G.R. No. and Date: G.R. No. L-11137, December 7, 1915

FACTS:
Plaintiff B. Montague sued the P.B. Artesian Water Company for damages arising from the alleged breach of contracts. The contracts were signed by E.L. Poole as president of the defendant corporation. One contract, dated August 26, 1914, obligated the defendant to purchase Montague’s entire ice production for two and a half years. Another related agreement involved the takeover of automobile trucks. The defendant corporation defended by asserting that its Board of Directors never authorized, executed, ratified, or approved these contracts. The articles of incorporation listed the corporate purposes, which primarily involved water-related businesses. The by-laws vested the power to enter into contracts and manage corporate affairs exclusively in the Board of Directors and required that contracts signed by the president be first approved by the Board. On August 27, 1914, the Board expressly resolved not to enter into the ice business. Despite this, Poole and the corporate secretary, V.L. Boeck, proceeded to receive and sell Montague’s ice until September 14, 1914, when the plaintiff was formally informed the Board would not confirm the contract. The trial court absolved the defendant corporation.

ISSUE:
Whether the unauthorized contracts executed by the corporation’s president (E.L. Poole) were subsequently ratified by the defendant corporation, thereby making it liable to the plaintiff.

RULING:
No. The Supreme Court affirmed the trial court’s judgment, holding the defendant corporation not liable. The Court, bound by the trial court’s factual findings due to the appellant’s failure to bring the evidence on appeal, upheld the conclusion that there was no ratification. The power to ratify an unauthorized contract executed by a corporate officer rests solely with the Board of Directors acting as a body. The Board’s resolution of August 27, 1914, expressly refusing to enter the ice business, constituted a clear denial of authority. The subsequent acts of Poole and Boeck in receiving ice and depositing sale proceeds into the corporate treasury were performed without the Board’s knowledge or approval. These unauthorized acts of agents could not themselves constitute corporate ratification. The corporation did not accept the benefits of the contract with full knowledge of the unauthorized acts, as the Board was never shown to have been advised of them. Consequently, the contracts never became binding on the corporation. The plaintiff’s recourse, if any, was against the individual officers who acted without authority.