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which it asked judgment. The answer as cers who had the power to authorize the act to the note consists of denials only. It de knew of it, and adopted it as a valid act of nies that the defendant ever made, executed, the corporation, although no formal vote is cr delivered the note in suit. Neither want passed by them." Mr. Mora witz says: of consideration, fraud in its execution, es “The ratification by a corporation, acting toppel, or payment is pleaded. To cite au through one of its agents, of an unauthorized thorities to the effect that without such pleas act performed by an inferior agent, may be neither of these defenses should be consid shown in the same manner as a ratification ered is carrying coals to Newcastle, but I by the company directly. Acquiescence is will refer to the following: Pom. Rem. & good evidence of consent, and if the agents Repi. Rights, &$ 061, 675, 709, 712, 730; Bliss, of a corporation who have the power to ratiCode Pl. 88 211, 269, 274, 357; Sharon v. fy an unauthorized act performed by another Minnock, 6 Nev. 377; Hanson v. Chiatovich, agent manifest no dissent after full notice, 13 Vev. 335. This, then, was the sole issue a ratification of the act may often be pre to be tried: Was the note the defendant's sumed." Mor. Corp. $ 633. In 1 Beach, note? If it was, judgment should go against Corp. $ 195, the rule is stated thus: “Any it; if not, in it:3 favor. A corporation can
officer or agent of a corporation may give act only through its officers or agents. When validity to the unauthorized acts of his subwe wish to ascertain what a corporation has ordinates, provided they be of a kind which done, we ask what its authorized agents have he might have authorized them to perform. done. In this country, for all practical pur Thus directors may ratify the unauthorized poses, the board of trustees is the corpora acts of their appointees, or the acts of other tion, so far, at least, as its relations to the corporate officers, which should not have public are concerned. Railway Co. v. Mc been done without authority first obtained Vay, 98 Ind. 391. In this case there is no from the directors. * . * Ratification by question but that the power to execute prom
directors may be made by accepting the re. issory notes rested in the board of trustees. port of a committee stating the facts, or by As the note of 1879, which had been exe the acquiescence of a majority of the direct. cuted alone by the president and secretary, ors with full knowledge of the contract so had been recognized and acted upon by the ratified. Ratification may also be presumed corporation for a number of years as a legal
from a failure to exercise promptly the right and binding obligation against it, it admits of disaffirmance." Sherman V. Fitch, 9S of large question whether these officials were Mass. 59, was an action upon a mortgage esnot impliedly authorized to execute also the ecuted by the president of the corporation note in suit, (Wilcox v. Railroad Co., 24 without formal authority. The court said, Minn. 209; Mechem, Ag. $$ 84, 274; Story, (page 64:) "The remaining consideration reAg. $$ 55, 87;) but I will pass that by, and lates to the authority of Sampson to execute look only to the acts of the trustees. That the mortgage in behalf of the corporation. body could have authorized its execution in | It is not necessary that the authority should the first place, or they could subsequently be given by formal vote. Such an act by ratify the act of making it. Story, Ag. $ the president and general manager of the 244. In Cook v. Tullis, 18 Wall. 332, 338, business of the corporation, with the knowl. Justice Field said: “The ratification op edge and consent of the directors, or with erates upon the act ratified precisely as their subsequent and long-continued acquiesthough authority to do the act had been pre cence, may properly be regarded as the act viously given.” The same principle applies of the corporation. Authority in the agent equally to corporations 2 Mor. Corp. 8 618. of a corporation may be inferred from the There was no formal resolution of the board conduct of its officers, or from their knowl. ratifying the making of the note, but the edge and neglect to make objection, as well evidence is, to my mind, overwhelming and as in the case of individuals. The absence conclusive that they did so ratify it by silence of one of the directors in Europe could not and acquiescence, and are now estopped to deprive the corporation of the capacity to question its validity. In Kelsey v. Bank, 69 act and bind itself by the acts of the officers Pa. St. 426, 429, the court uses this lan in actual charge of its affairs." Hundreds guage: "The law is well settled that a prin of authorities could be cited to the same efcipal who neglects promptly to disavow an fect, but these are sufficient to demonstrate act of his agent, by which the latter has that, if a board of trustees of a corporation, transcended his authority, makes the act his a majority of them, know of and acown; and the maxim which makes ratifica quiesce in the making of a promissory note tion equivalent to a precedent authority is by an unauthorized officer, it becomes the as much predicable of a ratification by a cor note of the corporation. Upon this point it poration as it is of a ratification by any only remains to show from the evidence that other principal, and it is equally to be pre such was the case here. In 1875 the plainsumed from the absence of dissent." Again, tiff purchased a note against defendant for in Murray v. Lumber Co., 143 Mass. 250, 9 the sum of $2,000. On August 2d of that N. E. Rep. 634, the court said: "When the year, by resolution of the board of trustees, alleged principal is a corporation, a ratifica a new note was duly made and delivered to tion may be shown by proving that the offi him in place of the old one. Interest was
