1 Paige Ch. 100 | New York Court of Chancery | 1828
The Chancellor :—The answer in this case is put in by defendants, who probably knew nothing of the transaction charged in the bill to have been fraudulent. Their answer, of course, can only deny the equity of the bill, by information *and belief. They cannot deny the facts stated therein upon any knowledge they possess. The answer, therefore, is not sufficient to authorize a dissolution of the injunction. Roberts v. Anderson, (2 John. Ch. R. 202.) Independent of the complainant’s oath to the bill, the facts stated therein, and admitted by the answer, show a case of suspicion. The single circumstance, that the person against whom the decree of this court was obtained, conveyed a large estate to his mother in law, within a few days after the decree, and before it could be enrolled and enforced against the property, is sufficient to raise a doubt as to the validity and honesty of that transaction.
If the conveyance was fraudulent, no period of time, short of twenty years, will prevent the persons intended to be defrauded thereby, from pursuing their remedy against the land in the hands of the fraudulent grantee, or her heirs or devisees. Twenty years is the shortest limitation of actions at law respecting real property in this state, and by analogy to the statute of limitations, that is the shortest period which can bar a proceeding in this court to set aside conveyances of real property, on the ground of fraud.
In this case, it is no objection to the dissolution of the injunction, that Mary Post has not answered. The complainant has suffered nearly three years to elapse, without taking any steps to compel an answer from her, and it is suggested in the answer of the other defendants, that there is collusion between her and the complainant. Under such circumstances, if he wished to rely upon the objection that she had not answered, in opposing this motion to dissolve the injunction as to the other defendants, he should have produced an affidavit denying the collusion, and showing why he had not compelled her to answer. But for the
The "bank commenced operations on the first of June, 1825, and within thirty days thereafter obtained the receipt of the treasurer of the state for the $25,000, required to be paid by the last section of the act of incorporation. The bank continued in operation until the 18th of November, 1825, when it stopped payment. At the time the complainant held 1,444 shares, being merely three-fourths of all the stock subscribed; and the bank held his stock notes, for $114,400, payable to Edward C. Priest, cashier of the bank, and for the security thereof, 1,144 shares of his stock were pledged. On the 23d of November, in the same year, the legislature of New Jersey repealed the act of incorporation, and appointed the defendants, together with Caleb S. Riggs, who is since dead, trustees; and authorized them, or a majority of them, to demand, sue for, collect and receive, and take into *their possession, all the goods and chattels, rights and credits, moneys and effects, lands and tenements, books of account, securities for money, evidences of debts, and all property of every nature and description, belonging to the bank at the time of passing the repealing act; and to sell and convey all the personal estate of said corporation, and pay into the Court of Chancery the proceeds of the corporate property, debts and funds, to be disposed of equitably, under the order of the Chancellor, amongst the creditors of the corporation, after allowing to the trustees a reasonable compensation for their trouble. On the 10th of December, 1825, the legislature passed a supplementary act, with a preamble reciting that doubts had arisen, touching the powers and duties of the trustees, and that it was the intention of the repealing act to preserve uninjured and unimpaired, all the then existing rights and responsibilities, whether in favor of, or against the said bank; and then enacting and declaring, that the trustees were, and from the passing of the repealing act, should be deemed, and taken to have been vested as trustees for the
P. W. Radcliff and P. A. Jay, for the defendadts:—The complainant is too late in his motion to amend his bill. He should have asked to amend, as soon as the defect ivas discovered. The stock subscribed by the complainant was a sufficient consideration for his stock notes.' The failure of the bank, and the depreciation of this stock thereby, is no defence to an action upon these notes, either at law or in" equity; and the complainant can interpose the same defence *to these notes as if he had been sued thereon by the directors of the bank.
