Opinion
No. 4485.
Argued June 5, 1956.
Decided July 6, 1956.
Where one officer and director of a corporation directed the conversion of certain lumber which the corporation had previously sold to the plaintiff and had been paid for and the second officer and director knowingly acquiesced in its accomplishment both were held personally liable to the plaintiff for such conversion.
A promise to make monthly payments until the agreed value of certain lumber of the plaintiff, which had previously been converted by the defendants to their own use, was paid did not as a matter of law constitute an accord and satisfaction in the absence of evidence that the promise was accepted as such.
ACTION OF TROVER, for the conversion of lumber purchased and paid for by the plaintiff in July, 1952, and sold by the Enfield Box Company, Inc., the principal officers, directors and stockholders of which were the defendants. Prior to the hearing the value of the lumber purchased by the plaintiff and never received, less certain outstanding credits, was agreed upon by the parties as being $5,708.29. The case was referred to a referee (Francis W. Johnston) who found a verdict for the plaintiff in the agreed amount. The referee's report was approved by Wescott, J., who reserved and transferred the defendants' exceptions thereto.
The material findings of the referee are as follows:
"On July 19, 1952, Enfield Box Co. sold and conveyed title to 250,000 board feet of round edge pine situate on the hill, so-called, south of the road leading to the saw mill, in Enfield, N.H., to the plaintiff at $50 per M., and received payment in the amount of $12,500. This lumber was capable of being identified readily as the property of the plaintiff by reason of being located apart and being marked with signs and with a stamp or imprint on the edge of some of the boards.
"On July 14, 1952, Enfield Box Co., purported to sell and convey title to 312,000 board feet of dry round edge pine situate on the Stanley lot in Lebanon, Maine, to the plaintiff at $52 per M., and received payment in the sum of $16,224. . . .
"Of the lumber situate in Enfield and sold to the plaintiff the amount of 104,590 board feet was taken and used in the Enfield Box plant prior to Dec. 13, 1952. Of the lumber situate in West Lebanon, Maine, and sold to, the plaintiff the amount of 63,671 board feet was taken and disposed of beyond the control of the plaintiff.
"These acts of conversion were done under the direction of the defendant Walter W. Gilbert. They were done with the knowledge of the defendant W. Stanley Deminie who made no protest and consented thereto and stood to profit thereby. He was president of the Enfield Box Co., a director, a principal stockholder owning one-half or more of the shares of stock and maintenance man around the Enfield plant. Both defendants were personally liable on some of the notes of the Enfield Box Co., payment of which was being pressed."
Cooper, Hall Cooper and John M. Brant (Mr. Brant orally), for the plaintiff.
Richard C. Duncan (by brief and orally), for the defendants.
An officer or director of a corporation is not personally liable for a conversion committed by the corporation or one of its officers merely by virtue of the office or directorship which he holds in the corporation. Refrigeration Discount Corp. v. Catino, 330 Mass. 230. An officer or director is personally liable for a conversion committed by the corporation only if he participates in the conversion or has knowledge amounting to acquiescence or commits a breach of duty which he owes to the owner of the property. 3 Fletcher, Cyc. Corporations, ss. 1137, 1140; anno. 152 A.L.R. 696; Stambaugh v. Haffa, 217 Iowa 1161. If the defendant knows nothing about the conversion, there is no personal liability on his part. Cohen v. Maus, 297 Pa. 454. "Some knowledge and participation, actual or implied, must be brought home to him." Fletcher, supra, p. 715. It is the defendants' position that there is no evidence to support a finding of personal liability in this case.
It is not seriously disputed that the shortage of lumber at Enfield was caused by using that lumber in the box shop of the Enfield Box Company and the shortage at Lebanon was caused for the same reason or by a subsequent sale to third parties. Deminie signed the invoice for the sale of the lumber in Lebanon and Gilbert signed the bill of sale for the lumber in Enfield. They claim the shortages were due to the inaccuracy of the inventory record which they kept and indicate only negligence on their part in using faulty records. However, the plaintiff's evidence casts serious doubt on this explanation as being either accurate or complete. It appeared that the defendants denied seeing any of the plaintiff's signs at Enfield although clearly obvious to others, that it was common knowledge among the employees that the plaintiff's lumber was being used in the box shop of the Enfield Box Company and that Gilbert had instructed his employees to use other lumber when there was a shortage of lumber at the mill. Some of the plaintiff's signs that were used to designate its lumber were seen in the mill where Gilbert was the general manager and Deminie was in charge of maintenance and the mechanical work of the corporation. The defendants had formerly been partners, held frequent directors' meetings and were both aware of the necessity of selling lumber in 1952 in order to meet pressing financial obligations. The lumber at Enfield was marked by the plaintiff and readily identifiable and the lumber at Lebanon consisted of specific lots which had been inspected for dryness. Gilbert conceded on cross-examination that he had no right to take the Enfield lumber. Since the referee granted all of the plaintiff's requests for findings of fact it is evident that the plaintiff's evidence was accepted as true and the defendants' was rejected as either untrue or mistaken. In either event, this would not shield the defendants from personal liability. Restatement, Agency, s. 349. See Gage v. Whittier, 17 N.H. 312, 320, 321.
Particular stress is placed on the argument that although Gilbert may have been the person who directed the operations leading to the conversion, Deminie's sole connection with the conversion is only the fact that he was an officer, director and stockholder of the corporation. Deminie's testimony that he did not see what was obvious to the plaintiff's witnesses, that he did not hear what was common knowledge among the corporation's employees, and that he did not know the source of the, lumber being used in the mill is all a matter of credibility. This pristine, three-pronged presentation did not have to be accepted as true by the trier of fact. Anctil v. Dupont, 96 N.H. 501, 503. The evidence warranted a finding that Gilbert directed the conversion and that Deminie knew about it and, in view of their financial predicament, he acquiesced in the conversion. Decisions relied upon by the defendants, Thomsen v. Culver City Motor Co., 4 Cal.App. (2d) 639 and Cohen v. Maus, 297 Pa. 454, are distinguishable since in both of these cases the corporate directors had no knowledge of the conversion. In the present case there was ample proof that Gilbert brought about the shortage of the plaintiff's lumber and it was findable that Deminie knowingly acquiesced in its accomplishment. See Hirsch v. Phily, 4 N. J. 408.
After the shortage became known to the plaintiff, Gilbert in his capacity as officer of the Enfield Box Company, Inc., agreed to pay $500 monthly until the agreed value of the shortage was paid. Before the payments were completed the corporation was placed in receivership. The defendants claim that this is an accord and satisfaction which discharged and extinguished the claim for conversion. However there was no evidence that the plaintiff accepted the promise to pay for the shortage as an accord and satisfaction. It would be presumed that the performance of the subsequent promise was intended by the parties to the agreement (6 Williston, Contracts, s. 1847) but whether the creditor accepts the debtor's proposition as satisfaction is a question of fact and not of law. N.H. Anno., Restatement, Contracts, s. 420. The defendants' requests that the referee find that there was an accord and satisfaction were denied and this is consistent with Langlois v. Maloney, 95 N.H. 408, 415. There was no accord and satisfaction and the nonperformance of the subsequent agreement to make monthly payments "leaves the parties with their former rights and liabilities unaffected." Langlois v. Maloney, supra.
Judgment on the verdict.
All concurred except GOODNOW, J., who dissented on the personal liability of Deminie for conversion of the lumber on the Lebanon lot.