Rep. 385. If such free use of character evidence is well founded, the transition is easy to a general exception allowing evidence of the character of third persons whenever it is material. If, on the other hand, the general rule is grounded in experience and justice, its application ought not to be further limited. While good character has a material, though uncertain, value in disproving a depraved act, bad character is of less weight in proving the commission of a particular act. The fact that a man is capable of a certain crime tends only remotely to show that he was actually committing it at a particular time. Moreover, character evidence is likely to be colored by individual prejudice, and it is also of so vague a nature and so difficult to test by cross-examination, that it may go to the jury unshaken, though manufactured to suit the needs of the case. Obviously, too, although the degradation of the person injured has no bearing upon the degree of the defendant's crime, it is hardly possible that the jury's estimate of his guilt will not be influenced by it. Because of the inherent weakness of character evidence, and the unwarranted effect it is likely to have on the jury, it would appear to be the safer course to adhere to the general rule, save in the cases where precedent has established exceptions.

8

1

PAYMENT INTO Court as AN ADMISSION OF LIABILITY. When payment into court by a defendant was first allowed, the money was brought in under a rule of court, that, unless the plaintiff accepted it in discharge of his claim, the amount should be struck from the declaration. By the General Rules of Trinity Term, 1 Vict., however, it was provided that such payment should in all cases be pleaded. It had already been decided that a tender could not be pleaded concurrently with a denial of liability on the same cause of action, although the pleading of inconsistent defenses was permissible at the discretion of the court. On the same principle, it was now held that payment into court could not be pleaded in conjunction with a denial of the cause of action thereby admitted." This remained the rule, until a decision under the Judicature Acts of 1873 and 1875° effected the radical change of allowing the plea of payment into court concurrently with any defense denying the cause of action. The decision might at first appear a necessary consequence of the new statutes stripping the court of its discretionary powers in permitting inconsistent defenses; but this view disregards the fundamental question, whether a proceeding which amounts to conclusive admission of the right of action can properly be termed a defense at all, though, by a technical rule of procedure, it appears on the record as a plea. On this latter reasoning the court in an early Massachusetts case' summarily disposed of the contention that to refuse a defendant who had paid money into court the right to deny the cause of action would be to violate the statute allowing inconsistent defenses. The case is in accord 7 I Wigmore, Ev. 68.

1 See I Tidd's Pr., 6th ed., 650. The New Jersey practice would appear to be the same. See Levan v. Sternfeld, 55 N. J. Law 41.

2 See 3 Chitty, Pr. 577.

8 Maclellan v. Howard, 4 T. R. 194; Jenkins v. Edwards, 5 T. R. 97.

St. 4 Anne, c. xvi. § 4.

5 Thompson v. Jackson, 1 Man. & G. 242.

Berdan v. Greenwood, 3 Ex. D. 251. Followed, and the rule extended to the plea of truth in an action for libel in Hawkesley v. Bradshaw, 5 Q. B. D. 302.

7 Bacon v. Charlton, 61 Mass. 581.

8

with the universal American rule, and, if the premise on which it proceeds is admitted, it is unimpeachable.

Obviously, then, the English rule can be upheld only by regarding payment into court as not necessarily an admission of the cause of action. But, then, what is it? It cannot be construed as an offer of compromise, made, through the court, at the last moment; for, on payment into court, the money becomes the property of the plaintiff whatever the outcome of the action. Perhaps it may best be interpreted as a sort of premium paid by the defendant to secure himself against payment of costs in case he is correct in his judgment that the plaintiff has no right of action for an amount beyond that tendered. Provided such is actually his intention, it seems reasonable enough to allow him this privilege, since the plaintiff can in no wise be prejudiced thereby."

In a recent case of first impression on the point, the St. Louis Court of Appeals has followed the American rule. Wells v. Missouri Edison Co., 84 S. W. Rep. 204. The case, however was a tort action, in which paymen into court is not a common law right, having been first given by statute.10 Since no such statute exists in Missouri, it had previously been held that in such an action payment into court will not avail the defendant to escape the payment of costs, though the recovery is for a smaller amount than that brought in.11 But if payment into court by the defendant in tort actions is void, it should be nugatory as well in respect of benefits to be derived therefrom by the plaintiff as by the defendant. The principal case, therefore, can be supported only if it overrules the earlier case.

