Skinner v. Dayton

19 Johns. 513 | N.Y. Sup. Ct. | 1822

Platt, J.

The bill filed by Skinner against .the respondents embraced two objects : 1st. A liquidation of damages, upon principles of equity, arising out of the contract made by. the appellant with White, Taylor and White : and 2d, To compel the other respondents to contribute, for the damages to be assessed in favor of While, Taylor and While.

That the appellant is personally liable upon the covenant which he executed, so as to give to White, Taylor and While, a remedy against him alone, has been decided by ■the Supreme Ccurt, as well as the court of Chancery. The .wholesubject, however, has never before been presented in all its parts and relations; and in reviewing the decisions at law, and in equity, upon the particular points that have been adjudged in relation to this controversy, I am clearly of opinion, that the doctrine óf res judicata has no just application on,this appeal.

The decision of the Supreme Court (13 Johns. Rep. 307) pronounced^ that Reuben Skinner was personally and individually liable upon the covenant executed by him to White, Taylor and White. But it turned merely upon a question of special pleading. It was there decided, on demurrer, that to avoid individual responsibility, it was necessary for Skinner to aver and prove, not only that he sealed the contract for the directors, &c. but that he had authority from them for that purpose. It turned upon the technical effect of a seal. For if the associates are considered as partners, one of them could not bind his co-partners by.aseal, without special authority: and admitting that, as a partner, the appellant might in this instance have made a contv&ctwilhout seal, which would have bound all the associates, yet, as he used a seal, the simple contract, as partner, was merged in the covenant | and thereby it became, in judgment of law, his own individual contract, unless he could prove that bis associates specially authorized him to seal for them. The respondent, (iSkinner) in that case, was allowed to plead de novo ; and ■ before final judgment was rendered, he resorted to the court of chancery, where the whole subject has been developed ; and we now have the proofs as well as the pleadings before The former appeal to this court was upon a decretal or* us. ■der, which dissolved the injunction for staying the proceedings at law. In reversing that decretal order, this court was confined to the allegations in the bill and answer: and the decision on that 'appeal did not involve the questions now presented. We are at liberty, therefore, to disregard the obiter dicta of the learned members'of this court, who assigned the reasons for that reversal : “ judex non redditplus quam quod petens ipse requirit.” We were not then required to decide as to the rule of damages ; nor the right on the part of Skinner to contribution from his associates ;.nor could we then determine definitively as to the er'.ntual liability of Skinner', because, all the defensive allegations in the answer of White, Taylor and White - were denied by the replication of Skinner, and the proofs were not then before us. The order of this court for continuing the injunction was a preliminary step for arresting the proceedings at law, until the whole merits should be ascertained from the proofs, as well as the pleadings. The'condition annexed to that order, that judgment should be confessed and perfected át law, was' intended as a provisional security merely; to be used or modified as the equity of the case should eventually- demand ; and we have a rightful control; over that judgment,.by perpetual injunction, for the whole or for part, as equity shall require.

As to the validity and binding force of the covenant entered into by Reuben Skinner, so as to render him personally and individually responsible, Iísee no reason to entertain a doubt. Whatever relation he may have stood in, with regard'to his associates in the manufacturing company whether, as co-partner, or as agent, he had a right to volunteer his own individual credit and responsibility ; but he certainly had no right to contract, in that form, either for the company, or for his co-directors. They had given him no authority to seal for them : and yet he voluntarily undertook to perform that office on their behalf; stating, on the face of the instrument, that he so executed it, for himself and Wm. Raymond, jun. and Abner C. Hitchcock, as directors of the&ranvillel.Cotton'Manufacturing Company. He thereby virtually represented and affirmed, that he had authority from his co-directors to make such a contract for them. No bad faith is imputable to White, Taylor and White in any part of the whole transaction. They fairly and ho-, nestly "acquired that security :and when obtained, it was obligatory on Reuben Skinner, and on no other person. He did not bind his principals, because he exceeded the authority which they had given him ; and neither law nor equity would tolerate the idea, that the covenant, thus executed, - was to be treated as a nullity, if Skinner did not bind his principals by sealing that contract, it must follow that he bound himself individually. White, Taylor and While were no doubt induced to believe, that they had the covenant of all the three directors of the manufacturing company : and when their mistake is discovered, shall it be allowed, that Skinner, who led them into that error, shall take advantage of his own wrong, and be held irresponsible ? By executing that contract, Skinner neither created any obligation, nor gave any right of action against any person but himself. The Grannville Manufacturing Company had a right to adopt, or disavow the contract as they pleased; and Skinner had no right to cast upon White, Taylor and White, the burthen of proving a subsequent ratification by the company. White Taylor and White had a right, therefore, to elect to consider and treat it as the personal and individual covenant of Skinner ; and they have uniformly done so. Whether the co-directors, or the members of the association subsequently ratified and adopted the contract, so as to render them liable for contribution, is a distinct question, which I shall, hereafter examine. But I think it clear, that until such ratification, White, Taylor and White had no remedy against them, either in law or equity. And if, at any rimé, personal and individual responsibility attached to • Reuben Skinner upon the covenant, White, Taylor and While had a right to rely on his security alone, and to leave him to seek aid or contribution from his associates.

But it is insisted, by the counsel for the appellant, that White, Taylor and White have no equitable claim for damages, because they chose to stop in the progress of the work and have never delivered, nor tendered", any part of the machinery.

This was an excutory contract, which could not be altered nor rescinded, without the mutnal consent of the parties; and I have no doubt, that White, Taylor and White might have proceeded, if they chose, to a completion of the whole contract on their part; and then they would have hada right to recover the whole price according to the contract. But I think the letters of the 20th of May, and the 24th of July, 1815, with all the concomitant circumstances of the case, were abundantly sufficient to excuse and dispense with any further performance of the contract on the part of White, Taylor and White. They were notified that the stockholders had refused to pay the assessments, and would “ of necessity have to abandon the business, unless some alteration could be made in the contract.” While, Taylor and White were under no obligation to alter the contract; and in my judgment they had a right to stopprogress of the work, and to have a liquidation of damages, upon equitable principles» as to what had been rightfully ¿¡¡one under the contract, be-, fore the 1st of August¿18-15, wheij^jt was mutually abandoned.

That White, Taylor and ¡fFAwfe'hatWubscribed for shares in that association cannot, I-, think, -$ary the construction of their agreement with -Skinnernpt; afiect their rights under it, except it]>e to render' tyjfi contributory, if the point of contribution^hall be.determined against the stockholders.

The next question in ..order i§* as to the rule of damages upon the liquidation pf the contract. There is great difficulty in prescribing the rule; and tijfere will probably be still greater difficulty in the application of it. According to my view of this question, 4'he master should be directed to ascertained report, 1st, Wfef&tsountof labour was performed, what amount of^niateriaW- was procured, and what amount of expenses v^ere actually, and bona Jinde incurred by White Taylor and JFAfie,"put'suant 'to the covenant, up to the 1st day of August, 1815 ; 2dlyi.What amount of profits (if any) would have.acferuéd lf0¥JkMe, Taylor and While, if the contract had been-mu-ytii?Iiy fulfilled by the parties in good faith, and in all its .pari & 3dly, What proportion did the profits (if any) upon the labour^matTíVials and expenditures so applied under the contract* upyto the 1st of August, 1815, bear to the estimated pjesñCs-fifa'ny) on the entire and mutual fulfilment of the contract: l^nd, 4lhly, What was the available Amount in value to White, Taylor and White, in fair open market on the 1st day oí August, 1815, of all the actual la-hour, expenses and materials so appropriated and applied by them under the contract, up to that day ; to the end, that White, Taylor and White may be credited with the amount oí labour, materials and expenditures found to have been so applied on the 1st of August, 1815 ; and also credited for the proportion of profits (if any) so to be found under the 3d head of inquiry above stated; and that interest be added to both those items of credit, from the 1st day of August, 1815 5 and that they be debited with the available amount of labour, expenses, and materials so found to have been appropriated and supplied by them, under the 4th head of inquiry, together with interest.thereon from the 1st -day of August, 1815 : and the balance of such account will be the amount of damages to be recovered under the contract.

As Whitt, Taylor and While elected to abandon the further execution of the contract, when that option was tendered to them by the opposite party, 1 can perceive no equitable grounds for their claim of projits, beyond the pro rata allowance.

Suppose the fair calculation of profits on the entire and successful completion of the whole machinery, to be $3000, as estimated by some of the witnesses $ yet it is to be considered, that they must have devoted their time and services, and capital, and credit, for nearly a year longer; and during that time, they would have been subject to a great variety of risks and unfortunate casualties, from all which they were relieved by the mutual abandonment of the contract. To entitle them to profits on the whole machinery,they must have earned those profits, by completing the whole work, which they have not done.

It is contended, that in fact, White, Taylor and White had no option: that the default on the part of Skinner in not paying the two first instalments, deprived them of the means of prosecuting the work; and that this compulsory abandonment of the contract was the cause of their utter ruin in business and property. These are among the unfortunate consequences which daily occur, from the want of punctuality in pecuniary engagementsbut neither courts of law nor equity can measure damages by such remote consequences, or contingencies. If the money had been punctually, paid according to contract, it might perhaps have been profitably used; but it might also have been lost or wasted. The lawful rate of interest is the only standard which we can recognize, for damages arising from the non-payment of money, upon such contracts.

