having been organized for the purpose of buying and selling merchandise, could the notes there before the court, signed by one manager only, have been validated, under the statute. Section 6083, supra. They were void upon their face. A part of such section 6083, however, reads as follows:

"Except in case of associations for the purpose of buying and selling merchandise, a majority of the interest in such association may select one of the managers each year to purchase merchandise required in the business of the association, make contracts and sign notes for the same. Provided, Such power given in writing fully setting forth the extent to which such manager may make purchases and contract debt for the association, which shall be signed by a majority of the members in number and value of their interest, and such power of purchasing and contracting debts shall be strictly limited to the ordinary business of the association."

As pointed out above, the Central Implement Company, Limited, was organized for the purpose of buying, selling, and dealing in merchandise, and did do a very large merchandising business, and as such was authorized by the method pointed out in the statute under which it was organized, just quoted, to select one of its managers to purchase merchandise required in the business of the association, make contracts, and sign notes for the same, even in excess of $500. No such authority was ever given to Mr. Armstrong or anyone in the manner pointed out by the statute. The question arises then: Would the fact that such authority might have been given, although in fact it was not, make the notes in question invalid in the hands of a bona fide purchaser for value? The record shows that, during the entire life of the association, a period of some three years and a half, Mr. Armstrong was permitted by his fellow managers and associates in the enterprise to exercise the authority which the statute says might be exercised by one manager, in the manner pointed out therein. He had authority to execute this paper and sign it by his name alone, if authorized to

do so by the association. During the period from February, 1902, to October, 1905, literally hundreds of notes such as those in question were made by Mr. Armstrong or under his direction, signed by one manager only. Contracts other than notes for amounts exceeding $500 in value for the purchase of goods were habitually made by Mr. Armstrong acting alone. During all this period the notes given in settlement for the purchases so made, until the insolvency of the implement company, were paid and acknowledged by the association; and it appears that all of the managers of the association were aware of this course of dealing, and at least part of the stockholders likewise had knowledge that this was the course of business. Under these circumstances, had the good-faith purchaser of the paper in question, whether he acquired it by parting with money or goods therefor, the right to assume from the long course of dealing above pointed out, without objection from anyone to the public, that the authority, which under the statute might have been given to Mr. Armstrong to make such paper, had in fact been given?

It is well to premise this discussion by the statement that this court has determined that the law governing corporations, rather than the law governing copartnerships, is applicable to a partnership limited such as the insolvent implement company was. Rouse, Hazard & Co. v. Detroit Cycle Co., 111 Mich. 251 (38 L. R. A. 794); Staver & Abbott Manfg. Co. v. Blake, 111 Mich. 282-289 (38 L. R. A. 798).

"Actual mala fides must be shown to the satisfaction of the jury to deprive a holder for value of the character of bona fide holder, and negligence in not inquiring into facts which ought to have put him on inquiry is not sufficient. Gross carelessness, even on the part of the holder, is not conclusive of notice, though it is, of course, perfectly competent evidence to go to the jury on the question of bad faith. So that in case of bills and notes the purchaser for value is not bound, at his peril, to be on the alert for circumstances which might possibly excite

the suspicions of a wary, vigilant man. He does not owe to the party who put negotiable paper afloat the duty of active inquiry to avert the imputation of bad faith, and the speculative issue of his diligence or negligence does not enter into the question. The question is one simply of good faith in the purchaser; and, unless the evidence makes out a case upon which the jury would be authorized to find fraud or bad faith in the purchaser, it is the duty of the court to direct a verdict for the holder." Norton on Bills and Notes (3d Ed.), p. 320.

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It has been held that, where the charter prescribes that corporate contracts shall be signed by certain officers, a contract that is signed by only a part of them is not enforceable, even in bona fide hands. But the harshness and the inconvenience of this rule have caused it to be widely departed from and practically abandoned. Acts done by a corporation, which presuppose the existence of other acts to make them legally operative, are presumptive proofs of the latter. A mortgagee is not bound to inquire into the observance of the rules and regulations of the company relative to the call of meetings. Where the seal of the company has been affixed to a mortgage by the secretary, the mortgagee need not inquire whether a quorum of the directors was present at the meeting and authorized the mortgage, nor whether the secretary was duly authorized to affix the seal; the court upholding the mortgage, although a quorum was not present when it was authorized. The Supreme Court of the United States lays down the rule as follows:

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"One who takes from a railroad or business corporation, in good faith and without actual notice of any inherent defect, a negotiable obligation issued by order of the board of directors, signed by the president and secretary in the name and under the seal of the corporation, and disclosing upon its face no want of authority, has the right to assume its validity, if the corporation could, by any action of its officers or stockholders, or both, have authorized the execution and issue of the obligation.' Louisville, etc., R. Co. v. Trust Co., 174 U. S. 552, 573."

