Court Opinion

ID: 5183878
Source: CourtListenerOpinion
Date Created: 2022-01-06 04:45:45.905687+00
Date Added: 2024-06-11T08:26:40.261615
License: Public Domain

Ingraham, J. (dissenting):
The court below directed a verdict for the plaintiff which imposed upon the defendants a liability for a debt of this corpora*36tion, of which, the defendants are directors, upon the ground that ■the defendants were subject to the penalty provided for by section 30 of the act in relation to stock corporations, being chapter 564 of the Laws of 1890, as amended by chapter 2 of the Laws of 1892. This penalty is sought to be imposed upon these defendants as directors of the corporation, although a report was filed which complied in all respects with the statute, except that the report was verified by the oath of the president alone. The evidence clearly established that the defendants endeavored in good faith to comply with this law. They filed a report containing the' statements required by the act in question. It was signed by a majority of the directors of the corporation, and was verified by the oath' of the president. It is not alleged that such report was, in any respects, incorrect;' that it failed to give to the plaintiff and to the public the information required by the statute, or that the plaintiff has sustained any injury in consequence of the fact that the report was verified by but one officer of the corporation. It also appears that the report, before it was filed, was submitted to the counsel for the corporation, and was approved .by him. There is nothing to question the good faith of these defendants, or their endeavor to comply with the law, and this judgment subjects the defendants to the imposition of a penalty in a very large amount, because of the fact that, by a recent change of the laws, the report was required to be verified by other officers of the corporation as well as by the president. “ The purpose of the provisions of the statute is to inform the public and those interested in the .affairs of the company of its financial standing- and condition from time to time. And when such information has been published, in good faith, in the manner and form pointed out by the statute, the trustees have done all ■ that was in their power to comply with the provisions of the statute and to avoid the incurrence of a penalty for the non-performance of the duty imposed.” (Wallace v. Walsh, 125 N. Y. 26.) The statute referred to required every stock corporation, annually, during the month of January, to make a report as of the first day of January, which shall state the amount of its capital stock, the nature of its existing assets and debts, the amount of its debts,, the amount of its assets and the names of its then stockEol'ders. .Such report must be signed by a majority of its stock*37holders and verified by the oath of the president or vice-president, treasurer or secretary, and filed, as provided for by the statute. The court below held that, by the provisions of this- section of the statute, this report is required to be verified by two officers, either the president or vice-president, and either the treasurer or secretary. The statute, in imposing the penalty, does not. expressly say that an unverified report shall impose this penalty upon the directors. It-says that every stock corporation shall make a report, which shall contain the information before "mentioned, and that such report shall be signed by a majority of the directors and verified. The provision imposing the penalty provides that if such report is not so made and filed, all the directors of the corporation shall be jointly and severally personally liable for all the debts of the corporation then existing. It is a matter of some doubt whether the making of the report included its verification, as by the provisions of the statute the making and verification of the report appear to be distinct acts, and the provision imposing the penalty does not in express terms provide that a failure to verify the report, as required by the statute, shall impose this penalty upon the directors of the corporation. From the terms of the statute it is also somewhat uncertain as to what was intended by the provision as to the verification of the report. The act, in its present form, is contained.in an amendment to the law as-originally passed. (Chap. 2, Laws of 1892.) The act of 1890 provided that this report shall be verified by the oath of the president and treasurer In 1892 that was amended by requiring it to be verified by the oath of the president or vice-president, and treasurer or secretary. The act of 1848 required the report to be verified only by the oath of the president or the secretary; but, by the passage of the Stock Corporation Law in 1890, it seems to have been the intention of the Legislature to require a double verification; and it is insisted that the amendment of 1892 still continued the necessity of a verification by two officers of the company. The language used, however, is not clear, and its construction must largely depend upon the punctuation. It is claimed by the defendants that this provision of the act is satisfied by the oath of the president, as it was intended that his oath should be sufficient, or, if his oath was not forthcoming, then the report should be verified by the vice-president and either the treasurer or secretary. If there had been a comma after the word *38“ president,” in the act as passed, 1 think the act would bear that construction. Certainly-the provision of the statute is not entirely clear.
