Smith v. Martin Anti-Fire Car Heater Co. — 47 N.Y. St. Rep. 26

Majority

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Roderick H. Smith, Resp’t, v. The Martin Anti-Fire Car Heater Co., App’lt.

(Supreme Court, General Term, First Department,

Filed June 3, 1892.)

Headnote

1. COBFOBATIONS—CONTEACT MADE BY PBESIDBNT.

Plaintiff was employed by defendant’s president to act as its agent to. secure orders from railroad companies for fitting up trial trains with the device manufactured by it, for which services a commission was to be-paid. In an action for commissions, defendant claimed that the president was not authorized to make the contract with plaintiff, as its by-laws provided that the vice-president should attend to the details of the business. Held, that as the contract was one within the scope of the apparent authority of the president, and directly related to the business of the corporation, plaintiff was not bound by the limitation of authority contained in. the by-laws which were not brought to his knowledge.

2. Same—Ratification.

After plaintiff had obtained from a railroad corporation an acceptance-

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of a proposition signed by him as such agent, and had submitted the same to defendant, the vice-president called on the railroad superintendent, and, after some slight alteration, marked the proposition approved. Held, that this constituted a ratification and adoption of plaintiff’s services, and rendered defendant liable to pay for the same.

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

Benjamin S. Harmon and Charles F. Mathewson, for resp’t; O. W. Johnson (Daniel Whitford, of counsel), for app’lt.

-—-This action was brought for an accounting and to recover from the defendant such amounts as might be found to be due to plaintiff as commissions for services rendered pursuant to a contract claimed to have been made between the plaintiff and the president of the defendant company. The latter was a domestic corporation engaged in the manufacture and sale of a certain device for heating railroad cars with steam drawn from the locomotive. The complaint alleged that in February, 1887, the defendant through its authorized agents'entered into a contract with the plaintiff, by which it was agreed that the latter should endeavor to secure orders from different railroad companies for fitting up a trial train or trains with the device manufactured and sold by the defendant; for which services plaintiff was to receive ten per cent of the amount received by defendant for the fitting and equipping of the first or trial train, and five per cent, of all amounts thereafter received from the railroad company for the fitting up and equipping of additional cars and locomotives with defendant’s invention or device.

The two questions most strongly urged upon this appeal, and to which alone we shall direct our attention, are, first, was any such contract made ? and, second, if so, was it one binding upon the defendant as having been made by a duly authorized agent ?

The testimony in brief shows that at the time of the making of the alleged contract, the plaintiff and William Martin, the defendant’s president, resided at Dunkirk, 1ST. Y., where the chief office of the defendant was located. Intending to change his residence from Dunkirk to this city, the plaintiff, who was well acquainted with the officers of the defendant and especially with the president Martin, had an interview with him in respect to doing business for the defendant company, and as a result he testified that a contract such as alleged in the complaint was entered into.

Though the making of any such contract was put in issue by the answer, which was supported by the testimony of' Martin, the question was purely one of fact, and the conclusion reached by the referee is sustained by evidence showing the existence of a contract of the character claimed by plaintiff. The conduct of the plaintiff in having his cards prepared describing himself as the “ Agent for the Martin Anti-Fire Car Heater Company,” his thereafter calling upon the superintendent of the Hew York Central Company, and subsequently submitting to him a written proposition signed as agent of the defendant, and his notification to defendant of the acceptance of the proposition, were facts

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strongly tending to support, and consistent only with, the view that plaintiff thought himself warranted to represent and act as the agent of the defendant. Impressed, no doubt, with the strength of such testimony, the defendant, to avoid the legal effect of the contract as claimed, insists that it was the individual contract of Martin, who did not assume to bind the defendant. We think, upon this question, the finding of the referee that Martin did assume to bind the defendant finds support in the evidence.

It is further urged, however, that Martin had no authority to-bind the corporation; that although he was the president, his duties related to supervision over the mechanical portion of the-work, and that one Shaw, who was vice-president of the defendant, was constituted by the by-laws the general agent to attend to-all the details of the business. On examination, we do not think that the by-laws relied upon as limiting the powers of the president aré susceptible of the construction which the defendant would now seek to place upon them, nor do they in any substantial degree take away the powers ordinarily conferred upon the president of a corporation. Be this, however, so or not, it-was clearly shown that no knowledge of any limitation of the powers of the president under the by-laws was brought "home to the plaintiff; but, on the contrary, the entire testimony shows that a contract, such as' is claimed to have been made, was within the apparent scope of the authority conferred upon the chief executive officer of a manufacturing corporation.

