Court Opinion

ID: 6697259
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:56:46.197608+00
Date Added: 2024-06-11T16:01:17.475591
License: Public Domain

CoNNOR, J.
It is not alleged in the complaint, nor was it contended at the trial of this action, that the contracts entered into by and between the president and general manager of the plaintiff corporation, and the defendant, for the purchase from defendant of shares of the common stock of the Southern Steel and Cement Corporation, and for the payment of the purchase price for said stock in accordance with the terms of the contract of purchase, were ultra vires, and therefore void and of no binding force and effect on the plaintiff. It is expressly provided in the certificate of incorporation of the plaintiff, that in order that plaintiff may properly prosecute the business in which it was authorized therein to engage, “the said corporation shall have full power and authority to purchase, lease and otherwise acquire, hold, mortgage, convey and otherwise dispose of all kinds of property, both real and personal, both in this State and in all other States, territories, and dependencies of the United States; to purchase the good will, business and all other property of any individual, firm or corporation, as a going concern, and to assume all its debts, contracts and obligations, provided said business is authorized by the powers herein conferred.” The Southern Steel and Cement Company was a corporation organized under the laws of this State and, by virtue of the powers and authority conferred upon it as a corporation by its certificate of incorporation, was engaged in the identical business as that in which the plaintiff was and had been engaged at and prior to the date of said contracts. Therefore the contracts to purchase from the defendant the common stock of said corporation, and to pay for the same, in accordance with the contract of purchase, and thus *108acquire control of its business, were witbin tbe express power conferred upon plaintiff as a corporation. In addition to tbis express power, conferred upon plaintiff by its certificate of incorporation, tbe plaintifE, as a corporation organized under tbe laws of tbis State, bas tbe power, by virtue of C. S., 1166, to “purchase stock, securities, and other evidences of indebtedness created by any other corporation or corporations of this or any other state, and while owner of such to exercise all tbe rights, powers and privileges of ownership.”
It is not alleged in tbe complaint nor was it contended at tbe trial of tbis action that tbe contracts entered into by and between tbe president and general manager of tbe plaintiff corporation, and tbe defendant, for tbe purchase from defendant of shares of the common stock of tbe Southern Steel and Cement Company, and for tbe payment of tbe purchase price for said stock, in accordance with tbe terms of tbe contract of purchase, were fraudulent, or not in good faith. All tbe evidence is to tbe effect that in entering into said contracts, tbe president and general manager of tbe plaintiff, and tbe defendant, both acted in good faith, and with no purpose to defraud tbe plaintifE. Indeed, but for tbe business depression which bas occurred since tbe date of said contracts, it does not appear that they were not in tbe interest of tbe plaintifE. No complaint was made by tbe directors and stockholders of plaintifE until after the business of both the plaintiff and the Southern Steel and Cement Company had fallen off in volume as the result of business conditions in Buncombe County and elsewhere.
The question, therefore, presented for decision by this appeal is whether tbe president and general manager of a corporation organized under tbe laws of tbis State, who by virtue of his office bas full control and management of the business of said corporation, may, without express authority conferred by resolution of tbe board of directors or of tbe stockholders of said corporation, adopted in a meeting of said board or of said stockholders, purchase the stock of another corporation, for and in tbe name of bis corporation, and bind tbe same by contracts in its name for tbe payment of tbe purchase price for said stock, where the purchase of said stock is witbin the corporate powers of bis corporation, and is made in good faith for its benefit and in its interest.
It is well settled that tbe general manager of a corporation bas larger and broader powers than its president. Ordinarily, tbe president of a corporation has- no power to bind tbe corporation by contracts executed by him in its name, without tbe express authority of its board of directors. Contracts made by him, without such authority, are not binding upon tbe corporation, and unless ratified by its board of directors or by its stockholders, cannot be enforced against tbe corporation. “Aside from bis position as presiding officer of the board of directors and of the *109stockholders when convened in general meeting', the president of a corporation, has by virtue of bis office, merely, no greater power than that of a director. Whatever authority he has must be expressly conferred on him by statute, charter, or by-law, or the board of directors, or be implied from express powers granted, usage or custom, or the nature of the company’s business. He may be, and frequently is, made the chief executive officer of the company and invested with broad general powers of management and superintendence; and in such case he necessarily has many implied powers.” 14a O. J., 93, sec. 1858(3).