Next, in order, is the important question, whether the stockholders or members of 44 The Granville cotton manufacturing company,” are liable to contribution for those damages ? And if liable, are they bound personally, to the whole extent of the damages, or only to the extent of the common property and funds of the company ?

This was a voluntary association for the joint.and personal benefit of its members, who by the agreement, styled 44 the constitution, ” dated the 19th day of April, 1815, declare their object to be “ for manufacturing cotton yarn and cloth.” By the 1st article they adopt a name, viz. “ The Granville Cotton Manufacturing company.” The 2d article provides for a proper selection of their members to transact the business of the company, to be called “ President and Directors ” and a Treasurer.

By the'Sd, 4th and 5th articles, particular powers and instructions, are given in regard to the employment of a sub-agent and clerk, and their duties. The 6th article declares that 44 each person shall at the time of subscribing for stock t£ in said company, pay in cash on every share by him or 44 her subscribed ten dollars; and shall from time to time, 44 and at all times hereafter, pay such assessments as shall be 44 made by the President and Directors, or forfeit such share “ or shares with all previous payments made thereon.”

The construction to be given to the 6th article will determine the character of the association. The exposition given by his Honor the Chancellor, is, that " the company " could not be bound beyond the capital paid in ; and the " president and directors had no power under the articles " of association, to bind the members individually. Whoe" ver dealt with the company as such, and without resort- ‘‘ ing to a personal covenant, was to be presumed to deal with them, according to the terms of their constitution, and “ to give the credit to the funds of the company actually “ paid in, or to be paid in, underassessments duly made. " He had no right to look to the credit of the individual “ member's, unless these individual members entered into “ a personal covenant or contract.”

In considering the avowed object of this association, and examining all the provisions of their constitution, my mind has been led to a different conclusion. It was an inconsiderate and adventurous enterprise; and, in all probability, the question now agitated, of personal liability for contracts made on behalf of the company, in the event of a deficiency of the joint fund, never actually occurred to the minds of the associates. If they meant to guard against such individual responsibility, it is extraordinary that they did not, in their constitution, expressly stipulate against it, and give public notice accordingly, instead of leaving it to.silent inference. And the question also presents itself to my mind, with some force, why, if they intended to avoid personal liability, did they not avail themselves of the statute which authorized them to incorporate themselves as a manufacturing company, by filing a certificate in the Secretary’s Office ? (Act of 22d March, 1821.) The provisions of that statute exactly applied to their case, and it depended upon their own volition, whether they would avail themselves of that shield or not.

My first proposition is, that if the terms of their association do not, by fair and necessary construction, negate the intention of personal liability, in judgment of law and equity, the members of the company are individually responsible for all debts contracted, for the objects, and within the scope of the association. If they did not mean to be personally liable for deficiencies, good faith required that théy should speak unequivocally, and give notice ,that such were the terms on which they contracted. If they had accepted the franchise of an incorporation, offered to them by the Legislature, their rights and duties would have been distinctly marked and understood, and no person wmuld have confided in their personal responsibility.

In my judgment, the 6th article, (which is the only one relied on for that purpose) contains no such negation of per» liability. A capital was necessarily to be provided J an<* aPPeara to me, that the only object in that article a the copartnership, and which entirely satisfies all the words 0f ¡t) was to determine the amount, and the rule óf contribution, in regard to the sums to be invested as capital its their joint concern. And the stipulated forfeiture was intended merely as a summary means of enforcing the punctual compliance with that essential requisite. They were to pay in their proportion Of capital, as required by the directors, or to incur the penalty of forfeiture. A forfeiture Of shares under that article would undoubtedly .also operate ; as a dissolution of the partnership, as to the person So forfeiting his shares, in regard to all contracts subtequenfly tnade by the directors. To say that the 6th article was intended to secure to each stockholder a right to withdraw from the partnership whenever he pleased, would be adopting a construction which imputes to that article no positive meaning, nor any practical effect. Because, each- partner •would have had the same right, without any such provision. It is a right inseparably incident to every partnership.— /There can be no such thing as an ini&ssotuble partnership, Every partner has an indefeasible right to dissolve the partnership, as to all future contracts, by publishing his owh volition to that effect -: and after such publication, the other members of the firm have no capacity to bind him by any contract. Even where partners covenant with each other, that the partnership shall continue seven years, either partner may dissolve it the next day, by proclaiming his determination for that purpose: thé only consequence being, that he thereby subjects himself to a claim for damages for a breach of his covenant. The power given by one partner to another, to make joint contracts for them both, is not only a revocable power, but a man can do no act to devest himself of the capacity to revoke it. It is remarkable, that . there is a perfect silence throughout the instrument of association, in regard to profits and loss, and yet the law will intend that both were contemplated; arid, in the absence of all explanation on their part, we must intend, that they were to be borne and enjoyed by the associates, in propervtioti to their shares of interest, which are expressly stated* As to their organization and interior economy for conductingth eir joint concerns, the associates have made a law for themselves, by their constitution, as they had a perfect right to do. Articles of co-partnership, in almost every case, contain some peculiar provisions or restrictions which are valid and bihding between the partners, as such, but which have no application to those with whom they contract. These associates engaged in a bold enterprize, exposed to great risks, and involving large expenditures. They provide for a regular succession of directors; but there is an utter silence in the constitution, in regard to their power of making contracts for land, buildings or machinery ; and yet, from their name of office, and the obvious design of their appointment, we must suppose it was intended, that they should be the acting partners or agents of the company ; and if they had power to act at all, we must presume they had power to contract for machinery for spinning cotton, which was the avowed design of the institution.

The only specified power conferred on the directors is (in 4th article) that “ it shall be the duty of the president and •“ directors to appoint a general agent, whose duty if shall be “ to purchase stock, and vend the goods of said company,” &c. But this obviously refers to a sub-agent, who was to conduct the ordinary business of the company, after the establishment should be in operation. -

The whole scope of the testimony shows, that the members of the association recognized the directors (of whom the president was one) as the persons authorized to contract on their behalf: and the question now is, hadjthey power to contract, so as to bind the individual associates beyond the common funds so placed under the management and control of the directors 1 In my judgment, the directors had power to bind the stockholders individually and personally, for debts bona fide contracted in the regalar prosecution of the business committed to their charge ; and every contract made by them, as directors, in general terms, was obligatory on the associates to that extent. Whether any private individual stockholder had power to bind his associates, by assuming to contract, contrary to the fundamental rules and organization of the company, is a very different question, which does not arise in this case.

In the case of M'Neven and others v. Livingston, &c (17 Johns. Rep. 437.) this court decided, that joint proprietors of patent-rights for navigating by steam, on the mere ground of such joint interest, could not bind each other by any contract with any assignee of such right, “ not connected with the enjoyment and exercise of their common privilege,” which isiq perfect accordance with the doctrine which I apply to this case. In the case of Livingston v. Lynch, and others, (4 Johns. Ch. Rep. 573.) his honor the Chancel,lor decided that the association of stockholders of the'North river steam boat company was not a partnership, in a commercial sense; but the parties were tenants in common of the property and franchises belonging to the company: and that the constitution adopted and subscribed by all the members, as ¡he fundamental articles of their association, could not be abrogated or changed, except by unanimous consent. That was a suit by one of the associates against the other members of the company, to enforce the original stipulations of their constitution, which provided for the custody of their boats, the appointment of their officers, and the deposit of all moneys received by the captains ; which provisions, a majority of the stockholders had resolved to modify and vary. Ia maintaining the rights of the individual member, against the innovations attempted' to be imposed on him, by a majority of his associates, the Chancellor undoubtedly decided correctly. For admitting them to be partners, in relation to contracts with others, they had a right to make a law for themselves, as to all the objects of that decree. The reasoning of the Chancellor, on that occasion, in reference to the case before him, was conclusive : but with great deference, I remark, that there are several gratuitous dicta in that case, to which iny judgment cannot yield assent. Although the general law of partnership, which gives to each partner an equal right to the custody "and 'control of the chattels and money of the company, was, in that instance, modified by convention of the parties ; yet, while unincorporated, it appears to me, they were personally responsible as partners, for all contracts made by their acknowledged agents, within the scope of their employment, and “ connected with the enjoyment and exercise ol iheir common privilege.” Suppose, the ostensible agent of such a company contracts fora steam-engine, or for fuel for their use, can it be admitted, that in case of a destruction of the steam boats, or a deficiency in the common fund, the individual members of the association can escape payment, by abandoning their worthless stock ?

In the case now before us, the Chancellor remarks, that the right of abandoning, merely on forfeiture of stock, was reserved to the members, “ as a check to extra- “ vagance and abuse in the management of the company “ concerns ; ” and “ it can not be supposed that individuals “ who consented to take certain shares upon these terms, “ intended to place their whole fortunes at the power and “ disposal of the directors.”

In answer to these remarks, I apply the maximil juclicandum est legibus, non exemplis,>'> It may justly be said, that the object of these associates was private gain : they acted voluntarily, and had a right to choose their own associates. Every partnership implies mutaual confidence, and involves great risks ; but it accords best with the principles of equity and public policy, that whoever speculates for gain, in that mode, should also incur the hazards which attend it. The members of such associations, or those who represent them as agents or directors, must be presumed to know the amount and condition of their funds and resources; while others who contract with them, have not the means of estimating their joint funds. It, therefore, seems to me that the wisest and most salutary “ check against extravagance and abuse, in the management of the company concerns,” is in holding the individual members responsible for deficiencies, to bona fide creditors.

