Trippe, Judge.
The injunction prayed for was to restrain the defendant from further paying interest upon its indorsement of the bonds of the estera Railroad, and also from consummating the purchase which it and the Central Railroad and Banking Company had made of the Western Railroad. The chancellor, in refusing the injunction, put his decision on the ground that there was enough before him at the hearing to raise such a presumption of “ratification or consent of complainants, either actual or constructive,” to the acts complained against, as to authorize him to refuse to interfere by injunction, and that the question whether they did so.consent and ratify should be determined by a jury. We cannot say his discretion was abused. As to the matter of the liability of the de[384] fendant corporation upon its indorsements, enough appears in the record, which, if sustained at the final hearing, would authorize an absolute decree against complainants refusing the injunction on the ground that the railroad company could not deny its liability, and that the stockholders were committed either by direct approval of the transaction or by having given such authority to the officers of the corporation, that they cannot now repudiate.it. We are aware of the great conflict of authorities on the principle involved in this point. Some decisions go so far as to rule that any act of the officers of a corporation which is ultra vires, is void, and that no consent and acquiescence or ratification by the stockholders will make it valid, or estop them from asserting its illegality, whenever it may be their interest so.to do. But there are more numerous cases to the contrary, and it is now generally accepted as the true rule that when the act is only ultra vires as between the corporators — because it is in violation of their rights — or when from some defect in a contract it may not be binding on the corporation, in all such cases both the corporation as an entity, and the stockholders, as such, may be estopped from repudiating it, either by express ratification or by such acquiescence and enjoyment of the fruits thereof as would make it a fraud to permit it to be set aside. Instances of both these kinds of ultra vires acts are generally governed by the rules applicable to.principal and agent, or by an analagous principle adopted in reference to contracts under the statute of frauds, where, though the bargain or contract may not be binding, ab initio, it may still become so by the subsequent action of the parties to it: 1st Eng. R., 98; Law R., 7; C. P., 43; 23 Howard, 381; 4 Johns. Ch., 370; 43 Georgia, 13; 48 Georgia, 109; Brice’s Ultra Vires, 462. There is, it is true, another class of ultra vires acts to which no ratification, even unanimously by the shareholders, nor any amount of performance1 ór other thing done by the corporation can give life "or legality. They are those by which the contract of the corporation with the public is violated — as where a new franchise is usurped — where the power is attempted to [385] be exercised by undertaking a new enterprise clearly outside of that authorized by the charter; for instauce: where the legislature has authorized a railway to be constructed and worked, and the company undertakes to establish a bank or make an harbor. In such cases, nothing short of legislative assistance can give legal force to what may have been done. Eor were it not so, a charter for one purpose might be made an omnibus to carry any enterprise which avarice or selfish aggrandizement might suggest. .
Now let us look to the facts of this case. The Georgia Railroad and Banking Company, jointly with the Central, indorsed certain bonds of the Western Railroad Company. This was done under a contract made between the two first. The Central, by some previous arrangement it had made with the Western, had gotten control of the latter, a monopoly of it, as it is called in the record. The Georgia Road, desiring to enjoy the benefits of its own connection with the Western Road, for the purpose of attaining this object and of sharing the advantages with the Central, agreed with .the latter that they should jointly indorse these bonds; and this was a consideration for letting in the former to a joint participation of the benefits theretofore secured to the Central. Not only this, but by it the Western Road was induced to put itself within the .coiitrol of these two. Under this arrangement the bonds were indorsed, put upon the market, were sold, and a large amount of money raised and expended in improving the Western Road, and in extending its connection, and thereby that of the Georgia with the Western. This was the avowed policy of the Georgia Road, so declared by its president and directors, and in a convention of the stockholders. The plan was fully carried out. The two companies, by the control obtained over the Western Railroad, reaped for about five years all the fruits of the general scheme, and paid, during that time, large amounts of interest to the holders of the indorsed bonds. All this tended to appreciate the bonds of the Western road so indorsed, and to induce their circulation and sale in the market, whilst the indorsers were enjoying the
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Trippe, Judge.
