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the records of the proceedings of the board ment of Helm; and the fact that the secreof trustees showing or tending to show that tary drew the checks thereafter "payable to the officers of the company were authorized the order of S. C. Wright on account of A. or instructed to renew the note. But it is Helm" was
a notice to Wright, and he not denied but what the company owed the should have inquired into the cause of the money at the date of the renewal in 1879, change of payment of interest from the name and courts have usually held that a contract of the company to that of A. Helm if the entered into by a corporation or its officers statement of A. Helm was not correct. In may not be within the scope of the powers answer to a question asked Helm, "Who conferred upon it by its charter or by-laws, was present when this conversation took place yet if the corporation receives the benefit between yourself and Mr. Wright in the therefrom in money it will not be allowed bank?" he answered: "Nobody was presto deny the indebtedness on the ground that ent. I took pains not to say anything when its officers were not empowered to make anybody was around, as I didn't care to the contract. Union Gold Min. Co. v. Rocky expose my condition at that time." The invaMt. Nat. Bank, 2 Colo. 260; Bradley v. Bal lidity of the note of 1886 springs-First, lard, 55 Ill. 413, 419; Arms Co. v. Barlow, from issuing the same without being author63 N. Y. 69. There is also an increase in ized so to do by the board of trustees; secthe rate of interest mentioned in the note ond, the corporation was not indebted to of 1879 over that of 1875. In the resolution Wright at the time of the giving of the passed by the board of trustees on the 20 note, and the same was given without any day of August, 1875, authorizing the execut consideration being received by the corporaing of the note of that date, the rate of in tion. It was not sufficient in this action for terest was fixed at 14 per cent. per month. the plaintiff to say, "I supposed it was all By the one made in 1879, without any authori. right, and the officers had authority to renew ty whatever, interest was provided to be the note.” Persons dealing with corporations paid at the rate of 142 per cent. per month. are chargeable with notice of the extent of The renewal of the note of 1886 does not the agent's powers, and Wright was bound come within either of the above-mentioned to know that Helm and Richards could not rules in this: there was no order or resolu act beyond the powers vested in them by tion of the board of trustees, nor a majority
the board of trustees, and the by-laws. thereof, authorizing the president and sec Mechem, Ag. $ 276; 1 Pars. Cont. 40–42; retary to execute the note. The renewal of Smith v. Association, 12 Daly, 305; Mining the note must be considered in connection Co. v. Fraser, (Colo. App.) 29 Pac. Rep. 668; with the powers and duties of the officers Owings v. Hull, 9 Pet. 628. The action of who renewed the same, the circumstances Helm in drawing up the note of 1886, and under which it was renewed, and the ben- signing the same as president of the Carefits derived therefrom by the corporation.
son Water Company, and inducing the secThe evidence in the case, as it now stands, retary to sign the same, giving as his reais such as to show that the president of the son for such request that there was to be company has made use of his official posi a reduction in the rate of interest, was in tion to secure to himself the use of money, excess of their powers. Instead of acting by issuing what purported to be the com for the corporation, they executed a note pany's note, without the knowledge or con purporting to be a valid obligation to the sent of the board of trustees or the stock company, when in fact it was to secure the holders of the Carson Water Company. Mr.
