Court Opinion

ID: 5205888
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:02:19.972529+00
Date Added: 2024-06-11T08:27:17.019538
License: Public Domain

Ingraham, J. (dissenting) : •
The court submitted two questions to the jury. ..The first was : “ Were the officers who signéd or directed the signing of the alleged agreement — that is, the agreement in suit here — authorized by the •defendant corporation to execute it as its corporate act and affix thereto its corporate seal?” to which the jury answered “ Yes.” The other question was as to a question of fact raised by the evidence and is not important. After the jury had answered these questions and the amount due to the plaintiff had been determined the court dismissed the complaint. Mr. Justice Laughlin is of the opinion that there was no evidence to justify the submission of this question to the jury and that is the important question on this appeal.
The instrument was executed at the office of the trust company ; it was signed by one of the defendant’s vice-presidents by direction of the president in the name of the trust company; the seal of the trust company was placed upon it by one of the assistant secretaries who signed it as secretary of the company, and it was then delivered to the plaintiff who relied upon it and acted upon it. At the time this agreement was executed the plaintiff was the owner of 240 bonds of the Pnited States Shipbuilding Company of $1,000 each 1,916 shares of the preferred stock of the corporation of the par value of $100 each, and 1,916 shares of the common stock of the corporation of the par value of $100 each, the total par value of *453these securities being $623,200. These securities were held by the plaintiff during the life of the contract without notice from the defendant that it would not recognize the contract, the company thus having received the benefits that it expected to receive by reason of its execution of this contract with the plaintiff; that the plaintiff from relying upon the promise contained in this contract has sustained a very serious loss is clear and to now refuse to enforce the contract against the defendant because of a claimed lack of authority of its officer to execute it seems to me an act of gross injustice to the plaintiff which would only be justified in case the lack of authority is so apparent that the plaintiff was not justified in acting on the assumption that the acts of the officers of the defendant were authorized. Here was a corporation organized to do business for private gain. It appointed its executive officers to represent it, make contracts for it and transact its business. Such officers in the usual course of business made a contract with the plaintiff for which the defendant has received'the consideration, and it will not do to say that that contract will not be enforced because of some provision of the by-law under which the president was not authorized to execute it. There is nothing to limit the power of the president to make such a contract. ' That he did, acting for the defendant, make the contract with the plaintiff, is not disputed. The defendant received the benefit-from its contract and the plaintiff has lost the right to dispose of his securities until they have become of no value, and it seems to me that the defendant should be held to its contract. '
Before considering the contract it will be useful to call to mind the situation of the defendant in reference to the securities in relation to which the contract in question was made. Sometime early in the year 1902 a corporation was organized known as the United States Shipbuilding Qompany, wfth a very large capital, which was intended to purchase the various shipbuilding establishments in the United States and consolidate them into one corporation. Early in May the president of the defendant had entered into relations with those engaged in organizing this shipbuilding company and had made an agreement which secured to the defendant trust company the transfer agency of the shipbuilding company, and by which it was to be a depository of its funds. On the-27th of June, 1902, the *454president of the corporation reported to the directors that the defendant had been appointed transfer agent of the stock of the United States Shipbuilding Company, which was to be formed, and would also be made the banking or fiscal agent to receive subscriptions for the bonds of the'company, and this announcement was received with approbation by the directors. As time went on it became necessary, in order to carry out the scheme of these organizers of this company, to secure subscriptions to its securities, and what are called underwriting syndicates were organized, through which it was expected the securities of the shipbuilding company-would be sold and the necessary money to carry out the organization of the-company procured. The promoters of this scheme expected to have subscriptions to the securities from England, France and America. The English subscriptions did not materialize. The promoters, however, considered that the French subscriptions would bé paid. As the time for the payments, required to be made by the shipbuilding company to the other coinpanies approached some provision must be made to secure the money necessary to make the payments. About August 11,1902, the president of the defendant and the officers of the shipbuilding company made notes amounting to more than $4,000,000, secured by securities of the shipbuilding company, which they procured the defendant to guarantee, and upon which money was advanced by several financial institutions in Hew York, which was used to carry out the-obligation of the shipbuilding company. It would also seem that the defendant had become responsible for other obligations of this shipbuilding company ;■ certainly a collapse of the new company would cause the defendant to lose a very large sum of money as well as all the. benefits that it had expected from its employment, as. transfer and fiscal agent. On September 9, 1902, there was a meeting of the executive committee of the defendant at which a. report was made in relation to the situation of these companies, and a resolution was passed authorizing the president of the defendant to make or guarantee loans in the company’s name when necessary. This plainly had relation to loans that had been or were to be guaranteed by the trust company to provide money to carry out this shipbuilding project. The connection of the trust company with this shipbuilding company was largely advertised in the newspapers, and it seems *455established that the officers and directors of this company knew of the relations which this company bore to the shipbuilding company and that it was expected that a large and profitable business would result in consequence of such connection.
