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rants, there will accrue and become due to the company semi-annually during the continuance of said contracts the sum of $1,962.50; that said town refuses to pay the said several amounts heretofore accrued and payable, and refuses to pay the said several amounts which will hereafter accrue, and gives out and pretends that the said contract is inoperative and invalid, and refuses to perform the same on its part, although in the possession, use, and enjoyment of the said water plant under said contract.

The bill prayed that the town of Raton should be decreed specifically to perform the said contract, and to pay the amounts of said rental which had theretofore accrued and become payable, and might thereafter accrue and become payable, in pursuance of the terms of the contract, and should be enjoined from enforcing said repealing ordi

nances.

The defendant, in its answer, admitted the making of the contract, the performance thereof by the company; that the board of trustees issued to the company the several warrants, drawn in manner, amount, and [362]number as alleged in the bill; "that it was the duty of the treasurer of the town to keep in his office a book of registry, but denied that it was the duty of the treasurer to enter and set down, at the date of the presentation thereof, each of said warrants, and to pay out of the funds of the town in his hands for disbursement the amount of each of said warrants in the order in which the same were presented, or in any other order, said warrants being illegal, null, and void. Also admitted the passage of the original ordinance prescribing the method of payment of rental by the issuance of warrants, and the passage of the repealing ordinance complained of, and that it has been and now is in the possession, use, and enjoyment of the water plant of the waterworks company.

The answer likewise admitted that it has

• given out that said contract, so far as it calls for the payment of $1,962.50 semi-annually, is inoperative and invalid, and that

it has refused to pay said sum semi-annual

ly.

By way of defense, the answer alleged that defendant, as a municipal corporation of the territory of New Mexico, is authorized by law to levy each year and collect a special tax sufficient to pay off the water rents agreed to be paid to the complainant, provided that said special tax shall not exceed the sum of two mills on the dollar for any one year; that said alleged semi-annual rental of $1,962.50 claimed by the complainant is far in excess of the amount derivable from a two-mill tax levy on the assessed value of property subject to taxation within said town of Raton, and that said rental, so far as it is in excess of the proceeds of such a tax levy, is illegal; that said original ordinance, so far as the same imposes upon the defendant the obligation to pay complainant an annual sum greater than the proceeds of a twomill tax, or to impose a tax levy greater than said rate, was and is null, void, and inoperative, the same having been made and entered into by defendant's trustees in vio

lation of law and in excess of the powers conferred upon them by the statutes of New Mexico; and that the warrants issued to complainant were and are null and void, because issued in excess of the amount derivable from a two-mill tax levy on each dollar of taxable property.

com

*Having thus answered, the defendant[363] pleaded "that all and every the matters the complainant's bill mentioned and plained of are matters which may be tried and determined at law, and with respect to which the complainant is not entitled to any relief from a court of equity, and this defendant asks that it shall have the same benefit of this defense as if it had demurred to the complainant's bill."

The cause was heard on bill and answer, and in September, 1896, the said district court entered a decree in accordance with the prayer of the bill, decreeing that the said original ordinance, contract, and agreement should in all things be specifically performed by and on the part of the town of Raton, and that the town should issue and pay the warrants out of any funds or moneys in the treasury of the town, whether derived from general or special taxes. From this decree an appeal was taken to the supreme court of the territory, where the decree of the lower court was reversed and an order was entered directing the lower court to dismiss the bill at the costs of the waterworks company. The cause was then brought to this court on an appeal from the decree of the supreme court of the territory.

Mr. Henry A. Forster, for appellant: The bill made out a proper case for equitable relief.

National Waterworks Co. v. Kansas City, 27 U. S. App. 165, 62 Fed. Rep. 853, 10 С. C. A. 653, 27 L. R. A. 827; Fazende v. Houston, 34 Fed. Rep. 95.

Specific performance of the contract contained in ordinance No. 10, at least to the extent of declaring it a valid and subsisting

contract, binding and obligatory on the

town, and ordering the town to pay the hydrant rentals, should have been granted.

National Waterworks Co. v. Kansas City, 27 U. S. App. 165, 62 Fed. Rep. 853, 10 C. С. A. 653, 27 L. R. A. 827.

The town should have been enjoined from further breaches of the contract.

Boston Water Power Co. v. Boston & W. R. Corp. 16 Pick. 525; St. Louis R. Co. v. Northwestern St. Louis R. Co. 69 Mo. 65; Newburgh & C. Turnp. Road v. Miller, 5 Johns. Ch. 101, 9 Am. Dec. 274.

