Sec 142

A distinction, also, is to be observed between suits against and suits by a corporation. When a corporation is sued on an executory contract which is ultra vires, the attempt is to drag it into a sphere in which it cannot legally exist. When a corporation seeks to enforce a contract on which it has already performed its part, it may go out of its sphere, but this is for the purpose of turning into that sphere the fruits of its own action. Hence, there are many cases in which contracts sued on by corporations have been sustained on the ground that the profits go to the lawful use9 of the corporation, when, were the purpose to apply the funds of the corporation to a purely extraneous object, the action of the corporation would be held ultra vires.1 The plea of ultra vires, for instauce, Distinction between suits against and suits by a corporation.

1 Infra, sec 199.

2 Merchants' Bk. v. State Bk., 10 Wall. 604; Stoney v. Ins. Co., 11 Paige, 635; Genesee Bk. v. Patchin Bk., 3 Kern. 309; Farmers' Bk. v. Butchers' Bk., 16 N. Y. 125 ; Bradley v. Ballard, 55 111. 413; Thompson v. Lambert, 44 Iowa, 239.

3 Pollock, ut supra; Foster v. Essex Bank, 17 Mass. 479 ; Austin v. Daniels, 4 Denio, 299 ; First Nat. Bk. v. Ocean Nat. Bk., 60 N. Y. 278; Ogdensburg R. R. v. Vt. R. R., 6 Thomp & C.488 ; 4 Hun, 268 ; see Brown v. Donnell, 49 Me. 421 ; Hood p. R. R., 22 Conn. 502.

4 Badger v. Bank, 26 Me. 428 ; Bank of Ky. v. Schuylkill Bk., 1 Parsons Sel. Cas. 180; Hagerstown Bk. v. London Soc, 3 Grant (Penn.) 135.

5 Wh. on Ev. sec 1310; Grady's case, 1 De G. J. & S. 488 ; Express Co. v. R. R., 99 U. S. 199 ; Muzzey v. White, 3 Greene, 290; Copp v. Lamb, 12 Me. 312; Hathaway v. Addison, 48 Me. 440 ; Cobleigh v. Young, 15 N. H.493 ; Bassett v. Porter, 10 Cush. 418; Mc-Farlan v. Ins. Co., 4 Denio, 392 ; Yates v. Van De Bogert, 56 N. Y. 526 ; Endres v. Lloyd, 56 Ga. 547 ; Dana v. Bank, 4 Minn. 385 ; see Morris R. R. v. Sussex R. R., 20 N. J. Eq. 542.

6 Clark v. Wardwell, 55 Me. 61.

1 National Bank v. Matthews, 98 U. S. 621; Old Colony R. R. v. Evans, 6 Gray, 25 ; National Bank v. Porter, 125 Mass. 333. The cases on this point are thus examined by Gray, C. J., in Davis v. R. R., ut supra. "In Chester Glass Co. v. Dewey, 16 Mass. 94, the plaintiff, a corporation established for the purpose of manufacturing glass, kept a shop near its factory, for the accommodation of its workmen, containing a general assortment of such goods as are usually kept in country stores; and the defendant was a carpenter, living near, who made boxes and did other carpenter's work for the corporation. In an action for the price of goods sold and delivered to him from the shop, the defendant objected that the plaintiff was not authorized by law to keep such a shop and to sell goods in this manner ; and it was held that this objection could not avail him. The leading reason assigned was, ' The legislature did not intend to prohibit the supply of goods to those employed in the manufactory ;' in other words, the contract sued on was not ultra vires. This reason being decisive of the case, the further suggestion in the opinion, 'Besides, the defendant cannot refuse payment on this ground ; but the legislature may enforce the prohibition, by causing the charter to he revoked, when they shall determine that it has been abused,' was, as has been since observed by the court, wholly obiter dictum. Whittenton Mills v. Upton, 10 Gray, 599.

