bare of any evidence showing that he either authorized Emmott to sign the notes or that he thereafter ratified their execution. It is clear that, if the present action was brought on the notes, there can be no recovery against Young. words, they are what are popularly known as The ground work of the action was the notes and not the loan. This clearly appears from the plaintiff's statement and by the conduct of counsel on both sides during the trial of the cause. In fact, it was so stated by the learned court in his charge to the jury. After stating the amount of the claim in suit, the statement avers that Young was a member of the partnership; that the plaintiff loaned the money on the credit of the firm and the partners "and therefore obtained from the said Emmott Tea & Coffee Company a certain note or obligation, a copy of which is as follows." The same averment is made as to both notes, and it is accompanied by a copy of the note as required in actions of assumpsit by the Practice Act of May 25, 1887 (P. L. 271), when the plaintiff's claim is founded on a note. The statement concludes: "Plaintiff avers that, although demand has been made upon the said defendant, the said Emmott, and the said Emmott Tea & Coffee Company for payment of said notes, they have failed and refused and still refuse to pay said notes or either of them or any part thereof, wherefore this suit is brought." The default averred in the statement being the refusal to pay the notes, it is conclusive of the cause of action. Chidsey v. Porter, 21 Pa. 390, page 393. In that case Mr. Justice Woodward, delivering the opinion, said: "There was no error in refusing to permit the plaintiff to recover on the DE FOREST v. NORTHWEST TOWNSITE consideration of the note, for, though the narr. contains a count for goods sold and delivered, the only breach assigned is for not paying the note." The judgment of the court below is reversed, and judgment non obstante veredicto is now entered for the defendant. CO. (241 Pa. 78) (Supreme Court of Pennsylvania. May 12, 1913.) 1. CORPORATIONS (8 407*)-CONTRACT BY OF·FICER-VALIDITY. An employment contract executed by the president of a corporation was not enforceable against the corporation, where the corporate by-laws gave him no authority to execute it, and it was not authorized or ratified, but instead was repudiated, by the directors. tions, Cent. Dig. 88 1615-1619; Dec. Dig. § [Ed. Note.-For other cases, see Corpora407.*] 2. CORPORATIONS (§ 393*)-FOREIGN CORPORATION-INTERFERENCE WITH INTERNAL AF FAIRS. On the trial of the cause the plaintiff was called as a witness in his own behalf, and he testified that he loaned the money to the Emmott Tea & Coffee Company and received the two judgment notes for the loan. Emmott was called as a witness for the plaintiff and testified: "Q. I show you two notes which have been identified by Mr. Funk (the plaintiff) as sued on in this case, and ask if those are notes given by you to Mr. Funk? A. Yes, sir." At the conclusion of Emmott's testimony the counsel for the plaintiff said: "I offer in evidence the two notes in suit." The counsel for the defendant objected "to the offer on the ground that it is not the implied power of one partner to give an instrument under seal so as to bind another partner and that applies to judgment notes." In his charge to the jury, the learned court said, inter alia: "Gentlemen of the jury, this is a suit upon two instruments in the form of promissory notes, with warrants of Action by Charles M. De Forest against attorney to confess judgment; in other the Northwest Townsite Company. From a for the breach of an employment contract, it In an action against a foreign corporation was not an interference with the internal affairs of the corporation for the court to enforce the corporate by-laws by declaring the contract void because executed by the president of the corporation without authority. [Ed. Note. For other cases, see Corporations. Cent. Dig. §§ 1574, 1575; Dec. Dig. § 393.*] Appeal from Court of Common Pleas, Philadelphia County. judgment on directed verdict for defendant, a trial upon the merits." On the facts beplaintiff appeals. Affirmed. Argued before BROWN, POTTER, ELKIN, STEWART, and MOSCHZISKER, JJ. Harry D. Wescott, of Philadelphia, for appellant. M. Hampton Todd, of Philadelphia, for appellee. * fore us at that time we were of opinion that the question of ratification would take the case to the jury; but we particularly said: "The burden will be upon the plaintiff to show such acquiescence in, knowledge of, and adoption of his services by the corporation as will warrant the jury, under instructions as to the law, in finding a ratification." MOSCHZISKER, J. The plaintiff claimed The present record shows that when the for the breach of a written contract of emcase came to trial the plaintiff was given ployment for one year executed by the de- ample opportunity to prove ratification, but fendant corporation through its president, in failed to do so. The evidence now before us which he was guaranteed $5,000 compensa- makes it manifest that the president