Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/108

 § 115.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. Considera- tions re- garding the corporate powers. quently, whether a given act is within the corporate powers, depends on whether it is an act authorized by the constitution to be done for the attainment of the object of incorporation. 1 § 115. It is not merely for the convenience of the corporators that the state, by giving the force of law to the con- tract between the corporators, sanctions the corporate powers. In the creation or recognition of every rule of law in the constitution of a corporation, and con- sequently of every rule the function of which is to regulate the corporate powers, the state has continually in view the security of persons dealing with the corporation, as well as the welfare of the public so far as the public may be interested in the ^bject of incorporation. The oontract embodied in the consti- tution is a contract made with the intention that persons other than the contracting parties shall act relying on its terms. 2 Indeed many of the provisions of this contract, which through incorporation become rules of law, are evidently such as will manifest themselves in the rights of persons other than share- holders. Accordingly, every one will have a right, correspond- ing to his interests in the corporate enterprise, to insist on a proper exercise of the corporate powers, and to restrain the corporation from improper and ultra vires action. R. R. Co., 59 Mo. 514. See, also, Spangler v. Butterfield, 6 Col. 356, 364. In Bank v. Flour Co., 41 O. St. 552, the court reasoned thus: In determining whether an act is within the powers of a corporation, regard is to be had to its effect and the real object in view; e. g., though a cor- poration may not ordinarily, unless specially authorized, make contracts of suretyship, yet it may guaranty a debt of its president to a third per- son when the real object sought is to secure its own indebtedness to him. 1 It follows that a charter or ena- bling act of a corporation is in its general nature enabling and not res- trictive; conferring powers which may be exercised, rather than enu- 88 merating those which may not be exercised. Accordingly, where the charter or enabling act is silent in regard to any class of acts, the pre- sumption will be that the corpora- tion lias no authority to do them, un- less tbey are incidental to the exer- cise of the powers expressly granted. See Thomas v. Railroad Co., 101 U. S. 71; Head v. Providence Ins. Co., 2 Cranch, 127, 166; »lso §§ 120, 121. 2 A corporation, organized pursu- ant to an agreement authorized by competent legislation, is bound by all the liabilities imposed by the agreement in favor of third persons. Welsh v. First Div. St. Paul and Pac. R. R. Co., 25 Minn. 314.