3 Cook on Corporations (6th Ed.), § 725.

"A bona fide purchaser of paper assets formerly owned by a corporation and indorsed by the proper officers thereof, may assume that the indorsement was duly authorized, and is not bound to search the corporation books for such

authority before completing his purchase." Walker v. Railway Co., 47 Mich. 338.

"Negotiable paper of a corporation is valid in the hands of a bona fide holder, if it appears on its face to have been duly issued by the corporation in conformity to the provisions of its charter. If the corporation has power under any circumstances to issue such paper, a bona fide holder has the right to presume, although it may be that the note was unauthorized for the purpose for which it was made, that it was issued under the circumstances which gave authority." Genesee County Sav. Bank v. Barge Co., 52 Mich. 164, 438.

"If the contract can be valid under any circumstances, an innocent party in such a case has a right to presume their existence, and the corporation is estopped to deny them." Merchants' Bank v. State Bank, 10 Wall. 604.

"Contracts of a corporation which are not contrary to the express provisions of its charter are presumed to be within its powers." Gorder v. Canning Co., 36 Neb.

548.

See, also, McLellan v. Detroit File Works, 56 Mich. 579.

'The guaranty by the railroad company of the bonds was not ultra vires in the sense of being outside of the corporate powers of the former company, for the statute of 1883 expressly authorized such a company to execute such a guaranty, and its board of directors to direct its execution by the company. The statute indeed made it a prerequisite to the action of the board of directors that it should be upon the petition of a majority of the stockholders, but this was only a regulation of the mode and the agents by which the corporation should exercise the power granted to it. The distinction between the doing by a corporation of an act beyond the scope of the powers granted to it by law, on the one side, and an irregularity in the exercise of the granted powers, on the other, is well established, and has been constantly recognized by this court. One who takes from a railroad or business corporation, in good faith, and without actual notice of any inherent defect, a negotiable obligation issued by order of the board of directors, signed by the president and secretary in the name and under the seal of the corporation, and disclosing upon its face no want of authority, has the right to assume its validity, if the corporation

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*

could, by any action of its officers or stockholders, or of both, have authorized the execution and issue of the obligation." Louisville, etc., R. Co. v. Trust Co., 174 U. S. 552.

"The directors intrusted the entire management of the bank to the cashier, Mr. Bradley, and therefore neither the bank nor its receiver can now be heard to deny the authority of the cashier to do any of those acts which it or its directors might lawfully authorize the cashier to do. * ** In such case the authority of the cashier would be presumed when the paper is in the hands of a bona fide holder for value without notice of any defect in his authority." Davenport v. Stone, 104 Mich. 521.

"While the secretary of a corporation has not, merely by virtue of his office, authority to negotiate notes held by the corporation, it is well settled that if such an officer has been permitted by the directors to negotiate notes, or if the company acquiesce in and receive the benefits of such acts, a purchaser of a particular note, familiar with such facts, may assume the officer's authority, and the corporation will not be permitted to set up want of authority against such purchaser." Commercial Nat. Bank v. Brill, 37 Neb. 626.

See, also, County of Gloucester Bank v. Colliery Co., L. R. 58 Chan. Div. 633 (1895); Biggerstaff v. Rowatt's Wharf, L. R. 61 Chan. Div. 93 (1896); Mechem on Agency, § 84.

The contention is made that, a part of this paper being accommodation paper, no consideration having passed to the Central Implement Company, Limited, from E. Bement's Sons for the same, no recovery can be had thereon. It has been pointed out, however, that the accommodation paper was treated by the association exactly as was the paper given for value. It was recognized from time to time, renewed, and in part paid by the maker, and no question is raised as to the fact that the present holders thereof purchased the same in good faith and without notice of lack of consideration therefor. Under those circumstances, we are of opinion that the failure of consideration as to part of this paper cannot be urged against