Case Name: The People of the State of New York, Respondent, v. Arthur E. Stilwell and Others, Appellants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1913-07-10
Citations: 157 A.D. 839
Docket Number: 
Parties: The People of the State of New York, Respondent, v. Arthur E. Stilwell and Others, Appellants.
Judges: 
Reporter: Appellate Division Reports
Volume: 157
Pages: 839–843

Head Matter:
The People of the State of New York, Respondent, v. Arthur E. Stilwell and Others, Appellants.
First Department,
July 10, 1913.
Corporation — General Corporation Law, section 36, applicable to corporations formed under special act — said section self-executing — quo warranto against corporation incorporated under special act for failure to commence business within two years — provision of charter not extending period limited by statute for commencement of business.
The provisions of section 36 of the General Corporation Law that “ If any corporation, except a railroad, turnpike, plank-road or bridge corporation, shall not organize and commence the transaction of its business or undertake the discharge of its corporate duties within two years from the date of its incorporation, its corporate powers shall cease,” apply to a corporation whether incorporated under the general statute or by special act.
Said statute is self-executing and no action or judicial proceeding is necessary to declare or complete the loss of corporate powers by a, corporation which has not commenced the transaction of business or undertaken the discharge of its corporate duties within two years after the date of its incorporation.
Hence, a corporation incorporated in 1895, under a special act, claiming under its charter all the general powers of a trust company, which has neither organized and commenced the transaction of business nor undertaken the discharge of its corporate duties for fifteen years from the date of its incorporation, has forfeited its charter under the provisions of section 36 of the General Corporation Law, and a judgment on the pleadings in favor of the People in an action of quo warranto brought against the officers and directors of said corporation should be affirmed.
A provision- in the charter of such corporation that certain persons named should be appointed examiners to open books for subscriptions to the capital stock of the company “at such times and places as they or a majority of them shall determine ” did not extend the period limited by section 36 of the General Corporation Law for the commencement of business.
Appeal by the defendants, Arthur E. Stilwell and others, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 7th day of March, 1913, pursuant to an order made at the New York Special Term, with notice of intention to bring up for review on such appeal the said order, entered in said clerk’s office on the 26th day of February, 1913, granting the plaintiff’s motion for judgment on the pleadings.
Henry D. Estabrook, for the appellants.
Franklin Kennedy, Deputy Attorney-General, for the respondent.

Opinion:
Dowling, J.:
By chapter 1033 of the Laws of 1895, which became a law June 15, 1895, the Metropolis Finance Company of New York was incorporated in this State. Under its charter it was authorized to guarantee the payment of contracts, loan" moneys, advance moneys, securities and credits upon property, real and personal, upon such terms as may be agreed on, and invest its assets in such securities as savings banks and trust companies are authorized by the laws of the State to acquire, or in such securities and property as it is authorized to advance upon. It also had power to borrow money and receive the same in trust, upon such terms as may be agreed upon, and to accept and execute any trust, duty, power and agency not inconsistent with the laws of this State, which may be committed to it by any person, corporation or court. In fine, under its charter all the general powers of a trust company are claimed. Nothing whatever was done, however, under this charter -until the year 1910, when it fell into the possession of the United States and Mexican Trust Company, an Alabama corporation. Thereafter the individual defendants, who are in control of the United States and Mexican Trust Company, applied to the State Department of Insurance for leave to change the name of the Metropolis Finance Company to the United States and Mexican Trust Company, which was refused, on reference to the Attorney-General, upon the ground that the charter of the Metropolis Company had expired and been forfeited. They tendered the organization tax to the State Treasurer, which was refused. They did pay certain taxes on franchises for the years 1910 and 1911 to the State Treasurer. Defendants have continued doing business in this State since 1910, without any license of any kind and without complying with any of the provisions of law which govern the operations of trust companies.
