Case ID: wis_113/html/0379-01.html
Source: Caselaw Access Project
Author: {"author": "jBaedeeN, J. Maeshaií, T.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Meating, Appellant, vs. Tigerton Lumber Company, Respondent.
    
      January 31 —
    February 18, 1902.
    
    
      Corporations: Contracts: Ultra vires: Authority of president: Evidence: Direction of verdict: Pleading: Payment: Presumptions: Limitation of actions.
    
    1. In an action against a corporation to recover wages, it appeared' that S. was the president of the corporation, and that he hired plaintiff to work for it. Field, that these facts alone were not sufficient to establish defendant’s liability.
    2. The president of a corporation ex officio has no power to contract. for it. When expressly authorized by the articles of incorporation or by the board of directors, or when authority arises from having assumed and exercised the power in the past, he may enter into such contracts as pertain to the regular course of the corporate business under his direction, and no more.
    
      .5. Plaintiffs testimony tended to show that lie was employed by S., president of defendant corporation. No proof was offered that S. bad any authority to hire men, or sustained any relation to the corporation except as its, president. There was testimony tending to show that for two years prior to the alleged hiring, S., when at home, was the managing officer of defendant. Held, that the jury would he justified in finding S. had authority to make the contract with plaintiff, and it was error to direct a verdict for defendant.
    •4. A complaint failing to allege that the amount due plaintiff has not been paid is not subject to the objection that it does not state a cause of action.
    '5. There is no presumption of payment within the period of the statute of limitations.
    ■6. Payment is an affirmative defense and must he pleaded or evidence of the fact'will be excluded.
    Appeal from a judgment of the circuit court for Shawano •county: Jonsr, Goodlaud, Circuit Judge.
    
      Reversed.
    
    The plaintiff brings this action to recover for services alleged to have been performed by him as cook for the defendant. He introduced testimony tending .to show that he was ■hired by H. Swanke, who was president of the defendant •corporation, to work for the corporation. Ho proof was offered by him that Swanke had any authority to hire men, or that he held any relation to.the corporation, except that he was president. The evidence of defendant tended to show that the logging camp- where plaintiff was employed was •operated by H. Swanke & Co., and not by defendant. Such •evidence also tended to prove that Swanke was the managing officer of the defendant for two years prior to the time plaintiff was hired. This fact was testified to by the witness Edwards, who was also an officer of defendant, who also said he had charge of defendant’s business when Swanke was absent. At the close of the testimony the defendant moved for a direction of a verdict on the ground that it was not shown that defendant was interested in the logging camp at which plaintiff worked, or that plaintiff was ever employed by defendant, or that Swanke was ever authorized to hire men to work for de-feudant. This motion was granted, and from a judgment for tbe defendant this appeal bas been taken.
    
      F. G. Weed, for tbe appellant.
    Eor tbe respondent there was a brief by Walrich, Dillett & Fberlein, and oral argument by G. F. Dillett.
    
   jBaedeeN, J.

Tbe court evidently directed a verdict for defendant on tbe ground that there was nothing in tbe ease to show authority on tbe part of Swapke to contract on behalf of tbe defendant. He was president of tbe defendant corporation. Tbe plaintiff and one witness testify that be hired the-former to work for tbe defendant. These facts alone would! not be sufficient to establish liability. Tbe general rule is: that the president of a corporation ex officio bas no power to-contract for tbe corporation. 2 Cook, Stock, § 716. Such-authority may be expressly given by tbe articles of incorporation, or by tbe board of directors, or it may arise from bis having assumed and exercised tbe power in tbe past. Being invested with such authority within tbe lines mentioned, be-may enter into such contracts as pertain to tbe regular course-of tbe corporate business under bis direction, and no more. "When be goes outside of bis express or implied authority, his-acts will not be binding upon tbe corporation. Recent cases in which there is a discussion of this question are as follows : Ford v. Hill, 92 Wis. 188; McElroy v. Minn. P. H. Co. 96 Wis. 317; Northwestern F. Co. v. Lee, 102 Wis. 426; Calteaux v. Mueller, 102 Wis. 525; Hiawatha I. Co. v. John Strange P. Co. 106 Wis. 111; Heinze v. South Green Bay L. D. Co. 109 Wis. 99.