The president of the defendant testified that at every meeting of the board of directors and of the executive 'committee at which he was present during the summer and fall of 1902 he advised the directors and executive committee in relation to the shipbuilding company; that he was trying to keep them informed of the general progress of the project and of what the situation was as it went on from time to time. There was certainly evidence from which the jury could find that both the directors.and the executive committee had knowledge of the relations between the trust company and the shipbuilding company; had knowledge of the obligations that the defendant had assumed in order to successfully carry through the promotion of the shipbuilding company; that this was approved by the directors and the executive committee as a transaction for the benefit of the trust company and to enable it to secure this very profitable connection ; that this relation between the trust company and the shipbuilding company had been widely published with the knowledge of -the directors, and persons dealing with the trust company were justified in relying upon the well-known relation, and that what was being done by the defendant in promoting this shipbuilding company was done with the authority and assent of its directors.
Prior to the year 1902 the plaintiff had been the owner of something more than one-half the capital stock of the Harlan & Hollingsworth Company, a shipbuilding company, which it was considered essential for ’ this new shipbuilding company that the defendant was promoting to acquire. Sometime in 1902 efforts were made to induce the plaintiff to sell his stock, and as all of the stockholders of the new company had entered into an agreement to pool their securities with the exception of the Harlan & Hollingsworth Company, thé president of the defendant instructed the vice-president to go to Wilmington to see the various people who held stock in the Harlan & Hollingsworth Company, at the same time handing him a contract under which the other stockholders of the new company had pooled their stock. The vice-president of the defendant went to Wilmington and saw the plaintiff and others interested. At *456that time the vice-president of the defendant showed the plaintiff this pooling agreement, stated that it was essential that all of the stockholders of the new company should go into this pooling arrangement, and requested the plaintiff to sign the agreement. Plaintiff said that he did not know the Mr. Clarke named in the pooling agreement, hut he expressed a willingness to enter into some such arrangement of that kind if the trust company was a party to it, because he considered that the trust company was responsible. After this interview the vice-president returned to New York and reported to the president of the defendant as to what he had done and what plaintiff had said. Subsequently the plaintiff came to New York and after interviews with the officers of the defendant finally prepared a contract that he was willing to sign. After that contract was submitted to the defendant the vice-president again, under directions of the president, went to Wilmington to see the plaintiff. The president of the defendant did not wish-to sign such á contract, but all the other contracts in relation to this pooling agreement were conditional upon all the vendors going into it. After all the other vendors had signed the pooling-agreement the president of the defendant came to an agreement with the plaintiff on behalf of the defendant. There -was considerable negotiation in relation to the form of this contract, which continued both personally and by letter during the month of September, and the contract was finally executed on the 26th of -September, 1902, although dated the 28.th of August, 1902. An analysis of the contract is necessary to enable us to determine the questions presented.
The contract is between the Trust Company of' the Republic, a corporation organized under the laws of the State of New York, party of the first part, and" Harry T. Gause, of Wilmington, Del., party of the second part. It recites that it is the mutual desire of the parties thereto that the securities of the Hnited States Shipbuilding Company should be sold to the best advantage, both parties being interested in the same, and that a selling syndicate, of which Thomas C. Clarke has been 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 plaintiff with the defendant trust company. It' was agreed *457that both parties to the agreement would in good faith co-operate with the said syndicate in furthering such object and that the agreement was intended to be an aid to the same; that the plaintiff agreed that he would deposit with the defendant all his bonds and shares of preferred and common stock of the United States Shipbuilding Company under the terms and conditions' of this agreement ; that the defendant should rise and dispose of the said securities of the plaintiff 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 plaintiff “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 witlv 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 tins agreement.” That the defendant was accorded the exclusive right to sell the said securities of the plaintiff during the jieriod of the agreement; that no obligation or liability in addition to those therein expressed shall be implied against the defendant, “ 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.”
