Court Opinion

ID: 9827007
Source: CourtListenerOpinion
Date Created: 2023-09-01 17:03:29.600378+00
Date Added: 2024-06-11T11:17:39.355317
License: Public Domain

On Motion for Rehearing.
Appellee has presented nothing new in his motion for rehearing,- but, inasmuch as he insists that our opinion conflicts with holdings in certain cases cited by him, we have concluded to discuss those cases and distinguish them from the ease at bar. There is little controversy over the general rules laid down by our Supreme Court as to what makes a contract ultra vires. The question here, as stated in our opinion, is one of application of those rules to the undisputed facts of the case at bar.
The first case of alleged conflict cited is the Sealy Oil Mill Case (Tex. Com. App.) in 235 S. W. 850. In that case the seed involved were those accumulated by the gin during the ginning season by taking seed as toll for ginning and paying the patron for the remainder of the seed in the bale. The court found in that case not only that, such a practice was customary among gins generally, and had been practiced by the manager of this particular gin with knowledge of its stockholders and directors for a number of years, but that acquisition of seed in this manner “was an essential thing to do to secure business.’’ (Italics ours.) In that case accumulation of such seed from time to time in small quantities, largely as pay in kind for the very work the gin company was chartered .to do, and which could be readily disposed of immediately to oil mills at a fixed market xorice, met all the elements of the rule of the Supreme Court to bring it within the implied powers of the corporation; that is, that the return to the corporation was direct, immediate, reasonable, and necessary.
The second case of alleged conflict is that of Itasca Mill & Elevator Co. v. Wooten (Tex. Civ. App.) 246 S. W. 678, involving the sale by the manager of the corporation of seed wheat for spring planting. The manager sold the farmer fall wheat for spring wheat, and his crop failed. He sued the elevator company for damages. The corporation in that case was chartered under section 28, art. 1121, R. S. 1911, and the charter itself stated- that its purpose was “milling corn and wheat; buying and selling all kinds of farm products, and elevator and storage business.” The plaintiff recovered in the trial court, and the Court of Civil Appeals affirmed its judgment, holding, first, that the language of the chapter creating the corporation, along with other objects, for “selling all kinds of farm products” authorized the sale of seed wheat as an express power of the corporation; and, second, that by accepting and retaining the purchase price of the wheat, without offer to refund it, the corporation ratified the act of its agent. In that case it is clear that the corporation was expressly authorized in its charter to do a merchandizing business in the very commodity sold.
In Hollis Cotton Oil, Light & Ice Co. v. Marris (Tex. Civ. App.) 207 S. W. 368, the Fort Worth Court of Civil Appeals, following the rule announced by the Supreme Court that, “if the means be such as are usually resorted to, and a direct method of accomplishing the purpose of the incorporation” (italics ours), they are within the powers of the cor-poratiqn, held that the corporation had authority to purchase cattle to feed meal and hulls to in order to dispose of its products. Not only was this practice common to that particular corporation, but its charter, granted under the Oklahoma statute, allowed the corporation, not only to engage in distinct and different kinds of enterprises as its charter name indicates, but “to manufacture produce, prepare, buy, sell, import, export, and generally deal in cotton seed and any and all products and by-products thereof, * * * and to do such other things as will further *750the interests of the cotton oil, ginnery, ice, electric light, and elevator business.”
It would be difficult to make more inclusive'its express powers, or to give the corporation a wider latitude in their exercise. In that case the undertaking was wholly subordinate to the main purposes of the corporation and a direct method used to dispose of its by-products. After discussing numerous cases on the question of ultra vires, the court expresses some doubt in its holding thereon in concluding:
“But, even if we are mistaken in the views heretofore expressed, we are of the opinion that this judgment should be sustained on the ground that the plaintiff corporation was es-topped from asserting its lack of corporate power to make the contract alleged by the defendants.”
In Comanche Cotton Oil Co. v. Browne, 99 Tex. 660, 92 S. W. 450. Mrs. Browne resisted payment on a subscription contract for stock in “a cotton oil mill,” on the ground that there was a fundamental variance between the charter powers of the corporation after it was organized and the subscription contract which she signed. The contract called only for a “cotton oil mill.” The charter authorized the corporation, in addition, to “erect, own, and operate whatever cotton gins may be necessary and proper as feeders for said oil mill.” The trial court rendered judgment for Mrs. Browne. The Supreme Court reversed this judgment, holding that “if one or more cotton gins should be found reasonably necessary to the operation of the cotton seed oil mill, the corporation would be authorized to operate such necessary cotton gins.” (Italics ours.) And further stated that:
“The charter as it was framed does not empower the corporation to operate cotton gins as a business independent of their necessity as a support for the oil mill business.”
No contract of the corporation under its charter was involved, and it is manifest that in passing upon the corporate powers the criterion of the Supreme Court was that of reasonable necessity. And in the North Side Ry. Co. and Bowtaan Lumber Co. Cases, Chief Justices Gaines and Phillips have added that the undertaking must be a direct or immediate means of furthering the corporate purpose, not indirect, remote, speculative, or by reaction.
It is clear to us, therefore, that these cases are readily distinguishable from the case at bar. In the instant case the corporation was organized to acquire or build and operate a gin. Its purpose was to gin cotton. Its manager, without the knowledge or consent of its board of directors, made the contract-before the ginning season opened. The seed were delivered after the ginning season closed. Hence the contract could have been no inducement to farmers to bring cotton to the gin for that season in order to get planting seed. After the ginning season was over and the gin closed down there was no more reason, if as much, why a farmer should go there for planting seed than to an oil mill, feed store, seed and grain dealer, or other agency of that character. Even banks sometimes obtain improved planting seeds for farmers. Then, too, if Carmichall had authority to contract for one carload of seed, he could with equal reason have contracted for two or even three carloads, should the cotton acreage in that vicinity have justified it. Yet three cars at the price fixed would have obligated the entire capital stock of the corporation in an enterprise only incidental at most t9 its main purpose, speculative and hazardous in character, with only an indirect return, if any at-all, to the corporation, and that more than a year after the contract was made.
Nor have we disregarded the jury’s findings as charged by appellee in his motion. We have accepted their finding as sustained by the evidence. It is to be noted, however, that the question submitted to the jury makes no limitation in such purchases, as to time of purchase, place, quantity, time of delivery, necessity for such purchase — in short, of those elements essential to bring the purchase within the implied powers of the corporation under the rules laid down by the Supreme Court. We have merely concluded that under the undisputed facts of this case, including the jury’s findings, the contract was ultra vires.
Nor do we wish to be understood as holding that under no circumstances wQuld a gin corporation be authorized to furnish planting seed in any quantity to its patrons. If in doing so there was a direct return to the gin such undertaking was reasonable in extent, and became reasonably necessary in the conduct of its business, a different question would be presented. What we do hold here is that the purchase by Carmichall, without the knowledge of his hoard of directors, of $3,400 worth of seed, under the facts and circumstances of this particular case, was ultra vires under rules long since established.by our Supreme Court.
Appellee requests us to file conclusions of law and fact, but we think we have made sufficient statement of facts and conclusions of law in our opinion and on this motion to render further findings and conclusions unnecessary. Appellee’s motion is overruled.
Motion overruled.