Case Name: PRESIDENT, ETC., OF MANHATTAN CO. v. KALDENBERG et al.
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1898-03-11
Citations: 50 N.Y.S. 265
Docket Number: 
Parties: PRESIDENT, ETC., OF MANHATTAN CO. v. KALDENBERG et al.
Judges: 
Reporter: West's New York Supplement
Volume: 50
Pages: 265–275

Head Matter:
(27 App. Div. 31.)
PRESIDENT, ETC., OF MANHATTAN CO. v. KALDENBERG et al.
(Supreme Court, Appellate Division, First Department.
March 11, 1898.)
1 Corporations—Annual Report—'Verification.
The true construction oí section 30 of the “Stock Corporation Daw” (Daws 1890, c. 504, amended by Daws 1892, c. 088), requiring the annual report to be verified by the oath oí the “president or vice president and treasurer or secretary,” is that it must be verified by the oath of either the president or vice president, together with that of either a treasurer or secretary.
2. Same.
Where the corporate organization of a stock corporation provides that there shall be a president, a vice president, a secretary, and a treasurer, the fact that, through the failure of'the directors to elect a secretary and treasurer, those offices are vacant at the time required by section 30 for the making and filing of the annual report, does not render a report verified by the president only a compliance with the statute, !bo as to relieve the directors from resulting individual liability.
8. Same—Action against Directors.
Between the 21st and 30th days of January, 1893, the K. Co. became indebted to the plaintiff upon discounts of commercial paper. In an action brought against directors of the corporation to charge them with individual liability for failure to file an annual report for 1892, which default con- tinned up to and including January 30, 1893, held, that the plaintiff, though ,a simple contract creditor, was entitled to maintain the action.
Ingraham and McLaughlin, JJ., dissenting.
Appeal from trial term.
Action by the president and directors of the Manhattan Company against Frederick J. Kaldenberg and others. From a judgment on a verdict directed by the court, and from an order denying a new trial, defendants appeal. Affirmed.
Argued before VAN BRUNT, P. J., and McLAUGHLIN, PATTERSON, O’BRIEN, and INGRAHAM, JJ.
B. F. Tracy, for appellants.
Chas. E. Rushmore, for respondents.

Opinion:
PATTERSON, J.
This action was brought against directors of a manufacturing corporation to charge them with the liability imposed by the .terms of section 30 of the stock corporation act, for the failure of the corporation to make and file a properly verified report, as required by law, for the year 1892, such default continuing up to and including the 30th of January, 1893. At the last-mentioned date a proper report was filed. Between the 21st and the 30th days (inclusive) of January, 1893, the F. J. Kaldenberg Company became indebted to this plaintiff upon discounts of commercial paper in a large sum of money, and the indebtedness arising on such promissory notes, due and payable at the time this action was brought, is sought to be charged against the defendants (appellants herein). At the trial of the cause a verdict was directed for the plaintiff, and from the judgment entered upon the •verdict, and from an order denying the defendants'.motion for a new trial, this appeal is taken.
There was an issue of fact litigated on the trial in respect of which there was conflicting evidence. The withdrawal of that issue from the jury would require a reversal of the judgment if the case turned upon it, but its determination becomes unimportant in the final disposition of the cause. The rights of the parties depend upon questions of law, and, in the view we entertain of those questions, the course pursued by the court below was the correct one. "That the plaintiff was not a judgment creditor at the time the action was brought does not affect the right to recover. An amendment to the complaint was allowed on the trial, which showed that certain judicial action had been taken restraining creditors of the corporation from prosecuting claims, and due proof thereof was made; but, in addition to that, we have held in several cases that a simple contract creditor may maintain an action of this kind, under such circumstances as are shown in this record. Manufacturing Co. v. Reamer, 14 App. Div. 408, 43 N. Y. Supp. 1027; Donnelly v. Pancoast, 15 App. Div. 326, 44 N. Y. Supp. 104; Rose v. Chadwick, 9 App. Div. 311, 41 N. Y. Supp. 190.
It appeared in evidence that in 1892, and long before the indebtedness of the Kaldenberg corporation to this plaintiff accrued, the directors of that company signed an annual report, which, as to its contents, complied with the requirements of section 30 of the stock corporation •act, as amended in 1892. It was signed by a majoritj of the directors.
