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his own name as officer or agent, with the understanding on the part of both parties that the contract is with the corporation, he is clearly not personally liable, if the contract is within his authority, or is ratified by the corporation.79 This proposition is too elementary to require citation of authorities, and is supported by the governing rule relating to agencies in general.80 Liability for corporate debts does not rest upon corporate officers personally.81

"Corporators and officers of corporations acting in good faith within the limits of its legitimate corporate powers ought not to be, and will not be, held liable for its contract, in the absence of a statute making them so, although it turns out in its future operations, and as the result thereof, that it is wholly unable to meet them.” 82

§2521. Personal liability expressly agreed upon. Of course, a corporate officer may make himself personally liable on a corporate contract or for a corporate debt by an express agreement.83 Thus, an officer may make himself personally liable on a corporate contract by guaranteeing its performance.84 So directors may bind themselves individually to pay corporate taxes.8 And the other party to a contract may hold the officer liable for services rendered

79 Alabama. Sampson v. Fox, 109 Ala. 662, 670, 55 Am. St. Rep. 950, 19 So. 896.

Connecticut. Ogden v. Raymond, 22 Conn. 379, 58 Am. Dec. 429.

Illinois. McCormick v. Seeberger, 73 Ill. App. 87, aff'd 178 Ill. 404, 53 N. E. 340, writ of error dismissed 175 U. S. 274, 44 L. Ed. 161; Fisk v. Carbonized Stone Co., 67 Ill. App. 327. Massachusetts. Mann v. Chandler, 9 Mass. 335.

Rhode Island. Pease v. Francis, 25 R. I. 226, 55 Atl. 686.

Vermont. Hall v. Huntoon, 17 Vt. 244, 44 Am. Dec. 332.

England. Ferguson v. Wilson, 2 Ch. App. 77.

And see the valuable note on personal liability of officers of corporations to third persons in 48 Am. St. Rep. 913, 916.

80 See 2 Clark & Skyles, Agency, § 564.

85

81 Tishomingo Elec. Light & Power Co. v. Burton, 6 Indian T. 445, 98 S. W. 154; Fremont Carriage Mfg. Co. v. Thomsen, 65 Neb. 370, 91 N. W. 376; Tilley v. Coykendall, 172 N. Y. 587, 65 N. E. 574.

82 Shoun v. Armstrong (Tenn. Ch. App.), 59 S. W. 790.

83 Buffalo Loan, Trust & Safe Deposit Co. v. Carstensen, 107 N. Y. App. Div. 128, 94 N. Y. Supp. 907, aff'd without opinion in 186 N. Y. 608, 79 N. E. 1101.

84 J. L. Mott Iron Works v. Clark, 87 S. C. 199, 69 S. E. 227, where president of corporation wrote: "I will see that you are protected in any dealings that you may have with this corporation," and signed it "W. A. Clark, Presd 't.'

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85 State of New Jersey v. Limburg, 54 N. Y. Misc. 404, 105 N. Y. Supp. 1016.

the corporation where the officer agrees.to pay him himself if he will continue work.86 An agreement by corporate officers, by separate instrument, to be jointly bound on obligations of the corporation, in consideration of loans to the corporation, cannot be construed as an indorsement of notes in a state where the Negotiable Instruments Law has been enacted, since it requires an indorsement to be made on the instrument or on an attached paper.87

§ 2522. Personal liability as undisclosed agent for corporation. The rule that where an agent enters into a contract in his own name for an undisclosed principal, the other party to the contract may hold the agent personally liable 88 applies equally well to corporate officers or agents.89 If an officer or agent of a corporation enters into a contract without disclosing the fact that he is acting for the corporation, or otherwise than individually, the other party may, at his election, either hold the corporation on the contract, or hold the officer personally liable, but he cannot hold both.90 The other party to the contract may elect to sue the corporation where it has accepted the benefits of the contract.91

This rule does not apply, however, unless the agent expressly binds himself, where the party dealing with him has knowledge of the agency or of circumstances which, if inquired into, would have disclosed the principal.92 Thus, where the president of an incorpo

86 See Anderson v. Dailey, 25 Colo. App. 175, 136 Pac. 461.

87 First Nat. Bank of Louisville v. Doherty, 156 Ky. 386, 161 S. W. 211. 88 See 2 Clark & Skyles, Agency, $ 568.

89 Indiana, Polk v. Haworth, 48 Ind. App. 32, 95 N. E. 332.

Massachusetts. Chelmsford Foundry Co. v. Shepard, 206 Mass. 102, 92 N. E. 75.

New Hampshire. Hilliard v. Upper Coos R. R., 77 N. H. 129, 88 Atl. 993.