If a contrary doctrine be established, it will tempt men to speculate, on the public credulity, by rash and ill advised schemes, which, if they happen to succeed, may enrich the adventurers; but where failure and consequent ruin are the result, the calamity must fall on other heads than their own. Bold enterprise and adventurous speculation, for pecuniary profit, form one of the characierfsiic foibles of out countrymen, and instead of being encou* raged and lured on by personal indemnity, that spirit ought to be checked and restrained by the impressive consideration of individual risk and responsibility.

This brings me to the question, whether the contract made originally by Reuben Skinner alone, with White, Taylor and White, was subsequently ratified and adopted by the directors of this company ? The only directors were Reuben Skinner, Wm. Raymond, jun. and Abner P. Hitchcock. The answer of Wm. Raymond, jun. “ denies that he ever approved of the said contract in any shape, or that be has ever intentionally done any act or thing to ratify the proceedings of the appellant.” “ He denies that ever the appellant consulted him upon the expediency of making the contract upon the terms ultimately concluded ; and if he had done so, this appellant would have dissuaded and protested against the same.” And Abner P. Hitchcock, (the other director) in his answer, “ wholly denies that he ever directly or indirectly gave his assent to said contract, before or after its execution.”

[Here his honor detailed the testimony taken in the cause.]

In regard to Hitchcock, the other director, I perceive no evidence that he was consulted, or that he assented to the contract before it was made.

[Here his honor stated the testimony of the witnesses.]

On weighing the evidence on this point, I concur in the opinion of his Honor the Chancellor, “ that there is not the requisite evidence that the two directors, Raymond and “ Hitchcock, ever authorized the making of the contract. ”

But, in my judgment the Chancellor erred in his next conclusion, viz. “ that the contract was never submitted to “ the consideration of the board of directors; and that it « never received their united deliberation and assent.”

It is proved, without contradiction, that soon after the contract was made, Skinner, as president, convened the board. All the directors attended ; he laid before them the contract which he had made with White Skinner and White, whicl) on the face of it explained, that he had assumed to act as their agent; their names were recited in it as the parties to be bound by it; they made no objection. One of them moved a resolution for an assessment of $60 on each share, with an explanation, that it was intended for the express purpose of meeting the first instalment on that contract; and the time of payment was made to correspond with the contract, allowing time to send it to White, Taylor and White at Troy. The other director seconded the motion, and the resolution for such assessment was unanimously agreed to. On the 20th of May, 1815,' the three directors wrote to White, Taylor and White a letter, in the following words: “ The bearer, Mr. Nathan H. Raymond is authorized by us to call on you respecting the contract niade for machinery for the intended factory : several shares have been forfeited, and consequently the remaining stockholders feel embarrassed, and will of necessity have to abandon the business, unless some, alteration is made in the contract conforming to the circumstances of the present stockholders. The bearer is authorized to make such alterations as the company feel able to meet.” This letter was signed by all the directors ; and to me, it seems pregnant, in every line, with the most satisfactory evidence, that the directors had ratified and adopted the contract, and meant to treat it as if it had been duly executed by them all.

These facts are undeniably proved; and although the two directors swear in their answers, that they “ did not consent to, nor ratify the contract,” we must intend that they did not mean to deny these facts, which they soon after published in the church, to a host of witnesses ; but that they swore to what they understood to be the legal inference from those facts. On reviewing the whole series of conduct on the part of the directors, after the contract was presented for their ratification, my mind is irresistibly led to the conclusion, that it was adopted by them in their official character. They determined to carry it into effect ; and laid an assessment for that purpose: and thereby they made their election, and are concluded by it.

When Skinner told them “.he had fun the company in debt $15,000, and did not know how they would like it,” and presented to them the contract which he had sealed, good faith required, that they should thenh&ve taken theirstand, and have apprised him of their intention, if they meant to disavow the contract, and throw the burthen on him alone. If they had done so, he might have found other associates, and provided other-means of carrying the contract into effect ; and secured himself against a ruinous loss, which now would be inevitable. “Ratihabitio retrotrahitur, e<- mandato (Equiparaturd’’

My opinion, therefore, is, that in regard to the question of contribution, the stockholders stand in the same situation as-if their agents, the directors, had originally made the contract on behalf of the Company ; and that all who continued to be stockholders, at the date of the ratification of that contract, are personally liable to such contribution, if the joint fund shall prove insufficient; and that While, Taylor and White are to be included as stockholders, for two shares, in-respect to such contribution. As creditors, they have a right to recover damages under the contract; and as copartners they are bound to contribution. Their subscription for two shares of stock Was accompanied by a stipulation, that they (White, Taylor and White)11 should be exempt from any assessment which had been or should be made until the factory should be in operation but this exemption extends only to-assessments for capital stock to be invested in the joint concern ; and has no application to their mutual responsibility for the debts of the Company beyond the joint fund. >

It follows, therefore, that it would be inequitable to allow While, Taylor and White to sue out execution,until the measure of contribution is settled, . and a reasonable time has-been allowed to enforce it»

For these reasons, my conclusion is, that the decretal orders appealed from ought to be reversed.

Yates, J.

This appeal is from two decretal orders of tbeCourt of Chancery: the one is a reference to a master, as between the appellant and the respondents, White, Taylor and White, to ascertain and report the damages sustained by them, by reason of the non-execution and abandonment, on the part of the appellant, of the agreement between them of the 25th of April, 1815, requiring the master to report the amount due-to those three respondents, for the work done and the material's furnished, and for all other expenses by them bona fide and actually incurred, pursuant to the said agreement, prior to the 1st of August, 1815, when the further execution of the agreement was abandonded, by reason of notice of the inability or refusal of the appellant to fulfil it; and also to ascertain and report, in addition thereto, the amount of the actual loss and injury, if any, which W. T. and W. may have sustained, by reason -of such abandonment of the contract, reserving the question of the costs and all further questions, until the coming in of the master’s report.

The other decretal order complained of, is, that the respondents were not bound to contribute to the damages which might be assessed and levied by and on behalf of the respondents, White, Taylor and White, against the appellant, upon the above mentioned contract, and ordering a statement of accounts by the master, in furtherance of such decision.

A suit at law having been brought on this contract against the appellant, for these instalments, amounting to $1900, it is insisted, that the judgment on the demurrer to the plea pleaded in that cause, has settled the question as to the individual responsibility of the appellant. In my view of the subject, this decision cannot be considered as conclusive. The fact is, that the suit in Chancery had been instituted, and all proceedings at law enjoined, before such judgment had been rendered. Besides, the ground of that decision against the defendant in the Supreme Court, was an emission in his plea in bar, of an averment that the appellant had authority to execute the agreement for the directors; and the bill and evidence clearly show facts and circumstances not available-in the defence at law ; and that the appellant, in order to secure the benefit of this evidence, has been obliged to resort to a court of equitable jurisdiction for relief. The judgment of the Supreme Court cannot, therefore, be deemed res judi~ cata, so as to preclude an equitable remedy.; nor does the decree of this Court, reversing the order of his honour the Chancellor for dissolving the injunction, establish the individual responsibility of the appellant, so as to prevent him from claiming his right to contribution from the members of the association, or some of them. That decree was made on the bill and answer of White, Taylor and White, which answer was then properly taken to be true, leaving to the appellant the right, afterwards, of disproving it, and bowing facts from which he might still be entitled to th® contribution sought by the bill, and, as stated by the counsel, on the part of the appellant. The condition annexed, upon which the injunction was to be continued, of confessing a judgment in the suit at law, was an exercise of discretion by this Court, with a view to the security of White, Taylor and White, for any loss by suspension of the proceedings, without conclusively deciding with regard to damages. The question, therefore, whether the alleged authority in Skinner-to execute the contract for the other directors and the other stockholders, has been made out by the pleadings and evidence, subsequently taken in the cause to entitle him to contribution, still remained open, and, of course, was a proper subject of investigation for the court below, notwithstanding the judgment at law and,the decree of this Court.

In the decision of this Court alluded to, it is stated in the opinion delivered by me, that the respondents, White, Taylor and White were entitled to the damages sustained by them in consequence of the rescinding of the contract; and that from the circumstances disclosed, such rescinding must be d eemed to Jiave been by mutual assent, which placed the rights of the parties under it, on grounds different from what would have been the case, if White, Taylor and White had continued their operations. The profits, therefore, which might have been made, if the contract had been complied with on their part, I am inclined to think, ought not to be taken into account. It certainly was not intended by me, that -it should be considered a subject of inquiry, in ascertaining those damages. They had performed the contract in part; and as far as that had been done, they were entitled to just compensation in damages, for their actual losses and expenditures ; that is, as far as they had proceeded in complying with the contract.

It is undoubtedly settled law, that one person cannot seal for another, without express authority; and that by assuming to act.without it, a personal obligation is created. That au-thority may, however, in some instances, be by parol; as in the case of Ball v. Dunsterville, (4 Term Rep. 313.) where • a bill of sale was made by two partners, sealed with the seal of one of them, for and in behalf of himself and the other, and by the authority of the .other,., and in his presence ;—the Court decided, that it was a good execution though sealed with the seal of one only.

