Sec 129

A contract in express contravention of the charter, or of the legislation, under which the corporation comes into existence, is invalid.2 But it does not follow that because an act is prohibited in a charter it is invalid as against bona fide third parties. It may be that the prohibition is purely corrective, as where a penalty by way of a mere fine is imposed upon the exercise of a particular act. If so, the act is not invalid, though the corporation has to pay the penalty of doing it.3-Whether, when a prohibition not simply corrective is in a charter or in independent binding legislation, this prohibition makes contracts as to such action void ab initio, has been much discussed. In New York such contracts may be only voidable.4 In New Jersey they are regarded, and with better reason, in all cases in which the prohibition is a matter of public legislation, as from the outset illegal and void.5 Such, also, is the English rule.6-A charter, as will be hereafter seen more fully, is, in case of doubt, to be construed liberally in favor of the grantees.7

Contracts prohibited by charter invalid.

1 Koehler v. Iron Co., 2 Black, 715.

2 Bank U. S. v. Owens, 2 Pet. 527 ; Hitchcock v. Galveston, 96 U. S. 351; Harris v. Runnels, 12 How. 79 ; Whitney v. Bank, 50 Vt. 388; Phil. Loan Co. v. Towner, 13 Conn. 249 ; Fuller v. Nav. Co., 21 Conn. 559 ; Hood v. R. R., 23 Conn. 609 ; Crocker v. Whitney, 71 N. Y. 161; Maryland Hosp. v. Foreman, 29 Md. 524; State Board v. R. R., 47 Ind. 411 ; Wood v. Caldwell, 54 Ind. 271; Pangborn v. Westlake, 36 Iowa, 546; Hazlehurst v. R. R., 43 Ga. 13; Montgomery v. Plank Road, 31 Ala. 76 ; Marion Bank v. Dunkin, 54 Ala. 471; and other cases cited Morawetz on Corp. sec 40. See infra, sec 135-7. That in New York, by statute, all banking contracts made by corporations without authority are invalid, see New York Ins. Co. v. Helmer, 77 N. Y. 64.

3 Farmers' Bank v. Dearing, 91 U. S. 29 ; Central Bank v. Pratt, 115 Mass. 539.

4 See Moss ft. Averill, 10 N. Y. 460 ; Whitney Arms Co. v. Barlow, 63 N. Y. 62 ; and see infra, sec 135-7.

5 Morris R. R. v. Sussex R. R., 20 N. J. Eq. 542.

6 Ashbury R. R. v. Riche, L. R. 7 H. L. 653 ; Morawetz on Corp. sec 43.

7 Infra, sec 670 ; Morawetz on Corp. sec 154.

Sec 130

Since a corporation acts only through agents, it is bound by its agents' contracts when made ostensibly within the range of their office, or when specially authorized by itself, supposing the transaction be not obviously ultra vires.1 But contracts not within the range of the agent's power, and which he is not specially authorized to make, do not bind his principal as against parties who ought to have taken notice of this limitation.2 A general agent, however, employed to conduct the business of the corporation gen. erally, binds the corporation, if the appointment is consistent with the charter, in all matters within the corporate range.3 sec 131. A corporation is also liable for the frauds and deceits of its agents, when acting within their orbit, even though such agents are appointed by parol. Wherever they can contract, they can subject their principals to liability for their deceitful misstatements or malicious misconduct.4 Hence, a corporation is liable for malicious prosecution1 and for libel.2 "As to the difficulty of imputing fraudulent intention to a corporation," says Mr. Pollock,3 "which has been thought to be peculiarly great, it maybe remembered that no one has ever doubted that a corporation may be relieved against fraud to the same extent as a natural person. There is exactly the same difficulty in supposing a corporation to be deceived as in supposing it to deceive; and it is equally necessary, for the purpose of doing justice in both cases, to impute to the corporation a certain mental condition-of intention to produce a belief in the one case, of belief produced in the other-which, in fact, can exist only in the individual mind of the person who is its agent in the transaction. Lord Langdale found no difficulty in speaking of two railway companies as 'guilty of fraud and collusion,' though not in an exact sense.5 However, the members of a corporation cannot, even by giving an express authority in the name of the corporation, make it responsible, or escape from being individually responsible themselves for a wrongful act (as trespass in removing an obstruction of an alleged highway), which, though not a personal wrong, is of a class wholly beyond the competence of the corporation, so that, if .lawful, it would not be a corporate act."6 A corporation, also, is liable for injuries caused by the negligence of its agents and subalterns when engaged in their official duties. And this lia-bility extends not only to injuries inflicted on parties with whom the agents deal contractually, but to injuries to third parties.1 It is, therefore, liable for nuisances to third parties, and for so misusing its franchises and property as to injure third parties.2 A municipal corporation, however, is not liable for the non-exercise of discretionary functions.3 But while a corporation which puts a work out on contract is not, with certain limitations, liable for the negligence of the contractor,4 yet if a nuisance be produced incidentally to such work, such nuisance not being authorized by the legislature, the corporation is liable for the damage.5

Liable on agents' contracts.

