Case ID: ad_21/html/0204-01.html
Source: Caselaw Access Project
Author: {"author": "Goodrich, P. J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Charles F. Holm, Respondent, v. The Claus Lipsius Brewing Company, Appellant.
    
      ■Corporation—a gúaA'anty of rent given by a brewing company to the owner of premises on which its beer is sold is not ultra vires —■ lack of the corporate seal.
    
    A covenant indorsed, upon a lease qf saloon premises, by which a brewing company. guarantees to the owner the rent of such premises, on which the tenant sells beer manufactured by the guarantor, is not a contract ultra vires, and is valid, although the guaranty has upon it only a wafer, instead of the corporate seal of the company.
    tinder such covenant the guarantor is liable, to a grantee of the premises and assignee of the lease and guaranty, for rent unpaid by a sub-tenant of the original lessee, who continues to' sell the beef manufactured by the guarantor,
    ' particularly where, in response tó a demand upon it, the company has already, paid one installment of rent owing by the sub-tenant, and-in a letter wfitten by it has, in effect, stated that it would consider itself responsible in case of further default.
    Appeal by the defendant, The Claus Lipsius Brewing Company, from an- order of the Supreme Court, made at the Kings County Trial Term and entered in the office of the clerk of the county of Kings on the 6th day of March, 1897, denying the defendant’s motion for a new trial made upon the minutes, in an action tried before the court and a jury, in which a verdict was rendered for the ■plaintiff.
    
      Joseph F. Daly, for the appellant.
    
      Terry Smith, for' the respondent.
   Goodrich, P. J.:

Mary Henken,, being the owner of a building at the corner of Sixth avenue and Fourteenth street, Brooklyn, on December 13, 1893, leased it to one Stahnke for a term of five years from March 1, 1894, at the annual rent of $900, payable monthly in advance. The defendant is a corporation organized under the laws of this State for “ the manufacture and sale of malt liquors.” The certificate of incorporation names, among other trustees, William C. Gluck, who was also treasurer. Under date of March 28, 1894,, there was indorsed upon the lease an agreement signed:

“ THE CLAUS LIPSIUS BREWING COMPANY. [Wafer.]
“ W. C. Gluck, Treas. [Seal.] ”

in which was the following covenant: “ If default shall at any time-be made by the said William G. Stahnke in the payment of the rent and performance of the covenants contained in the within lease on his part to be paid and performed, that I will well and truly pay the said rent, or any arrears thereof, that' may remain due unto the-said party of the first part, and also all damages that may arise in consequence of the non-performance of said covenants, or either of them, without requiring notice of any such default from the said party of the first part.”

Stahnke entered the premises as lessee and continued to occupy them up to a date which is not definitely fixed, but was probably some time in the year 1895. Oh January 2,1896, Mrs. Henken conveyed the premises to the plaintiff and assigned to him the lease, “and also the surety agreement annexed and forming a part of said lease wherein the Claus Lipsius Brewing Co. covenant to pay said rent if default is made by the lessee.” Apparently, at this time, Stahnke had ceased to occupy the premises and had been succeeded by Jacob-Muller.

On January 20,' 1896, the plaintiff wrote to the defendant calling-its attention to the fact that it was the guarantor of the rent of the-'¡premises “ which Stahnke, .the tenant, subleased- or transferred (as far as the saloon- business is. concerned) to a man by name.-of Muller,” and demanding the rent for January. Similar letters were written on January twenty-fourth and, January twenty-ninth, and on February fourteenth the defendant inclosed its check for the January rent of seventy-five dollars, asking for a receipt, which was sent on the next day and contains the following clause.-: “ As per lease made by Mary Henken to Stahnke and held by Claus Lipsius Brewing Company under assignment from said Stahnke.”

On February twenty-fourth, the plaintiff wrote the. defendant demanding the February rent and referring to Muller as the subtenant of the defendant. The latter answered on February twenty-fifth, the-letter containing the following sentences:

“We appreciate your endeavor to collect from Mr. Miller first, before applying to us. * * * We will consider ourselves under obligations, if Mr. Miller fails to pay his rent by the' twentieth, to.receive .notice from you, and we will promptly mail you' our check in return.” ■ The two letters- of the defendant are written ppon letter paper the heading of which contains the name, address and names of officers of the defendant, and are respectively- signed:
“THE CLAUS LIPSIUS BREWING CO.
. “ (Bowles) ”
and. “THE CLAUS LIPSIUS BREWING CO.
“(Bunker.)”

