[No. 9325. Department Two. July 3, 1911.]
MATT STARWICH et al., Appellants, v. WASHINGTON CUT
GLASS COUNTY, Respondent. «1»
LANDLORD AND TENANT - RENTS - LEASE - ACCEPTANCE. A lessee
is liable for rent upon accepting a lease, although it did
not go into possession or sign the lease.
CORPORATIONS - CONTRACTS - ACCEPTANCE OF LEASE - LANDLORD AND
TENANT. A corporation accepts a lease and is liable for the
rent, where the trustees authorized the officers to enter into
it, the lease was delivered to the officers, who accepted it
on behalf of the corporation, and directed that rents received
from tenants in possession be applied upon the rent reserved
in the lease.
CORPORATIONS - OFFICERS - AUTHORITY - EVIDENCE. Authority to
the president and secretary of a corporation to enter into a
lease may be shown by parol as well as by minutes of the board
of trustees, where no minutes were necessary.
SAME - REQUIREMENTS OF BY-LAWS. A formal act of the trustees,
required by the by-laws, is not essential to bind the corporation
by a lease executed by the officers pursuant to the assent and
previous authority of all the trustees, constituting all of the
stockholders.
Appeal from a judgment of the superior court for King
county, Main, J., entered December 8, 1910, upon findings
in favor of the defendant, after a trial on the merits before
the court without a jury, in an action on contract.
Reversed.
«1» Reported in 116 Pac. 459.
STARWICH v. WASHINGTON CUT GLASS CO. 43
July 1911 Opinion Per MORRIS, J.
McBurney & Cummings, H. McC. Billingsley, and C. C.
Cutler (Walter S. Fulton, of counsel), for appellants.
William R. Bell, for respondent.
MORRIS, J. - Appeal from a judgment of dismissal in an
action to recover for breach of a lease. Appellants were
owners of certain premises in Seattle. The respondent
company was organized in October, 1907, to engage in the
manufacture of cut glass. It desired to obtain suitable quarters
for that purpose. Appellants' building was suggested, and
negotiations were entered into to obtain same, resulting in
an offer from appellants to lease for a term of three years at
$75 per month in advance. This offer was submitted to
meeting of the trustees of the respondent, held on October
21, 1907, and was accepted, providing the building was
found suitable for the required purposes. A committee of
three was appointed to examine the building. Upon such
examination the building was found to be satisfactory, and
measurements of it were taken and handed to one of the
trustees, who was to purchase necessary machinery in the
east. This condition was reported to the president and
secretary of the company, who thereupon requested appellants
to prepare and submit a form of lease, which was done, and
the submitted form being satisfactory to the president and
secretary, appellants were requested to formally execute the
lease and return it to the officers of the company. This
required some time as the appellants were residents of different
places. However, about the last of December, 1907, the
lease, having been formally executed, was delivered to the
president and secretary of the company, who accepted and
received the same on behalf of the company. Subsequently
demands for rent were made, which were not complied with,
the president and secretary asking for time an account of the
inability of the company to get things moving as they had
anticipant. The lease was not returned to appellants, and
they were informed that the same had been mislaid and
44 STARWICH v. WASHINGTON CUT GLASS CO.
Opinion Per MORRIS, J. 64 Wash.
could not be found. The president and secretary of the
company, however, continually asserted their acceptance of
the lease, and their intention to pay the rent as soon as their
financial situation would permit.
At the time of the execution of the lease, the premises were
partly occupied and paying a small rental. These tenants
remained in possession, and the agent of appellants, who had
formerly collected the rent, was instructed by the president
of the company to continue doing so and apply the proceeds
in payment of the rent reserved in the company's lease. This
was done. February 20, 1908, the president of the company
wrote the vice president, and member of the board of
trustees, who had gone east to further promote the business of
the company, saying, among other things: "We have entered
into a lease for the brick building in South Seattle of which
you have the measurements, at $75 per month, from January
1, 1908, from which we are only getting $20 per month
revenue at the present time." The demands for rent
continued and became more insistent, when in March the
treasurer of the company discovered that the lease had not been
signed by the company and, refusing to pay for that reason,
negotiations were broken off and this suit followed.
Subsequently appellants filed an amended complaint in which
they recite a reentry and a reletting of the promises, and
seek now to recover the difference between the rent reserved
in the lease and the rental value of the premises.
The lower court denied any liability upon the lease, as we
gather from the findings, for the reasons, (1) that the lease
was not signed by the lessees; (2) that the lease had never
been formally submitted to, nor accepted by, the trustees of
respondent; (3) that no possession had been taken of the
premises, nor other action by the trustees showing a
ratification. These are the questions now submitted on the
appeal. There were five stockholders in this company, and the
five stockholders were elected five trustees. The trustees
then elected one of their number president. another vice president,
STARWICH v. WASHINGTON CUT GLASS CO. 45
July 1911 Opinion Per MORRIS, J.
a third secretary, a fourth treasurer; the fifth trustee
expected to act as manager when the company commenced
active operations. With these determinative facts in mind,
we come to the discussion of the legal phases suggested.
