Ultra Vires

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Ultra vires is a Latin phrase that translates to “beyond the powers.” This means that someone is acting beyond the scope of the authority or power that is granted to him by law, contract, or agreement. Ultra vires is opposite from intra vires, which is Latin for “within the powers.” If someone needs the legal authority to do something, and then acts within that granted authority, then he is acting intra vires. For example, ultra vires actions can be deemed invalid after the fact, while acts that are performed “intra vires” are considered valid. To explore this concept, consider the following ultra vires definition.

Definition of Ultra Vires

Pronounced

uhl-truh vahy-reez

Noun

  1. Beyond one’s legal power or authority.

Origin

1785-1795        Latin    (“beyond strength”)

Ultra Vires Doctrine

The doctrine of Ultra vires is associated with actions taken by an individual in relation to a corporation or company. Every company has what is called a “Memorandum of Association of Company” (“Memorandum”), which is the company’s constitution. The Memorandum defines the company’s objectives, powers, and areas of operation, both internal and external. The Memorandum serves as an outline and a guide that the executives of the company can follow to be sure of the scope of their own powers, and what lines they cannot and should not cross.

This commitment to uphold the company’s Memorandum is referred to as “ultra vires doctrine.” If the company performs an act that is beyond the scope of the powers afforded to it by its Memorandum, then that act is ultra vires, or beyond its powers. The ultra vires doctrine is a kind of insurance policy that reassures a company’s shareholders and creditors that the company will not use their assets or funds for any purposes other than those that are afforded to it, and specified within the ultra vires doctrine.

Types of Ultra Vires Acts

There are three types of ultra vires acts, which outlined below:

  • Ultra Vires the Memorandum by the Company – Acts performed by the company that are beyond the powers granted to it in the Memorandum are ultra vires.
  • Ultra Vires the Articles, Intra Vires the Company – These are acts performed beyond the powers granted to the company by its Articles of Incorporation, but that are still within the powers of its Memorandum. These acts are ultra vires the Articles, but intra vires the company.
  • Ultra Vires the Directors, but Intra Vires the Company – These are acts performed by the company’s directors that are ultra vires their authority, but intra vires the company as a whole.

Ultra vires acts cannot be ratified. This means that once someone commits an ultra vires act, that act cannot retroactively be made valid. It is permanently invalid and beyond the scope of that actor’s powers, as granted to him by the company’s Memorandum.

Ultra Vires Example in Municipal Ordinance

An example of ultra vires issues being brought before the Court began in 2011, when the city of Houston, Texas implemented a drainage fee ordinance for certain properties. Under this ordinance, drainage fees were imposed upon the city’s properties that benefited from the drainage system. These fees were a way of recouping some of the city’s costs in providing drainage to those properties.

Part of the fees were also to be allocated toward funding future improvements that would become necessary to maintain the drainage system. Any monies collected were specifically to be used solely for the “expenses associated with the cost of service to provide drainage services within the service area.”

This ordinance gave Daniel Krueger, Houston’s Director of Public Works and Engineering, the authority to manage any policies or procedures that were necessary in order to keep the drainage system working. He was also in charge of collecting these newly implemented fees, and distributing them as he was directed by the ordinance. The ordinance also specified the scope and the limits of Krueger’s power in his capacity as the director of his department.

Shortly after the ordinance went into effect, three railroads – Houston Belt & Terminal Railway, BNSF Railway, and Union Pacific Railway – received notices outlining the charges that were proposed by Krueger for their properties.

The charges amounted to $3 million a year, based on Krueger’s determination that all of the railroads’ properties within Houston not only benefitted from the drainage system, but were also impervious properties. This meant that their land does not absorb water well, or that it does not allow water to easily pass through, and so a separate drainage system is necessary.

The railroads collectively sued Krueger, alleging that he was acting outside his scope, or ultra vires, and asked the court to grant injunctive relief. The City and Krueger filed a plea to the trial court stating that the government had immunity to an ultra vires claim. The court agreed. The railroads appealed, and the appellate court was entrusted to decide two issues in particular:

  1. Did Krueger act ultra vires by determining which properties were benefitted and therefore subject to drainage fees?
  2. Did Krueger act ultra vires by determining that the railroads were responsible for paying $3 million based on their properties’ impervious surface areas?

The court of appeals granted the appeal in part and denied it in part. The Court determined that the railroads provided sufficient proof of Krueger’s first action being ultra vires, but not his second. The railroads, as far as the court was concerned, did not effectively prove that their lands were not impervious, and that they did not need the proposed widespread drainage system. The parties cross-appealed, and the matter was brought before the Texas Supreme Court.

The Supreme Court held that Krueger’s determinations did not meet the definitions provided in the ordinance and that he did, in fact, act ultra vires. The Court noted that the railroad properties were not, in fact, “benefitted properties” as the ordinance had defined them. Further, while Krueger may have had some power insofar as determining which properties were benefited, he did not have the power to make that determination when it would conflict with additional provisions within the ordinance. He was also incorrect in determining which properties were “impervious properties,” as per the Court.

The Court found that the railroads did, in fact, provide a valid example of an ultra vires claim, and so the case was remanded to the lower court for further proceedings.

Related Legal Terms and Issues

  • Articles of Incorporation – An official document filed to establish a corporation, and which declares the company’s purpose.
  • Injunctive Relief – A court-ordered act or prohibition against an act or condition.
  • Ordinance – A law or regulation instituted by a municipal authority.