Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/270

 § 286.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. a corporation such property, real or personal, as it is author- ized to purchase, he is under no obligation to inform himself whether, under the circumstances, the particular purchase was proper for the corporation to make. 1 Indeed, it is held that even if the vendor of goods or the lender of money to a corpo- ration knows that the goods are bought or the money bor- rowed to be used for some unauthorized or even illegal pur- pose, he may still recover the price or the loan; provided it was no part of his contract that the goods or money were to be used for that purpose, and provided, also, that he has done nothing to further the unlawful design. 2 The principle re- ferred to also covers cases where a corporation, authorized to borrow money to a certain amount, borrows in excess. If a person lends money to it in ignorance that the limit has been already reached, he will be entitled to recover. 3 And, finally, under this principle arises the obvious distinction between the exercise by a corporation of a power not possessed by it and in no way incidental to the objects of its incorporation, as set forth in its constitution, of which every one must take notice, and the abuse of a general power possessed by the corporation, or the failure to comply with prescribed formalities in exercis- ing its powers, when such abuse or failure is not known to the other contracting party. 4 but if he has no such knowledge, it would be binding in his favor." Eastern Counties Railway Co. v. Hawkes, 5 H. L. C. 331, 338, per Lord Campbell. 1 Eastern Counties Railway Co. v. Hawkes, 5 H. L. C. 331. See Cowell v. Springs Co., 100 U. S. 55; Natoma Water and Mfg. Co. v. Clarkin, 14 Cal. 544, 552; Moss u. Rossie Lead Mfg. Co., 5 Hill, 137. 2 Tracy v. Talmadge, 14 N. Y. 162; and see cases in the last note, and § 293. This last proposition may be questionable. Very likely it would and should hold when goods are sold directly to a principal, the vendor knowing that they will be put to some illegal use. But suppose the vendor knows that an agent, to 250 whom he is selling the goods, is go- ing to use them in some way not au- thorized by the principal, or is go- ing to embezzle them: should the vendor then be allowed to recover against the principal, e. g., a corpora- tion ? 3 Humphrey v. Patrons' Mercantile Ass'n, 50 Iowa, 607; Aueibach v. Le Sueur Mill Co., 28 Minn. 291; Os- sipee Mfg. Co. v. Canney, 54 N. H. 295; Connecticut River Savings Bk. v. Fiske, 60 N. H. 363; (a suit against a shareholder. ) Beach & Weld v. Wakefield, 107 Iowa, 567. See §§ 127 and 205. But the lender is affected with notice when his loan by itself exceeds the charter limitation. First Nat. Bk. v. Kiefer Co., 95 Ky. 97.
 * See Davis v. Old Colony Railroad,