Court Opinion

ID: 5368180
Source: CourtListenerOpinion
Date Created: 2022-01-08 07:57:35.280651+00
Date Added: 2024-06-11T08:29:58.863751
License: Public Domain

Untermyer, J.
(dissenting). It is important to observe that the present case does not involve the right of the corporation to rescind an ultra vires contract for which it has received a consideration or which contains mutual covenants. The amended complaint alleges the existence of a lease between the defendant as landlord and one of its tenants, on which the plaintiff corporation was not liable. It charges that the plaintiff, out of its own funds, paid the rent for the apartment occupied by this tenant without consideration of any kind to the plaintiff and that in receiving these payments the defendant landlord “ had knowledge that the plaintiff’s funds were being used for the payment of the debts of a third person and that the debts paid were not those of the plaintiff corporation.’’ It is alleged that the plaintiff subsequently disaffirmed the transaction and demanded restitution. Under these circumstances the authorities which hold that a corporation ordinarily may not rescind an ultra vires contract which has been executed by the parties do not apply.
The transaction set forth in the amended complaint constituted a diversion or gift of corporate assets received by the defendant with knowledge of the illegal character of the payment. Such a gratuitous payment may be recovered by the corporation or by a stockholder suing for its benefit. (See Quintal v. Kellner, 264 N. Y. 32.)
The order and judgment should be reversed and the motion to dismiss the amended complaint denied.
Martin, P. J., concurs.