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Mayor v. Kent

57 N.Y. Super. Ct. 109 25 Jones & S. 109 Court N.Y. Super. Ct. Decision date 1889-06-03 English

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THE MAYOR, &c., OF THE CITY OF NEW YORK, Respondents, v. MARY A. KENT, et. al., Appellants.

Headnote

Lease of city real estate executed by comptroller, valid, as also bond executed by sureties for its performance.
A lease of real estate, executed in behalf of the city of New York by its comptroller in accordance with resolution of the “ commissioners of the Sinking Fund,” is not void. Even if deemed informal it could have been cured on demand of either party, but if not objected to within reasonable time after execution, the parties thereto are estopped by their own laches from complaint or objection on the ground of informality.
The current of judicial authority favors giving effect to corporate acts, even where formalities prescribed by law have been omitted, provided the manifest lawful intention has been carried into effect, and there is no element of fraud in the transaction, and no violation of justice or equity. This principle of law is held to apply with special force to the case at bar, where the contract in dispute has ceased to be merely executory, and has, in fact, been in part carried out, and where the party dealing with the corporation, having enjoyed the advantages of the contract, seeks to escape from the performance of obligations on the ground of a defect in formal execution.
A bond executed to the corporation of the city of New York by sureties to secure the performance of such a lease by the lessee is valid, notwithstanding it was not executed by the lessee. Being joint and several, it binds all -who execute it, especially if the intention of the sureties sufficiently appears.
Before Sedgwick, Oh. J., Freedman and O’Gorman, JJ.
Decided June 3, 1889.
Appeal from a judgment entered in favor of the plaintiffs against the defendants upon a trial at special term, a jury having been waived.
Benjamin Yates, attorney and of counsel, for appellants, argued :—
I. The lease is invalid. Carlton v. Darcy, 46
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Supr. Ct. (15 J. & S.) 484 ; Ib. Darcy, 90 N. Y. 566 . In Carlton v. Darcy, supra, this court held a lease executed in the same manner as the lease in question to be invalid and void and not to convey a title, and the court at page 493 says : “ The answer set up a lease dated April 3d, 1876, which is put in evidence by the defendant between the mayor, aider-men and commonalty of the city of New York, acting by the commissioners of the Sinking Fund, and defendant Darcy, under which he claimed title. This lease is executed by Andrew H. Green and not by the board of the commissioners of the Sinking Fund, nor by the mayor, aldermen, &c. This lease has no validity and confers no title upon Darcy. It was not executed by the commissioners of the Sinking Fund, who appear upon the face of the lease to be acting as agent of the city. Besides Green as an individual or comptroller had no authority to execute the lease.” Carlton v. Darcy was an action of ejectment, and was reversed by the court of appeals ( 90 N. Y. 566 ), but the decision of this court as to the validity of a lease of this kind was not disturbed. The court of appeals at p. 573 say : “ The' relation of landlord and tenant between the city and Darcy was recognized by both parties, and although the lease was not formally correct in the manner of execution, the plaintiff is not in a position to question the existence of that relation between the defendants. Whether the city could be made liable upon the covenants in the case in an action by the lessee is not a material question.” Carlton v. Darcy, 90 N, Y. 566 . The lease in this case is a lease from the city, and the clerk’s signature and seal of the corporation are necessary under existing laws. (Laws 1873, §§ 13, 102). The charter creating the Board of Commissioners of the Sinking Fund gives them the power to sell or léase lands of the city, but it does not authorize them to execute grants or
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leases, (Laws 1873, § 15.) Where the charter prescribes the mode in which an act must be done, that mode must be followed, otherwise the act is invalid. Taylor v. Beebe, 3 Robt. 262 ; Brady v. Mayor, 2 Bos. 173; S. C. 20 N. Y. 312 ; Schenck v. Mayor, 69 Ib. 444; Smith v. City of Newburg, 77 Ib. 138; Lawton v. Met. E. Church, 97 Ib. 119; Dillon on Mun. Corp., 3 ed., § 578; Rex. v. Inhabitants, 5 East. 239.
