Delaware City, S. & P. S. N. Co. v. Reybold

The Court below, Comegys, C. J., charged the jury as follows: 1. That the charter of the corporation defendant, a copy of which is hereto annexed marked “A” provides, “ That the business and concerns of said corporation shall be managed by seven Directors, who shall be stockholders, and shall be elected at each annual meeting of the stockholders.” The Directors had, in virtue of such provision, the right to settle and dispose of the claims of the Company, the same as any Directors have, in any Company, with such powers as these Directors had. That the Directors of a Company, within the defined scope of their authority, are, virtually, the hand of the Company doing its business. 2. That whatever a corporation may lawfully do, can be done by its agents acting under its authority for that purpose. It appearing that about eight-ninths of the stock of the Company was held by its Directors, if the jury should .be satisfied from the evidence, that the said Directors agreed that the plaintiff should have — 215 — whatever he could colletit from the United States Government upon the claim of the defendant against it, he bearing all the expense of the effort for such collection, then there was a valid legal agreement initiated between the parties, which was consummated when the plaintiff expended any money or rendered any service in the prosecution of the claim, which but for the understanding with the Company, he would not have spent Or rendered; in other words, that the declaration of the Directors, sworn to by witnesses, that if he would proceed for the claim of the defendant and recover anything upon it, he might have it, was if the jury believe them, in the nature of an offer on their part, which when accepted by him by acting upon it and expending his time and money in the recovery of the claim, bound the Company whose officers they were, such agreement being within the scope' of their authority as Directors according to the language and meaning of the charter of the Company. 3. That the Company could not legally assign its claim by gift or otherwise.to the plaintiff, still if the jury are satisfied from the evidence that he secured it by his efforts and expenditures in the production of the necessary proof, he is entitled to recover upon the count for money had and received; for the money received by the Company was his money and the Company cannot be allowed, in this action, or under such a count to shelter itself under any defence of the illegality of the contract inter sese. 4. The plaintiff may recover under the count for work and labor under the circumstances shown by the proof of the plaintiff, if the jury believe it, such proof being, that the Directors furnished the plaintiff, upon his request, with the means—through its books and accounts—of prosecuting the claim. If therefore, the Company would avail itself of the fruits of the plaintiff's work and labor and services, it should pay him what they were worth— the same as a man who sees another working in his corn field among other hired laborers, should pay him what -his labor was — 216 — worth if the jury in such case should be satisfied that there was from the circumstances evidence of a hiring. That the question in the case in hand, as well as in that cited, was for the jury upon the facts proved. Anthony Higgins and William C. Spruance for plaintiff in error: The alleged agreement by the Directors of the Defendant Company that they would let the plaintiff have whatever he could collect from the United States Government upon the claim of the defendant against it, provided he bore all the expenses of its collec tian, was in violation of Section 3477 of the Revised Statutes of the United States, was illegal and void and no action could be maintained upon it. The plaintiff could not under his contract have prosecuted in his own name, and for his own use, this claim against the Government, in any court, or before the Treasury Department. (United States v. Gillis, 95U. S., 407.) A voluntary transfer of a claim against the United States by way of mortgage, completed and made absolute by judicial sale, yas held to be within the provision of the Statute, and a suit in the Court of Claims against the Government was on that ground dismissed. (St. Paul R. Go. v. United States, 112 U. S., 733. An equitable assignment of a claim against the United States made before the claim was allowed or warrant issued was void under the Statute, and the assignee tobk no interest in the claim and