Hyperlawhypertext legal database Reed v. Keese 37 N.Y. Super. Ct. 269

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Reed v. Keese

37 N.Y. Super. Ct. 269 5 Jones & S. 269 Court N.Y. Super. Ct. Decision date 1874-04-04 English

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CHARLES C. REED, et al., Plaintiffs and Respondents, v. SAMUEL F. KEESE, et al., Defendants and Appellants.

Headnote

Section 13 of the act for the organization of manufacturing and mining corporations (Laws of 1848, p. 54), provides that for the omission to make and file the annual report, the trustees shall be jointly and severally liable for all the debts of the company then existing and, such as shall be contracted before such, report shall be made, <6c. Section 4 of the same act provides that “ all acts of trustees shall be valid and binding as against the company until their successors shall be elected.”
Held, that trustees of such corporations continue in office after the expiration of their terms, and until their successors are elected, so far at least as to make their acts binding upon the company, and may, therefore, be regarded as trustees, so as to render them liable as such, if,' after the expiration of their term (no successors being elected), they continue to act, but if, at the expiration of his term, a trustee retires from the company, and afterwards performs no official act, and assumes no official authority, he cannot be held liable as trustee under .the act for the omission to make and file a report (Doming Puleston, 33 Supr. Ot. 331; 1 Jones & Spencer).
A person thus holding over and acting as trustee during and after, the default or omission of the trustees to make and file the required report, is liable for a debt contracted at any time before such report shall be made and filed as provided in the act.
It seems by the decision of the court of appeals (Miller «.■ White, 50 H. T. 137), that a judgment against the corporation will not be received as evidence of a debt against the corporation in an action brought against the trustees to enforce their personal liability for the debt, included in the judgment.
Before Sedgwick, Van Vobst, and Speir, J.J.
Decided April 4, 1874.
The Bartlett Reversible Sewing Machine Company was organized as a corporation, in March, 1869, under the act of the legislature of this State, entitled “ An act
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to authorize the formation of corporations for manufacturing, mining, mechanical, or chemical purposes.” The original corporators were Peter V. Husted, Samuel F. Keese and Alexander Studwell, and were named as trustees of the company for the first year. On August 20, 1870, an agreement was made between the corporation and Oscar T. Earle and E. H. Van Dyke, by which the two last named parties became interested in the stock and concerns of the company, and were empowered to carry on its business. On August 81, 1870, the number of trustees was increased to five under the statute, and the said Earle and Van Dyke were added as the new trustees.
The plaintiffs, as copartners, in August, 1871, sold to the Bartlett Reversible Sewing Machine Co., certain varnishes, japans, &c., to the value of one thousand one hundred and sixty-five dollars and thirteen cents, on a credit of four months, and for which a note was given, signed by Van Dyke for the company, which was not paid at maturity. The company had not, on December 11, when this note became due, filed and published any annual report, as required by law. hior was any such report filed until January 20, 1872, when a report was filed, signed by the defendants Studwell and Keese, as trustees, and duly verified—more than five months after the debt was contracted, and more than one month after the note had become due and payable. On December 16, 1871, a suit was brought against the company by the plaintiffs, to recover the value of the goods, and judgment was recovered for the sum of one thousand three hundred and eighteen dollars.
The plaintiffs, failing to obtain payment from the company, on July 26, 1872, within one year after the debt was contracted, brought this action against the trustees, to enforce their liability under the statute. The defendants offered no testimony in their behalf.
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The court dismissed the complaint as to defendant Husted—it appearing he did not continue to act as trustee—but directed a verdict against the defendants Keese and Stud well, against whom judgment was entered, and they appealed.
Dailey c& Perry, for appellants,—I.
