Kasch v. Farmers' Gin Co.

3 S.W.2d 72, 1928 Tex. App. LEXIS 1296
CourtTexas Commission of Appeals
DecidedFebruary 29, 1928
DocketNo. 884-4536
StatusPublished
Cited by12 cases

This text of 3 S.W.2d 72 (Kasch v. Farmers' Gin Co.) is published on Counsel Stack Legal Research, covering Texas Commission of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kasch v. Farmers' Gin Co., 3 S.W.2d 72, 1928 Tex. App. LEXIS 1296 (Tex. Super. Ct. 1928).

Opinion

SPEER, J.

Tbe Farmers’ Gin Company is a corporation whose charter purpose is “constructing or purchasing, operating and maintaining, cotton gins.” During the period intervening July and December, 1920, Car-miehall was its employee, with authority to hire and discharge men whose services were required to operate the gin plant during that season and to purchase such materials as might be necessary for the operation. He was given no authority to act for the corporation in respect to a contract or the subject-matter there of such as that in controversy-— any such authority was definitely precluded when he was employed. Nevertheless, in August, 1920, he signed a contract in the corporation’s name with Kasch, whereunder Kasch agreed to sell to the corporation 1,000 bushels of certain “pedigreed cotton seed” at $3.40 per bushel, to be delivered about January 1, 1921, and to be resold (for planting purposes) to farmers in the vicinity of the gin plant. No officer or director or agent of the corporation (except Carmichall) Knew that any such contract had been made prior to the 6th or 7th day of January, 1921. The cotton seed were shipped from San Marcos early in January, 1921. Kasch drew a draft (with bill of lading attached) upon the corporation, and forwarded it to a bank at Blum for collection. The draft was presented to the corporation (through its president and other officers), and payment was declined with the statement that the corporation had not bought or agreed to buy the cotton seed. ' Through presentation of the draft and investigation which followed, the officers of the corporation, for the first time, learned of the contract and Oarmichall’s acts.

Ed Kasch and Herman Conrad (alleging that they did business as partners in the name of “Ed Kasch”) sued upon the contract and its breach. The corporation, amongst other defenses, set up ultra vires. Peremptory instruction was requested by the corporation and refused by the court. The case was submitted on special issues, and, upon a verdict finding that plaintiff knew of no limitation upon Carmichall’s authority, that “the purchase of planting seed for distribution to customers, was customary among gin men, was reasonably incident to and for the purpose of furthering and promoting the gin business,” etc., judgment was rendered against the corporation. Upon appeal, the Court of Civil Appeals held the contract to be ultra vires, and therefore unenforceable, and reversed the judgment, rendering judgment-for the corporation. 277 S. W. 746. Writ of error was allowed upon assignments presenting an intra vires nature for the contract.

The contract upon which the suit was predicated was clearly not ■ within the express powers of the defendant in error corporation. Whether or not it falls within the implied powers must be determined from the principles announced in our decisions, from some of which we quote:

“Whatever be a company’s legitimate business, the company may foster it by all the usual means; but it may not go beyond this. It may not, under the pretext of fostering, entangle itself in proceedings with which it has no legitimate concern. • * * In short, if the means be such as are usually resorted to and a direct method of accomplishing the purpose of the incorporation, they are within its powers; if they be unusual and tend in an indirect manner only to promote its interests, they are held to be ultra vires. * * ⅜ A corporation, created * * * under a statute' which merely states the nature of the business and does not further ' define its powers, may exercise such powers as are reasonably necessary to accomplish the purpose of its creation; and it may be such as are usually incidental in practice to the prosecution of the business, and no more.” Northside R. Co. v. Worthington, 88 Tex. 562, 30 S. W. 1055, 53 Am. St. Rep. 778.
“Corporations have an implied power to make such contracts as are usual and necessary for carrying into effect the purposes for which they were created. * * * ‘The power, of a corporation, in respect to contracts and business dealings, extends not merely to those which are absolutely essential or indispensable to the performance of the specified acts authorized by its charter, but as well to those which, not being prohibited by statute or public policy, are designed and may be useful to promote the main enterprise. The choice of means which are reasonably promotive of the main purpose is with the corporation; and where different methods stand this test, judicial tribunals will not revise its discretion by holding that the one chosen was not indispensable, and that another might have been more wisely taken.’ ” Indianola v. Gulf, W. T. & P. R. Co., 56 Tex. 602.
“It is our opinion that a corporation in the transaction of its business, the business for which it was organized, has ihe same latitude as the individual in the same character of business in those things that are essential to the successful operation of that particular business.” Sealy Oil Mill & Mfg. Co. v. Bishop Mfg. Co. (Tex. Com. App.) 235 S. W. 850.
“Every corporation is created with certain express powers. Being endowed with these express powers, it has the implied power to do whatever is necessary or reasonably appropriate to their exercise. It has, in a word; the authority to i do whatever will legitimately effect the express purposes- of its creation.” Bowman Lumber Co. v. Pierson, 110 Tex. 545, 221 S. W. 930, 931 (11 A. L. R. 547).
“Undoubtedly the main business of a corporation is to be confined tó that class of operations -which properly appertain to the- -general purposes for which its charter was granted. But it may also enter into contracts and'engage [74]*74in transactions which are incidental or auxiliary to its main business, or which may become necessary, expedient, or profitable in the care and management of the property which it is authorized to hold under the act by which it was created.” Texas Fidelity & Bonding Co. v. General Bonding & Casualty Ins. Co. (Tex. Com. App.) 216 S. W. 145.

To erystalize the rule, it may be said the implied powers of a corporation embrace those that are reasonably necessary, according to the usual methods of that particular business, to the successful prosecution of the specific business authorized, and is not limited to those things indispensably necessary to the business, provided always the benefits to be derived from the contract are direct, and not so indirect as to be remote.

Under the charter of defendant in error, it had the full power to operate and maintain its cotton gin in the usual manner such business enterprises were conducted, and, the purchase of planting seed for disposition to customers having been found by the jury to be customary among gin men, and it being evident that such custom is not only reasonably helpful and necessary, but that it directly contributes to the successful operation of the gin business, the question of the contract’s being ultra vires must be settled in favor of the power.

What is the usual and customary method of operating a business is essentially a question of fact, for such custom and usage change with time. The writer is not an old man, and yet he recalls vividly as though it were yesterday, that in an earlier day in Texas the gin business was not what it is to-day. In those days, the ordinary gin plant consisted of an unpretentious equipment frequently of a capacity of two bales per day (twelve hour time).

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Cite This Page — Counsel Stack

Bluebook (online)
3 S.W.2d 72, 1928 Tex. App. LEXIS 1296, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kasch-v-farmers-gin-co-texcommnapp-1928.