Kelley, Maus & Co. v. O'Brien Varnish Co. , 1900 Ill. App. LEXIS 144 ( 1900 )

Mr. Justice Adams

delivered the opinion of the court.

Appellee, by demurring generally to appellant’s pleas, admitted that it was not within the corporate powers with which appellant was vested by law to execute as surety the appeal bond in question. But appellee’s counsel contend the appellant having, by the delay occasioned to appellee by the appeal, derived benefit from the appeal, as averred in the second count of the declaration, it is estopped to plead ultra vires. In view of recent decisions of the Supreme Court, we can not concur in this view. In National Home Bldg. Ass’n v. Bank, 181 Ill. 35, 43-4, the court say:

“ It is also argued that the building and loan association is estopped to raise' the question whether the contract was ultra vires because it has received the benefit of the contract by the conveyance of property to it. That depends, as we think, upon the sense in which the term ultra vires is used. It has been applied indiscriminately to different states of fact in such a way as to cause considerable confusion. When used as applicable to some conditions, it has been frequently said that a corporation is estopped to make such a defense where it has received the benefit of the contract. Bor example, the term has been applied to acts of directors or officers which are outside and beyond the scope of their authority, and therefore are invasions of the rights of stockholders, but which are within the powers of the corporation. In such a case the act may become binding by ratification, consent and acquiescence, or by the corporation receiving the benefit of the contract. Again, it has been applied to cases where an act was within the authority of the corporation for some purposes or under some circumstances, and where one dealing in good faith with the corporation had a right to assume the existence of the conditions which ivould authorize the act. Where an act is not ultra vires for want of power in the corporation, but for want of power in the agent or officer, or because of the disregard ol" formalities which the law requires to be observed, or is an improper use of one of the enumerated powers, it may be valid as to third persons. In the more proper and legitimate use of the term it applies only to acts which are beyond the purpose of the corporation, which could not be sanctioned by the stockholders. There would of course, be no power to confirm or ratify a contract of that kind, because the power to enter into it is absolutely wanting. If there is no power to make the contract there can be no power to ratify it, and it would seem clear that the opposite party could not take away the incapacity and give the contract validity by doing something under it. It would be contradictory to say that a contract is void for an absolute want of power to make it and yet it may become legal and valid as a contract, by way of estoppel, through some other act of the party under such incapacity, or some act of the other" party chargeable by law with notice of the want of power.”

In Best Brewing Co. v. Klassen, 185 Ill. 37, which was a suit by Klassen against the Brewing Company on an appeal bond executed for it as surety for one Bounds, the court say:

“We think the primary question here is, not whether appellant has reaped a benefit from the act, of becoming surety for Bounds upon the bond, but whether the act of signing it was within the scope of its corporate authority. The purpose of the corporation, as expressed in its charter, is to manufacture and sell ale, beer and porter and carry on a general brewing business. It would seem no acts could be more unlike than the doing of those authorized by the charter of the company and the signing of appeal bonds as surety. The instrument was executed in a suit, not by or against the corporatioii, but by a third person against another to recover possession of a house. Prima faeie^ the signing by the company of an appeal bond in such a suit was an act beyond the purpose for which it was organized, and consequently illegal. If it had been shown that it was executed clearly for the purpose of promoting or protecting its own business of brewing or selling beer, etc., that is to say, if the act had been reasonably necessarj^ to accomplish the end for which the corporation was formed, it would have been within the scope of the corporate power. But it can not be held that every act in furtherance of the interests of a corporation is inter vires. Many acts can be suggested which, though beneficial to the business of a corporation, are too remote from its general purposes to be deemed reasonably within its implied powers. What is and what is not too remote must be determined according to the facts of each case.”

In the present case the sole object of the incorporation of appellant, as alleged in its first plea, was to buy, sell and deal in iron, heavy hardware, shelf goods, wagon materials and carriage trimmings, and to carry on such business as usually appertains to a heavy hardware and iron store. In Best Brewing Co. v. Klassen, supra, the court say:

“ In exercising powers conferred by its charter, a corporation ‘may adopt any proper and convenient means tending directly to their accomplishment, and not amounting to the transaction of a separate unauthorized business; ’ ” citing Clark v. Farrington, 11 Wis. 340."

The signing the bond in question by appellant certainly did not tend directly to the accomplishment of any power conferred by its articles of incorporation. See also, Chicago Pneumatic Tool Co. v. H. W. Johns Mfg. Co., Ill. App. Ct., Gen. No. 8384, unreported.

To delay another creditor of appellant’s debtor by becoming surety on an appeal bond, in order that it may collect its own claim against the debtor, can not be said to be a power necessarily implied from any power conferred on it by its charter, or a proper and legitimate means of the exercise of any such power. The judgment will be reversed.