Githers v. Clarke , 158 Pa. 616 ( 1893 )

Opinion by

Me. Justice McCollum;,

This is a judgment entered for want of a sufficient affidavit of defence. The defendants therein are the appellants here, and in 1890 they were directors of the Workingmen’s Cooperative Association of Beaver Falls, Pa., which was duly incorporated in February, 1887, under the act of April 14, 1868, P. L. 100. By the 5th section of this act the directors were required to make an annual statement in writing signed by a majority of them, “ including the treasurer,” showing the condition of the association and “ setting forth the amount of capital stock, the number of shares issued and the par value thereof, the number of stockholders together with the greatest number of shares held by any one stockholder, the amount and character of the property of the corporation and of its debts and liabilities; ” and by the 8th section thereof they became liable “ for all debts of the corporation,” if they failed to make such statement or if they made a false statement. In May, 1890, the association passed into the hands of a receiver. It was indebted to the plaintiffs below, and appellees here, in the sum of $216.64 for merchandise sold and delivered during the months of March and April in that year. It was hopelessly insolvent, although two days before the receiver was appointed the directors made a statement by which it appeared that its assets were sufficient to meet its liabilities. The appellees having established their claim before the auditor appointed to distribute the fund belonging to the creditors of the association on settlement of its affairs, received a dividend which reduced its indebtedness to them to the sum of $191.44, for which amount, with interest thereon from June 20,1890, they recovered a judgment in the court below. In their declaration or statement the matters essential to the maintenance of the action were duly set forth, and these, unanswered, entitled them to the judgment they obtained. Inasmuch as the material averments of the statement which are not denied in the affidavit of defence must be accepted as true, it appears from the pleadings that the association was indebted to the appellees in the amount claimed by them, that it was insolvent on or before February 28, 1890, and that from December 31,1888, to May 26,1890, its directors failed to make any statement of its condition.

But the appellants contend that their affidavit contained a good defence because it averred that, while the suit was brought against all the directors and the writ was returned mortuus est as to one of them, it could not be maintained without joining and declaring against his administrator with the other defendants ; that a statement which “ was neither false nor defective but was made with ordinary care and prudence ” was filed by them during the year they were elected directors, and that when they filed it they believed the “ association was solvent and was as so represented therein.”

It is enough to say of the first branch of their defence, that if the directors were jointly liable for the debts of the corporation, and one of them died before suit brought, his executor could not be sued jointly with the survivors, and if he died after suit brought against all of them, it was optional with the plaintiffs to bring in his administrator or proceed against the survivors without doing so: Chitty on Pl. 42-50; Am. & Eng. Ency. of Law, vol. 17, page 580, and cases cited: Dingman v. Amsink, 77 Pa. 114; Ash v. Guie, 97 Pa. 493.

As to the other branch of their defence, it is quite clear that their belief that the corporation was solvent was no excuse for their failure to make an earlier statement, and that “ ordinary care and prudence ” in making it when they did cannot relieve them from the liability incurred by their delay. They were chargeable with knowledge of the condition of the association, and they ought to have made a true and intelligible statement of it in conformity with the act of assembly. It was a duty the association owed to the public, and the default of their predecessors should have hastened their performance of it. But they neglected to make any statement for three months and until the association was about to pass into the hands of a receiver, and when they did make one it was deceptive. It did not set forth with reasonable particularity the “ nature aud character of the property of the corporation.” It represented the association as solvent when in fact it was not able to pay more than ten per cent of its liabilities. It may be true that the directors believed the corporation was solvent, and that its assets were as valuable as represented, but it is very evident that their belief was not warranted by the facts, nor consistent with the knowledge of its affairs which the law imputes to them. We conclude that their delay in making the statement, and the defective and misleading character of it, brought them fairly within the personal liability clause of the statute.

The specifications of error are overruled.

Judgment affirmed.