Court Opinion

ID: 6582268
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:39:14.639355+00
Date Added: 2024-06-11T15:57:19.815982
License: Public Domain

Loomis, J.
This is an action of replevin brought by the trustees of Brown & Brothers, an insolvent corporation, for certain goods that were on the 4th of January, 1886, attached by the defendant as a deputy sheriff, on the suit of the National Shoe & Leather Bank of New York against the corporation. On the evening of the same day an assignment for the benefit of all the creditors of the corporation was made, pursuant to a vote of a majority of its directors, as is claimed, which was lodged on file in the probate court, and subsequently accepted, approved and recorded by that court, and the plaintiffs were appointed and qualified as trustees. The sole defense against this action is that the assignment was invalid and of no effect.
*464The claimed illegality of the assignment is based upon three objections only. 1st. That two of the five directors, being out of the state at the time, did not receive any notice of the meeting. 2d. That of the three persons who acted as directors in the matter in question, one, namely, Henry S. Coit, was not legally a director though chosen as'such, because he was not a stockholder of Brown & Brothers. 8d. That the notices of the meeting sent to the directors did not.specify the object of the meeting as required by statute.
1. We do not think the assignment invalid for want of actual notice to the two directors who were at- the time absent from the state. Notice was sent by telegram to them as to the others, at their address in this state, but one being in the territory of Montana and the other in South Carolina, they failed to receive the notices. Under these circumstances it would seem unreasonable to hold that a majority of the whole number, being present, could not do a legal act binding the corporation. The exigency demanded immediate action to save the property and to save expense. It is easy to see how disastrous might be the consequences were .we to adopt the principle contended for by the defendants. The situation of the absent directors might be much more remote and inaccessible than in the present case, requiring several months to reach them by actual notice. Must the corporation remain paralyzed all this time, without ability to protect itself ?
But the suggestion was made in the argument in behalf of the defendants, that it might be treated as a case of vacancy, which the remaining directors could fill, pursuant to the act of 1880. Session Laws of 1880, p. 561, sec. 7. If however the office was vacant as to the two absent directors, then surely the remaining directors could lawfully represent the corporation, for there is no general law or principle requiring vacancies on the board of directors to be filled before the remaining directors can act in the business of the corporation, provided of course the number left is sufficient to constitute a legal quorum. Under our General Statutes, p. 279, sec. 12, l< a majority of the directors of any corpora*465tion, convened according to the by-laws, shall constitute a quorum for the transaction of business.” In order, probably, to avoid a doubt that might arise, whether a general assignment was such business as was contemplated under the above statute, the legislature by the act of 1885, (Session Laws of 1885, p. 493,) provided that “the assignment of any corporation may be made by the directors in legal meeting called for such purpose.” This however was not intended to change the rule as to a quorum under the preceding statute. There can be no doubt that a majority of the directors could make a valid assignment.
2. But this brings u's to the second objection, that Henry R. Coit, one of the three who participated in making the assignment, was not a lawful director, and therefore the attempted assignment was made by only-two directors. It is conceded that Coit was regularly appointed to the office and that he was at the time a director de facto, but the contention is that he was not eligible to the office because he was not a stockholder of the Brown & Brothers corporation. In behalf of the plaintiff it is earnestly contended that the acts of Coit as a de facto director are perfectly valid, and cannot be questioned except once for all in a direct proceeding to oust him from the office, as upon a quo warrantoOn the other hand the counsel for the defendants contend that the principle applies only where there exists the element of an estoppel in pais, that is, where third parties have deal t with the corporation on the faith that its directors and agents had in fact the authority they were permitted to assume and exercise; but that the corporation itself could not invoke the aid of the same principle in support of the validity of its own acts which have affected the rights of third parties, because the corporation could not have been misled. We have no occasion to settle this interesting question, because we think Coit was a director de jure.
While we concede that he was not. a personal stockholder of Brown & Brothers, yet by representation he was a stockholder ; that is, he was secretary, treasurer and managing director of the Litchfield Savings Society, which was at *466the time of his appointment a lawful stockholder in the corporation of Brown & Brothers. At any rate he was eligible to the office of director under the act of 1876, (Session Laws of 1876, ch. 65,) which provides that “any one of the directors or executive officers of any corporation, incorporated by the laws of this state, owning stock in any of the' banks or other corporations of this state, shall be eligible to be elected as a director of such banks or other corporations, legally convened for the election of directors, and upon such election may act as director of such bank or other corporation.”
