corporate misconduct, the right of ouster has accrued to the State, subsequent good behavior on the part of the corporation will not atone for past misdoings. The right to insist upon forfeiture, when it has once accrued, continues, unless waived. The charter of every private corporation contains the condition, implied if not expressed, that it shall live up to the objects of its organization and abide by the provisions of the general law under which it was created. Failure to faithfully perform these conditions is a breach of the charter contract, and confers upon the State full power of revocation, independent of constitutional reservations and statutory provisions. The necessity for strict State control has become more and more manifest as the number and power of private corporations have increased. The ostensible object of State supervision is the protection of the public and the State. As a matter of fact, however, rational supervision operates to safeguard the corporations themselves. It has a tendency to prevent loose practices, clandestine dealings and reckless over-valuations. Moreover, it tends to render corporate stocks a staple form of investment, thus inviting the channels of industry funds which would otherwise remain dormant. Both the State and the corporations are coming to realize that undue secrecy is as pernicious as undue publicity. The laws relating to the examination of State banks and requiring the publication of financial statements by such corporations represent, perhaps, the most rational and salutary advancement in this direction thus far gained in Michigan. Another most important corporate duty is the preservation of the corporation's capital stock. In Michigan it is distinctly held that the capital stock of a private corporations is a trust fund held for the benefit of its stockholders10, and of its present and future creditors11. Deliberate impairment of capital stock is not infre

6. People v. Bank of Pontiac, 12 Mich. 526-537.

7. People v. Bank of Pontiac, (Id.)

8. C. L. 1897, Sec. 6110. 9. C. L. 1897, Sec. 6128, Am. Act 107 of 1903, p. 130.

10. In Lenawee County Savings Bank v. Adrian, 66 Mich. 273-275, Chief Justice Campbell used the following language: "A corporation is always, so far as its property is concerned, a mere trustee for its stockholders, whose inter

ests are in its corporate charge."

11. Chief Justice Grant in Clark v. E. C. Clark Machine Co., 151 Mich. 416-424, stated the attitude of our Supreme Court in the following language: "We are compelled to hold that the assessable stock and assets of a corporation constitute a trust fund, not only for the benefit of existing, but also for future creditors." Citing American Steel & Wire Co. v. Eddy, 130 Mich. 266. Young v. Erie Iron Co., 65 Mich. 111-128; Penin

The trust

quently visited with serious statutory liabilities12. fund doctrine, however, is independent of statute law, and rests upon equitable principles. The corporation may not, as against creditors, impair its capital stock by releasing a stockholder from his subscription obligations13, nor by exchanging shares for services11 or property15 taken at a grossly excessive valuation, nor by purchasing its own shares, except from profits16; nor by paying unearned dividends17. It is the duty of every corporation to confine itself to its corporate objects18. These are to be determined by the purposes declared in the articles of association19. Both the interest of the State and the protection of the stockholders demand that the corporation shall confine its activities within the designated field. Otherwise the State would have no means of knowing the precise purpose for which any corporation is organized, and stockholders would be unable to forsee the class of operations in which their investments might be employed20.

$25. Liabilities.

We have seen that a corporation is liable upon its contracts made within the scope of its powers, to the same extent, and under the same circumstances, as a natural person21. Corporations are also liable for their torts22, even in cases where a

sular Savings Bank v. Stove Polish Co., 105 Mich. 535; Turnbull v. Prentiss Lumber Co., 55 Mich. 387-394; Upton v. Tribilcock, 91 U S. 45; 23 L. ed. 203.

12. See Act 232 of 1903, Secs. 22-23.

13. Moore v. Universal Elevator Co., 122 Mich. 48-59; Whitaker v. Grummond, 68 Mich. 249-257.

14. Peninsular Savings Bank v. Stove Polish Co., 105 Mich. 535538.

15. Moore v. Universal Elevator Co., 122 Mich. 48-61; Peninsular Savings Bank v. Stove Polish Co., 105 Mich. 535-538; Atlantic Dynamite Co. V. Andrews, 97 Mich. 466; McBryan v. Universal Elevator Co., 130 Mich. 111.

16. Clark v. E. C. Clark Machine Co., 151 Mich. 416.

17. American Steel & Wire Co. v. Eddy, 130 Mich. 266; Id. 138

Mich. 403-408.

