Story Case

The American State Bank was incorporated for the purpose of conducting a banking business in the city of Louisville, Kentucky. It leased a building from Mr. G. J. Hoffman in which the banking institution was to be established. The following contract was signed and delivered to Mr. Hoffman by the officers of the banking corporation:

"The American State Bank, by its officers and agents, agrees to pay to Mr. G. J. Hoffman, his heirs or administrators, the sum of $150 per month as rental for the building and premises, in which the American State Bank is to conduct its business, for a period of two years.

American State Bank,

By, H. G. Walling, President."

A few days after the foregoing agreement was signed and delivered, the officers of the bank found a better location than the one in question. They, therefore, refused to take the building from Mr. Hoffman. Mr. Hoffman then brought this action against the bank for damages. The officers of the bank contended that no action could be brought upon the foregoing contract, because it was not executed under seal. Under the foregoing circumstances, what should be the decision of the Court?

Ruling Court Case. Quackenbos Vs. Globe & Rutgers Fire Ins. Co., Volume 177 New York Reports, Page 71

This action was brought upon a written contract, which had been signed by the president and secretary of the company, and sealed with the corporate seal. Upon some proof of irregularity in its execution, the company asked the Court to refuse to admit this contract as evidence in the case.

The Court said, in an opinion by Mr. Justice Martin: "It is an ancient and well established rule of law, that where the seal of a corporation is affixed to a contract or written instrument, to which such corporation is a party, and it is signed by the president and secretary or other proper officers, it will be presumed that the officers did not exceed their powers, as the seal is prima facie proof that it was attached by proper authority, and it lies with the party objecting to its execution, to show that it was affixed surreptitiously or improperly."

Judgment was given for the plaintiff.

Ruling Law. Story Case Answer

Formerly, it was thought that a corporation could do no corporate business, except that it be under seal. It was thought that all its contracts were invalid unless sealed with the corporate seal. This notion, however, no longer prevails. A corporation is not compelled to use a seal where a natural person need not use one. Conversely, a corporation must use a seal in all cases where a natural person would be required to use a seal. In the Story Case, the contract is binding upon the corporation, even though not under seal. Accordingly, judgment would be given for G. J. Hoffman.