194. (b) Ratification by the corporation. A corporation like a natural person may ratify any act of its agents which it could itself lawfully perform. And a transaction, although originally unauthorized, once ratified, becomes as binding upon a corporation as in case of a ratification by an individual. Thus, under a statute making the written assent of stockholders owning two-thirds of the stock of a manufacturing corporation indispensable to a valid mortgage, such assent, if given afterwards, will validate the mortgage, if no intervening equities have arisen, even though it be not filed in the office of the clerk of the county where the mortgaged property is situated. A ratification by the stockholders made with full knowledge of all the material facts, although in ignorance of their legal effect, is conclusive against the company.* The stockholders only can ratify the unauthorized acts of directors and of such corporate officers as are elected directly by the shareholders. The question of ratification of the acts of directors can seldom arise in an American court, for the reason that, in general, the whole power of the corporation itself is vested in the board of directors; therefore, what may be lawfully done by the corporation can generally be done. by the board of directors. In other words, an act beyond the powers of the directors is ultra vires the corporation and void. In England, on the contrary, the question may, and frequently does, arise because the directors are regarded simply as special agents of the corporation. 5 1 Oregonian Ry. Co. v. Oregon Ry. & Nav. Co., (1885) 28 Fed. Rep. 505, where it was held that the entry into possession of a leased road in pursuance of a lease executed by its officers without due authority, and operating the same and paying the rent therefor, as reserved in said lease, is ample evidence of the ratification. Planters' Bank v. Sharp, 4 Sm. & M. 75; s. c. 43 Am. Dec. 470; Fleckner v. Bank of United States, 8 Wheat. 338, 363; Greenleaf v. Norfolk Southern R. Co., 91 N. C. 33; First National Bank v. Ficke, 75 Mo. 178; s. c. 42 Am. Rep. In such cases the obviously 397; Kelsey v. National Bank, 69 Pa. St. 426. 220 Cent. L. J. 412; Fleckner v. U. S. Bank, 8 Wheat. 338. 3 Rochester Savings Bank v. Averell, (1883) 96 N. Y. 467, construing N. Y. Laws 1864, ch. 517, and 1871, ch. 481. 4 Kelley v. Newburyport & Amesbury Horse R. Co., (1885) 141 Mass. 496. 5 Payson v. Stower, 2 Dill. 427; In re New Zealand Banking Co., L. R. 3 Ch. 131; Lane's Case, 1 De Gex, J. & S. 504. 6 Lindley on Part. (4th ed.) p. 249. just rule is adopted that if the act of the directors to be ratified is one which the company itself has no power to perform, no amount of acquiescence on the part of the shareholders can effect a ratification. "Not if every shareholder of the com ́pany had said, 'That is the contract which we desire to make, which we authorize the directors to make, to which we sanction the placing the seal of the company.' 999 1 In other cases, whether the company, i. e., the body of the shareholders, have ratified an act of the directors in excess of their authority depends upon whether the act has been brought to the notice of the shareholders directly and by them ratified, or, whether it has been adopted by other agents of the company having authority to act in the premises. While the unauthorized acts of officers not elected by the stockholders may be sufficiently ratified by the superior officers appointing them, the shareholders also may impart validity to such acts by their ratification thereof. So also a corporation, after having once confirmed acts done by one who has passed himself off as an agent, is estopped from denying his authority on the ground that he was not duly chosen by the directors. Where a contract under seal has been executed by the officers of a corporation in their individual names, it is competent to aver and prove by parol that the corporation, as the real party in interest, adopted, ratified, and undertook to carry out the terms of the contract in such a manner as to become bound thereby." § 195. (c) Ratification by directors and other officers.Any officer or agent of a corporation may give validity to the unauthorized acts of his subordinates, provided they be of a But see Green v. Nixon, 23 Beav. 530. 