Wainwright v. P.H.&F.M. Roots Co.

• Decision Date: 09 January 1912
• Docket Number: No. 21,871.,21,871.
• Citation: 97 N.E. 8,176 Ind. 682
• Court: Indiana Supreme Court
• Parties: WAINWRIGHT v. P. H. & F. M. ROOTS CO.

176 Ind. 682

97 N.E. 8

WAINWRIGHT

v.P. H. & F. M. ROOTS CO.

No. 21,871.

Supreme Court of Indiana.

Jan. 9, 1912.

Appeal from Circuit Court, Henry County; Ed Jackson, Judge.

Action by William W. Wainwright against the P. H. & F. M. Roots Company. From a judgment for defendant, plaintiff appealed to the Appellate Court, and it transferred the cause to the Supreme Court, under Burns' Ann. St. 1908, § 1405. Reversed, with instructions.R. E. Barnhart, L. H. Stanford and Finly H. Gray, for appellant. Forkner & Forkner and Conner, Conner & Chrisman, for appellee.

COX, J.

The appellee is a private manufacturing corporation, organized under the laws of this state, and carrying on its business in the city of Connersville. Appellant was formerly the superintendent of its factory, under the supervision of its president, and while acting in this capacity, under a written contract of employment for a term of years, which had not yet expired, and as a director of the corporation, entered into another written contract which by its terms canceled the existing contract, and in which it was agreed, in substance, that appellee would separate from its factory a particular and considerable part of its manufacturing business, and install it in a special foundry and machine shop to be properly constructed and equipped by appellee with the necessary machinery and appliances; that therein the certain named articles, so to be separated from the main business, were to be manufactured at a fixed schedule of prices; that in addition to providing the building and machinery appellee was to furnish all necessary capital to pay for labor and materials for manufacturing the articles to be turned out by the special factory; that appellant was to have entire control over the special factory, and was to provide all labor and materials necessary to promptly and efficiently turn out the work contemplated, and was to turn it out complete and first class in respect to workmanship, design, and material at the prices fixed in the contract, or lower, if possible; that the work was to be done under the cost system, and that if appellant succeeded in producing work at less than the prices fixed in the schedule the difference between the prices so fixed and the actual cost should be divided equally between appellant and appellee; that in addition to such percentage of possible additional profits appellant was to be compensated by a yearly salary of $1,800, and one-half of the profit on repairs of articles manufactured and returned for repairs; that appellant was not to incur any liability in case of his inability to produce the various articles to be manufactured at the prices named; and that the relation created by the contract should continue for five years.

This contract was entered into and executed by the president and general manager of appellee and the appellant. The performance of its provisions was never entered upon, and appellant sued for damages for its breach, alleging the refusal of appellee to perform its part of the conditions and his readiness at all times to perform those imposed upon him. In addition to the general denial, appellee answered the complaint by second, third and fourth paragraphs of answer, to which appellant demurred. These demurrers were overruled, and these rulings are relied on by appellant as being reversible errors.

The second paragraph of answer was verified, and admitted the status of the appellee as an Indiana manufacturing corporation and the execution of the contract by Johnston its president and general manager; but it averred, in substance, that the authority of such president was only that which the law gave the president of such a corporation, and that no extra or additional powers had been delegated to him as president; that the only authority that Johnston had, at the time of the execution of the contract, as general manager of the company, was to manage its ordinary business affairs; that he was not authorized by the by-laws nor by the board of directors to engage in new enterprises, or to delegate, by contract or otherwise, any part of the business of the company to the management and control of another; that Johnston, neither as president nor general manager, had authority to execute the contract in the name of and for and in behalf of the company; and that neither the directors nor the stockholders had ever ratified or approved the action of Johnston in executing the same.

The statute authorizing the creation of corporations, such as appellee, provides that the business of such corporation shall be managed by the board of directors, for the election of which the statute makes provision. Section 5070, Burns 1908.

