in which, among other things, it covenanted to take a lease of several other railroads whose companies have introduced into Parliament a bill for consolidation under the name of East Anglian Railways Company, and to assume the payment of Parliamentary expenses of this act of consolidation.

This covenant was held void, as beyond the power conferred by the charter. "They cannot," said the court, "engage in a new trade, because they are incorporated only for the purpose of making and maintaining the Eastern Counties Railway. What additional power do they acquire from the fact that the undertaking may in some way benefit their line? Whatever be their object or prospect of success, they are still but a corporation for the purpose only of making and maintaining the Eastern Counties Railway; and if they cannot embark in new trades because they have only a limited authority, for the same reason they can do nothing not authorized by their act and not within the scope of their authority."

This case, decided in 1851, was afterward cited with approval by the Lord Chancellor, in 1857, in delivering the opinion of the House of Lords, in Eastern Counties Railway Company v. Hawkes (5 H. L. Cas., 331), and it is there stated that it was also acted on and recognized in the Exchequer Chamber in McGregor v. The Deal & Dover Railway Co., 22 Law J., N. s., Q. B., 69; 18 Q. B., 618. Both these cases are cited approvingly in the opinion of Lord CAIRNS in The Ashbury Company, on appeal in the House of Lords.

This latter case, as decided in the Exchequer Chamber (Law Rep., 9 Exch., 224), is much relied on by counsel for plaintiffs here as showing that, though the contract may be ultra vires when made by the directors, it may be enforced if afterwards ratified by the shareholders or if partly executed.

But in the House of Lords, where the case came on appeal, this principle was overruled unanimously in opinions delivered by Lord Chancellor CAIRNS, Lords SELBORN, CHELMSFORD, HATHERLY and O'HAGAN, and the broad doctrine established that a contract not within the scope of the powers conferred on the corporation cannot be made valid by the assent of every one of the shareholders, nor can it by any partial performance become the foundation of a right of action.

It would be a waste of time to attempt to examine the American cases on the subject, which are more or less conflicting, but we think we are warranted in saying that this latest decision of the House of Lords represents the decided preponderance of authority, both in this country and in England, and is based upon sound principle.

There is another principle of equal importance and equally conclusive against the validity of this contract, which, if not coming exactly within the doctrine of ultra vires as we have just discussed it, shows very clearly that the railroad company was without the power to make such a contract.

That principle is that when a coporation, like a railroad company, has granted to it by charter a franchise intended in large measure to be exercised for the public good, the due preformance of those functions being the consideration of the public grant, any contract which disables the corporation from performing those functions, which undertakes, without the consent of the State, to transfer to others the rights and powers conferred by the charter, and to relieve the grantees of the burden which it imposes, is a violation of the contract with the State, and is void as against public policy. This doctrine is asserted with remarkable clearness in the opinion of this court, delivered by Mr. Justice CAMPBELL, in The New York & Maryland Line Railroad Co. v. Winans, 17 How., 30. The corporation in that case was chartered to build and maintain a railroad in Pensylvania by the legislature of that State. The stock in it was taken by a Maryland corporation, called the Baltimore & Susquehanna Railroad Company, and the entire management of the road was committed to the Maryland company, which appointed all the officers and agents upon it, and furnished the rolling-stock. In reference to this state of things and its effect upon the liability of the Pennsylvania corporation for infringing a patent of the defendant in error, Winans, this court said: "This conclusion [argument] implies that the duties imposed upon the plaintiff by the charter are fulfilled by the construction of the road, and that by alienating its right to use, and its powers of control and supervision, it may avoid further responsibility. But those acts involve an overturn of the relations which the charter has ar

ranged between the corporation and the community. Important franchises were conferred upon the corporation to enable it to provide facilities for communication and intercourse, required for the public convenience. Corporate management and control over these were prescribed, and corporate responsibility for their insufficiency provided as a remuneration to the community for their grant. The corporation cannot absolve itself from the performance of its obligations without the consent of the legislature. Beman v. Rufford, 1 Sim., N. s., 550; Winch v. B. & L. Railroad Co., 13 L. & Eq., 506."

And in the case of Black v. Delaware & Raritan Canal Co., 22 N. J., Eq., 130, Chancellor ZABRISKIE, says: "It may be considered as settled that a corporation cannot lease or alien any franchise, or any property necessary to perform its obligations and duties to the State, without legislative authority." P. 399. For this he cites some ten or twelve decided cases in England and in this country.

