The Corn Exchange Bank v. The Cumberland Coal Co.

THE CORN EXCHANGE BANK v. THE CUMBERLAND COAL COMPANY.

It is undeniable that a corporation may be bound by the act of an agent where the agent acts in the discharge of his duties, and within the scope of his powers as such, although the particular act may not have been directed or authorized by any formal resolution of the directors of the company.

So a corporation is bound by the act of an agent done on its behalf and in its name, when it accepts the benefit of the act, although the agent had no prior authority, express or implied. The acceptance of the benefit is an adoption of his act.

But it is certain, that in every case, in order to bind a corporation, there must be proof of the prior authority of the agent, general, or special, or of the subsequent adoption of his act.

When the powers of the agent are solely derived from an express authority, the terms of the authority must be strictly pursued, or it must appear that the corporation has accepted the benefit of his act, or has otherwise adopted it.

In the principal case, two members of an executive committee of the defendants, who were only authorized to act when the president, as one of their number, was present, in his absence made a contract for a lease by the defendants of certain rooms belonging to the plaintiffs, and it appeared that the defendants had never entered on the occupation of the rooms.

Held by the Court that the contract was void, and that no action thereon could be maintained against the defendants for the recovery of rent.

Verdict for plaintiffs set aside, and new trial granted.

(Before BOSWORTH & WOODRUFF, J.J.)

Heard, June 9; decided, June 27, 1857.

CASE upon a verdict for the plaintiffs, taken subject to the opinion of the Court at General Term. This action was tried before CH. J. OAKLEY and a jury, in December, 1856. It was brought to recover a quarter's rent of certain rooms in a building belonging to the plaintiffs. It was alleged that the defendants had leased the rooms for one year, at the rent of $2,500.

The controversy turned solely on the validity of the contract of hiring, and all the material facts upon which the decision of the question depended are fully stated in the opinion of the Court.

T. C. T. Buckley, for the plaintiffs.

T. D. James, for the defendants.

The Corn Exchange Bank v. The Cumberland Coal Co.

BY THE COURT. WOODRUFF, J.-It appears by the evidence herein, without contradiction, that by the by-laws of the defendants, it is provided that their concerns shall be managed by a president and a board of twelve directors, of which board, the president shall be a member, and have the casting vote when the board is equally divided. Or by an executive committee of three directors, * * and the president in like manner shall have the casting vote when the committee is equally divided, and that at stated meetings the president and four directors, and at intermediate meetings the president and two of the executive committee, shall constitute a quorum for the transaction of any business."

*

And further, that "in case of absence or sickness of the president, the board of directors or executive committee, as the case may be, shall have power to appoint a president, pro tempore."

It further appeared that the president of the plaintiffs, was himself a director, and at the time of the transactions in question, a member of the executive committee of the defendants. And, therefore, in his dealings with the defendants through their executive committee, he must be taken to have had full knowledge of these by-laws, under which the concerns of the defendants were managed.

At a meeting of the board of directors of the defendants, on the 4th day of April, 1855, nine directors being present, and among them, Mr. Dunham, the president of the plaintiffs, the defendants' president being absent, A. M. Sherman, Esq., was appointed chairman of the meeting; and on this occasion Mr. Dunham was appointed a member of the executive committee to fill a vacancy caused by a resignation.

At this meeting the attention of the board being called "to the proposition to lease offices from the Corn Exchange Bank," the proposition was "referred to the executive committee with full power, and to report at the next meeting of the board."

The executive committee consisted of Messrs. Thompson, Bloodgood, and Dunham; and Mr. Mehaffey was the president.

Mr. Dunham, when appointed a member of the executive committee, stated to the board that, as he was acting for the Corn Exchange Bank (the plaintiffs), in the matter of leasing their

The Corn Exchange Bank v. The Cumberland Coal Co.

rooms, he should not meet with the executive committee on that subject.

On the following day Messrs. Bloodgood and Thompson, being at the office of the defendants, concluded on behalf of the defendants (the president not being present), to take the rooms, and accordingly Mr. Bloodgood addressed and sent a note to Mr. Dunham, as president of the plaintiffs, in these words:

"Office of the C. C. & I. Co.

New York, April 5, 1855.

Dear Sir:-This Company will take the rooms over the bank. By order of the Ex. Com.

