Opinion
May, 1905.
Theodore Prince, for the appellants.
Fancher Nicoll, for the respondent.
The plaintiff in August, 1899, sold and delivered to the Powell Brothers Company, a domestic corporation, a quantity of meat of the value of $414.26. The corporation failed and neglected to pay the purchase price and thereupon this action was brought and a recovery had against the appellants upon the ground that they were liable for such debt, inasmuch as the corporation failed to file an annual report on or after January 1, 1900.
The appellants concede that the Powell Brothers Company became indebted to the plaintiff in 1899; that such debt remains unpaid and that no report of any kind was filed either by the corporation or its directors on or after January 1, 1900. They contend, however, that notwithstanding such fact they are not liable for such debt for the reason that the corporation was at the time engaged in a foreign business and was not obliged to file a report for the year 1899 before April 30, 1900, before which time they had both ceased to be directors and there was no obligation upon them to thereafter see that a report was made and filed.
The statute under which it is sought to make the appellants liable is section 30 of the Stock Corporation Law (Laws of 1892, chap. 688, as amd. by Laws of 1897, chap. 384), which reads as follows: "§ 30. Annual Report. — Every domestic stock corporation and every foreign stock corporation doing business within this State, except moneyed and railroad corporations, shall annually during the month of January or if doing business without the United States before the first day of May make a report as of the first day of January, which shall state," etc. Then follows a statement as to what the report shall contain and a provision making the directors of the corporation jointly and severally personally liable for all the existing debts of the corporation and for all debts contracted before such report shall be made in case such report is not so made and filed. This statute, like all similar ones which impose upon directors a liability for failure to file reports, is penal in character and as such is to be construed strictly in favor of the directors. ( Manhattan Co. v. Kaldenberg, 165 N.Y. 1; Wallace v. Walsh, 125 id. 26; Whitney Arms Co. v. Barlow, 68 id. 34.)
Keeping this in mind, I do not see how the appellants can be held liable in view of the undisputed facts set out in the record, which are that "the Powell Brothers Company did a meat and poultry business within the United States and a poultry and game business in England, Canada and Germany;" that it did a large business with Musson Co., of Liverpool, England; that its secretary and treasurer went to England in 1899 and established an agency; that the corporation dealt with Thomas Derry Co. of Montreal and also with Ingraham Block of Hamburg, Germany. These facts being uncontradicted, the corporation was clearly, during the year 1899, doing business without the United States, and, therefore, it had until the 30th of April, 1900, in which to file its report for the preceding year. A reasonable construction is not only to be put upon the words "doing business without the United States," but such words must also be construed with reference to the object sought to be accomplished by the statute requiring stock corporations, other than moneyed and railroad corporations, to file an annual report as of the first day of January. It appeared that each of the appellants resigned as director prior to the 21st of April, 1900. The trial court found that Elmer E. Hand was a director from the 21st of March, 1899, to the 21st of April, 1900, and that Eleanor M. Hand was a director from the 1st day of March, 1899, to the 1st day of March, 1900. At the time, therefore, that the appellants ceased to be directors the corporation was not in default in making its report for the year 1899 and they could not be made liable because it thereafter failed to file such report. After they ceased to be directors they could not make and file a report and they were under no obligation to see that one was made and filed.
It has been held that a plaintiff cannot maintain an action of this character unless three things coexist: The default in making the report; the fact that at the time of such default the defendants were trustees or directors, and a debt due from the company. ( Jones v. Barlow, 62 N.Y. 202; Wood Selick v. Vanderveer, 55 App. Div. 549.) On the 30th of April, 1900, the last day on which a report for the year 1899 could have been made and filed, these three things, so far as the appellants are concerned, did not coexist, because they had ceased to be directors of the corporation. This being so, they could not be made liable for a debt of the corporation on the ground of its default in making and filing an annual report for the preceding year.
The judgment appealed from, therefore, must be reversed and a new trial ordered, with costs to appellants to abide event.
VAN BRUNT, P.J., PATTERSON, INGRAHAM and LAUGHLIN, JJ., concurred.
Judgment reversed, new trial ordered, costs to appellants to abide event.