The plaintiffs, copartners doing business as public accountants under the name of Respess Respess, brought suit against the defendant, a corporation, to recover for services rendered in auditing and reporting the condition of the defendant's business. On the trial the plaintiffs offered in evidence the following resolution appearing in the minutes of a regular annual meeting of the stockholders of the defendant held on 6 February, 1923: "Mr. W. D. Adams offered the following resolution in writing, to wit: Resolved that Allen J. Graham, W. C. Wilkinson and W. D. Adams be authorized to employ auditors to examine the books of the company covering the period since acquisition by them of stock in the corporation. (Signed) W. D. Adams, J. H. Mayes."
After the introduction of other record evidence and the examination of several witnesses this verdict was returned:
1. Is the defendant indebted to the plaintiffs? Answer: Yes.
2. If so, in what amount? Answer : $4,266.66.
Judgment for the plaintiffs. Appeal by defendants on assignments of error appearing in the opinion.
Two propositions constitute the basis of the defendant's motion for nonsuit: (1) The resolution purporting to authorize the employment of auditors was not adopted or approved by the directors, but by the stockholders in a meeting at which all the stockholders were not present or represented. (2) When they made the audit the plaintiffs had not complied with the law prescribed for public accountants. In our opinion neither of them assigns sufficient cause for dismissing the action.
With respect to the first we do not think it necessary to enter into a discussion of the duties devolving respectively upon the stockholders and the directors of a corporation. Pursuant to the resolution adopted by the stockholders in their regular annual meeting the plaintiffs were employed to audit the defendant's books; they made a detailed audit covering the time elapsing between 1 January, 1920, and 31 December, 1922; they presented and explained their audit to the
stockholders in a meeting held 29 June, 1923, upon notice duly given; and their report was "accepted as information" by the stockholders. With the resolution upon the minutes, this appropriation of the plaintiffs' audit was a recognition of the alleged agreement with the plaintiffs; it was a ratification by the stockholders even if the directors had not authorized the committee to act in the premises. As the contract was not ultra vires
it was not beyond the power of corporate ratification. By subsequent recognition it became as effectual and binding as if the committee had had undisputed power to bind the defendant. This on the principle that the defendant could not accept the benefit of the report and repudiate the agreement under which the report was made, or profit by the agreement and repudiate the authority of the agent by whom it was made. The ratification of an act by one who assumes to be an agent relates back, and is equivalent to a prior authority. 7 R. C. L., 662 (663), and cases cited; Greenleaf v.R. R., 91 N.C. 33; Taylor v. Navigation Co., 105 N.C. 484; Starnes v.R. R., 170 N.C. 222; Morris v. Basnight, 179 N.C. 298. The absence of some of the stockholders did not impair the force of the resolution. We have held that if an act is to be done by an incorporated body, the law, resolution, or ordinance authorizing it to be done is valid if passed by a majority of those present at a legal meeting. Hospital v. Nicholson,189 N.C. 44; Cotton Mills v. Comrs., 108 N.C. 678.
Now, as to the defendant's second proposition. The plaintiffs are public accountants under the laws of the State of Georgia; but neither the plaintiffs nor H. T. Amason, who was assigned as their employee to do the work in the defendant's mill, had a public accountant's certificate as required by the laws of North Carolina. C.S., 7008 et seq. Section 7023, provides that if any person shall practice in this State as a certified public accountant without having received such certificate he shall be guilty of a misdemeanor; and section 7020, defines a public accountant as one "actively engaged and practicing accounting as his principal vocation during the business period of the day." The Revenue Act, Schedule B, imposed on public accountants the sum of five dollars as a license tax for the privilege of carrying on their business and made it unlawful for any person to carry on any business for which a license was required without having the license or a duplicate thereof in his actual possession at the time. Laws 1921, ch. 34, secs. 31, 88; Laws 1923, ch. 4, secs. 29, 95. The defendant contends that in breach of these statutes the plaintiffs in making the audit practiced the profession or carried on the business of public accountants in this State and hence cannot force the defendant to comply with its executory agreement to pay for their services. It is not doubt true that as a rule a contract will not be enforced if it rests upon a consideration which contravenes good
morals, public policy, or the common or statute law. In Sharp v. Farmer,20 N.C. 255, it is said: "After a vast number of cases upon the subject, it seems to be now perfectly settled, that no action will be sustained in affirmance and enforcement of an executory contract to do an immoral act, or one against the policy of the law, the due course of justice, or the prohibition of a penal statute"; and in Covington v. Threadgill,88 N.C. 186, it was held that the courts of this State have never recognized any distinction in this regard between the effect of statutes declaring certain acts to be unlawful and the effect of those imposing a penalty. Also in Courtney v. Parker, 173 N.C. 479: "It is well established that no recovery can be had on a contract forbidden by the positive law of the State, and the principle prevails as a general rule whether it is forbidden in express terms or by implication arising from the fact that the transaction in question has been made an indictable offense or subjected to the imposition of a penalty." See, in addition to the cases there cited:Blythe v. Lovingood, 24 N.C. 20; Ramsay v. Woodard, 48 N.C. 508; Ingramv. Ingram, 49 N.C. 188; Griffin v. Hasty, 94 N.C. 438; Puckett v.Alexander, 102 N.C. 95; Randolph v. Heath, 171 N.C. 383; Phosphate Co.v. Johnson, 188 N.C. 419.
