36 A.D. 275 | N.Y. App. Div. | 1899
The details of the controversy out of which-this action springs are fully narrated in the report of a prior appeal to this division of the . court. • (26 App. Div. 499.) The new trial ordered on the previous appeal was had-.hefore .the same-justice who originally decided the cause. He has rendered judgment in favor of the plaintiff, declaring that the mortgage executed by the New York City Suburban Water Company (the first of that name) was not a lien oñ the property of the consolidated corporation (also named the New York City Suburban Water Company); that the judgment entered in the action against the consolidated company to foreclose such mortgage was fraudulent and void, and has directed that the same, and also thé deed to the-defendant The New York Suburban Water Company, made on the sale under such judgment, be set aside, and that a receiver be appointed to take possession of the property on behalf of the New York City Suburban Water Company, 2d, which latter -company he has directed to elect officers and proceed to perform its . corporate function, recognizing the plaintiff as a stockholder thereof' • to. .the extent of ten shares. , .
In Polhemus v. The Fitchburg R. R. Co. (123 N. Y. 502) the Court of Appeals referred to this decision in the United States court, but declined to pass on the question. In delivering the opinion of this court on the former appeal, Mr. Justice Hatch said:" “ 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.” There is still some difference of opinion among the members of this court on the question, and we do not find it necessary even yet to decide it. We all agree, however, that the provisions of the consolidation agreement, with reference to the mortgage, were conclusive on the holders of the 1,855 shares of the stock of the Mount Vernon Company who voted for that- agreement, even though it be assumed .that, they were not valid as to the holders of the remaining shares.
The plaintiff or his predecessor in the ownership of the stock had .ample remedy in the foreclosure suit. There is no proof that either was ignorant of the prosecution of that suit. If he thought that there was a valid defense to the mortgage, he could have applied to the court to intervene- and set up such a defense. Such was the course taken by the stockholders- in Farmers’ Loan & Trust Co. v. N. Y. & N. R. Co. (150 N. Y. 410). . Even now application may be made in the foreclosure action to vacate and set aside the decree and let the plaintiff in to defend ; but unless the foreclosure judgment is. void because fraudulently obtained, the remedy of the plaintiff is by motion in that action.
We are further of opinion that, under the circumstances of this case, the plaintiff should not, either in this action or by motion in the foreclosure suit, be permitted to set aside the sale' of' the property to its present owner, the New York Suburban Water Company, unless that company refuses to pay the plaintiff the fair value of his interest in the property.' The. plaintiff is the holder of but 10-shares of- the capital stock of the consolidated company of 2,000 outstanding. In other words, his aliquot interest in the-property was a one two-hundredth part. As already said, the ' holders of 1,855 shares out' of the 2,000 are estopped from asserting the invalidity of the mortgage lien. The trial court has found that at the time of the consolidation, which the plaintiff’s assignor opposed, the value of the whole property of the consolidated company was under $200,000. If this finding is' to be construed as intending to give the value of the property apart from the liens, then the plaintiff’s interest was valueless, as the property was subject to $400,000 of mortgages. Construing.it, however, most favorably to the plaintiff, as being $200,000 above the incumbrances, the value of the plaintiff’s interest would be' $1,000. The property sold .at the foreclosure for $50,000. The plaintiff is the only stockholder who seeks to avoid the transactions of which he complains. He is appealing to a court of equity whose first rule is that he who seeks equity must do equity. Here the holders of a million and a half of ' bonds are interested in having the foreclosure sale stand. Assume ing that some or many of those bondholders are not entitled to
The judgment and order appealed from should be reversed and a new trial granted, costs to abide the final award of costs.
All concurred.
" Judgment reversed and new trial granted, costs to abide the final award of costs.