Cameron v. Seaman

Headnote

Trustees — of corporations formed under chap. 40, Laws of 1848 — liability of — Failure to publish annual reports — Extending time of payment of debt — effect of.

A failure to publish, the annual report required by the act of February 17th, 1848, entitled “An act to authorize the formatiou of corporations for manufacturing, mining, mechanical or chemical purposes,” creates the same liability, as a failure to make the report or to file it would have done. It was the intention of the legislature to make it the duty of the trustees to cause all those acts to he done.

Although the statute is a penal one, and will not he extended in its operation by construction, yet the same rules of interpretation apply to it as to statutes not penal. The legislative will governs in all cases.

The extent of the liability is “for all debts then existing and for all that shall he contracted before such report shall be made,” and it falls upon those in office when the default occurred, although contracted before they became trustees. The liability of the trustees is not affected by the recovery of judgment against the corporation, or by extending the time for the payment of the debt without their consent.

Appeal from a judgment entered upon the decision of the justice, on a trial by the court without a jury.

This action was brought against the defendants to recover a debt due to the plaintiffs from the Sbenandoab Mining Company (a corporation organized under tlie general act of the legislature in relation to manufacturing and mining corporations, passed February 17th, 1848), for failure on the part of the trustees of said company to file or publish the annual report required by section 12 of said act, within twenty days from January 1st, 1874, or within twenty days from January 1, 3875. The place where the business of the company was carried on was East Fishkill, Dutchess county. The newspaper published nearest said place of business was the Fishkill Journal, published at Fishkill, in said county. The report of the said trustees for 1874 was filed in the clerk’s office on the twenty-second day of January, and published in the Poughkeepsie Eagle, a newspaper published in the city of Poughkeepsie, on the twenty-fourth day of January, and was not published in any othei ”

newspaper. In so tiling and publishing, the trustees intended in good faith to comply with the statute concerning the making, tiling and publishing of the annual reports of said companies. The report of said company for 1875 was not signed by any persons who were trustees of the company. The persons who signed said report hav ing been elected trustees in June, 1873, and at the election held in September, 1874, a new board had been elected, none of whom had made any report for January, 1875. The defendant Henry A. Seaman was elected a trustee in September, 1874, and claimed on the trial that he had resigned his office. The court decided that he was still a trustee. The plaintiffs’claim, for which this suit was brought, was for lumber sold the company, between January 29, 1873, and August 20, 1873. On March 26, 1874, the plaintiffs took the notes of the company at four mouths, for the whole amount of the claim then unpaid, which notes the plaintiffs procured to be discounted at the bank, and credited the company with the proceeds, thereby balancing the account. When the notes fell due the plaintiffs took them up, and afterwards obtained judgment thereon against the company.

By this statute, the making of the report is the only act which is required to be done within the twenty days, and for the failure to do which the penalty is imposed upon the trustees. The publishing and filing are acts to be done after the report is made. No time is absolutely fixed within which they must be done. It may be impracticable, in certain cases, to publish the report within the twenty days, as where the nearest newspaper is only issued monthly, and the publication day is after the twenty-first of the month. So as to the filing, the report may have to be sent to a distant clerk’s office, and require several days for its transmission. Yet the trustees have the whole twenty days within which to make their report. Both the publication and the filing are matters not wholly within the control of the trustees. In the one case the printer and in the other the county clerk, must do the act. Therefore, when the statute comes to impose the penalty upon the trustees, it is when they shall fail to do so, that is, fail to do what they are required to do, viz., to make the report, and not when they shall fail tc

canse to be done, acts, which from their nature must be done by others than themselves. This construction is further supported by the concluding words by which they are made liable for debts contracted before the report shall be made; not made, filed and published. The publication in the Poughkeepsie newspaper was sufcient. The company had a “ place where the business of said company was carried on,” in the city of Poughkeepsie. The fact that some one published a paper in the little village of Fishkill (a little nearer to the iron mine of the company than Poughkeepsie), which paper was so obscure that the trustees of this company never heard of it, cannot have the unreasonable and illogical effect of making the trustees personally liable for all the debts of the company. By taking the notes of the company on time, having them discounted, and balancing the account, the plaintiffs canceled the original debt, and waived any claim they may have then had against the trustees. (Fisher v. Marvin, 47 Barb., 159 .) Their liability, if any, was of the nature of a suretyship. {Moss v. MoOuttough, 5 Hill, 133 ; Miller v. White, 50 N. Y., 137 , 141, 142.) And the giving time to the principal debtor released them. {Hart v. Hudson, 6 Duer, 294 .) There - was no ground for recovery against the defendant Henry A. Seaman. He was not a trustee in January, 1874. Henry A. Seaman, as soon as he heard of the action of that meeting refused to serve, and never did serve as a trustee. The old board of trustees held over. He had the right to resign, from which it follows he had the right not to accept. {Chandler v. Hoag, 3 Hun, 613 ; since affirmed by Court of Appeals.) Even if Henry A. Seaman duly elected, and bound to be a trustee nolens volens, yet he is not liable in this case, because the debt was contracted before he became a trustee. {Shaler Quarry Co. v. Bliss, 27 N. Y., 297 ; Gat rison v. Howe, 17 id., 458 ; Boughton v. Otis, 21 id., 261.)

