and understanding are correctly represented by the statement in the text."

§376. Uniform Partnership Act. Section 9. (Partner Agent of Partnership as to Partnership Business.)-(1) Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority.

(2) An act of a partner which is not apparently for the carrying on of the business of the partnership in the usual way does not bind the partnership unless authorized by the other partners.

(3) Unless authorized by the other partners or unless they have abandoned the business, one or more but less than all the partners have no authority to:

(a) Assign the partnership property in trust for creditors or on the assignee's promise to pay the debts of the partnership, (b) Dispose of the good-will of the business,

(c)

Do any other act, which would make it impossible to carry on the ordinary business of the partnership,

(d) Confess a judgment,

(e) Submit a partnership claim or liability to arbitration or reference.

(4) No act of a partner in contravention of a restriction on his authority shall bind the partnership to persons having knowledge of the restriction."

§377. From W. D. Lewis. The Uniform Partnership ActA Reply to Mr. Crane's Criticism. 29 Harv. L. Rev. 291.-"Section 9 (1) Provides that the act of every partner for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership. Mr. Crane suggests that instead of the words quoted the wording of the English Partnership Act should have been followed, which provides that 'Any act,' by a partner, 'for the carrying on in the usual way the business of the kind carried on by the firm,' binds the partnership.

The question raised by the suggestion, which was much dis

cussed both by the Committee on Commercial Law and by the Commissioners, is: To what end should the inquiry of the court be directed when it has to decide the scope of a partner's apparent authority? Should the inquiry be: How did the partnership business appear to be carried on? or, How are businesses of the kind carried on by the partnership usually carried on?

It was argued in favor of the second view, as Mr. Crane has argued, that to declare that the inquiry should be: 'How is this partnership apparently carried on?' imposes an undue burden on the third person to learn the habits of this particular firm. On the other hand, it was contended that the wording of the English Act was susceptible of the interpretation that a partnership was bound, if the act was a usual act in the business of the kind carried on by the partnership, even though it was apparent that this particular partnership did not carry on the business in that manner. The argument which finally led the Commissioners to adopt the present wording was that it emphasizes the fundamental reason why a partnership is ever bound by an act of a partner not authorized by his co-partners, namely, that partners are bound because they have held him out to do that class of acts. The question therefore which should be determined in each case is, was it an act for apparently carrying on in the usual way the business of the partnership of which he is a member? Again, even if the contract was not one for carrying on in the usual way the business of the kind carried on by the firm, the partnership should be held, if it was a contract for apparently carrying on in the usual way that particular partnership; a matter which would be more than doubtful if the wording suggested by Mr. Crane had been adopted.".

PRACTICE PROBLEMS

(a) A was conducting a business apparently as a sole trader but actually as a partner of B. A induced C to enter into a contract which was within the scope of the business of the firm, but which A had agreed with B in the partnership contract never to make without B's consent. At the time of the contract C did not know of the existence of the partnership. B's assent was never given to the contract. Is the contract binding on the partnership?

(b) A trading partnership doing business under the firm name and style of "A & Co." was composed of A, B, and C. A made two notes to the order of "A & Co." and indorsed one to his tailor for a suit of clothes ordered by him, and the other to a bank for cash. The cash was appropriated by A to personal uses. Is the firm liable on either of these notes?

C. IN CORPORATIONS.

$378 VICTOR v. LOUISE COTTON MILLS.

Supreme Court of North Carolina, 1908. [148 N. Car., 107.]

CONNOR, J., (after stating the facts): Eliminating all formal and irrelevant matter, we extract from the pleadings the following facts: The defendant cotton mills is, and was prior to 1 June, 1905, chartered and organized in the city of Charlotte, with a capital stock of $300,000, two-thirds of which is common and one-third preferred stock. Plaintiff is the owner of ten shares of common stock in said corporation. On and before said date the said corporation was, in accordance with its charter, operating a mill and machinery for the purpose of manufacturing cotton goods. On 30 June, 1905, the defendant Wilson was, and had for several years prior thereto been, the president of said corporation, and continued so to be until he resigned, on 2 October, 1906, since which time he has had no connection with said mills. Said Wilson was at the time of his connection with said mills "a manufacturer and financier of great capacity, skill and ability. The services which said Wilson performed for defendant mills during the whole time he occupied the position of its president were of great and peculiar value and of great benefit and advantage to the defendant and its stockholders, including the plaintiff, and such services as could be performed by the said Wilson only. On 30 June, 1905, the said J. P. Wilson, at the instance and request of the Louise Mills, made application for an insurance policy upon his life in the said Travelers Insurance Company for the sum of $100,000, for the benefit of the Louise Mills, under a plan of insurance known as "twenty-payment life." Two policies, No. 157589 and No. 157590, were issued in accordance with said application, for $50,000 each, and were made payable to the executors or administrators or assigns of J. P. Wilson, and the same were immediately after their delivery assigned by him to the Louise Mills, and said Louise Mills paid the first and all subsequent premiums thereon, and that the said policies are now in force, if the same are or ever were valid insurance contracts, and the next premium for the current year will be due thereon on 7 July, 1908.