EFFECT OF ULTRA VIRES TRANSACTIONS. When the sovereign gave definite effect to the idea that the act of a community of men should be distinguished from their several acts by erecting the community into an artificial legal person,1 the courts naturally had to pass upon the rights and liabilities of this new being. In its nature they found its limitations. Being invisible, it could appear only by attorney; and being intangible, it could not suffer or commit personal injuries. Having no soul,* it could not commit a crime or take an oath. All these limitations were inherent in its nature, and not due to any legal prohibition. Even in requiring a seal, the courts merely followed the custom of cor

8 See 1 Greenleaf, Ev., 16th ed., § 205.

2

8

9 See the opinions of Thesiger, L. J., in Berdan v. Greenwood, supra, and of Lord Bramwell, L. J., in Hawkesley v. Bradshaw, supra. On this point, too, later English legislation is suggestive. By Rules of the Supreme Court, 1883, Order XXII. rule 6, it is provided that, when payment into court is accompanied by an express denial of the right of action, and when the plaintiff persists in his suit, and recovers less than the amount tendered, the difference shall be returned to the defendant. It would seem, also, that, when the payment is unaccompanied by such denial, the old practice has been restored, and the defendant cannot show that no cause of action exists. See Dumbleton v. Williams, 102 L. T. 384.

10 St.

& 4 Will. IV. c. 42, § 21.

11 Joyner v. Bentley, 21 Mo. App. 26.

2 Brooke Abr. tit. Corp. 63.

8 Brooke Abr. tit. Corp. 63. This has been doubted. See Grant, Corp. 278.

Tipling v. Pexall, 2 Bulst. 233.

See Case of Sutton's Hospital, 10 Co. 22 b, 32 b.

Wych v. Meal, 3 P. Wms. 310.

porate action. In fact, the Statutes of Mortmain were the first to deprive corporations of privileges which both they and individuals were capable of exercising. But these statutes did not change their nature.

When, however, the question of the effect of ultra vires transactions first came before courts of the nineteenth century, the principles of agency were sufficient to overcome the difficulties which beset the ancient lawyers on account of their pseudo-anthropomorphic conception. Nevertheless, many courts seem to have confounded the older idea of inherent limitations with an idea of disability arising from lack of authorization by charter. As a result, the law is in confusion. Many cases go to the extent of saying that an ultra vires transaction, whether executed or executory, is absolutely void. Shaw v. National, etc., Bank, 132 Fed. Rep. 658; Anglo-American, etc., Co. v. Lombard, 132 Fed. Rep. 721. Most of the authorities, however, agree in refusing to enforce a wholly executory ultra vires contract,' and also in refusing to overthrow the transaction if completely executed on both sides. 10 If one party has fully performed, and thereby conferred a benefit upon the other, the courts are almost evenly divided as to holding the party benefited to his bargain." And where the act done is within the apparent power of a corporation, so that only its officers have means of knowing whether the contract is ultra or intra vires, some courts enforce it.12 Moreover, in many of these cases, the ultra vires transaction is held so far effective as to give one of the parties quasi-contractual rights.18

Upon principle, as well as historically, the theory that a transaction is absolutely void simply because it is ultra vires is without foundation. Under this theory no corporation could commit a tort or a crime or do anything to justify quo warranto proceedings on the part of the State. The argument that in such cases a corporation is acting not in excess but in abuse of its powers is untenable, for abuses, as well as excesses, are strictly beyond the powers granted in the charter. The true doctrine would seem to be that a corporation has the power to do anything, while its charter defines the limits of its authority. Lack of authorization is not equivalent to absolute statutory prohibition; but the stockholders and creditors have the right to rely upon the terms of the charter, and, therefore, to object to ultra vires transactions.15 Upon this ground it has been ably argued that, in the absence of objection by creditors or stockholders, all ultra vires transactions should be enforced. 16 This contention, however, disregards the interest of the public in controlling and limiting corporate action within the bounds imposed by charter. It is this public policy which

7 I Poll. & Mait. Hist. Eng. Law, 2d ed., 683.

14

8 Thomas v. Railroad Co., 101 U. S. 71, 82 et seq.; Davis v. Old Colony R. Co., 131 Mass. 258. See South, etc., Ry. v. Great Northern Ry., 9 Exch. Rep. 55, 84.

