Bank of Columbia v. Patterson's Administrator
11 U.S. 299 (1813)

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U.S. Supreme Court

Bank of Columbia v. Patterson's Administrator, 11 U.S. 7 Cranch 299 299 (1813)

Bank of Columbia v. Patterson's Administrator

11 U.S. (7 Cranch) 299

ERROR TO THE CIRCUIT COURT

FOR THE DISTRICT OF COLUMBIA

Syllabus

Upon a special contract executed on the part of the plaintiff, indebitatus assumpsit will lie for the price.

A simple contract is not merged in a sealed instrument which merely recognizes the debt and fixes the mode of ascertaining its amount.

Upon general counts, a special agreement executed may be given in evidence.

The recital of a prior in a later agreement, after it has been executed, does not extinguish the former.

Wherever a corporation aggregate is acting within the scope of the legitimate purposes of its institution, all parol contracts made by its authorized agents are express promises of the corporation, and all duties imposed on them by law and all benefits conferred at their request raise implied promises for the enforcement of which an action lies.

The technical doctrine that a corporation could not contract except under its seal -- or in other words, could not make a promise -- if it ever had been fully settled, must have been productive of great mischief. Indeed, as soon as the doctrine was established that its regularly appointed agents could contract in their name without seal, it was impossible to support it, for otherwise the party who trusted it must have been without remedy against the corporation. Accordingly it would seem to be a sound rule that whenever a corporation is acting within the scope of the legitimate purposes of the institution, all parol contracts made by its authorized agents are express promises of the corporation; and all duties imposed on them by law, and all benefits conferred at their request raise implied promises, for the enforcement of which an action will lie.

Error to the Circuit Court for the District of Columbia in an action of indebitatus assumpsit brought by the defendant in error against the president, directors, and company of the Bank of Columbia in their corporate capacity. There were four counts only in the declaration.

1st, indebitatus assumpsit for matters properly chargeable in account; 2d, indebitatus assumpsit for work and labor done; 3d, quantum merit, and 4th, insimul computassent.

The defendant pleaded nonassumpsit and a tender.

On the trial below, the defendant took three bills of exceptions.

The 1st stated that the plaintiff read in evidence a sealed agreement, dated 10 December, 1807, between Patterson and a duly authorized committee of the directors of the bank under their private seals. It recites that a difference of opinion had arisen between

Page 11 U. S. 300

Patterson and the committee for building the new banking house as to certain work extra of an agreement made between Patterson and the said committee in 1804, and thereto annexed, whereupon it was agreed that all the work done by Patterson should be measured and valued by two persons therein mentioned according to certain rates, called in Georgetown old prices, and the sum certified by them should be taken by both parties, in their settlement, as the amount thereof. It was also thereby agreed that the outhouses, respecting which there had been no specific agreement, should be measured and valued by the same persons in the same manner. The agreement of 1804 referred to in and annexed to the agreement of 1807 was also offered in evidence by the plaintiff, and states that Patterson had agreed with the committee to do all the carpenter's work required, agreeably to the plan of the new bank, and states particularly the manner in which it was to be done, and that "in consideration of the work being done" as stated, the committee agreed to pay Patterson $3,625 as full consideration, and that if, when the work should be finished, the committee should be of opinion that that sum was too much, Patterson agreed to have the work measured, at the expense of the bank, by two persons mutually appointed, who should take the old prices as the standard, and in case the bill of measurement did not amount to the sum of $3,625, Patterson agreed to take the amount of measurement for full satisfaction. The plaintiff then read in evidence a paper of particulars of the work, certified by the persons named in the agreement of 1807. The defendants offered in evidence the plan of the building, and that it was built principally according to that plan, and the agreement, and that any work other than that stated in the plan and agreement was to be charged separately as extra work, and that it was so charged by Patterson, before 10 December, 1807, the date of the 2d agreement, who presented the account (so charged) to the defendants, claiming the amount of the same, and claiming also for the work done under the agreement of 1804, the sum of $3,625, and proved that while the work was going on, the defendants paid Patterson sundry large sums of money on account thereof.

Page 11 U. S. 301

The court was thereupon prayed by the defendants to instruct the jury that if it believed that the agreement of 1804 was assented to by Patterson and the committee as binding between them, and that the work therein contracted for was done by Patterson, and that the sum of $3,625 therein mentioned was claimed by him on account of the same, then the plaintiff could recover for no such work, but could only recover for the work done extra of the said agreement, which instruction the court refused to give.