acquired no lien in the fund arising therefrom. Spofford v. Kirk, 97 U. S., 484. Though not technically or formally an assignment yet the agreement or transaction as stated by the Court below amounted to a “ transfer ” to the plaintiff of the defendant’s claim against the' Government and was prohibited by the Statute. Even if this transaction was not a “ transfer ” or “ assignment” — 217 — of the “ claim ”—but on the other hand was an “ agreement that the plaintiff should have whatever he could collect from the Government upon it ”—it was prohibited by the words of the statute which say that transfers and assignments not only of any “ claim ” shall be null and void, but also “ of any part or share thereof, or “ interest therein, whether absolute or conditional,” “ and all “ powers of attorney, orders, or other authorities for receiving pay- “ ment of any such claim, or of any part or share thereof.” It will not be disputed that the “ agreement that the plaintiff “ should have what he could collect on the claim from the Govern- “ ment,” was a transfer of what he “ could collect.” Before the agreement he had no such right. After the agreement he did have it. It would be a mere juggle with words to say that this does not amount to a “transfer” from the Company to the plaintiff of a valuable right. Now this right, the transfer of which was thus attempted was, if not the “ claim” itself, or even, “ any part “ or share thereof,” was certainly an “ interest therein” But this right or “ interest ” thus secured by this “agreement” is made null and void by the Statute “ whether absolute or conditional,” and it was subject to two conditions. (1.) It was whatever the plaintiff could collect from the Government, and (2.) It was upon “ his bearing all the expense of the effort for such collection.” The Statute also makes null and void all “ orders or other authorities far receiving payment of any such claim or any part or share thereof,” and the “ agreement ” by which the plaintiff was to “ have whatever he could collect,” if sustained by the Court, would effectually operate as an “ authority ” by which the plaintiff would receive payment of the claim for a part or share thereof, to wit, whatever he could collect of it. — 218 — The transaction between the plaintiff and the Directors was a “ transfer ” of the claim, within the meaning and intent of the statute, because it was in terms and in fact a gift of it, by the Directors to the plaintiff. The intention of Congress in the Act was to render all claims inalienable alike in law and in equity for every purpose and between all parties, and • especially claims within the mischiefs designed to be remedied by the statute. Spoffard v. Kirk, 97 U. S., 489; Goodman v. Niblack, 102 U. S., 559; Trist v. Childs, 21 Wall., 449. The agreement was in violation of the policy of the statute and therefore void. Cook v. Pierce, 2 Houst., 502; Perkins v. Savage, 15 Wend, 412; Cannon v. Bryce, 2 B. and Aid., 179; Langton v. Plug lies, 1 M. and S., 594. The intention of the statute is further shown by making null and void the transfer of a claim until after it has been allowed, the amount ascertained, and a warrant issued for its payment. What becomes of this precaution for the protection of this Government, if by a valid agreement the claimant can vest in a stranger the right to every dollar of it the moment the claim is allowed. The law will not enforce an agreement which accomplishes all the mischiefs intended to be remedied by the statute because of the mere form of the agreement. It will not permit to be done indirectly what it prohibits being done directly. Newport Bank v. Tweed, 4 Houston, 231. The plaintiff’s case is an attempt to enforce an illegal contract, and not one to assert title to money arising from an illegal contract. The claim of the defendant against the Government, was a legal and valid one. The only illegality consisted in the attempted transfer of it to the plaintiff before it was allowed and its amount ascertained and in the form required by the statute. — 219 — The case therefore differs essentially from those where the illegal transaction having ended a contract “ subsequent, collateral to, and wholly independent of, the illegal transaction upon which the principle contract was • founded ” has been sustained. Such were the cases of Faikney v. Renons, 4 Burr., 20, 69; Petrie v. Hannay, 3 T. R., 418; Tenant v. Elliot, 1 Bos. and P., 3; Farmer v. Russel, Id., 296 ; Sharp v. Taylor, 2 Phil. Ch. R., 807; McBlair v. Gibbes, 17 How., 