Case ID: sd_40/html/0136-01.html
Source: Caselaw Access Project
Author: {"author": "WHITING, P. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

PORTER, Receiver of the Independent Elevator Company, Respondent, v. HALLET & CAREY COMPANY, Appellant.
    (166 N. W. 525.)
    (File No. 4209.
    Opinion filed February 25, 1918.)
    1. Contracts — Board of Trade Speculation, Recovery to Meet Dosses — Corporation Moneys, Transaction by Agent, Expenditure Through Agency — Corporate Knowledge of Transaction, Effect — Right to Recover, Whether Corporation, or Agent.
    One N.,_and two others constituted plaintiff’s board of directors'1 N. being also secretary and manager and in charge of the corporation books. Certain of plaintiff’s money was paid by N. to defendant corporation to meet losses which had resulted from hoard of trade speculations; entries of payments of said moneys both credits and debits being regularly made in plaintiff’s hooks as were its usual business transactions. The other directors plead ignorance of contents of the hooks. There was no evidence to sustain finding that defendant, when it received the money, knew the party paying same had no authority, to pay it over for purpose for which it was paid. Held, that the transactions in question were those of plaintiff; the hooks in effect showing that plaintiff, and not N. was the real party in interest in the transaction; that N. could not have claimed, as against plaintiff, any profit arising therefrom; that the other directors’ ignorance of the contents of the hooks is not a ground of recovery by plaintiff.
    2. Corporations — Corporate Books, Contents, Duty c-f Directors to Know — Recovery to Meet Board of Trade Dosses Recorded, Right To.
    A corporation may not base a right of recovery of moneys shown by its hooks to have been expended, on the ground of the directors’ ignorance of what appeared on the company’s books. The corporation’s duty is to know what its hooks disclose; which knowledge should come through its hoard of directors; and the corporation, as against third parties, cannot be heard to plead ignorance which, if it existed, resulted from directors’ failure, to advise themselves of the corporate hook entries. So held, where plaintiff corporation sued defendant corporation to recover the amount of losses resulting from board of trade speculations with plaintiff’s moneys, so applied through its manager who made the hook entries, in the board of trade transactions.
    McCoy, J., dissenting.
    Appeal from Circuit Court, Bea-dle County. Hon. JosjSpi-i H. Bottum, Judge.
    
      Action by Clement F. Porter, Jr., Receiver of the Independent Elevator Company, a corporation, against the Hallet & Carey Company, a ooaiporialtioo, to receiver oertain moneys claimeidi by plaintiff to have been wrongfully paid -by its manager to defendant corporation for use in board of trade speculations. From a judgment for plaintiff, and from an order denying a new trial, defendant appeals.
    Reversed.
    
      H. V. Mercer, C. C. Krcmse, and Krause & Krause, for Appellant.
    
      Frank McNulty, and Howard, Babcock, for Respondents.
    (1) To point one of the opinion, Appieilamt cited: Davis v. Smith, 29 Minn. 202.
    Respondent cited: Porter v. Lien, 36 S'. D. 18, i53 N. W. 905; Mamin V. Lyon, 69 Minn. 257, 72 N-. W. 72; Moibn v. Miesen, 47 Minn. 228, 49 N. W. 862; Union- Stock Yards National Bank v-. Gillespie, T37 U. S. 411; 34 L. Ed. 724.
    (2) To point two of the opinion, Appellant cited: Russell v. Waterloo^ Threshing Machine Co. 116 N. W. 611 (N. D.) ; Brown’s Valley State Bank v. Porter, 232 Fed 434; Bank v. Porter, 232 Fed. 434; Columbia Mill Go. v. Nat Bank of Commerce, 52, Minn. 224 (53 N. W. 1061) ; Sinclair v. Investors’ Syndicate, 125 Minn. 311-314.
   WHITING, P. J.

Action far certain -moneys which it is claimed that one No-rby wrongfully paid -'to defendant corporation -cut of the moneys of the Independent Elevator Company, hereinafter spoken of' -as plaintiff. Judgment for plaintiff. From such judgment- and an order -denying a mew trial thi-s- appe-al was taken.

