duly published. Iowa Supreme Ct. 1857, Clapp . County of Cedar, 5 Clarke, 15. change for stock of the company, instead of being issued for money borrowed, to be used 295. Where the coupon bonds issued by in building the company's road, as prescribed a municipal corporation have passed into by the statute authorizing them, is not a the hands of bona fide purchasers for value, bona fide holder; but takes such bonds, subit is not in the power of the city to defeat ject to any defence which the town might an action on the coupons, on the ground of have against the company. N. Y. Ct. of irregularities in the election authorizing Appeals, 1861, Starin v. Town of Genoa, 23 their issue. Wis. Supreme Ct. 1859, Clark N. Y. 439; Gould v. Town of Sterling, Id. v. City of Janesville, 10 Wis. 136. 456. 296. A statute authorizing a municipal corporation to issue bonds is a public law, which a purchaser of them is required to know, so far as to see that the authority to make the issue exists; but when the exercise of the power is made to depend upon an election, he is not bound to inquire into its regularity. He may presume that the preliminary steps have been taken according to law, but of the existence and regularity of the steps he is not bound to make inquiry. The rule that partics dealing with officers of municipal corporations are bound to know that they have authority to act, though proper for the protection of those whom the officers represent, should not be carried so far as to destroy the safety and rights of those who, with good faith and due diligence, deal with such corporations. Ib. But compare People ex rel Fiedler v. Mead, 34 How. Pr. 294. 297. Where a corporation has no general power in its charter to issue negotiable paper (the charter being a public act), a note or bill issued by it, out of the course of its legitimate business, is void, even in the hands of a bona fide holder without notice. The corporation having no general power, either express or implied, to issue negotiable paper, it is a condition precedent to the validity of such paper, that the debt which forms its consideration should be contracted in the course of their proper, legitimate business. Every person who takes their paper is bound to know the extent of their powers, and is presumed to receive it with a full knowledge that they have only a limited and conditional power to issue it. He is thus put on inquiry, and takes at his peril. N. Y. Supreme Ct. 1849, Halstead r. Mayor &c. of New York, 5 Barb. 218. 298. One who purchases bonds from a railroad company at a discount, with knowledge that they were irregularly issued by the obligors (a municipal corporation), in ex 299. Corporation bound by usual course of business. It is not universally true that a corporation cannot bind the corporators beyond what is expressly authorized in the charter. Where a series of contracts have been openly made, by the officers of a corporation, within the knowledge of the corporators, who have acquiesced in and received the value of them, the contracts are binding upon the corporation, although not expressly authorized in its charter. The public have a right to presume that the acts are within the scope of the authority granted. Although the corporators are in general protected from unauthorized acts of their agents, a rule of equal force requires that they should not deceive the public, or lead them to trust in unauthorized acts of their agents. If they receive the avails, it is implicit evidence that they consented. If the corporation be a municipal corporation, it is bound to pay whatever may be due thereon, by the assessment of taxes if it has no other means. Pa. Supreme Ct. 1850, Alleghany City . McClurkan, 14 Pa. St. 81. Compare Zabriskie v. Cleveland &c. R. R. Co. 23 How. (U. S.) 381. 300. Authority from the directors to an agent to execute a bond to bind the corporation may be given without an assembly or meeting of the directors unless that is the usual mode of their doing such acts. If they adopt the practice of giving a separate assent to the execution of contracts by their agents, it is of the same force as if done at a regular meeting of the board. If this were not so, it would lead to very great injustice, for it is notorious that the transaction of the ordinary business of railways, banks and similar corporations in this country is withont any formal meetings or votes of the board. Hence, there follows a necessity of giving effect to the acts of such corporations according to the mode in which they choose to allow them to be transacted. A corporation. is bound by the action of a majority of the board of directors, expressed in the usual mode which they adopt in the transaction of the business of the board. Vt. Supreme Ct. 1858, Bank of Middlebury v. Rutland & Washington R. R. Co. 30 Vt. 159. Hill, 37; 5 Id. 137, 490, 491, n.; 16 Mass. 102; 13 Pa. 13; 3 Sandf. 