Court Opinion

ID: 5185220
Source: CourtListenerOpinion
Date Created: 2022-01-06 04:47:27.584452+00
Date Added: 2024-06-11T08:26:40.890440
License: Public Domain

Ingraham, J. (dissenting):
I cannot concur in Mr. Justice Patterson’s construction of section 48 of the Stock Corporation Law (Oliap. 688, Laws of 1892,. amending chap. 564 of the Laws of 1890)." That section first provides that “no corporation which shall have refused to pay any of its notes or other obligations when due in lawful money of the United States, nor any of its officers or directors, shall transfer any of its property to any of its officers, directors or stockholders, directly or indirectly, for the payment of any debt,, or upon any other consideration, than the full value of the property paid in cash.” The prohibition contained in this clause applies only to a corporation which shall have refused to pay any of its notes or other obligations when due; and such a corporation, namely, one which shall have refused to pay any of its notes, or other obligations when due, is absolutely prohibited from transferring any of its property to any of its officers, directors or stockholders, directly or indirectly, for the payment of any debt, or upon any other consideration than the full value of the property paid in cash. The section then continues: “ No conveyance, assignment or transfer of any property of any such corporation, by it or by any officer, director or stockholder thereof, nor any payment made, judgment suffered, lien created or security given by it or by any officer, director or stockholder, when the corporation- is insolvent or its insolvency is imminent, with the intent of giving a preference to any particular creditor over other creditors of the corporation,, shall he valid.” Here is a prohibition of a payment to any person with the intent of giving a preference to any particular creditor. But both clauses of the section would seem to apply to the same corporation* viz., a corporation which shall have refused to pay any of its notes' or other obligations when due, prohibiting it, first, from making a transfer of any of its property to any of its officers, directors or stockholders except upon the payment of the full value of the property in cash ; and, second, from making any conveyance, assignment or transfer of any of its property, or making any payment, suffer*28ing any judgment, creating any lien or giving any security when such corporation, namely, a corporation which shall have refused to pay any of its notes or other obligations when due, is insolvent or insolvency is imminent, with intent of giving a preference.
The statute in force before the enactment of the Stock Corporation Law was materially changed by the latter act. By the Revised, Statutes (1 R. S, 603, § 4) it was provided that when any incorporated company shall have refused to pay any of its notes, or other evidences of debt, it should not he lawful for such copapany to transfer any of its property to any officer or stockholder of such company, directly or indirectly, for the payment of any debt; and it should not be lawful to make any transfer or assignment in contemplation of the insolvency of such company to any person or persons’whatever. It was. held by the Supreme Court in the case of Harris v. Thompson (15 Barb. 64) that the words “ such company ” in the 2d clause of this. section referred to an incorporated ■company, and this case has been generally followed. This provision of the Revised Statutes was repealed by section 23 of;the General Corporation Law (Chap. 563, Laws of 1890), and' by section 10 of the Stock Corporation Law (Chap. 564, Laws of 1890). By section 48 of the Stock Corporation Law, which became a law at the same time as did the General Corporation Law, it w¿s provided that no corporation which shall have refused to pay ■any of. its notes, or other obligations when, due, shall assign any of its property to any of its officers, directors or stockholders for the payment of .any debt; and no officer, director or stockholder thereof shall make any transferí or assignment of its property, or of any stock therein, to any person in contemplation of its insolvency. There can he no doubt, I think, but that this section would '■only affect a corporation which shall have refused to pay its motes or other obligations when due. The second prohibition contained in the section was that no officer, director or stockholder thereof, namely, a corporation which shall have refused to pay any •of its notes, or other obligations when, due, shall make any transfer ■or assignment to any person in contemplation of its insolvency. 'This section was amended by chapter 688' of the- Laws of 1892. Section 48 of the act as then amended is the section .now under ■consideration, and to give the second prohibition contained iin this *29section a construction which would make it apply to all corporations would he disregarding the. express language used, which confínes such a prohibition to such a corporation as had been before named in the section, and would make the second prohibition refer not to-such a corporation, but to all corporations, which, it seems to me, would be contrary to the express meaning of the words used.
