26 A.D. 1 | N.Y. App. Div. | 1898
The plaintiff is a corporation organized under the general law of 1848 (Chap. 40), and the objects for which it- is organized are the manufacture and sale of various kinds of ales and beer. In the month of November, 1890, certain infants, the owners of a building in this city, were, by their special guardian, about to lease the premises to one Hyland to be used as a saloon for the sale of beer. The plaintiff corporation had agreed to guarantee the performance of the covenants of the lease by Hyland. Before that was doné, however, the plaintiff entered into a contract with the defendant under his seal, which recited the fact that the lease was about to be made, describing it, and that Koehler & Co. were about to guarantee the performance of the conditions in the lease; and the defendant agreed that, if default should be made by the lessee; in the performance of any of the covenants, and the said Koehler & Co. should be called upon to pay the rent or perform the conditions, of the lease, he would pay to Koehler & Co. the rent or any arrears thereof that might remain due under the lease, and all damages that might arise in consequence of the non-performance of the covenants or either of them. The lessee defaulted in the payment of certain of the rent, and the' lessor thereupon brought an action against Koehler & Co. to recover the amount not paid by the lessee. That action was settled by Koehler & Co. by the payment of a less amount than was actually due to the lessor, and in return- for that payment it obtained a receipt in full for the amount unpaid and a release from further liability upon its guaranty. Having made that payment, Koehler & Co. brought this action to recover the amount it had paid and the expenses to which it had been put. At the Trial Term the complaint was dismissed, the court deciding that the contract of guaranty entered into by Koehler & Co. with the lessor was not within its power as a corporation to make; that, consequently, the contract could not have been enforced against it had it resisted, and that the defendant was only bound to indemnify the plaintiff against a legal liability which it could have been compelled to perform. The complaint was dismissed, therefore, upon the sole ground that the contract between the plaintiff here and the lessor, by which the plaintiff guaranteed the performance by the lessee of the covenants contained in the lease, was ultra vires; and, conse
The case of Filon v. The Miller Brewing Company (15 N. Y. Supp. 57) has been cited as laying down a different rule. The question there was not presented in precisely the same way. In that case the secretary of the Miller Brewing Company had leased from Filón certain premises to be used by a third person. It appeared that the company did not take possession of the premises leased and did not make any effort to occupy them, but that it proposed to permit a third person to use them, and there was grave doubt in the case whether the secretary who executed the lease had any power to do so. The court held in that case that the proper execution of the lease had not been proved so as to charge the brewing company. It was also held by the justice delivering the opinion that if the secretary had power to.execute the lease, the act was outside of the purposes for which the company was incorporated, and, therefore, it was ul1/ra vires, and the defendant was not liable upon the lease. If that case could be deemed an authority that á corporation in guaranteeing a lease for the purpose of increas
In examining the question whether a contract of a trading corporation is beyond its powers, it is not very important whether the contract was a sagacious one to make or not. If it appears that the thing done tended to increase the business it was organized to do, the courts need not concern themselves with the question whether the contract was a wise one. The simple question is, if the contract were carried out, whether it would have been likely to increase the business of the corporation. In this case, as the contract appears to have been made with the purpose of obtaining a customer for the plaintiff’s beer, the only thing to be examined is whether, if the arrangement had been carried out as expected at the time the contract of guaranty was entered into, it would have tended to increase the sales of the commodity in . which the plaintiff dealt. The arrangement with Hyland may not have reached the dignity of an enforcible contract, but yet it may well have resulted in a great increase of the plaintiff’s business, and if so, it was undoubtedly a reasonable contract for it to make. The purpose of the plaintiff’s organization was to make and sell beer. It was undoubtedly competent to enter into any contract adapted to further that purpose and not against public policy. Ho one would hesitate to say that the plaintiff might have rented a place in which to dispose of its wares, and established an agent there for- that purpose. Can it be said, as a matter of law, that it was foreign to the purposes of its organization to enter into a contract with a person who was engaged
An examination of the record shows that the persons entering into this lease were infants; that an application had been made to the court by their special guardian to authorize the lease of these premises; that the special guardian reported to the court the terms upon which the lease was to be made and that one of those terms was that the lease was to be guaranteed by the plaintiff. That report was accompanied by a memorándum of an agreement by which the lessee undertook- to procure such a guaranty, and the order of confirmation authorizing the execution of the lease required that, in addition to the usual covenants, it should contain • certain other conditions, one of which was that the lessee should procure H. Koehler & Co. to guarantee in the usual form the performance of the covenants and conditions contained in the lease. It is apparent from these facts that this guaranty given by the plaintiff ' Was a condition upon which the lessor was permitted to enter into the lease, and that the lease was executed upon the express authority of that guaranty. It was, therefore, so far as -the plaintiff ivas concerned, an executed contract by which, in reliance upon the act of the plaintiff, the lessor had delivered over the possession of this property under the lease to the lessee. That state of facts brings the case precisely within the case of Whitney Arms Co. v. Barlow (63 N. Y. 62), in which it was said that a corporation will not be . permitted to advance.the plea of ultra vires where the contract with regard to which it is interposed was one entered into in reliance upon the act of the corporation. (See, also, Bath Gas Light Co. v. Claffy, 151 N. Y. 24.) It maybe said that the liability imposed
It is said that there was no consideration moving to Reinheimer for his contract of indemnity. Upon that point it need only be remarked that his contract was under seal and expressed a consideration, and that was amply sufficient to support it.
We do not consider whether Reinheimer was induced to enter into this contract by false representations. While evidence was given upon both sides in regard to that matter, the court did not pass upon it, but put its decision solely upon the ground that the contract was one which the plaintiff had no power to make. Our judgment is that, upon the facts appearing here, this contract of guaranty was one within the power of the plaintiff to enter into; that it could have no defense to the action brought against it by the lessor, and, therefore, it was entitled to he indemnified against the liability which it incurred, and should have recovered from the defendant the amount it lost.
The judgment, therefore, should be reversed and a new trial granted, with costs to the appellant to abide the event.
Van Brunt, P. J., Barrett, Ingraham and McLaughlin, JJ., concurred.
Judgment reversed, new trial ordered, costs to appellant to abide event.