Case Name: OTTMANN v. BLAUGAS CO. OF CUBA et al.
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1916-02-11
Citations: 157 N.Y.S. 413
Docket Number: 
Parties: OTTMANN v. BLAUGAS CO. OF CUBA et al.
Judges: 
Reporter: West's New York Supplement
Volume: 157
Pages: 413–417

Head Matter:
OTTMANN v. BLAUGAS CO. OF CUBA et al.
(Supreme Court, Appellate Division, First Department.
February 11, 1916.)
Corporations <§=306—Liability op Directors—Fraud.
Where the board of directors of a corporation authorized an executive committee, composed of some of their members, to act for it during a certain period, the directors who were not members of the executive committee were not personally liable for the fraudulent act of the executive committee in issuing a false prospectus and collecting money for sales of stock, of which acts they had no knowledge.
(Ed. Note.—For other cases, see Corporations, Cent. Dig. §§ 1457, 1458; Dec. Dig. <®=306J
Page and Dowling, JJ., dissenting.
<©^>For other cases see same topic & KBY-NlTMBBft in all Key-Numbered Digests & Indexes
Appeal from Special Term, New York County.
Action by Phillip Ottmann against the Blaugas Company of Cuba and others. From a judgment for plaintiff, defendants appeal. Reversed as to some defendants, and dismissed, and as to others affirmed.
Argued before CLARKE, P. J., and SCOTT, DOWLING, SMITH, and PAGE, JJ.
Charles E. Travis, of New York City, for appellants Blaugas Co. and others.
Charles De Witt Rogers, of New York City, for appellant Cushman.
George J. Kilgen, of New York City, for appellant Strauss.
L. Barton Case, of New York City, for appellants Grimes and Dunn.
H. Schieffelin Sayers, of New York City, for respondent.

Opinion:
SCOTT, J.
In my opinion the evidence failed to establish liability on the part of these directors who were not members of the executive committee, and who are not shown to have had any knowledge of or any hand in preparing the so-called booklet containing the false statements which constitute the basis of this action. They were not members of a syndicate of promoters seeking to sell stock for their individual benefit as were the defendants in Downey v. Finucane, 205 N. Y. 251, 98 N. E. 391, 40 L. R. A. (N. S.) 307, and Lehman-Charley v. Bartlett, 202 N. Y. 524, 95 N. E. 1125, but simply directors of a corporation which employed an agent to sell stock for the benefit of the corporation. What interest such directors had in the corporation, or to what extent they would be benefited by its successful flotation, does not appear. As to these directors the rule is applicable which is clearly shaied in Arthur v. Griswold, 55 N. Y. 400, and Rives v. Bartlett, 215 N. Y. 33, 109 N. E. 83, and recognized in Downey v. Finucane, supra. In Rives v. Bartlett this court applied the Finucane Case to a state of facts which upon the record much resembled the facts shown by the present record. The Court of Appeals said:
"The doctrine of the Finucane Case has no application to the facts of this case. Tn that case the defendants were held liable for the acts of Fenn, not on the ground that he was a codirector, but because they had constituted him as agent of a syndicate organized for their personal profit, and because he acted as agent of the syndicate, and not as agent of the corporation. In this case there is nothing upon which to base a claim that Bartlett was the agent of the appellants, except the bare fact that he was a codirector, and that is not sufficient."
In my opinion this exactly expresses the position of the defendants who were directors of the company, but not members of the executive committee, and therefore as to these defendants the judgment should be reversed, with costs, and the complaint dismissed, with costs, and in other respects modified, in accordance with the opinion of Mr. Justice PAGE, and, as so modified, affirmed, with costs as against the remaining defendants. Settle order on notice.
CEARKE, P. J., and SMITH, J., concur.