Gunther v. Mayer — 51 N.Y. St. Rep. 538

Majority

p. 538

Gottlob Gunther, Pl’ff, v. Rudolph Mayer et al., Def’ts.

(Supreme Court, General Term, Second Department,

Filed February 13, 1893.)

Headnote

Corporations — Mortgage.

At a meeting of a corporation the stockholders voted to give a mortgage to secure bonds to secure a debt to a bank for moneys had and future loans. The bonds were issued and given to the bank, but the mortgage was not executed until after the corporation became insolvent. Held, that the mortgage was valid and was not in violation of the statute prohibiting corporations from making assignments in contemplation of insolvency.

Appeal by the defendants, the Holland Trust Co. and Twelfth Ward Bank, from order confirming report of referee in surplus proceedings, holding void a trust mortgage held by said defendant trust company. On foreclosure of a first mortgage against property of the Vertical Tube Boiler Co. there was a surplus of' $7,000, which was claimed by the trust company under its mortgage. The referee, however, adjudged said mortgage void, and awarded said surplus to judgment creditors and the receiver of said corporation.

George M. Van Hoesen (William N. Dykman, of counsel), for app’lt, Holland Trust Co.; Joseph F. Stier (Frederic J. Swift, of counsel), for app’lt, Twelfth Ward Bank; P. Q. Eckerson, for resp'ts.

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 seventy-five 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 and 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, thereupon, the mortgage was not in contravention of the statute. Paulding v. The Chrome, etc, 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

p. 539

then the tube compañy 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 amount. The bonds were soon thereafter drawn, 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 by 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 on them was to be raised by selling the bonds by the bank and paying their debt out of it 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 cover 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.

Pratt, J., concurs; Dykman, J., not sitting.