paid on this every month up to 1879, when ery of that note of July, 1879, to Mr. Wright, it was renewed by the president and secre ever ratified by the board of trustees of the tary, but without any formal authorization corporation? Answer. I always supposed by the board of trustees. Interest was reg that the note had been authorized by the ularly paid on this note up to 1886, when it | board, and how it happened that the rectras again renewed by the giving of the note ord was not made of it I cannot tell. in suit, on which interest was paid up to Q. It was the same course of proceeding 1889. I do not overlook the fact that from with reference to the note issued December 1881 the interest so paid was charged to 8, 1886, that was proceeded with with referMr. Helm, but that fact, as I will hereafter ence to the issuance of the note of 1879; show, is immaterial, and is certainly im that is, there was no ratification or authorimaterial to the question now in hand, which, zation of either, so far as the records show, I will again repeat, is simply whether this or so far as your recollection serves you? A. note is the note of the corporation. From I never thought about it being required by 1881 the board consisted of Mr. Helm, the the by-laws." If these two trustees that president, Mr. Richards, the secretary, and signed this note had entered a formal resoMr. Yernigton. Two of these trustees, com lụtion upon the minutes, directing or ratiposing a majority of the board, signed this fying its execution, there could then be no nute. These two could have met at any question that it would be the note of the time, and, either with or without the consent corporation; and, under' the circumstances of the third, could bave entered upon the existing here, to make the case turn upon minutes a formal order authorizing the mak the fact that they neglected to do so, or ing of the note, or ratifying it after it was overlooked the necessity of its being done, made. The fact that they also occupied the is, in my judgment, to sacrifice justice to the positions of president and secretary would veriest technicality. But if these two trusin no manner curtail their power as trustees. tees had had nothing to do with the execuThese two-a majority of the board-cer tion of the note, and had known no more of tainly knew of and acquiesced in the contin it than Mr. Yernigton did, under the uncon. ued existence of the note of 1879, and, as
tradicted evidence in the case the corpora. tbey made the note of 1886, and knew all tion should still be held to be estopped by about it, there is not much chance to say acquiescence and laches from contesting its that they did not, as trustees, acquiesce in validity. Mr. Richards, the secretary, testiand ratify their act as president and secre fied as follows: "Question. Did you, as sectary in executing the latter. This, under retary of the defendant corporation, make all the law that I have found or have out and submit to the board of trustees of knowledge of, made it the note of the cor defendant, at its meetings held at various poration, and entitled the plaintiff to the times between December 8, 1836, and August judgment obtained by him. In I)exter. Hor 1, 1889, and also between December 8, 1886, ton & Co. v. Long, 2 Wash. St. 435, 27 Pac. and the date you became secretary of deRep. 271, where a somewhat similar situa fendant, statements and balance sheets, tion existed, the court said: “Another objec showing in gross that this note, with other tion raised by the appellant is that the mort indebtedness, was, during said time, outgage was not executed by the trustees of standing, and also that interest was being the defendant corporation, but that the presi paid on it monthly by the company to dent and secretary, by whom the mortgage Wright? Answer. I did. Q. Was there ev. was executed, had no authority to enter into er any objection raised at any time to the such a contract, and that it was, therefore, payment of the interest on this note? A. ultra vires. Even conceding that the con No, sir. Q. No member of the board ever tract was ultra vires, and that the appellant objected to the payment of the interest? A. has placed himself in a position in this case Not until the time of its discontinuance. Q. io legally allege it, under the testimony in That was in 1889? A. Yes, sir. this case it will not avail against the plain The note of 1886 appears on your books as tiff. The corporation was trying to execute an outstanding indebtedness? A. Yes, sir. a bona fide mortgage. It was within the Q. Why was biils payable never credited to power of the corporation to execute it, and that? A. I am not aware of that. its officers and ageuts were trying to carry sume the credit is there." Then, during all out the will of the corporation. There were these years, the books of the company but three trustees, and two of them signed showed that this note was a part of its the mortgage, but not as trustees. They outstanding indebtedness. In every report did not go through the form of an authoriza made by the secretary it was included as a tion by resolution, but a majority of those part of that indebtedness, and these reports who had power to pass the resolution, by a showed, as of course the books did, that inshort cut, brought about the result wbich the terest was being paid upon it every month. resolution would have authorized.”
