Hyde v. Larkin

• Decision Date: 15 April 1889
• Citation: 35 Mo.App. 365
• Parties: GEORGE H. HYDE, Respondent, v. WILLIAM LARKIN, Appellant.
• Court: Kansas Court of Appeals

35 Mo.App. 365

GEORGE H. HYDE, Respondent, v. WILLIAM LARKIN, Appellant.

Court of Appeals of Missouri, Kansas City.

April 15, 1889

Mar 10, 1888.

Appeal from the Jackson Circuit Court. --HON. TURNER A. GILL, Judge.

REVERSED AND REMANDED.

Lathrop & Smith, for appellant.

(1) The president of Star Coal and Mining Company had no power by virtue of his office to sell the personal or other property of the company or to assign the account sued upon, even if it were to pay a debt due from the company to plaintiff. Bank v. Farmers' L. & T. Co., 14 Wis. 329; Asher v. Sutton, 3 Am. & Eng. Corp. Cases (342) 344-6; Olney v. Chadsey, 7 R.I. (224) 228; Gashwiler v. Willis, 33 Cal. (11) 18, 24; Railroad v. James, 22 Wis. 198; Titus & Schudder v. Railroad, 37 N.J. Law, 102; Hoyt v. Thompson, 1 Seld. (N. Y.) 333; Hodge's Ex'r v. Bank, 22 Gratt. 59; Brouwer v Appleby, 1 Sand. 158; Spyker v. Spence, 8 Ala 340; Winsor v. Bank, 18 Mo.App. 671-5; Luse v. Railroad, 25 Am. Rep. 509; S. C., 6 Oregon 125; Morawetz on Priv. Corp. (2 Ed.) 536, 537, and authorities cited. (2) Transferring the assets is a corporate act, and can only be done by the board of directors. City of St. Louis v. Clemens, 43 Mo. 404; R. S. 1879, sec. 930. (3) Section 731 of Revised Statutes, 1879, relied upon by plaintiff, has no application, and does not pretend to be anything, except a declaratory statute. The law is the same without it. Preston v. Lead Co., 51 Mo. 47. (4) The Star Coal and Mining Company had no power to borrow money anyway. Bank v. Young, 37 Mo. 398. (5) If it had such power, the president could not exercise it without authority from the board of directors. Crum's Appeal, 66 Pa.St. 476. (6) When the president of a private corporation has such power, it is conferred either by by-law or vote of board of directors. No such by-law or vote was shown or claimed in the case at bar. Such authority, however, must be proved by legal evidence. Bank v. Farmers' L. & T. Co., supra; Bank v. Hamlin, 14 Mass. 180; Titus & Schudder v. Railroad, supra; Railroad v. James, supra; Bliss v. Kaweah C. & I. Co., 65 Cal. 504. (7) A by-law of the corporation authorizing its president to act as its business and financial agent would not authorize him to transfer or pledge the accounts, much less an oral appointment. Luse v. Railroad, supra. (8) The directors or officers of a corporation cannot mortgage or convey property to themselves to secure a debt or for any other purpose, and such a mortgage or conveyance is void. The assignment in the case at bar was by president to treasurer. Harwood v. Lbr. Co., 26 N.W. 184. (9) There is a difference between the powers of a president of an ordinary business corporation and the powers of a bank cashier

Henry Wollman, for respondent.

(1) Morawetz, in his now famous work on Private Corporations, Vol. 1 (2 Ed.) sec. 509, page 475 in the text, says: " The extent of the powers of agents of a well defined class, such as presidents, directors or cashiers, is determined largely by general custom, of which the courts will take judicial notice, and parties dealing with such agents are entitled to assume that they possess all the powers which are usually accorded to agents of the class to which they belong." Carlyle v. McElrath, 3 Sandf. N.Y. 179; Bank v. Fox, 3 Blatch. 431; Patton v. Moses, 49 Me. 255; Cabot v. Given, 45 Me. 144; Irwin v. Bailey, 8 F. 421; Castle v. Belfast Co., 72 Me. 170; Recond v. Railroad, 15 Nev. 177; Railroad v. Bastian, 16 Md. 501; R. S. 1879, sec. 731; Southgate v. Railroad, 61 Mo. 89; Turner v. Railroad, 51 Mo. 501; Bank v. Gilstrop, 45 Mo. 419; Chamberlin v. Minn. Co., 20 Mo. 96; Bulkley v. Briggs, 30 Mo. 452; Fire Co. v. Seminary, 52 Mo. 480. (2) Having used and retained the money he got as the " proceeds" of his " " " " unauthorized" act, the corporation ratified his act, and his act is binding upon it, even though he exceeded his authority in the first place. Preston v. Lead Co., 51 Mo. 47; Bank v. Fricke, 75 Mo. 183; Drug Co. v. Robinson, 81 Mo. 26, and cases cited.

Lathrop, Smith & Morrow, for appellant on rehearing.

