Pettengill v. Blackman

• Decision Date: 24 March 1917
• Citation: 30 Idaho 241,164 P. 358
• Parties: BEN. Q. PETTENGILL, as Special Deputy Bank Commissioner of the State of Idaho and as Receiver in the Matter of Winding Up the Affairs of the BOISE STATE BANK, LIMITED, an Insolvent Bank and Trust Company, Appellant, v. WILLIAM H. BLACKMAN and HERBERT F. LEMP, EDWARD PAYNE, as Trustee, and EDWARD PAYNE, Respondents
• Court: Idaho Supreme Court

164 P. 358

30 Idaho 241

BEN. Q. PETTENGILL, as Special Deputy Bank Commissioner of the State of Idaho and as Receiver in the Matter of Winding Up the Affairs of the BOISE STATE BANK, LIMITED, an Insolvent Bank and Trust Company, Appellant, v. WILLIAM H. BLACKMAN and HERBERT F. LEMP, EDWARD PAYNE, as Trustee, and EDWARD PAYNE, Respondents

Supreme Court of Idaho

March 24, 1917

ACTION TO QUIET TITLE-ADVERSE INTERESTS-ADMISSION OF GENUINENESS OF INSTRUMENT NOT ADMISSION OF VALIDITY-TRANSFER BY INSOLVENT CORPORATION-CONSIDERATION-UNLAWFUL MEETING OF BOARD OF DIRECTORS-UNAUTHORIZED ACTS OF CORPORATION OFFICERS-RATIFICATION-ESTOPPEL.

1. Held, that in this case an action to quiet title is a proper form of action to attain the end desired, as shown by the pleadings.

2. In a suit to quiet title the plaintiff has a right to have every adverse interest determined, and anyone claiming to hold any interest in the property in question, which would be adverse to plaintiff's interest, may be required to come in and set up the nature of his interest and its source. The interest of a mortgagee is an interest adverse to the holder of a legal title.

3. Where plaintiff has waived his right to introduce evidence attacking the due execution or genuineness of a written instrument pleaded and set forth in defendant's answer by failing to file an affidavit denying the same, as required by sec. 4201, Rev. Codes, such omission does not place him in the position of admitting the validity of such instrument but he may interpose any evidence on the trial tending to show that such instrument, irrespective of its due execution and genuineness, is void, invalid and of no effect for the purpose offered.

4. In the absence of collusion or fraud, an insolvent corporation is not prohibited from preferring certain creditors over others.

5. Where an insolvent corporation makes a bona fide transfer of property to a creditor as security for an actual indebtedness and for an adequate consideration, neither collusion nor fraud in its legal sense can be predicated on such transaction.

6. Where a meeting of the board of directors of a private corporation was not lawful, for the reason that notice was not given to all of the directors as required by the by-laws the failure of absent directors or the stockholders to dissent or take any action to set aside the action of the board of directors, under such circumstances, with knowledge of such action, amounts to a ratification thereof.

7. Where a private corporation receives and retains the benefits of an unauthorized or illegal transaction, on the part of its board of directors, such conduct amounts to a ratification.

8. The extension of time by a creditor within which to pay an old obligation is as much a consideration and as much an extension of credit as the granting of a new loan.

9. Where one without collusion or fraud deals with a corporation through an officer, who is in active management of the corporate business, if the act done by such officer is one which the corporation might do, such corporation will be estopped from relying upon any lack of authority on the part of such officer as a defense against the rights of the party so dealing with the corporation.

10. Where a party deals with a corporation in good faith and he is unaware of any defect of authority or other irregularity on the part of those acting for the corporation, and there is nothing to excite suspicion of such defect or irregularity, the corporation is bound by the contract although such defect or irregularity in fact exists.

[As to clouds on title and who may maintain suits to remove them, see note in 45 Am.St. 373]

APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. Charles P. McCarthy, Judge.

Action to quiet title to certain real property, brought under sec. 4538, Rev. Codes. From a judgment for defendant, plaintiff appeals. Affirmed.

Case remanded to the district court, with instructions. Costs awarded to respondent.

Martin & Cameron, for Appellant.

The giving of the trustee deed and mortgage by the Boise State Bank was unauthorized. The board of directors of the bank did not meet pursuant to law at the time the mortgage and trustee deed were acted upon. (2 Thompson on Corporations, secs. 1139, 1140; Doernbecher v. Columbia City Lumber Co., 21 Ore. 573, 28 Am. St. 766, 28 P. 899; Curtin v. Salmon River etc. Co., 130 Cal. 345, 80 Am. St. 132, 62 P. 552; Singer v. Salt Lake City C. Mfg. Co., 17 Utah 143, 70 Am. St. 773, 53 P. 1024; Harding v. Vandewater, 40 Cal. 77; Farwell v. Houghton Copper Works, 8 F. 66; Bank of Little Rock v. McCarthy, 55 Ark. 473, 29 Am. St. 60, 18 S.W. 759; Stow v. Wyse, 7 Conn. 214, 18 Am. Dec. 99; Hatch v. Lucky Bill Mining Co., 25 Utah 405, 71 P. 865; Simon v. Sevier Assn., 54 Ark. 58, 14 S.W. 1101; Whitehead v. Hamilton Rubber Co., 52 N.J. Eq. 78, 27 A. 897; Paola etc. Ry. Co. v. Anderson, County Commrs., 16 Kan. 302.)

