Paterson & Edey Lumber Co. v. Bank of Mobile

• Citation: 84 So. 721,203 Ala. 536
• Decision Date: 18 December 1919
• Docket Number: 1 Div. 86
• Parties: PATERSON & EDEY LUMBER CO. v. BANK OF MOBILE.
• Court: Supreme Court of Alabama

84 So. 721

203 Ala. 536

PATERSON & EDEY LUMBER CO. v. BANK OF MOBILE.

1 Div. 86

Supreme Court of Alabama

December 18, 1919

Appeal from Circuit Court, Mobile County; Norvelle R. Leigh, Judge.

Action by the Paterson & Edey Lumber Company against the Bank of Mobile for breach of contract relative to the sale of lumber. Judgment for plaintiff, and defendant appeals. Reversed and remanded.

The judgment entry recites that--

"Issue having joined between the plaintiff and defendant, thereupon came a jury of good and lawful men, *** who, having heard the evidence and charge of the court, and thereupon, before the jury retired, the plaintiff makes known to the court that because of and from the adverse rulings and decisions of the court on the pleadings and the evidence, and the court's charge to the jury, it has become necessary for the plaintiff to suffer a nonsuit, with bill of exceptions, and that it desires to take the same in such manner as to preserve its rights to have each of said rulings reviewed by the Supreme Court on an appeal: It is therefore considered, ordered, and adjudged by the court that, because of the aforesaid adverse rulings and decisions of the court on the pleadings and the evidence, and on the court's charge to the jury, the plaintiff suffer a nonsuit, with bill of exceptions in this court," etc.

The following is the contract made the basis of the suit:

"August 16, 1915, Mobile, Alabama.

"Hallett Mfg. Co., Mobile, Alabama: Confirming purchasing order No. 8161-P (show this number on your invoice): Please cut the following long leaf yellow pine clear oak, and ship as directed below, noting carefully all instructions, terms, and conditions. Positively no allowance made for overshipment. Ship exact amounts shown below. Order to be shipped complete one car of each as shown below. Consign to Frost & Wood Company, Ltd., Smith's Falls Ontario, Canada, via Big Four and C.P. Railway. 40,000 feet 1X3 and up X 4' 4"' or 8', 9', or 10', $37.50. 40,000 feet 1 1/2X6X8' (this may be 1 1/2X2 3/4 or 3 1/4"'), $42.50. F.o.b. cars Smith's Falls, Ontario, Canada. Please give us nice clean, clear, even-cut stock, dry, or nearly so; one car of each size in September, November, and January.

"Terms: If inspected at mill by our authorized inspector, 100 per cent., less 2 per cent. discount upon receipt of invoice, inspector report, and signed original bill of lading conforming to our shipping instructions. If not inspected at mill by our inspector, 80 per cent., less 2 per cent. discount upon receipt of invoice and signed original bill of lading conforming to our shipping instructions.

"The Paterson & Edey Lumber Company, Inc., has the right to accept any portion of any shipment that may be up to above specifications, and may reject any portion that may not be up to said specifications, and shall hold the rejected portion for thirty days at seller's risk, subject to the disposition of the seller, which time it may be sold by Paterson & Edey Lumber Company, Inc., to cover costs. All freight paid on shipments to be deducted from proceeds of accepted stock.

"Paterson & Edey Lumber Company, Inc."

The case was tried on the common count and on the counts mentioned in the complaint, all of which sought to recover as for the breach of the contract above set out; the breach being stated in varying terms. The pleas were the general issue, non est factum, ultra vires by reason of the fact pleas setting up the fact that plaintiff had instructed the defendant in writing not to make further shipment of said lumber, and pleas alleging that before the lumber was cut up in accordance with the terms of the contract it was exhibited to plaintiff's agent, who inspected and accepted the same. The plaintiff sought to show that, while the contract was between it and the Hallett Manufacturing Company, the Hallett Manufacturing Company was acting for and on behalf of the Bank of Mobile, who owned the lumber, and whose vice president, A.L. Staples, had directed the Hallett Manufacturing Company to sell it to the bank. The evidence tended to establish that the lumber was bulk stock, stored in piles, and formerly owned by the Blue Rock Manufacturing Company, who delivered it to the Bank of Mobile as a payment on certain notes due from it to the bank. The letter was introduced from A.L. Staples, vice president, to the Hallett Manufacturing Company, saying that Hallett was to receive $6 per thousand feet for all the lumber that passed through his mill; the letter further stating that all the lumber that could not be cut into the Paterson & Edey specification should be cut in standard sizes. It further appeared that the bank received the proceeds of said lumber in the form of four checks, signed by the Paterson & Edey Lumber Company.

The main questions litigated were that the contract was ultra vires and that, even if the contract was within the power of the bank, Mr. Staples, the vice president, was not shown to have any authority to make it. At the conclusion of the evidence the court, at the request of the defendant, directed a verdict for the defendant.