The complaint makes the basis of the action against the defendants, t-hat a debt was contracted in August, 1871, and became due in December, 1871, and that a report was not filed and published in January, 1871. All the testimony offered was to sustain those allegations, which, if admitted, would not make these defendants liable. On this ground then, with the evidence showing no other laches on the part of the company, the complaint should have been dismissed (See opinion, Comstock, Ch. J., in Boughton v. Otis, 31 N. Y. 361 ).
II. The evidence does not show that tlley were trustees during January, 187Í, so that no default ap-' pears against them for failure. The debt herein was contracted in 1871, and for' that year as under the statute a report was filed. No cause of action could accrue against them on this debt until the twenty days after January 1, 1873, and then only on failure to file report, even though they were shown to be trustees when the debt was contracted (Miller v. White, 50 N. Y. 137 .) Again, if the defendants, under the testimony, were held to be trustees by having acted as such in signing the certificate of increase, and that held them during the successive year from March, 1870, to March 1871, their time then expired, and the act being voluntary for that purpose only, they cannot be held for a failure to file a report in January, 1871. If a trustee fails to do an official act after the expiration of the term for which he was elected, he cannot be held liable for debts thereafter contracted (See MSS. opinion, Common Pleas, Stevens v. Hastings, Sp. T., and Deming v.
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Puleston, 33 Supr. Ct. 231; 1 Jones & Speneer, citing many cases; Boughton v. Otis, 21 N. Y. 261 ; The Shaler & Hall Quarry Company v. Bliss, 34 Barb. 309 ; Oviatt v. Hughes, 41 Id. 541).
III. There was no attempt made to show that defendants were trustees when the debt was contracted. It was shown that in August, 1870, they acted as such, but from that time to January, 1872, nothing of their connection is shown, nor whether a re-election, if any, was had before or after the contracting of this debt. An implication of a continued act in law does not adjnit of eighteen months vacancy, more especially under a statute requiring yearly elections (General Act, 1848, ch. 40).
Charles S. Winfield, for respondents.—I.
The filing of an annual report by this company, in January, 1872 —default having been made in the several years preceding—did not discharge nor affect'the liability of the trustees for ah indebtedness created in 1871, during the existence of such- default. The purpose and wisdom of requiring an annual report is apparent at a glánce. It is to enable a party who is asked to extend credit to the corporation, to refer to the report on file to ascertain he condition of the company, and so judge of the safety and propriety of such dealing. Of course, this purpose would be entirely subverted if a subsequent filing should be held good and effectual (Garrison v. Howe, 17 N. Y. 458 ). The language of the statute seems to be too clear, to admit of any question or doubt: “If any of said companies shall fail so to do, all the trustees of the company shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be contracted before such report shall be filed.” The Bartlett Reversible Sewing Machine Company made default by not filing an annual report within twenty days after January 1, 1871. The
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indebtedness to the plaintiffs was contracted in August, 1871, and matured in December of that year. During the whole of that period the default continued. The trustees became thereby liable. “ The liability, when it has once attached, and upon whomsoever it has attached, remains fixed and unalterable. This is plain.” (Comstock, Ch. J., in Boughton v. Otis, 21 N. Y. 363 .) A trustee in office at the time a corporation fails to make its annual report, is liable for all the existing debts of the company, and such as may thereafter be contracted until the report is filed (Nimmons v. Tappan, 3 Sweeney, 653). “The meaning of the statute is, that the trustees of a corporation which shall omit to make its annual report, who are in office at the time of such omission, shall be liable for all debts existing at that time, whenever contracted, and shall also be further liable for all debts which may be contracted after such time and until such report is filed. That is the plain letter and intent of- the statute, and is recognized in the following cases : Garrison v. Howe (ubi supra), Shaler & Hall Quarry Co. v. Bliss (ub. sup.), Boughton v. Otis (ub. sup.), and McHarg n. Eastman, 7 Rob. 137 ” (Nimmons v. Hennion, 3 Sweeney, 663).

