Tyler Estate v. Hoffman

GOODE, J. (after stating the facts). — As to the contention against the validity of the chattel mortgage and the pledge because of usury in the loans, suffice to say tiie evidence was not, in our opinion, conclusive one way or the other, Jjut raised issues of fact for the court to determine as trier of the facts. The main controversy on the appeal relates to the exclusion of evidence proffered by the interpleader upon the question of the authority of Brooks as president of the Brooks Publishing Company, to execute the mortgage on its property, or to pledge its property to secure loans made in its behalf. And right here we may say there was evidence conducing to show both loans were — 519 — made in the company’s behalf, and it seems not to be questioned the mortgage loan was. The rejected offers of proof were evidence regarding the financial condition of the Brooks Publishing Company and the supply of money it had to carry on its business; what authority and power Brooks, as president, had been exercising in respect of financial transactions, such as the negotiation of loans and the assignment of property by way of pledge to secure loans, without express authority from or ratification of his acts by the board of directors. More specifically, the interpleader offered to prove Brooks constantly attended to all the financial affairs of the company, had borrowed money for it, and assigned ’advertising contracts held by the company as well as other contracts, as collateral security for loans he had made in its behalf. The general tenor of the offer of proof went to show he had exercised complete control of the business of the company, handled its funds, borrowed in its name when he wished, and on two or more occasions had assigned contracts under which money would become due to it, to persons, from whom, in its, behalf, he had borrowed. Interpleader’s attorney conceded he had no proof to offer tending to show Brooks ever had executed a chattel mortgage in behalf of the company other than the one in question, but said he could show contracts representing valuable considerations had been put up as collateral security for loans and notes of the company; that these things had been done by the president “without formal authority or formal ratification, but they were all known to the board of directors and had been discussed at meetings of the board without action of any character being taken on them.” Evidence to prove those alleged facts was, as said, excluded. Certain by-laws of the company were received in evidence, which authorized the president to receive and disburse money of the company, and to keep, or cause to be kept, accurate accounts of such disbursements, giving him authority to check on the — 520 — funds of the company in the bank, and saying “notes, drafts, acceptances and other pecuniary obligations in connection with the business of the company (may) be executed by the president.” The last clause of the bylaws went far toward expressly empowering Brooks to borrow money for business purposes of his company, but hardly can be held to be express authority to him to confer liens on its property by way of mortgage or pledge. The offer of proof went to show he had pledged company property to secure loans and with the knowledge of the directors and their tacit, if not express, approval, after report and discussion of the acts. Hence the pledge to the interpleader was a contract of the same kind he had theretofore made with the board’s approval. Actual authority in a president or general manager of a company to do acts of a particular kind, or make a certain class of contracts in its behalf, and among others to give a lien on its property by pledging or mortgaging it, may be established not only by a resolution of the board of directors, but by fair inference that it had been conferred on him, drawn from continued exercise of the authority with the knowledge of the directors and without objection from them. And especially is this true if the officer who purported to act for the company had been allowed unhampered management of its affairs for a considerable period, and the money borrowed was used for the benefit of the company, to the knowledge of the directors. [First Nat. Bank v. Mining Co., 89 Fed. 489; Id., 95 Fed. 23.; Sherman, etc., Co. v. Swigart, 43 Kas. 292; Nat. State Bank v. Fork, etc., Co., 157 Ind. 10; Moore v. Gaus & Sons Mfg. Co., 113 Mo. 98, 106.] Some vagueness is detectible in the books regarding whether this implied, or, as it may be called more properly, inferred authority, can be availed of by a person with whom a corporation official makes a contract, unless the person dealt with knew of the previous similar acts by the official and relied on them, as shoAving authority in the official; — 521 — that is, on the appearance of authority with which the latter had been invested and which he had been held out to the world as possessing, by a course of conduct he had pursued and the company had tolerated. It is contended for respondent in the present case there was no proof, or offer to prove, Hoffman knew of a course of business pursued by Brooks in respect of borrowing money for the company and transferring its property as security for the loans. Therefore it is argued Hoffman is not entitled to the benefit of any