INTERNATIONAL BANK V. FABER.
INTERNATIONAL BANK OF ST. LOUIS v. FABER, (Circuit Court of Appeals, Second CircUit. No. 66. March 3, 1898.)
When the report' filed by a corporation, pursuant to section 30 of the New York stock corpQrati.on law, Is signed by the proper officers, and verified by their oath, the fact that the jurat Itself Is not signed by them does not make the report defective, so as to make the officers and directors personally liable for corporate debts. 79 Fed. 919, affirmed.
SAME-NUMBER OF DIRECTORS SIGNING.
TO STATE OFFICERS-JURAT.
Where the number of directors has been reduced by a change In the bylaws, the signing of the report by a majority of the reduced number is sufficient, though no certificate of the change has been filed in the proper office.
SAME-VACANCY IN OFFICES.
Where there is a bona fide temporary vacancy in the offices of secretary and treasurer, it Is sufficient that a report, complete in all other respects, is verified only by the president, who is also discharging the duties of secretary , and treasurer. 79 E'ed. 919, affirmed.
SAME-RESIGNATION OF OFFICER.
In the apsence of statutory regulations, the resignation of an officer of a corporation takes effect on his delivery of his written resignation to the president, and before acceptance thel-'eof by the board of directors.
In El'l'or to the Circult Court of the United States for the Eastern ' District of New York,
This is a writ of error from a judgment of the circuit court for the Eastern district of New York. action was tried and the facts were specially found by the court, a jury having been waived by written stipUlation signed by the .attorneys for the respective parties. The F. J. Kaldenberg Company, a corporation organized under the laws of the state, of New York, and located in the county of Westchester, made five 'notes in December, 1892, and in January, 1893, amounting in all to $9,500, and each one of which matured in four months from its date. These notes were discounted for the benefit of the maker by the plaintiff, the International Bank of St. LOUis, a banking corporation located .at St. Louis, in the state of Missouri, and nothing has been paid thereon except a part of the first note. The Kaldenberg Company was dissolved by decree of the proper state court on September 21, 1893. At its incorporation it had 11 directors, but in the year 1890 the number was reduced to 7 by a change in the by-laws. It did not appear whether a certificate of this change was filed either in the office of the clerk of Westchester or in the office of the secretary of state. During the years 1892 and 1893 the defendant, Eberhard l!'aber, was a director of the company. In April, 1891, he was chosen by the board of directors secretary and treasurer, and in October, 1891, both orally and by a written resignation delivered to the president of the company, he resigned both offices, and thereafter ceased to act in either capacity. After his resignation no meetIngs of the board or of the executive committee were held until February 29, 1892, during which time the duties of secretary and treasurer, so far as they were performed, were carried on by F. J. Kaldenberg, the president of the company. His resignation was formally accepted by the company at the meeting of the board of directors held on the 29th day of February, 1892, at which meeting a quorum was present, and a new treasurer was appointed. I<'our directors constituted a quorum, and by the by-laws it was provided that the acts of the executive committee, of. which two constituted a .quorum, should have the same power and effect as the proceedings of the board' .of directors, when it was not in session. Three of the directors and of the executive committee were habitually present in thfl factory during business hours, and the defendant was habitually at his office in the city of New York. On January 18D2, the company dUly made and filed il:: the offices of the secretary of state of York and the clerk
86 FEDERAL REPORTER., , ,cq
reports compIled with the statutes In all respects as to the contents thereof, and contained all the information ,required to be contained therein. These reports were signed' by F. J;. Kaldenberg, as president of 'the company, and, by five of Its directors. and were duly verified by the oath of the said Kaldenberg, president. The verification of the report filed in the office of the secretary of state was not signed by said Kaldenberg. No other reports were made or filed by the company during the month of January, 1892, or during the'year ,1892. or until the 31st day of January, 1893, when' reports were fiied by it complying in all respects with the law. The reports fiIedon JannalJ.1y29, 1892, were made and filed by the company III good faith. and in an honest t6comply wIth the law' as It uhderstood It; and in verifying sald lreports Kaldenberg believed that the law only reqUired' a verification by the president. The resignation of the defendant as secretary and treasurer of the company was made in good faith,'and was not made with reference to, or in contemplation of, the making and filing of reports or of the creation of the company's' indebtedness to this plallltiff. By a statute of the state of New York, amended on January 14, 1892, every stock corporation, except money-ed and, railroad corporations, is required to make a report annu,ally In January, or, if doing business without the United States, before, the 1st day qf May, which,shall state the facts designated by the statute. "Sllch report s1:lall, I:>e signed by a majority of its directors, and verified by the oath of the president or the vice president and treasurer or secretary, and filed In the office of the secretary of state, and in the office of the county clerk of the coup.ty where its principal business office may be ,located. If such report is not so made and lj:led, all the directors of the corporation shall jointly and severally be personally'liable for all the debts of the corporation then eXisting, and for all contracted before such report shall be made." The suit was brought to compel Faber to pay the amount due upon the notes, upon the ground that the report required by the statute in 1B92 had not been made and filed. The circuit court entered judgment for the defendant.
of the county of Westchester annual reports, as requIred by law, whlch sald
Robert D. Murray, for plaintiff in error. Benjamin F. Tracy, FI:ancis Forbes, and Charles T. Haviland, for defendant in error. ' Before WALLACE, LAOOMB.E,and SHIPMAN, Oircuit Judges.
