T. P. Ranch Co. v. Gueydan & Riley

SOMMERVILLE, J. The plaintiff corporation, domiciled in Jefferson Davis parish, is the owner of what was formerly known as the Klondike plantation in the parish of Cameron, which it leased to Gueydan & Riley, defendants, a partnership domiciled in the parish of Vermilion. The lease extended through two years at a rental of $15,000 per annum. In the contract of lease was an option to purchase most of the plantation during the term of the lease, at $35 per acre during the year 1919, and at $37.50 per acre during the year 1920. In the latter part of the year 1919 this suit was filed by the T. P. Ranch Company to have declared invalid the contract of lease with the option to purchase, on the ground that the same was entered into without authority or knowledge of the plaintiff company, which lack of authority was well known to defendants. The defendants answered that the agents of plaintiff had been regularly and formally authorized to enter into the contract of lease, or that they believed said agents to have been so authorized, and that if they had not been authorized that the company had estopped itself by receiving from defendants the rental under the contract, and applying said rental to the payment of its debts and running expenses, all of which payments took place at a time subsequent, when knowledge of the existence of the option to purchase had come to plaintiff. There was judgment in favor of defendants on the ground that plaintiff had been estopped by its conduct from annulling the contract, and plaintiff has appealed. [1, 2] It is the duty of every person entering into a contract with a corporation to see that the agents representing the corporation have been authorized to make the contract. The evidence shows in this case that the defendants knew at the time of the signing of the contract that the president and secretary of plaintiff corporation, who were acting as agents of this corporation on that occasion, had not been authorized to make the contract. The evidence also shows that defendants knew that the domicile of the corporation was in Jefferson Davis parish, and that there was no consent by the remaining member of the board of directors to hold the meeting of the board in Cameron parish. It shows, further, that Senator Gueydan, one of the defendants, in the presence of Mr. Riley, the other defendant, prepared the contract of lease, and that when he presented it to Mr. and Mrs. Priddy, the president and secretary-treasurer of the corporation, to be read, that Mrs. Priddy .told him that there had not been any- meeting of the board; and that he replied that he had made the statement of the meeting at the home of the Priddys in Cameron parish, as it was a mere formality; and that the Priddys, the principal stockholders of the corporation, were present and would sign, and that that would cure all defects. Senator Gueydan and Mr. Riley both knew that Mr. Nicholls, the third member of the board of directors, was not present, and that he knew nothing whatever about the transaction which was being entered into. The contract having been entered into by parties unauthorized to represent the plaintiff corporation, the contract is null and void, unless, as was found by the district judge, the corporation had estopped itself to deny, the validity of the contract. The evidence on this point is that during the year 1919 one Mr. Nugier had mentioned to Mr. Nicholls the option to sell the Klondike plantation to defendants, but Mr. Nicholls denied that there was any reference made in the conversation between the parties to the option to purchase. He knew that de [459] fenclants were planting tlie plantation, but be did not know tbe terms of tbe contract, ■as tbe Priddys bad tbe management of leasing and other powers of general administration. [3] It is on tbis assumed knowledge on tbe part of tbe third member of tbe board of directors of tbe contract or option to sell tbat defendants rely to sustain tbeir plea of estoppel. The evidence also shows that out of the rental money received by plaintiff from tbe defendants it paid its running expenses and its debts. But tbe evidence does not show tbat Mr. Nicholls, the third member of the board of directors, knew that the money paid by defendants was in part payment for any option to purchase; and therefore bis conduct, together with that of tbe Priddys, cannot be held to ratify the illegal contract of lease, and to estop plaintiff from setting up tbe illegality thereof. [4] To constitute an equitable estoppel as to plaintiff it must appear that it has done some act or made a declaration inconsistent with tbe truth, with tbe design of injuring defendants; tbat defendants were ignorant of tbe truth, and relied on the faith of such ■acts and declarations; that injury will result to them by the denial. £5] Tbe unauthorized lease made by tbe president and secretary being void, the acquiescence therein by tbe corporation is not to be inferred from silence merely. Tbe silence of Mr. Nicholls and tbe other members of tbe board of directors had not led defendants astray, for they knew all tbe time that there -had been no authority given to tbe Priddys to execute the lease; and silence did not have the effect of placing defendants in a worse position than tbat they already occupied. There is error in tbe judgment appealed from, and it will be reversed. It is therefore ordered, adjudged, and decreed that tbe judgment appealed from be annulled, avoided, and reversed, and tbat there now be judgment in favor of iflaintiff as prayed for, with costs, and that there be reserved to all parties all claims for damages arising out of the issuance of tbe injunction, and for other causes.