It was also verified by the president of the company, and was filed in the office of the secretary of state, and in the office of the clerk of Westchester county; but it was verified only by the president of the company. The contention made by the defendants (appellants) is that the authentication thus made was sufficient within the fair interpretation of the provision of section 30, relating to the subject of verification of such reports. It is claimed, and rightfully so, that the law is a penal statute, and that it is to be construed strictly in favor of the directors of a corporation. It is needless to cite authorities to that point, for they are abundant and unmistakable in their effect; but it has not yet been decided.by any court of final authority that judicial construction of the admittedly penal provisions of the act of 1892, or of. any other of the statutes in pari materia, from the general manufacturing law of 1848, down to the present time, is to be carried to the point of judicial nullification; and that would be the effect of the establishment of the appellants' contention in this case. Section 30 of the stock corporation act, as amended in 1892, requires the report to be signed by a majority of directors, and verified by the oath of the president or vice president and treasurer or secretary. That is a specific requirement, that two officers shall verify the report. It may be that the same person may fill two offices, and discharge the duties of both, but that situation does not arise in this case. Section 27 of the stock corporation act provides that the directors may appoint from their number a president, and "from the stockholders," a secretary and treasurer, and may appoint such other subordinate agents or employes as the by-laws may designate. By article 4 of the by-laws of the Kaldenberg Company, read in evidence, it appeared "that the officers of the company shall consist of a president, a vice president, a secretary, and a treasurer." The corporate organization of the company, therefore, provided for the four distinct officers. The appellants would read the provision of the statute under consideration as if it presented this alternative situation, namely, that the annual report should be verified by the oath of the president, and, if not by the president, then by the vice president and secretary or treasurer. That construction carries the alternative beyond the manifest meaning of' the provision. The true interpretation, as we understand it, is that the report shall be verified by the oath of either the president or vice president, together with the oath of either a treasurer or secretary. The disjunctive conjunctions are interposed in the sentence, so as to limit the alternative, and the copulative conjunction is so placed as to require plurality in the verification. This interpretation is the only admissible one.in view of the course of legislation upon the subject. In the general manufacturing law of 1848 (section 12), the provision was that the verification by either the president or the secretary would suffice, and the same requirement appeared in the amendment of the general manufacturing law made by section 12, c. 510, of the Laws of 1875; but when the stock corporation act came to be passed, in 1890, the policy of the law was entirely changed, and it was required that the report should be signed by the president and a majority of the directors, and be verified by the president and treasurer; thus introducing into the statute the feature of a double verification. The amendment of 1892, which is the one now in question, merely car ríes out that same requirement of a double verification, but does not limit the making of that verification to the president and treasurer, but allows the vice president, if there be one, and the secretary, to make the verification.
It is very strenuously urged by the learned counsel for the appellants that there was no secretary or treasurer of the Kaldenberg Company during the year 1892, and up to the 30th of January, 1893, by whom the verification could be made; and, consequently, there was no way of complying with the provisions of the statute under consideration; and that an excuse for noncompliance is therefore furnished. It is claimed that inasmuch as, at the time of the making and filing the report of 1892, the president was performing the duties of secretary and treasurer, his single verification was sufficient, under the reasonable and liberal construction of the statute. We do not think that argument can be made available. We will assume that there was neither secretary nor treasurer 'actually having an official status by election or appointment from the time Mr. Faber handed to Mr. Kaldenberg the letter of resignation in November, 1891, down to the latter part of January, 1893, when Mr. Rankin was formally appointed. But the statute established the offices of secretary and treasure**, and the by-laws of the corporation expressly declare that there should be such officers of that corporation. The neglect of the directors of the corporation to select or appoint such officers cannot be a legal excuse for their failure to perform an act which the statute required to be done, to exempt them from liability to a penalty. If the contrary were to be allowed, directors could very readily escape from the performance of their statutory duties. The case is not like that" of directors resigning at the end of their terms, and leaving the corporation without any directorate, as was the case in Wade v. Baker, 14 Hun, 617. Here there was a failure on the part of the directors to select officers required by the by-laws of the corporation, which officers, had they been selected, would have had imposed upon them, under the supervision of the directors, the duty of making, verifying, and filing a report; for the report to be filed is a report of the corporation, to-be signed by a majority of the directors, and verified in the manner required by the statute. The whole report, in other words, • is a matter of the directors and two of the officers specified in the statute. If the directors neglect to fill the offices, so that the statutory duty may not be performed, they cannot rely upon that neglect to escape the consequences of their failure to carry out the provisions of law.
We therefore are of the opinion that the court below properly instructed the jury that the plaintiff was entitled to recover, and the-judgment should be affirmed, with costs.
VAN BRUNT, P. J., and O'BRIEN, J., concur.