247 Mo. 1 | Mo. | 1912
Both pleadings and proof in this cause are voluminous in the extreme. Plaintiff, a Missouri corporation, by its petition sues for the possession of a certain mining property in Jasper county, Missouri, which • it formerly held and possessed under a mining lease from another company. Monthly rents and profits.are alleged to be $2400. Waste is also charged in the aggregate sum of $25,000. The petition concludes with the prayer:
*8 “Wherefore plaintiff prays judgment for the recovery of said premises, and $40,000 damages for unlawfully withholding the same from plaintiff, and the waste and injury aforesaid, and the rents and profits down to the time of assessing the same, and $2400 per month for monthly rents and profits from the rendition of judgment until possession is delivered to plaintiff, and costs,” etc.
In fact there was nothing small about plaintiff’s case but the result nisi, which was to the effect that plaintiff had no interest in the property and was entitled to no damages therefor; not only so, hut an affirmative decree that defendants Moore and Bushnell in good conscience were the owners of the property,. and were so decreed it.
The case made and tried nisi is well indicated by the answer and the reply. The answer of Taylor, omitting from a contract pleaded the schedule of debts and machinery, is:
“Now in this day comes defendant H. L. Taylor and for his separate amended answer to plaintiff’s petition herein, denies each and every allegation therein contained, except such as are hereinafter expressly admitted.
“And for further separate answer this defendant says that on or about the 18th day of April, A. D. 1906, plaintiff was in possession, claiming to be the owner of a certain mining lease, granting to plaintiff the right to mine and use certain mining machinery belonging to New York & St. Louis Mining and Milling Company, on a certain tract of land situate in the county of Jasper and State of Missouri,, and described as follows, to-wit: The east one-half of the forty acres known as the ‘Royal Lease’ more particularly described as follows: The east one-half of the southwest quarter of the northeast quarter of section thirty-three, township twenty-eight, range thirty-two. Said lease being for a term ending January 1, 1912,*9 with an extension provided for a further term ending January 1, 1916. And that said plaintiff was in possession of and claimed to be the owner of certain other machinery, tools and supplies located on said lease and •other accounts, credits and assets located in Jasper •county, Missouri; that plaintiff then and there being •embarrassed by accounts unpaid and debts contracted in running and operating said mining lease and machinery, amounting to approximately $3800, and having no money or means with which to pay the same, and being desirous then and there of having said indebtedness liquidated, as a means thereto and providing therefor, plaintiff agreed to sell, assign and transfer all of its property and assets in Jasper county, Missouri, to this defendant for and in consideration of the sum of one dollar and the assumption by this defendant of the aforesaid mentioned debts and indebtedness, and this defendant agreed to purchase the same on the terms and for the consideration aforesaid, and thereupon an agreement in writing was made and entered into by and between the plaintiff and this defendant herein, being in words and figures as follows, to-wit:
“ ‘Know all men by these presents: That the Common Sense Mining & Milling Company, a corporation of the State of Missouri, party of the first part and H. L. Taylor, of Joplin, Missouri, party of the second part, witnesseth:
“ ‘That the said first party, for and in consideration of one dollar and the assumption and payment by the said second party of all debts of said first party amounting to about $3800, a schedule whereof is hereto attached and made a part hereof.
“ ‘The said first party hereby agrees to sell and assign to said second party or to his assigns all the property of said first party being situate in the county of Jasper, Missouri, to-wit: Lease on twenty acres of mineral ground belonging to B. F. Horton and*10 Luck K. Smith., more particularly described in the lease to one Coburn, of record in said Jasper county,, and released to the New York and St. Louis Mining & Metal Co., and in lease executed by said Horton and Smith to the said first party dated the — day of January, 1906, and recorded in Book —, at page —, in the office of the recorder of deeds for said Jasper county, at Carthage, Mo., together with all machinery, tools and supplies at the mines, accounts and credits, an inventory whereof is hereto attached and made a part hereof.
“ ‘The said second party accepts said property with the understanding that this is in full and complete payment and discharge of all claims or debts against or due by said first party contained in the schedule hereto attached or any other just and legitimate claim not scheduled, but inadvertently omitted therefrom.
