Deming v. Puleston — 35 N.Y. Super. Ct. 309

Majority

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GEORGE K. DEMING, Plaintiff and Respondent, v. JOHN H. PULESTON, Defendant and Appellant.

Headnote

In an action brought by a creditor of a mining coloration to collect his judgment against one of the trustees because of the failure of said corporation in making and filing an annual report, it appeared that the defendant’s term as trustee had expired before all the debt had accrued, and the company had neglected to elect trustees, the defendant and others continuing to act as trustees after their term had expired, and it also appeared that the unliquidated debt of the company in favor of the plaintiff had merged or been liquidated or included in the company’s notes, that were taken by the plaintiff, and the judgment was recovered against the company by plaintiff, at a time when defendant claims he had ceased to be a trustee, his term having expired as above stated.

In this act of 1848, the fourth section provides, that, if an election of trustees be not had at the time appointed, “ all acts of trustees shall be valid, and binding as against the company until their successors shall be elected,” and the weight of authority favors the conclusion,' that trustees in office at the time of election would hold over and continue to be trustees after the year had expired, in case there was no election held, and if they acted as trustees, they would be such “ de jure ” as well as “ de facto.”

The trustee, in this case, acted as such after the time for said election had passed, and his acts indicated that he considered himself as a trustee “ de jure,” and he most certainly was such “ de facto,” and therefore held to be liable as trustee.

The liquidation of the debt by the company, and payment thereof in its promissory notes, did not cancel the debt, and does not alter the situation nor the liability of the trustees.

Before Sedgwick and Van Vorst, JJ.

Decided February 1, 1873.

Appeal to the General Term from a judgment recovered in favor of the plaintiff against the defendant upon the verdict of a jury.

The Hocking Valley Oil and Coal Company was organized on the 21st day of November, 1864, as a corporation, under the act of February, 1848, upon which

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day the certificate of incorporation required Tby the act was filed in the proper offices.

The defendant was named as one of the trustees for the first year in the articles of association, and thereafter acted as such. On the first day of May, 1865, plaintiff was employed to superintend the operations of the company in Ohio, at a salary of one hundred and twenty-five dollars for the first month, and one hundred and fifty dollars per month afterwards. The defendant took part in employing plaintiff. From the defendant plaintiff received directions, and to him plaintiff made monthly statements of the operations. Plaintiff continued in the employment of the company until May 8, 1866. In May, 1866, plaintiff had a settlement with,the company at the office of Cochran, the treasurer. Defendant.was present with the president and other trustees. The defendant himself produced the statements rendered Tby plaintiff; his accounts were pronounced satisfactory, and his claim for services was adjusted at $1,004.28, defendant offering to make his personal affidavit, that plaintiff’s claim was, correct. The company then gave the plaintiff their two promissory notes, one for $802.83, the other for $201.45, payable, the one in thirty days, and the other one day after date.' The notes were neither of them paid, and the plaintiff brought an action and recovered a judgment against the corporation for their amount. Since the recovery of the judgment the plaintiff had collected on his claim $33. The balance remains unpaid.

The corporation has filed no certificate stating the amount of capital of said company fixed and paid in, nor any annual report, or report in writing, concerning or affecting the company since the date of the certificate of incorporation filed as above mentioned. There has been no annual election of trustees held since the filing of the certificate in November, 1864. In November, or December, 1865, at a meeting of the trustees, at which

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defendant was present, a discussion took place on the subject, a motion was made by defendant that the trustees should hold over. There was a disagreement. After the meeting in May, 1866, at which plaintiff’s claim was adjusted, another meeting of the trustees was held in June following, at which the defendant was present. By a vote of the board, a new superintendent in plaintiff’s place was appointed. Defendant himself engaged the new superintendent. In August following another meeting of the board was held, at which defendant was also present, and in the proceedings of which he took part. This meeting had reference to the operations of the new superintendent. The defendant was also secretary of the company, but an assistant secretary in the employ of the company took the minutes of the company instead of defendant.

At the close of the testimony the “ defendant’s counsel “moved to dismiss the complaint on the ground that the “liability of the company has merged in the promissory “ notes at or subsequent to the time when the defendant “ceased to be a trustee, viz., November 21st, 1865. “That whatever claim or demand the plaintiff may have “had against him, under the statute, as a trustee of “a defaulting company, he waived it as to a trustee “who had ceased to be a trustee by taking the promis- “ sory notes and entering judgment upon them.”

