Morris v. Griffith & Wedge Co.

• Decision Date: 08 July 1895
• Docket Number: 667.,666
• Parties: MORRIS v. GRIFFITH & WEDGE CO. DOVEY v. SAME.
• Court: U.S. District Court — Southern District of Ohio

69 F. 131

MORRIS v. GRIFFITH & WEDGE CO.

DOVEY v. SAME.

Nos. 666, 667.

United States Circuit Court, S.D. Ohio, Eastern Division.

July 8, 1895

Butterworth & Dowell, for plaintiffs.

J. J Stoddard and F. A. Durban, contra.

SAGE District Judge.

These actions are upon promissory notes executed in the name of the defendant company, in the city of Philadelphia, Pa., by Frank N. Wedge, who was at the time vice president of the defendant company, and by him there delivered to the plaintiffs. The notes to the plaintiff Henry G. Morris were for $5,300, dated February 6, 1890, at 30 days, and for $5,200, dated March 30 1890, at 90 days, both to his order. The first was a renewal of a note of the same description dated October 3, 1889, at four months; the second, a renewal of a note dated January 6 1890; and that was a renewal of a note of the same description dated October 3, 1889. The original notes were for money loaned by Morris, as he understood, and as was represented by Wedge, to the defendant company.

Morris, through his agent, Dovey, gave to Wedge, at Philadelphia, for the two original notes, a New York draft for $10,000, dated October 4, 1889, payable to the order of Dovey & Co., and by them indorsed to the order of Frank N. Wedge. The note to the plaintiff John S. Dovey was made at Philadelphia, January 10, 1890, although dated as at Zanesville, Ohio, for $5,000, and signed in the name of the defendant company by Frank N. Wedge, vice president, and by him there delivered to Dovey, who remitted the money therefor to Wedge in various sums, making up the amount of the note, within 10 days or 2 weeks after the delivery of the note to him, retaining a balance for interest or discount. This also was a loan represented by Wedge, and understood by Dovey, to be for the defendant company. The defense is that Frank N. Wedge had no authority to borrow money for the defendant company, or to use its notes; also that the money sued for was not borrowed for the company; that the company got no part of it, and that it was used by Frank N. Wedge for his individual purposes. That all the money was used by Frank N. Wedge for his individual purposes is in evidence, and uncontroverted, excepting that it appears that $2,500 of the money obtained from Dovey was deposited in bank to the credit of the company. The defendant company was organized under and subject to the provisions of the corporation statutes of the state of Ohio. Section 3248, Rev. St. Ohio, provides that the corporate powers, business, and property of corporations formed under the act must be exercised, conducted, and controlled by the board of directors, or, where there is no capital stock, by the board of trustees. Section 3249 authorizes every corporation to adopt a code of regulations for its government, not inconsistent with the constitution and laws of the state. By section 3251 regulations may be adopted or changed by the assent thereto in writing of two-thirds of the stockholders, or by a majority of the stockholders at a meeting held for that purpose upon due notice. It is to be noted that the power to make regulations is vested in the stockholders, and not in the board of directors. Reference to section 3252 will make it apparent that section 3251 secures to the stockholders an effectual and beneficial control over the board of directors, and salutary means of keeping them and the officers of the corporation in check, so that its affairs shall be managed within due bounds and with due regard to the interests and rights of the stockholders. Section 3252 specifies what may be provided for by regulations, including 'the duties and compensation of officers. ' Section 3250 authorizes the trustees or directors of a corporation to adopt by-laws for their government, not inconsistent with the regulations of the corporation or the constitution and laws of the state, and to change the same at pleasure. Here it is to be observed that the by-laws are for the government of the board of directors. The board of directors of the defendant company undertook, by article 4 of the by-laws of the corporation, to prescribe the duties of the president and of the vice president, as follows:

'It shall be the duty of the president to preside at all meetings of the stockholders and directors, and to sign the records thereof and all certificates of stock, decide all disputes arising among the stockholders pertaining to the employment of employes, which decision shall be final, and in a general way to perform all the duties usually incident to such office, or which shall be required by the stockholders or directors. It shall be the duty of the vice president to perform all the duties of the president in case of the latter's absence or disability.'

