instruments must fall. It is true that both had a good consideration, in the existing liability of the bank to indemnify the Palmers against the bills which had been drawn and accepted under the letter of credit. But neither a prior debt nor any other good consideration, will support a new contract which is in itself contrary to the provisions of law. And although it is true in this case that the payment of the notes would have the effect of discharging the prior liability of the bank to the Palmers, yet the deed was made to secure the performance of the new contract.

The recitals in the deed show an intention to indemnify the Palmers, as acceptors, against the bills which Davis had drawn under the credit: but the parties intended to effect the object in an illegal manner: to wit, by issuing prohibited certificates of deposit, and assigning certain property to secure the payment of the certificates. A legal purpose must be carried into effect by legal means. When we get beyond the recitals, and come to the covenants and stipulations in the deed, there is not a single word about the prior liability of the bank; but the whole is about the certificates of deposit. The trustees are to hold the assigned securities until the certificates of deposit shall be paid: to hold the securities in trust for the bank until default shall be made in the payment of the certificates of deposit; and after default, in trust for the holders of the certificates of deposit. And the trustees are thereupon to proceed to the realization of the assigned securities, and to pay over the moneys to Palmers & Co., or to the other holders of the certificates of deposit. And so the parties proceed to the end of the instrument, at every step making stipulations concerning the certificates of deposit, without any covenant, grant, or even allusion to or concerning any other liability on the part of the bank. The transaction amounted to this-neither more nor less-there was a promise, which, though founded on a good consideration, was forbidden by law, and therefore void; and an assignment of property in trust to secure the performance of the illegal promise. Such a trust can not be supported.

It is undoubtedly true, that where a deed or other contract contains distinct undertakings, some of which are legal, and some illegal, the former will in certain cases be upheld, though the latter are void: and if there had been an additional provision in this deed, that the assigned property should be held as a security for the original liability of the bank, that part of the deed might be allowed to stand, though the trust for the pay.

ment of the certificates should fail. But there is no agreement or stipulation in the deed for securing the original liability of the bank-nothing of the kind.

Again: although it appears from the recitals in the deed, that one object of the arrangement of the thirtieth of November, 1840, was to secure the performance of the original undertaking of the bank, it was, as I have already remarked, to be done in an illegal manner; to wit, by issuing prohibited notes or certificates, and assigning property to secure the performance of the new and vicious contract. A legal end can not be attained by illegal means.

The ground on which the counsel for the defendants seemed mainly to rely was, that the deed should be reformed, so as to make it a security for the original liability of the bank. His printed point touching the question is as follows: "The company having agreed with Palmers, Mackillop, Dent & Co. for a new and valuable consideration, to pledge to them the securities in question, and having actually assigned and delivered the securities, equity will reform any defects, arising from mistake or accident, in the written instruments." There are several difficulties standing in the way of this argument. So far as relates to the notes or certificates of deposit, it was of no practical importance, as we have already seen, which should be issued; for both would be alike void. As to reforming the deed, there is no bill or application for that purpose: not even an allegation in the answers, that there was any mistake or accident in preparing the instrument, or that it does not express the real intention of the parties. If we could see that there had been a mistake in drawing up the deed, it could not be reformed without filing a bill for that purpose; nor could we read and enforce the instrument as though it had been properly drawn. We should be obliged to follow the deed as it is. But what is, if possible, still more conclusive, there is not a particle of evidence to show that there was any mistake or accident in preparing the deed, or that it is not just what the parties intended it should be; and it could not be reformed in equity, if a bill had been filed for that purpose. It is true that the parties intended to secure the original liability of the bank; but so far as appears, they intended to do it in the very way it has been done; and that way is illegal. If they mistook the law, we can not grant relief by making a new contract for them. This question was very fully considered in the case of Hunt v. Rousmaniere, 2 Mason, 342; 8. C., 8 Wheat. 174; S. C., 3 Mason, 294; S. C., 1 Pet. 1; and

see 1 Story's Eq., secs. 114, 115; which underwent a great deal of discussion, and is directly in point.