The authority set up by the appellant, with regard to the execution of this agreement, has not been recognized, or assented to by White, Taylor and White, so as to confine them, in seeking compensation, to the directors, or the members of the association. There certainly appears to have been no previous resolution of the directors' or the company, entered in their minutes, expressly authorizing the appellant to execute it, or Skinner never could have expressed himself as he did, u That he had run ¡he company in debt, that day, to $ ¡ 5.000, “ and he did not know how they would like it.” Although this shows, that no resolution stating the terms of the contract specially, had been entered in the books of the company, still it is by no means conclusive that the appellant acted altogether without authority. The terms of the contract could not be known to the company until made, and he might in this conversation have alluded to the terms only. Under those circumstances, no doubt remains of the individual liability' of the appellant to White, Taylor and White, for the amount of the damages on the contract, as before stated, if they elected to resort to him exclusively. But this individual responsibility, under the control of White, Taylor and White, does not release the other stockholders from contribution. The conditional signature for the shares subscribed, so far implicated White, Taylor and White, as to subject their recovery to the equitable qualifications and restrictions necessarily arising out of the facts disclosed in the vase. The form of the contract, and signing, as for^the directors, must be deemed the exclusive act of the appellant, as it regards White, Taylor and White ; and cannot affect their remedy against him, except by subjecting it to the restrictions mentioned. If the assumption to seal for the directors, had been without their knowledge, or subsequent assent, and whollyunaccompanied by acts of recognition or ratifica'ion on their part, there must have been an unqualified recovery for the damages against the appellant, not subject to any restrictions by the Court of Chancery ; and he, of course, would have been without remedy against the other members of the company.

It cannot, however, be denied, that the source from whence the payments were lo have been derived was known to both Parl*es ’ and having failed, the disappointment must have been equally unexpected to both; because the respondents, While, Taylor and White, subscribed the articles of the association, on an express condition or stipulation against assessments on themselves, until the factory should be in operation. They, therefore, knew that the payments were to be drawn from those assessments ; and the refusal of the stockholders to pay, when called upon, being an incident not to be avoided, and beyond the control of the appellant and While, Taylor and White, I can see no sound objection to its affording grounds for the interposition of a court of equity, in postponing the collection of the amount of damages which might be found against the appellant, until the question of contribution shall be settled between him and those of the company who may be adjudged liable to bear the burthen with him, and a reasonable opportunity afforded to enforce such contribution. It will readily he perceived, that by adopting this measure, recourse will be had, in the first instance, to the legitimate source from whence the parties to the agreement originally expected the fundsshould be derived. It is, therefore, no matter of surprize on White, Taylor and White. And this course, it would seem to me, is dictated by the soundest principles of equity; for it cannot be controverted, but that the present situation of the appellant has arisen from the default of others, without fraud or collusion on .his part; a result, as has been before stated, equally unexpected to both' parties to the ^agreement, and inevitable, as it regards the appellant.

This leads me to the question of contribution before alluded to ; and, on that subject, I am inclined to think, that the evidence fully authorizes the appellant’s claim, on some of the respondents, to contribute rateably to the payment of the amount of damages which may be recovered against him, according to their respective shares in the company.

That the appellant was about entering into a contract for machinery, was known to some of the company, is a fact which cannot be denied. And that the assent to the making of such contract by him had been obtained of some of the memBers individually, also appears by the testimony of several witnesses. It must, however, be admitted, that according to She térms of the contract, such knowledge and individual assent alone, would not be sufficient to entitle the appellant to claim contribution from the other stockholders. If the contribution sought for, therefore, rested merely on what took place previous to the making of the agreement with White Taylor and White, I should entertain doubts on the subject. But connecting those facts and circumstances with the subsequent acts of the directors, it seems to me that sufficient appears to implicate all the stockholders, (except Nathan Doan, who bad forfeited his share before the contract had been entered into,) so as to render them liable to contribution.. For if the directors had the power, by the articles of association, to authorize an agent to make the contract, it would be extraordinary, indeed, if they, as principals, elected to> conduct the business themselves,-they should not be at liberty io do it.

The assessment of the 27th of April, only two days subsequent to the consummation of the contract, was unquestionably m.ade by them with a view to meet the payment of the first instalments; and the letter of the 20th of May, 1815, under the signature of the appellant, William Ray~ mond,jun. and Abner P. Hitchcock conclusively proves, that they, as directors, had recognized and adopted the contract made with While, Taylor and White. In that letter they state, that Nathan H. Raymond, the bearer, ivas authorized to make such alterations as the company felt able to tpeet'Raymond was Treasurer to the association ; and it is evident that Ira Hall, Abraham Dayton and Reuben Wheeler, by their acts and declarations, recognized and adopted it. It cannot be pretended, that they did this without information as to the true situation of the company. It is, therefore, clear, that the subsequent acts of the directors evinced their views and intentions in relation to this agreement.. This ratification of the contract by the directors, in my view of the subject, establishes the appellant’s claim for contribution from all the stockholders. But admitting that the ■ assent of all was necessary to make them liable, the testimony ig conclusive, as to the interference of those who wye stockholders at the time, and immediately after the contract had been entered into. Henru Buckley, a subscribing wit-V <y 7 o ness to ib states, that Ira Hall and William Raymond, jun. were present when it was made, and assented to it. That Reuben Wheeler, after it was executed, declared that the company were bound by it. That there was not one of them who dared deny it. That in the fall of 1816, Abner P. Hitchcock and Reuben Wheeler were both desirous to reduce the contract to 500 spindles. Sylvester JYorton, another subscribing witness, and Richard Savage confirmed the above testimony as to Ira Hall and Wiliam Raymond, jun. Samuel Clark states, that Abraham Dayton told him his $1000 would be applied on the contract for the machinery. The testimony of Ebenezer Walker, Charles Buckley and Martin Lee, goes to show that Abner P. Hitchcock knew'of the agreement, and confessed that assessments had been made to meet the instalments. That the directors were called 'together for the purpose.

Fonblanque, (vol. 1. p. 295. b. 1. ch. 4. sec. 18.) states, that, if a third person treats for one that is absent, without his order, but undertakes for his consent, the absent party does not enter into the covenant until he ratifies it. The case of the Bank of Columbia v. Patterson’s heirs, decided in the Supreme Court of the United States, (7 Cranch, 299.) contains principles peculiarly applicable to the present. It appears that in 1804 a contract had been made by Patterson and an authorized committee of the Bank, under their private seals; whereby Patterson agreed to do all the carpenter’s work to the banking house, in the manner therein stated, which was referred to in a subsequent agreement, in 1807 ; by which last agreement, all the work done by Patterson was to be measured and valued by two persons named, according to certain rates. The court decided, that upon a special contract executed on the part of the plaintiff, indebitatus assumpsit would lie for the price, and that a simple contract was not merged in a sealed instrument, which merely recognizes the debt, and fixes the mode of ascertaining its amount} and that upon general counts, a special agreement executed, might be given in evidence ; that wherever a corporation aggregate is acting within the scope of the legitimate purposes of its institution, all parol contracts made are express promises of the corporation, and all du1 * r 5 ties imposed on them by law, and all benefits conferred at their request, raise implied promises, for the enforcement of ,r , ‘ ... , . . „ , which an action lies. J udgeSlory, in giving the opinion or the court, says, “ the contracts were for the exclusive use and “ benefit of the corporation, and made by their agents for pur- “ poses authorized by their charter. The corporation proiC ceed, on the faith of those contracts, to pay money, from “ time, to time to the plaintiff’s intestate ; although, then, an 61 action might have laid against the committee personally, 66 upon their express contract, yet as the whole benefit result- “ ed to the corporation, it seems to the court that from this “ evidence the jury might legally infer that the corpora- “ tion had adopted the contracts of the committee^ and had “ voted to pay the whole sum which should become due un- “ der the contracts, and that the plaintiff’s intestate had ac-61 cepted their engagement.”

If this principle of subsequent adoption and ratification is applicable to corporations, it applies more emphatically to private associations, especially, when the contract has been ratified, not only by those immediately authorized to conduct the business of the Company '; but when the recognition and adoption of it has been brought home to every individual interested in the association.

In this case, no payment had been made by the company to White, Taylor and White, so that they had. not accepted of their engagements, but assessments had been ordered by them ; and it is in vain to pretend, that the procuring of the machinery would not have proved beneficial and necessary to conduct the business of the association. It was evidently a measure indispensable in the creation of the establishment, according to the intent and meaning of the articles of association ; and it will not admit of a moment’s doubt, but that it was so treated and considered by all the persons concerned in the undertaking, at the time the contract was entered into, and immediately thereafter. To suffer those persons, therefore, to stand by and encourage the appellant to make the agreement, and by their subsequent conduct to recognize and adopt it, and, afterwards, on finding the cbticern to be a losing business, to shield themselves from responsibility, under the pretence of want of authority to make the contract, and thus throw the responsibility on the. the appellant exclusively, with ruinous damages, seems to me to be an act of injustice not to be tolerated. On the contrary, it presents a case, in jmy view, peculiarly requiring the interposition of a Court of Equity, in securing to the party a right to look, to the credit of the individual members ; because, they must be deemed, by their own acts, to hav.e ratified the- covenant or contract, and, of course, in making themselves parties to it, rendered themselves personally liable with the appellant, in proportion to their interest. If this be correct, it is evident, that none of the members, thus circumstanced, could shelter themselves under the sixth article of the association by a forfeiture of shares, and by those indirect means avoid the performance of a contract to which they had before voluntarily (at least in a Court of Equity) made themselves parties. If this article should receive the exposition contended for by the respondents, a door would be open for the practice of frauds on innocent strangers ; for it must readily be perceived, that co-partners for conducting business of this description could, at all times, so arrange their concerns as to reap the profits of the establishment, at the sole risk of their creditors.