Page 11 U. S. 302

STORY J. delivered the opinion of the Court as follows:

Several exceptions have been taken to the opinion of the court below, which will be considered in the order in which the objections arising out of them have been presented to us. We are sorry to say that the practice of filing numerous bills of exceptions is very inconvenient,

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for all the points of law might be brought before the Court in a single bill, with a simplicity, which would relieve the bar and the bench from every unnecessary embarrassment.

As the argument on the first exception has proceeded upon the ground that the agreement of 1804 was completely executed and performed, and the objection relates only to a supposed mistake in the form of the declaration, it will at present be considered in this view. And we take it to be incontrovertibly settled that indebitatus assumpsit will lie to recover the stipulated price due on a special contract, nor under seal, where the contract has been completely executed, and that it is not in such case necessary to declare upon the special agreement. Gordon v. Martin, Fitzgibbon 303; Musson v. Price, 4 East 147; Cook v. Munstone, 4 Bos. & Pul. 351; Clarke v. Gray, 6 East. 564, 569; 2 Sand. 350, note 2.

In the case before the Court we have no doubt that indebitatus assumpsit was a proper form of action to recover as well for the work done under the contract of 1804 as for the extra work. It may therefore safely be admitted (as is contended by the plaintiff in error) that where there is a special agreement for building a house, and some alterations or additions are made, the special agreement shall notwithstanding be considered as subsisting so far as it can be traced. Pepper v. Burland, Peake 103. The first exception, therefore, wholly fails.

Under the second exception, the plaintiff in error has made various objections.

1. The first is that though a promise would be implied by law for the extra work against the corporation, yet that such promise was extinguished by operation of law by the provisions of the sealed contract of 1807. It is undoubtedly true that a security under seal extinguishes a simple contract debt, because it is of a higher nature. Cro.Car. 415; Raym. 449; 2 Jones 158; 1 Burr 9; 5 Com.Dig. tit. Pleader 2, G. 12. But this effect never has been attributed to a sealed instrument which merely recognizes an existing debt and provides a mode to ascertain its amount and liquidation. At most, the sealed agreement of 1807 could not be

Page 11 U. S. 304

construed to extend beyond this import. In no sense could it be considered as a higher security for the money originally due. This objection therefore cannot prevail even supposing that the agreement were the deed of the corporation.

2. A second objection is that the special agreements connected with the certificates of admeasurement were inadmissible evidence under the general counts, and could be admissible only under counts framed on the special agreements.

To this objection an answer has already in part been given. And we would further observe that if the agreements connected with the admeasurements were the means of ascertaining the value of the work, the evidence was pertinent under every count. 2 Saund. 122, note 2. And if the certificates of admeasurement were of the nature of an award, they were clearly admissible under the insimul computassent count. Keen. v. Batshore, 1 Esp. 194.

3. Another objection is that as the agreement of 1807 is sealed, and is connected by reference with the prior agreement, they are to be construed as one sealed instrument, and assumpsit will not lie upon an instrument under seal.

The foundation of this objection utterly fails, for the agreement is not under the seal of the corporation, but the seals of the committee, and if it were otherwise it is too plain for argument that the original agreement was not extinguished, but referred to, as a subsisting agreement. It is quite impossible to contend that the mere recital of a prior in a later agreement, after it has been executed, extinguishes the former.

Two other objections are made under this exception, but as they are answered in the preceding observations, it is unnecessary to notice them further.

Under the third exception, the only objections relied on are in principle the same as the objections urged under the former exceptions, and they admit the same answers.

Page 11 U. S. 305

The case has thus been considered all along as though the contracts were made between the plaintiff's administrator and the Corporation, and indeed some points in the argument have proceeded upon this ground. It is very clear, however, that neither the first nor second agreements were made by the corporation, but by the committee in its own name. In consideration of the work being done, the committee, and not the corporation, personally and expressly agree to pay the stipulated price. A question has therefore occurred how far the corporation was capable of contracting except under their corporate seal, and if it were capable, as no special agreement is found in the case, how far the facts proved show an express or an implied contract on the part of the corporation.

Anciently it seems to have been held that corporations could not do anything without deed. 13 H. 8, 12; 4 H. 7, 6; 7 H. 7, 9.

