Schallard v. Eel River Steam Navigation Co.

California Supreme Court Jul 13, 1886 No. No. 9313Published

Before: Foote

AI Brief

AI-generated · verify before citing

Holding. The court held that corporate mortgages signed by proper officers and bearing the corporate seal are presumed valid, and that the absence of formal resolutions in corporate records does not invalidate such instruments when evidence supports their authorization.

Issues

Whether corporate mortgages executed by officers with the corporate seal are valid despite claims of improper director meeting notice.
Whether the absence of formal resolutions in corporate books invalidates mortgages otherwise supported by evidence of authorization.
Whether the trial court erred in denying counsel fees where the authorizing resolutions did not explicitly provide for them.

Disposition. affirmed

Quotations verified verbatim against the opinion

“They have affixed to them the corporate seal, and are proved to be signed by the proper officers. Therefore the latter must be presumed not to have exceeded their authority, and the contrary must be shown by the opposite party.”

“we do not entertain the opinion that the fact that such resolutions do not happen to appear in the proper booh of the corporation, should be held absolutely to disprove their existence”

Synopsis

Corporation—Mortgage—Execution of—Authority of Officers—. Presumption. —A mortgage executed in the name of a corporation by its president and secretary, and having the corporate seal attached, is presumed to have been executed in pursuance of a due authorization to such officers, and the burden of proof is on the corporation to show the contrary.

Id.—Resolutions—Proof of Existence—Validity of Mortgage.—, Where the circumstances surrounding the execution of the mortgage show the existence of proper resolutions of authorization, and support the presumption of its authoritative execution, as shown by affixing the corporate seal and the signatures of the proper officers, the mere fact that such resolutions do not appear in the proper book of the corporation is not sufficient to disprove their existence and invalidate the mortgage.

Id.—Counsel Pees—Resolution must Provide for.—In an action for the foreclosure of a mortgage against a corporation, the plaintiff is not entitled to recover counsel fees if the resolution of the corporation authorizing the execution of the mortgage did not provide that the payment of counsel fees should be secured by it.

Foote, C. The defendant is a corporation formed under the laws of this state, and this action was instituted for the purpose of foreclosing two mortgages, aggregating the sum of $11,941.81, upon the steamer Ferndale, which was constructed by and is the property of the defendant. ,

Those mortgages and the notes, the payment of wjich the former were intended to secure, were executed in the name of that corporation by its president and secretary, with the corporate seal affixed. One of the loans of [145]money was made about one year preceding the commencement of the present action, and the other about fourteen months prior thereto. The money thus obtained was used in the construction of said steamer.

The defense chiefly relied upon is, that the execution of those mortgages was not authorized by the corporation, and that they are invalid as such.

There seems to have been no question but what the money was loaned in the most perfect good faith; that it went toward the building and finishing the steamer of the corporation; that the board of directors of the corporation had lawful power, if exercised at lawful meetings by proper resolutions, to borrow the money and execute the mortgages; and that the corporation received adequate benefit from the transaction.

The contention is, that the meetings of the directors were special in their character, and without proper and legal notice being given to some of the directors who were absent therefrom.

The findings state the fact to be, among other things, that the meetings at which these loans and mortgages were authorized were “ adjourned meetings ” from regular meetings of said board of directors, and that a majority of said board was present, and that no other notice of said meeting was required by the by-laws of the corporation, except said by-laws stated that regular meetings should be held every three months.

It does not appear that any one of the directors, whether present or absent, objected to the negotiation of the loans or the execution of the mortgages, either at the time it was done or afterwards, which, while it does not affect the question of the legality of their execution, does go far to make it evident that the transaction was a fair one, destitute even of the smallest degree of turpitude. In fact, it seems to be conceded on all sides that the corporation is legally liable for the money in a

Schallard v. Eel River Steam Navigation Co.

AI Brief

Synopsis

More from California Supreme Court

Related research

AI Brief