Court Opinion

ID: 7952362
Source: CourtListenerOpinion
Date Created: 2022-09-08 23:28:18.063469+00
Date Added: 2024-06-11T16:34:12.068957
License: Public Domain

Bird, J.
(dissenting). I am not in accord with the conclusion reached by Mr. Justice Sharpe in this case. The principal question involved is the authority of the president and general manager, John Schlaff, to execute a certain contract for defendant With plaintiff. Mr. Justice Sharpe considers the question whether the president and general manager has the authority to order a machine which would wash and re-fill milk bottles. Inasmuch as defendant was engaged in the business of distributing milk and John Schlaff, president and general manager, was in charge of the business, the conclusion is reached that he had authority to make a contract to purchase it.
This is not exactly the situation. Schlaff, as president and manager, did not buy nor did he order a bottle washing and re-filling machine. What he did order from plaintiff, was,
"all necessary patterns, castings and machine shop work for one Van Horn bottle filling and washing machine, from plans and specifications presented to you by Mr. Almon J. Cordrey.”
It appears that one Van Horn had invented a machine which he claimed would wash, re-fill and cap milk bottles, but he did not have the money to pay the cost of manufacturing one of them. He got Schlaff interested by transferring a half interest in the patent through one Cordrey, and Schlaff undertook to build a machine and use the company’s credit for it. The machine was never finished and was never delivered to the defendant and no expression is *549found in the record that if it had been finished it would have worked. The cost of making the patterns, castings, machine work, etc., was upwards of $8,000. This sum was several times what a finished machine would have cost after the first cost of making patterns, castings, etc.
The real question, therefore, is whether the president and general manager of a milk distributing corporation has the authority, without the knowledge and consent of the board of directors, to use the funds of the company to experiment and build a machine, that if it proves a success will be useful to it in its business. Neither the president nor general manager of a corporation has any such power by force of his official title.
“The president of a private corporation is, as the term implies, the presiding officer of its board of directors and of its shareholders when convened in general meeting.
“The office itself, however, confers no power to bind the corporation or control its property. The president’s power as an agent must be sought in the organic law of the corporation, in a delegation of authority from it, directly or through its board of directors, formally expressed or implied from a habit or custom of doing business.” 10 Cyc. p. 903.
“Aside from his position as presiding officer of the board of directors and of the stockholders when convened in general meeting, the president of a corporation has, by virtue of his office, merely, no greater power than that of any director. Whatever authority he has must be expressly conferred on him by statute, charter, or by-law, or the board of directors, or loe 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. He is without power to do an act which is beyond the objects or purposes of the corporation, or which *550has the effect of overruling or revoking the action of the directors.” 14A C. J. p. 93.
“The president of a corporation is its executive officer. Within the scope of his duties, as the head of the corporation, he has the power to act without direct authority of the directors. And the president of a corporation, who is its general manager, has authority to adopt and ratify a contract made by himself for the corporation before it was legally created for the performance of services for the company, which he would have power to engage if no previous contract existed. Still the president of a corporation when acting for the corporation is merely its agent and cannot act so as to bind the corporation beyond the scope of his authority, and the fact that he owns a_ majority of the corporate stock does not itself vest him with any additional authority. The president cannot be regarded as the agent of the corporation for the purpose of ratifying his own acts any more than for conferring authority upon himself in the first instance to make a contract. While the extent of the inherent authority of the president is not clearly defined. it seems to be quite limited; he has no general inherent authority to act as its agent in making contracts, _ but like other agents, he must derive his authority from the board of directors or from the corporation.” 7 R. C. L. p. 450.
No by-law was shown which would confer this power on him, nor was any resolution of the board of directors shown, investing him with this authority, nor was any custom shown which would give him this right. The most that can be claimed for Schlaff’s authority was that he was authorized to conduct the business in the usual course. It is very doubtful as to whether this authority would give him the right to purchase a finished machine which would cost $8,000, without the knowledge or consent of the board of directors, when the company was already provided with washing and re-filling machines. But if we concede for the moment that he would have that power, that authority would not carry with it the right to *551take the funds of the corporation and experiment with a patent right — to build a machine which no one was certain would work after it was finished, according to the blue prints. This certainly would not be in the usual course of business of a milk-distributing plant.
It further appears that Schlaff himself was the owner of a one-half interest in this speculation. It was transferred to him by Cordrey, and this was quite likely done for the purpose of getting Schlaff to advance the money to make the first machine, which would be the expensiye one.
We, therefore, have a situation where the president and general manager of defendant dealt with himself as part owner of the patent and charged the cost of the transaction up to the defendant. The rule in the event of such dealings is as follows: >
“Subject to exceptions in favor of innocent parties, the general rule is that acts of officers of a corporation in any transaction in which both a corporation and they themselves individually are interested do not bind the corporation. Thus if the president of a corporation makes a note of the corporation and uses it for his own benefit, the corporation will not be chargeable thereon in favor of the holder, unless the latter occupies the position of a bona fide purchaser without- notice. Nor is the company bound by its president’s acts, where he is clearly acting as the special agent of a third person.” 10 Cyc. p. 912.
The plaintiff admitted upon the witness stand that he knew of the defendant company, that he knew it was a milk-distributing concern, and he knew that Schlaff managed the business. This would be ample notice to the plaintiff that the president and general manager of a company that was organized for the purpose of distributing . milk would not have the authority to expend the funds of the company to the extent of $8,000, or more, in trying to make a patent right a success.
*552Being of the opinion that the president and general manager as such of this company had no authority to expend the money for such a purpose, and especially when he was interested in it himself, I think no recovery should be had.
The judgment should be reversed with no new trial, with costs to the defendant.
Clark, J., concurred with Bird, J.