Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/268

 § 284.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. was put as a qualification to the general rules as stated in §§ 205 and 2G6. The principle that neither the officers of a corpora- tion, nor the body corporate itself, can bind dissenting share- holders or creditors by ultra vires contracts, is mainly based on the fundamental principle of corporation law, that all persons dealing with the corporation or its agents are affected with notice of the corporate powers as indicated by the corporate constitution. It is accordingly evident that, the main reason for the rule failing, this principle does not apply to contracts apparently within the corporate powers, but in reality ultra vires on account of extraneous facts. A person dealing with a corporation may assume that acts done on its behalf are proper ; and circumstances especially within the knowledge of the corporate representative will not ordinarily affect the rights of such a person acting in good faith. 1 Accordingly, if an act done by a corporate agent, or by the body corporate, be appar- ently within the scope of the corporate powers, the rights of the party dealing with the corporation or its agent will not be af- ected by the circumstance that the act in question was rendered ultra vires either by extraneous facts, or by the secret purpose of the corporation or its agent respecting the act ; provided the party acted in good faith and as a careful man. 2 " When a corporation is acting within the general scope of the powers conferred upon it by the legislature, the corporation as well as persons contracting with it may be estopped to deny that it has complied with the legal formalities which are pre- requisites to its existence or to its action, because such requisites might in fact have been complied with. But when the contract is beyond the powers conferred upon it by existing laws, neither the corporation nor the other party to the contract can be es- topped, by assenting to it, or by acting upon it, to show that it was prohibited by those laws." 3 " The distinction between the doing by a corporation of an act beyond the scope of the powers granted to it by law, on the one side, and an irregularity in the exercise of the granted 1 § 203. 2 See Express Co. v. R. R. Co., 99 U. S. 191, 199; Charleston, etc., Turn- pike Co. v. Willey, 16 Ind. 34; Ward- ner, etc., Co. v. Jack, 82 Iowa, 435; 248 Luttrell v. Martin, 112 N. C. 592; Kennedy v. Savings Bk., 101 Cal. 495. 3 Opinion of court per Justice Gray in Central Trans. Co. v. Pullman's Pal. Car Co., 139 U. S. 24, 60.