In addition, every member of the company In regard to the want of action by the must have known, if he knew anything about board, Mr. Helm testified: "Question. With the company's business, that the $2,000 borreference to the note of 1879, was the mak rowed to pay the note were still in Mr. ing of that pote, or the execution and deliv. Helm's hands. Mr. Yernigton testified that
he did not know of the existence of either board, affords a strong presumption of a the note of 1879 or of 1886, but, if not, with ratification of those acts." In Conover . all these means of information before him, Insurance Co., 1 N. Y. 290, 292, it was said: it must be admitted that he was not paying “And it is insisted that, inasmuch as the very close attention to the affairs of the board never by any formal act gave their company. It is possible that he had such sanction, and the by-laws required the conconfidence in the other trustees that he did sent in writing of the directors to any conpot attend the meetings of the board, or ditional alienation by mortgage subsequent paid but little attention to the business when to the insurance, the consent in this case he did; but it is hardly necessary to say was unauthorized and void. I cannot subthat, under the circumstances, such volun scribe to this doctrine. The directors were tary want of knowledge upon the part of bound to know the uniform course pursued one or all the trustees should not relieve the by their sole agent in the transaction of their company of a liability that would have ex. business at their office, especially where reg. isted if they had had such knowledge. Ev ular entries of his acts were made in their ery member of the company had such knowl books; and they must be held responsible edge or such notice and means of knowl on the ground of a tacit assent and approredge of the note that he must be held to al, unless they can show that by a strict have known it. It is one of the simplest vigilance and scrutiny into his acts they were principles of justice that a man must not unable to ascertain the course he was purshut his eyes to the means of knowledge suing, and could not therefore arrest it, or surrounding him, and then claim that he did put the public on their guard." In Jones F. not know that which he could so easily have Agricultural Co., 38 Ark. 17, it was held that ascertained. If his confidence in others has the directors are conclusively presumed to misled him, he, or the company he repre know the pecuniary condition of their comsents, and not another, who had no means pany; and in Corbett v. Woodward, 5 Sawy. of knowing of the ignorance of the first, 403, 417, Deady, J., said: “Be this as it should suffer the consequences.
Under the may, the law will not permit a person to circumstances shown by the testimony, become a director in a corporation, and neg. Wright had no possible reason to suppose lect the duties and avoid the responsibilithat Yernigton and all other members of the ties thereof as to third persons with imcompany did not know of this note. The punity. A voluntary ignorance of what it slightest examination of the books or re was his duty to know and understand is ports, a mere inquiry as to whom or for no excuse for him when the rights of others what the company owed this money, would are in question. By becoming a director, have made the whole thing clear. The au
which includes the taking of an oath to 'faiththorities to the effect that want of knowl. | fully and honestly discharge the duties of edge, under such circumstances, constitutes the office, he engages to take good care of no defense, are numerous and well consid the interests of the stockholders and credered. In Morawitz on Corporations (section itors intrusted to his charge, and this nec 630) the author says: "In some instances a essarily implies that he will use due diliprincipal may be estopped from repudiating gence to keep himself properly informed conan unauthorized act of which he had no cerning the same.” actual knowledge; as, where the principal There is a distinction sometimes drawn, ought, by reason of the relation of the par but more often ignored, between ratification ties, to have known of the act, and cannot, of an unauthorized act and such acquiescence in equity and good conscience, set up his ig and laches in the matter as will be held to norance. Nor can the stockholders of a cor estop the principal from denying the want of poration avoid responsibility for the unau authority. 2 Mor. Corp. § 628. It is unnecthorized acts of their agents by abstaining essary to more than refer to it here, for the from inquiry into the affairs of the company, reason that, rejecting the plaintiffs' testi. or by absenting themselves from the com mony wherever it conflicts with that of the pany's meetings, and at the same time reap defendant, and taking the view of it most the benefit of their acts in case of success. favorable to the defendant, it shows both If a shareholder fails to take the trouble ratification of the note by the corporation of inquiring into the affairs of the corpora
and such facts as should estop it from contion of which he is a member, or to attend testing its validity. There can be no ques. its meetings, It seems no more than just that tion that the note of 1875 was a valid and his supineness should be construed as an ac. binding obligation. If the corporation did quiescence in the proceedings of the major not intend to ratify the execution of the ity.” In Olcott v. Railroad Co., 27 N. Y. note of 1879, taken in its place, it should 546, where the question was whether the cor have promptly notified the plaintiffs, and poration had ratified the unauthorized act returned the old note, and then they could of the president in executing a bill of ex have still maintained an action upon the lat change, the court said, (page 560:) “But ter. Not having done so, but, on the other the subsequent rendering of accounts of the hand, having paid interest on the new note, board of managers containing entries of such and recognized it in every way as the payments, unobjected to on the part of the company's note, that also became a valid ob
