Court Opinion

ID: 3548270
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:00:57.054685+00
Date Added: 2024-06-11T14:22:28.677884
License: Public Domain

The action was begun by S. C. Wright, but upon his death his executors were substituted as parties plaintiff. The other facts sufficiently appear in the opinion.
This is an appeal from an order of the district court granting the respondent's motion for a new trial. The action was commenced to recover the sum of two thousand dollars alleged to be due on a promissory note, which is in words and figures as follows: *Page 474 
"$2,000.00.            CARSON CITY, Nev., December 8, 1886.
  One clay after date we, or either of us, promise to pay to
the order of Sam C. Wright two thousand dollars in gold coin
of the United States of America, at their office in Carson,
for value received, with interest payable monthly in like
gold coin at the rate of one and one-fourth per cent. per
month from date until paid. Protest as evidence of
presentment and non-payment is hereby waived.
[Signed]                              CARSON WATER COMPANY.
  By Alfred Helm, Pres. Carson Water Co.
                          By G. W. Richard, Secy."
  We gather from the record the following facts: Some time
prior to the incorporation of the Carson Water Company,
Alfred Helm and Henry F. Rice purchased the land upon which
the company's reservoir is constructed and the water right
connected therewith, from W. P. Warren, and gave their
promissory note in payment therefor in the sum of two
thousand dollars. On the 29th day of December, 1874, the
company was incorporated and has been in existence ever
since. The affairs of the company are controlled by a board
of three trustees. Some time prior to August, 1875, the
Warren note becoming due, or Warren wanting his money, Mr.
Rice induced Sam C. Wright to take up the note, which he did
at a discount of one hundred and fifty dollars. On the 2d
day of August, 1875, at a meeting of the board of trustees
of said company, the president of the Carson Water Company
was empowered and instructed to make, execute and deliver on
behalf of the company and as its act and deed, a promissory
note to S. C. Wright, at ten days' sight, for the sum of two
thousand dollars to retire the note of W. P. Warren. In
compliance with said resolution, on the 2d day of August,
1875, the following note was delivered to S. C. Wright:
"$2,000.00.                    CARSON CITY, August 2, 1875.
  At ten days' sight we promise to pay S. C Wright or order
the sum of two thousand dollars in gold coin of the United
States, and interest at the rate of one and one-fourth per
cent. per month for value received."
  (The signatures have been torn off.)
  On the 1st day of July, 1879, the note of "August 2, 1875,"
not Having been paid, a new note was given in figures and
words as follows:
 *Page 475 
"$2,000.00.                      CARSON CITY, July 1, 1879.
  One day after date, without grace, we promise to pay to Sam
C. Wright, or order, the sum of two thousand dollars,
payable only in gold coin of the government of the United
States, for value received, with interest thereon in like
gold coin at the rate of one and one-half per cent. per
month from date until paid.      T. C. PICKNEY, Secretary."
  (Other signature torn off.)

There does not appear to have been any order or resolution of the board of trustees authorizing the making or giving of the above note. In 1881 the Carson Water Company being indebted to a number of parties, borrowed money to pay them off.
The following is the testimony of Alfred Helm, who was then the president of the company, drew the money and was authorized to pay off the indebtedness: "On or about the 10th or 12th or 15th of March — early in March anyway — we borrowed some money in San Francisco to take up some notes of the company outstanding in San Jose, and also to take up this note of Mr. Wright's. I went to San Jose and paid off the notes there and took a check in my own name, I think, to come up here to settle this note up. After I got home — I got home Sunday — and on Monday following I met Mr. Wright and I told him I had the money to take up that note. We went to Wells-Fargo, where he has got a tin box. He went into the vault, got the box and brought it on the counter, opened the box, took out the note, held it in his hand. I said to him that I was in a tight place at that time myself, and I said to him, Sam, you don't need this money and I need it awful;' and I said, `I will give you my third of the water company's stock as security and let me keep this money.' I had three hundred and thirty-three shares and I said, `Give me this two thousand dollars and you can have the stock,' and he asked me about the stock, and how much there was of it, and finally he said, `I don't believe I want your stock, but let it run as it stands and you can pay it in a few months, and you can pay the interest and let it be as it is and not make any change.' I objected to it, but he said, `Let it be as it is.' Afterwards I went to the secretary, Mr. Richard, and told him I used the money represented by the check. I paid my debts with some and bought stock with the rest. I ordered the interest paid at *Page 476 
the office charged to me." This conversation referred to the note of July 1, 1879.
Question by the court: "Was there two thousand dollars due from the company to Mr. Wright at the time of the execution of this note of December, 1886?