II. The lease, the principal obligation, being invalid, the bond, the . collateral obligation, is also invalid, as a valid subsisting' principal obligation is necessary to render the sureties liable. Brandt on Sureties, p. 181; Swift v. Boers, 3 Den. 70 ; Purdy v. Peters, 35 Barb. 239 ; Putnam v. Schuyler, 4 Hun, 170 . The condition of the bond is that the lessee will perform the covenants of the lease, but the lessee not being liable on the covenants, the defendants cannot be subrogated to the rights of the plaintiffs under the lease, so the plaintiffs have no rights, and the bond necessarily falls with the lease.
III. The bond, independently of any question as to the validity of the lease, was never executed so as to become a binding obligation upon the defendants. Choteau v. Suydam, 21 N. Y. 179 ; Whitford v. Laidler, 94 Ib. 145; Alb. Law Jl, vol. 37, p. 188— 208, and cases cited. . The bond was signed by the defendants at different times, and the condition under which it was signed, was that it should be executed by the lessee and two sureties, and approved by the comptroller. These were the terms announced by the plaintiffs, the bond was prepared by them, has been always in their possession, the name of Mary Kent was recited therein-, and a seal was affixed for her signature, but was never signed by Mary Kent nor approved by the comptroller. A surety has the right to prescribe the exact terms upon which he will enter into the obligation and to
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insist upon his discharge in case these terms are not complied with. Barnes v. Borrow, 61 N. Y. 39 .
Henry R. Beekman, counsel to the corporation, and Henry B. Twombly, of counsel, for respondents, argued :—
I. The defendant sureties are estopped from denying the right of the comptroller to execute the lease in question. The facts in the case at bar wbre entirely within the knowledge of the sureties. The lessee acted in the capacity which the bond in question recited she occupied ; she had received the benefit from the lease, and had become a defaulter therein. In all such cases, it has been uniformly held that the principles of equitable estoppel apply, as well as the rule that a man cannot aver against his own deed. In the case of Otto v. Jackson, 35 Ill. 349 , a parallel case where the action was of covenant on a seal guaranty of a lease, it was objected that there was no proof that one of the lessors executed the lease ; but it was held that the guarantors were estopped from denying the- execution of the lease by the lessees. The court said : “ Entering into this guaranty was an acknowledgment by the guarantors that the lease was duly executed by both lessees.” The same rule is laid down in the text-books, Brandt on Suretyship, § 31. Baylies on Sureties, p. 403. Baylies states the general rule as follows : “Nor will a guarantor of the payment of a bond assigned by him be permitted to defend an action on his guaranty, by showing that the makers of the bond were not competent to contract in the manner they did, by reason that the bond issued by a corporation for a purpose not authorized by its charter. The guaranty of payment of the bond in such case imports an undertaking or agreement that the makers were competent to contract in the manner they have, and that the instru
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ment is a binding obligation on them.” And the cases all bear this rule out: 1869, Remsen v. Graves, 41 N. Y. 471 ; 1859, Zabriskie v. R. R., 23 How. (U. S.) 399 ; 1875, Dalrymple v. Hillenbrand, 62 N. Y. 9 ; 1875, Putnam v. Schuyler, 4 Hun, 169 ; 1875, Arnot v. Erie R. R. Co., 5 Ib., 608. (a.) By virtue of the lease, the defendant has had the possession and use of the property ; the contract, whether authorized or not, has been fully performed in good faith by the city, and the lessee has had the benefit of such performance. Under such circumstances the law will not permit her or her sureties, whose duty it was to see that the lessee did pay, to be relieved from the duty of payment, even if the contract was made without authority by the corporation. When a contract between corporations, or < between a corporation and an individual, has been executed by one of the parties and not by the other, the delinquent party cannot set up ultra vires as a defence. It is only when a contract remains executory on both sides that the defence is available'. In Whitney Arms Co. v. Barlow, 