Bishop Mfg. Co. v. Sealy Oil Mill & Mfg. Co.

MOURSUND, J. The Sealy Oil Mill & Manufacturing Company sued the Bishop Manufacturing Company for damages for breach of a contract to sell cotton seed to plaintiff. The defendant company, in addition to a general denial, relied upon pleas that its secretary and general manager had no power or authority to make such a contract as was sued on; that such contract, if made, was wholly beyond the express and implied powers of defendant; and that the contract was wholly without consideration. By supplemental petition it was alleged that the purchase of cotton seed was essential and a necessary incident to the successful operation of the defendant’s plant, and so closely connected therewith that the authority to make contracts for the sale of such seed is a necessary incident to its successful operation of its gin, and that therefore it had full authority to make the contract sued on; that Nuekols in making the contract was then and there acting within the apparent scope of his authority; that defendant had ratified said contract and acquiesced in the same for nearly two years; and that it was now estopped from denying the same or pleading the plea of ultra vires. This petition was excepted to on various grounds, and the allegations thereof denied. Judgment was rendered for plaintiff for $3,050, with interest, and findings of fact and conclusions of law filed as follows: “(1) I find as a fact that both the plaintiff and defendant are corporations incorporated under the general laws of the state of Texas. “(2) I find as a fact that on the 7th day of April, A. D. 1916, the defendant made and entered into a ‘contract with the plaintiff by which it sold to plaintiff, and agreed, bound, and obligated itself to deliver unto the plaintiff in railroad cars upon the railroad tracks at Bishop, Tex., in the months of August and 'September, A. D. 1916, five cars of good, sound, clean, prime cotton seed, for and in consideration of $32.50 per ton, two cars to be delivered by defendant to plaintiff in the month of August, 1916, and three cars to be delivered in the month of September, 1916. I find that plaintiff agreed, bound, and obligated itself to take, receive, and páy for said five cars of cotton seed at the rate of $32.50 per ton in the months of August and September, 1916, when delivered by defendant in railroad cars upon the railroad tracks at Bishop, Tex. “ (3) I find as a fact that the defendant failed to deliver said cotton seed either in the month of August, 1916, or September, 1916, as provided for in said contract, although often requested by plaintiff so to do, but wholly breached its said contract. “(4) I further find as a fact that, after the defendant had failed to comply with its said contract, it asked for an extension of the time in the performance of its said contract until August and September, 1917. I find that in the latter part of October, A. D. 1916, the plaintiff agreed with the defendant to extend [205] the time for the delivery of said five cars of cotton seed until August and September, 1917, and that thereupon the plaintiff and defendant changed the original contract and substituted therefor another contract in every respect the same as the original contract, except that the five cars of cotton seed should be delivered in the months of August and September, A. D. 1917; that is, two cars of cotton seed should be delivered by the defendant to the plaintiff in railroad cars upon the railroad tracks at Bishop, Tex., or its nearest shipping point, in the month of August, 1917, and the remaining three cars should be delivered by defendant to the plaintiff in railroad cars upon the railroad tracks at Bishop, Tex., or its nearest shipping point, in the month of September, 1917. I find that plaintiff agreed, bound, and obligated itself to take, receive, and pay for said five cars of cotton seed at the rate of $32.50 per ton in the months of August and September, 1917, when delivered by defendant in railroad cars upon the railroad tracks at Bishop, Tex., which was its nearest shipping point. “(5) I find as a fact that the defendant failed and refused to deliver the two cars of cotton seed in the month of August, 1917, and also failed and refused to deliver the three cars of cotton seed in the month of September, 1917, as provided in said contract and as it had agreed to do, but breached its said contract. “(6) I find as a fact that at the time the original contract and at the time the substitute contract was made and executed that W. E. Sehier was the general manager for the plaintiff, Sealy Oil Mill & Manufacturing Company, and M. Nuckols was the secretary and general manager for the defendant, Bishop Manufacturing Company. “(7) I find as a fact that the board of directors of the defendant Bishop Manufacturing Company held M. Nuckols out to the world as its secretary and general manager, and that he acted in that capacity, and in truth and in fact was its secretary and general manager. “(8) I find that the Bishop Manufacturing Company, defendant, owned and operated a cotton gin at Bishop, Tex.; that it was incorporated, among other things, for that purpose. I find that it ginned cotton for cotton farmers, and took cotton seed in exchange for its services rendered to the farmer and paid to the farmer the difference between