Craw v. Easterly

Johnson, J. This is a case without action, upon facts agreed upon by the parties under section 372 of the Code. The plaintiff asks for judgment against the defendant only, on the ground that he was one of the trustees of the “ Stevenson Manufacturing Company” during a portion of the year 1868, and up to the 1st of March, 1869. Hpon the facts agreed upon the corporation became indebted to the plaintiff on the 12th of January, 1869. The plaintiff has obtained a judgment upon the note given by the corporation for such indebtedness. — 518 — The corporation did not make or cause to be made, within twenty days after the first of January, 1869, a report as required by section 12 of the act of 1848, under which it was organized. (Session Laws of 1848, chap. 40.) Upon this default all the trustees of the corporation became jointly and severally liable for all the debts of the company then existing. The defendant is liable, therefore, and the plaintiff is entitled to the judgment asked for if the defendant was a trastee of the company at the time of the default in making the report. The question therefore is, whether the defendant was at the time a trustee in fact, and in law, of the corporation. The corporation was organized on the 29th of February, 1868; and in the certificate of organization the number of trustees was fixed at six, and the names of the six, who should be trustees for the first year, were designated. The defendant was not one of this number. One of the six named as trustees was Smith D. Wackman, who was a stockholder, and who had taken upon himself, with the other persons so named, the duties of trustee. In April, 1868, Wackman and the defendant negotiated for the sale of a portion of Wackman’s stock to the defendant, and the negotiation was completed, and the stock transferred on the books of the company to the defendant on the twentieth of May thereafter. Wackman retained the residue of his stock until the 1st of June, 1868, when it was transferred to another person. On the 5th of May, 1868, at a meeting of the stockholders of the company, held without any notice thereof, having been previously published, and at which Wackman was not present, a preamble and resolution was adopted declaring that Wackman had sold all his interest in the company and resolving, that his office of trustee was thereby declared vacant, and that the defendant was thereby appointed trustee to fill the vacancy. The defendant was present at this meeting and consented to the act of his appointment, and afterward met with the trustees and assumed to act with them as one of the trustees — 519 — until December, 1868, when he removed from the State to the State of Tennessee, where he resided until October, 1869. There can be no doubt upon these facts that the resolution of the fifth of May was a mere nullity. The stockholders had no power either to create a vacancy in office of trustee by declaring it in that way, or to fill a vacancy in that manner when created. The resolution could have no effect, either to confer upon the defendant the right to take part in managing and directing the affairs of the company as trustee, or to charge him with any duty pertaining to the office of trustee. There was, in law, no vacancy in the office, and the stockholders had no power to make one where it did not exist. Wackman had neither died nor resigned. The statute before referred to, section 1, provides, that the persons named in the certificate of organization as trustees, “ shall manage the concerns of the company for the first year.” By section 3 of the act, provision is made for the election of trustees by the stockholders, by ballot, after the first year. The same section also provides, that when any vacancy shall happen among the trastees by death, resignation, or otherwise, it may be filled for the remainder of the year in such manner as may be provided for in the by-laws of the company. In this case, as appears, the company adopted a set of by-laws, by which the annual election of trustees was fixed for the first day of March in each year, but in which no provision was made for filling vacancies. Wackman was a stockholder at the time the resolution was passed, and an acting trustee; and there was no provision of the statute, or any by-law of the company by which the office of trustee became vacant by transferring his stock after he was legally made trustee. The statute is imperative that the persons named in the certificate as trustees shall manage the concerns the first year. On the other hand, the defendant at the time of his pretended appointment was not eligible to thg office of trustee of the company — 520 — The statute, section 3, provides, that the trustees shall he stockholders; and, according to the facts agreed upon, the defendant did not become a stockholder until the twentieth of May, fifteen days after the adoption of the resolution by which it is claimed he was appointed. Before that he was only negotiating a purchase by which he might become a stockholder. The negotiation was not completed, and the stock transferred until the twentieth. The by-laws adopted provided, that no transfer of stock should be valid for any purpose unless it was in writing, and duly entered on the transfer book of the company. The case however states, that the negotiation for the stock was not completed