Wall v. Niagara Mining & Smelting Co. of Idaho

• Decision Date: 18 November 1899
• Citation: 20 Utah 474,59 P. 399
• Parties: JOHN WALL, RESPONDENT v. THE NIAGARA MINING & SMELTING COMPANY OF IDAHO, A CORPORATION, APPELLANT
• Court: Utah Supreme Court

59 P. 399

20 Utah 474

JOHN WALL, RESPONDENT v. THE NIAGARA MINING & SMELTING COMPANY OF IDAHO, A CORPORATION, APPELLANT

Supreme Court of Utah

November 18, 1899

Appeal from the Third District Court, Salt Lake County, Hon. A. N Cherry, Judge.

Action to recover three thousand dollars and interest, alleged to be due upon a contract. From a judgment for plaintiff, defendant appealed.

Affirmed.

W. C Hall, Esq., for appellant.

A corporation is distinct from its stockholders, and although one person may own all the stock, he cannot, as such stockholder, act for the corporation. Cook on Stockholders (2d ed.) Sec. 709.

All contracts of a corporation are to be made by or under the direction of the board of directors and not by the stockholders. Cook's Stockholders (2d ed.) Sec. 712, 716; Titus v. Cairo, etc., R. Co., 37 N. J. 98 (Law); Cook on Stockholders (2d ed.) Sec. 714; Burton v. Hoffman, 61 Wis. 20, S.C. 20 N.W. 668; 1 Morawetz on Corporations, Sec. 232; Cutshaw v. Fargo, 18 Ind.App. 691, S.C. 34 N.E. 378; Harrington v. Connor, (Neb. Ap. '97) 6 A. & E. Corps. Ca., N. S. 609, 613, 614; England v. Dearborn, 141 Mass. 591, S.C. 6 N.E. 838; Winona, etc., E. Co. v. St. Paul, etc., R. Co., 23 Minn. 359; Boone on Corp. Sec. 199; Hopkins v. Roseclare Lead Co., 72 Ill. 397; Gorman v. Gilson, 28 Cal. 484; Kansas City Hay Press Co. v. Devol, 72 F. 721-722, and cases cited; Gashwiler v. Willis, 33 Cal. 19, 20; Kohl v. Lilienthal, 81 Cal. 378; Parker v. Bethel Hotel Co., 34 S.W. 209, 3 Am. & Eng. Corpo. Cases (N. S.) 477, 491, 492.

"Articles of incorporation under the general law of the State, with the provisions defining their effect, constitute the charter of the corporation; and from them the purposes of the corporation, and the uses to which its property may be put, must be ascertained and limited." North Point Con. Irr. Co. v. Utah & S. L. Canal Co., (Feb. 5, 1898) 52 P. 168; Rhorer v. Middlesboro Town & Land Co., (Ky.) 44 S.W. 449.

A corporation can only be exercised in the manner prescribed by the law under which it is organized. Johnson v. Sage, 44 P. 641; Cook on Stockholders, Sec. 716 and note; 1 Morawetz on Corpo., Sec. 537; Wait v. Nashua Armory Assn., (N.H.) 23 A. 78.

"The declarations or statements of individual directors when the board was not in session, and when such declarations or admissions did not accompany any official act, were clearly incompetent; and the statements made in discussion while the board was in session were not negotiations between the company and the plaintiff." Peck v. Detroit Novelty Works, 29 Mich. 313; 1 Morawetz on Corpo. Sec. 540 and note; Wyman v. Hollowell and Augusta Bank, 14 Mass. 58; Salem Bank v. Gloucester Bank, 17 Mass. 28-29.

Corporate acts must be performed by the body and in the manner directed by the statute under which the corporation was organized. Kansas City Hay Press Co. v. Devol, 72 F. 721; City of Joseph v. Clemens, 43 Mo. 404; Gashwiler v. Willis, 33 Cal. 12; Titus v. Railroad Co., 37 N. J. L. 102; Bank v. Dunn, 6 Pet. 51; U.S. v. City Bank of Columbus, 21 How. 356; Railway Co. v. Allerton, 18 Wall. 233; Walworth County Bank v. Farmer's Loan & Trust Co., 14 Wis. 357; Hyde v. Larkin, 35 Mo.App. 365, 72 F. 721-622; Mut. L. Ins. Co v. Robinson, 40 N.Y.S. 888; Hamilton v. Bates, 35 P. 304; Bank v. Gifford, 47 Iowa 575; Mallory v. Mallory, Wheeler Co., 61 Conn. 131; Bear R. Valley Orchard Co. v. Hanley, 30 P. 614 (Utah) .

"Agents cannot make contracts with themselves so as to bind their principals. The law will not permit one who acts in a fiduciary capacity to deal with himself in his individual capacity." 1 Daniel Neg. Instr. Sec. 282; San Diego v. San Diego R. Co., 44 Cal. 113; Andrew v. Pratt, 44 Cal. 317-18; Wilbur v. Lynde, 49 Cal. 290-292.

A corporation cannot ratify a contract made for it before its creation. Alger on Promotion of Corpos. Sec. 199; Melhado v. Porto Algere Ry. Co., L. R. 9 C. P. 503, 10 Moakes Eng. R. 281; Abbot v. Hapgood, 150 Mass. 252, 22 N.E. 908, also citing Kelner v. Baxter, Melhado v. Ry. Co. supra, and Gurn v. Ins. Co., 12 C. B. (N. S.) 694, 104 Eng. C. L. 694; Ruby Chief M. & M. Co. v. Gurley, 17 Colo. 199, 29 P. 688; Winters v. Hub. M. Co., (C. C. Id.) 57 F. 287; Long v. Citizens' Bank, 8 Utah 104, 29 P. 878; Morawetz on Corporations, Sec. 547; N.Y. & N.H. R. Co. v. Ketchum, 27 Conn. 180; Schriner v. Turner, etc., 43 P. 721.

