Source: https://supreme.justia.com/cases/federal/us/120/256/
Timestamp: 2019-04-25 18:03:48+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 120 › Indianapolis Rolling Mill v. St. L., F.S. & W. R.
The president of a manufacturing corporation who is also its superintendent, having general authority to contract by parol contract without the corporate seal for making and delivering its manufactured goods, has like authority, unless the power is withdrawn, to authorize the termination and release of such a contract.
A board of directors of a corporation to whom the president of the company communicates his execution of a contract on the part of the corporation, which is within its corporate powers but unauthorized by the board, will be presumed to ratify his act unless it dissents within a reasonable time, and a delay in the disaffirmance of six months after knowledge of the act is an unreasonable delay.
This was an action at law on a contract for the sale and purchase of railroad iron. Judgment for defendant. Plaintiff sued out this writ of error. The case is stated in the opinion of the Court.
for 10,000 tons, to be delivered, during the period between October and June inclusive, on board of the railroad cars at Indianapolis. A jury was waived, and the case was tried before the court, which made a finding of facts, on which it declared the law to be for the defendant, and rendered judgment accordingly. During the trial, the defendant company produced a release, apparently executed by the plaintiff company, from the obligation of the contract to receive and pay for the iron, except so far as it had been fulfilled, and upon the validity of this release the decision depends.
It appears from the facts found by the court that the plaintiff was in the habit of receiving payment for iron delivered, by drafts on the defendant, payable in New York, and that Moran Brothers were the financial agents of the defendant, through whom such payments were made; that drafts to the amount of $54,000 were due on the fourth day of October, 1882, and the company, being hard pressed for money, asked an extension of payment, which was granted for four months; that when these drafts again fell due, they were protested for nonpayment, and the defendant company was insolvent, which fact was well known to the plaintiff. It appears also that Mr. Thomas, who was the treasurer of the plaintiff company, visited New York, and called upon the firm of Moran Brothers at whose banking house said drafts were payable, and endeavored to induce them to pay the drafts, but that Moran Brothers, who had no funds of the defendant's at the time, declined to do so, but finally said: "We, Moran Brothers, will pay these drafts if you will sign a release for the balance of the contract." To this Mr. Thomas replied that he was not authorized to execute such a release; but he communicated with Mr. Jones, who was the president and superintendent of the company, and obtained from him authority to accept the money and sign the release. This was accordingly done, the release being dated "New York, 8th February, 1883," and signed "Indianapolis Rolling Mill Co., by J. Thomas, Treasurer."
"shall have charge of the works, property, and operations of the company, and shall employ all operatives, and certify all wages due and other expenditures to the secretary, . . . and shall, with the approval of the president, buy and sell material, and make all contracts for the same, and for work,"
"the superintendent and all other persons shall in all cases be subject to the control of the board of directors, in everything where the board shall elect to exercise such control,"
release so executed, and that this suit was originally instituted in this Court at the first term hereof after the execution of the release."
We concur with the court below that on the facts thus stated the release was a valid release. Its execution was of that class of business which, under the bylaws of the corporation and the course of business between these parties, had been confided to the president and superintendent, both of which offices were held by Mr. Jones. The direction given by Mr. Jones to the treasurer, Mr. Thomas, both of whom were also directors in the corporation, was within the line of his authority. He had under this same authority, without any express resolution or ratification of the board of directors, made the contract on which this suit is brought, and it would seem that, not being under seal, a simple contract concerning the ordinary business of the company, the same power which enabled him to make it was sufficient to enable him to release it, unless the power had been withdrawn.
"the authorities to the point of the necessity of the exercise of the right of rescinding or avoiding a contract or transaction as soon as it may be reasonably done, after the party with whom that right is optional is aware of the facts which gave him that option, are numerous. . . . The more important are as follows: Badger v. Badger, 2 Wall. 87; Harwood v. Railroad Co., 17 Wall. 78; Marsh v. Whitmore, 21 Wall. 178; Vigers v. Pike, 8 Cl. & Fin. 650; Wentworth v. Lloyd, 32 Beavan 467; Follansbe v. Kilbreth, 17 Ill. 522."
See also Gold Mining Co. v. National Bank, 96 U. S. 640; Law v. Cross, 1 Black 533.
It is said that the release was without consideration, because Moran Brothers had the means in their hands to pay the drafts of the property of the defendants, but we think the finding of facts clearly disproves that; indeed, the court found, as a matter of fact, that the defendants were then insolvent, and that Moran Brothers had no funds in their hands out of which they could have paid the drafts. It is obvious, therefore, that the consideration for this release was the voluntary payment by Moran Brothers of the existing protested drafts of the plaintiff company out of their own means, and not out of the means of the defendant corporation. We think this was a sufficient consideration to support the release.

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