1 Ashbury &c. R. Co. v. Riche, 2 App. Cas. 653, 673; s. c. I. R. 9 Exch. 224, 262, per Blackburn, J. 2 Lindley on Part. (4th ed.) 259. See Burgess and Stock's Case, 2 Johns. & H. 441; Irvine v. Union Bank, 2 App. Cas. 366; Athenæum L. Assurance Co. v. Porley, 3 De Gex & J. 294; Spackman v. Evans, L. R. 3 H. L. 171; Evans v. Smallcombe, L. R. 3 H. L. 249; Lane's Case, L. R. 7 C. P. 43; Sewell's Case, L. R. 3 Ch. 131; Kent v. Jackson, 14 Beav. 367; Hodgkinson v. Nat. Live Stock Ins. Co., 26 Beav. 473; 20 Cent. L. J. 414. 3 Mount Washington Hotel Co. v. Marsh, (1885) 63 N. H. 230. 4 Flynn v. Des Moines &c. Ry. Co., 63 Iowa, 490. ♪ Williams v. Uncompahgre Canal Co., (Colo. 1890) 22 Pacif. Rep. 806. kind which he might have authorized them to perform.1 Thus, directors may ratify the unauthorized acts of their appointees or the acts of other corporate officers which should not have been done without authority first obtained from the directors. But of course the managers of a company can not ratify an act which under the charter can only be done with the consent of the stockholders. Ratification by directors may be made by accepting the report of a committee stating the facts," or by the acquiescence of a majority of the directors with full knowledge of the contract so ratified." Ratification may be also presumed from a failure to exercise promptly the right of disaffirmance. The president and sec 1 Pacific R. Co. v. Thomas, 19 Kan. what they are able to know, and 256. 2Lyndeborough Glass Co. v. Massachusetts Glass Co., 111 Mass. 315; Sherman v. Fitch, 98 Mass. 59: Fleck ner v. Bank of United States, 8 Wheat 338, 368; Scott v. Middletown &c. R. Co., 86 N. Y. 200. 3 Perry v. Simpson &c. Co., 37 Conn. 520; Sherman v. Fitch, 98 Mass. 59; Darst v. Gale, 83 Ill. 136. what they undertook to know when, The 4 Crum's Appeal, (1870) 66 Pa. St. show that the directors, or a majority 474. 5 Thus, a ratification of the treasurer's use of the corporate seal on notes, may be presumed, where a committee of the directors pronounced the notes genuine, where interest was paid on them, and reports stating this fact were accepted. St. James Parish v. Newburyport & Amesbury Horse R. Co., (1885) 141 Mass. 500. 6 In an action on a contract executed by the president of the defendant corporation without authority from the directors, where the plaintiff has performed all the acts required of him by the contract, and relies on the acquiescence of the directors as a ratification, a charge that "all directors are presumed to know what it is their duty to know, of them, actually knew of the contract and its terms, and with such knowledge acquiesced in it. Murray v. Nelson Lumber Co., (1887) 143 Mass. 250. 7 Under the by-laws of a corporation, its board of directors retained the power in their hands to control the president and superintendent whenever it was thought proper to do so; and where a release was made of a contract by the president, and reported to the board, but no act or resolution of disaffirmance of the release was passed till two years after notice of the transaction, and about a year and a half after suit had been commenced upon the original contract, it was held that a ratification of the release was presumed, the right of disaffirmance not being retary may thus ratify acts brought to their notice. But the president can not ratify his own wrongful act. In an action for breach of a contract made by the treasurer of defendant for wharf privileges, where the superintendent of defendant testified that it "had used the plaintiffs' wharf since the date of the agreement, and acted under it," a charge that this was a sufficient ratification of the contract if defendant accepted it, acted under it, and performed its terms, with full knowl edge of its import, was sustained. § 196. Ratification by acquiescence. The ratification of the unauthorized acts of officers of corporations, may be presumed indirectly from acts of recognition and acquiescence beyond the time during which disaffirmance should have been made. This is true even in respect of the torts of its agents. exercised promptly, and that the suit, having been begun six months after notice of the transaction, if it can be considered as a disaffirmance of the release, came too late. Indianapolis Rolling-mill Co. v. St. Louis, Ft. S. & W. R. Co., (1887) 120 U. S. 256. 