In the giving of the contemplated deed to Blackman, Payne was to act as a trustee, with limited powers, according to the minutes of the directors' meeting. He was to be trustee appointed by the bank for this particular purpose, and any act done by Payne, without the scope of this trusteeship there given him, was invalid and void, and cannot bind this plaintiff. ( Owen v. Reed, 27 Ark. 122; Zion Church v. Parker, 114 Iowa 1, 86 N.W. 60; Smith v. Burgess, 133 Mass. 511; Perry on Trusts and Trustees, sec. 475.)

A contract not within the scope of the authority of the officer who made it could not be ratified by the board of directors unless they had full and complete knowledge of the terms and conditions of the contracts proposed to be ratified. (2 Thompson on Corporations, 2d ed., sec. 2030, and cases cited; Conqueror Gold Min. etc. Co. v. Ashton, 39 Colo. 133, 90 P. 1124.)

The plaintiff by failing to file an affidavit denying the genuineness and due execution of this note and mortgage did not thereby admit that said not and mortgage were the note and mortgage of the Boise State Bank, and thereby preclude himself from showing that said note and mortgage were not authorized by the board of directors. (Myers v. Sierra Valley etc. Assn., 122 Cal. 669, 55 P. 689; 3 Thompson on Corp., 2d ed., p. 1225; Heath v. Lent, 1 Cal. 410, 411; Marx v. Raley & Co., 6 Cal.App. 479, 92 P. 519.)

The case of Cox v. Northwestern Stage Co., 1 Idaho 376, curtails the effect of a failure to file an affidavit denying the genuineness and due execution, and points out that any other defense may be interposed except what is strictly included within genuineness and due execution.

The officers of a corporation can only execute a deed in its name pursuant to resolution of the board of directors. ( Warren v. Stoddart, 6 Idaho 692, 59 P. 540; Johnson v. Sage, 4 Idaho 758, 44 P. 641; Bliss v. Kaweah Const. & Irr. Co., 65 Cal. 502, 4 P. 507.)

It is the execution only that is admitted by an affidavit and not the right or authority of the party making it. ( Hilsmeyer v. Blake, 34 Okla. 477, 125 P. 1129; Flesher v. Callahan, 32 Okla. 283, 122 P. 489.)

Acts done by an agent or trustee outside the strict scope of his authority are absolutely void. (United States Nat. Bank v. Herron, 73 Ore. 391, 144 P. 661, L. R. A. 1916C, 125; 1 Clark & Skyles on the Law of Agency, par. 266; 1 Mechem on Agency, secs. 784, 974; Craighead v. Peterson, 72 N.Y. 279, 28 Am. Rep. 150; Batty v. Carswell, 2 Johns. (N. Y.) 48, 49; Mechanics' Bank v. Schaumburg, 38 Mo. 228; Harris v. Johnston, 54 Minn. 177, 40 Am. St. 312, 55 N.W. 970; 31 Cyc. 1383.)

Wyman & Wyman, for Respondents.

Where an officer of a corporation without authority undertakes to perform a corporate act, the other officers or directors must immediately on discovery repudiate the transaction and return the benefits or the corporation will be bound. (Thompson on Corporations, 2d ed., secs. 2019, 2020, 2044; Currie v. Bowman, 25 Ore. 364, 35 P. 848.)

Where the bank retains the benefit of the contract, it is estopped to deny its validity. (Bartlett Estate Co. v. Fraser, 11 Cal.App. 373, 105 P. 130; Ida County Sav. Bank v. Johnson, 156 Iowa 234, 136 N.W. 225; German Nat. Bank v. Grinstead, 21 Ky. Law Rep. 674, 52 S.W. 951; First Nat. Bank v. Kimberlands, 16 W.Va. 555; Akers v. Ray County Savings Bank, 63 Mo.App. 316; Goldbeck v. Kensington Nat. Bank, 147 Pa. 267, 23 A. 565; Bank of New London v. Ketchum, 64 Wis. 7, 24 N.W. 468; Thompson on Corporations, 2d ed., secs. 1960, 1964.)

No affidavit was filed by the plaintiff, and consequently the genuineness and due execution of the contract was deemed admitted by the plaintiff. (Cox v. Northwestern Stage Co., 1 Idaho 376; Martin v. Dowd, 8 Idaho 453, 69 P. 276; Sloan v. Diggins, 49 Cal. 38; Carpenter v. Shinners, 108 Cal. 359, 41 P. 473; Rianda v. Watsonville Water & Light Co., 152 Cal. 523, 93 P. 79; Petersen v. Taylor, 4 Cal. Unrep. 335, 34 P. 724; Cordano v. Wright, 159 Cal. 610, Ann. Cas. 1912C, 1044, 115 P. 227; Knight v. Whitmore, 125 Cal. 198, 57 P. 891; Reynolds v. Pennsylvania Oil Co., 150 Cal. 629, 635, 89 P. 610.)

There was no legal objection to the bank's giving the security, even though Blackman had known that the bank was in failing circumstances at the time. (Wilson v. Baker Clothing Co., 25 Idaho 378, 137 P. 896, 50 L. R. A., N. S., 239; Capital Lumber Co. v. Saunders, 26 Idaho 408, 143 P. 1178.)

BUDGE, C. J. MORGAN, J., RICE, J., Concurring.

OPINION

BUDGE, C. J.

This is an action brought by Ben. Q. Pettengill, as receiver of the Boise State Bank, Limited, against William H. Blackman Edward Payne as trustee, and Edward Payne, for the purpose of quieting title to lots Nos. 1, 2, 3, 4 and 5 of block No. 13, Riverside Addition to Boise City, Ada county. Herbert F. Lemp was...