Action brought before a justice of the peace on a contract of guaranty signed by defendant, a business corporation, incorporated in 1897, under article 8, chapter 42, Revised Statutes 1889. A jury was waived in the circuit court where the case was taken by appeal and judgment was entered for defendant. Plaintiff appealed.
Thеre is no serious controversy over the facts. Plaintiff, a corporation, is a wholesale merchant in Kansas City. The Joplin Co-operative Stores Company, another corporation, was a retail merchant at Joplin and in May, 1906, applied to plaintiff for crеdit on a bill of merchandise if desired to purchase. Plaintiff required security and the Joplin company offered defendant as guarantor. Plаintiff’s creditman then telephoned Mr. Shelley, the president of defendant company, and was informed that defendant was willing to guarantee the payment of the account. Thereupon the following written instrument was executed and delivered by defendant to plaintiff..
“Dated this 18th day of May, 1906.
“Ellett-Kendall Shoe Company,
“Kansas City, Missouri.
“For and in considеration of the sum of one ($1.00) dollar to me in hand paid, the receipt of which is hereby acknowledged, and in consideration of my desire tо give Joplin Co-Op. Store Co. credit with you, I hereby authorize you to give them credit for all' bills of goods which they may purchase of you until I notify you in writing to the contrary, limit of $1,000. I hereby agree to pay said bills at such time after maturity thereof as you may notify me of any failure on .their part tо pay same. I waive notice of your acceptance of this guaranty, and of any and all sales and shipments made by you to said Jоplin Co-Op. Store Co., and you may,
“Western Stores Oo.
“By Geo. M. Shelley, Pt.”
Plaintiff then sold and delivered the merchandise to the Joplin company ,and being unable to collect the account (of $289.07) from that compаny when it matured, demanded payment of defendant and followed the refusal of the demand with the bringing of this suit. No formal answer was filed but the defense urgеd in the circuit court and here is that the attempt of defendant to guarantee the account was ultra vires and void. As before stated, defendant -was incorporated under the statutes relating to manufacturing and business companies. Its articles of incorporation state: “This corporation is formed for the purpose of buying, selling and exchanging goods, wares and merchandise of every description.” Its capital stock is $100,000, divided into-one thousand shares of the par value of $100 each, all except two of the shares being owned by Geo. M. Shelley, its president. Its board of directors is composed of three members and it appears that the execution of the contract under consideration was not authorized or ratified by the board in any manner. At the time of the transaction with plaintiff, the Joplin company was a сustomer of defendant and was indebted to it in a large amount. Defendant received no consideration for the guarantee, but gave it аs an accommodation to its customer.
If this were a case where the defendant corporation had entered into an ultra vires cоntract which had for its object the conferring of some benefit on the corporation and the contract had been executed by the other party, the decisions in this State relied on by plaintiff would be in point. In such cases it has been said on a number of occasions thаt “The defense of ultra vires
That the contract is ultra vires is manifest: Section 2805, Revised Statutes 1889, expressly provides “that no corporation shall engage in business other than that expressly authorized in its charter or the laws under which it may have been or may hereafter be organized.” Defendant had no authority under its charter, either express or implied, to sign accommodation paper, or to become surety or guarantor for another. “A contract of a corporation which is ultra vires in the proper sense, that is to say, outside the objects of its creation as defined in the law of its organization and, therefore, beyond the powers conferred upon it by the Legislature, is not voidable only but wholly void and of no legal effect. The objection to the contract is not merely that the cоrporation ought not to hare made it but that it could not make it. The contract cannot be ratified by either party, because it cоuld not have been authorized by either. No performance on either side can give the unlawful contract any validity, or be the foundation of any right of action upon
There is no consideration of equity which may be invoked successfully by plaintiff to relieve it from the operаtion of the principle quoted. Not only was the contract devoid of any benefit to defendant and, therefore, clearly extrinsic tо the purposes of its creation, but plaintiff must be presumed to have known of ihe limitations of the powers defendant might exercise under its charter and, therefore,. must be said to have entered knowingly into an ultra vires contract. We find in McCormick v. Bank,
The last of these reasons by far is the strongest. Considerаtions of public safety imperatively demand that corporations of all classes be held, strictly within the limits of their charter rights and powers and that their unlawful contracts be pronounced void in all cases except those falling within the principle that “A man who enjoys a privilege has no right to say that because he ought not to have enjoyed it he will not pay for it.” [City of Goodland v. Bank,
The judgment is affirmed.