of the earlier cases. His concession that the large increase of the business of common carriers, which has rapidly multiplied corporate associations for that purpose, and which has rendered "it desirable for them and the business community that they should have power to make business connections and contracts with each other, and assume joint responsibility for carriage beyond the termination of their routes"; and that "the tendency of the courts is almost universally to recognize their power so to do, where the purpose is auxiliary, beneficial and within a reasonable limit, as an intended or necessary incidental power by a liberal construction of the legislative grants," and the discordant decisions of the courts as to the application of the doctrine to such contracts, or as to what cases it should, in suits on executory and executed contracts, be applied or qualified, may well lead us to seriously consider whether in its application to such cases the doctrine rests upon any sound foundation whatever. In many recent cases and well-reasoned opinions it has been maintained, as we shall hereafter see, that it has no proper application to such contracts; that it never rested on any solid foundation in its application, especially to executed contracts, where the corporation had received and appropriated the benefit of them. These views will be found ably presented in the following leading case of Bissell v. The Michigan Southern & Northern Indiana Railroad Companies, 22 N. Y., 258.

Where the doctrine of Hood v. New York & New Haven Railroad Company was not followed.-In Cary v. Cleveland & Toledo R. Co., 29 Barb., 35, the plaintiff brought an action to recover the value of baggage delivered to the defendant at Toledo, in the State of Ohio, to be carried to Buffalo, in the State of New York, and there delivered to the passenger to whom it belonged, but which the defendant failed to deliver. The defendant was a corporation organized and constituted under the laws of the State of Ohio for the construction and operation of a railroad for the transportation of freight and passengers between Toledo and Cleveland, in that State. Between Cleveland and Buffalo there were two other railroad lines in operation, the Cleveland, Painsville & Ashtabula and the Buffalo & State Line. At Buffalo and Toledo tickets were sold and baggage checked over all these routes; and the plaintiff's assignor purchased a ticket of defendant's agent, at Toledo, over the whole route to Buffalo, and received a check for her baggage which entitled her to receive it at Buffalo.

One of the defenses interposed was, that the contract was ultra vires, the defendant having no power to contract to carry beyond the terminus at Cleveland. But the court held that where corporations owning separate lines of railroad connect with each other and form a continuous route, and enter into an agreement with each other by which at either terminus passage tickets may be sold and baggage checked over their roads to the other terminus, a person purchasing a passage ticket at one terminus over all the roads, and receiving a check for his baggage over the whole route, could recover of the company from whom he purchased the ticket the value of his baggage in case of the loss of the same, under the same circumstances that he might recover if the company from whom he purchased had owned and operated the whole route; and that the plea of ultra vires could not be successfully interposed in such a case. In this case

the court say: "Contracts should be palpably ultra vires before they should be held to be void for that reason, at the instance of the company, as agaiust innocent third persons dealing with it. Corporations should be restricted so far as courts can in the exercise of their powers limit them to the exercise of their legitimate functions; but the plea is not a gracious one, that a contract which they have deliberately made, and of which they have received the full benefit, is void for want of power in them to make it. Eminent judges have expressed regret that covenants entered into deliberately and with fair intentions on both sides, should be resisted on the ground of ultra vires; a sentiment, says Lord CAMPBELL, after quoting it from Lord St. Leonard, in which we should all concur.' (Mayor of Norfolk v. Norfolk Railway 4 E. & B., 446.)

