Josephine Hospital Corp. v. Modoc Realty Co.

• Decision Date: 19 March 1925
• Docket Number: 23919
• Citation: 270 S.W. 638,307 Mo. 336
• Parties: JOSEPHINE HOSPITAL CORPORATION, Appellant, v. MODOC REALTY COMPANY et al
• Court: Missouri Supreme Court

270 S.W. 638

307 Mo. 336

JOSEPHINE HOSPITAL CORPORATION, Appellant, v. MODOC REALTY COMPANY et al

No. 23919

Supreme Court of Missouri

March 19, 1925

Appeal from St. Louis City Circuit Court; Hon. John W Calhoun, Judge.

Affirmed.

Anderson Gilbert & Wolfort, Frank X. Hiemenz and Edward W. Foristel for appellant.

(1) The officers of the corporation can exercise only such powers as are granted them by the by-laws of the corporation or by a duly organized meeting of the board of directors. Union Natl. Bank v. State Natl. Bank, 155 Mo. 108; Danglade & Robinson Mining Co. v. Mexico-Joplin Land Co., 190 S.W. 35; Coleman v. Mutual Life Ins Co., 201 S.W. 544. (2) The officers of a corporation, as such, have no authority to convey the corporate real estate without the authorization of the board of directors. Green v. Hugo, 81 Tex. 452; McKeag v. Collins, 87 Mo. 164; Hall v. Bank, 145 Mo. 418; Gashwiler v. Willis, 33 Cal. 11; Fitzhugh v. Franco-Texan Land Co., 81 Tex. 306; Graferman Dairy Co. v. Bank, 235 S.W. 435. (3) The fact that the board of directors seldom met, took but little interest in the affairs of the corporation and left the management of the business of the corporation to the president, who treated the institution as his own property, confers no authority on the president to convey corporate lands. McKeag v. Collins, 87 Mo. 169. (4) One claiming under a contract executed by an agent is bound to know the extent of the agent's authority. Green v. Hugo, 81 Tex. 452; Alexander v. Cauldwell, 83 N.Y. 480; Franco-Texan Land Co. v. McCormick, 85 Tex. 416; Sidway v. Land Co., 163 Mo. 342; Taylor v. George, 176 Mo.App. 215. (5) The president and secretary of the board of trustees of an eleemosynary institution have no power to make a deed of the corporate property, unless authorized to do so by the board of trustees. Mott v. Danville Seminary, 129 Ill. 403. (6) An agent of a grantee in a deed is not competent to testify to an oral agreement between him as such agent and the deceased president of a company which purports to be the grantor in an alleged deed. Green Real Estate Co. v. Mutual House Bldg. Co., 196 Mo. 358; Williams v. Edwards, 94 Mo. 447. (7) It was the duty of the trial court under the conditions and the issues in this case to try, ascertain, find and adjudge the respective interest of the parties to this action in and to the real estate involved in this suit, and the judgment dismissing the bill was improper. Maynor v. Land Co., 236 Mo. 728; Ev. Church v. Schrieber, 277 Mo. 126; R. S. 1919, sec. 1970.