The defendant’s motion was denied, and the defendant excepted.

The defendant’s counsel also asked the court to direct the jury that they only find a verdict for the plaintiff for $475, the amount due on the 21st November, 1865, on the ground that defendant then ceased to be a trustee. This request was denied, and the defendant excepted.

A verdict was directed for the plaintiff by the court for $2,339.48, to which defendant also excepted.

H. S. Bennets, of counsel for appellant.

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W. B. Putney, of counsel for respondent.

The defendant seeks to avoid liability in this action, in any event, for1 so much of the plaintiff’s claim as accrued after the 21st November, 1865, on the ground that the defendant’s-term as a trustee then expired, and further urges as an objection to the whole claim that it was merged in the company’s notes taken by plaintiff, and the judgment-recovered thereon in his favor, when the defendant was-no longer a trustee.

A failure to elect officers of a corporation at the designated time would not dissolve the corporation. The old officers may hold over until their successors are appointed. The fourth section of the act of 1848 provides, that, if an election be not had at the time appointed,, “all acts of trustees shall be valid and binding as-against the company until their successors shall be-elected.” In McCall v. Bryan, 6 Conn. 428 , it was held,' that where the officers of a corporation are required by its charter to be elected yearly, yet they may continue' in office until their successors are elected (Nashville Bank v. Petnay, 3 Hamp. Tenn. R. 522).

In Slee v. Bloom, 5 John. Chy. 366, it is said, “The officers already in would continue to be good officers after the year and until others are elected.”

The better opinion appears to be, that where the members are to be “annually elected,” these words are-directory only (2 Kent’s Com. 295, and cases cited).

The defendant’s acts, after the 21st November, 1865, in the affairs of the corporation would indicate that he-considered himself still a trustee “ de jure,” and as to third persons would constitute him at least “ de facto.” He attended meetings of the board; he received the monthly statements of the plaintiff’s operations and services for the company up to May, 1866, and knew all about, approved, and aided in continuing his services.

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He himself, at a meeting of the trustees, pronounced the claim of the plaintiff for his services rendered the corporation up to May, 1866, just, and aided in continuing the operations of the company by the employment of a new superintendent in the summer of 1866. He himself employed the new superintendent, as he had the power. Such acts on his part are consistent with no other relation than that of trustee and manager. He substantially held himself out as such, and aided by his acts in maintaining the corporate existence, and the purposes for which it was formed. Public interests require that the acts of officers, who are such “ de facto,” should be held valid as to third persons, and when they so act they are entitled to all the benefit and should assume' all the liabilities imposed by such relation.

The acts of the defendant above mentioned did not properly belong to him as secretary. They advanced the material purposes for which the corporation was organized, enabled it to contract debts and incur liabilities, such as directors only assume. The requests of the-defendant’s counsel in effect asked the judge to decide, as matter of law, on the trial, that after the 21st November, 1865, the defendant was no longer a trustee. This, under the facts disclosed, the judge could not properly do. The most that the defendant was entitled to ask on that subject was, that it be submitted to the jury whether defendant, after that time, had assumed to act, and had acted as a trustee. This he did not do. In the absence of such request, the judge was justified in holding, as he unquestionably did, that the defendant had so acted.

Although the portion of the act under which this corporation was organized, which imposes liability upon trustees for its debts, in the event of a failure to file annual statements, may be considered penal in its nature, yet, if the party assumed to act as a trustee, it was his duty to perform all the acts incumbent upon a

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trustee, and to aid in making, signing, and filing such' certificate as the law requires, if he would escape liability:

The objection that the plaintiff’s claim became merged in the notes of the company, and in the judgment recovered, is unsound. The notes did not cancel the debt. They amounted to the company’s promise to pay at a future day, which it failed to do. The indebtedness still remains.

The obtaining of the judgment and the attempt to collect it out of the corporate property before resorting to the defendant personally, was favorable to the defendant, and in no manner affects the liability imposed upon him under § 12 of the act of 1848.

None of the defendant’s exceptions are well taken, and the judgment should be affirmed with costs.