Answer. No, sir; I suppose it was due from me. But at the same time he met me, and said I must either pay the money — I think he spoke to me a day or two before, and wanted to know if I could pay up the money and I said, `No, and he said that note was about run out, and he said he would have to have a new note. He had a note, written by himself, and he told me to sign it as the president of the company, and he asked me to take it to Mr. Richard and get him to sign it, and I think I copied the note. Anyway, that is the way that note was signed — as you see it there.
The shareholders of the company did not know anything about the note of 1886, but I knew about it. There was nothing in the books of the company, that I know of, about the note of 1886 the interest was charged to me every month, and that was done under my instructions." In reply to a question asked Mr. Helm as to how the rate of interest happened to be reduced in the note of 1886 from that charged in the note of 1879, he answered, "I don't recollect just the time it was done, but I went to him and told him that I wanted him to reduce it, because I thought we were paying too much interest. I told him, `You know that I have to pay that interest myself, and I can't afford it;' and he said to me, `Let the interest go at one and one-fourth per cent.' That is the way the note of 1886 came to be drawn with interest at the rate of one and one-fourth per cent. I think that was the reason that I rewrote the note that he had written himself, and I changed the rate from one and one-half to one and one-fourth per cent. per month. I had a check of the Carson Water Company in my possession in the month of March, 1881, for the purpose of paying the note then outstanding in the name of Mr. Wright, and for the purpose of paying it to Mr. Wright."
Mr. Wright denied that he ever had any such conversation as testified to by Mr. Helm in relation to the note of 1879. It appears from the books of the company that the interest paid upon the note given in 1879, as well as that paid on the one *Page 477 
given in 1886, was charged to Mr. Helm from May 31, 1881, to and including the month of August, 1889.
Mr. Richard, the secretary, testified to a question asked, "How did the interest come to be charged to Mr. Helm?" and answered: "Mr. Helm said, `That Wright note is mine, and in paying interest charge it to me.' He said, `I will protect that note at all hazard.' "Mr. Richard also testified that there was no order of the board of trustees authorizing the renewal of the note of 1879 or 1886 by the president and secretary; that he had never notified the stockholders of the signing of the note of 1886, or that such a note was in existence; that so far as he knew, Helm and himself were the only stockholders that knew of the existence of the note of 1886, and Mr. Helm and himself had never met as a board of trustees to issue the note of 1886. "The circumstances under which I signed the note of 1886 — Mr. Helm brought that note to me, saying he wished to take up the other note, and saying that he had secured a reduction in the interest from one and one-half to one and one-fourth per cent. He wished to take up the note that Mr. Wright held, because he had secured a reduction in the interest. It was at the request of Mr. Helm that I signed that note."
H. M. Yerington testified that he was now and had been since 1889 president of the Carson Water Company; that he first became acquainted with and interested in said company in 1877: that he owned two thirds of the stock; that he had been a trustee of the company since 1877; that it has always been the custom of the company, when it wished to borrow money, to do so by resolution of the board of trustees, introduced and passed at a meeting thereof; that the corporation never authorized the renewal of the note of 1875 with the note of 1879 and the note of 1886, and he never knew nor heard of the renewal of the notes, nor the giving of the notes of 1779 and 1886, until after he was elected president in 1889. The following is the manner in which Mr. Yerington says he found out about this transaction: "About two and a half or three years ago I asked the secretary of the company to give me a balance sheet showing the affairs of the company in full. I had not had any and I was not posted with regard to the affairs of the company, and I wanted to see what we were doing. Mr. Richard then came to my office, I think, and he told me about the existence of this note of 1886, and I was very much surprised about it, as I *Page 478 
didn't think we owed anybody anything. We had borrowed a large amount from the Firemen's Fund in San Francisco in 1881, I think, and paid off the debts of the company. We had paid the Bank of San Jose a large sum and we also paid some debts in town here, and the current receipts of the company were sufficient to pay the interest on the debt and any other indebtedness. So I was surprised to find a note against us in favor of Mr. Wright; but Mr. Richard said that was the way it stood. I then found out that the interest had been paid to Mr. Wright by the secretary, and charged to Mr. Helm, for a number of years, and of course I was very much surprised to see that, but I finally got to the bottom of the affair. A. few days after that I met Mr. Wright, and I found that he owed the company for water six or seven hundred dollars, and Helm had explained to me that Wright's water bill had not been collected because Wright insisted that he had a note against him personally. However, when I met Mr. Wright, I said to him, `You owe this money to the company, and I want you to pay it;' and he said that Helm owed him, and I said that I could not help that, that the company did not owe him anything, and I told him he must pay his water bill. I said, `You must pay us this bill, as we owe money ourselves.' Then the conversation returned to the two thousand dollar note, and I said to him. `You loaned that money to Helm, and we will not pay it, as we don't owe it.' I went to the secretary and told him not to pay any more money to Mr. Wright for Mr. Helm or for anybody else."
