Huntington Brewing Co. v. McGrew

• Citation: 64 Ind.App. 273,112 N.E. 534
• Decision Date: 11 May 1916
• Docket Number: No. 9025.,9025.
• Parties: HUNTINGTON BREWING CO. v. McGREW.
• Court: Court of Appeals of Indiana

64 Ind.App. 273

112 N.E. 534

HUNTINGTON BREWING CO.

v.McGREW.^*

No. 9025.

Appellate Court of Indiana.

May 11, 1916.

Appeal from Circuit Court, Huntington County; James J. Moran, Special Judge.

Action by Charles McGrew, trustee, against the Huntington Brewing Company. From a judgment for plaintiff, defendant appeals. Affirmed.C. W. Watkins and C. A. Butler, both of Huntington, for appellant. Burdge H. Hurd and Lesh & Lesh, all of Huntington, for appellee.

HOTTEL, J.

This is an appeal from a judgment in appellee's favor in an action brought by it on a note executed by appellant.

The pleadings upon which the case proceeded to trial were a complaint in one paragraph, a special answer in one paragraph, and a reply in two paragraphs. As no question is raised on the pleadings, it is sufficient to say concerning them that the special answer proceeds on the theory that appellant is an Indiana corporation, organized for the purpose of manufacturing and selling malt, malt liquors, and ice, and to purchase and sell lands; that the note in suit was not given to obtain money or anything of value to be used by defendant in its business, but was to be used solely for the purpose of locating other factories in the city of Huntington, Ind., and was ultra vires and void.

To this answer there was filed a general denial, and also a special reply, which proceeds on the theory that the note in suit was given pursuant to and in settlement of a written subscription made by appellant to a $50,000 factory fund to be used in locating factories in the city of Huntington, and that appellant is estopped from invoking the defense of ultra vires against the collection of said note by reason of the fact that it received benefits under said agreement pursuant to which the note was given. Such reply also alleged facts showing a mutuality of interest and agreement between the respective subscribers to said subscription paper, and that such subscription agreement had been so far executed by the respective parties thereto that it would be inequitable and unjust to such parties who have performed such agreement to permit appellant to now escape performance on its part.

On the issues thus tendered the trial court, pursuant to request, rendered a special finding of facts and stated its conclusions of law thereon. The court found in substance:

(1) That appellee is a corporation organized under the laws of Indiana to promote and extend the commercial and industrial interests of the city and citizens of Huntington, Ind., by inducing factories and other enterprises to locate at or in said city. Said funds were collected and held by Charles McGrew, trustee, he having been appointed to succeed Julius Dick, the original trustee in said matter.

(2) That appellant is an Indiana corporation organized to make and sell beer and ice and to sell real estate in furtherance of and incidental to its main business of making and selling beer, and has its brewery and principal place of business in Huntington.

(3) Prior to May 6, 1907, representatives and agents of said factory fund association circulated a formal subscription among the citizens of Huntington to obtain donations to said fund, which subscription agreement, omitting signatures, was as follows:

“We, the undersigned, agree to pay the sums set opposite our names for a $50,000 factory fund to be used in locating factories in the city of Huntington, Indiana, said fund to be paid to Julius Dick trustee of said fund for said purposes; subscriptions not to be binding until the full amount of $50,000 shall have been subscribed and payments of amount subscribed shall be made as follows without relief from valuation or appraisement laws: 10 per cent. shall be paid as soon as the full amount of $50,000 is subscribed, and notes for the balance of each subscription shall be executed for 10 per cent. of each subscription, payable semiannually, without interest.

Name. Amount.”

(4) That Henry W. Hoch was a director of said association, and, as such, actively participated in its business affairs and in the circulation of said subscription paper, and was then secretary and treasurer of appellant company, and subscribed $2,000 for it; that the amount of the subscriptions so obtained, including the said subscription of appellant, aggregated $50,000.

(5) Said subscriptions were settled by the various subscribers giving their notes for the balance due on their subscriptions after deducting the cash payments made by them, and appellant settled its subscription after deducting its cash payment of $200 by executing and delivering to appellee the note herein sued on for $1,800, payable semiannually in installments of $200 each, which is set out in the findings.

(6) That appellant paid $200 on said note, and that $200 is a reasonable attorney's fee; that the $200 was paid with full knowledge of all stockholders of the company without objection by any of them.

(7) At the time appellant executed its note its capital stock then amounted to $50,000, all of which had been issued and was then owned by Hoch and Knipp in equal shares, their respective wives each formally holding one share to meet the requirements of the law; that appellant owns a large amount of real estate in Huntington and adjacent thereto, and has an artificial ice plant, and has made and sold ice, but is not now engaged in such business.

(8) That appellee collected from said subscriptions and notes given therefor about $40,000 and has paid out for the location of factories in said city $35,000, and has greatly extended the business interests of the city and its citizens, and the population of said city has been increased 1,000 by reason of said business enterprises.

(9) That appellant received a valuable consideration for the note.

The conclusions of law are:

(1) That the law is with the appellee.

(2) That the note sued on is a legal and binding obligation duly executed by appellant.

(3) That appellee should recover judgment from appellant in the sum of $2,200 as principal, interest, and attorney's fees without relief, etc., and its costs.

Appellant's motion for a venire de novo and for a new trial were each overruled, and these rulings and the conclusions of law supra are assigned as error in this court.

While numerous rulings of the trial court are presented by said several assigned errors, appellant in its brief says:

“This was an action on a promissory note in due form executed and delivered to the appellee's predecessor in office, by the appellant calling for $1,800, on which $200 had been paid. Two questions were involved, the first as to the note being ultra vires the corporation, and the second as to the receipt by appellant of benefits of such a nature as to work an estoppel. The plea of ultra vires was raised by appellant, defendant below, and the plea of estoppel is invoked by appellee. *** The appeal in this case, as we desire to present it, involves the following questions: Had appellant the power to make the note sued upon? Is appellant estopped by reason of having received any benefits growing out of said contract? Is such a contract contrary to public policy? On the trial of the case error in the admission of evidence on those points depends largely upon viewpoint on the above questions.”

[1] We therefore go direct to such questions: (1) Under the facts found by the court was the execution of the note in suit ultra vires?

[2] The rule of strict construction of corporate authority, as applied to some of the earlier cases which deny the right of a corporation to enter into any contract or do any act not specifically granted by its charter or necessary for the purpose of carrying into effect the powers so expressly granted, has been modified by the later cases, and the rule now seems to be substantially as follows: Any act done or agreement made by a corporation by and through its proper and duly authorized officers with an honest view of serving corporate ends in a substantial sense, which act is in itself lawful, and not prohibited by charter or otherwise, will be considered within the corporate powers as against an after claim of such corporation that such act is ultra vires. 29 Am. & Ency. of Law (2d Ed.) 47; Winterfield v. Cream City Brewing Co., 96 Wis. 239, 71 N. W. 101. Upon this subject it is said in 7 Am. & Eng. Ency. of Law (2d Ed.) p. 807:

“It has often been held that it is not within the powers of a corporation to subscribe for the purpose of aiding other enterprises, even though it may tend to increase its own business; but on this point there is a direct conflict in the cases. Many courts have held that such power is to be implied whenever such a subscription is necessary, or when it would be usual or proper for a natural person under the circumstances.”

See cases cited in note.

In Wright v. Hughes, 119 Ind. 324, 328, 21 N. E. 907, 908 (12 Am. St. Rep. 412), our Supreme Court, in discussing this question, say:

“It may be regarded as settled that, where general authority is given a corporation to...