Elblum Holding Corp. v. Mintz

• Decision Date: 20 August 1938
• Docket Number: No. 421.,421.
• Citation: 120 N.J.L. 604,1 A.2d 204
• Parties: ELBLUM HOLDING CORPORATION v. MINTZ.
• Court: New Jersey Supreme Court

1 A.2d 204

120 N.J.L. 604

ELBLUM HOLDING CORPORATION

v. MINTZ.

No. 421.

Supreme Court of New Jersey.

Aug. 20, 1938.

Action by the Elblum Holding Corporation against Harry Mintz for rent due under leases. From an order discharging a rule to show cause why the complaint should not be dismissed for want of authority in the president of the corporation to file the complaint, the defendant appeals.

Affirmed.

Argued May term, 1938, before TRENCHARD and PERSKIE, JJ.

Israel B. Greene, of Newark, for appellant.

Milton M. Unger, of Newark, for appellee.

PERSKIE, Justice.

Does a president of a corporation, as such, have authority to employ and authorize an attorney to institute suit at law in behalf of his corporation?

Plaintiff is a corporation engaged in the real estate business. Its stock is owned equally by two families who are at cross-purposes with each other. An executive committee, consisting of the president, Abraham Elgart, a member of one faction, and the treasurer, Harry Mintz, a member of the other faction, manages the business during the intervals between meetings of the board of directors. The present suit was started at the behest of the president without official sanction of the directors. It is an action against the treasurer of the corporation in his individual capacity, upon two leases. The allegations are that the defendant held over after the expiration of one lease, and at the time of suit, on November 23, 1937, owed the corporation $11,400 in rent. The second lease in suit was for an office, upon a month to month basis, and it is alleged that $270 rent is due thereon. After service of the complaint the defendant obtained a rule to show cause from Mr. Justice Parker why the complaint should not be dismissed for want of authority to file same. Affidavits were submitted. Defendant's affidavits showed, in substance, that neither the board of directors nor the executive committee authorized the bringing of the suit, and that the by-laws of the corporation do not expressly sanction such action by the president. Affidavits by the president of the corporation, on the other hand, disclose that the corporate stock is equally divided between the Elgart and Mintz families; that it is impossible to secure anything except an equally divided vote upon controversial corporate matters as between the equally contracted interests of the respective families; that defendant owed rent and that his failure to pay seriously hampered and prejudiced the corporation since it had substantial indebtedness by way of a $760,000 mortgage; a yearly tax bill of approximately $26,000; insurance premiums of about $7,000, and an indebtedness to banks in the sum of some $18,000. The president of the corporation also stated the impossibility of securing corporate sanction to bring the suit; and alleges that he always managed the properties in question, and because of the seriousness of the situation concluded that it was necessary to take action. Pending the determination of the question raised by the rule to show cause, defendant was given leave, without prejudice or waiver of the right of either of the parties, to file an answer and counter-claim. Subsequently, the rule to show cause was discharged, and a petition for re-hearing denied.

Defendant, upon the authority of Key v. Paul, 61 N.J.L. 133, 38 A. 823, appeals from the disposition thus made by Mr. Justice Parker.

First. We are met, in limine, with a procedural question. Plaintiff challenges defendant's right of appeal. That challenge, exclusive of plaintiff's right to bring this suit on the theory of a "course of dealing" which, it is claimed, formed no part of the determinations under review, is rested upon the premise that the order sought to be reviewed was a discretionary one and not involving the substantial rights of the parties. That premise is supported with the observation "that defendant may still submit his defense and have his day in court, and if after final judgment is rendered against him, may then appeal from such finding." While there is much force to the point thus made, and while Mr. Justice Parker was of the mind that the application for a stay was based upon "purely technical" grounds, the meritorious question involved was presented, argued, considered and determined. A theory of a suit so adopted and pursued is binding upon the respective parties. Cf. Lastowski v. Lawnicki, 115 N.J.L. 230, at page 234, 179 A. 266. At all events, we shall assume that the right of appeal does exist and proceed with our consideration and determination thereof upon the merits.

Second. We desire at the outset to mark the fact that the question here requiring decision is one of first impression with us. Our courts have not heretofore, so far as industry of counsel and this court reveal, decided whether a president of a corporation, qua president, has the authority to employ and authorize an attorney to institute a suit in behalf of his corporation. Nor is there any concordance in the decisions of our sister states or in the writings of eminent and acknowledged scholars upon the subject.

Most generally stated there is, on the one hand, a respectable body of authority that, apart from the acts done by a president of a corporation in the course of its ordinary business, of acts done in pursuance of clothed, apparent authority, of acts done as incidental to his office, the powers of a president of a corporation to do a particular act depends upon the powers conferred upon him, either by statute, or by charter of his corporation, or by the by-laws, or by the directors thereof. And the mere fact he is president, without more, does not imply that he has any greater power than any other director. The following are some of the authorities so holding: Cook on Corporation, vol. 4 (8th Ed.) sec. 716; Ballantine Private Corporations, sec. 105, p. 341; Ney v. Eastern Iowa Telephone Co....