that the road master and conductor have no authority to employ surgeons for employees, in the service of a railway company. And there is a similar decision in England in respect of the station master. In a case decided recently in Texas a finding by the jury that one who had the control and direction of the entire business affairs of a railroad company, and whose duty it was to prepare the case of the company in litigations affecting it, had authority to institute a prosecution for per jury, alleged to have been committed in any such litigation, was sustained by the court. A corporation organized and chartered for the purpose of holding the title to a college building and property erected and maintained by a religious denomination, is bound by contracts made by the synod of the denomination for the erection of the building, the synod being a shifting, unincorporated body, which, however, controls the denomination." plaintiff should be the latter's subcontractor in such a manner as to be subrogated to his rights. A subsequent meeting of defendant's board of directors approved the contract with D., and a proposed agreement by D. with plaintiff was also approved, and the board agreed to accept plaintiff as subrogated to D.'s rights and liabilities on the execution of the contract with D. by plaintiff. At the same meeting L. and S. were appointed counsel and chief engineer respectively of defendant, and L. sent plaintiff a copy of the resolution concerning D.'s contracts with the company and plaintiff. L. and S. had been previously designated as counsel and engineer in a printed circular, but had not been formally appointed such. Plaintiff's advances and services were given with the knowledge and consent of S. and L., and were essential in preparing to construct a railroad, and drawings paid for by plaintiff were approved by defendant's president. The construction of a railroad was defendant's only immediate object, and plaintiff had a practical knowledge of that business. Another person, who represented the stockholders, was active in the negotiations with plaintiff. And it was decided that plaintiff was entitled to assume that the persons with whom he dealt represented and acted with the authority of defendant, and that, on defendant's refusal to award him the contract, he could recover for his services and expenditures. Wilson v. Kings County Elevated R. Co., (1889) 114 N. Y. 487; s. c. 6 Ry. & Corp. L. J. 342. 1 Peninsular R. Co. v. Gary, (1886) 22 Fla. 356; s. c. 1 Am. St. Rep. 194. 2 Cox v. Midland Counties Rv. Co., 3 Ex. 268, which, however, say Brown & Theobald, would probably not now be followed. Brown & Theobald's Ry. Law, 108. 3 Gulf, C. & S. F. Ry. Co. v. James, (1889) 73 Tex. 12. 4 McLaughlin v. Concordia College, (1885) 20 Mo. App. 42. 191. Authority of promoters.- Promoters are a class of quasi agents, voluntary officials in advance, that are neither officers nor agents of the new company, but who do it the service of bringing it into being, and who are held to sustain a fiduciary relation to the company similar to that of an agent to a principal. A promoter is one who undertakes to form a company with reference to a given project and to set it going, and who takes the necessary steps to accomplish that purpose. The old and familiar principles of the law of agency and trusteeship have been extended to meet cases of promoters. Persons agreeing together to take measures to organize a company, and for that purpose drawing up the subscription paper and signing and circulating it, and selling lands to the company and dividing the profits, may be regarded as part 2 Cockburn, C. J., in Trycross v. Grant, (1877) 2 C. P. Div. 541. "The term 'promoter' involves the idea of exertion for the purpose of getting up and starting a company (or what is called 'floating' it), and also the idea of some duty towards the company ímposed by or arising from the position which the so-called promoter assumes toward it before it comes into existence." Emma Silver M. Co. v. Lewis, 4 C. P. Div. 396. In this case it was further said that it was a "mistake to suppose that after a company is registered its directors are the only persons who are in such a position towards it as to be under fiduciary relations to it. A person, not a director, may be a promoter of a company which is already incorporated, but the capital of which has not been taken up, and which is not yet in a position to perform the obligations imposed upon it by its creators." 