Sec 138

A corporation is entitled to borrow money when this is necessary to enable it to exercise the franchises of its charter; and the right to borrow includes the right to give written acknowledgments of debt.6 If a corporation is restricted by its charter from issuing paper beyond a certain limit, it is not bound, unless by way of estoppel, for its issues beyond such limit.1 But this refers to loans in their formal sense. Such a limitation does not preclude the corporation from borrowing money to carry on the ordinary business of the corporation.2 The right to borrow includes, unless there be a restriction, the right to mortgage.3 In England the right to issue negotiable paper is- limited to those corporations to whose business the issue of such paper is an ordinary incident ;4 and has been denied to mining companies,5 to gas companies,6 to cemetery companies,7 to waterworks companies,8 and to railway companies.9 According to Mr. Pollock, a corporation may be bound by negotiable paper issued by it in the following cases: 1. When the issuing of such paper is one of the objects for which the corporation is chartered, as is the case not only with banks, but with " financial companies generally."10 2. "When the instrument is accepted or made by an agent for the corporation whom its constitution empowers to accept bills, etc., on its behalf, either by express words or by necessary implication."11 In this country it has been laid down that a power to borrow money implies a power to issue negotiable paper as security for money borrowed ;12

Corporation may borrow money and issue negotiable paper.

1 See 2 Kent's Com. 298-9.

2 Infra, sec 627 et seq.

3 Infra, sec 674; Ashbury R. R. v. Riche, L. R. 7 H. L. 653; At. Gen. v. R. R., L. R. 5 Ap. Ca. 481; R. v. Reed, L. R. 5 Q. B. D. 488.

4 Davis v. R. R., ut supra; Zabriskie v. R. R., 23 How. 381 ; Bulkley v. Fishing Co., 2 Conn. 252 ; Bank of Northern Liberties v. Cresson, 12 S. & R. 306.

5 Internat. Life Ass. Co. in re, L. R. 10 Eq. 312 ; Fay v. Noble, 12 Cush. 1; Partridge v. Badger, 25 Barb. 146; Clark v. Titcomb, 42 Barb. 122 ; Nelson v. Eaton, 26 N. Y. 410; Lucas v. Pitney, 3 Dutch. 221; Bank of Chillicothe v. Chillicothe, 7 Ohio, 354; Tucker v. Raleigh, 75 N. C. 267; Craven v. R. R., 77 N. C. 289; Oxford Co. v. Spradley, 46 Ala. 98; Alabama Ins.

Co. v. Association, 54 Ala. 73 ; Bradley v. Ballard, 55 111. 413. That negotiability of bonds depends on terms of document, see infra, sec 797.

1 Worcester Com. Exch. Co. in re, 3 De G. M. & G. 180.

2 German Mining Co. in re, 4 De G. M. & G. 19 ; Cork, etc. R. R. in re, L. R. 4 Ch. 748 ; Norwich Yarn Co. in re, 22 Beav. 143.

3 Jones v. Guaranty Co., 101 U. S. 622; Pierce v. Emery, 32 N. H. 503; Richards v. R. R., 44 N. H. 127; Curtis v. Leavitt, 15 N. Y. 9 ; Nelson v. Eaton, 26 N. Y. 410; Patent File Co. in re, L. R. 6 Ch. 83; Shears v. Jacob, L. R. 1 C. P. 513; Watt's App., 78 Penn. St. 370; Susquehanna Bridge Co. v. Ins. Co., 3 Md. 305 ; Burt v. Rattle, 31 Oh. St. 116 ; Aurora Soc. v.

Paddock, 80 111. 263 ; Burr v. McDonald, 3 Grat. 215 ; and other cases cited, Morawetz on Corp. sec 174.

4 See Bateman v. R. R., L. R. 1 C. P. 499.

5 Brown v. Byers, 16 M. & W. 252.

6 Bramah v. Roberts, 3 Bing. N. C. 963.

7 Steele v. Harmer, 14 M. & W. 831.

8 Broughton v. Waterworks, 3 B. & Ald. 1.

9 Bateman v. R. R., L. R. 1 C. P. 499.

10 Per Montague Smith, J., Shears v. Jacob, L. R. 1 C. P. 512 ; City Bank ex parte, L. R. 3 Ch. 758.

11 Pollock, 3d ed. 141-2. . 12 Police Jury v. Britton, 15 Wall. 560.

and the general rule is that corporations, in all cases in which the issue of negotiable paper is promotive of the objects of their charter, may be held liable on such paper, either as maker, as drawer, or as endorser.1 Unless the corporation is precluded from exercising such a power, the execution, when undertaken, will be presumed to be regular.2-When a private corporation has prima facie power, either express or implied, to issue negotiable securities, such securities possess the ordinary incidents of negotiable paper; and the holder, acquiring title in good faith before maturity and for value, may recover even though in the particular case the power of the corporation was irregularly exercised.3 Manufacturing companies in

