Opinion
November, 1908.
Henry W. King, for appellant.
Harris Fischer, for respondent.
This is an appeal from a judgment, rendered on the verdict of a jury, in plaintiff's favor, and from an order denying a motion for a new trial. The action was for rent on a written lease, signed by the secretary of defendant in the corporation name, sealed with the corporation seal, and delivered by the secretary to the plaintiff. The defense of the defendant is that the alleged lease was not the act of the defendant; that it had never been authorized by the proper authorities of the defendant, and that the latter had never ratified it, so as to make it binding upon it. The constitution and by-laws of defendant gave the secretary no power to make a contract or lease; the said secretary was not the custodian of the corporate seal; and the power to sign all contracts belonged to the board of governors, or to their delegated authority. The minutes of the meetings were introduced by the defendant, to show what was done by the board of governors in respect to this lease, and to show that no authority was ever granted by the board of governors to the secretary or to any person to execute this lease. The portion read in evidence was as follows:
"Minutes of the Board of Governors, meeting held July 9, 1907. A meeting of the Board of Governors was held at the office of the Secretary on the above date. Members of the Board present were Dr. Louis Newman, E.A. Stevens, Jr., Frank D. Gheen and H.S. Gambel.
"The proposition made by Reisenwebers for the lease of the premises 304 W. 58th Street was then read. In this proposition were included all alterations to suit the acommodation of the Club; heat service; linen for sleeping apartments; wiring of entire building for electricity; help; percentage on the total amount of receipts per month, for the sum of $3,000 and a three years' lease. After some discussion on the matter it was regularly moved, seconded and carried that the matter be laid over until the next meeting of the Board in order to give further discussion and time to consider the proposition.
"July 29, 1907. A special meeting of the Board of Governors was held at the office of the Secretary on the above date. The members present being Dr. Louis Newman, Charles Francis and Hugh S. Gambel, S.D. Gheen.
"The meeting was called for the purpose of discussing further the proposition made by Reisenwebers for a town house and such other business as might be brought to the attention of the Committee.
"After some discussion in the matter it was the sense of the meeting that if, upon a written proposition made by Reisenwebers, embodying all that was desirous in the way of alterations, help, etc., it be satisfactory to the Board, that same be accepted, and that the Secretary request that Reisenwebers furnish the Board with such proposition in writing.
"Minutes of the meeting of the Board of Governors held at the office of the Secretary on August 2nd. Those present were Hugh S. Gambel; Frank D. Gheen; E.A. Stevens, Jr. The Secretary read a communication received from Reisenwebers as an answer to a letter sent at the request of the Board at a previous meeting for full details etc. in writing as regards to the leasing of the premises 304 West 58th Street, New York City, as a town house. After some discussion and consideration of various matters in connection with the communication, it was regularly moved, seconded and carried that we accept of the proposition and that a committee of three be appointed for the purpose of taking up all matters pertaining to the necessary alterations and interior finishing of the Club for occupancy. The Chair appointed Messrs. Frank D. Gheen, Charles H. Leary and Dr. Louis Newman."
These were the minutes of the meetings held prior to the date when the lease was executed. No express authority was, therefore, given here to the secretary, to sign, seal or deliver the lease. The general rule is that corporations are bound only by the act and contract of their agents, done and made within the scope of their authority, and that one who deals with them is bound to know their powers and the extent of their authority, express or implied (Alexander v. Cauldwell, 83 N.Y. 480; Columbia Bank v. Gospel Tabernacle, 127 id. 368); and the secretary of a corporation has no implied authority to execute and deliver a lease on behalf of his corporation. Karsch v. Pottier Stymus Co., 82 A.D. 232; Cook Corp. 782, 783; Parmelee v. Associated Physicians, 9 Misc. 458. The Membership Corporations Law, under which defendant was incorporated, provides in section 13 as follows: "No purchase, sale, mortgage or lease of real property shall be made by a membership corporation, unless ordered by the concurring vote of at least two-thirds of the whole number of its directors, provided however that when the whole number of directors is not less than twenty-one, the vote of a majority of the whole number shall be sufficient."