In the case before us the determinative question is whether the plaintiffs in auditing the defendant's books "practiced as," or "carried on the business of," public accountants in North Carolina; and the answer must be sought in our interpretation of the statutes heretofore cited. In trying to ascertain whether a specific act is a breach of a statute we must consider, not only the language, but the scope and purpose of the statute and the object to be secured.
Free access — add to your briefcase to read the full text and ask questions with AI
The plaintiffs, copartners doing business as public accountants under the name of Respess Respess, brought suit against the defendant, a corporation, to recover for services rendered in auditing and reporting the condition of the defendant's business. On the trial the plaintiffs offered in evidence the following resolution appearing in the minutes of a regular annual meeting of the stockholders of the defendant held on 6 February, 1923: "Mr. W. D. Adams offered the following resolution in writing, to wit: Resolved that Allen J. Graham, W. C. Wilkinson and W. D. Adams be authorized to employ auditors to examine the books of the company covering the period since acquisition by them of stock in the corporation. (Signed) W. D. Adams, J. H. Mayes."
After the introduction of other record evidence and the examination of several witnesses this verdict was returned:
1. Is the defendant indebted to the plaintiffs? Answer: Yes.
2. If so, in what amount? Answer : $4,266.66.
Judgment for the plaintiffs. Appeal by defendants on assignments of error appearing in the opinion.
Two propositions constitute the basis of the defendant's motion for nonsuit: (1) The resolution purporting to authorize the employment of auditors was not adopted or approved by the directors, but by the stockholders in a meeting at which all the stockholders were not present or represented. (2) When they made the audit the plaintiffs had not complied with the law prescribed for public accountants. In our opinion neither of them assigns sufficient cause for dismissing the action.
With respect to the first we do not think it necessary to enter into a discussion of the duties devolving respectively upon the stockholders and the directors of a corporation. Pursuant to the resolution adopted by the stockholders in their regular annual meeting the plaintiffs were employed to audit the defendant's books; they made a detailed audit covering the time elapsing between 1 January, 1920, and 31 December, 1922; they presented and explained their audit to the
stockholders in a meeting held 29 June, 1923, upon notice duly given; and their report was "accepted as information" by the stockholders. With the resolution upon the minutes, this appropriation of the plaintiffs' audit was a recognition of the alleged agreement with the plaintiffs; it was a ratification by the stockholders even if the directors had not authorized the committee to act in the premises. As the contract was not ultra vires
it was not beyond the power of corporate ratification. By subsequent recognition it became as effectual and binding as if the committee had had undisputed power to bind the defendant. This on the principle that the defendant could not accept the benefit of the report and repudiate the agreement under which the report was made, or profit by the agreement and repudiate the authority of the agent by whom it was made. The ratification of an act by one who assumes to be an agent relates back, and is equivalent to a prior authority. 7 R. C. L., 662 (663), and cases cited; Greenleaf v.R. R., 91 N.C. 33; Taylor v. Navigation Co., 105 N.C. 484; Starnes v.R. R., 170 N.C. 222; Morris v. Basnight, 179 N.C. 298. The absence of some of the stockholders did not impair the force of the resolution. We have held that if an act is to be done by an incorporated body, the law, resolution, or ordinance authorizing it to be done is valid if passed by a majority of those present at a legal meeting. Hospital v. Nicholson,189 N.C. 44; Cotton Mills v. Comrs., 108 N.C. 678.
Now, as to the defendant's second proposition. The plaintiffs are public accountants under the laws of the State of Georgia; but neither the plaintiffs nor H. T. Amason, who was assigned as their employee to do the work in the defendant's mill, had a public accountant's certificate as required by the laws of North Carolina. C.S., 7008 et seq. Section 7023, provides that if any person shall practice in this State as a certified public accountant without having received such certificate he shall be guilty of a misdemeanor; and section 7020, defines a public accountant as one "actively engaged and practicing accounting as his principal vocation during the business period of the day." The Revenue Act, Schedule B, imposed on public accountants the sum of five dollars as a license tax for the privilege of carrying on their business and made it unlawful for any person to carry on any business for which a license was required without having the license or a duplicate thereof in his actual possession at the time. Laws 1921, ch. 34, secs. 31, 88; Laws 1923, ch. 4, secs. 29, 95. The defendant contends that in breach of these statutes the plaintiffs in making the audit practiced the profession or carried on the business of public accountants in this State and hence cannot force the defendant to comply with its executory agreement to pay for their services. It is not doubt true that as a rule a contract will not be enforced if it rests upon a consideration which contravenes good
morals, public policy, or the common or statute law. In Sharp v. Farmer,20 N.C. 255, it is said: "After a vast number of cases upon the subject, it seems to be now perfectly settled, that no action will be sustained in affirmance and enforcement of an executory contract to do an immoral act, or one against the policy of the law, the due course of justice, or the prohibition of a penal statute"; and in Covington v. Threadgill,88 N.C. 186, it was held that the courts of this State have never recognized any distinction in this regard between the effect of statutes declaring certain acts to be unlawful and the effect of those imposing a penalty. Also in Courtney v. Parker, 173 N.C. 479: "It is well established that no recovery can be had on a contract forbidden by the positive law of the State, and the principle prevails as a general rule whether it is forbidden in express terms or by implication arising from the fact that the transaction in question has been made an indictable offense or subjected to the imposition of a penalty." See, in addition to the cases there cited:Blythe v. Lovingood, 24 N.C. 20; Ramsay v. Woodard, 48 N.C. 508; Ingramv. Ingram, 49 N.C. 188; Griffin v. Hasty, 94 N.C. 438; Puckett v.Alexander, 102 N.C. 95; Randolph v. Heath, 171 N.C. 383; Phosphate Co.v. Johnson, 188 N.C. 419.
