Navco Hardwood Co. v. Bass

Decision Date19 November 1925
Docket Number1 Div. 340
Citation214 Ala. 553,108 So. 452
PartiesNAVCO HARDWOOD CO. v. BASS.
CourtAlabama Supreme Court

Rehearing Denied May 13, 1926

Appeal from Circuit Court, Mobile County; C.A. Grayson, Judge.

Action by Walt G. Bass against the Navco Hardwood Company. From a judgment for plaintiff, defendant appeals. Affirmed.

Yerger & Foster, of Mobile, for appellant.

Stevens McCorvey, McLeod, Goode & Turner, of Mobile, for appellee.

THOMAS J.

The suit was on common counts and on special contract for salary as general manager of defendant company at the point and for the time indicated. In addition to the general issue defendant filed pleas of counterclaim and set-off. The pertinent questions are presented by the affirmative instructions requested by defendant and refused by the court and by the motion for a new trial, which was overruled.

A consideration of the record convinces us that defendant company, with full knowledge on its part and that of its directing and executive officers--including its president, first vice president and later general manager--accepted the services of plaintiff rendered the corporation under the contract which he had, or understood he had, with the corporation. This amounted to an adoption of the contract and bound the corporation for such salary of its general manager.

The plaintiff testified as to his activities for and on behalf of the corporation before and after the corporation was formed. Stone v. Walker, 201 Ala. 130, 77 So. 554, L.R.A.1918C, 839. He testified he acted as its general manager at the request of Knight, the president of the corporation; that it was understood between them that the duties of general manager, so performed by plaintiff, were those of, or were embraced within, the duties of second vice president, to which office plaintiff was elected; that plaintiff was held out to the public as its general manager for more than a month, and during the time he so acted he signed the checks of the company and discharged the other duties of its general manager at the time and place covered by the suit.

After his discharge by the defendant, it was the duty of plaintiff to have used reasonable diligence to minimize the damages accruing to him from his discharge, by a reasonable diligence to obtain similar employment at or within the same section or community and line of business and within the time embraced in the suit. H. & L.M. Warten Cotton Co. v. McGuire, 206 Ala. 469, 91 So. 308; Alabama Northern Ry. Co. v. Hoge, 207 Ala. 692, 93 So. 517; People's Shoe Co. v. Skally, 196 Ala. 349, 71 So. 719; U.S. Shipping, etc., Co. v. Sherman & Ellis, 208 Ala. 83, 93 So. 834; Troy Fertilizer Co. v. Logan, 96 Ala. 619, 12 So. 712; Morris Mining Co. v. Knox, 96 Ala. 320, 11 So. 207; Strauss v. Meertief, 64 Ala. 299, 38 Am.Rep. 8. The evidence was sufficient to show the discharge of plaintiff by defendant, and that he duly made the required effort to obtain other employment within the time covered by the suit.

A case which counsel for appellant seem to rely on is Rush v. Aunspaugh, 179 Ala. 542, 60 So. 802. The assumption in the Rush Case is unlike the proposition now presented. There a contract was made between two individuals (Aunspaugh and Rush), by the terms of which Aunspaugh agreed to organize a corporation and that the corporation, after being organized, would enter into a contract with Rush for a term of two years at a stipulated salary, and cause a designated part of the capital stock to be transferred and assigned to Rush as his absolute property after Rush had fulfilled his contract obligations. It appears that no such corporation as the one contemplated between the parties to the contract was ever organized, and no proposition was presented as to whether or not the corporation had adopted as its own a preorganization contract which one of its promoters had made for its benefit. If Aunspaugh had organized the corporation which he had promised to organize, and the incorporators had named Rush as vice president of the corporation for the first year, with the duties of general manager, and after the corporation had been organized Rush discharged the duties of vice president and general manager, devoting practically all of his time to the corporation, and the corporation had held him out to the world as its vice president and general manager, and had thus recognized and adopted the contract originally made by Aunspaugh on behalf of the corporation, and the corporation had paid to Rush the agreed or stipulated monthly salary, then we would have a different case from that presented and discussed in the Rush Case. It will be further noted that in Aunspaugh v. Rush, supra, the suit was by Rush against Aunspaugh, and not against any corporation organized by Aunspaugh. This would be an apt authority if Knight and associates had not organized the Navco Hardwood Company and Bass had undertaken to sue Knight individually under the contract made by the latter with plaintiff for and on behalf of the corporation which was to be thereafter created.

The case of Stone v. Walker, 201 Ala. 130, 134, 77 So. 554, L.R.A.1918C, 839, is in support of the contention of appellee. In that case the question of the ratification or adoption by a corporation (after its organization) of a contract made for its benefit by its promoters prior to incorporation was fully discussed and the binding obligation of such ratification or adoption of the preorganization agreements announced. That is to say, the effect of that holding was that the promoter's contract is in the nature of a proposal, which the corporation could accept or reject after it came into existence. We quote as follows from that opinion:

"It does seem to us to be in keeping with the rules of justice and of law that, where the parties who made the contract intended that the prospective corporation, when formed, should become a party to the undertaking, and intended that the contract should be for the use and benefit of the corporation, and the corporation does accept the benefit, it thereby adopts the proposed contract as fully as if it had been an original party thereto. In the case at bar the corporation bank availed itself of a subscription made for shares before it was formed, and received the price paid therefor, and issued to the subscriber certificates of stock, thereby treating him as a shareholder. This, as all the authorities hold, was sufficient to bind the subscriber, and we think it ought to bind also the corporation. Its obligations and its benefits ought to be mutual, and to be as binding as if it had made the original contract of subscription by its legally authorized agents."

In the case last cited we have a situation more nearly like the case here presented. Here the corporation accepted the services of Bass, paid him the stipulated salary, held him out as its second vice president and general manager, elected him as one of its said officers for the first year of its existence, and did what a corporation could do to ratify or adopt as its own the agreement which Knight had with Bass for and on behalf of the corporation which he was to form and for its benefit. This action of the executive officers or the alter ego of the corporation when formed was of the force and effect and binding obligation of the more solemn resolution of its board of directors. If executive officers had not such binding authority in the absence of resolution of its board of directors, the handling of corporate affairs would be much interfered with in matters within the general rule obtaining and in the conduct of the particular business.

The section of the article on corporations found in Corpus Juris cited by appellant is section 289, and will be considered with section 290, where the law applicable to the facts with which we are here confronted is thus stated:

"By the great weight of authority a contract made by the promoters of a corporation before it was formed becomes the contract of the corporation, so that it is both entitled to the benefit thereof and liable thereon, if it expressly or impliedly ratifies and adopts the same as its own or, in most jurisdictions, ratifies it, after it comes into existence, provided it is a contract which the corporation has the power under its charter to make." 14 C.J. § 290, pp. 257, 258.

The ratification or adoption of a contract made for the corporation to be formed is cum onere. 14 C.J. § 292. See Davis v....

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