notice thereof, and, if benefits have been received, returning them or otherwise placing the other party in statu quo.84 If it desires to ratify the contract, it may either expressly ratify it or impliedly ratify it by conduct. Torts committed by corporate officers or agents may be ratified the same as any other act.85 Like other cases of agency, void, as distinguished from voidable, acts cannot be ratified,86 and this includes acts done in violation of law or in contravention of public policy. Likewise, a corporation cannot ratify an ultra vires contract.87 § 2179. Statutory regulation. In some states statutes lay down. certain rules as to ratification which are applicable to corporations as well as to others. 88 Ordinarily, however, these rules are merely declaratory of the common law. § 2180. Necessity for ratification. Of course no ratification is ordinarily necessary where a corporate officer or agent acts within his authority and in an authorized manner. However, ratification or approval of particular corporate acts or contracts is sometimes required by statute or charter provision or by the by-laws; and consent of the stockholders or certain percentage thereof is sometimes necessary to validate a corporate transaction.89 So ratification by the stockholders is sometimes made a condition to a power to contract delegated by the board of directors, in which case ratification of a particular contract made by the officer or officers to whom the power was delegated is necessary, although the contract is silent in regard thereto.90 A contract may itself provide for its ratification by certain officers before it shall become effective, in which case ratification is necessary, although the representatives of the corporation who made the contract had implied power, by virtue of their offices, to bind the corporation without any ratification.91 But an assignee of a lease who has collected rents thereunder cannot attack the lease 84 H. J. Mohlman Co. v. Reikers, 36 N. Y. Misc. 770, 74 N. Y. Supp. 848. 85 See generally 1 Mechem, Agency (2nd Ed.), § 357. 86 See generally 1 Mechem, Agency (2nd Ed.), § 358. 87 See § 1518, supra. 88 See Colpe v. Jubilee Min. Co., 2 Cal. App. 393, 84 Pac. 324. 89 See 801, supra. 90 Kelsey v. New England St. Ry. Co., 60 N. J. Eq. 230, 46 Atl. 1059. As to what constitutes waiver of required ratification, see Kelsey v. New England St. Ry. Co., 60 N. J. Eq. 230, 46 Atl. 1059. 91 Roberts.v. New & B. St. Corporation, 138 N. Y. App. Div. 47, 122 N. Y. Supp. 989. on the ground that it was not ratified by the stockholders of the lessor as required by statute. 92 If the charter requires contracts to be ratified by the directors, assent to a proposed contract given by the directors before its execution is equivalent to subsequent ratification.93 § 2181. Ultra vires acts. As a corporation has such powers only as are conferred upon it by its charter, and cannot properly authorize its officers or agents to engage in transactions which are ultra vires, it cannot properly ratify ultra vires acts or contracts. Ratification of such an act or contract cannot render it any the less ultra vires.94 This rule has been stated and considered at length in preceding 92 Standard Oil Co. v. Slye, 164 Cal. 435, 129 Pac. 589. 93 New York & N. J. Globe Gas Light Co. v. Metropolitan Inv. Co., 10 N. Y. App. Div. 342, 41 N. Y. Supp. 797. 