Case Name: Frederick M. Hill, Respondent, v. Carl G. Weidinger, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1906-01-26
Citations: 110 A.D. 683
Docket Number: 
Parties: Frederick M. Hill, Respondent, v. Carl G. Weidinger, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 110
Pages: 683–688

Head Matter:
Frederick M. Hill, Respondent, v. Carl G. Weidinger, Appellant.
First Department,
January 26, 1906.
Corpbration-r-action to enforce personal liability of directors'—failure to file report — no recovery on complaint showing unliquidated debt of corporation—when complaint for a breach of contract not amendable to allow proof of rescission thereof—variance.
A complaint does not state a cause of aetion against a director of a domestic corporation for failure of the corporation to file its annual report, required by - section’30 of the Stock Corporation Law, as it existed tinder Laws of 1892, chapter 688, and failure of said director tó file the statement permitted by said section 30 to exonerate him from liability, which alleges, after setting forth the incorporation of the company, the directorship of defendant and the failure to file reports, that one Munsell, plaintiff’s assignor, entered into a contract with the corporation to purchase, with the right to use, certain Canadian patents thereafter to be obtained (claimed to be owned by the corporation) and f. r the purchase of a machine to be manufactured -in conformity therewith, the payment 6f §4,000, the purchase price under the contract, except the amount to be paid for the machine, the assignment to plaintiff, his demand upon defendant to pay, and that plaintiff’s assignor was at all times ready and willing to perforpi, and offered to and did perform his part of the contract, but that the corporation, by making a general assignment for the benefit of creditors, incapacitated itself to perform, and did not perform, but “ wholly failed and neglected to do so, whereby said Harvey M. Munsell was damaged in the .sum of’ four thousand dollars.” '
Such complaint sets forth a’cause of action for breach of the contract with the corporation for which defendant as director was not liable, as the “debt ”■ for which the director of the corporation could be made liable must be one existing in fact and not for unliquidated damages arising from breach of contract. To charge a director personally with the debt of his corporation for a failure to ' file an annual report three elements must exist: directorship, failure to make and file the report, and a debt against the corporation existing at some period ■ of the directorship and at the time of the failure.
’ When under such complaint a recovery has been had without amendment of the complaint or request to amend, and against the protest of defendant by seasonable and proper motion, upon the theory that plaintiff’s assignor rescinded the contract, and from that time a debt in assumpsit arose against the corporation, which defendant became liable to pay because of failure to file said reports, it is a recovery for a wholly different cause of action than- stated in the complaint, and is a fatal variance between allegation and proof, and under such circumstances the pleadings cannot be amended to conform to the proof nor be amended upon appeal to sustain the judgment.
Appeal by the defendant, Carl Gr. Weidinger, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Hew York on the 14th day of April, 1904, uptin the verdict of a jury, and also from an order entered in said clerk’s office on the 13th day of May, 1904, denying the defendant’s motion for a new trial made, upon the minutes.
Edmund Luis Mooney, for the appellant.
Walter Caroll Low, for the respondent.

Opinion:
Houghton, J.:
Plaintiff brings this action against the defendant to charge him with an alleged debt of the Universal Lasting Machine Company, a domestic stock corporation, on the ground that the corporation did not" in the year 1897, or in the month of January, 1898, file .the annual report as to its financial condition required by section 30. of chapter 688 of the Laws of 1892, and that he himself, as director of such corporation, did not during the year 1897 or within thirty days from the 1st day of Fébruary, 1898, file the statement permitted by such section, exonerating himself from liability because of such failure. - v
Plaintiff's assignor, one Harvey M. Munsell, in tlie year 1889 entered into a contract with the Universal Lasting Machine Com pany for the purchase and right to use certain Canadian patents, to be thereafter obtained, for improved method of tacking boots and shoes lasted upon a machine, the patents for which were said to be owned by the corporation, and for the purchase of a machine to be manufactured in conformity with such patents. Five hundred dollars in cash was paid upon the execution of the agreement, and in -1891, the corporation being in need of money and soliciting Hunsell therefor, $3,500 in addition was paid, being the full, purchase price- provided by the contract except the amount to be paid for the machine when completed. The patent claimed to be owned by the corporation was known as the " John Patten Lasting Machine " patent, and the new patent was described by the contract as the "John Patten Tacking Machine" patent. ' The new patent was granted to John Patten by the Canadian government in 1889, shortly after the contract was entered into between the corporation and Hunsell, but it is not shown that it-was assigned by him to Hunsell or the corporation. Hunsell was to pay for the procuring of this patent, but he does not appear to have ever been called upon so to do. Fío time was provided within which the machine contracted for was to be manufactured, and it would seem that its practical construction was a matter of experiment, and that, at least down to June,, 1897, money was being expended and efforts made to make it a commercial success.