What was intended by this agreement seems to be quite plain. It recited that the trust company was interested m the successful *458carrying out of the syndicate agreement with whom' all of the stocks and bonds of this shipbuilding company had been deposited except those owned by the plaintiff, and the proof shows it has assumed • large obligations which were secured by the like securities. The defendant considered it essential to the successful disposition of these securities that the plaintiff’s bonds and stocks should be added to those to be sold by the syndicate. By the acquisition of the plaintiff’s securities defendant had in its possession all of the securities of the shipbuilding company and thus acquired complete control of the . issues, and to accomplish this defendant was willing to guarantee that the plaintiff’s stocks and bonds would be sold at the prices named within the period 'specified, or in default of a sale before that time, to account to the plaintiff for the securities at a price specified. If the securities had not been sold and the defendant had paid the plaintiff the amount named, which was all it was obliged to do, the defendant would have been the owner of these securities and could have made such -disposition of them as it chose. There was no arrangement by which these securities were to ever be returned to the plaintiff, and after their deposit with the defendant the sole interest of the plaintiff in these securities was the obligation of the defendant to account to him for them at the prices specified. Tiiis it seems to me was tlié obvious intent of the paiv ties to this agreement. There is nothing here that guaranteed the payment of an indebtedness or obligation of a third party, and the use of the word “ guarantee ” is misleading. It was the defendant who was to have charge of the sale of the securities and it was the defendant who was to reap the benefit which would accrue by reason of the deposit with the defendant of the securities, and it was that benefit which was considered by the officers of the defendant as important for the defendant, and that formed the’consideration for the undertaking to so manage the time and place of sale as to secure to the plaintiff at least the amount specified in the agreement.
The plaintiff was not told and had no right to inquire as to the interest of the defendant in the securities or in the successful disposition of them. - He made his agreement with the responsible officers of the company; he saw the contract to which the parties had agreed executed by the responsible officer of the company and the seal of the company affixed, and delivered to him, and he has *459complied witli it. Before discussing the question as to the authority of. the officers of the defendant to execute such agreement, it will be well to consider briefly the question of ultra vires.
The defendant was organized under the Banking Law (Laws of 1892, chap. 689). By subdivisions 1, 8 and' 9 of section 156 of that act (as amd. by Laws of 1893, chap. 696*) it had power to act as the fiscal or transfer agent of any corporation, and in such capacity to receive and disburse money, and transfer, register and countersign certificates of stock, bonds or other evidences of indebtedness; to take, accept and execute any and all such trusts and powers of whatever nature or description as may be conferred upon or intrusted or committed to it by any person or persons or any body politic, corporation or other authority; to purchase, invest^ in and sell stocks, bills of exchange, bonds and mortgages and other securities, and when moneys or securities for moneys are borrowed or received on deposit or for investment, the bonds or obligations of the company may be given therefor.- And under subdivision 11 of section 156 (as amd. by Laws of 1901, chap. 660*), section 55 (as amd. by Laws of 1900, chap. 310), and section 56 of the same act, general banking' powers were conferred upon trust companies, and the defendant had by implication all incidental powers necessary to carry out the general' and - express powers conferred upon it. By the. by-laws of the company the president was to preside at all. meetings of the directors;-and Was ex officio a member of the executive committee; - he -was authorized to take charge of and beep under his control all the ■ stocks- and personal securities of every description owned by the Company; directed at all times and on all occasions to - exercise such general direction and supervision over all the affairs of tlik company as its interest and security may require. The president was also given power to affix the corporate seal of the company to various instruments specified in the by-laws. ■ The vice-presidents were authorized to perform such duties as may be from time to time determined by the executive committee, and also such ás may be assigned to them by 'the president. It was also provided that the executive committee should exercise all the- power of the board of directors when the board was not in session, and than the executive committee may, in its *460. discretion, authorize the president generally to make investments in such securities as are authorized by the charter of the company.
