50 N.Y.S. 826 | N.Y. App. Div. | 1898
The judgment rendered in this action proceeds upon the theory that the issue of stock of the New York and Mount Vernon Water Company in fulfillment of the construction contract was in fraud of the rights of the stockholders of that company, in consequence of which such stock, so far as it participated in the vote for consolidation, is void as against the plaintiff in this action, and others similarly situated ; that the creation of the New York City Suburban Water Company and the subsequent consolidation were in pursuance of a fraudulent scheme to obtain control of the property of the New York and Mount Vernon Water Company for little outlay in money, and subject it to the lien of a mortgage largely in excess of the value of the property, by reason of which fraud the whole transaction was vitiated, and that neither the parties who conceived the scheme nor the persons who thereafter became possessed of the stock and bonds of the consolidated company, by purchase, for value or otherwise, acquired any rights which entitle them to consideration in the judgment. It is quite evident that the judgment rendered is radical and sweeping in its character and effect. It sharply sets the time where the fraud began, and in the determination of property rights leaves no doubt upon which side stand the sheep and upon which side stand the goats.
As the questions to be determined are important and vitally affect the property rights of a large number of persons who are wholly cut off if the judgment is to stand, we have given it careful attention, and extended the discussion beyond ordinary limits. Is it true that the stock issued in payment for construction, which participated in the vote for consolidation, is void ? There is no dispute of fact in connection with this matter. Inman Bros, appear to have fulfilled their contract to the letter. They constructed the works which they contracted to construct, and the company and the village of Mount Vernon accepted the same, and entered into the enjoyment of the property, and it and its successors have been in the enjoyment of the property since. This judgment wipes out the consideration in part which was paid for that work, and it sustains, in the hands of the plaintiff, a part of the same consideration which it wipes out when found in the hands of other parties. There can be no question but that the New York and Mount Vernon Water Com
There exists strong ground for saying that the mortgage held by the Atlantic Trust Company became a lien upon all of the property-held by the consolidated company. But we do not find it necessary in this action to determine or discuss this question. It is. sufficient-now to say that, whether such mortgage be valid or invalid, persons, who have parted with their money or property upon the strength of it as a security are entitled to protection, and that the company and its stockholders are estopped from asserting its invalidity. (Carpenter
It should, therefore, be reversed and a new' trial granted, with costs to abide the final award of costs.
All concurred.
Judgment reversed and new trial granted, costs to abide the final award of costs.