indorse notes for the accommodation of others.61 The validity of such paper can also be assailed upon the theory that the officer of a corporation who executes it cannot so bind the corporation in a matter not connected with its business, or in which it has no beneficial interest.62 But in the hands of a bona fide purchaser for value accommodation paper duly executed by the officers of a corporation can be enforced against the corporation.63 The rules applicable to the rights of bona fide holders of accommodation paper, signed by one of a partnership without the consent of his copartners, can also be applied in the case of similar paper executed by the officers of a corporation. 64 d. Presumption in favor of validity of corporation paper. A corporation having either an express or implied power to issue negotiable paper is presumed to act within the scope of such power and in accordance therewith; and, therefore, a presumption exists in favor of the validity of the corporation's paper issued 61. Hall v. Auburn Turnp. Co., 27 Cal. 255, 87 Am. Dec. 75. Ratification by stockholders.— In the case of Martin v. Niagara Falls Paper Mfg. Co., 122 N. Y. 165, 25 N. E. 303, it was held that if the officers or trustees of a manufacturing corporation do an unauthorized act, or incur indebtedness, which would not create a corporate liability, the stockholders may subsequently ratify, and so validate the transaction. There is nothing malum in se or malum prohibitum in the loaning of its credit by such a corporation, and when accommodation paper has been executed in its name by its president, and the transactions have been ratified by the stockholders, and no other rights intervene, they are thus validated and may be enforced against the corporation. But see Webster v. Howe Mach. Co., 54 Conn. 394, 8 Atl. 482. Loans of credit to persons dealing with corporation.-A corporation dealing in manufactured goods, and needing them for sale, may, as a proper incident to its business, extend financial aid to a manufacturer by advancing him money to enable him to furnish the goods. This may be done by a loan of its own money, or by indorsing the manufacturer's note, looking for reimbursement out of the goods to be manufactured and delivered. Holmes v. Willard, 125 N. Y. 75, 25 N. E. 1083, 11 L. R. A. 170; National Bank of Commerce v. Allen, 90 Fed. 545. 62. National Park Bank v. GermanAm. Mut., etc., Co., 116 N. Y. 281, 22 N. E. 367. 63. Bank of Genesee v. Patchin, 13 N. Y. 309; Mechanics, etc., Assn. v. New York, etc., Co., 35 N. Y. 505; Bridgeport Bank v. Empire Stone Dressing Co., 30 Barb. (N. Y.) 421; Madison, etc., R. Co. v. Norwich Savings Soc., 24 Ind. 457; National Bank v. Young, 41 N. J. Eq. 531, 7 Atl. 488. The provision of a statute that no corporation shall employ its stock, means, assets, or other property for any other purpose than the objects of its creation, does not render the accommodation indorsement of a corporation on a draft invalid, in the hands of a bona fide holder for value before maturity. Marshall Nat. Bank v. O'Neal (Tex. Civ. App.), 34 S. W. 344. Where a corporation and a firm are, for all practical purposes, one and the same, and all transactions that inure to the benefit of one also benefit the other, accommodation paper executed by the corporation for the benefit of such firm is binding on the corporation, whether it has power to execute accommodation paper or not. National Bank of Cynthiana V. Mattingly (Ky.), 33 S. W. 415. 64. See preceding section, p. 118. 65 66 pursuant to such power. Paper so issued will then be presumed valid until the contrary is shown, and the burden is upon him who denies the existence of the power, or the right to execute the paper under that power. As said by Mr. Thompson "the presumption manifestly has no scope where the corporation is under a statutory prohibition in respect of issuing, taking, or transferring any paper of the kind in controversy; and it is in this relation that we find, in some of the decisions, the qualification that, although negotiable securities issued by a corporation are to be presumed valid and legal when not prohibited by law, and when they are received in good faith, yet they are invalid when given in violation of law, or for purposes wholly foreign to those for which the corporation was created." 