Georgia Granite Railroad v. Miller

Per Curiam. 1. The term “ultra vires,” whether with perfect accuracy or not, as to the acts of a corporation, or acts purporting to be done by it, has been used in more than one sense. An act is ultra vires in the strictest sense when it is beyond the scope of the powers granted by law to the corporation, so that it is not in the power of the corporation to perform it under any circumstances. Sometimes an act is said "to be ultra vires with reference to the rights of certain persons, when the corporation can not legally perform such act without their consent. Sometimes an act is said to be ultra vires with reference to some specific purpose, when the corporation can not perform it for that purpose. 2. If an act be done which is ultra vires in the sense first mentioned, it is wholly void, and the corporation may avail itself of that fact as a defense. If an act is ultra vires in either of the last two senses, the right of the corporation to avail itself of the defense will depend upon the circumstances of the case. Miners’ Ditch Co. v. Zellebach, 37 Cal. 543 (99 Am. D. 300). (as) There is a distinction between the doing by a corporation of an act beyond the scope of the powers granted to it by law, and an irregularity in the exercise of the granted powers. Zabriskie v. Cleveland etc. Railroad Co., 23 How. (64 U. S.) 381, 398 (46 L. ed. 488); Central Transportation Co. v. Pullman Palace Car Co., 139 U. S. 24, 59-60 (11 Sup. Ct. 478, 35 L. ed. 55); Louisville etc. Railway Co. v. Louisville Trust Co., 174 U. S. 552, 570 (19 Sup. Ct. 817, 43 L. ed. 1082). 3. The general law which provides the method of incorporating railroad companies, and declares powers possessed by companies incorporated thereunder, contains a provision authorizing such a company to borrow “such sums of money, at such rates of interest and upon such terms, as such company or its board of directors shall deem necessary or expedient, and to execute one or more trust deeds or mort [666] gages, or both, if the occasion may require, on said railroad in process of construction, or after the same has been constructed, for the amounts borrowed, or owing by such company; . . but all rights to borrow money, issue bonds or other evidences of debt, and to execute trust deeds or mortgages to secure the same, shall be exercised within the limitations and in the manner which shall be prescribed by the law of the State.” Civil Code (1910), § 2585, par. 10. Provision is also made as to the rights of purchasers at a sale under such a trust deed or the foreclosure of such a mortgage. Id. par. 11, 12. Section 2583 contains the following clause: “In no case shall said road be bonded or capital stock increased except by a vote of two thirds of the capital stock of said corporation, represented at an annual or a special meeting of stockholders called for that purpose, and after each stockholder has been notified in the manner prescribed for notifying stockholders; and in addition to said notice there shall be published in some newspaper in the town or city where the principal office of said corporation is located, once a week for four weeks prior to the time of holding said meeting, a notice stating that at said meeting so called an increase of the stock or an issuance of the bonds of the road will be considered, either or both. No action contemplated under this section, looking to an increase of stock or increase of bonds, shall be legal unless there shall be present at said meeting a majority of stock, represented in person or by written proxy.” Held, that if a railroad company was incorporated under the general incorporation law above mentioned, and if a special meeting of the stockholders was held, and also a meeting of the board of directors, at each of which a resolution was adopted authorizing the issuance of bonds and the execution of a mortgage or trust deed to secure them, and if the bonds were issued and the mortgage or deed of trust executed, and the latter contained a recital that notice was duly given, that a majority of all the capital stock was represented in person or by proxy, and that the stockholders by unanimous vote authorized the issuance of such bonds so secured, and if the bonds found their way into the hands of innocent purchasers, such bonds and mortgage or deed of trust were not so void that they could not be ratified, or that the company might not be estopped from contesting their validity, even if in fact notice of the stockholders’ meeting was not published for the time stated in the statute and one or possibly two persons who were stockholders, holding each one share of stock, did not receive notice of the meeting. («.) There was evidence sufficient to authorize the finding of the auditor that there had been ratification by the company of the acts of its officers in issuing the bonds, by acquiescence in such acts with knowledge thereof; or perhaps more strictly, as to it, there was an estoppel. (6) The only persons defending against the foreclosure of the mortgage of the railroad company are the company itself and the trustee of bondholders of the granite company, who claims as such trustee to own a majority of the stock of the railroad company, as part of the security for the bonds. As to the voting of this latter stock at the meeting of the stockholders of the railroad company, a ruling is hereinafter made. [667] (e) No estoppel on the public arises in this State as to unauthorized acts of public officers; but such a point is not here involved. Civil Code . (1910), § 303.