Providence Steam & Gas Pipe Co. v. Connell

MERWIN, J. This action is brought by a creditor of a stock corporation to enforce the liability of a director for failure to file an annual report, as required by section 30 of the stock corporation law (chapter 564 of the Laws of 1890, as amended by chapter 688 of 1892). The main questions here are (1) whether the plaintiff itself, being a foreign corporation, has capacity to sue; and (2) whether the debt of the plaintiff is within the provision of the statute making the directors liable “for all the debts of the corporation then existing, and for all contracted before such report shall be made.” The plaintiff, at the time of the transactions in question, was a foreign manufacturing stock corporation, organized several years before, under the laws of the state of Rhode Island. It was doing business within this state, and has not at any time filed in the office of the secretary of • state the proofs required by section 16 of the general corporation law (chapter 563 of 1890, as amended by chapter 687 of 1892), and procured the certificate required by section 15 of that act. The Syracuse Bamboo Furniture Company is a manufacturing stock corporation incorporated on the 19th August, 1891, under the provisions of the business corporation law (chapter 567 of 1890), and the defendant is, and has been since its incorporation, one of its directors. Its business was carried on first at Syracuse, and afterwards at Baldwinsville, in this state. On the 12th April, 1892, the plaintiff and the furniture company entered into a contract in writing by which the plaintiff agreed to supply to the factory of the furniture company, at Baldwinsville, a system of automatic fire extinguishers, for the price of $950, which the company agreed to pay. The plaintiff completed the contract on its part on or about July 14, 1892. On December 9, 1892, the furniture company, for the price stated in the contract, gave to the plaintiff three notes, dated that day, for $300 each, and payable, respectively, in one, two, and three months from date, with interest, and the balance of the price was paid in cash. The first of these notes was paid at maturity, upon the second there was paid $103.20, and the balance of that and the. third note has not been paid. On the 17th June, 1893, the plaintiff recovered a judgment against the furniture company for the balance due on the notes. It was found by the special term that the notes were made and accepted in full payment and settlement of the plaintiff’s claim, and that it was so [484] agreed between the parties. The furniture company did not in January, 1892, file any annual report, as required by section 30 of the stock corporation law; and it filed none until January 31, 1893, at which date it filed its report in the office of the clerk of Onondaga county, and on the 1st February a duplicate was filed in the office of the secretary of state. This report was verified by J. 0. Kenyon, who deposed that he was the vice president and treasurer of the company. Section 15 of the general corporation law is as follows: “Sec. 15. Certificate of Authority of a Foreign Corporation. No foreign stock corporation other than a monied corporation, shall do business in this state without having first procured from the secretary of state a certificate that it has complied with all the requirements of law to authorize it to do business in this state, and that the business of the corporation to be carried on in this state is such as may be lawfully carried on by a corporation incorporated under the laws of this state for such or similar business, or, if more than one kind of business, by two or more corporations so incorporated for such kinds of business respectively. The secretary of state shall deliver such certificate to every such corporation so complying with the requirements of law. No such corporation now doing business in this state shall do business herein after December 31, 1892, without having procured such certificate from the secretary of state, but any lawful contract previously made by the corporation may be performed and enforced within the state subsequent to such date. No foreign stock corporation doing business in this state without such certificate shall maintain any action in this state upon any contract made by it in this state until .it shall have procured such certificate.” Section 16 states what proof shall be filed with the secretary of state before he shall grant the certificate. These two sections were not in the law of 1890. The act of 1892 (chapter 687) was passed May 18,1892, and took effect 20 days after its passage, except as therein otherwise provided. So that when the contract was made between the plaintiff and the furniture company, the capacity of the plaintiff to sue was the same as that of a domestic corporation. Code Civ. Proc. § 1779; Demarest v. Flack, 128 N. Y. 205, 28 N. E. 645. It was doing business in the state when the act of 1892 took effect, and it is expressly provided, in section 15, that: “No such corporation now doing business in this state shall do business herein after December 31,1892, without having procured such certificate from the secretary of state, but any lawful contract previously made by. the corporation may be performed and enforced within the state subsequent to such date.” This, in effect, provided that a corporation in the situation of the plaintiff had a right to go on with its business in the ordinary way, without a certificate, up to and including