the value of the cotton seed and the amount charged for its services. I also find that it had been engaged in buying cotton seed from farmers ever since its incorporation in 1913 up to the present time. “(9) I find as a fact that it is and has for many years been customary and is the universal practice of all persons and corporations owning and operating cotton gins in this state, to engage in the purchase of cotton seed and sell the same to oil mills and other parties, and I find that it is essential for the purpose of their incorporation business for cotton gin owners to do so. “(10) I find as a fact that the defendant pursued the customary practice, and engaged in the purchase of cotton seed and the sale of it, and that it was essential for it to do so for the successful operation of its cotton gin. “(11) I find as a fact that after the defendant had entered into the contract with plaintiff to deliver unto the plaintiff the five cars of cotton seed in the months of August and September, A. D. 1917, the plaintiff sold oil and cotton seed cake against it for future delivery based upon the contract price of cotton seed expressed in said contract. “(12) I find that the defendant has adopted by-laws for the government of its officers in the management of its business, but that the plaintiff had no knowledge of such by-laws or the contents thereof or any provision in same. “(13) I find as a fact that by the words ‘five ears of good, dean, sound, prime cotton seed,’ as expressed in the contract, is meant five average railroad ears loaded to their average capacity. “(14) I find that an average railroad car loaded to its average capacity contains 20 tons of cotton seed. “(15) I find that in the month of August, 1917, the market price of cotton seed at Bishop, Tex., was $60 per ton, and in the month of September, 1917, the market price of cotton seed at Bishop, Tex., was $65 per ton. “(16) I find as a fact that the difference between the contract price and the market price of the five cars of cotton seed at the time same should have been delivered is $3,050. I find that the plaintiff, the Sealy Oil Mill & Manufacturing Company, has sustained damages in the sum of $3,050 by reason of the defendant’s breach of its said contract in failing to deliver said five cars of cotton seed at the time and place specified in said contract. “(17) I find that the substituted contract mentioned in the fourth finding above was not only upon the good and valuable consideration expressed upon its face, but was also in consideration of such substitution and of releasing defendant from the performance of the original contract at the time therein stated, and that such substituted contract was beneficial to and for a purpose of the defendant company. “(18) The periods and times pertaining to the seventh through the tenth findings of fact are during 1916 and 1917, and for. a number of years prior thereto. “Conclusions of Law. “(1) I conclude as a matter of law that the plaintiff is entitled to recover of and from the defendant, Bishop Manufacturing Company, the difference between the contract price of cotton seed per ton and the actual market price of cotton seed per ton'at the time said five cars of cotton seed should have been delivered to plaintiff under said contract, which amount I found to be $3,050. “(2) I conclude as a matter of law that M. Nuckols, as secretary and general manager for the defendant, Bishop Manufacturing Company, has authority .to make and enter into the contract sued upon and bind the defendant. “(3) I also conclude as a matter of law that the defendant is estopped to deny that M. Nuckols, its secretary and general manager, was not authorized and empowered to make and enter into the contract sued upon. “(4) I further conclude as a matter of law that the purchase and sale of cotton seed by the defendant was essential to the transaction of its authorized business and for the success of its business. “(5) I further conclude as a matter of law [206] that article 1121, § Y2, of the Revised Civil Statutes of Texas, under which defendant was incorporated, does not define its powers definitely nor limit and restrict its powers and authority to any certain definite and specific purpose, and that therefore a corporatipn incorporated under said article and section of the statutes has authority to do and transact such business and matters as are essential to the transaction of its authorized business, or as is customarily and usually done by institutions of like character in furtherance of their business. “(6) I conclude as a matter of law that the defendant should not be permitted to plead ultra vires because plaintiff has been damaged and great injustice would be done plaintiff if defendant was permitted so to do, as plaintiff bad sold oil and cake against the seed it had purchased based upon the contract price of seed at $32.50 per ton, and had to purchase either seed at a higher price in order to fill its said contracts.” The second, third, fourth, and eleventh findings of fact and the first, second, third, and sixth conclusions of law are directly challenged by appellant, and by the first assignment it is contended that the judgment of the court is contrary to the undisputed evidence. In this connection the contentions of plaintiff in error concerning what is shown by the