§ 275.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VII. justice and convenience of application. The authority for it would seem to rest, in the first instance, upon dicta contained in the leading case of Bissell y. Michigan Southern and North- ern Indiana K. II. Cos. 1 In the course of an elaborate opinion Judge Comstock said: 3 "I think this doctrine of theoretical perfection in corporations would convert them practically into most mischievous monsters. A bank, through its board of di- rectors, may invest its funds in the purchase of stock, and every holder of the stock may acquiesce, expecting to profit by the speculation. If the enterprise is successful, the corporation and the shareholders gain by the result. If a depression occurs in the market and disaster is threatened, the doctrine that a cor- poration can never act outside of its charter enables it to say, 'this is not our dealing,' and the money used in the adventure may be unconditionally reclaimed from whatever parties have received it in exchange for value ; while the injured dealer must seek his remedy against agents, perhaps irresponsible and unknown. Corporations may thus take all the chances of gain without incurring the hazards of loss." The same judge said on the same page : 3 " In the relations of private principal and agent, the adoption of an agent's unau- thorized dealing is equivalent to an original authority, and the adoption is perfect when the principal receives the proceeds of the dealing. Corporations may practically act in the same manner." Here the difficulty is, that in a corporate enterprise no one has authority to ratify ultra vires acts so as to bind any one else, because the ratification of ultra vires acts is beyond the scope of any agency in the directors or in the body corpo- 1 22 N. Y. 258. Approved in Buf- fet v. Troy & Boston R. R. Co., 40 N. Y. 168. 2 22 N. Y. 264. 3 Logically these statements are open to criticism. The shareholders who assent certainly should not be allowed to object to the contract ; but suppose that the bank owes a creditor a large sum of money; if the bank pays the losses from the stock operations, this creditor will j 236 lose part of his claim. He has a bet- ter right to be paid than the creditors whose claims arise from transactions known to have been beyond the cor- porate powers. The inquiry should be, is there any person whose rights would be impaired by carrying out the ultra vires contract who is not estopped fiom claiming the contract to have been ultra vires ? It is right to say, however, that the interests of creditors were not before the court.