170; 11 Barb. 213.] When it is a simple question of capacity or authority to contract, arising either on a question of regularity of organization, or of powers conferred by the charter, a party 301. The court will assume that authority who has had the benefit of the contract, actually existed, where the agents have re- cannot be permitted to question its validity, peatedly pursued a particular course of con- in an action founded upon it. Even where duct, and the company as often have ratified there has been a general restriction in the their acts by treating them just as if author- charter, an isolated case of excess beyond the ity actually existed. [12 Wheat. 69.] Thus, limit prescribed, has been protected, and the where certain agents of a railroad company contract held binding, when the general were employed by the company to purchase practice of the corporation had been in land, and had frequently, without express authority, submitted the question of price to arbitrators, and the price awarded had been paid by the financial officers of the company, -Held, that the company were bound by the award of arbitrators to whom these agents had submitted a question of price. N. Y. Ct. of Appeals, 1853, Wood r. Auburn & Rochester R. R. Co. 8 N. Y. (4 Seld.) 160. 302. It is not requisite, that the contract of submission should be under the seal of the company, in such case, nor will it be avoided by the agent attaching a seal to its execution, by himself. Ib. 303. If an officer of a company, who usually transacts its financial business, borrows money in the name of the company, having been theretofore suffered to do so repeatedly by the directors, he binds the company, unless the company prove it was borrowed for an illegal purpose, or was misapplied. N. Y. Supreme Ct. 1852, Beers v. Phoenix Glass Co. 14 Barb. 358. 304. Proof that the agent of a corporation was in the habit of giving notes for the company, is inadmissible to show the validity of a note given by him as against the corporation, unless accompanied by proof that the company had some knowledge that the agent was in the practice of giving notes in its name. strict conformity with its charter. [5 Hill, 490, 491, n.; 6 Id. 217; 11 Barb. 213.] N. Y. Supreme Ct. 1853, Steam Navigation Co. v. Weed, 17 Barb. 378. To the same effect is, 1855, Mott v. United States Trust Co. 19 Id. 568. 306. One who has received property from a corporation by way of mortgage, and has sold it under the power contained in the mortgage, cannot refuse to credit the company with the proceeds, on the ground that their dealings with him exceeded their corporate powers. N. Y. Ct. of Appeals, 1860, Parish v. Wheeler, 22 N. Y. 494. 307. A corporation cannot enforce a mortgage which it has obtained by a transfer taken contrary to the express provision of its charter; and the objection may be taken by the mortgagor. This objection is not an attempt to set up collaterally a forfeiture of the charter, but only that the title to the mortgage was obtained by a positively illegal act. N. Y. A. V. Chan. Ct. 1846, Green v. Seymour, 3 Sandf. Ch. 285. 308. One who contracts with a corporation to pay money for land obtained from them, and held by him, not having notice not to pay, and there being no adverse claimant who could again recover the money, cannot defend an action of assumpsit by the N. Y. Supreme Ct. 1864, Law-corporation to recover the money, by setrence . Gebhard, 41 Barb. 575. 305. When the other party to the contract is bound. In an action brought by a corporation to recover a sum of money loaned to the defendant, the latter, having had the benefit of the contract of loan, cannot be permitted to avail himself of the defence that the corporation plaintiff had no authority, express or implied, by the terms of its charter to make the loan. [4 Johns. Ch. 370; 6 ting up that the land was previously conveyed to trustees, in trust for an academy, which was afterwards incorporated by a stattute directing the property to vest in the corporation, but without any conveyance from the trustees to the corporation. Pa. Supreme Ct. 1837, Fox v. Union Academy, 6 Watts & S. 353. 