Gold v. Clyne

• Decision Date: 01 October 1892
• Citation: 134 N.Y. 262,31 N.E. 980
• Parties: GOLD et al. v. CLYNE et al.
• Court: New York Court of Appeals Court of Appeals

134 N.Y. 262

31 N.E. 980

GOLD et al.

v.CLYNE et al.

Court of Appeals of New York, Second Division.

Oct. 1, 1892.

Appeal from supreme court, general term, first department.

Action by Edward F. Gold and Frederick W. Wright against James Clyne and others, to charge them as directors for an alleged debt of the Central Park Building Company. From a judgment of the general term, (12 N. Y. Supp. 531,) affirming a judgment entered on report of a referee, dismissing the complaint, plaintiffs appeal. Affirmed.

Ira D. Warren, for appellants.

Geo. A. Strong, for respondents.

The other facts fully appear in the following statement by BRADLEY, J.:

On April 23, 1884, the plaintiffs entered into contract with the Central Park Building Company, of the city of New York, whereby they undertook to put into four apartment buildings, known as ‘Valencia,’ ‘Tolosa,’ ‘Granada,’ and ‘Saragosa,’ complete steam-heating and ventilating apparatus, for the sum of $25,000, which the company agreed to pay as follows:

+------------------------------------------------+
                ¦(1)¦Payment when all the steam and   ¦          ¦
                +---+---------------------------------+----------¦
                ¦   ¦return pipes are in              ¦$7,666 66 ¦
                +---+---------------------------------+----------¦
                ¦(2)¦Payment when all the radiators   ¦          ¦
                +---+---------------------------------+----------¦
                ¦   ¦are connected                    ¦7,666 66  ¦
                +---+---------------------------------+----------¦
                ¦(3)¦Payment when the whole work      ¦          ¦
                +---+---------------------------------+----------¦
                ¦   ¦is finished                      ¦7,666 68  ¦
                +---+---------------------------------+----------¦
                ¦(4)¦Payment when the apparatus       ¦          ¦
                +---+---------------------------------+----------¦
                ¦   ¦shall have had one winter's trial¦          ¦
                +---+---------------------------------+----------¦
                ¦   ¦to the satisfaction of the       ¦          ¦
                +---+---------------------------------+----------¦
                ¦   ¦architect                        ¦2,000 00  ¦
                +---+---------------------------------+----------¦
                ¦   ¦                                 ¦$25,000 00¦
                +------------------------------------------------+
                

The plaintiffs proceeded with the work. The first and second installments, amounting to $15,333.32, became due and were paid. The third installment became due in December, 1885, and the last one the 1st of March, 1886. The company was a corporation created in June, 1883, and the period of its duration stated in the certificate was two years. The defendants became directors of the company. No annual report was filed in 1885. The referee determined that the defendants were not, by reason of such default, liable to the plaintiffs.

BRADLEY, J., ( after stating the facts.)

The Central Park Building Company was incorporated pursuant to the provisions of chapter 611, Laws 1875; and at the time the contract was made with the plaintiffs the company was engaged in building four apartment houses in the city of New York known as the ‘Navarro Flats.’ The contract with the company, by which the plaintiffs agreed to put into the buildings heating and ventilating apparatus for $25,000, was made in April, 1884. The company undertook to pay the amount in four installments, three of them at certain stages of the work, and the fourth after a time specified for its trial and approval. The first two, amounting to $15,333.32, were paid; and the plaintiffs having completed the work in December, 1885, were then entitled to the third installment, of $7,666.68, and to the balance March 1, 1886. They remain unpaid. The purpose of this action is to recover of the defendants, who were directors of the company, the amount so remaining unpaid, and it is founded upon default in filing a report in 1885 as required by the statute, which provides that ‘every such corporation shall annually, within twenty days after the first day of January, make a report, which shall state the amount of capital, and the proportion actually paid in, the amount, and, in general terms, the nature, of its existing assets and debts, and the names of its then stockholders, and the dividends, if any, declared since the last report, which report shall be signed by the president and a majority of the directors, and shall be verified by the oath of the president and secretary of such corporation, and filed in the office of the secretary of state; and if any such corporation shall fail so to do, all the directors thereof shall be jointly and severally liable for all the debts of the corporation then existing, and for all that shall be contracted before such report shall be made.’ Laws 1875, c. 611, § 18.

The duration of the corporation, as set forth in the certificate provided for by the statute, (Id. § 3,) was two years, which expired with the 16th day of June, 1885; and the defense rests upon the ground that it ceased to exist at that time, and that the plaintiffs' claim was not a debt then existing of the corporation. It is essential to the liability of directors, by virtue of the statute, for default in filing a report, that their occupancy of that relation, such default, and the debt of the corporation have existence at the same point of time. Shaler v. Bliss, 27 N. Y. 297;Duckworth v. Roach, 81 N. Y. 49. There would be no difficulty in bringing all those elements within the same period of time, if the pendency of the unexecuted contract were sufficient to furnish the existence of a debt of the company. The indebtedness of the corporation was dependent upon performance of the contract by the plaintiffs, and did not until then arise. Then, and not until that time, did it become a debt of the company. Garrison v. Howe, 17 N. Y. 458:Whitney Arms Co. v. Barlow, 68 N. Y. 34. In that view the plaintiffs' claim never was a debt existing against the company, because its period of duration as such terminated, and it ceased to have corporate existence, while the contract in respect to the money sought to be recovered was executory, and the liability of the corporation was unperfected and contingent. In Jones v. Barlow, 62 N. Y. 202, it was held that the liability of directors dependent on default in filing a report is measured by the obligation of the company, and that the remedy against it and them is concurrent. And such was the view of the court as expressed in Rector, etc., v. Vanderbilt, 98 N. Y. 170, 173, 174.

We do not intend here to hold that the directors may not be chargeable, after dissolution of a corporation, for a debt before then existing, and becoming dueafter such dissolution, in case it was then in default in filing a report, nor is it necessary to express any opinion on that question in the present case.

Our attention is called to the provision of the statute that ‘the dissolution for any cause of any corporation created as aforesaid shall not take away or impair any remedy given against such corporation, its stockholders or officers, for any liability incurred previous to its dissolution.’ Laws 1875, c. 611, § 38. And it is urged that a liability of the corporation was...