132 Minn. 160 | Minn. | 1916
The corporation was formed to take over and develop Gross’ land. According to the evidence of plaintiff’s own witness, Gross was, up to 1910, “the one person who carried on the business of the corporation, whatever there was to be done.” He was in name its president and
In March, 1909, Gross, as president, and Scrimgeour, as secretary, executed and delivered to defendant a mortgage for $3,000, covering the land mentioned. Defendant paid the amount to Gross, and Gross devoted it to his own personal use. This’action is brought to set aside this mortgage. The trial court found for plaintiff, and defendant appeals.
It is doubtless true that such officers have usually no implied power to mortgage corporate real estate. Such power usually resides in the board of directors. But we are not concerned with usual corporations. This was an unusual one. We are of the opinion that under the conceded facts of this case it must be held that Gross, as president and treasurer, and virtual manager of all the operations of the company, together with the secretary of the corporation, had the power and authority to execute a mortgage of this land to raise money for any legitimate corporate purpose. While the board of directors is usually the managing body of the corporation, it is not necessarily so. Where the duties of directors are not expressly prescribed by statute or by the articles of incorporation, they derive their power from the stockholders, who may, if they see fit, select other agencies for the transaction of- the corporate
“Where the shareholders of a corporation, by their direct act or acquiescence, invest the executive officers of the company with the powers and functions of the board of directors as a continuous and permanent arrangement, the board being entirely inactive, and the officers discharging all its duties, a mortgage on the property of the corporation, made and executed in its behalf by such officers, is valid, although not authorized by any vote of the shareholders or directors.”
See also Martin v. Niagara Falls Paper Mnfg. Co. 44 Hun, 130; Garmany v. Lawton, 124 Ga. 876, 53 S. E. 669, 110 Am. St. 207; Poole v. West Point Butter & Cheese Ass’n. 30 Fed. 513; G. V. B. Min. Co. v. First Nat. Bank, 95 Fed. 23, 36 C. C. A. 633; and see Kraniger v. People’s Bldg. Society, 60 Minn. 94, 61 N. W. 904; Rosemond v. Northwestern A. R. Co. 62 Minn. 374, 64 N. W. 925.
However, if it appears that money is borrowed, not for a corporate purpose, but for the private use of the officer of the corporation to whom it is paid and with intent on his part to divert it to such private use, and that the lender knows or is chargeable with knowledge of that fact, then the transaction, so far as the corporation is concerned, is a nullity. See First National Bank of Rice Lake v. Flour City Trunk Co., 118 Minn. 151, 136 N. W. 563; National City Bank of Minneapolis v. Zimmer V. R. Co. infra, page 211, 156 N. W. 265.
The adoption of this resolution cannot be considered á ratification of an act of an officer of the corporation done in the name of the corporation, but for his own private benefit. Nothing less than the unanimous action of the whole body of stockholders can authorize the use of the corporate credit for the benefit of an individual. Jones v. Morrison, 31 Minn. 140, 16 N. W. 854; Bothwell v. Bobinson, 39 Minn. 1, 38 N. W. 772, 12 Am. St. 608. And nothing short of the unanimous action of the whole body can ratify such action after it is done.
Batification to be effective 'must be with full knowledge of the facts (Jackson v. Badger, 35 Minn. 52, 26 N. W. 908), and no stockholder can be said to ratify a mortgage given by the corporation for the private benefit of an officer of the corporation, unless he have notice both of the giving of the mortgage and o'f the purpose for which it was given. Knowledge of one stockholder is not knowledge of the others, nor is it notice to them. In this case it affirmatively appears that at least one stockholder, the present secretary of the corporation, had no-knowledge of any of the facts pertaining to the mortgage.
If-defendant was ignorant of the fact that Gross was borrowing this money for his personal use, no ratification was necessary. If he was not, there was no ratification.
Order reversed and new trial granted on the issue indicated in this opinion.