Case Name: H. Koehler & Co., Plaintiff, v. Isaac. Reinheimer, Defendant
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1897-03
Citations: 20 Misc. 62
Docket Number: 
Parties: H. Koehler & Co., Plaintiff, v. Isaac. Reinheimer, Defendant.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 20
Pages: 62–63

Head Matter:
H. Koehler & Co., Plaintiff, v. Isaac. Reinheimer, Defendant.
(Supreme Court, New York Trial Term,
March, 1897.)
I. Guaranty — Corporations.
• A brewing corporation, organized under the General Manufacturing Companies Act, has no power, express or implied, to guaranty the payment of rent under a lease' to a third person.
2. Same — Indemnity.
A contract- to repay any sum which the other party may be ■“ called upon to pay ” refers to a legal obligation to pay, and the giving thereof does not estop the maker from setting up the invalidity' of the obligation of the other party.
Action upon an agreement to repay sums which, plaintiff might be called upon to pay under its guaranty of payment of rent.
Myers & Bronner, for plaintiff.
Dittenhoefer, Gerber & James, for defendant.

Opinion:
Dugro, J.
The plaintiff, a brewing corporation, organized under the General Manufacturing Companies Act, guaranteed the payment of rent. Before delivering its guaranty it obtained a guaranty from defendant that if it should be " called upon -to pay " he would repay the payment. Plaintiff seeks to recover from defendant the amount which it paid upon the tenant's, default.
As the words " called upon " have reference to a legal obligation to pay, unless the plaintiff was legally bound by -its guaranty the defendant is not liable upon his.
The plaintiff was not expressly empowered to make such a guaranty as the one it gave, nor was the giving incidental to any power granted. If it at all related to the powers of the corporation it is by so slight or remote a relationship that.it cannot be considered as incidental. In Brice's Ultra Vires, 269 (3d ed.), it is said, that: "It is no part' of the ordinary business of commercial, a fortiori, still less so of noncommercial,' corporations to become surety for others. Under ordinary circumstances, without positive authority in this behalf, in the constating instruments, all engagements of this description are- ultra vires whether they take direct form of suretyship, -or the indirect forms of joining in accommodation bills, or otherwise becoming liable for the debts of others."
The guaranty, not being within the powers granted or incidental to any of them, was ultra vires, and of itself insufficient, upon a default of the. lessee, to create a liability-. See cases cited in Brice (3d ed.), 269.
There is no circumstance in the case which, taken with the guaranty and -default, would create a liability. The payment by the corporation must, therefore, be considered voluntary. No right of recovery against defendant because of the payment exists.
The mere expectation that the giving of the guaranty would induce the lessee to .become a customer of the corporation is not material. Filon v. Miller Brewing Co., 15 N. Y. Supp. 57.
" The objection to the guaranty is that it risks the funds of the company in a different enterprise and business, under the control of another and different person or corporation, contrary to what its stockholders, its creditors and the state have the right from its charter to expect." Humboldt Min. Co. v. Am. Mfg. Co., 62 Fed. Repr. 356.
The parties must be supposed to have understood that the guaranty given by plaintiff to the lessor in its inception was ultra vires. The act of the defendant in giving his guaranty cannot work an estoppel against setting up the invalidity of plaintiff's guaranty. Day v. Spiral Springs Buggy Co., 58 Am. Rep. 355.
The complaint must-be dismissed.
Complaint dismissed.