Case Name: GAUSE v. COMMONWEALTH TRUST CO. OF NEW YORK
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1908-02-21
Citations: 108 N.Y.S. 1080
Docket Number: 
Parties: GAUSE v. COMMONWEALTH TRUST CO. OF NEW YORK.
Judges: 
Reporter: West's New York Supplement
Volume: 108
Pages: 1080–1099

Head Matter:
GAUSE v. COMMONWEALTH TRUST CO. OF NEW YORK.
(Supreme Court, Appellate Division, First Department.
February 21, 1908.)
1. Appeal—Special Verdicts—Effect on Appeal.
Where, in an action on contract for money, the special finding of the jury that the parol collateral agreement relied on by defendant was not made was supported by the evidence, plaintiff on appeal from a judgment of dismissal was entitled to the benefit of the finding, as provided by Code Civ. Proe. § 1187, providing for the rendition of general or special verdicts in actions for money, and that on appeal the special verdict shall form a part of the record, and that the appellate court may direct such judgment thereon as either party may be entitled to.
2. Corporations!—Contracts—Autiiobity to Execute—Evidence.
On the issue whether a contract, signed by a trust company by its vice president and sealed by its seal, was authorized by the company, governed by Banking Law, Laws 1892, p. 1912, c. 689, § 161, providing that its corporate powers shall be exercised by a board of directors, and Stock Corporation Law, Laws 1890, p. 1071, c. 564, § 27, authorizing the directors of a stock corporation to appoint officers with power to manage the affairs of the corporation subject to the control of the directors, evidence examined, and held hot to show that the contract was authorized by the company.
[Ed. Note.—For cases in point, see Cent. Dig. vol. 12, Corporations, § 1737.]
3. Same—Presumptions.
Proof that the seal of a corporation whose name was signed to a contract was attached thereto is prima facie evidence that the contract was signed by the authority of the corporation.
[Ed. Note.—For eases in point, see Cent. Dig. vol. 12,• Corporations, § 1737.]
4. Same.
Though persons dealing with a business corporation may rely on the apparent authority of its officers, yet, in the absence of evidence on which to predicate an estoppel as by holding out as authorized, or a course of dealing, the question is whether a contract with a corporation was. authorized," and when it appears that it was not, and that there has been no estoppel, the corporation is not liable.
5. Same—Estoppel.
On the issue whether a corporation was estopped from questioning the validity of a contract signed in its name by its vice president without authority, it appeared that the corporation received no benefit from the contract, and that as a corporation it had no knowledge of the making thereof. The officers having knowledge of the contract kept it secret from the corporation because of their interests, and because of their fear that it would not be ratified by the corporation. Held, that the corporation was not estopped from assailing the validity of the contract.
Ingraham and Clarke, JJ., dissenting.
Appeal from Trial Term.
Action by Henry T. Cause against the Commonwealth Trust Company of New York. From a judgment dismissing the complaint (55 Mise. Rep. 110, 106 N. Y. Supp. 288), pursuant to direction of the-court at the close of the evidence on the trial after receiving a verdict on special questions submitted, plaintiff appeals. Affirmed.
See 111 App. Div. 530, 97 N. Y. Supp. 1091.
Argued before PATTERSON, P. J., and INGRAHAM, RAUGH-UN, CLARKE, and SCOTT, JJ.
Howard Taylor (Henry B. Anderson, on the brief), for appellant-
D. Cady Herrick, for respondent.

Opinion:
LAUGHLIN, J.
The defendant is a domestic trust company. It was incorporated under the name of the "Trust Company of the Republic" on the 29th day of March, 1902, and its name was changed on the 12th day of October, 1903. The action is brought to recover damages for the breach of a contract in writing, bearing date the-28th day of August, 1902, and purporting to have been made by and between the Trust Company of the Republic, as party of the first part, and the plaintiff, as party of the second part. The agreement acknowledges the consideration of $1 moving to the plaintiff from the trust company and "other good and valuable considerations," and then provides as follows:
"Whereas, a selling syndicate, of which Thomas O. Clarke, is named as-manager, has been formed to arrange for such sales, and for other purposes, under an agreement providing for the deposit of all of said securities, except those of the party hereto of the second part, with the party hereto of the first-part for such purposes, both parties hereto will in good faith, co-operate with the said syndicate in furthering such object, and this agreement is intended to be an aid to same.
