Court Opinion

ID: 5325506
Source: CourtListenerOpinion
Date Created: 2022-01-08 04:50:09.859621+00
Date Added: 2024-06-11T08:29:22.714736
License: Public Domain

Merrell, J. (dissenting).
The action was brought by plaintiff to recover $1,416.66 for moneys had and received. Plaintiff on June 28, 1928, was the owner of a building located on Grand street, New York city. The Allen Theatre Corporation was a lessee of a portion of the premises and had fallen in arrears in the payment of rent. In consideration of plaintiff permitting the Allen Theatre Corporation to sublet said premises, and in payment of said arrears, it is claimed by plaintiff that the Allen Theatre Corporation assigned to plaintiff its claim against the Dubuque Fire and Marine Insurance Company arising out of a fire loss under a policy issued by said insurance company to the extent of $1,416.66. The alleged assignment was in writing and purports to have been executed by the Allen Theatre Corporation and to bear the corporate seal of said corporation, and to have been signed and acknowledged by the corporation by its secretary, one Max Cohen. It is the contention of plaintiff that thereafter the Allen Theatre Corporation received a check from the Dubuque Fire and Marine Insurance Company for $1,600 in settlement of its claim under said policy, but that instead of turning over to plaintiff $1,416.66 of the sum so collected as provided in the alleged assignment, an officer of the Allen Theatre Corporation who executed said assignment, indorsed the check and it was deposited to the credit of the defendant, of which corporation the said Max Cohen was treasurer. The defendant retained the proceeds of said check and no part was paid to plaintiff by either the Allen Theatre Corporation or by defendant.
The sole question presented by this appeal was as to whether the alleged assignment of the Allen Theatre Corporation, which purported to have been executed by the secretary of said corporation, was duly executed. At the trial the defendant contended that the burden was upon the plaintiff to show that Max Cohen, who assumed to act as secretary for the Allen Theatre Corporation, had authority to execute the assignment to plaintiff. When plaintiff’s Exhibit 1, the alleged assignment, was offered in evidence, it was received by the court, subject to connection, the court stating to plaintiff’s trial counsel that it would be necessary for him to show that Cohen, the secretary, was authorized to execute said assignment. There was no evidence whatever given at the trial of any authority on the part of Cohen. At the close of the plaintiff’s case defendant’s trial counsel moved to dismiss the complaint on the ground that *8plaintiff had failed to establish a claim against defendant, and that plaintiff had failed to show any authority on the part of Max Cohen to execute the assignment in question. Defendant’s trial counsel also moved to strike out the assignment which had been marked in evidence and which was received subject to connection, and upon the ground that no proof had been given as to the authority of Cohen to execute the same. The court granted the motions of defendant and dismissed the complaint on which the judgment was entered. We think the court was entirely correct in so ruling.
The appellant in its brief and upon the argument asserted that the respondent retained the proceeds of the check paid by the insurance company, notwithstanding it had prior knowledge of the assignment. The record contains no proof whatever of any prior knowledge on the part of the defendant of such assignment. Plaintiff offered no proof whatever with respect to knowledge of the assignment on the part of the respondent. In the brief of the appellant the statement is made that the respondent’s liability arose from the collection of the check with notice of the prior assignment. The record discloses no proof of any notice to defendant of the prior assignment to plaintiff. The allegation of knowledge of prior assignment is set forth in the complaint and is specifically denied by the answer. The appellant, to sustain an action for moneys had and received, was required to allege and prove that the moneys alleged to have been received were the property of appellant, and that the defendant, respondent, promised to return the same, or that it was received for the appellant’s use. (Sharp v. Rose, 20 N. Y. Supp. 826; affd., 139 N. Y. 652.) It is the contention of appellant that the burden was upon defendant, respondent, to plead an absence of authority on the part of Cohen, the secretary, affirmatively. We do not think such is the rule, but, on the contrary, that the burden was upon plaintiff to show authority in Cohen to execute the instrument in question. The case of Karsch v. Pottier & Stymus Mfg., etc., Co. (82 App. Div. 230) holds, in substance, that in an action against a corporation on a note indorsed by its secretary proof of the secretary’s authority must be offered before the note is admissible in evidence, and that the defense of ultra vires only becomes an affirmative defense after a prima facie case has been established. In Hess v. Sloane (66 App. Div. 522) the court held that the defense of ultra vires pertaining to the permissibility of a corporation to contract, to be available, must be pleaded, and in discussing the question of authority is silent with regard to the fact that where the authority of an officer of a corporation to commit an act is questioned, that must be set up affirmatively.