“ ‘That the sale and assignment herein provided shall be concluded and fully executed within ten days-from the date hereof and that in the meantime till such consummation said second party to have care and custody of said property, to be relinquished at the expiration hereof should this conveyance not be followed by deed as herein contemplated.
“ ‘In Witness Whereof, the said parties have hereunto subscribed their names and affixed their seals. The said first party, its corporate seal affixed by authority of its board of directors, and the said second party his scroll seal. This 19th day of April, 1906.
“Common Sense Mining & Milling Co.
“Gr. A. SaNdehsoN, President.
“II. L. Tayloe (Seal).
a i
Attest:
“ ‘J. A. Farquhar,
Secretary. ’
“(Schedule of debts and machinery omitted)
*11 “That afterwards and on, to-wit, the 27th day of April, 1906, it was agreed by and between the plaintiff and this defendant that said above mentioned contract he and the same was then and thereby extended for a further period of ten days.
“This defendant states that relying on the promises and agreements made by said plaintiff in said written contract and the extension thereof he proceeded at much cost and expense to himself in both time and money to induce capital to invest in said property. That he did, within the time mentioned in said contract and the extension thereto, induce F. W. Moore and J. W. Bushnell of the city of East St. Louis, Illinois, to purchase said property in said contract mentioned and to pay therefor a sum of money sufficient to pay off and discharge the obligations of said plaintiff in manner and form as provided in said contract and the extension thereof. That in order to induce the said F. W. Moore and J. W. Bushnell to purchase said property aforesaid and to pay therefor the amount of money sufficient to discharge the obligations of the said plaintiff as aforesaid, it became necessary for this defendant to and he did exhibit to them the aforsaid contract and acquaint them of the provisions thereof, and promise and agree with them to continue in control of and assume the active management of the mining property mentioned in said contract, under an agreement with said F. W. Moore and J. W: Bushnell that they would give him in consideration of his future management of said property a contingent one-third interest therein, and they to retain a two-thirds interest therein, but that this defendant should not have nor receive any dividends from said property until the said property should pay to the said F. W. Moore and J. W. Bushnell the moneys expended by them in the purchase of said property in paying off said claims as aforesaid, and that the moneys to be expended by them in the improve*12 ments and operation of said property, and until the property was put on a paying basis.
“This defendant further states that he complied in full with all the conditions of said contract of purchase to be by him performed and in the time and manner thereby provided; that he paid, assumed and discharged all of the aforesaid debts in the manner provided in said contract and that this defendant did in all things • perform and fully comply with all the terms and conditions in said contract by him to be performed.
“That this defendant then and there notified plaintiff that he had secured parties to take over said property and pay the indebtedness of said plaintiff and that he had fully complied with all the terms and conditions of said contract by him to be performed, and offered and tendered to plaintiff receipted bills for all of said indebtedness and then and there requested plaintiff to execute and deliver to him good and sufficient conveyance of all its property aforesaid.
“That this defendant, relying on the promises and agreement of said plaintiff in said contract contained and by virtue of said contract and in compliance with the aforesaid agreement with the said F. W. Moore and J. W. Bushnell, did, on or about the 4th day of May, A. D. 1906, begin the operation of said mining lease and machinery and to mine thereon in good faith and has continued to operate the same in good faith ever since and has expended large sums of money thereon, to-wit, the sum of approximately $16,012.54, in developing and improving said mining lease and mining property and the further sum of approximately $4375, in purchasing additional machinery and mining equipment for said property.
“This defendant further states that plaintiff has wholly failed to comply with the agreements and conditions of said contract on its part to be kept and per*13 formed, and lias failed and refused and still fails and. refuses, although many times so requested to do, to> execute and deliver to plaintiff good and sufficient conveyance to all of its said property aforesaid or any part thereof.
“Wherefore this defendant prays a decree that plaintiff he directed to convey by good and proper-conveyance all of the aforesaid property to he in this defendant, and for such other and further relief as to the court may seem meet and proper.”