63 N. Y. 62 , the court of appeals say : “If the other party has had the benefit of the contract fully performed by the corporation, he will not be heard to object that the contract and performance were not within the legitimate powers of the corporation. * * * The only justification for such a plea by an individual sued upon a contract with the corporation, is, that the obligation is not mutual, as the other party, the corporation, would not be bound by it.” Parrish v. Wheeler, 22 N. Y. 494 , says : “ The executed dealings of corporations must be allowed to stand for and against both parties, where the plainest rules of good faith require.” In Steam Navigation Co. v. Weed, 17 Barb. 378 , it is decided that a party who has had the benefit of the contract cannot be permitted, in an action founded upon it, to question its
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validity upon the' ground of want of capacity to contract,, or regularity in contracting, on the part of the corporation which was a party to the contract. In Woodruff v. The Erie Railroad Company, 93 N. Y. 618 , it is stated that, a lessee, who has under the lease had possession and use of the property, is es-topped from questioning its validity in an action to recover the stipulated rent, and the court quotes : Whitney Arms Co. v. Barlow, supra and Bissel v. Michigan Southern R. R. Co., 22 N. Y. 258 , with unqualified approval. Vide Moss v. Rossi Mining Company, 5 Hill 137 ; Parrish v. Wheeler, 22 N. Y. 494 ; Arnot v. Erie R. R. Co., 67 Ib. 315 ; Buffet v. T. & B. R. R. Co., 40 Ib. 168 ; Fisher v. N. Y. C. & H. R. R. Co., 46 Ib. 644 ; Remsen v. Graves, 41 Ib. 471 ; Olcott v. Cayuga R. R. Co., 27 Ib. 546; Castle v. Lewis, 78 Ib. 134 ; Kent v. Quicksilver Mining Co., 78 Ib. 183. Probably the latest application of this principle is found in the decision of the supreme court in Starin y. The Staten Island Rapid Transit Railway Co., decided January 15, 1889, in which the court say : “ If the lease is executed the city could maintain an action against the corporation for the recovery of the rent, and it would be no defence to that action to say that the railroad corporation had no legal right to enter into such contract. Having entered into it as matter of fact and being in possession under the lease and enjoying its privileges, it would be agaiñst justice and right to set up such lack of power when asked to pay the consideration it promised in return for the granting of such lease. This principle was decided in Whitney Arms Co. v. Barlow ( 63 N. Y. 62 ), and has been followed in several cases in this court since that time, and is now the well - established doctrine in such cases.”
II. The commissioners of the Sinking Fund had .the power to delegate a purely ministerial duty of the comptroller, even though it involved more or
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less discretion on the part of the said comptroller. The charter of 1873, chapter 335, at section 102, granted the commissioners of the Sinking Fund power to execute leases in the following words : “ The said board shall have power to sell or lease for the highest marketable price or rental, at public auction, or by sealed bids, and always after public advertisement and appraisal under the direction of said board, any city property except wharves and piers.” 1876, Schanck v. Greene, 64 N. Y. p. 501; 1877, Hitchcock v. Galveston, 96 U. S., 341 .
III. The informalities in the execution of the bond in question, said bond being sufficient in substance and containing the proper conditions, will be disregarded, as not affecting the validity of said bond. (a) The fact that the sureties were not named in the body of the bond does not release them from liability. 1857, Decker v. Judson, 16 N. Y 439 ; Stewart v. Carter, 4 Nebraska, 564 ; Baylies on Sureties, p. 404 ; Smith v. Crooker, 5 Mass. 538 ; Danker v. Attwood, 119 Ib. 146 ; Scheid v. Leibshultz, 51 Ind. 38 . (b)
The omission of the principal to sign the bond does not release the sureties' from their liability upon it. The attention of the court is called to the fact that in this case the bond was joint and several. 1864, Williams v. Marshall, 42 Barb. 528 ; 1870, Dillon v. Anderson, 43 N. Y. 235 ; 1862, Secor v. Laws, 9 Bosw. 185 ; 1842, Parker v. Bradley, 2 Hill, 584 ; 1874, Russell v. Freer, 56 N. Y. 67 ; 1871, Loew v. Stocker, 68 Penn. St., 226 ; 1881, Board of Trustees v. Scheick, 10 Brad. (Ill.), 51 ; State v. Bowman, 10 Ohio, 445 ; Brandt on Sureties, § 127.