(1) The mere fact that the Star Coal and Mining Company received money from Hyde, and that it was used to pay employes of said company, does not constitute a ratification. All this may have been done without knowledge, and was in this case done without knowledge of any officer or director except those immediately concerned in the deal. Thomp. Trial, sec. 1382; Pennsylvania Co. v. Dandridge, 8 Gill & J. 314. (2) When the evidence is doubtful and may admit of different interpretations, and when it can justly lead to no safe or satisfactory conclusion, a ratification ought not to be presumed. Story Ag., sec. 253; Bank v. Jones, 8 Tex. 828; Thomp. Trial, sec. 1382.

Henry Wollman, for respondent on rehearing.

(1) Appellants apparently assume that the only way a corporation can ratify is through its directors. That is not the law and no decisions bear this out. Preston v. Lead Co., 51 Mo. 47; Bank v. Fricke, 75 Mo. 183; Ten Broek v. Winn, 20 Mo.App. 19; Holmes v. Board of Trade, 81 Mo. 141; Buford v. Keokuk N. L. P. Co., 69 Mo. 613; Watson v. Bigelow, 47 Mo. 413; Chouteau v. Allen, 70 Mo. 329; Bank v. Schumburg, 38 Mo. 226; Tyrell v. Railroad, 7 Mo.App. 299; Green v. Railroad, 82 Mo. 659. (2) The courts have not even allowed a corporation to plead that an act done on its behalf exceeded its charter powers, until it returned whatever consideration it received. Railroad v. Dow, 19 F. 388; Buford v. Keokuk N. L. P. Co., 69 Mo. 613.

ELLISON J.

The facts necessary to be stated to an understanding of the contested point in this case are, that the Star Coal and Mining Company was a domestic corporation engaged in mining and selling coal. That defendant Larkin owed the company an account for coal, the sum of five hundred and sixty dollars. That the corporation had a president and general manager who borrowed a sum of money of plaintiff and, as security therefor, assigned to him the account against defendant. That the money so borrowed of plaintiff was used by the president in paying hands engaged in the service of the corporation.

It appears that the board of directory never authorized the money to be borrowed or the assignment of the account. It does not appear that they knew that the money was borrowed, or that the account was assigned. It does not appear that it was the usage, or that it was customary for the president to borrow money, or assign the accounts of the company, nor does it appear that he ever did so, save in this instance.

Under this state of facts the question is, did the assignment transfer the title to the account to the plaintiff?

If it did so, it must be by reason of the power and authority of the president and general manager virtute officii, to assign the choses in action or assets of a corporation of this character. In order that the act of officers or agents may bind a corporation, when not expressly authorized, the act " must be such as is in the line of their duty or agency." Winsor v. Bank, 18 Mo.App. 665.

The corporation is bound " for all such acts of the agent as are usually performed in that particular class of business." Morawetz on P. Cor., sec. 587. The authority of some agents, such as cashiers and tellers of banks, is fixed by general custom, of which the courts will take judicial notice. In other instances, the scope of the agent's authority is determined either by the terms of the appointment, by the nature of the company's business, and by the practice which has been acquiesced in by the company. Morawetz on P. Cor., sec. 590. In Hazelton Coal Co. v. Megargel, 4 Barr. 324, Chief Justice GIBSON, after stating that there was no proof of any special authority, says: " And what is the authority of the president of a company incorporated, not for purposes of banking or any object connected with currency, but for mining and marketing coal? The powers of such an officer are much more restricted than the operations of a banking one." In the case of the New York Iron Mine v. Bank, 39 Mich. 651, it was insisted by counsel that the general agent of a mining corporation as a mattter of law, by virtue of his appointment, had authority to bind it by commercial paper and that the court should take notice of his authority as it would of the authority of a bank cashier; but the court held that issuing promissory notes is not a power necessarily incident to the conduct of the business of mining. That it was a power so susceptible of abuse that the law wisely left it to be conferred or not, as the directory might determine. I am firmly persuaded that the president, general agent or manager of a mining corporation cannot, by virtue of his office merely, assign the assets of the corporation. He must have some warrant from the charter, the directory or the custom and usage of the corporation. It is certainly the safer and more conservative rule, and commends itself to sound reason. If it were not so, such officer might act in disregard of the board of directors and might by the mere power inherent in his office, transfer the entire assets of the corporation. The proposition is supported by the weight of authority. Whitewell v. Warner, 29 Vt. 425; The Chicago & N. W. Railroad v. James, 22 Wis. 194, 198; Stow v. Wise, 7 Conn. 214; Sherman v. Fitch, 98 Mass. 59; Lydeborough Glass Co. v. Mass. Glass Co., 111 Mass. 315; Kraft v. Freeman Printing Co., 87 N.Y. 628; Asher v. Sutton, 31 Kan. 286; Walworth v. Farmers' L. & T. Co., 14 Wis. 325; Hoyt v. Thompson, 1 Selden 320; Despatch Line of Packets v. Mfg. Co., 12 N.H. 205, 228.

" It is true" as is stated in Winsor v. Lafayette Co Bank, supra, " that a corporation may by a course of conduct with its officers and the public give them authority,...