It is well established that it is not essential to the validity
of a lease that it be signed by the lessee, providing the lessee
accepted the lease and acts thereunder, which acceptance is
generally shown by taking possession or the payment of rent.
Underhill, Landlord and Tenant, SS 252; McAdam, Landlord
and Tenant, SS 47; Tiffany, Landlord and Tenant, SS 27. It
is also held that the lessee is bound where he accepts the lease,
even though his acceptance be not established by possession.
McFarlane v. Williams, 107 Ill. 158; Doxey's Estate v.
Service, 150 Ind. App. 174, 65 N. E. 757; Midland R. Co. v.
Fisher, 125 Ind. 19, 24 N. E. 756, 21 Am. St. 189;
Schmucker v. Sibert, 18 Kan. 104, 26 Am. Rep. 765; Guthrie
v. Anderson, 47 Kan. 383. Underhill, Landlord and Tenant,
SS 242, asserts that, inasmuch as the delivery of a lease may
be a benefit to the lessee, there is a presumption of acceptance,
and this presumption may be raised by a retention of the
lease.
Without committing ourselves to this last doctrine, it is
plain to us that there was an acceptance of this lease by the
president and secretary of this company. Every act upon
which acceptance could be predicated is present, except the
formal signing of the lease. They admit their liability for
the rent and promise to pay the same. They direct the
collection of the rent from the tenants in possession of a portion
of the premises, and direct it to be credited upon the rent to
be paid by the company. And as the vice president of the
company, on account of his absence, is the only officer of the
company to whom these facts are not known, the president
writes him a letter, giving him the information. This
company did not proceed further than its organization and the
negotiations concerning this lease. As we have indicated, it
was unable to rise above the financial stress of the time of its
46 STARWICH v. WASHINGTON CUT GLASS CO.
Opinion Per MORRIS, J. 64 Wash.
organization. It held no meeting subsequent to October 21,
1907. It awaited the result of its vice president's efforts in
the east, and when they failed, it give up the ghost. But
that did not deliver it from the burden of its contracts, nor
create an excuse upon which it can escape liability upon this
lease. Conceding all that its president and secretary have
done in the acceptance of this lease, respondent seeks to
escape liability in its contention that no meeting of its
trustees is shown in which this lease was formally accepted; nor
is any action shown on the part of the trustees obligating the
company to pay the rent. It is shown, however, that at the
meeting of the trustees October 21, the president and
secretary were authorized to execute a lease upon the terms then
and there suggested. This does not appear in the minutes
of that day's meeting. The secretary says, in moving his
office about that time, the minutes were lost. It is
immaterial whether they were or not. No minutes were necessary
to the conferring of such authority, and the acts of the
trustees could be shown by parol as well as by the minutes.
Handley v. Stutz, 159 U.S. 417. A previous authority by
the trustees to the president and secretary to execute a lease
would be as binding as any subsequent ratification of such an
act.
It is again strongly urged that the provisions of the
laws of the company only permit the company to be bound
by the formal act of its trustees. By-laws are for the
protection of the stockholders, and act as a restraint to prevent
the officers of a corporation from exercising more or greater
authority than that conferred. In the case before us the
stockholders were all trustees, and all officers, save one.
They all took part in what was done. They were not attempting
to represent others with or without authority.
They represented themselves. The negotiations for the lease
were submitted to all of them. They knew its terms and
conditions, and authorized its execution. They investigated
the building and found it satisfactory. They took
STATE v. POOLE. 47
July 1911 Syllabus.
measurements of the building, and forwarded them to the trustee
in the east to aid him in the selecting of suitable machinery.
They do not question their liability for rent until it is
discovered the lease is not signed. We might add, as is said in
Solomon Solar Salt Co. v. Barber, 58 Kan. 419, 49 Pac. 524:
"What the rights of dissentient stockholders might be in
such case, we need not and do not consider; nor need we
consider what the corporation, the legal entity itself, might
do in behalf of dissenting stockholders. In this case, there
is neither officer nor owner to now dissent from that to which
he had not previously given assent."
The previous assent of these stockholders, acting as
trustees, to the negotiations for this lease, and their authority
to the president and secretary to execute it, are as binding
upon them and the corporation itself as any subsequent
ratification could be. Morawetz, Private Corporations, SS 228;
Union Nat. Baa. k v. Shoemaker, 68 Mo. App. 592.
We therefore hold that there was an acceptance of the
lease by the respondent, and for that reason, the judgment
is reversed.
DUNBAR, C. J., ELLIS, CROW, and CHADWICK, JJ., concur.