Balfour v. Fresno Canal & Irrigation Co.
Before: Temple
Synopsis
Contract—Ambiguous Terms—Evidence—Conversations with President of Corporation—Ratification of Contract.—The interpretation of a contract entered into between the plaintiff and the defendant corporation by its president, which is susceptible of two different constructions, may be aided by evidence of conversations had between plaintiff and such president, showing how the contract was understood between them. The ratification of the contract by the corporation does not preclude the admission of such evidence; but it conclusively proves the authority of the president to bind the corporation by his negotiations.
Id.—Estoppel of Corporation—Acceptance of Contract Cum Onere.— The corporation, by accepting the contract, took it cum onere, and cannot insist upon its contract rights, and repudiate the representations of its president, which constituted the inducement to plaintiff to make the contract.
Id.—Ratification—Knowledge of Facts by Principal—Applicability of Rule.—The rule that a principal will not be held to a ratification unless he acts with full knowledge of the facts, has no application where the principal insists upon the contract.
Id.—Notice to Corporation—Knowledge of President—Presumption. A corporation must be presumed to have full notice of all the facts which are known to its president affecting its interests. It is his duty as the head of the corporation to report the same to the trustees, and it is usually conclusively presumed that he has done so.
Id.—Contract to Pay for Use of Water—Interpretation—Evidence.— The most natural interpretation of a contract to pay a rental for the use of water, after it is brought upon the land of plaintiff by a ditch to be constructed by him, is that the rental is to begin when the water is brought upon the land by the ditch of the plaintiff, as provided for in the contract. But where the contract leaves it doubtful whether plaintiff was required to construct the ditch at once, evidence is admissible to show that the parties understood that the water was not to be paid for until it was actually used by the plaintiff. Such evidence does not tend to modify the contract, but only to ascertain its meaning.
Id.—Second Appeal—Law of Case.—The decision of this court upon a first appeal becomes the law of the case, and is controlling upon a second appeal.
TEMPLE, J. This appeal is from a judgment and from an order refusing a new trial. It is the second appeal in the case. The first was taken by the plaintiff and will be found reported in Balfour v. Fresno Canal Co., 109 Cal. 221, where a more detailed statement of the facts can be found than is deemed important here. The language of the contract is there stated, and it was determined that such language was fairly susceptible of two constructions, without doing violence to its usual and ordinary import on any established rule of construction, and that, therefore, there was an ambiguity to explain which it was competent to show the surrounding circumstances and how the parties understood its terms as manifested by their declarations during the negotiations which preceded the execution of the contract.
The only ruling discussed in the opinion relates to the exclusion of the conversations between the president of the defendant corporation and the plaintiff. The court held that the trial court erred in striking out the evidence on motion of the defendant, and for such error the judgment was reversed and the cause remanded for a new trial.
Upon the new trial, the same evidence was offered and received, but the objections made were not precisely the same. On the first trial, the objection was that the evidence was incompetent and could not be received to contradict, add to, or vary the terms of the written contract. On the last trial, the objection was added that no one present had authority to represent the corporation. It is admitted that the corporation ratified the contract made, but it is contended that the power was vested entirely in the directors and all that they ratified [397]was the written contract, and they cannot he held to any other construction than that which would he given the language unaided by those unauthorized conversations. The corporation accepted the contract as written, and can he hound only by its terms. It knew of no conversations which might give a different effect to the contract than the obvious purport of its language.
This proposition cannot he maintained. When the corporation ratified and adopted the contract made for it by its president, it took it cum onere. The ratification itself affords conclusive proof that the president had authority to negotiate such contracts for the corporation. If no previous authorization existed, the ratification is the equivalent of a previous authorization. If the corporation ratified without adequate knowledge of the facts, or if unauthorized representations were made without the knowledge of the principal, it might under some circumstances refuse to he hound by the contract and seek a rescission, hut it cannot insist upon its contract rights and repudiate the authorized representations of the agent, which, to some extent, constituted the inducement to make the contract on the part of the other party. (Gribble v. Columbus etc. Co., 100 Cal. 71; Mundorff v. Wickersham, 63 Pa. St. 87; 3 Am. Rep. 531; Bennett v. Judson, 21 N. Y. 238.) In these cases numerous authorities are cited to the same effect.
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