appearance of authority created by prior transactions. No doubt such a course of business might create apparent ■•authority to do acts which, in point of fact, the official had been inhibited from doing by resolution of the directors; and persons in “reliance on this appearance might make contracts with the official which would be binding, if they had no notice of the limitation of his powers. [Empire, etc., Cattle Co. v. Railroad, 135 Fed. 135, 150.] But the law goes further. Actual authority to a corporation officer to do acts he is accustomed to do with the knowledge of the company may be implied from that method of management. Hence a customary act by an official may be treated as valid and within the exercise of an actual authority, not necessarily because the company is estopped to deny its validity from having invested the officer with apparent authority to perform it, but because the inference can be drawn that he was, in truth, authorized. The estoppel mode of ¿validating the acts of an officer of a corporation, or the acts of an agent of any other principal, more often comes into operation when the officer or agent is invested with certain duties, which, according to common usage, carry with them the right to do some particular act or make contracts. For instance, if a banking company appoints a person cashier, he has apparent authority to do whatever bank cashiers are accustomed to do; and those dealing with him may take for granted he has such authority, even though, in fact, it has been expressly — 522 — ■withheld from him, unless they have reasonable grounds to believe it has been withheld. [Lawson, Usages & Customs, sec. 65, et seq.; 4 Thompson, Corporations, secs. 4744, 4877.] But numerous authorities favor the proposition that where a corporate officer has been allowed by the directors of a company to pursue a particular line of acts, beyond those belonging to him by virtue of his office, or wield certain powers not commonly exercised by officials of the same class, this is evidence that such unusual powers had been allowed by the directors. [4 Thompson, secs. 4746, 4881 et seq.; Clark, Corporations, 481; Bank v. Coal Co., 86 Mo. 125, 139; Sparks v. Transfer Co., 104 Mo. 531, 539; Chenoweth v. Express Co., 93 Mo. App. 185, 199; Chambers v. Lancaster, 160 N. Y. 342, 349; Hoshannon, etc., Co. v. Sloan, 109 Pa. 352.] That doctrine is palpably sound; for long acquiescence by the directors-of a company in a line of conduct pursued by an official, and particularly a chief official, certainly has a tendency to prove they regard him as acting within his authority; otherwise it is fair to premise they would check him. The probabilities and the law at this point are the same as between a company and Its officials as they are between a principal and his agent. If the principal permits the agent to exercise certain powers continually, it is reasonable to imply authority to exercise them, as principals usually protest against such conduct if opposed to' their wish. It is said as regards the validity of the mortgage in present dispute, it was conceded Brooks had never before executed a mortgage in behalf of the company, and therefore it follows he had been invested with no authority by usage to execute one. This is too narrow a view. If he had been accustomed to manage all the financial affairs of the company, borrow money and execute notes in its behalf, and secure the loans by assignments of property as collateral security, and the board knew of and discussed those doings and did not — 523 — object to them, but accepted their fruits, we think this impliedly conferred power on him to secure a loan, not only by assignments of property in the form of pledges, as he had theretofore done, but also in the form of a chattel mortgage. The effect of security in the two forms would be the same practically so far as the company’s rights and obligations were concerned. The case of State ex rel. y. Perkins, 90 Mo. 603, which is relied on by respondent’s counsel as an authority against the right of Brooks to execute the mortgage, is, in its facts, too unlike the case at bar to be in point. There, no habit of the president to borrow money- in the name of the company or control its business with the knowledge of the directors and without express authority from them was shown. It is true the opinion said that as far as appeared, the mortgage or deed of trust in question was the first act of the kind the president of the company had ever attempted, and the security therefor stood unsupported by any implied authority to execute it. But that remark must be understood with reference to the facts of the case, which were, as said, that no general management of the business and financial affairs of the company by its president and the borrowing of money and securing it on company property was shown. The opinion did not mean to say if such a course of business had been pursued, the chattel mortgage security would fail simply because no instrument of the identical kind had been executed by the president before, even if analogous ones had. The' declarations of law given by the court rather look in conflict with the rulings on the evidence, particularly the second one. For the exclusion of the offered evidence, the judgment will be reversed and the cause -remanded. All concur.