C. L. Kraft Co. v. Grubbs

Wood, J., (after stating the facts). The testimony on behalf of the appellee would have warranted the court in submitting to the jury the issue as to whether or not C. M. McCain, as president and active manager of the appellant, had been in the habit of executing notes in the name of the company in order to carry on the company’s business, and for the benefit of the company, without express authority from the board of directors, 'and also as to whether or not the board of directors had knowledge of such habit or custom on the part of its president, McCain. In other words, it was an issue for the jury as to whether or not .the board of directors, without expressly authorizing him to do so, had permitted McCain to execute notes on behalf of the company to such an extent as to establish a custom by which the corporation was bound. The proof tended to show that McCain, as president and business manager of the corporation, frequently executed notes on behalf of the company in transacting business for the company, and that this was done so often as to warrant a finding that the board of directors permitted, •or at 'least consented or acquiesced in the exercise of such custom. But there is no evidence that tended to prove .a custom on the part of McCain to execute notes in the name of the C. L. Kraft Company for his own benefit. The custom that the testimony tended to prove was a custom of the president, McCain, to execute notes in the company’s name in the transaction of the business of the company, the company receiving the benefit of the proceeds of such notes. The instruction No. 1 was therefore inherently erroneous, for there was a sharp conflict in the evidence as to whether or not the proceeds of the note in controversy were used for the benefit of appellant, or for McCain’s individual benefit. The appellant contends, and testimony in its behalf tends to .show, that McCain executed the note in suit' in the name of the company for his own private benefit, and that the entire proceeds of the note were used by him for his individual benefit and not for the benefit of the corporation. But, under the above instruction, the jury were authorized to find the appellant liable on the note in suit, even though the proceeds of the note were used for the exclusive individual benefit of McCain. In other words, under the instruction, although the jury might have found that the appellant received no benefit whatever from the note in suit, it was nevertheless liable, if McCain was in the habit of or had established the custom of executing notes in the name and on behalf of the company in the transaction of the company’s business, and the proceeds of which the company received. This instruction was well calculated to confuse and mislead the jury and was highly prejudicial to appellant. The acts of a president of a corporation in the management of the business of the corporation, when within -the ■scope of his authority, are the acts of the corporation itself. And, if the corporation has customarily permitted him to exercise acts within the scope of his employment as general manager of the corporation, it will be liable for such acts. Wales-Riggs Plantations v. Caston, 105 Ark. 641. But here, as before stated, there was no authority by custom or otherwise for McCain to execute notes in the name of the company to be used for his own individual benefit. The execution of notes, therefore, to be nsed for bis, individual benefit, and not for the benefit of 'the corporation, was beyond tbe scope of any authority, express, implied or apparent, with which the company had clothed him. The court erred, therefore, in granting appellee’s prayer for instruction No. 1, and also instruction No. 4, which was, in part, based upon it. Otherwise, we find no reversible errors in tbe rulings of tbe court. For tbe error indicated the judgment is reversed, and the cause remanded for a new trial.