TEMPLIN et al.

V.

CHICAGO, BURLINGTON, & PACIFIC R. Co. et al.

(Iowa Supreme Court.)

Construction of Road-Mechanic's Lien - Sub-contractors. - Where one railroad company sells its road to another, and the first company thereafter enters into a contract with a third party for the construction of the track, such third party cannot, under the Iowa statute, acquire a lien for material and labor as against the company purchasing, unless they are sub-contractors, there being no privity of contract between him and the purchasing company.

Same — Sale of Road before Construction. — When one railroad company sells its road to another before completion, and, in doing so, enters into a contract to complete it, a third person with whom it enters into a contract for work in connection with such completion stands on the relation of a subcontractor to the purchasing company, and is entitled to a lien for labor and material only in the event of his complying with the statute providing for sub-contractors.

Same Power of President - Contract. - The president of a railroad company has no power, merely by virtue of his office, to bind the company by a contract for the construction of its railroad; particularly is this true when the same is already under contract by the board of directors.

APPEAL from Henry County Circuit Court.

Action to establish and foreclose an alleged lien for material supplied and labor done in the construction of a railroad. Appeal by defendants from a decree in plaintiff's favor.

The facts are stated in the opinion.

R. Ambler, J. H. Blair, and A. C. Daly for appellants.

Woolson & Babb for appellees.

Facts.

ADAMS, C. J.-The plaintiffs performed labor in laying a part of a track, and in doing other work, on a certain railroad in Iowa. They received payment in part, and bring this action to recover of the defendant the Chicago, Burlington, & Pacific Railroad Company for an alleged balance, and to establish the same as a lien upon the road. The parties are not agreed as to who contracted with the plaintiffs to do the work, nor as to who owned the road at the time, nor as to who received the benefit of the work. The plaintiffs claim that the road was owned by the defendant the Chicago, Burlington, & Pacific Railroad Company, and that that company contracted with them to do the work in question, and received the benefit of the work.

The company, in its answer, denies all three of these propositions. Its counsel, in their argument, contend that the evidence shows that the road was owned by the defendant the Central Iowa Railway Company, and that the work in question was done for the Trunk Line Construction Company, a corporation organized under the laws of Connecticut, and engaged in constructing railroads. The construction company is not made defendant.

It is conceded that the road was owned at one time by the defendant the Chicago, Burlington, & Pacific Railroad Company; but we think that the evidence shows, that, before the contract sued upon was entered into, that company sold and conveyed the road by a duly recorded deed to the defendant the Central Iowa Railway Company. The court decreed a mechanic's lien against the latter company, but there is no pretence that the plaintiffs had any contract with that company. The contract not having been made with the company then owning the road, the plaintiffs could not acquire a lien as against that company unless they were sub-contractors. But the action is not brought upon that theory, nor is there any pretence that the requisite steps were taken to establish a sub-contractor's lien. The plaintiffs' claim is, that they were original contractors, by virtue of a contract with the Chicago, Burlington, & Pacific Railroad Company, and that they are entitled to a lien notwithstanding the fact that that company had already sold and conveyed its road before their contract was entered into. At the time of the sale of the road it was only partially constructed, and the seller, the Chicago, Burlington, & Pacific Railroad Company, entered into a contract with the purchaser binding itself to construct the remainder; and it is contended by the plaintiffs that the seller agreed to complete the road for the consideration agreed upon in the sale. But such fact would not give the plaintiffs a contract with the owner of the road; and it is only under a contract with the owner that the plaintiffs, under the statute, can be allowed a lien as original

Vendee company a contractor. Sub-con

tractor's lien.

contractors. It was the Central Iowa Railway Company's right to proceed and settle for the road with the only party with whom it had contracted, unless labor and materials had been furnished under a subcontract, and the requisite steps had been taken to obtain a sub-contractor's lien. If, after the sale and conveyance, the Chicago, Burlington, & Pacific Railroad Company was under contract to complete the road, its relation to the road was substantially the same as if it had never owned it. The company was virtually a contractor; and persons working under it, by contract made subsequent to the sale, were virtually sub-contractors. To acquire a lien, the persons thus working should bring themselves within the statute providing for sub-contractors.

contention. Other facts.

