55 N.Y.S. 206 | N.Y. App. Div. | 1898
Lead Opinion
This- action was brought by the receivers of the Madison. Square Bank to recover from the defendant a sum of money to which they claimed they- were entitled under the provisions of section 48 of the Stock Corporation Law (Laws of 1890, chap. 564, as .amended by •Laws of 1892, chap. 688), which reads as follows : “No corporation which shall have refused to pay any of its notes or other -obligations when due in lawful money of the United States, nor any of its officers or directors, shall transfer any of its property to any of its officers, ■ directors or stockholders, directly or indirectly, for the payment of •any debt, or upon any Other consideration than the full value of the-property paid in cash 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
The material facts of the case are without dispute. On the 8th ■of August, 1893, the defendant was a depositor in the Madison Square Bank, and it had standing to. its credit on the books of the bank on that day the sum of $50,000. As to that amount, the ordinary relation of debtor and creditor, and no other, existed between the bank and the depositor. Oti the night of the 8th of August, 1893, it became known to Frederick Uhlman, a director of the Madison Square Bank and also .the president of the East River Bridge ■Company, that the bank was insolvent, or in imminent danger of insolvency, and that it would be closed the -.following day. Frederick Uhlman also knew that the S't. Nicholas Bank was the agent .•at the Clearing House of the Madison Square Bank, and that on the ■8th of August, 1893, the' St. Nicholas Bank had in its possession a large amount of securities belonging to the Madison Square Bank, and that it held such securities as collateral for any and all obligations as agent of the Madison Square Bank. He also knew that the ■St. Nicholas Bank had notified the Clearing House that it .would cease to act for the Madison Square Bank,, and that the St. Nicholas Bank, by the rules and regulations of the Clearing House, was responsible for all checks of the Madison Square Bank .that would be presented-at the Clearing House in the exchanges on the morning of the ninth of August. All this knowledge was acquired by Frederick Uhlman as a director of the Madison Square Bank. On.the night of August eighth Simon Uhlman, who was largely interested in the stock of the East River. Bridge Company, learned of the imminency of insolvency of the Madison Square Bank, and that it would probably be closed the following .morning. Thereupon .he caused a check to be filled up, drawn upon the Madison Square Bank for $50,000, and took it to the treasurer pf .the defendant at
If the construction given by the learned.referee to section-48 of the Stock Corporation Law is the correct one, no other course could have- been justified underthe proofs than was taken by him in directing judgment for- the defendant, for, as he very properly states, if the transaction, the subject of inquiry in this case, amounted to an illegal preference, it must be solely because of the part taken by Frederick Uhlman in that, transaction. But we are not able to-adopt the referee’s interpretation of the statute. While it is one
The preposition “by,” as used in the 48th section of the statute in this connection, is equivalent to the phrase “ through the means, act or instrumentality of,” and that section may well be paraphrased so as to read: “ No conveyance, assignment or transfer of any property of any such corporation by it, or effected through the means, act or instrumentality of any one who is an officer, director or stockholder thereof, nor any payment made, judgment suffered, lien created or security given by it, or through the means, act or instrumentality of any one who is such officer, director or stockholder, when the corporation is insolvent or its insolvency is imminent, with the intent of giving preference to any particular creditor over other creditors of the corporation, shall be valid.” We do not think it is an essential condition that the director shall be acting officially as a director in making the transfer. An individual director cannot make an official transfer of assets of a corporation by any inherent authority derived from the mere fact of his being a director. The statute refers to a person being a director — (its words mean “ any one who is ”); and to hold otherwise would be merely saying that the words “officer” .or “director” are.utterly meaningless in the connection in which they are used. What the statute condemns is a conveyance or transfer effected in a particular way and with" a certain intent; not necessarily a corporate intent, but an intent of a person being an officer, director or stockholder to give a preference to any particular creditor over other creditors. It contemplates the
It remains to consider whether the acts of Frederick Uhlman were of such a character as to bring them within the operation of' section 48 of the Stock Corporation Law. It is urged in this, connection that the section does not apply to a banking corporation.. But that question was settled in this court by what was decided in' Hirshfeld v. Bopp (27 App. Div. 180). Frederick Uhlman’s dealing with the check after it was drawn establishes the intent. His; active agency in getting it paid from the funds of the bank in which
The judgment must, therefore, be reversed and a new trial ordered, with costs to the appellants to abide the event.
