Citizens State Bank v. Hawkins

JENKINS, Circuit Judge, after stating the facts as above, deliv- ' ered the opinion of the court. An act is ultra vires a corporation when it is beyond and outside of . the scope of. the powers conferred by its founders, — when the corpora- ' tion is without authority to perforin it under any circumstances or for .any purpose. Such acts are wholly void, and no contract for [371] their performance can be enforced by or against the corporation, the plea of ultra vires being available to either party to the contract. Such was the character of the agreement under consideration in Thomas v. Railroad Co., 101 U. S. 71; Central Transp. Co. v. Pullman’s Palace Car Co., 139 U. S. 24, 11 Sup. Ct. 478. There are, however, acts done in excess of conferred powers, illegal as to shareholders, hut for which the corporation is liable to innocent parties; as, for example, where a corporation is authorized to perform an act for a specific purpose, and performs the act for another and unauthorized purpose. In such case the plea of ultra vires is available to neither party. 8ueh was the character of the contracts under consideration in Union Cold Min. Co. v. National Bank, 96 U. S. 640; Smith v. Sheeley, 12 Wall. 358; Bank v. Matthews, 98 U. S. 621; Bank v. Whitney, 103 U. S. 99; Bank v. Stewart, 107 U. S. 676, 2 Sup. Ct. 778; Fritts v. Palmer, 132 U. S. 282, 10 Sup. Ct. 93; Bank v. Townsend, 139 U. S. 67, 11 Sup. Ct. 496; Thompson v. Bank, 146 U. S. 240, 13 Sup. Ct. 66; Bank v. Butler, 157 Mass. 548, 32 N. E. 909; Ditch Co. v. Zellerbach, 37 Cal. 543. In the case in hand no power is granted to purchase stock in another hank, and therefore a prohibition to do so may be implied. First Nat. Bank v. National Exch. Bank, 92 U. S. 122. It is not doubted, however, that under the banking law of Indiana the plaintiff in error had power to accept stock in another hank as security for a loan, or to acquire such stock by levy thereon and sale thereof under execution to satisfy a debt due to it. Morse, Banks, § 59; Bank v. Case, 99 U. S. 628. It had the power, therefore, under certain circumstances, and for certain purposes, to acquire stock in a nalional bank. It obtained the stock in question by purchase from a third party, and procured its transfer to itself upon the hooks of the national hank. The acquisition of such stock was within the general scope of its powers. The case is, therefore, one of an abuse of a general power, a wrongful exercise of conferred power, for purposes and under circumstances contrary to law, and not the case of the exercise of a power not in any event given. It is, therefore, related to the second class above noted,.to which the doctrine of ultra vires does not apply. In all such cases a corporation cannot “set up its own violation of law to escape the responsibility resulting from its illegal action.” Id. 628-633. The misuse of power in such cases is matter for consideration by the authorities of the state. If such abuse of power he prejudicial to the public, a forfeiture of the charter will furnish a preventive remedy. It would lie grievous wrong to permit a corporation to assert its own abuse of power to escape liability under the facts here disclosed. It held this stock for many years, taking any profits accruing therefrom. It must meet the liability resulting from the failure of the bank. It cannot approbate and reprobate. It has received the benefits. It must bear the burdens. “The doctrine of ultra vires, when invoked for or against a corporation, should not he allowed to prevail when it: would defeat the ends of justice or work a legal wrong.” Railroad Co. v. McCarthy, 96 U. S. 258-267; The judgment will he affirmed.