To repeat in part, Mr. Wright emphatically denies that he ever had any such conversation as testified to by Mr. Helm in relation to the note of 1879. He also denies that Mr. Yerington, in his conversation with him, denied but what the company owed the money to him, but Yerington complained about the amount of interest the company had paid on the note. In this respect the testimony is conflicting. It is conceded that there was no order or resolution made or entered at any time authorizing the officers of the company, or any one of them, to execute the notes of 1879 or 1886 in renewal of the note of 1875.
The appellants contend and take the position that it was not necessary for the trustees of the corporation to have met and passed a resolution or order authorizing the president and secretary, or either of them, to execute and deliver the notes of *Page 479 
1879 and 1886 in renewal of the note of 1875 or that of 1879 in order to make them corporation notes and binding upon the corporation; and in support of their position they argue(1) that the president and secretary were a majority of the board of trustees, therefore it would be useless for them to call a meeting of the trustees merely for the purpose of adopting a resolution and spreading it upon the minutes, authorizing themselves to renew the notes; (2) that the corporation, having the use of the money, is now estopped to deny the indebtedness; and (3) that the stockholders, having an opportunity to inform themselves as to the liabilities of the company from the balance sheets, they cannot now be heard to say that they had not been informed as to this particular note.
A corporation is an artificial person created by the statutes of the different states, and is vested with the power and capacity to make contracts within the scope of the powers conferred upon it by the act of incorporation and the by-laws which the organizers thereof may see fit to adopt for the government of the corporation and its officers. (Darmouth College v. Woodward, 4 Wheat. 636;Providence Bank v. Billings, 4 Pet. 561.) Angell  Ames, treating of private corporations and of what acts are necessary to create and constitute a corporation, and of its actions, powers, etc., at section 110 say, among other things: (5) "To make by-laws, which are considered as private statutes for the government of the corporate body." In 2 Kent, Comm. (13th ed.) p. 300, it is said: "Where a corporation was created for the purposes of trade, it resulted necessarily that they must have power to accept bills and issue notes. But if a company be formed, not for the purpose of trade, but for other purposes, as, for instance, to supply water, the nature of their business does not raise a necessary implication that they should have power to make notes and issue bills; and it seems to be doubted whether there must not be an express authority to enable them to do it. The acts of corporation agents are construed with equal strictness, and it is the doctrine that though a deed be signed by the president and cashier of a corporation, and be sealed with its corporate seal, yet the courts may look beyond the seal, and if it be affixed without the authority of the directors, and that fact be made affirmatively to appear, the instrument is null and void." It was the rule of decisions in years gone by that corporations could only be held responsible for *Page 480 
their contracts and agreements made under seal. This was before the modern era of trade and commerce, which has given birth to corporations organized for the purposes of carrying on and engaging in all branches of business, trades and speculations, and as a rule are incorporated under a general law of the state, and if not prohibited by statute or by its by-laws, and the nature of its business is such as to render the borrowing of money necessary for the purpose of accomplishing the object for which it was incorporated, courts have usually held that they would imply in the corporation, and those who had control of its affairs, who were, according to the provisions of its charter carrying on the corporate concerns, an authority to borrow money for the use of the corporation to carry into effect the purposes for which it was organized, and without which it could not subsist. (Ketchum v. City of Buffalo,14 N.Y. 363, and cases cited; Rockwell v. ElkhornBank, 13 Wis. 655.)
The Carson Water Company was organized for the purpose of purchasing and laying in place water pipe, and keeping and maintaining such pipes, leading to and through the town of Carson City, and elsewhere in the county of Ormsby, state of Nevada, for the purpose of supplying the people of the aforesaid town and others with water, and for the purpose of acquiring such real and personal property as might be necessary for the purposes above mentioned. The affairs of the company were to be managed by three trustees, and its principal place of business was to be Carson City, Nev. There is no provision in the articles of incorporation nor in the by-laws that would indicate that the corporation, or any officer thereof, was authorized to borrow money or execute notes, nor is there anything therein contained from which we could infer that such a power is vested in the president and secretary of the company, without first being authorized so to do by the board of trustees. The president of the Carson Water Company is to preside at all meetings of the board of trustees, and cull special meetings at such times as he may deem necessary for the interest of the company. The secretary of the company shall keep a record book, in which he shall transcribe the proceedings of all meetings, and issue stock, and keep a list of the names of persons from and to whom stock is transferred. Before a corporation can be held responsible for the contracts of its officers or its agents, it must affirmatively appear that the officer or agent was authorized *Page 481 
to enter into the contract by the company, or that the company received the benefits derived from the transaction; nor is there anything in the record to indicate that there was a recognized course of dealings whereby these officers were held out as possessing any such power; but, upon the contrary, Mr. Yerington testified "that when the company had to borrow money they always held a meeting and discussed the advisability of doing so, and, if agreed upon, would then authorize the officers to execute the papers." When it is within the implied powers of a corporation to borrow money, execute and put in circulation negotiable paper, and where there is evidence that in the course of its business it has been in the habit of executing and circulating its note made by its officers, and this mode of raising money has been recognized by the corporation, in such case a note, so indorsed by the proper officers, would be held binding upon it when in the hands of a bona fide holder; but these incidental powers are not to be lightly inferred, nor are the officers authorized to go beyond the instructions given them by the board of trustees or those contained in the by-laws.