67 e. Power of officers to issue commercial paper.- Treasurers of manufacturing and trading corporations have been held to be clothed by virtue of their office with power to act for the corporation in making, accepting, indorsing, issuing, and negotiating promissory notes and bills of exchange; and such negotiable instruments in the hands of innocent purchasers for value, who have taken them without notice of any want of authority on the part of the treasurer, are binding upon the corporation. This proposi Validity in hands of bona fide holder. -A negotiable security of a corporation, which, upon its face, appears to have been duly issued by such corporation, and in accordance with the provisions of its charter, is valid in the hands of a bona fide holder thereof, without notice, although such security was in fact issued for a purpose, and at a place not authorized by the charter of the company and in violation of the laws of the State where it was actually issued. Smith v. Sac County, 78 U. S. 163, 20 L. Ed. 109; Goodman v. Simonds, 61 U. S. 365, 15 L. Ed. 941; Thompson v. Lee County, 70 U. S. 327, 18 L. Ed. 177. And see also Auerbach v. Le Sueur Mill Co., 28 Minn. 296; McIntire v. Preston, 10 Ill. 48; Monument Nat. Bank v. Globe 68 Works, 101 Mass. 57; Mechanics' Banking Assn. v. New York, etc., Co., 35 N. Y. 505; Bissell v. Michigan, S. & N. I. R. Co., 22 N. Y. 258. 68. Drafts accepted by the treasurer of a corporation are presumed to be properly accepted by the corporation, there being no circumstances to indicate fraud or illegality; and in an action by the holder against the corporation as acceptor, the burden of proof is upon the defendant corporation to show that the plaintiff had knowledge that the acceptances were for accommodation, and that he was not a bona fide holder for value. Credit Co. v. Howe Machine Co., 54 Conn. 357, 1 Am. St. Rep. 123. See also Walker v. Detroit Transit R. Co., 47 Mich. 338, 11 N. W. 187. A corporation may be held liable upon promissory notes issued by its treasurer in accordance with a usage as well as upon those expressly authorized. In re Great Western Tel. Co., Fed. Cas. 5,740, 5 Biss. 363. And in the case of Foster v. Ohio-Colo. Reduction & Mining Co., 17 Fed. (C. C.) 130, it was held that the authority tion has not remained unchallenged; there are many cases holding that such officers are not to be presumed to possess the power to bind the corporation by its notes executed by them.69 It has been stated as a general proposition that the president and secretary of a corporation are not empowered to bind it by their signatures to commercial paper. 70 They have no inherent power to execute negotiable notes in the name of the corporation." The directors of a corporation are in control of its affairs and have the management of its business, subject to the restrictions and limitations imposed upon them by the articles of incorporation, by-laws, and statutes. If the issuing of commercial paper is within the power of the corporation itself, such paper may in all cases be executed by the directors acting as a board.72 of an officer of a corporation depends The rule as laid down in the above upon the by-laws, or upon the custom case would seem to be confined to a of the corporation; if it be the custom manufacturing or trading corporations. of a corporation to permit the treas- The Supreme Court of Massachusetts urer to execute its promissory notes, the corporation will be bound by such note, especially if it received the benefit of the money for which it was issued. 66 has said in the case of Craft v. South Boston R. Co., 150 Mass. 207, 22 N. E. 920, 5 L. R. A. 641, that whatever may be true of trading corporations there is nothing in the nature of the business of a horse railroad corporation, or of the duties of a treasurer of such a corporation, which implies that the treasurer, by virtue of his office, has authority to borrow money for the company and to give its notes 69. Atkinson v. St. Croix Mfg. Co., 24 Me. 171; In re Millward-Cliff Cracker Co., 161 Pa. St. 157, 28 Atl. 1072; Oak Grove & Sierra Verde Cattle Co. v. Foster, 7 N. M. 650, 41 Pac. 522. 70. City Electric St. R. Co. v. First Nat. Exch. Bank, 62 Ark. 33, 34 S. W. 89, 31 L. R. A. 535. But see Am. Exch. Bank v. Oregon Pottery Co., 55 Fed. 265. Rule in Massachusetts.