Watts Mercantile Co. v. Buchanan

• Decision Date: 13 April 1908
• Docket Number: 12,959
• Court: Mississippi Supreme Court
• Parties: WATTS MERCANTILE COMPANY v. JAMES A. BUCHANAN

46 So. 66

92 Miss. 540

WATTS MERCANTILE COMPANY v. JAMES A. BUCHANAN

No. 12,959

Supreme Court of Mississippi

April 13, 1908

FROM the circuit court of, second district, Jones county, HON DAVID M. MILLER, Judge.

Buchanan appellee, was plaintiff in the court below; the mercantile company, appellant, was defendant there. From a judgment in plaintiff's favor defendant appealed to the supreme court. The facts are stated in the opinion, of the court.

Affirmed.

W. R Harper, for appellant.

The court below held that Donald as manager had authority to purchase the Stock in another corporation and give the notes of the Watts Mercantile Company therefor.

This ruling is so manifestly wrong, that it need only to be stated to this court to be determined. The Watts Mercantile Company itself could not purchase or hold stock in the Alberta Hoop Company, under Code 1906, 5005, and even if there had been direct authority from the company to the manager, it would have been ultra vires and absolutely void, and all notes given for such stock, being without consideration, are invalid and uncollectible. The act of this one corporation, giving notes for stock in another corporation, was in direct defiance of law, and this law was well known to the holders and takers of the notes, and to the purchasers thereof, and these notes being without consideration, are null and void in the hands of all persons.

Manifestly under Code 1906, § 5005, and the decisions thereunder, the court below ought to have decided for the appellant.

Pack & Montgomery, for appellee.

The court below held that appellant was liable for the notes, not because one corporation had the right to purchase the stock of another corporation, but because appellant absorbed all the assets of the Alberta Hoop Company, and in this view, we contend that the court was clearly right.

The position of appellant taken in the court below and in this court shows that liability is denied on two grounds:

1. That the purchase of said stock was not authorized by an action of the board of directors of the Watts Mercantile Company; and that Donald therefore acted without authority from the corporation.

2. That even though appellant received the assets of the Alberta Hoop Company, and enjoyed the fruits of said transaction, it is not liable because the purchase of the stock was ultra vires.

In answer to the first contention, we submit that appellant cannot complain of the act of its manager, Donald, because it acquiesced in and ratified his acts by accepting and appropriating to its own use, all the assets of the Alberta Hoop Company, and thereby enjoyed the fruits of Donald's acts. The act of Donald, he being permitted to manage and control the affairs of appellant corporation, was, under the law, the act of the corporation itself. Code 1906, § 5015.

Relative to the second point, even though admitting that said transaction was in violation of law, appellant is estopped from pleading ultra vires as a defense, since it retained the fruits of the contract. 10 Cyc., 1067, pars. a and b, and authorities cited thereunder. In the case of Manchester, etc., R. R. Co. v. Concord R. R. Co., 9 L. R. A., 693, the court holds in a similar case that such a defense is "so repugnant to the natural sense of justice, so contrary to good faith and fair dealing and so opposed to the weight of modern authority, that it need only be said that neither party to the transaction, ultra vires simply, will be heard to allege its invalidity while retaining the fruits." This case is cited and approved in a number of cases shown in 2 L. R. A. Cases As Authorities, 243.

Appellant has violated the law, in purchasing said stock, and subjected itself to an action by the state to forfeit its charter, but this is a complaint for the state alone to make and the corporation cannot set this act up itself as a defense to this suit, so long as it retains the fruits of the transaction. 10 Cyc., p. 249, and authorities; Wood v. Corry Water Works Co., 12 L. R. A., 168, and the exhaustive notes thereunder, and see this case cited and followed in L. R. A. cases as authorities, vol. 2, p. 543.

OPINION

CALHOON, J.

Buchanan brought this suit against the Watts Mercantile Company on a promissory note for $ 200; the note itself reciting that it was "for his entire interest in the Alberta Hoop Company." This note was given before the Code of 1906 took effect. The note was signed, "Watts Mercantile Company, per S. Q. Donald." Two defenses are set up--the one being that S. Q. Donald had not been...