The question involved in this appeal is whether the Metropolis Finance Company was authorized to exercise corporate powers in the year 1910, or at any time thereafter. By section 36 of the General Corporation Law (Consol. Laws, chap. 23; Laws of 1909, chap. 28) it is provided that: "If any corporation, except a railroad, turnpike, plank-road or bridge corporation, shall not organize and commence the transaction of its business or undertake the discharge of its corporate duties within two years from the date of its incorporation, its corporate powers shall cease." This provision finds its origin in the Revised Statutes of 1827 and 1828 (1R. S. 600, § 7), where it is in the following form: "If any corporation hereafter created by the Legislature, shall not organize and commence the transaction of its business within one year from the date of its incorporation, its corporate powers shall cease." This forms part of title 3 of chapter 18 of part 1 of the Eevised Statutes, entitled: "Of the general powers, privileges and liabilities of corporations." This enactment remained in full force throughout the various revisions of the statutes until by chapter 687 of the Laws of 1892 (§ 31), the period within which the corporation must commence business was extended to two years, and the law was put in the precise form in which it now appears in the General Corporation Law. (See Laws of 1846, chap. 155; Gen. Corp. Law [Gen. Laws, chap. 35; Laws of 1890, chap. 563], § 21; as revised by Laws of 1892, chap. 687, § 31.)
At the time of the granting of this charter the two-year period was in operation. Concededly, the Metropolis Finance Company neither organized and commenced the transaction of business nor undertook the discharge of its corporate duties within two years after the date of its incorporation. It took no steps in this direction for fifteen years. We believe that the provisions of the act applied, as its terms indicate, to any corporation, whether incorporated under general statute or by special enactment. Ho reason of public policy is indicated why the plain language of the act should not be enforced and all corporations brought within its operation. The policy of the State to limit the period within which corporations (save certain excepted classes) should begin the exercise of their powers, has been a settled and continued one since 1827. Every corporation, whether formed under general or special laws, must be deemed to have been so formed subject to this general provision. The State had the right to determine upon what terms it would permit corporations to be organized. It had power to make restrictions upon the effectiveness of the powers it granted, and to limit the period of their exercise, not only by limiting their duration, but by limiting the time they might consume in actually commencing to exercise them. The grant of corporate powers to the Metropolis Finance Company was, by the operation of the general law, a conditional one. Compliance with the requirement for the commencement of business and the discharge of corporate duties within two years after the date of incorporation was a condition precedent to the right to exercise any corporate powers whatever. Upon fail ure to satisfy the condition within the time limited, the right to exercise such powers at once ceased. The statute is self-executory and no action or judicial procedure was needed to declare or complete the loss of its corporate powers. (Matter of Brooklyn, Winfield & Newtown R. Co., 72 N. Y. 245; 75 id. 335; Brooklyn Steam Transit Co. v. City of Brooklyn, 78 id. 524; Matter of Brooklyn, Queens County & Suburban R. R. Co., 185 id. 171; City of New York v. Bryan, 196 id. 158.) From the view we take of this limitation as a condition precedent to the exercise of any corporate powers, it is unnecessary to discuss the effect of these cases upon the limitation, if viewed as a condition subsequent.
Defendant further objects that the charter of the Metropolis Finance Company indefinitely postponed the date when the commencement of business was required, because it contained the following section: " § 6. John J. Jordan, William H. Walker and John H. Meyer shall be and they are hereby appointed commissioners to open books for subscriptions to the capital stock of the company, at such times and places as they or a majority of them shall determine." This section was obviously inserted for the convenience of the incorporators. There is no intention disclosed thereby that the general provisions of law should not apply, or that the powers thereby conferred should not be exercised within the general period of two years, or that the discretion conferred upon them should extend beyond such period. The mere language of this section evinced no intention to repeal or suspend as to this corporation the general statute, and it did not extend the period limited for the commencement of business. (Johnson v. Bush, 3 Barb. Ch. 207.)
The judgment appealed from will, therefore, be affirmed, with costs.
Ingraham, P. J., McLaughlin, Clarke and Hotchkiss, JJ., concurred.
Judgment affirmed, with costs.