SHIPMAN, Circuit Judge (after stating the facts). The plaintiff bases the allegation that the 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 Ilotdenied thathetook 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. Mi11ius.v. Shafer, 3 Denio, 60; Jackson v. Virgil, 3 Johns. 540; Bonnell 80 N. Y. 128.' , 2. Because the report was not sigued by six directors. The company originally had 11 directors, but in ISBO 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's report, which was filed un. dera similar statute, was treated by Chief Justice Ruger in Wallace v. Walsh, 125 N. Y. 26, 25 N. E; 1076, at length, and with more patient deliberation than one wollld now think it was entitled to receive. He said:' ,
a board of trustees, in part authorized by the corporation, and haVing possesslOn of lts property and franchises and undisputed control in the management of its affall'S, has filed and published within the time limited the report re-
qUiredby the statute, certified by a majority of such board, and verified by the ,president, it has, we think, complied 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 secl'etary by actual appointment, it is said that Faber was still secretary because his resignastion had not been accepted, and his verification was therefore nec' sary. His term of office was not regulated by statute, and the manner by which a resignation must take effect had not been prescribed. Under such a state of facts, that his resignation was effective, though not accepted by the board, has been sufficiently established by the authorities. Briggs v. Spaulding, 141 U. So 132, 11 Sup. Ct. 924; 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 aU 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 board 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 be verified by a secretary or treasurer. The directors should therefore have elected sollie one to the vacant office. Not having done 80, 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 verification by a member of two classes of officers, if such classes existed. The president supposed that if he, 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 to 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 take 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 sundl'S 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
86 :FEDERAL REPORTER.
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 necessiu'y 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 differell,t sets of conclusions maybe drawn from them.; It is as easy to infer thaLthe executive officers .decided to do all the work them· selves for a time, or that they were unable to find a per,son 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 beHeved 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 veri· fied 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 :asubstantial 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, 1893, soonl,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. :aJheir action in January, 1892, was a substantial oompliance under the existing cir.cumstances at that time. There ate two conflicting opinions in the supreme court of the state of New York upon 'a corresponding state of facts. The case of Shultz v. Ohatfield, 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,whHe.in·the case of Noble v,. Euler, 47 N. Y. Supp. 302, 20 App. Div. 5.48, 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. WALLAOE, Oircuit Judge.'I'here 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 toauthol'ize the con· 'elusion that a verification made by the president alone, when the cor· 'poration does. not have a treasurer Or secretary, is a sufficient compli. ·ance with its requirements. Jones v,. Butler, 146 N. y. 55, 41 N. E. 633; Wallace v. Walsh, 125N. Y. 26,;25 N. E..1076; Gold v. Olyne, 134 N.Y. 262, 31 N. E. 980; Noble v.Euler"W App; Div.648, 47 N. Y. Bupp.302.
CLARK et aI. v. GEER. (Clrcnlt Court of Appeals, Eighth Circuit. March ,21, 1898.) Nos. 972 and 973.
CARRIERS'-:SPECIAL PASSENGER CONTRACT.
Where a cattle dealer purchases a ticket to ride on a freight train on con. dltlon that the company shall not be liable to him In, any manner as a passenger, or for any accident resulting to him, or liable to him for Injury to person or property, unless caused by the gross negligence of the company, the llabillty In no case to exceed $1,000, such agreement shows that be was contracting solely with reference to a liability to hImself, and not with reference to the statutory liability of the carrier to others In case of his death through the wrongful aCt of the carrier.
, Where the trains of one company, In charge of Its own run over the of another company, under contract that they shall obey the orders of the train dispatcher of the latter company, sUch contract does not releaSe the company so using the track from liability for Injuries caused by the negli'genceof Its emploYlls. A master cannot claim exemption from liability for damages occasioned by the negligent act of his servant committed while In his Immediate service, and doing his work, merely' becanse he has empowered a thIrd party to give that sel"Vant directions, relative to certain matters connected with the doing of the work.
.. RESPONDEAT SUPERIOR.
In Error to the Oircuit Oourt of the United States for the District of Kansas.
Arthur C. Geer; as admIhlstrator'of William A. Geer. deceased, the defendant In error, sued the receivel'S of the Union Pacific: Railway Company, hereafter termed the "U. P. Company," and the Chicago, Rock Isiand & Pacific Railway Company, l\ereafter termed ,the "'R. 1. Company," they being the respective plaintiffs in error, on account of the death of his Intestate, who was killed in a railway collision which occurred on 'January 2, 1894; at Linwood, on the line of the U. P, Company, between Kansas City and Topeka, Kan. The deceased was, at the time of the coll,islan,a passenger on a freight train of the U. P. Company, whIch, was run Into at the rear end by, a freight train of the R. I. Company. Both trains b.e.tween which the collision occurred were at the time traveling east over the 'same' track. Both companies' operated their freight and passenger trains between Topeka and Kansas "City" Kan., over the track of the U. P. Company, under an arrangement existing between, them which is hereafter referred to. The petition in the case averred that the death of the deceased was occasioned by acts of negligence on the part of both railway companies, and that the negligence of the R. 1. Company consisted, in part, 'In the failure of its engineer in charge of its freight train to keep a proper lookout ahead, and a. failure on his part to discover at an earlier moment, as he ought to have done In the exercise of ordinary care, the red lights of the rear end of th'e U. train, which was run into. and on which the deceased was riding wheli he was killed. There was considerable evidence tending to support this cha'rge o,fneg)igence against the R. 1. Company. There was a verdict and judgment against. both companies for the sum of $6,000. To reverse that judgment e!ich company, for reasons whIch will hereafter appear, sued out a separate writ of error, but both cases are before us on a single record.
N. H. Loomis (A. L. Williams and R. W. Blair, on the brief), for the receivers. M. A. Low (W. F. Evans, on the brief), for Chicago, Rock Island & Pacific Railway Company. Waters & Waters and RG. Laing filed brief for administrator. Before SANBORN and THAYER, Circuit Judges.