113 Cal. 221 | Cal. | 1896
Lead Opinion
Appeals from the judgment and from the order denying a new trial.
The complaint is a pleading in the usual form to fore-'
Upon the trial the following facts were disclosed: One James A. Blood was the owner of a ranch containing about three hundred and fifty acres. In the year 1887 he authorized his nephew, James A. Blood, Jr., a real estate broker, to make a sale of this ranch at the price of one hundred and five thousand dollars, agreeing to pay him a commission of five thousand dollars for effecting the sale. Blood, Jr., proceeded as a “promoter” to organize a corporation for the purpose of purchasing this land, platting, subdividing, and selling it. Under these circumstances the La Serena Land and Water Company was organized as a corporation. After it had filed its articles of incorporation, but before any meeting of its directors was held, the subscribers to the capital stock of the corporation, of whom Blood, Jr., was one, in meeting agreed upon the purchase of the Blood ranch, and to that end authorized the payment by Blood, Jr., to plaintiff of one-half of the purchase price of the ranch. Upon receipt of this sum plaintiff was to execute to the corporation his deed for the land, and in return the corporation was to make and deliver to him its note and mortgage for the remaining one-half of the purchase price.
Thereafter the directors met and organized. They made no formal adoption of a corporate seal, but seem to have instructed their president to procure such a seal. They passed no resolution looking to or touching upon the purchase of the Blood ranch, or the execution of the note and mortgage. Payment to plaintiff of the onéhalf of the purchase price was, however, made by Blood, Jr., pursuant to the instructions which he had received at the stockholder’s meeting, which payment consisted of about forty thousand dollars in gold coin, and stock of the corporation of the estimated value of twelve
The corporation entered upon and took possession of the land, exercising general acts of dominion and ownership over it. It was surveyed and platted; orchards were cut down, springs developed, certain portions of it sold, and deeds for those portions executed by the corporation in its own name, Blood, Sr., joining therein-Interest was paid upon the mortgage for a time, and by a later convention between the corporation and the mortgagee, the produce of the ranch was afterward taken in lieu of interest.
• Finally, the coloration having failed to meet the terms of the contract, this action was instituted.
The court found that the note and mortgage were duly
Appellant first contends that the evidence of plain-, tiff failed in showing that the seal employed upon the instruments was in fact the common seal of the corporation. It is true that one offering a paper purporting to be the instrument of a corporation under seal is called upon to make proof that the seal employed is the corporate seal, but the earlier strictness of proof in this regard has been much abated by later decisions, and it is sufficient if plaintiff can show, either that the seal is the regularly adopted common seal of the corporation, or that it is the seal which without such formal adoption is and has been habitually used as such. In the present case it appeared that the seal was not regularly adopted, and also that it was used upon the instruments in question for the first time in the history of the corporation. But it was further shown that it had been afterward employed as the seal of the corporation in all transactions requiring the impress of such a seal, and we are of opinion that there was a sufficient showing to warrant a finding that it had become the common seal of the corporation by use.
Plaintiff thus established his prima facie showing of regular and due authorization; but it was a showing which could be overcome, and in this case it was in fact overcome by proof that no resolution authorizing the
The defect in this instance did not arise from a mere failure to record a resolution duly passed, which was the question considered in Schallard v. Eel River Nav. Co., 70 Cal. 144, but in a showing that such a resolution was ■never in fact adopted.
But was the contract, originally defective and voidable for lack of power and authorization, afterward ratified by the corporation? It is so found by the court. 'Can the finding be sustained? It is a general principle that a corporation, like an individual, may ratify and validate any unauthorized act, the doing of which it could, in the first instance, have authorized and empowered. ’VYhat conduct and proceedings will constitute and amount to a ratification is a question which the courts have been called upon to decide with great frequency. In the literature of the law which is thus full upon the subject there has often been little inclination displayed to distinguish between ratification and estoppel in pais. The facts are usually set forth at length, and the conclusion is reached and expressed that such conduct amounts to ratification; and indeed, where the .form which the ratification must take is not governed by statutory rules, It may and usually does matter little whether the acts of a principal are said to be such as to •constitute a ratification, or to be such as to constitute an estoppel. By either name he is held equally bound. But the distinction between the two is nevertheless well defined, and where, as in this state, the mode of ratificationis .governed by statute it becomes important and necessary
The requisites and forms of ratification, however, are entirely within the provisions of the code.
“An oral authorization is sufficient for any purpose, except that any authority to enter into a contract required by law to be in writing can only be given by an instrument in writing.” (Civ. Code, sec. 2309.)
“A ratification can be made only in the manner that would have been necessary to confer original authority for the act ratified, or, where an oral authorization would suffice, by accepting or retaining the benefit of the act, with notice thereof.” (Civ. Code, sec. 2310.)
Ratification is thus a question of legal cognizance, while estoppel in pais addresses itself to equity. Ratification under our code is a legal term with a well defined and specific meaning, and to use it interchangeably with estoppel, or with the verbs “to adopt” or “to confirm,” must result and has resulted in unfortunate confusion.