*9It is quite apparent that Max Cohen, in executing the assignment in question, as secretary of the assignor, was not acting within the apparent scope of his authority. Ordinarily it is no part of the duty of a secretary to execute contracts in behalf of his corporation. The appellant contends that the instrument being executed under seal, the presumption arose that it was the act of the corporation, and that the presence of the corporate seal established a prima facie case. The law is well settled that the power of a corporate officer may not be increased by the mere using of a corporate seal. In 10 Cyc. 1009 the following statement is made: “ But if no power exists on the part of an officer of a corporation to make a contract which he assumes to make for it, the contract cannot be vitalized, that is to say, this wanting power cannot be created and put into the contract, by the mere fact that in executing the instrument which is evidence of it the officer used the corporate seal.” Several cases are cited by appellant in support of its contention that the execution of the assignment in question was regular and sufficient, but none of the cases cited by appellant in support of that proposition is available for the reason that under all of the cases cited the instrument was executed not only by the secretary but by the president of the corporation. In Parmelee v. Associated Physicians & Surgeons (9 Misc. 458) the court stated : “ But if the officer, with a liability for whose act the corporation is sought to be charged, is one to whose office there is attached no inherent executive authority, then, and in that event, the third person dealing with the officer in an executive capacity is chargeable with notice of an apparent want of authority and so deals with the latter at his peril; and in such a case, if the officer’s authority to make the contract is disputed, it is incumbent upon such third person to establish the authority by proper evidence; * * * but in Jemison v. Bank, 122 N. Y. 135, the court say that a party dealing with an agent of a corporation is chargeable with knowledge of the extent of such agent’s powers. In Wilson v. Kings Co. R. Co., 114 N. Y. 492, it was held that the burden is upon the party claiming under a contract with a corporation, when made through an agent, to prove the authority of the person so assuming to act as agent * * *.”
In Jacobus v. Jamestown Mantel Co. (211 N. Y. 154) Judge Chase, writing, said (at p. 161): “ A treasurer of a manufacturing corporation has no power to make promissory notes in its name unless such power is expressly given to such officer by the by-laws of the corporation or by resolution of its board of directors. (Thompson on Corporations [2d ed.], sec. 1564; Daniel on Negotiable Instruments [5th ed.], vol. 1, sec. 394; Edwards on *10Bills, sec. 65; Beach on Private Corporations [2d ed.], vol. 2, sec. 804; McCullough v. Moss, 5 Denio, 567; National Bank of Newport v. Snyder Mfg. Co., 107 App. Div. 95; Niagara Falls Susp. Bridge Co. v. Bachman, 66 N. Y. 261; Dabney v. Stevens, 40 How. Pr. 341; Marine Bank v. Clements, 3 Bosw. 600; National Bank of the Republic v. Navassa Phosphate Co., 56 Hun, 136; People’s Bank v. St. Anthony’s R. C. Church, 109 N. Y. 512.) No presumption existed that the defendant’s treasurer had power to make or indorse business paper. It was necessary, therefore, for the plaintiff to show that the treasurer had authority to execute promissory notes in the name of the corporation in the ordinary course of its business, or that the defendant was estopped from denying such authority.”
In the case of Traitel Marble Co. v. Brown Brothers, Inc. (159 App. Div. 485), Justice Hotchkiss, speaking for the court, stated: “It is also the general rule that an officer of a corporation is prima facie presumed to have only such authority as is usually incident to his particular office; the treasurer to act with respect of the finances, the secretary to keep the records, etc. In 10 Cyc. 940, these rules are well stated and ample • authority cited in their support.” We think under the law as enunciated by the Court of Appeals in Jacobus v. Jamestown Mantel Co. (supra) there can be no question that it was necessary for the plaintiff to show that Max Cohen, assuming to execute the assignment in question as secretary of the assignor, was authorized to execute the instrument. There was no proof whatever of authority on the part of Cohen to execute said instrument, and, therefore, plaintiff failed to establish any cause of action against the defendant.
The judgment appealed from should be affirmed, with costs to defendant, respondent, against plaintiff, appellant.
McAvoy, J., concurs.
Judgment reversed and a new trial ordered, with costs to the appellant to abide the event.