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corporation is a person by definition. Is the contractual capacity of this person general, like that of a natural person, or has the corporate person only partial or limited capacity? Chief Justice Marshall thought that the corporation derived all its powers from the act creating it, and was capable of exerting its faculties only in the manner which that act authorized.' The doctrine of special capacity has also found favor in some English cases. A learned writer in the Encyclopedia of the Laws of England,' speaking of the sphere of corporate powers defined by the charter says, "outside this sphere it is stricken with impotence." The language of Mr. Justice Gray previously quoted has often been cited with approval, as, for example, by the Supreme Court of Illinois in a very recent case which settled the law of that state in regard to ultra vires contracts. These citations show that the doctrine of special capacity is still entitled to respectful consideration. It is not, however, the prevailing view to-day, and in spite of the apparent authority in support of it, no dependence can be placed upon it. The objection to the doctrine is well stated by Sir Frederick Pollock" as follows: "All rights are in one sense creatures of the law, and it is in a special sense by creation of the law that artificial persons exist at all. But when you have got your artificial person, why call in a second special creation to account for its rights?" The view now generally accepted, therefore, is that the contractual capacity of a corporation is as extensive as that of a natural person; that an act beyond the powers of a corporation is open to attack, not on the ground that it is impossible, but that it is illegal for the corporation to do the act. An ultra vires lease, therefore, may be regarded 1 Head vs. Providence Ins. Co., 2 Cranch 127, 169 (1804); Bank of U. S. vs. Dandridge, 12 Wheaton 64, 99 (1827).

2 Pollock, Contracts, Appendix D.

3 Mr. E. Manson.

4 Vol. XII, p. 360.

5 National Home Building Asso'n. es. Bank, 181 Ill. 35, 45 (1899).
Contracts (2nd Am. Ed.) 121.

Ibid.; Morawetz, Corporations, 648; George Wharton Pepper, 9 Harvard Law Review 255.

simply as a corporate act which is illegal. Why is the act illegal, and what is the effect of the illegality?

The illegality of an ultra vires act may rest on one of three grounds:

First. The act may be objectively illegal; that is, illegal for any person to do.

Second. The corporation may be forbidden by statute to do the act.

Third.-Ultra vires acts may be illegal at common law, because regarded as injurious to the public welfare.

In the case of an ultra vires lease all three grounds of illegality may be present. If the corporation is under obligation to the public, as in the case of a railroad company, the alienation by lease or otherwise of property necessary to enable it to fulfill that obligation is clearly an illegal act. Again, if a statute forbids the lease, either expressly or by implication, it is unlawful. The English doctrine of the invalidity of ultra vires acts of companies rests upon the construction placed by the House of Lords, in Ashbury Co. es. Riche', on the provisions of the Companies Act. The court, in construing that act, held that it prohibited the making of any contract not authorized by the memorandum of association. The American doctrine on this point is clearly stated by Mr. Justice Miller in Thomas vs. Railroad Co. Conceding the rule applicable to all statutes, that what is fairly implied is as much granted as what is expressed, it remains that the charter of the corporation is the measure of its powers, and that the enumeration of these powers implies the exclusion of all others." 3

Apart from statute, however, is there any illegality in an ultra vires act? The ordinary answer to this question is in the affirmative. Ultra vires contracts are unlawful and void, it is said, on account of "the interest of the public that the corporation shall not transcend the powers conferred upon 1 L. R. 7 H. L. 653 (1875).

2 101 U. S. 71 (1879).

3 Ibid. 82.

it by law." This doctrine has been so often reiterated by courts of the highest authority that it may seem presumptuous to question it. There are strong grounds, however, which cannot be set forth at length in this paper, for believing that the illegality of ultra vires acts, in every case where the act is not objectively illegal, may be shown to rest upon an express or implied statutory prohibition of such acts.2 There is no stronger argument in support of this view than the different construction placed by the United States Supreme Court upon different provisions of the National Banking Act. A national bank is prohibited from lending money on real estate security, but a mortgage.taken to secure such loans is enforceable. The bank is prohibited from transacting any business except such as is incidental and preliminary to its organization, until authorized by the Comptroller of the Currency. A lease made in violation of this provision is illegal and void. The same court has held, moreover, that the effect of an ultra vires act is a matter of statutory construction, in regard to which the Federal courts are bound by the decisions of the Supreme Court of the state creating the corporation."

On whatever grounds the illegality may rest, it is well settled that an ultra vires lease is illegal, and that no action can be brought upon the lease as a contract by either party. It

Central Transportation Co. vs. Pullman Co., 139 U. S. 24, 48 (1891); McCormick vs. Market Bank, 165 U. S. 538, 550 (1897); De La Vergne Co. vs. German Savings Institution, 175 U. S. 40, 59 (1899).

2 Riche vs. Ashbury Co., L. R. 9 Ex. 224, 264 (1874).

3 National Bank us. Matthews, 98 U. S. 621 (1878).

McCormick vs. Market Bank, 165 U. S. 538 (1897).

