Third Nat. Bank Of Cumberland v. Laboringman's Mercantile & Mfg. Co. *

• Decision Date: 13 December 1904
• Parties: THIRD NAT. BANK OF CUMBERLAND, MD. v. LABORINGMAN'S MERCANTILE & MFG. CO. et al.*
• Court: West Virginia Supreme Court

49 S.E. 544

56 W.Va. 446

THIRD NAT. BANK OF CUMBERLAND, MD.

v.LABORINGMAN'S MERCANTILE & MFG. CO. et al.^*

Supreme Court of Appeals of West Virginia.

Dec. 13, 1904.

corporations—authority of president-ratification by directors—notes of corporation.

1. The president of a corporation has no inherent authority, by virtue of his office, to execute a negotiable note which will bind the corporation.¶ 1. See Corporations, vol. 12, Cent. Dig. § 1641.

2. The directors of a corporation may ratify any act done or contract made by its president without authority, which they could have authorized him to do or make.

3. The authority of an officer of a, corporation to do a particular act may be inferred from proof of his habitual doing of such acts, with the acquiescence of the directors of the corporation. And where no such acts are proven, if any act or contract of such officer, made without authority, is subsequently ratified by the directors upon full knowledge of all the circumstances of the case, the corporation will be bound thereby as fully as if the officer had been expressly authorized to do the act or make the contract.

4. M., as president of the defendant corporation, without authority, made the negotiable note of the corporation; had it discounted by the plaintiff bank, and the proceeds thereof credited to the bank account of defendant. The proceeds of the note so deposited were by direction of M. credited on the books of defendant to an account due it from another company, of which M. was manager, and for which indebtedness he was liable to defendant. Defendant then, by its checks drawn on this fund in bank by its manager in favor of various wholesale houses, its creditors, paid out the same; but all of these transactions were, at the times thereof, unknown to the directors of the company, but were afterwards brought to their notice. The defendant failed to return to the bank the money, the benefit of which it had thus received, when its receipt had become known to defendant's directors.

Held, that the failure of the defendant to return to the bank the money so received by it, when its receipt had become known to its directors, was a ratification of the execution and use of the note by Murphy as aforesaid.

5. It is a general principle, which applies without regard to the mode of ratification, that a voidable engagement, made by one assuming to act as agent, cannot be ratified in part, so far as it is beneficial to the principal, and repudiated so far as it is detrimental to him.

(Syllabus by the Court.)

Error to Circuit Court, Tucker County; John Homer Holt, Judge.

Action by the Third National Bank of Cumberland, Md., against the Laboringman's Mercantile & Manufacturing Company and others. Judgment for defendant company, and plaintiff brings error. Reversed.

Cunningham & Stallings, for plaintiff in error.