A court of equity should restrain the enforcement of an invalid ordinance, whenever vested rights granted by a prior ordinance would be thereby impaired.

New Orleans Waterworks Co. v. Rivers, 115 U. S. 674, 683, 29 L. ed. 525, 528; New Orleans Gaslight Co. v. Louisiana Light & H. P. & Mfg. Co. 115 U. S. 673,29 L. ed. 524; Walla Walla City v. Walla Walla Water Co. 172 U. S. 1, ante, 341; Foster v. Joliet, 27 Fed. Rep. 899; Quincy v. Bull, 106 III. 337; Baltimore v. Radecke, 49 Md. 217, 33

Am. Rep. 239; People, Davis, v. Sturtevant, | 423 [24: 1061]; Rogers v. Durant, 106 U. S.

9 N. Y. 263, 59 Am. Dec. 536.

Mr. N. B. Laughlin, for appellee:

There is not any equity in complainant's bill because the principal object sought is specific performance; and on the allegations, as therein averred, the court has no jurisdiction to enforce the relief prayed for.

Phyfe v. Wardell, 2 Ed. Ch. 47; Pierce v. Plumb, 74 Ill. 326.

There was nothing to act on in the case at bar but the validity of the warrants issued under the contract, and that can be determined in an action at law.

State, Great Falls Waterworks, v. Great Falls, 19 Mont. 518.

Appellant has not exhausted his remedy at law.

Leadville Illuminating Gas Co. v. Leadville, 9 Colo. App. 400; Leadville Water Co. v. Leadville, 22 Colo. 297.

This court should affirm the decree of dis

missal with costs, with the modification that the dismissal is without prejudice to the rights of the appellant or the legal holders of said warrants to bring an action at law.

644 [27:303].

Accordingly, and without expressing or implying any opinion of our own on the merits of the controversy, the decree of the Supreme Court of the Territory is reversed, and the cause is remanded to that court with directions to amend its decree by directing the. District Court to dismiss the bill without prejudice to the right of the complainant to sue at law.

FIRST NATIONAL BANK OF CONCORD, New Hampshire, Plff. in Err.,

υ.

EDWARD HAWKINS, Receiver of the Indianapolis National Bank, of Indianapolis.

(See S. C. Reporter's ed. 364-373.)

One national bank cannot acquire the stock of another-assessment of such stock.

1. One national bank cannot lawfully purchase and hold the stock of another as an investment.

Lacassagne v. Chapuis, 144 U. S. 119, 36 L. ed. 368; Sanders v. Devereux, 19 U. S. 2. In the case of such an actual purchase by App. 630, 60 Fed. Rep. 311, 8 C. C. A. 629; 6 Enc. Pl. & Prac. 895.

[363] *Mr. Justice Shiras delivered the opinion of the court:

The waterworks company, when it filed its bill in this case, was in possession of warrants that had been issued to it by the town of Raton in pursuance of the provisions of a contract existing between the company and the town. Those warrants were in the form of drafts drawn on the treasurer of the town, signed by the mayor and countersigned by the recorder of the town. They were for specific sums of money, payable at fixed periods, bearing interest from date, and some of them past due when the bill was

filed.

[364] *In short, the warrants, if valid, were legal causes of action enforceable in a court of law. The defendant did not waive the question, but averred in its answer that the matters complained of in the bill were matters which could be tried and determined at law. And the supreme court of the territory in its opinion says: "If the warrants upon which payment is sought here are valid, an action at law is the proper remedy to enforce their payment. They have been issued, and are claimed to be outstanding obligations against defendant town, and it says they are void, and therefore declines to pay them. Then, if in any action at law judgment should be entered in favor of the legal holders, and defendant's trustees should decline to provide for their payment, mandamus would be the proper remedy to compel the necessary levy." [9 N. Μ. -, 49 Рас. 898.]

In this state of facts we think the courts below erred in considering and determining the legal controversy in a suit in equity, but should have dismissed complainant's bill without prejudice to its right to bring an action at law. Barney v. Baltimore, 6 Wall. 280 [18:825]; Kendig v. Dean, 97 U. S.

a national bank, it is not estopped to deny its llability, as an apparent stockholder, for an assessment on such stock ordered by the Comptroller of the Currency.

[No. 187.]

Argued and Submitted January 20, 1899. Decided May 15, 1899.