, Assuming,- however, that this statute does impose the penalty in ease a report is filed, which is not verified as therein required, and that the statute requires that the report should be verified, not only by the oath of the president or vice-president, but also by the treasurer or secretary, it does not -seem to me that it could have been the intention of. the Legislature to impose upon the directors of a corporation of this kind this extréme penalty, in. a case where it was impossible to comply with the provisions of the statute, because there were not in existence the officers whose verifications to the réport was required. There is no provision in the act under which this defendant was incorporated which requires it to have any particular officers. No penalty is imposed upon a corporation organized under this statute for its failure to elect any officers to the corporation. The corporation was organized under chapter 40 of the Laws of 1848. By section 3 of that act it is- provided that such corporation shall be managed by not less than three nor more than nine trustees. By section 5 it is provided that there shall be a president of the company, who shall be designated from the number of the trustees, and also -such subordinate officers as the company, by its by-laws, may designate. Thus the corporation was required to have a president, but whether or not it should have other, officers, and their number, was left to the corporation itself. It appears, however, that by the by-laws of the corporation it was provided that the officers of the company should consist of a president, a vice-president, a secretary and treasurer,_ who should severally be appointed by the trustees, and who should hold office during the pleasure of the board. It further' appeared that prior to November, 1891, the defendant Eberhard' Eaber had been secretary and treasurer of the corporation, and that about the first of November lie wrote and delivered to the president of the corporation a letter which said : “ I resign as secretary and treasurer of the F. J. Kaldenberg Company, to take effect ■ immediately; ” that that letter was delivered to the president of the company about the first of November; was retained by the president in his possession- until the 29th of February, 1892, when the letter was presented to the trustees of the corporation, and was then acted upon and Faber’s successor as treasurer appointed. It *39also appeared that, between the time that this letter was delivered to the president of the company and the twenty-ninth, of February, when formal action was taken by the corporation, no meeting of the board of trustees was held, although several efforts were made to hold a meeting, as no quorum attended. The fact that this letter was written and delivered to the president, and was received'and accepted by him, was quite satisfactorily proved, although the original letter was not produced, it having been lost, but it was sworn to by both the secretary who resigned and the president who received it, and others who saw it, and the minutes of the company show that it was produced before tile board of trustees on the twenty-ninth of February and was then acted upon. There was also testimony to show that during this period the president of the company acted as secretary and treasurer, performing whatever duties were required by that officer until after the meeting of the board of trustees,' November 29, 1892.
We have thus the fact that a corporation, organized under a statute which required it only to have a president, and having, because of a resignation of its secretary and treasurer, neither of the latter officers— tire duty of such secretary and treasurer being performed by the president — upon being required by law,to make a report verified by the oath of the president and secretary or treasurer, attempted to-comply with the law by making the report required, verified by the only officer that the corporation had who was by statute required to verify it, which report was duly filed as required by the statute and accomplished the object for which the statute was passed, the officers of the corporation thus doing all in their power to comply with the statute. Is not such an act a substantial compliance with the statute ? I think it is. Looking at the object for which this statute .was passed, it would seem that this report provided the information required.It was made in good faith, intending to carry out the provisions of the statute. It was signed by those whom the statute required it' should be signed by, and was verified by the oath of the only officer then in office. To impose this penalty upon these defendants for not doing what it was impossible for them to do, viz., to have this report verified by the second officer, when there was no such officer, seems to to impose a penalty upon these defendants for the failure to do an act which, from the nature of the case, was impossible. Suppose-*40that