Respondent objects to a consideration -of the statement contained in appellant’s brief -and to a consideration of a -part of the printed -record herein designated “Appendix.” Such objections are without- merit in the light of the settled record herein.

Respondent -objects to our considering the question of the sufficiency of the evidence to support toe findings, urging five reasons why we should not consider same. An' examination of the whole record herein reveals that non-e -of said objections -are well taken; and none -of them raise any question of practice of sufficient moment to warrant further -consideration.

Certain money was paid to defendant to meet losses which 'had resulted from speculations upon the Chicago Board of Trade. In conducting such speculative transactions defendant was acting either for plaintiff oir for Norby. It is the contention of plaintiff and was found by the trial court that such transactions were in fact the personal transactions loif Norby; that they were made in his name by defendant; that Norby had no authority to rise the money of plaintiff in connection with such transactions whether they were entered into for himself or for plaintiff; that defendant, when receiving the money, knew it to be the money of plaintiff; and 'that it took such money at its peril and subject to a liability to repay the same to plaintiff if Norby did in fact lack authority to use the same for the purposes for which he placed it in defendant’s hands. The court also found that, when defendant received such money from such manager, it knew that h.e had no authority or right to pay said money to defendant for the purposes for which it was paid to and received by defendant.

The evidence in this case is very voluminous. We have given to same the most careful consideration and analysis both by a study of the printed re'Coirdi herein, by a study of the settled record transmitted! to 'us from the trial court. No useful purpose could possibly be subserved by an extended review of such evidence. The evidence show that Norby and two others constituted .plaintiff’s board of directors, Noirby being also secretary and manager and as such having charge of the books of such corporation. A record of the payment of this money to defendant was regularly entered upon plaintiff’s books exactlyy as were other business transactions of plaintiff. All the proper entries, both debits and credits, were entered upon such books from time to> time exactly as would have been done if the business transacted through defendant were being transacted for and on behalf of plaintiff. On the face of such books it would appear that plaintiff and not Norby was the real party in interest in the business transacted by defendant. In the light of such books Norby could' not 'have claimed, as against plaintiff,' any profits arising from such transactions. The other directors plead ignorance of the contents of the books, and the only possibly ground1 upon which plaintiff could be allowed' to recover was because of such alleged ignorance. Plaintiff should not be. allowed to base a right of recovery on such directors’ ignorance of what clearly appeared! on the company’s -books. It is the duty of a corporation- to know wh-at'its books disclose; this knowledge should come' through its board of directors; an-d the -corporation, as against third parties-, should' not be -heard to plead ignorance when such ignorance,’ -if same in fact existed,’ -resulted! from the failure of such, directors to advise themselves of what was revealed by the books of the corporation. As was said by the court in Bank v. Porter, 232 Fed. 437, 146 C. C. A. 431, a case- involving the business, of .plaintiff corporation and in which the evidence was, in great part, identical with that before us:

“Had’ * * * [the two- directors- 'of plaintiff- other than the secretary and manager] given clue attention to their -duties-as .directors, they would have known these payments were -being made, -and it was due to the manner in which fh-ey conducted the business- that they did- not know.”

There was absolutely no evidence to sustain -the finding that defendant, when it received the money, knew -th-ait the party paying same bad! no authority 'to pay it over for the purposes for which it was paid.

We are of the -opinion' that, under the undisputed evidence herein, there is no room for -reasonable men. to reach different conclusions -as to the material facts; and that, under such facts, the transactions in question were those of plaintiff. This being true we must, as a matter of law, reverse the -trial court. Drew v. Lawrence, 37 S. D. 620, 159 N. W. 274. In any case it would be unconscionable to allow plaintiff to recover herein, because, while this suit is- brought ostensibly on behalf of plaintiff company, in reality, as is clearly disclosed by the evidence, the only persons Who- would in fact benefit thereby are the two directors other than Nobby and those claiming under No-rby.

The judgment and- order appealed- from are reversed.

McCOY, J., dissenting.