I

'N ERROR to the United States Circuit Court of Appeals for the First Circuit to review a judgment of that court affirming the judgment of the Circuit Court of the United States for the District of New Hampshire in favor of Edward Hawkins, receiver of the Indianapolis National Bank, against the First National Bank of Concord for the recovery of an assessment on the stock of the Indianapolis bank held by the First National Bank of Concord; said assessment being ordered by the Comptroller to enforce the individual liability of stockholders. Judgment of the Circuit Court of Appeals and of the Circuit Court reversed, and cause remanded to the Circuit Court, with directions to enter a judgment in accordance with the opinion of this court.

See same case below, 33 U. S. App. 747, 79 Fed. Rep. 51, 24 С. С. А. 444.

er

Statement by Mr. Justice Shiras:

*In May, 1895, Edward Hawkins, as receiv-[365]

of the Indianapolis National Bank, brought a suit, in the Circuit Court of the United States for the District of New Hampshire, against the First National Bank of Corcord. At the trial a jury was waived, and the court found the following facts:

"The plaintiff is receiver of the Indianapolis National Bank of Indianapolis, which bank was duly organized and authorized to do business as a national bank association. The bank was declared insolvent and ceased to do business on the 24th day of July, 1893; the plaintiff was duly appointed and qualified

receiver of the bank on the 3d day of August, 1893, and took possession of the assets of the bank on the 8th day of the same month.

"The capital stock of the bank was 3,000 shares of the par value of $100 each. On the 25th day of October, 1893, an assessment was ordered by the Comptroller of $100 per share on the capital stock of the bank, to enforce the individual liability of stockholders, and an order made to pay such assessment on or before the 25th day of November, 1893; and the defendant was duly notified thereof.

"The defendant, being a national banking association, duly organized, and authorized to do business at Concord, N. H., on the 21st day of May, 1889, with a portion of its surplus funds, purchased of a third party, authorized to hold and make sale, 100 shares of the stock of the Indianapolis National Bank as an investment, and has ever since held the same as an investment. The defendant bank has appeared upon the books of the Indianapolis blis bank as a shareholder of 100 shares of its stock, from the time of such purchase to the present time. During such holding the endant bank received annual dividends declared by the Indianapolis bank "prior to July, 1993. The defendant has not paid said assessment or any part thereof."

1366]defendant

After argument the court, on July 28, 1896, entered judgment in favor of the plaintiff for the sum of $11,646.67 and costs. From that judgment a writ of error from the United States circuit court of appeals for the first circuit was sued out, and by that court the judgment of the trial court was, on March 5, 1897, affirmed. 33 U. S. App. 747. From the judgment of the circuit court of appeals a writ of error was allowed to this

court.

Mr. Frank S. Streeter for plaintiff in

error:

The recent decision in California Bank v. Kennedy, 167 U. S. 362, 42 L. ed. 198, determines the point raised in this case.

No power is granted by U. S. Rev. Stat. $5136 to national banks to buy and sell stocks generally; nor is such power incidental to the business of banking.

First Nat. Bank v. National Exch. Bank, 92 U. S. 122, 23 L. ed. 679; Logan County Nat. Bank v. Townsend, 139 U. S. 67, 73, 35 L. ed. 107, 110; Re Royal Bank of India, L. R. 4 Ch. 252; Fowler v. Scully, 72 Pa. 456, 13 Am. Rep. 699; Weckler v. First Nat. Bank, 42 Md. 581, 20 Am. Rep. 95; Nassau Bank v. Jones, 95 N. Y. 115, 47 Am. Rep.

14.

Upon principle and authority a stockholder's liability to assessment is a contractual liability.

Richmond v. Irons, 121 U. S. 27, 30 L. ed. 864; Flash v. Conn, 109 U. S. 371, 27 L. ed. 966; Hodgson v. Cheever, 8 Mo. App. 321; Manville v. Edgar, 8 Mo. App. 324; Queenan v. Palmer, 117 III. 619; Aultman's Appeal, 98 Pa. 505; Sackett's Harbour Bank v. Blake, 3 Rich. Eq. 225; Woods v. Wicks, 7 Lea, 40: Ex parte Van Riper, 20 Wend. 614; Grand Rapids Sav. Bank's Appeal, 52 Mich. 557; Lowry v. Inman, 46 N. Y. 119; Corning ▼. McCullough, 1 N. Y. 47.

The Concord Bank had no power to make the contract, and it cannot be enforced against it.