This is an appeal from a judgment entered against the defendants upon a trial at the special term, a trial by jury being waived.

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The action was brought for the recovery from the defendants, as sureties, upon a bond executed by them, to secure the performance by “ Mary Kent ” of the covenants of a lease made by the plaintiffs to ' her, of certain premises in the city of New York, of which the plaintiffs were owners. The lease was for a term of two years, from May the first, 1877.

The lessee entered on the premises and occupied them, according to. the terms of the lease, until May the first, 1879, leaving rent unpaid, amounting to $750.

The lease was executed in counterpart by “ John Kelly, Comptroller,” on behalf of the plaintiffs, and the lessee received one counterpart lease, at' the time of its execution.

The defence is that this lease, so called, was invalid, void, and of no force or effect, on either the lessors or lessee, because executed by “ John Kelly, Comptroller,” inasmuch as he was not the proper officer of the plaintiffs to execute said lease on their behalf; and, further, because the clerk of the common council had not signed said lease, and attached the seal of the corporation thereto.

The defendants contend that the lease, being thus void, and incapable of conveying any title or interest in the premises to Mary Kent, the bond executed to secure her performance of the covenants in the lease, set forth, was also void, and of no binding force or effect as against them. They further contend that, by reason of certain fatal defects in the bond itself, it is void.

The material facts are these :

The “ commissioners of the Sinking Fund,” under authority of law giving them full power to execute leases on behalf of the city adopted a resolution that the “ comptroller ” be authorized to lease the premises in question, and he proceeded to carry the resolution into effect, and executed, signed and

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sealed the lease to “ Mary Kent.” § 102, ch. 335, Laws of 1873.

The lease and bond were prepared by the counsel of the plaintiffs, and there is reason for the presumption that any defect' in the lease or bond was, the result of inadvertence on his part.

The defendants contend that the law required that the lease should be signed by the clerk, and the seal of the corporation affixed, and that the signature of “ John Kelly, Comptroller,” without the corporate seal, was a fatal defect, and cite various judicial decisions in support of their proposition.

I have examined these decisions, and I do not think that they sufficiently sustain that proposition. On the contrary, the prevailing current of more recent judicial authority seems to me. in favor of giving effect to corporate acts, even where formalities and preliminaries prescribed by law have been neglected, provided the manifest lawful intention of the corporation be thereby carried into effect, and there is no element of fraud in the transaction itself, and no violation of justice and equity. This rule of law is held to apply with special force to cases where, as in the case at bar, the contract in dispute has ceased to be merely executory, but has in fact been in part carried- out, and where the party dealing with the corporation, having enjoyed the advantages of the contract, seeks to escape from the performance of its obligations, on the ground of defect in its text, or formal execution. Mayor v. Sonneborn, 113 N. Y. 423 . This liberal application of the principles of law is sustained in Kent v. Quicksilver Mining Co., 78 N. Y. 183 ; Whitney Arms Co. v. Barlow, 63 Ib. 62 ; The People, ex rel Schanck v. Green, 64 Ib. 501 ; Woodruff v. Erie R’y Co., 93 Ib. 609 ; Rider Life Raft Co. v. Roach, 97 Ib. 378, 381 ; and in Starin v. Edson et al., 112 N. Y., 206 ; N. Y. State Reporter, Vol. 20, No. 5, pp. 898, 903.

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For these reasons, the execution of the lease by the “ comptroller," was not, in my opinion, void, but, at the most,- an informality, capable of being at any time, cured, on demand of either party, and, if not objected'to within reasonable time, the parties are estopped by their own laches from complaint.

The claim of the defence, that the sureties are not bound, by reason of defect in the execution of the lease, is, therefore, not sustained,

The defendants further object that, independently of any defect in the lease, the bond itself was void, because not executed by “ Mary Kent,” the lessee. The bond here was joint and several, and binds all those, severally, who execute it. The intention of the defendants in executing the bond sufficiently appears. Williams v. Marshall, 42 Barb. 528 ; Dillon v. Anderson, 43 N. Y. 235 ; Parker v. Bradley, 2 Hill. 584 ; Decker v. Judson, 16 N. Y. 439 ; Loew v. Stocker, 68 Penn. St. 226 .

The proper time for raising these objections was when these documents were executed, or soon after. It is too late to raise them now, after a long and almost suspicious silence, when their interposition only tends to promote injustice.

I am of the opinion that no error was committed at the trial, and that the judgment appealed from, should be affirmed, with costs.

Sedgwick, Ch. J., and Freedman, J., concurred.

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