Case ID: ad_45/html/0475-01.html
Source: Caselaw Access Project
Author: {"author": "Barrett, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Broadway Theatre Company, Appellant, v. The Dessau Company, Respondent.
    Ultra vires contract executed by the secretary and treasurer of a corporation — special authority in him must be shown — not ratified by his acts and those of the president.
    
    'The secretary and treasurer of a corporation has no implied power to execute a contract which is, on its face, ultra vires, and a person claiming under such a contract must prove that the secretary and treasurer had special authority to • execute it.
    Acts and declarations of the secretary and treasurer, and the president, who owned all but four shares of the stock of the corporation, do not operate as a ratification of the contract in the absence of a resolution of the board of directors or the acquiescence of all the stockholders.
    Appeal by the plaintiff, The Broadway Theatre Company, from :a judgment of the Supreme Court in favor of the defendant, ■entered in the office of the clerk of the county of Hew York on the 17th day of June, 1899, upon the dismissal of the complaint by •direction of the court after a trial before the court and a jury at ■the Hew York Trial Term.
    
      W. E. Carnochan, for the appellant.
    
      Esek Cowen, for the respondent.
   Barrett, J.

The action is for the breach of a written contract with regard to the production of a play. The plaintiff was to furnish the theatre •and its accessories; the defendant, the play and the performers. The plaintiff is a domestic, the defendant a foreign corporation. The purposes for which the latter was organized, as specified in its articles of incorporation, are mining, smelting and manufacturing ■ores, metals and minerals, and selling or dealing in steel products. In its answer the defendant denied that it entered into the contract alleged in the complaint. Indeed, it denied every allegation of the •complaint except the fact of incorporation. It then pleaded affirmatively ¿first, in substance, that the contract was ultra vires ; second, that Simon Dessau, who as its secretary' and treasurer signed the ■contract, did so without authority and that the making of this contract was not within the course of his duties.

Upon the trial the plaintiff proved Dessau’s signature to the contract, and then offered it in evidence. It was not admitted and the plaintiff excepted. The ruling was correct.. The contract -had no relation to the business of the corporation as specified in its articles. The burden was consequently on the plaintiff to prove special authority to execute it. This burden, at that stage of the trial, was entirely independent of the legal effect of what may have been done under the agreement upon the question of ultra vires. Even were the defendant liable as contended because of the partial execution of the contract — although inherently ultra vires•—(as to which we express no opinion), still as upon fits face it was outside of the ordinary business of the corporation, it was inadmissible until special authority to execute it was shown. There can be no implied authority upon the part of the secretary and treasurer of- a corporation to execute an apparently ultra vires contract. Such an implication can only relate to contracts made in the ordinary course of the corporate business and within the scope of its articles. When the contract goes outside the widest scope of that business, as evidenced by the articles, the least that can be required of one who claims under the instrument, is that authority to make it should be shown. It may then be admitted in evidence, and the effect of partial execution .upon the further question of ultra vires would follow.

We do not mean to intimate that special authority to execute such a contract may not be inferred from its ratification by the corporation. But 'the difficulty here is that proof of ratification was not given or offered. The only proof which was offered on that head was the declarations and acts of the secretary and the president. The secretary could not ratify it himself. He had no more authority to do this than he had to execute it. He was not the corporation. The same observations apply in a degree to the president — although that officer happened here to be. the owner of all but some four shares, of the stock.

The plaintiff neither offered a resolution of the board of directors, authorizing or ratifying the contract, nor the acquiescence of all the stockholders. It is, therefore, begging the question to say that the contract was in process of execution when the breach occurred.

It follows that the declarations of the president and the acts of the secretary were without binding force upon the real question, namely, the admissibility of the contract. The corporation as such was not connected with it, either in its origin or execution.

It follows that the complaint"was properly dismissed and the judgment should be affirmed, with costs.

Van Brunt, P. J., Rumsey, Ingraham and McLaughlin, JJ., concurred.

Judgment affirmed, with costs.