Van Brunt, P. J., O’Brien and McLaughlin, JJ., concurred; Ingraham, J., dissented.
Concurrence Opinion
I concur in the opinion of Mr. Justice Patterson. The statute under consideration is a beneficial one and its effect should not be
It has, however, been suggested, not by the learned referee or the counsel for the respondent, but in the dissenting opinion, that the
It is also • said that the act prohibited by the statute is the act of the corporation itself, or of some one acting for or on its behalf. To give the statute this construction is to take out of it words contained therein and thereby destroy one of the purposes sought to be-accomplished by it. But this question seems to have been settled by the Court of Appeals in Throop v. Hatch Lithographic Co. (125 N. Y. 530). There the plaintiff, a trustee of the corporation,, acting, not in collusion with, but in hostility to, the corporation, and the other trustees, in an a-ction to recover money loaned, procured an attachment, which was thereafter vacated, and the Court of .Appeals,, in affirming the order vacating the attachment, said, “the plaintiff,, in commencing this action and 'procuring his attachment, was not acting in collusion with the trustees, but distinctly in hostility to the-board of directors and the other officers of the company. * * *■ It is true that the plaintiff, as director only, had no power over the corporate assets. He could neither assign nor transfer them to himself, or any one else, by his own act. But the plaintiff, in place of procuring an assignment or transfer by the voluntary action of the corporation, procured what is equivalent by legal process issued on his application. Construing the language of the statute in connection with its obvious policy, we think a construction which disables-an- officer- of an- insolvent corporation from acquiring a-.preferential lien on the corporate assets by legal process is justified.”
Van Brunt, P. J., Patterson and O’Brien, JJ., concurred.
Dissenting Opinion
I cannot concur in Mr. Justice Patterson’s construction of section 48 of the Stock Corporation Law (Oliap. 688, Laws of 1892,. amending chap. 564 of the Laws of 1890)." That section first provides that “no corporation which shall have refused to pay any of its notes or other obligations when due in lawful money of the United States, nor any of its officers or directors, shall transfer any of its property to any of its officers, directors or stockholders, directly or indirectly, for the payment of any debt,, or upon any other consideration, than the full value of the property paid in cash.” The prohibition contained in this clause applies only to a corporation which shall have refused to pay any of its notes or other obligations when due; and such a corporation, namely, one which shall have refused to pay any of its notes, or other obligations when due, is absolutely prohibited from transferring any of its property to any of its officers, directors or stockholders, directly or indirectly, for the payment of any debt, or upon any other consideration than the full value of the property paid in cash. The section then continues: “ 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 he valid.” Here is a prohibition of a payment to any person with the intent of giving a preference to any particular creditor. But both clauses of the section would seem to apply to the same corporation* viz., a corporation which shall have refused to pay any of its notes' or other obligations when due, prohibiting it, first, from making a transfer of any of its property to any of its officers, directors or stockholders except upon the payment of the full value of the property in cash ; and, second, from making any conveyance, assignment or transfer of any of its property, or making any payment, suffer
The statute in force before the enactment of the Stock Corporation Law was materially changed by the latter act. By the Revised, Statutes (1 R. S, 603, § 4) it was provided that when any incorporated company shall have refused to pay any of its notes, or other evidences of debt, it should not he lawful for such copapany to transfer any of its property to any officer or stockholder of such company, directly or indirectly, for the payment of any debt; and it should not be lawful to make any transfer or assignment in contemplation of the insolvency of such company to any person or persons’whatever. It was. held by the Supreme Court in the case of Harris v. Thompson (15 Barb. 64) that the words “ such company ” in the 2d clause of this. section referred to an incorporated ■company, and this case has been generally followed. This provision of the Revised Statutes was repealed by section 23 of;the General Corporation Law (Chap. 563, Laws of 1890), and' by section 10 of the Stock Corporation Law (Chap. 564, Laws of 1890). By section 48 of the Stock Corporation Law, which became a law at the same time as did the General Corporation Law, it w¿s provided that no corporation which shall have refused to pay ■any of. its notes, or other obligations when, due, shall assign any of its property to any of its officers, directors or stockholders for the payment of .any debt; and no officer, director or stockholder thereof shall make any transferí or assignment of its property, or of any stock therein, to any person in contemplation of its insolvency. There can he no doubt, I think, but that this section would '■only affect a corporation which shall have refused to pay its motes or other obligations when due. The second prohibition contained in the section was that no officer, director or stockholder thereof, namely, a corporation which shall have refused to pay any •of its notes, or other obligations when, due, shall make any transfer ■or assignment to any person in contemplation of its insolvency. 