"In Old Colony Railroad v. Evans, 6 Gray, 25, the defendant, being under contract to haul a large quantity of gravel on to lauds bolonging to the ' city of Boston, made an agreement in writing with the plaintiff corporation, by which it agreed to purchase a tract of land in Quincy, and he agreed to take gravel therefrom, and to carry it in his own cars over the plaintiff's road to Boston, paying a specified toll; the defendant afterwards further agreed in writing, that if the plaintiff would purchase another tract for the same purpose, he would pay the cost of the first tract; and both tracts were purchased by the plaintiff. The objection that the corporation had no right to trade in gravel or land was raised by the defendant by way of defence to a bill in equity by the corporation for specific performance of his second agreement, by accepting a deed of and paying for the first tract. There can be no doubt of the correctness of the decision overruling the objection. The corporation, by its purchase, had acquired a title to the land, which was good against all the world, except, possibly, the commonwealth ; and the defendant, having knowledge of all the facts, did not and could not object that the title might be defeasible by the commonwealth. Banks v. Poitiaux, 3 Rand. 136 ; Leazure v. Hillegas, 7 S. & R. 313; Goundie v. Northampton Water Co., 7 Penn. St. 233 ; Silver Lake Bank v. North, 4 Johns. Ch. 370, 383 ; Smith v. Sheeley, 12 Wall. 358; Common-

[sec 142 cannot be properly interposed when a corporation lends money and seeks to recover the loan,1 or when it sells goods and seeks wealth v. Wilder, 127 Mass. 1, 6. Although it was said in the opinion, that the purchase of the land seemed to have been made as a mode of promoting the purposes of the plaintiffs incorporation, the increasing of its business in transportation upon its railroad, and not as an object of trade or speculation in lands, the point adjudged was that the want of corporate capacity to purchase and sell lands was not a legal objection to the maintenance of the bill. The only authority referred to by the court was the treatise of Angell & Ames on Corporations, sees. 10, 11, 151, 153, of which the section most directly applicable is section 153, in which it is clearly laid down that a court of equity will enforce against a natural person his agreement to purchase of a corporation lands which it holds in violation of its charter, but will not enforce against a corporation its agreement to purchase lands for a purpose not authorized by its charter. The distinction is obvious. In the latter case, to enforce the agreement against the corporation is to compel the application of its funds to a purpose not authorized by law. In the former case, to compel the individual to take and pay for the property according to his agreement is the surest and most effectual means of replacing in the treasury of the corporation, for its lawful uses and the benefit of its stockholders, the funds which it had misapplied. Rutland, etc. R. Co. v. Proctor, 29 Vt. 93, 97.

"In National Pemberton Bank v. Porter, the point decided was, that the objection that a national bank had exceeded its powers by purchasing a promissory note from an indorsee thereon did not prevent it from maintaining an action upon the note against the* maker ; for the reasons, that the action was not brought upon the contract of purchase, or against any party to that contract, and that it was not necessary in this commonwealth that the plaintiff in an action on the promissory note should have any title or interest in it. See also Attleborough National Bank v. Rogers, 125 Mass. 339.

"In National Bank v. Matthews, 98 U. S. 621, the act of congress providing that a national bank might purchase and hold real estate for certain enumerated purposes only, of which to secure money lent at the time of taking a mortgage, was not one, was held by a majority of the court, in accordance with the opinion of Chancellor Kent, in Silver Lake Bank v. North, above cited, not to make void a mortgage given to secure the payment of a promissory note for money so lent, nor to prevent the bank from enforcing such a mortgage. A like decision was made in National Bank v. Whitney, 103 U. S. 99.

"A corporation may, indeed, be bound to refund to a person, from whom it has received money or property for a purpose unauthorized by its charter, the value of that which it has actually received ; for, in such a case, to maincontract is technically ultra vires.1-So far as concerns the question of the due execution of a power, the rule is thus authoritatively stated: "Where legislative authority has been given to a municipality, or to its officers, to subscribe for the stock of a railroad company, and to issue municipal bonds in payment, but only on some precedent condition, such as a popular vote favoring the subscription, and where it may be gathered from the legislative enactment that the officers of the municipality were invested with power to decide whether the condition precedent has been complied with, their recital that it has been, made in the bonds issued by them and held by a bona fide purchaser, is conclusive of the fact, and binding upon the municipality ; for the recital is itself a decision of the fact by the appointed tribunal."2 And, as we have seen,3 a corporation will be estopped by its recitals of due execution.4

1 Steam Nav. Co. v. Wead, 17 Barb. 378 ; see Hays v. Galion Co., 29 Oh. St. 330 ; Darst v. Gale, 83 111. 141; though see contra, Grand Lodge v. Waddill, 36.

Ala. 313. That this is the case with usurious contracts, see Philadelphia Loan Co. v. Towner, 13 Conn. 249 ; Perkins v. Watkyns, 58 Tenn. 173. 189 to recover the price.1 On the other hand, when it is sued on a purely executory contract, in which no bona fide third party intervenes, and on which there is no estoppel, it is free to show that the contract was ultra vires.