The suit is brought on the original transaction with the company creating the indebtedness, the failure to pay, the trusteeship of the defendants, default in filing the annual report, and the existence of such default at the time of contracting the indebtedness, as well as at the maturity of the note. In Shaler & Hall Quarry Company v. Bliss, 27 N. Y. 397 , Seldem, J., says : “ The true interpretation of the statute, I think, is that three circumstances must concur in point of time to render a trustee liable, viz : the existence of the debt, the existence of the default in making the report, and the trusteeship. Where these

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concur, the trustee is liable for all debts, if he, was such trustee at the time when the default occurred.

The complaint alleges both the original indebtedness and the recovery of the judgment. ■ Prior to the decision in Miller v. White, 50 N. Y. 137 , which was published after the commencement of this action, the question whether an intermediate judgment against the corporation could be used as evidence, and with what effect, was unsettled both in this court and other courts of the State.

The above case has settled for the first time, I believe, that such a judgment was neither prima facie nor conclusive evidence of a debt in an action against trustees, to enforce their individual liability; and hence, evidence of the judgment against the corporation seems to have been excluded on the trial of this case.

I cannot discover, after an attentive examination, that there was any error in the numerous rulings of the learned justice upon the trial, as to the admission and exclusion of the testimony. The sale and delivery of the goods by the plaintiffs to the defendants, were not only clearly shown, but it was proven that the goods were used in the business of the company.

The defendants, moved to dismiss the complaint, on the ground that no proof had been offered that the defendants Studwell, Keese and Husted ever acted as trustees outside of the particular contract presented by the plaintiffs, claiming that it was an acfiqn of the trustees, as such ; and on the ground that it dAd not appear that they ever were re-elected after the yOar expiring March, 1870 ; or that they ever assumed any authority as trustees after that year. The motion was granted, as to Husted—the evidence failing to show that he continued to act as trustee ; and denied, as to Studwell and Keese, on which denial an exception was taken.

The appointment of all the defendants as trustees, in 1869, appears by the filing of the original certificate,

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and of the continued action on the part of Studwell and Keese, as trustees, during the whole period between the year 1869 and January 20, 1872,' when they filed their report.

By the fourth section of the act, under which the company was incorporated, the office of trustee does not cease with the end of the year for which he was chosen ; but the trustee continues until his successor is elected.

In Deming v. Puleston, 33 Supr. Ct. Rep. 231 (1 Jones & Spencer), this court held that trustees holding over, after the expiration of their terms, (no successors being elected) may be regarded as trustees, so as to render them liable, if after the expiration of their term they continue to act as trustees.

The evidence showing the appointment of all the defendants as trustees, and the continued action, as "such, of the defendants Studwell and Keese, up to January, 1872, was therefore competent for the purpose, and was not contradicted. In Gramson v. Howe, 17 N. Y. 458 , Judge Denio clearly states the purpose and wisdom of requiring the annual report. The general object of the law was, beside enforcing the duty of making reports for the benefit of all concerned, to enable parties proposing to deal with the corporation ; to see whether they could do so with safety. If a: subsequent filing should be held good and effectual in discharging the indebtedness, this purpose would be entirely subverted, and the learned judge decides that the debt must have been contracted during a default, or have existed at a time of a subsequent default.

The statute is clear: “If any of said companies shall fail so to do, all the trustees of the company shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be contracted before such report shall be filed.” The liability, when it has once attached, and upon whomsoever it has attached, remains fixed and unalterable.

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It was objected that it had not been shown that the defendant, Van Dyke, was authorized by the corporation to purchase goods on credit, and give notes, making the company liable to pay for them. The answer to this is, that it was expressly stipulated by the corporation and trustees, that he and Earle should have the sole control and management of the business; and Van Dyke consulted and advised with them in relation to it. Even if he had no such express authority, the proof is clear that the company had, and used the identical goods. Besides, the note was not paid, and the action proceeds upon the ground of the original transaction of indebtedness, and failure to discharge it. I cannot see that the making of the note, which proved to be valueless in the hands of the plaintiffs,.has .anything’ to do with the question of authority.

The judgment must be affirmed, with costs.

Sedgwick and Van Vorst, JJ., concurred.

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