Messrs. Zane & Rogers and Geo. P. Costigan, Jr. Esq., for respondent.

It is laid down by all the American authorities, and is admitted by the very authority appellant cites, that a corporation may "adopt" or "accept" a promoter's contract, and so be bound by it, even though it cannot "ratify" it. Alger's Promotion of Corporations, Sec. 202.

"A corporation may, however, make itself responsible for such acts and contracts by subsequently adopting them. The liability of the corporation under these circumstances does not rest upon a supposed agency of the promoters, and a ratification of their acts, but upon the immediate and voluntary act of the company." Morawetz, Sec. 548.

The Illinois cases are to the effect that the corporation is bound if it does adopt or accept the benefits. Woods v. Phelan, 93 Ill. 153; Archwald v. Commercial Hotel Co., 106 Ill. 439.

And can bind the other parties to the contract in the same way. Lauder v. Peoria Co., 71 Ill. 475; Hotel Co. v. Encampment Co., 140 Ill. 248.

"A corporation may become bound to fulfill a contract made in its name and behalf in anticipation of its existence, by afterwards accepting the benefits of the contract, as it may acquire a right to enforce such a contract against the other party by his acceptance of performance by the corporation." Penn. Match Co. v. Hapgood, 141 Mass. 145.

"A corporation accepting the benefits of the contract of its incorporators must accept the burden, and a promoter's contract which has been ratified or adopted by the corporation, or the benefits of which have been accepted by the corporation, may be enforced against it." 2 Cook on Stock and Stockholders, 3d ed., p. 1045; Thompson on Corporations, Secs. 5289, 8444; Grape Co. v. Small, 40 Md. 395, (acceptance of benefit); Seymour v. S. F. C. Ass'n, 144 N.Y. 333, (ratification); Rogers v. N.Y. Co., 134 N.Y. 211, (acceptance of benefit); Huron Printing Co. v. Kittleson, 57 N.W. 233; Pittsburg Co. v. Quintrell, 20 S.W. 248, (acceptance of benefit); Paxton Cattle Co. v. Bank, 21 Neb. 621, (acceptance of benefit); Whitney v. Wyman, 101 U.S. 392, (ratification); R. R. Co. v. Rollins, 13 Colo. 4, (acceptance of benefit); Bruner v. Brown, 139 Ind. 600, (adoption of contract); Queen City Furniture Co. v. Crawford, 187 Mo. 356, (adoption of contract); Schreyer v. Mills Co., (Ore.) 43 P. 719, (ratification); Bommer v. Amer. Co., 81 N.Y. 473, (acceptance of benefit); McArthur v. Times Printing Co., 48 Minn. 319, (adoption); Bell's Gap R. R. Co. v. Christy, 79 Pa. 54, (acceptance of benefit); Pratt v. Match Co., 89 Wis. 406, (adoption of contract); Swisshelm v. Laundry Co., 95 Pa. 367, (adoption of contract); Low v. R. R. Co., 45 N.H. 370, (acceptance of benefit); Stanton v. Ry. Co., 22 A. 300, (ratification); Davis v. Montg. Co., 8 So. R. 496, (Ala.) (ratification); Davis v. Butter Co., 52 Kan. 693, (acceptance of benefits); Wood v. Phelan, 93 Ill. 153, (ratification by issuing bonds executed by corporation previous to incorporation); North Point Case, 52 P. 168 (Utah) ; Reicherwald v. Hotel Co., 106 Ill. 439, (acceptance of benefit).

BARTCH, C. J. MINER, J. and BASKIN, J., concur.

OPINION

BARTCH, C. J.

The plaintiff brought this action to recover $ 3,000, with interest, alleged to be due upon a contract. It appears from the record that the plaintiff, Ole H. Petersen, Peter A. H. Franklin, Hans H. Petersen, G. E. Palen and Sarah J. Vance were the promotors and incorporators of the defendant company. The articles of incorporation, which were signed by the promoters, were dated October 29, 1888, but were neither sworn to nor filed as required by law before December 3, 1888. The plaintiff, Ole H. Petersen and Sarah J. Vance, on the same day, December 3, 1888, conveyed by deed to the corporation certain mining claims, which were described in the articles of incorporation, and accepted by the corporation as payment in full of its capital stock, which, according to the articles, consisted of 200,000 shares of the par value of $ 10 each. Of this stock Ole H. Petersen received 53,200 shares, the plaintiff Wall 66,666, Peter A. H. Franklin, 33,334, Hans H. Petersen, 133, G. E. Palen, 33,334, and Sarah J. Vance 13,333 shares. Each of the parties contributed to the corporation twenty-five per centum of his stock, making in all 50,000 shares as working capital. As appears from the evidence neither Franklin nor Palen contributed property for their shares.

On the same day, December 3, 1888, on which the articles of incorporation and the deed were executed, and these arrangements made, the contract which has given rise to this controversy, was entered into, by the terms of which, and in consideration of the conveying of the mining claims to the corporation, the plaintiff was to be paid out of the first sale of the 50,000 shares of working capital 35 per cent. of the proceeds until he had received $ 3,000. There appears to be no question that the working capital was sold for sufficient to pay the plaintiff's claim in accordance with the terms of the contract.

Peter A. H. Franklin was named in the articles of incorporation as president of the company, and the contract was executed by the company through him. Palen was not a resident of Utah and there is some evidence tending to show that Franklin was acting as his agent, but whether he had authority to so act is not very clear. There is...