In the case before us the determinative question is whether the plaintiffs in auditing the defendant's books "practiced as," or "carried on the business of," public accountants in North Carolina; and the answer must be sought in our interpretation of the statutes heretofore cited. In trying to ascertain whether a specific act is a breach of a statute we must consider, not only the language, but the scope and purpose of the statute and the object to be secured.
To practice a profession or to carry on a business usually signifies the regular pursuit of such profession or business as an occupation, — to make a practice of it, or actively to engage in it customarily or habitually. This definition is not without exceptions. As the Legislature may prohibit a general practice until prescribed conditions are complied with, it may attach the same conditions to a single transaction of a kind not likely to occur otherwise than as an instance of general practice.Collins v. Texas, 223 U.S. 288, 56 Law Ed., 439. But this the Legislature has not done in the cited statutes, and the construction of the act of 1925 is not involved. Laws 1925, 261.
As we have said, the plaintiffs, who have their office in Atlanta, are certified public accountants under the laws of Georgia. Allen J. Graham, one of the three men named in the resolution of the stockholders, went to Atlanta, and there the alleged agreement was made. The plaintiffs then appointed H. T. Amason and three others to do certain work at the defendant's mill. At that time neither of them was a certified
accountant. They spent several weeks at the mill, prepared their audit "in the rough with pencil," and returned to Atlanta and made up their report. Amason was senior accountant; and this was all the work he did in North Carolina.
In these circumstances we are of opinion that the plaintiffs did not practice or carry on the business of certified public accountants in this State within the meaning of the statutes. To carry on the business of a public accountant or to practice as a certified public accountant is much more than is implied in the series of detached acts done by the plaintiffs' representatives in acquiring information upon which to base their report. We are the more inclined to this view because the statutes are penal and should be construed strictly against the offender and liberally in his favor. Also because the act of 1925 was evidently intended to cure the defects or omissions of former statutes. We think the motion for nonsuit was properly overruled.
The first and fifth assignments of error relate to the exclusion of evidence offered by the defendant as to the circumstances under which the resolution of 6 February, 1923, was passed, — particularly that the word "instructed" in the original draft was changed to "authorized" before the resolution was adopted, and that an opinion was expressed by some of those present as to what the resolution would mean should the former be substituted by the latter. The controversy turned on the question whether Graham, Wilkinson, and Adams had been authorized to have an audit made for the defendant or for their own exclusive benefit.
As a general rule the minutes of a corporation are the best evidence of its acts, resolutions, and proceedings; and when they are complete, when no fraud or mistake is shown, and it does not appear that there is any error or omission, parol evidence is not admissible to contradict, modify or vary the record. If the language is ambiguous or its meaning is indefinite, or if the minutes are incomplete and fragmentary parol evidence may be heard to show what was done. Motor Co. v. Scotton, 190 N.C. 194; 4 Fletcher's Cyclopedia, Corporations, sec. 2782 et seq.
The resolution is expressed in language that is clear and unambiguous. Manifestly the three designated stockholders were "authorized" to employ auditors on behalf of the corporation; they were entitled for their own benefit, without a resolution, to reliable information as to the affairs and condition of the defendant and pretended grant of authority to inspect its books and records would have imparted no additional vigor to their legal right. Otis-Hidden Co. v. Scheirich, 22 A.L.R., 19 and annotation. Apart from this the proffered evidence was vague, indefinite, and unsatisfactory. In its exclusion we see no error. It follows that his Honor's instruction as to the first issue was correct and that the seventh assignment must be overruled.
The defendant contended, as the basis of its fourth assignment, that the plaintiffs' audit had been repudiated by the stockholders and offered certain minutes in proof of this contention. The defendant says that as the suit was brought to recover for services rendered if no benefit was received no recovery can be had. The consideration did not necessarily consist of any profit or advantage accruing to the defendant; any benefit to the promisor or any loss or detriment to the promisee is a sufficient consideration. Fawcett v. Fawcett, ante, 679. If the information disclosed was not pleasing to the defendant the plaintiffs' detriment was not for this reason any the less. The fourth assignment is therefore overruled.
To the other exceptions we have given our careful attention and have found them to be without merit.
There is no reversible error in the record.
No error.