Warren v. Bigelow Blue Stone Co.

Headnote

Corporation — defense of wa/nt of authority and, defective execution of a mortgage — stockholder concluded by his laches.

A stockholder of a corporation cannot be permitted to set up as a defense to an action to foreclose a mortgage given by the corporation to trustees to secure an issue of bonds, that such mortgage was not properly executed nor authorized, where interest has been regularly paid upon such bonds to her knowledge for twelve years during which time she has been a stockholder of the corporation.

Appeal by the petitioner, Helen M. Kellogg, from an order of the Supreme Court, entered in the office of the clerk of the county of Ulster on the 5tli day of June, 1893, denying the motion of the petitioner to be allowed to intervene as a party defendant and setting aside the stay of proceedings heretofore granted in this action.

The opinion of the Special Term was as follows:

“ Brown, J.:

The petitioner on this motion is the owner of shares of stock in the defendant corporation, of which she became the owner in February, 1880. She received them from the estate of her father, Luther Baffin, who was a stockholder at the date of the execution of the mortgage in suit.

“Interest was paid regularly on the bonds until 1892, and annual statements, showing that mortgage bonds to the amount of $100,000' were among the liabilities of the company, were forwarded to the. stockholders.

“ It is not claimed that Mrs. Kellogg or her father did not know of the execution and existence of the mortgage, and it appears uncontradicted that some of the bonds were offered to her father at the time of their issue, but he declined to purchase them.

“ Under these circumstances, the petitioner cannot be permitted to plead as a defense to an action to foreclose the mortgage that it. was not properly executed, or that, it was not authorized by the owners of two-thirds of the capital stock.

“ Acquiescence after such lapse of time will be presumed. (Kent v. Quicksilver Minmg Co., 78 N. Y. 159 ; Skinner v. Smith, 134 id. 240 .)

“ The claim that thirty-two thousand dollars of the bonds have been paid by the company does not rest upon the assertion of any fact. It is fully met in the affidavit of Mr. Caswell, and the transaction explained, and it affirmatively appears that none of the bonds, were .paid by the company.

“ The defense of usury cannot be pleaded to the mortgage in suit..

“ The petition does not make out a prima facie case, and if all the facts set forth in the moving papers were before the trial court, the plaintiffs would be entitled to a decree directing a sale of the. mortgaged property.

“ The motion must be denied.”

This is an action to foreclose a mortgage given to secure a series' of bonds issued by the defendant.

Pending the action, Helen M. Kellogg, a stockholder of the defendant, petitions to intervene and to be made a defendant, and permitted to interpose an answer. The court at Special Term denied her application, and from that order she appeals.