The defendant, thus being expressly authorized by the statute under which it was incorporated to act as fiscal or transfer agent of any corporation, and to receive and disburse money, transfer, register and countersign certificates of stock, bonds or other evidences of indebtedness, and to take, accept and execute any and all such trusts and powers of whatever nature or description as may be conferred upon it, would certainly have authority to make such reasonable contracts as were essential to obtain such business or to carry it on. It had general banking power’s, power to loan money, to purchase and sell stocks and other securities; and it seems to me that the corporation clearly had authority to make a contract, such as the one now before us, if it related to or tended' to facilitate the defendant in making the arrangements for the business that it was expressly authorized to do. If this contract had been in form a contract to purchase the stock of this shipbuilding company within a time specified, there would have been no question but that the company would have had power to execute it. The fact that it gave the company either the option to sell it to somebody else, or to purchase it itself, does not, it, seems to me,, change the essential charac■ter of the agreement,- and itiseems, t© me that the contract was one clearly within the power of the corporation to execute; but if there was atiy question as to the power of the corporation, under the rule as established in this.Sit-ateythe.-defense of ultra vires is not open to the defendant. As before ■ stated,the plaintiff has executed the contract on his part,,and -of. the execution of that contract by the plaintiff the defendant ha-s received:the. full benefit. It was enabled, in the month of October,; to relieve -itself,of liability for upwards of $4,000,000 o'f securities1 by an .agreement:;for the sale of these shipbuilding securities, and the plamtiff-.was,- by this contract with the defendant, prevented from availing himself of that opportunity to dispose of his securities at that time.. ..The contract lias,.therefore, been fully performed on the part.-©£-.the plaintiff. He made no effort to sell his securities, and could -not without breach of his contract with the defendant. 1
There can be no question but that if-this shipbuilding company was successfully started there would result a valuable connection *461■ for the defendant. The president had from time to time reported to the directors the arrangements that he had made for that purpose, and neither the directors nor the executive committee had ever objected to or disapproved of the arrangements that he had made. The successful establishment of the company depended upon the sale or disposition of the shipbuilding company’s securities, and it was for this purpose that the president and other officers of the defendant made the various contracts which have been indicated. The defendant had guaranteed loans to the amount of over $4,000,000 upon the securities of this company, and it is apparent that the throwing upon the market at that time of a large amount of securities of the company would necessarily have depreciated their value, impaired the security of these loans, and exposed the defendant to a claim under its guaranty. Under, these circumstances, the president' of the defendant solicited the plaintiff to make this contract. It was made for the benefit of the defendant, and at the ' t solicitation of its president and other officers. "After it was executed it was placed by the defendant in its vault with the other securities, and remained there until the spring of 1903. During all that time there was not the slightest objection or notice that it would not be complied with, or that it was ultra vires or unauthorized. It seems to me that, under such circumstances, the corporation having power to purchase securities and make the incidental contracts necessary to conduct its business, this contract was .not, under the rules as established in this State, ultra, vires.
In Whitney Arms Co. v. Barlow (63 N. Y. 62) the rule of this State as to an ultra vires contract was formulated, which has not since been departed from. The rule is there stated : “ 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.” This principle has since been followed in Kent v. Quicksilver Mining Co. (78 N. Y. 159); Rider Life Raft Co. v. Roach (97 id. 378); Vought v. Eastern Building (& Loan Assn. (172 id. 508), and Bowers v. Ocean Accident & Guarantee Corp., Ltd. (110 App. Div. 691; affd., by the Court of Appeals, 187 N. Y. 561). This contract, therefore, not being ultra vires, or at any rate the defense of ultra vires not being avail*462able to the defendant, we come back to the question as to whether, upon this evidence, a finding of the jury that its officers had author? ity to execute the contract or affix the seal of the company thereto was without evidence to support it. ■
The evidence clearly shows a constant course of dealing by the president of this corporation without express reference to or authority from either the board of directors or the executive committee. There are a series.of contracts made by the president on its behalf, guaranteeing loans and making contracts- in relation to this shipbuilding company, of which tire contract with the plaintiff is one. They were made as carrying out the general arrangement in relation to this shipbuilding company that had been reported to the directors and had received its acquiescence. So far as appears, these contracts and obligations- were all carried out and performed, except the contract with the plaintiff. The relation of this defendant to the shipbuilding conipany’s securities was advertised in the newspapers and was apparently well known to everybody except these directors, who now claim that all this was done without their knowledge. But, without objection, the president of this corporation was allowed to make this, contract, giving to the defendant a decided advantage, which it availed itself of, and without the slightest notice to the plaintiff that the contract had been made without its authority, the plaintiff was prevented from protecting himself by his obligations to the defendant under this contract. It seems to me, under those circumstances, where the plaintiff has fully carried out the contract, relying upon the' authority of the president of the defendant to make this contract, without the slightest notice that such authority did not exist, that the defendant is estopped from disputing his authority. (People’s Bank v. National Bank, 101 U. S. 181.)
