Girard v. Case Bros. Cutlery Co.

Corporations — Promoters—Contract of employment — Ratification. Where the officers and stockholders of a corporation and the members of a partnership agree to form a new corporation to take over the business of the two concerns, and the promoters agree that one of the paid officers of the old corporation shall become a paid officer of the new corporation, and after the new corporation is organized such officer assumes his new office and performs its duties, the contract of employment is binding upon the new corporation unless it is renounced and disapproved by its directors.

Appeal, No. 341, Jan. T., 1908, by defendant, from judgment of C. P. McKean Co., Oct. T., 1907, No. 93, on verdict for plaintiff in case of Charles L. Girard v. Case Bros. Cutlery Company. Assumpsit on a contract of employment. Before Bouton, P. J. At the trial it appeared that the defendant, a corporation, was organized to take over the business of an older corporation known as the Kane Cutlery Company, and a partnership composed of John D. Case and others. Prior to the organization of the new company the officers and stockholders of the old corporation and the members of the Case firm orally agreed, according to the weight of the testimony, that the plaintiff, Charles L. Girard, should receive a salary as an officer of the corporation of $1,800 a year which was the same as he received as manager of the Kane Cutlery Company, and that he would be paid 100 per cent above par on his $1,500 investment in stock, when he left the employment of the new company. When the new company was organized the plaintiff assumed his new position, and continued therein for nearly eight months. He was then discharged. He then brought this action to recover $3,000, which he claimed he was to receive for his stock when he left the employ of the company. The court charged in part as follows:' [It is incumbent upon the plaintiff to show by a fair preponderance of his evidence that the contract sued on, the basis of his recovery, was actually entered into. If he has satisfied the jury of such facts, then the evidence that the services were performed is some evidence of a. ratification of such contract on the part of the corporation.] [2] [The serious question which this jury have is, what, was this contract? Was the contract entered into as testified to by this plaintiff, and was it entered into with the promoters of this corporation, and was it ratified by the corporation afterward, or was the contract merely as claimed on behalf of this defendant? Now, gentlemen, you will take this case and give it your best consideration, and it is an important case. Bring in such a verdict as is warranted by the evidence, find the facts in accordance with the evidence, bear in mind that the burden is on the plaintiff to satisfy the jury of his contention by a fair preponderance of the evidence.] [3] Plaintiff presented these points: 1. The knowledge of the principal promoters of a corporation, who acquire their knowledge as such promoters, and who on the organization become officers and directors, is the knowledge of the corporation. Answer: We affirm this point, and say to you that if the promoters of a corporation have knowledge which is important to the corporation, knowledge which affects the corporation, and if such promoters after-wards become the directors of the corporation, that corporation is charged with the knowledge which those promoters had prior to the incorporation. [5] 2. If the president or vice president or director or manager of a corporation set to work a person hired by the promoters of the corporation, this is a ratification. Answer: We affirm this point. We say to you that if a contract was made, a contract of hiring was made by the promoters of a corporation, and those promoters of that corporation afterwards became directors of the corporation or became the president or vice president of the corporation, and that person so hired by them afterwards performed the services, then the corporation would be bound on the theory that the corporation ratified the act of the promoters in the contract. They would have knowledge of the contract by reason of the fact that they became directors or principal officers of the corporation, and having become directors, having knowledge of the fact that that person performed the services, having knowledge of the fact that that person was performing such service under such a contract as they as promoters made with him, then the corporation would be bound to pay such person. [6] 3. Where the promoters and incorporators are the same persons, become the directors and so continue for some time, a contract made by them before organization and acted upon afterwards is binding upon the corporation. Answer: We affirm this point. [7] 4. Ratification is not essential by a resolution, but it is sufficient if the corporation by its act shows an adoption of the agreement. Answer: We affirm this point. This, of course, gentlemen, you will take in connection with the fact that they myst have had knowledge of the contract. [8] 5. In order to bind a corporation by acquiescence of its directors to an act performed by its agents, promoters or officers in its behalf, it is not necessary that notice thereof be given them sitting in their official capacity as a board. It is sufficient if they are personally cognizant thereof, and do not call a meeting to disavow it. Answer: We affirm this point. [9] 6. If the jury find there was such agreement as claimed by the plaintiff made by the promoters, that plaintiff rendered the services and was ready to comply with the other terms, and that the defendant by its officers afterwards ratified the same, then the corporation is bound by the terms of the agreement so made. Answer: We affirm this point. [10] 6J. Ratification by defendant of any part of the agreement is, so far as the plaintiff is concerned, a ratification of the whole. Answer: We affirm this point. To explain, if a contract was made to do several things, all in one contract, and if the party who was to perform the services or do those things, did with the assent of the corporation who had knowledge of the contract, part of the things, that would be a ratification of the whole contract, and the plaintiff would be em titled to recover on the whole contract. [11] 7. If persons assume to act for an intended corporation without legal authority, and the corporation gets the benefits and uses the property, such acts will ratify the contract and render the corporation liable. Answer: That point is affirmed. As a general proposition of law the same rule applies as to individuals. If a person enters the service of an individual without any previous contract, then he may recover from that person for such services, if the person for whom the services are performed does not forbid him from continuing, but permits him to go on. [12] 8. Where officers of a corporation know of a contract made for the corporation and allow it to be acted upon without objection it is evidence of ratification by the corporation. Answer: We affirm that point, but say to you that it is merely some evidence of the ratification and not evidence from which a jury of itself without other evidence would be justified in finding a ratification, but would be in the absence of other evidence go slight that a jury would not be justified in finding a ratification. [13] Verdict and judgment for plaintiff for $3,558.80. Defendant appealed. Errors assigned were (2, 3, 5-13), above instructions, quoting them.