Peoples National Bank v. New England Home ( 1911 )

Knowlton, C. J.

This is an action upon a promissory note, against a charitable corporation. The note was signed by the corporation’s president and treasurer. As officers of such a corporation, they had no right to make a note without special authority, and on its face the note does not purport to bind the corporation, without proof of their authority to sign it. Packard v. Universalist Society, 10 Met. 427. Dedham Institution for Savings v. Slack, 6 Cush. 408. Craft v. South Boston Railroad, 150 Mass. 207. Merchants’ National Bank of Gardiner v. Citizens’ Gas Light Co. 159 Mass. 505. Jewett v. West Somerville Cooperative Bank, 173 Mass. 54. Slattery v. North End Savings Bank, 175 Mass. 380.

The vote at the meeting of the trustees did not authorize these officers to make this note. It recited certain terms upon which the real estate had been offered, calling for payment in part by giving certain notes and mortgages, and it purported to authorize the president and treasurer to “ execute and sign the necessary papers.” The note in suit is not included among these papers. But even more fundamentally, the meeting could give no authority to purchase, lease, or sell real estate, because the by-laws of the corporation require the presence of two thirds of the whole number of trustees to transact that kind of business, and at this meeting only eight of the fifteen trustees were present. Upon the undisputed facts, therefore, the note sued on was not the note of the corporation and no action can be maintained on it, even by a holder in due course, unless the corporation by its subsequent conduct has created a liability upon it.

The plaintiff contends that the defendant has ratified it as a binding note, or has become estopped to deny its validity. The defendant has had no dealings or relations with Mitchell, the payee, which, in connection with its subsequent conduct, amount to a ratification in his favor, or estop it to deny the validity of the note as against him.

Mitchell acted as the agent of the defendant in negotiating a purchase of real estate. He falsely represented the price at which the owner would sell the property, at $2,000 more than it really was. This note of that amount was to reimburse him for a payment of that sum, which he represented that he had made to the owner. In fact, he made no such payment and the note was without consideration. The officers of the corporation did not ascertain the facts until long after the purchase had been completed, and they had entered into possession of the real estate. The question is whether the retention of the real estate by the corporation is evidence of a ratification of the note, or of an estoppel against the corporation from denying its validity.

Suppose that the officers ascertained all the facts. Was the corporation bound to give up all the real estate, or ratify this note given without authority ? The argument is that a retention of the real estate was inconsistent with a refusal to pay this note. But the defendant did not receive the real estate from Mitchell. It had no dealings with him as a party to the contract whereby it obtained the real estate. His only relation to that transaction was as the agent of the defendant in negotiating for a purchase. The giving of the note was a separate transaction to compensate the payee for a pretended payment. To this note the corporation had three different defenses, — one that it was obtained by fraud, one that it was without consideration, and one that it was not made by the defendant. The first two of these defenses would not avail it as against a holder in due course, but the last is effectual against anybody. As to this, a ratification by the corporation of the transaction conducted by its officers, between it and the former owner of the real estate, whereby it acquired its title, was not inconsistent with a refusal to ratify a merely collateral transaction whereby these officers undertook to borrow $2,000 from Mitchell, and to give him a note and mortgage from the corporation to secure payment of the loan. The corporation and its officers, upon learning all the facts, well might say: We ratify the transaction of our representatives with the former owner of the property, whereby the land was acquired; but we decline to ratify their action in giving a note to our fraudulent agent, which did not enter into the transaction with the former owner from whom we obtained our property.

We are of opinion that there is no evidence of ratification by the corporation, of the giving of this note, much less is there any estoppel against it.

Judgment on the verdict.