Cunningham v. Massena Springs & Fort Covington Railroad — 44 N.Y. St. Rep. 723

Majority

p. 723

Marcus G. Cunningham, Resp’t, v. The Massena Springs & Fort Covington Railroad Company, Appl’t.

(Supreme Court, General Term, Third Department,

Filed April 4, 1892.)

Headnote

1. Corporations—Verbal contract by officers—Ratification.

Plaintiff brought an action to recover a balance due for constructing defendant’s railroad under a verbal contract made with defendant’s president and general manager, and which was afterwards reduced to writing ; the answer denied the making of the contract. Upon the trial it appeared that, after the making of the contract with defendant s president, ground was broken and the work commenced by plaintiff in the presence of a large number of defendant’s directors, and that its president then and there pointed him out as the contractor who was to build the road ; that defendant furnished him materials to use in the work, made payments thereon, and recognized him as a contractor by a resolution of its directors. Held, that the contract had been ratified by defendant.

'2. Same—When defense of ultra vires not available.

In an action against a corporation on a contract, it cannot avail itself of the defense of ultra vires where the contract has been in good faith fully performed by the other party, and it has had the benefit of the performance.

Appeal from judgment in favor of plaintiff, entered upon report of referee.

Walter J. Hears ( William P. Cantwell, pf counsel), for app’lt; • Malt. C. Ransom, for resp’t.

Plaintiff brought this action to recover a balance •claimed to be due for constructing a portion of defendant’s rail

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road, under a verbal contract alleged to have been made with one Foster, president and general manager of defendant, and which, contract was afterwards in part reduced to writing. The case was-tried before a referee, who found in favor of the plaintiff. The defendant insists that the referee made various errors in his rulings in the course of the trial, and in his findings upon the facts- and law, for which the judgment should be reversed.

First. Defendant claims that the referee erred in finding that there was a valid contract entered into between the defendant,, through Foster, and plaintiff on the 23d of October, 1884, with the terms and conditions as stated in his report. That the evidence does not sustain such finding.

Plaintiff testified to the making of the contract with Foster. It, was shown by several witnesses, without objection, that Foster, who was president of the defendant, was also its general business-manager. After the contract it appears that in the presence of twelve or fifteen of the defendant’s directors ground was broken and the work was commenced by the plaintiff, and that Foster-then and there pointed him out as the contractor who was to-build the road. Plaintiff went on with the work in pursuance of the contract made with Foster, 'and the defendant not only furnished materials necessary to be used in said work, but made payments thereon to a large amount. The testimony indicates.that plaintiff under the contract with Foster performed the work with the knowledge and consent of defendant’s officers. lie was-also recognized as a contractor by a resolution passed at a meeting of defendant’s directors.

A corporation may become bound by a contract express or implied under the same circumstances as an individual. To make a corporation liable it is not necessary to show an express resolution passed at a meeting of its directors. Where a party does work or furnishes materials to a corporation under a contract with one assuming to act as its agent, to the knowledge of its officers, without dissent on the part of the corporation, it will be held to have ratified the contract and liable thereunder. Lee v. The Pittsburgh Coal & Mining Co., 56 How., 373 ; Wilson v. Kings Co. El. R. R. Co., 114 N. Y., 487 ; 24 St. Rep., 81 ; Howell v. The Joseph Edwards Dredging Co., 36 id., 803; Marine Bank of Buffalo v. The Butler Colliery Co., 23 id., 318; Martin v.Niagara Falls Paper Mfg. Co., 44 Hun, 137 ; 8 St. Rep., 265 .

The evidence given in the case amply sustains the finding of the referee in the regard above mentioned. And also his finding that said contract was subsequently, and on or about January 21, 1886, partially reduced to writing.

Second. But the defendant says that although Foster might be-authorized to make a contract with the plaintiff to construct the road on defendant’s line, he was not authorized to contract for the building of a bridge and a piece o'f road beyond defendant’s line. That such a contract was ultra vires. Foster could not make it under the authority conferred upon him by defendant’s directors, and the defendant itself could only legally enter into-such an agreement.