"2. The party of the second part agrees that he will deposit with the party of the first part all of his bonds and shares of preferred and common stock of the United States Shipbuilding Company, under the terms and conditions of this agreement, as hereinafter set forth.
"3. The party of the first part will use and dispose of said securities of the-party of the second part as in its judgment is necessary to further the purposes of said syndicate, and in so doing will do whatever is necessary to insure equal benefits to the party hereto of the second part pro rata to his-holdings of said securities that are enjoyed at any time by the vendors who-shall be or become parties to the agreement with said syndicate in connection with the sale and disposition of said- securities or the proceeds of sale of" same, and it hereby guarantees to the party of the second part the sale of all of his said securities on or before August 25th, 1903, whether through the- efforts of said syndicate or otherwise, and the party of the first part agrees to account to the party of the second part, on or before the 25th day of August, 1903, and that the prices thereof shall be on a basis which will realize to the party of the second part not less than 95 per cent, of the par value of the bonds and 68 per cent, of the par value of the said preferred stock and 25 per cent, of the par value of the said common stock, less brokerage expenses, as hereinafter stated, and the party of the first part hereby agrees to pay to the party of the second part, the interest on the bonds as and when received from the United States Shipbuilding Company, during the period of this agreement; and in case of their sale or any of them during the period of this agreement, and if under such circumstances, it elects to retain the proceeds of the sale of the same, under the provisions hereof, until the final accounting hereunder, the party of the first part agrees to pay to the party of the second part, the accrued interest on such bonds as may b.e sold, up to the dates of their sale, and also interest on the proceeds of sale of same, at the same rate that the bonds would have earned if same had not been deposited under the terms of this agreement, said. payments of interest to be made January 1st, and July 1st, 1903, if this agreement is not sooner terminated, but at its termination at any time payment is to be made in full.
"4. The party of the first part is hereby accorded the exclusive right to sell the said securities of the party of the second part during the period of this agreement.
"5. The party of the first part shall have authority from time to time, and at any time, to pay the usual brokerage and brokers' expenses, if any, in connection with the sale of said securities of the party of the second part.
"6. Said party of the first part shall not be liable for any error of judgment or for any mistake of law or fact, nor shall it be liable for any act or omission while endeavoring in good faith to carry out the purposes hereof according to its judgment, but such exemption of liability shall not affect its liability named in clause 3 hereof. No obligation or liability in addition to those herein expressed shall be implied against the said party of the first part; it being the spirit and intent of this agreement that said securities are deposited as named under a guaranty of sale at not less than the minimum figures hereinbefore mentioned, and all proceeds of sales are to be accounted for at the figures at which such sales shall be made, and the same with all incidental' net profits in connection with the same.
. '7. This agreement and all it contains shall become null and void on August 25, 1903, or at any time prior thereto coincident with the sale of and settlement for all of the said securities of the party of the second part or the termination of the said syndicate by the fulfillment of its agreement with the other vendors and underwriters of the said securities."
The agreement is signed "Trust Company of the Republic, by James Duane Livingston, Vice President," and the seal of the company is attached and is attested by W. Babcock both as secretary and as witness. He was not in fact secretary, but was assistant secretary. The plaintiff duly tendered the securities specified in the contract to Livingston, the vice president of the trust company, and by his direction retained them until such time as they might be called for by the trust company. They were neither called for nor sold by the trust company on or prior to the 25th day of August, 1903. The plaintiff, by his original complaint, sought to recover the minimum price for which, by the agreement, the trust company obligated itself to sell the securities. On an appeal by the defendant from an interlocutory judgment sustaining plaintiff's demurrers to various affirmative defenses set forth in -its amended answer, this court held that the defendant did not obligate itself by the agreement to pay the plaintiff a certain sum of money, but that the defendant became thereby the selling agent of the plaintiff of the securities mentioned in the agreement, under a covenant that, if it were given the exclusive right to sell the securities during the period named, they would realize a sum equal to the minimum figures specified in the contract, and that title remained in the plaintiff and without his consent, the defendant could not become the purchaser. Gause v. Commonwealth Trust Co., 100 App. Div. 427, 91 N. Y. Supp. 847. In deciding that appeal, Presiding Justice Van Brunt, writing for the court, said:
"The cause of action, if any, alleged was not a breach of a covenant to pay a certain sum of money, but to perform a certain duty, namely, to sell these securities, and a covenant that they would realize a certain sum at least. There were no allegations whatever contained in this complaint tending to show that by reason of the breach of this covenant of sale, the plaintiff has suffered any damage whatever. It seems to us, therefore, that there being no covenant to pay the sum mentioned in the complaint, and it being the duty of the defendant to sell these securities and to account for the proceeds to the plaintiff, which it covenanted would realize at least a certain sum, whatever right of action the plaintiff has is for a breach of these covenants. We think that the complaint was insufficient, and for that reason the demurrers should have been overruled."
