Smith v. Los Angeles Immigration & Land Co-operative Ass'n

20 P. 677, 78 Cal. 289, 1889 Cal. LEXIS 583

• Court: California Supreme Court
• Decided: February 27, 1889
• Docket: No. 12396
• Status: Published

Opinion

The Court.

This is a suit on a promissory note purporting to have been executed by one Garey, president of the corporation defendant, in his own favor, and assigned after maturity to the plaintiff;

Conceding for the purpose of this decision that the sum for which the note was given was honestly due from the corporation to its president, the note was, nevertheless, invalid, unless authorized or ratified by the directors.

The judgment of the superior court in favor of plaintiff rests upon a finding that the execution of the note was duly authorized. But the evidence shows that the only authority to execute it was the following resolution: That “all notes held by T. A. Garey, and also by H. J. Crow, be renewed, and two per cent interest per month be allowed.”

There were seven directors of the corporation, and only four — a bare quorum, two of whom were Garey and Crow — were present at the meeting at which the above resolution was attempted to be passed.

It was essential to its adoption that a majority of the quorum should vote for it (Civ. Code, sec. 308); and clearly there could not have been such majority unless the vote of Garey or Crow was counted in the affirmative.

Garey testifies that he did not vote at all upon the resolution, and respondent contends that so far as it concerned the renewal of Garey’s notes, Crow was competent to act. But we cannot assent to this proposition. He was, we think, disqualified by his direct interest in the passage of that inseparable part of the resolution which authorized the renewal of his own notes.

We feel constrained to hold that the finding of an original authority to execute the note sued on is unsupported by the evidence.

As to the claim that the judgment of the superior court may be upheld on the ground that the corporation subsequently ratified the execution of the note, we can only say that upon this point the evidence is conflicting, and as the superior court has made no finding, we cannot supply one.

The fact that the note appeared upon its face to have been executed by Garey on behalf of the corporation was sufficient to charge his assignee with notice of any want of authority to execute it. (Wilbur v. Lynde, 49 Cal. 290; 19 Am. Rep. 695.)

For these reasons, it will be necessary to remand the cause for a new trial, and as the question will necessarily arise in any future trial as to the effect of the judgment pleaded by defendant as an estoppel, we will add that in our opinion the superior court did not err in holding that the plea of estoppel was not sustained by the judgment and findings offered in evidence.

Judgment and order reversed, and cause remanded.