309. A contract by a corporation for the sale of property which they have previously III. INTERPRETATION. bought, is not void, so as to preclude them | contract, though not under seal, had been from enforcing it against the purchaser, be- executed. Exch. 1855, Australian Royal cause the property in question is such as the Mail Steam Nav. Co. v. Marzetti, 32 Eng. L. corporation were not empowered (although & Eq. 572; 24 Law J. N. S. 273. not expressly forbidden) to purchase and hold. If the directors exceeded their powers in making a purchase of such property, and therefore the title did not vest in the company, the title to the property may be regarded as vested in the directors as natural persons. In such a state of the title the directors might dispose of the property, and collect the avails, as a legitimate mode of restoring the funds misapplied, to the company. And for this purpose they may unquestionably take the securities upon sale of the property, payable to the company, or stipulate that the purchaser shall pay the company. And this, so far from being a continuance of the perversion of the charter powers, is the surest and only obvious mode of restoring the funds to their proper channel. Vt. Supreme Ct. 1856, Rutland & Burlington R. R. Co. v. Proctor, 29 Vt. 93. 310. If a person enter and occupy premises under a corporation, though without their having demised under the common seal, the absence of such demise does not relieve him from payment of a just equivalent for the use of the property, and he will be liable in debt or assumpsit for use and occupation. C. P. 1826, Southwark Bridge Co. v. Sills, 2 Carr. & P. 371; 1827, Mayor &c. of Stafford v. Till, 4 Bingh. 75. 1. Corporate rights and obligations. 313. Effect of corporate contracts generally. Whenever a corporation makes a contract, it is the contract of the legal entity.- of the artificial being created by the charter, and not the contract of the individual members. The only rights it can claim are the rights which are given to it in that character, and not the rights which belong to its members as citizens of a State. U. S. Supreme Ct. 1839, Bank of Augusta v. Earle, 13 Pet. 519. 314. A promise to pay to a company or their treasurer for the time being, is not a promise to two distinct parties in the alternative, but a promise to the company. [3 Bos. & P. 147.] N. H. Supreme Ct. 1859, Atlantic Mut. Fire Ins. Co. v. Young, 38 N. H. 451. 315. A promise "to pay the commissioners of" the corporation, naming it, but not naming the commissioners as individuals, is not a mere promise to the individuals appointed commissioners, but to the corporation; and an action lies thereon in the corporate name, though it might be otherwise if the promise named the commissioners individually. [13 Johns. 38; 6 Hill, 476; 21 Pick. 486; 1 D. Ch. 431; 13 Vt. 334.] Vt. Supreme Ct. 1848, Vt. Central R. R. Co. v. Clayes, 21 Vt. 30. 311. Where a contract has been entered into with a corporation, which is executed before action brought, and under which the defendant has received the whole benefit of 316. Continuance of corporate contracts. the consideration for which he bargained, it The obligation of a contract of a corporais no answer to an action of assumpsit by tion survives the dissolution of the corporathe corporation, that the corporation itself tion. The consequences of a forfeiture of was not originally bound by the contract, the charter do not enter into and form a by reason of its not having been made under their common seal. C. P. 1843, Fishmongers' Company v. Robertson, 12 Law J. N. S. 185; 5 Mann. & G. 131; 6 Scott N. R. 56. 312. The plaintiffs, who were a corporation by charter, bought, by parol contract of the defendants, a quantity of ale for the use of the passengers on board the plaintiffs' steam vessel, and paid the defendants for the same. The ale proved unfit for use. Held, that the defendants were liable to the plaintiffs in damages, it appearing that the part of the contract in such sense that if the State enforce a forfeiture and do not remit a dissolution, that is, continue the corporate existence, the contract becomes extinguished. [8 Pet. 281; 17 Serg. & R. 65; 6 Mo. 364]. Miss. Ct. of Errors, 1846, Nevitt v. Bank of Port Gibson, 6 Smedes & M. 513, 522, 558. 