to or work done for a corporation, for which it has issued its bonds to the creditor.

The agreement was entered into November 3d, 1871, between the Camden & Atlantic Railroad Co. and the Mays Landing & Egg Harbor City Railroad Co., in and by which it was agreed that if the latter company would construct the branch road in a specified manner, on or before the 1st day of July, 1872, the former company would guarantee the bonds of the latter company to the amount of $37,500, to be used in the construction of the said road, and take a lease for the same, when completed, for nine hundred and ninety-nine years at a specified rental.

In pursuance of this agreement the bonds were issued by the branch road, and guaranteed by the main line. The road was built under the direction of the main line, and the lease executed.

Every term of this agreement on both sides has been fulfilled, and the agreement, in all respects, substantially executed.

The annual report of the directors of the main line to the stockholders for the year ending December 31st, 1871, recited the terms of this agreement in detail.

Annually thereafter, until 1879, the existence of the lease and the income and disbursements incident to the operation of the branch were duly reported to the stockholders of the main line, during all which time no attempt was made to avoid the lease.

We must impute to the stockholders of the main line utter neglect of their affairs, if we say that they did not have notice of the agreement to build the branch road, and of the lease executed in pursuance thereof.

The only reasonable inference from the circumstances proven is that they had knowledge of the transaction, and that it was engaged in and consummated with their approval and acquiescence. This case presents all the features which have led the judicial mind, in the cases cited, to establish the distinction between executory and executed contracts, in which respect it essentially differs from the Thomas Case, in 101 U. S. This was not, as in the case in the Federal Court, the mere leasing of a road owned by the lessor, where the repudiation of its terms would restore both parties to their former status.

Here the lessor built the road, not for itself, but at the instance of and for the lessee, with the proceeds of bonds guaranteed by the lessee to promote and effect the scheme. The branch road was a mere instrument in the hands of the main line to consummate the undertaking.

By the clearly expressed contract of the parties the road was to be the road of the lessee, the lessor to have only the fixed rentals. The lessor has fulfilled every term of its agreement, and put the lessee in possession of all that it stipulated for. Nothing remains on the part of the lessor to be done. We must look at the substance of things in applying legal principles. The lease for nine hundred and ninety-nine years is practically an absolute transfer of the road to the lessee, and the rental a mere mode of paying the lessor for the work done and money expended in constructing the road for the lessee, instead of paying a fixed principal sum. The case does not, in effect and substance, differ from what it would have been if the main line had employed the branch road to construct the branch at a stipulated price, and had issued its bonds in payment, after completion and acceptance of the work.

All the cases concede that under such circumstances the contract must be treated as executed.

If the contract had been to compensate the branch road for the work, by the bonds of the main line securing the payment of an annuity for nine hundred and ninety-nine years, and those bonds had been delivered, would it be asserted that it was, in substance, the less an executed agreement? It is the merest verbiage and form whether it is termed a lease securing a rental for nine hundred and ninety-nine years, or a bond securing an annuity for a like term.

The injustice and inadmissibility of permitting the main line to repudiate its bonds after it has been in occupancy of the road for more than seven years, because the road proved to be unprofitable, would not be more glaring than the inequity of the defense interposed here to the payment of the rental. The work undertaken to be done was fully executed by the branch road, and the manner in which it is to be paid for is immaterial, so far as the principle involved is concerned. There is no consideration of justice and fair dealing, which, in the cases referred to, led to the rejection of the offer by the corporations to set up their own incapacity in avoidance of their just obligations, which is not most forcibly presented by this case. It cannot, in the application of legal principles, be disassociated from executed contracts without disregarding the reasons which lie at the foundation of the rule. If the lease is subject to the defense of ultra vires, the guarantee of the bonds is also incapable of enforcement, and thus loss will likewise fall upon those who advanced the money, upon the faith of the guaranty, to be used under the direction of the lessee, and for its purposes.

If such a doctrine is established, who can answer for the solvency of our insurance companies, savings banks and moneyed institutions?

It is a matter of common knowledge that corporate bodies, in many instances, through misconception of their powers, or otherwise, have exceeded the legal limits of their authority.

An action to enforce against the main line its guaranty of these bonds could not be classed with those cases in which companies have been required to return the money they had received on ultra vires contracts, or to pay rentals for the period of occupancy.

If the invalidity of the contract and the right to repudiate it be conceded, the law cannot raise an implied obligation on the ruins of the contract upon which to found a recovery. The liability of the defendant upon the bonds must rest, if it exists at all, upon the contract of guaranty.

The money was not paid to the main line, but to the obligor of the bonds, and no obligation can be implied on the part of the defendant to repay it. The validity of the guaranty contract must be affirmed, or no action can lie against the defendant.

In the destruction of the contract there must be an entire absence of legal liability.

