Adam v. New England Inv. Co.

• Decision Date: 07 July 1911
• Citation: 80 A. 426,33 R.I. 193
• Parties: ADAM v. NEW ENGLAND INV. CO.
• Court: Rhode Island Supreme Court

80 A. 426

33 R.I. 193

ADAM

v. NEW ENGLAND INV. CO.

Supreme Court of Rhode Island.

July 7, 1911.

Case Certified from Superior Court, Providence and Bristol Counties; Elmer J. Rathbun, Judge.

Action by Sylvia G. Adam against the New England Investment Company. Certified to the Supreme Court under Gen. Laws 1909, c. 298, § 4, for determination on an agreed statement of facts. Judgment for plaintiff directed.

Waterman, Curran & Hunt, for plaintiff.

Quinn & Kernan, for defendant.

PARKHURST, J. This is an action of trespass on the case for promises broken, brought in the superior court for Providence county, and upon an agreed statement of facts. The action, being at issue on its merits, was on May 2, 1911, certified to this court, to be here heard and determined, under Gen. Laws R. I. 1909, c. 298, § 4. The facts agreed upon are, in substance, as follows:

The plaintiff, Sylvia G. Adam, of the city of Cranston, on November 25, 1908, was the owner of 139 shares of the capital stock of the American Pickling Company, a Rhode Island corporation, doing business in Providence; and on or about the above date the defendant, the New England Investment Company, also a Rhode Island corporation, which had received authority from the Legislature of the state of Rhode Island, at the January session, 1908, to purchase shares of stock of other corporations, was negotiating for and had purchased certain of the stock of the said American Pickling Company. The stock was bought at prices ranging from $45 to $65. On October 27, 1908, the directors of the defendant company voted to purchase all available stock in the American Pickling Company for $45 a share. During the latter part of November, 1908, Joseph De Champlain, the president, general manager, and a director of the New England Investment Company, entered Into negotiations with the plaintiff, through Joseph W. Adam, the husband of the plaintiff, for the purchase by the defendant company of the plaintiff's stock in the American Pickling Company. The proposition which he made, and which was accepted by the plaintiff on the 25th day of November, 1908, was for the plaintiff to deliver her stock in the American Pickling Company to the New England Investment Company, and to receive therefor 1,520 shares of the stock of the defendant corporation, with the distinct understanding that the defendant corporation would redeem and purchase from said plaintiff said 1,520 shares, at the price of $2.50 per share, at any time after six months from the date of the transfer to it of the American Pickling Company stock. The deal above set forth was carried out. The plaintiff transferred her stock in the American Pickling Company to the defendant, and received from De Champlain a certificate for 1,520 shares of defendant's stock, upon the above conditions as to redemption and purchase. At the time the plaintiff delivered her stock to the New England Investment Company, she knew of the purchase by the defendant corporation of shares of the American Pickling Company stock from other stockholders. Tbe American Pickling Company received the plaintiff's certificate, and issued a new certificate for 139 shares of its capital stock in the name of the defendant corporation, and the defendant corporation has held said stock in its name up to the present time. On the 21st day of April, 1909, the plaintiff presented to the treasurer of the New England Investment Company for redemption 1,520 shares of the said defendant corporation stock, and on that day the treasurer of said corporation paid from the funds of said corporation the sum of $800 in payment of 320 shares, and issued to her a certificate for 1,200 shares of the said defendant corporation. On the 14th day of August, 1909, the plaintiff presented to the treasurer of the defendant corporation for redemption 1,200 shares of the stock of the defendant corporation standing in her name, and payment was refused; but the president and general manager, De Champlain, promised to pay the plaintiff in full for all the stock of the New England Investment Company which she held on October 1, 1909. On the 4th day of October, 1909, the said plaintiff tendered to said treasurer of the said defendant corporation for redemption 1,200 shares of the capital stock of said New England Investment Company, and the treasurer forthwith paid her $500 in payment of 200 shares of said stock, and issued to her a certificate for 1,000 shares. On November 6, 1909, the plaintiff presented for redemption 1,000 shares of the capital stock of the said defendant corporation, and received the sum of $250 in payment for 100 shares, and a certificate for 900 shares, the balance remaining after the above payment; and the plaintiff did on the 12th day of February, 1910, and on other dates thereafter, tender to the said defendant corporation for redemption the 900 shares now standing in her name, but payment has been refused upon the same.

