Taylor v. Agricultural & Mechanical Ass'n

68 Ala. 229 | Ala. | 1880

BEIOKELL, C. J.

The “Agricultural and Mechanical Association of West Alabama” is a private corooration, formed on the 8th day of May, 1871, under the general laws of force provic.ing for the formation of corporations. The purpose and object of the corporation, as expressed in the declaration filed in the office of the judge of probate, is “the promotion of the agricultural and mechanioal interests of West Alabama,” and the same purpose is expressed in the constitution. On the 3d June, 1871, the association was organized by the adoption of a constitution, and the election of officers. The officers consisted of a president, vice-president, secretary, treasurer, and a board of directors, ten of whom were elected by the stockholders, and the president, vice-president, secretary, and treasurer were ex officio members of the board. The duties of the several officers yere prescribed in the constitution. The eighth section declared: “The president, vice-president, secretary, treasurer and directors shall constitute a board, of whom five shall constitute a quorum for the transaction of all official business.”- The ninth section reads: “The board of directors shall have power to elect an executive committee, to be composed of three of their number, who shall be competent to transact any official business, unless otherwise instructed.” The power of private corporations, by the general law of force when the association was formed and organized, were defined as follows: 1. To have succession by its corporate name, for the period limited in its charter, and when no period is limited, perpetually. 2. To sue and be sued. ' 3. To use a common seal, and to alter the same at pleasure. 4: To hold, purchase, dispose of, and convey such real and personal estate as is limited by its charter; and if not' so limited, such an amount as the business of the corporation requires. 5. To appoint such subordinate officers and agents as the business of the corporation requires, prescribe their duties, and fix their compensation. 6. To make by-laws not inconsistent with any existing law, for the transfer of its stock, the management of its property, or the regulation of its affairs. No private corporation could exercise any other than these powers, except such as were expressly given in its charter, or such as were necessary to .he exercise of the powers thus given.—R. C. 1867, §§ 1767-69.

The plan adopted by the association for effecting the purposes of its creation, “the promotion of the agricultural and mechanical interests of West Alabama,” was that which is now very usual, the holding of fairs at stated times for the competitive exhibition of tbe domestic animals of farms or plantations, agricultural products and implements, and specimens of mechanical skill and industry. This rendered necessary the acquisition of land, and the construction of buildings suitable for the exhibitions. The association had the power to make all such contracts as were necessary and proper to enable it to acquire real estate, and to erect the necessary buildings. A usual and proper mode of acquiring lands and defraying the expense of erecting buildings, would be the borrowing of money to be used for these purposes. Having expressly the capacity to acquire, purchase, dispose of, and convey real and personal estate, it had the power to mortgage it as security for debts incurred in its acquisition, or in the erection of buildings, or for money borrowed. This power resides in all private corporations having capacity to acquire and hold property, unless it is withheld by statute. The power was not withheld by. the statute, but it was evidently contemplated that the corporation should have the power of a natural person, by any voluntary conveyance to part with its property.—Gordon v. Preston, 1 Watts, 385; 1 Jones on Mort. § 102.

These propositions are not denied by the counsel for the appellees, but it is objected, that the debts the mortgage was intended to secure, were not the .debts of the association, but the debts of the makers and indorser of the notes, and for their security the association was without power to mortgage , its real estate. Though the association may not have been liable to the holders of the • notes, yet, as between it and the makers and the indorser, it was primarily liable for their payment. The makers aird indorser simply loaned to it their credit; the notes were negotiated for its benefit; the money obtained, received by it, and applied to its own use. The transaction was the one not infrequent of a loan of credit, to enable the borrower to raise money. Into such a transaction the association had capacity to enter ; the capacity was involved in the power to borrow money — the power to make all usual and proper contracts to enable it to obtain loans, whether it be by a direct negotiation for a loan on its own paper and security, or by borrowing the credit of others, and employing it in raising money.—Ala. Gold Life Ins. Co. v. Central A. & M. Ass., 54 Ala. 73. Having the power to borrow the credit of the makers and indorser of the notes, it was a legal obligation and duty to protect, secure, and indemnify them against the liability incurred for the accommodation and benefit of the association. The mortgage is consequently a security for a debt and liability resting upon, and binding the association.

