or controlled, and the business of which was managed under a consolidated arrangement, which had been in force between the defendants, for some time previous to the injury complained of; that, being so engaged, they undertook and assumed to carry him, the plaintiff, as a passenger, from Chicago, or a point near that place, eastward over the consolidated line of road; that he took his seat in their cars accordingly, and that, during the transit, he was injured by an accident which happened through their carelessness and neglect. Assuming the truth of this statement, there is no doubt of the plaintiff's right to

recover.

But the defendants deny the legal truth of these facts, because one of the companies was chartered by the legislature of Michigan, with power to build a road in that state, and the other by the legislature of Indiana, with power to build one in that state. They both insist, that they had no right or power, under their respective charters, to consolidate their business in the manner stated, and especially, that they could not legally, either separately or jointly, acquire the possession and use of a connecting road in the state of Illinois, and undertake to carry passengers or freight over the same. They do not deny that their boards of directors and agents, duly authorized to wield all the powers which the corporations themselves possessed, entered into the arrangements which have been mentioned, nor that, in the execution of those arrangements, they made the contract with the plaintiff to carry him as a passenger; nor do they deny that they received the benefit of that contract, in the customary fare which he paid. Their defense is, simply and purely, that they transcended their own powers, and violated their own organic laws. On this ground, they insist that their business was not, in judgment of law, consolidated; that they did not use and operate a road in Illinois; that they did not undertake to carry the plaintiff over it; and did not, by their negligence, cause the injury of which he complains; but that all these acts and proceedings were, in legal contemplation, the acts and proceedings of the natural persons who were actually engaged in promoting the same.

Can, then, two railroad corporations, having connecting lines, thus unite their business, for the purpose of promoting their common interest; charter another connecting road, in furtherance of the same policy; hold themselves out to the public as carriers over the whole route; enter into contracts accordingly; receive the benefit of those contracts; and then, when liabilities arise, interpose the violation of their own charters to shield them from responsibility? Such a defense is shocking to the moral sense, and although it appears to have some support in judicial opinions, I think it has no foundation in the law.

[Theory of incapacity.]-The doctrine has certainly been asserted on some occasions, that in all cases where the contracts and dealings of a corporation are claimed to be invalid for want of power to enter into the same, a comparison must be instituted between those contracts and dealings and the charter, and, if the charter does not appear to embrace them, then that they must be adjudged void to all intents

and purposes, and in all conceivable circumstances. The reasoning on which this doctrine has been usually claimed to rest, denies, in effect, that corporations can, or ever do, exceed their powers. They are said to be artificial beings, having certain faculties given to them by law, which faculties are limited to the precise purposes and objects of their creation, and can no more be exerted outside of those purposes and objects than the faculties of a natural person can be exerted in the performance of acts which are not within human power. In this view, these artificial existences are cast in so perfect a mold that transgression and wrong become impossible. The acts and dealings of a corporation, done and transacted in its name and behalf, by its board of directors, vested with all its powers, are, unless justified by its charter, according to this reasoning, the acts and dealings of the individuals engaged in them, and for which they alone are responsible. But such, I apprehend, is not the nature of these bodies; like natural persons, they can overleap the legal and moral restraints imposed upon them: in other words, they are capable of doing wrong. To say that a corporation has no right to do unauthorized acts, is only to put forth a very plain truism; but to say that such bodies have no power or capacity to err, is to impute to them an excellence which does not belong to any created existences with which we are acquainted. The distinction between power and right is no more to be lost sight of in respect to artificial, than in respect to natural per

sons.