The company failed to comply with the statute in January, 1874. The report of 1874 was not filed in the clerk’s office until January twenty-second. East Fishkill was named in the certificate of incorpciat’on as the town where the business of the company was carried on, and was the place of business of the company, within the meaning of the

act of the legislature. {McHarg v. Eastman, 4 Robt., 635 ; West. Transportation Oo. v. Saheu, 19 N. Y., 408 ; Oswego Starch Go. v. Holloway, 21 id., 453,454 .) There was no newspaper published in East Fishkill, and the Fishkill Journal was the newspaper published nearest the place of business of the company. They were required to publish the report in this newspaper. They had no nore right to publish in the Poughkeepsie Eagle than in a newspaper in Buffalo or New York city. Their failure to comply with the law made “ all the trustees jointly and severally liable for all debts of the company then existing.” {Garrison v. Ilowe, 11 N. Y., 458 ; Shaler dé Hall Quarry Go. v. Bliss, 27 id., 297; Bough-ton v. Otis, 21 id., 261; McHarg v. Eastman, 1 Robt., 137; Shaler dé Hall Quarry Go. v. Brewster, 10 Abb. Pr., 467 ; Doming v. Pulleston, 55 N. Y., 655 ; Miller v. White, 8 Abb. Pr. [N. S.], 55.) It is no answer for the defendants to say that the report was made within the twenty days. The law intended the report for some purpose, and what purpose could be accomplished by permitting the trustees to sign the report and then keep it in' their pocket for an indefinite period. _ The language of the statute is, “ shall make a report * * * which shall be published * * * and filed * * * and if any of said companies fail so to do the trustees shall be liable,” etc. The failure to which the penalty is attached is not only the making but the publishing and filing. The debt due to the plaintiffs was an existing debt on the 21st day of January, 1874. The lumber had all beeu sold aud delivered prior to September 1st, 1873, and had never been paid for. It is true the plaintiffs had taken the company’s draft or acceptance for a part of the debt, but this was only the promise of the company to pay at a future day. It did not extinguish or pay the debt; and the taking of the note of the company for the debt does not relieve the trustees. {Jones v. Barlow, 6 Jones & Spencer, 162 ; Demivg v. Pulleston, 3 id., 309 ; S. C., 55 N. Y., 655 ; McHarg v. Eastman, 1 Robt., 137.) In Jones v. Barlow, after the default of filing the report, the plaintiff took ten notes of the company for his debt* one of which was not due at the commencement of the action. The court held that the remedy against the trustees is distinct and concurrent, and not inconsistent with the other remedies in favor of the creditors against either corporation and stockholder. lie

may take notes of the company or sue the company or stockholders, and if he does not collect can still sue the trustees. It was claimed on the trial that the defendant Henry A. Seaman was only liable for debts contracted while he was trustee. There is nothing in the law that warrants such a construction, and the cases in the Court of Appeals effectually dispose of such a defense. (Garrison v. Howe, 17 N. Y., 458 ; Boughton v. Otis, 21 id., 261; Shaler <& Tlall Quarry Co. v. Bliss, 27 id., 297; Miller v. White, 8 Abb. Pr. [N. S.], 55.) In Boughton v. Otis, Judge Combtogk says (page 264): “ The general policy of the act is immunity from personal liability, but this is attended by certain conditions demanding the personal observance of the trustees. A single case may occur where successive boards may be liable for the same debts, and that is where there are successive defaults in January The liability of the trustees for a failure to make a report is in the nature of a penalty, and the penalty is all the debts of the company then existing. The trustees are not relieved by the recovery of a judgment against the company, or by the creditor’s taking the company’s note, and the statute of limitations commences to run anew upon every sue cessive default. (.Miller v. White, 2 Abb. Pr. [N. S.], 61; Shaler da Ilcill Quarry Go. v. Bliss, 27 N. Y., 297 ; Squire v. Brown, 22 IIow., 35; Merchants' Bank of New York v. Bliss, 35 N. Y., 412 ; McTIarg v. Eastman, 7 Hobt., 137.) Nor is it any defense that the trustees acted in good faith. (Whitney Arms Co. v. Barlow, 6 Jones & Spencer, 554 .)