1 Railroad Co. v. Howard, 7 Wall. 392 ; State Bank v. Fox, 3 Blatch. C. C. 431; Came v. Brighain, 39 Me. 35 ; Patten v. Moses, 49 Me. 255 ; Farmer's Bk. v. Maxwell, 32 N. Y. 579 ; Farmer's Bk. v. Watson, 32 N. Y. 583 ; Mechanic's Ass. v. White Lead Co., 35 N. Y. 505; Strauss v. Ins. Co., 5 Ohio St. 59 ; Hardy v. Merriweather, 14 Ind. 203; Goodrich v. Reynolds, 31 111. 490; Preston v. Mo. Lead Co., 51 Mo. 43 ; Bacon v. Ins. Co., 31 Miss. 116.

2 London, etc., R. R. v. Fairclough, 2 Man. & G. 674 ; Lexington v. Butler, 14 Wall. 282; Great West. Tel. Co. in re, 5 Bis. 363 ; Atlantic Bk. v. Merchant's Bk., 10 Gray, 532 ; Monumental Bank v. Globe Works, 101 Mass. 57; Clarke v. School Dist., 3 R. I. 199 ; Brown v. Bank, 3 Barr, 187 ; Oxford Iron Co. v. Spradley, 46 Ala. 98. Whether a municipal corporation can issue negotiable paper, see Mayor v. Ray, 19 Wall. 468.

3 Field, Corp. 303; Green's Brice's Ultra Vires, 273-4; Moran v. Miami Co., 2 Black, 722; Lexington v. Butler, 14 Wal. 282; Narragansett Bk. v. Silk Co., 3 Met. Mass. 282 ; Monument. Nat. Bk. v. Globe Works, 101 Mass. 57; Moss v. Averill, 10 N. Y. 449 ; Bissell v. Mich. South. R. R., 22 N. Y. 289; Mclntire v. Preston, 10 111. 48 ; Smith v.

Flour Mills, 6 Cal. 1; Magee v. Canal Co., 5 Cal. 258.

"Although in such a case," said Dickenson, J., in a case in 1881 in the Supreme Court of Minnesota, " the corporation or its officers exceeded the corporate authority, and its contract would be, hence, in a sense ultra vires, yet other legal principles besides those merely relating to the powers of the corporation come in to affect the result. It is true, a corporation is a being created by the law, and has, properly, no authority but such as is conferred upon it, expressly or by implication, by the law of its creation; yet it may become legally bound to observe and perform contracts which it had not authority to enter into. The ends of justice may require, as in this case, that the corporation which has exceeded its powers should be estopped by its own acts from pleading in defence of its assumed obligations that they were ultra vires. To apply the principle of estoppel is not to enlarge the powers of the corporation; nor does it give warrant to a corporation to disregard or violate the restrictions which have been expressly imposed upon it, or which exist in the absence of power conferred. Bradley v. Ballard, 55 111. 413; R. R. Co. v. McCarthe United States (though it is otherwise in England) have power to issue negotiable paper ;1 and so have railway companies.2 thy, 96 U. S. 258. In this case the defence sought to be made to the note is, that in giving it the article of the defendant's incorporation, limiting the amount of its indebtedness, was violated. The debt was incurred in the ordinary prosecution of the business of the corporation. The defendant received and appropriated the money which was the consideration of the note, and, having authority to issue negotiable paper, it put forth the note in question, negotiable, calculated to circulate as, and perform the office of, commercial paper, and expressing upon its face the obligation and promise of the maker to pay to the bearer, at all events, the sum named. It has come into the hands of a bona fide purchaser, and simple justice, as well as plain principles of law, forbid that courts should listen to the plea that in this particular case the corporation had not authority to issue its note. It ought to be, and it is, estopped." Auerbach v. Mill Co., S. C. Minn. 1881, 13 Rep. 51.