"EARLE, J., in the case last cited, conceding that it stood decided that a statute incorporating a company for public purposes prohibits by implication some contracts, claims that the prohibition by which that principle is to be implied, and the class of prohibited contracts is to be defined, is not laid down with the precision which removes doubt, and advances the opinion that the legality of this doctrine of an implied prohibition could be properly discussed only in a court of error. But acts of a corporation not within the corporate power, ultra vires, are void, and the contracting parties are not estopped by the contract itself from alleging the invalidity, when they are sought to be enforced. Mechanics' Bank v. New York & New Haven Railroad Company, 13 N. Y. (3 Kern.), 599. It would seem from the reasoning of Judge COMSTOCK, in the case cited, that there would be no case in which the corporation would be estopped from setting up a want of power to make the contract upon which it is sought to be charged. Whether the learned judge intended to be so understood is not material in this case, for the reason that there is no circumstance upon which an estoppel can be predicated in the case before us. No fraud was practiced upon the other contracting party; and if the contract could not take effect as the contract of the defendant for want of power to make it, it could take effect in another way consistent with law and the intention of the several railroads interested in it. Certain contracts have been held ultra vires when made by railroad corporations, but they have been for the construction of some independent work not embraced within the line of the road which they have been authorized to make, and having no necessary connection with the work for which they were incorporated. The principle of these decisions may be referred to the expression of Lord CAMPBELL, in Mayor of Norwich v. Norfolk Railway Co., supra. They (railway companies) have certain powers unconnected with locality; but they have other powers which may be exercised within the area specified by the act of Parliament creating the company. They cannot lawfully extend the railway beyond the prescribed limits, or alter the line on which it is to be constructed.' While, in respect to acts which, within the remark of Lord CAMPBELL, are 'territorial' in their character, such as the purchase and holding of real estate, the construction of the railway, harbor, depot, and the like, they can be upheld, if done without the limits of the territory within which the corporation is permitted to act, for the reson that they may tend to advance the objects of the

incorporation to increase the tariff upon the railway, or increase the profits of the shareholders (per Lord LANGDALE, in Coleman v. The Eastern Counties Railway Company, 10 Beav.), the rule is not the same as to acts 'unconnected with locality'; and in such cases acts in furtherance of the main object and for the purpose of effectuating it, are valid, if not illegal by the law of the place where they are performed, and not expressly prohibited by the charter. This distinction is recognized in all the cases in fact, although not, perhaps, in words; and there is no discrepancy between the cases holding one class of contracts void and another valid.

"Those cases in which railway companies have been held to their contracts to be performed beyond the terminii of their roads, and outside of their territorial limits, when such are personal in their nature and within the general scope of the powers conferred, are not cited as bearing upon, or treated as overruled by the cases avoiding contracts of a different character. The converse is equally true. The cases are not treated as coming in conflict with each other. The Mayor of Norwich v. The Norfolk Railway Co. (4 E. & B., 397), was not decided, except pro forma by the withdrawal of the opinion of the junior judge, to enable the parties to bring error. It was a border case and if the contract was void it was for the reason urged by Lord CAMPBELL that it contemplated an act which the company could only perform within the prescribed limits. The Eastern Counties Railway Company (11 B. C., 775), was the case of a contract of a like character, and JARVIS, C. J., in delivering the opinion of the court, says: It is clear that the defendants have a limited authority only, and are a corporation only for the purpose of making and maintaining the railway sanctioned by the act, and that their funds can only be applied for the purposes directed and provided for by the statute.' So in The Calendonia and Dumbartonshire Junction Railway Co. v. The Hohnsburgh Harbor Trustees, decided in the House of Lords in 1857, and reported in 39 English Law and Eq. Rep., 28, it was held that the contract being to expend money in the construction of a harbor not contemplated by the act of incorporation, was void as ultra vires. The Connecticut cases of Hood v. The New York and New Haven Railroad Company (22 Conn., 1), and Naugatuck Railroad Company v. Waterbury Buiton Company (24 Id., 468), carry the principle of limitations upon the corporate power of railway companies to a greater extent.

*

"The contract which was enforced in Muschamp v. Lancaster & Preston Junction Railway Company (8 M. & W., 421), was on all fours with this, so far as it was affected by the question of power. A parcel was delivered at Lancaster to the Lancaster & Preston Railway Company directed to a place in Derbyshire. The person who brought it to the station offered to pay the carriage, but the book-keeper said it had better be paid on its delivery. The L. & P. Railway Company were known to be the proprietors of the line only so far as Preston, where the railway connects with the North Union Line and that further on with the road of another company, and so on into Derbyshire. The parcel was lost after it was forwarded from Preston. It was held that the L. & P. Railway Company was liable. The Judge charged the jury that when a common carrier takes into his care a parcel directed to a particular place and does not by positive agreement limit his responsibility

to a part only of the distance, it was prima facia evidence of an undertaking on his part to carry the parcel to the place to which it is directed, although beyond the limits of his ordinary trade as a carrier. Lord ABINGER, chief justice, held that what was the contract was properly submitted to the jury. Watson v. The Ambergate, Nottingham & Boston Railway Company (3 Eng. L. & Eq. R., 497), affirms in the Queen's Bench the doctrine of Muschamp's case, with this variation from it in circumstance—that in Watson's case the clerk of the railway company received pay for the carriage over the defendant's line, only. See, also, Scottham v. The South Staffordshire Railway Company (18 Eng. L. & Eq. R., 553), to the same effect."

