Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/201

 PART II.] ACTS WITHIX THE CORPORATE POWERS. [§ 211. the payee. 1 Nor will knowledge by one of several corporators of the existence of an incumbrance on property purchased by the corporation, affect his associates when he does not act as their agent in forming the company. 2 § 211. If an unauthorized act is done on behalf of a corpora- tion, although the corporation may not be bound by the act as done, yet, if the corporation or that corporate authority which would have been competent originally to do the act, knowingly ratifies it or accepts the benefit of it, or if all the per- Ratifica- sons having a right to object to the act knowingly ^u° f acquiesce in it, the act will be as binding on the thonzed corporation as if it had been originally authorized. 3 This proposition is but an application of the doctrine of the law of agency, that when a person ratifies the unauthorized act of another who has purported to act on his behalf, the legal effect of the act will be the same as if it had been author- ized before it was done. True, in applying this doctrine to corporations, circumstances and the complicated legal relations subsisting in respect of corporate enterprises must be taken into consideration. Nevertheless, the doctrine applies to corpora- tions in its fullest scope, 4 and with them, as with natural prin- cipals, subsequent ratification is equivalent to antecedent au- thority. 5 The important principle to be borne in mind is this : 1 First Nat. Bk. v. Loyhed, 28 Minn. 396. Compare National Bk. v. Wal- lan, 37 Minn. 404; Martin v. South Salem Land Co., 94 Va. 28. See §641. 2 Burt v. Batavia Paper Mfg. Co., 86 111. 66. So, on the other hand, when a person is merely in posses- sion of bank stock as collateral se- curity, does not participate in shareholders' meetings, and is not recognized by shareholders as a member, he is not such a member of the corporation as to be bound to have knowledge of facts known to the corporation or its officers. Baker v. Woolston, 27 Kan. 185. 3 The effect of acquiescence in ultra vires acts, by persons entitled to object, is discussed in Part III, of the present chapter. The discussion here relates only to acts within the scope of the corporate powers. 4 Kelsey ». Nat. Bk., 69 Pa. St. 426; Ace. German Nat. Bank ». First Nat. Bank, 59 Neb. 7; Dedrick v. Ormsly Land & Mort. Co., 12 S. Dak. 29; Phillips ». Sanger Lumber Co., 130 Cal. 431. 5 First Nat. Bk. v. Fricke, 75 Mo. 178; Planters' Bk. v. Sharp, 12 Misc. 75; Mt. Washington Hotel Co. v. Marsh, 63 N. H. 230; Greenleaf v. Norfolk Southern R. R. Co., 91 N. C. 33; Wash. Times Co. v. Wilson, 12 D. C. App. Ca. 62. In re West Jersey Traction Co., 59 N. J. Eq. 63. The corporation by ratifying the act of its agent becomes charged with notice of what such 181