Warshawsky v. Grand Theatre Co.

recently the treasurer and a director. The plaintiff was bookkeeper for defendant under the direction of Jacob Fishel, the treasurer, with whom he had intimate business relations outside of the business of the theater. Mr. Fishel was not an actor, and the other stockholders were of opinion that the stock should be wholly owned by actors, one of whom, named Adler, was even then negotiating to purchase the stock of the corporation. Mr. Fishel was therefore requested to consent to sell his stock, which he finally agreed to do at par. He insisted, however, as the sole condition on which he would sell, that the corporation should pay him a sum. of money for the services he had rendered in the past as treasurer. Accordingly the note in suit was made out and signed by the president and assistant treasurer. There was no formal meeting of the board of directors, and no vote or resolution was adopted authorizing the execution of the note. The sole consideration claimed for it and upon which it was exacted was that it was in payment of services previously rendered by Fishel, although there had never been any agreement to compensate him, nor any salary fixed for his office. In fact, the by-laws under which the company operated expressly provided that no officer was to receive any salary. There is no pretense that the sum represented by the note was part of the purchase price of the stock. It is clear that there was no consideration for the note, that it was void at its very inception, and that Fishel could not have recovered a judgment upon it. Met. El. R. Co. v. Kneeland, 120 N. Y. 134 , 24 N. E. 381 , 8 L. R. A. 253 , 17 Am. St. Rep. 619 . Is the present, plaintiff in any better position? We think not. The rule is well settled that one who receives from an officer of a corporation the notes or securities of such corporation in payment of or as security for a personal debt of such officer does so at his peril. Prima facie the act is unlawful, and, unless actually authorized, the purchaser will be deemed to have taken with notice of the rights of the corporation. Wilson v. Met. El. R. Co., 120 N. Y. 145 , 24 N. E. 384 , 17 Am. St. Rep. 625 ; R. & C. T. R. Co. v. Paviour, 164 N. Y. 281 , 58 N. E. 114 , 52 R. R. A. 790. There is no doubt that the plaintiff knew of Fishel’s relationship to the corporation, and from his position as bookkeeper he must also have known that the books showed no indebtedness from the corporation to Fishel, and, if he had made proper inquiry, he could easily have ascertained that the note which he purchased had never been authorized by the board of directors. He is therefore chargeable with notice of the initial infirmity of the note, and can no more recover upon it than could Fishel have done if he had been plaintiff.

Judgment should be reversed, and new trial granted,, with costs to appellant to abide the event.