Crown Paving & Construction Co. v. Walla Walla County

Mitchell, J.

— Since 1911, the plaintiff has been a corporation organized under the laws of the Province of Alberta, Dominion of Canada, with its office and principal place of business at Calgary. By the laws of the province and the articles and by-laws of the corporation, its business is required to be managed by a board of directors, the three officers of which, at the dates of the transactions here involved, were a president, a vice-president, and a secretary-treasurer and manager. The board of directors elected R. C. Marshall as managing director and made him alone the general and controlling agent of the corporation in its financial and business dealings. The powers or duties of its president were limited to presiding at the meetings of the directors and shareholders. In 1920, it commenced to do business in this country. First, it forwarded from its home office a bid for a contract for road work in this state. Thereafter it sent its president into this state and Montana to assist in procuring information necessary in making bids for contracts for the construction of highways, with specific and limited instruction to make no bid except upon positive directions by tbe manager of the corporation. At one place in Montana, and at Prosser and Walla Walla in this state, the public authorities, at about the same time, were calling for bids for street or highway improvements, of which the plaintiff was advised by its president, who visited the different localities.

To facilitate its business the plaintiff furnished its president with two drafts, one for $10,000 and the other for $3,700, drawn by its bank in Calgary on New York, with instructions not to use either until directed to do so. The county of Walla Walla advertised for sealed bids to be opened at two p. m., April 30, 1920, for the paving of two pieces of road, requiring each bid to be accompanied “by a certified check in ten per cent of the amount of the bid, conditioned that the check be forfeited to Walla Walla county if the party making such bid fail or neglect to enter into a written contract and give bond within ten days after date of award for the faithful performance of the contract. ’ ’ This is admitted by the answer, by failure to deny it. The president of the corporation was positively instructed by the manager, by two telegrams, not to bid for either of the jobs. Nevertheless, he did make written bids in the name of the corporation, one for $199,672.10, to which he attached the $10,000 draft, and the other for $72,399.29, to which he attached the $3,700 draft. Both drafts were drawn payable to the treasurer of Walla Walla county and were in no way endorsed by the president of the corporation in his own name or otherwise. Both bids were accepted, but prior thereto the county commissioners were notified by plaintiff’s president that he had no power to enter into the contract, which would have to be forwarded to Calgary for that purpose. Contracts were prepared and forwarded to the home office of the plaintiff, and on May 8, by telegram and letter, it advised the county commissioners, in effect, that notwithstanding the president had been instructed not to make the bids (by three telegrams, the last of which, however, did not reach him until after the bids were in), the corporation had, upon getting the proposed contracts, taken the matter up with its bank and bonding company, but found that, on account of other obligations and circumstances, sufficient bond could not be arranged for both contracts, but that it was willing to carry out the smaller of the two projects if the county so desired.

On May 11, ten days after the awards were made, the county commissioners canceled the awards and at once accepted bids and entered into contracts for both projects with another bidder whose certified checks had been held from the date of the opening of the bids. Thereupon the plaintiff demanded a return of the $13,700, which was refused, and the county commissioners, upon notice and over the protest of the plaintiff, declared the whole amount forfeited. This suit followed to recover the money forfeited, together with interest from the commencement of the suit, with the result of a judgment in favor of the county, from which the plaintiff has appealed.

On the testimony of both the manager and president of the appellant, and also upon that of all three of the county commissioners on the subject of the good faith of the appellant, the trial court was of the opinion that “there.is nowhere any suggestion or claim of bad faith on the part of any person involved in this transaction.”

It has already been noticed that plaintiff’s president violated positive instructions in submitting the bids. There is no evidence tending to show that he had any express authority to make the bids, or that he had been clothed with apparent authority, or that he had ever before executed any such bids, or that he had ever been held out by the appellant as having such authority, or that his acts of bidding had been ratified. In the case of Lewiston Water & P. Co. v. Brown, 42 Wash. 555, 85 Pac. 47, we quoted with approval the rule as stated in 10 Cyc. 903, as follows:

“ ‘The president of a private corporation is, as the term implies, the presiding officer of its board of directors and of its shareholders when convened in general meeting. The office itself, however, confers no power to bind the corporation or control its property. The president’s power as an agent must be sought in the organic law of the corporation, in a delegation of authority from it, directly or through its board of directors, formally expressed or implied from a habit or custom of doing business. ’ ’

See, also, Oldfield v. Angeles Brewing & Malting Co., 77 Wash. 158, 137 Pac. 469; 2 Thompson on Corporations (2d ed.), § 1450 et seq.

The argument on behalf of the respondent that the drafts furnished by the appellant from its home office to the president of the corporation and by him attached to the bids were tokens of implied or apparent authority of the president to bind the appellant is convincingly overcome by the fact that the drafts in no way bore the name of appellant, and, also, because the $13,700 is noticeably deficient to justify or support bids amounting to $272,071.39 on calls requiring a deposit of ten per cent of the amount of the bids. Rather than constituting apparent authority it was, under the circumstances, notice to the county commissioners of lack of authority to make the bids in question.

In the case of Donaldson v. Abraham, 68 Wash. 208, 122 Pac. 1003, wherein a bidder for county work was relieved from the forfeiture of a certified check submitted with, his hid because by mistake aud inadvertence the bid was in a sum much less than was intended, it was held that, where the mistake relied on was of the kind and made under circumstances ordinarily giving a court of equity jurisdiction for the purpose of granting relief, “equity has the same power to relieve from forfeitures provided for by statute as it has to relieve from forfeitures provided for by ordinary contract.” But the present case is stronger than that for the appellant, because it appears in this case that the mind of appellant, who seeks to be relieved from a forfeiture of its funds, never met the mind of the other party which declared the forfeiture and appropriated the funds, for the reason, as already noticed, the person who deposited the money was without authority to do so.

It is insisted, however, that if the president of the corporation was unauthorized to make the bids and deposits, nevertheless the appellant is bound because of its subsequent ratification of those acts. But we do not understand there was any ratification. The conduct of the appellant relied on in this respect was that, upon learning of the unauthorized act of its president, it determined upon a line of business dealing-consistent with the knowledge of the right and power to ratify and, accordingly, promptly attempted to make arrangements with its bonding company and bank so it could accept the situation, but upon learning it could not effect such arrangement, it just as promptly notified the commissioners to that effect, saying, however, it would take the smaller contract if desired by the board. This the board refused to do. By its conduct the appellant profited in no manner whatever, nor did it disadvantage the respondent, which was in just the same situation as if the so-called bids of appellant had never been filed. At once the respondent accepted the lowest bids that had actually been made, by parties whose forfeit money had never been released, and without any expense by way of readvertising for bids or otherwise, entered into contracts under which the improvements were made.

Upon consideration of the whole record in the case, we are satisfied that the judgment should be, and it is, reversed with directions to grant the relief prayed for.

Parker, O. J., Fullerton, Tolman, and Bridges, JJ., concur.