There was no attempt in this case to show that Swank’e bad express authority from tbe board of directors. There-was, however, testimony tending to show that for two years prior to tbe time of tbe contract in question be was tbe president and acting bead of tbe defendant corporation. Tbe inference is plainly justified from tbe testimony of Mr. Ed■wards tbat be was its managing officer wben be was at borne. As sucb be would bave tbe power and authority of similar .agents under like circumstances. Roche v. Pennington, 90 Wis. 107. From tbe testimony before tbe court tbe jury would bave been justified in finding tbat be bad authority ■to make tbe contract sued upon; hence a direction of a verdict for defendant was erroneous.

Tbe objection tbat tbe complaint does not state a cause of .action because it is not alleged tbat tbe amount earned by plaintiff has not been paid is not tenable. There is no presumption of payment within tbe period of tbe statute of limitations. Payment is an affirmative defense, and must be set up in tbe answer, or evidence of tbe fact will be excluded.

By the Gourt. — Tbe judgment is reversed, and tbe cause is •remanded for a new trial.

Maeshaií, T.

I concur in tbe conclusion reached in this •case, and with tbe propositions of law, in tbe abstract, leading thereto, but_ am .fearful tbat an idea may be read out of tbe opinion of tbe court, not intended by tbe court or tbe writer ■of sucb opinion. I do not wish by this to be understood as stating as a fact what tbe court did or did not intend, but-what my individual opinion in tbe matter is, based on tbe general trend of our decisions, in previous years, some of which are cited by the court, and in one of which tbe doctrine I desire to make significant here is as well stated by my. brother BakdeeN as it can be found expressed anywhere by this court. Northwestern F. Co. v. Lee, 102 Wis. 426.

Tbe transaction, tbe validity of which is called in question in this case, was a contract, made by tbe president of a corporation assuming to act as its general agent, which was one ■of tbe ordinary transactions in tbe regular course of its corporate business. Tbe defendant was a lumber company. It was necessarily obliged to employ laborers of tbe class to which plaintiff belonged. Its president, as sucb, made a contract, as is claimed, concerning tbat subject, — a simple contract of hiring. There was nothing unusual either as to the purpose or the nature of the transaction. These ideas are ■expressed by the court in regard to that situation: Eirst, the president of the corporation did not,' by virtue of his office alone, possess power to bind the company. Second, the mere fact that he made the contract in question as agent of the •corporation does not indicate power to do so. Third, a corporation may, by its course of business for a considerable length of time in holding out its president as its general agent, be bound by all his acts which fall within the implied authority of such an agent. Fourth, there being evidence of such holding out in this case, in that there was proof that the president of the corporation, prior to the hiring in question, for a considerable length of time had been the managing agent thereof, the verdict should not have been directed for the defendant on the ground that the evidence did not show or tend to show that its president had power to bind the corporation. Those propositions, though unquestionably correct, might easily be misunderstood without some explanation to point out the scope thereof. For instance, take the third proposition, which, as will be seen, is stated in a restrictive way, and the authorities cited to support it relate, in the main, to the doing of acts by the president of the corporation outside the ordinary business of the ,company, — acts which a general agent or manager would not have implied power to do. There is room for one to understand that, in the making or enforcement of a contract like the one in question — an ordinary contract made in the course of a corporation’s ordinary daily business — a person cannot rely on the me're fact that it is customary for the president of a corporation to act in such matters as its general agent and that he was apparently acting in that capacity in the given case; but that he must comply with the rule which prevailed in Ford v. Hill, 92 Wis. 188; McElroy v. Minn. P. H. Co. 96 Wis. 317; and Calteaux v. Mueller, 102 Wis. 525, in each of which cases the act challenged .was one that a mere general agent or manager would not have implied authority to do; further, that when the evidence shows that the president of a corporation, in a given case, was apparently acting in the capacity of general manager, without any reasonable ground for an outsider to suspect otherwise, the corporation, though prima facie bound by the appearance of authority, may show want of authority in fact, to the prejudice of the innocent party.