There were nine members of the board of governors of the defendant in office during all this time; so that, to delegate to the secretary the ministerial duty of signing a lease, the concurrent vote of six governors was required. There were only five members present at the meeting held August 2, 1907, when the question was considered; and thus, from no point of view, was proper authority given. As defendant was a membership corporation, with strictly limited powers and sharply defined methods of procedure, any person dealing with it was bound to know of these limitations and methods, and acted at his peril. The restrictions on the powers of the board of governors of a membership corporation must be strictly construed, for the statute imposes upon each director a liability for the debts of a corporation; and before that liability can be fixed the directors are entitled to the protection afforded them by the statute. The plaintiff, however, claims that, in any view, the defendant is bound by the lease, for the reason that it ratified and affirmed the act of its secretary in making the same. The rule is laid down by the Court of Appeals as follows: "Where third parties have dealt with the company, relying in good faith upon the existence of corporate authority to do an act, there it is not needed that there be an express assent thereof on the part of the stockholders to work an equitable estoppel upon them. Their conduct may have been such, though negative in character, as to be taken for an acquiescence in the act; and when harm would come to such third parties if the act were held invalid, the stockholders are estopped from questioning it. We suppose acquiescence or tacit assent to mean the neglect to promptly and actively condemn the unauthorized act, and to seek judicial redress, after knowledge of the committal of it, whereby innocent third parties have been led to put themselves in a position from which they cannot be taken without loss." Kent v. Quicksilver Mining Co., 78 N.Y. 159. In the case at bar we have the evidence of the three meetings of the defendant and the resolution of the board of governors to accept plaintiff's terms, and that alterations and improvements were to be made. There are two letters of one of the committee delegated to attend to the alterations, one letter to the architect and one to Mr. Gambel, showing that the alterations were going on. There is the letter sent by the plaintiff to defendant, that plaintiff had complied with all the requirements of the lease and had demanded the rent. There is the evidence of the plaintiff that he received a message to get the furniture, and that the plaintiff sent his wagon for the furniture; that the furniture was taken from the defendant's club-house and taken to the leased premises, and that one or two meetings were held at said premises. There is the evidence of the vice-commodore, Dr. Seymour Oppenheimer, "that a meeting of the club was held," that notices were sent out for this meeting; and there is testimony that business of the defendant was transacted at the meeting. The evidence is as follows: "Q. Was there any business transacted there at all? A. At the meeting? Q. Yes. A. Yes, sir. Q. Of the Motor Club? A. Yes, sir." Where a party does work or furnishes material to a corporation, to the knowledge of its officers, without prompt dissent on the part of the corporation, it will be held to have ratified the contract and be liable thereunder. Cunningham v. United States, 18 N.Y.S. 600; Lee v. Pittsburgh Coal Mining Co., 56 How Pr. 373. The fact that defendant held at least one meeting at the leased premises, and transacted business of the defendant at the meeting, was evidence tending to show that it took possession, and that there was a ratification (Du Bois v. Shepard, 58 N.Y.S. 563; Kent v. Quicksilver Mining Co., 78 N.Y. 159), making the act of the secretary equivalent to an original authority on the part of such secretary. The testimony tends to show that the acts of the secretary were with the knowledge and assent of the board of governors and tends to establish a ratification. Globe Gaslight Co. v. Met. Ins. Co., 41 N.Y.S. 797. Although the secretary had no authority his act will be presumed to have been ratified, unless the corporation dissented within a reasonable time. Indianapolis R.M. Co. v. St. Louis, etc., 120 U.S. 256; Pittsburg R.R. Co. v. Keokuk Bridge Co., 131 id. 371. There was sufficient evidence of ratification and change of position to warrant the trial judge in sending the case to the jury, and their finding on the subject is conclusive. There are no errors of such weight as to call for a reversal, and the judgment should be affirmed, with costs.
Present: GILDERSLEEVE, MACLEAN and SEABURY, JJ.
Judgment affirmed, with costs.