66 1 Chandler v. Bacon, (1887) 30 Fed. in this case, however, said that it Rep. 538. was not correct to say the defendant in the case was the agent of the company, when it did not exist, and that it was not much less objectionable to talk of his being in a fiduciary relation to the company before it was organized. 'The word 'promoter' is ambiguous, and it is necessary to ascertain in each case what the so-called ' promoter' really did before his legal liabilities could be accurately ascertained. . . . In the present case defendant procured the company to be formed and to be managed in such a way as to transfer from the moneys of the company to himself the sum of 10,800l. without informing the company of that fact. The company were told that they had to pay 100,000l. for the property, but they did not know that of that sum 10,800l. was to go into the pockets of the man who had got the company up and who had in fact increased the purchase money in order to get that 10,8007. Under those circumstances he cannot retain the sum so got." Lydney &c. Co. v. Bird, (1886) 55 L T. N. S. 560, overruling same case in 81 Ch. Div. 328. The judge ners,' and this, as to all others who may subsequently become members or subscribers to the new company.2 § 192. Misrepresentations of officers and agents.— A corporation may be held responsible for false and fraudulent misrepresentations of its officers and agents whilst acting within the scope of their authority, in the same manner as other principals may be rendered liable by such acts on the part of their agents. But if the officer was ignorant of the untruthfulness of the representations when he made them, and he alone transacted all the business in reference to the contract, it will be presumed, in the absence of evidence to the contrary, that the corporation was ignorant of the falsity of the representations. Where the authority of a corporate agent to enter into a certain contract apparently within the scope of his general powers, depends upon the existence of some fact particularly within his knowledge, the company is bound by his representations in respect thereof whether they be true or false. Thus where an applicant for insurance can neither read nor write, and has no knowledge of the contents of his application, which is made out by the insurer's agent, he is not bound by statements falsely made therein by the agent, who 1 Getty v. Devlin, (1873) 54 N. Y. bury, L. R. 9 Q. B. 301. Apparently 413. But vide supra, § 160. 2 Densmore Oil Co. v. Densmore, (1870) 64 Pa. St. 50; Emery v. Parrott, (1867) 107 Mass. 103. The rule that partners are not at liberty to make individual profits out of the business of the concern without the knowledge and assent of their associates is peculiarly applicable to transactions which precede the formation of companies or partnerships. Simons v. Vulcan Oil &c. Co., (1869) 61 Pa. St. 217, referring to Lindley on Partnership, 497. Mackay v. Commercial Bank, L. R. 5 P. C. 394; Weir v. Bell, 3 Ex. Div. 238; Weir v. Barnett, 3 Ex. Div. 32; Sevire v. Francis, 3 App. Cas. 106; Barwick v. London Joint-Stock Bank, L. R. 2 Ex. 259; Swift v. Jews contra is Western Bank v. Addie, 4 Watson Coal & Min. Co. v. James, (1887) 72 Iowa, 184. 5 Story on Agency, 452; New York &c. R. Co. v. Schuyler, 34 N. Y. 30, 68; Griswold v. Haven, 25 N. Y. 601; s. c. 82 Am. Dec. 380; Beach on Railways, § 501. is the agent of the insurer, and not of the insured, in what he does and the statements he makes in preparing the application.1 Again, where the questions asked the assured by an insurance agent are answered truthfully, but the agent writes down false answers, and cheats the assured into signing a false warranty and paying the premium, a policy issued thereon can not be avoided on the ground that the warranty was false. But in that case the insurer will not be estopped from setting up their falsehood in an action on the policy, where a copy of the application was indorsed on the back of the policy, and in the possession of the insured before the loss occurred, as he is then chargeable with knowledge of its contents, whether he read it or not, and by failing to procure a correction or rescission of the contract he becomes a party to the agent's fraud. To render the declaration of an officer admissible in evidence it must be shown either that he had authority to make the statement, or that he was held out as the proper officer to whom to apply for information, or that he had some duty to perform in the premises.