Opinion of the Court. be enforced against the city, but that the mortgagors had a right to reclaim the property and to demand an account of the city; and Mr. Justice Blatchford, in delivering judgment, said: "The enforcement of such right is not in affirmance of the illegal contract, but is in disaffirmance of it, and seeks to prevent the city from retaining the benefit which it has derived from the unlawful act. There was no illegality in the mere putting of the property by the O'Briens [the mortgagors] in the hands of the city. To deny a remedy to reclaim it is to give effect to the illegal contract. The illegality of that contract does not arise from any moral turpitude. The property was transferred under a contract which was merely malum prohibitum, and where the city was the principal offender. In such a case, the party receiving may be made to refund to the person from whom it has received property for the unauthorized purpose, the value of that which it has actually received." The case of Chapman v. Douglas County, in which the opinion was delivered by Mr. Justice Matthews, is to the same effect. 107 U. S. 348, 355 & seq. In Pittsburgh &c. Railway v. Keokuk & Hamilton Bridge, it was stated, as the result of the previous cases in this court, that "a contract made by a corporation, which is unlawful and void because beyond the scope of its corporate powers, does not, by being carried into execution, become lawful and valid, but the proper remedy of the party aggrieved is by disaffirming the contract and suing to recover, as on a quantum meruit, the value of what the defendant has actually received the benefit of." 131 U. S. 371, 389. The view which this court has taken of the question presented by this branch of the case, and the only view which appears to us consistent with legal principles, is as follows: A contract of a corporation, which is ultra vires, in the proper sense, that is to say, outside the object 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 corporation ought not to have made it, but that it could not make it. The contract can Opinion of the Court. not be ratified by either party, because it could 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 it. When a corporation is acting within the general scope of the powers conferred upon it by the legislature, the corporation, as well as persons contracting with it, may be estopped to deny that it has complied with the legal formalities which are prerequisites to its existence or to its action, because such requisites might in fact have been complied with. But when the contract is beyond the powers conferred upon it by existing laws, neither the corporation, nor the other party to the contract, can be estopped, by assenting to it, or by acting upon it, to show that it was prohibited by those laws. The doctrine of the common law, by which a tenant of real estate is estopped to deny his landlord's title, has never been considered by this court as applicable to leases by railroad corporations of their roads and franchises. It certainly has no bearing upon the question whether this defendant may set up that the lease sued on, which is not of real estate, but of personal property, and which includes, as inseparable from the other property transferred, the inalienable franchise of the plaintiff, is unlawful and void, for want of legal capacity in the plaintiff to make it. A contract ultra vires being unlawful and void, not because it is in itself immoral, but because the corporation, by the law of its creation, is incapable of making it, the courts, while refusing to maintain any action upon the unlawful contract, have always striven to do justice between the parties, so far as could be done consistently with adherence to law, by permitting property or money, parted with on the faith of the unlawful contract, to be recovered back, or compensation to be made for it. In such case, however, the action is not maintained upon the unlawful contract, nor according to its terms; but on an implied contract of the defendant to return, or, failing to do that, to make compensation for, property or money which it has no right to retain. To maintain such an action is not to affirm, but to disaffirm, the unlawful contract. Opinion of the Court. The ground and the limits of the rule concerning the remedy, in the case of a contract ultra vires, which has been partly performed, and under which property has passed, can hardly be summed up better than they were by Mr. Justice Miller in a passage already quoted, where he said that the rule "stands upon the broad ground that the contract itself is void, and that nothing which has been done under it, nor the action of the court, can infuse any vitality into it;" and that "where the parties have so far acted under such a contract that they cannot be restored to their original condition, the court inquires if relief can be given independently of the contract, or whether it will refuse to interfere as