incur indebtedness to a specified amount, borrowing in excess of that amount is unauthorized.' And it is so in the case of a corporation borrowing a sum of money less than the amount authorized by its charter but which added to amounts previously borrowed makes the total amount of indebtedness greater than that it is authorized to contract. Under an act incorporating a railway company, and providing that the company "shall have the power and authority to borrow money in any sum or sums not exceeding in amount one-half of the par value of the capital stock," the par value of the capital stock is the amount of paid-up capital only, and not the full amount of authorized capital.

incurred an indebtedness greater than its authorized limit, the , contract is binding upon it whenever it has actually received the money borrowed. And extending the principle still further, where the directors of a corporation, acting in good faith, on the reports and representations of its authorized agents, borrow money for the purposes of the corporation, it is not necessary to show that the money so borrowed was actually appropriated to the use of the corporation, in order to establish an indebtedness against it, or a personal liability of its stockholders in favor of the lender of the money, or of the sureties who pay the loan. Under an authority to borrow money a railroad company has no right to raise money by the issue of irredeemable bonds entitling the holder merely to a share of the earnings after payment of a certain dividend to the stockholders. The issue of preferred stock is analogous to this deferred bond scheme and is likewise not within the borrowing power.

§ 382. Exclusive privileges.- Exclusive and irrevocable franchies may be granted to corporations, when there is no constitutional inhibition thereof." Charters with exclusive privileges have been repeatedly granted by the older States. They have been deemed necessary to the promotion of enterprises of public utility, and have in many instances operated greatly to the convenience of the community, as the means of accomplishing public improvements which would not otherwise have been undertaken, or must have been delayed to a much later period." The right to make such exclusive grants has been supported by some of the most eminent counsel in the United States, and has not been contested by others who would not have failed to deny it had it been deemed of ques

1 Pool v. West Point &c. Assoc., 30 Fed. Rep. 513; Warfield v. Marshall County &c. Co., 72 Iowa, 666.

shire Bridge, (1834) 7 N. H. 35; Bridge Co. v. Hoboken Land Co., 13 N. J. Eq. 81: The Binghamton Bridge, 3

2 Borland v. Haven, (1889) 37 Fed. Wall. 51; Bridge Proprietors v. HoRep. 394. boken Land Co., 1 Wall. 116; Che

Taylor v. Philadelphia &c. R. Co., nango Bridge Co. v. Binghamton (1881) 7 Fed. Rep. 386. Bridge Co., 27 N. Y. 87.

4 Kent v. Quicksilver Min. Co., 78 N. Y. 159. But Burt v. Rattle, 31 Ohio St., 116, was different.

Piscataqua Bridge v. New Hamp

6 Parker, J., in Piscataqua Bridge v. New Hampshire Bridge, (1834) 7 N. H. 35, 63, citing Gibbons v. Ogden, 9 Wheat. 97, note a.

tionable character. It has received the sanction of some of the most learned tribunals in the union and we see no reason to doubt the soundness of the principle. But such grants are seldom now made, there being contrary provisions or reservations of power in general laws or in the special laws or charters, almost invariably. And articles of association, under a general act of incorporation, are a part of the law under which a company is organized, and subject to alteration or repeal, the same as any other part of the general system.3 Such a grant is to be construed most strictly against the grantee and in favor of the State; nothing passes by implication, especially where it would be in derogation of the sovereign power; and if the grant does not, in clear and explicit language, make the franchise exclusive, it will not be so understood. The exercise of the corporate franchise, being exclusive of individual. rights, can not be extended beyond the letter and spirit of the act of incorporation. And exclusive privileges of supplying water to the public or of manufacturing gas, or of supplying light and heat to the public by any other means, do not extend to companies formed for the purpose of furnishing light by electricity. Powers, however, that are clearly implied with those incidental to the corporation are as much beyond the control of subsequent legislation, as those expressly

1 Parker, J., in Piscataqua Bridge v. New Hampshire Bridge, (1834) 7 N. H. 35, 63, citing Charles River Bridge v. Warren Bridge, 7 Pick. 393, 440; Livingston v. Van Ingen, 9 Johns. 525, 551; Ogden v. Gibbons, 4 Johns. Ch. 150; Gibbons v. Ogden, 17 Johns. 488; s. c. 9 Wheat. 74, 143.

2 For example, the right of the legislature, under the code of Georgia, S$ 1651, 1682, reserving to the State the right to modify or withdraw the charter of any private corporation created by it, and to amend the charter of a railroad company before the road is built, is not affected by executory contracts that may have been made for the construction of the road, and performance of such con

tracts, so far as they are rendered impossible by such amendment, will be excused, as such impossibility results from the act of the law. Macon & B. R. Co. v. Stamps, (Ga. 1890) 11 S. E. Rep. 442.

3 Sherman v. Smith, 1 Black, 587. 4 Charles River Bridge v. Warren Bridge, 11 Pet. 420; Gaines v. Coates, 51 Miss. 335; Delancy v. Ins. Co., 52 N. Y. 581; Lehigh Water Co.'s Appeal, 102 Pa. St. 515.

5 Beaty v. Knowler, (1830) 4 Pet. 162; Appeal of Scranton Electric Light & Heat Co., (1888) 122 Pa. St. 154; s. c. 9 Am. St. Rep. 79.

6 Appeal of Scranton Electric Light & Heat Co., (1888) 122 Pa. St. 154; s. c. 9 Am. St. Rep. 79, citing Emerson v. Commonwealth, 108 Pa. St. 111.

granted. These questions, however, are to be found more fully treated in the chapter upon the amendment and repeal of corporate charters.