It is admitted that, upon each and every occasion when payment was made by the defendant corporation in redeeming the plaintiff's stock, the treasurer of the said defendant corporation paid from the funds of the corporation, either by check drawn by the corporation, or by the indorsement of funds payable to the order of the corporation, and that upon each and every occasion the certificates of stock issued to the plaintiff were properly signed and countersigned by the duly authorized officers of the corporation. It is admitted that the stockholders of the defendant corporation never passed any vote ratifying the agreement made by its president for the repurchase of the plaintiff's stock, nor did the board of directors, by any formal vote, ratify such repurchases as he did in fact make. The New England Investment Company acquired 540 shares of stock out of a total outstanding issue of 600 shares of the American Pickling Company. At the time of the purchase of the plaintiff's stock, the American Pickling Company was a going concern and solvent, and has since the purchase of the plaintiff's stock by the defendant corporation been put into liquidation by the defendant, and most of its assets absorbed by the New England Investment Company. The United States Circuit Court appointed a receiver of the said defendant corporation on April 23, 1910, but said receivership was discharged by said court on March 3, 1911. The present action is brought by the plaintiff to recover the value of 900 shares at present standing in her name, and which the defendant company has failed to redeem at the agreed price of $2.50 per share, amounting to $2,250, together with interest thereon from the 1st day of July, 1909, to the date of the plaintiff's writ, amounting to $102.25.

Under the agreed facts, as above set forth, the plaintiff contends in argument that, as the defendant corporation had power to buy the stock of the American Pickling Company, under the amendment of its charter passed by the General Assembly at the January session, 1908, and as the board of directors had voted on October 27, 1908, to buy all available stock of the American Pickling Company at $45 per share, the purchase of the plaintiff's stock in the latter concern was within the power of the defendant corporation, and that the defendant corporation is bound to carry out its part of the bargain made at the time of the purchase; that, even if De Champlain, the president and general manager of the defendant corporation, had no express authority to bind the defendant company, the defendant company has, by its acceptance of the plaintiff's stock, and by its conversion of the same into cash through liquidation of the American Pickling Company, received the benefit of the trade which he made for it; and that, as it has never taken any steps to rescind the contract, but has by its action ratified the same, it is consequently estopped from denying the validity of the contract and its binding force upon it. The plaintiff further contends that the contract which the plaintiff made, for the resale of her stock in the defendant company to it, was a bona fide sale, with the date of payment by the purchaser postponed and the seller secured by the stock of the defendant company; that the defendant corporation had power to purchase its own stock; but that, even in case it is held that the defendant corporation had no right to agree to repurchase its own stock delivered under the contract of the plaintiff, the defendant corporation, having received the benefits in full of the plaintiff's performance of her part of the contract, cannot refuse to perform its part upon the ground that the contract was ultra vires, because, having taken the plaintiff's property and being unable to return the same, it is estopped from setting up such a defense.

Under the agreed state of facts, the following questions are suggested by the plaintiff for our determination:

First. Could the president and general manager, under the authority of the board of directors voting to buy available American Pickling Company stock at $45 a share, bind the corporation to pay $27 a share six months after the purchase of the stock?

Second. Is the defendant corporation bound by the contract made by the plaintiff and De Champlain, acting for and in behalf of the defendant corporation and ratified by the defendant?

Third. Can a corporation buy its own stock?

Fourth. If it should be held that the defendant corporation could not buy its own stock, is the defendant corporation, by reason of its acceptance of the plaintiff's performance, estopped from taking advantage of the fact that its performance would be ultra vires?

1. Inasmuch as the defendant corporation had express authority under legislative amendment of its charter, passed May 20, 1908, "to buy, hold and sell stocks in other corporations," and as corporations can only act through their authorized agents, and as the board of directors by their vote of October 27, 1908, voted "to purchase all...