Liable for agents' frauds, malice, and negligence.

1 Wh. on Agency, sec 57, 59, 171, 670; Gibson v. East Ind. Co., 5 Bing. N. C. 275 ; Church v. Gas Co., 6 A. & E. 846 ; Ferguson v. Wilson, L. R. 2 Ch. 77 ; Trundy v. Farrer, 32 Me. 225 ; Smith v. Proprietors, 8 Pick. 178; Merrick v. R. R., 11 Iowa, 74; Seagraves v. Alton, 13 111. 366 ; Rochford R. R. v. Wilcox, 66 111. 417.

2 Wh. on Agency, sec 687; Angell & Ames on Corp. ch. 9 ; U. S. v. City Bank, 21 How. 356 ; Frankford Bank v. Johnson, 24 Me. 490; Conant v. Bellows Falls Co., 29 Vt. 263; Bank v. Steward, 37 Me. 519 ; Cocheco Bank v. Haskell, 51 N. H. 116 ; Bank of Genesee v. Patchin, 13 N. Y. 309 ; Pope v. Bank, 57 N. Y. 126 ; Watson v. Bennett, 12 Barb. 196; Leggett v. Bank, 1 N. J. Eq. 541; Harrisburg Bank v. Tyler, 3 Watts & S. 373; Lamm v. Port Deposit Co., 49 Md. 233; Humphrey v. Mercant. Ass., 50 Iowa, 607 ; Western Cottage Co. v. Reddish, 51 Iowa, 55 ; Bank of St. Mary's v. Calder, 3 Strobh. 403; Holt v. Bacon, 25 Miss. 567.

3 Ibid. Crowley v. Mining Co., 55 Cal. 270; McKieman v. Lemsen, 56 Cal. 61.

4 Infra, sec 277; Greene's Brice's Ultra Vires, 425 ; Angell & Ames on Corp. sec 388 ; Barwick v. Joint Stock Bank, L. R. 2 Ex. 259 ; Bayley v. R. R., L. R. 7 C. P. 415 ; 8 C. P. 148 ; Moore v. R. R., L. R. 8 Q. B. 36; Boling-broke v. Board, L. R. 9 C. P. 575 ; Edwards v. R. R., L. R. 6 Q. B. D. 287; Houldsworth v. Bank, 5 App. Cas. 317 ; Butler v. Watkins, 13 Wall. 456 ; Fer-son v. Sanger, 1 W. & M. 136 ; Thayer v. Boston, 19 Pick. 516 ; Gloucester Bank v. Salem Bank, 17 Mass. 33 ; Andrews v. Suffolk Bank, 12 Gray, 461; Kibbe v. Ins. Co., 11 Gray, 163 ; Goodspeed v. East Haddam Bank, 22 Com. 530 ; Watson v. Bennett, 12 Barb. 196; Allerton v. Allerton, 50 N. Y. 670 ; Mundorff v. Wickersham, 61 Penn. St. 87; Tome v. R. R., 39 Md. 36 ; Carter p. Machine Co., 51 Md. 290; Daly v. Bank, 56 Mo. 94; Madison R. R. v. Norwich, 24 Ind. 457 ; Indianapolis R. R. v. Anthony, 43 Ind. 183; Scofield v. State, 54 Ga.

635 ; Western Union Tel. Co. v Eyser, 2 Col. T. 141; South R. R. Co. v. Chap-pell, 61 Ala. 527 ; Factors' Ins. Co. v. Dry Dock, 31 La. Ann. 149. That directors are not personally liable in such cases see infra, sec 277.

1 Copley v. Grover, 2 Woods, 494.

2 Maynard v. Ins. Co., 34 Cal. 48; 47 Cal. 207; Vinas v. Ins. Co., 27 La. Ann. 367. In the Roman law, municipal corporations, at least, were held not liable in actions charging malicious torts. Vangerow, sec 55. In L. 15, sec 1, de. dolo malo, Ulpian replies to the question whether such a corporation could be held so responsible by another question : Quid enim municipes dolo facere possunt? The dolus, in such cases, is imputable to the offending agent. It is true that penalties were imposed on municipalities, but this was rather politically than judicially, such as has been sometimes the case in England, where municipal charters were forfeited for political offences. But that the members of private corporations were held liable for delicts, see Savigny, Syst. ii. p. 340.

3 3d ed. 127.

4 Citing Lord Blackburn, Erlanger v. Phosphate Co., 3 App. Ca. 1264.

5 Solomon v. Laing, 12 Beav. 382.

6 Mill v. Hawker, L. R. 9 Ex. 309 no judgment on this part of the case (according to Mr. Pollock) being given in Ex. Ch. L. R. 10 Ex. 92. It has been held in Georgia that as directors of a corporation are quasi trustees they cannot bind it by a contract to pay usury. Planters' Co. v. Johnson, 62 Ga. 308.