had no tion. He averred an unlawful discharge be- power to enter into the contract sued upon; fore the expiration of the year, and that a that the board of directors never approved large part of the compensation remained it; that when the terms of the plaintiff's unpaid, for which he brought suit. The employment were first brought to their attrial judge gave binding instructions for the tention they promptly expressed their disdefendant, saying: "Mr. De Forest (the approval; and that, after securing the advice plaintiff) made a contract with Mr. Bailey, of counsel, they at once repudiated the conwho was president of the * (defend- tract. Counsel for the plaintiff, in his ant) company. An examination of the by- printed argument, correctly states that the laws shows that the president had no right material facts were "not disputed in a manto make any such contract. Such a conner calculated to test veracity and kindred tract required the approval of the board of elements." Hence, under the circumstances, directors; he did not have it. * no error was committed in directing a verTherefore the contract was a void con- dict for the defendant. tract unless the directors by some action of theirs ratified the contract. I see no ratification of the contract at all. On the contrary, their action was a disavowal of it. Under the circumstances, Mr. De Forest, having been paid for what he did, cannot recover the main sum in the contract, to wit, the guaranty that he would get $5,000 for the year." A verdict was rendered accordingly, and the plaintiff has appealed from the judgment entered thereon. The details of the contract, the bylaws of the defendant company, and other enlightening facts are contained in a former report of this case in 236 Pa. 125, 84 Atl. 674. * [1] An examination of the record and testimony satisfies us that the learned court below took a correct view of this case. When the matter was here before, in reversing a judgment entered for want of a sufficient affidavit of defense, speaking by our Brother Elkin, we said: "The president may have exceeded his authority, and no doubt he did so, but the question still remains whether the board of directors accepted the services of appellee (the plaintiff) under the terms of the contract, * * and acquiesced in the arrangement to such an extent as to operate as a ratification. In some cases this question is for the court, and in others for the jury; it depends upon the facts in each particular case. The affidavit of defense was sufficient to prevent judgment and to make it necessary for * [2] We are not impressed with the contention of the appellant that the action of the trial court in giving force and effect to the defendant's duly proved and undisputed by-laws constituted an interference in the internal affairs of a foreign corporation; the question simply concerned the reasonable limitations placed by the by-laws of a corporation upon the authority of its agents, and the fact that it was a foreign corporation did not enter into the determination below, and can have no weight here. It remains but to say that this was not an everyday business transaction, but a contract of a special character that would naturally call for the exercise of the judgment of the board of directors; there was no evidence of a continued course of dealing between the plaintiff and the president of the defendant company, or of an abandonment of the affairs of the corporation to the management of that agent, or of a holding out to the world of the latter as vested with general authority to bind his principal, or of other exceptional facts which would raise an implication of authority in the president to enter into agreements of this nature, and take the case out of the ordinary rules applicable to and controlling contracts made by agents, as defined in Twelfth St. Market Co. v. Jackson, 102 Pa. 269, Millward-Cliff Cracker Co.'s Est., 161 Pa. 157, 28 Atl. 1072, and other like authorities. The assignments of error are all overruled, and the judgment is affirmed. ceding the prayer for relief and is as follows: "The plaintiff charges that the defendants have acted negligently in some regards, and in other respects they acted fraudulently, in their capacity of directors of the said cor 1. CORPORATIONS ( 665*)-FOREIGN CORPO-poration; that, solely due to their negligence BATIONS-BILL AGAINST RESIDENT OFFICERS -JURISDICTION. A Pennsylvania common pleas court has jurisdiction of a bill filed by a Delaware corporation against its former officers and directors, who are resident within the jurisdiction, to recover for losses sustained by their negli gence and fraudulent acts; such proceeding not being an interference with the internal management of a foreign corporation. [Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 2571, 2573, 2595-2600; Dec. Dig. § 665.*] 2. CORPORATIONS (§ 319*)-ACCOUNTING AND DISCOVERY-BILL AGAINST OFFICERS. A bill in equity by a corporation against its former officers and directors will not be dismissed on the ground that plaintiff has an adequate remedy at law, where an accounting and discovery are necessary. [Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 1415, 1416-1425; Dec. Dig. § 319.