Galbraith v. First Nat. Bank

Citations

• 221 F. 386
• 137 C.C.A. 194
• 1915 U.S. App. LEXIS 1342

Syllabus

<p>L Corporations <§=>415—Mortgages—Authority to Execute—Authority op President in Sole Control op Business.</p> <p>The business of a corporation organized to take over a business formerly conducted by its president, who owned most of its stock, most of the other stockholders being his relatives, was conducted in the same manner as before the corporation was formed; no dividends being declared, and the president, who managed the business, taking whatever money he needed for his living or other expenses as if it were his individual property. His wife was first elected secretary, but subsequently another stockholder was elected, and thereafter for several years no stockholders’ or directors’ meetings were held. None of the other stockholders took any interest in the management of the corporation, or made any inquiries as to the business, and neither the president’s wife nor the secretary subsequently elected discharged any of the duties of a secretary. To secure a loan of money received and used in the corporation’s business, the president and his wife, without authority from the board ,of directors, and without their knowledge, executed a mortgage, which they acknowledged as president and secretary, to a bank, which was told and believed that the wife was secretary. None of the directors or stockholders had objected to the mortgage. Meld, that the mortgage was valid, since, while ordinarily the president and secretary of a corporation have no power to execute a mortgage on the corporation’s property without authority from the board of directors, when the president or other officer is intrusted by the directors with the sole management of the corporation and permitted to manage the business as if it were his own, the directors being nonresidents and never meeting, a mortgage executed by him for moneys loaned to the corporation, and received and used solely for its benefit, is valid.</p> <p>[Ed. Note.—For other cases, see Corporations, Cent. Dig. §§ 1664-1669; Dec. Dig