
    George Ehret, Jr., and George F. Trommer, as Executors, etc., of William G. Ringler, Deceased, Respondents, v. George Ringler Company, Defendant. Anna Hachemeister and J. Edward Jetter, as Administrators with the Will Annexed of Henry Hachemeister, Deceased, Appellants.
    First Department,
    May 5, 1911.
    Motion and order — practice—filing order with clerk of Special Term — corporation — receiver — removal of directors by' court — when remaining directors and officers may administer assets — de facto directors and officers—practice — order not effective until signed — re-election of director before order ousting him is signed.
    An order embodying a decision made at Special Term and deposited with the special deputy to the county clerk assigned to act as clerk at Special Term becomes as effective as if filed with the county clerk, although not yet transmitted to him.
    A receiver of a corporation should not tie appointed under section 306 of the General Corporation Law on the ground that there are no officers of; the corporation entitled to hold its assets merely because three of five directors have been ousted by order of the court, if the two remaining are prima facie qualified to act in that they are apparently duly elected and one of them, the vice-president, is given by the by-laws all the powers of the president who was ousted. 
      De-facto directors and officers of a corporation have authority to conduct its ordinary business and preserve its property.
    An order does not become effective until signed, and hence, it seems, that where a director of a corporation resigned and was re-elected to office after a decision ousting him had been rendered but before the order embodying the same had been signed, he was a defacto officer and entitled to act as such.
    IxeRAHAM,' P. J., dissented, with opinion. , -
    Appeal by Anna Hachemeister and another, as administrators, etc., from an order of the Supreme Court, made at the New York Special Term, and entered in the office of the clerk of the county of New York on the 21st day of February, 1911.
    
      David Leventritt, for the appellants.
    
      John M. Bowers, for the respondents.
   Scott, J.:

This is an appeal from an order of the Special.Term appointing a receiver of the corporation known as George Ringler & Co., a going and solvent concern carrying on a large brewing business. This action results from á contest over certain shares of stock in the corporation, the ownership of which practically involves the question of its control and management. The corporation is capitalized at $600,000 divided into 6,000 shares. This stock was owned equally by Henry Hachemeister and William G. Ringler until Henry Hachemeister died in July, 1907, leaving a will by which he appointed William G. Ring-lei and another his executors and trustees. Ringler alone qualified, and received letters testamentary, and he thereupon became the owner of all of the capital stock, holding 3,000 shares in his own right and 3,000 in his capacity as .executor and trustee of the Hachemeister estate. The by-laws of the corporation require that there shall' be five trustees, each of whom must be the' owner or holder of at least one share of capital stock. Ringler accordingly transferred, out of his individual holdings, five shares each to Mrs. Hachemeister, widow of. Henry Hachemeister, deceased,, and to George F.' Trommer, Arthur Strauss and Isaac Kugelman. This stock was transferred to the respective transferees upon the books of the company and certificates of stock issued to them. These certificates they indorsed and handed to William G. Bingler among whose papers they were found after his death. It.is ■conceded as to Trommer, Strauss and Kugelman that these transfers, were made merely to .qualify them to be trustees, and that they never acquired any beneficial interest in' the stock thus transferred to them. It is claimed by plaintiffs that the same is true as to the stock transferred to Mrs. Hachemeister, but she asserts the contrary, and the question is involved in another action now pending in this court.

WiEiam G. Bingler died January 23, 1910, leaving a wfil by which plaintiffs were appointed executors and trustees. They duly qualified and letters testamentary were issued to' them. Immediately upon their qualification, finding among Bingler’s papers the certificate for five shares which had been issued to Mrs. Hachemeister and which she had indorsed, they transferred the shares to themselves, surrendering her certificate and taking out a new one. They also issued a certificate for five shares to John T. Wflson, and one for five shares, to George Ehret, Jr. Since Mrs. Hachemeister had ceased to be a stockholder of record the trustees declared her office as trustee to be vacant, and elected John T. Wüsori a trustee in her • ' - » z place. George Ehret, Jr., was also elected a trustee in place of WiEiam G. Bingler, deceased. Meanwhile Mrs. Hachemeister and one J. Edward Jetter were, appointed administrators with the wül annexed of Henry Hachemeister, deceased, and Mrs. Hachemeister began an action to enforce- her claim to the absolute ownership of the. five shares of. stock above mentioned. The administrators cum testamento annexo of Henry Hachemeister, deceased, then moved at Special Term to oust all the trustees of the company on the ground that none of them were’qualified, because none were, when elected,■ the beneficial owners of stock in the company. This motion was made under section 32 of the General Corporation Law (Consol. Laws, chap. 23; Laws of 1909, chap. 28) which reads as-foEows: § 32. Powers of Supreme Court Bespecting Elections.--. The Supreme Court shaE, upofi' the application of any person or corporation aggrieved by or complaining of any election of any corporation or any proceeding, act or matter touching the: same, upon notice thereof to the adverse party, or to those to be affected • thereby, forthwith and in a summary way, hear the affidavits, proofs and allegations of the parties, or otherwise . inquire into the matters or causes of complaint, and establish the election or order of a new election, or make such order and give such relief as right and justice may require. ”

Mr. Justice Bischoff, who heard the application at Special Term, held that a director’s qualification by holding stock involves and requires his ownership of the beneficial interest therein. He accordingly held that the election of Trommer, Strauss and Kugelman at the last stockholders’ meeting on October 30, 1909, was irregular and of no effect, and enjoined these persons from further acting as trustees under such election. He did not pass upon the application as to Ehret and Wilson, because they had not been elected at a stockholders’ meeting, but had been elected by the board of trustees to fill vacancies, which, as he considered, was not a matter concerning which the section above quoted conferred summary jurisdiction upon the court. (Matter of Ringler & Co., 70 Misc. Rep. 581.) An order embodying this decision was signed by the justice and deposited with the special deputy to the county clerk assigned to act as clerk of Special Term, Part I, but, as it is said, has not yet been transmitted to the county clerk him- ■ self. It was claimed upon the argument, and seems to be assumed by all parties, that an order thus deposited has not become effective, and that filing with the special deputy county clerk is not equivalent to filing with the county clerk. The contrary was distinctly held in Fink v. Wallach (109 App. Div. 718). We must assume, therefore, that the order above mentioned was effectual to oust Trommer, Strauss and Kugelman from their offices as trustees, and that order is not before us for review upon this appeal. This left the corporation with only two trustees, less than a quorum.