New York. Donohue v. Watson, 72 Misc. 56, 128 N. Y. Supp. 1089; Cook v. Williams, 85 N. Y. Supp. 1123.

Vermont. Curtis v. Watson, 64 Vt. 536, 25 Atl. 478.

Where a contract is made by a corporate officer with one who understands in the transaction that he is

dealing with the officer as an individual and is unaware of the interest of the corporaton, the officer becomes bound personally. Cook v. Williams, 85 N. Y. Supp. 1123.

90 Neely v. State, 60 Ark. 66, 27 L. R. A. 503, 46 Am. St. Rep. 148, 28 S. W. 800; Holt v. Ross, 54 N. Y. 472, 13 Am. Rep. 615.

91 Nesbitt v. Cherry Creek Irrigation Co., 38 Nev. 150, 145 Pac. 929.

Where one deals with property which he holds as an officer or agent of the corporation or in trust, and signs individually, but is acting as agent in reference to the property, the corporation is bound. Fountain v. West Lumber Co., 161 N. C. 35, 76 S. E. 533.

92 2 Clark & Skyles, Agency, § 568d.

rated university, without expressly binding himself, requested an architect to prepare plans and specifications for a university building, the latter being aware of circumstances which, if inquired into, would have shown that the contract was for the university, the president is not personally liable.93

§ 2523. Liability in case of pretended but nonexisting corporation. This principle of individual liability also applies where a person enters into a contract in the name of a pretended corporation, or of an association which, in attempting to organize, has not so far complied with the law as to acquire a de facto corporate existence, or the power to commence business and enter into contracts,94 or in the name of a foreign corporation which has not complied with the statutes of the state prescribing conditions precedent to the right to do business therein.95 In Illinois a statute expressly imposes personal liability upon officers who contract in the name of a pretended corporation.96

Closely akin to this principle is the rule that where the business for which a body is incorporated is not within the classes of business enumerated in the statute authorizing the creation of corporations, the incorporators are liable as partners.97

§ 2524. Liability where corporation de jure not yet authorized to do business. In Illinois it is held that where a corporation (in this case a national bank) executed a lease before it was authorized to do business, the directors are liable upon the implied warranty of their authority to act on behalf of the corporation, where they knew of their want of authority while the other party to the contract had no such knowledge.98

93 Johnson v. Armstrong, 83 Tex. 325, 29 Am. St. Rep. 648, 18 S. W. 594.

94 Lewis v. Tilton, 64 Iowa 220, 52 Am. Rep. 436, 19 N. W. 911; Farmers' Co-operative Trust Co. v. Floyd, 47 Ohio St. 525, 12 L. R. A. 346, 21 Am. St. Rep. 846, 26 N. E. 110; Bartholomew v. Bentley, 15 Ohio 659, 45 Am. Dec. 596; Lasher v. Stimson, 145 Pa. St. 30, 23 Atl. 552. Compare Seeberger v. MeCormick, 178 Ill. 404, 53 N. E. 340 writ of error dismissed 175 U. 874, 44 L. Ed. 161.

Rules as to personal liability of pro

IV Priv. Corp.-26

moters on their contracts, see §§ 158, 159, vol. 1.

95 Infra, chapter on Foreign Corporations.

96 To authorize a recovery, plaintiff must prove that defendant acted as officer, that there was no such corporation, and that such officer contracted in the name of the corporation. Title Guaranty & Surety Co. v. Turnes, 182 Ill. App. 23.

97 See § 281, vol. 1, and also Staacke v. Routledge, Tex. Civ. App. —,

175 S. W. 444.

98 Seeberger v. McCormick, 178 Ill.

§ 2525. Personal liability where officer exceeds his authorityGeneral rule. The rule of agency that if an agent acts without or in excess of his authority, so that his principal is not bound, he will himself be liable, provided the other party did not know of his want of authority,99 applies equally well to corporate officers and agents. If an officer enters into a contract for and in the name of the corporation, but in excess of his authority, and the contract is not ratified by the corporation, the other party not having knowledge of his want of authority, he is personally liable, in some jurisdictions, on the contract itself, or in an action of assumpsit, on the theory of an implied warranty of authority, and, in other jurisdictions, in an action on the case for false warranty of authority. However, it has

404, 53 N. E. 340, aff'g 73 Ill. App. 87, writ of error dismissed 175 U. S. 274, 44 L. Ed. 161.

991 Mechem, Agency (2nd Ed.), § 1363 et seq.; 2 Clark & Skyles, Agency, § 577 et seq.

1 Arkansas. Dale v. Donaldson Lumber Co., 48 Ark. 188, 3 Am. St. Rep. 224, 2 S. W. 703.

California. Wallace v. Bentley, 77 Cal. 19, 11 Am. St. Rep. 231, 18 Pac. 788; Farmers' & Mechanics' Bank v. Colby, 64 Cal. 352, 28 Pac. 118.