In the case of The Life and Fire Insurance Company v. Mechanics' Fire Insurance Company, 7 Wend. 31, it was contended that a certain corporate transaction, if unlawful, was to be regarded as the act of the agents or officers of the company, and not of the company, and, therefore, that the company should be allowed to recover back the money or property improperly disposed of. That doctrine was refuted by Mr. Justice Sutherland, in this language: "This would be a most convenient distinction for corporations to establish-that every violation of their charter, or assumption of unauthorized power on the part of their officers, although with the full approbation of their directors, is to be considered the act of the officers, and is not to prejudice the corporation itself. There would be no possibility of ever convicting a corporation of exceeding its powers, and thereby forfeiting its charter, or incurring any other penalty, if this principle could be established." These remarks suggest an unanswerable argument against the doctrine. Why, it may be asked, does the law provide the remedy by quo warranto against corporations, for usurpation and abuse of power? Is it not the very foundation of that proceeding, that corporations can and do perform acts and usurp franchises beyond the rightful authority conferred by their charters? Most assuredly this is so. The sovereign power of the state interposes, alleges the excess or abuse, and on that ground demands from the courts a sentence of forfeiture.

Corporations are said to be clothed with certain powers enumerated

in their charters, or incidental to those which are enumerated, and it is also said they can not exceed those powers; therefore, it has been urged, that all attempts to do so are simply nugatory. The premises are correct, when properly understood; but the conclusion is false, because the premises are misinterpreted. When we speak of the powers of a corporation, the term only expresses the privileges and franchises which are bestowed in the charter; and when we say it can not exercise other powers, the just meaning of the language is, that as the attempt to do so is without authority of law, the performance of unauthorized acts is a usurpation, which may be a wrong to the state, or, perhaps to the shareholders. But the usurpation is possible. The privileges and franchises granted are not the whole of a corporation. Every trading corporation aggregate includes an association of persons having a collective will, and a board of directors or other agency in which that will is embodied, and through which it may be exerted in modes of action not expressed in the organic law. Thus, like moral and sentient beings, they may and do act in opposition to the intention of their creator, and they ought to be accountable for such acts.

[Theory of illegality.] But the doctrine, that corporations can never be bound by engagements not justified by the grant of power from the state, is next defended on a different ground. Although it be conceded that they are present and acting as legal persons, or entities, when such engagements are entered into, it is said that all contracts in excess of the rightful power possessed by corporations are illegal, and therefore void. This is an argument totally different from the one which has been so far examined, because it necessarily imputes the making of the contract to the corporate person or being; whereas the doctrine which I have endeavored to refute denies that proposition. The very point of the supposed illegality consists, or, at least, it may consist, in the performance of acts perfectly lawful in themselves, but which being done by a corporation and not by individuals, are pronounced illegal, because they are so done without authority contained in the charter.

But is it true that all contracts of corporations for purposes not embraced in their charters are illegal, in the appropriate sense of that term? This proposition I must deny. Undoubtedly, such engagements may have the vices which sometimes infect the contracts of individuals. They may involve a malum in se or a malum prohibitum, and may be void for any cause which would avoid the contract of a natural person. But where no such vices exist, and the only defect is one of power, the contract can not be void, because it is illegal or immoral. Such a doctrine may have some slight foundation in the earlier English railway cases, East Anglian Railway Co. v. Eastern Counties Railway Co., 11 C. B. 775, 7 Eng. Law. & Eq. 509; McGregor v. Deal and Dover Railway Co., 18 Q. B. 618; but it was never established, and is not now received in the English courts. Mayor of Norwich v. Norfolk Railway Co., 4 El. & Bl. 397; Eastern Counties Railway Co. v. Hawkes, 5 H. L. C. 347.

The books are full of cases upon the powers of corporations, and

the effect of dealing in a manner and for objects not intended in their charters; but with the slight exception named, there is an entire absence, not only of adjudged cases, but of even judicial opinion or dicta, for the proposition that mere want of authority renders a contract illegal. Such a proposition seems to me absurd; the words. ultra vires and illegality represent totally different and distinct ideas. It is true, that a contract may have both these defects, but it may also have one without the other. For example, a bank has no authority to engage, and usually does not engage, in benevolent enterprises. A subscription, made by authority of the board of directors and under the corporate seal, for the building of a church or college, or an almshouse, would be clearly ultra vires, but it would not be illegal; if every corporator should expressly assent to such an application of the funds, it would still be ultra vires, but no wrong would be committed, and no public interest violated. So a manufacturing corporation may purchase ground for a school-house, or a place of worship for the intellectual, religious, and moral improvement of its operatives; it may buy tracts and books of instruction for distribution amongst them. Such dealings are outside of the charter; but, so far from being illegal or wrong they are in themselves benevolent and praiseworthy. So a church corporation may deal in exchange; this, although ultra vires, is not illegal, because dealing in exchange is, in itself, a lawful business, and there is no state policy in restraint of that business.

