Case Name: Hoboken Beef Company, Respondent, v. Elmer E. Hand and Eleanor M. Hand, Appellants, Impleaded with Charles B. Dewar, Defendant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1905-05
Citations: 104 A.D. 390
Docket Number: 
Parties: Hoboken Beef Company, Respondent, v. Elmer E. Hand and Eleanor M. Hand, Appellants, Impleaded with Charles B. Dewar, Defendant.
Judges: 
Reporter: Appellate Division Reports
Volume: 104
Pages: 390–393

Head Matter:
Hoboken Beef Company, Respondent, v. Elmer E. Hand and Eleanor M. Hand, Appellants, Impleaded with Charles B. Dewar, Defendant.
Directors of a corpcrration— liability of, for its debts because of (¿failure to tie d report —. what must be shown to establish it — the statute must be strictly construed, — Words “ doing business without the United States,” defined.
Section 30 of the Stock Corporation Law (Laws of 1892, chap. 688, as amd. by Laws, of 1897, chap. 384), which, imposes on the directors of a corporation a liability for neglecting to file the annual reports of the corporation- required by that section, is -penal in its character and as such is to be construed strictly in favor of the directors. ...
A creditoriof the corporation cannot maintain an action against the directors thereof under such section unless three things coexist, viz., the default in mak- . ing the report; the fact that the' defendants were directors at the time the default occurred, and a debt due from the corporation. If it appears that the defendants ceased to be directors prior to the expiration of the time allowed for the filing' of the report, the action-cannot be maintained. /
What constitutes “ doing business without the United States ” within the mean, ipg of that section. , -
App’eal by the defendants, Elmer E. Hand and another, from, a judgment o.f the Supreme' Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 5th day of November, 1904, upon the decision of the court rendered after a trial at the New York Trial Term, a jury having been waived.
Theodore Prince, for the appellants.
Fancher Nicoll, for the respondent.

Opinion:
McLaughlin, J.:
The plaintiff in August, 1899, sold and delivered to the Powell Brothers Company, a domestic corporation, a quantity of meat of the value of $414.26. The corporation failed and neglected to pay the purchase price and thereupon this action was brought and a recovery had against the appellants upon the ground that they were liable for such debt, inasmuch as the corporation failed to file an annual report on or after January 1, 1900.
The appellants concede that the . Powell Brothers Company became indebted to the plaintiff in 1899 ; that such debt remains unpaid and that no report of any kind was filed either by the corporation or its directors on or after January 1, 1900. They contend, however, that notwithstanding such fact they are not liable for such debt- for the reason that the corporation was at the time engaged in a foreign business and was not obliged to file a report for the year 1899 before April 30, 1900, before which time they had both ceased to be directors and there was no obligation upon' them to thereafter see that a report was made and filed.
The statute under which it is sought to make the appellants liable is section 30 of the Stock Corporation Law (Laws of 1892, chap. 688, as amd. by Laws of 1897, chap. 384), which;reads as follows : " § 30. Annual Report.— Every domestic stock corporation and every foreign stock corporation doing business within this State, except moneyed and railroad corporations, shall annually during the month of January or if doing business without the United States before the first day of May make a report as of the first day of January, which shall state," etc. Then follows a statement as to what the report shall contain and a provision making tlie directors of the corporation jointly and severally personally liable for all the existing debts of the corporation and for all* debts contracted before such report shall be made in case such report is not so made and filed. This statute, like all similar ones which impose upon directors a liability for failure to file reports, is penal in character and as such is to be construed strictly in favor'of the directors. (Manhattan Co. v. Kaldenberg, 165 N. Y. 1; Wallace v. Walsh, 125 id. 26 ; Whitney Arms Co. v. Barlow, 68 id. 34.)
Keeping this in mind, I do not see how the appellants can be held liable in view of the undisputed facts set out in the record, which are that "the Powell Brothers Company did a meat and poultry, business within the United States and a poultry and game business in England, Canada and Germany; " that it did a large business with Musson & Go., of Liverpool, England; that its secretary and treasurer went to England in 1899 an.d established an agency; that the corporation dealt with Thomas Derry & Go. of Montreal and also with Ingraham & Block of Hamburg, Germany. These facts being uncontradicted, the corporation was clearly, during the year 1899, doing business without the United States, and, therefore, it had until the 30th of April, 1900, in which to file its report for the preceding year. A reasonable construction is not only to be put upon the words " doing business without the United States," but such words must also, be construed with reference to the object sought to be accomplished by the statute requiring stock corporations, other than moneyed and railroad corporations, to.file an annual report as ¡of the first day of January. It appeared that each of the appellants resigned as director prior to-the 21st of April, 1900. The trial court found that Elmer E. Hand was a director from the 21st of March, Í899, to the 21st of April, 1900, and that Eleanor M. Hand was a director from the 1st day of March, 1899, to the 1st day of March, 1900. At the time, therefore, that the appellants ceased to be directors the corporation was not in default in making its report for the year 1899 and they could not be made liable because it thereafter failed to file such report. After they .ceased to be directors they could not make and file a report and they were under no obligation to see that one was made and filed.
It has been held that a plaintiff cannot maintain an action of this character unless three things coexist: The default in making the report; the fact that at the time of such default < the defendants were trustees or directors, and a debt due from the company. (Jones v. Barlow, 62 N. Y. 202; Wood & Selick v. Vanderveer, 55 App. Div. 549.) On the 30th of April, 1900, the last day on which a report for the year 1899 could have been made and filed, these three things, so far as the appellants are concerned, did not coexist, because they had ceased to be directors of the corporation. This being so, they could not be made liable for a debt of the corporation on the.ground of its default in making and filing an annual report for the preceding year.
The judgment appealed from, therefore, must be reversed and a new trial ordered, with costs to appellants to abide event.
Van Brunt, P. J., Patterson, Ingraham and Laughlin, JJ., concurred. ,
Judgment reversed, new trial ordered, costs to appellants to abide event.