12 N.Y.S. 313 | N.Y. Sup. Ct. | 1890
This is an action of ejectment, tried before the court without a jury. The property in Question, on or prior to June 6,1874, belonged to the Ulster County Agricultural Society, a corporation, under chapter 425, Laws 1855, arid the special provision of chapter 394, Laws 1867. On that day a meeting of the stockholders was held, and, by a two-thirds vote, it was resolved to mortgage the property to the amount of $1,300, and to pay existing debts; such bond and mortgage to be executed by the president, secretary, and treasurer of the society, or a majority of them. A written consent of the same date, signed by two-thirds of the stockholders, to the same effect, was proved at the trial. The directors had voted to the same effect October 4, 1873. Pursuant to authority herein given, a bond and mortgage, dated the 15th day of June, 1872, was executed, as authorized by said vote, by the president, secretary, and treasurer to Robert Loughran, the defendant, to secure $1,300, payable in one year, with interest. On the 13th day of July, 1887, Loughran assigned the bond and mortgage to Charles Burhans, the object of the assignment being to have the mortgage foreclosed. On the 10th day of August, 1887, Burhans commenced an action of foreclosure on the bond and mortgage against said society and other defendants. The summons and complaint were duly served on the society by delivery to the president, and were duly served on the other defendants. The usual proceedings were taken on default, and a judgment of foreclosure and sale was granted October 8, 1887. On the 4th day of November, 1887, the referee advertised, and on the 30th of June, 1888, sold the premises to defendant for $1,600. His report was made, dated July 2, 1888, and was confirmed July 21, 1888. The referee’s deed was executed and delivered to defendant dated June 30, 1888.
This is an abstract of defendant’s title. On the 16th of September, 1887, an action was commenced by the people against the Ulster County Agricultural Society to have the corporation dissolved, on the ground that it had suspended its business for many years. No defense was made, and on October 8, 1887, a judgment was entered, dissolving the corporation, and appointing the plaintiff a receiver of the property. Under this judgment, the receiver took possession of the books of the corporation. This judgment, which it will be seen was granted the same day with the aforesaid judgment, contained the following provisions; “Nothing in this decree contained shall be deemed in any way to prejudice the legal rights of Charles Burhans under the mortgage held by him, and under the decree of foreclosure and sale heretofore made in an action brought by said Charles Burhans to foreclose, said mortgage. Nor shall it be necessary for the said Charles Burhans or the said Robert Lough-ran to bring said receiver as a party to their respective actions, nor shall this decree operate as a stay in either of said actions of said Charles Burhans and Robert Loughran. ” On November 2, 1887, upon affidavits of Preston, the above plaintiff, and of his attorney, notice was given to the attorney of Burhans of a motion for an order opening the foreclosure decree, and allowing Preston, as receiver, to be let in to defend in the interest of all creditors and stockholders, and a stay of proceedings in the foreclosure action for 20 days was granted to enable Preston to make the motion. A reference was had to take evidence in said motion, and the motion was finally heard June 16,1888, and was denied, with costs and disbursements to be paid out of the proceeds of the sale. This, however, was without prejudice to Preston, receiver, to bring an action to recover for alleged claims asked to be set up as to the cause
This is an abstract of plaintiff’s title to the land,—that is, the plaintiff makes four claims: First, that the society had no power to mortgage; second, that the complaint in the foreclosure avers an assignment to Burhans of the mortgage, but does not aver an assignment of the bond; third, thatLoughran, being an officer of the company, could not buy for himself; fourth, that after the appointment of plaintiff as receiver, the sale under the foreclosure was absolutely void.
The learned court held with the plaintiff in the third and fourth points» The complaint in the foreclosure action was sufficient. The mere omission of the words “bond and” did not make the complaint invalid. It would hardly be demurrable. The meaning was plain. ' The assignment of the mortgage, with the bond, was on record July 29, 1887. The reference was to compute-what was due on the bond and mortgage, and the referees reported accordingly, referring to the record of the assignment. The judgment was valid.
- Next as to the power of the society to execute the mortgage. The general act (chapter 425, Laws 1855) does not provide for stock companies. The payment of $10 makes one a life member, and the payment of 50 cents annually, a so-called “stockholder. ” But there is no capital stock. The power to sell land is to be obtained on application to the court, after a vote at an annual meeting, following a notice published for three months previous. But the society in question was organized into a stock company, (chapter 394, Laws-1867,) with shares of $25 each; and section 6 provides that, by authority of a vote of two-thirds, the officers might sell and dispose of the property of the society in the manner directed by such vote, and distribute the same, after payment of debts. The section of the general act providing for an application to the court was, as to this society, superseded by this provision; and, inasmuch as the society had become a stock corporation, it was proper, unless some restriction appeared, that it should have control of its property, to sell and dispose of the same. “Corporations, unless restrained by their charter, have the power to secure borrowed money or ttieir debts.” Carpenter v. Mining Co., 65 N. Y. 43, at 48. “By the common law, the power to alien and mortgage lands in the course of its business inhered in corporations capable of acquiring and holding them as in natural persons, as an incident of ownership. ” Bank v. Averell, 96 N. Y. 467, at 472. Whatever, then, may be the powers of societies organized under the general act, this society has ne restriction placed upon its power to dispose of its property, except the requirement of a vote of two-thirds. It owed*debts, and it borrowed the money in-question to pay them. In this case there was a vote of the directors, and subsequently, on due notice of the object, a two-thirds vote of the stockholders,, and finally a written consent of two-thirds of the stockholders. We think that the society had the power to mortgage, and the proceedings therefor were regular. If there were any irregularity in those proceedings, the society had the opportunity to set it up when it was.sued in foreclosure, and no such defense was set up.
How, was it proved in this cáse that Loughran assigned to Burhans only for the purpose of foreclosure? Loughran had a subsequent judgment against the society, and was advised by counsel that for that reason he had better assign his mortgage. The foreclosure sale was then for his benefit as creditor. In such a case, he must plainly have a right to protect his interest, both under the mortgage and under the judgment, by bidding; otherwise, the property might be sacrificed, and he must have a right to bid for himself. If the mortgagor, the society, should think that the property sold for too little, they might move for á resale; and perhaps on such a motion the court would consider the fact that the purchaser was an officer in the company. But the sale would be valid, and could only be set aside in equity. Harrington v. Bank, 101 N. Y. 257 , 4 N. E. Rep. 346.
There remains to be considered the fourth question, whether a valid sale could be made after the appointment of a receiver. The cases on which the learned court relied as establishing the negative are Wiswall v. Sampson, 14 How. 52, and Walling v. Miller, 108 N. Y. 173, 15 N. E. Rep., 65. Both of these were eases of a sale under the ordinary execution against property. . To understand what the court of appeals decided, we must quote a few words. There had been a levy under execution on property as personal. Two days afterwards a receiver was appointed. Afterwards a sale was made under the execution, and under that sale plaintiff claimed title. Still later the receiver sold, and the purchaser took, the property. The purchaser under the execution sale sued the receiver and the purchaser at his sale. The court said; “ The lien of the execution was not destroyed, but the rights and interests of all parties to the property were thereafter to be adjusted by the court which appointed the receiver, and the property could not be taken out of the possession of the receiver and sold upon the execution without leave of the court. Persons having liens upon the property had no right to interfere with its pas?
Another circumstance confirms this view. When the motion made by the receiver to open the foreclosure judgment was denied, an order was made by the consent of his attorneys. That order directed that the motion costs of