Law School Case Brief
711 Kings Highway Corp. v. F.I.M.'s Marine Repair Serv., Inc. - 51 Misc. 2d 373 (Sup. Ct. 1966)
N.Y. Bus. Corp. Law § 203, provides as follows: that no act of a corporation and no transfer of property to or by a corporation, otherwise lawful, shall be invalid by reason of the fact that the corporation was without capacity or power to do such act or engage in such transfer except that such lack of capacity or power may be asserted (1) in an action brought by a shareholder to enjoin a corporate act or (2) in an action by or in the right of a corporation against an incumbent or former officer or director of the corporation or (3) in an action or special proceeding brought by the attorney-general. By virtue of this statute, the ultra vires doctrine may not be invoked even though the contract that is claimed to be ultra vires is executory.
The owner of premises 711-715 Kings Highway in the County of Kings, City of New York, entered into a written lease agreement with a tenant whereby the property was leased to the tenant for a period of 15 years commencing July 1, 1966. The tenant's lease provided that the premises were to be used as a movie theater. The tenant's certificate of incorporation, however, stated that it was formed to carry on marine activities. Plaintiff landlord brought an action asserting that the lease was invalid because the operation of the motion picture theater was outside of the authority conferred by defendant tenant's corporate charter. The tenant filed a motion to dismiss for failure to state a cause of action. With the exception of a security deposit of $ 5,000 paid by the tenant to the landlord pursuant to the lease agreement, the lease remained wholly executory.
Where plaintiff landlord contended that a lease was invalid, should the court grant defendant tenant's motion to dismiss the landlord's complaint for insufficiency?
The court stated that the complaint had to be dismissed for failure to state a cause of action because under N.Y. Bus. Corp. Law § 203, a valid transfer of property could not be made invalid just because the tenant's corporation was without capacity to operate a movie theater. The court stated that the landlord did not fall within one of the exceptions listed in § 203 and that by virtue of § 203 the ultra vires doctrine could not be invoked. The court granted defendant tenant's motion for judgment dismissing the complaint for insufficiency.
Access the full text case
Not a Lexis Advance subscriber? Try it out for free.
Be Sure You're Prepared for Class