It may be assumed that both of the letter's were written with the authority of the defendant, as one of them contained the defendant’s check for seventy-five dollars in payment of the January rent, and the other was followed by the payment of the February, rent. These letters and the receipt are evidence of the fact that the defendant was the assignee of the Stahnke lease,, if not in actual possession by Muller, its sub-tenant. There is also evidence tending to show that Muller, who was. on the premises for about a year, made an arrangement for entering upon the premises with Gluck, the treasurer of the defendant, which had, before that, supplied Stahnke with its beer and put its signs upon the building, and continued the .same method of dealing with Muller when he went into possession, These letters and facts constitute a guaranty to pay, provided the plaintiff would delay payment till the twentieth of each month, as well as a ratification of the original guaranty of the defendant. It is true that the .guaranty had upon it only a wafer as a seal, opposite the name of the corporation, instead of what is commonly known as a corporate seal, but a seal is not necessary tó the validity of such an agreement, and it does not appear that any of the stockholders object to any of the transactions in question (see Holmes v. Willard, 125 N. Y. 75); and it is fairly inferable from the evidence that the original inducement for the guaranty was the opening of a saloon in which should be sold the defendant’s beer, the sale of which was one of .the purposes stated in the certificate of organization; that when Stahnke left the premises the lease was assigned by him to the defendant, and that when Muller ' went into, possession he did so by some similar arrangement with the brewing company.

The defendant claims that the guaranty is ultra vires. I see no force in this objection. ' The doctrine of ultra vires originated at a time when nearly all corporations were created for public purposes, and there is no reason why it should.ever have been applied to private corporations any more than to the powers of individuals in a partnership. (5 Thomp. on Corp. § 5971.)

In Whitney Arms Co. v. Barlow (63 N. Y. 62, 69) the court said : “ The plea of ultra vires should not, as a general rule, prevail, whether interposed for or against a corporation, when it would hot advance justice, but, on the contrary, would accomplish a legal wrong. * •* It is now very well settled that a corporation Cannot avail itself of the defense of ultra vires, when the contract has been, in good faith, fully performed by the other party, and the corporation has had the full benefit of the performance and of the contract.” ,

In Holmes v. Willard (125 N. Y. 75) the court said: “ Directors and officers of corporations are agents of the corporation for which they act. ";t * * A corporation dealing ■■iri manufactured goods and needing them for sale, may, as a proper incident to its business, extend financial aid to a manufacturer. * * . * ”

So in the case of Bath Gas Light Co. v. Claffy (151 N. Y. 24, 36, 37), where a quasi public corporation was involved and-where the court stated that the contract was made by the corporation without legal sanction, it was said : “ Public policy is promoted by * * * the maintenance of the obligation of contracts, and to permit a lessee of a corporation to escape the .payment of rent by pleading the incapacity of the corporation to make the lease * * * would be, we think, most inequitable and unjust. * * * The courts in this State * * * have sought to regulate and restrict the defense of ultra vires so as. to make it consistent with the obligations of justice.”

In the. very similar case, of Fuld v. Burr Brewing Co. (18 N. Y. Supp. 456) the General Term of the Common Pleas of Hew York held a similar guaranty to be not ull/ra vires and not beyond the • scope of the corporate. powers. In this case, as in the one at bar, checks had been given by the defendant for a part of the rent named in the guaranty.

It would be extremely inequitable, under the circumstances of this case, to permit the defendant to avoid liability on the contract, inasmuch as, during the term of both tenants, the premises were used for the sale of its beer, and it became assignee* of Stahnke’s lease, and, in a certain sense, occupant of the premises through Muller’s possession.

The defendant’s counsel contends that the original • guaranty ran only to Mrs: Henken and not to.kef assigns, and that the, contract ' being strietissimi juris cannot be extended for the’ bene6t:-óf il|e.ii grantee. The answer to this is clear. The plaintiff' obtains his rightSj not alone under the deed of Mrs. Henken, but also under her assignment of the lease and its annexed guaranty and under the- . promise, contained in the letter of February twenty-fifth, in which the defendant promised to pay the rent if Muller failed to pay it by the' twentieth of each month, the evidence showing that the plaintiff did wait till that time and that Muller did not pay.

This suit is'brought to recover-the rent which became due during the term of the lease, and which is covered by the original guaranty, as it does not appear that any assent was given by Mrs: Henken or by the plaintiff to the surrender of Stahnke’s term or the change of possession to Muiller.. •' •

The plaintiff is entitled to recovery and the, judgment is affirmed.

All concurred.

Order denying motion for a new trial affirmed, with costs.