One instance out of many may be cited to point what has been said. In the syllabus to Borel v. Rollins, 30 Cal. 408, is the following: “Ratification by acts constituting estoppel in pais.—The principle that an unauthorized act of an attorney in fact, acting under a power required to be under seal, must be confirmed by an instrument under seal, does not prevent the principal from ratifying by an act which operates as an estoppel in pais.”
Had the words “confirmed” and “ratifying” been transposed in the foregoing, the language would have been accurate and unobjectionable. But, if the act in fact has been ratified, the ratification is sufficient, and
Now, while ratification may be proved under a plea of due execution (Goetz v. Goldbaum, 37 Pac. Rep. 646), yet the evidence in this case falls short of proving it, and more strongly tends to establish an estoppel.
As in the case of Borel v. Rollins, supra, it showed a certain confirmation by the corporation of the unauthorized acts of its president and secretary. The land was taken, control exercised over it, portions of it were sold. There was even some recognition of the corporation’s indebtedness by a payment of moneys for interest upon the mortgage debt, though it is claimed that this payment was made, not by the corporation, but by certain individual shareholders therein. Many acts of knowledge and adoption might be instanced, but they singly and collectively fall short of the code requirements for ratification. The corporation in the first instance could have authorized the execution of this particular note and mortgage only by a resolution of its board of directors (the equivalent of a writing) duly assembled in meeting, which resolution, either by itself or taken with its by-laws, would have authorized the president and secretary not only to make a mortgage, but would have
As has been intimated, they more strongly tend to establish against the corporation an estoppel in pais. Such an estoppel was, however, neither pleaded nor found. We do not mean to be understood to say that under the peculiar facts of this case it was necessary for plaintiff so to have pleaded. Plaintiff went into court in the belief that he held a note and mortgage duly executed to him. He established a prima facie case to that effect. In turn he was met by a counter-showing of lack of due authorization, and undertook to meet this by evidence of subsequent ratification. The same evidence, however, treated as evidence by way of estoppel, was admissible, without pleading estoppel, to raise an equitable barrier against defendant’s proof of want of authority. Had plaintiff, in the first instance, been called upon to rely upon an estoppel in pais in order to maintain his action against defendant at all, it would have been necessary, of course, for him so to have pleaded. But such was not his cause of action. He successfully makes out a prima facie case, and may, without pleading it, use the evidence in estoppel to prevent the corporation from maintaining what, as
Whether or not the acts of the corporation are sufficient to raise such an estoppel is not now a question for determination. It would involve, not the review of findings made by the trial court upon the question, for the trial court made none, but would necessitate the making in this court, in the first instance, of such findings. This we have neither the right nor the disposition to do.
But as, under the facts here disclosed, such findings are necessary to the proper determination of the rights of the litigants, a new trial must be ordered. Upon such trial it may be determined what position Blood, Jr., occupied in relation to the corporation, whether he was merely a mouthpiece to deliver messages, or • whether he was chargeable with the high good faith exacted of all who stand in a relation of trust. It may also be determined whether or not the corporation knew, or was chargeable with knowledge of, the interest of Blood, Jr., and of the fact that he was to receive a commission from the vendor. In short, there may be explicitly set forth the acts and conduct of the corporation which may be claimed to estop it from contesting the validity of the note and mortgage. Thereafter, should an appeal be taken to this court, the question will be properly under review.
So far as this decision goes, it is but a determination that the findings of due execution of the note and mortgage, and of ratification thereof, are not supported by the evidence, and cannot stand.
The judgment and order are reversed and the cause remanded for a new trial. ■
Temple, J., Harrison, J., Garoutte, J., and Van Fleet, J., concurred.
Dissenting Opinion
I dissent, and adhere to the opinion delivered in Department. (Blood v. La Serena Land etc. Co., infra.) Section 2310 of the Civil
In my opinion the judgment should be affirmed.
The following is the opinion of Department One, rendered on the 27th of September, 1895, and adhered to in the dissenting opinion of Mr. Justice McFarland.