The defendants contend that the plaintiffs did not have a contract even with the company which once owned the road, but that their work was performed for the Trunk Line Construction Company, and that they have been paid for their work by that company, so far as they have been paid at all. The plaintiffs base their claim upon an alleged written contract, and that contract purports to be signed by one S. C. Cook, who was at the time the president of the Chicago, Burlington, & Pacific Railroad Company, and the contract purports to bind that company. It is undisputed, however, that the company had at the time a contract with the Trunk Line Construction Company to do all the work in the construction of the road, including the work in question, and that the railroad company paid, or arranged for the payment of, the construction. company for the same. If the Chicago, Burlington, & Pacific. Railroad Company must pay the plaintiffs for the work, it must pay for it twice. The evidence shows, that, at the time the plaintiffs' contract was made, Cook was not only president of the railroad company, but superintendent of a part of the work for the construction company. As such superintendent, he had occasion to employ some one to lay the rails and do some other work. He accordingly employed the plaintiffs. For some reason, however, not very apparent from the evidence, he executed the written contract in the name of the railroad company, by himself as president. He undoubtedly thought that the construction company would pay promptly for the work according to the contract, and that no one would be injured; and we surmise that he was led into his irregular action by the supposition that the plaintiffs would prefer a contract with the railroad company. But it is not important to inquire how the irregularity occurred; the important question is as to whether the railroad company is bound by Cook's action. It is shown by undisputed evidence that Cook had no express authority to make such a contract in behalf of the company. Witnesses so testify, and there was no evidence, by introduction of the articles of incorporation or otherwise, tending to show to the contrary. There is no evidence that he had been accustomed to make such contracts in behalf of the company from which his authority could be inferred. He had not been held out by the company in any way particularly, and the plaintiffs were not justified in inferring that he had larger powers than those which he actually possessed; nor do we understand the plaintiffs as contending that he had been so held out. Their contention is, as we understand them, that he had such power simply by virtue of his office as president, and without any express provision therefor in the articles of incorporation, or, authorization by the board of directors.

Power of president to contract for construction.

We have, then, the question, Has a president of a railroad company the power, by virtue of his office simply, to let a contract in behalf of the company for the construction of its road, when the same is already under contract by the board of directors? No authority has been cited which so holds, and we conclude that such is not the law. In Taylor on Corporations, sect. 236, the author says, "Virtute officii, a president has very little authority to act for his corporation, and can bind it only by such contracts as plainly come within its most ordinary routine of business:" citing Bank v. Hock, 89 Pa. St. 324; Blen v. Water Co., 20 Cal. 602; Risley v. Railroad Co., I Hun, 202. In Adriance v. Boone, 52 Barb. 399, it was held that the officers of a corporation are special, and not general agents; that there is no grant of power in the name by which they are designated; that they have no power to bind the corporation, except within the limits prescribed by the charter and by-laws; and that persons dealing with such officers are charged with notice of the authority conferred upon them, and of the limitations and restrictions upon it contained in the charter and by-laws.

In our opinion the decree must be reversed.

Power of President to bind Corporation. The ordinary affairs of a corporation, such as custom has imposed upon, or necessity requires of, the president of a corporation, may be performed by him without express authority. Blen v. Bear River & A. Water Co., 20 Cal. 602; Mitchell v. Deeds, 49 Ill. 416; Chicago, B. & Q. R. Co. v. Coleman, 18 Ill. 297; Kennedy v. Otoe County Nat. Bank, 7 Neb. 59; Adriance v. Boone, 52 Barb. (N. Y.) 399; Soper v. Buffalo & R. R. Co., 19 Barb. (N. Y.) 310; Risley v. Indianapolis, B. & W. R. Co., 1 Hun (N. Y.), 202; First Nat. Bank v. Hoch, 89 Pa. St. 324. For any other acts he must have the authority of the board of directors. Mitchell v. Deeds, 49 Ill. 417; Bacon v. Mississippi Ins. Co., 31 Miss. 116; Titus v. Cairo & F. R. Co., 37 N. J. L. (8 Vr.) 98; Leggett v. New Jersey Banking Co., 1 N. J. Eq. (1 Saxt.) 541; Marine Bank v. Clements, 3 Bosw. (N. Y.) 600: Farmers' Bank of Buck's Co. v. McKee, 2 Pa. St. 318; Hodges v. Rutland & B. R. Co., 29 Vt. 220.

The simple fact that a person is president does not of itself afford any evidence of his authority to bind the company by a contract. Dabney v. Stevens, 10 Abb. (N. Y.) Pr. N. S. 39: Adriance v. Boone, 52 Barb. (N. Y.) 390; Risley v. Indianapolis, B. & W. R. Co., I Hun (N. Y.), 204.

Extension of Power by Charter. - The president's authority may, however, be extended by the charter or by-laws, or by the directors, so as to authorize him to do any act which is within the general scope of the corporation's business. Pixley v. Western Pac. R. Co., 33 Cal. 183; Mitchell v. Deeds, 49 Ill. 417; Burrill v. Nahant Bank, 43 Mass. (2 Metc.) 163; Olcott v. Tioga R. Co., 27 N. Y. 546; Mechanics' Bank v. New York & N. H. R. Co., 13 N. Y. 632; Dabney v. Stevens, 10 Abb. (N. Y.) Pr. N. S. 39.