- In the case of Merchants' Nat. Bank v. Gas Light Co., 159 Mass. 505, 34 N. E. 1083, 38 Am. St. Rep. 453, this question was discussed at length and the court said: "Treasurers of business corporations usually have much more extensive therefor." powers (than treasurers of towns or cities), and the decisions of this court hold that the treasurer of a manufacturing and trading corporation is clothed by virtue of his office with power to act for the corporation in making, accepting, indorsing, issuing, and negotiating promissory notes and bills of exchange, and that such negotiable paper in the hands of an innocent holder for value, who has taken it without notice of any want of au- 71. McCullough v. Moss, 5 Den. thority on the part of the treasurer, (N. Y.) 567; Life & F. Ins. Co. v. is binding on the corporation, al- Mechanic F. Ins. Co., 7 Wend. (N. Y.) though with reference to the corpora- 31; Hyde v. Larkin, 35 Mo. App. 365; tion it is accommodation paper." Cit- Walworth Co. Bank v. Farmers' Loan ing Narragansett Bank v. Atlantic & Trust Co., 14 Wis. 325; Titus v. Silk Co., 3 Metc. (Mass.) 282; Bates Cairo & F. R. Co., 37 N. J. L. 98; v. Keith Iron Co., 7 Metc. (Mass.) 224; Lester v. Webb, 1 Allen (Mass.), 34: Bird v. Daggett, 97 Mass. 494; Monument Nat. Bank v. Globe Works, 101 Mass. 57, 3 Am. Rep. 322; Corcoran v. Snow Cattle Co., 151 Mass. 74, 23 N. E. 727. Wait v. Nashua Armory Assn., 66 N. 72. Schimpf v. Lehigh Valley Mut. Ins. Co., 86 Pa. St. 373. 74 73 66 The rules controlling the liability of a corporation for the acts of its officers and agents are similar to those applying to the acts and contracts of the agents of a natural person." Corporations, like natural persons, are bound, and bound only, by the acts and contracts of their agents, done and made within the scope of their authority." If the business of a corporation is of such a character as to require the issuing of negotiable paper under ordinary circumstances, a party receiving such paper in good faith and without notice, from an agent of the company having authority to issue it under ordinary circumstances, will be protected, although the agent may have acted without authority and in violation of the company's charter in the particular case. But if the execution of negotiable instruments is not required in carrying on the legitimate business of a corporation, except under extraordinary circumstances, a party receiving such paper is not entitled to assume the existence of those extraordinary circumstances and must, at his peril, ascertain the real facts.75 The power to bind the corporation by issuing bills and notes is usually conferred upon its officers by its articles of incorporation, its by-laws, or by resolution duly passed by its board of directors. But the power may be inferred from the circumstances of the particular case, or from an acquiescence of the corporation in the acts of its officers in the regular course of its authorized business for a series of years.76 73. See ante, § 29, p. 80ff. 74. Per Justice Campbell in Philadelphia, etc., R. Co. v. Quigley, 21 How. (U. S.) 202, 16 L. Ed. 72. 75. Morawetz on Private Corporations, § 351. from such board. Cattron v. First Univ. Soc., 46 Iowa, 102. And in the case of Downer v. Read, 17 Minn. 493, it was held that a transfer by the trustee of a corporation of a promissory note, payable to 76. Implied power of officers gener- its order, and the legal title to which ally. The power to make commer- is in the corporation, without the cial paper is a necessary incident to direction of its executive committee, the proper transaction of business by who alone have power to authorize a business corporation and the usual such transfer, was binding and vested executive officers are presumed to act a good title, even as against the corwithin the scope of their authority, poration, the beneficial owner, if the and every intendment will be made to indorsee knew nothing of the restricsupport the paper given, especially tion on the power of the trustee. when signed by the financial officer of the company. In re Great Western Tel. Co., Fed. Cas. No. 5,740, 5 Biss. 363. Where it is within the power of a corporation to make and indorse notes, and, in the course of its business, notes have been made by a certain When the business of a church cor- officer, an indorsement of a note by poration