It is next objected, that the executive committee had not authority to mortgage the real estate of the association; that the only authority delegated to them by the board of directors was to negotiate a loan, and their authority did not include authority to mortgage or pledge any property of the association. It is an error to regard the executive committee as the agents of the board of directors. They derived their appointment from the board of directors, but they are, as fully as the directors themselves, the officers and agents of the association. Their appointment is provided for in the •constitution, and their duty and authority defined and prescribed by it. That duty and authority is “the transaction of any official business, unless otherwise instructed.” The same term, official business, is employed in defining the authority and power of the board of directors. It is employed in the same sense, and is of the same meaning, when applied to the board of directors, as when applied to the executive committee. It does not in either connection enlarge or narrow in signification. Corporations can only exercise their powers, transact their business, accomplish the purposes of their creation, through the instrumentality of agents or officers. The term, official business, as here employed, included the exercise of the general corporate powers, which were not by the constitution committed to somfe other officers, or reserved to the stockholders in their annual meetings. It does not seem possible to suggest any other definition and meaning of the term.—Hoyt v. Thompson, 19 N. Y. 207. Debts of necessity would be created, security for their payment would often be required, and must be given. These transactions would rest in the power of the directors, until the appointment of an executive committee; and when the committee was appointed, the power would devolve on them, save so far as they were otherwise instructed — devolve upon them, not by delegation from the directors, nor as their agents; but by operation of the constitution, and as the agents of the association. While the executive committee were expressly authorized by the board of directors to negotiate a loan, and to transact other business which was specified, they were not inhibited from, or instructed against making a mortgage for the security of the loan. On the contrary, after instructing them specially to negotiate a loan, and to perform other duties, in the broadest of terms they were instructed “to transact other business pertaining to the boardT So far from narrowing by instructions the power they could exercise under the constitution, in the absence of instructions, there is an explicit declaration, that the whole power should remain vested in them, as fully as if there had been no instructions given as to the particular matters. The execution of the mortgage was within the corporate power essential to the consummation of the purposes for which the association was organized, and its execution was included in the general grant of power to the executive committee to transact official business.—Sargent v. Webster, 13 Metc. 497; Hoyt v. Thompson, 19 N. Y. 207.

The next objection is, that though the executive committee may have had power to execute the mortgage, yet the mortgage is inoperative and invalid, because not executed in the name of the association and under its corporate seal. In a court of law this objection would be conclusive; the mortgage would be ineffectual and inoperative as a conveyance of the legal estate in the premises, the effect and operation it has in courts of law. This is conceded by the bill, and' the insufficiency of the mortgage is the most important fact, rendering necessary a resort to a court of equity, to cure the insufficiency. The rule is unquestioned, that a conveyance executed by an agent or attorney, to operate in a court of law as a transfer of the right and interest of the principal, must be made in the name of the principal, and must be executed as his deed. There is no rule of law more firmly settled, and supported by greater uniformity of decision, though it may seem narrow and technical, and may often operate the disappointment of the clear and manifest purpose and intention of parties. The rule is as applicable when a corporation, as when a natural person, is the principal. Though the conveyance may, as in the mortgage before us, run in the name of the principal in its body, and in all its clauses, yet, if it is executed by an agent in his own name, and not in the name of the principal, it is not the deed of the principal, and against him can have no operation in a court of law.—1 Am. Lead. Cases (5th Ed.), 727; 1 Jones, Mort. § 130; Jones v. Morris, 61 Ala. 518.

While this rule prevails at law, in equity it is equally well settled, that contracts or conveyances made by an agent having authority, though informally and defectively executed, are binding on, and will be enforced against the principal. Upon this doctrine a court of equity imparts validity to, and enforces a mortgage defectively executed by an agent having authority to execute a mortgage in the name of, and as the act and deed of the principal. It is not material, whether the defective execution is the result of mere inadvertance, or whether it is founded in ignorance or mistake of law. When there is a valuable consideration, and the parties have contracted, having full capacity, equity looks “ upon that as done, which ought to have been done.” The true meaning of this maxim is,” says Judge Stoby, “ that equity will treat the subject-matter, as to collateral consequences and incidents, in the same manner as if the final acts contemplated by the parties had been executed exactly as they ought to have been ; not as the parties might have executed them.” 1 Story Eq. Jur. § 64 g. The executive committee had, as we have determined, power not only to negotiate a loan in the name of, and for the use and benefit of the association, binding the association for its payment, but they had also power to mortgage in the name of the association the corporate property as security, or as indemnity to the makers and indorser of the promisory notes, whose credit was borrowed. This power existing, and its exercise having been attempted, the parties are not to be disappointed, and their just rights defeated merely because, from, inadvertance, or from ignorance, or mistake as to the method which ought to be pursued to bind the association, passing its estate and interest in the lands, there is a defective execution of the power. A court of equity, acting upon its just maxims of treating that as done, which ought to have been done, considering agreements founded on a valuable consideration, as performed at the time when they ought to have been performed, in fayor of whoever has the right to demand performance, will aid and cure the defective execution.—Love v. S. N. L. W. & M. Co. 32 Cal. 639; M. & C. P. R. R. Co. v. Talman, 15 Ala. 471; 1 Jones, Mort. § 169.