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It was shown on the trial that under the contract with Foster plaintiff built a pile bridge and a small piece of road adjoining, but beyond defendant’s line. It also appears, and the referee found, that plaintiff, while constructing said bridge and piece of road, supposed it to be a part of defendant’s line and did the work in good faith. Defendant furnished a large part of the materials for the bridge, and made payments thereon, and had the benefit of the bridge and road. Defendant so furnished materials and made payments on the bridge to the amount of $1,857.49. The referee made no allowance to plaintiff for work on said bridge over said payments. Practically he determined that plaintiff built the bridge and defendant paid for it. Whether the contract with Foster to build the bridge and the small piece of road at the end of and beyond defendant’s line was or was not beyond defendant’s power, having been executed by plaintiff in good faith and the bridge and piece of road having gone into defendant’s possession, the plea of ultra vires ■ cannot be sustained. ‘‘A corporation cannot avail itself of the defense of ultra vires where the contract has been in good faith fully performed by the other party, and the corporation has had the full benefit of the performance of the contract.” Whitney Arms Co. v. Barlow, 63 N. Y., 70 ; Bissell v. The Mich. S. & N. I. R. R. Cos., 22 id., 259; Woodruff v. Erie R. R. Co., 93 id., 618; The Rider Life Raft Co. v. Roach, 97 id., 381.

Were it otherwise, however, if plaintiff could net enforce the contract as to the bridge, because beyond the power of defendant to make it, yet defendant having paid $1,857.49 on the illegal contract could not recover said sum of the plaintiff. See Knowlton v. Congress & Empire Spring Co., 57 N. Y., 531 -2; Nellis v. Clark, 4 Hill, 424 . “ Ho case can be found where, when money has been actually paid by one of the parties to the other upon an illegal contract, both being pariiceps criminis, an action has been maintained to recover it back again.”

Hence if it were the fact that for want of power to make the contract on the part of defendant plaintiff could not recover a part of the sum allowed by the referee, it would only be the amount allowed for the small part of defendant’s road between the bridge and defendant’s line,; two or three hundred dollars.

For the reasons above stated, however, I think plaintiff was entitled to recover the value of his work upon the bridge, and also upon this small piece of road.

Third. The claim of defendant’s that plaintiff cannot recover in the action because he abandoned the work and failed to fully perform the contract is not sustained by the evidence. There was evidence given in the case which justified the finding of the referee that the plaintiff ceased work at the suggestion of defendant’s president and manager that there was no money to go on with, and that as soon as defendant collected the money for that purpose plaintiff would be informed; that plaintiff was always ready and willing to continue the work, but never received any such notice.

. Also, the evidence is clear that defendant could not meet the

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payments as provided in the contract and failed to pay plaintiff according to its terms and for that reason plaintiff could properly refuse to continue the work. Strack v. Hurd, 41 St. Rep., 777 .

It is insisted by defendant that the referee erred in not allowing defendant four items of credit amounting to $1,079.97 which it claimed were established by the evidence on the trial. I will not undertake to discuss the testimony given in regard to those items, but I have read and considered it all carefully. There was conflicting evidence given in the case as to the said items, and I think the findings of the able and experienced referee on the questions of fact submitted to him should not be disturbed. The same may be said as to the item for work on the “ abandoned line ” and the item for plaintiff’s services.

It is suggested that the referee erred in overruling the objections to the introduction of the memorandum made by Shanly. Shanly testified that as the work progressed he measured it from time to time and when finished made a memorandum of the whole work done. He did not remember independently of the memorandum. That it was correct. I think under well settled rules the memorandum was properly received in evidence. Wilson v. Kings Co. El. R. R. Co., 114 N. Y., 498 ; 24 St. Rep., 81 .

Paper “A” was also competent evidence. It was properly received as tending to show that defendant through Shanly, its employee, took charge and control of the pile bridge in question and finished the same. The defense of ultra vires asserted by defendant upon the trial and the claim of the lack of authority of Foster to make the contract with plaintiff rendered this evidence proper.

The evidence of plaintiff of his conversation with Foster, about where the work began, and about the bridge, etc., was also properly received by the referee. Although there was a written contract between the parties, the writing only contained part of the contract, and hence the conversation between the plaintiff and Foster was competent. I also think that the referee did not err in overruling the objections to that part of plaintiff’s evidence detailing what occurred at a meeting when work was commenced on the road by plaintiff. At that meeting a large number of defendant’s directors were present. The question was raised on the trial as to Foster’s authority to contract with plaintiff. Foster in the presence of defendant’s directors pointed out the plaintiff as the contractor who was to do the work of the road. The work was commenced at this time in the presence of Foster and defendant’s directors and of plaintiff. The evidence tended to show the knowledge and assent of defendant’s officers to the contract made by Foster with plaintiff.

' There are various other exceptions made by defendant to rulings of the referee on the trial, and to his findings, which I do not deem it necessary to discuss here. I have examined them all with care, and am unable to find any exception xdhich, in my judgment, requires discussion or which should lead to a reversal of the judgment

íhe questions involved in the case are mostly those of fact. I

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think the findings of the learned referee should stand, and that the judgment should be affirmed, with costs.

Mayiiam, P. J., and Herricic, J., concur.