My opinion, accordingly, is, that, with regard to the first decretal order, as between the appellant and the respondents, John While, Randolph Taylor and Marvin While, the master be directed ¿'To inquire and report only as to their actual losses and expenditures, as far as they had proceeded in complying with the contract \ that the injunction with regard to the judgment in the suit at law, in which John White, Randolph Taylor and Marvin While are plaintiffs, and Reuben Skinner, defen danf, be continued, until the question as to contribution between the appellant and the respondents is finally decided and ascertained. That the last decretal order as between the appellant and all the other respondents, he reversed, with directions to the Court of Chancery to enter a decree 'declaring all the respondents, except Nathan» Doan, liable individually to contribute tateabjy in the payovent of the damages, which may ultimately be recovered from the appellant, in consequence of the abandonment of the contract with White, Taylor and White for machinery: and as respects Nathan Doane, that the bill be dismissed, and that he be paid the costs incurred in the Court below.

Woodworth J. concurred.

Van Ness, J. was of opinion that the decree of the Court of Chancery ought to be affirmed, and stated his reasons,

Spencer, Ch. J.

I canngt think that the question whether the appellant is bound at law, to respond to W. T. & W. because he has entered into a covenant under seal, admitting that he had authority from the Granville Cotton Manufacturing Company to make the contract, has been decided either in the Supreme Court, or in this court, on the former appeal. The appellant never availed himself of the permission given by the Supreme Court to amend his plea, by setting forth his authority from the company to -contract with W. T. & W. He saw fit to seek relief in equity • and when the case came before this court, on the former occasion, it was from an appeal dissolving the injunction; and the argument proceeded on the bill and answer only. All the parties are now before the court; and it is not material to inquire, what would be the strict principle of law, as between the appellant and W. T. & W. The question now is, whether the appellant, admitting him to be eventually responsible on his covenant to W. T. & IV., is not, as between himself atld the other respondents, entitled to call on them to contribute towards the payment of such damages, as W. T. <$■ W. are entitled to recover by virtue of their contract, and whether all, or some only, of the respondents, are liable to such contribution.

I take it tti be plearly proved, that the appellant, who together with William Raymond, jun. and Abner P. Hitchcoctc were the directors and agents of the company, (which is a private unincorporated association) made the contract . with W, T. W- with the direct approbation and consent of Wm. Raymond, jun. and that it was subsequently made known, assented to, and ratified by A. P. Hitchcock, the other director, Ira Hall, Abraham Dayton, Reuben Wheeler and Nathan H. Raymond. Indeed, all the respondents, except Nathan Doane, have assented to and ratified this contract, either by being present and concurring in the assessment made, the 27th of April, 1815, for the express purpose of raising moneys to meet the engagement entered into by the . contract of the 25th of April, 1815, between the appellant, in behalf of the directors, and W. T. & W.f or by payments on that assessment, with a full knowledge of the purpose and object of the call and assessment.

Both at law and in equity, the subsequent assent of the principal to the act of an agent, in relation to the interest and affairs of the principal, is equivalent to a positive and direct authorization to do the act. Such subsequent assent is an adoption of the act of the agent, with a view to reap the benefit flowing from it; and he who receives the advantages and profit of a contract, must assume the risk of the disadvantage and loss which may attend iff

"There would be no difficulty in coming to the conclusion, that all the members of the association who ratified the con-, tract, were bound to abide the advantages and loss attending it, but for the terms of the association. The associates were partners, as regarded each other, and as regarded the public, who dealt with them and trusted them.' Their respective liabilities to each other, and to third persons ignorant of the terms of their association, may, undoubtedly, be different. In the latter case, they would be liable without reference to their private rules, but in the former case, their own rules would be binding as among themselves.

It has been strongly insisted on, that the only remedy which one of the members of the association can have against another, is by a forfeiture of the shares held by such member. The sixth article of the constitution, or association, is as follows : “ Each person shall at the time of sub- “ scribing for stock, pay in cash, on every share by him or “ her subscribed, ten dollars, and shall, from time to time, “ and at all times thereafter, pay such assessments as shall il be made by the president and directors, or forfeit such « share or shares with all previous payments made thereon.” The Chancellor was of opinion that the appellant was not entitled to charge the other members of the association individually, with any part of the damages for which he ¡‘-as liable under the contract to W. T. &/• W. He held, that the company could not be bound, beyond the capital paid in, and that the president and directors had no power, under the articles, to bind the members individually ; and that whoever dealt with the company, as such, and without resorting to a personal covenant, was to be presumed to deal with them according to the terms of their constitution ; and to give the credit to the funds of the company actually paid in, or to be paid in under assessments duly made; and that he had no right to look to the credit of the individual members, unless those individual members entered into a personal covenant or contract. He considered the sixth article as a check to extravagance and abuse in the management of the company concerns, and that every member reserved to himself the right to withdraw from further responsibility, by refusing to pay any more assessments, under the penalty of a forfeiture of his shares and of all previous payments made thereon. He was of opinion that the assessment of the 27th of April, 1815, implied no other obligation than to pay it, or submit to the forfeiture; that an assent to the assessment was no ratification of the contract, and that the other respondents were not chargeable with any breach of faith in refusing to pay it, and submitting to the penalty ; and that neither the appellant nor W. T. & W. could complain of any surprize or imposition, by such refusal, for they' were subscribers to the articles of association, and knew the tenor of it.

It seems to me, with all deference, that the opinion of the Chancellor goes to the subversion of all claim or demand for compensation by W. T. & W. for the non fulfilment of the contract with the appellant; unless we are prepared to say, that the contract ought to be considered a personal covenant on the part of the appellant. It appears to me impossible that it should so be considered by a Court of Equity. W. T, & W. being subscribers to the articles of association, and knowing the tenor of it, knew as well as the appellant, whether he. could bind the association by his contract. This case is entirely distinguishable from the one where a stranger is dealing with an agent who professes to have poxver to bind his principal, when be has no such au« thority. In that case, if the agent exceeds his power, he shall be personally bound; otherwise, the party dealing xvith him, and ignorant of his defect of power, would be defrauded; but when the knowledge of the contracting parties is the same, when the defect of power is known to both, if the person assuming to be an agent, acts in that capacity, but, from defect of power, does not bind the principal, in such case the other party cannot impute fraud to him ; and, in the language ■ of the Chancellor, “ cannot complain of surprise or imposition.”

No man can read the agreement between the appellant and W• T. ápd W. xvithout seeing, in every sentence of it, the complete sense of the parties, that the appellant was contracting as agent, for the sole.benefit of the company ; and that he'did not mean, nor could W. T. and W. under-him to mean, to be personally bound. The agreement professes to be made by SJcinner, Raymond and Hitchcock, as directors. They engage, in behalf of the company, to pay W. T. ■ and W. the price stipulated for the machinery. They, as directors, engage to pay the balance due on the first six frames, when put in operation ; and the company further engage, to procure drums and belts for the machinery. The appellant alone signs and seals for the directors y and, by way of postscript, the company engage to transport' the'machinery at fifty cents per hundred weight. . Now we perceive that at one time, the directors engage in behalf the company; at another, for themselves as directors; and in other parts of the agreement, the company engage y thus demonstrating, that the agreement and engagemen t regarded a performance by the company alone. ‘ We perceive, that the whole amount to be paid to W. T. and W., was $15,120. Is it possible to believe, that they looked to the individual responsibility of the appellant? Did they not know that he was not to pay any thing beyond the amount of his subscription ? Did they not know' that the stockholders were to pay rateably ? "

But it has been strongly contended, that the appellant had aot power to bind the company by this contract: I do not now mean as to their responsibility beyond voluntary payments upon calls, but that he had no authority to contract at all. The fact has already been stated, that the associates elected the appellant, as president, and William Raymond, jun. and Abraham P. Hitchcock, as directors. Nows under the 4th article of the association, it is declared to be the duly of the president and directors, to appoint a general agent, whose duty it shall be to purchase stock and vend the goods of the company, and under the particular direction of the president and directors to transact all such business as they shall deem best calculated to advance the interest of the company. This virtually vests the power of transacting all necessary business in the president and directors ; for if they could direct an agent to transact it, no agent having been appointed, they could themselves transact all necessary business. A power to direct the thing to be done, implies a power in the persons authorized to give directions to do the thing themselves. Why were these appointments made, unless it was intended, that the president and directors should act ? How was the object of the association to be attained, but through the agency of the president and directors ? They, undoubtedly, had authority to make contracts, or else the associates were never in earnest in the avowal of their intention to put in operation a cotton factory. It is not necessary to discuss the question, whether the president and one director could legally bind the company, without the concurrence of the other director, because the proof is clear and unanswerable, that Wm. Raymondj jun. did assent to the contract at the time, and that both he and A. P. Hitchcock, fully approved it, two days after it was made, by voting for an assessment to meet the payments stipulated in the contract. They were, therefore, bound; and all the associates, excepting Doane, who was not present at the meeting on the 27th of April, were bound by the contract, unless their responsibilities were limited to a forfeiture of their stock and previous payments.

