Respess v. Rex Spinning Co.

• Court: United States State Supreme Court of North Carolina
• Citation: 133 S.E. 391,191 N.C. 809
• Docket Number: 464.
• Parties: RESPESS et al. v. REX SPINNING CO.
• Decision Date: 27 May 1926

133 S.E. 391

191 N.C. 809

RESPESS et al. v. REX SPINNING CO.

No. 464.

Supreme Court of North Carolina

May 27, 1926

Appeal from Superior Court, Mecklenburg County; Webb, Judge.

Action by James L. Respess and others against the Rex Spinning Company. Judgment for plaintiffs, and defendant appeals. No error.

The ratification of an agent's acts, with knowledge of the circumstances, relates back to the time they were performed and binds the principal the same as if authority had been given in advance.

The plaintiffs, copartners doing business as public accountants under the name of Respass & Respass, brought suit against the defendant, a corporation, to recover for services rendered in auditing and reporting the condition of the defendant's business. On the trial, the plaintiffs offered in evidence the following resolution, appearing in the minutes of a regular annual meeting of the stockholders of the defendant held on February 6, 1923:

"Mr W. D. Adams offered the following resolution in writing, to wit: Resolved that Allen J. Graham, W. C. Wilkinson, and W D. Adams be authorized to employ auditors to examine the books of the company covering the period since acquisition by them of stock in the corporation.

"[Signed]

W. D. Adams.

"J. H. Mayes."

After the introduction of other record evidence and the examinations of several witnesses, this verdict was returned:

"(1) Is the defendant indebted to the plaintiffs? Ans.: Yes.

"(2) If so, in what amount? Ans.: $4,266.66."

Judgment for the plaintiffs. Appeal by defendants on assignments of error appearing in the opinion.

Hugh M. McAulay and Stewart, McRae & Bobbitt, all of Charlotte, for appellant.

Cansler & Cansler and John M. Robinson, all of Charlotte, for appellees.

ADAMS J.

Two propositions constitute the basis of the defendant's motion for nonsuit: (1) The resolution purporting to authorize the employment of auditors was not adopted or approved by the directors, but by the stockholders, in a meeting at which all the stockholders were not present or represented. (2) When they made the audit, the plaintiffs had not complied with the law prescribed for public accountants. In our opinion neither of them assigns sufficient cause for dismissing the action.

With respect to the first, we do not think it necessary to enter into a discussion of the duties devolving respectively upon the stockholders and the directors of a corporation. Pursuant to the resolution adopted by the stockholders in their regular annual meeting, the plaintiffs were employed to audit the defendant's books; they made a detailed audit covering the time elapsing between January 1, 1920, and December 31, 1922; they presented and explained their audit to the stockholders in a meeting held June 29, 1923, upon notice duly given; and their report was "accepted as information" by the stockholders. With the resolution upon the minutes, this appropriation of the plaintiff's audit was a recognition of the alleged agreement with the plaintiffs; it was a ratification by the stockholders, even if the directors had not authorized the committee to act in the premises. As the contract was not ultra vires, it was not beyond the power of corporate ratification. By subsequent recognition it became as effectual and binding as if the committee had had undisputed power to bind the defendant; this on the principle that the defendant could not accept the benefit of the report and repudiate the agreement under which the report was made, or profit by the agreement and repudiate the authority of the agent by whom it was made. The ratification of an act by one who assumes to be an agent relates back, and is equivalent to a prior authority. 7 R. C. L. 662 (663), and cases cited; Greenleaf v. Railroad, 91 N.C. 33; Taylor v. Navigation Co., 105 N.C. 484, 10 S.E. 897; Starnes v. Railroad, 170 N.C. 222, 87 S.E. 43; Morris v. Basnight, 179 N.C. 298, 102 S.E. 389. The absence of some of the stockholders did not impair the force of the resolution. We have held that, if an act is to be done by an incorporated body, the law, resolution, or ordinance authorizing it to be done is valid if passed by a majority of those present at a legal meeting. Hospital v. Nicholson, 189 N.C. 44, 126 S.E. 94; Cotton Mills v. Com'rs, 108 N.C. 678, 13 S.E. 271.

Now as to the defendant's second proposition: The plaintiffs are public accountants under the laws of the state of Georgia; but neither the plaintiffs nor H. T. Amason, who was assigned as their employee to do the work in the defendant's mill, had a public accountant's certificate as required by the law of North Carolina. C. S. § 7008 et seq. Section 7023 provides that, if any person shall practice in this state as a certified public accountant without having received such certificate, he shall be guilty of a misdemeanor; and section 7020 defines a public accountant as one "actively engaged and practicing accounting as his principal vocation during the business period of the day." The Revenue Act, schedule B, imposed on public accountants the sum of $5 as a license tax for the privilege of carrying on their business, and made it unlawful for any person to carry on any business for which a license was required without having the license or a duplicate thereof in his actual possession at the time. Laws 1921, c. 34, §§ 31, 88; Laws 1923, c. 4, §§ 29, 95. The defendant contends that in breach of these statutes the plaintiffs, in making the audit, practiced the profession or carried on the business of public accountants in this state, and hence cannot force the defendant to comply with its executory agreement to pay for their services. It is no doubt true that as a rule a contract will not be enforced if it rests upon a consideration which contravenes good morals, public policy, or the common or statute law. In Sharp v. Farmer, 20 N.C. 255, it is said:

"After a vast number of cases upon the subject, it seems to be now perfectly settled that no action will be sustained in affirmance and enforcement of an executory contract to do an immoral act, or one against the policy of the law, the due course of justice, or the prohibition of a penal statute."

And in Covington v. Threadgill, 88 N.C. 186, it was held that the courts of this state have never recognized any distinction in this regard between the effect of statutes declaring certain acts to be unlawful and the effect of those imposing a penalty. Also in Courtney v. Parker, 173 N.C. 479, 92 S.E. 324:

"It is well established that no recovery can be had on a contract forbidden by the positive law of the state, and the principle prevails as a general rule, whether it is forbidden in express terms or by implication arising from the fact that the transaction in question has been made an indictable offense or subjected to the imposition of a penalty."

See, in addition to the cases there cited, Blythe...