True, the president of a corporation has no power, by virtue of his office alone, to malm a contract binding on his corporation, and the mere fact, in any given case, of his making the contract, would not necessarily be sufficient to disturb the effect thereof. That is an ancient doctrine. It is stated in 2 Cook, Stock, § 716, as indicated in the opinion of the court, and by substantially all the text writers that have treated the subject. Morawetz, Priv. Corp. § 537; Elliott, Priv. Corp. § 529; Thompson, Corp. § 4617. However, its effect in many jurisdictions, and in none more, as I believe, than in this state, has long since been done away with, so far as otherwise, a person dealing in good faith with the president of a corporation apparently in charge of its' affairs, in respect to the ordinary business of his company, would be in danger of having the authority of such officer thereafter questioned by such company to such person’s prejudice, or, so far as otherwise, a person relying on an instrument made in the name of a corporation by its president, of a class which is ordinarily so made, would primarily be obliged to produce proof of the authority of the president to act in the given case or cases of like character. The doctrine is just as forceful as ever between the corporation and its president, but has been limited by the doctrine of estoppel so far as otherwise it might be used to the prejudice of an innocent person, by the same wise judicial policy that now precludes a corporation from pleading ultra vires where it would be thus used merely as an instrument to enable tbe pleader to perpetrate a fraud (John V. Farwell Co. v. Wolf, 96 Wis. 10; Zinc Carbonate Co. v. First Nat. Bank, 103 Wis. 125), and tbe same policy tbat treats as obsolete tbe rule tbat a corporation can contract only by deed under its corporate seal. A person wbo finds tbe president of a corporation apparently in charge of its business, or assuming to have tbe right to act as its general agent, there being nothing to put him on guard to tbe contrary, may freely and safely deal with such officer in respect to tbe ordinary business of tbe corporation — business which, by common usage, is managed in tbat way — on tbe assumption tbat tbe officer possesses tbe power of a general agent. Tbe custom is so general for such an officer to exercise such power, tbat tbe character given to him by tbe corporation, by making him its president, is a sufficient bolding out on its part, nothing appearing to tbe contrary, to impliedly give him tbe requisite authority. Tbat principle alone would not have been sufficient to sustain tbe cause of action in Ford v. Hill, 92 Wis. 188, or tbat in any of tbe kindred cases tbat might be referred to, because tbe act challenged in each of such cases, as before indicated, was not within tbe power of a general agent or manager to perform.

All tbe text writers recognize tbe modern rule, some giving it more significance than others, aco'rding to individual notions as to what is tbe better rule. 2 Cook, Stock, § 716, and notes, et seq., gives far more force to tbe old rule than many other modern writers. He seems not to have discovered tbat there has been any radical departure from its ancient rigor, except, possibly, in tbe state of Illinois. He even casts doubt upon any such departure there. How he could reach tbat conclusion, in view of tbe many states where tbe views here expressed prevail, is not perceived. His suggestion, however, tbat it may possibly be said tbat Illinois no longer bolds to the ancient doctrine, should not be overlooked, in view of tbe fact tbat tbe decisions of tbat state, on some important phases of tbe subject, bave been quoted by tbis court as worthy to be followed, and bave been followed. Ford v. Hill, supra.