Extension of Power by Usage. - Authority to make contracts which otherwise would be ultra vires, may be inferred from the general manner in which, for a period sufficiently long to establish a settled course of business, he was allowed, without interference, to conduct the affairs of the company. Mount

Sterling & J. T. R. Co. v. Looney, 1 Met. (Ky.) 550; Northern Cent. R. Co. v. Bastian, 15 Md. 494; Kraft v. Freeman Pub. Co., 87 N. Y. 628; Hoyt v. Thompson, 5 N. Y. 320, 323; Dabney v. Stevens, to Abb. (N.Y.) Pr. Ń. S. 39; Elwell v. Dodge, 33 Barb. (N. Y.) 336; Scott v. Johnson, 5 Bosw. (N. Y.) 213; Lee v. Pittsburgh, C. & M. Co., 56 How. (N. Y.) Pr. 373; Martin v. Niagara Falls Paper Mfg. Co., 44 Hun (N. Y.), 130; Fulton Bank v. New York & Sharon Coal Co., 4 Paige, Ch. (N. Y.) 127; Dougherty v. Hunter, 54 Pa. St. 380; Neiffer v. Bank of Knoxville, 1 Head (Tenn.), 162; Minor v. Mechanics' Bank, 26 U. S. (1 Pet. ) 46; bk. 7, L. ed. 47.

The subsequent and long-continued acquiescence of the directors will operate as a ratification of an act otherwise beyond the authority_of_the president. Sherman v. Fitch, 98 Mass. 59; Rich v. State Nat. Bank, 7 Neb. 201; s. c., 29 Am. Rep. 382; Titus v. Cairo & F. R. Co., 37 N. J. L. (8 Vr.) 98; Olcott v. Tioga R. Co., 27 N. Y. 546; Chicago & N. W. R. Co. Jame's, 22 Wis. 198; s. c., 24 Wis. 388. But see Crum's appeal, 66 Pa. St. 274.

ย.

-

Selling Property, borrowing Money, etc. He cannot sell the company's property, borrow money in the name of the company, or make a mortgage on corporate property. Bliss v. Kaweah Can. & I. Co., 65 Cal. 502; s. c., 6 Am. & Eng. Corp. Cas. 247; Hollowell Bank v. Hamlin, 14 Mass. 178; Titus v. Cairo & F. R. Co., 37 N. J. L. (8 Vr.) 98; Leggett v. New Jersey Banking Co., 1 N. J. Eq. (1 Saxt.) 541; Life & Fire Ins. Co. v. Mechanics' Fire Ins. Co., 7 Wend. (N. Y.) 31; Crump v. United States Mining Co., 7 Gratt. (Va.) 352; Chicago & N. W. R. Co. v. James, 22 Wis. 194: Jesup v. City Bank, 14 Wis. 331; Walworth Co. Bank v. Farmers' Loan & Trust Co., 14 Wis. 325. But it would seem to be held that this is so only if the sale, assignment, or transfer of the property of the corporation requires the use of the common seal. It can only be made in that event with the assent and authority of the board of directors. Hoyt v. Thompson, 5 N. Y. 320, 335.

Transfer of Negotiable Instruments.— If, however, the property conveyed is in the form of negotiable instruments, it may be indorsed and transferred in the usual course of business by the president or other officer having charge of the company's business without any special authority. Hoyt v. Thompson, 5 N. Y. 320, 335.

It has been said that the president of an insurance company has no implied authority to indorse and negotiate notes belonging to it. Marine Bank v. Clements, 3 Bosw. (N. Y.) 600. But authority to do so may be inferred from the course of the company's business. Člark v. Titcomb, 42 Barb. (N. Y.) 122; Scott v. Johnson, 5 Bosw. (N. Y.) 213.

Union Gold

Repayment of Loan - Release of Subscriptions, etc. The president has no authority, as such, to undertake, in the corporate name, the repayment of an unauthorized loan made to the superintendent of the company. M. Co. v. Rocky Mountain Nat. Bank, 2 Colo. 565. And he has of himself no authority to release subscriptions to the stock of the corporation. Custar v. Titusville Gas & W. Co., 63 Pa. St. 381. Release or Surrender of Claim Stay of Execution. - The president of a bank has no authority virtute officii to surrender or release the claim of the corporation against any one. Olney v. Chadsey, 7 R. I. 224; Hodge's Exr. v. First Nat. Bank, 22 Gratt. (Va.) 51. Nor has the president of an insurance company. Brouwer v. Appleby, 1 Sandf. (N. Y.) 158. He has no power to stay the collection of an execution in favor of the corporation. Spyker v. Spence, 8 Ala. 333.

Authority to commence and defend Actions. The president of a corporation, being its chief executive officer, may appear and answer for it, and employ counsel for its defence. Savings Bank v. Benton, 2 Met. (Ky.) 240; Oakley v. Workingmen's Union, 2 Hilt. (N. Y.) 487: American Ins. Co. v. Oakley, 9 Paige, Ch. (N. Y.) 496. He cannot, however, confess judgment against the