23 N.Y.S. 404 | N.Y. Sup. Ct. | 1893
This is an action to foreclose a mortgage made by the defendant company to the plaintiffs, as trustees, to secure a series of 500 bonds of $1,000 each, dated August 5, 1886. All the bonds, save 20, have been issued, and are still outstanding. The mortgagor did not defend. W. F. Buckley, a stockholder and creditor of the mortgagor, applied to be made a party defendant. An order of reference was made on that motion to compute the amount due, and Mr. Buckley was allowed to intervene, with leave to defend and contest as to the amount due, and he and every other party in interest were thereby allowed to contest the validity and amount due upon any of the bonds. Mr. Buckley, in both above capacities, and Richard Gurney, Jr., and Ira M. Stanley, as stockholders, availed themselves of the privileges provided by this order of reference. The referee made his report. The plaintiffs and Buckley and Stanley excepted thereto. Their exceptions were argued before and overruled by the special term. Judgment was entered to this effect December 29, 1892, directing a sale of the mortgaged premises. These exceptants have each appealed from parts of the judgment.
The referee found that the mortgagor was insolvent when the mortgage was made, and had been insolvent for a long time prior thereto, but that the mortgage was not made in contemplation of insolvency. It appears by the findings, without exception, that the mortgage in suit was the third one which had been made by the mortgagor. The first one was made August 15, 1881, to said Buckley and the plaintiff Cochran, as trustees, to secure a series of 800 bonds of $1,000 each, bearing 6 per cent, interest, payable at or before May 1, 1896. These bonds were all sold to the Guarantee Trust & Safe Deposit Company, of Philadelphia, and are still outstanding. The mortgagor afterwards became indebted to that company in $43,500; and on April 12, 1886, made its second mortgage to that company to secure the payment of that indebtedness on or before April 14, 1889, with interest. It also became indebted to other persons in large sums, and the mortgage and 500 bonds in suit were authorized by its board of trustees for the purpose of paying the debts accrued subsequent to the first mortgage, and in order to raise money for uses of the corporation. On August 11, 1886, the mortgagor’s board of trustees resolved that, after applying so many of these new (500) bonds at par as might be necessary to liquidate its existing floating indebtedness, the balance should be deposited with the Philadelphia Company as collateral for the $43,-500 debt secured by the second mortgage. It was contemplated that that company should sell those bonds, and pay that debt out of the proceeds of such sales, and apply the balance of such proceeds to the uses of the mortgagor as it might require. That resolution authorized the delivery of the mortgagor’s note to the Philadelphia Company for the $43,500 debt. The precise course authorized by
The only question left, on this branch of the case, is whether or not the judgment follows these findings in this respect. As we read its provisions, it protects the right of the parties as thus decided by the referee, and that seems to be the view of the parties who have appealed. It provides that the sheriff, in distributing the proceeds of the sale, shall pay to the holders of these bonds, not the sum due on the face of the bonds, but the sums
We now proceed to examine other questions. It is claimed that because the mortgagor, being a corporation, etc., was insolvent, and its directors were cognizant of that fact, all acts through which they secured bonds under this mortgage, and the bonds themselves in their hands, are utterly void, because necessarily in contemplation of insolvency, within the meaning of that phrase as used in the statute. We do not thus understand the rules governing the case. Speaking generally, these bonds were given in fair business transactions with the mortgagor, the obvious purpose *of which was to save the company and its property, if possible; and they were reasonably adapted to that end, and not in any respect out of the ordinary course of raising money or adjusting ordinary affairs. The company received clear benefit from these transactions, and there has been nothing like rescission or any offer to rescind or restore those benefits which it received. The case, therefore, seems to fall within the rule of Duncomb’s Case, 84 N. Y. 190. We think the referee was right in holding that the bonds were not utterly void.
We think, however, that the judgment must be reversed, and the case sent back to the referee to take testimony with respect to the actual merits of the claims for which all the bonds, other than the 284 above alluded to, were held. The purpose of the order of reference was that Buckley and every other party in interest should be allowed to appear before the referee, and contest the validity or amount due upon any of the said issue of bonds. This means that the court desired information of the actual indebtedness of this company to each holder of a bond, no matter what may have been conceded as to the amount of indebtedness by the company through its trustees; that may have been erroneous or even fraudulent. This intervention was allowed for the purpose of enabling stockholders and creditors to raise and litigate in this summary manner any and every question which they could raise in any manner or in any action or proceeding. This, be it observed, is not at all inconsistent with the point above decided, viz. that the possessors of these bonds should not be allowed to participate at all in the proceeds of this sale of the mortgaged premises. If they were honest creditors, or advanced money as a present consideration for the bonds, they stand secured for