There is no evidence to show that, prior to August ninth, the Madison Square Bank had refused to pay any of its notes or other obligations when due. The bank was open for business and apparently did pay on demand all its obligations up to three o’clock on August eighth, the day the check in-question was drawn. It had on deposit on the night of August eighth, with the St. Nicholas Bank, its Clearing House agent, about $28,000, and that bank further held a large amount of bills receivable and'other collateral, belongs ing to the Madison Square Bank, as security for any amount owing by the Madison Square Bank to it; and the officers of the St. Nicholas Bank apparently had no knowledge of the'Madison Square Bank’s insolvency prior to the morning of August 8, 1893. Nor do I think that the evidence in this case shows that there was a conveyance, assignment or transfer of any property, or any payment made by this bank or any oiBcer, director or stockholder thereof, with the intent of giving a preference to the defendant as a creditor.
I concur with the view taken by the learned referee in his opinion as to the construction of this statute. As before stated, the section in question prohibits two acts of the bank or its officers: First, the transfer of any of its property to any of its officers, directors or stockholders, directly or indirectly, for the payment of any debt or for any other consideration than the full payment of the value of the property in cash. This prohibition is absolute. When a bank .lias failed to-pay any .of -its .notes or obligations when due,, no officer,director or stockholder thereof can receive from the bank or its officers any property of the Corporation for. any other consideration than the full value of the property paid in cash. The object of the statute is to prevent the persons named from receiving any property from the bank upon any other consideration, after it has declared its inability to meet its accruing obligations. This does not depend upon the solvency or insolvency of the bank, nor upon- the intent *30when such transfer was made. The second prohibition is that no such corporation, nor its officers, directors or stockholders, shall make any conveyance, assignment or transfer to any person, when the corporation is insolvent ór insolvency is imminent, with the Intent of giving a preference to a particular creditor. The act that is here prohibited is an act of the bank or any one acting for or ■on behalf of the bank, its agents or those in charge of its affairs, whether as officers, directors or stockholders, creating a preference.
The intent necessary to make such a transfer illegal is an intent •existing on behalf of the corporation or those assuming to act for it in making the transfer. It seems to me that the act prohibited must be an act of the corporation or an officer, director or stockholder ..acting for the corporation by whom the property is transferred, with the intent of preferring a particular creditor. It seems that this construction of the statute was directly approved by the Court ■of Appeals in the case of French v. Andrews (145 N. Y. 444).' In that case the court held that “ merely permitting a creditor to obtain ■a judgment in the regular course of legal proceedings is not, on the part of-the officers of the corporation, a transfer or assignment of the property of the corporation within the meaning of the statute quoted. And the conduct of the treasurer in giving notes which might be sued! by the defendant in the Municipal Court,” did not bring the pase within the contemplation of the statute. Now, in this case a director •of this bank, who is president of the defendant, a corporation who was a depositor in the bank, signed as president of the defendant a check upon the Madison Square Bank, and delivered that check to another bank to be credited to the account of the defendant. It could not be •claimed that either of these acts was the act of a director of the Madison Square Bank, but they were the acts of-the president of the-defendant, solely in the interest of such defendant, and had no relation to the position of the -president of the defendant as a director of the Madison Square Bank, and no authority that he derived as such director had any relation to his act of signing "this check or delivering it to ■the Hanover National Bank for collection. That check would have been collected as it was, whether Uhlman had been a director of thei Madison Square Bank or not, and no act of his as director had anything to do with the execution or collection of the check. The ■check when presented was paid by the St. Nicholas ■ Bank-under, a *31contract which it had- with the Madison Square Bank and not as the agent of tlie-Madison Square Bank, That was expressly determined in the case of O’Brien v. Grant (146 N. Y. 163). Neither the Madison Square Bank nor any of its officers, directors or .stockholders transferred any of the property of the bank or made any payment by the bank to the defendant. If Uhlman, as director of the bank, had obtained any money from the bank after it had refused to pay its obligations, either in payment of a debt or for any other consideration, except in payment of its full value in cash to the bank, that transfer would have been void under the 1st clause of the section of the Stock Corporation Law before referred to. But this payment to the defendant was not a payment by the bank or by any of its officers, directors or stockholders, and it, therefore, seems to me that the conclusion arrived at by the learned referee was correct, and the judgment should be affirmed.
Judgment reversed, new trial ordered, costs to appellants to abide event.