18. Detroit Driving Club V. Fitzgerald, 109 Mich. 670-675; People v. River Raisin & L. E. R. Co., 12 Mich. 389-396. C. L. 1897, Sec. 5477, et seq., provides that bonuses paid in aid of a corporation must be restored, with interest, or profits, if the enterprise is abandoned or removed.

19. Attorney General V. Lorman, 59 Mich. 157.

20. Day v. Spiral Springs Buggy Co., 57 Mich. 146-150.

21. Eureka Iron & Steel Works V. Bresnahan, 60 Mich. 332-338; McCracken v. Halsey Fire Engine Co., 57 Mich. 361; Cicotte v. St. Anne's Church, 60 Mich. 552.

22. "The doctrine which formerly was sometimes asserted, that an action will not lie against a corporation for tort, is exploded. The same rule in that respect now

malicious motive is a necessary element of the wrong23. A corporation must respond for the fraud of its officers and agents perpetrated in its name and behalf within the scope of the agency2. The fact that the corporation is liable does not relieve. the wrongdoers from personal liability25. A corporation may become liable for a tort through ratification26. Liability for a

suit under the pretext of showing the degree of credit and the probable weight attaching to the alRandall leged publications.

V.

applies to corporations as to individuals. They are equally responsible for injuries done in the course of their business by their servants. This is so well settled Evening News Ass'n, 97 Mich. 136140. In Cascarella v. National Groas not to require the citation of any authorities in its support.”— cer Co., 151 Mich. 15, a corporation Justice Field in Baltimore & Po- was held liable for malicious prosR. Co. tomoc 5th V. ecution. Baptist A corporation may, of Church, 108 U. S. 335, 27 L. ed. course, be liable for a trespass 739-744. (Bath v. Caton, 37 Mich. 199), a nuisance (Brady v. Detroit Steel & Spring Co., 102 Mich. 277; PeoWhite ple v. Lead Works, 82 Mich. 471) or an assault (Lindsay Wabash Ry. Co. 141 Mich.

23. "It is now well settled that a corporation may be liable in tort, even though a malicious intent is necessary to be proven. The malice of the agent is imputable to the corporation."-Justice McGrath in Wachsmuth v. Merchants National Bank, 96 Mich. 426-430. (In this case a banking corporation was held liable for "Since..... false imprisonment.)

...corporations have taken such common and important parts in the business of the country, and have been created for almost every conceivable purpose where an aggregation of capital can be employed to advantage, it has been considered to be consistent with the principles of justice to hold them to a large measure of the accountability which attaches to individuals. It is well settled in this State that an action can be maintained against a corporation for libel."-Justice Champlin, in Bacon v. Michigan Central R. Co. 55 Mich. 224-228; (Railroad corporation held liable for libel). See also Detroit Daily Post v. McArthur, 16 Mich. 447. The malice of a stockholder is not imputable is corporation, unless it shown that the corporation acted upon it. Nor can wealth of a defendant corporation be given in evidence in a slander or a libel

to

a

V.

204.)

24. Laiser v. Appleton Land & Iron Co., 130 Mich. 588-590. 25. Hempfling v. Burr, 59 Mich.

294-296.

26. Cascarella v. National Grocer Co., 151 Mich. 15-19. In this case. it appeared that Nesen was local cashier of the defendant company. Acting, as he thought, in the interest of the company, he caused the arrest of Cascarella on a charge of larceny. Gamble, defendant's general agent, approved of Nesen's act. The charge against Cascarella proved unfounded and the defendant company was held liable jointly with Nesen, in an action for malicious prosecution. The company's liability was predicated on Gamble's ratification of Nesen's action. The following general principle is deducible from the case: An unauthorized act, performed ostensibly for the corporation by its agent, may be effectively ratified by another agent of the same corporation, provided the ratifying agent himself has general authority to perform the act ratified. See also Ironwood Store Co. v. Harrison, 75 Mich.

tort can not be escaped by a corporation on the ground that the act was ultra vires7. But where the wrong was committed without prior authority, express or implied, no liability attaches to the corporation in the absence of a clear ratification28. An exception to the rule of corporate liability for torts obtains in favor of charitable institutions. Corporations administering charitable trusts, such as churches and hospitals, are not liable for the negligence of their officers and agents in cases where the resulting injury is inflicted upon one who is, at the time, a participant in the benefaction which the corporation is administering29. A corporation may be held to criminal liability in all cases where commission of the crime charged is within the capacity of a corporation and is punishable by fine. Crimes punishable at discretion by fine or imprisonment are also imputable to corporations, inasmuch as the discretion may be exercised by imposing the pecuniary penalty30. Thus a corporation may be prosecuted criminally for maintaining a nuisance, where the offense is punishable by fine31. Examination of the

197-203, where it was held that a corporate agent may ratify the unauthorized acts of a stranger provided the agent had general power to appoint agents for the performance of such acts.

