Wood v. Wiley Construction Co.

Pardee, J.

These are two cases against the Wiley Construction Company, upon the same state of facts. They were argued together by agreement, and will be treated as one case.

*92 The defendant corporation was organized early in February, 1880, under the joint stock laws of this state, and located in Hartford. A certificate of organization was filed in the office of the secretary of the state February 9,1880.

The capital stock was fixed at $500,000 divided into five thousand shares. Solon L. Wiley subscribed for two thousand five hundred shares, George W. Ballou for two thousand four hundred and ninety-nine shares, and George E. Beatty for one share.

Wiley lived at Greenfield, in the state of Massachusetts, Ballou at New York City or Boston, and Beatty at Boston. Wiley was, and for many years had been, a civil engineer and engaged in various engineering enterprises, and particularly in obtaining rights or franchises from cities, towns, villages, etc., in different parts of the United States, to construct systems of water works for supplying such niunicipalities and the inhabitants thereof with water; and, having obtained such rights or franchises, had been engaged in constructing the water-works, either personally or through a local company organized to construct them.

Ballou was engaged in the banking and brokerage business in New York and Boston, and at or about the time when the defendant corporation was organized, was interested and engaged in promoting and floating various railroad, mining, and other enterprises, and in providing the capital to build and work the same, and in providing for the issue and marketing of the stock and bonds incident to these schemes. Ballou’s principal place of business was in New York City, and the greater part of his time and attention was applied to bis business at New York, though occasionally he was in Boston. Beatty was employed by Ballou as cashier in his Boston office. Ballou and Wiley had known each other from childhood, and knew of the line of business each was so engaged in.

There was no evidence that the articles of association were advertised, as required by law.

No formal meetings of the stockholders or directors were held after the meetings at which the defendant was organ iz *93 ed, except possibly a meeting to place Walter Burnham in the place occupied before his death by Mr. Beatty.

The business and affairs of the company were managed by Ballou and Wiley in an informal manner, and as if it was their joint personal affair, they using the name of the defendant for that purpose.

No formal resolution or vote was had empowering any person to act for the defendant in any way j but the authority to act for and bind the defendant was agreed by Ballou, Wiley and Beatty to be exercised by Wiley in the manner that he did in fact act.

The corporation was organized as the result of the agreement of Ballou and Wiley. Beatty had no real interest in it, and subscribed for his single share so as to make the three persons associating required by the statute. Beatty’s single share was held for the benefit of Ballou.

The corporators were made directors. Wiley was made president, and Beatty secretary and treasurer.

Nothing has ever been paid in on account of any of the subscriptions to the capital stock.

The condition of affairs and the reasons which induced Ballou and Wiley to organize the corporation were as follows :

From and after 1877 or 1878, and down to the organization of the corporation, water-works had been commenced or constructed in whole or in part in several places: those at Ottumwa and Tiffin were completed so far as the original construction was concerned, and those at Niles, Owego and Towanda were in process of construction. Those completed were receiving repairs and extensions from time to time.

The corporation was suggested and organized for the purpose of doing all that had theretofore been done by Ballou and Wiley in obtaining the right to build, and in constructing and extending water-works and pipe lines, and in keeping the same in repair.

Contracts, rights or franchises to construct were to be obtained by Wiley in the defendant’s name, and the con struction, extension and repair were thereafter to be done *94 by the defendant or by Wiley in its name, and the material and supplies used in the construction were to be purchased by Wiley in its name or in his own name as he saw fit.

As president and general manager of the Wiley Construction Company, and with the knowledge and consent of Ballou, Wiley, beginning in the spring of 1880, took, in behalf of the company, new contracts to build works at Gardner in Massachusetts, Las Vegas in New Mexico, Clifton in Arizona, and Appleton in Wisconsin. He also contracted to build, and did build a pipe line for the San Pedro & Cañón Del Agua Mining Company. But as Ballou was the president and promoter, and his house the financial agent of the mining company, it was thought best by Ballou and Wiley that Wiley should take this contract in his individual name. But in fact it was for the benefit of Ballou and Wiley in the same manner and to the same extent as all the others, and purchases were made by Wiley therefor in the name and upon the credit of the Wiley Construction Company. Shipments were made on account of this contract, both to Wiley and to Captain Ruger, an employee engaged in the construction of the pipe lines.

All the affairs, financial or otherwise, of the Wiley Construction Company from and after its organization down to the year 1882, were managed by Wiley, with the advice and direction of Ballou.

Beatty died in July, 1881, and his place as director and officer of the corporation seems not to have 'been filled until the fall of 1881, when one Walter Burnham, au attorney-at-law by profession, but then employed by Ballou in some of his many schemes, acted, to some extent, in place of Beatty as an officer of the company.

No books of the defendant seem to have been kept, and no formal record of the doings of its officers or stockholders. No reports, as required by law, were made. But Ballou and Wiley continued to prosecute their schemes after the formation of the corporation substantially as they did before, using the name of the corporation when it suited their purposes, and omitting it when they chose.

