Mack Realty Co. v. Hardware

• Decision Date: 30 April 1929
• Docket Number: (No. 6448)
• Citation: 107 W.Va. 290
• Court: West Virginia Supreme Court
• Parties: Mack Realty Company v. Beckley Hardware & SupplyCompany

107 W.Va. 290

Mack Realty Company

v. Beckley Hardware & SupplyCompany

(No. 6448)

Supreme Court of Appeals of West Virginia.

Decided April Term 1929.

1. Corporations Corporation is Entity Entirely Distinct From Stockholders; Corporations is Not Affected by Contract Made in its Name by Individuals Holding Majority of Capital Stock; Contract by Majority of Corporate Directors in Individual Capacity Cannot Bind Corporation; Corporate Officers Cannot Bind Corporation by an Act Not Within Their Authority, Express or Implied.

A corporation is an entity entirely distinct from its stockholders. It is therefore not affected by a contract made in its name by individuals holding the majority of its capital stock. "For every corporation * * * there shall be a board of directors who shall have power to do or cause to be done all things that are proper to be done by the corporation." Code, section 49, Chapter 53. What the directors do for the corporation must be clone as a board; a majority of them when acting in their individual capacity cannot bind the corporation. The board of directors generally causes the executive business of the corporation to be done by agents who are denominated the officers of the corporation. Such officers cannot bind the corporation by an act not within their authority express or implied. (p. 294).

(Corporations;, 14 C. J. § 5, p. 52, N. 23.)

2. Same Notice to Corporate Directors of Matter Not Within Scope of Their Authority is Not Notice to Corporation.

Notice to individual directors of a matter not within the scope of their authority as such, is not notice to the corporation. (p. 294).

(Corporations:, 14a C. J. § 2210, p. 349, N. 41.)

3. Same Evidence Authority to Contract Sale of Real Estate is Not Imputed to Chief Executive of Mercantile Corporation; Presumption of Authority to Contract Sale of Real Estate Arises From Contract Signed and Sealed With Corporate Name and Seal of Chief Executive; Presumption of Authority of Chief Executive of Mercantile Corporation to Contract Sale of Real Estate May be Rebutted by Parole Evidence; Corporate Records Are generally Inadmissible to Establish Right of Corporation Against Stranger.

Authority to contract the sale of real estate is not imputed to the chief executive of a mercantile corporation merely by reason of his position. A presumption of authority will arise however from a contract signed and sealed with the corporate name and seal by him. That presumption may be rebutted by parole evidence, the corporate records being generally inadmissible to establish a right of the corporation against a stranger. (p. 296).

(Corporations, 14a C. J. § 2223, p. 361, N. 60.)

4. Principal and Agent Implied Agency is Limited to Obvious Purposes For Which it Was Apparently Created; Implied Agency to Lease Property Cannot Be Extended to Implication of Authority to Contract Sale; One Alleging Agency Must Have Been Misled Thereby.

An implied agency is limited to the obvious purposes for which it was apparently created. Such an agency to lease property cannot be extended to an implication of authority to contract its sale. One alleging an implied agency against the principal must have been misled thereby. (p. 295).

(Corporations, C. J. § 2240, p. 387, N. 37.)

5. Corporations Mere Delay in Disapproving Unauthorized

Act of Corporate Executive May Furnish Presumption of Approval; Unreasonable Delay in Disapproving Unauthorized Act of Corporate Executive Depends on Situation of Parties and Circumstances of Case; Facts and Circumstances on Which Implied Ratifications is Predicated Should be Inconsistent With Different Intention.

Mere delay in disapproving an unauthorized act of an executive, for an unreasonable time, may furnish a presumption of approval in some cases. What is an unreasonable delay depends upon the situation of the parties and the circumstances of each case. Where there is no express ratification the facts and circumstances upon which a ratification is predicated should be inconsistent with a different intention. (p. 296).

(Corporations, C. J. § 2250, p. 397, N. 17.)

6. Principal and Agent Delay in Repudiating Unauthorized Act of Agency May Estop Principal to Deny Agency; Delay in Repudiating Unauthorized Act Will Not Estop Principal to Deny Agency, Unless He Knew, or Should Have Known, That Delay Might Mislead Another.

Delay in repudiating an unauthorized act of agency, may estop the principal to deny the agency, when inaction operates to the prejudice of an innocent party. Delay will not so estop unless the principal knew or should have known that the delay might mislead another. (p. 297).

(Agency, 2 C. J. § 126, p. 509, N. 61.)

(Note: Parenthetical references by Editors, C. J. Cyc. Not part of syllabi.)

Appeal from Circuit Court, Raleigh County.