Foreclosure of mortgage. Defendant is a corporation. The complaint, filed May 24,1892, was in the usual form, alleging with other matters that defendant made its promissory note to plaintiff on August 30, 1887, for the sum of fifty-two thousand five hundred dollars, besides interest, due one year from date, and, at the same time, to secure payment of the note, executed to plaintiff a mortgage of certain lands in Santa Barbara county. The note and mortgage were subscribed with the name of the defendant by its president and secretary, and both bore the impress of a seal purporting to be that of the corporation. The only defense made by the answer was that the defendant never authorized the execution of the note and mortgage. De-fendant filed a cross-complaint stating, among other things, that about September 1,1887, plaintiff conveyed to defendant by deed the premises described in the mortgage, and that, as part of the consideration therefor, said note and mortgage were delivered to plaintiff without the authority or consent of defendant, and that it was not privy to the purchase of the land; that defendant never appropriated to itself the use of the land or the profits thereof; that defendant’s board of directors, at a meeting held May 26, 1892, passed a resolution reciting that the purchase of said land—called the “Blood ranch”—and the execution of said note and mortgage were never authorized by the defendant, and directing the president of the company to make in its name and tender to plaintiff a reconveyance of the land, excepting a small parcel previously conveyed by defendant, in conjunction with plaintiff, to one Thompson; that such a deed was so made and tendered to plain
It is disclosed by the record that the plaintiff was the owner of the land—about three hundred and fifty acres —in the year 1887, and authorized his nephew, also named James A. Blood, a real estate broker, to make sale of the same at the price of one hundred and five thousand dollars, agreeing to pay him a commission of five thousand dollars, contingent upon his effecting a sale. The broker associated several other persons with himself, and they formed, in August, 1887, the defendant corporation for the purpose of buying plaintiff’s land; said broker conducted the negotiation with plaintiff on behalf of the promoters of the corporation, and the terms of the purchase were substantially settled before August 29, 1887, at which time officers of the corporation were elected, said broker becoming its secretary and a member of its board of directors. Plaintiff executed a deed of the land to defendant, and, at the same time, received (but from whose hands does not clearly appear) the said note and mortgage as security for the deferred or second payment of one-half the agreed purchase price, the first payment being made partly in cash—about thirty-seven thousand five hundred dollars —paid by the subscribers to defendant’s stock, and partly in such stock itself. There was no resolution of defendant’s board of directors authorizing the purchase of the land, or the issuance of the note and mortgage, nor was the seal affixed thereto ever adopted as the corporate seal by any direct action of the board for that purpose. Plaintiff’s deed to defendant bore the same date as the mortgage—August 30, 1887, but they were not, in fact, exchanged until about September 15th, following.
The trial was had in November, 1892, the evidence closing on the twenty-third day of that month; said real estate broker was a witness, and, incidentally to the main purposes of his examination, gave testimony of his agency to sell the land, and of his interest in effecting the sale. On May 12, 1893, the court announced orally its decision in favor of plaintiff, and on May 25tli following, before the findings were signed, defendant applied for leave to amend its answer by adding a de
1. For the purposes of the decision it may bé assumed, in accordance witli the contention of appellant, that the corporation was not originally privy to the purchase of the land from plaintiff, and that the instruments in suit purporting to be its obligations were originally executed without its authority. But it is manifest—leaving out of view for the moment the effect of the broker’s double agency—that the corporation adopted as its own the whole transaction with plaintiff, of which the execution of the note and mortgage was an inseparable part. Defendant, acting through its board of directors and officers, and they having full knowledge of the terms of the mortgage, took possession of the land, surveyed and platted it, cultivated it, took its rents and profits, sold and conveyed some of it, and offered to sell the remainder; and, in all respects, conducted itself as the absolute owner thereof, subject only to the encumbrance of the mortgage. The facts that the proceeds of sale of portions of the land, and of produce grown thereon, were all paid over to plaintiff for application on the indebtedness in question, and that after April 23, 1889, the1 entire profits of the land were delivered to him in lieu of interest, cut no figure in the case, so far as we see,' except to show defendant’s knowledge of the debt and
2. That a broker cannot represent both parties to a contract of sale in which discretion, judgment, and skill are to be exercised by him, unless they have knowledge of his double capacity and consent to be so represented, and that a party led unwittingly into a contract by means of such double agency may avoid the contract by methods suitable to the circumstances of the case, are propositions not to be denied. (Empire State Ins. Co. v. American Cent. Ins. Co., 138 N. Y. 446, and cases cited; Cassard v. Hinman, 6 Bosw. 8; Hunsaker v. Sturgis, 29 Cal. 142; Davis v. Rock Creek Co., 55 Cal. 359.) In this case the real estate broker, as a promoter of the corporation, occupied a relation of trust to the subscribers for the stock, and to the corporation itself. (Burbank v. Dennis, 101 Cal. 100.) If he failed to disclose to his associates his agency for the plaintiff, and his interest in effecting the sale, and if he was charged with any duty in their behalf beyond merely communicating to
3. But it is said that the fact that the broker represented both parties to the transaction for the sale of the land was a matter unknown to defendant at the time of its proceedings evincive of adoption and ratification of the contract with plaintiff, and hence the effect of those proceedings as confirmatory of the contract is nullified. (Civ. Code, sec. 2314.) That section provides that “ a ratification may be rescinded when made without such consent as is required in a contract, or with an imperfect knowledge of the material facts of the transaction ratified, but not otherwise.” Now, if it were conceded, as we do not concede, that defendant could obtain a rescission without some appropriate pleading showing the ground therefor, and that it had taken the steps necessary to give it the right to rescind, yet we think the evidence before us does not bring defendant’s case
The judgment and order should be affirmed.