Dartmouth College v. Woodward, 4 Wheat. 518, 4 L. ed. 629; Bank of United States v. Dandridge, 12 Wheat. 64, 6 L. ed. 552; Head v. Providence Ins. Co. 2 Cranch, 127, 2 L. ed. 229; Beaty v. Knowler, 4 Pet. 152, 7 L. ed. 813; Bank of Augusta v. Earle, 13 Pet. 519, 10 L. ed. 274; Perrine v. Chesapeake & D. Canal Co. 9 How. 172, 13 L. ed. 92; Oregon R. & Nav. Co. v. Oregonian R. Co. 130 U. S. 1, 32 L. ed. 837; Logan County Nat. Bank v. Townsend, 139 U. S. 67, 35 L. ed. 107; Wiley v. First Nat. Bank, 47 Vt. 546; Whitney v. First Nat. Bank, 50 Vt. 388, 28 Am. Rep. 503; Talmage v. Pell, 7 N. Y. 328; Franklin Co. v. Lewiston Inst. for Savings, 68 Me. 43, 28 Am. Rep. 9; Crocker v. Whitney, 71 N. Y. 161.

The Concord Bank is not estopped to insist upon the defense of ultra vires.

Central Transp. Co. v. Pullman's Palace Car Co. 139 U. S. 24, 35 L. ed. 55; Pennsylva nia R. Co.v. St. Louis, A. & T. H. R. Co. 118 U. S. 290, 30 L. ed. 83; Thomas v. West Jersey R. Co. 101 U. S. 85, 25 L. ed. 953; Atty. Gen. v. Great Eastern R. Co. L. R. 5 App. Cas. 473; Small v. Smith, L. R. 10 App. Cas. 119; Wenlock v. River Dee Co. L. R. 10 App. Cas. 354; Trevor v. Whitworth, L. R. 12 App. Cas. 409; McCormick v. Market Nat. Bank, 165 U. S. 538, 41 L. ed. 817; Union P. R. Co. v. Chicago, R. I. & P. R. Co. 163 U. S. 564, 41 L. ed. 265.

Messrs. John G. Carlisle and J. W. Kern, for defendant in error:

This court, recognizing the policy of the law in this respect, has decided that the comptroller has authority to make assessments upon the shareholders to pay debts, and that an assessment made for that purpose is conclusive both as to necessity for making it and as to the amount of each shareholder's liability.

Kennedy v. Gibson, 8 Wall. 498, 19 L. ed. 476; Casey v. Galli, 94 U. S. 673, 680, 24 L ed. 168, 170; National Bank v. Case, 99 U. S. 628, 25 L. ed. 448; Waite v. Dowley, 94 U. S. 527, 24 L. ed. 181.

National banks are not expressly prohibited by the law from acquiring or holding shares of stock in other corporations, but on the contrary, are permitted to do so under certain circumstances.

California Bank v. Kennedy, 167 U. S. 362, 42 L. ed. 198; Anderson v. Philadel phia Warehouse Co. 111 U. S. 479, 28 L. ed. 478; National Bank v. Case, 99 U. S. 628, 25 L. ed. 448; Bowden v. Johnson, 107 U. S. 251, 27 L. ed. 386.

One is estopped from denying his liability by voluntarily holding himself out to the public as the owner of stock.

Pullman v. Upton, 96 U. S. 328, 24 L. ed. 818; Sanger v. Upton, 91 U. S. 56, 23 L. ed. 220; Upton v. Tribilcock, 91 U. S. 45, 23 L. ed. 203; Webster v. Upton, 91 U. S. 65, 23 L. ed. 384; Casey v. Galli, 94 U. S. 673, 24 L. ed. 168.

The express language of the act of Congress imposing the liability on the party to whom the shares are transferred on the

books of the bank estops the plaintiff in er- | as pledgee it may become the owner of the ror to deny its obligation to pay the amount, collateral and be subject to liability as other

and thus deprive the creditors of the failed
bank of a security which the law clearly in-
tended to afford them. The liability is not
contractual, but statutory.

Bank of Redemption v. Boston, 125 U. S.
60, 31 L. ed. 689; Welles v. Larrabee, 36 Fed.
Rep. 866, 2 L. R. A. 471; Witters v. Sowles,
32 Fed. Rep. 767; Pauly v. State Loan & T.
Co. 165 U. S. 606, 41 L. ed. 844; Citizens'
State Bank v. Hawkins, 34 U. S. App. 423,
71 Fed. Rep. 369, 18 C. C. A. 78; Cooper Ins.
Co. v. Hawkins, 34 U. S. App. 428, 71 Fed.
Rep. 373, 18 C. C. A. 81; Keyser v. Hitz,
133 U. S. 138, 33 L. ed. 531.

