Holmes v. Willard

• Decision Date: 02 December 1890
• Citation: 25 N.E. 1083,125 N.Y. 75
• Parties: HOLMES, BOOTH & HAYDENS v. WILLARD.
• Court: New York Court of Appeals Court of Appeals

125 N.Y. 75

25 N.E. 1083

HOLMES, BOOTH & HAYDENS

v.WILLARD.

Court of Appeals of New York.

Dec. 2, 1890.

Appeal from supreme court, general term, first department.

Action by Holmes, Booth & Haydens, a corporation, against Samuel P. Willard, its former treasurer. A judgment for defendant, entered on the dismissal of the complaint at the trial, was affirmed on appeal to the general term; and from the judgment of affirmance plaintiff appeals.

Wm. H. Harris, for appellant.

Marshall P. Stafford, for respondent.

EARL, J.

The plaintiff is a Connecticut corporation, authorized by its charter to exercise its corporate powers ‘for the purpose of manufacturing and dealing in all kinds of brass, copper, and German silver goods, plated ware, and metals composed wholly or in part of copper, brass, or German silver, and all articles composed in whole or in part of metal which it shall deem expedient, and to do such other things as are incident to the prosecution of said business, and to exercise such mercantile powers as may be convenient and necessary for the successful prosecution of said business;’ and there was no other description of or limitation on the business which it could engage in. Its directors were authorized to manage its affairs, and its stockholders could at any legal meeting make, alter, or repeal the by-laws which it was authorized to have for the management of its business. On the 7th day of July, 1886, and for some years prior thereto, the defendant was the treasurer and general manager of the corporation. The directors took no part in the management of the affairs of the corporation, and habitually held no meetings, except annual meetings, and they intrusted the entire management to the defendant, permitting him to use his uncontrolled discretion in and about the corporate business. On the 1st day of May, 1885, and until some time after July, 1886, the Forest City Carbon Manufacturing Company was an Ohio corporation, located and doing business at Cleveland, and it was engaged in manufacturing carbons for electric lighting purposes. At the former date the plaintiff entered into a written contract with that corporation by which, during five years, it was to receive and sell at prices stipulated all the carbons manufactured by the carbon company, and the latter company was not to sell any of the carbons manufactured by it to any other party, and the plaintiff was not to deal in any other carbons, and was to use all its facilities to in troduce and extend the sale of such carbons. That contract was executed on behalf of the plaintiff by the defendant without, so far as appears, any previous action of its board of directors. The contract did not stipulate for any financial aid to be furnished by the plaintiff to the carbon company. Under that contract the plaintiff received and sold the carbons, and the dealings therein were profitable to it. The market for them was large and constantly increasing. The carbon company was not able to supply the demand for the carbons with the facilities which it then possessed. There was finally a consultation between the president of the carbon company and the defendant as to some method by which sufficient carbons might be delivered to the plaintiff to supply its orders for the same, and it was arranged that the plaintiff should extend financial aid to the carbon company to enable it to increase its plant and facilities for production. In pursuance of that arrangement, and for that purpose only, on the 7th of July, 1886, the carbon company made its promissory note to the order of the plaintiff for $10,000, and the defendant, as treasurer, indorsed thereon the name of the plaintiff, and procured the note to be discounted, and took the proceeds and remitted them to the carbon company, to be used for the purpose mentioned. The plaintiff was ultimately compelled to pay that note, and has not been able to collect any part thereof from the carbon company. The plaintiff, claiming that the defendant was unauthorized to indorse its name upon that note, and to company, has brought this action against him to recover damages for his unauthorized act. There is no allegation, proof, or claim of any fraud or intended wrong on the part of the defendant, and the plaintiff bases its claim to recover in this action solely on the ground that the defendant acted without authority.

There can be no doubt that dealing in the carbons was ultra vires of the plaintiff. It was not incident to, nor, so far as appears, convenient or necessary for the successful prosecution of its legitimate business. It was in fact entirely foreign to the business for which it was chartered. It could not lawfully engage in this foreign business simply because it could make a profit therein. A corporation may foster its legitimate business by all the usual and appropriate means. But it cannot, under the pretense of fostering, engage in transactions entirely ultra vires. When the...