individual indebtedness of its president for Helm and Mr. Yernigton testified that in money which the corporation had intrusted 1881 the corporation borrowed a large sum to him to pay its debts, and which he of money to pay off the outstanding indebt testifies he was permitted to retain to his edness of the company, including the $2,000 own use, with the knowledge and consent due Mr. Wright on the 1879 note. Mr. Helm of the debtor, Wright. Under such circumtestified that he had the check to pay the stances, at the time of the giving of the Wright note, and went to the bank of Wells, note of 1886, Helm was acting for himself, Fargo & Co. with Mr. Wright to pay it, and and he was not, with respect to the transwhile there had the conversation with Mr. action, an agent at all; and the corporaWright as testified to above; and, if the tion is not, as to that matter, bound by his same is to be taken as true, Helm induced acts, nor is it chargeable with his knowlWright to let him retain the money that had edge. been intrusted to Helm by the company to In the case of Frenkel v. Hudson, 82 Ala. pay off the Wright note of 1879, which 162, 2 South. Rep. 758, Somerville, J., in Helm says he did use for his individual speaking of the general rule that the knowlbenefit in paying off his own debts with some, edge of the agent must be imputed to the and purchased stock with the balance. The principal, said: “It has no application, howcorporation not owing Wright at the time ever, to a case where the agent acts for himof the recewal of the note of 1886, and Mr. self, in his own interest, and adversely to Helm instructing the secretary to charge the that of his principal. His adversary char. interest thereafter paid on the Wright note acter and antagonistic interests take him to bis individual account, supports the state out of the operation of the general rule, for
two reasons: First, that he will very likely, tees of a corporation occupy a position of in such case, act for himself, rather than for the highest trust and confidence. The uthis principal; and, secondly, he will not be most good faith is required in the exercise likely to communicate to the principal a fact of the powers conferred upon them. They which he is interested in concealing. It have no right, under any circumstances, to would be both unjust and unreasonable to use their official position for their own bene impute notice by mere construction under fit or profit, or for the benefit of any one such circumstances, and such is the estab except the corporation. This is one of the lished rule of law upon this subject.”. reasons given why an officer has no right Mechem, Ag. § 723; Ang. & A. Corp. $$ 308, nor authority to vote upon or represent the 309. It is a cardinal principle in the law corporation in a transaction in which he is of agency that the powers of the agent are personally interested in obtaining an adto be exercised for the benefit of the prin vantage at the expense of the other stockcipal, and not for the agent or third parties,
holders. Therefore, if the testimony of Helm and a person dealing with one whom they be true, the company did not owe Wright know to be an agent, and to be exercising any money in 1886, when the note was his authority for his own benefit, acquires given, but Helm did; and, if such was the no rights against the principal in the trans case, then the information given by Helm action. Such transactions are usually spoken to Richards, upon requesting him to sign of by the courts as fraudulent, because cir the note, as the interest was to be reduced, cumstances known to both parties make the was misleading, and not in accordance with contract agreement absolutely void.
the facts in the case. Under such circumMechem, Ag. 88 797, 798. It is a well-set-stances, the signing of the note cannot be tled rule in equity that, when the relation deemed a corporate act, for the acts of offiship of principal and agent exists, the agent cers of corporations are to be tested by will not be permitted to make use of his posi
the principles of the law of agency; and no tion for his own personal interests. This
agent whatsoever aan bind the corporation rule is strict in its requirements, and in
if such agent fails to act in accordance with flexible in its operation. It extends to all the purposes and objects of the corporation, transactions where the agent's personal in
and within the scope of his authority. Lynterests may be brought into conflict with his
don Mill Co. v. Lyndon Literary & Biblical acts in the fiduciary capacity; and it is im
Inst., (Vt.) 22 Atl. Rep. 576; Reynolds & material as to whether there was fraud, or
Henry Const. Co. v. Police Jury, (La) 11 as to whether the transaction was entered
South. Rep. 238; Miner v. Ice Co., (Mich.) into with the best of intentions. When the
53 N. W. Rep. 222; Johnson v. Signal Co., possibility of a conflict exists, there is the
(N. Y. App.) 29 N. E. Rep. 966; Ang. & A. danger to be guarded against by the absolute
Corp. § 291; Dispatch Line of Packets v. ness of the rule. It is a violation of duty Bellamy Manuf’g Co., 12 N. H. 231; Hofr. for any officer of a corporation to enter in
man v. Insurance Co., 92 U. S. 164; Nelligan to a contract with himself, or to so manage
v. Campbell, (Sup.) 20 N. Y. Supp. 234; the affairs of the company as to enrich him
Field, Corp. § 271. self at the expense of the stockholders.