[366] *Mr. Justice Shiras delivered the opinion of the court:

The questions presented for our consider-
ation in this case are whether one national
bank can lawfully acquire and hold the stock

of another as an investment, and, if not,
whether, in the case of such an actual pur-
chase, the bank is estopped to deny its lia-
bility, as an apparent stockholder, for an as-
sessment on such stock ordered by the Comp-
troller of the Currency.

By section 5136 of the Revised Statutes a
national banking association is authorized
"to exercise by its board of directors, or duly

authorized officers and agents, subject to law,
all such incidental powers as shall be neces-
sary to carry on the business of banking; by
discounting and negotiating promissory
and other evi-

notes, drafts, bills of exchange,
dences of indebtedness; by receiving deposits;
by buying and selling exchange, coin, and
bullion; by by loaning loaning money on personal secur-

stockholders. So, also, a national bank may be conceded to possess the incidental power of accepting in good faith stock of another corporation as security for a previous indebt edness. It is clear, however, that a national bank does not possess the power to deal in stocks. The prohibition is implied from the failure to grant the power."

Accordingly it was held in that case that a provision of the laws of the state of California, which declared a liability on the part of stockholders to pay the debts of a savings bank, in proportion to the amount of stock held by each, could not be enforced against a national bank, in whose name stood shares of stock in a savings bank, it being admitted that the stock of the savings bank had not been taken as security, and that the transaction by which the stock was placed in the name of the national bank was one not in the course of the business of banking for which

the bank was organized.

*It is suggested by the learned circuit [368]
judge, in his opinion overruling a petition
for a rehearing in the circuit court of ap-
peals, that the question considered in the
case of California Nat. Bank v. Kennedy
was the liability of a national bank as a
stockholder in a state savings bank, while
the question in the present case is as to its

liability as a stockholder in another national
bank, and that therefore it does not follow
beyond question that the decision in the form-
er case is decisive of the present one.
U. S. App. 178.

ity; and by
ing notes according to the provisions of this
title."

and none occurs to us. by obtaining, issuing, and circulat

In construing this provision, it was said [367]by this court, in "First National Bank v. Na tional Exchange Bank, 92 J. S 122 [23: 679], that "dealing in stocks is not expressly prohibited, but such prohibition is implied from the failure to grant the power. In the honest exercise of the power to compromise a doubtful debt owing to a bank, it can hardly be doubted that stock may be accepted in payment and satisfaction, with a view to their subsequent sale or conversion into money so as to make good or reduce an antici. pated loss. Such a transaction would not amount to a dealing in stoeks."

And in the recent case of California Nat. Bank v. Kennedy, 167 U. S. 362 [42: 198], it was said to be "settled that the United States statutes relative to national banks constitute the measure of the authority of such corporations, and that they cannot rightfully exercise any powers except those expressly granted, or which are incidental to carrying on the business for which they are established. No express power to acquire the stock of another corporation is conferred upon a national bank, but it has been held that, as incidental to the power to loan money on personal security, a bank may,

and

50

No reason is given by the learned judge in
support of the solidity of such a distinction,
Indeed, we think
that the reasons which disqualify a national
bank from investing its money in the stock
of another corporation are quite as obvious
when that other corporation is a national
bank as in the case of other corporations.
The investment by national banks of their
su
surplus funds in other national banks, sit-
uated, perhaps, in distant states, as in the
present case, is plainly against the meaning
policy of the statutes from which they
derive their powers, and evil consequences
would be certain to ensue if such a course of
conduct were countenanced as lawful. Thus,
it is enacted, in section 5146, that "every di-
rector must, during his whole term of serv-
ice, be a citizen of the United States, and
at least three fourths of the directors must
have resided in the state, territory, or dis-
trict in which the association is located for
at least one year immediately preceding
their election, and must be residents therein
during their continuance in office."

One of the evident purposes of this enact-
ment is to confine the management of each
bank to persons who live in the neighbor-
hood, and who may, for that reason, be sup-
posed to know the trustworthiness of those
who are to be appointed officers of the bank,
and the character and financial ability of
those who may seek to borrow its money.

in the usual course of doing such business, But if the funds of a bank in New Hampaccept stock of another corporation as col- shire, instead of being retained in the cuslateral, and by the enforcement of its rights tody and management of its directors. are U. S., Book 43.