The stock was not apportioned in the manner required by the charter. The bank went into operation before the sum required was paid in. In fact there was an entire want of capital when the bank commenced business. When the bank stopped payment, the complainant held nearly three-fourths of the stock, for which he had given his note to the bank without security. These reasons were sufficient to authorize the legislature of New Jersey to repeal the charter, and appointed the defendants trustees to take possession of the effects of the bank. It was not necessary to assign these reasons upon the face of the act. The act repealing the charter was constitutional, as the right of repeal was reserved by the legislature of Eew Jersey in the act of incorporation. It was one of the conditions of the contract to which the stockholders acceded. The rule that a condition repugnant to a
J. Tallmadge and D. B. Ogden, for the complainant:—The complainant is not too late in his application to amend his bill, by adding a prayer for general relief. (12 Ves. 48, 62, 64, 66; 15 Ves. 358.) The court will retain this cause. The complainant being lawfully here, this court ought not to send him back to a court of law. Where a court of chancery gains jurisdiction for one purpose, it may retain the bill generally. (Rathbone v. Warren, 10 John. 587; King v. Baldwin, 17 John. 384.) The complexity of circumstances in this case, will induce the court to retain jurisdiction of the cause. The complainant cannot avail him
The Chancellor :—If the act repealing the charter of the bank was unconstitutional, the defendants acquired no rights under that act, and the notes in controversy still belong to the corporation. It is proper, therefore, that that question should be first considered. It is a well settled principle of the common law, that the privileges and franchises granted to a private corporation become a right vested, which cannot be divested or altered, except by the consent of the corporation, by a forfeiture declared by the proper tribunal, or by act of parliament. In this country they can only be divested by one of the two first methods. Although the state legislatures have all the powers of the British parliament, where they are not positively restricted by the United States or state constitutions, the fundamental law of our free government has deprived them of the power of interfering with vested rights. In the case of The Dartmouth College v. Woodward, (4 Wheat. Rep. 518,) the Supreme Court of the United States decided, that the privileges and franchises granted to a private corporation became a contract executed, within the prohibitory clause of the constitution of the United States, which declares that no state shall pass any law impairing the obligation of contracts ; and that a law altering the charter, in a material respect, is unconstitutional *and void. Neither that case, or The Bank of Columbia v. Oakley, (4 Wheat. Rep. 235,) recognize the distinction contended for by the complainant’s counsel, between the franchises, and the administrative part of the charter. On the contrary, in the former case Judge Story says, “ Unless a power be reserved for that purpose, the crown cannot, by virtue of its prerogative, without the consent of the corporation, alter or amend the charter, or divest the corporation of any of its franchises, or add to or diminish the number of the trustees, or remove any of the members, or change or control the administration of the
The validity of the act repealing the charter, must, there fore, depend upon the effect that is to be given to the seventeenth section of the original act of incorporation. This section, in terms, gives the legislature a right, at any time, to alter, amend or repeal the act of incorporation. But the counsel for the complainant contends that this section is repugnant to the grant of the franchises contained in the other parts of the act, and is therefore void. The common law principle, that a condition repugnant to the grant is void, has no application to this case. The seventeenth section is not a condition repugnant to the grant; it is only a limitation of the grant. Even in a common law conveyance, a power of revocation reserved to the grantor was valid. It is true, that by the statute of frauds, (1 Rev. Laws, 77, sec. 5,) all grants of land, with a power of revocation, are declared to be void as against *puichasers who purchase of the grantee before the power of revocation is executed. The object of this statute was to prevent the frauds which were practiced under such powers, at the common law; but even since this statute, the estate will be di vested if the power of revocation is executed while the title
If it were necessary for the defendants to show that the legislature had good cause for repealing the charter, I think *there is sufficient in the bill and answer in this case, to show it was not only the right, but the duty of the legislature to put an end to the banking powers of this corporation as soon as possible.
By the act of incorporation the capital stock of-the bank was to be $400,000, divided into 4,000 shares of $100 each; and if any excess was subscribed, the commissioners were to apportion it among the several subscribers. But the corporation were authorized to commence operations when $200,000 was subscribed and paid in. It does not appear, from the bill and answer, how much was subscribed, or whether there was any excess over the 4,000 shares. But it does appear, that of the 217 persons who were subscribers, 187 got no stock; and the commissioners, instead of dividing the 4,000 shares among the subscribers, as directed by the act, limited the number of shares to 2,000, which they were not authorized to do by the act of incorporation. Of that 2,000 the complainant took 800, and the other five commissioners 200 each, and they distribu ted the remaining 200 among 24 other persons. Having thus secured the stock, the complainant and four of his associate commissioners elected themselves directors, in conjunction with four other persons, and appointed the complainant president. The directors gave him $30,000 for his secret services in procuring the charter. With this he was enabled to pay for 300 shares of his stock, which he afterwards pledged to the commissioners of the school fund to secure his bond for the bonus, which he substituted in lieu of the money received from the bank for that purpose. He alleges in his bill, that he bought in 644 shares of the stock subscribed by other persons; for which, and the remaining 500 shares of his original subscription, he gave his notes to the bank without security, for $114,400, and pledged the stock for the payment. By these operations, if all the residue of the stock subscribed was paid in, the capital could not exceed $30,600. If, as was most probably the case, the other directors got discounts in the same proportion, there was not only an entire want of capi
What then was the effect of this repeal, upon the debts, credits and property of this corporation ? The effect, at common law, of the dissolution of a corporation, it is not necessary to consider in this case, because the common law is changed by the statute of New Jersey passed in January, 1817, which was read by the complainant’s counsel on the argument. That statute provides, that on the dissolution of a corporation of this description, the directors then in office shall be trustees for the stockholders and creditors; and all the property and rights of the corporation are transferred to such trustees. Such would have been the effect of a simple repeal of the charter of this bank. But the same power which had a right to change the common law, had also a perfect right to change the trustees provided for by the act of 1817. This was done in the repealing act. There never was an instant of time when the creditors of the bank were released from the obligation of their contracts, or when any rights vested in the directors as trustees.