Defendants Moore and Bnshnell pleaded the same contract, and allege that after seeing the contract and an extension thereof, and making inquiry as to the property, they purchased the same from Taylor, relying upon such contract. The additional material portions of their answer being:
“And the said H. L. Taylor acquainted them with the provisions of said contract and extension thereof, and described to them the location of the property therein described and the approximate amount of the' debts against the said Common Sense Mining & Milling Company and importuned them and each of them, to purchase said property. These defendants then, and there agreed with the said defendant H. L, Taylor, to purchase said property upon the terms mentioned in said contract and extensions thereof, provided that said defendant IT. L. Taylor, would agree’ to enter into the active control and management of said property and the operation thereof, these defendants then and there agreeing with said H. L. Taylor that in consideration of his entering into said active control and management of said property and the operation thereof and his services thereby to be rendered to give him a contingent interest in and to said property.
.“Defendants further state that they proposed that he should and the said H. L. Taylor agreed to actively and personally manage and operate said*14 property and out of any and all proceeds from said property these defendants were to receive:
“1st. Any and all moneys which they expended in the purchase of said property and in its improvement and operation and that relying npon the good faith of the said Common Sense Mining & Milling Company, and npon its agreements in the aforesaid contract contained, and extension thereof, these defendants purchased said property and paid to said H. L. Taylor a snm sufficient to pay off and discharge all of the debts and obligations of the said Common Sense Mining & Milling Company, as provided in said contract, and directed him to proceed at once to pay off and discharge the obligations and debts in said contract and extensions thereof mentioned. And that said H. L. Taylpr forthwith and in the time and manner provided within said contract and extension thereof paid off and discharged all of the debts and obligations of plaintiff in said contract mentioned.
“Defendants further state that, relying npon the good faith of the plaintiff and npon its promises made in said contract and extension thereof, they did on or about the 4th day of May, 1906, authorize, empower and direct the said H. L. Taylor to enter into the active control, management and operation of said mine and property; that the said H. L. Taylor did, on said last-mentioned date, by virtue of the said contract and extensions thereof, between plaintiff and himself, and in conformity with these defendants’ directions and agreement, begin to operate and manage said property and mining lease and that he has, from that day to the present time, continued to operate and manage the same in good faith.
“The defendants further state, relying upon the good faith of the plaintiff and upon the promise made in the aforesaid contract and extension, that they have, since said 4th day of May, 1906, and up to the present time, expended necessarily in the develop*15 ment and improvement of said property and mine under said management and operation approximately the snm of $17,000, and that these defendants have expended the further sum of approximately $5000 in purchasing machinery and-mining equipment for said property and mining lease. That all of said amounts have been expended necessarily and in good faith and for the purpose of the betterment of said property ,and mining lease.
‘‘The defendants further state that the said H. L. Taylor did, on or about the 4th day of May, A. D. 1906, notify the said plaintiff that he had sold said property and mining lease and that he had paid off and discharged the obligations of said plaintiff as mentioned in said contract and extension, and then and there requested said plaintiff to execute and deliver to him a good and sufficient conveyance of all of said property mentioned in said contract and that said plaintiff then and there failed and refused and still fails and refuses, although many times requested so to do, to execute and deliver to said Ií. L. Taylor a good and sufficient conveyance to all of said property aforesaid or any part thereof.
“Wherefore these defendants pray a decree that plaintiff he directed to convey by good and proper conveyance the aforesaid mining lease and property to the defendant H. L. Taylor so that the same may he properly and justly adjusted between said H. L. Taylor and these defendants, or that the title of the aforesaid mining lease and property he vested in these defendants and divested from plaintiff, and for such other and further relief as to the court may seem meet and proper.”