In 4 Thompson, Corp, § 4617, tbe author recognizes tbe existence of tbe two opposing theories on tbe subject under discussion, and tbat tbe one which we call tbe modern and more reasonable theory has - quite as much support in tbe boobs, probably more in tbe decisions of recent years, than tbe other. Tbe author admits tbat tbe popular, almost universal, idea is tbat tbe president of a corporation may be safely presumed to bave tbe powers of a general manager. He pleads guilty to having supposed tbe authorities were all in accord therewith before be carefully investigated them, but says tbat, upon such investigation being made, be discovered two well-defined and supported theories. He deduced from tbe authorities supporting tbe more modern doctrine tbe following rule:

“Tbe law ascribes to tbe president of a business corporation tbe authority of its general agent for tbe purpose of binding it by contracts made within tbe ordinary scope of its business, and in tbe absence of notice to tbe contrary, persons dealing with tbe corporation may safely act upon tbat assumption. To use. an everyday illustration, let us suppose tbat a corporation is formed to deal in a certain article of commerce. Any member of tbe public can safely act upon tbe assumption that tbe president of tbe corporation is authorized to make sales for the corporation of that article in tbe ordinary course of its business, and. no resolution of its directors conferring such authority need be shown.”

We will supplement tbe above quotation by reference to some of tbe leading cases supporting it. In Ceeder v. H. M. Loud & Sons L. Co. 86 Mich. 541, tbe circumstances were very much like those in tbis case. Tbe contract was made with tbe president of tbe corporation acting, apparently, as manager of its business. It was clearly within tbe scope of tbe powers of a managing agent. Tbe court held tbat tbe president, as matter of law, possessed implied power to bind liis corporation in the matter. In Moser v. Kreigh, 49 Ill. 84, the validity of an undertaking made by the president of a corporation as its act, the instrument being one required in the usual and ordinary course of its business, was questioned. The court held that, there being no evidence to the contrary, it would be presumed that he possessed authority to make the paper. In Sparks v. Dispatch T. Co. 104 Mo. 531, speaking on the same subject, the court took the advanced ground indicated by the following language there used:

“The president of a business corporation is its chief executive officer. He may, without any special authority from thb board of directors, perform all acts of an ordinary nature, which, by usage or necessity, are incident to his office, and may bind the corporation by contracts in matters arising-in the usual course of business.”

In Smith v. Smith, 62 Ill. 493, the court said, in substance, that corporate business is ordinarily managed by the president of the company; that he is the legal head of the body; that when an act pertaining to the ordinary business of the company is performed by him, the presumption will be indulged in that the act is legally done and is binding upon that body. To the same effect are the decisions of the highest court in New York. There, an instrument, purporting to be the^ act of a corporation acting through its president, in the absence of evidence to the contrary, is presumed to be a corporate act. Patterson v. Robinson, 116 N. Y. 193; Chemical Nat. Bank v. Kohner, 85 N. Y. 189. In Richmond, F. & P. R. Co. v. Snead, 19 Grat. 354, it was held that by general usage the president of a railway corporation possesses implied power to make contracts in the lawful, necessary, ordinary business of the company. In State Nat. Bank v. Union Nat. Bank, 168 Ill. 519, this language was used:

“The rule seems to be well established in this state that the ordinary affairs of a corporation, such as custom has imposed upon or necessity requires of tbe president of a corporation, may be performed by bim without express authority. Under this rule the president of the corporation no doubt had power to . . . malee all contracts necessary in the transaction of its business.”

From the foregoing it will be plainly seen that there is no want of authority for the proposition that in modern business life the general custom is to intrust to presidents of corporations the powers of a general agent, and that sound judicial policy requires the court to recognize that situation by holding that, in the absence of evidence to the contrary, brought home to the person affected, the act of a corporation in clothing one of its members with the office of president, proclaims him to the world as its general agent, with all the incidentally implied power; that a person, in dealing with such an officer, within the scope of said power, need not stand in fear of losing the benefits of his contract because he may not be able to show that such officer had express authority to act in the matter, nor that he may be obliged, in order to protect his rights, to show those significant circumstances necessary to create an estoppel against the corporation within the rule of Ford v. Hill, 92 Wis. 188, and kindred cases. Courts, in order to efficiently perform their legitimate functions, must necessarily realize that we are living under entirely new conditions, compared with those of a bygone age when the ancient doctrine, that the president of a corporation has no power by mere implication, was in force. We are required to deal with corporations, as represented by their presidents, very much as we do with individuals. In our busy life we do that day by day, at every turn, in all sorts of transactions. The necessities of modern activity render the rule we have discussed absolutely essential to freedom and safety in business transactions. Judicial policy must be adapted to this modern condition. With some modifications to suit our method of creating corporate bodies, the language of Coulteb, J., in Steamboat Co. v. McCutcheon, 13 Pa. St. 13, may well be applied to the situation in onr own state:

“Who, then, was the proper person to make the contract? Certainly, the president. We must bear in mind that these kind of artificial men, or persons, are becoming very common in this state. The legislature turns them out, almost as rapidly as a miller does his grist. They compose a new element. or ingredient, of modern society. They contract with everybody, and about all manner of things; and they can contract by their chief officers; and such is their usual course of business. The president of a company presents himself to make a contract, evidently connected with the business. He declares the object and purpose of the contract. Who doubts him? We are a dealing people. Is he asked to produce the books of the company to show that he is authorized to make the contract secundum artemf Such is not the custom. Society must be protected from mischief, arising from the multiplication of these bodies. As they can only contract by their officers, the declarations of those officers, when engaged in the business of the company, like the declarations of an agent within the scope of his authority, or the declarations of an individual engaged in his own business, are evidence against their principals.”.

We indorse, heartily, all said in the foregoing quotation. The court is committed to it in letter and spirit in the cases cited in the opinion of the court, and others on the same subject; also in the numerous decisions to the effect that, as against an innocent person who would otherwise, be prejudiced, a corporation will be bound by. its contracts regardless of the doctrine of ultra vires; and in many other cases where ancient rules might otherwise be invoked by corporations to the prejudice of innocent persons to enable the corporation to perpetrate fraud. In a very recent ease, Marvin v. Anderson, 111 Wis. 387, this court applied the doctrine that where a paper purports to have been executed by the president and secretary of a corporation, it will be presumed that they possessed power to do so. A large collection of cases will be found cited in the opinion on the general subject,of the implied powers of corporate officers who, according to custom,, act as tbe agents of corporations. In Bullen v. Milwaukee T. Co. 109 Wis. 41, 44, tbis language was used witb tbe approval of tbe court, on tbe strength of tbe cases cited in tbe opinion:

“Tbe idea that every time a person deals witb an officer of a corporation, or person assuming to act in bis bebalf, be must under all circumstances take bis chances on whether such officer or person has been specially authorized in regard to tbe matter, has no place in tbe law in our day. Proof of apparent authority of a corporate officer to contract in its be-balf prima facie establishes actual authority so to do, and evidence of want of such authority will not relieve tbe corporation from tbe burden of a contract made witb reasonable reliance upon such apparent authority, if such corporation is responsible for such appearance.”

Nothing has been said which is intended to militate against tbe idea that tbe president of a corporation does not, by virtue of bis office alone, possess power to bind bis company by contract. However, be may, by virtue thereof and tbe custom known to all men that such an officer is generally intrusted with tbe powers of a general agent for bis company, exercise such power as between tbe corporation and tbe public, especially when be is actually conducting, to all appearances, tbe business of tbe corporation. Thus tbe ancient rule is preserved in all its integrity as between tbe corporation and its president; but by applying tbe doctrine of estoppel by bolding out, as between tbe corporation and tbe innocent public, as regards tbe powers of tbe president, a convenient and efficient way is found to adapt an old rule to new conditions,’ preserving its efficiency where that is essential, and guarding against innumerable embarrassments and mischiefs which would flow from bolding to its ancient 'effect as between tbe corporation and outsiders.

It follows in any view that proof that tbe president of tbe defendant, acting as such, contracted witb tbe plaintiff, and tbat tiie contract was within the ordinary scope of the powers of a managing agent of the corporation, was sufficient to bind the corporation as a matter of law.