Case ID: ad_44/html/0562-01.html
Source: Caselaw Access Project
Author: {"author": "Woodward, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Edward P. Tysen and Joseph O. Totten, Respondents, v. Henry Fritz, Appellant.
    
      Inability of directors for a failure to file an annual report —- cw'iijkate of the Secretary of State, as proof that no report was filed—irresponsive answer—-an. exception to the question is insufficient.
    
    Under section 18 of chapter 563 of the Laws of 1890, and section 23 of chapter 687 of the Laws of 1892, providing that every director of a corporation “ shall continue to hold his office and discharge its duties until his successor has been elected,” which áre.both to be construed as amendments of section 4 of chapter 40 of .the Laws of 1848, a director of a corporation organized under the act of 1848, elected in 1892 to fill a vacancy, is liable for a failure to file the amended report of the corporation in January, 1897, as required by section 30 of chapter 688.of the Laws of. 1892.
    A certificate of the Secretary of State, made in 1898, stating that he had made a diligent search and had failed to find any annual report of the corporation, is sufficient to cover the period of the default.
    In an action brought to enforce the liability imposed upon a director by such default, a witness who managed the business of the corporation may properly be asked, “ What, if anything, did Mr. Fritz (the defendant) say regarding fixing the books so as to show that he was not a director ?”
    Where, in such a case, the-witness, in answer to the question, states what a third person said, and the defendant makes no motion- to have the answer stricken out as irresponsive, and does not call the attention of .the court to it in anjr manner, but relies ujjou an objection taken to the question upon the ground, that it was “incompetent, immaterial and irrelevant," the fact that the court permits the evidence to remain in the case does not constitute reversible error.
    Appeal Dy the defendant, Henry Fritz, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of Richmond on the 24th day of October, 1898, upon the verdict of a jury, and also from an order entered in said clerk’s office on the 28th day of October, 1898, denying the defendant’s- motion for a new tidal made upon the minutes.
    
      Malcolm L. Lawrence, for the appellant.
    
      Sidney F. Rawson, for the respondents.
   Woodward, J.:

This action was brought to recover from a director of a corporation a debt of the corporation on the failure of the proper officers to file annual reports as required by section 30 of chapter 688 of the Laws of 1892. (Chap. 36, General Laws.) Plaintiffs produced evidence in support of the various facts necessary to constitute a cause of action, and the jury found in their favor. From a judgment entered upon the verdict of the jury, and from the order denying a motion for a new trial, appeal comes to this court, the appellant urging that he was not a director of the corporation under the law, and that the trial court erred in the rejection and' reception of evidence. The most important point to be considered is whether the appellant was, in law, a director of the corporation at the time of the default in filing the report required by the statute, it being conceded that the corporation owed the debt, and that the plaintiffs had exhausted their remedy against the corporation. The contention of the appellant is that, as the corporation of which he became a director and treasurer in 1892, was organized under chapter 40 of the Laws of 1848, there is no presumption that he continued a director up to and including the month of January, 1897, at which time the default is alleged, and this proposition receives some support in the case of Bank of the Metropolis v. Faber (38 App. Div. 159) where the court held that a corporation organized prior to 1892, under the Manufacturing Act of 1848, is not governed by the rule found in the statute of 1892 (Chap. 687, § 23) that every director shall continue to hold his office and discharge his duties until his successor .has been elected.” There is no proof that the defendant was ever, •elected after the meeting held in 1892, at which time he was chosen to fill a vacancy, though there is evidence which would warrant the jury in finding that he did take part in a meeting in 1896, after which time it is not urged that he did any act which indicated that .he was not to be considered as a director. It is, perhaps, unnecessary, under the circumstances, to consider the law in force at the ’■■time of the alleged default, but as the defendant insists that the evb •dence in support of his acting as a director, in 1896 was improperly •■admitted, it may not be out of place to review the history of the legislation upon this point. Section 4 .of chapter 40 of the Laws of 1848, known as the Manufacturing Act, provided that if it should happen at any time that the trustees should not be elected on the day providéd by the by-laws the corporation should not bé -dissolved, but that it should be “lawful on any other day. to hold an -election for trustees in such manner as shall be provided for by the -said by-laws, and all acts of trustees shall be valid and binding as -against such company until their successors shall be elected.” Chapiter 563 of the Laws of 1890 repealed section 4 of the Manufacturing Act, and by section 18 enacted that in the event of .a failure on '.¡the part of the corporation to elect on the proper day, it should -have the power to elect directors at a subsequent date, and that every director shall continue to hold his office and discharge its -duties until his successor has been elected.” Lest there should be -some mistake about the intention of the Legislature to amend the .laws under which the various corporations were operating at that .time, .-section 25 provided that “ The provisions of this chapter, -so far as they are substantially the same as those of laws existing on April thirtieth, eighteen hundred and ninety-one, shall be «construed as a continuation of such laws, modified or amended according to the language employed in this chapter and not as new enactments.” This act was to take effect on the 1st day of May, 1891, and it is to be understood merely as an amendment •of section *4' of chapter 40 of the Laws of 1848, so that when the defendant accepted a place as a member of the board of directors of. the California Vintage Company in 1892 he took office under the law as it then stood, and he could not free himself from the obligations growing out of that trust without having someone elected in his stead, unless it should be that the corporation* actually went out of business, as in the case of Losee v. Bullard (79 N. Y. 404). This provision of the law was re-enacted as section-23 of chapter 687 of the Laws of 1892, with the same provision as to the construction to be given it, so that the law, during all the time that the defendant was in office, made him liable for a failures-to perform any of the acts required by law to be performed by a. director of the company.. Having once accepted the trust he could, not, without severing his connection by disposing of his stock, rid himsqlf of the responsibilities- of his position except by procuring the election- of his successor. He could not go on year after year, neglecting to insist upon an annual election, and be absolved from his obligations as a director. It was to compel directors to direct the affairs of the corporations with which they were connected that section 30 of the Stock Corporation Law (Chap. 36, General Laws), was enacted, and the decision in this case is not controlled by that in the case of Van Amburgh v. Baker (81 N. Y. 46) which arose-prior to the amendment of chapter 40 of the Laws of 1848, and' was controlled by the statute as it then existed. Independently,, therefore, of the evidence that the defendant was present and acted as a director in. 1896, we are of opinion that the appellant was a. member of the board of directors at , the time of the alleged default, in filing the certificate required by law. .