174 U. S.

64

1009

invested in the stock of a bank in Indiana, "It was argued on behalf of the plaintiff

the policy of this wholesome provision of the statute would be frustrated. The property of the local stockholders, so far as thus in[869]vested, would not be managed by directors of their own selection, but by distant and unknown persons. Another evil that might result, if large and wealthy banks were permitted to buy and hold the capital stock of other banks, would be that, in that way, the banking capital of a community might be concentrated in one concern, and business men be deprived of the advantages that attend competition between banks. Such accumulation of capital would be in disregard of the policy of the national banking law, as seen in its numerous provisions regulating the amount of the capital stock and the methods to be pursued in increasing or reducing it. The smaller banks, in such a case, would be in fact, though not in form, branches of the larger one.

Section 5201 may also be referred to as indicating the policy of this legislation. It is in the following terms:

"No association shall make any loan or discount on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith; and stock so purchased or acquired shall, within six months from the time of its purchase, be sold or disposed of at public or private sale; or, in default thereof, a receiver may be appointed to close up the business of the association."

This provision forbidding a national bank to own and hold shares of its own capital stock would, in effect, be defeated if one national bank were permitted to own and hold a controlling interest in the capital stock of another.

Without pursuing this branch of the subject further, we are satisfied to express our conclusion, upon principle and authority, that the plaintiff in error, as a national banking association, had no power or authority to purchase with its surplus funds as an investment, and hold as such, shares of stock in the Indianapolis National Bank of Indianapolis.

The remaining question for our determination is whether the First National Bank of Concord, having, as a matter of fact, but without authority of law, purchased and held as an investment shares of stock in the [870]Indianapolis National Bank, "can protect it self from a suit by the receiver of the latter brought to enforce the stockholders' liability, arising under an assessment by the Comptroller of the Currency, by alleging the unlawfulness of its own action.

This question has been so recently answered by decisions of this court that it will be sufficient, for our present purpose, to cite those decisions without undertaking to fortify the reasoning and conclusions therein reached. In Central Transportation Company v. Pullman's Palace Car Co. 139 U. S. 24 [35: 55], after an examination of the authorities, the conclusion was thus stated by Mr. Justice Gray:

that, even if the contract sued on was void,
because ultra vires and against public pol-
icy, yet that, having been fully performed on
the part of the plaintiff, and the benefits of
it received by the defendant, for the period
covered by the declaration, the defendant
was estopped to set up the invalidity of the
contract as a defense to this action to recover
the co compensation agreed on for that period.
But this argument, though sustained by de
cisions in some of the states, finds no sup-
port in the judgment of this court.
The view which this court has taken of the
question presented by this branch of the
case, and the only view which appears to us
consistent with legal principles, is as fol-
lows:

"A contract of a corporation which is ultra vires in the proper sense, that is to say, outside the object of its creation as defined in the law of its organization, and therefore beyond the powers conferred upon it by the legislature, is not voidable only, but wholly void and of no legal effect. The objection to the contract is, not merely that the corporation ought not to have made it, but that it could not make it. The contract cannot be ratified by either party, because it could not be authorized by either. No performance on either side can give the unlawful contract any validity, or be the foundation of any right of action upon it.

"When a corporation is acting within the general scope of the powers conferred upon it by the legislature, the corporation, as well as persons contracting with it, may be estopped to deny that it has complied with the [371] legal formalities which are prerequisites to its existence or to its action, because such requisites might in fact have been complied with. But when the contract is beyond the powers conferred upon it by existing laws, neither the corporation nor the other party to the contract can be estopped by assenting to it, or by acting upon it, to show that it was prohibited by those laws."

The principles thus asserted were directly applied in the case of California Nat. Bank v. Kennedy, 167 U. S. 367 [42:198], where the question and the answer were thus stated by Mr. Justice White:

"The transfer of the stock in question to the bank being unauthorized by law, does the fact that, under some circumstances, the bank might have legally acquired stock in the corporation estop the bank from setting up the illegality of the transaction?

"Whatever divergence of opinion may arise from conflicting adjudications in some of the state courts, in this court it is settled in favor of the right of the corporation to plead its want of power, that is to say, to assert the nullity of an act which is an ultra vires act. The cases recognize as sound doctrine that the powers of corporations are such only as are conferred upon them by statute."

There is then quoted a passage from the decision of the court in McCormick v. Market National Bank, 165 U. S. 549 [41:821], as follows:

"The doctrine of ultra vires, by which a

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