But the claim is made that this provision was repealed by the seventh section of the new joint stock act of 1880, (Session Laws of 1880, p. 561,) which, in providing that the affairs of every joint stock corporation shall be managed by three or more directors, adds—“who shall be stockholders in the corporation.”
There is no express repeal of the first mentioned act, and the implication is strongly against it from the fact that certain specific provisions of former statutes are mentioned as ■repealed while the act of 1876 is not mentioned. Then, in connection with the general repealing clause of acts inconsistent, there is a saving among other things of any rights acquired under existing laws. The right of a savings bank whose assets are invested in another corporation to have a voice in directing its affairs, is surel\r of great importance and value. The record does not tell us whether this investment of the Litchfield Savings Society existed when the act of 1880 was passed. We refer to this now to show the spirit and purpose of the legislature in carefully guarding all important rights and interests. There is no reason why in 1880 they should have desired or designed to repeal the wise and just provision of 1876. Nevertheless the counsel for the defendants insist that, however wise and just, it must be swept away by the act of 1880, because it is so inconsistent with it that both cannot stand and operate together. We answer that both did stand and operate together for the period of four years at least, from 1876 to 1880, for it is to be borne in mind that the provision referred *467to in the act of 1880 was not new, but merely continued in force an old provision found in the General Statutes of 1875, p. 312, sec. 1, and in the statutes long before that. When the joint stoQk act was re-enacted in 1880 with some new provisions, it seems unreasonable to suppose that by the mere retention of the old provision in the same language, it could have been intended to give it a force and effect so much greater than it had for the four years preceding. The remedial nature of the acts in question and the reasons for their enactment will justify us in construing one as explaining and qualifying the other. While it is true that only stockholders are eligible, the necessary implication is that all stockholders are eligible, but inasmuch as the savings bank in its corporate capacity could not well act as a director in another corporation, its executive officer or chief manager is the stockholder within the meaning of the two acts under consideration. In reaching the result that the provision of 1876 has not been repealed we are glad to be supported by the new revision of the statutes which goes into effect in 1888. In that revision the act of 1876 is retained in section 1922, while the provision of 1880 is also found in section 1950.
3. The only remaining objection is, that the meeting of the directors for the making of the assignment was illegal for defects in the notice. The only by-law or rule adopted relative to the matter prescribed simply that “ meetings of directors may be held as often, at such place, and in such manner, as they may from time to . time determine.” No formality whatever is prescribed, and if all the directors happened to be together and agreed to hold a meeting immediately for a particular object within their jurisdiction, we do not see how their action could be impeached on that ground. As the want of actual notice to the two directors who were absent from the state, at places so remote that they could not be reached, has been excused in this case, all the directors capable of acting under the circumstances were present.
But it is said that the statute which empowers directors *468to make an assignment requires that “ the meeting be called for such purpose,” and in this connection the defendants rely on the finding, which says that “ there was no evidence that the telegram contained any notification as to the purpose of the proposed meeting.” It will be observed that this is not a finding that the purpose Avas not specified, but only that the contents of the telegram had not been proved by either party; but under the circumstances Ave are about to mention, the burden of showing that the object was not specified was on the defendants. The record of this meeting is annexed as part of the finding and it says :—“ At a special meeting of the directors of Brown & Brothers, called for the purpose of making an assignment of its estate in insolvency for the benefit of all the creditors pursuant to the statutes,” etc.
Upon this record, until the contrary is found, it must be presumed that the purpose Avas specified in the call. This principle is sustained by the case of Sargent v. Webster, 13 Met., 504, where the validity of an assignment by a corporation for the benefit of creditors was sought to be impeached for want of notice to all the directors. Shaav, C. J. disposed of the objection as follows“ Another objection of the same kind is, that it does not appear that notice of the meeting was given to all the directors. But the contrary does not appear; and it would be hazardous to decide that every vote passed by an aggregate body is void if it do not appear by the record that all were notified. We believe it is not usual in corporate records to state how the members were notified. The presumption, omnia rite acta, covers multitudes of defects in such cases, and throws the burden on those who would deny the regularity of a meeting for want of due notice, to establish it by proof.”
Our own court in Lane v. Brainerd, 30 Conn., 565, applied the same principle both to directors’ and to stockholders’ meetings. The mere record of the meeting in the former case was presumptive proof that all the directors had been duly notified, and in the latter case the mere record of the organization of a corporation was presumptive evidence of a *469fact which was an indispensable condition precedent to its lawful organization.
We advise judgment for the plaintiffs.
In this opinion the other judges concurred.