The plaintiff thereafter amended the complaint, and alleged a cause of action on the contract to recover for the difference between the value of the securities on the 25th day of August, 1903, and the price for which the defendant obligated itself to sell them. The defendant demurred to the amended complaint. The demurrer was overruled, and on appeal this court held that the construction of the contract on the former appeal was the law of the case, so far as this court was concerned, and that plaintiff was entitled to recover upon the theory of the amended complaint. 111 App. Div. 530, 97 N. Y. Supp. 1091. The answer of the defendant, among other things, put in issue the making of the contract, and set up, among other defenses, that it was ultra vires, and that a parol collateral agreement was made to the effect that the contract upon which the action is based was not to become operative unless all the other vendors, to whom reference is made in the agreement, signed the syndicate agreement therein mentioned. In support of the defense of a parol collateral agreement, testimony was given by Livingston, the vice president of the defendant, which, however, was controverted by the testimony of the plaintiff. The defendant offered no evidence on the question of damages. At the close of the evidence, by consent of the parties, the court was authorized to assess the damages in the event that the plaintiff should be entitled to recover, and, pending motions by each party for a direction of a verdict, the court submitted two questions to the jury. One was as to whether the officers who'signed or directed the signing of the agreement upon which the action is founded were authorized by the defendant to execute it as its corporate act and to affix the corporate seal thereto, and the other was as to whether the alleged parol collateral agreement was made. The jury answered the first question in the affirmative, and the second in the negative. The court thereafter assessed the damages at $362,882, and then granted the defendant's motion to dismiss the complaint. The special finding of the jury that no parol collateral agreement was made is fairly sus tained by the evidence, and the plaintiff upon this appeal is entitled to the benefit of the special verdict. Code Civ. Proc. § 1187.
The decision of this appeal involves the consideration of three questions : First, whether the officers who signed the contract were authorized to execute it; second, if so, whether it was ultra vires; and, third, whether the defendant is estopped from questioning the validity of the contract.
I am of opinion that there is no evidence legitimately tending to show that the execution of the contract was authorized by the defendant and requiring the submission of that question to the jury and that the court properly disregarded the special finding of the jury that the execution of the contract was authorized. The learned trial justice wrote a careful instructive opinion in support of his determination to dismiss the complaint, but the importance of the questions requires that we should express our views more at length. The undisputed evidence shows that there was no resolution of the board of directors authorizing the execution of the contract. Section 161 of the banking law (chapter 689, p. 1912, Laws 1892) provides that "the affairs of every such corporation [which includes a trust company]' shall be managed and its corporate powers exercised by a board of directos." Section 27 of the stock corporation law (chapter 564, p. 1071, Laws 1890) provides "the directors of a stock corporation may appoint from their number a president and may appoint a secretary, treasurer and other officers, agents and employés who shall respectively have such powers and perform such duties, in the management of the property and affairs of the corporation, subject to the control of the directors, as may be prescribed by them or in the by-laws." Section 5 of article 3 of the by-laws of the defendant provides that the president shall "exercise such general direction as its interests and security may require"; and section 6 of the same article confers authority upon him to affix the corporate seal to certain specified instruments prepared or approved by the counsel or attorney of the company; but it is clear that it does not include such a contract as this, and, moreover, this contract was not prepared by the counsel or attorney of the company. By section 1 of article 4 of the by-laws, the vice presidents are required to perform the duties assigned to them by the executive committee or by the president. It is not claimed that the assistant secretary had any independent authority. The board of directors consisted of 25 members, but at the time in question there was one vacancy. Article 6 of the by-laws provides for an executive committee, to consist of the president and six other directors to be elected by the board, and that a majority should constitute a quorum in the absence of the president, but three should constitute a quorum when he is present. Section 2 of that article provides as follows:
"The executive committee shall exercise all the powers of the board of directors, when the hoard is not in session, except the power to fill a vacancy-in the board. The assent of the executive committee shall he required for all investments that shall be made of the funds of the company in stocks, personal securities and bonds and mortgages, and for the disposition of the same, and of the funds of the special trusts. The executive committee may in its discretion authorize the president generally to make investments in such securities as are authorized by the charter of the company, and to dispose of such securities without previously consulting, as to the details, with the committee; but all such transactions shall be reported to the committee at its next meeting."