This case, then, cannot be distinguished from that of Randall v. Van Vechten and others. (19 Johns. Rep. 60.) That, also, was upon a contract under the hands and seals of the defendants, and they stipulated to pay the sums mentioned in the body of the agreement. They were styled, in the agreement, a committee appointed by the corporation of Albany for that purpose; but they signed and affixed their individual seals to it. The principal question in the case was, whether it was a personal covenant, binding the defendants individually, or whether it was a contract which bound the corporation. The Supreme Court held, that when a person assumed to contract as an agent for an individual or a corporation, he must see to it, that the principal was legally bound by his act; for if he does not give a right of action against his principal, the law held him personally liable. It was there said, that, the defendant contracted in the character of agent for the corporation, in relation to a subject exclusively appertaining to the corporation, and that they were not bound, unless the nature and form of the contract was such as to create no liability on the part of the corporation, and that it was incumbent on the defendants, in order to excuse themselves from personal responsibility, to show that the plaintiff had a legal remedy against the corporation. From the facts in the case, the Court was of opinion, that the plaintiff there had a remedy, by an action of assumpsit, against the corporation : and particular stress Vas laid on the fact, that the corporation had recognised, adopted and ratified the contract, by a variety of acts in reference, to it. It was held, that the corporation was not absolved, because their agents had etitered into a sealed contract, and that the sealing of the contract by the agerits did not alter the question. The same principle was decided by the Supreme Court of the United Stales, in the case of Bank of Columbia v. Patterson's administrators. (7 Cranch, 297.)

There is a striking analogy between these cases. Here the appellant contracted, in the character of an agent for the company,and in relation to a subject emphatically theirs, with a joint interest of his own. Whether they were liable, eo instanti, is not made the test. They were liable, before the arrival of the time for. the fulfilment of the contract ; and in that casé? as here; their liability was evinced by their rátification and adoptoin of the contract. The variance in an important fact, between the cases, would vary also the conelusion on another point. Admitting, for the present, that the company were bound no furthertlian they individually chose to comply with the assessment; it may then be said that the appellant is bound, because he has not shown that W. T. and TV. have a legal remedy against the company. But the important difference between the cases is this, Randall was not a member of the corporation ; he knew nothing of their resolutions until after the contract was entered into ; but, W. T. and W. were members of this company; they knew, or were bound to know, if the case be so, that they would not be bound personally, or in any other way than by calls and assessments. The appellant then has shown that IV. T. and TV. have every legal remedy on the contract, which was within the contemplation of the parties. The appellant has bound them by their subsequent ratification, as fully as they could be bound by the terms of their association : and if they are not so bound, as to be responsible fully to indemnify W. T. and TV. for the losses they have sustained, it is not because the appellant had "not power to bind or to contract for them,but because, from the nature of the association, it was optional whether they, would be bound or not. This risk and contingency TV. T. and W. must be deemed to have contemplated. If the contract, or articles of association, were susceptible of this construction, it appears to me, that such would be the consequence; and that the appellant would not be holden personally, he having acted in good faith, and W. T. and TV. being fully apprised of all the facts, and acquainted with the articles of association.

But I cannot yield my assent to the principle, that such of the respondents as ratified, adopted and confirmed the contract, between the appellant and W. T. and TV. are not responsible in their individual persons or property; nor can I assent to the position, that, under the 6th article of the association, those who have thus ratified the contract in question, have a right to withdraw themselves from further responsibility, by refusing to pay any further assessments, and by a mere forfeiture of their shares and the previ cus payments.

The object of the association was to manufacture cotton yarn and cloth; they were, consequently,to procure a site for a factory, to procure machinery to purchase the raw material, employ workmen, and do every thing necessary to the accomplishment of the object. I have already shown, that under the 4th article of the constitution oí the company, the president and directors had the power to transact all such business, as they should deem best calculated to advance the interest of the company- They had the power to make assessments ; and the 9th article provides, that the president and directors shall give the stockholders of the company thirty days notice of any assessment made and payment required. Would it be a fair and natural construction of their powers; would it comport with the interests of the concern, or can it be presumed to have been the intention of the parties, that no engagement should be entered into, nothing undertaken or done, until the calls had been made, and the money actually in the hands of the treasurer ? I think not; and the acts of the respondents show they had no such meaning. It is in evidence, that when the assessment of the 27th of April, 1815, was made, it was fully stated that it was made to meet the paymeats which would fall due under the contract with W. T. and W. This, then, was an express recognition of the right of the president and directors to make contracts, stipulating for future payment j and it was a practical construction of the terms of the association. But the president and directors were, by the 4th article, authorized to transact all such business as they should deem best calculated to advance the interest of the company. This was a plenary power to enter into contracts,' and to incur debts, to promote, according their best discretion, the interests of the association. Can it then be contended, that it was the intention of the company that their confidential agents should assume responsibilities, and pledge their private fortun'es, whilst the other members of the association should be at liberty, if they thought it for their interest, to retire and throw the whole charge upon their agents, with no other loss than the forfeiture of their shares, and the payments made ? In the commencement of the business, and wi.c-B Heavy expenditures were necessary, they could thus retire with almost perfect impunity. - The mere statement of the pretension seems to me to show its unreasonbleness ; and, I think, we ought not to construe the 6th article of the compact in a manner which would produce such unjust consequences. We must regard the end and object of the association, and all its provisions, in order to ascertain the real intention of the 6th article. I have already stated, that it binds the associates to pay the assessments made by the president and directors, or to forfeit each share or shares, with all previous payments made thereon. It may well be questioned, whether the right of forfeiture is not one vested in the president and directors, to be enforced, when one of the company shall neglect or refuse compliance wth the assessments and calls. I much doubt, whether it is a right vested in the individual; but, admitting it to be so, good faith requires,, and there is nothing in this article that forbids such construction, that the right should be exercised, and an election should be made, in limine. It is too late to resort to it, after the stockholders have assented to a contract made in their behalf, and which imposes a heavy personal responsibility on their agents. If this particular contract with W. T. and W. had been repudiated, on the 27th of April, two days after it was made, the appellant might have exonerated himself, by procuring it to be rescinded ; or had W. T. and W. been immediately informed that the stockholders were dissatisfied with it, and meant to avail themselves of their right to forfeit their shares, they would probably have desisted from carrying it into execution. On the contrary, the assessments were laid, and the calls made without any opposition, arid with the express assent of all the stockholders, except Doane ; and thus the appellant and W. T’■ and W. were lulled into security, and thrown off their guard. They had a right to believe, and to act on that belief, that the assessments would be paid. It is a principle of equity, that, when a man is bound to speak, and by his silence contributes to a fraud, he shall be compelled to repair the mischief his fraudulent silence has occasioned. (1 Mad. Ch. 210, 211.) TJiis principle is directly applicable to this view of the case; and I should consider it a fraud on the appellant.

d W.T. and W. for the stockholders to be silent,when provision was making for the fulfilment of the contract,with respect to their determination to forfeit their shares, and thus prevent its being rescinded ; and afterwards, when the misch e had happened, to interpose their right of forfeiture. Common honesty, as well as equity, forbids such a course.

My conclusion is, that, although W. T. and W. would not have any remedy against the appellant, solely, they have a good ground of action against the individuals composing the association, excepting Doane ; and the parties being all before the court, there is no difficulty in applying the remedy, by directing a contribution, rateably, in proportion to the shares held by the respondents respectively, for the payment of the sum justly due to W; T. and ¡V. under the contract with the appellant.

Much stress has been laid on the fact, that the appellant refused to pay the assessments on his shares. He had the same right to refuse as the other respondents; but this has nothing to do with the question, whether those who thus refused, are not now bound to contribute; nor has it any bearing on the question, whether the appellant acted as the agent of the company in making the contract with W T< and W., nor whether that contract was afterwards adopted and ratified by the company. I have not thought it necessary to refer to the evidence showing that adoption and ratification ; this has been already sufficiently shown.

S. M. Hopkins, Senator. If the decree of this .court, on the former appeal from the order of the court of Chancery, dissolving the injunction, is to be considered as finally settling'the right to damages, it is difficult to understand, and the case does not inform us, why the parties, afterwards, on filing a replication, have examined witnesses and gone into a hearing in the Court of Chancery, wjpon the the merits at large. That course, however, has been taken, and I do not see that the propriety of it has been questioned. On the hearing, the Chancellor, intending to conform to the directions of this court, has ordered a reference to a master, to ascertain the. compenation or damages which W. T. and W. should recover; and as to the other respondents, he has decreed that they are not bound to contribute.