To illustrate the subject in another manner: An agent may make a contract in the name and behalf of his principal, but not within the scope of his agency. If the consideration and purpose of such a contract be lawful, it may be void as against the principal, but not on the ground of illegality. A corporation is not an agent of the state, nor, in any strict sense, of the shareholders. But it derives its powers from the state, and it may transcend those powers for purposes which, in themselves considered, involve no public wrong. Contracts so made may be defective in point of authority, and may contemplate a private wrong to the shareholders; but they are not illegal, because they violate no public interest or policy. My meaning, in short, is that the illegality of an act is determined in its quality, and does not depend on the person or being which performs it.

There

[Underlying reasons and policy-Nature of a corporation.] has been, I think, some want of reflection, even in judicial minds, upon the reasons and policy which mainly govern in the granting of charters to corporations, with certain specified powers and no others. A private or trading corporation is essentially a chartered partnership, with or without immunity from personal liability beyond the capital invested, and with certain other convenient attributes which ordinary partnerships do not enjoy. It is also something more than a partnership, because the legal or artificial person becomes vested with the title to all the estate and capital contributed, to be held and used, however, in trust for the shareholders. Now, in a well-regulated unincorporated partnership, the articles entered into by the associates specify the objects of their association. But, suppose the same associates

desire a charter of incorporation for the more convenient prosecution of the same business, and obtain one. We shall find it to contain the like specification, which becomes the grant of power from the sovereign authority of the state. I am speaking of powers and privileges granted which are not, in their essential nature, corporate or public franchises, as distinguished from the private enterprises which any class of citizens may embark in; and, with the exception of municipal or governmental charters, the class of powers here referred to will be found to cover nearly the whole field of corporate rights. It is not difficult, then, to see the reason and policy which underlie such grants. The associates ask for a charter, in order to carry on their business with greater advantages; and the same reason exists for a specification of the purposes of their organization, as in the case of an association without a charter. The charter takes the place of the articles of agreement, and becomes the appropriate rule of action. No public interest or policy is involved, because the objects of the grant are not of a public nature; the powers and rights specified are identical with those which any private person or association of persons may exercise. If those who manage the concerns of a simple partnership deal with the funds in a manner or for purposes not specified, their acts are ultra vires; and if the directors of such corporation as I am here speaking of do the same thing, their acts are also ultra vires in the same sense and no other. To apply the word "illegality" to such transactions, is to confound things of a totally different nature. It is only private interests which are affected by them; and there is no statute or rule of the common law by which they become public offenses.

In every treatise upon the law of contracts-and there are many of them-we shall find an enumeration of such as are immoral or illegal ; but amongst them can not be found a specification of the promise or agreement of a corporation, founded on a lawful consideration, and to do that which in itself is lawful to be done, although not within the powers granted. It has always been supposed, and to that effect are all the authorities, that contracts are illegal either in respect to the consideration or the promise. Where both of these are lawful and right, the maxim, "ex turpi contractu non oritur actio," can have no application. The incapacity of the contracting party, whether it be a corporation, an infant, a feme covert, or a lunatic, has nothing to do with the legality of the contract, in that sense of the word which is now under discussion. So, in the treatises upon corporations, we shall find their rights and privileges to be very extensively considered, but nowhere an intimation that their dealings outside of their charters are deemed illegal for that cause.

[Estoppel.] Let us now concede that the unauthorized contracts of a corporation are illegal in the sense contended for; it by no means follows that they are never to be enforced. An agreement declared by statute to be void can not be enforced, because such is the legislative will; but when, without any such declaration, it is simply illegal, it is capable of enforcement, where justice plainly requires it. Circum