235; Brooks v. Martin, 2 Wall., 70; Newport Bank v. Tweed, 4 Houst., 231. But in the present case, the plaintiff has no claim against the proceeds of the claim except through an illegal contract, and therefore the case falls within the principle of Thomson v. Thomson, 7 Ves., 470. The authority of Faikney v. Renons and Petrie v. Hannay, have been overruled. Anbert v. Maze, 2 Bos. & Pul., 371 (per. Ld. Eldon.); Cannon v. Bruce, 3 B. & Ald., 179. The plaintiff cannot recover in this case because he has to rely upon an illegal contract. “ Whenever the contract which a party seeks to enforce, be it “ express or implied, is expressly or by implication forbidden by the “ common or statute law, no Court will lend its assistance to give it “ effect, and the test as to whether a demand connected with an “ illegal transaction be capable of being enforced at law, is whether “ the plaintiff requires to rely on such transaction in order to estab- “ lish his case.” Chitty on Contracts, 579, 6th ed.; Leake on Contracts, 771, 774; Thomson v. Thomson, 7 Ves., 470; Simpson v. Bloss, 7 Taunt., 240; Exparte Bell, Maulé & Sel., 751; Fivaz v. Nichols, 2 C. B., 512; Taylor v. Chester, L. R., 4 Q. B., 310; Cannon v. Bryce, 3 B. & Ald., 113; Begbie v. Phosphate Co., L. R., 10 Q,. B., 499; Aubert v. Maze, 2 Bos. & P., 373; Pearc v. Provost, 4 Houst., 467; Perkins v. Savage, 15 Wend., 412; Nellis v. Clark, 20 Wend., 24; Collins v. Blantern, 1 Smith’s Lead., Cas., 699. — 220 — After the execution of the illegal contract or purpose the money paid under it whether as consideration, or in performance of the promise cannot be recovered back, and the rule “ applies in pari delicto melior est conditio possidentis.” Leake on Contracts, 774 and cases cited: Taylor v. Chester, L. R., 4 Q,. B., 314. The plaintiff cannot recover under the count for work and labor. 1. Because the work done by the plaintiff he did for himself and not for the defendant. 2. Because the work was done under an illegal contract, namely, the prosecution of a claim against the Government of the defendant for the benefit of the plaintiff. Cannon v. Bryce, 3 B. & Ald., 179: Simpson v. Bloss, Taunt., 246. The agreement was beyond the powers of the Directors because it was in violation of Sec. 3477, U. S. Revised Statutes, and by it made null and void. A contract or transfer of property by a corporation is absolutely void if declared void by a general law. 2 Moranetz on Corp., Sec. 706. It requires no argument to show that by incorporating an association, the Legislature does not intend to emancipate it from the general laws of the land.. Ibid, Sec. 32; Thomas v. The West Jersey R. Co., 101 U. S., 86; Marshall v. Balt. & Ohio R. R. C, 16 How., 314; Oscanyan v. Arnis Co., 103 U. S., 261. The agreement being a gift by the Directors to the plaintiff of this claim or its proceeds, the property of the shareholders, without the unanimous consent or ratification of the stockholders, was a misapplication of the property of the corporation, without authority from its charter, of which fact the plaintiff was fully aware, and was void against the Company. Though the fact that a corporation had no legal right to enter — 221 — into a contract is held in some cases not to be ground for treating such contract void as against an innocent party having no notice of the excess of authority. Yet it renders void such a contract as against a party having notice of such excess of authority. 2 Morawetz, 686; Mayor of Norwich v. Norfolk Ry. Co., 4 El. and Bl., 443; East Anglican Ry. Co. v. Eastern Counties Ry. Co., 11 C. B., 775; West St. Louis Sav. Rank v. Shawnee Co. Bank, 95 U. S., 557; Monument National Bank v. Globe Works, 101 Mafs., 57; Mining Co. v. Anglo California Bank, 104 U. S., 192. To make such a gift as is relied on in this case valid requires the consent or ratification of all the stockholders. Where it does not appear that the stockholders expressly consented to, or ratified such gift, such consent or ratification cannot be implied without proof that the khowledge of such gift was brought home to all the stockholders. Morawetz on Corp., 618; 131 Mass., 258. It is the duty of the Company to rescind an unexecuted contract or gift, if the same is ultra vires, or prohibited by law. Thomas v. West Jersey R. Co., 101 U. S., 86. Whether the agreement was performed or not performed by the plaintiff on his part should have been left by the Court to the jury. The Corporate Funds cannot be given away gratuitously. The property and funds of a corporation belong