'This section was amended by chapter 688' of the- Laws of 1892. Section 48 of the act as then amended is the section .now under ■consideration, and to give the second prohibition contained iin this
There is no evidence to show that, prior to August ninth, the Madison Square Bank had refused to pay any of its notes or other obligations when due. The bank was open for business and apparently did pay on demand all its obligations up to three o’clock on August eighth, the day the check in-question was drawn. It had on deposit on the night of August eighth, with the St. Nicholas Bank, its Clearing House agent, about $28,000, and that bank further held a large amount of bills receivable and'other collateral, belongs ing to the Madison Square Bank, as security for any amount owing by the Madison Square Bank to it; and the officers of the St. Nicholas Bank apparently had no knowledge of the'Madison Square Bank’s insolvency prior to the morning of August 8, 1893. Nor do I think that the evidence in this case shows that there was a conveyance, assignment or transfer of any property, or any payment made by this bank or any oiBcer, director or stockholder thereof, with the intent of giving a preference to the defendant as a creditor.
I concur with the view taken by the learned referee in his opinion as to the construction of this statute. As before stated, the section in question prohibits two acts of the bank or its officers: First, the transfer of any of its property to any of its officers, directors or stockholders, directly or indirectly, for the payment of any debt or for any other consideration than the full payment of the value of the property in cash. This prohibition is absolute. When a bank .lias failed to-pay any .of -its .notes or obligations when due,, no officer,director or stockholder thereof can receive from the bank or its officers any property of the Corporation for. any other consideration than the full value of the property paid in cash. The object of the statute is to prevent the persons named from receiving any property from the bank upon any other consideration, after it has declared its inability to meet its accruing obligations. This does not depend upon the solvency or insolvency of the bank, nor upon- the intent
The intent necessary to make such a transfer illegal is an intent •existing on behalf of the corporation or those assuming to act for it in making the transfer. It seems to me that the act prohibited must be an act of the corporation or an officer, director or stockholder ..acting for the corporation by whom the property is transferred, with the intent of preferring a particular creditor. It seems that this construction of the statute was directly approved by the Court ■of Appeals in the case of French v. Andrews (145 N. Y. 444).' In that case the court held that “ merely permitting a creditor to obtain ■a judgment in the regular course of legal proceedings is not, on the part of-the officers of the corporation, a transfer or assignment of the property of the corporation within the meaning of the statute quoted. And the conduct of the treasurer in giving notes which might be sued! by the defendant in the Municipal Court,” did not bring the pase within the contemplation of the statute. Now, in this case a director •of this bank, who is president of the defendant, a corporation who was a depositor in the bank, signed as president of the defendant a check upon the Madison Square Bank, and delivered that check to another bank to be credited to the account of the defendant. It could not be •claimed that either of these acts was the act of a director of the Madison Square Bank, but they were the acts of-the president of the-defendant, solely in the interest of such defendant, and had no relation to the position of the -president of the defendant as a director of the Madison Square Bank, and no authority that he derived as such director had any relation to his act of signing "this check or delivering it to ■the Hanover National Bank for collection. That check would have been collected as it was, whether Uhlman had been a director of thei Madison Square Bank or not, and no act of his as director had anything to do with the execution or collection of the check. The ■check when presented was paid by the St. Nicholas ■ Bank-under, a
Judgment reversed, new trial ordered, costs to appellants to abide event.