In the case of Coal Co. v. Lotspeich, (Ky.) Pomeroy, in his work on Equity Jurispru
20 S. W. Rep. 378, the president of the comdence, (volume 2, § 959,) says: “The under pany entered into a contract with one of lying thought is that an agent should not
the stockholders to deliver to himn a quantiunite his personal and his representative ty of coal, the pay therefor to be applied characters in the same transaction; and on the payment of the individual indebtedequity will not permit him to be exposed to ness of the president to the stockholders. the temptation, or brought into a situation In an action by the plaintiff to enforce the where his own personal interest conflicts
contract and be permitted to apply the price with the interest of his principal, and with of the coal on the debt, in passing upon this the duties which he owes to his principal." question the court said: “The pleadings do See, also, sections 1050, 1051, and notes there not present the question of fraud by way in referred to. 1 Beach, Priv. Corp. 88 236,
of defense, but nevertheless, in construing 240, et seq.; Pickett v. School Dist., 25 Wis. a contract made between officers of a cor553. In the case of People v. Township poration, by which & corporate liability is Board of Overyssel, 11 Mich. 225, the court attempted to be created to the one officer or said: “So careful is the law in guarding the other, that construction should be placed against the abuse of fiduciary relations, that on its terms most favorable to the corporait will not permit an agent to act for him tion; and particularly when the great weight self and his principal in the same transac
of the evidence, and in fact all of it, shows tion, as to buy of himself, as agent, the that corporate property was being used, by property of his principal, or the like. All reason of this contract, to pay an individual such transactions are void, as it respects debt of one director to the other.” In the his principal, unless ratified by him with full case of Hardin v. Construction Co., 78 Iowa, knowledge of all the circumstances.” 2 729, 43 N. W. Rep. 543, the board of directors rfield, Briefs, $ 193. A corporate body can authorized the officers of the company to only act by agents, and the directors or trus execute a note for $9,000, and a chattel mort.
gage upon the rolling stock of the company of authority; but a corporation must act by to secure the payment of the same. The way of agents, and the authority of the officers executed the note and mortgage and agent who acts for it is not presumed. It stipulated therein for attorney's fees in case may, however, be shown, either by showing of suit for the collection of the same. The an express authority,--as, for example, a plaintiffs commenced suit to foreclose the resolution of the board of trustees authorizmortgage. The district court refused to al ing a certain party to execute a note on be low attorney's fees, and the plaintiffs ap half of the corporation,-or by a provision pealed. In passing on this question, the of the constitution or by-laws of the corsupreme court said: “This was an explicit poration authorizing a certain officer to exdirection to execute a note for $9,000 and ecute promissory notes. It might be shown interest, and no more. The company did not, in that way, but I believe it is not claimed by any official action, authorize the execu that there is anything of this kind here. tion of a note in any amount exceeding said It may also be shown by the course of dealsum in any event. We think the court cor ings of the corporations, and by facts and rectly held that the measure of liability circumstances which are sufficient, in the was $9,000 and interest." Pacific R. M. Co. Judgment of the jury, to show that the party V. Dayton S. & G. R, Ry. Co., 7 Sawy. 61, 5 who executed the note had the authority. Fed. Rep. 852. In the case of New York If it was the custom of this corporation to Iron Mine v. Negaunee Bank, 39 Mich. 648, permit the treasurer to execute its promisJudge Cooley, in speaking of the powers of sory notes, and if he was in the habit of docorporations and agents to borrow money by ing so, with the knowledge of the trustees or issuing notes, at page 651 says: “It is not of the corporation, which means, of course, disputed by the defense that the corpora the trustees, they had, by recognizing that tion, as such, had power to make the notes custom, and acting upon it, themselves bein suit. The question was whether it