1 In an action by a tenant under a lease executed by an unauthorized agent of a corporation, it appeared that for more than a hundred days after the president and secretary had received notice of the lease, nothing was done towards repudiating it, and meantime plaintiff was allowed by the agents in charge to expend labor and money in developing the property. During sixty days of the time plaintiff acted under a letter from the duly-accredited agent of the company, which gave him to understand that the company had sanctioned the lease; accordingly he was held entitled to recover. Hoosac Mining & Milling Co. v. Donat, (1888) 10 Colo. 529. 2 Where the president of a milling company incorporated for the purpose of converting and selling agri cultural products, purchases flour in the name of the company, and ships it to a dealer in options in grain, and pledges the flour in payment of options on wheat, the purchase of flour and wheat being unknown to and unauthorized by the ing to it by reason thereof, his acts milling company, no benefit resultwill not amount to a ratification of the purchase. Getty v. Barnes Milling Co., (Kan. 1888) 19 Pacif. Rep. 617. gation Co., (N. C. 1890) 10 S. E. Rep. 3 Taylor v. Albemarle Steam Navi897. 50 Mich. 528. A railroad 4 Scott v. Jackson M. E. Church, tion should be deemed to have ratified a settlement by its directors by corporagiving notes, where for ten years its liability on the notes was not questioned, where it paid interest on them, and accepted reports in which they were referred to as outstanding obligations, Kelley v. Newburyport. Mass. 496. So the defense of ultra & Amesbury Horse R. Co., (1885) 141 vires was held not available in an action by an artist to recover on a and servants; and a corporation which ratifies or accepts the unauthorized malicious acts of its agents is liable in exemplary damages.1 But ratification is not to be lightly presumed from silence alone; certainly not, where the act is wholly beyond the ordinary duties of the officers or agents performing it. And where a corporation sues to set aside a contract claimed to have been agreed to by its directors in fraud of its rights, the other party to the contract can not contend that the acquiescence of the corporation precludes its action. The existence of a new board of directors is no ground for denying to a corporation the right to rescind a fraudulent contract entered into by a former board. § 197. Ratification by acceptance of benefits. If a person assuming to act as agent of a corporation, but without. legal authority, or an agent in excess of his proper authority, make a contract, and the corporation knowingly receive and retain the benefit of it, this will be a ratification of the contract and render the corporation liable as a party to it. In contract, made with the treasurer and performed in good faith, to make a statue of an inventor for whom the defendant corporation was named, to be erected in the New York Central Park; a scheme for voluntary subscriptions having proved abortive. Ellis v. Howe Machine Co., 9 Daly, (N. Y.) 78. An allegation in the complaint of a corporation that the contract was entered into "with the plaintiff," and by setting forth the contract in terms by which it appeared to have been made by the president in behalf of the corporation, has been held sufficient to show authority in the president to make the contract. St. Paul Land Co. v. Dayton, (1887) 37 Minn. 364. 1 Galveston, Harrisburg &c. Ry. Co. v. Donahoe, (1881) 56 Tex. 162. 2 Kersey Oil Co. v. Oil Creek & Allegheny R. Co., 12 Phila. 374. 4 Metropolitan Elevated Ry. Co. v. Manhattan Elevated Ry. Co., (1884) 11 Daly, 373. 5 Metropolitan Elevated Ry. Co. v. Manhattan Elevated Ry. Co., (1884) 11 Daly, 373. 6 Kickland v. Menasha &c. Co., 68 Wis. 34: Paxton Cattle Co. v. First National Bank, 21 Neb. 621; s. c. 59 Am. Rep. 852; Holmes v. Kansas City Board of Trade, 81 Mo. 137; Paulding v. London &c. Ry. Co. 8 Ex. 867; Beverly v. Lincoln Gas Light &c. Co., 6 Adol. & Ell. 829; Tuscaloosa &c. Co. v. Perry, (1888) 85 Ala. 158. The law upon this point is well stated by Chief Justice Shaw in a frequently cited case: "It seems to be now well settled in this commonwealth, since the great multiplication of corporations, extending to almost all the concerns of business, that trading corporations, whose dealings embrace all 3 Kersey Oil Co. v. Oil Creek & transactions from the largest to the Allegheny R. Co., 12 Phila. 374. minutest, and affect almost every in |