The reply covers 20 large closely printed pages. It charges bad conduct upon the part of Taylor in selling the company some electric drills and machinery long prior to the contract. It charges that Taylor whilst installing the machinery and drills dis
The trial judge made some findings of fact in his judgment, thus:
“This cause coming on foT hearing on this 29th day of June, 1907, the parties to this cause, both plaintiff and defendant, appear by their respective counsel of record, and no party, plaintiff or defendants, requesting or asking a jury, all the parties to said cause waiving a jury, the cause is submitted to the court upon the pleadings and evidence for final determination and judgment. The court finds the allegations of plaintiff’s petition charging ‘that plaintiff was entitled to the possession of the following described premises, situate in the county of Jasper and State of Missouri, to-wit: The east one-half of the southwest quarter of the northeast quarter, of section thirty-three, township twenty-eight, range thirty-two, and being so entitled to the possession thereof that the defendant TI. L. Taylor afterwards, on the 19th day of April, A. D. 1906, entered into such premises, and unlawfully withholds from plaintiff the possession thereof,’ is not, upon consideration of the evidence, sustained, and therefore finds against plaintiff as to and upon, said allegations of fact. The court further finds that the charges made in the petition of waste and damage occasioned by the defendant H. L. Taylor, to plaintiff’s injury, are not sustained upon consideration of the evidence and finds against plaintiff*17 as tp and upon said allegations of fact. The court further finds that the allegations of the answer of the defendants E. W. Moore and J. W. Bushnell as to the execution of the contract, set out in said answer under date of April 19,1906, are true. That by the terms of said contract, the plaintiff purported to contract and agree for and in consideration of one dollar and the assumption and payment by the defendant H. L. Taylor of all debts of the plaintiff, amounting to about $3800, to convey to said defendant Taylor, or to his assigns, the property in controversy in this suit; that said contract was ordered by plaintiff at a special meeting of the hoard of directors at which said meeting more than a majority of said board', to-wit, five, were present, and two were absent; that notice of said special meeting was not given as provided by the by-laws of plaintiff; that said contract was executed and signed by plaintiff by its president, attested by plaintiff’s secretary, as ordered by said hoard of directors at said meeting. That upon the execution of said contract (the same having been by plaintiff signed and delivered to the defendant Taylor) possession of the premises in controversy was under said contract turned over by plaintiff to the defendant, H. L. Taylor, who thereupon held the same in good faith and so complied, while so holding, with the said contract of purchase, and complied with all the conditions of the lease to him transferred by plaintiff by the said contract. That in order to carry out and perform the obligations qn his part under said contract, executed as' aforesaid, and in order to procure adequate funds to pay and discharge the obligations of plaintiff in said contract, mentioned, the defendant H. L. Taylor, contracted to and did assign to the defendants F. "VV. Moore and J. W. Bushnell all his right, title and interest in the property in controversy, the said Moore and Bushnell having no*18 knowledge of the want of notice given at the special meeting aforesaid and acting in good faith and relying on said contract and believing the same to be authorized by plaintiff; that at the time of entering into said contract with the said H. L. Taylor, the plaintiff was in embarrassed circumstances, financially, and in an insolvent condition, and without credit, means or funds wherewith to pay its divers obligations and debts, many of which were past due and were being pressed for collection; that plaintiff, with full knowledge of the terms of said contract and knowledge of the facts that H. L. Taylor had assigned the same to ■ obtain funds for the purpose therein mentioned, stood by in silence, while the defendants Moore and Bushnell in good faith, relying upon said contract, and upon the right of assignment thereunder, did discharge all of said indebtedness of plaintiff as stipulated in said contract, so that, of said indebtedness, nothing remains, and thereby ■ plaintiff was and is forever released and discharged of all of its said debts. The court finds that defendants F. W. Moore and J. W. Bushnell, having entered upon the premises in controversy as assignees of the defendant H. L. Taylor, under said contract, have in good faith, necessarily and for the preservation and betterment of said property and mining lease, expended a large sum of money, to-wit, about eighteen thousand dollars above the receipts of said mine and lease, whereby said property was and is developed and rendered more valuable and increased in value to said amount and more. The court finds that plaintiff having had and obtained the benefit of the funds and labor of defendants, commenced their action herein without tendering or offering to the defendants to refund or repay any of the moneys paid in discharge of plaintiff’s debts, to plaintiff’s advantage, and with its knowledge and acquiescence under and in recognition of the contract aforesaid. The court finds that the defendant H. L. Tay*19 lor and Ms assignees, the defendants F. W. Moore and J. W. Bnshnell, have complied with the conditions of said contract upon their part, and having so complied have demanded the conveyance of the property in controversy in accordance with the terms of said contract by plaintiff, and although said demand has often been made the plaintiff has neglected, failed and refused to make and deliver such conveyance.