December 31, 1892, and after that date perform and enforce any lawful contracts previously made, but that if, after that date, it desired to do business beyond the performance and enforcement of previous contracts, it must have a certificate. The last clause of the section was not intended to change these provisions, but was applicable to cases where corporations were doing business in defiance of the law, and it provided that contracts made by them when so acting could not be enforced until the certificate was procured. See White, Corp. Law, 21. This [485] action of the plaintiff is not, strictly speaking, upon any contract made by it (Stokes v. Stickney, 96 N. Y. 323; Carr v. Risher, 119 N. Y. 117, 23 N. E. 296), but assuming it is, in substance, an action to enforce its contract with the furniture company, the inhibition in the last clause of the section does not, we think, apply. The plaintiff had a right to carry on its business when the contract and notes were made, and it was not the design of the statute to interfere with the ordinary remedies in such a case. We think, therefore, the plaintiff had capacity to sue. The defendant further claims that he is not liable because the notes that represent the balance of the debt due to plaintiff were not either of them due until after the annual report was filed, on January 31, 1893. The plaintiff says the debt was contracted before, and that was enough. The position of the defendant is based on the idea that the debt for the contract price of the articles supplied by plaintiff, which had been due for some time before the giving of the notes, was satisfied by the notes, so that a liability against defendant cannot be predicated on the original debt. It is not entirely clear that the evidence authorizes a finding that the notes were received in satisfaction of the prior debt (Carroll v. Sweet, 128 N. Y. 21, 27 N. E. 763), but assume that they were. Then we have the case of a debt contracted on December 9,1892, but not due until after January, 1893. Is the defendant relieved of liability because the debt was not due during the existence of the default in filing the report? Jones v. Barlow, 62 N. Y. 202, is cited on both sides. That was an action to enforce the liability of a trustee under the general manufacturing act (chapter 40, § 12, Laws 1848), by reason of failure to file an annual report in January, 1871. A report was filed in January, 1872. See Jones v. Barlow, 38 N. Y. Super. Ct. 143. The plaintiff in 1871 sold goods to the corporation, for which in December, 1871, the corporation gave its notes, on time. On 6th June, 1872, these notes were taken up, and 10 new ones given, severally maturing, the • first one month from date, and the others, successively, at intervals of one month. The action was commenced February 7, 1873, and at that time three of the notes were not due. The court below sustained a recovery for the full amount of all the notes, but the court of appeals held that the recovery must be limited to the amount due when the suit was commenced. It was not decided that a debt must become or be due during the existence of the default in filing the report, in order to be recoverable. On the contrary, Judge Allen, at page 206, says: “It would not be contended by any one that, for merchandize sold the corporation upon an agreed credit, while the trustees are in default for not making the statutory report, an action would lie against the trustees at once, and before the expiration of the term of credit. The law does not vary the contract of the parties, or absolve either from its performance, or an observance of its terms. In such cases there would be a liability, but it would be dormant, and not constitute a cause of action until the debt shall become due.” The case of Arms Co. v. Barlow, 68 N. Y. 34, does not help the defendant. That was the case of an executory contract for the delivery of a certain quantity of locks; and it was not shown that, dur [486] ing the existence of the default in filing the report, there had been any such performance as created an obligation to pay either presently or in the future. It seems to have been conceded that if there had been a performance an indebtedness would have existed, within the statute, although the corporation had a term of credit for the price. In Vernon v. Palmer, 48 N. Y. Super. Ct. 231, it is said that the true doctrine is that a debt is contracted when, in consideration of value received by the corporation, a payment is to be made, no matter whether at once, or at a future period. See, also, Carr v. Risher, 50 Hun, 148, 2 N. Y. Supp. 792. We are of the opinion that the debt to plaintiff is within the statute. It was contracted during the existence of the default, and the fact that the notes of December, 1892, were not due when the report of 1893 was filed does not relieve the defendant. The debt was contracted, and so within the statute, though not due. All the notes became due long before the present action was commenced. An extension of time by the corporation would not discharge the defendant, though it would postpone the remedy. Jones v. Barlow, supra. The obtaining of a judgment by the plaintiff against the corporation did not affect the defendant’s liability, as the debt was not. paid. Deming v. Puleston, 35 N. Y. Super. Ct. 309, 314, affirmed in 55 N. Y. 655. These considerations lead to the conclusion that the complaint was improperly dismissed. Judgment reversed, and new trial ordered; costs to abide the event. All concur.