evidence are stated as follows: “ * * * That Bishop Manufacturing Company was incorporated at the time the alleged contracts were made and breached, and that it had certain well-defined and fixed charter powers and purposes, none of which included either expressly or impliedly the purchase and sale of cotton seed on the open market or the purchase and sale of cotton seed on the open market for future delivery; that the alleged contracts were .ultra vires and void; that there was no rati-fi&ation thereof by those having power to so bind the corporation; that the alleged contracts were made by M. Nuckols, secretary and general manager of the corporation, who was without power or authority, either expressly or by implication, to bind the Bishop Manufacturing Company thereby or to lay the Bishop Manufacturing Company liable to damages for an alleged breach thereof, and there is no evidence in the record of any ratification of said contracts or estoppel on the part of said corporation to deny the unauthorized acts of its said agent, and there is no evidence in the record to warrant a finding that the business of buying and selling cotton seed on the market generally, and the business of buying and selling cotton seed for future delivery was either necessarily incidental to the purposes and business of said corporation or essential to the operation, conduct, and prosecution of the business of said corporation.” The propositions of law relied, on are: First, that the contract was ultra vires, and that appellant received no benefits therefrom and was not estopped to rely on the plea of ultra vires; and, second, that Nuckols had no authority, real, apparent, or implied, to make such a contract, and that appellant did not ratify his act and received no benefits thereunder, and therefore could not he held liable for a breach thereof. The ’findings of fact which are challenged are subject to the following objections: (1) The legal conclusion that defendant entered into the two contracts mentioned should be discarded, and in lieu thereof the fact substituted that such contracts were made by Nuckols, purporting to act for defendant, and that all negotiations of any kind which took place with reference to said contracts were conducted by Nuckols, and not participated in or ratified by the directors of defendant company. (2) The finding that plaintiff sold oil and cotton seed cake against the contract for future delivery based upon the contract price of cotton seed expressed in said contract is not warranted by the evidence. In support of the findings three letters are referred to written by plaintiff to defendant. The introduction in evidence of these letters established the fact that they 'were written and that certain statements were made therein, but certainly could not establish that all statements of fact therein made were true. If the truth of the statements had been shown, such statements would not have justified the broad finding of the court; for there was nothing in the statements indicating that a lower price had been placed on the products claimed to have been sold than would be justified by the market price of cotton seed at the time of such contracts. The inference from the letters is that the plaintiff in contracting figured it would get the five cars of cotton seed, but it would be indeed mere surmise to say that the idea was conveyed that the price had anything to do with the selling price of the products referred to as having been sold by plaintiff. There was no evidence that cotton seed could not be bought in the open market to fill any contracts that might have been made; so it is evident that so far as this record discloses, the only element of loss incurred by defendant in error by reason of the making of such contract and the repudiation thereof, is the profit which would have been realized by virtue of the fact that the value of cotton seed had advanced. (3) The new contract was a substitute for the first contract, and naturally operated to cancel the first contract. The plaintiff bound itself to pay for the cotton seed when delivered, and, as it was never delivered, plaintiff never delivered anything of value to defendant on the faith of the contract. There is no evidence that the contract was beneficial to and for a purpose of the defendant company. The finding seems to have been based on the theory that the substitution of a contract extending the time conferred a benefit upon defendant. If this was the only benefit, it might as well have been omitted from the findings, as an ultra vires [207] or unauthorized contract made by an agent would not be rendered valid by reason of the fact that it was a substitute for a similar contract and merely extended the time of performance. (4) The conclusion that the contract was for a purpose of defendant and the finding that it is essential for the purpose of their incorporation business for cotton gin owners generally and for plaintiff in error to engage in the purchase and sale of cotton seed in the open market are not warranted by the evidence. ■ . The statement of the witness Baldwin concerning the purchase of cotton seed being essential to the cotton ginning business was based by him upon the fact that many people are not prepared to take care of their seed, and unless the gin buys them it will not do business; in