## Facts

- A landlord owned commercial premises at 711–715 Kings Highway in Kings County, New York.
- The landlord and a corporate tenant executed a written 15-year lease commencing July 1, 1966.
- The lease required the premises to be used as a motion picture theatre.
- The tenant’s certificate of incorporation limited its corporate purposes to marine-related activities, including repairs and building/equipping boats and vessels.
- The tenant paid a $5,000 security deposit; the landlord alleged the lease was otherwise executory and tendered return of the deposit.
- The landlord sued for a declaration that the lease was invalid or, alternatively, rescission and an injunction barring the tenant from asserting rights under the lease, arguing the lease and intended theatre operation were beyond the tenant’s corporate powers.
- The tenant moved to dismiss for failure to state a claim under CPLR 3211(a)(7), or alternatively for summary judgment.

## Issues

1. Whether an outsider to the corporation (a landlord) may obtain rescission or a declaration invalidating an otherwise lawful lease by alleging the tenant corporation lacked charter power to operate the contemplated business under N.Y. Business Corporation Law § 203.
2. Whether the landlord could invoke ultra vires to avoid performance because the lease was allegedly executory (other than the security deposit).

## Decision

- The court granted the tenant’s CPLR 3211(a)(7) motion and dismissed the complaint for failure to state a cause of action.
- The court held that N.Y. Business Corporation Law § 203 bars invalidation of an otherwise lawful corporate act or transfer solely due to lack of corporate capacity or power, except in specified statutory proceedings.
- The landlord’s suit did not fall within the statutory exceptions (shareholder action to enjoin, corporate action against officers/directors, or Attorney General proceeding).
- The executory character of the lease did not permit the landlord to invoke ultra vires to unwind or enjoin the lease.

## Legal Principles

- Under N.Y. Business Corporation Law § 203, an otherwise lawful act or property transfer involving a corporation is not invalid merely because the corporation lacked capacity or power, except in narrowly defined actions authorized by statute.
- Ultra vires is not available to a private contracting counterparty as an affirmative basis to rescind or invalidate an otherwise lawful contract outside the statutory exceptions.
- The statutory restriction applies even when the challenged contract is executory.

## Conclusion

The court dismissed the landlord’s attempt to void a lease on ultra vires grounds, holding that N.Y. Business Corporation Law § 203 limits who may challenge corporate acts for lack of power and does not permit an outsider to rescind or enjoin an otherwise lawful, even if executory, lease on that basis.


711 Kings Highway Corp. v. F.I.M.’s Marine Repair Serv., Inc., 51 Misc. 2d 373, 273 N.Y.S.2d 299 (Sup. Ct. Kings Cnty. 1966)