is required by its articles to him in the name of the corporation be conducted by its officers as a board may be enforced by a bona fide holder, of trustees, the president and secre- notwithstanding that the holder has tary cannot execute a note binding never before dealt with the corporaon the corporation without authority tion's commercial paper. Bank of At Evidence that paper signed by an officer of a corporation was habitually used by it in the ordinary transaction of its business for a long time, although without any express authority conferred by its by-laws, or by any formal resolution of its board of directors, is sufficient to establish a power in such officer to bind the corporation." As was said by Judge Story in the case of Bank of United tica v. Pottier & Stymus Mfg. Co., L. Co., 59 Cal. 22; McCormick v. 49 Hun, 606, 1 N. Y. Supp. 483. Stockton & T. C. R. Co., 130 Cal. 100, 62 Pac. 267. Authority of the president and general manager of a corporation to issue A general power vested in the presinotes in its name will not be implied dent of a corporation to borrow from the fact that they had on for- money includes authority to transfer mer occasions executed notes in the the ordinary securities for the money corporate name, which they had taken borrowed. Hatch v. Coddington, 95 care of, without the knowledge of the U. S. 48, 24 L. Ed. 339. See also board of directors. Elwell v. Puget Mitchell v. Deeds, 49 Ill. 416, 95 Am. Sound & C. R. Co., 7 Wash. 487, 35 Dec. 621. Nat. Bank v. Hogan, 47 Mo. 472; Pac. 376. Power of secretary. The secretary Power of president.—A construction of a mining company has no implied company, whose president had gen- authority, as incident to his office, to eral charge and control of its business, make an assignment of promissory and who had been permitted by the notes belonging to the company. To directors to execute and indorse notes sustain such an assignment, either an and drafts for the purpose of raising express authority or a ratification money to conduct the corporate busi- must be shown. Blood v. Marcuse, 38 ness, is liable for the amount of notes Cal. 590, 99 Am. Dec. 435. See First executed by the president to pay off debts due from the company. Fitzgerald & Mallory Const. Co. v. Fitzgerald, 137 U. S. 98, 11 Sup. Ct. 36, 34 L. Power of superintendent or manEd. 608. See also Irwin v. Bailey, Fed. ager.- The sole manager of a corpoCas. No. 7,079, 8 Biss. 523. Possessed ration intrusted by the officers with by a president of an insurance com- its entire conduct may bind it by pany authorized and required by its executing a note in its name, especiby-laws to pay losses. Baker v. Cot- ally where the officers had previously ter, 45 Me. 236. And also where by-laws acquiesced in his execution of similar give power to corporation to borrow notes. Gane v. Loemo Printing Co., money. People ex rel. Attorney-Gen- 46 Ill. App. 456. See also Bates v. eral v. American Steam Boiler Ins. Keith Iron Co., 7 Metc. (Mass.) Co., 3 App. Div. 504, 38 N. Y. Supp. 224. The fact that an agent who 406. accepted a draft upon the corporation In the absence of evidence to the acted as general agent is insufficient, contrary it is presumed that the man- of itself, to show his authority to acaging president of a corporation en- cept the draft. Gould v. Norfolk Lead gaged in loaning money and buying Co., 63 Mass. 338, 57 Am. Dec. 50. and selling securities has authority A general agent of a mining comas such to transfer a note payable to pany, without being especially authorsuch corporation. Merrill v. Hurley, ized so to do, has no authority to 6 S. D. 592, 62 N. W. 958. And make promissory notes in the name of where full control of the business of the company. New York Iron Mine a corporation is conferred upon the Co. v. First Nat. Bank, 39 Mich. 644; president by a vote of the directors, he Merchants' Nat. Bank v. Detroit Knitmay purchase materials and give the note of the corporation therefor. Castle v. Belfast Foundry Co., 72 Me. 167. See also Siebe v. Joshua Hendy Mach. Wks., 86 Cal. 390, 25 Pac. 14; Seeley v. San José Independent M. & ting Co., 68 Mich. 620, 36 N. W. 696. 77. Power exercised in ordinary transaction of business; acquiescence of directors.— The leading New York case on this proposition is that of Olcott v. Tioga R. Co., 27 N. Y. 546, where |