31 N.Y.S. 522 | N.Y. Sup. Ct. | 1894
The object of this suit was to obtain a judgment declaring void certain judgments obtained by the defendants Helene De Riesthal and William C. Bowers against a corporation known as the A. De Riesthal Company, of which the plaintiff, Milbank, is now the receiver. The ground upon which the complaint predicated the plaintiff’s demand for relief was that such judgments were invalid because in contravention of section 48 of chapter 688 of the Laws of 1892, known as the “Stock Corporation Law.” June 1,1893, the defendant Bowers loaned the A. De Riesthal Company $3,000, receiving therefor a promissory note, payable on demand. Subsequently, payment was demanded and refused, and immediately thereafter an action was commenced to recover on the note, to which defendant did not interpose an answer; and in due course, and on September 1, 1893, judgment was entered in favor of the plaintiff for the amount due, with costs. On the same day the defendant Helene De Riesthal entered judgment against the corporation in an action brought on two promissory notes, the principal sum of which aggregated $8,000. That she had advanced such sum to the corporation, and taken its demand notes therefor, is not disputed. As in Bowers’ case, the judgment thus entered was in an action commenced by the service of a summons of which the corporation took no notice. So far as the record discloses, the officers of the corporation were passive. The trial court found as a fact “that neither said defendant corporation, the A. De Riesthal Company, nor any of its officers or directors, did or performed any act or thing to aid or assist the said defendants Helene De Riesthal and William C. Bowers in obtaining their respective judgments against the corporation.”
The first question is whether these judgments are condemned by section 48 of the stock corporation law. That portion of it which is pertinent to the present inquiry reads:
“No conveyance, assignment, or transfer of any property of any such corporation by it or by any officer, director or stockholder thereof, nor any payment made, judgment suffered, lien created or security given by it or by any officer, director or stockholder when the corporation is insolvent or its insolvency is imminent, with the intent of giving a preference to any particular creditor over other creditors of the corporation, shall be valid.”
Our attention has not been called to any case arising since the passage of the act in which this question has been brought to the attention of the court. The first part of section 48 absolutely prohibits the transfer of any property to an officer, director, or stockholder of a corporation, which shall have refused to pay any of its obligations when due, upon any other consideration than the full value of the property paid in cash. But that portion of the section which we have quoted has for its object the prevention of preferences to a particular creditor or creditors over other creditors of a corporation which is either insolvent or its insolvency is imminent. It does not declare invalid all transfers of property or payments
“The creditor sued them, and recovered judgment, and levied execution on their property. They afforded him no facilities to do this, and they interposed no hindrance. * * * There is nothing morally wrong in their course in this matter. They were sued for a just debt. They had no defense to it, and they made none. To have made an effort by dilatory or false pleas to delay a judgment in the state court would have been a moral wrong and a fraud upon the due administration of the law. There was no obligation on them to do this, either in law or in ethics. * * * It is also argued that, inasmuch as to lay [lie] by and permit one creditor to obtain judgment and levy on property necessarily gives that creditor a preference, the debtor must be supposed to intend that which he knows will follow. The general legal proposition is true that where a person does a positive act, the consequences of which he knows beforehand, he must be held to intend those consequences. But it cannot be inferred that a man intends, in the sense*525 of desiring, promoting, or procuring it, a result of other persons’ acts when he contributes nothing to their success or completion, and is under no legal or moral obligation to hinder or prevent them.”
In Bank v. Warren, 96 U. S. 539-541, the court said:
“This action goes upon the theory that the mere nonresistance of a debtor to the judicial proceedings against him when the debt is due, and there is no valid defense to it, is the suffering and giving a preference under the bankrupt act. This theory is expressly repudiated in the case of Wilson v. Bank, 17 Wall. 473.”
Other evidence was necessary to require of the trial court the inference essential to support a judgment in favor of the plaintiff. No evidence was received by the court tending to show the existence of a desire to prefer the defendant creditors, aside from the fact that the officers of the corporation remained entirely passive touching the efforts of Bowers and Helene De Biesthal to obtain judgments for the several amounts due them, unless the plaintiff’s position be well taken that the corporation had a legal defense to the notes held by them. The appellant insists that the corporation could have successfully defended the actions, on the ground that the notes which were given at the time the loans were made were not signed by the secretary, as required by the by-laws of the corporation. The by-laws do seem to provide that the secretary shall sign all notes and other obligations of the company. It is quite evident, however, that this was a mistake of the scrivener who copied the by-laws into the minute book. Article 3 of the by-laws relates to the duties of the officers of the corporation; section 1, to those of the president; section 2, to those of the vice president; section 3, to those of the treasurer; and section 4, to those of the secretary. In section 3, relating to the duties of the treasurer, may be found the following:
“The treasurer shall present his financial statement at each annual meeting, and also whenever directed by the president or by the board of directors. The secretary shall also sign all certificates of stock and all notes and other obligations of the company.”
It would seem that the word “secretary” must have been inadvertently used, instead of the word “treasurer,” to the duties of whom that section relates. But, assuming that the by-laws make it the duty of the secretary to sign all notes and obligations of the corporation, we are, nevertheless, of the opinion that the corporation had no defense. The notes were executed by the officers of the corporation who had been accustomed to sign its notes, to wit, the president and treasurer. The money was borrowed for the corporation by its president. It went into its treasury, and was used for its benefit. Under these circumstances, the notes were valid and enforceable. Kraft v. Association, 87 N. Y. 628; Smith v. Heater Co. (Sup.) 19 N. Y. Supp. 285; Bank of Attica v. Pottier & S. Manuf’g Co. (Sup.) 1 N. Y. Supp. 483; Second Nat. Bank v. Pottier & S. Manuf’g Co. (Super. Ct. N. Y.) 2 N. Y. Supp. 644; Bank v. Colwell (Com. Pl. N. Y.) 9 N. Y. Supp. 285.
Now, while the evidence justifies the decision of the trial court, we still think the judgment must be reversed, because of the re