Case ID: ad_151/html/0237-01.html
Source: Caselaw Access Project
Author: {"author": "McLennan, P. J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Buffalo Electro-Plating Company, Appellant, v. Alvin W. Day, Respondent.
    Fourth Department,
    May 1, 1912.
    Corporation—directors — ownership of stock not essential—presumption — resolution not making manager sole owner of corporation — process — motion to set aside service of summons.
    As by virtue of section 25 of the Stock Corporation Law a person not a stockholder may be a director if a provision to that effect is made by the corporation charter or by-laws, it will be presumed that a person elected director and president continues to hold office in the absence of proof that he has resigned or that his successor has been elected, even though he has parted with all his stock. Hence, in the absence of proof to the contrary, he has prima facie authority to institute ah action on behalf of the corporation pursuant to a resolution authorizing him to do so.
    A resolution appointing a person manager of the business of a corporation with full power and control to coHect assets, incur indebtedness and pay the same, and to sell the property of the corporation if he deem it . advisable, under the condition that he make monthly reports of all his proceedings and as often as required by the board of directors, does not make him sole owner of the corporation although he has acquired all the corporate stock save one share owned by a director.
    Papers on a motion to set aside service of a summons in an action brought by a corporation examined, and held, insufficient to justify a finding that certificates of stock indorsed in blank by a director were owned by the defendant.
    Appeal by the plaintiff, the Buffalo Electro-Plating Company, from an order of the ¡Supreme Court, made at the Erie Special Term and entered in the office of the clerk of the county of' Erie on the 22d day of August, 1911, vacating and setting aside the service of a summons in the action.
    The motion was made by the defendant upon the ground that the plaintiff’s attorney had not proper authority for bringing the action.
    
      John L. Ahern, for the appellant.
    
      George Clinton, Jr., for the respondent.
   McLennan, P. J.:

The plaintiff is a domestic corporation, having its principal office and place of business in the city of Buffalo. It commenced this action on the 21st day of July, 1911, to compel the defendant to account for his receipts and disbursements as manager for the plaintiff since August 5, 1904. The defendant did not answer the complaint but moved to set aside the service of the summons.

The plaintiff was incorporated January 15, 1903, and in its certificate of incorporation John H. Stackhouse, W. H. Widner and J. M. Shevlin were named as directors. They owned all its capital stock. No other directors, so far as appears, have since been elected. On August 5, 1904, the board of directors met and passed a resolution as follows:

“ Upon motion of Mr. W. H. Widner, seconded by John M. Shevlin, it was ' •
“Resolved, that Mr. Alvin W. Day be appointed manager of the business of this company with full power, and control over its affairs to carry on its business, collect moneys due or to become due to it, incur such indebtedness as may be necessary for the carrying on of the business, to pay the debts of the company and, if in his judgment it shall be advisable, to sell all the property and assets of the corporation or so much thereof as he may deem necessary. And it is further
‘'Resolved, that the treasurer of the Company shall pay out moneys of the corporation upon the order of the said Alvin W. Day. And it is further
“ Resolved, that the said Manager shall make, reports of. his proceedings and of all moneys coming into his hands, monthly, and as often as may be required by the Board of Directors.-”

Defendant thereupon became manager of the corporation. It is alleged that he has never rendered any report or account as such manager, which he does not deny.

John H. Stackhouse, who was elected president by the board of directors shortly after its mcorporation, before the commencement of this action called a meeting of the board of directors by regular written notice. He and Shevlin attended the meeting and adopted a resolution authorizing the bringing of this action. Widner sent a note to the effect that he had resigned at the last board meeting, seven years previous, and had since disposed' of all his stock to the defendant.

Defendant bases his contention largely upon the fact that he has in his possession all the stock which Stackhouse ever owned, 265 shares, which appear to be indorsed in blank by Stack-house, and has purchased all Widner’s stock, and claims that he is entitled to the remaining single share of stock held by Shevlin, and that that constitutes the entire capital stock Of the plaintiff.

The particular ground upon which the court at Special Term based its conclusion that the plaintiff’s attorney is not authorized to bring this action is not stated in the order appealed from. It would seem, however, that the court must have arrived at the conclusion that Stackhouse had at some time previous transferred all his stock to the defendant, and that such transfer forfeited his office as director and president of the plaintiff, leaving only one director, who could npt alone assume to act as the board of directors.

Since the amendment in 1901 of section 20 of the Stock Corporation Law (Gren. Laws, chap. 36 [Laws of 1892, chap. 688], as amcl. by Laws of 1901, chap. 354), which was re-enacted by the amendment' of 1906 (Laws of 1906, chap. 238), and is now contained in section 25 of the Stock Corporation Law (Consol. Laws, chap. 59; Laws of 1909, chap. 61), a corporation may have as its directors persons who are not stockholders, if provision to that effect be made by its charter or by-laws. Whether such is the fact as to the plaintiff is not attempted to be shown in the record. Unless Stackhouse has resigned or his successor has been elected it seems to me that he must be presumed to be acting as president and director, even though it be assumed that he has parted, with all his stock, for it cannot be presumed, as a matter of law, that the sale of his stock forfeited his office as director, when nothing further is shown.

An examination of the resolution under which defendant was chosen as manager does not show that the defendant became thereby the sole owner of the corporation, nor that any such thing was intended. To me it seems to indicate the contrary. In express terms it requires the defendant to render an account monthly, and as often as may be required by the board of directors.

I think further that the Special Term was not warranted in finding, as it apparently did, upon the affidavits presented and upon the examination of the certificates of stock produced, indorsed'in blank by Stackhouse, that the defendant was the owner of such stock. Stackhouse denies it, and gives his explanation as to how they came to be in defendant’s possession. The defendant claims he obtained them at about the time he became manager, pursuant to the resolution then adopted. As above stated, I think the resolution warrants an inference to the contrary of defendant’s claim, and I think, in view of this fact, the court was not warranted in determining upon the other facts shown that defendant was the owner of the shares of stock issued to Stackhouse.

I think the Special Term should have denied defendant’s motion. The affidavits presented on the motion do not establish lack of authority of plaintiff’s attorney for bringing this action.

The order appealed from should be reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.

All concurred.

Order reversed,, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.