It does not appear, that nd W. were advised, that in defending the bill, they could plead or insist upon the . - judgment of the Supreme Court on the demurrer, as con-eluding the rights of the parties, as to the subj'ect matters of the bill, or any part of it, nor upon the pendency of that suit, as a dilatory plea. But it has been insisted on, in argument, that the appellant’s individual liability has been finally adjudicated by the Supreme Court, on the demurrer, and that he cannot now be allowed to setup a defence which he has, or might have, availed himself of in that court; and it has been suggested, though not strongly contended, that the former decree of this court concluded the question. The cases cited in support of that position are clearly distinguishable from the present case. Here, the suit in the Supreme Court was not decided on the merits ; but left open for the admission of further facts: and the plaintiff elected to state those facts in a bill in Chancery, introducing new parties, and seeking a remedy for himself, and stating the authoniy by which he executed the contract, &c. It does not follow, that because this court, on thé former appeal, reiained the injunction, and directed a judgment to be confessed, in the suit at law, that they, therefore, decided the main question. The direction given might be proper, as a precautionary and preparatory measure towards the final decision of the controversy. Even if the court, in a previous stage of the cause, had intimated an opinion, it would not be conclusive. No final judgment or decree has been given ; the cause is now open on its whole merits; and this court is at liberty to examine it, from its foundation.

The parties to this bill, or those whom they represent, formed a limited and qualified co-partnership, the articles of which are set forth in the case. The business was to be conducted by officers, under the particular direction of the president and directors, all of whom were chosen by the stockholders. The president and directors were authorized to lay assessments upon the stockholders, which were to be paid, under the pain of forfeiture, and the shares were transferrable. On the plain meaning of this instrument, it is impossible to doubt, or that the subscription to k imported nopersonal obliga lion, either upon the original stockholders "or the transferees, to pay up the assessments, and that the for* feiture of the shares was the only remedy for non-payment. The respondents, W. T. and W. subscribed two shares, and the appellant and the other original parties subscribed the residue of the stock, or eighteen shares. The inartificial and inaccurate contract of the 25ih of April, 1815, was executed. The introductory part of this contract states it to be entered into between the appellant, W. R.jun. and A. P. H. “ as directors of the Granville Manufacturing Company,” and W. T. and IV. The object of the contract is machinery for the manufactory. . In a subsequent clause, the appellant and the other two directors named, “ engage in behalf of the said company, to pay, ” &cc. And again, “ the said directors engage to pay the balance when the frames are in operation.” “ And the said company further engage to procure drums and belts,” Stc. And in the conclusion, it is said, '• the parties have set their hands and seals.” And it is executed, in behalf of the company, thus : “ For the directors, Reuben Skinner, ” (L. S )

The first and cardinal rule in the constructiou of contracts, and that to which all other rules are subservient, is to construe them according to the real intent of the parties. This rule is only to be departed from when the particular intent would interfere with some great and salutary rule of public policy, the breach of which would be a greater evil than the individual wrong. In this case, no such general controling principle interferes with the particular intent. What, then, was the real meaning of the parties ? It is imposible to read the contract, and doubt, for a moment, but that all parties supposed that credit was given to the Granville Manufacturing Company, in their collective and abstract capacity, as a company, and not as individuals. Is it possible to believe that the appellant, when he executed the contract, “ for the directors,” imagined that he was signing it, for no person but himself, or that W. T. and IV. so understood it ? In sayinghhis, I lay out of view all the petrol proof of intent, as inadmissible, both in equity and at law. What inflexible rule of public pohey, then, is there which compels us^to construe this contract directly contrary to the intention of the parties ? I know of none, unless it bo found in the judgment of the Supreme Court, on the demurrer between the original parties. (13 Johns. Rep. 307.) It is there decided, as I understand the case, that a person who enters into a contract in the name of another, and as the agent of another, is personally responsible to the persons with whom he contraéis, if from a defect" of authority, the principal is not bound. That a person pretending to act under a power of attorney may be so answerable, in some cases, I freely admit; but the rule as laid down by the Supreme Court appears to me too general. It ought to be limited to the cas e, first, of fraud in the agent, or such misconduct as is equivalent to fraud; and second, to the case of a personal engagement that the principal shall ratify. The position which I question, and shall proceed to examine, is this : that an agent is universally answerable for the sufficiency of his powers, though he be free from all imputation of fraud, and though he has interposed no personal engagement.” The cases cited in support of this position, are, Yelv. 127. 2 Vern. 127. 3 P. Wms. 277. 1 Fonbl. 287. note. Poth. on Oblig. n. 448. 4 Burr. 2108. 3 Johns. Cas. 70. 5 East, 148. 4 Mass. Rep. 595. None of the English cases," and but one dictum, and that not a judicial one,- is applicable to this point. The case in 2 Vernon, was that of an attorney at law, who received from an insolvent debtor, in behalf of his client, a composition for a debt, saying, that he had no authority, but engaging that his client should agree to it, and give up the bonds. The case in 3 P. Wms. contains merely an obiter dictum of Lord Talbot, who puts the doctrine on the ground of fraud ; and Fonblanque makes a very loose and general remark upon the opinion of Lord Talbot. He does not define what sort of an attorney or agent, or how constituted, or in whose favour the liability of the agent attaches. He may mean a liability of an attorney to his constituent, which is not the present case. In 4 Burr, the action was by a client against his attorney, for mismanagement. It is unnecessary to examine other cases decided on a different principle ; for it is very distinguishable, when an attorney does not act or contract in the name of his principal, nor affect to bind him; but binds himself that his principal shall do a particular act. Such was the case of Tippets v. Walker and others, (4 Mass. Rep. 599.) which has been relied upon, as perfectly analogous to the present. The defendants, in the beginning of the contract, describe themselves as a committee appointed by the directors of the Middlesex Turnpike Corporation: This is a mere descriptio personarum, and the committee agree to make the several payments there mentioned to the plaintiff. In no part of the contract do they engage for the directors or the company; nor do they sign and seal for their principal. In the contract in the present case, the word “ company” is twice used. “ The company engage,” &c. This shows what is meant by the word “ directors,” used in another place ; and the plaintiff signs and seals “ for the directors.” The case in Yelverlón was that of a servant, who wrote thus : “Memorandum, thatl have “ received to the use of my master, fifty pounds, to be paid next Michaelmas.” The servant was held liable, because it was uncertain who was to pay. But, if, says the case, he had expressed it, “to be repaid by my master, it would have been different.” This observation strictly applies to the present case, where the words are, “ the company engage.” In the case, in 4 Burr, the court looked much to the question, whether the attorney knew that he exceeded his powers; and this, too, where he was sued by his client. A fortiori, they would not have held him liable to a third person, where the knowledge of both was the same; so that neither this case, nor that in Yeherton, supports the position for which it was cited ; but even it the principal point decided in Yelverton were contrary to the doctrine for which I contend, it is directly contrary to the rule of the civil law, as cited in Livermore on Agency vol. 2. p. 274.

The principle which I am examining is not of a technical or local character, but depends on a right application of human reason "to human affairs, generally. It is a case of very frequent occurrence. If it were correct, therefore, it would be found in the codes of all civilized nations. It is not in .the Civil or French law. It is not laid down as a principle of the English law, by Blackslone, Finer, or Comyns. Mr. Chitiy, in his Treatise on Pleadings, p. 24., in deducing a rule from the case in 3 P. Wms., states the principle, with so much less latitude, as manifestly to show his distrust of that case. In the treatise of Mr. Liver ;nore, to which I have referred, he states the doctrine in general terms, manifestly, however, as derived from the case of Dusenbury v. Ellis (3 Johns. Cases, 70.) That case came before the Supreme Court, on a certiorari directed to a Justice’s Court : And it is to be remarked, that the urisdiction of these inferior courts is of a mixed and peculiar character, and of a very limited extent. Questions brought up from those courts are seldom much discussed, and the decision upon them can hardly he considered as of more authority than that of a judge at nisi prius. In that case, the defendant made a promissory note beginning, “ I promise to pay,” and signed thus, “ for Peter Sharpe, G, D.” In point of fact, the defendant had only a general power to collect debts. The Court, in giving judgment for the defendant, said, that the party who accepts a note under such a mistake or imposition ought to have the same remedy against the attorney as against the principal. But what were the facts in that case ? Did the court proceed on the ground of a mistake, or of imposition ? For there is a wide difference between them. Or did they ground their decision upon the fact, that the principal was in a foreign country, which would constitute a case entirely different in principle ? Was the note, so trifling in amount, given for a person in a foreign country, for goods purchased, or money borrowed by the agent for him ? Was it not rather a mere settlement of accounts ? If so, it is obvious that injustice was done, as it always will be done, when the decision in that case is followed.

I have thus shown on what ground, in point of authority,, the decision of the Supreme Court, on the demurrer in the present case, rests; and I think that I may safely conclude, that there is no precedent or authority to support the position, that an agent acting under defective powers, or beyond his powers, is personally liable therefor, to the person with whom he contracts, if the mistake is mutual, or if the agent acts bona-fide, or if there is no special engagement on his part.

Next, let us test the doctrine, as to principle, and by its application to different cases. In Nixon v. Hyserott, (5 Johns. Rep. 58.) it was decided, that an attorney who was authorized by a regular power to sell land, had not thereby authority to enter into covenants of warranty, &c. in the deed, which he should execute to the purchaser. Suppose, that, at t'me execi>t>ng a conveyance with such covenants, he had produced his power to the purchaser, or that it was recorded, or that the grantee, in any way, knew as much of the power, or was chargeable with as much knowledge, of it, as, the attorney, and that there was no fraud, practice, or concealment by the attorney, would it not be a case of mutual error, in which the attorney would not be liable ? A gain ; to test the doctrine by the roles of pleading : the action is brought directly against the agent or attorney, alleging that he covenanted, 8zc. The deed, in the usual form, would be expressed to be made “ between A. B. of the first part, by C. J). his attorney, and E. F of the second part; and the covenant would be by the said party of the first part. How, then, could a declaration be drawn so as to charge the attorney ? If drawn in the usual form, the plaintiffmust fail, on the general issue. And I know of no precedent of a special declaration on the covenant in such a case, nor has any been shown.