this company had never had a secretary or treasurer, as it was not required to have by the statute under which it was incorporated, but that by the by-laws of the company the president was to perform the duties appertaining to such an office, could it be held for á .moment that these defendants would be liable for all debts of the ■company if the officer who performed all the duties of president ■and secretary and treasurer verified the report ? To hold that they would, would be to impose a penalty upon the directors for failing . to provide a treasurer or secretary, and yet no such penalty is imposed By statute. Looking ait this provision of the law and the object ¡sought to be attained by requiring, not only the president, the principal executive officer d'f the corporation, to verify the report, but its "treasurer or secretary, who must be presumed to have knowledge of the financial affairs of the company, and the exact amount of its •assets and indebtedness, what was evidently intended was, that the. •officers who could supjily the knowledge which was required to make the report and a complete statement of the facts required, should be responsible for the report itself by verifying it; but when it •appeared that one man was, in reality, the executive officer of the ■company, and also its treasurer and secretary, the object for which this double verification was required was attained, as the one man "who had the most complete knowledge of the affairs of the comjpany, and the only one who held an office in the company, except the trustees, had sworn to the truth of the statements contained in the report. The object of the statute would thus seem to have been ■complied with. At all events, the direction of the Legislature was. ■actually complied with so far as it was possible. ' The information ■ required to be given to the public was given. No injury has resulted to any one from the fact that an additional verification was not pirn vided, and it would seem to me that there was a substantial compliance with the statute. ■
This question was presented to the Appellate Division of this ■court in the second department, in Noble v. Euler (20 App. Div. 548). That was an action brought by a creditor of this corporation to recover from one of the defendants the amount of the. indebtedness due to him upon the ground that that report was not verified ¡as required by the statute. The question was referred to á referee, who found that the filing of this report was a substantial compli*41anee with the statute, and upon an appeal to the Appellate Division that judgment was affirmed upon the opinion of the referee. The question is very fully discussed in that opinion and I think was correctly decided. Another action brought by a creditor of this corporation against one of the directors, who was one of the defendants in this action, was before the United States Circuit Court in this district. (See International Bank v. Faber, 79 Fed. Rep. 919; affd. by Circuit Court of Appeals March 3, 1898.) There Judge Wheeleb held that there was a substantial compliance with, the statute, saying: “ The law does not require performance of impossibilities. The defendant could not after resignation reinstate himself as secretary or treasurer, and cannot be liable for not doing that. No secretary or treasurer could verify the reports, for there was none to do it. It ivas verified as the law required, so far as there were officers for the law to apply to, and beyond that the law would be as well attained by the verification made as by anything further in that direction.” While these authorities are not controlling iipon us, they are at least entitled to respect, and I do not think that we should deliberately disregard the opinion of a branch of this court sitting in another department upon the exact question presented here which seems to have been deliberately considered and carefully decided. But, independent of those decisions, I think, applying the principle established in this State, that they were correctly decided. This statute imposing this penalty has been discussed in many cases by the Court of Appeals. Attention has again and again been called to the fact that it is a penal statute imposing severe penalties and is to be strictly construed, As was said by the referee in his opinion in the case of Noble v. Euler (supra), which was adopted by the Appellate Division in the second department, “ the policy of the law is neither to punish an honest mistake in the interpretation of a statute, nor the shortcomings of an innocent and willing officer who has to the full extent of his power conformed to the statute.' And I do not think it can be said that this defendant was bound, at his peril, to act under such final clause, inasmuch as a report was made and verified to the extent of the possibilities, and was, therefore, not a nullity. Therefore, there was neither refusal nor neglect within the meaning of this provision.”