Section 4 of the same article provides that the executive committee shall meet at the main office every Thursday and at other times on call of the president. Article 9 provides that there shall be a regular meeting of the board of directors at the main office of the company on the third Tuesday in every month "to which a report shall be made by the president of the finances, affairs and business of the company." Section 2 of article 15 provides that the seal of the company shall be in the custody of the president "and shall not be affixed to any deed, conveyance or instrument other than those enumerated in article 3, section 6 of these by-laws, unless by the authority of the board or the executive committee, and whenever affixed to any paper it shall be attested by the secretary." There is no evidence that any authority was conferred upon the president, by action of the board of directors or of the executive committee. Authority to make a lease for the main office of the defendant at No. 346 Broadway was conferred on the officers of the defendant by the directors at its first meeting, and it also appears by the minutes of the meeting of the executive committee, held on the 9th day of September, 1902, at which the president and two directors were present, that "a resolution was adopted authorizing the president to make or guarantee loans in the companies name when necessary." It is not claimed that this resolution, if adopted, conferred authority to make the contract in question, which took place as of a prior date. If adopted, it was evidently intended to relate to certain loans that had been made to, or .guaranteed by, the company on or about the 11th day of August, 1902, which will be considered presently. One of the directors present testified that the resolution was not adopted. Another was dead, and Dresser, the president, testified that he had no recollection of it; but he admitted that he had testified on the trial of a former action that he had authority to borrow certain moneys, and with respect thereto was given full power to do what he pleased, and that this resolution was adopted to confirm such authority. The resolution, however, on its face, does not relate to past transactions. The contract in question was negotiated between the plaintiff and vice president Livingston, who had charge of the branch office of the defendant .at No. 71 William street, and he acted in making the contract under the direction of the president. At the time the negotiations were had and the contract was signed, both Dresser and Livingston were directors of the shipbuilding company, and Livingston was vice president as well. There were interviews and there was correspondence between the plaintiff and Livingston, leading up to the making -of the contract which was signed in its final form on the 26th day of September, 1902, as of August 28th; but an agreement had been reached between them, reduced to writing and signed, to substantially the same effect, on the date of the agreement—-August 28, 1902. This correspondence was had and kept at the William street branch office; and Livingston testified that he retained the company's duplicates of the contracts, and placed them in the vault in that office, but that he never communicated any information concerning this contract, or the fact that it had been executed, to the board of directors or the executive committee or to any members thereof, excepting Dresser. Dresser testified that he never informed the board of directors or executive committee or any member thereof with respect to the negotiation for or the execution of this contract. Ten of the 24 directors testified that they never heard of this contract or of any negotiations with respect to it until on or after the 3d day of June, 1903, when a letter was received by the newly elected president of the company from the attorney for the plaintiff with respect to' depositing the securities under a plan for the reorganization of the shipbuilding company. It appears that on the 16th day of the same-month, after investigation with respect to this contract, the defendant formally repudiated it, and so notified the plaintiff. Both Dresser and Livingston were then out of office, and although Livingston testified that he left the contracts in the vault, it appears that a careful examination was made and they were not found. Three of the other directors were dead at the time of the trial, and seven others were nonresidents. Of the remaining four resident directors, one was-ill, and it does not appear that the other three took an active interest in the affairs of the company to give them any special knowledge-on this subject.
There is no force in the claim that the board of directors or the executive committee, in effect, failed to exercise their functions, and left the management of the company, at the times in question, in the hands-of the president. It appears that the board of directors met regularly in the year 1902, down to the 22d day of July. The meeting in August was adjourned for lack of a quorum, but a meeting was held on the-16th day of September. The executive committee met regularly in the year 1902, down to the 4th day of June, and thereafter the executive committee met on June 17th, June 24th, July 8th, July 22d, September 9th, and September 16th. On the 10th of June a quorum was-not present, and it does not appear that there was any attempt to meet on the other dates for regular meetings. This was during the vacation season, and there is nothing to show that the directors had knowledge of any business of the company requiring either a meeting of the board of directors or of the executive committee at the times whem meetings were not held. There is nothing in the defendant's connection with the United States Shipbuilding Company, which was organized in June, 1902, from which it could be inferred that implied authority was conferred upon Dresser or Livingston to make the contract with the plaintiff. The Mercantile Trust Company of New York was one of the principal promoters of the shipbuilding company... Prior to the incorporation of the shipbuilding company, which was-in June, 1902, there were negotiations between Dresser and Livingston---, and the Mercantile Trust Company, by which it was understood that on the incorporation of the shipbuilding company the defendant should! act:
"(a) As issuing bankers and perform all the duties incidental thereto.