C. William Koenig and Julius T. Muench for respondents.

(1) The power of an officer of a corporation to bind the corporation is governed by the law of agency, and, where an officer has been permitted to manage all the business of a corporation, is for all practical and business purposes the corporation, his authority to bind it will be implied from the actual or apparent power thus conferred upon him or inferred from the same evidence which would justify the inference in the case of a natural person, and the corporation is estopped to deny his acts. Moore v. Gaus & Sons Mfg. Co., 113 Mo. 98; Washington Savings Bank v. Butchers & Drovers Bank, 107 Mo. 133; Sparks v. Dispatch Transportation Co., 104 Mo. 531; Pasche v. South St. Joseph Town Co., 174 Mo.App. 614; Tyler Est. v. Hoffman, 146 Mo.App. 610; Coal Co. v. Mining Co., 207 S.W. 268; Lyons v. Corder, 253 Mo. 539; Christian University v. Jordan, 28 Mo. 68; Jones v. Williams, 139 Mo. 1; Fourtelet v. Whithed, 9 N. Dak. 474; Fletcher on Corp., secs. 1731, 1906, 1907. (2) A board of directors may, through custom and usage, delegate its power to the president of the corporation. And where the board of directors, or trustees, allow one of their number to conduct and transact the business of the corporation, he is the same as an executive committee or general manager or managing director, and is the alter ego of the corporation, and his acts bind the corporation, even though there was no formal vote giving him authority. Fitzgerald Const. Co. v. Fitzgerald, 137 U.S. 98; Tyler Estate v. Hoffman, 146 Mo.App. 510; Jones v. Williams, 139 Mo. 1; Washington Savings Bank v. Butchers & Drovers Bank, 107 Mo. 133; Chestnut Trust & Savings Fund Co. v. Record Pub. Co., 227 Pa. St. 235; Edwards v. Light & Water Co., 49 Mont. 535; Martin v. Webb, 110 U.S. 7; McCormick v. Unity Co., 142 Ill.App. 172; 3 Fletcher on Corporations, secs. 1904, 2034; Morawetz on Corporations, sec. 538. (3) A corporation may ratify the acts of its president through acquiescence, by receiving the benefits of the contract, and by delay. And ratification will be construed as antecedent authority if the corporation acquiesces in the act or neglects to promptly disavow it after knowledge thereof. R. S. 1909, sec. 2993; R. S. 1919, sec. 9753; Mining Co. v. Taylor, 247 Mo. 1; First National Bank v. Fricke, 75 Mo. 178; Campbell v. Pope, 96 Mo. 468; Washington Savings Bank v. Bank, 107 Mo. 133; Jones v. Williams, 139 Mo. 1; Quinn v. Assurance Co., 183 Mo.App. 19; Murray v. Beal, 23 Utah 548; 3 Fletcher on Corporations, secs. 1831, 2022; Field on Corporations, sec. 167. (4) The recourse against an ultra vires act or voidable contract of an officer of a corporation in the disposition of corporate property lies in an action against such officer, or his estate, and not against a bona-fide purchaser for value without notice. Furthermore, the option to avoid a voidable contract is lost if wholly executed or executed by the adverse party. Mining Co. v. Taylor, 247 Mo. 1; Smith v. Richardson, 77 Mo.App. 422; Gilbert v. Finch, 173 N.Y. 455; Gallery v. National Exch. Bank, 41 Mich. 169. (5) A corporation is responsible for the negligence of its board of directors, and when that has been the proximate cause of injury to another, the corporation, and not that other, must bear the loss. When one of two innocent parties must suffer, then the loss should fall on the one by whose fault or negligence the injury was caused. Fairgate Realty Co. v. Drozda, 181 S.W. 398; Gate City B. & L. Assn. v. Bank of Commerce, 126 Mo. 82. (6) Payment of the purchase price of the property in controversy to the agent of the appellant corporation was payment to the corporation, regardless of what may have thereafter been done with the money. It was not the duty of Herrmann to follow the check and see that it was properly applied. Building & Loan Assn. v. Bank, 126 Mo. 82; Drumheler v. Haff, 23 Mo.App. 161; A. H. Whitney Co. v. Burnham, 48 Mo.App. 340. A bona-fide purchaser from a trustee or other fiduciary is under no legal obligation or responsibility to follow the funds paid into the corporate treasury or to see to their application. R. S. 1909, sec. 11927; R. S. 1919, sec. 13426; Orr v. Rode, 101 Mo. 387. (7) A party who comes into a court of equity to enforce an equitable claim must not delay until his adversary is exposed to the danger of injustice from loss of means of recourse against another, occasioned by deaths, insolvencies and other untoward acts. Smith v. Thompson, 7 Gratt. (48 Va.) 112; Williard v. Woods, 164 U.S. 502; Dunscomb v. Railroad, 158 C. C. A. 458; Vermilion County Children's Home v. Warner, 192 Ill. 594; Home for Poor v. Coleman, 122 Ky. 544; Becket First Cong. Soc. v. Snow, 1 Cush. (Mass.) 510. Equity views with disfavor a suit which would "make the dead sin in their graves," where such suit might have been brought during the lifetime of parties acquainted with the whole business. McClanahan v. West, 100 Mo. 324; Dexter v. McDonald, 196 Mo. 373, 399.

OPINION

David E. Blair, J.

Suit in equity to cancel a deed to real estate, and for other relief. From the judgment of the trial court dismissing its petition, plaintiff has appealed.

In substance, the petition alleged that plaintiff is a corporation, organized under Chapter 10, Article XXXIII, Revised Statutes 1909, to conduct a hospital, and that defendant Modoc Realty Company is a Missouri business corporation; that on June 6, 1903, one Josephine M. Heitkamp (hereafter referred to as "testatrix") made and executed a ninety-nine-year lease covering the real estate in the city of St. Louis here involved, to John P. Hermann, Jr. Real Estate Company, on certain terms and conditions; that said testatrix died January 29, 1904, seized of an estate in fee simple in said real estate, subject to said ninety-nine-year lease; that, by her last will and testament, duly probated Februrary 2, 1904, testatrix named said John P. Hermann as executor, and that he qualified as such and duly administered said estate and was finally discharged; that, among other things, testatrix devised to plaintiff corporation the real estate here involved, in trust to apply the net income thereof, or the income of any fund or property into which same might be converted, to the maintenance and support of Josephine Hospital at St. Louis (hereinafter referred to as "hospital"), giving said hospital full power to sell, lease and encumber said real estate and to reinvest the proceeds; that such devise by testatrix was in addition to other money and property testatrix had provided in her lifetime for the support of said hospital and for the purchase of a site and the erection of buildings therefor; that said hospital corporation was organized as part of the plan of testatrix to endow said hospital, to be operated by the plaintiff corporation, and to receive such endowment and gifts of land; that testatrix was one of the trustees of plaintiff corporation during her lifetime; that the board consisted of seven trustees, to be elected pursuant to by-laws enacted by plaintiff corporation, the officers thereof to consist of president, vice-president, secretary and treasurer, and to be elected annually from said trustees; that plain...