DocketNumber: No. 15,654
Judges: Porter
Filed Date: 7/3/1908
Status: Precedential
Modified Date: 11/9/2024
The Farmers Cooperative Shipping Association brought an action against C. B. Hoffman to charge him personally with certain losses alleged to have been sustained while he was 'its general manager. Issues being joined, the cause was referred to George H. Whitcomb, as referee, who made findings of fact and conclusions of law. The court afterward rendered judgment upon the findings in favor of the plaintiff and against the defendant for the sum of $1706.24. The defendant seeks to reverse the judgment and brings these proceedings in error. The plaintiff has filed a cross-petition in error and asks judgment upon the findings for an increased amount.
It was claimed in the petition that the defendant agreed to manage and conduct the business of the association with care, skill, and fidelity; that he failed to perform his contract, and failed to account for specific sums of money which came into his hands as general manager; and that while general manager of the plaintiff company he engaged extensively in dealing in options on the future price of grain on the board of trade at Kansas City, Mo., contrary to the express provisions of the by-laws of the company, resulting in'loss to the plaintiff.
The Farmers Cooperative Shipping Association was organized in 1903. The charter provided:
“That the purposes for which this corporation is formed are to purchase, sell, store, ship and handle grain, live stock and other farm products, and supplies, and to acquire, own and operate elevators, warehouses, and such other shipping facilities as the business of the association may require, and all lands necessary or convenient for such .purposes.”
At the first meeting of the board of directors, and after the election of officers, by-laws were adopted which contained the following provisions:
“Sec. 2. If any officer shall fail to perform any serv*564 ice required of him by law or by the board of directors, or shall be guilty of any misuse of the funds or property of the association, or shall engage in the transaction of any business in the name or on behalf of the association without authority from the board, or shall engage in speculating, or in options on grain, stock, or produce, he shall be deemed to have forfeited his position, and upon determining that any officer has committed any such offense the board shall immediately remove him from office.
“Sec. 3. Any officer guilty of misconduct, as provided in section 2 of this article, shall be personally liable to the association for any damage resulting from such misconduct, and the stock of such officer or any indebtedness of the association to him on any account shall be subject to the payment of such liability.
“Sec. 4. This association shall at no time speculate in grain or live stock or other farm products, nor shall the funds of the association be loaned to any person.”
The defendant, who was a director of the company, was appointed general manager, and his salary fixed at $4000 per annum. He was given the management and control of the business of the company, with authority to employ such persons as in his judgment were competent and suitable for the various positions they were required to fill, to discharge any employees, to sign «checks, drafts and all documents necessary for the transaction of business, to receive moneys and funds from any and all sources, and to distribute them as the business should require. At the time he became general manager of the company the defendant was a member of the firm of C. Hoifman & Son. This firm owned and operated a mill at Enterprise, Kan., which required daily about 6000 bushels of wheat, and the firm had been engaged for twenty-five or thirty years in buying and shipping grain. The company commenced business in July, 1903, under the charge of the defendant as general manager. Its principal business was done at Enterprise, and consisted in buying and selling grain, and also handling grain for customers on consignments. The business increased until the company owned and
On October 1,1903, the main office of the company was removed to Kansas City, Mo., and located in the same building where the board of trade is situated. About the same time the company, acting through its general manager, purchased a membership on the board of trade, which the referee found was not necessary to the carrying on of a cash grain business, but was necessary only to enable the company to buy and sell grain for future delivery. For some time thereafter the business which the company engaged in was the purchase of grain at its stations in the country from its stockholders and other producers, and the sale of the same to millers and other buyers wherever located, or to dealers on the Kansas City market, and in the. sale at Kansas City of grain consigned to it for sale on commission.
It also appears from the findings that some time in the spring of 1904 the company, under the defendant’s supervision and direction, commenced the business of buying and selling grain for future delivery for customers on the board of trade. One of the company’s, largest customers was C. Hoffman & Son, and a large part of the business carried on for that firm was of a. speculative character, and was conducted for the sole purpose of making profits on the rise and fall of the market. Under the management of the defendant there was a book, known as the “option book,” in which the accounts were kept of the future-delivery business. Entries in this book were sometimes made by defendant, but the book was for the most part kept by J. M. Senter, assistant general manager. His appointment was made by the defendant, but was afterward ratified by the board of directors. Senter was permitted by the defendant to sign checks in the name of the company. He soon began speculating on his own account, and conducted a great many transactions in futures, most of which were carried on the books in the name of C.
We shall first consider the claims of error made by the defendant. The demurrer to the petition was properly overruled. There was no misjoinder of causes of action sounding in tort and on contract. The separate causes of action were all alleged to have resulted from-the failure of the defendant to perform his duties as manager of the company. The cause was a proper one for reference, and the court committed no error in referring it. Before any judgment could have been rendered it was necessary that the books of the company and hundreds of accounts with customers should be examined.
The principal contention of the defendant is that the court should have rendered judgment in his favor on the findings. This contention is based on two propositions: First, that the findings show that the transactions complained of were of a legitimate character, and clearly within the power of the company and of the defendant as general manager; second, that the findings show that defendant’s action in dealing in options and futures was acquiesced in and ratified by the board of directors and stockholders of the company.
In support of the first proposition — that the business was of a legitimate character — counsel refer to the charter of the company, which authorized it to pur
The findings of. the referee are very full and complete with respect to the manner in which the business complained of was conducted on the board of trade at Kansas City, from which it conclusively appears that the losses were caused by the company’s engaging in the very kind of business which the by-laws sought to prohibit. There is no pretense of an express ratification of the acts of the defendant by the company. The only claim of ratification is based on findings which show that the board of directors knew that a membership had been purchased on the board of trade, that John W. Moore had been employed as floor salesman, that the company was acting as broker for customers dealing in futures, and that the company itself was doing business of that character. In addition, it is claimed that the matter was discussed at one of the annual meetings and some of the stockholders protested against the company’s dealing for itself or others in speculative contracts. The board of directors could not bind the association by any ratification of transactions which the by-laws expressly prohibited, because the by-laws applied as much to the directors as to the defendant and furnished the rules of conduct for all officers of the association. The provision of the by-laws prohibiting speculation in options was never repealed. It can not therefore be said that the company ratified the defendant’s acts in conducting the business complained of.
We come now to the claims made by the cross-petition in error. These are based, first, on the contention that judgment should have been rendered on the findings of the referee in favor of the plaintiff for the full amount of the losses sustained by the Senter deals. It is urged that defendant’s liability for these losses.
The next question presented by the cross-petition arises over what is known as the “hedge account.” The findings show that the company, under the direction and management of the defendant, purchased options on wheat for the purpose of “hedging” — that is,
We have carefully considered all the matters urged by both petitions in error and find nothing further which requires comment or which alters our view of
It is therefore ordered that the judgment be modified in accordance with this opinion, and judgment is directed in plaintiff’s favor for the sum of $2262.49.