We assent to the propositions of law, which are supported by numerous authorities, and which are relied upon by the appellant,, that the president of a corporation has, by virtue of his office merely, no authority to contract for the corporation, and that one-contracting with a corporation is bound to take notice of limitations contained in the by-laws on authority to contract for the corporation. These as general propositions of law are correct; but they are subject to certain well defined modifications which have grown out of the necessity of broadening and giving validity to the acts of the executive officers of business and manufacturing corporations, some cases going to the extent even of holding such corporations to be bound by the acts of their agents whenever justice and fair business dealing would seem to require. Unlike the rule as it prevailed at common law, corporations are now held to be affected with constructive notice, and implied assent, tacit acquiescence, and generally with the same legal and equitable considerations as affect the rights of natural persons. So far as' business, trading and manufacturing corporations are concerned, it would be utterly impossible to transact their business if persons dealing with their officers and agents were hampered with the-old rule that they were bound to know the exact extent of their authority to bind the corporation. We think, therefore, that the first distinction to be observed in respect to the acts of officers relates to the nature of the corporation and the character of its business.

Another distinction to be observed in testing the question as to what acts would bind a corporation is, to determine whether or

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not such acts áre done or performed in connection with the purn )se directly connected with tile company’s legitimate business. As stated in Spelling's recent work on Private Corporations, § 193: Usage and custom and the necessities and conveniences' of business attach to certain corporate officers functions independent of any express authority from the board of directors.. In the exercise of these they are as much the agents of the corporation as if authority go to act were specially delegated. The president, for instance, as chief executive officer of the corporation, may bind it by all acts the performance of which is incidental to his office. When the president of a corporation performs an act pertaining to its business, a presumption exists in favor of the legality of the act.” See, also, Morawetz on Private Corporations (2d ed.), § 538; Beach on Private Corporations, § 202.

While it is impossible to reconcile all the cases with this view of the law, there Being dicta in some of the cases, and others holding directly, that a president by virtue of his office has no authority to make* a contract on behalf of the corporation, we think that most of them can be reconciled with the .view here expressed, if we keep in mind the distinction always to be made as to whether the contract in its nature is directly connected with the purpose of the incorporation, whether made in the usual course of the business of the corporation, and by an officer or agent acting within the scope of the apparent authority of such officer or agent. The application of such principles of law to the contract found by the referee to have been entered into by the defendant corporation through its president presents a case where the president, by acting within the scope of his apparent authority, made a contract relating to the business of the corporation, which the latter has acted upon to its profit, and by which in honesty and fairness it should be bound.

Were we, however, to go to the extent of holding that the limitations upon the powers of the president would have prevented the-making of this contract, and that the only officer authorized to bind the corporation was the vice-president, we do not think, upon the facts here presented, that the appellant can gain much comfort from such a contention. It is shown that after the plaintiff had entered into negotiations with the superintendent of the railroad company, after a written proposition had been made and accepted, the vice-president called upon the superintendent, and having the facts of the written proposition and acceptance before-him, upon examination, after some slight alterations therein, which in no respect changed the substance of the contract, he marked the same approved.

If this was not a ratification of the acts of the plaintiff, and if such testimony cannot be regarded as proving acquiescence in the plaintiff’s negotiation with the railroad company, it would be difficult to determine what else would be required. The vice-president, with the knowledge that the plaintiff was holding himself out as the agent of the defendant, -approved of the contract substantially as made by the plaintiff with the railroad company ; and there is evidence to support the finding of the referee, that at.

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the time of accepting the order from the railroad company and ■equipping the trial train, the defendant’s managing officers knew that the order had been obtained through the efforts of the plaintiff, claiming to act as the agent of the defendant. Upon this appearing, even assuming that the president of the defendant was not authorized to make the contract with plaintiff, yet the corporation, in availing itself of plaintiff’s services thereunder, has adopted and ratified the same, and should pay for the services according to the agreement.

Upon an examination of the record, therefore, wé see no reason to interfere with the conclusion reached by the referee, which is -consonant not only with justice and equity, but with well settled principles of law.

We are of -opinion, therefore, that the judgment appealed from should be affirmed, with costs.

Van Brunt, P. J., and Barrett, J., concur in result.