26 F. 140 (D.Kan. 1886), Indianapolis Rolling-Mill Co. v. St. Louis, F.S. & W.R. Co.

Citation:26 F. 140
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

Page 140

26 F. 140 (D.Kan. 1886)



ST. LOUIS, F.S. & W.R. CO. 1

United States Circuit Court, D. Kansas.


Wilson, Dunn & Dunn, T. P. Fenlon, and Warner & Dean, for plaintiff.

J. H. Richards and Rossington, Smith & Dallas, for defendant.

FOSTER, J., (orally.)

There are two principal objections urged by the plaintiff rolling-mill company against the validity of the release that is set up here by the defendant railroad company. The first objection that is urged by the plaintiff company is this: That the release which was executed by Mr. Thomas in New York, as treasurer of the rolling-mill company, was and is absolutely void by reason of the want of authority to execute the same. It appears from the evidence that that release was executed in pursuance of a telegram received by him from Mr. Jones, the president of the rolling-mill company. In the telegram he also recites that two other of the directors of the company concurred with him in consenting to this release; hence this release was made by the consent of Mr. Thomas, the treasurer, Mr. Jones, the president, and two other directors of the company. Now, it is claimed that under the by-laws of this corporation, the rolling-mill company, this release was and is absolutely null and void; and my attention has been called to by-law No. 4, in which it is provided that the superintendent shall have charge of the works, property, and operation of the company, and shall employ all operatives and certify all wages due and their expenditures to the secretary, who shall keep the records thereof, and draw an order on the treasurer for

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the payment thereof; and shall, with the approval of the president, buy and sell material, and make all contracts for the same and for work. He shall report once each month, etc. Now, in this case, Mr. Jones was both president and superintendent. Under this by-law he had the power to buy and sell materials, and to make all contracts for the same, etc. And it appears from by-law No. 6 as follows: 'The superintendent, and all other persons, shall, in all cases, be subject to the control of the board of directors in everything where the board shall elect to exercise such control. ' This original contract between the rolling-mill and the defendant, by which the rolling-mill company sold this large amount of iron, was made by the president of the company, and the board did not choose to exercise any control or management over it. The extensions of the payment of these drafts or acceptances, which were drawn at different times,-- the $85,000 and $54,000 drafts,-- were made by these officers. The board of directors did not choose to exercise any control or management over it. This contract of release, because it is a contract,-- and where he has authority, under by-law No. 4, to make all contracts concerning the buying of all material, and so on,-- I take it is amply broad enough to permit him to modify any contract made, to change any contract made, and to release any contract made. It would be a very restricted and narrow construction to take any other view of the powers therein conferred and granted.

It is argued here that this is a disposition of the assets of the company. Well, supposing that the rolling-mill company had made a contract that was very disadvantageous to it; that it was losing money by carrying it into force and effect,-- then would it be argued that this rule would apply if it was releasing what would be a good contract, but would not apply if it was releasing the company from a contract under which it was bound to lose money? If this authority exists, it must exist as to releasing a contract, whether it be a good or a bad one for the plaintiff company.

Now, this release was made in New York. Mr. Thomas states that he made his report before the board of directors some day in March. It appears from the minutes of the proceedings of the board at that time that no conclusion was arrived at, and no action was taken upon it. One thing is certain upon that record; the board did not elect to exercise the control given them under by-law No. 6 at that time, for they did not repudiate it. The record says they took no action upon it; but Mr. Thomas says the action that really was taken was in substance this: to take the legal advice of counsel, and act upon that; and not until some two years afterwards does the record of the plaintiff company show a repudiation, in terms, of this release, although suit had been brought in the June following the March of which it was first laid before them. Now, if the board of directors of this company should elect to exercise the control which was given them by by-law No. 6, they must act promptly. They could not play

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fast and loose. They cannot say those officers have the power to make a contract, and, if it is good for the company, we won't exercise any control over it, but if they make a contract, and if it is to the disadvantage of the company, we will reserve the right to act upon it, although it may be years afterwards. They cannot do that. If they elected to act upon that release, and repudiate it, they should have acted promptly, and within a reasonable time after full knowledge of all the facts was laid before them. But it appears from the evidence in this case that they did not do it. All that they ever...

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