When the by-laws of a corporation provide for the election by the board of directors of a general manager of the corporation, and the board of directors by virtue of such provision, have elected a general manager, as in the instant case, in the absence of limitations upon his authority in the by-laws or by the action of the board of directors, he has the power to bind the corporation by contracts made in good faith, and within the corporate powers, without any resolution of the board of directors expressly authorizing the contracts. Supply Co. v. Machin, 150 N. C., 738, 64 S. E., 887. In Morris v. Basnight, 179 N. C., 298, 102 S. E., 389, it is said: “The contract to convey is sufficient in form, and having been executed by the general manager of the company, apparently within the course and scope of his powers, and in the line of the company’s business, is prima facie binding on the company. Bank v. Oil Mill, 157 N. C., 302, 73 S. E., 93; Clowe v. Imperial Pine Products Co., 114 N. C., 304, 19 S. E., 153.”
Again in Watson v. Mfg. Co., 147 N. C., 469, 61 S. E., 273, it is said: “The management of the entire business of a corporation may be entrusted to its president either by express resolution of the directors, or by their acquiescence in a course of dealing.” Brown, J., writing the opinion in this case, quotes with approval from Thompson on Corporations as follows: “A stranger dealing with the corporation is not affected by secret restrictions upon his (such manager’s) powers of which he has no notice. In short, the powers of one who has been appointed general manager of the business of the corporation are, in America, generally understood to be coextensive with the general scope of its business.” In the instant case there was no restriction, secret or otherwise, upon the powers of the president and general manager of the plaintiff corporation. The contracts challenged by this action were similar to other contracts theretofore made by him, the validity of which had never been questioned by the corporation.
“The general manager of a corporation has general charge, direction and control of the affairs of the company for the carrying on of which it was incorporated. He is to be distinguished from a person who has the management of some particular branch of the business. While it *110is said that be is virtually the corporation itself, and that his implied powers are coextensive with the general scope of the business of the corporation, yet the ultimate control rests with the board of directors. The office of general manager is of broader import than that of president. The fact that a person having an active conduct of the business of a corporation is also its president does not operate as a limitation upon the powers usually exercised by its general agents or managers. His authority is not limited to that possessed by virtue of. his office as president, but is incidental to the management of the business.” 14a C. J., 94, sec.-1862(9). See, also, 7 R. C. L., 628, section 627 where it is said: “At the present time the general business of corporations is frequently entrusted to the management of a general manager, and it is well recognized that the corporation is bound by the acts of such manager within the apparent scope of his authority. The fact that a person having the general direction and active conduct of the business of a corporation is also its president does not operate as a limitation of the powers usually exercised by such agents or managers. His authority is not limited to that possessed by virtue of his office as president, but is incident to the management of the business.”
Without regard to the facts shown by all the evidence, tending to show that the board of directors and the stockholders of plaintiff corporation, ratified the contracts made by its president and general manager 'with the defendant, with respect to the purchase of the shares of common stock of the Southern Steel and Cement Company and for the payment of the purchase price for such shares of stock, we are of opinion that plaintiff cannot recover in this action for that the said contracts were valid and binding on the plaintiff. Even if the contracts were not authorized, all the evidence shows that they were subsequently ratified by the corporation, and are therefore binding 'upon it. The corporation accepted the benefits of the contract of purchase, with full knowledge on the part of the directors that the stock had been purchased from defendant by its president and general manager, and sold and transferred the certificates for same after the directors were fully advised of the guarantee of redemption in- the name of the corporation of the preferred stock of the Southern Steel and Cement Company issued to the defendant in part payment of the purchase price of the stock. See Weathersby v. Texas & Ohio Lumber Co., 107 Tex., 474, 180 S. W., 735, 7 A. L. R., 1440 and note, in which it is said by the annotator that “it is well established that when an officer, without authority so to do, enters into a contract for a corporation, and the corporation receives and retains the benefits of the contract after acquiring knowledge of the circumstances attending its execution, it thereby ratified the contract and makes it good by adoption.” See, also, Morris v. Y. & B. Corporation, 198 *111N. C., 705, where the principles upon which the doctrine of ratification are founded and the decisions of this and other courts, applying these principles, are fully discussed by Clarkson, J.
The judgment dismissing the action, at the close of the evidence, on motion of defendant under C. S., 567, is
Affirmed.