Court Opinion

ID: 5192791
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:38:49.755541+00
Date Added: 2024-06-11T08:26:56.856913
License: Public Domain

McLennan, J. (dissenting):
It seems to me, upon principle as well as upon authority, that the order appealed from should be reversed. The facts upon which the *423order is based, bluntly stated, are as follows: The Rogers Construction Company was a corporation engaged in the general contracting business in the city of North Tonawanda, N. Y. On the 12tli day of September, 1896, said company was notoriously insolvent and had been at least from May previous, as appears by the trial balance sheet made at that time, as explained by the evidence. On the 25th day of September, 1896, an action was commenced to dissolve the corporation because of its insolvency, and one Burke was appointed its receiver.
Prior to December, 1895, the corporation had a valid claim against the Buffalo, Kenmore and Tonawanda Electric Railway Company for about $7,000, which had been placed in the hands of its attorneys for collection. Judgment was recovered upon the claim in favor of the construction company on the 3d day of April, 1896, for $7,602.51 damages and costs, and was duly docketed in the office of the clerk of Erie county on that day. The petition alleges and the proof shows that on the said 12th day of September, 1896, the Rogers Construction Company, by an instrument in writing, executed by its president and by its secretary, who was also its treasurer, such judgment was assigned to' the petitioner, the German-American Bank of Tonawanda, N. Y. Concededly, if the assignment of the judgment was made at that time and by that instrument, as is alleged in the petition, it was absolutely void under section 48 of the Stock Corporation Law (Laws of 1890, chap. 564, as amd. by Laws of 1892, chap. 688). Proof, however, was given which tends to show, and the petitioner now claims, that the assignment of the claim upon which the judgment was recovered was actually made in December, 1895, when the corporation was solvent; that such assignment was effected by an oral conversation had between a Mr. Crown, who was secretary and treasurer of the construction company, and the cashier of the petitioner, bank. The substance of the conversation was that if the bank would advance $2,000 more money to the construction company, Crown, representing it, agreed to assign the claim against the electric railway company to the bank to secure such loan and other indebtedness which was then held by the bank against such construction company, and that the bank advanced the additional. $2,000, and that then and there such claim became the property of the bank. It nowhere *424appears that Crown had authority to make such an agreement, or to in any manner transfer the property of the corporation of' which he happened .to be secretary and treasurer. No resolution of the directors of the corporation had been passed directing or authorizing such action upon his part and no custom was shown from which such authority could be inferred. After such pretended oral assignment of the claim suit was brought upon it in the name of the Rogers Construction Company and judgment was recovered in its favor.
There is some evidence tending to show that in June, 1896, nearly six months after the ■ alleged oral agreement was made, and at a time when the construction company was insolvent, the board of directors, by resolution, ratified such oral agreement and authorized the formal assignment to be made, and it was made September twelfth following, as before stated. The transfer of the judgment, in question to the petitioner bank must have been made, I take it, either upon the 12th day of September, 1896, when the written assignment was executed, or in December previous, when the oral conversation took place. Concededly, if made in September, 1896, it was void under the provisions of the. statute, because at that.time the corporation was insolvent. If the conversation took place, as it is claimed, in December, 1895, we think it is entirely, ineffectual for the purpose of transferring the property of the corporation to the petitioner bank. We do not believe that a secretary and treas-. urer of a corporation can orally, without the express authorization of the corporation so to do, and without proof of such custom on his part as would justify the inference of authority, convey to another its choses in action or property.
The case is entirely different from where an officer of a corporation has property in his possession and delivers it to a honafide purchaser. In this case there was nothing of the kind. The officer simply said, the corporation which I represent has a claim; I transfer it or will, transfer it to you. There was no delivery, actual or symbolical; no writing, no memorandum of the transaction.
It seems to me that if the correct interpretation of section 48 of the Stock Corporation Law is as indicated in the prevailing opinion, it would be quite as well to .declare the statute repealed as to spend time in .ascertaining its meaning. Of course, after it is ascertained *425that a corporation is insolvent, hopelessly so, as in the case at bar, no preference can be given to a favored creditor, but if all that is necessary in'order to accomplish that purpose is to prove that at some time, months or a year previous, some officer of the insolvent corporation said to some individual or an officer of some other corporation, the property of the corporation is yours, and such talk is held to be effectual for the purpose of investing the favored creditor with such property, then there is no life or force left in the statute. I am assuming that the conversation actually took place between the treasurer of the construction company and the cashier of the petitioner bank, as stated by them; but if such secret agreement is to be given the force of a valid transfer, not evidenced by any writing not capable of being recorded, what safety is there for those who may deal with and trust a corporation % A person who is asked to give credit to a corporation may satisfy himself that there are no mortgages which are liens upon its property; investigate and ascertain that there are no bills of sale filed; may learn what property is actually in its possession and under its control, and upon the facts ascertained from such investigation give credit, only to find, when the corporation becomes embarrassed, that the property which was in its possession and under its control, all of it perhaps, was orally transferred months before by one of its officers, without any authority even from its board of directors, and that, indeed, the entire assets of the corporation are “ swallowed up in victory.”
I believe it is the law that a mortgage upon real property may be given secretly; be kept off the record, and that it may be enforced against the mortgagor, regardless of the rights of his other creditors who trusted him, believing that his real estate was unincumbered. I do not believe, however, it has ever before been held that. the same rule applies to personal property, and that its application is even broader, to wit, that in such case it is not even necessary that an incumbrance or transfer should be evidenced by a writing ; that a bare conversation between the interested parties will suffice'. The judgment or claim in question became the properly of the petitioner bank either on the 12th day of September, 1896, when the formal assignment was executed and delivered, or in December, 1895, when the secretary and treasurer of the corporation said it belonged to the bank, and the cashier of the bank in effect said *426amen; or it never became its property, but continued to belong to the construction company. In September no title could pass, because the corporation was insolvent, and because of the statute which prohibits a corporation from transferring its property and assets under such circumstances. 3STo title could pass in December, because at that time there was no delivery or change of possession, and no writing or memorandum of sale or transfer.
My conclusion is that the judgment in question, and the claim upon which it was based, continued to be the property of the Rogers Construction Company, and was such at the time of its dissolution, and, therefore, that it belongs to the receiver, and should be distributed ratably between the creditors of such corporation.
It follows that the order appealed from should be reversed, with costs. ■ .
Order affirmed, with costs.