Article 5 defines the duties of the secretary, as follows:

'It shall be the duty of the secretary to keep an accurate record of the acts and proceedings of the stockholders and directors, give all notices required by law and the acts of the stockholders and directors; keep proper books of account and books for transfer of stock; on the expiration of his term of office deliver all books, papers, and property of the company in his hands to his successor or the president, and in a general way to perform all the duties usually pertaining to the office.'

Article 6, in defining the duties of the treasurer, provides that:

'The treasurer shall receive and safely keep all money and papers of value belonging to the company, and dispose of the same under the direction of the board of directors.'

Article 13 provides that:

'The board of directors may appoint an executive committee of not less than three member of their own number, who shall have charge of the management of the business and affairs of the company in the interim between the meetings of the directors, with power to fix prices for the company's products, determine credits, make investments, and generally to discharge the duties of the board of directors, but not to incur debts, excepting for current expenses, unless specially authorized. They shall at all times act under the direction and control of the board of directors, and shall make report to the same of their acts, which shall form a part of the records of the company.'

These articles are relied upon as fixing the duty and limiting the authority of the president, the vice president, the secretary, and treasurer, and of the executive committee. As we have seen above, however, the duties of officers must be provided for by regulations adopted by the stockholders, and the by-laws which may be adopted by the directors are to be only for their own government. However, these by-laws although not authoritative, may be referred to in considering the mode of conducting the business and administering the affairs of the corporation. From the testimony of Mr. Gigax, treasurer and bookkeeper of the defendant company, and called on its behalf, it appears that from the organization of the company down to and including the time of the transactions involved in these actions, Francis Wedge was its president and managing and directing spirit; that he directed its affairs, accepted bills of exchange, and signed notes, and that the treasurer did whatever he was by him directed to do. He testifies that if 'we' (meaning the company) needed money he would say to Mr. Wedge or Frank Wedge or Charlie Wedge (brother of Frank N.) that 'we needed some money, and I would draw up a note for whatever amount was needed, and we signed it, and we took it to the Citizen's National Bank (of Zanesville) and discounted it, and we checked against that to pay our bills. I would make a list of what we owned, and the Citizens' National Bank would give me New York drafts. ' He testifies that he wrote the checks and Mr. Wedge signed them. Who was 'we' in his testimony respecting the signatures to notes, he was not asked, and did not explain, but if we turn to the record of his testimony as to the signing of a $15,660.98 note, to which reference will hereinafter be made, we find that Frank N. Wedge, the vice president, and his father, Francis Wedge, the president, were standing in the office of the company at Francis Wedge's desk, and the witness saw Francis Wedge, the president, sign the paper, and then Frank Wedge said to the witness, 'Sign this note.' Witness looked at it, and answered, 'no, we don't owe the Citizens' National Bank $15,000. ' Frank said, 'Yes, we do.' The witness insisted that the did not, and refused to sign it, except by order of the directors. Witness spoke to one of the directors, and, upon his suggestion, they went to the counsel of the company, and the matter was talked over. The counsel asked whether Mr. Wedge (the president) had credit on the books. The witness answered in the affirmative. Counsel responded that there was no objection to Mr. Wedge's drawing up to the amount of his credit. That was then, as the books show, $27,000. The witness returned to the office, said he would sign the note, provided it was charged to Francis Wedge's account, and he did sign it and so charge it, but did not know what the note was for. From this it would appear that it was the custom for the treasurer as well as the president to sign notes made in the name of the company. There is no testimony in the case that Frank N. Wedge, the vice president, ever was authorized to sign notes, or did in fact sign notes, in the name of the company, excepting those in suit in this case, and others for which they were renewals, and still others,-- all which were on account of his personal transactions, but made in the name of the company. Frank N. Wedge was a speculator. He had taken a venture in a proposed belt railroad at Zanesville, which resulted disastrously. He seems to...