* $193. Unauthorized acts- (a) In general. It is a general rule, founded upon unbroken authority, that a corporation is bound only by such acts of its officers or agents as have been either expressly or by implication authorized." Acts, however, which are performed by officers within their apparent power form an exception to the rule. And this exception goes so far that even their fraudulent acts may operate to bind the company.' But an incorporated company can not 1 State Ins. Co. v. Jordan, (Neb. 1890) 45 N. W. Rep. 792. 2Dwelling-House Ins. Co. v. Gould, (Pa. 1890) 19 Atlan. Rep. 793. 'Johnson v. Dakota F. & M. Ins. Co., (N. D. 1890) 45 N. W. Rep. 799. Tuthill Spring Co. v. Shaver Wagon Co., (1888) 35 Fed. Rep. 644, 5 The general doctrine is applied in the following cases: Kelsey v. Sargent, 40 Hun, 150: De Bost v. Albert Palmer Co., 35 Hun, 386; Little v. Kerr, (1886) 44 N. J. Eq. 263; Mutual Ins. Co. v. McSherry, (1888) 68 Md. 41; Rice v. Peninsular Club, (1883) 52 Mich. 87; Gregory v. Lamb, 16 Neb. 205; Dale v. Donaldson Lumber Co., (1886) 48 Ark. 188; and in Moshannon Land Co. v. Sloan, (1885) 109 Pa. St. 532, it was further held that if the principal was not bound on an unauthorized contract made in its name by its agent, the agent was bound. 6 Vide supra, § 191; Morawetz on Corp., (2d ed.) § 585; Eaglesfield v. Marquis of Londonderry, 4 Ch. Div. 693. 7 Vide supra, § 195. be called to answer in an action of deceit for false representations made by its employees, unless it has authorized the false representations.' The general rule is further modified by the fact that unauthorized acts may be ratified or acquiesced in by the corporation, and thus bind it. In considering the effect of ratification, however, the distinction between unauthorized acts of officers, directors and agents and acts done by them in excess of the corporate powers, should be borne in mind.3 It is self evident that a corporation is not bound by engagements of its promoters, assuming to contract for it in advance; though it may, by adopting such contracts, make them its own. It is just as plain that even a president can not bind the company by an act after he has ceased to hold the office." A corporation will not be bound by contracts to pay fictitious claims, or by a vote by the directors of large salaries to its president and secretary under circumstances showing conspiracy. And it has been decided generally that a person, in acting at the instance of a director who assumes powers never delegated to him, does so at his own peril and creates no charge against the corporation." 1 Houston & Texas Central R. Co. v. McKinney, (1881) 55 Tex. 176. So, in an action against a corporation for deceit by false representations made by its agent on the sale of goods manufactured and sold by it for a particular purpose, there can be no recovery without proof of bad faith or absence of reasonable grounds of belief. Erie City Iron Works v. Barber, (1884) 106 Pa. St. 125; s. c. 51 Am. Rep. 508. 2 Mutual Life Ins. Co. v. McSherry, 68 Md. 41; Metropolitan &c. Co. v. Domestic &c. Co., 43 N. J. Eq. 626. Vide infra, §§ 197-201. 3 "The expression, 'unauthorized acts,' is used to designate those contracts or transactions which a corporation, without exceeding its charter or statutory powers, might have authorized its directors, officers and agents to perform, but which they have entered into without that au thority, either express or implied." Beach on Railways, § 499. 4 Battelle v. Northwestern &c. Co., (1887) 37 Minn. 89. 5 New York &c. Ry. Co. v. Bates, (1887) 68 Md. 184. In this case, in an action for personal services against a railroad company, defendant asked that the jury be instructed that if they found from the evidence that the unpaid vouchers of plaintiff were not signed and approved by one P. until he had ceased to be president of the road, then, in the absence of proof that any other official of the company had authority to sign and approve them, the vouchers in themselves were not evidence of indebtedness, and the jury were not at liberty to consider them. This was improperly refused. Kelsey v. Sargent, 40 Hun, 150. 7 Rice v. Peninsular Club, 52 Mich. 87. |