In the view we take of the case, it is unnecessary for us to review the facts in relation to the giving of the note of 1875. If Wright purchased the Warren note, he did so at the earnest solicitation of Mr. Rice, one of the trustees; and if he advanced the money of the company to retire the Warren note, the company had the use of the money, and the transaction, whichever way it may have been, was afterwards ratified by the board of trustees. (Seeley v. Lumber Co.,59 Cal. 23.) The renewal of the note of 1875 by the note given in 1879 stands on a different footing. There is nothing in the records of the proceedings of the board of trustees showing or tending to show that the officers of the company were authorized or instructed to renew the note. But it is not denied but what the company owed the money at the date of the renewal in 1879, and courts have usually held that a contract entered into by a corporation or its officers may not be within the scope of the powers conferred upon it by its charter or by-laws, yet if the corporation receives the benefit therefrom in money it will not be allowed to deny the indebtedness on the ground that its officers were not empowered to make the contract. (Union Gold Min.Co. v. Rocky Mt. Nat. Bank, 2 Colo. 260;Bradley v. Bollard, 55 Ill. 413, 419;Whitney *Page 482 Arms Co. v. Barlow, C3 N. Y. 69.) There is also an increase in the rate of interest mentioned in the note of 1879 over that of 1875. In the resolution passed by the board of trustees on the 2d day of August, 1875, authorizing the executing of the note of that date, the rate of interest was fixed at one and one-fourth per cent per month. By the one made in 1879, without any authority whatever, interest was provided to be paid at the rate of one and one-half per cent per month.
The renewal of the note of 1886 does not come within either of the above mentioned rules in this: there was no order or resolution of the board of trustees, nor a majority thereof, authorizing the president and secretary to execute the note. The renewal of the note must be considered in connection with the powers and duties of the officers who renewed the same, the circumstances under which it was renewed and the benefits derived therefrom by the corporation. The evidence in the case, as it now stands, is such as to show that the president of the company has made use of his official position to secure to himself the use of money, by issuing what purported to be the company's note, without the knowledge or consent of the board of trustees or the stockholders of the Carson Water Company.
Mr. Helm and Mr. Yerington testified that in 1881 the corporation borrowed a large sum of money to pay off the outstanding indebtedness of the company, including the two thousand dollars due Mr. Wright on the 1879 note. Mr. Helm testified that he had the check to pay the Wright note, and went to the bank of Wells, Fargo  Co. with Mr. Wright to pay it, and while there had the conversation with Mr. Wright as testified to above; and if the same is to be taken as true, Helm induced Wright to let him retain the money that had been intrusted to Helm by the company to pay off the Wright note of 1879, which Helm says he did use for his individual benefit in paying off his own debts with some and purchased stock with the balance. The corporation not owing Wright at the time of the renewal of the note of 1886, and Mr. Helm instructing the secretary to charge the interest thereafter paid on the Wright note to his individual account, supports the statement of Helm; and the fact that the secretary drew the checks thereafter "payable to the order of S. C. Wright on account of A. Helm" was a notice to Wright, and he should have inquired into the cause of the change of payment of interest *Page 483 
from the name of the company to that of A. Helm if the statement of A. Helm was not correct. In answer to a question asked Helm, "Who was present when this conversation took place between yourself and Mr. Wright in the bank?" he answered: "Nobody was present. I took pains not to say anything when anybody was around, as I didn't care to expose my condition at that time." The invalidity of the note of 1886 springs: First, from issuing the same without being authorized so to do by the board of trustees; second, the corporation was not indebted to Wright at the time of the giving of the note, and the same was given without any consideration being received by the coloration. It was not sufficient in this action for the plaintiff to say: "I supposed it was all right and the officers had authority to renew the note." Persons dealing with corporations are chargeable with notice of the extent of the agent's powers, and Wright was bound to know that Helm and Richard could not act beyond the powers vested in them by the board of trustees and the by-laws. (Mechem, Ag. Sec. 276; 1 Pars. Cont. 40-42;Smith v. Association, 12 Daly 305;Mining Co. v. Fraser, 29 Pac. Rep. 668;Owings v. Hull, 9 Pet. 628.) The action of Helm in drawing up the note of 1886, and signing the same as president of the Carson Water Company, and inducing the secretary to sign the same, giving as his reason for such request that there was to be a reduction in the rate of interest, was in excess of their powers. Instead of acting for the corporation, they executed a note purporting to be a valid obligation of the company, when in fact it was to secure the individual indebtedness of its president for money which the corporation had intrusted to him to pay its debts, and which he testifies he was permitted to retain for his own use, with the knowledge and consent of the debtor, Wright. Under such circumstances, at the time of the giving of the note of 1886, Helm was acting for himself, and he was not, with respect to the transaction, an agent at all; and the corporation is not, as to that matter, bound by his acts, nor is it chargeable with his knowledge.
