Court Opinion

ID: 3588783
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:37:59.914898+00
Date Added: 2024-06-11T13:59:20.584647
License: Public Domain

If, at the time the agreement set forth in the complaint was made, there had been such a corporation as the Cattaraugus Water Company, then it would be quite conceivable that there might be a ratification by it of the act of a person standing in the relation to it of an officer or agent. Ratification presupposes the doing of an act by an agent, which a principal could have authorized. It is defined as an agreement to adopt an act performed for us by another and is equivalent to an original authority to do the thing in question. But, here, Cowan represented no one but himself. He and others were proposing to associate themselves in a corporate project. He was a mere promoter and he had no principal. When the plaintiff entered into the agreement with Cowan, he was bound to inform himself as to whether the latter represented an actual principal. If he neglected to do so, his *Page 440 
agreement was worthless; except so far as it imposed upon Cowan, individually, a liability for undertaking to act with no responsible principal behind him. (Dunlap's Paley on Agency, *374.) We may assume that there was sufficient evidence upon which a jury might have found that there was ratification, if there had been a contract made for the company; but it ought to be perfectly manifest that, unless there had been in esse a corporation, de-facto or de-jure, which could have made Cowan its attorney or agent, there could not be such a thing as a ratification. The rule is stated in Morawetz on Private Corporations (section 547) as follows, viz.: "A corporation is not responsible for acts performed, or contracts entered into, before it came into existence, by promoters or other persons, assuming to bind the company in advance." Again, at section 549, the author says, that "a corporation cannot be charged with the acts or contracts of its promoters, by virtue of the technical doctrine of ratification. This doctrine applies only to acts performed on behalf of an existing principal." These statements are amply borne out by the authorities cited by the author, and are founded in clear reason. (And see Caledonian etc. R. Co. v.Helensburgh, 2 Macq. H.L. Cas. 391, 409.) There may, however, be an adoption of agreements made by promoters of companies by a formal acceptance; or, if it is a case where the members of the corporation would be chargeable with knowledge of the contract, and had knowingly received the benefit of an engagement entered into by promoters, adoption might be implied. The adoption of such an agreement by a corporation is equivalent, of course, to the creation of a new agreement and is governed by all the rules applicable to the formation of a contract under the common law. (1 Morawetz Corps. sec. 549.) I am unable to believe, and I know of no authority for holding, that adoption, in such a case, of a written contract could rest in implication from the mere statements or acts of the interested party who made it, with no evidence to show any knowledge or acquiescence on the part of any other officer or member of the corporation. I think the other view would be a most hazardous one to take, for the interests of shareholders in corporations. *Page 441 
Assuming that a corporation may become obligated by a contract, made for it before its incorporation, through acceptance or adoption, it should at least appear, in order to justify a verdict from the facts, that those facts established a knowledge by its agents of its existence and of its terms; or that the benefits, the acceptance of which is relied upon to constitute adoption, were of that nature as to presuppose and to charge the company or its agents with knowledge of a contract with the person from whom derived.
In this case it is not proved that there was any formal or official action upon the agreement; or that any of the directors knew of such, outside of Cowan himself. There was nothing which amounted to a representation by the defendant to plaintiff that the contract was subsisting and valid. (Wilson v. WestHartlepool R. Co., 2 De G., J.  S. 491.) There may have been sufficient evidence in the case to warrant the submission to a jury of the question whether the defendant had not, through its chief officer and manager, become liable to pay plaintiff the value of his services; as the evidence might exhibit that value to be. But this is not such an action. The plaintiff rests his action solely upon the obligation, which the agreement set forth imposed upon the defendant, and if, as it is conceded, there could have been none imposed at the time, it could never have become one, in the absence of an adoption of the agreement. As I have said, this agreement, so far as the record discloses, was never brought to the knowledge of any of the directors, or of the members of the corporation, and it is not at all easy to see what services the plaintiff actually did under it, before or after the company was formed, which could possibly have led any one to suppose that he was under a contract with it, of the nature of the one in question, or of any other nature. We assume, however, that there were services rendered to and accepted by the defendant; but we hold that they were to be recovered for according to their value and that the contract produced by the plaintiff never became the agreement of the company, so as to obligate *Page 442 
it, absolutely and in all events, to pay him the sum stated therein, upon the completion of the water works.
For these reasons the judgment should be affirmed, with costs.
EARL, PECKHAM and BARTLETT, JJ., concur with O'BRIEN, J.; FINCH, J., concurs with GRAY, J., ANDREWS, Ch. J., not sitting.
Judgment reversed.