International Bank of St. Louis v. Faber

SHIPMAN, Circuit Judge (after stating the facts). The plaintiff bases the allegation that the company did not make the report required by the statute upon three alleged defects: 1. Because the verification of the paper was not signed by the president. It is not denied that he took the oath, and that the magistrate certified to that fact, but it is said that he should have signed an oath. This criticism is frivolous. Millius v. Shafer, 3 Denio, 60; Jackson v. Virgil, 3 Johns. 540; Bonnell v. Griswold, 80 N. Y. 128. 2. Because the report was not signed by six directors. The company originally had 11 directors, but in 1890 reduced the number to 7 by a change in the by-laws, and thereafter chose only that number. Whether a certificate of the change was filed in the appropriate offices in Westchester county and at Albany is not known, but the actual number of directors who constituted the board was 7. The technical objection to the validity of a corporation’^ report, which was filed under a similar statute, was treated by Chief Justice Rugér in Wallace v. Walsh, 125 N. Y. 26, 25 N. E. 1076, at length, and with more patient deliberation than one would now think it was entitled to receive. He said: “Where a board of trustees, in part authorized by the corporation, and having possession of its property and franchises and undisputed control in the management of its affairs, has filed and published within the time limited the report re445 qiiired by tlie statute, certified by a majority of such board, and verified by the president, it has, we think, compiled with the letter and spirit of the law.” No argument is needed in support of this conclusion. 3. Because the papers were not verified by the separate oath of a treasurer or secretary in addition to verification by the president. To the obvious suggestion that there was no secretary by actual appointment, it is said that Faber was still secretary because his resignation had not been accepted, and his verification was therefore necessary. His term of office was not regulated by statute, and the manner by which a resignation must take effect had not been proscribed. Under such a state of facts, that his resignation was effective, (hough not accepted by the hoard, has been sufficiently established by the authorities. Briggs v. Spaulding, 141 U. S. 132, 11 Sup. Ct. 824; Olmsted v. Dennis, 77 N. Y. 378; Bruce v. Platt, 80 N. Y. 379; Van Amburgh v. Baker, 81 N. Y. 46. The remaining point in the case is this: Was the report, containing all the information required by the statute, signed and'verified by the president, who also acted, though not by vote of the board, as secretary and treasurer, and signed by a majority of the hoard of directors, all acting in good faith, a substantial compliance with the statute, there being, temporarily, no secretary or treasurer? The uniform course of decisions of the highest court of the state of New York has been not to give a harsh construction of this statute against persons who are sought to be brought within its penal provisions. Chase v. Curtis, 113 U. S. 452, 5 Sup. Ct. 554. To say that directors are liable for a part or all of the debts of an insolvent corporation, because, at the time of signing the report, an existing vacancy in the; offices of secretary and treasurer had not been filled, when the report was signed by the other requisite officers and was verified by the president, who was also the acting treasurer, savors of harshness. The main and strongest reason which is given by the plaintiff in favor of the defendant’s liability is as follows: The statute requires that the report should he verified by a secretary or treasurer. The directors should therefore have elected some one to the vacant office. Not having done so, they are guilty of laches, and must suffer the consequences of their neglect. It Is true, in our opinion, that the existing statute did require veri flea (ion by a member of two classes of officers, if such classes existed. The president supposed that if lie, as president, verified the report, the statute did not require an additional verification by another officer,— a construction which, while it may have been presented (o him as of authority, is not well founded. The next step in the argument is that the directors are bound to know the law. and are guilty of negligence in not having provided the corporation with an officer who was qualified to verify the report, and cannot hike advantage of the neglect to escape from liability. The circuit court did not find negligence. It found nonaction for about four months, and also found sundry facts from which it is said that laches or neglect must be inferred. It found that three of the directors and of the executive committee, two of them being the president and the vice president, were constantly at the factory during business hours. They were probably the managers of [446] the company’s business. It found that the president discharged the duties of secretary and treasurer, so far as they were performed, and believed that it was not necessary for such an officer to verify a report. It found that in February, 1892, a new treasurer was appointed. These facts are certain, but the necessary inferences are not so certain, and different sets of conclusions may be drawn from them. It is as easy to infer that the executive officers decided to do all the work themselves for a time, or that they were unable to find a person who was disposed to accept these offices, as that they were guilty of neglect in not more promptly filling the vacancy. The inference of blameworthy neglect stands before this court as it left the circuit court, — with an absence of finding upon the subject, — and the mere fact of temporary nonaction, when the president believed that there was no necessity to act, is not sufficient to entail upon the directors the consequences of noncompliance with the statutory requirements. We have, then, a report duly made and signed in all respects, except that it was verified only by the president, who also acted as secretary and treasurer during the temporary vacancy in those offices, and the question is whether such a report was a substantial compliance with the statute. The officers seem to have followed its terms as closely as they were able to do at the time, and when in January, 1898, soon after the debt originated, they had power to do more, and to verify by the oath of a treasurer, they complied literally with the statute. Their action in January, 1892, was a substantial compliance under the existing circumstances at that time. There are two conflicting opinions in the supreme court of the state of New York upon a corresponding state of facts. The case of Shultz v. Chatfield, 17 Misc. Rep. 264, 40 N. Y. Supp. 1081, affirmed in 12 App. Div. 625, 43 N. Y. Supp. 1164, holds that the directors were liable, while in the case of Noble v. Euler, 47 N. Y. Supp. 302, 20 App. Div. 548, upon the same state of facts which exists in this case, the decision is in favor of the directors. The judgment of the circuit court is affirmed, with costs of this court. WALLACE, Circuit Judge. There is some room for a construction of the statute by which it is satisfied by the filing of a report verified by the president alone, or by the vice president and the treasurer, or by the secretary; but, read in the light of the previous legislation, it should probably be construed as requiring the verification to be by the president or vice president and the treasurer or secretary. Upon this construction, were it not for the decision of the state court, I should be of the opinion that there should have been a judgment for the defendant. These decisions should be followed by this court. They adopt such a liberal view of the statute as to authorize the conclusion that a verification made by the president alone, when the corporation does not have a treasurer or secretary, is a sufficient compliance with its requirements. Jones v. Butler, 146 N. Y. 55, 41 N. E. 633; Wallace v. Walsh, 125 N. Y. 26, 25 N. E. 1076; Gold v. Clyne, 134 N. Y. 262, 31 N. E. 980; Noble v. Euler, 20 App. Div. 548, 47 N. Y. Supp. 302.