317. Where the charter of the corporation is in its nature perpetual, but subject to repeal, a contract by the corporation to continue during the time for which the corporation was established, is a contract for an indefinite time, and a stipulation by the corporation to pay so long as the other party shall perform, with a proviso, that, by the death of the party contracting to perform services, the corporation shall be discharged, is, in legal effect, a contract for life. Mass. Supreme Ct. 1824, Revere v. Boston Copper Co. 15 Pick. 351. 318. Influence of usage. The usages of a bank, at which the parties are accustomed to transact business, may be shown, not as forming rules for the decision of the court, but as evidence of the assent of the parties to such usage, and of their waiving the legal claims. Mass. Supreme Ct. 1808, Jones v. Fales, 4 Mass. 245; 1810, Widgery v. Munroe, 6 Id. 449; 1812, Lincoln & Kennebec Bank T. Page, 9 Id. 155; The Same v. Hammett, 9 Id. 159; 1814, Blanchard . Hilliard, 11 Id. 85; 1815, Smith v. Whiting, 12 Id. 6; 1821, Whitwell v. Johnson, 17 Id. 449; 1826, City Bank v. Cutter, 3 Pick. 414; U. S. Supreme Ct. 1809, Yeaton v. Bank of Alexandria, 5 Cranch. 49; 1824, Renner v. Bank of Columbia, 9 Wheat. 581; 1828, Pearson v. Bank of the Metropolis, 1 Pet. 89; Bank of Metropolis v. New England Bank, 1 How. 234; 1847, The Same v. The Same, 6 Id. 213; Conn. Supreme Ct. 1821, Hartford Bank v. Stedman, 3 Conn. 48); Md. Ct. of Appeals, 1824, Bank of Columbia v. Magruder, 6 Harr. & J. 172. 319. But to give the usage of it such effect, a knowledge, express or implied, of the usage, must be brought home to the party who is to be affected by it. Mass. Supreme Ct. 1817, Pierce v. Butler, 14 Mass. 303; N. Y. Superior Ct. 1853, Holford v. Adams, 2 Duer, 471. 320. of rules of company. A borrowed a sum of money from a loan society, and the defendant joined him in a joint and several promissory note for the amount. At the time of the loan, a printed book of the society's rules was given to the defendant. By these rules it was stated, that after default by the principal, notice would be given to the surety, and that if the money was not then paid, legal proceedings would be taken. The book was not signed. Held, that these rules did not constitute an agreement contemporaneous with the note, so as to be admissible to vary the contract on the note. C. P. 1842, Brown v. Langley, 4 Mann. & G. 466. 321. Conditions. Where a corporation have accepted an annuity granted upon a condition, and the condition has been acted on, they cannot afterwards renounce it at pleasure, although the gift was directed by the donor to be applied to another purpose specified, in case the corporation at any time should refuse or neglect to perform the condition. Rolls Ct. 1830, Attorney-General v. Christ's Hospital, 1 Russ. & M. 626. 322. Agreement for construction of canal. Under an agreement made between a canal company and a contractor, for the construction of a lock, providing that the work should be done with such changes and alterations as might thereafter be adopted by the company, they paying all the additional expense for increase of work or materials caused by such change or alterations, the company may change the location and materials of the lock, without incurring any other liability than that prescribed in the contract itself. Va. Ct. of Appeals, 1867, James River & Kanawha Co. v. Adams, 17 Gratt. 428. 323. Where, in such a case, the contractor, notwithstanding any modification, change, or alteration in the plan, continued the work, and his work was estimated and paid for according to the terms of the contract,— Held, that the contractor could not recover for any such work done beyond the estimates, or for loss of time, or consequence thereof, unless the company acted in bad faith. Ib. 324. An agreement entered into between a canal company and a contractor, for building a dam, provided that the company should furnish the cement necessary for the purposes of construction, upon the written order of the contractor; but that if from any cause they should not be able to supply it as required, they should not be responsible for damages arising to the contractor from the want of the same. Held, that it was not a sufficient excuse for failing to furnish the cement, that the company had not a sufficient quantity on hand to supply it as required, it being their duty to use due and reasonable diligence to obtain and keep on hand a sufficient supply for such purpose; and that a failure in this regard was a breach of the covenant, for which the contractor might recover damages. Ib. 325. Agreements for interest. The char ter of a corporation required the interest on mortgages taken by them to be made payable annually. A mortgage was dated in August, 1837, and the interest was payable yearly on November 1, in each year. Held, that as the word "yearly" must be rejected in order to make the interest payable on the first day of August, 1838, the first November next after the date must be disregarded as a day of paying interest, making the first interest payable in November, 1839. N. Y. Ct. of Appeals, 1850, Clowes v. Farmers Loan & Trust Co. 3 N. Y. (3 Comst.) 