This brings us to the proposition that the legislature of New Jersey has given her consent by an act which amounts to a ratification of this lease.

The act is entitled, "A supplement to the act entitled 'An act to incorporate the Millville and Glassboro Railroad Company,'" approved April 10, 1867; and its only purpose was to regulate the rates at which freight and passengers should be carried. It reads as follows:

"That it shall be unlawful for the directors, lessees or agents, of said railroad to charge more than three and a half cents per mile for the carrying of passengers, and six cents per ton per mile for the carrying of freight or merchandise of any description, unless a single package weighing less than one hundred pounds; nor shall more than one-half the above rate be charged for carrying any fertilizing materials, either in their own cars, or cars of other companies running over said railroad: Provided, that nothing contained in this act shall deprive the said railroad company, or its lessees, of the benefits of the provisions of an act entitled, 'An Act relative to freights and fares on railways in the State,' approved March 4, 1858, and applicable to all other railroads in the State."

It may be fairly inferred that the legislature knew at the

time the statute was passed that plaintiffs were running the road, and claiming to do so as lessees of the corporation. It was not important for the purpose of the act to decide whether this was done under a lawful contract or not. No inquiry was probably made as to the terms of that lease, as no information on that subject was needed.

The legislature was determined that whoever did run the road and exercise the franchises conferred on the company, and under whatever claim of right this was done, should be bound by the rates of fare established by the act. Hence, without undertaking to decide in whom was the right to the control of the road, language was used which included the directors, lessees, and agents of the railroad. The mention of the lessees no more implies a ratification of the contract of lease than the word "directors" would imply a disapproval of the contract. It is not by such an incidental use of the word "lessees" in an effort to make sure that all who collected fares should be bound by the law, that a contract unauthorized by the charter, and forbidden by public policy, is to be made valid and ratified by the State.

It remains to consider the suggestion that the contract having been executed, the doctrine or ultra vires is inapplicable to the case. There can be no question that, in many instances, where an invalid contract, which the party to it might have avoided or refused to perform, has been fully preformed on both sides, whereby money has been paid or property changed hands, the courts have refused to sustain an action for the recovery of the property or the money so transferred.

In regard to corporations, the rule has been well laid down by COMSTOCK, C. J., in Parish v. Wheeler (22 N. Y., 494), that the executed dealings of corporations must be allowed to stand for and against both parties when the plainest rules of good faith require it.

But what is sought in the case before us is the enforcement of the unexecuted part of this agreement. So far as it has been executed, namely, the four or five years of action under it, the accounts have been adjusted, and each party has received what he was entitled to by its terms.

There remains unperformed the covenant to arbitrate with

regard to the value of the contract. It is the damages pr vided for in that clause of the contract that are sued for in this action. Damages for a material part of the contract never performed; damages for the value of a contract which was void. It is not a case of a contract fully executed. The very nature of the suit is to recover damages for its non-performance. As to this it is not an executed contract.

Not only so, but it is a contract forbidden by public policy and beyond the power of the defendants to make. Having entered into the agreement it was the duty of the company to rescind or abandon it at the earliest moment.

This duty was independent of the clause in the contract which gave them the right to do it. Though they delayed its performance for several years, it was, nevertheless, a rightful act when it was done. Can this performance of a legal duty, a duty both to the stockholders of the company and to the public, give to plaintiffs a right of action? Can they found such a right on an agreement void for want of corporate authority and forbidden by the policy of the law? To hold that they can, is, in our opinion, to hold that any act performed in executing a void contract makes all its parts valid, and that the more that is done under a contract forbidden by law, the stronger is the claim to its enforcement by the courts.

We cannot see that the present case comes within the principle that requires that contracts which, though invalid for want of corporate power, have been fully executed, shall remain as the foundation of rights acquired by the transactions.

We have given this case our best consideration on account of the importance of the principles involved in its decision, and after a full examination of the authorities we can see no error in the action of the Circuit Court.

JUDGMENT AFFIRMED.

MR. JUSTICE BRADLEY did not sit in this case.

NOTES

General observations on the doctrine.-The term ultra vires signifies the act of a corporation which is beyond the power expressly conferred upon it, and not within the scope of those which are incidentally conferred by its charter; the doctrine being, that, as to such act the corporation may