ligation that the plaintiffs could have main are quite confusedly mixed together; pertained an action on. The same remarks hold haps upon the theory that, even though no true of the note of 1886. Had its execution one of them may be sufficient, all put tobeen promptly repudiated, the plaintiffs gether must be. They seem, however, among could still have maintained an action on the other things, to hold that what took place in old obligation. Not baving been, but, on the 1881 between Wright and Helm coustituted contrary, having allowed the plaintiffs to rest a payment of the company's indebtedness to in the belief that the new note was regular Wright, a transfer of their liability to Helm, and valid, until the old one was perhaps and in some manner prerents the note of barred by the statute of limitations, and at 1886 from being the company's note. In my least never returning or tendering it to them, judgment, under the pleadings and circumto allow it to repudiate the note now, oper stances existing here, it should make no difates as a fraud upon the plaintiffs, and the ference in the result whether it did or dial company should be held estopped to make not constitute a payment of the note of 1879. such a defense. “This principle is believed Wright claimed that did not, and the note to be applicable to all cases in which the of 1886, upon which the action is brought, parties, acting in the belief that the agency was made in place of the old one. As so is valid, have suffered a change of circum often stated, the question is, is this the comstances, and cannot be restored to the posi- pany's note? But it could be their note even tion in which they would have been if the though they owed Wright nothing, the same agency had been repudiated immediately up as an individual might make a note even on notice of the unauthorized act.” Hallett, though he owed the payee nothing, and reJ., in Union Gold Min. Co. v. Rocky Mt. Nat. ceived no consideration for making it. If the Bank, 2 Colo. 248, 262. This case, which is note of 1879 was paid, then that note might very much in point, and quite instructive, be no sufficient consideration for the note of was three times before the supreme court of 1886, but that would be its only possible efColorado, and was subsequently confirmed fect; and, as no want of consideration is in the United States supreme court, (96 U. S. pleaded, under all rules of pleading, that 640.) It was there held that, where the presi- | should cut no figure in the case. To illusdent of a mining company was informed of trate: If the execution of the note had been an indebtedness, incurred, without author- formally authorized by the board of trustees, ity, by the general manager, and the com then certainly there could be no question that pany did not within a reasonable time re it was the note of the corporation; but, if pudiate the act of the manager in borrowing the indebtedness had been paid in 1881, the the money, such notice to the president was defense of want of consideration might still notice to the company, and the jury would exist. At any rate, this matter does not be authorized to conclude that the company help us the least bit to determine whether had consented to what had been done in its the company has through its representatives
In concurring opinion, Wells, J., ratified the execution by its president and said, (2 Colo. 265:) "I grant that if by such secretary of the note in question, so as to attention to its affairs as a man of ordinary
make it the company's note, and consequentprudence in the like case would have exer ly it is entirely immaterial. But, if mistaken cised the corporation might have informed in this, and it be material, then it seems clear itself of Becker's doings, it is the same as if
that the transaction of 1881 did not constithey had actual knowledge. The corporation tute payment, nor in any manner release the ought not to be heard to say that it did not company from its obligation to pay Wright know that which by the ordinary diligence the money due either upon this note or the which the law exacts of them they might
one of 1879. Neither by pleading nor proof have known." I deem it unnecessary to fol
is it claimed that there was any fraud, delow this further, except to add, to avoid mis- ception, misrepresentation, or concealment in understanding, that, the plaintiffs having had that matter, nor does it appear that any was no call or opportunity for pleading their es intended or contemplated. We have, consetoppel, they may, contrary to the rule that quently, only to analyze the transaction, and should be applied to the defendant, rely upon to determine what was really done there, it without such pleading. Clink v. Thurs and its legal effect. As the plaintiff denies ton, 47 Cal. 21; Bigelow, Estop. 584.
the conversation with Helm in toto, the view The foregoing will sufficiently indicate the most favorable to the defendant is to adopt ground upon which I think the case should Helm's version of the matter. Mr. Helm tesbe decided; but, under the circumstances, I tified as follows: "I got home Sunday, and deem it proper to follow it up a little fur on Monday following I met Mr. Wright, and ther. I must confess that I have found it I told him I had the money to take up that quite difficult to determine from the opinion note. We went to Wells-Fargo, where he of my learned associates just what ground or has got a tin box. He went into the vault, grounds they have placed their judgment got the box, and brought it on the counter, upon. With all deference, it seems to me opened the box, took out the note, held it in that, while no one of them is in the end re his hand. I said to him that I was in a lied upon, the doctrines of payment, want of tight place myself, and I said to him, "Sam, consideration, ratification, and other subjects you don't need this money, and I need it aw
tul;' and I said, 'I will give you my third of estops Mr. Wright from asserting his claim the water company's stock as security, and against the company; so, if it was not a let me keep this money.'