other words, a custom has arisen for gins to buy seed from their customers because the latter are not prepared to handle the seed. He did not undertake to show how the purchase of seed from others than customers would in any manner affect the extent of the ginning business. In view of the findings made by us, it is apparent that no element of estoppel or ratification enters into this case, and the only questions of law are: First, whether the contract was ultra vires; and, second, if it was not, did Nuekols have authority to make the same? In order to determine whether a contract is ultra vires, it must be tested by the charter powers of the corporation. Defendant in error contends that this cannot be done because the charter is not in evidence, and the amendment thereto, which was introduced in evidence, merely changed the name, and did not enumerate the purposes for which the incorporation was secured. The plaintiff in error stated in its pleading the purposes for which it was incorporated, and the court in his fifth conclusion of law stated that it was incorporated under section 72 of article 1121 of the Revised Civil Statutes. The evidence on the point is as follows : Incorporation was had under the laws of Texas. The corporation operated two gins and an ice plant. Nuekols testified that the gin out in the country was operated under the same charter. He also testified: “My company authorized me to operate mills, but did not specify the kind of mills.” We believe the evidence is sufficient to show that the charter was secured under the provisions of section 72 of article 1121, R. S. 1911. Under the law its purposes were bound to have been limited to those specified in said section. The court found that defendant was incorporated under said provision, which finding was necessarily one of fact, although stated in connection with a conclusion of law, and the correctness thereof has not been challenged by appellee by any cross assignment of error. The statute above referred to under which plaintiff in error was incorporated reads as follows: “Private corporations may be created for, or after being created, may be amended so as to include two or more of the following purposes, namely: The construction or purchase and maintenance of mills and gins; the manufacture and supply to the public, by any means, of ice, gas, light, heat, water and electric motor power, or either, in connection with such mills or gins, or either, the harvesting of grain, or the harvesting and threshing of grain; provided, that the authorized capital stock of all incorpora-tions, authorized by this subdivision shall not exceed two hundred and fifty thousand dollars.” It appears that .when cbtton was ginned by plaintiff in error company Nuekols purchased the seed if the owner wished to sell, and the difference in the price of ginning and that of-the seed was paid; also that he purchased' seed from persons who did not have any-ginning done; in other words, went into the open market and bought cotton seed; also-that in 1918 he even bought and sold cotton. The transaction with defendant in error was the only one in which he undertook to sell cotton seed whieñ plaintiff in error did not have on hand, and long before it could be determined with any degree of certainty what the market price would be. He testified that this was the first and only time he ever sold seed before the crop came in, but that he had sold seed for five or ten days shipment. This suit does not involve a contract by plaintiff in error to purchase cotton seed, and we do not think it is necessary to deal at length with the question concerning its powers in that respect. It may be conceded that, if it acquires cotton seed, even though by an ultra vires contract, it could make a legal sale thereof. If it be necessary that it should buy cotton seed from its customers, or even from others, it does not follow that it is necessary or proper that it should contract for the sale of cotton seed which it does not possess. There can be no necessity for entering into a contract for the sale of something it does not possess. A contract for the delivery of cotton seed six months in the future, made upon the expectation of purchasing such seed in time to fulfill the contract, is nothing more than speculating in the cotton seed market. Such a contract cannot tend in any way to further the purposes of the corporation in so far as conducting the ginning business is concerned. It is simply speculating in the cotton seed market, and it cannot be contended that any stockholder of a gin corporation would understand that the officers thereof were authorized to engage in such a business. We conclude that the contract was clearly ultra vires: North Side Ry. Co. v. Worthington, 88 Tex. 562, 30 S. W. 1055; Planters’ [208] Cotton. Oil Co. v. Guarantee State Bank of Mertens, 188 S. W. 39. There being no element of estoppel in the ease, the judgment is not supported by tbe evidence. While our holding on the issue above discussed disposes of the case, and the issue raised concerning Nuckols’ authority need not be discussed, we deem it proper to say that the record wholly fails to show authority, actual or apparent, on the part of Nuckols to make the contract in question. The judgment is reversed, and judgment rendered that defendant in error take nothing by its suit.