*] Appeal from Court of Common Pleas, Philadelphia County. Bill by the Loan Society of Philadelphia against Marvin M. Eavenson and others. From a decree dismissing the bill, plaintiff appeals. Reversed. Argued before FELL, C. J., and BROWN, MESTREZAT, POTTER, and MOSCHZISKER, JJ. Owen J. Roberts, of Philadelphia, for appellant. C. S. Wesley, of Philadelphia, for appellees. MESTREZAT, J. The Loan Society of Philadelphia is a corporation chartered September 3, 1908, under the laws of the state of Delaware with authority to loan money on collateral security. Its principal place of business is in the city of Philadelphia, where, since its organization, the society has carried on the business for which it was incorporated. On December 7, 1911, it filed this bill in equity against the defendants, seven of whom appeared and filed answers, one filed a demurrer which was sustained, and Mead and four others filed neither demurrer nor answer to the bill. The answers substantially admitted the material facts averred in the bill but denied negligence or intent to defraud, and alleged that the transactions described in the bill were carried on by the defendant Mead as general manager, without the knowledge or consent of the respondents. Issue was joined as to the seven defendants who filed substantially the same answer, and the case was heard on the bill, answers, and replication. The bill is quite lengthy and sets forth in detail the charges against the defendants for which relief is sought. The substance of the averments is contained in the clause pre and fraudulent conduct, the said corporation has lost from August 31, 1908, to August 31, 1911, the sum of $137,196.53, for which sum the defendants and each of them are in law responsible to the treasury of the plaintiff corporation." The prayers of the bill are: (a) For a decree declaring each of the defendants to be liable and accountable to the plaintiff for the sum of money which the court may find to have been lost and to have been fraudulently paid out by the neglect or connivance of the defendants; (b) for an account showing the amounts for which the defendants are liable, and a decree directing the payment of such sums to the plaintiff; (c) for discovery by each defendant of all sums paid to him by the plaintiff and of all matters appertaining to the transactions of the plaintiff during his incumbency as director; (d) general relief. At the hearing the learned court below dismissed the bill on motion of defendants' counsel for the reason, as stated by it, "that we are without jurisdiction of the subjectmatter; the questions involved being questions which, in view of the court, must be decided almost entirely under the laws of Delaware, the corporation plaintiff being a Delaware corporation, and all the defendants having been formerly officers of the corporation." In other words, as held by the court in the opinion dismissing exceptions to its findings, to investigate the charges contained in the bill "would necessitate the inquiry by us as to whether the internal management of the affairs of this corporation was legal and proper. This in our judgment we have no right to do." The plaintiff has taken this appeal. [1] We do not agree with the learned court below in its conclusion that it did not have jurisdiction of the cause averred in the bill. We have frequently held, and it may now be considered as settled in this state, that our courts will not take jurisdiction of a case involving the internal management of a foreign corporation. In all matters relating merely to corporate management, an injured party will be required to seek his redress in the domicile of the corporation. Our courts will not exercise visitorial power over corporations chartered in another state, nor will they interfere in any way in determining the rights or duties of the directors or officers of the corporation under the laws of a foreign jurisdiction. These are matters wholly within the jurisdiction of the courts of the state which create the corporation. If the facts averred in the bill disclosed that the plaintiff is seeking to control or interfere with the management of the corporation, an action at law. The defendants occupy the rule just announced would apply and the decree dismissing the bill would have to be affirmed. The relief sought in the bill, however, is not the control of the corporation or its officers or the management of its internal affairs. In no proper sense whatever can the action be regarded as an attempt on the part of the plaintiff to have the court control or direct the affairs of the corporation. The corporation is the plaintiff and is seeking the relief asked for in the bill. It is duly registered in this state and is authorized to sue in this jurisdiction. The defendants against whom the corporation is proceeding are residents of the state, are within the jurisdiction of the court, and have been duly served. Any decree that may be entered against them can be enforced by the