Keystone Surgical Supply Manufacturing Co. ex rel. Rennyson v. Bate
Keystone Surgical Supply Manufacturing Co. ex rel. Rennyson v. Bate
Opinion of the Court
Opinion by
Perhaps the plaintiff had no case, but we are of opinion that neither the court below nor we, on at least one aspect of it, can determine that fact without the verdict of the jury. The plaintiffs assignor is a manufacturing corporation, of which the defendant, Richard H. Bate, was a stockholder and director. On March 16, 1894, the corporation entered into an agreement in writing with William T. Bate and Richard H. Bate, doing business as William T. Bate & Son, whereby Bate & Son agreed to construct for the company, on a tract of land in the borough of Bridgeport, Montgomery county, for the price of $5,500, a large building, according to plans and specifications already accepted. The company agreed to pay the consideration money upon completion of the building and on receiving title to the land, by delivering to Bate & Son a first mortgage upon the property in the sum of $5,500, payable in five years, interest at six per cent to be paid semi-annually, with the option to the mortgagor to pay it off at any time within the five years. William T. Bate, of Bate & Son, owned individually the land on which it was pro-X^osed to erect the buildings, so on the same day, by another agreement in writing, he contracted to sell to the company, for the consideration of $1,000, the land; the deed to be made as soon as the building was completed, at which time the consideration was to be paid in cash. The consideration was actually paid before the building was completed, about which time the company took possession of the building and placed in it valuable machinery. There was evidence tending to show, that the directors of the company had adopted the site and invited proposals for the erection of the building, and that at a meeting held on February 23,1894, Richard H. Bate submitted propositions to construct the buildings, at three different prices, differing according to different details in the plans and quality
If the company paid to Bate the $1,000 as alleged, it was the owner of the land, and had a right to demand the legal title from William T. Bate; a court of equity would have so decreed, and what ought to have been done, equity will consider as done. Then, we have the case of the owner of land on which a building has been erected, in the rightful possession of the premises, for there is no pretense that the possession taken by the company was not peaceable and with consent of the builders, wrongfully dispossessed. But, it is argued, the company did not, from the evidence, perform its contract with Bate & Son by a delivery or tender of the mortgage; admit it; but what right did that give building contractors to eject the owner
But appellant offered evidence tending to show the building contract had been procured by falsehood and fraud on the part of the active member of the partnership, and therefore it was not bound to tender performance. Richard H. Bate was a director and stockholder and also one of the building committee, and acted in each capacity; then, as one of the firm of contractors, he dealt with the company. Appellant cites the act of March 31, 1860, to show that in no case can an officer of a corporation contract for himself with the corporation to furnish supplies or materials, etc. This act, obviously, lias no application to contracts like unto this one with a private corporation, and it has been frequently so held. This transaction comes under the common-law rule, that all such transactions should be closely scrutinized, and it must be shown that the contract is in all respects fair and reasonable; for the parties do not deal at arms’ length; a certain degree of confidence and trust is necessarily reposed in the officer by his corporation; his opinion, often, has great weight with his associates, and this gives him an advantage which he may use for his own interests, in disregard of his duty to the corporation. If it be true, as alleged, that Bate, being a director and member of the building committee, was entrusted along with his associates with the duty of procuring the erection of the buildings at the lowest price, then, after ascertaining from Shoffner that it could be erected for less than $4,000 represented to the directors that it could not be built at actual cost for less then $5,500, and thus secured the contract for his firm at a profit of nearly $1,500, that was a fraud upon the corporation which warranted the rescission of the contract, or it could waive the right to rescind and tender a mortgage for or pay the actual cost of the work performed by the unfaithful director. It was not in default when it refused to accede to the demand for a mortgage of $5,500; if it had complied, that, after knowledge, would have been a ratification of the fraudulent contract. Clearly, on appellant’s evidence, if believed, the company could have defended in an action by Bate & Son on the contract to the amount it was damaged by
Reference
- Full Case Name
- Keystone Surgical Supply Manufacturing Company, to use of William Rennyson, Assignee for benefit of Creditors v. William T. Bate and Richard H. Bate, trading as W. T. Bate & Son
- Cited By
- 4 cases
- Status
- Published
- Syllabus
- Corporation — Trespass—Wrongful dispossession of real estate — Province of court and jury— Contract — Director. In an action by the assignee of an insolvent corporation against two partners, the evidence showed that one of them who was a stockholder, director and one of the building committee of the corporation, entered into a contract, in the name of the partnership, with the corporation, to build a factory upon land owned by the other partner, the building when finished to be paid for by a mortgage for the contract price; and, further, that the company paid the owner of the land the price agreed on in a contract made the same day. The evidence also tended to show that the partner who had agreed to construct the building, secretly sublet the contract at a much less sum to another person who, before the contract with the corporation was made, had offered to do the work for him at this less sum. The property was delivered to the corporation, which placed in the building valuable machinery, but refused to execute a mortgage for the full amount of the contract price. The partners thereupon ejected the corporation from the possession of the building. Held, that plaintiff, under the evidence, had a right to go to the jury on tlie question of damages for a wrongful dispossession. While the act of March 81, 1860, forbidding officers of a corporation to contract with the corporation to furnish supplies and materials, does not apply to contracts with private corporations, yet such contracts come under tlie common-law rule that they shall be closely scrutinized, aud be in all respects fair and reasonable.