Blen v. Bear River & Auburn Water & Mining Co.

20 Cal. 602, 1862 Cal. LEXIS 82

• Court: California Supreme Court
• Decided: July 1, 1862
• Status: Published

Opinion

Cope J. delivered the opinion of the Court—Field, C. J. and Norton J. concurring.

The plaintiff sues to recover a sum of money alleged to be due him on a sale to the defendant of certain ditch property. The defendant is a corporation, and the contract for the property was made on its behalf by one Eeall, who was its President, and a member of the Board of Trustees. The answer puts in issue the authority of Eeall to make the contract, and sets up certain matters of fraud and misrepresentation as destroying its validity. These constitute the principal points of inquiry in the case, and we shall consider them without reference to the particular exceptions taken at the trial.

On the question of authority, the plaintiff relies upon the general powers of Eeall as President, and upon a ratification by the Board of Trustees, and various acts showing an acceptance of the contract. It is clear that Eeall had no such authority merely as President, for his powers in that capacity only extended to matters arising in the ordinary course of the business of the corporation. Outside of these matters he had no power to bind the corporate body, and he was not authorized to make contracts for the purchase of property, unless required in the usual course of business. The property purchased was for the use of the corporation, but the object in view was to extend its operations, and the purchase was of no utility for any other purpose.

The evidence of a ratification by the Board of Trustees is drawn from the record of its proceedings, and it is contended that taking the contract and the record together, no ratification appears. It is claimed that the Board acted upon information communicated by Eeall hi a written report upon the subject, some of the provisions of the contract being omitted in the report. The report does not profess to give the details of the contract in every respect, but states generally the fact of the purchase, and the price to be paid; and points out the advantages to result from the transaction. The record recites that the Board, by an unanimous vote, ratified the “ report and proceedings,” Eeall being present, participating in the ratification. The position taken is that the Board based its action solely upon the report, and was not sufficiently informed of the terms of the contract to make the ratification binding. In other words, that the Board acted in the matter without a knowledge of the facts, and that a ratification under such circumstances is not valid and cannot be enforced. The rule invoked is undoubtedly correct, but we do not consider the case a proper one for its application, as in our opinion the point raised rests upon a mere assumption. As Hoall was present, it is hardly to be supposed that the report was received and voted upon in silence, for the matter was of too much importance to be disposed of in that manner. The natural presumption is that it was fully considered, and the particulars inquired into and explained, and the idea that this was not done is certainly at variance with the usual mode of conducting business. If it were not for the report, no doubt could possibly be entertained upon the subject, for the ratification amounts in itself to presumptive evidence of everything required to sustain it. A ratification supposes a knowledge of the thing ratified, and in the case of a contract the inference from the ratification is that its provisions were known. When the ratification is proved, this inference necessarily follows, and if there was any mistake or misapprehension, that fact must be shown. There is no evidence of any mistake in this case, and we cannot infer that the Board knew nothing of the contract except through the medium of the report. The circumstances indicate a different state of facts, for it is unreasonable to suppose that the Board, with Heall at its head, confirmed the contract in ignorance of its terms. It cannot be said that the contract was not included in the ratification, for the “ proceedings ” were ratified as well as the report, and the “ proceedings ” embraced the contract. It amounted to an express ratification of the contract; and the mere fact that the report does not state all its provisions, is no evidence that the Board was ignorant upon the subject. In this view, it is unnecessary to inquire whether the knowledge of Neall was of itself sufficient to bind the corporation; but we are inclined to the opinion that it was not. A similar question has occasionally arisen in other States, but the decisions are by no means harmonious; nor is there much difference in the weight of authority on each side. The subject is mentioned by Judge Story in his work on the Law of Agency, but he merely refers to it, and arrives at no satisfactory conclusion. He cites the cases, however, and says that upon principle, notice to one trustee, unknown to the other members of the Board, ought not to bind the corporation.

The subsequent acts relied on are the acceptance of a deed, and the talcing possession of and using the property; all of which, however, are consistent with the idea of a ratification by mistake. If it were shown that the Board really acted under a misapprehension of the contract, we should be disposed to regard the subsequent acts as attributable to the same error. If it appeared that the contract had been ratified by mistake, the presumption would bo that the mistake continued throughout; but this, as we have stated, does not appear.

The fraud complained of was fully investigated by the jury, and we are unable to discover any error for which the verdict should be set aside. The evidence was submitted under proper instructions from the Court, and it would require a very clear showing in such a case to induce us to interfere. If any fraud was committed, the fact was known long prior to the commencement of this suit, and it is too late now to avoid the contract on that ground. The offer to rescind should have been made as soon as the fraud was discovered, and the defendant could not remain in possession, quietly enjoying the property, and afterwards repudiate the contract. This is also an answer to the point taken as to a partial failure of the consideration, except so far as such failure is relied upon by way of recoupment. In this respect, however, we think the defense entirely fails, as the defendant undoubtedly received all that was contracted for. There was no breach of warranty, and there is no evidence from which fraud is necessarily to be inferred, and the right to recoup has no foundation to rest upon. It is said that the purchase was of a ditch represented to have priority of right to the water, and that this representation was untrue and intended to mislead. The inference from the evidence is that the plaintiff made it in good faith, believing it to be true, and it is at least doubtful whether even the effect was to deceive. The matter was open to the investigation of both parties, and there is some evidence showing that the purchase was made with knowledge that the priority was disputed. We regard the allegations of fraud, however, as really unworthy of consideration, for the evidence is wholly insufficient to justify the charge of intentional misrepresentation.

We have examined the additional points made, and do not regard any of them as well taken; nor are they of sufficient importance to entitle them to special notice. The only point about which we have entertained a doubt is the rejection of Neall as a witness for the defendant, but we have come to the conclusion that he was properly rejected. We were disposed to regard him as standing in the position of an ordinary agent, and to hold his testimony admissible ex necessitate, as in other cases of agency, but we are satisfied that his interest disqualified him. The exception to the general rule in such cases, so far as the members of a corporation are concerned, seems to be confined to keepers and depositaries of corporate documents. Members acting for the corporation in ordinary matters of business are not included, and when interested they are incompetent to testify. The cases of McAuley v. The York Mining Co. (6 Cal. 80) and Mokelumne Hill Canal Co. v. Woodbury (14 Cal. 265) settle the question of the sufficiency of the interest to disqualify.

The judgment is affirmed.