In the case of Frenkel v. Hudson, 82 Ala. 162, Somerville, J., in speaking of the general rule that the knowledge of the agent must be imputed to the principal, said "It has no application, however, to a case where the agent acts for himself, in his own interest and adversely to that of the principle His adversary character and antagonistic interests take him out of *Page 484 
the operation of the general rule, for two reasons: First, that he will very likely in such case act for himself rather than for his principal; and, secondly, he will not be likely to communicate to the principal a fact which he is interested in concealing. It would be both unjust and unreasonable to impute notice by mere construction uinder such circumstances, and such is the established rule of law upon this subject." (Mechem Ag. Sec 723; Aug.  A. Corp. Secs. 308, 309.) It is a cardinal principle in the law of agency that the powers of the agent are to be exercised for the benefit of the principal and not for the agent or third parties, and a person dealing with one whom they know to be an agent, and to be exercising his authority for his own benefit, acquires no rights against the principal in the transaction. Such transactions are usually spoken of by the courts as fraudulent, because circumstances known to both parties make the contract or agreement absolutely void. (Mechem, Ag. Secs. 797, 798.)
It is a well-settled rule in equity that, when the relationship of principal and agent exists, the agent will not be permitted to make use of his position for his own personal interests. This rule is strict in its requirements and inflexible in its operation. It extends to all transactions where the agent's personal interests may be brought into conflict with his acts in the fiduciary capacity; and it is immaterial as to whether there was fraud, or as to whether the transaction was entered into with the best of intentions. When the possibility of a conflict exists, there is the danger to be guarded against by the absoluteness of the rule. It is a violation of duty for any officer of a corporation to enter into a contract with himself, or to so manage the affairs of the company as to enrich himself at the expense of the stock holders. Pomeroy, in his work on Equity Jurisprudence, (volume 2, sec. 959), says: "The underlying thought is that an agent should not unite his personal and his representative characters in the same transaction; and equity will not permit him to be exposed to the temptation, or brought into a situation where his own personal interest conflicts with the interest of his principal, and with the duties which he owes to his principal." See, also, sections 1050, 1051, and notes therein referred to. (1 Beach, Priv. Corp. Secs. 236, 240, et seq.; Pickett v. School Dist.,25 Wis. 553.)
In the case of People v. Township Board ofOveryssel, *Page 485 11 Mich. 225, the court said: "So careful is the law in guarding against the abuse of fiduciary relations, that it will not permit an agent to act for himself and his principal in the same transaction, as to buy of himself, as agent, the property of his principal, or the like. All such transactions are void, as it respects his principal, unless ratified by him with a full knowledge of all the circumstances." (2 Field, Briefs, Sec. 193.) A corporate body can only act by agents, and the directors or trustees of a corporation occupy a position of the highest trust and confidence. The utmost good faith is required in the exercise of the powers conferred upon them. They have no right, under any circumstances, to use their official position for their own benefit or profit, or for the benefit of any one except the corporation. This is one of the reasons given why an officer has no right nor authority to vote upon or represent the corporation in a transaction in which he is personally interested in obtaining an advantage at the expense of the other stockholders. Therefore, if the testimony of Helm be true, the company did not owe Wright any money in 1886, when the note was given, but Helm did; and if such was the case, then the information given by Helm to Richard, upon requesting him to sign the note, as the interest was to be reduced, was misleading and not in accordance with the facts in the case. Under such circumstances, the signing of the note cannot be deemed a corporate act, for the acts of officers of corporations are to be tested by the principles of the law of agency; and no agent whatsoever can bind the corporation if such agent fails to act in accordance with the purposes and objects of the corporation and within the scope of his authority. (Lyndon Mill Co. v. Lyndon Literary  Biblical Inst.,
22 Atl. Rep. 576; Reynolds  Henry Const.Co. v. Police Jury, 11 South. Rep. 238;Miner v. Ice Co., 53 N. W. Rep. 222;Johnson v. Signal Co., 29 N. E. Rep. 966; Ang.  A. Corp. Sec. 291; Despatch Line ofPackets v. Bellamy Manut'y Co., 12 N. H. 231;Hoffman v. Insurance Co., 92 D. S. 164;Nelligan v. Campbell, 20 N. Y. Supp. 234; Field, Corp. Sec. 271.)