I had 33 payment, it is immaterial what else it was shares, and I said, "Give me this $2,000, and Admitting that it was wrong for him to conyou can have the stock;' and he asked me sent to Helm's keeping the company's money, about the stock, and how much there was of and that he was to such an extent his brothit, and finally he said, 'I don't believe I want er's keeper that he should have said, "No, your stock, but let it run as it stands, and you must not do this," still the question is you can pay it in a few months, and you not whether it was right, but whether, concan pay the interest and let it be as it is, and trary to the understanding and intention of not make any change.' I objected to it, but both, it constituted a payment of the note, he said, 'Let it be as it is.'
. I used and substituted Helm as the plaintiffs' debt. the money represented by the check. Then or. Helm's acts show that he had a per. I ordered the interest paid at the office | fectly clear understanding of the transac charged to me. Question. Do you know who tion. He understood that the note was still drew the money represented by the check an outstanding and binding obligation upon you speak of;
whether you drew it the company; but because he had used the or whether Mr. Wright drew the money? | money that should have gone to pay it, he Answer. I presume I did. Q. Did Mr. Wright was in duty bound to protect the company, ever surrender to you the note of the Carson both as to the principal and interest. Hence Water Company that he held against the his statement to the secretary to charge the company as his security? A. No, sir. Q. interest to him, and that he would protect Mr. Wright never did surrender that note? the note at all bazards. Wright also underA. No, sir. * * Q. You will not state stood that the note had not been paid, that that you delivered him a dollar, or paid him the company still owed it to him, and be the check for the Carson Water Company at never made any claim upon Helm on account that time? A. I don't think I did." There of it. To avoid misunderstanding, it should can be no dispute that in this Helm did not be stated that the evidence shows that his pay Wright any money, or transfer or deliv claim to offset his water bill against Helm's er anything to him. He received nothing indebtedness to him was on other money from Wright, gave him no note or security, that Helm owed him, and not on this note. nor did he by word or deed become bound
There can be no payment where the debtor for the payment of any money to Wright.
gives up nothing, the creditor receives nothThe whole transaction amounted to simply ing, and neither party understands that any this: Wright got nothing, either in the way
payment has been made. When Helm used of money, notes, or security;
ga this money he became the company's debtor; matter of good-natured accommodation to and if it has never been paid, -as presumably Helm, and without any possible advantage it has not,-he still owes it to them, but he to himself, did not insist upon the payment owes nothing by reason of it to Wright. If of the note at that time, and agreed to let the Wright had only the same confidence in matter stand as it was. On the other hand,
Helm that the company seem to have had, he refused to surrender the company's note, there was still no reason for him to think and take Helm's note and stock in place that his use of the money was not known to of it. Helm was 'the company's agent to all, and entirely satisfactory, for no ob pay this money. Can any one claim that in
jection was made for some eight or nine his hands the check was not the company's,
years, and, very possibly, not until it was and represented the company's money? found that Helm was unable to replace it. It Wright could have no title to it until it
would hardly seem possible that under the should be paid to him, and could in no man
circumstances existing here $2,000 could disner have compelled Helm to pay it to him. appear from the exchequer of a company If not paid, his only remedy would be against
handling no more money than this one prethe company upon the note. When it was
sumably handled, and every one interested not paid, can there be any doubt that it was
the company or paying any attention to its still the company's property, and that they affairs not know all about it. Had the arcould have compelled their agent to give it rangement between Helm and Wright been up to them? It follows that when Helin made for the purpose of enabling Helm to de used it, it was the company's check and mon fraud the company of the money, by induey that he used. The most that can be said is cing the belief that the note had been paid that Wright consented to Helm's keeping with it, when it had not, and particularly the company's money. Helm was the presi had Wright represented to any of the comdent and business manager of the company. pany's officers that it had been paid, this Wright evidently looked upon him as being would probably constitute a defense to the the same as the company. To Wright's com company, as Wright would be estopped to prehension, if Helm did not pay the money deny that such was the case; but it is not to him, there was nothing to prevent his claimed by any one that anything of this keeping it, and it would be all right. At kind exists here. No pretense was made by any rate, it is not claimed that there was anybody that the hote had been paid, or that any fraud in the matter, or anything that the money was not still in Helm's hands.