During the years from 1889 to the spring of 1896 very many interviews were had between Hunsell and Englehorn, the president of the corporation, in. which the president expressed great hope .for the ultimate success of the experiments and the machine, and from which it would appear that Hunsell was reasonably resigned to' the long delay; and, indeed, counsel for the respondent admits by his points that the tirne of performance of the contract was extended by Hunsell at least .to April, 1896. At this time a new president of the corporation was elected and the defendant was made one of the directors and continued to act as such until March 28, 1898, when the corporation made a general assignment for the benefit of its creditors. The retiring president assured Hunsell that the incoming president would look after his interests as carefully as he himself, had done, and that-he need have no fear that he would not be taken care of as well as the circumstances would permit. In the late winter or spring of 1897 Munsell had an interview with the then president with, respect to the patents and the manufacture of the machine and the progress of the experiments, and the president told him that he hoped within, three or four months to be able to get the patents and have the machine completed. At the end of that period, which is fixed as June, 1897, Munsell testifies that he demanded the patent and the machine or his money.
The patents were not assigned, the machine was neither com-pleted nor delivered, nor was the money paid. In September, 1899, Munsell assigned to the plaintiff all his rights under the contract and claims against any persons thereunder.. Thereafter the plaintiff notified the defendant that he proposed to hold him liable because of his directorship and the failure of the company to file an annual report in the years 1897 and 1898, particularly for the consideration paid, because there had been a " breach " of the contract by the corporation. Thereupon plaintiff brought this action, and in his complaint, in addition to setting forth the incorporation of the company, directorship of the defendant, failure to file the reports, entering into the contract, payment of -the $4,000' assignment to himself, demand upon defendant to pay, alleged specifically that Munsell was at all times ready and willing to perform, and offered to and did perform his part of such contract, but that the corporation, by the making of a general assignment for the benefit of its creditors, incapacitated itself to perform and did not perform, but " wholly failed and neglectéd to do so, whereby said Harvey M. Munsell was damaged in the sum of four thousand dollars ($4,000), for which said corporation became indebted to him," and judgment was demanded for such sum, with interest from the 28th of March, 1898, the date of the general assignment for the benefit of creditors.
Both parties concede, as they manifestly must, that in order to charge a director with a debt of the corporation, three elements must exist, directorship, failure to make and file the report, and a debt against the corporation existing at some period of the directorship and at the time of the failure. (Rector, etc., of Trinity Church v. Vanderbilt, 98 N. Y. 170, 173.) It is. also conceded by the respondent that the " debt" must be one existing,in fact, and that a. director cannot be held liable for unliquidated damages arising out of a breach of contract made with the corporation, and such we understand to bé the law. (Victory Webb Printing Co. v. Beecher, 26 Hun, 48 ; affd., 97 N. Y. 651 ; Whitney Arms Co. v. Barlow, 68 id. 34 ; Gold v. Clyne, 134 id. 262 ; Oviatt v. Hughes, 41 Barb. 541.)
Without any amendment of his complaint, or request to amend, and against the earnest and repeated protest of the defendant by seasonable and proper motion, the plaintiff' was permitted to recover upon the theory that in June, 1897, Munsell rescinded his contract with the corporation and demanded repayment of the $4,000 which lie had paid thereon, knd that, hence, at that time a debt in assumpsit arose against the corporation, which the defendant became liable to pay, because in the January following the corporation filed no annual report, and because lie himself filed no report which would exonerate him'from such failure. /
It seems very plain that tiie complaint is framed not upon rescission of the contract, but upon its breach. The plain allegation is that Munsell was at all times ready and willing to perform, but that the corporation by making the general assignment for the benefit of its creditqrs, incapacitated itself from performance and - thereby broke its contract. That the damages asked are confined to the consideration paid does not remedy the difficulty. . The consideration paid may have represented the largest and the only damages flowing from a breach, for-the contract may have been of no valiie.
The plaintiff alleged a cause of action arising out of a breach of his assignor's contract with the corporation, for which the defendant as director was not liable. He was permitted to prove and recover upon a wholly different cause of action, without amendment asked or allowed and against seasonable objection by the defendant. Under such circumstances the pleadings cannot be conformed to the proof, even though defendant was probably not misled. (Southwick v. First National Bank of Memphis, 84 N. Y. 420 ; Reed v. McConnell, 133 id. 426 ; Davis v. Broadalbin Knitting Co., 90 App. Div. 567.)
If plaintiff's complaint be interpreted as one in rescission, because the corporation had made itself incapable, of performing the contract by its general assignment for the benefit of its creditors, still the plaintiff could not recover from the defendant on that ground, because that act was not performed until the 28th of "March,. 1898 and if .there was' any occasion for the corporation filing a .report thereafter, there is no proof that this was not-, done, or that the defendant continued to be a director. Even on the plaintiff's own theory there is doubt whether the testimony discloses an actual rescission in June, 1897, but our conclusion that the .judgment must be reversed because the recovery was'had .'Upon, a cause of action not alleged in the. complaint and inconsistent' with it, to which defendant made proper objection, renders it unnecessary for us to consider this question or .the many others, urged in appellant's brief. , .
The judgment and order- should be reversed and a, new trial granted, with costs.to the appellant to abide the event.
O'Brien,'P. J., Ingraham, McLaughlin and Laugiilin, JJ., concurred.
Judgment, and order reversed, new trial ordered, costs to appellant to abide event.