Bank of Garfield v. Clark

Lumpkin, J. (After stating the foregoing facts.) The whole case revolves about the question of the validity of the transfer of the deed made to secure the bank. It did not recite that it was a sealed instrument, nor was the corporate seal of the company attached to it. The name of the company was signed, followed by that of its president and its “G. M.” and secretary and treasurer. Presumably “ G. M.” stood for general manager. Opposite each were the letters “L. S.,” enclosed in parenthesis. This was not enough to make the instrument admissible as prima facie importing authority on the part of the officers of the company who executed it. Brooks v. Kiser, 69 Ga. 762. In Jones v. Ezell, 134 Ga. 553 (68 S. E. 303), under a creditors’ bill against a corporation stockholders intervened and attacked a mortgage on the ground that the officers of the' corporation were without authority to execute it. In the opinion (on page 556) it was said: “If on the trial of the case it should appear that the officers were without authority to execute the various contracts, but did in fact execute them, and the fruits thereof were applied to the proper corporate use, the corporation will still be liable, notwithstanding its officers may have been without specific authority to execute the particular form of contract. The corporation can not retain the property or money of the creditor, and successfully defend because it was obtained by an ultra vires act of its officers.” The intervening stockholders in that case had no greater right to defend than the corporation itself. See also Towers Excelsior &c. Co. v. Inman, 96 Ga. 506 (23 S. E. 418); Johnson & Harrold v. Mercantile Trust Co., 94 Ga. 324 (21 S. E. 576); Butts v. Cuthbertson, 6 Ga. 166, 171. If it should be proved that the company obtained the bank’s money by means of this transfer of title as security, and used it, the company would not be permitted to keep the fruits of its officers’ acts and at the same time repudiate the contract, although there may have been no formal resolution authorizing the giving of the security. Nor would the directors and stockholders of the company, who took a subsequent mortgage to secure themselves against loss by reason of indorsing the bank’s notes, and who had notice of the facts, be [802] allowed to repudiate the transfer and successfully assert a priority over it by virtue of the junior mortgage held by them. Especially is this true where their own mortgage recited that it was a second lien. It does not appear that there was any other lien claimed on the real estate, except that asserted by the bank and the mortgage held by these stockholders and directors. It was competent to introduce evidence to prove the facts of the transaction: whether the company obtained the money upon the transfer, whether the stockholders and directors had notice of the fact, and whether the money was used in improving the very property which these stockholders and directors are now seeking to subject to their mortgage. If the company was insolvent when the mortgage was given to the stockholders and directors, the ruling in Atlas Tack Co. v. Exchange Bank, 111 Ga. 703 (36 S. E. 939), would apparently apply. It is unnecessary to take up each of the grounds of the motion where evidence on this subject was rejected, and deal with it separately. After rejecting several pieces of evidence, an objection was made to certain questions as not being competent, and the court said: “I don’t think so. Under my view of it, I will have to hold that the transfer would not be valid unless it was executed by the authority of some by-law, or under the charter directly or indirectly, or by some resolution duly passed. Unless you can show that, I will have to exclude all evidence along the line as to the debt. I understand that is admitted; so it looks like it is consuming time practically for nothing, to travel along this line that is being traveled now.” ’ Some of the evidence offered was objectionable in the form in which it was tendered. Thus it is not competent for a witness to testify broadly what another person knew, or that the company was benefited, or that the officers had authority, or the like. These things are matters of conclusion. But- the presiding judge evidently did not base his ruling on such matters of form, but on the ground that) in the absence of specific authority, the company would not be bound. There was some evidence in the record tending to support the contention that money was advanced when the transfer of the deed was executed and on the faith of it, and that the later note was a renewal. In connection with the recital in the mortgage to the stockholders and directors and the other evi [803] clence in the record, the transfer to the bank was admissible in evidence, without discussing its attestation or registration. The statement of the receiver, in an application to sell, in which he referred to the bank as holding title, was not admissible as binding on the stockholders and creditors. The presiding judge did not adjudicate this to be true, but an interlocutory order for the sale of the property free from encumbrances was granted, reserving the question of the claim of priority for future adjudication. What has been said above covers in substance the rulings of the court in erroneously excluding evidence on the theory that nothing would suffice to make the transfer to the bank good except the production of a specific charter provision or a resolution on the minutes. If it be sought to show formal action by the directors or stockholders, the minutes should be produced ■ or accounted for. If a resolution was in fact passed, but not entered on the minutes, this should be shown. It is not competent, without laying a sufficient foundation therefor, to introduce parol evidence that directors acted on a certain transaction, or that the corporation “agreed” to a certain thing, where the issue -is whether the officers or agents who acted had authority to bind the corporation in the transaction. The difficulty in dealing with certain grounds of the motion for new trial is increased by the absence of a statement as to the objections, which were made and sustained, so that the exact ruling of the court is left to inference. The evidence on the subject of usury did not authorize the direction of a verdict. Judgment reversed. All the Justices concur.