Cram v. Bangor House Proprietary , 12 Me. 354 ( 1835 )

Weston C. J.

delivered the opinion of the Court.

The object of this proprietary was, the erection of a convenient building, with suitable accommodations for travellers. They confided their business to a board of directors. This board contracted with the plaintiff to furnish, upon certain stipulated terms, the glass necessary for the house. It was a contract directly in aid of the purposes, for which the corporation was created, and clearly within the authority of the directors. The contract is not in terms made with the proprietary, but with the agents, who represented them. The directors, who are individually named, covenant to pay to the plaintiff the price agreed, at the time limited. And they affix to the contract their names and their several seals. It is not under the seal of the corporation ; and is therefore not their deed. Tippets v. Walker et al. 4 Mass. 595. It is objected that the parties, having respectively contracted by deed, there is no promise on either side, express or implied, which will support an action of assumpsit; and that tifo plaintiff’s only remedy is by an action of covenant broken. The first inquiry arising in the case is, whether the plaintiff has any claim upon the defendants; and if so, secondly, by what form of action it may lawfully be enforced. There can be no doubt but the defendants would be liable, but for the express contract made with the directors.

In the Bank of Columbia v. Patterson, 7 Cranch, 299, one of the points considered was, whether the bank could be bound by a contract not made by the corporation, but by their committee, acting in their own names, who had personally and expressly agreed to pay the stipulated price. And it being a contract made for the benefit of the corporation, and the committee having authority to make it, it was holden that the corporation were bound. Story J., by whom the opinion of the court was delivered, states that, “ it would seem to be a sound rule of law, that wherever a corporation is acting within the scope of the legitimate purposes of its institution, all parol contracts, made by its authorized agents, are express promises of the corporation.” It is a parol contract, which thus creates and is evidence of a promise; for if the agent has authority to contract by deed, and does so in the name, and affixes the seal of his principal, it is the covenant and not the promise of the latter. But suppose the agent, clothed with power to contract by a corporation, affixes to the instrument his own name and seal, and not theirs, although it is not the deed of the corporation, yet if it would bind them as an agreement, if it were not under seal, there is no reason for its ceasing to bind them, the agent’s seal being affixed thereto, except what is purely technical. The agent has superadded a more solemn authentication, which usually converts it into an instrument of a higher character. But as the corporation cannot be affected by this additional quality, it not being their deed, shall it cease to be evidence of their agreement ? They authorized it, their agent made it, and if he added formalities, which were useless and inoperative, they may be disregarded, and the corporation stand charged, as if they had been omitted. A covenant is a promise, and something more. It is a promise under seal. If the seal affixed, is not that of the party, who substantially makes the promise, and who is to be charged by it, the promise remains, and is not changed into a contract of a higher nature.

Randall v. Van Vechten et al. 19 Johns. 60, is an authority directly in point. An authorized committee of the corporation of the city of Albany, setting forth their appointment and power, entered into a contract for the benefit of the corporation, and for corporate purposes, and signed thereto their names, and affixed their individual seals, covenanting to make certain payments and advances to the other contracting parly. Upon covenant broken, against the individual members of the committee, the court decided that they were not holden, but that the corporation was ; and as they could not be charged in covenant, it not being their deed, that they were liable in assumpsit. And the authority of the committee being conceded, they held the instrument executed by them, evidence of a promise by the corporation, disregarding the seals. In deducing the power of the committee, they refer to certain acts of recognition, on the part of the corporation. No such evidence is necessary here, where the agency exercised results from their office and character as directors. In Tippets v. Walker et al. before cited, where a committee of the directors of the Middlesex Turnpike Corporation were held liable upon their covenant, in regard to corporate objects, one reason assigned by the court was, that the directors, who were the immediate agents of the corporation, had no right to contract by the substitution of other agents, from which a strong implication arises, that it might have been otherwise holden, if the contract had been made by the directors. It is a doctrine, well settled at the present day, that a corporation may contract by vote, or by agents ; and the old rule, that they could do so only by their corporate seal has been exploded. The authorities upon this point are cited and examined in the case of the Columbia Bank v. Patterson.

It being the opinion of the Court, that the defendants might be charged in assumpsit, for the glass delivered under the contract with the directors, and the jury having been otherwise instructed, a new trial is granted upon this ground.

As the other questions presented may again arise, we have considered them. It is insisted that a majority of the directors could not bind the corporation. But we cannot regard the presence and concurrence of all essential to the validity of their acts. It would bo nearly impracticable for them to fulfill the objects of their appointment, under such a restriction. It would so clog and retard their operations in the business, with which they may be daily and hourly charged, as to defeat the beneficial exercise of their powers. So universal is the the usage, for a majority of the directors of banks, insurance companies, and other corporations of this description, to act for the whole, that a power to do so may by general consent, be understood to be implied by their appointment. Nor do we hold it to be necessary, that every direction of theirs, within the scope of their authority, should be recorded by their clerk. In purchasing materials, in giving directions to workmen, and in many of the multiplied details of the business confided to them, it would be a formality more burdensome than useful. It may be left to them, or to the corporation to prescribe what part of their doings shall be entered on their records. We doubt not that the corporation are bound by any verbal order or direction, in which a majority of the board concurred, in relation to any business deputed to them.

An argument has been urged against the constitutionality of that provision in the act incorporating the defendants, which admits a member as a witness, where the corporation is concerned, notwithstanding his corporate interest. A privilege is thus given to these defendants, which has not before been conferred on corporations of this class. It is a law for all the citizens, who may litigate with this corporation ; and is not made to apply to a particular case. Yet it does give them an advantage, not enjoyed by the adverse party. The same right has been given by a general law, to the inhabitants of counties, towns, and parishes. There the general law, which excludes interested witnesses as incompetent, is partially modified. But as all the citizens sustain these relations, all being inhabitants of counties, and most of towns and parishes, the law bears equally and generally.

The law under consideration, establishes the competency of the witness, but the objection remains to his credibility, which is to be submitted to the jury. And this may be a sufficient protection to the party to be affected. Every immunity conferred on a corporation, is in the nature of an exclusive privilege, as is the corporate character itself. The law operates upon all, who may have legal controversies with this corporation, as well upon those who enacted it, as others. It cannot be disguised, however, that it approaches near to that interference with the judicial tribunals in particular cases, which does not belong to the legislative power ; although we are not prepared to say that it transcends the line, which separates the two departments.

In the case before ús, the plaintiff was one of those in whose favor the act passed ; he being named therein as a corporator. He further manifested his assent, by becoming a subscriber to shares in their stock. Upon these facts, we are of opinion that it is not competent for him to object to the operation of a law, the passage of which he must be presumed to have solicited, and which he subsequently accepted. The objection of interest may always be waived by the party to be affected. But it is insisted that the rights of a third party, the assignees of the plaintiff are in controversy. They succeeded to his rights, sucli as they were, at the time of the assignment. If, therefore, matter of off-set, or of payment, could at that time be made out by competent proof against the plaintiff, he ought not to be permitted by his own act, to place the defendants in any worse situation. Nor is this demanded for the protection of the equitable claims of the assignees.

New trial granted.