had come bound by it, and especially if they in any manner delegated that power to Wet received the benefits of transactions of this more. We cannot agree with the plaintiff sort, which they permitted the treasurer to that the mere appointment of a general enter into. It is only, therefore, necessary agent confers any such power." In McCul for you, in considering this branch of the lough v. Moss, 5 Denio, 567, the subject re defense, to inquire whether the evidence ceived careful attention, and it was held here establishes the fact that Mr. Penn, that the president and secretary of i min the treasurer, was in the habit of acting for ing company, without being authorized by and on behalf of the corporation in executing the board of directors so to do, could not promissory notes and other instruments of bind the corporation by a note made in its like character, and whether the corporation name. Murray v. East India Co., 5 B:un. & was aware of that fact, and made no objecAld. 204; Benedict v. Lansing, 5 Denio, 283; tions to it. If you find this to be so, then and The Floyd Acceptances, 7 Wall. 666,--are you will come to the conclusion that the note authorities in support of the view. The was executed by the corporation, and you plaintiff, then, cannot rest its case on the will proceed then to the other question; implied authority of the general agent. The that is, whether the corporation was indebted issuing of promissory notes is not a power to Mrs. Foster in the amount of money for necessarily incident to the conduct of the which this note was given.” In the case at business of mining, and it is so susceptible bar it was necessary for the plaintiffs to of abuse to the injury, and, indeed, to the prove that the president and secretary were utter destruction, of a corporation, that it authorized by the board of trustees to reis wisely left by the law to be conferred or new the note in 1886, or that it had been the or not, as the prudence of the board of custom of the company to transact business directors may determine." Judge McCrary, in that way, and that the trustees were in charging the jury in the case of Foster knowing to the fact, and acquiesced in such v. Mining Co., 17 Fed. Rep. 130, said: "Up- procedure. It was also a question of fact to on the first question,-as to whether this be determined from the evidence as to Is the note of the defendant corporation, whether the Carson Water Company owed that is to be determined upon the question S. C. Wright the sum of $2,000 when the whether the person who executed the note note of 1886 was executed, or was it the on behalf of the corporation, Mr. Penn, the individual indebtedness of A. Helm? If the treasurer of the company, was authorized president and secretary of the Carson Water to execute such an instrument. The law Company did not have the power to borrow upon this subject is that the authority is not money and execute a note in the first inpresumed from the mere fact that the per stance without being authorized so to do by the son assumed the right to give a note in the board of trustees,—which we think they did name of the corporation. A corporation is not,--they did not possess the power to renew an artificial person, which must act within the same without authority from the board certain limits. It differs from a natural so to do; for when the adoption of any parperson. If an individual gives his note, it ticular form or mode is necessary to confer is not necessary to prove anything in the way authority upon agents of corporations in
the first instance, there can be no ratifica With regard to the question of ratification except in the same manner, or it should tion, it is to be observed that this is not be made to appear that the company was case, as presented to us, in which the in the habit of issuing promissory notes officers of a corporation have exceeded the without such authorization. In order to hold powers delegated to them by the corporate the corporation responsible upon the note of body in entering into an unauthorized con1886, it was necessary to show that the tract. When the proceeds of such unauofficers had authority to renew the same,
thorized act have come into the de or that the company had at that time the fendant's treasury, and had been used in use of the money. Middlesex County Bank the regular course of its business, with v. Hirsch Bros. Veneer Manuf'g Co., (City Ct. the knowledge of the trustees or stockN. Y.) 4 N. Y. Supp. 385.