Ş 383. Notice of corporate powers.-The constitution of a corporation, and consequently the corporate powers, are presumed to be known as matters of law to all persons interested in the corporate enterprise or dealing with the corporation.2 Every person who enters into a contract with a corporation is bound at his peril to take notice of the legal limits of its capacity. And all persons dealing with a corporation are bound to take notice of its charter, constitution, by-laws, and manner of doing business. But if a contract would under ordinary circumstances be within the corporate powers, and the other party, exercising reasonable care, does not discover that by reason of the particular circumstances of the case the corporation is in that instance exceeding its charter privileges, it can not plead its want of authority as a ground upon which to avoid liability. There is much authority in favor of the

1 People v. Manhattan Co., 9 Wend. 351; People v. Marshall, 1 Gilman, 672.

2 Taylor on Corporations, § 264; Davis v. Old Colony R. Co., 131 Mass. 258; Relfe v. Rundle, 103 U. S. 222; Salt Lake City v. Hollister, 118 U. S. 256, 263; Bohmer v. City Bank, 77 Va. 445; Leonard v. American Ins. Co., 97 Ind. 299; Haden v. Farmers' &c. Assoc., 80 Va. 683; Spence v. Mobile &c. Ry. Co., 79 Ala. 576.

Pearce v. Madison &c. R. Co., 21 How. 441; Davis v. Old Colony R. Co., 131 Mass. 258; s. c. 41 Am. Rep. 221; Ashbury Ry. &c. Co. v. Riche, L. R. 7 H. L. 653; East Anglian Ry. Co. ". Eastern Counties Ry. Co., 11 C. B. 775.

4 Bocock v. Alleghany Coal & Iron Co., (1887) 82 Va. 913; s. c. 3 Am. St. Rep. 128; Elevator Co. v. Memphis &c. R. Co., (1887) 85 Tenn. 703.

Express Co. v. Railroad Co., 99 U. S. 191, 199; Zabriskie v. Cleve

land &c. R. Co., 22 How. 381, 398; Bissell v. Michigan &c. R. Co., 23 N. Y. 264; Davis v. Old Colony R., 131 Mass. 258, 260; s. c. 41 Am. Rep. 221; Charleston &c. Turnpike Co. v. Willey, 16 Ind. 34; Eastern Counties Ry. Co. v. Hawkes, 5 H. L. Cas. 331, 338. Cf. Fontaine v. Carmathen Ry. Co., 5 Eq. 322. Thus where directors have power to bind the company on certain conditions, a person dealing with them may assume that the conditions have been fulfilled. Potterdell v. Fareham Brick Co., L. R. 1 C. P. 674; Royal British Bank v. Turquand, 5 El. & B. 248; s. c. 6 Ell, & B. 327. And an innocent holder of negotiable securities which it is in the power of directors to issue is not bound to see that certain preliminaries on the part of the company which ought to have gone through have been gone through. In re Laud Credit Co., Ex parte Iverend & Gurney, 4 Ch. 460.

general rule that outsiders are not charged with knowledge of the by-laws of a corporation. Accordingly, it has been held that it is no defense to an action for breach of a contract by a corporation that, in entering into the contract, it violated its own rules, when that fact was within its knowledge at the time the contract was entered into.' But where the want of power is apparent upon comparing the act done with the terms of the charter, the party dealing with the corporation is presumed to haye knowledge of the defect and the defense of ultra vires is available against him.3

§ 384. Notice of powers of corporate officers. This doctrine of notice of corporate powers of course includes notice of the authority and powers of the agents and officers by whom only the corporation acts. Therefore persons dealing with the managers of a corporation must take notice of the limitations imposed upon their authority by the act of incorporation. Although a person dealing with a domestic corporation is charged with knowledge of the general law regulating corporations, statutory as well as unwritten, and even when dealing with the agents of a foreign corporation must likewise take notice of every limitation in its charter, yet he is not affected with notice of statutes of a general nature enacted by the foreign State, though they tend to abridge the corporate

1 Fay v. Noble, 12 Cush. 1; Ten Broek v. Boiler &c. Co., 20 Mo. App. 19; Kingsly v. New England Ins. Co., 8 Cush. 403; Mechanics' Bank v. Smith, 19 Johns. 115; AngloCalifornia Bank v. Grangers' Bank, 63 Cal. 353.

2 Samuel v. Fidelity &c. Co., (1888) 49 Hun, 122. Thus in a recent case it was held that parties contracting with a corporation without actual notice of rules adopted by it, by which it exempts itself from liability on contracts unless they are in writing and signed by its president, will not be bound by such rules. Walker v. Wilmington &c. R. Co., (1887) 26 S. C. 80.

3 Bissell v. Michigan &c. R. R. Co., 22 N. Y. 264.

4 Beatty v. Marine Ins. Co., 2 Johns. 109; Dabney v. Stevens, 2 Sweeney, 415, aff'd 46 N. Y. 681; Silliman v. Fredericksburg &c. R. Co., 27 Gratt. 119; Salem Bank v. Gloucester Bank, 17 Mass. 1, 29; Root v. Wallace, 4 McLean, 8; Zabriskie v. Cleveland &c. R. Co., 23 How. 381, 398; In re County Life Assur. Co., L. R. 5 Ch. 288, 293; Royal British Bank v. Turquand, 6 El. & Bl. 327; Ernest v. Nicholls, 6 H. L. C. 401, 419; Fountaine v. Carmarthen Ry. Co., L. R. 5 Eq. 316, 322.

Pearce v. Madison &c. R. Co, 21 How. 441.