H. Horowitz, Inc. v. Weehawken Trust & Title Co.

• Decision Date: 15 March 1932
• Citation: 159 A. 384
• Parties: H. HOROWITZ, Inc. v. WEEHAWKEN TRUST & TITLE CO.
• Court: New Jersey Supreme Court

159 A. 384

H. HOROWITZ, Inc.

v. WEEHAWKEN TRUST & TITLE CO.

Supreme Court of New Jersey.

March 15, 1932.

Action by H. Horowitz, Inc., against the Weehawken Trust & Title Company. Motion to strike out part of defendant's answer as sham and part as frivolous.

Motion denied.

George Rothstein, of Union City, for plaintiff.

Dippel, Davis & Stewart, of Union City, for defendant.

ACKERSON, C.

The complaint seeks to recover from the defendant bank the balance of a deposit made with it by Harry Horowitz in the name of the plaintiff before its incorporation, which balance, the plaintiff claims, is $1,858. Defendant's answer admits the deposit, but denies the amount of the balance, insisting that it is only $208, which amount the defendant is willing to pay to the plaintiff.

Plaintiff now moves to strike out as sham that part of the answer which alleges that there is only a balance of $208 standing to the credit of the plaintiff, and to strike out as frivolous that part of the answer which alleges a willingness to pay over the alleged balance of $208.

Taking up the last criticism first, we must remember that the complaint charges that defendant refuses to pay plaintiff the amount of $1,858. In admitting this, the defendant is certainly justified in pleading what it claims to be the true balance, and its willingness to pay it, without having such pleading censured as frivolous.

The real question raised by this motion is whether the defendant's claim that the real balance is only $208 is sham, and this turns upon whether two checks aggregating $1,050 are properly charged against the account in question.

From the affidavits submitted with this motion, the following facts should be noted in their chronological order: On November 19, 1931, Harry Horowitz went to the defendant's place of business with Anna Sobel, a promotor of and now the president and treasurer and principal stockholder of the plaintiff corporation, and opened a checking account in the name of "H. Horowitz, Inc.," with the deposit of a certified check drawn by Anna Sobel on another bank. Harry Horowitz stated to the defendant's treasurer, in the presence of Miss Sobel, that he was the secretary of "H. Horowitz, Inc.," a corporation, and that he was the only one authorized to sign checks drawn on the account. The certificate of incorporation of "II. Horowitz, Inc.," was not signed and executed until two days later on November 21, 1931, and filed in the office of the secretary of state on November 24, 1931. On November 24, 1931, three checks were presented to the defendant by other banks where they had been deposited by the payees thereof. One was for $50, dated November 24, 1931, payable to Joseph A. Harnd and signed "H. Horowitz"; one for $50, dated November 24, 1931, payable to George Rothstein and signed "H. Horowitz," and one for $42, dated November 23, 1931, payable to James Orlando and signed "H. Horowitz." As the three checks bore the individual signature of H. Horowitz and he had no personal account with the defendant, its treasurer directed the bookkeeper to write the words "II. Horowitz, Inc." above the signature and the word "secretary" below, on each check and they were charged to the account which had been opened as aforesaid.

On November 25, 1931, Mrs. H. Horowitz personally presented to the defendant a check for $150, payable to "cash" and signed "H. Horowitz." Defendant's bookkeeper, in the presence of Mr. Horowitz, informed the defendant's teller that there was no individual account and wrote "H. Horowitz, Inc." above the signature, and Mr. Horowitz then individually indorsed the cheek and was paid the $150 in cash. On November 30, 1931, at about 12 o'clock noon, Mr. Horowitz personally presented another check for $1,500, payable to "cash" and signed "H. Horowitz." At the direction of defendant's teller, Mr. Horowitz added "Inc." after the signature and again wrote his name "H. Horowitz" underneath, indorsed his name on the back, and was paid the $1,500 in cash.

Afterwards on November 30, 1931, at 6:15 p. m., the defendant was served with a notice signed "H. Horowitz, Inc., by Anna Sobel, Incorporator," which informed defendant that the plaintiff was incorporated November 23, 1931, that no organization meeting had been held as yet, and that defendant was not to honor any checks against the account which had been opened in the name of "H. Horowitz, Inc.," until further instructed by resolution of the company, and that the defendant would be held strictly accountable for any moneys on deposit in the name of "H. Horowitz, Inc." Defendant's affidavits allege that this was the first notice it had received that "H. Horowitz, Inc.," had not as yet been fully organized and that Harry Horowitz was not its secretary and not authorized to sign checks against the aforesaid account. All of the abovementioned checks had already been charged against said account.

On December 1, 1931, the organization meeting of the plaintiff corporation was held and its officers elected, and at this meeting a resolution was adopted ratifying and confirming the deposit previously made by Harry Horowitz with the defendant, in opening an account in the name of "H. Horowitz, Inc.," and the issuance and payment of the first three checks hereinbefore mentioned in the following language:

"Whereas, one Harry Horowitz has received the sum of $2000.00 for stock subscribed in this company, and has deposited said sum of money with the Weehawken Trust and Title Company of Union City, in the name and to the credit of this company,

"Be it therefore resolved that such deposit with the aforesaid bank to the credit of this company be and the same is hereby confirmed and ratified.

"'Whereas it has been brought to the knowledge of this company that the said Harry Horowitz has, without the authorization or consent of this company, issued checks upon the monies on deposit to the credit of this company in the Weehawken Trust and Title Company, amount which checks are: One to the order of George Rothstein in the sum of $50.00. One to the order of Joseph A. Harnd in the sum of $50.00. One to the order of James Orlando in the sum of $42.00.

"'Be it further resolved that the issuance of the aforementioned checks only, be and they are hereby ratified and confirmed and acquiesced in, but this ratification and confirmation shall not be construed or interpreted to be any ratification or confirmation of any authority or right on the part of said Harry Horowitz to draw upon the funds of this corporation.'"

It is to be noted from what has already been said that, at the time the deposit contract was made on November 19, 1931, the plaintiff corporation was not in existence. By the great weight of authority, however, a contract made by the promoters of a corporation before it was formed becomes the contract of the corporation, so that it is both entitled to the benefit thereof and liable thereon, if it expressly or impliedly ratifies and adopts the same after it comes into existence, provided it is a contract which the corporation has the power under its charter to make. 14 C. J. 257. Whether we call the act by which the corporation becomes bound upon such contracts a...