2 Sweeny 415 | The Superior Court of New York City | 1870
By the Court:
The appeal papers submitted in this case have been prepared in a very objectionable form. They contain not only all the exceptions taken by the four appellants, which are very numerous, fiut also the exceptions of the respondents, which are equally numerous. Such practice, being calculated to mislead, imposes upon the court at General Term much additional and superfluous labor. This should not be done. An exception taken during the progress of a trial by a party who finally succeeded, is improperly incorporated into the printed case, unless its insertion can be justified by the existence of a special reason therefor. I have, however, carefully examined the whole case as submitted, and the examination thus made has led me to the conclusion that the evidence was insufficient to authorize the referee to find as matters of fact that the drafts in question were drawn by the company, upon the condition, among others, that the company should place the plaintiffs in cash funds to meet their
It has been repeatedly held that the liability imposed by the statute upon trustees of manufacturing companies for neglecting to make and file an annual report, is in the nature of a penalty for misconduct in office. The penalty imposed is the debt of the corporation (Bird v. Hayden, 2 Abb. Pr. R., N. S., 61; McHarg v. Eastman, 35 How., 205; Merchants’ Bank v. Bliss, 35 N. Y., 412, affirming 1 Robertson, 391).
Plaintiffs should be held, therefore, to strict proof of their case, and the burden of proof was upon them to establish that the debt was contracted by the corporation.
A corporation aggregate, being an artificial body—an imaginary person of the law, so to speak—is, from its nature, incapable of doing any act, except through agents, to whom is given by its fundamental law, or in pursuance of it, every power of action it is capable of possessing or exercising. The acts of such agents, in order to be binding upon the corporation, must, as a general rule, be done in the line of such agency, and within the limits of the authority conferred on them (Hartford Bank v. Hart, 3 Day, 493; Wyman v. Hallowell and Augusta Bank, 14 Mass., 62; Bellows v. Same, 2 Mass., 31; Salem v. Gloucester Bank, 17 Mass., 1).
Thus an agreement of the president of a private corporation was held not to be evidence against the corporation without something from which it could be inferred to have been within the scope of his authority (Pa. Supreme Court, Farmers’ Bank of Bucks Co. v. McKee, 2 Pa. St. R., 318).
The statute under which manufacturing corporations may be organized places the management of their property and concerns
In the case at bar, the by-laws of the Simpson Water-proof Manufacturing Company were adopted at the first meeting of the board of trustees. They provided that the officers of the company shall consist of a president, a secretary, and a treasurer. The respective duties of these officers were also clearly defined. It was made the duty of the president to preside at all meetings of the stockholders and trustees, and to oversee, under the direetion of the trustees, the manufacturing, selling, and all other operations of the company and its subordinate officers. It was made the duty of the treasurer to keep the moneys of the company, to deposit them in a bank designated by the trustees, and to disburse them under the direction of the trustees / but it was expressly provided that no money should be paid unless in pursuance of a vote of the trustees, and upon checks signed by the treasurer and countersigned by the president. The duty of the secretary was defined to be, to keep all the books and papers of the company, and to record the doings of the trustees. Eeither the president, therefore, nor the secretary, nor both combined, possessed the power to bind the company by making the
Thus it has been held that, whenever a corporation have a board of directors, under whose general supervision and control the business of the corporation is transacted, an agent, who attends to the daily routine of business and its management under all ordinary circumstances, has no authority, by virtue merely of his agency, to make a contract creating a general hen upon the personal property of the company, to secure money borrowed, but such contract must receive the approval of the board of directors. A general agent might be deemed vested with power to make such contracts, when necessary, in the intervals of corporate meetings, if the corporation had no other board of control but the agent; but if they have such a board, under whose control the agent was acting, such a contract by the agent without their sanction is not binding (Vermont Supreme Court, 1848; Whitwell v. Warner, 20 Vt., 425).
The evidence given on both sides in the case at bar presents no conflict of any consequence. It shows that the drafts were drawn by the secretary, simply because the president ordered him so to do, and that thereupon they were negotiated by the president for his private benefit; that neither of the defendants, Learned, Dixon, or Palmer, had any knowledge of any of the transactions which took place between plaintiffs and the president and secretary, or either of them, prior to the commencement of this action,
Thus, a ratification may be inferred from the acquiescence of the directors or other governing body of the corporation; from the fact that after the facts have been brought to their knowledge they have taken no measures to show dissent; from the fact that they did not question the accounts submitted; from the fact that they kept the proceeds or retained the benefits of the unauthorized acts of the agent (Houghton v. Dodge, 5 Bosw., 326; Woodbridge v. Proprietors of Addison, 6 Vt., 528; Hoyt v. Thompson’s Exrs., 19 N. Y., 208; Olcott v. Tioga R.R. Co., 27 N. Y., 546; Walworth Co. Bank v. Farmers’ Loan and Trust Co., 16 Wis., 629; Farmers’ and Citizens’ Bank v. Sherman, 6 Bosw., 181).
But in all these cases the board of directors or trustees had full ■knowledge of the facts, and I have been unable to find a single case in which a subsequent ratification has been inferred without proof that the board of directors or trustees had such knowledge. On the contrary, it has been held in several cases that it must be shoujn by the party asserting such ratification that the resolution or acts of the corporation, or of their directors or trustees, relied on as constituting the ratification, were performed with a full knowledge of all the material facts necessary to an understanding of their rights (Cal. Supreme Ct., Blen v. Bear River, etc., Co., 20 Cal., 602; Md. Ct. of Appeals, Cumberland Coal, etc., Co. v. Sherman, 20 Md., 117).
And where the ratification by a corporation of-the unauthorized contract of their agent consisted in their having received
As the evidence in this case unmistakably shows that, with the exception of the president, none of the trustees ever had any knowledge or notice of the unauthorized transactions which took place between said president and the plaintiffs until about the commencement of this action, and that the said unauthorized acts have not in any manner been ratified by an affirmative corporate act, the mere fact that the president, probably in extenuation of his otherwise inexcusable conduct, testified that he originally advanced about $30,000 to the company, a great portion of which he repaid to himself out of the proceeds of the drafts issued by him, cannot, in the absence of proof that the company had recognized this indebtedness, that the loan had become due, that the said president had actually given credit to the company for the proceeds received, and that the company had notice thereof, be construed into a ratification on the part of the company on the ground of acquiescence.
Finally, it seems to me equally clear that the defendants cannot be held liable upon the ground that the conduct of the corporation was such as. to create a well-founded belief in the plaintiffs that the president had either a general or special power to issue and negotiate the drafts. There was no proof that the president had been in the habit of borrowing of the plaintiffs in the name of the company, and that such loans had been ratified by the company, or that it was his custom of borrowing of other persons; that his act, in this respect, had been ratified by the company, and that these facts were known to the plaintiffs at the time they made the loan (Martin v. Great Falls Manufacturing Co., 9 N. H., 51). The evidence did not disclose any corporate acts from which plaintiffs could have inferred such authority; but it showed that plaintiffs, because they had neither prior
The judgment appealed from should be reversed as to all the defendants, and the order of reference vacated, and a new trial ordered, with costs to appellants, to abide the event.