There were separate assignments of the several securities mentioned in the schedule to the trust deed; but they were all made to Blatchford and Murray as trustees; were executed and delivered simultaneously with the execution and delivery of the deed; and were made for the purposes expressed in that instrument. Those purposes were to secure the payment of the certificates of deposit. The reason for making separate assignments probably was, greater convenience in recording in the proper counties, and in making subsequent transfers and discharges.. But, however that may be, the assignments are but a part of one entire act; and can not be separated from the fate of the deed and promissory notes which were executed at the same time, and as parts of the same transaction.

I have purposely avoided the expression of any opinion on the several important questions which were so ably discussed at the bar, touching the purchase of the five thousand shares of the capital stock of the bank, and the means which were used to raise the necessary funds for that purpose. I have done so, because in the view which has been taken of the case, it was not necessary to consider those questions; and for the further reason, that after this bill was filed, an order of the court of chancery was made, by the consent of these parties, in the suit of Tracy against the bank, referring it to a master to take proofs, and report upon the claim of the Palmers to be creditors of the bank. The master was also to ascertain what part of their claims, if any, was secured by trusts, and what preferences they claimed under the trusts; but he was not to report on the validity of the trusts, or the right to a preference under them. Those questions were to be settled in other suits then pending. This is one of those suits; and the view which has been taken of the case, disposes of this trust, and the preference claimed by Palmers & Co. under it. If it has not already been done, it will be settled in the Tracy suit, whether the Palmers are creditors of the bank; and if they are, they will come in with other creditors, and share in a ratable distribution of the assets of the bank; or will receive the whole of their debt, if the assets are sufficient to satisfy all of the creditors. The opinion which I have expressed does not, in its consequences, go beyond denying to Palmers & Co. the preference which they claim over other creditors.

I am of opinion that so much of the decree of the supreme

court as declares the forty-eight notes illegal and void, and di rects them to be delivered up to be canceled, should be affirmed, and that the residue of the decree [unless the clauses which relate to the special receivers John J. Palmer and Fisher Howe should be excepted] should be reversed; and that a decree should be made declaring the trust deed, the further agreement following the deed, and the several separate assignments of the securities mentioned in the schedule to the deed, illegal and void, and requiring them to be delivered up to be canceled. The trustees must assign and deliver to the receiver all the securities which yet remain in their hands; and render an account, and pay over to the receiver all the moneys and other things which have come to their hands under the trust, except what they may have paid over to the Palmers. If anything has been received by the Palmers under the trust, they must account, and pay over the same to the receiver.

The decree must be so drawn up as not in any manner to affect the question whether Palmers & Co. are creditors of the bank.

Such are my views of the case, and such is the judgment of the court.

Ordered accordingly.

CONTRACT BY CORPORATION FORBIDDEN BY CHARTER or by other statute is void: New York etc. Ins. Co. v. Ely, 13 Am. Dec. 100; Bank of Chillicothe v. Swayne, 32 Id. 707; Bank of Michigan v. Niles, 41 Id. 575, and notes. See, however, Rivanna etc. Co. v. Dawsons, 46 Id. 183. And generally a corpora tion has only such powers as are expressly conferred by its charter or as are necessarily implied in the powers so conferred, and its contracts beyond that are ultra vires and void, and their invalidity may be alleged by either of the contracting parties: New York etc. Ins. Co. v. Ely, 13 Id. 108, note briefly dis cussing this subject. See also People v. Utica Ins. Co., 8 Id. 243; Leggett v. New Jersey etc. Co., 23 Id. 728; People v. Albany, 27 Id. 95; State v. Woram, 40 Id. 378; Blair v. Perpetual Ins. Co., 47 Id. 129, and notes. In Underwood v. Newport Lyceum, 41 Id. 260, it is held that though a corporation is forbidden by law to engage in the banking business, assumpsit will lie against it for work and labor in engraving bank bills for it. And in Gist v. Drakely, Id. 426, it is held to be no defense to the surety for a corporation that the contract upon which he is surety was beyond the powers of the corporation. In Bissell v. Michigan etc. R. R. Co., 22 N. Y. 302, Selden, J., refers to Leavitt v. Palmer, as an "important case" which was "elaborately argued," distinctly presenting the question whether a corporation can avoid its own. contracts by showing that it was made in contravention of a public statute, which question was unanimously decided against the validity of such con tracts as against the corporation. The case is cited to the same point by James, J., dissenting, in Buffett v. Troy etc. R. R. Co., 40 N. Y. 178, speaking of it as "a case with which the bench and the bar of this state are quite familiar." And generally, that bills or notes issued by a bank in violation of