until the day of the entry was made on the transfer book. It is clear, therefore, that the title to the stock did not vest in the defendant, even as between him and Wackman, until several days after the adoption of the resolution. The office, therefore, was not only not vacant, but the defendant was not eligible to it had it been so. And, in addition to this, the appointment, such as it was, was made in a manner unauthorized by the statute or the by-laws. Such an appointment can scarcely be called colorable. In order that an election or appointment shall give color of right, it must be under some semblance of legal authority. Here there was none whatever. It is true that a person by color of election, or appointment may be an officer defacto, though ineligible to the office, or though the office was not at the time vacant, but was then filled by an officer de jure. (Aug. & Ames on Corp., 274.) But a colorable election or appointment, I take it, means an election or appointment in some form known to the law for that office, and which confers an apparent or prima facie right. But granting that the defendant by reason of the appoint ment in that manner, and of his subsequent action in meeting with the trustees, and acting as one of them, became so far a trustee defacto, that his acts would be binding upon the cor: poration and upon himself, as.trustee, so far as he assumed to act in that capacity, it does not follow that he would be liable — 521 — to the plaintiff, or any other person similarly situated on a claim of the kind here made. The debt was against the corporation only. The relation of creditor and debtor was between the plaintiff and the company solely until after the default in making the report. After that time the trustees became liable by force of the statute. The statute creates and imposes the liability, in the nature of a penalty, for the neglect to perform a duty which it imposes. It requires a report to be made and published within twenty days after the first of January in each year of the condition and affairs of the company as therein specified, to be signed by the president and a majority of the trustees, and to be verified and filed; and then provides that “ if any of said companies shall fail so to do, all the trustees of the company shall be jointly and severally liable for all the debts of the company then existing,” &c. It has been held that this provision applies to such trustees only as have been guilty of the neglect of duty. (Boughton v. Otis, 27 Barb., 196 ; S. C. 21 N. Y., 261.) It has been already shown that when the stockholders undertook to appoint the defendant a trustee there was no vacancy to be filled. Wackman was then a trustee and the board was full. The number had been fixed, and neither the number, constituting the trustees, nor the individuals composing the body, could be changed in that way. It was the duty of those who were by law trustees to make the report, and not of persons who were not legally trustees. The defendant never became charged with the duty of making the report, and never had any legal right to join in it, or to sign it as trustee. The plaintiff’s right depends upon his being able to show that t3ie defendant was such a trustee as the statute contemplates, whose neglect to act would be a non-feasance. In order to make a party liable for a non-feasance, it must be shown that he has refused or neglected the performance of some act which the law made it his duty to perform. The statute provides who shall be trustees, and manage the concerns of the company for the first year; and the defendant — 522 — was not one of the persons. It was the duty of those, who ■ were made trustees by statute, to make the report which should have bee'n made. Those persons are liable to the plaintiff, jointly and. severally. As the defendant was not a trustee, within the contemplation and meaning of the statute, he is not amenable to the penal imposition of the liability. As was said by Denio, J., in regard to the provision in question, in Garrison v. Howe (17 N. Y., 466), “the provision is highly penal, and the rules of law do not permit us to extend it by construction to cases not fairly within its language.” There is no question of estoppel in the case. It does not appear that the plaintiff dealt with the company, or gave it credit, on the faith of the defendant being one of the trustees. The question, lying at the foundation of the plaintiff’s claim, is, whether the defendant was a trustee of the company for the first year, and charged by statute with the duty of making the report. Even if he might be estopped from disputing the validity of his acts as trustee, so far as he did act, there is nothing in the principle of estoppel to prevent his denying that he had any right, or was under any obligation, to go further, and continue to act as trustee through the year. I am clearly of the opinion that the defendant never became trustee; that he never acquired any right or title to the office; and,- consequently, was never under any duty or obligation to perform the acts required by the statute to be performed by the trustees of the Company. The defendant must, therefore, have judgment for his costs. Mullin, P. J., agrees. Talcott, J., dissents, on the ground that the defendant is estopped from denying that he was such trustee. " ■ Judgment for defendant.