to its shareholders, and cannot be devoted to any use which is not in accordance with the chartered purposes, except by unanimous consent. No agent of a corporation has implied authority to give away any portion of the corporate property, or to create a corporate obligation granitously. Salem Bank v. Gloucester Bank, 17 Mass., 30; St. James Church v. Church of the Redeemer, 45 Barb., 356 ; Frankford Bank v. Johnson, 24 Me., 490 ; Bissell v. City of Kankakee, 64 111., 249 ; Jones v. Morrison, 31 Minn., 140; Broadhead v. City of Milwau — 222 — kee, 19 Wis., 658 ; Atty. Gen. v. Mayor & cq. Bailey, 26 L. T. N. S., 392; Exparte Mellish, 8 L. T. N. S., 47; Bedford R. Co. v. Bowser, 48 Penna. St., 29 ; Hilles v. Parrish, 14 N. J. Eg., 380; 1 Morawetz on Corp. Sect., 423. It follows for the same reason, that authority can never be implied to lend the credit of a corporation without a consideration, or to sign its name to. negotiable paper for the accommodation of others. West St. Louis Sav. Bank v. Shawnee Co. Bank No. 95, U. S., 557 ; Bank of Geneva v. Patchin Bank, 12 N. Y., 309; Morford v. Farmer’s Bank, 21 Barb., 566 ; Savage Manuf. Co. v. Worthington, 1 Gill., 284; AEtna Nat. Bank v. Charter Oak Ins. Co., 50 Conn., 167 ; Culver v. Reno Real Estate Co., 91 Pa. St., 367 ; Beecher v. Dacey, 45 Mich,, 92 ; Lafayette Sav. Bank v. St. Louis Stoneware Co., 2 Mo. App., 299. George Gray and E. G. Bradford for defendant in error: The judgment of the court below should not be reversed unless error is clearly disclosed upon the record; for every presumption is to be made in support of the judgment. Perminter v. Kelley, 18 Ala., 716; Thompson v. Monrow, 2 Cal., 99 ; Wagers v. Dickey, 17 Ohio, 439. ' Nor will the judgment of the Court below necessarily be reversed because error has been committed, unless that error is of such a character as to seriously affect the party complaining of the judgment; and if it appears that, upon the law and facts of the whole case as disclosed by the record, justice has been done by the Court below, the judgment will not be reversed on account of cr-. roneous instructions. Gibbons v. Dillingham, 10 Arkansas, 9; Casteel v. Casteel, 8 Blackford, 240 ; Creevy v. Cummins, 3 La. Ann., 163. It is submitted that upon due examination no error will be discovered in the proceedings below. — 223 — There was consideration sufficient to support the contract, although the defendant might not receive any benefit from it. For either benefit to the defendant or detriment to the plaintiff is sufficient consideration. Leake on Contrs., 611; Addison on Contrs., 17, 18. And it was not necessary that the contract should be created or evidenced either by the seal or the formal vote of the corporation. Bank of U. S. v. Danridge, 12 Wheat., 64, 68, 69, 70, 72, 79, 80, 82, 83; Morawetz on Private Corp., § 167 ; Bank of Columbia v. Patterson’s Admr., 7th Crunch, 299. While it is generally true that Directors are not authorized to give away the property of the corporation, it is not universally true. Morawetz on Private Corp., § 233. But the contract in this case cannot properly be considered as one giving away the property of the defendant. Directors and stockholders considered the claim of the company against the United States .absolutely worthless, declared “ that there was no use in throwing good money after bad,” and declined to prosecute the claim for the Company. There was no contradiction in the testimony on this point. The rule which generally prevents directors from parting with the property of their company without consideration must receive a reasonable construction ; and, so construed, it could not prohibit the directors from entering into the agreement in this case. The claim did not appear to the directors to have any more value than a loose anchor at the bottom of the sea. They considered it utterly without value and refused to prosecute it. Unless the plaintiff had taken hold of it, in all human probability it never would have been realized. The Directors had the right, and it was their duty to determine whether the claim of the company had any value in it. They had the right to decline to prosecute claims that seemed to them to — 224 — be desperate, and to compromise claims that seemed to them to be doubtful. Morawetz on Private Corp., § 233. But, upon the assumption that the agreement between the plaintiff and defendant can be properly considered as one giving away the property of the defendant, it is submitted that the Directors had authority to enter into it on