Bradley Fertilizer Co. v. South Publishing Co. — 44 N.Y. St. Rep. 119

Majority

p. 119

The Bradley Fertilizer Co., Respt, v. The South Publishing Co., App’lt.^[1]

(New York Common Pleas, General Term,

Filed February 1, 1892.)

Headnote

I. Corporations—What constitutes—Liability.

Plaintiff sold goods to one C., who was doing business under the name of “ The South Publishing Co.” Seven months after the last delivery of goods, C., with others, incorporated “ The South Publishing Co.” Held, that the defendant could not beheld liable as a defacto corporation for the goods so purchased, as prior to its actual incorporation there was no use of corporate franchises, and nothing in the nature of corporate proceedings.

2. Same—Account stated—Ratification of agent’s act.

The act of defendant’s officers in receiving and retaining an account for such goods rendered by plaintiff does not make the defendant liable as on an account stated, or as a ratification of an agent’s act, since there could have been no account stated where there had been no prior transactions between the parties, and no ratification of an act of agency which was done at a time when there was no principal, and consequently no agent.

Appeal by defendant from a judgment of the general term of the city court, affirming a judgment of the special term in favor of plaintiff for $877.92, entered upon the verdict of a jury. The action was for a balance of $309.60, alleged to be due for goods sold and delivered to defendant between February, 1885, and May, 1887. The answer denied the sale and delivery by plaintiff of the goods to defendant.

Herbert H. Gibbs {Alan D. Kenyon, of counsel), for app’lt; George Walton Green, for resp’t.

It was proved that the goods for which the action was brought were sold and delivered by the plaintiff prior to May 28, 1887, and that the defendant was not incorporated until January 6, 1888; nevertheless the plaintiff was allowed to recover as upon a sale to defendant; and this recovery is attempted to be sustained upon the ground: 1st. of a de facto corporation existing at the time of the sale; and 2nd. of an account stated between the plaintiff and defendant.

The goods in question were sold and delivered by the plaintiff .to one Clough,-who, under the name of “ The South Publishing Co.,” was issuing a publication in which the plaintiff advertised, paying for such advertising in its goods, and the transactions by the plaintiff were with Clough under his name of The South Publishing Co., not knowing that that appellation was assumed by Clough for his individual business. About seven months after the last delivery of goods Clough with others, among them his employees, organized under the laws of Florida the defendant company and continued his correspondence with plaintiff through said company; and the plaintiff having addressed to The South Publishing Company an enclosure with its bill or account for such goods, the officers of the company received the same, acknowledged it and retained it without objection. Hone of the goods included in that account, however, were received by the defendant corporation.

p. 120

The defendant cannot be held liable upon any theory of a purchase of these goods by a de facto corporation. A de facto corporation is constituted by a user of corporate franchises and by acts in the nature of corporate proceedings, under color of organization, Childs v Smith, 55 Barb., 56 , or where proceedings have been taken in professed compliance with some law authorizing the fonnation of a corporation and there are acts of subsequent user, M. E. U. Church v. Pickett, 19 N. Y., 482 , or where there is a user of corporate franchises under color of an act authorizing the incorporation. Bank of Toledo v. International Bank, 21 N.Y., 542 .

There was nothing of the kind in this case. There was no attempt at organization ; no use of corporate franchises and nothing-in the nature of corporate proceedings prior to the actual incorporation of the defendant, and this was long after the sale of the: goods from plaintiff to Clough. Clough was not purchasing for any corporation, or contemplated corporation, but for himself individually; and his use of the name, “The South Publishing Co.,” was a mere representation that there was an existing corporation when none existed in law or in. fact. The act of the officers of. the defendant in receiving and retaining the account rendered by the plaintiff does not make the defendant liable. Had the corporation existed when the goods were purchased and had such purchase been made by an agent without authority, subsequent, ratification might be inferred from the receipt and retention of the account. Olcott v. Tioga R. R., 27 N. Y., 546 ; Scott v. Middletown R. R., 86 id., 200; Hoyt v. Thompson's Ex'r, 19 id., 207. But there can be no ratification or affirmance of an act of agency' which was done at a time when there was no principal, and consequently there could be no agent. Nor could there be an account stated between the plaintiff and this defendant as to transactions occurring before the defendant existed. An account presumes prior transactions between the parties. Here there were no. such transactions. “An account stated is an agreement between persons who have had previous transactions fixing the amount due-in respect of such transactions and promising payment. ” Abbott’s-Trial Evidence, 458. An account stated is merely an admission of the correctness of the items and the stated balance. A right of action, as upon a promise to pay, necessarily follows, but there is no estoppel. The account may be impeached for errors or mistakes. If it appears that any of the charges are not in law or in equity proper claims against the party debited with them, no promise to pay will be implied in respect to the balance into-which they entered and of which they are a part. Young v. Hill, 67 N. Y., 172 . As the goods included in the. account sent to the defendant had never been sold to nor received by it, nor properly chargeable against it, there was no basis in law or in equity for the claim and there can be no liability as upon an account stated.

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

Bischoff, J., concurs.