In Weed v. The Saratoga & Schenectady, Railroad Company (19 Wend., 534), although the case went off upon another point, Judge CARSEN says: "The defendants having undertaken to carry from the Springs to Albany, cannot now be received to say that they were in truth carriers no further than Schenectady, the termination of their own road. As to the parties for whom they may thus undertake, they are estopped to deny that they are carriers for a distance commensurate with what they engage for."

The same question was involved and decided in Hart v. The Rensselaer & Saratoga Railroad Company (4 Seld., 37). In this case three separate railroad companies, owning distinct portions of a continuous line between two terminii, ran their cars over the whole route, and employed the same agents to sell passage tickets and receive baggage to be carried over the entire line. It was held that one of the companies might be sued for the loss of baggage received by it at one terminus to be carried over the whole road. See, also, the same principle held in Bard v. Poole (2 Kern), 12 N. Y., 495; Quimby v. Vanderbilt, 71 N. Y., 306.

ULTRA VIRES NOT APPLICABLE TO THE CONTRACTS OR TORTS OF CARRIERS BEYOND THEIR CHARTERED LINES-NOT APPLICABLE TO CORPORATE TORTS.

SEVENTH SELECTED CASE.

BISSELL V. THE MICHIGAN SOUTHERN & NORTHERN INDIANA RAILROAD COMPANIES.*

Where two corporations, chartered respectively by the States of Michigan and Indiana, with power to each to build and operate a railroad within its own State, have united in the business of transporting passengers over a third road, in the State of Illinois, beyond the limits authorized by the charter of either, such corporations are jointly liable for injuries to a pas*Reported in 22 N. Y., 258 (1860).

senger resulting from the negligence of their employes. The following propositions were discussed, but not passed upon by the court; viz., Corporations, like natural persons, have power and capacity to do wrong. They may, in their contracts and dealings, break over the restraints imposed upon them by their charters; and when they do so, their exemption from liability cannot be claimed on the mere ground that they have no attributes or faculties which render it possible for them to act. Per COMSTOCK, CH. J., concurring.

Corporations have no right to break their charters, but they have capacity to do so, and to be bound by their acts where a repudiation of such acts would result in manifest wrong to innocent parties. Per COMSTOCK, CH. J.

A corporation is more than an agent of the shareholders. Such bodies are clothed with the legal title to the property or funds which represent the capital, in trust, however, for the shareholders who are the beneficial owners; and, like other trustees, it is impossible for them to deal with the capital in a manner and for purposes not authorized by their charters, and to be bound by such dealings. Per COMSTOCK, CH. J.

The plea of ultra vires, according to its just meaning, imports not that the corporation could not, and did not in fact, make the authorized contract, but that it ought not to have made it. Such a defense, therefore, necessarily rests upon the violation of trust or duty toward the shareholders, and is not to be entertained where its allowance will do a greater wrong to innocent third parties. The acquiescence of the shareholders in the abuse will prevent the interposition of such a plea. Per Соматоск, Сн. Ј.

When corporations abuse their powers the State may interpose and reclaim their charters. So a threatened abuse may be arrested by the courts at the suit of the shareholders. So, also, the shareholders may recover their damages against the officers and agents who have diverted the capital to improper purposes. Per COMSTOCK, CH. J.

Where a corporation has received the consideration of its unauthorized contract, and a restitution will not do complete justice, the remedy of the other party is not confined to a suit in disaffirmance of such contract, but may be directly upon it. So the contract will be enforced under any circumstances of controlling equity. Per COMSTOCK, CH. J.

The contracts of corporations, made in excess of their rightful powers, but free from any other vice, are not illegal in the sense of the maxim, ex turpi causa, etc. The illegality of a contract in that sense is determined by its quality, and does not depend on the person or being which makes it. Per COMSTOCK, CH. J.

The powers and privileges of corporations are conferred not for the private convenience of the corporators but for public purposes, and to promote the public interest. They are granted at the expense of the public, since they create advantages which persons unincorporated do not possess. The public benefit is treated as a compensation for the grant;