Brand v. Godwin — 29 N.Y. St. Rep. 143

Majority

p. 143

John E. Brand, Resp’t, v. Parke Godwin, App’lt.^[1]

(New York Common Pleas, General Term,

Filed February 3, 1890.)

Headnote

1. Corporations—Laws 1875, chap. 611—Liability of director for false report.

A director is an officer of a corporation, within the meaning of § 21 of chapter 611, Laws of 1875, and, therefore, severally liable for debts owed by it at the time of filing a false report.

2. Same—Defense.

The officer’s personal innocence of fraudulent intent, and ignorance of the truth or falsity of the statements made in-the report, can furnish no defense.

3. Contract—Services—Incompetency.

The contract between plaintiff and the company provided that in case of incompetency or continued illness, or decrease of physical or vocal faculties so as to prevent service for over two weeks, the contract could be canceled without any claim for damages, and that the directors should be the sole judges of the fact. Held, that when the reason for a discharge under this provision is “ incompetency,” there must be something more than arbitrary caprice to authorize the act, and that the court could review the action of the directors, notwithstanding the provision making them sole judges.

Appeal from judgment of the general term of the city court of New York, affirming judgment in favor of plaintiff.

Nelson Smith, for app’lt; Isaac N. Falk, for resp’t.

The general term of the city court affirmed the judgment in plaintiff's favor, without feeling called upon to add anything to the very complete and satisfactory opinion delivered by the learned judge who tried the case without a jury. I have examined such opinion, and think that it considers and correctly disposes of every question both of law and fact The judge found as matter of fact, on sufficient evidence, that the report of the American Opera Company, signed by defendant as a director, was false in material particulars. As shown in such opinion, the defendant was clearly an officer of the company, within the meaning of § 21 of the act of 1875, and, therefore, severally liable for debts owed by it at the time of the filing of such false report. The remedy against the corporation has been exhausted by. judgment and execution, and the indebtedness established de nova in the present

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action. The case therefore comes clearly within the statute. Counsel for appellant claims that defendant’s personal innocence of fraudulent intent, his ignorance as to the truth or falsity of the statements made in the report, should operate as a valid defense. The authorities cited on this point in his elaborate brief are, in the main, cases of a criminal, or quasi criminal nature, such as prosecutions for the sale of noxious drugs or impure milk or oleomargarine and the like. In all criminal proceedings guilty intent is the very gist of the matter, and naturally all the proof and discussion relate directly or indirectly to this central question. But these authorities have no application here. The act of 1875 does not make an infringement of this provision a misdemeanor; it grants a remedy by civil action. The purpose of the section under which this action was brought was to provide for the furnishing by public records of correct information as to the financial status of corporations. Its intent was, further, to put upon any person who assumed to sign a report as an officer the responsibility of ascertaining at his' peril the truth or falsity of its contents, and to provide any individual who might be misled by false information so promulgated an indemnity for his loss by action over against the fraudulent or negligent officers. The strictest and most literal construction could not obscure such legislative intent, and the case at bar is clearly an action of the class the framers of the section had m mind.

We think the learned judge correctly disposed of the defense set up under rule 6 of the contract between plaintiff and the corporation. A portion of such rule is as follows:

“ In the event either of incompetency, or of such continued illness or decrease of physical or vocal faculties as to prevent one from doing service for a period of more than two weeks, the company may in its discretion cancel or annul the contract with the party in question, without being subjected to any claims for damages. The vocal and musical directors shall be the sole judges of the fact and extent of the incompetency in applying this rule."

“ Incompetent ” is certainly not a synonym for “ unsatisfactory." If the contract had provided that in case plaintiff proved “ unsatisfactory " he might be summarily dismissed, the company would have been justified m dispensing with his service at any time, for any cause, or no cause. Glenny v. Lacy, 16 N, Y. State Rep., 798.

But where the reason given for the discharge is “ incompetency," there must be something more than arbitrary caprice to authorize the act One man may be more competent for a task than another, yet both may be competent. One vocalist may sing the baritone part of an opera better than another, yet neither be “ incompetent/- Webster, illustrates the use of the word “incompetent" by the phrases “mcompetency of a child for hard labor" “ mcompetency of a lunatic for intellectual labor.” In the sense suggested by such illustrations the plaintiff was not “ incompetent ” at all. A lunatic is not at all able to perform intellectual labor. Plaintiff had sung his parts acceptably, and received his salary without demur, for a period of seven weeks. This is undis

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puted, and, under such state o£ affairs it was clearly right to hold that some allegation and proof of facts tending to show actual “ incompetency ” was required, in order to sustain the action of the board. Although the vocal and musical directors are, by the rule, made the sole judges of the fact and extent of the “ incompetency, ” the court will, nevertheless, assert the right of reviewing their action, in the interests of justice, where no facts appear which tend to render the charge of “ incompetency ” plausible. They could not make plaintiff “incompetent” by agreeing to pronounce him so. All the circumstances point to an attempt, through an ambiguous clause in the instrument, to get rid of the employee who was, faithfully performing his contract, because it had become inconvenient to continue the payment of his wages.

The above' additional remarks are to be taken in connection with the opinion of the trial judge, in the reasoning of which I concur.

The judgment appealed from should be affirmed, with costs.

Daly and Bischoff, JJ., concur.