the matter stands." Pennsylvania Railroad v. St. Louis &c. Railroad, 118 U. S. 317. Whether this plaintiff could maintain any action against this defendant, in the nature of a quantum meruit, or otherwise, independently of the contract, need not be considered, because it is not presented by this record, and has not been argued. This action, according to the declaration and the evidence, was brought and prosecuted for the single purpose of recovering sums which the defendant had agreed to pay by the unlawful contract, and which, for the reasons and upon the authorities. above stated, the defendant is not liable for. Judgment affirmed. MR. JUSTICE BROWN, not having been a member of the court when this case was argued, took no part in its decision. Opinion of the Court. PULLMAN'S PALACE CAR COMPANY v. CENTRAL TRANSPORTATION COMPANY. ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF PENNSYLVANIA. No. 20. Argued January 28, 29, 1890.- Decided March 2, 1891. Under an indenture in the nature of a lease which includes railway sleeping cars and written contracts for letting them to certain railroad companies, and which provides that if the revenue derived from such contracts shall, by reason of the refusal of any of the railroad companies to permit the cars to be run over their lines of road, fall below the sum agreed in the indenture to be paid quarterly by way of annual rent, the lessee" shall have the right either to declare this contract null and void and surrender" to the lessor the property leased, "or shall and will pay in like manner, in lieu of said sum, such sum or share of the net revenue from the remaining lines of the roads as the parties hereto may at that time agree upon," the lessee, if he makes no election, in case of the revenue, by reason of such refusal of the railroad companies, falling below the sum first mentioned, is no longer liable for that sum, but only for such share of the net revenue from remaining railroads as the parties may at that time agree upon, and, if they do not agree, for a sum to be assessed by the jury in the nature of a quantum meruit, not exceeding the whole of such net revenue. THE case is stated in the opinion. Mr. Edward S. Isham and Mr. Wayne McVeagh for plaintiff in error. Mr. John G. Johnson for defendant in error. MR. JUSTICE GRAY delivered the opinion of the court. This was an action of covenant, brought July 30, 1885, by the Central Transportation Company against Pullman's Palace Car Company to recover the rent or sum of $132,000, due for the first two quarters of the year 1885, under the indenture of lease of February 17, 1870, counted on in the other case between the same parties, argued at the same time, and just decided, Opinion of the Court. ante, 24. The plaintiff obtained a verdict and judgment for $119,729.13; and the defendant sued out this writ of error. In the present action, which was tried before the other was brought, the objection that the contract sued on was ultra vires was not pleaded, nor in any way brought to the notice of the court below. The defendant, therefore, is not entitled to avail itself of it upon this writ of error. Bell v. Bruen, 1 How. 69; Marine Bank v. Fulton Bank, 2 Wall. 252; Klein v. Russell, 19 Wall. 433; Badger v. Ranlett, 106 U. S. 255; Union Trust Co. v. Illinois Midland Co., 117 U. S. 434, 468. Whether, under these circumstances, this court, of its own motion, might take this objection need not be considered, because upon another ground the verdict must be set aside and a new trial ordered. The defendant pleaded only two pleas, the first of which was simply "covenants performed, absque hoc," (according to the form used in Pennsylvania,) which put in issue the performance of the defendant's covenants, as well as the performance of the plaintiff's covenants, as alleged in the declaration, but not the execution or the validity of the contract sued on. Wilkinson v. Pittsburg Turnpike Co., 6 Penn. St. 398; Farmers' & Mechanics' Turnpike Co. v. McCullough, 25 Penn. St. 303. The other plea set up an agreement between the parties, dated February 27, 1885, which recited the eighth covenant in the original indenture of lease, in these words: "8th. In the event that any of the railroad companies mentioned in the assigned contracts shall at any time during this agreement refuse to permit the cars of the second party to be run on and over their respective lines of roads, so that, by reason of such prevention or refusal, the profits, income and revenue derived from and under any other remaining contracts with other and remaining railroad companies mentioned in the assigned contracts shall fall below the sum of two hundred and sixty-four thousand dollars, then, and in that event, said second party shall have the right either to declare this contract null and void and surrender to said first party the said herein before demised property, or shall and will pay, in like manner, in lieu of the said sum of two hundred and sixty |