The statute under which the order appealed from was made is section 306, subdivisión 3, of the General Corporation Law (formerly Code Civ. Proc. § 1810, subd. 3). It provides as follows: “A receiver of the property, of a corporation can be appointed only by the court, and in one of the following cases: "* * *

“3. An action brought by the Attorney-General, or by a stockholder, to preserve the assets of a corporation,- having no officer empowered to hold the same.”

There are-few precedents construing this section, .but the. Court of Appeals has said that it must be taken to mean just what it says (Zeltner v. Zeltner Brewing Co., 174 N. Y. 247, 251), to wit, that a receiver can be appointed under it only when there is literally no officer empowered to hold the assets, and as was said by this court in the Second Department in the sanie case: fC In the case of a domestic corporation it is difficult to see how the subdivision could apply unless upon the sudden physical incapacity or decease of all the directors in office.” (79 App. Div. 136, 139.) The question we have to consider, therefore, is whether or not this condition of affairs has been shown to exist. As has been said, the application to oust the trustees was granted only as to three of them, leaving in office, and presumably in possession of the assets of the corporation, two trustees apparently duly elected, and apparently duly qualified, because they were stockholders - of record when elected. ■ Prima facie, therefore, they were qualified to act as trustees. One of them holds the office of vice-president, who, under the by-laws, is given all the power of the president, in, case the latter, shall be incapacitated or disqualified for any cause, including the power to transact such business as. may in • his judgment be of interest to the company, and to appoint, discharge and fix the compensation of all employees connected with the- business of the companies. Assuming, but not deciding, that Trommer, Strauss and Kugelman were disqualified' to act as trustees and were rightly ousted from office, Ehret and Wilson are qualified prima facie, have not been declared to be disqualified, and no order of ouster has been made, against them. Ehret, who holds the office of vice-president, after ' Trommer, the president, had been disqualified and ousted, sue- • ceeded to all the powers above mentioned. Whether the title of Wilson and Ehret as trustees and the title of. the latter as vice-president be hereafter found to be valid or not if judicially questioned, they .undoubtedly now answer to the description of trustees de facto, and Ehret answers to the description of vice-president de facto, and as such they or he have authority to conduct the ordinary business of the corporation, and to take charge of and preserve its property and funds. The authorities to support this proposition are numerous. (See 10 Cyc. 775 et seq., and cases cited; 8 Am. & Eng. Ency. of Law [2d ed.], 777, and cases cited; Thomp. Corp. § 1117; Cook Corp. § 713.) In my opinion, however, the corporation had, when the application for the present order was made, yet a third trustee. It is alleged in the complaint that “on or about the 28th day of November, 1910, the said George E. Trommer resigned as director and president of said corporation, and on said date was re-elected director and president of said corporation to fill the vacancy caused by his said resignation; that on said 28th day of November, 1910, and for a long time prior thereto, Mr. Trommer as one of the trustees and executors of the said William G. Ringler, deceased, was properly qualified * * * to serve as a director of said corporation.” The date given as that of the re-election of Mr. Trommer was before the order of ouster had been signed, but after the decision of the motion had been handed down. That order did not become effective until signed, and until so signed the ‘ disqualified trustees remained trustees de facto, and, therefore, competent to participate in a board meeting, accept the resignation of Trommer and re-elect him. Whether this last view be accepted or not it is clear that the statute relied on to sustain the order appealed from is inapplicable, because it cannot be said that the corporation has no officers, de facto or de jure, empowered to hold its assets.

The order appealed from must be reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs.

Laughlin, Clarke and Miller, JJ.,'concurred; Ingraham, P. J., dissented. .

Ingraham, P. J. (dissenting):

I do not concur in the reversal of this order. It seems to me that the situation here presented is just that contemplated by' subdivision 3 of section 306 of the General Corporation Law (Consol. Laws, chap. 23; Laws of 1909, chap. 28) which was formerly subdivision 3 of section 1810 of the Code of Civil Procedure. By that provision the court was authorized to appoint a receiver of the property of a corporation to preserve the assets of a, corporation having no officer empowered to hold the' same.. By the decision of Mr. Justice Bisghoff three of the directors of -. the corporation were held not to he stockholders and, therefore, not qualified to act as directors and they were in consequence removed. ' This left the corporation with but two directors, who ' did not constitute a quorum who could control'the corporation. The same disqualification applied to the remaining directors, and if this decision of Mr. Justice Bisghoff Was correct they were also disqualified from acting either as directors or as officers of the corporation. The fact that they were de facto directors or de facto officers if not qualified to act as such would impose serious responsibility upon them if they Attempted to act in the name of the corporation, and so long as the order of Mr. Justice Bisghoff stood unreversed I do not think it could be said that they were directors of the corporation empowered to hold' its assets. Considering the character of the business in which this corporation is engaged, I think the court was justified in appointing á receiver to preserve its property and carry bn'itsbusiness and that the order should be affirmed.

Order reversed, with ten dollars costs-and disbursements, and motion denied, with ten dollars costs.  