27. "Corporations are liable for every wrong they commit, and in such cases the doctrine of ultra vires has no application." Justice Swayne, in First Nat'l Bank V. Graham, 100 U. S. 699, 25 L. ed 750-751.

28. Govaski V. Downey, 100 Mich. 429-435; Travis v. Ins. Co., 85 Mich. 288; Turner v. Phoenix Ins. Co., 55 Mich. 236-242; Cascarella v. National Grocer Co., 151 Mich. 15.

29. One who participates in the benefaction waives the right to recover damages against the benefactor corporation. He assumes the risk. Pepke v. Grace Hospital, 130 Mich. 493; Downes v. Harper Hospital, 101 Mich. 555, 25 L. R. A. 602. But one who suffers an injury when not a participant in the benefaction may hold the charitable corporation liable. Thus in Bruce v. Central M. E. Church,

147 Mich. 230, the defendant was held liable to the employee of a contractor on account of negligently erected staging constructed by defendant for the use of the plaintiff, who was engaged in tinting the walls of a church, and was injured by the breaking of the staging.

30. Marshall's Corp. p. 325.

31. People V. White Lead Works, 82 Mich. 471. This was a prosecution brought jointly against the corporation and its officers for maintaining a nuisance. Justice Grant, speaking for the court, said: "All the defendants were properly convicted. The officers of the company are jointly responsible for the business. It is not necessary to conviction that they should have been actually engaged in work upon the premises. The work is carried on by employes. The directors and officers are the persons primarily responsible, and therefore, the proper ones to be prosecuted. A fine can be collected against the defendant company, and therefore it is subject to prosecution.

statutes of Michigan relating to crimes32 discloses that the policy of legislation in this State is to visit the offenses of the corporation directly upon the participating officers. Sometimes forfeiture of the corporate charter is expressly included among the penalties33.

§26. Liabilities.-Ultra Vires Acts.

The early doctrine in Michigan as elsewhere was, that corporate acts unauthorized by the charter were utterly and irredeemably void; that a contract beyond the corporate powercr, to use the accepted phraseology, an ultra vires contract-was a total nullity, which no estoppel could sustain, no recognition support, no ratification validate34. In Michigan it is rather in the application, than in the statement of the rule, that the modern modification of the doctrine of ultra vires is to be found. There has been no express recantation of the theory first announced, but instead, the decisions disclose a gradual progression toward a more equitable view. "When the reason failed, the rule failed." Entrenched behind its reserved right to amend and repeal charters, the State is no longer menaced by the dangers which were incident to perpetual grants of indestructible corporate powers. The corporate person has ceased to be regarded as a potential malefactor. Instead, it is known as a powerful servant, indispensable to the general welfare. Sound public policy now ascribes to corporate beings substantially the capacities of natural persons35, subject to State control. The change from the old

32. C. L. 1897, Title XIX, p. 3379; as to monopoly, see Sec. 11377, et seq; as to gambling in stocks, see Sec. 11373; as to extortion, see Sec. 11400.

33. C. L. 1897, Sec. 11380, also

11354.

34. In Orr v. Lacey, 2 Doug. (Mich.) 230-253, decided in 1846 Justice Whipple stated the early position of our Supreme Court as follows: "A corporation possesses only those powers expressly given by its charter. Among those granted to the Indiana State Bank, is a power to discount bills and loan money, reserving upon such loan six per cent per annum, and no more.

There is no provision in the charter which declares that a contract reserving more than six per cent shall be void. No principle, however, is at this day, better settled, than that a court will never carry into effect a contract made in violation of a positive law, any more than they would a contract founded on an immoral consideration. If, therefore, there was an incapacity on the part of the bank to make the contract declared upon, or, if that contract was made in violation of its charter, a court of justice will not lend its aid to carry it into execution."

35. Eureka Iron & Steel Works v. Bresnahan, 60 Mich. 332, (1886).