The said Louise Mills has already paid upon said policies the sum of $13,926, consisting of the premiums due for the years 1905, 1906 and 1907, which were $2,321 a year on each policy. The plaintiff has made demand upon the said Louise Mills, its officers and directors that it and they cease and desist from any further payment of the funds of the corporation on account of said premiums.

The defendants, on the contrary, insist that the corporation had an insurable interest in the life of Mr. Wilson when the policy was obtained, and it being at that time and under the existing conditions a valid contract of insurance, it remains so, notwithstanding his resignation as president of the corporation.

The defendant Mills denies that the payment of the premiums from the funds of the corporation is an unwarranted diversion of such funds. The plaintiff's contention and application for injunctive relief are based upon two propositions:

1. That the amounts paid for premiums is an unauthorized and improper application or diversion of the funds of the corporation.

2. That the corporation has no insurable interest in the life of the defendant Wilson; that the policy is for that reason a gambling contract and therefore invalid; that upon the death of said Wilson its payment cannot be enforced in the courts of the state.

It is alleged and admitted that it is customary for corporations to insure the lives of their officers whose services are of peculiar value and whose death would impair the value of their stock. The extent of this custom is not alleged. In the view which we take of the question involved, it is not material. If the question of the personal liability of directors, in which the bona fides of their conduct was material, were involved, the general custom known to and acquiesced in by the stockholders would probably be material. We notice that the pleadings refer to the insurance and payments of premiums on the policy as the action of the corporation, and not of the board of directors. The complaint sets out the transaction as the act of the corporation, and the answer so admits it. The demurrer must be construed as admitting the allegation to be construed as most favorably to the defendants. We are, therefore, to deal with the question presented as calling into question the corporate act, and not involving any suggestion of an excess or abuse of power by the directors. There are, of course, many acts done by the board of directors which can be called into question only by the corporation in its capacity as a legal entity or by a stockholder conforming to the rule laid down in Hawes v. Oakland, 104

66

U. S. 450; Merrimon v. Paving Co., 142 N. C., 539. If the act of the corporation be ultra vires, any one or more stockholders may by some appropriate method call it in question and, unless by having consented to or acquiesced in it he is barred, have relief. As any stockholder may restrain the diversion of corporate funds for any purpose not embraced in the original purpose of the corporation, no majority, however large, can compel a stockholder to submit to any fundamental change in the business or objects of the company. A stockholder, by becoming such, contracts with the corporation that he will submit his interests to the direction and control of the proper officers of the company in carrying out the objects and purposes for which it was instituted; and the undertaking on the part of the company is that the objects and purposes of its institution shall not be changed without at least the unanimous consent of all the stockholders, and that no other responsibilities and hazards shall be imposed on the stockholders than those which grow out of the original undertaking. The right to restrain by injunction exists in a stockholder, though every other stockholder may favor the ultra vires acts." 2 Purdy's Beach on Corp., $904. "And he may enjoin and set aside any acts which do not conform to these limits." 2 Cook on Stockholders, §681; Pickering v. Stephenson, 14 L. R. (1870), 340; Wiswal v. Turnpike Co., 5 N. C., 183; Womack Pr. Corp., 147. "It is no sufficient answer to the suit of a dissenting stockholder, in case of an ultra vires act, to say that no wrong or fraud was intended, or that it would benefit the corporation and be no injury to the stockholders. The fact is enough that it is ultra vires." Purdy's Beach, §905. In Central Railroad v. Collins, 40 Ga. 582, it is said: "We do not think the profitableness of this contract to the stockholders of the corporation has anything to do with the matter. These stockholders have a right of their pleasure to stand on their contract. If the charters do not give these companies the right to go into this new enterprise, any one stockholder has the right to object. He is not to be forced into an enterprise not included in the charter. That it will be to his interest is no excuse; that is for him to judge."

"The right of a non-assenting stockholder to equitable relief does not depend in any respect upon the profitableness or unprofitableness of the transaction. He has the legal right that the corporation shall keep within the powers granted by the charter." Byrne v. Elec. Mfg. Co., 65 Conn., 336, a very able opinion by Andrews, C. J., reviewing the authorities.

It is true, as held by numerous courts, including our own, that the doctrine of ultra vires has been very much modified in