Case Name: White versus The Westport Cotton Manufacturing Company
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1822-10
Citations: 1 Pick. 215
Docket Number: 
Parties: White versus The Westport Cotton Manufacturing Company.
Judges: 
Reporter: Massachusetts Reports
Volume: 18
Pages: 221–226

Head Matter:
White versus The Westport Cotton Manufacturing Company.
An agent of an incorporated company cannot bind it for a debt contracted by the company before it was incorporated, without an express authority by a vote of the corporation.
Assumpsit on a promissory note, signed by one Marvel, as agent of The Westport Cotton Manufacturing Company.
It appeared in evidence on the trial, before Wilde J., that certain individuals (who will be designated as the voluntary company) were the owners of a cotton mill and machinery, some stock on hand, about an acre of land, on which the buildings of the manufactory stood, and a farm Called the Freelove farm. The two parcels of land had been conveyed to them by name, their heirs and assigns. On the 27 th of February, 1815, the voluntary company became incorporated by the name of the Westport Cotton Manufacturing Company. At the time of the incorporation, the voluntary company were working the mill; and the rents of the farm, which was at lease under their care and management, were received and applied to the credit of the company. The corporation was organized on the 22d of April, at which time, or soon after, Marvel was duly chosen their agent. The corporation proceeded to a division of the stock of the members into shares, but no transfer of the real or personal property of the voluntary company, held as before mentioned, was then, nor has been since, made to the corporation ; but the debts due to the voluntary company were collected by the corporation, and the books of the voluntary company were used as the books of the corporation, the accounts therein being continued as before, and the rents of the farm, until the date of the note, were received and appropriated by the corporation to their own use.
Upon the organization of the defendants under the act of incorporation, one Sylvia Gifford, who was not a member of the voluntary company, was admitted a member of the corporation, and received a certificate of her interest in the shares belonging to her, without a conveyance from the members of the voluntary company of any part of the real estate before mentioned.
The voluntary company were indebted to a considerable amount for the purchase of stock, money lent for their use, and also for a sum exceeding 2000 dollars, being the balance jue for t}le purchase of the Freelove farm. Marvel was a member of the voluntary company at the date of the incorporation, and also of the corporation for some time after it was organized; and it was admitted, that the agents of the corporation not only received payment of debts due to the voluntary company, but also in some instances paid debts due from them, and in others gave notes for the payment of the same by the corporation ; although it did not appear that the defendants by any vote assumed to pay the debts of the voluntary company.
The note declared on was given for the renewal of certain securities and demands which the plaintiff held against the vol untary company, for money lent, beef supplied, and for the dis count of one of the notes given for the purchase of the farm.
It was testified by one witness, that Henry Freelove left with him certain notes, given by the voluntary company, for about 2000 dollars, as part of the consideration for the sale of the farm, which became due the 25th of March, 1817, and that about that time he attended a meeting of the corporation, and informed the members present that he was ordered, if the notes were not forthwith paid or renewed by the corporation, to put them in suit against the corporation ; whereupon these notes were taken up and new ones given, on behalf of the corporation, by Marvel, who was their agent ; which notes have since been paid by Marvel and by one Macomber, a member of the voluntary company and of the corporation.
This was all the evidence of Marvel’s authority to sign notes on behalf of the corporation originating in the purchase of land by the voluntary company ; but his authority to sign notes for the corporation for debts due from the voluntary company for stock, or money lent, was not questioned at the trial.
It appeared, also, that members of the corporation who were not members of the voluntary company, having purchased shares of those who were members of the voluntary company, (which shares had been sold to defray the assessments due thereon,) had, long after the date of the note declared on, purchased and taken deeds, for a valuable consideration there- m expressed, (in some of the deeds, one, five, ten, and fifty dollars respectively,) and to their own use, of the greater part of the rights of the members of the voluntary company in the land, and particularly in the farm ; and that the persons so purchasing, together with the remaining members of the corporation who were members of the voluntary company, (except one who was a member of the voluntary company and still retains his share in the land,) have, since the date of the writ, sold all the land, together with the manufactory and machinery, to persons who are now in possession claiming under the conveyance.
The present clerk of the corporation testified, that since his election he has received the rents of the farm, but has omitted to credit them to the corporation, and now holds them subject to the order of those who may rightfully demand them.
Spooner, for the defendants.
The agent of the corporation • was not authorized to substitute a note of the corporation for the note of the voluntary company. In Odiorne v. Maxcy, 13 Mass. Rep. 181, it is said, that the authority of a general agent must necessarily be restrained to the transac ■ tians and concerns of the principal. The act of an agent, to be binding upon a. corporation, must be either previously authorized, or subsequently ratified, by a vote of the corporation, at a regular meeting, or must have been done by virtue of an authority necessarily resulting from the trust confided to the agent. Here there was no vote of the corporation assuming the payment of the securities out of which the present note originated ; and, in the absence of direct and positive evidence, the circumstances which may be relied on to show a ratification of the act of the agent, apparently so unwarranted, in substituting the new security, ought to be very strong. Wyman v. Hallowell and Augusta Bank, 14 Mass. Rep. 61. All the evidence of Marvel’s authority to sign, in behalf of the corporation, notes which originated m the purchase of land by the voluntary company, is derived from the testimony of the witness who attended the meeting of the corporation, with the notes due to Freelove. No vote was taken to pay the notes then presented, but the evidence is simply, that the agent of the corporation, on their being threatened with a suit, gate new notes in the place of the notes of the voluntary company, and that the new notes have been paid by Marvel and Macomber, who were members of the voluntary company and of the corporation, and were originally liable for the payment of the old notes.