Vide Ante, p. 60.

The case of Randall v. Van Vechten,* decided in May term last, shows, that even if the defendant puts his own hand and seal, and with express words of personal engagement, the covenant does not necessarily bind him. The court, in that case, resting on extrinsic circumstances, determined that the instrument was no deed, but merely evidence against the corporation of the city of Albany. That is a much stronger case than the present, in favour of the defendant. The court, however, put it on the ground, that an action was furnished against the corporation. It is not my duty to examine that ground ; and I cite the case merely to show that sealing and delivery, and express words of personal engagement by the agent, do not, of necessity, import personal obligation.

It comes, then, to this, that if the agent has been guilty of fraud, the common principles of law and equity, and the remedies founded on them, will reach him. If he specially engaged that bis principal should ratify his act, as in the ease in Vernon, the same remark will apply : an action or bill adapted to the case, will be the proper course of proceeding.

Neither fraud nor contract can be presumed; they must be specially alleged and put in issue. They consutuie the gist of the action, and no conclusion against the agent can follow, until one or the other is affirmatively established. It would seem to me, that any other construction would lend to confound innocence with guilt, fraud with candour, and to break down the distinction between right and wrong. The analogy of the whole law is opposed to the principle of making a man answerable for an innocent mistake, whether of law or fact, or of presuming a fraud, unless it be charged against him, and proved. In no part of the proceedings, in the present case, before the court, do fV. T Sc W. charge the appellant S. with deceiving them; and it is perfectly manifest that they could not maintain such a charge, for they were equally parties to, and had equal knowledge of, the “ constitution ” of the company. All the parties signed at the same time, and are all alike chargeable with notice of who were the officers, and what were their powers. All were equally negligent of that salutary caution and accuracy in the form of such an instrument, which, had they been observed, would have saved them from great trouble and expense, and some of them from ruin. The relation of W. T. W. as members of the company, and their privity to its constitution, render it unnecessary to inquire what would be the effect of a contract between the company and strangers.

It has been argued, that if Skinner is not personally liable, some one must be so; that if the directors or stockholders are not personally liable, the contract wholly fails of effect, which would be absurd, and contrary to the plain equity and intent; and that, therefore, the appellant must be liable. I deny, first, all the premises in this argument; and, secondly, admitting the premises, I deny the conclusion.

IF the members of the company are not personally bound, W. T. W. may have a defective or void security. That is a misfortune which daily happens to other men. If the contract is not what the parties intended it should be, it does not, therefore, follow, that it is some other and different thing which they did not intend. B.ut, in my opinion,, the contract, though very inartificially drawn, is a good and valid contract for all the purposes actually intended by the Part’es ; and ought to be carried into execution, as far as it may be, according to that intent. It conferred mutual rights, though it was not, perhaps, precise or equal in its terms. By the « constitution ” of the company, it is made the duty of the president and directors, “ to appoint a general agent, whose duty it shall be to purchase,” &tc. ‘‘ and, under the particular direction of the president and directors, to transact all such business as they shall deem best,” &z,c. They, therefore, are to judge what business is to he done, and it is to be done under their particular directions. Now, if R. S. entered into this contract, with the approbation and consent of the directors, that is a sufficient appointment of him as agent for the time. No form, election, or writing is necessary for that purpose; and as the agent was to do this business under the particular direction of the president and directors, I am inclined to the opinion, that they had an implied authority to do it themselves. The intervention of an agent was only for their own ease and relief.

On the 20th of May, the president and both the directors wrote a letter to W. T. fy W., which more fully recognises the contract as their own. They speak of the forfeiture of shares, and solicit an alteration of the contract. Their own shares were not then forfeited : at least, the thirty days were not then expired. The whole conduct of W. T. &/• W., in relation to this letter, shows that they recognised its principles ; otherwise, they would, at once, have replied, that they had no concern with the company ; that the forfeiture of shares did not affect them, and that they had no dealing with any one but Skinner, the appellant. The conduct of all parties, at this period, shows that they acted upon this as a valid contract with the company. A more complete ratification cannot well be imagined. The ratification is equally well proved by the fact attending the first asses>ment, which was made on eighteen shares, only, the other two shares being subscribed by W, T. & W. on the special condition, connected with their contract, that they should be exempt from assessment, for a certain time. It is difficult to suppose a more decisive recognition of the contract itself, than this act of the president and directors, in making this assessment two days after the contract. This subsequent recognition amounts to a catón—It does more: It is a fact from which assent and, participation at the time, may be, and ought to be inferred : and when so inferred, all difficulty is removed, for no writing, nor any particular form is necessary to give the contract validity.

The contract, then, was made or ratified by the proper agents of the company, and is binding, not upon the individuals, as such, but upon the company, in its collective capacity, that is upon its fund. If that fund proves too small; if it was liable to be withheld by a forfeiture of shares, it is the misfortune of W. T. <§• W. It was to that fund that they trusted. If it proves a shadow, the law cannot give them a ubstance, for which they never stipulated.

The result of my opinion is, 1. That the appellant has a perfect defence against the action at law, not so properly under a special plea, as under the general issue : That the paper was not his deed, nor the deed of any one. It was an agreement of a peculiar and qualified character, like that in the case of Randall v. Van Vechten and others.

2. That, of consequence, the appellant’s bill ought to have been dismissed as unnecessary.

3. That the proper remedy of W. T. and W. was by a bill in equity against the company, upon the peculiar and qualified nature of their engagement which a Court of law could not enforce, according to its intent.

4. But as this Court formerly decided to retain the bill,- and the whole merits of the case being now before us, there is no reason why the rights of the parties should not now be adjusted under it: and I am, accordingly, of opinion, that the Chancellor’s decretal order for taking an account of the damages, #-c. be affirmed ; and that the Court of Cham eery be further directed to cause an account to be taken of the real and personal property belonging to the CO' partnership, and to cause the same to be sold and applied, together with any assessments of any members, who have not forfeited their shares, to the payment of the damages so found; but that the other defendants and the appellant he decreed not to be liable personally to make good the said contract, nor to respond in damages therefor; and that a perpetual injunction be issued, to restrain the further prosecution of the suit at law, and that no costs be recovered by eit*ler Pa>'ty5 on any of the proceedings previous to this de-

Barstow, Bouck, Bowne, Gurnee, Ha^brouck, Huntington, Judson, Lynde, Miles, Miller, Mooers, More, Paine, Rosencrantz, Seymour, and Townsend, Senator were of opinion that the decree of the Chancellor ought to be reversed.

Adams, Austin, Frothingham and Viele Senators, concurred in the opinion of Mr. Justice Van Ness, that the decree of the Court of Chancery ought to be affirmed.

A majority of the Court,^* being of opinion that the decree of the Court of Chancery ought to be reversed; it was thereupon, “ Ordered, adjduged, and decreed, That the decretal orders of the Court of Chancery, appealed from, be reversed : And it is further ordered, adjudged, and decreed, that it be referred to a master of the Court of Chancery, to ascertain and report the actual damages, if any, sustained by White, Taylor and White, on the first day of August, 1815, under the covenant and agreement of the 25th of April, 1815, set forth in the pleadings; and that the master, with a view the more precisely to estimate such damages, ascertain and report the actual and bona fide expenditures, in materials and labour, incurred under and in fulfilment of the said covenant, on the first day of August, 1815 ; the profits which White, Taylor and White, would have made on such expenditures only, and the value of White Taylor and White, in market, or. that day, of the work so done, which value to be deducted from the amount of such expenditures and profits, together with interest, on the balance from the 1st of August, 1815, shall constitute the damages recoverable on the said contract. That it be referred to a master, to take and state an account between the appellant and all the respondents, except Nathan Doane, who were subscribing partners in the Granville Cotton Manufacturing Company, and the respondents, the representatives of Abner P. Hitchcock and Ira Hall deceased, who were, also, subscribing partners in the said company respecting the es« late and the concerns of the said company : And, also, to ascertain the sum which such paitners, respectively, ought rateably to contribute to the damages,, if any, that shall be found due to White, Taylor and White. That the injunction against the judgment at law- be continued, until such contributions shall have been ascertained, and until it shall be found that payment thereof, except the contribution of While, Taylor and White, cannot be enforced out of what may remain of the clear estate of the said company, or by process of execution ; in "which case, the deficiency, and no more, may be diiectcd to be levied under such judgment. That the appellant’s bill, as to the respondent, Nathan Doane, be dismissed with costs, as to him, in the Court of Chancery, to be taxed. That neither of the parties have costs, as against each other, in this Court: And that the record be remitted to the Court of Chancery, to the end tha this decree may be executed.”

END OF THE CASES IN ERROR.

* For reversing, 21 For affirming, 5.

Case Details

Case Name: Skinner v. Dayton

Court Name: New York Supreme Court

Date Published: Feb 15, 1822

Citation: 19 Johns. 513

Court Abbreviation: N.Y. Sup. Ct.