Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/252

 § 2G9.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. injure some one's rights. If the persons whose rights would have been injured assent to the contract, it thereupon becomes valid, since thus the reasons for its invalidity cease. 1 If, how- ever, the contract, besides being ultra vires, is also illegal, the rights of the public may be regarded as affected, and the assent of all the individuals especially interested in the corporate enterprise will not make the contract valid. 2 As Judge Folger said, giving the opinion of the New York Court of Appeals in Kent v. Quicksilver Mining Co., 3 "In the application of the doctrine of ultra vires, it is to be borne in mind that it has two phases : one where the public is concerned ; one where the question is between the corporate body and the stockholders in it, or between it and its stockholders, and third parties dealing with it and through it with them. When the public is con- cerned to restrain a corporation within the limits of the power given to it by its charter, an assent by all the stockholders to the use of unauthorized power by the corporate body will be of no avail. When it is a question of the right of a stockholder to restrain the corporate body within its express or incidental powers, the stockholder may in many cases be denied on the ground of his express assent, or his intelligent though tacit con- sent to the corporate action. If there be a departure from statutory direction, which is to be considered merely a breach of trust to be restrained by a stockholder, it is pertinent to con- sider what has been his conduct in regard thereto. A corpora- tion may do acts which affect the public to its harm, inasmuch as they are per se illegal or are malum prohibitum. Then no assent of stockholders can validate them. It may do acts not thus illegal, though there is want of power to do them, which affect only the interest of the stock-holders. They may be made good by the assent of the stockholders, so that strangers to the stockholders, dealing in good faith with the corporation, will be protected in a reliance on those acts." 4 1 The act of incorporation furnishes no security to persons assenting to unauthorized acts. Kearny v. But- tles, 1 Ohio St. 362. Accordingly when a mortgage is executed hy the directors, who own all the stock of the corporation, the corporation can- 232 not plead ultra vires. Witter v. Grand Rapids, etc., Co., 78 Wis. 543. 2 The illegality of ultra vires acta is discussed in §§ 2S7 et seq. 3 78 N. Y. 159, 185. 4 Compare Andrews v. Union Mut. Fire Ins. Co., 37 Me. 256. "I think