Admitting that the corporation, by receiving the personal property of the voluntary company, have made themselves liable for the debts incurred on account of such property, yet they are not liable at law or in equity for the note declared on ; for the real estate, out of which it originated, never vested in the corporation. 13 Mass. Rep. 182. The receipt of the rents cannot raise a presumption that the corporation undertook to pay the notes given for the farm, because the consideration would be inadequate.
It does not appear, that information of the making of the note was communicated to the corporation until this suit was brought, and without such information they cannot be presumed to have adopted the act of their agent. Frothingham v. Haley, 3 Mass. Rep. 70; Clement v. Jones, 12 Mass. Rep. 60; Herring v. Polley, 8 Mass. Rep. 113; Lent v. Padelford, 10 Mass. Rep. 230; Kupfer v. South Parish in Augusta, 12 Mass. Rep. 185; Towle v. Stevenson, 1 Johns. Cas. 110; Codwise v. Hacker, 1 Caines’s Rep. 527.
It is needless to add, that the power exercised by the agent did not necessarily result from the trust committed to him.
Supposing the note to have been founded on two or more different considerations, if one of them is invalid, and the other good, the note is binding ; Bliss v. Negus, 8 Mass. Rep. 51; but damages should be given for that part only for which the consideration is good. If, however, the present note was made with the fraudulent intent of discharging the voluntary company, and compelling payment by the corporation, the whole contract is void. Coulston v. Carr, Cro. Eliz. 848
W. Bay lies, on the same side.
H. Cushman, for the plaintiff.
If the making of this note by the agent of the corporation was no benefit to them, the giving up the old one was a detriment to the plaintiff, and so there was a sufficient consideration. The corporation, though different in name, was the same body with the voluntary company. It is admitted, that all the personal property went to the corporation. No transfer was made of the real estate, because it was not thought to be necessary ; but the corporation possessed it quietly, receiving the rents, and it was viewed as their property, as is manifest from the small consideration expressed in the deeds from the members of the voluntary company to the individuals who purchased shares in the property of the corporation.
It is said, that the power of a general agent is not unlimited. Here the agent had general authority to bind the corporation for notes of the voluntary company given for stock or money lent, and the public had a right to presume that he was authorized to give such a note as the one declared on. The burden is on the defendants to show the restriction. In one instance, notes similar to the present were renewed by the agent in the presence of the corporation, at a public meeting, and the new notes were afterwards paid by the agent and Macomber. The legal inference is, that they were paid out of the funds of the corporation. The acts of an agent of a corporation are like those of an agent of an individnal. Where a servant takes up goods at a shop, and the master afterwards pays for them, he will be bound in future, unless he expressly prohibits giving credit to the servant on his account.
■ It is said the corporation had no information of this note, before me suit was brought; their books, however, show the contrary to be true.

Opinion:
The opinion of tne Court was delivered at April term 1823, at Taunton, by
Parker C. J.
The question is, whether the note declared on is the note of the defendants ; and that depends upon the authority of Marvel, their agent, to sign such a note. His general authority as agent extended to the purchase of stock, and making such contracts as related to the business of the company of which he had the management; for such purposes he might pay the money of the corporation, or, if credit were obtained, might make them liable in a note made by him for them ; but he could not for any other purpose bind them, although he assumed to act as their agent. P appears, that the note in suit was given for a part of the consideration of the Ureelove farm, the title of which is not in the defendants, although they have appropriated the rents and profits since the incorporation. He could not make a promise binding them for this object, without express authority of the corporation. No such authority appeared in evidence ; nor is there any evidence of any corporate act .which can amount to an assumption of the debt or ratification of the promise. That most of the members of the corporation were members of the voluntary association makes no difference, as there were some members who did not belong to the voluntary association, and whose property ought not to be taken to pay the debts of those individuals who hold the property for which the note was given. If' the corporation should be held answerable in this suit, then, by the provisions of the statutes, the plaintiff might compel an individual who has no interest in the consideration of the note to pay the whole debt, which would be unreasonable and unjust. The plaintiff's remedy is against Marvel, who signed the note, or perhaps upon his original demand against those who purchased the farm. That part of the consideration of the note, which was not for the farm, was for the renewal of securities given by the voluntary company for debts previously existing against them. Nothing short of a vote of the corporation could render them liable for these demands, or could authorize their agent to make them responsible.
Judgment for the defendants.
See New Eng. M. Ins. Co. v. De Wolf, 8 Pick. 56.