In Holmes v. Willard (125 N. Y. 75) the question of the. ultra vires of a. contract and the authority of an executive officer of a corporation to execute it were discussed by the court, and certain principles were established which, it seems to me, apply to this case. It was there said: “ While the plaintiff did not have the right under its charter to carry on this business, it had 'capacity to do so and could make contracts therein which would bind it and the persons with whom it dealt, and its acts therein could be regarded as corporate acts.’’ The evidence is undisputed that this contract, being one *463within the general powers of the corporation to make, was duly signed by its officers and its seal duly affixed to it at the office of the company. As was said in Quackenboss v. Globe & R. F. Ins. Co. (177 N. Y. 71) : “ It is an ancient and well-established rule of law that where the seal of a corporation is affixed to a contract or written instrument, to which such corporation is a party, and it is signed by the president and secretary or other proper officers, it will be presumed that., such officers did not exceed their powers, as the seal is prima facie proof that it was attached by proper authority, and it lies with the party objecting to its execution to show that it was affixed surreptitiously or improperly.” We have, therefore, a presumption from the formal and notorious execution of the instrument at the office of the conrpany, by the officers of-the company, which has been performed by the plaintiff and the advantage of such performance had been appropriated by the corporation, without notice to the plaintiff of any lack of authority on the part of its officers to execute the agreement. It seems to me that from this evidence there was at least a question of fact presented as to whether this contract was authorized by the defendant, and which justified the finding of the jury. It is quite immaterial to say that the directors had no knowledge of this agreement.. It was made for its benefit by its principal executive officers. The original contract was put with its other records and preserved. The corporation itself is, I think, chargeable with notice of the execution of such contract, and it certainly cannot go on and allow a person openly and notoriously dealing with it to rely upon his contract with such a corporation, obtaining .the benefit of the contract, without at least raising a question of fact as to either the original authority on behalf of the officers of the corporation to execute the contract, or a ratification of the act of the corporation in executing it. The evidence adduced by the defendant to show that the directors or executive committee had no knowledge of this contract is extremely indefinite and assuming, that, if neither the executive committee nor the board of directors had expressly authorized this contract, it could not be enforced, the testimony in relation to it would do no more than raise á question of fact for the, jury which the verdict of the jury has settled in favor of the plaintiff. (New England Iron Co. v. Gilbert Elev. R. R. Co., 91 N. Y. 153, 164.) In Jourdan v. L. I. R. *464B. Co. (115 N. Y. 380) a contract was drafted in pursuance of negotiations between the two companies. An emergency arose which called for its completion, and the secretary, after consulting with the president, signed, sealed and delivered it, expecting, as he testified, to get a ratification, intending to call the board of directors’ attention to it but forgot it. The Court of Appeals held that this raised a question for the jury as to the authority to execute the instrument, and that the facts, which were not( nearly so strong as in the case at bar, were “ abundant and conclusive evidence that the contract was adopted and ratified by the defendanj; in its corporate capacity.” It was there said : “ Moreover, the defendant received a pecuniary benefit under the contract upon the assumption that the contract was valid. If they intended to disavow it, it was their duty to be pctive in so doing and not remain willfully passive in order to profit by an omission or mistake on the part of their own officers and which they .might have prevented.” (See, also, Fifth Nat. Bank v. Navassa Phosphate Co., 119 N. Y. 256.) In view of these authorities and in view of the undisputed testimony, that the acts of Dresser as president of the defendant in making arrangements to secure the business of this shipbuilding company were approved by the directors and executive committee,and he was allowed to make such contracts, borrow money, guarantee notes and other obligations, all of which were either expressly authorized ór ratified by the company, it is difficult to see how it can be seriously contended that there was not at least a question for the jury as. to whether or not these officers" of the defendant had authority to execute this contract or whether their action in executing it was not subsequently ratified by the corporation.
I think that this contract was not ultra vires j that the finding of the jury that the defendant authorized its execution was sustained by the evidence, and that the plaintiff and not the defendant was entitled to judgment upon the verdict of the jury.
I think, therefore, that the judgment should be reversed and judgment ordered for the plaintiff, upon the verdict, with costs to the plaintiff.
Clarke, J., concurred.
Judgment affirmed, with costs.

 Since amd. by Laws of 1904. chap. 492, and Laws of 1906, chap. 601.— [Rep.