“The court further finds that the plaintiff has not, since this action has been pending, reimbursed or offered to reimburse or pay to the- defendants Moore and Bushnell the sums of money paid, in good faith, to the plaintiff’s benefit and the release and discharge of the plaintiff’s debts, as provided in said contract and to pay the defendants the amount necessarily paid in good faith by them for and toward the development, betterment and preservation of said property and lease, and that the plaintiff, although pending the trial of this cause was given an opportunity-and reasonable time in which so to do, has failed, neglected and refused to pay the debts paid on its account aforesaid, or pay the sums expended by said defendants for the preservation of the property and lease, aforesaid, or to pay any part of either. The court further finds that the defendants F. W. Moore and J. "W". Bushnell are the assignees of the defendant H. L. Taylor, to all the right, title, interest and claim of said Taylor and of all the right, title, interest and claim of the plaintiff in and to the property in controversy, and that the plaintiff, with full knowledge of the facts, has accepted, received and enjoyed all the benefits to it reserved and provided by said contract with defendant Taylor, but fails and refuses to perform said contract on its part. The court further finds that the plaintiff by its acts and conduct ratified said contract and is estopped to deny said F. W. Moore ■and J. W. Bushnell the ownership of the property in controversy, and estopped to assert or claim that the*20 said contract was or is void. It is therefore ordered,, adjudged and decreed, by the court.
“First: That the plaintiff take nothing by its action herein against the defendant TI. L. Taylor, and that said defendant have judgment for his costs herein expended.
“Second: That the plaintiff take nothing by its. action herein against the defendants F. W. Moore and J. W. Bushnell or from either of them.
“Third: That all right, title, claim or interest of the plaintiff in or to the property described in plaintiff’s petition, hereinbefore set out, as well as all right, title, claim or interest. in and to the personal property in said contract mentioned, to-wit: Hoisting engine and connections, Westinghouse motor, Westinghouse generators, transformers, switchboard and connections, blower engine and blower, tubs, cars, rails and cables, tools of all kinds and descriptions, electric drills, columns, tripods and steel, oil supplies in oil house, telephones, steam pipe and connections used underground and belting, be divested out of plaintiff, and the same is hereby so divested, and that all said right, title and interest in and to all of said property be and the same is hereby vested in defendants F. W. Moore and J. W. Bushnell, and the same is-hereby so in them vested. That plaintiff be and hereby is forever estopped as against said defendants, from claiming any right, title or interest in or to said property or any part thereof.
“Fourth: That plaintiff be taxed with the costs, of this suit and that execution issue therefor.”
Other material matters will be Uoted in the course of the opinion.
I. Upon the whole the evidence justifies the findings of the trial court. The court finds that only five of the seven directors were present when the contract.
II. The trial court found that the plaintiff was estopped from denying the validity of this contract, and we think under the evidence and law, such was a proper finding.
Within' the ten days prescribed by the contract Taylor notified the president of the plaintiff corporation that he thought he had a party who would buy the property, referring to defendants Moore and Bushnell, though not mentioning them. He asked for an extension of ten days, and the president of plaintiff by wire granted the extension. The original contract .and this wire were presented to Moore and Bushnell and upon the strength of them they purchased and
The contract of April 19, was valid upon its face, and carried with it the presumption that it was duly authorized. In fact it recited that it was fully authorized by the directors of the plaintiff corporation. Not only so, but it was recognized as a valid contract,, when later the officers duly executed and placed in escrow an assignment of the lease and other property of the plaintiff.
