Summary
In Vail v. Hamilton (85 N.Y. 453) a mortgage was set aside on the ground that the requisite consent had not been obtained in an action brought by the receiver of the corporation, as the present one is.
Summary of this case from Black v. EllisOpinion
Argued May 13, 1881
Decided May 31, 1881
F.A. Paddock for appellants. H.E. Davies, Jr., for respondent.
The persons who became "a body politic and corporate," under the name of the "Secor Sewing Machine Company," were made capable of buying, purchasing, holding and conveying in their corporate name any lands, goods, wares and merchandise, necessary to enable the company to carry on the operations named in their certificate of incorporation. But while a certain limited number of the stockholders, to be called trustees, were empowered in that character to manage this property and the stock and concerns of the company, neither in a corporate capacity, nor through its trustees, was it permitted to mortgage the same without first obtaining and filing "the written assent of the stockholders owning at least two-thirds of the capital stock of such" company. (Laws of 1848, chap. 40, §§ 2, 3; Laws of 1864, chap. 517; Laws of 1871, chap. 481.) It is noticeable that there is thus called into action, the corporation as an artificial entity, the body of the trustees as its agent, and lastly, the constituent members of the corporation or the several individuals composing it. To each of these a duty is assigned, and to make valid the transaction now before us, it is plain that something more than corporate action was required. The corporation might become a party to the mortgage, and the trustees direct its officers to execute it; but there must still be the assent of the stockholder. The will of the whole body, expressed by vote or resolution, cannot take its place. The name of the corporation is signed to the assent. This, if it amounts to any thing, must be the result of corporate, not individual, action. It was signed by its officers, and their act to bind even the corporation must have been official; it can have no force as representing an individual. As to nine hundred and forty shares, therefore, there is no other assent to the mortgage in question than that of the corporation. The mortgage itself must be deemed a corporate act, and assent thereto by the same body can give it no additional validity. As to those shares assent has not been given. It follows also that as the corporation cannot assent for the stockholders, neither can one stockholder for another; nor can one who assents on the strength of stock standing in his own name be deemed to represent a proportionate amount of the stock owned by the corporation. It is claimed, however, by the respondent that if neither the corporation nor the general stockholders can be deemed to represent, by their assents, the nine hundred and forty shares, they should be deducted from the whole number, and then the assents of the stockholders would be enough. But however this may be with the residue, the shares transferred to Conkling ought not to be so treated. As to them, at least, there was no merger in the general fund of the company. They were, in the first instance, duly issued for value received by it, and might be lawfully repurchased or taken in payment of debts due or otherwise acquired by the corporation. In some way it had become the owner of these shares, not for the purpose of diminishing its capital stock, but for enjoyment as property. As such they stood upon its books, until in the regular transaction of business the stock was transferred to Conkling. The company had a right to hold it unextinguished, and a right to reissue it. ( City Bank of Columbus v. Bruce and Fox, 17 N.Y. 507.) The facts adverted to show that they availed themselves of this right. It is true the shares were transferred to Conkling as collateral security, but the certificate was absolute in its terms, and he was described therein as owner. He so appeared upon the proper books of the corporation. Under such a title he had power to render the security available by sale to satisfy the debt on default of payment, and until the debt was satisfied he was the one interested in protecting the property represented by the shares, from diversion by liens or preferences improperly created. The company had a right of redemption, and so had an equitable interest in the stock; but upon the defendants' theory they could without redemption overreach the legal title by creating a mortgage, which, when enforced, would extinguish it, and until that event deprive it of value. Conkling had a clear interest in that matter. Except as limited by statute, no stockholder, by any title, could have more, or greater rights, or be subject to other liabilities. He is relieved by statute from personal liability as stockholder. (Laws of 1848, chap. 40, § 16.) He would otherwise be bound for the debts of the corporation, for a creditor need in general look only for the legal title. ( Adderly v. Storm Bailey, 6 Hill, 624; Rosevelt v. Brown, 11 N.Y. 148; In re Empire City Bank, 18 id. 199.) For the same reason he had a right to vote; his character upon the books of the bank would be conclusive upon the inspectors. ( In re Long Island R.R. Co., 19 Wend. 37.) And whether section 17 of the act of 1848 ( supra) could, under any circumstances, be so construed as to deprive one with such a title from voting, it is not necessary to inquire, for the question does not arise; but it is clear that except for the permission given in that section, even a pledgor could not vote. It has no application to an assent required to be given in writing to a specific act of the corporation, and which, without qualification, the statute requires to be given by a stockholder. Such, we have no doubt, was the character of Conkling as to the five hundred shares in question, at the time of the execution of the mortgage. Including these shares as part of the stock to be represented, the assent required by statute was not given and the mortgage is of no validity. It was, however, an apparent lien upon the property embraced in it; and we concur with the General Term in the conclusion that the action was well brought by the receiver to remove it. (Laws of 1858, chap. 314.)
The judgment appealed from should, therefore, be affirmed, with costs.
All concur, except FOLGER, Ch. J., absent.
Judgment affirmed.