court. The suit is a proceeding to compel the defendants to account for losses sustained by the corporation by reason of their negligent and fraudulent acts while officers of the corporation. To enforce this relief the bill prays for an accounting and discovery. This, of course, involves an investigation of the management of the affairs of the corporation by the defendants while they were acting in their official capacity as directors. This investigation is necessary in order to establish the tortious acts of the defendants complained of in the bill and for which the corporation itself now seeks reparation. This is not, however, an interference with the internal management of the corporation within contemplation of the rule which denies jurisdiction to our courts. It does not seek to control or regulate the affairs of the corporation. It does not attempt to control the acts of any of the officials of the corporation. It does not seek to determine the rights of the stockholders among themselves or between them and the corporation. There is no attempt to test the right of any officer or director to his office or control his action in the performance of any official duty. The proceeding was instituted against the defendants after they had severed their connection with the corporation to compel them to account to the corporation for losses sustained while acting in their official capacity as directors. This, as already observed, involves an investigation of the official conduct of the defendants as directors of the corporation, but it does not regulate or interfere with the management of the corporation. It seeks redress for the mismanagement and misfeasance of the defendants as directors, but it does not ask the court to control or regulate the management of the corporation. [2] This suit was instituted by the corporation itself to enforce redress for injuries which it alleges it has sustained by the wrongful acts of the defendants. If it were not for the fact that an accounting and discovery were necessary to afford the plaintiff the same position as any third party who has committed tortious acts resulting in injury to the plaintiff. In such case there could be no question as to the jurisdiction of the court. The plaintiff is authorized by the laws of this state to bring the action, and the defendants are all within the reach of the process of the court. The mere fact, however, that the plaintiff was required to go into equity instead of bringing an action on the law side of the court cannot oust the jurisdiction. The court has jurisdiction of the parties and may therefore enforce any deor judgment entered against them. Hence it is immaterial whether the suit is at law or in equity. The form of the action is not determinative of the jurisdiction. cree There is every reason why the court should take jurisdiction in this case. The plaintiff corporation, though chartered in another state, has the right to sue in this state. The business of the corporation is carried on in this state. The defendants against whom relief is sought reside in this state. This is an action to enforce the common-law liability of the seven directors, resident within the jurisdiction of the court, for mismanagement and misfeasance in conducting the affairs of the company. If jurisdiction is denied, it deprives the corporation of all relief for the injuries which it alleges it has sustained by reason of the tortious acts of its former directors. The defendants reside in this state, are subject to the process of its courts, and no service can be had on them in Delaware, unless by chance they may be served while temporarily in that state. The plaintiff is not required to take such chances in order to enforce its rights. It is no hardship on the defendants to be required to answer for their acts in the jurisdiction in which they reside. They might well complain if required to go to another state and defend against the claim. The plaintiff simply asks them to submit to the judgment of their own tribunals, and no sufficient reason, legal or equitable, has been shown why they should not do so. We are not impressed with the argument of the appellees' counsel that the bill should be dismissed because the complainant has an adequate remedy at law, because the bill is multifarious, because there is no reason for an accounting, and because fraud is insufficiently averred. As intimated above, both discovery and an accounting are necessary to afford relief to the plaintiff, and hence an action at law will not furnish the plaintiff corporation an adequate remedy for the injuries it has sustained. The bill seeks to require the defendants to account for the losses which resulted from their negligent and fraudulent management of the plaintiff's affairs. The relief asked against all the defendants is the same and while acting in the same official capacity as directors An examination of the cases cited and relied on by the learned court below to sustain its action in dismissing the bill discloses a misapprehension of the facts and of the decisions in those cases. In each case the