Buena Vista Veneer Co. v. Hodges , 116 Ark. 253 ( 1915 )

Smith, J.,

(after stating the facts). Various questions are raised in the briefs, but we find it necessary to discuss only one of them, that toeing the authority of Romunder to purchase the bank stock with the assets of the veneer company. We think he had no such authority. It is true he was the controlling spirit in the veneer company and dictated its policies and either owned or held in his name as president the great majority of the stock. Notwithstanding the jury, by its. verdict, must have found that Romunder directed Vaughan to deduct from the veneer company’s deposit the purchase price of the stock, the fact is undisputed that the books of the appellant company showed that this sum had been credited back to it, and no other stockholder of this company ever knew of that action. Romunder’s 'knowledge of this transaction could not toe imputed to other stockholders of the corporation who had no actual knowledge, because the contract was for Romunder’s personal advantage and against the interest of the veneer company. Bank of Hartford v. McDonald, 107 Ark. 232.

It is not contended that the veneer company could derive any benefit or advantage from this transaction, and it is sought to bind that company only upon the theory that Romunder was the veneer company, but it has been shown that he was not the owner of all the stock. This deposit constituted in part, the assets of the veneer company and, such assets constitute a trust fund for the benefit of any creditors there may be. Even if Vaughan’s version of this transaction is accepted as reflecting the truth, which must ibe done in view of the verdict of the jury, the fact stands undisputed that the ¡bank knew it was taking assets 'belonging to the veneer company, and not to Romunder personally, with which to pay Romunder’s personal obligation, and Romunder could not authorize this action.

In a discussion of the principle involved here, in the case of American Bonding Co. v. Laigle S. & L. Co., 111 Ark. 155, it was said: “Now, it must be conceded that the note executed by Forsythe in the name of his principal, to .secure his own debt, was not a valid obligation of the Bradley Lumber Company, for it is not within the real or apparent scope of authority of an agent of a corporation, or even of its officers, to bind the corporation by the execution of negotiable paper for accommodation. Simmons National Bank v. Dilley Foundry Co., 95 Ark. 368. Nor did Forsythe have authority to use the funds of the corporation in payment of his private debt. Anders knew, when the note was'executed by Forsythe, that the name of the Bradley Lumber Company was signed merely as an accommodation, and, therefore, the paper was not binding on the Bradley Lumber Company. ’ ’

A number of authorities on this subject were reviewed in the opinion in the case of Simmons National Bank v. Dilley Foundry Co., 95 Ark. 368, where the law on this subject was stated as follows:

“It follows, from this, that no corporation has the power to divert its funds or assets from the purposes for which it was created, and it therefore has not the power by any form of contract to become a surety for or otherwise to lend its credit to another person or corporation. It has the power to make all contracts necessary or incidental to its own business; and therefore a corporation organized for the purpose of carrying on a manufacturing business, such as tbe Dilley Foundry Company, -has tbe implied power to borrow money and make negotiable paper for use within the scope of its 'own -business; but it has no power to become a party to ¡a bill or note for the accommodation of another person or -corporation. The officers of a corporation have no power to bind it by the execution of such accommodation paper, and it can not be held liable thereon when it is known by the' payee or holder that it was executed only for accommodation. 3 Thompson on Corporations, § 2225; West St. Louis Savings Bank v. Shawnee County Bank, 95 U. S. 557; 7 Cyc. 679; 10 Cyc. 1115; El Dorado Improvement Co. v. Citizens Bank, 85 Ark. 185; Park Hotel Co. v. Fourth National Bank, 30 C. C. A. 409; Owen v. Storm, 72 Atl. 441.”

It follows, therefore, that the court erred in rendering judgment upon the verdict of the jury for the amount of the alleged overdraft, -and that judgment will be reversed and judgment entered here for the appellant company for $155 and interest from the 2d day of April, 1913.