9 Nassau Bank v. Jones, 95 N. Y. 115.

10 Long v. Georgia Pacific Ry. Co., 91 Ala. 519.

11 Bissell v. Mich. Southern, etc., Ry. Cos., 22 N. Y. 258, per Comstock, C. J.; National Bldg., etc., Ass'n v. Home Savings Bank, 181 Ill. 35.

12 Monument Nat'l Bank v. Globe Works, 101 Mass. 57.

13 McCormick v. Market Bank, 165 U. S. 538.

14 Sometimes statutes forbid a corporation to do ultra vires acts. In such a case the court must decide what the statute means, and apply the law in regard to any illegal contract. See 20 N. J. Eq. 542, 562, 564. Similarly in deciding the effect of the Mortmain Acts, the courts decided that the transaction was void as to superstitious corporations, but voidable as to other corporations. It is important to distinguish such cases from simple ultra vires acts.

15 Colman v. Eastern Counties Ry. Co., 10 Beav. I.

16 Professor George Wharton Pepper in 9 HARV. L. REV. 255.

seems to explain the refusal of the courts to enforce such contracts when purely executory. Though the corporation has acted, the courts refuse to give effect to those acts. But when the contract is fully performed in good faith on one side, the public policy against its enforcement is overbalanced by the hardship which such refusal would cause. The disability, being imposed for reasons of public good, should be removed by the same considerations.

EXERCISE OF GENERAL CORPORATE POWER FOR PARTICULAR ULTRA VIRES PURPOSE. Although the proposition that anyone dealing with a corporation must at his peril take notice of its charter or articles of association, and cannot recover on a contract in the making of which its corporate powers have been exceeded, is accorded general recognition as an established rule of law,1 nevertheless there exists on the part of the courts a decided tendency to seize upon any exceptional circumstances as a basis for enforcing these ultra vires contracts. Accordingly, the rule is qualified in cases where a corporation has a certain general power and the circumstances are such that whether the particular exercise of this power is ultra vires depends on facts peculiarly within the knowledge of the officers of the corporation. The nature of this qualification is represented by the following classes of cases: (1) A corporation with power to issue negotiable paper in the course of its business is liable on its accommodation note in the hands of an innocent holder for value.2 (2) A corporation with power to incur indebtedness up to a certain fixed amount is liable to one who in good faith loans it money in excess of that amount.3 (3) By analogy, it has recently been held that where a corporation with power to borrow money for the purposes of its business exercises that power for another purpose, the loan is not thereby invalidated in the absence of knowledge by the lender of the improper purpose of the loan. In re David Payne & Co., Limited, [1904]

2 Ch. 608.

This leads to a consideration of the effect of knowledge, on the part of the contracting party, of the extraneous facts which render a contract ultra vires. It might be contended that actual notice is equivalent to notice presumed by the law in matters entirely outside the scope of the corporate business, and that, where the reason for the qualification does not exist, the rules applicable to ultra vires contracts in general should prevail. Such undoubtedly would be the result in the first two classes of cases. The third class, however, in spite of the importance attached by the court in the principal case to the absence of knowledge of the improper purpose of the loan, is to be distinguished on the ground that such contracts are not in fact ultra vires. When a corporation issues an accommodation note or borrows money in excess of a fixed limit, the transaction per se is ultra vires, and the contracting party is a participant in that ultra vires transaction; but when a corporation exercises its general borrowing power for an improper purpose, it is the improper application of the funds that is ultra vires, and in that part of the transaction the lender is not directly concerned. In contracts between individuals for the sale of goods, bare knowledge by a vendor that an unlawful use is to be made of the goods sold will not prevent recovery of