94 United States. Medlin Milling Co. v. Moffatt Commission Co., 218 Fed. 686, gambling in futures in grain. Park Hotel Co. v. Fourth Nat. Bank of St. Louis, 86 Fed. 742. Alabama. Alabama Great Southern R. Co. v. Loveman Compress Co., 72 So. 311. Illinois. Wheeler v. Home Savings & State Bank, 188 Ill. 34, 80 Am. St. Rep. 161, 58 N. E. 598, rev'g 85 Ill. App. 28; National Home Building & Loan Ass'n v. Home Sav. Bank, 181 Ill. 35, 64 L. R. A. 399, 72 Am. St. Rep. 245. Nebraska. Thompson v. West, 59 Neb. 677, 49 L. R. A. 337, 82 N. W. 13. New Jersey. Elkins v. Camden & A. R. Co., 36 N. J. Eq. 5. New Mexico. Rankin v. Southwestern Brewery & Ice Co., 12 N. M. 49, 73 Pac. 612. Tennessee. Buckeye Marble & Freestone Co. v. Harvey, 92 Tenn. 115, 18 L. R. A. 252, 36 Am. St. Rep. 71, 20 S. W. 427. England. Ashbury Ry. Carriage & Iron Co. v. Riche, L. R. 7 H. L. 653. Thus a wrongful withdrawal by a member of a building and loan association, and payment for his stock when the association has no funds applicable to withdrawals, cannot be validated by ratification by the directors. Aldrich v. Gray, 147 Fed. 453, 8 Ann. Cas. 832. "It is settled that the powers of the agents of corporations to enter into contracts in their behalf are limited, by the nature of things, to such contracts as the corporations are by their charters authorized to make. The same want of power to give authority to an agent to contract, and thereby bind the corporation in matters beyond the scope of their corporate objects, must be equally conclusive against any attempt to ratify such contract. What they cannot do directly they cannot do indirectly. They cannot bind themselves by the ratification of a contract which they had no authority to make. The power of the agent must be restricted to the business which the company was authorized to do. Within the scope of the business which they had power to transact, he, as its agent, may be authorized to act for it, but beyond that he could not be authorized, for its powers extend no further." Downing v. Mt. Washington Road Co., 40 N. H. 230. chapters.95 However, a corporation is capable of exceeding its powers, and in most jurisdictions it cannot always escape liability upon a contract, or for an act which it has authorized, by setting up that it was beyond its powers.96 This is just as true where an ultra vires contract is ratified as where it was authorized.97 Individual directors, by their words or their silence, cannot ratify a contract made by a corporate officer, nominally in its behalf, but actually without authority, and a matter with which the company has no concern.98 So the board of directors cannot bind the company by ratifying transactions of officers which the by-laws expressly prohibited, for the reason that the by-laws apply as much to the directors as to the officers violating them.99 1 § 2182. Knowledge as element of ratification-General rule. As a general rule, ratification of the unauthorized act of an agent, to be effectual and binding upon the principal, must have been made with a full knowledge of all material facts; and this rule applies, of course, to ratification by a corporation of an unauthorized contract or other act by its officers or agents, whether the ratification is by the stockholders or by the directors, or by a subordinate officer having authority to ratify. It follows that if a corporation had no knowledge 95 See §§ 801, 1518, supra. 97 Perkins v. Portland, S. & P. R. Co., 47 Me. 573, 74 Am. Dec. 507. See Peck v. Doran & Wright Co., 57 Hun (N. Y.) 343, 10 N. Y. Supp. 401. 