holders, under such circumstances, very Plaintiffs contend that the action of the slight evidence would be sufficient to espresident and secretary in executing the tablish the company's liability. But when note of 1886 has been ratified by the de it is made to appear that such unauthorized fendant by reason of its having paid the contract was entered into by two of the interest becoming due each month from three trustees, without the knowledge or 1886 until 1889. We do not think that the consent of the third, and in fact one of evidence supports the plaintiffs' conten the two who signed the note not knowtion. Mr. Helm, the president, and Mr. ing the facts connected with such renewal, Richards, the secretary, testified that the and, as appears from the evidence, not interest was paid by Helm from 1881 until for the benefit of the corporation, but for the payment of interest was discontinued, the individual benefit of one of the two in 1889. True it is that it was paid by com who signed the note, the property of the pany's check, but always on account of A. third, or that of the otuer stockholders, if Helm; and, as we understand the evi there are any, ought not to be held liable dence, the amounts were charged against on the void contract, without it is made Helm's private account on the books of clear that the third acquiesced in the prothe company. Mr. Helm says: “No mem ceedings, and ratified the acts of the other ber of the company knew anything about two, after having been fully advised as to this transaction with Wright except my
all the material facts in the case, and self.” Mr. Richards says: "I knew nothing given an opportunity to act. The evidence, about the giving of the note of 1886, or in our judgment, is insufficient to show & why it was given, except as Helm told me subsequent ratification, either express or it was to secure a reduction in the rate implied. The president and secretary cer. of interest; and at Helm's request I tainly were not competent to ratify their signed it." Mr. Yernigton testified “that own unauthorized acts. Hotchin v. Kent, he was a trustee of the company from 1877 8 Mich. 527; Dabney V. Stevens, 40 How. until 1889, when he was elected president. Pr. 344; Story, Ag. $ 243; Howell v. Mc He was the owner of two-thirds of the Crie, 36 Kan. 652, 14 Pac. Rep. 257; Combs stock, and never knew of the existence V. Scott, 12 Allen, 496; Mallory v. Mallory of the note until after his election as Wheeler Co., 61 Conn 141, 23 Atl. Rep. president in 1889. As soon as he heard 708; Dispatch Line of Packets v. Bellamy of the existence of the note, be sent for Manufg Co., 12 N. H. 232; Lyndon Mill Helm, the former president, and Richards, Co. v. Lyndon Literary & Biblical Inst, the secretary, and, after being informed (Vt.) 22 Atl. Rep. 5775 Owings v. Hull, 9 by them as to how the note of 1886 was Pet. 629; Bohm v. Brewery Co., (Com. Pl. executed, he went and saw Mr. Wright, N. Y.) 9 N. Y. Supp. 515; Murray v. Lumand informed him that it was not the ber Co., 143 Mass. 250, 9 N. E. Rep. 634; company's note, and that the company Fitzhugh v. Land Co., 81 Tex 310, 16 would not pay it, and instructed Richards, S. W. Rep. 1078; Institution v. Slack, 6 the secretary, not to pay any more in Cush. 411. terest on the note." There is no testimony The plaintiffs argue that by reason of in the transcript from which we could the fact that the secretary made out state infer that the corporation had the use of ments showing the indebtedness of the comor received any benefit from the Wright pany, in which the claim of Wright was money after 1881. Under these circum included, was sufficient notice from which stances, the making of the note of 1886 the stockholders could have informed themshould not be held to be a corporate act. selves as to this claim; and, they not hay. Craft y. Railroad Co., 150 Mass. 208, 22 ing done so, the company is now bound by N. E. Rep. 920; First Nat. Bank of Middle the acts of the officers who signed the note. town v. Council Bluffs City Water Works Mr. Richards testified that he did make out Co, (Sup.) 9 N. Y. Supp. 860; Bohn v. statements of the company's affairs in gross. Brewery Co., (Com. Pl. N. Y.) Id. 514; | How many or how often such statements Wahlig v. Manufacturing Co., (City Ct. N. were made out he does not state, but he Y.) Id. 739; Westervelt v. Radde, 55 How. does say that he never made out and subPr. 370.