C. O. Strieby and C. W. Dailey, for defendants in error.

MILLER, J. The Third National Bank of Cumberland, Md., a corporation organized under the laws of the United States, commenced its action in debt in the circuit court of Tucker county against the Laboringman's Mercantile & Manufacturing Company, a corporation organized under the laws of the state of West Virginia, P. M. Murphy, president, P. M. Murphy, N. B. Twigg, M. M. Phelps, W. E. Patterson, E. S. Muse, J. B. Guinard, F. M. Houser, J. W. Baker, Samuel Buser, B. A. Stuckey, and Geo. W. Everett, for the recovery of $1,000, debt, with $2.79, protest charges, and interest, and at the August rules, 1901, filed its declaration therein, in which it is alleged that the defendant company, by P. M. Murphy, its president, made its certain negotiable note in writing, dated the 29th day of March, 1901, and subscribed its name thereto, as follows, to wit, "Laboringman's Mer. & Mfg. Co., " by P. M. Murphy, president, thereby meaning the Laboringman's Mercantile & Manufacturing Company, whereby it promised, three months after date, to pay to the order of P. M. Murphy, president, $1,000, at the Third National Bank of Cumberland, Md., without defalcation, for value received; that said P. M. Murphy, president, before the maturity of the note, indorsed the same to P. M. Murphy, and in like manner Murphy indorsed it to Twigg; that all of the defendants indorsed the note in the order as above named; that said Geo. W. Everett indorsed it to the plaintiff bank; and that at its maturity the note was protested for nonpayment. At the November term, 1901, of the court, on motion of the plaintiff, the action was abated as to all of the said indorsers of the note, including P. M. Murphy, president, and was ordered to be proceeded in against the defendant the Laboringman's Mercantile & Manufacturing Company. The plaintiff at the January rules, 1902, filed in the clerk's office an amended declaration against the defendant corporation alone, but otherwise substantially in the language of its original declaration. At the March term, 1902, of the court, the defendant company entered its plea of nil debet, and it also filed two several special pleas in writing, both verified by affidavit. One of said special pleas avers that the defendantdid not make or deliver for discount the note sued on and described in the declaration, and that said note was not discounted by plaintiff for defendant. The other plea avers that the defendant company did not make or deliver for discount the note sued on and described in the declaration, and that said note was not discounted by the plaintiff for the defendant; that P. M. Murphy never had the authority of the defendant to make or deliver the said note for discount to the plaintiff; that N. B. Twigg and the others named therein, whose names appear on the back of the note, never indorsed the same; that the plaintiff never discounted the note for defendant; and that the defendant never became liable to pay the plaintiff the sum of money in the said note specified. Issue was joined on each of the aforesaid pleas, and at the same term a trial of said action was had before a jury. At the conclusion of the evidence the defendant demurred thereto, in which demurrer the plaintiff joined, and the jury found for the plaintiff the sum of $1,042, if the law, upon the demurrer to the evidence, be for the plaintiff; but, if the law be for the defendant, they found for the defendant. The court sustained defendant's demurrer, and gave judgment against the plaintiff for costs. To this judgment the plaintiff excepted, and obtained from this court a writ of error and supersedeas to the same.

Upon the issues thus made, the burden was upon the plaintiff bank to prove the authority of Murphy to make said note for the company.

It appears from the record that the defendant did a general mercantile business at Davis, Tucker county, W. Va. Said P. M. Murphy was at the date of the note in controversy, and had been for some time prior thereto, president, W. E. Patterson, secretary and a director, and W. W. Golightly, general manager, of the company. Who the other directors were, is not shown. Its stockholders numbered about 100. There is no evidence in the record showing the extent of the authority of the president of the company, except a by-law in these words: "The president shall preside at all meetings of the stockholders and board of directors, call all special meetings, sign minutes of all meetings; all contracts made by the company, and all certificates of stock." Murphy, as it is shown, claiming to act as president, executed the note in controversy, payable to himself as president, and then indorsed as such, and also individually, and presented it, with the other names indorsed thereon, some of which on the trial proved to be forgeries, at the Third National Bank of Cumberland; had the same discounted, by the bank, and the proceeds thereof placed to the credit of the defendant It is not shown that any of the directors or officers of the company had at that time any knowledge of the making or discounting of the note. Said W. E. Patterson, J. B. Guinard, and Geo. W. Everett, stockholders in said company, whose names appear on the back of the note, testified that they did not indorse and did not authorize any person to indorse or put their respective names upon said note for them, and that they had not seen the note until the day of the trial. H. E. Weber, president of the bank, testified that the note sued on came into possession of the bank through Murphy, as president of the defendant company; that it was discounted; that the proceeds thereof were placed to the credit of the defendant; that the bank then and prior thereto had an open account with the defendant; that the "note was Signed by Murphy, president, brought to us by Murphy, president, and Mr. Murphy is the only person we ever saw or knew, of the company, until we came up here to try this case." He further testified that on May 19, 1899, Murphy came to the bank, represented himself to be the president of the defendant company, asked to open an account with the bank, and at the time deposited some money therein, and said that later he would probably want a loan of $3,000; that on the 26th day of May, a week later, and almost two years before the note in controversy was made, the bank discounted a $3,000 note for the company, and placed its proceeds to the credit of defendant. It further appears that the proceeds of the two notes and some deposits, amounting to $1,400 or $1,500, placed in the bank by Murphy and Golightly for the company, were checked out and paid to wholesale merchants who were creditors of the defendant, in checks in their favor drawn on said bank; but nothing is shown by the records of the company or otherwise to prove that the directors or other officers of the company, except Murphy and Golightly, had any notice or knowledge of the aforesaid transactions. It is also shown that at the time of the execution and discount of the $1,000 note there was another company at Davis, called the Davis Poultry...