by the courts and the profession generally. As far as space permits illustrations of the principles deducible from the cases, as well as of the exceptions, will be presented. The acts which corporations are empowered to do as well as those considered outside

of and beyond their express and implied powers are considerably discussed in other parts of this work, and a few of the topics usually discussed under this head. will be found elsewhere in this work and are omitted here.1

§ 760. The term ultra vires used in different senses.The term ultra vires since first employed, has been often used and much misused. From its very general nature, it is incapable of an exact definition. The act of an agent may be in excess of the power given him by his principal, and in that sense clearly ultra vires, while in itself perfectly innocent and lawful and binding on his principal. So may a transaction by a trustee in dealing with the funds of his cestui que trust be a violation of his fiduciary relation, and yet no court would hold that that fact could be set up by either party to the transaction so as to deprive the beneficiary of the trust, or an innocent third party of any right. Again, where parties deliberately engage in a transaction expressly declared illegal, there is no question of authority involved, and yet their acts are said to be ultra vires, but in an entirely different sense, and to an entirely different effect. In this case, however great its hardship, a court will furnish the losing party no remedy, although the plea of ultra vires is equally as unmeritorious on the part of the person setting it up as in the other cases. The value of the defence is affected, however, to some extent, by the different relations of the parties to the transaction and to each other. By keeping these distinctions in view, much difficulty is obviated in comprehending the grounds of decision in cases involving the acts of corporations

1 Supra, § See for powers generally, Ch. IV.; scope of, and limitations upon, special powers, Chs. VI.-XI.

alleged to be without warrant or legal authority and power, or in violation of some general or special law.1

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§ 761. Meaning, when applied to acts of corporations.— Though the term in its general sense is applicable alike to individuals and corporations, yet, when used with reference to the latter, the primary meaning of ultra vires is thus defined in a leading case :-" When acts of corporations are spoken of as ultra vires, it is not intended that they are unlawful, or even such as the corporation cannot perform, but merely those which are not within the powers conferred upon the corporation by the act of its creation, and are in violation of the trust reposed in the managing board by the shareholders, that the affairs shall be managed and the funds applied solely to the carrying out of the objects for which the corporation was created."

§ 762. Public and private considerations distinguished. -No better explanation of this observation can be found than in the language of the Court in a case where the doctrine of ultra vires was successfully invoked as a defence. "In the application of the doctrine ultra vires, it is to be borne in mind that it has two phases--one where the public is concerned, one where the question is between the corporate body and the stockholders in it, or between it and its stockholders and third parties dealing with it, and through it with them. When the public is concerned, to restrain a corporation within the limits of the power given to it by its charter, an assent by all the stockholders to the use of the unau

1 “There is nothing of mystery or of sanctity in the use of the words of a dead language, ultra vires. It is as applicable to individual as to corporate action. An illegal act of an individual is as really ultra vires as the unauthorized act of a corporation." Miners' Ditch Co. v. Zellerbach, 38 Cal. 543 2 Whitney Arms Co. v. Barlow, 63 N. Y. 62.

thorized power by the corporate body will be of no avail. When it is a question of the right of a stockholder to restrain the corporate body within its express or incidental powers, the stockholder may, in many cases, be denied such right on the ground of his express assent, or his intelligent though tacit consent of the corporate action." 1

§ 763. Common law prohibition.—It is an undisputed proposition, often important to be borne in mind, that the exercise of all powers not expressly granted to a corporation, or the exercise of which would be contrary to the terms upon which those granted were conferred, are prohibited by the common law.2

The same rule applies to all corporations exercising public franchises for private gain. They cannot disable themselves by contract from the performance of public duties which they have undertaken and thereby make public accommodation or convenience subservient to private interests. Such contracts are frequently held to be ultra vires and void on the ground that they

1 The justice delivering the opinion further illustrated the distinction as follows: "If there be a departure from statutory direction which is to be considered merely a breach of trust to be restrained by a stockholder, it is pertinent to consider what has been his conduct in regard thereto. A corporation may do acts which affect the public to its harm inasmuch as they are per se illegal or are malum prohibitum. Then no assent of stockholders can validate them. It may do acts thus illegal, though there is a want of power to do them, which affect only the interest of the stockholders. They may be made good by the assent of the stockholders, so that strangers to the stockholders, dealing in good faith with the corporation, will be protected in a reliance on those acts." Kent v. Quicksilver Min. Co., 78 N. Y. 159.

2 Certain classes of corporations, railroad companies for instance, owe duties to the public recognized by the common law and acts, having the effect of incapacitating them from the performance of those duties, are invalid, because contrary to the implied terms of their charters. Falling within this class is a contract not to operate a railroad required for public use. State v. Haryford & N. Haven R. R. Co., 29 Conn. 538, 547. Supra, Ch. VIII.

are contrary to the policy of the common law against the creation of monopolies.' This rule is also applicable to all contracts made in restraint of trade in England as well as in this country.2 Contracts by railroad companies to give preferences to particular shippers are illegal for similar reasons.3

§ 764. Statutory declarations of the common law prohibition. Some states have provided in general terms against the exercise of other corporate powers than those conferred in charters or provided in laws applicable alike to all corporations. These are usually given only the force and effect of declarations of the common law prohibition. But it may be safely assumed that in no case would a court at the present day, declare a transaction void on account of such general provisions,

Gibbs v. Baltimore Gas. Co., 130 U. S. 396; Centr. Transp. Co. v. Pullman Pal. Car Co., 11 S. Ct. 478. See also, West Va. Transp. Co. v. Ohio River Pipe Line Co., 22 W. Va. 600; Chicago, etc., Gas. Co. v. People's Gas. Co., 121 Ill. 530; West. Un. Tel. Co. v. Am. Un. Tel. Co., 65 Ga. 160; People v. N. R. Sugar Refinery Co., 121 N. Y. 696; 5 Ry. & Corp. L. J. 56.

"

2 Mitchell v. Reynolds, 1 P. Wms. 181; s. c. Smith's Leading Cases, 407 (7th Ed.); 8th Am. Ed. 756. In Oregon Steam Nav. Co. v. Winsor, 29 Wall. 64, 68, Justice BRADDEY said: 'Cases must be judged according to their circumstances and can only be rightly judged when the reason and grounds of the rule are carefully considered. There are two principal grounds on which the doctrine is founded that a contract in restraint of trade is void as against public policy. One is, the injury to the public by being deprived of the restricted party's industry; the other is, the injury to the party himself, by being precluded from pursuing his occupation, and thus being prevented from supporting himself and his family. It is evident that both these evils occur when the contract is general, not to pursue one's trade, at all, or not to pursue it in the entire realm or country. The country suffers the loss in both cases; and the party is deprived of his occupation, or is obliged to expatriate himself in order to follow it. A contract that is open to such grave objection is clearly against public policy."

3 Messenger v. Penn. R. R. Co., 36 N. J. L. 413; 1 Wood's Ry. Law, p. 10, and cases cited.

▲ Vandall v. S. S. F. Dock, 40 Cal. 83, 88; Mass. v. Averill, 10 N. Y. 460; Whitney Arms Co. v. Barlow, 63 N. Y. 62; Whitney v. Wyneau, 101 U. S. 392. There are, however, decisions giving a contrary construction to such general provisions. Morris, etc., R. R. Co. v. Sussex R. R. Co., 20 N. J. Eq. 542, 562; Ashbury, etc., R. R. Co. v. Riche, L. R. 7 H. L. Cas. 653.