its charter, or of a general banking law, such as the New York statute of 1840, are invalid, is held, citing the principal case, in Bank of Peru v. Farnsworth, 18 Ill. 564; Bank Commissioners v. St. Lawrence Bank, 7 N. Y. 515; Leavitt v. Blatchford, 17 Id. 539, a case affecting the same banking association; and Oneida Bank v. Ontario Bank, 21 Id. 495.

In the latter case, Comstock, C. J., admitting that the soundness of this posi tion must be assumed upon the direct authority of the principal case, says: "If the question were now a new one, I should entertain the opinion, certainly with diffidence, that the decision here referred to went far beyond the intention of the legislature." Then, after quoting the prohibitory words of the statute of 1840, he goes on to say: "There is, no doubt, a principle of the common law, that illegal and prohibited contracts are void, without being so expressly declared by any statute. But there is also another principle, equally well ascertained, and more beneficent in its results, that no party shall set up his own illegality or wrong, to the prejudice of an innocent person. He can set it up when the legislative power not only forbids to make the contract, but declares it to be void. But the logic of the law, and certainly its morality, are not opposed to the doctrine that the legislature may prohibit the contract and punish the guilty parties, and leave the contract to stand in favor of innocent persons not included in the terms of the prohibition. This, I think, is a just result from the decision of this court in Tracy v. Tallmadge, 14 N. Y. 162, and of the principles which underlie that decision. In regard to the statute now in question [Stat. 1840, before referred to], reading the whole of the prohibitory section, it seems to me the intention of the legislature was to forbid bankers, and officers and members of banking associations, to issue contracts of a certain description, and to punish them if they violated the law, but not to enable them to take advan tage of their own wrong by repudiating their own obligations."

These considerations are not without force as applied to contracts of nat ural persons which they are prohibited by law from making, but which, upon their face, convey no intimation that they were made in violation of the prohibition. But where a corporation, whose powers are derived from and limited by law, makes a contract in violation of a statutory prohibition, such contract gives notice upon its face of its invalidity, since all persons dealing with a corporation, or receiving its obligations, are legally presumed to have knowledge of its powers and their limitations. In a legal sense, a person taking such a contract can not be deemed "innocent." He is a party to the violation of law. If the corporation ought not to be permitted to take advantage of its own wrong to resist the contract, he ought not to be permitted to take advantage of his wrong to enforce it. They are in pari delicto. Besides, in the case of a corporation, a valid statutory prohibition to contract destroys the capacity to contract, and does not, as in the case of a natural person having a general original power of contracting, without the aid of any statute, simply make the prohibited contract unlawful. The contract of a corporation not authorized by law is no contract. It would be a strange rule that, on any ground whatever, would hold a corporation bound by a contract which it had no capacity to make.

In Curtis v. Leavitt, 17 Barb. 319, the principal case is also cited to the point that the notes therein passed upon were void because prohibited by law; but Roosevelt, J., intimates that sufficient attention was not paid to the magnitude of the notes, and to the fact that they were payable in England and in English money, so that in fact the transaction amounted in reality merely to a sale or transfer of the specified amount of foreign coin. In the