Mutual Life Insurance v. Granniss ( 1907 )

Giegerich, J.

The complaint sets forth five separate causes of action, to the third and fourth of which the defendant has interposed a demurrer upon the ground of the insufficiency of the facts stated. The third cause of action, stated in outline, alleges that in the year 1904 the defendant, being then a director and vice-president of the plaintiff company, made or authorized a. payment of $2,500 - out of the plaintiff’s moneys for the purpose of defraying the expenses of a campaign conducted by a political party for the election of its nominees, and that such payment was unlawful and a waste of the assets of the plaintiff, and was made or authorized by the defendant through want of faithfulness and ordinary vigilance and diligence in the discharge of his duties to the plaintiff, “ and that said payment was made without authority or authorization by the plaintiff.” The allegation that the payment was made without authority or authorization is the one challenged in the argument, the claim being made that if there was subsequent ratification by the plaintiff, then no cause of action exists against the defendant, and that it is a necessary part of the plaintiff’s case to plead the absence of such ratification. It is established by the decisions of this State, however, that an allegation - of authority is sustained by proof of ratification, ratification by a principal of an unauthorized act of an agent having a retroactive efficacy, and being equivalent to an original authority. Hoyt v. Thompson, 19 N. Y. 207, 219; Merritt v. Bissell, 84 Hun, 194. The latter case was reversed in 155 N. Y. 396, but upon the ground that the evidence did not show a ratification, and not upon the ground that the evidence offered in proof of ratification was inadmissible under the allegation of authority. On behalf of the defendant an attempt is made to distinguish and evade the application of the authorities just cited to the case presented in these pleadings on' the ground that the averment here is not that there was authority, hut that there was not authority; but I cannot recognize any distinction. Ratification is a form of authorization, and consequently an allegation that' there was no authorization must be deemed to be an allegation that there was- no authorization in any of its forms, whether previously given or subsequently given, and operating; retroactively. The demurrer to the third cause of action is, therefore, overruled, with leave to the defendant to answer within twenty days. The fourth cause of action, which is also demurred to, alleges that the defendant, as director and vice-president as aforesaid, affixed his signature to a certain voucher admitting the receipt by one Robert Olyphant from the moneys of the plaintiff of the sum of $2-5,000, and that the defendant by so signing the voucher intended and did cause the amount mentioned to be paid to Olyphant, knowing at the time that “ the said Olyphant was not authorized by the plaintiff to receive or disburse the said sum or any other moneys of the plaintiff on its behalf, nor was the plaintiff indebted to the said Olyphant,” and that by reason of the defendant’s act the money was lost to the plaintiff. It is argued that the portion of the averment contained in the quotation marks just above is incomplete and not sufficient to show any wrongdoing on the part of the defendant, and that it might well be that Olpyhant was neither authorized to receive or disburse moneys of the plaintiff on its -behalf nor possessed of any claim against it as a creditor, and still it might be entirely proper that money be paid to him by the plaintiff or on behalf of the plaintiff to be by him paid over to some creditor of the company or otherwise properly disposed off If, for instance, he had been acting as agent on behalf of some principal from whom the board of directors of the plaintiff had properly and -within the scope of their powers purchased securities or supplies or made any other investment or purchase, the payment to him as such agent would have been entirely lawful, and the mere fact that the investment resulted in a total loss or the mofchandise was not delivered would not have the effect of making the defendant liable. The demurrer to this cause of action is well grounded and should be sustained, with leave •to the plaintiff to amend within twenty days. Demurrer disposed of as indicated, without costs. Code Civ. Pro., § 3232; Nat. Gum & Mica Co. and A. Wilhelm Co. v. MacCormack, N. Y. L. J , June 18, 1907.

Ordered accordingly.