mitted to the board of trustees an itemized
statement, prior to 1889, and that the Wright note was never mentioned at any of the meetings of the board, to his knowledge. We do not think that statements made out in the manner in which it is said they were were sufficient to impart knowledge to the stockholders as to who the creditors or debtors of the company were. As we under. stand the law to be, it is this: That before an individual or corporation can be held to have ratified the unauthorized acts of his or its agents, every detail of the transaction must have been made known to the principal. If, after obtaining such knowledge, the principal fails to act, long and continued silence will be deemed an approval of the act, and such ratification relates back and is equivalent to a prior authority to make the contract. 1 Daniel, Neg. Inst. 88 316319; Stark Bank v. United States Pottery Co., 34 Vt 146; Story, Ag. $ 239; Bank v. Jones, 18 Tex. 816; Smith v. Tracy, 36 N. Y. 82; French v. O'Brien, 52 How. Pr. 398; Combs v. Scott, 12 Allen, 497. In the case of Mining Co. V. Stevenson, 5 Nev. 228, Lewis, C. J., speaking for the court, said: “So, where it is sought to charge a corporation with the ratification of an unauthorized act of an agent hy reason of its acceptance of some benefit or advantage from it, it should appear that such benefit was accepted with full knowledge of the character of the act. The evidence in this case, however, is clear and positive that the board of trustees, which was the authorized agent of the corporation, knew nothing of the terms, nor even of the existence, of the lease in question. The money paid by the appellants was reported by the superintendent to the board as received for ores sold. Nothing seems ever to have appeared in his reports from which it could even have been inferred that the money paid by or due from Stevenson to the company was for the use or rental of any portion of the mine. How, then, can it be held that the acceptance of money by the board, reported to it as being for ores sold, was a ratification of the lease executed to the appellant? The company did not know of such lease, nor were there any such circumstances connected with the acceptance of the money as to place it upon inquiry, or to charge it with presumptive notice of its existence. If, then, it be the law that there must be a full knowledge of all the material facts before the acceptance of profit or advantage by the principal will be held to constitute a ratification, surely the respondent here cannot be held upon the lease in question, for it knew nothing of the material facts respecting it. If it were shown that the board knew of the lease, the acceptance of payment from Stevenson for the ore extracted would doubtless be sufficient to establish a ratification; but, the contrary being shown, it would manifestly be opposed to the well-settled rules of
law to hold such acceptance to be a ratification.
It cannot, we think, be maintained that the kpowledge obtained unofficially by three of the trustees that Stevenson was engaged in extracting ore froin the mine is sufficient to charge the company with such knowledge. As any number or trustees, acting individually and not as a board, cannot act for the corporation, so any information obtained by individual trustees, and not communicated to the board, should not, it would seem, become the foundation of a contract binding upon the company. The trustees represent the corporation only when assembled together and acting as a board. Such being the law, how can it be claimed that information communicated to them individually, but not to the board, can be made the foundation of an implied coutract on the part of the corporation ?" Hillyer v. Mining Co., 6 Nev. 55.
It is to the interest of the public that there should be a speedy termination of a lawsuit; but there is another principle of public policy that should not be lost sight of, and that is that no man should be deprived of his property to pay another's debts without it clearly appears that he has placed himself in that position wherein the law says, "You have assumed the responsibility, and you cannot be released therefrom." The evidence in this case is conflicting and obscure in many particulars. The motion for a new trial was made upon the ground, among others, that the findings of fact were contrary to, and not supported by, the evidence, and that the judgment was contrary to law. It does not appear on what ground the motion was granted. The granting or refusal of a motion for a new trial on the ground of the insufficiency of the evidence to support the findings is addressed to the sound discretion of the judge who presided at the trial of the case in the lower court, and on an appeal from such order, where the court below, in the exercise of a sound discretion, grants a new trial on conflicting evidence, appellate courts have always refused to disturb the order. Kellenberger v. Railway Co., (Cal.) 33 Pac. Rep. 90. The order of the district court in granting the new trial is affirmed.
BELKNAP, J., concurs
BIGELOW, J., (dissenting.) For the purpose of clearing away the cloud of dust that seems to envelop this case, I propose to first ascertain what the case is, and what the issues were that were to be tried in the district court. The coinplaint alleges that on December 1, 1886, the defendant made, executed, and delivered to the plaintiffs a certain promissory note, which, at the commencement of the action, was, with a portion of the interest, due and unpaid, and for