July 7, 1911. The opinion of the Court was delivered by This is an action, in which the plaintiff seeks a recovery of judgment against the defendant, for $250.00 and the cancellation of certain notes. *Page 185
There was a demurrer to the complaint, on the ground that it did not state facts, sufficient to constitute a cause of action, which was overruled.
His Honor, the presiding Judge, after hearing the testimony, granted the relief for which the plaintiff prayed, and the defendant appealed.
The first question that will be considered is, whether the Circuit Judge erred in overruling the demurrer to the complaint.
In determining this question, it will be necessary to refer to the complaint and the grounds of the demurrer, which will be reported.
There are allegations in the complaint, appropriate to an action for damages, arising out of the alleged breach of the contract, by reason of the defendant's failure, to perform its part thereof, although its agent may have exceeded his authority, when he entered into the agreement with the plaintiff:
The Court in the case of Vought v. Eastern B. L.Asso., 172 N.Y. 172, thus states the rule in such cases:
"We deem it unnecessary, at this time, to determine whether the defendant was authorized by that statute to enter into such contracts; for, if we assume that the making of them was in excess of the express power conferred upon the corporation by that statute, still, as the contracts involved no moral turpitude, and did not offend any express statute, they were not illegal in a sense, that would prevent the maintenance of an action thereon. It is now well settled, that a corporation cannot avail itself, of the defense ofultra vires, when the contract has been, in good faith, fully performed by the other party, and the corporation has had the benefit of the performance and of the contract. As has been said, corporations, like natural persons, have power and capacity to do wrong. They may, in their contracts and dealings, break over the restraints imposed upon them by their charters; and when they do so, their exemption *Page 186 from liability cannot be claimed on the mere ground, that they have not attributes or facilities, which render it possible for them to thus act. While they have no right to violate their charters, yet they have capacity to do so, and are bound by their acts, where a repudiation of them would result in manifest wrong to innocent parties, and especially where the offender alleges its own wrong, to avoid a just responsibility. It may be that, while a contract remains unexecuted upon both sides, a corporation is not estopped to say, in its defense, that it had not the power to make the contract sought to be enforced; yet, when it becomes executed by the other party, it is estopped from asserting its own wrong, and cannot be excused from payment upon the plea, that the contract was beyond its power."
This language is quoted with approval, in Eastern B. L. Asso. v. Williamson, 23 Sup. Ct. Rep. 527, and Drewery v. Columbia Amusement Co., 87 S.C. 445, and is in harmony with the principle announced in Williamson v. EasternB. L. Asso., 54 S.C. 582, 32 S.E. 765.
In the case of B. B. Ry. Co. v. McDonald, 60 Am. St. Rep. 172, it is correctly said by the Court: "The general rule is, that where a private corporation, has entered into a contract, not immoral in itself, and not forbidden by the statute, and it has been in good faith performed by the other party, the corporation will not be heard on a plea ofultra vires." The principle is thus stated in the case ofWashington Gas Light Co. v. Landsden,19 Sup. Ct. Rep. 300: "The Corporation can be held responsible, for acts which are not strictly within the corporate powers, but which were assumed to be performed for the corporation, and by the corporate agents, who were competent to employ the corporate powers, actually exercised."
But, as was said by the Court in the case of Williamson v.Association, 54 S.C. 582, 32 S.E. 765: "If the agreement was ultra vires, and the association entered into it, knowing it could not perform its part thereof, and thereby *Page 187 induced the plaintiff, to part with his money in the purchase of stock, then it was a tort, and the defendant would be liable therefor. Furthermore, even if the agreement wasultra vires, and the defendant could interpose this plea, it would not be allowed to retain the benefits, which it derived therefrom, and this would give the plaintiff a cause of action." (Citing North Hudson B. L. Asso. v. Bank, 11 L.R.A. 845.)
There are also allegations, appropriate to an action for rescission of the alleged agreement, on the ground that the defendant's agent, was not authorized to enter into the agreement, and that the defendant refused to ratify his acts. The allegations of the complaint are, therefore, appropriate to an action, both on the law and the equity side of the Court.
A complaint is not subject to demurrer, if it contains allegations entitling the plaintiff to relief, either on the law or the equity side of the Court. Bank v. Dowling, 45 S.C. 677,23 S.E. 982; Latham v. Harby, 50 S.C. 428,27 S.E. 862; Simon v. Sabb, 56 S.C. 38, 33 S.E. 799.
The plaintiff's cause of action for rescission, is based upon the theory, that the agreement into which he entered with the defendant's agent, was invalid in toto, and that there never was a binding contract, between the parties.
On the other hand, the grounds of demurrer upon which the defendant relied, rest upon the proposition, that there was a binding contract between the parties, although certain parts thereof, were without force and effect, by reason of the fact, that the agent exceeded his authority, and that the defendant refused to ratify his acts, to that extent.
Conceding that there are allegations in the complaint, giving rise to both theories, the Court could not sustain the proposition, for which the defendant contends, without assuming that there was a binding contract, between the parties, which, of course, it cannot do. *Page 188
As the allegations of the complaint, are sufficient to show that the plaintiff has complied with the terms of the contract, but that the defendant has refused to perform its part thereof; also, that the agreement was not only without force and effect in part, but in toto, the demurrer was properly overruled.
The defendant appealed upon other exceptions, besides those assigning error in overruling the demurrer.
It will not be necessary to consider them seriatim, as several of the questions presented by them, become merely speculative, in the light of our conclusions upon the pivotal issues in the case.
The defendant's answer to the complaint, contained a denial of certain allegations; and, by way of defense, a counterclaim for one thousand dollars, based upon the five notes, each for two hundred dollars, described in the complaint. No other defenses were interposed.
We have not undertaken to state in detail, our review of the testimony, for the reason that both the plaintiff and the defendant concede, that the agent exceeded his authority, when he entered into the contract, and that the defendant refused to ratify his acts to that extent. If the plaintiff had seen fit, he might have proceeded against the defendant, for refusing to comply with the terms of the contract, on the ground, that he was induced by the defendant's agent, to become a stockholder, and that the defendant was estopped from pleading that the acts of the agent were ultra vires.
But he also had the right, to bring an action for rescission of the contract. And as it is conceded by both parties, that the agent was without authority, and that the defendant refused to ratify the transaction, the plaintiff was entitled to the relief granted in the decree.
Judgment affirmed. *Page 189