The defendants in this case have all the rights which were vested in the corporation at the moment of its dissolution; and the complainant can make any defence to an action brought against him by the trustees which he might have made against a suit brought by the corporation, had it continued in existence. They have, therefore, no right to recover against him as the drawer of the bill of exchange on Thomas B. Woodward, or as indorser of the notes of Daniel Mallery, or Abraham Collins & Co.; in
In consequence of the difficulties in relation to a set-off at law, since the decision of the Supreme Court in Wheeler v. Raymond, (5 Cowen’s Rep. 231,) it is probable the complainant, on a bill properly framed for that purpose, might have been entitled to the aid of this court in allowing his set-off against the notes, on account of the doubt and difficulties *of such a defence at law. When he sought the aid of a court of chancery for this purpose, he should have stated more particularly the nature and amount of those claims for set-off, and the particular circumstances under which they accrued. He should also have framed the prayer of his bill in such a manner that the court would be enabled to direct an account of the debt and credit to be ascertained here, and to decree a payment of the balance which was justly due. As the bill now stands, the defendants are entitled to a dissolution of the injunction, except so much thereof as restrains them from proceeding against the complainant as drawer and indorser of the bills and notes which were drawn and indorsed by him as an officer of the corporation.
But as the complainant has asked leave to amend the prayer of his bill, I shall endeavor to modify the injunction in such a manner as to do justice between the parties, and shall permit the complainant to amend his bill, if he thinks proper to avail himself of such permission.
It is very doubtful whether the bill, as it now stands, is anything more than a bill of discovery. To such a bill, the answer of the defendants would necessarily be different from the answer to a bill of discovery and relief. In the latter case, many matters of defence might properly be set up, which would be unnecessary and impertinent in an answer to a bill of discovery merely. If the complainant avails himself of the permission to amend, it must be on
hf the complainant prefers to have his account with the trustees settled under the direction of this court, as he has not disclosed the items or amount of the set-off which he claims, he must pay into court the amount of the stock notes with interest, to abide the further order and decree of the court, and the injunction will then be retained. But if he prefers to avail himself of a defence at law, I can only require of the defendants, as a condition of the dissolution of the injunction, that they stipulate to allow him to give in evidence any equitable set-off which he had against the demands of the bank at the time of the dissolution of the incorporation.
(1) Apthorpe v. Comstock, 1 Hop. 140; Little v. Marsh, 2 Iredell’s Eq. 18; Poor v. Carleton, 3 Sumner, 70; Norton v. Woods, 5 Paige, 260; Manchester v. Day, 6 id. 295; Everly v. Rice, 3 Green. Ch. 553. See further Am. Ch. Dig by Waterman, tit. Injunction.
(2) Effect will be given to the statute of limitations in equity as well as in law. Lewis v. Marshal, 1 McLean, 16; Lewis v. Marshal, 5 Pet. 496; Humbert v. Trinity Church, 24 Wen. 587; M’Crea v. Purmont, 16 Wen. 460; Thomas v. Harvie, 10 Wheat. 146. But the statute of limitations is not always applicable to cases of equitable cognizance merely; Attorney-General v. Purmont, 5 Paige, 620; it is generally adopted; Humbert v. Trinity Church, supra; cases of fraud excepted: Michoud v. Girod, 4 How. U. S., 503; Marks v. Pell, 1 John. Ch. 594.
2 Kent, 306, n.