Egbert v. Sun Co.

• Decision Date: 21 December 1903
• Docket Number: 38.
• Citation: 126 F. 568
• Parties: EGBERT v. SUN CO.
• Court: U.S. District Court — Eastern District of Pennsylvania

126 F. 568

EGBERT v. SUN CO.

No. 38.

United States Circuit Court, E.D. Pennsylvania.

December 21, 1903

L. L Smith, for plaintiff.

W. R Bliss and W. B. Broomall, for defendant.

DALLAS Circuit Judge.

'Undoubtedly the board of directors is generally the governing and controlling body of a corporation,' and therefore, except with its assent, express or implied, a corporation cannot incur a contractual obligation. Salem Iron Co. v. Lake Superior Consol. Iron Mines, 112 F. 241, 50 C.C.A. 213. But it is equally well settled that 'corporations are liable for the acts of their servants while engaged in the business of their employment, in the same manner and to the same extent that individuals are liable under like circumstances. ' And, indeed, it has been perceived that for the enforcement of fair dealing by corporations, they should be held to this liability with especial stringency inasmuch as, by reason of their intangible nature, they are incapable of acting otherwise than through the agency of natural persons, and those who deal with them in good faith, without having any reason to suspect any defect of authority on the part of those acting for them, ought not, after involving themselves in onerous engagements, to be told that the apparent and asserted authority upon which they had relied as being adequate to bind the corporation, was defective or irregular. Merchants' Bank v. State Bank, 10 Wall. 644, 645, 19 L.Ed. 1008. Upon this ground alone, regardless of the question of ratification presently to be referred to, I am of opinion that the defendant's point to the effect that there was no evidence that it either made or ratified the contract upon which this suit was founded was not well taken; and that, therefore, its motion for judgment non obstante veredicto must be denied, and the first reason assigned in support of its motion for a new trial be overruled. The contract in question, as appears from the copy thereof hereafter contained in this opinion, was in the form of a letter by the president of the defendant company. It was signed by him as its president, and was written upon paper bearing the letter heading of the company. The writer had been permitted to and did exercise very general authority in the conduct of the corporation's affairs. Upon being asked, as a witness, whether it was not true that almost the entire executive management of its business was in his hands, he answered, 'I think I was very largely in control of it,' and from the testimony as a whole it plainly appears that he was. In Merchants' Bank v. State Bank, supra, the Supreme Court held that the cashier of a bank, who, with its knowledge, had dealt with the public in buying and selling exchange for its account, might be inferred to have authority to buy and sell coin on its behalf, and also that the authority of such cashier to pledge the bank's credit by certifying a check to be good was inferable from the fact of his having frequently pledged its credit for large amounts in the usual course of business. In the opinion of the court in that case several observations were made, which, in addition to those already referred to, are peculiarly applicable to the present one. It was said:

'Smith was the cashier of the State Bank. As such he approached the Merchants' Bank. The bank did not approach him. Upon the faith of his acts and declarations, it parted with its property. The misfortune occurred through him, and, as the case appears on the record, upon the plainest principles of justice, the loss should fall upon the defendant. The ethics and the law of the case alike require this result.'

In the case in hand Pew was the president of the Sun Company. As such he approached Egbert. Egbert did not approach him. Upon the faith of his letter, Egbert gave up the position in which he was then employed, and with nothing but that letter to justify it in doing so, the corporation itself terminated its arrangement with him, and threw him entirely out of employment. The consequent loss to Egbert resulted through the action of Pew, and upon the plainest principles of justice, the corporation for which he acted should compensate that loss by payment of the sum agreed upon. The court in the same case further said (quoting from a New York decision):

'The bank selects its teller, and places him in a position of great responsibility. Persons having no voice in his selection are obliged to deal with the bank through him. If, therefore, while acting on business of the bank, and within the scope of his employment, so far as is known or can be seen by the party dealing with him, he is guilty of misrepresentation, ought not the bank to be responsible?'

The portion of this extract which is here italicized appears in italics in the opinion of the Supreme Court of the United States as reported, and it is followed by this statement 'Smith, by his conduct, if not by his declarations, avowed his authority to buy the certificates and gold from the Merchants' Bank, and the bank, under the...