The legal doctrine, which must be invoked to maintain an action by the bondholders on the guaranty, will support the judgment in this case.

The doctrine of estoppel by acquiescence, in cases which present the characteristics which appear here, can work no inequity, for it may safely be presumed that the parties to be affected by an engagement are competent to determine what will best promote their own interest, and for any error in judgment they, and not others, should suffer.

The contrary doctrine, affording so easy an escape from the consequences of their acts, invites them to overstep the boundaries of their authority.

There can be no dissent from the assertion that good faith and honest dealing unite in forbidding that the defense here set up shall be successfully interposed. In my opinion, the law is against. it, and the judgment below should be affirmed. * * *

For affirmance- THE CHANCELLOR, DIXON, MAGIE, REED, SCUDDER, VAN SYCKEL, BROWN, CLEMENT, COLE, MCGREGOR, WHITAKER.

For reversal-DEPUE, KNAPP, PATERSON.

ASHBURY COMPANY V. RICHE.

L. R. 7 House of Lords 653 (1875).

MR. JOHN ASHBURY had carried on at two places in Lancashire a very extensive business in making railway carriages and wagons, turn-tables, points, crossings, and roofs, and other things of a like sort needed by a railway company, but had not been concerned in the construction of railways themselves.

A company called "The Ashbury Railway Carriage and Iron Company," incorporated under the Companies Act, 1862, was started for the purpose of buying Mr. John Ashbury's business, and among the other articles in the agreement for its purchase was this, that the said John Ashbury shall not be interested (except as shareholder in a company) in "the business of a railwaycarriage maker, iron manufacturer or contractor, or any other business or branch of business theretofore carried on by him at the said works."

A memorandum of association of the company, dated on the 12th of September, 1862, was drawn up. By the third clause of this memorandum of' association the objects of the company were thus defined: "The objects for which the company is established are to make and sell, or lend on hire, railway-carriages and wagons, and all kinds of railway plant, fittings, machinery, and rollingstock; to carry on the business of mechanical engineers and general contractors; to purchase and sell, as merchants, timber, coal, metals, or other materials; and to buy and sell any such materials on commission, or as agents."

The articles of association recited an agreement to purchase the business of John Ashbury. The first portion of these articles need not be referred to. In a second portion (which was marked by a different enumeration of clauses), under the heading "Business," the 4th clause was in these terms: "An extension of the company's business beyond or for other than the objects or purposes expressed or implied in the memorandum of association shall take place only in pursuance of a special resolution." By clause 36 of the articles it was provided that "the directors may, with the sanction of a special resolution of the company, previously given in general meeting, increase its capital," etc. By clause 68 the directors were to have the general conduct of the business of the company, and to "exercise all such powers of the company as are not, by the act of Parliament or the regulations of the company," to be exercised in general meeting. By clause 70 the directors might "at any board meeting direct the affixing of the seal of the company

to any deed or document." By clause 85 the directors might delegate any of their powers to committees consisting of such member or members of their body as they shall think fit."

In 1864 Mr. Riche, the defendant in error, was carrying on business in Belgium, in partnership with his brother (since deceased), as a railway contractor. On the 14th of March, 1864, the Belgian Government granted to certain persons named Gillon and Bertsoen a provisional concession for making a line of railway from Antwerp to Tournay, the payment of two sums of £4,000 and £16,000 being settled as what is called "caution money." The two concessionaries desired a company to be formed to carry this concession into effect. It was agreed that Messrs. Riche were to have the construction of the line; and in the early part of 1865 the two concessionaries and Messrs. Riche and the directors of the Ashbury Company met together, and agreed to form a company (Société Anonyme) to work the concession. The arrangement was for the Ashbury Company to purchase the concession from Messrs. Gillon for £70,000, and to give the contract for its construction to Messrs. Riche, the company thus becoming, in fact, the contractor for the construction of the line. In this negotiation Mr. James. Ashbury, one of the directors of the English company, represented that company, and entered into the contracts. Sir Cusack Roney afterwards acted in the same character.

The formation of a société anonyme in Belgium, and the agreement with Messrs. Riche that they should construct the line, the Ashbury company undertaking to supply the société anonyme with the requisite funds, was said to have been adopted because the rails, etc., supplied by a Belgian house would be free from the duty that the Belgian Government imposed on rails imported from England, and consequently the profit from the construction of the line would be increased. Messrs. Riche began and for some time continued the works for the construction of the line; and for some time too the Ashbury directors paid, in the name of their company, money to the société anonyme to which Messrs. Riche had become entitled.

Difficulties about payment arose as the work went on, the English shareholders not adopting the views of their directors as to the speculation.

In May, 1867, there was an "extraordinary meeting of the shareholders of the company," at which a report was read from a committee previously appointed at the general meeting of December, 1866. This report disapproved of what had been done by the directors in the matter of the Belgian railway (and likewise of what