In Bank of the Metropolis v. Faber (supra) the defendant,, against' whom it was sought to enforce the indebtedness of theKaldenburg Company, of which he was one of the original directors, by reason of a default in filing the annual report, the corporation was organized under the Manufacturing Act of 1848 in 1887.. The court held that, conceding .the election of the defendant m. April, 1887, he held office for one year, and that there was no presumption, under the provisions of the Manufacturing Act, that the-defendant held over; that the presumption was that he went out of his office at the end of his term. It is to be observed, however,, that the defendant in that case was elected as a director in 1887,. before the enactment of chapter 563 of the Laws of 1890, and ,at that time there is no doubt that'the presumption of law was as stated. -by the court. In the case'at bar the defendant was elected 'after the Manufacturing Act liad been amended, and he came into office-‘under a law which provided that “every director shall continue to hold his office, and discharge its duties until his successor has been elected.” The default alleged in tlié Bank case (supra) was made in 1893, but the defendant was not shown to have been in office except during the year from April, 1887, to April, 1888, under a statute that raised no presumption of his having continued in office after the expiration of the time for which he was elected. When the facts are understood there is no conflict between the conclusion which we. have reached and that announced by the court in Bank of the Metropolis v. Faber (supra).

We are also satisfied that, the plaintiff sustained the burden of proof in establishing the default; the certificate of the Secretary of State in 1898 that he has made a diligent search, and has failed to find any annual report of the corporation specified, is certainly broad 1 ■enough to cover the period of January, 1897.

The attention of this court is called to an alleged error in the admission of the evidence of one Hamlin, who appears to have had ■charge of the business of the California Vintage Company. The -question was asked “ What, if anything, did Mr. Fritz (the defendant) say regarding fixing the books so as to show-that he was n.ot a director ? ” “ A. I suppose I will have to answer that question.” “ Q. I don’t see any way for you to escape it, if there was '.anything said. A. Mr. Lawrence stated that there was only one' way out'of it that he saw-—one or two ways out of this thing that he saw, and that was either to destroy the minute book oi’ remove that page from the book which contained his election as an officer of the company.” The question was objected to as incorcn petent, immaterial and irrelevant; objection overruled and the witness answered as above stated. The question as asked was not open to any of the objections staffed ; it was proper for the witness to testify to any remarks of the defendant made in his presence bearing upon the question of his liability. The answer was not, however, responsive to the question. It did not undertake to give the language of Mr. Fritz, but of a Mr. Lawrence. The defendant did not ask to have the answer stricken out; he relied, if at all, upon his objections to the materiality, competency or relevancy of the qufestion, and did not call the attention of the court to the answer in any manner. He cannot now be heard to urge that the answer was pre judical to his interests; the trial court cannot be said to have en;ed in respect to a question on which no ruling was made.

We have considered the exceptions to the charge of the trial judge, as well as those to the admission or exclusion of evidence, and we are unable to discover - reversible error in the case. If we are right in concluding that the act of 1848 was amended by the act of 1890, so that the directors were obliged to hold over until the election of their successors, and upon this point we have no doubt, then the charge of the trial court was as favorable to the defendant as could be expected, or as he had any right to-expect, and it is the duty of this court to affirm the judgment and order appealed from.

The judgment and order appealed from should be affirmed, with costs.

All concurred.

Judgment and order affirmed, with costs.