Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/269

 PART III.] ACTS BEYOND THE CORPORATE POWERS. [§ 286. powers, on the other, is well established and has been constantly recognized by this court." 1 § 285. This principle is particularly applicable to negotiable instruments issued by a corporation. A negotiable Neo . otiable corporate security, which upon its face appears to instm- have been duly issued in conformity with the cor- porate constitution, is valid in the hands of a bona fide holder for value without notice, although the security was in fact is- sued for a purpose and at a place not authorized by the cor- porate constitution. 2 If the agent had power to issue a cor- porate security for any purpose, anyone receiving it in the ordinary course of business is justified in assuming that it was properly issued. 3 Under this principle, moreover, accommoda- tion indorsements and certifications of banks, which may be beyond the bank's powers, will bind the bank in favor of any bona fide holder for value without notice of the character of the indorsement or certification. 4 § 286. The application of this principle, however, is not re- stricted to negotiable instruments. If a corporation borrows money or purchases property, having the pi^tioi^of power to do so, the rights of the lender or vendor the. quaiifi- r ' ° cation. will not be affected by the circumstance, unknown to him, that the money is borrowed or the property purchased for an unauthorized purpose. 5 Accordingly, if a person sells to 1 Opinion of the court per Justice Gray in Louisville, etc., Ii. R. Co. v. Louisville T. Co., 17-4 U. S. 552, 570. See, also, e. g., Nat. Home B'ld'g Ass'n v. Home S'vgs B'k, 187 111. 35, 44. 2 Stoney v. Ameri. L. Ins. Co., 11 Paige, 635; Galveston R. R. v. Cow- drey, 11 Wall. 459 ; Alexander v. Rollins, 84 Mo. 657; Leh. Val. Coal Co. o. Agricul. Works, 63 Wis. 45. See, also, Safford v. Wyckoff, 4 Hill, 442; Main v. Casserly, 67 Cal. 127; cf. Steiner ». Steiner Land & Lum- ber Co., 120 Ala. 128; §§ 203, 204. 3 Genesee Savings Bk. v. Michigan Baye Co., 52 Mich. 438. Railroad companies have a general power to make contracts and borrow money, and persons dealing in securities is- sued by them may, in the absence of notice to the contrary, assume that restrictions upon this power have not been violated. Ellsworth v. St. Louis, etc., R. R. Co., 98 N. Y. 553. See §§ 205, 328. 4 National Bank v. Young, 41 N. J. Eq. 531; Jacobs Pharmacy Co. v. Trust Co., 97 Ga. 573. See §§ 242- 244. 5 See Thompson v. Lambert, 44 Iowa, 239; Oxford Iron Co. o. Sprad- ley, 51 Ala. 171; Brewer Brewing Co. v. Boddie, 181 111. 622; and §§ 204-207. " If the contract is ultra vires with the knowledge of the party making it, he cannot afterwards enforce it; 249