But in addition to this on September 25, following, the corporation, through its directors fully recognized the contract of April 19, by passing a resolution to rescind the contract. That resolution as offered by the plaintiff reads: “And be it further resolved that the contract between said company and H. L. Taylor bearing date 18th day of April 1906, be and is hereby rescinded and annulled.”
• On the same day in a letter to the Conqueror Trust Co. of Joplin, Missouri, the company which held the assignment mentioned supra in escrow, the reason for the attempted rescinding of the contract is thus set forth by the plaintiff company.
“You are hereby further notified that H. L. Taylor for whom said written documents were deposited in escrow in your custody by said company has wholly failed to perform his contract with said company and that said Common Sense Mining & Milling Company has rescinded and annulled said contract.”
It will be observed that throughout the plaintiff acted in full recognition of the contract, but tried to rescind it upon the ground that its terms had not been complied with by Taylor or his assignees. The trial court under the evidence found that there had been a, compliance with the contract, and that the contract had been fully performed by Taylor and his assignees Moore and Bushnell. This finding is fully justified
Under the proof plaintiff knew that its debts were being paid by Taylor.and his assignees. It knew that defendants were operating the mine and improving it at their own great expense. It knew that all this was being done in good faith under this contract to convey. It accepted the full fruits of the contract without complaint or murmur, and after its debts had been fully paid by Moore and Bushnell, and after they had expended some $18,000 in betterments of the property, and after five long months of delay, the plaintiff finally concludes its contract was never legally made, and brings this suit to recover the property, all the betterments, as well as damages for ore taken out. A bare statement of the facts makes the case smack of fraud and inequity. It does not appeal to our better sense of justice and right. No offer to place defendants in statu quo. No offer to do equity, although the trial judge recites that opportunity was given plaintiff to make such offer. On the other hand, plaintiff stands mute throughout, demanding its former property with all betterments, and most graciously accepting nearly four thousand dollars of its debts which were paid by the defendants. If any law can be found to throttle such a monstrosity it should be found, and we think the trial court found it, when in its judgment it declared that the plaintiff by its own acts was estopped to deny the contract.
The plaintiff should be estopped on the ground of preventing a fraud by the corporation on Moore
In Smith v. Richardson, 77 Mo. App; l. c. 430, BoND, J., clearly states the legal principle involved in this case. His remarks are so pointed and well worded that we quote at some length, rather than undertake a formulation of the rule ourselves:
“In determining the obligation of a private corporation for acts commonly termed ultra vires, an important distinction, noted in every well reasoned case, is sometimes overlooked. No corporation can hind itself or its stockholders by a contract expressly prohibited by its charter, by a statute, or by the general law. Such contracts are strictly ultra vires and create no obligation as far as they are executory, although the consideration therefor may have been received and enjoyed by the corporation. On the other hand, an act or contract merely in excess of the power granted to .corporations, but which is not expressly forbidden either by its charter or the general law of the State, although lacking affirmative authority for its performance on account of the silence, on that subject, of its charter or the general law, may yet, if the contract has been executed by the other party and its consideration received by the corporation, bind the latter on the principle of estoppel so that it could not be annulled by the corporation without a return of the consideration received by it. Contracts of this kind are not in the strict sense of the term ultra vires. They are only unauthorized acts of corporations, and not being void, but only voidable, the option to avoid them is lost if they have been wholly executed or executed by the adverse party. [Thompson Con., sec. 6016 el seq.] The reason a contract strictly ultra vires as above - defined, can never be enforced while anything remains to be done thereunder, is that a corporation deriving all its power to act from its constraining articles and the general law can make no*25 lawful contract in violation of the positive edicts of either. On the other hand, the estoppel of a corporation to annul an executed agreement or one whose consideration it has received (which though unauthorized, is not prohibited by law or its charter), is grounded oil the idea of preventing a fraud by the corporation on the party whom it had misled into the performance of the agreement. A careful view of the controlling decisions will fully sustain this distinction between the enforcible and the nonenforeible acts of private corporations.”