Suit by the Mack Realty Company against the Beckley Hardware & Supply Company.

Decree for plaintiff, and defendant appeals.

Reversed; bill dismissed.

W. H. Rardin and File, Goldsmith & Scherer, for appellant. J. II. McGinnis, for appellee.

Hatcher, Judge:

The G. C. Murphy Company is a Pennsylvania corporation engaged in a chain store business. The plaintiff, Mack Realty Company, is another Pennsylvania corporation, and according to the testimony of one of its officers "is just the real estate department of the G. C. Murphy Company, and is owned body and soul by the G. C. Murphy Company." The defendant, Beckley Hardware & Supply Company, is a West Virginia corporation engaged in the hardware mercantile business in the city of Beckley. In 1924 defendant's board of directors conferred authority on T. E. Bibb, its president and general manager, to sell a building which it owned in that city, at the minimum price of $75,000.00. In 1925, no purchaser having been found for the building, Mr. Bibb reported to the board that he had applications from several renters and recommended that certain improvements be made on the building with a view to renting it. Mr. Bibb's recommendation was approved, about $10,000.00 was spent in remodeling the building, and it was then rented advantageously. In July, 1928, Paul R. Reed and Walter C. Shaw, who are officers of the G. C. Murphy Company, conferred with Mr. Bibb in the presence of his sons, E. E. Bibb and C. A. Bibb, relative to purchasing the property. E. E. Bibb is a director and secretary and treasurer of defendant; C. A. Bibb is a stockholder. According to Reed and Shaw, T. E. Bibb said that he would like to discuss the terms of sale with another of his directors, but that it did not matter as the board of directors had already given him authority to sell the property at $75,000.00. He thereupon agreed upon terms of an option and on the following day, July 12th, he executed an option under the seal of defendant, giving to the Murphy Company the right for a period of twenty days to purchase the property at $75,000.00, of which amount $15,000.00 was to be paid cash, an indebtedness of $30,000.00 was to be assumed, and the balance was to be paid in five annual installments of $6,000.00 each. The option was prepared by W. H. Rardin, an attorney, who was a director of the defendant, and occasionally acted as its attorney. On July 31st the Murphy company both wired and wrote an acceptance of the option to the defendant. On August 10th, Rardin as attorney of the defendant, wrote the Murphy company acknowledging receipt of the acceptance of the option and advising: '' The question of whether or not the stockholders will ratify the" sale of this property is being discussed by some of the stockholders.'' On August 16th, representatives of the plaintiff, Mack Realty Company, came to Beckley for the purpose of closing up the option which had been assigned to it. At that time the plaintiff's representatives were informed by attorney Rardin that the defendant was not ready to close; that some of its directors did not approve of the option, and no definite reply could be given until after a stockholders' meeting. A meeting of the board of directors and stockholders of the defendant was held on August 23rd when the option was disapproved. The Murphy company was so notified the following day. This is a suit for specific performance of the option. The circuit court found in favor of plaintiff.

Plaintiff's brief states that it places no reliance upon the special authority conferred on T. E. Bibb by the defendant's board of directors in 1924. Lapse of time and changed conditions had of course annulled that power. See Clark & Skyles on the Law of Agency, section 183. Besides, power to sell does not imply power to sell on credit or to option. Dyer v. Duffy, 39 W. Va. 149; Tibbs v. Zirkle, 55 W. Va. 49; Mechem on Agency (2nd Ed.), section 816, 819; Tiffany on Agency (2nd Ed.), section 24, p. 71.

It is settled law that T. E. Bibb had no implied authority by virtue of his position as president and general manager of the defendant to execute the option. That power was not connected with the "ordinary business entrusted to his management." Carroll-Cross Co. v. Abrams Cr. Co., 83 W. Va. 205, 212-213; Kelly Co. v. Rhodes, 102 "W. Va. 16; Varney & Evans v. Hutchinson Co., 70 W. Va. 169; Cook on Corp. (8th Ed.), section 716, 719. T. E. Bibb, and E. E. Bibb as directors could not agree outside of a meeting of the board and bind the defendant by the option. "The authority of the directors or trustees is conferred upon them as a board, and they can bind the corporation only by acting together as a board; a majority of them in their individual names cannot act for the board itself and bind the corporation." 7 R. C. L., p. 439, section 427. Limer v. Traders Co., 44 W. Va. 175; Lawrence v. Gas Co., 88 W. Va. 352, 358; Cook, supra, sec. 712. Neither could they as such officers and directors, ratify an unauthorized act committed by themselves. 14a C. J., p. 376, sec. 2234. Therefore unless T. E. Bibb had special authority from the board of directors to execute this option, it was invalid.

But, says the plaintiff, ...