"(b) Advertise prospectus.
"(c) Receive all subscriptions.
"(d) Pay the necessary cash to the trustees to clear the titles and commitments thereto.
"(e) Deliver all bonds and shares to the subscribers.
"(f) Registrar and transfer agent of the shares of the company."
The Mercantile Trust Company was to act as trustee for the bonds of the shipbuilding company, and to perform certain other duties in connection with its affairs after its incorporation.
Thereafter, at the meeting of the board of directors of the defendant, held on the 17th day of June, 1902, Dresser made a report "on the U. S. Shipbuilding consolidation." He testifies that he informed the board, in substance, of his negotiations in this matter, and that the proposition was to have the defendant act as the transfer agent of the stock, as a bank of deposit for the shipbuilding company, to act as the house of issue of the securities that had been or could be submitted to the public for sale, and, in effect, that this was acquiesced in. It appears that the plan of organization of the shipbuilding company contemplated subscriptions here in America for $3,000,000 of the $9,-000,000 of bonds of the shipbuilding company, to be issued in the first instance for the purchase of the constituent plants that were to be transferred to the shipbuilding company, and for expenses and a working capital. Dresser undertook with the mercantile company to obtain subscribers for the $3,000,000 of bonds among the customers of the defendant. Three directors of the defendant became subscribers under the underwriting agreement which was between the Mercantile Trust Company and the subscribers for bonds, but it does not appear that the defendant was a party thereto, or was interested therein. Dresser succeeded in obtaining subscribers for that amount, and after-wards, on a failure of the plan, for obtaining subscriptions for the remainder of the issue in Europe, he obtained subscriptions for about $1,700,000 more. The options which the promoters of the shipbuilding company had for the purchase of the plants to be transferred to it expired on the 11th day of August, 1902. Some of these options- ran to Lewis Nixon, and others to Dresser. On or about the 7th day of August, 1902, Dresser was ready to pay over the subscriptions which he had obtained; but on account of the failure of the plans to float the securities abroad he was induced to undertake to obtain subscribers for upwards of $3,000,000 more in order to insure the consummation of the plan. To enable him to accomplish this the Mercantile Trust Company delivered to him the securities, and it appears that they were used with guaranties made by Dresser in the name of the defendant, as collateral to notes made by him and Nixon, and discounted at banks and trust companies with some of which defendant had relations; and it would seem that he also procured the discount of two notes of this defendant aggregating $750,000, using some of these securities as collateral. He thus succeeded in raising the necessary amount, which apparently was deposited with the defendant, for, on August 11th, its checks were used in the disbursement thereof to the vendors of the constituent plants. On the 14th of June, 1902, an advertisement was published in the New York Evening Post, and simultaneously in various other newspapers throughout the country, for subscriptions to the public issue of these bonds, and the name of the defendant ap peared thereon as "Transfer Agents" and "Bankers," and it was stated therein that the defendant was authorized to receive applications for the bonds, and that it reserved the right to reject any or all bids, and at the foot of the advertisement was a notice to apply to the defendant and Harris, Gates & Company, Bankers, for additional information. According to the testimony of Dresser, he reported to the board of directors and to the executive committee from time to time concerning the progress of the shipbuilding company matters, but it does not appear that he assumed to do anything that would in any manner involve the defendant financially in the enterprise until about the 11th day of August, 1903, and it appears by his testimony that he did not inform any of the members of the board of directors of his action with respect to borrowing funds in the name of the defendant or on his and Nixon's individual notes or the guaranties thereof. While there is some evidence tending to show that in one or two instances these guaranties were signed "by what purported to be a majority of the executive committee," no such guaranty in writing was produced, and it is fairly to be inferred from the evidence that all of these guaranties were signed either by Dresser or Livingston or by other persons acting under Dresser's direction, and none of whom were directors of the defendant. It appears that early in October some of the other directors acquired information with respect to these loans and guaranties, through the banking department or otherwise, and that the banking department insisted that the defendant should rid itself of these obligations in connection with the shipbuilding securities. The matter was then taken up by the directors, and although they did not recognize Dresser's authority for what had been done in raising funds in the name of the defendant, they apparently deemed it advisable to assume the responsibility, and with that end in view the so-called "Sheldon Syndicate Agreement" was executed on the 39th day of October, 1903, which contemplated raising money by subscription to be used in paying off the notes thus executed by Dresser and Nixon and the defendant and certain other obligations of the defendant for which some of these securities were pledged, and reimbursing the subscribers by a sale of the securities, and in the event of inability to sell them turning the securities over to the subscribers. Prior to this date, the defendant had taken none of the securities of the shipbuilding company as a "house of issue," but on this date title to the securities was formally transferred to the defendant for the purpose of transferring the securities to the managers of the Sheldon Syndicate agreement with a view to carrying out the plan of that agreement, which was done. Funds were thus raised with which the notes and obligations in question were paid and the securities released.