Illinois. Frankland V. Johnson, .147 Ill. 520, 37 Am. St. Rep. 234, 35 N. E. 480.

Maryland. Keener v. Harrod, 2 Md. 63, 56 Am. Dec. 706.

Massachusetts. Jefts v. York, 10 Cush. 392.

Michigan. Solomon v. Penoyer, 89 Mich. 11, 50 N. W. 644; Knickerbocker v. Wilcox, 83 Mich. 200, 21 Am. St. Rep. 595, 47 N. W. 123.

New Hampshire. Weare v. Gove, 44 N. H. 196.

New York. White v. Madison, 26 N. Y. 117; Walker v. Bank of State of New York, 9 N. Y. 582; Nellegan v. Campbell, 65 Hun 622, 20 N. Y. Supp. 234.

Ohio. Farmers' Co-operative Trust Co. v. Floyd, 47 Ohio St. 525, 12 L. R. A. 346, 21 Am. St. Rep. 846.

Pennsylvania. Lasher v. Stimson, 145 Pa. St. 30, 23 Atl. 552.

South Dakota. Small v. Elliott, 12 S. D. 570, 76 Am. St. Rep. 630, 82 N. W. 92.

West Virginia. Danser v. Dorr, 72 W. Va. 430, 78 S. E. 367.

Wisconsin. McCurdy v. Rogers, 21 Wis. 197, 91 Am. Dec. 468.

England. Collen v. Wright, 8 El. & Bl. 647, 7 El. & Cl. 301; Cherry v. Colonial Bank of Australasia, L. R. 3 P. C. 24.

If the president indorses a note in the name of the corporation without authority, he cannot charge the company with the amount he paid on the note. Triplett v. Fauver, 103 Va. 123, 4S S. E. 875.

So where a corporate officer holds himself out as acting for a corporation, although not possessing authority in fact, his agreement to repay money which was paid to the corporation for an option to purchase its land upon the surrender of the option does not constitute a promise to answer for the debt of another, within the meaning of the statute of frauds. The officer, therefore, renders himself personally liable by such agreement. The court said: "It is well settled that an agent purporting to act for and bind a principal whom he has no

been held that where two persons sign a note in behalf of the corporation by subscribing the corporate name together with their names and titles, and then indorse the note as individuals, they cannot be held individually liable as makers although they had no authority to sign the note for the corporation, for the reason that the contract, i. e., the note, was not drawn so as to make the alleged agents a primary contracting party thereto.2

§ 2526. -Where other party to contract has knowledge, or is chargeable with knowledge, of want of power. There is no personal liability where the other party to the contract has knowledge, or is chargeable with knowledge, of the want of authority of the officer.3

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§ 2527. - Where contract ratified by corporation. If the officer acted in excess of his authority, but the contract is validated by its ratification by the corporation, then the officer is not personally liable thereon. Thus, if persons execute a note for a corporation with knowledge that they have no authority to do so, but the corporation becomes liable on the note because of ratification or estoppel, the former cannot thereafter be held liable in an action for deceit.5

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§ 2528. Where there is mutual mistake of law as to authority. So far as agents in general are concerned, it has been said that

authority to bind, and who does not thereby become bound, is liable, not on the contract which he attempts to make, but for breach of implied warranty, or in tort, to the extent of any damages resulting to the other party from his misrepresentation of authority. In order to establish the individual liability of the person thus purporting to act as agent, it is not essential to show that his express or implied representations as to authority were intentionally false. If one who in fact has no authority to represent another as principal assumes to make a binding contract as agent in behalf of such principal with another, who is not charged with knowledge of such want of authority, he renders himself liable in damages to the other party to the assumed contract. And this principle is applicable to officers

or corporations acting in excess of their authority." Groeltz v. Armstrong, 125 Iowa 39, 99 N. W. 128.

2 McDonald v. Luckenbach, 170 Fed. 434, rev 'g 164 Fed. 296, and discussing question at length.

3 McDonald v. Luckenbach, 170 Fed. 434; Sourwine v. McRoy Clay Works, 42 Ind. App. 358, 85 N. E. 782. See generally 2 Clark & Skyles, Agency, § 582a.

4 See Moody & Meckelburg Co. v. Trustees of M. E. Church of Port Washington, 99 Wis. 49, 74 N. W. 572, applying rule to minister of church. See generally 2 Clark & Skyles, Agency, § 584.

5 Chieppo v. Chieppo, 88 Conn. 233, 90 Atl. 940. To same effect, see Shawmut Commercial Paper Co. v. Auerbauch, 214 Mass. 363, 101 N. E. 1000.

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