Witter v. Grand Rapids Flouring Mill Co.

Tatloe, J.

This is an action to foreclose a mortgage purporting to have been given by the Grand Rapids Flouring Mill Company to the plaintiff to secure the payment of the promissory note of said company given to said plaintiff for the sum of $10,000. The defendants Heeves are made parties to the action because they signed the note individually as sureties for the- company. The flouring mill *545 company is a corporation duly organized under the laws of this state. The answer of the defendants admits the fact that the company is a corporation and was such when the mortgage was given.

Upon the trial of the action the court found in favor of the plaintiff, and ordered judgment of foreclosure, and also judgment for any deficiency which might remain after the sale of the mortgaged premises against the defendants Nemes. The defendants appeal from such judgment, and allege that it is erroneous, (1) because the corporation had no power under the law to give any mortgage upon its real estate; and (2) if it be admitted that the corporation had the power to execute said mortgage, it never was executed by said corporation in the manner prescribed by law.

The learned counsel for the appellants have made an argument of considerable length and force to prove that the mortgage was not regularly executed by the proper officers of the corporation, or, if executed by such officers, they were not authorized by the corporation to execute the same. Upon the admitted facts in this case it appears to us unnecessary to determine whether the- officers of said corporation were or were not regularly authorized to execute said mortgage, or whether said corporation was expressly authorized by law to mortgage the property of the corporation for the purposes thereof. Upon the whole evidence in the case, we think it is very clear that these defendants, the corporation and the said Neeves, are estopped from setting up the want of authority to execute said mortgage.

The evidence conclusively shows that the money borrowed was borrowed to be used and was used for the purposes of the corporation; that the persons who executed the mortgage were the acting officers of the corporation; and that it was executed in the form prescribed by law. And it also appears that the persons acting as the officers of said cor *546 poration, and who executed said mortgage, were the stockholders of the corporation, and owned all of the stock in their individual or representative capacity, excepting perhaps one share of the par value of $25. "We have, therefore, the corporation in its corporate capacity and the stockholders consenting to this loan, consenting to secure the same by a mortgage of the real estate of the corporation, receiving the money loaned, and applying it to the use of the corporation. Under such circumstances the corporation and its stockholders are estopped from setting up a want of authority on the part of the corporation to execute the mortgage, or a want of authority on the part of the officers executing the same.

That a corporation cannot repudiate its contract when it has received the benefit thereof, when such contract is not expressly prohibited by law, is well settled by the authorities, and it is equally well settled that when the stockholders assent to such contract, and the avails of the contract áre used for their benefit, they cannot avoid such contract. This has been so often held by the courts that it is almost unnecessary to cite authorities to sustain the proposition. This court has held this doctrine in North Hudson M. B. & L. Asso. v. First Nat. Bank, 79 Wis. -. 1 See, also, Knee-land v. Gilman, 24 Wis. 42 , and cases cited; Sheldon H. B. Co. v. Eickemeyer H. B. Co. 90 N. Y. 607, 613 ; Tayl. Corp. §§ 212-214, and cases cited. In Hotel Co. v. Wade, 97 U. S. 13 , it was held by the supreme court of the United States that “ when the stockholders sanction a contract under which moneys were loaned to a corporation by its directors, and its bonds therefor secured by mortgage given, and the moneys have been properly applied, the corporation is es-topped from setting up that the bonds and mortgage are *547 void by reason of the trust relation which the directors sustain to it.”

We think the estoppel in this case is complete, and it is wholly unnecessary to determine whether the persons executing the mortgage were acting in strict accordance with the by-laws and regulations of the corporation in executing. the same.

By the Ooiort.— The judgment of the circuit court is affirmed.