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Elblum Holding Corp. v. Mintz

Decided: August 18, 1938.


On motion to dismiss complaint for lack of authority to file same and to review rule made denying motion to dismiss complaint.

For the appellant, Israel B. Greene.

For the appellee, Milton M. Unger.

Before Justices Trenchard and Perskie.


The opinion of the court was delivered by

PERSKIE, J. 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 23d, 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 rehearing denied.

Defendant, upon the authority of Key v. Paul, 61 N.J.L. 133; 38 A. 873, 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 p. 234); 179 A. 266. At all events, we shall assume that the right of appeal does exist and proceed with our ...

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