[1] The second paragraph of answer alleges that as president Johnston had only such powers as the law gave him. This action of the statute placed the power to manage the business of appellee in its board of directors, and no such power is conferred on the president as such. The general rule is that the office of president of a private corporation of itself confers no power on the incumbent to bind the corporation or control its property. His powers as agent must come by delegation from the corporation, through the board of directors, formally and directly granted, or implied from its habit or custom of doing business. 10 Cyc. 903; 3 Cook on Corp. (6th Ed.) 716; 2 Thomp. on Corp. (2d Ed.) §§ 1451, 1464; National State Bank v. Vigo County National Bank, (1895) 141 Ind. 352, 355, 40 N. E. 799, 50 Am. St. Rep. 330. The answer alleges that no authority beyond that the law gave him had been delegated to Johnston as president.

[2] The office of general manager is of broader import than that of president, and implies authority in one invested with it to do such acts as are necessary in the usual and ordinary course of the business carried on by the corporation. 10 Cyc. 909; 3 Cook on Corp. (6th Ed.) 719; 2 Thomp. on Corp. (2d Ed.) §§ 1465, 1466, 1575; 4 Words and Phrases, p. 3073 et seq.; Louisville, etc., Co. v. McVay (1884) 98 Ind. 391, 49 Am. Rep. 770;Cushman v. Cloverland Coal Co. (1907) 170 Ind. 402, 405, 84 N. E. 759, 16 L. R. A. (N. S.) 1078, 127 Am. St. Rep. 391.

But here we have a contract of rather an unusual and extraordinary character. The general manager gets his authority by delegation from the board of directors. Under our statute, the directors are elected annually by the stockholders. The stockholders then may make an entirely different board of directors in one year's time, and such new board may displace the general manager and select another. The terms and character of the contract under consideration not only give rise to the implication that it may be beyond the usual and ordinary course of the business of the appellee in the separation of the part dealt with from the main business, and placing it under the entire control of appellant, with a division of the profits, but it also does this for a period of five years, which may be both beyond the terms of the general manager and board of directors. Added to this showing, the answer directly alleges that Johnston, as general manager, had no authority to execute the contract for the corporation, and that it was never ratified or approved by the board of directors or stockholders. The answer, by force of this last allegation, was sufficient to withstand a demurrer, and raised an issue of fact whether Johnston had such authority. National State Bank v. Vigo County Nat'l Bank, supra; Kennedy v. Supreme Lodge, 124 Ill. App. 55;La Plant v. Pratt-Food Co., 102 Minn. 93, 112 N. W. 889;Perryman & Co. v. Farmers', etc., Co., 167 Ala. 414, 52 South. 644.

[3] Appellee's third paragraph of answer alleged, in substance, that at the time of the execution of the contract there was no definite agreement relative to the particular place where the building for the new enterprise, which, by the terms of the contract, appellee agreed to construct and equip, was to be located, but that the location was left to the discretion of the appellee; that at the time there was in East Connersville, which was in close proximity to the city wherein appellee's main business was located, a building, erected for manufacturing purposes, which was a better one for the purpose involved in the contract than the one contemplated by the parties to the contract, and advantageously located in respect to transportation facilities and otherwise; that soon after the execution of the contract appellant personally inspected such building, and expressed his opinion that the building itself and its location were ideal for the business to be carried on under the contract; that appellee thereupon arranged with the owner of the building to lease it for the purpose of carrying out the contract; that appellee repeatedly notified appellant that it was ready and willing to properly equip said building, and in all things comply with the terms of the contract, except the one provision for the erection of a new building; that appellant was secretly trying to arrange with other parties to enter business as a competitor of appellee, and repeatedly notified appellee that he would not carry out the contract upon his part, unless appellee would construct a new building. Appellant's objection to this paragraph of answer does not go to the fact that appellee had offered to provide a building then existent, rather than to build a new one in accordance with the provision of the contract, but that this building was in a different place from that contemplated for the erection of the new one. The contract, it is conceded, does not fix such place, but it is insisted by counsel for appellant that a location in the city of Connersville, where he lived, and where appellee's shops and business were located, was intended. If this be so, it would seem to be apparent that the location of the building proffered was fairly within that intent. It was inclose proximity to the city and obviously a...