159 N.Y.S. 1010 | N.Y. App. Div. | 1916
Lead Opinion
The plaintiff is a corporation organized and doing business under the laws of the State of New York, and brings this action to set aside and cancel of record a certain chattel mortgage, with certain promissory notes, on the ground that such chattel mortgage and notes were the result of fraud practiced upon the plaintiff. The transaction out of which this controversy grows was substantially this: One Arthur H. Labaree undertook to purchase substantially all of the stock of the plaintiff from James D. P. Wingate on or about the 11th day of September, 1914, paying partially for such property in cash and subsequently delivering to the said Wingate the promissory notes of the plaintiff for $4,000, secured by the chattel mortgage involved in this controversy, in final payment of the purchase price of the said stock. Labaree appears to have held a meeting of the stockholders of the corporation and to have adopted a resolution authorizing and directing the execution and delivery of the notes in question, together with the chattel mortgage. Later a third person, the defendant in this action, became the owner and holder of the said promissory notes and the chattel mortgage, and the plaintiff, a portion of whose stock is now owned by third persons, brings this action to set aside the notes remaining unpaid, and to be relieved from the chattel mortgage. The learned trial court has found the facts necessary to sustain the judgment in favor of the plaintiff, and the defendant appeals from the judgment.
There can be no question^ of course,, that there was no con
That decision, and the others upon which the appellant relies, were made at a time.when it was provided merely that “In addition to the powers herein enumerated, and those expressly given in the law under which it is or shall be incorporated, no corporation shall possess or exercise any corporate powers except such as shall be necessary to the exercise of the powers so enumerated and given ” (1 R. S. 600, § 3, as revised by Gen. Oorp. Law [Gen. Laws, chap. 35; Laws of 1890, chap. 563], § 9), which obviously referred to implied powers, as shown by the subheading in the statute, and was not a positive inhibition upon the powers of corporations as at present found in the General Corporation Law (§ 10). Moreover, the meeting at which the resolution was adopted pretending to authorize this illegal disposition of the assets of the corporation (M. E. R. Co. v. Kneeland, supra, 143) was not a meeting of the board of directors, but was declared to be “a joint special meeting of the stockholders and directors of the Republican Art Printery, Inc.,” and the records of this meeting show that there was “present Arthur H. Laharee, representing 148 shares of capital stock in the company and Henry J. Granee, representing one share of the stock of the company,” while the third director was not present, and there is no evidence that she had any notice of this alleged joint special meeting of the stockholders and directors. It is true that the minutes in evidence assert that “Henry J. Crance presented a waiver of notice of the meeting signed by all the directors and stockholders of the company, which on motion duly seconded and carried was ordered spread upon the minutes of the meeting,” but the evidence shows that the only waiver was for the meeting held at the office of the attorney on the 14th day of September, 1914, at one-thirty P. m., while the resolution of authorization was adopted at a meeting subsequently held at the same office at
Section 34 of the General Corporation Law provides that “ the affairs of every corporation shall be managed by its board of directors,” and that “unless otherwise provided a majority of the board of directors of a corporation at a meeting duly assembled shall be necessary to constitute a quorum for the transaction of business and the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors,” but it is necessary that the meeting shall be duly—lawfully — assembled, and this requires that each director shall have notice of the meeting, or shall duly waive such notice. The waiver presented by the record, as we have seen, was not of the meeting held at two o’clock, but of the meeting held at one-thirty of the same day, and it was not until after the holding of the first meeting at one-thirty of September 14, 1914, that M. IP. Labaree (the mother of Arthur H. Labaree) became a director. It likewise appears from the alleged waiver in evidence that the waiver was of notice to the stockholders, and not of the members of the board of directors, so that there is an entire absence of evidence to show that there was ever a legal meeting of the board of directors of the Republican Art Printery, Inc., and these facts would have appeared to any one making an examination of the records of the corporation. The defendant admits a situation which prompted him to make inquiries; he traveled from Boston to Chatham to find out whether the notes were good, and he accepted the statement of Arthur H. Labaree, the president of the corporation, that the notes were valid, but he assumed the risk of the statement being true, and the statement not being true, he is not protected. (Wilson v. M. E. R. Co., 120 N. Y. 145, 153.) Not only did the corporation have no right to pass the resolution giving away the property of the corporation to meet the individual obligations of the president (M. E. R. Co. v. Kneeland, 120 N. Y. 134, 143), but the evidence fails to show that a legal meeting of the board of directors was held on the day on which -the resolution purports
The judgment appealed from should be affirmed, with costs.
All concurred, except Kellogg, P. J., who dissented, in opinion.
Dissenting Opinion
Wingate owned the entire stock of the Republican Art Printery, Inc., a corporation. He sold to Labaree “all that certain printing and publishing business, now conducted by me on Main Street, Chatham, Hew York, and known as the Republican Art Printery, Incorporated, including the good will thereof, lease, if any, stock in trade, machines, fixtures, and appurtenances, job and advertising books, outstanding subscription accounts, and each and everything used by me therein,” for $10,500, receiving $6,500 in cash; for the remaining $4,000 Labaree was to execute a chattel mortgage “for said amount upon all the business hereinabove sold,” etc. The contract also provided that Wingate was “ to pay all accounts due from said Republican Art Printery up to the date of said sale.” This was more than a sale of the capital stock of the corporation; it was a sale of the printing and publishing business as conducted. The fact that Wingate was to pay all accounts against the business indicated clearly that it was the sale of the business and not merely of the capital stock. The corporation, after Labaree took control of the business, executed the notes in question and a chattel mortgage to Win-gate for the $4,000, the mortgage reciting that the printery is indebted to him in that amount, “being for sufficient good and valuable consideration.” The judgment appealed from sets aside the notes and the mortgage given to secure them, upon the ground that they represent the individual debt of Labaree and not the debt of the corporation, and are, therefore, void as to the corporation, although apparently Labaree owned all the stock at the time the notes were paid, one share standing in the name of a relative who was financing the enterprise for him. In various forms upon the trial the defend
Judgment and order affirmed, with costs.