The learned counsel for the appellant contends that these transac-* tions show a recognition of the authority of Dresser to deal in the, matter of shipbuilding securities without limitation or restraint. I am of opinion that they do not. They of course show a ratification of the particular acts involved, but they do not aid the plaintiff. The contract upon which the plaintiff seeks to recover is quite different. No knowledge that any directors possessed could have led a reasonable man to believe that the making of such an agreement as that made with the plaintiff would be incident to the business relations which were outlined by Dresser to the board of directors of the defendant as intended to be established between the defendant and the shipbuilding company. At the time the agreement with the plaintiff was made, the defendant owned none of the shipbuilding securities. At most, assuming it to have authorized all of Dresser's other acts in connection therewith, it was interested in those securities only to the extent that it held them as collateral. It may be that its interest was such that with a view to maintaining the market price of the securities, it would have been competent for the board of directors to have authorized this agreement. It is, however, unnecessary to decide that question, for it is quite clear, I think, not only that it never authorized the agreement, but that the plaintiff was not justified in assuming that the execution of that agreement was within the general authority of the president of the defendant or of those who signed. Even if it were competent for the defendant to make the agreement, it was apparently so foreign to the business of the defendant, and of such an extraordinary nature, that the plaintiff was put upon notice as to the authority of those executing the agreement.
The seal of the defendant was attached to the agreement, and that constituted prima facie evidence that the agreement was signed by authority. Quackenboss v. Globe & R. F. Ins. Co., 177 N. Y. 71, 69 N. E. 223. But as already indicated, the evidence introduced by the defendant completely overcame that presumption. Parties dealing with a business corporation as distinguished from religious and other corporations may rely on the apparent authority of the officers (Karsch v. Pottier & Stymus Mfg. Co., 82 App. Div. 230, 81 N. Y. Supp. 782); but in the absence of evidence upon which estoppel may be predicated, as by holding out as authorized or a course of dealing, the question in all cases still is whether the contract was authorized, and when it appears that it was not, and that there has been no estoppel, that becomes a complete defense. The rights of stockholders must not be entirely overlooked. Stockholders are powerless to protect their interests by electing competent directors if the officers thus elected or appointed by the directors may, without the knowledge or consent of the latter, secretly make important contracts, like this, which are not within their apparent scope or authority, for they are not within the ordinary business of the corporation. The defense that the contract was unauthorized must therefore be sustained as matter of law.
The plaintiff doubtless supposed that the contract was authorized. It appears that he remained ready to perform, and he invokes estoppel against repudiation of the contract by the defendant. The defendant in fact received no benefit from the contract. It is urged, however, that he derived the benefit contemplated of having plaintiff's securities kept off the market. The difficulty with that contention is that it was an unconscious or involuntary benefit at most, because the defendant as a corporation had no knowledge of the making of the contract. The only ground for making the contract or explanation of the conduct of Dresser and Livingston in keeping it. secret from the company, in dicated by the. record, is their interest in the success of the shipbuilding company,, and fear that it would not be authorized or ratified by the defendant. The case of Vought v. Eastern Building & Loan Ass'n, 172 N. Y. 508, 64 N. E. 496, 92 Am. St. Rep. 761, is not in point. There, the corporation, after actually and knowingly receiving the benefit of the contract, was held estopped from pleading that the contract was ultra vires.
It follows, therefore, that the judgment should be affirmed, with costs.
PATTERSON, P. J., and SCOTT, J., concur.