Armbrecht, Johnston & McMillan, of Mobile, for appellant.

Inge & Kilborn, of Mobile, for appellee.

THOMAS J.

The recent announcements of this court with respect to the taking of a nonsuit with a bill of exceptions are contained in Schillinger v. Wickersham, 75 So. 11, 12; Herrmann v. Mobile Co., 80 So. 112, 113; State ex rel. Kernachan v. Roberts, 83 So. 49; Engle v. Patterson, 167 Ala. 117, 120, 121, 52 So. 397; Code, § 3017. It is the law of this jurisdiction that a party to an ultra vires executory contract made with a corporation is not estopped to defend against an action thereon, for the want of corporate capacity to make such contract, "either by the fact of contracting, whereby the power to contract is, in a sense, admitted or recognized, or by the fact that the fruits or issues of the contract have been received or enjoyed, and this though the assault upon the transaction comes from the corporation itself." Sherwood v. Alvis, 83 Ala. 115, 3 So. 307, 3 Am.St.Rep. 695; Chewaela Lime Works v. Dismukes, 87 Ala. 344, 6 So. 122, 5 L.R.A. 100; Wiley Fert. Co. v. Carroll, 80 So. 417. As early as Smith v. Ala. Life Ins. & Trust Co., 4 Ala. 558, 568, it was announced that an ultra vires contract "cannot be the foundation of any proceeding in a court of justice"; in Chambers v. Falkner, 65 Ala. 448, 456, that no right of action can spring out of ultra vires acts of corporations, and that no action can be maintained thereon "whatever form the pleader's skill may give it." Grand Lodge v. Waddill, 36 Ala. 313, 319; Long v. Ga. Pac. Ry. Co., 91 Ala. 519, 8 So. 706, 24 Am.St.Rep. 931. A note of Alabama cases is contained in L.R.A. 1917B, pp. 834, 849, and recent English cases on the subject are In re Birbeck Permanent Benefit Building Soc., [1912] 2 Ch. (Eng.) 183, 208; s.c., [[1915] 1 Ch. (Eng.) 91; Sinclair v. Broughan, [1915] A.C. (Eng.) 398.

An exception to this general rule was recognized in Allen v. Lafayette, 89 Ala. 641, 652, 8 So. 30, 34 (9 L.R.A. 497), by the holding that liability was imposed by law upon the municipal corporation that had "legitimately used it [the money loaned] for the benefit of the town, in a way and to an end fully authorized by its charter"; and in Mayor, etc., v. Hollingsworth, 170 Ala. 396, 402, 54 So. 95, 97 (Ann.Cas.1912D, 652), that, "although no action may be had upon the express contract, still where money or property has been received under the contract, and beneficially applied to authorized objects or purposes under the law, an action of implied assumpsit may be had." In Bluthenthal v. Town of Headland, 132 Ala. 249, 31 So. 87, 90 Am.St.Rep. 904, is contained the declaration that the money or property received by the municipality must have been devoted to the necessaries of the corporation. The use of the phrase "expressly authorized by the charter, or is necessarily incident to the powers for carrying out the objects of the charter," was, in A.G.S. Ry. Co. v. Loveman Comp. Co., 196 Ala. 683, 689, 72 So. 311, 313, declared not intended to indicate that action "necessarily incident to the powers" should be "indispensably necessary to the purposes of the corporation, but only that they should be necessary in the sense of being appropriate and suitable for the purposes for which the corporation was organized." Jackson Lbr. Co. v. Trammell, 74 So. 469. The subject of the contracts was insurance in Sales-Davis Co. v. Henderson-Boyd Co., 193 Ala. 166, 69 So. 527, and U.S.C.I.P. & Fdy. Co. v. Bailey, 194 Ala. 261, 69 So. 825, and held to be within the charter power of said corporations (being engaged, respectively, in lumbering and industrial manufacturing), or necessarily incident thereto. In A.C., G. & A. Ry. Co. v. Kyle, 81 So. 54, 56, the latest declaration of this court on this subject, the observation was made that--

"The charter of a corporation, read in connection with the general laws applicable to it, is the measure of its powers, and a contract manifestly beyond those powers will not sustain an action against it. But whatever, under the charter and other general laws, reasonably construed, may fairly be regarded as incidental to the objects for which the corporation was created, is not to be taken as prohibited."

Such was the rule declared by the federal courts. Thomas v. West Jersey Railroad Co., 101 U.S. 71, 81, 25 L.Ed. 950; Green Bay & M.R. Co. v. Union, etc., Co., 107 U.S. 98, 100, 2 Sup.Ct. 221, 27 L.Ed. 413; 10 Rose's Notes, U.S.Rep. 452; 9 Rose's Notes, 905 et seq.

The federal courts have also announced this rule:

"A contract of a corporation which is ultra vires, *** outside the object of its creation as defined in the law of its

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