Westerfield v. Radde — 7 Daly (N.Y.) 326

Majority

p. 326

Joseph H. Westerfield et al. Respondents, against William Radde et al. Appellants.

(Decided November 5th, 1877.)

Headnote

The president of a manufacturing corporation, organized under the act of 1848', cannot lawfully bind it in the purchase of goods required in its business, when a resolution forbidding such act on his part exists, and appears on the books of the corporation, even if the seller of the goods had no notice of such resolution, unless through a well recognized general course of dealing such president has been permitted and held out by the corporation as possessed of authority to make such purchases.

Appeal by the defendants from a judgment in favor of plaintiffs, entered upon a decision of the general term of the Marine Court of the city of New York, affirming a judgment entered upon a verdict in that court at a trial term.

The plaintiffs, Westerfield and others, brought this action against Radde and others, as trustees of the Paragon Match Company, a manufacturing corporation, organized under the general statute of this State .of 1848, to recover of them the price of merchandise, alleged in the complaint to have been sold and delivered by plaintiffs to that corporation, on the ground of the failure of the trustees to file their annual report as required by statute.

The complaint alleged that plaintiffs had recovered judgment against the corporation for the price of the merchandise; and that an execution thereon had been returned unsatisfied.

Oil the trial, the plaintiff gave evidence that the merchandise was bought by the company through one Bock, a trustee and the president of the corporation, that a part were delivered and used by the company, and that Bock was authorized, by a resolution of the trustees, to buy the merchandise. This evidence was in part the testimony of J3oclc, who, however, testified that he remembered “ the

p. 327

transaction,” because one of the' members of plaintiffs’ firm “ refused to give credit to the company,” and his testimony in other particulars was directly contradicted by the testimony of Radde. It was shown on the trial that one of the by-laws provided that no officer, trustee or employee of the. company should have power 'to incur any debt to the charge of the company, unless he be so authorized by the board of trustees, by a resolution duly entered upon the minutes of the meeting of said board. It was also shown that at the first meeting of the trustees, May 4th, 1872, the following resolution was passed: “ On motion it is ordered that the company do not commence actual,operations before the 1st day of .time, 1872, or until an amount deemed sufficient for the successful commencement of operations shall be in the hands of the treasurer.”

The court directed the jury to find a verdict for the plaintiff. The defendants excepted and asked the court to submit to the jury the question as to whether any, and as to how much of the merchandise had been delivered to the company. This request was refused, the court holding that the preponderance of evidence was so great that a verdict for defendants would be set aside.

The jury found a verdict for plaintiffs.

John A. Foster, for appellants.

Jno. P. Reed, jr., for respondents.

Plaintiffs sued the appellants, Radde & Koehler, and two others, as trustees of a corporation formed under the general manufacturing act of 1848, known as “ The Paragon Match Company,” for goods sold and delivered that company between May 29th and June 27th, 1872, by reason of the alleged failure of the company to make and publish the report required by the 12th section of that act. The company was organized in April, 1872, with seven trustees, including the two defendants. The by-laws prescribed that no officer, trustee or employee should have power to

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incur an)-- debt unless authorized by the board of trustees,' by resolution entered in its minutes. The company was intended to succeed to the business of the firm of “ Bock, Schneider & Co.,” match manufacturers, whose assets and good will were purchased and were to be paid for, part in stock and part in cash derivable from sales of stock. It was also resolved by resolution passed May 4th, that the company should not commence actual operations before the 4th of May, 1872, nor until an amount deemed sufficient for the successful commencement of operations should be in the hands of the treasurer. The company was organized in June, and Mr. Bock, one of the trustees, was elected president. At a meeting held by five of the directors in the early part of December, 1872, all of them, including these defendants, resigned. The default charged, was for not making the report required by the act in January, 1873. The judge before whom the cause was tried, upon the proof tending to show a sale and delivery of the goods for which the action was brought upon the order of said Bock, held (against objection and exceptions) that the president of such a corporation could lawfully bind it in the purchase of goods required in its business, notwithstanding there was a resolution to the contrary on its books, unless the plaintiffs had notice of such resolution.

Bock, the president, had, as member of the firm of Bock, Schneider & Co., Bock, Grenin 5s Co., and until such' assumed organization, purchased goods of plaintiffs, and he expressly swore plaintiffs refused to give credit to the company. The refusal of the judge, therefore, to submit to the jury the question of the sale and delivery of the goods to the company, and as to the delivery of all the goods for which claim was made, was erroneous. The judge also erred in holding that the president of such a corporation “ could lawfully bind it in the purchase of goods required in its' business, notwithstanding a resolution to the contrary on its books, unless the plaintiffs had notice of such resolutions.” As president he was but presiding officer of the board of trustees. The concerns of the company was to be managed

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by the trustees, who were to be, by the articles of incorporation, “ not less than three nor more than nine.” The authority to contract a debt or transact any other business of the 'corporation, except such they specifically authorized by'' resolution or by-law, must grow out of some delegation of their authority, either by by-law or resolution, or through a well recognized general course of dealing, by which some person has been permitted and held out by the corporation'as possessed of authority to transact its business. ( 1 Wend. 31 ; 1 Hun, 202 ; 3 Bosw. 600 .) Under the views previously' expressed, various other errors occurred in the admission of improper testimony—in admissions made by Bock, personally and in writing.

The status of these defendants when the alleged default of the corporation occurred,.as two out of seven trustees fixed in number by the articles of incorporation, was admitted by their answers, no questions arising out of their previous resignation as well as the others of the trustees, or-as .to their power as a minority of such as was required by the articles of incorporation to transact any business of the corporation, or as to their exemption from responsibility by reason of any incapacity in the corporation to make the report because of the resignation of the majority of the trustees, .or the effect of their subsequent abortive attempt to cause such report to be made, were properly presented on the trial, and if deemed material must be made the subjects of consideration on a future occasion.

■ The judgment appealed from must be reversed, and a new trial ordered, with costs to abide the event.

Joseph F. Daly, and Larremore, JJ., concurred..

'Judgment reversed and a new trial ordered.

Cases cited

Bank of Orange v. Brown 1 Wend. 31 N.Y. Sup. Ct. p. 329
Marine Bank v. Clements 3 Bosw. 600 N.Y. Super. Ct. 1858-12-04 p. 329