98 Demarest v. Spiral Riveted Tube Co., 71 N. J. L. 14, 58 Atl. 161. 99 Hoffman v. Farmers' Co-op. Shipping Ass'n, 78 Kan. 561, 97 Pac. 440. 1 Combs v. Scott, 12 Allen (Mass.) 493. 2 United States. Watkins Salt Co. v. Mulkey, 225 Fed. 739; Marqusee v. Insurance Co. of North America, 211 Fed. 903, 907; Pennsylvania Taximeter Cab Co. v. Cressey, 191 Fed. 337. California. Smith v. Pacific Vinegar & Pickle Works, 145 Cal. 352, 104 Am. St. Rep. 42, 78 Pac. 550; Blen v. Bear River & A. Water & Mining Co., 20 Cal. 602, 81 Am. Dec. 132; Wickersham Banking Co. v. Nicholas, 2 Cal. App. 18, 82 Pac. 1124. Colorado. Conqueror, Gold Mining & Milling Co. v. Ashton, 39 Colo. 133, 90 Pac. 1124; Extension Gold Mining & Milling Co. v. Skinner, 28 Colo. 237, 64 Pac. 198. Florida. First Nat. Bank v. Kirkby, 43 Fla. 376, 32 So. 881. Georgia. Butler v. Standard Guaranty & Trust Co., 122 Ga. 371, 50 S. E. 132; Singleton v. Bank of Monticello, 113 Ga. 527, 38 S. E. 947. Illinois. National Hollow BrakeBeam Co. v. Chicago R. Equipment Co., 226 Ill. 28, 80 N. E. 556, rev'g 123 Ill. App. 533; Thompson v. Hemenway, 218 Ill. 46, 109 Am. St. Rep. 239, 75 N. E. 791. Iowa. Teeple v. Hawkeye Gold Dredging Co., 137 Iowa 206, 114 N. W. 906; Bristol Sav. Bank v. Judd, 116 Iowa 26, 89 N. W. 93; Groeltz v. Armstrong Real Estate Co., 115 Iowa 602, 89 N. W. 21; Thompson v. Des Moines Driving Park, 112 Iowa 628, 84 N. W. 678. of a contract when made by one of its officers, but as soon as it learns thereof it refuses to accept the fruits thereof, there is no ratification or estoppel. It is also necessary to show knowledge, or to show facts from which knowledge may be presumed, in order that a corporation may be held to have impliedly ratified an unauthorized act Kentucky. Star Mills v. Bailey, 140 Ky. 194, 140 Am. St. Rep. 370, 130 S. W. 1077; Pennsylvania Iron Works Co. v. Voght Mach. Co., 29 Ky. L. Rep. 861, 96 S. W. 551. Maine. Hyams v. Old Dominion Co., 113 Me. 294, 300, L. R. A. 1915 D 1128, 93 Atl. 747; Camden Land Co. v. Lewis, 101 Me. 78, 63 Atl. 523. Maryland. Cumberland Coal & Iron Co. v. Sherman, 20 Md. 117. Massachusetts. Bishop v. Burke, 207 Mass. 133, 93 N. E. 254; Old Dominion Copper Mining & Smelting Co. v. Bigelow, 203 Mass. 159, 89 N. E. 193; Bi-Spool Sew. Mach. Co. v. Acme Mfg. Co., 153 Mass. 404, 26 N. E. 991; Murray v. Nelson Lumber Co., 143 Mass. 250, 9 N. E. 634. Minnesota. National City Bank of Minneapolis v. Zimmer Vacuum Renovator Co., 132 Minn. 211, 156 N. W. 265. Missouri. Sanders V. Chartrand, 158 Mo. 352, 59 S. W. 95; Bartlett v. Garrett, 188 Mo. App. 144, 185 S. W. 79; Bradley-Metcalf Co. v. TootleCampbell Dry Goods Co., Mo. App. -, 180 S. W. 389; Sedalia Nat. Bank v. Economy Steam Heating & Electric Co., 145 Mo. App. 319, 130 S. W. 377. Montana. Trent v. Sherlock, 26 Mont. 85, 66 Pac. 700. New Jersey. Lister Agr. Chemical Works v. Selby, 68 N. J. Eq. 271, 59 Atl. 247; Pomeroy v. New York Smelting & Refining Co. (N. J. Ch,), 48 Atl. 395. New York. Lord v. United States Transp. Co., 143 App. Div. 437, 128 N. Y. Supp. 451; Gause v. Commonwealth Trust Co., 124 App. Div. 438, 108 N. Y. Supp. 1080, aff'g 55 Misc. 110, 106 N. Y. Supp. 288; Caldwell v. Mutual Reserve Fund Life Ass'n, 53 App. Div. 245, 65 N. Y. Supp. 826; Ives v. Smith, 55 Hun 606, 8 N. Y. Supp. 46; Missouri Pac. Ry. v. Mercantile Trust Co., 76 Misc. 10, 134. N. Y. Supp. 548. North Dakota. Smith v. Courant Co., 23 N. D. 297, 136 N. W. 781. Oregon. Crawford v. Albany Ice Co., 36 Ore. 535, 60 Pac. 14. South Carolina. Ravenel