*95 The manager at the plaintiffs’ works, and the treasurer and financial manager of the plaintiffs, called upon or saw Ballou, and he told each of them that the defendant was responsible, and that Wiley had power to purchase on behalf of the defendant, and the goods were sold and delivered to Wiley upon the credit of the defendant, and the debt in question incurred in reliance upon such statements of Ballou, and upon the representations of Wiley, and the credit of the defendant. The goods were used at Tiffin, Towanda, Las Vegas, Clifton, Ottumwa, Owego and Appleton.

The defendant filed reasons of appeal as follows;

1. 'That the court erred in not holding that, there being no evidence that the articles of association were published as required by law, the Wiley Construction Company was never authorized to transact business and could not legally transact any.

2. The court erred in holding that, upon the facts found, the contracts of purchase made by Wiley of the plaintiffs in the name of the Wiley Construction Company, were binding upon that corporation.

3. The court erred in holding, upon the facts found, that Wiley had legal authority to make contracts binding upon the Wiley Construction Company.

4. The court erred in holding that the statements of Ballou in relation to the authority of Wiley to make contracts in the name of the Wiley Construction Company, were binding upon the corporation as an estoppel or otherwise.

5. The court erred in holding that, there never having been any legal meeting of the directors after the organization, authority could be legally given to Wiley to make contracts for the corporation by separate agreements of the directors. ■

6. That it does not appear from the finding of facts that Wiley had any legal authority to make the purchases of the plaintiffs for the Wiley Construction Company for which they have recovered judgment, nor that the same have ever been ratified or affirmed by the corporation, nor that the corporation had ever received any benefit from the same.

*96 7. That it does not appear from the finding, that Wiley had any authority to make any of the contracts for water works in the name of the Wiley Construction Company which are mentioned in the finding, and especially the contracts at Appleton and elsewhere for which the goods of the plaintiffs in this case were furnished.

The finding is that “no formal resolution or vote was had empowering any person to act for the defendant in any way, but the authority to act for and bind the defendant was agreed by Ballou, Wiley and Beatty to be exercised by Wiley in the manner he did in fact act.”

In the case of a joint stock corporation organized under the laws of this state, whenever and wherever all of its stockholders are assembled and in fact engaged in considering and determining what the corporation shall do, and by whom it shall act, there is the corporation ; what they do, it does ; the appointment of an agent to speak or act for it, or represent it in any one matter, or in all matters with unlimited authoi'ity, is an appointment by it, and it is bound by his action. It is not necessary to this result that there should have been any previous notice of such meeting, nor that there should be any written resolution, nor that there should be any record of what was done ; their consenting speech and act is legally equivalent to all these.

Upon the record every stockholder was a director and was present, was considering what the corporation should do, and joined in appointing Wiley as its agent and in sending him into the world with full authority to do everything which was subsequently done by him and-to bind the corporation by every purchase and promise which he has made for it and in its name.

Of course the individuals drew over themselves the’Corporate shield as protection'against the hazards of their projected enterprises to their individual fortunes. Of necessity then they intended that all purchases and promises should be by the corporation, and that Wiley should be appointed and authorized by it to make for it and in its name and behalf these purchases and promises. To do this particular *97 business was the only reason for the existence of the corporation ; no one of its stockholders had any other purpose in view when organizing it; but every one of them did intend that it should so far act and make contracts in its corporate capacity, through the instrumentality of Wiley, its agent, as to relieve themselves from all burden of personal responsibility. They all so said to Wiley when all were assembled as a corporation. It is found that when thus assembled they agreed that contracts, rights or franchises to construct were to be obtained by Wiley in the defendant’s name, and the work of construction, extension and repair should thereafter be done by it or by Wiley in its name, and the materials and supplies were to be purchased by Wiley in its name or in his own name as he saw fit. This business was within corporate scope. The agent exercised the power conferred and used the corporate name. The acts and contracts by this agent are the acts and contracts of the corporation.

The degree of informality which attended the management of its affairs by all of the shareholders assembled and uniting is of no legal significance ; none, even if they were mistaken as to the legal effect of their use of the corporate name; none, even if they supposed, as a matter of law, although using the corporate name, that the business might remain that of a partnership. The corporation was organized; its directors and agents acting as such could not transact its business in its name and control the legal result.

Our statute declares that before a joint stock corporation shall commence business the president and directors shall publish at full length its articles of association in a newspaper published in the county in which it is located. Upon the trial there was no evidence as to such publication. The statute, Revision 1875, p. 489, sec. 23, provides that “a copy certified by the secretary of this state under its seal, of the original certificate of organization of any joint stock corporation, shall be primd facie evidence of the due formation, existence and capacity of such corporation.” That is, shall be primd facie evidence not merely that the corporation is a legal entity, but that there is no legal bar to the *98 transaction of business as such. For such a statute there is good reason. If the stockholders have omitted to meet any one of the formal statutory prerequisites, and notwithstanding proceed to transact business and hold themselves out to the world as a corporation, buy and use property and promise to pay for it, and if, when sued for breach of contract, they desire to take advantage of a defect in their armor, known to themselves, concealed from creditors, it is proper that the burden of showing the defect should be placed upon themselves.

There is no error in the judgment complained of.

In this opinion the other judges concurred.