5 Sioux City R. Co. vs. North American Trust Co, 173 U. S. 99, 112 (1899).

6 Thomas vs. Railroad Co., 101 U. S. 71 (1879); Pennsylvania R. vs. St. Louis, etc. R., 118 U. S. 290 (1886); Oregon Railway & Navigation Co. vs. Oregonian Railway Co., 130 U. S. 1 (1889); Central Transportation Co. 78. Pullman Co., 139 U. S. 24 (1891); McCormick vs. Market Bank 165 U. S. 538 (1897); Brunswick Gaslight Co. vs. United Gas Co., 85 Me. 532 (1893). "It has been uniformly held that there could be no recovery on the lease itself." Brown, J., in De La Vergne Co. vs. German Savings Inst., 175 U. S. 40, 59 (1899).

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is immaterial in this connection whether it is the lessor or the lessee that lacks corporate power to make the lease; although, if the lessee is a foreign corporation, the authorization of the lease by the legislature prevents either party from raising the question of its illegality. In some jurisdictions, however, if the lessee has occupied the premises under the lease he is liable for the rent. This liability is said to rest upon estoppel. Such an application of the doctrine of estoppel has been often repudiated by the United States Supreme Court, and there is a tendency to abandon it in some of the states where it previously prevailed." An analysis of the nature of estoppel shows clearly that the doctrine can have no application to ultra vires acts. Estoppel is analogous to contract. In contract, responsibility springs from the promise acted upon by the promisee. In estoppel, responsibility springs from the representation of fact acted upon by the party claiming the estoppel. If we take the position that the invalidity of an ultra vires act is due to lack of corporate capacity, we are confronted with the principle that estoppel cannot effect contractual capacity as determined by personal status." One who cannot be bound by a contract, cannot be estopped from setting up the invalidity of that contract, as the cases of infants and married women show. On the other hand, if we regard an ultra vires act as illegal, we cannot escape the rule that there can be no estoppel against the law. If it is illegal for the corporation to do an ultra vires act, the act cannot be validated by the representa

1 Pennsylvania R. Co. vs. St. Louis, etc. R., 118 U. S. 290 (1886); St. Louis, etc., R. Co. vs. Terre Haute, etc. R. Co. 145 U. S. 393 (1892). 2 Boston, Concord, etc. R. Co. vs. Boston & L. R. Co., 65 N. H. 393 (1888).

3 Camden, etc. R. vs. May's Landing, e.c. R., 48 N. J. 530 (1886); Corpus Christi vs. Central Wharf Co., 8 Tex. Civ. App. 94; 27 S. W. 803 (1894); Heims Brewing Co. vs. Flannery, 137 Ill. 309 (1891); Bath Gas Light Co. rs. Claffy, 151 N. Y. 24 (1896).

* St. Louis, etc. R. vs. Terre Haute, etc. R., 145 U. S. 393 (1892); and cases supra, note 6 on page 6, supra.

5 National Home Building Ass'n vs. Bank, 181 III. 35 (1899).

6 Bigelow, Estoppel, (5th ed.) 604, 605.

tion of the corporation itself. Instead of relying on an erroneous application of the doctrine of estoppel, it would be far more satisfactory if the courts which object to what Mr. Thompson,' with unnecessary asperity, calls "the abominable doctrine of ultra vires," would simply say that the violation of the law by a corporation which exceeds its charter powers is an irrelevant issue except in a direct proceeding by the state against the corporation. Nevertheless, the supposed harshness of the rule making all ultra rires acts illegal has often induced courts to sustain the validity of such acts at the expense of strict logic. Such a result is an unsatisfactory compromise between the theory that ultra vires contracts are void for illegality, and the theory that the illegality of such contracts is irrelevant in actions between private persons. Any real hardship from the application of the strict rule of illegality may be obviated by holding the officers of the corporation personally liable for breach of warranty of their authority to bind the corporation, as they have recently been held liable by the Supreme Court of Illinois in a case where an ultra vires lease had been held void.

The lease being void for illegality, what remedy has the lessor if the lessee refuses to perform the covenants of the lease? Since the lessor has no contractual rights, he is to recover, if at all, against the lessee, upon equitable grounds; either on an implied assumpsit at law, or by filing a bill in equity for an accounting, as the case may be. There is a broad principle of equity, sometimes called the doctrine of unjust enrichment, that where one obtains property from another under a supposed contract, he cannot repudiate the contract and at the same time keep the property without paying anything for it. This quasicontractual obligation on the part of the lessee to pay for what he has received under the lease, which in 1885 Mr. Justice Miller' said admitted of doubt, is now definitely established by 1 Corporations, vol. 7, § 8314 (1899).

2 Seeberger vs. McCormick, 178 Ill. 404 (1899).

Pennsylvania Co. rs. St. Louis, etc. R., 118 U. S. 318 (1898).

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