Hyperlawhypertext legal database Parmelee v. Associated Physicians & Surgeons 61 N.Y. St. Rep. 118

← Cases

Parmelee v. Associated Physicians & Surgeons

61 N.Y. St. Rep. 118 Court N.Y.C.P. Decision date 1894-08-01 English

Delivered by Bischoff, J.

Contents

Majority

p. 118
Samuel B. Parmelee, Resp’t, v. The Associated Physicians and Surgeons, App’lts.
(New York Common Pleas, General Term.
Filed August 1, 1894.)

Headnote

Corporations—Officers—Authority.
A contract for employment, made with a person by the treasurer of a corporation in disregard of its by-law restricting the execution of such contract' by that officer alone, is not binding upon the corporation.
Reargument of an appeal from a judgment of the district court in the city of New York for the seventh judicial district rendered by the justice, without a jury, in favor of the plaintiff. Action upon a contract of employment made by plaintiff with the treasurer of the defendant corporation, the act of such officer purporting to be the act of the corporation. The principal defense was that the defendant was not chargeable under the contract in view of the fact that a by-law of the corporation prohibited the making of an agreement involving a liability to the extent of that
p. 119
in suit, without the approval of the president, which had not here been given.
Charles De Hart Brower, for app’lt; David B. Simpson, for resp’t

Further consideration of this case, upon re-argument, but serves to strengthen our opinion that the judgment is not to be supported. An examination of the later decisions of the court of appeals taken with those of earlier date, leads to the conclusion that the rule to be deduced, with regard to the effect of by-laws restrictive of the powers of an agent as officer of a corporation upon a contract entered into through such agent or officer opposes a recovery upon his contract by the plaintiff herein. This rule may properly be stated to be that .if the officer assuming to act for the corporation, in the making of a contract with a third person, is one whose office is attended with inherent general executive authority for the ordinary conduct and management of the corporate business, and the contract is one which could, therefore, be delegated to an officer or agent, the officer so assuming to act is clothed with apparent authority upon which such third person may rely in the absence of notice of limitations upon the officer’s authority which are imposed by the by-laws or the proceedings of the board of directors; but, if the officer, with a liability for whose act the corporation'is sought to be charged, is one to whose office there is attached no inherent executive authority then, and in that event, the third person dealing with the officer in an executive capacity is chargeable with notice of an apparent want of authority and so deals with the latter at his peril ; and in such a case if the officer’s authority to make the contract is disputed, it is incumbent upon such third person to establish the authority by proper evidence. If the by-laws which are relied upon as evidence impose certain limitations or restrictions upon the exercise of the authority, such limitations or restrictions may not be disregarded but must be held to determine the extent of the authority, Rathbun v. Snow, 123 N. Y. 343 ; 33 St. Rep. 600 ; Patterson v. Robinson, 116 N. Y. 193 ; 26 St. Rep. 685 ; Jemison v. Citizens Sav. Bank, 122 N. Y. 135 ; 33 St. Rep. 335 ; Wilson v. Kings Co. El. Ry. Co., 114 N. Y. 492 ; 24 St. Rep. 81 ; First Natl. Bank v. Ocean Natl. Bank, 60 N. Y. 278 ; Lee v. Pittsburgh C. & M. Co., 56 How. Pr. 373 ; aff’d, 75 N. Y. 601 . In Patterson v. Robinson, 116 N. Y. 193 ; 26 St. Rep. 685 , it was held that where a contract, made in the name of a corporation by its president, is one which the corporation had power to authorize its president to make, a presumption that such officer was so authorized obtains, but in Jemison v. Citizens Sav. Bank, 122 N.Y. 135 ; 33 St. Rep. 335 , the court says that a party dealing vnth an agent of a corporation is chargeable with knowledge of the extent of such agent’s powers. In Wilson v. Kings Co. Ry. Co., 114 N. Y. 492 ; 24 St. Rep. 81 , it was held that the burden is upon the party claiming under a contract with a corporation, when made through an agent to prove the authority of the person so assuming to act as agent; the party thus dealing with the corporation being chargeable with knowledge of the actual or apparent authority of its

p. 120
agents or officers, and to the same effect is the case of First Natl. Bank v. Ocean Natl. Bank, 60 N. Y. 278 . In Chemical Nat. Bank v. Kohner, 85 N. Y. 189 , the court held that the president and cashier, general executive officers, of a bank would be presumed to have authority to enter into contracts in the course of the usual business of the bank, and in Lee v. Pittsburgh C. & M. Co., supra, the president of a corporation was held to be possessed of apparent general executive powers in furtherance of the business of the corporation, and so in Rathbun v. Snow, 182 N. Y. 343 ; 33 St. Rep. 600 , in dealing with a case involving the apparent powers of a general managing agent of a corporation, the court say that these apparent powers are not to be restricted, as to third persons by secret limitations contained in the by-laws. But the treasurer of a corporation is an agent with special powers merely and cannot bind such corporation by the performance of acts without the scope and ordinary course of the duties of his office (Boone on Corporations § 143) and as also of the secretary (id. § 145). Applying the rule before stated to the decisions of this court in Westerfield v. Radde, 7 Daly, 326 ; Rathbun v. Snow, 15 id. 141; 22 St. Rep. 227 , and Bohm v. Loewer’s, etc, Brewery Co., 16 Daly, 80 ; 30 St. Rep. 424 , it is apparent that the rule stated in those cases, namely, that persons contracting with a corporation through an officer thereof are affected by limitations imposed by the by-laws upon the latter’s authority, and of which by-laws such person may have had no actual notice, must be accepted with the qualification that it applies only to cases where the officer assuming to act for the corporation was not, by virtue of his incumbency of an executive office, clothed with apparent authority to act in the premises. Further in the case of Bohm v. Loewer’s Brewery Co., supra, the contracting party had knowledge of the by-law requiring that such contracts as that in suit should be signed by the treasurer as well as the president, and it appears that a request to approve the contract was made of the former, in accordance with such knowledge, and refused. It follows from the views expressed that the contract for employment made with plaintiff by the treasurer of the defendant corporation, in disregard of the by-law restricting the execution of such a contract by that officer alone, was not binding upon the defendant and that this action, as brought upon such contract must fail.

The judgment should therefore be reversed and the complaint dismissed with costs.

Bookstaver, J., concurs.

Cases cited