The injunction prayed for was to restrain the defendant from further paying interest upon its indorsement of the bonds of the estera Railroad, and also from consummating the purchase which it and the Central Railroad and Banking Company had made of the Western Railroad. The chancellor, in refusing the injunction, put his decision on the ground that there was enough before him at the hearing to raise such a presumption of “ratification or consent of complainants, either actual or constructive,” to the acts complained against, as to authorize him to refuse to interfere by injunction, and that the question whether they did so.consent and ratify should be determined by a jury. We cannot say his discretion was abused. As to the matter of the liability of the de[384] fendant corporation upon its indorsements, enough appears in the record, which, if sustained at the final hearing, would authorize an absolute decree against complainants refusing the injunction on the ground that the railroad company could not deny its liability, and that the stockholders were committed either by direct approval of the transaction or by having given such authority to the officers of the corporation, that they cannot now repudiate.it. We are aware of the great conflict of authorities on the principle involved in this point. Some decisions go so far as to rule that any act of the officers of a corporation which is ultra vires, is void, and that no consent and acquiescence or ratification by the stockholders will make it valid, or estop them from asserting its illegality, whenever it may be their interest so.to do. But there are more numerous cases to the contrary, and it is now generally accepted as the true rule that when the act is only ultra vires as between the corporators — because it is in violation of their rights — or when from some defect in a contract it may not be binding on the corporation, in all such cases both the corporation as an entity, and the stockholders, as such, may be estopped from repudiating it, either by express ratification or by such acquiescence and enjoyment of the fruits thereof as would make it a fraud to permit it to be set aside. Instances of both these kinds of ultra vires acts are generally governed by the rules applicable to.principal and agent, or by an analagous principle adopted in reference to contracts under the statute of frauds, where, though the bargain or contract may not be binding, ab initio, it may still become so by the subsequent action of the parties to it: 1st Eng. R., 98; Law R., 7; C. P., 43; 23 Howard, 381; 4 Johns. Ch., 370; 43 Georgia, 13; 48 Georgia, 109; Brice’s Ultra Vires, 462. There is, it is true, another class of ultra vires acts to which no ratification, even unanimously by the shareholders, nor any amount of performance1 ór other thing done by the corporation can give life "or legality. They are those by which the contract of the corporation with the public is violated — as where a new franchise is usurped — where the power is attempted to [385] be exercised by undertaking a new enterprise clearly outside of that authorized by the charter; for instauce: where the legislature has authorized a railway to be constructed and worked, and the company undertakes to establish a bank or make an harbor. In such cases, nothing short of legislative assistance can give legal force to what may have been done. Eor were it not so, a charter for one purpose might be made an omnibus to carry any enterprise which avarice or selfish aggrandizement might suggest. .
Now let us look to the facts of this case. The Georgia Railroad and Banking Company, jointly with the Central, indorsed certain bonds of the Western Railroad Company. This was done under a contract made between the two first. The Central, by some previous arrangement it had made with the Western, had gotten control of the latter, a monopoly of it, as it is called in the record. The Georgia Road, desiring to enjoy the benefits of its own connection with the Western Road, for the purpose of attaining this object and of sharing the advantages with the Central, agreed with .the latter that they should jointly indorse these bonds; and this was a consideration for letting in the former to a joint participation of the benefits theretofore secured to the Central. Not only this, but by it the Western Road was induced to put itself within the .coiitrol of these two. Under this arrangement the bonds were indorsed, put upon the market, were sold, and a large amount of money raised and expended in improving the Western Road, and in extending its connection, and thereby that of the Georgia with the Western. This was the avowed policy of the Georgia Road, so declared by its president and directors, and in a convention of the stockholders. The plan was fully carried out. The two companies, by the control obtained over the Western Railroad, reaped for about five years all the fruits of the general scheme, and paid, during that time, large amounts of interest to the holders of the indorsed bonds. All this tended to appreciate the bonds of the Western road so indorsed, and to induce their circulation and sale in the market, whilst the indorsers were enjoying the
[386] power and benefits which they had thus purchased. Further, when the two indorsing companies ascertained that’loss might finally be sustained by them, suit was instituted in their behalf against the Western Road, to be reimbursed for interest paid, and to secure them against further damage by reason of said indorsement. To this end a receiver was appointed, and afterwards, a final decree obtained ordering a sale of the road for which they had indorsed. Under this decree the sale was had, and whether the purchaser was a third' person, or these two roads, does not affect the point now under consideration, to-wit: the liability of the Georgia Railroad and Banking Company upon a contract made as above stated, the fruits of which were thus used; .upon which suit was brought, judgment rendered for it and its co-indorser, and actually the whole property of their principal, so to call the Western Road, sold by virtue of that judgment. Could the Georgia Railroad and Banking Company, under these facts, deny its liability upon said indorsement? If it could not, then no stockholder could not enjoin it from voluntarily paying what it could be forced by law to-pay. Brice, in his work on- the doctrine of ultra vires, page 380, in speaking of contracts which a corporation might deny, as not being bound by them, and how it might lose its right by way