Court Opinion

ID: 6436889
Source: CourtListenerOpinion
Date Created: 2022-06-25 12:13:18.059238+00
Date Added: 2024-06-11T15:52:25.544612
License: Public Domain

Carroll, J.
A promissory note for $1,000, dated January 24, 1922, and signed by the defendant by its treasurer, Charles S. Beatty, was delivered to the payee, Arthur Berenson, and by him indorsed to his secretary, it being agreed that “ the action should be considered in all respects as though no transfer had been made, and Berenson, the payee, were the plaintiff.” Before the execution of the note, the defendant’s president informed Berenson that he wished to take up fifty shares of the preferred stock of the defendant corporation held by one McKenney, which could be bought for $1,000. Beatty was instructed by the president to carry out the details of the transaction. Berenson paid for the stock and received from Beatty the note in suit, the certificate of stock being indorsed to Berenson, he agreeing to deliver the certificate to the defendant when the note was paid. Berenson (hereinafter called the plaintiff) was elected a director of the defendant corporation for the term of one year in the years 1919,1920, and 1921. There was evidence that he resigned as director in “ the latter part of 1920 or the early part of 1921 ” and, as we construe the report, it was found that he had knowledge of the defendant’s by-laws when he was a director but had no knowledge of them after he resigned. The by-laws of the defendant were in evidence. It was found that a vote of its board of directors, giving Beatty charge and direction of the defendant’s affairs subject to the direction of its president, was passed at a meeting of a majority of the board, although the minutes of the meeting were not signed by the recording officer. The records of the defendant’s board of directors contained no reference to the purchase of the stock from McKenney or the transaction by which the note in suit was delivered to the plaintiff. In the Municipal Court of the City of Boston there was a finding for the plaintiff. The defendant’s request, that there® was no evidence sufficient to warrant a finding that the defendant’s directors authorized its treasurer to purchase the corporation’s own stock, was refused.
Assuming that the directors, without a vote of the stockholders, could purchase the stock of the Corporation Finance Company, Commercial Brewing Co. v. McCormick, 225 Mass. *63504 (see Leland v. Hayden, 102 Mass. 542, 551, Tuttle v. Batchelder & Lincoln Co. 170 Mass. 315), the transaction in question was never considered at a meeting of the directors and was never, in the words of the report, “formally brought to the attention of defendant’s Board of directors, at a meeting.” The records show that no meeting of the board was held in the year 1922 until May 24. The board of directors did not act collectively as a board. Commercial Brewing Co. v. McCormick, supra. It was thereupon incumbent on the plaintiff to prove that the directors, or at least a majority of them, knew of the transaction and its terms and with such knowledge acquiesced in it and adopted it. Murray v. Nelson Lumber Co. 143 Mass. 250. Sears v. Corr Manuf. Co. 242 Mass. 395.
The board of directors was made up of nine members and the only evidence bearing on the knowledge of the directors, or a majority of them, is the testimony of the defendant’s president, that before making the loan he talked with Beatty, Thompson and two or three other directors. It does not appear when this conversation was and it does not appear that even a majority of the directors knew of any of the details of the transaction or approved the purchase of the stock or the loan to the plaintiff. There was no evidence of a ratification by the corporation or its directors. No mention was made of the transaction in the record of the directors’ meetings. The fifty shares of. stock did not appear on the defendant’s books as assets. There was no entry in the cash book on the page allotted to the plaintiff. The only entry bearing on the matter was in the journal under date of May 27, 1922, of “ Notes Payable ” to “ A. Berenson ” $1,000; and the defendant’s treasurer testified he did not know by whom this entry was made. The stock was held by the plaintiff and never was transferred to the defendant. If any benefit was received by the corporation, there was nothing to show that the directors knew of it. The request therefore that the defendant’s directors gave no authority to the treasurer to purchase the stock should have been given, and its refusal was error. Murray v. Nelson Lumber Co., supra. C. A. Dodge Co. v. Western Avenue Tabernacle Baptist Church, 247 Mass. 330.
*64The defendant’s fourth request, that there was no evidence that the execution or delivery of the note sued on was authorized or ratified by the defendant, should have been given for the reasons stated. A payment on the note was made in July, 1922, by the Commonwealth Securities Trust, but there is no evidence to show that this payment was known to the defendant or authorized by it. And it does not appear that the trust company had any connection with the defendant or was acting for it in making the payment.
There was no authority given the treasurer to sign the note for the purchase of the company’s stock. The judge found that the by-laws gave no authority to the treasurer to; purchase the defendant’s own stock, that no authority was given him by the stockholders. The by-laws are silent on the treasurer’s authority to bind the corporation by a note signed by him; and while the vote at the meeting of the directors on July 22, 1920, appointed Beatty an officer of the corporation to have general charge of its affairs, subject to the direction of the president, by an earlier vote the checks of the corporation were to be signed by the president and countersigned by the treasurer. We find nothing in the evidence to indicate that Beatty had express authority to sign the note in suit. See Mahone v. Manchester & Lawrence Railroad, 111 Mass. 72, 75; Williams v. Dugan, 217 Mass. 526; Forgeron v. Corey Hill Garage, Inc. 249 Mass. 163, 165. Nor do we find any evidence that he was clothed with apparent or ostensible authority to execute the note. Beatty testified that on two occasions he executed notes on behalf of the corporation, one in the sum of $500 and one for $1,000, and that they were paid by the corporation. The books of the corporation which were in court contained no record of these notes, there was no record of any vote authorizing them, and no evidence that the directors ever knew of these transactions. Sears v. Corr Manuf. Co., supra. There is no evidence showing that the responsible officers of the corporation knew that these two notes were executed by Beatty in the name of the corporation, his acts were not adopted as the acts of the corporation, his acts therefore in executing the two notes were not ratified. Sears v. Corr Manuf. Co., supra, and cases cited.
*65The treasurer had no authority to sign the note of the defendant for the purchase of stock in the corporation. The purchase of the stock was not authorized or approved. The plaintiff cannot recover on the note and the request, that the plaintiff could not recover, should have been given. The order dismissing the report must be reversed, and judg-. ment entered for the defendant.

So ordered.