F. BLOODGOOD, of the Ex. Com."

The president of the defendants, on his return, learning what had taken place, requested Mr. Dunham, the plaintiffs' president, to release the defendants from their engagement; this was refused. The power of Dunham to bind the plaintiffs appears to have been derived from a resolution of the plaintiffs' Board of Directors in these terms:

"On motion resolved, that the renting of the offices in the banking house be referred to the officers with power." And the testimony showed that the officers of the bank were the president and cashier; and there was evidence that the bank went into that building the previous year and that the president was the officer who had always made the contracts for renting the rooms in the building, and that the cashier collected the rents.

The defendants never entered into the occupation of the rooms, and this action is brought to recover rent thereof for three months, viz., from May 1st to August 1st, 1855, after the rate of $2,500 per annum, and there was evidence sufficient to show that the renting, to which the correspondence and resolution referred, was orally spoken of as a renting for one year, from May 1, 1855, at the rent mentioned, viz., $2,500 per annum.

We are of opinion that no contract of hiring was established which was binding upon the defendants.

It is not necessary to deny that corporations may become bound by the acts of their agents, done in the discharge of their

The Corn Exchange Bank v. The Cumberland Coal Co.

duties, and within the scope of the power of the agents, and that without a formal vote of the Board of Directors: nor to deny that contracts will be implied against corporations, when they have accepted the benefit of what is done by the agent in their name, and have so adopted the act.

Under what various circumstances a formal act of the Board of Directors may be dispensed with it is not necessary to say, but this is clear, there must be an authority to contract, or there must be an adoption of the contract, otherwise the corporation is not bound.

If an agent have been clothed with powers sufficiently comprehensive, he may bind the corporation. This may be by an express grant of authority, or by the very appointment to an office, the ordinary duties of which involve the exercise of the alleged power.

The present case requires no consideration of these general inquiries. We have before us just the powers conferred by the defendants, and the manner in which they were to be exercised, and we also find the plaintiffs dealing with the defendants with knowledge of both.

No contract was made with the plaintiffs by a general agent. The defendants did not occupy the rooms, and by accepting the benefit of the alleged agreement, become impliedly bound to pay

the rent.

The subject of taking the rooms in question was referred to the defendants' executive committee with power.

That committee, therefore, had under this reference, and perhaps also under their general authority to "manage the concerns of the company," power to bind the defendants.

But to constitute a quorum for the transaction of any business, it was necessary that the president and two members of the committee should be present. If the president was absent the committee must appoint a president pro tempore.

Instead of a formal meeting, two members of the committee confer together and agree to take the rooms, and give notice accordingly. This we think was not enough. It is left in some doubt by the evidence whether the president of the defendants was not in the city, though not at the defendants' office at the time; at all events, his place does not appear to have been filled,

The Corn Exchange Bank v. The Cumberland Coal Co.

or if the appointment of Mr. Sherman, chairman of the Board of Directors, had any effect beyond the meeting of the Board itself, then he was not present at the meeting of the committee. Probably his duties as chairman ceased with the meeting of the Board. We think it quite clear that the sending of the letter in question created no contract binding upon either the plaintiffs or the defendants. What took place afterwards consists of efforts on the part of the officers of the defendants to induce the plaintiffs to relinquish any claim, and the manifestation of a determination by the plaintiffs to insist on the contract.

The general rule that a corporation can only act in the mode prescribed by the law of its creation, where the prescribed mode is restrictive and not cumulative in its nature, is applicable by analogy to this case. (Dawes v. the North River Ins. Co., 7 Cow. 462.) Although the restrictions here are contained in the by-laws of the defendants, knowledge of those by-laws is brought home to the plaintiffs through their president.

And not only so; the very basis of the plaintiffs' claim is an authority to the executive committee given by a resolution of the Board, passed in the presence of the plaintiffs' president, and the action of that committee could only bind the defendants when had in the manner which the laws of its government prescribed.

It is urged, also, that the defendants were not bound because, in this transaction, Mr. Dunham acted alone, when he had no authority from the plaintiffs themselves to let their offices without the concurrence of the cashier. We are of opinion that, under the resolution of the plaintiffs' Board, read in evidence, if that stood alone, it would have been necessary for the plaintiffs to show that both of the officers of the Bank concurred in the letting. Still, had the undertaking, on the part of the defendants, been made in such form and manner as would bind them, probably the sanction of the plaintiffs' Board of Directors, implied in the statement contained in one of the letters read in evidence, which states that the Board think they cannot annul the contract, might sufficiently show an approval of the act of their President. And besides, there was evidence tending to show the previous usage of the Bank, which indicated an actual concurrence of the two officers in the letting of the rooms by the President, from