Westchester Mortgage Co. v. Thomas B. McIntire, Inc.

Majority

p. 518

Westchester Mortgage Company, Respondent, v. Thomas B. McIntire, Inc., and Thomas B. McIntire, Defendants, Impleaded with William H. Foster, Appellant.

Second Department,

March 10, 1916.

Headnote

Corporations — guranty and suretyship — action upon general written guaranty for payment of promissory note of corporation — proof of execution of note — corporate seal — authority of officer to execute note.

Where, in an action upon a general written guaranty for the payment of a promissory note of a corporation executed by its president but not under the corporate seal, the defendant guarantor, vice-president and

p. 519

stockholder of the corporation, denies the allegation of the plaintiff as to the making of the note, it is necessary for the plaintiff to prove the authority of the president of the defendant corporation to make and deliver the note, because the guarantor has a right to avail himself of any defenses available to- the corporation, the principal debtor.

As a general rule, an officer of a corporation cannot bind it on a promissory note without special authority, either from specific resolutions of the directors or from the by-laws.

Putnam, J., and Jenks, P. J., dissented, with opinion.

Appeal by the defendant, William H. Foster, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Westchester on the 10th day of May, 1915, upon the verdict of a jury rendered by direction of the court.

Frederick B. Van Kleeck, Jr., for the appellant.

Jonathan Holden, for the respondent.

The defendant Foster appeals from a judgment entered against him on the direction of a verdict in favor of the plaintiff. Both parties requested the direction of a verdict. There was no opinion filed on the direction of the verdict. While the case was apparently a very simple one, yet the defendant Foster set up ten separate defenses in his answer. The action was upon a general written guaranty for the payment of a promissory note alleged to have been made by the defendant Thomas B. Mclntire, Inc., a domestic corporation. A like instrument of guaranty between the same parties was before this court in 168 Appellate Division, 139, and it was held to be a general guaranty. So far as the facts go I recommend no interference with the finding of the trial court. This would dispose of the appellant’s contention that there was a diversion of the proceeds of the note contrary to the understanding upon which he signed the instrument of guaranty. There is, however, a question of law involved, as to which, as it seems to me, the trial court committed reversible error. The plaintiff pleaded the making of the corporation note in paragraph “ First ” of its complaint. The defendant Foster denied this allegation in his answer. The guarantor, Foster, had a right

Dissent

p. 520

to avail himself of any defenses available to the principal debtor. (Springer v. Dwyer, 50 N. Y. 19 ; Feinstein v. Jacobs, 139 App. Div. 192 .) As against the latter, a corporation, it would have been necessary to show the power of the president, Thomas B. McIntire, to execute and deliver the note which formed the subject of the guaranty. Likewise, was it necessary so to do against the guarantor, Foster. The note was not under the corporate seal; if so there would have been a prima facie presumption of authority in the president of the corporation. (Quackenboss v. Globe & R. F. Ins. Co., 177 N. Y. 71 ; United Surety Co. v. Meenan, 211 id. 39.) But where there is no corporate seal on the instrument there is no presumption of authority in the officer who executed it in the corporate name, and the simple production of the note does not make out a prima facie case against the corporation. (7 Ruling Case Law, 452.) That an officer of a corporation cannot generally bind the corporation on a promissory note without special' authority arising either from specific resolutions of the directors or from by-laws of the corporation is well settled. (People’s Bank v. St. Anthony’s R. C. Church, 109 N. Y. 525 ; Parmelee v. Associated Physicians, etc., 9 Misc. Rep. 459 .) There is no proof in the record of the authority of McIntire as president to' make and deliver the corporate note. Hence, there seems to me no proof that the defendant appellant’s guaranty ever took a legal inception. If I am right in this, the judgment must be reversed and a new trial granted, costs to abide the event.

Stapleton and Rich, JJ., concurred; Putnam, J., read for affirmance, with whom Jenks, P. J., concurred.

Appellant Foster by the words of his guaranty, in which he fully described this sixty-day note, I think, became estopped from setting up the omission of a seal or otherwise questioning the note’s validity. As vice-president and a stockholder in the corporation of Thomas B. McIntire, Inc., his signature on this guaranty procured a loan for the corporate purposes, which has been so applied. He stands like an indorser who cannot raise such a defense, as by the indorsement he guarantees the validity of the corporate notes. (Donohoe v. Meeker, 35 App. Div. 43 ;

p. 521

Glidden v. Chamberlin, 167 Mass. 486 ; Joyce Defenses to Com. Paper, §§ 95, 671, 672.)

Furthermore, there was proof of two prior corporate notes thus made by the president and supported by a like guaranty in which appellant joined. Corporate authority may be implied from previous official dealings, and here this authority must be regarded as found, and such a finding comprised in the court’s direction of a verdict.

Where the corporation had the full proceeds and applied them in its business within the scope of the guaranty, I cannot agree to let out a guarantor merely because the note did not bear a corporate seal.

Jenks, P. J., concurred.

Judgment reversed and new trial granted, costs to abide the event.

Cases cited

Springer v. Dwyer 50 N. Y. 19 N.Y. 1872-06-20 p. 520
Quackenboss v. Globe & Rutgers Fire Insurance 177 N. Y. 71 N.Y. 1903-12-18 p. 520