*42The case of Wallace v. Walsh (supra) seems to me to be a direct authority in favor of the sufficiency of this report. In that case it was claimed that the requirements of the statute were not complied with, because such report was not signed by a majority of the trustees whom the company was authorized to elect ■ under its charter, and that the'trustees signing did not constitute a majority of such theoretical number. . It appeared, in that case, that the certificate of incorporation provided that the number of trustees to manage the concerns of the company for the first year should consist of twelve, but that since the year 1885 the stockholders had, in fact, elected but nine trustees. The number signing the report was six, and because six is not a majority of twelve it was claimed that the trustees became liable for the debts of the corporation as a penalty for an omission by the company to make reports. In that case the legal number of trustees was twelve. No certificate reducing that number had been filed as provided ^or by law, and this report did not strictly comply with the statute, as it was not signed by a majority of the trustees that 'the Company was required to have under its charter. The company had attempted to reduce the number of its trustees, but it was thus as much the duty of the stockholders of this corporation to elect twelve trustees as it was the duty of the trustees of this corporation to elect a secretary and treasurer in place of the one who had resigned. Yet the court held that such a certificate signed by six trustees was a substantial compliance with the statute. In discussing the question the court say : “ Whether an omission by the stockholders at an annual meeting to elect a full board, under any circumstances, would create a vacancy which might be supplied by the trustees under the by-laws, is a matter of some doubt, but in a case where the. board. itself is constituted under a declaration on the part of both stockholders and trustees that a full board should consist of nine members only, and.nine, only were elected, we think it would be a clear case of usurpation for a board so constituted to declare the existence of vacancies, and of its own motion appoint additional trustees to fill such vacancies. It cannot, we think, be doubted, but that the proceedings referred to, concurred in by every one having an interest' in the corporation or its affairs, effected a practical reduction of the number: of its trustees and constituted the nine thereafter elected, a de jure, *43as well as a de facto board, entitled to act for the corporation in transacting its business until some party, whose interests were affected, should raise the question in a direct proceeding -to question the exercise of such authority.” Then the court say: “ So far as the plaintiff and the public were concerned the whole object and purpose of the statute was accomplished by the reports published, and no one has been injured or aggrieved, either by what has heretofore been done .or omitted by the corporation. The purpose of the provisions of the statute is to inform the public and those interested in the affairs of the company of its financial standing and condition from time to time. And when such information has been published in good faith in the manner and form pointed out by the statute, the trustees have done all that was in their power to comply with the provisions of the statute, and to avoid the incurrence of a penalty’ for the non-performance of the duty imposed.”
•' It seems to me that this rule .as here stated applies to this case. The condition here was that, although a secretary and treasurer had been elected, the duties of the office were principally performed by the president. In the meantime the secretary and treasurer refusing longer to eon tin ue in office had resigned, and by that resignation the office was vacant. It had no incumbent, the president of the corporation performing the duties. In this condition it became the duty of the corporation to file a report verified by the oath of its president and secretary or treasurer. It performed that duty as well as it was able. The report was signed by a majority of the trustees. It was verified by the only existing officer of the corporation. The duty was imposed upon the corporation, not upon its officers, to make the report and this corporation did perform this duty; and where the corporation has performed this duty imposed upon it by statute, so far as it was possible for it to comply with the statute, .and filed a report which, in all respects, followed the provisions of the statute, except so far as the existing conditions rendered it. impossible, and where no injury resulted to any one because of the-variations rendered by the existing’ circumstances necessary, I do not think that in enforcing a penal statute a construction should be given to it which will’ impose a penalty which it was impossible to-avoid. The fact that the verification of the report, as filed in the office of the Secretary of State, was not signed by the officer verify*44ing it, would not of itself make the-report a. nullity. The name of the. officer appeared in the verification as being the person who was •duly sWorn. His oath was attested by the notary piiblie before whortí it was taken, and there is nothing in the statute which requires the verification to be subscribed by the officer making it. It is enough if the' report itself is verified, and the certificate of the notary before whom .such verification was had is evidence of such, verification.
The plaintiff .attacks the good faith of this resignation, of the, secretary and treasurer, but the evidence was express and ilncontradicted that the letter.of resignation was delivered to and accepted by the president about the 1st day of November,. 1891; and it is clear that from that time on the office was.vacant.
. The counsel for the defendants expressly requested the court to •charge the jury that if if believed the testimony of the witnesses to the effect that a letter was written by Mr. Faber, ¡addressed to'the •corporation .in the fall of 1891, in which he tendered his resignation •as secretary and treasurer of the corporation to take effect immediately, and that such letter was delivered by Mr.. Faber to the presi■dent of. the company for the purpose of effecting such resignation, then- the jury should find for the defendants. That request was refused, and to such refusal to charge the defendants excepted.. I think the defendants were entitled to have this request charged,- and ■that,, for that reason, a new trial should be ordered;
I cannot concur, therefore, with. Mr. Justice Patterson in the ' affirmance of this judgment..
' McLaughlin, J., concurred.
Judgment affirmed, with costs.