In the case of Main Jellico Mountain Coal Co. v. Lotspeich,
20 S. W. Rep. 379, the president of the company entered into a contract with one of the stockholders to deliver to him a quantity of coal, the pay therefor to be applied on the payment of the individual indebtedness of the president to the stockholders. In an action by the plaintiff to enforce the contract *Page 486 
and be permitted to apply the price of the coal on the debt, in passing upon this question the court said: "The pleadings do not present the question of fraud by way of defense, but nevertheless, in construing a contract made between officers of a corporation by which a corporate liability is attempted to be created to the one officer or the other, that construction should be placed on its terms most favorable to the corporation; and particularly when the great weight of the evidence, and in fact all of it, shows that corporate property was being used, by reason of this contract, to pay an individual debt of one director to the other."
In the case of Hardin v. Construction Co.,78 Iowa, 729, the board of directors authorized the officers of the company to execute a note for nine thousand dollars, and a chattel mortgage upon the rolling stock of the company to secure the payment of the same. The officers executed the note and mortgage and stipulated therein for attorney's fees in case of suit for the collection of the same. The plaintiffs commenced suit to foreclose the mortgage. The district court refused to allow attorney's fees, and the plaintiffs appealed. In passing on this question, the supreme court said: "This was an explicit direction to execute a note for nine thousand dollars and interest, and no more. The company did not, by any official action, authorize the execution of a note in any amount exceeding said sum in any event. We think the court correctly held that the measure of liability was nine thousand dollars and interest." (Pacific R. M. Co. v. Dayton S.  G. R. Ry. Co.,
7 Sawy. 61.)
In the case of New York Iron Mine v. NegauneeBank, 39 Mich. 648, Judge Cooley, in speaking of the powers of corporations and agents to borrow money by issuing notes, at page 651 says: "It is not disputed by the defense that the corporation, as such, had power to make the notes in suit. The question was whether it had in any manner delegated that power to Wetmore. We cannot agree with the plaintiff that the mere appointment of a general agent confers any such power. In McCullough v. Moss,
5 Denio, 567, the subject received careful attention, and it was held that the president and secretary of a mining company, without being authorized by the board of directors so to do, could not bind the corporation by a note made in its name. Murray v. East India Co.,
5 Barn.  Ald. 204; Benedict v. Lansing,
5 Denio, 283, and The Floyd Acceptances, *Page 487
7 Wall. 666, are authorities in support of the view. The plaintiff, then, cannot rest its case on the implied authority of the general agent. The issuing of promissory notes is not a power necessarily incident to the conduct of the business of mining, and it is so susceptible of abuse to the injury; and, indeed, to the utter destruction of a corporation, that it is wisely left by the law to be conferred or not, as the prudence of the board of directors may determine." Judge McCrary, in charging the jury in the case of Foster v. Mining Co., 17 Fed. Rep. 130, said: "Upon the first question — as to whether this is the note of the defendant corporation — that is to be determined upon the question whether the person who executed the note on behalf of the corporation, Mr. Penn, the treasurer of the company, was authorized to execute such an instrument. The law upon this subject is that the authority is not presumed from the mere fact that the person assummed the right to give a note in the name of the corporation. A corporation is an artificial person, which must act within certain limits. It differs from a natural person. If an individual gives his note, it is not necessrry to prove anything in the way of authority; but a corporation must act by way of agents, and the authority of the agent who acts for it is not presumed. It may, however, be shown either by showing an express authority — as, for example, a resolution of the board of trustees authorizing a certain party to execute a note on behalf of the corporation — or by a provision of the constitution or by-laws of the corporation authorizing a certain officer to execute promissory notes. It might be shown in that way, but I believe it is not claimed that there is anything of this kind here. It may also be shown by the course of dealings of the corporations, and by facts and circumstances which are sufficient, in the judgment of the jury, to show that the party who executed the note had the authority. If it was the custom of this corporation to permit the treasurer to execute its promissory notes, and if he was in the habit of doing so, with the knowledge of the trustees or of the corporation, which means, of course, the trustees, they had, by recognizing that custom and acting upon it, themselves become bound by it, and especially if they received the benefits of transactions of this sort, which they permitted the treasurer to enter into. It is only, therefore, necessary for you in considering this branch of the defense to *Page 488 
inquire whether the evidence here establishes the fact that Mr. Penn, the treasurer, was in the habit of acting for and on behalf of the corporation in executing promissory notes and other instruments of like character, and whether the corporation was aware of that fact, and made no objections to it. If you find this to be so, then you will come to the conclusion that the note was executed by the corporation, and you will proceed then to the other question; that is, whether the corporation was indebted to Mrs. Foster in the amount of money for which this note was given."