bill was filed by a stockholder, and the visitorial powers of the court were invoked to give the plaintiff the redress he sought. In neither of the cases was the corporation the plaintiff seeking redress for wrongs or injuries sustained by the misconduct of its former officers who were resident in the jurisdiction of the court. The decree of the court below reversed, the bill is reinstated, and a procedendo is awarded. (241 Pa. 105) STERLING et al. v. H. F. WATSON CO. CORPORATIONS (8 68*)-PREFERRED STOCK Where preferred stock certificates specified that they were issued pursuant to Acts of Assembly April 18, 1874 (P. L. 61), April 3, 1872 (P. L. 37), and April 28, 1873 (P. L. 79), and provided that the stock was entitled to cumulative semiannual dividends of 4 per cent., payable from the company's net earnings, and that it was issued subject to the company's right to extinguish it upon payment of the arrears of dividends and the par value, the corporation could not compel a surrender of the stock for redemption except on payment in cash of accumulated dividends and the par value of the stock, though a portion of a stock dividend had been distributed to the preferred stockholders; such distribution of new stock not constituting payment on account of dividends. [Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 181-183, 449; Dec. Dig. § 68.*] arrears of dividends, and the par value thereof, at any time after April 6, 1907." Three hundred and sixty of these preferred shares were purchased by the plaintiffs at par and certificates were duly issued to them by the company, and are still held and owned by them. On November 11, 1897, one semiannual dividend was declared on said shares, payable as of October 1, 1897, which dividend was paid in cash to one of the plaintiffs and credited to the others upon the books of the company. On January 20, 1904, only 410 of said 2,500 preferred shares having been sold or issued, the company resolved to change the remaining 2,090 shares from preferred to common shares and thereupon declared a "stock dividend" of 25 per cent., "to be paid in common stock to all holders of either preferred or common stock as their interest may appear upon the stock book today." Said stock dividend was distributed to all common and preferred stockholders alike and receipted for by them as a "stock dividend." The common stock at this time was worth from 40 to 50 cents on the dollar. At the time this action was taken, the plaintiffs were minority holders of the stock of the company as well as minority directors. No further or other dividends were paid by the company after the issue of the preferred shares in 1897. The company having been prosperous, its stockholders and directors resolved in January, 1912, against the protest and votes of the plaintiffs, to redeem the preferred shares by paying on February 15, 1912, the par value thereof and accrued dividends to October 1, 1911, and deducting therefrom the par value of said 25 per cent. stock dividend which had been distributed eight years before to all stockholders as Appeal from Court of Common Pleas, Erie aforesaid. Said resolution further declared County. Bill for injunction by W. B. Sterling and others against the H. F. Watson Company. | From a decree for plaintiffs, defendant appeals. Affirmed. From the record it appeared that the H. F. Watson Company was a Pennsylvania manufacturing corporation. On April 6, 1897, it increased its capital stock from $750,000 to $1,000,000; such increase to consist of cumulative preferred stock. The certificate of preferred stock contained the following clause: "The stock represented by this certificate is a portion of the preferred stock authorized by the stockholders, in pursuance of the Acts of Assembly of April 18, 1874 [P. L. 61], April 3, 1872 [P. L. 37], and April 28, 1873 [P. L. 79]; is entitled to cumulative semiannual dividends of four per cent. each on the par value of the stock, payable from the net earnings of the company; and is subject to the right of the H. F. Watson Company, at its option, to retire and extinguish the same upon the payment to the owner thereof of all that the financial condition of the company justified such redemption and payment of dividends and also declared that after October 1, 1911, all further earnings and dividends on said preferred shares should cease and determine, and that none of said preferred shares should afterwards be transferred upon the books of the company. The plaintiffs filed their bill of complaint, asking that the company be restrained from carrying said resolutions into effect, from stopping said dividends as of the preceding October 1st, from refusing transfers, from paying dividends upon the common stock until dividends upon said preferred shares were first paid in full, and for a decree for the payment of all arrears of preferred dividends which the company, by said resolutions, had declared itself able to pay. The court filed the following conclusions of law: "Opinion of Court Below. "First. The 4 per cent. semiannual cumulative dividends provided for the preferred |