of being estopped, says: “ Filing a bill to enforce the contract is sufficient, and so is the suing at law to judgment.” Surely, if any case could authorize such a rule, a rule that under any circumstances would estop a corporation from denying the binding forcé of its contracts, it is the one at bar: See 47 Indiana, 407, 34 L. J., ch. 241; L. R., 6, ch. 551; and the opinion of Brown, Chief Justice,- in the Central Railroad and Banking Company vs. Collins et al., 40 Georgia, 641. It might be sufficient to add, that if the holders of the indorsed bonds could enforce them against the railroad company, these complainants cannot restain the company from voluntarily discharging its liability; for it would be absurd to say the corporation was bound to pay, and at the same time admit that a stockholder, or any number of-them, can prevent it. But [387] the record shows many acts on the part of the stockholders from which their authority may be fairly, if not directly, inferred to have been given for the indorsement. A report was made to them in convention, stating the control which had been gained by the Central Road over the Western, the necessity for sharing this monopoly, the policy of extending the western connections of the Georgia Road, the propriety and purpose of making the Western Railroad a first-class road, and of building it to Selma, in the state of Alabama, and that to accomplish this guarantees would have to be given and liabilities incurred. Resolutions were adopted indorsing these views, and declaring that it was expedient and wise for the president and directors, by every judicious and prudent means in their power, to extend and improve the connections of their road with the west, and that the president be fully authorized to do all acts that may be necessary to promote that object. The answer to the bill states that there was no secrecy iir the matter; that all the facts were generally known, and could have been ascertained by any stockholder on inquiry or by examination of the books or minutes; and that the contract with the Central RaiLoad was entered on the minutes. None of the complainants set up that they were kept in ignorance, or were, in fact, ignorant, of what was done, or of the making of the indorsement and of the payments that had been going on for several year’s. In the Phosphate of Lime Company vs. Green et al., 1 Eng. R., 98, it xvas held by all the judges — the opinions being pronounced seriatim — that “to show assent and acquiescence, it is not necessary to prove the acquiescence of each individual stockholder. It is enough to show circumstances which are reasonably calculated to satisfy the court or a jury that the thing to be ratified came to the knowledge of all who chose to inquire, all having full opportunity and means of inquiry.” In the case of 43 Georgia, supra, there was a recognition of a rule similar to the above, under a state of facts showing that where knowledge of the act was at the command of all, and there were circumstances that suggested an inquiry into [388] it brought to the notice of the stockholders,'1 then knowledge would be presumed. Putting together all the foregoing facts, and more especially considering the suits by the company, the decree therein in its favor, and the sale under that decree, it may be said with emphasis that neither the corporation itself, nor a stockholder, or any number of them, can ask a court of equity to intervene on the ground of the want of charter-authority to make the indorsements.
Should the injunction be granted to restrain the Georgia Railroad Company from consummating the purchase of the "VVesfern Railroad? A fact may properly be mentioned here that is not given in the reporter’s statement: The decree under which the sale was had, in terms, recognized and recited the right of the Georgia Railroad and Banking Company, and the Central Railroad Company, or either of them, to buy the Western Railroad at the sale which was therein ordered. Subsequently, and about two mouths before the sale, the legislature of Georgia, by special act, empowered the two roads to make the purchase. The directors of each company resolved to do so, and notice was given to all the stockholders of the Georgia Railroad Company of that purpose. This notice was sent to each of the complainants two months prior to the purchase, and it was not denied that it was received. The purchase was made by the Georgia and Central Roads, jointly, under an agreement for that purpose. No dissent or objection was made by any one of the complainants' or any other stockholder. With this direct assent on the part of the state, and this failure to make any objection on the part of any stockholder, after notice given, it would be a great wrong, if not a fraud, on the other co-purchasing company to cast upon it the whole burden of carrying out the purchase, which was prescribed in the decree, and at the same time would, in all probability, work much injury to other creditors of the Western Road, and other interests in that road, which were set up and provided for in the decree of sale. The state will not complain against the company for the usurpation of an ungranted power. It has consented to the exercise of this power for this very purpose.
[389] The complaining stockholders, with express notice of the arrangement made with the Central for the purchase, and of the time when the sale would take place, failed to move until the deed was done; and then, when it would be almost impossible to tell what would be the result of restraining the Georgia Railroad Company from proceeding further in the matter, or the probable ruin that would thereby result to great and important interests of others, they ask for this injunction. It is asked for, both to restrain the company from making further payments on the indorsed bonds and from consummating said purchase. It is not prayed for in the alternative; that is; it is not asked that the purchase be restrained, independent of the injunction as to paying the bonds, and it is not presumable that such an injunction would be desired. For if the company is bound on the bonds, and the decree provides- for its protection by a sale of the Western road, it is not probable that a stockholder should wish to deny it all the additional security that might be gained by getting absolute control of the property of its debtor, especially as the sale of the road of the insolvent company does noL discharge its liabilities.
In view of all the facts, the refusal of the injunction by the chancellor is affirmed.