Case Name: The People of the State of New York ex rel. Charles T. Barney, Appellant, v. John S. Whalen, as Secretary of the State of New York, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1907-05-08
Citations: 119 A.D. 749
Docket Number: 
Parties: The People of the State of New York ex rel. Charles T. Barney, Appellant, v. John S. Whalen, as Secretary of the State of New York, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 119
Pages: 749–752

Head Matter:
The People of the State of New York ex rel. Charles T. Barney, Appellant, v. John S. Whalen, as Secretary of the State of New York, Respondent.
Third Department,
May 8, 1907.
Corporation — Secretary of State not required to file certificate creating unlawful powers—- provision in,certificate that business corporation may sell its whole.property by two-thirds vote unauthorized.
The Secretary of State is not required to file a certificate of incorporation if it contain provisions not authorized by law. Thus, he cannot be" compelled by mandamus to file a certificate incorporating a business corporation which provides that the directors may, with the consent of the holders of two-thirds of the capital stock issued and outstanding, sell, assign, transfer or otherwise dispose of the whole property of the- corporation, ,not including franchises,- to any person or corporation, domestic or foreign.
Such provision is not authorized by law, nor can "it be justified under section 2 of the Business Corporations Law, as a provision regulating the business or relating to the conduct of the affairs of the corporation, being rather for the purpose of closing up its affairs.
Such provision is contrary to section 33 of the" Stock Corporation Law, which governs the power of a corporation to sell its property, for said section provides that the transfer of a Whole property requires the consent, of ninety-five percentum of the stockholders if made to a foreign corporation, and transfers to domestic corporations can only he made if the transferee is engaged in a business of the same general character.-
Appeal by the relator, Charles T. Barney, from an order of the Supreme- Court, made at the Albany Special Term and entered in the office of the clerk of the county of Albany on the -23d day of February, 1907, denying the relator’s motion for a peremptory writ of mandamus.,'
Charles H. Tuttle and Charles Francis Stone, for the appellant.
William S. Jackson, Attorney-General, and Frank White, Deputy Attorney-General, for the respondent.

Opinion:
Chester,. J.:
The order appealed from, denies the application of. the relator for a peremptory writ of mandamus requiring the respondent to file in his office a certificate of incorporation. The secretary refused to file the certificate because there was contained therein the following clause:
" The directors may, with the consent of the holders of two-tliirds of the capital stock, issued and outstanding, sell, assign, transfer or otherwise dispose of, the whole of the property of the corporation,. not including franchises, to any person or corporation, domestic or" foreign."
The respondent, as Secretary of State, was not required to filé a certificate of incorporation if it contained provisions unauthorized by law. (People ex rel. Blossom v. Nelson, 46 N. Y. 477.) Section 2 of the Business Corporations Law ^Laws of 1892, chap. 691, as amd. by Laws of 1895, chap. 671; Laws- of 1896, chaps. 369, 460; Laws of 1901, chap. 520; Laws of 1903, chap. 525, and Laws of 19Ó4, chap. 446), under which it was proposed to file the certificate in question, prescribes what a certificate of incorporation thereunder must, contain. -The' clause objected to is clearly outside of any of the requirements there specified. That section also contains the following provision :. " The certificate may contain any other provision for the regulation of the business and conduct of the affairs of the corporation and any limitation upon its powers and upon the powers of its directors and stockholders which, does not exempt them from any obligation or from the performance of any duty imposed by law." . ,.
Substantially the same provision is also included in section 10 of . the General Corporation Law (Laws of 1892, chap. 687, as amd. . by Laws of 1895; chap. 672). That section also provides that " ISTo corporation shall possess or exercise any corporate powers not given. by law or not necessary to the exercise of the powers so given."
If, therefore, the clause in question, which the respondent objected to, was one which purported to give the proposed corporation powers, or the right to exercise powers not given by law, he was justified in withholding his assent to such filing. That clause is not one regulating' the business or relating to the conduct of the affairs of the corporation but is rather one for the purpose of ending or closing up its business or affairs. It is not one limiting its powers or those of its directors and stockholders but is one intended to enlarge such powers. It assumes to give the directors of the corporation, with the consent of the holders of two-thirds of the outstanding capital stock issued, the right to dispose of the whole of the property of the corporation, except.its franchises, to any person or corporation, domestic or foreign.
The statutory power to sell the property of a corporation is found in section 33 of the Stock Corporation Law (Laws of 1892, chap. 688, added by Laws: of 1893, chap. 638, and amd. by Laws of 1901, chap. 130). That section gives a domestic stock corporation, except a railroad corporation, and except as othérwise provided by law, with the consent of two-thirds of its stockholders, the right "to sell and convey its property, rights, privileges and franchises, or any. interest therein, to a' domestic.corporation engaged, in a business of the same general character; and it also provides that a domestic corporation, the principal business. of which is carried on in, and the principle tangible property, of which is located within, a State adjoining the State of New York, may, w-ith the consent of the holders of ninety-five pereentum of its capital stock, sell and convey its property situate without the State, not including its franchise, to a corporation organized under the laws of such adjoining State.,
The clause which the respondent objects to authorizes the directors to dispose of the whole of the property of the proposed corporation, except its franchises, to a domestic or to a foreign corporation, on the consent of two-thirds of the capital stock issued and outstanding, and, therefore, it is an attempt to procure the right to exercise powers in this respect not conferred by the statute which, as we have seen, prohibits a domestic corporation from so transferring its property to a domestic corporation unless it is engaged" in a business of the same general character, and from transferring its whole property to a foreign corporation, except where the business of such, corporation is carried on in an adjoining State, and .even then such transfer can be made, under the statute, only upon the consent of ninety-five pereentum of its stockholders, instead of two-thirds thereof.
The argument of the. learned counsel for the appellant that corporations organized for private purposes and owing no duty of a public nature have always possessed and still possess a common-law right to convey their entire property to an individual or corporation upon the unanimous consent of the stockholders, may be conceded, yet that argument lias no -force as applied to the situation here That power, if it exists, may be exercised by a corporation duly organized, not by virtue- of any thing stated in its certificate of i-ncor- poration, but by virtue of its corporate existence.. The further-argument that by inserting' a provision in the certificate of incorporation authorizing the corporation to dispose of its entire property, except franchises, to.a foreign corporation upon, the consent of a. less percentage of tlie capital stock than thé whole, is effective as the unanimous and irrevocable consent of all stockholders, given in advance, to such a disposition, does not appeal to us as sound. .A subscriber to- the capital stock of a'corporation is undoubtedly bound by such provisions of the certificate of incorporation as are lawfully inserted therein, hut as the provision here -is not one required by. the statute; it would not be- effective to bind them except by virtue of some-lawful agreement on their part to be bound thereby. More than this, we think' the provisions of section 33 of the Stock Corporation Law above referred to stand -in the way of permitting the directors of the proposed'corporation -to dispose of its entire property as above stated 'to a foreign corporation upon the consent of two-thirds, only of its stockholders, because that' section requires the consent of ninety-five percentum thereof for such disposition.. ' •
The order should be affirmed, with costs.- .
All concurred. '
Order affirmed, with costs.