Afterwards the rule seems to have been relaxed, and they were, for convenience's sake, permitted to act in ordinary matters without deed, as to retain a servant, cook, or butler. Plow. 91b; 2. Sand. 305; and gradually this relaxation widened to embrace other objects. Bro. Corp. 51; 3. Salk. 191; 3 Lev. 107; Moore 512. At length it seems to have been established that though it could not contract directly except under its corporate seal, yet it might by mere vote or other corporate act, not under its corporate seal, appoint an agent whose acts and contracts, within the scope of his authority, would be binding on the corporation. Rex v. Bigg, 3. P.Wms. 419, and courts of equity, in this respect seeming to follow the law, have decreed a specific performance of an agreement made by a major part of a corporation, and entered in the corporation books, although not under the corporate seal, 1 Fonb. 305; Phil. ed. note (o). The sole ground upon which such an agreement can be enforced, must be the capacity of the corporation, to make an unsealed contract.

As it is conceded in the present case that the committee were fully authorized to make agreements, there could then be no doubt that a contract made by them in the name of the Corporation, and not in their own names,

Page 11 U. S. 306

would have been binding on the corporation. As, however, the committee did not so contract, if the principles of law on this subject stopped here, there would be no remedy for the plaintiff except against the committee.

The technical doctrine that a corporation could not contract except under its seal, or in other words could not make a promise, if it ever had been fully settled, must have been productive of great mischiefs. Indeed, as soon as the doctrine was established that its regularly appointed agent could contract in their name without seal, it was impossible to support it, for otherwise the party who trusted such contract would be without remedy against the corporation. Accordingly it would seem to be a sound rule of law that wherever a corporation is acting within the scope of the legitimate purposes of its institution, all parol contracts made by its authorized agents are express promises of the corporation, and all duties imposed on them by law, and all benefits conferred at their request, raise implied promises for the enforcement of which an action may well lie. And it seems to the Court that adjudged cases fully support the position. Bank of England v. Moffat, 3. Bro.Ch. 262; Rex. v. Bank of England, Dong. 524, and note ibidem;Gray v. Portland Bank, 3 Mass. 364; Worcester Turnpike Corporation v. Willard, 5 Mass. 80; Gilmore v. Pope, 5 Mass. 491; Andover & Medford Turnpike Corporation v. Gould, 6 Mass. 40.

In the case before the Court these principles assume a peculiar importance. The act incorporating the Bank of Columbia (Act of Maryland, 1793, ch. 30), contains no express provision authorizing the corporation to make contracts. And it follows that upon principles of the common law, it might contract under its corporate seal. No power is directly given to issue notes not under seal. The corporation is made capable to have, purchase, receive, enjoy, and retain lands, tenements, hereditaments, goods, chattels, and effects of what kind, nature, or quality soever, and the same to sell, grant, demise, alien, or dispose of, and the board of directors is authorized to determine the manner of doing business and the rules and forms to be pursued; to appoint and pay the various officers and dispose of

Page 11 U. S. 307

the money or credit of the bank in the common course of banking for the interest and benefit of the proprietors. Unless, therefore, a corporation not expressly authorized may make a promise, it might be a serious question how far the bank notes of this bank were legally binding upon the corporation, and how far a depositor in the bank could possess a legal remedy for his property confided to the good faith of the corporation. In respect to insurance companies also, it would be a difficult question to decide whether the law would enable a party to recover back a premium the consideration of which had totally failed. Public policy, therefore, as well as law, in the judgment of the Court, fully justifies the doctrine which we have endeavored to establish. Indeed the opposite doctrine, if it were yielded to, is so purely technical that it could answer no salutary purpose and would almost universally contravene the public convenience. Where authorities do not irresistibly require an acquiescence in such technical niceties, the Court feels no disposition to extend their influence.

Let us now consider what is the evidence in this case from which the jury might legally infer an express or an implied promise of the corporation. The contracts were for the exclusive use and benefit of the corporation, and made by their agents for purposes authorized by their charter. The corporation proceeds on the faith of those contracts to pay money from time to time to the plaintiff's intestate. Although, then, an action might have laid against the committee personally, upon its express contract, yet as the whole benefit resulted to the corporation, it seems to the Court that from this evidence the jury might legally infer that the corporation had adopted the contracts of the committee, and had voted to pay the whole sum which should become due under the contracts, and that the plaintiff's intestate had accepted its engagement. As to the extra work, respecting which there was no specific agreement, the evidence was yet more strong to bind the corporation.

In every way of considering the case, it appears to the Court that there was no error in the court below and that the judgment ought to be

Affirmed.

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