In the case at bar it was necessary for the plaintiffs to prove that the president and secretary were authorized by the board of trustees to renew the note in 1886, or that it had been the custom of the company to transact business in that way, and that the trustees were knowing to the fact and acquiesced in such procedure. It was also a question of fact to be determined from the evidence as to whether the Carson Water Company owed S. C. Wright the sum of two thousand dollars when the note of 1886 was executed, or was it the individual indebtedness of A. Helm. If the president and secretary of the Carson Water Company did not have the power to borrow money and execute a note in the first instance without being authorized so to do by the board of trustees — which we think they did not — they did not possess the power to renew the same without authority from the board so to do; for when the adoption of any particular form or mode is necessary to confer authority upon agents of corporations in the first instance, there can be no ratification except in the same manner, or it should be made to appear that the company was in the habit of issuing promissory notes without such authorization. In order to hold the corporation responsible upon the note of 1886, it was necessary to show that the officers had authority to renew the same, or that the company had at that time the use of the money. (Middlesex County Bank v. HirschBros. Veneer Manuf'g. Co., 4 N. Y. Supp. 385.)
Plaintiffs contend that the action of the president and secretary in executing the note of 1886 has been ratified by the defendant by reason of its having paid the interest becoming due each month from 1886 until 1889. We do not think that the evidence supports the plaintiffs' contention. Mr. Helm, the president, and Mr. Richard, the secretary, testified that the interest *Page 489 
was paid by Helm from 188L until the payment of interest was discontinued in 1889. True it is that it was paid by company's check, but always on account of A. Helm; and, as we understand the evidence, the amounts were charged against Helm's private account on the books of the company. Mr. Helm says: "No member of the company knew anything about this transaction with Wright except myself." Mr. Richard says: "I knew nothing about the giving of the note of 1886, or why it was given, except as Helm told me it was to secure a reduction in the rate of interest; and at Helm's request I signed it." Mr. Yerington testified "that he was a trustee of the company from 1877 until 1889, when he was elected president. He was the owner of two-thirds of the stock, and never knew of the existence of the note until after his election as president in 1889. As soon as he heard of the existence of the note he sent for Helm, the former president, and Richard, the secretary, and after being informed by them as to how the note of 1886 was executed, he went and saw Mr. Wright, and informed him that it was not the company's note, and that the company would not pay it, and instructed Richard, the secretary, not to pay any more interest on the note." There is no testimony in the transcript from which we could infer that the corporation had the use of or received any benefit from the Wright money after 1881. Under these circumstances the making of the note of 1886 should not be held to be a corporate act. (Craft v. South BostonRailroad Co., 150 Mass. 208; First Nat. Bank ofMiddletown v. Council Bluffs City Water Works Co.,
9 N. Y. Supp. 860; Bohm v. Brewery Co., Id. 514;Wahlig v. Manufacturing Co., Id. 739;Westervelt v. Raddle, 55 How. Pr. 370.)
With regard to the question of ratification, it is to be observed that this is not a case, as presented to us, in which the officers of a: corporation have exceeded the powers delegated to them by the corporate body in entering into an unauthorized contract. When the proceeds of such unauthorized act have come into the defendant's treasury, and had been used in the regular course of its business, with the knowledge of the trustees or stockholders, under such circumstances very slight evidence would be sufficient to establish the company's liability. But when it is made to appear that such unauthorized contract was entered into by two of the three trustees, without the knowledge or consent *Page 490 
of the third, and in fact one of the two who signed the note not knowing the facts connected with such renewal and, as appears from the evidence, not for the benefit of the corporation but for the individual benefit of one of the two who signed the note, the property of the third, or that of the other stockholders, if there are any, ought not to be held liable on the void contract, without it is made clear that the third acquiesced in the proceedings, and ratified the acts of the other two, after having been fully advised as to all the material facts in the case and given an opportunity to act. The evidence in our judgment is insufficient to show a subsequent ratification, either express or implied. The president and secretary certainly were not competent to ratify their own unauthorized acts. (Hotchin v. Kent, 8 Mich. 527;Dabney v. Stevens, 40 How. Pr. 344; Story, Ag. Sec. 243; Howell v. McCrie, 36 Kan. 652;Combs v. Scott, 12 Allen, 496;Mallory v. Mallory Wheeler Co., 61 Conn. 141;Despatch Line of Packets v. Bellamy Manuf'gCo., 12 N. H. 232; Lyndon Mill Co. v. LyndonLiterary  Biblical last., 22 Atl. Rep. 577;0wings v. Hull, 9 Pet. 629;Bohm v. Brewery Co., 9 N. Y. Supp. 515;Murray v. Lumber Co., 143 Mass. 250;Fitzhugh v. Land Co., 81 Tex. 310; DedhamInstitution for Savings v. Slack, 6 Cush. 411.)
