80 N.Y. 345 | NY | 1880
The facts stated in the submission in legal effect constituted a sale of the machinery in controversy by Innis, and the firm of Armstrong, Follett Co., the defendant's assignors, to the Alder Brook Woolen Company, under an agreement that the property was to be paid for at certain specified periods, and the payments to be secured by the notes of the company, and a chattel mortgage to each of said parties upon the property sold. The transaction was consummated by the delivery of the notes, and the execution and delivery of the mortgages. The defendant, in March, 1872, became the purchaser, upon a foreclosure, of the real estate in which the machinery was situated, and entered into possession of the same, and of the personal property, having become the assignee of the two chattel mortgages. On the 15th of February, 1872, the plaintiff recovered a judgment against the Woolen Company, and issued and delivered an execution to the sheriff, who, on the twelfth day of April, levied upon the machinery, and on the *349 eighth day of July sold the same, subject to all liens and incumbrances that were paramount to the interest acquired by the judgment and execution. The question presented is, which of these parties has the superior right to the property. The plaintiff rests his contention upon the statute prohibiting corporations, created under the general manufacturing law (chap. 40, Laws of 1848), from mortgaging or creating any lien upon their property, and insists that the mortgages were absolutely void. Section two, of the act aforesaid, declares that corporations created under the act shall be "capable in law of purchasing, holding, and conveying any real and personal estate whatever which may be necessary to enable the said company to carry on their operations named in such certificate, but shall not mortgage the same, or give any lien thereon." This section was modified by chapter 517 of the Laws of 1864, by authorizing corporations to mortgage their real estate, with the written consent of the stockholders owning two-thirds of the capital stock, and by chapter 481 of the Laws of 1871, this modification was extended so as to include personal estate. These amendments indicate that the prohibition clauses were intended for the protection of the stockholders, and that when they consented, the policy of the Legislature was to permit these corporations to incumber their property, the same as individuals.
These mortgages however were executed before the amendments were passed, and while the prohibition contained in the original act was in force, and the amendments are of no value in determining the question involved, except perhaps for the purpose of reflecting light upon the object which the Legislature had in view, and thus to assist in determining the proper rule of construction to be applied. The equities are very strongly in favor of the vendors, who are represented by the defendant. They parted with their property with the intention of retaining by way of a claim, lien, or interest, sufficient to secure them for the payment of the purchase-money. They never intended to part with the absolute property in the chattels, until they were paid for. Conceding *350
that the form of the security adopted, was prohibited by the statute, does that destroy the equitable right of the vendors to hold the property as against any one except bona fide
purchasers, until the purchase-money is paid? The statute does not prohibit a corporation from owning incumbered property, nor from buying such property subject to incumbrances, nor from taking a qualified title, nor from taking property by a conditional sale. The transaction must be construed as a whole, and all the papers must be read together, and in effect it was a sale upon condition of payment of the purchase-price within a specified period. This rule has been recognized in sales of real estate, and I see no reason why it should not apply to personal property. (Stow v. Tifft, 15 J.R., 458; Dusenbury v.Hulbert,
In the case of Cox v. Gould (4 Blatch., 341), cited by the counsel for the plaintiff, a deficiency judgment after the foreclosure of a mortgage substantially executed by the corporation, and sale of the premises, was sought to be recovered against a stockholder. The court very properly held that a liability against a stockholder could not be created by the violation of a statute designed for his protection. The question would have been radically different if a judgment-creditor, or even a stockholder had attempted to deprive the vendor of his equitable lien for the purchase-money, and that is precisely this case.
As to the Thomas mortgage, executed subsequently, I am unable to perceive any equities in favor of the claim secured by it, to prevent its condemnation by the force of the prohibitory clause of the statute.
The judgment should be reversed, and judgment for defendant ordered, with costs.
MILLER, EARL and DANFORTH, JJ., concur; FOLGER, RAPALLO and ANDREWS, JJ., do not vote.
Judgment reversed. *353