PART III. J ACTS BEYOND THE CORPORATE POWERS. [§ 275. thereon will be disallowed when there is a concourse of creditors and the corporation is insolvent in the hands of a receiver. 1 Since the only interest of a creditor is that the funds of the corporation shall suffice for the payment of debts due him, and as his only right in respect of the funds is that they shall not be used, in contravention of the constitution of the corporation, in a way to imperil his interests, it follows that, should the corporation be clearly solvent and the debt due a creditor claiming under an ultra vires contract but small in comparison with the resources of the corporation, the corporate creditors would have no rights which would justify the disallowance of the debt arising from the ultra vires contract. § 27i. Summing up, it may be said that to hold that a con- tract ultra vires a corporation binds or affects the rights of per- sons who neither expressly nor impliedly have assented to it, is to hold as to shareholders that funds subscribed for a cer- tain purpose, in pursuance of direct authorization from the state, may, against the will of the subscribers, be applied to other purposes ; is to hold, as to creditors, that funds set apart for the payment of their claims, on the faith of which they contracted and were invited to contract, may without their assent be applied to purposes other than the satisfaction of their legal claims. Such a decision disregards vested rights and im- pairs the obligations of a contract. — § 2t£. We now pass to a consideration of the second mode of viewing ultra vires transactions. It may be formu- lated in this rule : When a corporation has made a Yo rk rukT. contract beyond its powers {ultra vires), and has per- Opinion in formed its side of the contract, the other contracting- Railroad Co party cannot plead in an action on the contract that it was ultra vires the corporation ; nor, conversely, if the other party has performed, and the corporation has had the benefit of his performance, may the corporation plead that the contract was ultra vires. The reasons for this rule lie in its apparent 1 lb.; Abbott v. Balto., etc., St. P. Co., 1 Md. Ch. 542. See First Nat. Bk. v. Kiefer Co., 95 Ky. 97. A re- ceiver of an insolvent corporation may repudiate a transfer of mort- gages owned by the corporation, if the transfer was made to secure the obligations of the corporation arising from an ultra vires transaction. Tal- mage v. Pell, 7 N. Y. 328; Bank Com- missioners v. St. Lawrence, ib. 513. 235
