Duke v. . Markham

Clark, J.: This was a claim and delivery proceeding brought against defendant, who, as Sheriff of. Durham County, had taken possession of certain personal property of a corporation — the Durham Sash, Door and Blind Manufacturing Company — by virtue of executions in his hands, and had advertised the same for sale. The plaintiff claims the property by virtue of the mortgage of November 15th, 1888, given to indemnify him against loss as surety to said company upon a note to the bank, which would fall due November 15th, 1889. The conclusion of the mortgage and the probate are in the following words: “Tn witness whereof, the Durham Sash, Door and Blind Manufacturing Company sign by the names of president, secretary and treasurer, and two stockholders, and attest their seals. F. RbmiNGTON, President. “ L. W. Grissom, Sec. and Treas. “W. A. Wilkerson, Stockholder. “WalteR Wilkerson, Stockholder. “Witness: “Geo. W. Watts.” “North Carolina — Durham County. “ The execution of the foregoing instrument was this day acknowledged on the part of L. W. Grissom, and proven on *135 the oath and examination of L. W. Grissom as to W. F. Remington, W. A. Wilkerson and Walter Wilkerson. Let the same, with-this certificate, be registered. “ This November 15th, 1888. “D. O. MaNgum, C. S. C.” We think his Honor erred in admitting the mortgage in evidence upon such probate, and likewise in instructing the jury, upon the proof offered by plaintiff, that it was valid as to creditors whom defendant represented by virtue of the executions in his hands. In Pierce v. New Orleans Building Co., 9 La., 397, it is held that the act of a majority of the stockholders, expressed elsewhere than at a meeting of stockholders, as where the assent of each one is given separately and at different times, is not binding on the corporation. The same is true of a meeting of which notice is not given. Stow v. Wyse, 18 Am. Dec., 99, and notes; Cook on Stockholders, §594; 1 Potter on Corporations, § 336, and notes. In Leggett v. N. J. M. & B. Co., 1 Saxton, ch. 541, it is held that a corporation is only bound by an agent’s acts when within the scope of his authority, and that a president and cashier, as such, cannot execute a mortgage of corporate property without special authority from the board of directors or the stockholders, and that the proceeds of a mortgage have been applied to the use'of the corporation in paying its debts, or otherwise, is not sufficient to render the mortgage binding if its execution was not properly authorized. “The members of a corporation cannot, separately and individually, give their consent in such manner as to bind it as a collective body, for, in such case, it is not the body that acts; and this is no less the doctrine of the common than of the Roman Civil Law. Being laufully assembled,” says Ayliffe, “they represent but one person, and may conse *136 quently make contracts, and, by their collective assent, oblige themselves thereunto. And though all the members of a corporation covenanted on behalf of it under their private seals,” this, it was held, would only bind them personally, and not the corporation. Angelí & Ames on Corporations, § 232, which is supported by the numerous cases there cited. Again, in the same work, §504: “The separate action, individually, without consultation, although a majority in number should agree upon a certain act, would not be the act of the constituted body of men clothed with corporate powers.” Indeed, the authorities upon this subject are numerous, uncontradicted, and supported by reason. It is true the common seal is prima facie evidence that a deed or contract is the act of the company, and that the seal has been affixed by authority, though it is competent to go behind the seal and show that it was not affixed by legally exercised authority of the companj'-. In this case there was no common seal of the company attached. While a seal is not essential to the validity of a chattel mortgage, in the absence of the company’s-seal there is no presumption of its being the corporation’s act, and it devolves upon the party relying upon the mortgage to show that the agent- or officer had authority to execute it. The plaintiff’s witness testifies that there was no resolution of stockholders or directors to authorize the mortgage, and no record to that effect is entered on the books of the company, that lie went around privately and saw a majority of the stockholders, and they authorized him to execute the mortgage, and that he requested the president and two directors to sign. A corporation can only act in the manner authorized by law. If, by the meeting of stockholders (or of the directors, if they have, by the charter, the right), the secretary of the company had been authorized to execute this mortgage, or mortgages generally, the mortgage might have been valid; but, as we have seen, no authority can be derived in this irregular manner, by an *137 officer going around privately to what he alleges was a majority of the stockholders and -getting their consent. There is nothing to show that they were a majority and that they did consent, as would be the case if a meeting were regularly held, the vote taken and a minute entered on the company records. To give validity to such proceedings would lead to irremediable evils and abuses. The corporation seal not being attached, it was incumbent on the plaintiff to look to the authority of the agent with whom he dealt. Since it was not in the scope of the secretary’s authority, as such, to execute the mortgage, and no legal authority to execute the same especially was given, it goes for naught. The receipt and use of the money is not of itself, as we have seen, a sufficient ratification by the corporation. But it is immaterial here whether there was a subsequent ratification or not. Ratification -would be good between the corporation and the mortgagee, but would not validate, as to other creditors, a mortgage which was invalid when registered. The mortgage is not good at common law for want of authority to the secretary to exécute it, nor is it good as a statutory mortgage under The Code, §685, for there is no common seal attached as required by that section, and the probate shows that as to the president and the two stockholders there was no legal proof of its execution by them. They7 neither acknowledged the same, nor was it proven by the examination of the subscribing witness, as required by. The Code, §1246 (1). Indeed, under the words of the statute, The Code, §685, it may be that more than one witness is necessary. In Todd v. Outlaw, 79 N. C., 235 (237), Bynum, J., says: “Until a deed is proved in the manner prescribed by the statute, the public register has no authority to put it on his book; the probate is his warrant, and his only warrant, for doing so. Williams v. Griffin, 4 Jones, 31; Burnett v. Thompson, 3 Jones, 113; Lambert v. Lambert, 11 Ired., 162; *138 Carrier v. Hampton, 11 Ired., 307. Not having been duly proved, the registration was ineffectual to pass the title as against creditors or purchasers. Robinson v. Willoughby, 70 N. C., 358; Fleming v. Burgin, 2 Ired. Eq., 584; DeCourcy v. Barr, Bush. Eq., 181.” To same effect is Evans v. Etheridge, 99 N. C., 43. Error.