But independent of these views, it is shown very fully that the association had ratified and approved all the acts of the executive committee in this transaction, not only the mode adopted in borrowing the money, but the execution of the mortgage. We do not mean, that it is shown that there was assent to, and confirmation of the transaction, expressed in words. That is not essential, for ratification is more often implied from the acts and conduct of parties having an election to avoid or to confirm, than found expressed in words. And it is implied, whenever the acts and conduct of the principal, having full knowledge of the facts, is inconsistent with any other supposition than that of a previous authority, or an intention to abide by the act, though it was unauthorized. Here the association accepted all the benefits of the transaction — received and appropriated to its own uses the money obtained on the promissory notes, and has acquiesced in all that was done by the executive committee, not even now objecting that it was unauthorized. A corporation has as full capacity as- a natural person' to ratify the unauthorized or the defectively executed acts of its agents,- and the ratification is the' équivalent of a prior authority.—Ang. & Ames, Cor. § 304; 1 Am. Lead. Cases (5th Ed.), 719. Having received and retained the benefits of this transaction, with full knowledge of all the facts, the association has ratified and confirmed it, unless intentional fraud is imputed, for which there is neither room nor reason. It is too late now, as it was when the judgment creditor Cleveland obtained judgment, and when he acquired a mere general lien by the issue of execution, for the association to impugn the transaction. The ratification may rest in parol; it nevertheless operates as an estoppel on the association. In a court of equity, an. estoppel resting in parol may bind the legal estate in lands.—McPherson v. Walters, 16 Ala. 714; Walker v. Murphy, 34 Ala. 591.

The estoppel is as binding on a subsequent judgment creditor as it is on the association. His succession is to the estate, right and interest of the association, bound by its acquiescence in, and ratification of the acts of the executive committee. As the association did not disaffirm these acts, but received and enjoyed all the benefits resulting from them, long before he acquired a lien, there is no equity in Ms claim to disavow and disaffirm them to the prejudice of other cx*ed-itors equally meritorious, who, relying upon them, may have lost all opportunity to obtain other security.—Gordon v. Preston, 1 Watts, 385.

It is insisted, however, that the sale under the power in the mortgage was irregular, and passed to the appellant no right or estate in the lands ; that as the mortgage was valid and operative only in a court of equity, there could be no foreclosure of it otherwise than by a decree of a court of equity; that the legal estate remained in the association, and passed to Cleveland by his purchase at the sale by the sheriff. Assuming all this to be true, the ineffectual sale, in equity, operates as an assignment of the mortgage to the appellant, and he now has a full right as assignee to a decree of foreclosure and sale, or to a decree confirming the ineffectual sale, if the owner of the equity of redemption does not interpose to avoid it.—1 Jones on Mortgages, § 812; 2 Ib. 1678-1902.

It is lastly insisted, that Cleveland is a bona fide purchaser without notice of the facts which, in equity, render the mortgage valid and operative as the act and deed of the association, and should therefore be protected. But we think notice must be imputed to him. It is an admitted fact that his attorney, about the time the suit at law was commenced, examined the registration of the mortgage. That this examination was made while the relation of attorney and client was existing, and in the course of transacting the business of the client, is justly inferable from the terms of the admission. The mortgage on its face purports to be the act and deed of the association. It recites the making of the promissory notes at the request, and for the accommodation of the association ; also their negotiation by the association, the reception of the money thereby obtained, and its use in erecting buildings. Notice of these facts was surely sufficient to excite inquiry, whether the executive committee executing it in their own names had not authority to execute it in the name of the association, or if wanting in original authority, whether there had not been ratification, and consequently, that though the mortgage was invalid as a legal conveyance, it was valid and operative in a court of equity. Whenever a purchaser has such information as would put a prudent man on inquiry, and inquiry would lead to knowledge of an adverse claim, it is his own folly, if he does not act on the information, and make the inquiry. He is wanting in good faith, an indispensable element of a purchaser without notice, whom a court of equity protects, if he does not pursue the inquiry, and can claim no protection against an outstanding equity, prior in point of time to his purchase, of which he would have been informed, if diligent.—2 Lead. Eq. Cases (4th Ed), 144. All that Cleveland acquired by the purchase at the sheriff’s sale, in the view of a court of equity, was the equity of redemption of the mortgagor. It is not that he claims, but the legal estate in the premises, to which he is not entitled. Of the ineffectual or irregular sale no complaint is made, and no claim to its vacation is preferred.

The decree of the chancellor is reversed, and a decree is here rendered granting relief to the appellant.