Getty v. C. R. Barnes Milling Co.

Opinion by ClogstON, C.: Plaintiffs in error brought this action to recover $1,350, the price of flour sold by them to C. R. Barnes, or the C. R. Barnes Milling Company; and at the trial a demurrer was sustained to the plaintiffs’ evidence. John Getty & Co. were a milling firm at Ellsworth, Kansas, and the defendant, the C. R. Barnes Milling Company, was a corporation engaged in the milling business at Clay Center. About July 27, 1885, C. R. Barnes went to Ellsworth and purchased of the plaintiffs sixty thousand pounds of flour, at $2.25 per hundred-weight, to be paid for in thirty days. At [283] this time Barnes represented that he was the president of the C. R. Barnes Milling Company, and was its manager, and that the flour was for the purpose of supplying its trade. The flour was shipped to C. R. Barnes at Kansas City, and placed to the credit of the Barnes Milling Company, with one A. J. Meade, who was a commission merchant in Kansas City. Shortly afterward, Barnes, in the name of the milling company, commenced purchasing options on wheat, and continued so to do until some fifty thousand bushels had been purchased. The flour purchased of the plaintiffs, and other flour owned by Barnes, was placed with Meade to pay the margin on the wheat deals. Wheat gradually declined on the market, and his options were closed out at a loss of more than $5,000, more than covering all the flour stored with Meade. All of these transactions — the purchase of the flour stored with Meade, and the purchase of wheat on the market — were without the knowledge of the Barnes Milling Company, save Barnes himself, who was the president of the company; and all of said transactions Avere repudiated by the company as soon as known by it. Plaintiffs now insist that they had a right to rely upon the statements of Barnes, and that his statements Avere binding upon the corporation of Avhich he was president; while on the other hand defendant insists that the corporation is not liable for the acts of Barnes unauthorized by the company, and that such a contract was not within the purview and scope of its corporate business. Plaintiffs claim that even if the purchase was unauthorized, yet it was ratified by the subsequent transactions in Kansas City. The charter under which the defendant company was doing business was as follows: “Thepurposes for which this corporation is formed are for the conversion and disposal of agricultural products by means of mills, elevators, stores, or otherwise.” The first question is, under this charter, had the president or general manager of the company, Avithout special direction from his company, the right to go upon the market and purchase flour? In our judgment this question must be decided by determining whether flour is an agricultural prod284 net. In one sense it may be said that flour is a product of agriculture, but in the common, application of the term we think this is not true. The product of agriculture is that which is the direct result of husbandry and culture of the soil. It embraces the product in its natural, unmanufactured condition. As cotton is a product of agriculture, yet cotton cloth, or other fabrics made from cotton, can hardly be termed agricultural products. If the products resulting from the manufacture of agricultural products are not to be determined by the common acceptation of the phrase “agricultural products,” then this charter would embrace an innumerable variety of manufactures and their products. Flour, being the product of manufacture, is not strictly within the purview of this charter. But under some circumstances and conditions a corporation may be authorized to purchase and sell property or goods not strictly embraced in the purposes enumerated in its charter; the general rule being that a corporation may carry on the business for which it was chartered, in the usual and ordinary manner. (Canal Co. v. Vallette, 21 How. 424; Thompson v. Lambert, 44 Iowa, 239; McKiernan v. Lenzen, 56 Cal. 61.) What is or is not within the chartered powers of a corporation cannot be laid down as a strict rule of law. Each particular case must be governed by itself, and the facts that surround it may include or exclude it from its powers. There might be instances in which a corporation formed as the defendant was could purchase flour, and still not be in violation of its chartered rights. For instance, its mill might be disabled, and for the purpose of holding and controlling its trade during the time of repairs, flour might perhaps be properly purchased by its officers or agents for the purpose of carrying on the legitimate objects for which the corporation was organized. (Fleckner v. Bank of U. S., 8 Wheat. 351; National Bank v. Exchange Bank, 92 U. S. 128; Organ Co. v. Reddish, 57 Iowa, 55.) But because some such peculiar situation would give the corporation the right to go apparently outside of its strict chartered powers, it would not authorize the act complained of in this action unless some such peculiar [285] reasons existed for so doing. (Lynderborough Glass Co. v. Mass. Glass Co., 111 Mass. 315; Sherman v. Fitch, 98 id. 59.) It has been held that a railroad company may purchase coal land and engage in coal mining if thereby it can supply its wants cheaper than by purchasing on the market. So it may under peculiar circumstances charter or purchase steamships in connection with its business, where it is shown that such acts facilitate and add to the general purpose and scope of the business. So it has been held that railroad companies may build and manage hotels, reading rooms, book stalls, where those things tend to the comfort of its employés or patrons ; that it may also build docks, elevators and warehouses for the storage of property transported, and erect workshops for the manufacture and repair of machinery. But these things can only be done where the peculiar circumstances of the case make them applicable. (Lyde v. Eastern Rly. Co., 36 Beav. 16; Hoagland v. Hannibal Rld. Co., 39 Mo. 451; Pearce v. Madison Rld. Co., 21 How. 441.) While a railroad company may purchase and mine coal for its own use, yet it cannot engage in that business for sale and speculation, and it can make no difference that this transaction would be remunerative to the company. (Att’y Gen. v. Great Northern Rly. Co., 1 Dr. & Sm. 154; Alexander v. Couldwell, 38 N. Y. 480.) So in the present case, under peculiar circumstances floú?notof within scope of corporate the defendant might have purchased flour to sell again, to meet some temporary want, or to supply 6 ’ . , r . J , ’ rr/ and protect its trade, yet it could not engage in this class of business as a business, under its charter; and where the plaintiffs seek to justify a sale to the officer of a corporation, they must either show that it “ company,°not shown. comes within the purview of the charter of that # x corporation, or else some peculiar facts or circumstances that would make an exception to the general rule. Nothing of that kind is shown in this case. The next question is, did the acts of the president of the corporation, in depositing this flour at Kansas City, and the purchase of wheat on the market, ratify the purchase? The [286] evidence in this case clearly shows that the purchase of wheat by Barnes in the name of the milling company, which under the charter he had a right to do, was simply an option purchase, and not an actual purchase; in other words, 3. Unauthorized purchase, not .. . 0 » -¶ • , , , . ■ it was a species or gambling contract, and not such a transaction as would ratify an unauthorized act. Such contracts of purchase as that shown by the evidence in this case, have been universally held to be illegal and void. ( Washer v. Bond, and cases cited, ante, p. 84.) We are therefore of the opinion that the judgment of the court below should be affirmed. By the Court: It is so ordered. VALENTINE and Johnston, JJ., concurring.