behalf of the defendant. But, even if the contract had originally been unauthorized by the defendant’s charter, it not being forbidden by the charter or any other law, and having been executed by the plaintiff, is now to be treated as valid. Morawetz on Pri. Corp. Secs. 85, 86, 100, 103, 104, 1Q5, 107; Hitchcock v. Galveston, 96 U. S., 341, 350, 351; Railway Co. v. McCarthy, 96 U. S., 258, 257; Township of Pine Grove v. Talcott, 19 Wallace, 666, 678; Gold Mining Co. v. Nat. Bank, 96 U. S., 640,641, 642; Chester Glass Co. v. Dewey, 16 Mass., 94, 102; Whitney Arms Co. v. Barlow, 63 N. Y., 62 ; Oil Greek &c., R. R. Co. v. Penn. Trans. Co. 83 Penn. St., 160; Parish v. Wheeler, 22 N. Y., 494; State Board &c., v. Citizens’ St. Railway Co., 47 Ind., 407; National Bank v. Matthews, 98 U. S., 621; Steam Navigation Co. v. Weed, 17 Barb., 378; De Groff v. Am. Linen Thread Co., 21 N. Y., 124, 127; Union Water Co. v. Murphey’s Flat Fluming Co., 22 Cal., 620, 630 ; Underwood v. Newport Lyceum, 5 B. Monroe, 129; Barst v. Gale et al., 83 Ill., 136, 140; Bradley v. Ballard, 55 Ill., 413, 417; Argenti v. City of San Francisco, 16 Cal., 255, 256, 264; E. St. Louis v. E. St. Louis Gas L. and Coke Co., 98 Ill., 415; Bank v. Hammond, 1 Richardson (S. C.,) 281, 288; Newburg Petroleum Co. v. Weare, et al., 27 Ohio St., 343, 354. And it is immaterial whether in fact a person dealing with a. corporation has had disclosed to him its want of corporate authority to perform the act or enter into the contract, for he is presumed to know the contents of its charter. Morawetz on Private Corp., § 64. — 225 — Therefore the rule above stated as to the binding force of executed contracts, unauthorized by charter, equally applies, whether the party dealing with the corporation in fact had or had not knowledge of its want of authority in that behalf. Aside from from its legality, the contract having been executed on the plaintiff’s part, and nothing remaining but a money payment on the part of the defendant, the common count for money had and received is proper. 2 Greenl. on Em., § 104; Hurlock v. Copperthwaite, 2 Hous., 550; Bank of Columbia v. Pattersonson’s Adm’r, 7 Cranch, 299. And the count for money had and received is peculiarly appropriate under the circumstances. ' Leake on Contrs., 87, 88,104, Note c; Moses v. Macferland, 2 Burrows, 1005, 1008, 1010,1012; Guthrie v. Hyatt, 1st Harr., 446. The fourth assignment of error was : “ That the Court erred in not charging the jury according to “ the prayers of the defendant company.” Some of the instructions prayed for by the defendant were manifestly improper. This assignment of error, being general, must therefore be overruled. Worthington v. Mason, 101 U. S., 149. It is not law, that in the absence of express consent or ratification, consent or ratification cannot be implied without proof that the knowledge of such gift was brought home to all of the stockholders.” Private Corp., Secs. 79, 80. Hobbs v. McLane, 117 U. S., Ct. Rep., 567; Dillon v. Barnard, 21 Wall, 430; Prist v. Child, 21 Wall, 441; Hobbs v. McLane, 117 U. S., 567; Erwin v. United States, 97 U. S., 392; Goodman v. Niblack, 102 U. S., 556; Bailey v. United States, 109 U. S., 432; St. Paul R. R. v. United States, 112 U. S., 733; Hobbs v. McLane, 117 U. S., 567. — 226 — The transaction between the plaintiff and defendant was not avoided by Sec. 3477. But even if it were, as has already been shown, the defendant should not be permitted to retain the benefits that it has received. Saulsbury, Ch. The action in the court below was assumpsit. The plaintiff’s narr, contained two counts: one for money had and received, and the other for work and labor done. There was no count in the narr, upon any special contract. The jury in the court below heard the proof offered in support of these respective counts. They passed upon the sufficiency of that proof. Their judgment on this question was conclusive and final. This court has no jurisdiction to determine whether their verdict was right or wrong, and no power to review their finding upon a mere question of fact. This court, in affirming the judgment below, do so for the reason that the finding of the jury, under the second count, for work and labor done, being in favor of the plaintiff below, there was no error in the rendition of the judgment by the court below upon such finding of the jury. The court declines to render any decision upon any other questions raised in the cause in the arguments of counsel, because it considers such questions as irrelevant.