470; S. C. 8 N. Y. Leg. Obs. 249; A. V. Chan. Ct. 1846, Farmers Loan & Trust Co. v. Perry, 3 Sandf. Ch. 339. 326. The stockholders of a railroad corporation voted to pay interest on subscriptions for stock until the completion of the road, but finding themselves unable, after the road was finished, to pay one dividend then in arrears, authorized the issue of certificates therefor, payable at a future day named, "with the express understanding and agreement that if there is not sufficient money in the treasury on the day that it falls due," the holders of such scrip should recover pro rata according to the ability of the treasurer to pay, and that he should give notice when he should become able to pay the balHeld, that so long as the treasurer had no funds, the holders of scrip could maintain no action. Mass. Supreme Ct. Cunningham r. Vermont & Massachusetts R. R. Co. 12 Gray, 411. ance. 327. Agreement to pay in stock. A contract of a corporation to pay for labor at a fixed time, in its own stock, no place of payment being fixed, is to be performed at the office of the company. They are not bound to seek the other party, and make a tender. This is not an agreement to pay a certain sum in specific articles, but rather an agreement to receive payment in a particular currency. N. Y. Supreme Ct. 1851, Moore r. Hudson River R. R. Co. 12 Barb. 156. 328. Under an agreement to pay a portion of the amount earned under a contract, in the capital stock of a corporation, without specifying any method of valuation, if the debtor in the agreement neglects to pay until the stock has become worthless, the right to pay in stock is forfeited, and the amount is recoverable in money. N. Y. Supreme Ct. 1859, Hart v. Lauman, 29 Barb. 410. 329. It was agreed between defendants, a corporation, and the subscribers to their capital stock, that application should be made to the legislature for power to issue additional shares of stock, to be applied to the payment of interest on the installments paid in by the subscribers on the capital stock subscribed for by them respectively, until income should be realized from the road. The legislature passed an act authorizing the company to issue additional shares "to enable the company to provide for and pay interest on the installments paid in for the construction of the road, until it should be completed and put in operation." Held, that the reasonable construction of the agreement, as confirmed by the statute, was, 1. That the additional shares to be issued by the company were to be applied by converting them into money, and paying the proceeds. 2. That interest continued to accrue to the subscribers until an income exceeding expenses should be realized, after the completion of the whole road. N. Y. Superior Ct. 1854, Manice v. Hudson River R. R. Co. 3 Duer, 426. 330. A contract with a company to do certain work at a fixed price, stipulated that the contractor should, if and when required by the company, accept payment of twothirds of the amount in fully paid-up shares (at par). Held, that the contractor, he having completed the work, and the company being subsequently ordered to be wound up, was not bound to accept the depreciated shares in payment, but might prove for the whole amount of his claim. Rolls Ct. 1866, Re Alexandra Park Co. 14 Week. Rep. 855. 331. Assignment or appointment of agent. The directors of a raiload company delivered to a "trustee" certain State bonds, "for the protection of the creditors." He was directed to pay them to such creditors as would receive them at a specified price, the balance of their claims to be paid in drafts; all bonds remaining, and not accepted by creditors as above, within a specified time, to be returned to the company. Subsequently the directors ordered the trustee to deliver ten of the bonds for another purpose, which order he obeyed. Held, that the transaction, especially when construed in view of the action under it as above, was not an assignment, passing the legal title to the trustee, |