1 Morawetz, Private Corporations, 2d ed., § 591.

2 Monument National Bank v. Globe Works, 101 Mass. 57.
Ossipee, etc., Manufacturing Co. v. Canney, 54 N. H. 295.

the contract price, although anything amounting to participation in the unlawful act will bar that recovery. By analogy it is believed that, in the third class of cases, the lender should be allowed to recover regardless of notice. In further support of this contention it is to be noted that if the improper purpose of the officers of the corporation should be subsequently abandoned and the funds properly applied, mere knowledge on the part of the lender of the preliminary wrongful intent would surely not be sufficient ground for invalidating the contract. This distinction, therefore, seems one upon which courts may properly seize in permitting a lender with notice of the wrongful purpose of the loan to recover against the corporation."

RECENT CASES.

ADMISSIONS - ADMISSIONS BY CONDUCT-PAYMENT INTO COURT. — In an action of tort for personal injuries, the defendant pleaded a general denial and paid money into court. Held, that the cause of action is conclusively admitted, leaving only the question of damages to be tried. Wells v. Missouri Edison Co., 84 S. W. Rep. 204 (Mo., St. Louis Ct. App.). See NOTES, p. 460.

BANKRUPTCY - PROVABLE CLAIMS PART PAYMENT FOR BREACH OF TRUST BY CO-TRUSTEE. - By a compromise effected with one of two co-trustees who were jointly and severally liable for a breach of trust, the cestui que trust received a part of the sum found to be due. The other co-trustee was insolvent. Held, that the cestui may prove against the insolvent estate the full amount of the damages sustained by the breach of trust without deducting the sum already received. Edwards v. Hood-Barrs, 21 T. L. R. 89 (Eng., Ch. D.).

As the party injured may bring separate actions against each of several joint tortfeasors, so may a cestui que trust prove his claim for a breach of trust against the insolvent estate of each of his co-trustees. Ex parte Poulson, DeG. 79. But a claim against any one of several joint tortfeasors is satisfied in England by a judgment against any of the others, and in the United States by a satisfaction of such judgment. Brinsmead v. Harrison, L. R. 7 C. P. 547; Lovejoy v. Murray, 3 Wall. (U. S.) 1. It follows that where a compromise secures part satisfaction from one of those liable, the claim against the other parties should be correspondingly reduced. Ellis v. Esson, 50 Wis. 138. Where the other parties are insolvent the rule should apparently hold as to claims against their estates. Cf. In re Pulsifer, 14 Fed. Rep. 247. The point is, however, said to be new in England, and does not seem to have been directly adjudicated in this country. Nor is assistance to be obtained from the cases where after part payment by a surety the creditor has still been permitted to prove for his whole debt; for the total amount provable remains in such cases unchanged, the only question being as to those entitled to prove it. See 16 HARV. L. REV. 139.

BILLS AND NOTES CHECKS-EFFECT OF DUPLICATE CHECK.-The defendant, the payee of a check, indorsed it to the plaintiff, who lost it. Nearly seven months later the plaintiff obtained a duplicate from the drawer which the defendant indorsed but which the drawee refused to pay for lack of funds. Held, that the payee's indorsement of the duplicate is only an acknowledgment of his original liability from which the plaintiff's laches has already discharged him. Lewis v. Commercial National Bank, 83 S. W. Rep. 423 (Tex., Civ. App.).

The plaintiff's laches constituted a good defense to the liability of the defendant on the original check, since the loss of it did not dispense with a regular presentment for payment. Thackray v. Blackett, 3 Camp. N. P. 164. And the indorsement of the duplicate check by the payee charged him with no new liability to the plaintiff. See Benton v.

Cheney v. Duke, to Gill & J. (Md.) 11; Hodgson v. Temple, 5 Taunt. 181.
Wheeler v. Russell, 17 Mass. 258.

6 Wright v. Hughes, 119 Ind. 324; Bradley v. Ballard, 55 Ill. 413; In re Contract Corporation, L. R. 8 Eq. 14.