At page 432 he further says: “This contract was fully performed by both parties — the corporation got the delay of one year, and the holder of the note received the collateral. Having had the benefit of its agreement — the nature of which is such that it cannot be restored — the corporation now seeks to recover what it gave while retaining what it received. Upon the plainest principles of justice this cannot be done under a contract which, like the one in question, does not violate the provisions of its charter or the general law. That the contract of the president of the association was unauthorized by its board of directors and unratified by them as a body, may be conceded. This at most rendered it voidable only, not an absolute nullity. No steps having been taken to avoid the agreement prior to its full performance .by both parties, it is too late for such action now.”
So in the case at bar. The contract made with Taylor was not void, but only voidable. It was not a contract ultra vires, but at most under plaintiff’s contention, a contract which the corporation could make, but which it did not make on account of no authority given to the president to make it. This corporation stood by and saw this alleged voidable contract fully performed. It was performed with the full knowledge of its officers. Not only so, but it stood by and saw thousands of dollars expended on the property upon
Judge Thompson, in 10 Cyc. 1065, says: “Subject to exceptions in the case of municipal or governmental corporations, which are held to a strict exercise of their powers, the general rule is that corporations quite as much as individuals are held to a careful adherence to truth in their dealings with mankind, and cannot by representations or by silence involve others in onerous engagements and then defeat the just expectations which their conduct has superin-duced. A round statement of this doctrine is that es-toppels in pais' operate against corporations in like manner as against natural persons.”
And further discussing the doctrine of .estoppel as applicable to corporations, at page 1066 of the same volume he says: “As more fully explained later the same principle validates the voidable acts of corporations, on the theory of a ratification by the acquiescence of all the shareholders; so that after a long delay in which time other rights have supervened or expectations have been founded, upon the faith of an existing state of facts, the shareholders will be precluded from maintaining actions in equity to undo what has been done by the directors or officers without their authority.”
The same writer in his work on Corporations— 2 Thompson on Corporations (2 Ed.), section 1960, page 1048 — says: “In the law of agency there is a rule that if one accepts the benefits of an unauthorized contract made in his behalf by another, he is bound by its terms the same as if he had entered into the contract in person or had expressly ratified it; provided of course that he had full knowledge of all the. facts, and he is thereby estopped from repudiating the contract without restoring the benefits and putting
In the same volume at page 1056, it is further said: “It is not strictly necessary to the proper application of the principle of estoppel that the corporation should have received a benefit from the contract but it is sufficient that the other party has acted on the faith of it to his disadvantage — as where he has expended money on the faith of it. The reason of the rule is that honesty and fair dealing are the highest public policy, and that a private corporation, which is a mere collection of individuals, is no more privileged to repudiate its engagements and act dishonestly than a single individual is.”
In 3 Clark & Marshall on Private Corporations, Sec. 680, p. 2084, it is said: “Failure to give notice of a directors’ meeting cannot be set up to defeat the rights of innocent third persons dealing with the corporation, for they have a right to assume that the meeting was regular.”
And in Sec. 682, p. 2090, of the same volume it is said: “As a rule, illegality or irregularity in a directors’ meeting cannot be set up to defeat the rights of innocent third persons dealing with the corpora
In the case at bar the contract recited that it was made by authority of the board of directors. The real defendants were innocent third parties. In the face of this recitation in the contract, and under the law, the corporation should be estopped from denying the validity of this contract.
III. Indeed the trial court might have well put his decree upon the doctrine of ratification.
In 10 Cyc. 1073, the doctrine is thus stated: “Where the president of a corporation executes in its behalf, and within the scope of its charter, a contract which requires the concurrence of the board of directors, and the board, knowing .that he has done so, does not dissent within a reasonable time, it will be presumed to have ratified the act.”
The contract involved here was within the scope of the plaintiff’s charter. No contention is made to the contrary. Such act of the president and secretary in this case was known to the corporation through its directors for more than five months. Under the circumstances of this case that is a reasonable time in which to disown the act of the officers, even if such act was not fully authorized. This delay upon the part of the corporation amounts to acquiescing in and ratifying the unauthorized contract. We need not go further into other questions urged and- elaborately briefed.
The judgment nisi is a righteous one, and should be and is affirmed. All concur.