v. Lyles, Speer Eq. 281. South Dakota. Porter v. Lien, 36 S. D. 18, 153 N. W. 905. Utah. Murray v. Beal, 23 Utah 548, 65 Pac. 726. Washington. Coolidge v. Schering, 32 Wash. 557, 73 Pac. 682. Wisconsin. Glendale Inv. Ass'n v. Harvey Land Co., 114 Wis. 408, 90 N. W. 456. Where there is no knowledge of an unauthorized exchange of notes for bonds until after the bankruptcy of the corporation, a sale of the bonds by the trustee before acquiring knowledge of the facts does not constitute a ratification. In re Charles R. Partridge Lumber Co., 215 Fed. 973. 3 Red Cross Protective Society v. Wayte, 171 Fed. 643. by accepting the benefits of it, or by failure on its part to disaffirm it.1 However, want of knowledge of the law, as distinguished from the facts, is immaterial.5 § 2183. Matters equivalent to knowledge and what constitutes knowledge. Summing up the conclusions of Professor Mechem in. his valuable work on the law of agency, they are that the knowledge required for ratification is ordinarily actual knowledge and not merely the opportunity for acquiring knowledge: but that the principal cannot be justified in wilfully closing his eyes to knowledge; the facts may be so patent and obvious that the principal, as a reasonable man, cannot be heard to say that he was ignorant of them; the existence of actual knowledge may be found by inference like any other fact; and the knowledge may be the knowledge possessed by some other agent having a general authority in the matter, and which 4 California. Blen v. Bear River & A. Water & Mining Co., 20 Cal. 602, 81 Am. Dec. 132. Colorado. Extension Gold Mining & Milling Co. v. Skinner, 28 Colo. 237, 64 Pac. 198; Union Gold Min. Co. v. Rocky Mountain Nat. Bank, 1 Colo. 531. Iowa. Thompson v. Des Moines Driving Park, 112 Iowa 628, 84 N. W. 678. Kansas. Getty v. C. R. Barnes Milling Co., 40 Kan. 281, 19 Pac. 617; First Nat. Bank of Ft. Scott v. Drake, 29 Kan. 311, 44 Am. Rep. 646. Maryland. Cumberland Coal & Iron Co. v. Sherman, 20 Md. 117. Massachusetts. Bi-Spool Sew. Mach. Co. v. Acme Mfg. Co., 153 Mass. 404, 26 N. E. 991; Murray v. Nelson Lumber Co., 143 Mass. 250, 9 N. E. 634. Minnesota. Ft. Dearborn Nat. Bank v. Seymour, 75 Minn. 100, 77 N. W. 543. Missouri. Sanders v. Chartrand, 158 Mo. 352, 59 S. W. 95. Nevada. Edwards v. Carson Water Co., 21 Nev. 469, 34 Pac. 381; Yellow Jacket Silver Min. Co. v. Stevenson, 5 Nev. 224. New York. Caldwell v. Mutual Reserve Fund Life Ass'n, 53 App. Div. 245, 65 N. Y. Supp. 826; Camacho v. Hamilton Bank Note & Engraving Co., 2 App. Div. 369, 37 N. Y. Supp. 725; French v. O'Brien, 52 How. Pr. 394. South Carolina. Ravenel v. Lyles, Speer Eq. 281. Vermont. Lyndon Mill Co. v. Lyndon Literary & Biblical Inst., 63 Vt. 581, 25 Am. St. Rep. 783, 22 Atl. 575; Stark Bank v. United States Pottery Co., 34 Vt. 144. Washington. Elwell v. Puget Sound & C. R. Co., 7 Wash. 487, 35 Pac. 376. If an officer purchases goods for a corporation without authority, and it is agreed and understood between him and the directors that he is furnishing the goods to the corporation gratuitously, the use of the goods by the corporation is not a ratification of his unauthorized purchase, nor ground for implying a promise on the part of the corporation to pay for the goods. Lyndon Mill Co. v. Lyndon Literary & Biblical Inst., 63 Vt. 581, 25 Am. St. Rep. 783, 22 Atl. 575. 5 Davis v. Nueces Valley Irr. Co., 103 Tex. 243, 126 S. W. 4, rev'g on other grounds (Tex. Civ. App.), 116 S. W. 633. |