The plaintiffs argue that by reason of the fact that the secretary made out statements showing the indebtedness of the company, in which the claim of Wright was included, was sufficient notice from which the stockholders could have informed themselves as to this claim; and they not having done so, the company is now bound by the acts of the officers who signed the note. Mr. Richard testified that he did make out statements of the company's affairs in gross. How many or how often such statements were made out he does not state, but he does say that he never made out and submitted to the board of trustees an itemized statement prior to 1889, and that the Wright note was never mentioned at any of the meetings of the board, to his knowledge. We do not think that statements made out in the manner in which it is said they were were sufficient to impart knowledge to the stockholders as to who the creditors or debtors of the company were. As we understand the law to be, it is this: That before an individual or corporation can be held to have ratified the unauthorized acts of his or its agents, every detail *Page 491 
of the transaction must have been made known to the principal. If, after obtaining such knowledge, the principal fails to act, long and continued silence will be deemed an approval of the act, and such ratification relates back and is equivalent to a prior authority to make the contract. (1 Daniel, Neg. Inst. Secs. 316-319; StarkBank v. United State Pottery Co., 34 Vt. 146; Story, Ag. Sec. 239; Commercial Bank v. Jones,18 Tex. 816; Smith v. Tracy, 36 N.Y. 82;French v. O'Brien, 52 How. Pr. 398;Combs v. Scott, 12 Allen 497.)
In the case of Yellow Jacket Silver MiningCo. v. Stevenson, 5 Nev. 228, Lewis, C. J., speaking for the court, said: "So, where it is sought to charge a corporation with the ratification of an unauthorized act of an agent by reason of its acceptance of some benefit or advantage from it, it should appear that such benefit was accepted with full knowledge of the character of the act. The evidence in this case, however, is clear and positive that the board of trustees which was the authorized agent of the corporation knew nothing of the terms, nor even of the existence of the lease in question. The money paid by the appellants was reported by the superintendent to the board as received for ores sold. Nothing seems ever to have appeared in his reports from which it could even have been inferred that the money paid by or due from Stevenson to the company was for the use or rental of any portion of the mine. How then can it be held that the acceptance of money by the board reported to it as being for ores sold was a ratification of the lease executed to the appellant? The company did not know of such lease, nor were there any such circumstances connected with the acceptance of the money as to place it upon inquiry, or to charge it with presumptive notice of its existence. If, then, it be the law that there must be a full knowledge of all the material facts before the acceptance of profit or advantage by the principal will be held to constitute a ratification, surely the respondent here cannot be held upon the lease in question, for it knew nothing of the material facts respecting it. If it were shown that the board knew of the lease, the acceptance of payment from Stevenson for the ore extracted would doubtless be sufficient to establish a ratification; but the contrary being shown, it would manifestly be opposed to the well-settled rules of law to hold such acceptance to be a ratification. * * * It cannot, we think, be maintained that the knowledge obtained unofficially by three of the trustees that *Page 492 
Stevenson was engaged in extracting ore from the mine is sufficient to charge the company with such knowledge. As any number of trustees, acting individually and not as a board, cannot act for the corporation, so any information obtained by individual trustees and not communicated to the board, should not, it would seem, become the foundation of a contract binding upon the company. The trustees represent the corporation only when assembled together and acting as a board. Such being the law, how can it be claimed that information communicated to them individually, but not to the board, can be made the foundation of an implied contract on the part of the corporation?" (Hillyer v. The OvermanSilver Mining Co., 6 Nev. 55.)
It is to the interest of the public that there should be a speedy termination of a lawsuit; but there is another principle of public policy that should not be lost sight of, and that is that no man should be deprived of his property to pay another's debts without it clearly appears that he has placed himself in that position wherein the law says, "You have assumed the responsibility and you cannot be released therefrom."
The evidence in this case is conflicting and obscure in many particulars. The motion for a new trial was made upon the ground, among others, that the findings of fact were contrary to and not supported by the evidence, and that the judgment was contrary to law. It does not appear on what ground the motion was granted. The granting or refusal of a motion for a new trial on the ground of the insufficiency of the evidence to support the findings is addressed to the sound discretion of the judge who presided at the trial of the case in the lower court, and on an appeal from such order, where the court below, in the exercise of a sound discretion, grants a new trial on conflicting evidence, appellate courts have always refused to disturb the order. (Kellenberger v. Market Str. Cable RailwayCo., 33 Pac. Rep. 90.)
The order of the district court in granting the new trial is affirmed.