Chase v. Tuttle

• Decision Date: 29 February 1888
• Court: Connecticut Supreme Court
• Parties: CHASE et al. v. TUTTLE et al.

12 A. 874

55 Conn. 455

CHASE et al.

v. TUTTLE et al.

Supreme Court of Errors of Connecticut.

February, 1888.

Reserved case from superior court, New Haven county.

This was an action of replevin by Augustus S. Chase et al., trustees of Brown & Bros., an insolvent corporation, against Noah B. Tuttle et al.

S. W. Kellogg and C. R. Ingersoll, for plaintiffs. John S. Beach, D. F. Hollister, and George C. Lay, for defendants.

LOOMIS, J. This is an action of replevin, brought by the trustee of Brown & Bros., an insolvent corporation, for certain goods that were on the 4th of January, 1886, attached by the defendant, as a deputy-sheriff, on the suit of the National Shoe & Leather Bank of New York against the corporation. On the evening of the same day an assignment for the benefit of all the creditors of the corporation was made, pursuant to a vote of a majority of its directors, as is claimed, which was lodged on file in the probate court, and subsequently accepted, approved, and recorded by that court; and the plaintiffs were appointed and qualified as trustees. The sole defense against this action is that the assignment was invalid and of no effect. The claimed illegality of the assignment is based upon three objections only: (1) That two of the five directors, being out of the state at the time, did not receive any notice of the meeting; (2) that, of the three persons who acted as directors in the matter in question, one, namely, Henry R. Coit, was not legally a director, though chosen as such, because he was not a stockholder of Brown & Bros.; (3) that the notices of the meeting sent to the directors did not specify the object of the meeting, as required by statute.

1. We do not think the assignment invalid for want of actual notice to the two directors who were at the time absent from the state. Notice was sent by telegram to them, as to the others, at their address in this state; but one being in the territory of Montana, and the other in South Carolina, they failed to receive the notices. Under these circumstances, it would seem unreasonable to hold that a majority of the whole number, being present, could not do a legal act binding the corporation. The exigency demanded immediate action to save the property and to save expense. It is easy to see how disastrous might be the consequences were we to adopt the principle contended for by the defendants. The situation of the absent directors might be much more remote and inaccessible than in the present case, requiring many months, or even years, to reach them by actual notice. Must the corporation remain paralyzed all this time, without ability to protect itself? But the suggestion was made, in the argument in behalf of the defendants, that it might be treated as a case of vacancy, which the remaining directors could fill, pursuant to the act of 1880, (Sess. Laws 1880, p. 561, § 7.) If, however, the office was vacant as to the two absent directors, then surely the remaining directors could lawfully represent the corporation; for there is no general law or principle requiring vacancies in the board of directors to be filled before the remaining directors can act in the business of the corporation: provided, of course, the number left is sufficient to constitute a legal quorum. Under our General Statutes, p. 279, § 12, "a majority of the directors of any corporation, convened according to the by-laws, shall constitute a quorum for the transaction of business." In order, probably, to avoid a doubt that might arise whether a general assignment was such business as was contemplated under the above statute, the legislature, by the act of 1885, (Sess. Laws 1885, p. 493,) provided that the assignment of any corporation may be made by the directors in legal meeting called for such purpose." This, however, was not intended to change the rule as to a quorum under the preceding statute. There can be no doubt that a majority of the directors could make a valid assignment.

2. But this brings us to the second objection,—that Henry R. Coit, one of the three who participated in making the assignment, was not a lawful director, and therefore the attempted assignment was made by only two directors. It is conceded that Coit was regularly appointed to the office, and that he was at the time a director de facto; but the contention is that he was not eligible to the office, because he was not a stockholder of the Brown & Bros. corporation. In behalf of the plaintiff, it is earnestly contended that the acts of Coit as a de facto director are perfectly valid, and cannot be questioned except once for all in a direct proceeding to oust him from the office, as upon a quo warranto. On the other hand, the counsel for the defendants contend that the principle applies only where there exists the element of an estoppel in pais,—that is, where third parties have dealt with the corporation on the faith that its directors and agents had in fact the authority they were permitted to assume and exercise; but that the corporation itself could not invoke the aid of the same principle in support of the validity of its own acts which have affected the rights of third parties, because the corporation could not have been misled. We have no occasion...