Court Opinion

ID: 5504136
Source: CourtListenerOpinion
Date Created: 2022-01-10 03:05:43.986473+00
Date Added: 2024-06-11T08:34:00.509010
License: Public Domain

BARNARD, P. J.
The Vertical Tube Boiler Company, a domestic
corporation, executed a mortgage to the Holland Trust Company upon its lands in Queens county, to secure $75,000. This amount was represented by 75 bonds of $1,000 each. The Holland Company was simply a trustee. The mortgage is a first record lien on the surplus money in question, but it was given when the tube company was insolvent and in contemplation of insolvency, and is therefore void. The trust company, ánd a creditor holding some of the bonds, seek to escape this result by proof that the mortgage was given under an agreement to execute the same at a time long prior to the insolvency; that money was acquired under the agreement; and that therefore the mortgage was not in contravention of the statute.1 Paulding v. Steel Co., 94 N. Y. 334. The referee has found against the agreement, and the only question is whether the finding is supported by the evidence. It appears that the tube company, in April, 1888, had an account with the Twelfth Ward Bank in the city of New York. That then the tube company borrowed money of the bank. During the year 1888 notes were given and renewed, and in March, or April, 1889, it was agreed by the president and treasurer of the tube company and the president of the bank that security must or should be given to secure the existing debt and all future advances, and that a meeting of the tube company should be called to consider the subject, which meeting met on April 5, 1889. The meeting resolved to give a mortgage for $75,000 to a trust company to secure bonds in that *52amount. The bonds were soon thereafter drawn j but the drawing of the mortgage was delayed by the attorney until October, 1890, when the company was insolvent. The bonds were not signed by the treasurer of the tube company until September or October, 1889. The whole issues were delivered as collateral security to the Twelfth Ward Bank. Forty-five thousand of these are still held b}’- the bank and thirty thousand by the trust company. No question can be made as to the authority of the parties who contracted for the security in the spring of 1889. The president and secretary represented the tube company, and the president, Steers, represented the bank. The negotiations were initiatory only, and the tube company voted the security, and the requisite number of stockholders approved the vote. The bank received the bonds with the official approval of the tube company written thereon, and received them at once when printed, long before the mortgage was given. It is immaterial whether the money in them was to be raised by selling the bonds by the bank, and paying their debt out of i-t, or not. The security was voted to pay the bank debt, and the bond, which recites the agreement, was at once delivered to the bank, and an agreement to give a mortgage to a naked trustee was an agreement in equity to give the mortgage for the security of the persons who held the debt. The trustee’s signature was not at all vital under the circumstances presented by the case. The tube company delivered the bonds as good bonds, and the approval of the trustee could come at any time thereafter. The order should be reversed, and the motion to confirm referee’s report denied, and the surplus ordered to be paid to the Holland Trust Company, with costs to appellant out of fund.

Rev. St. p. 603, § 4, provides that it shall not be lawful for any incorporated company to make any transfer or assignment of its property in contemplation of insolvency to any person whatever, and every such transfer or assignment to such person, or in trust for him or his benefit, shall be utterly void.